As filed with the Securities and Exchange
Commission on February 4, 2015.
Registration No. 333-
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
PANGAEA
LOGISTICS SOLUTIONS LTD.
(Exact name of registrant as specified in
its charter)
Bermuda
(State or other jurisdiction of
incorporation or organization)
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4412
(Primary Standard Industrial
Classification Code Number)
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Not Applicable
(I.R.S. Employer
Identification Number)
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Pangaea Logistics Solutions Ltd.
109 Long Wharf
Newport, Rhode Island 02840
(401) 846-7790
(Address, including Zip Code, and Telephone
Number, including Area Code, of Registrant’s Principal Executive Offices)
Anthony Laura
Trudy Coleman
Pangaea Logistics Solutions Ltd.
109 Long Wharf
Newport, Rhode Island 02840
(401) 846-7790
(Name, Address, including Zip Code, and
Telephone Number, including Area Code, of Agent for Service)
Copies to:
Kirk A.
Radke, Esq.
Willkie
Farr & Gallagher LLP
787 7th
Avenue
New York,
NY 10019-6099
Telephone:
(212) 728-8996
Telecopy:
(212) 728-9996
Approximate
date of commencement of proposed sale to the public:
As soon as practicable after the effective
date hereof.
If any of the securities being registered
on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box.
o
If this Form is filed to register additional
securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration statement for the same offering.
o
If this Form is a post-effective amendment
filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration number
of the earlier effective registration statement for the same offering.
o
If this Form is a post-effective amendment
filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number
of the earlier effective registration statement for the same offering.
o
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act. (Check one):
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Large accelerated filer
o
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Accelerated filer
o
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Non-accelerated filer
x
(Do not check if a
smaller reporting company)
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Smaller reporting company
o
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CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities
to be Registered
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Amount to be
Registered(1)
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Proposed Maximum
Aggregate
Offering Price
Per Share(2)
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Proposed Maximum
Aggregate
Offering Price(2)
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Amount of
Registration Fee (3)
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Common Shares, $0.0001 par value per share
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291,953
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$3.47
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$1,013,077
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$117.72
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(1)
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Represents (a) 291,953 shares of common stock issued on a restricted basis to certain shareholders that are being registered
for resale on behalf of such holders and (b) pursuant to Rule 416 under the Securities Act, an indeterminate number of shares of
common stock that are issuable upon stock splits, stock dividends, recapitalizations or other similar transactions affecting such
shares.
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(2)
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These figures are estimated solely for the purpose of calculating
the amount of the registration fee pursuant to Rule 457(c) under the Securities Act of 1933, as amended (the “
Securities
Act
”). The price per share and aggregate offering price are based on the average of the high and low sales prices of
the registrant’s Common Shares on February 3, 2015, as reported on the Nasdaq Capital Market.
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(3)
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Calculated by multiplying the proposed maximum aggregate offering price by 0.0001162.
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The information in this prospectus is
not complete and may be changed without notice. The shares of common stock offered hereby may not be sold until the registration
statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these
The Registrant hereby amends this Registration
Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment
which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act, or until the Registration Statement shall become effective on such date as the U.S. Securities and Exchange
Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus
is not complete and may be changed. We and the Selling Shareholders may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it
is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED
FEBRUARY 4, 2015
291,953 Common Shares
Pangaea Logistics Solutions Ltd.
This Prospectus relates to the offer and
sale of: (i) up to 29,441 shares of our common stock by Dinan & Company, LLC (“Dinan”) which Dinan purchased
from us pursuant to a Letter Agreement, dated as of October 1, 2014; (ii) up to 176,644 shares of our common stock by EarlyBirdCapital,
Inc. (“EBC”) which EBC purchased from us pursuant to a Letter Agreement, dated as of October 1, 2014; and (iii)
up to 85,868 shares of our common stock by Jefferies LLC (“Jefferies”), which Jefferies received from us in
connection with providing services to the Company in connection with its merger with Quartet Merger Corp. (“Quartet”),
collectively, (the “Selling Shareholders).” The registration of the offer and sale of securities covered by this prospectus
does not necessarily mean that any of the securities will be offered or sold by the Selling Shareholders.
We will not receive any cash proceeds from
the selling shareholders from the offer and sale of the common shares described in this registration statement. The common shares
issued to Dinan, EBC and Jefferies were issued in lieu of cash fees payable to each such party in connection with the merger of
the Company and Quartet that was consummated on October 1, 2014.
The selling shareholders may offer the
securities from time to time directly or through underwriters, broker-dealers or agents and in one or more public or private transactions
and at fixed prices, prevailing market prices, at prices related to prevailing market prices or at negotiated prices. If these
securities are sold through underwriters, broker-dealers or agents, the selling shareholders will be responsible for underwriting
discounts or commissions or agents’ commissions. See the sections entitled “Plan of Distribution” and “About
this Prospectus” for more information.
Our common stock is currently quoted on
the Nasdaq Capital Market (“Nasdaq”) under the symbol “PANL”. The closing price of our common stock
on February 3, 2015 was $3.47 per share.
Investing in our common stock
involves risk. See “Risk Factors” beginning on page 3 of this Prospectus to read about factors you should
consider before investing in our common shares.
Neither the Securities and Exchange
Commission nor any state securities commission has approved or disapproved of these securities or determined if this Prospectus
is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this Prospectus is
February 4, 2015
TABLE OF CONTENTS
We have not authorized any dealer, salesperson or other person
to give any information or represent anything not contained in this prospectus. You should not rely on any unauthorized information.
This prospectus does not offer to sell or buy any shares in any jurisdiction in which it is unlawful. The information in this prospectus
is current as of the date on the cover. You should rely only on the information contained or incorporated by reference in this
prospectus.
ABOUT
THIS PROSPECTUS
This prospectus
is part of a registration statement on Form S-1 that we filed with the Securities and Exchange Commission, the
(“SEC”), on behalf of the selling shareholders, who are named in the table under the section entitled
“Selling Shareholders” beginning on page 3 of this prospectus. You should read both this prospectus and any
prospectus supplement together with the additional information described in the section entitled “Where You Can Find
More Information.”
To the extent permitted
by applicable law, rules or regulations, we may add, update or change the information contained in this prospectus by means of
a prospectus supplement or post-effective amendments to the registration statement of which this prospectus forms a part through
filings we make with the SEC or by another method as may then be permitted under applicable law, rules or regulations.
You should rely only
on the information contained in or incorporated by reference into this prospectus or any applicable prospectus supplement. Neither
we nor the selling shareholders have authorized anyone to provide you with additional or different information. Neither this prospectus
nor any free writing prospectus is an offer to sell anywhere or to anyone where or to whom we are not permitted to offer or to
sell securities under applicable law. The information in this prospectus or any free writing prospectus is accurate only as of
the date of this prospectus or such free writing prospectus, as applicable.
For investors outside
the United States, neither we, the Selling Shareholders, nor any of the underwriters, have done anything that would permit this
offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other
than in the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering
and the distribution of this prospectus outside of the United States.
The market data and
certain other statistical information used throughout this prospectus are based on independent industry publications, government
publications or other published independent sources. Industry publications and surveys and forecasts generally state that the information
contained therein has been obtained from sources believed to be reliable and we are not aware of any misstatements regarding our
market, industry or similar data presented herein. We believe that such third party information concerning industry and market
data is reliable. Such third-party information may be different from other sources and may not reflect all or even a comprehensive
set of the actual transactions occurring in the market. In addition, some data is also based on our good faith estimates and our
management’s understanding of industry conditions. Such data involve risks and uncertainties and is subject to change based
on various factors, including those discussed under the headings “Forward-Looking Statements” and “Risk Factors”
in this prospectus.
The information contained
in this prospectus and any supplement hereto are accurate only as of their respective dates, regardless of the time of delivery
of this prospectus or any sale of a security. Our business, financial condition, results of operations and prospects may have changed
since that date.
PRIOR TO MAKING A
DECISION ABOUT INVESTING IN OUR COMMON SHARES, YOU SHOULD CAREFULLY CONSIDER THE SPECIFIC RISKS CONTAINED IN THE SECTION ENTITLED
“RISK FACTORS” IN THIS PROSPECTUS, AND ANY APPLICABLE PROSPECTUS SUPPLEMENT, TOGETHER WITH ALL OF THE OTHER INFORMATION
CONTAINED IN THIS PROSPECTUS AND ANY PROSPECTUS SUPPLEMENT OR APPEARING IN THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS
FORMS A PART.
PROSPECTUS
SUMMARY
The following summary
highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider
before investing in our common shares. You should read this entire prospectus, including the sections entitled “Risk Factors,”
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated
financial statements and the related notes to those statements, before making an investment decision. The terms “Pangaea,”
the “Company,” “we,” “our” and “us”, refer to Pangaea Logistics Solutions Ltd.
and its directly and indirectly owned subsidiaries, except where otherwise stated or where it is clear that the terms mean only
Pangaea Logistics Solutions. Ltd. exclusive of its subsidiaries.
Overview
On April 30, 2014
the Company (formerly known as “Quartet Holdco Ltd.”) entered into an Agreement and Plan of Reorganization (the “Merger
Agreement”) with Quartet, Quartet Merger Sub Ltd. (“Merger Sub”), Bulk Partners (Bermuda), Ltd. (at
the time, Pangaea Logistics Solutions Ltd., now known as “Bulk Partners” or “Former Pangaea”),
and the security holders of Bulk Partners (“Former Pangaea Holders”), which contemplated (i) Quartet merging
with and into the Company, with the Company surviving such merger as the publicly-traded entity and (ii) Merger Sub merging with
and into Bulk Partners with Bulk Partners surviving such merger as a wholly-owned subsidiary of the Company (collectively, the
“Mergers”). On September 29, 2014, Quartet held a special meeting in lieu of annual meeting of stockholders,
at which the Quartet stockholders considered and adopted, among other matters, the Merger Agreement and the Mergers. On September
26, 2014, Bulk Partners’ Board of Directors, acting by unanimous written consent, approved the Merger Agreement and the Mergers.
On October 1, 2014, the parties consummated the Mergers.
This Prospectus relates
to the offer and sale of: (i) up to 29,441 shares of our common stock by Dinan & Company, LLC (“Dinan”)
which Dinan purchased from us pursuant to a Letter Agreement, dated as of October 1, 2014; (ii) up to 176,644 shares of our common
stock by EarlyBirdCapital, Inc. (“EBC”) which EBC purchased from us pursuant to a Letter Agreement, dated as
of October 1, 2014; and (iii) up to 85,868 shares of our common stock by Jefferies LLC (“Jefferies”), which
Jefferies received from us in connection with providing services to the Company in connection with its merger with Quartet Merger
Corp. (“Quartet”), collectively, (the “Selling Shareholders).” The registration of the offer and
sale of securities covered by this prospectus does not necessarily mean that any of the securities will be offered or sold by the
selling shareholders.
We will not receive
any cash proceeds from the Selling Shareholders from the offer and sale of the common shares described in this registration statement.
The common shares issued to Dinan, EBC and Jefferies were issued in lieu of cash fees payable to each such party in connection
with the merger of the Company and Quartet that was consummated on October 1, 2014.
Pangaea is a holding
company incorporated under the laws of Bermuda as an exempted company on April 29, 2014 in connection with the Mergers. Bulk Partners,
which following the Mergers is wholly owned by Pangaea, is also a holding company that was incorporated under the laws of Bermuda
as an exempted company on June 17, 2008, the subsidiaries of which provide seaborne drybulk transportation services. Pangaea also
maintains offices in Copenhagen, Denmark, Athens, Greece, Rio de Janeiro, Brazil and Singapore.
Pangaea is a growth-oriented
global logistics company that utilizes its logistics experience and assets to service a broad base of industrial customers who
require the transportation of a wide variety of drybulk cargoes, including grains, pig iron, hot briquetted iron, bauxite, alumina,
cement clinker, dolomite and limestone.
Pangaea derives its
revenue from (i) contracts of affreightment (“COAs”), which are contracts to transport multiple shipments of cargo
during the term of the contract between specified load and discharge ports, at a fixed or variable price per metric ton of cargo,
(ii) voyage charters, under which a vessel carries a shipment of cargo for a customer on a specified route for a fixed price per
metric ton of cargo, and (iii) time charters, during which the vessel is dedicated solely to the charterer for the term of the
agreement. A majority of Pangaea’s revenue is from COA’s and voyage charters, as Pangaea’s focus is on transporting
cargo for its customers. Pangaea’s COAs typically extend for a period of one to five years, although some extend for longer
periods. A time charter may vary from a single trip to longer-term charters, whenever Pangaea deems such use to be in its commercial
interest. The length of a voyage depends on the number of load and discharge ports, the time spent in such ports and the distance
between the ports. Pangaea attempts, through selecting COAs and voyage contracts on what would normally be backhaul or “ballast”
legs, to enhance vessel utilization and its profitability because these contracts and charters position vessels at or near loading
areas where spot cargoes are typically obtained. This reduces ballast time and expense as a percentage of the vessel’s total
revenue and increases expected earnings for the vessel.
Pangaea utilizes its
logistics expertise to service a broad base of industrial customers who require the transportation of a wide variety of drybulk
cargoes, including grains, pig iron, hot briquetted iron, bauxite, alumina, cement clinker, dolomite and limestone. Pangaea addresses
the transportation needs of its customers by undertaking a comprehensive set of services and activities, including cargo loading,
cargo discharge, vessel chartering, voyage planning, and technical vessel management. In particular, Pangaea has historically focused
on providing such services for backhaul routes. In addition, Pangaea has developed customized shipping routes, which Pangaea believes
create value for its customers and its shareholders by both reducing the time and cost of transportation between ports and increasing
cargo carried per voyage. For example, in 2010, Pangaea was the first non-Russian vessel operator to carry drybulk cargoes from
Europe to Asia via the Northern Sea Route. Similarly, in 2013, Pangaea was the first vessel operator to carry drybulk cargo from
the West Coast of Canada to Europe via the Northwest Passage. Pangaea is the leading transporter of bauxite from Jamaica to the
United States, carrying on average more than 3.5 million tons per year. Pangaea believes that its experience in carrying a wide
range of cargoes, pioneering new routes, and serving less common ports increases its opportunities to secure higher margins than
in more commoditized cargoes and routes. Pangaea believes that providing such specialized drybulk transportation logistics services
together with its long-term commercial and contractual relationships makes Pangaea less vulnerable to industrial and economic cycles
as compared to other bulk-shipping operators. Finally, Pangaea believes that it can create value by serving and focusing on customer
needs rather than depending on its correct anticipation of future charter rates.
Pangaea uses a mix
of owned and chartered-in vessels to transport more than 19.5 million dwt of cargo to more than 190 ports around the world, averaging
over 48 vessels in service daily during 2014. The majority of its fleet is chartered-in on short-term charters of less than 9 months.
Pangaea believes that these shorter-term charters afford it more flexibility to match its variable costs to its customers’
service requirements, allowing it to respond to changes in market demand and limiting its exposure to changes in prevailing charter
rates. In addition to its chartered-in fleet, Pangaea has interests in 13 vessels and has placed orders for the construction of
five additional vessels; all at prices that Pangaea believes will permit it to operate profitably through a range of cargo rate
environments. These vessels are and will be used to serve its customers’ cargo transportation needs. Included in the vessels
currently owned or on order are six Ice-Class 1A Panamax vessels that are currently the only drybulk vessels of their size rated
to operate on the Northern Sea Route and the severe ice conditions of the Baltics in winter. Pangaea believes that a combination
of owned and chartered-in vessels help it to more efficiently match its customer demand than it could with an entirely owned fleet
or an entirely chartered-in fleet. Pangaea expects to scrap its oldest vessel, the
m/v Bulk Cajun
, in early 2015.
Some of the Company’s
Ice-Class 1A vessels are under contract to obtain technical management by a third-party manager with extensive expertise managing
these vessel types and ice pilotage. The technical management of the remainder of the Company’s owned fleet will continue
to be performed in-house. The Company believes its in-house management provides exceptional service and pricing for these vessel
types, reduces time out of service, and best enhances the service value of this fleet. The technical management for the Company’s
chartered-in vessels is performed by each respective ship owner.
Active risk management
is an important part of its business model. Pangaea believes its active risk management allows it to reduce the sensitivity of
its earnings to market fluctuations and helps it to secure its long-term profitability. Pangaea manages its market risk primarily
through chartering in vessels for periods of less than nine months. Pangaea further manages its market exposure through a portfolio
approach based upon owned vessels, chartered-in vessels, COAs, voyage charters, and time charters. Pangaea tries to identify routes
and ports for efficient bunkering to minimize its fuel expense. Pangaea also seeks to hedge a portion of its exposure to changes
in the price of marine fuels, or bunkers, uses forward freight agreements to protect against changes in charter rates and has entered
into interest rate swap agreements to fix a portion of its interest rate exposure.
Corporate
and Other Information
Pangaea is a holding
company incorporated under the laws of Bermuda as an exempted company on April 29, 2014 in connection with the Mergers. Bulk Partners,
which following the Mergers is wholly owned by Pangaea, is also a holding company that was incorporated under the laws of Bermuda
as an exempted company on June 17, 2008, the subsidiaries of which provide seaborne drybulk transportation services. Pangaea owns
its vessels through separate wholly-owned subsidiaries and through joint venture entities, which Pangaea consolidates as variable
interest entities, incorporated in Bermuda and Denmark. Furthermore, certain of its wholly-owned subsidiaries that are organized
in Bermuda, British Virgin Islands, Panama, and Delaware provide it with office space, vessel management services and administrative
support.
Pangaea’s principal
executive headquarters is located at 109 Long Wharf, Newport, Rhode Island 02840, and its phone number at that address is (401)
846-7790. Pangaea also has offices in Copenhagen, Denmark, Athens, Greece, Rio de Janeiro, Brazil and Singapore. Pangaea’s
corporate website address is
http://www.pangaeals.com
. The information contained on or accessible from its corporate website
is not part of this prospectus.
RISK
FACTORS
Investing in our common
shares involves a high degree of risk. You should consider and read carefully all of the risks and uncertainties described below,
as well as other information included in this prospectus, including our consolidated financial statements and related notes appearing
at the end of this prospectus, before making an investment decision. The risks and uncertainties described below are not the only
risks and uncertainties we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial
also may impair our business operations. If any of the following risks actually occur, our business results of operations and financial
condition could suffer. In such case, the trading price of our common shares could decline, and you may lose all or part of your
original investment. This prospectus also contains forward-looking statements and estimates that involve risks and uncertainties.
Our actual results may differ substantially from those discussed in these forward-looking statements.
Risks
Relating to Our Business
The cyclical and volatile nature
of the seaborne drybulk transportation industry may lead to decreases in charter and freight rates, which may have an adverse effect
on Pangaea’s revenues, earnings and profitability and its ability to comply with its loan covenants. Demand remains generally
weak, rates have been soft and, although asset values for modern tonnage increased in the beginning of the year, decreases in such
values since that time suggest that there is reduced anticipation of higher rates for 2015.
The seaborne drybulk
transportation industry is cyclical and volatile, and the prolonged downturn in the drybulk charter market has severely affected
the entire drybulk shipping industry. The Baltic Dry Index, or the BDI, an index published daily by the Baltic Exchange Limited,
a London-based membership organization that provides daily shipping market information to the global investing community, is a
daily average of charter rates for key drybulk routes, and has long been viewed as the main benchmark to monitor the movements
of the drybulk vessel charter market. The BDI declined 94% in 2008 from a peak of 11,793 in May 2008 to a low of 663 in December
2008 and has remained volatile since then. The BDI recorded a record low of 647 in February 2012. While the BDI has increased from
these low levels and has floated between approximately 2,340 and 700 from December 2012 through December 2014, there can be no
assurance that the drybulk charter market will increase and the market could decline. The decline and volatility in charter and
freight rates have been due to various factors, including the over-supply of drybulk vessels and the lack of trade financing for
purchases of commodities carried by sea, which resulted in a significant decline in cargo shipments.
Although our operating
fleet is primarily chartered-in on a short term basis and though lower charter rates result in lower vessel hire costs for Pangaea,
if low charter and freight rates in the drybulk market decline for any significant period, this could have an adverse effect on
our vessel values and earnings on our owned fleet, and similarly, could affect our cash flows, liquidity and ability to comply
with the financial covenants in our loan agreements. In addition, the decline in the drybulk carrier market has had and may continue
to have additional adverse consequences for the drybulk shipping industry, including an absence of financing for vessels and little
or no active secondhand market for the sale of vessels. Accordingly, the value of our common shares could be substantially reduced
or eliminated.
Because we employ
our vessels under a mix of COAs, voyage charters and time charters, which typically extend for varying
lengths of time of between one month to ten years, we are exposed to changes in market rates for drybulk carriers and such changes
may affect our earnings and the value of our owned drybulk carriers at any given time. A COA relates to the carriage of multiple
cargoes over the same route and enables the COA holder to nominate different vessels to perform individual voyages. We may not
be able to successfully employ our vessels in the future or renew existing contracts at rates sufficient to allow us to meet our
obligations. We are also exposed to volatility in the market rates we pay to charter-in vessels. Fluctuations in charter and freight
rates result from changes in the supply of and demand for vessel capacity and changes in the demand for seaborne carriage of commodities.
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.
Factors that influence
demand for vessel capacity include:
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supply and demand for energy resources, commodities, semi-finished and finished consumer and industrial
products;
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changes in the exploration or production of energy resources, commodities, semi-finished and finished
consumer and industrial products;
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the location of regional and global exploration, production and manufacturing facilities;
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the location of consuming regions for energy resources, commodities, semi-finished and finished
consumer and industrial products;
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the globalization of production and manufacturing;
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global and regional economic and political conditions, including armed conflicts, terrorist activities,
embargoes and strikes;
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natural disasters and other disruptions in international trade;
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developments in international trade;
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changes in seaborne and other transportation patterns, including the distance cargo is transported
by sea;
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environmental and other regulatory developments;
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currency exchange rates;
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bunker (fuel) prices; and
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The factors that influence the supply of
vessel capacity include:
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the number of newbuilding deliveries;
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port and canal congestion;
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the scrapping rate of older vessels;
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prevailing speed at which vessels are sailing; and
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the number of vessels that are out of service.
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In addition to the
prevailing and anticipated charter and freight 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 and insurance coverage, 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 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 and our transportation services will be dependent upon continued economic growth in
the world’s economies, including China and India, seasonal and regional changes in demand, changes in the capacity of the
global drybulk carrier fleet and the sources and supply of drybulk cargoes to be transported by sea. Given the large number of
new drybulk carriers currently on order with shipyards, the capacity of the global drybulk carrier fleet seems likely to increase
even if economic growth does not similarly increase. Adverse economic, political, social or other developments could have a material
adverse effect on our business and operating results.
An over-supply
of drybulk carrier capacity may prolong or further depress the current low charter and freight rates and, in turn, adversely affect
our profitability.
The market supply
of drybulk carriers has been increasing as a result of the delivery of numerous newbuilding orders over the last few years. Newbuildings
have been delivered in significant numbers since the beginning of 2006. However, as of December 2014, the majority of newbuilding
orders, which were placed over recent years, were completed, and the current order book stands at 22% of the fleet outstanding.
Vessel supply growth has been outpacing vessel demand growth over the past few years causing downward pressure on charter rates.
Until the new supply is fully absorbed by the market, charter rates may continue to be under pressure due to vessel supply in the
near to medium term. Although Pangaea typically enters into COAs to offset the large uncompensated cost of positioning vessels
for front haul voyages, if market conditions persist or worsen, upon the expiration or termination of our vessels’ COAs,
we may only be able to re-employ our vessels at reduced or unprofitable rates, or we may not be able to employ our vessels at all.
The occurrence of these events could have a material adverse effect on our business, results of operations, cash flows, financial
condition and ability to pay dividends.
The market
values of our owned vessels may decrease, which could limit the amount of funds that we can borrow or cause us to breach certain
covenants in our credit facilities, as we did in 2012, and we may incur a loss if we sell vessels following a decline in their
market value.
The fair market values
of our owned vessels have generally experienced high volatility, and you should expect the market values of our vessels to fluctuate
depending on a number of factors including:
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prevailing level of charter and freight rates;
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general economic and market conditions affecting the shipping industry;
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types and sizes of vessels;
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supply of and demand for vessels;
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other modes of transportation;
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governmental and other regulations; and
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technological advances.
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In addition, as vessels
grow older, they generally decline in value. If the market values of our owned vessels decrease, we may not be in compliance with
certain covenants in our credit facilities secured by mortgages on our drybulk vessels unless we provide additional collateral
or prepay a portion of the loan to a level where we are again in compliance with our loan covenants. As of September 30, 2014 and
December 31, 2013, we were in compliance with all of our covenants contained in our debt agreements.
In addition, if we
sell one or more of our vessels at a time when vessel prices have fallen and before we have recorded an impairment adjustment to
our consolidated financial statements, the sale proceeds may be less than the vessel’s carrying value on our consolidated
financial statements, resulting in a loss and a reduction in earnings.
The carrying amounts
of vessels held and used by us are reviewed for potential impairment whenever events or changes in circumstances indicate that
the carrying amount of a particular vessel may not be fully recoverable. In such instances, an impairment charge would be recognized
if the estimate of the undiscounted future cash flows expected to result from the use of the vessel and its eventual disposition
is less than the vessel’s carrying amount. This assessment is made at the asset group level which represents the lowest level
for which identifiable cash flows are largely independent of other groups of assets. The asset groups are defined by vessel size
and classification. At September 30, 2014, we identified a potential impairment indicator due to the estimated market value of
certain vessels. As a result, we evaluated each asset group for impairment by estimating the total undiscounted cash flows expected
to result from the use of the asset group and its eventual disposal. At September 30, 2014, the estimated
undiscounted future cash flows exceeded the carrying amount of the asset groups in the consolidated balance sheet and therefore,
we did not recognize a charge to impairment.
Pangaea has
relied on financial support from its founders and investors through related party loans, which may not be available to Pangaea
in the future.
From time to time,
we have obtained loans from our founders, Edward Coll, Anthony Laura, and Lagoa Investments, an entity beneficially owned by Claus
Boggild, to meet vessel purchase, newbuilding deposit, and other obligations of Pangaea. These loans have been historically available
to Pangaea on an as needed basis, and payable as cash flow reasonably permitted. These loans may not be available to Pangaea in
the future. We may seek to refinance such related party loans with the net proceeds of future debt and equity offerings, but we
cannot be sure that we will be able to do so on acceptable terms. If we are not able to find additional sources of financing on
acceptable terms, we may have to dedicate a larger portion of our cash flow from operations to pay the principal and interest of
these loans and facilities than we would if we were able to refinance on superior terms. Even if we are able to borrow money from
such parties, such borrowing could create a conflict of interest of management to the extent they also act as lenders to Pangaea.
The current
state of the global financial markets and current economic conditions may adversely impact our ability to obtain additional financing
on acceptable terms and otherwise negatively impact our business.
Global financial markets
and economic conditions have been, and continue to be, volatile. In recent years, operating businesses in the global economy have
faced tightening credit, weakening demand for goods and services, deteriorating international liquidity conditions, and declining
markets. There has been a general decline in the willingness of banks and other financial institutions to extend credit, particularly
in the shipping industry. As the shipping industry is highly dependent on the availability of credit to finance and expand operations,
it has been negatively affected by this decline.
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 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, additional financing may not be available if needed and to the extent required, on acceptable
terms or at all. If additional financing is not available when needed, or is available only on unfavorable terms, we may be unable
to expand or meet our obligations as they come due or we may be unable to enhance our existing business, complete additional vessel
acquisitions or otherwise take advantage of business opportunities as they arise.
Our revenues
are subject to seasonal fluctuations, which could affect our operating results and our ability to pay dividends, if any, in the
future.
We operate our drybulk
vessels in markets that have historically exhibited seasonal variations in demand and, as a result, in charter and freight rates.
This seasonality may result in quarter-to-quarter volatility in our operating results, which could affect our ability to pay dividends,
if any, in the future from quarter to quarter. The drybulk carrier market is typically stronger in the fall and winter months in
anticipation of increased consumption of coal and other raw materials in the northern hemisphere during the winter months. In addition,
unpredictable weather patterns in these months tend to disrupt vessel scheduling and supplies of certain commodities. This seasonality
may adversely affect our operating results and our ability to pay dividends, if any, in the future.
Risks associated
with operating ocean-going vessels could affect our business and reputation, which could adversely affect our revenues and price
of our common shares.
The operation of ocean-going
vessels carries inherent risks. These risks include the possibility of:
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environmental accidents;
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cargo and property losses or damage;
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business interruptions caused by mechanical failure, human error, war, terrorism, political action
in various
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countries, labor strikes or adverse weather conditions; and
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The involvement of
our vessels in an environmental disaster may harm our reputation as a safe and reliable vessel owner and operator. Any of these
circumstances or events could increase our costs or lower our revenues.
The operation
of drybulk carriers entails certain unique operational risks.
The operation of certain
ship types, such as drybulk carriers, has certain unique risks. With a drybulk carrier, the cargo itself and its interaction with
the ship can be a risk factor. 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. Furthermore, any defects or flaws in the
design of a drybulk carrier may contribute to vessel damage. Hull breaches in drybulk carriers may lead to the flooding of the
vessel’s holds. If a drybulk carrier suffers flooding in its 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. Any of these circumstances or events could negatively impact our business, financial
condition, results of operations and our ability to pay dividends, if any, in the future. In addition, the loss of any of our vessels
could harm our reputation as a safe and reliable vessel owner and operator.
Our vessels
may call on ports located in countries that are subject to restrictions imposed by the U.S. or other governments, which could adversely
affect our reputation and the market for our common shares.
None of our vessels
has called 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, such as Cuba, Iran, Sudan and
Syria; however our vessels may call on ports or operate in these countries from time to time in the future on our charterers' instructions
notwithstanding contractual restrictions agreed with us. 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 U.S. 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. During 2014, several Executive Orders were signed which authorize and subsequently expand sanctions
on individuals and entities responsible for violating the sovereignty and territorial integrity of Ukraine, or for stealing the
assets of the Ukrainian people. These sanctions put in place restrictions on the travel of certain individuals and officials and
showed our continued efforts to impose a cost on Russia and those responsible for the situation in Crimea. 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.
Although we believe
that we have been 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 fines, penalties or other sanctions that 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. 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 permissible 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 permissible 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 common shares may be adversely
affected by the consequences of war, the effects of terrorism, civil unrest and governmental actions in these and surrounding countries.
We are subject
to international safety regulations and the failure to comply with these regulations 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 United Nations’ International Maritime Organization’s International
Management Code for the Safe Operation of Ships and Pollution Prevention, or ISM Code. The ISM Code requires ship owners and ship
managers 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 and describing procedures for dealing
with emergencies. The failure of a ship-owner 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 the vessels that has been delivered to us is ISM Code-certified and we expect that each other
vessel that we have agreed to purchase will be ISM Code-certified when delivered to us.
In addition, vessel
classification societies also impose significant safety and other requirements on our vessels. In complying with current and future
environmental requirements, vessel-owners and operators may also incur significant additional costs in meeting new maintenance
and inspection requirements, in developing contingency arrangements for potential spills and in obtaining insurance coverage. Government
regulation of vessels, particularly in the areas of safety and environmental requirements, can be expected to become stricter in
the future and require us to incur significant capital expenditures on our vessels to keep them in compliance.
The operation of our
vessels is also affected by other government regulation in the form of international conventions, national, state and local laws
and regulations in force in the jurisdictions in which the vessels operate, as well as in the country or countries of their registration.
Because such conventions, laws, and regulations are often revised, we cannot predict the ultimate cost of complying with such conventions,
laws and regulations or the impact thereof on the resale prices or useful lives of our vessels. Additional conventions, laws and
regulations may be adopted that could limit our ability to do business or increase the cost of our doing business and which may
materially adversely affect our operations. We are required by various governmental and quasi-governmental agencies to obtain certain
permits, licenses, certificates, and financial assurances with respect to our operations.
We are subject
to complex laws and regulations, including environmental regulations that can adversely affect the cost, manner or feasibility
of doing business.
Our operations are
subject to numerous laws and regulations in the form of international conventions and treaties, national, state and local laws
and national and international regulations in force in the jurisdictions in which our vessels operate or are registered, which
can significantly affect the ownership and operation of our vessels. These requirements include, but are not limited to, European
Union Regulations, the International Convention for the Prevention of Pollution from Ships of 1975, the International Maritime
Organization, or IMO, International Convention for the Prevention of Marine Pollution of 1973, the IMO International Convention
for the Safety of Life at Sea of 1974, the International Convention on Load Lines of 1966, the U.S. Oil Pollution Act of 1990,
or OPA, the U.S. Comprehensive Environmental Response, Compensation and Liability Act of 1980, or CERCLA, the U.S. Clean Air Act,
U.S. Clean Water Act and the U.S. Marine Transportation Security Act of 2002.
Compliance with such
laws, regulations and standards, where applicable, may require installation of costly equipment or operational changes and may
affect the resale value or useful lives of our vessels. We may also incur additional costs in order to comply with other existing
and future regulatory obligations, including, but not limited to, costs relating to air emissions including greenhouse gases, the
management of ballast waters, maintenance and inspection, development and implementation of emergency procedures and insurance
coverage or other financial assurance of our ability to address pollution incidents. These costs could have a material adverse
effect on our business, results of operations, cash flows and financial condition. 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.
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.
We are required to
satisfy insurance and financial responsibility requirements for potential oil (including marine fuel) spills and other pollution
incidents. Although we have arranged 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, results
of operations, cash flows and financial condition and our ability to pay dividends.
Increased
inspection procedures and tighter import and export controls could increase costs and disrupt our business.
International shipping
is subject to various security and customs inspections and related procedures in countries of origin, destination and trans-shipment
points. Inspection procedures may result in the seizure of the contents of our vessels, delays in the loading, offloading or delivery
of our vessels 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 may have a material adverse effect on our business, financial
condition and results of operations.
Maritime
claimants could arrest one or more of our vessels, which could interrupt our cash flow.
Crew members, suppliers
of goods and services to a vessel, shippers of cargo and other parties may be entitled to a maritime lien against a vessel for
unsatisfied debts, claims or damages. In many jurisdictions, a claimant may seek to obtain security for its claim by arresting
a vessel through foreclosure proceedings. The arrest or attachment of one or more of our vessels could interrupt our cash flow
and require us to pay large sums of money to have the arrest or attachment lifted. In addition, in some jurisdictions, such as
South Africa, under the “sister ship” theory of liability, a claimant may arrest both the vessel which is subject to
the 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 a vessel in our fleet for claims relating to another
of our vessels.
Governments
could requisition our vessels during a period of war or emergency, resulting in a loss of earnings.
A government could
requisition one or more of our vessels for title or for hire. Requisition for title occurs when a government takes control of a
vessel and becomes her owner, while requisition for hire occurs when a government takes control of a vessel and effectively becomes
her charterer at dictated charter rates. Generally, requisitions occur during periods of war or emergency, although governments
may elect to requisition vessels in other circumstances. Although we would be entitled to compensation in the event of a requisition
of one or more of our vessels, the amount and timing of payment would be uncertain. Government requisition of one or more of our
vessels may negatively impact our revenues and reduce the amount of dividends, if any, in the future.
Changes in
fuel, or bunkers, prices may adversely affect profits.
Fuel, or bunkers,
is typically the largest expense in our shipping operations for our vessels and changes in the price of fuel may adversely affect
our profitability and is a significant factor in negotiating vessel employment and cargo carriage rates. When we operate vessels
under COAs or voyage charters, we bear voyage costs, including bunkers. The price and supply of fuel is unpredictable and fluctuates
based on events outside our control, including geopolitical developments, supply and demand for oil and gas, actions by 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 may
reduce our profitability. We continually monitor the market volatility associated with bunker prices and seek to hedge our exposure
to changes in the price of marine fuels with our bunker hedging program. However, falling fuel prices resulted in mark to market
adjustments in the third and fourth quarters of 2014. We had bunker swaps, effective through December 2014, for 9,600 metric tons.
Please see “
Pangaea’s Management and Discussion Analysis of Financial Condition and Results of Operations — Quantitative
and Qualitative Disclosures about Market Risks — Fuel Swap Contracts
.”
In the highly
competitive international shipping industry, we may not be able to compete successfully for charters-in or vessel employment with
new entrants or established companies with greater resources and, as a result, we may be unable to employ our vessels profitably
or to charter-in vessels at reasonable rates.
We charter-in and
employ our vessels in a highly competitive market that is capital intensive and highly fragmented. Competition arises primarily
from other vessel owners and operators, some of whom have substantially greater resources than we do. Competition for seaborne
transportation of drybulk cargo by sea is intense and depends on the charter or freight rate, location, size, age, condition and
the acceptability of the vessel and its operators to their customers. Due in part to the highly fragmented market, competitors
with greater resources than ours are able to operate larger fleets through consolidations or acquisitions and may be able to offer
lower charter or freight rates and higher quality vessels than we are able to offer. If we are unable to successfully compete with
other drybulk shipping operators, we may be unable to retain customers or attract new customers, which would have an adverse impact
on our results of operations.
Labor interruptions
could disrupt our business.
Our vessels are manned
by masters, officers and crews that are contracted by our technical management teams. If not resolved in a timely and cost-effective
manner, industrial action or other labor unrest could prevent or hinder our operations from being carried out normally and could
have a material adverse effect on our business, financial condition, results of operations and cash flows and ability to pay dividends.
Acts of piracy
on ocean-going vessels have had and may continue to have an adverse effect on our industry.
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. Although the frequency of sea piracy continued to decrease during 2014 to its lowest
level since 2009, sea piracy incidents continue to occur, particularly in the Gulf of Aden off the coast of Somalia and increasingly
in the Gulf of Guinea and the West Coast of Africa, with drybulk vessels and tankers particularly vulnerable to such attacks. If
these piracy attacks result in regions in which our vessels are deployed being characterized as “war risk” zones by
insurers, as the Gulf of Aden temporarily was in May 2008, or Joint War Committee “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 to employ onboard security guards, could increase in such circumstances. Furthermore, the obligations for charter
hire payments and determination of on-hire days is unclear with respect to piracy. We may not be adequately insured to cover losses
from these incidents, which could have a material adverse effect on us. In addition, any detention 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 impact on our business, financial condition and results of operations.
Political
instability, terrorist attacks and international hostilities can affect the seaborne transportation industry, which could adversely
affect our business.
We conduct most of
our operations outside of the United States, and our business, results of operations, cash flows, financial condition and ability
to pay dividends, if any, in the future may be adversely affected by changing economic, political and government conditions in
the countries and regions where our vessels are employed or registered. Moreover, we operate in a sector of the economy that is
likely to be adversely impacted by the effects of political conflicts, including the current political instability in the Middle
East, North Africa, North Korea and other geographic countries and areas, terrorist or other attacks, war or international hostilities.
Terrorist attacks such as those in New York on September 11, 2001, in London on July 7, 2005, and in Mumbai on November 26, 2008,
and the continuing response of the United States and others to these attacks, as well as the threat of future terrorist attacks
around the world, continues 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 the Middle East and North Africa, and the presence of
U.S. or other armed forces in Iraq, Afghanistan and various other regions, 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. In the past, political conflicts
have also resulted in attacks on vessels, such as the attack on the MT
Limburg
, a vessel unaffiliated with us, in October
2002, 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 and the Gulf of Aden off the coast
of Somalia. Any of these occurrences could have a material adverse impact on our operating results, revenues and costs.
Our insurance
may not be adequate to cover our losses that may result from our operations due to the inherent operational risks of the seaborne
transportation industry.
We carry insurance
to protect us against most of the accident-related risks involved in the conduct of our business, including marine hull and machinery
insurance, protection and indemnity insurance, which include pollution risks, crew insurance and war risks insurance. However,
we may not be adequately insured to cover all of our potential losses, which could have a material adverse effect on us. Additionally,
our insurers may refuse to pay particular claims, and our insurance may be voidable by the insurers if we take, or fail to take,
certain action, such as failing to maintain certification of our vessels with the applicable maritime regulatory organizations.
Any significant uninsured or under-insured loss or liability could have a material adverse effect on our business, financial condition,
results of operations and cash flows and our ability to pay dividends. In addition, we may not be able to obtain adequate insurance
coverage at reasonable rates in the future during adverse insurance market conditions.
In addition, we do
not carry loss-of-hire insurance, which covers the loss of revenues during extended vessel off-hire periods, such as those that
occur during an unscheduled drydocking due to damage to the vessel from accidents. Accordingly, any loss of a vessel or extended
vessel off-hire, due to an accident or otherwise, could have a material adverse effect on our business, financial condition, results
of operations and our ability to pay dividends.
Risks Relating to Our Company
Our business
strategy includes chartering-in vessels, and we may not be able to charter-in suitable vessels.
Our business strategy
depends, in large part, on our ability to charter-in vessels. If we are not able to find suitable vessels to charter-in, or to
charter-in vessels at what we deem to be a reasonable rate, we may not be able to operate profitably or perform our contractual
obligations. As a result, we may need to adjust our business strategy, and we may experience material adverse effects on our business,
financial condition and results of operations. In addition, if we charter in a vessel and shipping rates were to subsequently decrease
or we were unable to secure employment for that vessel, our obligation under the charter to pay above-market rates may adversely
affect our financial condition and results of operations.
We depend
upon a few significant customers for a large part of our revenues and cash flow, and the loss of one or more of these customers
could adversely affect our financial performance.
We expect to derive
a significant part of our revenue and cash flow from a small number of repeat customers. For customers representing over 5% of
revenue, for the nine months ended September 30, 2014, our top three customers accounted for 19% of our revenues, and for the nine
months ended September 30, 2013, three customers accounted for 25% of our revenues. For customers representing over 5% of revenue,
for the year ended December 31, 2013, three of our customers accounted for 23% of our revenues, compared to two customers for a
total of 18% in 2012 and four customers totaling 37% of our revenues in 2011.
For the nine months
ended September 30, 2014 and 2013, the top ten customers accounted for 41% and 46% of our revenues, respectively. For the fiscal
years ended December 31, 2013, 2012 and 2011, our top 10 customers accounted for 42%, 44% and 54% of our revenues, respectively.
If one or more of our significant customers is unable to perform under one or more charters or COAs with us and we are not able
to find a replacement charter or COA, or if a customer exercises certain rights to terminate the charter or COA, we could suffer
a loss of revenues that could materially adversely affect our business, financial condition, results of operations and cash available
for distribution as dividends to our shareholders.
We could lose a customer
or the benefits of a charter or COA if, among other things:
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the customer fails to make charter payments because of its financial inability, disagreements with
us or otherwise; or
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the customer terminates the charter because we do not perform in accordance with such charter and
do not cure such failures within a specified period.
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If we lose a key customer,
we may be unable to obtain charters or COAs on comparable terms or at all. The loss of any of our customers, COAs, charters or
vessels, or a decline in payments under our agreements, could have a material adverse effect on our business, results of operations
and financial condition and our ability to pay dividends to our shareholders.
We are a
holding company, and depend on the ability of our subsidiaries, through which we operate our business, to distribute funds to us
in order to satisfy our financial obligations or to make dividend payments.
We are a holding company,
and our subsidiaries conduct all of our operations and own all of our operating assets. Our equity interests in our vessel-owning
subsidiaries represent a significant portion of our operating assets. As a result, our ability to satisfy our financial obligations
and to pay dividends to our shareholders depends on the ability of our subsidiaries to generate profits available for distribution
to us and, to the extent that they are unable to generate profits, we will be unable to pay dividends to our shareholders.
We are subject
to certain risks with counterparties on contracts and the failure of such counterparties to meet their obligations could cause
us to suffer losses or otherwise adversely affect our business and ability to comply with covenants in our loan agreements.
We enter into various
contracts that are material to the operation of our business, including COAs, time charters and voyage charters under which we
employ our vessels, and charter agreements under which we charter-in our vessels. We also enter into loan agreements and hedging
agreements, such as interest rate swap agreements, bunker swap agreements, and forward freight agreements, or FFAs. 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, including, among other things, general economic
conditions, the condition of the drybulk shipping industry, the overall financial condition of our counterparty, prevailing prices
for drybulk cargoes, rates received for specific types of vessels and voyages, and various expenses. In addition, in depressed
market conditions, our customers may no longer need us to carry a cargo that is currently under contract or may be able to obtain
carriage at a lower rate. If our customers fail to meet their obligations to us or attempt to renegotiate our employment agreements
it may be difficult to secure substitute suitable employment for such vessel, and any new charter arrangements we secure may be
at lower rates, and further, if our counterparties fail to deliver a vessel we have agreed to charter-in, or if a counterparty
otherwise fails to honor its obligations to us under a contract, we could sustain significant losses which could have a material
adverse effect on our business, financial condition, results of operations, cash flows, ability to pay dividends to holders of
our common stock in the amounts anticipated or at all and compliance with covenants in our secured loan agreements.
Additionally, we are
subject to certain risks as a result of using our vessels as collateral. If we are in breach of financial covenants contained in
our loan agreements, we may not be successful in obtaining waivers and amendments. If our indebtedness is accelerated, it may be
difficult in the current financing environment for us to refinance our debt or obtain additional financing and we could lose our
vessels if our lenders foreclose on their liens. Please see “—
We may be unable to comply with covenants in
our credit facilities or any future financial obligations that impose operating and financial restrictions on us
.”
We may be
unable to comply with covenants in our credit facilities or any future financial obligations that impose operating and financial
restrictions on us.
Certain of our credit
facilities, which are secured by mortgages on our vessels, will impose certain operating and financial restrictions on us, mainly
to ensure that the market value of the mortgaged vessel under the applicable credit facility does not fall below a certain percentage
of the outstanding amount of the loan, which we refer to as the asset coverage ratio. In addition, certain of our credit facilities
will require us to satisfy certain other financial covenants, which require us to, among other things, maintain:
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a consolidated leverage ratio of not more than 200%;
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a consolidated debt service ratio of not less than 125%;
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minimum consolidated net worth of $45 million; and
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consolidated minimum liquidity of not less than $13 million plus $1 million for each additional
vessel we acquire
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In general, the operating
restrictions that are contained in our credit facilities may prohibit or otherwise limit our ability to, among other things:
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effect changes in management of our vessels;
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sell or dispose of any of our assets, including our vessels;
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declare and pay dividends;
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incur additional indebtedness;
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mortgage our vessels; and
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incur and pay management fees or commissions.
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A violation of any
of our financial covenants or operating restrictions contained in our credit facilities may constitute an event of default under
our credit facilities, which, unless cured within the grace period set forth under the applicable credit facility, if applicable,
or waived or modified by our lenders, provides our lenders with the right to, among other things, require us to post additional
collateral, enhance our equity and liquidity, increase our interest payments, pay down our indebtedness to a level where we are
in compliance with our loan covenants, sell vessels in our fleet, reclassify our indebtedness as current liabilities and accelerate
our indebtedness and foreclose their liens on our vessels and the other assets securing the credit facilities, which would impair
our ability to continue to conduct our business.
As of September
30, 2014 and December 31, 2013, we were in compliance with all of our covenants contained in our debt
agreements.
Furthermore, certain
of our credit facilities contain a cross-default provision that may be triggered by a default under one of our other credit facilities.
A cross-default provision means that a default on one loan would result in a default on certain other loans. Because of the presence
of cross-default provisions in certain of our credit facilities, the refusal of any one lender under our credit facilities to grant
or extend a waiver could result in certain of our indebtedness being accelerated, even if our other lenders under our credit facilities
have waived covenant defaults under their respective credit facilities. If our secured indebtedness is accelerated in full or in
part, it would be very difficult in the current financing environment for us to refinance our debt or obtain additional financing
and we could lose our vessels and other assets securing our credit facilities if our lenders foreclose their liens, which would
adversely affect our ability to conduct our business.
Moreover, in connection
with any waivers of 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. 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, our lenders may require the payment of additional fees, require prepayment of a portion of
our indebtedness to them, accelerate the amortization schedule for our indebtedness and increase the interest rates they charge
us on our outstanding indebtedness.
For more information,
please read “
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity
and Capital Resources — Borrowing Activities.
”
We may be
unable to effectively manage our growth strategy.
One of our principal
business strategies is to continue to expand capacity and flexibility by increasing our owned fleet as we secure additional demand
for our services. Our growth strategy will depend upon a number of factors, some of which may not be within our control. These
factors include our ability to:
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enter into new contracts for the transportation of cargoes;
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locate and acquire suitable vessels for acquisitions at attractive prices;
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obtain required financing for our existing and new operations;
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integrate any acquired vessels successfully with our existing operations, including obtaining any
approvals and qualifications necessary to operate vessels that we acquire;
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enhance our customer base;
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hire, train and retain qualified personnel and crew to manage and operate our growing business
and fleet;
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identify additional new markets; and
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improve our operating, financial and accounting systems and controls.
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We intend to finance
our growth with cash flows from operations, and may undertake future financings. Our failure to effectively identify, purchase,
develop and integrate any vessels could adversely affect our business, financial condition and results of operations. The number
of employees that perform services for us and our current operating and financial systems may not be adequate as we implement our
plan to expand the size of our fleet, and we may not be able to effectively hire more employees or adequately improve those systems.
Finally, acquisitions may require additional equity issuances or debt issuances (with amortization payments), both of which could
lower our available cash. If any such events occur, our financial condition may be adversely affected.
Growing any business
presents numerous risks such as difficulty in obtaining additional qualified personnel and managing relationships with customers
and suppliers. The expansion of our fleet may impose significant additional responsibilities on our management and staff, and may
necessitate that we increase the number of personnel. 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.
Investment
in forward freight agreements and other derivative instruments could result in losses.
We manage our market
exposure using forward freight agreements, or FFAs, and other derivative instruments, such as bunker hedging contracts and interest
rate swap agreements. FFAs are cash-settled derivative contracts based on future freight delivery rates and other derivative instruments.
FFAs may be used to hedge exposure to the charter markets by providing for the purchase or sale of a contracted charter rate along
a specified route or combination of routes and over a specified period of time. Upon settlement, if the contracted charter rate
is less than the settlement rate, the seller of the FFA is required to pay the buyer an amount equal to the difference between
the contracted rate and the settlement rate, multiplied by the number of days in the specified period. Conversely, if the contracted
rate is greater than the settlement rate, the buyer is required to pay the seller the settlement sum. If we take positions in FFAs
and do not correctly anticipate rate movements for the specified vessel route or routes and relevant time periods or our assumptions
regarding the relative relationships of certain vessels’ earnings, routes and other factors relevant to the FFA markets are
incorrect, we could suffer losses in settling or terminating our FFAs. In addition, we cannot guarantee that such hedges will qualify
for special hedge accounting and, as such, our use of such derivatives may lead to material fluctuations in our results of operations.
We also seek to manage
our exposure to volatility in the market price of bunkers and interest rate fluctuations by entering into bunker hedging contracts
and interest rate swap agreements. Bunker prices have declined throughout the second half of 2014 in tandem with the falling oil
price. Accordingly, the bunker hedge derivatives declined in value resulting in an unrealized fair value loss in the income statement
for the nine months ended September 30, 2014. There can be no assurance that we will be able to successfully limit our risks, leaving
us exposed to unprofitable contracts and we may suffer significant losses from these hedging activities.
Our long-term
COAs, single charter bookings and time-charter agreements may result in significant fluctuations in our quarterly results, which
may adversely affect our liquidity, as well as our ability to satisfy our financial obligations.
As part of our business
strategy, we enter into long-term COAs, single charter bookings and time-charter agreements. We evaluate entering into long-term
positions based on the expected return over the full term of the contract. However, long-term contracts that we believe provide
attractive returns over their full term may produce losses over portions of the contract period. We may be required to provide
additional margin collateral in connection with FFA positions that are settled through clearinghouses, depending upon movements
in the FFA markets. These interim losses, fluctuations in our quarterly results or incremental collateral requirements may adversely
affect our financial liquidity, as well as our ability to satisfy our financial obligations.
We depend
on COAs, which could require us to operate at unfavorable rates for a certain amount of time or subject us to other operating risks.
A significant portion
of our revenues are derived from COAs. While COAs provide a relatively stable and predictable source of revenue, they typically
fix the rate we are paid for our drybulk shipping services. Once we have entered into a COA, if we have not correctly anticipated
vessel rates, location and availability for our owned or chartered-in fleet to fulfill the COA, we could suffer losses. Moreover,
factors beyond our control may cause the rates we are paid under that COA to become unprofitable. Nevertheless, we would be obligated
to continue to perform at these rates for the term of the COA. In addition, factors beyond our control, such as vessel availability,
port delays or congestion, changes in government or industry rules or regulation, industrial actions or acts of terrorism or war,
could affect our ability to perform our obligations under our COAs, which could result in breach of contract or other claims by
our COA counterparties. Any of these occurrences could have a material adverse effect on our business, financial condition and
results of operations and financial condition.
We are an
“emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth
companies will make our common shares less attractive to investors.
We are an “emerging
growth company,” as defined in the Jumpstart our Business Startups Act of 2012, or the JOBS Act, and we may take advantage
of certain exemptions from various reporting requirements that are applicable to other public companies. These exemptions include
not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley,
reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions
from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute
payments not previously approved. Such exemptions may be available until the last day of 2018, provided no other disqualifying
provisions of the JOBS Act have been triggered at an earlier date. Investors may find our common shares and the price of our common
shares less attractive because we rely, or may rely, on these exemptions. If some investors find our common shares less attractive
as a result, there may be a less active trading market for our common shares and the price of our common shares may be more volatile.
In addition, under
the JOBS Act, “emerging growth companies” can delay adopting new or revised accounting standards until such time as
those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised
accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies
that are not “emerging growth companies.”
We could remain an
“emerging growth company” until the last day of 2018, although a variety of circumstances could cause us to lose that
status earlier. For as long as we take advantage of the reduced reporting obligations, the information that we provide shareholders
may be different from information provided by other public companies.
Obligations
associated with being a public company require significant company resources and management attention, and we have incurred and
will continue to incur increased costs as a result of being a public company.
We are subject to
the reporting requirements of the Securities Exchange Act of 1934, as amended, or the “Exchange Act,” and the other
rules and regulations of the SEC, including, over time, Sarbanes-Oxley, and requirements of the NASDAQ Global Select Market. These
requirements and rules have placed and will continue to place a strain on our systems and resources. For example, the Exchange
Act requires that we file annual, quarterly and current reports with respect to our business and financial condition and Sarbanes-Oxley
requires that we maintain effective disclosure controls and procedures and internal control over financial reporting. These reporting
and other obligations have placed and will continue to place significant demands on our management, administrative, operational
and accounting resources and have caused and will continue to cause us to incur significant legal, accounting and other expenses
that we had not previously incurred. The expenses incurred by public companies, generally, for reporting and corporate governance
purposes have been increasing and the costs we will incur for such purposes may strain our resources. We expect these rules and
regulations to increase our legal and financial compliance costs, divert management's attention to ensure compliance and to make
some activities more time-consuming and costly. We may need to upgrade our systems or create new systems, implement additional
financial and management controls, reporting systems and procedures, create or outsource an internal audit function, and hire additional
accounting and finance staff. If we are unable to accomplish these objectives in a timely and effective fashion, our ability to
comply with the financial reporting requirements and other rules that apply to reporting companies could be impaired. In addition,
our limited management resources may exacerbate the difficulties in complying with these reporting and other requirements while
focusing on executing our business strategy. Our incremental general and administrative expenses as a publicly traded corporation
will include costs associated with reports to shareholders, tax returns, investor relations, registrar and transfer agent’s
fees, incremental director and officer liability insurance costs and director compensation. We cannot predict or estimate the amount
of the additional costs we may incur, the timing of such costs or the degree of impact that our management’s attention to
these matters will have on our business. Any failure to maintain effective internal control over financial reporting could have
a material adverse effect on our business, prospects, liquidity, results of operations and financial condition. Furthermore, if
we are unable to satisfy our obligations as a public company, we could be subject to delisting of our common stock, fines, sanctions
and other regulatory action.
As a public company,
we are required to comply with certain provisions of Section 404 of Sarbanes-Oxley as early as December 31, 2014, although as an
“emerging growth company” we are exempt from certain of its requirements for so long as we remain as such. For example,
Section 404 of Sarbanes-Oxley requires that we and our independent auditors report annually on the effectiveness of our internal
control over financial reporting, however, as an “emerging growth company” we may take advantage of an exemption from
the auditor attestation requirement. Once we are no longer an “emerging growth company” or, if prior to such
date, we opt to no longer take advantage of the applicable exemption, we will be required to include an opinion from our
independent auditors on the effectiveness of our internal control over financial reporting. Management, however, is not exempt
from this requirement, and will be required to, among other things, maintain and periodically evaluate our internal control over
financial reporting and disclosure controls and procedures. In particular, we will need to perform system and process evaluation
and testing of our internal control over financial reporting to allow us to report on the effectiveness of our internal control
over financial reporting, as required.
As an “emerging
growth company,” we also intend to continue to take advantage of certain other exemptions from various reporting requirements
that are applicable to other public companies that are not “emerging growth companies” including, but not limited to,
reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from
the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute
payments not previously approved. We intend to take advantage of these reporting exemptions until we are no longer an “emerging
growth company,” at which time we expect to incur significant additional expenses and devote substantial management effort
toward ensuring compliance with these additional requirements, including Section 404 of the Sarbanes-Oxley Act.
A failure
to pass inspection by classification societies could result in one or more vessels being unemployable unless and until they pass
inspection, resulting in a loss of revenues from such vessels for that period and a corresponding decrease in earnings.
The hull and machinery
of every commercial vessel must be classed by a classification society authorized by its country of registry. The classification
society certifies that a vessel is safe and seaworthy in accordance with the applicable rules and regulations of the country of
registry of the vessel and the United Nations Safety of Life at Sea Convention. Our owned fleet is currently enrolled with Bureau
Veritas (BV), De Norske Veritas (DNV), and Nippon Kaiji Kyokai (NK).
A vessel must undergo
annual surveys, intermediate surveys and special surveys. In lieu of a special survey, a vessel’s machinery may be on a continuous
survey cycle, under which the machinery would be surveyed periodically over a five-year period. Our vessels are on special survey
cycles for hull inspection and continuous survey cycles for machinery inspection. Every vessel is also required to be drydocked
every 30 to 60 months for inspection of the underwater parts of such vessel.
If any vessel fails
any annual survey, intermediate survey or special survey, the vessel may be unable to trade between ports and, therefore, would
be unemployable, potentially causing a negative impact on our revenues due to the loss of revenues from such vessel until it was
able to trade again.
If we purchase
and operate secondhand vessels, we will 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.
As part of our current
business strategy to increase our owned fleet, we may acquire new and secondhand vessels. While we typically inspect secondhand
vessels prior to purchase, 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. Even if we do physically inspect a secondhand vessel, an inspection
does not provide us with the same knowledge about its condition that we would have if the vessel had been built for and operated
exclusively by us. Accordingly, we may not discover defects or other problems with secondhand vessels prior to purchase or charter,
or may incur costs to terminate a purchase agreement. Any such hidden defects or problems, when detected, may be expensive to repair,
and if not detected, may result in accidents or other incidents for which we may become liable to third parties. Generally, we
do not receive the benefit of warranties from the builders for the secondhand vessels that we acquire. In addition, to the extent
we charter-in vessels that are not in good repair or do not meet our expected specifications, we may be unable to profitably perform
under the related COA.
In general, the costs
to maintain a vessel in good operating condition increase with the age of the vessel. Older vessels are typically less fuel-efficient
than more recently constructed vessels due to improvements in engine technology. Cargo insurance rates increase with the age of
a vessel, making older vessels less desirable to charterers.
Furthermore, governmental
regulations, safety or other equipment standards related to the age of vessels may require expenditures for alterations, or the
addition of new equipment, to our vessels and may restrict the type of activities in which the vessels may engage. As our vessels
age, market conditions may not justify those expenditures or enable us to operate our vessels profitably during the remainder of
their useful lives.
Unless we
set aside reserves or are able to borrow funds for vessel replacement, we will be unable to replace the vessels in our fleet at
the end of their useful lives.
Unless we maintain
reserves or are able to borrow or raise funds for vessel replacement, we will be unable to replace the vessels in our fleet upon
the expiration of their remaining useful lives. We estimate the useful life of most of our vessels to be 25 years to 30 years from
the date of initial delivery from the shipyard. The remaining estimated useful lives of our fleet range from 1 to 29 years, depending
on the type of vessel and market conditions. The average age of our owned drybulk carriers at the time of this prospectus will
be approximately 15 years. A portion of our cash flows and income are dependent on the revenues earned by employing our vessels.
If we are unable to replace the vessels in our fleet upon the expiration of their useful lives, our business, results of operations,
financial condition and ability to pay dividends could be materially and adversely affected. We currently do not maintain reserves
for vessel replacements. We intend to finance vessel replacements from internally generated cash flow, borrowings under our credit
facilities or additional equity or debt offerings. Any reserves set aside for vessel replacement may not be available for dividends.
Our ability
to obtain additional debt financing, or refinance any existing indebtedness, may be dependent on the performance and length of
our COAs and charters and the creditworthiness of our contract counterparties.
The performance and
length of our COAs and charters and the actual or perceived credit quality of our contract counterparties, and any defaults by
them, may materially affect our ability to obtain the additional capital resources required to purchase additional vessels or may
significantly increase our costs of obtaining such capital. Our inability to obtain additional financing at anticipated costs or
at all may materially affect our results of operations and our ability to implement our business strategy.
We intend to partially
finance acquisitions of vessels with borrowings drawn under credit facilities. While we may refinance amounts drawn under our credit
facilities with the net proceeds of future debt and equity offerings, we cannot assure you that we will be able to do so at interest
rates and on terms that are acceptable to us or at all. If we are not able to refinance these amounts with the net proceeds of
debt and equity offerings at an interest rate or on terms acceptable to us or at all, we will have to dedicate a larger portion
of our cash flow from operations to pay the principal and interest of this indebtedness. If we are not able to satisfy these obligations,
we may have to undertake alternative financing plans. The actual or perceived credit quality of our contract counterparties, any
defaults by them and the market value of our fleet, among other things, may materially affect our ability to obtain alternative
financing. In addition, debt service payments under our credit facilities or alternative financing may limit funds otherwise available
for working capital, capital expenditures, the payment of dividends and other purposes. If we are unable to meet our debt obligations,
or if we otherwise default under our credit facilities or alternative financing arrangements, our lenders could declare the debt,
together with accrued interest and fees, to be immediately due and payable and foreclose on our fleet, which could result in the
acceleration of other indebtedness that we may have at such time and the commencement of similar foreclosure proceedings by other
lenders.
We depend
on our Chief Executive Officer, our Chief Financial Officer and other key employees, and the loss of their services would have
a material adverse effect on our business, results and financial condition.
We depend on the efforts,
knowledge, skill, reputations and business contacts of our Chief Executive Officer, Edward Coll, and our Chief Financial Officer,
Anthony Laura, and other key employees including Claus Boggild, Christian Bonfils, Mads Boye Petersen, Peter Koken, Robert Seward,
Fotis Doussopoulos, and
Gianni Del Signore. Accordingly, our success will depend on the continued
service of these individuals. We do not have employment agreements with our executive officers. We may experience departures of
senior executive officers and other key employees, and we cannot predict the impact that any of their departures would have on
our ability to achieve our financial objectives. The loss of the services of any of them could have a material adverse effect on
our business, results of operations and financial condition.
Our senior
executive officers and directors may not be able to successfully organize and manage a publicly traded company.
Not all of our senior
executive officers or directors have previously organized and managed a publicly traded company, and they may not be successful
in doing so. The demands of organizing and managing a publicly traded company, like ours, is much greater as compared to those
of a private company, and some of our senior executive officers and directors may not be able to successfully meet those increased
demands.
We are incorporated
in Bermuda and it may not be possible for our investors to enforce U.S. judgments against us.
We are incorporated
in Bermuda and substantially all of our assets are located outside the U.S. In addition, one of our directors is a non-resident
of the U.S., and all or a substantial portion of such director’s assets are located outside the U.S. As a result, it may
be difficult or impossible for U.S. investors to serve process within the U.S. upon us or our directors and executive officers,
or to enforce a judgment against us for civil liabilities in U.S. courts.
In addition, you should
not assume that courts in the countries in which we are incorporated or where our assets are located would enforce judgments of
U.S. courts obtained in actions against us based upon the civil liability provisions of applicable U.S. federal and state securities
laws or would enforce, in original actions, liabilities against us based on those laws.
Because we
are a foreign corporation, you may not have the same rights that a shareholder in a U.S. corporation may have.
We are a Bermuda exempted
company. Our memorandum of association, bye-laws and The Companies Act, 1981 of Bermuda, (the “Companies Act”), govern
our affairs. The Companies Act does not as clearly establish your rights and the fiduciary responsibilities of our directors as
do statutes and judicial precedent in some U.S. jurisdictions. Therefore, you may have more difficulty in protecting your interests
as a shareholder in the face of actions by the management, directors or controlling shareholders than would shareholders of a corporation
incorporated in a United States jurisdiction. There is a statutory remedy under Section 111 of the Companies Act which provides
that a shareholder may seek redress in the courts as long as such shareholder can establish that our affairs are being conducted,
or have been conducted, in a manner oppressive or prejudicial to the interests of some part of the shareholders, including such
shareholder. However, you may not have the same rights that a shareholder in a U.S. corporation may have.
We may be
subject to litigation, arbitration and other proceedings that could have an adverse effect on our business.
We may be, from time
to time, involved in various litigation matters arising in the ordinary course of business or otherwise. These matters may include,
among other things, contract disputes, personal injury claims, environmental matters, governmental claims for taxes or duties,
securities, or maritime matters. The potential costs to resolve any claim or other litigation matter, or a combination of these,
may have a material adverse effect on us because of potential negative outcomes, the costs associated with asserting our claims
or defending such lawsuits, and the diversion of management's attention to these matters.
United States
tax authorities could treat us as a “passive foreign investment company,” which could have adverse United States federal
income tax consequences to U.S. holders.
A foreign corporation
will be treated as a “passive foreign investment company,” or PFIC, for United States federal income tax purposes if
either (1) at least 75% of its gross income for any taxable year consists of certain types of “passive income” or (2)
at least 50% of the average value of the corporation's assets produce or are held for the production of those types of “passive
income.” For purposes of these tests, “passive income” includes dividends, interest, and gains from the sale
or exchange of investment property and rents and royalties other than rents and royalties which are received from unrelated parties
in connection with the active conduct of a trade or business. For purposes of these tests, income derived from the performance
of services does not constitute “passive income.” United States shareholders of a PFIC are subject to a disadvantageous
United States 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.
Based on our proposed
method of operation, we do not believe that we will be a PFIC with respect to any taxable year. In this regard, we intend to treat
the gross income we derive or are deemed to derive from our time chartering activities as services income, rather than rental income.
Accordingly, we believe that our income from our time chartering activities does not constitute “passive income,” and
the assets that we own and operate in connection with the production of that income do not constitute passive assets.
There is, however,
no direct legal authority under the PFIC rules addressing our proposed method of operation. Accordingly, no assurance can be given
that the United States Internal Revenue Service, or 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. Moreover, no assurance can be given that we would not constitute a PFIC
for any future taxable year if there were to be changes in the nature and extent of our operations.
If the IRS finds that
we are or have been a PFIC for any taxable year, our United States shareholders will face adverse United States tax consequences.
Under the PFIC rules, unless those shareholders make an election available under the Code (which election could itself have adverse
consequences for such shareholders), such shareholders would be liable to pay United States federal income tax at the then prevailing
income tax rates on ordinary income plus interest upon excess distributions and upon any gain from the disposition of our common
shares, as if the excess distribution or gain had been recognized ratably over the shareholder’s holding period of our common
shares.
We may have
to pay tax on United States source income, which would reduce our earnings
Under sections 863(c)(3)
and 887(a) of the United States Internal Revenue Code of 1986, as amended, or the “Code,” 50% of the gross shipping
income of a vessel owning or chartering corporation, such as ourselves and our subsidiaries, that is attributable to transportation
that begins or ends, but that does not both begin and end, in the United States may be subject to a 4% United States federal income
tax without allowance for deduction, unless that corporation qualifies for exemption from tax under section 883 of the Code and
the applicable Treasury Regulations recently promulgated thereunder.
We expect that we
and each of our subsidiaries qualify for this statutory tax exemption and we will take this position for United States federal
income tax return reporting purposes. However, there are factual circumstances beyond our control that could cause us to lose the
benefit of this tax exemption and thereby become subject to United States federal income tax on our United States source income.
Due to the factual nature of the issues involved, we can give no assurances on our tax-exempt status or that of any of our subsidiaries.
If we or our subsidiaries
are not entitled to exemption under Code section 883 for any taxable year, we or our subsidiaries could be subject for those years
to an effective 2% United States federal income tax on the shipping income these companies derive during the year that are attributable
to the transport or cargoes to or from the United States. The imposition of this taxation would have a negative effect on our business
and would result in decreased earnings available for distribution to our shareholders.
We have previously
identified material weaknesses in our internal control over financial reporting and may identify additional material weaknesses
in the future that may cause us to fail to meet our reporting obligations or result in material misstatements of our financial
statements.
As a privately held
company until October 1, 2014, we were not required to maintain internal control over financial reporting in a manner that meets
the standards of an SEC registrant required by Section 404(a) of the Sarbanes-Oxley Act. However, our management team is responsible
for establishing and maintaining adequate internal control over
financial reporting. Internal
control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements in accordance with U.S. generally accepted accounting principles. A material weakness
is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable
possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely
basis.
Our management team
previously determined that we had material weaknesses in our controls over financial reporting. The material weaknesses were as
follows:
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our controls and procedures over the financial statement close process were not effectively designed
to assess whether financial statements are in compliance with GAAP due to lack of sufficient resources. This matter was specifically
identified in relation to the accounting for and reporting of complex accounting matters, evaluation of balance sheet classifications
and period-end cut-off, and the appropriate preparation of the underlying accounting records; and
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we did not have adequate controls in place in our finance and accounting function to ensure appropriate
segregation of duties. The lack of segregation of duties existed in key areas such as: review and approval of journal entries,
payroll processing, information systems administration and cash disbursements.
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Historically, we have
not had sufficient accounting and supervisory personnel or adequate formally documented accounting policies and procedures to support
effective internal controls and appropriate segregation of duties. We have commenced the process of formally documenting, reviewing
and improving our internal control over financial reporting. We have made efforts to improve our internal control and accounting
policies and procedures. These efforts included hiring new accounting personnel. In addition, our Audit Committee includes two members with experience as chief financial officers of publicly traded companies. However, we may
identify additional deficiencies, including material weaknesses, or fail to remediate the identified deficiencies in our internal
controls. If material weaknesses or deficiencies in our internal controls exist and go undetected, our financial statements could
contain material misstatements that, when discovered in the future, could cause us to fail to meet our future reporting obligations
and cause the price of our common stock to decline.
We cannot assure you
that we will not continue to have material weaknesses or significant deficiencies in our internal control over financial reporting.
If we are unable to successfully remediate any material weakness or significant deficiency in our internal control over financial
reporting, or identify any material weaknesses or significant deficiencies that may exist, the accuracy and timing of our financial
reporting may be adversely affected, we may be unable to maintain compliance with securities law requirements regarding timely
filing of periodic reports in addition to applicable stock exchange listing requirements, and our stock price may decline materially
as a result.
Pursuant to Section
404(a) of the Sarbanes-Oxley Act, we will be required to furnish a report by our management on our internal control over financial
reporting. We have begun the process of documenting and evaluating our system of internal control over financial reporting necessary
for our management to issue this report. However, we anticipate that we will need to retain additional finance capabilities and
build our financial infrastructure as we transition to operating as a public company, including complying with the requirements
of Section 404 of the Sarbanes-Oxley Act.
Until we are able
to expand our finance and administrative capabilities and establish necessary financial reporting infrastructure, we may not be
able to prepare and disclose, in a timely manner, our financial statements and other required disclosures or comply with the Sarbanes-Oxley
Act or existing or new reporting
requirements. If we cannot provide reliable financial reports
or prevent fraud, our business and results of operations could be harmed and investors could lose confidence in our reported financial
information.
Risks Relating to
this Offering and Our Common Shares
Our share
price may be volatile or may decline regardless of operating performance.
The market price of
our common shares may fluctuate significantly in the future. Some of the factors that could negatively affect the market price
of our common shares include:
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actual or anticipated variations in our quarterly operating results;
|
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|
·
|
changes in our earnings estimates or publication of research reports about us or the real estate
industry;
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·
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changes in market valuations of similar companies;
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·
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any indebtedness we incur in the future;
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·
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changes in credit markets and interest rates;
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·
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changes in government policies, laws and regulations;
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·
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additions to or departures of our key management personnel;
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·
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actions by shareholders;
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·
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speculation in the press or investment community;
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·
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strategic actions by us or our competitors;
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·
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changes in our credit ratings;
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·
|
general market and economic conditions;
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·
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our failure to meet, or the lowering of, our earnings estimates or those of any securities analysts;
and
|
|
|
·
|
price and volume fluctuations in the stock market generally.
|
The stock markets
have experienced extreme volatility in recent years that has been unrelated to the operating performance of particular companies.
These broad market fluctuations may adversely affect the trading price of our common shares. In the past, securities class action
litigation has often been instituted against companies following periods of volatility in their stock price. This type of litigation,
even if it does not result in liability for us, could result in substantial costs to us and divert management’s attention
and resources.
Future resales
of our common shares issued to the Former Pangaea Holders may cause the market price of our securities to drop significantly, even
if our business is doing well.
The Former Pangaea
Holders are restricted from selling any of the common shares that they received as a result of the Mergers for a period of twelve
months following the consummation of the Mergers, subject to certain exceptions, pursuant to certain lock-up agreements executed
on October 1, 2014 pursuant to the Merger Agreement.
Subject to these restrictions,
we also entered into a registration rights agreement upon consummation of the Mergers with the Former Pangaea Holders pursuant
to which such holders were granted certain demand and “piggy-back” registration rights with respect to their securities.
Furthermore, the Former Pangaea Holders may sell common shares pursuant to Rule 144 under the Securities Act, if available, rather
than under a registration statement. In these cases, the resales must meet the criteria and conform to the requirements of that
rule, including waiting one year after our filing with the SEC of a Current Report on Form 8-K containing the Form 10 type information
reflecting the consummation of the Mergers, which we filed on October 8, 2014.
Upon expiration of
the applicable lock-up periods, and upon effectiveness of the registration statement we file pursuant to the registration rights
agreement or upon satisfaction of the requirements of Rule 144 under the Securities Act, the Former Pangaea Holders may sell large
amounts of the common shares in the open market or in privately negotiated transactions, which could have the effect of increasing
the volatility in our stock price or putting significant downward pressure on the price of our common shares.
If securities
or industry analysts do not publish research or publish misleading or unfavorable research about our business, our share price
and trading volume could decline.
The trading market
for our common shares depends in part on the research and reports that securities or industry analysts publish about us or our
business. If one or more of these analysts ceases coverage of our Company or fails to publish reports on us regularly, demand for
our shares could decrease, which could cause our share price or trading volume to decline.
Holders of
our shares may have difficulty effecting service of process on us or enforcing judgments against us in the United States.
We are a Bermuda exempted
company. As a result, the rights of holders of our common shares will be governed by Bermuda law and our memorandum of association
and bye-laws. The rights of shareholders under Bermuda law may differ from the rights of shareholders of companies incorporated
in other jurisdictions. Certain of our directors and some of the named experts referred to in this prospectus are not residents
of the United States, and a substantial portion of our assets are located outside the United States. As a result, it may be difficult
for investors to affect service of process on those persons in the United States or to enforce in the United States judgments obtained
in U.S. courts against us or those persons based on the civil liability provisions of the U.S. securities laws. It is doubtful
whether courts in Bermuda will enforce judgments obtained in other jurisdictions, including the United States, against us or our
directors or officers under the securities laws of those jurisdictions or entertain actions in Bermuda against us or our directors
or officers under the securities laws of other jurisdictions.
Future offerings
of debt or equity securities, which may rank senior to our common shares, may restrict our operating flexibility and adversely
affect the market price of our common shares.
If we decide to issue
debt securities in the future, it is likely that they will be governed by an indenture or other instrument containing covenants
restricting our operating flexibility. Additionally, any equity securities or convertible or exchangeable securities that we issue
in the future may have rights, preferences and privileges more favorable than those of our common shares and may adversely affect
the market price of our common shares. Any such debt or preference equity securities will rank senior to our common shares and
will also have priority with respect to any distributions upon a liquidation, dissolution or similar event, which could result
in the loss of all or a portion of your investment. Our decision to issue such securities will depend on market conditions and
other factors beyond our control, and we cannot predict or estimate the amount, timing or nature of our future offerings.
The
Offering
Offering
Summary
|
Issuer
|
Pangaea Logistics Solutions Ltd.
|
|
|
|
|
Securities Offered
|
Up to 291,953 common shares.
|
|
|
|
|
Use of Proceeds
|
We will not receive any cash proceeds from the selling shareholders’ sale of common shares covered by this Prospectus. See “Description of Business” and “Use of Proceeds”.
|
|
|
|
|
NASDAQ Trading Symbol
|
Our common shares are traded on the NASDAQ Capital Market under the symbol “PANL”.
|
|
|
|
|
Risk Factors
|
Ownership
of the common shares offered hereby involves a high degree of risk and should not be purchased by investors who cannot afford
the loss of their entire investment. See “Risk Factors” beginning on page 3.
|
USE
OF PROCEEDS
We will not receive
any cash proceeds from the selling shareholders’ sale of common shares covered by this Prospectus.
DETERMINATION
OF OFFERING PRICE
The offering price
of the securities offered by the selling shareholders will be determined by the prevailing market price for the common shares at
the time of sale or negotiated transactions.
DIVIDEND
POLICY
Under our Bye-laws,
our board of directors may declare dividends or distributions out of contributed surplus and may also pay interim dividends to
be paid in cash, shares of the Company’s stock or any combination thereof. Our board of directors’ objective is to generate competitive returns for our shareholders. Any dividends declared will
be in the sole discretion of the board of directors and will depend upon earnings, restrictions in our debt agreements described
later in this prospectus, market prospects, current capital expenditure programs and investment opportunities, the provisions of
Bermuda Law affecting the payment of distributions to shareholders and other factors. Under Bermuda law, the board of directors
has no discretion to declare or pay a dividend if there are reasonable grounds for believing that the Company is, or would after
the payment be, unable to pay its liabilities as they become due or the realizable value of the Company’s assets would thereby
be less than its liabilities.
In addition, since
we are a holding company with no material assets other than the shares of our subsidiaries through which we conduct our operations,
our ability to pay dividends will depend on our subsidiaries’ distributing to us their earnings and cash flows.
During the years ended
December 31, 2012 and 2013, we declared $15.1 million and $12.7 million dividends respectively, on our common shares. No dividends
were declared in the year ended December 31, 2014 or the nine-month periods ended September 30, 2013 and 2014. During the year
ended December 31, 2012, $8.2 million of the $15.1 million declared dividend was paid in the form of 8,201.425 shares of convertible
redeemable preferred stock at $1,000 per share. All convertible redeemable preferred stock was converted to common stock in conjunction
with the Mergers.
We cannot assure you
that we will be able to pay regular quarterly dividends, and our ability to pay dividends will be subject to the limitations set
forth above and in the section of this prospectus titled “Risk Factors.”
SELLING SHAREHOLDERS
We are registering
the offer and sale of common shares in order to permit the Selling Shareholders to offer the common shares for resale from time
to time. None of the selling shareholders or any of their affiliates has held a position or office, or had any other material relationship,
with us within the past three years.
The following table
sets forth information with respect to the Selling Shareholders and the number of common shares beneficially owned by each Selling
Shareholder that may be offered for sale under this prospectus. The percentage of common shares beneficially owned before the offering
is based on 34,756,997 aggregate common shares outstanding as of December 31, 2014. In addition, a Selling Shareholder may have
sold, transferred or otherwise disposed of all or a portion of that shareholder’s common shares since the date on which they
provided information for this table. We are relying on the selling shareholders to notify us of any changes in their beneficial
ownership after the date they originally provided this information.
Name of Selling
Shareholder
|
|
Common Shares
Beneficially Owned (1)
|
|
|
Percentage of
Common Shares
Beneficially Owned
|
|
|
Maximum Common
Shares that may be
sold in the Offering
|
|
|
EBC
|
|
|
176,664
|
|
|
|
0.51
|
%
|
|
|
176,664
|
|
|
Jefferies
|
|
|
85,868
|
|
|
|
0.25
|
%
|
|
|
85,868
|
|
|
Dinan
|
|
|
29,441
|
|
|
|
0.08
|
%
|
|
|
29,441
|
|
_______________________
|
|
(1)
|
The beneficial ownership of the common shares by the Selling Shareholders set forth in the table is
determined in accordance with Rule 13d-3 under the Exchange Act, and the information is not necessarily indicative of beneficial
ownership for any other purpose. Under such rule, beneficial ownership includes any common shares as to which the Selling Shareholder
has sole or shared voting power or investment power and also any common shares that the Selling Shareholder has the right to acquire
within 60 days. The percentage of beneficial ownership is calculated based on 34,756,997 outstanding common shares, which does
not take into account the shares that may be issued to the Former Pangaea Holders upon achievement of certain net income targets.
Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to
all common shares beneficially owned by them.
|
PLAN
OF DISTRIBUTION
We are registering
the offer and sale of common shares covered by this prospectus to permit Selling Shareholders to conduct public secondary trading
of these common shares from time to time after the date of this prospectus. We will not receive any of the proceeds of the sale
of the common shares offered by this prospectus. The aggregate proceeds to the Selling Shareholders from the sale of the common
shares will be the purchase price of the common shares less any discounts and commissions. A Selling Shareholder reserves the right
to accept and, together with their agents, to reject, any proposed purchases of common shares to be made directly or through agents.
The common shares
offered by this prospectus may be sold from time to time to purchasers:
|
|
·
|
directly by the Selling Shareholders and their successors, which include their donees, pledgees
or transferees or their successors-in-interest, or
|
|
|
·
|
through underwriters, broker-dealers or agents, who may receive compensation in the form of discounts,
commissions or agent’s commissions from the Selling Shareholders or the purchasers of the common shares. These discounts,
concessions or commissions may be in excess of those customary in the types of transactions involved.
|
The Selling Shareholders
and any underwriters, broker-dealers or agents who participate in the sale or distribution of the common shares may be deemed to
be “underwriters” within the meaning of the Securities Act. The selling shareholders identified as or affiliated with
registered broker-dealers in the Selling Shareholders table above (under “Selling Shareholders”) are deemed to be underwriters
with respect to securities sold by them pursuant to this prospectus. As a result, any profits on the sale of the common shares
by such selling shareholders and any discounts, commissions or agent’s commissions or concessions received by any such broker-dealer
or agents may be deemed to be underwriting discounts and commissions under the Securities Act. Selling Shareholders who are deemed
to be “underwriters” within the meaning of Section 2(11) of the Securities Act will be subject to prospectus delivery
requirements of the Securities Act. Underwriters are subject to certain statutory liabilities, including, but not limited to, Sections
11, 12 and 17 of the Securities Act.
The common shares
may be sold in one or more transactions at:
|
|
·
|
prevailing market prices at the time of sale;
|
|
|
·
|
prices related to such prevailing market prices;
|
|
|
·
|
varying prices determined at the time of sale; or
|
These sales may be
effected in one or more transactions:
|
|
·
|
on any national securities exchange or quotation on which the common shares may be listed or quoted
at the time of the sale;
|
|
|
·
|
in the over-the-counter market;
|
|
|
·
|
in transactions other than on such exchanges or services or in the over-the-counter market;
|
|
|
·
|
through the writing of options, whether such options are listed on an options exchange or otherwise;
|
|
|
·
|
ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
|
|
|
·
|
block trades in which the broker-dealer will attempt to sell the common shares as agent but may
position and resell a portion of the block as principal to facilitate the transaction;
|
|
|
·
|
purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
|
|
|
·
|
an exchange distribution in accordance with the rules of the applicable exchange;
|
|
|
·
|
privately negotiated transactions;
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|
|
·
|
through the settlement of short sales;
|
|
|
·
|
sales pursuant to Rule 144 or Rule 144A;
|
|
|
·
|
broker-dealers may agree with the Selling Shareholder to sell a specified number of common shares
at a stipulated price per share;
|
|
|
·
|
through any combination of the foregoing; or
|
|
|
·
|
any other method permitted pursuant to applicable law.
|
These transactions
may include block transactions or crosses. Crosses are transactions in which the same broker acts as an agent on both sides of
the trade.
In connection with
the sales of the common shares, the Selling Shareholders may enter into hedging transactions with broker-dealers or other financial
institutions which in turn may:
|
|
·
|
engage in short sales of the common shares in the course of hedging their positions;
|
|
|
·
|
sell the common shares short and deliver the common shares to close out short positions;
|
|
|
·
|
loan or pledge the common shares to broker-dealers or other financial institutions that in turn
may sell the common shares;
|
|
|
·
|
enter into option or other transactions with broker-dealers or other financial institutions that
require the delivery to the broker-dealer or other financial institution of the common shares, which the broker-dealer or other
financial institution may resell under the prospectus; or
|
|
|
·
|
enter into transactions in which a broker-dealer makes purchases as a principal for resale for
its own account or through other types of transactions.
|
The common shares
may be offered to the public either through underwriting syndicates represented by one or more managing underwriters or directly
by one or more of such firms. The obligations of underwriters or dealers to purchase the common shares offered will be subject
to certain conditions precedent and the terms of any agreement entered into with the underwriters. Any public offering price and
any discount or concession allowed or reallowed or paid by underwriters or dealers to other dealers may be changed from time to
time.
To our knowledge,
there are currently no plans, arrangements or understandings between any Selling Shareholders and any underwriter, broker-dealer
or agent regarding the sale of the common shares by the Selling Shareholders.
In order to comply
with the securities laws of certain states, if applicable, the common shares may be sold only through registered or licensed brokers
or dealers. In addition, in certain states, the common shares may not be sold unless they have been registered or qualified for
sale in the state or an exemption from the registration or qualification requirement is available and complied with. Brokers, dealers,
underwriters, or agents participating in the distribution of the common shares as agents may receive compensation in the form of
commissions, discounts, or concessions from the selling stockholder and/or purchasers of the common shares for whom the broker-dealers
may act as agent. The compensation paid to a particular broker-dealer may be less than or in excess of customary commissions.
None of the Company
or any of the Selling Shareholders can presently estimate the amount of compensation that any agent will receive. We know of no
existing arrangements between the Selling Shareholders, any other stockholder, broker, dealer, underwriter, or agent relating to
the sale or distribution of the common shares offered by this Prospectus. At the time a particular offer of shares is made, a Prospectus
supplement, if required, will be distributed that will set forth the names of any agents, underwriters, or dealers and any compensation
from the Selling Stockholder, and any other required information.
Our common stock is
listed on the Nasdaq Capital Market under the symbol “PANL.”
We will pay all of
the expenses incident to the registration, offering, and sale of the common shares to the public other than commissions or discounts
of underwriters, broker-dealers, or agents.
There can be no assurance
that any Selling Shareholder will sell any or all of the common shares under this prospectus. Further, we cannot determine whether
any such Selling Shareholder will transfer, devise or gift the common shares by other means not described in this prospectus. In
addition, any common shares covered by this prospectus that qualify for sale under Rule 144 of the Securities Act may be sold under
Rule 144 rather than under this prospectus. The common shares covered by this prospectus may also be sold to non-U.S. persons outside
the U.S. in accordance with Regulation S under the Securities Act rather than under this prospectus. The common shares may be sold
in some states only through registered or licensed brokers or dealers. In addition, in some states the common shares may not be
sold unless they have been registered or qualified for sale or an exemption from registration or qualification is available and
complied with.
The Selling Shareholders
and any other person participating in the sale of the common shares will be subject to the Exchange Act. The Exchange Act rules
include, without limitation, Regulation M. While the Selling Shareholders are engaged in a distribution of the common shares included
in this Prospectus, they are required to comply with Regulation M promulgated under the Exchange Act, and are aware of their compliance
obligations pursuant to Regulation M. With certain exceptions, Regulation M precludes the Selling Shareholders, any affiliated
purchasers, and any broker-dealer or other person who participates in the distribution from bidding for or purchasing, or attempting
to induce any person to bid for or purchase any security which is the subject of the distribution until the entire distribution
is complete.
Regulation M also
prohibits any bids or purchases made in order to stabilize the price of a security in connection with the distribution of that
security. All of the foregoing may affect the marketability of the common shares offered pursuant to this Prospectus. This offering
will terminate on the date that all shares offered by this Prospectus have been sold by the Selling Shareholders or may be resold
by the Selling Shareholders without restriction under Rule 144(b)(1)(i) under the Securities Act.
DESCRIPTION
OF SHARE CAPITAL
The following is a
description of the material terms of our common shares and includes a summary of specified provisions of our bye-laws. This description
is qualified by reference to our bye-laws, copies of which are attached to this Prospectus and are incorporated in this Prospectus
by reference.
General
Our constitutional
documents provide for the issuance of 100,000,000 common shares, par value $.0001, and 1,000,000 preferred shares, par value $.0001.
Common Shares
The holders of our
common shares will be entitled to one vote for each share held of record on all matters to be voted on by shareholders.
There is no cumulative
voting with respect to the election of directors, with the result that the holders of more than 50% of the shares voted for the
election of directors can elect all of the directors.
Holders of our common
shares will not have any conversion, preemptive or other subscription rights and there are no sinking fund or redemption provisions
applicable to the common shares.
As of December 31,
2014, we have approximately 324 holders of our common shares.
Preferred Shares
The Company’s
memorandum of association and amended and restated bye-laws authorized the issuance of 1,000,000 blank check preferred shares with
such designations, rights and preferences as may be determined from time to time by the Board. Accordingly, the Board is empowered,
without shareholder approval, to issue preferred shares with dividend, liquidation, conversion, voting or other rights which could
adversely affect the voting power or other rights of the holders of common shares. In addition, the preferred shares could be utilized
as a method of discouraging, delaying or preventing a change in control of the Company.
Dividends
It is the present
intention of the Board to pay an annual cash dividend of $0.10 per share. Notwithstanding the foregoing, the payment of dividends
is entirely within the discretion of the Board and is contingent upon our revenues and earnings, if any, capital requirements and
general financial condition subsequent.
Transfer Agent
Our transfer agent
for our common shares is Continental Stock Transfer & Trust Company, 17 Battery Place, New York, New York 10004.
Registration Rights
On October 1,
2014, we entered into the registration rights agreement with the Former Pangaea Holders. See “Certain Relationships and Related
Party Transactions — Related Person Transactions — Registration Rights Agreement.”
Market Listing
Our common shares
are listed on Nasdaq under the symbol “PANL”.
CAPITALIZATION
The following
table sets forth our capitalization as of September 30, 2014, giving effect to the Mergers which were consummated on October
1, 2014.
You should read this
table in conjunction with the sections of this prospectus entitled “Selected Consolidated Financial and Other Data,”
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated
financial statements and related notes included elsewhere in this prospectus.
|
|
|
As of
September 30,
2014
|
|
|
($ in thousands, except per share amounts)
|
|
Actual
|
|
|
As
Adjusted(1)
|
|
|
Cash and Cash Equivalents
|
|
|
20,158
|
|
|
|
23,793
|
|
|
Restricted Cash
|
|
|
500
|
|
|
|
500
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cash
|
|
$
|
20,658
|
|
|
$
|
24,293
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
Common shares, $0.0001 par value per share(2)
|
|
|
87,329
|
|
|
|
3
|
|
|
Additional paid-in capital
|
|
|
0
|
|
|
|
123,100
|
|
|
Accumulated other comprehensive income
|
|
|
0
|
|
|
|
0
|
|
|
Accumulated deficit
|
|
|
(7,324
|
)
|
|
|
(7,324
|
)
|
|
Treasury stock, at cost
|
|
|
0
|
|
|
|
0
|
|
|
Total Pangaea Logistics Solution Ltd. equity
|
|
|
(7,237
|
)
|
|
|
115,779
|
|
|
Non-controlling interest
|
|
|
3,716
|
|
|
|
3,716
|
|
|
Total capitalization
|
|
$
|
(3,520
|
)
|
|
$
|
119,496
|
|
|
|
(1)
|
Adjusted balance represents the combined unaudited consolidated historical balance sheet amount of Bulk Partners as of
September 30, 2014 and the unaudited historical balance sheet amount of Quartet as of September 30, 2014, giving effect to
the Mergers as if they had been consummated on that date.
|
|
|
(2)
|
100,000,000 shares authorized and 34,696,997 shares issued and outstanding at September 30, 2014.
|
EXPERTS
The consolidated balance sheets as of December 31, 2013 and
2012, and the related consolidated statements of income, changes in convertible redeemable preferred stock and stockholders’
equity, and cash flows for each of the two years in the period ended December 31, 2013, included in this prospectus and elsewhere
in the registration statement have been so included in reliance upon the reports of Grant Thornton LLP, independent registered
public accountants, upon the authority of said firm as experts in accounting and auditing.
With respect to the unaudited interim financial information
for the quarters ended September 30, 2014 and 2013, included in this prospectus and elsewhere in the registration statement, Grant
Thornton LLP has reported that they have applied limited procedures in accordance with professional standards for a review of such
information. However, their separate report thereon states that they did not audit and they do not express an opinion on that interim
financial information. Accordingly, the degree of reliance on their report on such information should be restricted in light of
the limited nature of the review procedures applied. In addition, Grant Thornton LLP is not subject to the liability provisions
of Section 11 of the Securities Act of 1933 for their report on the unaudited interim financial information because that report
is not a “report” or a “part” of the registration statement prepared or certified by the accountants within
the meaning of the Sections 7 and 11 of that Act.
The audited financial
statements of Nordic Bulk Holding ApS, not separately presented in this Prospectus, have been audited by PricewaterhouseCoopers
Statsautoriseret Revisionspartnerselskab, an independent registered public accounting firm, whose report thereon appears herein.
The audited financial statements of Bulk Partners (Bermuda) Ltd, to the extent they relate to Nordic Bulk Holding ApS, have been
so included in reliance on the report of such independent registered public accounting firm given on the authority of said firm
as experts in auditing and accounting.
With respect to the unaudited interim
financial information of Nordic Bulk Holding ApS for the nine-months ended September 30, 2014 and 2013, not separately
presented in this prospectus or elsewhere in the registration statement, PricewaterhouseCoopers Statsautoriseret
Revisionspartnerselskab has reported that they have applied limited procedures in accordance with professional standards for
a review of such information. However, their separate report dated November 13, 2014 appearing herein states that they did
not audit and they do not express an opinion on that unaudited interim financial information. Accordingly, the degree of
reliance on their report on such information should be restricted in light of the limited nature of the review procedures
applied. PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab is not subject to the liability provisions of
Section 11 of the Securities Act of 1933 for their report on the unaudited financial information because that report is not a
“report” or a “part” of the registration statement prepared or certified by PricewaterhouseCoopers
Statsautoriseret Revisionspartnerselskab within the meaning of Sections 7 and 11 of the Act.
FORWARD-LOOKING STATEMENTS
Our disclosure and
analysis in this prospectus pertaining to our operations, cash flows and financial position, including, in particular, the likelihood
of our success in developing and expanding our business, include forward-looking statements. Statements that are predictive in
nature, that depend upon or refer to future events or conditions, or that include words such as “expects,” “anticipates,”
“intends,” “plans,” “believes,” “estimates,” “projects,” “forecasts,”
“may,” “should” and similar expressions are forward-looking statements.
All statements in this
prospectus that are not statements of either historical or current facts are forward-looking statements. Forward-looking statements
include, but are not limited to, such matters as:
|
|
·
|
our future operating or financial results;
|
|
|
·
|
our ability to charter-in vessels and to enter into COAs, voyage charters, time charters and forward
freight agreements and the performance of our counterparties in such contracts;
|
|
|
·
|
our financial condition and liquidity, including our ability to obtain financing in the future
to fund capital expenditures, acquisitions and other general corporate activities;
|
|
|
·
|
our expectations of the availability of vessels to purchase, the time it may take to construct
new vessels, and vessels’ useful lives;
|
|
|
·
|
competition in the drybulk shipping industry;
|
|
|
·
|
our business strategy and expected capital spending or operating expenses, including drydocking
and insurance costs;
|
|
|
·
|
global and regional economic and political conditions, including piracy; and
|
|
|
·
|
statements about shipping market trends, including charter rates and factors affecting supply and
demand.
|
Many of these statements
are based on our assumptions about factors that are beyond our ability to control or predict and are subject to risks and uncertainties
that are described more fully under the “Risk Factors” section of this prospectus. Any of these factors or a combination
of these factors could materially affect our future results of operations and the ultimate accuracy of the forward-looking statements.
Factors that might cause future results to differ include, but are not limited to, the following:
|
|
·
|
changes in governmental rules and regulations or actions taken by regulatory authorities;
|
|
|
·
|
changes in economic and competitive conditions affecting our business, including market fluctuations
in charter rates and charterers’ abilities to perform under existing time charters;
|
|
|
·
|
potential liability from future litigation and potential costs due to environmental damage and
vessel collisions;
|
|
|
·
|
the length and number of off-hire periods; and
|
|
|
·
|
other factors discussed under the “Risk Factors” section of this prospectus.
|
You should not place
undue reliance on forward-looking statements contained in this prospectus, because they are statements about events that are not
certain to occur as described or at all. All forward-looking statements in this prospectus are qualified in their entirety by the
cautionary statements contained in this prospectus. These forward-looking statements are not guarantees of our future performance,
and actual results and future developments may vary materially from those projected in the forward-looking statements.
Except to the extent
required by applicable law or regulation, we undertake no obligation to release publicly any revisions to these forward-looking
statements to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated event.
Item 11. Information
with Respect to the Registrant
Overview
On April 30, 2014
the Company (formerly known as “Quartet Holdco Ltd.”) entered into an Agreement and Plan of Reorganization (the “
Merger
Agreement
”) with Quartet, Quartet Merger Sub Ltd. (“
Merger Sub
”), Bulk Partners (Bermuda), Ltd. (at
the time, Pangaea Logistics Solutions Ltd., now known as “
Bulk Partners
” or “
Former Pangaea
”),
and the securityholders of Bulk Partners (“
Former Pangaea Holders
”), which contemplated (i) Quartet merging
with and into the Company, with the Company surviving such merger as the publicly-traded entity and (ii) Merger Sub merging with
and into Bulk Partners with Bulk Partners surviving such merger as a wholly-owned subsidiary of the Company (collectively, the
“
Mergers
”). On September 29, 2014, Quartet held a special meeting in lieu of annual meeting of stockholders,
at which the Quartet stockholders considered and adopted, among other matters, the Merger Agreement and the Mergers. On September
26, 2014, Bulk Partners’ Board of Directors, acting by unanimous written consent, approved the Merger Agreement and the Mergers.
On October 1, 2014, the parties consummated the Mergers.
Pangaea is a holding
company incorporated under the laws of Bermuda as an exempted company on April 29, 2014 in connection with the Mergers. Bulk Partners,
which following the Mergers is wholly owned by Pangaea, is also a holding company that was incorporated under the laws of Bermuda
as an exempted company on June 17, 2008, the subsidiaries of which provide seaborne drybulk transportation services.
Pangaea derives its
revenue from (i) contracts of affreightment (“COAs”), which are contracts to transport multiple shipments of cargo
during the term of the contract between specified load and discharge ports, at a fixed or variable price per metric ton of cargo,
(ii) voyage charters, under which a vessel carries a shipment of cargo for a customer on a specified route for a fixed price per
metric ton of cargo, and (iii) time charters, during which the vessel is dedicated solely to the charterer for the term of the
agreement. A majority of Pangaea’s revenue is from COA’s and voyage charters, as Pangaea’s focus is on transporting
cargo for its customers. Pangaea’s COAs typically extend for a period of one to five years, although some extend for longer
periods. A time charter may vary from a single trip to longer-term charters, whenever Pangaea deems such use to be in its commercial
interest. The length of a voyage depends on the number of load and discharge ports, the time spent in such ports and the distance
between the ports. Pangaea attempts, through selecting COAs and voyage contracts on what would normally be backhaul or “ballast”
legs, to enhance vessel utilization and its profitability because these contracts and charters position vessels at or near loading
areas where spot cargoes are typically obtained. This reduces ballast time and expense as a percentage of the vessel’s total
revenue and increases expected earnings for the vessel.
Pangaea utilizes its
logistics expertise to service a broad base of industrial customers who require the transportation of a wide variety of drybulk
cargoes, including grains, pig iron, hot briquetted iron, bauxite, alumina, cement clinker, dolomite and limestone. Pangaea addresses
the transportation needs of its customers by undertaking a comprehensive set of services and activities, including cargo loading,
cargo discharge, vessel chartering, voyage planning, and technical vessel management. In particular, Pangaea has historically focused
on providing such services for backhaul routes. In addition, Pangaea has developed customized shipping routes, which Pangaea believes
create value for its customers and its shareholders by both reducing the time and cost of transportation between ports and increasing
cargo carried per voyage. For example, in 2010, Pangaea was the first non-Russian vessel operator to carry drybulk cargoes from
Europe to Asia via the Northern Sea Route. Similarly, in 2013, Pangaea was the first vessel operator to carry drybulk cargo from
the West Coast of Canada to Europe via the Northwest Passage. Pangaea is the leading transporter of bauxite from Jamaica to the
United States, carrying on average more than 3.5 million tons per year. Pangaea believes that its experience in carrying a wide
range of cargoes, pioneering new routes, and serving less common ports increases its opportunities to secure higher margins than
in more commoditized cargoes and routes. Pangaea believes that providing such specialized drybulk transportation logistics services
together with its long-term commercial and contractual relationships makes Pangaea less vulnerable to industrial and economic cycles
as compared to other bulk-shipping operators. Finally, Pangaea believes that it can create value by serving and focusing on customer
needs rather than depending on its correct anticipation of future charter rates.
Pangaea uses a mix
of owned and chartered-in vessels to transport more than 19.5 million dwt of cargo to more than 190 ports around the world, averaging
over 48 vessels in service daily during 2014. The majority of its fleet is chartered-in on short-term charters of less than 9 months.
Pangaea believes that these shorter-term charters afford it more flexibility to match its variable costs to its customers’
service requirements, allowing it to respond to changes in market demand and limiting its exposure to changes in prevailing charter
rates. In addition to its chartered-in fleet, Pangaea has interests in 13 vessels and has placed orders for the construction of
five additional vessels, all at prices that Pangaea believes will permit it to operate profitably through a range of cargo rate
environments. These vessels are and will be used to serve its customers’ cargo transportation needs. Included in the vessels
currently owned or on order are six Ice-Class 1A Panamax vessels that are currently the only drybulk vessels of their size rated
to operate on the Northern Sea Route and the severe ice conditions of the Baltics in winter. Pangaea believes that a combination
of owned and chartered-in vessels help it to more efficiently match its customer demand than it could with an entirely owned fleet
or an entirely chartered-in fleet.
The Company’s Ice-Class 1A vessels
are under contract to be technically managed by a third-party manager with extensive expertise managing these vessel types and
ice pilotage. The technical management of the remainder of the Company’s owned fleet will continue to be performed in-house.
The Company believes its in-house management provides exceptional service and pricing for these vessel types, reduces time out
of service, and best enhances the service value of this fleet. The technical management for the Company’s chartered-in vessels
is performed by each respective ship owner.
Active risk management
is an important part of its business model. Pangaea believes its active risk management allows it to reduce the sensitivity of
its earnings to market fluctuations and helps it to secure its long-term profitability. Pangaea manages its market risk primarily
through chartering in vessels for periods of less than 9 months. Pangaea further manages its market exposure through a portfolio
approach based upon owned vessels, chartered-in vessels, COAs, voyage charters, and time charters. Pangaea tries to identify routes
and ports for efficient bunkering to minimize its fuel expense. Pangaea also seeks to hedge a portion of its exposure to changes
in the price of marine fuels, or bunkers. Pangaea has also entered into interest rate swap agreements to fix a portion of its interest
rate exposure.
Our Competitive
Strengths
Pangaea believes that
it possesses a number of competitive strengths in its industry, including:
|
|
·
|
Expertise in niche markets and routes
. Over the past five years, Pangaea has developed
expertise and a major presence in selected niche markets and less commoditized routes, especially the Baltic Sea in winter, the
Northern Sea Route between Europe and Asia in summer, and the trade route between Jamaica and the United States, as well as selected
ports, particularly in Newfoundland, Venezuela, and Brazil. Pangaea believes that there is less competition to carry “minor,”
as compared to traditional “major,” bulk cargoes, and, similarly, there is less competition on less commoditized routes.
Pangaea believes that its experience in carrying a wide range of cargoes and transiting less common routes and ports increases
its likelihood of securing higher rates and margins than those available for more commoditized cargoes and routes. Pangaea believes
it operates assets well suited to certain of these routes, including three Japanese-built Ice-Class 1A Panamax vessels and two
Korean built Ice-Class 1A Handymax vessels. The majority of its fleet is chartered in and Pangaea selects these vessels to match
the cargo and port characteristics of their nominated voyages. Pangaea has experience operating in all regularly operating drybulk
loading and discharge ports globally.
|
|
|
·
|
Enhanced vessel utilization and profitability through strategic backhaul and triangulation
methods
. Pangaea has enhanced vessel utilization and profitability through selecting COAs and other contracts to carry
cargo on what would normally be backhaul or “ballast” legs. In contrast to the typical practice of incurring charter
hire and bunker costs to position an empty vessel in a port or area where cargo is normally loaded, Pangaea instead actively works
with its customers to secure cargoes for discharge in loading areas. Pangaea’s practice allows it to position vessels for
loading at lower costs than Pangaea would bear if Pangaea positioned such vessels by traveling unladen or if Pangaea chartered
in vessels in a loading area. Pangaea believes that this focus on backhaul cargoes permits them to benefit from ballast bonuses
that are paid to position vessels for fronthaul cargoes or, alternatively, to collect a premium for delivering ships that are in
position for fronthaul cargoes.
|
|
|
·
|
Strong relationships with major industrial customers
. Pangaea has developed strong
commercial relationships with a number of major industrial customers, including Cargill, Tata Steel, Glencore Xstrata, Noranda
and Duferco. These customer relationships are based upon Pangaea’s general industry reputation and specific history of service
to the customer. Pangaea believes that these relationships help it generate recurring business with such customers which, in some
cases, is formalized through contracts for repeat business. Pangaea also believes that these relationships can help create new
opportunities. Although many of these relationships have extended over a period of years, there is no assurance that such relationships
or business will continue in the future. Repeat customers, measured as having shipping days in three or more years of the trailing
four years, represented nearly 54% of its total shipping days for the trailing four year period ended December 31, 2014, 59% of
its total shipping days for the trailing four year period ended December 31, 2013, as compared to 56% and 46% of its total shipping
days for comparable periods ended December 31, 2012 and 2011. In addition, Pangaea believes that its familiarity with local regulations
and market conditions at its serviced ports, particularly in Venezuela, Newfoundland, and Jamaica, provides it with a strong competitive
advantage and allows it to attract new customers and secure recurring business.
|
|
|
·
|
In-house commercial and technical management capability
. Pangaea’s in-house
vessel management team consists of experienced professionals who continuously monitor and oversee the maintenance of its non-Ice-Class
owned vessels, including the superintendence of maintenance, repairs, improvements, drydocking and crewing. Pangaea believes this
capability helps it to exercise better quality control over these vessels and reduce vessel operating costs and unscheduled off-hire
days. Pangaea believes that its in-house expertise also enables it to evaluate and operate older vessels effectively.
|
|
|
·
|
Specialized Ice-Class technical management
. Pangaea has assigned technical management
of its Ice-Class vessels to a company that specializes in operation of these vessel types. The Company believes that the manager
brings with it the expertise in servicing ports and routes subject to severe ice conditions, including the Baltic Sea and the Northern
Sea Route. Pangaea believes this extensive experience in ice pilotage will result in lower costs of operation through quality control
and minimal unscheduled off-hire days.
|
|
|
·
|
Strong alignment and transparency
. Pangaea observes that many publicly traded shipping
companies rely on service providers affiliated with senior management or dominant shareholders for fundamental activities. Beyond
the operational benefits to its customers of integrated commercial and technical management, Pangaea believes that its shareholders
are benefited by its strategy of performing those activities in-house. Related to these efforts to maximize alignment of interest,
Pangaea believes that the associated transparency of ownership and authority will be attractive to current and prospective shareholders.
Consistent with the foregoing, Pangaea’s only related party transactions with senior management are for principal and interest
obligations for cash loaned to Pangaea by management, both on terms approved by third parties not affiliated with management.
|
|
|
·
|
Experienced management team
. The day-to-day operations of a transportation logistics
services company requires close coordination among customers, land based-transportation providers and port authorities around the
world. Its efficient operation depends on the experience and expertise of management at all levels, from vessel acquisition and
financing strategy to oversight of vessel technical operations and cargo loading and discharge. Pangaea has a management team of
senior executive officers and key employees with extensive experience and relationships in the commercial, technical and financial
areas of the drybulk shipping industry. Members of its management team and key employees have on average over 25 years of shipping
experience.
|
|
|
·
|
Risk-management discipline
. Pangaea believes its risk management allows it to reduce
the sensitivity of its earnings to market changes and lower the risk of losses. Pangaea manages its risks primarily through short-term
charter-in agreements of less than nine months, FFAs, fuel hedges and modest leverage. Pangaea believes that shorter-term charters
permit it to adjust its variable costs to match demand more rapidly than if Pangaea chartered in those vessels for longer periods.
Pangaea often seeks to manage the risks of higher rates for certain future voyages by purchasing and selling FFAs to limit the
impact of changes in chartering rates. Similarly, Pangaea often seeks to manage the risks of more expensive bunkers through bunker
hedging transactions. Finally, Pangaea believes that its expected income related to COAs is sufficient to satisfy obligations related
to its owned fleet.
|
Our Business
Strategy
Pangaea’s principal
business objectives are to profitably grow its business and increase shareholder value. Pangaea expects to achieve these objectives
through the following strategies:
|
|
·
|
Focus on increasing strategic COAs
. Pangaea intends to increase its COA business,
in particular, COAs for cargo discharge in traditional loading areas, by leveraging its relationships with existing customers and
attracting new customers. Pangaea believes that its dedication to solving its customers’ transportation problems, reputation
and experience in carrying a wide range of cargoes and transiting less common routes and ports increases its likelihood of securing
strategic COAs.
|
|
|
·
|
Expand capacity and flexibility by increasing its owned fleet
. Pangaea is continually
looking to acquire additional high-quality vessels suited for its business strategy, the needs of its customers and the growth
opportunities Pangaea has identified. Pangaea plans to increase its controlled fleet (the vessels that Pangaea owns or has an ownership
interest in) from 13 (including the m/v Bulk Cajun, which is expected to be sold for its scrap value in the first quarter of 2015)
to 17 by the end of 2016. Pangaea has shipbuilding contracts for the construction of five more ships, including three Ice-Class
1A Panamax newbuildings, for which Pangaea expects to take delivery of in the first quarter of 2015 and one it expects to take
delivery of in 2016; and two Ice-Class 1C Ultramax newbuildings, for which Pangaea expects keel laying and delivery to occur in
2016. Pangaea believes that its experience as a reliable and serious counterparty in the purchase and sale market for second-hand
vessels positions it as a candidate for acquisition of high quality vessels.
|
|
|
·
|
Expand operations in Southeast Asia and the Middle East
. Pangaea intends to expand
its operations and presence in Southeast Asia and the Middle East to better access customers in these high growth regions. Pangaea
believes that expanding its network of offices will allow it to meet more regularly with existing and potential customers and increase
its shipping days as a result. Pangaea opened an office in Singapore in 2013.
|
|
|
·
|
Increase backhaul focus and fleet efficiency
. Pangaea intends to continue to focus
on backhaul cargoes, including backhaul cargoes associated with COAs, to reduce ballast days and increase expected earnings for
well-positioned vessels. In addition, Pangaea intends to continue to charter in vessels for periods of less than nine months to
permit it to match its variable costs to demand. Pangaea believes that increased vessel utilization and positioning efficiency
will enhance its profitability.
|
|
|
·
|
Maintain moderate balance sheet leverage
. In the future, Pangaea expects to incur
additional indebtedness to expand its fleet and operations. Pangaea expects to repay existing and future debt from time to time
with cash flow from operations or from the net proceeds of asset sales and future security issuances. Pangaea intends to limit
the amount of indebtedness that it has outstanding relative to its assets and cash flow and will seek to maintain indebtedness
at levels lower than many publicly traded drybulk ship owning companies to reduce risks associated with high leverage.
|
Pangaea’s
Customers
Pangaea provides its
logistics services to a broad base of industrial customers who require the transportation of a wide variety of drybulk cargoes,
including grains, pig iron, hot briquetted iron, bauxite, alumina, cement clinker, dolomite and limestone. Pangaea’s clients
comprise producers, consumers and traders of commodities, including Bunge, RioTinto, and Glencore Xstrata. During the years ended
December 31, 2014, 2013 and 2012, no single customer accounted for more than 10% of its revenues.
Management
Pangaea’s management
team consists of senior executive officers and key employees with decades of experience in the commercial, technical, management
and financial areas of the logistics and shipping industries. Its Co-Founder and Chief Executive Officer, Edward Coll, has over
35 years of experience in the drybulk shipping industry. Other members of its management team and key employees, Anthony Laura,
Claus Boggild, Christian Bonfils, Mads Boye Petersen, Peter Koken, Robert Seward, Fotis Doussopoulos, and Gianni Del Signore, have
an average of more than 25 years of experience in the shipping industry. Pangaea believes its management team is well respected
in the drybulk sector of the shipping industry and, over the years, has developed strong commercial relationships with industrial
customers and lenders. Pangaea believes that the experience, reputation and background of its management team will continue to
be key factors in its success.
Operations
and Assets
Pangaea is a service
business and its customers select the Company where they believe it adds and creates value for them. To add value, Pangaea works
with its customers to provide a range of logistics services beyond the traditional loading, carriage and discharge of cargoes.
For example, Pangaea works with certain customers to review their contractual delivery terms and conditions, permitting those customers
to reduce costs and risks while accelerating payments. As another example, one of its customers is heavily dependent upon a port
that was insufficiently supported by port pilots for the approach to port. To permit a large expansion of its services for this
client, Pangaea formed a separate pilots association to increase the number of available pilots and improve access to the port.
As a result of efforts such as these, in some cases Pangaea is the de facto transportation department for certain clients.
Its core offering
is the safe, reliable, and timely loading, carriage, and discharge of cargoes for customers. This offering requires identifying
customers, agreeing on the terms of service, selecting a vessel to undertake the voyage, working with port personnel to load and
discharge cargo, and documenting the transfers of title upon loading or discharge of the cargo. As a result, Pangaea spends significant
time and resources to identify and retain customers and source potential cargoes in its areas of operation. To further expand its
customer base and potential cargoes, Pangaea has developed expertise in servicing ports and routes subject to severe ice conditions,
including the Baltic Sea and the Northern Sea Route. Pangaea’s subsidiary, NBC, is an adviser to the European Commission
on Arctic maritime issues.
To support its services,
Pangaea operates a fleet of owned vessels which Pangaea technically manages with a dedicated in-house team based in Athens, Greece.
As of December 31, 2014, these vessels are described in the table below:
|
Vessel Name
|
|
Type
|
|
DWT
|
|
|
Year
Built
|
|
|
Yard
|
|
Rightship
Stars
|
|
Type of
Employment
Charter
|
|
Newbuild 6*
|
|
Ultramax (Ice Class 1C)
|
|
|
59,000
|
|
|
|
2016
|
|
|
Oshima Shipbuilding
|
|
N/A
|
|
N/A
|
|
Newbuild 5*
|
|
Ultramax (Ice Class 1C)
|
|
|
59,000
|
|
|
|
2016
|
|
|
Oshima Shipbuilding
|
|
N/A
|
|
N/A
|
|
m/v Nordic Oasis
|
|
Panamax (Ice Class 1A)
|
|
|
74,000
|
|
|
|
2015
|
|
|
Oshima Shipbuilding
|
|
N/A
|
|
N/A
|
|
m/v Nordic Olympic
|
|
Panamax (Ice Class 1A)
|
|
|
74,000
|
|
|
|
2015
|
|
|
Oshima Shipbuilding
|
|
N/A
|
|
N/A
|
|
m/v Nordic Odin
|
|
Panamax (Ice Class 1A)
|
|
|
74,000
|
|
|
|
2015
|
|
|
Oshima Shipbuilding
|
|
N/A
|
|
N/A
|
|
m/v Nordic Oshima
|
|
Panamax (Ice Class 1A)
|
|
|
76,180
|
|
|
|
2014
|
|
|
Oshima Shipbuilding
|
|
N/A
|
|
NBC
(1)
|
|
m/v Nordic Orion
|
|
Panamax (Ice Class 1A)
|
|
|
75,603
|
|
|
|
2011
|
|
|
Oshima Shipbuilding
|
|
5 star
|
|
NBC
(1)
|
|
m/v Nordic Odyssey
|
|
Panamax (Ice Class 1A)
|
|
|
75,603
|
|
|
|
2010
|
|
|
Oshima Shipbuilding
|
|
5 star
|
|
NBC
(1)
|
|
m/v Bulk Trident
|
|
Supramax
|
|
|
52,514
|
|
|
|
2006
|
|
|
Tsuneishi Heavy Industries (Cebu)
|
|
5 star
|
|
PBC
(2)
|
|
m/v Bulk Newport
|
|
Supramax
|
|
|
52,587
|
|
|
|
2003
|
|
|
Shin Kurushima Toyohashi
|
|
5 star
|
|
PBC
(2)
|
|
m/v Bulk Beothuk
|
|
Supramax
|
|
|
50,992
|
|
|
|
2002
|
|
|
Oshima Shipbuilding
|
|
4 star
|
|
PBC
(2)
|
|
m/v Bulk Juliana
|
|
Supramax
|
|
|
52,510
|
|
|
|
2001
|
|
|
Shin Kurushima Toyohashi
|
|
5 star
|
|
PBC
(2)
|
|
m/v Bulk Pangaea
|
|
Panamax
|
|
|
73,700
|
|
|
|
1999
|
|
|
Sumitomo Shipbuilding
|
|
4 star
|
|
PBC
(2)
|
|
m/v Bulk Patriot
|
|
Panamax
|
|
|
70,165
|
|
|
|
1996
|
|
|
Sumitomo Shipbuilding
|
|
4 star
|
|
PBC
(2)
|
|
m/v Nordic Bothnia
|
|
Handymax (Ice Class 1A)
|
|
|
43,706
|
|
|
|
1995
|
|
|
Daewoo
|
|
4 star
|
|
NBC
(3)
|
|
m/v Nordic Barents
|
|
Handymax (Ice Class 1A)
|
|
|
43,702
|
|
|
|
1995
|
|
|
Daewoo
|
|
4 star
|
|
NBC
(3)
|
|
m/v Bulk Discovery
|
|
Panamax
|
|
|
69,349
|
|
|
|
1989
|
|
|
Tsuneishi Shipbuilding
|
|
4 star
|
|
PBC
(2)
|
|
m/v Bulk Cajun
|
|
Panamax
|
|
|
66,917
|
|
|
|
1984
|
|
|
Mitsubishi
|
|
5 star
|
|
PBC
(2)
|
|
|
*
|
Name to be determined as these vessels are currently under construction and with the expected delivery
date listed in the build year column.
|
|
|
1.
|
This vessel is time-chartered to Nordic Bulk Carriers A/S (“NBC”), a wholly-owned subsidiary
of Nordic Bulk Holding ApS (“NBH”), a corporation that was duly organized in March 2009 under the laws of Denmark.
The primary purpose of NBC is to manage and operate vessels. NBC specializes in ice trading, as well as the carriage of a wide
range of commodities, including cement clinker, steel scrap, fertilizers, and grains. Pangaea has a 51% ownership interest in NBH
at September 30, 2014.
|
|
|
2.
|
This vessel is operated by Pangaea's wholly-owned subsidiary, Phoenix Bulk Carriers (BVI) Ltd.
(“PBC”).
|
|
|
3.
|
This vessel is operated by NBC. The time-charter, renews on a yearly basis at renegotiated terms,
and expires no sooner than December 2019.
|
Pangaea believes that
in-house technical management of certain vessels in its fleet affords high quality service on attractive terms because of the strong
alignment of its technical managers and its commercial and operational objectives. In addition, in-house technical management permits
Pangaea to review potential vessel acquisitions quickly and with a clear understanding of its trading requirements as well as high
sensitivity to the costs of owning and operating the vessel over time. The Company has contracted for technical management of some
of its Ice-Class fleet by a third party specializing in the management of such vessels. The manager brings with it the expertise
in servicing ports and routes subject to severe ice conditions, including the Baltic Sea and the Northern Sea Route.
Pangaea owns its vessels
through separate wholly-owned subsidiaries and through joint venture entities with other owners, which Pangaea consolidates as
variable interest entities in its consolidated financial statements. Pangaea’s three Ice-Class 1A Panamax vessels, the
m/v
Nordic Orion,
the
m/v Nordic Odyssey
and the
m/v
Nordic Oshima
, are owned by Nordic Bulk Holding Company
Ltd., (“NBHC”), a corporation that was duly organized under the laws of Bermuda. NBHC was established in October 2012,
together with a third-party, for the purpose of owning vessels through wholly-owned subsidiaries. At September 30, 2014, Pangaea
had a one-third ownership interest in NBHC, the remainder of which is owned by third-parties. These vessels are chartered to NBC
at a fixed rate, plus 75% of the profit in excess of the fixed rate. NBHC has contracted for the construction of three additional
Ice-Class 1A Panamax vessels from a Japanese shipyard. Pangaea expects to take delivery of these vessels in 2015 and 2016.
Pangaea owns 50% of
Nordic Bulk Ventures Holding Company Ltd., (“BVH”), a corporation that was duly organized under the laws of Bermuda.
BVH was established in August 2013, together with a third-party, for the purpose of owning Bulk Nordic Five Ltd. (“Five”)
and Bulk Nordic Six Ltd. (“Six”). Five and Six are corporations that were duly organized under the laws of Bermuda
in November 2013 for the purpose of owning new ultramax newbuildings to be delivered in 2016. At September 30, 2014, Pangaea had
a 50% ownership interest in BVH, the remainder of which is owned by a third-party.
The
m/v Bulk Cajun
is owned 90% by Pangaea and the remaining 10% is owned by certain employees of Seamar through Virginia Holding. This vessel is
thirty years old, therefore, the Company intends to sell it for its scrap value as soon as a buyer is found.
In addition to its
owned fleet, Pangaea operates chartered-in Panamax, Supramax, Handymax and Handysize drybulk carriers. On average, over the past
three years, Pangaea has owned or employed a fleet of approximately 35 – 50 vessels at any one time. In 2011, Pangaea
owned interests in 6 vessels and chartered in an additional 199 for one or more voyages. In 2012, Pangaea owned interests in 8
vessels and chartered in an additional 237 for one or more voyages. In 2013, Pangaea owned interests in 12 vessels and chartered
in an additional 215 for one or more voyages. Pangaea currently owns interests in 13 vessels and chartered in an additional 205
during the year ended December 31, 2014. Pangaea generally charters in third-party vessels for periods of less than nine months.
Chartered-in contracts are negotiated through brokers, who are paid commission on a percentage basis. Pangaea believes that shorter-term
charters afford it flexibility to match its variable costs to its customers’ service requirements. Pangaea also believes
that this combination of owned and chartered-in vessels helps it to more efficiently match its customer demand than Pangaea could
with only owned vessels or an entirely chartered-in fleet. Pangaea does not charter-in any vessels under speculative arrangements.
Corporate
Structure
Pangaea is a holding
company incorporated under the laws of Bermuda as an exempted company on April 29, 2014 in connection with the Mergers. Bulk, which
following the Mergers is wholly owned by Pangaea, is also a holding company that was incorporated under the laws of Bermuda as
an exempted company on June 17, 2008, the subsidiaries of which provide seaborne drybulk transportation services. Pangaea owns
its vessels through separate wholly-owned subsidiaries and through joint venture entities, which Pangaea consolidates as variable
interest entities, incorporated in Bermuda and Denmark. Furthermore, certain of its wholly-owned subsidiaries that are organized
in Bermuda, British Virgin Islands, Panama, and Delaware provide it with office space, vessel management services and administrative
support.
Pangaea’s principal
executive headquarters is located at 109 Long Wharf, Newport, Rhode Island 02840, and its phone number at that address is (401)
846-7790. Pangaea also has offices in Copenhagen, Denmark, Athens, Greece, Rio de Janeiro, Brazil and Singapore. Pangaea’s
corporate website address is
http://www.pangaeals.com
. The information contained on or accessible from its corporate website
is not part of this prospectus.
Pangaea’s consolidated
subsidiaries are as follows:
|
Company Name
|
|
Country of Organization
|
|
Proportion of
Ownership Interest
|
|
|
Phoenix Bulk Carriers (BVI) Limited (“PBC”)
|
|
British Virgin Islands
|
|
|
100
|
%
(A)
|
|
Phoenix Bulk Management Bermuda Limited
|
|
Bermuda
|
|
|
100
|
%
(B)
|
|
Americas Bulk Transport (BVI) Limited
|
|
British Virgin Islands
|
|
|
100
|
%
(C)
|
|
Bulk Ocean Shipping (Bermuda) Ltd.
|
|
Bermuda
|
|
|
100
|
%
(D)
|
|
Phoenix Bulk Carriers (US) LLC
|
|
Delaware
|
|
|
100
|
%
(E)
|
|
Allseas Logistics Bermuda Ltd.
|
|
Bermuda
|
|
|
100
|
%
(F)
|
|
Bulk Pangaea Limited (“Bulk Pangaea”)
|
|
Bermuda
|
|
|
100
|
%
(G)
|
|
Bulk Discovery (Bermuda) Ltd. (“Bulk Discovery”)
|
|
Bermuda
|
|
|
100
|
%
(G)
|
|
Bulk Cajun Bermuda Ltd. (“Bulk Cajun”)
|
|
Bermuda
|
|
|
90
|
%
(G)
|
|
Bulk Patriot Ltd. (“Bulk Patriot”)
|
|
Bermuda
|
|
|
100
|
%
(G)
|
|
Company Name
|
|
Country of Organization
|
|
Proportion of
Ownership Interest
|
|
|
Bulk Juliana Ltd. (“Bulk Juliana”)
|
|
Bermuda
|
|
|
100
|
%
(G)
|
|
Bulk Trident Ltd. (“Bulk Trident”)
|
|
Bermuda
|
|
|
100
|
%
(G)
|
|
Bulk Atlantic Ltd. (“Bulk Beothuk”)
|
|
Bermuda
|
|
|
100
|
%
(G)
|
|
Bulk Phoenix Ltd. (“Bulk Newport”)
|
|
Bermuda
|
|
|
100
|
%
(G)
|
|
Nordic Bulk Barents Ltd. (“Bulk Barents”)
|
|
Bermuda
|
|
|
100
|
%
(G)
|
|
Nordic Bulk Bothnia Ltd. (“Bulk Bothnia”)
|
|
Bermuda
|
|
|
100
|
%
(G)
|
|
Nordic Bulk Carriers A/S (“NBC”)
|
|
Denmark
|
|
|
51
|
%
(H)
|
|
Nordic Bulk Holding ApS (“NBH”)
|
|
Denmark
|
|
|
51
|
%
(H)
|
|
109 Long Wharf LLC (“Long Wharf”)
|
|
Delaware
|
|
|
100
|
%
(I)
|
|
Bulk Nordic Odyssey Ltd. (“Odyssey”)
|
|
Bermuda
|
|
|
33
|
%
(G)
|
|
Bulk Nordic Orion Ltd. (“Orion”)
|
|
Bermuda
|
|
|
33
|
%
(G)
|
|
Bulk Nordic Oshima Ltd. (“Oshima”)
|
|
Bermuda
|
|
|
33
|
%
(G)
|
|
Bulk Nordic Odin Ltd. (“Odin”)
|
|
Bermuda
|
|
|
33
|
%
(G)
|
|
Bulk Nordic Olympic Ltd. (“Olympic”)
|
|
Bermuda
|
|
|
33
|
%
(G)
|
|
Bulk Nordic Oasis Ltd. (“Oasis”)
|
|
Bermuda
|
|
|
33
|
%
(G)
|
|
Nordic Bulk Holding Company Ltd. (“NBHC”)
|
|
Bermuda
|
|
|
33
|
%
(J)
|
|
Bulk Nordic Five Ltd. (“Five”)
|
|
Bermuda
|
|
|
50
|
%
(G)
|
|
Bulk Nordic Six Ltd. (“Six”)
|
|
Bermuda
|
|
|
50
|
%
(G)
|
|
Nordic Bulk Ventures Holding Company Ltd. (“BVH”)
|
|
Bermuda
|
|
|
50
|
%
(K)
|
|
|
(A)
|
The primary purpose of this corporation is to manage and operate ocean-going vessels.
|
|
|
(B)
|
The primary purpose of this entity is to perform certain administrative management functions that
have been assigned by PBC.
|
|
|
(C)
|
The primary purpose of this corporation is to provide logistics services to customers by chartering,
managing and operating ships.
|
|
|
(D)
|
The primary purpose of this corporation is to manage the fuel procurement of the chartered vessels.
|
|
|
(E)
|
The primary purpose of this corporation is to act as the U.S. administrative agent for Pangaea.
|
|
|
(F)
|
The primary purpose of this corporation is to act as the Treasury Agent for Pangaea.
|
|
|
(G)
|
The primary purpose of these entities is owning bulk carriers.
|
|
|
(H)
|
The primary purpose of NBC is to provide logistics services to customers by chartering, managing
and operating ships. NBH is the holding company of NBC.
|
|
|
(I)
|
109 Long Wharf LLC is a limited liability company previously owned by the Pangaea securityholders
that was duly organized under the laws of Delaware for the objective and purpose of holding real estate located in Newport, Rhode
Island. Ownership of 109 Long Wharf LLC was transferred to Pangaea on October 1, 2014.
|
|
|
(J)
|
The primary purpose of this entity is owning bulk carriers through wholly-owned subsidiaries. Pangaea’s
interest in Odyssey and Orion is through NBHC.
|
|
|
(K)
|
The primary purpose of this entity is owning bulk carriers through wholly-owned subsidiaries. Pangaea’s
interest in Five and Six is through BVH.
|
Summary
Risk Factors
An investment in our
stock involves substantial risks and uncertainties. Some of the more significant challenges and risks include the cyclicality and
volatility of the seaborne transportation industry, the historically high charter rates for vessels in the drybulk shipping sector,
the possibility of an oversupply of drybulk carrier capacity in the coming years and potential losses that could result from defaults
by our contract counterparties.
You should carefully consider all of the
information included in this prospectus, including matters set forth under the headings “Risk Factors” and “Forward-Looking
Statements,” before deciding to invest in our common shares.
Corporate
and Other Information
Pangaea is a holding
company incorporated under the laws of Bermuda as an exempted company on April 29, 2014 in connection with the Mergers. Bulk Partners,
which following the Mergers is wholly owned by Pangaea, is also a holding company that was incorporated under the laws of Bermuda
as an exempted company on June 17, 2008, the subsidiaries of which provide seaborne drybulk transportation services. Pangaea owns
its vessels through separate wholly-owned subsidiaries and through joint venture entities, which Pangaea consolidates as variable
interest entities, incorporated in Bermuda and Denmark. Furthermore, certain of its wholly-owned subsidiaries that are organized
in Bermuda, British Virgin Islands, Panama, and Delaware provide it with office space, vessel management services and administrative
support.
Pangaea’s principal
executive headquarters is located at 109 Long Wharf, Newport, Rhode Island 02840, and its phone number at that address is (401)
846-7790. Pangaea also has offices in Copenhagen, Denmark, Athens, Greece, Rio de Janeiro, Brazil and Singapore. Pangaea’s
corporate website address is
http://www.pangaeals.com
. The information contained on or accessible from its corporate website
is not part of this prospectus.
Implications
of Being an Emerging Growth Company
We qualify as an “emerging
growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As an emerging growth company,
we have elected to take advantage of the reduced disclosure requirements available to emerging growth companies under the JOBS
Act about our executive compensation arrangements and the presentation of selected financial data for periods prior to the earliest
audited period presented in this prospectus and an exemption from the auditor attestation requirement in the assessment of our
internal controls over financial reporting pursuant to the Sarbanes-Oxley Act of 2002.
As a result of these
elections, the information that we provide in this prospectus may be different than the information you may receive from other
public companies in which you hold equity interests. In addition, it is possible that some investors will find our common shares
less attractive as a result of our elections, which may result in a less active trading market for our common shares and more volatility
in our share price.
We may take advantage
of these provisions 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 consummation of the Mergers, (b) in
which we have total annual gross revenue of at least $1.0 billion or (c) in which we are deemed to be a large accelerated
filer, which means the market value of our common shares which are held by non-affiliates exceeds $700 million as of the prior
September 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.
Crewing
and Employees
Each of its vessels
is crewed with approximately 25 independently contracted officers and crew members and directly contracted officers on certain
vessels. Its technical managers are responsible for locating, contracting and retaining qualified officers for its vessels. The
crewing agencies handle each crew member’s training, travel and payroll, and ensure that all the crew members on its vessels
have the qualifications and licenses required to comply with international regulations and shipping conventions. Pangaea typically
crews its vessels with more crew members than are required by the country of the vessel’s flag in order to allow for the
performance of routine maintenance duties.
As of December 31,
2014, Pangaea employed 62 shore-based personnel and have approximately 325 independently contracted seagoing personnel on its owned
vessels. Of the 62 personnel, 21 are employed in the United States, 22 are employed in Athens, 14 are employed in Copenhagen, 5
are employed in Brazil and 3 are employed in Singapore.
Competition
Pangaea operates in
markets that are highly competitive and based primarily on supply and demand for ocean transport of drybulk commodities. Pangaea
competes for COAs on the basis of service, price, route history, size, age and condition of the vessel and for charters on the
basis of service, price, vessel availability, size, age and condition of the vessel, as well as on its reputation as an owner and
operator. Pangaea principally competes with owners and operators of Panamax, Supramax, Handymax and Handysize vessels.
Seasonality
Demand for vessel
capacity has historically exhibited seasonal variations and, as a result, fluctuations in charter rates. This seasonality may result
in quarter-to-quarter volatility in its operating results. The drybulk carrier market is typically stronger in the fall and winter
months in anticipation of increased consumption of coal and other raw materials in the northern hemisphere during the winter months.
In addition, unpredictable weather patterns in these months tend to disrupt vessel scheduling and supplies of certain commodities.
Permits
and Authorizations
Pangaea is required
by various governmental and quasi-governmental agencies to obtain certain permits and certificates with respect to its vessels.
The kinds of permits 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 the vessel. Pangaea has been able to obtain
all permits and certificates currently required to permit its vessels to operate. Additional laws and regulations, environmental
or otherwise, may be adopted which could limit its ability to do business or increase the cost of doing business.
Environmental
and Other Regulations
Government regulation
significantly affects the ownership and operation of its vessels. Pangaea is subject to international conventions and treaties,
national, state and local laws and regulations in force in the countries in which its vessels may operate or are registered relating
to safety and health and environmental protection including 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 other requirements entails significant expense, including vessel modifications and implementation of
certain operating procedures.
A variety of government
and private entities subject Pangaea’s vessels to both scheduled and unscheduled inspections. These entities include the
local port authorities (such as the U.S. Coast Guard, harbor master or equivalent), classification societies, flag state administrations
(countries of registry) and charterers, particularly terminal operators. Certain of these entities require it to obtain permits,
certificates or approvals for the operation of its vessels. Failure to maintain necessary permits, certificates or approvals could
require it to incur substantial costs or temporarily suspend the operation of one or more of its vessels.
Pangaea believes that
the heightened level of environmental and quality concerns among insurance underwriters, regulators and charterers is leading to
greater inspection and safety requirements on all vessels and may accelerate the scrapping of older vessels throughout the drybulk
shipping industry. Increasing environmental concerns have created a demand for vessels that conform to the stricter environmental
standards. Pangaea is required to maintain operating standards for all of its vessels that emphasize operational safety, quality
maintenance, continuous training of its officers and crews and compliance with United States and international regulations. Pangaea
believes that the operation of its vessels is in substantial compliance with applicable environmental laws and regulations and
that its vessels have all material permits, certificates or other approvals necessary for the conduct of its operations as of the
date of this prospectus. However, because such laws and regulations are frequently changed and may impose increasingly strict requirements,
Pangaea cannot predict the ultimate cost of complying with these requirements, or the impact of these requirements on the resale
value or useful lives of its vessels. In addition, a future serious marine incident, such as the 2010
Deepwater Horizon
oil spill, that results in significant oil pollution or otherwise causes significant adverse environmental impact could result
in additional legislation or regulation that could negatively affect Pangaea’s profitability.
The laws and regulations
discussed below may not constitute a comprehensive list of all such laws and regulations that are applicable to the operation of
its vessels.
International Maritime Organization
The United Nations’
International Maritime Organization, or the IMO, has adopted the International Convention for the Prevention of Marine Pollution
from Ships, 1973, as modified by the Protocol of 1978 relating thereto (collectively referred to as MARPOL 73/78 and herein as
“MARPOL”). MARPOL entered into force on October 2, 1983. It has been adopted by over 150 nations, including many of
the jurisdictions in which its vessels operate. MARPOL sets forth pollution-prevention requirements applicable to drybulk carriers,
among other vessels, and is broken into six Annexes, each of which regulates a different source of pollution. Annex I relates to
oil leakage or spilling; Annexes II and III relate to harmful substances carried, in bulk, in liquid or packaged form, respectively;
and Annexes IV and V relate to sewage and garbage management, respectively. Annex VI, separately adopted by the IMO in September
of 1997, relates to air emissions.
Air Emissions
In September of 1997,
the IMO adopted Annex VI to MARPOL to address air pollution. Effective May 2005, Annex VI sets limits on nitrogen oxide emissions
from ships whose diesel engines were constructed (or underwent major conversions) on or after January 1, 2000. It also prohibits
“deliberate emissions” of “ozone depleting substances,” defined to include certain halons and chlorofluorocarbons.
“Deliberate emissions” are not limited to times when the ship is at sea; they can for example include discharges occurring
in the course of the ship’s repair and maintenance. Emissions of “volatile organic compounds” from certain tankers,
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 (see below).
The IMO’s Marine Environment Protection
Committee, or MEPC, adopted amendments to Annex VI on October 10, 2008, which amendments were 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 sulphur contained in any fuel oil used onboard ships. As of January 1, 2012, the Amended Annex VI required that fuel
oil contain no more than 3.50% sulfur (from the current cap of 4.50%). By January 1, 2020, sulfur content must not exceed 0.50%,
subject to a feasibility review to be completed no later than 2018.
Sulfur content standards are even stricter
within certain “Emission Control Areas”, or ECAs. On July 1, 2015, ships operating within an ECA were not permitted
to use fuel with sulfur content in excess of .1% (from 1.0%) Amended Annex VI established procedures for designating new ECAs.
Currently, the Baltic Sea and the North Sea have been so designated. Effective August 1, 2012, certain coastal areas of North America
were designated ECAs, and effective January 1, 2014, applicable areas of the United States Caribbean Sea adjacent to Puerto Rico
and the U.S. Virgin Islands were designated ECAs. Ocean-going vessels in these areas are subject to stringent emissions controls
which will cause the Company 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 EPA or the states where the Company
operates, compliance with these regulations could entail significant capital expenditures or otherwise increase the costs of the
Company’s operations.
As of January 1, 2013,
MARPOL made mandatory certain measures relating to energy efficiency for ships. It makes the Energy Efficiency Design Index, or
EEDI, for new ships mandatory and the Ship Energy Efficiency Management Plan, or SEEMP, apply to all ships.
Amended Annex VI also
establishes new tiers of stringent nitrogen oxide emissions standards for new marine engines, depending on their date of installation.
The U.S. Environmental Protection Agency promulgated equivalent (and in some senses stricter) emissions standards in late 2009.
Safety Management System Requirements
The IMO also adopted
the International Convention for the Safety of Life at Sea, or SOLAS, and the International Convention on Load Lines, or the LL
Convention, which impose a variety of standards that regulate the design and operational features of ships. The IMO periodically
revises the SOLAS and LL Convention standards. May 2012 SOLAS amendments entered into force as of January 1, 2014. The Convention
on Limitation of Liability for Maritime Claims, or LLMC, was recently amended and the amendments are expected to go 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
ship owners.
The operation of Pangaea’s
ships is also affected by the requirements set forth in Chapter IX of SOLAS, which sets forth the IMO’s International Management
Code for the Safe Operation of Ships and Pollution Prevention, or the ISM Code. The ISM Code requires ship owners and ship managers
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 and describing procedures for dealing with emergencies.
Pangaea relies upon the safety management system that Pangaea and its technical manager have developed for compliance with the
ISM Code. The failure of a ship owner 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. As of the
date of this filing, each of its vessels is ISM code-certified.
The ISM Code requires
that vessel operators obtain a safety management certificate, or SMC, for each vessel they operate. This certificate evidences
compliance by a vessel’s operators with the ISM Code requirements for a safety management system, or SMS. No vessel can obtain
an SMC under the ISM Code unless its manager has been awarded a document of compliance, or DOC, issued in most instances by the
vessel's flag state. Pangaea’s appointed ship managers have obtained documents of compliance for their offices and safety
management certificates for all of its vessels for which the certificates are required by the IMO. The document of compliance,
or the DOC, and safety management certificate, or the SMC, are renewed as required.
International Labor Organization
The International
Labor Organization (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 is required to
ensure compliance with the MLC 2006 for all ships above 500 gross tons in international trade. The MLC 2006 entered into force
on August 20, 2013 at which time all of Pangaea’s vessels were in full compliance with its requirements.
Pollution Control and Liability Requirements
The IMO has negotiated
international conventions that impose liability for pollution in international waters and the territorial waters of the signatories
to such conventions. For example, the IMO adopted the International Convention for the Control and Management of Ships’ Ballast
Water and Sediments, or 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. The BWM Convention
will not enter into force until 12 months after it has been adopted by 30 states, the combined merchant fleets of which represent
not less than 35% of the gross tonnage of the world’s merchant shipping tonnage. To date, there has not been sufficient adoption
of this standard for it to take force. However, Panama may adopt this standard in the relatively near future, which would be sufficient
for it to take force. Upon entry into force of the BWM Convention, mid-ocean ballast exchange would be mandatory for its vessels.
The cost of compliance could increase for ocean carriers, and these costs may be material. Pangaea’s vessels would be required
to be equipped with a ballast water treatment system that meets mandatory concentration limits not later than the first intermediate
or renewal survey, whichever occurs first, after the anniversary date of delivery of the vessel in 2014, for vessels with ballast
water capacity of 1500 – 5000 cubic meters, or after such date in 2016, for vessels with ballast water capacity
of greater than 5000 cubic meters. If mid-ocean ballast exchange or ballast water treatment requirements become mandatory, the
cost of compliance could increase for ocean carriers. Although Pangaea does not believe the costs of compliance with mandatory
mid-ocean ballast exchange would be material, it is difficult to predict the overall impact of such a requirement on its operations.
The IMO adopted the
International Convention on Civil Liability for Bunker Oil Pollution Damage, or the Bunker Convention, to impose strict liability
on ship owners for pollution damage in jurisdictional waters of ratifying states caused by discharges of bunker fuel. The Bunker
Convention requires registered owners of ships 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 ships’ bunkers typically is determined by the national
or other domestic laws in the jurisdiction where the events or damages occur.
In March 2006, the
IMO amended Annex I to MARPOL, including a new regulation relating to oil fuel tank protection, which became effective August 1,
2007. The new regulation applies to various ships delivered on or after August 1, 2010. It includes requirements for the protected
location of the fuel tanks, performance standards for accidental oil fuel outflow, a tank capacity limit and certain other maintenance,
inspection and engineering standards.
Noncompliance with
the ISM Code or other IMO regulations may subject Pangaea to increased liability, lead to decreases in available insurance coverage
for affected vessels or result in the denial of access to, or detention in, some ports. As of the date of this report, each of
Pangaea’s vessels is ISM Code certified. However, there can be no assurance that such certificate will be maintained.
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 might have on Pangaea’s operations.
The U.S. Oil Pollution Act of 1990
and Comprehensive Environmental Response, Compensation and Liability Act
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 with 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 around
the United States. The United States has also enacted the Comprehensive Environmental Response, Compensation and Liability Act,
or CERCLA, which applies to the discharge of hazardous substances other than oil, 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.
Both OPA and CERCLA impact Pangaea’s 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:
|
|
·
|
injury to, destruction or loss of, or loss of use of, natural resources and related assessment
costs;
|
|
|
·
|
injury to, or economic losses resulting from, the destruction of real and personal property;
|
|
|
·
|
net loss of taxes, royalties, rents, fees or net profit revenues resulting from injury, destruction
or loss of real or personal property, or natural resources;
|
|
|
·
|
loss of subsistence use of natural resources that are injured, destroyed or lost;
|
|
|
·
|
lost profits or impairment of earning capacity due to injury, destruction or loss of real or personal
property or natural resources; and
|
|
|
·
|
net cost of increased or additional public services necessitated by removal activities following
a discharge of oil, such as protection from fire, safety or health hazards, and loss of subsistence use of natural resources.
|
OPA contains statutory
caps on liability and damages; such caps do not apply to direct cleanup costs. Effective July 31, 2009, the U.S. Coast Guard adjusted
the limits of OPA liability for non-tank vessels (e.g. drybulk) to the greater of $1,000 per gross ton or $854,400 (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
responsibility 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
damages 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 $5.0 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 U.S. Coast Guard 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.
The 2010
Deepwater
Horizon
oil spill in the Gulf of Mexico may also result in additional regulatory initiatives or statutes, including the raising
of liability caps under OPA. Compliance with any new requirements of OPA may substantially impact Pangaea’s cost of operations
or require it to incur additional expenses to comply with any new regulatory initiatives or statutes. Additional legislation or
regulations applicable to the operation of its vessels that may be implemented in the future could adversely affect its business.
Pangaea currently
maintains pollution liability coverage insurance in the amount of $1.0 billion per incident for each of Pangaea’s vessels.
If the damages from a catastrophic spill were to exceed Pangaea’s insurance coverage it could have an adverse effect on its
business and results of operation.
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 and some states have enacted legislation providing
for unlimited liability for oil spills. In some cases, states which have enacted such legislation have not yet issued implementing
regulations defining vessel owners’ responsibilities under these laws. Pangaea intends to comply with all applicable state
regulations in the ports where its vessels call. Pangaea believes that it is in substantial compliance with all applicable existing
state requirements. In addition, Pangaea intends to comply with all future applicable state regulations in the ports where its
vessels call.
International
Code for Ships Operating in Polar Waters
The
IMO in November 2014 adopted the International Code for Ships Operating in Polar Waters (the “Polar Code”),
and related amendments to the International Convention for the Safety of Life at Sea (“SOLAS”) to make it mandatory.
The expected date of entry into force of the SOLAS amendments
is January 1, 2017, under the tacit acceptance procedure. It will apply to new ships constructed after that date. Ships constructed
before January 1, 2017 will be required to meet the relevant requirements of the Polar Code by the first intermediate or renewal
survey, whichever occurs first, after January 1, 2018.
The Polar Code will be mandatory under both SOLAS and MARPOL because
it contains both safety and environment related provisions. In October 2014, IMO’s Marine Environment Protection
Committee (“MEPC”) approved the necessary draft amendments to make the environmental provisions in the Polar
Code mandatory under MARPOL. The MEPC is expected to adopt the Code and associated MARPOL amendments at its next session in
May 2015, with an entry-into-force date to be aligned with the SOLAS amendments.
Other Environmental Initiatives
The U.S. Clean Water
Act, or CWA, prohibits the discharge of oil, hazardous substances and ballast water 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 and complements the remedies available
under OPA and CERCLA. Furthermore, 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, authorizing
ballast water discharges and other discharges incidental to the operation of vessels. The VGP imposes technology and water-quality
based effluent limits for certain types of discharges and establishes specific inspection, monitoring, recordkeeping and reporting
requirements to ensure the effluent limits are met. On March 28, 2013, the EPA re-issued the VGP for another five years, which
took effect December 19, 2013. The 2013 VGP contains numeric ballast water discharge limits for most vessels to reduce the risk
of invasive species in US waters, more stringent requirements for exhaust gas scrubbers and the use of environmentally acceptable
lubricants.
U.S. Coast Guard 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 U.S. Coast Guard implemented
revised regulations on ballast water management by establishing standards on the allowable concentration of living organisms in
ballast water discharged from ships in U.S. waters. The revised ballast water standards are consistent with those adopted by the
IMO in 2004. Compliance with the EPA and the U.S. Coast Guard regulations could require the installation of certain engineering
equipment and water treatment systems 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 its vessels from entering U.S. waters.
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 ship is in
danger.
The European Union
has adopted several regulations and directives requiring, among other things, more frequent inspections of high-risk ships, as
determined by type, age, and flag as well as the number of times the ship has been detained. The European Union also adopted and
then extended a ban on substandard ships 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.
With effect from January
1, 2010, Directive 2005/33/EC of the European Parliament and of the Council of July 6, 2005, amending Directive 1999/32/EC came
into force. The objective of the directive is to reduce emission of sulfur dioxide and particulate matter caused by the combustion
of certain petroleum derived fuels.
The directive imposes
limits on the sulfur content of such fuels as a condition of their use within a Member State territory. The maximum sulfur content
for marine fuels used by inland waterway vessels and ships at berth in ports in EU countries after January 1, 2010, is 0.10% by
mass. As of January 1, 2015, all vessels operating within Emissions Control Areas, or ECAs, worldwide must comply with 0.1% sulfur
requirements. Currently, the only grade of fuel meeting 0.1% sulfur content requirement is low sulfur marine gas oil, or LSMGO.
As of July 1, 2010, the reduction of applicable sulfur content limits in the North Sea, the Baltic Sea and the English Channel
Sulfur Control Areas will be 0.1%. Pangaea does not expect that it will be required to modify any of its vessels to meet any of
the foregoing low sulfur fuel requirements. On July 15, 2011, the European Commission also adopted a proposal for an amendment
to Directive 1999/32/EC which would align requirements with those imposed by the revised MARPOL Annex VI which introduced stricter
sulfur limits.
Greenhouse Gas Regulation
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. However, in July 2011, MEPC adopted two new sets of mandatory requirements to address
greenhouse gas emissions from ships that entered into force in January 2013. Currently operating ships will be required to develop
Ship Energy Efficiency Management Plans, and minimum energy efficiency levels per capacity mile, outlined in the Energy Efficiency
Design Index, will apply to new ships. These requirements could cause Pangaea to incur additional compliance costs. The IMO is
also planning to implement market-based mechanisms to reduce greenhouse gas emissions from ships at an upcoming MEPC session. The
European Union has indicated that it intends to propose an expansion of the existing European Union emissions trading scheme to
include emissions of greenhouse gases from marine vessels, and in January 2012 the European Commission launched a public consultation
on possible measures to reduce greenhouse gas emissions from ships. In the United States, the EPA has issued a finding that greenhouse
gases endanger the public health and safety and has adopted regulations to limit greenhouse gas emissions from certain mobile sources
and large stationary sources. Although the mobile source emissions regulations do not apply to greenhouse gas emissions from vessels,
such regulation of vessels is foreseeable, and the EPA has in recent years received petitions from the California Attorney General
and various environmental groups seeking such regulation. Any passage of climate control legislation or other regulatory initiatives
by the IMO, European Union, the U.S. or other countries where Pangaea operates, or any treaty adopted at the international level
to succeed the Kyoto Protocol, that restricts emissions of greenhouse gases could require Pangaea to make significant financial
expenditures which Pangaea cannot predict with certainty at this time.
Vessel Security Regulations
Since the terrorist
attacks of September 11, 2001 in the United States, there have been a variety of initiatives intended to enhance vessel security
such as the Maritime Transportation Security Act of 2002, or MTSA. To implement certain portions of the MTSA, in July 2003, the
U.S. Coast Guard 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 U.S. Environmental Protection Agency, or the EPA.
Similarly, in December
2002, amendments to SOLAS created a new chapter of the convention dealing specifically with maritime security. The new Chapter
V became effective in July 2004 and imposes various detailed security obligations on vessels and port authorities, and mandates
compliance with the International Ship and Port Facilities Security Code, or the ISPS Code. The ISPS Code is designed to enhance
the security of ports and ships against terrorism. 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. Among the various requirements
are:
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on-board installation of automatic identification systems to provide a means for the automatic
transmission of safety-related information from among similarly equipped ships and shore stations, including information on a ship’s
identity, position, course, speed and navigational status;
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on-board installation of ship security alert systems, which do not sound on the vessel but only
alert the authorities on shore;
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the development of vessel security plans;
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ship identification number to be permanently marked on a vessel’s hull;
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a continuous synopsis record kept onboard showing a vessel’s history including the name of
the ship, the state whose flag the ship is entitled to fly, the date on which the ship was registered with that state, the ship’s
identification number, the port at which the ship is registered and the name of the registered owner(s) and their registered address;
and
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compliance with flag state security certification requirements.
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Ships operating without
a valid certificate may be detained at port until they obtain an ISSC, or they may be expelled from port, or refused entry at port.
Furthermore, additional
security measures could be required in the future which could have a significant financial impact on Pangaea. The U.S. Coast Guard
regulations, intended to be aligned with international maritime security standards, exempt non-U.S. vessels from MTSA vessel security
measures, provided such vessels have on board a valid ISSC that attests to the vessel's compliance with SOLAS security requirements
and the ISPS Code.
Pangaea intends to
implement the various security measures addressed by MTSA, SOLAS and the ISPS Code, and Pangaea intends that its fleet will comply
with applicable security requirements. Pangaea has implemented the various security measures addressed by the MTSA, SOLAS and the
ISPS Code.
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:
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Annual Surveys:
For seagoing ships, annual surveys are conducted for the hull
and the machinery, including the electrical plant, and where applicable for special equipment classed, within three months before
or after each anniversary date of 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 are
to be carried out at or between the occasion of the second or third annual survey.
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Class Renewal Surveys:
Class renewal surveys, also known as special surveys,
are carried out for the ship’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 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 shipowner 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 shipowner’s request, the surveys required for class renewal may be split according to an agreed schedule to extend
over the entire period of class. 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.
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Most vessels are also
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 ship owner within prescribed time
limits. Pangaea expects to drydock 6 vessels in 2015 and and 3 vessels in 2016, at an aggregate anticipated cost of $4.6 million
and $2.3 million, respectively, not including any unanticipated repairs made while the vessel is offhire. Pangaea estimates that
drydocking a vessel is typically for a period of 2 to 15 days, depending on the size and condition of the vessel.
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. All of Pangaea’s vessels are certified as being
“in class” either by Det Norske Veritas, Nippon Kaiji Kiokai or Bureau Veritas. All new and secondhand vessels that
Pangaea purchases must be certified prior to their delivery under its standard purchase contracts and memorandum of agreement.
For the secondhand vessels, the same is verified by a Class Maintenance Certificate issued within 72 hours prior to delivery. If
the vessel is not certified on the date of closing, Pangaea has the option to cancel the agreement due to Seller’s default
and not take delivery of the vessel.
Risk of
Loss and Insurance
General
The operation of any
drybulk vessel includes risks such as mechanical failure, collision, property loss, cargo loss or damage and business interruption
due to political circumstances in foreign countries, hostilities and labor strikes. In addition, there is always an inherent possibility
of marine disaster, including oil spills (e.g. fuel oil) and other environmental mishaps, 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 accidents in the United States,
has made liability insurance more expensive for ship owners and operators trading in the U.S. market.
While Pangaea maintains
hull and machinery insurance, war risks insurance, protection and indemnity cover and freight, demurrage and defense cover for
its operating fleet in amounts that Pangaea believes to be prudent to cover normal risks in its operations, Pangaea may not be
able to achieve or maintain this level of coverage throughout a vessel’s useful life. Furthermore, while Pangaea believes
that its current insurance coverage is adequate, not all risks can be insured, and there can be no guarantee that any specific
claim will be paid, or that Pangaea will always be able to obtain adequate insurance coverage at reasonable rates.
Hull & Machinery and War Risks
Insurance
Pangaea maintains
marine hull and machinery and war risks insurances, which cover the risk of actual or constructive total loss for all of its vessels.
Its vessels are each covered up to at least their fair market value with a deductible of $100,000 per vessel per incident.
Protection and Indemnity Insurance
Protection and indemnity
insurance is a form of mutual indemnity insurance and is provided by mutual protection and indemnity associations, or P&I Associations,
which insure Pangaea’s third party liabilities in connection with its shipping activities. This includes third-party liability
and other related expenses resulting from the injury, illness 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. Subject to the “capping”
discussed below, Pangaea’s coverage, except for pollution, is unlimited.
Pangaea’s current
protection and indemnity insurance coverage for pollution is $1.0 billion per vessel per incident. The 13 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. As a member of a P&I Association, which is a member of
the International Group, Pangaea is 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.
Properties
Pangaea owns office
space at 109 Long Wharf, Newport, Rhode Island 02840 and leases office space in Copenhagen, Athens, Rio de Janeiro and Singapore.
Legal
Proceedings
Pangaea is not and
has not been involved in any legal proceedings which may have, or have had, a significant effect on its business, financial position
and results of operations or liquidity, nor is Pangaea aware of any proceedings that are pending or threatened which may have a
significant effect on its business, financial position, results of operations, or liquidity. From time to time, Pangaea may be
subject to legal proceedings and claims in the ordinary course of business, principally personal injury and property casualty claims.
Pangaea expects that these claims would be covered by insurance, subject to customary deductibles. Any such claims, even if lacking
merit, could result in the expenditure of managerial resources and materially adversely affect its business, financial condition
and results of operations.
Exchange
Controls
The Bermuda Monetary
Authority, or the BMA, must give permission for all issuances and transfers of securities of a Bermuda exempted company like Pangaea,
unless the proposed transaction is exempted by the BMA’s written general permissions. Pangaea intends to apply for general
permission from the BMA to issue any unissued common shares and for the free transferability of its common shares as long as its
common shares are listed on an “appointed stock exchange.” Pangaea’s common shares are listed on the
NASDAQ Global Select Market, which is an “appointed stock exchange.” A general permission issued
by the BMA results in its common shares being freely transferable among persons who are residents
and non-residents of Bermuda.
Although Pangaea is
incorporated in Bermuda, Pangaea is classified as a non-resident of Bermuda for exchange control purposes by the BMA. Other than
transferring Bermuda Dollars out of Bermuda, there are no restrictions on its ability to transfer funds into and out of Bermuda
or to pay dividends in currency other than Bermuda Dollars to U.S. residents (or other non-residents of Bermuda) who are holders
of its common shares.
In accordance with
Bermuda law, share certificates may be issued only in the names of corporations, individuals or legal persons. In the case of an
applicant acting in a special capacity (for example, as an executor or trustee), certificates may, at the request of the applicant,
record the capacity in which the applicant is acting. Notwithstanding the recording of any such special capacity, Pangaea is not
bound to investigate or incur any responsibility in respect of the proper administration of any such estate or trust.
Pangaea will take
no notice of any trust applicable to any of its shares or other securities whether or not Pangaea had notice of such trust.
Tax
Considerations
The following is a
discussion of the material Bermuda and United States federal income tax considerations relevant to a U.S. Holder and a Non-U.S.
Holder, each as defined below, with respect to the ownership of our common shares. This discussion does not purport to deal with
the tax consequences of owning common shares to all categories of investors, some of which, such as financial institutions, regulated
investment companies, real estate investment trusts, insurance companies, U.S. expatriates, persons holding our ordinary shares
as part of a hedging, integrated, conversion or constructive sale treatment or a straddle, traders in securities that have elected
the mark-to-market method of accounting for their securities, persons liable for alternative minimum tax, pass-through entities
and investors therein, dealers in securities, investors whose functional currency is not the United States dollar and investors
that own, actually or under applicable constructive ownership rules, 10% or more of our common shares, may be subject to special
rules. This discussion deals only with holders who acquire their common shares in connection with the mergers and hold the common
shares as a capital asset. You are encouraged to consult your own tax advisors concerning the overall tax consequences arising
in your own particular situation under United States federal, state, local or foreign law of the ownership of our common shares.
Bermuda Tax Considerations
At the present time,
in the opinion of Appleby there is no Bermuda income or profits tax, withholding tax, capital gains tax, capital transfer tax,
estate duty or inheritance tax payable by us or by our shareholders in respect of our shares. We have obtained an assurance from
the Minister of Finance of Bermuda under the Exempted Undertakings Tax Protection Act 1966, as amended, that in the event any legislation
is enacted in Bermuda imposing any tax computed on profits or income, or computed on any capital asset, gain or appreciation or
any tax in the nature of estate duty or inheritance tax, such tax shall not, until March 31, 2035, be applicable to it to any of
its operations or to its shares, debentures, or other obligations except insofar as such tax applies to persons ordinarily resident
in Bermuda or is payable by us in respect of real property owned or leased by us in Bermuda.
Material United States Federal Income
Tax Considerations
In the opinion of
Willkie Farr & Gallagher LLP, our United States counsel, the following are the material United States federal income tax consequences
to us of our activities and to United States Holders, as defined below, of our common shares following consummation of the business
combination. The following discussion of United States federal income tax matters is based on the Code, judicial decisions, administrative
pronouncements, and existing and proposed regulations issued by the United States Department of the Treasury, all of which are
subject to change, possibly with retroactive effect. The discussion below is based, in part, on the description of Pangaea’s
business as described above and assumes that it conducts its business as described in this section.
United States Federal Income Taxation
of Pangaea
Taxation of Operating
Income: In General
Unless exempt from
United States federal income taxation under the rules discussed below, a foreign corporation is subject to United States federal
income taxation in respect of any income that is derived from the use of vessels, from the hiring or leasing of vessels for use
on a time, voyage or bareboat charter basis, from the participation in a pool, partnership, strategic alliance, joint operating
agreement, code sharing arrangements or other joint venture it directly or indirectly owns or participates in that generates such
income, or from the performance of services directly related to those uses, which we refer to as “shipping income,”
to the extent that the shipping income is derived from sources within the United States. For these purposes, 50% of shipping income
that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States constitutes
income from sources within the United States, which we refer to as “U.S.-source shipping income.”
Shipping income attributable
to transportation that both begins and ends in the United States is considered to be 100% from sources within the United States.
We are not permitted to engage in transportation that produces income which is considered to be 100% from sources within the United
States.
Shipping income attributable
to transportation exclusively between non-United States ports will be considered to be 100% derived from sources outside the United
States. Shipping income derived from sources outside the United States will not be subject to any United States federal income
tax.
In the absence of
exemption from tax under Section 883, our gross U.S.-source shipping income would be subject to a 4% tax imposed without allowance
for deductions as described below.
Exemption of Operating
Income from United States Federal Income Taxation
Under Section 883
of the Code, we will be exempt from United States federal income taxation on our U.S.-source shipping income if:
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we are organized in a foreign country (our “country of organization”) that grants an
“equivalent exemption” to corporations organized in the United States; and
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more than 50% of the value of our stock is owned, directly or indirectly, by individuals who are
“residents” of our country of organization or of another foreign country that grants an “equivalent exemption”
to corporations organized in the United States, which we refer to as the “50% Ownership Test,” or
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our stock is “primarily and regularly traded on an established securities market” in
our country of organization, in another country that grants an “equivalent exemption” to United States corporations,
or in the United States, which we refer to as the “Publicly-Traded Test.”
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Bermuda, the jurisdiction
where we and our ship-owning subsidiaries are incorporated, grants an “equivalent exemption” to United States corporations.
Therefore, we will be exempt from United States federal income taxation with respect to our U.S.-source shipping income if we satisfy
either the 50% Ownership Test or the Publicly-Traded Test.
The regulations provide,
in pertinent part, that stock of a foreign corporation will be considered to be “primarily traded” on an established
securities market if the number of shares of each class of stock that are traded during any taxable year on all established securities
markets in that 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. Our common shares are primarily traded on Nasdaq and satisfy the listing requirement thereof.
It is further required
that with respect to each class of stock relied upon to meet the listing threshold (i) such class of the stock is traded on the
market, other than in minimal quantities, on at least 60 days during the taxable year or 1/6th of the number of days in a short
taxable year; and (ii) the aggregate number of shares of such class of stock traded on such market is at least 10% of the average
number of shares of such class of stock outstanding during such year or as appropriately adjusted in the case of a short taxable
year. If we failed to continue to satisfy the trading frequency and trading volume tests, the regulations provide that the trading
frequency and trading volume tests will be deemed satisfied by a class of stock if such class of stock is traded on an established
market in the United States and such class of stock is regularly quoted by dealers making a market in such stock.
Notwithstanding the
foregoing, the regulations provide, in pertinent part, that our common shares will not be considered to be “regularly traded”
on an established securities market for any taxable year in which 50% or more of the outstanding common shares are owned, actually
or constructively under specified stock attribution rules, on more than half the days during the taxable year by persons who each
own 5% or more of our common shares, which we refer to as the “5 Percent Override Rule.”
For purposes of being
able to determine the persons who own 5% or more of our stock, or “5% Stockholders,” the regulations permit us to rely
on Schedule 13G and Schedule 13D filings with the SEC to identify persons who have a 5% or more beneficial interest in our common
shares. The regulations further provide that an investment company which is registered under the Investment Company Act of 1940,
as amended, will not be treated as a 5% Stockholder for such purposes.
If our 5% Stockholders
own more than 50% or more of our common shares, we would be subject to the 5% Override Rule unless we can establish that among
the closely-held group of 5% Stockholders, there are sufficient 5% Stockholders that are qualified stockholders for purposes of
Section 883 of the Code to preclude non-qualified 5% Stockholders in the closely-held group from owning 50% or more of each class
of our stock for more than half the number of days during the taxable year. In order to establish this, sufficient 5% Stockholders
that are qualified stockholders would have to comply with certain documentation and certification requirements designed to substantiate
their identity as qualified stockholders. These requirements are onerous and there is no assurance that we will be able to satisfy
them.
Taxation In Absence
of Exemption
To the extent the
benefits of Section 883 are unavailable, our U.S.-source shipping income, to the extent not considered to be “effectively
connected” with the conduct of a United States trade or business, as described below, would be subject to a 4% tax imposed
by Section 887 of the Code on a gross basis, without the benefit of deductions. Since under the sourcing rules described above,
no more than 50% of our shipping income would be treated as being derived from United States sources, the maximum effective rate
of United States federal income tax on our shipping income would never exceed 2% under the 4% gross basis tax regime.
To the extent the
benefits of the Section 883 exemption are unavailable and our U.S.-source shipping income is considered to be “effectively
connected” with the conduct of a United States trade or business, as described below, any such “effectively connected”
U.S.-source shipping income, net of applicable deductions, would be subject to the United States federal corporate income tax currently
imposed at rates of up to 35%. In addition, we may be subject to the 30% “branch profits” taxes on earnings effectively
connected with the conduct of such trade or business, as determined after allowance for certain adjustments, and on certain interest
paid or deemed paid attributable to the conduct of its United States trade or business.
Our U.S.-source shipping
income would be considered “effectively connected” with the conduct of a United States trade or business only if:
|
|
·
|
We have, or are considered to have, a fixed place of business in the United States involved in
the earning of shipping income; and
|
|
|
·
|
substantially all of our U.S.-source shipping income is attributable to regularly scheduled transportation,
such as the operation of a vessel that follows a published schedule with repeated sailings at regular intervals between the same
points for voyages that begin or end in the United States.
|
We do not intend to
have, or permit circumstances that would result in having any vessel operating to the United States on a regularly scheduled basis.
Based on the foregoing and on the expected mode of our shipping operations and other activities, we believe that none of our U.S.-source
shipping income will be “effectively connected” with the conduct of a United States trade or business.
United States Taxation
of Gain on Sale of Vessels
If we qualify for
exemption from tax under Section 883 in respect of the shipping income derived from the international operation of our vessels,
then we believe that it is likely that gain from the sale of any such vessel should likewise be exempt from tax under Section 883.
If, however, our shipping income from such vessels does not for whatever reason qualify for exemption under Section 883 and assuming
that any decision on a vessel sale is made from and attributable to an office that we maintain in the United States, as we believe
might likely to be the case as we are currently structured, then we believe that it is likely that any gain derived from the sale
of any such vessel will be treated as derived from United States sources and subject to United States federal income tax as “effectively
connected” income (determined under rules different from those discussed above) under the above described net income tax
regime.
United States Federal
Income Taxation of U.S. Holders
As used herein, the
term “U.S. Holder” means a beneficial owner of common shares that is a United States citizen or resident, United States
corporation or other United States entity taxable as a corporation, an estate the income of which is subject to United States federal
income taxation regardless of its source, or a trust if a court within the United States is able to exercise primary jurisdiction
over the administration of the trust and one or more United States persons have the authority to control all substantial decisions
of the trust.
If a partnership holds
our common shares, the tax treatment of a partner will generally depend upon the status of the partner and upon the activities
of the partnership. If you are a partner in a partnership holding our common shares, you are encouraged to consult your tax advisor.
Distributions
Subject to the discussion
of passive foreign investment companies below, any distributions made by us with respect to our common shares to a U.S. Holder
will generally constitute dividends, which may be taxable as ordinary income or “qualified dividend income” as described
in more detail below, to the extent of our current or accumulated earnings and profits, as determined under United States federal
income tax principles. Distributions in excess of our earnings and profits will be treated first as a nontaxable return of capital
to the extent of the U.S. Holder's tax basis in his common shares on a dollar-for-dollar basis and thereafter as capital gain.
Because we are not a United States corporation, U.S. Holders that are corporations will not be entitled to claim a dividends received
deduction with respect to any distributions they receive from us. Dividends paid with respect to our common shares will generally
be treated as “passive category income” or, in the case of certain types of U.S. Holders, “general category income”
for purposes of computing allowable foreign tax credits for United States foreign tax credit purposes.
Dividends paid on
our common shares to a U.S. Holder who is an individual, trust or estate (a “U.S. Individual Holder”) will generally
be treated as “qualified dividend income” that is taxable to such U.S. Individual Holders at preferential tax rates
provided that (1) the common shares are readily tradable on an established securities market in the United States (such as the
NASDAQ Stock Market, on which our common shares will be listed); (2) we are not a passive foreign investment company 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); and (3) the U.S. Individual Holder has owned the common shares for more than 60 days in the 121-day period beginning
60 days before the date on which the common shares becomes ex-dividend. So long as our stock is considered readily tradable on
an established securities market in the United States, dividends received by U.S. Individual Holders should, subject to applicable
limitations, qualify as “qualified dividend income” eligible for preferential rates. Any dividends paid by us which
are not eligible for these preferential rates will be taxed as ordinary income to a U.S. Holder.
Special rules may
apply to any “extraordinary dividend” generally, a dividend in an amount which is equal to or in excess of ten percent
of a stockholder's adjusted basis (or fair market value in certain circumstances) in common shares paid by us. If we pay an “extraordinary
dividend” on our common shares that is treated as “qualified dividend income,” then any loss derived by a U.S.
Individual Holder from the sale or exchange of such common shares will be treated as long-term capital loss to the extent of such
dividend.
Sale, Exchange
or other Disposition of Common Shares
Assuming we do not
constitute a passive foreign investment company for any taxable year, a U.S. Holder generally will recognize taxable gain or loss
upon a sale, exchange or other disposition of our common 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 tax basis in such stock. Such gain or loss
will be treated as long-term capital gain or loss if the U.S. Holder's holding period is greater than one year at the time of the
sale, exchange or other disposition. Such capital gain or loss will generally be treated as United States-source income or loss,
as applicable, for United States foreign tax credit purposes. A U.S. Holder's ability to deduct capital losses is subject to certain
limitations.
Passive Foreign
Investment Company Status and Significant Tax Consequences
Special United States
federal income tax rules apply to a U.S. Holder that holds stock in a foreign corporation classified as a passive foreign investment
company for United States federal income tax purposes. In general, we will be treated as a passive foreign investment company with
respect to a U.S. Holder if, for any taxable year in which such holder held our common shares, either:
|
|
·
|
at least 75% of our gross income for such taxable year consists of passive income (e.g., dividends,
interest, capital gains and rents derived other than in the active conduct of a rental business); or
|
|
|
·
|
at least 50% of the average value of the assets held by the corporation during such taxable year
produce, or are held for the production of, passive income.
|
For purposes of determining
whether we are a passive foreign investment company, we will be treated as earning and owning our proportionate share of the income
and assets, respectively, of any of our subsidiary corporations in which we own at least 25% of the value of the subsidiary's stock.
Income earned, or deemed earned, by us in connection with the performance of services would not constitute passive income. By contrast,
rental income would generally constitute “passive income” unless we were treated under specific rules as deriving our
rental income in the active conduct of a trade or business.
Based on Pangaea’s
current operations, income and assets, we do not believe that we are a passive foreign investment company with respect to the present
or any prior taxable years. Although there is no legal authority directly on point, for purposes of determining whether we are
a passive foreign investment company, we believe that the gross income we derive or are deemed to derive from the time chartering
and voyage chartering activities of our wholly-owned subsidiaries should constitute services income, rather than rental income.
Correspondingly, such income should not constitute passive income, and the assets that we or our wholly-owned subsidiaries own
and operate in connection with the production of such income should not constitute passive assets for purposes of determining whether
we are a passive foreign investment company. However, in the absence of any legal authority specifically relating to the statutory
provisions governing passive foreign investment companies, the Internal Revenue Service or a court could disagree with our position.
In addition, although we intend to conduct our affairs in a manner to avoid being classified as a passive foreign investment company
with respect to any taxable year, we cannot assure you that the nature of our operations will not change in the future.
As discussed more
fully below, if we were to be treated as a passive foreign investment company for any taxable year, a U.S. Holder would be subject
to different taxation rules depending on whether the U.S. Holder makes an election to treat us as a “Qualified Electing Fund,”
which election we refer to as a “QEF election.” As an alternative to making a QEF election, a U.S. Holder should be
able to make a “mark-to-market” election with respect to our common shares, as discussed below. A U.S. Holder of shares
in a PFIC will be required to file an annual information return containing information regarding the PFIC as required by applicable
Treasury Regulations.
Taxation of U.S.
Holders Making a Timely QEF Election
If a U.S. Holder makes
a timely QEF election, which U.S. Holder we refer to as an “Electing Holder,” the Electing Holder must report each
year for United States federal income tax purposes his pro rata share of our ordinary earnings and our net capital gain, if any,
for our taxable year that ends with or within the taxable year of the Electing Holder, regardless of whether or not distributions
were received from us by the Electing Holder. The Electing Holder's adjusted tax basis in the common shares will be increased to
reflect taxed but undistributed earnings and profits. Distributions of earnings and profits that had been previously taxed will
result in a corresponding reduction in the adjusted tax basis in the common shares and will not be taxed again once distributed.
An Electing Holder would generally recognize capital gain or loss on the sale, exchange or other disposition of our common shares.
A U.S. Holder would make a QEF election with respect to any year that our company is a passive foreign investment company by filing
IRS Form 8621 with his United States federal income tax return. If we were aware that we were to be treated as a passive foreign
investment company for any taxable year, we would provide each U.S. Holder with all necessary information in order to make the
QEF election described above.
Taxation of U.S.
Holders Making a “Mark-to-Market” Election
Alternatively, if
we were to be treated as a passive foreign investment company for any taxable year and, as we anticipate, our stock is treated
as “marketable stock,” a U.S. Holder would be allowed to make a “mark-to-market” election with respect
to our common 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 common shares at the end of the taxable year over such holder's adjusted
tax basis in the common shares. The U.S. Holder would also be permitted an ordinary loss in respect of the excess, if any, of the
U.S. Holder's adjusted tax basis in the common shares over its fair market value at the end of the taxable year, but only to the
extent of the net amount previously included in income as a result of the mark-to-market election. A U.S. Holder's tax basis in
his common shares would be adjusted to reflect any such income or loss amount. Gain realized on the sale, exchange or other disposition
of our common shares would be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of the
common shares would be treated as ordinary loss to the extent that such loss does not exceed the net mark-to-market gains previously
included by the U.S. Holder.
Taxation of U.S.
Holders Not Making a Timely QEF or Mark-to-Market Election
Finally, if we were
to be treated as a passive foreign investment company for any taxable year, a U.S. Holder who does not make either a QEF election
or a “mark-to-market” election for that year, whom we refer to as a “Non-Electing Holder,” would be subject
to special rules with respect to (1) any excess distribution (i.e., the portion of any distributions received by the Non-Electing
Holder on our common shares in a taxable year in excess of 125 percent 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 common shares), and
(2) any gain realized on the sale, exchange or other disposition of our common shares. Under these special rules:
|
|
·
|
the excess distribution or gain would be allocated ratably over the Non-Electing Holders' aggregate
holding period for the common shares;
|
|
|
·
|
the amount allocated to the current taxable year and any taxable year before we became a passive
foreign investment company would be taxed as ordinary income; and
|
|
|
·
|
the amount allocated to each of the other taxable years would be subject to tax at the highest
rate of tax in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed deferral benefit
would be imposed with respect to the resulting tax attributable to each such other taxable year.
|
These penalties would
not apply to a pension or profit sharing trust or other tax-exempt organization that did not borrow funds or otherwise utilize
leverage in connection with its acquisition of our common shares. If a Non-Electing Holder who is an individual dies while owning
our common shares, such holder's successor generally would not receive a step-up in tax basis with respect to such stock.
United
States Federal Income Taxation of “Non-U.S. Holders”
A beneficial owner
of our common shares that is not a U.S. Holder is referred to herein as a “Non-U.S. Holder.”
Dividends on Common
Shares
Non-U.S. Holders generally
will not be subject to United States federal income tax or withholding tax on dividends received from us with respect to our common
shares, unless that income is effectively connected with the Non-U.S. Holder's conduct of a trade or business in the United States.
If the Non-U.S. Holder is entitled to the benefits of a United States income tax treaty with respect to those dividends,
that income is taxable only if it is attributable to a permanent establishment maintained by the Non-U.S. Holder in the United
States.
Sale, Exchange
or Other Disposition of Common Shares
Non-U.S. Holders generally
will not be subject to United States federal income tax or withholding tax on any gain realized upon the sale, exchange or other
disposition of our common shares, unless:
|
|
·
|
the gain is effectively connected with the Non-U.S. Holder's conduct of a trade or business in
the United States. If the Non-U.S. Holder is entitled to the benefits of an income tax treaty with respect to that gain, that gain
is taxable only if it is attributable to a permanent establishment maintained by the Non-U.S. Holder in the United States; or
|
|
|
·
|
the Non-U.S. Holder is an individual who is present in the United States for 183 days or more during
the taxable year of disposition and other conditions are met.
|
If the Non-U.S. Holder
is engaged in a United States trade or business for United States federal income tax purposes, the income from the common shares,
including dividends and the gain from the sale, exchange or other disposition of the stock that is effectively connected with the
conduct of that trade or business will generally be subject to regular United States federal income tax in the same manner as discussed
in the previous section relating to the taxation of U.S. Holders. In addition, if a Non-U.S. Holder is a corporation, its earnings
and profits that are attributable to the effectively connected income, which are subject to certain adjustments, may be subject
to an additional branch profits tax at a rate of 30%, or at a lower rate as may be specified by an applicable income tax treaty.
Backup Withholding
and Information Reporting
In general, dividend
payments, or other taxable distributions, made within the United States to you will be subject to information reporting requirements.
Such payments will also be subject to backup withholding tax if you are a non-corporate U.S. Holder and you:
|
|
·
|
fail to provide an accurate taxpayer identification number;
|
|
|
·
|
are notified by the Internal Revenue Service that you have failed to report all interest or dividends
required to be shown on your federal income tax returns; or
|
|
|
·
|
in certain circumstances, fail to comply with applicable certification requirements.
|
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.
If you sell your common
shares to or through a United States office or broker, the payment of the proceeds is subject to both United States backup withholding
and information reporting unless you certify that you are a non-United States person, under penalties of perjury, or you otherwise
establish an exemption. If you sell your common shares through a non-United States office of a non-United States broker and the
sales proceeds are paid to you outside the United States then information reporting and backup withholding generally will not apply
to that payment. However, United States information reporting requirements, but not backup withholding, will apply to a payment
of sales proceeds, even if that payment is made to you outside the United States, if you sell your common shares through a non-United
States office of a broker that is a United States person or has some other contacts with the United States.
Backup withholding
tax is not an additional tax. Rather, you generally may obtain a refund of any amounts withheld under backup withholding rules
that exceed your income tax liability by filing a refund claim with the IRS.
Pursuant to recently
enacted legislation, individuals who are U.S. Holders (and to the extent specified in applicable Treasury regulations, certain
individuals who are Non-U.S. Holders and certain United States entities) who hold “specified foreign financial assets”
(as defined in Section 6038D of the Code) are required to file IRS Form 8938 with information relating to the asset for each taxable
year in which the aggregate value of all such assets exceeds $75,000 at any time during the taxable year or $50,000 on the last
day of the taxable year (or such higher dollar amount as prescribed by applicable Treasury regulations). Specified foreign financial
assets would include, among other assets, our common shares, unless the common shares are held through an account maintained with
a United States financial institution. 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 United States entity) that is required
to file IRS Form 8938 does not file such form, the statute of limitations on the assessment and collection of United States 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 United States entities) and Non-U.S. Holders are encouraged consult their own tax advisors regarding
their reporting obligations under this legislation.
SELECTED FINANCIAL AND OPERATING DATA
The following tables
set forth our selected consolidated statements of operations and comprehensive income and selected consolidated balance sheets
data. The selected consolidated statements of operations and comprehensive income for the years ended December 31, 2013 and 2012
and the selected consolidated balance sheets data as of December 31, 2013 and 2012 have been derived from our audited consolidated
financial statements and the notes thereto included elsewhere in this prospectus. The consolidated statements of operations and
comprehensive income for the nine months ended September 30, 2014 and 2013, and the consolidated balance sheet data as of September
30, 2014 have been derived from our unaudited consolidated financial statements appearing elsewhere in this prospectus. Our historical
operating results are not necessarily indicative of future operating results, and our interim results are not necessarily indicative
of the results to be expected for the full year or any other period.
The following data
should be read together with our consolidated financial statements and the related notes thereto, as well as the section entitled
“
Management’s Discussion and Analysis of Financial Condition and Results of Operations
”, included elsewhere
in this prospectus.
|
|
|
As of and for the nine months ended
September 30,
|
|
|
As of and for the years ended
December 31
|
|
|
|
|
2014
|
|
|
2013
|
|
|
2013
|
|
|
2012
|
|
|
|
|
(US dollars in thousands, except for per share amounts)
|
|
|
Income Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voyage revenue
|
|
$
|
252,085
|
|
|
$
|
246,642
|
|
|
|
336,160
|
|
|
$
|
342,085
|
|
|
Charter revenue
|
|
|
43,112
|
|
|
|
34,329
|
|
|
|
56,311
|
|
|
|
44,972
|
|
|
Total revenue
|
|
|
295,197
|
|
|
|
280,971
|
|
|
|
392,471
|
|
|
|
387,058
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
Charter expense
|
|
|
136,625
|
|
|
|
86,098
|
|
|
|
196,036
|
|
|
|
200,867
|
|
|
Voyage expense
|
|
|
112,272
|
|
|
|
147,120
|
|
|
|
130,880
|
|
|
|
133,524
|
|
|
Vessel operating expenses
|
|
|
22,587
|
|
|
|
15,710
|
|
|
|
22,958
|
|
|
|
14,814
|
|
|
General and administrative
|
|
|
7,719
|
|
|
|
8,592
|
|
|
|
11,599
|
|
|
|
11,028
|
|
|
Depreciation and amortization
|
|
|
8,415
|
|
|
|
7,060
|
|
|
|
9,615
|
|
|
|
7,180
|
|
|
Loss on sale of vessels
|
|
|
(3,948
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Total expenses
|
|
|
283,670
|
|
|
|
264,581
|
|
|
|
371,088
|
|
|
|
367,414
|
|
|
Income from operations
|
|
|
11,527
|
|
|
|
16,390
|
|
|
|
21,383
|
|
|
|
19,644
|
|
|
Total other expense, net
|
|
|
(6,948
|
)
|
|
|
(5,054
|
)
|
|
|
(5,869
|
)
|
|
|
(3,731
|
)
|
|
Net income
|
|
|
4,579
|
|
|
|
11,336
|
|
|
|
15,514
|
|
|
|
15,913
|
|
|
Income attributable to noncontrolling interests
|
|
|
335
|
|
|
|
(820
|
)
|
|
|
(62
|
)
|
|
|
(2,059
|
)
|
|
Net income attributable to Pangaea Logistics Solutions Ltd.
|
|
$
|
4,914
|
|
|
$
|
10,516
|
|
|
$
|
15,452
|
|
|
$
|
13,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
20,158
|
|
|
$
|
23,810
|
|
|
$
|
18,928
|
|
|
$
|
19,696
|
|
|
Total assets
|
|
$
|
335,626
|
|
|
$
|
308,192
|
|
|
$
|
330,373
|
|
|
$
|
231,137
|
|
|
Total third-party debt (current and long-term)
|
|
$
|
113,407
|
|
|
$
|
105,447
|
|
|
$
|
102,368
|
|
|
$
|
84,876
|
|
|
Total preferred equity and shareholders' equity
|
|
$
|
99,716
|
|
|
$
|
114,776
|
|
|
$
|
117,874
|
|
|
$
|
73,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
16,417
|
|
|
$
|
18,933
|
|
|
$
|
21,117
|
|
|
$
|
15,877
|
|
|
Net cash used in investing activities
|
|
$
|
(30,115
|
)
|
|
$
|
(75,681
|
)
|
|
$
|
(83,980
|
)
|
|
$
|
(101,405
|
)
|
|
Net cash provided by financing activities
|
|
$
|
14,928
|
|
|
$
|
60,863
|
|
|
$
|
62,095
|
|
|
$
|
86,486
|
|
|
Adjusted EBITDA
(1)
|
|
$
|
19,942
|
|
|
$
|
23,451
|
|
|
$
|
30,998
|
|
|
$
|
26,824
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shipping Days
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voyage days
|
|
|
9,792
|
|
|
|
8,773
|
|
|
|
12,076
|
|
|
|
11,545
|
|
|
Time charter days
|
|
|
3,086
|
|
|
|
2,723
|
|
|
|
4,072
|
|
|
|
3,224
|
|
|
Total shipping days
|
|
|
12,878
|
|
|
|
11,496
|
|
|
|
16,148
|
|
|
|
14,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TCE Rates ($/day)
(3)
|
|
$
|
12,313
|
|
|
$
|
11,642
|
|
|
$
|
12,163
|
|
|
$
|
12,607
|
|
Adjusted EBITDA represents operating earnings
before interest expense, income taxes, depreciation and amortization and other non-operating income and/or expense, if any. Adjusted
EBITDA is included because it is used by management and certain investors to measure Bulk Partners’ operating performance.
Adjusted EBITDA is also used by management in its determination of the fair value of its preferred and common stock and is also
reviewed periodically as a measure of financial performance by Bulk Partners’ Board of Directors. Adjusted EBITDA is not
an item recognized by the generally accepted accounting principles in the United States of America, or U.S. GAAP, and should not
be considered as an alternative to net income, operating income, or any other indicator of a company's operating performance required
by U.S. GAAP. Bulk Partners’ definition of Adjusted EBITDA used here may not be comparable to the definition of EBITDA used
by other companies. A reconciliation of income from operations to Adjusted EBITDA is as follows:
|
Income from operations
|
|
$
|
11,527
|
|
|
$
|
16,390
|
|
|
$
|
21,383
|
|
|
$
|
19,644
|
|
|
Depreciation and amortization
|
|
|
8,415
|
|
|
|
7,060
|
|
|
|
9,615
|
|
|
|
7,180
|
|
|
Adjusted EBITDA
|
|
$
|
19,942
|
|
|
$
|
23,451
|
|
|
$
|
30,998
|
|
|
$
|
26,824
|
|
Shipping days. Pangaea defines shipping
days as the aggregate number of days in a period during which its vessels are performing either a voyage charter (voyage days)
or time charter (time charter days).
Time Charter Equivalent, or “TCE,”
rates. Pangaea defines TCE rates as total revenues less voyage expenses divided by the length of the voyage, which is consistent
with industry standards. TCE rate 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 are generally not expressed in per-day amounts while charter hire rates for vessels on time charters generally
are expressed in such amounts.
SELECTED UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL INFORMATION
As disclosed under the sections entitled
“The Merger Proposal” and “The Merger Agreement” beginning at pages 60 and 84, respectively, of the final
prospectus contained in the Registration Statement on Form S-4 and definitive proxy statement (the “Proxy Statement/Prospectus”)
filed with the SEC on August 13, 2014 by Quartet Holdco Ltd., now known as Pangaea Logistics Solutions Ltd. (the “Company”),
and Quartet Merger Corp. (“Quartet”), respectively, the Company entered into an Agreement and Plan of Reorganization
(the “Merger Agreement”), dated as of April 30, 2014, with Quartet, Quartet Merger Sub Ltd. (“Merger Sub”),
Pangaea Logistics Solutions Ltd., now known as Bulk Partners (Bermuda), LTD. (“Bulk Partners”), and the security holders
of Bulk Partners (“Signing Holders”), which contemplated (i) Merger Sub merging with and into Bulk Partners with Bulk
Partners surviving as a wholly-owned subsidiary of the Company (the “Transaction Merger”) and (ii) Quartet merging
with and into the Company, with the Company surviving as the publicly-traded entity (the “Redomestication Merger” together
with the Transaction Merger, the “Mergers”).
The following unaudited pro forma condensed
combined financial statements give effect to the mergers which were consummated on October 1, 2014 pursuant to the Merger Agreement
(the “Closing”).
The mergers are accounted for as a “reverse
merger” and recapitalization at the date of the consummation of the transaction, since the Signing Holders own at least 50.1%
of the outstanding common shares of the Company immediately following the completion of the mergers, the officers of Bulk Partners
have assumed all corporate and day-to-day management of the Company, including the chief executive officer and the chief financial
officer, and Bulk Partners has the sole right to appoint six of the eight directors to the board of the Company. Accordingly, Bulk
Partners is deemed to be the accounting acquirer in the transaction and, consequently, the transaction is treated as a recapitalization
of Bulk Partners. As a result, the assets and liabilities and the historical operations that are reflected in the Company’s
financial statements are those of Bulk Partners and are recorded at the historical cost basis of Bulk Partners. Quartet’s
assets, liabilities and results of operations are consolidated with the assets, liabilities and results of operations of Bulk Partners.
The following unaudited pro forma condensed
combined balance sheet combines the unaudited consolidated historical balance sheet of Bulk Partners as of September 30, 2014 with
the unaudited historical balance sheet of Quartet as of September 30, 2014, giving effect to the mergers as if they had been consummated
as of that date.
The following unaudited pro forma condensed
combined income statement for the nine months ended September 30, 2014 combines the unaudited historical consolidated statement
of income of Bulk Partners for the nine months ended September 30, 2014 with the unaudited historical statement of operations of
Quartet for the nine months ended September 30, 2014, giving effect to the mergers as if they had been consummated as of January
1, 2013.
The following unaudited pro forma condensed
combined income statement for the year ended December 31, 2013 combines the audited historical consolidated statement of income
of Bulk Partners for the year ended December 31, 2013 with the audited historical statement of operations of Quartet for the year
ended December 31, 2013, giving effect to the mergers as if they had been consummated on January 1, 2013.
The historical financial information of Quartet
was derived from the unaudited consolidated financial statements of Quartet for the nine months ended September 30, 2014 and audited
consolidated financial statements of Quartet for the year ended December 31, 2013. The historical financial information of Bulk
Partners was derived from the unaudited consolidated financial statements of Bulk Partners for the nine months ended September
30, 2014 and audited consolidated financial statements of Bulk Partners for the year ended December 31, 2013.
The unaudited pro forma condensed combined
financial statements should be read in conjunction with the historical financial statements and accompanying notes of Quartet which
are included in this Registration Statement and the historical consolidated financial statements and accompanying notes of Bulk
Partners, which are included in this Registration Statement.
The historical financial information has
been adjusted to give effect to pro forma events that are related and/or directly attributable to the mergers, are factually supportable
and are expected to have a continuing impact on the combined results. The adjustments presented on the unaudited pro forma condensed
combined financial statements have been identified and presented to provide relevant information necessary for an accurate understanding
of the combined company upon consummation of the mergers. Material nonrecurring charges which resulted directly from the transaction
are not included in the pro forma condensed combined income statements.
The unaudited pro forma condensed combined
financial information is for illustrative purposes only. The financial results may have been different had the companies always
been combined. The unaudited pro forma condensed combined financial information should not be relied upon as being indicative of
the historical results that would have been achieved had the companies always been combined or the future results that the combined
company will experience. Bulk Partners and Quartet have not had any historical relationship prior to the mergers. Accordingly,
no pro forma adjustments were required to eliminate activities between the companies.
In the transaction merger, holders of 8,840,014
shares of Quartet common stock sold in its initial public offering (“public shares”) exercised their rights to convert
those shares to cash at a conversion price of approximately $10.20 per share, or an aggregate of approximately $90,139,132. As
a result of the number of public shares converted into cash, the Quartet initial stockholders forfeited 1,739,062 shares (the “Forfeited
Shares”) of Quartet common stock immediately prior to the Closing.
Upon the Closing, the former security holders
of Quartet were issued an aggregate of 3,130,861 common shares of the Company, including 1,026,812 common shares of the Company
issued in exchange for Quartet’s then outstanding rights.
Per the terms of the convertible redeemable
preferred stock of Bulk Partners, upon the Closing, 105,670 convertible redeemable preferred shares were converted into 115,352
common shares of Bulk Partners. The Signing Holders received 29,411,765 shares of the Company in exchange for their Bulk Partners
securities and an additional 1,739,062 Forfeited Shares, or 31,150,827 shares in aggregate.
Further, in connection with the mergers,
Quartet entered into agreements with certain third parties pursuant to which such parties agreed to accept payment for certain
amounts owed to them in shares of the Company, resulting in the issuance of an aggregate of 291,953 common shares. Additionally,
420,000 unit purchase options of Quartet were converted into 123,356 common shares of the Company. These shares of 415,309 in total,
are denoted as “Advisors to the Mergers” shares below.
As a result of the mergers, as of the date
of this filing, there are 34,696,997 common shares of the Company outstanding where the Signing Holders own approximately 89.8%
of the Company shares, the Quartet stockholders own approximately 9.0% of the Company shares, and the Advisors to the Mergers own
approximately 1.2% of the Company shares.
Additionally, the Merger Agreement provides
for the Signing Holders to receive up to 7,352,941 net income shares, contingent upon Bulk Partners attaining specified net income
targets in the fiscal years ending December 31, 2014, 2015, and 2016. The following table sets forth the targets and the contingent
shares issuable to the Signing Holders:
|
|
|
Contingent Payment Schedule
|
|
|
|
|
Net Income Target
|
|
|
Contingent
Shares
|
|
|
Fiscal year ending December 31, 2014
|
|
$
|
27,300,000
|
|
|
|
3,431,373
|
|
|
Fiscal year ending December 31, 2015
|
|
$
|
34,000,000
|
|
|
|
1,960,784
|
|
|
Fiscal year ending December 31, 2016
|
|
$
|
41,000,000
|
|
|
|
1,960,784
|
|
|
Total
|
|
$
|
102,300,000
|
|
|
|
7,352,941
|
|
Irrespective of whether Bulk Partners meets
any of the net income targets set forth above in the applicable fiscal year, in the event that Bulk Partners has cumulative net
income of $102,300,000 or more for any of the one, two, or three-year periods beginning on January 1, 2014, the Company shall issue
to the Signing Holders in aggregate 7,352,941 shares
For purposes of these contingent net income
shares, net income is defined in the Merger Agreement to mean net income of Bulk Partners as determined in accordance with U.S.
GAAP, including any net income attributable to acquisitions of vessels and any interests of Seamar Management S.A., Nordic Bulk
Holding ApS or Nordic Bulk Holding Company Ltd., or any subsidiaries thereof by Bulk Partners or any of its subsidiaries following
the closing date, and excluding any non-recurring or extraordinary expenses of Bulk Partners or any of its subsidiaries, such as
any expenses incurred in connection with the mergers, or Quartet expenses incurred prior to the closing that are included in the
Company’s 2014 income statement.
Pangaea Logistics Solutions Ltd.
(previously known as Quartet Holdco Ltd.
and formerly Quartet Merger Corp.)
Pro Forma Condensed Combined Balance
Sheet
As of September 30, 2014
(Unaudited)
|
(In thousands)
|
|
Quartet
Merger
Corp.
Historical,
Unaudited
|
|
|
Bulk
Partners
(Bermuda)
LTD.
Historical,
Unaudited
|
|
|
Adjustments
for
Mergers
|
|
|
Proforma
Unaudited,
Combined
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
8
|
|
|
$
|
20,158
|
|
|
$
|
8,361
|
(a)
|
|
$
|
23,793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,238
|
)(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(496
|
)(a)
|
|
|
|
|
|
Restricted cash
|
|
|
|
|
|
|
500
|
|
|
|
|
|
|
|
500
|
|
|
Accounts receivable
|
|
|
|
|
|
|
30,463
|
|
|
|
|
|
|
|
30,463
|
|
|
Other receivables
|
|
|
|
|
|
|
288
|
|
|
|
|
|
|
|
288
|
|
|
Bunker inventory
|
|
|
|
|
|
|
21,050
|
|
|
|
|
|
|
|
21,050
|
|
|
Advance hire, prepaid expenses and other current assets
|
|
|
33
|
|
|
|
10,916
|
|
|
|
2
|
(a)
|
|
|
10,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(347
|
)(b)
|
|
|
|
|
|
Total current assets
|
|
|
41
|
|
|
|
83,374
|
|
|
|
|
|
|
|
86,698
|
|
|
Fixed assets, net
|
|
|
|
|
|
|
225,179
|
|
|
|
|
|
|
|
225,179
|
|
|
Investment in newbuildings in-process
|
|
|
|
|
|
|
25,577
|
|
|
|
|
|
|
|
25,577
|
|
|
Cash and cash equivalents held in trust
|
|
|
98,500
|
|
|
|
|
|
|
|
(98,500
|
)(a)
|
|
|
—
|
|
|
Other noncurrent assets
|
|
|
2
|
|
|
|
1,495
|
|
|
|
(2
|
)(a)
|
|
|
1,495
|
|
|
Total assets
|
|
$
|
98,544
|
|
|
$
|
335,626
|
|
|
|
|
|
|
$
|
338,949
|
|
|
Liabilities, convertible redeemable preferred stock and stockholders' equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
|
496
|
|
|
|
40,623
|
|
|
|
(496
|
)(a)
|
|
|
40,623
|
|
|
Related party debt
|
|
|
|
|
|
|
46,372
|
|
|
|
|
|
|
|
46,372
|
|
|
Deferred revenue
|
|
|
|
|
|
|
5,863
|
|
|
|
|
|
|
|
5,863
|
|
|
Current portion long-term debt
|
|
|
|
|
|
|
18,687
|
|
|
|
|
|
|
|
18,687
|
|
|
Line of credit
|
|
|
|
|
|
|
3,000
|
|
|
|
|
|
|
|
3,000
|
|
|
Dividend payable
|
|
|
|
|
|
|
29,381
|
|
|
|
(16,556
|
)(c)
|
|
|
12,825
|
|
|
Other current liabilities
|
|
|
|
|
|
|
264
|
|
|
|
100
|
(b)
|
|
|
364
|
|
|
Total current liabilities
|
|
|
496
|
|
|
|
144,190
|
|
|
|
|
|
|
|
127,733
|
|
|
Secured long-term debt
|
|
|
|
|
|
|
91,720
|
|
|
|
|
|
|
|
91,720
|
|
See notes to pro forma condensed combined
financial statements
|
(In thousands)
|
|
Quartet
Merger
Corp.
Historical,
Unaudited
|
|
|
Bulk
Partners
(Bermuda)
LTD.
Historical,
Unaudited
|
|
|
Adjustments
for
Mergers
|
|
|
Proforma
Unaudited,
Combined
|
|
|
Common Stock, subject to possible conversion
|
|
|
93,492
|
|
|
|
|
|
|
|
(93,492
|
)(a)
|
|
|
—
|
|
|
Convertible redeemable preferred stock, net of issuance costs
|
|
|
—
|
|
|
|
103,236
|
|
|
|
(103,236
|
)(c)
|
|
|
—
|
|
|
Stockholders' equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
0
|
|
|
|
87
|
|
|
|
0
|
(a)
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115
|
(c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(87
|
)(d)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(115
|
)(d)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
(d)
|
|
|
|
|
|
Additional paid-in capital
|
|
|
5,608
|
|
|
|
—
|
|
|
|
3,353
|
(a)
|
|
|
123,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,685
|
)(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
119,677
|
(c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200
|
(d)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,053
|
)(e)
|
|
|
|
|
|
Accumulated deficit
|
|
|
(1,053
|
)
|
|
|
(7,324
|
)
|
|
|
1,053
|
(e)
|
|
|
(7,324
|
)
|
|
Total Pangaea Logistics Solutions Ltd. equity
|
|
|
4,556
|
|
|
|
(7,237
|
)
|
|
|
|
|
|
|
115,779
|
|
|
Non-controlling interest
|
|
|
—
|
|
|
|
3,716
|
|
|
|
|
|
|
|
3,716
|
|
|
Total stockholders' equity
|
|
|
4,556
|
|
|
|
(3,520
|
)
|
|
|
|
|
|
|
119,496
|
|
|
Total liabilities, convertible redeemable preferred stock and stockholders' equity
|
|
$
|
98,544
|
|
|
$
|
335,626
|
|
|
|
|
|
|
$
|
338,949
|
|
See notes to pro forma condensed combined
financial statements
Note: Figures may not foot due to rounding.
|
|
(a)
|
Cash and cash equivalents amount of approximately $8.4 million was determined by reducing the cash and cash equivalents held in trust of $98.5 million by the cash conversion payment of approximately $90.1 million (8,840,014 of the Quartet public shares electing cash conversion at approximately $10.20 per share), and the payment of Quartet’s historical accrued liabilities balance of approximately $496,000. In addition, long-term prepaid expenses of approximately $2,000 are reclassified to current assets.
|
|
|
(b)
|
The effects of an estimated $4.7 million of incremental transaction costs associated with the merger.
|
|
|
(c)
|
The conversion of Bulk Partners' preferred stock of approximately $103.2 million and accumulated unpaid accrued preferred dividends of approximately $16.6 million into 115,352 shares of Bulk Partners’ common stock.
|
|
|
(d)
|
Reclassification of Bulk Partners’ common stock and issuance of the Company’s ordinary shares at par value of $0.0001.
|
|
|
(e)
|
Reclassification of Quartet's accumulated deficit to additional paid-in capital.
|
Pangaea Logistics Solutions Ltd.
(previously known as Quartet Holdco Ltd.
and formerly Quartet Merger Corp.)
Pro Forma Condensed Combined Income Statement
For the Nine Months Ended September 30,
2014
(Unaudited)
(In thousands, except share and per share
information)
|
|
Quartet
Merger
Corp.
Historical,
Unaudited
|
|
|
Bulk
Partners
(Bermuda)
LTD.
Historical,
Unaudited
|
|
|
Adjustments
for Mergers
|
|
|
Proforma
Unaudited,
Combined
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voyage revenue
|
|
$
|
—
|
|
|
$
|
252,085
|
|
|
|
|
|
|
$
|
252,085
|
|
|
Charter revenue
|
|
|
|
|
|
|
43,112
|
|
|
|
|
|
|
|
43,112
|
|
|
|
|
|
—
|
|
|
|
295,197
|
|
|
|
—
|
|
|
|
295,197
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voyage expense
|
|
|
|
|
|
|
136,625
|
|
|
|
|
|
|
|
136,625
|
|
|
Charter expense
|
|
|
|
|
|
|
112,272
|
|
|
|
|
|
|
|
112,272
|
|
|
Vessel operating expenses
|
|
|
|
|
|
|
22,587
|
|
|
|
|
|
|
|
22,587
|
|
|
General and administrative
|
|
|
1,026
|
|
|
|
7,719
|
|
|
|
|
|
|
|
8,745
|
|
|
Depreciation and amortization
|
|
|
|
|
|
|
8,415
|
|
|
|
|
|
|
|
8,415
|
|
|
Gain on sale of vessel
|
|
|
|
|
|
|
(3,948
|
)
|
|
|
|
|
|
|
(3,948
|
)
|
|
Total expenses
|
|
|
1,026
|
|
|
|
283,670
|
|
|
|
—
|
|
|
|
284,697
|
|
|
Income from operations
|
|
|
(1,026
|
)
|
|
|
11,527
|
|
|
|
—
|
|
|
|
10,501
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
|
|
(4,339
|
)
|
|
|
|
|
|
|
(4,339
|
)
|
|
Interest expense related party debt
|
|
|
|
|
|
|
(171
|
)
|
|
|
|
|
|
|
(171
|
)
|
|
Imputed interest on related party long-term debt
|
|
|
|
|
|
|
(323
|
)
|
|
|
|
|
|
|
(323
|
)
|
|
Unrealized loss on derivative instruments
|
|
|
|
|
|
|
(2,123
|
)
|
|
|
|
|
|
|
(2,123
|
)
|
|
Other income
|
|
|
39
|
|
|
|
8
|
|
|
|
|
|
|
|
47
|
|
|
Total other income (expense), net
|
|
|
39
|
|
|
|
(6,948
|
)
|
|
|
—
|
|
|
|
(6,909
|
)
|
|
Net (loss) income
|
|
|
(987
|
)
|
|
|
4,579
|
|
|
|
—
|
|
|
|
3,592
|
|
|
Loss attributable to non-controlling interests
|
|
|
—
|
|
|
|
335
|
|
|
|
|
|
|
|
335
|
|
|
Net income attributable to Pangaea Logistics Solutions Ltd.
|
|
$
|
(987
|
)
|
|
$
|
4,914
|
|
|
|
—
|
|
|
$
|
3,926
|
|
|
Weighted average shares outstanding — basic and diluted
|
|
|
3,513,522
|
|
|
|
|
|
|
|
|
|
|
|
34,696,997
|
|
|
(Loss) or pro forma earnings per share — basic and diluted, for the nine months ended September 30, 2014
|
|
$
|
(0.28
|
)
|
|
|
|
|
|
|
|
|
|
$
|
0.11
|
|
|
Shares outstanding as of September 30, 2014
|
|
|
3,513,522
|
|
|
|
|
|
|
|
|
|
|
|
34,696,997
|
|
|
Book value per share or pro forma book value per share as of September 30, 2014
|
|
$
|
1.30
|
|
|
|
|
|
|
|
|
|
|
$
|
3.34
|
|
See notes to pro forma condensed combined
financial statements
Pangaea Logistics Solutions Ltd.
(previously known as Quartet Holdco Ltd.
and formerly Quartet Merger Corp.)
Pro Forma Condensed Combined Income Statement
For the Year Ended December 31, 2013
(Unaudited)
(In thousands, except share and per share
information)
|
|
Quartet
Merger
Corp.
Historical
|
|
|
Bulk
Partners
(Bermuda)
LTD.
Historical
|
|
|
Adjustments
for Mergers
|
|
|
Proforma
Unaudited,
Combined
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voyage revenue
|
|
$
|
—
|
|
|
$
|
336,160
|
|
|
|
|
|
|
$
|
336,160
|
|
|
Charter revenue
|
|
|
|
|
|
|
56,311
|
|
|
|
|
|
|
|
56,311
|
|
|
Total revenues
|
|
|
—
|
|
|
|
392,471
|
|
|
|
—
|
|
|
|
392,471
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voyage expense
|
|
|
|
|
|
|
196,036
|
|
|
|
|
|
|
|
196,036
|
|
|
Charter expense
|
|
|
|
|
|
|
130,880
|
|
|
|
|
|
|
|
130,879
|
|
|
Vessel operating expenses
|
|
|
|
|
|
|
22,958
|
|
|
|
|
|
|
|
22,958
|
|
|
General and administrative
|
|
|
77
|
|
|
|
11,599
|
|
|
|
|
|
|
|
11,676
|
|
|
Depreciation and amortization
|
|
|
|
|
|
|
9,615
|
|
|
|
|
|
|
|
9,615
|
|
|
Total expenses
|
|
|
77
|
|
|
|
371,087
|
|
|
|
—
|
|
|
|
371,164
|
|
|
(Loss) income from operations
|
|
|
(77
|
)
|
|
|
21,384
|
|
|
|
—
|
|
|
|
21,307
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
|
|
(5,487
|
)
|
|
|
|
|
|
|
(5,487
|
)
|
|
Interest expense related party debt
|
|
|
|
|
|
|
(411
|
)
|
|
|
|
|
|
|
(411
|
)
|
|
Imputed interest on related party long-term debt
|
|
|
|
|
|
|
(1,117
|
)
|
|
|
|
|
|
|
(1,117
|
)
|
|
Unrealized gain on derivative instruments
|
|
|
|
|
|
|
1,101
|
|
|
|
|
|
|
|
1,101
|
|
|
Other income
|
|
|
11
|
|
|
|
35
|
|
|
|
|
|
|
|
46
|
|
|
Income from unconsolidated entity
|
|
|
|
|
|
|
10
|
|
|
|
|
|
|
|
10
|
|
|
Total other income (expense), net
|
|
|
11
|
|
|
|
(5,869
|
)
|
|
|
—
|
|
|
|
(5,858
|
)
|
|
Net (loss) income
|
|
|
(66
|
)
|
|
|
15,515
|
|
|
|
—
|
|
|
|
15,449
|
|
|
Income attributable to non-controlling interests
|
|
|
—
|
|
|
|
(62
|
)
|
|
|
|
|
|
|
(62
|
)
|
|
Net income attributable to Pangaea Logistics Solutions Ltd.
|
|
$
|
(66
|
)
|
|
$
|
15,452
|
|
|
|
—
|
|
|
$
|
15,387
|
|
|
Weighted average shares outstanding – basic and diluted
|
|
|
2,671,441
|
|
|
|
|
|
|
|
|
|
|
|
34,696,997
|
|
|
(Loss) or pro forma earnings per share – basic and diluted, for the year ended December 31, 2013
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
$
|
0.44
|
|
|
Shares outstanding as of December 31, 2013
|
|
|
2,671,441
|
|
|
|
|
|
|
|
|
|
|
|
34,696,997
|
|
|
Book value per share or pro forma book value per share as of December 31, 2013
|
|
$
|
2.07
|
|
|
|
|
|
|
|
|
|
|
$
|
3.41
|
|
See notes to pro forma condensed combined
financial statements
|
|
(i)
|
Weighted average common shares outstanding, basic is adjusted to reflect the following:
|
|
|
i.
|
2,415,000 shares owned by Quartet management, and 1,739,062 Forfeited Shares, or 675,938 shares total;
|
|
|
ii.
|
608,125 shares owned by Quartet insiders;
|
|
|
iii.
|
1,026,813 shares from the rights exercise;
|
|
|
iv.
|
29,411,765 shares issued to the Signing Holders, on a fully-diluted basis, and 1,739,062 Forfeited Shares, or 31,150,827 shares total;
|
|
|
v.
|
291,953 shares issued to Advisors to the Mergers, and 123,356 shares from the conversion of the 420,000 unit purchase options, or 415,309 total;
|
|
|
vi.
|
9,660,000 shares which have been issued to the public, and 8,840,014 shares elected for cash conversion, or 819,986 shares total.
|
|
|
(j)
|
There are no dilutive shares, and thus, the weighted average common shares outstanding, diluted is equal to the weighted average common shares outstanding, basic.
|
The following table presents information
used in the unaudited pro forma condensed combined financial information and the notes thereto, and other supplementary unaudited
pro forma condensed combined financial information:
|
(In thousands, except share and per share information)
|
|
Proforma Unaudited,
Combined
|
|
|
Quartet public shares electing cash conversion
|
|
|
8,840,014
|
|
|
Quartet public shares not converted
|
|
|
819,986
|
|
|
Forfeited Shares
|
|
|
1,739,062
|
|
|
Cash and cash equivalents adjustment (proceeds from shares not converted to cash, at approximately $10.20 per share, and any cash consideration)
|
|
$
|
8,361
|
|
|
Purchase price consideration to Signing Holders at approximately $10.20 per share and any cash consideration
|
|
$
|
317,636
|
|
|
Shares outstanding
|
|
|
34,696,997
|
|
|
Shares owned by Signing Holders
|
|
|
89.8
|
%
|
|
Weighted average share calculation, basic and diluted
|
|
|
|
|
|
Shares owned by Signing Holders
|
|
|
31,150,827
|
|
|
Quartet management shares
|
|
|
675,938
|
|
|
Quartet insider shares
|
|
|
608,125
|
|
|
Shares from rights exercise
|
|
|
1,026,812
|
|
|
Shares owned by Quartet public shareholders
|
|
|
819,986
|
|
|
Advisors to the Mergers shares
|
|
|
415,309
|
|
|
Weighted average shares, basic and diluted
|
|
|
34,696,997
|
|
|
Pro forma book value per share calculation
|
|
|
|
|
|
Total Pangaea Logistics Solutions Ltd. equity
|
|
$
|
115,779
|
|
|
Weighted average shares, basic and diluted
|
|
|
34,696,997
|
|
|
Book value per share or pro forma book value per share as of September 30, 2014
|
|
$
|
3.34
|
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
1
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
The following discussion and analysis
should be read in conjunction with the 2013 annual consolidated financial statements and notes thereto included in the Company’s
Form S-4/A, filed with the SEC on August 12, 2014, the Form 8-K filed with the SEC on October 8, 2014 and the Form 8-K/A filed
with the SEC on November 17, 2014.
The following discussion contains forward-looking statements that reflect Bulk Partners’
future plans, estimates, beliefs and expected performance. The forward-looking statements are dependent upon events, risks and
uncertainties that may be outside Bulk Partners’ control. Bulk Partners’ actual results could differ materially from
those discussed in these forward-looking statements. Please read “Risk Factors” and “Forward-Looking Statements”
contained in the Company’s Form S-4/A, filed with the SEC on August 12, 2014, the Form 8-K filed with the SEC on October
8, 2014 and the Form 8-K/A filed with the SEC on November 17, 2014. In light of these risks, uncertainties and assumptions, the
forward-looking events discussed may not occur.
Bulk Partners is an established, growth-oriented
global logistics company providing seaborne drybulk transportation services. Bulk Partners was incorporated in Bermuda on June
17, 2008, and is headquartered in Newport, Rhode Island. Bulk Partners also maintains offices in Copenhagen, Denmark, Athens, Greece,
Rio de Janeiro, Brazil and Singapore.
Bulk Partners utilizes its logistics expertise
to service a broad base of industrial customers who require the transportation of a wide variety of drybulk cargoes, including
grains, pig iron, hot briquetted iron, bauxite, alumina, cement clinker, dolomite and limestone. In particular, Bulk Partners has
historically focused on backhaul routes. Bulk Partners derives substantially all of its revenue from contracts of affreightment,
also known as COAs, voyage charters, and time charters, with the majority of Bulk Partners’ revenues derived from COAs and
voyage charters due to Bulk Partners’ focus on carrying cargo for its customers. Backhaul routes allow Bulk Partners to reduce
ballast days and, instead, earn revenues at times and on routes that are typically travelled without paying cargo. Bulk Partners’
predecessor company first concentrated on the backhaul carriage of pig iron, complemented by the fronthaul carriage of grains,
and Bulk Partners remains the largest transporter of pig iron in the world.
Bulk Partners uses a mix of owned and chartered-in
vessels to transport more than 19.5 million dwt of cargo to more than 190 ports around the world, averaging over 44 vessels in
service during 2013. The majority of its fleet is chartered-in on short-term charters of less than nine months. Bulk Partners believes
that these shorter-term charters afford it more flexibility to match its variable costs to its customers’ service requirements,
allowing Bulk Partners to respond to changes in market demand and limiting its exposure to changes in prevailing charter rates.
In addition to Bulk Partners’ chartered-in fleet, Bulk Partners has interests in 13 vessels and has orders for the construction
of five additional vessels; all at prices that Bulk Partners believes will permit it to operate profitably through a range of cargo
rate environments. These vessels are and will be used to serve Bulk Partners’ customers’ cargo transportation needs.
Bulk Partners has plans to scrap its oldest vessel, the
m/v Cajun
, early in 2015 during which time it also expects delivery
of two of the Ice-Class 1A Panamax newbuildings. The six Ice-Class 1A Panamax vessels owned and on order are currently the only
drybulk vessels of their size rated to operate on the Northern Sea Route and the severe ice conditions of the Baltics in winter.
Bulk Partners believes that a combination of owned and chartered-in vessels help it to more efficiently match its customer demand
than it could with an entirely owned fleet or an entirely chartered-in fleet.
Some of the Company’s
Ice-Class 1A vessels are technically managed by a third-party manager with extensive expertise managing these vessel types and
ice pilotage. The technical management of the remainder of the Company’s owned fleet is performed in-house. The Company believes
its in-house management provides exceptional service and pricing for these vessel types, reduces time out of service, and best
enhances the service value of this fleet. The technical management for the Company’s chartered-in vessels is performed by
each respective ship owner.
Active risk management is an important
part of Bulk Partners’ business model. Bulk Partners believes its active risk management allows it to reduce the sensitivity
of its revenues to market fluctuations and helps it to secure its long-term profitability. Bulk Partners manages its market risk
primarily through chartering in vessels for periods of less than 9 months. Bulk Partners further manages its market exposure through
a portfolio approach based upon owned vessels, chartered-in vessels, COAs, voyage charters, and time charters. Bulk Partners tries
to identify routes and ports for efficient bunkering to minimize its fuel expense. Bulk Partners also seeks to hedge a portion
of its exposure to changes in the price of marine fuels, or bunkers. Bulk Partners has also entered into interest rate swap agreements
to fix a portion of its interest rate exposure.
Critical Accounting Policies
The discussion and analysis of Bulk Partners’
financial condition and results of operations is based upon its consolidated financial statements, which have been prepared in
accordance with U.S. GAAP. The preparation of those financial statements requires Bulk Partners to make estimates and judgments
that affect the reported amounts of assets and liabilities, revenues, expenses and related disclosure of contingent assets and
liabilities at the date of its financial statements. Actual results may differ from these estimates under different assumptions
and conditions. Significant estimates include the establishment of the allowance for doubtful accounts, the fair value of convertible
redeemable preferred stock and the estimate of salvage value used in determining vessel depreciation expense.
Critical accounting policies are those
that reflect significant judgments or uncertainties and potentially result in materially different results under different assumptions
and conditions. The critical accounting policies are revenue recognition, deferred revenue, allowance for doubtful accounts, vessels
and depreciation, long-lived assets impairment considerations, and the fair value of convertible redeemable preferred stock transactions.
Revenue Recognition.
Voyage
revenues represent revenues earned by Bulk Partners, principally from voyage charters. A voyage charter involves the carriage of
a specific amount and type of cargo on a load port to discharge port basis, subject to various cargo handling terms. Under a voyage
charter, the revenues are earned and recognized ratably over the duration of the voyage. Estimated losses under a voyage charter
are provided for in full at the time such losses become probable. Demurrage, which is included in voyage revenues, represents payments
by the charterer to the vessel owner when loading and discharging time exceed the stipulated time in the voyage charter. Demurrage
is measured in accordance with the provisions of the respective charter agreements and the circumstances under which demurrage
revenues arise, and is also earned and recognized ratably over the duration of the voyage to which it pertains. Voyage revenue
recognized is presented net of address commissions. Charter revenues relate to a time charter arrangement under which Bulk Partners
is paid charter hire on a per day basis for a specified period of time. Revenues from time charters are earned and recognized on
a straightline basis over the term of the charter, as the vessel operates under the charter.
Deferred Revenue.
Billings
for services for which revenue is not recognized in the current period are recorded as deferred revenue. All deferred revenue recognized
in the accompanying consolidated balance sheets is expected to be realized within 12 months of the balance sheet date.
Allowance for Doubtful Accounts.
Bulk Partners provides a specific reserve for significant outstanding accounts that are considered potentially uncollectible
in whole or in part. In addition, Bulk Partners establishes a reserve equal to approximately 25% of accounts receivable balances
that are 30 − 180 days past due and approximately 50% of accounts receivable balances that are 180 or more days past due,
and which are not otherwise reserved. The reserve estimates are adjusted as additional information becomes available, or as payments
are made.
Vessels and Depreciation.
Vessels
are stated at cost, which includes contract price and acquisition costs. Significant betterments to vessels are capitalized; maintenance
and repairs that do not improve or extend the lives of the vessels are expensed as incurred. Depreciation is provided using the
straight-line method over the remaining estimated useful lives of the vessels based on cost less salvage value. Each vessel’s
salvage value is equal to the product of its lightweight tonnage and an estimated scrap rate of $375 per ton which was determined
by reference to quoted rates and is reviewed annually. Bulk Partners estimates the useful life of its vessels to be 25 years to
30 years from the date of initial delivery from the shipyard. The remaining estimated useful lives of the current fleet are 1 −
29 years. Bulk Partners does not incur depreciation expense when vessels are taken out of service for drydocking or when they are
held for sale or scrap.
Drydocking Expenses and Amortization.
Significant upgrades made to the vessels during drydocking are capitalized when incurred and amortized on a straight-line
basis over the five year period until the next drydocking. Costs capitalized as part of the drydocking include direct costs incurred
to meet regulatory requirements that add economic life to the vessel, that increase the vessel’s earnings capacity or which
improve the vessel’s efficiency. Direct costs include the shipyard costs, parts, inspection fees, steel, blasting and painting.
Expenditures for normal maintenance and repairs, whether incurred as part of the drydocking or not, are expensed as incurred. Unamortized
drydocking costs of vessels that are sold are written off and included in the calculation of the resulting gain or loss on sale.
Long-lived Assets Impairment Considerations.
The carrying values of Bulk Partners’ vessels may not represent their fair market value or the amount that could
be obtained by selling the vessel at any point in time since the market prices of second-hand vessels tend to fluctuate with changes
in charter rates and the pricing of new vessels. Historically, both charter rates and vessel values tend to be cyclical. The carrying
value of each group of vessels (allocated by size and major characteristic or trade), which are classified as held and used by
Bulk Partners, are reviewed for potential impairment whenever events or changes in circumstances indicate that the carrying value
of a particular group may not be fully recoverable. In such instances, an impairment charge would be recognized if the estimate
of the undiscounted future cash flows expected to result from the use of the group and its eventual disposition is less than its
carrying value. This assessment is made at the group level, which represents the lowest level for which identifiable cash flows
are largely independent of other groups of assets. The asset groups established by Bulk Partners are defined by vessel size and
major characteristic or trade.
The significant factors and assumptions
used in the undiscounted projected net operating cash flow analysis include Bulk Partners’ estimate of future TCE rates based
on current rates under existing charters and contracts or an index TCE rate applicable to the size of the ship. When existing contracts
expire, Bulk Partners uses the latest index rate available and extends these rates out to the end of the vessel’s useful
life. As previously noted, TCE rates decreased approximately 27% from 2011 through the third quarter of 2013, at which time TCE
rates began to increase. This trend continued into the first quarter of 2014, during which time rates were approximately 16% higher
than the first quarter of 2013. Rates fell again in the second and third quarters of 2014 and made only modest gains through the
end of the year. This volatility in TCE rates may affect the fair value of Bulk Partners’ vessels and may have a significant
impact on Bulk Partners’ ability to recover the carrying amount of its fleet. Accordingly, the volatility is contemplated
in the undiscounted projected net operating cash flow analysis by using a sensitivity analysis based on percent changes in the
TCE rates. Bulk Partners prepares a series of scenarios in an attempt to capture the range of possible trends and outcomes. For
example, in the event that TCE rates over the estimated useful lives of the entire fleet are 10% lower than expected, the impact
on the total undiscounted projected net operating cash flow would be a decrease of 24%. Projected net operating cash flows are
net of brokerage and address commissions and assume no revenue on scheduled offhire days. Bulk Partners uses the current vessel
operating expense budget, estimated costs of drydocking and historical general and administrative expenses as the basis for its
expected outflows, and applies an inflation factor it considers appropriate. The net of these inflows and outflows, plus an estimated
salvage value, constitutes the projected undiscounted future cash flows. If these projected cash flows do not exceed the carrying
value of the asset group, an impairment charge would be recognized.
At September 30, 2014, Bulk Partners identified
a potential impairment indicator by reference to estimated market values of certain vessels in its fleet. As a result, Bulk Partners
evaluated each vessel group for impairment by estimating the total undiscounted cash flows expected to result from the use of the
group and its eventual disposal. At September 30, 2014, the estimated undiscounted future cash flows exceeded the carrying value
of the groups in the consolidated balance sheets and therefore, Bulk Partners did not recognize a charge to impairment.
New Accounting Pronouncements
In April 2014, the FASB issued an update
Accounting Standards Update for Reporting Discontinued Operations and Disclosures of Disposals and Components of an Entity, Presentation
of Financial Statements, and Property Plant and Equipment. Under this new guidance, only disposals that represent a strategic shift
that has (or will have) a major effect on the entity’s results and operations would qualify as discontinued operations. In
addition, the new guidance expands the disclosure requirements for disposals that meet the definition of a discontinued operation
and requires entities to disclose information about disposals of individually significant components that do not meet the definition
of discontinued operations. The new standard is effective for interim and annual reporting periods in fiscal years that begin after
December 15, 2014. Bulk Partners does not expect a material impact on its consolidated financial statements as a result of the
adoption of this standard.
In May 2014, the FASB issued an update
Accounting Standards Update for Revenue from Contracts with Customers. The core principle of the guidance 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. The new standard is effective for interim and
annual reporting periods in fiscal years that begin after December 15, 2016. Bulk Partners is evaluating the impact of the adoption
of this guidance to determine whether or not it has a material impact on its consolidated financial statements.
The table set forth below indicates the
purchase price of Bulk Partners’ vessels and the carrying value of each vessel as of September 30, 2014.
(In thousands of U.S. dollars)
|
Vessel Name
|
|
Date
Acquired
|
|
Size
|
|
Purchase Price
|
|
|
Carrying
Value
|
|
|
m/v Nordic Orion
|
|
April 2012
|
|
PMX-1A
|
|
$
|
32,362.6
|
|
|
$
|
29,916.5
|
|
|
m/v Nordic Odyssey
|
|
April 2012
|
|
PMX-1A
|
|
|
32,690.7
|
|
|
|
29,425.9
|
|
|
m/v Bulk Trident
|
|
September 2012
|
|
SMX
|
|
|
17,010.3
|
|
|
|
16,569.3
|
|
|
m/v Bulk Newport
|
|
September 2013
|
|
SMX
|
|
|
15,546.0
|
|
|
|
14,871.4
|
|
|
m/v Bulk Beothuk
|
|
February 2013
|
|
SMX
|
|
|
14,196.9
|
|
|
|
13,280.8
|
|
|
m/v Bulk Juliana
|
|
April 2012
|
|
SMX
|
|
|
14,750.0
|
|
|
|
14,005.3
|
|
|
m/v Bulk Pangaea(1)
|
|
December 2009
|
|
PMX
|
|
|
26,500.0
|
|
|
|
21,207.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
m/v Bulk Patriot(1)
|
|
October 2011
|
|
PMX
|
|
|
15,350.0
|
|
|
|
14,802.5
|
|
|
m/v Nordic Bothnia
|
|
January 2014
|
|
HMX-1A
|
|
|
7,640.0
|
|
|
|
7,406.1
|
|
|
m/v Nordic Barents
|
|
March 2014
|
|
HMX-1A
|
|
|
7,640.0
|
|
|
|
7,863.0
|
|
|
m/v Bulk Discovery(1)
|
|
March 2011
|
|
PMX
|
|
|
15,200.0
|
|
|
|
11,870.6
|
|
|
m/v Bulk Cajun(1)
|
|
June 2011
|
|
PMX
|
|
|
6,960.0
|
|
|
|
6,053.5
|
|
|
m/v
Nordic Oshima
|
|
September 2014
|
|
PMX-1A
|
|
|
33,709.1
|
|
|
|
33,709.1
|
|
|
Total
|
|
|
|
|
|
$
|
239,555.6
|
|
|
$
|
220,982.0
|
|
(1) At September 30, 2014, the aggregate
carrying value of
m/v Bulk Cajun
,
m/v Bulk Discovery
,
m/v Bulk Pangaea
and the
m/v Bulk Patriot
is
approximately $53.9 million, which is higher than the aggregated estimated market value of $29.1 million. As such, Bulk Partners
has reviewed each vessel group in the fleet and determined that the undiscounted sum of cash flows that will result from the use
and disposal of each of its vessel groups exceed the carrying value of the vessel groups. Therefore, no charge to impairment is
required.
The table set forth below indicates the
total cost of Bulk Partners’ newbuildings on order and the carrying value of each vessel as of September 30, 2014. As of
September30, 2014, Bulk Partners had deposits of $25.6 million for the purchase of these newbuildings.
(In thousands of U.S. dollars)
|
Vessel Name
|
|
Date
Acquired
|
|
Size
|
|
Purchase Price
|
|
|
Carrying
Value
|
|
|
m/v Nordic Odin
|
|
Q1 2015
|
|
PMX-1A
|
|
|
32,625.0
|
|
|
|
N/A
|
|
|
m/v Nordic Olympic
|
|
Q1 2015
|
|
PMX-1A
|
|
|
32,600.0
|
|
|
|
N/A
|
|
|
m/v Nordic Oasis
|
|
Q1 2016
|
|
PMX-1A
|
|
|
32,600.0
|
|
|
|
N/A
|
|
|
Newbuild 5*
|
|
Q4 2016
|
|
UMX-1C
|
|
|
28,950.0
|
|
|
|
N/A
|
|
|
Newbuild 6*
|
|
Q4 2016
|
|
UMX-1C
|
|
|
28,950.0
|
|
|
|
N/A
|
|
|
Total
|
|
|
|
|
|
$
|
155,725.0
|
|
|
|
N/A
|
|
* The name of the vessel will be determined at the delivery
date.
Convertible Redeemable Preferred
Stock.
Bulk Partners classifies its convertible redeemable preferred stock as a separate item from permanent equity because
it is redeemable outside of Bulk Partners’ control (at the option of the preferred stockholders). Bulk Partners recorded
such convertible redeemable preferred stock at fair value upon issuance, net of any issuance costs. The value of the convertible
redeemable preferred stock was determined based on a lattice model, which includes the use of various assumptions, such as cash
flow projections, the equity value of peer group companies and volatility rates. Any beneficial conversion features are recognized
as convertible redeemable preferred stock discounts and the discount is accreted to additional paid-in-capital through the earliest
possible redemption date.
Important Financial and Operational
Terms and Concepts
Bulk Partners uses a variety of financial
and operational terms and concepts when analyzing its performance. These include revenue recognition, deferred revenue, allowance
for doubtful accounts, vessels and depreciation, long-lived assets impairment considerations, and the fair value of convertible
redeemable preferred stock transactions, as defined above as well as the following:
Voyage Expenses.
Bulk Partners
incurs expenses for voyage charters, including bunkers (fuel), port charges, canal tolls, broker commissions and cargo handling
operations, which are expensed as incurred.
Charter Expenses.
Bulk Partners
relies on a combination of owned and chartered-in vessels to support its operations. Bulk Partners hires vessels under time charters,
and recognizes the charter hire payments as an expense on a straight-line basis over the term of the charter. Charter hire payments
are typically made in advance, and the unrecognized portion is reflected as advance hire in the accompanying consolidated balance
sheets. Under the time charters, the vessel owner is responsible for the vessel operating costs such as crews, maintenance and
repairs, insurance, and stores.
Vessel Operating Expenses.
Vessel
operating expenses represent the cost to operate Bulk Partners’ owned vessels. Vessel operating expenses include crew hire
and related costs, the cost of insurance, expenses relating to repairs and maintenance, the cost of spares and consumable stores,
tonnage taxes, other miscellaneous expenses, and technical management fees. These expenses are recognized as incurred. Bulk Partners
entered into technical management agreements for each of its owned vessels with an equity method investee. Technical management
services include day-to-day vessel operations, performing general vessel maintenance, ensuring regulatory and classification society
compliance, arranging the hire of crew, and purchasing stores, supplies, and spare parts.
Fleet Data.
Bulk Partners
believes that the measures for analyzing future trends in its results of operations consist of the following:
•
Shipping days.
Bulk Partners
defines shipping days as the aggregate number of days in a period during which its vessels are performing either a voyage charter
(voyage days) or a time charter (time charter days).
•
Daily vessel operating expenses.
Bulk Partners defines daily vessel operating expenses as vessel operating expenses divided by ownership days for the period.
Vessel operating expenses include crew hire and related costs, the cost of insurance, expenses relating to repairs and maintenance,
the costs of spares and consumable stores, tonnage taxes, other miscellaneous expenses, and technical management fees.
•
Chartered in days.
Bulk Partners
defines chartered in days as the aggregate number of days in a period during which it chartered in vessels.
•
Time Charter Equivalent ‘‘TCE’’
rates.
Bulk Partners defines TCE rates as total revenues less voyage expenses divided by the length of the voyage, which is
consistent with industry standards. TCE rate 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 are generally not expressed in per-day amounts while charter hire rates for vessels on time
charters generally are expressed in per-day amounts.
Overview
The overall drybulk
rate environment was severely depressed in the second and third quarters of 2014. While volumes in many segments were reasonable,
supply continued to weigh on the market and rates declined to levels last seen at the end of 2008 and beginning of 2009. This environment
negatively affected our performance but also highlighted the differentiation of our business model. Reduced rates mean reduced
fronthaul margins, and given our strategy to charter in vessels to serve only contracted business, we deemed it best to reduce
our carried volumes. This shielded us from excessive losses as compared to a long-term charter-in strategy.
Moreover, consistent
with our approach to continually optimize our fleet, we took advantage of the strong secondhand market in the first quarter of
2014 to sell two vessels that no longer fit our overall fleet profile. The net selling price of the
m/v Bulk Providence
,
a 2007 built Handysize, was approximately $13.1 million and the net selling price of the
m/v Bulk Liberty
, a 1998 built
Handymax, was approximately $12.4 million.
Nine Months Ended September 30, 2014
Compared to Nine Months Ended September 30, 2013
Revenues
Bulk
Partners’ revenues are derived predominately from voyage and time charters. Total revenue for the nine months ended September
30, 2014 was $295.2 million, compared to $281.0 million for the same period in 2013. The number of shipping days increased 12%
to 12,878 in the nine months ended September 30, 2014, compared to 11,496 for the same period in 2013. This increase in shipping
days is due to Bulk Partners’ continued focus on leveraging its relationships with existing customers, attracting new industry
customers, and supplementing its chartered-in fleet with owned vessels.
Voyage
revenues increased 2%, from $246.6 million for the nine months ended September 30, 2013 to $252.1 million for the nine months ended
September 30, 2014. Voyage days increased 12% from 8,773 in 2013 to 9,792 in 2014, however, the overall market decline tempered
most of the impact of this increase.
Charter
revenues increased 26% from $34.3 million for the nine months ended September 30, 2013 to $43.1 million for the nine months ended
September 30, 2014. The increase in charter revenues was driven by the 13% increase in time charter days and a 6% increase in the
average TCE rates. The number of time charter days was 3,086 days for the nine months ended September 30, 2014 compared to 2,723
days for the same period in 2013.
Voyage Expenses
Voyage expenses for
the nine months ended September 30, 2014 were $136.6 million, compared to $147.1 million for the same period in 2013, a decrease
of approximately 3%. The decrease in voyage expenses was primarily due to the fact that expenses related to cargo relets were $1.9
million in 2014 as compared to $14.2 million in 2013. Certain cargoes may be sublet for various reasons, however there was little
incentive to perform such sublets in 2014. This was offset by the increase relating to the higher number of voyage days, as discussed
above.
Charter Hire Expenses
Charter hire expenses
for the nine months ended September 30, 2014 were $112.3 million, compared to $86.1 million for the same period in 2013. The 30%
increase in charter expenses was predominantly due to the 6% increase in chartered in days and to a 24% increase in rates. The
average hire rate per day for the nine months ended September 30, 2014 was $11,993 as compared to $9,704 in the same period of
2013. The number of chartered in days was 9,361 for the nine months ended September 30, 2014 and 8,873 days for the nine months
ended September 30, 2013.
Vessel Operating Expenses
Vessel operating expenses
for the nine months ended September 30, 2014 were $22.6 million, compared to $15.7 million in the comparable period in 2013, an
increase of approximately 44%. The increase in vessel operating expenses was primarily due to the acquisition of four vessels in
2013 and two vessels during the three months ended March 31, 2014, which was slightly tempered by the sale of two ships in the
second and third quarters of 2014. The number of ownership days increased 34%, from 2,624 for the nine months ended September 30,
2013 to 3,517 for the nine months ended September 30, 2014. Ownership days are the aggregate number of days in a period during
which each vessel in Bulk Partners’ fleet has been owned. The vessels acquired in 2013 were owned for a total of 440 days
during the nine months ended September 30, 2013 compared to 868 days for the nine months ended September 30, 2014. The two vessels
acquired in 2014 were owned for a total of 459 days. The vessel operating expense expressed on a per day basis increased to $6,422
for the nine months ended September 30, 2014 from $5,987 for the same period in 2013. The increase is due to the fact that the
two vessels acquired in 2014 were purchased as is, with the understanding that significant repairs were necessary to bring the
ships up to Bulk Partners’ standards.
Depreciation and Amortization
For the nine months
ended September 30, 2014 and 2013, total depreciation and amortization expense was $8.4 million and $7.1 million, respectively.
The increase in depreciation and amortization expense was attributable to the acquisition of four vessels in 2013 and two vessels
in 2014.
Gain on Sale of Vessel
Bulk Partners sold
the m/v Bulk Providence on May 27, 2014 and the m/v Liberty on July 4, 2014. The aggregate gain on the sales was $3.9 million.
Income Attributable to Non-Controlling
Interests
This amount represents
the net income attributable to non-controlling interest in NBH, NBHC, BVH and Bulk Cajun. Net loss attributable to non-controlling
interest for the nine months ended September 30, 2014 was $0.3 million and net income attributable to non-controlling interests
was $0.8 million for the nine months ended September 30, 2013. The change was predominantly due to the fact that NBH had losses
of $3.4 million in the nine months ended September 30, 2014 as compared to $0.2 million for the nine months ended September 30,
2013. This was offset by the change in net income of NBHC, which was $1.9 million for the nine months ended September 30, 2014
and $1.4 million for the nine months ended September 30, 2013.
Fiscal Year
Ended December 31, 2013 Compared to Fiscal Year Ended December 31, 2012
Revenues
Bulk Partners’
revenues are derived predominantly from voyage charters and time charters. Total revenue for the fiscal year ended December 31,
2013, was $392.5 million, compared to $387.1 million for the same period in 2012. The number of shipping days increased by 9% to
16,148 in the fiscal year ended December 31, 2013, compared to 14,769 for the same period in 2012 due to Bulk Partners’ continued
focus on leveraging its relationships with existing cargo customers and attracting new cargo customers. The revenue increase was
predominantly due to this increase in shipping days, however, the increase was tempered by a decrease in the average TCE rate,
which declined 4% to $12,164 per day for the fiscal year ended December 31, 2013, from $12,607 per day for same period in 2012.
The average TCE rates declined in the first nine months of 2013 due to a decrease in market rates, however, rates increased in
the fourth quarter and the average TCE increased 4% during that time as a result.
Voyage revenues for
the fiscal year ended December 31, 2013, decreased by 2% to $336.2 million compared to $342.1 million for the same period in 2012.
The decrease in voyage revenues was primarily driven by the decrease in market rates, but was partially offset by the increase
in voyage days. The number of voyage days increased by 5%, to 12,076 days for the fiscal year ended December 31, 2013, compared
to 11,545 days for the same period in 2012.
Charter revenues increased
to $56.3 million from $45.0 million, or 25%, for the fiscal year ended December 31, 2013, compared to the same period in 2012.
The increase in charter revenues was driven by the 26% increase in time charter days. The number of time charter days increased
to 4,072 days for the fiscal year ended December 31, 2013, compared to 3,224 days for the same period in 2012.
Voyage
Expenses
Voyage expenses for
the fiscal year ended December 31, 2013 were $196.0 million, compared to $200.9 million for the same period in 2012, a decrease
of approximately 2%. The decrease in voyage expenses was primarily due to the decrease in market charter hire rates. Voyage expenses
as a percentage of voyage revenue remained at approximately 58% from 2012 to 2013.
Charter
Expenses
Charter expenses for
the fiscal year ended December 31, 2013 were $130.9 million, compared to $133.5 million for the same period in 2012. The 2% decrease
in charter expenses was predominantly due to the decrease in market charter hire rates as discussed above. The number of chartered-in
days remained flat at 12,426 days in 2013 compared to 12,417 days in 2012.
Vessel
Operating Expenses
Vessel operating expenses
for the fiscal year ended December 31, 2013 were $23.0 million, compared to $14.8 million in the comparable period in 2012, an
increase of approximately 55%. The increase in vessel operating expenses was due to the acquisition of interests in four vessels
in 2013 and four vessels in 2012, and the resulting 59% increase in the number of ownership days to 3,728 for the fiscal year ended
December 31, 2013 from 2,352 for the same period in 2012. Ownership days are the aggregate number of days in a period during which
each vessel in Bulk Partners’ fleet has been owned by it. The vessels acquired in 2013 were owned for a total of 808 days
in 2013. The four vessels acquired in 2012 were owned for a total of 888 days in 2012 versus 1,460 in 2013. The vessel operating
expense expressed on a per day basis decreased to $6,158 for the fiscal year ended December 31, 2013 from $6,299 for the same period
in 2012, or 2%.
General
and Administrative
Bulk Partners’
general and administrative expenses include legal and professional fees, rent, payroll and related expenses for its corporate offices.
General and administrative expenses for the fiscal year ended December 31, 2013 and 2012 were $11.6 million and $11.0 million,
respectively, an increase of approximately 5%. The increase in general and administrative expenses was attributable to an increase
in professional fees of $0.3 million, an increase in salary and related expenses of approximately $0.5 million, an increase in
travel expenses of $0.1 million, increases in other miscellaneous expenses totaling $0.3 million, and to the addition of an office
in Singapore with start-up and other expenses of $0.4 million. This was offset by a decrease in incentive compensation of $1.0
million.
Depreciation
and Amortization
For the fiscal year
ended December 31, 2013 and 2012, total depreciation and amortization expense was $9.6 million and $7.2 million, respectively.
At December 31, 2013, total depreciation and amortization includes $8.8 million of vessel and other fixed assets depreciation,
and $0.8 million relating to the amortization of deferred drydocking costs. At December 31, 2012, total depreciation and amortization
includes $6.7 million of vessel and other fixed assets depreciation, and $0.5 million relating to the amortization of deferred
drydocking costs. The increase in depreciation and amortization expense was attributable to the acquisition of interests in four
vessels during 2013 ($1.1 million) and to the increase resulting from a full year of depreciation on the four vessels acquired
during 2012 ($3.6 million in 2013 versus $2.3 million in 2012). The $0.3 million increase in drydocking amortization is also because
there is a full year of amortization in 2013 but not in 2012 as the upgrades were completed at various dates in 2012. See “
Vessel
Operating Expenses
,” above, for details regarding ownership days.
Income
from Operations
For the fiscal year
ended December 31, 2013, income from operations increased 8% to $21.4 million, compared to $19.6 million for the same period in
2012. The increase is attributable to a $10.2 million (6%) increase in TCE revenue and a $2.6 million decrease in charter hire
expense for the fiscal year ended December 31, 2013 compared to the same period in 2012. This was offset by an $8.2 million increase
in vessel operating cost, a $0.5 million increase in general and administrative expenses and a $2.4 million increase in depreciation
and amortization stemming from the increase in the number of owned vessels. The increase in TCE revenue is predominantly due to
the increase in total shipping days from 14,769 in 2012 to 16,148 in 2013. The decrease in charter hire expense is due to a decrease
in rates.
Interest
Expense
Interest expense for
the fiscal years ended December 31, 2013 and 2012 was $5.5 million and $3.3 million, respectively. The increase was primarily due
to the financing of four vessels acquired during the fiscal year ended December 31, 2013 and to the increase resulting from a full
year of debt outstanding for the four vessels acquired at various times in 2012. Additionally, for the year ended December 31,
2013 and 2012, amortization of deferred financing costs was $0.9 million and $0.6 million, respectively. The increase was also
due to the financing arrangements discussed above. Bulk Partners’ weighted-average interest rate on December 31, 2013 and
2012 were 4.67% and 4.24%, respectively.
Interest
Expense on Related Party Debt
Interest expense on
related party debt for the fiscal years ended December 31, 2013 and 2012 was $0.4 million and $1.3 million, respectively. The decrease
was due to the fact that the loan from the noncontrolling interest in Odyssey and Orion (to finance the acquisition of the
m/v
Nordic Orion
and
m/v Nordic Odyssey)
was restructured and the outstanding balance reclassified to long-term. The restructured
loan was non-interest bearing, resulting in the imputation of interest, which is recorded as imputed interest on related party
long-term debt in the consolidated statements of income (see below).
Imputed
Interest on Related Party Long-Term Debt
NBHC entered into contracts
to construct four Ice-Class 1A newbuildings and paid total deposits of $26.1 million. Each of NBHC’s shareholders provided
funding for the deposits in the form of non-interest bearing long-term debt payable on January 9, 2023. The loans are carried at
the present value of the future cash flows utilizing an imputed interest rate of 7.5% (which was determined by reference to rates
of comparable companies on similar subordinated debt instruments). The discount of $17.8 million is being amortized over the term
of the loan using the interest method. The amortization of this discount (imputed interest) was $1.1 million for the year ended
December 31, 2013.
Income
Attributable to Non-controlling Interests
This amount represents
the net income attributable to non-controlling interest in NBH, NBHC (owner of Odyssey and Orion as of December 31, 2012), BVH,
and Bulk Cajun. Net income attributable to non-controlling interest for the year ended December 31, 2013 and 2012 was a loss of
$0.06 million and $2.1 million, respectively. The decrease was predominantly due to the fact that NBH had losses of $1.8 million
in 2013 as compared to $2.0 million of income, for the year ended December 31, 2012.
Liquidity and Capital
Resources
Liquidity and Cash Needs
Bulk Partners has historically
financed its capital requirements with cash flow from operations, the issuance of convertible redeemable preferred stock, proceeds
from related party debt, and proceeds from long-term debt. Bulk Partners has used its funds primarily to fund its operations, vessel
acquisitions, and the repayment of debt and the associated interest expense. Bulk Partners may consider debt or equity financing
alternatives from time to time. However, if market conditions are negative, Bulk Partners may be unable to raise additional debt
or equity financing on acceptable terms or at all. As a result, Bulk Partners may be unable to pursue opportunities to expand its
business.
Additionally, NBHC,
a 33% owned subsidiary of Bulk Partners, has made all of its newbuilding deposits required to date by using funds from related
party loans from its shareholders, Bulk Partners, ST Shipping and Transport Ltd. (“ST Shipping”) and ASO 2020 Maritime
S.A. (“ASO2020”) (see the Related Party Transactions section below). Bulk Partners believes that each of NBHC’s
joint venture partners, ST Shipping and ASO2020, will continue to meet the deposit schedule for each newbuilding by making additional
related party loans, and will not call any existing related party loans. However, if NBHC’s shareholders do not provide required
funds, NBHC would likely need to seek replacement financing, which may not be available on acceptable terms. In such case, Bulk
Partners may not be able to pursue opportunities to expand its business or meet its other commitments.
At September 30, 2014,
December 31, 2013 and 2012, Bulk Partners had working capital deficits of $60.8 million, $13.8 million and $15.3 million, respectively.
These working capital deficits were partially impacted by accrued dividends payable to preferred shareholders, most of which were
converted to common shares as part of the merger with Quartet Holdco Ltd. on October 1, 2014. At September 30, 2014, December 31,
2013 and 2012, accrued dividends payable to preferred shareholders were $16.6 million, $10.3 million and $4.0 million, respectively.
The working capital deficits are also largely impacted by the related party loans from shareholders of NBHC, which are payable
on demand and therefore, included in current liabilities. These loans were made by the shareholders in order to fund the purchase
of the four new buildings, one of which was delivered on September 25, 2014 and three which are scheduled to be delivered over
the next two years. A portion of the loans is expected to be refinanced with commercial bank loans upon delivery of the vessels
to Bulk Partners.
In light of the working
capital deficits, certain of Bulk Partners’ common shareholders have provided written agreements whereby they have committed
to providing financial support in the form of loans.
Capital Expenditures
Bulk Partners’
capital expenditures relate to the purchase of interests in vessels, and capital improvements to its vessels which are expected
to enhance the revenue earning capabilities and safety of these vessels. Bulk Partners’ current owned fleet consists of seven
Panamax drybulk carriers (three of which are Ice-Class 1A), four Supramax drybulk carriers and two Handymax drybulk carriers. In
addition, Bulk Partners has contracted for the construction of three Ice-Class 1A Panamax vessels from a Japanese shipyard through
NBHC, a joint venture in which Bulk Partners owns a one-third interest. NBHC expects to take delivery of these vessels in 2015
and 2016. Bulk Partners has also contracted for the construction of two Ice-Class 1C Ultramax vessels from a Japanese shipyard
through BVH, a joint venture which Bulk Partners owns a 50% interest. BVH expects to take delivery of these vessels in 2016. Each
of the respective shareholders is obligated to provide required deposits during the construction of the vessels and the balance
is expected to be financed with bank debt.
In addition to vessel
acquisitions that Bulk Partners may undertake in future periods, its other major capital expenditures include funding its program
of regularly scheduled drydockings necessary to make improvements to its vessels, as well as to comply with international shipping
standards and environmental laws and regulations. Although Bulk Partners has some flexibility regarding the timing of drydocking,
the costs are relatively predictable. Funding of these requirements is anticipated to be met with cash from operations. Bulk Partners
anticipates that this process of recertification will require it to reposition these vessels from a discharge port to shipyard
facilities, which will reduce Bulk Partners’ available days and operating days during that period. Bulk Partners expects
to drydock five vessels during 2015 and three vessels during 2016, at an aggregate anticipated cost of $4.8 million and $2.3 million,
respectively, not including any unanticipated repairs.
The following table summarizes Bulk Partners’
net cash flows from operating, investing and financing activities for the nine-month periods ended September 30, 2014 and 2013.
|
|
|
For the nine months ended
September 30,
|
|
|
(In millions of U.S. dollars)
|
|
2014
|
|
|
2013
|
|
|
Net cash provided by operating activities
|
|
|
16.4
|
|
|
|
18.9
|
|
|
Net cash used in investing activities
|
|
|
(30.1
|
)
|
|
|
(75.7
|
)
|
|
Net cash provided by financing activities
|
|
|
14.9
|
|
|
|
60.9
|
|
Net Cash Provided
by Operating Activities
. Net cash provided by operating activities during the nine months ended September 30,
2014 was $16.4 million, compared with net cash provided by operating activities of $18.9 million during the corresponding nine
months ended September 30, 2013. Approximately $6.75 million of the decrease was due to the decrease in net income. The balance
is due to changes in operating assets and liabilities, predominantly comprised of accounts receivable and deferred revenue. These
balances fluctuate significantly depending on the number of voyages in process, the number of vessels being chartered out and the
number of days elapsed since charter hire was collected.
Net Cash Used
in Investing Activities
. Net cash used for investing activities during the nine months ended September 30, 2014,
was $30.1 million, compared with $75.7 million for the nine months ended September 30, 2013. Bulk Partners used approximately $38.3
million for the purchase of vessels in 2014 compared to $75.6 million in 2013. Bulk Partners also paid approximately $7.0 million
as deposits on newbuildings and $3.6 million to upgrade vessels during the nine months ended September 30, 2014. These outflows
were offset by the sale of two vessels for cash proceeds of $19.3 million in 2014.
Net Cash Provided
by Financing Activities
. Net cash provided by financing activities during the nine months ended September 30,
2014 was $14.9 million compared to $60.9 million during the nine months ended September 30, 2013. Related parties provided net
financing of $4.7 million in 2014 for deposits on newbuildings. Long-term debt increased by $10.3 million on a net basis. During
the nine months ended September 30, 2013, related parties provided $21.4 million for deposits on newbuildings, cash provided through
long-term debt was $20.9 million, net of payments and financing fees, and cash provided through issuance of convertible redeemable
preferred stock was $18.2 million.
The following table summarizes Bulk Partners’
net cash flows from operating, investing and financing activities for the fiscal years ended December 31, 2013, 2012, and 2011.
|
|
|
For the years ended December 31,
|
|
|
(In millions of U.S. dollars)
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
Net cash provided by operating activities
|
|
|
21.1
|
|
|
|
15.9
|
|
|
|
12.3
|
|
|
Net cash used in investing activities
|
|
|
(84.0
|
)
|
|
|
(101.4
|
)
|
|
|
(28.2
|
)
|
|
Net cash provided by financing activities
|
|
|
62.1
|
|
|
|
86.5
|
|
|
|
19.5
|
|
Net Cash Provided
by Operating Activities.
Net cash provided by operating activities during the year ended December 31, 2013 was
$21.1 million, compared to net cash provided by operating activities of $15.9 million during the year ended December 31, 2012.
The increase is due to changes in operating assets and liabilities, predominantly inventory, and accounts payable and accrued expenses.
These balances fluctuate significantly depending on the number and percentage of completion of voyages in process.
Net cash provided by
operating activities during the year ended December 31, 2012 was $15.9 million, compared with net cash provided by operating activities
of $12.3 million during the corresponding year ended December 31, 2011. The increase was primarily due to the increase in net income
of $12.1 million for the fiscal year ended December 31, 2012 compared to the same period in 2011, higher depreciation and amortization
of $2.0 million due to the operation of a larger fleet which was partially offset by an increase of $9.7 million in working capital
for the fiscal year ended December 31, 2012 compared to the same period in 2011.
Net Cash Used
in Investing Activities.
Net cash used in investing activities during the year ended December 31, 2013 was $84.0
million, compared to $101.4 million for the year ended December 31, 2012. Pangaea used $81.6 million on new vessels and deposits
on newbuildings in 2013 versus $96.8 in 2012. In addition, approximately $4.0 million was used to upgrade vessels in 2012, whereas
only $0.7 million was used in 2013. Pangaea also used $1.5 million as deposits toward the purchase of interests in two vessels
in 2013. Both of these ships were delivered in the first quarter of 2014.
Net cash used for investing
activities during the year ended December 31, 2012, was $101.4 million, compared with $28.2 million for the year ended December
31, 2011. The increase is predominantly due to an increase of $58.2 million in purchase of interests in vessels and is also due
to an increase of $4.0 million in drydocking expenditures and a $0.6 million net increase in other investing activities, as well
as a decrease of $11.8 million from proceeds from sale of vessels during 2011.
Net Cash Provided
by Financing Activities.
Net cash provided by financing activities during the year ended December 31, 2013 was
$62.1 million, compared to $86.5 million for the year ended December 31, 2012. Related parties provided net financing of $24.3
million in 2013 as compared to $15.9 million in 2012, predominantly for vessel acquisition. Long-term debt increased $16.0 million
on a net basis, and cash provided through the issuance of convertible redeemable preferred stock was $21.9 million. During the
year ended December 31, 2012, cash provided through long-term debt was $48.7 million, net of payments and financing fees, and cash
provided through issuance of convertible redeemable preferred stock was $20.6 million.
Net cash provided by financing activities
during the year ended December 31, 2012 and 2011 was $86.5 million and $19.5 million, respectively. The financing activity during
the years ended December 31, 2012 and 2011, related primarily to proceeds from and payments on loans provided for vessel financing
and to the issuance of convertible redeemable preferred stock to fund vessel acquisitions. During the year ended December 31, 2012,
Pangaea borrowed $58.3 million of bank debt and issued $20.6 million of convertible redeemable preferred stock. Pangaea borrowed
$26.7 million of bank debt and issued $6.2 million of convertible redeemable preferred stock during the year ended December 31,
2011.
Borrowing Activities
Long-term debt consists of the following:
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bulk Pangaea Secured Note
(1)
|
|
$
|
3,468,750
|
|
|
$
|
4,509,375
|
|
|
Bulk Discovery Secured Note
(2)
|
|
|
4,136,000
|
|
|
|
5,204,000
|
|
|
Bulk Patriot Secured Note
(1)
|
|
|
5,375,000
|
|
|
|
7,212,500
|
|
|
Bulk Cajun Secured Note
(2)
|
|
|
1,137,500
|
|
|
|
1,990,625
|
|
|
Bulk Trident Secured Note
(1)
|
|
|
7,968,750
|
|
|
|
8,925,000
|
|
|
Bulk Juliana Secured Note
(1)
|
|
|
5,408,333
|
|
|
|
6,422,395
|
|
|
Bulk Nordic Odyssey, Bulk Nordic Orion and Bulk Nordic Oshima Loan Agreement
(3)
|
|
|
53,500,000
|
|
|
|
34,000,000
|
|
|
Bulk Atlantic Secured Note
(2)
|
|
|
7,980,000
|
|
|
|
8,250,000
|
|
|
Bulk Phoenix Secured Note
(1)
|
|
|
9,133,333
|
|
|
|
9,783,334
|
|
|
Term Loan Facility of USD 13,000,000 (Nordic Bulk Barents Ltd. and Nordic Bulk Bothnia Ltd.)
|
|
|
12,347,820
|
|
|
|
-
|
|
|
Long Wharf Construction to Term Loan
|
|
|
1,002,920
|
|
|
|
1,016,834
|
|
|
Bulk Providence Secured Note
(4)
|
|
|
-
|
|
|
|
7,760,000
|
|
|
Bulk Liberty Secured Note
(5)
|
|
|
-
|
|
|
|
5,685,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
111,458,406
|
|
|
|
100,759,063
|
|
|
Less: current portion
|
|
|
(18,686,730
|
)
|
|
|
(16,065,483
|
)
|
|
Less: unamortized bank fees
|
|
|
(1,051,730
|
)
|
|
|
(1,391,159
|
)
|
|
Secured long-term debt
|
|
$
|
91,719,946
|
|
|
$
|
83,302,421
|
|
|
|
(1)
|
The Bulk Pangaea Secured Note, the Bulk Patriot Secured Note, the Bulk Trident Secured Note, the Bulk Juliana Secured Note, and the Bulk Phoenix Secured Note are cross-collateralized by the vessels m/v Bulk Juliana, m/v Bulk Patriot, m/v Bulk Trident, m/v Bulk Pangaea, and m/v Bulk Newport and are guaranteed by Bulk Partners.
|
|
|
(2)
|
The Bulk Discovery Secured Note, the Bulk Cajun Secured Note, and the Bulk Atlantic Secured Note are cross-collateralized by the vessels m/v Bulk Discovery, m/v Bulk Cajun, and m/v Bulk Beothuk and are guaranteed by Bulk Partners.
|
|
|
(3)
|
The Bulk Nordic Odyssey and the Bulk Nordic Orion Loan Agreement was amended on September 17, 2014, to provide for an additional advance to finance the acquisition of m/v Nordic Oshima.
|
|
|
(4)
|
The Bulk Providence Secured Note was repaid in connection with the sale of the m/v Bulk Providence on May 27, 2014.
|
|
|
(5)
|
The Bulk Liberty Secured Note was repaid in connection with the sale of the m/v Bulk Liberty on July 4, 2014.
|
The Senior Secured Post-Delivery Term Loan Facility
On April 15, 2013, Bulk Partners,
through its wholly-owned subsidiaries,
Bulk Pangaea Limited, Bulk Patriot Ltd., Bulk Juliana Ltd. and Bulk Trident Ltd.,
entered into a $30.3 million Senior Secured Post-Delivery Term Loan Facility (the “Post-Delivery Facility”) to refinance
the Bulk Pangaea Secured Term Loan Facility dated December 15, 2009, the Bulk Patriot Secured Term Loan Facility dated September
29, 2011, the Bulk Juliana Secured Term Loan Facility dated April 18, 2012, and the Bulk Trident Secured Term Loan Facility dated
August 28, 2012, the proceeds of which were used to finance the acquisitions of the
m/v Bulk Pangaea
,
the m/v Bulk Patriot
,
the m/v Bulk Juliana
and the m/v Bulk Trident
, respectively. The Post-Delivery Facility was subsequently amended
on May 16, 2013 by the First Amendatory Agreement, to increase the facility by $8.0 million to finance the acquisition of the m/v
Bulk Providence
and again on August 28, 2013, by the Second Amendatory Facility, to increase the facility by $10.0 million
to finance the acquisition of the m/v Bulk Newport.
The Post-Delivery Facility contains
financial covenants that require Bulk Partners to maintain a minimum consolidated net worth, and requires Bulk Partners to maintain
a minimum EBITDA to fixed charges ratio tested annually, as defined. In addition, the facility contains other Company and vessel
related covenants that, among other things, restricts changes in management and ownership of the vessel, declaration of dividends,
further indebtedness and mortgaging of a vessel without the bank’s prior consent. It also requires minimum collateral maintenance,
which is tested at the discretion of the lender. As of September 30, 2014 and December 31, 2013, Bulk Partners was in compliance
with all required covenants.
The Post-Delivery Facility is divided into six tranches,
as follows:
Bulk
Pangaea Secured Note
Initial amount of $12,250,000,
entered into in December 2009, for the acquisition of m/v Bulk Pangaea. The interest rate was fixed at 3.96% in April 2013, in
conjunction with the post-delivery amendment discussed above. The amendment also modified the repayment schedule to 15 equal quarterly
payments of $346,875 ending in January 2017.
Bulk
Patriot Secured Note
Initial amount of $12,000,000,
entered into in September 2011, for the acquisition of the m/v Bulk Patriot. Loan requires repayment in 24 equal quarterly installments
of $500,000 beginning in January 2012. The interest rate was fixed at 4.01% in April 2013 in conjunction with the post-delivery
amendment discussed above.
Bulk
Trident Secured Note
Initial amount of $10,200,000,
entered into in April 2012, for the acquisition of the m/v Bulk Trident. Loan requires repayment in 24 equal quarterly installments
of $318,750 beginning in December 2012 with a balloon payment of $2,550,000 together with the last quarterly installment. Interest
was fixed at 4.29% in April 2013 in conjunction with the post-delivery amendment discussed above.
Bulk
Juliana Secured Note
Initial amount of $8,112,500,
entered into in April 2012, for the acquisition of the m/v Bulk Juliana. Loan requires repayment in 24 equal quarterly installments
of $338,021 beginning in October 2012. Interest was fixed at 4.38% in April 2013 in conjunction with the post-delivery amendment
discussed above.
Bulk
Phoenix Secured Note
Initial amount of $10,000,000,
entered into in May 2013, for the acquisition of m/v Bulk Newport. Loan requires repayment in 7 equal quarterly installments of
$216,667 and 16 equal quarterly installments of $416,667 with a balloon payment of $1,816,659 due in July 2019. Interest is fixed
at 5.09%.
Bulk
Providence Secured Note
Initial amount of $8,000,000,
entered into in May 2013, for the acquisition of m/v Bulk Providence. Loan requires repayment in 8 equal quarterly installments
of $120,000, 16 equal quarterly installments of $190,000 and a balloon payment of $4,000,000 due in July 2019. Interest is fixed
at 4.38%. The loan was repaid in conjunction with the sale of the m/v Bulk Providence on May 27, 2014.
Other secured debt:
Bulk Cajun Secured Note
Initial amount of $4,550,000,
entered into in October 2011, for the acquisition of the m/v Bulk Cajun. Loan requires repayment in 16 equal quarterly installments
of $284,375 beginning in January 2012 with a balloon payment of $2,000,000 together the last quarterly installment. Interest is
fixed at 6.51%.
Bulk Discovery Secured Note
Initial amount of $9,120,000,
entered into in February 2011, for the acquisition of the m/v Bulk Discovery. Loan requires repayment in 20 equal quarterly installments
of $356,000 beginning in September 2011 with a balloon payment of $2,000,000 together with the last quarterly installment. Interest
is fixed at a rate of 8.16%.
Bulk Atlantic Secured Note
Initial amount of $8,520,000,
entered into on February 18, 2013, for the acquisition of m/v Bulk Beothuk. Loan requires repayment in 8 equal quarterly installments
of $90,000 beginning in May 2013, 12 equal quarterly installments of $295,000 and a balloon payment of $4,260,000 due in February
2018. Interest is fixed at 6.46%.
Bulk Liberty Secured Note
Initial amount of $5,685,000,
entered into on July 2013, for the acquisition of m/v Bulk Liberty. Loan requires repayment in 19 equal quarterly installments
of $149,605 beginning in January 2014 and a balloon payment of $2,842,505 due in February 2018. Interest is fixed at 7.06%. The
loan was repaid in connection with the sale of the m/v Bulk Liberty on July 4, 2014.
The other secured debt, as outlined
above, contains collateral maintenance ratio clauses. If Bulk Partners encountered a change in financial condition which, in the
opinion of the lender, is likely to affect Bulk Partners’ ability to perform its obligations under the loan facility, Bulk
Partners’ credit agreement could be cancelled at the lender’s sole discretion. The lender could then elect to declare
the indebtedness, together with accrued interest and other fees, to be immediately due and payable, and proceed against any collateral
securing such indebtedness. As of September 30, 2014 and December 31, 2013, Bulk Partners was in compliance with all required covenants.
Bulk Nordic Odyssey and Bulk
Nordic Orion Loan Agreement
Initial amount of $40,000,000,
entered into on August 6, 2012, for the acquisition of the m/v Nordic Odyssey and the m/v Nordic Orion. The agreement requires
repayment in 20 quarterly installments of $1,000,000 beginning in October 2012, with an additional $1,000,000 installment payable
on the 5th, 9th and 17th installment dates and a balloon payment of $17,000,000 due with the final installment. Interest is floating
at LIBOR plus 3.25% (3.48% at September 30, 2014 and 2013). The loan is secured by first preferred mortgages on the m/v Nordic
Orion and the m/v Nordic Odyssey, the assignment of the earnings, insurances and requisite compensation of the two entities, and
by guarantees of their shareholders. The Agreement contains one financial covenant that requires Bulk Partners to maintain minimum
liquidity and a collateral maintenance ratio clause which requires the aggregate fair market value of the vessel plus the net realizable
value of any additional collateral previously provided to remain above defined ratios. As of September 30, 2014 and December 31,
2013, Bulk Partners was in compliance with this covenant.
The loan was amended on September
17, 2014 in conjunction with the delivery of the m/v Nordic Oshima (discussed below), whereby the margin was reduced to 3.00%.
Bulk Nordic Odyssey Ltd., Bulk
Nordic Orion Ltd. And Bulk Nordic Oshima Ltd. – Dated September 17, 2014 Amended and Restated Loan Agreement
Entered into on September 17,
2014, to finance the purchase of the m/v Nordic Oshima, which was delivered to Bulk Partners on September 25, 2014. The amended
agreement advanced $22,500,000 and requires repayment of this advance in 28 equal quarterly installments of $375,000 and a balloon
payment of $12,000,000 due with the final installment. Interest on the advance related to m/v Nordic Oshima is floating at LIBOR
plus 2.25% (2.48% at September 30, 2014). The amended loan is secured by first preferred mortgages on the m/v Nordic Odyssey, the
m/v Nordic Orion and m/v Nordic Oshima, the assignment of earnings, insurances and requisite compensation of the three entities,
and by guarantees of their shareholders. The amended agreement contains one financial covenant that requires Bulk Partners to maintain
minimum liquidity and a collateral maintenance ratio clause which requires the aggregate fair market value of the vessel plus the
net realizable value of any additional collateral provided to remain above defined ratios. As of September 30, 2014 and December
31, 2013, Bulk Partners was in compliance with this covenant.
Term Loan Facility
of USD 13,000,000 (Nordic Bulk Barents Ltd. and Nordic Bulk Bothnia Ltd.)
Nordic Bulk Barents and Nordic
Bulk Bothnia entered into a secured Term Loan Facility of $13,000,000 in two tranches of $6,500,000 which were drawn in conjunction
with the delivery of the m/v Nordic Bothnia on January 23, 2014 and the m/v Nordic Barents on March 7, 2014. The loan is secured
by mortgages on these two vessels.
The facility bears interest
at LIBOR plus 2.5% (2.73% at September 30, 2014). The loan requires repayment in 22 equal quarterly installments of $163,045 (per
borrower) beginning in September 2014, one installment of $163,010 (per borrower) and a balloon payment of $2,750,000 (per borrower)
due in December 2019. In addition, any cash in excess of $750,000 per borrower on any repayment date shall be applied toward prepayment
of the relevant loan in inverse order, so the balloon payment is prepaid first. The agreement also contains a profit split in respect
of the proceeds from the sale of either vessel, a minimum value clause of not less than 100% of the indebtedness and a minimum
liquidity clause. As of September 30, 2014 and December 31, 2013, Bulk Partners was in compliance with all required covenants.
Line of Credit
During the year ended December
2012, the Company entered into a revolving line of credit with a maximum capacity of $3,000,000. Borrowings under of the line of
credit are due upon expiration of the line of credit. The expiration date was extended to August 19, 2015 from its original expiration
date of November 19, 2013. The line of credit contains certain covenants including a liquidity covenant that may result in the
acceleration
of the payment of the borrowings. Borrowings under the line are secured by personal guarantees of the
Founders, as well as collateralized against a personal account of one of the Founders held at the lending bank. Interest is payable
at Prime + 1%. As of September 30, 2014 the Company was in compliance with all required covenants.
Long Wharf Construction
to Term Loan
Initial amount of $1,048,000
entered into in January 2011. The loan is payable monthly based on a 25 year amortization schedule with a final balloon payment
of all unpaid principal and accrued interest due January 2021. Interest is floating at LIBOR plus 2.85%. Bulk Partners entered
into an interest rate swap which matures January 2021 and fixes the interest rate at 6.63%. The loan is collateralized by all real
estate located at 109 Long Wharf, Newport, RI, as well as personal guarantees from the Founders and a corporate guarantee of Bulk
Partners. The loan contains one financial covenant that requires Bulk Partners to maintain a minimum debt service coverage ratio.
As of September 30, 2014 and December 31, 2013, Bulk Partners was in compliance with this covenant.
The future minimum annual payments (excluding unamortized
bank fees) under the debt agreements are as follows:
|
|
|
Years ending
September 30,
|
|
|
|
|
|
|
|
2015
|
|
$
|
18,686,730
|
|
|
2016
|
|
|
19,323,468
|
|
|
2017
|
|
|
30,994,082
|
|
|
2018
|
|
|
11,971,926
|
|
|
2019
|
|
|
8,765,181
|
|
|
Thereafter
|
|
|
21,717,019
|
|
|
|
|
$
|
111,458,406
|
|
Covenants
With the exception of Bulk Partners’
related party loans, certain of its debt agreements generally contain financial covenants, which require it, among other things,
to maintain:
|
|
•
|
a consolidated leverage ratio of at least 200%;
|
|
|
•
|
a consolidated debt service ratio of at least 125%;
|
|
|
•
|
a minimum consolidated net worth of $45 million; plus 25% of the purchase price or (finance) lease amount of such vessels;
|
|
|
•
|
a consolidated minimum liquidity of not less than $13.0 million plus $1 million for each additional vessel Bulk Partners acquires.
|
Certain of Bulk Partners’
debt agreements also contain restrictive covenants, which may limit it and its subsidiaries’ ability to, among other things:
|
|
•
|
effect changes in management of Bulk Partners’ vessels;
|
|
|
•
|
sell or dispose of any of Bulk Partners’ assets, including its vessels;
|
|
|
•
|
declare and pay dividends;
|
|
|
•
|
incur additional indebtedness;
|
|
|
•
|
mortgage Bulk Partners’ vessels; and
|
|
|
•
|
incur and pay management fees or commissions.
|
A violation of any of
Bulk Partners’ financial covenants or operating restrictions contained in its credit facilities may constitute an event of
default under its credit facilities, which, unless cured within the grace period set forth under the applicable credit facility,
if applicable, or waived or modified by Bulk Partners’ lenders, provides its lenders with the right to, among other things,
require Bulk Partners to post additional collateral, enhance its equity and liquidity, increase its interest payments, pay down
its indebtedness to a level where it is in compliance with its loan covenants, sell vessels in its fleet, reclassify its indebtedness
as current liabilities and accelerate its indebtedness and foreclose their liens on its vessels and the other assets securing the
credit facilities, which would impair Bulk Partners’ ability to continue to conduct its business.
As of September 30,
2014, and December 31, 2013, Bulk Partners was in compliance with all of the covenants contained in its debt agreements.
Furthermore, certain
of Bulk Partners’ credit facilities contain a cross-default provision that may be triggered by a default under one of its
other credit facilities. A cross-default provision means that a default on one loan would result in a default on certain other
loans. Because of the presence of cross-default provisions in certain of Bulk Partners’ credit facilities, the refusal of
any one lender under its credit facilities to grant or extend a waiver could result in certain of Bulk Partners’ indebtedness
being accelerated, even if its other lenders under Bulk Partners’ credit facilities have waived covenant defaults under the
respective credit facilities. If Bulk Partners’ secured indebtedness is accelerated in full or in part, it would be very
difficult in the current financing environment for Bulk Partners to refinance its debt or obtain additional financing and Bulk
Partners could lose its vessels and other assets securing its credit facilities if Bulk Partners’ lenders foreclose their
liens, which would adversely affect Bulk Partners’ ability to conduct its business.
Moreover, in connection
with any waivers of or amendments to Bulk Partners’ credit facilities that it may obtain, its lenders may impose additional
operating and financial restrictions on Bulk Partners or modify the terms of its existing credit facilities. These restrictions
may further restrict Bulk Partners’ ability to, among other things, pay dividends, make capital expenditures or incur additional
indebtedness, including through the issuance of guarantees. In addition, Bulk Partners’ lenders may require the payment of
additional fees, require prepayment of a portion of its indebtedness to them, accelerate the amortization schedule for Bulk Partners’
indebtedness and increase the interest rates they charge Bulk Partners on its outstanding indebtedness.
Related Party Transactions
|
|
|
December 31,
|
|
|
|
|
|
September 30,
|
|
|
|
|
2013
|
|
|
Activity
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Included in accounts payable and accrued expenses on the consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
To Founders
|
|
$
|
203,050
|
|
|
$
|
(203,050
|
)
|
|
$
|
-
|
|
|
|
|
$
|
203,050
|
|
|
$
|
(203,050
|
)
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in current related party debt on the consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan payable – 2011 Founders Note
|
|
$
|
4,325,000
|
|
|
|
-
|
|
|
$
|
4,325,000
|
|
|
Interest payable – 2011 Founders Note
|
|
|
296,248
|
|
|
|
(54,507
|
)i.
|
|
|
241,741
|
|
|
Loan payable – BVH shareholder ST Shipping
|
|
|
2,995,000
|
|
|
|
-
|
|
|
|
2,995,000
|
|
|
Loan payable to NBHC shareholder ST Shipping
|
|
|
-
|
|
|
|
19,405,000
|
ii.
|
|
|
19,405,000
|
|
|
Loan payable to NBHC shareholder (ASO2020)
|
|
|
-
|
|
|
|
19,404,972
|
ii.
|
|
|
19,404,972
|
|
|
|
|
$
|
7,616,248
|
|
|
$
|
38,755,465
|
|
|
$
|
46,371,713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in related party long-term debt on the consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan payable to NBHC shareholder ST Shipping
|
|
$
|
17,030,000
|
|
|
|
$ (17,030,000
|
)iii.
|
|
$
|
-
|
|
|
Loan payable to NBHC shareholder (ASO2020)
|
|
|
17,029,972
|
|
|
|
(17,029,972
|
)
iii.
|
|
|
-
|
|
|
Less unamortized discount
|
|
|
(16,756,054
|
)
|
|
|
16,756,054
|
iv.
|
|
|
-
|
|
|
Total related party long-term debt
|
|
$
|
17,303,918
|
|
|
$
|
(17,303,918
|
)
|
|
$
|
-
|
|
|
i.
|
Paid in cash
|
|
ii.
|
Loans payable to NBHC shareholders ST Shipping and ASO2020, including additional borrowing on May 28, 2014. On April 1, 2014, the loans were amended to remove the maturity date and have therefore been reclassified as current.
|
|
iii.
|
Balance at December 31, 2013 has been reclassified as current
|
|
iv.
|
Unamortized discount at December 31, 2013 was reduced by imputed interest of $322,946 which was recorded for the three months ended March 31, 2014, prior to the amendment of the loan. The net unamortized discount on April 1, 2014 of $16,433,109 has been recorded as a reduction of noncontrolling interest due to the debt modification.
|
BVH entered into an
agreement for the construction of two new ultramax newbuildings in 2013. ST Shipping provided a loan of $2,995,000 to make deposits
on the contracts. The loan is payable on demand and does not bear interest.
In connection with the
acquisition of m/v Nordic Orion and m/v Nordic Odyssey in 2012, STST provided two $8,050,000 subordinated notes (one designated
for each vessel) which were payable on demand and do not bear interest. During the year ended December 31, 2012, aggregate repayments
of $3,600,000 were made against these notes. Bulk Partners restructured its existing related party loans payable to ST Shipping
at December 31, 2012 to modify the repayment date to January 9, 2023, which was accounted for as a modification under ASC 470-50.
In January 2013, Bulk Partners entered into a Share Transfer Restructuring Agreement through which the shareholders of Odyssey
and Orion transferred their shares of those entities and their zero interest subordinated shareholder loans to these entities,
to NBHC in exchange for the shares of NBHC.
Also during 2013, NBHC
entered into contracts to purchase four Ice-Class 1A newbuildings and paid deposits of $26,100,000. STST provided an additional
$4,530,000, thereby increasing its loan to $17,030,000. The newest shareholder, ASO2020, also provided $17,030,000 in loans and
acquired one-third of the common stock of NBHC for approximately $13,000. On April 1, 2014, the loans were amended to remove the
maturity date. The unamortized discount at April 1, 2014 of $16,433,108 has been recorded as a reduction to noncontrolling interest
because the original discount was recorded as an increase in noncontrolling interest. On May 28, 2014, each of the shareholders
provided additional loans of $1,187,500 to finance the second installment on the first vessel delivery. On August 7, 2014, each
of the shareholders provided additional loans of $1,187,500 to finance the third installment on the first vessel delivery. These
loans are also payable on demand and do not bear interest.
On October 1, 2011,
Bulk Partners entered into a $10,000,000 loan agreement with Bulk Partner’s founders, which was payable on demand at the
request of the lenders (the 2011 Founders Note). The note bears interest at a rate of 5%. On January 1, 2012 Bulk Partners issued
5,675 shares of convertible redeemable preferred stock to the Founders, representing a partial repayment of the note, the balance
of which was $4,325,000 at September 30, 2014, December 31, 2013 and 2012.
Under the terms of a
technical management agreement between Bulk Partners and Seamar Management S.A. (Seamar), an equity method investee, Seamar is
responsible for the day-to-day operations for all of Bulk Partners’ owned vessels. During the nine-month periods ended September
30, 2014 and 2013, Bulk Partners incurred technical management fees of approximately $1,759,000 and $1,312,000, respectively under
this arrangement. During the years ended December, 2013 and 2012, Bulk Partners incurred technical management fees of approximately
$1,864,000 and $1,201,000, respectively under this arrangement. These fees are included in vessel operating expenses in the consolidated
statements of income.
Off-balance Sheet Arrangements
As of September 30,
2014, December 31, 2013 and 2012, Bulk Partners did not have any off-balance sheet arrangements.
Contractual Obligations
The following table
sets forth Bulk Partners’ contractual obligations and their maturity dates as of September 30, 2014. The table reflects Bulk
Partners’ agreements for:
|
|
•
|
The construction of three Ice-Class 1A Panamax vessels from a Japanese shipyard through NBHC, a joint venture in which Bulk Partners owns a one-third interest. NBHC expects to take delivery of these vessels in 2015 and 2016;
|
|
|
•
|
The construction of two Ice-Class 1C Ultramax vessels from a Japanese shipyard through BVH, a joint venture which Bulk Partners owns a 50% interest. BVH expects to take delivery of these vessels in 2016.
|
|
|
|
Total
|
|
|
Less than
One Year
|
|
|
One to
Three
Years
|
|
|
Three to
Five Years
|
|
|
More than
Five Years
|
|
|
|
|
(US dollars in millions)
|
|
|
Long-Term Debt and Line of Credit
|
|
$
|
114.5
|
|
|
$
|
21.7
|
|
|
$
|
50.3
|
|
|
$
|
20.7
|
|
|
$
|
21.7
|
|
|
Purchase Obligations
|
|
|
124.2
|
|
|
|
75.0
|
|
|
|
49.2
|
|
|
|
|
|
|
|
|
|
|
Other Long-Term Liabilities Reflected
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
on the Balance Sheet under GAAP
(1)
|
|
|
103.2
|
|
|
|
103.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
341.9
|
|
|
$
|
199.9
|
|
|
$
|
99.5
|
|
|
$
|
20.7
|
|
|
$
|
21.7
|
|
|
(1)
|
Convertible redeemable preferred stock dividends were converted to common stock in conjunction with the merger and have therefore been included with contractual obligations due in less than one year.
|
Quantitative and Qualitative Disclosures about Market Risks
Interest Rate Risk
The international shipping industry is
capital intensive, requiring significant amounts of investment provided in the form of long-term debt. Certain of Bulk Partners’
outstanding debt contains floating interest rates that fluctuate with changes in the financial markets and in particular changes
in LIBOR. Increasing interest rates could increase Bulk Partners’ interest expense and adversely impact its future earnings.
In the past, Bulk Partners has managed this risk by entering into interest rate swap agreements in which Bulk Partners exchanged
fixed and variable interest rates based on agreed upon notional amounts. Bulk Partners has used such derivative financial instruments
as risk management tools and not for speculative or trading purposes. In addition, the counterparties to Bulk Partners’ derivative
financial instruments have been major financial institutions, which helped it to manage its exposure to nonperformance of its counterparties
under Bulk Partners’ debt agreements. As of September 30, 2014 and December 31, 2013 and 2012, Bulk Partners was a party
to one interest rate swap agreement, which had an approximate fair value of $(0.1) million, $(0.1) million and $(0.2) million,
respectively . Bulk Partners’ net effective exposure to floating interest rate fluctuations on its outstanding debt was $65.8
million, $34.0 million and $39.0 million, respectively, at September 30, 2014 and December 31, 2013 and 2012.
Bulk Partners’ interest expense is
affected by changes in the general level of interest rates, particularly LIBOR. As an indication of the extent of Bulk Partners’
sensitivity to interest rate changes, an increase in LIBOR of 1% would have decreased Bulk Partners’ net income and cash
flows during the nine months ended September 30, 2014 and the year ended December 31, 2013 by approximately $0.3 million and $0.4
million, respectively, based on the debt levels for the beginning and ending balances of each period. Bulk Partners expects its
sensitivity to interest rate changes to increase in the future if Bulk Partners enters into additional debt agreements in connection
with its acquisition of additional vessels.
Forward Freight Agreements
Bulk Partners assesses risk associated
with fluctuating future freight rates and, when appropriate, actively hedges identified economic risk related to long-term cargo
contracts with forward freight agreements, or FFAs. The usage of such derivatives can lead to fluctuations in Bulk Partners’
reported results from operations on a period-to-period basis. During the nine months ended September 30, 2014 and the years ended
December 31, 2013 and 2012, Bulk Partners entered into various FFAs. The aggregate fair value of the FFAs at September 30, 2014,
December 31, 2013 and 2012 were liabilities of approximately $0.2 million, assets of approximately $0.9 million and liabilities
of approximately $0.2 million, respectively.
Fuel Swap Contracts
Bulk Partners monitors the market volatility
associated with bunker prices and its impact on long-term contracts; and seeks to reduce the risk of such volatility through a
bunker hedging program. During the three and nine months ended September 30, 2014 and the year ended December 31, 2013, Bulk Partners
entered into various fuel swap contracts that were not designated for hedge accounting. The aggregate fair value of these fuel
swaps at September 30, 2014, December 31, 2013 and 2012, were liabilities of approximately $1.1 million, $0.2 million and $0.2
million, respectively.
DIRECTORS
AND EXECUTIVE OFFICERS
The board of directors
of the Company (the “Board”) is comprised of eight directors, six of whom were nominated by Pangaea and two of whom
were nominated by Quartet. Pangaea nominated Edward Coll, Carl Claus Boggild, Peter M. Yu, Paul Hong, Richard T. du Moulin and
Mark L. Filanowski. Quartet nominated Eric S. Rosenfeld and David D. Sgro. Each director will hold office until his or her term
expires or until his or her death, resignation, removal or the earlier termination of his or her term of office. Messrs. Eric Rosenfeld,
Richard du Moulin and Mark Filanowski serve as Class I directors, whose term expires at the Company’s 2015 annual meeting.
Messrs. Paul Hong, Claus Boggild and David Sgro serve as Class II directors, whose term expires at the Company’s 2016 annual
meeting and Messrs. Peter Yu and Edward Coll serve as Class III directors, whose term expires at the Company’s 2017 annual
meeting. Messrs. Filanowski, Hong and Sgro were appointed to serve on the Company’s audit committee. Messrs. du Moulin, Rosenfeld
and Yu were appointed to serve on the Company’s compensation committee and nominating committee.
Edward Coll is the
Chairman of the Board and Chief Executive Officer, Carl Claus Boggild is the President and Anthony Laura is the Chief Financial
Officer and Secretary, as set forth in the table below.
The following sets
forth certain information concerning the persons who serve as the Company’s directors and executive officers as of December
31, 2014:
|
Name
|
|
Age
|
|
Position
|
|
Edward Coll
|
|
58
|
|
Chairman of the Board and Chief Executive Officer
|
|
Carl Claus Boggild
|
|
58
|
|
President (Brazil) and Director
|
|
Peter M. Yu
|
|
53
|
|
Director
|
|
Paul Hong
|
|
45
|
|
Director
|
|
Richard T. du Moulin
|
|
68
|
|
Director
|
|
Mark L. Filanowski
|
|
60
|
|
Director
|
|
Eric S. Rosenfeld
|
|
57
|
|
Director
|
|
David D. Sgro
|
|
38
|
|
Director
|
|
Anthony Laura
|
|
63
|
|
Chief Financial Officer
|
Biographical information
concerning the directors and executive officers listed above is set forth below.
Edward Coll.
Mr. Coll is the Chairman of the Board and Chief Executive Officer. Mr. Coll is a founder of Pangaea and has served as its
Chief Executive Officer since its inception. Prior to co-founding Bulk Partners Ltd., the predecessor company to Pangaea, in 1996,
Mr. Coll spent 10 years at Continental Grain Company with assignments in New York, New Orleans, Rome and Rotterdam. He joined Commodity
Ocean Transport Corp (COTCO) in 1989 and became president of the company in 1993. In this position, Mr. Coll was responsible for
the overall activities and businesses of three U.S public shipping companies. Mr. Coll is an elected member of the American Bureau
of Shipping and has considerable expertise in the worldwide shipping and commodities markets and lectures regularly on these topics.
He holds a B.S. in nautical science from the United States Merchant Marine Academy at Kings Point and a master's degree in international
business from Pace University. Mr. Coll’s qualifications to sit on our board include his operational experience and deep
knowledge of the shipping industry.
Carl Claus Boggild.
Mr. Boggild is the President (Brazil) of the Company. Mr. Boggild is a founder of Pangaea and has served as its President (Brazil)
since its inception. Prior to co-founding Bulk Partners Ltd., the predecessor company to Pangaea, in 1996, Mr. Boggild was Director
of Chartering and Operations at the Korf Group of Germany. He also was a partner at Trasafra Ltd, a Brazilian agent for the largest
independent grain parcel operator from Argentina and Brazil to Europe. He worked for Hudson Trading and Chartering where he was
responsible for Brazilian related transportation services. As President of Commodity Ocean Transport Corporation (COTCO) he was
responsible for the operations of its affiliate Handy Bulk Carriers Corporation. Prior to becoming President of COTCO, Mr. Boggild
was an Executive Vice President and was responsible for its Latin American operations. Mr. Boggild holds a diploma in International
Maritime Law. Mr. Boggild’s qualifications to sit on our board include his operational experience and deep knowledge of the
shipping industry.
Peter M. Yu.
Mr. Peter M. Yu serves as a director of the Company. Mr. Yu will continue to serve as a director of Pangaea, a position he has
held since 2008. Mr. Yu founded Cartesian Capital Group, LLC, a global private equity firm with more than $2 billion in commitments
under management and the responsibility for more than 19 investments in a variety of fields and industries, in 2006. Prior to founding
Cartesian, Mr. Yu founded AIGCP in 1996 and served as President and Chief Executive Officer. Under his leadership, AIGCP became
a leading international private equity firm, with more than $4.5 billion in committed capital. Prior to founding AIGCP in 1996,
Mr. Yu served President Clinton as Director to the National Economic Council, the White House office responsible for developing
and coordinating economic policy. A graduate of Harvard Law School, Mr. Yu served as President of the Harvard Law Review and as
a law clerk on the U.S. Supreme Court. Mr. Yu received a B.A. degree from Princeton University’s Woodrow Wilson School. Mr.
Yu is a director of Banco Daycoval, S.A., a publicly traded bank headquartered in Brazil. Mr. Yu is also a director of a number
of private entities partly or wholly-owned by funds sponsored by Cartesian Capital Group. Mr. Yu’s qualifications to sit
on our board include his substantial experience in the areas of business management and financial and investment expertise.
Paul Hong.
Mr.
Paul Hong serves as a director of the Company. Mr. Hong is a Senior Managing Director at Cartesian Capital Group. Prior to joining
Cartesian, Paul served as Senior Vice President and General Counsel of AIG Capital Partners. Paul was previously an attorney in
the corporate and tax departments of Kirkland & Ellis where he specialized in private equity transactions. Paul holds an AB
in Economics from Columbia College, a JD from Columbia Law School, and an LLM in Taxation from New York University Law School.
Mr. Hong’s qualifications to sit on our board include his substantial experience in the areas of business management and
financial and investment expertise.
Richard T. du
Moulin.
Mr. Richard T. du Moulin serves as a director of the Company. Mr. du Moulin is currently the President of Intrepid
Shipping LLC, a position he has held since he founded Intrepid in 2002. From 1974, he spent 15 years with OMI Corporation, where
he served as Executive Vice President, Chief Operating Officer, and as a member of the company's Board of Directors. From 1998
to 2002, Mr. du Moulin served as Chairman and Chief Executive Officer of Marine Transport Corporation. From 1989 to 1998, Mr. du
Moulin served as Chairman and CEO of Marine Transport Lines. Mr. du Moulin is a member of the Board of Trustees and Chairman of
the Seamens Church Institute of New York and New Jersey. He currently serves as a Director of Teekay Tankers and, Tidewater Inc.
Mr. du Moulin served as Chairman of Intertanko, the leading trade organization for the tanker industry, from 1996 to 1999. Mr.
du Moulin served in the US Navy and is a recipient of the US Coast Guard's Distinguished Service Medal. He received a BA from Dartmouth
College and an MBA from Harvard University. Mr. du Moulin’s qualifications to sit on our board include his operational experience
and deep knowledge of the shipping industry.
Mark L. Filanowski.
Mr. Mark L. Filanowski serves as a director of the Company. Mr. Filanowski formed Intrepid Shipping LLC with Richard du Moulin
in 2002. He started his career at Ernst & Young from 1976 to 1984. Subsequently, Mr. Filanowski spent 4 years at Armtek Corporation,
where he served as Vice President and Controller. From 1989 to 2002, he served as Chief Financial Officer and Senior Vice President
at Marine Transport Corporation, which he helped take private from NASDAQ. Mr. Filanowski is a Director of ETRE REIT, LLC and is
a member of the American Bureau of Shipping. Previously, he has served as the Chairman of the Board at Arvak and at Shoreline Mutual
(Bermuda) Ltd., an insurance company. Mr. Filanowski was formerly a Certified Public Accountant. He earned a BS from University
of Connecticut and an MBA from New York University. Mr. Filanowski’s qualifications to sit on our board include his operational
experience and deep knowledge of the shipping industry and his qualifications to sit on the audit committee include his financial
experience as a CPA with Ernst & Young as well as his positions as Controller at Armtek and as CFO at Marine Transport.
Anthony Laura.
Mr. Laura is the Chief Financial Officer of the Company. Mr. Laura is a founder of Pangaea and has served as its Chief Financial
Officer since its inception. Prior to co-founding Bulk Partners Ltd., the predecessor to Pangaea, in 1996, Mr. Laura spent 10 years
as CFO of COTCO. Mr. Laura also served at Navinvest Marine Services from 1986 to 1996. Mr. Laura is a graduate of Fordham University.
Eric S. Rosenfeld.
Eric S. Rosenfeld serves as a director of the Company. Mr. Rosenfeld served as Quartet’s chairman of the board and chief
executive officer from its inception through consummation of the Mergers. Mr. Rosenfeld has been the president and chief executive
officer of Crescendo Partners, L.P. (“
Crescendo
”), a New York-based investment firm, since its formation in
November 1998. Mr. Rosenfeld has formed and served as a director and management of three prior special purpose acquisition companies,
Arpeggio Acquisition Corporation (“
Arpeggio
”), Rhapsody Acquisition Corp. (“
Rhapsody
”) and
Trio Merger Corp. (“
Trio
”). Mr. Rosenfeld presently serves or has served on the board of directors of Arpeggio,
Rhapsody, Trio, CPI Aerostructures, Inc., Cott Corporation, Absolute Software Corporation, Primoris Services Corporation (“
Primoris
”),
Hill International, Spar Aerospace Limited, Hip Interactive, AD OPT Technologies Inc., Pivotal Corporation, Sierra Systems Group,
Inc., Geac Computer Corporation Limited, Emergis Inc., Matrikon Inc., Dalsa Corporation and Computer Horizons Corp. Prior to forming
Crescendo Partners, Mr. Rosenfeld had been managing director at CIBC Oppenheimer and its predecessor company Oppenheimer &
Co., Inc. since 1985. Mr. Rosenfeld is a regular guest lecturer at Columbia Business School and has served on numerous panels at
Queen’s University Business Law School Symposia, McGill Law School, the World Presidents’ Organization and the Value
Investing Congress. He is a senior faculty member at the Director’s College. He has also been a regular guest host on CNBC.
Mr. Rosenfeld received an A.B. in economics from Brown University and an M.B.A. from the Harvard Business School.
David D. Sgro
.
David D. Sgro serves as a director of the Company. Mr. Sgro served as Quartet’s chief financial officer, secretary and a
member of its board of directors from its inception through consummation of the Mergers. Mr. Sgro has been a Managing Director,
Senior Vice President, Vice President and investment analyst of Crescendo from May 2005 to the present. Mr. Sgro presently serves
or has served on the board of directors of Rhapsody, Trio, Primoris, Bridgewater Systems, Inc. and COM DEV International Ltd. Mr.
Sgro attended Columbia Business School and prior to that, Mr. Sgro worked as an analyst and then senior analyst at Management Planning,
Inc., a firm engaged in the valuation of privately held companies. Simultaneously, Mr. Sgro worked as an associate with MPI Securities,
Management Planning, Inc.’s boutique investment banking affiliate. From June 2004 to August 2004, Mr. Sgro worked as an analyst
at Brandes Investment Partners. Mr. Sgro received a B.S. in Finance from The College of New Jersey and an M.B.A. from Columbia
Business School. In 2001, he became a Chartered Financial Analyst (CFA) Charterholder. Mr. Sgro is a regular guest lecturer at
the College of New Jersey and Columbia Business School.
Independence of Directors
As a result of its
common shares being listed on Nasdaq following consummation of the Mergers, the Company must adhere to the rules of Nasdaq in determining
whether a director is independent. The Board has consulted, and will consult, with its counsel to ensure that the Board’s
determinations are consistent with those rules and all relevant securities and other laws and regulations regarding the independence
of directors. The Nasdaq listing standards define an “independent director” as a person, other than an executive officer
of a company or any other individual having a relationship which, in the opinion of the issuer’s board of directors, would
interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Consistent with these considerations,
Messrs. Yu, Hong, du Moulin, Filanowski, Rosenfeld and Sgro are independent directors of the Company and participate in regularly
scheduled meetings at which only independent directors are present.
Board Leadership Structure
and Role in Risk Oversight
Having Mr. Coll serve
as both Chairman of the Board and Chief Executive Officer is most appropriate for the Company at this time because it provides
the Company with consistent and efficient leadership, both with respect to the Company’s operations and the leadership of
the Board. In particular, having Mr. Coll act in both of these roles increases the timeliness and effectiveness of the Board’s
deliberations, increases the Board’s visibility into the day-to-day operations of the Company, and ensures the consistent
implementation of the Company’s strategies.
The Company also believes
in the importance of independent oversight and will look to ensure that this oversight is truly independent and effective through
a variety of means, including:
|
|
·
|
Having a majority of the Board be considered independent.
|
|
|
·
|
At each regularly scheduled Board meeting, all independent directors will typically be scheduled
to meet in an executive session without the presence of any management directors.
|
|
|
·
|
The charters for each of standing committees of the Board require that all of the members of those
committees be independent.
|
We believe that the
combined role of Chairman and Chief Executive Officer, together with the significant responsibilities of the Company’s other
independent directors described above, provides an appropriate balance between leadership and independent oversight.
Corporate Governance
Audit Committee
Effective October 2014, we established an
audit committee of the board of directors, which is comprised of Mark Filanowski, Paul Hong and David Sgro, each of whom is an
independent director. The audit committee’s duties, which are specified in our Audit Committee Charter, include, but are
not limited to:
|
|
·
|
reviewing and discussing with management and the independent auditor the annual audited financial statements, and recommending to the board whether the audited financial statements should be included in our Form 10-K;
|
|
|
·
|
discussing with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation of our financial statements;
|
|
|
·
|
discussing with management major risk assessment and risk management policies;
|
|
|
·
|
monitoring the independence of the independent auditor;
|
|
|
·
|
verifying the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law;
|
|
|
·
|
reviewing and approving all related-party transactions;
|
|
|
·
|
inquiring and discussing with management our compliance with applicable laws and regulations;
|
|
|
·
|
pre-approving all audit services and permitted non-audit services to be performed by our independent auditor, including the fees and terms of the services to be performed;
|
|
|
·
|
appointing or replacing the independent auditor;
|
|
|
·
|
determining the compensation and oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work;
|
|
|
·
|
establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or reports which raise material issues regarding our financial statements or accounting policies; and
|
|
|
·
|
approving reimbursement of expenses incurred by our management team in identifying potential target businesses.
|
Financial Experts on Audit Committee
The audit committee
is composed exclusively of “independent directors” who are “financially literate” as defined under the
Nasdaq listing standards. The Nasdaq listing standards define “financially literate” as being able to read and understand
fundamental financial statements, including a company’s balance sheet, income statement and cash flow statement.
In addition, we must
certify to Nasdaq that the committee has, and will continue to have, at least one member who has past employment experience in
finance or accounting, requisite professional certification in accounting, or other comparable experience or background that results
in the individual’s financial sophistication. The board of directors has determined that Mark Filanowski and David Sgro qualify
as “audit committee financial experts,” as defined under rules and regulations of the SEC.
Nominating Committee
Effective October 2014,
we established a nominating committee of the board of directors, which consists of Richard du Moulin, Eric Rosenfeld and Peter
Yu, each of whom is an independent director. The nominating committee is responsible for overseeing the selection of persons to
be nominated to serve on our board of directors. The nominating committee considers persons identified by its members, management,
stockholders, investment bankers and others.
Guidelines for Selecting Director Nominees
The guidelines for
selecting nominees, which are specified in our Nominating Committee Charter, generally provide that persons to be nominated:
|
|
·
|
should have demonstrated notable or significant achievements in business, education or public service;
|
|
|
·
|
should possess the requisite intelligence, education and experience to make a significant contribution to the board of directors and bring a range of skills, diverse perspectives and backgrounds to its deliberations; and
|
|
|
·
|
should have the highest ethical standards, a strong sense of professionalism and intense dedication to serving the interests of our stockholders.
|
The Nominating Committee
will consider a number of qualifications relating to management and leadership experience, background, integrity and professionalism
in evaluating a person’s candidacy for membership on the Board. The nominating committee may require certain skills or attributes,
such as financial or accounting experience, to meet specific board needs that arise from time to time and will also consider the
overall experience and makeup of its members to obtain a broad and diverse mix of board members. The nominating committee does
not distinguish among nominees recommended by stockholders and other persons.
There have been no
material changes to the procedures by which security holders may recommend nominees to our board of directors.
Compensation Committee
Effective October
2014, we established a Compensation Committee which is comprised of Richard du Moulin, Eric Rosenfeld and Peter Yu. The Compensation
Committee reviews and approves compensation paid to the Company’s officers and directors and administers the Company’s
incentive compensation plans, including authority to make and modify awards under such plans. The Compensation Committee Charter
is available on the Company’s website at
www.pangaeals.com
.
Compensation committee interlocks and insider participations
As of December 31, 2014, none of the members
of our compensation committee will be, or will have at any time during the past year been, one of our officers or employees. None
of our executive officers currently serves or in the past year has served as a member of the board of directors or compensation
committee of any entity that has one or more executive officers serving on our board of directors or compensation committee.
EXECUTIVE AND DIRECTOR COMPENSATION
The Company qualifies
as an “emerging growth company,” as defined in the Jumpstart our Business Startups Act of 2012, or JOBS Act, and the
following is intended to comply with the scaled-back disclosure requirements applicable to emerging growth companies.
Summary Compensation
Table of The Company’s Named Executive Officers
The following Summary
Compensation Table sets forth the total compensation of the Company’s “named executive officers” for the fiscal
years ended December 31, 2014 and 2013, who consist of (i) the Company’s Chief Executive Officer, (ii) each of the Company’s
next two most highly compensation executive officers, other than its Chief Executive Officer, who served as an executive officer
at December 31, 2014 and whose total compensation exceeded $100,000, and (iii) two individuals for whom disclosure would have been
required but who were not serving as executive officers of the Company at December 31, 2014.
|
Name and Principal Position
|
|
Year
|
|
|
Salary
|
|
|
Discretionary
Bonus
|
|
|
All Other
Compensation
(1)
|
|
|
Total
|
|
|
Edward Coll
|
|
|
2014
|
|
|
$
|
200,000
|
|
|
$
|
425,000
|
|
|
$
|
5,750
|
|
|
$
|
630,750
|
|
Chief Executive Officer
(Principal Executive Officer)
|
|
|
2013
|
|
|
$
|
200,000
|
|
|
$
|
432,500
|
|
|
$
|
2,300
|
|
|
$
|
634,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carl Claus Boggild
|
|
|
2014
|
|
|
$
|
200,000
|
|
|
$
|
200,000
|
|
|
$
|
-
|
|
|
$
|
400,000
|
|
|
President – Brazil
|
|
|
2013
|
|
|
$
|
200,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
200,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anthony Laura
|
|
|
2014
|
|
|
$
|
200,000
|
|
|
$
|
200,000
|
|
|
$
|
5,750
|
|
|
$
|
405,750
|
|
Chief Financial Officer
(Principal Financial Officer)
|
|
|
2013
|
|
|
$
|
200,000
|
|
|
$
|
135,000
|
|
|
$
|
2,300
|
|
|
$
|
337,300
|
|
|
|
(1)
|
All other compensation includes employer matching contribution to
the Phoenix Bulk Carriers (US) LLC 401(k) plan.
|
Narrative
Disclosure to Summary Compensation Table
The Company does not
have employment agreements with any of its senior executives, including its named executive officers, and has not previously granted
its named executive officers any share or share-based awards. The Company’s compensation philosophy is to pay for performance,
rewarding our executives, including our named executive officers, for their historic contributions to our performance subject to
our overall performance. For the Company’s senior executives, including out named executive officers, merit increases and
discretionary annual bonus awards are generally awarded in December of each year, following completion of the annual performance
review cycle.
Employee
Benefits and other Perquisites
The Company
maintains, and its named executive officers (other than Mr. Boggild) participate in the Phoenix Bulk Carriers (US) LLC 401(k)
Plan, a 401(k) retirement savings plan. Each participant who is a United States employee may contribute to
the 401(k) plan, through payroll deductions, up to 90% of his or her salary limited to the maximum allowed by the Internal
Revenue Service regulations. All amounts contributed by employee participants and earnings on these contributions are fully
vested at all times and are not taxable to participants until withdrawn. Employee participants may elect to invest their
contributions in various established funds. The Company also makes contributions to the accounts of plan participants.
Except as set forth
above, the Company’s named executive officers generally participate in the same employee benefit programs as its other employees.
Outstanding
Equity Awards at Fiscal Year-End
As of December 31,
2014, none of the Company’s senior executives, including its named executive officers, held any outstanding equity- or equity-based
awards in respect of the Company..
Retirement
Benefits, Termination and Severance; Change in Control Payments
As of December 31, 2014,
none of the Company’s senior executives, including its named executive officers, have any retirement benefits (other than
their right to participate in Pangaea’s 401(k) retirement plan, as described above) or have any rights to severance or other
payments in connection with a termination of their employment or upon a change in control of the Company.
Compensation
of Non-Employee Directors.
The following
table sets forth compensation expected to be earned by our non-employee directors for the period from October 1, 2014 through
September 30, 2015:
|
Name
|
|
Fees Earned or
Paid in Cash
|
|
|
Stock
Awards
|
|
|
Option
Awards
|
|
|
Non-equity
incentive plan
compensation
|
|
|
Nonqualified
Deferred
Compensation
Earnings
|
|
|
All Other
Compensation
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark Filanowski
|
|
$
|
25,000
|
|
|
$
|
46,600
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
71,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard DuMoulin
|
|
$
|
25,000
|
|
|
$
|
46,600
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
71,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter Yu
|
|
$
|
25,000
|
|
|
$
|
46,600
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
71,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul Hong
|
|
$
|
25,000
|
|
|
$
|
46,600
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
71,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric Rosenfeld
|
|
$
|
25,000
|
|
|
$
|
46,600
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
71,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Sgro
|
|
$
|
25,000
|
|
|
$
|
46,600
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
71,600
|
|
During the fiscal
year ending December 31, 2014, our board of directors established a compensation program for our non-employee directors. Under
the plan, these non-employee directors will receive a combination of cash compensation and restricted shares of our common stock
as payment for services rendered as such members. Members of our board of directors who are not our employees received 10,000 restricted
shares of our common stock pursuant to the 2014 Long-Term Incentive Plan on December 30, 2014 and will receive $25,000 cash as payment for services rendered for the annual period ending September
30, 2015. Restricted
shares vest at the rate of 50% after one year and the remaining 50% after two years. All restricted shares granted on December
30, 2014 will be forfeited if the non-employee director does not serve until the Company’s 2015 annual meeting of shareholders,
except in the event of death of the non-employee director.
We also reimburse
our directors for reasonable and necessary out-of-pocket expenses incurred in attending Board and committee meetings or performing
other services for us in their capacities as directors.
Equity Compensation
Plan Information
During 2014, the Company
adopted the 2014 Share Incentive Plan (the “2014 Plan”). The purpose of the 2014 Plan is to assist in attracting, retaining,
motivating, and rewarding certain key employees, officers, directors, and consultants of the Company and its affiliates and promoting
the creation of long-term value for our shareholders by closely aligning the interests of such individuals with those of such shareholders.
The 2014 Plan authorizes the award of share-based incentives to encourage eligible employees, officers, directors, and consultants,
as described below, to expend maximum effort in the creation of shareholder value.
Summary of the 2014
Plan
Plan Administration.
The 2014 Plan is administered by the Board or such other committee consisting of two or more individuals appointed by the Board
to administer the plan (the “Committee”). The Committee has the authority, among other things, to select participants,
determine types of awards and terms and conditions of awards for participants, prescribe rules and regulations for the administration
of the plan and make all decisions and determinations as deemed necessary or advisable for the administration of the 2014 Plan.
The Committee may delegate certain of its authority as it deems appropriate, pursuant to the terms of the 2014 Plan, to officers
or employees of the Company or its affiliates. The Committee’s actions will be final, conclusive and binding.
Authorized Shares.
A total of 1,500,000 common shares are reserved and available for delivery under the 2014 Plan. The number of common shares
reserved and available for delivery under the 2014 is subject to adjustment, as described below. The maximum number of common shares
reserved and available for delivery under the 2014 Plan may be issued in respect of incentive stock options. Common shares issued
under the 2014 Plan may consist of authorized but unissued common shares or previously issued common shares. Common shares underlying
awards that are settled in cash, canceled, forfeited, or otherwise terminated without delivery to a participant will again be available
for issuance under the 2014 Plan. Common shares withheld or surrendered in connection with the payment of an exercise price of
an award or to satisfy tax withholding will again become available for issuance under the 2014 Plan.
Individual Limits.
The maximum number of common shares that may be subject to awards granted to any non-employee director of the Company in any one
calendar year is 10,000.
Types of Awards.
The types of awards that may be available under the 2014 Plan are described below. All of the awards described below will be subject
to the terms and conditions determined by the Committee in its sole discretion, subject to certain limitations provided in the
2014 Plan. Each award granted under the 2014 Plan will be evidenced by an award agreement, which will govern that award’s
terms and conditions.
Non-qualified Stock
Options
. A non-qualified stock option is an option that is not intended to meet the qualifications of an incentive stock option,
as described below. An award of a non-qualified stock option grants a participant the right to purchase a certain number of our
common shares during a specified term in the future, or upon the achievement of performance or other conditions, at an exercise
price set by the Committee on the grant date. The term of a non-qualified stock option will be set by the Committee but may not
exceed 10 years from the grant date. The exercise price may be paid using cash, or by certified or bank
cashier’s check, and if approved by the Committee (i) by delivery of common shares previously owned by the participant,
(ii) by a broker-assisted, cashless exercise in accordance with procedures approved by the Committee, or (iii) by any other means
approved by the Committee.
Incentive Stock
Options
. An incentive stock option is an option that meets the requirements of Section 422 of the Code. Incentive
stock options may be granted only to our employees or employees of certain of our subsidiaries and must have an exercise price
of no less than 100% of the fair market value (or 110% with respect to a ten-percent shareholder) of a common share on the grant
date and a term of no more than 10 years (or 5 years with respect to a ten-percent shareholder). The aggregate fair market value,
determined at the time of grant, of our common shares subject to Incentive Stock Options that are exercisable for the first time
by a participant during any calendar year may not exceed $100,000.
Share Appreciation
Rights
. A share appreciation right entitles the participant to receive an amount equal to the difference between
the fair market value of our common shares on the exercise date and the base price of the share appreciation right that is set
by the Committee on the grant date, multiplied by the number of shares subject to the share appreciation right. The term of a share
appreciation right will be set by the Committee but may not exceed 10 years from the grant date. Payment to a participant upon
the exercise of a share appreciation right may be either in cash, common shares, or specified property as determined by the Committee.
Restricted Shares
. A
restricted share award is an award of restricted common shares that does not vest until a specified period of time has elapsed,
and/or upon the achievement of performance or other conditions determined by the Committee, and which will be forfeited if the
conditions to vesting are not met. During the period that any restrictions apply, transfer of the restricted common shares is generally
prohibited. Unless otherwise specified in their award agreement, participants generally have all of the rights of a shareholder
as to the restricted common shares, including the right to vote such shares, provided, that any cash or share dividends with respect
to the restricted common shares will be withheld by the Company and will be subject to forfeiture to the same degree as the restricted
common shares to which such dividends relate.
Restricted Share
Units
. A restricted share unit is an unfunded and unsecured obligation to issue a common share (or an equivalent
cash amount) to the participant in the future. Restricted share units become payable on terms and conditions determined by the
Committee and will vest and be settled at such times in cash, common shares, or other specified property, as determined by the
Committee.
Other Share-Based
Awards
. Under the 2014 Plan, the Committee may grant other types of equity-based or cash-based awards subject to
such terms and conditions that the Committee may determine. Such awards may include the grant of dividend equivalents, which generally
entitle the participant to receive amounts equal to the dividends that are paid on the shares underlying the award. The Committee
may also grant common shares as a bonus, and may grant other awards in lieu of obligations of the Company or its affiliates to
pay cash or deliver other property under the 2014 Plan or under other plans or compensatory arrangements, subject to such terms
and conditions as the Committee may determine.
Performance Awards
. A
performance award is an award of common shares or units subject (in whole or in part) to the achievement of pre-determined performance
objectives specified by the Committee. Earned performance awards may be settled in cash, common shares, or other awards (or in
a combination thereof), at the discretion of the Committee.
Adjustments
. The
aggregate number of common shares reserved and available for delivery under the 2014 Plan, the individual limitations, the number
of common shares covered by each outstanding award, and the price per common share underlying each outstanding award will be equitably
and proportionally adjusted or substituted, as determined by the Committee, as to the number, price or kind of share or other consideration
subject to such awards in connection with share dividends, extraordinary cash dividends, share splits, reverse share splits, recapitalizations,
reorganizations, mergers, amalgamations, consolidations, combinations, exchanges, or other relevant changes in our capitalization
affecting our common shares or our capital structure, or in the event of any change in applicable law or circumstances that results
in or could result in, as determined by the Committee in its sole discretion, any substantial dilution or enlargement of the rights
intended to be granted to, or available for, participants in the 2014 Plan.
Corporate Events
. In
the event of a merger, amalgamation, or consolidation involving the Company in which the Company is not the surviving corporation
or in which the Company is the surviving corporation but the holders of its common shares receive securities of another corporation
or other property or cash, a “change in control” (as defined in the 2014 Plan), or a reorganization, dissolution, or
liquidation of the Company, the Committee may, in its discretion, provide for the assumption or substitution of outstanding awards,
accelerate the vesting of outstanding awards, cash-out outstanding awards, or replace outstanding awards with a cash incentive
program that preserves the value of the awards so replaced.
Transferability
. Awards
under the 2014 Plan may not be sold, transferred, pledged, or assigned other than by the will or by the applicable laws of descent
and distribution, unless (for awards other than incentive stock options) otherwise provided in an award agreement or determined
by the Committee.
Amendment
. The
Board o or the Committee may amend the 2014 Plan or outstanding awards at any time. The Company’s shareholders must approve
any amendment if their approval is required pursuant to applicable law or the applicable rules of each national securities exchange
on which the Company’s common shares are traded. No amendment to the 2014 Plan or outstanding awards which materially impairs
the right of a participant is permitted unless the participant consents in writing. Shareholder approval will be required for any
amendment that reduces the exercise price or base price of any outstanding award or that would be treated as a repricing under
generally accepted accounting principles. Shareholder approval will also be required for the repurchase for cash or cancelation
of an award at a time when its exercise price or base price, as applicable, exceeds the fair market value of a common share on
the date of such repurchase or cancelation.
Termination
. The
2014 Plan will terminate on the day before the tenth anniversary of the 2014 Plan’s effective date. In addition, the Board
or the Committee may suspend or terminate the plan at any time. Following any such suspension or termination, the 2014 Plan will
remain in effect to govern any then outstanding awards until such awards are forfeited, terminated or otherwise canceled or earned,
exercised, settled or otherwise paid out, in accordance with their terms.
Clawback
. All
awards under the 2014 Plan will be subject to any incentive compensation clawback or recoupment policy currently in effect, or
as may be adopted by our board of directors or any committee thereof from time to time.
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
All ongoing and future
transactions between us and any of our officers and directors or their respective affiliates will be on terms believed by us to
be no less favorable to us than are available from unaffiliated third parties. Such transactions will require prior approval by
our audit committee and a majority of our uninterested independent directors, in either case who had access, at our expense, to
our attorneys or independent legal counsel. We will not enter into any such transaction unless our audit committee and a majority
of our disinterested independent directors determine that the terms of such transaction are no less favorable to us than those
that would be available to us with respect to such a transaction from unaffiliated third parties.
Related Party Policy
Our Code of Ethics
requires us to avoid, wherever possible, all related party transactions that could result in actual or potential conflicts of interests,
except under guidelines approved by the board of directors (or the audit committee). Related-party transactions are defined as
transactions in which (1) the aggregate amount involved will or may be expected to exceed $120,000 in any calendar year, (2) we
or any of our subsidiaries is a participant, and (3) any (a) executive officer, director or nominee for election as a director,
(b) greater than 5% beneficial owner of our shares of common stock, or (c) immediate family member, of the persons referred to
in clauses (a) and (b), has or will have a direct or indirect material interest (other than solely as a result of being a director
or a less than 10% beneficial owner of another entity). A conflict of interest situation can arise when a person takes actions
or has interests that may make it difficult to perform his or her work objectively and effectively. Conflicts of interest may also
arise if a person, or a member of his or her family, receives improper personal benefits as a result of his or her position.
We also require each
of our directors and executive officers to complete a directors’ and officers’ questionnaire that elicits information
about related party transactions.
These procedures are
intended to determine whether any such related party transaction impairs the independence of a director or presents a conflict
of interest on the part of a director, employee or officer.
Section 16(a) Beneficial
Ownership Reporting Compliance
Section 16(a) of the
Exchange Act requires our directors, officers and persons owning more than 10% of our common stock to file reports of ownership
and changes of ownership with the SEC. Based on our review of the copies of such reports furnished to us, or representations from
certain reporting persons that no other reports were required, we believe that all applicable filing requirements were complied
with during the year ended December 31, 2014.
Related Person Transactions
Escrow Agreement
The Company is a
party to an Escrow Agreement, dated as of October 1, 2014, by and among Continental Stock Transfer & Trust Company, as escrow
agent, the stockholders listed thereto (the “
Stockholders
”) and a representative of Quartet (the “
Escrow
Agreement
”). Upon consummation of the transactions contemplated by the Merger Agreement (the “
Transactions
”),
of the common shares issued to the Stockholders as consideration for the Transactions an aggregate of 1,100,000 such shares (“
Escrow
Shares
”) were placed in escrow pursuant to the Escrow Agreement. Of the 1,100,000 common shares held in escrow, 550,000
shall be released on October 1, 2015 and the remaining shares will be released on October 1, 2016, in each case subject to reduction
based on shares cancelled for claims ultimately resolved and those still pending resolution at the time of the release. The foregoing
description of the Escrow Agreement is qualified in its entirety by the terms of the Escrow Agreement, a copy of which is filed
hereto as an attached hereto as
Exhibit 10.1
.
Registration
Rights Agreement
The Company is party
to a registration rights agreement, dated October 1, 2014, by and among the Company and the Stockholders (the “
Registration
Rights Agreement
”), which provides the Stockholders with certain rights to cause the Company to register under the Securities
Act, the common shares issued pursuant to the Merger Agreement and any securities issued by the Company in connection with the
foregoing by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation
or reorganization or otherwise (the foregoing, collectively, “
Registrable Securities
”). The Stockholders are
entitled to certain demand and “piggy back” registration rights with respect to the Registrable Securities. The foregoing
description of the Registration Rights Agreement is qualified in its entirety by the terms of the Registration Rights Agreement,
a copy of which is attached hereto as
Exhibit 10.2
.
Lock-up Agreements
The Company has also
entered into a lock-up agreement with each of the Stockholders (the “
Lock-up Agreement
”) pursuant to which
they have agreed not to transfer common shares that they received upon consummation of the Mergers until (A) with respect to 50%
of such shares, the earlier of (i) the date on which the closing price of the common shares exceeds $12.50 per share for any 20
trading days within a 30-trading day period and (ii) October 1, 2015 and (B) with respect to the remaining 50% of such shares,
September 30, 2015, in each case subject to certain exceptions, provided, that the lock-up period shall terminate immediately
prior to the consummation of a liquidation, merger, stock exchange or other similar transaction that results in any of the Company’s
shareholders having the right to exchange the Company’s common shares for cash, securities or other property. The foregoing
description of the Lock-up Agreement is qualified in its entirety by the terms of the Lock-up Agreement, a copy of which is attached
hereto as
Exhibit 10.3
.
Related Party Transactions
|
|
|
December 31,
|
|
|
|
|
|
September 30,
|
|
|
|
|
2013
|
|
|
Activity
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Included in accounts payable and accrued expenses on the consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
To Founders
|
|
$
|
203,050
|
|
|
$
|
(203,050
|
)
|
|
$
|
-
|
|
|
|
|
$
|
203,050
|
|
|
$
|
(203,050
|
)
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in current related party debt on the consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan payable – 2011 Founders Note
|
|
$
|
4,325,000
|
|
|
|
-
|
|
|
$
|
4,325,000
|
|
|
Interest payable – 2011 Founders Note
|
|
|
296,248
|
|
|
|
(54,507
|
)
i.
|
|
|
241,741
|
|
|
Loan payable – BVH shareholder ST Shipping
|
|
|
2,995,000
|
|
|
|
-
|
|
|
|
2,995,000
|
|
|
Loan payable to NBHC shareholder ST Shipping
|
|
|
-
|
|
|
|
19,405,000
|
ii.
|
|
|
19,405,000
|
|
|
Loan payable to NBHC shareholder (ASO2020)
|
|
|
-
|
|
|
|
19,404,972
|
ii.
|
|
|
19,404,972
|
|
|
|
|
$
|
7,616,248
|
|
|
$
|
38,755,465
|
|
|
$
|
46,371,713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in related party long-term debt on the consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan payable to NBHC shareholder ST Shipping
|
|
$
|
17,030,000
|
|
|
$
|
(17,030,000
|
)
iii.
|
|
$
|
-
|
|
|
Loan payable to NBHC shareholder (ASO2020)
|
|
|
17,029,972
|
|
|
|
(17,029,972
|
)
iii.
|
|
|
-
|
|
|
Less unamortized discount
|
|
|
(16,756,054
|
)
|
|
|
16,756,054
|
iv.
|
|
|
-
|
|
|
Total related party long-term debt
|
|
$
|
17,303,918
|
|
|
$
|
(17,303,918
|
)
|
|
$
|
-
|
|
|
i.
|
Paid in cash
|
|
ii.
|
Loans payable to NBHC shareholders ST Shipping and ASO2020, including additional borrowing on May 28, 2014. On April 1, 2014, the loans were amended to remove the maturity date and have therefore been reclassified as current.
|
|
iii.
|
Balance at December 31, 2013 has been reclassified as current
|
|
iv.
|
Unamortized discount at December 31, 2013 was reduced by imputed interest of $322,946 which was recorded for the three months ended March 31, 2014, prior to the amendment of the loan. The net unamortized discount on April 1, 2014 of $16,433,109 has been recorded as a reduction of noncontrolling interest due to the debt modification.
|
BVH entered into an
agreement for the construction of two new ultramax newbuildings in 2013. ST Shipping provided a loan of $2,995,000 to make deposits
on the contracts. The loan is payable on demand and does not bear interest.
In connection with the
acquisition of m/v Nordic Orion and m/v Nordic Odyssey in 2012, STST provided two $8,050,000 subordinated notes (one designated
for each vessel) which were payable on demand and do not bear interest. During the year ended December 31, 2012, aggregate repayments
of $3,600,000 were made against these notes. Bulk Partners restructured its existing related party loans payable to ST Shipping
at December 31, 2012 to modify the repayment date to January 9, 2023, which was accounted for as a modification under ASC 470-50.
In January 2013, Bulk Partners entered into a Share Transfer Restructuring Agreement through which the shareholders of Odyssey
and Orion transferred their shares of those entities and their zero interest subordinated shareholder loans to these entities,
to NBHC in exchange for the shares of NBHC.
Also during 2013, NBHC
entered into contracts to purchase four Ice-Class 1A newbuildings and paid deposits of $26,100,000. STST provided an additional
$4,530,000, thereby increasing its loan to $17,030,000. The newest shareholder, ASO2020, also provided $17,030,000 in loans and
acquired one-third of the common stock of NBHC for approximately $13,000. On April 1, 2014, the loans were amended to remove the
maturity date. The unamortized discount at April 1, 2014 of $16,433,108 has been recorded as a reduction to noncontrolling interest
because the original discount was recorded as an increase in noncontrolling interest. On May 28, 2014, each of the shareholders
provided additional loans of $1,187,500 to finance the second installment on the first vessel delivery. On August 7, 2014, each
of the shareholders provided additional loans of $1,187,500 to finance the third installment on the first vessel delivery. These
loans are also payable on demand and do not bear interest.
On October 1, 2011,
Bulk Partners entered into a $10,000,000 loan agreement with Bulk Partner’s founders, which was payable on demand at the
request of the lenders (the 2011 Founders Note). The note bears interest at a rate of 5%. On January 1, 2012 Bulk Partners issued
5,675 shares of convertible redeemable preferred stock to the Founders, representing a partial repayment of the note, the balance
of which was $4,325,000 at September 30, 2014, December 31, 2013 and 2012.
Under the terms of a
technical management agreement between Bulk Partners and Seamar Management S.A. (Seamar), an equity method investee, Seamar is
responsible for the day-to-day operations for all of Bulk Partners’ owned vessels. During the nine-month periods ended September
30, 2014 and 2013, Bulk Partners incurred technical management fees of approximately $1,759,000 and $1,312,000, respectively under
this arrangement. During the years ended December, 2013 and 2012, Bulk Partners incurred technical management fees of approximately
$1,864,000 and $1,201,000, respectively under this arrangement. These fees are included in vessel operating expenses in the consolidated
statements of income.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, MANAGEMENT AND SELLING SHAREHOLDERS
The following table
sets forth the beneficial ownership of our common shares as of most recent practicable date prior to filing by (1) each person,
or group of affiliated persons, known by us to be the beneficial owner of 5% or more of our outstanding common shares, (2) each
of our directors, (3) each of our named executive officers, (4) all of our directors and executive officers as a group
and (5) each selling shareholder.
To our knowledge,
each person named in the table has sole voting and investment power with respect to all of the securities shown as beneficially
owned by such person, except as otherwise set forth in the notes to the table. The number of securities shown represents the number
of securities the person “beneficially owns,” as determined by the rules of the SEC. The SEC has defined “beneficial”
ownership of a security to mean the possession, directly or indirectly, of voting power and/or investment power. A security holder
is also deemed to be, as of any date, the beneficial owner of all securities that such security holder has the right to acquire
within 60 days after that date through (1) the exercise of any option, warrant or right, (2) the conversion of a
security, (3) the power to revoke a trust, discretionary account or similar arrangement, or (4) the automatic termination
of a trust, discretionary account or similar arrangement.
The percentages reflect
beneficial ownership prior to this offering as determined in accordance with Rule 13d-3 under the Exchange Act and assumes
there are 34,756,997 common shares outstanding.
|
Name and Address of Beneficial Owner (1)
|
|
Amount and
Nature of
Beneficial
Ownership
|
|
|
Approximate
Percentage of
Beneficial
Ownership (2)
|
|
|
Directors and Executive Officers:
|
|
|
|
|
|
|
|
Edward Coll(3)
|
|
|
7,495,173
|
|
|
|
21.56
|
%
|
|
Carl Claus Boggild(4)
|
|
|
7,417,105
|
|
|
|
21.34
|
%
|
|
Richard T. du Moulin*
|
|
|
10,000
|
|
|
|
0.03
|
%
|
|
Mark L. Filanowski*
|
|
|
10,000
|
|
|
|
0.03
|
%
|
|
Eric S. Rosenfeld
|
|
|
366,576
|
|
|
|
1.05
|
%
|
|
David D. Sgro*
|
|
|
75,568
|
|
|
|
0.22
|
%
|
|
Peter Yu (5)
|
|
|
13,926,467
|
|
|
|
40.07
|
%
|
|
Anthony Laura
|
|
|
2,335,382
|
|
|
|
6.72
|
%
|
|
Paul Hong
|
|
|
10,000
|
|
|
|
0.03
|
%
|
|
All Directors and Officers as a Group
|
|
|
31,646,271
|
|
|
|
91.05
|
%
|
|
Name and Address of Beneficial Owner (1)
|
|
Amount and
Nature of
Beneficial
Ownership
|
|
|
Approximate
Percentage of
Beneficial
Ownership (2)
|
|
|
Three Percent Holders:
|
|
|
|
|
|
|
|
|
|
Edward Coll(3)
|
|
|
7,495,173
|
|
|
|
21.56
|
%
|
|
Lagoa Investments(4)
|
|
|
7,417,105
|
|
|
|
21.34
|
%
|
Pangaea One, L.P.
c/o Cartesian Capital Group, LLC
505 Fifth Avenue, 15th Floor
New York, NY 10017
|
|
|
5,982,750
|
|
|
|
17.21
|
%
|
Pangaea One (Cayman), L.P.
c/o Cartesian Capital Group, LLC
505 Fifth Avenue, 15th Floor
New York, NY 10017
|
|
|
3,297,254
|
|
|
|
9.49
|
%
|
Pangaea One Parallel Fund, L.P.
c/o Cartesian Capital Group, LLC
505 Fifth Avenue, 15th Floor
New York, NY 10017
|
|
|
3,081,156
|
|
|
|
8.86
|
%
|
Pangaea One Parallel Fund (b), L.P.
c/o Cartesian Capital Group, LLC
505 Fifth Avenue, 15th Floor
New York, NY 10017
|
|
|
1,555,307
|
|
|
|
4.47
|
%
|
*Less than 1%.
|
|
(1)
|
Unless otherwise indicated, the business address of each of the individuals is c/o Pangaea Logistics
Solutions Ltd., 109 Long Wharf, Newport, Rhode Island 02840.
|
|
|
(2)
|
The beneficial ownership of the common shares by the selling shareholders
set forth in the table is determined in accordance with Rule 13d-3 under the Exchange Act, and the information is not necessarily
indicative of beneficial ownership for any other purpose. Under such rule, beneficial ownership includes any common shares as to
which the Selling Shareholder has sole or shared voting power or investment power and also any common shares that the Selling Shareholder
has the right to acquire within 60 days. The percentage of beneficial ownership is calculated based on 34,756,997
outstanding
common shares, which does not take into account the shares that may be issued to the Former Pangaea Holders upon achievement of
certain net income targets. Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment
power with respect to all common shares beneficially owned by them upon consummation of the Mergers.
|
|
|
(3)
|
Shares owned by Edward Coll include 120,000 common shares held by three irrevocable trusts
for the benefit of his children as well as 13,300 open market purchases, all as to which Mr. Coll has sole or shared voting
power or investment power. Accordingly, solely for purposes of reporting beneficial ownership of such shares pursuant to
Section 13(d) of the Exchange Act, Mr. Coll may be deemed to be the beneficial owner of these shares.
|
|
|
(4)
|
Shares owned by Lagoa Investments. Mr. Boggild is the Managing Director of Lagoa Investments and
solely for purposes of reporting beneficial ownership of such shares pursuant to Section 13(d) of the Exchange Act, Mr. Boggild
may be deemed to be the beneficial owner of the shares held by Lagoa Investments.
|
|
|
(5)
|
Mr. Yu is a principal officer or director of the entity directly or indirectly controlling the
general partner of each of Pangaea One, L.P., Pangaea One (Cayman), L.P. and Pangaea One Parallel Fund, L.P. and Pangaea One Parallel
Fund (B), L.P. (collectively, the “Pangaea One Entities”). Accordingly, solely for purposes of reporting beneficial
ownership of such shares pursuant to Section 13(d) of the Exchange Act, Mr. Yu may be deemed to be the beneficial owner of the
shares held by the Pangaea One Entities.
|
SHARES
ELIGIBLE FOR FUTURE SALE
Sales of substantial
amounts of our common shares in the public market could adversely affect prevailing market prices of our common shares. Some of
our common shares are not available for sale for a certain period of time following consummation of the Mergers because they are
subject to contractual and legal restrictions on resale some of which are described below. Sales of substantial amounts of common
shares in the public market after these restrictions lapse, or the perception that these sales could occur, could adversely affect
the prevailing market price and our ability to raise equity capital in the future.
Sales of Restricted
Securities
All of the common
shares held by the Selling Shareholders will be freely tradable without restriction under the Securities Act, unless purchased
by our “affiliates,” as that term is defined in Rule 144 under the Securities Act. Of the remaining common shares
that will be outstanding after this offering, 33,645,058 common shares are “restricted securities” within the meaning
of Rule 144 under the Securities Act. Restricted securities may be sold in the public market only if they are registered under
the Securities Act or are sold pursuant to an exemption from registration under Rule 144 or Rule 701 under the Securities
Act, which are summarized below. Subject to any restrictions on unvested shares issued under our share incentive plans and the
lock-up agreements described below, shares held by non-affiliates that are not restricted securities or that have been owned for
more than one year may be sold without regard to the provisions of Rule 144.
Rule 144
In general, under
Rule 144, beginning 90 days after the date of this prospectus, a person who is not our affiliate and has not been our
affiliate at any time during the preceding three months will be entitled to sell any common shares that such person has beneficially
owned for at least six months, including the holding period of any prior owner other than one of our affiliates, without regard
to volume limitations. Sales of our common shares by any such person would be subject to the availability of current public information
about us if the shares to be sold were beneficially owned by such person for less than one year.
In addition, under
Rule 144, a person may sell our common shares acquired from us immediately upon the closing of this offering, without regard
to volume limitations or the availability of public information about us, if:
|
|
·
|
the person is not our affiliate and has not been our affiliate at any time during the preceding
three months; and
|
|
|
·
|
the person has beneficially owned the shares to be sold for at least one year, including the holding
period of any prior owner other than one of our affiliates.
|
Beginning 90 days
after the date of this prospectus, our affiliates who have beneficially owned our common shares for at least six months, including
the holding period of any prior owner other than one of our affiliates, would be entitled to sell within any three-month period
a number of shares that does not exceed the greater of:
|
|
·
|
1% of the number of our common shares then outstanding, which will equal approximately 347,570
shares immediately after this offering; and
|
|
|
·
|
the average weekly trading volume in our common shares on the Nasdaq during the four calendar weeks
preceding the date of filing of a Notice of Proposed Sale of Securities Pursuant to Rule 144 with respect to the sale.
|
Sales under Rule 144
by our affiliates are also subject to manner of sale provisions and notice requirements and to the availability of current public
information about us.
Equity Incentive Plans
Our Board, and our
shareholders have approved, the 2014 Long-Term Incentive Plan. For additional information regarding our 2014 Plan, including the
number of shares reserved for issuance, see “Executive Compensation — Stock and Retirement Plans” above.
Registration Rights
The holders of approximately
291,953 common shares, or their transferees, are entitled to certain rights with respect to the registration of the offer and sale
of those shares under the Securities Act pursuant to the registration rights agreement. If these shares are registered, they will
be freely tradable without restriction under the Securities Act. For a description of these registration rights, see “Certain
Relationships and Related Party Transactions — Related Person Transactions — Registration Rights Agreement.”
WHERE
YOU CAN FIND ADDITIONAL INFORMATION
We file reports, proxy
statements and other information with the SEC as required by the Exchange Act. You may read and copy reports, proxy statements
and other information filed by us with the SEC at the SEC public reference room located at 100 F Street, N.E., Washington, D.C.
20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. You may also
obtain copies of the materials described above at prescribed rates by writing to the Securities and Exchange Commission, Public
Reference Section, 100 F Street, N.E., Washington, D.C. 20549. You may access information on the Company at the SEC web site containing
reports, proxy statements and other information at:
http://www.sec.gov.
This Prospectus incorporates
important business and financial information about us that is not included in or delivered with the Prospectus. Information and
statements contained in this Prospectus or any annex to this Prospectus are qualified in all respects by reference to the copy
of the relevant contract or other annex filed as an exhibit to the registration statement of which this Prospectus forms a part.
If you would like
additional copies of this document or if you have questions about the Company, you should contact via phone or in writing:
Mr. Edward Coll
Pangaea Logistics Solutions Ltd.
109 Long Wharf
Newport, Rhode Island 02840
(401) 846-7790
INDEX TO FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Pangaea
Logistics Solutions Ltd.
We have reviewed the accompanying
consolidated balance sheet of Bulk Partners (Bermuda) LTD. and subsidiaries (the “Company”), as of September 30,
2014 and the related consolidated statements of income for the three- and nine-month periods ended September 30, 2014 and
2013, changes in convertible redeemable preferred stock and stockholders’ equity (deficit) for the nine months
ended September 30, 2014, and cash flows for the nine months ended September 30, 2014 and 2013. These interim financial
statements are the responsibility of the Company’s management.
We were furnished with the report of
other accountants on their reviews of the consolidated interim financial statements of Nordic Bulk Holding ApS and its
subsidiary, whose total assets as of September 30, 2014 constituted 5.4% of the related consolidated total, and whose
revenues for the three- and nine-month periods ended September 30, 2014 and 2013 constituted 38.3%, 39.0%, 32.4%, and 32.6%,
respectively, of the related consolidated totals.
We conducted our reviews in accordance
with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information
consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our reviews and the report of
other accountants, we are not aware of any material modifications that should be made to the
consolidated
interim financial statements referred to above for them to be in conformity with accounting principles generally accepted in the
United States of America.
We have previously audited, in accordance
with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company
as of December 31, 2013, and the related consolidated statements of income, changes in convertible redeemable preferred stock and
stockholders’ equity, and cash flows for the year then ended (not presented herein); and we expressed, based on our audit
and the report of other auditors, an unqualified opinion on those consolidated financial statements in our report dated May 5,
2014. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2013, is fairly
stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
/s/ GRANT THORNTON LLP
Boston, Masssachusetts
November 14, 2014
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Nordic Bulk Holding ApS
We have reviewed the accompanying consolidated balance sheet
of Nordic Bulk Holding ApS (a Danish corporation) and its subsidiary (the “Company”), and the related consolidated
statements of income, changes in shareholders’ equity, and cash flows, as of September 30, 2014 and for the three and nine
month periods ended September 30, 2014 and 2013. These interim financial statements are the responsibility of the Company’s
management.
We conducted our reviews in accordance with the standards of
the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of
applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially
less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications
that should be made to the consolidated interim financial statements referred to above for them to be in conformity with accounting
principles generally accepted in the United States of America.
PricewaterhouseCoopers
Statsautoriseret Revisionspartnerselskab
Copenhagen, Denmark
November 13, 2014
Bulk Partners (Bermuda) LTD.
Consolidated Balance Sheets
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
2014
|
|
|
2013
|
|
|
Assets
|
|
(unaudited)
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
20,157,708
|
|
|
$
|
18,927,927
|
|
|
Restricted cash
|
|
|
500,000
|
|
|
|
500,000
|
|
|
Accounts receivable (net of allowance of $2,047,603 at
|
|
|
|
|
|
|
|
|
|
September 30, 2014 and $1,662,593 at December 31, 2013)
|
|
|
30,462,924
|
|
|
|
44,688,470
|
|
|
Other receivables
|
|
|
287,668
|
|
|
|
133,646
|
|
|
Bunker inventory
|
|
|
21,050,009
|
|
|
|
21,072,192
|
|
|
Advance hire, prepaid expenses and other current assets
|
|
|
10,916,092
|
|
|
|
12,744,125
|
|
|
Total current assets
|
|
|
83,374,401
|
|
|
|
98,066,360
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed assets, net
|
|
|
225,179,262
|
|
|
|
197,153,889
|
|
|
Investment in newbuildings in-process
|
|
|
25,576,943
|
|
|
|
31,900,000
|
|
|
Other noncurrent assets
|
|
|
1,495,078
|
|
|
|
3,253,022
|
|
|
Total assets
|
|
$
|
335,625,684
|
|
|
$
|
330,373,271
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities, convertible redeemable preferred stock
|
|
|
|
|
|
|
|
|
|
and stockholders' equity
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
40,623,223
|
|
|
$
|
45,878,378
|
|
|
Related party debt
|
|
|
46,371,713
|
|
|
|
7,616,248
|
|
|
Deferred revenue
|
|
|
5,862,960
|
|
|
|
16,155,498
|
|
|
Current portion long-term debt
|
|
|
18,686,730
|
|
|
|
16,065,483
|
|
|
Line of credit
|
|
|
3,000,000
|
|
|
|
3,000,000
|
|
|
Dividend payable
|
|
|
29,381,125
|
|
|
|
23,177,503
|
|
|
Other current liablities
|
|
|
263,982
|
|
|
|
-
|
|
|
Total current liabilties
|
|
|
144,189,733
|
|
|
|
111,893,110
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured long-term debt, net
|
|
|
91,719,946
|
|
|
|
83,302,421
|
|
|
Related party long-term debt, net
|
|
|
-
|
|
|
|
17,303,918
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible redeemable preferred stock, net of issuance costs
|
|
|
|
|
|
|
|
|
|
($1,000 par value, 112,500 shares authorized, 89,114
|
|
|
|
|
|
|
|
|
|
and 64,047 shares issued and outstanding at September 30, 2014
|
|
|
|
|
|
|
|
|
|
December 31, 2013, respectively)
|
|
|
103,236,399
|
|
|
|
103,236,399
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' (deficit) equity:
|
|
|
|
|
|
|
|
|
|
Common stock ($1.00 par value, 199,829 shares authorized
|
|
|
|
|
|
|
|
|
|
87,329 shares issued and outstanding at September 30, 2014,
|
|
|
|
|
|
|
|
|
|
December 31, 2013 and December 31, 2012
|
|
|
|
|
|
|
|
|
|
191,606 shares issued and outstanding on pro forma basis
|
|
|
87,329
|
|
|
|
87,329
|
|
|
Additional paid-in capital
|
|
|
-
|
|
|
|
-
|
|
|
Accumulated deficit
|
|
|
(7,324,015
|
)
|
|
|
(5,933,870
|
)
|
|
Total Bulk Partners (Bermuda) LTD. deficit
|
|
|
(7,236,686
|
)
|
|
|
(5,846,541
|
)
|
|
Non-controlling interest
|
|
|
3,716,292
|
|
|
|
20,483,964
|
|
|
Total stockholders' (deficit) equity
|
|
|
(3,520,394
|
)
|
|
|
14,637,423
|
|
|
Total liabilities, convertible reemable preferred stock
|
|
|
|
|
|
|
|
|
|
and stockholders' (deficit) equity
|
|
$
|
335,625,684
|
|
|
$
|
330,373,271
|
|
The accompanying notes are an integral part of these financial statements
Bulk Partners (Bermuda) LTD.
Consolidated Statements of Income
|
|
|
Three months ended September 30,
|
|
|
Nine months ended September 30,
|
|
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voyage revenue
|
|
$
|
80,604,263
|
|
|
$
|
80,371,836
|
|
|
$
|
252,084,882
|
|
|
$
|
246,642,009
|
|
|
Charter revenue
|
|
|
10,600,956
|
|
|
|
14,797,016
|
|
|
|
43,112,456
|
|
|
|
34,328,821
|
|
|
|
|
|
91,205,219
|
|
|
|
95,168,852
|
|
|
|
295,197,338
|
|
|
|
280,970,830
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voyage expense
|
|
|
46,598,184
|
|
|
|
45,193,740
|
|
|
|
136,624,745
|
|
|
|
147,119,813
|
|
|
Charter hire expense
|
|
|
34,315,719
|
|
|
|
31,984,645
|
|
|
|
112,271,588
|
|
|
|
86,098,418
|
|
|
Vessel operating expense
|
|
|
7,935,565
|
|
|
|
6,148,253
|
|
|
|
22,587,314
|
|
|
|
15,710,044
|
|
|
General and administrative
|
|
|
2,790,350
|
|
|
|
2,747,691
|
|
|
|
7,719,226
|
|
|
|
8,592,008
|
|
|
Depreciation and amortization
|
|
|
3,118,973
|
|
|
|
2,518,726
|
|
|
|
8,415,174
|
|
|
|
7,060,351
|
|
|
Gain on sale of vessels
|
|
|
(1,661,368
|
)
|
|
|
-
|
|
|
|
(3,947,600
|
)
|
|
|
-
|
|
|
Total expenses
|
|
|
93,097,423
|
|
|
|
88,593,055
|
|
|
|
283,670,447
|
|
|
|
264,580,634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from operations
|
|
|
(1,892,204
|
)
|
|
|
6,575,797
|
|
|
|
11,526,891
|
|
|
|
16,390,196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (expense) income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(1,348,252
|
)
|
|
|
(1,419,338
|
)
|
|
|
(4,338,904
|
)
|
|
|
(3,889,788
|
)
|
|
Interest expense related party debt
|
|
|
(108,422
|
)
|
|
|
(194,543
|
)
|
|
|
(170,784
|
)
|
|
|
(357,341
|
)
|
|
Imputed interest on related party long-term debt
|
|
|
-
|
|
|
|
(317,942
|
)
|
|
|
(322,947
|
)
|
|
|
(793,222
|
)
|
|
Unrealized (loss) gain on derivative instruments
|
|
|
(551,354
|
)
|
|
|
1,854,930
|
|
|
|
(2,123,246
|
)
|
|
|
183,287
|
|
|
Other income (expense)
|
|
|
83,803
|
|
|
|
(515,677
|
)
|
|
|
8,030
|
|
|
|
(197,127
|
)
|
|
Total other expense, net
|
|
|
(1,924,225
|
)
|
|
|
(592,570
|
)
|
|
|
(6,947,851
|
)
|
|
|
(5,054,191
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
(3,816,429
|
)
|
|
|
5,983,227
|
|
|
|
4,579,040
|
|
|
|
11,336,005
|
|
|
Loss (income) attributable to noncontrolling interests
|
|
|
906,822
|
|
|
|
(113,827
|
)
|
|
|
334,563
|
|
|
|
(820,323
|
)
|
|
Net (loss) income attributable to Bulk Partners (Bermuda) LTD.
|
|
$
|
(2,909,607
|
)
|
|
$
|
5,869,400
|
|
|
$
|
4,913,603
|
|
|
$
|
10,515,682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(64.68
|
)
|
|
$
|
(7.77
|
)
|
|
$
|
(15.92
|
)
|
|
$
|
(63.30
|
)
|
|
Diluted
|
|
$
|
(64.68
|
)
|
|
$
|
(7.77
|
)
|
|
$
|
(15.92
|
)
|
|
$
|
(63.30
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used to compute loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
per common share, basic and diluted
|
|
|
87,329
|
|
|
|
87,329
|
|
|
|
87,329
|
|
|
|
87,329
|
|
The accompanying notes are an integral part of these financial statements
Bulk
Partners (Bermuda) LTD. Consolidated Statements of Changes in Convertible Redeemable Preferred Stock and Stockholders' Equity
(Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
Convertible
Redeemable Preferred Stock
|
|
|
Common
Stock
|
|
|
Additional
Paid-in
|
|
|
Accumulated
|
|
|
Bulk
Partners (Bermuda) LTD.
|
|
|
Non-Controlling
|
|
|
Total
Stockholders'
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Deficit
|
|
|
Interest
|
|
|
Equity
(Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2013
|
|
|
89,113.888
|
|
|
$
|
103,236,399
|
|
|
|
87,329
|
|
|
$
|
87,329
|
|
|
$
|
-
|
|
|
$
|
(5,933,870
|
)
|
|
$
|
(5,846,541
|
)
|
|
$
|
20,483,964
|
|
|
$
|
14,637,423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued convertible redeemable preferred stock
dividends
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,303,748
|
)
|
|
|
(6,303,748
|
)
|
|
|
-
|
|
|
|
(6,303,748
|
)
|
|
Shareholder loan modification
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16,433,109
|
)
|
|
|
(16,433,109
|
)
|
|
Net income (loss)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,913,603
|
|
|
|
4,913,603
|
|
|
|
(334,563
|
)
|
|
|
4,579,040
|
|
|
Balance at September 30, 2014 (unaudited)
|
|
|
89,113.888
|
|
|
$
|
103,236,399
|
|
|
|
87,329.000
|
|
|
$
|
87,329
|
|
|
$
|
-
|
|
|
$
|
(7,324,015
|
)
|
|
$
|
(7,236,686
|
)
|
|
$
|
3,716,292
|
|
|
$
|
(3,520,394
|
)
|
The accompanying notes are
an integral part of these financial statements
Bulk Partners (Bermuda) LTD.
Consolidated Statements of Cash Flows
|
|
|
Nine months ended September 30,
|
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
4,579,040
|
|
|
$
|
11,336,005
|
|
|
Adjustments to reconcile net income to net cash
|
|
|
|
|
|
|
|
|
|
provided by operations:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense
|
|
|
8,415,174
|
|
|
|
7,060,351
|
|
|
Amortization of deferred financing costs
|
|
|
627,961
|
|
|
|
658,089
|
|
|
Unrealized loss (gain) on derivative instruments
|
|
|
2,123,246
|
|
|
|
(183,287
|
)
|
|
Provision for doubtful accounts
|
|
|
(385,010
|
)
|
|
|
-
|
|
|
Write off of unamortized financing costs
|
|
|
241,522
|
|
|
|
-
|
|
|
Amortization of discount on related party long-term debt
|
|
|
322,947
|
|
|
|
-
|
|
|
Imputed interest on related party long-term debt
|
|
|
-
|
|
|
|
793,222
|
|
|
Change in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
14,610,555
|
|
|
|
1,018,218
|
|
|
Other receivables
|
|
|
(154,022
|
)
|
|
|
(56,781
|
)
|
|
Bunker inventory
|
|
|
22,183
|
|
|
|
(4,490,193
|
)
|
|
Advance hire, prepaid expenses and other current assets
|
|
|
1,770,164
|
|
|
|
687,302
|
|
|
Other non-current assets
|
|
|
(236,223
|
)
|
|
|
-
|
|
|
Account payable, accrued expenses and other current liabilities
|
|
|
(4,570,546
|
)
|
|
|
2,343,788
|
|
|
Other current liabilities
|
|
|
(657,491
|
)
|
|
|
(381,011
|
)
|
|
Deferred revenue
|
|
|
(10,292,538
|
)
|
|
|
147,241
|
|
|
Net cash provided by operating activities
|
|
|
16,416,962
|
|
|
|
18,932,944
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activites
|
|
|
|
|
|
|
|
|
|
Purchase of vessels
|
|
|
(38,288,452
|
)
|
|
|
(75,588,933
|
)
|
|
Sale of vessels
|
|
|
19,331,787
|
|
|
|
-
|
|
|
Deposits on newbuildings in-process
|
|
|
(6,960,499
|
)
|
|
|
-
|
|
|
Drydocking costs
|
|
|
(3,639,677
|
)
|
|
|
-
|
|
|
Purchase of building and equipment
|
|
|
(558,376
|
)
|
|
|
(92,388
|
)
|
|
Net cash used in investing activities
|
|
|
(30,115,217
|
)
|
|
|
(75,681,321
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
Proceeds of related party debt
|
|
|
4,750,000
|
|
|
|
21,559,972
|
|
|
Payments on related party debt
|
|
|
(54,507
|
)
|
|
|
(203,582
|
)
|
|
Proceeds from long-term debt
|
|
|
35,500,000
|
|
|
|
32,205,000
|
|
|
Payments of financing and issuance costs
|
|
|
(366,800
|
)
|
|
|
(1,595,450
|
)
|
|
Payments on long-term debt
|
|
|
(24,800,657
|
)
|
|
|
(9,713,178
|
)
|
|
Proceeds from issuance of convertible redeemable preferred stock
|
|
|
-
|
|
|
|
18,199,180
|
|
|
Common stock dividends paid
|
|
|
(100,000
|
)
|
|
|
(100,000
|
)
|
|
Decrease (increase) in restricted cash
|
|
|
-
|
|
|
|
687,500
|
|
|
Distributions to non-controlling interest
|
|
|
-
|
|
|
|
(176,667
|
)
|
|
Net cash provided by financing activities
|
|
|
14,928,036
|
|
|
|
60,862,775
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
1,229,781
|
|
|
|
4,114,398
|
|
|
Cash and cash equivalents at beginning of period
|
|
|
18,927,927
|
|
|
|
19,695,675
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
20,157,708
|
|
|
$
|
23,810,073
|
|
The accompanying notes are an
integral part of these financial statements
|
Bulk Partners (Bermuda) LTD.
|
|
Consolidated Statements of Cash Flows (continued)
|
|
|
|
Nine months ended September 30,
|
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
Disclosure of noncash items
|
|
|
|
|
Dividends declared, not paid
|
|
$
|
6,303,622
|
|
|
$
|
5,769,050
|
|
|
Issuance of convertible redeemable preferred stock
|
|
|
|
|
|
|
|
|
|
as settlement of accrued dividends
|
|
$
|
-
|
|
|
$
|
213,152
|
|
|
Issuance of convertible redeemable preferred stock
|
|
|
|
|
|
|
|
|
|
in settlement of notes payable
|
|
$
|
-
|
|
|
$
|
1,385,503
|
|
|
Beneficial conversion feature of convertible redeemable
|
|
|
|
|
|
|
|
|
|
preferred stock at issuance date
|
|
$
|
-
|
|
|
$
|
5,748,464
|
|
|
Modification of Shareholder loan to on Demand
|
|
$
|
16,433,108
|
|
|
|
|
|
|
Imputed interest on related party long-term debt
|
|
$
|
322,947
|
|
|
$
|
793,222
|
|
|
Discount on related party long-term debt
|
|
$
|
-
|
|
|
$
|
17,080,063
|
|
|
Cash paid for interest
|
|
$
|
3,660,117
|
|
|
$
|
4,366,007
|
|
The accompanying notes are an integral part of these financial statements
Note 1.
Basis of Presentation and General Information
The accompanying consolidated financial statements include
the accounts of Bulk Partners (Bermuda) Ltd. (formerly known as Pangaea Logistics Solutions Ltd.) and its
wholly-owned subsidiaries (collectively, the ‘‘Company”, ‘‘we’’
or ‘‘our’’). The Company was incorporated in 2008 under the laws of Bermuda to pursue opportunities
in the international dry bulk shipping trade.
In July 2014, Bulk Nordic Odin Ltd. (“Bulk Odin”)
was organized under the laws of Bermuda for the purpose of owning a new Ice-Class 1A Panamax vessel under construction. Bulk Odin
is a wholly-owned subsidiary of Nordic Bulk Holding Company Ltd, a consolidated affiliate of the Company.
In September 2014, ownership of Long Wharf was transferred to
the Company. Long Wharf was previously owned by two of the Company’s Founders and was heavily dependent on the Company to
fund its operations; and as such, was consolidated pursuant to ASC 810-10.
The Company is engaged in the ocean transportation of dry bulk
cargoes worldwide through the ownership, chartering and operation of dry-bulk vessels. The Company’s fleet is comprised of
Panamax, Supramax and Handymax dry bulk carriers and the Company operates its business in one business segment.
As of September 30, 2014, the Company owned a fleet of 13 oceangoing
vessels comprised of three Ice Class 1A Panamax, four Panamax, four Supramax and two Handymax vessels with an average age of approximately
13.5 years.
The accompanying consolidated balance sheet as
of September 30, 2014, the consolidated statements of income for the three- and nine-month periods ended September 30, 2104
and 2013, changes in convertible redeemable preferred stock and stockholders’ equity (deficit) for the nine months
ended September 30, 2014, and cash flows for the nine months ended September 30, 2014 and 2013 are unaudited. The unaudited
interim consolidated financial statements have been prepared on the same basis as the annual consolidated
financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring
adjustments, necessary to present fairly the Company’s financial position and results of operations and cash flows for
the nine months ended September 30, 2014 and 2013. The financial data and the other information disclosed in these notes to
the condensed consolidated financial statements related to these nine month periods are unaudited. Certain information
and disclosures included in the annual consolidated financial statements have been omitted for the interim periods
disclosed pursuant to the rules and regulations of the SEC. The results of the nine months ended September 30, 2014 are not
necessarily indicative of the results to be expected for the year ending December 31, 2014 or for any other interim period or
other future year.
The
preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. The significant estimates and assumptions of the Company are the estimated salvage value used
in determining depreciation expense, the allowances for doubtful accounts, the fair value of convertible redeemable preferred stock,
and the discount on interest free loans
.
Advance
hire, prepaid expenses and other current assets were comprised of the following:
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
Advance hire
|
|
$
|
5,664,781
|
|
|
|
8,788,882
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
1,102,270
|
|
|
|
514,169
|
|
|
|
|
|
|
|
|
|
|
|
|
Margin account deposit
|
|
|
1,782,926
|
|
|
|
1,062,439
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current assets
|
|
|
2,366,115
|
|
|
|
2,378,635
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10,916,092
|
|
|
$
|
12,744,125
|
|
Accounts payable, accrued
expenses and other current liabilities were comprised of the following:
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
Accounts payable
|
|
$
|
35,789,564
|
|
|
|
39,201,642
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued expenses
|
|
|
3,427,481
|
|
|
|
3,839,531
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current liabilities
|
|
|
1,406,178
|
|
|
|
2,837,205
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
40,623,223
|
|
|
$
|
45,878,378
|
|
Note 2. New Accounting Pronouncements
In April 2014, the
FASB issued an update Accounting Standards Update for Reporting Discontinued Operations and Disclosures of Disposals of Components
of an Entity, Presentation of Financial Statements, and Property Plant and Equipment. Under this new guidance, only disposals that
represent a strategic shift that has (or will have) a major effect on the entity’s results and operations would qualify as
discontinued operations. In addition, the new guidance expands the disclosure requirements for disposals that meet the definition
of a discontinued operation and requires entities to disclose information about disposals of individually significant components
that do not meet the definition of discontinued operations. The new standard is effective for interim and annual reporting periods
in fiscal years that begin after December 15, 2014. The Company does not expect a material impact on the Company’s consolidated
financial statements as a result of the adoption of this standard.
In May 2014, the FASB issued an update Accounting Standards
Update for Revenue from Contracts with Customers. The core principle of the guidance 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. The new standard is effective for interim and annual reporting
periods in fiscal years that begin after December 15, 2016. The Company is evaluating the impact of the adoption of this guidance
to determine whether or not it has a material impact on the Company’s consolidated financial statements.
Note 3. Fixed Assets
Vessel and Vessel
Improvements
The cost of vessels and vessel
improvements, net of accumulated depreciation of $30,190,224 and $27,074,656 as of September 30, 2014 and December 31, 2013,
respectively, is as follows:
|
|
|
September 30, 2014
|
|
|
December 31, 2013
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
m/v BULK PANGAEA
|
|
$
|
21,207,761
|
|
|
$
|
20,879,837
|
|
|
m/v BULK DISCOVERY
|
|
|
11,870,654
|
|
|
|
13,583,813
|
|
|
m/v BULK CAJUN
|
|
|
6,053,450
|
|
|
|
6,566,227
|
|
|
m/v BULK PATRIOT
|
|
|
14,802,541
|
|
|
|
13,573,298
|
|
|
m/v BULK JULIANA
|
|
|
14,005,361
|
|
|
|
14,614,596
|
|
|
m/v NORDIC ODYSSEY
|
|
|
29,425,883
|
|
|
|
30,252,396
|
|
|
m/v NORDIC ORION
|
|
|
29,916,572
|
|
|
|
30,449,503
|
|
|
m/v BULK TRIDENT
|
|
|
16,569,270
|
|
|
|
16,273,240
|
|
|
m/v BULK BEOTHUK
|
|
|
13,280,825
|
|
|
|
13,732,350
|
|
|
m/v BULK NEWPORT
|
|
|
14,871,461
|
|
|
|
15,339,224
|
|
|
m/v BULK PROVIDENCE
|
|
|
-
|
|
|
|
10,114,377
|
|
|
m/v BULK LIBERTY
|
|
|
-
|
|
|
|
9,217,410
|
|
|
m/v NORDIC BOTHNIA
|
|
|
7,406,137
|
|
|
|
-
|
|
|
m/v NORDIC BARENTS
|
|
|
7,862,978
|
|
|
|
-
|
|
|
m/v NORDIC OSHIMA
(1)
|
|
|
33,709,143
|
|
|
|
-
|
|
|
|
|
|
220,982,036
|
|
|
|
194,596,271
|
|
|
Other fixed assets, net
|
|
|
4,197,226
|
|
|
|
2,557,618
|
|
|
|
|
$
|
225,179,262
|
|
|
$
|
197,153,889
|
|
(1)
The Company took delivery of the newbuilding m/v Nordic Oshima on September 25, 2014
At September 30. 2014, the aggregate
carrying value of
m/v Bulk Cajun
,
m/v Bulk Discovery
,
m/v Bulk Pangaea
and the
m/v Bulk Patriot
is approximately $53.9 million, which is higher than the aggregated estimated market value of $29.1 million. As such Bulk
Partners has reviewed each vessel group in the fleet and determined that the undiscounted sum of cash flows that will result
from the use and disposal of each of its vessel groups exceed the carrying value of the vessel groups. Therefore, no
impairment charge is required.
Note 4. Long-term Debt
Long-term debt consists of the following:
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bulk Pangaea Secured Note
(1)
|
|
$
|
3,468,750
|
|
|
$
|
4,509,375
|
|
|
Bulk Discovery Secured Note
(2)
|
|
|
4,136,000
|
|
|
|
5,204,000
|
|
|
Bulk Patriot Secured Note
(1)
|
|
|
5,375,000
|
|
|
|
7,212,500
|
|
|
Bulk Cajun Secured Note
(2)
|
|
|
1,137,500
|
|
|
|
1,990,625
|
|
|
Bulk Trident Secured Note
(1)
|
|
|
7,968,750
|
|
|
|
8,925,000
|
|
|
Bulk Juliana Secured Note
(1)
|
|
|
5,408,333
|
|
|
|
6,422,395
|
|
|
Bulk Nordic Odyssey, Bulk Nordic Orion and Bulk Nordic Oshima Loan Agreement
(3)
|
|
|
53,500,000
|
|
|
|
34,000,000
|
|
|
Bulk Atlantic Secured Note
(2)
|
|
|
7,980,000
|
|
|
|
8,250,000
|
|
|
Bulk Phoenix Secured Note
(1)
|
|
|
9,133,333
|
|
|
|
9,783,334
|
|
|
Term Loan Facility of USD 13,000,000 (Nordic Bulk Barents Ltd. and Nordic Bulk Bothnia Ltd.)
|
|
|
12,347,820
|
|
|
|
-
|
|
|
Long Wharf Construction to Term Loan
|
|
|
1,002,920
|
|
|
|
1,016,834
|
|
|
Bulk Providence Secured Note
(4)
|
|
|
-
|
|
|
|
7,760,000
|
|
|
Bulk Liberty Secured Note
(5)
|
|
|
-
|
|
|
|
5,685,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
111,458,406
|
|
|
|
100,759,063
|
|
|
Less: current portion
|
|
|
(18,686,730
|
)
|
|
|
(16,065,483
|
)
|
|
Less: unamortized bank fees
|
|
|
(1,051,730
|
)
|
|
|
(1,391,159
|
)
|
|
Secured long-term debt
|
|
$
|
91,719,946
|
|
|
$
|
83,302,421
|
|
|
|
(1)
|
The Bulk Pangaea Secured Note, the Bulk Patriot Secured Note, the Bulk Trident Secured Note, the
Bulk Juliana Secured Note, and the Bulk Phoenix Secured Note are cross-collateralized by the vessels m/v Bulk Juliana, m/v Bulk
Patriot, m/v Bulk Trident, m/v Bulk Pangaea, and m/v Bulk Newport and are guaranteed by the Company.
|
|
|
(2)
|
The Bulk Discovery Secured Note, the Bulk Cajun Secured Note, and the Bulk Atlantic Secured Note
are cross-collateralized by the vessels m/v Bulk Discovery, m/v Bulk Cajun, and m/v Bulk Beothuk and are guaranteed by the Company.
|
|
|
(3)
|
The Bulk Nordic Odyssey and the Bulk Nordic Orion Loan Agreement was amended on September 17, 2014,
to provide for an additional advance to finance the acquisition of m/v Nordic Oshima.
|
|
|
(4)
|
The Bulk Providence Secured Note was repaid in connection with the sale of the m/v Bulk Providence
on May 27, 2014.
|
|
|
(5)
|
The Bulk Liberty Secured Note was repaid in connection with the sale of the m/v Bulk Liberty on
July 4, 2014.
|
The Senior Secured Post-Delivery Term Loan Facility
On April 15, 2013, the Company,
through its wholly-owned subsidiaries,
Bulk Pangaea, Bulk Patriot, Bulk Juliana and Bulk Trident, entered into a $30.3 million
Senior Secured Post-Delivery Term Loan Facility (the “Post-Delivery Facility”) to refinance the Bulk Pangaea Secured
Term Loan Facility dated December 15, 2009, the Bulk Patriot Secured Term Loan Facility dated September 29, 2011, the Bulk Juliana
Secured Term Loan Facility dated April 18, 2012, and the Bulk Trident Secured Term Loan Facility dated August 28, 2012, the proceeds
of which were used to finance the acquisitions of the m/v Bulk Pangaea
,
the m/v Bulk Patriot
,
the m/v Bulk Juliana
and the m/v Bulk Trident
,
respectively. The Post-Delivery Facility was subsequently amended on May 16, 2013 by the First
Amendatory Agreement, to increase the facility by $8.0 million to finance the acquisition of the m/v Bulk Providence
and
again on August 28, 2013, by the Second Amendatory Facility, to increase the facility by $10.0 million to finance the acquisition
of the m/v Bulk Newport.
The Post-Delivery Facility contains
financial covenants that require the Company to maintain a minimum consolidated net worth, and requires the Company to maintain
a minimum EBITDA to fixed charges ratio tested annually, as defined. In addition, the facility contains other Company and vessel
related covenants that, among other things, restricts changes in management and ownership of the vessel, declaration of dividends,
further indebtedness and mortgaging of a vessel without the bank’s prior consent. It also requires minimum collateral maintenance,
which is tested at the discretion of the lender. As of September 30, 2014 and December 31, 2013, the Company was in compliance
with all required covenants.
The Post-Delivery Facility
is divided into six tranches, as follows:
Bulk
Pangaea Secured Note
Initial amount of $12,250,000,
entered into in December 2009, for the acquisition of m/v Bulk Pangaea. The interest rate was fixed at 3.96% in April 2013, in
conjunction with the post-delivery amendment discussed above. The amendment also modified the repayment schedule to 15 equal quarterly
payments of $346,875 ending in January 2017.
Bulk
Patriot Secured Note
Initial amount of $12,000,000,
entered into in September 2011, for the acquisition of the m/v Bulk Patriot. Loan requires repayment in 24 equal quarterly installments
of $500,000 beginning in January 2012. The interest rate was fixed at 4.01% in April 2013 in conjunction with the post-delivery
amendment discussed above.
Bulk
Trident Secured Note
Initial amount of $10,200,000,
entered into in April 2012, for the acquisition of the m/v Bulk Trident. Loan requires repayment in 24 equal quarterly installments
of $318,750 beginning in December 2012 with a balloon payment of $2,550,000 together with the last quarterly installment. Interest
was fixed at 4.29% in April 2013 in conjunction with the post-delivery amendment discussed above.
Bulk
Juliana Secured Note
Initial amount of $8,112,500,
entered into in April 2012, for the acquisition of the m/v Bulk Juliana. Loan requires repayment in 24 equal quarterly installments
of $338,021 beginning in October 2012. Interest was fixed at 4.38% in April 2013 in conjunction with the post-delivery amendment
discussed above.
Bulk
Phoenix Secured Note
Initial amount of $10,000,000,
entered into in May 2013, for the acquisition of m/v Bulk Newport. Loan requires repayment in 7 equal quarterly installments of
$216,667 and 16 equal quarterly installments of $416,667 with a balloon payment of $1,816,659 due in July 2019. Interest is fixed
at 5.09%.
Bulk
Providence Secured Note
Initial amount of $8,000,000,
entered into in May 2013, for the acquisition of m/v Bulk Providence. Loan requires repayment in 8 equal quarterly installments
of $120,000, 16 equal quarterly installments of $190,000 and a balloon payment of $4,000,000 due in July 2019. Interest is fixed
at 4.38%. The loan was repaid in conjunction with the sale of the m/v Bulk Providence on May 27, 2014.
Other secured debt:
Bulk Cajun Secured Note
Initial amount of $4,550,000,
entered into in October 2011, for the acquisition of the m/v Bulk Cajun. Loan requires repayment in 16 equal quarterly installments
of $284,375 beginning in January 2012 with a balloon payment of $2,000,000 together the last quarterly installment. Interest is
fixed at 6.51%.
Bulk Discovery Secured Note
Initial amount of $9,120,000,
entered into in February 2011, for the acquisition of the m/v Bulk Discovery. Loan requires repayment in 20 equal quarterly installments
of $356,000 beginning in September 2011 with a balloon payment of $2,000,000 together with the last quarterly installment. Interest
is fixed at a rate of 8.16%.
Bulk Atlantic Secured Note
Initial amount of $8,520,000,
entered into on February 18, 2013, for the acquisition of m/v Bulk Beothuk. Loan requires repayment in 8 equal quarterly installments
of $90,000 beginning in May 2013, 12 equal quarterly installments of $295,000 and a balloon payment of $4,260,000 due in February
2018. Interest is fixed at 6.46%.
Bulk
Liberty Secured Note
Initial amount of $5,685,000,
entered into on July 2013, for the acquisition of m/v Bulk Liberty. Loan requires repayment in 19 equal quarterly installments
of $149,605 beginning in January 2014 and a balloon payment of $2,842,505 due in February 2018. Interest is fixed at 7.06%. The
loan was repaid in connection with the sale of the m/v Bulk Liberty on July 4, 2014.
The other secured debt, as outlined
above, contains collateral maintenance ratio clauses. If the Company encountered a change in financial condition which, in the
opinion of the lender, is likely to affect the Company’s ability to perform its obligations under the loan facility, the
Company’s credit agreement could be cancelled at the lender’s sole discretion. The lender could then elect to declare
the indebtedness, together with accrued interest and other fees, to be immediately due and payable, and proceed against any collateral
securing such indebtedness. As of September 30, 2014 and December 31, 2013, the Company was in compliance with all required covenants.
Bulk Nordic Odyssey and Bulk
Nordic Orion Loan Agreement
Initial amount of $40,000,000,
entered into on August 6, 2012, for the acquisition of the m/v Nordic Odyssey and the m/v Nordic Orion. The agreement requires
repayment in 20 quarterly installments of $1,000,000 beginning in October 2012, with an additional $1,000,000 installment payable
on the 5th, 9th and 17th installment dates and a balloon payment of $17,000,000 due with the final installment. Interest is floating
at LIBOR plus 3.25% (3.48% at September 30, 2014 and 2013). The loan is secured by first preferred mortgages on the m/v Nordic
Orion and the m/v Nordic Odyssey, the assignment of the earnings, insurances and requisite compensation of the two entities, and
by guarantees of their shareholders. The Agreement contains one financial covenant that requires the Company to maintain minimum
liquidity and a collateral maintenance ratio clause which requires the aggregate fair market value of the vessel plus the net realizable
value of any additional collateral previously provided to remain above defined ratios. As of September 30, 2014 and December 31,
2013, the Company was in compliance with this covenant.
The loan was amended on September
17, 2014 in conjunction with the delivery of the m/v Nordic Oshima (discussed below), whereby the margin was reduced to 3.00%.
Bulk Nordic Odyssey Ltd., Bulk
Nordic Orion Ltd. And Bulk Nordic Oshima Ltd. – Dated September 17, 2014 Amended and Restated Loan Agreement
Entered into on September 17,
2014, to finance the purchase of the m/v Nordic Oshima, which was delivered to the Company on September 25, 2014. The amended agreement
advanced $22,500,000 and requires repayment of this advance in 28 equal quarterly installments of $375,000 and a balloon payment
of $12,000,000 due with the final installment. Interest on the advance related to m/v Nordic Oshima is floating at LIBOR plus 2.25%
(2.48% at September 30, 2014). The amended loan is secured by first preferred mortgages on the m/v Nordic Odyssey, the m/v Nordic
Orion and m/v Nordic Oshima, the assignment of earnings, insurances and requisite compensation of the three entities, and by guarantees
of their shareholders. The amended agreement contains one financial covenant that requires the Company to maintain minimum liquidity
and a collateral maintenance ratio clause which requires the aggregate fair market value of the vessel plus the net realizable
value of any additional collateral provided to remain above defined ratios. As of September 30, 2014 and December 31, 2013, the
Company was in compliance with this covenant.
Term Loan Facility
of USD 13,000,000 (Nordic Bulk Barents Ltd. and Nordic Bulk Bothnia Ltd.)
Nordic Bulk Barents and Nordic
Bulk Bothnia entered into a secured Term Loan Facility of $13,000,000 in two tranches of $6,500,000 which were drawn in conjunction
with the delivery of the m/v Nordic Bothnia on January 23, 2014 and the m/v Nordic Barents on March 7, 2014. The loan is secured
by mortgages on these two vessels.
The facility bears interest
at LIBOR plus 2.5% (2.73% at September 30, 2014). The loan requires repayment in 22 equal quarterly installments of $163,045 (per
borrower) beginning in September 2014, one installment of $163,010 (per borrower) and a balloon payment of $2,750,000 (per borrower)
due in December 2019. In addition, any cash in excess of $750,000 per borrower on any repayment date shall be applied toward prepayment
of the relevant loan in inverse order, so the balloon payment is prepaid first. The agreement also contains a profit split in respect
of the proceeds from the sale of either vessel, a minimum value clause of not less than 100% of the indebtedness and a minimum
liquidity clause. As of September 30, 2014 and December 31, 2013, the Company was in compliance with all required covenants.
Long Wharf Construction to Term
Loan
Initial
amount of $1,048,000 entered into in January 2011. The loan is payable monthly based on a 25 year amortization schedule with a
final balloon payment of all unpaid principal and accrued interest due January 2021. Interest is floating at LIBOR plus 2.85%.
The Company entered into an interest rate swap which matures January 2021 and fixes the interest rate at 6.63%. The loan is collateralized
by all real estate located at 109 Long Wharf, Newport, RI, as well as personal guarantees from the Founders and a corporate guarantee
of the Company
.
The loan contains one financial covenant that requires the Company to maintain a minimum debt service coverage ratio. As of September
30, 2014 and December 31, 2013, the Company was in compliance with this covenant.
Line of Credit
During the year ended
December 2012, the Company entered into a revolving line of credit with a maximum capacity of $3,000,000. Borrowings under of
the line of credit are due upon expiration of the line of credit. The expiration date was extended to November 19, 2014 from
its original expiration date of November 19, 2013. The line of credit contains certain covenants including a
liquidity covenant that may result in the acceleration
of the payment of the borrowings. Borrowings under the
line are secured by personal guarantees of the Founders, as well as collateralized against a personal account of one of the
Founders held at the lending bank. Interest is payable at Prime + 1%. As of September 30, 2014 the Company was in compliance
with all required covenants.
The future minimum annual payments (excluding unamortized
bank fees) under the debt agreements are as follows:
|
|
|
Years ending September 30,
|
|
|
|
|
|
|
|
2015
|
|
$
|
18,686,730
|
|
|
2016
|
|
|
19,323,468
|
|
|
2017
|
|
|
30,994,082
|
|
|
2018
|
|
|
11,971,926
|
|
|
2019
|
|
|
8,765,181
|
|
|
Thereafter
|
|
|
21,717,019
|
|
|
|
|
$
|
111,458,406
|
|
Note 5. Derivative Instruments
and Fair Value Measurements
Interest-Rate Swaps
From time to time, the Company
enters into interest rate swap agreements to mitigate the risk of interest rate fluctuations on its variable rate debt. At September
30, 2014 and December 31, 2013, the Company was party to one interest rate swap, which was entered into in February 2011,
as required by the 109 Long Wharf Construction Loan agreement. Under the terms of the swap agreement, the interest rate on this
note is fixed at 6.63%.
The Company did not elect to
designate the swap as a hedge at inception, pursuant to ASC 815,
Derivatives and Hedging.
Accordingly, changes in the fair
value are recorded in current earnings in the accompanying consolidated statements of income.
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
Interest rate swap agreement on:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long Wharf Construction to Term Loan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional amount
|
|
$
|
1,001,329
|
|
|
$
|
1,032,000
|
|
|
Effective dates
|
|
|
2/1/11-1/24/21
|
|
|
|
2/1/11-1/24/21
|
|
|
Fair value
|
|
|
(112,124
|
)
|
|
|
(94,882
|
)
|
The fair
value of the interest rate swap agreements at September 30, 2014 and December 31, 2013 were liabilities of approximately $112,000
and $95,000, which are included in other current liabilities on the consolidated balance sheets based on the instrument’s
maturity date. The aggregate change in the fair value of the interest rate swap agreements for the nine months ended September
30, 2014 was a loss of approximately $17,000,, which is reflected in the unrealized loss on derivative instruments in the accompanying
consolidated statements of income. No mark to market adjustments were made during the three months ended September 30, 2014 or
for interim periods in 2013.
Forward Freight
Agreements
The Company
assesses risk associated with fluctuating future freight rates and, when appropriate, actively hedges identified economic risk
with appropriate derivative instruments, specifically forward freight agreements (FFAs). Such economic hedges do not always qualify
for hedge accounting under ASC 815 and as such, the usage of such derivatives can lead to fluctuations in the Company’s reported
results from operations on a period-to-period basis. During the nine months ended September 30, 2014 and the year ended December
31, 2013, the Company entered into various FFAs that did not qualify for hedge accounting. The aggregate fair values of the FFAs
at September 30, 2014 was a liability of approximately $225,000 which is included in other current liabilities The aggregate fair
values of the FFAs at December 31, 2013 was an asset of approximately $944,000, which is included in advance hire, prepaid
expenses and other current assets. The change in the aggregate fair value of the FFAs during the three months ended September 30,
2014 and 2013 resulted in gains of approximately $764,000 and $963,000, respectively, which are included in unrealized loss on
derivative instruments in the accompanying consolidated statements of income. The change in the aggregate fair value of the FFAs
during the nine months ended September 30, 2014 and 2013 resulted in losses of approximately $1,169,000 and gains of approximately
$125,000, respectively, which are included in unrealized loss on derivative instruments in the accompanying consolidated statements
of income.
Fuel Swap Contracts
The Company
continuously monitors the market volatility associated with bunker prices and seeks to reduce the risk of such volatility through
a bunker hedging program. During the months ended September 30, 2014 and the year ended December 31, 2013, the Company entered
into various fuel swap contracts that were not designated for hedge accounting. The aggregate fair value of these fuel swaps at
September 30, 2014 and December 31, 2013 are liabilities of approximately $1,146,000 and $209,500, respectively, which are
included in other current liabilities on the consolidated balance sheets. The change in the aggregate fair value of the fuel swaps
during the three months ended September 30, 2014 and 2013 was a loss of approximately $1,315,000 and a gain of approximately $917,000,
which are included in unrealized loss on derivative instruments in the accompanying consolidated statements of income. The change
in the aggregate fair value of the fuel swaps during the nine months ended September 30, 2014 and 2013 was a loss of approximately
$937,000 and a gain of $84,000, which are included in unrealized loss on derivative instruments in the accompanying consolidated
statements of income.
The three levels of
the fair value hierarchy established by ASC 820, in order of priority are as follows:
Level 1 – Quoted prices in
active markets for identical assets or liabilities. Our Level 1 non-derivatives include cash, money-market accounts, restricted
cash accounts and investment.
Level 2 – Quoted prices for
similar assets and liabilities in active markets or inputs that are observable. Our Level 2 non-derivatives include our term loan
account.
Level 3 – Inputs that are
unobservable (for example cash flow modeling inputs based on assumptions).
The following
table summarizes assets and liabilities measured at fair value on a recurring basis at September 30, 2014 and December 31, 2013:
|
|
|
Balance at September 30, 2014
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Margin accounts
|
|
$
|
1,782,926
|
|
|
$
|
1,782,926
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Interest rate swaps
|
|
|
(112,124
|
)
|
|
|
-
|
|
|
|
(112,124
|
)
|
|
|
-
|
|
|
Forward freight agreements
|
|
|
(225,355
|
)
|
|
|
-
|
|
|
|
(225,355
|
)
|
|
|
-
|
|
|
Fuel swap contracts
|
|
|
(1,146,230
|
)
|
|
|
-
|
|
|
|
(1,146,230
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2013
|
|
|
|
Level 1
|
|
|
|
Level 2
|
|
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Margin accounts
|
|
$
|
1,062,439
|
|
|
$
|
1,062,439
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Interest rate swaps
|
|
|
(94,882
|
)
|
|
|
-
|
|
|
|
(94,882
|
)
|
|
|
-
|
|
|
Forward freight agreements
|
|
|
944,225
|
|
|
|
-
|
|
|
|
944,225
|
|
|
|
-
|
|
|
Fuel swap contracts
|
|
|
(209,506
|
)
|
|
|
-
|
|
|
|
(209,506
|
)
|
|
|
-
|
|
The
estimated fair values of the Company’s interest rate swap instruments, forward freight agreements and fuel swap contracts
are based on market prices obtained from an independent third-party valuation specialist. Such quotes represent the estimated
amounts the Company would receive to terminate the contracts.
Note 6. Commitments and Contingencies
Legal Proceedings
The
Company is subject to certain asserted claims arising in the ordinary course of business. The Company intends to vigorously assert
its rights and defend itself in any litigation that may arise from such claims. While the ultimate outcome of these matters could
affect the results of operations of any one year, and while there can be no assurance with respect thereto, management believes
that after final disposition, any financial impact to the Company would not be material to its consolidated financial position,
results of operations, or cash flows.
Note
7. Related Party Transactions
|
|
|
December 31,
|
|
|
|
|
|
September 30,
|
|
|
|
|
2013
|
|
|
Activity
|
|
|
2014
|
|
|
Included in accounts payable and accrued expenses
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
on the consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
|
To Founders
|
|
$
|
203,050
|
|
|
$
|
(203,050
|
)
|
|
$
|
-
|
|
|
|
|
$
|
203,050
|
|
|
$
|
(203,050
|
)
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in current related party debt on the consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
Loan payable – 2011 Founders Note
|
|
$
|
4,325,000
|
|
|
|
-
|
|
|
$
|
4,325,000
|
|
|
Interest payable – 2011 Founders Note
|
|
|
296,248
|
|
|
|
(54,507)
|
|
i.
|
|
241,741
|
|
|
Loan payable – BVH shareholder (STST)
|
|
|
2,995,000
|
|
|
|
-
|
|
|
|
2,995,000
|
|
|
Loan payable to NBHC shareholder (STST)
|
|
|
-
|
|
|
|
19,405,000
|
|
ii.
|
|
19,405,000
|
|
|
Loan payable to NBHC shareholder (ASO2020)
|
|
|
-
|
|
|
|
19,404,972
|
|
ii.
|
|
19,404,972
|
|
|
|
|
$
|
7,616,248
|
|
|
$
|
38,755,465
|
|
|
$
|
46,371,713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in related party long-term debt on the consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan payable to NBHC shareholder (STST)
|
|
$
|
17,030,000
|
|
|
|
$ (17,030,000)
|
|
iii.
|
$
|
-
|
|
|
Loan payable to NBHC shareholder (ASO2020)
|
|
|
17,029,972
|
|
|
|
(17,029,972)
|
|
iii.
|
|
-
|
|
|
Less unamortized discount
|
|
|
(16,756,054
|
)
|
|
|
16,756,054
|
|
iv.
|
|
-
|
|
|
Total related party long-term debt
|
|
$
|
17,303,918
|
|
|
$
|
(17,303,918
|
)
|
|
$
|
-
|
|
|
|
ii.
|
Loans payable to NBHC shareholders STST and ASO2020,
including additional borrowing on May 28, 2014. On April 1, 2014, the loans were amended to remove the maturity date and have
therefore been reclassified as current.
|
|
|
iii.
|
Balance at December 31, 2013 has been reclassified as
current
|
|
|
iv.
|
Unamortized discount at December 31, 2013 was reduced
by imputed interest of $322,946 which was recorded for the three months ended March 31, 2014, prior to the amendment of the loan.
The net unamortized discount on April 1, 2014 of $16,433,109 has been recorded as a reduction of noncontrolling interest due to
the debt modification.
|
BVH entered into an
agreement for the construction of two new ultramax newbuildings in 2013. STST provided a loan of $2,995,000 to make deposits on
the contracts. The loan is payable on demand and does not bear interest.
In connection with
the acquisition of m/v Nordic Orion and m/v Nordic Odyssey in 2012, STST provided two $8,050,000 subordinated notes (one designated
for each vessel) which were payable on demand and do not bear interest. During the year ended December 31, 2012, aggregate repayments
of $3,600,000 were made against these notes. The Company restructured its existing related party loans payable to STST at December
31, 2012 to modify the repayment date to January 9, 2023, which was accounted for as a modification under ASC 470-50. In January
2013, the Company entered into a Share Transfer Restructuring Agreement through which the shareholders of Odyssey and Orion transferred
their shares of those entities and their zero interest subordinated shareholder loans to these entities, to NBHC in exchange for
the shares of NBHC.
Also during 2013, NBHC
entered into contracts to purchase four Ice-Class 1A newbuildings and paid deposits of $26,100,000. STST provided an additional
$4,530,000, thereby increasing its loan to $17,030,000. The newest shareholder, ASO2020, also provided $17,030,000 in loans and
acquired one-third of the common stock of NBHC for approximately $13,000. On April 1, 2014, the loans were amended to remove the
maturity date. The unamortized discount at April 1, 2014 of $16,433,108 has been recorded as a reduction to noncontrolling interest
because the original discount was recorded as an increase in noncontrolling interest. On May 28, 2014, each of the shareholders
provided additional loans of $1,187,500 to finance the second installment on the first vessel delivery. On August 7, 2014, each
of the shareholders provided additional loans of $1,187,500 to finance the third installment on the first vessel delivery. These
loans are also payable on demand and do not bear interest.
On October 1,
2011, the Company entered into a $10,000,000 loan agreement with the Founders, which was payable on demand at the request of the
lenders (the 2011 Founders Note). The note bears interest at a rate of 5%. On January 1, 2012 the Company issued 5,675 shares of
convertible redeemable preferred stock to the Founders, representing a partial repayment of the note, the balance of which was
$4,325,000 at September 30, 2014 and December 31, 2013.
Under the terms of
a technical management agreement between the Company and Seamar Management S.A. (Seamar), an equity method investee, Seamar is
responsible for the day-to-day operations for all of the Company’s owned vessels. During the three-month periods ended September
30, 2014 and 2013, the Company incurred technical management fees of approximately $620,000 and $430,000, respectively under this
arrangement. During the nine-month periods ended September 30, 2014 and 2013, the Company incurred technical management fees of
approximately $1,759,000 and $1,312,000, respectively under this arrangement. These fees are included in vessel operating expenses
in the consolidated statements of income.
Note 8.
Loss Per Common Share
|
|
|
For the three months ended September 30,
|
|
|
For the nine months ended September 30,
|
|
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
|
Numerator:
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
Net (loss) income attributable to Pangaea
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Logistics Solutions Ltd.
|
|
$
|
(2,909,607
|
)
|
|
$
|
5,869,400
|
|
|
$
|
4,913,603
|
|
|
$
|
10,515,682
|
|
|
Less: dividends declared on convertible
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
redeemable preferred stock
|
|
|
(2,739,068
|
)
|
|
|
(2,941,600
|
)
|
|
|
(6,303,748
|
)
|
|
|
(5,769,050
|
)
|
|
Less: beneficial conversion
|
|
|
-
|
|
|
|
(2,386,745
|
)
|
|
|
-
|
|
|
|
(5,748,464
|
)
|
|
Less: settlement of accrued dividends
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(45,843
|
)
|
|
Less: settlement of notes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(324,484
|
)
|
|
Less: fair value adjustment
|
|
|
-
|
|
|
|
(2,395,255
|
)
|
|
|
-
|
|
|
|
(5,409,840
|
)
|
|
Total loss allocated to common stock
|
|
$
|
(5,648,675
|
)
|
|
$
|
(1,854,200
|
)
|
|
$
|
(1,390,145
|
)
|
|
$
|
(6,781,999
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of shares of
|
|
|
87,329
|
|
|
|
87,329
|
|
|
|
87,329
|
|
|
|
87,329
|
|
|
common stock outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS - common stock
|
|
$
|
(64.68
|
)
|
|
$
|
(7.77
|
)
|
|
$
|
(15.92
|
)
|
|
$
|
(63.30
|
)
|
|
Diluted EPS - common stock
|
|
$
|
(64.68
|
)
|
|
$
|
(7.77
|
)
|
|
$
|
(15.92
|
)
|
|
$
|
(63.30
|
)
|
(i) The fair
value of the beneficial conversion adjustment to net income during the nine months ended September 30, 2013 for purposes of
calculating EPS is $5,748,464. However, retained earnings was reduced by $3,823,325
Note 9. Subsequent Events and Reverse
Merger
The Company evaluated
subsequent events or transactions through November 14, 2014, which is the date these financial statements were issued.
The Company
entered into an Agreement and Plan of Reorganization (the “Merger Agreement”), dated as of April 30, 2014, with
Quartet Holdco Ltd., now known as Pangaea Logistics Solutions, Ltd. (the “Registrant”), Quartet Merger Corp.
(“Quartet”), Quartet Merger Sub Ltd. (“Merger Sub”), and the security holders of the Company
(“Signing Holders”). The Mergers (as defined below) was consummated on October 1, 2014 pursuant to the
Merger Agreement, where (i) Merger Sub merged with and into the Company, with the Company surviving as a wholly-owned
subsidiary of the Registrant (the “Transaction Merger”) and (ii) Quartet merging with and into the Registrant,
with the Registrant surviving as the publicly-traded entity (the “Redomestication Merger” together with the
Transaction Merger, the “Mergers”). In the transaction merger, holders of 8,840,014 shares of Quartet
common stock sold in its initial public offering (“public shares”) exercised their rights to convert those shares
to cash at a conversion price of approximately $10.20 per share, or an aggregate of approximately $90,139,132. As a result of
the number of public shares converted into cash, the Quartet initial stockholders forfeited 1,739,062 shares
(the “Forfeited Shares”) of Quartet common stock immediately prior to the Closing. Upon the Closing, the
former security holders of Quartet were issued an aggregate of 3,130,861 common shares of the Registrant, including 1,026,812
common shares of the Registrant issued in exchange for Quartet’s then outstanding rights. Per the terms of the
convertible redeemable preferred stock of the Company, upon the Closing, 105,670 convertible redeemable preferred shares were
converted into 115,352 common shares of the Company. The Signing Holders received 29,411,765 shares of the Registrant
in exchange for their the Company securities and an additional 1,739,062 Forfeited Shares, or 31,150,827 shares in
aggregate. Further, in connection with the mergers, Quartet entered into agreements with certain third parties pursuant
to which such parties agreed to accept payment for certain amounts owed to them in shares of the Registrant, resulting in the
issuance of an aggregate of 291,953 common shares. Additionally, 420,000 unit purchase options of Quartet were
converted into 123,356 common shares of the Registrant. These shares of 415,309 in total, are denoted as
“Advisors to the Mergers” shares below. As a result of the mergers, as of November 14, 2014 there are
34,696,997 common shares of the Registrant issued and outstanding where the Signing Holders own approximately 89.8% of the
Registrant shares, the Quartet stockholders own approximately 9.0% of the Registrant shares, and the Advisors to the Mergers
own approximately 1.2% of the Registrant shares.
In
November, 2014, Bulkinvest, Ltd., an entity owned by the Company’s founders, agreed to lend the Company an aggregate of
$5.0 million. The note, which bears interest of 5% per annum, is
due on January 1, 2016.
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
Bulk Partners (Bermuda) Ltd.
We have audited the accompanying consolidated
balance sheets of Bulk Partners (Bermuda) Ltd. and subsidiaries (the “Company”) as of December 31, 2013 and 2012, and
the related consolidated statements of income, changes in convertible redeemable preferred stock and stockholders’ equity,
and cash flows for each of the two years in the period ended December 31, 2013. These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We did not audit the financial statements of Nordic Bulk Holding ApS and its subsidiary, a majority-owned subsidiary, which statements
reflect total assets constituting $21,515,471 and $16,908,948, respectively, of consolidated total assets as of December 31, 2013
and 2012, and total revenues of $129,715,144 and $141,508,024, respectively, of consolidated total revenues for the years then
ended. Those statements were audited by other auditors, whose report has been furnished to us, and our opinion, insofar as it relates
to the amounts included for Nordic Bulk Holding ApS and its subsidiary, is based solely on the report of the other auditors.
We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not
engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration
of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits and the report of the other auditors
provide a reasonable basis for our opinion.
In our opinion, based on our audits and
the report of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects,
the financial position of Bulk Partners (Bermuda) Ltd. and subsidiaries as of December 31, 2013 and 2012, and the results of their
operations and their cash flows for each of the two years in the period ended December 31, 2013 in conformity with accounting principles
generally accepted in the United States of America.
/s/ GRANT THORNTON LLP
Boston, Massachusetts
May 5, 2014
Report of Independent Registered Public Accounting Firm
Board of Directors and Shareholders
Nordic Bulk Holding ApS
We have audited the accompanying consolidated
balance sheets of Nordic Bulk Holding ApS (a Danish corporation) and its subsidiary (the “Company”) as of December
31, 2013 and 2012, and the related consolidated statements of income, changes in shareholders’ equity, and cash flows for
each of the two years in the period ended December 31, 2012. These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over
financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated
financial statements referred to above present fairly, in all material respects, the financial position of Nordic Bulk Holding
ApS and its subsidiary as of December 31, 2013 and 2012, and the results of their operations and their cash flows for each of the
two years in the period ended December 31, 2012 in conformity with accounting principles generally accepted in the United States
of America.
/s/ PricewaterhouseCoopers
Statsautoriseret Revisionspartnerselskab
Copenhagen, Denmark
April 18, 2014
|
Bulk Partners (Bermuda) Ltd.
|
|
Consolidated Balance Sheets
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
18,927,927
|
|
|
$
|
19,695,675
|
|
|
Restricted cash
|
|
|
500,000
|
|
|
|
687,500
|
|
|
Accounts receivable (net of allowance of $1,662,593 and $1,351,590 at December 31, 2013 and 2012, respectively)
|
|
|
44,688,470
|
|
|
|
29,610,068
|
|
|
Other receivables
|
|
|
133,646
|
|
|
|
418,870
|
|
|
Bunker inventory
|
|
|
21,072,192
|
|
|
|
13,856,452
|
|
|
Advance hire, prepaid expenses and other current assets
|
|
|
12,744,125
|
|
|
|
9,774,424
|
|
|
Total current assets
|
|
|
98,066,360
|
|
|
|
74,042,989
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed assets, net
|
|
|
197,153,889
|
|
|
|
156,188,373
|
|
|
Deposits on newbuildings in-process
|
|
|
31,900,000
|
|
|
|
-
|
|
|
Other noncurrent assets
|
|
|
3,253,022
|
|
|
|
905,744
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
330,373,271
|
|
|
$
|
231,137,106
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities, convertible redeemable preferred stock and stockholders' equity
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
44,881,388
|
|
|
$
|
27,953,763
|
|
|
Related party debt
|
|
|
7,616,248
|
|
|
|
20,395,323
|
|
|
Deferred revenue
|
|
|
16,155,498
|
|
|
|
13,422,447
|
|
|
Current portion of secured long-term debt
|
|
|
16,065,483
|
|
|
|
13,390,382
|
|
|
Line of credit
|
|
|
3,000,000
|
|
|
|
3,000,000
|
|
|
Dividends payable
|
|
|
23,177,503
|
|
|
|
9,840,005
|
|
|
Other current liablities
|
|
|
996,990
|
|
|
|
1,355,859
|
|
|
Total current liabilties
|
|
|
111,893,110
|
|
|
|
89,357,779
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured long-term debt, net
|
|
|
83,302,421
|
|
|
|
68,485,753
|
|
|
Related party long-term debt, net
|
|
|
17,303,918
|
|
|
|
-
|
|
|
Other non-current liabilties
|
|
|
-
|
|
|
|
181,382
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible redeemable preferred stock, net of issuance costs ($1,000 par value, 112,500 shares authorized, 89,114 and
64,047 shares issued and outstanding at December 31, 2013 and December 31, 2012, respectively)
|
|
|
103,236,399
|
|
|
|
69,450,675
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity:
|
|
|
|
|
|
|
|
|
|
Common stock ($1.00 par value, 199,829 shares authorized 87,329 shares issued and outstanding at December 31, 2013 and December 31, 2012, respectively
|
|
|
87,329
|
|
|
|
87,329
|
|
|
Additional paid-in capital
|
|
|
-
|
|
|
|
197,035
|
|
|
Accumulated deficit
|
|
|
(5,933,870
|
)
|
|
|
174,385
|
|
|
Total Bulk Partners (Bermuda) Ltd. (deficit) equity
|
|
|
(5,846,541
|
)
|
|
|
458,749
|
|
|
Non-controlling interests
|
|
|
20,483,964
|
|
|
|
3,202,768
|
|
|
Total stockholders' equity
|
|
|
14,637,423
|
|
|
|
3,661,517
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities, convertible reemable preferred stock and stockholders' equity
|
|
$
|
330,373,271
|
|
|
$
|
231,137,106
|
|
The accompanying notes are an integral part of these financial
statements.
|
Bulk Partners (Bermuda) Ltd.
|
|
Consolidated Statements of Income
|
|
|
|
|
|
Years ended December 31,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Voyage revenue
|
|
$
|
336,160,290
|
|
|
$
|
342,085,254
|
|
|
Charter revenue
|
|
|
56,310,682
|
|
|
|
44,972,326
|
|
|
|
|
|
392,470,972
|
|
|
|
387,057,580
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Voyage expense
|
|
|
196,035,698
|
|
|
|
200,867,181
|
|
|
Charter expense
|
|
|
130,879,639
|
|
|
|
133,524,256
|
|
|
Vessel operating expenses
|
|
|
22,958,049
|
|
|
|
14,814,402
|
|
|
General and administrative
|
|
|
11,599,121
|
|
|
|
11,027,875
|
|
|
Depreciation and amortization
|
|
|
9,614,859
|
|
|
|
7,179,943
|
|
|
Total expenses
|
|
|
371,087,366
|
|
|
|
367,413,657
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
21,383,606
|
|
|
|
19,643,923
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(5,487,246
|
)
|
|
|
(3,280,755
|
)
|
|
Interest expense related party debt
|
|
|
(411,784
|
)
|
|
|
(1,255,776
|
)
|
|
Imputed interest on related party long-term debt
|
|
|
(1,117,231
|
)
|
|
|
-
|
|
|
Unrealized gain on derivative instruments
|
|
|
1,101,239
|
|
|
|
362,176
|
|
|
Other income
|
|
|
35,713
|
|
|
|
511,210
|
|
|
Income (loss) from unconsolidated entity
|
|
|
10,224
|
|
|
|
(67,912
|
)
|
|
Total other expense, net
|
|
|
(5,869,085
|
)
|
|
|
(3,731,057
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
15,514,521
|
|
|
|
15,912,866
|
|
|
Income attributable to non-controlling interests
|
|
|
(62,152
|
)
|
|
|
(2,058,987
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Bulk Partners (Bermuda) Ltd.
|
|
$
|
15,452,369
|
|
|
$
|
13,853,879
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share (Note 3):
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(100.64
|
)
|
|
$
|
(30.77
|
)
|
|
Diluted
|
|
$
|
(100.64
|
)
|
|
$
|
(30.77
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used to compute earnings per common share (Note 3)
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
87,329
|
|
|
|
87,329
|
|
The accompanying notes are an integral part of these financial
statements.
|
Bulk Partners (Bermuda) Ltd.
|
|
Consolidated Statements of Changes in Convertible Redeemable Preferred Stock and Stockholders' Equity
|
|
|
|
|
|
Convertible Redeemable Preferred
Stock
|
|
|
Common Stock
|
|
|
Additional Paid-
in
|
|
|
(Accumulated
Deficit) Retained
|
|
|
Total Bulk
Partners
(Bermuda)
|
|
|
Non-Controlling
|
|
|
Total
Stockholders'
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Earnings
|
|
|
Equity
(Deficit)
|
|
|
Interests
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2011
|
|
|
25,630.513
|
|
|
$
|
24,893,865
|
|
|
|
87,329
|
|
|
$
|
87,329
|
|
|
$
|
512,671
|
|
|
$
|
7,706,399
|
|
|
$
|
8,306,399
|
|
|
$
|
1,473,695
|
|
|
$
|
9,780,094
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of convertible redeemable
preferred stock as settlement of dividend on common stock
|
|
|
6,000.000
|
|
|
|
6,000,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,000,000
|
)
|
|
|
(6,000,000
|
)
|
|
|
-
|
|
|
|
(6,000,000
|
)
|
|
Recognized beneficial conversion
feature of convertible redeemable preferred stock at issuance date
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,584,272
|
|
|
|
(4,584,272
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
-
|
|
|
Modification of conversion
price of convertible redeemable preferred stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,372,149
|
|
|
|
(1,372,149
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Issuance of convertible redeemable
preferred stock for cash, net of issuance costs of $256,450
|
|
|
20,564.000
|
|
|
|
25,518,875
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(5,211,325
|
)
|
|
|
(5,211,325
|
)
|
|
|
-
|
|
|
|
(5,211,325
|
)
|
|
Issuance of convertible redeemable
preferred stock as settlement of accrued dividends
|
|
|
6,177.885
|
|
|
|
7,362,935
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,185,050
|
)
|
|
|
(1,185,050
|
)
|
|
|
-
|
|
|
|
(1,185,050
|
)
|
|
Issuance of convertible redeemable
preferred stock as repayment of notes payable
|
|
|
5,675.000
|
|
|
|
5,675,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Dividend on common stock and
participating preferred dividend declared
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
(6,272,057
|
)
|
|
|
(2,827,943
|
)
|
|
|
(9,100,000
|
)
|
|
|
|
|
|
|
(9,100,000
|
)
|
|
Accrued convertible redeemable
preferred stock dividends
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(167,305
|
)
|
|
|
(167,305
|
)
|
|
|
-
|
|
|
|
(167,305
|
)
|
|
Acquisition of non-controlling interest
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
20,000
|
|
|
|
20,000
|
|
|
Deconsolidation of non-controlling interest
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(37,849
|
)
|
|
|
(37,849
|
)
|
|
|
(349,914
|
)
|
|
|
(387,763
|
)
|
|
Net income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
13,853,879
|
|
|
|
13,853,879
|
|
|
|
2,058,987
|
|
|
|
15,912,866
|
|
|
Balance at December 31,
2012
|
|
|
64,047.398
|
|
|
$
|
69,450,675
|
|
|
|
87,329
|
|
|
$
|
87,329
|
|
|
$
|
197,035
|
|
|
$
|
174,385
|
|
|
$
|
458,749
|
|
|
$
|
3,202,768
|
|
|
$
|
3,661,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognized beneficial conversion
feature of convertible redeemable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
preferred stock at issuance
date
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,927,423
|
|
|
|
(4,927,423
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Issuance of convertible redeemable
preferred stock as settlement of accrued dividends
|
|
|
167.309
|
|
|
|
213,152
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(45,843
|
)
|
|
|
(45,843
|
)
|
|
|
-
|
|
|
|
(45,843
|
)
|
|
Issuance of convertible redeemable
preferred stock as repayment of notes payable
|
|
|
3,000.000
|
|
|
|
4,429,217
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(167,420
|
)
|
|
|
(1,261,797
|
)
|
|
|
(1,429,217
|
)
|
|
|
-
|
|
|
|
(1,429,217
|
)
|
|
Issuance of convertible redeemable
preferred stock for cash, net of issuance costs of $273,740
|
|
|
21,899.181
|
|
|
|
29,143,355
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(412,308
|
)
|
|
|
(7,105,607
|
)
|
|
|
(7,517,915
|
)
|
|
|
-
|
|
|
|
(7,517,915
|
)
|
|
Dividend on common stock and
participating preferred dividend declared
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,544,730
|
)
|
|
|
(8,155,270
|
)
|
|
|
(12,700,000
|
)
|
|
|
-
|
|
|
|
(12,700,000
|
)
|
|
Imputed interest on related
party long term debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17,873,285
|
|
|
|
17,873,285
|
|
|
Restructuring of NBHC (Note
1)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(64,684
|
)
|
|
|
(64,684
|
)
|
|
|
(654,241
|
)
|
|
|
(718,925
|
)
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,452,369
|
|
|
|
15,452,369
|
|
|
|
62,152
|
|
|
|
15,514,521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31,
2013
|
|
|
89,113.888
|
|
|
$
|
103,236,399
|
|
|
|
87,329
|
|
|
$
|
87,329
|
|
|
$
|
-
|
|
|
$
|
(5,933,870
|
)
|
|
$
|
(5,846,541
|
)
|
|
$
|
20,483,964
|
|
|
$
|
14,637,423
|
|
The accompanying notes are an integral part of these financial
statements.
|
Bulk Partners (Bermuda) Ltd.
|
|
Consolidated Statements of Cash Flows
|
|
|
|
|
|
Year Ended Dccember 31,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
15,514,521
|
|
|
$
|
15,912,866
|
|
|
Adjustments to reconcile net income to net cash provided by operations:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense
|
|
|
9,614,859
|
|
|
|
7,179,943
|
|
|
Amortization of deferred financing costs and bank fees
|
|
|
949,929
|
|
|
|
592,225
|
|
|
Unrealized gain on derivative instruments
|
|
|
(1,101,239
|
)
|
|
|
(362,176
|
)
|
|
(Income) loss on equity method investee
|
|
|
(10,224
|
)
|
|
|
67,912
|
|
|
Provision for doubtful accounts
|
|
|
652,318
|
|
|
|
851,591
|
|
|
Amortization of discount on related party long-term debt
|
|
|
1,117,231
|
|
|
|
-
|
|
|
Change in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(15,730,720
|
)
|
|
|
(9,936,096
|
)
|
|
Other receivables
|
|
|
285,224
|
|
|
|
(143,172
|
)
|
|
Bunker inventory
|
|
|
(7,215,740
|
)
|
|
|
3,937,289
|
|
|
Advance hire, prepaid expenses and other current assets
|
|
|
(2,233,596
|
)
|
|
|
(3,170,792
|
)
|
|
Other non-current assets
|
|
|
(410,312
|
)
|
|
|
-
|
|
|
Account payable and accrued expenses
|
|
|
16,927,622
|
|
|
|
(4,461,165
|
)
|
|
Other current liabilities
|
|
|
24,533
|
|
|
|
427,653
|
|
|
Deferred revenue
|
|
|
2,733,051
|
|
|
|
4,980,645
|
|
|
Net cash provided by operating activities
|
|
|
21,117,457
|
|
|
|
15,876,723
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activites
|
|
|
|
|
|
|
|
|
|
Purchase of vessels
|
|
|
(49,736,191
|
)
|
|
|
(96,768,542
|
)
|
|
Deposits on newbuildings in-process
|
|
|
(31,900,000
|
)
|
|
|
-
|
|
|
Drydocking costs
|
|
|
(731,285
|
)
|
|
|
(3,985,559
|
)
|
|
Purchase of building and equipment
|
|
|
(112,899
|
)
|
|
|
(601,268
|
)
|
|
Deposits on vessel purchase
|
|
|
(1,500,000
|
)
|
|
|
|
|
|
Acquisition of interest in equity method investee
|
|
|
-
|
|
|
|
(50,000
|
)
|
|
Net cash used in investing activities
|
|
|
(83,980,375
|
)
|
|
|
(101,405,369
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
Proceeds of related party debt
|
|
|
29,554,972
|
|
|
|
26,502,823
|
|
|
Payments on related party debt
|
|
|
(5,274,075
|
)
|
|
|
(10,557,500
|
)
|
|
Proceeds from long-term debt
|
|
|
32,205,000
|
|
|
|
58,312,500
|
|
|
Proceeds from line of credit
|
|
|
-
|
|
|
|
3,000,000
|
|
|
Payments of financing and issuance costs
|
|
|
(1,799,314
|
)
|
|
|
(1,865,893
|
)
|
|
Payments on long-term debt
|
|
|
(14,401,426
|
)
|
|
|
(7,722,636
|
)
|
|
Proceeds from issuance of convertible redeemable preferred stock
|
|
|
21,899,180
|
|
|
|
20,564,000
|
|
|
Common stock dividends paid
|
|
|
(100,000
|
)
|
|
|
(1,000,000
|
)
|
|
Decrease (increase) in restricted cash
|
|
|
187,500
|
|
|
|
(396,947
|
)
|
|
Distributions to non-controlling interest
|
|
|
(176,667
|
)
|
|
|
(349,914
|
)
|
|
Net cash provided by financing activities
|
|
|
62,095,170
|
|
|
|
86,486,433
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
|
(767,748
|
)
|
|
|
957,787
|
|
|
Cash and Cash equivalents at beginning of period
|
|
|
19,695,675
|
|
|
|
18,737,888
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents at end of period
|
|
$
|
18,927,927
|
|
|
$
|
19,695,675
|
|
|
Bulk Partners (Bermuda) Ltd.
|
|
Consolidated Statements of Cash Flows - Continued
|
|
|
|
|
|
Year Ended Dccember 31,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
Disclosure of noncash items
|
|
|
|
|
|
|
|
|
|
Dividends declared, not paid
|
|
$
|
12,700,000
|
|
|
$
|
9,267,305
|
|
|
Issuance of convertible redeemable preferred stock as settlement of accrued dividends
|
|
$
|
213,152
|
|
|
$
|
7,362,935
|
|
|
Issuance of convertible redeemable preferred stock in settlement of notes payable
|
|
$
|
4,429,217
|
|
|
$
|
5,675,000
|
|
|
Issuance of convertible redeemable preferred stock in settlement of common stock dividend
|
|
$
|
-
|
|
|
$
|
6,000,000
|
|
|
Beneficial conversion feature of convertible redeemable preferred stock at issuance date
|
|
$
|
8,959,421
|
|
|
$
|
4,584,272
|
|
|
Imputed interest on related party long-term debt
|
|
$
|
17,873,285
|
|
|
$
|
-
|
|
|
Transfer of ownership to noncontrolling interest
|
|
$
|
360,000
|
|
|
$
|
-
|
|
|
Cash paid for interest
|
|
$
|
4,059,340
|
|
|
$
|
3,097,021
|
|
The accompanying notes are an integral part of these financial
statements.
Bulk Partners (Bermuda) Ltd.
Notes to
Consolidated Financial Statements
Years Ended December 31, 2013 and 2012
NOTE 1 - NATURE OF ORGANIZATION
The Company was incorporated under
the laws of Bermuda on June 17, 2008, by three individuals who are collectively referred to as the Founders. The Company was
formed to pursue opportunities in the international dry bulk shipping trade.
The consolidated financial statements
include the operations of Bulk Partners (Bermuda) Ltd. and its wholly-owned subsidiaries (collectively referred to as “the
Company”), as well as other entities consolidated pursuant to Accounting Standards Codification (“ASC”) 810,
Consolidation
. A summary of the Company’s consolidation policy is provided in Note 2. A summary of the Company’s
variable interest entities is provided at Note 4. At December 31, 2013 and 2012, entities that are consolidated pursuant to
ASC 810-10 include the following wholly-owned subsidiaries:
|
|
·
|
Phoenix Bulk Carriers (BVI) Limited (“PBC”) – a corporation that was duly
organized under the laws of the British Virgin Islands. The primary purpose of this corporation is to manage and operate ocean-going
vessels.
|
|
|
·
|
Phoenix Bulk Management Bermuda Limited (“PBM”) – a corporation that was
duly organized under the laws of Bermuda. Certain of the administrative management functions of PBC have been assigned to PBM.
|
|
|
·
|
Americas Bulk Transport (BVI) Limited – a corporation that was duly organized under
the laws of the British Virgin Islands. The primary purpose of this corporation is to charter ships.
|
|
|
·
|
Bulk Ocean Shipping (Bermuda) Ltd. – a corporation that was duly organized under the
laws of Bermuda. The primary purpose of this corporation is to manage the fuel procurement of the chartered vessels.
|
|
|
·
|
Phoenix Bulk Carriers (US) LLC – a corporation that duly organized under the laws of Delaware.
The primary purpose of this corporation is to act as the U.S. administrative agent for the Company.
|
|
|
·
|
Allseas Logistics Bermuda Ltd. – a corporation that was duly organized under the laws of
Bermuda. The primary purpose of this corporation is the Treasury Agent for the group of Companies.
|
|
|
·
|
Bulk Pangaea Limited (“Bulk Pangaea”) – a corporation that was duly organized
under the laws of Bermuda. Bulk Pangaea was established in September 2009 for the purpose of acquiring the motor vessel (“m/v”)
Bulk Pangaea.
|
|
|
·
|
Bulk Discovery (Bermuda) Ltd. (“Bulk Discovery”) – a corporation that was
duly organized under the laws of Bermuda. Bulk Discovery was established in February 2011 for the purpose of acquiring the
m/v Bulk Discovery.
|
|
|
·
|
Bulk Cajun Bermuda Ltd. (“Bulk Cajun”) – a corporation that was duly organized
under the laws of Bermuda. Bulk Cajun was established in May 2011 for the purpose of acquiring the m/v Bulk Cajun. The Company
sold 10% of Bulk Cajun to a third party during 2013.
|
|
|
·
|
Bulk Patriot Ltd. (“Bulk Patriot”) – a corporation that was duly organized
under the laws of Bermuda. Bulk Patriot was established in September 2011 for the purpose of acquiring the m/v Bulk Patriot.
|
Bulk Partners (Bermuda) Ltd.
Notes to
Consolidated Financial Statements - Continued
Years Ended December 31, 2013 and 2012
NOTE 1 - NATURE OF ORGANIZATION - Continued
|
|
·
|
Bulk Juliana Ltd. (“Bulk Juliana”) – a corporation that was duly organized under
the laws of Bermuda. Bulk Juliana was established in March 2012 for the purpose of acquiring the m/v Bulk Juliana.
|
|
|
·
|
Bulk Trident Ltd. (“Bulk Trident”) – a corporation that was duly organized under
the laws of Bermuda. Bulk Trident was established in August 2012 for the purpose of acquiring the m/v Bulk Trident.
|
|
|
·
|
Bulk Atlantic Ltd. (“Bulk Beothuk”) – a corporation that was duly organized under
the laws of Bermuda. Bulk Atlantic was established in February 2013 for the purpose of acquiring the m/v Bulk Beothuk.
|
|
|
·
|
Bulk Providence Ltd. (“Bulk Providence”) – a corporation that was duly organized
under the laws of Bermuda. Bulk Providence was established in May 2013 for the purpose of acquiring the m/v Bulk Providence.
|
|
|
·
|
Bulk Liberty Ltd. (“Bulk Liberty”) – a corporation that was duly organized under
the laws of Bermuda. Bulk Liberty was established in April 2013 for the purpose of acquiring the m/v Bulk Liberty.
|
|
|
·
|
Bulk Phoenix Ltd. (“Bulk Phoenix”) – a corporation that was duly organized under
the laws of Bermuda. Bulk Phoenix was established in July 2013 for the purpose of acquiring the m/v Bulk Newport.
|
|
|
·
|
Nordic Bulk Barents Ltd. (“Bulk Barents”) – a corporation that was duly organized
under the laws of Bermuda. Bulk Barents was established in November 2013 for the purpose of acquiring the m/v Nordic Bulk Barents.
|
|
|
·
|
Nordic Bulk Bothnia Ltd. (“Bulk Bothnia”) – a corporation that was duly organized
under the laws of Bermuda. Bulk Bothnia was established in November 2013 for the purpose of acquiring the m/v Nordic Bulk Bothnia.
|
At December 31, 2013 and 2012, entities that are
consolidated pursuant to ASC 810-10, but which are not wholly-owned, include the following:
|
|
·
|
Nordic Bulk Holding ApS (“NBH”) – a corporation that was duly organized
in March 2009 under the laws of Denmark. The primary purpose of this corporation is to manage and operate vessels through
its wholly owned subsidiary Nordic Bulk Carriers AS (“NBC”). NBC specializes in ice trading, as well as the carriage
of a wide range of commodities, including cement clinker, steel scrap, fertilizers, and grains. The Company has a 51% ownership
interest in NBH at December 31, 2013 and 2012. The accompanying consolidated financial statements include the operations of
NBH for the years ended December 31, 2013 and 2012.
|
|
|
·
|
109 Long Wharf LLC (“Long Wharf”) – a corporation that was duly organized
under the laws of Delaware for the objective and purpose of holding real estate located in Newport, Rhode Island. Long Wharf is
owned by two of the Company’s Founders and is heavily dependent on the Company to fund its operations; as such, the Company
has consolidated 100% of Long Wharf for the years ended December 31, 2013 and 2012.
|
Bulk Partners (Bermuda) Ltd.
Notes to
Consolidated Financial Statements - Continued
Years Ended December 31, 2013 and 2012
NOTE 1 - Nature of Organization - Continued
|
|
·
|
Bulk Nordic Odyssey Ltd. (“Odyssey”) and Bulk Nordic Orion Ltd. (“Orion”)
- corporations that were duly organized under the laws of Bermuda. Odyssey and Orion were established in March 2012, for the purpose
of acquiring the m/v Bulk Nordic Odyssey and the m/v Bulk Nordic Orion. At December 31, 2012 the Company had a 50% ownership interest
in each, Odyssey and Orion, the remainder of which is owned by a third-party. The operating results of Odyssey and Orion are 100%
dependent on transactions with related parties and affiliates. Accordingly, the Company has consolidated these entities for the
year ended December 31, 2012. In January 2013, the Company entered into a share transfer restructuring agreement and the Odyssey
and Orion were transferred to Nordic Bulk Holding Company Ltd.
|
|
|
·
|
Nordic Bulk Holding Company Ltd. (“NBHC”) - a corporation that was duly organized under
the laws of Bermuda. NBHC was established in October 2012, together with a third-party, for the purpose of owning Odyssey and Orion
and to invest in additional vessels, through its wholly-owned subsidiaries. In January 2013, the Company entered into a share transfer
restructuring agreement (“the January 2013 transaction”), through which the shareholders of Odyssey and Orion transferred
their share of those entities and their zero-interest subordinated shareholder loans to the entities, to NBHC in exchange for the
shares of NBHC. The Company also entered into a subscription agreement which authorized the issuance of additional shares to be
subscribed by a third party. As a result, at December 31, 2013 the Company had one-third ownership interest in NBHC, the remainder
of which is owned by third-parties. The operating results of NBHC are 100% dependent on transactions with related parties and affiliates.
Accordingly, the Company has consolidated NBHC for the year ended December 31, 2013.
|
|
|
·
|
Nordic Bulk Ventures Holding Company Ltd. (“BVH”) – a corporation that was duly
organized under the laws of Bermuda. BVH was established in August 2013, together with a third-party, for the purpose of owning
Bulk Nordic Five Ltd. (“Five”) and Bulk Nordic Six Ltd. (“Six”). Five and Six are corporations that were
duly organized under the laws of Bermuda in November 2013 for the purpose of owning new ultramax newbuildings to be delivered in
2016. At December 31, 2013 the Company had a 50% ownership interest in BVH, the remainder of which is owned by a third-party. The
operating results of BVH are 100% dependent on transactions with related parties and affiliates. Accordingly, the Company has consolidated
BVH for the year ended December 31, 2013.
|
|
|
·
|
SeaRoll Navigation S.A. (SeaRoll) –was established in April 2010 for the purpose
of acquiring the m/v Bulk Trader. The Company had a 65% ownership interest in SeaRoll. During the year ended December 31,
2011, SeaRoll sold the m/v Bulk Trader for a $1,064,000 loss. SeaRoll was liquidated during the year ended December 31, 2012.
The Company’s financial results for 2012 include a gain of $511,000 following the liquidation of this entity as the Company
received more than the carrying value of the investment. The gain is recorded within other income in the accompanying consolidated
statements of income.
|
Bulk Partners (Bermuda) Ltd.
Notes to
Consolidated Financial Statements - Continued
Years Ended December 31, 2013 and 2012
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting
policies of the Company and its subsidiaries is presented to assist in understanding the Company’s consolidated financial
statements. These accounting policies conform to accounting principles generally accepted in the United States, and have been applied
in the preparation of the consolidated financial statements.
Use of Estimates
The preparation of financial
statements in conformity with accounting principles generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. Significant estimates include the establishment of the allowance for doubtful accounts, the
fair value of convertible redeemable preferred stock, the discount on interest free loans and the estimate of salvage value used
in determining vessel depreciation expense.
Consolidation
The purpose of consolidated
financial statements is to present the financial position and results of operations of a company and its subsidiaries as if the
group were a single company. The first step in the Company’s consolidation policy is to determine whether an entity is to
be evaluated for potential consolidation based on its outstanding voting interests or its variable interests. Accordingly, the
Company first determines whether the entity is a Variable Interest Entity (“VIE”) pursuant to the provisions of ASC
810-10. If the entity is a VIE, consolidation is based on the entity’s variable interests and not its outstanding voting
shares. If the entity is not determined to be a VIE, the Company evaluates the entity based on its outstanding voting interests.
Amounts pertaining to the non-controlling
ownership interest held by third parties in the financial position and operating results of the Company’s subsidiaries and/or
consolidated VIEs are reported as non-controlling interest in the accompanying consolidated balance sheets. As previously indicated,
certain of the entities within the Company’s consolidated financial statements are heavily dependent on financing and operating
activities with and among affiliates and/or related parties. Accordingly, as part of the Company’s consolidation process,
intercompany transactions are eliminated in the consolidated financial statements.
Business Combination
Prior to the January 2013 transaction,
Odyssey and Orion were owned 50% by the Company and 50% by ST Shipping and Transport Ltd. (“STST”). These shareholders
transferred their shares in Odyssey and Orion to NBHC in connection with the January 2013 transaction. On the same date, the net
assets of Odyssey and Orion were transferred to NBHC. In accordance with ASC 805-50, this transaction was considered a combination
between entities under common control; therefore, the net assets of Odyssey and Orion were transferred at their carrying values.
Bulk Partners (Bermuda) Ltd.
Notes to
Consolidated Financial Statements - Continued
Years Ended December 31, 2013 and 2012
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES - Continued
Revenue Recognition
Voyage revenues represent revenues
earned by the Company, principally from voyage charters. A voyage charter involves the carriage of a specific amount and type of
cargo on a load port-to-discharge port basis, subject to various cargo handling terms. Under a voyage charter, the revenues are
earned and recognized ratably over the duration of the voyage. Estimated losses under a voyage charter are provided for in full
at the time such losses become probable. Demurrage, which is included in voyage revenues, represents payments by the charterer
to the vessel owner when loading and discharging time exceed the stipulated time in the voyage charter. Demurrage is measured in
accordance with the provisions of the respective charter agreements and the circumstances under which demurrage revenues arise,
and is also earned and recognized ratably over the duration of the voyage to which it pertains. Voyage revenue recognized is presented
net of address commissions.
Charter revenues relate to a
time charter arrangement under which the vessel owner is paid charter hire on a per-day basis for a specified period of time. Revenues
from time charters are earned and recognized on a straight-line basis over the term of the charter, as the vessel operates under
the charter.
Deferred Revenue
Billings for services for which
revenue is not recognized in the current period are recorded as deferred revenue. Deferred revenue recognized in the accompanying
consolidated balance sheets is expected to be realized within 12 months of the balance sheet date.
Voyage Expenses
The Company incurs expenses
for voyage charters that include bunkers (fuel), port charges, canal tolls, broker commissions and cargo handling operations, which
are expensed as incurred.
Charter Expenses
The Company relies on a combination
of owned and chartered-in vessels to support its operations. The Company hires vessels under time charters, and recognizes the
charter hire payments as expense on a straight-line basis over the term of the charter. Charter hire payments are typically made
in advance, and the unrecognized portion is reflected as advance hire in the accompanying consolidated balance sheets. Under the
time charters, the vessel owner is responsible for the vessel operating costs such as crews, maintenance and repairs, insurance,
and stores.
Vessel Operating Expenses
Vessel operating expenses (“VOE”)
represent the cost to operate the Company’s owned vessels. VOE include crew wages and related costs, the cost of insurance,
expenses relating to repairs and maintenance, the cost of spares and consumables, other miscellaneous expenses, and technical management
fees. These expenses are recognized as incurred. The Company entered into technical management agreements for each of its owned
vessels with an equity method investee. Technical management services include day-to-day vessel operations, performing general
vessel maintenance, ensuring regulatory and classification society compliance, arranging the hire of crew, and purchasing stores,
supplies, and spare parts.
Bulk Partners (Bermuda) Ltd.
Notes to
Consolidated Financial Statements - Continued
Years Ended December 31, 2013 and 2012
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Concentrations of Credit
Risk
The Company’s financial
instruments that are exposed to concentrations of credit risk consist primarily of cash equivalents, trade receivables and derivative
instruments. The Company maintains its cash accounts with various high-quality financial institutions in the United States, Germany,
and Bermuda. The Company performs periodic evaluations of the relative credit standing of these financial institutions. The Company
does not believe that significant concentration of credit risk exists with respect to these cash equivalents. Trade accounts receivable
are recorded at the invoiced amount, and do not bear interest. Credit risk with respect to trade accounts receivable is limited
due to the long-standing relationships with significant customers, and their relative financial stability. The Company performs
ongoing credit evaluations of its customers’ financial condition, but does not require collateral. Derivative instruments
are recorded at fair value. The Company does not believe that significant concentration of credit risk exists with respect to these
derivative instruments due to the fact that the resulting assets and liabilities are not material to the financial statements.
The Company does not have any off-balance sheet credit exposure related to its customers.
At December 31, 2013, there
were three customers that accounted for 49% of the Company’s trade accounts receivable. At December 31, 2012, three
customers accounted for 38% of the Company’s trade accounts receivable.
At
December 31, 2013 customers in each of the following countries accounted for at least 10% of the Company’s accounts receivable;
the United States (27%) and Switzerland (11%). At December 31, 2012, customers in each of the following countries accounted
for at least 10% of the Company’s accounts receivable; the United States (32%), Canada (15%), and Brazil (14%).
For the year ended December
31, 2013 customers in each of the following countries accounted for at least 10% of total revenue; the United States (27%), Switzerland
(11%), and Canada (10%). For the year ended December 31, 2012, revenue from customers in each of the following countries accounted
for at least 10% of total revenue; the United States (21%), Switzerland (17%), Belgium (10%), and Germany (10%).
For the years ended December
31, 2013 and December 31, 2012, revenue from no single customer accounted for at least 10% of total revenue.
Cash and Cash Equivalents
Cash and cash equivalents include
short-term deposits with an original maturity of less than three months. At December 31, cash and cash equivalents by type
were as follows:
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
Money market accounts – cash equivalents
|
|
$
|
17,622,598
|
|
|
$
|
16,936,013
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
(1)
|
|
|
1,305,329
|
|
|
|
2,759,662
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
18,927,927
|
|
|
$
|
19,695,675
|
|
(1)
Consists of cash deposits at various major
banks.
Bulk Partners (Bermuda) Ltd.
Notes to
Consolidated Financial Statements - Continued
Years Ended December 31, 2013 and 2012
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES - Continued
Restricted Cash
Restricted cash at December
31, 2013 consists of cash held by a facility agent as required by the Bulk Atlantic Secured Note.
Restricted cash at December
31, 2012 consists entirely of cash held by a facility agent to cure a short fall in the Collateral Maintenance Ratio as defined
in the Bulk Patriot secured term loan facility. In April 2013, the funds were returned to the Company as the Company was no longer
in breach of the Collateral Maintenance Ratio.
Allowance for Doubtful Accounts
The Company provides a specific
reserve for significant outstanding accounts that are considered potentially uncollectible in whole or in part. In addition, the
Company’s policy based on experience is to establish a reserve equal to approximately 25% of accounts receivable balances
that are 30-180 days past due and approximately 50% of accounts receivable balances that are 180 or more days past due, and which
are not otherwise reserved. The reserve estimates are adjusted as additional information becomes available, or as payments are
made. At December 31, 2013 and 2012, the Company has provided an allowance for doubtful accounts of $1,662,593 and $1,351,590
respectively, for amounts that are not expected to be fully collected. The provision for doubtful accounts was $652,318 in 2013
and $851,590 in 2012. In 2013, the Company wrote off $341,316 that was previously included in the allowance and $19,421 directly
to the provision, because these amounts were determined to be uncollectible. No account balances were written off or reduced in
2012.
Bunker Inventory
Inventory is primarily comprised
of fuel oil purchased and stored onboard a vessel. Inventory is measured at the lower of cost under the first-in, first-out method
or net realizable value.
Advanced Hire, Prepaid
Expenses and Other Current Assets
Advance hire represents payment
to ship owners under time-charters for days subsequent to the balance sheet date. Hire is typically paid in advance for the following
fifteen days, but intervals vary by time-charter party. Prepaid
expenses include advance funding to the technical manager
for vessel operating expenses, lubricating oils and stores kept on board owned vessels, voyage expenses paid in advance. Other
assets include deposits held by counterparties to various derivative instruments and the fair value of derivative instruments when
it exceeds the settlement price of the instrument.
Bulk Partners (Bermuda) Ltd.
Notes to
Consolidated Financial Statements - Continued
Years Ended December 31, 2013 and 2012
NOTE 2 -
Summary
of Significant Accounting Policies - C
ontinued
At December 31, advance hire,
prepaid expenses and other current assets were comprised of the following:
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
Advance hire
|
|
$
|
8,788,882
|
|
|
$
|
7,128,846
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
514,169
|
|
|
|
1,149,729
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current assets
|
|
|
3,441,074
|
|
|
|
1,495,849
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
12,744,125
|
|
|
$
|
9,774,424
|
|
Vessels and Depreciation
Vessels are stated at cost,
which includes contract price and acquisition costs. Significant betterments to vessels are capitalized; maintenance and repairs
that do not improve or extend the lives of the vessels are expensed as incurred. Depreciation is provided using the straight-line
method over the remaining estimated useful lives of the vessels (excluding the time a vessel in is dry dock), based on cost less
salvage value. Each vessel’s salvage value is equal to the product of its lightweight tonnage and an estimated scrap rate
of $375 per ton, which was determined by reference to quoted rates and is reviewed annually. The Company estimates the useful life
of its vessels to be 25 years to 30 years from the date of initial delivery from the shipyard. The remaining estimated useful lives
of the current fleet are 3 - 24 years. The Company does not incur depreciation expense when vessels are taken out of service for
dry docking.
Dry Docking Expenses
and Amortization
Significant upgrades made to
the vessels during dry docking are capitalized when incurred and amortized on a straight-line basis over the five year period until
the next dry docking. Costs capitalized as part of the dry docking include direct costs incurred to meet regulatory requirements
that add economic life to the vessel, that increase the vessel’s earnings capacity or which improve the vessel’s efficiency.
Direct costs include the shipyard costs, parts, inspection fees, steel, blasting and painting. Expenditures for normal maintenance
and repairs, whether incurred as part of the dry docking or not, are expensed as incurred. Unamortized dry-docking costs of vessels
that are sold are written off and included in the calculation of the resulting gain or loss on sale.
Bulk Partners (Bermuda) Ltd.
Notes to
Consolidated Financial Statements - Continued
Years Ended December 31, 2013 and 2012
NOTE 2 -
Summary
of Significant Accounting Policies - C
ontinued
Long-lived Assets Impairment
Considerations
The carrying values of the Company’s
vessels may not represent their fair market value or the amount that could be obtained by selling the vessel at any point in time
since the market prices of second-hand vessels tend to fluctuate with changes in charter rates and the cost of new vessels. Historically,
both charter rates and vessel values tend to be cyclical. The carrying amounts of vessels held and used by the Company are reviewed
for potential impairment whenever events or changes in circumstances indicate that the carrying amount of a particular vessel may
not be fully recoverable. In such instances, an impairment charge would be recognized if the estimate of the undiscounted future
cash flows expected to result from the use of the vessel and its eventual disposition is less than the vessel’s carrying
amount. This assessment is made at the asset group level which represents the lowest level for which identifiable cash flows are
largely independent of other groups of assets. The asset groups established by the Company are defined by vessel size and classification.
At December 31, 2013, the Company identified a potential impairment indicator by reference to industry-wide estimated market values
of all vessels in the size range and age. As a result, the Company evaluated each asset group for impairment by estimating the
total undiscounted cash flows expected to result from the use of the asset group and its eventual disposal. At December 31, 2013,
the estimated undiscounted future cash flows exceeded the carrying amount of the asset groups in the consolidated balance sheets
and therefore, the Company did not recognize a charge to impairment. The Company did not identify any potential impairment indicators
with regard to its long lived assets during the year ended December 31, 2012.
The significant factors and
assumptions used in the undiscounted projected net operating cash flow analysis include: the Company’s estimate of future
TCE rates based on current rates under existing charters and contracts, and an index of TCE rates applicable to the size of the
ship, when available. The Company applies a multiple to account for expected growth or decline in TCE rates due to market conditions
for periods beyond those for which an index rate is available. Projected net operating cash flows are net of brokerage and address
commissions and exclude revenue on scheduled off-hire days. The Company uses the current vessel operating expense budget, estimated
costs of drydocking and historical general and administrative expenses as the basis for its expected outflows, and applies an inflation
factor it considers appropriate. The net of these inflows and outflows, plus an estimated salvage value, constitutes the projected
undiscounted future cash flows.
Deferred Financing
Costs, Bank Fees and Amortization
Qualifying expenses associated
with commercial financing are capitalized and are amortized over the terms of the respective financing arrangement using the effective
interest method, generally ranging from four to six years.
In connection with the Company’s
four secured term loans obtained in 2013, the Company capitalized financing costs of approximately $654,000. In connection with
the Senior Secured Post-Delivery Term Loan Facility executed in 2013, the Company capitalized an additional $238,000.
In connection with the Company’s
four secured term loans obtained in 2012, the Company capitalized financing costs of approximately $30,000 in 2013 and $508,000
in 2012.
Bulk Partners (Bermuda) Ltd.
Notes to
Consolidated Financial Statements - Continued
Years Ended December 31, 2013 and 2012
NOTE 2 -
Summary
of Significant Accounting Policies - C
ontinued
Amortization of the deferred
financing costs is included as a component of interest expense in the consolidated statements of income. The components of net
deferred financing costs are as follows:
|
|
|
December 31,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
Deferred financing costs
|
|
$
|
2,393,517
|
|
|
$
|
1,470,868
|
|
|
|
|
|
|
|
|
|
|
|
|
Less accumulated amortization
|
|
|
(1,050,808
|
)
|
|
|
(565,124
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred financing costs
|
|
|
1,342,709
|
|
|
|
905,744
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of deferred financing costs
|
|
$
|
485,684
|
|
|
$
|
289,246
|
|
Fees paid to financial institutions
to obtain financing are carried as a reduction of the outstanding debt and amortized over the term of the arrangement using the
effective interest method. The unamortized portion is included as a reduction of secured long-term debt on the consolidated balance
sheets.
In connection with the Company’s
four secured term loans obtained in 2013, the Company paid bank fees of approximately $577,000. In connection with the Senior Secured
Post-Delivery Term Loan Facility executed in 2013, the Company paid an additional $199,000. In connection with the Company’s
four secured term loans obtained in 2012, the Company paid bank fees of $949,000.
Amortization of the bank fees
is included as a component of interest expense in the consolidated statements of income. The components of net deferred financing
costs are as follows:
|
|
|
December 31,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
Bank fees paid to financial institutions
|
|
$
|
2,316,750
|
|
|
$
|
1,540,700
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: accumulated amortization
|
|
|
(925,591
|
)
|
|
|
(461,346
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Unamortized bank fees
|
|
|
1,391,159
|
|
|
|
1,079,354
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization included in interest expense
|
|
$
|
464,245
|
|
|
$
|
302,979
|
|
Bulk Partners (Bermuda) Ltd.
Notes to
Consolidated Financial Statements - Continued
Years Ended December 31, 2013 and 2012
NOTE 2 -
Summary
of Significant Accounting Policies - C
ontinued
Accounts Payable and Accrued
Expenses
The components of accounts payable
and accrued expenses are as follows:
|
|
|
December 31,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
39,201,642
|
|
|
$
|
20,529,469
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued voyage expenses
|
|
|
3,839,531
|
|
|
|
4,484,588
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued interest
|
|
|
716,575
|
|
|
|
570,073
|
|
|
|
|
|
|
|
|
|
|
|
|
Other accrued liabilities
|
|
|
1,123,640
|
|
|
|
2,369,633
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
44,881,388
|
|
|
$
|
27,953,763
|
|
Taxation
The
Company is not subject to corporate income taxes on its profits in Bermuda because Bermuda does not impose an income tax.
NBC,
an affiliated company consolidated pursuant to ASC 810-10, is subject to a Danish tonnage tax. NBC is not taxed on the basis of
their actual income derived from their business but on an alternative income determination based on the net tons carrying capability
of their fleet. As the tax is not determined based on taxable income, BC’s tax expense of approximately $263,000 and $241,000
is included within voyage expenses in the accompanying consolidated statements of operations as of December 31, 2013 and 2012,
respectively.
The
Company currently is exempt from taxation on its U.S. source shipping income under Section 883 of the United States Internal Revenue
Code of 1986, or the Code (the Code) or the related Treasury regulations. The Company will continue to qualify for this exemption
so long as, for more than half of the days in its taxable year, it is a controlled foreign corporation, as defined in the Code,
and more than 50 percent of the total value of its stock is owned by U.S. shareholders. To the extent the Company is unable to
qualify for exemption from tax under Section 883, and the U.S. source shipping income is considered to be effectively connected
with the conduct of a U.S. trade or business, as defined in the Code, the Company will be subject to U.S. federal income taxation
of 4% of its U.S. source shipping income on a gross basis without the benefit of deductions. If certain other conditions are present,
as defined in the Code, U.S. source shipping income, net of applicable deductions, may be subject to a U.S. federal corporate income
tax of up to 35% and a 30% branch profits tax. The Company believes that none of its U.S. source shipping income will be effectively
connected with the conduct of a U.S. trade or business. Since earnings from shipping operations of the Company are not subject
to U.S. or foreign income taxation, the Company has not recorded income tax expense, deferred tax assets or liabilities for the
years ending December 31, 2013 and December 31, 2012.
Bulk Partners (Bermuda) Ltd.
Notes to
Consolidated Financial Statements - Continued
Years Ended December 31, 2013 and 2012
NOTE 2 -
Summary
of Significant Accounting Policies - C
ontinued
Under ASC 740-10, the Company
may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained
on examination by taxing authorities, based on the technical merits of the position. The Company has determined that it has no
uncertain tax positions as of December 31,
2013 and 2012. Additionally, the Company accrues interest and penalties, if any,
related to unrecognized tax benefits as a component of income tax expense.
Where required, the Company
complies with income tax filings in its various jurisdictions of operations. With few exceptions, as of December 31, 2013 and December
31, 2012, the Company is not subject to U.S. federal or foreign examinations by tax authorities for years before 2010.
Convertible Redeemable
Preferred Stock
The
Company classifies its convertible redeemable preferred stock as a separate item from permanent equity because it is redeemable
outside of the Company’s control (at the option of the preferred stockholders). The Company recorded such convertible redeemable
preferred stock at fair value upon issuance, net of any issuance costs. The value of the convertible redeemable preferred stock
was determined based on a Lattice model which includes the use of various assumptions, such as cash flow projections, the equity
value of peer group companies and volatility rates. Any beneficial conversion features are recognized as convertible redeemable
preferred stock discounts and accreted to additional paid-in-capital through the earliest possible redemption date.
Dividends
Dividends on common stock are
recorded when declared by the Board of Directors. Dividends automatically accrued under the terms of the convertible redeemable
preferred stock, may be paid in cash, by issuance of additional convertible redeemable preferred shares or as a pro-rata share
of common stock dividends declared. Refer to Note 13 for a discussion regarding common stock and convertible redeemable preferred
stock dividends.
Earnings per Common
Share
Earnings per common share (“EPS”)
is calculated using the two-class method, which is an earnings allocation formula that determines net income per common share for
the holders of the Company’s common shares and participating securities. The convertible redeemable preferred stock contains
participation rights in any dividend paid by the Company and are deemed to be participating securities. Adjustments to the carrying
value of preferred stock that is classified as a separate item from permanent equity, inducement charges on preferred stock conversions,
preferred stock extinguishment effects, and deemed dividends for beneficial conversion features affect income available to common
shareholders. Net income is allocated to common and participating securities as if all of the earnings for the period had been
distributed. The participating securities do not include a contractual obligation to share in losses of the Company or undistributed
earnings in a loss position and are not included in the calculation of net loss per share.
Bulk Partners (Bermuda) Ltd.
Notes to Consolidated Financial Statements
- Continued
Years Ended December 31, 2013 and 2012
NOTE 2 -
Summary
of Significant Accounting Policies - C
ontinued
Diluted EPS is computed using
the more dilutive of (a) the two-class method, or (b) the if-converted method. The Company allocates net income first to convertible
redeemable preferred stockholders based on dividend rights and then to common and convertible redeemable preferred stockholders
based on ownership interests. The weighted-average number of common shares included in the computation of diluted net income gives
effect to all potentially dilutive common equivalent shares, including the potential issuance of stock upon the conversion of the
Company’s convertible redeemable preferred stock. Common equivalent shares are excluded from the computation of diluted net
income per share if their effect is antidilutive.
Foreign Exchange
The Company conducts all of
its business in U.S. dollars; accordingly, there are no foreign exchange transaction gains or losses reflected in the consolidated
statements of income.
Derivatives and Hedging
Activities
The Company accounts for derivatives
in accordance with the provisions of ASC 815,
Derivatives and Hedging
. The Company uses interest rate swaps to reduce market
risks associated with its operations, principally changes in variable interest rates on its bank debt. Additionally, the Company
uses forward freight agreements to protect against changes in charter rates and bunker (fuel) swaps to protect against changes
in fuel prices. Derivative instruments are recorded as assets or liabilities, and are measured at fair value. The Company is exposed
to credit loss in the event of nonperformance by the counterparty to the interest rate swaps, forward freight agreements and bunker
hedges; however, the Company does not anticipate nonperformance by the counterparty. See Note 9 for a description of the types
of derivative instruments the Company utilizes.
Segment Reporting
Operating segments are components
of a business that are evaluated regularly by the chief operating decision maker (CODM) for the purpose of assessing performance
and allocating resources. Based on the information that the CODM uses, including consideration of whether discrete financial information
is available for the business activities, the Company has identified multiple operating segments which have been aggregated based
on considerations such as the nature of its services, customers and operations. The Company has determined that it operates under
one reportable segment.
Fair Value of Financial
Instruments
The carrying amounts of cash
and cash equivalents, accounts receivable, accounts payable and short-term debt approximate fair value due to the short-term maturities
of these instruments. The carrying amount of a portion of the Company’s long-term debt approximates fair value due to the
variable interest rates associated with the related credit facilities.
Bulk Partners (Bermuda) Ltd.
Notes to
Consolidated Financial Statements - Continued
Years Ended December 31, 2013 and 2012
NOTE 2 -
Summary
of Significant Accounting Policies - C
ontinued
At December 31, 2013 and
2012, the Company has ten fixed rate debt facilities. The aggregate carrying amounts and fair values of the long-term debt associated
with the fixed rate borrowing arrangements are as follows:
|
|
|
December 31,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amount of long-term debt
|
|
$
|
83,046,146
|
|
|
$
|
10,040,500
|
|
|
Fair value of long-term debt
|
|
|
85,855,343
|
|
|
|
10,805,290
|
|
Fair values of these debt obligations
were estimated based on quoted market prices for the same or similar issues of debt with the same remaining maturities, which is
considered Level 2 in the fair value hierarchy established by ASC 820.
Revisions and Reclassifications:
The Company identified certain
immaterial errors and revised its financial statements for the year ended December 31, 2012 to correct these immaterial errors.
These revisions relate to certain equity transactions that were previously recorded as a reduction in retained earnings in the
consolidated statement of changes in convertible redeemable preferred stock and stockholders’ equity at December 31, 2012.
For certain transactions, a portion of the adjustment which was originally recorded against retained earnings has been reclassified
as a reduction against additional paid-in capital, reducing the additional paid-in capital balance to $197,035, and eliminating
the accumulated deficit with a resulting retained earnings balance of $174,385. In addition, the Company previously had not properly
reflected the impact of the beneficial conversion features and other changes in the carrying value of the convertible preferred
stock in determining its earnings per share available to its common shareholders. These revisions, as summarized in the tables
below, had no effect on the Company’s previously reported consolidated income or total shareholders’ equity.
|
|
|
December 31, 2012
|
|
|
|
|
As Reported
|
|
|
Adjustment
|
|
|
As Revised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
$
|
5,284,042
|
|
|
$
|
(5,087,007
|
)
|
|
$
|
197,035
|
|
|
Retained earnings (accumulated deficit)
|
|
|
(4,912,622
|
)
|
|
|
5,087,007
|
|
|
|
174,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
90.33
|
|
|
|
(121.10
|
)
|
|
|
(30.77
|
)
|
|
Diluted
|
|
|
90.33
|
|
|
|
(121.10
|
)
|
|
|
(30.77
|
)
|
In addition,
certain prior year amounts in the consolidated financial statements have been revised to conform to the current year’s presentation.
The Company identified bank fees paid to financial institutions to obtain financings (net of accumulated amortization) of $1,066,114
that were reclassified from deferred financing costs to secured long-term debt in the consolidation balance sheets at December
31, 2012. Changes in restricted cash totaling $396,947 were reclassified from operating activities on the consolidated statement
of cash flows for the year ended December 31, 2012 to financing activities.
Bulk Partners (Bermuda) Ltd.
Notes to
Consolidated Financial Statements - Continued
Years Ended December 31, 2013 and 2012
NOTE 3 - EARNINGS PER SHARE
The Company has one participating
security (the convertible redeemable preferred stock) and has no other potentially dilutive securities. For both 2013 and 2012
the diluted EPS reflects the two-class method, as it is more dilutive than the if-converted method. The computations of basic earnings
per common share and diluted earnings per common share for 2013 and 2012 are as follows:
|
|
|
Year Ended December 31,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
Net Income attributable to Bulk Partners (Bermuda) Ltd.
|
|
$
|
15,452,369
|
|
|
$
|
13,853,879
|
|
|
Less: dividends declared on convertible redeemable preferred stock
|
|
|
(6,288,456
|
)
|
|
|
(4,187,985
|
)
|
|
Less: modification of conversion price
|
|
|
-
|
|
|
|
(1,372,149
|
)
|
|
Less: beneficial conversion
|
|
|
(8,959,421
|
)
(i)
|
|
|
(4,584,271
|
)
|
|
Less: settlement of accrued dividends
|
|
|
(45,843
|
)
|
|
|
(1,185,050
|
)
|
|
Less: settlement of notes
|
|
|
(1,429,217
|
)
|
|
|
-
|
|
|
Less: fair value adjustment
|
|
|
(7,517,915
|
)
|
|
|
(5,211,325
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total earnings allocated to common stock
|
|
$
|
(8,788,483
|
)
|
|
$
|
(2,686,901
|
)
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
Weighted-average number of shares of common stock outstanding
|
|
|
87,329
|
|
|
|
87,329
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted EPS - common stock
|
|
$
|
(100.64
|
)
|
|
$
|
(30.77
|
)
|
|
|
(i)
|
The fair value of the beneficial conversion adjustment to net income for purposes of calculating
EPS is $8,959,421. However retained earnings was reduced by $4,927,423, with the remaining amount recorded as a reduction in APIC.
|
NOTE 4 - VARIABLE INTEREST ENTITIES
The Company has evaluated all of
the wholly and partially-owned entities as well as entities with common ownership or other relationships, pursuant to ASC 810.
A summary of the Company’s consolidation policy is provided at Note 2. The Company has concluded that Bulk Pangaea,
Bulk Discovery, Bulk Cajun, Bulk Patriot, Bulk Juliana, Bulk Liberty, Bulk Providence, Bulk Atlantic, Bulk Trident, Bulk Phoenix,
Bulk Barents, Bulk Bothnia, NBH, Long Wharf, NBHC and NBVH should be consolidated as VIEs at December 31, 2013. The Company has
concluded that Bulk Juliana, Bulk Trident, Bulk Pangaea, Bulk Discovery, Bulk Cajun, Bulk Patriot, NBH, Long Wharf, Odyssey and
Orion should be consolidated as VIEs at December 31, 2012.
Bulk Partners (Bermuda) Ltd.
Notes to
Consolidated Financial Statements - Continued
Years Ended December 31, 2013 and 2012
NOTE 4 - VARIABLE INTEREST ENTITIES - Continued
Bulk Pangaea, Bulk Discovery, Bulk
Patriot, Bulk Juliana, Bulk Liberty, Bulk Providence, Bulk Atlantic, Bulk Trident, Bulk Phoenix, Bulk Barents and Bulk Bothnia
are wholly-owned subsidiaries that were established for the purpose of acquiring bulk carriers. The Bulk Cajun is a majority owned
subsidiary established for the purpose of acquiring bulk carriers. The Company has concluded that Bulk Pangaea, Bulk Discovery,
Bulk Patriot, Bulk Juliana, Bulk Liberty, Bulk Providence, Bulk Atlantic, Bulk Trident and Bulk Phoenix are VIEs due to the existence
of guarantees and cross-collateralization on their outstanding debt, which is indicative of an inability to finance the entities’
activities without additional subordinated financial support. The Company concluded that Bulk Barents and Bulk Bothnia are VIE’s
due to an indication from the bank that guarantees and cross collateralization of the two vessels owned by these entities will
be necessary in order to obtain financing. Accordingly, the Company has consolidated these wholly-owned subsidiaries for the years
ended December 31, 2013 and 2012. The consolidation of all of these entities increased total assets by approximately $78,840,000
and increased total liabilities by approximately $67,460,000 at December 31, 2013. Total shareholders’ equity increased
by approximately $10,840,000. The Company sold 10% of Bulk Cajun to a third party during 2013. The non-controlling interest in
Bulk Cajun was $540,000 at December 31, 2013, of which $360,000 was reclassified from other noncurrent liabilities. The consolidation
of Bulk Pangaea, Bulk Discovery, Bulk Cajun, Bulk Patriot, Bulk Juliana and Bulk Trident increased total assets by approximately
$51,730,000 and increased total liabilities by approximately $44,260,000 at December 31, 2012. Total shareholders’ equity
increased by approximately $7,470,000.
In April 2009, the Company
acquired a 51% interest in NBH. The Company determined that NBH is a VIE due to the fact that NBH’s total equity investment
at risk is not sufficient to permit it to finance its activities without additional subordinated financial support. Furthermore,
the Company determined that it is NBH’s primary beneficiary, as it has a controlling financial interest in NBH, and has the
power to direct the activities of the entity. Accordingly, the Company has consolidated NBH for the years ended December 31,
2013 and 2012. The consolidation of NBH increased total assets by approximately $16,825,000 and $17,470,000, and increased total
liabilities by approximately $14,280,000 and $13,100,000 at December 31, 2013 and 2012, respectively. Total shareholders’
equity increased by approximately $1,357,000 and $4,370,000 at December 31, 2013 and 2012, respectively. Amounts pertaining
to the non-controlling ownership interest held by third parties in the financial position and operating results of NBH are reported
as non-controlling interest in the accompanying consolidated balance sheets. The non-controlling ownership interest attributable
to NBH amounts to approximately $1,189,000 and $2,101,000 as of December 31, 2013 and 2012, respectively. During 2013, the
Company lent NBC $3,500,000 in order to provide working capital. The total loan, which was eliminated in consolidation, was outstanding
at December 31, 2013. NBC repaid $2,500,000 of the loan in February 2014.
In September 2009,
certain owners of the Company established a new realty company, Long Wharf, for the purpose of buying a new office building. The
Company determined that Long Wharf is a VIE as Long Wharf’s total equity investment at risk is not sufficient to permit it
to finance its activities without additional subordinated financial support. The Company determined that the entities/individuals
that have a variable interest in Long Wharf are also related parties, and that none of those entities individually meet the criteria
to be the primary beneficiary, as none have the obligation to absorb the entity’s losses; therefore, since the Company represents
the party within the related party group that is most closely associated with the VIE, the Company concluded it was the primary
beneficiary. Accordingly, the Company has consolidated Long Wharf for the years ended December 31, 2013 and 2012. The consolidation
of Long Wharf increased total assets by approximately $984,000 and $960,000 and increased total liabilities by approximately $1,195,000
and $1,230,000 at December 31, 2013 and December 31, 2012, respectively. Total shareholders’ equity decreased by approximately
$211,000 and $270,000 at December 31, 2013 and 2012, respectively. There is no non-controlling ownership interest related
to Long Wharf.
Bulk Partners (Bermuda) Ltd.
Notes to
Consolidated Financial Statements - Continued
Years Ended December 31, 2013 and 2012
NOTE
4 - VARIABLE INTEREST ENTITIES - Continued
Odyssey and Orion were established
in March 2012, together with an unrelated third-party, for the purpose of acquiring the m/v Bulk Nordic Odyssey and the m/v Bulk
Nordic Orion. At December 31, 2012 the Company had a 50% ownership interest in each, Odyssey and Orion, the remainder of each was
owned by a third-party. The operating results of Odyssey and Orion are 100% dependent on transactions with related parties and
affiliates. Accordingly, the Company has consolidated these entities for the year ended December 31, 2012. The Company determined
that Odyssey and Orion are VIEs, as the total equity investment at risk is not sufficient to support the operation of these entities.
Furthermore, the Company determined that it is the primary beneficiary of Odyssey and Orion, as it has the controlling financial
interest in these entities, and has the power to direct the entities activities. Accordingly, the Company has consolidated Odyssey
and Orion for the year ended December 31, 2012.
The consolidation of Odyssey and
Orion increased total assets by approximately $54,360,000 and increased total liabilities by approximately $52,180,000 at December 31,
2012. Total shareholders’ equity increased by approximately $2,180,000 at December 31, 2012. Amounts pertaining to the
non-controlling ownership interest in the financial position and operating results of these entities are reported as non-controlling
interest in the accompanying consolidated balance sheets. The non-controlling ownership interest amounts to approximately $1,100,000
at December 31, 2012. In January 2013, the Company entered into a share transfer restructuring agreement and the Odyssey and
Orion were transferred to Nordic Bulk Holding Company Ltd. (“NBHC”).
NBHC was established in March 2012,
for the purpose of acquiring the m/v Nordic Odyssey, the m/v Nordic Orion and to invest in additional vessels, all through wholly-owned
subsidiaries. In January 2013, the Company entered into a Share Transfer Restructuring Agreement through which the shareholders
of Odyssey and Orion transferred their shares of those entities and their zero-interest subordinated shareholder loans to these
entities, to NBHC in exchange for the shares of NBHC.
Each of the ship owning companies
owned by NBHC entered into a Head Charterparty Agreement to charter the owned vessel to ST Shipping and Transport Ltd. (“STST”),
which in turn, entered into a Sub-Charterparty Agreement with NBC under a five year, fixed price, time charter arrangement. The
Company determined that NBHC is a VIE, as the total equity investment at risk is not sufficient to support operations. Furthermore,
the Company determined that it is the primary beneficiary of NBHC, as it has the power to direct its activities. Accordingly, the
Company has consolidated NBHC for the year ended December 31, 2013. The consolidation of NBHC increased total assets by approximately
$72,000,000 and increased total liabilities by approximately $52,810,000 at December 31, 2013. Total shareholders’ equity
increased by approximately $430,000 at December 31, 2013. Amounts pertaining to the non-controlling ownership interest held
by third parties in the financial position and operating results of NBHC are reported as non-controlling interest in the accompanying
consolidated balance sheets. The non-controlling ownership interest attributable to NBHC amounts to approximately $18,760,000 at
December 31, 2013.
Bulk Partners (Bermuda) Ltd.
Notes to
Consolidated Financial Statements - Continued
Years Ended December 31, 2013 and 2012
NOTE 4 - VARIABLE INTEREST ENTITIES - Continued
BVH was established in August 2013,
together with a third-party, for the purpose of owning Bulk Nordic Five Ltd. (“Five”) and Bulk Nordic Six Ltd. (“Six”).
Five and Six were established for the purpose of owning new ultramax newbuildings to be delivered in 2016. The operating results
of BVH are 100% dependent on transactions with related parties and affiliates. The Company determined that BVH is a VIE and is
the primary beneficiary of BVH, as it has the power to direct its activities. Accordingly, the Company has consolidated BVH and
its wholly-owned subsidiaries for the year ended December 31, 2013. The consolidation of BVH increased total assets by approximately
$2,989,000 and increased total liabilities by approximately $3,008,000 at December 31, 2013. Total shareholders’ equity
decreased by approximately $12,000 at December 31, 2013. Amounts pertaining to the non-controlling ownership interest held
by third parties in the financial position and operating results of BVH are reported as non-controlling interest in the accompanying
consolidated balance sheets. The non-controlling ownership interest attributable to BVH amounts to approximately $(7,000) at December 31,
2013.
NOTE 5
- FIXED ASSETS
At December 31,
fixed assets consisted of the following:
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessels and vessel upgrades
|
|
$
|
211,458,792
|
|
|
$
|
161,722,600
|
|
|
Capitalized dry docking
|
|
|
4,716,844
|
|
|
|
3,985,559
|
|
|
|
|
|
216,175,636
|
|
|
|
165,708,159
|
|
|
Accumulated depreciation and amortization
|
|
|
(21,579,365
|
)
|
|
|
(12,076,025
|
)
|
|
Vessels, vessel upgrades and capitalized dry docking, net
|
|
|
194,596,271
|
|
|
|
153,632,134
|
|
|
|
|
|
|
|
|
|
|
|
|
Land and building
|
|
|
2,541,085
|
|
|
|
2,541,085
|
|
|
Internal use software
|
|
|
268,313
|
|
|
|
268,313
|
|
|
Computers and equipment
|
|
|
306,953
|
|
|
|
194,055
|
|
|
|
|
|
3,116,351
|
|
|
|
3,003,453
|
|
|
Accumulated depreciation
|
|
|
(558,733
|
)
|
|
|
(447,214
|
)
|
|
Other fixed assets, net
|
|
|
2,557,618
|
|
|
|
2,556,239
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed assets, net
|
|
$
|
197,153,889
|
|
|
$
|
156,188,373
|
|
Bulk Partners (Bermuda) Ltd.
Notes to
Consolidated Financial Statements - Continued
Years Ended December 31, 2013 and 2012
NOTE 5 - FIXED ASSETS - Continued
The Company’s fleet consists
of the following:
|
Vessel
|
|
Date
Acquired
|
|
|
December
31, 2012
|
|
|
Additions
|
|
|
December
31, 2013
|
|
|
Accumulated
Depreciation
|
|
|
Carrying
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
m/v BULK PANGAEA
|
|
December 21, 2009
|
|
|
$
|
27,581,075
|
|
|
$
|
-
|
|
|
$
|
27,581,075
|
|
|
$
|
(6,701,238
|
)
|
|
$
|
20,879,837
|
|
|
m/v BULK DISCOVERY
|
|
March 2, 2011
|
|
|
|
18,175,762
|
|
|
|
(81,961
|
)
|
|
|
18,093,801
|
|
|
|
(4,509,988
|
)
|
|
|
13,583,813
|
|
|
m/v BULK CAJUN
|
|
June 24, 2011
|
|
|
|
8,262,479
|
|
|
|
69,319
|
|
|
|
8,331,798
|
|
|
|
(1,765,571
|
)
|
|
|
6,566,227
|
|
|
m/v BULK PATRIOT
|
|
October 6, 2011
|
|
|
|
15,350,000
|
|
|
|
-
|
|
|
|
15,350,000
|
|
|
|
(1,776,702
|
)
|
|
|
13,573,298
|
|
|
m/v BULK JULIANA
|
|
April 25, 2012
|
|
|
|
14,750,000
|
|
|
|
918,366
|
|
|
|
15,668,366
|
|
|
|
(1,053,770
|
)
|
|
|
14,614,596
|
|
|
m/v NORDIC ODYSSEY
|
|
June 17, 2012
|
|
|
|
32,272,785
|
|
|
|
3,753
|
|
|
|
32,276,538
|
|
|
|
(2,024,142
|
)
|
|
|
30,252,396
|
|
|
m/v NORDIC ORION
|
|
June 17, 2012
|
|
|
|
32,272,785
|
|
|
|
76,128
|
|
|
|
32,348,913
|
|
|
|
(1,899,410
|
)
|
|
|
30,449,503
|
|
|
m/v BULK TRIDENT
|
|
September 4, 2012
|
|
|
|
17,043,274
|
|
|
|
|
|
|
|
17,043,274
|
|
|
|
(770,034
|
)
|
|
|
16,273,240
|
|
|
m/v BULK BEOTHUK
|
|
February 19, 2013
|
|
|
|
-
|
|
|
|
14,243,327
|
|
|
|
14,243,327
|
|
|
|
(510,977
|
)
|
|
|
13,732,350
|
|
|
m/v BULK PROVIDENCE
|
|
May 22, 2013
|
|
|
|
-
|
|
|
|
10,300,000
|
|
|
|
10,300,000
|
|
|
|
(185,623
|
)
|
|
|
10,114,377
|
|
|
m/v BULK LIBERTY
|
|
August 6, 2013
|
|
|
|
-
|
|
|
|
9,392,563
|
|
|
|
9,392,563
|
|
|
|
(175,153
|
)
|
|
|
9,217,410
|
|
|
m/v BULK NEWPORT
|
|
September 3, 2013
|
|
|
|
-
|
|
|
|
15,545,981
|
|
|
|
15,545,981
|
|
|
|
(206,757
|
)
|
|
|
15,339,224
|
|
|
|
|
|
|
|
|
$
|
165,708,159
|
|
|
$
|
50,467,476
|
|
|
$
|
216,175,636
|
|
|
$
|
(21,579,365
|
)
|
|
$
|
194,596,271
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes 8 - Related Party Transactions and Note 12 - Long-term
Debt
During the year ended December
31, 2013, the Company purchased four vessels through wholly owned subsidiaries. The total purchase price of the vessels (m/v Bulk
Beothuk, m/v Bulk Providence, m/v Bulk Liberty and m/v Bulk Newport), was approximately $49,482,000. In addition, NBHC paid deposits
of approximately $26,100,000 toward the construction of four new 1A ice class panamax vessels to be delivered in 2014 through 2016.
NBVH paid deposits of $5,790,000 toward the construction of two ultramax vessels to be delivered in 2016. These deposits are included
as deposits on newbuildings in-process on the consolidated balance sheets.
Also during 2013, the Company completed
dry-docking on the m/v Bulk Juliana. The five year amortization period of the capitalized dry docking costs is within the remaining
useful life of the vessel.
During the year ended December
31, 2012, the Company purchased four vessels, the m/v Bulk Juliana, the m/v Bulk Trident, the m/v Bulk Nordic Orion and the m/v
Bulk Nordic Odyssey. The total purchase price for these four vessels was approximately $96,300,000.
During the year ended December
31, 2012, the Company completed dry-docking on the m/v Bulk Pangaea, the m/v Bulk Discovery, and the m/v Bulk Cajun. The amortization
period of the capitalized dry docking costs (5 years) were within the remaining useful life of the above vessels, except for the
m/v Bulk Cajun. As a result of the dry-docking, the Company determined that the remaining useful life of the m/v Bulk Cajun should
be extended beyond its original estimate end of life (2014) to 2017.
Bulk Partners (Bermuda) Ltd.
Notes to
Consolidated Financial Statements - Continued
Years Ended December 31, 2013 and 2012
NOTE 6 - MARGIN ACCOUNTS
During December 31,
2013 and 2012, the Company was party to forward freight agreements and fuel swap contracts to mitigate the risk associated
with volatile freight rates and fuel prices. See Note 7 for a complete discussion of these and other derivatives. Under
the terms of the forward freight agreements and fuel swap contracts, the Company was required to put approximately $1,062,000
and $510,000, respectively, on deposit as a margin account at December 31, 2013 and 2012, respectively, due to the decline in
the market values of the items being hedged. At December 31, 2013, the deposit on freight forward agreements was
approximately $962,000 and the deposit on fuel swap contracts was $100,000. At December 31, 2012, approximately $507,000
pertains to forward freight agreements and $3,000 pertains to fuel swap contracts. This margin account is required to remain
on deposit as collateral until such time as the market values of the items being hedged return to a preset limit. The margin
accounts are included in advance hire, prepaid expenses, and other current assets in the consolidated balance sheets at
December 31, 2013 and 2012.
NOTE 7 - DERIVATIVES AND FAIR VALUE
MEASUREMENT
Interest Rate Swaps
From time to time, the Company
enters into interest rate swap agreements to mitigate the risk of interest rate fluctuations on its variable rate debt. At December 31,
2013 and 2012, the Company was party to one interest rate swap, which was entered into in February 2011, as required by the
109 Long Wharf Construction Loan agreement. Under the terms of the swap agreement, the interest rate on this note is fixed at 6.63%.
The Company did not elect to
designate the swap as a hedge at inception, pursuant to ASC 815,
Derivatives and Hedging.
Accordingly, changes in the fair
value are recorded in current earnings in the accompanying consolidated statements of income.
Derivative
instruments are as follows:
|
|
|
December 31,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap agreement on:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long Wharf Construction to Term Loan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional amount
|
|
$
|
1,032,000
|
|
|
$
|
1,032,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective dates
|
|
|
2/1/11-1/24/21
|
|
|
|
2/1/11-1/24/21
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value at year-end
|
|
|
(94,882
|
)
|
|
|
(181,382
|
)
|
The fair value of the interest
rate swap agreements at December 31, 2013 and 2012 are approximately ($94,882) and ($181,382), which are included in other current
liabilities and other non-current liabilities on the consolidated balance sheets based on the instrument’s maturity date.
The aggregate change in the fair value of the interest rate swap agreements for the years ended December 31, 2013 and 2012
was a gain of approximately $86,500 and $6,000 respectively, which are reflected in the unrealized gain on derivative instruments
in the accompanying consolidated statements of income.
Bulk Partners (Bermuda) Ltd.
Notes to
Consolidated Financial Statements - Continued
Years Ended December 31, 2013 and 2012
NOTE 7 - DERIVATIVES AND FAIR VALUE
MEASUREMENT - Continued
Forward Freight Agreements
The Company assesses risk associated
with fluctuating future freight rates and, when appropriate, actively hedges identified economic risk with appropriate derivative
instruments, specifically forward freight agreements (FFAs). Such economic hedges do not always qualify for hedge accounting under
ASC 815 and as such, the usage of such derivatives can lead to fluctuations in the Company’s reported results from operations
on a period-to-period basis. During 2013 and 2012, the Company entered into various FFAs that did not qualify for hedge accounting.
The aggregate fair values of the FFAs at December 31, 2013 and 2012 were an asset of approximately $944,200 and $168,000,
respectively, which is included in advance hire, prepaid expenses and other current assets. The change in the aggregate fair value
of the FFAs during the years ended December 31, 2013 and 2012 resulted in a gain of approximately $776,500 and $350,000, respectively,
which are included in unrealized gain on derivative instruments in the accompanying consolidated statements of income.
Fuel Swap Contracts
The Company continuously monitors
the market volatility associated with bunker prices and seeks to reduce the risk of such volatility through a bunker hedging program.
In 2013 and 2012, the Company entered into various fuel swap contracts that were not designated for hedge accounting. The aggregate
fair value of these fuel swaps at December 31, 2013 and 2012 are liabilities of $209,500 and $449,000, respectively, which
are included in other current liabilities on the consolidated balance sheets. The change in the aggregate fair value of the fuel
swaps during the years ended December 31, 2013 and 2012 were gains of approximately $239,000 and $6,000, respectively, which
are included in unrealized gain on derivative instruments in the accompanying consolidated statements of income.
Fair Value Hierarchy
The three
levels of the fair value hierarchy established by ASC 820, in order of priority, are as follows:
Level
1 –quoted prices in active markets for identical assets or liabilities
Level
2 –observable inputs other than quoted prices in active markets for identical assets and liabilities
Bulk Partners (Bermuda) Ltd.
Notes
to Consolidated Financial Statements - Continued
Years
Ended December 31, 2013 and 2012
NOTE 7 - DERIVATIVES AND FAIR VALUE
MEASUREMENT - Continued
Level
3 – unobservable inputs in which there is little or no market data available, which require the reporting entity
to develop its own assumptions
|
|
|
Balance at
December
31, 2013
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Margin accounts
|
|
$
|
1,062,439
|
|
|
$
|
1,062,439
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Interest rate swaps
|
|
|
(94,882
|
)
|
|
|
-
|
|
|
|
(94,882
|
)
|
|
|
-
|
|
|
Forward freight agreements
|
|
|
944,225
|
|
|
|
-
|
|
|
|
944,225
|
|
|
|
-
|
|
|
Fuel swap contracts
|
|
|
(209,506
|
)
|
|
|
-
|
|
|
|
(209,506
|
)
|
|
|
-
|
|
|
|
|
Balance at
December
31, 2012
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Margin accounts
|
|
$
|
509,658
|
|
|
$
|
509,658
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Interest rate swaps
|
|
|
(181,382
|
)
|
|
|
-
|
|
|
|
(181,382
|
)
|
|
|
-
|
|
|
Forward freight agreements
|
|
|
167,710
|
|
|
|
-
|
|
|
|
167,710
|
|
|
|
-
|
|
|
Fuel swap contracts
|
|
|
(448,510
|
)
|
|
|
-
|
|
|
|
(448,510
|
)
|
|
|
-
|
|
The
estimated fair values of the Company’s interest rate swap instruments, forward freight agreements and fuel swap contracts
are based on market prices obtained from an independent third-party valuation specialist. Such quotes represent the estimated amounts
the Company would receive to terminate the contracts.
Bulk Partners (Bermuda) Ltd.
Notes to
Consolidated Financial Statements - Continued
Years Ended December 31, 2013 and 2012
NOTE 8 - RELATED PARTY TRANSACTIONS
Amounts
and notes payable to related parties consist of the following:
|
|
|
December 31,
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
2012
|
|
|
Activity
|
|
|
|
|
2013
|
|
|
Included in accounts payable and accrued expenses on the consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
To Founders
|
|
$
|
203,050
|
|
|
$
|
-
|
|
|
|
|
$
|
203,050
|
|
|
Affiliated companies (trade payables)
|
|
|
91,284
|
|
|
|
(91,284
|
)
|
|
|
|
|
-
|
|
|
|
|
$
|
294,334
|
|
|
$
|
(91,284
|
)
|
|
|
|
$
|
203,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in current related party debt on the consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan payable – STST (m/v Orion)
|
|
$
|
6,250,000
|
|
|
|
(6,250,000
|
)
|
|
I
|
|
$
|
-
|
|
|
Loan payable – STST (m/v Odyssey)
|
|
|
6,250,000
|
|
|
|
(6,250,000
|
)
|
|
i
|
|
|
-
|
|
|
Loan payable – 2011 Founders Note
|
|
|
4,325,000
|
|
|
|
-
|
|
|
|
|
|
4,325,000
|
|
|
Interest payable in-kind – 2011 Founders Note
|
|
|
341,916
|
|
|
|
(45,668
|
)
|
|
ii
|
|
|
296,248
|
|
|
Loan payable – 2012 Founders Note
|
|
|
3,000,000
|
|
|
|
(3,000,000
|
)
|
|
iii
|
|
|
-
|
|
|
Interest payable in-kind – 2012 Founders Note
|
|
|
228,407
|
|
|
|
(228,407
|
)
|
|
ii
|
|
|
-
|
|
|
Loan payable – BVH shareholder (STST)
|
|
|
-
|
|
|
|
2,995,000
|
|
|
iv
|
|
|
2,995,000
|
|
|
Total current related party debt
|
|
$
|
20,395,323
|
|
|
|
(12,779,075
|
)
|
|
|
|
$
|
7,616,248
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in related party long-term debt on the consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan payable to NBHC shareholder (STST)
|
|
$
|
-
|
|
|
|
17,030,000
|
|
|
i, v
|
|
$
|
17,030,000
|
|
|
Loan payable to NBHC shareholder (ASO2020)
|
|
|
-
|
|
|
|
17,029,972
|
|
|
v, vi
|
|
|
17,029,972
|
|
|
Less unamortized discount
|
|
|
-
|
|
|
|
(16,756,054
|
)
|
|
v
|
|
|
(16,756,054
|
)
|
|
Total related party long-term debt
|
|
$
|
-
|
|
|
|
17,303,918
|
|
|
|
|
$
|
17,303,918
|
|
|
i.
|
Loans payable to STST were converted to long-term debt in conjunction with the restructuring of Odyssey and Orion in 2013 (see Note 1). In 2013, STST provided an additional $4,530,000 (to NBHC) for a total of $17,030,000, which is payable in January 2023.
|
|
ii.
|
Paid in cash
|
|
iii.
|
Paid through issuance of convertible redeemable preferred stock
|
|
iv.
|
BVH shareholder contribution of $5,000 and loan of $2,995,000 entered into for purposes of providing cash deposit on ultramax newbuildings.
|
|
v.
|
Non-interest bearing loans payable by NBHC to shareholders STST and ASO2020. Discount on loan payable is being amortized over the term of the loans, which are due January 2023.
|
|
vi.
|
ASO 2020 Maritime S.A. ("ASO2020")
|
In
connection with the acquisition of m/v Bulk Orion and m/v Bulk Odyssey in 2012, STST provided two $8,050,000 subordinated
notes (one designated for each vessel) which were payable on demand and do not bear interest. During the year ended December
31, 2012, aggregate repayments of $3,600,000 were made against these notes.
Bulk Partners (Bermuda) Ltd.
Notes to
Consolidated Financial Statements - Continued
Years Ended December 31, 2013 and 2012
NOTE 8 - RELATED PARTY TRANSACTIONS
- Continued
The Company restructured its existing
related party loans payable to STST at December 31, 2012 to modify the repayment date to January 9, 2023, which was accounted for
as a modification under ASC 470-50.
In January 2013, the Company entered
into a Share Transfer Restructuring Agreement through which the shareholders of Odyssey and Orion transferred their shares of those
entities and their zero interest subordinated shareholder loans to these entities, to NBHC in exchange for the shares of NBHC.
Also during 2013, NBHC entered
into contracts to purchase four 1A ice-class newbuildings and paid deposits of $26,100,000. ST Shipping provided an additional
$4,530,000, thereby increasing its loan to $17,030,000. The newest shareholder, ASO2020, also provided $17,030,000 in loans and
acquired one-third of the common stock of NBHC for approximately $13,000. These loans are payable on January 9, 2023 and do not
bear interest. Accordingly, the loans are carried at the present value of the future cash flows utilizing an imputed interest rate
of 7.5% (which was determined by reference to rates of comparable companies on similar subordinated debt instruments). The discount
of $17,873,285 is being amortized over the term of the loan using the interest method. The amortization of the discount was $1,117,231
for the year ended December 31, 2013. The excess of cash received over the present value of the loans was recorded as an increase
to non-controlling interest.
BVH entered into an agreement for
the construction of two new ultramax newbuildings in 2013. ST Shipping provided a loan of $2,995,000 to make deposits on the contracts.
The loan is payable on demand and does not bear interest.
During the year ended December
31, 2012, in connection with the acquisition of the m/v Bulk Orion and m/v Bulk Odyssey, bridge financing of $32,000,000 was provided
by ST Shipping, a shareholder of Bulk Orion and Bulk Odyssey. This three month bridge loan bore interest at a floating rate of
LIBOR plus 7%. The loan and the related accrued interest were repaid in full during the year ended December 31, 2012.
On October 1, 2011, the Company
entered into a $10,000,000 loan agreement with the Founders, which was payable on demand at the request of the lenders (the 2011
Founders Note). The note bears interest at a rate of 5%. On January 1, 2012 the Company issued 5,675 shares of convertible
redeemable preferred stock to the Founders, representing a partial repayment of the note (see Note 11), the balance of which was
$4,325,000 at December 31, 2013 and 2012.
On April 16, 2012, the Founders
loaned the Company $11,057,500 (the 2012 Founders Note) under the same terms as the 2011 Founders Note in order for the Company
to invest in Bulk Orion and Bulk Odyssey. During the year ended December 31, 2012 the Company repaid $8,057,500 of principal on
this note. The remainder of the loan was repaid in 2013 through issuance of convertible redeemable preferred stock (see Note 11).
In April 2012 the Company entered
into a short term loan agreement with an affiliate for $2,500,000. This loan was repaid in September 2012 along with interest of
$58,562. On June 15, 2011, the Company entered into a loan agreement with an affiliate for $5,000,000. This loan bore interest
at a rate of 8% and was repaid in October 2011, with the exception of the related accrued interest which was paid during the
year ended December 31, 2012.
Bulk Partners (Bermuda) Ltd.
Notes to
Consolidated Financial Statements - Continued
Years Ended December 31, 2013 and 2012
NOTE 8 - RELATED PARTY TRANSACTIONS
- Continued
Under the terms of a technical
management agreement between the Company and Seamar Management S.A. (Seamar), an equity method investee, Seamar is responsible
for the day-to-day operations for all of the Company’s owned vessels. During the years ended December 31, 2013 and 2012,
the Company incurred technical management fees of $1,864,000 and $1,201,000 under this arrangement, which is included in vessel
operating expenses in the consolidated statements of income.
NOTE 9 - LINE OF CREDIT
During the year ended December
2012, the Company entered into a revolving line of credit with a maximum capacity of $3,000,000. Borrowings under of the line of
credit are due upon expiration of the line of credit. The expiration date was extended to May 19, 2014 from its original expiration
date of November 19, 2013. The line of credit contains certain covenants including a liquidity covenant that may result in the
acceleration of the payment of the borrowings. Borrowings under the line are secured by personal guarantees of the Founders, as
well as collateralized against a personal account of one of the Founders held at the lending bank. Interest is payable at Prime
+ 1% (4.25% at December 31, 2013 and 2012). As of December 31, 2013 the Company was in compliance with all required covenants.
NOTE 10 - SECURED LONG-TERM DEBT
Long-term debt consisted of
the following at December 31:
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
$
|
100,759,063
|
|
|
$
|
82,955,489
|
|
|
Less: current portion
|
|
|
16,065,483
|
|
|
|
13,390,382
|
|
|
|
|
|
84,693,580
|
|
|
|
69,565,107
|
|
|
Unamortized bank fees
|
|
|
(1,391,159
|
)
|
|
|
(1,079,354
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Secured long-term debt, net
|
|
$
|
83,302,421
|
|
|
$
|
68,485,753
|
|
Each of the facilities described below
is secured by the vessel indicated and cross-collateralized as noted. As such, there is no priority in liquidation of any individual
facility.
In April
2013, the Company executed a Senior Secured Post-Delivery Term Loan Facility that amended the Bulk Pangaea, Bulk Patriot, Bulk
Trident, and Bulk Juliana Secured Notes. Amendments included the extension of the Bulk Pangaea secured note maturity date, and
conversion of all loans from floating variable rate to a fixed interest rate.
Bulk Partners (Bermuda) Ltd.
Notes to
Consolidated Financial Statements - Continued
Years Ended December 31, 2013 and 2012
NOTE 10 - LONG-TERM DEBT -
Continued
|
|
|
December 31,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
Bulk Pangaea Secured Note, initial amount of $12,250,000, entered into in December 2009, for the acquisition of m/v Bulk Pangaea. The interest rate was fixed at 3.96% in April 2013, in conjunction with the post-delivery amendment discussed above. The amendment also modified the repayment schedule to 15 equal quarterly payments of $346,875 ending in January 2017. The facility bore interest at LIBOR plus 4% (4.31%) at December 31, 2012 and was hedged through an interest rate swap agreement that expired in March 2012. (B) (C) (G) (H)
|
|
$
|
4,509,375
|
|
|
$
|
5,562,500
|
|
|
|
|
|
|
|
|
|
|
|
|
Bulk Discovery Secured Note, initial amount of $9,120,000, entered into in February 2011, for the acquisition of the m/v Bulk Discovery. Loan requires repayment in 20 equal quarterly installments of $356,000 beginning in June 2011 with a balloon payment of $2,000,000 together with the last quarterly installment. Interest is fixed at a rate of 8.16%. (A) (D)
|
|
|
5,204,000
|
|
|
|
6,628,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Bulk Patriot Secured Note, initial amount of $12,000,000, entered into in September 2011, for the acquisition of the m/v Bulk Patriot. Loan requires repayment in 24 equal quarterly installments of $500,000 beginning in January 2012. The interest rate was fixed at 4.01% in April 2013 in conjunction with the post-delivery amendment discussed above. The facility bore interest at LIBOR plus 3.5% (3.81%) at December 31, 2012. (B) (C) (G) (J)
|
|
|
7,212,500
|
|
|
|
9,662,500
|
|
|
|
|
|
|
|
|
|
|
|
|
Bulk Cajun Secured Note, initial amount of $4,550,000, entered into in October 2011, for the acquisition of the m/v Bulk Cajun. Loan requires repayment in 16 equal quarterly installments of $284,375 beginning in January 2012 with a balloon payment of $2,000,000 together the last quarterly installment. Interest is fixed at 6.51% . (A) (D)
|
|
|
1,990,625
|
|
|
|
3,412,500
|
|
Bulk Partners (Bermuda) Ltd.
Notes to
Consolidated Financial Statements - Continued
Years Ended December 31, 2013 and 2012
NOTE 10 - LONG-TERM DEBT - Continued
|
Long Wharf Construction to Term Loan, initial amount of $1,048,000, entered into in January 2011, to partially finance the construction of the Company’s corporate office building. Loan requires repayment of interest only, payable monthly commencing on March 1, 2011 through February 28, 2012; thereafter, principal and interest are payable in monthly installments based on a 25 year amortization schedule with a final balloon payment of all unpaid principal and accrued interest due January 2021. Interest is floating at LIBOR, plus 2.85% (3.03% and 3.43% at December 31, 2012 and December 31, 2011, respectively). The Company entered into an interest rate swap agreement, which matures January 2021, and fixes the interest rate at 6.63%. (E)
|
|
$
|
1,016,834
|
|
|
$
|
1,034,260
|
|
|
|
|
|
|
|
|
|
|
|
|
Bulk Trident Secured Note, initial amount of $10,200,000, entered into in April 2012, for the acquisition of the m/v Bulk Trident. Loan requires repayment in 24 equal quarterly installments of $318,750 beginning in December 2012 with a balloon payment of $2,550,000 together with the last quarterly installment. Interest was fixed at 4.29% in April 2013 in conjunction with the post-delivery amendment discussed above. Interest was floating at LIBOR plus 3.5% (3.81%) at December 31, 2012. (B) (G) (J)
|
|
|
8,925,000
|
|
|
|
9,881,250
|
|
|
|
|
|
|
|
|
|
|
|
|
Bulk Juliana Secured Note, initial amount of $8,112,500, entered into in April 2012, for the acquisition of the m/v Bulk Juliana. Loan requires repayment in 24 equal quarterly installments of $338,021 beginning in October 2012. Interest was fixed at 4.38% in April 2013 in conjunction with the post-delivery amendment discussed above. Interest was floating at LIBOR plus 3.75% (4.07%) at December 31, 2012. (B) (G) (K)
|
|
|
6,422,395
|
|
|
|
7,774,479
|
|
|
|
|
|
|
|
|
|
|
|
|
Bulk Nordic Odyssey and Bulk Nordic Orion Loan Agreement, initial amount of $40,000,000, entered into on August 6, 2012, for the acquisition of the m/v Bulk Odyssey and the m/v Bulk Orion. The agreement requires repayment in 20 quarterly installments of $1,000,000 beginning in October 2012, with an additional $1,000,000 installment payable on the 5
th
, 9
th
and 17
th
installment dates and a balloon payment of $17,000,000 due with the final installment. Interest is floating at LIBOR plus 3.25% (3.56% at December 31, 2013 and 2012). (F)
|
|
|
34,000,000
|
|
|
|
39,000,000
|
|
Bulk Partners (Bermuda) Ltd.
Notes to
Consolidated Financial Statements - Continued
Years Ended December 31, 2013 and 2012
NOTE 10 - LONG-TERM DEBT - Continued
|
Bulk Atlantic Secured Note, initial amount of $8,520,000, entered into on February 18, 2013, for the acquisition of m/v Bulk Beothuk. Loan requires repayment in 8 equal quarterly installments of $90,000 beginning in May 2013, 12 equal quarterly installments of $295,000 and a balloon payment of $4,260,000 due in February 2018. Interest is fixed at 6.46%.
|
|
$
|
8,250,000
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Bulk Providence Secured Note, initial amount of $8,000,000, entered into in May 2013, for the acquisition of m/v Bulk Providence. Loan requires repayment in 8 equal quarterly installments of $120,000, 16 equal quarterly installments of $190,000 and a balloon payment of $4,000,000 due in July 2019. Interest is fixed at 4.38%. (B)(G)
|
|
|
7,760,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Bulk Liberty Secured Note, initial amount of $5,685,000, entered into on July 2013, for the acquisition of m/v Bulk Liberty. Loan requires repayment in 19 equal quarterly installments of $149,605 beginning in January 2014 and a balloon payment of $2,842,505 due in February 2018. Interest is fixed at 7.06%. (A)(D)
|
|
|
5,685,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Bulk Phoenix Secured Note, initial amount of $10,000,000, entered into in May 2013, for the acquisition of m/v Bulk Newport. Loan requires repayment in 7 equal quarterly installments of $216,667 and 16 equal quarterly installments of $416,667 with a balloon payment of $1,816,659 due in July 2019. Interest is fixed at 5.09%. (B)(G)
|
|
|
9,783,334
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100,759,063
|
|
|
|
82,955,489
|
|
|
Less: current portion
|
|
|
16,065,483
|
|
|
|
13,390,382
|
|
|
Long term debt
|
|
$
|
84,693,580
|
|
|
$
|
69,565,107
|
|
|
|
(A)
|
The Bulk Cajun Secured Note, the Bulk Discovery Secured Note, the Bulk Atlantic Secured Note and
the Bulk Liberty Secured Note are cross-collateralized by the vessels Bulk Discovery, Bulk Cajun, Bulk Beothuk and Bulk Liberty
and are guaranteed by the Company.
|
Bulk Partners (Bermuda) Ltd.
Notes to
Consolidated Financial Statements - Continued
Years Ended December 31, 2013 and 2012
NOTE 10 - LONG-TERM DEBT - Continued
|
|
(B)
|
The Bulk Pangaea Secured Note, the Bulk Patriot Secured Note, the Bulk Juliana Secured Note, the
Bulk Trident Secured Note, the Bulk Providence Secured Note and the Bulk Newport Secured Note are cross-collateralized by the vessels
Bulk Pangaea, Bulk Patriot, Bulk Juliana, Bulk Trident, Bulk Providence and Bulk Phoenix and are guaranteed by the Company.
|
|
|
(C)
|
The Bulk Pangaea Secured Note and the Bulk Patriot Secured Note contain financial covenants that,
among other things, limit the Company’s consolidated leverage ratio, as defined; requires the Company to maintain a minimum
consolidated net worth, as defined; requires the Company to maintain a minimum consolidated debt service coverage ratio, as defined;
and requires the Company to maintain a consolidated minimum liquidity, as defined.
|
|
|
(D)
|
The Bulk Discovery Secured Note, the Bulk Cajun Secured Note, the Bulk Atlantic Secured Note and
the Bulk Liberty Secured Note contain financial covenants that require the Company to maintain a minimum consolidated net worth,
and require the Company to maintain a minimum EBITDA to fixed charges ratio tested annually, as defined. In addition, these notes
contain other Company and vessel related covenants that, among other things, restrict changes in management and ownership of the
vessel, declaration of dividends, further indebtedness and mortgaging of a vessel without the bank’s prior consent. It also
requires minimum collateral maintenance, which is tested at the discretion of the lender.
|
|
|
(E)
|
The Construction Loan is collateralized by all real estate located at 109 Long Wharf, Newport,
RI, as well as personal guarantees from the Founders and a corporate guarantee of the Company. The Company was also required to
provide a cash deposit as collateral for the note, which was classified in other non-current assets as of December 31, 2011 in
the consolidated balance sheet. At completion of the construction in April 2012, the cash deposit was released to the Company.
The Construction Loan contains one financial covenant that requires the Company to maintain a minimum debt service coverage ratio.
|
|
|
(F)
|
The Bulk Nordic Orion and the Bulk Nordic Odyssey Loan Agreement (“the Agreement”),
is secured by first preferred mortgages on the m/v Bulk Orion and the m/v Bulk Odyssey, the assignment of the earnings, insurances
and requisite compensation of the two entities, and by guarantees of their shareholders. Additionally, the Agreement contains one
financial covenant that requires the Company to maintain minimum liquidity in addition to a collateral maintenance ratio clause
which requires the aggregate fair market value of the vessel plus the net realizable value of any additional collateral previously
provided to remain above defined ratios.
|
|
|
(G)
|
This secured note may require mandatory additional principal payments based on the operating cash
flows of the related vessel.
|
|
|
(H)
|
The Bulk Pangaea Secured Note was amended in April 2013. Amendments included the extension of the
loan maturity date to January 2017 and the conversion of the interest rate from a floating variable rate to a fixed interest rate
of 3.96%.
|
|
|
(I)
|
The Bulk Patriot Secured Note was amended in April 2013 resulting in the conversion of the interest
rate from a floating variable rate to a fixed interest rate of 4.01%.
|
Bulk Partners (Bermuda) Ltd.
Notes to
Consolidated Financial Statements - Continued
Years Ended December 31, 2013 and 2012
NOTE 10 - LONG-TERM DEBT - Continued
|
|
(J)
|
The Bulk Trident Secured Note was amended in April 2013 resulting in the conversion of the interest
rate from a floating variable rate to a fixed interest rate of 4.29%.
|
|
|
(K)
|
The Bulk Juliana Secured Note was amended in April 2013 resulting in the conversion of the interest
rate from a floating variable rate to a fixed interest rate of 4.38%.
|
The Secured Notes as outlined above
also contain collateral maintenance ratio clauses. If the Company encountered a change in financial condition which, in the opinion
of the lender, is likely to affect the Company’s ability to perform its obligations under the loan facility, the Company’s
credit agreement could be cancelled at the lender’s sole discretion. The lender could then elect to declare the indebtedness,
together with accrued interest and other fees, to be immediately due and payable, and proceed against any collateral securing such
indebtedness. As of December 31, 2013 and 2012, the Company was in compliance with all required covenants.
The future minimum annual payments under the debt agreements
are as follows:
|
|
|
Years ending
December 31,
|
|
|
|
|
|
|
|
2014
|
|
$
|
16,065,483
|
|
|
2015
|
|
|
16,506,108
|
|
|
2016
|
|
|
17,909,321
|
|
|
2017
|
|
|
27,201,673
|
|
|
2018
|
|
|
15,136,255
|
|
|
Thereafter
|
|
|
7,940,223
|
|
|
|
|
|
|
|
|
|
|
$
|
100,759,063
|
|
NOTE 11
- CONVERTIBLE REDEEMABLE PREFERRED STOCK, COMMON STOCK AND NON-CONTROLLING INTEREST
Common stock
The Company has 199,829 shares
of common stock ($1.00 par value) authorized, of which 87,329 shares were issued to the Founders at inception, for aggregate proceeds
of $600,000 (or $6.87 per share). The balance of authorized common shares (112,500 shares) has been reserved for issuance upon
conversion of preferred shares to common.
Dividends on common stock are
recorded when declared by the Board of Directors.
Bulk Partners (Bermuda) Ltd.
Notes to
Consolidated Financial Statements - Continued
Years Ended December 31, 2013 and 2012
NOTE 11
- CONVERTIBLE REDEEMABLE PREFERRED STOCK, COMMON STOCK AND NON-CONTROLLING INTEREST - Continued
Convertible redeemable preferred
stock
The Company has authorized 112,500
shares of convertible redeemable preferred stock ($1,000 par value) of which 89,114 shares and 64,047 shares were outstanding at
December 31, 2013 and 2012, respectively.
The characteristics of the convertible
redeemable preferred stock include:
Ranking
: The convertible
redeemable preferred stock ranks senior to the common stock with respect to payment of dividends and amounts upon liquidation,
dissolution, or winding up.
Dividends
: Annual dividends
declared are paid on a preferential basis to the holders of the convertible redeemable preferred stock. The amount of the dividend
is equal to the higher of (i) 8% of the outstanding preferred shares, or (ii) the total dividends declared by the Company multiplied
by the ratio of convertible redeemable preferred stock to the total weighted common and convertible redeemable preferred stock
outstanding (“the formula”). The preferred dividends are cumulative, such that all accrued and unpaid preferred dividends
must be paid before any dividends can be paid to the common shareholders. Additionally, the convertible redeemable preferred stock
is participating in dividends with the common shareholders.
Liquidation Preference
:
Upon any liquidation, dissolution, or winding up of the Company, the holders of the convertible redeemable preferred stock are
entitled to receive, prior and in preference to any distribution or payment made to holders of common stock, an amount equal to
the greater of (i) an aggregate preference amount of all of the shares held by such holder, and (ii) the amount that such holder
would be entitled to receive in connection with an applicable liquidation event had such holder converted all shares then held
by such holder into common stock immediately prior to such event.
Upon a Change in Control
:
The holders of the convertible redeemable preferred stock are entitled to receive a cash payment from the Company based on what
they would have received had they converted their convertible redeemable preferred stock to common stock.
Voting Rights
: The holders
of the convertible redeemable preferred stock are entitled to vote on all matters submitted to the shareholders on a basis consistent
with that of the common stock shareholders. During any period in which the investors own less than 20% of the common shares outstanding,
the Company is restricted from taking certain actions without the prior written consent of the investors. Furthermore, during any
period in which the investors own 20% or more of the common shares outstanding, the Company is also restricted from taking certain
actions without the prior written consent of the investors.
Conversion:
The convertible
redeemable preferred stock automatically converts to common stock upon a qualified public offering. After the initial restructuring,
or at the request of the convertible redeemable preferred stockholders upon certain events as defined, the convertible redeemable
preferred stock will convert to common stock based on a predetermined calculation. The calculation grants one share of common stock
for each share of convertible redeemable preferred stock at a conversion price of $1,000 per share, and provides for additional
common stock for any accrued preferred dividends granted by the Company.
Bulk Partners (Bermuda) Ltd.
Notes to
Consolidated Financial Statements - Continued
Years Ended December 31, 2013 and 2012
NOTE 11
- CONVERTIBLE REDEEMABLE PREFERRED STOCK, COMMON STOCK AND NON-CONTROLLING INTEREST - Continued
During 2012 the Company amended
the convertible redeemable preferred stockholder agreement to revise the conversion price to $916.07 per share. The Company accounted
for the reduction in the conversion price as a modification. As a result, the increase in the value of the conversion option of
approximately $1,372,000 was accounted for as a preferred stock discount with a corresponding increase in additional paid-in-capital.
The preferred stock discount was amortized as a dividend at the measurement date, resulting in a decrease in retained earnings.
Redemption:
If a qualified
public offering does not occur by December 31, 2013 (which was changed to December 31, 2014 subsequent to the balance sheet
date), and based on the level of investment made by the investors at such time, the investors can require the Founders to repurchase
all (or a portion, depending on the circumstances) of the outstanding preferred shares. Proceeds used to affect such redemption
may come from various sources including, but not limited to, the liquidation of the Company. Additional circumstances under which
the convertible redeemable preferred stock would be redeemed include a change of control, receipt of Key Man Life insurance proceeds
or an Event of Noncompliance, as defined.
Convertible redeemable preferred
stock transactions during the years ended December 31, 2013 and 2012 were as follows:
In 2012, the Company issued
20,564 shares of convertible redeemable preferred stock for gross proceeds of $20,564,000, less issuance costs of approximately
$256,000. The excess of the fair value of the convertible redeemable preferred stock over the issuance price, approximately $5,211,000,
is recorded as a reduction in retained earnings.
In 2012, the Company also issued
1,852.885 shares of convertible redeemable preferred stock as payment of certain accrued preferred stock dividends declared in
2011. In addition, the Company paid $1,000,000 cash and issued 4,325 shares of convertible redeemable preferred stock in settlement
of certain accrued common stock dividends declared in 2008 and as a payment in-kind of certain common stock dividends declared
in 2012. The excess of the carrying amount of the accrued dividends over the fair value of the convertible redeemable preferred
stock of approximately $1,185,050 was recorded as a reduction in retained earnings.
Also in 2012, the Company issued
5,675.000 shares of convertible redeemable preferred stock as a partial repayment of the $10 million shareholder loan made in 2011.
There was no excess of carrying value of the loan payable over the fair value of the convertible redeemable preferred stock at
issuance date.
Additionally, during 2012 the
Company issued 6,000.000 shares of convertible redeemable preferred stock in settlement of certain accrued common stock dividends
declared during the year. There was no excess of carrying value of the dividend payable over the fair value of the convertible
redeemable preferred stock at issuance date.
In January 2013, the Company
issued 167.309 shares of convertible redeemable preferred stock as payment of certain accrued preferred stock dividends declared
in 2012. The excess of the carrying amount of the accrued dividends over the fair value of the convertible redeemable preferred
stock of approximately $45,843 was recorded as a decrease in retained earnings.
Bulk Partners (Bermuda) Ltd.
Notes to
Consolidated Financial Statements - Continued
Years Ended December 31, 2013 and 2012
NOTE 11
- CONVERTIBLE REDEEMABLE PREFERRED STOCK, COMMON STOCK AND NON-CONTROLLING INTEREST - Continued
In January, April and October
of 2013, the Company issued a total of 3,000.00 shares of convertible redeemable preferred stock as final repayment of the $11
million shareholder loan made in 2012. The excess of carrying value of the loan payable over the fair value of the convertible
redeemable preferred stock was $1,429,217. Of this amount, $1,261,797 was recorded as a reduction in retained earnings and $167,420
was recorded as a decrease in additional paid-in capital.
At various dates during 2013,
the Company issued 21,899.181 shares of convertible redeemable preferred stock for gross proceeds of $21,899,181, less issuance
costs of approximately $274,000. The excess of the fair value of the convertible redeemable preferred stock over the issuance price
was $7,517,915. Of this amount, $7,105,607 was recorded as a reduction in retained earnings and $412,308 was recorded as a decrease
in additional paid-in capital.
The beneficial conversion feature
of the convertible redeemable preferred stock resulted in an aggregate reduction in retained earnings totaling $4,927,423 and $4,584,272
for the years ended December 31, 2013 and 2012, respectively.
Dividends
During 2012, the Company declared
a special $9,100,000 common stock dividend. The preferred shareholders pro rata share of the dividend was less than 8% of the weighted
preferred shares outstanding. Accordingly, the preferred shareholders were entitled to their pro rata share of the common stock
dividend, which amounted to approximately $4,021,000 and an sadditional 8% convertible redeemable preferred stock dividend catch-up
in the amount of $167,305. A total of $6,272,057 was recorded as a decrease in additional paid-in capital. The remaining $2,827,943
was recorded as a reduction in retained earnings.
The Company declared a $6,000,000
common stock dividend in 2012 which was paid in-kind during the 2012 fiscal year and recorded as a decrease in retained earnings.
On December 31, 2013, the Company
declared a common stock dividend of $12,700,000 ($145.43 per share), of which $4,544,730 was recorded as a decrease in additional
paid-in capital, reducing the balance to zero, and the remainder, $8,155,270 was recorded as a reduction in retained earnings.
The preferred shareholders’ pro rata share of the dividend was more than 8% of the weighted average preferred shares outstanding.
Accordingly, the preferred shareholders were entitled to their pro rata share of the common stock dividend, which amounted to approximately
$6,288,000.
Prior to the January 2013 Transaction,
Odyssey and Orion declared dividends totaling $2,162,938 in order to distribute all retained earnings, of which $1,081,469 (50%)
eliminates in consolidation. The remaining amount payable to noncontrolling interest of $904,803 is included as dividend payable
in the consolidated balance sheets at December 31, 2013.
Bulk Partners (Bermuda) Ltd.
Notes to
Consolidated Financial Statements - Continued
Years Ended December 31, 2013 and 2012
NOTE 11
- CONVERTIBLE REDEEMABLE PREFERRED STOCK, COMMON STOCK AND NON-CONTROLLING INTEREST - Continued
Dividends payable consist of
the following:
|
|
|
2008
common
stock
dividend
|
|
|
2011
convertible
redeemable
preferred
stock
dividend
|
|
|
2012
common
stock
special
dividend
|
|
|
2012
preferred
stock
catch-
up
dividend
|
|
|
2012
common
stock
dividend
|
|
|
2013
common
stock
dividend
|
|
|
2013
Odyssey
and
Orion
dividend
|
|
|
Total
|
|
|
Balance at December 31, 2011
|
|
$
|
5,897,700
|
|
|
$
|
1,852,885
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
7,750,585
|
|
|
Gross amount of dividend accrued
|
|
|
-
|
|
|
|
-
|
|
|
|
9,100,000
|
|
|
|
167,305
|
|
|
|
6,000,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15,267,305
|
|
|
Paid in kind
|
|
|
(2,123,575
|
)
|
|
|
(1,852,885
|
)
|
|
|
(2,201,425
|
)
|
|
|
-
|
|
|
|
(6,000,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(12,177,885
|
)
|
|
Paid in cash
|
|
|
(1,000,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,000,000
|
)
|
|
Balance at December 31, 2012
|
|
|
2,774,125
|
|
|
|
-
|
|
|
|
6,898,575
|
|
|
|
167,305
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,840,005
|
|
|
Gross amount of dividend accrued
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12,700,000
|
|
|
|
1,081,469
|
|
|
|
13,781,469
|
|
|
Paid in kind
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(167,305
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(167,305
|
)
|
|
Paid in cash
|
|
|
(100,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(176,666
|
)
|
|
|
(276,666
|
)
|
|
Balance at December 31, 2013
|
|
$
|
2,674,125
|
|
|
$
|
-
|
|
|
$
|
6,898,575
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
12,700,000
|
|
|
$
|
904,803
|
|
|
$
|
23,177,503
|
|
Non-controlling interest
Amounts pertaining to the non-controlling
ownership interest held by third parties in the financial position and operating results of the Company’s subsidiaries and/or
consolidated VIEs are reported as non-controlling interest in the accompanying consolidated balance sheets. The non-controlling
ownership interest attributable to NBH amounts to approximately $1,190,000 and $2,101,000 as of December 31, 2013 and 2012,
respectively. The non-controlling ownership interest attributable to NBHC and its wholly-owned shipowning subsidiaries amounts
to approximately $18,660,000 and $1,101,000 at December 31, 2013 and 2012, respectively. The non-controlling interest attributable
to Bulk Cajun and BVH was approximately $543,000 and $(7,000), respectively at December 31, 2013.
NOTE 12 - COMMITMENTS AND CONTINGENCIES
In January 2013, the Company signed
a shipbuilding contract for the construction of four Ice Class 1A panamax vessels at $32,600,000 each, at which time deposits of
$6,520,000 were placed for each of the first two vessels, which are expected to be delivered in the fourth quarter of 2014 and
the first quarter of 2015. In February 2013 the Company placed a deposit of $6,520,000 on the third vessel, which is expected to
be delivered in the first quarter of 2015. In June 2013, the Company placed a deposit of $6,520,000 on the fourth vessel, which
is expected to be delivered in the first quarter of 2016. The second installments of 10% of the purchase price become due and payable
upon keel-laying of the vessel. The third installments of 10% are due and payable upon launching of the vessels and the balance
is due upon delivery of the vessels. The Company expects to finance these payments with commercial financing.
Bulk Partners (Bermuda) Ltd.
Notes to
Consolidated Financial Statements - Continued
Years Ended December 31, 2013 and 2012
NOTE 12 - COMMITMENTS AND CONTINGENCIES
– Continued
In December 2013, the Company entered
into shipbuilding contracts for the construction of two ultramax vessels for $28,950,000 each, at which time deposits of $2,895,000
were placed by two wholly-owned subsidiaries of the newly formed Nordic Bulk Ventures Holding Company Ltd. (“BVH”).
The second installments of 5% are due and payable on December 2, 2014. The third installments of 5% are due and payable upon keel
laying of the vessels. The fourth installments of 10% are due and payable upon launching of the vessels and the balance is due
upon delivery of the vessels. The Company expects to finance these payments with commercial financing.
In November 2013, the Company signed
memoranda of agreements to purchase the m/v Nordic Bothnia (“Bothnia”) and the m/v Nordic Barents (“Barents”)
for a total of $15,000,000. Deposits of $750,000 were made for each vessel, and the balance of $13,500,000 was paid on delivery.
In conjunction with the purchase, NBC entered into a secured Term Loan Facility of $13,000,000 in two tranches of $6,500,000 which
were drawn in conjunction with the delivery of the vessels from the seller. The Bothnia was delivered to the Company on January
23, 2014 and the Barents was delivered to the Company on March 7, 2014.
The Company is subject to certain
asserted claims arising in the ordinary course of business. The Company intends to vigorously assert its rights and defend itself
in any litigation that may arise from such claims. While the ultimate outcome of these matters could affect the results of operations
of any one year, and while there can be no assurance with respect thereto, management believes that after final disposition, any
financial impact to the Company would not be material to its consolidated financial position, results of operations, or cash flows.
NOTE 13 - SUBSEQUENT
EVENTS
The Company evaluated subsequent
events or transactions through May 5, 2014, which is the date these financial statements were available to be issued.
Effective January 1, 2014, the
shareholders of the Company implemented a management ownership plan (the "Plan"). Under the Plan, the Founders agreed
to contribute common stock to a newly established partnership ("the Partnership") in exchange for Partnership interests.
The Partnership may, in its sole discretion, issue profit interests of the Partnership to employees of the Company and its subsidiaries.
No such interests have been issued to date.
In March 2014, the Company committed
to a plan to sell two of its vessels. The m/v Bulk Providence is less suitable to the Company and its customers due to its size,
and both it and the m/v Bulk Liberty are believed to have market values that are significantly higher than the related outstanding
debt. The proceeds of the sales will be used to finance the newbuilding program and/or to acquire more suitable tonnage. A memorandum
of agreement has not been signed as of the date noted above, but the Company expects to execute such an agreement for the m/v Bulk
Providence in the near future. No negotiations have taken place with respect to the m/v Bulk Liberty.
In February 2014, Bulk Nordic Oshima
Ltd. (“Bulk Oshima”) and Bulk Nordic Olympic Ltd. (“Bulk Olympic”) were organized under the laws of Bermuda
for the purpose of owning new Ice class 1A Panamax vessels under construction. Bulk Oshima and Bulk Olympic are wholly-owned subsidiaries
of NBHC.
On April 30, 2014, the Company
changed its name to Pangaea Logistics Solutions Ltd. and entered into a merger agreement with Quartet Merger Corp.
291,953 Common Shares
Pangaea Logistics Solutions Ltd.
PROSPECTUS
February 4, 2015
PART II — INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth the costs
and expenses payable by our Company in connection with the sale of common shares being registered. All amounts are estimates except
the SEC registration fee. No expenses will be borne by the Selling Shareholders.
|
SEC registration fee
|
|
$
|
117.72
|
|
|
Legal fees and expenses
|
|
$
|
59,000
|
|
|
Accounting fees and expenses
|
|
$
|
17,500
|
|
|
Miscellaneous
|
|
$
|
5,000
|
|
|
Total
|
|
$
|
81,617.72
|
|
Item 14. Indemnification of Directors and Officers.
Section 98 of
the Companies Act provides generally that a Bermuda company may indemnify its directors, officers and auditors against any liability
which by virtue of any rule of law would otherwise be imposed on them in respect of any negligence, default, breach of duty or
breach of trust, except in cases where such liability arises from fraud or dishonesty of which such director, officer or auditor
may be guilty in relation to the company. Section 98 further provides that a Bermuda company may in its bye-laws or in any
contract or arrangement between the company and any officer, or any person employed by the company as auditor, exempt such officer
or person from, or indemnify him in respect of , any loss arising or liability attaching to him by virtue of any rule of law in
respect of any negligence, default, breach of duty or breach of trust of which the officer or person may be guilty in relation
to the company or any subsidiary thereof.
We have adopted provisions
in our bye-laws that provide that we shall indemnify our officers and directors in respect of their actions and omissions, except
in respect of their fraud or dishonesty. Our bye-laws provide that the shareholders waive all claims or rights of action that they
might have, individually or in right of the company, against any of the company’s directors or officers for any act or failure
to act in the performance of such director’s or officer’s duties, except in respect of any fraud or dishonesty of such
director or officer. Section 98A of the Companies Act permits us to purchase and maintain insurance for the benefit of any
officer or director in respect of any loss or liability attaching to him in respect of any negligence, default, breach of duty
or breach of trust, whether or not we may otherwise indemnify such officer or director.
Insurance.
We
maintain directors’ and officers’ liability insurance, which covers directors and officers of our Company against certain
claims or liabilities arising out of the performance of their duties.
Indemnification
Agreements.
We intend to enter into agreements to indemnify our directors and officers. These agreements will provide for indemnification
of our directors and officers to the fullest extent permitted by applicable Bermuda law against all expenses, including attorneys’
fees, judgments, fines and settlement amounts incurred by any such person in actions or proceedings, including actions by us or
in our right, arising out of such person’s services as our director or officer, any of our subsidiaries or any other company
or enterprise to which the person provided services at our Company’s request.
Item 15. Recent Sales of Unregistered
Securities.
Pursuant to the Merger
Agreement, the Former Pangaea Holders received, as consideration for all shares of Former Pangaea they held, an aggregate of 31,150,827
common shares.
Item 16. Exhibits and Financial
Statement Schedules.
(a) Exhibits: The
list of exhibits is set forth under “Exhibit Index” at the end of this registration statement.
(b) Financial Statement
Schedules: All schedules have been omitted since the required information is included in the consolidated financial statements
and the notes thereto, information therein is not applicable or the omitted schedules are not required.
Item 17. Undertakings.
The undersigned Company
hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreements certificates in such denominations
and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.
Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act, and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred or paid by
a director, officer or controlling person of the Company in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the securities being registered, the Company will, unless in
the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
The undersigned Company
hereby undertakes that:
(1) For
purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Company pursuant
to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement
as of the time it was declared effective.
(2) For
the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Newport, Rhode Island on February 4, 2015.
|
Pangaea Logistics Solutions Ltd.
|
|
|
|
|
By:
|
|
/s/ Edward Coll
|
|
Name:
|
|
Edward Coll
|
|
Title:
|
|
Chairman of the Board and Chief Executive Officer
|
POWER OF ATTORNEY
Each person whose signature appears below
constitutes and appoints Edward Coll and Anthony Laura and each of them, as attorney-in-fact with full power of substitution and
re-substitution, for him or her and in his or her name, place or stead, in any and all capacities, to sign any and all amendments
to this Registration Statement (including post-effective amendments), and to file the same, with exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about
the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities
Act of 1933, as amended, this Registration Statement on Form S-1 has been signed by the following persons in the capacities and
on the dates indicated.
|
Signature
|
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Title
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Date
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/s/
Edward Coll
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Chairman of the Board and
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February 4, 2015
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Edward Coll
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Chief Executive Officer
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/s/
Carl Claus Boggild
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President (Brazil) and Director
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February 4, 2015
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Carl Claus Boggild
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/s/
Anthony Laura
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Chief Financial Officer
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February 4, 2015
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Anthony Laura
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/s/
Peter M. Yu
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Director
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February 4, 2015
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Peter M. Yu
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/s/
Paul Hong
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Director
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February 4, 2015
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Paul Hong
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/s/
Richard T. du Moulin
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Director
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February 4, 2015
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Richard T. du Moulin
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/s/
Mark L. Filanowski
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Director
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February 4, 2015
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Mark L. Filanowski
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/s/
Eric S. Rosenfeld
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Director
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February 4, 2015
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Eric S. Rosenfeld
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February 4, 2015
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/s/
David D. Sgro
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Director
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David D. Sgro
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February 4, 2015
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EXHIBIT INDEX
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Exhibit no.
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Description
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2.1
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Agreement and Plan of Reorganization, dated as of April 30, 2014, by and among Quartet Merger Corp., Quartet Holdco Ltd., Quartet Merger Sub Ltd., Pangaea Logistics Solutions, Ltd., and the securityholders of Pangaea Logistics Solutions, Ltd.
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3.1
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Certificate of Incorporation of the Company, as amended
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3.2
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Bye-laws of Company
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10.1
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Form of Escrow Agreement among Quartet Holdco Ltd., the Representative (as described in the Agreement and Plan of Reorganization), the securityholders of Pangaea Logistics Solutions, Ltd., and Continental Stock Transfer & Trust Company, as Escrow Agent.
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10.2
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Form of Registration Rights Agreement between Quartet Holdco Ltd. and certain holders identified therein.
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10.3
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Form of Lock-Up Agreement.
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10.4
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$1.048 Million Secured Construction Loan Agreement
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10.5
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$9.12 Million Secured Term Loan
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10.6
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$4.55 Million Secured Term Loan
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10.7
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$40.0 Million Secured Loan Facility
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10.8
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$8.52 Million Term Loan
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10.9
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$5.685 Million Secured Loan Facility
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10.10
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Post-Delivery Facility
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10.11
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$10.0 Million Loan from Shareholder
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10.12
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January 10, 2013 Related Party Loan with ASO 2020 Maritime S.A.
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10.13
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March 18, 2013 Related Party Loan with ASO 2020 Maritime S.A.
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10.14
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June 18, 2013 Related Party Loan with ASO 2020 Maritime S.A.
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10.15
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Related Party Loan with ST Shipping and Transport Pte. Ltd.
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10.16
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$5.0 million Loan Agreement from Bulk Partners (Bermuda) Ltd. to Nordic Bulk Carriers AS
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10.17
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$13.0 Million Term Loan
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10.18
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Nordic Bulk Holding Company Ltd. Shareholders Agreement
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10.19
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Nordic Bulk Ventures Holding Company Shareholders Agreement
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15.1
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Acknowledgement of Grant Thornton LLP
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15.2
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Acknowledgement of PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab
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23.1
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Consent of Grant Thornton LLP.
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23.2
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Consent of PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab.
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(This page
has been left blank intentionally.)
Exhibit 2.1
Execution Copy
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
QUARTET MERGER CORP.,
QUARTET HOLDCO LTD.,
QUARTET MERGER SUB, LTD.,
PANGAEA LOGISTICS SOLUTIONS LTD.
AND
THE SECURITYHOLDERS OF PANGAEA LOGISTICS SOLUTIONS LTD.
DATED AS OF APRIL 30, 2014
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION is made and entered into as of April 30, 2014, by and among Quartet Merger Corp., a Delaware corporation (“
Quartet
”), Quartet Holdco Ltd., a Bermuda company and wholly owned subsidiary of Quartet (“
Holdco
”), Quartet Merger Sub, Ltd., a Bermuda company and wholly owned subsidiary of Holdco (“
Merger Sub
”), Pangaea Logistics Solutions Ltd., a Bermuda company (“
Company
”), each of the persons or entities listed under the caption “Signing Securityholders” on the signature page hereof for the limited purpose of the
sections of this Agreement (as defined below) identified on such page, such persons being the holders of all of the issued share capital of the Company (each a “
Stockholder
” and collectively the “
Stockholders
”). The term “
Agreement
” as used herein refers to this Agreement and Plan of Reorganization, as the same may be amended from time to time, and all schedules hereto (including the Company Schedule and the Quartet Schedule, as defined in the preambles to Articles II and III hereof, respectively).
RECITALS
A. Upon the terms and subject to the conditions of this Agreement and in accordance with the Delaware General Corporation Law (the “
DGCL
”), the Companies Act, 1981 of Bermuda (the “
Companies Act
”) and other applicable law, Quartet and the Company intend to enter into a business combination transaction by means of (i) a merger of Quartet with and into Holdco, with Holdco surviving the merger and becoming the public company (the “
Redomestication Merger
”) and (ii) a merger of Merger Sub with and into the Company, with the Company being the surviving entity and becoming a wholly
owned subsidiary of Holdco (the “
Transaction Merger
” and together with the Redomestication Merger, the “
Mergers
”).
B. The board of directors of each of Quartet (including any committee or subgroup thereof, the “
Quartet Board
”), Holdco (including any committee or subgroup thereof, the “
Holdco Board
”), Merger Sub (including any committee or subgroup thereof, the “
Merger Sub Board
”) and the Company (including any committee or subgroup thereof, the “
Company Board
”) has determined that the Mergers are fair to, and in the best interests of, its respective company and securityholders.
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NOW, THEREFORE, in consideration of the covenants, promises and representations set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows (defined terms used in this Agreement are listed alphabetically in Article IX, together with the Section and, if applicable, paragraph number in which the definition of each such term is located):
ARTICLE I.
THE MERGERS
1.1.
The Mergers
. At the Effective Time (as defined in Section 1.2) and subject to and upon the terms and conditions of this Agreement and the applicable provisions of the DGCL and the Companies Act, (i) Quartet shall be merged with and into Holdco, the separate corporate existence of Quartet shall cease and Holdco shall continue as the surviving corporation in the Redomestication Merger (“
Surviving Pubco
”) and (ii) Merger Sub shall be merged with and into the Company, the separate corporate existence of Merger Sub shall cease and the Company shall continue as the surviving corporation
in the Transaction Merger (“
Surviving Corp
”). At the Effective Time, the Transaction Merger shall be deemed to occur immediately prior to the Redomestication Merger.
1.2.
Effective Time; Closing
. Subject to the conditions of this Agreement, as soon as practicable on or after the Closing Date (as hereinafter defined), the parties hereto shall cause (i) the Redomestication Merger to be consummated by filing a certificate of merger (the “
Delaware Certificate of Merger
”) with the Secretary of State of the State of Delaware in accordance with the applicable provisions of the DGCL and such documents as required by the Companies Act to consummate the Redomestication Merger and obtaining a certificate of merger issued by the Registrar of Companies of
Bermuda (the “
Bermuda Certificate of Merger
”) and (ii) the Transaction Merger to be consummated by the filing of such documents as required by the Companies Act to consummate the Transaction Merger and obtaining a certificate of merger issued by the Registrar of Companies of Bermuda (the “
Bermuda Merger Sub Certificate of Merger
” and together with the Delaware Certificate of Merger and the Bermuda Certificate of Merger hereinafter referred to as the “
Certificates of Merger
”) (the time of such filing, or such later time as may be agreed in writing by the Company and Quartet and specified in the Certificates of Merger being the “
Effective Time
”). Unless this Agreement shall have been terminated pursuant to Section 8.1, the consummation of the transactions contemplated by this Agreement (the “
Closing
”), other than the filing of the Certificates of Merger, shall take place at the offices of Graubard
Miller, counsel to Quartet, 405 Lexington Avenue, New York, New York 10174 at a time and date to be specified by the parties, which shall be no later than the third (3
rd
) Business Day after the satisfaction or waiver of the conditions set forth in Article VI, or at such other time, date and location as the parties hereto agree in writing (the “
Closing Date
”). Closing signatures may be transmitted by facsimile or by emailed PDF file.
1.3.
Effect of the Mergers
. At the Effective Time, the effect of the Mergers shall be as provided in this Agreement and the applicable provisions of the DGCL and Companies Act and other applicable provisions of law (collectively, the “
Applicable Law
”). Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, (i) all the issued and outstanding securities of Quartet shall be automatically converted into a like type and number of securities of Holdco as provided herein, (ii) all outstanding common shares, par value $1.00 per share, of the Company
(“
Company Common Shares
”), and shares of Series A Participating Convertible Preferred Stock, par value $1.00 per share, of the Company (“
Company Preferred Shares
”) shall be canceled for the considerations set forth herein and (iii) all the property, rights, privileges, powers and franchises of Quartet and the Company shall vest in Surviving Pubco and Surviving Corp, respectively, and all debts, liabilities and duties of Quartet and the Company shall become the debts, liabilities and duties of Surviving Pubco and Surviving Corp, respectively.
1.4.
Governing Documents
. At the Effective Time:
(a) the Memorandum of Association of Holdco shall be amended and restated as mutually agreed to by the parties prior to the Effective Time and shall become the Memorandum of Association of the Surviving Pubco;
(b) the Bye-laws of Holdco shall be amended and restated as mutually agreed to by the parties prior to the Effective Time and shall become the Bye-laws of the Surviving Pubco; and
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(c) the Bye-laws of the Company shall be amended and restated as mutually agreed to by the parties prior to the Effective Time and shall become the Bye-laws of the Surviving Corp.
1.5.
Conversion of Securities
.
(a)
Redomestication Merger
. Subject to the terms and conditions of this Agreement, the following shall occur in the Redomestication Merger:
(i) Each share of common stock, par value $0.0001 per share, of Quartet issued and outstanding immediately prior to the Effective Time (“
Quartet Common Stock
”) will be automatically converted (subject to Section 1.5(c)) into one common share of Holdco (“
Holdco Shares
”) and the holders thereof shall cease to have any further rights as holders of Quartet Common Stock. Each certificate that evidenced Quartet Common Stock immediately prior to the Redomestication Merger (“
Quartet Common Certificate
”) shall entitle the holder to the applicable number of Holdco Shares into which the
Quartet Common Stock is convertible according to this Section 1.5(a)(i); provided, however, that each Quartet Common Certificate owned by holders who have validly elected to receive a portion of the proceeds held in Quartet’s Trust Fund (as defined in Section 3.25 hereof) shall entitle the holder thereof to receive only such portion of the Trust Account as provided for in Quartet’s Charter Documents (as defined below).
(ii) Each right of Quartet entitling the holder to automatically receive one-tenth ( 1/10) of a share of Quartet Common Stock upon consummation of the Mergers issued and outstanding immediately prior to the Effective Time (“
Quartet Rights
”) will automatically be converted (subject to Section 1.5(c)) into one-tenth ( 1/10) of a Holdco Share. Each certificate that evidenced Quartet Rights immediately prior to the Redomestication Merger (“
Quartet Rights Certificate
” and together with the Quartet Common Certificates, the “
Quartet Certificates
”) shall entitle the holder
to the applicable number of Holdco Shares into which the Quartet Rights are convertible according to this Section 1.5(a)(ii).
(iii) The unit purchase options of Quartet (the “
Quartet UPOs
”) issued and outstanding immediately prior to the Effective Time, entitling the holders thereof to purchase an aggregate of 420,000 units of Quartet (“
Quartet Units
”) for $11.75 per Quartet Unit, each such Quartet Unit consisting of one share of Quartet Common Stock and one Quartet Right, shall remain outstanding immediately following the Effective Time but shall be deemed to have been converted and to represent an option to purchase 1.1 Holdco Share (for $11.75 per share, or effectively $10.68 per share), for an aggregate of
462,000 Holdco Shares, on the same terms existing under the Quartet UPOs immediately prior to the Effective Time.
(iv) Each share of Quartet Common Stock and each Quartet Right held by Quartet or the Company immediately prior to the Effective Time shall be cancelled and extinguished without any conversion or payment in respect thereof.
(v) Certificates representing the Holdco Shares issuable pursuant to Sections 1.5(a)(i) and 1.5(a)(ii) shall be issued to the holders of Quartet Certificates upon surrender of the applicable Quartet Certificates in the manner provided in Section 1.6 (or in the case of a lost, stolen or destroyed certificate, upon delivery of an affidavit (and indemnity, if required) in the manner provided in Section 1.8).
(vi) All of the Holdco Shares issued to the holders of Quartet Common Stock and Quartet Rights upon consummation of the Redomestication Merger shall be deemed to have been issued in full satisfaction of all rights pertaining to the outstanding Quartet Common Stock and Quartet Rights that were outstanding immediately prior to the Effective Time and there shall be no further registration of transfers on the records of the Surviving Pubco of such shares of Quartet Common Stock or Quartet Rights.
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(b)
Transaction Merger
. Subject to the terms and conditions of this Agreement, the following shall occur in the Transaction Merger:
(i) At the Effective Time, by virtue of the Transaction Merger and this Agreement and without any action on the part of the Company, each Company Common Share and each Company Preferred Share issued and outstanding immediately prior to the Effective Time, together with all accrued but unpaid dividends on the Company Preferred Shares, will be canceled and the rights pertaining thereto will be automatically converted (subject to Sections 1.5(b)(ii) and 1.5(c)) into the right to receive (A) an aggregate of 28,431,372 Holdco Shares, (B) the Net Income Shares (as defined in Section 1.14) in accordance with Section 1.14, (C) the
Cancellation Shares (as defined in Section 1.15) in accordance with Section 1.15, all as allocated on
Schedule 1.5(b)(i)
, and (D) the Potential Cash Consideration (as defined below), or if the Company elects to receive an amount that is less than the Potential Cash Consideration pursuant to Section 1.5(b)(iii), (x) the Elected Cash Consideration (as defined below) and (y) an aggregate amount of Holdco Shares determined by dividing (1) the Potential Cash Consideration minus the Elected Cash Consideration by (2) $10.20. Immediately following the Transaction Merger, each certificate that evidenced Company Common Shares and Company Preferred Shares immediately prior to the Transaction Merger (“
Company Certificates
”) shall entitle the holder to the applicable number of Holdco Shares into which the Company Common Shares is convertible according to this Section 1.5(b)(i). At the Effective Time, by virtue of the Transaction Merger and this Agreement and without any
action on the part of the Company, the Company will issue one share of common stock in the Company to Holdco.
(ii) All of the Holdco Shares issued to the holders of Company Common Shares and Company Preferred Shares upon consummation of the Transaction Merger shall be deemed to have been issued in full satisfaction of all rights pertaining to the Company Common Shares and Company Preferred Shares that were outstanding immediately prior to the Effective Time, and there shall be no further registration of transfers on the records of the Surviving Corp of such Company Common Shares or Company Preferred Shares.
(iii) The holders of Company Common Shares (after giving effect to the conversion of Company Preferred Shares described in Section 1.5(b)(i) above) shall be entitled to elect to receive up to $10,000,000 (the “
Potential Cash Consideration
”), which amount shall be allocated among the holders as indicated in such election. The portion of the Potential Cash Consideration that such holders have elected to receive (the “
Elected Cash Consideration
”) shall be payable on the Closing Date.
(c)
No Fractional Shares
. No fraction of a Holdco Share will be issued by virtue of the Mergers or the transactions contemplated hereby, and each Person who would otherwise be entitled to a fraction of a Holdco Share (after aggregating all fractional Holdco Shares that otherwise would be received by such holder) shall receive, in lieu of such fractional share, an amount in cash without interest determined by multiplying the closing sale price of a share of Quartet Common Stock on Nasdaq on the trading day immediately preceding the Closing Date by the fraction of a Holdco Share to which such holder would
otherwise have been entitled.
(d)
Adjustments to Exchange Ratios
. The number of Holdco Shares that the holders of Company Common Shares, Company Preferred Shares, Quartet Common Stock, Quartet Rights and Quartet UPOs are entitled to receive as a result of the Mergers shall be equitably adjusted to reflect appropriately the effect of (i) any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into Quartet Common Stock or Company Common Shares), cash dividends, reorganization, recapitalization, reclassification, combination, exchange of shares or other like change with respect
to the Quartet Common Stock or Company Common Shares occurring on or after the date hereof and prior to the Effective Time, and (ii) any breach or inaccuracy of either Section 2.3 or 3.3.
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1.6.
Exchange Procedures
.
(a) Prior to the Effective Time, Holdco shall appoint Continental Stock Transfer & Trust Company (“
Continental
”), as agent (the “
Exchange Agent
”), for the purpose of exchanging the merger consideration for (i) Quartet Certificates, (ii) Company Certificates and (iii) any uncertificated shares of Quartet or the Company (the “
Uncertificated Shares
”). Upon surrender of the Quartet Certificates and Company Certificates and any Uncertificated Shares and delivery of a duly executed letter of transmittal, in each case to the Exchange Agent, the holders of such Quartet
Certificates and Company Certificates shall receive in exchange therefor certificates representing the Holdco Shares (“
Holdco Certificates
”) into which their shares of Quartet Common Stock, Quartet Rights, Company Common Shares and Company Preferred Shares shall be converted at the Effective Time and the Quartet Certificates, Company Certificates and any Uncertificated Shares so surrendered shall forthwith be canceled. Holdco shall make available to the Exchange Agent, as necessary, the Holdco Certificates to be paid in respect of the Quartet Certificates, Company Certificates and the Uncertificated Shares surrendered. Until so surrendered, outstanding Quartet Certificates, Company Certificates and Uncertificated Shares will be deemed, from and after the Effective Time, to evidence only the right to receive the merger consideration to which the holder thereof is entitled pursuant to Sections 1.5(a) and 1.5(b).
(b) If certificates representing Holdco Shares are to be issued in a name other than that in which the Quartet Certificates or Company Certificates surrendered in exchange therefor are registered, it will be a condition of the issuance thereof that the Quartet Certificates or Company Certificates so surrendered will be properly endorsed and otherwise in proper form for transfer, accompanied by an instrument of transfer that is reasonably satisfactory to the Company and that the persons requesting such exchange will have paid to Holdco, or any agent designated by it, any transfer or other taxes required by reason of the
issuance of certificates representing Holdco Shares in any name other than that of the registered holder of the Quartet Certificates or Company Certificates surrendered, or established to the satisfaction of Holdco or any agent designated by it that such tax has been paid or is not payable.
1.7.
No Distributions Until Surrender of Certificates
. No dividends or other distributions declared or made after the date of this Agreement with respect to Holdco Shares with a record date after the Closing Date will be paid to the holders of any unsurrendered Quartet Certificates or Company Certificates with respect to the Holdco Shares to be issued upon surrender thereof until the holders of record of such Quartet Certificates or Company Certificates shall surrender such Quartet Certificates or Company Certificates. Subject to applicable law, following surrender of any such Quartet Certificates or
Company Certificates with a properly completed letter of transmittal, Holdco shall promptly deliver to the record holders thereof, without interest, the Holdco Certificates representing Holdco Shares issued in exchange therefor and the amount of any such dividends or other distributions with a record date after the Closing Date theretofore paid with respect to such Holdco Shares.
1.8.
Lost, Stolen or Destroyed Certificates
. In the event that any Quartet Certificates or Company Certificates shall have been lost, stolen or destroyed, Holdco shall issue in exchange for such lost, stolen or destroyed Quartet Certificates or Company Certificates, upon the making of an affidavit of that fact by the holder thereof, the certificates representing the Holdco Shares that the shares of Quartet Common Stock, Quartet Rights, Company Common Shares and Company Preferred Shares formerly represented by such Quartet Certificates or Company Certificates were converted into and any dividends or
distributions payable pursuant to Section 1.7; provided, however, that as a condition precedent to the issuance of such certificates representing Holdco Shares and other distributions, the owner of such lost, stolen or destroyed Quartet Certificates or Company Certificates shall indemnify Holdco against any claim that may be made against Holdco or the Surviving Pubco with respect to the Quartet Certificates or Company Certificates alleged to have been lost, stolen or destroyed.
1.9.
Tax Consequences; Required Withholding
.
(a) It is intended by the parties hereto that the Mergers will qualify as tax-free transactions pursuant to Section 351 and/or Section 368(a) of the Internal Revenue Code of 1986, as amended (the “
Code
”) and, by executing this Agreement, adopt a “plan of reorganization” within the meaning of Treasury Regulation Sections 1.368-2(g) and 1.368(a) of the United States Income Tax Regulations.
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(b) Holdco and the Surviving Pubco shall each be entitled to deduct and withhold from any consideration payable or otherwise deliverable pursuant to this Agreement to any Person such amounts as are required to be deducted or withheld therefrom under the Code, or under any provision of state, local or foreign tax law or under any other applicable legal requirement. To the extent such amounts are so deducted or withheld, such amounts shall be treated for all purposes under this Agreement as having been paid to the Person to whom such amounts would otherwise have been paid.
1.10.
Taking of Necessary Action; Further Action
. If, at any time after the Effective Time, any further action is necessary or desirable to carry out the purposes of this Agreement and to vest the Surviving Pubco or Surviving Corp with full right, title and possession to all assets, property, rights, privileges, powers and franchises of Quartet and the Company, respectively, the then current officers and directors of Quartet, Holdco and Merger Sub and the officers and directors of the Company shall take all such lawful and necessary action.
1.11.
Escrow
. As the sole remedy for the indemnification obligations set forth in Article VII of this Agreement, 1,100,000 of the Holdco Shares to be issued to the Stockholders pursuant to the Transaction Merger (the “
Escrow Shares
”) shall be deposited in escrow (the “
Escrow Account
”), which shall be allocated among the Stockholders in the same proportion as their proportionate share of the total Company Common Shares immediately prior to the Effective Time, all in accordance with the terms and conditions of the escrow agreement to be entered into at the Closing
between Holdco, the Representative, and Continental, as escrow agent (“
Escrow Agent
”), substantially in the form of
Exhibit A
hereto (the “
Escrow Agreement
”). On the first anniversary of the Closing Date (the “
Basic Indemnity Escrow Termination Date
”), the Escrow Agent shall release 550,000 of the original number of Escrow Shares to the Stockholders, less any of such shares applied in satisfaction of a claim for indemnification pursuant to Article VII and any of such shares related to a claim that is then unresolved, in the same proportions as originally deposited into escrow. The remaining Escrow Shares (the “
Environmental Indemnity Shares
”) shall be available for indemnification only with respect to Environmental Indemnification Claims (each as hereinafter defined). On the second anniversary of the Closing Date (the “
Environmental Indemnity Escrow Termination Date
”), the Escrow Agent shall
deliver the Environmental Indemnity Shares, less any of such shares applied in satisfaction of an Environmental Indemnification Claim and any of such shares related to an Environmental Indemnification Claim that is then unresolved, to each recipient in the same proportions as initially deposited in escrow. Any Escrow Shares held with respect to any unresolved claim for indemnification and not applied as indemnification with respect to such claim upon its resolution shall be delivered to such Persons promptly upon such resolution. “
Environmental Indemnification Claim
” means a claim for indemnification pursuant to Article VII with respect to (y) a breach of the representations and warranties set forth in Section 2.17 and (z) the matters referred in
Schedule 2.17
.
1.12.
Quartet Representative
. Quartet hereby appoints Gregory Monahan as the representative of the holders of the Quartet Common Stock and Quartet Rights (the “
Representative
”) to take actions and make decisions required or permitted to be taken or made by the Representative pursuant to this Agreement or the Escrow Agreement. Acceptance of Holdco Shares by a holder of Quartet Certificates to which such holder is entitled shall be deemed acceptance by such holder of the appointment of the Representative to act in such holder’s behalf. Should the Representative resign or be unable
to serve, a new Representative shall be selected by majority vote of those Persons who served on the Quartet Board immediately prior to the Effective Time. The Representative shall not be liable to recipients of Holdco Shares for any liability, loss, damage, penalty, fine, cost or expense incurred without gross negligence by the Representative while acting in good faith and arising out of or in connection with the acceptance or administration of his duties hereunder (it being understood that any act done or omitted pursuant to the advice of counsel shall be conclusive evidence of such good faith). From and after the Effective Time, a decision, act, consent or instruction of the Representative shall be final, binding and conclusive and not subject to challenge by any recipient. Surviving Pubco and Surviving Corp are hereby relieved from any liability to any person for any acts done by Representative and any acts done by Surviving Pubco or Surviving Corp in accordance with any such
decision, act, consent or instruction of the Representative. Surviving Pubco, the Surviving Corp and each of their respective Affiliates shall be entitled to rely upon, and shall be fully protected in relying upon, the power and authority of the Representative without independent investigation.
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1.13.
Stockholder Matters
.
(a) By its execution of this Agreement, each Stockholder, in its capacity as a stockholder of the Company, hereby approves this Agreement and authorizes the Company and its directors and officers to take all actions necessary for the consummation of the Mergers and the other transactions contemplated hereby pursuant to the terms of this Agreement and its exhibits. Such execution and approval shall be irrevocable by each Stockholder.
(b) Each Stockholder has all necessary power and authority to execute and deliver this Agreement and to perform its obligations hereunder and, to consummate the transactions contemplated hereby. With respect to any Stockholder that is not an individual, the execution and delivery of this Agreement and the consummation by each Stockholder of the transactions contemplated hereby (including the Transaction Merger) have been duly and validly authorized by all necessary action on the part of such Stockholder and no other proceedings on the part of such Stockholder is necessary to authorize this Agreement or to consummate the
transactions contemplated hereby pursuant to Applicable Law and the terms and conditions of this Agreement. This Agreement has been duly and validly executed and delivered by each Stockholder and, assuming the due authorization, execution and delivery thereof by the other parties hereto, constitutes the legal and binding obligation of each Stockholder, enforceable against such Stockholders in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity.
(c) Each Stockholder for itself only, represents and warrants as follows:
(i) that its execution and delivery of this Agreement does not, and the performance of its obligations hereunder will not, require any consent, approval, authorization or permit of, or filing with or notification to, any court, administrative agency, commission, governmental or regulatory authority, domestic or foreign (a “
Governmental Entity
”), except (1) for applicable requirements, if any, of the Securities Act of 1933, as amended (“
Securities Act
”), the Securities Exchange Act of 1934, as amended (“
Exchange Act
”), state securities laws (“
Blue Sky Laws
”),
and the rules and regulations thereunder, and (2) where the failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect (as defined in Section 10.2(a)) on itself or the Company or prevent consummation of the Mergers or otherwise prevent the parties hereto from performing their material obligations under this Agreement;
(ii) it is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D under the Securities Act;
(iii) it is not subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under Regulation D of the Securities Act (a “
Disqualification Event
”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3); and
(iv) it owns the Company Common Shares and Company Preferred Shares listed on
Schedule 2.3(a)
as being owned by it free and clear of all Liens and has not granted to any other Person any options or other rights to buy such securities, nor has it granted any interest in such securities to any Person of any nature.
1.14.
Net Income Shares
.
(a) If, for the fiscal year of the Company ending December 31, 2014, the Company has Net Income equal to or greater than $27,300,000, Holdco shall issue to the Stockholders, in the aggregate, 3,431,373 Holdco Shares. For the avoidance of doubt, Net Income for the fiscal year of the Company ending December 31, 2014 shall include Net Income for the entire twelve (12) months of 2014 for the Company.
(b) If, for the fiscal year of the Company ending December 31, 2015, the Company has Net Income equal to or greater than $34,000,000, Holdco shall issue to the Stockholders, in the aggregate, 1,960,784 Holdco Shares.
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(c) If, for the fiscal year of the Company ending December 31, 2016, the Company has Net Income equal to or greater than $41,000,000, Holdco shall issue to the Stockholders, in the aggregate, 1,960,784 Holdco Shares.
(d) Irrespective of whether the Company meets any of the Net Income targets set forth above in the applicable fiscal year of the Company, in the event that the Company has cumulative Net Income of $102,300,000 or more for any of the one, two or three-year periods beginning on January 1, 2014, Holdco shall issue to the Stockholders, in the aggregate, 7,352,941 Holdco Shares less the number of Holdco Shares already issued pursuant to Sections 1.14(a), (b) or (c) in accordance with Section 1.14(h), which Holdco Shares shall be issued no later than thirty (30) days after the Net Income Calculation determining that the
Company’s cumulative Net Income exceeded $102,300,000 becomes conclusive and binding. If Holdco has issued Holdco Shares pursuant to Sections 1.14(a), (b) or (c), and the Company fails to meet any of the Net Income targets set forth above in subsequent fiscal years, the Stockholders issued such Holdco Shares shall have no obligation to return such issued Holdco Shares.
(e) As used herein,
(i) “
Net Income
” means net income of Holdco as set forth in Holdco’s audited financial statements for any applicable year, as determined in accordance with U.S. GAAP (as hereafter defined), including any net income attributable to acquisitions of vessels and any interests of Seamar Management S.A., Nordic Bulk Holding ApS or Nordic Bulk Holding Company Ltd. or any subsidiaries thereof (including for avoidance of doubt Bulk Nordic Odyssey Ltd. and Bulk Nordic Orion Ltd.) by the Company or any of the Subsidiaries following the Closing Date, and excluding any non-recurring (i.e., one-time) or extraordinary
expenses of the Company or any of the Subsidiaries, such as any expenses incurred in connection with the Mergers or expenses incurred in connection with the Holdco Plan, or Quartet expenses incurred prior to the Closing that are included in Holdco’s 2014 income statement.
(ii) “
Net Income Shares
” means Holdco Shares issuable pursuant to this Section 1.14.
(f) Subject to compliance with Applicable Law, any Net Income Shares to be issued pursuant to this Section 1.14 shall be (i) issued automatically and without requiring approval from the Holdco Board other than approvals granted in connection with this Agreement and the Mergers, (ii) allocated among the Stockholders as set forth on
Schedule 1.14(f)
, and (iii) automatically equitably adjusted to reflect appropriately the effect of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into Holdco Shares), cash dividends, reorganization, recapitalization,
reclassification, combination, exchange of shares or other like change with respect to the Holdco Shares occurring on or after the date such Net Income Shares are issued.
(g) Not later than 150 days after the fiscal year with respect to which Net Income is calculated, Holdco shall deliver to the Representative its Net Income calculation (the “
Net Income Calculation
”), which shall be conclusive and binding upon the parties unless the Representative, within ten Business Days after its receipt of the Net Income Calculation, notifies Holdco in writing that it disputes any of the amounts set forth therein, specifying the nature of the dispute and the basis therefore. The parties shall in good faith attempt to resolve any dispute and, if the parties so resolve all disputes, the Net
Income Calculation, as amended to the extent necessary to reflect the resolution of the dispute, shall be conclusive and binding on the parties. If the parties do not reach agreement in resolving the dispute within ten Business Days after notice is given to Holdco by the Representative, the parties shall submit the dispute to an independent accounting firm which is mutually agreeable to the parties (the “
Accounting Arbiter
”). Within thirty 30 days of such submission, the Accounting Arbiter shall determine (it being understood that in making such determination, the Accounting Arbiter shall be functioning as an expert and not as an arbitrator), based solely on written submissions by Holdco and the Representative, and not by independent review, only those issues in dispute and shall render a written report as to the resolution of the dispute and the resulting Net Income Calculation which shall be conclusive and binding on the parties. In resolving any disputed item, the
Accounting Arbiter (x) shall be bound by the provisions of this Section 1.14(g) and (y) may not assign a value to any item greater than the greatest value for such items claimed by either party or less than the smallest value for such items claimed by
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either party. The fees, costs and expenses of the Accounting Arbiter shall be borne by Holdco. The Representative shall be entitled to engage a firm of independent accountants to advise it with respect to the Net Income Calculation, with the reasonable fees and expenses of such firm to be paid by Holdco.
(h) Except as set forth in Section 1.14(d), Net Income Shares shall be issued to the Persons entitled to them no later than thirty (30) days after the Net Income Calculation becomes conclusive and binding for the fiscal year with respect to such Net Income Shares are earned.
1.15.
Cancellation Shares
.
(a) In the event that holders of Quartet Common Stock elect to receive a portion of the proceeds held in the Trust Fund instead of Holdco Shares upon consummation of the Redomestication Merger as permitted by Quartet’s Charter Documents with respect to 1,449,000 or more shares of Quartet Common Stock, the holders of Company Common Shares issued and outstanding immediately prior to the Effective Time shall be entitled to receive an additional number of Holdco Shares in the Transaction Merger (“
Cancellation Shares
”) equal to the product of (1) 1,932,000 and (2) one minus the quotient obtained by taking (i)
the number of shares of Quartet Common Stock that have not sought to receive a portion of the proceeds held in Quartet’s Trust Fund upon consummation of the Redomestication Merger as permitted by Quartet’s Charter Documents,
divided by
(ii) 8,211,000, which additional Holdco Shares shall be allocated among the holders of Company Common Shares issued and outstanding immediately prior to the Effective Time in the same proportion as their proportionate share of the total Company Common Shares outstanding immediately prior to the Transaction Merger and be payable at the Effective Time. Solely for purposes of illustration and without limiting the generality of the foregoing, if 2,000,000 of the shares of Quartet Common Stock have elected to receive a portion of the proceeds held in Quartet’s Trust Fund upon consummation of the Redomestication Merger, the holders of Company Common Shares would be issued an additional 129,647 Holdco Shares in the Transaction Merger.
(b) The Quartet shareholders listed on
Schedule 1.15(b)
(the “
Quartet Founding Shareholders
”) will agree to contribute back to Holdco at the Effective Time the same number of shares to be issued to the holders of Company Common Shares pursuant to this Section 1.15(b) and Holdco shall hold such shares in treasury and shall not reissue such shares prior to the consummation of the transactions contemplated in this Agreement.
(c) Quartet agrees to (i) use its reasonable best efforts to minimize the holders of Quartet Common Stock that seek to receive a portion of the proceeds held in Quartet’s Trust Fund instead of Holdco Shares upon consummation of the Redomestication Merger and (ii) provide the Company with information necessary to calculate the number of Holdco Shares to be issued pursuant to this Section 1.15 from time-to-time and in any event as soon as such information becomes known to Quartet or its agents or representatives.
(d) Any additional Holdco Shares to be issued to the holders of Company Common Shares pursuant to this Section 1.15 shall be subject to the Lock-Up Agreements (as defined below).
1.16.
Consideration Adjustment
. The parties agree to treat the transactions contemplated by Sections 1.14 and 1.15 as adjustments to the consideration to be issued in the Mergers for all income tax purposes.
1.17.
Sale Restriction
. Prior to the Effective Time, each holder of Company Common Shares and Company Preferred Shares prior to the Effective Time shall enter into a Lock-Up Agreement in the form of
Exhibit B
(the “
Lock-Up Agreement
”). Holdco’s register of members and certificates evidencing Holdco Shares issued as a result of the Transaction Merger shall each include prominent disclosure or bear a prominent legend evidencing the fact that such shares are subject to such Lock-Up Agreements.
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ARTICLE II.
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY
Subject to the exceptions set forth in disclosure schedules attached hereto (the “
Company Schedule
”), the Company hereby represents and warrants to Quartet, Holdco and Merger Sub as follows (as used in this Article II, the term “
Company
” includes the Subsidiaries (as defined below), unless the context reasonably otherwise indicates):
2.1.
Organization and Qualification
.
(a) The Company is duly incorporated as an exempted company, validly existing and in good standing under the laws of Bermuda and has the requisite corporate power and authority to own, lease and operate its assets and properties and to carry on its business as it is now being conducted. The Company is in possession of all franchises, grants, authorizations, licenses, permits, easements, consents, certificates, approvals and orders, including those required by Maritime Guidelines (“
Approvals
”), necessary to own, lease and operate the properties it purports to own, operate or lease and to carry on its business
as it is now being conducted, except where the failure to have such Approvals could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company. Complete and correct copies of the memorandum of association and bye-laws (or other comparable governing instruments with different names) (collectively referred to herein as “
Charter Documents
”) of the Company, as amended and currently in effect, have been heretofore made available to Quartet or Quartet’s counsel. The Company is not in violation of any of the provisions of the Company’s Charter Documents.
(b) The Company is duly qualified or licensed to do business as a foreign corporation or company and is in good standing in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its activities makes such qualification or licensing necessary, except for such failures to be so duly qualified or licensed and in good standing (or the equivalent thereof) that could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company. Each jurisdiction in which the Company is so qualified or licensed is listed in
Schedule 2.1
.
(c) The minute books of the Company contain true, complete and accurate records of all written minutes for meetings and written resolutions in lieu of meetings of its Board of Directors (and any committees thereof), similar governing bodies and shareholders (“
Corporate Records
”) since the time of the Company’s organization. Copies of such Corporate Records of the Company have been made available to Quartet or Quartet’s counsel. For avoidance of doubt, references to the Company in this Section 2.1(c) shall not be deemed to include references to the Subsidiaries.
(d) The stock transfer and ownership records of the Company contain true, complete and accurate records of the securities ownership as of the date of such records and the transfers involving the capital stock and other securities of the Company since the time of the Company’s incorporation. Copies of such records of the Company have been made available to Quartet or Quartet’s counsel. For avoidance of doubt, references to the Company in this Section 2.1(d) shall not be deemed to include references to the Subsidiaries.
2.2.
Subsidiaries
.
(a) The Company has no direct or indirect subsidiaries or participations in joint ventures or other entities other than those listed in
Schedule 2.2
(the “
Subsidiaries
”). Except as set forth in
Schedule 2.2
, the Company owns all of the outstanding equity securities of the Subsidiaries, free and clear of all Liens (as defined in Section 10.2(e)) other than Permitted Liens, either directly or indirectly through one or more other Subsidiaries. There are no outstanding options, warrants or other rights to purchase securities of any Subsidiary. Except for the Subsidiaries, the Company does not own,
directly or indirectly, any ownership, equity, profits or voting interest in any Person or have any agreement or commitment to purchase any such interest, and the Company has not agreed and is not obligated to make nor is bound by any written or oral agreement, contract, subcontract, lease, binding understanding, instrument, note, option, warranty, purchase order, license, sublicense, insurance policy, benefit plan, commitment or
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undertaking of any nature, as of the date hereof or as may hereafter be in effect under which it may become obligated to make, any future investment in or capital contribution to any other entity.
(b) Each Subsidiary that is a corporation is duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation (as listed in
Schedule 2.2
) and has the requisite corporate power and authority to own, lease and operate its assets and properties and to carry on its business as it is now being conducted. Each Subsidiary that is a limited liability company is duly organized or formed, validly existing and in good standing under the laws of its state of organization or formation (as listed in
Schedule 2.2
) and has the requisite power and authority to own, lease and operate
its assets and properties and to carry on its business as it is now being conducted. Each Subsidiary is in possession of all Approvals necessary to own, lease and operate the properties it purports to own, operate or lease and to carry on its business as it is now being conducted, except where the failure to have such Approvals could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company. Complete and correct copies of the Charter Documents of each Subsidiary, as amended and currently in effect, have been made available to Quartet or Quartet’s counsel. No Subsidiary is in violation in any material respect of any of the provisions of its Charter Documents.
(c) Each Subsidiary is duly qualified or licensed to do business as a foreign corporation or foreign limited liability company and is in good standing in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its activities makes such qualification or licensing necessary, except for such failures to be so duly qualified or licensed and in good standing that could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company.
(d) The minute books of each Subsidiary contain true, complete and accurate records of all written minutes for meetings and written consents in lieu of meetings of its Board of Directors (and any committees thereof), similar governing bodies and stockholders, except where the failure to be true, complete and accurate could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company. Copies of the Corporate Records of each Subsidiary have been heretofore made available to Quartet or Quartet’s counsel.
2.3.
Capitalization
.
(a) The authorized share capital of the Company consists of 199,829 Company Common Shares, of which 87,329 shares are issued and outstanding as of the date of this Agreement, and 112,500 Company Preferred Shares, of which 89,113.89 shares are designated as convertible preferred stock and are issued and outstanding as of the date of this Agreement, all of which shares are validly issued, fully paid and nonassessable. Other than Company Common Shares and Company Preferred Shares, the Company has no class or series of securities authorized by its Charter Documents.
Schedule 2.3(a)
hereto contains a list of all of the
stockholders of the Company, the number of Company Common Shares and Company Preferred Shares owned, or to be owned at the time of the Closing, by each shareholder and each shareholder’s state or province of residence. As of the date of this Agreement, the Company has no outstanding options to purchase Company Common Shares or outstanding warrants or other rights or derivative securities to purchase Company Common Shares. All outstanding Company Common Shares have been issued and granted in compliance with (x) all applicable securities laws and (in all material respects) other applicable laws and regulations, and (y) all requirements set forth in any applicable Company Contracts (as defined in Section 2.20).
(b) Except as set forth in
Schedule 2.3(b)
hereto, there are no subscriptions, options, warrants, equity securities, partnership interests or similar ownership interests, calls, rights (including preemptive rights), commitments or agreements of any character to which the Company is a party or by which it is bound obligating the Company to issue, deliver or sell, or cause to be issued, delivered or sold, or repurchase, redeem or otherwise acquire, or cause the repurchase, redemption or acquisition of, any shares of capital stock, partnership interests or similar ownership interests of the Company or obligating the
Company to grant, extend, accelerate the vesting of or enter into any such subscription, option, warrant, equity security, call, right, commitment or agreement.
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(c) Except as contemplated by this Agreement and except as set forth in
Schedule 2.3(c)
hereto, there are no registration rights, and there is no voting trust, proxy, rights plan, antitakeover plan or other similar agreement or understanding to which the Company is a party or by which the Company is bound with respect to any equity security of any class of the Company.
(d) Except as set forth in
Schedule 2.3(d)
, no outstanding Company Common Shares are unvested or subjected to a repurchase option, risk of forfeiture or other condition under any applicable agreement with the Company.
(e) The common share of the Company to be issued by the Company to Holdco in connection with the Transaction Merger, upon issuance in accordance with the terms of this Agreement, will be duly authorized and validly issued and such share will be fully paid and nonassessable.
(f) Except as provided for in this Agreement or as set forth in
Schedule 2.3(f)
, as a result of the consummation of the transactions contemplated hereby, no shares of capital stock, warrants, options or other securities of the Company are issuable and no rights in connection with any shares, warrants, options or other securities of the Company accelerate or otherwise become triggered (whether as to vesting, exercisability, convertibility or otherwise).
2.4.
Authority Relative to this Agreement
. The Company has all necessary corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder and, to consummate the transactions contemplated hereby (including the Transaction Merger). The execution and delivery of this Agreement and the consummation by the Company of the transactions contemplated hereby (including the Transaction Merger) have been duly and validly authorized by all necessary corporate action on the part of the Company (including the approval by the Company Board, subject in all cases (i) to the
satisfaction of the terms and conditions of this Agreement, including the conditions set forth in Article VI, and (ii) approval of the Transaction Merger by the Stockholders), and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions contemplated hereby pursuant to Applicable Law and the terms and conditions of this Agreement. This Agreement has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery thereof by the other parties hereto, constitutes the legal and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity.
2.5.
No Conflict; Required Filings and Consents
. Except as set forth in
Schedule 2.5
hereto:
(a) The execution and delivery of this Agreement by the Company does not, and the performance of this Agreement by the Company shall not, (i) conflict with or violate the Company’s Charter Documents, (ii) assuming the accuracy of the representations and warranties of Quartet, Holdco and Merger Sub set forth in Section 3.5, conflict with or violate any Legal Requirements (as defined in Section 10.2(b)), (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or materially impair the Company’s or any Subsidiary’s rights or alter
the rights or obligations of any third party under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or encumbrance on any of the properties or assets of the Company or any Subsidiary pursuant to, any Company Contracts or (iv) result in the triggering, acceleration or increase of any payment to any Person pursuant to any Company Contract, including any “change in control” or similar provision of any Company Contract, except, with respect to clauses (ii), (iii) or (iv), for any such conflicts, violations, breaches, defaults, triggerings, accelerations, increases or other occurrences that would not, individually and in the aggregate, have a Material Adverse Effect on the Company.
(b) The execution and delivery of this Agreement by the Company does not, and the performance of its obligations hereunder will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Entity or other third party (including lenders and lessors), except (i) for applicable requirements, if any, of the Securities Act, the Exchange Act or Blue Sky Laws, and the rules and regulations thereunder, and appropriate documents received from or filed with the relevant
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authorities of other jurisdictions in which the Company is licensed or qualified to do business, (ii) for the filing of any notifications required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “
HSR Act
”), if required upon advice of counsel, and the expiration of the required waiting period thereunder, (iii) the consents, approvals, authorizations and permits described in
Schedule 2.5
and (iv) where the failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on the Company or, after the Closing, the Surviving Corp, or prevent consummation of the Mergers or otherwise prevent the parties hereto from performing their obligations under this Agreement.
2.6.
Compliance
. Except as disclosed in
Schedule 2.6
during the three year period prior to the date of the Closing, the Company and its Subsidiaries has complied with and is not in violation of any Legal Requirements with respect to the conduct of its business, or the ownership or operation of its business, except for failures to comply or violations which, individually or in the aggregate, have not had and are not reasonably likely to have a Material Adverse Effect on the Company. Neither the Company nor its Subsidiaries is in violation of any term of any Company Contract, except for failures
to comply or violations which, individually or in the aggregate, have not had and are not reasonably likely to have a Material Adverse Effect on the Company. No representation or warranty is given under this Section 2.6 with respect to ERISA, Taxes or Environmental Laws, which matters are covered exclusively under Sections 2.11, 2.16 and 2.17, respectively.
2.7.
Financial Statements; Internal Controls
.
(a) The Company has provided to Quartet a correct and complete copy of the audited consolidated financial statements (including any related notes thereto) of the Company for the fiscal years ended December 31, 2013 and 2012 (the “
Audited Financial Statements
”). The Audited Financial Statements were prepared in accordance with generally accepted accounting principles of the United States (“
U.S. GAAP
”) applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto), and each fairly presents in all material respects the financial position of the
Company at the respective dates thereof and the results of its operations and cash flows for the periods indicated.
(b) The books of account, minute books, stock certificate books and register of members and other similar books and records of the Company have been maintained in accordance with good business practice, are complete and correct in all material respects and there have been no material transactions that are required to be set forth therein and which have not been so set forth.
(c) The Company maintains disclosure controls and procedures over financial reporting, and such disclosure controls and procedures are designed to ensure that material information concerning the Company is made known to its principal executive officer and principal financial officer, as appropriate.
2.8.
No Undisclosed Liabilities
. Except as set forth in
Schedule 2.8
hereto, the Company and its Subsidiaries have no liabilities (absolute, accrued, contingent, or otherwise) of a nature required under U.S. GAAP, as in effect on the date of this Agreement, to be disclosed on a balance sheet or in the related notes to financial statements that are, individually or in the aggregate, material to the business, results of operations or financial condition of the Company and its Subsidiaries, except such liabilities (i) liabilities or obligations disclosed and provided for in the Audited Financial
Statements or in the notes thereto, (ii) arising in the ordinary course of the Company’s business since December 31, 2013 or (iii) incurred in connection with the transactions contemplated by this Agreement, none of which, individually or in the aggregate, would have a Material Adverse Effect on the Company.
2.9.
Absence of Certain Changes or Events
. Except as set forth in
Schedule 2.9
hereto and except as contemplated by this Agreement, since December 31, 2013 until the date hereof, there has not been: (i) any Material Adverse Effect on the Company and its Subsidiaries, (ii) any declaration, setting aside or payment of any dividend on, or other distribution (whether in cash, stock or property) in respect of, any of the Company’s stock, or any purchase, redemption or other acquisition by the Company of any of the Company’s capital stock or any other securities of the Company or any
options, warrants, calls or rights to acquire any such
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shares or other securities, (iii) any split, combination or reclassification of any of the Company’s capital stock, (iv) any granting by the Company or its Subsidiaries of any increase in compensation or fringe benefits, except for normal increases of cash compensation in the ordinary course of business consistent with past practice or pursuant to any Plans (as defined in Section 2.11(a)), or any granting by the Company or any of its Subsidiaries of any increase in severance or termination pay or any entry by the Company or any of its Subsidiaries into any currently effective employment, severance, termination or
indemnification agreement, (v) any material change by the Company or any of its Subsidiaries in its accounting methods, principles or practices, (vi) any issuance of capital stock of the Company, (vii) any revaluation by the Company of any of its assets, including, without limitation, writing down the value of capitalized inventory or writing off notes or accounts receivable or any sale of assets of the Company other than in the ordinary course of business, (viii) any incurrence of debt by the Company other than debt in the ordinary course of business or (ix) any agreement, whether written or oral, to do any of the foregoing.
2.10.
Litigation
. Except as disclosed in
Schedule 2.10
hereto, there are no claims, suits, actions or proceedings pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries before any court, governmental department, commission, agency, instrumentality or authority, or any arbitrator that could have a Material Adverse Effect on the Company.
2.11.
Employee Benefit Plans
.
(a)
Schedule 2.11(a)
lists all material employee compensation, incentive, fringe or benefit plans, programs, policies, or other arrangements (whether or not set forth in a written document), other than any plan, program, policy or other arrangement sponsored by a Government Entity, covering any active or former employee, director or consultant of the Company or any of its Subsidiaries, or any trade or business (whether or not incorporated) which is under common control with the Company or any of its Subsidiaries, with respect to which the Company has liability (individually, a “
Plan,
” and,
collectively, the “
Plans
”). All Plans have been maintained and administered in all material respects in compliance with their respective terms and with the requirements prescribed by any applicable Legal Requirements. No suit, action or other litigation (excluding claims for benefits incurred in the ordinary course of Plan activities) has been brought, or, to the knowledge of the Company, is threatened, against or with respect to any Plan. There are no material audits, inquiries or proceedings pending or, to the knowledge of the Company, threatened by any governmental agency with respect to any Plan. All contributions, reserves or premium payments required to be made or accrued as of the date hereof to the Plans have been timely made or accrued in all material respects. Neither the Company nor any of its Subsidiaries have any binding commitment to establish or enter into any new Plan or to modify any Plan (except to the extent required by law or to conform any such
Plan to the requirements of any applicable law, in each case as previously disclosed to Quartet in writing, or as required by this Agreement).
(b) Except as provided pursuant to Article I of this Agreement or disclosed in
Schedule 2.11(b)
hereto, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) result in any payment (including severance, unemployment compensation, bonus or otherwise) becoming due to any director or employee of the Company and its Subsidiaries under any Plan or otherwise, (ii) materially increase any benefits otherwise payable under any Plan, or (iii) result in the acceleration of the time of payment or vesting of any such benefits.
(c) No material liability under Title IV of the Employee Retirement Income Security Act of 1974, as amended (“
ERISA
”) has been incurred by the Company or any of its Subsidiaries that has not been satisfied in full and no event has occurred and, to the Company’s knowledge, no condition exists that could reasonably be likely to result in the Company or any of its Subsidiaries incurring a material liability under Title IV of ERISA. No Plan is a defined benefit pension plan or is subject to Section 302 or Title IV of ERISA or Section 412 of the Code. No Plan is a multiemployer plan within the meaning of
Section 3(37) of ERISA or a multiple employer welfare arrangement as defined in Section 3(40) or ERISA.
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2.12.
Labor Matters
.
(a) Except as set forth on
Schedule 2.12(a)
, the Company and its Subsidiaries are not a party to any collective bargaining agreement or other labor union contract applicable to persons employed by the Company and its Subsidiaries nor, to the Company’s knowledge, are there any activities or proceedings of any labor union to organize any such employees. There are no pending grievance or similar proceedings involving the Company and its Subsidiaries and, to the Company’s knowledge, any of its employees who are subject to a collective bargaining agreement or other labor union contract, and there are no continuing
obligations of the Company and its Subsidiaries pursuant to the resolution of any such proceeding that is no longer pending.
(b) Except as set forth on
Schedule 2.12(b)
, there are no material written agreements between the Company and its Subsidiaries and any of their employees or individual contractors that their employment or services will be for any particular length that cannot be terminated at any time, subject to any applicable notice period prescribed therein. To the Company’s knowledge, none of its officers or key employees currently intends to terminate his or her employment with the Company or any of its Subsidiaries. The Company and its Subsidiaries are in compliance in all material respects and, to the Company’s
knowledge, each of the Company’s and its Subsidiaries’ employees and individual contractors is in compliance in all material respects, with the terms of the respective employment and service agreements between the Company or its Subsidiaries and such individuals, except, in each case, where noncompliance would not reasonably be likely to result in the Company or any of its Subsidiaries incurring a material liability. Except as otherwise disclosed in
Schedule 2.12(b)
, there are no material oral or informal arrangements, commitments or promises between the Company or its Subsidiaries and any officers or key employees of the Company or its Subsidiaries that have not been documented as part of the formal written agreements between any such individuals and the Company or its Subsidiaries and made available to Quartet.
(c) The Company and its Subsidiaries are in compliance in all material respects with all Legal Requirements applicable to its employees, including all applicable labor and employment provisions included in the Maritime Guidelines, respecting employment, employment practices, terms and conditions of employment and wages and hours and is not liable for any material arrears of wages or penalties with respect thereto. The Company’s and its Subsidiaries’ obligations to provide statutory severance pay to their employees are fully funded or accrued on the Audited Financial Statements and the Company has no knowledge of any
circumstance that is reasonably likely to give rise to any valid claim by a current or former employee for compensation on termination of employment (beyond the statutory severance pay to which employees are entitled) that would reasonably likely to result in the Company or any of its Subsidiaries incurring a material liability. Except as would not reasonably be expected in the Company or any of its Subsidiaries incurring a material liability, there are no pending, or to the Company’s knowledge, threatened or reasonably likely claims or actions against the Company or any of its Subsidiaries by any employee in connection with such employee’s employment or termination of employment by the Company or any of its Subsidiaries.
(d) Except as would not reasonably be expected in the Company or any of its Subsidiaries incurring a material liability, no employee or former employee of the Company or any of its Subsidiaries is owed any wages, benefits or other compensation for past services (other than wages, benefits and compensation accrued in the ordinary course of business during the current pay period and any accrued benefits for services, which by their terms or under applicable law, are payable in the future, such as accrued vacation, recreation leave and severance pay).
2.13.
Restrictions on Business Activities
. Except as disclosed in
Schedule 2.13
hereto, there is no agreement, commitment, judgment, injunction, order or decree binding upon the Company or its Subsidiaries or their assets or to which the Company or its Subsidiaries is a party which has or could reasonably be expected to have the effect of prohibiting or materially impairing any business practice of the Company or its Subsidiaries, any acquisition of property by the Company or its Subsidiaries or the conduct of business by the
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Company or its Subsidiaries as currently conducted other than such effects, individually or in the aggregate, which have not had and could not reasonably be expected to have a Material Adverse Effect on the Company and its Subsidiaries.
2.14.
Title to Property
.
(a) All real property and vessels owned by the Company and its Subsidiaries (including improvements and fixtures thereon, easements and rights of way) are shown or reflected on the balance sheet of the Company included in the Audited Financial Statements and are listed on
Schedule 2.14(a)
hereto. Except as would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect on the Company, and except for vessels that are either undergoing or are en route to a location for refurbishment, repair or maintenance, with respect to each vessel owned or operated by the Company and/or one of its
Subsidiaries, such vessels are in satisfactory operating condition for the purpose and in the waters in which such vessels are working as of the date of this Agreement or, if not working on the date or this Agreement, for the purpose and in the waters where it performed its most recently completed customer work.
(b) The Company and/or one of its Subsidiaries has good, valid and marketable fee simple title to the real property identified on
Schedule 2.14(a)
as being owned by such entity, subject to Permitted Liens, and except as set forth in the Audited Financial Statements, Permitted Liens or as identified on
Schedule 2.14(b)
hereto, all of such owned real property is held free and clear of (i) all leases, licenses and other rights to occupy or use such real property and (ii) all Liens, rights of way, easements, restrictions, exceptions, variances, reservations, covenants or other title defects or limitations of any
kind.
Schedule 2.14(b)
hereto also contains a list of all options or other contracts under which the Company and its Subsidiaries have a right to acquire or the obligation to sell any interest in real property.
(c) Except as otherwise disclosed on
Schedule 2.14(c)
, all leases of real property held by the Company and its Subsidiaries (“
Real Property Leases
”), and all material personal property and other material property and assets of the Company and its Subsidiaries owned, used or held for use in connection with the business of the Company and its Subsidiaries (the “
Personal Property
”) are shown or reflected on the balance sheet included in the Audited Financial Statements, to the extent required by U.S. GAAP, as of the dates of such Audited Financial Statements, other than those entered into
or acquired on or after the date of the Audited Financial Statements in the ordinary course of business.
Schedule 2.14(c)
hereto contains a list of all Real Property Leases and material Personal Property held by the Company and its Subsidiaries (other than leases of vehicles (including vessels), office equipment, or operating equipment made in the ordinary course of business). The Company and its Subsidiaries have good and marketable title to the material Personal Property owned respectively by each such entity, and all such material Personal Property is in each case held free and clear of all Liens, except for Permitted Liens and Liens disclosed in the Audited Financial Statements or in
Schedule 2.14(c)
hereto, none of which Liens is reasonably expected to have, individually or in the aggregate, a Material Adverse Effect on the Company and its Subsidiaries.
(d) All Real Property Leases and leases pursuant to which the Company and/or its Subsidiaries lease from others Personal Property are valid and effective in accordance with their respective terms, and there is not, under any of such leases, any existing material default or event of default of the Company or its Subsidiaries or, to the Company’s knowledge, any other party (or any event which with notice or lapse of time, or both, would constitute a material default), except where the lack of such validity and effectiveness or the existence of such default or event of default could not reasonably be expected to have a
Material Adverse Effect on the Company and its Subsidiaries.
2.15.
Vessels; Maritime Matters
.
(a)
Schedule 2.15(a)
sets forth a complete list of all vessels owned by the Company or any of its Subsidiaries (the “
Owned Vessels
”), including the name, registered owner, capacity (gross tonnage or deadweight tonnage, as specified therein), year built, classification society, IMO number and flag state. As of the date hereof, neither the Company nor any Subsidiary leases or charters-in pursuant to a leaseback or charter arrangements (the “
Leased Vessels
” and together with the Owned Vessels, the “
Vessels
”) any
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vessel for a period longer than nine (9) months. Except as set forth on
Schedule 2.15(a)
, each Vessel is operated in compliance with all Maritime Guidelines, except where such failure to be in compliance has not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company. Each of the Company’s Subsidiaries, as applicable, is qualified to own and operate the applicable Owned Vessel under Applicable Law, including the laws of each Owned Vessel’s flag state, except where such failure to be qualified would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company.
(b) Except as set forth in
Schedule 2.15(b)
, each Owned Vessel is classed by any of Lloyd’s Register of Shipping, American Bureau of Shipping, Det Norske Veritas or a classification society which is a full member of the International Association of Classification Societies and, to the knowledge of the Company, (i) no event has occurred and no condition exists that would cause such Vessel’s class to be suspended or withdrawn, and (ii) has been reasonably maintained consistent with standards generally followed in the industry (ordinary wear and tear excepted).
(c) Except as set forth in
Schedule 2.15(c)
, with respect to each of the Owned Vessels, either the Company or one of its Subsidiaries, as applicable, is the sole owner of each such Vessel and has good title to such Vessel free and clear of all Liens, other than Permitted Liens.
2.16.
Taxes
.
(a)
Tax Definitions
. As used in this Agreement, (i) the term “
Tax
” (including, with correlative meaning, the terms “
Taxes
” and “
Taxable
”) includes all federal, state, local and foreign income, profits, franchise, gross receipts, environmental, customs duty, capital stock, severance, stamp, payroll, sales, employment, occupation, ad valorem, transfer, recapture, unemployment, disability, use, property, withholding, excise, production, value added, occupancy and other taxes, duties or assessments of any nature whatsoever, together will all interest, penalties
and additions, and (ii) the term “
Tax Return
” includes all returns and reports (including elections, declarations, disclosures, schedules, estimates and information returns) required to be supplied to a Tax authority relating to Taxes.
(b)
Tax Returns and Audits
. Except as set forth in
Schedule 2.16
hereto:
(i) The Company and its Subsidiaries have timely filed all Tax Returns required to be filed by the Company or its Subsidiaries with any Tax authority prior to the date hereof, except such Tax Returns that are not material to the Company and its Subsidiaries. The Company and its Subsidiaries have paid all Taxes shown to be due and payable on such Tax Returns.
(ii) All material Taxes that the Company and its Subsidiaries are required by law to withhold or collect have been duly withheld or collected, and have been timely paid over to the proper governmental authorities to the extent due and payable.
(iii) The Company and its Subsidiaries have not been delinquent in the payment of any material Tax nor is there any material Tax deficiency outstanding, proposed or assessed against the Company or its Subsidiaries, nor have the Company or its Subsidiaries executed any unexpired waiver of any statute of limitations on or extending the period for the assessment or collection of any Tax. The Company and its Subsidiaries have complied in all material respects with all Legal Requirements with respect to payments made to third parties and the withholding of any payment of withheld Taxes and has timely withheld from employee wages
and other payments and timely paid over in full to the proper taxing authorities all amounts required to be so withheld and paid over for all periods.
(iv) To the knowledge of the Company, no audit or other examination of any Tax Return of the Company and its Subsidiaries by any Tax authority is presently in progress, nor has the Company or any Subsidiary been notified in writing of any request for such an audit or other examination.
(v) No adjustment relating to any Tax Returns filed by the Company or any Subsidiary has been proposed in writing, formally or informally, by any Tax authority to the Company or any Subsidiary or any representative thereof.
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(vi) The Company and its Subsidiaries have no material liability for any unpaid Taxes which have not been accrued for or reserved on the Company’s balance sheets included in the Audited Financial Statements, whether asserted or unasserted, contingent or otherwise, other than any liability for unpaid Taxes that may have accrued since the end of the most recent fiscal year in connection with the operation of the business of the Company in the ordinary course of business.
2.17.
Environmental Matters
.
(a) Except as disclosed in
Schedule 2.17
hereto and except for such matters that, individually or in the aggregate, are not reasonably likely to have a Material Adverse Effect: (i) the Company and/or its Subsidiaries are in compliance with all applicable Environmental Laws (as defined below); (ii) there is no Environmental Claim (as defined below) pending or, to the knowledge of the Company, threatened against the Company and/or its Subsidiaries; (iii) neither the Company, any Subsidiary, nor, to the knowledge of the Company, any other person has placed, stored, deposited, discharged, buried, dumped, disposed of or
released any Hazardous Substances produced by, or resulting from any of the Company’s or the Subsidiaries’ operations, at any Real Property, except for inventories of such substances to be used, and wastes generated therefrom, in the ordinary course of business of the Company and the Subsidiaries (which inventories and wastes, if any, were and are stored or disposed of in accordance with applicable Environmental Laws); (iv) neither the Company nor its Subsidiaries have received any written notice, demand, letter, claim or request for information alleging that the Company and/or its Subsidiaries may be in violation of or liable under any Environmental Law; and (v) the Company and/or its Subsidiaries are not subject to any orders, decrees, injunctions or other arrangements with any Governmental Entity or subject to any indemnity or other agreement with any third party relating to liability under any Environmental Law or relating to Hazardous Substances.
(b) As used in this Agreement, the term “
Environmental Claim
” means any claim, action, cause of action, investigation or written notice by any person or entity alleging potential liability (including potential liability for investigatory costs, cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries, or penalties) arising out of, based on or resulting from (a) the presence, release or threatened release of any Hazardous Substances at any location, whether or not owned or operated by the Company or any of its Subsidiaries, or (b) circumstances forming the
basis of any violation or alleged violation of any Environmental Law.
(c) As used in this Agreement, the term “
Environmental Law
” means any Maritime Guideline or federal, state, local or foreign law, regulation, order, decree, permit, authorization, opinion, common law or agency requirement relating to: (A) pollution or protection of human health or the environment, including laws relating to the exposure to, or releases or threatened releases of, Hazardous Substances or (B) the manufacture, processing, distribution, use, treatment, storage, release, transport or handling of Hazardous Substances and all laws relating to the management or use of natural resources.
(d) As used in this Agreement, the term “
Hazardous Substance
” means any substance that is: (i) listed, classified or regulated pursuant to any Environmental Law; (ii) any petroleum product or by-product, asbestos-containing material, lead-containing paint or plumbing, polychlorinated biphenyls, radioactive materials or radon; (iii) explosive or (iv) any other substance which is the subject of regulatory action by any Governmental Entity pursuant to any Environmental Law.
(e) The Company has delivered or otherwise made available for inspection to Quartet complete and correct copies of material studies, audits, assessments, memoranda and investigations pertaining to Hazardous Substances or regarding the Company’s or any Subsidiary’s compliance with applicable Environmental Laws that are in the possession of the Company or any Subsidiary and which have been prepared in the last 5 years.
2.18.
Brokers; Third Party Expenses
. The fees, expenses, commissions or other similar charges that the Company and its Affiliates have incurred, or will incur, directly or indirectly, in connection with this Agreement or any transactions contemplated hereby shall not exceed $6,000,000 in the aggregate. Neither the Company nor its Affiliates have entered into any agreement that would result in any common shares, shares of
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common stock, options, warrants or other securities of either Company or Quartet to be payable to any third party service provider as a result of the Mergers.
2.19.
Intellectual Property
.
(a)
Schedule 2.19
hereto contains a description of all material Registered Intellectual Property of the Company and its Subsidiaries. For the purposes of this Agreement, the following terms have the following definitions:
(i) “
Intellectual Property
” shall mean any or all of the following and all worldwide common law and statutory rights in, arising out of, or associated therewith: (i) patents and applications therefor and all reissues, divisions, renewals, extensions, provisionals, continuations and continuations-in-part thereof; (ii) inventions (whether patentable or not), invention disclosures, improvements, trade secrets, proprietary information, know how, technology, technical data and customer lists, and all documentation relating to any of the foregoing; (iii) copyrights, copyrights registrations and applications
therefor, and all other rights corresponding thereto throughout the world (“
Copyrights
”); (iv) domain names, uniform resource locators and other names and locators associated with the Internet (v) industrial designs and any registrations and applications therefor; and (vi) trade names, logos, common law trademarks and service marks, trademark and service mark registrations and applications therefor (collectively, “
Trademarks
”).
(ii) “
Company Intellectual Property
” shall mean any Intellectual Property that is owned by, or exclusively licensed to, the Company or any of its Subsidiaries, including software and software programs developed by or exclusively licensed to the Company or any of its Subsidiaries (specifically excluding any off the shelf or shrink-wrap software).
(iii) “
Registered Intellectual Property
” means all Intellectual Property that is the subject of an application, certificate, filing, registration or other document issued, filed with, or recorded by any government or other legal authority.
(iv) “
Company Products
” means all current versions of products or service offerings of the Company or any of its Subsidiaries.
(b) To the Company’s knowledge, the Company and its Subsidiaries own or have enforceable rights to use all Intellectual Property required, in all material respects, for the conduct of their respective business as presently conducted. Except as disclosed in
Schedule 2.19
hereto, no Company Intellectual Property or Company Product is subject to any material proceeding or outstanding decree, order, judgment, contract, license, agreement or stipulation restricting in any manner the use thereof by the Company or any of its Subsidiaries, or which may affect the validity, use or enforceability of such Company
Intellectual Property or Company Product, which in any such case could reasonably be expected to have a Material Adverse Effect on the Company or any of its Subsidiaries.
(c) Except as disclosed in
Schedule 2.19
hereto, the Company and its Subsidiaries owns and has good and exclusive title to each material item of Company Intellectual Property owned by it free and clear of any Liens (excluding non-exclusive licenses and related restrictions granted by it in the ordinary course of business).
(d) To the Company’s knowledge, the operation of the business of the Company and its Subsidiaries as such business currently is conducted, including the Company’s and its Subsidiaries’ use of any product, device or process, does not infringe or misappropriate the Intellectual Property of any third party or constitute unfair competition or trade practices under the laws of any jurisdiction and the Company and its Subsidiaries have not received any claims or threats from third parties alleging any such infringement, misappropriation or unfair competition or trade practices.
2.20.
Agreements, Contracts and Commitments
.
(a)
Schedule 2.20
hereto sets forth a complete and accurate list of all Material Company Contracts (as hereinafter defined), specifying the parties thereto. For purposes of this Agreement, (i) the term “
Company Contracts
” shall mean all written contracts, agreements, leases, mortgages, indentures, notes,
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bonds, and other similar understandings, commitments and obligations (including outstanding offers and proposals) of any kind to which the Company or any of its Subsidiaries is a party or by or to which any of the material properties or assets of the Company or any of its Subsidiaries may be bound, subject or affected (including notes or other instruments payable to the Company or any of its Subsidiaries) and (ii) the term “
Material Company Contracts
” shall mean (x) each Company Contract (A) that would be required to be included as an exhibit to a registration statement with the Securities and Exchange
Commission (“
SEC
”) if the Company had a class of equity securities registered under Section 12(b) or 12(g) of the Exchange Act, (B) providing for payments (present or future) to the Company or any of its Subsidiaries in excess of $2,000,000 in the aggregate (other than any Company Contract that is a vessel charter or other similar agreement) or (C) under or in respect of which the Company or any of its Subsidiaries presently have any liability or obligation of any nature whatsoever (absolute, contingent or otherwise) in excess of $2,000,000 (other than any Company Contract that is a vessel charter or other similar agreement), (y) each Company Contract that otherwise is or could reasonably be material to the businesses, operations, assets, or condition (financial or otherwise) of the Company and its Subsidiaries, and (z) the limitations of subclause (x) and subclause (y) notwithstanding, each of the following Company Contracts:
(i) any mortgage, indenture, note, installment obligation or other instrument, agreement or arrangement for or relating to any borrowing of money from the Company or any of its Subsidiaries by any officer, director, stockholder or holder of derivative securities of the Company or any of its Subsidiaries (“
Insider
”);
(ii) any mortgage, indenture, note, installment obligation or other instrument, agreement or arrangement for or relating to any borrowing of money from an Insider by the Company;
(iii) any guaranty, direct or indirect, by the Company, a Subsidiary or any Insider of the Company of any obligation for borrowings, or otherwise, excluding endorsements made for collection in the ordinary course of business;
(iv) any material Company Contract of employment or management pursuant to which the Company or any of its Subsidiaries has made payments in excess of $250,000 in the twelve (12) calendar months ended December 31, 2013;
(v) each material ship-sales, memoranda of agreement or other vessel acquisition Company Contract for vessels under construction or newly constructed for the Company or any of its Subsidiaries, other than Owned Vessels (“
Newbuildings
”) and secondhand vessels contracted for by the Company (other than Owned Vessels) and other material Company Contracts with respect to Newbuildings and the financing thereof, including charters pursuant to which the Company or any of its Subsidiaries has made payments in excess of $2,000,000 in the twelve (12) calendar months ended December 31, 2013;
(vi) each Company Contract pursuant to which an Owned Vessel is leased or chartered by the Company to a third party, including all bareboat charters in connection with the Leased Vessels pursuant to which the Company or any of its Subsidiaries has received payments in excess of $2,000,000 in the twelve (12) calendar months ended December 31, 2013;
(vii) each material operating agreement, management agreement, crewing agreement, contract of affreightment or financial lease (including sale/leaseback or similar arrangements) with respect to any Vessel pursuant to which the Company or any of its Subsidiaries has made payments (or received payments) in excess of $2,000,000 in the twelve (12) calendar months ended December 31, 2013;
(viii) each Company Contract, including any option, with respect to the purchase or sale of any vessel pursuant to which the Company or any of its Subsidiaries has made payments (or received payments) in excess of $2,000,000 in the twelve (12) calendar months ended December 31, 2013;
(ix) any Company Contract made other than in the ordinary course of business or (x) providing for the grant of any non-arms length rights to purchase or lease any asset of the Company or any of
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its Subsidiaries or (y) providing for any right (exclusive or non-exclusive) to sell or distribute, or otherwise relating to the sale or distribution of, any product or service of the Company or any of its Subsidiaries;
(x) any Company Contract to register any shares of the capital stock or other securities of the Company or any of its Subsidiaries with any Governmental Entity;
(xi) any Company Contract to make payments, contingent or otherwise, arising out of the prior acquisition of the business, assets or stock of other Persons;
(xii) any collective bargaining agreement with any labor union;
(xiii) any lease or similar arrangement for the use by the Company or any of its Subsidiaries of real property or Personal Property where the annual lease payments are greater than $100,000 (other than any lease of vehicles, office equipment or operating equipment made in the ordinary course of business); and
(xiv) any Company Contract to which any Insider of the Company or any of its Subsidiaries, or any entity owned or controlled by an Insider, is a party.
(b) Each Material Company Contract was entered into at arms’ length and in the ordinary course, is in full force and effect and, to the Company’s knowledge, is valid and binding upon and enforceable against each of the parties thereto, except insofar as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally or by principles governing the availability of equitable remedies. To the Company’s knowledge, no other party to a Material Company Contract is the subject of a bankruptcy or insolvency proceeding. True,
correct and complete copies of all Material Company Contracts and all offers and proposals that, if accepted, would constitute Material Company Contracts (or written summaries in the case of oral Material Company Contracts or offers or proposals) have been made available to Quartet or Quartet’s counsel.
(c) Except as set forth in
Schedule 2.20
, neither the Company nor, to the Company’s knowledge, any other party thereto is in breach of or in default under, and no event has occurred which with notice or lapse of time or both would become a breach of or default under, any Company Contract, and no party to any Company Contract has given any written notice of any claim of any such breach, default or event, which, individually or in the aggregate, are reasonably likely to have a Material Adverse Effect on the Company and its Subsidiaries. Each Material Company Contract that has not expired by its terms is in full
force and effect.
2.21.
Insurance
. The Company and its Subsidiaries maintain insurance policies with respect to its assets, business, equipment, properties, operations, employees, officers and directors (collectively, the “
Insurance Policies
”) that are reasonably consistent with generally accepted standards in the bulk shipping industry. Each vessel the Company operates is covered by hull and machinery, war risk and protection and indemnity insurance. Each Insurance Policy is in full force and effect and all premiums due and payable thereon have been paid in full. As of the date hereof, neither the
Company nor any of its Subsidiaries has received a written notice of cancellation or non-renewal or any Insurance Policy, nor to the Company’s knowledge, is the termination of any Insurance Policy threatened. The insurances provided by the Insurance Policies are adequate in amount and scope for the Company’s and its Subsidiaries’ business and operations.
2.22.
Governmental Actions/Filings
.
(a) The Company and its Subsidiaries have been granted and hold, and have made, all Governmental Actions/Filings (as defined below) (including Governmental Actions/Filings required for emission or discharge of effluents and pollutants into the air and the water) necessary to the conduct by the Company and its Subsidiaries of their business (as presently conducted) or used or held for use by the Company and its Subsidiaries except for any of the foregoing that if not granted, held or made, would not have, individually or in the aggregate, a Material Adverse Effect upon the Company and its Subsidiaries taken as a whole. Each
such Governmental Action/Filing is in full force and effect and the Company and its Subsidiaries are in substantial compliance with all of their obligations with respect thereto. To the
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knowledge of the Company, no event has occurred and is continuing which requires or permits, or after notice or lapse of time or both would require or permit, and consummation of the transactions contemplated by this Agreement or any ancillary documents will not require or permit (with or without notice or lapse of time, or both), any modification or termination of any such Governmental Actions/Filings except such events which, either individually or in the aggregate, would not have a Material Adverse Effect upon the Company or any of its Subsidiaries taken as a whole. To the knowledge of the Company, no Governmental
Action/Filing is necessary to be obtained, secured or made by the Company or any of its Subsidiaries to enable any of them to continue to conduct its business and operations and use its properties after the Closing in a manner that is consistent with current practice except for any of such that, if not obtained, secured or made, would not, either individually or in the aggregate, have a Material Adverse Effect upon the Company or any of its Subsidiaries taken as a whole.
(b) Except as set forth in
Schedule 2.22(b)
, to the knowledge of the Company, no contractors’ licenses are necessary to be obtained, secured or made by the Company or any of its Subsidiaries to enable any of them to continue to conduct its businesses and operations and use its properties after the Closing in a manner which is consistent with current practice. To the knowledge of the Company, all of the contractors’ licenses listed on
Schedule 2.22(b)
have been obtained, secured or made and are in full force and effect.
(c) For purposes of this Agreement, the term “
Governmental Action/Filing
” shall mean any material franchise, license, certificate of compliance, authorization, consent, order, permit, approval, consent or other action of, or any filing, registration or qualification with, any federal, state, municipal, foreign or other governmental, administrative or judicial body, agency or authority.
2.23.
Interested Party Transactions
. Except as set forth in the
Schedule 2.23
hereto, no employee, officer, director or stockholder of the Company or any of its Subsidiaries or a member of his or her immediate family is indebted to the Company or any of its Subsidiaries, nor is the Company or any of its Subsidiaries indebted (or committed to make loans or extend or guarantee credit) to any of such Persons, other than (i) for payment of salary for services rendered, (ii) reimbursement for reasonable expenses incurred on behalf of the Company or any of its Subsidiaries, and (iii) for other
employee benefits made generally available to all employees. Except as set forth in
Schedule 2.23
, to the knowledge of the Company, no officer, director or shareholder or any member of their immediate families is, directly or indirectly, interested in any Material Company Contract with the Company or any of its Subsidiaries (other than such contracts as relate to any such Person’s ownership of capital stock or other securities of the Company or such Person’s employment with the Company or any of its Subsidiaries).
2.24.
Board Approval
. The Company Board has, as of the date of this Agreement, duly approved this Agreement and the transactions contemplated hereby.
2.25.
Stockholder Approval
. The Company Common Shares owned by the Stockholders constitute, in the aggregate, the requisite amount of shares necessary for the adoption of this Agreement and the approval of the Transaction Merger by the stockholders of the Company in accordance with Applicable Law.
2.26.
No Illegal or Improper Transactions
. Since January 1, 2011, neither the Company nor any of its Subsidiaries nor, to the knowledge of the Company, any officer, director, employee, agent or Affiliate of the Company or its Subsidiaries on its behalf has offered, paid or agreed to pay to any person or entity (including any governmental official) or solicited, received or agreed to receive from any such person or entity, directly or indirectly, any money or anything of value for the purpose or with the intent of (a) obtaining or maintaining business for the Company or any of its Subsidiaries, (b)
facilitating the purchase or sale of any product or service, or (c) avoiding the imposition of any fine or penalty, in any manner which is in violation of any applicable ordinance, regulation or law, the effect of which, individually or in the aggregate, would have a Material Adverse Effect. To the Company’s knowledge, no employee of the Company or any of its Subsidiaries has provided or is providing information to any law enforcement agency regarding the commission or possible commission of any crime or the violation or possible violation of any applicable law. Neither the Company nor any of its Subsidiaries nor, to the Company’s knowledge, any officer, employee, contractor, subcontractor or agent of the Company or any of its Subsidiaries has discharged, demoted,
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suspended, threatened, harassed or in any other manner discriminated against an employee of the Company or any of its Subsidiaries in the terms and conditions of employment because of any act of such employee described in 18 U.S.C. §1514A(a).
2.27.
Representations and Warranties Complete
. Except for the representations and warranties contained in Article III, the Company acknowledges that neither Quartet nor any other Person on behalf of Quartet or any of its Affiliates has made, makes or shall be deemed to make any other express or implied representation or warranty with respect to Quartet or with respect to any other information provided to the Company and Quartet disclaims any such representation or warranty. Neither Quartet nor any other Person will have or be subject to any liability or indemnification obligation to the Company or any
other Person resulting from the distribution to the Company, or its use of, any such information.
2.28.
Survival of Representations and Warranties
. The representations and warranties of the Company and its Subsidiaries set forth in this Agreement shall survive the Closing as set forth in Section 7.4(a).
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF QUARTET, HOLDCO AND MERGER SUB
Subject to the exceptions set forth in
Schedule 3
attached hereto (the “
Quartet Schedule
”), Quartet, Holdco and Merger Sub represent and warrant to the Company and Stockholders, as follows:
3.1.
Organization and Qualification
.
(a) Quartet is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power and authority to own, lease and operate its assets and properties and to carry on its business as it is now being conducted. Quartet is in possession of all Approvals necessary to own, lease and operate the properties it purports to own, operate or lease and to carry on its business as it is now being conducted, except where the failure to have such Approvals could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on
Quartet. Complete and correct copies of the Charter Documents of Quartet, as amended and currently in effect, have been heretofore delivered to the Company or its counsel. Quartet is not in violation of any of the provisions of Quartet’s Charter Documents.
(b) Quartet is qualified or licensed to do business as a foreign corporation and is in good standing in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its activities makes such qualification or licensing necessary, except where the failure to be so duly qualified or licensed and in good standing could not reasonably be expected to have a Material Adverse Effect on Quartet.
3.2.
Subsidiaries and Other Interests
.
(a) Quartet has no Subsidiaries except for Holdco and Merger Sub. Except for Holdco and Merger Sub, Quartet does not own, directly or indirectly, any ownership, equity, profits or voting interest in any Person or have any agreement or commitment to purchase any such interest, and Quartet has not agreed and is not obligated to make nor is bound by any written, oral or other agreement, contract, subcontract, lease, binding understanding, instrument, note, option, warranty, purchase order, license, sublicense, insurance policy, benefit plan, commitment or undertaking of any nature, as of the date hereof or as may hereafter be in
effect under which it may become obligated to make, any future investment in or capital contribution to any other entity.
(b) Except for Holdco and Merger Sub, Quartet does not own directly or indirectly any interest or investment (whether equity or debt) in any corporation, partnership, joint venture, business, trust or other entity (other than investments in short term investment securities).
(c) Each of Holdco and Merger Sub is an exempted company duly incorporated, validly existing and in good standing under the laws of Bermuda and has the requisite corporate power and authority to own, lease and operate its assets and properties and to carry on its business as it is now being conducted. Each of Holdco and Merger Sub is in possession of all Approvals necessary to own, lease and operate the
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properties it purports to own, operate or lease and to carry on its business as it is now being conducted, except where the failure to have such Approvals would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Quartet. Complete and correct copies of the Charter Documents of Holdco and the Merger Sub, as amended and currently in effect, have been heretofore delivered to the Company or its counsel. Neither Holdco nor Merger Sub is in violation of any of the provisions of its Charter Documents.
(d) Each of Holdco and Merger Sub is duly qualified or licensed to do business as a foreign corporation or foreign limited liability company and is in good standing in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its activities makes such qualification or licensing necessary, except for such failures to be so duly qualified or licensed and in good standing that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Quartet.
(e) Neither Holdco nor Merger Sub has any assets or properties of any kind, does not now conduct and has never conducted any business, and has and will have at the Closing no obligations or liabilities of any nature whatsoever, except for such obligations as are imposed under this Agreement.
3.3.
Capitalization
.
(a) The authorized capital stock of Quartet consists of 15,000,000 shares of Quartet Common Stock and 1,000,000 shares of preferred stock, par value $0.0001 per share (“
Quartet Preferred Stock
” and, together with the Quartet Preferred Stock, the “
Quartet Capital Stock
”), of which 12,683,125 shares of Quartet Common Stock and no shares of Quartet Preferred Stock are issued and outstanding. Except as set forth in
Schedule 3.3(a)
, all of such securities are validly issued, fully paid and nonassessable and free of preemptive rights or rights of first refusal created by statute, the Charter
Documents of Quartet or any agreement to which Quartet is a party or by which it is bound, and free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof or under applicable federal or state securities or “blue sky” laws. Except as set forth in
Schedule 3.3(a)
, Quartet has no outstanding bonds, debentures, notes or other obligations the holders of which have or upon the happening of certain events would have the right to vote (or which are convertible into or exercisable or exchangeable for securities having the right to vote) with the stockholders of Quartet on any matter.
(b) Except for the Quartet Rights and Quartet UPOs or as set forth in
Schedule 3.3(b)
, there are no (i) options, warrants, calls, subscriptions, convertible securities, or other rights, agreements, stock appreciation rights, restricted stock units, phantom stock or similar derivative securities, equity-based compensation or instruments or commitments which obligate Quartet to issue, transfer or sell any Quartet Capital Stock or make any payments in lieu thereof, (ii) agreements or understandings to which Quartet is a party with respect to the voting of any Quartet Capital Stock or which restrict the transfer of any
such shares, agreements or understandings with respect to the voting of any such shares or which restrict the transfer of any such shares, (iii) outstanding contractual obligations of Quartet to repurchase, redeem or otherwise acquire any Quartet Capital Stock or any other securities of Quartet, (iv) outstanding options to purchase Quartet Common Stock or Quartet Preferred Stock granted to employees of Quartet or other parties, (v) outstanding warrants to purchase Quartet Common Stock or Quartet Preferred Stock or (vi) outstanding notes, debentures, securities or agreements convertible into Quartet Common Stock or Quartet Preferred Stock. All shares of Quartet Common Stock and Quartet Preferred Stock have been duly authorized, validly issued, fully paid and nonassessable. All outstanding shares of Quartet Common Stock and all outstanding Quartet Rights have been issued and granted in compliance with (x) all applicable securities laws and (in all material respects) other applicable laws
and regulations, and (y) all requirements set forth in any applicable agreements.
(c) Except as set forth in
Schedule 3.3(c)
, there are no registrations rights, and there is no voting trust, proxy, rights plan, antitakeover plan or other agreements or understandings to which Quartet is a party or by which Quartet is bound with respect to any security of any class of Quartet.
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(d) Except as set forth in
Schedule 3.3(d)
, as a result of the consummation of the transactions contemplated hereby, no shares of capital stock, warrants, options or other securities of Quartet are issuable and no rights in connection with any shares, warrants, options or other securities of Quartet accelerate or otherwise become triggered (whether as to vesting, exercisability, convertibility or otherwise).
(e) The Holdco Shares to be issued by Holdco in connection with the Mergers, upon issuance in accordance with the terms of this Agreement, will be duly authorized and validly issued and such Holdco Shares will be fully paid and nonassessable.
(f) The authorized share capital of Holdco is 100,000,000 shares, par value $0.0001 per share, of which 10 shares are issued and outstanding. Quartet owns all of the issued and outstanding equity securities of Holdco, free and clear of all Liens.
(g) The authorized share capital of Merger Sub is 100 shares, par value $1.00 per share, of which 100 shares are issued and outstanding. Holdco owns all of the issued and outstanding equity securities of Merger Sub, free and clear of all Liens.
3.4.
Authority Relative to this Agreement
. Each of Quartet, Holdco and Merger Sub has full corporate power and authority to: (i) execute, deliver and perform this Agreement, and each ancillary document that Quartet, Holdco or Merger Sub has executed or delivered or is to execute or deliver pursuant to this Agreement, and (ii) carry out Quartet’s, Holdco’s and Merger Sub’s obligations hereunder and thereunder and, to consummate the transactions contemplated hereby (including the Mergers). Other than the Quartet Stockholder Approval (as defined in Section 5.1(a)), the execution and
delivery of this Agreement by Quartet, Holdco and Merger Sub and the consummation by Quartet, Holdco and Merger Sub of the transactions contemplated hereby (including the Mergers) have been duly and validly authorized by all necessary corporate action on the part of Quartet, Holdco and Merger Sub (including the approval by the Quartet Board, Holdco Board and Merger Sub Board and shareholders of Holdco with respect to the Redomestication Merger and shareholders of Merger Sub with respect to the Transaction Merger as the case may be), and no other corporate proceedings on the part of Quartet, Holdco or Merger Sub are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Quartet, Holdco and Merger Sub and, assuming the due authorization, execution and delivery thereof by the other parties hereto, constitutes the legal and binding obligation of Quartet, Holdco and Merger Sub,
enforceable against Quartet, Holdco and Merger Sub in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity.
3.5.
No Conflict; Required Filings and Consents
.
(a) The execution and delivery of this Agreement by Quartet, Holdco and Merger Sub does not, and the performance of this Agreement by Quartet, Holdco and Merger Sub shall not: (i) conflict with or violate Quartet’s, Holdco’s or Merger Sub’s Charter Documents, or (ii) assuming the accuracy of the representations and warranties of the Company set forth in Section 2.5, conflict with or violate any Legal Requirements, or (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or materially impair Quartet’s, Holdco’s or
Merger Sub’s rights or alter the rights or obligations of any third party under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on any of the properties or assets of Quartet pursuant to, any Quartet Contracts, except, with respect to clauses (ii) or (iii), for any such conflicts, violations, breaches, defaults or other occurrences that would not, individually and in the aggregate, have a Material Adverse Effect on Quartet.
(b) The execution and delivery of this Agreement by Quartet, Holdco and Merger Sub does not, and the performance of it hereunder will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Entity, except (i) for applicable requirements, if any, of the Securities Act, the Exchange Act, Blue Sky Laws, and the rules and regulations thereunder, and appropriate documents with the relevant authorities of other jurisdictions in which Quartet, Holdco or
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Merger Sub is qualified to do business and (ii) for the filing of any notifications required under the HSR Act, if required upon advice of counsel, and the expiration of the required waiting period thereunder.
3.6.
Compliance
. Each of Quartet, Holdco and Merger Sub has complied with, and is not in violation of, any Legal Requirements with respect to the conduct of its business, or the ownership or operation of its business, except for failures to comply or violations which, individually or in the aggregate, have not had and are not reasonably likely to have a Material Adverse Effect on Quartet. The business and activities of Quartet, Holdco and Merger Sub have not been and are not being conducted in violation of any Legal Requirements. Neither Quartet, Holdco nor Merger Sub is in default or violation of any
term, condition or provision of any applicable Charter Documents. No written notice of non-compliance with any Legal Requirements has been received by Quartet.
3.7.
SEC Filings; Financial Statements; Internal Controls
.
(a) Quartet has made available to the Company and the Stockholders a correct and complete copy of each report, registration statement and definitive proxy statement filed by Quartet (the “
Quartet SEC Reports
”) with the SEC, which are all the forms, reports and documents required to be filed by Quartet with the SEC prior to the date of this Agreement. All Quartet SEC Reports required to be filed by Quartet in the twelve (12) month period prior to the date of this Agreement were filed in a timely manner. As of their respective dates the Quartet SEC Reports: (i) were prepared in accordance and complied with the
requirements of the Securities Act or the Exchange Act, as the case may be, and the rules and regulations of the SEC thereunder applicable to such Quartet SEC Reports, and (ii) did not at the time they were filed (and if amended or superseded by a filing prior to the date of this Agreement then on the date of such filing and as so amended or superseded) contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Except to the extent set forth in the preceding sentence, Quartet makes no representation or warranty whatsoever concerning any Quartet SEC Report as of any time other than the date or period with respect to which it was filed. The certifications and statements required by (A) Rule 13a-14 under the Exchange Act and (B) 18 U.S.C. §1350 (Section 906 of the Sarbanes-Oxley Act) relating to the Quartet
SEC Documents are accurate and complete and comply as to form and content with all applicable laws or rules of applicable governmental and regulatory authorities in all material respects.
(b) Each set of financial statements (including, in each case, any related notes thereto) contained in Quartet SEC Reports, including each Quartet SEC Report filed after the date hereof until the Closing, complied or will comply as to form with the published rules and regulations of the SEC with respect thereto, was or will be prepared in accordance with U.S. GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto or, in the case of unaudited statements, do not contain footnotes as permitted by Form 10-Q of the Exchange Act) and each fairly presents or will fairly
present in all material respects the financial position of Quartet at the respective dates thereof and the results of its operations and cash flows for the periods indicated, except that the unaudited interim financial statements were, are or will be subject to normal adjustments which were not or are not expected to have a Material Adverse Effect on Quartet taken as a whole.
(c) Quartet maintains disclosure controls and procedures that satisfy the requirements of Rule 13a-15 under the Exchange Act, and such disclosure controls and procedures are designed to ensure that all material information concerning Quartet is made known on a timely basis to the individuals responsible for the preparation of Quartet’s filings with the SEC and other public disclosure documents.
(d) To the knowledge of Quartet, Quartet’s auditor has at all required times since the date of enactment of the Sarbanes-Oxley Act been: (i) a registered public accounting firm (as defined in Section 2(a)(12) of the Sarbanes-Oxley Act); (ii) “independent” with respect to Quartet within the meaning of Regulation S-X under the Exchange Act; and (iii) in compliance with subsections (g) through (l) of Section 10A of the Exchange Act and the rules and regulations promulgated by the SEC and the Public Company Accounting Oversight Board thereunder.
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3.8.
No Undisclosed Liabilities
. Neither Quartet, Holdco nor Merger Sub has any liabilities (absolute, accrued, contingent or otherwise) of a nature required under U.S. GAAP, as in effect on the date of this Agreement, to be disclosed on a balance sheet or in the related notes to the financial statements included in Quartet SEC Reports that are, individually or in the aggregate, material to the business, results of operations or financial condition of Quartet, except (i) liabilities provided for in or otherwise disclosed in Quartet SEC Reports filed prior to the date hereof, (ii) liabilities incurred
since December 31, 2013 in the ordinary course of business, or (iii) incurred in connection with the transactions contemplated by this Agreement, none of which individually or in the aggregate would have a Material Adverse Effect on Quartet. Neither Quartet, Holdco nor Merger Sub is or has been a party to any securitization transactions or “off-balance sheet arrangements” (as defined in Item 303(a)(4)(ii) of Regulation S-K under the Securities Act).
3.9.
Absence of Certain Changes or Events
. Except as set forth in Quartet SEC Reports filed prior to the date of this Agreement, and except as contemplated by this Agreement, since December 31, 2013, there has not been: (i) any Material Adverse Effect on Quartet, (ii) any declaration, setting aside or payment of any dividend on, or other distribution (whether in cash, stock or property) in respect of, any of Quartet’s capital stock, or any purchase, redemption or other acquisition by Quartet of any of Quartet’s capital stock or any other securities of Quartet or any options, warrants, calls
or rights to acquire any such shares or other securities, (iii) any split, combination or reclassification of any of Quartet’s capital stock, (iv) any granting by Quartet of any increase in compensation or fringe benefits, except for normal increases of cash compensation in the ordinary course of business consistent with past practice, or any payment by Quartet of any bonus, except for bonuses made in the ordinary course of business consistent with past practice, or any granting by Quartet of any increase in severance or termination pay or any entry by Quartet into any currently effective employment, severance, termination or indemnification agreement or any agreement the benefits of which are contingent or the terms of which are materially altered upon the occurrence of a transaction involving Quartet of the nature contemplated hereby, (v) any material change by Quartet in its accounting methods, principles or practices, except as required by concurrent changes in U.S. GAAP, (vi)
any change in the auditors of Quartet, (vi) any issuance of capital stock of Quartet, or (vii) any revaluation by Quartet of any of its assets, including, without limitation, writing down the value of capitalized inventory or writing off notes or accounts receivable or any sale of assets of Quartet other than in the ordinary course of business.
3.10.
Litigation
. There are no claims, suits, actions or proceedings pending or to Quartet’s knowledge, threatened against Quartet, Holdco or Merger Sub before any court, governmental department, commission, agency, instrumentality or authority, or any arbitrator.
3.11.
Employee Benefit Plans
. Quartet does not maintain, and has no liability under, any Plan, and neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) result in any payment (including severance, unemployment compensation, golden parachute, bonus or otherwise) becoming due to any stockholder, director or employee of Quartet, or (ii) result in the acceleration of the time of payment or vesting of any such benefits.
3.12.
Labor Matters
. Neither Quartet, Holdco or Merger Sub is a party to any collective bargaining agreement or other labor union contract applicable to persons employed by Quartet, Holdco or merger Sub and neither Quartet, Holdco or Merger Sub knows of any activities or proceedings of any labor union to organize any such employees.
3.13.
Business Activities
. Since its organization, neither Quartet, Holdco nor Merger Sub has conducted any business activities other than activities directed toward the accomplishment of a business combination. Except as set forth in the Quartet Charter Documents, there is no agreement, commitment, judgment, injunction, order or decree binding upon Quartet, Holdco or Merger Sub or to which Quartet, Holdco or Merger Sub is a party which has or could reasonably be expected to have the effect of prohibiting or materially impairing any business practice of Quartet, any acquisition of property by Quartet
or the conduct of business by Quartet as currently conducted other than such effects, individually or in the aggregate, which have not had and could not reasonably be expected to have a Material Adverse Effect on Quartet.
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3.14.
Title to Property
. Neither Quartet, Holdco nor Merger Sub owns or leases any real property or personal property. Except as set forth in
Schedule 3.14
, there are no options or other contracts under which Quartet, Holdco or Merger Sub has a right or obligation to acquire or lease any interest in real property or personal property.
3.15.
Taxes
. Except as set forth in
Schedule 3.15
hereto:
(a) Each of Quartet, Holdco and Merger Sub has timely filed all Tax Returns required to be filed by Quartet, Holdco and Merger Sub with any Tax authority prior to the date hereof. Each of Quartet, Holdco and Merger Sub has paid or accrued for in Quartet’s, Holdco’s or Merger Sub’s books and records of account all Taxes shown to be due on such Tax Returns.
(b) All material Taxes that Quartet, Holdco or Merger Sub is required by law to withhold or collect have been duly withheld or collected, and have been timely paid over to the proper governmental authorities to the extent due and payable.
(c) Neither Quartet, Holdco nor Merger Sub has been delinquent in the payment of any material Tax that has not been accrued for in Quartet’s, Holdco’s or Merger Sub’s books and records of account for the period for which such Tax relates nor is there any material Tax deficiency outstanding, proposed or assessed against Quartet, Holdco or Merger Sub nor has Quartet, Holdco or Merger Sub executed any unexpired waiver of any statute of limitations on or extending the period for the assessment or collection of any Tax. Quartet, Holdco and Merger Sub have complied in all material respects with all Legal Requirements
with respect to payments made to third parties and the withholding of any payment of withheld Taxes and has timely withheld from employee wages and all other payments and timely paid over in full to the proper taxing authorities all amounts required to be so withheld and paid over for all periods.
(d) No audit or other examination of any Tax Return of Quartet, Holdco or Merger Sub by any Tax authority is presently in progress, nor has Quartet, Holdco or Merger Sub been notified in writing of any request for such an audit or other examination.
(e) No adjustment relating to any Tax Returns filed by Quartet, Holdco or Merger Sub has been proposed in writing, formally or informally, by any Tax authority to Quartet, Holdco or Merger Sub or any representative thereof.
(f) Neither Quartet, Holdco nor Merger Sub has any material liability for any unpaid Taxes which have not been accrued for or reserved on Quartet’s, Holdco’s or Merger Sub’s balance sheets included in the audited financial statements for the most recent fiscal year ended, whether asserted or unasserted, contingent or otherwise, other than any liability for unpaid Taxes that may have accrued since the end of the most recent fiscal year in connection with the operation of the business of Quartet in the ordinary course of business.
3.16.
Environmental Matters
. Except for such matters that, individually or in the aggregate, are not reasonably likely to have a Material Adverse Effect: (i) Quartet has complied with all applicable Environmental Laws; (ii) there is no Environmental Claim pending or, to the knowledge of Quartet, threatened against Quartet, Holdco or Merger Sub; (iii) neither Quartet, Holdco or Merger Sub is subject to liability for any Hazardous Substance disposal or contamination on any third party property; (iii) neither Quartet, Holdco nor Merger Sub has been associated with any release or threat of release of any
Hazardous Substance; (iv) neither Quartet, Holdco nor Merger Sub has received any notice, demand, letter, claim or request for information alleging that Quartet may be in violation of or liable under any Environmental Law; and (v) neither Quartet, Holdco nor Merger Sub is subject to any orders, decrees, injunctions or other arrangements with any Governmental Entity or subject to any indemnity or other agreement with any third party relating to liability under any Environmental Law or relating to Hazardous Substances.
3.17.
Brokers; Third Party Expenses
. The fees, expenses, commissions or other similar charges that Quartet and its Affiliates have incurred, or will incur, directly or indirectly, in connection with this Agreement or any transactions contemplated hereby shall not exceed $6,000,000 in the aggregate. Except with respect to the Quartet UPOs, neither Quartet nor its Affiliates have entered into any agreement that would result in any
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common shares, shares of common stock, options, warrants or other securities of either Company or Quartet to be payable to any third party service provider as a result of the Mergers.
3.18.
Intellectual Property
. Neither Quartet, Holdco nor Merger Sub owns, licenses or otherwise has any right, title or interest in any material Intellectual Property or Registered Intellectual Property except non-exclusive rights to the name “Quartet.”
3.19.
Agreements, Contracts and Commitments
.
(a) Except as set forth in the Quartet SEC Reports filed prior to the date of this Agreement or as set forth in
Schedule 3.19
, other than confidentiality and non-disclosure agreements, there are no contracts, agreements, leases, mortgages, indentures, notes, bonds, liens, license, permit, franchise, purchase orders, sales orders or other understandings, commitments or obligations (including outstanding offers or proposals) of any kind, whether written or oral, to which Quartet, Holdco or Merger Sub is a party or by or to which any of the properties or assets of Quartet, Holdco or Merger Sub may be bound, subject or
affected, which may not be cancelled by Quartet, Holdco or Merger Sub on 30 days’ or less prior notice (“
Quartet Contracts
”). All Quartet Contracts are listed in
Schedule 3.19
other than those that are exhibits to the Quartet SEC Reports.
(b) Except as set forth in the Quartet SEC Reports filed prior to the date of this Agreement, each Quartet Contract was entered into at arms’ length and in the ordinary course, is in full force and effect and is valid and binding upon and enforceable against each of the parties thereto. True, correct and complete copies of all Quartet Contracts (or written summaries in the case of oral Quartet Contracts) have been heretofore been made available to the Company or Company counsel.
(c) Neither Quartet, Holdco or Merger Sub nor, to the knowledge of Quartet, any other party thereto is in breach of or in default under, and no event has occurred which with notice or lapse of time or both would become a breach of or default under, any Quartet Contract, and no party to any Quartet Contract has given any written notice of any claim of any such breach, default or event, which, individually or in the aggregate, are reasonably likely to have a Material Adverse Effect on Quartet. Each agreement, contract or commitment to which Quartet, Holdco or Merger Sub is a party or by which it is bound that has not expired by
its terms is in full force and effect, except where such failure to be in full force and effect is not reasonably likely to have a Material Adverse Effect on Quartet.
3.20.
Insurance
. Except for directors’ and officers’ liability insurance, neither Quartet, Holdco nor Merger Sub maintains any Insurance Policies.
3.21.
Interested Party Transactions
. Except as set forth in the Quartet SEC Reports filed prior to the date of this Agreement: (a) no employee, officer, director or stockholder of Quartet, Holdco or Merger Sub or a member of his or her immediate family is indebted to Quartet nor is Quartet indebted (or committed to make loans or extend or guarantee credit) to any of them, other than reimbursement for reasonable expenses incurred on behalf of Quartet; and (b) to Quartet’s knowledge, no officer, director or stockholder or any member of their immediate families is, directly or indirectly, interested
in any material contract with Quartet (other than such contracts as relate to any such individual ownership of capital stock or other securities of Quartet).
3.22.
Indebtedness
. Except as set forth in the Quartet SEC Reports filed prior to the date of this Agreement, neither Quartet, Holdco nor Merger Sub has any indebtedness for borrowed money.
3.23.
Listing of Securities
. The Quartet Units, Quartet Common Stock and Quartet Rights are listed for trading on the Nasdaq Capital Market (“
Nasdaq
”). There is no action or proceeding pending or, to Quartet’s knowledge, threatened against Quartet by Nasdaq with respect to any intention by such entity to prohibit or terminate the listing of the Quartet Units, Quartet Common Stock or Quartet Rights on the Nasdaq.
3.24.
Board Approval
. The Quartet Board has, as of the date of this Agreement, unanimously (i) declared the advisability of the Mergers and approved this Agreement and the transactions contemplated hereby, (ii) determined that the Mergers are in the best interests of the stockholders of Quartet, and (iii) determined that the fair market value of the Company is equal to at least 80% of the balance in the Trust Fund (as defined in Section 3.25). Quartet has taken all action necessary to exempt the Mergers, this
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Agreement, any ancillary agreement hereto (including the Lock-Up Agreements and the Founding Shareholder Agreements (as defined below)), and the transactions contemplated hereby and thereby, from Section 203 of the DGCL, and, accordingly, neither such Section nor any other antitakeover or similar statute or regulation applies or purports to apply to any such transactions. No other “control share acquisition,” “fair price,” “moratorium” or other antitakeover laws enacted under U.S. state or federal laws apply to the Mergers, this Agreement, any ancillary agreement hereto (including the Lock-Up
Agreements and the Founding Shareholder Agreements), and the transactions contemplated hereby and thereby.
3.25.
Financial Capacity/Trust Fund
. Quartet has as of the date hereof all funds necessary to consummate the transactions contemplated by this Agreement and to perform its obligations hereunder (without taking into account any disbursements contemplated by Section 5.21). As of the date hereof and immediately prior to the Effective Time, Quartet has and will have no less than $98,491,750 in a trust account administered by Continental (the “
Trust Fund
”); provided that a portion of the Trust Fund shall be utilized in accordance with Section 5.21.
3.26.
Governmental Filings
. Except as set forth in
Schedule 3.26
, each of Quartet, Holdco and Merger Sub has been granted and holds, and has made, all Governmental Actions/Filings necessary to the conduct by Quartet, Holdco and Merger Sub of its business (as presently conducted) or used or held for use by Quartet, Holdco and Merger, and true, complete and correct copies of which have heretofore been delivered to the Company. Each such Governmental Action/Filing is in full force and effect and, except as disclosed in
Schedule 3.26
, will not expire prior to December 31, 2014, and each of
Quartet, Holdco and Merger Sub is in compliance with all of its obligations with respect thereto. No event has occurred and is continuing which requires or permits, or after notice or lapse of time or both would require or permit, and consummation of the transactions contemplated by this Agreement or any ancillary documents will not require or permit (with or without notice or lapse of time, or both), any modification or termination of any such Governmental Actions/Filings except such events which, either individually or in the aggregate, would not have a Material Adverse Effect upon Quartet.
3.27.
Representations and Warranties Complete
. Except for the representations and warranties contained in Article II, each of Quartet, Holdco and Merger Sub acknowledges that neither the Company nor any other Person on behalf of the Company or any of its Affiliates has made, makes or shall be deemed to make any other express or implied representation or warranty with respect to the Company (or any of its Subsidiaries) or with respect to any other information provided to Quartet and the Company disclaims any such representation or warranty. Neither the Company nor any other Person will have or be
subject to any liability or indemnification obligation to Quartet or any other Person resulting from the distribution to Quartet, or its use of, any such information.
3.28.
Survival of Representations and Warranties
. The representations and warranties of Quartet, Holdco and Merger Sub set forth in this Agreement shall survive until the Closing.
ARTICLE IV.
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1.
Conduct of Business by the Company and Quartet, Holdco and Merger Sub
. Except as set forth in
Schedule 4.1
hereto, during the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement pursuant to its terms or the Closing, each of the Company, its Subsidiaries and Quartet, Holdco and Merger Sub shall, except to the extent that the other party shall otherwise consent in writing (which consent shall not be unreasonably withheld, conditioned or delayed), carry on its business in the usual, regular and ordinary course consistent with past
practices, in substantially the same manner as heretofore conducted and in compliance with all applicable laws and regulations (except where noncompliance would not be reasonably likely to result in a Material Adverse Effect), use its commercially reasonable efforts consistent with past practices and policies to (i) preserve substantially intact its present business organization, (ii) keep available the services of its present officers and employees and (iii) preserve its relationships with customers, suppliers, distributors, licensors, licensees, and others with which it has significant business dealings. In addition, except as required or permitted by the terms of this Agreement or any ancillary agreement hereto, to the extent required by Applicable Law, or set forth in
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Schedule 4.1
hereto, without the prior written consent of the other party (which consent shall not be unreasonably withheld or delayed), during the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement pursuant to its terms or the Closing, each of the Company, its Subsidiaries and Quartet, Holdco and Merger Sub shall not do any of the following:
(a) waive any stock repurchase rights, accelerate, amend or change the period of exercisability of options or restricted stock, or reprice options granted under any employee, consultant, director or other stock plans or authorize cash payments in exchange for any options granted under any of such plans;
(b) transfer or license to any person or otherwise extend, amend or modify any material rights to any Intellectual Property of the Company, its Subsidiaries or Quartet, Holdco or Merger Sub, as applicable, or enter into grants to transfer or license to any person future patent rights, other than in the ordinary course of business consistent with past practices provided that in no event shall the Company, its Subsidiaries or Quartet, Holdco or Merger Sub license on an exclusive basis or sell any Intellectual Property of the Company, its Subsidiaries or Quartet, Holdco or Merger Sub as applicable;
(c) grant any severance or termination pay to any officer or employee outside the ordinary course of business except pursuant to applicable law, written agreements outstanding, or policies existing on the date hereof and as previously or concurrently disclosed in writing or made available to the other party, or adopt any new severance plan, or amend or modify or alter in any manner any severance plan, agreement or arrangement existing on the date hereof;
(d) declare, set aside or pay any dividends on or make any other distributions (whether in cash, stock, equity securities or property) in respect of any capital stock or split, combine or reclassify any capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for any capital stock;
(e) purchase, redeem or otherwise acquire, directly or indirectly, any shares of capital stock of the Company, its Subsidiaries and Quartet, Holdco and Merger Sub, as applicable;
(f) issue, deliver, sell, authorize, pledge or otherwise encumber, or agree to any of the foregoing with respect to, any shares of capital stock or any securities convertible into or exchangeable for shares of capital stock, or subscriptions, rights, warrants or options to acquire any shares of capital stock or any securities convertible into or exchangeable for shares of capital stock, or enter into other agreements or commitments of any character obligating it to issue any such shares or convertible or exchangeable securities;
(g) amend its Charter Documents;
(h) acquire or agree to acquire by merging or consolidating with, or by purchasing any equity interest in or a portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof, or otherwise acquire or agree to acquire any assets which are material, individually or in the aggregate, to the business of Quartet, the Company or its Subsidiaries as applicable, or enter into any joint ventures, strategic partnerships or alliances or other arrangements that provide for exclusivity of territory or otherwise restrict such party’s ability
to compete or to offer or sell any products or services. For purposes of this paragraph, “material” includes the requirement that, as a result of such transaction, financial statements of the acquired, merged or consolidated entity be included in the Proxy Statement/Prospectus (as defined in Section 5.1);
(i) sell, lease, license, encumber or otherwise dispose of any properties or assets, except (A) sales of inventory and property, plant and equipment in the ordinary course of business consistent with past practice, and (B) the sale, lease or disposition (other than through licensing) of property or assets that are not material, individually or in the aggregate, to Quartet or the Company;
(j) except in the ordinary course of business consistent with past practice, incur any indebtedness for borrowed money or guarantee any such indebtedness of another Person or Persons (other than Affiliates), issue or sell any debt securities or options, warrants, calls or other rights to acquire any debt securities of Quartet, Holdco, Merger Sub, the Company or any of its Subsidiaries, as applicable, enter into any “keep
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well” or other agreement to maintain any financial statement condition or enter into any arrangement having the economic effect of any of the foregoing;
(k) except in the ordinary course of business consistent with past practices or pursuant to applicable law, a Plan or written agreement, adopt or amend any employee benefit plan, policy or arrangement, any employee stock purchase or employee stock option plan, or enter into any employment contract or collective bargaining agreement (other than offer letters and letter agreements entered into in the ordinary course of business consistent with past practice with employees who are terminable “at will”), pay any special bonus or special remuneration to any director or employee, or increase the salaries or wage rates or
fringe benefits (including rights to severance or indemnification) of its directors, officers, employees or consultants;
(l) pay, discharge, settle or satisfy any material claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), or litigation (whether or not commenced prior to the date of this Agreement) other than the payment, discharge, settlement or satisfaction of claims, obligations or litigations in the ordinary course of business consistent with past practices or in accordance with their terms, or liabilities recognized or disclosed in the Audited Financial Statements or in the most recent financial statements included in the Quartet SEC Reports filed prior to the date of this Agreement, as
applicable, or incurred since the date of such financial statements;
(m) waive the benefits of, agree to modify in any manner, terminate, release any officer, director or stockholder from or knowingly fail to enforce any material confidentiality or material similar agreement to which the Company or Quartet is a party or of which the Company or Quartet is a beneficiary, as applicable
(n) except in the ordinary course of business consistent with past practices, modify, amend or terminate, in each case in any material respect, any Material Company Contract or Quartet Contract, as applicable, or waive, delay the exercise of, release or assign any material rights or claims thereunder;
(o) except as required by U.S. GAAP or as set forth in
Schedule 4.1(o)
, revalue any of its assets or make any change in accounting methods, principles or practices;
(p) except in the ordinary course of business consistent with past practices, incur or enter into any agreement, contract or commitment requiring such party to pay in excess of $7,500,000 in any 12 month period;
(q) settle any material litigation where the consideration given is other than monetary except in the ordinary course of business consistent with past practices;
(r) make or rescind any Tax elections that, individually or in the aggregate, could be reasonably likely to adversely affect in any material respect the Tax liability or Tax attributes of such party, settle or compromise any material income tax liability or, except as required by applicable law, materially change any method of accounting for Tax purposes or prepare or file any Tax Return in a manner inconsistent with past practice;
(s) make capital expenditures in excess of $10,000,000 in the aggregate, except as otherwise permitted in this Agreement;
(t) make or omit to take any action which would be reasonably likely to have a Material Adverse Effect;
(u) enter into any material transaction with or distribute or advance any assets or property to any of its officers, directors, partners, stockholders or other Affiliates other than in the ordinary course of business consistent with prior practice or, in the case of Quartet, advancement or reimbursement of expenses in connection with Quartet’s search for a business combination; or
(v) agree in writing or otherwise agree, commit or resolve to take any of the actions described in Section 4.1(a) through (u) above.
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ARTICLE V.
ADDITIONAL AGREEMENTS
5.1.
Proxy Statement/Prospectus; Registration Statement; Special Meeting.
(a) As soon as is reasonably practicable and in any event no later than 25 Business Days following the date of this Agreement, the Company, Quartet and Holdco shall prepare and file with the SEC under the Securities Act, and with all other applicable regulatory bodies, a registration statement on Form S-4 with respect to the Holdco Shares to be issued in connection with the Redomestication Merger (the “
Registration Statement
”), which shall include proxy materials for the purpose of soliciting proxies from holders of Quartet Common Stock to vote, at a meeting of the holders of Quartet Common Stock to be called
for such purpose (the “
Special Meeting
”), in favor of (i) the adoption of this Agreement and the approval of the Mergers (“
Quartet Stockholder Approval
”) and (ii) an adjournment proposal, if necessary, to adjourn the Special Meeting if, based on the tabulated vote count, Quartet is not authorized to proceed with the Mergers. Such proxy materials shall be in the form of a proxy statement/prospectus to be used for the purpose of soliciting proxies from holders of Quartet Common Stock for the matters to be acted upon at the Special Meeting and also for the purpose of issuing the Holdco Shares as contemplated hereby (the “
Proxy Statement/Prospectus
”). Each of the Company and Quartet shall furnish to the other all information concerning its respective company and business as may reasonably be requested in connection with the preparation of the Registration Statement and Proxy Statement/Prospectus, including providing the Company with (i)
updates with respect to the tabulated vote counts received by Quartet, (ii) the right to demand postponement or adjournment of the Special Meeting if, based on the tabulated vote count, Quartet will not receive the required approval of the Quartet shareholders authorized necessary to proceed with the Mergers, and (iii) the right to review and comment on all communications send to or received from Quartet stockholders, holders of Quartet Rights and/or proxy solicitation firms.
(b) Quartet, Holdco and the Company, with the assistance of their respective counsel, shall promptly respond to any SEC comments on such filings and shall otherwise use reasonable best efforts to cause the Registration Statement to be declared effective by the SEC as promptly as practicable, and keep the Registration Statement effective as long as is necessary to consummate the Mergers. Each of Quartet, Holdco and the Company shall also take any and all actions required to satisfy the requirements of the Securities Act and the Exchange Act.
(c) As soon as practicable following the SEC declaring the Registration Statement effective, but in any event no later than five (5) Business Days following such declaration, Quartet and Holdco shall distribute the Proxy Statement/Prospectus to the holders of Quartet Common Stock and Quartet Rights and, pursuant thereto, shall duly call, give notice of, convene and hold the Special Meeting in accordance with the DGCL for a date no later than thirty (30) days following the SEC declaring the Registration Statement effective and, subject to the other provisions of this Agreement, solicit proxies from the holders of Quartet
Common Stock to vote in favor of the adoption of this Agreement and the approval of the Mergers and the other matters presented to the stockholders of Quartet for approval or adoption at the Special Meeting, including the matters described in Section 5.1(a). Unless otherwise agreed in writing by the Company, Quartet agrees that its obligations to hold the Special Meeting pursuant to this Section 5.1(a) shall exist irrespective of whether the Quartet Board believes Quartet’s stockholders will vote to approve this Agreement and the Mergers and shall not be affected by the commencement, public proposal, public disclosure or communication to Quartet of any alternative transaction and nothing contained herein shall be deemed to relieve Quartet of such obligation. Neither the Quartet Board nor any committee or agent or representative thereof shall (i) withdraw (or modify in any manner adverse to the Company), or propose to withdraw (or modify in any manner adverse to the Company), the
Quartet Board’s recommendation in favor of this Agreement and the Mergers, (ii) approve, recommend or declare advisable, or propose publicly to approve, recommend or declare advisable, any Alternative Transaction Proposal (as defined below), (iii) approve, recommend or declare advisable, or propose to approve, recommend or declare advisable, or allow Quartet to execute or enter into, any agreement related to an Alternative Transaction Proposal, (iv) enter into any agreement, letter of intent, or agreement in principle requiring Quartet to abandon, terminate or fail to consummate the transactions contemplated hereby or
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breach its obligations hereunder, (v) fail to recommend against any Alternative Transaction Proposal, (vi) fail to re-affirm the aforementioned Quartet Board recommendation at the written request of the Company within five (5) Business Days or (vii) resolve or agree to do any of the foregoing.
(d) The Company and Quartet shall, and shall use reasonable best efforts to ensure that the Registration Statement and the Proxy Statement/Prospectus, comply with all applicable provisions of and rules under the Exchange Act and all applicable provisions of the DGCL in the preparation, filing and distribution of the Proxy Statement/Prospectus, the solicitation of proxies thereunder, and the calling and holding of the Special Meeting.
(e) The Company, Quartet and Holdco shall make all necessary filings with respect to the Mergers and the transactions contemplated hereby under the Securities Act and the Exchange Act and applicable Blue Sky Laws and the rules and regulations thereunder. Quartet and Holdco will advise the Company, promptly after it receives notice thereof, of the time when the Registration Statement has become effective or any supplement or amendment has been filed, the issuance of any stop order, or any request by the SEC for amendment of the Proxy Statement/Prospectus or the Registration Statement or comments thereon and responses thereto
or requests by the SEC for additional information. No amendment or supplement to the Proxy Statement/Prospectus or the Registration Statement shall be filed without the approval of both the Company and Quartet, which approval shall not be unreasonably withheld or delayed. If, at any time prior to the Effective Time, any information relating to the Company or Quartet, or any of their respective Affiliates, officers or directors should be discovered by the Company or Quartet that should be set forth in an amendment or supplement to the Registration Statement or the Proxy Statement/Prospectus so that such documents would not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the party hereto that discovers such information shall promptly notify the other parties hereto and an appropriate amendment or supplement describing such information shall be
promptly filed with the SEC and, to the extent required by law, disseminated to the shareholders or stockholders of the Company and Quartet.
(f) Quartet, acting through its board of directors, shall include in the Proxy Statement/Prospectus the recommendation of its board of directors that the holders of Quartet Common Stock vote in favor of the adoption of this Agreement and the approval of the Mergers, and shall otherwise use best efforts to obtain the Quartet Stockholder Approval.
5.2.
Directors and Officers of Holdco After Merger
. The Quartet Founding Shareholders shall be entitled to appoint two directors to Holdco Board effective at Closing, and the Stockholders shall be entitled to appoint six directors to Holdco Board effective at Closing. The Stockholders shall be entitled to appoint the executive officers of Holdco effective at Closing. All such appointees shall serve in such positions effective immediately after the Closing and in accordance with the terms and conditions of the Memorandum of Association and Bye-Laws of Holdco.
5.3.
HSR Act
. If required pursuant to the HSR Act, as promptly as practicable after the date of this Agreement, Quartet and the Company shall each prepare and file the notification required of it thereunder in connection with the transactions contemplated by this Agreement and shall promptly and in good faith respond to all information requested of it by the Federal Trade Commission and Department of Justice in connection with such notification and otherwise cooperate in good faith with each other and such Governmental Entities. Quartet and the Company shall (a) promptly inform the other of any
communication to or from the Federal Trade Commission, the Department of Justice or any other Governmental Entity regarding the transactions contemplated by this Agreement, (b) give the other prompt notice of the commencement of any action, suit, litigation, arbitration, proceeding or investigation by or before any Governmental Entity with respect to such transactions and (c) keep the other reasonably informed as to the status of any such action, suit, litigation, arbitration, proceeding or investigation. Filing fees with respect to the notifications required under the HSR Act shall be paid by the Company.
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5.4.
Other Actions
.
(a) As promptly as practicable after execution of this Agreement, Quartet will prepare and file a Current Report on Form 8-K pursuant to the Exchange Act to report the execution of this Agreement (“
Signing Form 8-K
”). Promptly after the execution of this Agreement, Quartet and the Company shall also issue a mutually agreeable press release announcing the execution of this Agreement (the “
Signing Press Release
”).
(b) At least five (5) days prior to Closing, Quartet and Holdco shall prepare draft Form 8-Ks in connection with and announcing the Closing, together with, or incorporating by reference, the financial statements prepared by the Company and its accountant, and such other information that may be required to be disclosed with respect to the Mergers in any report or form to be filed with the SEC (the “
Closing Form 8-Ks
”). Prior to Closing, Quartet and the Company shall prepare a mutually agreeable press release announcing the consummation of the Mergers hereunder (“
Closing Press Release
”).
Concurrently with the Closing, the Company shall distribute the Closing Press Release. Concurrently with the Closing, or as soon as practicable thereafter, Quartet and Holdco shall file the Closing Form 8-Ks with the SEC.
5.5.
Required Information
.
(a) In connection with the preparation of the Signing Form 8-K, the Signing Press Release, the Registration Statement, the Proxy Statement/Prospectus, the Closing Form 8-Ks and the Closing Press Release, or any other statement, filing, notice, release or application made by or on behalf of Quartet, Holdco and/or the Company to any Government Entity in connection with Mergers and the other transactions contemplated hereby (each, a “
Reviewable Document
”), and for such other reasonable purposes, the Company and Quartet each shall, upon request by the other, promptly furnish the other with all information
concerning themselves, their respective directors, officers, shareholders, stockholders and Affiliates (including the directors of the Company to be elected effective as of the Closing pursuant to Section 5.2 hereof) and such other matters as may be reasonably necessary or advisable in connection with the Mergers and the preparation of such document. Each party warrants and represents to the other party that all such information shall be true and correct in all material respects as of the date of filing, issuance or other submission or public disclosure of such document and the Closing Date and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading (provided, that each party shall not be responsible for the accuracy or completeness of any information relating to the other party or any other
information furnished by the other party for inclusion in any such document).
(b) At a reasonable time prior to the filing, issuance or other submission or public disclosure of a Reviewable Document by either Quartet, Holdco or the Company, the other party shall be given an opportunity to review and comment upon such Reviewable Document and give its consent to the form thereof, such consent not to be unreasonably withheld, and each party shall accept and incorporate all reasonable comments from the other party to any such Reviewable Document prior to filing, issuance, submission or disclosure thereof.
(c) Any language included in a Reviewable Document that reflects the comments of the reviewing party, as well as any text as to which the reviewing party has not commented upon after being given a reasonable opportunity to comment (and in any event no fewer than three (3) Business Days, shall be deemed to have been approved by the reviewing party and may henceforth be used by other party in other Reviewable Documents and in other documents distributed by the other party in connection with the transactions contemplated by this Agreement without further review or consent of the reviewing party.
(d) Prior to the Effective Time (i) the Company, Quartet and Holdco shall notify each other as promptly as reasonably practicable upon becoming aware of any event or circumstance which should be described in an amendment of, or supplement to, a Reviewable Document that has been filed with the SEC, and (ii) the Company and Quartet shall each notify the other as promptly as practicable after the receipt by it of any written or oral comments of the SEC on, or of any written or oral request by the SEC for amendments or supplements to, any such Reviewable Document, and shall promptly supply the
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other with copies of all correspondence between it or any of its representatives and the SEC with respect to any of the foregoing filings. Quartet and the Company shall use their respective reasonable best efforts, after consultation with each other, to resolve all such requests or comments with respect to the any Reviewable Document as promptly as reasonably practicable after receipt of any comments of the SEC. All correspondence and communications to the SEC made by Quartet or Holdco with respect to the transactions contemplated by this Agreement or any agreement ancillary hereto shall be considered to be Reviewable
Documents subject to the provisions of this Section 5.5.
5.6.
Confidentiality; Access to Information
.
(a)
Confidentiality
. Any confidentiality agreement previously executed by the parties shall be superseded in its entirety by the provisions of this Agreement. Each party agrees to maintain in confidence any non-public information received from the other party, and to use such non-public information only for purposes of consummating the transactions contemplated by this Agreement. Such confidentiality obligations will not apply to (i) information which was known to one party or their respective agents or representatives or prior to receipt from the other party; (ii) information which is or becomes
generally known; (iii) information acquired by a party or their respective agents from a third party who was not bound to an obligation of confidentiality; (iv) disclosure required by law, regulation or stock exchange rule; or (v) disclosure consented to in writing by the other party. In the event this Agreement is terminated as provided in Article VIII hereof, each party will destroy or return or cause to be destroyed or returned to the other all documents and other material obtained from the other in connection with the Mergers contemplated hereby.
(b)
Access to Information
.
(i) The Company will afford Quartet and its financial advisors, accountants, counsel and other representatives reasonable access during normal business hours, upon reasonable notice, to the properties, books, records and personnel of the Company during the period prior to the Closing to obtain all information concerning the business, including the status of business development efforts, properties, results of operations and personnel of the Company, as Quartet may reasonably request. No information or knowledge obtained by Quartet in any investigation pursuant to this Section 5.6 will affect or be deemed to modify or create
any representation or warranty contained herein or the conditions to the obligations of the parties to consummate the Mergers.
(ii) Quartet will afford the Company and its financial advisors, underwriters, accountants, counsel and other representatives reasonable access during normal business hours, upon reasonable notice, to the properties, books, records and personnel of Quartet, Holdco and Merger Sub during the period prior to the Closing to obtain all information concerning the business, including properties, results of operations and personnel of Quartet, Holdco and Merger Sub, as the Company may reasonably request. No information or knowledge obtained by the Company in any investigation pursuant to this Section 5.6 will affect or be deemed to
modify or create any representation or warranty contained herein or the conditions to the obligations of the parties to consummate the Mergers.
5.7.
Commercially Reasonable Efforts
. Upon the terms and subject to the conditions set forth in this Agreement, each of Quartet, Holdco, Merger Sub and the Company agrees to use its commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties hereto in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Mergers and the other transactions contemplated by this Agreement, including using commercially reasonable efforts to
accomplish the following: (i) the taking of all reasonable acts necessary to cause the conditions precedent set forth in Article VI to be satisfied, (ii) the obtaining of all necessary actions, waivers, consents, approvals, orders and authorizations from Governmental Entities and the making of all necessary registrations, declarations and filings (including registrations, declarations and filings with Governmental Entities, if any) and the taking of all reasonable steps as may be necessary to avoid any suit, claim, action, investigation or proceeding by any Governmental Entity, (iii) the obtaining of all consents, approvals or waivers from third parties required as a result of the transactions contemplated in this Agreement, including the consents referred to in
Schedule 2.5
of the Company Schedule,
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(iv) providing suitably knowledgeable directors, officers, employees and other Persons to attend “road shows” that are to be presented to existing and prospective Quartet security holders; (v) the defending of any suits, claims, actions, investigations or proceedings, whether judicial or administrative, challenging this Agreement or the consummation of the transactions contemplated hereby, including seeking to have any stay or temporary restraining order entered by any court or other Governmental Entity vacated or reversed and (vi) the execution or delivery of any additional instruments reasonably necessary to
consummate the transactions contemplated by, and to fully carry out the purposes of, this Agreement; provided the Company’s compliance with the foregoing shall not require it or its employees to unreasonably disrupt the ordinary course operations of the Company. In connection with and without limiting the generality of the foregoing, the Quartet Board, the Company and the Company Board shall, if any state takeover statute or similar statute or regulation is or becomes applicable to the Mergers, this Agreement or any of the transactions contemplated by this Agreement, use its commercially reasonable efforts to enable the Mergers and the other transactions contemplated by this Agreement to be consummated as promptly as practicable on the terms contemplated by this Agreement. Notwithstanding anything herein to the contrary, nothing in this Agreement shall be deemed to require Quartet, the Company or any Stockholder to agree to any divestiture by itself or any of its Affiliates of
shares of capital stock or of any business, assets or property, or the imposition of any material limitation on the ability of any of them to conduct their business or to own or exercise control of such assets, properties and stock.
5.8.
Registration Rights
.
The Parties hereto agree to enter into a registration rights agreement (the “
Registration Rights Agreement
”) in the form attached as
Exhibit C
at the Closing pursuant to which Holdco will agree to register for resale under the Securities Act the Holdco Shares to be issued to the Stockholders pursuant to this Agreement, including those individuals to be appointed as officers or directors of Holdco following the Closing pursuant to Section 5.2 hereof.
5.9.
Treatment as a Reorganization
. None of Quartet, Holdco, Merger Sub, the Company or the Stockholders shall take any action prior to or following the Mergers that could reasonably be expected to cause either of the Mergers to fail to qualify as a “reorganization” within the meaning of Section 368(a)(i)(A) of the Code and the regulations thereunder.
5.10.
No Quartet Securities Transactions
. Neither the Company, the Stockholders nor any of their respective Affiliates, directly or indirectly, shall engage in any transactions involving the securities of Quartet prior to the time of the making of a public announcement of the transactions contemplated by this Agreement. The Company shall use commercially reasonable efforts to require each of its officers, directors, employees, agents, advisors, contractors, associates, clients, customers and representatives, to comply with the foregoing requirement.
5.11.
No Claim Against Trust Fund
. Notwithstanding anything else in this Agreement, the Company and the Stockholders acknowledge that they have read Quartet’s final prospectus dated October 28, 2013 (“
Final Prospectus
”) and understand that Quartet has committed to seeking to have any business with which it enters into a business combination execute a waiver of its rights, title, interest or claim of any kind in or to any monies in the Trust Fund. The Company and the Stockholders further acknowledge that, if Quartet does not consummate a business combination by May 1, 2015 (or
November 1, 2015 if certain conditions are met), Quartet will be obligated to return to its stockholders the amounts being held in the Trust Fund. Accordingly, the Company, for itself and its subsidiaries, affiliated entities, directors, officers, employees, shareholders, stockholders, representatives, advisors and all other associates and Affiliates, and the Stockholders, for themselves (collectively, the “
Company and Stockholder Releasors
”), hereby waive all rights, title, interest or claim of any kind against any monies in the Trust Fund for any monies that may be owed to the Company and Stockholder Releasors by Quartet for any reason whatsoever, including but not limited to a breach of this Agreement by Quartet or any negotiations, agreements or understandings with Quartet (whether in the past, present or future), and the Company and Stockholder Releasors will not seek recourse against the Trust Fund at any time for any reason whatsoever. Notwithstanding the
foregoing, in the event this Agreement is terminated pursuant to any of Sections 8.1 (b) (but only if the transactions contemplated hereby have failed to close by September 30, 2014 because of Quartet’s breach of an obligation herein), 8.1(d), 8.1(g)(i) or 8.1(g)(ii) (but only if the transactions contemplated hereby have failed to close within 45 days after the Proxy Statement/Prospectus being cleared by the SEC because of Quartet’s breach of an obligation herein), and
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Quartet completes a business combination with another company, neither the Company nor any Stockholder Releasor shall be prohibited from filing and pursuing a claim for damages in connection with this Agreement or the transactions contemplated herein following consummation by Quartet of an alternative business combination, in each case against Quartet or any other entity that is party to such alternative business combination or any Affiliate thereof. Furthermore, Quartet shall not execute any definitive agreement related to such business combination that (i) attempts to prevent the Company or any Stockholder Releasor from so
filing or pursuing any such claim, or (ii) permits the entity that survives such combination to not assume Quartet’s obligation for damages in connection with this Agreement and the transactions contemplated herein. This paragraph will survive the termination of this Agreement for any reason.
5.12.
Disclosure of Certain Matters
. Each of Quartet, Holdco, Merger Sub, the Company and the Stockholders will provide the others with prompt written notice of any event, development or condition that (a) would cause any of such party’s representations and warranties to become untrue or misleading or which may affect its ability to consummate the transactions contemplated by this Agreement, (b) had it existed or been known on the date hereof would have been required to be disclosed under this Agreement, (c) gives such party any reason to believe that any of the conditions set forth in Article VI
will not be satisfied, (d) is of a nature that is or may be materially adverse to the operations or condition (financial or otherwise) of the Company, or (e) would require any amendment or supplement to the Proxy Statement/Prospectus. The parties shall have the obligation to supplement or amend the Company Schedules and Quartet Schedules (the “
Disclosure Schedules
”) being delivered concurrently with the execution of this Agreement with respect to any material matter hereafter arising or discovered which, if existing or known at the date of this Agreement, would have been required to be set forth or described in the Disclosure Schedules. The obligations of the parties to amend or supplement the Disclosure Schedules being delivered herewith shall terminate on the Closing Date. Notwithstanding any such amendment or supplementation, for purposes of Sections 6.2(a), 6.3(a), 7.1(a)(i), 8.1(d) and 8.1(e), the representations and warranties of the parties shall be made with
reference to the Disclosure Schedules as they exist at the time of execution of this Agreement, subject to such anticipated changes as are set forth in
Schedule 4.1
or otherwise expressly contemplated by this Agreement or that are set forth in the Disclosure Schedules as they exist on the date of this Agreement.
5.13.
Holdco Listing
. Quartet, Holdco and the Company shall use reasonable best efforts to obtain the listing for trading on the New York Stock Exchange (“
NYSE
”) or Nasdaq of the Holdco Stock.
5.14.
Further Actions
. The parties hereto shall use their best efforts to take such actions as are necessary to fulfill their respective obligations under this Agreement.
5.15.
No Solicitation
. None of the Company, Quartet, or any of their respective Affiliates, directors, employees, agents and representatives will, directly or indirectly, (i) solicit or initiate, or knowingly encourage, induce or facilitate (including by way of providing information) a proposal for an alternative transaction involving the Company or Quartet (an “
Alternative Transaction Proposal
”) or any inquiry or proposal that constitutes or may reasonably be expected to result in an Alternative Transaction Proposal, (ii) participate in any discussions or negotiations with any Person
regarding, or furnish to any Person any information with respect to, or cooperate in any way with any Person (whether or not a Person making an Alternative Transaction Proposal) with respect to any Alternative Transaction Proposal or any inquiry or proposal that may reasonably be expected to result in an Alternative Transaction Proposal, (iii) approve or recommend, or propose to approve or recommend, any Alternative Transaction Proposal, (iv) approve or recommend, or propose to approve or recommend, or execute or enter into, any letter of intent, agreement in principle, memorandum of understanding, merger agreement, asset or share purchase or share exchange agreement, option agreement or other similar agreement related to any Alternative Transaction Proposal, (v) enter into any agreement or agreement in principle requiring the Company or Quartet to abandon, terminate or fail to consummate the transactions contemplated hereby or breach its obligations hereunder, or (vi) propose or agree
to do any of the foregoing. Each of the Company and Quartet shall, and shall cause its respective agents and representatives to, immediately cease and cause to be terminated all existing discussions or negotiations with any Person conducted heretofore with respect to any Alternative Transaction Proposal, or any inquiry or proposal that may reasonably be expected to result in an Alternative Transaction Proposal, request the prompt return or destruction of all confidential information previously furnished with respect to an Alternative Transaction Proposal and immediately terminate all physical and electronic data room access
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previously granted to any such Person or its agents or representatives with respect to an Alternative Transaction Proposal. For the avoidance of doubt, this Section 5.15 shall not in any way prohibit Crescendo Advisors II, LLC and its Affiliates, directors, employees, agents and representatives from directly or indirectly soliciting or initiating, or knowingly encouraging, inducing or facilitating, proposals for transactions not involving Quartet.
5.16.
Liability Insurance
.
(a) From and after the Effective Time, each of Holdco and the Surviving Pubco agrees that it will (i) indemnify and hold harmless, to the extent Quartet is obligated to indemnify and hold harmless such Persons as of the date of this Agreement to the fullest extent permitted by Applicable Law (and Holdco and the Surviving Pubco shall also advance expenses as incurred to the extent Quartet is obligated to advance such expenses as of the date of this Agreement, provided the Person to whom expenses are advanced provides an undertaking to repay such advances if it is ultimately determined that such Person is not entitled to
indemnification), each present and former director, officer and special advisor of Quartet and Holdco (in each case, when acting in such capacity) (the “
Holdco Indemnified Parties
”), against any costs or expenses (including reasonable attorneys’ fees), judgments, fines, settlements, losses, claims, damages or liabilities (collectively, “
Costs
”) incurred in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, arising out of matters existing or occurring at or prior to the Effective Time, whether asserted or claimed prior to, at or after the Effective Time, including the Mergers and (ii) include and cause to be maintained in effect in the Surviving Pubco’s (or any successor’s) constitutional documents after the Effective Time provisions regarding the elimination of liability of directors and officers and the indemnification of the Indemnified Parties that
are no less advantageous to the intended beneficiaries than the corresponding provisions contained in the current Charter Documents of Quartet.
(b) Prior to the Effective Time, Quartet and Holdco shall, and if Quartet or Holdco is unable to, the Company shall cause the Surviving Pubco as of the Effective Time to, obtain and fully pay for “tail” insurance policies with a claims period of six years from and after the Effective Time from one or more insurance carriers with the same or better credit rating as Quartet’s current insurance carriers with respect to directors’ and officers’ liability insurance and fiduciary liability insurance to the fullest extent permitted by Applicable Law (collectively, “
D&O Insurance
”) with
benefits and levels of coverage at least as favorable as Quartet’s existing policies with respect to matters existing or occurring at or prior to the Effective Time (including in connection with this Agreement or the transactions or actions contemplated hereby). If Quartet, Holdco and the Surviving Pubco for any reason fail to obtain such “tail” insurance policies as of the Effective Time, the Surviving Pubco shall, and the Company shall cause the Surviving Pubco to, continue to maintain in effect for a period of six years from and after the Effective Time the D&O Insurance in place as of the date hereof with benefits and levels of coverage at least as favorable as provided in Quartet’s existing policies as of the date hereof, or the Surviving Pubco shall, and the Company shall cause the Surviving Pubco to, purchase comparable D&O Insurance for such six-year period with benefits and levels of coverage at least as favorable as provided in Quartet’s
existing policies as of the date hereof; provided, however, that in no event shall the Company or the Surviving Pubco be required to expend for such policies premium amounts in excess of 250% of the premiums currently paid by Quartet for such insurance; and, provided, further that if the annual premiums of such insurance coverage exceed such amount, the Surviving Pubco shall obtain a policy with the greatest coverage available for a cost not exceeding such amount.
(c) If Holdco or the Surviving Pubco or any of its successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving entity of such consolidation or merger, or (ii) transfers or conveys all or substantially all of its properties and assets to any Person, then, in each such case, to the extent necessary, proper provision shall be made so that the successors and assigns of Holdco or the Surviving Pubco assume the obligations set forth in this Section 5.16.
(d) The provisions of this Section 5.16 are intended to be for the benefit of, and shall be enforceable by, each Person who will have been a director or officer of Quartet and Holdco for all periods ending on or before the Closing Date and may not be changed without the consent of the Representative.
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(e) The rights of the Indemnified Parties under this Section 5.16 shall be in addition to any rights such Indemnified Parties may have under the Charter Documents of Quartet or Holdco, or under any applicable contracts or Applicable Law.
5.17.
Insider Loans; Equity Ownership in Subsidiaries
. The Stockholders, at or prior to Closing, shall (i) repay to the Company any loan by the Company to such Stockholders and any other amount owed by the Stockholders to the Company; (ii) cause any guaranty or similar arrangement pursuant to which the Company has guaranteed the payment or performance of any obligations of such Stockholders to a third party to be terminated; and (iii) cease to own any direct equity interests in any Subsidiary of the Company. The Company shall use its best efforts to enable the Stockholders to accomplish the foregoing.
5.18.
Certain Financial Information
. Within twenty (20) Business Days after the end of each month between the date hereof and the earlier of the Closing Date and the date on which this Agreement is terminated, the Company shall deliver to Quartet unaudited consolidated financial statements of the Company and its Subsidiaries for such month, including a balance sheet, statement of operations, and statements of stockholders’ equity and cash flow, prepared in accordance with the U.S. GAAP applied on a consistent basis to prior periods (except as may be indicated in the notes thereto) and that fairly
present in all material respects the financial position of the Company at the date thereof and the results of its operations for the period indicated, except that such statements need not contain notes.
5.19.
Access to Financial Information
. The Company will, and will cause its auditors to, (a) continue to provide Quartet and its advisors full access to all of the Company’s financial information used in the preparation of its Audited Financial Statements and the financial information furnished pursuant to Section 5.18 hereof and (b) cooperate fully with any reviews performed by Quartet or its advisors of any such financial statements or information.
5.20.
Quartet Borrowings
. Through the Closing, Quartet shall be allowed to borrow up to $1,000,000 of funds from its directors, officers and/or stockholders to meet Quartet’s reasonable working capital requirements, with any such loans to be made only as reasonably required by the operation of Quartet in due course on a non-interest bearing basis and repayable in cash at Closing (or, with respect to up to $500,000 of loans, convertible into securities of Quartet in accordance with the terms of the promissory notes issued to evidence the borrowing, which such terms have been set in the Final
Prospectus).
5.21.
Trust Fund Disbursement
. Quartet shall cause the Trust Fund to be disbursed to the Company and as otherwise contemplated by this Agreement immediately upon the Closing. All liabilities and obligations of Quartet due and owing or incurred at or prior to the Effective Time shall be paid as and when due, including all amounts payable (i) to stockholders who elect to have their shares of Quartet Common Stock converted to cash in accordance with the provisions of Quartet’s Charter Documents, (ii) for income tax or other tax obligations of Quartet prior to Closing, (iii) as repayment of loans and
reimbursement of expenses to directors, officers and founding stockholders of Quartet, and (iv) to third parties (e.g., professionals, printers, etc.) who have rendered services to Quartet in connection with its operations and efforts to effect a business combination, including the Mergers.
5.22.
Section 16 Matters
. Prior to the Effective Time, Quartet and Holdco shall take all reasonable steps as may be required or permitted to cause any dispositions of the Quartet Shares and Quartet Rights that occur or are deemed to occur by reason of or pursuant to the Mergers by each individual who is or will be subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to Quartet to be exempt under Rule 16b-3 promulgated under the Exchange Act, including by taking steps in accordance with the No-Action Letter, dated January 12, 1999, issued by the SEC regarding such
matters.
5.23.
Holdco Plan.
As soon as practicable following Closing, Holdco shall create an incentive stock plan (the “
Holdco Plan
”) that provides that an aggregate of no more than 4.0% of the Holdco Shares to be outstanding immediately after the Effective Time shall be reserved for issuance pursuant to the Holdco Plan.
5.24.
Founding Shareholder Letters
. In connection with the execution and delivery of this Agreement, as of the date hereof, Quartet will cause the Quartet Founding Shareholders to execute letter agreements (“
Founding Shareholder Agreements
”) in the form of
Exhibit D
.
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ARTICLE VI.
CONDITIONS TO THE TRANSACTION
6.1.
Conditions to Obligations of Each Party to Effect the Mergers
. The respective obligations of each party to this Agreement to effect the Mergers shall be subject to the satisfaction at or prior to the Closing Date of the following conditions:
(a)
Registration Statement
. The Registration Statement shall have become effective under the Securities Act and shall not be the subject of any stop order suspending the effectiveness of the Registration Statement nor shall proceedings for that purpose have been threatened.
(b)
Quartet Stockholder Approval
. This Agreement and the Mergers shall have been duly approved and adopted by the stockholders of Quartet by the requisite vote under the laws of the State of Delaware and the Quartet Charter Documents.
(c)
Quartet Common Stock
. Holders of no more than 9,169,603 of the shares of Quartet Common Stock issued in Quartet’s initial public offering of securities and outstanding immediately before the Closing (or such greater or lesser number as may be derived from the Quartet SEC Reports filed after the date hereof) shall have exercised their rights to convert their shares into a pro rata share of the Trust Fund in accordance with Quartet’s Charter Documents.
(d)
HSR Act; No Order
. All specified waiting periods under the HSR Act shall have expired and no Governmental Entity shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, executive order, decree, injunction or other order (whether temporary, preliminary or permanent) which is in effect and which has the effect of making the Mergers illegal or otherwise prohibiting consummation of the Mergers, substantially on the terms contemplated by this Agreement.
(e)
Listing
. Quartet shall receive written confirmation from NYSE or Nasdaq that the Company meets all the requirements for listing on such exchange other than the requirement to have a sufficient number of round lot holders.
6.2.
Additional Conditions to Obligations of the Company
. The obligations of the Company and the Stockholders to consummate and effect the Mergers shall be subject to the satisfaction at or prior to the Closing Date of each of the following conditions, any of which may be waived, in writing, exclusively by the Company:
(a)
Representations and Warranties
. Each representation and warranty of Quartet, Holdco and Merger Sub contained in this Agreement shall have been true and correct (without regard to any materiality or Material Adverse Effect qualifier contained therein) (A) as of the date of this Agreement and (B) subject to the last sentence of Section 5.12, on and as of the Closing Date (except for any representations and warranties made as of an earlier date, which shall be true and correct as of the specified date) with the same force and effect as if made on the Closing Date with the same force and effect as if
made on the Closing Date, except (i) where the failure of such representations and warranties to be true and correct would not have a Material Adverse Effect with respect to Quartet and (ii) that the representations and warranties set forth in Sections 3.3, 3.4, 3.22, 3.23, 3.24 and 3.25 shall be true and correct in all respects as of the date of this Agreement and as of the Closing Date as though made as of the Closing Date. The Company shall have received a certificate with respect to the foregoing signed on behalf of Quartet, Holdco and Merger Sub by an authorized officer of Quartet, Holdco and Merger Sub (“
Quartet Closing Certificate
”).
(b)
Agreements and Covenants
. Quartet, Holdco and Merger Sub shall have performed or complied with all agreements and covenants required by this Agreement to be performed or complied with by them on or prior to the Closing Date, in each case in all material respects, and the Quartet Closing Certificate shall include a provision to such effect.
(c)
No Litigation
. No action, suit or proceeding shall be pending or threatened before any Governmental Entity which is reasonably likely to (i) prevent consummation of any of the transactions contemplated by this Agreement, (ii) cause any of the transactions contemplated by this Agreement to be rescinded following consummation or (iii) affect materially and adversely the right of Quartet or the
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Company to own, operate or control any of the assets and operations of Surviving Pubco or the Surviving Corp following the Mergers and no order, judgment, decree, stipulation or injunction to any such effect shall be in effect.
(d)
Consents
. Quartet, Holdco and Merger Sub shall have obtained all consents, waivers and approvals required to be obtained in connection with the consummation of the transactions contemplated hereby, other than consents, waivers and approvals the absence of which, either alone or in the aggregate, could not reasonably be expected to have a Material Adverse Effect on Quartet and the Quartet Closing Certificate shall include a provision to such effect.
(e)
Material Adverse Effect
. No Material Adverse Effect with respect to Quartet shall have occurred since the date of this Agreement.
(f)
SEC Compliance
. Immediately prior to Closing, Quartet shall be in compliance with the reporting requirements under the Exchange Act.
(g)
Registration Rights Agreement
. The Registration Rights Agreement, in the form of
Exhibit C
shall be executed by Quartet and delivered to the Company.
(h)
Other Deliveries
. At or prior to Closing, Quartet shall have delivered to the Company (i) copies of resolutions and actions taken by the respective board of directors and shareholders or stockholders of Quartet, Holdco and Merger Sub in connection with the approval of this Agreement and the transactions contemplated hereunder, (ii) such other documents or certificates as shall reasonably be required by the Company and its counsel in order to consummate the transactions contemplated hereunder, and (iii) the Cash Consideration by wire transfer of immediately available funds to an account designated
in writing to the Representative.
(i)
Trust Fund
. Quartet shall have made appropriate arrangements to have the Trust Fund, less amounts paid and to be paid pursuant to Section 5.21, disbursed to the Company upon the Closing.
(j)
Opinion of Quartet Counsel
. The Company shall have received from Graubard Miller, counsel to Quartet, an opinion of counsel in substantially the form of
Exhibit E
annexed hereto.
(k)
Opinion of Holdco and Merger Sub Counsel
. The Company shall have received from Cox Hallett Wilkinson Limited, counsel to Holdco and Merger Sub, an opinion of counsel in substantially the form of
Exhibit F
annexed hereto.
(l)
Founding Shareholder Agreements
. The Quartet Founding Shareholders shall have delivered the Founding Shareholder Agreements.
6.3.
Additional Conditions to the Obligations of Quartet, Holdco and Merger Sub
. The obligations of Quartet, Holdco and Merger Sub to consummate and effect the Mergers shall be subject to the satisfaction at or prior to the Closing Date of each of the following conditions, any of which may be waived, in writing, exclusively by Quartet:
(a)
Representations and Warranties
. Each representation and warranty of the Company and the Stockholder contained in this Agreement shall have been true and correct (without regard to any materiality or Material Adverse Effect qualifier contained therein) (A) as of the date of this Agreement and (B) subject to the last sentence of Section 5.12, on and as of the Closing Date (except for any representations and warranties made as of an earlier date, which shall be true and correct as of the specified date) with the same force and effect as if made on the Closing Date, except (i) where the failure of
such representations and warranties to be true and correct would not have a Material Adverse Effect and (ii) that the representations and warranties set forth in Sections 2.3, 2.4, 2.24 and 2.25 shall be true and correct in all respects as of the date of this Agreement and as of the Closing Date as though made as of the Closing Date. Quartet shall have received a certificate with respect to the foregoing signed on behalf of the Company by an authorized officer of the Company (“
Company Closing Certificate
”).
(b)
Agreements and Covenants
. The Company and the Stockholder shall have performed or complied with all agreements and covenants required by this Agreement to be performed or complied with by them at or prior to the Closing Date except to the extent that any failure to perform or comply
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(other than a willful failure to perform or comply or failure to perform or comply with an agreement or covenant reasonably within the control of the Company) does not, or will not, constitute a Material Adverse Effect on the Company, and the Company Closing Certificate shall include a provision to such effect.
(c)
No Litigation
. No action, suit or proceeding shall be pending or threatened before any Governmental Entity which is reasonably likely to (i) prevent consummation of any of the transactions contemplated by this Agreement, (ii) cause any of the transactions contemplated by this Agreement to be rescinded following consummation or (iii) affect materially and adversely the right of Quartet or the Company to own, operate or control any of the assets and operations of Surviving Pubco or the Surviving Corp following the Mergers and no order, judgment, decree, stipulation or injunction to any such effect
shall be in effect.
(d)
Consents
. The Company shall have obtained all consents, waivers, permits and approvals required to be obtained by the Company in connection with the consummation of the transactions contemplated hereby, other than consents, waivers and approvals the absence of which, either alone or in the aggregate, could not reasonably be expected to have a Material Adverse Effect on the Company and the Company Closing Certificate shall include a provision to such effect.
(e)
Material Adverse Effect
. No Material Adverse Effect with respect to the Company shall have occurred since the date of this Agreement.
(f)
Board of Directors
. The persons listed in
Schedule 5.2
shall have been appointed as officers and directors of Holdco.
(g)
Lock-Up Agreement
. The Lock-Up Agreements shall be executed by the Stockholders and delivered to Quartet.
(h)
Negative Assurance Letter
. Quartet shall have received a negative assurance letter in a form that is reasonably acceptable to Quartet from outside counsel to the Company that is reasonably acceptable to Quartet.
(i)
Opinion of Company Counsel
. Quartet shall have received from Appleby, counsel to the Company, an opinion of counsel in substantially the form of
Exhibit H
annexed hereto.
(j)
Other Deliveries
. At or prior to Closing, the Company shall have delivered to Quartet: (i) copies of resolutions and actions taken by the Company’s board of directors and shareholders in connection with the approval of this Agreement and the transactions contemplated hereunder, and (ii) such other documents or certificates as shall reasonably be required by Quartet and its counsel in order to consummate the transactions contemplated hereunder.
(k)
Insider Loans; Equity Ownership in Subsidiaries
. (i) All outstanding indebtedness owed by Insiders to the Company shall have been repaid in full, including the indebtedness and other obligations described on
Schedule 2.23
; (ii) all outstanding guaranties and similar arrangements pursuant to which the Company has guaranteed the payment or performance of any obligations of any Insider to a third party shall have been terminated; and (iii) no Insider shall own any direct equity interests in any Subsidiary of the Company.
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ARTICLE VII.
INDEMNIFICATION
7.1.
Indemnification of Surviving Pubco by the Stockholders
.
(a) Effective at and after the Closing, subject to the terms and conditions of this Article VII (including without limitation the limitations set forth in Section 7.4), the Surviving Pubco and its representatives, successors and permitted assigns (the “
Indemnified Parties
”) shall be indemnified, defended and held harmless by the Stockholders, but only to the extent of the Escrow Shares, from and against all Losses asserted against, resulting to, imposed upon, or incurred by any Indemnified Party by reason of, arising out of or resulting from:
(i) the inaccuracy or breach of any representation or warranty of the Company contained in or made pursuant to this Agreement, including any Schedule or ancillary agreement hereto, or contained in any certificate delivered by the Company to Quartet pursuant to this Agreement with respect hereto or thereto in connection with the Closing; and
(ii) the non-fulfillment or breach of any covenant or agreement of the Company contained in this Agreement;
(b) As used in this Article VII, the term “
Losses
” shall include on a dollar for dollar basis all losses, liabilities, damages, judgments, awards, orders, penalties, settlements, costs and expenses (including, without limitation, interest, penalties, court costs and reasonable legal fees and expenses) including those arising from any demands, claims, suits, actions, costs of investigation, notices of violation or noncompliance, causes of action, proceedings and assessments whether or not made by third parties or whether or not ultimately determined to be valid; provided that in no event will Losses include
any indirect, remote, exemplary, consequential, punitive or multiple-based losses, liabilities, damages, judgments, awards, orders, penalties, settlements, costs or expenses. Solely for the purpose of determining the amount of any Losses (and not for determining any breach) for which the Indemnified Parties may be entitled to indemnification pursuant to Article VII, any representation or warranty contained in this Agreement that is qualified by a term or terms such as “material,” “materially,” or “Material Adverse Effect” shall be deemed made or given without such qualification and without giving effect to such words.
7.2.
Indemnification of Third Party Claims
. The indemnification obligations and liabilities under this
Article VII
with respect to actions, proceedings, lawsuits, investigations, demands or other claims brought against a party under an obligation to indemnify pursuant to Sections 7.1 other than the Indemnified Parties (a “
Third Party Claim
”) shall be subject to the following terms and conditions:
(a)
Notice of Claim
. The Indemnified Parties will give the party allegedly required to provide indemnification protection under this Article VII (the “
Indemnifying Party
”) prompt written notice after receiving written notice of any Third Party Claim or discovering the liability, obligation or facts giving rise to such Third Party Claim (a “
Notice of Claim
”) which Notice of Third Party Claim shall set forth (i) a brief description of the nature of the Third Party Claim, (ii) the underlying representation, warranty or covenant alleged to have been breached and the facts
then known on which such alleged breach is based, (iii) the total amount of the actual out-of-pocket Loss or the anticipated potential Loss (including any costs or expenses which have been or may be reasonably incurred in connection therewith), and (iv) whether such Loss may be covered (in whole or in part) under any insurance and the estimated amount of such Loss which may be covered under such insurance, and the Indemnifying Party shall be entitled to participate in the defense of Third Party Claim at its expense.
(b)
Defense
. The Indemnifying Parties shall have the right, at their option (subject to the limitations set forth in subsection 7.2(c) below) and at their own expense, by written notice to the Indemnified Parties, to assume the entire control of, subject to the right of the Indemnified Parties to participate (at their expense and with counsel of their choice) in, the defense, compromise or settlement of the Third Party Claim as to which such Notice of Claim has been given, and shall be entitled to appoint a recognized and reputable counsel to be the lead counsel in connection with such defense;
provided that an Indemnifying Party’s assumption of the defense of a Third Party Claim will not,
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vis-à-vis the Indemnified Parties, constitute acceptance of liability to the Indemnified Parties under this Article VII. If the Indemnifying Parties elect to assume the defense of a Third Party Claim:
(i) the Indemnifying Parties shall diligently and in good faith defend such Third Party Claim and shall keep the Indemnified Parties reasonably informed of the status of such defense; provided, however, that in the case of any settlement providing for remedies which are not merely incidental to a primary damage claim or claims for monetary damages, the Indemnified Parties shall have the right to approve any settlement, which approval will not be unreasonably withheld, delayed or conditioned; and
(ii) the Indemnified Parties shall cooperate fully in all respects with the Indemnifying Parties in any such defense, compromise or settlement thereof, including, without limitation, the selection of counsel, and the Indemnified Parties shall make available to the Indemnifying Parties all pertinent information and documents under its control.
(c)
Limitations of Right to Assume Defense
. The Indemnifying Parties shall not be entitled to assume control of such defense and shall pay the reasonable fees and expenses of counsel retained by the Indemnified Parties if (i) the Third Party Claim relates to or arises in connection with any criminal proceeding, action, indictment, allegation or investigation; (ii) the Third Party Claim seeks an injunction or equitable relief against the Indemnifying Parties which is not merely incidental to a primary damage claim or claims for monetary damages; or (iii) there is a reasonable probability that a Third
Party Claim could result in a Material Adverse Effect of Holdco.
(d)
Other Limitations
. Failure to give prompt Notice of Claim or to provide copies of relevant available documents or to furnish relevant available data shall not constitute a defense (in whole or in part) to any Third Party Claim by the Indemnified Parties against the Indemnifying Parties and shall not affect the Indemnifying Parties’ duties or obligations under this Article VII, except to the extent (and only to the extent that) such failure shall have (i) adversely affected the ability of the Indemnifying Parties to defend against or reduce their liability or (ii) caused or increased such
liability or otherwise caused the Losses for which the Indemnifying Parties are obligated to be greater than such Losses would have been had the Indemnified Parties given the Indemnifying Parties prompt notice hereunder. So long as the Indemnifying Parties are defending any such action actively and in good faith, the Indemnified Parties shall not settle such action. The Indemnified Parties shall make available to the Indemnifying Parties all relevant records and other relevant materials required by them and in the possession or under the control of the Indemnified Parties, for the use of the Indemnifying Parties and their representatives in defending any such action, and shall in other respects give reasonable cooperation in such defense.
(e)
Failure to Defend
. If the Indemnifying Parties, promptly after receiving a Notice of Claim, fail to defend such Third Party Claim in good faith, the Indemnified Parties, at its own cost and expense, will (upon further written notice) have the right to undertake the defense, compromise or settlement of such Third Party Claim as it may determine in its reasonable discretion, provided that the Indemnifying Parties shall have the right to approve any settlement, which approval will not be unreasonably withheld, delayed or conditioned.
(f)
Indemnified Parties’ Rights
. Anything in this Section 7.2 to the contrary notwithstanding, the Indemnifying Parties shall not, without the written consent of the Indemnified Parties (which consent will not be unreasonably withheld, conditioned or delayed), settle or compromise any action or consent to the entry of any judgment which does not include a full and unconditional release from all liability and obligation in respect of such action without any payment by the Indemnified Parties.
(g)
Indemnifying Parties Consent
. Unless the Indemnifying Parties have consented to a settlement of a Third Party Claim, the amount of the settlement shall not be a binding determination of the amount of the Loss and such amount shall be determined in accordance with the provisions of the Escrow Agreement.
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7.3.
Insurance Effect
. To the extent that any Losses that are subject to indemnification pursuant to this Article VII are covered by insurance paid for by the Surviving Pubco or the Surviving Corp prior to or after the Closing, the Surviving Pubco and the Surviving Corp shall use commercially reasonable efforts to obtain the maximum recovery under such insurance; provided that the Indemnified Parties shall nevertheless be entitled to bring a claim for indemnification under this Article VII in respect of such Losses and the time limitations set forth in Section 7.4 hereof for bringing a claim of
indemnification under this Agreement shall be tolled during the pendency of such insurance claim. The existence of a claim by the Indemnified Parties for monies from an insurer or against a third party in respect of any Loss shall not, however, delay any payment pursuant to the indemnification provisions contained herein and otherwise determined to be due and owing by the Indemnifying Parties. If the Surviving Pubco or the Surviving Corp has received the payment required by this Agreement from the Indemnifying Parties in respect of any Loss and later receives proceeds from insurance or other amounts in respect of such Loss, then it shall hold such proceeds or other amounts in trust for the benefit of the Indemnifying Parties and shall pay to the Indemnifying Parties, as promptly as practicable after receipt, a sum equal to the amount of such proceeds or other amount received, up to the aggregate amount of any payments received from the Indemnifying Parties pursuant to this Agreement in
respect of such Loss. Notwithstanding any other provisions of this Agreement, it is the intention of the parties that no insurer or any other third party shall be (i) entitled to a benefit it would not be entitled to receive in the absence of the foregoing indemnification provisions, or (ii) relieved of the responsibility to pay any claims for which it is obligated.
7.4.
Limitations on Indemnification
. Notwithstanding anything to the contrary in this Article VII or elsewhere in this Agreement, the following terms will apply to any claim arising out of this Agreement or related to the transactions contemplated hereby:
(a)
Survival: Time Limitation
. The representations and warranties of the Parties under this Agreement will survive the execution and delivery of this Agreement until the first anniversary of the Closing Date, at which time such representations and warranties will expire (the “
Basic Survival Period
”) except that the right of the Indemnified Parties to bring (i) Environmental Indemnity Claims shall survive the Closing for the period that ends on the Environmental Indemnity Escrow Termination Date (the “
Environmental Indemnity Survival Period
”), (ii) Claims for the
breach of the representations and warranties in Sections 2.1(a) and (b), 2.3, 2.4 and 1.13(c)(iv) shall survive without limitation as to time, and (iii) Claims for the breach of the representations and warranties in Sections 3.1, 3.3, and 3.4 shall survive without limitation as to time. The covenants and agreements of the parties hereto contained in this Agreement, any ancillary agreement hereto or in any certificate or other writing delivered pursuant hereto or thereto or in connection herewith shall survive the Closing indefinitely or for the shorter period explicitly specified therein, except that for such covenants and agreements that survive for such shorter period, breaches thereof shall survive indefinitely or until the latest date permitted by law.
(b) Any indemnification claim made by the Indemnified Parties prior to the termination of the Basic Survival Period or the Environmental Indemnity Survival Period (each a “
Survival Period
”), as the case may be, shall be preserved despite the subsequent termination of such Survival Period and any claim set forth in a Notice of Claim sent prior to the expiration of such Survival Period shall survive until final resolution thereof. Except as set forth in the immediately preceding sentence, no claim for indemnification under this Article VII shall be brought after the end of the Survival Period or the
Environmental Indemnity Survival Period, as the case may be.
(c)
Deductible
. No amount shall be payable under Article VII unless and until the aggregate amount of all indemnifiable Losses otherwise payable exceeds $2,000,000 (the “
Deductible
”), in which event the amount payable shall be only the Losses that are indemnifiable pursuant to Section 7.1 in excess of the amount of the Deductible (including, for avoidance of doubt and subject to the limitations set forth in this Article VII, all Losses that are indemnifiable pursuant to Section 7.1 from time to time after the Deductible has been exceeded). Notwithstanding the foregoing, the Deductible
shall not apply to Losses that arise out of (i) a breach of the representations and warranties in Section 1.13(c)(iv) or Section 2.3, or (ii) an Environmental Indemnification Claim, each of which shall be indemnifiable as to all Losses that so arise from the first dollar thereof.
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(d)
Aggregate Amount Limitations
. The aggregate liability for Losses pursuant to Section 7.1 shall not in any event exceed the Escrow Shares in the case of Basic Indemnity Claims or the Environmental Indemnity Shares in the case of Environmental Indemnity Claims, and Surviving Pubco shall have no claim against the Shareholders other than for any of such Escrow Shares (and any dividends declared and actually paid with respect to the Escrow Shares).
(e)
No Double Recovery
. In the event that any Losses for which indemnification is provided under this Article VII are recoverable under more than one provision of this Agreement, the Indemnified Parties will only be permitted to recover with respect to any particular Losses suffered by it one time as it is the parties’ intention that once any particular Losses have been recovered by the Indemnified Parties under one provision, such Losses no longer exist and, therefore, recovery by the Indemnified Parties for such same Losses under another provision would constitute an unintended and prohibited
“double” recovery.
(f)
Miscellaneous Limitations
. Notwithstanding anything to the contrary contained in this Agreement or otherwise, the Indemnified Parties will not be entitled to indemnification pursuant to Section 7.1 for any Loss underlying such indemnification claim to the extent that: (i) the Indemnified Parties could have, with commercially reasonable efforts, mitigated or prevented such Loss (or any part thereof); (ii) such Loss (or any part thereof) results from or is increased by the action or inaction of any Indemnified Parties or any Affiliate thereof; or (iii) such Loss (or any part thereof) arises, or is
increased, as a result of a change after the Closing in any accounting principle, method or policy.
7.5.
EXCLUSIVE REMEDY
.
HOLDCO (WHICH SHALL SURVIVE THE REDOMESTICATION MERGER TO BECOME SURVIVING PUBCO), ON BEHALF OF ITSELF AND THE OTHER INDEMNIFIED PARTIES, HEREBY ACKNOWLEDGES AND AGREES THAT, FROM AND AFTER THE CLOSING, THE SOLE AND EXCLUSIVE REMEDY OF THE INDEMNIFIED PARTIES WITH RESPECT TO ANY AND ALL CLAIMS FOR LOSSES ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE PURSUANT AND SUBJECT TO THE REQUIREMENTS OF THE INDEMNIFICATION PROVISIONS SET FORTH IN THIS ARTICLE VII. ACCORDINGLY, EACH OF THE PARTIES TO THIS AGREEMENT EXPRESSLY WAIVES AND RELEASES ANY REMEDY, LIABILITY AND ANY
RIGHTS IT MAY HAVE PURSUANT TO LAW OR EQUITY OTHER THAN THE REMEDIES EXPRESSLY PROVIDED UNDER THIS ARTICLE VII. FURTHERMORE, EACH PARTY TO THIS AGREEMENT COVENANTS NOT TO SUE OR OTHERWISE THREATEN ANY CLAIM THAT INCLUDES ANY REMEDY WAIVED BY THE PRECEDING SENTENCE, AND SUCH PARTIES AGREE THAT, TO THE EXTENT REQUIRED BY APPLICABLE LAW TO BE EFFECTIVE, THE AGREEMENT, WAIVERS AND RELEASES CONTAINED IN THIS SECTION 7.5 ARE CONSPICUOUS. NOTWITHSTANDING ANY OF THE FOREGOING, NOTHING CONTAINED IN THIS ARTICLE VII SHALL IN ANY WAY IMPAIR, MODIFY OR OTHERWISE LIMIT THE INDEMNIFIED PARTIES’ RIGHT TO BRING ANY CLAIM, DEMAND OR SUIT AGAINST THE OTHER PARTY BASED UPON SUCH OTHER PARTY’S ACTUAL FRAUD OR INTENTIONAL OR WILLFUL MISREPRESENTATION OR OMISSION, IT BEING UNDERSTOOD THAT A MERE BREACH OF A REPRESENTATION AND WARRANTY, WITHOUT INTENTIONAL OR WILLFUL MISREPRESENTATION OR OMISSION, DOES NOT CONSTITUTE FRAUD.
7.6.
Adjustment to Merger Consideration
. Amounts paid for indemnification under Article VII shall be deemed to be an adjustment to the value of the Holdco Shares issued by Holdco as a result of the Mergers, except as otherwise required by Law.
7.7.
Representative Capacities; Application of Escrow Shares
. The parties acknowledge that the Representative’s obligations under this Article VII are solely as a representative of the Surviving Corp in the manner set forth in the Escrow Agreement with respect to the obligations to indemnify the Surviving Corp under this Article VII and that the Representative shall have no personal responsibility for any expenses incurred by him in such capacity and that all payments to the Surviving Corp as a result of such indemnification obligations shall be made solely from, and to the extent of, the Escrow
Shares. Out-of-pocket expenses of the Representative for attorneys’ fees and other costs shall be borne in the first instance by the Surviving Corp, which may make a claim for reimbursement thereof against the Escrow Shares upon the
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claim with respect to which such expenses are incurred becoming an Established Claim (as defined in the Escrow Agreement). The Escrow Agent, pursuant to the Escrow Agreement after the Closing, may apply all or a portion of the Escrow Shares to satisfy any claim for indemnification pursuant to this Article VII. The value of the Escrow Shares shall be determined in accordance with the Escrow Agreement. The Escrow Agent will hold the remaining portion of the Escrow Shares until final resolution of all claims for indemnification or disputes relating thereto.
7.8.
Tax Benefits
. The amount of any Losses for which indemnification is provided shall be reduced by any net Tax benefit to such Indemnified Party and its Affiliates, to the extent realized by such party as a result of such Losses, including the present value (determined by discounting at 8%) of the benefit arising from an increase in the Tax basis of assets, net of any Tax costs incurred by the Indemnified Party as a result of the receipt of the indemnification payments hereunder. In calculating the amount of net Tax benefit, the Indemnified Party and its Affiliates shall be presumed to pay Taxes at
a forty percent (40%) Tax rate. The Indemnified Party shall provide the Indemnifying Party with such documentation as may be reasonably requested in order to ascertain or confirm the amount of any net Tax benefit or net Tax cost referred to herein.
7.9.
Mitigation
. A Indemnified Party shall use commercially reasonably efforts to mitigate Losses suffered, incurred or sustained by it arising out of any matter for which it is entitled to indemnification hereunder; provided that no Indemnified Party shall be required to (i) take any action or refrain from taking any action that is contrary to any applicable Contract, order or law binding on it or any Affiliate thereof or (ii) incur any out-of-pocket expense in connection with such mitigation (other than de minimus incidental expenses).
7.10.
NO RELIANCE
.
AS MODIFIED BY THE APPLICABLE DISCLOSURE SCHEDULES, THE REPRESENTATIONS AND WARRANTIES OF THE COMPANY CONTAINED IN ARTICLE II AND QUARTET, HOLDCO AND MERGER SUB IN ARTICLE III, CONSTITUTE THE SOLE AND EXCLUSIVE REPRESENTATIONS AND WARRANTIES OF THE PARTIES TO THIS AGREEMENT AND IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY ANCILLARY AGREEMENT HERETO. EXCEPT FOR SUCH REPRESENTATIONS AND WARRANTIES, NO PARTY TO THIS AGREEMENT MAKES ANY OTHER EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY OF ANY NATURE. EACH PARTY CONFIRMS THAT IT IS NOT RELYING ON ANY
REPRESENTATION OR WARRANTY OTHER THAN AS SET FORTH IN THIS AGREEMENT AND EACH PARTY ACKNOWLEDGES THAT THIS NO RELIANCE CONFIRMATION IS A MATERIAL INDUCEMENT TO THE OTHER PARTY’S WILLINGNESS TO ENTER INTO THIS AGREEMENT AND CONSUMMATE THE TRANSACTIONS CONTEMPLATED HEREBY AND BY ANY ANCILLARY AGREEMENT HERETO. WITHOUT LIMITING THE FOREGOING, THE PARTIES ACKNOWLEDGE AND AGREE THAT, EXCEPT AS EXPRESSLY SET FORTH IN ARTICLE II, THE COMPANY IS NOT MAKING AND HAS NOT MADE ANY REPRESENTATION OR WARRANTY WITH RESPECT TO MATERIALS FURNISHED TO QUARTET OR ITS REPRESENTATIVES DURING THE DILIGENCE PROCESS OR OTHERWISE (INCLUDING FINANCIAL OR OPERATIONAL FORECASTS) OR MATTERS THAT WERE DISCUSSED ORALLY OR IN WRITING ON OR PRIOR TO THE DATE HEREOF
.
ARTICLE VIII.
TERMINATION
8.1.
Termination
. This Agreement may be terminated at any time prior to the Closing:
(a) by mutual written agreement of Quartet and the Company at any time;
(b) by either Quartet or the Company if the Mergers shall not have been consummated by September 30, 2014 (the “
Termination Date
”) for any reason; provided, however, that the right to terminate this Agreement under this Section 8.1(b) shall not be available to any party whose action or failure to act has been a principal cause of or resulted in the failure of the Mergers to occur on or before such date and such action or failure to act constitutes a breach of this Agreement;
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(c) by either Quartet or the Company if a Governmental Entity shall have issued an order, decree, judgment or ruling or taken any other action, in any case having the effect of permanently restraining, enjoining or otherwise prohibiting the Mergers, which order, decree, ruling or other action is final and nonappealable;
(d) by the Company, upon a material breach of any representation, warranty, covenant or agreement on the part of Quartet set forth in this Agreement, or if any representation or warranty of Quartet shall have become untrue, in either case such that the conditions set forth in Article VI would not be satisfied as of the time of such breach or as of the time such representation or warranty shall have become untrue, provided, that if such breach by Quartet is curable by Quartet prior to the Closing Date, then the Company may not terminate this Agreement under this Section 8.1(d) for fifteen (15) days after delivery of written
notice from the Company to Quartet of such breach (or if the Termination Date is less than fifteen (15) days from notice by the Company, is not cured, or by its nature or timing cannot be cured, by the Company by the Termination Date), provided Quartet continues to exercise commercially reasonable efforts to cure such breach (it being understood that the Company may not terminate this Agreement pursuant to this Section 8.1(d) if it shall have materially breached this Agreement or if such breach by Quartet is cured during such fifteen (15)-day period);
(e) by Quartet, upon a material breach of any representation, warranty, covenant or agreement on the part of the Company set forth in this Agreement, or if any representation or warranty of the Company shall have become untrue, in either case such that the conditions set forth in Article VI would not be satisfied as of the time of such breach or as of the time such representation or warranty shall have become untrue, provided, that if such breach is curable by the Company prior to the Closing Date, then Quartet may not terminate this Agreement under this Section 8.1(e) for fifteen (15) days after delivery of written notice
from Quartet to the Company of such breach (or if the Termination Date is less than fifteen (15) days from notice by Quartet, is not cured, or by its nature or timing cannot be cured, by Quartet by the Termination Date), provided the Company continues to exercise commercially reasonable efforts to cure such breach (it being understood that Quartet may not terminate this Agreement pursuant to this Section 8.1(e) if it shall have materially breached this Agreement or if such breach by the Company is cured during such fifteen (15)-day period);
(f) by the Company, if, at the Special Meeting (including any adjournments thereof), this Agreement and the transactions contemplated thereby shall fail to be approved and adopted by the affirmative vote of the holders of Quartet Common Stock required under Quartet’s Charter Documents, or the holders of more than 9,169,603 of the shares of Quartet Common Stock issued in Quartet’s initial public offering and outstanding as of the date of the record date of the Special Meeting (or such greater or lesser number as may be derived from the Quartet SEC Reports filed after the date hereof) shall exercise their rights to
convert the shares of Quartet Common Stock held by them into cash in accordance with Quartet’s Charter Documents;
(g) by the Company if (i) the Quartet Board shall change its recommendation that Quartet’s stockholders vote in favor of this Agreement or the Mergers, or fails to reaffirm such recommendation as promptly as practicable (and in any event within five Business Days) after receipt of any written request to do so from the Company, or Quartet breaches any of its obligations under Section 5.1 (it being understood, however, that the Company may not terminate this Agreement pursuant to this Section 8.1(g) if the breach of Quartet’s obligations under Section 5.1 arises as a result of the Company’s failure to provide the
information concerning the Company required to be included in the Registration Statement and Proxy Statement/Prospectus or the Company’s failure to provide the necessary consents and approvals for the Registration Statement and Proxy Statement/Prospectus from its auditors within 20 Business Days after the date of this Agreement) or (ii) the Mergers have not been consummated within 45 days after the Proxy Statement/Prospectus has been cleared by the SEC; and
(h) by the Company, if at any point Quartet does not have cash on hand (or in Quartet’s Trust Fund) of at least $25,000,000 (including immediately prior to the Mergers, after giving effect to the payment to stockholders who elect to have their shares of Quartet Common Stock converted to cash in accordance with the provisions of Quartet’s Charter Documents).
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8.2.
Notice of Termination; Effect of Termination
. Any termination of this Agreement under Section 8.1 above will be effective immediately upon (or, if the termination is pursuant to Section 8.1(d) or Section 8.1(e) and the proviso therein is applicable, thirty (30) days after) the delivery of written notice of the terminating party to the other parties hereto. In the event of the termination of this Agreement as provided in Section 8.1, this Agreement shall be of no further force or effect and the Mergers shall be abandoned, except for and subject to the following: (i) Sections 5.6, 5.12, 8.2 and 8.3
and Article X (General Provisions) shall survive the termination of this Agreement, and (ii) nothing herein shall relieve any party from liability for any breach of this Agreement, including a breach by a party electing to terminate this Agreement pursuant to Section 8.1(b) caused by the action or failure to act of such party constituting a principal cause of or resulting in the failure of the Mergers to occur on or before the date stated therein.
8.3.
Fees and Expenses
. All fees and expenses incurred in connection with this Agreement and the transactions contemplated hereby (including the preparation, review and filing of any filings prepared for filing with the SEC) shall be paid by the party incurring such expenses whether or not the Mergers are consummated. All documented fees and expenses incurred in direct connection with this Agreement, the transactions contemplated hereby, and the S-1 filed previously by the Company shall be paid by the party incurring such expenses whether or not the Mergers are consummated. All fees and expenses
incurred by any Affiliates of the Company (including for the avoidance of doubt Cartesian Capital Group, LLC and its Affiliates) in connection with this Agreement and the transactions contemplated hereby shall be deemed to be expenses of the Company. Any fee or expense in excess of $25,000 incurred by either party in connection with this Agreement and the transactions contemplated hereby will be subject to the approval of the other party, such approval not to be unreasonably withheld, delayed or conditioned.
ARTICLE IX.
DEFINED TERMS
Terms defined in this Agreement are organized alphabetically as follows, together with the Section and, where applicable, paragraph, number in which definition of each such term is located:
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“Accounting Arbiter”
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Section 1.14(g)
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“Affiliate”
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Section 10.2(g)
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“Agreement”
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Header
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“Alternative Transaction Proposal”
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Section 5.15
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“Applicable Law”
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Section 1.3
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“Approvals”
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Section 2.1(a)
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“Audited Financial Statements”
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Section 2.7(a)
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“Basic Indemnity Escrow Termination Date”
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Section 1.2
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“Basic Survival Period”
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Section 7.5(a)
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“Bermuda Certificate of Merger”
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Section 1.2
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“Bermuda Merger Sub Certificate of Merger”
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Section 1.2
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“Blue Sky Laws”
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Section 1.13(c)(i)
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“Business Days”
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Section 10.2(i)
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“Cancellation Shares”
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Section 1.15(a)
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“Certificates of Merger”
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Section 1.2
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“Charter Documents”
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Section 2.1(a)
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“Closing”
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Section 1.2
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“Closing Date”
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Section 1.2
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“Closing Form 8-Ks
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Section 5.4(b)
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“Closing Press Release”
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Section 5.4(b)
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“Code”
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Section 1.9(a)
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“Companies Act”
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Recital A
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“Company and Stockholder Releasors”
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Section 5.10
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“Reviewable Document”
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Section 5.5(a)
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“Company Board”
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Recital B
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“Company Certificates”
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Section 1.5(b)(i)
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“Company Closing Certificate”
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Section 6.3(a)
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“Company Common Shares”
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Section 1.3
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“Company Contracts”
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Section 2.20(a)
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“Company Intellectual Property”
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Section 2.19(a)(ii)
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“Company Preferred Shares”
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Section 1.3
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“Company Products”
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Section 2.19(a)(iv)
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“Company Schedule”
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Article II Preamble
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“Continental”
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Section 1.6(a)
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“Copyrights”
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Section 2.19(a)(i)
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“Corporate Records”
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Section 2.1(c)
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“Costs”
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Section 5.16(a)
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“D&O Insurance”
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Section 5.16(b)
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“Deductible”
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Section 7.5(c)
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“Delaware Certificate of Merger”
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Section 1.2
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“Disqualification Event”
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Section 1.13(c)(iii)
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“DGCL”
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Recital A
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“Disclosure Schedules”
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Section 5.12
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“Effective Time”
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Section 1.2
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“Elected Cash Consideration”
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Section 1.5(b)(iii)
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“Environmental Claim”
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Section 2.17(c)
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“Environmental Indemnification Claim”
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Section 1.11
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“Environmental Indemnity Escrow Termination Date”
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Section 1.11
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“Environmental Indemnity Shares”
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Section 1.11
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“Environmental Indemnity Survival Period”
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Section 7.5(a)
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“Environmental Law”
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Section 2.17(b)
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“ERISA”
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Section 2.11(c)
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“Escrow Account”
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Section 1.11
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“Escrow Agent”
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Section 1.11
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“Escrow Agreement”
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Section 1.11
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“Escrow Shares”
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Section 1.11
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“Exchange Act”
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Section 1.13(c)(i)
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“Exchange Agent”
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Section 1.6(a)
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“Final Prospectus”
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Section 5.11
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“Founding Shareholder Agreements”
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Section 5.24
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“Governmental Action/Filing”
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Section 2.22(c)
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“Governmental Entity”
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Section 1.13(c)(i)
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“Hazardous Substance”
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Section 2.17(d)
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“Holdco”
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Heading
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“Holdco Board”
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Recital B
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“Holdco Certificates”
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Section 1.6(a)
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“Holdco Indemnified Parties”
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Section 5.16(a)
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“Holdco Plan”
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Section 5.23
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“Holdco Shares”
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Section 1.5(a)(i)
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“HSR Act”
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Section 2.5(b)
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“Indemnified Parties”
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Section 7.1(a)
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“Indemnifying Parties”
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Section 7.3(a)
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“Insider”
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Section 2.20(a)(i)
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“Insurance Policies”
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Section 2.21
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“Intellectual Property”
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Section 2.19(a)(i)
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“knowledge”
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Section 10.2(e)
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“Leased Vessels”
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Section 2.15(a)
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“Legal Requirements”
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Section 10.2(b)
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“Lien”
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Section 10.2(f)
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“Lock-Up Agreements”
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Section 1.17
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“Losses”
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Section 7.1(b)
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“Maritime Guidelines”
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Section 10.2(c)
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“Material Adverse Effect”
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Section 10.2(a)
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“Material Company Contracts”
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Section 2.20(a)
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“Mergers”
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Recital A
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“Merger Sub”
|
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Heading
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“Merger Sub Board”
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Recital B
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“Nasdaq”
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Section 3.23
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“Net Income”
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Section 1.14(e)(i)
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“Net Income Calculation”
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Section 1.14(g)
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“Net Income Shares”
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Section 1.14(e)(ii)
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“Newbuildings”
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Section 2.20(a)(v)
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“Notice of Claim”
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Section 7.3(a)
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“NYSE”
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Section 5.13
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“Owned Vessels”
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Section 2.15(a)
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“Permitted Liens”
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Section 10.2(h)
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“Person”
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Section 10.2(d)
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“Personal Property”
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Section 2.14(c)
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“Plan/Plans”
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Section 2.11(a)
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“Potential Cash Consideration”
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Section 1.5(b)(iii)
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“Proxy Statement/Prospectus”
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Section 5.1(a)
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“Quartet”
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Heading
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“Quartet Board”
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Recital B
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“Quartet Capital Stock”
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Section 3.3(a)
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“Quartet Certificates”
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Section 1.5(a)(ii)
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“Quartet Common Certificate”
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Section 1.5(a)(i)
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“Quartet Closing Certificate”
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Section 6.2(a)
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“Quartet Common Stock”
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Section 1.5(a)(i)
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“Quartet Contracts”
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Section 3.19(a)
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“Quartet Founding Shareholders”
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Section 1.15(b)
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“Quartet Preferred Stock”
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Section 3.3(a)
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“Quartet Rights”
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Section 1.5(a)(ii)
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“Quartet Rights Certificate”
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Section 1.5(a)(ii)
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“Quartet Schedule”
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Article III Preamble
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“Quartet SEC Reports”
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Section 3.7(a)
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“Quartet Stockholder Approval”
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Section 5.1(a)
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“Quartet Units”
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Section 1.5(a)(iii)
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“Quartet UPOs”
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Section 1.5(a)(iii)
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“Real Property Leases”
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Section 2.14(c)
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“Redomestication Merger”
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Recital A
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“Registered Intellectual Property”
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Section 2.19(a)(iii)
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“Registration Rights Agreement”
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Section 5.8
|
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“Registration Statement”
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Section 5.1(a)
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“Representative”
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Section 1.12
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“Reviewable Document”
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Section 5.5(a)
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“SEC”
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Section 2.20(a)
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“Securities Act”
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Section 1.13(c)(i)
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“Special Meeting”
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Section 5.1(a)
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“Signing Form 8-K
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Section 5.4(a)
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“Signing Press Release”
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Section 5.4(a)
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“Stockholder/Stockholders”
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Heading
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“Subsidiary/Subsidiaries”
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Section 2.2(a)
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“Survival Period”
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Section 7.5(b)
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“Surviving Corp”
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Section 1.1
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“Surviving Pubco”
|
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Section 1.1
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“Tax/Taxes”
|
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Section 2.16(a)
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“Taxable”
|
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Section 2.16(a)
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“Tax Return”
|
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Section 2.16(a)
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“Termination Date”
|
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Section 8.1(b)
|
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“Third Party Claim”
|
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Section 7.3
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“Trademarks”
|
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Section 2.19(a)(i)
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“Transaction Merger”
|
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Recital A
|
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“Trust Fund”
|
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Section 3.25
|
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“Uncertificated Shares”
|
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Section 1.6(a)
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“U.S. GAAP”
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Section 2.7(a)
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“Vessels”
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Section 2.15(a)
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ARTICLE X.
GENERAL PROVISIONS
10.1.
Notices
. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally or by commercial delivery service, or sent via email or telecopy to the parties at the following addresses or telecopy numbers (or at such other address or telecopy numbers for a party as shall be specified by like notice):
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if to Quartet, Holdco or Merger Sub, to:
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Quartet Merger Corp.
777 Third Avenue, 37
th
Floor
New York, New York 10017
Attention: Eric Rosenfeld
Telephone: 212-319-7676
Telecopy: 212-319-0760
E-mail:
erosenfeld@crescendopartners.com
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with a copy to:
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Graubard Miller
405 Lexington Avenue
New York, New York 10174-1901
Attention: David Alan Miller, Esq.
Telephone: 212-818-8880
Telecopy: 212-818-8881
Email:
dmiller@graubard.com
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if to the Company or Stockholder, to:
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Pangaea Logistics Solutions Ltd..
109 Long Wharf, 2
nd
Floor
Newport, RI 02840
Attention: Edward Coll
Telephone: 401 846 7790
Telecopy:
E-mail:
ecoll@phoenixbulkus.com
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with a copy to:
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Cartesian Capital Group
505 Fifth Avenue 15
th
Floor
New York, NY 10017
Attention: Peter Yu Paul Hong
Telephone: 212 461 6363
Telecopy: 212 461 6366
E-mail:
peter.yu@cartesiangroup.com
paul.hong@cartesiangroup.com
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with a copy to:
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Willkie Farr & Gallagher LLP
787 7
th
Avenue
New York, NY 10036
Attention: Kirk A. Radke
Telephone: 212 728 8996
Telecopy: 212 728 9996
E-mail:
kradke@willkie.com
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10.2.
Interpretation
. The definitions of the terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context shall require, any pronoun shall include the corresponding masculine, feminine and neuter forms. When a reference is made in this Agreement to an Exhibit or Schedule, such reference shall be to an Exhibit or Schedule to this Agreement unless otherwise indicated. When a reference is made in this Agreement to Sections or subsections, such reference shall be to a Section or subsection of this Agreement. Unless otherwise indicated the words
“include,” “includes” and “including” when used herein shall be deemed in each case to be followed by the words “without limitation.” The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. When reference is made herein to “the business of” an entity, such reference shall be deemed to include the business of all direct and indirect Subsidiaries of such entity. Reference to the Subsidiaries of an entity shall be deemed to include all direct and indirect Subsidiaries of such entity. For purposes of this Agreement:
(a) the term “
Material Adverse Effect
” when used in connection with an entity means any change, event, or circumstance or effect, individually or when aggregated with other changes, events, circumstances or effects, which has had a material adverse effect on the business, assets (including intangible assets), revenues, financial condition, or results of operations of such entity and its subsidiaries, taken as a whole, it being understood that none of the following alone or in combination shall be deemed, in and of itself, to constitute a Material Adverse Effect: (i) any outbreak or any development, change,
worsening or escalation of hostilities (whether or not armed), acts of war (whether or not declared), sabotage or terrorism, (ii) any act of God, hurricane, tornado, flood, volcano, earthquake or other natural or man-made disaster, (iii) any proposal, enactment or change in interpretation of, or other change in, applicable law, U.S. GAAP (or equivalent accounting practice in any other jurisdiction) or governmental policy or any development or effect of any investigation, audit or review of the Company or any of its Subsidiaries by any Governmental Entity commencing from and after the date hereof, (iv) general conditions in the industries in which the Company or any of its Subsidiaries operate (except to the extent the party suffering such event is affected in a disproportionate manner relative to other companies in the industry in which such party conducts business), (v) the failure, in and of itself, of the Company or any of its Subsidiaries to meet any internal or published
projections, forecasts, estimates or predictions in respect of revenue, earnings or other financial or operating metrics before, on or after the date of this Agreement, or changes in the credit rating of the Company or any of its Subsidiaries (it being
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understood that the underlying facts giving rise or contributing to such failure or change may be taken into account in determining whether there has been a Material Adverse Effect if otherwise contemplated by this definition), (vi) changes attributable to the public announcement or pendency of the transactions contemplated hereby, (vii) changes in general national or regional political, economic or industry-wide conditions (except to the extent the party suffering such event is affected in a disproportionate manner relative to other companies in the industry in which such party conducts business), and (viii) any action taken
or omitted to be taken by the Company or its Subsidiaries at Quartet’s direction or written request (including any action not taken as a result of the failure of Quartet to consent to any action requiring Quartet’s consent) or otherwise required or permitted to be taken or omitted to be taken by this Agreement;
(b) the term “
Legal Requirements
” means any federal, state, local, municipal, foreign or other law, statute, constitution, principle of common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling, requirement or Maritime Guideline issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Entity and all requirements set forth in applicable Company Contracts or Quartet Contracts;
(c) the term “
Maritime Guidelines
” means any United States, international or non-United States (including Bermuda) rule, code of practice, convention, protocol, guideline or similar requirement or restriction concerning or relating to an Owned Vessel, and to which an Owned Vessel is subject and required to comply with, imposed, published or promulgated by any Governmental Entity, the International Maritime Organization, such Owned Vessel’s classification society or the insurer(s) of such Owned Vessel;
(d) the term “
Person
” shall mean any individual, corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, company (including any limited liability company or joint stock company), firm or other enterprise, association, organization, entity or Governmental Entity;
(e) the term “
knowledge
” means actual knowledge or awareness as to a specified fact or event and, with respect to the Company or Quartet of each of the persons listed on
Schedule 10.2(e)
;
(f) the term “
Lien
” means any mortgage, pledge, security interest, encumbrance, lien, restriction or charge of any kind (including, without limitation, any conditional sale or other title retention agreement or lease in the nature thereof, any sale with recourse against the Company or any Affiliate of the Company, or any agreement to give any security interest);
(g) the term “
Affiliate
” means, as applied to any Person, any other Person directly or indirectly controlling, controlled by or under direct or indirect common control with, such Person. For purposes of this definition, “control” (including with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or
otherwise;
(h) the term “
Permitted Liens
” means any and all Liens (a) which result from all statutory or other liens for Taxes or assessments and are not yet due and payable or delinquent or the validity of which is being contested in good faith by appropriate proceedings along with the posting of any security or bond required under applicable Law in connection with such contest, (b) imposed or promulgated by law or any Governmental Entity, (c) arising in connection with any cashiers’, landlords’, workers’, mechanics’, carriers’, repairers’ or other similar lien imposed by law and arising
out of obligations incurred in the ordinary course of business, (d) created as a result of any action taken by Quartet or any of its Affiliates, (e) that are expressly listed as exceptions in insurance policies, (f) listed on
Schedule 10.2(h)
, (g) under any financing mortgages over the Owned Vessels, and including with respect to any asset, (h) covenants, conditions, restrictions, encroachments, Liens, easements, rights of way, licenses, grants, building or use restrictions, exceptions, reservations, limitations or other imperfections of title with respect to such asset which, individually or in the aggregate, does not materially detract from the value of, or materially interfere with the present occupancy or use of, such asset and the continuation of the present occupancy
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or use of such asset, (i) purchase money liens or liens securing rental payments under capital lease arrangements; and (j) which individually or in the aggregate do not materially detract from the value of or materially interfere with the present use of the property subject thereto or affected thereby and would not otherwise have a Material Adverse Effect;
(i) the term “
Business Day
” means a day, other than Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by Applicable Law to close;
(j) the term “
have been made available to Quartet or Quartet’s counsel
” means that the Company or its advisors have either provided the applicable document, data or material to Quartet in electronic format (including by email or by uploading such document, data or material to an electronic data room to which Quartet and its counsel were provided access) or have been willing (and will be willing at any time prior to Closing) to provide such materials in such format to Quartet and its counsel; and
(k) all monetary amounts set forth herein are referenced in United States dollars, unless otherwise noted.
10.3.
Counterparts; Facsimile Signatures
. This Agreement and each other document executed in connection with the transactions contemplated hereby, and the consummation thereof, may be executed in one or more counterparts, all of which shall be considered one and the same document and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party, it being understood that all parties need not sign the same counterpart. Delivery by email or facsimile to counsel for the other party of a counterpart executed by a party shall be deemed to meet
the requirements of the previous sentence.
10.4.
Entire Agreement; Third Party Beneficiaries
. This Agreement and the documents and instruments and other agreements among the parties hereto as contemplated by or referred to herein, including the Exhibits and Schedules hereto (a) constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof, it being understood that the letter of intent between Quartet and the Company dated March 20, 2014 is hereby terminated in its entirety and
shall be of no further force and effect (except to the extent expressly stated to survive the execution of this Agreement and the consummation of the transactions contemplated hereby); and (b) are not intended to confer upon any other person any rights or remedies hereunder (except as specifically provided in this Agreement).
10.5.
Severability
. In the event that any provision of this Agreement, or the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
10.6.
Other Remedies; Specific Performance
. Except as otherwise provided herein, any and all remedies herein expressly conferred upon a party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of any one remedy will not preclude the exercise of any other remedy. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity.
10.7.
No Recourse
. Except as expressly set forth in this Agreement, and other than in the case of fraud or willful and intentional breach of this Agreement or any ancillary agreement hereto, notwithstanding any rights of Quartet at law or in equity, in the event of any default or breach by the Company under this Agreement or any ancillary agreement hereto, Quartet’s remedies shall be restricted to enforcement of its rights against the property and assets of the Company, and no liability whatsoever shall attach to, be imposed
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on or otherwise be incurred by, any former, current or future director, officer, employee, agent, general or limited partner, manager, member, shareholder, stockholder or Affiliate of the Company (other than the Company), any Stockholder, or any former, current or future director, officer, employee, agent, general or limited partner, manager, member, shareholder, stockholder or Affiliate (other than the Company) of any of the foregoing, whether by the enforcement of any assessment or by any legal or equitable proceeding, or by virtue of any statute, regulation or other applicable law, for any obligations or liabilities of the
parties to this Agreement or any ancillary agreement hereto or for any claim based on, in respect of, or by reason of, the transactions contemplated hereby or thereby. Except as expressly set forth in this Agreement or any ancillary agreement, and other than in the case of fraud or willful and intentional breach of this Agreement, notwithstanding any rights of the Company at law or in equity, in the event of any default or breach by Quartet, under this Agreement or any ancillary agreement hereto, the remedies of the Company and the Stockholders shall be restricted to enforcement of its rights against any other property and assets of Quartet, and no liability whatsoever shall attach to, be imposed on or otherwise be, incurred by, any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder or Affiliate of Quartet, (other than Quartet) or any former, current or future director, officer, employee, agent, general or limited
partner, manager, member, stockholder or Affiliate of any of the foregoing (other than Quartet), whether by the enforcement of any assessment or by any legal or equitable proceeding, or by virtue of any statute, regulation or other applicable Law, for any obligations or Liabilities of the parties to this Agreement or for any claim based on, in respect of, or by reason of, the transactions contemplated hereby. Without limiting the generality of the foregoing, each party hereto agrees that it shall, and shall cause its Affiliate to, not file, or threaten to file, any claim, suit, action or proceeding in violation of this Section 10.7. Quartet and the Company will be liable for all attorneys’ fees and court costs arising from a breach of this Section 10.7.
10.8.
Governing Law
. This Agreement shall be governed by and construed in accordance with the law of the State of Delaware regardless of the law that might otherwise govern under applicable principles of conflicts of law thereof.
10.9.
Rules of Construction
. The parties hereto agree that they have been represented by counsel during the negotiation and execution of this Agreement and, therefore, waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document.
10.10.
Assignment
. No party may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the other parties. Subject to the first sentence of this Section 10.10, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.
10.11.
Amendment
. This Agreement may be amended by the parties hereto at any time prior to the Closing Date by execution of an instrument in writing signed on behalf of each of the parties. After the Closing Date, this Agreement may be amended only with the consent of the Representative.
10.12.
Extension; Waiver
. At any time prior to the Closing, any party hereto may, to the extent legally allowed, (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties made to such party contained herein or in any document delivered pursuant hereto and (iii) waive compliance with any of the agreements or conditions for the benefit of such party contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party. Delay in exercising any right under this Agreement shall not constitute a waiver of such right.
10.13.
CONSENT TO JURISDICTION AND SERVICE OF PROCESS
.
EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF ANY FEDERAL OR STATE COURT LOCATED IN THE COUNTY OF NEW YORK OF THE STATE OF NEW YORK OR THE COUNTY OF WILMINGTON OF THE STATE OF DELAWARE IN RESPECT OF ANY ACTION, SUIT OR PROCEEDING ARISING IN CONNECTION WITH THIS AGREEMENT AND THE DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY, AND AGREES THAT ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE BROUGHT ONLY IN SUCH COURT (AND WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS OR
A-57
ANY OTHER OBJECTION TO VENUE THEREIN); PROVIDED, HOWEVER, THAT SUCH CONSENT TO JURISDICTION IS SOLELY FOR PURPOSES OF THIS AGREEMENT OR ANY ANCILLARY AGREEMENT RELATED HERETO, OR ANY TRANSACTION RELATED HERETO (INCLUDING THE MERGERS) OR THERETO.
Each of the parties hereto irrevocably waives, and agrees not to assert, by way of motion, as a defense, counterclaim or otherwise, in any action or proceeding with respect to this Agreement, (i) the defense of sovereign immunity, (ii) any claim that it is not personally subject to the jurisdiction of the above-named courts for any reason, (iii) that it or its property is exempt
or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise), and (iv) to the fullest extent permitted by applicable law that (A) the suit, action or proceeding in any such court is brought in an inconvenient forum, (B) the venue of such suit, action or proceeding is improper and (C) this Agreement, or the subject matter hereof, may not be enforced in or by such courts. Any and all process may be served in any action, suit or proceeding arising in connection with this Agreement by complying with the provisions of Section 10.1. Such service of process shall have the same effect as if the party being served were a resident of the State of New York and had been lawfully served with such process in such jurisdiction. The parties hereby waive all claims of error by reason of such service. Nothing herein shall
affect the right of any party to service process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against the other in any other jurisdiction to enforce judgments or rulings of the aforementioned courts.
10.14.
WAIVER OF JURY TRIAL
.
EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND
THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.14.
10.15.
Currency
. All references to currency amounts in this Agreement shall mean United States dollars.
[The Signature Page is the following page.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above.
QUARTET MERGER CORP.
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By:
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/s/ Eric Rosenfeld
Name: Eric Rosenfeld
Title: Chief Executive Officer
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QUARTET HOLDCO LTD.
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By:
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/s/ Eric Rosenfeld
Name: Eric Rosenfeld
Title: President
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QUARTET MERGER SUB, LTD.
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By:
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/s/ Eric Rosenfeld
Name: Eric Rosenfeld
Title: President
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PANGAEA LOGISTICS SOLUTIONS LTD.
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By:
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/s/ Arthur Jones
Name: Arthur Jones
Title: Authorized Signatory
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SIGNING SECURITYHOLDERS,
for the purposes of Sections 1.11, 1.13, 5.11, 5.12, 5.17 and Articles VII and X:
/s/ Edward Coll
Edward Coll
/s/ Anthony Laura
Anthony Laura
LAGOA INVESTMENTS
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By:
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/s/ Deborah L. Davis
Name: Deborah L. Davis
Title: Director
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PANGAEA ONE, L.P.
By: Pangaea One GP, LLC
Its: General Partner
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By:
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/s/ Peter Yu
Name: Peter Yu
Its: Managing Member
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PANGAEA ONE PARALLEL FUND (B), L.P.
By: Pangaea One GP, LLC
Its: General Partner
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By:
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/s/ Peter Yu
Name: Peter Yu
Its: Managing Member
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PANGAEA ONE (CAYMAN), L.P.
By: Pangaea One GP (Cayman), L.P.
Its: General Partner
By: Pangaea One GP (Cayman), Co.
Its: General Partner
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By:
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/s/ Peter Yu
Name: Peter Yu
Its: Director
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PANGAEA ONE PARALLEL FUND, L.P.
By: Pangaea One GP2 (Cayman), L.P.
Its: General Partner
By: Pangaea One GP2 (Cayman), Co.
Its: General Partner
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By:
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/s/ Peter Yu
Name: Peter Yu
Its: Director
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List of Omitted Schedules
The following is a list of the Schedules to the Merger Agreement, omitted pursuant to Rule 601(b)(2) of Regulation S-K:
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Schedule 1.5(b)(i).
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Allocations of Holdco Stock, Net Income Shares, and Cancellation Shares
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Schedule 1.14(f).
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Allocations of Net Income Share
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Pangaea Disclosure Schedules
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Schedule 2.1.
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Jurisdictions
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Schedule 2.2.
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Subsidiaries
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Schedule 2.3.
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Capitalization
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Schedule 2.5.
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No Conflict; Required Filings and Consents
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Schedule 2.6.
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Compliance
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Schedule 2.8.
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No Undisclosed Liabilities
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Schedule 2.9.
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Absence of Certain Changes
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Schedule 2.10.
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Litigation
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Schedule 2.11.
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Employee Benefits
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Schedule 2.12.
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Labor Matters
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Schedule 2.13.
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Restriction on Business Activities
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Schedule 2.14(a).
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Real Property and Vessels Owned
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Schedule 2.14(b).
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Permitted Liens
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Schedule 2.14(c).
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Real Property Leases
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Schedule 2.15.
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Vessels
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Schedule 2.16.
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Taxes
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Schedule 2.17.
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Environmental Matters
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Schedule 2.19.
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Intellectual Property
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Schedule 2.20.
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Material Company Contracts
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Schedule 2.22(b).
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Governmental Actions/Filings
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Schedule 2.23.
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Interested Party Transaction
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Quartet Disclosure Schedules
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Schedule 3.3(a).
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Capitalization
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Schedule 3.3(b).
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Capitalization
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Schedule 3.3(c).
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Capitalization
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Schedule 3.3(d).
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Capitalization
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Schedule 3.14.
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Title to Property
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Schedule 3.15.
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Taxes
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Schedule 3.17.
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Brokers
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Schedule 3.19.
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Agreements, Contracts and Commitments
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Schedule 3.26.
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Government Filings
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Schedule 4.1.
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Conduct of Business
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Schedule 10.2(e).
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Knowledge
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Schedule 10.2(h).
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Permitted Liens
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Exhibit 3.1
Exhibit 3.2
Exhibit 10.1
ESCROW AGREEMENT
ESCROW AGREEMENT (“Agreement”)
dated October 1, 2014 by and among QUARTET HOLDCO LTD., a Bermuda company (“Holdco”), GREGORY MONAHAN (the “Representative”),
as the representative of the former stockholders of QUARTET MERGER CORP., a Delaware corporation (“Quartet”), EDWARD
COLL, ANTHONY LAURA, LAGOA INVESTMENTS, PANGAEA ONE, L.P., PANGAEA ONE PARALLEL FUND (B), L.P. and PANGAEA ONE PARALLEL FUND, L.P.
(together the “Stockholders”) and CONTINENTAL STOCK TRANSFER & TRUST COMPANY, as escrow agent (the “Escrow
Agent”).
Holdco, Quartet, Quartet
Merger Sub, Ltd., a wholly-owned subsidiary of Holdco (“Merger Sub”), Pangaea Logistics Solutions Ltd. (“Company”)
and the Stockholders as the former securityholders of the Company are the parties to an Agreement and Plan of Reorganization dated
as of April 30, 2014 (the “Merger Agreement”) pursuant to which (i) Quartet has merged with and into Holdco, with Holdco
being the surviving entity of such merger and (ii) Merger Sub has merged with and into the Company, with the Company being the
surviving entity of such merger and remaining a wholly-owned subsidiary of Holdco. Pursuant to the Merger Agreement, Holdco is
to be indemnified in certain respects. The parties desire to establish an escrow fund as the sole remedy for the indemnification
obligations set forth in Article VII of the Merger Agreement. The Stockholders, together with their permitted transferees, are
referred to herein as the “Owners”. Capitalized terms used herein that are not otherwise defined herein shall have
the meanings ascribed to them in the Merger Agreement.
The parties agree as
follows:
1.
(a) Concurrently with the execution hereof, each of the Stockholders (or Holdco, on their behalf) is delivering to the
Escrow Agent, to be held in escrow pursuant to the terms of this Agreement, stock certificates in the amounts set forth in Schedule
A hereto issued in the name of such Stockholder representing a portion of the shares of Holdco Shares issued to such Stockholder
in the Transaction Merger. The Holdco Shares represented by the stock certificates so delivered by the Stockholders to the Escrow
Agent are herein referred to in the aggregate as the “Escrow Fund.” The Escrow Agent shall maintain a separate account
for each Stockholder’s, and, subsequent to any transfer permitted pursuant to Paragraph 1(d) hereof, each Owner’s,
portion of the Escrow Fund.
(a)
The Escrow Agent hereby agrees to act as escrow agent and to hold, safeguard and disburse the Escrow Fund pursuant to the
terms and conditions hereof. It shall treat the Escrow Fund as a trust fund in accordance with the terms of this Agreement and
not as the property of Holdco. The Escrow Agent’s duties hereunder shall terminate upon its distribution of the entire Escrow
Fund in accordance with this Agreement.
(b)
Except as herein provided, the Owners shall retain all of their rights as shareholders of Holdco with respect to shares
of Holdco Stock constituting the Escrow Fund during the period the Escrow Fund is held by the Escrow Agent (the “Escrow Period”),
including, without limitation, the right to vote their shares of Holdco Stock included in the Escrow Fund.
(c)
During the Escrow Period, all dividends payable in cash with respect to the shares of Holdco Stock included in the Escrow
Fund shall be paid to the Owners, but all dividends payable in stock or other non-cash property (“Non-Cash Dividends”)
shall be delivered to the Escrow Agent to hold in accordance with the terms hereof. As used herein, the term “Escrow Fund”
shall be deemed to include the Non-Cash Dividends distributed thereon, if any.
(d)
During the Escrow Period, no sale, transfer or other disposition may be made of any or all of the shares of Holdco Stock
in the Escrow Fund except (i) to a “Permitted Transferee” (as hereinafter defined), (ii) by virtue of the laws of descent
and distribution upon death of any Owner, or (iii) pursuant to a qualified domestic relations order; provided, however, that such
permissive transfers may be implemented only upon the respective transferee’s written agreement to be bound by the terms
and conditions of this Agreement. As used in this Agreement, the term “Permitted Transferee” shall include: (1) members
of a Stockholder’s “Immediate Family” (as hereinafter defined); (2) an entity in which (A) a Stockholder and/or
members of a Stockholder’s Immediate Family beneficially own 100% of such entity’s voting and non-voting equity securities,
or (B) a Stockholder and/or a member of such Stockholder’s Immediate Family is a general partner and in which such Stockholder
and/or members of such Stockholder’s Immediate Family beneficially own 100% of all capital accounts of such entity; (3) a
revocable trust established by a Stockholder during his lifetime for the benefit of such Stockholder or for the exclusive benefit
of all or any of such Stockholder’s Immediate Family; and (4) any Affiliate. As used in this Agreement, the term “Immediate
Family” means, with respect to any Stockholder, a spouse, parent, lineal descendants, the spouse of any lineal descendant,
and brothers and sisters (or a trust, all of whose current beneficiaries are members of an Immediate Family of the Stockholder).
As used in this Agreement, “Affiliate” means, as applied to any Person, any other Person directly or indirectly controlling,
controlled by or under direct or indirect common control with, such Person. For purposes of this definition, “control”
(including with correlative meanings, the terms “controlling,” “controlled by” and “under common
control with”), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.
As used in this Agreement, “Person” means any individual, corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint venture, estate, trust, company (including any limited liability
company or joint stock company), firm or other enterprise, association, organization, entity or governmental entity. In connection
with and as a condition to each permitted transfer, the Permitted Transferee shall agree in writing to be bound by the terms and
conditions of this Agreement. Upon receipt of such agreement, the Escrow Agent shall deliver to Holdco’s transfer agent the
original stock certificate out of which the assigned shares are to be transferred, and shall request that Holdco issue new certificates
representing (m) the number of shares, if any, that continue to be owned by the transferring Stockholder, and (n) the number of
shares owned by the Permitted Transferee as the result of such transfer. Holdco, the transferring Stockholder and the Permitted
Transferee shall cooperate in all respects with the Escrow Agent in documenting each such transfer and in effectuating the result
intended to be accomplished thereby. During the Escrow Period, no Owner shall pledge or grant a security interest in such Owner’s
shares of Holdco Stock included in the Escrow Fund or grant a security interest in such Owner’s rights under this Agreement.
2.
(a) Holdco, acting through the Representative, may make a claim for indemnification pursuant to the Merger Agreement
(“Indemnification Claim”) against the Escrow Fund by giving notice (a “Notice”) to the Stockholder Nominee
(defined below), with a copy to the Escrow Agent, specifying (i) the covenant, representation, warranty, agreement, undertaking
or obligation contained in the Merger Agreement which it asserts has been breached or otherwise entitles Holdco to indemnification,
(ii) in reasonable detail, the nature and dollar amount of any Indemnification Claim, (iii) whether the Indemnification Claim is
a Basic Indemnification Claim or an Environmental Indemnification Claim, and (iv) whether the Indemnification Claim results from
a Third Party Claim against Holdco or the Company. The Representative also shall deliver to the Escrow Agent (with a copy to the
Stockholder Nominee), concurrently with its delivery to the Escrow Agent of the Notice, a certification as to the date on which
the Notice was delivered to the Stockholders. As used herein, “Basic Indemnification Claim” means an Indemnification
Claim other than an Environmental Indemnification Claim.
(b)
If the Stockholder Nominee shall give a notice to the Representative (with a copy to the Escrow Agent and Holdco) (a “Counter
Notice”), within 30 days following the date of receipt (as specified in the Representative’s certification) by the
Stockholder Nominee of a copy of the Notice, disputing whether the Indemnification Claim is indemnifiable under the Merger Agreement,
the Representative and Stockholder Nominee shall attempt to resolve such dispute by voluntary settlement as provided in paragraph
2(c) below. If no Counter Notice with respect to an Indemnification Claim is received by the Escrow Agent from the Stockholder
Nominee within such 30-day period, the Indemnification Claim shall be deemed to be an Established Claim (as hereinafter defined)
for purposes of this Agreement.
(c)
If the Stockholder Nominee delivers a Counter Notice to the Representative and the Escrow Agent, the Representative and
Stockholder Nominee shall, during the period of 60 days following the delivery of such Counter Notice or such greater period of
time as the parties may agree to in writing (with a copy to the Escrow Agent), attempt to resolve the dispute with respect to which
the Counter Notice was given. If the Representative and Stockholder Nominee shall reach a settlement with respect to any such dispute,
they shall jointly deliver written notice of such settlement to the Escrow Agent specifying the terms thereof. If the Representative
and Stockholder Nominee shall be unable to reach a settlement with respect to a dispute, such dispute shall be resolved by arbitration
pursuant to paragraph 2(d) below.
(d)
If the Representative and Stockholder Nominee cannot resolve a dispute prior to expiration of the 60-day period referred
to in paragraph 2(c) above (or such longer period as the parties may have agreed to in writing), then such dispute shall be submitted
(and either party may submit such dispute) for arbitration in accordance with Section 8.
(e)
As used in this Agreement, “Established Claim” means any (i) Indemnification Claim deemed established pursuant
to the last sentence of paragraph 2(b) above, (ii) Indemnification Claim resolved in favor of Holdco by settlement pursuant to
paragraph 2(c) above, resulting in an award to Holdco, (iii) Indemnification Claim established by the decision of an arbitrator
pursuant to paragraph 2(d) above, resulting in a dollar award to Holdco, (iv) Third Party Claim that has been sustained by a final
determination (after exhaustion of any appeals) of a court of competent jurisdiction, or (v) Third Party Claim that the Representative
and Stockholder Nominee have jointly notified the Escrow Agent has been settled in accordance with the provisions of the Merger
Agreement; provided that, subject to the terms of the Merger Agreement, notwithstanding anything herein, no Indemnification Claim
by Holdco shall become an Established Claim unless and until the aggregate amount of indemnification Losses exceeds (i) $2,000,000
(the “
Deductible
”), in which event only the amount of such Established Claim(s) in excess of the Deductible
shall be payable. The aggregate liability for Losses shall not in any event exceed the Escrow Shares in the case of Basic Indemnity
Claims or the Environmental Indemnity Shares in the case of Environmental Indemnity Claims.
(f)
(i) Promptly after an Indemnification Claim becomes an Established Claim, the Representative and Stockholder Nominee
shall jointly deliver a notice to the Escrow Agent (a “Joint Notice”) directing the Escrow Agent to pay to Holdco,
and the Escrow Agent promptly shall deliver Escrow Shares to Holdco, the dollar amount of which shall equal the Loss (as defined
in the Merger Agreement) resulting from the Established Claim (or, if at such time there remains in the Escrow Fund less than the
full amount so payable, the full amount remaining in the Escrow Fund).
(ii)
Payment of an Established Claim shall be made from Escrow Shares pro rata from the account maintained on behalf of each
Owner. For purposes of each payment, such shares shall be valued at the “Fair Market Value” (as defined below). However,
in no event shall the Escrow Agent be required to calculate Fair Market Value or make a determination of the number of shares to
be delivered to Holdco in satisfaction of any Established Claim; rather, such calculation shall be included in and made part of
the Joint Notice. The Escrow Agent shall transfer to Holdco out of the Escrow Fund that number of shares of Holdco Stock necessary
to satisfy each Established Claim, as set out in the Joint Notice. Any dispute between the Representative and Stockholder Nominee
concerning the calculation of Fair Market Value or the number of shares necessary to satisfy any Established Claim, or any other
dispute regarding a Joint Notice, shall be resolved between the Representative and Stockholder Nominee in accordance with the procedures
specified in paragraph 2(d) above, and shall not involve the Escrow Agent. Each transfer of shares in satisfaction of an Established
Claim shall be made by the Escrow Agent delivering to Holdco one or more stock certificates held in each Owner’s account
evidencing not less than such Owner’s pro rata portion of the aggregate number of shares specified in the Joint Notice, together
with assignments separate from certificate executed in blank by such Owner and completed by the Escrow Agent in accordance with
instructions included in the Joint Notice. Upon receipt of the stock certificates and assignments, Holdco shall deliver to the
Escrow Agent new certificates representing the number of shares owned by each Owner after such payment. The parties hereto (other
than the Escrow Agent) agree that the foregoing right to make payments of Established Claims in shares of Holdco Stock may be made
notwithstanding any other agreements restricting or limiting the ability of any Owner to sell any shares of Holdco stock or otherwise.
The Representative and Stockholder Nominee shall be required to exercise utmost good faith in all matters relating to the preparation
and delivery of each Joint Notice. As used herein, “Fair Market Value” means the average reported closing price for
the Holdco Stock for the ten trading days ending on the last trading day prior to (x) the day the Established Claim is paid with
respect to Indemnification Claims paid on or before the Basic Indemnity Escrow Termination Date, (y) the Basic Indemnity Escrow
Termination Date with respect to shares constituting the Pending Claims Reserve (as hereinafter defined) on the Basic Indemnity
Escrow Termination Date, and (z) with respect to shares placed in the Pending Claims Reserve for an Environmental Indemnification
Claim asserted after the Basic Indemnity Escrow Termination Date, the day such Environmental Indemnification Claim is asserted.
If Holdco Stock is not then listed or admitted to trading on any national securities exchange, the “Fair Market Value”
means the average of the reported closing bid and asked prices of Holdco Stock on such date on the principal over the counter market
on which Holdco Stock is traded, and if Holdco Stock is not so traded, a market price per share determined in good faith by the
Holdco Board of Directors.
(iii)
Notwithstanding anything herein to the contrary, at such time as an Indemnification Claim has become an Established Claim,
the Stockholders shall have the right to substitute for the Escrow Shares that otherwise would be paid in satisfaction of such
claim (the “Claim Shares”), cash in an amount equal to the Fair Market Value of the Claim Shares (“Substituted
Cash”). In such event (i) the Joint Notice shall include a statement describing the substitution of Substituted Cash for
the Claim Shares, and (ii) substantially contemporaneously with the delivery of such Joint Notice, the Stockholders shall cause
currently available funds to be delivered to the Escrow Agent in an amount equal to the Substituted Cash. Upon receipt of such
Joint Notice and Substituted Cash, the Escrow Agent shall (y) in payment of the Established Claim described in the Joint Notice,
deliver the Substituted Cash to Holdco in lieu of the Claim Shares, and (z) cause the Claim Shares to be returned to the Owners.
3.
(a) On the first Business Day after the Basic Indemnity Escrow Termination Date, upon receipt of a Joint Notice, the
Escrow Agent shall distribute and deliver to each Owner certificates representing shares of Holdco Stock then in such Owner’s
account in the Escrow Fund equal to one-half of the original number of shares placed in such Owner’s account less that number
of shares in such Owner’s account equal to the sum of (i) the number of shares applied in satisfaction of Indemnification
Claims made prior to that date and (ii) the number of shares in the Pending Claims Reserve allocated to such Owner’s account,
as provided in the following sentence, and shall continue to hold the remaining shares in such Owner’s account as Environmental
Indemnity Shares. If, at such time, there are any Indemnification Claims with respect to which Notices have been received but which
have not been resolved pursuant to Section 2 hereof or in respect of which the Escrow Agent has not been notified of, and received
a copy of, a final determination (after exhaustion of any appeals) by a court of competent jurisdiction, as the case may be (in
either case, “Pending Claims”), and which, if resolved or finally determined in favor of Holdco, would result in a
payment to Holdco, the Escrow Agent shall retain in the Pending Claims Reserve that number of shares of Holdco Stock having a Fair
Market Value equal to the dollar amount for which indemnification is sought in such Indemnification Claim, allocated pro rata from
the account maintained on behalf of each Owner. The Representative and Stockholder Nominee shall certify to the Escrow Agent the
Fair Market Value to be used in calculating the Pending Claims Reserve and the number of shares of Holdco Stock to be retained
therefor. Thereafter, if any Pending Claim becomes an Established Claim, the Representative and Stockholder Nominee shall deliver
to the Escrow Agent a Joint Notice directing the Escrow Agent to deliver to Holdco the number of shares in the Pending Claims Reserve
in respect thereof determined in accordance with paragraph 2(f) above and to deliver to each Owner the remaining shares in the
Pending Claims Reserve allocated to such Pending Claim, all as specified in a Joint Notice. If any Pending Claim is resolved against
Holdco, the Representative and Stockholder Nominee shall deliver to the Escrow Agent a Joint Notice directing the Escrow Agent
to pay to each Owner its pro rata portion of the number of shares allocated to such Pending Claim in the Pending Claims Reserve.
(b)
On the first Business Day after the Environmental Escrow Termination Date, upon receipt of a Joint Notice, the Escrow Agent
shall distribute and deliver to each Owner certificates representing the remaining shares of Holdco Stock then in such Owner’s
account in the Escrow Fund other than Environmental Indemnity Shares in the Pending Claims Reserve. Upon the subsequent resolution
of a Claim for which shares remain in the Pending Claims Reserve, upon receipt of a Joint Notice, the Escrow Agent shall distribute
and deliver such shares to Holdco, if the Claim is resolved in favor of Holdco, or to the Owners pro rata to the accounts maintained
for them, if the Claim is resolved against Holdco. Upon resolution of all Pending Claims, the Representative and Stockholder Nominee
shall deliver to the Escrow Agent a Joint Notice directing the Escrow Agent to pay to each Owner the remaining portion of his or
her account in the Escrow Fund.
(c)
As used herein, the “Pending Claims Reserve” shall mean, at the time any such determination is made, that number
of shares of Holdco Stock in the Escrow Fund having a Fair Market Value equal to the sum of the aggregate dollar amounts claimed
to be due with respect to all Pending Claims (as shown in the Notices of such Claims).
4.
The Escrow Agent, the Representative and Stockholder Nominee shall cooperate in all respects with one another in the calculation
of any amounts determined to be payable to Holdco and the Owners in accordance with this Agreement and in implementing the procedures
necessary to effect such payments.
5.
(a) The Escrow Agent undertakes to perform only such duties as are expressly set forth herein. It is understood that
the Escrow Agent is not a trustee or fiduciary and is acting hereunder merely in a ministerial capacity.
(b)
The Escrow Agent shall not be liable for any action taken or omitted by it in good faith and in the exercise of its own
best judgment, and may rely conclusively and shall be protected in acting upon any order, notice, demand, certificate, opinion
or advice of counsel (including counsel chosen by the Escrow Agent), statement, instrument, report or other paper or document (not
only as to its due execution and the validity and effectiveness of its provisions, but also as to the truth and acceptability of
any information therein contained) which is believed by the Escrow Agent to be genuine and to be signed or presented by the proper
person or persons. The Escrow Agent shall not be bound by any notice or demand, or any waiver, modification, termination or rescission
of this Agreement unless evidenced by a writing delivered to the Escrow Agent signed by the proper party or parties and, if the
duties or rights of the Escrow Agent are affected, unless it shall have given its prior written consent thereto.
(c)
The Escrow Agent’s sole responsibility upon receipt of any notice requiring any payment to Holdco pursuant to the
terms of this Agreement or, if such notice is disputed by the Representative or Stockholder Nominee, the settlement with respect
to any such dispute, whether by virtue of joint resolution, arbitration or determination of a court of competent jurisdiction,
is to pay to Holdco the amount specified in such notice, and the Escrow Agent shall have no duty to determine the validity, authenticity
or enforceability of any specification or certification made in such notice.
(d)
The Escrow Agent shall not be liable for any action taken by it in good faith and believed by it to be authorized or within
the rights or powers conferred upon it by this Agreement, and may consult with counsel of its own choice and shall have full and
complete authorization and indemnification under Section 5(g), below, for any action taken or suffered by it hereunder in good
faith and in accordance with the opinion of such counsel.
(e)
The Escrow Agent may resign at any time and be discharged from its duties as escrow agent hereunder by its giving the other
parties hereto written notice and such resignation shall become effective as hereinafter provided. Such resignation shall become
effective at such time that the Escrow Agent shall turn over the Escrow Fund to a successor escrow agent appointed jointly by the
Representative and Stockholder Nominee. If no new escrow agent is so appointed within the 60 day period following the giving of
such notice of resignation, the Escrow Agent may deposit the Escrow Fund with any court it reasonably deems appropriate. the Escrow
Agent shall resign and be discharged from its duties as escrow agent hereunder if so requested in writing at any time by the other
parties hereto, jointly, provided, however, that such resignation shall become effective only upon acceptance of appointment by
a successor escrow agent as provided in this Section 5(e).
(f)
The Escrow Agent shall be indemnified and held harmless by Holdco from and against any expenses, including counsel fees
and disbursements, or loss suffered by the Escrow Agent in connection with any action, suit or other proceeding involving any claim
which in any way, directly or indirectly, arises out of or relates to this Agreement, the services of the Escrow Agent hereunder,
or the Escrow Fund held by it hereunder, other than expenses or losses arising from the gross negligence or willful misconduct
of the Escrow Agent. Promptly after the receipt by the Escrow Agent of notice of any demand or claim or the commencement of any
action, suit or proceeding, the Escrow Agent shall notify the other parties hereto in writing. In the event of the receipt of such
notice, the Escrow Agent, in its sole discretion, may commence an action in the nature of interpleader in the any state or federal
court located in New York County, State of New York.
(g)
The Escrow Agent shall be entitled to reasonable compensation from Holdco for all services rendered by it hereunder. The
Escrow Agent shall also be entitled to reimbursement from Holdco for all expenses paid or incurred by it in the administration
of its duties hereunder including, but not limited to, all counsel, advisors’ and agents’ fees and disbursements and
all taxes or other governmental charges.
(h)
From time to time on and after the date hereof, the Representative and Stockholder Nominee shall deliver or cause to be
delivered to the Escrow Agent such further documents and instruments and shall do or cause to be done such further acts as the
Escrow Agent shall reasonably request to carry out more effectively the provisions and purposes of this Agreement, to evidence
compliance herewith or to assure itself that it is protected in acting hereunder.
(i)
Notwithstanding anything herein to the contrary, the Escrow Agent shall not be relieved from liability hereunder for its
own gross negligence or its own willful misconduct.
6.
This Agreement expressly sets forth all the duties of the Escrow Agent with respect to any and all matters pertinent hereto.
No implied duties or obligations shall be read into this Agreement against the Escrow Agent. The Escrow Agent shall not be bound
by the provisions of any agreement among the parties hereto except this Agreement and shall have no duty to inquire into the terms
and conditions of any agreement made or entered into in connection with this Agreement, including, without limitation, the Merger
Agreement.
7.
This Agreement shall inure to the benefit of and be binding upon the parties and their respective heirs, successors, assigns
and legal representatives shall be governed by and construed in accordance with the law of New York applicable to contracts made
and to be performed therein. This Agreement cannot be changed or terminated except by a writing signed by the Representative, the
Escrow Agent and a majority of the Stockholders.
8.
All disputes arising under this Agreement between the Representative and Stockholder Nominee, including a dispute arising
from a party’s failure or refusal to sign a Joint Notice, shall be submitted to arbitration to the American Arbitration Association
in New York City. The Representative and Stockholders each hereby consents to the exclusive jurisdiction of the federal and state
courts sitting in New York County, State of New York, with respect to any claim or controversy arising out of this Agreement. Service
of process in any action or proceeding brought against the Representative or Stockholders in respect of any such claim or controversy
may be made upon it by registered mail, postage prepaid, return receipt requested, at the address specified in Section 10, with
copies delivered by nationally recognized overnight carrier to Graubard Miller, The Chrysler Building, 405 Lexington Avenue, New
York, N.Y. 10174, Attention: David Alan Miller, Esq., and to Willkie Farr & Gallagher LLP, 787 7th Avenue, New York, NY 10036,
Attention: Kirk A. Radke, Esq.
9.
The Stockholders hereby appoint Edward Coll to act on their behalf (the “Stockholder Nominee”) to take any and
all actions and make any decisions required or permitted to be taken by such Stockholders under this Agreement. Should the Stockholder
Nominee resign or be unable to serve, a new Stockholder Nominee will be selected by a majority of the Stockholders, whose appointment
shall be effective upon execution by such successor of a joinder agreement providing for such successor to become a party to the
Escrow Agreement as the Stockholder Nominee, in which case such successor shall for all purposes of this Agreement be the Stockholder
Nominee (and the prior acts taken by the succeeded Stockholder Nominee shall remain valid for purposes of this Agreement). The
Stockholder Nominee shall not be liable to the Stockholders for any liability, loss, damage, penalty, fine, cost or expense incurred
without gross negligence or willful misconduct by the Stockholder Nominee while acting in good faith and arising out of or in connection
with the acceptance or administration of its duties hereunder.
10.
All notices and other communications under this Agreement shall be in writing and shall be deemed given if given by hand
or delivered by nationally recognized overnight carrier, or if given by telecopier and confirmed by mail (registered or certified
mail, postage prepaid, return receipt requested), to the respective parties as follows:
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A.
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If to the Representative, to it at:
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Gregory Monahan
c/o Crescendo Advisors II LLC
777 Third Avenue, 37th Floor
New York, New York 10017
Telecopier No.: 212-319-0760
with a copy to:
Graubard Miller
The Chrysler Building
405 Lexington Avenue
New York, New York 10174-1901
Attention: David Alan Miller, Esq.
Telecopier No.: 212-818-8881
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B.
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If to the Stockholders, to each at the address listed on Schedule A hereto
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with a copy to:
Edward Coll
c/o Quartet Holdco Ltd.
109 Long Wharf
Newport, RI 02840
Telecopier No.:
with a copy to:
Willkie Farr & Gallagher LLP
757 Seventh Avenue
New York, New York 10019
Attention: Kirk A. Radke, Esq.
Telecopier No.: 212-728-9210
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C.
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If to the Stockholder Nominee, to it at:
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Edward Coll
c/o Quartet Holdco Ltd.
109 Long Wharf
Newport, RI 02840
E-mail: ecoll@phoenixbulkus.com
with a copy to:
Cartesian Capital Group
505 Fifth Avenue, 15
th
Floor
New York, NY 10017
Attention: Peter Yu
Paul Hong
Telecopy: 212 461 6366
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D.
|
If to the Escrow Agent, to it at:
|
Continental Stock Transfer & Trust
Company
17 Battery Place
New York, New York 10004
Attention: Mark Zimkind
Telecopier No.: 212-509-5150
or to such other person or address as any
of the parties hereto shall specify by notice in writing to all the other parties hereto.
11.
(a) If this Agreement requires a party to deliver any notice or other document, and such party refuses to do so, the
matter shall be submitted to arbitration pursuant to paragraph 2(d) of this Agreement.
(b)
All notices delivered to the Escrow Agent shall refer to the provision of this Agreement under which such notice is being
delivered and, if applicable, shall clearly specify the aggregate dollar amount due and payable to Holdco.
(c)
This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original instrument
and all of which together shall constitute a single agreement.
[Signatures are on following page]
IN WITNESS WHEREOF,
each of the parties hereto has duly executed this Agreement on the date first above written.
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QUARTET HOLDCO LTD.
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By:
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/s/ David D. Sgro
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Name:
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David D. Sgro
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Title:
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CFO
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THE REPRESENTATIVE
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/s/ Gregory Monahan
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Gregory Monahan
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STOCKHOLDERS
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/s/ Edward Coll
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Edward Coll
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/s/ Anthony Laura
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Anthony Laura
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LAGOA INVESTMENTS
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By:
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/s/ Deborah L. Davis
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Name:
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Deborah L. Davis
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Title:
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Director
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[Signature Page – Escrow Agreement]
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PANGAEA ONE, L.P.
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By:
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Pangaea One GP, LLC
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Its:
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General Partner
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By:
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/s/ Peter Yu
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Name:
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Peter Yu
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Its:
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Managing Member
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PANGAEA ONE PARALLEL FUND (B), L.P.
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By:
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Pangaea One GP, LLC
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Its:
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General Partner
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By:
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/s/ Peter Yu
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Name:
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Peter Yu
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Its:
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Managing Member
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PANGAEA ONE (CAYMAN), L.P.
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By:
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Pangaea One GP (Cayman), L.P.
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Its:
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General Partner
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By:
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Pangaea One GP (Cayman), Co.
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Its:
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General Partner
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By:
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/s/ Peter Yu
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Name:
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Peter Yu
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Its:
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Director
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PANGAEA ONE PARALLEL FUND, L.P.
|
|
|
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By:
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Pangaea One GP2 (Cayman), L.P.
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Its:
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General Partner
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|
|
|
|
|
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By:
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Pangaea One GP2 (Cayman), Co.
|
|
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Its:
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General Partner
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|
|
|
|
|
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By:
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/s/ Peter Yu
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Name:
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Peter Yu
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Its:
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Director
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[Signature Page – Escrow Agreement]
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ESCROW AGENT
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CONTINENTAL STOCK TRANSFER & TRUST COMPANY
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|
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By:
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/s/ Mark Zimkind
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Name:
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Mark Zimkind
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Title:
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Vice President and Director of Shareholder Services
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[Signature Page – Escrow Agreement]
Schedule A
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Name and Address of Stockholder
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No. of Shares in Escrow
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Edward Coll
c/o Quartet Holdco Ltd.
109 Long Wharf
Newport, RI 02840
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263,230
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Anthony Laura
2420 NW 53
rd
St.
Boca Raton, FL 33496
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82,170
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|
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Lagoa Investments
3rd Floor, Par la Ville Place
14 Par la Ville Road, Hamilton HM08, Bermuda
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263,230
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|
|
|
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Pangaea One, L.P.
c/o Cartesian Capital Group
505 Fifth Avenue, 15
th
Floor
New York, NY 10017
|
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211,310
|
|
|
|
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Pangaea One Parallel Fund (B), L.P.
c/o Cartesian Capital Group
505 Fifth Avenue, 15
th
Floor
New York, NY 10017
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54,890
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|
|
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Pangaea One (Cayman), L.P.
c/o Cartesian Capital Group
505 Fifth Avenue, 15
th
Floor
New York, NY 10017
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116,380
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|
|
|
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Pangaea One Parallel Fund, L.P.
c/o Cartesian Capital Group
505 Fifth Avenue, 15
th
Floor
New York, NY 10017
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108,790
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|
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Total
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1,100,00
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Exhibit 10.2
REGISTRATION RIGHTS AGREEMENT
among
Quartet
Holdco Ltd.
and
certain holders identified herein
Dated: October 1, 2014
TABLE OF CONTENTS
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Page
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1.
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Definitions and Interpretation
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1
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2.
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General; Securities Subject to this Agreement
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6
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3.
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Demand Registration
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7
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4.
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Incidental or “Piggy-Back” Registration
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10
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5.
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Shelf Registration
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11
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6.
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Lock-up Agreements
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13
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7.
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Registration Procedures
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14
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8.
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Indemnification; Contribution
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22
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9.
|
Miscellaneous
|
24
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REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS
AGREEMENT (this “
Agreement
”) is entered into as of the 1st day of October, 2014, by and among Quartet Holdco
Ltd., a Bermuda company (the “
Company
”), and each of the persons or entities listed under the caption “Stockholders”
on the signature page hereof (each a “
Stockholder
” and collectively the “
Stockholders
”).
Capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to such terms in Section 1.
R E C I T A L S
:
WHEREAS, the Stockholders
and the Company desire to enter into this Agreement to provide the Stockholders with certain rights relating to the registration
of shares issued to Stockholders and that may be issued to Stockholders pursuant to that certain Agreement and Plan of Reorganization,
dated as of April 30, 2014, by and among Quartet Merger Corp., a Delaware corporation (“
Quartet
”), the Company,
Quartet Merger Sub, Ltd., a Bermuda company, Pangaea Logistics Solutions Ltd., a Bermuda company (“
Pangaea Logistics
”),
and the Stockholders (the “
Merger Agreement
”);
WHEREAS, at the effective
time of the Mergers, among other things, the Stockholders shall receive shares of Common Stock in exchange for the shares of preferred
and common stock of Pangaea Logistics formerly held by them; and
WHEREAS, the Company
and the Stockholders desire to enter into this Agreement to provide the Stockholders with certain rights relating to the registration
of shares of Common Stock to be received by them, whether pursuant to the Mergers or otherwise, and any other securities that fall
within the definition of “Registrable Securities” hereunder;
NOW, THEREFORE, in consideration
of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the parties hereto agree as follows:
1.
Definitions and Interpretation
.
(a)
Certain Definitions
. As used in this Agreement, and unless the context requires a different meaning, the following
terms have the meanings indicated:
“
Agreement
”
means this Agreement, as the same may be amended, supplemented or modified from time to time in accordance to the terms hereof.
“
Affiliate
”
means any Person who is an “affiliate” as defined in Rule 12b-2 promulgated under the Exchange Act.
“
Approved Underwriter
”
has the meaning set forth in Section 3(f).
“
Automatic Shelf
Registration Statement
” means an “automatic shelf registration statement” as defined in Rule 405 promulgated
under the Securities Act.
“
Board of Directors
”
means the board of directors of the Company.
“
Pangaea Logistics
”
has the meaning set forth in the Recitals.
“
Business Day
”
means any day other than a Saturday, Sunday or other day on which commercial banks in the State of New York are authorized or required
by law or executive order to close.
“CCG
Holders” means
Pangaea One, L.P., Pangaea
One Parallel Fund (B), L.P., Pangaea One (Cayman), L.P., and Pangaea One Parallel Fund, L.P.
“
Closing Price
”
means, with respect to the Registrable Securities, as of the date of determination, (i) if the Registrable Securities are
listed on a national securities exchange, the closing price per share of a Registrable Security officially reported on the principal
national securities exchange on which the Registrable Securities are then listed or admitted to trading; or (ii) if the Registrable
Securities are not then listed or admitted to trading on any national securities exchange, the average of the reported closing
bid and asked prices of the Registrable Securities on such date on the principal over the counter market on which the Registrable
Securities are traded; or (iii) if neither of clause (i) or (ii) is applicable, a market price per share determined in
good faith by the disinterested members of the Board of Directors or, if such determination is not satisfactory to the Holder for
whom such determination is being made, by a nationally recognized investment banking firm mutually selected by the Company and
such Holder, the expenses for which shall be borne equally by the Company and such Holder. If trading is conducted on a continuous
basis on any exchange, then the closing price shall be at 4:00 P.M. New York City time.
“
Commission
”
means the Securities and Exchange Commission.
“
Common Stock
”
means the common stock, par value $0.0001 per share, of the Company or any other capital stock of the Company (or any successor
entity) into which such stock is reclassified or reconstituted and any other common stock of the Company (or any successor entity).
“
Company
”
has the meaning set forth in the Preamble.
“
Company Underwriter
”
has the meaning set forth in Section 4(a).
“
Contemporaneous
Company Offering
” has the meaning set forth in Section 5(b).
“
Demand Registration
”
has the meaning set forth in Section 3(a).
“
Determination
Date
” has the meaning set forth in Section 5(f).
“
Disclosure
Package
” means, with respect to any offering of securities, (i) the preliminary Prospectus, (ii) each Free
Writing Prospectus and (iii) all other information, in each case, that is deemed, under Rule 159 promulgated under the Securities
Act, to have been conveyed to purchasers of securities at the time of sale of such securities (including a contract of sale).
“
Exchange Act
”
means the Securities Exchange Act of 1934 and the rules and regulations of the Commission promulgated thereunder.
“
FINRA
”
means the Financial Industry Regulatory Authority.
“
Free Writing
Prospectus
” means any “free writing prospectus” as defined in Rule 405 promulgated under the Securities Act.
“
Hedging Counterparty
”
means a broker-dealer registered under Section 15(b) of the Exchange Act or an Affiliate thereof.
“
Hedging Transaction
”
means any transaction involving a security linked to the Registrable Class Securities or any security that would be deemed to be
a “derivative security” (as defined in Rule 16a-1(c) promulgated under the Exchange Act) with respect to the Registrable
Class Securities or transaction (even if not a security) which would (where it a security) be considered such a derivative security,
or which transfers some or all of the economic risk of ownership of the Registrable Class Securities, including any forward contract,
equity swap, put or call, put or call equivalent position, collar, non-recourse loan, sale of exchangeable security or similar
transaction. For the avoidance of doubt, the following transactions shall be deemed to be Hedging Transactions:
(i)
transactions by a Holder in which a Hedging Counterparty engages in short sales of Registrable Class Securities pursuant
to a Prospectus and may use Registrable Securities to close out its short position;
(ii)
transactions pursuant to which a Holder sells short Registrable Class Securities pursuant to a Prospectus and delivers Registrable
Securities to close out its short position;
(iii)
transactions by a Holder in which the Holder delivers, in a transaction exempt from registration under the Securities Act,
Registrable Securities to the Hedging Counterparty who will then publicly resell or otherwise transfer such Registrable Securities
pursuant to a Prospectus or an exemption from registration under the Securities Act; and
(iv)
a loan or pledge of Registrable Securities to a Hedging Counterparty who may then become a selling stockholder and sell
the loaned shares or, in an event of default in the case of a pledge, sell the pledged shares, in each case, in a public transaction
pursuant to a Prospectus.
“
Holder
”
means the Stockholders and any Permitted Transferee thereof to whom Registrable Securities are transferred in accordance with Section 9(g)
other than a transferee to whom Registrable Securities have been transferred pursuant to a Registration Statement under the Securities
Act or Rule 144 or Regulation S promulgated under the Securities Act.
“
Holder Free
Writing Prospectus
” means each Free Writing Prospectus prepared by or on behalf of the relevant Holder or used or referred
to by such Holder in connection with the offering of Registrable Securities.
“
Holders’
Counsel
” has the meaning set forth in Section 7(a)(i).
“
Incidental
Registration
” has the meaning set forth in Section 4(a).
“
Indemnified
Party
” has the meaning set forth in Section 8(c).
“
Indemnifying
Party
” has the meaning set forth in Section 8(c).
“
Initiating
CCG Holder
” has the meaning set forth in Section 3(a).
“
Initiating
Holder
” has the meaning set forth in Section 3(a).
“
Initiating
Management Holder
” has the meaning set forth in Section 3(a).
“
Inspectors
”
has the meaning set forth in Section 7(a)(viii).
“
Liability
”
has the meaning set forth in Section 8(a).
“
Lock-up Agreements
”
has the meaning set forth in Section 6(a).
“
Long-Form Registration
”
has the meaning set forth in Section 3(a).
“
Management
Holders” means
Edward Coll, Anthony Laura,
and Lagoa Investments.
“
Market Price
”
means, on any date of determination, the average of the daily Closing Price of the Registrable Securities for the immediately preceding
30 days on which the national securities exchanges are open for trading.
“
Mergers
”
has the meaning set forth in the Merger Agreement.
“
Merger Agreement
”
has the meaning set forth in Recitals.
“
Merger Lock-Up
Agreement
” means that certain Lock-Up Agreement dated as of the date hereof, as may be amended, among Quartet, the Company
and each Stockholder, a form of which is attached as Exhibit B to the Merger Agreement.
“
Permitted Transferee
”
means any Person to whom a Holder is permitted to transfer Common Stock according to the terms and conditions the Merger Lock-Up
Agreement.
“
Person
”
means any individual, firm, corporation, partnership, limited liability company, trust, incorporated or unincorporated association,
joint venture, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind, and
shall include any successor (by merger or otherwise) of such entity.
“
Prospectus
”
means any “prospectus” as defined in Rule 405 promulgated under the Securities Act, including any amendment or supplement
thereto.
“
Records
”
has the meaning set forth in Section 7(a)(viii).
“
Registrable
Class Securities
” means the Registrable Securities and any other securities of the Company that are of the same class
as the relevant Registrable Securities.
“
Registrable
Securities
” means each of the following: (i) any and all shares of Common Stock owned after the date hereof by the
Holders (irrespective of when acquired) and any shares of Common Stock issuable or issued upon exercise, conversion or exchange
of other securities of the Company; and (ii) any securities of the Company issued in respect of the shares of Common Stock
issued or issuable to any of the Holders with respect to the Registrable Securities by way of stock dividend or stock split or
in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise and any
shares of Common Stock issuable upon conversion, exercise or exchange thereof.
“
Registration
Expenses
” has the meaning set forth in Section 7(d).
“
Registration
Statement
” means a registration statement filed pursuant to the Securities Act, including an Automatic Shelf Registration
Statement.
“
Requested Shelf
Registered Securities
” has the meaning set forth in Section 5(b).
“
Seasoned Issuer
”
means an issuer eligible to use Form S-3 or F-3 under the Securities Act for a primary offering in reliance on General Instruction
I.B.1 to those Forms.
“
Securities
Act
” means the Securities Act of 1933 and the rules and regulations of the Commission promulgated thereunder.
“
Shelf Initiating
Holders
” has the meaning set forth in Section 5(a).
“
Shelf Registered
Securities
” means, with respect to a Shelf Registration, any Registrable Securities whose sale is registered pursuant
to the Registration Statement filed in connection with such Shelf Registration.
“
Shelf Registration
”
has the meaning set forth in Section 5(a).
“
Shelf Requesting
Holder
” has the meaning set forth in Section 5(b).
“
Short-Form
Registration
” has the meaning set forth in Section 3(a).
“
Stockholder
”
has the meaning set forth in the Preamble.
“
Transfer
”
means, with respect to any security, the offer for sale, sale, pledge, transfer or other disposition or encumbrance (or any transaction
or device that is designed to or could be expected to result in the transfer or the disposition by any Person at any time in the
future) of such security, and shall include the entering into of any swap, hedge or other derivatives transaction or other transaction
that transfers to another in whole or in part any rights, economic benefits or risks of ownership, including by way of settlement
by delivery of such security or other securities in cash or otherwise.
“
underwritten
public offering
” of securities means a public offering of such securities registered under the Securities Act in which
an underwriter, placement agent or other intermediary participates in the distribution of such securities, including a Hedging
Transaction in which a Hedging Counterparty participates.
“
Valid Business
Reason
” has the meaning set forth in Section 3(b).
“
Well-Known
Seasoned Issuer
” means a “well-known seasoned issuer” as defined in Rule 405 promulgated under the Securities
Act and which (i) is a “well-known seasoned issuer” under paragraph (1)(i)(A) of such definition or
(ii) is a “well-known seasoned issuer” under paragraph (1)(i)(B) of such definition and is also eligible
to register a primary offering of its securities relying on General Instruction I.B.1 of Form S-3 or Form F-3 under the Securities
Act.
(b)
Interpretation
. Unless otherwise noted:
(i)
All references to laws, rules, regulations and forms in this Agreement shall be deemed to be references to such laws, rules,
regulations and forms, as amended from time to time or, to the extent replaced, the comparable successor thereto in effect at the
time.
(ii)
All references to agencies, self-regulatory organizations or governmental entities in this Agreement shall be deemed to
be references to the comparable successor thereto.
(iii)
All references to agreements and other contractual instruments shall be deemed to be references to such agreements or other
instruments as they may be amended from time to time.
(iv)
Whenever the words “include,” “includes” or “including” are used in this Agreement,
they shall be deemed to be followed by the words “without limitation.”
2.
General; Securities Subject to this Agreement
.
(a)
Grant of Rights
. Subject to, and conditioned upon, the consummation of the Mergers, the Company hereby grants registration
rights to the Holders upon the terms and conditions set forth in this Agreement.
(b)
Registrable Securities
. For the purposes of this Agreement, any given Registrable Securities will cease to be Registrable
Securities when (i) a Registration Statement covering such Registrable Securities has been declared effective under the Securities
Act by the Commission and such Registrable Securities have been disposed of pursuant to such effective Registration Statement,
(ii) such Registrable Securities have been sold pursuant to Rule 144 promulgated under the Securities Act, (iii) such
Holder (together with any other person who would be considered a “person” with such Holder under Rule 144(a)(2) and
any person whose Common Stock would be aggregated with such Holder for purposes of Rule 144(e)) owning such Registrable Securities
owns less than 1% of the outstanding shares of Common Stock on a fully diluted basis, (iv) the Registrable Securities are
proposed to be sold or distributed by a Person not entitled to the registration rights granted by this Agreement, or (v) such
Registrable Securities are no longer outstanding.
(c)
Holders of Registrable Securities
. A Person is deemed to be a holder of Registrable Securities whenever such Person
owns of record or beneficially owns Registrable Securities, or holds an option granted by the Company to purchase, or a security
issued by the Company that is convertible into, or exercisable or exchangeable for, Registrable Securities whether or not such
purchase, conversion, exercise or exchange has actually been effected. If the Company receives conflicting instructions, notices
or elections from two or more Persons with respect to the same Registrable Securities, the Company may act upon the basis of the
instructions, notice or election received from the registered owner of such Registrable Securities. Registrable Securities issuable
upon exercise of an option granted by the Company or upon conversion, exercise or exchange of another security issued by the Company
shall be deemed outstanding for the purposes of this Agreement.
3.
Demand Registration
.
(a)
Request for Demand Registration
.
(i) CCG Holders holding at least a majority
of the outstanding Registrable Securities held by the CCG Holders (the “
Initiating CCG Holders
”) may make a
written request to the Company to register, and the Company shall register, in accordance with the terms of this Agreement, the
sale of the number of Registrable Securities stated in such request under the Securities Act (other than pursuant to a Registration
Statement on Form S-4 or S-8), at the election of the Initiating CCG Holders, on Form S-1 or any similar long-form registration
(a “
Long-Form Registration
”) and (ii) (x) the Initiating CCG Holders, or (y) Management Holders holding
held by the Management Holders, and any transferee of such the CCG Holders or other Holder, as the case may be
(the “
Initiating Management Holders
” and together with the Initiating CCG Holders, individually as applicable,
e
CCG
s)
applicable $10,000,000.00anyEach
of theManagement Holders, and the Initiating CCG Holders, as the case may be
.
(b)
Limitations on Demand Registrations
. If the Board of Directors, in its good faith judgment, determines that any registration
of Registrable Securities should not be made or continued because it would materially interfere with any material financing, acquisition,
corporate reorganization or merger or other material transaction involving the Company or is necessary to avoid premature disclosure
of a matter the Board of Directors has determined would not be in the best interests of the Company to be disclosed at such time
including any registration of Registrable Securities that is requested or continuing at a time during a “blackout period”
in accordance with the Company’s trading policies or at such time that any Initiating Holder may be deemed to hold material
non-public information regarding the Company, due to such person’s status as a director or officer of the Company, or otherwise
(a “
Valid Business Reason
”), (i) the Company may postpone filing a Registration Statement relating to a
Demand Registration until such Valid Business Reason no longer exists, and (ii) in case a Registration Statement has been
filed relating to a Demand Registration, the Company, upon the approval of a majority of the Board of Directors, may postpone amending
or supplementing such Registration Statement and, if determined by the Board of Directors to be in the best interests of the Company,
may cause such Registration Statement to be withdrawn and its effectiveness terminated. The Company shall give written notice to
all participating Holders of its determination to postpone or withdraw a Registration Statement and of the fact that the Valid
Business Reason for such postponement or withdrawal no longer exists, in each case, promptly after the occurrence thereof. If the
Company gives notice of its determination to postpone or withdraw a Registration Statement pursuant to this Section 3(b),
the Company shall extend the period during which such Registration Statement shall be maintained effective pursuant to this Agreement
(including, in the case of a Long-Form Registration, the period referred to in the second sentence of Section 3(d)) by the
number of days during the period from and including the date of the giving of such notice pursuant to this Section 3(b) to
and including the date when sellers of such Registrable Securities under such Registration Statement shall have received the copies
of the supplemented or amended Prospectus contemplated by and meeting the requirements of Section 7(a)(vi). Notwithstanding
anything to the contrary contained herein, the Company may not withdraw a filing under this Section 3(b) or Section 5(c)
due to a Valid Business Reason more than once in any 12 month period, and may not postpone an offering under this Section 3(b)
or Section 5(c) due to a Valid Business Reason for a period of greater than 120 days during any 12-month period.
(c)
Incidental or “Piggy-Back” Rights with Respect to a Demand Registration
. Any Holder which has not requested
the relevant Demand Registration under Section 3(a)) may offer such Holder’s Registrable Securities under any such Demand
Registration pursuant to this Section 3(c). The Company shall (i) as promptly as reasonably practicable but in no event
later than five days after the receipt of a request for a Demand Registration from any Initiating Holders, give written notice
thereof to all of the Holders (other than such Initiating Holders), which notice shall specify the number of Registrable Securities
subject to the request for Demand Registration, whether such Demand Registration is a Short-Form Registration or Long-Form Registration,
the names and notice information of the Initiating Holders and the intended method of disposition of such Registrable Securities
and (ii) subject to Section 3(f), include in the Registration Statement filed pursuant to such Demand Registration all
of the Registrable Securities requested by such Holders for inclusion in such Registration Statement from whom the Company has
received a written request for inclusion therein within 10 days after the receipt by such Holders of such written notice referred
to in clause (i) above. Each such request by such Holders shall specify the number of Registrable Securities proposed to be
registered and such Holder shall send a copy of such request to the Initiating Holders. The failure of any Holder to respond within
such 10-day period referred to in clause (ii) above shall be deemed to be a waiver of such Holder’s rights under this
Section 3(c) with respect to such Demand Registration. Any Holder may waive its rights under this Section 3(c) prior
to the expiration of such 10-day period by giving written notice to the Company, with a copy to the Initiating Holders. If a Holder
sends the Company a written request for inclusion of part or all of such Holder’s Registrable Securities in a registration,
such Holder shall not be entitled to withdraw or revoke such request (except as contemplated by Section 3(f)) without the prior
written consent of the Company in the Company’s sole discretion unless, as a result of facts or circumstances arising after
the date on which such request was made relating to the Company or to market conditions, such Holder reasonably determines that
participation in such registration would have a material adverse effect on such Holder.
(d)
Effective Demand Registration
. The Company shall use its reasonable best efforts to cause any such Demand Registration
to become effective within (i) 90 days after it receives a request under Section 3(a) for a Long-Form Registration and
(ii) 45 days after it receives a request under Section 3(a) for a Short-Form Registration, and in each case to remain
effective thereafter. A registration shall not constitute a Long-Form Registration until it has become effective and remains continuously
effective for the lesser of (A) the period during which all Registrable Securities registered in the Long-Form Registration
are sold and (B) 120 days;
provided
,
however
, that a registration shall not constitute a Long-Form Registration
if (x) after such Long-Form Registration has become effective, such registration or the related offer, sale or distribution
of Registrable Securities thereunder is interfered with by any stop order, injunction or other order or requirement of the Commission
or other governmental agency, court or other Person for any reason not attributable to the Initiating Holders and such interference
is not thereafter eliminated or (y) the conditions specified in the underwriting agreement, if any, entered into in connection
with such Long-Form Registration are not satisfied or waived, other than by reason of a failure by the Initiating Holders.
(e)
Expenses
. The Company shall pay all Registration Expenses in connection with a Demand Registration, whether or not
such Demand Registration becomes effective;
provided
,
however
, that in no event shall the Company be responsible
for the expenses of any Holder who voluntarily withdraws Registrable Securities from any registration or offering (except as contemplated
by Section 3(f)) or was required to withdraw such Registrable Securities as a result of a breach, or failure to satisfy any
condition, of this Agreement.
(f)
Underwriting Procedures
. If the Company or the Initiating CCG Holders or Initiating Management Holders, as the case
may be, holding a majority of the Registrable Securities held by all of the applicable Initiating Holders so elect, the Company
shall use its reasonable best efforts to cause the offering made pursuant to such Demand Registration to be in the form of a firm
commitment underwritten public offering, and the managing underwriter or underwriters for such offering shall be an investment
banking firm or firms of national reputation selected to act as the managing underwriter or underwriters of the offering in accordance
with Section 3(g) (each, an “
Approved Underwriter
”). In connection with any Demand Registration under this
Section 3 involving an underwritten public offering, none of the Registrable Securities held by any Holder making a request
for inclusion of such Registrable Securities pursuant to Section 3(c) shall be included in such underwritten public offering
unless such Holder accepts the terms of the offering as agreed upon by the Company, the applicable Initiating Holders and the Approved
Underwriters, and then only in such quantity as will not, in the opinion of the Approved Underwriters, jeopardize the success of
such offering by the applicable Initiating Holders. If the Approved Underwriters advise the Company that the aggregate amount of
such Registrable Securities requested to be included in such offering is sufficiently large to have a material adverse effect on
the success of such offering, then the Company shall include in such registration only the aggregate amount of Registrable Securities
that the Approved Underwriters believe may be sold without any such material adverse effect and shall reduce the amount of Registrable
Securities to be included in such registration,
first
, as to the equity securities offered by the Company for its own account;
second
, as to the Registrable Securities of Holders who are not Initiating Holders, as a group, if any,
pro rata
within such group based on the number of Registrable Securities owned by each such party; and
third
, as to the Registrable
Securities of the Initiating Holders, as a group,
pro rata
within such group based on the number of Registrable Securities
owned by each such party;
provided
,
however
, that any party whose right to participate in such offering is reduced
by greater than thirty percent (30%) may withdraw all of its Registrable Securities from such registration.
(g)
Selection of Underwriters in a Demand Registration
. If an offering of Registrable Securities made pursuant to any
Demand Registration is in the form of an underwritten public offering, the applicable Initiating Holders holding a majority of
the Registrable Securities held by all of the applicable Initiating Holders shall select the Approved Underwriters;
provided
,
however
, that the Approved Underwriters shall, in any case, also be reasonably acceptable to the Company.
4.
Incidental or “Piggy-Back” Registration
.
(a)
Request for Incidental or “Piggy-Back” Registration
. If the Company proposes to file a Registration Statement
with respect to an offering by the Company for its own account (other than a Registration Statement on Form S-4 or S-8) or for
the account of any stockholder of the Company (other than for the account of any Holder pursuant to Section 3 or Section 5),
then the Company shall give written notice of such proposed filing to each of the Holders at least 10 days before the anticipated
filing date, and such notice shall describe the proposed registration, offering price (or reasonable range thereof) and distribution
arrangements, and offer such Holders the opportunity to include for sale the number of Registrable Securities as each such Holder
may request (an “
Incidental Registration
”). In connection with any Incidental Registration under this Section 4(a)
involving an underwritten public offering, the Company shall use its reasonable best efforts (within 10 days after the notice provided
for in the preceding sentence) to cause the managing underwriter or underwriters (the “
Company Underwriter
”)
to permit each of the Holders who has requested in writing to participate in the Incidental Registration to include the number
of such Holder’s Registrable Securities specified by such Holder in such offering on the same terms and conditions as the
securities of the Company or for the account of such other stockholder, as the case may be, included therein. In connection with
any Incidental Registration under this Section 4(a) involving an underwritten public offering, the Company shall not be required
to include any Registrable Securities in such underwritten public offering unless the Holders thereof accept the terms of the underwritten
public offering as agreed upon between the Company, such other stockholders, if any, and the Company Underwriter, and then only
in such quantity as the Company Underwriter believes will not jeopardize the success of the offering by the Company. If the Company
Underwriter advises the Company that the registration of all or part of the Registrable Securities which the Holders have requested
to be included would materially adversely affect the success of such offering, then the Company shall include in such Incidental
Registration only the aggregate amount of Registrable Securities that the Company Underwriter believes may be sold without any
such material adverse effect and shall include in such registration,
first
, all of the securities to be offered for the
account of the Company;
second
, the Registrable Securities to be offered for the account of the Holders pursuant to this
Section 4, as a group,
pro rata
based on the number of Registrable Securities owned by each such Holder; and
third
,
any other securities requested to be included in such offering by other security holders of the Company, pro rata based on the
number of relevant securities owned by the security holders in such group.
(b)
Expenses
. The Company shall bear all Registration Expenses in connection with any Incidental Registration pursuant
to this Section 4, whether or not such Incidental Registration becomes effective;
provided
,
however
, that in
no event shall the Company be responsible for the expenses of any Holder who voluntarily withdraws Registrable Securities from
any registration or offering (except as contemplated by Section 3(f)) or was required to withdraw such Registrable Securities
as a result of a breach, or failure to satisfy any condition, of this Agreement.
(c)
Right to Terminate Registration
. The Company shall have the right to terminate or withdraw any registration initiated
by it prior to the effectiveness of such registration whether or not any Holder has requested to include Registrable Securities
in such registration.
5.
Shelf Registration
.
(a)
Request for Shelf Registration
. (i) Upon the Company becoming eligible for use of Form S-3 under the Securities Act
in connection with a secondary public offering of its equity securities, in the event that the Company shall receive from one or
more of the Holders (the “
Shelf Initiating Holders
”), a written request that the Company register, under the
Securities Act on Form S-3 in an offering on a delayed or continuous basis pursuant to Rule 415 promulgated under the Securities
Act (a “
Shelf Registration
”), the sale by the Shelf Initiating Holders of at least $5,000,000.00
of Registrable
Securities owned by such Shelf Initiating Holders, the Company shall give written notice of such request to all of the Holders
(other than the Shelf Initiating Holders) as promptly as reasonably practicable but in no event later than 10 days before the anticipated
filing date of such Form S-3, and such notice shall describe the proposed Shelf Registration, the intended method of disposition
of such Registrable Securities and any other information that at the time would be appropriate to include in such notice, and offer
such Holders the opportunity to include for sale the number of Registrable Securities as each such Holder may request in writing
to the Company, given within 10 days after their receipt from the Company of the written notice of such Shelf Registration. The
“Plan of Distribution” section of such Form S-3 shall permit all lawful means of disposition of Registrable Securities,
including firm-commitment underwritten public offerings, block trades, agented transactions, sales directly into the market, purchases
or sales by brokers, Hedging Transactions, distributions to stockholders, partners or members of such Holders and sales not involving
a public offering. With respect to each Shelf Registration, the Company shall (i) as promptly as reasonably practicable after
the written request of the Shelf Initiating Holders, file a Registration Statement and (ii) use its reasonable best efforts
to cause such Registration Statement to be declared effective within 45 days after it receives a request therefor, and remain effective
until there are no longer any Shelf Registered Securities. The obligations set forth in this Section 5(a) shall not apply
if the Company has a currently effective Automatic Shelf Registration Statement covering all Registrable Securities in accordance
with Section 5(f) and has otherwise complied with its obligations pursuant to this Agreement.
(b)
Shelf Underwriting Procedures
. Upon written request made from time to time by a Holder of some or all of such Holder’s
Self Registered Securities (the “
Shelf Requesting Holder
”), which request shall, subject to Section 5(a),
specify the amount of such Shelf Requesting Holder’s Shelf Registered Securities to be sold (the “
Requested Shelf
Registered Securities
”), the Company shall use its reasonable best efforts to cause the sale of such Requested Shelf
Registered Securities to be in the form of a firm commitment underwritten public offering (unless otherwise consented to by the
Shelf Requesting Holder) if the anticipated aggregate offering price (calculated based upon the Market Price of the Registrable
Securities on the date of such written request and including any Registrable Securities subject to any applicable over-allotment
option) to the public equals or exceeds $10,000,000.00 (including causing to be produced and filed any necessary Prospectuses or
Prospectus supplements with respect to such offering). The managing underwriter or underwriters selected for such offering shall
be selected by the Shelf Requesting Holder and shall be reasonably acceptable to the Company, and each such underwriter shall be
deemed to be an Approved Underwriter with respect to such offering. Notwithstanding the foregoing, in connection with any offering
of Requested Shelf Registered Securities involving an underwritten public offering that occurs or is scheduled to occur within
45 days of a proposed registered underwritten public offering of equity securities for the Company’s own account (a “
Contemporaneous
Company Offering
”), the Company shall not be required to cause such offering of Requested Shelf Registered Securities
to take the form of an underwritten public offering but shall instead offer the Shelf Requesting Holder the ability to include
its Requested Shelf Registered Securities in the Contemporaneous Company Offering pursuant to Section 4.
(c)
Limitations on Shelf Registrations
. If the Board of Directors has a Valid Business Reason, (i) the Company may
postpone filing a Registration Statement relating to a Shelf Registration until such Valid Business Reason no longer exists and
(ii) in case a Registration Statement has been filed relating to a Shelf Registration, the Company may postpone the offering
of Registrable Securities thereunder. The Company shall give written notice to all participating Holders of its determination to
so suspend required registration actions and of the fact that the Valid Business Reason for such postponement or withdrawal no
longer exists, in each case, promptly after the occurrence thereof. Notwithstanding anything to the contrary contained herein,
the Company may not cause such suspension due to a Valid Business Reason under this Section 5(c) or Section 3(b) more
than once in any 12 month period, and may not postpone an offering under this Section 5(c) or Section 3(b) due to a Valid
Business Reason for a period of greater than 120 days during any 12-month period.
(d)
Expenses
. The Company shall bear all Registration Expenses in connection with any Shelf Registration pursuant to
this Section 5, whether or not such Shelf Registration becomes effective;
provided
,
however
, that in no event
shall the Company be responsible for the expenses of any Holder who voluntarily withdraws Registrable Securities from any registration
or offering (except as contemplated by Section 3(f)) or was required to withdraw such Registrable Securities as a result of
a breach, or failure to satisfy any condition, of this Agreement.
(e)
Additional Selling Stockholders
. After the Registration Statement with respect to a Shelf Registration is declared
effective, upon written request by one or more Holders (which written request shall specify the amount of such Holders’ Registrable
Securities to be registered), the Company shall, as promptly as reasonably practicable after receiving such request, (i) if
it is a Seasoned Issuer or Well-Known Seasoned Issuer, or if such Registration Statement is an Automatic Shelf Registration Statement,
file a Prospectus supplement to include such Holders as selling stockholders in such Registration Statement or (ii) if it
is not a Seasoned Issuer or Well-Known Seasoned Issuer, and the Registrable Securities requested to be registered represent more
than 1% of the outstanding Registrable Securities, file a post-effective amendment to the Registration Statement to include such
Holders in such Shelf Registration and use reasonable best efforts to have such post-effective amendment declared effective.
(f)
Automatic Shelf Registration
. Upon the Company becoming a Well-Known Seasoned Issuer, (i) the Company shall
give written notice to all of the Holders as promptly as reasonably practicable but in no event later than five Business Days thereafter,
and such notice shall describe, in reasonable detail, the basis on which the Company has become a Well-Known Seasoned Issuer, and
(ii) the Company shall, as promptly as reasonably practicable, register, under an Automatic Shelf Registration Statement,
the sale of all of the Registrable Securities in accordance with the terms of this Agreement. The Company shall use its reasonable
best efforts to file such Automatic Shelf Registration Statement within 10 Business Days after it becomes a Well-Known Seasoned
Issuer, and to cause such Automatic Shelf Registration Statement to remain effective thereafter until there are no longer any Registrable
Securities. The Company shall give written notice of filing such Registration Statement to all of the Holders as promptly as reasonably
practicable thereafter. At any time after the filing of an Automatic Shelf Registration Statement by the Company, if it is reasonably
likely that it will no longer be a Well-Known Seasoned Issuer as of a future determination date (the “
Determination Date
”),
at least 30 days prior to such Determination Date, the Company shall (A) give written notice thereof to all of the Holders
as promptly as reasonably practicable but in no event later than 10 Business Days prior to such Determination Date and (B) if
the Company is eligible to file a Registration Statement on Form S-3 with respect to a secondary public offering of its equity
securities, file a Registration Statement on Form S-3 with respect to a Shelf Registration in accordance with Section 5(a),
treating all selling stockholders identified as such in the Automatic Shelf Registration Statement (and amendments or supplements
thereto) as Shelf Requesting Holders and use all commercially reasonable efforts to have such Registration Statement declared effective
prior to the Determination Date. Any registration pursuant to this Section 5(f) shall be deemed a Shelf Registration for purposes
of this Agreement.
(g)
Not a Demand Registration
. No Shelf Registration pursuant to this Section 5 shall be deemed a Demand Registration
pursuant to Section 3.
6.
Lock-up Agreements
.
(a)
Demand Registration
. With respect to any Demand Registration, the Company shall not (except as part of such Demand
Registration) effect any Transfer of Registrable Class Securities, or any securities convertible into or exchangeable or exercisable
for Registrable Class Securities (except pursuant to a Registration Statement on Form S-4 or Form S-8), during the period beginning
on the effective date of any Registration Statement in which the Holders are participating and ending on the date that is 120 days
after date of the final Prospectus relating to such offering, except as part of such Demand Registration. Upon request by the Approved
Underwriters or the Company Underwriter (as the case may be), the Company shall, from time to time, enter into customary Lock-up
agreements (“
Lock-up Agreements
”) on terms consistent with the preceding sentence.
(b)
Shelf Registration
. With respect to any Shelf Registration and offering of Requested Shelf Registered Securities
that takes the form of an underwritten public offering, the Company shall not (except as part of such offering) effect any Transfer
of Registrable Class Securities, or any securities convertible into or exchangeable or exercisable for such Registrable Class Securities
(except pursuant to a Registration Statement on Form S-4 or Form S-8), during the period beginning on the date the Shelf Requesting
Holder delivers its request pursuant to the first sentence of Section 5(b) and ending on the date that is 90 days after date
of the final Prospectus relating to such offering, except as part of such Shelf Registration. Upon request by the Approved Underwriters
or the Company Underwriter (as the case may be), the Company shall, from time to time, enter into Lock-up Agreements on terms consistent
with the preceding sentence.
(c)
Additional Lock-up Agreements
. With respect to each relevant offering, the Company shall use its reasonable best
efforts to cause all of its officers, directors and holders of more than 1% of the Registrable Class Securities (or any securities
convertible into or exchangeable or exercisable for such Registrable Class Securities) (but excluding any Holder) to execute lock-up
agreements that contain restrictions that are no less restrictive than the restrictions contained in the Lock-up Agreements executed
by the Company.
(d)
Third Party Beneficiaries in Lock-up Agreements
. Any Lock-up Agreements executed by the Company, its officers, its
directors or other stockholders pursuant to this Section 6 shall contain provisions naming the selling stockholders in the
relevant offering that are Holders as intended third-party beneficiaries thereof and requiring the prior written consent of such
stockholders holding a majority of the Registrable Securities for any amendments thereto or waivers thereof.
7.
Registration Procedures
.
(a)
Obligations of the Company
. Whenever registration of Registrable Securities has been requested or required pursuant
to Section 3, Section 4 or Section 5, the Company shall, subject to any terms, conditions or limitations set forth
in Section 3, Section 4 or Section 5, as applicable, use its reasonable best efforts to effect the registration
and sale of such Registrable Securities in accordance with the intended method of distribution thereof as promptly as reasonably
practicable, and in connection with any such request or requirement, the Company shall:
(i)
as soon as reasonably practicable, prepare and file with the Commission a Registration Statement on any form for which the
Company then qualifies or which counsel for the Company shall deem appropriate and which form shall be available for the sale of
such Registrable Securities in accordance with the intended method of distribution thereof, and cause such Registration Statement
to become effective;
provided
,
however
, that (A) before filing a Registration Statement or Prospectus or any
amendments or supplements thereto (including any documents incorporated by reference therein), or before using any Free Writing
Prospectus, the Company shall provide the single law firm selected as counsel by the Holders holding a majority of the Registrable
Securities being registered in such registration (“
Holders
’
Counsel
”) and any other Inspector with
an adequate and appropriate opportunity to review and comment on such Registration Statement, each Prospectus included therein
(and each amendment or supplement thereto), each document incorporated by reference therein and each Free Writing Prospectus to
be filed with the Commission, subject to such documents being under the Company’s control, and (B) the Company shall
notify the Holders’ Counsel and each seller of Registrable Securities pursuant to such Registration Statement of any stop
order issued or threatened by the Commission and take all actions required to prevent the entry of such stop order or to remove
it if entered;
(ii)
as soon as reasonably practicable, prepare and file with the Commission such amendments and supplements to such Registration
Statement and the Prospectus used in connection therewith as may be necessary to keep such Registration Statement effective for:
(x) the lesser of (A) 120 days and (B) such shorter period which will terminate when all Registrable Securities covered
by such Registration Statement have been sold ;
provided
, that in the case of a Shelf Registration, the Company shall keep
such Registration Statement effective until all Registrable Securities covered by such Registration Statement shall have been sold,
and shall comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration
Statement during such period in accordance with the intended methods of disposition by the sellers thereof set forth in such Registration
Statement;
(iii)
as soon as reasonably practicable, furnish to each seller of Registrable Securities, prior to filing a Registration Statement,
at least one copy of such Registration Statement as is proposed to be filed, and thereafter such number of copies of such Registration
Statement, each amendment and supplement thereto (in each case including all exhibits thereto), the Prospectus included in such
Registration Statement (including each preliminary Prospectus), any Prospectus filed pursuant to Rule 424 promulgated under the
Securities Act and any Free Writing Prospectus as each such seller may reasonably request in order to facilitate the disposition
of the Registrable Securities owned by such seller;
(iv)
as soon as reasonably practicable, register or qualify such Registrable Securities under such other securities or “blue
sky” laws of such jurisdictions as any seller of Registrable Securities may request, and to continue such registration or
qualification in effect in such jurisdiction for as long as permissible pursuant to the laws of such jurisdiction, or for as long
as any such seller requests or until all of such Registrable Securities are sold, whichever is shortest, and do any and all other
acts and things which may be reasonably necessary or advisable to enable any such seller to consummate the disposition in such
jurisdictions of the Registrable Securities owned by such seller;
provided
,
however
, that the Company shall not be
required to (A) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but
for this Section 7(a)(iv), (B) subject itself to taxation in any such jurisdiction or (C) consent to general service
of process in any such jurisdiction;
(v)
as soon as reasonably practicable, notify each seller of Registrable Securities: (A) when a Prospectus, any Prospectus
supplement, any Free Writing Prospectus, a Registration Statement or a post-effective amendment to a Registration Statement has
been filed with the Commission, and, with respect to a Registration Statement or any post-effective amendment, when the same has
become effective; (B) of any request by the Commission or any other federal or state governmental authority for amendments
or supplements to a Registration Statement, related Prospectus or Free Writing Prospectus or for additional information; (C) of
the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness
of a Registration Statement or the initiation or threatening of any proceedings for that purpose; (D) of the receipt by the Company
of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any proceedings for such purpose; (E) of the existence
of any fact or happening of any event of which the Company has knowledge which makes any statement of a material fact in such Registration
Statement, related Prospectus or Free Writing Prospectus or any document incorporated or deemed to be incorporated therein by reference
untrue or which would require the making of any changes in the Registration Statement, Prospectus or Free Writing Prospectus in
order that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case
of such Prospectus or Free Writing Prospectus, it will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which
they were made, not misleading; and (F) of the determination by counsel of the Company that a post-effective amendment to a Registration
Statement is advisable;
(vi)
as soon as reasonably practicable, upon the occurrence of any event contemplated by Section 7(a)(v)(E) or, subject
to Sections 3(b) and 5(c), the existence of a Valid Business Reason, as promptly as reasonably practicable, prepare a supplement
or amendment to such Registration Statement, related Prospectus or Free Writing Prospectus and furnish to each seller of Registrable
Securities a reasonable number of copies of such supplement to or an amendment of such Registration Statement, Prospectus or Free
Writing Prospectus as may be necessary so that, after delivery to the purchasers of such Registrable Securities, in the case of
the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading, and that in the case of such Prospectus or Free
Writing Prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading;
(vii)
enter into and perform customary agreements (including underwriting and indemnification and contribution agreements in customary
form with the Approved Underwriter or the Company Underwriter, as applicable) and take such other commercially reasonable actions
as are required in order to expedite or facilitate each disposition of Registrable Securities and shall provide all reasonable
cooperation, including causing appropriate officers to attend and participate in “road shows” and other information
meetings organized by the Approved Underwriter or Company Underwriter, if applicable, and causing counsel to the Company to deliver
customary legal opinions in connection with any such underwriting agreements;
(viii)
make available at reasonable times for inspection by any seller of Registrable Securities, any managing underwriter participating
in any disposition of such Registrable Securities pursuant to a Registration Statement, Holders’ Counsel and any attorney,
accountant or other agent retained by any such seller or any managing underwriter (collectively, the “
Inspectors
”),
all financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries (collectively,
the “
Records
”) as shall be reasonably necessary to enable them to exercise their due diligence responsibility,
and cause the Company’s and its subsidiaries’ officers, directors and employees, and the independent public accountants
of the Company, to supply all information reasonably requested by any such Inspector in connection with such Registration Statement.
Records that the Company determines, in good faith, to be confidential and which it notifies the Inspectors are confidential shall
not be disclosed by the Inspectors (and the Inspectors shall confirm their agreement in writing in advance to the Company if the
Company shall so request) unless (A) the disclosure of such Records is necessary, in the Inspector’s judgment, to avoid
or correct a misstatement or omission in the Registration Statement, (B) the release of such Records is ordered pursuant to
a subpoena or other order from a court of competent jurisdiction after exhaustion of all appeals therefrom or (C) the information
in such Records was known to the Inspectors on a non-confidential basis prior to its disclosure by the Company or has been made
generally available to the public. Each seller of Registrable Securities agrees that it shall, upon learning that disclosure of
such Records is sought in a court of competent jurisdiction, give notice to the Company and allow the Company, at the Company’s
expense, to undertake appropriate action to prevent disclosure of the Records deemed confidential;
(ix)
if such sale is pursuant to an underwritten public offering, use its commercially reasonable best efforts to obtain a “cold
comfort” letter or letters, dated as of such date or dates as the Holders’ counsel or the managing underwriter reasonably
requests, from the Company’s independent public accountants in customary form and covering such matters of the type customarily
covered by “cold comfort” letters as Holders’ Counsel or the managing underwriter reasonably requests;
(x)
furnish, at the request of any seller of Registrable Securities on the date such securities are delivered to the underwriters
for sale pursuant to such registration or, if such securities are not being sold through underwriters, on the date the Registration
Statement with respect to such securities becomes effective, an opinion with respect to legal matters and a negative assurance
letter with respect to disclosure matters, dated such date, of counsel representing the Company for the purposes of such registration,
addressed to the underwriters, if any, and to the seller making such request, covering such matters with respect to the registration
in respect of which such opinion and letter are being delivered as the underwriters, if any, and such seller may reasonably request
and are customarily included in such opinions and negative assurance letters;
(xi)
with respect to each Free Writing Prospectus or other materials to be included in the Disclosure Package, ensure that no
Registrable Securities be sold “by means of” (as defined in Rule 159A(b) promulgated under the Securities Act) such
Free Writing Prospectus or other materials without the prior written consent of the Holders of the Registrable Securities covered
by such registration statement, which Free Writing Prospectuses or other materials shall be subject to the review of Holders’
Counsel;
(xii)
as soon as reasonably practicable and within the deadlines specified by the Securities Act, make all required filings of
all Prospectuses and Free Writing Prospectuses with the Commission;
(xiii)
as soon as reasonably practicable and within the deadlines specified by the Securities Act, make all required filing fee
payments in respect of any Registration Statement or Prospectus used under this Agreement (and any offering covered thereby);
(xiv)
comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon
as reasonably practicable but no later than 15 months after the effective date of the Registration Statement, an earnings statement
covering a period of 12 months beginning after the effective date of the Registration Statement, in a manner which satisfies the
provisions of Section 11(a) of the Securities Act and Rule 158 promulgated thereunder;
(xv)
cause all such Registrable Securities to be listed on each securities exchange on which Registrable Class Securities issued
by the Company are then listed,
provided
that the applicable listing requirements are satisfied;
(xvi)
as expeditiously as practicable, keep Holders’ Counsel advised in writing as to the initiation and progress of any
registration under Section 3, Section 4 or Section 5 and provide Holders’ Counsel with all correspondence
with the Commission in connection with any such Registration Statement;
(xvii)
cooperate with each seller of Registrable Securities and each underwriter participating in the disposition of such Registrable
Securities and their respective counsel in connection with any filings required to be made with FINRA;
(xviii)
if such registration is pursuant to a Registration Statement on Form S-3 or any similar short-form registration, include
in the body of the prospectus included in such Registration Statement such additional information for marketing purposes as the
managing underwriter reasonably requests; and
(xix)
take all other steps reasonably necessary to effect the registration and disposition of the Registrable Securities contemplated
hereby.
(b)
Seller Obligations
. In connection with any offering under any Registration Statement under this Agreement:
(i)
each Holder shall promptly furnish to the Company in writing such information with respect to such Holder and the intended
method of disposition of its Registrable Securities as the Company may reasonably request or as may be required by law for use
in connection with any related Registration Statement or Prospectus (or amendment or supplement thereto) and all information required
to be disclosed in order to make the information previously furnished to the Company by such Holder not contain a material misstatement
of fact or necessary to cause such Registration Statement or Prospectus (or amendment or supplement thereto) not to omit a material
fact with respect to such Holder necessary in order to make the statements therein not misleading;
(ii)
each Holder shall comply with the Securities Act and the Exchange Act and all applicable state securities laws and comply
with all applicable regulations in connection with the registration and the disposition of the Registrable Securities;
(iii)
each Holder shall not use any Free Writing Prospectus without the prior written consent of the Company;
(iv)
with respect to any underwritten offering pursuant to Section 3, (x) each Initiating Holder and each Holder participating
in such offering pursuant to Section 3(c) shall enter into an underwriting agreement in customary form with the managing underwriter
or underwriters and (y) no selling Holder may participate in any such underwritten offering unless such selling Holder completes
and/or provides all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents or information
reasonably required under the terms of, or in connection with, such underwriting agreement; and
(v)
each Shelf Requesting Holder shall enter into an underwriting agreement in customary form with managing underwriter or underwriters,
and no Shelf Requesting Holder shall participate in any underwritten registration pursuant to Section 5(b) unless such selling
Holder completes and/or provides all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents
or information reasonably required under the terms of, or in connection with, such underwriting agreement.
(c)
Notice to Discontinue
. Each Holder agrees that, upon receipt of any notice from the Company of the happening of any
event of the kind described in Section 7(a)(v)(E), such Holder shall forthwith discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities until such Holder’s receipt of the copies of
the supplemented or amended Prospectus or Free Writing Prospectus contemplated by Section 7(a)(vi) and, if so directed by
the Company, such Holder shall deliver to the Company (at the Company’s expense) all copies, other than permanent file copies
then in such Holder’s possession, of the Prospectus or Free Writing Prospectus covering such Registrable Securities which
is current at the time of receipt of such notice. If the Company shall give any such notice, the Company shall extend the period
during which such Registration Statement shall be maintained effective pursuant to this Agreement (including the period referred
to in Section 7(a)(ii)) by the number of days during the period from and including the date of the giving of such notice pursuant
to Section 7(a)(v)(E) to and including the date when sellers of such Registrable Securities under such Registration Statement
shall have received the copies of the supplemented or amended Prospectus or Free Writing Prospectus contemplated by and meeting
the requirements of Section 7(a)(vi).
(d)
Registration Expenses
. Subject to the last sentence of this Section 7(d), and except as otherwise provided
in this Agreement, the Company shall pay all expenses arising from or incident to its performance of, or compliance with, this
Agreement, including (i) Commission, stock exchange and FINRA registration and filing fees, (ii) all fees and expenses
incurred in complying with securities or “blue sky” laws (including reasonable fees, charges and disbursements of
counsel to any underwriter incurred in connection with “blue sky” qualifications of the Registrable Securities as
may be set forth in any underwriting agreement), (iii) all printing, messenger and delivery expenses, (iv) the reasonable
fees, charges and expenses of Holders’ Counsel, any necessary counsel with respect to state securities law matters, counsel
to the Company and of its independent public accountants, and any other accounting fees, charges and expenses incurred by the
Company (including any expenses arising from any “cold comfort” letters or any special audits incident to or required
by any registration or qualification),
(v) all fees and expenses in connection with maintaining the
effectiveness of any Registration Statement, including the reasonable fees, charges and expenses of counsel to the Company, including
regulatory counsel, and (vi
any liability insurance or other premiums for insurance obtained in connection with any Demand
Registration or piggy-back registration thereon, Incidental Registration or Shelf Registration pursuant to the terms of this Agreement,
regardless of whether such Registration Statement is declared effective. All of the expenses described in the preceding sentence
of this Section 7(d) are referred to herein as “
Registration Expenses
.” Notwithstanding the foregoing,
(x) the Holders of Registrable Securities sold pursuant to a Registration Statement shall bear the expense of any broker’s
commission or underwriter’s discount or commission relating to the registration and sale of such Holders’ Registrable
Securities and, subject to clause (iv) above, shall bear the fees and expenses of their own counsel, and (y) in no event
shall the Company be responsible under the foregoing clause (iv) above for any fees, charges or expenses with respect to
any Holder who voluntarily withdraws Registrable Securities from any registration or offering (except as contemplated by Section 3(f))
or was required to withdraw such Registrable Securities as a result of a breach, or failure to satisfy any condition, of this
Agreement.
(e)
Hedging Transactions
.
(i)
The Company agrees that, in connection with any proposed Hedging Transaction, if, in the reasonable judgment of Holders’
Counsel, it is necessary or desirable to register under the Securities Act such Hedging Transaction or sales or transfers (whether
short or long) of Registrable Class Securities in connection therewith, then the Company shall use its reasonable best efforts
to take such actions (which may include, among other things, the filing of a post-effective amendment to a Registration Statement
to include additional or changed information that is material or is otherwise required to be disclosed, including a description
of such Hedging Transaction, the name of the Hedging Counterparty, identification of the Hedging Counterparty or its Affiliates
as underwriters or potential underwriters, if applicable, or any change to the plan of distribution) as may reasonably be required
to register such Hedging Transaction or sales or transfers of Registrable Class Securities in connection therewith under the Securities
Act in a manner consistent with the rights and obligations of the Company hereunder with respect to the registration of Registrable
Securities. Any information provided by the Holders regarding the Hedging Transaction that is included in a Registration Statement,
Prospectus or Free Writing Prospectus pursuant to this Section 7(e) shall be deemed to be information provided by the Holders
selling Registrable Securities pursuant to such Registration Statement for purposes of Section 7(b).
(ii)
All Registration Statements in which Holders may include Registrable Securities under this Agreement shall be subject to
the provisions of this Section 7(e), and the registration of Registrable Class Securities thereunder pursuant to this Section 7(e)
shall be subject to the provisions of this Agreement applicable to any such Registration Statements;
provided
,
however
,
that the selection of any Hedging Counterparty shall not be subject to Section 3(g), but the Hedging Counterparty shall be
selected by the Holders of a majority of the Registrable Class Securities subject to the Hedging Transaction that are proposed
to be included in such Registration Statement.
(iii)
If in connection with a Hedging Transaction, a Hedging Counterparty or any Affiliate thereof is (or may be considered) an
underwriter or selling stockholder, then it shall be required to provide customary indemnities to the Company regarding the plan
of distribution and like matters.
(iv)
The Company further agrees to include, under the caption “Plan of Distribution” (or the equivalent caption),
in each Registration Statement, and any related Prospectus (to the extent such inclusion is permitted under applicable Commission
regulations and is consistent with comments received from the Commission during any Commission review of the Registration Statement),
language substantially in the form of
Schedule 1
hereto and to include in each Prospectus supplement filed in connection
with any proposed Hedging Transaction language mutually agreed upon by the Company, the relevant Holders and the Hedging Counterparty
describing such Hedging Transaction.
8.
Indemnification; Contribution
.
(a)
Indemnification by the Company
. The Company shall indemnify and hold harmless each Holder, its stockholders, partners,
members, directors, managers, officers, employees, trustees, attorneys, advisors, Affiliates and each Person who controls (within
the meaning of Section 15 of the Securities Act) such Holder from and against any and all losses, claims, damages, liabilities
and expenses, or any action or proceeding in respect thereof (including reasonable costs of investigation and reasonable attorneys’
fees and expenses) (each, a “
Liability
”) arising out of or based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Disclosure Package, the Registration Statement, the Prospectus, any Free Writing
Prospectus or in any amendment or supplement thereto, (ii) the omission or alleged omission to state in the Disclosure Package,
the Registration Statement, the Prospectus, any Free Writing Prospectus or in any amendment or supplement thereto any material
fact required to be stated therein or necessary to make the statements therein not misleading, and (iii) any violation or
alleged violation by the Company of the Securities Act, the Exchange Act, any other federal law, any state or foreign securities
law, or any rule or regulation promulgated under any of the foregoing laws, relating to the offer or sale of the Registrable Securities;
provided
,
however
, that the Company shall not be liable in any such case to the extent that any such Liability arises
out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such Disclosure
Package, Registration Statement, Prospectus or preliminary prospectus or amendment or supplement thereto in reliance upon and in
conformity with written information furnished to the Company by or on behalf of the Holder (including the information provided
pursuant to Section 7(b)(i)) expressly for use therein.
(b)
Indemnification by Holders
. In connection with any offering in which a Holder is participating pursuant to Section 3,
4 or 5, such Holder shall indemnify and hold harmless the Company, each other Holder, their respective directors, officers, other
Affiliates and each Person who controls the Company, and such other Holders (within the meaning of Section 15 of the Securities
Act) from and against any and all Liabilities arising out of or based upon (i) any untrue statement or alleged untrue statement
of a material fact contained in the Disclosure Package, the Registration Statement, the Prospectus, any Holder Free Writing Prospectus
or in any amendment or supplement thereto, and (ii) the omission or alleged omission to state in the Disclosure Package, the
Registration Statement, the Prospectus, any Holder Free Writing Prospectus or in any amendment or supplement thereto any material
fact required to be stated therein or necessary to make the statements therein not misleading, in each case, to the extent such
Liabilities arise out of or are based upon written information furnished by such Holder or on such Holder’s behalf expressly
for inclusion in the Disclosure Package, the Registration Statement, the Prospectus or any amendment or supplement thereto relating
to the Registrable Securities (including the information provided pursuant to Section 7(b)(i));
provided
,
however
,
that the obligation to indemnify shall be individual, not joint and several, for each Holder and the total amount to be indemnified
by such Holder pursuant to this Section 8(b) shall be limited to the net proceeds (after deducting the underwriters’
discounts and commissions) received by such Holder in the offering to which the Registration Statement, Prospectus, Disclosure
Package or Holder Free Writing Prospectus relates.
(c)
Conduct of Indemnification Proceedings
. Any Person entitled to indemnification hereunder (the “
Indemnified
Party
”) shall give prompt written notice to the indemnifying party (the “
Indemnifying Party
”) after
the receipt by the Indemnified Party of any written notice of the commencement of any action, suit, proceeding or investigation
or threat thereof made in writing for which the Indemnified Party intends to claim indemnification or contribution pursuant to
this Agreement;
provided
,
however
, that the failure to so notify the Indemnifying Party shall not relieve the Indemnifying
Party of any Liability that it may have to the Indemnified Party hereunder (except to the extent that the Indemnifying Party forfeits
substantive rights or defenses by reason of such failure). If notice of commencement of any such action is given to the Indemnifying
Party as above provided, the Indemnifying Party shall be entitled to participate in and, to the extent it may wish, jointly with
any other Indemnifying Party similarly notified, to assume the defense of such action at its own expense, with counsel chosen by
it and reasonably satisfactory to such Indemnified Party. The Indemnified Party shall have the right to employ separate counsel
in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be paid by the Indemnified
Party unless (i) the Indemnifying Party agrees to pay the same, (ii) the Indemnifying Party fails to assume the defense
of such action with counsel reasonably satisfactory to the Indemnified Party or (iii) the named parties to any such action
(including any impleaded parties) include both the Indemnifying Party and the Indemnified Party and such parties have been advised
by such counsel that either (A) representation of such Indemnified Party and the Indemnifying Party by the same counsel would
be inappropriate under applicable standards of professional conduct or (B) there may be one or more legal defenses available
to the Indemnified Party which are different from or additional to those available to the Indemnifying Party. In any of such cases,
the Indemnifying Party shall not have the right to assume the defense of such action on behalf of such Indemnified Party; it being
understood, however, that the Indemnifying Party shall not be liable for the fees and expenses of more than one separate firm of
attorneys (in addition to any local counsel) for all Indemnified Parties. No Indemnifying Party shall be liable for any settlement
entered into without its written consent, which consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the written consent of such Indemnified Party, effect any settlement of any pending or threatened proceeding in respect of which
such Indemnified Party is a party and indemnity has been sought hereunder by such Indemnified Party, unless such settlement includes
an unconditional release of such Indemnified Party from all liability for claims that are the subject matter of such proceeding.
(d)
Contribution
. If the indemnification provided for in this Section 8 from the Indemnifying Party is unavailable
to an Indemnified Party hereunder in respect of any Liabilities referred to herein, then the Indemnifying Party, in lieu of indemnifying
such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Liabilities
in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection
with the actions which resulted in such Liabilities, as well as any other relevant equitable considerations. The relative faults
of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material
fact, has been made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’
relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable
by a party as a result of the Liabilities referred to above shall be deemed to include, subject to the limitations set forth in
Sections 8(a), 8(b) and 8(c), any legal or other fees, charges or expenses reasonably incurred by such party in connection
with any investigation or proceeding;
provided
, that the total amount to be contributed by any Holder shall be limited to
the net proceeds (after deducting the underwriters’ discounts and commissions) received by such Holder in the offering. The
parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 8(d) were determined
by
pro rata
allocation or by any other method of allocation which does not take account of the equitable considerations
referred to in the immediately preceding paragraph. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.
(e)
Exchange Act Reporting and Rule 144
. The Company covenants that it shall (a) file any reports required to be
filed by it under the Exchange Act and (b) take such further action as each Holder may reasonably request (including providing
any information necessary to comply with Rule 144 promulgated under the Securities Act), all to the extent required from time to
time to enable such Holder to sell Registrable Securities without registration under the Securities Act within the limitation of
the exemptions provided by (i) Rule 144 promulgated under the Securities Act, as such rule may be amended from time to time,
or Regulation S promulgated under the Securities Act or (ii) any similar rules or regulations hereafter adopted by the Commission.
The Company shall, upon the request of any Holder, deliver to such Holder a written statement as to whether it has complied with
such requirements.
9.
Miscellaneous
.
(a)
Termination
. In the event the Merger Agreement is terminated, this Agreement shall automatically terminate and be
of no further force and effect. This Agreement shall automatically terminate with respect to a Holder once such Holder no longer
owns Registrable Securities.
(b)
Recapitalizations, Exchanges, etc
. The provisions of this Agreement shall apply to the full extent set forth herein
with respect to (i) the shares of Common Stock and (ii) any and all securities of the Company or any successor or assign
of the Company (whether by merger, consolidation, sale of assets, recapitalization, reorganization or otherwise) which may be issued
in respect of, in conversion of, in exchange for or in substitution of, the shares of Common Stock and shall be appropriately adjusted
for any stock dividends, splits, reverse splits, combinations, recapitalizations and the like occurring after the date hereof.
The Company shall cause any successor or assign (whether by merger, consolidation, sale of assets, recapitalization, reorganization
or otherwise) to assume this Agreement or enter into a new registration rights agreement with the Holders on terms substantially
the same as this Agreement as a condition of any such transaction.
(c)
No Inconsistent Agreements
. The Company represents and warrants that it has not granted to any Person the right to
request or require the Company to register any securities issued by the Company, other than the rights granted to the Holders herein.
The Company shall not enter into any agreement with respect to its securities that is inconsistent with the rights granted to the
Holders in this Agreement or grant any additional registration rights to any Person or with respect to any securities which are
not Registrable Securities which are prior in right to or inconsistent with the rights granted in this Agreement. Any agreement
pursuant to which the Company or any subsidiary has granted the Holders any registration rights with respect to the Company’s
or its subsidiary’s securities, as applicable, shall automatically terminate and be of no further force and effect at the
effective time of the Mergers.
(d)
Remedies
. The Holders, in addition to being entitled to exercise all rights granted by law, including recovery of
damages, shall be entitled to specific performance of their rights under this Agreement, without need for a bond. The Company agrees
that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of
this Agreement and hereby agrees to waive in any action for specific performance the defense that a remedy at law would be adequate
or that there is need for a bond.
(e)
Amendments and Waivers
. Except as otherwise provided herein, the provisions of this Agreement may not be amended,
modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless consented to
in writing by (i) the Company and (ii) the Holders holding Registrable Securities representing (after giving effect to
any adjustments) at least a majority of the aggregate number of Registrable Securities owned by all of the Holders;
provided
that such majority shall include the Investors. Any such written consent shall be binding upon the Company and all of the Holders.
(f)
Notices
. All notices, demands and other communications provided for or permitted hereunder shall be made in writing
and shall be made by registered or certified first-class mail, return receipt requested, telecopy, electronic transmission, courier
service or personal delivery:
(i) if to the
Company:
Pangaea Logistics Solutions Ltd.
109 Long Wharf, 2nd Floor
Newport, RI 02840
Attention: Edward Coll
Telephone: 401 846 7790
Telecopy:
E-mail:
ecoll@phoenixbulkus.com
with a copy
to:
505 Fifth Avenue
15th Floor
New York, NY 10017
Attention: Peter Yu
Paul Hong
Telephone: 212 461 6363
Telecopy: 212 461 6366
E-mail:
peter.yu@cartesiangroup.com
paul.hong@cartesiangroup.com
with a copy
to:
Willkie Farr & Gallagher LLP
787 7
th
Avenue
New York, NY 10036
Attention: Kirk A. Radke
Telephone: 212 728 8996
Telecopy: 212 728 9996
E-mail:
kradke@willkie.com
.
(ii) if to
the Investors, at the addresses set forth on the signature pages hereto;
(iii) if to
any Holder, as set forth in the applicable joinder agreement.
All such notices, demands and other communications
shall be deemed to have been duly given when delivered by hand, if personally delivered; when delivered by courier, if delivered
by commercial courier service; five Business Days after being deposited in the mail, postage prepaid, if mailed; and when receipt
is acknowledged, if telecopied or electronically transmitted. Any party may by notice given in accordance with this Section 9(f)
designate another address or Person for receipt of notices hereunder.
(g)
Successors and Assigns; Third Party Beneficiaries
. This Agreement shall inure to the benefit of and be binding upon
the successors and permitted assigns of the parties hereto as provided herein. The registration rights and requirements and related
rights of the Holders contained in this Agreement, shall be with respect to any Registrable Security, transferred to any Person
who is the transferee of such Registrable Security (including for avoidance of doubt, any Permitted Transferee), without the consent
of the Company, but only if transferred in compliance with this Agreement and only to the extent such transfer would not cause
the Registrable Securities to cease being Registrable Securities under Section 2(b). At the time of the transfer of any Registrable
Security as contemplated by this Section 9(g), such transferee shall execute and deliver to the Company a joinder agreement,
in form and substance attached as Exhibit A hereto, to evidence its agreement to be bound by, and to comply with, this Agreement
as a Holder. All of the obligations of the Company hereunder shall survive any such transfer. The Company shall not assign this
Agreement, in whole or in part. Except as provided in Section 8, no Person other than the parties hereto and their successors
and permitted assigns is intended to be a beneficiary of this Agreement.
(h)
Headings
. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect
the meaning hereof.
(i)
GOVERNING LAW; CONSENT TO JURISDICTION
. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF THAT WOULD APPLY THE LAWS OF ANOTHER
JURISDICTION. The parties hereto irrevocably submit to the exclusive jurisdiction of any state or federal court sitting in the
County of New York, in the State of New York over any suit, action or proceeding arising out of or relating to this Agreement or
the affairs of the Company. To the fullest extent they may effectively do so under applicable law, the parties hereto irrevocably
waive and agree not to assert, by way of motion, as a defense or otherwise, any claim that they are not subject to the jurisdiction
of any such court, any objection that they may now or hereafter have to the laying of the venue of any such suit, action or proceeding
brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in
an inconvenient forum.
(j)
WAIVER OF JURY TRIAL
. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY DISPUTE OR CONTROVERSY THAT MAY ARISE, WHETHER
IN WHOLE OR IN PART, UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH PARTY HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY CLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(k)
Severability
. If any one or more of the provisions contained herein, or the application thereof in any circumstance,
is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions hereof shall not be in any way impaired, unless the provisions
held invalid, illegal or unenforceable shall substantially impair the benefits of the remaining provisions hereof.
(l)
Rules of Construction
. Unless the context otherwise requires, references to sections or subsections refer to sections
or subsections of this Agreement. Terms defined in the singular have a comparable meaning when used in the plural, and vice versa.
(m)
Interpretation
. The parties hereto acknowledge and agree that (i) each party hereto and its counsel reviewed
and negotiated the terms and provisions of this Agreement and have contributed to its revision, (ii) the rule of construction
to the effect that any ambiguities are resolved against the drafting party shall not be employed in the interpretation of this
Agreement and (iii) the terms and provisions of this Agreement shall be construed fairly as to all parties hereto, regardless
of which party was generally responsible for the preparation of this Agreement.
(n)
Entire Agreement
. This Agreement is intended by the parties as a final expression of their agreement and intended
to be a complete and exclusive statement of the agreement and understanding of the parties hereto with respect to the subject matter
contained herein. There are no restrictions, promises, representations, warranties or undertakings with respect to the subject
matter contained herein, other than those set forth or referred to herein. This Agreement supersedes all prior agreements and understandings
among the parties with respect to such subject matter.
(o)
Further Assurances
. Each of the parties shall execute such documents and perform such further acts as may be reasonably
required or desirable to carry out or to perform the provisions of this Agreement.
(p)
Other Agreements
. Nothing contained in this Agreement shall be deemed to be a waiver of, or release from, any obligations
any party hereto may have under, or any restrictions on the transfer of Registrable Securities or other securities of the Company
imposed by, any other agreement, including the Merger Agreement.
(q)
Counterparts
. This Agreement may be executed in any number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute
one and the same agreement.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF,
the undersigned have executed, or have caused to be executed, this Agreement on the date first written above.
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COMPANY:
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QUARTET HOLDCO LTD.
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By:
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/s/ David D. Sgro
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Name: David D. Sgro
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Title: CFO
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STOCKHOLDERS:
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/s/ Edward Coll
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Edward Coll
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/s/ Anthony Laura
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Anthony Laura
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LAGOA INVESTMENTS
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By:
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/s/ Deborah L. Davis
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Name: Deborah L. Davis
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Title: Director
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PANGAEA ONE, L.P.
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By:
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/s/ Peter Yu
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Name: Peter Yu
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Title: Managing Member
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PANGAEA ONE PARALLEL FUND (B), L.P.
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By:
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/s/ Peter Yu
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Name: Peter Yu
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Title: Managing Member
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[Signature Page – Registration Rights
Agreement]
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PANGAEA ONE (CAYMAN), L.P.
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By:
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/s/ Peter Yu
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Name: Peter Yu
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Title: Director
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PANGAEA ONE PARALLEL FUND, L.P.
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By:
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/s/ Peter Yu
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Name: Peter Yu
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Title: Director
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Schedule 1
Plan of Distribution
A selling stockholder
may also enter into hedging and/or monetization transactions. For example, a selling stockholder may:
(a)
enter into transactions with a broker-dealer or affiliate of a broker-dealer or other third party in connection with which
that other party will become a selling stockholder and engage in short sales of the common stock under this prospectus, in which
case the other party may use shares of common stock received from the selling stockholder to close out any short positions;
(b)
itself sell short common stock under this prospectus and use shares of common stock held by it to close out any short position;
(c)
enter into options, forwards or other transactions that require the selling stockholder to deliver, in a transaction exempt
from registration under the Securities Act, common stock to a broker-dealer or an affiliate of a broker-dealer or other third party
who may then become a selling stockholder and publicly resell or otherwise transfer that common stock under this prospectus; or
(d)
loan or pledge common stock to a broker-dealer or affiliate of a broker-dealer or other third party who may then become
a selling stockholder and sell the loaned shares or, in an event of default in the case of a pledge, become a selling stockholder
and sell the pledged shares, under this prospectus.
Exhibit A
Form of Joinder Agreement
ACKNOWLEDGMENT AND
AGREEMENT
Joinder to Registration
Rights Agreement
Relating to Quartet
Holdco Ltd. Common Stock
The undersigned (the
“
Transferee
”) wishes to receive, from _____________ (the “
Transferor
”), __________ shares,
par value $0.0001 per share, of common stock (the “
Common Stock
”), of Quartet Holdco Ltd., a Bermuda company
(the “
Company
”);
The Common Stock is subject
to that certain Registration Rights Agreement, dated as of October 1, 2014 and as further amended from time to time (the “
Agreement
”),
by and among the Company and certain investors named therein. Capitalized terms used herein and not otherwise defined are given
the meaning assigned to such terms in the Agreement;
The Transferee has been
given a copy of the Agreement and afforded ample opportunity to read it, and the Transferee is thoroughly familiar with its terms;
Pursuant to the terms
of the Agreement, the Transferor is prohibited from transferring the registration rights and requirements and related rights of
Holders conferred in the Agreement related to the Common Stock that constitutes the Registrable Securities unless in compliance
with the Agreement and in accordance with Section 9(g) thereof. This Acknowledgment and Agreement constitutes a joinder agreement
as contemplated by Section 9(g) of the Agreement.
NOW, THEREFORE, in consideration
of the mutual premises contained herein and for other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, and to induce the Transferor to transfer such Common Stock to the Transferee and the Company to permit such
transfer, the Transferee does hereby acknowledge and agree that (i) the Transferee has been given a copy of the Agreement and ample
opportunity to read it, and is thoroughly familiar with its terms, (ii) the Common Stock are subject to the terms and conditions
set forth in the Agreement and (iii) the Transferee shall become a party to the Agreement and shall be fully bound by, and subject
to, all of the covenants, terms and conditions of the Agreement as though an original party thereto.
Signed this ____ day
of _________, 20___,
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Transferee:
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By:
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Name:
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Title:
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Exhibit 10.3
LOCK-UP AGREEMENT
__________, 20__
Quartet Merger Corp.
777 Third Avenue, 37th Floor
New York, New York 10017
Pangaea Logistics Solutions Holding Ltd.
109 Long Wharf, 2nd Floor
Newport, RI 02840
Attention: Edward Coll
Ladies and Gentlemen:
In connection with
the Agreement and Plan of Reorganization (the “Merger Agreement”), dated as of April 30, 2014, by and among Quartet
Merger Corp. (“Quartet”), Quartet Holdco Ltd. (“Holdco”), Quartet Merger Sub, Ltd., Pangaea Logistics Solutions
Ltd. (“Company”) and the securityholders of the Company, to induce the parties to consummate the transactions contemplated
by the Merger Agreement, the undersigned agrees not to, either directly or indirectly, during the “Restricted Period”
(as hereinafter defined):
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(1)
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sell or offer or contract to sell or offer, grant any option or warrant for the sale of, assign,
transfer, pledge, hypothecate, or otherwise encumber or dispose of (all being referred to as a “Transfer”) any legal
or beneficial interest in any shares of Holdco Stock, issued or to be issued to the undersigned or to any other person or entity
of which the undersigned is an Affiliate (as defined below), in each case in connection with the transactions contemplated by the
Merger Agreement, including without limitation the Net Income Shares and Cancellation Shares (the “Restricted Securities”);
for the avoidance of doubt, if any Holdco Stock is acquired by the undersigned after the Closing Date in any open-market transaction,
such Holdco Stock shall not be deemed a “Restricted Security” hereunder,
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(2)
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enter into any swap or any other agreement or any transaction that transfers, in whole or in part,
directly or indirectly, the economic consequence of ownership of any of the Restricted Securities, whether such swap transaction
is to be settled by delivery of any Restricted Securities or other securities of any person, in cash or otherwise, or
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(3)
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publicly disclose the intention to make any offer, sale, pledge or disposition, or to enter into
any transaction, swap, hedge or other arrangement relating to any of the Restricted Securities (it being understood that the foregoing
shall not prohibit the undersigned from making any such disclosure to the undersigned’s existing or potential shareholders,
members, partners, Affiliates, general partners, directors, officers, employees or partners, and their respective shareholders,
members, partners, Affiliates, general partners, directors, officers, employees or partners, in each case on a confidential basis).
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As used herein, “Restricted Period”
means the period commencing on the Closing Date and (A) with respect to 50% of such Restricted Securities, ending on the earlier
of (i) the date on which the Closing Price of the shares of Holdco Stock exceeds $12.50 per share (as adjusted for stock splits,
stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period following
the Closing Date and (ii) the day preceding the day that is twelve months after the Closing Date and (B) with respect to the remaining
50% of such Restricted Securities, ending on the day preceding the day that is twelve months after the Closing Date;
provided
,
however
, the Restricted Period shall terminate immediately prior to the consummation of a liquidation, merger, stock exchange
or other similar transaction that results in any HoldCo stockholder having the right to exchange their shares of Holdco Stock for
cash, securities or other property (including pursuant to an acceptance of a general offer for Restricted Securities made to all
holders of such class of securities on equal terms or provision of an irrevocable undertaking to accept such an offer).
For purposes of this
Lock-Up Agreement, “Closing Price” means, with respect to the Restricted Securities, as of the date of determination,
(i) if the Restricted Securities are listed on a national securities exchange, the closing price per share of a Restricted Security
officially reported on the principal national securities exchange on which the Restricted Securities are then listed or admitted
to trading; or (ii) if the Restricted Securities are not then listed or admitted to trading on any national securities exchange,
the average of the reported closing bid and asked prices of the Restricted Securities on such date on the principal over the counter
market on which the Restricted Securities are traded; or (iii) if neither of clause (i) or (ii) is applicable, a market price per
share determined in good faith by the Holdco Board or, if such determination is not satisfactory to the undersigned for whom such
determination is being made, by a nationally recognized investment banking firm mutually selected by Holdco and the undersigned,
the expenses for which shall be borne equally by Holdco and the undersigned. If trading is conducted on a continuous basis on any
exchange, then the closing price shall be at 4:00 P.M. New York City time
Notwithstanding the
foregoing limitations, this Lock-Up Agreement will not prevent any Transfer of any or all of the Restricted Securities, either
during the undersigned’s lifetime or on the undersigned’s death (in the event the undersigned is an individual rather
than an entity), (i) in a transaction that does not involve a Public Offering or is not made through a securities exchange or an
over-the-counter securities market, or (ii) by gift, will or intestate succession, or by judicial decree, to the undersigned’s
beneficiaries or “family members” (as defined below), as applicable, or to trusts, corporations, partnerships, limited
liability companies, family limited partnerships and similar entities primarily for the benefit of the undersigned or the undersigned’s
“family members” or executives of Holdco or any controlled subsidiary of Holdco; provided, however, that in each and
any such event it shall be a condition to the Transfer that the transferee execute an agreement stating that the transferee is
receiving and holding the Restricted Securities subject to the provisions of this Lock-Up Agreement. For purposes of this sub-paragraph,
“family member” shall mean any relationship by blood, marriage or adoption, including, but not limited to, spouse,
lineal descendants, stepchildren, father, mother, brother or sister of the transferor or of the transferor’s spouse. For
purposes of this Lock-Up Agreement, “Public Offering” means an underwritten public offering of registrable securities
pursuant to an effective registration statement under the Securities Act, other than pursuant to a registration statement on Form
S-4 or Form S-8 or any similar or successor form.
Also notwithstanding
the foregoing limitations, in the event the undersigned is an entity rather than an individual, this Lock-Up Agreement will not
prevent any Transfer of any or all of the Restricted Securities to the shareholders, members, Affiliates, directors, officers,
employees or partners of such entity or any Affiliate of the foregoing or Holdco or any controlled subsidiary of Holdco; provided,
however, that in each and any such event it shall be a condition to the Transfer that the transferee execute an agreement stating
that the transferee is receiving and holding the Restricted Securities subject to the provisions of this Lock-Up Agreement.
Any of the Restricted
Securities subject to this Lock-Up Agreement may be released, from time to time, in whole or part from the terms hereof upon the
unanimous written consent of the disinterested members of the Holdco Board (provided the shares of Holdco Stock held by the Quartet
Founding Shareholders are similarly released from all restrictions on transfer then applicable to such shares).
The undersigned hereby
authorizes Holdco’s transfer agent to apply to any certificates representing Restricted Securities issued to the undersigned
an appropriate legend to reflect the existence and general terms of this Lock-up Agreement.
This Lock-up Agreement
will be legally binding on the undersigned and on the undersigned’s successors and permitted assigns, and is executed as
an instrument governed by the law of Delaware.
This Lock-Up Agreement
shall automatically terminate and be of no further force or effect upon the earlier to occur of (i) the termination of the Merger
Agreement and (ii) the first Business Day following the expiration of the Restricted Period.
All capitalized terms
used herein, but not otherwise defined, shall have the meaning ascribed to them in the Merger Agreement. This Lock-Up Agreement
constitutes the entire agreement, and supersedes all prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter of this Lock-Up Agreement, including without limitation that certain letter agreement dated
as of March 20, 2014 by and between Quartet and Cartesian Capital Group, LLC. Sections 10.1 – 10.4, 10.8 – 10.15 of
the Merger Agreement are incorporated herein by reference and shall apply to this Lock-Up Agreement
mutatis mutandis
. Each
of the parties to this Lock-Up Agreement agrees to use its reasonable best efforts to take, or cause to be taken, all actions,
and to do, or cause to be done, and to assist and cooperate with the other parties to this Lock-Up Agreement in doing, all things
necessary, in the most expeditious manner practicable to carry out or to perform the provisions of this Lock-Up Agreement
[Signature page follows]
SIGNATURE PAGE TO THE LOCK-UP AGREEMENT
Exhibit 10.4
Loan No. 310629100
CONSTRUCTION LOAN AGREEMENT
AGREEMENT
made this 24
th
day of January, 2011, by and between
Rockland Trust Company
, a Massachusetts trust company with a place of business located
at 288 Union Street, Rockland, Massachusetts 02370 (the "Lender") and
109 LONG WHARF LLC
, a Delaware limited liability
company with a mailing address c/o Phoenix Bulk Carriers, 88 Valley Road, Middletown, Rhode Island 02842 (the "Borrower").
I. DEFINITIONS
1.01.
Certain Defined Terms
.
In addition to the definitions contained in the foregoing recital clause, the following terms shall have the meanings provided
below:
"
Agreement
" means this
Agreement, as amended from time to time.
"
Change Order
" means any
change, amendment or modification to the Plans or the Construction Contract.
"
Collateral
" shall have
the meaning ascribed to that term in the Mortgage.
"
Collateral Assignment
"
means the Collateral Assignment of Leases and Rents by the Borrower to the Lender dated of even date.
"
Completion
" or "
Completion
of the Improvements
" shall mean the completion and payment of the Direct Costs and the Indirect Costs of all design, construction,
equipping, furnishing and tenant-fixturing of the Improvements, all clearing, landscaping, lighting and paving of the Premises,
and procurement of all approvals, licenses and permits necessary to make the same ready for use and occupancy, open the same to
the public and place the same in operation in order to convert, exchange, remortgage, rent, sell, use or otherwise dispose of the
Premises and Improvements, as a whole or in parts, so that the Loan can be repaid or refinanced on or before the maturity date
of the Note.
"
Completion Date
" shall
mean January 24, 2012.
"
Construction Assignment
"
shall mean the Assignment of Project Contracts by and between the Borrower and the Lender dated even date.
"
Construction Consultant
"
shall mean an independent qualified engineer or architect, selected by the Lender whose duties shall include analysis of the Plans
and Requisitions, monitoring progress on the construction of the Improvements, and other customary services incidental to the foregoing.
"
Construction Contract
"
shall mean that contract between the Borrower and the Contractor dated July 1, 2010 to provide, or supervise or manage the procurement
of, substantially all labor and materials needed for the construction of the Improvements.
"
Construction Term
" shall
mean the period commencing on the date hereof and ending on the Completion Date.
"
Contractor
" shall mean
The Damon Company, with a place of business located at 62 Warner Street, Newport, Rhode Island.
"
Corporate Guarantor
"
shall mean Bulk Partners (Bermuda) Ltd.
"
Default
" means any of
the events specified in Article IX hereof which with the passage of time or giving of notice or both would constitute an Event
of Default.
"
Direct Costs
" shall mean
the aggregate costs of all labor, materials, equipment, fixtures and furnishings necessary for the Completion of the Improvements.
The initial projection of the Direct Costs appears on the Initial Project Cost Statement.
"
Event of Default
" means
an Event of Default described in Article IX hereof.
"
GAAP
" means generally
accepted accounting principles in the United States.
"
Governmental Authorities
"
means the United States, the state in which the Premises is located and any political subdivision, agency, department, commission,
board, bureau or instrumentality of either of them, including any local authorities, which exercise jurisdiction over the Premises
or the construction of the Improvements thereon.
"
Guarantor
" shall, jointly
and severally, mean Anthony Laura, Edward Coll and Bulk Partners (Bermuda) Ltd.
"
Guaranty
" shall collectively
mean the Guaranties of the Guarantor dated of even date.
"
Hazardous Waste Laws
"
shall mean any federal, state or local law governing the existence, release, generation, storage or disposal of any Hazardous Waste
now or hereafter existing.
"
Hazardous Waste
" shall
mean any "oil," "hazardous material," "hazardous wastes" or "hazardous substances" as defined
in the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. §9601
et
seq
., as amended,
or any similar statute, and the regulations adopted pursuant thereto and shall include without limitation (whether or not included
in the definition contained in said laws), petroleum, solvents, asbestos and other chemicals which would be materially dangerous
to the environment or to human beings.
"
Improvements
" shall mean
a building or buildings of office space and all related facilities, improvements and fixtures to be renovated on the Premises.
"
Indebtedness
" means, for
the Borrower (i) all indebtedness or other obligations of the Borrower for borrowed money or for the deferred purchase price of
property or services, (ii) all indebtedness or other obligations of any other Person for borrowed money or for the deferred purchase
price of property or services the payment or collection of which the Borrower has guaranteed (except by reason of endorsement for
collection in the ordinary course of business) or in respect of which the Borrower is liable, contingently or otherwise, including,
without limitation, liable by way of agreement to purchase, to provide funds for payment, to supply funds to or otherwise to invest
in such other Person, or otherwise to assure a creditor against loss, (iii) all indebtedness or other obligations of any other
Person for borrowed money or for the deferred purchase price of property or services secured by (or for which the holder of such
indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, deed of trust, pledge, lien, security
interest or other charge or encumbrance upon or in property (including, without limitation, accounts and contract rights) owned
by the Borrower, whether or not the Borrower has assumed or become liable for the payment of such indebtedness or obligations and
(iv) capitalized lease obligations of the Borrower.
"
Indirect Costs
" shall
mean all costs of Completion of the Improvements other than Direct Costs, including but not limited to, architects' fees, attorneys'
fees, interest, real estate taxes, survey costs, accounting fees and title insurance premiums. The initial projection of the Indirect
Costs appears on the Initial Project Cost Statement.
"
Individual Guarantor
"
shall, jointly and severally, mean Anthony Laura and Edward Coll.
"
Initial Advance
" shall
mean the first advance to be made hereunder, which may be contemporaneous with or subsequent to the time of the execution and delivery
by the Borrower and the Lender of this Agreement.
"
Initial Project Cost Statement
"
means the projection of, among other things, the Direct Costs and the Indirect Costs as set forth in
Exhibit A
attached
hereto and made a part hereof.
"
Leases
" means any and
all leases with respect to the Premises including the lease with Phoenix Bulk Carriers (US) LLC.
"
Loan
" shall mean the loan
of up to One Million Forty-Eight Thousand Dollars ($1,048,000) from the Lender to the Borrower.
"
Major Subcontracts
" shall
mean the subcontracts of each and every subcontractor or material supplier whose bid represents 10% or more of the total costs
of Completion of the Improvements and a sufficient number of subcontractors' and material suppliers' contracts whose bids collectively
represent not less than 70% of the total costs of Completion of the Improvements.
"
Mortgage
" shall mean the
Open-End Mortgage and Security Agreement by the Borrower to the Lender dated even date.
"
Note
" shall mean the Borrower's
secured promissory note in the form attached hereto as
Exhibit B
, which Note is hereby incorporated herein by reference
and made a part hereof.
"
Obligations
" means all
obligations and all liabilities of the Borrower under this Agreement, the Note and the Security Documents.
"
Permitted Encumbrances
"
shall mean those encumbrances, if any, permitted by the Lender on the property of the Borrower as set forth in
Exhibit C
attached hereto and incorporated herein by reference.
"
Person
" means and includes
an individual, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department
or agency thereof.
"
Plans
" means all preliminary
and final drawings, plans, specifications and other documents (including but not limited to complete architectural, structural,
mechanical, electrical and sprinkler system) prepared by the Borrower or the Contractor and approved by the Lender and the Construction
Consultant which describe and show the materials, equipment, fixtures and furnishings necessary for the construction of the Improvements,
including all amendments and modifications thereof made by approved Change Orders and also showing minimum grade of finishes and
furnishings for all areas of the Improvements to be leased or sold in ready-for-occupancy condition.
"
Premises
" means that certain
parcel of land, with all buildings and improvements now or hereafter situated thereon, located at 109 Long Wharf, Newport, Rhode
Island and more particularly described in the Mortgage.
"
Project Proceeds
" shall
mean the monies and proceeds derived by the Borrower or its affiliates from the Premises or the Improvements prior to the repayment
of the Loan, including any reimbursements for tenant work done by the Borrower, tax refunds, refunds or rebates from contractors
or suppliers, performance bond and insurance proceeds, condemnation awards and capital contributions or loans by such affiliates
or other Persons or entities but
excluding
tenant security deposits, rentals and any ordinary and necessary costs or expenses
of raising or collecting such monies and proceeds.
"
Requisition
" means a statement
by the Borrower and, in the case of a Direct Cost requisition, by the Borrower and the Contractor, in the forms acceptable to the
Lender setting forth the amount of the Loan advance requested in each instance.
"
Retainage
" shall mean
the retention by the Lender of five percent (5%) of the funds to be advanced under a Direct Cost Requisition pending the Completion
of the Improvements.
"
Security Documents
" means
the Mortgage, the Guaranty, the Collateral Assignment, the Construction Assignment and any other agreement or instrument now or
hereafter securing the Note.
"
Site Assessment Report
"
shall mean an environmental site assessment report prepared by a qualified environmental engineer satisfactory to the Lender indicating
that no Hazardous Waste is or has been present on the Premises or areas adjacent to the Premises and containing evidence satisfactory
to the Lender that no "notice of responsibility" or other order has been issued by the United States Environmental Protection
Agency against the Borrower or the Premises.
1.02.
Defined LIBOR Terms
.
“
Hedging Contracts
”
means the ISDA Master Agreement and Schedule thereto, and any swap agreements, as defined in 11 U.S.C. §101, entered into
pursuant to said ISDA Master Agreement and Schedule thereto. Any prepayment, acceleration, reduction, increase or any change in
the terms of the Note will not alter the notional amount of such interest rate swap transactions, which will remain in full force
and effect notwithstanding any such prepayment, acceleration, reduction, increase or change, subject to the terms of such interest
rate swap transactions.
“
Interest Rate
”
shall mean the rate at which interest shall accrue on the unpaid principal balance of the Note during each Interest Period from
the date hereof at a rate per annum equal to 1-month LIBOR plus two hundred eighty-five (285) basis points per annum, adjusted
monthly, subject to the Hedging Contracts, as hereinafter defined.
“
Interest Period
”
shall mean each period commencing on and including the date an interest payment is due as provided in the payment schedule in the
Note and ending on but excluding the date the next interest payment is due, with the first Interest Period commencing on the day
of closing. Upon determination by the Lender of the Interest Rate for any Interest Period, such Interest Rate shall remain in effect
for the entire Interest Period until redetermined for the next successive Interest Period.
“
LIBOR
” is
the rate for U.S. dollar deposits with a maturity equal to one month, and reported on Reuters Screen LIBOR01 as of 11:00 a.m. London
time, on the day that is two (2) London business days prior to beginning of the applicable Interest Period. Interest shall be computed
based upon a year consisting of twelve (12) months of thirty days each. If for any reason, LIBOR ceases to be available, then interest
shall accrue upon the unpaid principal balance of the Note during each Interest Period at a rate equal to one and one-half percent
(1.5%) per annum above the Prime Lending Rate in effect upon the commencement of (or is such day is not a business day, the last
business day before) each applicable Interest Period.
"
Prime Lending Rate
"
shall mean the rate listed in the Wall Street Journal as the so-called national "prime rate", but if no such designation
is published, the term shall mean the nearest equivalent to such term as published by the Wall Street Journal (as determined by
the Lender), or if no equivalent is published by the Wall Street Journal, by another financial publication of national standing.
The so-called Prime Lending Rate is a rate for reference purposes only and is not necessarily the lowest rate offered by the Lender.
1.03.
LIBOR Provisions
.
(a)
The Borrower shall hedge the floating interest expense of the Loan evidenced by the Note by maintaining one or more interest rate
swap agreements in an aggregate notional amount equal to the principal balance of the Note outstanding over such term that the
hedge is executed and providing for a fixed rate acceptable to Lender, with the Borrower making fixed rate payments and receiving
floating rate payments to offset changes in the variable interest expense of the Note, all upon such terms and conditions as shall
be acceptable to Lender. To establish this interest rate hedge, the Borrower and the Lender have entered into the Hedging Contracts.
(b) The Borrower hereby warrants and represents
that it has received and reviewed the Derivative Risk Disclosure provided to the Borrower by the Lender. Borrower warrants and
represents that it knows and understands the risks associated with the transactions contemplated by the Hedging Contracts, and
has consulted with or had the opportunity to consult with legal, tax and accounting advisors regarding such risks.
1.04.
Accounting Terms.
All
accounting terms not specifically defined herein shall be construed in accordance with GAAP consistent with those applied in the
preparation of all financial data submitted pursuant to this Agreement and prepared in accordance with GAAP.
II. GENERAL TERMS
2.01.
Amount of Loan
.
The
Borrower has applied to the Lender for the Loan and the Lender has agreed to make the Loan to the Borrower subject to all the terms
and conditions of this Agreement.
2.02.
Note
.
The borrowing
is to be evidenced by the Note.
2.03.
Payments
.
The Borrower
shall make payments to the Lender in immediately available funds, as and when required by the Note.
2.04.
Security for the Note
.
The Note shall be secured by the Security Documents and by such additional security as shall be agreed to by the Lender and the
Borrower from time to time.
2.05.
Advances.
Subject to
the provisions of this Agreement, the Lender will advance and the Borrower will accept the Loan in installments as follows: The
Initial Advance will be made upon the satisfaction of the applicable conditions set forth in Article IV hereof relevant thereto,
and all subsequent advances shall be made not more frequently than monthly thereafter, upon the satisfaction of the applicable
conditions set forth in Article V hereof, in amounts which shall be equal to the aggregate of the Direct Costs and the Indirect
Costs incurred by the Borrower through the end of the period covered by the Requisition
less
:
(i) The Retainage until the Project
is fifty percent (50%) complete, at which time the Retainage may be eliminated; and
(ii) The total of the Loan advances
theretofore made by the Lender;
and
, at the election of the Lender,
less
any combination of the following further amounts:
(iii) The entire amount by which
any Direct Costs or Indirect Costs are (or are estimated by the Lender to be) greater than the amounts set forth on the Initial
Project Cost Statement for such costs; and/or
(iv) Any costs covered by the
Requisition not approved, certified or verified as provided in Section 2.06 below, any Indirect Costs covered by a previous
Requisition for which proof of payment has not been received by the Lender,
and/or
any Direct Costs covered by a previous
Requisition for which payment receipts have not been received by the Construction Consultant and/or the Lender; and/or
(v) Any real estate taxes, mechanics'
liens, security interests, claims or other charges against the Premises or the Improvements and any interest, fees or other costs
which the Borrower may have failed to pay in accordance with this Agreement, the Note or the Security Documents.
2.06.
Certification of Direct Costs.
All Direct Costs are to be certified by the Contractor and verified by the Construction Consultant. Verification of the monthly
progress and Direct Costs of construction of the Improvements which have been incurred by the Borrower from time to time and the
estimated total Direct Costs of construction of the Improvements from time to time may be made by the Construction Consultant in
his sole discretion. Both the Direct Costs and the Indirect Costs are to be approved by the Lender and may also be verified by
the Lender from time to time.
2.07.
Location of Advances and Deposit
Thereof.
All advances are to be made from the principal office of the Lender or from such other place as the Lender may
designate. Requisitions shall be received five (5) business days prior to the date of the requested advance. Such advance shall
be made to or deposited in a separate bank account with the Lender which shall (a) be the depository for all advances made hereunder
and (b) not be drawn upon except to pay (or to reimburse the Borrower if previously paid) for Direct Costs and Indirect Costs approved
by the Lender.
2.08.
Last Advance.
Amounts
not advanced pursuant to paragraph (a)(i) of Section 2.05 during the course of construction of the Improvements shall be advanced
upon the satisfaction of the conditions set forth in Section 5.02 hereof for the receipt of the last advance for Direct Costs.
Loan budget amounts for Indirect Costs not advanced prior to Completion of the Improvements shall be advanced until exhausted,
not more frequently than once a month, for the Indirect Costs as incurred after such Completion.
2.09.
Building Material Advances.
The Lender shall not be required to make any advances for building materials or furnishings which are not stored on the Premises
or which are stored on the Premises but not affixed to or incorporated in the Improvements; provided, however, the Lender may make
advances for such materials if (a) they are stored on the Premises or in a bonded warehouse, (b) they are covered by adequate insurance,
(c) they are adequately protected against theft and damage and (d) the Construction Consultant confirms the foregoing and recommends
such disbursements.
2.10.
Acceleration of Advances.
If the Lender considers that its best interests and the best interests of Completion of the Improvements lies in accelerating the
amounts to be advanced pursuant to paragraph (a) of Section 2.05 hereof, it shall be entitled to do so and no Person dealing with
the Borrower or the Contractor or any other Person shall have standing to demand any different performance from the Lender. The
Lender may also disburse proceeds of the Loan, at its option, directly to the Contractor and/or subcontractors.
2.11.
Reallocation of Loan Budget
Amounts.
If at any time during the existence of this Agreement the undisbursed balance of the Loan budget amount for any
category of cost shown on the Initial Project Cost Statement is, in the Lender's sole judgment, excessive, the excess may be reallocated
to any other Loan budget amount balance which is deemed by the Lender to be insufficient.
2.12.
Insufficient Loan Proceeds.
If at any time (which may include the execution of this Agreement and the inception of the Loan), and from time to time, the Lender
shall determine that the Loan, or the undisbursed balance thereof, is insufficient to cover the remaining costs of Completion of
the Improvements, then to further secure payment, the Lender may require the Borrower to pay sufficient funds to the Lender to
cover the Completion of the Improvements.
2.13.
Permanent Phase of Loan
.
On January 24, 2012, the Loan shall continue for the term and subject to the conditions and requirements as stated in the Note,
and all of the representations, warranties, covenants and agreements of the Borrower stated herein shall continue until payment
in full of all principal, interest and charges due under the Note and hereunder.
2.14.
Forced-Funding
.
Loan
proceeds which are not advanced in accordance with the Loan Disbursement Schedule attached hereto as
Exhibit D
and incorporated
herein by reference shall be forced funded and disbursed into an interest earning deposit account with the Lender. Advances drawn
from this account shall bear interest at the same rate as all other Advances. Disbursements of funds from such forced-funded deposit
account will occur on the same terms and conditions as established by this Agreement for construction draws. The forced funded
deposit account shall serve as collateral for the Loan. All interest earned on the forced funded deposit account will, if the Loan
is not in Default, accrue to the Borrower. By executing this Agreement, the Borrower hereby directs and authorizes the Lender to
force-fund the account if necessary and no further direction or authorization from Borrower shall be necessary with respect to
such advances, and all such advances shall be secured by the Security Documents.
2.15.
Participations
.
The
Lender reserves the right without notice to the Borrower to sell participations in the Loan, in whole or in part, provided that
the Borrower's rights under this Agreement will not be modified thereby. Furthermore, the Lender shall have the right to make available
to actual or potential participants all financial information, public or non-public, that the Lender receives from the Borrower.
2.16.
Environmental Condition.
The Borrower and Lender acknowledge that the Premises is governed by an environmental land use restriction (“ELUR”).
The Borrower shall, at all times comply with the requirements of the Rhode Island Department of Environmental Management, during
and after construction of the improvements (as further set forth in Section 5.02(d)) and the Borrower shall further comply with
the terms of the ELUR by providing the Bank with a copy of the required annual inspection report as it is submitted to the Department
of Environmental Management.
III. REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this
Agreement and make the Loan, the Borrower represents and warrants to the Lender (which representations and warranties shall survive
the delivery of the Note and the making of the Loan) that:
3.01.
Financial Statements
.
All financial statements previously furnished by the Borrower to the Lender have been prepared in accordance with GAAP applied
on a basis consistent with that of preceding periods, are complete and correct, and fully and accurately reflect the financial
condition of the Borrower as of said dates, and the results of its operations for the period stated. To the best of the Borrower's
knowledge and belief, the Borrower does not have any contingent obligations, liabilities for taxes, unusual long-term commitments
or lease commitments except as specifically mentioned in such financial statements or the notes thereto. Since the date of the
most recent financial statements submitted to Lender there has been no material adverse change in the financial condition of the
Borrower.
3.02.
Organization and Qualification
.
The Borrower (i) is duly organized, validly existing and in good standing under the laws of its state of organization, (ii)
has the power and authority to own its properties and to carry on business as now being conducted and is qualified to do business
in every jurisdiction where such qualification is necessary and (iii) has the power to execute and deliver this Agreement, to borrow
hereunder and to execute and deliver to the Lender the Note, the Security Documents and any other instruments required hereunder.
3.03.
No Conflict
.
(a) The
Borrower has taken all necessary action to authorize the borrowings on the terms and conditions of this Agreement and to authorize
the execution, delivery and performance of this Agreement, the Note, the Security Documents and any other agreements referred to
herein or related to the Loan.
(b) All consents, licenses, approvals or authorizations
of, or registrations or declarations with, any Governmental Authorities, bureaus or agencies which are required in connection with
the execution, delivery, performance, validity or enforceability of this Agreement, the Note and any other agreements referred
to herein have been duly obtained and are in full force and effect.
(c) The execution, delivery and performance
of this Agreement, the Note, the Security Documents and any other agreement referred to herein will not be in conflict with, result
in a breach of, or constitute (with due notice or lapse of time or both) a default under, any provision of any existing law or
regulation or of any order or decree of any courts or Governmental Authorities, bureaus or agencies or of the Articles of Organization
or Operating Agreement of the Borrower or of any mortgage, indenture, contract or other agreement to which the Borrower is a party
or which purports to be binding upon it or upon any of its properties or assets, and will not result in the creation or imposition
of any lien, charge or encumbrance on, or security interest in, any of its properties or assets, except in favor of the Lender.
3.04.
Litigation
.
There is
no action, suit or proceeding at law or in equity or by or before any Governmental Authorities or other agencies now pending or,
to the knowledge of the Borrower, threatened against or affecting the Borrower which, if adversely determined, would have a material
adverse effect on the business operations, properties, assets or condition (financial or otherwise) of the Borrower. The Borrower
is not in default with respect to any order of any courts, arbitrators or Governmental Authorities arising out of any action, suit
or proceeding under any statute or other law.
3.05.
No Default
.
The Borrower
is not a party to any agreement or instrument or subject to any restriction adversely affecting its business, properties or assets,
operations or conditions, financial or otherwise. The Borrower is not in default in the performance, observance or fulfillment
of any of the obligations, covenants or conditions contained in any agreement or instrument to which it is a party or by which
its assets may be bound, and no Default or Event of Default as hereinafter specified has occurred and is continuing hereunder.
3.06.
Properties
.
The Borrower
has good title to, or valid leasehold interests in, all of its properties and assets, real and personal, including the Premises,
free and clear of all mortgages, liens and encumbrances, except for the Permitted Encumbrances.
3.07.
Taxes
.
The Borrower
has filed or caused to be filed all tax returns required to be filed, and has paid all taxes shown to be due and payable on said
returns or on any assessments made against it, and no tax liens have been filed and no claims are being asserted, or proposed or
threatened to be asserted, with respect to any taxes which are not reflected in the financial statements referred to in Section
3.01 hereof, and the Borrower is currently providing adequate reserves for all current taxes.
3.08.
No Pending Insolvency
.
Any funds advanced to the Borrower under this Agreement do not and will not render the Borrower insolvent; the Borrower is not
contemplating either the filing of a petition under any state or federal bankruptcy or insolvency laws or the liquidation of all
or a major portion of its property and the Borrower has no knowledge of any Person contemplating the filing of any such petition
against it, and none of such properties and assets owned by the Borrower is subject to any mortgage, security interest, pledge,
lien, charge, encumbrance or title retention or other security agreement or arrangement of any nature whatsoever, except for the
Permitted Encumbrances.
3.09.
Statements
.
No statement
of fact made by or on behalf of the Borrower in this Agreement or in any certificate or schedule furnished to the Lender pursuant
hereto, contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements contained
therein or herein not misleading. There is no fact presently known to the Borrower which has not been disclosed to the Lender which
materially affects adversely nor as far as the Borrower can foresee, will materially affect adversely the property, business, prospects
or condition (financial or otherwise) of the Borrower.
3.10.
Legally Enforceable Agreement
.
This Agreement, the Note, the Security Documents and any other documents executed by the Borrower in connection with the Loan,
are the legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective
terms, except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and except as certain remedies thereunder may be subject to equitable principles.
3.11.
Regulation U
.
The Borrower
is not engaged principally, or as one of the Borrower's important activities, in the business of extending credit for the purpose
of purchasing or carrying margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System),
and will not use the proceeds of the Loan so as to violate Regulation U as it may be amended or interpreted from time to time by
the Board of Governors of the Federal Reserve System.
3.12.
Plans
.
The Plans are
satisfactory to the Borrower, have been reviewed and approved by the Guarantor, the Contractor, the tenants under any Leases which
require approval of the Plans and, to the extent required by applicable law or any effective restrictive covenant, by all Governmental
Authorities and the beneficiary of any such covenant, respectively. The Plans so approved have been initialed by the Borrower and
the Contractor. All construction, if any, already performed on the Improvements has been performed within the perimeter of the
Premises in accordance with the Plans approved by the Persons named above and with any restrictive covenants applicable thereto.
There are no structural defects in the Improvements or violations of any requirement of any Governmental Authorities with respect
thereto; the planned use of the Improvements complies with applicable zoning ordinances, regulations and restrictive covenants
affecting the Premises as well as all environmental, ecological, landmark and other applicable laws and regulations; and all requirements
for such use have been satisfied.
3.13.
Utilities.
All utility
services necessary for the construction of the Improvements and the operation thereof for their intended purposes are available
at the boundaries of the Premises, including, without limitation, water supply, fire protection, storm and sanitary sewer, gas,
electric power and telephone facilities, and are of sufficient capacity to service adequately the Improvements and all necessary
governmental regulatory consents to the connecting of such facilities to the Improvements (when constructed) have been obtained
(which consents are not on a "stand-by" basis).
3.14.
Roads
.
All roads necessary
for the full utilization of the Improvements for their intended purposes have either been completed or the necessary rights of
way therefor have been acquired by the appropriate Governmental Authorities or dedicated to public use and accepted by the Governmental
Authorities, and all necessary steps have been taken by the Borrower and the Governmental Authorities to assure the complete construction
and installation thereof no later than the Completion Date or any earlier date required by any law, order or regulation or Lease.
3.15.
Leases
.
The Leases are
in full force and effect, there are no defaults under any of the provisions thereof and all conditions to the effectiveness and
continuing effectiveness thereof required to be satisfied as of the date hereof have been satisfied.
3.16.
No Violation; Approvals
.
Construction of the Improvements will not violate the Permitted Encumbrances nor any zoning, environmental, building code, subdivision
or land use ordinance, regulation or law. No approvals are required by the U.S. Environmental Protection Agency or the Department
of Housing and Urban Development under the Flood Disaster Act of 1973.
3.17.
Brokerage Commissions
.
The making of the Loan or the Lender's acquisition of the Note or any of the Security Documents will not subject the Lender to
any claim for a brokerage commission.
IV. CONDITIONS OF MAKING THE INITIAL
ADVANCE
The obligation of the Lender to make the
Initial Advance hereunder is subject to the following conditions precedent:
4.01.
Representations
.
The
representations and warranties set forth in Article III hereof shall be true and correct on and as of the date hereof and the date
that each advance under the Loan is made.
4.02.
Certification
.
The Borrower
shall have executed and delivered to the Lender, upon the execution of this Agreement, the following: (a) a Certificate of the
Members of the Borrower certifying the Votes of the Members authorizing the execution and delivery of this Agreement, the Note,
the Security Documents and any other documents related to the Loan, and (b) such other supporting documents as the Lender may reasonably
request.
4.03.
Legal Opinion
.
The Lender
shall have received the favorable written opinion of Corcoran, Peckham, Hayes and Galvin PC, counsel for the Borrower, dated the
date of the Loan, satisfactory to the Lender and its counsel in scope and substance, with respect to, among other things, the matters
set forth in Sections 3.02, 3.03, 3.04 and 3.05.
4.04.
Good Standing
.
The Lender
shall have received for the Borrower Certificates of Good Standing from the Delaware Secretary of State.
4.05.
Legal Matters
.
All legal
matters incident to the transactions hereby contemplated shall be satisfactory to counsel for the Lender.
4.06.
Commitment Letter
.
There
shall be compliance with all terms of the commitment letter of the Lender to the Borrower dated December 29, 2010.
4.07.
No Material Damage.
The Improvements, if any, shall not have been materially injured or damaged by fire or other casualty.
4.08.
First Requisition.
The
Lender shall have received a Requisition for the Initial Advance, together with proof of payment of the Indirect Costs for which
the advance is requested.
4.09.
Title Continuation.
The Lender shall have received a title continuation report of the title policy to the date of the Initial Advance in a form approved
by the Lender and the Lender's counsel containing a pending disbursements provision and setting forth no additional exceptions
except those approved in writing by the Lender and its counsel.
4.10.
No Default
There shall
be no Default under this Agreement or the Security Documents at the time of the Initial Advance.
4.11.
Direct Costs.
If the
Initial Advance shall consist of advances for Direct Costs (in addition to Indirect Costs) or be solely for Direct Costs, or if
Direct Costs shall have theretofore been incurred even though not included within the Initial Advance, the Construction Consultant
shall have received and approved copies of (l) the Requisition, (2) the Construction Contract, and (3) all Change Orders which
are in effect as of the date of such Requisition.
4.12.
Documents To Be Delivered To
The Lender.
The items to be delivered to the Lender prior to the Initial Advance shall be:
(a) The commitment fee, to be retained by
Lender whether or not any advances are made under this Agreement.
(b) The Construction Consultant's fees and
expenses and Lender's counsel fees and expenses.
(c) Current financial statements and such
other financial statements as the Lender shall require.
(d) An appraisal of the value of the Premises
and the Improvements to be built thereon.
(e) Advice from the Construction Consultant
to the effect that (l) the Plans have been approved by him and by the Governmental Authorities, (2) a Construction Contract and/or
Major Subcontracts are in effect which satisfactorily provide for the Completion of the Improvements, (3) all utilities necessary
for the full utilization of the Improvements for their intended purposes have been completed or the presently installed and proposed
utilities will be sufficient for the full utilization of the Improvements for their intended purpose, and (4) in his opinion the
construction of the Improvements theretofore performed was performed in accordance with the Plans and will be finished along with
all necessary roads and utilities on or before the Completion Date.
(f) The executed Note.
(g) The executed Security Documents.
(h) The policies of hazard insurance required
by the Security Documents, accompanied by evidence of the payment of the premiums therefor, which policies shall contain an endorsement
specifically providing that, in the case of any damage, the entire insurance proceeds will be paid to the Lender so long as it
certifies to the insurer that the unpaid principal amount of the Loan equals or exceeds the proceeds of insurance.
(i) A paid title insurance policy, or commitment
therefor, in American Land Title Association form, approved by the Lender, from a title insurer acceptable to the Lender, for the
amount of the Note, insuring the Mortgage to be a valid first lien on the Borrower's interest in the Premises free and clear of
all defects, encumbrances and exceptions except such as the Lender and its counsel shall approve, and shall contain:
(i) full coverage against mechanics' and materialmen's
liens;
(ii) a reference to the survey but no survey exceptions
except those theretofore approved in writing by Lender and its counsel; and
(iii) a pending disbursement clause in a form approved
by the Lender.
(j) A copy of the current survey of the Premises.
(k) Filed Uniform Commercial Code financing
statements to perfect the security interest created by the Security Documents in the personalty, fixtures and other property described
therein.
(l) A progress schedule or chart showing the
interval of time over which each item of Direct Cost is projected to be incurred or paid.
(m) The Initial Project Cost Statement.
(n) Certified copies of all authorizations
including plot plan approvals, subdivision approvals, sewer permits and zoning variances, if any, building and other permits required
by any Governmental Authorities for the construction, use, occupancy and operation of the Premises and/or the Improvements for
the purposes contemplated by the Plans in accordance with all applicable building, environmental, ecological, landmark, subdivision
and zoning codes, laws and regulations, which are presently procurable.
(o) A current title report from the title
insurer which shall set forth a legally sufficient description of the Premises, copies of all instruments which appear as exceptions
in the report, any liens which have been previously discharged by bonding, court deposit or other means other than full payment,
the status of the title to abutting streets and roads, and any UCC filings against the Borrower or other owner of the Premises;
and advice from the title insurer to the effect that searches of proper public records disclose no leases of personalty or financing
statements filed or recorded against the Premises or the Borrower, or owner of any of the property which is the subject of the
Security Documents.
(p) Copies of the Construction Contract and
all riders, addenda and other instruments referred to therein as "contract documents," certified by the Borrower to be
true and complete and copies of Major Subcontracts so certified.
(q) such other matters as the Lender or its
counsel may reasonably request.
(r) Lien releases or affidavits from, or the
submission of other appropriate forms by, suppliers, the Contractor, subcontractors or materialmen as the Lender may deem desirable.
(s) The Site Assessment Report.
4.13.
Documents To Be Delivered To
The Construction Consultant.
The items to be delivered to the Construction Consultant prior to the Initial Advance shall
be:
(a) Copies of a site plan (showing all necessary
approvals, utility connections and site improvements) and the Plans.
(b) A copy of the current survey of the Premises.
(c) Copies of the Construction Contract and
any Major Subcontracts
(d) A statement of Direct Costs.
(e) Copies of any Leases containing any requirements
or specifications for the construction of the Improvements.
(f) Copies of the authorizations, approvals,
permits and other documents referred to in paragraph (n) of Section 4.12.
(g) A project progress schedule showing the
interval of time over which each item of Direct Cost is projected to be incurred or paid.
V. CONDITIONS OF MAKING ADVANCES
AFTER THE INITIAL ADVANCE
5.01.
Conditions Precedent.
The Lender's obligation to make Loan advances after the Initial Advance shall be subject to the satisfaction of the following conditions:
(a) All conditions of Article IV shall remain
satisfied, performed and unimpaired as of the date of each such subsequent advance.
(b) If the advance shall consist of disbursements
for Direct Costs, the Construction Consultant and the Lender shall have received, as of the date of the advance, the items required
by Section 4.12 and such other documentation and information (including but not limited to the progress schedule) as the Construction
Consultant or the Lender may require.
(c) The Lender shall have received a Requisition
for the advance.
(d) The Lender shall have received a title
continuation report of the title policy to the date of such advance, in the form approved by the Lender's counsel, including, but
not limited to, the pending disbursements clause and setting forth no additional exceptions except those approved in writing by
the Lender and its counsel.
(e) The representations and warranties set
forth in Article III hereof shall be true and correct on and as of the date of the advance with the same effect as if made on such
date.
(f) There shall be no Default under this Agreement
or the Security Documents as of the date of such advance.
5.02.
Last Advance
.
In the
case of the last Loan advance as provided in Section 2.08 and prior to converting to the Permanent Phase of the Loan, the Lender
shall also have received:
(a) Evidence of (i) approval by all Governmental
Authorities of the Completion of the Improvements in their entirety and the issuance of a certificate for the permanent occupancy
thereof to the extent any such approval is a condition of the lawful use and occupancy of the Improvements for the contemplated
uses, (ii) such approval by the State Fire Marshall or its equivalent, and (iii) the approval of the contemplated uses thereof
by all Governmental Authorities.
(b) Advice from the Construction Consultant
to the effect that all design, site, construction and finishing work necessary for the Completion of the Improvements and any necessary
utilities and roads have been finished and made available for use in accordance with the Plans.
(c) An affidavit of the Borrower that no work
has been performed or materials supplied for the Improvements for more than two hundred (200) days or lien releases or affidavits
from, or the submission of other appropriate forms by, suppliers, the Contractor, subcontractors or materialmen as the Lender may
deem desirable.
(d) Evidence to the Lender that the Borrower
is in full compliance with the ELUR requirements associated with the Premises. This requirement shall include delivery to the Lender
of a copy of the “ELUR Remedial Action Closure Report” and subsequent “Letter of Compliance” to be issued
by the Rhode Island Department of Environmental Management.
VI. AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that,
from the date hereof and until payment in full of the principal of, and interest on, the Note and any other Indebtedness of the
Borrower to the Lender, whether now existing or arising hereafter, unless the Lender shall otherwise consent in writing, the Borrower
will:
6.01.
Maintenance of Properties; Insurance
.
(a) Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its rights, licenses, permits
and franchises and comply with all laws and regulations applicable to it; at all times maintain, preserve and protect all franchises
and trade names and preserve all the remainder of its property used or useful in the conduct of its business and keep the same
in good repair, working order and condition, and from time to time, make, or cause to be made, all needful and proper repairs,
renewals, replacements, betterments and improvements thereto, so that the business carried on in connection therewith may be properly
and advantageously conducted at all times; and maintain insurance in accordance with the requirements of the Security Documents.
(b) Comply with all applicable laws and regulations,
whether now in effect or hereafter enacted or promulgated by any Governmental Authorities having jurisdiction over the property
which is the subject of the Security Documents.
6.02.
Payment of Obligations and Taxes
.
Pay and discharge or cause to be paid and discharged all of its obligations and liabilities and all taxes, assessments and governmental
charges or levies imposed upon it or upon its respective income and profits or upon any of its property, real, personal or mixed,
or upon any part thereof, before the same shall become in default, as well as all lawful claims for labor, materials and supplies
or otherwise, which, if unpaid, might become a lien or charge upon such properties or any part thereof; provided that the Borrower
shall not be required to pay and discharge or cause to be paid and discharged any such tax, assessment, charge, levy or claim so
long as the validity thereof shall be contested in good faith by appropriate proceedings and it shall have set aside on its books
adequate reserves with respect to any such tax, assessment, charge, levy or claim, so contested; and provided, further, that payment
with respect to any such tax, assessment, charge, levy or claim shall be made within ten (10) days after entry of final judgment
and before any of its property shall be seized or sold in satisfaction thereof.
6.03.
Legal Proceedings
.
Give
prompt written notice to the Lender of any proceedings instituted against it in any Federal or state court or before any commission
or other regulatory body, Federal, state or local, which, if adversely determined, would have an adverse effect upon its business,
operations, properties, assets, or condition, financial or otherwise.
6.04.
Books, Records and Reports
.
At all times keep proper books of record and accounts in which full, true and correct entries will be made of its transactions
in accordance with GAAP and in a manner satisfactory to the Lender. The Borrower hereby authorizes the Lender to make or cause
to be made, at the Borrower's expense and in such reasonable manner and at such reasonable times as the Lender may require:
(a) Inspections and audits of any books, records
and papers in the custody or control of the Borrower or others, relating to the Borrower's financial or business conditions, including
the making of copies thereof and extracts therefrom, and
(b) Inspections and appraisals of any of the
Borrower's assets.
6.05.
Financial Statements
.
Furnish to the Lender:
(a) Within one hundred twenty (120) days of
the end of each fiscal year, management prepared financial statements of Borrower in form and substance reasonably satisfactory
to the Lender;
(b) Within thirty (30) days of filing but
not later than one hundred twenty (120) days after the end of each calendar year, annual federal income tax returns of Borrower;
(c) Within one hundred twenty (120) days of
the end of each calendar year, updated personal financial statements in form and substance reasonably satisfactory to the Lender
and copies of federal and state income tax returns of Individual Guarantor;
(d) Within one hundred eighty (180) days of
the end of each fiscal year, audited financial statement of Corporate Guarantor in form and substance reasonably satisfactory to
the Lender;
(e) Within thirty (30) days of filing but
not later than one hundred eighty (180) days after the end of each calendar year, annual federal income tax returns of Corporate
Guarantor; and
(f) Promptly, from time to time, such other
information regarding its operations, assets, business, affairs and financial condition, as the Lender may reasonably request.
6.06.
Adverse Changes
.
Promptly
advise the Lender of (a) all litigation and proceedings affecting the Borrower in which the amount involved is Fifty Thousand Dollars
($50,000) or more and is not covered by insurance; (b) any material adverse change in its condition, financial or otherwise; or
(c) any Default described in Article IX hereof or of the occurrence of any event which upon notice or lapse of time or both would
constitute such an Event of Default.
6.07.
Accounting
.
Maintain
a standard system of accounting in accordance with GAAP.
6.08.
Depository
.
Use the
Lender as the principal bank of account of the Borrower's funds.
6.09.
Additional Instruments
.
Promptly execute and deliver or cause to be executed and delivered to the Lender all such additional and/or supplemental other
instruments and documents from time to time as the Lender deems necessary or appropriate for the performance of the Borrower's
obligations under this Agreement, so long as such additional instruments do not create any additional liabilities or obligations
of the Borrower.
6.10.
Subordination of Debt.
Subordinate all member debt to this Loan and not make any payments on account of such debt without the prior written consent of
the Lender.
6.11.
Compliance with Laws.
Promptly comply with all laws, ordinances, orders, rules, statutes and regulations of Governmental Authorities and furnish the
Lender, promptly, with reports of any official searches made by any Governmental Authorities and any claims of violations thereof.
6.12.
Inspection of Premises.
Permit the Lender, its representatives and the Construction Consultant, to enter upon the Premises at all reasonable times, to
inspect the Improvements and all materials to be used in the construction thereof and to examine all detailed plans and shop drawings
which are or may be kept at the construction site. The Borrower will cooperate and also cause the Contractor and the subcontractors
under the Major Subcontracts to cooperate with the Construction Consultant to enable him to perform his functions hereunder. At
the time of each inspection by the Construction Consultant, the Borrower will make available to the Construction Consultant, on
demand, daily log sheets covering the period since the immediately preceding inspection showing the date, weather, subcontractors
on the job, number of workers and status of construction.
6.13.
Payment of Fees.
Pay
or authorize the Lender to pay out of proceeds of the Loan all costs and expenses required for the Completion of the Improvements
and the satisfaction of the conditions of this Agreement, including without limitation:
(a) The commitment fee and all costs of title
searches or abstracts, document taxes, stamp taxes and recording expenses;
(b) Any fees and commissions due to brokers
in connection with this transaction; and
(c) The Construction Consultant's fees and
expenses and Lender's counsel fees and expenses.
6.14.
Commencement of Construction.
Commence construction of the Improvements no later than thirty (30) days from the date hereof; requisition the Initial Advance
not later than thirty (30) days after commencement of such construction and subsequent advances on a monthly basis (or, with the
Lender's approval, less frequently) thereafter; cause the construction thus begun to be prosecuted with diligence and continuity
in accordance with the Plans except during the existence of delays (for not more than forty-five (45) days) caused by events beyond
its control; and complete the Improvements in accordance with the Plans on or before the Completion Date free and clear of defects
and liens or claims for liens for material supplied or labor or services performed in connection with the construction of the Improvements.
6.15.
Satisfaction of Conditions.
Cause the satisfaction of all conditions of this Agreement to be performed by or imposed upon the Borrower.
6.16.
Indemnification.
Indemnify
the Lender against claims of brokers arising by reason of the execution hereof or the consummation of the transactions contemplated
hereby.
6.17.
Delivery of Bill of Sale, Etc.
Deliver to the Lender or the Construction Consultant copies of all contracts, bills of sale, statements, receipted vouchers or
agreements under which the Borrower claims title to any materials, fixtures or articles incorporated in the Improvements or subject
to the lien of the Security Documents, or under which it has incurred costs for which it is entitled to a Loan advance.
6.18.
Correction of Defects.
Upon demand of the Lender or the Construction Consultant, correct any defects (including structural) in the Improvements or any
departures from the Plans not approved by the Lender (with respect to which the advance of any Loan proceeds shall not constitute
a waiver of the Lender's right to require correction of any such defects or departures from the Plans not theretofore discovered
by, or called to the attention of, the Lender or the Construction Consultant).
6.19.
Security.
Employ means
to protect from theft or vandalism all portions of the Improvements and all tools and building materials stored at the Premises.
6.20.
Compliance with Easements, Etc.
Comply with all restrictions, covenants and easements affecting the Premises or the Improvements.
6.21.
Change Orders
.
Not permit
Change Orders which would involve a change in costs of more than $30,000 or involve changes exceeding $60,000 in the aggregate.
VII. FINANCIAL COVENANTS
The Borrower covenants and agrees that,
from the date hereof and until payment in full of the principal of, and interest on, the Note and any other Indebtedness of the
Borrower to the Lender, whether now existing or arising hereafter, unless the Lender shall otherwise consent in writing, the Borrower
will:
7.01.
Minimum Debt Service Coverage
Ratio
. Maintain at all times a minimum debt service coverage ratio for the Premises of 1.25X, to be tested annually upon
review of the Borrower's federal tax return commencing after the first year of the Lease. Maintain at all times a minimum debt
service coverage ratio of the Corporate Guarantor of 1.25x, to be tested annually upon review of the audited, consolidated financial
statements commencing with the receipt of the December 31, 2010 audited financial report. Debt Service Coverage Ratio is defined
as the sum of earnings before interest, taxes, depreciation and amortization less cash capital expenditures, distributions, cash
taxes and cash preferred dividends divided by senior debt service requirements.
VIII. NEGATIVE COVENANTS
The Borrower covenants and agrees that,
until payment in full of the principal of, and interest on, the Note and any other Indebtedness of the Borrower to the Lender,
whether now existing or arising hereafter, unless the Lender shall otherwise consent in writing, it will not, directly or indirectly:
8.01.
Indebtedness
.
Incur,
create, assume, become or be liable in any manner with respect to, or permit to exist, any Indebtedness, liability or lease commitment,
except upon such terms and conditions as may be mutually agreed upon in advance by the Borrower and the Lender and except:
(a) Indebtedness under this Agreement and/or
any of the Security Documents and/or evidenced by the Note;
(b) Indebtedness with respect to trade obligations
and other normal accruals in the ordinary course of business not yet due and payable in accordance with customary trade terms or
with respect to which the Borrower is contesting in good faith the amount or validity thereof by appropriate proceedings and then
only to the extent the Borrower has set aside on its books adequate reserves therefor;
(c) Indebtedness described in the financial
statements and existing on the date hereof; provided that such Indebtedness is paid in accordance with its stated terms without
renewal, extension or modification;
(d) Other Indebtedness in the aggregate not
in excess of Twenty Five Thousand Dollars ($25,000);
(e) loans to the Borrower made by companies
affiliated with the Borrower.
8.02.
Liens
.
Create, incur,
make, assume or suffer to exist any assignment, mortgage, pledge, lien, charge, security interest or other encumbrance of any nature
whatsoever on any of its property or assets, now or hereafter owned, other than in favor of the Lender or other than:
(a) liens securing the payment of taxes, either
not yet due or the validity of which is being contested in good faith by appropriate proceedings, and as to which there shall have
been set aside on its books adequate reserves or other provisions made in accordance with GAAP;
(b) liens securing the Note;
(c) the Permitted Encumbrances;
(d) liens imposed by law, such as carriers',
warehousemen's and mechanics' liens, bankers' set off rights and other similar liens arising in the ordinary course of business
for sums not yet due or being contested in good faith and by appropriate proceedings diligently conducted and for which proper
reserve or other provision has been made in accordance with GAAP;
(e) liens arising in the ordinary course of
business out of pledges or deposits under worker's compensation laws, unemployment insurance, old age pensions, or other social
security or retirement benefits, or similar legislation;
(f) liens incurred as purchase money liens
or other liens of a conditional vendor or refundings thereof on property acquired or held by the Borrower to secure the purchase
price of such property; provided that the liens permitted by this clause (f) shall at all times be confined solely to the property
so purchased and shall secure Indebtedness which does not exceed the lower of the fair market value on the date of purchase or
the cost of the property so purchased and that any such obligations shall not otherwise be prohibited by the terms of this Agreement;
(g) liens arising from or upon any judgment
or award, provided that such judgment or award is being contested in good faith by proper appeal proceedings and only so long as
execution thereon shall be stayed;
(h) liens securing Indebtedness in the aggregate
not in excess of Twenty Five Thousand Dollars ($25,000).
8.03.
Guaranties
.
Make any
loans or advances to, or assume, guarantee, endorse or otherwise in any way become or be responsible for obligations of any other
Person, whether by agreement to purchase the Indebtedness of any other Person, or agreement for the furnishing of funds to any
other Person, firm, corporation or other enterprise, through purchase of goods, supplies or services, or by way of stock purchase,
capital contribution, advance or loan, for the purpose of paying any Indebtedness or obligation of such other Person, or otherwise,
except the endorsement of negotiable instruments for deposit or collection in the normal course of business.
8.04.
Sale of Assets; Management
.
Sell, lease, transfer or otherwise dispose of any or all of its properties, assets, rights, licenses and franchises to any Person,
except in the ordinary course of its business, or turn over the management of, or enter a management contract with respect to,
such properties, assets, rights, licenses, and franchises.
8.05.
Leasebacks
.
Enter into
any arrangement, directly or indirectly, with any Person whereby it shall sell or transfer any property, real, personal or mixed,
used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property.
8.06.
Investments
.
Purchase,
invest in or otherwise acquire or hold securities, including, without limitation, capital stock and evidences of indebtedness of,
or make loans or advances to, or enter into any arrangement for the purpose of providing funds or credit to, any other Person,
except investments in short-term obligations of the United States or certificates of deposit of the Lender.
8.07.
Fundamental Changes
.
Dissolve, liquidate, consolidate with, or merge with, or otherwise acquire all or substantially all of the assets or properties
of, any other corporation, or make any substantial change in its executive management, or engage, directly or indirectly, in any
business substantially different from the business now being conducted.
8.08.
Acceleration of Other Indebtedness
.
Accelerate the maturity of any Indebtedness now or hereafter outstanding to any other bank, supplier, or other third party,
or repay the same otherwise than in accordance with its regular amortization.
8.09.
Performance of Work
.
Permit the performance of any work on the Improvements pursuant to the Construction Contract, Major Subcontracts, Change Orders
or Plans until the Lender or the Construction Consultant shall have received copies of such Construction Contract, Major Subcontracts,
Change Orders or Plans and, in the case of Change Orders (except as provided in Section 6.21 hereof) or Plans, given specific written
approval thereof; it being understood that approval of any Plans or Change Orders will not obligate the Lender to increase or advance
any Loan budget amount on account of any such Plans or Change Orders.
8.10.
Installation of Material, etc.
Purchase nor install materials, equipment, fixtures, furnishings or any other part of the Improvements under purchase money security
agreements, conditional sales contracts or lease agreements, or other arrangements wherein title to or a security interest in such
property is retained or the right is reserved or accrues to anyone to remove or repossess any such property.
8.11.
Transfer of Interests
.
Not permit the direct or indirect transfer of any interest in the Borrower by any of its present members or the direct or indirect
dilution of the percentage interest in the Borrower currently held by any present member without the prior written consent of the
Lender.
8.12.
Hazardous Waste
.
Release,
generate or dispose of any Hazardous Waste at the Premises or on any properties adjacent to the Premises in violation of any Hazardous
Waste Laws. In the event that any Hazardous Waste is found at the Premises, the Borrower shall immediately contain and remove the
same in compliance with all Hazardous Waste Laws. The Borrower shall insure that all of its properties and operations, and those
of its Lessees, are in compliance with all Hazardous Waste Laws.
IX. DEFAULTS AND REMEDIES
9.01.
Events of Default
.
The
following shall constitute Events of Default:
(a) any representation or warranty made herein,
or in any report, certificate, financial statement, Requisition or other instrument furnished in connection with this Agreement,
or the borrowing hereunder, shall prove to be false or misleading in any material respect on or as of the date made or deemed made;
(b) default in the payment of any installment
of the principal of, or fees or interest on, the Note after the date when the same shall become due and payable, whether at the
due date thereof or at a date fixed for prepayment or by acceleration or otherwise;
(c) default, after the expiration of any applicable
grace period, in the payment of any installment of the principal of, or fees or interest on, any other Indebtedness of the Borrower
to the Lender after the date when the same shall become due and payable;
(d) default in the due observance or performance
of any covenant, condition or agreement contained in Articles V, VI or VII hereof, in the Note (other than payment) or in the Security
Documents, and the continuance of such default for a period of twenty (20) days after the date such performance or observance was
due;
(e) default in the due observance or performance
of any other covenant, condition or agreement, on the part of the Borrower to be observed or performed pursuant to the terms hereof,
and the continuance of such default for a period of twenty (20) days after the date such performance or observance was due;
(f) default, after the expiration of any applicable
grace period, in the due observance or performance of any covenant, promise or provision contained in any other agreement of the
Borrower in favor of the Lender, including without limitation, any other loan agreement, mortgage deed or security document;
(g) default with respect to any evidence of
Indebtedness of the Borrower (other than the Note), if the effect of such default is to accelerate the maturity of such Indebtedness
or to permit the holder thereof to cause such Indebtedness to become due prior to the stated maturity thereof, or if any Indebtedness
of the Borrower is not paid, when due and payable, whether at the due date thereof or a date fixed for prepayment or otherwise;
(h) the Borrower shall (i) apply for or consent
to the appointment of a receiver, trustee or liquidator of it or any of its property, (ii) admit in writing inability to pay its
debts as they mature, (iii) make a general assignment for the benefit of creditors, (iv) be adjudicated a bankrupt or insolvent
or (v) file a voluntary petition in bankruptcy, or a petition or an answer seeking reorganization or an arrangement with creditors
or to take advantage of any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law or statute,
or an answer admitting the material allegations of a petition filed against it in any proceeding under any such law or if action
shall be taken for the purpose of effecting any of the foregoing;
(i) an order, judgment or decree shall be
entered, without the application, approval or consent of the Borrower by any court of competent jurisdiction, approving a petition
seeking reorganization of the Borrower or appointing a receiver, trustee or liquidator of the Borrower or of all or a substantial
part of the assets of the Borrower, provided, however, with respect to such involuntary proceedings, the Borrower shall have thirty
(30) days from the date of such order, judgment or decree to discharge the same;
(j) final judgment for the payment of money
in excess of an aggregate of Twenty Thousand Dollars ($20,000) shall be rendered against the Borrower and the same shall remain
undischarged for a period of thirty (30) consecutive days, during which execution shall not be effectively stayed;
(k) the occurrence of any attachment of any
deposits or other property of the Borrower in the hands or possession of the Lender, or the occurrence of any attachment of any
other property of the Borrower (other than the Premises or the Improvements thereon) in an amount exceeding Twenty Thousand Dollars
($20,000) which shall not be discharged within thirty (30) days of the date of such attachment;
(l) any Event of Default shall occur and be
continuing under any Guaranty;
(m) any Guarantor shall terminate his Guaranty;
(n) failure to carry on the construction of
the Improvements with reasonable dispatch or discontinuance of such construction for a continuous period of five (5) days or, as
a result of delays beyond the Borrower's reasonable control, for a period of more than forty-five (45) days;
(o) refusal to permit the Lender, its representatives
or the Construction Consultant to enter upon the Premises at all reasonable times to inspect the Improvements, the construction
thereof and all materials, fixtures and articles used or to be used in said construction and to examine all detailed plans, shop
drawings and specifications which relate to the Improvements, and/or failure to furnish to the Lender, its representative or the
Construction Consultant copies of such plans, drawings and specifications when requested;
(p) use of any materials, fixtures, furnishings
or equipment in the construction of the Improvements or any appurtenances that are obsolete or not new or not installed in a good
and workmanlike manner in accordance with the Plans;
(q) execution by the Borrower of any security
instrument other than the Security Documents covering any materials, fixtures, furnishings or equipment intended to be incorporated
or placed in the Improvements, the filing of a financing statement, publishing notice of such security instrument, or failure to
purchase any of such materials, fixtures, furnishings or equipment so that the ownership thereof will not vest unconditionally
in the Borrower free from encumbrances on delivery at the Premises;
(r) failure by the Borrower to disclose to
the Lender or the Construction Consultant, upon request, the names of all Persons with whom the Borrower has contracted or intends
to contract for the construction of the Improvements or for the furnishing of labor or materials therefor, or to obtain the approval
of such Persons by the Lender when required by this Agreement;
(s) failure or inability of the Borrower to
complete the Improvements on or before the Completion Date;
(t) refusal or inability of the Borrower to
satisfy any condition to the receipt of an advance hereunder for a period in excess of thirty (30) days;
(u) failure to satisfy or bond a lien for
the performance of work or the supply of materials filed against the Premises before the date of any Loan advance or for a period
of thirty (30) days after the filing thereof;
(v) the sale, conveyance or other transfer
of any interest of the Borrower in the Improvements or the Premises;
(w) the failure or inability of the title
insurer to certify, at the time or prior to the time at which the Lender would make any advance of the Loan, that title to the
Premises has not adversely changed since the date hereof;
(x)(i) the Improvements, or the collateral
which is the subject of the Security Documents, are, in the opinion of the Lender, materially damaged or destroyed by fire or other
casualty or (ii) the Premises or any substantial portion thereof is taken by eminent domain in such a manner as to significantly
interfere with the operations of any business and/or the Completion of the Improvements thereon;
(y) if (i) any "notice of violation",
"notice of responsibility" or other similar order is issued by any one or more Governmental Authorities against the Premises
or the Borrower under any applicable Hazardous Waste Law and remains undischarged for a period of sixty (60) days after the issuance
thereof or such lesser period of time stated in said notice or in any Hazardous Waste Law or (ii) if any lien or claim is filed
or arises against the Premises under any Hazardous Waste Law;
(z) a default under the terms of the Hedging Contracts;
(aa) loss, theft, damage or destruction of
any material portion of the Collateral for which there is no insurance coverage or for which, in the opinion of the Lender, there
is insufficient insurance coverage;
(bb) the occurrence of any adverse change
described in Section 6.06 hereof;
(cc) a default shall have occurred under any
of the Leases;
(dd) if any easement over, across or under
or otherwise affecting the Premises or any portion thereof (other than customary utility easements) shall be granted without the
Lender's prior written consent; or
(ee) the Security Documents shall at any time
after their execution and delivery and for any reason cease (a) to create a valid and perfected mortgage and/or security interest
in and to the property purported to be the subject thereof and/or in the priority agreed to by the parties thereto; or (b) to be
in full force and effect or shall be declared null and void, or the validity or enforceability thereof shall be contested by the
Borrower, or the Borrower shall deny it has any further liability or obligation under the Security Documents.
9.02.
Acceleration
.
Upon the
occurrence of any such Event of Default and at any time thereafter during the continuance of such Event of Default, the Lender
may, by written notice to the Borrower, declare the entire principal amount of the Note, and any and all other Indebtedness of
the Borrower to the Lender, forthwith to be due and payable, whereupon the Note and/or such other Indebtedness shall become forthwith
due and payable, both as to principal and interest, without presentment, demand, protest or notice of any kind, all of which are
hereby expressly waived, anything contained herein or in the Note or other evidence of such Indebtedness to the contrary notwithstanding
and any obligation of the Lender to extend further credit pursuant to any of the terms hereof shall immediately terminate.
9.03.
Set-off
.
The Borrower
hereby grants to the Lender the right at any time after the occurrence of an Event of Default to set off or otherwise apply by
the Lender against the payment of all amounts owing in respect to this Agreement or of any other liabilities, Obligations and Indebtedness
of the Borrower, or any part thereof, whether or not due, in such order as it shall determine, all tangible and intangible personal
property, credits, accounts, claims and balances of whatever nature of the Borrower at any time in the possession or control of
or owing by the Lender or its agents (remittances and property to be deemed in possession of the Lender as soon as put in transit
to it) including, without limitation, any balances on deposit in any account of the Borrower.
9.04.
Completion by the Lender.
After and during the continuation of any Event of Default which in the Lender's judgment may interfere with Completion of the Improvements,
the Lender shall have the right and is hereby given a license, in addition to and without limiting any other rights or remedies
afforded by the Note, the Security Documents, the Guaranty or this Agreement, or other documents executed and delivered hereunder
or thereunder, or by law, to enter or to cause the Construction Consultant or another independent contractor of the Lender's selection
to enter the Premises and perform any and all work and labor necessary for the Completion of the Improvements. All sums advanced
hereunder and any other amounts expended by the Lender for the Completion of the Improvements shall be deemed to have been advanced
to the Borrower and shall be secured by the Security Documents.
9.05.
Attorney-In-Fact.
For
purposes of Section 9.04, the Borrower hereby constitutes and appoints the Lender, the Construction Consultant and/or another independent
contractor selected by the Lender, its true and lawful attorney-in-fact with full power of substitution for the purpose of causing
the Completion of the Improvements in the name of the Borrower, and hereby empowers said attorney-in-fact to do any or all of the
following:
(a) To use any and all funds which may remain
unadvanced hereunder for the purpose of causing the Completion of the Improvements in the manner called for by the Plans;
(b) To make such additions, changes and corrections
in the Plans as shall be necessary or desirable for the Completion of the Improvements in substantially the manner contemplated
by the Plans;
(c) To employ any contractors, subcontractors,
agents, architects and inspectors required for said purposes;
(d) To employ attorneys to defend against
attempts to interfere with the exercise of the powers granted hereby;
(e) To pay, settle or compromise all existing
bills and claims which are or may be liens against the Premises or Improvements or may be necessary or desirable for the Completion
of the Improvements or the clearance of title;
(f) To execute all applications and certificates
in the name of the Borrower which may be required by any construction contract; and/or
(g) To prosecute and defend all actions or
proceedings in connection with the construction of the Improvements on the Premises and to take such action, require such performance
and do any and every other act as is deemed reasonably necessary with respect to the Completion of the Improvements which the Borrower
might do in its own behalf.
9.06.
Power Coupled with an Interest.
The power-of-attorney given in Section 9.05 shall be a power coupled with an interest which, together with the license given in
Section 9.04, cannot be revoked until the Completion of the Improvements in accordance with this Agreement.
9.07.
Payment Direct to Contractor.
After the occurrence of any Event of Default, the Borrower does irrevocably permit and authorize the Lender to advance any remaining
proceeds of the Loan directly to subcontractors under the Major Subcontracts, the Contractor and other Persons to pay for the Completion
of the Improvements but the Lender is not under any obligation to do so. No further direction or authorization from the Borrower
shall be necessary to warrant such direct advances and all such advances shall satisfy pro tanto the obligations of the Lender
hereunder and shall be secured by the Security Documents as fully as if made to the Borrower regardless of the disposition thereof
by any major subcontractor, the Contractor or such other Persons. The Lender may impose any condition for such direct payment including,
but not limited to, receipt of estoppel certificates, waivers of lien, releases and the like.
9.08.
Casualty or Condemnation.
If one of the events set forth in Section 9.01(y) occurs, the insurance proceeds or condemnation award, as the case may be, shall
be paid to the Lender alone, to be applied, in the Lender's discretion, and in such order as the Lender may determine, (i) to the
costs of collection of such amounts, (ii) to payment of the outstanding amount of the Loan, whether or not then due, and all other
sums then due from the Borrower to Lender or (iii) in accordance with this Agreement with the same limitations and restrictions
applicable to advances hereunder, to the restoration, replacement and rebuilding of the Improvements. The Lender is authorized,
without the consent of the Borrower, to adjust and compromise any such loss or condemnation award, collect and receipt for any
such proceeds or awards and endorse the Borrower's name on any check or draft in payment thereof, provided, however, without limiting
the foregoing, the Lender shall consult with Borrower and advise the Borrower of its actions.
9.09.
Other Remedies
.
The
Lender may look to, utilize, and realize upon any item or portion of any security held by it hereunder or under the Security Documents,
or other instrument securing the Loan or any other Indebtedness, liabilities, or Obligations of the Borrower to the Lender, whether
now existing or hereafter contracted or acquired, in any order it may elect without obligation to equalize the burden between or
among the separate items of security or portions thereof or between or among the owners thereof, or to marshal the same in any
way, and the Lender may apply any proceeds of any security in such order as it shall determine, and after all Indebtedness, liabilities,
and Obligations now or hereafter of the Borrower to the Lender have been paid in full, the Lender shall account for any security
then remaining or any surplus proceeds of any security then remaining to the owner of such security.
X. MISCELLANEOUS
10.01.
Survival of Representations
.
This Agreement and all covenants, agreements, representations and warranties made herein and in the certificates delivered pursuant
hereto, shall survive the making by the Lender of the Loan, the execution and delivery to the Lender of the Note and the Security
Documents, and shall continue in full force and effect so long as the Note and any other Indebtedness of the Borrower to the Lender
is outstanding and unpaid.
10.02.
Successors and Assigns.
Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and
assigns of such party; and all covenants, promises and agreements in this Agreement contained, by or in behalf of the Borrower
shall inure to the benefit of the respective successors and assigns of the Lender, provided that the Borrower may not transfer
or assign any of its respective rights hereunder without the prior written consent of the Lender.
10.03.
Lender's Expenses
.
The Borrower will reimburse the Lender upon demand for all out-of-pocket costs, charges and expenses of the Lender (including reasonable
fees and disbursements of counsel to the Lender) in connection with (i) the preparation, execution and delivery of this Agreement,
the Note, the Security Documents and any other agreements hereunder, (ii) the making of the Loan, (iii) any amendments, modifications,
consents, or waivers in respect thereof, (iv) any enforcement thereof and (v) any enforcement of the Lender's rights with respect
to, or the administration, supervision, preservation, protection of, or realization upon, any property securing the Note and/or
this Agreement.
10.04.
Governing Law
.
This
Agreement, the Note and the Security Documents (unless otherwise specified therein) shall be construed in accordance with and governed
by the internal laws (and not the law of conflicts) of the State of Rhode Island.
10.05.
No Waiver
.
No modification
or waiver of any provision of this Agreement or the Note nor consent to any departure by the Borrower therefrom, shall in any event
be effective unless the same shall be in writing, and then such waiver or consent shall be effective only in the specific instance,
and for the purpose, for which given. No notice to, or demand on, the Borrower, in any case, shall entitle the Borrower to any
other or future notice or demand in the same, similar or other circumstances. Neither any failure nor delay on the part of the
Lender in exercising any right, power or privilege hereunder, or under the Note, or any other instrument given as security therefor,
shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or future exercise, or the
exercise of any other right, power or privilege.
10.06.
Captions
.
The captions
and other headings contained in this Agreement are for reference only and shall not affect the meaning or interpretation of this
Agreement.
10.07.
Notices
.
All notices,
requests, demands, consents or other communications given hereunder or in connection herewith (collectively the "Notice")
shall be in writing and shall be sent by registered or certified mail, return receipt requested, postage prepaid, addressed to
the party to receive such Notice at its address set forth below. Either party may, by Notice given as aforesaid, change its address
for any subsequent Notice.
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If to the Lender:
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Rockland Trust Company
288 Union Street
Rockland, MA 02370
Attention: Graham M. W. Kilvert, Vice President
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With a copy to:
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Edward G. Avila, Esquire
Roberts, Carroll, Feldstein & Peirce Incorporated
10 Weybosset Street
Providence, Rhode Island 02903
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If to the Borrower:
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109 LONG WHARF LLC
c/o Phoenix Bulk Carriers
88 Valley Road
Middletown, Rhode Island 02842
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With a copy to:
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Patrick O’Neill Hayes, Jr., Esquire
Corcoran Peckham Hayes & Galvin, PC
31 America’s Cup Avenue
Newport, Rhode Island 02840
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Each party by notice duly given in accordance herewith may specify
a different address for the purposes hereof.
10.08.
Maximum Payments
.
Notwithstanding
any other terms or conditions hereof, in no event shall the amount paid or agreed to be paid to the Lender hereunder exceed the
maximum permissible under applicable law. If, for any reason, fulfillment of any obligation of Borrower shall involve the exceeding
of such maximum, then such obligation, automatically and without action or notice by Lender, shall be reduced to such maximum valid
amount and any amount received by Lender in excess thereof shall be applied to the reduction of principal outstanding and not to
interest.
10.09.
Jurisdiction
.
The Borrower,
to the extent that it may lawfully do so, hereby consents to the jurisdiction of the courts of the State of Rhode Island and the
United States District Court for the District of Rhode Island as well as to the jurisdiction of all courts from which an appeal
may be taken from such courts, for the purpose of any suit, action or other proceeding arising out of any of its Obligations arising
hereunder or with respect to the transactions contemplated hereby, and expressly waives any and all objections it may have as to
venue in any of such courts.
10.10.
Severability
.
Any provision
of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
10.11.
Gender
.
Words of the
masculine gender shall mean and include correlative words of the feminine and neuter genders and words importing the singular number
shall mean and include the plural number and vice versa.
10.12.
Arm's-Length Transaction
.
The Borrower and each Guarantor (by delivery of a Guaranty) recognize, stipulate and agree that the Lender's actions and relationships
with the parties hereto, including, but not limited to, those relationships created or referenced by or in this Agreement, the
Note and the Security Documents, have been and constitute arm's-length commercial transactions and that such actions and relationships
shall at all times in the future continue to constitute arm's-length commercial transactions and that the Lender or the Lender's
attorneys shall not at any time act, be obligated to act, or otherwise be construed or interpreted as acting as or being the agent,
attorney, partner, employee or fiduciary of any such parties.
10.13.
Negotiations
.
The Borrower
and each Guarantor (by delivery of a Guaranty) stipulate and agree that each of this Agreement, the Note and the Security Documents
are products of and result from lengthy arm's-length negotiations between the parties and that neither the Lender nor any other
party has exerted or attempted to induce, through threats or otherwise, the execution or delivery of this Agreement, the Note or
the Security Documents. Without in any way limiting the foregoing, the Borrower and each Guarantor stipulate and agree that at
all times during the course of the negotiations surrounding the execution and delivery of this Agreement, the Note and the Security
Documents, they have, to the extent deemed necessary or advisable in their sole discretion, been advised and assisted by competent
counsel of their own choosing, that counsel has been present and actively participated in the negotiations surrounding this Agreement,
the Note and the Security Documents, and that they have been fully advised by counsel of their choosing of the effect of each term,
condition, provision and stipulation contained herein and therein.
10.14.
No Offer
.
Neither the
negotiations to date nor the preparation of this Agreement, the Note or the Security Documents shall be deemed an offer by any
of the parties to the other. No such instrument, document or agreement shall be deemed binding on any party until such party has
executed and delivered the same in writing.
10.15.
Agreements Relating to Consideration
.
The Borrower and each Guarantor (by delivery of a Guaranty) hereby acknowledge and agree that the covenants and agreements of the
Lender under this Agreement constitute full and fair consideration for the obligations, covenants and agreements of (a) the Borrower
under this Agreement and (b) each Guarantor under the applicable Guaranty, and that, by virtue of such consideration, each of the
parties hereto and thereto have received reasonably equivalent value in exchange for the covenants and agreements hereunder and
thereunder.
10.16.
No Joint Venture
.
Notwithstanding
anything to the contrary contained herein, in the Note and/or in the Security Documents, the Lender, by entering into this Agreement
with the Borrower, will not be deemed a partner or joint venturer with the Borrower or any Guarantor and the Borrower (and each
Guarantor by virtue of the execution and delivery by each Guarantor of a Guaranty) agree to hold the Lender harmless from any damages
and expenses resulting from such construction of the relationship of the parties or any exertion thereof.
10.17.
Integration
.
This Agreement
and the Security Documents contain the entire agreement between the parties relating to the subject matter hereof and thereof and
supercede all oral statements and prior writings with respect thereto.
10.18.
Jury Waiver
.
Each party
to this Agreement hereby expressly WAIVES ANY RIGHT TO TRIAL BY JURY of any claim, demand, action or cause of action (a) arising
under this Agreement or any other instrument, document or agreement executed or delivered in connection herewith, (b) in any way
connected with or incidental to the dealings of the parties hereto or any of them with respect to this Agreement or any other instrument,
document or agreement executed or delivered in connection herewith, or the transactions related hereto or thereto, in each case
whether now existing or hereafter arising and whether sounding in contract or tort or otherwise; AND EACH PARTY HEREBY AGREES AND
CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY A COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY
TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT
OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
[Signature Pages Follow]
IN WITNESS WHEREOF,
the Borrower
and the Lender have caused this Construction Loan Agreement to be duly executed all as of the day and year first above written.
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WITNESS/ATTEST:
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Rockland Trust Company
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By
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Name: Graham M. W. Kilvert
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Title: Vice President
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IN WITNESS WHEREOF,
the Borrower
and the Lender have caused this Construction Loan Agreement to be duly executed all as of the day and year first above written.
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WITNESS/ATTEST:
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109 LONG WHARF LLC
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By:
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Name: Edward Coll
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Title: President
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EXHIBIT A
Initial Project Cost Statement
EXHIBIT C
Permitted Encumbrances
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1.
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Grant of Easement recorded in Book 386 at Page 15.
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2.
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Environmental Land Usage Restriction recorded in Book 769 at Page 197
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3.
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Zoning Decisions recorded in Book 1540 at Page 31, Book 2037 at Page 25 and Book 2095 at Page 217.
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EXHIBIT D
Forced Funding
Exhibit 10.5
LOAN AND GUARANTY AGREEMENT
THIS LOAN AND GUARANTY AGREEMENT (“
Agreement
”)
is entered into as of the 25th day of February, 2011, between GATX CORPORATION, a New York corporation (“
Lender
”),
and BULK DISCOVERY (BERMUDA) LTD., a Bermuda company (“
Borrower
”), BULK PARTNERS (BERMUDA) LTD., a Bermuda company
(“
Holding Company
”), and AMERICAS BULK TRANSPORT (BVI) LIMITED, a British Virgin Islands business company (“
Charterer
”),
with respect to the following facts:
A. Borrower
wishes to obtain from Lender, and Lender wishes to provide to Borrower a term loan in the principal amount of U.S. $9,120,000.00
on the terms and conditions stated herein, in order to finance the purchase of the vessel IOANNA L, Greek Official No. 9577, IMO No.
8806187, to be reflagged in Panama as the BULK DISCOVERY (the “
Vessel
”).
B. Holding
Company is the indirect owner of Borrower, and Charterer will be the time charterer of the Vessel after Borrower purchases the
Vessel, in consideration of which Holding Company and Charterer are guarantying the Borrower’s obligations under this Agreement.
NOW, THEREFORE, in consideration of the
foregoing and the agreements of the parties hereto, and for other good and valuable consideration, the receipt of which the parties
hereby acknowledge, the parties hereto represent, warrant and agree as follows:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
1.1
Defined
Terms
. As used herein and in the schedules of this Agreement, the terms defined below shall have the definitions ascribed to
them below:
“
Advance
” has the meaning
given to it in Section 2.1(a).
“
Affiliate
” means, with
respect to a Person any other Person which directly or indirectly controls, is controlled by, or is under common control with,
such Person. “Control” “controlled by” and “under common control with” means direct or indirect
possession of the power to direct or cause the direction of management or policies (whether through ownership of voting securities,
by contract or otherwise);
provided that
control shall be conclusively presumed for this purpose when any Person or affiliated
group directly or indirectly owns ten percent (10%) or more of the securities or other Equity Interests having ordinary voting
power for the election of directors, managing general partners, trustees or managers of a Person.
“
Allseas
” means Allseas
Logistics Bermuda Ltd., a Bermuda company.
“
Allseas Charge on Cash Deposit
”
has the meaning given to it in Section 3.1(a)(xiii).
“
Banking Day
” means any
day on which commercial banks are open for general business (including dealings in foreign exchange and foreign currency markets)
in New York and Chicago.
“
Bankruptcy or Other Proceeding
”
means a Debtor Relief Proceeding; a dissolution, winding up, liquidation, or reorganization of a Person; an arrangement with a
Person’s creditors or a composition of a Person or any of its debts; or an assignment for the benefit of creditors or any
other marshalling of the assets and liabilities of a Person.
“
Borrower’s Earnings Assignment
Agreement
” has the meaning given to it in Section 3.1(a)(iii).
“
Bulk Discovery Freights Account
”
has the meaning given to it in Section 3.1(i)
“
Bulk Discovery Hire Account
”
has the meaning given to it in Section 3.1(h)
“
Charterer’s Earnings Assignment
Agreement
” has the meaning given to it in Section 3.1(a)(v).
“
Closing
” means the satisfaction
or waiver of the conditions precedent listed in Article III.
“
COA
” means the Contract
of Affreightment between Phoenix Bulk Carriers (US) LLC and Noranda Alumina LLC dated as of January 1, 2011.
“
Code
” means the Internal
Revenue Code of 1985.
“
Collateral
” means personal
or real property, whether tangible or intangible, on which an Encumbrance is granted as security for any or all of the Obligations
outstanding from time to time under any Loan Document.
“
Commercial Management Agreement
”
means the Commercial Management Agreement for the Vessel between Borrower and Phoenix Bulk Carriers (BVI) Limited dated February
11, 2011.
“
Commitment Fee
” has
the meaning given to it in Section 3.1(j).
“
Constitutional Documents
”
means the certificate of incorporation, memorandum of association and by-laws of a corporation, as amended and restated.
“
Credit Party
” means
Borrower, Pledgor, Holding Company, Charterer, or any future Guarantor.
“
Debtor Relief Proceeding
”
means bankruptcy, insolvency, receivership dissolution, arrangement, reorganization, administration, debt relief or similar proceeding
pertaining to a Person.
“
Default
” means an event
or condition which, with the giving of notice, the passage of time, or both, would become an Event of Default.
“
Default Rate
” has the
meaning given to it in Section 2.1(c)(i).
“
EBITDA
” means, for any
period, for any Person, an amount equal to the Net Earnings of such Person for such period
plus
the following to the extent
deducted in calculating such Net Earnings: (i) the Interest Expense of such Person for such period, (ii) the provision
for federal, state, local and foreign income taxes payable by such Person for such period, and (iii) the amount of depreciation
and amortization expense deducted in determining such Net Earnings.
“
Encumbrance
” means any
lien, mortgage, pledge, assignment, security interest, liability for forfeiture, defeasance, lease, charter, right to possession
or services of the relevant property, option, right of first refusal with respect to the relevant property, restriction against
transferability or use, or other encumbrance whatsoever.
“
Environmental Law
” means
law relating to environmental, health, safety or land use matters applicable to any property.
“
Environmental Liability
”
means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties
or indemnities), that is directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation,
use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials,
(d) the release or threatened release of any Hazardous Materials into the environment, or (e) any contract, agreement or other
consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.
“
Equity Interest
” means
stock in a corporation, a membership interest in a company, a general or limited partnership interest in a partnership, a beneficial
interest in a trust, or other equity interest in a Person.
“
ERISA
” means the Employee
Retirement Income Security Act of 1974 and any regulations issued pursuant thereto.
“
ERISA Affiliate
” means
any trade or business (whether or not incorporated) under common control with Borrower or a Guarantor within the meaning of Section
414(b) or (c) of the Code and Sections 414(m) and (o) of the Code.
“
Event of Default
” has
the meaning given to it in Section 7.1.
“
Fee Letter
” has the
meaning given to it in Section 3.1(j).
“
Fixed Charges
” means,
for any period, for any Person, the sum of Interest Expense, operating lease payments, payments of the current portion of capital
leases, and payments of the current portion of long term Indebtedness, and distributions of equity made during the relevant period.
“
Funds Deposit Agreement
”
has the meaning given to it in Section 3.1(a)(ix).
“
GAAP
” means at any time
generally accepted accounting principles as then in effect in the United States, applied on a consistent basis.
“
Governmental Authority
”
includes all foreign and U.S. federal, national, state and local governments; government corporations, authorities, boards, commissions,
and entities; and all departments, ministries, agencies, bureaus, offices, and subdivisions of any of the foregoing.
“
Guarantor
” means Holding
Company, Charterer, and any other Person that grants Lender a guaranty for any of the Obligations, as the context requires.
“
Hazardous Materials
”
means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including
petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious
or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.
“
Indebtedness
” means,
for any Person, (i) indebtedness for borrowed money, (ii) obligations evidenced by bonds, debentures, notes or other similar instruments,
(iii) obligations to pay the deferred purchase price of property or services, (iv) obligations as lessee under leases which shall
have been or should be, in accordance with GAAP, recorded as capital leases, (v) obligations as lessee under Synthetic Lease Obligations,
(vi) obligations with respect to undrawn letters of credit issued for the account of that Person or under bonds or suretyship arrangements;
and (vii) all obligations arising under any swap transaction or other agreement or arrangement designated to protect the Person
against fluctuation in interest rates, currency exchange rates or commodity prices; (viii) obligations to ordinary trade creditors
which are more than ninety (90) days delinquent, (ix) liabilities in respect of unfunded vested benefits under plans covered by
Title IV of ERISA, (x) obligations under indemnification agreements in favor of issuers of letters of credit (contingent or otherwise),
and (xi) obligations under direct or indirect guaranties or suretyship agreements in respect of, and obligations (contingent or
otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations
of others of the kinds referred to in clauses (i) through (x) above.
“
Indemnitee
” has the
meaning given to it in Section 9.2.
“
Interest Expense
” shall
mean for any period, for any Person, the aggregate amount of interest expense of such Person for such period as determined in accordance
with GAAP. Notwithstanding the foregoing, specific items of interest expense shall only be included in this definition to the extent
such items have been deducted from gross revenues in calculating the Net Earnings of such Person for such fiscal period.
“
Interest Rate
” has the
meaning given to it in Section 2.1(c)(i).
“
Investment
” means, as
to any Person, any acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of capital
stock or other securities of another Person, (b) a convertible loan or advance, or capital contribution to, purchase or other acquisition
of any other debt or equity participation or interest in, another Person, including any partnership interest, membership interest,
joint venture interest, or other beneficial interest in such other Person, or (c) the purchase or other acquisition (in one transaction
or a series of transactions) of assets of another Person that constitute a business unit. For purposes of covenant compliance,
the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in
the value of such Investment.
“
IRS
” means the United
States Internal Revenue Service.
“
Loan Document
” means
any of: this Agreement; and any other loan agreement, promissory note or other evidence of indebtedness related to this Agreement;
any ship or naval mortgage, security agreement, assignment, deed of trust, pledge, or other security document; any guaranty; any
subordination agreement, or any other agreement, instrument, certificate, or other document; in each case whether heretofore, concurrently,
or hereafter entered into by any Person in connection with this Agreement (each, as assigned, assumed, amended, renewed, replaced,
or otherwise modified from time to time).
“
Manager’s Undertaking
”
means a Manager’s Undertaking described in Sections 3.1(a) (vii) or 3.1(a)(viii).
“
Material
” means, with
reference to the significance of a matter which is reasonably calculable in monetary terms, a change or effect related to such
matter which has a monetary consequence of $500,000.00 or more in amount.
“
Mortgage
” has the meaning
given to it in Section 3.1(a)(ii).
“
Multiemployer Plan
”
means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which Borrower, a Guarantor or any ERISA
Affiliate makes or is obligated to make contributions, or during the preceding three calendar years, has made or been obligated
to make contributions.
“
Net Earnings
” means,
for any period, for any Person, the net earnings of such Person for such period determined in accordance with GAAP for such period,
but not including the net after-tax amount of: (a) any gains or losses resulting from the disposition of capital assets (as
defined by GAAP) where the consideration paid in connection with such disposition is not paid in cash,
provided, however,
that when all or any portion of the consideration paid in connection with such disposition is received in cash, checks or other
cash equivalent financial instruments, such amount shall be recognized as gain or loss and included in the net earnings of such
Person in the fiscal period received; (b) any gains or income resulting from the write-up of assets; (c) any gains or
losses resulting from the acquisition of securities or the retirement or extinguishment of Indebtedness; (d) any losses from
the impairment of goodwill or other intangible assets required to be recognized under GAAP; (e) any losses from the impairment
or disposal of long-lived assets required to be recognized under GAAP; (f) any gains or losses arising from changes in accounting
principles; (g) any equity of such Person in the undistributed earnings of any Person which is not a Subsidiary; (h) any
earnings of any Person acquired by such Person through purchase, merger or consolidation or otherwise for any period prior to the
date of acquisition; (i) any deferred credit representing the excess of equity in any Subsidiary at the date of acquisition
over the cost of the investment in such Subsidiary; and (j) any extraordinary gains or losses.
“
Obligations
” means all
obligations of Borrower to repay the Advance, to pay interest thereon, or to pay and perform other debts, liabilities, obligations,
covenants and duties, existing or arising under any Loan Document, whether direct or indirect (including those acquired by assumption),
absolute or contingent, due or to become due, now existing or hereafter arising, and including interest that accrues after the
commencement, by or against Borrower or any Person of which Borrower is a partner, joint venturer, or member, or any Debtor Relief
Proceeding in which such Person is the debtor in such proceeding.
“
Other Taxes
” has the
meaning given to it in Section 2.5(a)(ii).
“
Permit
” means any authorization,
certificate, consent, approval, license, permit, waiver or exemption issued or granted by a Governmental Authority.
“
Permitted Encumbrance
”
has the meaning given to it in Section 4.9.
“
Pension Plan
” means
any “employee pension benefit plan” (as such term is defined in Section 3(2) of ERISA) that is sponsored or maintained
by Borrower, a Guarantor, or any ERISA Affiliate or to which Borrower, a Guarantor, or any ERISA Affiliate contributes or has an
obligation to contribute, or in the case of a multiple employer plan (as described in Section 4064(a) of ERISA) has made contributions
at any time during the immediately preceding five plan years.
“
Permitted Investments
”
means (i) U.S. Dollar demand deposits maintained in the United States with any commercial bank which has a combined capital and
surplus of at least $100,000,000.00; (ii) U.S. Dollar time deposits maintained in the United States with, or certificates of deposit
having a maturity of six months or less issued by, any commercial bank which has its head office in the United States and which
has a combined capital and surplus of at least $100,000,000.00; (iii) direct obligations of, or obligations unconditionally guaranteed
by, the United States Government and having a maturity of one year or less; (iv) readily marketable commercial paper having a maturity
of six months or less, issued by any corporation organized and existing under the laws of the United States, any state thereof,
or the District of Columbia and rated A-1 by Standard & Poor's Corporation or P-1 by Moody's Investors Service, Inc. (or, if
neither such organization shall rate such commercial paper at any time, rated by any nationally recognized rating organization
in the United States with the highest rating assigned by such organization).
“
Person
” includes an
individual natural person, corporation, limited liability company, general or limited partnership, joint venture, association,
trust, Governmental Authority, and any other entity.
“
Phoenix
” means Phoenix
Bulk Carriers (US) LLC, a Delaware limited liability company.
“
Plan
” means any “employee
benefit plan” (as such term is defined in Section 3(3) of ERISA) established by Borrower or any ERISA Affiliate.
“
Pledgor
” means Bulk
Fleet Bermuda Holding Company Ltd., a Bermuda company.
“
Process Agent
” has the
meaning given to it in Section 3.1(a)(xiv), and includes any successor thereto that is appointed as contemplated in Section 7.4.
“
Process Agent Appointment
”
has the meaning given to it in Section 3.1(a)(xiv).
“
Requisition
” means expropriation,
confiscation, requisition or acquisition of the title to or use of the Vessel, whether for full consideration or a consideration
less than full value, which is effected by any Governmental Authority or by any Person or Persons claiming to be or to represent
a Governmental Authority
“
Reportable Event
” means
any of the events set forth in Section 4043(c) of ERISA.
“
Request for Advance
”
has the meaning given to it in Section 2.1(a).
“
Seizure
” means an arrest,
repossession, taking into custody, detention or seizure by judicial or nonjudicial means (including attachment, garnishment, or
execution or levy), and “
Seize
” has a correlative meaning).
“
Sub-COA
” means the Contract
of Affreightment between Charterer and Phoenix dated as of January 1, 2011.
“
Subordinated Debt
” has
the meaning given to it in Section 8.6(a).
“
Subordinated Liens
”
has the meaning given to it in Section 8.6(a).
“
Subsidiary
” means any
corporation, limited liability company, partnership, joint venture, association, trust or estate of which (or in which) the relevant
Person owns, directly or indirectly, ten percent (10%) or more of (i) the outstanding capital stock having ordinary voting power
to elect a majority of the Board of Directors of such corporation (irrespective of whether or not at the time capital stock of
any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (ii) the
interest in the capital or profits of such limited liability company, partnership or joint venture, or association, or (iii) the
beneficial interest of such trust or estate.
“
Synthetic Lease Obligation
”
means the monetary obligation of a Person under (a) a so called synthetic, off-balance sheet or tax retention lease, or (b) an
agreement for the use or possession of property creating obligations that do not appear on the balance sheet of such Person but
which, upon the insolvency or bankruptcy of such Person, would be characterized as the indebtedness of such Person (without regard
to accounting treatment).
“
Taxes
” has the meaning
given to it in Section 2.5(a)(i).
“
Technical Management Agreement
”
means the Ship Management Agreement for the Vessel between Borrower and Seamar Management S.A. dated February 23, 2011.
“
Time Charter
” means
the Time Charter for the Vessel between Borrower and Charterer dated February 7, 2011.
“
United States
” means
the United States of America, its territories and possessions.
“
Vessel
” has the meaning
given to it in Recital A.
1.2
Currency
.
All references to dollars and all usage of the symbol “$” are references to U.S. Dollars.
1.3
Accounting
Terminology
. All accounting terms used in the Loan Documents shall be construed, and all financial records and reports prepared
or provided pursuant to the Loan Documents shall be prepared, in accordance with GAAP.
1.4
Computation
of Interest and Time Periods
. Under the Loan Documents, interest shall accrue and be calculated at a rate per annum based on
the actual number of days elapsed and a 360-day year. Anything in the Loan Documents to the contrary notwithstanding, interest
shall not accrue thereunder at a rate in excess of the maximum rate, if any, that is permitted under applicable law, and shall
be deemed automatically capped at the relevant maximum rate in effect, if any, from time to time. At no time shall the interest
rate payable on the Advance, together with the late payment fees and prepayment fees that accrue under, and all other amounts payable
under the Loan Documents to the Lender, to the extent the same are construed to constitute interest, exceed the maximum rate of
interest that at any time may be contracted for, taken, charged or received by the Lender under the Loan Documents under applicable
law. If for any period during the term of this Agreement any amount paid to the Lender under the Loan Documents (to the extent
the same shall (but for the provisions of this Section) constitute or be deemed to constitute interest) would exceed the maximum
amount of interest permitted during such period, then such excess amount shall be applied or shall be deemed to have been applied
as a prepayment of the Advance in such order as the Lender shall determine. In computations of interest or time under this Agreement
“from” means “from and excluding,” and “to” or “through” means “to and including.”
For the calculation of the duration of a monthly period, a month commencing on one numeric day of a calendar month shall end on
the same numeric day of the next calendar month, if any, or else the last day of the next calendar month.
1.5
Construction
.
In this Agreement, unless expressly stated otherwise: (a) references to articles, sections, exhibits and schedules, are references
to articles, sections, exhibits, and schedules of this Agreement, and references to “herein,” “hereof,”
and “hereto” are references to this Agreement as a whole; (b) the terms “include,” “including”
and similar terms shall be construed as if followed by the words “but not limited to”; (c) the term “documents”
includes any and all instruments, documents, charters, leases, contracts, agreements, certificates, notices, reports, financial
statements and other writings, however evidenced, whether in physical or electronic form; (d) references to execution of documents
shall include obtaining notarial acknowledgements thereof in accordance with applicable law as required by Lender; (e) words denoting
the singular shall include the plural, and vice versa, and words denoting any gender shall include all genders; (f) captions of
articles and sections of this Agreement are inserted for convenience of reference only and shall not be considered in the interpretation
or construction of this Agreement; (g) references to agreements and other contractual instruments shall be deemed to include such
agreements and other instruments as assigned, assumed, amended, renewed, replaced, or otherwise modified from time to time, but
only to the extent that the assignments, assumptions, amendments, renewals, replacements, novations, and other modifications are
not prohibited by any Loan Document; and (h) references to the accrual of interest include reference to the applicable loan margins
and increases in interest relevant to an Event of Default, as provided in the Loan Documents. In this Agreement “
law
”
includes (i) all international, foreign, U.S. federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances,
codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental
Authority, court, administrative or other governmental tribunal charged with the enforcement, interpretation or administration
thereof, (ii) all applicable administrative orders, directed duties, requests, and Permits of, or issued by, any Governmental Authority,
in each case whether or not having the force of law, and (iii) any particular law shall include all recodifications, amendments,
consolidations, replacements, and supplements thereto and thereof, and interpretations of such law by relevant Governmental Authorities.
Each party to the Loan Documents has had an opportunity to review and revise them, so the rule of construction to the effect that
any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation or construction of the
Loan Documents. Time is of the essence of the Loan Documents.
ARTICLE II
LOAN
2.1
Loan Advance
.
(a)
Loan
Advance
. Lender agrees, on the terms and conditions set forth herein, to advance to Borrower, in a single advance, $9,120,000.00
(the “
Advance
”). The Advance shall be disbursed for the account of Borrower in accordance with an executed request
therefor in substantially the form attached hereto as
Exhibit A
(“
Request for Advance
”).
(b)
Principal
Repayments
. The Advance shall be repaid in installments as follows: principal installments of $356,000.00 shall be repaid on
the first day of each June, September, December and March commencing with June 1, 2011 until the principal of the Advance is fully
repaid,
provided,
the final installment of all principal then outstanding, shall be repaid in full on March 1, 2016. Once
repaid no portion of the Advance may be reborrowed.
(c)
Interest
.
(i)
Interest
Rate
. Interest shall accrue on the outstanding principal of the Advance from February 28, 2011 (or such later date as the Advance
is disbursed to a bank in Greece in preparation for Closing) until the principal is fully repaid, at the rate of eight and 16/100ths
percent (8.16%) per annum (the “
Interest Rate
”),
provided
,
however
, that after the occurrence
and during the continuance of an Event of Default, in the exercise of Lender’s sole discretion, the Interest Rate shall be
increased by the five percent (5%) (such resulting rate being the “
Default Rate
”),
provided, further,
in
no event shall the Advance or any other amount owing under the Loan Documents accrue interest in excess of the maximum amount,
if any, that is permitted by law. Interest shall accrue and be calculated at a rate per annum based on the actual number of days
elapsed and a 360-day year.
(ii)
Interest
Payments.
On each date on which a payment of principal is due under this Agreement, Borrow shall also make payment of all interest
that has accrued and that remains unpaid as of that date.
2.2
Payments;
Late Payments; Business Days
. If any payment to be made by Borrower under the Loan Documents shall fall due on a day other
than a Business Day, payment shall be made on the next following Business Day. Principal payments made more than five (5) Business
Days’ late shall incur a late payment fee of five percent (5%) of the amount that is late, which shall be due concurrently
with the late payment, without limiting Lender’s rights to interest or default interest, or the right to exercise any of
its other rights, powers, and remedies for default.
2.3
Application
of Payments
. Unless the application of payments received on account of the Obligations in advance of an Event of Default are
otherwise specified by another provision of the Loan Documents, all payments and other funds received on account of the Obligations
(including insurance proceeds, proceeds of Requisition of the Vessel, proceeds of disposition of or realization on Collateral,
and other proceeds of collection), together with the proceeds of any claims for damages received by the Lender pursuant to or under
the terms of the Loan Documents, shall be applied as follows:
first
, toward the payment
of the fees, costs and other expenses (including attorneys’ fees and expenses), and interest thereon, that are owed by Borrower
and that are outstanding under the Loan Documents at the time, and, as required by Lender from time to time, to provide adequate
indemnity against Encumbrances claiming priority over Lender’s security in any Collateral,
provided that
unless an
Event of Default has occurred and is continuing said sums shall not be used to satisfy or provide indemnity against or security
for Permitted Encumbrances;
second
, toward interest
that accrues on the Obligations;
third
, toward payment of
the principal of the Advance; and
fourth
, to the Borrower
or to whomsoever may be entitled thereto.
When applied to the Advance, payments and prepayments shall
be applied in the reverse order of the maturity of the installments thereof.
2.4
Prepayment
.
(a)
Required
Prepayments
. At six-month intervals after Closing Borrower shall provide to Lender a written appraisal of the Vessel that is
prepared by an appraiser listed in
Schedule 2.4
, and dated not more than fourteen days before it is given to Lender. In
lieu of the foregoing, or in the event that Borrower fails to timely deliver any required appraisal, the Lender may have the Vessel
appraised, at Borrower’s expense, by an appraiser selected by Lender in the exercise of its sole discretion. In either event
the Borrower shall make the Vessel available for inspection (without being required to delay a departure for, or deviate from,
a voyage under the Sub-COA, or to specially dry dock the Vessel), but for this purpose such an inspection shall not be required
unless requested by Lender. The appraiser shall determine the fair market value of the vessel on a lien- and charter- free basis,
assuming a willing buyer and a willing seller not under a compulsion to sell. If that valuation is an amount that is less than
seventy percent (70%) of the outstanding principal of the Advance at the time the appraisal is made, and if demanded to do so by
Lender, Borrower shall, within sixty (60) days after receiving notice thereof and a copy of the appraisal, either (i) prepay an
amount such that, after such prepayment is first applied to outstanding interest at the time the prepayment is made and the balance
is applied to the principal of the Advance, the outstanding amount of the Advance shall not exceed seventy percent (70%) of the
appraised value of the Vessel, or (ii) Borrower shall provide further security to Lender that is of a type, value, and that is
subject to a first priority perfected security interest in favor of Lender, acceptable to Lender in the exercise of its sole discretion.
(b)
Voluntary
Prepayments
. Borrower may make voluntary prepayment of the Advance and all accrued unpaid interest thereon in whole but not
in part on March 1, 2013, March 1, 2014, or March 1, 2015 (or the first Business Day thereafter), by first providing to Lender
sixty (60) days’ advance written notice of Borrower’s intention to do so. Once such notice is given for any prepayment,
Borrower is obligated to make such prepayment on the date so indicated.
(c)
Other
Prepayments; Prepayment Fee
. In the event the Advance is prepaid pursuant to Sections 2.4(a) or (b), or as a result of receipt
by Lender and application of proceeds of insurance, foreclosure or other realization on Collateral, collection actions with respect
to an Obligation, proceeds of Requisition, a payment from Bankruptcy or Other Proceedings, prepayment compelled by law, or any
other mandatory or involuntary prepayment, Borrower shall, concurrently with Lender’s receipt of such prepayment, pay a
prepayment fee calculated as the difference between X and Y, with the variables X and Y defined as follows:
X equals all future scheduled principal and interest
payments (from the date of prepayment through March 1, 2016) related to the portion of the Advance prepaid, reduced to present
value as of the prepayment date at the rate of four and 35/100
ths
percent (4.35%) per annum.
Y equals the amount of the Advance prepaid.
Borrower acknowledges that the prepayment fee is intended to
compensate the Lender and is not a penalty.
2.5
Taxes;
Yield Protection; Illegality
.
(a)
Taxes
.
(i) All
payments by Borrower to or for the account of Lender under the Loan Documents shall be made free and clear of and without deduction
for present or future taxes, duties, levies, imposts, deductions, assessments, fees, withholdings or similar charges, and all liabilities
with respect thereto, excluding taxes imposed on or measured by Lender’s net income or gross receipts, and franchise taxes
imposed on Lender (in lieu of net income taxes) by the jurisdiction (or any political subdivision thereof) under the laws of which
Lender is organized or maintains a lending office (all such non-excluded taxes, duties, levies, imposts, deductions, assessments,
fees, withholdings or similar charges, and liabilities being hereinafter referred to as “
Taxes
”). If Borrower
shall be required by any law to deduct any Taxes from or in respect of any sum payable under any Loan Document to Lender, (A) the
sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional
sums payable under this Section 2.5), Lender receives an amount equal to the sum it would have received had no such deductions
been made, (B) Borrower shall make such deductions, (C) Borrower shall pay the full amount deducted to the relevant taxation authority
or other authority in accordance with applicable law, and (D) within thirty (30) days after the date of such payment, Borrower
shall furnish to Lender the original or a certified copy of a receipt evidencing payment thereof. In the event and to the extent
that Lender receives, from an applicable taxing authority, a refund or credit for any Taxes so withheld and paid to a Governmental
Authority by Borrower and for which Borrower makes an additional payment to Lender under the foregoing clause (A), Lender shall
promptly make a refund to Borrower of the amount of such refund or credit.
(ii) Borrower
agrees to pay all present or future stamp taxes, court or documentary taxes, and other excise or property taxes or charges or similar
levies which arise from any payment made under any Loan Document or from the execution, delivery, performance, enforcement, filing
or registration of, or otherwise with respect to, any Loan Document (hereinafter referred to as “
Other Taxes
”).
(iii) If
Borrower shall be required to deduct or pay any Taxes or Other Taxes from or in respect of any sum payable to Lender under any
Loan Document, Borrower shall also pay to Lender, at the times interest is paid, such additional amounts that Lender specifies
as necessary to preserve the after-tax yield (after factoring in all Taxes, Other Taxes, and taxes imposed on or measured by net
income or gross receipts, and franchise taxes) Lender would have received if such Taxes or Other Taxes had not been imposed.
(iv) Borrower
agrees to indemnify Lender for (A) the full amount of Taxes and Other Taxes (including any Taxes or Other Taxes imposed or asserted
by any jurisdiction on amounts payable under this Section 2.5) paid by Lender, (B) amounts otherwise payable under this Section
2.5, and (C) all liabilities (including penalties, interest and expenses) arising therefrom or with respect thereto, in each case
whether or not such Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.
Payment under this Section (iv) shall be made within thirty (30) days after the date Lender makes a demand therefor.
(b)
Matters
Applicable to all Requests for Compensation
. A certificate of Lender claiming compensation under this Section 2.5 and setting
forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining
such amount, Lender may use any reasonable averaging and attribution methods.
(c)
Survival
.
All of Borrower’s obligations under this Section 2.5 shall survive repayment of the Advance and all interest thereon.
2.6
Wire
Transfers
. If the Advance is, at Borrower’s request, to be wire transferred to Borrower or any other Person, such transfer
shall be subject to all applicable law, including the policies of the Board of Governors of the Federal Reserve System. Borrower
acknowledges that as a result thereof, the transmission of the Advance may be significantly delayed.
2.7
Renewal
of Credit Facilities
. Borrower acknowledges that any request that it makes for a renewal, extension, or replacement of the
credit facilities contained in this Agreement shall be granted or withheld by Lender in the exercise of Lender’s sole discretion.
2.8
Conditions
.
Lender shall not be required to make the Advance unless at such time: all Conditions Precedent that are relevant to the Advance
have been timely fulfilled; none of the covenants, representations or warranties of Borrower or any other Person other than Lender
that are contained in the Loan Documents shall have been materially breached or shall be materially untrue; no Default or Event
of Default shall have occurred and be outstanding; and all other requirements set forth in the Loan Documents shall be satisfied
in all material respects; provided that any of the foregoing may be waived by the Lender if done in writing. Other than as expressly
set forth herein, Lender shall be under no obligation to make advances to Borrower, and no other advances made by Lender apart
from the requirements of this Agreement shall be deemed to establish any contrary practice, course of dealing or obligation.
ARTICLE III
CONDITIONS PRECEDENT
3.1
Conditions
Precedent to the Advance
. Lender’s obligation to make the Advance under this Agreement shall be subject to the fulfillment,
on or before March 15, 2011 (or such later date as Lender approves in writing), of all of the following conditions precedent, and
all other conditions precedent that may be contained in any of the Loan Documents:
(a)
General
Documents
. Borrower shall furnish to Lender the following in form and substance satisfactory to Lender, dated as of Closing,
unless otherwise indicated below:
(i) the
Request for Advance;
(ii) a
First Naval Mortgage encumbering the Vessel, duly executed by Borrower in substantially the form attached hereto as
Exhibit
B
, that has been notarized and legalized, and stamped with a consular registration number by the Panamanian consul in Greece
as preliminarily registered (the “
Mortgage
”);
(iii) an
Assignment of Charter, Earnings and Insurances executed by Borrower in substantially the form attached hereto as
Exhibit C
(the “
Borrower’s Earnings Assignment Agreement
”);
(iv) a
certification that an executed Notice of Assignment in substantially the form of Exhibit A to Exhibit C hereto was delivered to
Charterer, and that an Acknowledgement and Agreement executed by Charterer in substantially the form of Exhibit B to Exhibit C
hereto;
(v) an
Assignment of Contract of Affreightment, Earnings and Insurances executed by Charterer in substantially the form attached hereto
as
Exhibit D
(the “
Charterer’s Earnings Assignment Agreement
”);
(vi) a
certification that an executed Notice of Assignment in substantially the form of Exhibit A to Exhibit D hereto was delivered to
Phoenix, an Acknowledgement and Agreement executed by Phoenix in substantially the form of Exhibit B to Exhibit D hereto;
(vii) a
Manager’s Undertaking executed by Seamar Management S.A., in substantially the form attached hereto as
Exhibit E
;
(viii) a
Manager’s Undertaking executed by Phoenix, in substantially the form attached hereto as
Exhibit F
;
(ix) a Funds Deposit Agreement
executed by Borrower, Charterer, Phoenix, Allseas, and Lender, in substantially the form attached hereto as
Exhibit G
(the
“
Funds Deposit Agreement
”);
(x) a copy of a letter executed
by Phoenix, addressed to Mid-Ship Group LLC, that instructs Mid-Ship Group LLC to remit all freights and other sums paid by Noranda
Alumina LLC under the COA, less commissions retained by Mid-Ship Group LLC under the COA, to the Bulk Discovery Freights Account,
in form acceptable to Lender;
(xi) charge
over Shares regarding all of the issued and outstanding shares of stock in Borrower, executed by Pledgor in substantially the form
attached hereto as
Exhibit H
(the “
Shares Charge
”), and (A) a Shareholder’s Proxy executed by Pledgor
in substantially the form attached to the Shares Charge, (B) a Share Transfer Form executed by Pledgor in substantially the form
attached to the Shares Charge that pertains to the shares subject to the Shares Charge, (C) all share certificates for all issued
an outstanding shares of stock of Borrower, (D) an Undertaking executed by Pledgor in substantially the form attached to the Shares
Charge, and (E) undated Director & Officer Resignation Letters executed by all of the directors and officers of Borrower in
substantially the form attached to the Shares Charge;
(xii) a
Charge Over Cash Deposit executed by Borrower, Lender, and HSBC Bank Bermuda Limited in substantially the form attached hereto
as
Exhibit I
;
(xiii) a
Charge Over Cash Deposit executed by Allseas, Lender, and HSBC Bank Bermuda Limited in substantially the form attached hereto as
Exhibit I
(the “
Allseas Charge on Cash Deposit
”);
(xiv) an
irrevocable consent to appointment as registered agent for service of process on Borrower, Pledgor, Allseas, and the Guarantors,
executed by Leicht & Rein (“
Process Agent
”), in form acceptable to Lender (“
Process Agent Appointment
”);
(xvi) copies
of the executed Time Charter, Technical Management Agreement, and Commercial Management Agreement certified by an officer of Borrower
or another individual acceptable to Lender;
(xvii) copy,
certified by Charterer or another individual acceptable to Lender, of the executed Sub-COA;
(xviiii) copy, certified by Phoenix
or another individual acceptable to Lender, of the executed COA;
(xix) certified copies of all
entries and filings in respect of each of Borrower, Holding Company, Pledgor, and Allseas on file in the Register of Companies
at the office of the Registrar of Companies in Hamilton, Bermuda;
(xx) copies, certified by the
secretaries of the respective companies or other individuals acceptable to Lender, of the Constitutional Documents of each of Borrower,
Holding Company, Pledgor, and Allseas, and of minutes of the meetings of the board of directors of each of Borrower, Holding Company,
Pledgor, and Allseas containing,
inter alia
, the unanimous resolutions of the directors of each of such companies approving
such companies’ authorization of and entry into the Loan Documents to be executed on their behalf;
(xxi) a Certificate of Compliance
issued by the Registrar of Companies in respect of each of Borrower, Holding Company, Pledgor, and Allseas;
(xxii) a certified copy of the
Register of Shareholders in respect of each of Borrower, Holding Company, Pledgor, and Allseas;
(xxiii) a certified copy of the
Register of Directors and Officers in respect of each of Borrower, Holding Company, Pledgor, and Allseas, certified by their respective
secretaries;
(xxiv) certified copy of a current
Foreign Exchange Letter issued by the Bermuda Monetary Authority with respect to each of Borrower, Holding Company, Pledgor, and
Allseas certified by their respective secretaries;
(xxv) a certified copy of a current
Tax Assurance issued by the Registrar of Companies for the Minister of Finance in relation to each of Borrower, Holding Company,
Pledgor, and Allseas certified by their respective secretaries;
(xxvi) copies of the Constitutional
Documents and public records of Charterer obtained from the Registry of Corporate Affairs and the High Court Registry of the British
Virgin Islands and certified by the secretary of Charterer;
(xxvii) copies of the memorandum
and articles of association and certificate of incorporation of Charter certified by the secretary of Charterer;
(xxviii) copy of the public records
of Charterer obtained from the Registry of Corporate Affairs in the British Virgin Islands and the public information revealed
from a search of each of the Civil Index Book and the Commercial Book, each from the date of the Charterer’s incorporation,
maintained by the British Virgin Islands’ High Court Registry;
(xxix) a certificate of the secretary
of the Charterer identifying, inter alia, the directors, officers, and shareholders of Charterer;
(xxx) a copy certified by the
secretary of the Charterer of the written resolutions of the directors of Charterer approving, inter alia, the Charterer’s
authorization of and entry into the Loan Documents to be executed for and on behalf of Charterer;
(xxxi) a copy of the register
of the members of Charterer certified by the secretary of Charterer;
(xxxii) a copy of the register
of the directors of Charterer certified by the secretary of Charterer;
(xxxiii) a Certificate of Good
Standing for Phoenix issued by the Division of Corporations of the Delaware Department of State on or about the date of Closing;
(xxxiv) a copy of the Certificate
of Formation of Phoenix, as amended and restated, issued by the Division of Corporations of the Delaware Department of State on
or about the date of Closing;
(xxxv) a certificate of a manager
or officer of Phoenix that:
(A) attaches
a true and complete a copy of the Certificate of Formation of Phoenix, as amended and restated;
(B) attaches
a true and complete copy of the limited liability company operating agreement for Phoenix, as amended and restated;
(C) attaches
a true and complete copy of resolutions of the members and manager of Phoenix that authorizes the execution and delivery of a the
Loan Documents which this Agreement contemplates that it will execute and deliver, and that certifies that such resolutions are
in full force and effect; and
(D) verifies
the incumbency and signature of the individual who executes Loan Documents on behalf of Phoenix;
(xxxvi) certified true copies
of executed powers of attorneys appointing all attorneys-in-fact who executed Loan Documents on behalf of Borrower, Holding Company,
Pledgor, Allseas and Charterer;
(xxxvii) certifications of the
signatures of all individuals who execute Loan Documents on behalf of Borrower, Holding Company, Pledgor, Allseas, or Charterer;
(xxxviii) legal opinions of counsel
in Bermuda, the British Virgin Islands, and Panama that are acceptable to Lender, in form acceptable to Lender, regarding this
Agreement and the transactions and matters contemplated therein; and
(xxxix) such other agreements,
instruments, documents, and certifications as Lender may reasonably require.
(b)
Vessel
Documentation and Preliminary Registrations
. Lender shall have received
(i) certified
copies of a valid and unexpired Provisional Patente of Navigation and Registration Certificate and Radio Permit for the Vessel
that indicate that Borrower is the sole owner of the Vessel, and that the Vessel is duly registered under the laws of the Republic
of Panama,
(ii) original
bill of sale for the Vessel from Antonis Special Maritime Enterprise, as seller, that has been duly executed by the seller, notarized
and legalized, and that has been executed by Borrower as the transferee, and that bears a customary dated Panamanian consular attestation
together with the acceptance of sale referred to in section (iii) below; and bearing a Panamanian consular registration number
stamp as preliminarily registered,
(iii) an
acceptance of sale of Vessel in form acceptable to Lender, executed by Borrower, and notarized and legalized;
(iv) an
application for Panamanian preliminary registration of title to property executed by the Borrower and bearing a customary acknowledgement
by the Panamanian consul, and
(v) either
(A) a copy, with proof of filing with the Panamanian Merchant Marine Administration, of a power of attorney granted by Borrower
to a Panamanian lawyer or law firm, designating the lawyer or law firm as the Borrower’s legal representative of the Vessel
in Panama, or (B) an original such power of attorney that has been duly executed by Borrower, and notarized and legalized.
(c)
Mortgage
Filing
. The Mortgage shall have been duly preliminarily filed and recorded at the Public Registry of Titles and Encumbrances
of Vessels of the Panama Maritime Authority, such that it creates a duly perfected mortgage and maritime lien under the laws of
the Republic of Panama, and creates a preferred mortgage on the Vessel (as the term “preferred mortgage” is defined
at 46 U.S.C. § 31301(6)(B)), subject to no Encumbrances thereon other than Permitted Encumbrances. Lender shall have
received a certified copy of a certificate of ownership and encumbrance for the Vessel issued by the Panama Public Register Office
that indicates that Borrower is the sole owner of record of the Vessel, that the Mortgage has been duly filed and recorded at the
Panama Public Register Office, and that there are no outstanding Encumbrances of record at the Panama Public Register Office that
pertain to the Vessel.
(d)
Vessel
Items
. Lender shall have received the results of a survey and appraisal of the Vessel, and certified copies of valid and unexpired
documents that indicate that the Vessel satisfies the requirements contained in Section 4.19, in each such case that are satisfactory
to Lender, in the exercise of its sole discretion. There shall have been no change in the condition of the Vessel or in the existence
aboard or condition of any equipment listed in such survey since the date of the surveyor’s inspection thereof, except for
ordinary wear and tear. The Vessel shall have been duly deleted from the Greek registry, free of all Encumbrances, and Borrower
shall have provided to Lender copies of all documents referred to in the Addendum No 1 Dated 14
th
February 2011 to the
Memorandum of Agreement dated January 26, 2011 among Antonis Special Maritime Enterprise, Borrower, Lomar Shipping and Management
Inc. and Seamar Management S.A. Lender shall have received a copy, certified by the secretary of Borrower, of the foregoing Memorandum
of Agreement, and all attachments and addenda thereto.
(e)
Financing
Statements
. There shall have been duly filed in all jurisdictions of Lender’s choice forms of Uniform Commercial Code
financing statements pertaining to Borrower, Pledgor, Allseas and Charterer as debtors, with respect to the Collateral, in forms
required by Lender.
(f)
Perfection
.
Borrower, Pledgor, Allseas, and Charterer shall furnish to Lender all other evidence of the perfection of the security granted
in the Collateral Documents in all jurisdictions of Lender’s choice, in form as it may require, and evidence satisfactory
to Lender that all such mortgages, assignments, and other security interests have the priority required of them herein or in the
relevant Loan Documents.
(g)
Insurance
.
Borrower shall have furnished to all underwriters and protection and indemnity associations Notices of Assignment as required herein,
which shall have been duly endorsed on all policies and entries. Lender shall have been furnished with certified copies of all
policies of insurance and protection and indemnity association certificates of entry that Borrower is required to procure and maintain
pursuant to the Loan Documents, along with all required endorsements thereto, a letter of undertaking from the Vessel’s protection
and indemnity association, and a letter from the Borrower’s insurance broker as required herein. Lender shall have been furnished
with certified copies of all policies of insurance that Charterer obtains for which it is required to furnish documents pursuant
to the Charterer’s Earnings Assignment Agreement (or of a certificate of entry in the case of a protection and indemnity
association), and all such documents that Charterer is required to furnish pursuant to the Charterer’s Earnings Assignment
Agreement. Charterer shall have furnished to all underwriters and protection and indemnity associations Notices of Assignment as
required therein, which shall have been duly endorsed on all policies and entries.
(h)
Borrower
Bank Account
. Borrower shall have opened a demand deposit account with HSBC Bermuda Bank Limited for the purpose of receiving
charter hire under the Time Charter (the “
Bulk Discovery Hire Account
”).
(i)
Allseas
Bank Account
. Allseas shall have opened a demand deposit account with HSBC Bermuda Bank Limited for the purpose of receiving
freights and other amounts under the Sub-COA, and for the purpose of receiving from Mid-Ship Group LLC freights and other amounts
paid by Noranda Alumina LLC, its successors and assigns under the COA (the “
Bulk Discovery Freights Account
”).
(j)
Fees
and Expenses
. Borrower shall have paid (A) a commitment fee of one percent (1%) of the Advance (the “
Commitment Fee
”),
(B) all transaction fees payable to Lender pursuant to a fee letter executed by Lender and Borrower dated February 1, 2011 (the
“
Fee Letter
”), (C) all filing and recording fees, and all stamp and other taxes payable with respect to the
consummation of the transactions as contemplated in this Agreement, and (D) Lenders’ reasonable attorneys’ fees and
other expenses incurred as of Closing in connection with the transactions contemplated in this Agreement.
3.2
Compliance
with Loan Documents
. It is a condition precedent to the Advance that the representations and warranties of Borrower and Guarantors
contained in the Loan Documents shall be true, and there shall be no outstanding Default or Event of Default thereunder by any
of the Loan Documents, and there shall not exist any Material adverse condition with respect to a Credit Party that has not been
contained in the written information about them, their assets, their businesses, and their financial condition that has not heretofore
been disclosed to Lender in writing.
3.3
Unfulfilled
Conditions Precedent Become Ongoing Covenants
. Conditions Precedent specified in this Article III that remain unfulfilled as
of the disbursement of the Advance shall survive and shall be deemed ongoing covenants of Borrower, the performance of which shall
be due on demand, unless they are waived by Lender in writing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Credit Parties make the following representations,
warranties, and covenants in addition to those which may be contained elsewhere in the Loan Documents. All of the following and
such other representations, warranties, and covenants as such parties shall make in the other Loan Documents are continuing representations
and warranties and shall survive the Closing until all of the Obligations are fully performed:
4.1
Company
Matters
. Borrower, Pledgor, Allseas, Phoenix, and Holding Company are each an exempted company incorporated under the laws
of Bermuda, and possesses the capacity to sue and be sued in its own name and is in good standing under the laws of Bermuda. Charterer
is an exempted company incorporated under the laws of the British Virgin Islands, and possesses the capacity to sue and be sued
in its own name and is in good standing under the laws of the British Virgin Islands. Each Credit Party, and each of Allseas and
Phoenix possesses all requisite power and authority to enter into, execute, deliver, and perform its obligations under this Agreement
and the other Loan Documents to which it is or is to become party pursuant to this Agreement and to take all action as may be necessary
to consummate the contractions contemplated thereby. The entry into, execution, delivery, and performance by each Credit Party,
and each of Allseas and Phoenix, of the Loan Documents to which it is, or, pursuant to this Agreement is to be a party, and the
transactions contemplated thereby, have been duly authorized by all necessary corporate action. This Agreement and the Loan Documents
which this Agreement contemplates that the Credit Parties, Allseas and Phoenix will execute have been duly executed by such Persons
and constitute (or shall constitute when executed and delivered) legal, valid, and binding obligations of such Persons, enforceable
against them in accordance with their terms.
4.2
Legal
Matters
. The execution, delivery, and performance of the Loan Documents to which the Credit Parties, Allseas, and Phoenix are
or are to become party do not and will not (a) violate any provision of any law, rule, order, writ, judgment, injunction,
decree, determination or award presently in effect having applicability to them, or (b) result in a breach of or constitute a default
under any indenture, loan or credit agreement, or any other note, instrument, or agreement for borrowed money. None of the Credit
Parties, Allseas, or Phoenix are in Material violation of or Material default under any such law, rule, order, writ, judgment,
injunction, decree, determination, award, indenture, loan or credit agreement, or other note, instrument, or agreement for borrowed
money. The execution, delivery, and performance of the Loan Documents to which each of the Credit Parties, Allseas, and Phoenix
is or is to become a party do not and will not violate its Constitutional Documents, are within its powers, and have been duly
authorized by all necessary company action.
4.3
Authorization;
Validity and Enforceability
. This Agreement has been duly executed on behalf of Borrower and Guarantors, and constitutes a
valid obligation of each of them, and is enforceable against them in accordance with its terms. Each Loan Document, when executed
and delivered by such of the Credit Parties, Allseas, or Phoenix as are stated to be parties thereto, will be a legal, valid and
binding obligation of such of such Persons as are stated to be party thereto, enforceable against each such party in accordance
with its terms. This Agreement is not subject to any claim, defense or right of offset or recoupment of any kind whatsoever. None
of the Credit Parties, Allseas, or Phoenix has any claims, counterclaims or defenses against the Lender or any other Person that
would or might affect (1) the validity, enforceability or binding nature of any provision of any Loan Document or (2) the collectability
of any of the Obligations or any of the obligations of any Guarantor, Pledgor, Allseas, or Phoenix under the Loan Documents.
4.4
Lines
of Business
. Borrower is engaged exclusively in the ownership and operation of the Vessel for operation in the international
bulk cargo trade, including to and from ports in the United States, and activities reasonably related thereto.
4.5
Government
Approvals
. No Permit from, or filing or registration with any Governmental Authority is or will be necessary to the valid execution,
delivery, or performance of the Loan Documents by the Credit Parties, Allseas or Phoenix.
4.6
Ownership;
Subsidiaries
. All Equity Interests in the Credit Parties are owned as set forth in
Schedule 4.6
. Borrower has no Subsidiaries
other than as set forth in
Schedule 4.6
. Except as has been disclosed to the Lender in
Schedule 4.6
, there are no
outstanding subscription agreements, membership interest or share purchase agreements, warrants, or options for any Equity Interests
in Borrower. Allseas and Phoenix are, directly or indirectly, wholly-owned subsidiaries of Holding Company.
4.7
Financial
Condition
. All financial information heretofore given to Lender by Borrower or any of its Affiliates pertaining to Borrower
or any other Person reasonably and accurately reflected the facts stated therein or represented thereby as of the dates of such
financial information, and was prepared in accordance with GAAP, and was otherwise prepared in a manner that is consistent with
the financial information with which Lender has been provided heretofore, except as otherwise expressly noted therein. At such
dates there were no omissions of material facts or materially erroneous statements therein or therefrom, as determined in accordance
with GAAP.
4.8
Legal
Actions
. There are no actions, suits, or proceedings pending or threatened against any of the Credit Parties or any of their
assets, before any court, administrative or other tribunal, arbitrator or panel of arbitrators, or Governmental Authority except
as set forth in
Schedule 4.8
hereto.
4.9
Title
and Encumbrances
. Borrower has good and merchantable title to all of the Collateral except Collateral owned by Pledgor, Charterer,
or Allseas. Pledgor has good and merchantable title to all of the Equity Interest in Borrower, and all Collateral related thereto.
Charterer has good and merchantable title to the Time Charter, all other Collateral described in the Charterer’s Earnings
Assignment Agreement, and all Collateral related thereto. Allseas has good and merchantable title to the deposit account described
in the Allseas Charge on Cash Deposit, and all Collateral related thereto. None of Borrower’s assets or any of the other
Collateral are subject to any Encumbrances except (a) Encumbrances in favor of Lender, (b) Encumbrances listed in
Schedule
4.9
, and (c) Encumbrances expressly permitted in any Loan Documents (each, a “
Permitted Encumbrance
”).
4.10
Contracts
.
None of the Time Charter, Technical Management Agreement, Commercial Management Agreement, Sub-COA, and COA have been assigned,
assumed, amended, renewed, replaced, or otherwise modified.
4.11
Place
of Business
. Borrower’s, Charterer’s and Allseas offices where they keep their books and records pertaining to
deposit accounts and general intangibles owing or belonging to them, and all other records contemplated in Section 5.9 are located
at the address of Borrower stated in Section 9.4, and their chief executive offices and places of business are located at the locations
stated in
Schedule 4.11
.
4.12
Disclosure
.
All written statements, representations, and warranties made by the Credit Parties, Allseas, and Phoenix in the Loan Documents
are materially true, and do not omit any material facts on the date as of which such information was stated or certified.
4.13
Laws
and Regulations
. The Credit Parties, Allseas, and Phoenix are in compliance with all applicable laws, except for any violation
of which would not subject any Collateral to forfeiture, could not subject any directors, officers, or shareholders of any of the
Credit Parties, Allseas, or Phoenix to imprisonment, and could not have a Material affect on the Credit Parties, Allseas, or Phoenix
. Borrower is not engaged and shall not engage in the business of purchasing or carrying margin stock (within the meaning of Regulation
U issued by the Board of Governors of the Federal Reserve System), or extending credit for the purpose of purchasing or carrying
margin stock. Borrower is not subject to the Investment Company Act of 1940, the Public Utility Holding Company Act of 1935, or
any other law that restricts entering into or performing any obligation of Borrower under any Loan Document.
4.14
Tax
Status
. The Credit Parties and their Subsidiaries have filed all tax returns and reports required to be filed, has made provision
in accordance with GAAP for the payment of all applicable and accrued or accruing foreign, U.S. federal, state and local taxes,
and has paid all such taxes which are due and payable.
4.15
Fiscal
Year
. The Credit Parties’ and their Subsidiaries’ fiscal years for accounting and tax purposes end on December
31.
4.16
Intellectual
Property
. The Credit Parties own or possess the right to use, all of the trademarks, service marks, trade names, and copyrights
that are reasonably necessary for the operation of their businesses, without conflict with the rights of any other Person, and
it owns no patents, patent rights, franchises, or licenses or registered trademarks, service marks, trade names, copyrights, or
other intellectual property rights.
4.17
ERISA
Compliance
. No Credit Party or any ERISA Affiliate thereof has any Pension Plan or Multiemployer Plan.
4.18
Environmental
Compliance
.
(a) The
Credit Parties and their Subsidiaries are in compliance in all material respects with the requirements of all applicable Environmental
Laws, the violation of which could have a Material adverse effect on their assets or business.
(b) No
hazardous substances have been generated or manufactured on, transported to or from, treated at, stored at or discharged from or
on any real property or from a vessel, owned, leased or operated by any Credit Party or any of their Subsidiaries, in violation
of any Environmental Laws.
(c) None
of the Credit Parties or any of their Subsidiaries have received notice or otherwise learned of any claim, demand, suit, action,
proceeding, event, condition, report, directive, Encumbrance, violation, non-compliance or investigation indicating or concerning
any potential or actual liability or remedial action arising in connection with any non-compliance with or violation of the requirements
of any applicable Environmental Laws, or the presence of, or release or threatened release of any Hazardous Materials on or from
any real property, or from a vessel, owned, leased or operated by any of the Credit Parties or any of their Subsidiaries.
4.19
Vessel
.
The Vessel (a) satisfies the criteria to conduct the business as described in Section 4.4, including the carriage of cargo under
the Sub-COA and COA, (b) measures 9,977 light ship tons and 69,349 deadweight tons, (c) is in class BV + I 3/3 Bulk Ore Carrier,
Deep Sea, AU-MS of Bureau Veritas, and is so certified, without any outstanding exceptions or recommendations, and (d) has, and
Borrower has possession of, all required national and international certificates of financial responsibility, and all other Permits
that are required to conduct the business described in Section 4.4, including all Permits required under the laws of Panama, Jamaica,
and the United States for the carriage of cargo under the Sub-COA and COA.
4.20.
Land
.
Charterer owns no real property in the British Virgin Islands.
ARTICLE V
COVENANTS
So long as any Obligations are outstanding
or Lender has any commitment to make the Advance hereunder, Borrower and Guarantors agree to comply with the following covenants
that are applicable to them unless otherwise agreed to in writing by Lender:
5.1
Title
and Liens
.
(a) At
Closing, Borrower shall be the sole owner of the whole of Vessel and other Collateral except Collateral owned by Pledgor, Charterer,
or Allseas, and shall thereafter retain good and marketable title thereto, subject to no Encumbrances except Permitted Encumbrances;
and
(b) At
Closing, Charterer shall have good and merchantable title to the Time Charter, all Collateral described in the Charterer’s
Earnings Assignment Agreement, and all Collateral related thereto, and shall thereafter retain good and marketable title thereto,
subject to no Encumbrances except Permitted Encumbrances.
(c) The
Greek business day after Closing, Borrower shall deliver to Lender a certificate of the deletion of the Vessel from the Greek registry,
that has been notarized and legalized, showing that the last record owner of the Vessel was Antonis Special Maritime Enterprise,
and that when the Vessel was deleted from Greek registry, it was free and clear of liens and mortgages of record.
5.2
Change
in Business
. Borrower shall not engage in any trade or business in which it is not currently engaged. Borrower shall not change
the location of its chief executive office or the office where it keeps its books and records pertaining to accounts and general
intangibles owing or belonging to it without giving Lender at least thirty (30) days’ advance written notice.
5.3
Financial
Covenants
. Holding Company shall maintain a ratio of EBITDA to Fixed Charges for each fiscal year of not less than 1.2 : 1.
Holding Company shall at all times have shareholders’ equity of not less than $10,000,000.00, determined in accordance with
GAAP.
5.4
Company
Matters
.
(a) Without
the written consent of Lender previously obtained, Borrower shall not, and shall not allow any of its Subsidiaries to:
(i) make
any Investments except for Permitted Investments or Investments otherwise permitted by this Agreement;
(ii) incur
any Indebtedness (other than borrowing funds under this Agreement), make any loans or advances, or extend credit to any Person;
(iii) acquire
any Equity Interests, create any Subsidiaries, or contribute to the equity of any Person;
(iv) declare
or pay any dividends, distribute any equity, or make any other distributions to its shareholders or members;
(v) redeem
any Equity Interests;
(vi) change
its fiscal year or make any material change in its method of accounting;
(vii) merge,
consolidate or amalgamate with or into any other Person, change the legal nature of its form of entity, or change its jurisdiction
of formation;
(viii) liquidate
or dissolve;
(ix) sell
or dispose of any assets other than equipment that is obsolete, or worn out, or no longer necessary for the conduct of Borrower’s
business or the operation of the Vessel, however, if such equipment that is disposed of is equipment of the Vessel, such equipment
shall be concurrently replaced with equipment of equal value;
(x) grant
any Encumbrance on any of its assets except Permitted Encumbrances; or
(xi) incur
or pay any management fees or commissions to any Person other than pursuant to the current express provisions of the Technical
Management Agreement and the Commercial Management Agreement.
(b) Borrower
shall pay all of its obligations as they mature,
provided,
it may contest obligations in good faith if appropriate reserves
therefor are established and maintained consistently with GAAP, and security therefor is posted as may be required by Lender.
5.5
Financial
Statements/Reporting Requirements
. Each of Borrower (on a stand alone basis and on a consolidated basis as to it and its Subsidiaries,
if any), Holding Company (on a consolidated basis) shall deliver to Lender, in form and detail satisfactory to Lender, the following
information and documents, which shall be accurate and complete in all material respects:
(a) As
soon as available but no later than seventy-five (75) days after the end of the each of its fiscal quarters, complete copies of
its financial statements, which shall include its balance sheet, income statement, a statement of changes in equity, and a statement
of cash flows for the preceding fiscal quarter, prepared in a level of detail as reasonably required by Lender, certified by its
chief financial officer or a representative acceptable to Lender as being complete and correct, and fairly presenting its and their
respective financial conditions and the results of its and their respective operations in all material respects;
(b) As
soon as available but no later than one hundred eighty (180) days after the end of the each of their fiscal years, complete copies
of its financial statements, which shall include its balance sheet, income statement, a statement of changes in equity, and a statement
of cash flows for the preceding fiscal year, prepared in a level of detail as reasonably required by Lender, certified by its chief
financial officer or a representative acceptable to Lender as being complete and correct, and fairly presenting its and their respective
financial conditions and the results of its and their respective operations in all material respects, and which, as to Holding
Company, shall have been audited by an independent certified public accountant that has been selected with the written approval
of Lender;
(c) On
each September 1 and March 1 of each year, a Certificate of Compliance executed by an officer Borrower (or its authorized representative
approved by Lender) in substantially the form attached hereto as
Exhibit J
;
(d) Within
thirty (30) days after they are due to be filed under applicable law, as extended pursuant to any valid extensions, copies of the
income tax returns for Borrower and Guarantors in each relevant jurisdiction for each of their fiscal years ending after the date
of this Agreement, and, if filing extensions are requested, Borrower and Guarantors shall furnish Lender forthwith with copies
of all related extension applications and approvals;
(e) Within
ten (10) days after becoming aware of any of the following, written notice to Lender of:
(i) all
Material breaches of contract to which Borrower is a party,
(ii) any
Material disputed account receivable,
(iii) the
institution of any litigation or arbitration to which Borrower is a party or which affects any of its assets (including by means
of counterclaim, cross claim, impleader, or interpleader), in which the claim against the Borrower or a Guarantor is in excess
of $1,000,000.00,
(iv) the
revocation, modification, rescission or failure to renew of any Permit issued to Borrower or the Vessel,
(v) the
occurrence of any Default or Event of Default, together with a detailed statement of the steps being taken by the defaulting party
to deal with any such Default or Event of Default,
(vi) any
change in the jurisdiction of a Credit Party’s formation, or location of Borrower’s or Charterer’s chief executive
office or the office where it keeps its books and records pertaining to accounts and general intangibles owing or belonging to
it, or of the establishment of any new, or the discontinuance of any existing, place of business of Borrower or Charterer,
(vii) the
death of Edward Coll or Claus Boggild, or the disablement of one them such that he may no longer effectively participate in the
management of Holding Company,
(viii) the
occurrence of damage to the Vessel in excess of the amount of the deductible or franchise amount of the hull and machinery insurance
thereon; a total loss of the Vessel occurs, an incident of salvage or general average occurs with respect to the Vessel,
(ix) after
receiving knowledge of a Requisition of the Vessel, or knowledge that a Governmental Authority intends to effect a Requisition
of the Vessel (which shall be accompanied by a copy of the relevant communications received),
(x) after
the occurrence of any discharge from the Vessel of any Hazardous Material into the environment,
(xi) after
receipt of any notice from any Governmental Authority of any illegal act, omission, or condition by or concerning the Vessel or
its officers, crew, or cargoes,
(xii) if
any material requirement of any of Governmental Authority or classification society with respect to the Vessel is made that is
not complied with, or any Governmental Authority or classification society issues a recommendation or exception with respect to
a certification or Permit pertaining to the Vessel that is not complied with or rectified (which shall be accompanied by a copy
of the relevant communications received), or if any classification certificate for the Vessel is terminated,
(xiii) if
the Vessel is Seized,
(xiv) the
occurrence of an Event of Default or any event or condition which, with the passage of time, the giving of notice, or both, would
become an Event of Default, and
(xv) any
other matter which has resulted or might result in a Material adverse change in the financial condition or business of Borrower.
Borrower shall provide to Lender copies of all Form
CG-2692 accident reports (and all similar reports filed outside the United States) within five (5) days after submitting them to
the United States Coast Guard, and copies of all periodic classification society, damage, and insurance surveys that are prepared
for the Vessel; and
(f) Such
other statements, lists or property and accounts, budgets, forecasts, reports or other financial information as are regularly made
or maintained by Borrower as Lender may from time to time request.
5.6
Fiscal
Year
. No Credit Party shall change its fiscal year, nor shall it permit any Subsidiary thereof to do so, without the advance
written consent of Lender.
5.7
Accuracy
of Financial Information
. All financial information hereafter given to Lender by Borrower, Guarantor, or any accountant, or
other professional therefor pertaining to Borrower, Guarantor, or any Subsidiary thereof shall reasonably and accurately reflect
the facts stated therein or represented thereby as of the dates of such financial information subject to, in the case of non-fiscal
year-end information, normal year-end adjustments, and shall be prepared in accordance with GAAP and otherwise in a manner that
is consistent with the financial information with which Lender has been provided heretofore. There shall be no omissions of material
facts therefrom, determined in accordance with GAAP, and there shall be no material and erroneous statements therein, determined
in accordance with GAAP.
5.8
Access
.
The Borrower and Guarantors, shall cause their presidents, chief executive officers, chief financial officers, and authorized representatives
(and Holding Company shall cause the presidents, chief executive officers, chief financial officers, and authorized representatives
of Allseas and Phoenix, and the Persons with custody of or control over the books and records referred to in Section 5.9 pertaining
to Allseas and Phoenix), to be available during customary office hours at least once each fiscal quarter for a conference with
a representative of Lender for the purpose of discussing the financial affairs of Borrower (and any Subsidiaries of Borrower that
may exist from time to time), Guarantors, Allseas, Phoenix.
5.9
Accounting
Records
. Borrower and Guarantors shall maintain, and shall cause their Subsidiaries to maintain, adequate books, accounts and
records of all of their financial transactions and their assets and businesses, and prepare all financial statements, all in accordance
with GAAP and in compliance with the regulations of every Governmental Authority or other regulatory body having jurisdiction over
it or them or its or their businesses. Borrower and Guarantors shall permit, and cause their Subsidiaries to permit, employees
or agents of Lender at such reasonable times as Lender may request to inspect their assets, including without limitation regular
collateral audits, and to examine, audit, and make copies and memoranda of its and their documents, books, accounts and records,
including those kept in electronic form. None of Borrowers or Guarantors shall make or permit any material change in their accounting
policies or reporting practices, and shall ensure that none of their Subsidiaries do so, except (i) as required by generally accepted
accounting principles or (ii) with the prior written consent of the Lender, which consent shall not unreasonably be withheld.
5.10
Status
.
Borrower and Guarantors shall maintain, and shall cause their Subsidiaries to maintain, in full force and effect their corporate
existences, and shall maintain their qualifications to do business as foreign corporations in each jurisdiction in which the character
of the assets owned by them or the nature of their activities make such qualification necessary to avoid a material adverse effect
on them.
5.11
Condition
of Assets
. Borrower and Guarantors shall maintain all of its assets that are necessary or useful in the proper conduct of its
business in good working order and condition, normal wear and tear and excepted.
5.12
Legal
Compliance
. Borrower and Guarantors shall, and shall cause each of their Subsidiaries to, comply with the requirements of all
applicable law, and judicial, arbitral, and governmental rules, orders, writs, judgments, injunctions, decrees, determinations
and awards. Borrower and Charterer bear sole responsibility for compliance with or obtaining all Permits as may be necessary under
applicable contracts and law with respect to the security granted by them to Lender in the Collateral.
5.13
ERISA
Plans
. No Credit Party shall have, or permit any Subsidiary thereof to have any Pension Plan or Multiemployer Plan.
5.14
Taxes
.
Prior to the date on which they became delinquent, Borrower shall duly pay, and discharge, and shall cause each of its Subsidiaries
to pay and discharge, all taxes, duties, levies, imposts, deductions, assessments, fees, withholdings, user fees, and other governmental
charges imposed upon it or upon its income or profits, upon its or their activities, or upon any assets belonging to it or them,
provided,
Borrower and its Subsidiaries may contest in good faith any such claims and taxes, duties, levies, imposts, deductions,
assessments, fees, withholdings, user fees, and other governmental charges if appropriate reserves therefor are established and
maintained consistently with GAAP,
and provided, further,
if an Encumbrance on Collateral arises in respect thereto, Borrower
shall post, or shall cause its Subsidiary to post, security sufficient to ensure that the Governmental Authority asserting the
claim, or any successor or assign thereof, will not enforce an Encumbrance against the Collateral.
5.15
Permits
.
Borrower and Charterer shall obtain and maintain in full force and effect all of its Permits in effect on the date hereof or at
Closing, and such others as are necessary to allow it to conduct the business contemplated in Section 4.4. Borrower and Charterer
shall not operate, and shall not allow the Vessel to be operated, without a Permit in violation of applicable law. None of Borrower
or Charterer shall sell, subject to any Encumbrance, or otherwise transfer any such Permit or any right, title, or interest therein,
thereto, or thereunder.
5.16
Intellectual
Property
. Borrower and Guarantors shall not, sell, transfer, encumber, or otherwise dispose of any of its or their rights,
title, or interest in any trademarks, service marks, trade names, copyrights, patents, patent rights, franchises, licenses and
other intellectual property rights and assets that are reasonably necessary for the operation of its or their businesses, except
transfers of such property to Borrower.
ARTICLE VI
VESSEL PROVISIONS
On, and from and after Closing, Borrower
represents, warrants, and agrees as follows (and shall cause all managers and operators of the Vessel to ensure compliance with
the following provisions on behalf of Borrower):
6.1
Vessel
Registry
. Borrower shall keep the vessel fully documented under the Panamanian registry, including all additional certifications
required for vessels of its type, tonnage and area of operation, under the laws of and international conventions approved by the
Republic of Panama.
6.2.
Ownership
and Encumbrances
. Borrower is the sole owner of the whole of the Vessel free and clear of all Encumbrances except Permitted
Encumbrances, and is lawfully possessed of the Vessel and warrants and shall defend its title to and possession thereof and every
part thereof for the benefit of Lender against the claims and demands of all persons whomsoever. No Encumbrances shall exist hereafter
against the Vessel except for Permitted Encumbrances, and none of Borrower or the master of the Vessel nor any other Persons have
or shall have any right or authority to create, incur or permit to be placed or imposed upon the Vessel, or any part of any of
the Vessel, any Encumbrance whatsoever other than Permitted Encumbrances. Borrower shall pay and discharge, or cause to be paid
and discharged, when due and payable, from time to time, all Encumbrances on the Vessel except when the continuation of such an
Encumbrance is otherwise permitted in this Agreement.
6.3.
Transfers
.
There are no outstanding charters, contracts of affreightment, or other rights to possession of or services of the Vessel other
than as listed in
Schedule 4.9
. Borrower shall not sell, convey, mortgage, or charter the Vessel or any portion thereof,
or transfer any interest therein in any manner (including by grant of an option, right of first refusal, or restriction on transferability),
without the written consent of Lender being first obtained (except that Permitted Encumbrances are permitted),
provided,
sub-time charters, voyage charters, and contracts of affreightment may be entered into by Charterer with the prior written consent
of Lender granted or withheld in the exercise of its sole discretion. No such written consent to any such sale, conveyance, mortgage,
charter, or transfer shall be construed to be a waiver of this provision in respect to any subsequent proposed sale, conveyance,
mortgage, charter, or transfer. Borrower shall repay all of the Obligations concurrently with a sale or other transfer of title
to the Vessel. Each other mortgage, charter, or transfer shall be subject to the provisions of the Mortgage and the lien it creates.
6.4
Lawful
Operation
. The Vessel and its operations shall at all times comply with (a) all laws of the Republic of Panama, all applicable
treaties and conventions, and all applicable rules and regulations thereunder, as in effect from time to time, and (b) all laws
and regulations applicable to the Vessel and its operation in all trades and locations in which it operates or is located from
time to time; and the Vessel shall have on board as and when required thereby valid certificates of inspection and all other certificates
evidencing compliance therewith. Borrower shall obtain and file all certificates of financial responsibility as legally required
in all jurisdictions in which the Vessel is located from time to time. Borrower shall prepare and file all pollution prevention
and contingency plans and take all other steps required under all applicable laws concerning the prevention and cleanup of environmental
pollution, and the regulation of shipowners and vessels with respect to environmental matters. The Vessel shall not be abandoned,
and shall not carry any passenger, cargo, or other matter that will expose it to penalty, forfeiture or capture. Borrower shall
ensure that all reasonable precautions are taken to ensure that no illegal drugs or drug paraphernalia are used or kept on board
the Vessel, and shall otherwise comply with the anti-drug policies of the United States Government.
6.5
Operation
.
Unless otherwise agreed to in writing by Lender, granted or withheld in the exercise of its sole discretion, Borrower and Charterer
shall ensure that the Vessel shall at all times be dedicated to the performance of the Sub-COA and the COA, shall not be taken
to a zone that is a declared war zone by any government or by any of the Vessel’s war risk underwriters, and shall not be
abandoned in a port or place outside the United States. The Vessel satisfies, and shall continue to satisfy, the objective requirements
for it to be utilized under the Time Charter, Sub-COA and COA.
6.6
Maintenance
.
The vessel has a valid classification certificate issued by Bureau Veritas, in classification BV + I 3/3 Bulk Ore Carrier, Deep
Sea, AU-MS without outstanding exceptions or recommendations. Borrower shall, at all times, and without cost or expense to Lender,
maintain such classification status, and maintain and preserve the Vessel as required in all applicable manufacturer’s manuals,
and in a safe and seaworthy condition, and in such running order and repair as would be expected of a prudent, first-class shipowner,
and in a condition, working order and repair at least as good as such Vessel is in on the date of this Agreement, ordinary wear
and tear excepted. Borrower shall not make or permit to be made any material changes to the structure, type or speed of the Vessel,
or to its propulsion system, or make any alterations to the Vessel that would change its registered length, breadth, or depth,
or its gross, net, deadweight, or lightship tonnages, without first receiving written approval from Lender. Borrower may remove
equipment from the Vessel free and clear of the lien of the Mortgage if (i) it simultaneously replaces such equipment with equipment
of the same or greater value, (ii) it causes all damage to the Vessel caused by such removal and replacement to be promptly repaired,
and (iii) such removal and replacement will not adversely affect the fair market value of the Vessel. Borrower shall cause the
Vessel to be surveyed and placed in dry dock when and as is required in order for it to maintain its classification status, and
to maintain all certificates of inspection and other certifications that is now has or is required to have in order to pursue its
intended trades.
6.7
Access
and Surveys
. At all times Borrower shall afford Lender or its authorized representatives and surveyors full and complete access
to the Vessel for the purpose of inspecting it and its cargoes, and papers, and making copies of such papers, and shall provide
to Lender, within seven (7) days after being so requested, copies of all contracts, charterparties, policies of insurance, evidence
of club entries, and all other documents (including records that are in electronic form) pertaining to the Vessel or its operations.
Borrower shall provide to Lender prompt advance notice of all emergency dry-dockings of the Vessel, and fourteen (14) days advance
written notice of all non-emergency dry-dockings of the Vessel. If requested by Lender Borrower shall instruct the Vessel’s
classification society to make available to Lender all of its records pertaining to the Vessel (including records that are in electronic
form), and to provide Lender with copies of all of the classification society’s communications with Borrower, its managers
or agents with respect to the Vessel.
6.8
Seizure;
Requisition.
If the Vessel shall be Seized, Borrower, within thirty (30) days thereafter, shall cause the Vessel to be irrevocably
released and all Encumbrances thereon, other than the lien of the Mortgage, to be discharged by payment, performance, or the posting
of security therefor. In the event any of the foregoing occurs, Borrower agrees forthwith to notify Lender by facsimile or telegram,
confirmed by letter, at its address set forth in Section 9.4. In the event the Vessel shall be Seized and shall not be released
therefrom within thirty (30) days thereafter, Borrower hereby irrevocably authorizes and empowers each officer of Lender in the
name of Borrower (as attorney-in-fact, coupled with an interest) to apply for and receive possession of the Vessel, with all rights
and authority that Borrower might have, possess and exercise in any such event, but such officers shall not be under any obligation
to act in connection with the rights given in this Section. Borrower also authorizes and empowers Lender and the officials above
specified or their appointees, or any of them, to appear in the name of Borrower in any court of any country or nation of the world
where a complaint
in rem
or libel is pending against the Vessel, or where the Vessel is Seized or is subject to Seizure
and to take such actions as may seem proper toward the defense of such suit and the discharge of any or all Encumbrances thereon
or other relevant judgment or claim, and all expenditures made or so incurred shall be obligations due from Borrower to Lender,
shall be secured by the lien of the Mortgage, and shall accrue interest at the Interest Rate or Default Rate, as in effect from
time to time.
6.9
Insurance
.
Borrower shall obtain insurance for its assets and liabilities as would be customary for a business of its type. Without limiting
the foregoing:
(a) Borrower
shall, while any of the Obligations are outstanding, or Lender has any commitment to advance funds under this Agreement (whether
or not there is a request for an advance outstanding), obtain and maintain the following insurances with respect to the Vessel:
(i) Marine
hull and machinery insurance, and war risk hull and machinery insurance, in an amount not less than the full commercial value of
the Vessel, on a charter-free and lien-free basis, determined in a manner approved by Lender (which value shall not at any time
be an amount less than one hundred twenty percent (120%) of the principal amount of the Obligations outstanding from time to time);
(ii) Protection
and Indemnity insurance purchased through a protection and indemnity association that is a member of the International Group of
P & I Clubs including but not limited to coverage for crew injuries, pollution liability including clean-up costs, wreck removal,
4/4ths collision liability, third party bodily injury and property damage insurance and war risk protection and indemnity insurance,
in such amounts per occurrence as is currently available from the protection and indemnity associations that are members of the
International Group of P & I Clubs.
(iii) Loss
of earnings insurance in an amount not less than $1,350,000.00;
(iv) Workers
Compensation and Employers Liability insurance for each state in or from which the Vessel shall operate, if and as required by
law, and United States Longshore and Harbor Workers’ Compensation Act insurance for statutory amounts;
(v) A
separate policy of Mortgagee’s Interest Insurance with Lender as the Named Insured with respect to loss of or damage to the
Vessel in an amount at least equal to one hundred twenty percent (120%) of the principal amount of the Obligations outstanding
from time to time; and
(vi) Insurance
as required by law, and insurance against any other risks to the Vessel or liabilities that could give rise to liens thereon as
from time to time required by Lender.
Borrower shall obtain and maintain all such
insurances at its own expense, and shall timely pay all premiums, dues, calls, assessments and other amounts and expenses thereunder,
and issue or procure all guaranties required by protection and indemnity associations with respect thereto. In the event Borrower
fails to pay such amounts, Lender shall have no responsibility to make any such payments, and no payment or undertaking to pay
any such amounts by Lender shall relieve the Borrower of its responsibility to make such payments or its responsibility under Section
7.2(c) to reimburse Lender for all such amounts that Lender pays.
(b) All
policies of insurance shall be maintained in forms approved by Lender, effected by an insurance broker approved by Lender, and
contain insuring covenants, deductible or franchise clauses, mortgagee clauses, and other terms and conditions satisfactory to
Lender. No policy shall be materially amended or terminated without obtaining the prior written consent of Lender. All policies,
binders and interim contracts of insurance shall provide for fourteen (14) days’ prior written notice to be given to Lender
by the underwriters in the event of amendment or cancellation, except in the event of cancellation for nonpayment of premiums,
in which event Lender shall be furnished with not less than ten (10) days’ notice of cancellation, and in the event of cancellation
of war risk insurance, in which event Lender shall be furnished with the same advance written notice of cancellation as the relevant
policies shall provide for notices to Borrower. Certifications of all insurances required hereunder, including certified copies
of protection and indemnity association certificates of entry shall be provided to Lender forthwith upon placement of all such
insurances. Certified copies of the originals of all policies, amendments, endorsements, letters of undertaking, binders and other
interim insurance contracts shall be deposited with Lender promptly upon placement thereof, and the originals thereof shall be
furnished to Lender promptly on request. Evidence of renewal of all insurances shall be furnished to Lender not less than fourteen
(14) days prior to the expiration of all of such insurances. Borrower shall furnish evidence satisfactory to Lender whenever it
may require that all premiums, dues, assessments and other charges with respect to the insurance required herein have been fully
paid. At the option of Lender, and without waiver of any default with respect thereto, any policies of insurance required herein
and not timely obtained and properly maintained by Borrower may be obtained and maintained by Lender at Borrower’s expense.
(c) Borrower
shall provide to all underwriters of the insurances a Notice of Assignment in substantially the form attached hereto as
Exhibit
K
, which shall be endorsed on all relevant polices and protection and indemnity association entries. All insurances shall name
Lender as an additional insured in addition to Borrower and as sole loss payee, pursuant to endorsements in substantially the form
attached hereto as
Exhibit L
(including a customary protection and indemnity association letter of undertaking the customary
form issued by members of the International Group of P & I Clubs, except as to: (i) mortgagee’s interest insurance,
as to which Lender shall be the sole insured and sole loss payee, and (ii) the insurance required in Section 6.9(a)(iii)
and 6.9(a) (v). No assured or loss payees shall be added to any policy without obtaining the advance written consent of Lender.
All insurance required in Section 6.9 shall be endorsed to (i) waive the underwriters’ rights of subrogation against Lender,
(ii) to provide that all such insurance is primary and non-contributory with respect to insurances placed by Lender, and (iii)
provide that Lender will not be responsible for premiums, calls, supplementary calls or similar payments. Concurrently with each
placement and, not more than fourteen (14) days before expiration of an insurance coverage that is required herein, renewal or
replacement of that insurance, Borrower shall provide to Lender a Brokers Opinion Letter in substantially the form attached hereto
as
Exhibit M
confirming that the insurance placed by such broker conforms to the insurance requirements herein. in a customary
form reasonably acceptable to Lender.
(d) In
the event of an actual total loss, a constructive total loss, or a compromised, agreed, or arranged total loss of the Vessel, Lender
shall receive and retain out of the insurance payments received on account of such loss an amount equal to the Obligations outstanding
at the time or that are otherwise owing under or secured by any of the Loan Documents at that time, whether or not the same are
then due and payable, and shall pay the balance as provided in Section 2.3. Lender shall have the sole right to tender abandonment
of the Vessel to its underwriters on behalf of itself and Borrower. If there has not occurred and there is not continuing an Event
of Default at the time of tender of payment by the underwriters, in the event of any other loss payable in an amount less than
$500,000.00 under any hull and machinery insurance, war risk hull and machinery insurance, or other insurance in respect of loss
of or damage to the Vessel or any of its appurtenances, or sue and labor expenses or defense costs insured thereunder, Lender shall
instruct the underwriters to pay directly for the covered repairs, replacements, expenses, or costs, or to reimburse Borrower or
Lender therefor. If there has not occurred and there is not continuing an Event of Default, and the Vessel is not an actual total
loss, a constructive total loss, or a compromised, agreed, or arranged total loss, in the event of any other loss payable in an
amount equal to or greater than $500,000.00 under any hull and machinery insurance, or war risk hull and machinery insurance, or
increased value insurance in respect of loss of or damage to the Vessel or any of its appurtenances, or sue and labor expenses
or defense costs insured thereunder, in the exercise of its sole discretion, Lender shall either instruct the underwriters to pay
directly for the covered repairs, replacements, or sue and labor expenses or defense costs insured thereunder or to reimburse Borrower
or Lender therefor, or Lender may receive all such insurance proceeds and use them to pay directly for the repairs, replacements,
or sue and labor expenses or defense costs insured thereunder, or to reimburse Borrower or Lender therefor. All claims for unrepaired
damage shall be paid to Lender, which shall apply them as provided in Section 2.3. In the event of any loss payable under any hull
and machinery insurance, war risk hull and machinery insurance, or increased value insurance not provided for above in this Section
6.9(d), in the exercise of it is sole discretion, Lender may instruct the underwriters to pay directly for the covered repairs,
replacements, expenses, or costs, or to reimburse Borrower therefor, or Lender may, in the exercise of its sole discretion, receive
all such insurance proceeds defray its own covered expenses and apply the balance toward payment of the Obligations and all sums
otherwise owing under or secured by any of the Loan Documents at the time, whether or not the same are then due and payable, in
which event the balance of the proceeds shall be applied as provided in Section 2.3. For the purpose of this clause, all hull and
machinery, war risk hull and machinery, and increased value insurance proceeds payable with respect to an occurrence and its consequences
shall be deemed to be proceeds of a single loss event.
(e) In
the event that insurance moneys become due under any protection and indemnity insurance or other liability insurance coverage,
including coverage for salvage, general average, or other liabilities covered by the relevant hull insurance policy, if there has
not occurred and there is not continuing an Event of Default at the time of tender of payment by the underwriters or protection
and indemnity association, Lender shall instruct the underwriters to pay Borrower such insurance proceeds as may be due to Borrower
on account of any liability covered by such insurance if Borrower has already paid the liability, or to pay the party in respect
of whom the liability was incurred, in exchange for an appropriate release of liability with respect thereto. At such time of tender
of payment, if an Event of Default has occurred and is continuing in the exercise of Lender’s sole discretion and in lieu
of the foregoing, Lender shall be entitled to receive such insurance proceeds and may apply the proceeds thereof toward the discharge
or indemnification or reimbursement for the payment of the relevant liability, or payment of the Obligations and all sums otherwise
owing under or secured by any of the Loan Documents at the time, whether or not the same are then due and payable, in which event
the balance of the proceeds shall be applied as provided in Section 2.3 herein.
(f) Borrower
shall promptly file all required and customary proofs of loss and claims under all insurances, and on any failure by Borrower to
do so, Lender may do so on its and Borrower’s behalf, and is hereby irrevocably appointed as Borrower’s attorney-in-fact,
coupled with an interest, to do so.
(g) In
the event the Vessel is Seized, Lender may, in lieu of the foregoing Sections 6.9(d) and (e), in the exercise of its sole discretion,
agree with any surety executing a surety bond releasing the Vessel from such attachment or arrest to hold for the benefit of such
surety any or all insurance proceeds under the policies of insurance on the Vessel as collateral security to indemnify such surety
against liability under such bond.
(h) Borrower
shall not do any act or voluntarily suffer or permit any act to be done whereby any insurance shall or may be impaired, suspended,
or canceled, and shall not suffer or permit the Vessel to engage in any voyage or to engage in any trade or activity not permitted
under the policies of insurance at the time in effect without first covering the Vessel for such voyage, trade or activity with
insurances of the types, obtained from underwriters, and in the forms and amounts herein required.
(i) The
acquiescence by Lender in any noncompliance in the placement of insurance in one or more instances shall not establish a consent
or course of dealing with respect to such noncompliance in any other instances.
6.10
Cargo
.
There is no cargo aboard the Vessel as of the date hereof, and none will be loaded aboard the Vessel until after Closing.
ARTICLE VII
DEFAULT AND REMEDIES
7.1
Default
.
The occurrence of each of the following events of default shall constitute an “
Event of Default
” as such term
is used in this Agreement:
(a) Borrower
fails to make any payment of principal, interest or any other amount, as and when it becomes due to Lender under the Loan Documents,
including the Commitment Fee or any amount payable pursuant to the Fee Letter;
(b) any
representation or warranty made or to be made by Borrower or any other Person (other than Lender) in any Loan Document was false
or incorrect in any material respect when made or deemed made under the provisions of any Loan Document;
(c) any
of the Loan Documents, for any reason, cease to be in full force and effect or are declared to be null and void; or any Person
other than Lender that has executed a Loan Document denies that it has any or further liability or obligation under any Loan Document
which it has executed (or any provisions thereof) before full performance of all obligations thereunder;
(d) a
Credit Party, Phoenix, or Allseas: (i) applies for or consents to or becomes subject to the appointment of a receiver, trustee
or liquidator of itself, or of all or any part of its assets, or any Collateral, or becomes subject to an administration order,
(ii) makes a general assignment for the benefit of creditors, (iii) becomes or is adjudicated insolvent, (iv) commences any
Debtor Relief Proceeding in any jurisdiction, (v) becomes subject to any involuntary Debtor Relief Proceeding in any jurisdiction
and such proceeding is not dismissed within sixty (60) days after it is commenced, (vi) enters into an arrangement with a group
of creditors for the restructuring of its obligations, (vii) shall fail to pay its debts generally as they become due, (viii) if
a corporation, limited liability company, or partnership, merges or consolidates with any Person, (ix) commences a dissolution
or liquidation proceeding or is dissolved or liquidates, (x) becomes the subject of any involuntary dissolution or liquidation
proceeding and any such proceeding is not dismissed within sixty (60) days after it is commenced, (xi) commences, agrees to or
is or becomes subject to any action taken for the purpose of effectuating any of the foregoing, (xii) changes its name, and
(xiii) if a corporation, limited liability company, or partnership, reorganizes, reclassifies or recapitalizes its capital stock
or any membership or partnership interests in it;
(e) the
shareholders, directors, or members of any Credit Party, Phoenix or Allseas adopts a resolution authorizing or approving of any
of the actions described in Section 7.1(d) with respect to a Credit Party;
(f) Borrower
issues, redeems, purchases, retires or otherwise acquires any shares of any class of any Equity Interest in itself, enters into
any subscription agreement or other agreement for the issuance of any shares in itself, or grants or issues any warrant, right
or option pertaining thereto, or incurs any debt or obligations or issues any security that is convertible into any of the foregoing;
(g) any
judgment shall be entered against a Credit Party, Phoenix, or Allseas in a Material amount that is not covered by liability insurance
with a deductible clause that has been approved by Lender in writing, and such judgment is not effectively stayed and remains undischarged
and unbonded for thirty (30) days;
(h) without
Lender’s prior written consent any change shall occur in the legal structure of a Credit Party, Phoenix, or Allseas;
(i) A
Credit Party, Phoenix or Allseas is or becomes in default under any loan agreement, promissory note, guaranty or other instrument
or agreement with or in favor of Lender or any Affiliate of Lender, or any Indebtedness of any third party to Lender or any Affiliate
of Lender that is guaranteed by Borrower or a Guarantor is not paid in full when due, whether on maturity, upon acceleration, or
otherwise; or Borrower or a Guarantor is or becomes in default under any preferred or other mortgage, deed of trust, assignment,
or other security agreement that secures any of its obligations with respect to any of the foregoing;
(j) any
other Indebtedness of Credit Party, Phoenix or Allseas that is not subject to Section 7.1(i) in any Material amount is or becomes
due prematurely by reason of default; Borrower fails to make any Material payment thereunder on or before the due date for such
payment; or the security for any obligation of Borrower or a Guarantor, or any security therefor, becomes enforceable against any
Collateral or against a Material amount of any of its assets;
(k) without
the written consent of the Lender (i) Claus Boggild does not own at least sixty-seven percent (67%) of the Equity Interest in,
and hold at least sixty-seven percent (67%) of the voting power in Lagoa Investments Ltd., and Edward Coll, Anthony Laura, and
Lagoa Investments Ltd. do not collectively own at least fifty-one percent (51%) of the Equity Interest in, and hold at least fifty-one
percent (51%) of the voting power in Holding Company; (ii) Holding Company does not own all of the Equity Interest in and hold
all of the voting power in Bulk Partners Holding Company Bermuda Ltd, a Bermuda company; (iii) Bulk Partners Holding Company Bermuda
Ltd, a Bermuda company does not own all of the Equity Interest in and hold all of the voting power in Pledgor; (iv) Pledgor does
not own all of the Equity Interest in and hold all of the voting power in Borrower; and (v) Holding Company does not, directly
or indirectly, own all of the Equity Interest in and hold all of the voting power in Charterer and Allseas;
provided,
the
death of any of Claus Boggild, Anthony Laura or Edward Coll shall not cause an Event of Default under this Section 7.1(k) if there
is not an Event of Default outstanding or that results therefrom under Section 7.1(l);
(l) any
of Claus Boggild, Anthony Laura, or Edward Coll becomes sufficiently disabled that he or they cannot effectively participate in
the management of Holding Company, or dies, and at least one of them, or two of them collectively, who are alive and not so disabled,
does not hold voting control over fifty-one percent (51%) of the shares of Holding Company.
(m) any
judicial or nonjudicial foreclosure of or other realization upon any pledge or assignment of, or other security interest in, or
other encumbrance of any shares of the capital stock of Borrower shall be commenced or occur;
(n) any
of the Time Charter, Technical Management Agreement, Commercial Management Agreement, Sub-COA (in respect of the Vessel), and COA
(in respect of the Vessel) have been or are assigned, assumed, amended, renewed, replaced, or otherwise modified without the prior
written consent of Lender;
(o) a
material default by Borrower occurs under any of the Time Charter, Technical Management Agreement, Commercial Management Agreement,
or by Charterer or Phoenix under the Sub-COA (in respect of the Vessel), or by Phoenix under the COA (in respect of the Vessel)
or any such contract is terminated prematurely;
(p) Any
party defaults under the Funds Deposit Agreement or any Manager’s Undertaking.
(q) any
of Credit Parties or their Subsidiaries has a fiscal year-end that does not end on December 31;
(r) any
Vessel becomes subject to a Seizure and is not released therefrom within thirty (30) days thereafter in the manner required in
the applicable Preferred Mortgage;
(s) a
Vessel becomes an actual total loss, or a constructive, compromised, arranged, or agreed total loss, or there is a Requisition
of the Vessel, and the Obligations are not paid in full within one hundred twenty (120) days thereafter;
(t) any
Permit required in Section 4.19 or 5.15 is materially modified, becomes invalid, or is terminated;
(u) the
occurrence of illegal activity which in the opinion of the Lender caused the forfeiture of or which subjects to forfeiture the
Vessel or any other Collateral;
(v) the
Vessel or other Collateral is placed in danger of being seriously damaged or becoming a total loss and is not removed from such
danger by Borrower forthwith;
(w) Pledgor
does not or shall not have good and merchantable title to all of the shares of the Equity Interest in Borrower, and all Collateral
related thereto, and does not have or shall not hereafter retain good and marketable title thereto, subject to no Encumbrances
except Permitted Encumbrances;
(x) Allseas
does not or shall not have good and merchantable title to the deposit account described in the Allseas Charge on Cash Deposit,
and all Collateral related thereto, and does not have or shall not hereafter retain good and marketable title thereto, subject
to no Encumbrances except Permitted Encumbrances;
(y) without
Lender’s prior written consent, any amounts owed to Phoenix under the COA with respect to the Vessel, or to Charterer under
the Sub-COA with respect to the Vessel, are not promptly paid into the Bulk Discovery Freights Account after Noranda Alumina LLC,
its successor or assigns, makes payments under the COA, except for commissions payable to Mid-Ship Group LLC under Sections 54
of the COA and Sub-COA, and all hire owed by Charterer to Borrower is not fully and timely paid into the Bulk Discovery Hire Account;
(z) the
Mortgage is not permanently registered at the Public Registry of Titles and Encumbrances of Vessels of the Panama Maritime Authority,
such that it creates a duly perfected mortgage and maritime lien under the laws of the Republic of Panama, and creates a preferred
mortgage on the Vessel (as the term “preferred mortgage” is defined at 46 U.S.C. § 31301(6)(B)), or the title
to the property in the Vessel is not permanently registered in the Borrower’s name in such public registry, within thirty
(90) days after the date hereof;
(aa) before
the expiration of Provisional Patente of Navigation/Registration Certificate and Radio Permit for the Vessel, the corresponding
five (5) year validity Patente of Navigation and Radio License is not issued, confirming that all required legal documents and
technical certificates have been submitted to the Merchant Marine Administration (Dirección General de Marina Mercante),
including: Continuous Synopsis Record, Document of Compliance, Safety Management Certificate and International Ship Safety Certificate,
issued under the authority of the Republic of Panama; and
(bb) in
a manner which is not otherwise specifically referenced in this Section 7.1, Borrower from time to time breaches or fails to perform
or observe any term, covenant or agreement contained in the Loan Documents, is or becomes in default thereunder, or any further
event of default occurs under any of the Loan Documents.
7.2
Remedies
.
(a) Upon
the occurrence of:
(i) an
Event of Default constituting a default with respect to a payment of principal, interest, fees, expenses, or any other sum which
is payable to Lender which continues for longer than three (3) days after payment is due;
(ii) an
Event of Default consisting of: (A) a breach of an obligation with respect to obtaining or maintaining required insurance or providing
reasonable and prompt verification thereof, (B) and Event of Default with respect to Sections 5.4(vii), (viii), (ix), , 5.10, 6.3,
6.8, or 7.4, (C) an Event of Default described in Sections 7.1(d), (g), (h), (l), (m), (n), (q), (r), (t), (u), (y), or (z),
(D) an Event of Default which, by its nature, is not capable of being fully remedied so as to provide to Lender the practical benefits
to which it or they are entitled under any of the Loan Documents with respect to such Event of Default; or (E) an Event of Default
which occurs with the knowledge of a Borrower as to which a notice required to be given to Lender is not timely given; or
(iii) any
other Event of Default not specified in subsections (i) or (ii) above which is not fully remedied to the satisfaction of the Lender
within ten (10) days after it occurs,
Lender shall enjoy all rights, powers, and remedies which may
arise under the Loan Documents, or otherwise existing or arising by agreement, at law, in equity or in admiralty, including the
following: Lender may deem the principal of the Advance, interest thereon, and all other amounts then owing, accrued or accruing
with respect to the Advance immediately due and payable, and Lender may exercise all such rights, powers and remedies, without
presentments, demands, protests, or notices of any kind, all of which are hereby expressly waived by Borrower,
provided,
that in the event of an actual or deemed entry of an order for relief with respect to Borrower under the United States Bankruptcy
Code, as amended, the Obligations automatically shall become and be due and payable, without presentment, demand, protest or any
notice of any kind, all of which are hereby expressly waived by Borrower.
(b) All
rights, powers and authority granted to the Lender in any Loan Document may be exercised on its behalf by any agents or representatives
it appoints from time to time.
(c) On
the occurrence of an Event of Default Lender may, in its discretion, do any act or make any expenditures necessary to remedy such
default or preserve the value of or protect the Collateral, including entering the Vessel to make repairs, purchasing insurance,
discharging Encumbrances, or defending any lawsuit against the Vessel, and Borrower shall promptly reimburse Lender for all such
expenses, with interest at the Interest Rate or Default Rate, as in effect from time to time, for any and all expenditures so made
or incurred, and until Borrower has so reimbursed Lender for such expenditures; but Lender, though privileged so to do, shall be
under no obligation to Borrower to make any such expenditures nor shall the making thereof relieve Borrower of any default in that
respect.
(d) The
rights, powers, and remedies provided in the Loan Documents or otherwise existing or arising by agreement, at law, in equity or
in admiralty, or otherwise, are cumulative. All rights, powers, and remedies may be exercised, in whole or in part, from time to
time, as often, and in any order as Lender chooses, and the exercise or the beginning of the exercise of any right, power, or remedy
shall not be construed to be an election of rights, powers, or remedies, or a waiver of the right to exercise at the same time
or thereafter any other right, power, or remedy. No delay or omission by Lender in the exercise of any right, power, or remedy
accruing upon any Event of Default shall impair any such right, power, or remedy or be construed to be a waiver of any right to
take advantage of any such future event or of any such past Default or Event of Default. In case Lender proceeds to enforce any
right, power, or remedy, and such enforcement is discontinued or abandoned for any reason or is determined adversely to Lender,
in whole or in part, then, and in any such case, at the option of Lender, in the exercise of its sole discretion, the relevant
parties shall be restored to their former positions and rights, all rights, powers, and remedies of Lender shall continue as if
no such proceedings had been taken and nothing shall be construed to be a waiver of any right, power, or remedy of Lender. The
acceptance by Lender of any security or any payment of or on account of the Obligations maturing after any Event of Default or
any payment on account of any past default shall not be construed to be a waiver of any right of Lender to take advantage of any
future Event of Default or of any past Event of Default not completely cured thereby. Each Encumbrance that exists or is granted
or otherwise arises pursuant to the Loan Documents is cumulative and not in lieu of any other such Encumbrances.
7.3
Legal
Actions
. All judicial actions by any party to enforce any provision of any or all of the Loan Documents shall, if requested
by Lender, be brought in or transferred to the United States District Court for the Southern District of New York or the state
courts of general jurisdiction sitting in the County of New York in the State of New York, or in the jurisdiction where relevant
Collateral is located or subject to
in rem
or
quasi in rem
proceedings from time to time. Borrower consents to the
jurisdiction of all such courts over it, and hereby irrevocably waives any objection, including any objection to the laying of
venue or based on the grounds of forum non conveniens, which it may now or hereafter have to the bringing of any such action or
proceeding in such respective jurisdictions.
BORROWER WAIVES THE RIGHT TO TRIAL BY JURY IN EVERY ACTION,
SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO THE LOAN DOCUMENTS. BORROWER ACKNOWLEDGES THAT THE FOREGOING
WAIVER IS A MATERIAL INDUCEMENT TO LENDER ENTERING INTO THIS AGREEMENT AND THAT LENDER IS RELYING UPON THE FOREGOING WAIVER IN
ITS DEALINGS WITH BORROWER. BORROWER REPRESENTS AND WARRANTS THAT IT HAS REVIEWED, OR HAS HAD THE OPPORTUNITY TO REVIEW, THE FOREGOING
WAIVER WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION, OR THE OPPORTUNITY
TO CONSULT, WITH SUCH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL WITHOUT
A JURY BY THE COURT. BORROWER HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF LENDER, OR COUNSEL TO LENDER, HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT LENDER WOULD NOT, IN THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL
PROVISION.
7.4
Service
of Process
. Service of process may be made on Borrower by mailing or delivering a copy of such process to the Borrower in care
of the Process Agent at the Process Agent’s address specified in the Process Agent Appointment, or to any new address of
the Process Agent of which Lender becomes aware. Borrower hereby irrevocably authorizes and directs the Process Agent to accept
such service on its behalf at such addresses. Process Agent is at liberty to change its address to another address in the United
States but Lender is permitted to effect service upon Borrower by service by mail or by service on any person of suitable age and
discretion at the last address for Process Agent known by Lender at the time. Not later than fifteen (15) days before the appointment
of Process Agent is terminated for any reason, Borrower shall appoint a successor that has an address in the United States and
deliver to Lender a written acceptance of appointment of a substitute process agent that contains and agreement in writing to give
Lender not less than thirty (30) days advance written notice of any change of its address or any termination of its appointment
(delivered Lender to Lenders’ address of Lender specified in, or changed as provided in Section 9.4 hereof). As an alternative
method of service, the Borrower also irrevocably consents to the service of any and all process, postage prepaid, in any such action
or proceeding by the mailing a copy of such process to the Borrower at its address identified in or in accordance with Section
9.4. Nothing herein shall affect the right to serve process in any manner permitted by law.
7.5
Judgment
.
If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder in any currency (the “
Original
Currency
”) into another currency (the “
Other Currency
”) the parties hereto agree, to the fullest extent
that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures
the Lender could purchase the Original Currency with the Other Currency in New York City on the second Business Day preceding that
on which final judgment is given. Upon receipt of payment in the Other Currency of the amount of such judgment, the Lender shall
convert such amount into the Original Currency on or as of the next Business Day in accordance with normal banking procedures.
If the amount is so converted at or as of that time is insufficient to discharge the entire amount (including accrued interest),
denominated in the Original Currency, that would be owing at the time to the Lender had no judgment been entered or fixed in the
Other Currency, the Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify Lender against
such loss.
7.6
Right
of Set-Off
. Upon the occurrence and during the continuance of any Event of Default, Lender is hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits and investments (general
or special, time or demand, provisional or final) at any time held in any accounts, and other indebtedness at any time owed by
Lender, to or for the credit or the account of Borrower, against any or all of the obligations of Borrower now or hereafter existing
in favor of Lender, whether or not Lender shall have given any notice or made any demand to Borrower, and although such obligations
of Borrower may be unmatured. Lender agrees to mail or transmit notice to Borrower on the day of each such set-off and application
made by Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application, nor
shall such failure subject Lender to any liability. The rights of Lender under this Section are in addition to other rights, powers,
and remedies (including, without limitation, other rights of set-off) which Lender may have.
ARTICLE VIII
CONTINUING GUARANTY
8.1
Guaranty
.
Each Guarantor hereby unconditionally and irrevocably guarantees, as its separate and independent obligation, as principal obligor,
and not merely as a surety, the punctual payment and performance when due, whether at stated maturity, by acceleration, or otherwise,
of the Obligations. The obligations of the Guarantors and the Borrower are joint and several.
8.2
Guaranty
Absolute
. Guarantor guarantees that the Obligations shall be paid and performed strictly in accordance with the terms of the
Loan Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such
terms or the rights, powers, or remedies of Lender with respect thereto. This is a guaranty of payment, and not just of collection.
The liability of Guarantor under this Agreement for the Obligations or otherwise shall be absolute and unconditional irrespective
of one or more of: (a) any lack of validity or enforceability of any Loan Document or any provision thereof; (b) any change in
the time, manner or place of payment of, or in any other term of, any or all of the Obligations; (c) any waiver, termination, renewal,
replacement, amendment or other modification of, or any consent to any departure from, any Loan Document or any provision thereof;
(d) any taking, exchange, release or nonperfection of any real or personal property security for any or all of the Obligations;
(e) any taking, waiver, release, amendment or other modification of, or any consent to departure from, any other guaranty
of or liability for any or all of the Obligations; (f) any manner of sale or other disposition of any real or personal property
security for any or all of the Obligations; (g) any manner of application of any real or personal property security, or any proceeds
of any such security, to any or all of the Obligations; (h) any change, restructuring or termination of the structure or existence
of Borrower, any other guarantor or other obligor, or any other Person; or (i) any other circumstance (other than payment and performance
of the Obligations in full) that might otherwise constitute a suretyship or other defense available to Guarantor. The Guarantor
acknowledges that it has received copies of the Loan Documents now in existence, and has reviewed them to its satisfaction.
8.3
Waiver
.
With the exception of notices to which it is expressly entitled under applicable agreements, Guarantor hereby waives its rights,
if any, to any notices of acceptance and any other notices with respect to any of the Obligations or this Agreement, and waives
all requirements that Lender protect, secure, perfect or insure any real or personal property security for any or all of the Obligations,
or any property subject thereto, or exhaust any right or take any action against Borrower or any other Person, or any security,
or collateral. Lender shall have no obligation to marshal any present or future collateral security for any of the Obligations
or to resort to any such collateral security in any order.
8.4
Subrogation
.
The Guarantor shall not exercise any rights which it may acquire by way of subrogation under this Agreement, by any payment made
hereunder or otherwise, until all the Obligations shall have been paid and performed in full. If any amount shall be paid to the
Guarantor on account of such subrogation rights at any time when all the Obligations shall not have been paid and performed in
full, such amount shall be held in trust for the benefit of Lender and shall forthwith be paid to Lender to be credited and applied
to the Obligations, whether matured or unmatured, in accordance with Section 2.3.
8.5
Holding
Company Indemnification
. Holding Company shall indemnify and hold harmless Charterer from and against any and all liabilities
claims, actions, suits, judgments, costs, disbursements and expenses (including reasonable fees and expenses of legal counsel related
thereto) of any kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against Charterer as a result
of Charterer’s obligations under this Article.
8.6
Subordination
.
(a) Neither
Guarantor shall make any loans or advances to Borrower, and Holding Company shall ensure that no Subsidiaries thereof shall make
any loans or advances to Borrower, in each case other than equity investments of capital. All Indebtedness of Borrower to each
Guarantor whether now existing or hereafter arising (the “
Subordinated Debt
”) is hereby subordinated to full
payment and performance of the Obligations, and until then, Borrower shall not make, and neither Guarantor shall, without the prior
written consent from Lender (granted or withheld in the exercise of its sole discretion) accept any payment of an Indebtedness
from Borrower. All Encumbrances that either Guarantor may have or that would otherwise arise against any assets of Borrower, including
for any breach of the Time Charter, are hereby irrevocably subordinated to the lien of the Mortgage and other security granted
in the Loan Documents (the “
Subordinated Liens
”).
(b) Unless
otherwise permitted pursuant to this Agreement, all payments or distributions upon or with respect to the Subordinated Debt or
obligations secured by Subordinated Liens, including from Bankruptcy or Other Proceedings pertaining to any of them, whether through
payment, subrogation, or otherwise, shall be received in trust for the benefit of Lender, shall be segregated from other funds
and assets held by the recipient, and shall be forthwith paid to the Lender in the same form in which it was received (with any
necessary endorsement) to be applied (in the case of cash) to the Obligations in accordance with Section 2.3, or received as collateral
(in the case of non-cash property or securities) as security for, the payment of the Obligations, to be foreclosed upon in the
occurrence of an Event of Default as permitted by law.
(c) If
any Bankruptcy or Other Proceeding is commenced by or against or otherwise occurs with respect to Borrower, any member or shareholder
of Borrower, any Person of which Borrower is a partner, joint venturer, or member, or any Subsidiary of Borrower, this Agreement
shall remain in effect, and Lender is hereby irrevocably authorized (in its own name or in the name of Holding Company or Charterer,
as the case may be), but shall have no obligation, to demand, sue for, collect, and receive every payment or distribution that
results from a Bankruptcy or Other Proceeding on account of the Subordinated Debt or obligations secured by Subordinated Liens,
and to give acquittance therefor, file claims and proofs of claim, and take such other action with respect thereto (including voting
the Subordinated Debt or obligations secured by Subordinated Liens, enforcing security therefor, and compromising claims therefor)
as it may deem necessary or advisable for the exercise or enforcement of any of the rights, powers, and remedies of the Lender
hereunder.
(d) For
so long as any of the Obligations remain outstanding the Guarantors shall duly and promptly take or refrain from taking such action
as the Lender may reasonably require: (i) unless otherwise permitted pursuant to this Agreement, to collect the Subordinated Debt
and obligations secured by Subordinated Liens and remit the proceeds thereof to Lender, file appropriate claims and proofs of claim
in respect of the Subordinated Debt or obligations secured by Subordinated Liens, (ii) to execute and deliver to the Lender such
powers of attorney, assignments, and other instruments as the Lender may require in order to enable the Lender to enforce any or
all claims with respect to, and security for, the Subordinated Debt and obligations secured by Subordinated Liens, and (iii) to
collect and receive all payments and distributions that may be payable or deliverable upon or with respect to the Subordinated
Debt and obligations secured by Subordinated Liens.
(e) For
so long as any of the Advance remains outstanding Guarantors shall not, without the prior written consent of Lender: (i) accelerate
or demand payment of any of the Subordinated Debt or obligations secured by Subordinated Liens; (ii) commence any legal proceedings
or arbitration proceedings to collect any of the Subordinated Debt or obligations secured by Subordinated Liens, (iii) exercise
any rights, powers, or remedies with respect to collection of the Subordinated Debt or obligations secured by Subordinated Liens;
(iv) cooperate with or stipulate to the commencement or continuation of any Bankruptcy or Other Proceeding with respect to Borrower
or any of its assets, (v) assist the Borrower with respect to any Bankruptcy or Other Proceedings pertaining to the Borrower, or
(vi) assign, transfer, or subject to an Encumbrance any Subordinated Debt or obligations secured by Subordinated Liens.
(f) Borrower
shall not make any payment of any of the Subordinated Debt or obligations secured by Subordinated Liens without the written consent
of Lender previously obtained, which may be granted or withheld by Lender in the exercise of its sole discretion. None of the Subordinated
Debt or obligations secured by Subordinated Liens (or any agreements, instruments, or other evidence thereof) shall be amended
in a manner that would have an adverse effect on the rights, powers, or remedies of Lender under this Agreement. Borrower and Guarantors
agree to refrain from all acts which are in any way inconsistent with this Agreement or the rights of Lender hereunder. Borrower
and Guarantors agree to perform all further acts reasonably necessary to give full effect to this Agreement.
(g) Guarantors
waive the right to assert the doctrine of marshalling of assets against the Lender.
ARTICLE IX
MISCELLANEOUS
9.1
Loan
Documents, Administration and Collection Expenses.
Borrower shall pay or reimburse Lender for the preparation, negotiation
and execution of the Loan Documents, and all waivers under and amendments thereto from time to time, and the reasonable fees and
expenses of counsel for Lender in connection therewith, whether Borrower satisfies the conditions precedent contained in Article
III or not. Borrower shall pay or reimburse Lender for all costs and other expenses incurred in connection with the drafting, negotiation,
execution, delivery, filing, or recording of the Loan Documents, or the enforcement, attempted enforcement, or preservation of
any rights, powers, or remedies under the Loan Documents (including all such costs and expenses incurred during any “workout”
or restructuring in respect of the Obligations and during legal proceedings, including Bankruptcy or Other Proceedings), and including
all the reasonable fees and expenses of legal counsel. The foregoing costs and expenses shall include all search, filing, recording,
title insurance and appraisal charges and fees and stamp and other taxes related thereto, and other out-of-pocket expenses incurred
by Lender, and the cost of independent public accountants and other outside experts retained by Lender.
9.2
Indemnification
.
Whether or not the transactions contemplated herein are consummated, Borrower shall indemnify and hold harmless Lender and its
Affiliates, directors, officers, employees, counsel, agents and attorneys-in-fact (collectively, the “
Indemnitee
”)
from and against any and all liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits,
costs, disbursements and expenses (including reasonable fees and expenses of legal counsel related thereto) of any kind or nature
whatsoever which may at any time be imposed on, incurred by or asserted against any such Indemnitee in any way relating to or arising
out of or in connection with (a) the drafting, negotiation, execution, delivery, filing, recording, enforcement, performance or
administration of any Loan Document or any other document delivered in connection with the transactions contemplated thereby, or
the consummation of the transactions contemplated thereby, (b) the Advance or the use or proposed use of the proceeds thereof,
(c) the ownership and operation of the business and assets of Borrower, including if any assertion is made that Borrower, any Indemnitee,
or any other Persons were negligent with respect thereto, (d) any actual or alleged presence or release of Hazardous Materials
on or from any personal or real property currently or formerly owned or operated by Borrower or for its account, or any Environmental
Liability related in any way to Borrower or any of the Collateral, or (e) any actual or prospective claim, litigation, investigation
or proceeding relating to any of the foregoing, whether based on contract, tort, strict liability, or any other theory (including
any investigation of, preparation for, or defense of any pending or threatened claim, litigation, investigation, or proceeding)
and regardless of whether any Indemnitee is a party thereto, in all cases, whether or not caused by or arising, in whole or in
part, out of the negligence of the Indemnitee; provided that such indemnity shall not, as to any Indemnitee, be available to the
extent that such liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, disbursements
and expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted primarily
from the fraud, gross negligence or willful misconduct of an Indemnitee. The agreements in this Section shall survive the performance
of all the Obligations and termination of this Agreement.
9.3
Amendments
and Waivers
. No amendment, modification, termination, or waiver of any provision of any of the Loan Documents, nor consent
to any departure therefrom, shall be effective unless the same shall be in writing and signed by Lender. Waivers or consents shall
be effective only in the specific instances and for the specific purposes for which they are given. The Loan Documents shall not
be deemed amended, qualified, or supplemented by any course of dealing. No notice to or demand on any Person in any instance shall
entitle any Person to any other or further notice or demand in similar or other circumstances.
9.4
Notices
.
All notices, requests, demands, directions and other communications between parties hereto shall be in writing and delivered by
hand, sent by overnight courier, or by facsimile, or mailed by certified mail, return receipt requested (postage prepaid), to the
applicable party at the addresses indicated below:
If to a Credit Party (and Allseas and Phoenix):
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c/o Phoenix Bulk Carriers (US) LLC
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(as agent)
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88 Valley Road
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Middletown, RI 02842
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United States
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Attn: Mr. Anthony Laura
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Facsimile No.: (401) 846-1520
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If to Lender:
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GATX Corporation
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Four Embarcadero Center, Suite 2100
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San Francisco, CA 94111
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Attn: Contracts Administration
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Facsimile No.: 415-955-3416
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or, as to each party, at such other address as shall be designated
by such party on written notice to the other party otherwise complying as to form and delivery with terms of this paragraph. All
such notices, requests, demands, directions and other communications shall be effective on actual delivery, or, when mailed, shall
be effective on the third calendar day after being deposited in the U.S. mail, or, when sent by overnight courier, on the next
business day after being delivered to such overnight courier, or when transmitted by fax, shall be effective on transmission with
confirmed receipt of transmission, respectively.
9.5
Governing
Law
. The validity, performance, construction, interpretation, and effect of this Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York (excluding its laws relating to conflicts of law except for Sections
5-1401 and 5-1402 of the General Obligation Laws of New York), except as the same may be governed by the federal law of the United
States.
9.6
Severability
.
If any provision of this Agreement, or the application to any circumstance, person or place, is held to be unenforceable, invalid
or void by a court or other tribunal of competent jurisdiction, such provision shall be severed therefrom or shall be reformed
only to the extent necessary to be enforceable to such circumstance, person or place; and such provision as applied to other circumstances,
persons or places, and the remainder of this Agreement, shall remain in full force and effect.
9.7
Assignment
.
No assignment, delegation or other transfer of this Agreement, in whole or in part, directly or indirectly, whether voluntarily,
involuntarily or by operation of law, or of any rights and obligations under this Agreement can be made by any party other than
Lender, without the prior written consent of the other party, which consent can be withheld in the exercise of its sole discretion.
Any purported assignment, transfer, or delegation in violation of this Section shall be void. Subject to the limits on assignment,
this Agreement shall be binding upon and inure to the benefit of the parties and their respective permitted successors and assigns.
This Agreement does not create and shall not be construed as creating any rights enforceable by any person not a party to this
Agreement. To the extent permitted by law, Lender may freely assign any or all of the Loan Documents, or assign or delegate any
or all of its rights and obligations arising under the Loan Documents to other parties or financial institutions, and may permit
other parties or financial institutions to participate in the Obligations and transactions evidenced by the Loan Documents, in
which event reference to Lender in such documents shall refer to Lender’s successors, delegees, or assigns, and to such participants,
as appropriate. In that connection, Lender may disclose all documents and information which Lender now or hereafter may have relating
to the Loan Documents, the transactions evidenced thereby, Borrower, or its business.
9.8
Further
Assurances
. Each party hereto agrees to perform such further acts and to execute and deliver such additional written instruments
as may from time to time be reasonably required to provide, maintain and perfect the security contemplated in this Agreement, and
otherwise to carry out the intent, terms and conditions of this Agreement.
9.9
Authority
.
None of the obligations of any of the parties to this Agreement or to any of the other Loan Documents shall be affected in the
event that the execution and delivery of any or all of the Loan Documents on behalf of any other party was not duly authorized
by all necessary corporate or company action.
9.10
Complete
Agreement
. This Agreement, including all exhibits, schedules, and all additional documents herein or therein incorporated by
reference, expresses the complete understanding and agreement of the parties hereto with respect to its subject matter, all prior
oral and written agreements to the contrary notwithstanding, and all contemporaneous oral agreements notwithstanding.
9.11
Counterparts
.
This Agreement may be executed in counterparts, all of which, taken together, shall constitute the entire Agreement. For purposes
of this Agreement, a facsimile or other electronic version of a party’s signature, such as a .pdf, printed by a receiving
facsimile or printer shall be deemed an original signature.
[
Signatures
provided on next page
]
IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.
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GATX CORPORATION
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By:
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Name:
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Title:
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BULK DISCOVERY (BERMUDA) LTD.
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By:
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Name:
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Title:
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BULK PARTNERS (BERMUDA) LTD.
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By:
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Name:
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Title:
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AMERICAS BULK TRANSPORT (BVI) LIMITED
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By:
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Name:
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Title:
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Signature Page to Loan and Guaranty Agreement
SCHEDULES
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2.4
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Approved Appraisers
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4.6
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Shareholders
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4.8
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Litigation
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4.9
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Permitted Encumbrances
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4.11
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Locations
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EXHIBITS
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A
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Request for Advance
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B
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Mortgage
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C
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Borrower’s Earnings Assignment Agreement
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D
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Charterer’s Earnings Assignment Agreement
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E
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Manager’s Undertaking – Seamar Management S. A.
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F
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Manager’s Undertaking – Phoenix
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G
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Funds Deposit Agreement
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H
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Shares Charge
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I
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Charge Over Cash Deposit
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J
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Compliance Certificate
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K
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Notice of Assignment
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L
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Insurance Endorsements
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M
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Broker’s Opinion Letter
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SCHEDULE 2.4
APPROVED APPRAISERS
Fearnleys AS
H. Clarkson & Co. Limited
Platou Shipbrokers
SCHEDULE 4.6
EQUITY INTERESTS IN HOLDING COMPANY
Bulk Partners (Bermuda) Ltd.
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Shareholder
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Number of Shares
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Percentage
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Citizenship
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Ed Coll
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38,643(Common)
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44.25%
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United States
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Lagoa Investments Ltd.
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34,277 (Common)
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39.25%
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Bermuda
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Anthony Laura
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14,409 (Common)
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16.50%
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United States
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Pangaea One L.P.
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7,759.946 (Preferred)
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United States
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Pangaea One (Cayman) L.P.
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4,276.712 (Preferred)
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Cayman Islands
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Pangaea One Parallel Fund L.P.
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3,996.424 (Preferred)
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Cayman Islands
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Pangaea One Parallel Fund (B) L.P.
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2,107.317 (Preferred)
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United States
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EQUITY INTERESTS IN PLEDGOR
Bulk Fleet Bermuda Holding Company Limited
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Shareholder
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Number of
Shares
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Percentage
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Citizenship
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Bulk Partners (Bermuda) Ltd.
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10,000
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100%
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Bermuda
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EQUITY INTERESTS IN BORROWER
Bulk Discovery (Bermuda) Ltd.
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Shareholder
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Number of
Shares
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Percentage
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Citizenship
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Bulk Fleet Bermuda Holding Company Limited
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10,000
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100%
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Bermuda
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EQUITY INTERESTS IN CHARTERER
Americas Bulk Transport (BVI) Limited
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Shareholder
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Number of
Shares
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Percentage
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Citizenship
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Bulk Partners Holding Company Bermuda Ltd.
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1,000
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100%
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Bermuda
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BORROWER’S SUBSIDIARIES
(Direct and Indirect)
None
SUBSCRIPTION AGREEMENTS, ETC. FOR EQUITY
INTERESTS IN BORROWER
None
SCHEDULE 4.8
LEGAL ACTIONS
NONE
SCHEDULE 4.9
PERMITTED ENCUMBRANCES
Charters and Service Agreements
The Time Charter
The Sub-COA
The COA
Other Encumbrances
Maritime liens on the Vessel for:
(a) torts that are covered by insurance
that complies with the provisions of the Preferred Mortgages; or
(b) crew’s wages, salvage, or for
goods and services furnished to the Vessel in the ordinary course of Borrower’s business and not in violation of any provisions
of the Loan Documents, none of which are overdue
provided,
Borrower may contest such Encumbrances in good faith if appropriate
reserves therefor are established and maintained consistently with GAAP, and security therefor is posted as necessary to prevent
the Seizure of the Vessel, or, if the Vessel is Seized with respect to a claim of such an Encumbrance, the Vessel is released therefrom
within thirty (30) days.
SCHEDULE 4.11
LOCATIONS
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Entity
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Chief Executive Office
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Place of Business or Business Records
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Borrower
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3
rd
Floor – Par la Ville Place
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c/o Phoenix Bulk Carriers (US) LLC
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14 Par la Ville Road
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88 Valley Road
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Hamilton HM08
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Middletown, RI 02842
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Bermuda
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Pledgor
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3
rd
Floor – Par la Ville Place
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c/o Phoenix Bulk Carriers (US) LLC
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14 Par la Ville Road
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88 Valley Road
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Hamilton HM08
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Middletown, RI 02842
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Bermuda
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Charterer
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3
rd
Floor – Par la Ville Place
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c/o Phoenix Bulk Carriers (US) LLC
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14 Par la Ville Road
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88 Valley Road
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Hamilton HM08
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Middletown, RI 02842
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Bermuda
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Allseas
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3
rd
Floor – Par la Ville Place
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c/o Phoenix Bulk Carriers (US) LLC
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14 Par la Ville Road
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88 Valley Road
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Hamilton HM08
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Middletown, RI 02842
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Bermuda
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All of the above companies have no place of business or business
records at any location in the United States, with the possible exception of:
c/o Phoenix Bulk Carriers (US) LLC
88 Valley Road
Middletown, RI 02842
EXHIBIT A
REQUEST FOR ADVANCE
Pursuant to Section 2.1 of the Loan and Guaranty Agreement dated
February __, 2011 (as assigned, assumed, amended, renewed, replaced, or otherwise modified (the “
Loan Agreement
”)
among GATX Corporation (“Lender”) and Bulk Discovery (Bermuda) Ltd. (“
Borrower
”), Bulk Partners
(Bermuda) Ltd., and Americas Bulk Transport (BVI) Limited please disburse the Advance on a Business Day on or about _______, 2011
as follows:
1. The
amount of $_____________ by wire transfer as follows:
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_________________________
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Branch: _____________
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Account No.: _________________
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ABA Routing No.: ________________
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2. ____________________________________
None of Borrower’s representations or warranties contained
in any of the Loan Documents are untrue, Borrower is in compliance with all of its covenants contained in the Loan Documents, and
no Default or Event of Default has occurred and is continuing under the Loan Documents.
Terms used herein that are defined in the Loan Agreement have
the meaning herein that they are given therein.
DATE: _____________, 2011
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BULK DISCOVERY (BERMUDA) LTD.
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By:
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Its:
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Exhibit 10.6
LOAN AND GUARANTY AGREEMENT
THIS LOAN AND GUARANTY AGREEMENT (“
Agreement
”)
is entered into as of the 20th day of October, 2011, between GATX CORPORATION, a New York corporation (“
Lender
”),
and BULK CAJUN BERMUDA LTD., a Bermuda company (“
Borrower
”), BULK PARTNERS (BERMUDA) LTD., a Bermuda company
(“
Holding Company
”), and AMERICAS BULK TRANSPORT (BVI) LIMITED, a British Virgin Islands business company (“
Charterer
”),
with respect to the following facts:
A. Borrower
wishes to obtain from Lender and Lender wishes to provide to Borrower a term loan in the principal amount of U.S. $4,550,000.00
on the terms and conditions stated herein, in order to finance the vessel BULK CAJUN, Panamanian Official No. 43084-11, IMO No.
8200450 (the “
Vessel
”).
B. Holding
Company is the indirect owner of Borrower, and Charterer is the time charterer of the Vessel, in consideration of which Holding
Company and Charterer are guarantying the Borrower’s obligations under this Agreement.
NOW, THEREFORE, in consideration of the
foregoing and the agreements of the parties hereto, and for other good and valuable consideration, the receipt of which the parties
hereby acknowledge, the parties hereto represent, warrant and agree as follows:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
1.1
Defined
Terms
. As used herein and in the schedules of this Agreement, the terms defined below shall have the definitions ascribed to
them below:
“
Advance
” has the meaning
given to it in Section 2.1(a).
“
Affiliate
” means, with
respect to a Person any other Person which directly or indirectly controls, is controlled by, or is under common control with,
such Person. “Control” “controlled by” and “under common control with” means direct or indirect
possession of the power to direct or cause the direction of management or policies (whether through ownership of voting securities,
by contract or otherwise);
provided that
control shall be conclusively presumed for this purpose when any Person or affiliated
group directly or indirectly owns ten percent (10%) or more of the securities or other Equity Interests having ordinary voting
power for the election of directors, managing general partners, trustees or managers of a Person.
“
Allseas
” means Allseas
Logistics Bermuda Ltd., a Bermuda company.
“
Allseas Charge on Cash Deposit
”
has the meaning given to it in Section 3.1(a)(xiii).
“
Banking Day
” means any
day on which commercial banks are open for general business (including dealings in foreign exchange and foreign currency markets)
in New York and Chicago.
“
Bankruptcy or Other Proceeding
”
means a Debtor Relief Proceeding; a dissolution, winding up, liquidation, or reorganization of a Person; an arrangement with a
Person’s creditors or a composition of a Person or any of its debts; or an assignment for the benefit of creditors or any
other marshalling of the assets and liabilities of a Person.
“
Borrower Charge on Cash Deposit
”
has the meaning given to it in Section 3.1(a)(xii).
“
Borrower’s Earnings Assignment
Agreement
” has the meaning given to it in Section 3.1(a)(iii).
“
Bulk Cajun Freights Account
”
has the meaning given to it in Section 3.1(i).
“
Bulk Cajun Hire Account
”
has the meaning given to it in Section 3.1(h).
“
Bulk Cajun Mortgage
”
has the meaning given to it in Section 3.1(a)(ii).
“
BULK DISCOVERY
” means
the vessel BULK DISCOVERY, Official No. ______, registered in Panama and owned by Bulk Discovery.
“
Bulk Discovery
” means
Bulk Discovery (Bermuda) Ltd., a Bermuda company.
“
Bulk Discovery Loan Agreement
”
means the Loan and Guaranty Agreement dated as of February 25, 2011 among Lender, Bulk Discovery, Holding Company, and Charterer.
“
Bulk Discovery Loan Documents
”
means the Bulk Discovery Loan Agreement, the Bulk Discovery Mortgage, and all other agreements, instruments, certificates, or other
documents under or related thereto (each as assigned, assumed, amended, renewed, replaced, or otherwise modified from time to time).
“
Bulk Discovery Mortgage
”
has the meaning given to it in Section 3.1(j)(i).
“
Bulk Discovery Obligations
”
means the obligations of Bulk Discovery that are secured by the Bulk Discovery Mortgage.
“
Charterer’s Earnings Assignment
Agreement
” has the meaning given to it in Section 3.1(a)(v).
“
Closing
” means the date
the Advance is made upon satisfaction or waiver of the conditions precedent listed in Article III.
“
COA
” means the Contract
of Affreightment between Phoenix Bulk Carriers (US) LLC and Noranda Alumina LLC dated as of January 1, 2011.
“
Code
” means the Internal
Revenue Code of 1986.
“
Collateral
” means personal
or real property, whether tangible or intangible, on which an Encumbrance is granted as security for any or all of the Obligations
outstanding from time to time under any Loan Document.
“
Commercial Management Agreement
”
means the Commercial Management Agreement for the Vessel between Borrower and Phoenix Bulk Carriers (BVI) Limited dated as of June
24, 2011.
“
Commitment Fee
” has
the meaning given to it in Section 3.1(k).
“
Constitutional Documents
”
means the certificate of incorporation, memorandum of association and by-laws of a corporation, as amended and restated.
“
Credit Party
” means
Borrower, Pledgor, Holding Company, Charterer, or any future Guarantor.
“
Debtor Relief Proceeding
”
means bankruptcy, insolvency, receivership dissolution, arrangement, reorganization, administration, debt relief or similar proceeding
pertaining to a Person.
“
Default
” means an event
or condition which, with the giving of notice, the passage of time, or both, would become an Event of Default.
“
Default Rate
” has the
meaning given to it in Section 2.1(c)(i).
“
EBITDA
” means, for any
period, for any Person, an amount equal to the Net Earnings of such Person for such period
plus
the following to the extent
deducted in calculating such Net Earnings: (i) the Interest Expense of such Person for such period, (ii) the provision
for federal, state, local and foreign income taxes payable by such Person for such period, and (iii) the amount of depreciation
and amortization expense deducted in determining such Net Earnings.
“
Encumbrance
” means any
lien, mortgage, pledge, assignment, security interest, liability for forfeiture, defeasance, lease, charter, right to possession
or services of the relevant property, option, right of first refusal with respect to the relevant property, restriction against
transferability or use, or other encumbrance whatsoever.
“
Environmental Law
” means
law relating to environmental, health, safety or land use matters applicable to any property.
“
Environmental Liability
”
means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties
or indemnities), that is directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the
generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any
Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment, or (e) any
contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the
foregoing.
“
Equity Interest
” means
stock in a corporation, a membership interest in a company, a general or limited partnership interest in a partnership, a beneficial
interest in a trust, or other equity interest in a Person.
“
ERISA
” means the Employee
Retirement Income Security Act of 1974 and any regulations issued pursuant thereto.
“
ERISA Affiliate
” means
any trade or business (whether or not incorporated) under common control with Borrower or a Guarantor within the meaning of Section 414(b)
or (c) of the Code and Sections 414(m) and (o) of the Code.
“
Event of Default
” has
the meaning given to it in Section 7.1.
“
Fixed Charges
” means,
for any period, for any Person, the sum of Interest Expense, operating lease payments, payments of the current portion of capital
leases, and payments of the current portion of long term Indebtedness, and distributions of equity made during the relevant period.
“
Funds Deposit Agreement
”
has the meaning given to it in Section 3.1(a)(ix).
“
GAAP
” means at any time
generally accepted accounting principles as then in effect in the United States, applied on a consistent basis.
“
Governmental Authority
”
includes all foreign and U.S. federal, national, state and local governments; government corporations, authorities, boards, commissions,
and entities; and all departments, ministries, agencies, bureaus, offices, and subdivisions of any of the foregoing.
“
Guarantor
” means Holding
Company, Charterer, and any other Person that grants Lender a guaranty for any of the Obligations, as the context requires.
“
Hazardous Materials
”
means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including
petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious
or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.
“
Indebtedness
” means,
for any Person, (i) indebtedness for borrowed money; (ii) obligations evidenced by bonds, debentures, notes or other
similar instruments; (iii) obligations to pay the deferred purchase price of property or services; (iv) obligations as
lessee under leases which shall have been or should be, in accordance with GAAP, recorded as capital leases; (v) obligations
as lessee under Synthetic Lease Obligations; (vi) obligations with respect to undrawn letters of credit issued for the account
of that Person or under bonds or suretyship arrangements; (vii) all obligations arising under any swap transaction or other
agreement or arrangement designated to protect the Person against fluctuation in interest rates, currency exchange rates or commodity
prices; (viii) obligations to ordinary trade creditors which are more than ninety (90) days delinquent; (ix) liabilities
in respect of unfunded vested benefits under plans covered by Title IV of ERISA; (x) obligations under indemnification agreements
in favor of issuers of letters of credit (contingent or otherwise); and (xi) obligations under direct or indirect guaranties
or suretyship agreements in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise
to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (i)
through (x) above.
“
Indemnitee
” has the
meaning given to it in Section 9.2.
“
Interest Expense
” shall
mean for any period, for any Person, the aggregate amount of interest expense of such Person for such period as determined in accordance
with GAAP. Notwithstanding the foregoing, specific items of interest expense shall only be included in this definition to the extent
such items have been deducted from gross revenues in calculating the Net Earnings of such Person for such fiscal period.
“
Interest Rate
” has the
meaning given to it in Section 2.1(c)(i).
“
Investment
” means, as
to any Person, any acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of
capital stock or other securities of another Person, (b) a convertible loan or advance, or capital contribution to, purchase
or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership interest,
membership interest, joint venture interest, or other beneficial interest in such other Person, or (c) the purchase or other
acquisition (in one transaction or a series of transactions) of assets of another Person that constitute a business unit. For purposes
of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases
or decreases in the value of such Investment.
“
IRS
” means the United
States Internal Revenue Service.
“
Loan Document
” means
any of: this Agreement and any other loan agreement, promissory note or other evidence of indebtedness related to this Agreement;
and any ship or naval mortgage, security agreement, assignment, deed of trust, pledge, or other security document; any guaranty;
any subordination agreement, or any other agreement, instrument, certificate, or other document; in each case whether heretofore,
concurrently, or hereafter entered into by any Person in connection with this Agreement (each, as assigned, assumed, amended, renewed,
replaced, or otherwise modified from time to time).
“
Manager’s Undertaking
”
means a Manager’s Undertaking described in Sections 3.1(a) (vii) or 3.1(a)(viii).
“
Material
” means, with
reference to the significance of a matter which is reasonably calculable in monetary terms, a change or effect related to such
matter which has a monetary consequence of $500,000.00 or more in amount.
“
Multiemployer Plan
”
means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which Borrower, a Guarantor or any
ERISA Affiliate makes or is obligated to make contributions, or during the preceding three calendar years, has made or been obligated
to make contributions.
“
Net Earnings
” means,
for any period, for any Person, the net earnings of such Person for such period determined in accordance with GAAP for such period,
but not including the net after-tax amount of: (a) any gains or losses resulting from the disposition of capital assets (as
defined by GAAP) where the consideration paid in connection with such disposition is not paid in cash,
provided, however,
that when all or any portion of the consideration paid in connection with such disposition is received in cash, checks or other
cash equivalent financial instruments, such amount shall be recognized as gain or loss and included in the net earnings of such
Person in the fiscal period received; (b) any gains or income resulting from the write-up of assets; (c) any gains or
losses resulting from the acquisition of securities or the retirement or extinguishment of Indebtedness; (d) any losses from
the impairment of goodwill or other intangible assets required to be recognized under GAAP; (e) any losses from the impairment
or disposal of long-lived assets required to be recognized under GAAP; (f) any gains or losses arising from changes in accounting
principles; (g) any equity of such Person in the undistributed earnings of any Person which is not a Subsidiary; (h) any
earnings of any Person acquired by such Person through purchase, merger or consolidation or otherwise for any period prior to the
date of acquisition; (i) any deferred credit representing the excess of equity in any Subsidiary at the date of acquisition
over the cost of the investment in such Subsidiary; and (j) any extraordinary gains or losses.
“
Obligations
” means all
obligations of Borrower to repay the Advance, to pay interest thereon, or to pay and perform other debts, liabilities, obligations,
covenants and duties, existing or arising under any Loan Document, whether direct or indirect (including those acquired by assumption),
absolute or contingent, due or to become due, now existing or hereafter arising, and including interest that accrues after the
commencement, by or against Borrower or any Person of which Borrower is a partner, joint venturer, or member, of any Debtor Relief
Proceeding in which such Person is the debtor in such proceeding.
“
Other Taxes
” has the
meaning given to it in Section 2.5(a)(ii).
“
Permit
” means any authorization,
certificate, consent, approval, license, permit, waiver or exemption issued or granted by a Governmental Authority.
“
Permitted Encumbrance
”
has the meaning given to it in Section 4.9.
“
Pension Plan
” means
any “employee pension benefit plan” (as such term is defined in Section 3(2) of ERISA) that is sponsored or maintained
by Borrower, a Guarantor, or any ERISA Affiliate or to which Borrower, a Guarantor, or any ERISA Affiliate contributes or has an
obligation to contribute, or in the case of a multiple employer plan (as described in Section 4064(a) of ERISA) has made contributions
at any time during the immediately preceding five plan years.
“
Permitted Investments
”
means (i) U.S. Dollar demand deposits maintained in the United States with any commercial bank which has a combined capital
and surplus of at least $100,000,000.00; (ii) U.S. Dollar time deposits maintained in the United States with, or certificates
of deposit having a maturity of six months or less issued by, any commercial bank which has its head office in the United States
and which has a combined capital and surplus of at least $100,000,000.00; (iii) direct obligations of, or obligations unconditionally
guaranteed by, the United States Government and having a maturity of one year or less; or (iv) readily marketable commercial
paper having a maturity of six months or less, issued by any corporation organized and existing under the laws of the United States,
any state thereof, or the District of Columbia and rated A-1 by Standard & Poor's Corporation or P-1 by Moody's Investors Service,
Inc. (or, if neither such organization shall rate such commercial paper at any time, rated by any nationally recognized rating
organization in the United States with the highest rating assigned by such organization).
“
Person
” includes an
individual natural person, corporation, limited liability company, general or limited partnership, joint venture, association,
trust, Governmental Authority, and any other entity.
“
Phoenix
” means Phoenix
Bulk Carriers (US) LLC, a Delaware limited liability company.
“
Plan
” means any “employee
benefit plan” (as such term is defined in Section 3(3) of ERISA) established by Borrower or any ERISA Affiliate.
“
Pledgor
” means Bulk
Partners Holding Company Bermuda Ltd., a Bermuda company.
“
Process Agent
” has the
meaning given to it in Section 3.1(a)(xiv), and includes any successor thereto that is appointed as contemplated in Section 7.4.
“
Process Agent Appointment
”
has the meaning given to it in Section 3.1(a)(xiv).
“
Panamanian Public Registry
”
means the Panamanian Public Registry of Titles and Encumbrances of Vessels of the Panamanian Maritime Authority.
“
Requisition
” means expropriation,
confiscation, requisition or acquisition of the title to or use of property, whether for full consideration or a consideration
less than full value, which is effected by any Governmental Authority or by any Person or Persons claiming to be or to represent
a Governmental Authority
“
Reportable Event
” means
any of the events set forth in Section 4043(c) of ERISA.
“
Request for Advance
”
has the meaning given to it in Section 2.1(a).
“
Seizure
” means an arrest,
repossession, taking into custody, detention or seizure by judicial or nonjudicial means (including attachment, garnishment, or
execution or levy), and “
Seize
” has a correlative meaning.
“
Sub-COA
” means the Contract
of Affreightment between Charterer and Phoenix dated as of January 1, 2011.
“
Subordinated Debt
” has
the meaning given to it in Section 8.6(a).
“
Subordinated Liens
”
has the meaning given to it in Section 8.6(a).
“
Subsidiary
” means any
corporation, limited liability company, partnership, joint venture, association, trust or estate of which (or in which) the relevant
Person owns, directly or indirectly, ten percent (10%) or more of (i) the outstanding capital stock having ordinary voting
power to elect a majority of the Board of Directors of such corporation (irrespective of whether or not at the time capital stock
of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (ii) the
interest in the capital or profits of such limited liability company, partnership or joint venture, or association, or (iii) the
beneficial interest of such trust or estate.
“
Synthetic Lease Obligation
”
means the monetary obligation of a Person under (a) a so called synthetic, off-balance sheet or tax retention lease, or (b) an
agreement for the use or possession of property creating obligations that do not appear on the balance sheet of such Person but
which, upon the insolvency or bankruptcy of such Person, would be characterized as the indebtedness of such Person (without regard
to accounting treatment).
“
Taxes
” has the meaning
given to it in Section 2.5(a)(i).
“
Technical Management Agreement
”
means the Ship Management Agreement for the Vessel between Borrower and Seamar Management S.A. dated May 20, 2011.
“
Time Charter
” means
the Time Charter for the Vessel between Borrower and Charterer dated October 6, 2011.
“
United States
” means
the United States of America, its territories and possessions.
“
Vessel
” has the meaning
given to it in Recital A.
1.2
Currency
.
All references to dollars and all usage of the symbol “$” are references to U.S. Dollars.
1.3
Accounting
Terminology
. All accounting terms used in the Loan Documents shall be construed, and all financial records and reports prepared
or provided pursuant to the Loan Documents shall be prepared, in accordance with GAAP.
1.4
Computation
of Interest and Time Periods
. Under the Loan Documents, interest shall accrue and be calculated at a rate per annum based on
the actual number of days elapsed and a 360-day year. Anything in the Loan Documents to the contrary notwithstanding, interest
shall not accrue thereunder at a rate in excess of the maximum rate, if any, that is permitted under applicable law, and shall
be deemed automatically capped at the relevant maximum rate in effect, if any, from time to time. At no time shall the interest
rate payable on the Advance, together with the late payment fees and prepayment fees that accrue under, and all other amounts payable
under the Loan Documents to the Lender, to the extent the same are construed to constitute interest, exceed the maximum rate of
interest that at any time may be contracted for, taken, charged or received by the Lender under the Loan Documents under applicable
law. If for any period during the term of this Agreement any amount paid to the Lender under the Loan Documents (to the extent
the same shall (but for the provisions of this Section) constitute or be deemed to constitute interest) would exceed the maximum
amount of interest permitted during such period, then such excess amount shall be applied or shall be deemed to have been applied
as a prepayment of the Advance in such order as the Lender shall determine. In computations of interest or time under this Agreement
“from” means “from and excluding,” and “to” or “through” means “to and including.”
For the calculation of the duration of a monthly period, a month commencing on one numeric day of a calendar month shall end on
the same numeric day of the next calendar month, if any, or else the last day of the next calendar month.
1.5
Construction
.
In this Agreement, unless expressly stated otherwise: (a) references to articles, sections, exhibits and schedules, are references
to articles, sections, exhibits, and schedules of this Agreement, and references to “herein,” “hereof,”
and “hereto” are references to this Agreement as a whole; (b) the terms “include,” “including”
and similar terms shall be construed as if followed by the words “but not limited to”; (c) the term “documents”
includes any and all instruments, documents, charters, leases, contracts, agreements, certificates, notices, reports, financial
statements and other writings, however evidenced, whether in physical or electronic form; (d) references to execution of documents
shall include obtaining notarial acknowledgements thereof in accordance with applicable law as required by Lender; (e) words
denoting the singular shall include the plural, and vice versa, and words denoting any gender shall include all genders; (f) captions
of articles and sections of this Agreement are inserted for convenience of reference only and shall not be considered in the interpretation
or construction of this Agreement; (g) references to agreements and other contractual instruments shall be deemed to include
such agreements and other instruments as assigned, assumed, amended, renewed, replaced, or otherwise modified from time to time,
but only to the extent that the assignments, assumptions, amendments, renewals, replacements, novations, and other modifications
are not prohibited by any Loan Document; and (h) references to the accrual of interest include reference to the applicable
loan margins and increases in interest relevant to an Event of Default, as provided in the Loan Documents. In this Agreement “
law
”
includes (i) all international, foreign, U.S. federal, state and local statutes, treaties, rules, guidelines, regulations,
ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof
by any Governmental Authority, court, administrative or other governmental tribunal charged with the enforcement, interpretation
or administration thereof, (ii) all applicable administrative orders, directed duties, requests, and Permits of, or issued
by, any Governmental Authority, in each case whether or not having the force of law, and (iii) any particular law shall include
all recodifications, amendments, consolidations, replacements, and supplements thereto and thereof, and interpretations of such
law by relevant Governmental Authorities. Each party to the Loan Documents has had an opportunity to review and revise them, so
the rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation or construction of the Loan Documents. Time is of the essence of the Loan Documents.
ARTICLE II
LOAN
2.1
Loan
Advance
.
(a)
Loan
Advance
. Lender agrees, on the terms and conditions set forth herein, to advance to Borrower, in a single advance, $4,550,000.00
(the “
Advance
”). The Advance shall be disbursed for the account of Borrower in accordance with an executed request
therefor in substantially the form attached hereto as
Exhibit A
(“
Request for Advance
”).
(b)
Principal
Repayments
. The Advance shall be repaid in installments as follows: principal installments of $284,375.00 shall be repaid on
the first day of each January, April, July, and October, commencing with January 24, 2011 until the principal of the Advance
is fully repaid,
provided,
the final installment of all principal then outstanding, shall be repaid in full on October 24,
2015. Once repaid no portion of the Advance may be reborrowed.
(c)
Interest
.
(i)
Interest
Rate
. Interest shall accrue on the outstanding principal of the Advance from the date the Advance is disbursed until the principal
is fully repaid, at a fixed rate consisting of the sum of (A) five and seventy-five one-hundredths percent (5.75%) plus (B) the
rate for U.S. Treasury obligations with a four-year remaining time to maturity, reasonably determined by means of a straight line
interpolation of the rates quoted by Bloomberg at any time on the second Business Day before Closing for the purchase of U.S. Treasury
obligations with the closest that are quoted at that time to three- and five-year remaining times to maturity (the “
Interest
Rate
”),
provided
,
however
, that after the occurrence and during the continuance of an Event of Default,
in the exercise of Lender’s sole discretion, the Interest Rate shall be increased by the five percent (5%) per annum (such
resulting rate being the “
Default Rate
”),
provided, further,
in no event shall the Advance or any other
amount owing under the Loan Documents accrue interest in excess of the maximum amount, if any, that is permitted by law. Interest
shall accrue and be calculated at a rate per annum based on the actual number of days elapsed and a 360-day year. Lender’s
determination of the Interest Rate shall be conclusive absent manifest error.
(ii)
Interest
Payments
. On each date on which a payment of principal is due under this Agreement, Borrow shall also make payment of all interest
that has accrued and that remains unpaid as of that date.
2.2
Payments;
Late Payments; Business Days
. If any payment to be made by Borrower under the Loan Documents shall fall due on a day other
than a Business Day, payment shall be made on the next following Business Day. Principal payments made more than five (5) Business
Days’ late shall incur a late payment fee of five percent (5%) of the amount that is late, which shall be due concurrently
with the late payment, without limiting Lender’s rights to interest or default interest, or the right to exercise any of
its other rights, powers, and remedies for default.
2.3
Application
of Payments
. Unless the application of payments received on account of the Obligations in advance of an Event of Default are
otherwise specified by another provision of the Loan Documents, all payments and other funds received on account of the Obligations
(including insurance proceeds, proceeds of Requisition of the Vessel, proceeds of disposition of or realization on Collateral,
and other proceeds of collection), together with the proceeds of any claims for damages for loss of or damage to Collateral received
by the Lender pursuant to or under the terms of the Loan Documents, shall be applied as follows:
first
, toward the payment
of the fees, costs and other expenses (including attorneys’ fees and expenses), and interest thereon, that are owed by Borrower
and that are outstanding under the Loan Documents at the time, and, as required by Lender from time to time, to provide adequate
indemnity against Encumbrances claiming priority over Lender’s security in any Collateral,
provided that
unless an
Event of Default has occurred and is continuing said sums shall not be used to satisfy or provide indemnity against or security
for Permitted Encumbrances;
second
, toward interest
that accrues on the Obligations;
third
, toward payment of
the principal of the Advance; and
fourth
, to the Borrower
or to whosoever may be entitled thereto.
When applied to the Advance, payments and prepayments shall
be applied in the reverse order of the maturity of the installments thereof.
2.4
Prepayment
.
(a)
Required
Prepayments
. At six-month intervals after Closing Borrower shall provide to Lender a written appraisal of the Vessel that is
prepared by an appraiser listed in
Schedule 2.4
, and dated not more than fourteen days before it is given to Lender. In
lieu of the foregoing, or in the event that Borrower fails to timely deliver any required appraisal, the Lender may have the Vessel
appraised, at Borrower’s expense, by an appraiser selected by Lender in the exercise of its sole discretion. In either event
the Borrower shall make the Vessel available for inspection (without being required to delay a departure for, or deviate from,
a voyage under the Sub-COA, or to specially dry dock the Vessel), but for this purpose such an inspection shall not be required
unless requested by Lender. The appraiser shall determine the fair market value of the vessel on a lien- and charter- free basis,
assuming a willing buyer and a willing seller not under a compulsion to sell. If that valuation is an amount that is less than
seventy-five percent (75%) of the outstanding principal of the Advance at the time the appraisal is made, and if demanded to do
so by Lender, Borrower shall, within sixty (60) days after receiving notice thereof and a copy of the appraisal, either (i) prepay
an amount such that, after such prepayment is first applied to outstanding interest at the time the prepayment is made and the
balance is applied to the principal of the Advance, the outstanding amount of the Advance shall not exceed seventy-five percent
(75%) of the appraised value of the Vessel, or (ii) Borrower shall provide further security to Lender that is of a type, value,
and that is subject to a first priority perfected security interest in favor of Lender, acceptable to Lender in the exercise of
its sole discretion.
(b)
Voluntary
Prepayments
. Borrower may make voluntary prepayment of the Advance and all accrued unpaid interest thereon in whole but not
in part on the second, third, or fourth anniversary of the Closing (or the first Business Day thereafter), by first providing to
Lender sixty (60) days’ advance written notice of Borrower’s intention to do so. Once such notice is given for any
prepayment, Borrower is obligated to make such prepayment on the date so indicated.
(c)
Other
Prepayments; Prepayment Fee
. In the event the Advance is prepaid pursuant to Sections 2.4(a) or (b), or as a result of receipt
by Lender and application of proceeds of insurance, foreclosure or other realization on Collateral, collection actions with respect
to an Obligation, proceeds of Requisition, a payment from Bankruptcy or Other Proceedings, prepayment compelled by law, or any
other mandatory or involuntary prepayment, Borrower shall, concurrently with Lender’s receipt of such prepayment, pay a
prepayment fee calculated as the difference between X and Y, with the variables X and Y defined as follows:
X equals all future scheduled principal and interest
payments (from the date of prepayment through October 24, 2015) related to the portion of the Advance prepaid, reduced to
present value as of the prepayment date at the rate of four and No/100
ths
percent (4.00%) per annum.
Y equals the amount of the Advance prepaid.
Borrower acknowledges that the prepayment fee is intended to
compensate the Lender and is not a penalty.
2.5
Taxes;
Yield Protection; Illegality
.
(a)
Taxes
.
(i) All
payments by Borrower to or for the account of Lender under the Loan Documents shall be made free and clear of and without deduction
for present or future taxes, duties, levies, imposts, deductions, assessments, fees, withholdings or similar charges, and all liabilities
with respect thereto, excluding taxes imposed on or measured by Lender’s net income or gross receipts, and franchise taxes
imposed on Lender (in lieu of net income taxes) by the jurisdiction (or any political subdivision thereof) under the laws of which
Lender is organized or maintains a lending office (all such non-excluded taxes, duties, levies, imposts, deductions, assessments,
fees, withholdings or similar charges, and liabilities being hereinafter referred to as “
Taxes
”). If Borrower
shall be required by any law to deduct any Taxes from or in respect of any sum payable under any Loan Document to Lender, (A) the
sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional
sums payable under this Section 2.5), Lender receives an amount equal to the sum it would have received had no such deductions
been made, (B) Borrower shall make such deductions, (C) Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law, and (D) within thirty (30) days after the date of such payment,
Borrower shall furnish to Lender the original or a certified copy of a receipt evidencing payment thereof. In the event and to
the extent that Lender receives, from an applicable taxing authority, a refund or credit for any Taxes so withheld and paid to
a Governmental Authority by Borrower and for which Borrower makes an additional payment to Lender under the foregoing clause (A),
Lender shall promptly make a refund to Borrower of the amount of such refund or credit.
(ii) Borrower
agrees to pay all present or future stamp taxes, court or documentary taxes, and other excise or property taxes or charges or similar
levies which arise from any payment made under any Loan Document or from the execution, delivery, performance, enforcement, filing
or registration of, or otherwise with respect to, any Loan Document (hereinafter referred to as “
Other Taxes
”).
(iii) If
Borrower shall be required to deduct or pay any Taxes or Other Taxes from or in respect of any sum payable to Lender under any
Loan Document, Borrower shall also pay to Lender, at the times interest is paid, such additional amounts that Lender specifies
as necessary to preserve the after-tax yield (after factoring in all Taxes, Other Taxes, and taxes imposed on or measured by net
income or gross receipts, and franchise taxes) Lender would have received if such Taxes or Other Taxes had not been imposed.
(iv) Borrower
agrees to indemnify Lender for (A) the full amount of Taxes and Other Taxes (including any Taxes or Other Taxes imposed or
asserted by any jurisdiction on amounts payable under this Section 2.5) paid by Lender, (B) amounts otherwise payable under
this Section 2.5, and (C) all liabilities (including penalties, interest and expenses) arising therefrom or with respect thereto,
in each case whether or not such Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental
Authority. Payment under this Section (iv) shall be made within thirty (30) days after the date Lender makes a demand therefor.
(b)
Matters
Applicable to all Requests for Compensation
. A certificate of Lender claiming compensation under this Section 2.5 and setting
forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining
such amount, Lender may use any reasonable averaging and attribution methods.
(c)
Survival
.
All of Borrower’s obligations under this Section 2.5 shall survive repayment of the Advance and all interest thereon.
2.6
Wire
Transfers
. If the Advance is, at Borrower’s request, to be wire transferred to Borrower or any other Person, such transfer
shall be subject to all applicable law, including the policies of the Board of Governors of the Federal Reserve System. Borrower
acknowledges that as a result thereof, the transmission of the Advance may be significantly delayed.
2.7
Renewal
of Credit Facilities
. Borrower acknowledges that any request that it makes for a renewal, extension, or replacement of the
credit facilities contained in this Agreement shall be granted or withheld by Lender in the exercise of Lender’s sole discretion.
2.8
Conditions
.
Lender shall not be required to make the Advance unless at such time: all Conditions Precedent that are relevant to the Advance
have been timely fulfilled; none of the covenants, representations or warranties of Borrower or any other Person other than Lender
that are contained in the Loan Documents shall have been materially breached or shall be materially untrue; no Default or Event
of Default shall have occurred and be outstanding; no default shall have occurred and be outstanding under the Bulk Discovery Loan
Agreement; there shall have been no Materially adverse change in the businesses, assets, or liabilities of Holding Company since
the effective date of its audited financial reports dated or received by Lender on June 27, 2011, and its unaudited 2Q2011 financial
report provided to Lender; and all other requirements set forth in the Loan Documents shall be satisfied in all material respects;
provided that any of the foregoing may be waived by the Lender if done in writing. Other than as expressly set forth herein, Lender
shall be under no obligation to make advances to Borrower, and no other advances made by Lender apart from the requirements of
this Agreement shall be deemed to establish any contrary practice, course of dealing or obligation.
ARTICLE III
CONDITIONS PRECEDENT
3.1
Conditions
Precedent to the Advance
. Lender’s obligation to make the Advance under this Agreement shall be subject to the fulfillment,
on or before October 24, 2011 (or such later date as Lender approves in writing), of all of the following conditions precedent,
and all other conditions precedent that may be contained in any of the Loan Documents:
(a)
General
Documents
. Borrower shall furnish to Lender the following in form and substance satisfactory to Lender, dated as of Closing,
unless otherwise indicated below:
(i) the
Request for Advance;
(ii) a
First Naval Mortgage encumbering the Vessel, duly executed by Borrower in substantially the form attached hereto as
Exhibit
B
, that has been notarized and that complies with all other formalities as required for preliminary registration in the Public
Registry of Titles and Encumbrances of Vessels of the Panama Maritime Authority (the “
Bulk Cajun Mortgage
”);
(iii) an
Assignment of Charter, Earnings and Insurances executed by Borrower in substantially the form attached hereto as
Exhibit C
(the “
Borrower’s Earnings Assignment Agreement
”);
(iv) a
certification that an executed Notice of Assignment in substantially the form of
Exhibit D
to
Exhibit C
hereto was
delivered to Charterer, and an Acknowledgement and Agreement executed by Charterer in substantially the form of
Exhibit E
to
Exhibit C
hereto;
(v) an
Assignment of Contract of Affreightment, Earnings and Insurances executed by Charterer in substantially the form attached hereto
as
Exhibit D
(the “
Charterer’s Earnings Assignment Agreement
”);
(vi) a
certification that an executed Notice of Assignment in substantially the form of
Exhibit D
to
Exhibit D
hereto was
delivered to Phoenix, an Acknowledgement and Agreement executed by Phoenix in substantially the form of
Exhibit E
to
Exhibit
D
hereto;
(vii) a
Manager’s Undertaking executed by Seamar Management S.A., in substantially the form attached hereto as
Exhibit E
;
(viii) a
Manager’s Undertaking executed by Phoenix, in substantially the form attached hereto as
Exhibit F
;
(ix) a
Funds Deposit Agreement executed by Borrower, Charterer, Phoenix, Allseas, and Lender, in substantially the form attached hereto
as
Exhibit G
(the “
Funds Deposit Agreement
”);
(x) a
copy of a letter executed by Phoenix, addressed to Mid-Ship Group LLC, that instructs Mid-Ship Group LLC to remit all freights
and other sums paid by Noranda Alumina LLC under the COA with respect to the Vessel, less commissions retained by Mid-Ship Group
LLC under the COA, to the Bulk Cajun Freights Account, in form acceptable to Lender;
(xi) Charge over Shares regarding all of the
issued and outstanding shares of stock in Borrower, executed by Pledgor in substantially the form attached hereto as
Exhibit
H
(the “
Shares Charge
”), and (A) a Shareholder’s Proxy executed by Pledgor in substantially the
form attached to the Shares Charge, (B) a Share Transfer Form executed by Pledgor in substantially the form attached to the
Shares Charge that pertains to the shares subject to the Shares Charge, (C) all share certificates for all issued and outstanding
shares of stock of Borrower, (D) an Undertaking executed by Pledgor in substantially the form attached to the Shares Charge,
and (E) undated Director & Officer Resignation Letters executed by all of the directors and officers of Borrower in substantially
the form attached to the Shares Charge;
(xii) a
Charge Over Cash Deposit executed by Borrower and Lender, in substantially the form attached hereto as
Exhibit I
, and a
letter executed by HSBC Bank Bermuda Limited in substantially the form of Part 2 of Schedule I thereto (the “
Borrower
Charge on Cash Deposit
”);
(xiii) a
Charge Over Cash Deposit executed by Allseas, Lender, and HSBC Bank Bermuda Limited in substantially the form attached hereto as
Exhibit J
, and a letter executed by HSBC Bank Bermuda Limited in substantially the form of Part 2 of Schedule I thereto
(the “
Allseas Charge on Cash Deposit
”);
(xiv) an
irrevocable consent to appointment as registered agent for service of process on Borrower, Pledgor, Allseas, Phoenix, and the Guarantors,
executed by Leicht & Rein (“
Process Agent
”), in form acceptable to Lender (“
Process Agent Appointment
”);
(xv) copies
of the executed Time Charter, Technical Management Agreement, and Commercial Management Agreement certified by an officer of Borrower
or another individual acceptable to Lender, containing a certification that they are still in full force and effect, and have not
been amended or rescinded;
(xvi) copy,
certified by Charterer or another individual acceptable to Lender, of the executed Sub-COA, containing a certification that it
is still in full force and effect, and has not been amended or rescinded;
(xvii) copy,
certified by Phoenix or another individual acceptable to Lender, of the executed COA, containing a certification that it is still
in full force and effect, and has not been amended or rescinded;
(xviii) certified
copies of all entries and filings in respect of each of Borrower, Holding Company, Pledgor, and Allseas on file in the Register
of Companies at the office of the Registrar of Companies in Hamilton, Bermuda;
(xix) copies,
certified by the secretaries of the respective companies or other individuals acceptable to Lender, of the Constitutional Documents
of each of Borrower, Holding Company, Pledgor, and Allseas, and of minutes of the meetings of the board of directors of each of
Borrower, Holding Company, Pledgor, and Allseas containing,
inter alia
, the unanimous resolutions of the directors of each
of such companies approving such companies’ authorization of and entry into the Loan Documents to be executed on their behalf;
(xx) a
Certificate of Compliance issued by the Registrar of Companies in respect of each of Borrower, Holding Company, Pledgor, and Allseas;
(xxi) a
certified copy of the Register of Shareholders in respect of each of Borrower, Holding Company, Pledgor, and Allseas;
(xxii) a
certified copy of the Register of Directors and Officers in respect of each of Borrower, Holding Company, Pledgor, and Allseas,
certified by their respective secretaries;
(xxiii) certified
copy of a current Foreign Exchange Letter issued by the Bermuda Monetary Authority with respect to each of Borrower, Holding Company,
Pledgor, and Allseas certified by their respective secretaries;
(xxiv) a
certified copy of a current Tax Assurance issued by the Registrar of Companies for the Minister of Finance in relation to each
of Borrower, Holding Company, Pledgor, and Allseas certified by their respective secretaries;
(xxv) copies
of the Constitutional Documents and public records of Charterer obtained from the Registry of Corporate Affairs and the High Court
Registry of the British Virgin Islands and certified by the secretary of Charterer;
(xxvi) copies
of the memorandum and articles of association and certificate of incorporation of Charter certified by the secretary of Charterer;
(xxvii) copy
of the public records of Charterer obtained from the Registry of Corporate Affairs in the British Virgin Islands and the public
information revealed from a search of each of the Civil Index Book and the Commercial Book, each from the date of the Charterer’s
incorporation, maintained by the British Virgin Islands’ High Court Registry;
(xxviii) a certificate of the
secretary of the Charterer identifying, inter alia, the directors, officers, and shareholders of Charterer;
(xxix) a
copy certified by the secretary of the Charterer of the written resolutions of the directors of Charterer approving, inter alia,
the Charterer’s authorization of and entry into the Loan Documents to be executed for and on behalf of Charterer;
(xxx) a
copy of the register of the members of Charterer certified by the secretary of Charterer;
(xxxi) a
copy of the register of the directors of Charterer certified by the secretary of Charterer;
(xxxii) a Certificate of Good
Standing for Phoenix issued by the Division of Corporations of the Delaware Department of State on or about the date of Closing;
(xxxiii) a copy of the Certificate
of Formation of Phoenix, as amended and restated, issued by the Division of Corporations of the Delaware Department of State on
or about the date of Closing;
(xxxiv)
a certificate of a manager or officer of Phoenix that:
(A) attaches
a true and complete a copy of the Certificate of Formation of Phoenix, as amended and restated;
(B) attaches
a true and complete copy of the limited liability company operating agreement for Phoenix, as amended and restated;
(C) attaches
a true and complete copy of resolutions of the members and manager of Phoenix that authorizes the execution and delivery of the
Loan Documents which this Agreement contemplates that it will execute and deliver, and that certifies that such resolutions are
in full force and effect; and
(D) verifies
the incumbency and signature of the individual who executes Loan Documents on behalf of Phoenix;
(xxxv)
certified true copies of executed powers of attorneys appointing all attorneys-in-fact who executed Loan Documents on behalf of
Borrower, Holding Company, Pledgor, Allseas or Charterer;
(xxxvi) certifications of the
signatures of all individuals who execute Loan Documents on behalf of Borrower, Holding Company, Pledgor, Allseas, or Charterer;
(xxxvii) legal opinions of counsel
in Bermuda, the British Virgin Islands, and Panama that are acceptable to Lender, in form acceptable to Lender, regarding this
Agreement and the transactions and matters contemplated therein; and
(xxxviii) such other agreements,
instruments, documents, and certifications as Lender may reasonably require.
(b)
Vessel
Documents
. Lender shall have received:
(i) Copies
of the following documents that are duly issued, valid and current with respect to the Vessel:
(A) A five (5) year validity Patente
of Navigation and Radio License for the Vessel issued under the authority of the Republic of Panama;
(B) Document
of Compliance issued under the International Convention for the Safety of Life at Sea, 1974;
(C) International Tonnage Certificate
(ITC) for the Vessel;
(D) International
Safety Management Certificate;
(E) International
Ship Security Certificate; and
(F) Confirmation of Class Certificate
issued by the Vessel's classification society showing the Vessel's assigned class as +A1, BULK CARRIER, (E), +AMS.
(c)
Bulk
Cajun Mortgage Filing
. The Bulk Cajun Mortgage shall have been duly preliminarily filed and recorded at the Public Registry
of Titles and Encumbrances of Vessels of the Panama Maritime Authority, such that it creates a duly perfected mortgage and maritime
lien under the laws of the Republic of Panama, and creates a preferred mortgage on the Vessel (as the term “preferred mortgage”
is defined at 46 U.S.C. § 31301(6)(B)), subject to no Encumbrances thereon other than Permitted Encumbrances. Lender
shall have received a certified copy of a certificate of ownership and encumbrance for the Vessel issued by the Panama Public Register
Office that indicates that Borrower is the sole owner of record of the Vessel, that the Bulk Cajun Mortgage has been duly filed
and recorded at the Panama Public Register Office, and that there are no outstanding Encumbrances of record at the Panama Public
Register Office that pertain to the Vessel.
(d)
Vessel
Items
. Lender shall have received the results of a survey and appraisal of the Vessel, and certified copies of valid and unexpired
documents that indicate that the Vessel satisfies the requirements contained in Section 4.19, in each such case that are satisfactory
to Lender, in the exercise of its sole discretion. There shall have been no change in the condition of the Vessel or in the existence
aboard or condition of any equipment listed in such survey since the date of the surveyor’s inspection thereof, except for
ordinary wear and tear. The Vessel shall have been duly deleted from the Greek registry, free of all Encumbrances. Lender shall
have received verification satisfactory to it in its sole discretion that the Vessel is acceptable to Noranda Alumina LLC under
the COA.
(e)
Financing
Statements
. There shall have been duly filed in all jurisdictions of Lender’s choice forms of Uniform Commercial Code
financing statements pertaining to Borrower, Pledgor, Allseas and Charterer as debtors, with respect to the Collateral, in forms
required by Lender.
(f)
Perfection
.
Borrower, Pledgor, Allseas, and Charterer shall furnish to Lender all other evidence of the perfection of the security granted
in the Collateral Documents in all jurisdictions of Lender’s choice, in form as it may require, and evidence satisfactory
to Lender that all such mortgages, assignments, and other security interests have the priority required of them herein or in the
relevant Loan Documents.
(g)
Insurance
.
Borrower shall have furnished to all underwriters and protection and indemnity associations Notices of Assignment as required herein,
which shall have been duly endorsed on all policies and entries. Lender shall have been furnished with certified copies of all
policies of insurance and protection and indemnity association certificates of entry that Borrower is required to procure and maintain
pursuant to the Loan Documents, along with all required endorsements thereto, a letter of undertaking from the Vessel’s protection
and indemnity association, and a letter from the Borrower’s insurance broker as required herein. Lender shall have been furnished
with certified copies of all policies of insurance that Charterer obtains for which it is required to furnish documents pursuant
to the Charterer’s Earnings Assignment Agreement (or of a certificate of entry in the case of a protection and indemnity
association), and all such documents that Charterer is required to furnish pursuant to the Charterer’s Earnings Assignment
Agreement. Charterer shall have furnished to all underwriters and protection and indemnity associations Notices of Assignment as
required therein, which shall have been duly endorsed on all policies and entries. Borrower and Charterer shall have provided to
Lender duplicate originals so of the Notices of Assignment the forms of which are
Exhibits A
to Exhibits C and D hereof.
(h)
Borrower
Bank Account
. Borrower shall have opened a demand deposit account with HSBC Bermuda Bank Limited for the purpose of receiving
charter hire under the Time Charter (the “
Bulk Cajun Hire Account
”).
(i)
Allseas
Bank Account
. Allseas shall have opened a demand deposit account with HSBC Bermuda Bank Limited for the purpose of receiving
freights and other amounts under the Sub-COA with respect to the Vessel, and for the purpose of receiving from Mid-Ship Group LLC
freights and other amounts paid by Noranda Alumina LLC, its successors and assigns under the COA (the “
Bulk Cajun Freights
Account
”).
(j)
Bulk
Discovery Cross-Collateralization
.
(i) The
First Naval Mortgage granted by Bulk Discovery to Lender on the BULK DISCOVERY dated March 2, 2011 and recorded in the Public Registry
under Microjacket: 35245 and Document: 1904846, on July 28, 2011 (the “
Bulk Discovery Mortgage
”) shall be amended
such that (i) it acknowledges that an Event of Default shall be an event of default of Bulk Discovery under the Bulk Discovery
Loan Agreement, (ii) it secures the Obligations in addition to the Bulk Discovery Obligations, (iii) is substantially similar in
the form of the Bulk Cajun Mortgage after taking into appropriate account the identity of the grantor and the vessel, and (iv)
shall otherwise be in form satisfactory to Lender in the exercise of its sole discretion. Such amendment shall be preliminarily
filed and recorded at the Panamanian Public Registry such that the Bulk Discovery Mortgage, as amended, is a duly perfected mortgage
and maritime lien under the laws of the Republic of Panama, and creates a preferred mortgage on the Vessel (as the term “preferred
mortgage” is defined at 46 U.S.C. § 31301(6)(B)), subject to no Encumbrances thereon other than Permitted
Encumbrances and the Bulk Discovery Mortgage;
(ii) Lender
shall have received a certified copy of a certificate of ownership and encumbrance for the BULK DISCOVERY issued by the Panama
Public Registry that indicates that Bulk Discovery is the sole owner of record of the BULK DISCOVERY, that the Bulk Discovery Mortgage
and the amendment thereto referred to in Section 3.1(j)(i) have been duly filed and recorded at the Panama Public Register Office,
and that there are no other outstanding Encumbrances of record at the Panama Public Register Office that pertain to the BULK DISCOVERY;
and
(iii) Bulk
Discovery shall have furnished documentary evidence satisfactory to Lender that the Lender’s interest insurance on the BULK
DISCOVERY has been increased in amount to the lesser of (A) the sum of the Advance and the outstanding principal amount of the
loan made to Bulk Discovery under the Bulk Discovery Loan Agreement, increased by one hundred twenty percent (120%), or (B) the
amount of the hull and machinery insurance Bulk Discovery is required to maintain under the Bulk Discovery Loan Agreement.
(k)
Fees
and Expenses
. Borrower shall have paid (A) a commitment fee of one percent (1%) of the Advance (the “
Commitment
Fee
”), (B) Lender’s reasonable expenses incurred for inspecting and appraising the Vessel, (C) all filing
and recording fees, and all stamp and other taxes payable with respect to the consummation of the transactions as contemplated
in this Agreement, and (D) Lenders’ reasonable attorneys’ fees and other expenses incurred as of Closing in connection
with the transactions contemplated in this Agreement.
3.2
Compliance
with Loan Documents
. Without limiting the provisions of Section 2.8, it is a condition precedent to the Advance that the
representations and warranties of Borrower and Guarantors contained in the Loan Documents shall be true, and there shall be no
outstanding Default or Event of Default thereunder by any of the Loan Documents, and there shall not exist any Material adverse
condition with respect to a Credit Party that has not been contained in the most recent written information about them, their assets,
their businesses, and their financial condition that has not heretofore been disclosed to Lender in writing.
3.3
Unfulfilled
Conditions Precedent Become Ongoing Covenants
. Conditions Precedent specified in this Article III that remain unfulfilled as
of the disbursement of the Advance shall survive and shall be deemed ongoing covenants of Borrower, the performance of which shall
be due on demand, unless they are waived by Lender in writing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Credit Parties make the following representations,
warranties, and covenants in addition to those which may be contained elsewhere in the Loan Documents. All of the following and
such other representations, warranties, and covenants as such parties shall make in the other Loan Documents are continuing representations
and warranties and shall survive the Closing until all of the Obligations are fully performed:
4.1
Company
Matters
. Borrower, Pledgor, Allseas, Phoenix, and Holding Company are each an exempted company incorporated under the laws
of Bermuda, and possesses the capacity to sue and be sued in its own name and is in good standing under the laws of Bermuda. Charterer
is an exempted company incorporated under the laws of the British Virgin Islands, and possesses the capacity to sue and be sued
in its own name and is in good standing under the laws of the British Virgin Islands. Each Credit Party, and each of Allseas and
Phoenix possesses all requisite power and authority to enter into, execute, deliver, and perform its obligations under this Agreement
and the other Loan Documents to which it is or is to become party pursuant to this Agreement and to take all action as may be necessary
to consummate the contractions contemplated thereby. The entry into, execution, delivery, and performance by each Credit Party,
and each of Allseas and Phoenix, of the Loan Documents to which it is, or, pursuant to this Agreement is to be a party, and the
transactions contemplated thereby, have been duly authorized by all necessary corporate action. This Agreement and the Loan Documents
which this Agreement contemplates that the Credit Parties, Allseas and Phoenix will execute have been duly executed by such Persons
and constitute (or shall constitute when executed and delivered) legal, valid, and binding obligations of such Persons, enforceable
against them in accordance with their terms.
4.2
Legal
Matters
. The execution, delivery, and performance of the Loan Documents to which the Credit Parties, Allseas, and Phoenix are
or are to become party do not and will not (a) violate any provision of any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award presently in effect having applicability to them, or (b) result in a breach of
or constitute a default under any indenture, loan or credit agreement, or any other note, instrument, or agreement for borrowed
money. None of the Credit Parties, Allseas, or Phoenix are in Material violation of or Material default under any such law, rule,
order, writ, judgment, injunction, decree, determination, award, indenture, loan or credit agreement, or other note, instrument,
or agreement for borrowed money. The execution, delivery, and performance of the Loan Documents to which each of the Credit Parties,
Allseas, and Phoenix is or is to become a party do not and will not violate its Constitutional Documents, are within its powers,
and have been duly authorized by all necessary company action.
4.3
Authorization;
Validity and Enforceability
. This Agreement has been duly executed on behalf of Borrower and Guarantors, and constitutes a
valid obligation of each of them, and is enforceable against them in accordance with its terms. Each Loan Document, when executed
and delivered by such of the Credit Parties, Allseas, or Phoenix as are stated to be parties thereto, will be a legal, valid and
binding obligation of such of such Persons as are stated to be party thereto, enforceable against each such party in accordance
with its terms. This Agreement is not subject to any claim, defense or right of offset or recoupment of any kind whatsoever. None
of the Credit Parties, Allseas, or Phoenix has any claims, counterclaims or defenses against the Lender or any other Person that
would or might affect (1) the validity, enforceability or binding nature of any provision of any Loan Document or Bulk Discovery
Loan Document, or (2) the collectability of any of the Obligations or Bulk Discovery Obligations, or any of the obligations
of any Guarantor, Pledgor, Allseas, or Phoenix under the Loan Documents, or of any of the parties to the Bulk Discovery Loan Documents.
4.4
Lines
of Business
. Borrower is engaged exclusively in the ownership and operation of the Vessel for operation in the international
bulk cargo trade, including to and from ports in the United States, and activities reasonably related thereto.
4.5
Government
Approvals
. No Permit from, or filing or registration with any Governmental Authority is or will be necessary to the valid execution,
delivery, or performance of the Loan Documents by the Credit Parties, Allseas or Phoenix.
4.6
Ownership;
Subsidiaries
. All Equity Interests in the Credit Parties are owned as set forth in
Schedule 4.6
. Borrower has no
Subsidiaries other than as set forth in
Schedule 4.6
. Except as has been disclosed to the Lender in
Schedule 4.6
,
there are no outstanding subscription agreements, membership interest or share purchase agreements, warrants, or options for any
Equity Interests in Borrower. Allseas and Phoenix are, directly or indirectly, wholly-owned subsidiaries of Holding Company.
4.7
Financial
Condition
. All financial information heretofore given to Lender by Borrower or any of its Affiliates pertaining to Borrower
or any other Person reasonably and accurately reflected the facts stated therein or represented thereby as of the dates of such
financial information, and was prepared in accordance with GAAP, and was otherwise prepared in a manner that is consistent with
the financial information with which Lender has been provided heretofore, except as otherwise expressly noted therein. At such
dates there were no omissions of material facts or materially erroneous statements therein or therefrom, as determined in accordance
with GAAP.
4.8
Legal
Actions
. There are no actions, suits, or proceedings pending or threatened against any of the Credit Parties or any of their
assets, before any court, administrative or other tribunal, arbitrator or panel of arbitrators, or Governmental Authority except
as set forth in
Schedule 4.8
hereto.
4.9
Title
and Encumbrances
. Borrower has good and merchantable title to the Vessel and to all of the other Collateral except Collateral
owned by Pledgor, Charterer, or Allseas. Pledgor has good and merchantable title to all of the Equity Interest in Borrower, and
all Collateral related thereto. Charterer has good and merchantable title to the Time Charter, all other Collateral described in
the Charterer’s Earnings Assignment Agreement, and all Collateral related thereto. Allseas has good and merchantable title
to the deposit account described in the Allseas Charge on Cash Deposit, and all Collateral related thereto. None of Borrower’s
assets or any of the other Collateral are subject to any Encumbrances except (a) Encumbrances in favor of Lender, (b) Encumbrances
listed in
Schedule 4.9
, and (c) Encumbrances expressly permitted in any Loan Documents (each, a “
Permitted
Encumbrance
”).
4.10
Contracts
.
The Time Charter, Technical Management Agreement, Commercial Management Agreement, Sub-COA, and COA are in full force and effect,
to the knowledge of the Credit Parties no parties thereto are in default thereunder, and no such contracts have been assigned,
assumed, amended, renewed, replaced, or otherwise modified.
4.11
Place
of Business
. Borrower’s, Charterer’s and Allseas offices where they keep their books and records pertaining to
deposit accounts and general intangibles owing or belonging to them, and all other records contemplated in Section 5.9 are located
at the address of Borrower stated in Section 9.4, and their chief executive offices and places of business are located at
the locations stated in
Schedule 4.11
.
4.12
Disclosure
.
All written statements, representations, and warranties made by the Credit Parties, Allseas, and Phoenix in the Loan Documents
are materially true, and do not omit any material facts on the date as of which such information was stated or certified.
4.13
Laws
and Regulations
. The Credit Parties, Allseas, and Phoenix are in compliance with all applicable laws, except for any violation
of which would not subject any Collateral to forfeiture, could not subject any directors, officers, or shareholders of any of the
Credit Parties, Allseas, or Phoenix to imprisonment, and could not have a Material affect on the Credit Parties, Allseas, or Phoenix
. Borrower is not engaged and shall not engage in the business of purchasing or carrying margin stock (within the meaning of Regulation
U issued by the Board of Governors of the Federal Reserve System), or extending credit for the purpose of purchasing or carrying
margin stock. Borrower is not subject to the Investment Company Act of 1940, the Public Utility Holding Company Act of 1935, or
any other law that restricts entering into or performing any obligation of Borrower under any Loan Document.
4.14
Tax
Status
. The Credit Parties and their Subsidiaries have filed all tax returns and reports required to be filed, has made provision
in accordance with GAAP for the payment of all applicable and accrued or accruing foreign, U.S. federal, state and local taxes,
and has paid all such taxes which are due and payable.
4.15
Fiscal
Year
. The Credit Parties’ and their Subsidiaries’ fiscal years for accounting and tax purposes end on December
31.
4.16
Intellectual
Property
. The Credit Parties own or possess the right to use, all of the trademarks, service marks, trade names, and copyrights
that are reasonably necessary for the operation of their businesses, without conflict with the rights of any other Person, and
none own any patents, patent rights, franchises, or licenses or registered trademarks, service marks, trade names, copyrights,
or other intellectual property rights.
4.17
ERISA
Compliance
. No Credit Party or any ERISA Affiliate thereof has any Pension Plan or Multiemployer Plan.
4.18
Environmental
Compliance
.
(a) The
Credit Parties and their Subsidiaries are in compliance in all material respects with the requirements of all applicable Environmental
Laws, the violation of which could have a Material adverse effect on their assets or business.
(b) No
Hazardous Materials have been generated or manufactured on, transported to or from, treated at, stored at or discharged from or
on any real property or from a vessel, owned, leased or operated by any Credit Party or any of their Subsidiaries, in violation
of any Environmental Laws.
(c) None
of the Credit Parties or any of their Subsidiaries have received notice or otherwise learned of any claim, demand, suit, action,
proceeding, event, condition, report, directive, Encumbrance, violation, non-compliance or investigation indicating or concerning
any potential or actual liability or remedial action arising in connection with any non-compliance with or violation of the requirements
of any applicable Environmental Laws, or the presence of, or release or threatened release of any Hazardous Materials on or from
any real property, or from a vessel, owned, leased or operated by any of the Credit Parties or any of their Subsidiaries.
4.19
Vessel
.
The Vessel (a) satisfies the criteria to conduct the business as described in Section 4.4, including the carriage of cargo under
the Sub-COA and COA, (b) measures 11,462 light ship tons and 66,916 deadweight tons, (c) is in class +A1, BULK CARRIER,
(E), +AMS of American Bureau of Shipping, and is so certified, without any outstanding exceptions or recommendations, except for
recommendations, exceptions or Statutory Deficiencies noted by American Bureau of Shipping in its report issued on May 9, 2011,
and (d) has, and Borrower has possession of, all required national and international certificates of financial responsibility,
and all other Permits that are required to conduct the business described in Section 4.4, including all Permits required under
the laws of Panama, Jamaica, and the United States for the carriage of cargo under the Sub-COA and COA.
4.20.
Land
.
Charterer owns no real property in the British Virgin Islands.
ARTICLE V
COVENANTS
So long as any Obligations are outstanding
or Lender has any commitment to make the Advance hereunder, Borrower and Guarantors agree to comply with the following covenants
that are applicable to them unless otherwise agreed to in writing by Lender:
5.1
Title
and Liens
.
(a) At
Closing, Borrower shall be the sole owner of the whole of Vessel and other Collateral except Collateral owned by Pledgor, Charterer,
or Allseas, and shall thereafter retain good and marketable title thereto, subject to no Encumbrances except Permitted Encumbrances;
and
(b) At
Closing, Charterer shall have good and merchantable title to the Time Charter, all Collateral described in the Charterer’s
Earnings Assignment Agreement, and all Collateral related thereto, and shall thereafter retain good and marketable title thereto,
subject to no Encumbrances except Permitted Encumbrances.
5.2
Change
in Business
. Borrower shall not engage in any trade or business in which it is not currently engaged utilizing only the Vessel.
Borrower shall not change the location of its chief executive office or the office where it keeps its books and records pertaining
to accounts and general intangibles owing or belonging to it without giving Lender at least thirty (30) days’ advance written
notice.
5.3
Financial
Covenants
. Borrower shall maintain a ratio of EBITDA to Fixed Charges for each fiscal year of not less than 1.2 : 1. Holding
Company shall at all times have shareholders’ equity of not less than $10,000,000.00, determined in accordance with GAAP.
5.4
Company
Matters
.
(a) Without
the written consent of Lender previously obtained, Borrower shall not, and shall not allow any of its Subsidiaries to:
(i) make
any Investments except for Permitted Investments or Investments otherwise permitted by this Agreement;
(ii) incur
any Indebtedness (other than borrowing funds under this Agreement), make any loans or advances, or extend credit to any Person;
(iii) acquire
any Equity Interests, create any Subsidiaries, or contribute to the equity of any Person;
(iv) declare
or pay any dividends, distribute any equity, or make any other distributions to its shareholders or members;
(v) redeem
any Equity Interests;
(vi) change
its fiscal year or make any material change in its method of accounting;
(vii) merge,
consolidate or amalgamate with or into any other Person, change the legal nature of its form of entity, or change its jurisdiction
of formation;
(viii) liquidate
or dissolve;
(ix) sell
or dispose of any assets other than equipment that is obsolete, or worn out, or no longer necessary for the conduct of Borrower’s
business or the operation of the Vessel, however, if such equipment that is disposed of is equipment of the Vessel, such equipment
shall be concurrently replaced with equipment of equal value;
(x) grant
any Encumbrance on any of its assets except Permitted Encumbrances; or
(xi) incur
or pay any management fees or commissions to any Person other than pursuant to the current express provisions of the Technical
Management Agreement and the Commercial Management Agreement.
(b) Borrower
shall pay all of its obligations as they mature,
provided,
it may contest obligations in good faith if appropriate reserves
therefor are established and maintained consistently with GAAP, and security therefor is posted as may be required by Lender.
5.5
Financial
Statements/Reporting Requirements
. Each of Borrower (on a stand alone basis and on a consolidated basis as to it and its Subsidiaries,
if any), Holding Company (on a consolidated basis) shall deliver to Lender, in form and detail satisfactory to Lender, the following
information and documents, which shall be accurate and complete in all material respects:
(a) As
soon as available but no later than seventy-five (75) days after the end of the each of its fiscal quarters, complete copies of
its financial statements, which shall include its balance sheet, income statement, a statement of changes in equity, and a statement
of cash flows for the preceding fiscal quarter, prepared in a level of detail as reasonably required by Lender, certified by its
chief financial officer or a representative acceptable to Lender as being complete and correct, and fairly presenting its and their
respective financial conditions and the results of its and their respective operations in all material respects;
(b) As
soon as available but no later than one hundred eighty (180) days after the end of the each of their fiscal years, complete copies
of its financial statements, which shall include its balance sheet, income statement, a statement of changes in equity, and a statement
of cash flows for the preceding fiscal year, prepared in a level of detail as reasonably required by Lender, certified by its chief
financial officer or a representative acceptable to Lender as being complete and correct, and fairly presenting its and their respective
financial conditions and the results of its and their respective operations in all material respects, and which, as to Holding
Company, shall have been audited by an independent certified public accountant that has been selected with the written approval
of Lender;
(c) On
each September 1 and March 1 of each year, a Certificate of Compliance executed by an officer Borrower (or its authorized representative
approved by Lender) in substantially the form attached hereto as
Exhibit K
;
(d) Within
thirty (30) days after they are due to be filed under applicable law, as extended pursuant to any valid extensions, copies of the
income tax returns for Borrower and Guarantors in each relevant jurisdiction for each of their fiscal years ending after the date
of this Agreement, and, if filing extensions are requested, Borrower and Guarantors shall furnish Lender forthwith with copies
of all related extension applications and approvals;
(e) Within
ten (10) days after becoming aware of any of the following, written notice to Lender of:
(i) all
Material breaches of contract to which Borrower is a party,
(ii) any
Material disputed account receivable,
(iii) the
institution of any litigation or arbitration to which Borrower is a party or which affects any of its assets (including by means
of counterclaim, cross claim, impleader, or interpleader), in which the claim against the Borrower or a Guarantor is in excess
of $1,000,000.00,
(iv) the
revocation, modification, rescission or failure to renew of any Permit issued to Borrower or the Vessel,
(v) the
occurrence of any Default or Event of Default, together with a detailed statement of the steps being taken by the defaulting party
to deal with any such Default or Event of Default,
(vi) any
change in the jurisdiction of a Credit Party’s formation, or location of Borrower’s or Charterer’s chief executive
office or the office where it keeps its books and records pertaining to accounts and general intangibles owing or belonging to
it, or of the establishment of any new, or the discontinuance of any existing, place of business of Borrower or Charterer,
(vii) the
death of Edward Coll or Claus Boggild, or the disablement of one them such that he may no longer effectively participate in the
management of Holding Company,
(viii) the
occurrence of damage to the Vessel in excess of the amount of the deductible or franchise amount of the hull and machinery insurance
thereon; a total loss of the Vessel occurs; or an incident of salvage or general average occurs with respect to the Vessel,
(ix) after
receiving knowledge of a Requisition of the Vessel, or knowledge that a Governmental Authority intends to effect a Requisition
of the Vessel (which shall be accompanied by a copy of the relevant communications received),
(x) after
the occurrence of any discharge from the Vessel of any Hazardous Material into the environment,
(xi) after
receipt of any notice from any Governmental Authority of any illegal act, omission, or condition by or concerning the Vessel or
its officers, crew, or cargoes,
(xii) if
any material requirement of any Governmental Authority or classification society with respect to the Vessel is made that is not
complied with, or any Governmental Authority or classification society issues a recommendation or exception with respect to a certification
or Permit pertaining to the Vessel that is not complied with or rectified (which shall be accompanied by a copy of the relevant
communications received), or if any classification certificate for the Vessel is terminated,
(xiii) if
the Vessel is Seized,
(xiv) the
occurrence of an Event of Default or any event or condition which, with the passage of time, the giving of notice, or both, would
become an Event of Default, and
(xv) any other matter which
has resulted or might result in a Material adverse change in the financial condition or business of Borrower.
(f) Such
other statements, lists or property and accounts, budgets, forecasts, reports or other financial information as are regularly made
or maintained by Borrower as Lender may from time to time request.
Borrower shall provide to Lender copies of all Form CG-2692
accident reports (and all similar reports filed outside the United States) within five (5) days after submitting them to the United
States Coast Guard, and copies of all periodic classification society, damage, and insurance surveys that are prepared for the
Vessel.
5.6
Fiscal
Year
. No Credit Party shall change its fiscal year, nor shall it permit any Subsidiary thereof to do so, without the advance
written consent of Lender.
5.7
Accuracy
of Financial Information
. All financial information hereafter given to Lender by Borrower, any Guarantor, or any accountant,
or other professional therefor pertaining to Borrower, any Guarantor, or any Subsidiary thereof shall reasonably and accurately
reflect the facts stated therein or represented thereby as of the dates of such financial information subject to, in the case of
non-fiscal year-end information, normal year-end adjustments, and shall be prepared in accordance with GAAP and otherwise in a
manner that is consistent with the financial information with which Lender has been provided heretofore. There shall be no omissions
of material facts therefrom, determined in accordance with GAAP, and there shall be no material and erroneous statements therein,
determined in accordance with GAAP.
5.8
Access
.
The Borrower and Guarantors, shall cause their presidents, chief executive officers, chief financial officers, and authorized representatives
(and Holding Company shall cause the presidents, chief executive officers, chief financial officers, and authorized representatives
of Allseas and Phoenix, and the Persons with custody of or control over the books and records referred to in Section 5.9 pertaining
to Allseas and Phoenix), to be available during customary office hours at least once each fiscal quarter for a conference with
a representative of Lender for the purpose of discussing the financial affairs of Borrower (and any Subsidiaries of Borrower that
may exist from time to time), Guarantors, Allseas, Phoenix.
5.9
Accounting
Records
. Borrower and Guarantors shall maintain, and shall cause their Subsidiaries to maintain, adequate books, accounts and
records of all of their financial transactions and their assets and businesses, and prepare all financial statements, all in accordance
with GAAP and in compliance with the regulations of every Governmental Authority or other regulatory body having jurisdiction over
it or them or its or their businesses. Borrower and Guarantors shall permit, and cause their Subsidiaries to permit, employees
or agents of Lender at such reasonable times as Lender may request to inspect their assets, including without limitation regular
collateral audits, and to examine, audit, and make copies and memoranda of its and their documents, books, accounts and records,
including those kept in electronic form. None of Borrowers or Guarantors shall make or permit any material change in their accounting
policies or reporting practices, and shall ensure that none of their Subsidiaries do so, except (i) as required by generally
accepted accounting principles, or (ii) with the prior written consent of the Lender, which consent shall not unreasonably
be withheld.
5.10
Status
.
Borrower and Guarantors shall maintain, and shall cause their Subsidiaries to maintain, in full force and effect their corporate
existences, and shall maintain their qualifications to do business as foreign corporations in each jurisdiction in which the character
of the assets owned by them or the nature of their activities make such qualification necessary to avoid a material adverse effect
on them.
5.11
Condition
of Assets
. Borrower and Guarantors shall maintain all of its assets that are necessary or useful in the proper conduct of its
business in good working order and condition, normal wear and tear and excepted.
5.12
Legal
Compliance
. Borrower and Guarantors shall, and shall cause each of their Subsidiaries to, comply with the requirements of all
applicable law, and judicial, arbitral, and governmental rules, orders, writs, judgments, injunctions, decrees, determinations
and awards. Borrower and Charterer bear sole responsibility for compliance with or obtaining all Permits as may be necessary under
applicable contracts and law with respect to the security granted by them to Lender in the Collateral.
5.13
ERISA
Plans
. No Credit Party shall have, or permit any Subsidiary thereof to have any Pension Plan or Multiemployer Plan.
5.14
Taxes
.
Prior to the date on which they became delinquent, Borrower and Guarantors shall duly pay, and discharge, and shall cause each
of their Subsidiaries to pay and discharge, all taxes, duties, levies, imposts, deductions, assessments, fees, withholdings, user
fees, and other governmental charges imposed upon them or upon their income or profits, upon its or their activities, or upon any
assets belonging to it or them,
provided,
such Persons may contest in good faith any such claims and taxes, duties, levies,
imposts, deductions, assessments, fees, withholdings, user fees, and other governmental charges if appropriate reserves therefor
are established and maintained consistently with GAAP,
and provided, further,
if an Encumbrance on Collateral arises in
respect thereto, Borrower or Guarantors shall post, or shall cause their relevant Subsidiaries to post, security sufficient to
ensure that the Governmental Authority asserting the claim, or any successor or assign thereof, will not enforce an Encumbrance
against the Collateral.
5.15
Permits
.
Borrower and Charterer shall obtain and maintain in full force and effect all of its Permits in effect on the date hereof or at
Closing, and such others as are necessary to allow it to conduct the business contemplated in Section 4.4. Borrower and Charterer
shall not operate, and shall not allow the Vessel to be operated, without a Permit in violation of applicable law. None of Borrower
or Charterer shall sell, subject to any Encumbrance, or otherwise transfer any such Permit or any right, title, or interest therein,
thereto, or thereunder.
5.16
Intellectual
Property
. Borrower and Guarantors shall not, sell, transfer, encumber, or otherwise dispose of any of its or their rights,
title, or interest in any trademarks, service marks, trade names, copyrights, patents, patent rights, franchises, licenses and
other intellectual property rights and assets that are reasonably necessary for the operation of its or their businesses, except
transfers of such property to Borrower.
5.17
Arranger
Fee
. Borrower shall fully and timely pay all arranger and broker fees, commissions, and expenses incurred in connection with
this loan transaction, including those of Perigee Finance Group LLC.
ARTICLE VI
VESSEL PROVISIONS
On, and from and after Closing, Borrower
represents, warrants, and agrees as follows (and shall cause all managers and operators of the Vessel to ensure compliance with
the following provisions on behalf of Borrower):
6.1
Vessel
Registry
. Borrower shall keep the Vessel fully documented under the Panamanian registry, including all additional certifications
required for vessels of its type, tonnage and area of operation, under the laws of and international conventions approved by the
Republic of Panama.
6.2.
Ownership
and Encumbrances
. Borrower is the sole owner of the whole of the Vessel free and clear of all Encumbrances except Permitted
Encumbrances, and is lawfully possessed of the Vessel and warrants and shall defend its title to and possession thereof and every
part thereof for the benefit of Lender against the claims and demands of all persons whomsoever. No Encumbrances shall exist hereafter
against the Vessel except for Permitted Encumbrances, and none of Borrower or the master of the Vessel nor any other Persons have
or shall have any right or authority to create, incur or permit to be placed or imposed upon the Vessel, or any part of any of
the Vessel, any Encumbrance whatsoever other than Permitted Encumbrances. Borrower shall pay and discharge, or cause to be paid
and discharged, when due and payable, from time to time, all Encumbrances on the Vessel except when the continuation of such an
Encumbrance is otherwise permitted in this Agreement.
6.3.
Transfers
.
There are no outstanding charters, contracts of affreightment, or other rights to possession of or services of the Vessel other
than as listed in
Schedule 4.9
. Neither Borrower nor Charterer shall sell, convey, mortgage, or charter the Vessel
or any portion thereof, or transfer any interest therein in any manner (including by grant of an option, right of first refusal,
or restriction on transferability), without the written consent of Lender being first obtained (except that Permitted Encumbrances
are permitted),
provided,
(a) Charterer may enter into sub-time charters, voyage charters, or contracts of affreightment
that expire not later than March 30, 2012, for employment of the Vessel in the international bulk cargo trade, and (b) sub-time
charters, voyage charters, and contracts of affreightment may be entered into by Charterer with the prior written consent of Lender
granted or withheld in the exercise of its sole discretion. No such written consent to any such sale, conveyance, mortgage, charter,
or transfer shall be construed to be a waiver of this provision in respect to any subsequent proposed sale, conveyance, mortgage,
charter, or transfer. Borrower shall repay all of the Obligations concurrently with a sale or other transfer of title to the Vessel,
and shall simultaneously apply all other proceeds thereof toward the Bulk Discovery Obligations. Each other mortgage, charter,
or transfer shall be subject to the provisions of the Bulk Cajun Mortgage and the lien it creates.
6.4
Lawful
Operation
. The Vessel and its operations shall at all times comply with (a) all laws of the Republic of Panama, all applicable
treaties and conventions, and all applicable rules and regulations thereunder, as in effect from time to time, and (b) all
laws and regulations applicable to the Vessel and its operation in all trades and locations in which it operates or is located
from time to time; and the Vessel shall have on board as and when required thereby valid certificates of inspection and all other
certificates evidencing compliance therewith. Borrower shall obtain and file all certificates of financial responsibility as legally
required in all jurisdictions in which the Vessel is located from time to time. Borrower shall prepare and file all pollution prevention
and contingency plans and take all other steps required under all applicable laws concerning the prevention and cleanup of environmental
pollution, and the regulation of shipowners and vessels with respect to environmental matters. The Vessel shall not be abandoned,
and shall not carry any passenger, cargo, or other matter that will expose it to penalty, forfeiture or capture. Borrower shall
ensure that all reasonable precautions are taken to ensure that no illegal drugs or drug paraphernalia are used or kept on board
the Vessel, and shall otherwise comply with the anti-drug policies of the United States Government.
6.5
Operation
.
Unless otherwise agreed to in writing by Lender, granted or withheld in the exercise of its sole discretion, Borrower and Charterer
shall ensure that the Vessel shall on or before March 30, 2012, and at all times thereafter, be dedicated to the performance of
the Sub-COA and the COA, shall not be taken to a zone that is a declared war zone by any government or by any of the Vessel’s
war risk underwriters, and shall not be abandoned in a port or place outside the United States. The Vessel satisfies, and shall
continue to satisfy, the objective requirements for it to be utilized under the Time Charter, Sub-COA and COA, all of which are
in full force and effect.
6.6
Maintenance
.
The vessel has a valid classification certificate issued by the American Bureau of Shipping, in classification +A1, BULK CARRIER,
(E), +AMS without outstanding exceptions or recommendations, except for recommendations, exceptions or Statutory Deficiencies noted
by American Bureau of Shipping in its report issued on May 9, 2011, or any subsequent recommendations, exceptions or Statutory
Deficiencies, which are removed by American Bureau of Shipping not later than the end of the dry docking of the Vessel
that is currently scheduled,
provided,
the dry docking is completed and American Bureau of Shipping so confirms in writing
the removal of all recommendations, exceptions or Statutory Deficiencies before the earlier of the date the Vessel goes into service
under the COA or March 30, 2012, or such later date as Lender agrees to in writing. Borrower shall, at all times, and without cost
or expense to Lender, maintain such classification status, and maintain and preserve the Vessel as required in all applicable manufacturer’s
manuals, and in a safe and seaworthy condition, and in such running order and repair as would be expected of a prudent, first-class
shipowner, and in a condition, working order and repair at least as good as such Vessel is in on the date of this Agreement, ordinary
wear and tear excepted. Borrower shall not make or permit to be made any material changes to the structure, type or speed of the
Vessel, or to its propulsion system, or make any alterations to the Vessel that would change its registered length, breadth, or
depth, or its gross, net, deadweight, or lightship tonnages, without first receiving written approval from Lender. Borrower may
remove equipment from the Vessel free and clear of the liens of the Bulk Cajun Mortgage if (i) it simultaneously replaces
such equipment with equipment of the same or greater value, (ii) it causes all damage to the Vessel caused by such removal
and replacement to be promptly repaired, and (iii) such removal and replacement will not adversely affect the fair market
value of the Vessel. Borrower shall cause the Vessel to be surveyed and placed in dry dock when and as is required in order for
it to maintain its classification status, and to maintain all certificates of inspection and other certifications that is now has
or is required to have in order to pursue its intended trades.
6.7
Access
and Surveys
. At all times Borrower shall afford Lender or its authorized representatives and surveyors full and complete access
to the Vessel for the purpose of inspecting it and its cargoes, and papers, and making copies of such papers, and shall provide
to Lender, within seven (7) days after being so requested, copies of all contracts, charterparties, policies of insurance, evidence
of club entries, and all other documents (including records that are in electronic form) pertaining to the Vessel or its operations.
Borrower shall provide to Lender prompt advance notice of all emergency dry-dockings of the Vessel, and fourteen (14) days advance
written notice of all non-emergency dry-dockings of the Vessel. If requested by Lender Borrower shall instruct the Vessel’s
classification society to make available to Lender all of its records pertaining to the Vessel (including records that are in electronic
form), and to provide Lender with copies of all of the classification society’s communications with Borrower, its managers
or agents with respect to the Vessel.
6.8
Seizure;
Requisition
. If the Vessel shall be Seized, Borrower, within thirty (30) days thereafter, shall cause the Vessel to be irrevocably
released and all Encumbrances thereon, other than the lien of the Mortgage, to be discharged by payment, performance, or the posting
of security therefor. In the event any of the foregoing occurs, Borrower agrees forthwith to notify Lender by facsimile or telegram,
confirmed by letter, at its address set forth in Section 9.4. In the event the Vessel shall be Seized and shall not be released
therefrom within thirty (30) days thereafter, Borrower hereby irrevocably authorizes and empowers each officer of Lender in the
name of Borrower (as attorney-in-fact, coupled with an interest) to apply for and receive possession of the Vessel, with all rights
and authority that Borrower might have, possess and exercise in any such event, but such officers shall not be under any obligation
to act in connection with the rights given in this Section. Borrower also authorizes and empowers Lender and the officials above
specified or their appointees, or any of them, to appear in the name of Borrower in any court of any country or nation of the world
where a complaint
in rem
or libel is pending against the Vessel, or where the Vessel is Seized or is subject to Seizure
and to take such actions as may seem proper toward the defense of such suit and the discharge of any or all Encumbrances thereon
or other relevant judgment or claim, and all expenditures made or so incurred shall be obligations due from Borrower to Lender,
shall be secured by the liens of the Bulk Cajun Mortgage and Bulk Discovery Mortgage, and shall accrue interest at the Interest
Rate or Default Rate, as in effect from time to time.
6.9
Insurance
.
Borrower shall obtain insurance for its assets and liabilities as would be customary for a business of its type. Without limiting
the foregoing:
(a) Borrower
shall, while any of the Obligations or Bulk Discovery Obligations are outstanding, or Lender has any commitment to advance funds
under this Agreement (whether or not there is a request for an advance outstanding), obtain and maintain the following insurances
with respect to the Vessel:
(i) Marine
hull and machinery insurance, and war risk hull and machinery insurance, in an amount not less than the full commercial value of
the Vessel, on a charter-free and lien-free basis, determined in a manner approved by Lender (which value shall not at any time
be an amount less than one hundred twenty percent (120%) of the principal amount of the Obligations outstanding from time to time);
(ii) Protection
and Indemnity insurance purchased through a protection and indemnity association that is a member of the International Group of
P & I Clubs, including, but not limited to, coverage for crew injuries, pollution liability including clean-up costs, wreck
removal, 4/4ths collision liability, third party bodily injury and property damage insurance and war risk protection and indemnity
insurance, in such amounts per occurrence as is currently available from the protection and indemnity associations that are members
of the International Group of P & I Clubs;
(iii) Workers
Compensation and Employers Liability insurance for each state in or from which the Vessel shall operate, if and as required by
law, and United States Longshore and Harbor Workers’ Compensation Act insurance for statutory amounts;
(iv) A
separate policy of Lender’s Interest Insurance with Lender as the Named Insured with respect to loss of or damage to the
Vessel in an amount at least equal to the lesser of (A) one hundred twenty percent (120%) of the principal amount of the Obligations
and Bulk Discovery Obligations that are outstanding from time to time, and (B) in the amount required in Section 6.9(a)(i);
and
(v) Insurance
as required by law, and insurance against any other risks to the Vessel or liabilities that could give rise to liens thereon as
from time to time required by Lender.
Borrower shall obtain and maintain all such insurances at its
own expense, and shall timely pay all premiums, dues, calls, assessments and other amounts and expenses thereunder, and issue or
procure all guaranties required by protection and indemnity associations with respect thereto. In the event Borrower fails to pay
such amounts, Lender shall have no responsibility to make any such payments, and no payment or undertaking to pay any such amounts
by Lender shall relieve the Borrower of its responsibility to make such payments or its responsibility under Section 7.2(c)
to reimburse Lender for all such amounts that Lender pays.
(b) All
policies of insurance shall be maintained in forms approved by Lender, effected by an insurance broker approved by Lender, and
contain insuring covenants, deductible or franchise clauses, Lender clauses, and other terms and conditions satisfactory to Lender.
No policy shall be materially amended or terminated without obtaining the prior written consent of Lender. All policies, binders
and interim contracts of insurance shall provide for fourteen (14) days’ prior written notice to be given to Lender by the
underwriters in the event of amendment or cancellation, except in the event of cancellation for nonpayment of premiums, in which
event Lender shall be furnished with not less than ten (10) days’ notice of cancellation, and in the event of cancellation
of war risk insurance, in which event Lender shall be furnished with the same advance written notice of cancellation as the relevant
policies shall provide for notices to Borrower. Certifications of all insurances required hereunder, including certified copies
of protection and indemnity association certificates of entry shall be provided to Lender forthwith upon placement of all such
insurances. Certified copies of the originals of all policies, amendments, endorsements, letters of undertaking, binders and other
interim insurance contracts shall be deposited with Lender promptly upon placement thereof, and the originals thereof shall be
furnished to Lender promptly on request. Evidence of renewal of all insurances shall be furnished to Lender not less than fourteen
(14) days prior to the expiration of all of such insurances. Borrower shall furnish evidence satisfactory to Lender whenever it
may require that all premiums, dues, assessments and other charges with respect to the insurance required herein have been fully
paid. At the option of Lender, and without waiver of any default with respect thereto, any policies of insurance required herein
and not timely obtained and properly maintained by Borrower may be obtained and maintained by Lender at Borrower’s expense.
(c) Borrower
shall provide to all underwriters of the insurances a Notice of Assignment in substantially the form attached hereto as
Exhibit
L
, which shall be endorsed on all relevant polices and protection and indemnity association entries. All insurances shall name
Lender as an additional insured in addition to Borrower and as sole loss payee, pursuant to endorsements in substantially the form
attached hereto as
Exhibit M
(including a customary protection and indemnity association letter of undertaking the customary
form issued by members of the International Group of P & I Clubs, except as to: (i) Lender’s interest insurance,
as to which Lender shall be the sole insured and sole loss payee, and (ii) the insurance required in Section 6.9(a)(iii)
and 6.9(a) (v). No assured or loss payees shall be added to any policy without obtaining the advance written consent of Lender.
All insurance required in Section 6.9 shall be endorsed to (i) waive the underwriters’ rights of subrogation against
Lender, (ii) to provide that all such insurance is primary and non-contributory with respect to insurances placed by Lender,
and (iii) provide that Lender will not be responsible for premiums, calls, supplementary calls or similar payments. Concurrently
with each placement and, not more than fourteen (14) days before expiration of an insurance coverage that is required herein, renewal
or replacement of that insurance, Borrower shall provide to Lender a Brokers Opinion Letter in substantially the form attached
hereto as
Exhibit N
confirming that the insurance placed by such broker conforms to the insurance requirements herein. in
a customary form reasonably acceptable to Lender.
(d) In
the event of an actual total loss, a constructive total loss, or a compromised, agreed, or arranged total loss of the Vessel, Lender
shall apply insurance payments received on account of such loss as provided in Section 17 of the Bulk Cajun Mortgage. Lender shall
have the sole right to tender abandonment of the Vessel to its underwriters on behalf of itself and Borrower. If there has not
occurred and there is not continuing an Event of Default at the time of tender of payment by the underwriters, in the event of
any other loss payable in an amount less than $500,000.00 under any hull and machinery insurance, war risk hull and machinery insurance,
or other insurance in respect of loss of or damage to the Vessel or any of its appurtenances, or sue and labor expenses or defense
costs insured thereunder, Lender shall instruct the underwriters to pay directly for the covered repairs, replacements, expenses,
or costs, or to reimburse Borrower or Lender therefor. If there has not occurred and there is not continuing an Event of Default,
and the Vessel is not an actual total loss, a constructive total loss, or a compromised, agreed, or arranged total loss, in the
event of any other loss payable in an amount equal to or greater than $500,000.00 under any hull and machinery insurance, or war
risk hull and machinery insurance, or increased value insurance in respect of loss of or damage to the Vessel or any of its appurtenances,
or sue and labor expenses or defense costs insured thereunder, in the exercise of its sole discretion, Lender shall either instruct
the underwriters to pay directly for the covered repairs, replacements, or sue and labor expenses or defense costs insured thereunder
or to reimburse Borrower or Lender therefor, or Lender may receive all such insurance proceeds and use them to pay directly for
the repairs, replacements, or sue and labor expenses or defense costs insured thereunder, or to reimburse Borrower or Lender therefor.
All claims for unrepaired damage shall be paid to Lender, which shall apply them as provided in Section 17 of the Bulk Cajun Mortgage.
In the event of any loss payable under any hull and machinery insurance, war risk hull and machinery insurance, or increased value
insurance not provided for above in this Section 11(b), in the exercise of it is sole discretion, Lender may instruct the underwriters
to pay directly for the covered repairs, replacements, expenses, or costs, or to reimburse Borrower therefor, or Lender may, in
the exercise of its sole discretion, receive all such insurance proceeds defray its own covered expenses and apply the balance
as provided in Section 17 of the Bulk Cajun Mortgage. For the purpose of this clause, all hull and machinery, war risk hull and
machinery, and increased value insurance proceeds payable with respect to an occurrence and its consequences shall be deemed to
be proceeds of a single loss event.
(e) In
the event that insurance moneys become due under any protection and indemnity insurance or other liability insurance coverage,
including coverage for salvage, general average, or other liabilities covered by the relevant hull insurance policy, if there has
not occurred and there is not continuing an Event of Default at the time of tender of payment by the underwriters or protection
and indemnity association, Lender shall instruct the underwriters to pay Borrower such insurance proceeds as may be due to Borrower
on account of any liability covered by such insurance if Borrower has already paid the liability, or to pay the party in respect
of whom the liability was incurred, in exchange for an appropriate release of liability with respect thereto. At such time of tender
of payment, if an Event of Default has occurred and is continuing in the exercise of Lender’s sole discretion and in lieu
of the foregoing, Lender shall be entitled to receive such insurance proceeds and may apply the proceeds thereof toward the discharge
or indemnification or reimbursement for the payment of the relevant liability, and the balance of the proceeds shall be applied
as provided in Section 17 of the Bulk Cajun Mortgage.
(f) Borrower
shall promptly file all required and customary proofs of loss and claims under all insurances, and on any failure by Borrower to
do so, Lender may do so on its and Borrower’s behalf, and is hereby irrevocably appointed as Borrower’s attorney-in-fact,
coupled with an interest, to do so.
(g) In
the event the Vessel is Seized, Lender may, in lieu of the foregoing Sections 6.9(d) and (e), in the exercise of its sole
discretion, agree with any surety executing a surety bond releasing the Vessel from such attachment or arrest to hold for the benefit
of such surety any or all insurance proceeds under the policies of insurance on the Vessel as collateral security to indemnify
such surety against liability under such bond.
(h) Borrower
shall not do any act or voluntarily suffer or permit any act to be done whereby any insurance shall or may be impaired, suspended,
or canceled, and shall not suffer or permit the Vessel to engage in any voyage or to engage in any trade or activity not permitted
under the policies of insurance at the time in effect without first covering the Vessel for such voyage, trade or activity with
insurances of the types, obtained from underwriters, and in the forms and amounts herein required.
(i) The
acquiescence by Lender in any noncompliance in the placement of insurance in one or more instances shall not establish a consent
or course of dealing with respect to such noncompliance in any other instances.
6.10
Cargo
.
There is no cargo aboard the Vessel as of the date hereof, and none will be loaded aboard the Vessel until after Closing.
ARTICLE VII
DEFAULT AND REMEDIES
7.1
Default
.
The occurrence of each of the following shall constitute an “
Event of Default
” as such term is used in this
Agreement:
(a) Borrower
fails to make any payment of principal, interest or any other amount, as and when it becomes due to Lender under the Loan Documents,
including the Commitment Fee;
(b) any
representation or warranty made or to be made by Borrower or any other Person (other than Lender) in any Loan Document was false
or incorrect in any material respect when made or deemed made under the provisions of any Loan Document;
(c) any
of the Loan Documents, for any reason, cease to be in full force and effect or are declared to be null and void; or any Person
other than Lender that has executed a Loan Document denies that it has any or further liability or obligation under any Loan Document
which it has executed (or any provisions thereof) before full performance of all obligations thereunder;
(d) a
Credit Party, Phoenix, or Allseas: (i) applies for or consents to or becomes subject to the appointment of a receiver, trustee
or liquidator of itself, or of all or any part of its assets, or any Collateral, or becomes subject to an administration order,
(ii) makes a general assignment for the benefit of creditors, (iii) becomes or is adjudicated insolvent, (iv) commences
any Debtor Relief Proceeding in any jurisdiction, (v) becomes subject to any involuntary Debtor Relief Proceeding in any jurisdiction
and such proceeding is not dismissed within sixty (60) days after it is commenced, (vi) enters into an arrangement with a
group of creditors for the restructuring of its obligations, (vii) shall fail to pay its debts generally as they become due,
(viii) if a corporation, limited liability company, or partnership, merges or consolidates with any Person, (ix) commences
a dissolution or liquidation proceeding or is dissolved or liquidates, (x) becomes the subject of any involuntary dissolution
or liquidation proceeding and any such proceeding is not dismissed within sixty (60) days after it is commenced, (xi) commences,
agrees to or is or becomes subject to any action taken for the purpose of effectuating any of the foregoing, (xii) changes
its name, and (xiii) if a corporation, limited liability company, or partnership, reorganizes, reclassifies or recapitalizes
its capital stock or any membership or partnership interests in it;
(e) the
shareholders, directors, or members of any Credit Party, Phoenix or Allseas adopts a resolution authorizing or approving of any
of the actions described in Section 7.1(d) with respect to a Credit Party;
(f) Borrower issues, redeems, purchases, retires or
otherwise acquires any shares of any class of any Equity Interest in itself, enters into any subscription agreement or other agreement
for the issuance of any shares in itself, or grants or issues any warrant, right or option pertaining thereto, or incurs any debt
or obligations or issues any security that is convertible into any of the foregoing;
(g) any
judgment shall be entered against a Credit Party, Phoenix, or Allseas in a Material amount that is not covered by liability insurance
with a deductible clause that has been approved by Lender in writing, and such judgment is not effectively stayed and remains undischarged
and unbonded for thirty (30) days;
(h) without
Lender’s prior written consent any change shall occur in the legal structure of a Credit Party, Phoenix, or Allseas;
(i) A
Credit Party, Phoenix or Allseas is or becomes in default under any loan agreement, promissory note, guaranty or other instrument
or agreement with or in favor of Lender or any Affiliate of Lender, or any Indebtedness of any third party to Lender or any Affiliate
of Lender that is guaranteed by Borrower or a Guarantor is not paid in full when due, whether on maturity, upon acceleration, or
otherwise; or Borrower or a Guarantor is or becomes in default under any preferred or other mortgage, deed of trust, assignment,
or other security agreement that secures any of its obligations with respect to any of the foregoing;
(j) any
other Indebtedness of Credit Party, Phoenix or Allseas that is not subject to Section 7.1(i) in any Material amount is or
becomes due prematurely by reason of default; Borrower fails to make any Material payment thereunder on or before the due date
for such payment; or the security for any obligation of Borrower or a Guarantor, or any security therefor, becomes enforceable
against any Collateral or against a Material amount of any of its assets;
(k) without
the written consent of the Lender (i) Claus Boggild does not own at least sixty-seven percent (67%) of the Equity Interest
in, and hold at least sixty-seven percent (67%) of the voting power in Lagoa Investments Ltd., and Edward Coll, Anthony Laura,
and Lagoa Investments Ltd. do not collectively own at least fifty-one percent (51%) of the Equity Interest in, and hold at least
fifty-one percent (51%) of the voting power in Holding Company; (ii) Holding Company does not own all of the Equity Interest
in and hold all of the voting power in Bulk Partners Holding Company Bermuda Ltd, a Bermuda company; (iii) Bulk Partners Holding
Company Bermuda Ltd, a Bermuda company does not own all of the Equity Interest in and hold all of the voting power in Pledgor;
(iv) Pledgor does not own all of the Equity Interest in and hold all of the voting power in Borrower; and (v) Holding
Company does not, directly or indirectly, own all of the Equity Interest in and hold all of the voting power in Charterer and Allseas;
provided,
the death of any of Claus Boggild, Anthony Laura or Edward Coll shall not cause an Event of Default under this
Section 7.1(k) if there is not an Event of Default outstanding or that results therefrom under Section 7.1(l);
(l) any
of Claus Boggild, Anthony Laura, or Edward Coll becomes sufficiently disabled that he or they cannot effectively participate in
the management of Holding Company, or dies, and at least one of them, or two of them collectively, who are alive and not so disabled,
does not hold voting control over fifty-one percent (51%) of the shares of Holding Company;
(m) any
judicial or nonjudicial foreclosure of or other realization upon any pledge or assignment of, or other security interest in, or
other encumbrance of any shares of the capital stock of Borrower shall be commenced or occur;
(n) any
of the Time Charter, Technical Management Agreement, Commercial Management Agreement, Sub-COA (in respect of the Vessel), and COA
(in respect of the Vessel) have been or are assigned, assumed, amended, renewed, replaced, or otherwise modified, or terminated
without the prior written consent of Lender;
(o) a
material default by Borrower occurs under any of the Time Charter, Technical Management Agreement, Commercial Management Agreement,
or by Charterer or Phoenix under the Sub-COA (in respect of the Vessel), or by Phoenix under the COA (in respect of the Vessel)
or any such contract is terminated prematurely;
(p) Any
party defaults under the Funds Deposit Agreement or any Manager’s Undertaking;
(q) any
of Credit Parties or their Subsidiaries has a fiscal year-end that does not end on December 31;
(r) the
Vessel or the BULK DISCOVERY becomes subject to a Seizure and is not released therefrom within thirty (30) days thereafter in the
manner required in the applicable mortgage or mortgages granted by Borrower or Bulk Discovery;
(s) the
Vessel or the BULK DISCOVERY becomes an actual total loss, or a constructive, compromised, arranged, or agreed total loss, or there
is a Requisition of the Vessel, and the Obligations are not paid in full and the balance of the proceeds, if any, is not applied
to the Bulk Discovery Obligations, within one hundred twenty (120) days thereafter;
(t) any
Permit required in Section 4.19 or 5.15 is materially modified, becomes invalid, or is terminated;
(u) the
occurrence of illegal activity which in the opinion of the Lender caused the forfeiture of or which subjects to forfeiture the
Vessel or any other Collateral;
(v) the
Vessel or other Collateral is placed in danger of being seriously damaged or becoming a total loss and is not removed from such
danger by Borrower forthwith;
(w) Pledgor
does not or shall not have good and merchantable title to all of the shares of the Equity Interest in Borrower, and all Collateral
related thereto, and does not have or shall not hereafter retain good and marketable title thereto, subject to no Encumbrances
except Permitted Encumbrances;
(x) Allseas
does not or shall not have good and merchantable title to the deposit account described in the Allseas Charge on Cash Deposit,
and all Collateral related thereto, and does not have or shall not hereafter retain good and marketable title thereto, subject
to no Encumbrances except Permitted Encumbrances;
(y) Borrower
does not or shall not have good and merchantable title to the deposit account described in the Borrower Charge on Cash Deposit,
and all Collateral related thereto, and does not have or shall not hereafter retain good and marketable title thereto, subject
to no Encumbrances except Permitted Encumbrances;
(z) without
Lender’s prior written consent, any amounts owed to Phoenix under the COA with respect to the Vessel, or to Charterer under
the Sub-COA with respect to the Vessel, are not promptly paid into the Bulk Cajun Freights Account after Noranda Alumina LLC, its
successor or assigns, makes payments under the COA, except for commissions payable to Mid-Ship Group LLC under Section 54
of the COA and Sub-COA, and all hire owed by Charterer to Borrower is not fully and timely paid into the Bulk Cajun Hire Account;
(aa) the
Bulk Cajun Mortgage is not provisionally registered or within 120 days after the date hereof permanently registered, or the Bulk
Discovery Mortgage is not permanently registered, at the Panamanian Public Registry, such that they are and continue to be duly
perfected mortgages and maritime liens under the laws of the Republic of Panama, and create preferred mortgages on the Vessel or
the BULK DISCOVERY (as the term “preferred mortgage” is defined at 46 U.S.C. § 31301(6)(B));
(bb)
in a manner which is not otherwise specifically referenced in this Section 7.1, Borrower from time to time breaches or fails
to perform or observe any term, covenant or agreement contained in the Loan Documents, is or becomes in default thereunder, or
any further event of default occurs under any of the Loan Documents.
7.2
Remedies
.
(a) Upon
the occurrence of:
(i) an
Event of Default constituting a default with respect to a payment of principal, interest, fees, expenses, or any other sum which
is payable to Lender which continues for longer than three (3) days after payment is due;
(ii) an
Event of Default consisting of: (A) a breach of an obligation with respect to obtaining or maintaining required insurance
or providing reasonable and prompt verification thereof, (B) and Event of Default with respect to Sections 5.4(vii),
(viii), (ix), 5.10, 6.3, 6.8, or 7.4, (C) an Event of Default described in Sections 7.1(d), (g), (h), (l), (m), (n),
(q), (r), (t), (u), (y), or (z), (D) an Event of Default which, by its nature, is not capable of being fully remedied so as
to provide to Lender the practical benefits to which it or they are entitled under any of the Loan Documents with respect to such
Event of Default; or (E) an Event of Default which occurs with the knowledge of a Borrower as to which a notice required to
be given to Lender is not timely given; or
(iii) any
other Event of Default not specified in subsections (i) or (ii) above which is not fully remedied to the satisfaction of the Lender
within ten (10) days after it occurs,
Lender shall enjoy all rights, powers, and remedies which may
arise under the Loan Documents, or otherwise existing or arising by agreement, at law, in equity or in admiralty, including the
following: Lender may deem the principal of the Advance, interest thereon, and all other amounts then owing, accrued or accruing
with respect to the Advance immediately due and payable, and Lender may exercise all such rights, powers and remedies, without
presentments, demands, protests, or notices of any kind, all of which are hereby expressly waived by Borrower,
provided,
that in the event of an actual or deemed entry of an order for relief with respect to Borrower under the United States Bankruptcy
Code, as amended, the Obligations automatically shall become and be due and payable, without presentment, demand, protest or any
notice of any kind, all of which are hereby expressly waived by Borrower.
(b) All
rights, powers and authority granted to the Lender in any Loan Document may be exercised on its behalf by any agents or representatives
it appoints from time to time.
(c) On
the occurrence of an Event of Default Lender may, in its discretion, do any act or make any expenditures necessary to remedy such
default or preserve the value of or protect the Collateral, including entering the Vessel to make repairs, purchasing insurance,
discharging Encumbrances, or defending any lawsuit against the Vessel, and Borrower shall promptly reimburse Lender for all such
expenses, with interest at the Interest Rate or Default Rate, as in effect from time to time, for any and all expenditures so made
or incurred, and until Borrower has so reimbursed Lender for such expenditures; but Lender, though privileged so to do, shall be
under no obligation to Borrower to make any such expenditures nor shall the making thereof relieve Borrower of any default in that
respect.
(d) The
rights, powers, and remedies provided in the Loan Documents or otherwise existing or arising by agreement, at law, in equity or
in admiralty, or otherwise, are cumulative. All rights, powers, and remedies may be exercised, in whole or in part, from time to
time, as often, and in any order as Lender chooses, and the exercise or the beginning of the exercise of any right, power, or remedy
shall not be construed to be an election of rights, powers, or remedies, or a waiver of the right to exercise at the same time
or thereafter any other right, power, or remedy. No delay or omission by Lender in the exercise of any right, power, or remedy
accruing upon any Event of Default shall impair any such right, power, or remedy or be construed to be a waiver of any right to
take advantage of any such future event or of any such past Default or Event of Default. In case Lender proceeds to enforce any
right, power, or remedy, and such enforcement is discontinued or abandoned for any reason or is determined adversely to Lender,
in whole or in part, then, and in any such case, at the option of Lender, in the exercise of its sole discretion, the relevant
parties shall be restored to their former positions and rights, all rights, powers, and remedies of Lender shall continue as if
no such proceedings had been taken and nothing shall be construed to be a waiver of any right, power, or remedy of Lender. The
acceptance by Lender of any security or any payment of or on account of the Obligations maturing after any Event of Default or
any payment on account of any past default shall not be construed to be a waiver of any right of Lender to take advantage of any
future Event of Default or of any past Event of Default not completely cured thereby. Each Encumbrance that exists or is granted
or otherwise arises pursuant to the Loan Documents is cumulative and not in lieu of any other such Encumbrances.
7.3
Legal
Actions
. All judicial actions by any party to enforce any provision of any or all of the Loan Documents shall, if requested
by Lender, be brought in or transferred to the United States District Court for the Southern District of New York or the state
courts of general jurisdiction sitting in the County of New York in the State of New York, or in the jurisdiction where relevant
Collateral is located or subject to
in rem
or
quasi in rem
proceedings from time to time. Borrower and the Guarantors
consent to the jurisdiction of all such courts over them under or in connection with this Agreement or the Bulk Discovery Loan
Agreement, and hereby irrevocably waive any objection, including any objection to the laying of venue or based on the grounds of
forum non conveniens, which they may now or hereafter have to the bringing of any such action or proceeding in such respective
jurisdictions.
BORROWER AND GUARANTORS WAIVE THE RIGHT TO TRIAL BY JURY IN
EVERY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO THE LOAN DOCUMENTS AND THE BULK DISCOVERY
LOAN DOCUMENTS. BORROWER AND GUARANTORS ACKNOWLEDGE THAT THE FOREGOING WAIVER IS A MATERIAL INDUCEMENT TO LENDER ENTERING INTO
THIS AGREEMENT AND THAT LENDER IS RELYING UPON THE FOREGOING WAIVER IN ITS DEALINGS WITH BORROWER AND GUARANTORS. BORROWER AND
GUARANTORS REPRESENT AND WARRANT THAT THEY HAVE REVIEWED, OR HAVE HAD THE OPPORTUNITY TO REVIEW, THE FOREGOING WAIVER WITH THEIR
LEGAL COUNSEL AND HAVE KNOWINGLY AND VOLUNTARILY WAIVED THEIR JURY TRIAL RIGHTS FOLLOWING CONSULTATION, OR THE OPPORTUNITY TO CONSULT,
WITH SUCH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL WITHOUT A JURY
BY THE COURT. BORROWER AND GUARANTORS HEREBY CERTIFY THAT NO REPRESENTATIVE OR AGENT OF LENDER, OR COUNSEL TO LENDER, HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT LENDER WOULD NOT, IN THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL
PROVISION.
7.4
Service
of Process
. Service of process may be made on Borrower or Guarantors by mailing or delivering a copy of such process to the
Borrower or Guarantors in care of the Process Agent at the Process Agent’s address specified in the Process Agent Appointment,
or to any new address of the Process Agent of which Lender becomes aware. Borrower and Guarantors hereby irrevocably authorize
and direct the Process Agent to accept such service on their behalf at such addresses. Process Agent is at liberty to change its
address to another address in the United States, but Lender is permitted to effect service upon Borrower and Guarantors by service
by mail or by service on any person of suitable age and discretion at the last address for Process Agent known by Lender at the
time. Not later than fifteen (15) days before the appointment of Process Agent is terminated for any reason, Borrower and Guarantors
shall appoint a successor that has an address in the United States and deliver to Lender a written acceptance of appointment of
a substitute process agent that contains an agreement in writing to give Lender not less than thirty (30) days’ advance written
notice of any change of its address or any termination of its appointment (delivered to Lender’s address specified in, or
changed as provided in Section 9.4 hereof). As an alternative method of service, the Borrower and Guarantors also irrevocably
consent to the service of any and all process, postage prepaid, in any such action or proceeding by mailing a copy of such process
to the Borrower and Guarantors at their addresses identified in or in accordance with Section 9.4. Nothing herein shall affect
the right to serve process in any manner permitted by law. The provisions of this section apply equally to process related to the
Loan Documents and to process related to the Bulk Discovery Loan Documents.
7.5
Judgment
.
If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder in any currency (the “
Original
Currency
”) into another currency (the “
Other Currency
”) the parties hereto agree, to the fullest extent
that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures
the Lender could purchase the Original Currency with the Other Currency in New York City on the second Business Day preceding that
on which final judgment is given. Upon receipt of payment in the Other Currency of the amount of such judgment, the Lender shall
convert such amount into the Original Currency on or as of the next Business Day in accordance with normal banking procedures.
If the amount is so converted at or as of that time is insufficient to discharge the entire amount (including accrued interest),
denominated in the Original Currency, that would be owing at the time to the Lender had no judgment been entered or fixed in the
Other Currency, the Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify Lender against
such loss.
7.6
Right
of Set-Off
. Upon the occurrence and during the continuance of any Event of Default, Lender is hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits and investments (general
or special, time or demand, provisional or final) at any time held in any accounts, and other indebtedness at any time owed by
Lender, to or for the credit or the account of any Borrower or any Guarantor, against any or all of the obligations of the relevant
Borrower or Guarantor now or hereafter existing in favor of Lender, whether or not Lender shall have given any notice or made any
demand to the relevant Borrower or Guarantor, and although such obligations of the relevant Borrower or Guarantor may be unmatured.
Lender agrees to mail or transmit notice to the relevant Borrower or Guarantor on the day of each such set-off and application
made by Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application, nor
shall such failure subject Lender to any liability. The rights of Lender under this Section are in addition to other rights, powers,
and remedies (including, without limitation, other rights of set-off) which Lender may have.
ARTICLE VIII
CONTINUING GUARANTY
8.1
Guaranty
.
Each Guarantor hereby unconditionally and irrevocably guarantees, as its separate and independent obligation, as principal obligor,
and not merely as a surety, the punctual payment and performance when due, whether at stated maturity, by acceleration, or otherwise,
of the Obligations. The obligations of the Guarantors and the Borrower are joint and several.
8.2
Guaranty
Absolute
. Guarantor guarantees that the Obligations shall be paid and performed strictly in accordance with the terms of the
Loan Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such
terms or the rights, powers, or remedies of Lender with respect thereto. This is a guaranty of payment, and not just of collection.
The liability of Guarantor under this Agreement for the Obligations or otherwise shall be absolute and unconditional irrespective
of one or more of: (a) any lack of validity or enforceability of any Loan Document or any provision thereof; (b) any
change in the time, manner or place of payment of, or in any other term of, any or all of the Obligations; (c) any waiver,
termination, renewal, replacement, amendment or other modification of, or any consent to any departure from, any Loan Document
or any provision thereof; (d) any taking, exchange, release or nonperfection of any real or personal property security for
any or all of the Obligations; (e) any taking, waiver, release, amendment or other modification of, or any consent to departure
from, any other guaranty of or liability for any or all of the Obligations; (f) any manner of sale or other disposition of
any real or personal property security for any or all of the Obligations; (g) any manner of application of any real or personal
property security, or any proceeds of any such security, to any or all of the Obligations; (h) any change, restructuring or
termination of the structure or existence of Borrower, any other guarantor or other obligor, or any other Person; or (i) any
other circumstance (other than payment and performance of the Obligations in full) that might otherwise constitute a suretyship
or other defense available to Guarantor. The Guarantor acknowledges that it has received copies of the Loan Documents now in existence,
and has reviewed them to its satisfaction.
8.3
Waiver
.
With the exception of notices to which it is expressly entitled under applicable agreements, Guarantor hereby waives its rights,
if any, to any notices of acceptance and any other notices with respect to any of the Obligations or this Agreement, and waives
all requirements that Lender protect, secure, perfect or insure any real or personal property security for any or all of the Obligations,
or any property subject thereto, or exhaust any right or take any action against Borrower or any other Person, or any security,
or collateral. Lender shall have no obligation to marshal any present or future collateral security for any of the Obligations
or to resort to any such collateral security in any order.
8.4
Subrogation
.
The Guarantor shall not exercise any rights which it may acquire by way of subrogation under this Agreement, by any payment made
hereunder or otherwise, until all the Obligations shall have been paid and performed in full. If any amount shall be paid to the
Guarantor on account of such subrogation rights at any time when all the Obligations shall not have been paid and performed in
full, such amount shall be held in trust for the benefit of Lender and shall forthwith be paid to Lender to be credited and applied
to the Obligations, whether matured or unmatured, in accordance with Section 2.3.
8.5
Holding
Company Indemnification
. Holding Company shall indemnify and hold harmless Charterer from and against any and all liabilities
claims, actions, suits, judgments, costs, disbursements and expenses (including reasonable fees and expenses of legal counsel related
thereto) of any kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against Charterer as a result
of Charterer’s obligations under this Article.
8.6
Subordination
.
(a) Neither
Guarantor shall make any loans or advances to Borrower, and Holding Company shall ensure that no Subsidiaries thereof shall make
any loans or advances to Borrower, in each case other than equity investments of capital. All Indebtedness of Borrower to each
Guarantor whether now existing or hereafter arising (the “
Subordinated Debt
”) is hereby subordinated to full
payment and performance of the Obligations, and until then, Borrower shall not make, and neither Guarantor shall, without the prior
written consent from Lender (granted or withheld in the exercise of its sole discretion) accept any payment of an Indebtedness
from Borrower. All Encumbrances that either Guarantor may have or that would otherwise arise against any assets of Borrower or
Bulk Discovery, including for any breach of the Time Charter, are hereby irrevocably subordinated to the liens of the Bulk Cajun
Mortgage and other security granted in the Loan Documents, and the liens of the Bulk Discovery Mortgage and the other security
granted for the obligations secured thereby (the “
Subordinated Liens
”).
(b) Unless
otherwise permitted pursuant to this Agreement, all payments or distributions upon or with respect to the Subordinated Debt or
obligations secured by Subordinated Liens, including from Bankruptcy or Other Proceedings pertaining to any of them, whether through
payment, subrogation, or otherwise, shall be received in trust for the benefit of Lender, shall be segregated from other funds
and assets held by the recipient, and shall be forthwith paid to the Lender in the same form in which it was received (with any
necessary endorsement) to be applied (in the case of cash) to the Obligations in accordance with Section 2.3, or received
as collateral (in the case of non-cash property or securities) as security for, the payment of the Obligations, to be foreclosed
upon in the occurrence of an Event of Default as permitted by law.
(c) If
any Bankruptcy or Other Proceeding is commenced by or against or otherwise occurs with respect to Borrower, any member or shareholder
of Borrower, any Person of which Borrower is a partner, joint venturer, or member, or any Subsidiary of Borrower, this Agreement
shall remain in effect, and Lender is hereby irrevocably authorized (in its own name or in the name of Holding Company or Charterer,
as the case may be), but shall have no obligation, to demand, sue for, collect, and receive every payment or distribution that
results from a Bankruptcy or Other Proceeding on account of the Subordinated Debt or obligations secured by Subordinated Liens,
and to give acquittance therefor, file claims and proofs of claim, and take such other action with respect thereto (including voting
the Subordinated Debt or obligations secured by Subordinated Liens, enforcing security therefor, and compromising claims therefor)
as it may deem necessary or advisable for the exercise or enforcement of any of the rights, powers, and remedies of the Lender
hereunder.
(d) For
so long as any of the Obligations remain outstanding the Guarantors shall duly and promptly take or refrain from taking such action
as the Lender may reasonably require: (i) unless otherwise permitted pursuant to this Agreement, to collect the Subordinated
Debt and obligations secured by Subordinated Liens and remit the proceeds thereof to Lender, file appropriate claims and proofs
of claim in respect of the Subordinated Debt or obligations secured by Subordinated Liens, (ii) to execute and deliver to
the Lender such powers of attorney, assignments, and other instruments as the Lender may require in order to enable the Lender
to enforce any or all claims with respect to, and security for, the Subordinated Debt and obligations secured by Subordinated Liens,
and (iii) to collect and receive all payments and distributions that may be payable or deliverable upon or with respect to
the Subordinated Debt and obligations secured by Subordinated Liens.
(e) For
so long as any of the Advance remains outstanding Guarantors shall not, without the prior written consent of Lender: (i) accelerate
or demand payment of any of the Subordinated Debt or obligations secured by Subordinated Liens; (ii) commence any legal proceedings
or arbitration proceedings to collect any of the Subordinated Debt or obligations secured by Subordinated Liens, (iii) exercise
any rights, powers, or remedies with respect to collection of the Subordinated Debt or obligations secured by Subordinated Liens;
(iv) cooperate with or stipulate to the commencement or continuation of any Bankruptcy or Other Proceeding with respect to
Borrower or any of its assets, (v) assist the Borrower with respect to any Bankruptcy or Other Proceedings pertaining to the
Borrower, or (vi) assign, transfer, or subject to an Encumbrance any Subordinated Debt or obligations secured by Subordinated
Liens.
(f) Borrower
shall not make any payment of any of the Subordinated Debt or obligations secured by Subordinated Liens without the written consent
of Lender previously obtained, which may be granted or withheld by Lender in the exercise of its sole discretion. None of the Subordinated
Debt or obligations secured by Subordinated Liens (or any agreements, instruments, or other evidence thereof) shall be amended
in a manner that would have an adverse effect on the rights, powers, or remedies of Lender under this Agreement. Borrower and Guarantors
agree to refrain from all acts which are in any way inconsistent with this Agreement or the rights of Lender hereunder. Borrower
and Guarantors agree to perform all further acts reasonably necessary to give full effect to this Agreement.
(g) Guarantors
waive the right to assert the doctrine of marshalling of assets against the Lender.
ARTICLE IX
MISCELLANEOUS
9.1
Loan
Documents, Administration and Collection Expenses
. Borrower shall pay or reimburse Lender for the preparation, negotiation
and execution of the Loan Documents, and all waivers under and amendments thereto from time to time, and the reasonable fees and
expenses of counsel for Lender in connection therewith, whether Borrower satisfies the conditions precedent contained in Article
III or not. Borrower shall pay or reimburse Lender for all costs and other expenses incurred in connection with the drafting, negotiation,
execution, delivery, filing, or recording of the Loan Documents, or the enforcement, attempted enforcement, or preservation of
any rights, powers, or remedies under the Loan Documents (including all such costs and expenses incurred during any “workout”
or restructuring in respect of the Obligations and during legal proceedings, including Bankruptcy or Other Proceedings), and including
all the reasonable fees and expenses of legal counsel. The foregoing costs and expenses shall include all search, filing, recording,
title insurance and appraisal charges and fees and stamp and other taxes related thereto, and other out-of-pocket expenses incurred
by Lender, and the cost of independent public accountants and other outside experts retained by Lender.
9.2
Indemnification
.
Whether or not the transactions contemplated herein are consummated, Borrower shall indemnify and hold harmless Lender and its
Affiliates, directors, officers, employees, counsel, agents and attorneys-in-fact (collectively, the “
Indemnitee
”)
from and against any and all liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits,
costs, disbursements and expenses (including reasonable fees and expenses of legal counsel related thereto) of any kind or nature
whatsoever which may at any time be imposed on, incurred by or asserted against any such Indemnitee in any way relating to or arising
out of or in connection with (a) the drafting, negotiation, execution, delivery, filing, recording, enforcement, performance
or administration of any Loan Document or any other document delivered in connection with the transactions contemplated thereby,
or the consummation of the transactions contemplated thereby, (b) the Advance or the use or proposed use of the proceeds thereof,
(c) the ownership and operation of the business and assets of Borrower, including if any assertion is made that Borrower,
any Indemnitee, or any other Persons were negligent with respect thereto, (d) any actual or alleged presence or release of
Hazardous Materials on or from any personal or real property currently or formerly owned or operated by Borrower or for its account,
or any Environmental Liability related in any way to Borrower or any of the Collateral, or (e) any actual or prospective claim,
litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort, strict liability, or
any other theory (including any investigation of, preparation for, or defense of any pending or threatened claim, litigation, investigation,
or proceeding) and regardless of whether any Indemnitee is a party thereto, in all cases, whether or not caused by or arising,
in whole or in part, out of the negligence of the Indemnitee; provided that such indemnity shall not, as to any Indemnitee, be
available to the extent that such liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits,
costs, disbursements and expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have
resulted primarily from the fraud, gross negligence or willful misconduct of an Indemnitee. The agreements in this Section shall
survive the performance of all the Obligations and termination of this Agreement.
9.3
Amendments
and Waivers
. No amendment, modification, termination, or waiver of any provision of any of the Loan Documents, nor consent
to any departure therefrom, shall be effective unless the same shall be in writing and signed by Lender. Waivers or consents shall
be effective only in the specific instances and for the specific purposes for which they are given. The Loan Documents shall not
be deemed amended, qualified, or supplemented by any course of dealing. No notice to or demand on any Person in any instance shall
entitle any Person to any other or further notice or demand in similar or other circumstances.
9.4
Notices
.
All notices, requests, demands, directions and other communications between parties hereto shall be in writing and delivered by
hand, sent by overnight courier, or by facsimile, or mailed by certified mail, return receipt requested (postage prepaid), to the
applicable party at the addresses indicated below:
If to a Credit Party (and Allseas and Phoenix):
|
|
c/o Phoenix Bulk Carriers (US) LLC
|
|
|
(as agent)
|
|
|
88 Valley Road
|
|
|
Middletown, RI 02842
|
|
|
United States
|
|
|
Attn: Mr. Anthony Laura
|
|
|
Facsimile No.: (401) 846-1520
|
|
If to Lender:
|
GATX Corporation
|
|
|
|
|
|
Four Embarcadero Center, Suite 2100
|
|
|
San Francisco, CA 94111
|
|
|
Attn: Contracts Administration
|
|
|
Facsimile No.: 415-955-3416
|
or, as to each party, at such other address as shall be designated
by such party on written notice to the other party otherwise complying as to form and delivery with terms of this paragraph. All
such notices, requests, demands, directions and other communications shall be effective on actual delivery, or, when mailed, shall
be effective on the third calendar day after being deposited in the U.S. mail, or, when sent by overnight courier, on the next
business day after being delivered to such overnight courier, or when transmitted by fax, shall be effective on transmission with
confirmed receipt of transmission, respectively.
9.5
Governing
Law
. The validity, performance, construction, interpretation, and effect of this Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York (excluding its laws relating to conflicts of law except for Sections
5-1401 and 5-1402 of the General Obligation Laws of New York), except as the same may be governed by the federal law of the United
States.
9.6
Severability
.
If any provision of this Agreement, or the application to any circumstance, person or place, is held to be unenforceable, invalid
or void by a court or other tribunal of competent jurisdiction, such provision shall be severed therefrom or shall be reformed
only to the extent necessary to be enforceable to such circumstance, person or place; and such provision as applied to other circumstances,
persons or places, and the remainder of this Agreement, shall remain in full force and effect.
9.7
Assignment
.
No assignment, delegation or other transfer of this Agreement, in whole or in part, directly or indirectly, whether voluntarily,
involuntarily or by operation of law, or of any rights and obligations under this Agreement can be made by any party other than
Lender, without the prior written consent of the other party, which consent can be withheld in the exercise of its sole discretion.
Any purported assignment, transfer, or delegation in violation of this Section shall be void. Subject to the limits on assignment,
this Agreement shall be binding upon and inure to the benefit of the parties and their respective permitted successors and assigns.
This Agreement does not create and shall not be construed as creating any rights enforceable by any person not a party to this
Agreement. To the extent permitted by law, Lender may freely assign any or all of the Loan Documents, or assign or delegate any
or all of its rights and obligations arising under the Loan Documents to other parties or financial institutions, and may permit
other parties or financial institutions to participate in the Obligations and transactions evidenced by the Loan Documents, in
which event reference to Lender in such documents shall refer to Lender’s successors, delegees, or assigns, and to such participants,
as appropriate. In that connection, Lender may disclose all documents and information which Lender now or hereafter may have relating
to the Loan Documents, the transactions evidenced thereby, Borrower, or its business.
9.8
Further
Assurances
. Each party hereto agrees to perform such further acts and to execute and deliver such additional written instruments
as may from time to time be reasonably required to provide, maintain and perfect the security contemplated in this Agreement, and
otherwise to carry out the intent, terms and conditions of this Agreement.
9.9
Authority
.
None of the obligations of any of the parties to this Agreement or to any of the other Loan Documents shall be affected in the
event that the execution and delivery of any or all of the Loan Documents on behalf of any other party was not duly authorized
by all necessary corporate or company action.
9.10
Survival
of Agreement
. This Agreement shall remain in full force and effect until all Obligations, and the obligations secured by the
Bulk Discovery Mortgage are satisfied in full.
9.11
Complete
Agreement
. This Agreement, including all exhibits, schedules, and all additional documents herein or therein incorporated by
reference, expresses the complete understanding and agreement of the parties hereto with respect to its subject matter, all prior
oral and written agreements to the contrary notwithstanding, and all contemporaneous oral agreements notwithstanding.
9.12
Counterparts
.
This Agreement may be executed in counterparts, all of which, taken together, shall constitute the entire Agreement. For purposes
of this Agreement, a facsimile or other electronic version of a party’s signature, such as a .pdf, printed by a receiving
facsimile or printer shall be deemed an original signature.
[
Signatures
provided on next page
]
IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.
|
|
GATX CORPORATION
|
|
|
|
|
|
By:
|
|
|
|
|
Name: Kevin Hillesland
|
|
|
Title: Vice-President
|
|
|
|
|
|
BULK CAJUN BERMUDA LTD.
|
|
|
|
|
|
By:
|
|
|
|
|
Name: Deborah L. Davis
|
|
|
Title: Director
|
|
|
|
|
|
BULK PARTNERS (BERMUDA) LTD.
|
|
|
|
|
|
By:
|
|
|
|
|
Name: Deborah L. Davis
|
|
|
Title: Attorney-in-Fact
|
|
|
|
|
|
AMERICAS BULK TRANSPORT (BVI) LIMITED
|
|
|
|
|
|
By:
|
|
|
|
|
Name: Deborah L. Davis
|
|
|
Title: Director
|
Signature Page to Loan and Guaranty Agreement
SCHEDULES
|
|
4.9
|
Permitted Encumbrances
|
EXHIBITS
|
|
C
|
Borrower’s Earnings Assignment Agreement
|
|
|
D
|
Charterer’s Earnings Assignment Agreement
|
|
|
E
|
Manager’s Undertaking – Seamar Management
S. A.
|
|
|
F
|
Manager’s Undertaking – Phoenix
|
|
|
G
|
Funds Deposit Agreement
|
|
|
I
|
Charge Over Cash Deposit – Borrower
|
|
|
J
|
Charge Over Cash Deposit – Allseas
|
|
|
N
|
Broker’s Opinion Letter
|
SCHEDULE 2.4
APPROVED APPRAISERS
Fearnleys AS
H. Clarkson & Co. Limited
Platou Shipbrokers
SCHEDULE 4.6
EQUITY INTERESTS IN HOLDING COMPANY
Bulk Partners (Bermuda) Ltd.
|
Shareholder
|
|
Number of Shares
|
|
Percentage
|
|
Citizenship
|
|
|
|
|
|
|
|
|
|
Ed Coll
|
|
38,643(Common)
|
|
44.25%
|
|
United States
|
|
|
|
|
|
|
|
|
|
Lagoa Investments Ltd.
|
|
34,277 (Common)
|
|
39.25%
|
|
Bermuda
|
|
|
|
|
|
|
|
|
|
Anthony Laura
|
|
14,409 (Common)
|
|
16.50%
|
|
United States
|
|
|
|
|
|
|
|
|
|
Pangaea One L.P.
|
|
7,759.946 (Preferred)
|
|
|
|
United States
|
|
|
|
|
|
|
|
|
|
Pangaea One (Cayman) L.P.
|
|
4,276.712 (Preferred)
|
|
|
|
Cayman Islands
|
|
|
|
|
|
|
|
|
|
Pangaea One Parallel Fund L.P.
|
|
3,996.424 (Preferred)
|
|
|
|
Cayman Islands
|
|
|
|
|
|
|
|
|
|
Pangaea One Parallel Fund (B) L.P.
|
|
2,107.317 (Preferred)
|
|
|
|
United States
|
EQUITY INTERESTS IN PLEDGOR
Bulk Partners Holding Company Bermuda
Limited
|
Shareholder
|
|
Number of
Shares
|
|
Percentage
|
|
Citizenship
|
|
|
|
|
|
|
|
|
|
Bulk Partners (Bermuda) Ltd.
|
|
10,000
|
|
100%
|
|
Bermuda
|
EQUITY INTERESTS IN BORROWER
Bulk Cajun Bermuda Ltd.
|
Shareholder
|
|
Number of
Shares
|
|
Percentage
|
|
Citizenship
|
|
|
|
|
|
|
|
|
|
Bulk Partners Holding Company Bermuda Limited
|
|
10,000
|
|
100%
|
|
Bermuda
|
EQUITY INTERESTS IN CHARTERER
Americas Bulk Transport (BVI) Limited
|
Shareholder
|
|
Number of
Shares
|
|
Percentage
|
|
Citizenship
|
|
|
|
|
|
|
|
|
|
Bulk Partners Holding Company Bermuda Ltd.
|
|
1,000
|
|
100%
|
|
Bermuda
|
BORROWER’S SUBSIDIARIES
(Direct and Indirect)
None
SUBSCRIPTION AGREEMENTS, ETC. FOR EQUITY
INTERESTS IN BORROWER
None
SCHEDULE 4.8
LEGAL ACTIONS
NONE
SCHEDULE 4.9
PERMITTED ENCUMBRANCES
Charters and Service Agreements
|
|
·
|
Sub-time charters, voyage charters, or contracts of affreightment entered into by Charterer that expire not later than March
30, 2012, for employment of the Vessel in the international bulk cargo trade
|
Other Encumbrances
Maritime liens on the Vessel for:
(a) torts
that are covered by insurance that complies with the provisions of the Preferred Mortgages; or
(b) crew’s
wages, salvage, or for goods and services furnished to the Vessel in the ordinary course of Borrower’s business and not in
violation of any provisions of the Loan Documents, none of which are overdue
provided,
Borrower may contest such Encumbrances
in good faith if appropriate reserves therefor are established and maintained consistently with GAAP, and security therefor is
posted as necessary to prevent the Seizure of the Vessel, or, if the Vessel is Seized with respect to a claim of such an Encumbrance,
the Vessel is released therefrom within thirty (30) days.
SCHEDULE 4.11
LOCATIONS
|
Entity
|
|
Chief Executive Office
|
|
Place of Business or Business Records
|
|
|
|
|
|
|
|
Borrower
|
|
3
rd
Floor – Par la Ville Place
14 Par la Ville Road
Hamilton HM08
Bermuda
|
|
c/o Phoenix Bulk Carriers (US) LLC
88 Valley Road
Middletown, RI 02842
|
|
|
|
|
|
|
|
Pledgor
|
|
3
rd
Floor – Par la Ville Place
14 Par la Ville Road
Hamilton HM08
Bermuda
|
|
c/o Phoenix Bulk Carriers (US) LLC
88 Valley Road
Middletown, RI 02842
|
|
|
|
|
|
|
|
Charterer
|
|
3
rd
Floor – Par la Ville Place
14 Par la Ville Road
Hamilton HM08
Bermuda
|
|
c/o Phoenix Bulk Carriers (US) LLC
88 Valley Road
Middletown, RI 02842
|
|
|
|
|
|
|
|
Allseas
|
|
3
rd
Floor – Par la Ville Place
14 Par la Ville Road
Hamilton HM08
Bermuda
|
|
c/o Phoenix Bulk Carriers (US) LLC
88 Valley Road
Middletown, RI 02842
|
All of the above companies have no place of business or business
records at any location in the United States, with the possible exception of:
c/o Phoenix Bulk Carriers (US) LLC
88 Valley Road
Middletown, RI 02842
EXHIBIT A
REQUEST FOR ADVANCE
Pursuant to Section 2.1 of the Loan and Guaranty Agreement dated
October __, 2011 (as assigned, assumed, amended, renewed, replaced, or otherwise modified (the “
Loan Agreement
”)
among GATX Corporation (“Lender”) and Bulk Cajun Bermuda Ltd. (“
Borrower
”), Bulk Partners (Bermuda)
Ltd., and Americas Bulk Transport (BVI) Limited please disburse the Advance on a Business Day on or about _______, 2011 as follows:
1. The
amount of $_____________ by wire transfer as follows:
_______________________
Branch: _____________
Account No.: _________________
ABA Routing No.: ________________
2. ____________________________________
None of Borrower’s representations or warranties contained
in any of the Loan Documents are untrue, Borrower is in compliance with all of its covenants contained in the Loan Documents, and
no Default or Event of Default has occurred and is continuing under the Loan Documents.
Terms used herein that are defined in the Loan Agreement have
the meaning herein that they are given therein.
DATE: _____________, 2011
|
|
BULK CAJUN BERMUDA LTD.
|
|
|
|
|
|
|
By:
|
|
|
|
|
Its:
|
|
|
Exhibit 10.7
Execution Version
Date: as of July 25, 2012
BULK NORDIC ODYSSEY LTD. and
BULK NORDIC ORION LTD.
as Joint and Several Borrowers
THE BANKS AND FINANCIAL INSTITUTIONS
listed in Schedule 1
as Lenders
– and –
DVB BANK SE
as Agent
and as Security Trustee
LOAN AGREEMENT
relating to
a US$40,000,000 facility
to provide post-acquisition financing for
m.v. NORDIC ODYSSEY and m.v. NORDIC ORION
Watson, Farley & Williams
New York
INDEX
|
Clause
|
|
Page
|
|
|
|
|
|
1
|
INTERPRETATION
|
1
|
|
|
|
|
|
2
|
FACILITY
|
22
|
|
|
|
|
|
3
|
POSITION OF THE LENDERS
|
22
|
|
|
|
|
|
4
|
DRAWDOWN
|
24
|
|
|
|
|
|
5
|
INTEREST
|
25
|
|
|
|
|
|
6
|
INTEREST PERIODS
|
27
|
|
|
|
|
|
7
|
DEFAULT INTEREST
|
28
|
|
|
|
|
|
8
|
REPAYMENT AND PREPAYMENT
|
29
|
|
|
|
|
|
9
|
CONDITIONS PRECEDENT
|
31
|
|
|
|
|
|
10
|
REPRESENTATIONS AND WARRANTIES
|
32
|
|
|
|
|
|
11
|
GENERAL AFFIRMATIVE AND NEGATIVE COVENANTS
|
41
|
|
|
|
|
|
12
|
INTENTIONALLY OMITTED
|
49
|
|
|
|
|
|
13
|
MARINE INSURANCE COVENANTS
|
49
|
|
|
|
|
|
14
|
SHIP COVENANTS
|
54
|
|
|
|
|
|
15
|
COLLATERAL MAINTENANCE RATIO
|
59
|
|
|
|
|
|
16
|
INTENTIONALLY OMITTED
|
61
|
|
|
|
|
|
17
|
PAYMENTS AND CALCULATIONS
|
61
|
|
|
|
|
|
18
|
APPLICATION OF RECEIPTS
|
63
|
|
|
|
|
|
19
|
APPLICATION OF EARNINGS
|
64
|
|
|
|
|
|
20
|
EVENTS OF DEFAULT
|
65
|
|
|
|
|
|
21
|
FEES AND EXPENSES
|
69
|
|
|
|
|
|
22
|
INDEMNITIES
|
70
|
|
|
|
|
|
23
|
NO SET-OFF OR TAX DEDUCTION; tax indemnity
|
72
|
|
|
|
|
|
24
|
ILLEGALITY, ETC
|
76
|
|
|
|
|
|
25
|
INCREASED COSTS
|
76
|
INDEX
|
Clause
|
|
Page
|
|
|
|
|
|
26
|
SET-OFF
|
78
|
|
|
|
|
|
27
|
TRANSFERS AND CHANGES IN LENDING OFFICES
|
79
|
|
|
|
|
|
28
|
VARIATIONS AND WAIVERS
|
83
|
|
|
|
|
|
29
|
NOTICES
|
84
|
|
|
|
|
|
30
|
SUPPLEMENTAL
|
87
|
|
|
|
|
|
31
|
THE SERVICING BANKS
|
87
|
|
|
|
|
|
32
|
LAW AND JURISDICTION
|
92
|
|
|
|
|
|
33
|
WAIVER OF JURY TRIAL
|
93
|
|
|
|
|
|
34
|
PATRIOT ACT notice
|
93
|
|
|
|
|
|
EXECUTION PAGE
|
94
|
|
|
|
|
SCHEDULE 1 LENDERS AND COMMITMENTS
|
95
|
|
|
|
|
SCHEDULE 2 intentionally omitted
|
96
|
|
|
|
|
SCHEDULE 3 DRAWDOWN NOTICE
|
97
|
|
|
|
|
SCHEDULE 4 CONDITION PRECEDENT DOCUMENTS
|
99
|
|
|
|
|
SCHEDULE 5 TRANSFER CERTIFICATE
|
103
|
|
|
|
|
SCHEDULE 6 intentionally omitted
|
107
|
|
|
|
|
SCHEDULE 7 list of approved brokers
|
108
|
|
|
|
|
SCHEDULE 8 dvb loan administration form
|
109
|
|
|
|
|
SCHEDULE 9 FORM OF LETTER OF INSTRUCTION TO CLASSIFICATION SOCIETY
|
111
|
|
|
|
|
SCHEDULE 10 FORM OF CLASSIFICATION SOCIETY LETTER OF UNDERTAKING
|
113
|
|
|
|
|
appendix a FORM OF approved manager’s undertaking
|
114
|
|
|
|
|
appendix B FORM OF compliance certificate
|
115
|
|
|
|
|
appendix c FORM OF EARNINGS ACCOUNT PLEDGE
|
116
|
|
|
|
|
appendix d form of EARNINGS ASSIGNMENT
|
117
|
|
|
|
|
appendix e FORM OF guarantee
|
118
|
INDEX
|
Clause
|
|
Page
|
|
|
|
|
|
appendix f FORM OF insurance assignment
|
119
|
|
|
|
|
appendix g form of mortgage
|
120
|
|
|
|
|
appendix h FORM OF note
|
121
|
|
|
|
|
appendix i FORM OF shares pledge
|
122
|
|
|
|
|
appendix j FORM OF time charter assignment
|
123
|
|
|
|
|
appendix k FORM OF SUB-Time charter assignment
|
124
|
THIS LOAN AGREEMENT (this “
Agreement
”)
is made as of July 25, 2012
AMONG
|
|
(1)
|
BULK NORDIC ODYSSEY LTD. and BULK NORDIC ORION LTD., each a company organized and existing under
the laws of Bermuda whose registered office is at 3
rd
Floor, Par la Ville Place, 14 Par la Ville Road, Hamilton HM08,
Bermuda, as joint and several borrowers (the “
Borrowers
”, and each separately a “
Borrower
”,
which expressions include their respective successors, transferees and assigns);
|
|
|
(2)
|
THE BANKS AND FINANCIAL INSTITUTIONS listed in Schedule 1, as lenders (the “
Lenders
”,
which expression includes their respective successors, transferees and assigns);
|
|
|
(3)
|
DVB BANK SE, acting in such capacity through its office at Platz der Republik 6, 60325 Frankfurt
am Main, Germany, as agent for the Lenders (in such capacity, the “
Agent
”, which expression includes its successors,
transferees and assigns); and
|
|
|
(4)
|
DVB BANK SE, acting in such capacity through its office at Platz der Republik 6, 60325 Frankfurt
am Main, Germany, as security trustee for the Lenders (in such capacity, the “
Security Trustee
”, which expression
includes its successors, transferees and assigns).
|
BACKGROUND
|
|
(A)
|
The Lenders have agreed to make available to the Borrowers a loan facility of up to the lesser
of $40,000,000 or 65% of the aggregate Fair Market Value of the Panamanian registered vessels “NORDIC ODYSSEY” and
“NORDIC ORION” for the purpose of (i) repayment of a bridge loan provided by ST Shipping to the Borrowers, and (ii)
repayment of subordinated shareholder loans by ST Shipping and Bulk Partners to the Borrowers.
|
|
|
(B)
|
The Lenders have agreed to share
pari passu
in the Collateral to be granted to the Security
Trustee pursuant to this Agreement.
|
IT IS AGREED
as follows:
|
|
1.1
|
Definitions.
Subject to Clause 1.5, in this Agreement:
|
“
Acceptable Accounting
Firm
” means Ernst & Young LLP, or such other recognized accounting firm as the Agent may, with the consent of the
Majority Lenders, approve from time to time in writing, such approval not to be unreasonably withheld;
“
Account Bank
”
means HSBC Bank Bermuda Limited, 6 Front Street, Hamilton HM11, Bermuda;
“
Advance
”
means the principal amount of the borrowing by the Borrowers under this Agreement;
“
Affiliate
”
means, as to any person, any other person that, directly or indirectly, controls, is controlled by or is under common control with
such person or is a director or officer of such person, and for purposes of this definition, the term “
control
”
(including the terms “
controlling
”, “
controlled by
” and “
under common control with
”)
of a person means the possession, direct or indirect, of the power to vote 20% or more of the Voting Stock of such person or to
direct or cause direction of the management and policies of such person, whether through the ownership of Voting Stock, by contract
or otherwise;
“
Agreed Form
”
means in relation to any document, that document in the form approved by the Agent with the consent of the Majority Lenders (such
consent not to be unreasonably withheld), or as otherwise approved in accordance with any other approval procedure specified in
any relevant provision of any Finance Document;
“
Approved Broker
”
means any of the companies listed on Schedule 7 or such other company proposed by the Borrowers which the Agent may, with the consent
of the Majority Lenders (such consent not to be unreasonably withheld), approve from time to time for the purpose of valuing a
Ship, who shall act as an expert and not as arbitrator and whose valuation shall be conclusive and binding on all parties to this
Agreement;
“
Approved Flag
”
means the Panamanian flag or such other flag as the Agent may, with the consent of the Majority Lenders, approve from time to time
in writing as the flag on which a Ship shall be registered;
“
Approved Management
Agreement
” means, in relation to a Ship in respect of its commercial and/or technical management, a management agreement
between the relevant Borrower and an Approved Manager in Agreed Form;
“
Approved Manager
”
means Seamar Management SA or any other company proposed by the Borrowers which the Agent may, with the consent of the Majority
Lenders (such consent not to be unreasonably withheld), approve from time to time as the technical and/or commercial manager of
a Ship;
“
Approved Manager’s
Undertaking
” means, in relation to a Ship, the letter executed and delivered by an Approved Manager, in the form set
out in Appendix A;
“
Availability Period
”
means the period commencing on the Effective Date and ending on the earlier of:
|
|
(a)
|
July 31, 2012 (or such later date as the Agent may, with the consent of the Majority Lenders, agree
with the Borrowers); and
|
|
|
(b)
|
the date on which the Total Commitments are fully borrowed, cancelled or terminated;
|
“
Bank Secrecy Act
”
means the United States Bank Secrecy Act of 1970, as amended;
“
Basel III
”
means any of the changes designed to strengthen any capital standards or introduce minimum liquidity or other requirements referenced
in the publication of the Groups of Governors and Heads of Supervision of the Basel Committee on Banking Supervision (the “
Basel
Committee
”) dated 16 December, 2010, or any subsequent paper or document published by the Basel Committee on any of those
requirements;
“
Bulk Fleet
”
means Bulk Fleet Bermuda Holding Company Limited, a Bermuda company;
“
Bulk Partners
”
means Bulk Partners (Bermuda) Ltd., a Bermuda company;
“
Bulk Partners Shareholders
”
means Edward Coll, Anthony Laura, Lagoa Investments Ltd., a Bermuda company, Pangaea One, L.P., a Delaware limited partnership,
Pangaea One Parallel Fund (B), L.P., a Delaware limited partnership, Pangaea One (Cayman), L.P., a Cayman Islands limited partnership,
and Pangaea One Parallel Fund, L.P., a Cayman Islands limited partnership;
“
Business Day
”
means a day on which banks are open in London, England, New York, New York, and Frankfurt, Germany;
“
Capitalized Lease
”
means, as applied to any person, any lease of any property (whether real, personal or mixed) of which the discounted present value
of the rental obligations of such person, as lessee, in conformity with GAAP, is required to be capitalized on the balance sheet
of such person; and “
Capitalized Lease Obligation
” is defined to mean the rental obligations, as aforesaid,
under a Capitalized Lease;
“
Change of
Control
” means:
|
|
(a)
|
in respect of each of the Borrowers, the occurrence of any act, event or circumstance that without
prior written consent of the Majority Lenders results in Bulk Fleet and ST Shipping owning, in the aggregate, directly or indirectly
less than 100% of the issued and outstanding Equity Interests in a Borrower;
|
|
|
(b)
|
in respect of Bulk Fleet, the occurrence of any act, event or circumstance that without prior written
consent of the Majority Lenders results in Bulk Partners owning directly or indirectly less than 100% of the issued and outstanding
Equity Interests in Bulk Fleet;
|
|
|
(c)
|
in respect of Bulk Partners, the occurrence of any act, event or circumstance that without prior
written consent of the Majority Lenders results in the Bulk Partners Shareholders owning directly or indirectly less than 100%
of the issued and outstanding Equity Interests in Bulk Partners;
|
|
|
(d)
|
in respect of ST Shipping, the occurrence of any act, event or circumstance that without prior
written consent of the Majority Lenders results in Glencore AG owning directly or indirectly less than 100% of the issued and outstanding
Equity Interests in ST Shipping; and
|
|
|
(e)
|
in respect of Glencore AG, the occurrence of any act, event or circumstance that without prior
written consent of the Majority Lenders results in Glencore PLC and/or Glencore Xstrata plc owning directly or indirectly less
than 100% of the issued and outstanding Equity Interests in Glencore AG;
|
“
Charter
”
means, in relation to a Ship, any demise, time or consecutive voyage charter in respect of that Ship for a term which exceeds,
or which by virtue of any optional extensions may exceed, 12 months, in each case in Agreed Form, and for the avoidance of doubt,
the term “Charter” includes but is not limited to the Time Charters and the Sub-Time Charters;
“
CISADA
” means
the United States Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010;
“
Classification Society
”
means, in relation to a Ship, Det Norske Veritas or such other first-class vessel classification society that is a member of IACS
that the Agent may, with the consent of the Majority Lenders (such consent not to be unreasonably withheld), approve from time
to time;
“
Code
” means
the United States Internal Revenue Code of 1986, as amended, and the regulations promulgated and rulings issued thereunder;
“
Collateral
”
means all property (including, without limitation, any proceeds thereof) referred to in the Finance Documents that is or is intended
to be subject to any Security Interest in favor of the Security Trustee, for the benefit of the Lenders, securing the Secured Liabilities;
“
Collateral Maintenance
Ratio
” has the meaning given in Clause 15.2;
“
Commitment
”
means, in relation to a Lender, the amount set opposite its name in 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);
“
Compliance Certificate
”
means a certificate executed by an authorized person of the Borrowers in the form set out in Appendix B;
“
Contractual Currency
”
has the meaning given in Clause 22.4;
“
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 or any Lender, whether as at the date of this Agreement or at any later time;
“
Currency Agreement
”
means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect a person
or any of its subsidiaries against fluctuations in currency values to or under which such person or any of its subsidiaries is
a party or a beneficiary on the date of this Agreement or becomes a party or a beneficiary thereafter;
“
Dollars
”
and “
$
” means the lawful currency for the time being of the United States of America;
“
Drawdown Date
”
means, in relation to the Advance, the date requested by the Borrowers 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 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 a Borrower
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 Borrower owning that Ship 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 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, in relation to a Ship, an account in the name of the Borrower owning that Ship with the Account Bank designated as the Earnings
Account for that Ship, or any other account (with the Account Bank or the Agent or with another bank or financial institution acceptable
to the Majority Lenders) for the purpose of receiving all charter hire and other amounts paid under the relevant Time Charter;
“
Earnings Account Pledge
”
means a pledge of an Earnings Account, in the form set out in Appendix C;
“
Earnings Assignment
”
means, in relation to a Ship, an assignment of the Earnings and any Requisition Compensation of that Ship, in the form set
out in Appendix D;
“
Effective Date
”
means the date on which this Agreement is executed and delivered by the parties hereto;
“
Email
” has
the meaning given in Clause 29.1;
“
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,
|
and “
claim
”
means a claim for damages, compensation, indemnification, contribution, 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 and which involves a collision
or allision between a Ship and another vessel or object, or some other incident of navigation or operation, in any case, in connection
with which such Ship is actually or potentially liable to be arrested, attached, detained or injuncted and/or such Ship and/or
a Borrower and/or any operator or manager of such 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
a Ship and in connection with which such Ship is actually or potentially liable to be arrested and/or where a Borrower and/or any
operator or manager of such 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;
“
Environmental Permit
”
means any permit, approval, identification number, license or other authorization required under any Environmental Law;
“
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;
“
Equity Interests
”
of any person means:
|
|
(a)
|
any and all shares and other equity interests (including common stock, preferred stock, limited
liability company interests and partnership interests) in such person; and
|
|
|
(b)
|
all rights to purchase, warrants or options or convertible debt (whether or not currently exercisable),
participations or other equivalents of or interests in (however designated) such shares or other interests in such person;
|
“
ERISA
” means
the United States Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated and rulings issued
thereunder;
“
ERISA Affiliate
”
means a trade or business (whether or not incorporated) that, together with Bulk Partners or any subsidiary of it, would be deemed
to be a single employer under Section 414 of the Code;
“
Estate
” has
the meaning assigned such term in Clause 31.1(b)(ii);
“
Event of Default
”
means any of the events or circumstances described in Clause 20.1;
“
Exchange Act
”
means the United States Securities Exchange Act of 1934, as amended, and any successor act thereto, and (unless the context otherwise
requires) includes the rules and regulations of the Commission promulgated thereunder;
“
Executive Order
”
means an executive order issued by the President of the United States of America;
“
Fair
Market Value
” means, in relation to a Ship, the market value of such Ship at any date that is shown by the average of
two (2) valuations each prepared and addressed to the Agent:
|
|
(a)
|
as at a date not more than 14 days prior to the date such valuation is delivered to the Agent;
|
|
|
(b)
|
by Approved Brokers selected by the Agent (which shall be Maritime Strategies International Ltd.,
Arrow London, Compass Maritime, Maersk Brokers, ICAP, Howe Robinson or SSY),
provided that
, if requested by the Borrowers,
one of which may be selected by the Borrowers;
|
|
|
(c)
|
with or without physical inspection of that Ship (as the Agent may require);
|
|
|
(d)
|
on the basis of a sale for prompt delivery for cash on normal arm’s length commercial terms
as between a willing seller and a willing buyer, free of any existing charter or other contract of employment (and with no value
to be given to any pooling arrangements); and
|
|
|
(e)
|
after deducting the estimated amount of the usual and reasonable expenses which would be incurred
in connection with the sale;
|
provided
that
(i) if a range of market values is provided in a particular appraisal, then the market value in such appraisal shall be
deemed to be the mid-point within such range and (ii) if a third appraisal is obtained as provided in Clause 11.1(h), the market
value of such Ship shall be the average of the three appraisals obtained;
“
FATCA
” means
Section 1471 through 1474 of the Code, as of the date of this Agreement and any current or future proposed, temporary or final
regulations or official interpretations thereof;
“
Finance Documents
”
means:
|
|
(b)
|
the Earnings Account Pledges;
|
|
|
(c)
|
the Earnings Assignments;
|
|
|
(e)
|
the Insurance Assignments;
|
|
|
(i)
|
the Sub-Time Charter Assignments;
|
|
|
(j)
|
the Time Charter Assignments; and
|
|
|
(k)
|
any other document (whether creating a Security Interest or not) which is executed at any time
by any person as security for, or to establish any form of subordination or priorities arrangement in relation to, any amount payable
to the Lenders under this Agreement or any of the other documents referred to in this definition;
|
“
Financial Indebtedness
”
means, with respect to any person (the “
debtor
”) at any date of determination (without duplication):
|
|
(a)
|
all obligations of the debtor for principal, interest or any other sum payable in respect of any
moneys borrowed or raised by the debtor;
|
|
|
(b)
|
all obligations of the debtor evidenced by bonds, debentures, notes or other similar instruments;
|
|
|
(c)
|
all obligations of the debtor in respect of any acceptance credit, guarantee or letter of credit
facility or equivalent made available to the debtor (including reimbursement obligations with respect thereto);
|
|
|
(d)
|
all obligations (except trade payables ) of the debtor to pay the deferred purchase price of property
or services, which purchase price is due more than six months after the date of placing such property in service or taking delivery
thereto or the completion of such services;
|
|
|
(e)
|
all Capitalized Lease Obligations of the debtor as lessee;
|
|
|
(f)
|
all Financial Indebtedness of persons other than the debtor secured by a Security Interest on any
asset of the debtor, whether or not such Financial Indebtedness is assumed by the debtor,
provided that
the amount of such
Financial Indebtedness shall be the lesser of (i) the fair market value of such asset at such date of determination and (ii) the
amount of such Financial Indebtedness;
|
|
|
(g)
|
all Financial Indebtedness of persons other than the debtor under any guarantee, indemnity or similar
obligation entered into by the debtor to the extent such Financial Indebtedness is guaranteed, indemnified, etc. by the debtor;
and
|
|
|
(h)
|
to the extent not otherwise included in this definition, obligations of the debtor under Currency
Agreements and Interest Rate Agreements 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.
|
The amount
of Financial Indebtedness of any debtor at any date shall be the outstanding balance at such date of all unconditional obligations
as described above and, with respect to contingent obligations, the maximum liability upon the occurrence of the contingency giving
rise to the obligation, as determined in conformity with GAAP,
provided that
(i) the amount outstanding at any time of any
Financial Indebtedness issued with an original issue discount is the face amount of such Financial Indebtedness less the remaining
unamortized portion of such original issue discount of such Financial Indebtedness at such time as determined in conformity with
GAAP, and (ii) Financial Indebtedness shall not include any liability for taxes;
“
Fiscal Year
”
means, in relation to any person, each period of one (1) year commencing on January 1 of each year and ending on December 31 of
such year in respect of which its accounts are or ought to be prepared;
“
Foreign Pension Plan
”
means any plan, fund (including without limitation, any superannuation fund) or other similar program established or maintained
outside the United States of America by Bulk Partners or any one or more of its subsidiaries primarily for the benefit of its or
their employees residing outside the United States of America, which plan, fund or other similar program provides, or results in,
retirement income, a deferral of income in contemplation of retirement or payments to be made upon termination of employment, and
which plan is not subject to ERISA or the Code;
“
GAAP
” means
generally accepted accounting principles in the United States of America, including, without limitation, those set forth in the
opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board;
“
Glencore AG
”
means Glencore International AG, a Swiss corporation;
“
Glencore Guarantors
”
means Glencore AG and Glencore PLC;
“
Glencore PLC
”
means Glencore International plc, a Jersey corporation;
“
Guarantee
”
means a guarantee by a Guarantor of the obligations of the Borrowers under this Agreement, in the form set out in Appendix E;
“
Guarantors
”
means Bulk Partners, Glencore AG and Glencore PLC;
“
IACS
” means
the International Association of Classification Societies;
“
Insurances
”
means in relation to a Ship:
|
|
(a)
|
all policies and contracts of insurance, including entries of such Ship in any protection and indemnity
or war risks association, effected in respect of such Ship, the Earnings or otherwise in relation to such Ship; and
|
|
|
(b)
|
all rights and other assets relating to, or derived from, any of the foregoing, including any rights
to a return of a premium;
|
“
Insurance Assignment
”
means, in relation to a Ship, a first priority assignment of the Insurances, in the form set out in Appendix F;
“
Interest Period
”
means a period determined in accordance with Clause 6;
“
Interest Rate Agreement
”
means any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement designed to protect a person or any of its subsidiaries against fluctuations in interest rates to or under which
such person or any of its subsidiaries is a party or a beneficiary on the date hereof or becomes a party or a beneficiary hereafter;
“
ISM Code
”
means the International Safety Management Code (including the guidelines on its implementation), adopted by the International Maritime
Organization, 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);
“
ISM Code Documentation
”
includes, in respect of a Ship:
|
|
(a)
|
the Document of Compliance and Safety Management Certificate issued pursuant to the ISM Code in
relation to such Ship within the periods specified by the ISM Code;
|
|
|
(b)
|
all other documents and data which are relevant to the safety management system and its implementation
and verification which the Agent may reasonably require; and
|
|
|
(c)
|
any other documents which are prepared or which are otherwise relevant to establish and maintain
such Ship’s compliance or the compliance of a Borrower or the Approved Manager with the ISM Code which the Agent may reasonably
require;
|
“
ISPS Code
”
means the International Ship and Port Facility Security Code as adopted by the International Maritime Organization, as the same
may be amended or supplemented from time to time;
“
ISPS Code Documentation
”
includes:
|
|
(b)
|
all other documents and data which are relevant to the ISPS Code and its implementation and verification
which the Agent may require;
|
“
ISSC
” means
a valid and current International Ship Security Certificate issued under the ISPS Code;
“
Lending Office
”
means, with respect to any Lender, the office of such Lender specified as its “Lending Office” under its name on Schedule
1 or in the relevant Transfer Certificate pursuant to which it became a Lender, or such other office of such Lender as such Lender
may from time to time specify to the Borrowers and the Agent in accordance with Clause 27.14;
“
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 four (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 11:00 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;
“
Loan
” means
the principal amount from time to time outstanding under this Agreement;
“
Major Casualty
”
means, in relation to a Ship, any casualty to such 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 $1,500,000 or the equivalent in any other currency;
“
Majority Lenders
”
means:
|
|
(a)
|
before the Loan has been made, Lenders whose Commitments total 66.67% of the Total Commitments;
and
|
|
|
(b)
|
after the Loan has been made, Lenders whose Contributions total 66.67% of the Loan;
|
“
Margin
” means
3.25% per annum;
“
Margin Stock
”
has the meaning specified in Regulation U of the Board of Governors of the United States Federal Reserve System and any successor
regulations thereto, as in effect from time to time;
“
Maturity Date
”
means the earlier of the date which is the fifth anniversary of the Drawdown Date and the date on which the Loan is accelerated
pursuant to Clause 20.4;
“
Mortgage
”
means, in relation to a Ship, the first preferred Panamanian ship mortgage on that Ship, in the form set out in Appendix G;
“
Multiemployer Plan
”
means, at any time, a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA to which Bulk Partners or any
subsidiary of it or any ERISA Affiliate has any liability or obligation to contribute or has within any of the six preceding plan
years had any liability or obligation to contribute;
“
Negotiation Period
”
has the meaning given in Clause 5.10;
“
Non-indemnified Tax
”
means:
|
|
(a)
|
any tax on the net income of a Creditor Party (but not a tax on gross income or individual items
of income), whether collected by deduction or withholding or otherwise, which is levied by a taxing jurisdiction which:
|
|
|
(i)
|
is located in the country under whose laws such entity is formed (or in the case of a natural person
is a country of which such person is a citizen); or
|
|
|
(ii)
|
with respect to any Lender, is located in the country of its Lending Office; or
|
|
|
(iii)
|
with respect to any Creditor Party other than a Lender, is located in the country from which such
party has originated its participation in this transaction; or
|
|
|
(b)
|
any tax imposed under FATCA (or any amended or successor provision of FATCA that is substantively
comparable and not materially more onerous to comply with) to the extent imposed under the FATCA rules as in effect on the Effective
Date;
|
“
Note
” means
a promissory note of the Borrowers, payable to the order of the Agent, evidencing the aggregate indebtedness of the Borrowers under
this Agreement, in the form set out in Appendix H;
“
Notifying Lender
”
has the meaning given in Clause 24.1 or Clause 25.1 as the context requires;
“
OFAC
” means
the Office of Foreign Assets Control of the United States Department of the Treasury;
“
pari passu
”,
when used with respect to the ranking of any Financial Indebtedness of any person in relation to other Financial Indebtedness of
such person, means that each such Financial Indebtedness:
|
|
(a)
|
either (i) is not subordinated in right of payment to any other Financial Indebtedness of such
person or (ii) is subordinate in right of payment to the same Financial Indebtedness of such person as is the other and is so subordinate
to the same extent; and
|
|
|
(b)
|
is not subordinate in right of payment to the other or to any Financial Indebtedness of such person
as to which the other is not so subordinate;
|
“
PATRIOT Act
”
means the United States Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism
Improvement and Reauthorization Act of 2005 (H.R. 3199);
“
Payment Currency
”
has the meaning given in Clause 22.4;
“
Permitted Security
Interests
” means:
|
|
(a)
|
Security Interests created or permitted by the Finance Documents;
|
|
|
(b)
|
Security Interests for unpaid but not past due master’s and crew’s wages in accordance
with usual maritime practice;
|
|
|
(c)
|
Security Interests for salvage;
|
|
|
(d)
|
Security Interests arising by operation of law for not more than two (2) months’ prepaid
hire under any charter or other contract of employment in relation to a Ship not otherwise prohibited by this Agreement or any
other Finance Document;
|
|
|
(e)
|
Security Interests for master’s disbursements incurred in the ordinary course of trading
and any other Security Interests arising by operation of law or otherwise in the ordinary course of the operation, repair or maintenance
of a Ship,
provided
such Security Interests do not secure amounts more than 30 days overdue (unless the overdue amount is
being contested by the Borrower that owns such Ship in good faith by appropriate steps) and subject, in the case of Security Interests
for repair or maintenance, to Clause 14.13(h);
|
|
|
(f)
|
any Security Interest created in favor of a plaintiff or defendant in any proceedings or arbitration
as security for costs and expenses where a Borrower is actively prosecuting or defending such proceedings or arbitration in good
faith and such Security Interest does not (and is not likely to) result in any sale, forfeiture or loss of the Ship owned by that
Borrower; 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;
|
provided
that
the Security Interests described in paragraphs (b) through (g) above shall not exceed $1,000,000 in the aggregate at any
time;
“
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)
|
the jurisdiction under the laws of which the company is incorporated or formed;
|
|
|
(b)
|
a jurisdiction in which the company has the center of its main interests or in which the company’s
central management and control is or has recently been exercised;
|
|
|
(c)
|
a jurisdiction in which the overall net income of the company is subject to corporation tax, income
tax or any similar tax;
|
|
|
(d)
|
a jurisdiction 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 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; or
|
|
|
(e)
|
a jurisdiction the courts of which have jurisdiction to make a winding up, administration or similar
order in relation to the company whether as a 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 (a) or (b) above;
|
“
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;
“
Plan
” means
any employee benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the
Code or Section 302 of ERISA, and in respect to which Bulk Partners or any subsidiary of it or ERISA Affiliate is (or, if such
plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of
ERISA;
“
Potential Event of
Default
” means an event or circumstance which, with the giving of any notice, the lapse of time, a determination under
this Agreement and/or the satisfaction of any other condition, would constitute 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;
“
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 two (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 27.16, the London branches of three banks, each of which shall be a member of the British Bankers’
Association, one of which shall be selected by the Agent and two of which shall be selected by the Borrowers;
“
Repayment Date
”
means a date on which a repayment is required to be made under Clause 8;
“
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
”;
“
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 Council of the European Union, the United Nations or its Security
Council or the United Kingdom;
|
|
|
(c)
|
in respect of (i) a “national” of any “designated foreign country”, within
the meaning of the Foreign Assets Control Regulations or the Cuban Asset Control Regulations of the United States Department of
the Treasury, 31 C.F.R., Subtitle B, Chapter V, as amended, or (ii) a “specially designated national” listed by OFAC
or any regulations or rulings issued thereunder; or
|
|
|
(d)
|
otherwise imposed by any law or regulation or Executive Order by which any Creditor Party or a
Borrower or a Guarantor is bound or, as regards a regulation, compliance with which is reasonable in the ordinary course of business
of any Creditor Party or a Borrower or a Guarantor including without limitation laws or regulations or Executive Orders restricting
loans to, investments in, or the export of assets to, foreign countries or entities doing business there;
|
provided
that
the laws and regulations described in paragraphs (a) and (d) shall be applicable only to the extent such laws and regulations
are not inconsistent with the laws and regulations of the United States of America;
“
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 Borrowers and the Lenders;
“
Secured Liabilities
”
means all liabilities that any of the Security Parties has, at the date of this Agreement or at any later time or times, under
or in connection with any Finance Document or any judgment relating to any Finance Documents; and for this purpose, there shall
be disregarded any total or partial discharge of these liabilities, or variation of their terms, which is effected by, or in connection
with, any bankruptcy, liquidation, arrangement or other procedure under the insolvency laws of any country;
“
Security Interest
”
means:
|
|
(a)
|
a mortgage, encumbrance, charge (whether fixed or floating) or pledge, any maritime or other lien
or privilege 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 of the Borrowers, each of the Guarantors, the Time Charterer and any other person (except a Creditor Party) who, as
a surety, guarantor, mortgagor, assignor or pledgor, as a party to any subordination or priorities arrangement, or in any similar
capacity, executes a Finance Document;
“
Security Period
”
means the period commencing on the date of this Agreement and ending on the date on which the Agent notifies the Borrowers, the
other Security Parties and the other Creditor Parties that:
|
|
(a)
|
all amounts which have become due for payment by the Borrowers or any other Security Party under
the Finance Documents have been paid;
|
|
|
(b)
|
no amount is owing or has accrued (without yet having become due for payment) under any Finance
Document;
|
|
|
(c)
|
neither the Borrowers nor any other Security Party has any future or contingent liability under
Clause 21, 22 or 23 or any other provision of this Agreement or another Finance Document; and
|
|
|
(d)
|
the Agent, the Security Trustee and the Majority Lenders do not reasonably consider that there
is a significant risk that any payment or transaction under a Finance Document would be set aside, or would have to be reversed
or adjusted, in any present or possible future bankruptcy of a Borrower or another Security Party or in any present or possible
future proceeding relating to a Finance Document or any asset covered (or previously covered) by a Security Interest created by
a Finance Document;
|
“
Servicing Bank
”
means the Agent or the Security Trustee;
“
Shares
Pledge
”
means a pledge of the Equity Interests of the Borrowers in the form set out in Appendix I;
“
Ship
”
means each of:
|
|
(a)
|
the 2010-built motor vessel of 40,142 gross registered tons and 25,265 net registered tons named
“NORDIC ODYSSEY”, IMO Number 9529451, and registered in the name of Bulk Nordic Odyssey Ltd. under Panamanian flag;
and
|
|
|
(b)
|
the 2011-built motor vessel of 40,142 gross registered tons and 25,265 net registered tons named
“NORDIC ORION”, IMO Number 9529463, and registered in the name of Bulk Nordic Orion Ltd. under Panamanian flag;
|
“
ST
Shipping
” means ST Shipping and Transport Pte. Ltd. (Company Registration No. 200606717H), a company incorporated under
the laws of Singapore;
“
Sub-Time
Charter
” means, in relation to a Ship, a sub-time charter party in respect of that Ship in Agreed Form between the Time
Charterer as owner and the Sub-Time Charterer as charterer, the terms of which shall include, among other things, a charter period
of not less than 5 years and a daily hire rate of not less than $15,500;
“
Sub-Time
Charter Assignment
” means, in relation to a Ship, an assignment of the Sub-Time Charter for such Ship, in the form set
out in Appendix J;
“
Sub-Time
Charterer
” means Nordic Bulk Carriers A/S, a corporation incorporated and existing under the laws of Denmark;
“
Time
Charter
” means, in relation to a Ship, a time charter party in respect of that Ship in Agreed Form between the Borrower
that owns that Ship as owner and the Time Charterer as charterer, the terms of which shall include, among other things, a charter
period of not less than 5 years and a daily hire rate of not less than $15,500;
“
Time
Charter Assignment
” means, in relation to a Ship, an assignment of the Time Charter for such Ship, in the form set out
in Appendix K;
“
Time
Charter Guarantor
” means Glencore AG;
“
Time Charterer
”
means ST Shipping;
“
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 one (1) year without any right to an extension), unless it is within one
(1) month redelivered to the full control of the Borrower owning that Ship; or
|
|
|
(c)
|
any arrest, capture, seizure or detention of that Ship (including any hijacking or theft) unless
it is within one (1) month redelivered to the full control of the Borrower owning that Ship;
|
“
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 Borrower owning
that Ship with that Ship’s 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;
|
“
Transfer Certificate
”
has the meaning given in Clause 27.2;
“
Transferee Lender
”
has the meaning given in Clause 27.2;
“
Transferor Lender
”
has the meaning given in Clause 27.2;
“
UCC
” means
the Uniform Commercial Code of the State of New York; and
“
Voting Stock
”
of any person as of any date means the Equity Interests of such person that are at the time entitled to vote in the election of
the board of directors or similar governing body of such person.
|
|
1.2
|
Construction of certain terms.
In this Agreement:
|
“
approved
”
means, for the purposes of Clause 13, approved in writing by the Agent with the consent of the Majority Lenders;
“
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 corporation, limited liability company, partnership, joint venture, unincorporated association, joint stock company
and trust;
“
consent
”
includes an authorization, consent, approval, resolution, license, exemption, filing, registration, notarization and legalization;
“
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, Email or fax;
“
excess risks
”
means, in relation to a Ship, the proportion (if any) of claims for general average, salvage and salvage charges not recoverable
under the hull and machinery insurances in respect of that Ship in consequence of the value at which the Ship is assessed for the
purpose of such claims exceeding its insured value;
“
excess war risk P&I
cover
” means, in relation to a Ship, cover for claims only in excess of amounts recoverable under the usual war risk
cover including (but not limited to) hull and machinery, crew and protection and indemnity risks;
“
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 statute, regulation or resolution
of the United States of America, any state thereof, the Council of the European Union, the European Commission, the United Nations
or its Security Council or any other Pertinent Jurisdiction;
“
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 Borrower owning 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
natural persons; any company; any state, political sub-division of a state and local or municipal authority; and any international
organization;
“
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 that 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 Time Clauses (Hulls)(1/11/02 or 1/11/03) or clause 8 of the Institute Time Clauses (Hulls) (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 (either having the force of law or compliance with which
is reasonable in the ordinary course of business of the party concerned) of any governmental body, intergovernmental or supranational,
agency, department or regulatory, self-regulatory or other authority or organization;
“
subsidiary
”
has the meaning given in Clause 1.4;
“
successor
”
includes any person who is entitled (by assignment, novation, merger or otherwise) to any other person’s rights under this
Agreement or any other Finance Document (or any interest in those rights) or who, as administrator, liquidator or otherwise, is
entitled to exercise those rights; and in particular references to a successor include a person to whom those rights (or any interest
in those rights) are transferred or pass as a result of a merger, division, reconstruction or other reorganization of it or any
other person;
“
tax
” includes
any present or future tax, duty, impost, levy or charge of any kind which is imposed by any country, any state, any political sub-division
of a state or any local or municipal authority or any other governmental authority authorized to levy such tax (including any such
imposed in connection with exchange controls), and any related penalties, interest or fines; and
“
war risks
”
includes the risk of mines and all risks excluded by clause 29 of the Institute Hull Clauses (1/11/02 or 1/11/03) or clause 24
of the Institute Time clauses (Hulls) (1/11/1995) or clause 23 of the Institute Time Clauses (Hulls) (1/10/83).
|
|
1.3
|
Meaning of “month”.
A period of one or more “
months
” ends
on the day in the relevant calendar month numerically corresponding to the day of the calendar month on which the period started
(“
the numerically corresponding day
”), but:
|
|
|
(a)
|
on the Business Day following the numerically corresponding day if the numerically corresponding
day is not a Business Day or, if there is no later Business Day in the same calendar month, on the Business Day preceding the numerically
corresponding day; or
|
|
|
(b)
|
on the last Business Day in the relevant calendar month, if the period started on the last Business
Day in a calendar month or if the last calendar month of the period has no numerically corresponding day,
|
and “
month
”
and “
monthly
” shall be construed accordingly.
|
|
1.4
|
Meaning of “subsidiary”.
A company (S) is a subsidiary of another company (P)
if:
|
|
|
(a)
|
a majority of the issued Equity Interests in S (or a majority of the issued Equity Interests 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 Equity
Interests of S; or
|
|
|
(c)
|
P has the direct or indirect power to appoint or remove a majority of the directors (or equivalent)
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 in Clause 1.1 to a document being in the form of a particular Appendix include references
to that form with any modifications to that form which the Agent approves or reasonably requires with the consent of the Majority
Lenders and which are acceptable to the Borrowers;
|
|
|
(c)
|
references to, or to a provision of, any law or regulation include any amendment, extension, re-enactment
or replacement, whether made before the date of this Agreement or otherwise;
|
|
|
(d)
|
words denoting the singular number shall include the plural and vice versa; 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.
|
|
|
1.7
|
Accounting terms
. Unless otherwise specified herein, all accounting terms used in this Agreement
and in the other Finance Documents shall be interpreted, and all financial statements and certificates and reports as to financial
matters required to be delivered to any Creditor Party under this Agreement shall be prepared, in accordance with GAAP as from
time to time in effect.
|
|
|
1.8
|
Inferences regarding materiality
. To the extent that any representation, warranty, covenant
or other undertaking of a Security Party in this Agreement or any other Finance Document is qualified by reference to those matters
which are not reasonably expected to result in a “material adverse effect” or language of similar import, no inference
shall be drawn therefrom that any Creditor Party has knowledge or approves of any noncompliance by such Security Party with any
law or regulation.
|
|
|
2.1
|
Amount of facility.
Subject to the other provisions of this Agreement, the Lenders severally
agree to make available to the Borrowers a loan facility in the principal amount of up to the lesser of $40,000,000 or 65% of the
aggregate Fair Market Value of the Ships as of the date of this Agreement.
|
|
|
2.2
|
Lenders’ participations in Advance.
Subject to the other provisions of this Agreement,
each Lender shall participate in the Advance in the proportion which, as at the Drawdown Date, its Commitment bears to the Total
Commitments.
|
|
|
2.3
|
Purpose of Advance.
The Borrowers undertake with each Creditor Party to use the Advance
only for the purpose of (i) repayment of a bridge loan provided by ST Shipping to the Borrowers, and (ii) repayment of subordinated
shareholder loans provided by ST Shipping and Bulk Partners to the Borrowers.
|
|
|
2.4
|
Cancellation of Total Commitments.
Any portion of the Total Commitments not disbursed to
the Borrowers shall be cancelled and terminated automatically on the expiration of the Availability Period.
|
|
|
3
|
POSITION OF THE LENDERS
|
|
|
3.1
|
Interests several.
The rights of the Lenders under this Agreement are several.
|
|
|
3.2
|
Individual right of action.
Each Lender shall be entitled to sue for any amount which has
become due and payable by a Security Party to it under this Agreement without joining the Agent, the Security Trustee or any other
Lender as additional parties in the proceedings.
|
|
|
3.3
|
Proceedings requiring Majority Lender consent.
Except as provided in Clause 3.2, no Lender
may commence proceedings against 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 are several; and
a failure of a Lender to perform its obligations under this Agreement shall not result in:
|
|
|
(a)
|
the obligations of the other Lenders being increased; nor
|
|
|
(b)
|
any Security Party or any other Lender being discharged (in whole or in part) from its obligations
under any Finance Document,
|
and in no circumstances shall
a Lender have any responsibility for a failure of another Lender to perform its obligations under this Agreement.
|
|
3.5
|
Replacement of a Lender.
|
|
|
(i)
|
any Lender becomes a Non-Consenting Lender (as defined in paragraph (c) below); or
|
|
|
(ii)
|
a Borrower or any other Security Party becomes obliged in the absence of an Event of Default to
repay any amount in accordance with Clause 24 or to pay additional amounts pursuant to Clause 23 or Clause 25 to any Lender in
excess of amounts payable to other Lenders generally,
|
then the Borrowers
may, on 30 Business Days’ prior written notice to the Agent and such Lender, replace such Lender by requiring such Lender
to (and such Lender shall) transfer pursuant to Clause 27 all (and not part only) of its rights and obligations under this Agreement
to a Lender or other bank, financial institution, trust, fund or other entity (a “
Replacement Lender
”) selected
by the Borrowers, which is acceptable to the Agent with the consent of the Majority Lenders (other than the Lender the Borrowers
desire to replace), which confirms its willingness to assume and by its execution of a Transfer Certificate does assume all the
obligations of the transferring Lender (including the assumption of the transferring Lender’s participations on the same
basis as the transferring Lender) for a purchase price in cash payable at the time of transfer equal to the outstanding principal
amount of such Lender’s participation in the outstanding Advances and all accrued interest and/or breakages costs and other
amounts payable in relation thereto under the Finance Documents.
|
|
(b)
|
The replacement of a Lender pursuant to this Clause 3.5 shall be subject to the following conditions:
|
|
|
(i)
|
the Borrowers shall have no right to replace the Agent or the Security Trustee;
|
|
|
(ii)
|
neither the Agent nor any Lender shall have any obligation to the Borrowers to find a Replacement
Lender;
|
|
|
(iii)
|
in the event of a replacement of a Non-Consenting Lender such replacement must take place no later
than 30 days after the date the Borrowers notify the Non-Consenting Lender and the Agent of its intent to replace the Non-Consenting
Lender pursuant to Clause 3.5(a); and
|
|
|
(iv)
|
in no event shall the Lender replaced under this paragraph (b) be required to pay or surrender
to such Replacement Lender any of the fees received by such Lender pursuant to the Finance Documents.
|
|
|
(c)
|
For purposes of this Clause 3.5, in the event that:
|
|
|
(i)
|
a Borrower or the Agent has requested the Lenders to give a consent in relation to or to agree
to a waiver or amendment of any provisions of the Finance Documents;
|
|
|
(ii)
|
the consent, waiver or amendment in question requires the approval of all Lenders; and
|
|
|
(iii)
|
Lenders whose Commitments aggregate more than 66.67% percent of the Total Commitments have consented
to or agreed to such waiver or amendment,
|
then any Lender who does not
and continues not to consent or agree to such waiver or amendment shall be deemed a “
Non-Consenting Lender
”.
|
|
4.1
|
Request for Advance.
Subject to the following conditions, the Borrowers may request the
Advance to be made by delivering to the Agent a completed Drawdown Notice not later than 10:00 a.m. (New York City time) two (2)
Business Days prior to the intended Drawdown Date.
|
|
|
4.2
|
Availability.
The conditions referred to in Clause 4.1 are that:
|
|
|
(a)
|
the Drawdown Date must be a Business Day during the Availability Period;
|
|
|
(b)
|
the amount of the Advance shall not exceed the lesser of $40,000,000 and 65% of the aggregate Fair
Market Value of the Ships as of the date of this Agreement; and
|
|
|
(c)
|
the applicable conditions precedent stated in Clause 9 hereof shall have been satisfied or waived
as provided therein.
|
|
|
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 Drawdown Date;
|
|
|
(b)
|
the amount of that Lender’s participation in the Advance; and
|
|
|
(c)
|
the duration of the first Interest Period.
|
|
|
4.4
|
Drawdown Notice irrevocable.
A Drawdown Notice must be signed by a director, an officer
or a duly authorized attorney-in-fact of the Borrowers and once served, a Drawdown Notice cannot be revoked without the prior consent
of the Agent.
|
|
|
4.5
|
Lenders to make available Contributions.
Subject to the provisions of this Agreement, each
Lender shall, before 10:00 a.m. (New York City time) on and with value on the Drawdown Date, make available to the Agent for the
account of the Borrowers the amount due from that Lender under Clause 2.2.
|
|
|
4.6
|
Disbursement of Advance.
Subject to the provisions of this Agreement, the Agent shall on
the Drawdown Date pay to the Borrowers the amounts which the Agent receives from the Lenders under Clause 4.5 and that payment
to the Borrowers shall be made:
|
|
|
(a)
|
to the account which the Borrowers specify 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 the
account of a third party designated by the Borrowers in a Drawdown Notice shall constitute the making of the Advance and the Borrowers
shall at that time become indebted, as principal and direct obligor, to each Lender in an amount equal to that Lender’s Contribution.
|
|
|
(a)
|
The obligation of the Borrowers to pay the principal of, and interest on, the Loan shall be evidenced
by the Note, which shall be dated the date of the Drawdown Date.
|
|
|
(b)
|
The Advance made by the Lenders to the Borrowers may be evidenced by a notation of the same made
by the Agent on the grid attached to the Note, which notation, absent manifest error, shall be
prima facie
evidence of the
amount of the Advance.
|
|
|
(c)
|
Each Lender shall record on its internal records the amount of its participation in the Advance
and each payment in respect thereof, and the unpaid balance of such participation in the Advance shall, absent manifest error and
to the extent not inconsistent with the notations made by the Agent on the grid attached to the Note, be as so recorded.
|
|
|
(d)
|
The failure of the Agent or any Lender to make any such notation shall not affect the obligation
of the Borrowers in respect of the Advance or the Loan nor affect the validity of any transfer by the Agent of the Note.
|
|
|
(e)
|
On receipt of satisfactory evidence that the Note has been lost, mutilated or destroyed and on
surrender of the remnants thereof, if any, the Borrowers will promptly replace the Note, without charge to the Creditor Parties,
with a similar Note. If such replacement Note replaces a lost Note it shall bear an endorsement to that effect. Any lost Note subsequently
found shall be surrendered to the Borrowers and cancelled. The Agent shall indemnify the Borrowers for any losses, claims or damages
resulting from the loss of such Note.
|
|
|
5.1
|
Normal rate of interest.
Subject to the provisions of this Agreement, the rate of interest
on the Loan in respect of an Interest Period shall be the aggregate of the Margin and LIBOR for that Interest Period.
|
|
|
5.2
|
Payment of normal interest.
Subject to the provisions of this Agreement, interest on the
Loan in respect of each Interest Period shall be paid by the Borrowers on the last day of that Interest Period.
|
|
|
5.3
|
Payment of accrued interest.
In the case of an Interest Period longer than three (3) months,
accrued interest shall be paid every three (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
Borrowers and each Lender of:
|
|
|
(a)
|
each rate of interest; and
|
|
|
(b)
|
the duration of each Interest Period (as determined under Clause 6.2),
|
as soon as reasonably practicable
after each is determined.
|
|
5.5
|
Obligation of Reference Banks to quote.
A Reference Bank which is a Lender shall use all
reasonable efforts to supply the 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
two (2) or more of the Reference Banks fail to provide a quotation, the relevant rate of interest shall be set in accordance with
Clauses 5.7 to 5.12 of this Agreement.
|
|
|
5.7
|
Market disruption.
Clauses 5.7 to 5.12 of this Agreement apply if:
|
|
|
(a)
|
no Screen Rate is available for an Interest Period and two (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 one (1) Business Day before the start of an Interest Period, Lenders having Contributions
together amounting to more than 50% of the Loan (or, if an Advance has not been made, Commitments amounting to more than 50% of
the Total Commitments) notify the Agent that LIBOR fixed by the Agent 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.
|
|
|
5.8
|
Notification of market disruption.
The Agent shall promptly notify the Borrowers 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’s notice under Clause 5.8 is served before an
Advance is made, the Lenders’ obligations to make the Advance shall be suspended while the circumstances referred to in the
Agent’s notice continue.
|
|
|
5.10
|
Negotiation of alternative rate of interest.
If the Agent’s notice under Clause 5.8
is served after an Advance is made, the Borrowers, the Agent and the Lenders shall use reasonable endeavors 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 for the Lenders to fund or continue to fund their Contribution during the Interest Period concerned.
|
|
|
5.11
|
Application of agreed alternative rate of interest.
Any alternative interest rate which
is agreed during the Negotiation Period shall take effect in accordance with the terms agreed by the Borrowers, the Agent and the
Lenders.
|
|
|
5.12
|
Alternative rate of interest in absence of agreement.
If an alternative interest rate 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, set an interest period and interest rate representing the cost of funding of
the Lenders in Dollars or in any available currency of their or its Contribution plus the Margin. 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 Borrowers do not agree with an interest rate set by the Agent
under Clause 5.12, the Borrowers may give the Agent not less than 5 Business Days’ notice of its intention to prepay (without
premium or penalty and without any applicable prepayment fee under Clause 8.9(c)) 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 of the Borrowers’ notice of intended prepayment and:
|
|
|
(a)
|
on the date on which the Agent serves that notice, the Total Commitments shall be cancelled; and
|
|
|
(b)
|
on the last Business Day of the interest period set by the Agent, the Borrowers shall prepay (without
premium or penalty and without any applicable prepayment fee under Clause 8.9(c)) the Loan, 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.
|
|
|
6.1
|
Commencement of Interest Periods.
The first Interest Period applicable to the Advance shall
commence on the 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 and 6.5, each Interest Period
shall be 3 months or such other period as the Agent may, with the authorization of all the Lenders, agree with the Borrowers pursuant
to Clause 6.4.
|
|
|
6.3
|
Duration of Interest Periods for repayment installments.
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.
|
|
|
6.4
|
Interest periods longer than 12 months.
Subject to Clause 6.5, upon not less than fifteen
(15) Business Days prior written notice from the Borrowers to the Agent, and subject to the agreement of all of the Lenders, the
interest rate of all or more than 50% of the Advance may be fixed for an Interest Period in excess of 12 months. The interest rate
will be the actual refinancing rate available to the Lenders (on a weighted average basis) for that Interest Period plus the Margin.
The Agent shall notify the Borrowers of the proposed interest rate within 8 Business Days of the receipt of such notice from the
Borrowers. If the Borrowers notify the Agent within 5 Business Days of the notice of the proposed interest rate that the Borrowers
do not agree with the proposed interest rate, then the Interest Period shall be determined under Clause 6.2.
|
|
|
6.5
|
Non-availability of matching deposits for Interest Period selected.
If, after the Borrowers
have selected and the Lenders have agreed an Interest Period longer than three (3) months pursuant to Clause 6.4, any Lender notifies
the Agent by 11:00 a.m. (New York City time) on the third Business Day before the commencement of the Interest Period that it is
not satisfied that deposits in Dollars for a period equal to the Interest Period will be available to it in the London Interbank
Market when the Interest Period commences, the Interest Period shall be of three (3) months.
|
|
|
7.1
|
Payment of default interest on overdue amounts.
The Borrowers shall pay interest in accordance
with the following provisions of this Clause 7 on any amount payable by such Borrower under any Finance Document which the Agent,
the Security Trustee or any 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 20.4, 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 2.00 percent 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); and
|
|
|
(b)
|
the Margin plus, in respect of successive periods of any duration (including at call) up to three
(3) months which the Agent may, with the consent of the Majority Lenders, select from time to time, LIBOR.
|
|
|
7.4
|
Notification of interest periods and default rates.
The Agent shall promptly notify the
Lenders and each relevant Security Party 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 such Security Party is
liable to pay such interest only with effect from the date of the Agent’s 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.
|
|
|
8
|
REPAYMENT AND PREPAYMENT
|
|
|
8.1
|
Amount of repayment installments.
The Borrowers shall repay the Loan as follows:
|
|
Date
|
|
Repayment
|
|
|
Outstanding Loan
|
|
|
1st Repayment Date
|
|
$
|
1,000,000
|
|
|
$
|
39,000,000
|
|
|
2
nd
Repayment Date
|
|
$
|
1,000,000
|
|
|
$
|
38,000,000
|
|
|
3
rd
Repayment Date
|
|
$
|
1,000,000
|
|
|
$
|
37,000,000
|
|
|
4
th
Repayment Date
|
|
$
|
1,000,000
|
|
|
$
|
36,000,000
|
|
|
5
th
Repayment Date
|
|
$
|
2,000,000
|
|
|
$
|
34,000,000
|
|
|
6
th
Repayment Date
|
|
$
|
1,000,000
|
|
|
$
|
33,000,000
|
|
|
7
th
Repayment Date
|
|
$
|
1,000,000
|
|
|
$
|
32,000,000
|
|
|
8
th
Repayment Date
|
|
$
|
1,000,000
|
|
|
$
|
31,000,000
|
|
|
9
th
Repayment Date
|
|
$
|
2,000,000
|
|
|
$
|
29,000,000
|
|
|
10
th
Repayment Date
|
|
$
|
1,000,000
|
|
|
$
|
28,000,000
|
|
|
11
th
Repayment Date
|
|
$
|
1,000,000
|
|
|
$
|
27,000,000
|
|
|
12
th
Repayment Date
|
|
$
|
1,000,000
|
|
|
$
|
26,000,000
|
|
|
13
th
Repayment Date
|
|
$
|
1,000,000
|
|
|
$
|
25,000,000
|
|
|
14
th
Repayment Date
|
|
$
|
1,000,000
|
|
|
$
|
24,000,000
|
|
|
15
th
Repayment Date
|
|
$
|
1,000,000
|
|
|
$
|
23,000,000
|
|
|
16
th
Repayment Date
|
|
$
|
1,000,000
|
|
|
$
|
22,000,000
|
|
|
17
th
Repayment Date
|
|
$
|
2,000,000
|
|
|
$
|
20,000,000
|
|
|
18
th
Repayment Date
|
|
$
|
1,000,000
|
|
|
$
|
19,000,000
|
|
|
19
th
Repayment Date
|
|
$
|
1,000,000
|
|
|
$
|
18,000,000
|
|
|
Maturity Date
|
|
$
|
1,000,000
|
|
|
$
|
17,000,000
|
|
|
|
8.2
|
Repayment Dates.
The first installment shall be repaid on the date falling three (3) months
after the Drawdown Date and the last installment on the Maturity Date.
|
|
|
8.3
|
Maturity Date.
On the Maturity Date, the Borrowers shall additionally pay to the Agent for
the account of the Creditor Parties a balloon payment of $17,000,000, or such other amount as is outstanding on the Loan as of
the Maturity Date, and all other sums then accrued or owing under any Finance Document.
|
|
|
8.4
|
Voluntary prepayment.
Subject to the following conditions, the Borrowers may prepay the
whole or any part of the Loan on the last day of an Interest Period.
|
|
|
8.5
|
Conditions for voluntary prepayment.
The conditions referred to in Clause 8.4 are that:
|
|
|
(a)
|
a partial prepayment shall be $500,000 or a multiple of $500,000;
|
|
|
(b)
|
the Agent has received from the Borrowers at least five (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 Borrowers have provided evidence satisfactory to the Agent that any consent required by the
Borrowers in connection with the prepayment has been obtained and remains in force, and that any regulation relevant to this Agreement
which affects the Borrowers has been complied with (which may be satisfied by the Borrowers certifying that no consents are required
and that no regulations need to be 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 authorization of the Majority Lenders, and the amount specified in the prepayment notice
shall become due and payable by the Borrowers 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 Borrowers under
Clause 8.5(c).
|
|
|
8.8
|
Mandatory prepayment.
The Borrowers shall prepay the relevant proportion of the Loan if
a Ship is sold or becomes a Total Loss:
|
|
|
(a)
|
in the case of a sale, on or before the date on which the sale is completed by delivery of such
Ship to the buyer; or
|
|
|
(b)
|
in the case of a Total Loss, on the earlier of the date falling 150 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.
|
For purposes
of this Clause 8.8, “
relevant proportion
” means:
|
|
(i)
|
in the case of the first Ship to be sold and/or to become a Total Loss, in an amount needed to
preserve the Collateral Maintenance Ratio required by Clause 15.2(c); or
|
|
|
(ii)
|
100%, if the Ship is the second to be sold and/or to become a Total Loss.
|
|
|
8.9
|
Amounts payable on prepayment.
A voluntary prepayment under Clause 8.4 and a mandatory prepayment
under Clause 8.8 shall be made together with:
|
|
|
(a)
|
accrued interest (and any other amount payable under Clause 22 or otherwise) in respect of the
amount prepaid;
|
|
|
(b)
|
if the prepayment is not made on the last day of an Interest Period, any sums payable under Clause
22.1(b); and
|
|
|
(c)
|
the following prepayment fees as applicable:
|
|
|
(i)
|
2.00% of the prepaid amount in respect of any prepayment made prior to the first anniversary of
the Drawdown Date;
|
|
|
(ii)
|
1.00% of the prepaid amount in respect of any prepayment made on or after the first anniversary
of the Drawdown Date but prior to the second anniversary of the Drawdown Date;
|
|
|
(iii)
|
0.50% of the prepaid amount in respect of any prepayment made on or after the second anniversary
of the Drawdown Date but prior to the third anniversary of the Drawdown Date;
|
provided
that
no prepayment fee shall be payable:
|
|
(A)
|
in respect of a mandatory prepayment under Clause 8.8(b), 15.3 or 24.1(c);
|
|
|
(B)
|
in respect of amounts paid pursuant to Clauses 8.9(a) and (b); or
|
|
|
(C)
|
in respect of a voluntary prepayment under Clause 8.4 provided that such payment is made from the
Earnings Account and provided that the Minimum Balance required by Clause 19.2 is always maintained.
|
|
|
8.10
|
Application of partial prepayment.
Each partial prepayment under Clause 8.4 shall be applied
against the repayment installments specified in Clause 8.1 in inverse order of maturity.
|
|
|
8.11
|
No reborrowing.
No amount prepaid may be reborrowed.
|
|
|
9.1
|
Documents, fees and no default.
Each Lender’s obligation to contribute to the Advance
is subject to the following conditions precedent:
|
|
|
(a)
|
that, on or before the service of the Drawdown Notice, the Agent receives:
|
|
|
(i)
|
the documents described in Part A of Schedule 4 in form and substance satisfactory to the Agent;
and
|
|
|
(ii)
|
such documentation and other evidence as is reasonably requested by the Agent or a Lender in order
for each to carry out and be satisfied with the results of all necessary “know your customer” or other checks which
it is required to carry out in relation to the transactions contemplated by this Agreement and the other Finance Documents, including
without limitation obtaining, verifying and recording certain information and documentation that will allow the Agent and each
of the Lenders to identify each Security Party in accordance with the requirements of the PATRIOT Act;
|
|
|
(b)
|
that, on the Drawdown Date but prior to the making of the Advance, the Agent receives or is satisfied
that it will receive on the making of the Advance the documents described in Part B of Schedule 4 in form and substance satisfactory
to it;
|
|
|
(c)
|
that, on or before the service of the Drawdown Notice, the Agent receives the facility fee referred
to in Clause 21.1, all accrued commitment fee payable pursuant to Clause 21.1 and the upfront fee referred to in Clause 21.1 and
has received payment of the expenses referred to in Clause 21.2; and
|
|
|
(d)
|
that both at the date of the Drawdown Notice and at the Drawdown Date:
|
|
|
(i)
|
no Event of Default or Potential Event of Default has occurred or would result from the borrowing
of the Advance;
|
|
|
(ii)
|
the representations and warranties in Clause 10 and those of the Borrowers or any other Security
Party which are set out in the other Finance Documents (other than those relating to a specific date) would be true and not misleading
if repeated on each of those dates with reference to the circumstances then existing;
|
|
|
(iii)
|
there has been no material change in the consolidated financial condition, operations or business
prospects of the Borrowers or any of the Guarantors since the date on which the Borrowers and/or the Guarantors provided information
concerning those topics to the Agent and/or any Lender;
|
|
|
(iv)
|
there has been no material adverse global economic or political developments; and
|
|
|
(v)
|
there has been no material adverse development in the international money and capital markets.
|
|
|
(e)
|
that, if the Collateral Maintenance Ratio were applied immediately following the making of the
Advance, the Borrowers would not be required to provide additional Collateral or prepay part of the Loan under Clause 15; 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 authorization of the Majority Lenders,
reasonably request by written notice (email is an acceptable form of such notice) to the Borrowers prior to the Drawdown Date.
|
|
|
9.2
|
Waiver of conditions precedent.
Notwithstanding anything in Clause 9.1 to the contrary,
if the Agent, with the consent of the Majority Lenders, permits the Advance to be borrowed before certain of the conditions referred
to in Clause 9.1 are satisfied, the Borrowers shall ensure that such conditions are satisfied within ten (10) Business Days after
the Drawdown Date (or such longer period as the Agent may specify).
|
|
|
10
|
REPRESENTATIONS AND WARRANTIES
|
|
|
10.1
|
General.
Each of the Borrowers represents and warrants to each Creditor Party as of the
Effective Date and the Drawdown Date as follows.
|
|
|
10.2
|
Status.
Each of the Borrowers is:
|
|
|
(a)
|
duly incorporated or formed and validly existing and in good standing under the law of its jurisdiction
of incorporation or formation;
|
|
|
(b)
|
duly qualified and in good standing as a foreign company in each other jurisdiction in which it
owns or leases property or in which the conduct of its business requires it to so qualify or be licensed except where, in each
case, the failure to so qualify or be licensed and be in good standing could not reasonably be expected to have a material adverse
effect on its business, assets or financial condition or which may affect the legality, validity, binding effect or enforceability
of the Finance Documents; and
|
|
|
(c)
|
there are no proceedings or actions pending or contemplated by either of the Borrowers, or to the
knowledge of the Borrowers contemplated by any third party, seeking to adjudicate either of the Borrowers a bankrupt or insolvent,
or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief
or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property.
|
|
|
10.3
|
Company power; consents.
Each of the Borrowers and has taken all action, and no consent
of any person is required, for:
|
|
|
(a)
|
it to own or lease and operate its properties and to carry on its business as now conducted and
as proposed to be conducted;
|
|
|
(b)
|
it to execute each Finance Document to which it is or is to become a party;
|
|
|
(c)
|
it to execute the Time Charters, and comply with its obligations under the relevant Time Charter
and each Finance Document to which it is or is to become a party;
|
|
|
(d)
|
it to grant the Security Interests granted by it pursuant to the Finance Documents to which it
is or is to become a party;
|
|
|
(e)
|
the perfection or maintenance of the Security Interests created by the Finance Documents (including
the first priority nature thereof); and
|
|
|
(f)
|
the exercise by any Creditor Party of their rights under any of the Finance Documents or the remedies
in respect of the Collateral pursuant to the Finance Documents,
|
except, in each case, for consents
which have been duly obtained, taken, given or made and are in full force and effect.
|
|
10.4
|
Consents in force.
All the consents referred to in Clause 10.3 remain in force and nothing
has occurred which makes any of them liable to revocation.
|
|
|
(a)
|
Each of the Borrowers owns (i) in the case of owned real property, good and marketable fee title
to and (ii) in the case of owned personal property, good and valid title to, or, in the case of leased real or personal property,
valid and enforceable leasehold interests (as the case may be) in, all of its properties and assets, tangible and intangible, of
any nature whatsoever, free and clear in each case of all Security Interests or claims, except for Permitted Security Interests.
|
|
|
(b)
|
Except for Permitted Security Interests, neither of the Borrowers has created or is contractually
bound to create any Security Interest on or with respect to any of its assets, properties, rights or revenues, and except as provided
in this Agreement, neither of the Borrowers is restricted by contract, applicable law or regulation or otherwise from creating
Security Interests on any of its assets, properties, rights or revenues.
|
|
|
(c)
|
Each of the Borrowers has received all deeds, assignments, waivers, consents, non-disturbance and
attornment or similar agreements, bills of sale and other documents, and has duly effected all recordings, filings and other actions
necessary to establish, protect and perfect such Borrower’s right, title and interest in and to the Ship owned by it and
other properties and assets (or arrangements for such recordings, filings and other actions acceptable to the Agent shall have
been made).
|
|
|
10.6
|
Legal validity; effective first priority Security Interests.
Subject to any relevant insolvency
laws affecting creditors’ rights generally:
|
|
|
(a)
|
the Finance Documents to which each of the Borrowers is a party, constitute or, as the case may
be, will constitute upon execution and delivery (and, where applicable, registration as provided for in the Finance Documents),
such Borrower’s legal, valid and binding obligations enforceable against it in accordance with their respective terms; and
|
|
|
(b)
|
the Finance Documents to which each of the Borrowers is a party, create or, as the case may be,
will create upon execution and delivery (and, where applicable, registration as provided for in the Finance Documents), legal,
valid and binding first priority Security Interests enforceable in accordance with their respective terms over all the assets to
which they, by their terms, relate.
|
|
|
10.7
|
No third party Security Interests.
Without limiting the generality of Clauses 10.5 and 10.6,
at the time of the execution and delivery of each Finance Document to which a Borrower is a party:
|
|
|
(a)
|
the Borrower party thereto 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 borrowing of the Advance, the execution of each Finance Document and compliance
with each Finance Document will not involve or lead to a contravention of:
|
|
|
(a)
|
to the knowledge of the Borrowers, any law or regulation; or
|
|
|
(b)
|
the constitutional documents of a Borrower; or
|
|
|
(c)
|
any contractual or other obligation or restriction which is binding on a Borrower or any of its
assets.
|
|
|
10.9
|
Status of Secured Liabilities.
The Secured Liabilities constitute direct, unconditional
and general obligations of each Borrower and rank (a) senior to all subordinated Financial Indebtedness and (b) not less than
pari
passu
(as to priority of payment and as to security) with all other Financial Indebtedness of each Borrower.
|
|
|
(a)
|
All payments which a Borrower is liable to make under the Finance Documents to which it is a party
can properly be made without deduction or withholding for or on account of any tax payable under any law of any Pertinent Jurisdiction.
|
|
|
(b)
|
Each Borrower has timely filed or has caused to be filed all tax returns and other reports that
it is required by law or regulation to file in any Pertinent Jurisdiction, and has paid or caused to be paid all taxes, assessments
and other similar charges that are due and payable in any Pertinent Jurisdiction, other than taxes and charges:
|
|
|
(i)
|
which (A) are not yet due and payable or (B) are being contested in good faith by appropriate proceedings
and for which adequate reserves have been established and as to which such failure to have paid such tax does not create any material
risk of sale, forfeiture, loss, confiscation or seizure of a Ship or of criminal liability; or
|
|
|
(ii)
|
the non-payment of which could not reasonably be expected to have a material adverse effect on
the financial condition of such Borrower.
|
The charges,
accruals, and reserves on the books of each Borrower respecting taxes are adequate in accordance with GAAP.
|
|
(c)
|
No material claim for any tax has been asserted against a Borrower by any Pertinent Jurisdiction
or other taxing authority other than claims that are included in the liabilities for taxes in the most recent balance sheet of
such person or disclosed in the notes thereto, if any.
|
|
|
(d)
|
The execution, delivery, filing and registration or recording (if applicable) of the Finance Documents
and the consummation of the transactions contemplated thereby will not cause any of the Creditor Parties to be required to make
any registration with, give any notice to, obtain any license, permit or other authorization from, or file any declaration, return,
report or other document with any governmental authority in any Pertinent Jurisdiction.
|
|
|
(e)
|
No taxes are required by any governmental authority in any Pertinent Jurisdiction to be paid with
respect to or in connection with the execution, delivery, filing, recording, performance or enforcement of any Finance Document.
|
|
|
(f)
|
The execution, delivery, filing, registration, recording, performance and enforcement of the Finance
Documents by any of the Creditor Parties will not cause such Creditor Party to be subject to taxation under any law or regulation
of any governmental authority in any Pertinent Jurisdiction of the Borrowers.
|
|
|
(g)
|
It is not necessary for the legality, validity, enforceability or admissibility into evidence of
this Agreement or any other Finance Document that any stamp, registration or similar taxes be paid on or in relation to this Agreement
or any of the other Finance Documents.
|
|
|
10.11
|
No default.
No Event of Default or Potential Event of Default has occurred or would result
from the borrowing of the Advance.
|
|
|
10.12
|
Information.
All financial statements, information and other data furnished by or on behalf
of a Borrower to any of the Creditor Parties:
|
|
|
(a)
|
was true and accurate in all material respects at the time it was given;
|
|
|
(b)
|
such financial statements, if any, have been prepared in accordance with GAAP and accurately and
fairly represent in all material respects the financial condition of such Borrower as of the date or respective dates thereof and
the results of operations of such Borrower for the period or respective periods covered by such financial statements;
|
|
|
(c)
|
there are no other facts or matters the omission of which would have made or make any such information
false or misleading in any material respect;
|
|
|
(d)
|
there has been no material adverse change in the financial condition, operations or business prospects
of such Borrower since the date on which such information was provided other than as previously disclosed to the Agent in writing;
and
|
|
|
(e)
|
neither of the Borrowers has any contingent obligations, liabilities for taxes or other outstanding
financial obligations which are material in the aggregate except as disclosed in such statements, information and data.
|
|
|
10.13
|
No litigation.
No legal or administrative action involving a Borrower (including any action
relating to any alleged or actual breach of the ISM Code, the ISPS Code or any Environmental Law) has been commenced or taken by
any person, or, to a Borrower’s knowledge, is likely to be commenced or taken which, in either case, would be likely to have
a material adverse effect on the business, assets or financial condition of a Borrower or which may affect the legality, validity,
binding effect or enforceability of the Finance Documents.
|
|
|
10.14
|
Intellectual property.
Except for those with respect to which the failure to own or license
could not reasonably be expected to have a material adverse effect, each Borrower owns or has the right to use all patents, trademarks,
permits, service marks, trade names, copyrights, franchises, formulas, licenses and other rights with respect thereto, and have
obtained assignment of all licenses and other rights of whatsoever nature, that are material to its business as currently contemplated
without any conflict with the rights of others.
|
|
|
10.15
|
ISM Code and ISPS Code compliance.
Each Borrower has obtained or will obtain or will cause
to be obtained all necessary ISM Code Documentation and ISPS Code Documentation in connection with the Ship owned by it and its
operation and will be or will cause such Ship and the relevant Approved Manager to be in full compliance with the ISM Code and
the ISPS Code.
|
|
|
10.16
|
Validity and completeness of Time Charter and Sub-Time Charter.
|
|
|
(a)
|
Each Time Charter constitutes valid, binding and enforceable obligations of the Time Charterer
and the relevant Borrower in accordance with its terms and:
|
|
|
(i)
|
the copy of such Time Charter delivered to the Agent before the date of this Agreement is a true
and complete copy; and
|
|
|
(ii)
|
no amendments or additions to the Time Charter have been agreed nor has the relevant Borrower or
the Time Charterer waived any of their respective rights under the Time Charter, in each case that would be adverse in any material
respect to the interests of the Creditor Parties (or any of them) under or in respect of the Finance Documents.
|
|
|
(b)
|
[intentionally omitted].
|
|
|
(c)
|
Each Sub-Time Charter constitutes valid, binding and enforceable obligations of the Time Charterer
and the Sub-Time Charterer in accordance with its terms and:
|
|
|
(i)
|
the copy of such Sub-Time Charter delivered to the Agent before the date of this Agreement is a
true and complete copy; and
|
|
|
(ii)
|
no amendments or additions to the Sub-Time Charter have been agreed nor has the Time Charterer
or the Sub-Time Charterer waived any of their respective rights under the Sub-Time Charter in each case that would be adverse in
any material respect to the interests of the Creditor Parties (or any of them) under or in respect of the Finance Documents.
|
|
|
10.17
|
Compliance with law; Environmentally Sensitive Material.
Except to the extent the following
could not reasonably be expected to have a material adverse effect on the business, assets or financial condition of a Borrower,
or affect the legality, validity, binding effect or enforceability of the Finance Documents:
|
|
|
(a)
|
the operations and properties of each Borrower comply with all applicable laws and regulations,
including without limitation Environmental Laws, all necessary Environmental Permits have been obtained and are in effect for the
operations and properties of each such person and each such person is in compliance in all material respects with all such Environmental
Permits; and
|
|
|
(b)
|
neither of the Borrowers has been notified in writing by any person that it or any of its subsidiaries
or Affiliates is potentially liable for the remedial or other costs with respect to treatment, storage, disposal, release, arrangement
for disposal or transportation of any Environmentally Sensitive Material, except for costs incurred in the ordinary course of business
with respect to treatment, storage, disposal or transportation of such Environmentally Sensitive Material.
|
|
|
10.18
|
Ownership structure.
|
|
|
(a)
|
Each Borrower has no subsidiaries.
|
|
|
(b)
|
All of the Equity Interests of the Borrowers have been validly issued, are fully paid, non-assessable
and free and clear of all Security Interests and are owned of record by Bulk Fleet and ST Shipping.
|
|
|
(c)
|
All of the Equity Interests of ST Shipping are owned beneficially and of record by Glencore AG.
|
|
|
(d)
|
All of the Equity Interests of Bulk Fleet are owned beneficially by Bulk Partners.
|
|
|
(e)
|
None of the Equity Interests of any of the Borrowers are subject to any existing option, warrant,
call, right, commitment or other agreement of any character to which any of the Borrowers is a party requiring, and there are no
Equity Interests of any of the Borrowers outstanding which upon conversion or exchange would require, the issuance, sale or transfer
of any additional Equity Interests of any of the Borrowers or other Equity Interests convertible into, exchangeable for or evidencing
the right to subscribe for or purchase Equity Interests of any of the Borrowers.
|
|
|
10.19
|
ERISA.
Neither of the Borrowers nor Bulk Partners maintains any Plan, Multiemployer Plan
or Foreign Pension Plan.
|
|
|
10.20
|
Margin stock.
Neither of the Borrowers is engaged in the business of extending credit for
the purpose of purchasing or carrying Margin Stock and no proceeds of the Advance will be used to buy or carry any Margin Stock
or to extend credit to others for the purpose of buying or carrying any Margin Stock.
|
|
|
10.21
|
Investment company, public utility, etc.
Neither of the Borrowers is:
|
|
|
(a)
|
an “investment company,” or an “affiliated person” of, or “promoter”
or “principal underwriter” for, an “investment company,” as such terms are defined in the Investment Company
Act of 1940, as amended; or
|
|
|
(b)
|
a “public utility” within the meaning of the United States Federal Power Act of 1920,
as amended.
|
|
|
(a)
|
Each of the Borrowers is not a Prohibited Person, is not owned or controlled by, or acting directly
or indirectly on behalf of or for the benefit of, a Prohibited Person and does not own or control a Prohibited Person;
|
|
|
(b)
|
No proceeds of the Advance shall be made available, directly or indirectly, to or for the benefit
of a Prohibited Person or otherwise shall be, directly or indirectly, applied in a manner or for a purpose prohibited by Sanctions.
|
|
|
10.23
|
No money laundering.
Without prejudice to the generality of Clause 2.3, in relation to the
borrowing by the Borrowers of the Advance, the performance and discharge of its obligations and liabilities under the Finance Documents,
and the transactions and other arrangements affected or contemplated by the Finance Documents to which a Borrower is a party, each
of the Borrowers confirms that:
|
|
|
(a)
|
it is acting for its own account;
|
|
|
(b)
|
it will use the proceeds of the Advance for its own benefit, under its full responsibility and
exclusively for the purposes specified in this Agreement; and
|
|
|
(c)
|
the foregoing will not involve or lead to a contravention of any law, official requirement or other
regulatory measure or procedure implemented to combat “money laundering” (as defined in Article 1 of Directive 2005/60/EC
of the European Parliament and of the Council) and comparable United States federal and state laws, including without limitation
the PATRIOT Act and the Bank Secrecy Act.
|
|
|
10.24
|
Ships.
Each Ship is:
|
|
|
(a)
|
in the sole and absolute ownership of a Borrower and duly registered in such Borrower’s name
under the law of the Republic of Panama, unencumbered save and except for the Mortgage thereon in favor of the Security Trustee
recorded against it and Permitted Security Interests;
|
|
|
(b)
|
seaworthy for hull and machinery insurance warranty purposes and in every way fit for its intended
service;
|
|
|
(c)
|
insured in accordance with the provisions of this Agreement and the requirements hereof in respect
of such insurances will have been complied with;
|
|
|
(d)
|
in class in accordance with the provisions of this Agreement and the requirements hereof in respect
of such classification will have been complied with; and
|
|
|
(e)
|
managed by an Approved Manager pursuant to an Approved Management Agreement.
|
|
|
10.25
|
Place of business.
For purposes of the UCC, each of the Borrowers has only one place of
business located at, or, if it has more than one place of business, the chief executive office from which it manages the main part
of its business operations and conducts its affairs is located at:
|
Par la Ville Place
14 Par la Ville
Road
Hamilton HM08
Bermuda
|
|
|
Neither of the Borrowers has a place of business in the United States of America, the District
of Columbia, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United
States of America.
|
|
|
10.26
|
Solvency.
In the case of each of the Borrowers:
|
|
|
(a)
|
the sum of its assets, at a fair valuation, does and will exceed its liabilities, including, to
the extent they are reportable as such in accordance with GAAP, contingent liabilities;
|
|
|
(b)
|
the present fair market saleable value of its assets is not and shall not be less than the amount
that will be required to pay its probable liability on its then existing debts, including, to the extent they are reportable as
such in accordance with GAAP, contingent liabilities, as they mature;
|
|
|
(c)
|
it does not and will not have unreasonably small working capital with which to continue its business;
and
|
|
|
(d)
|
it has not incurred, does not intend to incur and does not believe it will incur, debts beyond
its ability to pay such debts as they mature.
|
|
|
10.27
|
Borrowers’ business.
From the date of its incorporation until the date hereof, each
of the Borrowers has not conducted any business other than in connection with, or for the purpose of, owning and operating the
Ships.
|
|
|
10.28
|
Immunity; enforcement; submission to jurisdiction; choice of law.
|
|
|
(a)
|
Each of the Borrowers is subject to civil and commercial law with respect to its obligations under
the Finance Documents, and the execution, delivery and performance by each Borrower of the Finance Documents to which it is a party
constitute private and commercial acts rather than public or governmental acts.
|
|
|
(b)
|
Neither Borrower nor any of its properties has any immunity from suit, court jurisdiction, attachment
prior to judgment, attachment in aid of execution of a judgment, set-off, execution of a judgment or from any other legal process
in relation to any Finance Document.
|
|
|
(c)
|
It is not necessary under the laws of either Borrower’s jurisdiction of incorporation or
formation, in order to enable any Creditor Party to enforce its rights under any Finance Document or by reason of the execution
of any Finance Document or the performance by either Borrower of its obligations under any Finance Document, that such Creditor
Party should be licensed, qualified or otherwise entitled to carry on business in such Borrower’s jurisdiction of incorporation
or formation.
|
|
|
(d)
|
Other than the recording of the Mortgage in accordance with the laws of the Republic of Panama
and such filings as may be required in a Pertinent Jurisdiction in respect of certain of the Finance Documents, and the payment
of fees consequent thereto, it is not necessary for the legality, validity, enforceability or admissibility into evidence of this
Agreement or any other Finance Document that any of them or any document relating thereto be registered, filed recorded or enrolled
with any court or authority in any Pertinent Jurisdiction.
|
|
|
(e)
|
The execution, delivery, filing, registration, recording, performance and enforcement of the Finance
Documents by any of the Creditor Parties will not cause such Creditor Party to be deemed to be resident, domiciled or carrying
on business in any Pertinent Jurisdiction of any Security Party or subject to taxation under any law or regulation of any governmental
authority in any Pertinent Jurisdiction of any Security Party.
|
|
|
(f)
|
Under the law of each Borrower’s jurisdiction of incorporation or formation, the choice of
the law of New York to govern this Agreement and the other Finance Documents to which New York law is applicable is valid and binding.
|
|
|
(g)
|
The submission by the Borrowers to the jurisdiction of the New York State courts and the U.S. Federal
court sitting in New York County pursuant to Clause 32.2(a) is valid and binding and not subject to revocation, and service of
process effected in the manner set forth in Clause 32.2(d) will be effective to confer personal jurisdiction over the Borrowers
in such courts.
|
|
|
11
|
GENERAL AFFIRMATIVE AND NEGATIVE COVENANTS
|
|
|
11.1
|
Affirmative covenants.
From the Drawdown Date until the Total Commitments have terminated
and all amounts payable hereunder have been paid in full each of the Borrowers undertakes with each Creditor Party to comply or
cause compliance with the following provisions of this Clause 11.1 except as the Agent, with the consent of the Majority Lenders,
may approve from time to time in writing, such approval not to be unreasonably withheld:
|
|
|
(a)
|
Performance of obligations.
Each Borrower shall duly observe and perform its obligations
under the relevant Time Charter and each Finance Document to which it is or is to become a party.
|
|
|
(b)
|
Notification of defaults (etc).
The Borrowers shall promptly notify the Agent, upon becoming
aware of the same, of:
|
|
|
(i)
|
the occurrence of an Event of Default or of any Potential Event of Default or any other event (including
any litigation) which might adversely affect its ability or the Time Charterer’s ability to perform its obligations under
the Time Charter, the Time Charter Guarantor’s ability to perform its obligations (if any) under the Time Charter, the Time
Charterer’s or the Sub-Time Charterer’s ability to perform its obligations under the Sub-Time Charter, or any Security
Party’s ability to perform its obligations under each Finance Document to which it is or is to become a party;
|
|
|
(ii)
|
any default, or any interruption in the performance whether or not the same constitutes a default,
by any party to the Time Charter or the Sub-Time Charter; and
|
|
|
(iii)
|
any damage or injury caused by or to the Ship in excess of $1,500,000.
|
|
|
(c)
|
Confirmation of no default.
The Borrowers will, within five (5) Business Days after service
by the Agent of a written request, serve on the Agent a notice which is signed by a director, an officer or a duly authorized person
of the Borrowers and which states that:
|
|
|
(i)
|
no Event of Default or Potential Event of Default has occurred; or
|
|
|
(ii)
|
no Event of Default or Potential Event of Default has occurred, except for a specified event or
matter, of which all material details are given.
|
The Agent may serve requests
under this Clause 11.1(c) from time to time but only if asked to do so by a Lender or Lenders having Contributions exceeding 10%
of the Loan or (if no Advances have been made) Commitments exceeding 10% of the Total Commitments, and this Clause 11.1(c) does
not affect the Borrowers’ obligations under Clause 11.1(b).
|
|
(d)
|
Notification of litigation.
The Borrowers will provide the Agent with details of any legal
or administrative action involving a Borrower, any other Security Party (other than the Glencore Guarantors and ST Shipping), the
Approved Manager or a Ship, the Earnings or the Insurances as soon as such action is instituted or it becomes apparent to the Borrowers
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.
|
|
|
(e)
|
Provision of further information.
The Borrowers will, as soon as practicable after receiving
the request, provide the Agent with any additional financial or other information relating to:
|
|
|
(ii)
|
any other matter relevant to, or to any provision of, a Finance Document,
|
which may be requested by the
Agent at any time.
|
|
(f)
|
Books of record and account; separate accounts.
|
|
|
(i)
|
Each of the Borrowers shall keep separate and proper books of record and account in which full
and materially correct entries shall be made of all financial transactions and the assets and business of each of the Borrowers
in accordance with GAAP, and the Agent shall have the right to examine the books and records of each of the Borrowers wherever
the same may be kept from time to time as it sees fit, in its sole reasonable discretion, or to cause an examination to be made
by a firm of accountants selected by it, provided that any examination shall be done without undue interference with the day to
day business operations of such Borrower.
|
|
|
(ii)
|
Each of the Borrowers shall keep separate accounts and shall not co-mingle assets with any other
person.
|
|
|
(g)
|
Financial reports.
Each of the Borrowers shall prepare and shall deliver, or shall cause
to be prepared and to be delivered, to the Agent:
|
|
|
(i)
|
as soon as practicable, but not later than 120 days after the end of each Fiscal Year, an unaudited
balance sheet as of the end of such period and the related statements of profit and loss and changes in financial position for
each Borrower, each in respect of such Fiscal Year, in reasonable detail and prepared in accordance with GAAP;
|
|
|
(ii)
|
as soon as practicable, but not later than 90 days after the end of each of the second and fourth
quarters of each Fiscal Year, management accounts as of the end of such period for the Sub-Time Charterer, and as soon as practicable,
but not later than 180 days after the end of each Fiscal Year, annual audited accounts as of the end of such period for the Sub-Time
Charterer;
|
|
|
(iii)
|
not later than 45 days after the end of each of the second and final quarters of each Fiscal Year,
and together with the financial statements that the Borrowers deliver in (i) above, a Compliance Certificate; and
|
|
|
(iv)
|
such other financial statements, annual budgets and projections as may be reasonably requested
by the Agent, each to be in such form as the Agent may reasonably request.
|
|
|
(h)
|
Appraisals of Fair Market Value.
The Borrowers shall procure and deliver to the Agent two
written appraisal reports setting forth the Fair Market Value of each of the Ships as follows:
|
|
|
(i)
|
on a bi-annual basis at the Borrowers’ expense for inclusion with each Compliance Certificate
required to be delivered under Clause 11.1(g)(iii); and
|
|
|
(ii)
|
at the Lenders’ expense, at all other times upon the request of the Agent or the Majority
Lenders, unless an Event of Default has occurred and is continuing, in which case the Borrowers shall procure it at its expense
as often as requested.
|
provided
that
if there is a difference of or in excess of 10% between the two appraisals obtained by the Borrowers, the Borrowers may,
at their sole expense, obtain a third appraisal from an Approved Broker.
|
|
(i)
|
Taxes.
Each of the Borrowers shall prepare and timely file all tax returns required to be
filed by it and pay and discharge all taxes imposed upon it or in respect of any of its property and assets before the same shall
become in default, as well as all lawful claims (including, without limitation, claims for labor, materials and supplies) which,
if unpaid, might become a Security Interest upon the Collateral or any part thereof, except in each case, for any such taxes (i)
as are being contested in good faith by appropriate proceedings and for which adequate reserves have been established, (ii) in
excess of $100,000 as to which such failure to have paid does not create any risk of sale, forfeiture, loss, confiscation or seizure
of a Ship or criminal liability, or (iii) the failure of which to pay or discharge would not be likely to have a material adverse
effect on the business, assets or financial condition of a Borrower or to affect the legality, validity, binding effect or enforceability
of the Finance Documents.
|
|
|
(j)
|
Consents.
Each of the Borrowers shall obtain or cause to be obtained, maintain in full force
and effect and comply with the conditions and restrictions (if any) imposed in connection with, every consent and do all other
acts and things which may from time to time be necessary or required for the continued due performance of:
|
|
|
(i)
|
all of its and the Time Charterer’s obligations under the relevant Time Charter;
|
|
|
(ii)
|
the Time Charter Guarantor’s obligations, if any, under the relevant Time Charter;
|
|
|
(iii)
|
the Time Charterer’s and the Sub-Time Charterer’s obligations under the Sub-Time Charter;
and
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|
|
(iv)
|
each Security Party’s obligations under each Finance Document to which it is or is to become
a party,
|
and the Borrowers
shall deliver a copy of all such consents to the Agent promptly upon its request.
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(k)
|
Compliance with applicable law.
Each of the Borrowers shall comply in all material respects
with all applicable federal, state, local and foreign laws, ordinances, rules, orders and regulations now in force or hereafter
enacted, including, without limitation, all Environmental Laws and regulations relating thereto, the failure to comply with which
would be likely to have a material adverse effect on the financial condition of such person or affect the legality, validity, binding
effect or enforceability of each Finance Document to which it is or is to become a party.
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|
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(l)
|
Existence.
Each of the Borrowers shall do or cause to be done all things necessary to preserve
and keep in full force and effect its existence in good standing under the laws of its jurisdiction of incorporation or formation.
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(i)
|
Each of the Borrowers shall conduct business only in connection with, or for the purpose of, owning
and chartering its Ship.
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(ii)
|
Each of the Borrowers shall conduct business in its own name and observe all corporate and other
formalities required by its constitutional documents.
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(i)
|
Except to the extent the failure to do so could not reasonably be expected to have a material adverse
effect on the business, assets or financial condition of a Borrower, or affect the legality, validity, binding effect or enforceability
of the Finance Documents, each Borrower shall maintain and preserve all of its properties that are used or useful in the conduct
of its business in good working order and condition, ordinary wear and tear excepted.
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|
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(ii)
|
Each of the Borrowers
shall obtain and maintain good and marketable
title or the right to use or occupy all real and personal properties and assets (including intellectual property) reasonably required
for the conduct of its respective business.
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(iii)
|
Each of the Borrowers
shall maintain and protect its respective intellectual
property and conduct its respective business and affairs without infringement of or interference with any intellectual property
of any other person in any material respect and shall comply in all material respects with the terms of its licenses.
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(o)
|
Loan proceeds.
The Borrowers shall use the proceeds of the Advance solely for the purpose
of (i) repayment of a bridge loan provided by ST Shipping to the Borrowers, and (ii) repayment of subordinated shareholder loans
provided by ST Shipping and Bulk Partners to the Borrowers.
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(p)
|
Change of place of business.
The Borrowers shall notify the Agent promptly of any change
in the location of the place of business where it or any other Security Party conducts its affairs and keeps its records.
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(q)
|
Pollution liability.
The Borrowers shall take, or cause to be taken, such actions as may
be reasonably required to mitigate potential liability to it arising out of pollution incidents or as may be reasonably required
to protect the interests of the Creditor Parties with respect thereto.
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|
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(r)
|
Subordination of loans.
The Borrowers shall cause all loans made to it by any Affiliate,
parent or subsidiary or any Guarantor, and all sums and other obligations (financial or otherwise) owed by it to any Affiliate,
parent or subsidiary or to an Approved Manager or a Guarantor to be fully subordinated (in Agreed Form) to all Secured Liabilities.
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(s)
|
Asset control.
Each of the Borrowers shall to the best of its knowledge and ability ensure
that:
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|
|
(i)
|
it is not owned or controlled by, or acting directly or indirectly on behalf of or for the benefit
of, a Prohibited Person and does not own or control a Prohibited Person; and
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|
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(ii)
|
no proceeds of the Advance shall be made available, directly or indirectly, to or for the benefit
of a Prohibited Person or otherwise shall be, directly or indirectly, applied in a manner or for a purpose prohibited by Sanctions.
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|
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(t)
|
Money laundering.
Each of the Borrowers shall to the best of its knowledge and ability comply,
and cause each of its subsidiaries to comply, with any applicable law, official requirement or other regulatory measure or procedure
implemented to combat “money laundering” (as defined in Article 1 of Directive 2005/60/EC of the European Parliament
and of the Council) and comparable United States federal and state laws, including without limitation the PATRIOT Act and the Bank
Secrecy Act.
|
|
|
(u)
|
Pension Plans.
Promptly upon the institution of a Plan, a Multiemployer Plan or a Foreign
Pension Plan by a Borrower or Bulk Partners, the Borrowers shall furnish or cause to be furnished to the Agent written notice thereof
and, if requested by the Agent or any Lender, a copy of such Plan, Multiemployer Plan or Foreign Pension Plan.
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|
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(v)
|
Information provided to be accurate.
All financial and other information which is provided
in writing by or on behalf of a Borrower or Bulk Partners under or in connection with any Finance Document shall be true and not
misleading in any material respect and shall not omit any material fact or consideration.
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|
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(w)
|
Shareholder and creditor notices.
The Borrowers shall send the Agent, at the same time as
they are dispatched, copies of all communications which are dispatched to its (i) shareholders (or equivalent) or any class of
them or (ii) creditors generally.
|
|
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(x)
|
Maintenance of Security Interests.
Each of the Borrowers shall:
|
|
|
(i)
|
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
|
|
|
(ii)
|
without limiting the generality of paragraph (i), at its own cost, promptly register, file, record
or enroll 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.
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|
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(y)
|
“Know your customer” checks.
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 any Security Party 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 the Agent or any Lender
(or, in the case of paragraph (iii), 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 Borrowers 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 (iii), 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 (iii), 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.
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|
(z)
|
Further assurances.
From time to time, at its expense, the Borrowers shall duly execute
and deliver to the Agent such further documents and assurances as the Majority Lenders or the Agent may request to effectuate the
purposes of this Agreement, the other Finance Documents or obtain the full benefit of any of the Collateral.
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|
|
11.2
|
Negative covenants.
From the Drawdown Date until the Total Commitments have terminated and
all amounts payable hereunder have been paid in full each of the Borrowers undertakes with each Creditor Party to comply or cause
compliance with the following provisions of this Clause 11.2 except as the Agent, with the consent of the Majority Lenders, may
approve from time to time in writing, such approval not to be unreasonably withheld:
|
|
|
(a)
|
Security Interests.
Neither of the Borrowers shall create, assume or permit to exist any
Security Interest whatsoever upon any of its properties or assets, whether now owned or hereafter acquired, except for Permitted
Security Interests.
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|
|
(b)
|
Sale of assets; merger.
Neither of the Borrowers shall sell, transfer or lease (other than
in connection with a Charter) all or substantially all of its properties and assets, or enter into any transaction of merger or
consolidation or liquidate, windup or dissolve itself (or suffer any liquidation or dissolution)
provided that
a Borrower
may sell a Ship pursuant to the terms of Clause 11.2(q).
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|
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(c)
|
No contracts other than in ordinary course.
Neither of the Borrowers shall enter into any
transactions or series of related transactions with third parties other than in the ordinary course of its business.
|
|
|
(d)
|
Affiliate transactions.
Neither of the Borrowers shall enter into any transaction or series
of related transactions, whether or not in the ordinary course of business, with any Affiliate other than on terms and conditions
substantially as favorable to such Borrower as would be obtainable by it at the time in a comparable arm’s-length transaction
with a person other than an Affiliate.
|
|
|
(e)
|
Change of business.
Neither of the Borrowers shall change the nature of its business or
commence any business other than in connection with, or for the purpose of, owning and operating the Ships.
|
|
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(f)
|
Change of Control; Negative pledge.
Neither of the Borrowers shall permit any act, event
or circumstance that would result in a Change of Control of such Borrower, and neither of the Borrowers shall permit any pledge
or assignment of its Equity Interests except in favor of the Security Trustee to secure the Secured Liabilities.
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|
|
(g)
|
Increases in capital.
Neither of the Borrowers shall permit an increase of its capital by
way of the issuance of any class or series of Equity Interests or create any new class of Equity Interests that is not subject
to a Security Interest to secure the Secured Liabilities.
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|
|
(h)
|
Financial Indebtedness.
Neither of the Borrowers shall incur any Financial Indebtedness
other than (i) in respect of the Loan and (ii) subordinated loans permitted under Clause 11.1(r).
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|
|
(i)
|
Dividends.
Neither of the Borrowers, without the prior written consent of the Majority Lenders,
such consent not to be unreasonably withheld, shall declare or pay any dividends or return any capital to its equity holders or
authorize or make any other distribution, payment or delivery of property or cash to its equity holders, or redeem, retire, purchase
or otherwise acquire, directly or indirectly, for value, any interest of any class or series of its Equity Interests (or acquire
any rights, options or warrants relating thereto but not including convertible debt) now or hereafter outstanding, or repay any
subordinated loans to equity holders or set aside any funds for any of the foregoing purposes,
provided
that any amounts
received from the sale of a Ship in excess of the “relevant proportion” (within the meaning of Clause 8.8 of this Agreement),
plus any other amounts due owning under this Agreement and the other Finance Documents, may be paid as a dividend so long as the
Collateral Maintenance Ratio set forth in Clause 15.2 is maintained both before and after such dividend payment.
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|
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(j)
|
No amendment to Time Charter.
Neither of the Borrowers shall agree to any amendment or supplement
to, or waive or fail to enforce, the relevant Time Charter or any of its provisions which would adversely affect in any material
respect the interests of the Creditor Parties (or any of them) under or in respect of the Finance Documents.
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|
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(k)
|
Intentionally omitted.
|
|
|
(l)
|
Loans and investments.
Neither of the Borrowers shall make any loan or advance to, make
any investment in, or enter into any working capital maintenance or similar agreement with respect to any person, whether by acquisition
of Equity Interests or indebtedness, by loan, guarantee or otherwise,
provided that
the following loans or advances shall
be permitted: (i) any loan made by one Borrower to another Borrower; (ii) any trade credit extended by either Borrower in the ordinary
course of business, (iii) any prepayment made by either Borrower for goods or services yet to be delivered in the ordinary course
of business, or (iv) any other loan or advance to which the Agent has consented in writing.
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|
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(m)
|
Acquisition of capital assets.
Neither of the Borrowers shall acquire any capital assets
(including any vessel other than the Ships) by purchase, charter or otherwise,
provided that
for the avoidance of doubt
nothing in this Clause 11.2(m) shall prevent or be deemed to prevent capital improvements being made to the Ships.
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|
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(n)
|
Sale and leaseback.
Neither of the Borrowers shall enter into any arrangements, directly
or indirectly, with any person whereby it shall sell or transfer any of its property, whether real or personal, whether now owned
or hereafter acquired, if it, at the time of such sale or disposition, intends to lease or otherwise acquire the right to use or
possess (except by purchase) such property or like property for a substantially similar purpose.
|
|
|
(o)
|
Changes to Fiscal Year and accounting policies.
Neither of the Borrowers shall change its
Fiscal Year or make or permit any change in accounting policies affecting (i) the presentation of financial statements or (ii)
reporting practices, except in either case in accordance with GAAP or pursuant to the requirements of applicable laws or regulations.
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|
|
(p)
|
Jurisdiction of incorporation or formation; Amendment of constitutional documents.
Neither
of the Borrowers shall change the jurisdiction of its incorporation or formation or materially amend its constitutional documents.
|
|
|
(q)
|
Sale of Ship.
Neither of the Borrowers shall consummate the sale of its Ship without paying
or causing to be paid all amounts due and owing under Clause 8.8 of this Agreement, as well as any other amounts due and owning
under this Agreement and the other Finance Documents prior to or simultaneously with the consummation of such sale.
|
|
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(r)
|
Change of location.
Neither of the Borrowers shall change the location of its chief executive
office or the office where its corporate records are kept or open any new office for the conduct of its business on less than thirty
(30) days prior written notice to the Agent.
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|
|
(s)
|
No employees; VAT group.
|
|
|
(i)
|
Neither of the Borrowers shall have any employees.
|
|
|
(ii)
|
Neither of the Borrowers shall be or become a member of any VAT (value added tax) group.
|
|
|
13
|
MARINE INSURANCE COVENANTS
|
|
|
13.1
|
General.
From the Drawdown Date until the Total Commitments have terminated and all amounts
payable hereunder have been paid in full, each of the Borrowers undertakes with each Creditor Party to comply or cause compliance
with the following provisions of this Clause 13 except as the Agent, with the consent of the Majority Lenders, may approve from
time to time in writing, such approval not to be unreasonably withheld.
|
|
|
13.2
|
Maintenance of obligatory insurances.
Each Borrower shall keep the Ship owned by it insured
at its expense for and against:
|
|
|
(a)
|
hull and machinery risks, plus freight interest and hull interest and any other usual marine risks
such as excess risks;
|
|
|
(b)
|
war risks (including the London Blocking and Trapping addendum or similar arrangement);
|
|
|
(c)
|
full protection and indemnity risks (including liability for oil pollution 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), or other with written consent from the Agent;
|
|
|
(d)
|
freight, demurrage & defense risks;
|
|
|
(e)
|
risks covered by mortgagee’s interest insurance (M.I.I.) (as provided in Clause 13.16 below);
|
|
|
(f)
|
risks covered by mortgagee’s interest additional perils (pollution) (M.A.P.) (as provided
in Clause 13.16 below); and
|
|
|
(g)
|
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 opinion of the Security Trustee be reasonable for the Borrowers
to insure and which are specified by the Security Trustee by notice to the Borrowers (such as political risks and mortgage rights
insurance).
|
|
|
13.3
|
Terms of obligatory insurances.
Each Borrower shall affect such insurances in respect of
the Ship owned by it:
|
|
|
(b)
|
in the case of the insurances described in (a), (b), (e) and (f) of Clause 13.2 shall each be for
at least the greater of:
|
|
|
(i)
|
when aggregated with the insured value of the other Ship then financed under this Agreement, 120%
of the Loan; and
|
|
|
(ii)
|
the Fair Market Value of the Ship;
|
|
|
(c)
|
in the case of oil pollution liability risks, for an aggregate amount equal to the greater of $1,000,000,000
and 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 the full tonnage of the Ship;
|
|
|
(e)
|
on approved terms; and
|
|
|
(f)
|
through approved brokers and with approved insurance companies and/or underwriters or, in the case
of war risks and protection and indemnity risks, in approved war risks and protection and indemnity risks associations that are
members of the International Group of P&I Clubs.
|
|
|
13.4
|
Further protections for the Creditor Parties.
In addition to the terms set out in Clause
13.3, each Borrower shall procure that the obligatory insurances affected by it shall:
|
|
|
(a)
|
subject always to paragraph (b), name that Borrower 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 that Borrower and every other named assured in proportion to the
aggregate 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 first priority mortgagee and 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 the 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;
|
|
|
(f)
|
provide that the Security Trustee may make proof of loss if that Borrower fails to do so; and
|
|
|
(g)
|
provide that the deductible of the hull and machinery insurance is not higher that the amount agreed
upon and stated in the loss payable clause.
|
|
|
13.5
|
Renewal of obligatory insurances.
Each Borrower shall:
|
|
|
(a)
|
at least 15 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 Borrower proposes to renew that obligatory insurance and of the proposed terms
of renewal; and
|
|
|
(ii)
|
obtain the Security Trustee’s approval to the matters referred to in paragraph (i);
|
|
|
(b)
|
at least five (5) days before the expiry of any obligatory insurance, renew that obligatory insurance
in accordance with the Security Trustee’s 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.
Each Borrower shall ensure that all approved
brokers provide the Security Trustee with pro forma copies of all policies and cover notes relating to the obligatory insurances
which they are to affect 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 in accordance with the requirements of the Insurance Assignment for that Borrower’s Ship;
|
|
|
(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 or if they cease to act as brokers;
|
|
|
(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 Borrower 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 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 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.
Each Borrower 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.
Each Borrower 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.
Each Borrower 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.
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.
|
|
|
13.11
|
Compliance with terms of insurances.
Neither Borrower 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)
|
each Borrower shall take all necessary action and comply with all requirements which may from time
to time be applicable to the obligatory insurances, and (without limiting the obligation contained in Clause 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)
|
neither Borrower shall make any changes relating to the classification or Classification Society
or manager or operator of the Ship unless approved by the underwriters of the obligatory insurances;
|
|
|
(c)
|
each Borrower shall make (and promptly supply copies to the 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
|
|
|
(d)
|
neither Borrower 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.
Neither Borrower 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.
Neither Borrower 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.
Upon specific request of the Security Trustee each
Borrower shall provide the Security Trustee, at the time of each such communication, copies of all written communications between
that Borrower and:
|
|
|
(a)
|
the approved brokers;
|
|
|
(b)
|
the approved protection and indemnity and/or war risks associations;
|
|
|
(c)
|
the approved insurance companies and/or underwriters, which relate directly or indirectly to:
|
|
|
(i)
|
that Borrower’s obligations relating to the obligatory insurances including, without limitation,
all requisite declarations and payments of additional premiums or calls; and
|
|
|
(ii)
|
any credit arrangements made between that Borrower 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; and
|
|
|
(d)
|
any parties involved in case of a claim under any of insurances relating to that Borrower’s
Ship.
|
|
|
13.15
|
Provision of information.
In addition, each Borrower shall promptly provide (and in no event
less than five (5) days prior to the Drawdown Date) 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 that 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
|
Mortgagee’s interest, additional perils and political risk insurances.
The Security
Trustee shall be entitled from time to time to effect, maintain and renew (i) mortgagee’s interest marine insurance, (ii)
mortgagee’s interest additional perils insurance and/or (iii) mortgagee’s political risks / rights insurance in such
amounts (up to 120% of the Loan), on such terms, through such insurers and generally in such manner as the Security Trustee may
from time to time consider appropriate and the Borrowers shall upon demand fully indemnify the Creditor 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.
|
|
|
13.17
|
Review of insurance requirements.
The Security Trustee may and, on instruction of the Majority
Lenders, shall review, at the expense of the Borrowers, the requirements of this Clause 13 from time to time in order to take account
of any changes in circumstances after the date of this Agreement which are, in the opinion of the Agent or the Majority Lenders
significant and capable of affecting the relevant Borrower or the relevant Ship and its insurance (including, without limitation,
changes in the availability or the cost of insurance coverage or the risks to which the relevant Borrower may be subject.)
|
|
|
13.18
|
Modification of insurance requirements.
The Security Trustee shall notify the Borrowers
of any proposed modification under Clause 13.17 to the requirements of this Clause 13 which the Security Trustee may or, on instruction
of the Majority Lenders, shall reasonably consider appropriate in the circumstances and such modification shall take effect on
and from the date it is notified in writing to the Borrowers as an amendment to this Clause 13 and shall bind the Borrowers accordingly.
|
|
|
14.1
|
General.
From the Drawdown Date until the Total Commitments have terminated and all amounts
payable hereunder have been paid in full, each of the Borrowers undertakes with each Creditor Party to comply or cause compliance
with the following provisions of this Clause 14 except as the Agent, with the consent of the Majority Lenders, may approve from
time to time in writing, such approval not to be unreasonably withheld.
|
|
|
14.2
|
Ship’s name and registration.
Each Borrower shall:
|
|
|
(a)
|
keep the Ship owned by it registered in its name under the law of an Approved Flag;
|
|
|
(b)
|
not do, omit to do or allow to be done anything as a result of which such registration might be
cancelled or imperiled; and
|
|
|
(c)
|
not change the name or port of registry of such Ship on which it was registered or documented when
it became subject to the Mortgage.
|
|
|
14.3
|
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;
|
|
|
(b)
|
so as to maintain the highest class for that Ship with the Classification Society, free of overdue
recommendations and conditions; and
|
|
|
(c)
|
so as to comply with all laws and regulations applicable to vessels registered under the law of
the Approved Flag on which that Ship is registered 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,
|
and the Borrowers
shall notify the Creditor Parties of the class and the Classification Society of each Ship not less than 15 days prior to the Drawdown
Date.
|
|
14.4
|
Classification Society instructions and undertaking.
Each Borrower shall instruct the Classification
Society referred to in Clause 14.3(b) and procure that the 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 that Borrower’s 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 Borrower and the Ship owned by it either (i) electronically (through the Classification
Society directly or by way of indirect access via the Borrowers’ account manager and designating the Security Trustee as
a user or administrator of the system under its account) or (ii) in person at the offices of the Classification Society, and to
take copies of them electronically or otherwise;
|
|
|
(c)
|
to notify the Security Trustee immediately
by Email to
neil.mclaughlin@dvbbank.com
and
techcom@dvbbank.com
if the
Classification Society:
|
|
|
(i)
|
receives notification from that Borrower or any other person that such Ship’s Classification
Society is to be changed;
|
|
|
(ii)
|
imposes a condition of class or issues a class recommendation in respect of that Ship; or
|
|
|
(iii)
|
becomes aware of any facts or matters which may result in or have resulted in a change, suspension,
discontinuance, withdrawal or expiry of that Ship’s class under the rules or terms and conditions of that Borrower’s
or that Ship’s membership of the Classification Society;
|
|
|
(d)
|
following receipt of a written request from the Security Trustee:
|
|
|
(i)
|
to confirm that such Borrower 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 Borrower 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.
|
|
|
14.5
|
Modification.
Neither Borrower shall make any modification or repairs to, or replacement
of, the Ship owned by it or equipment installed on that Ship which would or is reasonably likely to materially alter the structure,
type or performance characteristics of that Ship or materially reduce its value.
|
|
|
14.6
|
Removal of parts.
Neither Borrower shall remove any material part of the Ship owned by it,
or any item of equipment installed on, that Ship 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 favor of any person other than the Security Trustee and becomes on installation on that Ship, the property of that
Borrower and subject to the security constituted by the Mortgage,
provided that
a Borrower may install and remove equipment
owned by a third party if the equipment can be removed without any risk of damage to the Ship owned by it.
|
|
|
14.7
|
Surveys.
Each Borrower, at its sole expense, 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, at that Borrower’s sole expense, with copies of all survey reports.
|
|
|
14.8
|
Inspection.
Unless an Event of Default has occurred and is continuing, not more than once
per year (and not more than three times between the Effective Date and the Maturity Date) each Borrower shall permit the Security
Trustee (by surveyors or other persons appointed by it for that purpose at the cost of the Borrowers) to board the Ship 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. The Security Trustee shall use reasonable efforts to ensure that the operation of that
Ship is not adversely affected as a result of such inspections.
|
|
|
14.9
|
Prevention of and release from arrest.
Each Borrower shall promptly discharge or contest
in good faith with appropriate proceedings:
|
|
|
(a)
|
all liabilities which give or may give rise to maritime or possessory liens on or claims enforceable
against the Ship owned by it, the Earnings or the Insurances;
|
|
|
(b)
|
all taxes, dues and other amounts charged in respect of the Ship owned by it, the Earnings or the
Insurances; and
|
|
|
(c)
|
all other accounts payable whatsoever in respect of the Ship owned by it, the Earnings or the Insurances,
|
and, forthwith (and in no event
more than 30 days) 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 Borrower shall procure its release by providing bail or otherwise as the circumstances may require.
|
|
14.10
|
Compliance with laws etc.
Each Borrower shall:
|
|
|
(a)
|
comply, or procure compliance with, all laws or regulations:
|
|
|
(i)
|
relating to its business generally; or
|
|
|
(ii)
|
relating to the ownership, employment, operation and management of the Ship owned by it,
|
including but not limited to
the ISM Code, the ISPS Code, all Environmental Laws and all Sanctions;
|
|
(b)
|
without prejudice to the generality of paragraph (a) above, not employ the Ship owned by it nor
allow its employment in any manner contrary to any laws or regulations, including but not limited to the ISM Code, the ISPS Code,
all Environmental Laws and all Sanctions; and
|
|
|
(c)
|
in the event of hostilities in any part of the world (whether war is declared or not), not cause
or permit the Ship owned by it to enter or trade to any zone which is declared a war zone by any government or by that Ship’s
war risks insurers unless the prior written consent of the Security Trustee has been given and that Borrower has (at its expense)
effected any special, additional or modified insurance cover which the Security Trustee may require.
|
|
|
14.11
|
Provision of information.
Each Borrower 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 Ship’s master and crew;
|
|
|
(c)
|
any expenses incurred, or likely to be incurred, in connection with the operation, maintenance
or repair of that Ship and any payments made in respect of that Ship;
|
|
|
(d)
|
any towages and salvages; and
|
|
|
(e)
|
that Borrower’s, the Approved Manager’s and that Ship’s compliance with the ISM
Code and the ISPS Code,
|
and, upon the Security Trustee’s
request, provide copies of any current Charter relating to that Ship and copies of that Borrower’s or the Approved Manager’s
Document of Compliance.
|
|
14.12
|
Notification of certain events.
Each Borrower shall immediately notify the Security Trustee
by fax or Email, 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 condition 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 Security
Interest on that Ship or the Earnings or any requisition of that Ship for hire;
|
|
|
(e)
|
any intended dry docking of the Ship owned by it;
|
|
|
(f)
|
any Environmental Claim made against that Borrower 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 that Borrower, 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 that Borrower shall keep
the Security Trustee advised in writing on a regular basis and in such detail as the Security Trustee shall require of that Borrower’s,
the Approved Manager’s or any other person’s response to any of those events or matters.
|
|
14.13
|
Restrictions on chartering, appointment of managers etc.
Neither Borrower 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 that Ship for a term which exceeds,
or which by virtue of any optional extensions may exceed, 12 months (except pursuant to the relevant Time Charter or the relevant
Sub-Time Charter);
|
|
|
(c)
|
enter into any charter in relation to that Ship under which more than two (2) months’ hire
(or the equivalent) is payable in advance;
|
|
|
(d)
|
charter that Ship otherwise than on bona fide arm’s length terms at the time when that Ship
is fixed;
|
|
|
(e)
|
appoint a manager of that Ship other than the Approved Manager or agree to any alteration to the
terms of the Approved Management Agreement;
|
|
|
(f)
|
de-activate or lay up that Ship;
|
|
|
(g)
|
change the Classification Society;
|
|
|
(h)
|
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 $1,500,000 (or the equivalent in any other currency) without the prior written consent of
the Security Trustee, unless that person has first given to the Security Trustee and in terms satisfactory to it a written undertaking
not to exercise any Security Interest on that Ship or the Earnings for the cost of such work or for any other reason; or
|
|
|
(i)
|
enter into any Charter or other contract of employment for that Ship to carry any nuclear material
or nuclear waste.
|
|
|
14.14
|
Copies of Charters; charter assignment.
Provided that all approvals necessary under Clause
14.13 have been previously obtained, each Borrower shall:
|
|
|
(a)
|
furnish promptly to the Agent a true and complete copy of any Charter for the Ship owned by it,
all other documents related thereto and a true and complete copy of each material amendment or other modification thereof; and
|
|
|
(b)
|
in respect of any such Charter, execute and deliver to the Agent an assignment of charter in Agreed
Form and use reasonable commercial efforts to cause the charterer to execute and deliver to the Security Trustee a consent and
acknowledgement to such assignment of charter in the form required thereby.
|
|
|
14.15
|
Notice of Mortgage.
Each Borrower shall keep the Mortgage registered against the Ship owned
by it as a valid first priority mortgage, carry on board that Ship a certified copy of the Mortgage and place and maintain in a
conspicuous place in the navigation room and the Master’s cabin of that Ship a framed printed notice stating that such Ship
is mortgaged by that Borrower to the Security Trustee.
|
|
|
14.16
|
Sharing of Earnings.
Neither Borrower shall enter into any agreement or arrangement for
the sharing of any Earnings other than the relevant Charters.
|
|
|
14.17
|
ISPS Code.
Each Borrower 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 Ship’s compliance
with the ISPS Code comply with the ISPS Code; and
|
|
|
(b)
|
maintain for that Ship an ISSC; and
|
|
|
(c)
|
notify the Agent immediately in writing of any actual or threatened withdrawal, suspension, cancellation
or modification of the ISSC.
|
|
|
15
|
COLLATERAL MAINTENANCE RATIO
|
|
|
15.1
|
General.
From the Drawdown Date until the Total Commitments have terminated and all amounts
payable hereunder have been paid in full, the Borrowers undertake with each Creditor Party to comply with the following provisions
of this Clause 15 except as the Agent, with the consent of the Majority Lenders, may approve from time to time in writing, such
approval not to be unreasonably withheld.
|
|
|
15.2
|
Collateral Maintenance Ratio.
If, at any time, the Agent notifies the Borrowers that the
aggregate Fair Market Value of the Ships plus the net realizable value of any additional Collateral previously provided under this
Clause 15 is below:
|
|
|
(a)
|
117.6% of the Loan between the Effective Date and the first anniversary of the Drawdown Date;
|
|
|
(b)
|
133.3% of the Loan between the first anniversary of the Drawdown Date and the second anniversary
of the Drawdown Date; or
|
|
|
(c)
|
153.8% of the Loan between the second anniversary of the Drawdown Date and the Maturity Date (or
at any time after an event of default by the Time Charterer under the Time Charter),
|
(such ratio
being the “
Collateral Maintenance Ratio
”), then the Agent (acting upon the instruction of the Majority Lenders)
shall have the right to require the Borrowers to comply with the requirements of Clause 15.3.
|
|
15.3
|
Provision of additional security; prepayment
. If the Agent serves a notice on the Borrowers
under Clause 15.2, the Borrowers shall prepay such part (at least) of the Loan as will eliminate the shortfall on or before the
date falling one (1) month after the date on which the Agent’s notice is served under Clause 15.2 (the “
Prepayment
Date
”) unless at least one (1) Business Day before the Prepayment Date it has provided, or ensured that a third party
has provided, additional Collateral which, in the opinion of the Majority Lenders, has a net realizable value at least equal to
the shortfall and which has been documented in such terms as the Agent may, with the authorization of the Majority Lenders, approve
or require.
|
|
|
15.4
|
Value of additional vessel security.
The net realizable value of any additional Collateral
which is provided under Clause 15.3 and which consists of a Security Interest over a vessel shall be that shown by a valuation
complying with the definition of Fair Market Value.
|
|
|
15.5
|
Valuations binding.
Any valuation under Clause 15.3 or 15.4 shall be binding and conclusive
as regards the Borrowers, 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 Borrowers shall promptly provide the Agent and any Approved
Broker or other expert acting under Clause 15.4 with any information which the Agent or the Approved Broker or other expert may
request for the purposes of the valuation; and, if the Borrowers fail to provide the information by the date specified in the request,
the valuation may be made on any basis and assumptions which the Approved Broker or the Majority Lenders (or the expert appointed
by them) consider prudent.
|
|
|
15.7
|
Payment of valuation expenses.
Without prejudice to the generality of the Borrowers’
obligations under Clauses 21.2, 21.3 and 22.3, the Borrowers shall, on demand, pay the Agent the amount of the fees and expenses
of any Approved Broker or other expert instructed by the Agent under this Clause 15 and all legal and other expenses incurred by
any Creditor Party in connection with any matter arising out of this Clause 15.
|
|
|
15.8
|
Application of prepayment.
Clause 8 shall apply in relation to any prepayment pursuant to
Clause 15.3(b).
|
|
|
17
|
PAYMENTS AND CALCULATIONS
|
|
|
17.1
|
Currency and method of payments.
All payments to be made by the Lenders or by the Security
Parties 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 another Security Party to the Agent
or any Lender, to the account of the Agent at HSBC Bank USA, New York, New York, ABA No. 021001088, SWIFT ID No. MRMDUS33, for
credit to DVB Bank SE (Account No. 000.137.278, Reference: NORDIC ODYSSEY – NORDIC ORION), or to such other account with
such other bank as the Agent may from time to time notify to the Borrowers, the other Security Parties 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 Borrowers and the other Creditor Parties.
|
|
|
17.2
|
Payment on non-Business Day.
If any payment by a Security Party 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.
|
|
17.3
|
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.
|
|
|
17.4
|
Distribution of payments to Creditor Parties.
Subject to Clauses 17.5, 17.6 and 17.7:
|
|
|
(a)
|
any amount received by the Agent under a Finance Document for distribution or remittance to a Lender
or the Security Trustee shall be made available by the Agent to that Lender 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 or the Security Trustee may have notified
to the Agent not less than five (5) Business Days previously; and
|
|
|
(b)
|
amounts to be applied in satisfying amounts of a particular category which are due to the Lenders
generally shall be distributed by the Agent to each Lender pro rata to the amount in that category which is due to it.
|
|
|
17.5
|
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, deduct and withhold from that amount
any sum which is then due and payable to the Agent from that Lender under any Finance Document or any sum which the Agent is then
entitled under any Finance Document to require that Lender to pay on demand.
|
|
|
17.6
|
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 Borrowers or any Lender any sum
which the Agent is expecting to receive for remittance or distribution to the Borrowers or that Lender until the Agent has satisfied
itself that it has received that sum.
|
|
|
17.7
|
Refund to Agent of monies not received.
If and to the extent that the Agent makes available
a sum to the Borrowers or a Lender, without first having received that sum, the Borrowers or (as the case may be) the Lender 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.
|
|
|
17.8
|
Agent may assume receipt.
Clause 17.7 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.
|
|
|
17.9
|
Creditor Party accounts.
Each Creditor Party shall maintain accounts showing the amounts
owing to it by the Borrowers and each other Security Party under the Finance Documents and all payments in respect of those amounts
made by the Borrowers and any other Security Party.
|
|
|
17.10
|
Agent’s 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 Borrowers
and each other Security Party under the Finance Documents and all payments in respect of those amounts made by the Borrowers and
any other Security Party.
|
|
|
17.11
|
Accounts prima facie evidence.
If any accounts maintained under Clauses 17.9 and 17.10 show
an amount to be owing by the Borrowers or any other Security Party to a Creditor Party, those accounts shall be prima facie evidence
that that amount is owing to that Creditor Party.
|
|
|
18
|
APPLICATION OF RECEIPTS
|
|
|
18.1
|
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
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 other than those amounts referred to at paragraphs (ii) and (iii) (including, but without limitation,
all amounts payable by the Borrowers under Clauses 21, 22 and 23 of this Agreement or by the Borrowers or any other Security Party
under any corresponding or similar provision in any other Finance Document);
|
|
|
(ii)
|
second
, 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
|
|
|
(iii)
|
third
, in or towards satisfaction pro rata of the Loan;
|
|
|
(b)
|
SECOND: in retention of an amount equal to any amount not then due and payable under any Finance
Document but which the Agent, by notice to the Borrowers, the other Security Parties and the other Creditor Parties, states in
its opinion will or may become due and payable in the future and, upon those amounts becoming due and payable, in or towards satisfaction
of them in accordance with the provisions of Clause 18.1(a); and
|
|
|
(c)
|
THIRD: provided that no Event of Default has occurred and is continuing, any surplus shall be paid
to the Borrowers or to any other person appearing to be entitled to it.
|
|
|
18.2
|
Variation of order of application.
The Agent may, with the authorization of the Majority
Lenders, by notice to the Borrowers, the other Security Parties and the other Creditor Parties provide for a different manner of
application from that set out in Clause 18.1 either as regards a specified sum or sums or as regards sums in a specified category
or categories.
|
|
|
18.3
|
Notice of variation of order of application.
The Agent may give notices under Clause 18.2
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.
|
|
|
18.4
|
Appropriation rights overridden.
This Clause 18 and any notice which the Agent gives under
Clause 18.2 shall override any right of appropriation possessed, and any appropriation made, by the Borrowers or any other Security
Party.
|
|
|
18.5
|
Payments in excess of Contribution.
|
|
|
(a)
|
If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of
any right of set-off, counterclaim or otherwise) in excess of its Contribution, such Lender shall forthwith purchase from the other
Lenders such participation in their respective Contributions as shall be necessary to share the excess payment ratably with each
of them,
provided that
if all or any portion of such excess payment is thereafter recovered from such purchasing Lender,
such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the
extent of such recovery together with an amount equal to such Lender’s ratable share (according to the proportion of (a)
the amount of such Lender’s required repayment to (b) the total amount so recovered from the purchasing Lender) of any interest
or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered.
|
|
|
(b)
|
The Borrowers agree that any Lender so purchasing a participation from another Lender pursuant
to this Clause 18.5 may, to the fullest extent permitted by law, exercise all of its rights of payment (including the right of
set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrowers in the amount
of such participation.
|
|
|
(c)
|
Notwithstanding paragraphs (a) and (b) of this Clause 18.5, any Lender which shall have commenced
or joined (as a plaintiff) in an action or proceeding in any court to recover sums due to it under any Finance Document and pursuant
to a judgment obtained therein or a settlement or compromise of that action or proceeding shall have received any amount, such
Lender shall not be required to share any proportion of that amount with a Lender which has the legal right to, but does not, join
such action or proceeding or commence and diligently prosecute a separate action or proceeding to enforce its rights in the same
or another court.
|
|
|
(d)
|
Each Lender exercising or contemplating exercising any rights giving rise to a receipt or receiving
any payment of the type referred to in this Clause 18.5 or instituting legal proceedings to recover sums owing to it under this
Agreement shall, as soon as reasonably practicable thereafter, give notice thereof to the Agent who shall give notice to the other
Lenders.
|
|
|
19
|
APPLICATION OF EARNINGS
|
|
|
19.1
|
General.
From the Drawdown Date until the Total Commitments have terminated and all amounts
payable hereunder have been paid in full, each of the Borrowers undertakes with each Creditor Party to comply or cause compliance
with the following provisions of this Clause 19 except as the Agent, with the consent of the Majority Lenders, may approve from
time to time in writing, such approval not to be unreasonably withheld.
|
|
|
19.2
|
Funding of Earnings Account.
On the Drawdown Date, each of the Borrowers shall deposit $250,000
into and at all times retain such amount in its Earnings Account. Within one (1) year of the Drawdown Date, each of the Borrowers
shall have deposited an additional $250,000 into and at all times retain such amount in the relevant Earnings Account, so that
at all times from and after the first anniversary of the Drawdown Date the balance in each Earnings Account shall be not less than
$500,000 (the “
Minimum Balance
”).
|
|
|
19.3
|
Payment of Earnings into Earnings Account.
Each Borrower undertakes with each Creditor Party
to ensure that, subject only to the provisions of the relevant Time Charter Assignment or the relevant Earnings Assignment, all
Earnings of the Ship owned by it are paid to the relevant Earnings Account. Subject to Clause 19.2, and provided that no Event
of Default has occurred and is continuing, each Borrower shall be entitled to withdraw the Earnings from the relevant Earnings
Account to pay for the operation of the Ship owned by it and to pay the repayment installments specified in Clause 8.1 and the
interest payable under Clause 5.2.
|
|
|
19.4
|
Location of Earnings Account.
The Borrowers shall promptly:
|
|
|
(a)
|
comply, or cause the compliance, with any requirement of the Agent as to the location or re-location
of an Earnings Account, and without limiting the foregoing, each Borrower agrees to segregate, or cause the segregation of, the
relevant Earnings Account from the banking platform on which their other accounts are located or designated; and
|
|
|
(b)
|
execute, or cause the execution of, any documents which the Agent specifies to create or maintain
in favor of the Security Trustee a Security Interest over (and/or rights of set-off, consolidation or other rights in relation
to) the Earnings Accounts.
|
|
|
19.5
|
Debits for expenses etc.
Upon the occurrence and during the continuance of an Event of Default,
the Agent shall be entitled (but not obliged) from time to time to debit the Earnings Accounts without prior notice in order to
discharge any amount due and payable under Clause 21 or 22 to a Creditor Party or payment of which any Creditor Party has become
entitled to demand under Clause 21 or 22.
|
|
|
19.6
|
Borrowers’ obligations unaffected.
The provisions of this Clause 19 do not affect:
|
|
|
(a)
|
the liability of the Borrowers to make payments of principal and interest on the due dates; or
|
|
|
(b)
|
any other liability or obligation of the Borrowers or any other Security Party under any Finance
Document.
|
|
|
20.1
|
Events of Default.
An Event of Default occurs if:
|
|
|
(a)
|
either Borrower or any other Security Party fails to pay when due any sum payable under a Finance
Document to which it is a party or, only in the case of sums payable on demand, within five (5) Business Days after the date when
first demanded; or
|
|
|
(b)
|
any breach occurs of any of Clauses 8.8, 9.2, 11.2(b), 11.2(e), 11.2(o) or 11.2(p); or
|
|
|
(c)
|
any breach by either Borrower or any other Security Party occurs of any provision of a Finance
Document (other than a breach covered by paragraphs (a), (b), (d), (e) or (n) of this Clause 20.1) which is capable of remedy,
and such default continues unremedied 20 days after written notice from the Agent requesting action to remedy the same; or
|
|
|
(d)
|
(subject to any applicable grace period specified in a Finance Document) any breach by either Borrower
or any other Security Party occurs of any provision of a Finance Document (other than a breach falling within paragraphs (a), (b),
(c) or (e) of this Clause 20.1); or
|
|
|
(e)
|
any representation, warranty or statement made or repeated by, or by an officer or director or
other authorized person of, either Borrower or any other 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 in any material respect when it is made or repeated;
or
|
|
|
(f)
|
an event of default, or an event or circumstance which, with the giving of any notice, the lapse
of time or both would constitute an event of default, has occurred on the part of a Security Party (other than the Glencore Guarantors
and ST Shipping) under any contract or agreement (other than the Finance Documents) to which such person is a party, and, in respect
of any payment default, the value of which is or exceeds $1,000,000, and such event of default has not been cured within any applicable
grace period. For the avoidance of doubt, any event of default other than a payment default shall not be subject to the $1,000,000
threshold set forth herein; or
|
|
|
(g)
|
[intentionally omitted];
|
|
|
(h)
|
a Security Party shall generally not pay its debts as such debts become due, or shall admit in
writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or
|
|
|
(i)
|
any proceeding shall be instituted by or against a Security Party seeking to adjudicate it a bankrupt
or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of
it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of
an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial
part of its property, and solely in the case of an involuntary proceeding:
|
|
|
(i)
|
such proceeding shall remain undismissed or unstayed for a period of 60 days; or
|
|
|
(ii)
|
any of the actions sought in such involuntary proceeding (including, without limitation, the entry
of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any
substantial part of its property) shall occur; or
|
|
|
(j)
|
more than 25% of the undertakings, assets, rights or revenues of, or shares or other ownership
interest in, a Security Party are seized, nationalized, expropriated or compulsorily acquired by or under authority of any government;
or
|
|
|
(k)
|
a creditor attaches or takes possession of, or a distress, execution, sequestration or process
(each an “action”) is levied or enforced upon or sued out against, more than 25% of the undertakings, assets, rights
or revenues (the
“assets”
) of a Security Party in relation to a claim by such creditor which, in the reasonable
opinion of the Majority Lenders, is likely to materially and adversely affect the ability of such Security Party to perform all
or any of its obligations under or otherwise to comply with the terms of any Finance Document to which it is a party and such person
does not procure that such action is lifted, released or expunged within 20 Business Days of such action being (i) instituted and
(ii) notified to such Security Party; or
|
|
|
(l)
|
any judgment or order for the payment of money individually or in the aggregate in excess of $1,000,000
(exclusive of any amounts fully covered by insurance (less any applicable deductible) and as to which the insurer has acknowledged
its responsibility to cover such judgment or order) shall be rendered against a Security Party (other than the Glencore Guarantors
and ST Shipping) and such judgment shall not have been vacated or discharged or stayed or bonded pending appeal within 30 days
after the entry thereof or enforcement proceedings shall have been commenced by any creditor upon such judgment or order; or
|
|
|
(m)
|
a Security Party ceases or suspends or threatens to cease or suspend the carrying on of 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,
except in the case of a sale or a proposed sale of a Ship by a Borrower; or
|
|
|
(n)
|
a Ship becomes a Total Loss or suffers a Major Casualty and (i) in the case of a Total Loss, insurance
proceeds are not collected or received by the Security Trustee from the underwriters within 150 days of the Total Loss Date; or
(ii) in the case of a Major Casualty, that Ship has not been otherwise repaired in a reasonably timely and proper manner under
the prevailing circumstances; or
|
|
|
(o)
|
it becomes unlawful in any Pertinent Jurisdiction or impossible:
|
|
|
(i)
|
for 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;
|
|
|
(ii)
|
for the Agent, the Security Trustee or the Lenders to exercise or enforce any right under, or to
enforce any Security Interest created by, a Finance Document; or
|
|
|
(p)
|
any consent necessary to enable a Borrower to own, operate or charter the Ship owned by it or to
enable a Borrower or any other Security Party to comply with any material provision 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
|
|
|
(q)
|
any material provision 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
|
|
|
(r)
|
the security constituted by a Finance Document is in any way imperiled or in jeopardy; or
|
|
|
(s)
|
there occurs the cancellation or termination of any contract of employment for the Ship of more
than 12 months duration to which a Security Party is a party, unless such contract of employment is replaced with a substitute
contract of employment with the consent of the Lenders (such consent not to be unreasonably withheld); or
|
|
|
(t)
|
there occurs or develops a change in the financial position, business or prospects of a Borrower
which, in the reasonable opinion of the Majority Lenders, has a material adverse effect on such person’s ability to discharge
its liabilities under the Finance Documents as they fall due; or
|
|
|
(u)
|
the results of any survey or inspection of a Ship pursuant to Clause 14.7 or 14.8 are deemed unsatisfactory
by the Majority Lenders in their reasonable discretion after giving due consideration to the type and age of that Ship and whether
such results materially adversely affect that Ship’s Fair Market Value or safe operation, unless such survey or inspection
is revised to the reasonable satisfaction of the Majority Lenders within 60 days of the date that a copy of the original inspection
is delivered by the Borrowers to the Agent; or
|
|
|
(v)
|
a Ship is off charter for a continuous period of 90 days at any time (unless loss of hire insurance
commences within such 90 day period); or
|
|
|
(w)
|
a Change of Control shall have occurred; or
|
|
|
(x)
|
ST Shipping is declared by the Minister of Finance of Singapore to be a company to which Part IX
of the Companies Act, Chapter 50 of Singapore applies.
|
|
|
20.2
|
Actions following an Event of Default.
On, or at any time after and during the continuance
of, 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 Borrowers a notice stating that the Commitments and all other obligations of each
Lender to the Borrowers under this Agreement are cancelled; and/or
|
|
|
(ii)
|
serve on the Borrowers a notice stating that the Loan, together with accrued interest and all other
amounts accrued or owing under this Agreement, are immediately due and payable or are due and payable on demand,
provided that
in the case of an Event of Default under either of Clauses 20.1(h) or (i), the Loan and all accrued interest and other amounts
accrued or owing hereunder shall be deemed immediately due and payable without notice or demand therefor; 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 authorization 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 are entitled to take under any Finance Document or
any applicable law to enforce the Security Interests created by this Agreement and any other Finance Document in any manner available
to it and in such sequence as the Security Trustee may, in its absolute discretion, determine.
|
|
|
20.3
|
Termination of Commitments.
On the service of a notice under Clause 20.2(a)(i), the Commitments
and all other obligations of each Lender to the Borrowers under this Agreement shall be cancelled.
|
|
|
20.4
|
Acceleration of Loan.
On the service of a notice under Clause 20.2(a)(ii), all or, as the
case may be, the part of the Loan specified in the notice, together with accrued interest and all other amounts accrued or owing
from the Borrowers or any other 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.
|
|
|
20.5
|
Multiple notices; action without notice.
The Agent may serve notices under Clauses 20.2(a)(i)
and (ii) simultaneously or on different dates and it and/or the Security Trustee may take any action referred to in Clause 20.2
if no such notice is served or simultaneously with or at any time after the service of both or either of such notices.
|
|
|
20.6
|
Notification of Creditor Parties and Security Parties.
The Agent shall send to each Lender
and the Security Trustee a copy of the text of any notice which the Agent serves on the Borrowers under Clause 20.2. Such notice
shall become effective when it is served on the Borrowers, 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 Borrowers or any Security Party with any form of claim or
defense.
|
|
|
20.7
|
Creditor Party rights unimpaired.
Nothing in this Clause shall be taken to impair or restrict
the exercise of any right given to individual Lenders under a Finance Document or the general law; and, in particular, this Clause
is without prejudice to Clause 3.1.
|
|
|
20.8
|
Exclusion of Creditor Party liability.
No Creditor Party, and no receiver or manager appointed
by the Security Trustee, shall have any liability to any 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 realized from any asset comprised in such a Security Interest or for any reduction (however caused) in the value
of such an asset,
|
provided that
nothing
in this Clause 20.8 shall exempt a Creditor Party or a receiver or manager from liability for losses shown to have been directly
and mainly caused by the gross negligence or the willful misconduct of such Creditor Party’s own officers and employees or
( as the case may be) such receiver’s or manager’s own partners or employees.
|
|
21.1
|
Commitment, upfront and facility fees.
The Borrowers shall pay to the Agent:
|
|
|
(a)
|
on the Drawdown Date, for the period between the Effective Date and the Drawdown Date, for the
account of the Lenders, a commitment fee at the rate of 1.00 percent per annum on the amount of the Total Commitments,
provided
that
no commitment fee shall be due or payable if the Total Commitments are advanced to the Borrowers within 10 Business Days
of the Effective Date;
|
|
|
(b)
|
an upfront fee of 1.25% of the Total Commitments, such upfront fee to be payable to the Agent for
its own account, and 50% of such upfront fee shall be paid on the Effective Date and 50% of such upfront fee shall be paid on the
Drawdown Date; and
|
|
|
(c)
|
on the Drawdown Date and on each anniversary of the Drawdown Date, a facility fee of $15,000 payable
to the Agent for its own account.
|
|
|
21.2
|
Costs of negotiation, preparation etc.
The Borrowers 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, including, without limitation, the reasonable fees and disbursements of a Creditor Party’s legal counsel
and any local counsel retained by them.
|
|
|
21.3
|
Costs of variations, amendments, enforcement etc.
The Borrowers shall pay to the Agent,
on the Agent’s demand, the amount of all expenses incurred by the Agent or the Security Trustee, as the case may be, 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 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 Collateral or any other matter relating to such Collateral; or
|
|
|
(d)
|
any step taken by the Security Trustee or a Lender with a view to the protection, exercise or enforcement
of any right or Security Interest created by a Finance Document or for any similar purpose.
|
There shall be recoverable under
paragraph (d) the full amount of all legal expenses, whether or not such as would be allowed under rules of court or any taxation
or other procedure carried out under such rules.
|
|
21.4
|
Documentary taxes.
The Borrowers shall promptly pay any tax payable on or by reference to
any Finance Document, and shall, on the Agent’s demand, fully indemnify each Creditor Party against any claims, expenses,
liabilities and losses resulting from any failure or delay by the Borrowers to pay such a tax.
|
|
|
21.5
|
Certification of amounts.
A notice which is signed by an officer 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.
|
|
|
22.1
|
Indemnities regarding borrowing and repayment of Loan.
The Borrowers shall fully indemnify
the Agent and each Lender on the Agent’s 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)
|
the 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 Borrowers or any other Security Party 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 Borrowers on the amount concerned under Clause 7); or
|
|
|
(d)
|
the occurrence of an Event of Default or a Potential Event of Default and/or the acceleration of
repayment of the Loan under Clause 20.
|
It is understood
that the indemnities provided in this Clause 22.1 shall not apply to any claim cost or expense which is a tax levied by a taxing
authority on the indemnified party (which taxes are subject to indemnity solely as provided in Clause 23 below) but shall apply
to any other costs associated with any tax which is not a Non-indemnified Tax.
|
|
22.2
|
Breakage costs.
Without limiting its generality, Clause 22.1 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 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.
|
|
|
22.3
|
Miscellaneous indemnities.
The Borrowers 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 and mainly caused by the dishonesty or willful misconduct or gross
negligence of the officers or employees of the Creditor Party concerned.
Without prejudice to its generality,
this Clause 22.3 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, any Environmental Law or any business conducted directly or indirectly
by a Security Party with any Prohibited Person.
|
|
22.4
|
Currency indemnity.
If any sum due from the Borrowers or any other 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 Borrowers or any other 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 Borrowers 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 22.4, 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 22.4 creates a separate
liability of the Borrowers 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.
|
|
22.5
|
Intentionally omitted.
|
|
|
22.6
|
Certification of amounts.
A notice which is signed by an officer of a Creditor Party, which
states that a specified amount, or aggregate amount, is due to that Creditor Party under this Clause 22 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.
|
|
|
22.7
|
Sums deemed due to a Lender.
For the purposes of this Clause 22, a sum payable by the Borrowers
to the Agent or the Security Trustee for distribution to a Lender shall be treated as a sum due to that Lender.
|
|
|
23
|
NO SET-OFF OR TAX DEDUCTION; tax indemnity
|
|
|
23.1
|
No deductions.
All amounts due from a Security Party 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 such Security Party is required
by law to make.
|
|
|
23.2
|
Grossing-up for taxes.
If a Security Party is required by law to make a tax deduction from
any payment:
|
|
|
(a)
|
such Security Party shall notify the Agent as soon as it becomes aware of the requirement;
|
|
|
(b)
|
such Security Party shall pay the tax deducted to the appropriate taxation authority promptly,
and in any event before any fine or penalty arises; and
|
|
|
(c)
|
except if the deduction is for collection or payment of a Non-indemnified Tax of a Creditor Party,
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.
|
|
|
23.3
|
Evidence of payment of taxes.
Within one (1) month after making any tax deduction, the relevant
Security Party shall deliver to the Agent documentary evidence satisfactory to the Agent that the tax had been paid to the appropriate
taxation authority.
|
|
|
23.4
|
Tax credits
. A Creditor Party which receives for its own account a repayment or credit in
respect of tax on account of which the Borrowers have made an increased payment under Clause 23.2 shall pay to the Borrowers a
sum equal to the proportion of the repayment or credit which that Creditor Party allocates to the amount due from the Borrowers
in respect of which the Borrowers 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 23.4 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 23.4 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 Borrowers 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
23.4 shall be conclusive and binding on the Borrowers and the other Creditor Parties.
|
|
|
23.5
|
Indemnity for taxes.
The Borrowers hereby indemnify and agree to hold each Creditor Party
harmless from and against all taxes other than Non-indemnified Taxes levied on such Creditor Party (including, without limitation,
taxes imposed on any amounts payable under this Clause 23.5) paid or payable by such person, whether or not such taxes or other
taxes were correctly or legally asserted. Such indemnification shall be paid within 10 days from the date on which such Creditor
Party makes written demand therefore specifying in reasonable detail the nature and amount of such taxes or other taxes.
|
|
|
23.6
|
Exclusion from indemnity and gross-up for taxes.
The Borrowers shall not be required to
indemnify any Creditor Party for a tax pursuant to Clause 23.5, or to pay any additional amounts to any Creditor Party pursuant
to Clause 23.2, to the extent that the tax is collected by withholding on payments (a “
Withholding
”) and is
levied by a Pertinent Jurisdiction of the payer and:
|
|
|
(a)
|
the person claiming such indemnity or additional amounts was not an original party to this agreement
and under applicable law (after taking into account relevant treaties and assuming that such person has provided all forms it may
legally and truthfully provide) on the date such person became a party to this Agreement a Withholding would have been required
on such payment,
provided that
this exclusion shall not apply to the extent such Withholding does not exceed the Withholding
that would have been applicable if such payment had been made to the person from whom such person acquired its rights under the
Agreement and this exclusion shall not apply to the extent that such Withholding exceeds the amount of Withholding that would have
been required under the law in effect on the date such person became a party to this Agreement; or
|
|
|
(b)
|
the person claiming such indemnity or additional amounts is a Lender who has changed its Lending
Office and under applicable law (after taking into account relevant treaties and assuming that such Lender has provided all forms
it may legally and truthfully provide) on the date such Lender changed its Lending Office a Withholding would have been required
on such payment,
provided that
this exclusion shall not apply to the extent such Withholding does not exceed the Withholding
that would have been applicable to such payment if such Lender had not changed its Lending Office and this exclusion shall not
apply to the extent that the Withholding exceeds the amount of Withholding that would have been required under the law in effect
on the date such Lender changed its Lending Office; or
|
|
|
(c)
|
in the case of a Lender, to the extent that Withholding would not have been required on such payment
if such Lender has complied with its obligations to deliver certain tax form pursuant to Section 23.7 below.
|
|
|
23.7
|
Delivery of tax forms.
|
|
|
(a)
|
Upon the reasonable request of the Borrowers, each Lender or transferee that is organized under
the laws of a jurisdiction outside the United States (a “
Non-U.S. Lender
”) shall deliver to the Agent and the
Borrowers two properly completed and duly executed copies of either U.S. Internal Revenue Service Form W-8BEN, W-8ECI or W-8IMY
or, upon request of the Borrowers or the Agent, any subsequent versions thereof or successors thereto, in each case claiming such
reduced rate (which may be zero) of U.S. Federal withholding tax under Sections 1441 and 1442 of the Code with respect to payments
of interest hereunder as such Non-U.S. Lender may properly claim. In addition, in the case of a Non-U.S. Lender claiming exemption
from U.S. Federal withholding tax under Section 871(h) or 881(c) of the Code, such Non-U.S. Lender shall, when so requested by
the Borrowers provide to the Agent and the Borrowers in addition to the W-8BEN required under Section 23.7(a) a certificate representing
that such Non-U.S. Lender is not a bank for purposes of Section 881(c) of the Code, is not a 10-percent shareholder (within the
meaning of Section 871(h)(3)(B) of the Code) of the Borrowers and is not a controlled foreign corporation related to the Borrowers
(within the meaning of Section 864(d)(4) of the Code), and such Non-U.S. Lender agrees that it shall promptly notify the Agent
in the event any representation in such certificate is no longer accurate.
|
|
|
(b)
|
In the event that Withholding taxes may be imposed under the laws of any Pertinent Jurisdiction
(other than the United States or any political subdivision or taxing jurisdiction thereof or therein) in respect of payments on
the Loan or other amounts due under this Agreement and if certain documentation provided by a Lender could reduce or eliminate
such Withholding taxes under the laws of such Pertinent Jurisdiction or any treaty to which the Pertinent Jurisdiction is a party,
then, upon written request by the Borrowers, a Lender that is entitled to an exemption from, or reduction in the amount of, such
Withholding tax shall deliver to the Borrowers (with a copy to the Agent), at the time or times prescribed by applicable law or
promptly after receipt of Borrowers’ request, whichever is later, such properly completed and executed documentation requested
by the Borrowers, if any, as will permit such payments to be made without withholding or at a reduced rate of withholding; provided
that such Lender is legally entitled to complete, execute and deliver such documentation and in such Lender’s reasonable
judgment such completion, execution or delivery would not materially prejudice the legal or commercial position of such Lender.
Notwithstanding the foregoing, nothing in Clause 23.7 shall require a Lender to disclose any confidential information (including,
without limitation, its tax returns or its calculations).
|
|
|
(c)
|
Each Lender shall deliver such forms as provided in this Clause 23.7 within 20 days after receipt
of a written request therefor from the Agent or Borrowers.
|
|
|
(d)
|
Notwithstanding any other provision of this Clause 23.7, a Lender shall not be required to deliver
any form pursuant to this Clause 23.7 that such Lender is not legally entitled to deliver.
|
|
|
(a)
|
If at any time, any payment made to a Lender under a Finance Document might be subject to withholding
under FATCA, the Lender to whom such payment is to be made shall provide to the Agent and the Borrowers such forms or certificates
and other documentation as is required by FATCA to establish that no withholding is required on such payment as well as such other
documentation as the Agent or the Borrowers, as the case may be, shall reasonably request to determine the application of FATCA
to such payment.
|
|
|
(b)
|
As to any payment to be made to a Lender under any Finance Document for which the Agent or a Borrower
is a “withholding agent” as defined in FATCA, the Agent or the relevant Borrower may withhold and pay over to the United
States of America such portion of such payment as the Agent or such Borrower, as the case may be, shall determine that it is required
to so withhold and pay over under FATCA.
|
|
|
(c)
|
Each Lender hereby agrees to indemnify the Agent and each Borrower from and against any penalties,
costs or expenses that the Agent or such Borrower may incur as a result of any actions taken in reliance upon the certificates
and documents so provided by such Lender. Such forms shall be provided within 20 days after receipt of a written request therefor
from the Agent or the Borrowers, as the case may be, but in no event later than the first date on which withholding under a Finance
Document would be required under FATCA.
|
|
|
24.1
|
Illegality.
If it becomes unlawful in any applicable jurisdiction for a Lender (the “
Notifying
Lender
”) to perform any of its obligations as contemplated by this Agreement or to fund or maintain its participation
in any Advance:
|
|
|
(a)
|
the Notifying Lender shall promptly notify the Agent upon becoming aware of that event;
|
|
|
(b)
|
upon the Agent notifying the Borrowers and the other Creditor Parties, the Commitment of the Notifying
Lender will be immediately cancelled; and
|
|
|
(c)
|
the Borrowers shall repay the Notifying Lender’s participation in the Advance on the last
day of the Interest Period for the Advance occurring after the Agent has notified the Borrowers or, if earlier, the date specified
by the Notifying Lender in the notice delivered to the Agent (being no earlier than the last day of any applicable grace period
permitted by law).
|
|
|
24.2
|
Mitigation
. If circumstances arise which would result in a notification under Clause 24.1
then, without in any way limiting the obligations of the Borrowers under Clause 24.1, the Notifying Lender shall use reasonable
commercial efforts 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.
|
|
|
25.1
|
Increased costs.
This Clause 25 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 Non-Indemnified tax); 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
”.
Notwithstanding anything herein
to the contrary, the Dodd-Frank Wall Street Reform and Consumer Protection Act, and all requests, rules, guidelines and directives
promulgated thereunder, are deemed to have been introduced or adopted after the date hereof, regardless of the date enacted or
adopted.
|
|
25.2
|
Meaning of “increased costs”.
In this Clause 25, “
increased costs
”
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 having taken an assignment of rights under this Agreement, 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 Lender’s Contribution or (as the case may require) the proportion
of that cost attributable to the 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;
|
|
|
(e)
|
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 23 or an item arising directly out of
the implementation or application of or compliance with Basel III or any other law or regulation which implements Basel III (whether
such implementation, application or compliance is by a government, regulator, Creditor Party or any of its affiliates).
|
For the purposes of this Clause
25.2 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.
|
|
25.3
|
Notification to Borrowers of claim for increased costs.
The Agent shall promptly notify
the Borrowers and the other Security Parties of the notice which the Agent received from the Notifying Lender under Clause 25.1.
|
|
|
25.4
|
Payment of increased costs.
The Borrowers shall pay to the Agent, on the Agent’s demand,
for the account of the Notifying Lender the amounts which the Agent from time to time notifies the Borrowers that the Notifying
Lender has specified to be necessary to compensate the Notifying Lender for the increased cost.
|
|
|
25.5
|
Notice of prepayment.
If the Borrowers are not willing to continue to compensate the Notifying
Lender for the increased cost under Clause 25.4, the Borrowers may give the Agent not less than 14 days’ notice of its intention
to prepay the Notifying Lender’s Contribution at the end of an Interest Period.
|
|
|
25.6
|
Prepayment; termination of Commitment.
A notice under Clause 25.5 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 Borrowers shall prepay (without
premium or penalty but subject to any applicable prepayment fee under Clause 8.9(c)) the Notifying Lender’s Contribution,
together with accrued interest thereon at the applicable rate plus the Margin.
|
|
|
25.7
|
Application of prepayment.
Clause 8 shall apply in relation to the prepayment.
|
|
|
26.1
|
Application of credit balances.
Upon the occurrence and during the continuance of an Event
of Default, each Creditor Party may, with notice to the Borrowers:
|
|
|
(a)
|
apply any balance (whether or not then due) which at any time stands to the credit of any account
in the name of either Borrower at any office in any country of that Creditor Party in or towards satisfaction of any sum then due
from the Borrowers to that Creditor Party under any of the Finance Documents; and
|
|
|
(i)
|
break, or alter the maturity of, all or any part of a deposit of either Borrower;
|
|
|
(ii)
|
convert or translate all or any part of a deposit or other credit balance into Dollars; and
|
|
|
(iii)
|
enter into any other transaction or make any entry with regard to the credit balance which the
Creditor Party concerned considers appropriate.
|
|
|
26.2
|
Existing rights unaffected.
No Creditor Party shall be obliged to exercise any of its rights
under Clause 26.1; 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).
|
|
|
26.3
|
Sums deemed due to a Lender.
For the purposes of this Clause 26, a sum payable by the Borrowers
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 Lender’s 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.
|
|
|
26.4
|
No Security Interest.
This Clause 26 gives the Creditor Parties a contractual right of set-off
only, and does not create any Security Interest over any credit balance of either Borrower.
|
|
|
27
|
TRANSFERS AND CHANGES IN LENDING OFFICES
|
|
|
27.1
|
Transfer by Borrowers.
The Borrowers 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.
|
|
|
27.2
|
Transfer by a Lender.
Subject to Clause 27.4, a Lender (the “
Transferor Lender
”)
may at any time, with the consent of the Borrowers, 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 trust, fund or other entity
(a “
Transferee Lender
”) which (i) is regularly engaged in or established for the purpose of making, purchasing
or investing in loans, securities or other financial assets or the securitization or similar transaction of that Transferor Lender’s
Contribution or Commitment and (ii) is not an Affiliate of the Borrowers, 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.
Notwithstanding the foregoing,
any rights and obligations of the Transferor Lender in its capacity as Agent or Security Trustee shall be determined in accordance
with Clause 31.
|
|
27.3
|
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 Borrowers, the other Security Parties, the
Security Trustee and each of the other Lenders;
|
|
|
(b)
|
on behalf of the Transferee Lender, send to the Borrowers and each other 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 and the Transferee Lender once it is satisfied it has
complied with all necessary “know your customer” or other similar checks under all applicable laws and regulations
to the transfer to that Transferee Lender.
|
|
27.4
|
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 27.3 on or before that date.
|
|
|
27.5
|
No transfer without Transfer Certificate.
Except as provided in Clause 27.17, 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 Borrowers,
any other Security Party, the Agent or the Security Trustee unless it is effected, evidenced or perfected by a Transfer Certificate.
|
|
|
27.6
|
Lender re-organization; waiver of Transfer Certificate.
If a Lender enters into any merger,
de-merger or other reorganization as a result of which all its rights or obligations vest in a successor, the Agent may, if it
sees fit, by notice to the successor and the Borrowers and the Security Trustee waive the need for the execution and delivery of
a Transfer Certificate and, upon service of the Agent’s notice, the successor shall become a Lender with the same Commitment
and Contribution as were held by the predecessor Lender.
|
|
|
27.7
|
Effect of Transfer Certificate.
The effect of a Transfer Certificate is 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 Lender’s title and of any rights or equities which the Borrowers or any
other Security Party had against the Transferor Lender;
|
|
|
(b)
|
the Transferor Lender’s 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 Certificate’s
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 transferor’s title and any rights or equities of the Borrowers or any other 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
Borrowers or any other Security Party referred to above include, but are not limited to, any right of set off and any other kind
of cross-claim.
|
|
27.8
|
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 27.4) of the
Transfer Certificate; and the Agent shall make the register available for inspection by any Lender, the Security Trustee and the
Borrowers during normal banking hours, subject to receiving at least three (3) Business Days’ prior notice.
|
|
|
27.9
|
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.
|
|
|
27.10
|
Authorization of Agent to sign Transfer Certificates.
The Borrowers, the Security Trustee
and each Lender irrevocably authorizes the Agent to sign Transfer Certificates on its behalf.
|
|
|
27.11
|
Registration fee.
In respect of any Transfer Certificate, the Agent shall be entitled to
recover a registration fee of $5,000 from the Transferor Lender or (at the Agent’s option) the Transferee Lender.
|
|
|
27.12
|
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
Borrowers, any other 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.
|
|
|
27.13
|
Disclosure of information.
Each of the Borrowers irrevocably authorizes each Creditor Party
to give, divulge and reveal from time to time information and details relating to their accounts, the Ship, the Finance Documents,
the Loan or the Commitments to:
|
|
|
(a)
|
any private, public or internationally recognized authorities that are entitled to and have requested
to obtain such information;
|
|
|
(b)
|
the Creditor Parties’ respective head offices, branches and affiliates and professional advisors;
|
|
|
(c)
|
any other parties to the Finance Documents;
|
|
|
(d)
|
a rating agency or their professional advisors;
|
|
|
(e)
|
any person with whom such Creditor Party proposes to enter (or considers entering) into contractual
relations in relation to the Loan and/or its Commitment or Contribution; and
|
|
|
(f)
|
any other person regarding the funding, re-financing, transfer, assignment, sale, sub-participation
or operational arrangement or other transaction in relation to the Loan, its Contribution or its Commitment, including without
limitation, for purposes in connection with a securitization or any enforcement, preservation, assignment, transfer, sale or sub-participation
of any of such Creditor Parties’ rights and obligations;
|
provided
that
such Creditor Party has taken commercially reasonable efforts to ensure that any person to whom such Creditor Party passes
any information in accordance with the terms of this Clause 27.13 undertakes to maintain the confidentiality of such information
so as to protect any material non-public information of the Security Parties.
|
|
27.14
|
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.
|
|
|
27.15
|
Notification.
On receiving such a notice, the Agent shall notify the Borrowers 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.
|
|
|
27.16
|
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 Clauses 5.7 to 5.12 then, unless the Borrowers, the Agent and the
Majority Lenders otherwise agree, the Agent, acting on the instructions of the Majority Lenders, and after consulting the Borrowers,
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 Bank’s appointment shall cease to be effective.
|
|
|
27.17
|
Security over Lenders’ rights.
In addition to the other rights provided to Lenders
under this Clause 27, each Lender may without consulting with or obtaining consent from the Borrowers or any other Security Party,
at any time charge, assign or otherwise create a Security Interest 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:
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(a)
|
any charge, assignment or other Security Interest to secure obligations to a federal reserve or
central bank; and
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(b)
|
in the case of any Lender which is a fund, any charge, assignment or other Security Interest 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;
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except that
no such charge, assignment or Security Interest shall:
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(i)
|
release a Lender from any of its obligations under the Finance Documents or substitute the beneficiary
of the relevant charge, assignment or Security Interest for the Lender as a party to any of the Finance Documents; or
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(ii)
|
require any payments to be made by the Borrowers or any other Security Party 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.
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28
|
VARIATIONS AND WAIVERS
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28.1
|
Variations, waivers etc. by Majority Lenders.
Subject to Clause 28.2, a document shall be
effective to vary, waive, suspend or limit any provision of a Finance Document, or any Creditor Party’s rights or remedies
under such a provision or the general law, only if the document is signed, or specifically agreed to by fax, by the Borrowers,
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.
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28.2
|
Variations, waivers etc. requiring agreement of all Lenders.
As regards the following, Clause
28.1 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”:
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(a)
|
a reduction in the Margin;
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(b)
|
a postponement to the date for, or a reduction in the amount of, any payment of principal, interest,
fees or other sum payable under this Agreement or the Note;
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(c)
|
an increase in any Lender’s Commitment;
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(d)
|
a change to the definition of “
Majority Lenders
”;
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(e)
|
a change to Clause 3 or this Clause 28;
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(f)
|
any release of, or material variation to, a Security Interest, guarantee, indemnity or subordination
arrangement set out in a Finance Document; and
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(g)
|
any other change or matter as regards which this Agreement or another Finance Document expressly
provides that each Lender’s consent is required.
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28.3
|
Variations, waivers etc. relating to the Servicing Banks.
An amendment or waiver that relates
to the rights or obligations of the Agent or the Security Trustee under Clause 31 may not be effected without the consent of the
Agent or the Security Trustee.
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28.4
|
Exclusion of other or implied variations.
Except for a document which satisfies the requirements
of Clauses 28.1, 28.2 or 28.3, 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:
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(a)
|
a provision of this Agreement or another Finance Document; or
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(b)
|
an Event of Default; or
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(c)
|
a breach by the Borrowers or another Security Party of an obligation under a Finance Document or
the general law; or
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(d)
|
any right or remedy conferred by any Finance Document or by the general law,
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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.
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|
29.1
|
General.
Unless otherwise specifically provided, any notice under or in connection with
any Finance Document shall be given by letter, electronic mail (“
Email
”) or fax and references in the Finance
Documents to written notices, notices in writing and notices signed by particular persons shall be construed accordingly.
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29.2
|
Addresses for communications.
A notice by letter, Email or fax shall be sent:
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(a)
|
to the Borrowers:
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[Name of Borrower]
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Par la Ville Place
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14 Par la Ville Road
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Hamilton HM08
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Bermuda
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|
Attention: Ms. Deborah Davis
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|
Facsimile: +441 292 1373
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|
Email: ddavis@consolidated.bm
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With a copy to:
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Phoenix Bulk Carriers (US) LLC as agents
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109 Long Wharf
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Newport, Rhode Island 02840
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Attention: Mr. Tony Laura
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|
Facsimile: +401-846-1520
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|
Email: tlaurahome@aol.com
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(b)
|
to a Lender:
|
At the address below its name in Schedule 1 or (as the case may require) in the relevant Transfer Certificate.
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(c)
|
to the Agent:
|
DVB Bank SE
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Platz der Republik 6
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60325 Frankfurt am Main
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Germany
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|
Attention: Loan Administration Manager
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|
Facsimile: +49 69 97 50 4444
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|
With a copy to:
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DVB Bank SE
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|
c/o DVB Transport (US) LLC
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|
609 Fifth Avenue, 5th Floor
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|
New York, New York 10017
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|
Attention: Mr. Neil McLaughlin
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|
Facsimile: +212-858-2676
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Email: neil.mclaughlin@dvbbank.com
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(d)
|
to the Security Trustee:
|
DVB Bank SE
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|
Platz der Republik 6
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60325 Frankfurt am Main
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Germany
|
|
|
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|
|
|
Attention: Loan Administration Manager
|
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|
Facsimile: +49 69 97 50 4444
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|
With a copy to:
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|
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|
DVB Bank SE
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|
c/o DVB Transport (US) LLC
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|
609 Fifth Avenue, 5th Floor
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|
New York, New York 10017
|
|
|
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|
|
Attention: Mr. Neil McLaughlin
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|
Facsimile: +212-858-2676
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|
Email: neil.mclaughlin@dvbbank.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 Borrowers, the Lenders
and the Security Parties.
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|
29.3
|
Effective date of notices.
Subject to Clauses 29.4 and 29.5:
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|
(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;
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|
(b)
|
a notice which is sent by Email shall be deemed to be served, and shall take effect, at the time
when it is actually received in readable form; and
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|
(c)
|
a notice which is sent by fax shall be deemed to be served, and shall take effect, two (2) hours
after its transmission is completed.
|
|
|
29.4
|
Service outside business hours.
However, if under Clause 29.3 a notice would be deemed to
be served:
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|
(a)
|
on a day which is not a business day in the place of receipt; or
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|
|
(b)
|
on such a business day, but after 5:00 p.m. local time,
|
the notice shall (subject to
Clause 29.5) be deemed to be served, and shall take effect, at 9:00 a.m. on the next day which is such a business day.
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|
29.5
|
Illegible notices.
Clauses 29.3 and 29.4 do not apply if the recipient of a notice notifies
the sender within one (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.
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|
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29.6
|
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:
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|
|
(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
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|
(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.
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|
29.7
|
Electronic communication between the Agent and a Lender.
Any communication to be made between
the Agent and a Lender under or in connection with the Finance Documents may be made by Email or other electronic means, if the
Agent and the relevant Lender:
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|
|
(a)
|
agree that, unless and until notified to the contrary, this is to be an accepted form of communication;
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|
(b)
|
notify each other in writing of their Email address and/or any other information required to enable
the sending and receipt of information by that means; and
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|
(c)
|
notify each other of any change to their respective Email 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.
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|
29.8
|
English language.
Any notice under or in connection with a Finance Document shall be in
English.
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|
|
29.9
|
Meaning of “notice”.
In this Clause 29, “
notice
” includes
any demand, consent, authorization, approval, instruction, waiver or other communication.
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|
|
30.1
|
Rights cumulative, non-exclusive.
The rights and remedies which the Finance Documents give
to each Creditor Party are:
|
|
|
(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.
|
|
|
30.2
|
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.
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|
|
30.3
|
Counterparts.
A Finance Document may be executed in any number of counterparts.
|
|
|
30.4
|
Binding Effect.
This Agreement shall become effective on the Effective Date and thereafter
shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors and assigns.
|
|
|
31.1
|
Appointment and Granting.
|
|
|
(a)
|
The Agent
. Each of the Lenders appoints and authorizes (with a right of revocation) the
Agent to act as its agent hereunder and under any of the other Finance Documents with such powers as are specifically delegated
to the Agent by the terms of this Agreement and of any of the other Finance Documents, together with such other powers as are reasonably
incidental thereto.
|
|
|
(b)
|
The Security Trustee.
|
|
|
(i)
|
Authorization of Security Trustee
. Each of the Lenders and the Agent appoints and authorizes
(with a right of revocation) the Security Trustee to act as security trustee hereunder and under the other Finance Documents (other
than the Notes) with such powers as are specifically delegated to the Security Trustee by the terms of this Agreement and such
other Finance Documents, together with such other powers as are reasonably incidental thereto.
|
|
|
(ii)
|
Granting Clause
. To secure the payment of all sums of money from time to time owing to the
Lenders under the Finance Documents, and the performance of the covenants of the Borrowers and any other Security Party herein
and therein contained, and in consideration of the premises and of the covenants herein contained and of the extensions of credit
by the Lenders, the Security Trustee does hereby declare that it will hold as such trustee in trust for the benefit of the Lenders
and the Agent, from and after the execution and delivery thereof, all of its right, title and interest as mortgagee in, to and
under the Mortgages and its right, title and interest as assignee and secured party under the other Finance Documents (the right,
title and interest of the Security Trustee in and to the property, rights and privileges described above, from and after the execution
and delivery thereof, and all property hereafter specifically subjected to the Security Interest of the indenture created hereby
and by the Finance Documents by any amendment hereto or thereto are herein collectively called the “
Estate
”);
TO HAVE AND TO HOLD the Estate unto the Security Trustee and its successors and assigns forever, BUT IN TRUST, NEVERTHELESS, for
the equal and proportionate benefit and security of the Lenders, the Agent and their respective successors and assigns without
any priority of any one over any other, UPON THE CONDITION that, unless and until an Event of Default under this Agreement shall
have occurred and be continuing, the relevant Borrower shall be permitted, to the exclusion of the Security Trustee, to possess
and use the Ships. IT IS HEREBY COVENANTED, DECLARED AND AGREED that all property subject or to become subject hereto is to be
held, subject to the further covenants, conditions, uses and trusts hereinafter set forth, and each Security Party, for itself
and its respective successors and assigns, hereby covenants and agrees to and with the Security Trustee and its successors in said
trust, for the equal and proportionate benefit and security of the Lenders and the Agent as hereinafter set forth.
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|
|
(iii)
|
Acceptance of Trusts
. The Security Trustee hereby accepts the trusts imposed upon it as
Security Trustee by this Agreement, and the Security Trustee covenants and agrees to perform the same as herein expressed and agrees
to receive and disburse all monies constituting part of the Estate in accordance with the terms hereof.
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|
|
31.2
|
Scope of Duties
. Neither the Agent nor the Security Trustee (which terms as used in this
sentence and in Clause 31.5 hereof shall include reference to their respective affiliates and their own respective and their respective
affiliates’ officers, directors, employees, agents and attorneys-in-fact):
|
|
|
(a)
|
shall have any duties or responsibilities except those expressly set forth in this Agreement and
in any of the Finance Documents, and shall not by reason of this Agreement or any of the Finance Documents be (except, with respect
to the Security Trustee, as specifically stated to the contrary in this Agreement) a trustee for a Lender;
|
|
|
(b)
|
shall be responsible to the Lenders for any recitals, statements, representations or warranties
contained in this Agreement or in any of the Finance Documents, or in any certificate or other document referred to or provided
for in, or received by any of them under, this Agreement or any of the other Finance Documents, or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any of the other Finance Documents or any other document referred
to or provided for herein or therein or for any failure by a Security Party or any other person to perform any of its obligations
hereunder or thereunder or for the location, condition or value of any property covered by any Security Interest under any of the
Finance Documents or for the creation, perfection or priority of any such Security Interest;
|
|
|
(c)
|
shall be required to initiate or conduct any litigation or collection proceedings hereunder or
under any of the Finance Documents unless expressly instructed to do so in writing by the Majority Lenders; or
|
|
|
(d)
|
shall be responsible for any action taken or omitted to be taken by it hereunder or under any of
the Finance Documents or under any other document or instrument referred to or provided for herein or therein or in connection
herewith or therewith, except for its own gross negligence or willful misconduct. Each of the Security Trustee and the Agent may
employ agents and attorneys-in-fact and neither the Security Trustee nor the Agent shall be responsible for the negligence or misconduct
of any such agents or attorneys-in-fact selected by it in good faith, but shall be responsible for the gross negligence or willful
misconduct of such agents or attorneys-in-fact. Each of the Security Trustee and the Agent may deem and treat the payee of a Note
as the holder thereof for all purposes hereof unless and until a written notice of the assignment or transfer thereof shall have
been filed with the Agent.
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|
|
31.3
|
Reliance
. Each of the Security Trustee and the Agent shall be entitled to rely upon any
certification, notice or other communication (including any thereof by telephone, telex, telefacsimile, telegram or cable) believed
by it to be genuine and correct and to have been signed or sent by or on behalf of the proper person or persons, and upon advice
and statements of legal counsel, independent accountants and other experts selected by the Security Trustee or the Agent, as the
case may be. As to any matters not expressly provided for by this Agreement or any of the other Finance Documents, each of the
Security Trustee and the Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder or thereunder
in accordance with instructions signed by the Majority Lenders, and such instructions and any action taken or failure to act pursuant
thereto shall be binding on all of the Lenders.
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|
|
31.4
|
Knowledge.
Neither the Security Trustee nor the Agent shall be deemed to have knowledge
or notice of the occurrence of a Potential Event of Default or Event of Default (other than, in the case of the Agent, the non-payment
of principal of or interest on the Loan or actual knowledge thereof) unless each of the Security Trustee and the Agent has received
notice from a Lender or the Borrowers specifying such Potential Event of Default or Event of Default and stating that such notice
is a “Notice of Default”. If the Agent receives such a notice of the occurrence of such Potential Event of Default
or Event of Default, the Agent shall give prompt notice thereof to the Security Trustee and the Lenders (and shall give each Lender
prompt notice of each such non-payment). Subject to Clause 31.8 hereof, the Security Trustee and the Agent shall take such action
with respect to such Potential Event of Default or Event of Default or other event as shall be directed by the Majority Lenders,
except that, unless and until the Security Trustee and the Agent shall have received such directions, each of the Security Trustee
and the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Potential
Event of Default or Event of Default or other event as it shall deem advisable in the best interest of the Lenders.
|
|
|
31.5
|
Security Trustee and Agent as Lenders
. Each of the Security Trustee and the Agent (and any
successor acting as Security Trustee or Agent, as the case may be) in its individual capacity as a Lender hereunder shall have
the same rights and powers hereunder as any other Lender and may exercise the same as though it were not acting as the Security
Trustee or the Agent, as the case may be, and the term “Lender” or “Lenders” shall, unless the context
otherwise indicates, include each of the Security Trustee and the Agent in their respective individual capacities. Each of the
Security Trustee and the Agent (and any successor acting as Security Trustee and Agent, as the case may be) and their respective
affiliates may (without having to account therefor to a Lender) accept deposits from, lend money to and generally engage in any
kind of banking, trust or other business with the Borrowers and any of its subsidiaries or affiliates as if it were not acting
as the Security Trustee or the Agent, as the case may be, and each of the Security Trustee and the Agent and their respective affiliates
may accept fees and other consideration from the Borrowers for services in connection with this Agreement or otherwise without
having to account for the same to the Lenders.
|
|
|
31.6
|
Indemnification of Security Trustee and Agent.
The Lenders severally agree, ratably in accordance
with the aggregate principal amount of each Lender’s Contribution in the Loan, to indemnify each of the Agent and the Security
Trustee (to the extent not reimbursed under other provisions of this Agreement, but without limiting the obligations of the Borrowers
under said other provisions) for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Security
Trustee or the Agent in any way relating to or arising out of this Agreement or any of the other Finance Documents or any other
documents contemplated by or referred to herein or therein or the transactions contemplated hereby (including, without limitation,
the costs and expenses which the Borrowers are to pay hereunder, but excluding, unless an Event of Default has occurred and is
continuing, normal administrative costs and expenses incident to the performance of their respective agency duties hereunder) or
the enforcement of any of the terms hereof or thereof or of any such other documents, except that no Lender shall be liable for
any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the party to be indemnified.
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|
|
31.7
|
Reliance on Security Trustee or Agent.
Each Lender agrees that it has, independently and
without reliance on the Security Trustee, the Agent or any other Lender, and based on such documents and information as it has
deemed appropriate, made its own credit analysis of the Borrowers and decision to enter into this Agreement and that it will, independently
and without reliance upon the Security Trustee, the Agent or any other Lender, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement
or any of the Finance Documents. None of the Security Trustee or the Agent shall be required to keep itself informed as to the
performance or observance by the Borrowers of this Agreement or any of the Finance Documents or any other document referred to
or provided for herein or therein or to inspect the properties or books of any Borrower. Except for notices, reports and other
documents and information expressly required to be furnished to the Lenders by the Security Trustee or the Agent hereunder, neither
the Security Trustee nor the Agent shall have any duty or responsibility to provide a Lender with any credit or other information
concerning the affairs, financial condition or business of either Borrower or any subsidiaries or affiliates thereof which may
come into the possession of the Security Trustee, the Agent or any of their respective affiliates.
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|
|
31.8
|
Actions by Security Trustee and Agent.
Except for action expressly required of the Security
Trustee or the Agent hereunder and under the other Finance Documents, each of the Security Trustee and the Agent shall in all cases
be fully justified in failing or refusing to act hereunder and thereunder unless it shall receive further assurances to its satisfaction
from the Lenders of their indemnification obligations under Clause 31.6 against any and all liability and expense which may be
incurred by it by reason of taking or continuing to take any such action.
|
|
|
31.9
|
Resignation and Removal.
Subject to the appointment and acceptance of a successor Security
Trustee or Agent (as the case may be) as provided below, each of the Security Trustee and the Agent may resign at any time by giving
notice thereof to the Lenders and the Borrowers, and the Security Trustee or the Agent may be removed at any time with or without
cause by the Majority Lenders by giving notice thereof to the Agent, the Security Trustee, the Lenders and the Borrowers. Upon
any such resignation or removal, the Majority Lenders shall have the right to appoint a successor Security Trustee or Agent, as
the case may be. If no successor Security Trustee or Agent, as the case may be, shall have been so appointed by the Lenders or,
if appointed, shall not have accepted such appointment within 30 days after the retiring Security Trustee’s or Agent’s,
as the case may be, giving of notice of resignation or the Majority Lenders’ removal of the retiring Security Trustee or
Agent, as the case may be, then the retiring Security Trustee or Agent, as the case may be, may, on behalf of the Lenders, appoint
a successor Security Trustee or Agent. Upon the acceptance of any appointment as Security Trustee or Agent hereunder by a successor
Security Trustee or Agent, such successor Security Trustee or Agent, as the case may be, shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Security Trustee or Agent, as the case may be, and the
retiring Security Trustee or Agent shall be discharged from its duties and obligations hereunder. After any retiring Security Trustee
or Agent’s resignation or removal hereunder as Security Trustee or Agent, as the case may be, the provisions of this Clause
31 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as
the Security Trustee or the Agent, as the case may be.
|
|
|
31.10
|
Release of Collateral.
Without the prior written consent of the Majority Lenders, neither
the Security Trustee nor the Agent will consent to any modification, supplement or waiver under any of the Finance Documents nor
without the prior written consent of all of the Lenders release any Collateral or otherwise terminate any Security Interest under
the Finance Documents, except that no such consent is required, and each of the Security Trustee and the Agent is authorized, to
release any Security Interest covering property if the Secured Liabilities have been paid and performed in full or which is the
subject of a disposition of property permitted hereunder or to which the Lenders have consented.
|
|
|
32.1
|
Governing law.
THIS AGREEMENT AND THE OTHER FINANCE DOCUMENTS (EXCEPT AS OTHERWISE PROVIDED
IN A FINANCE DOCUMENT) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO ITS CONFLICT OF LAW PRINCIPLES.
|
|
|
32.2
|
Consent to Jurisdiction.
|
|
|
(a)
|
Each of the Borrowers hereby irrevocably and unconditionally submits, for itself and its property,
to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York
County, and any appellate court thereof, in any action or proceeding arising out of or relating to this Agreement or any of the
other Finance Documents to which such Security Party is a party or for recognition or enforcement of any judgment, and each of
the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may
be heard and determined in such New York State Court or, to the extent permitted by law, in such Federal court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions
by suit on the judgment or in any other manner provided by law.
|
|
|
(b)
|
Nothing in this Clause 32.2 shall affect the right of a Creditor Party to bring any action or proceeding
against a Security Party or its property in the courts of any other jurisdictions where such action or proceeding may be heard.
|
|
|
(c)
|
Each of the Borrowers hereby irrevocably and unconditionally waives to the fullest extent it may
legally and effectively do so:
|
|
|
(i)
|
any objection which it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or any other Finance Document to which it is a party in any New York State
or Federal court and the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court; and
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(ii)
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any immunity from suit, the jurisdiction of any court in which judicial proceedings may at any
time be commenced with respect to this Agreement or any other Finance Document or from any legal process with respect to itself
or its property (including without limitation attachment prior to judgment, attachment in aid of execution of judgment, set-off,
execution of a judgment or any other legal process), and to the extent that in any such jurisdiction there may be attributed to
such person such an immunity (whether or not claimed), such person hereby irrevocably agrees not to claim such immunity.
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(d)
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Each of the Borrowers hereby agrees to appoint Leicht & Rein Tax Associates, Ltd., with offices
currently located at 570 Seventh Avenue, New York, NY 10018 as its designated agent for service of process for any action or proceeding
arising out of or relating to this Agreement or any other Finance Document. Each of the Borrowers also irrevocably consents to
the service of any and all process in any such action or proceeding by the mailing of copies of such process to its address specified
in Clause 29.2. Each of the Borrowers also agrees that service of process may be made on it by any other method of service provided
for under the applicable laws in effect in the State of New York.
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32.3
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Creditor Party rights unaffected.
Nothing in this Clause 32 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.
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32.4
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Meaning of “proceedings”.
In this Clause 32, “
proceedings
”
means proceedings of any kind, including an application for a provisional or protective measure.
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33.1
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WAIVER.
EACH OF THE BORROWERS AND THE CREDITOR PARTIES MUTUALLY AND IRREVOCABLY WAIVE ANY
AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
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34.1
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PATRIOT Act Notice.
Each of the Agent and the Lenders hereby notifies the Borrowers that
pursuant to the requirements of the
Patriot
Act and the policies and practices of
the Agent and each Lender, the Agent and each of the Lenders is required to obtain, verify and record certain information and documentation
that identifies each of the Security Parties which information includes the name and address of each such person and such other
information that will allow the Agent and each of the Lenders to identify each such person in accordance with the PATRIOT Act.
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[SIGNATURE
PAGE FOLLOWS ON NEXT PAGE]
EXECUTION
PAGE
WHEREFORE, the parties
hereto have caused this Loan Agreement to be executed as of the date first above written.
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BULK NORDIC ODYSSEY LTD., as Borrower
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DVB BANK SE, as Lender, Agent and Security Trustee
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By:
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By:
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Name:
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Name:
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Title:
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Title: Attorney-in-Fact
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BULK NORDIC ORION LTD.,
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as Borrower
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By:
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Name:
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Title:
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SCHEDULE
1
LENDERS AND COMMITMENTS
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Lender
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Lending Office
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Commitment
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DVB BANK SE
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Platz der Republic 6
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$40,000,000
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60325 Frankfurt am Main
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Address for Notices
:
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Germany
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Platz der Republic 6
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60325 Frankfurt am Main
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Germany
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Attention: Loan Administration Manager
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Facsimile: +49 69 97 50 4444
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with a copy to:
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DVB Bank SE
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c/o DVB Transport (US) LLC
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609 Fifth Avenue, 5th Floor
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New York, New York 10017
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Attention: Neil McLaughlin
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Facsimile: +212-858-2676
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Email: neil.mclaughlin@dvbbank.com
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SCHEDULE
2
intentionally omitted
SCHEDULE
3
DRAWDOWN NOTICE
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To:
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DVB Bank SE, as Agent
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Platz der Republic 6
60325 Frankfurt am Main
Germany
Attention: Loans Administration
Manager
c/o DVB Transport (US)
LLC
609 Fifth Avenue, 5th
Floor
New York, New York
10017
Attention: Neil McLaughlin
Facsimile: +212-858-2676
[
l
],
2012
DRAWDOWN NOTICE
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1.
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We refer to the loan agreement dated as of June [
l
],
2012 (the “
Loan
Agreement
”) among ourselves, as Borrowers, the Lenders referred to therein, and yourselves
as Agent and as Security Trustee in connection with a facility of up to US$40,000,000. Terms defined in the Loan Agreement have
their defined meanings when used in this Drawdown Notice.
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2.
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We request to borrow as follows:
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(a)
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Amount: US$[40,000,000];
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(b)
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Drawdown Date: [
l
], 2012;
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(c)
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Duration of the first Interest Period shall be 3 months; and
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(d)
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Payment instructions:
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[
l
]
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3.
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We represent and warrant that:
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(a)
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no Event of Default or Potential Event of Default has occurred or would result from the borrowing
of the Advance;
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(b)
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the representations and warranties in Clause 10 and those of the Borrowers or any other Security
Party which are set out in the other Finance Documents are true and not misleading as of the date of this Drawdown Notice and will
be true and not misleading as of the Drawdown Date, in each case with reference to the circumstances then existing;
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(c)
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there has been no material change in the consolidated financial condition, operations or business
prospects of the Borrowers or any of the Guarantors since the date on which the Borrowers and/or the Guarantors provided information
concerning those topics to the Agent and/or any Lender;
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(d)
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Neither of the Borrowers, the Guarantors or any of their respective subsidiaries or Affiliates
has launched any other facilities or debt transactions into the international capital markets either publicly or privately that
could have a negative or adverse effect on the loan facility contemplated by this Agreement; and
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(e)
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if the Collateral Maintenance Ratio were applied immediately following the making of the Advance,
the Borrowers would not be required to provide additional Collateral or prepay part of the Loan under Clause 15.
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4.
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This notice cannot be revoked without the prior consent of the Majority Lenders.
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5.
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We authorize you to deduct the outstanding fees and expenses referred to in Clause 21 from the
amount of the Loan.
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Name
Title
for and on behalf of
BULK NORDIC ODYSSEY LTD.
Name
Title
for and on behalf of
BULK NORDIC ORION LTD.
SCHEDULE
4
CONDITION PRECEDENT DOCUMENTS
PART A
The following are the documents referred
to in Clause 9.1(a)(i):
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1.
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A duly executed original of this Agreement and the DVB Loan Administration form attached as Schedule
8.
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2.
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A copy of each Time Charter (and all addenda and supplements thereto), in form and substance acceptable
to the Agent and certified as of a date reasonably near the date of the Drawdown Notice by a director, an officer, an authorized
person or an attorney-in-fact of the relevant Borrower as being a true and correct copy thereof.
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3.
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A copy of each Sub-Time Charter (and all addenda and supplements thereto), in form and substance
acceptable to the Agent and certified as of a date reasonably near the date of the Drawdown Notice by a director, an officer, an
authorized person or an attorney-in-fact of the relevant Borrower as being a true and correct copy thereof.
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4.
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Copies of certificates dated as of a date reasonably near the date of the Drawdown Notice, certifying
that each of the Security Parties is duly incorporated or formed and in good standing under the laws of its respective jurisdiction
of incorporation or formation.
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5.
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Copies of the constitutional documents and each amendment thereto of each of the Security Parties,
certified as of a date reasonably near the date of the Drawdown Notice by a director, an officer, an authorized person or an attorney-in-fact
of such person as being a true and correct copy thereof.
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6.
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Copies of the resolutions of the directors (or equivalent governing body) and, where applicable,
the shareholders (or equivalent equity holders), of each of the Security Parties authorizing the execution of each of the Finance
Documents to which that person is a party and, in the case of each Borrower, authorizing a director, an officer, an authorized
person or an attorney-in-fact of such Borrower to give the Drawdown Notice and other notices required under the Finance Documents,
in each case certified as of a date reasonably near the date of the Drawdown Notice by a director, an officer, an authorized person
or an attorney-in-fact of such person as being a true and correct copy thereof,
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7.
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An incumbency certificate in respect of the officers and directors (or equivalent) of each of the
Security Parties and signature samples of any signatories to any Finance Document.
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8.
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The original or a certified copy of any power of attorney under which any Finance Document is executed
on behalf of a Security Party.
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9.
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Copies of all consents which any of the Security Parties requires to enter into, or make any payment
under, any Finance Document, each certified as of a date reasonably near the date of the Drawdown Notice by a director, an officer,
an authorized person or an attorney-in-fact of such party as being a true and correct copy thereof, or certification by such director,
officer, authorized person or attorney-in-fact that no such consents are required.
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10.
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Copies of any mandates or other documents required in connection with the opening or operation
of the Earnings Accounts, certified as of a date reasonably near the date of the Drawdown Notice by a director, an officer, an
authorized person or an attorney-in-fact of the relevant Borrower as being a true and correct copy thereof.
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11.
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Documentary evidence that the capital structure of each of the Borrowers and the Guarantors is
satisfactory to and in the sole discretion of the Agent.
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12.
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Documentary evidence that the agent for service of process named in Clause 32 of this Agreement
has accepted its appointment.
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13.
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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.
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PART B
The following are the documents referred
to in Clause 9.1(b):
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1.
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A duly executed original of each Finance Document (and of each document required to be delivered
by each Finance Document) other than those referred to in Part A(1) above.
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2.
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If the Drawdown Date is more than five (5) Business Days after the date of the Drawdown Notice,
a bringdown certificate of each of the Security Parties certifying as of the Drawdown Date as to the absence of any amendments
to the documents of such person referred to in paragraphs 4, 5 and 6 of Part A since the date of the Drawdown Notice.
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3.
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Certification by the Borrowers as of the date of the Drawdown Date for the Advance as to the matters
described in Clauses 9.1(d) and (e).
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4.
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Documentary evidence that:
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(a)
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each Ship is definitively registered in the name of the relevant Borrower under the law and flag
of the Republic of Panama;
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(b)
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each Mortgage has been preliminarily registered against the relevant Ship as a valid first preferred
ship mortgage in accordance with the laws of the Republic of Panama;
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(c)
|
the Security Interests intended to be created by each of the Finance Documents have been duly perfected
under applicable law;
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(d)
|
each Ship is in the absolute and unencumbered ownership of the relevant Borrower save as contemplated
by the Finance Documents;
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(e)
|
each Ship is insured in accordance with the provisions of Clause 13 of this Agreement and all requirements
therein in respect of insurances have been complied with; and
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(f)
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each Ship maintains the highest class for vessels of its type with the Classification Society free
of any recommendations and qualifications (which status shall be established by a Confirmation of Class Certificate issued by the
Classification Society and dated a date reasonably near the Drawdown Date (
NB: a “Class Statement” or similar instrument
shall not be acceptable for purposes of this clause
)).
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5.
|
Valuations of the Fair Market Value of each of the Ships, addressed to the Agent and the Lenders,
stated to be for the purposes of this Agreement and dated not more than 14 days before the Drawdown Date, which evidence an aggregate
average Fair Market Value for the Ships of not less than 117.6% of the Advance.
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6.
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A survey report addressed to the Agent and the Lenders, stated to be for the purposes of this Agreement
from an independent marine surveyor selected by the Agent in respect of the physical condition of each Ship, which report shall
confirm the condition of such Ship to the satisfaction of the Agent and the Lenders, in their sole discretion.
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7.
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Documentary evidence that the relevant Borrower has sent an instruction letter in the form of Schedule
9 hereto to the Classification Society as required under Clause 14.4 and that the Classification Society has executed the undertaking
in the form of Schedule 10 hereto as required by Clause 14.4.
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8.
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The following documents establishing that the relevant Ship will, as from the Drawdown Date, be
managed by an Approved Manager on terms acceptable to the Agent:
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(a)
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a copy of each Approved Management Agreement, certified as of the Drawdown Date by a director,
an officer, an authorized person or an attorney-in-fact of the relevant Borrower as being a true and correct copy thereof;
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(b)
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a Manager’s Undertaking executed by each Approved Manager in favor of the Agent; and
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(c)
|
copies of each Approved Manager’s Document of Compliance and of each Ship’s ISSC and
Safety Management Certificate (together with any other details of the applicable safety management system which the Agent requires),
certified as of the Drawdown Date by a director, an officer, an authorized person or an attorney-in-fact of the Approved Manager
as being a true and correct copy thereof.
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9.
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A favorable opinion from an independent insurance consultant acceptable to the Agent on such matters
relating to the insurances for the Ships as the Agent may require.
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10.
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Delivery of technical information in respect of the Ships, in a form acceptable to the Agent, including
but not limited to (but only if available to the Borrowers): (i) full history of class, (ii) details of statutory certificates,
(iii) summaries of inspections (flag, port state control, etc.) and (iv) any records of planned maintenance.
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11.
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A certificate that each Ship is free from Asbestos/Glass Wool and nuclear products (to be provided
by the relevant Borrower on a best efforts basis but only if available to such Borrower).
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12.
|
A copy of the approval page and a copy of the page where each Ship’s LDT is described in
the stability booklet (to be provided by the relevant Borrower on a best efforts basis but only if available to the relevant Borrower).
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13.
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Work list from the last Dry Dock completed (to be provided by the relevant Borrower on a best efforts
basis but only if available to the relevant Borrower).
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14.
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Last two Port State Control Certificates and a Port State Control history for the last 3 years
(to be provided by relevant Borrower on a best efforts basis but only if available to the relevant Borrower).
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15.
|
A favorable opinion of Watson, Farley & Williams (New York) LLP, New York counsel for the Creditor
Parties, in form, scope and substance satisfactory to the Creditor Parties.
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16.
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Favorable legal opinions from lawyers appointed by any of the Security Parties or the Agent on
such matters concerning the laws of such relevant jurisdictions as the Agent may require (including without limitation Panama,
Bermuda, Singapore, Switzerland, Jersey and England).
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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.
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To:
|
[Name of Agent] for itself and for and on behalf of the Borrower, the Security Trustee and each
Lender, as defined in the Loan Agreement referred to below.
|
[Date]
|
|
1.
|
This Certificate relates to a Loan Agreement dated as of [
l
],
2012 (as amended or supplemented, the “
Loan Agreement
”) among (1) Bulk Nordic Odyssey Ltd. and Bulk Nordic Orion
Ltd. (the “
Borrowers
”), (2) the banks and financial institutions named therein as Lenders, (3) DVB Bank SE as
Agent and (4) DVB Bank SE as Security Trustee for a loan facility of up to $40,000,000.
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|
2.
|
In this Certificate, terms defined in the Loan Agreement shall, unless the contrary intention appears,
have the same meanings when used in this Certificate and:
|
“
Relevant Parties
”
means the Agent, the Borrowers, the Security Trustee and each Lender;
“
Transferor
”
means [full name] of [lending office];
“
Transferee
”
means [full name] of [lending office].
|
|
3.
|
The effective date of this Certificate is [
l
],
provided
that
this Certificate shall not come into effect unless it is signed by the Agent on or before that date.
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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 Agreement and every other Finance Document in relation
to [
l
]% of its Contribution, which percentage represents $[
l
].
|
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5.
|
[By virtue of this Certificate and Clause 27 of the Agreement, the Transferor is discharged [entirely
from its Commitment which amounts to $[
l
]] [from [
l
]%
of its Commitment, which percentage represents $[
l
]] and the Transferee acquires a
Commitment of $[
l
].]
|
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|
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 27 of the Agreement provides will become
binding on it upon this Certificate taking effect.
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|
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 27 of the Agreement.
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|
(a)
|
warrants to the Transferee and each Relevant Party that:
|
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|
(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
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(ii)
|
this Certificate is valid and binding as regards the Transferor;
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(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
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(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 Transferee’s title under this Certificate
or for a similar purpose.
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(f)
|
confirms that it has received a copy of the Agreement and each of the other Finance Documents;
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(g)
|
agrees that it will have no rights of recourse on any ground against the Transferor, the Agent,
the Security Trustee or any Lender in the event that:
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|
(i)
|
any of the Finance Documents prove to be invalid or ineffective;
|
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|
(ii)
|
the Borrowers or any other Security Party fails to observe or perform its obligations, or to discharge
its liabilities, under any of the Finance Documents;
|
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|
(iii)
|
it proves impossible to realize 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 any other Security Party under
any of the Finance Documents;
|
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|
(h)
|
agrees that it will have no rights of recourse on any ground against the Agent, the Security Trustee
or any Lender in the event that this Certificate proves to be invalid or ineffective;
|
|
|
(i)
|
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
|
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|
(ii)
|
that this Certificate is valid and binding as regards the Transferee; and
|
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|
(j)
|
confirms the accuracy of the administrative details set out below regarding the Transferee.
|
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|
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 negligence or willful misconduct of the Agent’s
or the Security Trustee’s own officers or employees.
|
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|
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]
|
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By:
|
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By:
|
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|
Name:
|
|
Name:
|
|
Title:
|
|
Title:
|
|
Date:
|
|
Date:
|
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|
Agent
|
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|
Signed for itself and for and on behalf of itself
|
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|
as Agent and for every other Relevant Party
|
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|
[Name of Agent]
|
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By:
|
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Name:
|
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|
Title:
|
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Date:
|
|
|
Administrative Details of Transferee
Name of Transferee:
Lending Office:
Contact Person
(Loan Administration Department):
Telephone:
Fax:
Contact Person
(Credit Administration Department):
Telephone:
Fax:
Account for payments:
|
|
Note
:
|
This Transfer Certificate alone may not be sufficient
to transfer a proportionate share of the Transferor’s interest in the security constituted by the Finance Documents in the
Transferor’s or Transferee’s jurisdiction. It is the responsibility of each Lender to ascertain whether any other
documents are required for this purpose.
|
SCHEDULE
6
intentionally omitted
SCHEDULE
7
list of approved brokers
Maritime Strategies International Ltd.
Arrow London
Compass Maritime
Maersk Brokers
ICAP
Howe Robinson
SSY
SCHEDULE
8
dvb loan administration form
To: DVB Bank SE, as Agent
Platz der Republic 6
60325 Frankfurt am Main
Germany
Attention: Transaction &
Loan Services
Cc: DVB Bank SE
c/o DVB Transport (US)
LLC
609 Fifth Avenue, 5th
Floor
New York, New York
10017
Attention: Neil McLaughlin
Facsimile: +212-858-2676
Date: [
l
],
2012
|
|
Re:
|
Providing financing to Bulk Nordic Odyssey Ltd. and Bulk Nordic Orion Ltd. (the “
Companies
”
and each a “
Company
”) in relation to m.v. NORDIC ODYSSEY and m.v. NORDIC ORION (the “
Financing
”).
|
We refer to the Financing and a facility
agreement (the “
Facility Agreement
”) dated as of [
l
], 2012 and entered
into between, inter alia, (1) us, as borrowers, (2) the banks and financial institutions named therein as Lenders, (3) DVB Bank
SE as Agent and (4) DVB Bank SE as Security Trustee in relation to the Financing. Terms and expressions not otherwise defined herein
shall have the same meaning as defined in the Facility Agreement.
We hereby appoint the following persons
to act as our point of contact with regards to any issue arising in connection with the administration to the Facility Agreement
or any other documents related to the Financing:
1. [name], title
2. [name], title
3. [name], title
No other persons other than the [Directors]
[Officers] of each Company or the persons listed above (the “
Authorized Persons
”) are hereby authorized to request
any information from you regarding the Facility Agreement or any other matter related to the Financing or either Company or communicate
with you in any way regarding the forgoing in and under any circumstances.
For the avoidance of doubt, the following
are the Directors [and Officers] of the Companies:
1. [name], title
2. [name], title
3. [name], title
4. [name], title
This list of authorized persons may only
be amended, modified or varied in writing by an Authorized Person with copy to the other Authorized Persons. We agree to indemnify
you and hold you harmless in relation to any information you provide to any Authorized Person. This letter shall be governed and
construed in accordance with New York law.
Yours sincerely,
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BULK NORDIC ODYSSEY LTD.
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By:
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Name
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Authorized Person
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BULK NORDIC ORION LTD.
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By:
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Name
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Authorized Person
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SCHEDULE
9
FORM OF LETTER OF INSTRUCTION TO CLASSIFICATION SOCIETY
To:
[
l
]
Date: [
l
],
2012
Dear Sirs:
Name of ship: m.v. [“NORDIC ODYSSEY”]
[“NORDIC ORION”] (the “Ship”)
Flag: PANAMA
IMO Number: [
l
]
Name of Owner: BULK NORDIC [ODYSSEY]
[ORION] LTD. (the “Owner”)
Name of mortgagee: DVB BANK SE (the
“Mortgagee”)
We refer to the Ship, which is registered
in the ownership of the Owner, and which has been entered in and classed by
[
l
]
(the “
Classification Society
”).
The Mortgagee has agreed to provide financing
to the Owner upon condition that, among other things, the Owner issues to the Mortgagee this letter of instruction to the Classification
Society in the form presented by the Mortgagee.
The Owner and the Mortgagee irrevocably
and unconditionally instruct and authorise the Classification Society (notwithstanding any previous instructions whatsoever which
the Owner may have given to the Classification Society to the contrary) as follows:
|
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1
|
to send to the Mortgagee, following receipt of a written request from the Mortgagee, certified
true copies of all original certificates of class and other class records held by the Classification Society in relation to the
Ship;
|
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2
|
to allow the Mortgagee (or its agents), at any time and from time to time, to inspect the original
class and related records of the Owner and the Ship at the offices of the Classification Society and to take copies of them and,
to the extent possible, to grant the Mortgagee electronic access to such records;
|
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3
|
to notify the Mortgagee immediately
by email to
techcom@dvbbank.com
and
neil.mclaughlin@dvbbank.com
if the
Classification Society:
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(a)
|
receives notification from the Owner or any other person that the Ship’s classification society
is to be changed;
|
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(b)
|
imposes a condition of class or issues a class recommendation in respect of the Ship;
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(c)
|
becomes aware of any facts or matters which may result or have resulted in a change, suspension,
discontinuance, withdrawal or expiry of the Ship’s class under the rules or terms and conditions of the Owner’s or
the Ship’s membership of the Classification Society;
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4
|
following receipt of a written request from the Mortgagee:
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(a)
|
to confirm that the 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
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(b)
|
if the Owner is in default of any of its contractual obligations or liabilities to the Classification
Society, to specify to the Mortgagee in reasonable detail the facts and circumstances of such default, the consequences thereof,
and any remedy period agreed or allowed by the Classification Society.
|
Notwithstanding the above instructions
given for the benefit of the Mortgagee, the Owner shall continue to be responsible to the Classification Society for the performance
and discharge of all its obligations and liabilities relating to or arising out of or in connection with the contract it has with
the Classification Society, and nothing in this letter should be construed as imposing any obligation or liability on the Mortgagee
to the Classification Society in respect thereof. The instructions and authorisations which are contained in this notice shall
remain in full force and effect until the Owner and the Mortgagee together give you notice in writing revoking them.
The Owner undertakes 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.
This letter and any non-contractual obligations
arising from or connected with it are governed by New York law.
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For and on behalf of
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BULK NORDIC [ODYSSEY] [ORION] LTD.
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For and on behalf of
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DVB BANK SE
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SCHEDULE
10
FORM OF CLASSIFICATION SOCIETY LETTER OF UNDERTAKING
To: BULK NORDIC [ODYSSEY] [ORION] LTD.
and
DVB BANK SE
Dated: [
l
],
2012
Dear Sirs:
Name of ship: m.v. “NORDIC [ODYSSEY]
[ORION]” (the “Ship”)
Flag: Panama
IMO Number: [
l
]
Name of Owner: BULK NORDIC [ODYSSEY]
[ORION] LTD. (the “Owner”)
Name of mortgagee: DVB BANK SE (the
“Mortgagee”)
We [
l
],
hereby acknowledge receipt of a letter (a copy of which is attached hereto) dated [
l
],
2012 sent to us by the Owner and the Mortgagee (together the “
Instructing Parties
”) regarding the Ship.
In consideration of the agreement by the
Mortgagee to approve the selection of [
l
] (the receipt and adequacy of which is hereby
acknowledged), we undertake to comply with the instructions of the Instructing Parties contained in such letter.
This letter and any non-contractual obligations
arising out of or in connection with it shall be governed by New York law.
Yours faithfully
For and on behalf of
[
l
]
appendix
a
FORM OF approved manager’s undertaking
appendix
B
FORM OF compliance certificate
appendix
c
FORM OF EARNINGS ACCOUNT PLEDGE
appendix
d
form of EARNINGS ASSIGNMENT
appendix
e
FORM OF guarantee
appendix
f
FORM OF insurance assignment
appendix
g
form of mortgage
appendix
h
FORM OF note
appendix
i
FORM OF shares pledge
appendix
j
FORM OF time charter assignment
appendix
k
FORM OF SUB-Time charter assignment
Exhibit 10.8
A.1
Execution Version
LOAN AND GUARANTY AGREEMENT
Dated as of February 18, 2013
Among
GATX CORPORATION
,
as Lender,
BULK ATLANTIC LTD.
,
as Borrower,
BULK PARTNERS (BERMUDA) LTD.
,
as Holding Company,
and
AMERICAS BULK TRANSPORT (BVI) LIMITED
,
as Charterer
TABLE OF CONTENTS
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Page
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ARTICLE I
DEFINITIONS AND CONSTRUCTION
|
1
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1.1
|
Defined Terms
|
1
|
|
1.2
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Currency
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10
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1.3
|
Accounting Terminology
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10
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1.4
|
Computation of Interest and Time Periods
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10
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1.5
|
Construction
|
11
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ARTICLE II LOAN
|
11
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2.1
|
Loan Advance.
|
11
|
|
2.2
|
Payments; Late Payments; Business Days
|
12
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2.3
|
Application of Payments
|
12
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|
2.4
|
Prepayment.
|
13
|
|
2.5
|
Taxes; Yield Protection; Illegality.
|
14
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|
2.6
|
Wire Transfers
|
15
|
|
2.7
|
Renewal of Credit Facilities
|
15
|
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2.8
|
Conditions
|
15
|
|
ARTICLE III
CONDITIONS PRECEDENT
|
16
|
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3.1
|
Conditions Precedent to the Advance
|
16
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3.2
|
Compliance with Loan Documents
|
24
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3.3
|
Unfulfilled Conditions Precedent Become Ongoing Covenants
|
24
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
|
24
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4.1
|
Company Matters
|
24
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4.2
|
Legal Matters
|
25
|
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4.3
|
Authorization; Validity and Enforceability
|
25
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4.4
|
Lines of Business
|
25
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4.5
|
Government Approvals
|
26
|
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4.6
|
Ownership; Subsidiaries
|
26
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|
4.7
|
Financial Condition
|
26
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|
4.8
|
Legal Actions
|
26
|
|
4.9
|
Title and Encumbrances
|
26
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4.10
|
Contracts
|
26
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|
4.11
|
Place of Business
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26
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4.12
|
Disclosure
|
27
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4.13
|
Laws and Regulations
|
27
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4.14
|
Tax Status
|
27
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4.15
|
Fiscal Year
|
27
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4.16
|
Intellectual Property
|
27
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4.17
|
ERISA Compliance
|
27
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4.18
|
Environmental Compliance.
|
27
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4.19
|
Vessel
|
28
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4.20
|
Land
|
28
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|
4.21
|
No Prohibited Persons
|
28
|
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ARTICLE V
COVENANTS
|
28
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|
Loan and Guaranty Agreement
|
|
5.1
|
Title and Liens.
|
28
|
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5.2
|
Change in Business
|
28
|
|
5.3
|
Financial Covenants
|
29
|
|
5.4
|
Company Matters.
|
29
|
|
5.5
|
Financial Statements/Reporting Requirements
|
30
|
|
5.6
|
Fiscal Year
|
32
|
|
5.7
|
Accuracy of Financial Information
|
32
|
|
5.8
|
Access
|
32
|
|
5.9
|
Accounting Records
|
32
|
|
5.10
|
Status
|
33
|
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5.11
|
Condition of Assets
|
33
|
|
5.12
|
Legal Compliance
|
33
|
|
5.13
|
ERISA Plans
|
33
|
|
5.14
|
Taxes
|
33
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|
5.15
|
Permits
|
33
|
|
5.16
|
Intellectual Property
|
33
|
|
5.17
|
Arranger Fee
|
34
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5.18
|
Compliance by Allseas and Phoenix
|
34
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ARTICLE VI
VESSEL PROVISIONS
|
34
|
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6.1
|
Vessel Registry
|
34
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6.2
|
Ownership and Encumbrances
|
34
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6.3
|
Transfers
|
34
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6.4
|
Lawful Operation
|
35
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6.5
|
Operation
|
35
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6.6
|
Maintenance
|
35
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6.7
|
Access and Surveys
|
36
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6.8
|
Seizure; Requisition
|
36
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6.9
|
Insurance
|
36
|
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6.10
|
No Charters to Prohibited Persons
|
40
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|
6.11
|
Payment of Charter Hire and Vessel Revenues
|
40
|
|
ARTICLE VII
DEFAULT AND REMEDIES
|
40
|
|
7.1
|
Default
|
40
|
|
7.2
|
Remedies.
|
44
|
|
7.3
|
Legal Actions
|
45
|
|
7.4
|
Service of Process
|
46
|
|
7.5
|
Judgment
|
46
|
|
7.6
|
Right of Set-Off
|
46
|
|
ARTICLE VIII
CONTINUING GUARANTY
|
47
|
|
8.1
|
Guaranty
|
47
|
|
8.2
|
Guaranty Absolute
|
47
|
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8.3
|
Waiver
|
47
|
|
8.4
|
Subrogation
|
48
|
|
8.5
|
Holding Company Indemnification
|
48
|
|
8.6
|
Subordination.
|
48
|
|
ARTICLE IX
MISCELLANEOUS
|
50
|
|
9.1
|
Loan Documents, Administration and Collection Expenses
|
50
|
|
|
i
i
|
Loan and Guaranty Agreement
|
|
9.2
|
Indemnification
|
50
|
|
9.3
|
Amendments and Waivers
|
51
|
|
9.4
|
Notices
|
51
|
|
9.5
|
Governing Law
|
51
|
|
9.6
|
Severability
|
52
|
|
9.7
|
Assignment
|
52
|
|
9.8
|
Further Assurances
|
52
|
|
9.9
|
Authority
|
52
|
|
9.10
|
Survival of Agreement
|
52
|
|
9.11
|
Complete Agreement
|
52
|
|
9.12
|
Counterparts
|
53
|
|
Schedules
|
|
|
|
|
|
Schedule 2.4
|
Approved Appraisers
|
|
Schedule 4.6
|
Shareholders
|
|
Schedule 4.8
|
Litigation
|
|
Schedule 4.9
|
Permitted Encumbrances
|
|
Schedule 4.11
|
Locations
|
|
|
|
|
Exhibits
|
|
|
|
|
|
Exhibit A
|
Request for Advance
|
|
Exhibit B
|
Compliance Certificate
|
|
|
i
ii
|
Loan and Guaranty Agreement
|
LOAN AND GUARANTY AGREEMENT
THIS LOAN AND GUARANTY AGREEMENT ("
Agreement
")
is entered into as of the 18th day of February, 2013, between GATX CORPORATION, a New York corporation ("
Lender
"),
and BULK ATLANTIC LTD., a Bermuda company ("
Borrower
"), BULK PARTNERS (BERMUDA) LTD., a Bermuda company ("
Holding
Company
"), and AMERICAS BULK TRANSPORT (BVI) LIMITED, a British Virgin Islands business company ("
Charterer
"),
with respect to the following facts:
A. Borrower
wishes to obtain from Lender and Lender wishes to provide to Borrower a term loan in the principal amount of U.S. $8,520,000.00
on the terms and conditions stated herein, in order to finance the vessel BULK BEOTHUK (formerly known as PRABHU JIVESH), to be
registered under the laws and flag of the Republic of the Marshall Islands, Official No. 5017, IMO No. 9228083 (the "
Vessel
").
B. Holding
Company is the indirect owner of Borrower, and Charterer is the time charterer of the Vessel, in consideration of which Holding
Company and Charterer are guarantying the Borrower's obligations under this Agreement.
NOW, THEREFORE, in consideration of the
foregoing and the agreements of the parties hereto, and for other good and valuable consideration, the receipt of which the parties
hereby acknowledge, the parties hereto represent, warrant and agree as follows:
ARTICLE
I
DEFINITIONS AND CONSTRUCTION
1.1
Defined
Terms
. As used herein and in the schedules of this Agreement, the terms defined below shall have the definitions ascribed to
them below:
"
Advance
" has the meaning
given to it in Section 2.1(a).
"
Affiliate
" means, with
respect to a Person any other Person which directly or indirectly controls, is controlled by, or is under common control with,
such Person. "Control" "controlled by" and "under common control with" means direct or indirect possession
of the power to direct or cause the direction of management or policies (whether through ownership of voting securities, by contract
or otherwise);
provided that
control shall be conclusively presumed for this purpose when any Person or affiliated group
directly or indirectly owns ten percent (10%) or more of the securities or other Equity Interests having ordinary voting power
for the election of directors, managing general partners, trustees or managers of a Person.
"
Allseas
" means Allseas
Logistics Bermuda Ltd., a Bermuda company.
"
Allseas Cash Deposit Account
"
has the meaning given to it in Section 3.1(i).
"
Allseas Charge Over Cash Deposit
"
has the meaning given to it in Section 3.1(a)(xiv).
"
Applicable Law
" means
the laws of the country having jurisdiction over Lender, Borrower, the country of registry of the vessel, and the United States.
"
Banking Day
" means any
day on which commercial banks are open for general business (including dealings in foreign exchange and foreign currency markets)
in New York and Chicago.
"
Bankruptcy or Other Proceeding
"
means a Debtor Relief Proceeding; a dissolution, winding up, liquidation, or reorganization of a Person; an arrangement with a
Person's creditors or a composition of a Person or any of its debts; or an assignment for the benefit of creditors or any other
marshalling of the assets and liabilities of a Person.
"
Borrower
" has the meaning
set forth in the first paragraph hereof.
"
Borrower Charge Over Bulk Beothuk
Hire Account
" has the meaning given to it in Section 3.1(a)(xiii).
"
Borrower's Earnings Assignment
Agreement
" has the meaning given to it in Section 3.1(a)(iii).
"
Bulk Beothuk Hire Account
"
has the meaning given to it in Section 3.1(h).
"
Bulk Beothuk Mortgage
"
has the meaning given to it in Section 3.1(a)(ii).
"
BULK CAJUN
" means the
vessel BULK CAJUN, Official No. 43084-11, registered in Panama and owned by Bulk Cajun.
"
Bulk Cajun
" means Bulk
Cajun Bermuda Ltd., a Bermuda company.
"
Bulk Cajun Loan Agreement
"
means the Loan and Guaranty Agreement dated as of October 20, 2011 among Lender, Bulk Cajun, Holding Company, and Charterer.
"
Bulk Cajun Loan Documents
"
means the Bulk Cajun Loan Agreement, the Bulk Cajun Mortgage, and all other agreements, instruments, certificates, or other documents
under or related thereto.
"
Bulk Cajun Mortgage
" has
the meaning given to it in Section 3.1(l)(i).
"
Bulk Cajun Obligations
"
means all of the obligations of Bulk Cajun under any Bulk Cajun Loan Document, including but not limited to, the obligations of
Bulk Cajun that are secured by the Bulk Cajun Mortgage.
"
Bulk Cajun Pledgor
" means
Bulk Fleet Bermuda Holding Company Ltd., a Bermuda company.
"
BULK DISCOVERY
" means
the vessel BULK DISCOVERY, Official No. 42515-11, registered in Panama and owned by Bulk Discovery.
"
Bulk Discovery
" means
Bulk Discovery (Bermuda) Ltd., a Bermuda company.
|
|
2
|
Loan and Guaranty Agreement
|
"
Bulk Discovery Loan Agreement
"
means the Loan and Guaranty Agreement dated as of February 25, 2011 among Lender, Bulk Discovery, Holding Company, and Charterer.
"
Bulk Discovery Loan Documents
"
means the Bulk Discovery Loan Agreement, the Bulk Discovery Mortgage, and all other agreements, instruments, certificates, or other
documents under or related thereto.
"
Bulk Discovery Mortgage
"
has the meaning given to it in Section 3.1(k)(i).
"
Bulk Discovery Obligations
"
means all of the obligations of Bulk Discovery under any Bulk Discovery Loan Document, including but not limited to, the obligations
of Bulk Discovery that are secured by the Bulk Discovery Mortgage.
"
Cargill
" means Cargill
Ocean Transportation (Singapore) Pte. Ltd.
"
Cargill Charter
" means
the Time Charter for the Vessel between Borrower and Cargill dated October 16, 2012, as novated by the Novation Agreement.
"
Charterer
" has the meaning
set forth in the first paragraph hereof.
"
Charterer's Earnings Assignment
Agreement
" has the meaning given to it in Section 3.1(a)(v).
"
Closing Date
" means the
date the Advance is made upon satisfaction or waiver of the conditions precedent listed in Article III.
"
Code
" means the Internal
Revenue Code of 1986.
"
Collateral
" means personal
or real property, whether tangible or intangible, on which an Encumbrance is granted as security for any or all of the Obligations
outstanding from time to time under any Loan Document.
"
Commercial Management Agreement
"
means the Commercial Management Agreement for the Vessel between Borrower and Phoenix US dated as of February 12, 2013.
"
Commitment Fee
" has the
meaning given to it in Section 3.1(M).
"
Constitutional Documents
"
means the certificate of incorporation, memorandum of association and by-laws of a corporation, as the same may be amended, restated
or supplemented from time to time.
"
Credit Party
" means Borrower,
Pledgor, Holding Company, Charterer, or any Guarantor (including, but not limited to, Bulk Cajun and Bulk Discovery).
"
Cross-Collateral Guaranty
"
has the meaning given to it in Section 3.1(a)(xxxvii).
"
Debtor Relief Proceeding
"
means bankruptcy, insolvency, receivership dissolution, arrangement, reorganization, administration, debt relief or similar proceeding
pertaining to a Person.
|
|
3
|
Loan and Guaranty Agreement
|
"
Default
" means an event
or condition which, with the giving of notice, the passage of time, or both, would become an Event of Default.
"
Default Rate
" has the
meaning given to it in Section 2.1(c)(i).
"
EBITDA
" means, for any
period, for any Person, an amount equal to the Net Earnings of such Person for such period
plus
the following to the extent
deducted in calculating such Net Earnings: (i) the Interest Expense of such Person for such period, (ii) the provision
for federal, state, local and foreign income taxes payable by such Person for such period, and (iii) the amount of depreciation
and amortization expense deducted in determining such Net Earnings.
"
Encumbrance
" means any
lien, mortgage, pledge, assignment, security interest, liability for forfeiture, defeasance, lease, charter, right to possession
or services of the relevant property, option, right of first refusal with respect to the relevant property, restriction against
transferability or use, or other encumbrance whatsoever.
"
Environmental Law
" means
law relating to environmental, health, safety or land use matters applicable to any property.
"
Environmental Liability
"
means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties
or indemnities), that is directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the
generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any
Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment, or (e) any
contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the
foregoing.
"
Equity Interest
" means
stock in a corporation, a membership interest in a company, a general or limited partnership interest in a partnership, a beneficial
interest in a trust, or other equity interest in a Person.
"
ERISA
" means the Employee
Retirement Income Security Act of 1974 and any regulations issued pursuant thereto.
"
ERISA Affiliate
" means
any trade or business (whether or not incorporated) under common control with Borrower or a Guarantor within the meaning of Section 414(b)
or (c) of the Code and Sections 414(m) and (o) of the Code.
"
Event of Default
" has
the meaning given to it in Section 7.1.
"
Fixed Charges
" means,
for any period, for any Person, the sum of Interest Expense, operating lease payments, payments of the current portion of capital
leases, and payments of the current portion of long term Indebtedness, and distributions of equity made during the relevant period.
"
Funds Deposit Agreement
"
has the meaning given to it in Section 3.1(a)(xi).
|
|
4
|
Loan and Guaranty Agreement
|
"
GAAP
" means at any time
generally accepted accounting principles as then in effect in the United States, applied on a consistent basis.
"
Governmental Authority
"
includes all foreign and U.S. federal, national, state and local governments; government corporations, authorities, boards, commissions,
and entities; and all departments, ministries, agencies, bureaus, offices, and subdivisions of any of the foregoing.
"
Group Loan Documents
"
means, collectively, the Loan Documents, the Bulk Discovery Loan Documents and the Bulk Cajun Loan Documents.
"
Group Obligations
" means,
collectively, the Obligations, the Bulk Discovery Obligations and the Bulk Cajun Obligations.
"
Guarantor
" means Holding
Company, Charterer, and each of the Borrower, Bulk Cajun and Bulk Discovery in its capacity as guarantor under the Cross-Collateral
Guaranty, and any other Person that grants Lender a guaranty for any of the Obligations, as the context requires.
"
Hazardous Materials
" means
all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including
petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious
or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.
"
Holding Company
" has the
meaning set forth in the first paragraph hereof.
"
Indebtedness
" means, for
any Person, (i) indebtedness for borrowed money; (ii) obligations evidenced by bonds, debentures, notes or other similar
instruments; (iii) obligations to pay the deferred purchase price of property or services; (iv) obligations as lessee
under leases which shall have been or should be, in accordance with GAAP, recorded as capital leases; (v) obligations as lessee
under Synthetic Lease Obligations; (vi) obligations with respect to undrawn letters of credit issued for the account of that
Person or under bonds or suretyship arrangements; (vii) all obligations arising under any swap transaction or other agreement
or arrangement designated to protect the Person against fluctuation in interest rates, currency exchange rates or commodity prices;
(viii) obligations to ordinary trade creditors which are more than ninety (90) days delinquent; (ix) liabilities in respect
of unfunded vested benefits under plans covered by Title IV of ERISA; (x) obligations under indemnification agreements in
favor of issuers of letters of credit (contingent or otherwise); and (xi) obligations under direct or indirect guaranties
or suretyship agreements in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise
to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (i)
through (x) above.
"
Indemnitee
" has the meaning
given to it in Section 9.2.
"
Interest Expense
" shall
mean for any period, for any Person, the aggregate amount of interest expense of such Person for such period as determined in accordance
with GAAP. Notwithstanding the foregoing, specific items of interest expense shall only be included in this definition to the extent
such items have been deducted from gross revenues in calculating the Net Earnings of such Person for such fiscal period.
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"
Interest Rate
" has the
meaning given to it in Section 2.1(c)(i).
"
Investment
" means, as
to any Person, any acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of
capital stock or other securities of another Person, (b) a convertible loan or advance, or capital contribution to, purchase
or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership interest,
membership interest, joint venture interest, or other beneficial interest in such other Person, or (c) the purchase or other
acquisition (in one transaction or a series of transactions) of assets of another Person that constitute a business unit. For purposes
of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases
or decreases in the value of such Investment.
"
IRS
" means the United
States Internal Revenue Service.
"
Lender
" has the meaning
set forth in the first paragraph hereof.
"
Lender's Allowance
" means
the Lender's allowance described in Section 3.1(m)(ii).
"
Letter of Credit
" means
the standby letter of credit described in Section 3.1(j).
"
Loan Document
" means any
of: this Agreement, the Cross-Collateral Guaranty, the Omnibus Agreement, Bulk Beothuk Mortgage, Borrower's Earnings Assignment
Agreement, Charterer's Earnings Assignment Agreement, Phoenix Earnings Assignment Agreement, Borrower Charge Over Bulk Beothuk
Hire Account, Allseas Charge Over Cash Deposit, Funds Deposit Agreement, Manager's Undertaking, Shares Charge, Letter of Credit
and any other loan agreement, promissory note or other evidence of indebtedness related to this Agreement; and any ship or naval
mortgage, security agreement, assignment, deed of trust, pledge, or other security document; any guaranty; any subordination agreement,
or any other agreement, instrument, certificate, or other document; in each case whether heretofore, concurrently, or hereafter
entered into by any Person in connection with this Agreement.
"
Manager's Undertaking
"
means a Manager's Undertaking as described in Sections 3.1(a) (ix) or 3.1(a)(x).
"
Marshall Islands Registry
"
means the Office of the Maritime Administrator of the Republic of the Marshall Islands.
"
Material
" means, with
reference to the significance of a matter which is reasonably calculable in monetary terms, a change or effect related to such
matter which has a monetary consequence of $500,000.00 or more in amount.
"
Multiemployer Plan
" means
any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which Borrower, a Guarantor or any ERISA
Affiliate makes or is obligated to make contributions, or during the preceding three calendar years, has made or been obligated
to make contributions.
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"
Net Earnings
" means, for
any period, for any Person, the net earnings of such Person for such period determined in accordance with GAAP for such period,
but not including the net after-tax amount of: (a) any gains or losses resulting from the disposition of capital assets (as
defined by GAAP) where the consideration paid in connection with such disposition is not paid in cash,
provided, however,
that when all or any portion of the consideration paid in connection with such disposition is received in cash, checks or other
cash equivalent financial instruments, such amount shall be recognized as gain or loss and included in the net earnings of such
Person in the fiscal period received; (b) any gains or income resulting from the write-up of assets; (c) any gains or
losses resulting from the acquisition of securities or the retirement or extinguishment of Indebtedness; (d) any losses from
the impairment of goodwill or other intangible assets required to be recognized under GAAP; (e) any losses from the impairment
or disposal of long-lived assets required to be recognized under GAAP; (f) any gains or losses arising from changes in accounting
principles; (g) any equity of such Person in the undistributed earnings of any Person which is not a Subsidiary; (h) any
earnings of any Person acquired by such Person through purchase, merger or consolidation or otherwise for any period prior to the
date of acquisition; (i) any deferred credit representing the excess of equity in any Subsidiary at the date of acquisition
over the cost of the investment in such Subsidiary; and (j) any extraordinary gains or losses.
"
Novation Agreement
" means
the Novation Agreement dated February 18, 2013, among Tolani Shipping Co. Ltd., Borrower and Cargill.
"
Obligations
" means all
obligations of Borrower to repay the Advance, to pay interest thereon, or to pay and perform other debts, liabilities, obligations,
covenants and duties, existing or arising under any Loan Document, whether direct or indirect (including those acquired by assumption),
absolute or contingent, due or to become due, now existing or hereafter arising, and including interest that accrues after the
commencement, by or against Borrower or any Person of which Borrower is a partner, joint venturer, or member, of any Debtor Relief
Proceeding in which such Person is the debtor in such proceeding.
"
Omnibus Agreement
" has
the meaning set forth in Section 3.1(a)(xxxviii).
"
Other Taxes
" has the meaning
given to it in Section 2.5(a)(ii).
"
Permit
" means any authorization,
certificate, consent, approval, license, permit, waiver or exemption issued or granted by a Governmental Authority.
"
Permitted Encumbrance
"
has the meaning given to it in Section 4.9.
"
Pension Plan
" means any
"employee pension benefit plan" (as such term is defined in Section 3(2) of ERISA) that is sponsored or maintained by
Borrower, a Guarantor, or any ERISA Affiliate or to which Borrower, a Guarantor, or any ERISA Affiliate contributes or has an obligation
to contribute, or in the case of a multiple employer plan (as described in Section 4064(a) of ERISA) has made contributions
at any time during the immediately preceding five plan years.
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"
Permitted Investments
"
means (i) U.S. Dollar demand deposits maintained in the United States with any commercial bank which has a combined capital
and surplus of at least $100,000,000.00; (ii) U.S. Dollar time deposits maintained in the United States with, or certificates
of deposit having a maturity of six months or less issued by, any commercial bank which has its head office in the United States
and which has a combined capital and surplus of at least $100,000,000.00; (iii) direct obligations of, or obligations unconditionally
guaranteed by, the United States Government and having a maturity of one year or less; or (iv) readily marketable commercial
paper having a maturity of six months or less, issued by any corporation organized and existing under the laws of the United States,
any state thereof, or the District of Columbia and rated A-1 by Standard & Poor's Corporation or P-1 by Moody's Investors Service,
Inc. (or, if neither such organization shall rate such commercial paper at any time, rated by any nationally recognized rating
organization in the United States with the highest rating assigned by such organization).
"
Person
" includes an individual
natural person, corporation, limited liability company, general or limited partnership, joint venture, association, trust, Governmental
Authority, and any other entity.
"
Phoenix
" means Phoenix
Bulk Carriers (BVI) Limited, a British Virgin Islands business company.
"
Phoenix Earnings Assignment Agreement
"
has the meaning given to it in Section 3.1(a)(vii).
"
Phoenix US
" means Phoenix
Bulk Carriers (US) LLC, a Delaware limited liability company.
"
Plan
" means any "employee
benefit plan" (as such term is defined in Section 3(3) of ERISA) established by Borrower or any ERISA Affiliate.
"
Pledgor
" means Bulk Partners
Holding Company Bermuda Ltd., a Bermuda company.
"
Process Agent
" has the
meaning given to it in Section 3.1(a)(xii), and includes any successor thereto that is appointed as contemplated in Section 7.4.
"
Process Agent Appointment
"
has the meaning given to it in Section 3.1(a)(xv).
"
Prohibited Country
" means
(a) any state, country or jurisdiction which is subject to any United Nations Security Council Resolution, European Union Decision
or United States or other Applicable Law which would have the effect of prohibiting the sale, lease, charter, or voyage of the
Vessel to or from such country or otherwise cause the Lender or Borrower, to be in contravention of any Applicable Law to which
such party is subject; (b) any country to which voyages are not covered under the insurances required to be maintained by Borrower
herein; or (c) any country which Lender determines now or in the future due to a change in law or circumstances that voyages to
such country would materially prejudice the Lender’s ability to repossess the Vessel, or enforce the remedies or realize
the benefit of the Liens and rights established under this Agreement and the other Loan Documents. Lender has designated without
limitation Cuba, Iran, Syria, Sudan and North Korea as Prohibited Countries.
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"
Prohibited Person
" means
any individual or entity: (a) with whom Lender or Borrower is prohibited or restricted in engaging in transactions or exporting
goods or services to under Applicable Law; (b) who is a resident of, or organized under the laws of or doing business in any Prohibited
Country; (c) who is designated on any United Nations Security Council Resolution or any European Union or United States list, order,
or other published designation of terrorists, narcotics traffickers, proliferators of weapons of mass destruction or other lists
of barred or restricted entities or individuals including without limitation the U.S. Treasury Specially Designated Nationals List.
"
Panamanian Public Registry
"
means the Panamanian Public Registry of Titles and Encumbrances of Vessels of the Panamanian Maritime Authority.
"
Requisition
" means expropriation,
confiscation, requisition or acquisition of the title to or use of property, whether for full consideration or a consideration
less than full value, which is effected by any Governmental Authority or by any Person or Persons claiming to be or to represent
a Governmental Authority
"
Reportable Event
" means
any of the events set forth in Section 4043(c) of ERISA.
"
Request for Advance
" has
the meaning given to it in Section 2.1(a).
"
Seizure
" means an arrest,
repossession, taking into custody, detention or seizure by judicial or nonjudicial means (including attachment, garnishment, or
execution or levy), and "
Seize
" has a correlative meaning.
"
Shares Charge
" has the
meaning given to it in Section 3.1(a)(xii).
"
Sub-Time Charter
" means
the sub-time charter between Charterer and Phoenix dated February 14, 2013.
"
Subordinated Debt
" has
the meaning given to it in Section 8.6(a).
"
Subordinated Liens
" has
the meaning given to it in Section 8.6(a).
"
Subsidiary
" means any
corporation, limited liability company, partnership, joint venture, association, trust or estate of which (or in which) the relevant
Person owns, directly or indirectly, ten percent (10%) or more of (i) the outstanding capital stock having ordinary voting
power to elect a majority of the Board of Directors of such corporation (irrespective of whether or not at the time capital stock
of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (ii) the
interest in the capital or profits of such limited liability company, partnership or joint venture, or association, or (iii) the
beneficial interest of such trust or estate.
"
Synthetic Lease Obligation
"
means the monetary obligation of a Person under (a) a so called synthetic, off-balance sheet or tax retention lease, or (b) an
agreement for the use or possession of property creating obligations that do not appear on the balance sheet of such Person but
which, upon the insolvency or bankruptcy of such Person, would be characterized as the indebtedness of such Person (without regard
to accounting treatment).
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"
Taxes
" has the meaning
given to it in Section 2.5(a)(i).
"
Technical Management Agreement
"
means the Ship Management Agreement for the Vessel between Borrower and Seamar Management S.A. dated February 12, 2013.
"
Time Charter
" means the
time charter for the Vessel between Borrower and Charterer dated February 11, 2013.
"
United States
" means the
United States of America, its territories and possessions.
"
Vessel
" has the meaning
given to it in Recital A.
1.2
Currency
.
All references to dollars and all usage of the symbol "$" are references to U.S. Dollars.
1.3
Accounting
Terminology
. All accounting terms used in the Loan Documents shall be construed, and all financial records and reports prepared
or provided pursuant to the Loan Documents shall be prepared, in accordance with GAAP.
1.4
Computation
of Interest and Time Periods
. Under the Loan Documents, interest shall accrue and be calculated at a rate per annum based on
the actual number of days elapsed and a 360-day year. Anything in the Loan Documents to the contrary notwithstanding, interest
shall not accrue thereunder at a rate in excess of the maximum rate, if any, that is permitted under applicable law, and shall
be deemed automatically capped at the relevant maximum rate in effect, if any, from time to time. At no time shall the interest
rate payable on the Advance, together with the late payment fees and prepayment fees that accrue under, and all other amounts payable
under the Loan Documents to the Lender, to the extent the same are construed to constitute interest, exceed the maximum rate of
interest that at any time may be contracted for, taken, charged or received by the Lender under the Loan Documents under applicable
law. If for any period during the term of this Agreement any amount paid to the Lender under the Loan Documents (to the extent
the same shall (but for the provisions of this Section) constitute or be deemed to constitute interest) would exceed the maximum
amount of interest permitted during such period, then such excess amount shall be applied or shall be deemed to have been applied
as a prepayment of the Advance in such order as the Lender shall determine. In computations of interest or time under this Agreement,
"from" means "from and excluding," and "to" or "through" means "to and including."
For the calculation of the duration of a monthly period, a month commencing on one numeric day of a calendar month shall end on
the same numeric day of the next calendar month, if any, or else the last day of the next calendar month.
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1.5
Construction
.
In this Agreement, unless expressly stated otherwise: (a) references to articles, sections, exhibits and schedules, are references
to articles, sections, exhibits, and schedules of this Agreement, and references to "herein," "hereof," and
"hereto" are references to this Agreement as a whole; (b) the terms "include," "including" and
similar terms shall be construed as if followed by the words "but not limited to"; (c) the term "documents"
includes any and all instruments, documents, charters, leases, contracts, agreements, certificates, notices, reports, financial
statements and other writings, however evidenced, whether in physical or electronic form; (d) references to execution of documents
shall include obtaining notarial acknowledgements thereof in accordance with applicable law as required by Lender; (e) words
denoting the singular shall include the plural, and vice versa, and words denoting any gender shall include all genders; (f) captions
of articles and sections of this Agreement are inserted for convenience of reference only and shall not be considered in the interpretation
or construction of this Agreement; (g) references to agreements and other contractual instruments shall be deemed to include
such agreements and other instruments as assigned, assumed, amended, supplemented, renewed, restated, replaced, or otherwise modified
from time to time, but only to the extent that the assignments, assumptions, amendments, supplements, renewals, restatements, replacements,
novations, and other modifications are not prohibited by any Loan Document; and (h) references to the accrual of interest
include reference to the applicable loan margins and increases in interest relevant to an Event of Default, as provided in the
Loan Documents. In this Agreement "
law
" includes (i) all international, foreign, U.S. federal, state and
local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities,
including the interpretation or administration thereof by any Governmental Authority, court, administrative or other governmental
tribunal charged with the enforcement, interpretation or administration thereof, (ii) all applicable administrative orders,
directed duties, requests, and Permits of, or issued by, any Governmental Authority, in each case whether or not having the force
of law, and (iii) any particular law shall include all recodifications, amendments, consolidations, replacements, and supplements
thereto and thereof, and interpretations of such law by relevant Governmental Authorities. Each party to the Loan Documents has
had an opportunity to review and revise them, so the rule of construction to the effect that any ambiguities are to be resolved
against the drafting party shall not be employed in the interpretation or construction of the Loan Documents. Time is of the essence
of the Loan Documents.
ARTICLE
II
LOAN
2.1
Loan
Advance
.
(a)
Loan
Advance
. Lender agrees, on the terms and conditions set forth herein, to advance to Borrower, in a single advance, $8,520,000.00
(the "
Advance
"). The Advance shall be disbursed for the account of Borrower in accordance with an executed request
therefor in substantially the form attached hereto as
Exhibit A
("
Request for Advance
").
(b)
Principal
Repayments
. The Advance shall be repaid in installments as follows: principal installments of $90,000 each shall be repaid
on every three-month anniversary date of the Closing Date, commencing with the three-month anniversary date of the Closing Date
occurring in May, 2013 through February, 2015, and increasing to $295,000 on such three-month anniversary date occurring in May,
2015 and on each three-month anniversary date thereafter for the remaining term, plus a balloon payment of $4,260,000 due with
the final principal payment, until the principal of the Advance is fully repaid,
provided,
the final installment of all
principal then outstanding, shall be repaid in full on February 19, 2018. Once repaid no portion of the Advance may be reborrowed.
(c)
Interest
.
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(i)
Interest
Rate
. Interest shall accrue on the outstanding principal of the Advance from the date the Advance is disbursed until the principal
is fully repaid, at a fixed rate consisting of the sum of (A) five and sixty one-hundredths percent (5.60%) plus (B) the
rate for U.S. Treasury obligations with a five-year remaining time to maturity, as of the most recent rate published in the Federal
Reserve H15 report (the "
Interest Rate
"),
provided
,
however
, that after the occurrence and during
the continuance of an Event of Default, in the exercise of Lender's sole discretion, the Interest Rate shall be increased by five
percent (5%) per annum (such resulting rate being the "
Default Rate
"),
provided, further,
in no event shall
the Advance or any other amount owing under the Loan Documents accrue interest in excess of the maximum amount, if any, that is
permitted by law. Interest shall accrue and be calculated at a rate per annum based on the actual number of days elapsed and a
360-day year. Lender's determination of the Interest Rate shall be conclusive absent manifest error.
(ii)
Interest
Payments
. On each date on which a payment of principal is due under this Agreement, Borrow shall also make payment of all interest
that has accrued and that remains unpaid as of that date.
2.2
Payments;
Late Payments; Business Days
. If any payment to be made by Borrower under the Loan Documents shall fall due on a day other
than a Business Day, payment shall be made on the next following Business Day. Principal payments made more than five (5) Business
Days' late shall incur a late payment fee of five percent (5%) of the amount that is late, which shall be due concurrently with
the late payment, without limiting Lender's rights to interest or default interest, or the right to exercise any of its other rights,
powers, and remedies for default.
2.3
Application
of Payments
. (a) Unless the application of payments received on account of the Obligations in advance of an Event of Default
are otherwise specified by another provision of the Loan Documents, if no Event of Default shall have occurred and be continuing,
all payments and other funds received on account of the Obligations (including insurance proceeds, proceeds of Requisition of the
Vessel, proceeds of disposition of or realization on Collateral, and other proceeds of collection), together with the proceeds
of any claims for damages for loss of or damage to Collateral received by the Lender pursuant to or under the terms of the Loan
Documents, shall be applied as follows:
first
, toward the payment
of the fees, costs and other expenses (including attorneys' fees and expenses), and interest thereon, that are owed by Borrower
and that are outstanding under the Loan Documents at the time, and, as required by Lender from time to time, to provide adequate
indemnity against Encumbrances claiming priority over Lender's security in any Collateral,
provided that
unless an Event
of Default has occurred and is continuing said sums shall not be used to satisfy or provide indemnity against or security for Permitted
Encumbrances;
second
, toward interest
that accrues on the Obligations;
third
, toward payment of
the principal of the Advance; and
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fourth
, to the Borrower
or to whosoever may be entitled thereto.
(b) When
applied to the Advance, payments and prepayments shall be applied in the reverse order of the maturity of the installments thereof.
(c) If
an Event of Default shall have occurred and be continuing, all amounts received by the Lender from the Borrower or arising out
of any Collateral shall be applied in accordance with the terms of Section 17 of the Bulk Beothuk Mortgage.
2.4
Prepayment.
(a)
Required
Prepayments
. At six-month intervals after the Closing Date Borrower shall provide to Lender a written appraisal of the Vessel
that is prepared by an appraiser listed in
Schedule 2.4
, and dated not more than fourteen days before it is given to Lender.
In lieu of the foregoing, or in the event that Borrower fails to timely deliver any required appraisal, the Lender may have the
Vessel appraised, at Borrower's expense, by an appraiser selected by Lender in the exercise of its sole discretion. In either event
the Borrower shall make the Vessel available for inspection (without being required to delay a departure for, or deviate from,
a voyage under the any charter or contract of affreightment, or to specially dry dock the Vessel), but for this purpose such an
inspection shall not be required unless requested by Lender. The appraiser shall determine the fair market value of the Vessel
on a lien- and charter- free basis, assuming a willing buyer and a willing seller not under a compulsion to sell. If that valuation
is an amount that is less than seventy percent (70%) of the outstanding principal of the Advance at the time the appraisal is made,
and if demanded to do so by Lender, Borrower shall, within sixty (60) days after receiving notice thereof and a copy of the appraisal,
either (i) prepay an amount such that, after such prepayment is first applied to outstanding interest at the time the prepayment
is made and the balance is applied to the principal of the Advance, the outstanding amount of the Advance shall not exceed seventy
percent (70%) of the appraised value of the Vessel, or (ii) Borrower shall provide further security to Lender that is of a
type, value, and that is subject to a first priority perfected security interest in favor of Lender, acceptable to Lender in the
exercise of its sole discretion.
(b)
Voluntary
Prepayments
. Borrower may make voluntary prepayment of the Advance and all accrued unpaid interest thereon in whole but not
in part on the second, third, or fourth anniversary of the Closing Date (or the first Business Day thereafter), by first providing
to Lender sixty (60) days' advance written notice of Borrower's intention to do so. Once such notice is given for any prepayment,
Borrower is obligated to make such prepayment on the date so indicated.
(c)
Other
Prepayments; Prepayment Fee
. In the event the Advance is prepaid pursuant to Sections 2.4(a) or (b), or as a result of receipt
by Lender and application of proceeds of insurance, foreclosure or other realization on Collateral, collection actions with respect
to an Obligation, proceeds of Requisition, a payment from Bankruptcy or Other Proceedings, prepayment compelled by law, or any
other mandatory or involuntary prepayment, Borrower shall, concurrently with Lender's receipt of such prepayment, pay a prepayment
fee calculated as the difference between X and Y, with the variables X and Y defined as follows:
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X equals all future scheduled principal and interest
payments (from the date of prepayment through February 19, 2018) related to the portion of the Advance prepaid, reduced to present
value as of the prepayment date at the rate of three and 60/100
ths
percent (3.60%) per annum.
Y equals the amount of the Advance prepaid.
Borrower acknowledges that the prepayment fee is intended to
compensate the Lender and is not a penalty.
2.5
Taxes;
Yield Protection; Illegality
.
(a)
Taxes
.
(i) All
payments by Borrower to or for the account of Lender under the Loan Documents shall be made free and clear of and without deduction
for present or future taxes, duties, levies, imposts, deductions, assessments, fees, withholdings or similar charges, and all liabilities
with respect thereto, excluding taxes imposed on or measured by Lender's net income or gross receipts, and franchise taxes imposed
on Lender (in lieu of net income taxes) by the jurisdiction (or any political subdivision thereof) under the laws of which Lender
is organized or maintains a lending office (all such non-excluded taxes, duties, levies, imposts, deductions, assessments, fees,
withholdings or similar charges, and liabilities being hereinafter referred to as "
Taxes
"). If Borrower shall
be required by any law to deduct any Taxes from or in respect of any sum payable under any Loan Document to Lender, (A) the
sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional
sums payable under this Section 2.5), Lender receives an amount equal to the sum it would have received had no such deductions
been made, (B) Borrower shall make such deductions, (C) Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law, and (D) within thirty (30) days after the date of such payment,
Borrower shall furnish to Lender the original or a certified copy of a receipt evidencing payment thereof. In the event and to
the extent that Lender receives, from an applicable taxing authority, a refund or credit for any Taxes so withheld and paid to
a Governmental Authority by Borrower and for which Borrower makes an additional payment to Lender under the foregoing clause (A),
Lender shall promptly make a refund to Borrower of the amount of such refund or credit.
(ii) Borrower
agrees to pay all present or future stamp taxes, court or documentary taxes, and other excise or property taxes or charges or similar
levies which arise from any payment made under any Loan Document or from the execution, delivery, performance, enforcement, filing
or registration of, or otherwise with respect to, any Loan Document (hereinafter referred to as "
Other Taxes
").
(iii) If
Borrower shall be required to deduct or pay any Taxes or Other Taxes from or in respect of any sum payable to Lender under any
Loan Document, Borrower shall also pay to Lender, at the times interest is paid, such additional amounts that Lender specifies
as necessary to preserve the after-tax yield (after factoring in all Taxes, Other Taxes, and taxes imposed on or measured by net
income or gross receipts, and franchise taxes) Lender would have received if such Taxes or Other Taxes had not been imposed.
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(iv) Borrower
agrees to indemnify Lender for (A) the full amount of Taxes and Other Taxes (including any Taxes or Other Taxes imposed or
asserted by any jurisdiction on amounts payable under this Section 2.5) paid by Lender, (B) amounts otherwise payable under
this Section 2.5, and (C) all liabilities (including penalties, interest and expenses) arising therefrom or with respect thereto,
in each case whether or not such Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental
Authority. Payment under this Section (iv) shall be made within thirty (30) days after the date Lender makes a demand therefor.
(b)
Matters
Applicable to all Requests for Compensation
. A certificate of Lender claiming compensation under this Section 2.5 and setting
forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining
such amount, Lender may use any reasonable averaging and attribution methods.
(c)
Survival
.
All of Borrower's obligations under this Section 2.5 shall survive repayment of the Advance and all interest thereon.
2.6
Wire
Transfers
. If the Advance is, at Borrower's request, to be wire transferred to Borrower or any other Person, such transfer
shall be subject to all applicable law, including the policies of the Board of Governors of the Federal Reserve System. Borrower
acknowledges that as a result thereof, the transmission of the Advance may be significantly delayed.
2.7
Renewal
of Credit Facilities
. Borrower acknowledges that any request that it makes for a renewal, extension, or replacement of the
credit facilities contained in this Agreement shall be granted or withheld by Lender in the exercise of Lender's sole discretion.
2.8
Conditions
.
Lender shall not be required to make the Advance unless at such time: all Conditions Precedent that are relevant to the Advance
have been timely fulfilled; none of the covenants, representations or warranties of Borrower or any other Person other than Lender
that are contained in the Loan Documents shall have been materially breached or shall be materially untrue; no Default or Event
of Default shall have occurred and be outstanding; no default shall have occurred and be outstanding under the Bulk Discovery Loan
Agreement or the Bulk Cajun Loan Agreement; there shall have been no Materially adverse change in the businesses, assets, or liabilities
of Holding Company since the effective date of its audited financial reports dated or received by Lender on June 14, 2012, and
its unaudited 3Q2012 financial report provided to Lender; and all other requirements set forth in the Loan Documents shall be satisfied
in all material respects; provided that any of the foregoing may be waived by the Lender if done in writing. Other than as expressly
set forth herein, Lender shall be under no obligation to make advances to Borrower, and no other advances made by Lender apart
from the requirements of this Agreement shall be deemed to establish any contrary practice, course of dealing or obligation.
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ARTICLE
III
CONDITIONS PRECEDENT
3.1
Conditions
Precedent to the Advance
. Lender's obligation to make the Advance under this Agreement shall be subject to the fulfillment,
on or before February 19, 2013 (or such later date as Lender approves in writing), of all of the following conditions precedent,
and all other conditions precedent that may be contained in any of the Loan Documents:
(a)
General
Documents
. Borrower shall furnish to Lender the following, in form and substance satisfactory to Lender, dated as of the Closing
Date, unless otherwise indicated below:
(i) this
Agreement executed by the parties hereto and the Request for Advance executed by the Borrower in substantially the form attached
hereto as
Exhibit A
;
(ii) a
First Preferred Ship Mortgage encumbering the Vessel, duly executed by Borrower, in form and substance satisfactory to Lender,
that has been notarized and that complies with all other formalities as required for recordation in the Marshall Islands Registry
(the "
Bulk Beothuk Mortgage
");
(iii) an
Assignment of Charter, Earnings and Insurances (respecting the Time Charter and the Cargill Charter) executed by Borrower, in form
and substance satisfactory to Lender (the "
Borrower's Earnings Assignment Agreement
");
(iv) a
certification that an executed Notice of Assignment, in form and substance satisfactory to Lender, respecting the Borrower's Earnings
Assignment Agreement was delivered to Charterer, and an Acknowledgement and Agreement executed by Charterer, in form and substance
satisfactory to Lender;
(v) an
Assignment of Charter, Earnings and Insurances executed by Charterer, in form and substance satisfactory to Lender (the "
Charterer's
Earnings Assignment Agreement
");
(vi) a
certification that an executed Notice of Assignment, in form and substance satisfactory to Lender, respecting the Charterer's Earnings
Assignment Agreement was delivered to Phoenix, and an Acknowledgement and Agreement executed by Phoenix, in form and substance
satisfactory to Lender;
(vii) an
Assignment of Earnings and Insurances executed by Phoenix, in form and substance satisfactory to Lender (the "
Phoenix Earnings
Assignment Agreement
");
(viii) a
copy of the Cargill Charter, including the Novation Agreement and evidence from Borrower to Cargill, in form acceptable to Lender,
that instructs Cargill to remit all charter hire to the Allseas Cash Deposit Account;
(ix) a
Manager's Undertaking executed by Seamar Management S.A., in form and substance satisfactory to Lender;
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(x) a
Manager's Undertaking executed by Phoenix US, in form and substance satisfactory to Lender;
(xi) a
Funds Deposit Agreement executed by Borrower, Charterer, Phoenix, Allseas, and Lender, in form and substance satisfactory to Lender
(the "
Funds Deposit Agreement
");
(xii) a
Charge over Shares regarding all of the issued and outstanding shares of stock in Borrower, executed by Pledgor, in form and substance
satisfactory to Lender (the "
Shares Charge
"), and (A) a Shareholder's Proxy executed by Pledgor in substantially
the form attached to the Shares Charge, (B) a Share Transfer Form executed by Pledgor in substantially the form attached to
the Shares Charge that pertains to the shares subject to the Shares Charge, (C) all share certificates for all issued and
outstanding shares of stock of Borrower, (D) an Undertaking executed by Pledgor in substantially the form attached to the
Shares Charge, and (E) undated Director & Officer Resignation Letters executed by all of the directors and officers of
Borrower in substantially the form attached to the Shares Charge;
(xiii) a
Charge Over Bulk Beothuk Hire Account executed by Borrower and Lender, in form and substance satisfactory to Lender (the "
Borrower
Charge Over Bulk Beothuk Hire Account
"), and a letter executed by HSBC Bank Bermuda Limited respecting the Borrower Charge
Over Bulk Beothuk Hire Account, in form and substance satisfactory to Lender;
(xiv) a
Charge Over Cash Deposit executed by Allseas and Lender, in form and substance satisfactory to Lender (the "
Allseas Charge
Over Cash Deposit
"), and a letter executed by HSBC Bank Bermuda Limited respecting the Allseas Charge Over Cash Deposit
Account, in form and substance satisfactory to Lender;
(xv) an
irrevocable consent to appointment as registered agent for service of process on Borrower, Pledgor, Allseas, Phoenix, and the Guarantors,
executed by Leicht & Rein Tax Associates, Ltd., 570 Seventh Avenue, New York, New York 10018 ("
Process Agent
"),
in form acceptable to Lender ("
Process Agent Appointment
");
(xvi) copies
of the executed Time Charter, Cargill Charter, Technical Management Agreement, and Commercial Management Agreement certified by
an officer of Borrower or another individual acceptable to Lender, containing a certification that they are still in full force
and effect, and have not been amended or rescinded;
(xvii) a copy of the executed
Sub-Time Charter certified by an officer of Charterer or another individual acceptable to Lender, containing a certification that
it is still in full force and effect, and has not been amended or rescinded;
(xviii) certified
copies of all entries and filings in respect of each of Borrower, Holding Company, Pledgor, and Allseas on file in the Register
of Companies at the office of the Registrar of Companies in Hamilton, Bermuda;
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(xix) copies,
certified by the secretaries of the respective companies or other individuals acceptable to Lender, of the Constitutional Documents
of each of Borrower, Holding Company, Pledgor, and Allseas, and of minutes of the meetings of the board of directors of each of
Borrower, Holding Company, Pledgor, and Allseas containing,
inter alia
, the unanimous resolutions of the directors of each
of such companies approving such companies' authorization of and entry into the Loan Documents to be executed on their behalf;
(xx) a
Certificate of Compliance issued by the Bermuda Registrar of Companies in respect of each of Borrower, Holding Company, Pledgor,
Allseas;
(xxi) a
certified copy of the Register of Shareholders in respect of each of Borrower, Holding Company, Pledgor, and Allseas;
(xxii) a
certified copy of the Register of Directors and Officers in respect of each of Borrower, Holding Company, Pledgor, and Allseas,
certified by their respective secretaries;
(xxiii) certified
copy of a current Foreign Exchange Letter issued by the Bermuda Monetary Authority with respect to each of Borrower, Holding Company,
Pledgor, and Allseas, certified by their respective secretaries;
(xxiv) a
certified copy of a current Tax Assurance issued by the Bermuda Registrar of Companies for the Minister of Finance in relation
to each of Borrower, Holding Company, Pledgor, and Allseas, certified by their respective secretaries;
(xxv) copies
of the Constitutional Documents and public records of Charterer obtained from the Registry of Corporate Affairs and the High Court
Registry of the British Virgin Islands and certified by the secretary of Charterer;
(xxvi) copies
of the memorandum and articles of association and certificate of incorporation of Charterer certified by the secretary of Charterer;
(xxvii) copies
of the public information respecting Charterer revealed from a search of each of the Civil Index Book and the Commercial Book,
each from the date of the Charterer's incorporation, maintained by the British Virgin Islands' High Court Registry;
(xxviii) a certificate of the
secretary of the Charterer identifying, inter alia, the directors, officers, and shareholders of Charterer;
(xxix) a
copy certified by the secretary of the Charterer of the written resolutions of the directors of Charterer approving, inter alia,
the Charterer's authorization of and entry into the Loan Documents to be executed for and on behalf of Charterer;
(xxx) a
copy of the register of the members of Charterer certified by the secretary of Charterer;
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(xxxi) a
copy of the register of the directors of Charterer certified by the secretary of Charterer;
(xxxii) a certificate of the secretary
of Phoenix, certifying and attaching:
(A) copies
of the Constitutional Documents and public records of Phoenix obtained from the Registry of Corporate Affairs and the High Court
Registry of the British Virgin Islands;
(B) copies
of the memorandum and articles of association and certificate of incorporation of Phoenix;
(C) a
copy of the written resolutions of the directors of Phoenix respecting, inter alia, Phoenix's authorization of and entry into the
Loan Documents to be executed for and on behalf of Phoenix;
(D) verifies
the incumbency and signature of the individual who executes Loan Documents on behalf of Phoenix; and
(E) copies
of the public information respecting Phoenix revealed from a search of each of the Civil Index Book and the Commercial Book, each
from the date of Phoenix's incorporation, maintained by the British Virgin Islands' High Court Registry;
(xxxiii) a Marshall Islands Foreign
Maritime Entity Certificate of Good Standing for the Borrower issued by the Marshall Islands Registry on or about the Closing Date;
(xxxiv) certified true copies
of executed powers of attorneys appointing all attorneys-in-fact who execute Loan Documents on behalf of Borrower, Holding Company,
Pledgor, Bulk Cajun Pledgor, Allseas, Phoenix, Phoenix US or Charterer;
(xxxv) certifications of the signatures
of all individuals who execute Loan Documents on behalf of Borrower, Holding Company, Pledgor, Allseas, Phoenix, or Charterer;
(xxxvi) legal opinions of counsel
in Bermuda, the British Virgin Islands, the Marshall Islands and Panama that are acceptable to Lender, in form acceptable to Lender,
regarding this Agreement and the transactions and matters contemplated therein;
(xxxvii) a guaranty given by (A)
Bulk Discovery, with respect to the Obligations and the Bulk Cajun Obligations, and (B) Bulk Cajun, with respect to the Obligations
and the Bulk Discovery Obligations, and (C) the Borrower with respect to the Bulk Cajun Obligations and the Bulk Discovery Obligations,
executed in form and substance satisfactory to Lender (the "
Cross-Collateral Guaranty
");
(xxxviii) the Omnibus Agreement,
executed by Lender, Borrower, Bulk Discovery, Bulk Cajun, Holding Company, Charterer, Pledgor, Bulk Cajun Pledgor, Phoenix, Phoenix
US, and Allseas, in form and substance satisfactory to Lender (the "
Omnibus Agreement
"); and
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(xxxix) such other agreements,
instruments, documents, and certifications as Lender may reasonably require.
(b)
Vessel
Documents
. Lender shall have received:
(i) Copies
of the following documents respecting the Borrower's purchase of the Vessel (certified by Borrower as true, correct and complete):
(A) Memorandum
of Agreement dated 4th January 2013;
(B) Evidence
that the Vessel was registered immediately prior to purchase thereof by the seller thereof in the Indian registry free and clear
of all liens and encumbrances;
(C) Bill
of Sale in favor of the Borrower;
(D) Evidence
of deletion of the Vessel from Indian registry (which may be post-closing); and
(E) Protocol
of Delivery and Acceptance.
(ii) Copies
of the following documents that are duly issued, valid and current with respect to the Vessel:
(A) A
one (1) year validity Provisional Certificate of Registry and Radio License for the Vessel issued under the authority of the Republic
of the Marshall Islands;
(B) Document
of Compliance issued under the International Convention for the Safety of Life at Sea, 1974;
(C) International Tonnage Certificate
(ITC) for the Vessel;
(D) International
Safety Management Certificate;
(E) International
Ship Security Certificate; and
(F) Confirmation of Class Certificate
issued by Det Norske Veritas showing the Vessel's assigned class as BULK CARRIER and stating there are no recommendations.
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(c)
Bulk
Beothuk Mortgage Filing
. The Bulk Beothuk Mortgage shall have been duly filed and recorded at the Marshall Islands Registry,
such that it creates a duly perfected preferred mortgage and maritime lien under the laws of the Republic of the Marshall Islands,
and creates a preferred mortgage on the Vessel (as the term "preferred mortgage" is defined at 46 U.S.C. § 31301(6)(B)),
subject to no Encumbrances thereon other than Permitted Encumbrances. Lender shall have received an original certificate of ownership
and encumbrance for the Vessel issued by the Marshall Islands Registry that indicates that Borrower is the sole owner of record
of the Vessel, that the Bulk Beothuk Mortgage has been duly filed and recorded at the Marshall Islands Registry, and that there
are no outstanding Encumbrances of record at the Marshall Islands Registry that pertain to the Vessel.
(d)
Vessel
Items
. Lender shall have received the results of a survey of the Vessel, and certified copies of valid and unexpired documents
that indicate that the Vessel satisfies the requirements contained in Section 4.19, in each such case that are satisfactory to
Lender, in the exercise of its sole discretion. There shall have been no change in the condition of the Vessel or in the existence
aboard or condition of any equipment listed in such survey since the date of the surveyor's inspection thereof, except for ordinary
wear and tear.
(e)
Financing
Statements
. There shall have been duly filed in all jurisdictions of Lender's choice forms of Uniform Commercial Code financing
statements (or Company's Registry filings) and amendments thereto, as necessary, pertaining to Borrower, Bulk Discovery, Bulk Cajun,
Pledgor, Allseas, Phoenix, and Charterer as debtors, with respect to the Collateral, in forms required by Lender.
(f)
Perfection
.
Borrower, Bulk Discovery, Bulk Cajun, Pledgor, Allseas, Phoenix and Charterer shall furnish to Lender all other evidence of the
perfection of the security granted in the Collateral Documents in all jurisdictions of Lender's choice, in form as it may require,
and evidence satisfactory to Lender that all such mortgages, assignments, and other security interests have the priority required
of them herein or in the relevant Loan Documents.
(g)
Insurance
.
Borrower shall have furnished to all underwriters and protection and indemnity associations Notices of Assignment as required herein,
which shall have been duly endorsed on all policies and entries. Lender shall have been furnished with certified copies of all
policies of insurance and protection and indemnity association certificates of entry that Borrower is required to procure and maintain
pursuant to the Loan Documents, along with all required endorsements thereto, a letter of undertaking from the Vessel's protection
and indemnity association, and a letter from the Borrower's insurance broker as required herein. Lender shall have been furnished
with certified copies of all policies of insurance that Charterer obtains for which it is required to furnish documents pursuant
to the Charterer's Earnings Assignment Agreement (or of a certificate of entry in the case of a protection and indemnity association),
and all such documents that Charterer is required to furnish pursuant to the Charterer's Earnings Assignment Agreement. Charterer
shall have furnished to all underwriters and protection and indemnity associations Notices of Assignment as required therein, which
shall have been duly endorsed on all policies and entries. Borrower and Charterer shall have provided to Lender duplicate originals
of the Notices of Assignment respecting the Borrower's Earnings Assignment Agreement, the Charterer's Earnings Assignment Agreement,
and the Phoenix Earnings Assignment Agreement, in form and substance satisfactory to Lender.
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(h)
Borrower
Bank Account
. Borrower shall have opened a demand deposit account with HSBC Bermuda Bank Limited for the purpose of receiving
from the Allseas Cash Deposit Account charter hire generated under the Time Charter, the Sub-Time Charter and the Cargill Charter
(the "
Bulk Beothuk Hire Account
").
(i)
Allseas
Bank Account
. Allseas shall have opened a demand deposit account or confirmed that such demand deposit account exists, as the
case may be, with HSBC Bermuda Bank Limited for the purpose of receiving all revenues from any third party (including, but not
limited to Cargill) for employment of the Vessel (the "
Allseas Cash Deposit Account
").
(j)
Letter
of Credit
. Lender shall have received a $500,000 standby letter of credit, in form and substance satisfactory to Lender in
its sole discretion, and issued to it by HSBC Bermuda Bank Limited or such other bank acceptable to Lender in its sole discretion
(the Letter of Credit").
(k)
Bulk
Discovery Cross-Collateralization
.
(i) The
First Naval Mortgage granted by Bulk Discovery to Lender on the BULK DISCOVERY dated March 2, 2011 and recorded in the Panamanian
Public Registry under Microjacket: 35245 and Document: 1904846, on July 28, 2011, as amended by Amendment of Mortgage dated December
21, 2011, and as further amended by Amendment of Mortgage dated January 10, 2012 (collectively, the "
Bulk Discovery Mortgage
")
shall be amended and restated such that (i) it acknowledges that an Event of Default shall be an event of default of Bulk Discovery
under the Bulk Discovery Loan Agreement, (ii) it secures the obligations of Bulk Discovery under the Cross Collateral Guaranty,
(iii) is substantially similar in the form of the Bulk Beothuk Mortgage after taking into appropriate account the identity of the
grantor, the vessel, and the flag and (iv) shall otherwise be in form satisfactory to Lender in the exercise of its sole discretion.
Such amendment and restatement shall be preliminarily filed and recorded at the Panamanian Public Registry such that the Bulk Discovery
Mortgage, as amended and restated, is a duly perfected mortgage and maritime lien under the laws of the Republic of Panama, and
creates a preferred mortgage on the Vessel (as the term "preferred mortgage" is defined at 46 U.S.C. § 31301(6)(B)),
subject to no Encumbrances thereon other than Permitted Encumbrances and the Bulk Discovery Mortgage;
(ii) Lender
shall have received a certified copy of a certificate of ownership and encumbrance for the BULK DISCOVERY issued by the Panamanian
Public Registry that indicates that Bulk Discovery is the sole owner of record of the BULK DISCOVERY, that the Bulk Discovery Mortgage
and the amendment and restatement thereto referred to in Section 3.1(k)(i) have been duly filed and recorded at the Panama Public
Register Office, and that there are no other outstanding Encumbrances of record at the Panama Public Register Office that pertain
to the BULK DISCOVERY;
(iii) Each
of the Bulk Discovery Loan Documents shall be amended as Lender reasonably requires in order that the Group Obligations are completely
cross-collateralized; and
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(iv) The
Lender shall have received copies of such corporate authorizations and other instruments and documents relating to amendments to
the Bulk Discovery Loan Documents as it may reasonably request.
(l)
Bulk
Cajun Cross-Collateralization
.
(i) The
First Naval Mortgage granted by Bulk Cajun to Lender on the BULK CAJUN dated October 21, 2011 and recorded in the Panamanian Public
Registry under Microjacket: 35900 and Document: 1905707, on March 13, 2012, as amended by Amendment of Mortgage dated December
21, 2011 (collectively, the "
Bulk Cajun Mortgage
") shall be amended and restated such that (i) it acknowledges
that an Event of Default shall be an event of default of Bulk Cajun under the Bulk Cajun Loan Agreement, (ii) it secures the obligations
of Bulk Cajun under the Cross-Collateral Guaranty, (iii) is substantially similar in the form of the Bulk Beothuk Mortgage after
taking into appropriate account the identity of the grantor, the vessel, and the flag and (iv) shall otherwise be in form satisfactory
to Lender in the exercise of its sole discretion. Such amendment and restatement shall be preliminarily filed and recorded at the
Panamanian Public Registry such that the Bulk Cajun Mortgage, as amended and restated, is a duly perfected mortgage and maritime
lien under the laws of the Republic of Panama, and creates a preferred mortgage on the Vessel (as the term "preferred mortgage"
is defined at 46 U.S.C. § 31301(6)(B)), subject to no Encumbrances thereon other than Permitted Encumbrances and
the Bulk Cajun Mortgage;
(ii) Lender
shall have received a certified copy of a certificate of ownership and encumbrance for the BULK CAJUN issued by the Panamanian
Public Registry that indicates that Bulk Cajun is the sole owner of record of the BULK CAJUN, that the Bulk Cajun Mortgage and
the amendment and restatement thereto referred to in Section 3.1(l)(i) have been duly filed and recorded at the Panama Public Register
Office, and that there are no other outstanding Encumbrances of record at the Panama Public Register Office that pertain to the
BULK CAJUN;
(iii) Each
of the Bulk Cajun Loan Documents shall be amended as Lender reasonably requires in order that the Group Obligations are completely
cross-collateralized; and
(iv) The
Lender shall have received copies of such corporate authorizations and other instruments and documents relating to amendments to
the Bulk Cajun Loan Documents as it may reasonably request.
(m)
Fees
and Expenses
.
(i) Borrower
shall have paid (A) a commitment fee of one percent (1%) of the Advance (the "
Commitment Fee
"), (B) Lender's
reasonable expenses incurred for inspecting and appraising the Vessel, (C) all filing and recording fees, and all stamp and
other taxes payable with respect to the consummation of the transactions as contemplated in this Agreement, and (D) Lenders'
reasonable attorneys' fees and other expenses incurred as of the Closing Date in connection with the transactions contemplated
in this Agreement.
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(ii) Notwithstanding
the above, Lender will be responsible for $25,000 in costs and expenses (the "
Lender's Allowance
") and payment
of the transactions costs described in Section 3.1(m)(i) shall be made as follows:
first
, by application of
the $25,000 deposit paid by the Borrower upon acceptance of the Term Sheet dated December 20, 2012 between the Lender and the Holding
Company;
second
, by the Lender, up
to the Lender's Allowance amount; and
third
, by the Borrower.
3.2
Compliance
with Loan Documents
. Without limiting the provisions of Section 2.8, it is a condition precedent to the Advance that the
representations and warranties of Borrower and Guarantors contained in the Loan Documents shall be true, and there shall be no
outstanding Default or Event of Default thereunder by any of the Loan Documents, and there shall not exist any Material adverse
condition with respect to a Credit Party that has not been contained in the most recent written information about them, their assets,
their businesses, and their financial condition that has not heretofore been disclosed to Lender in writing.
3.3
Unfulfilled
Conditions Precedent Become Ongoing Covenants
. Conditions Precedent specified in this Article III that, with the prior written
consent of the Lender in its sole discretion, remain unfulfilled as of the disbursement of the Advance shall survive and shall
be deemed ongoing covenants of Borrower, the performance of which shall be due on demand, unless they are waived by Lender in writing.
Borrower shall cause Allseas and Phoenix to comply with all Conditions Precedent, applicable to them respectively, specified in
this Article III.
ARTICLE
IV
REPRESENTATIONS AND WARRANTIES
The Credit Parties party thereto make the
following representations, warranties, and covenants in addition to those which may be contained elsewhere in the Loan Documents.
All of the following and such other representations, warranties, and covenants as such parties shall make in the other Loan Documents
are continuing representations and warranties and shall survive the Closing Date until all of the Obligations are fully performed:
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4.1
Company
Matters
. Each of Borrower, Pledgor, Allseas, Phoenix, and Holding Company is an exempted company incorporated under the laws
of Bermuda, and possesses the capacity to sue and be sued in its own name and is in good standing under the laws of Bermuda. Charterer
is an exempted company incorporated under the laws of the British Virgin Islands, and possesses the capacity to sue and be sued
in its own name and is in good standing under the laws of the British Virgin Islands. Each Credit Party, and each of Allseas, Phoenix,
Bulk Cajun and Bulk Discovery possesses all requisite power and authority to enter into, execute, deliver, and perform its obligations
under this Agreement and the other Loan Documents, the Bulk Cajun Loan Documents, and the Bulk Discovery Loan Documents, respectively,
to which it is or is to become party pursuant to this Agreement and to take all action as may be necessary to consummate the transactions
contemplated thereby. The entry into, execution, delivery, and performance by each Credit Party, and each of Allseas, Phoenix,
Bulk Cajun and Bulk Discovery of the Loan Documents to which it is, or, pursuant to this Agreement is to be a party, and the transactions
contemplated thereby, have been duly authorized by all necessary corporate action. This Agreement and the Loan Documents, and the
other Group Loan Documents, in each case which this Agreement contemplates that any of the Credit Parties, Allseas, Phoenix, Bulk
Cajun or Bulk Discovery, respectively, will execute have been duly executed by such Persons and constitute (or shall constitute
when executed and delivered) legal, valid, and binding obligations of such Persons, enforceable against them in accordance with
their terms.
4.2
Legal
Matters
. The execution, delivery, and performance of the Loan Documents and the other Group Loan Documents to which any of
the Credit Parties, Allseas, Phoenix, Bulk Cajun or Bulk Discovery, respectively, are or are to become party do not and will not
(a) violate any provision of any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award
presently in effect having applicability to any of them, or (b) result in a breach of or constitute a default under any indenture,
loan or credit agreement, or any other note, instrument, or agreement for borrowed money. None of the Credit Parties, Allseas,
Phoenix, Bulk Cajun or Bulk Discovery, respectively, are in Material violation of or Material default under any such law, rule,
order, writ, judgment, injunction, decree, determination, award, indenture, loan or credit agreement, or other note, instrument,
or agreement for borrowed money. The execution, delivery, and performance of the Loan Documents, and the other Group Loan Documents,
in each case to which each of the Credit Parties, Allseas, Phoenix, Bulk Cajun or Bulk Discovery, respectively, is or is to become
a party do not and will not violate its Constitutional Documents, are within its powers, and have been duly authorized by all necessary
company action.
4.3
Authorization;
Validity and Enforceability
. This Agreement has been duly executed on behalf of Borrower and Guarantors, and constitutes a
valid obligation of each of them, and is enforceable against each of them in accordance with its terms. Each Loan Document, and
each other Group Loan Document when executed and delivered by such of the Credit Parties, Allseas, Phoenix, Bulk Cajun or Bulk
Discovery, respectively, as are stated to be parties thereto, will be a legal, valid and binding obligation of such Persons as
are stated to be party thereto, enforceable against each such Person in accordance with its terms. This Agreement, each Loan Document,
and each other Group Loan Document is not subject to any claim, defense or right of offset or recoupment of any kind whatsoever.
None of the Credit Parties, Allseas, Phoenix, Bulk Cajun or Bulk Discovery, respectively, have has any claims, counterclaims or
defenses against the Lender or any other Person that would or might affect (1) the validity, enforceability or binding nature
of any provision of any Loan Document, or any other Group Loan Document, or (2) the collectability of any of the Obligations
or any other Group Obligations, or any of the obligations of any Guarantor, Pledgor, Allseas, or Phoenix under the Loan Documents,
or of any of the parties to any other Group Loan Documents.
4.4
Lines
of Business
. Borrower is engaged exclusively in the ownership and operation of the Vessel for operation in the international
bulk cargo trade, including to and from ports in the United States, and activities reasonably related thereto.
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4.5
Government
Approvals
. No Permit from, or filing or registration with any Governmental Authority is or will be necessary to the valid execution,
delivery, or performance of the Loan Documents by the Credit Parties, Allseas or Phoenix.
4.6
Ownership;
Subsidiaries
. All Equity Interests in the Credit Parties are owned as set forth in
Schedule 4.6
. Borrower has no
Subsidiaries other than as set forth in
Schedule 4.6
. Except as has been disclosed to the Lender in
Schedule 4.6
,
there are no outstanding subscription agreements, membership interest or share purchase agreements, warrants, or options for any
Equity Interests in Borrower. Allseas and Phoenix are, directly or indirectly, wholly-owned subsidiaries of Holding Company and
Affiliates of Borrower.
4.7
Financial
Condition
. All financial information heretofore given to Lender by Borrower or any of its Affiliates pertaining to Borrower
or any other Person reasonably and accurately reflected the facts stated therein or represented thereby as of the dates of such
financial information, and was prepared in accordance with GAAP, and was otherwise prepared in a manner that is consistent with
the financial information with which Lender has been provided heretofore, except as otherwise expressly noted therein. At such
dates there were no omissions of material facts or materially erroneous statements therein or therefrom, as determined in accordance
with GAAP.
4.8
Legal
Actions
. There are no Material actions, suits, or proceedings pending or threatened against any of the Credit Parties, Bulk
Cajun or Bulk Discovery or any of their assets, before any court, administrative or other tribunal, arbitrator or panel of arbitrators,
or Governmental Authority except as set forth in
Schedule 4.8
hereto.
4.9
Title
and Encumbrances
. Borrower has good and marketable title to the Vessel and to all of the other Collateral except Collateral
owned by Pledgor, Charterer or Allseas. Pledgor has good and marketable title to all of the Equity Interest in Borrower, and all
Collateral related thereto. Charterer has good and marketable title to the Time Charter, all other Collateral described in the
Charterer's Earnings Assignment Agreement, and all Collateral related thereto. Allseas has good and marketable title to the deposit
account described in the Allseas Charge Over Cash Deposit and all Collateral related thereto. None of Borrower's assets or any
of the other Collateral are subject to any Encumbrances except (a) Encumbrances in favor of Lender, (b) Encumbrances
listed in
Schedule 4.9
, and (c) Encumbrances expressly permitted in any Loan Documents (each, a "
Permitted
Encumbrance
").
4.10
Contracts
.
The Time Charter, Sub-Time Charter, Cargill Charter, Technical Management Agreement, and Commercial Management Agreement are in
full force and effect, to the knowledge of the Credit Parties no parties thereto are in default thereunder, and no such contracts
have been assigned, assumed, amended, supplemented, renewed, restated, replaced, or otherwise modified.
4.11
Place
of Business
. Borrower's, Charterer's and Allseas' offices where they keep their books and records pertaining to deposit accounts
and general intangibles owing or belonging to them are located at the address of Borrower stated in Section 9.4. For purposes
of the Uniform Commercial Code, the Borrower, Charterer, Pledgor and Allseas have only one place of business located at, or if
each has more than one place of business, the chief executive office where management decisions are taken is, as stated in
Schedule 4.11
.
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4.12
Disclosure
.
All written statements, representations, and warranties made by any of the Credit Parties, Allseas, and Phoenix in the Loan Documents
or in any other Group Loan Documents are materially true, and do not omit any material facts on the date as of which such information
was stated or certified. All copies of documents, instruments or certificates delivered to Lender in connection herewith by any
Credit Party are true, correct and complete.
4.13
Laws
and Regulations
. The Credit Parties, Allseas, and Phoenix are in compliance with all applicable laws, except for any violation
of which would not subject any Collateral to forfeiture, could not subject any directors, officers, or shareholders of any of the
Credit Parties, Allseas, or Phoenix to imprisonment, and could not have a Material effect on the Credit Parties, Allseas, or Phoenix.
Borrower is not engaged and shall not engage in the business of purchasing or carrying margin stock (within the meaning of Regulation
U issued by the Board of Governors of the Federal Reserve System), or extending credit for the purpose of purchasing or carrying
margin stock. Borrower is not subject to the Investment Company Act of 1940, the Public Utility Holding Company Act of 1935, or
any other law that restricts entering into or performing any obligation of Borrower under any Loan Document.
4.14
Tax
Status
. The Credit Parties and their Subsidiaries have filed all tax returns and reports required to be filed, have made provision
in accordance with GAAP for the payment of all applicable and accrued or accruing foreign, U.S. federal, state and local taxes,
and have paid all such taxes which are due and payable.
4.15
Fiscal
Year
. The Credit Parties' and their Subsidiaries' fiscal years for accounting and tax purposes end on December 31.
4.16
Intellectual
Property
. The Credit Parties own or possess the right to use, all of the trademarks, service marks, trade names, and copyrights
that are reasonably necessary for the operation of their businesses, without conflict with the rights of any other Person, and
none own any patents, patent rights, franchises, or licenses or registered trademarks, service marks, trade names, copyrights,
or other intellectual property rights.
4.17
ERISA
Compliance
. No Credit Party or any ERISA Affiliate thereof has any Pension Plan or Multiemployer Plan.
4.18
Environmental
Compliance
.
(a) The
Credit Parties, Bulk Cajun and Bulk Discovery and their respective Subsidiaries are in compliance in all material respects with
the requirements of all applicable Environmental Laws, the violation of which could have a Material adverse effect on their assets
or business.
(b) No
Hazardous Materials have been generated or manufactured on, transported to or from, treated at, stored at or discharged from or
on any real property or from a vessel, owned, leased or operated by any Credit Party, Bulk Cajun and Bulk Discovery or any of their
respective Subsidiaries, in violation of any Environmental Laws.
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(c) None
of the Credit Parties, Bulk Cajun and Bulk Discovery or any of their respective Subsidiaries have received notice or otherwise
learned of any claim, demand, suit, action, proceeding, event, condition, report, directive, Encumbrance, violation, non-compliance
or investigation indicating or concerning any potential or actual liability or remedial action arising in connection with any non-compliance
with or violation of the requirements of any applicable Environmental Laws, or the presence of, or release or threatened release
of any Hazardous Materials on or from any real property, or from a vessel, owned, leased or operated by any of the Credit Parties,
Bulk Cajun and Bulk Discovery or any of their respective Subsidiaries.
4.19
Vessel
.
The Vessel (a) satisfies the criteria to conduct the business as described in Section 4.4, (b) measures 7,966 light ship tons
and 50,992 deadweight tons, (c) is in class BULK CARRIER of Det Norske Veritas, and is so certified, without any outstanding
exceptions or recommendations, and (d) has, and Borrower has possession of, all required national and international certificates
of financial responsibility, and all other Permits that are required to conduct the business described in Section 4.4, including
all Permits required under the laws of the Marshall Islands and the United States for the carriage of cargo under the Time Charter,
Sub-Time Charter and Cargill Charter.
4.20
Land
.
Charterer and Phoenix own no real property in the British Virgin Islands.
4.21
No
Prohibited Persons
. Neither Borrower nor any Affiliate of Borrower, nor any person or entity that owns or controls any of them
is a Prohibited Person. For purposes of this clause "ownership" shall mean 50% or more interest or a controlling minority
interest. "Control" shall mean the ability to direct or affect the day-to-day business of Borrower or any Affiliate of
Borrower.
ARTICLE
V
COVENANTS
So long as any Obligations are outstanding
or Lender has any commitment to make the Advance hereunder, Borrower and Guarantors agree to comply with the following covenants
that are applicable to them unless otherwise agreed to in writing by Lender:
5.1
Title
and Liens
.
(a) On
the Closing Date , Borrower shall be the sole owner of the whole of Vessel and other Collateral, except Collateral owned by Pledgor,
Charterer, or Allseas
,
and shall thereafter retain good and marketable title thereto, subject to no Encumbrances except
Permitted Encumbrances; and
(b) On
the Closing Date, Charterer shall have good and marketable title to the Time Charter, all Collateral described in the Charterer's
Earnings Assignment Agreement, and all Collateral related thereto, and shall thereafter retain good and marketable title thereto,
subject to no Encumbrances except Permitted Encumbrances.
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5.2
Change
in Business
. Borrower shall not engage in any trade or business in which it is not currently engaged utilizing only the Vessel.
Borrower shall not change the location of its chief executive office or the office where it keeps its books and records pertaining
to accounts and general intangibles owing or belonging to it without giving Lender at least thirty (30) days' advance written notice.
5.3
Financial
Covenants
. Borrower shall maintain a ratio of EBITDA to Fixed Charges for each fiscal year of not less than 1.2 : 1. Holding
Company shall at all times have shareholders' equity of not less than $10,000,000.00, determined in accordance with GAAP.
5.4
Company
Matters
.
(a) Without
the written consent of Lender previously obtained, Borrower shall not, and shall not allow any of its Subsidiaries to:
(i) make
any Investments except for Permitted Investments or Investments otherwise permitted by this Agreement;
(ii) incur
any Indebtedness (other than borrowing funds under this Agreement), make any loans or advances, or extend credit to any Person;
(iii) acquire
any Equity Interests, create any Subsidiaries, or contribute to the equity of any Person;
(iv) declare
or pay any dividends, distribute any equity, or make any other distributions to its shareholders or members;
(v) redeem
any Equity Interests;
(vi) change
its fiscal year or make any material change in its method of accounting;
(vii) merge,
consolidate or amalgamate with or into any other Person, change the legal nature of its form of entity, or change its jurisdiction
of formation;
(viii) liquidate
or dissolve;
(ix) sell
or dispose of any assets other than equipment that is obsolete, or worn out, or no longer necessary for the conduct of Borrower's
business or the operation of the Vessel, however, if such equipment that is disposed of is equipment of the Vessel, such equipment
shall be concurrently replaced with equipment of equal value;
(x) grant
any Encumbrance on any of its assets except Permitted Encumbrances; or
(xi) incur
or pay any management fees or commissions to any Person other than pursuant to the current express provisions of the Technical
Management Agreement and the Commercial Management Agreement.
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(b) Borrower
shall pay all of its obligations as they mature,
provided,
it may contest obligations in good faith if appropriate reserves
therefor are established and maintained consistently with GAAP, and security therefor is posted as may be required by Lender.
5.5
Financial
Statements/Reporting Requirements
. Each of Borrower (on a stand alone basis and on a consolidated basis as to it and its Subsidiaries,
if any) and Holding Company (on a consolidated basis) shall deliver to Lender, in form and detail satisfactory to Lender, the following
information and documents, which shall be accurate and complete in all material respects:
(a) As
soon as available but no later than seventy-five (75) days after the end of the each of its fiscal quarters, complete copies of
its financial statements, which shall include its balance sheet, income statement, a statement of changes in equity, and a statement
of cash flows for the preceding fiscal quarter, prepared in a level of detail as reasonably required by Lender, certified by its
chief financial officer or a representative acceptable to Lender as being complete and correct, and fairly presenting its and their
respective financial conditions and the results of its and their respective operations in all material respects;
(b) As
soon as available but no later than one hundred eighty (180) days after the end of the each of their fiscal years, complete copies
of its financial statements, which shall include its balance sheet, income statement, a statement of changes in equity, and a statement
of cash flows for the preceding fiscal year, prepared in a level of detail as reasonably required by Lender, certified by its chief
financial officer or a representative acceptable to Lender as being complete and correct, and fairly presenting its and their respective
financial conditions and the results of its and their respective operations in all material respects, and which, as to Holding
Company, shall have been audited by an independent certified public accountant that has been selected with the written approval
of Lender;
(c) On
each August 1 and February 1 of each year, a Compliance Certificate of Compliance executed by an officer Borrower (or its authorized
representative approved by Lender) in substantially the form attached hereto as
Exhibit B
;
(d) Within
thirty (30) days after they are due to be filed under applicable law, as extended pursuant to any valid extensions, copies of the
income tax returns for Borrower and Guarantors in each relevant jurisdiction for each of their fiscal years ending after the date
of this Agreement, and, if filing extensions are requested, Borrower and Guarantors shall furnish Lender forthwith with copies
of all related extension applications and approvals;
(e) Within
ten (10) days after becoming aware of any of the following, written notice to Lender of:
(i) all
Material breaches of contract to which Borrower is a party,
(ii) any
Material disputed account receivable,
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(iii) the
institution of any litigation or arbitration to which Borrower is a party or which affects any of its assets (including by means
of counterclaim, cross claim, impleader, or interpleader), in which the claim against the Borrower or a Guarantor is in excess
of $1,000,000.00,
(iv) the
revocation, modification, rescission or failure to renew of any Permit issued to Borrower or the Vessel,
(v) the
occurrence of any Default or Event of Default, together with a detailed statement of the steps being taken by the defaulting party
to deal with any such Default or Event of Default,
(vi) any
change in the jurisdiction of a Credit Party's formation, or location of Borrower's or Charterer's chief executive office or the
office where it keeps its books and records pertaining to accounts and general intangibles owing or belonging to it, or of the
establishment of any new, or the discontinuance of any existing, place of business of Borrower or Charterer,
(vii) the
death of Edward Coll or Claus Boggild, or the disablement of one them such that he may no longer effectively participate in the
management of Holding Company,
(viii) the
occurrence of damage to the Vessel in excess of the amount of the deductible or franchise amount of the hull and machinery insurance
thereon; a total loss of the Vessel occurs; or an incident of salvage or general average occurs with respect to the Vessel,
(ix) after
receiving knowledge of a Requisition of the Vessel, or knowledge that a Governmental Authority intends to effect a Requisition
of the Vessel (which shall be accompanied by a copy of the relevant communications received),
(x) after
the occurrence of any discharge from the Vessel of any Hazardous Material into the environment,
(xi) after
receipt of any notice from any Governmental Authority of any illegal act, omission, or condition by or concerning the Vessel or
its officers, crew, or cargoes,
(xii) if
any material requirement of any Governmental Authority or classification society with respect to the Vessel is made that is not
complied with, or any Governmental Authority or classification society issues a recommendation or exception with respect to a certification
or Permit pertaining to the Vessel that is not complied with or rectified (which shall be accompanied by a copy of the relevant
communications received), or if any classification certificate for the Vessel is terminated,
(xiii) if
the Vessel is Seized,
(xiv) the
occurrence of an Event of Default or any event or condition which, with the passage of time, the giving of notice, or both, would
become an Event of Default, and
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(xv) any other matter which
has resulted or might result in a Material adverse change in the financial condition or business of Borrower.
(f) Such
other statements, lists or property and accounts, budgets, forecasts, reports or other financial information as are regularly made
or maintained by Borrower as Lender may from time to time request.
Borrower shall provide to Lender copies of all Form CG-2692
accident reports (and all similar reports filed outside the United States) within five (5) days after submitting them to the United
States Coast Guard, and copies of all periodic classification society, damage, and insurance surveys that are prepared for the
Vessel.
5.6
Fiscal
Year
. No Credit Party shall change its fiscal year, nor shall it permit any Subsidiary thereof to do so, without the advance
written consent of Lender.
5.7
Accuracy
of Financial Information
. All financial information hereafter given to Lender by Borrower, any Guarantor, or any accountant,
or other professional therefor pertaining to Borrower, any Guarantor, or any Subsidiary thereof shall reasonably and accurately
reflect the facts stated therein or represented thereby as of the dates of such financial information subject to, in the case of
non-fiscal year-end information, normal year-end adjustments, and shall be prepared in accordance with GAAP and otherwise in a
manner that is consistent with the financial information with which Lender has been provided heretofore. There shall be no omissions
of material facts therefrom, determined in accordance with GAAP, and there shall be no material and erroneous statements therein,
determined in accordance with GAAP.
5.8
Access
.
The Borrower and Guarantors, shall cause their presidents, chief executive officers, chief financial officers, and authorized representatives
(and Holding Company shall cause the presidents, chief executive officers, chief financial officers, and authorized representatives
of Allseas and Phoenix, and the Persons with custody of or control over the books and records referred to in Section 5.9 pertaining
to Allseas and Phoenix) to be available during customary office hours at least once each fiscal quarter for a conference with a
representative of Lender for the purpose of discussing the financial affairs of Borrower (and any Subsidiaries of Borrower that
may exist from time to time), Guarantors, Allseas and Phoenix.
5.9
Accounting
Records
. Borrower and Guarantors shall maintain, and shall cause their Subsidiaries to maintain, adequate books, accounts and
records of all of their financial transactions and their assets and businesses, and prepare all financial statements, all in accordance
with GAAP and in compliance with the regulations of every Governmental Authority or other regulatory body having jurisdiction over
it or them or its or their businesses. Borrower and Guarantors shall permit, and cause their Subsidiaries to permit, employees
or agents of Lender at such reasonable times as Lender may request to inspect their assets, including without limitation regular
collateral audits, and to examine, audit, and make copies and memoranda of its and their documents, books, accounts and records,
including those kept in electronic form. None of Borrowers or Guarantors shall make or permit any material change in their accounting
policies or reporting practices, and shall ensure that none of their Subsidiaries do so, except (i) as required by generally
accepted accounting principles, or (ii) with the prior written consent of the Lender, which consent shall not unreasonably
be withheld.
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5.10
Status
.
Borrower and Guarantors shall maintain, and shall cause their Subsidiaries to maintain, in full force and effect their corporate
existences, and shall maintain their qualifications to do business as foreign corporations or as a foreign maritime entity in each
jurisdiction in which the character of the assets owned by them or the nature of their activities make such qualification necessary
to avoid a material adverse effect on them.
5.11
Condition
of Assets
. Borrower and Guarantors shall maintain all of their assets that are necessary or useful in the proper conduct of
its business in good working order and condition, normal wear and tear and excepted.
5.12
Legal
Compliance
. Borrower and Guarantors shall, and shall cause each of their Subsidiaries to, comply with the requirements of all
applicable law, and judicial, arbitral, and governmental rules, orders, writs, judgments, injunctions, decrees, determinations
and awards. Borrower and Charterer bear sole responsibility for compliance with or obtaining all Permits as may be necessary under
applicable contracts and law with respect to the security granted by them to Lender in the Collateral.
5.13
ERISA
Plans
. No Credit Party shall have, or permit any Subsidiary thereof to have any Pension Plan or Multiemployer Plan.
5.14
Taxes
.
Prior to the date on which they became delinquent, Borrower and Guarantors shall duly pay, and discharge, and shall cause each
of their Subsidiaries to pay and discharge, all taxes, duties, levies, imposts, deductions, assessments, fees, withholdings, user
fees, and other governmental charges imposed upon them or upon their income or profits, upon its or their activities, or upon any
assets belonging to it or them,
provided,
such Persons may contest in good faith any such claims and taxes, duties, levies,
imposts, deductions, assessments, fees, withholdings, user fees, and other governmental charges if appropriate reserves therefor
are established and maintained consistently with GAAP,
and provided, further,
if an Encumbrance on Collateral arises in
respect thereto, Borrower or Guarantors shall post, or shall cause their relevant Subsidiaries to post, security sufficient to
ensure that the Governmental Authority asserting the claim, or any successor or assign thereof, will not enforce an Encumbrance
against the Collateral.
5.15
Permits
.
Borrower and Charterer shall obtain and maintain in full force and effect all of their Permits in effect on the date hereof or
on the Closing Date, and such others as are necessary to allow them to conduct the business contemplated in Section 4.4. Borrower
and Charterer shall not operate, and shall not allow the Vessel to be operated, without a Permit in violation of applicable law.
None of Borrower or Charterer shall sell, subject to any Encumbrance, or otherwise transfer any such Permit or any right, title,
or interest therein, thereto, or thereunder.
5.16
Intellectual
Property
. Borrower and Guarantors shall not, sell, transfer, encumber, or otherwise dispose of any of its or their rights,
title, or interest in any trademarks, service marks, trade names, copyrights, patents, patent rights, franchises, licenses and
other intellectual property rights and assets that are reasonably necessary for the operation of its or their businesses, except
transfers of such property to Borrower.
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5.17
Arranger
Fee
. Borrower shall fully and timely pay all arranger and broker fees, commissions, and expenses incurred in connection with
this loan transaction, if any.
5.18
Compliance
by Allseas and Phoenix
. Borrower and Guarantors shall cause Allseas and Phoenix to comply with all applicable covenants contained
in this Agreement and in the other Group Loan Documents to which either is a party.
ARTICLE
VI
VESSEL PROVISIONS
On, from and after the Closing Date, Borrower
represents, warrants, and agrees as follows (and shall cause all managers and operators of the Vessel to ensure compliance with
the following provisions on behalf of Borrower):
6.1
Vessel
Registry
. Borrower shall keep the Vessel fully documented under the Marshall Islands Registry, including all additional certifications
required for vessels of its type, tonnage and area of operation, under the laws of and international conventions approved by the
Republic of the Marshall Islands.
6.2
Ownership
and Encumbrances
. Borrower is the sole owner of the whole of the Vessel free and clear of all Encumbrances except Permitted
Encumbrances, and is lawfully possessed of the Vessel and warrants and shall defend its title to and possession thereof and every
part thereof for the benefit of Lender against the claims and demands of all persons whomsoever. No Encumbrances shall exist hereafter
against the Vessel except for Permitted Encumbrances, and none of Borrower or the master of the Vessel nor any other Persons have
or shall have any right or authority to create, incur or permit to be placed or imposed upon the Vessel, or any part of any of
the Vessel, any Encumbrance whatsoever other than Permitted Encumbrances. Borrower shall pay and discharge, or cause to be paid
and discharged, when due and payable, from time to time, all Encumbrances on the Vessel except when the continuation of such an
Encumbrance is otherwise permitted in this Agreement.
6.3
Transfers
.
There are no outstanding charters, contracts of affreightment, or other rights to possession of or services of the Vessel other
than as listed in
Schedule 4.9
. So long as any Obligations are outstanding hereunder, the Vessel shall remain time
chartered under the Time Charter and sub-time chartered under the Sub-Time Charter. Neither Borrower nor Charterer shall sell,
convey, mortgage, or further charter the Vessel (except as set forth in the prior sentence or
Schedule 4.9
) or any
portion thereof, or transfer any interest therein in any manner (including by grant of an option, right of first refusal, or restriction
on transferability), without the written consent of Lender being first obtained,
provided,
that Permitted Encumbrances are
permitted. Phoenix shall not enter into any sub-time charters, voyage charters, or contracts of affreightment for employment of
the Vessel in the international bulk cargo trade for a period (including optional renewals) exceeding twelve (12) months without
the prior written consent (not to be unreasonably withheld) of Lender, and provided any such contracts are assigned by Phoenix
to Lender substantially in the form of Borrower's Earnings Assignment Agreement. No such written consent to any such sale, conveyance,
mortgage, charter, or transfer shall be construed to be a waiver of this provision in respect to any subsequent proposed sale,
conveyance, mortgage, charter, or transfer. Borrower shall repay all of the Obligations concurrently with a sale or other transfer
of title to the Vessel in accordance with the terms of Section 2.3(a) if no Default or Event of Default shall have occurred and
be continuing. If at the time of sale, a Default or Event of Default shall have occurred and be continuing, all proceeds of sale
shall be applied in the manner and order specified in Section 17 of the Bulk Beothuk Mortgage. Each other mortgage, charter, or
transfer shall be subject to the provisions of the Bulk Beothuk Mortgage and the lien it creates. Borrower shall cause each existing
time charter, sub-time charter or contract of affreightment that has a remaining term of twelve (12) months or greater, including
any extension option, to be assigned to Lender by means of an assignment of charter, earnings and insurances (or other appropriate
form of assignment) substantially in the form of the Borrower's Earnings Assignment Agreement.
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6.4
Lawful
Operation
. The Vessel and its operations shall at all times comply with (a) all laws of the Republic of the Marshall Islands,
all applicable treaties and conventions, and all applicable rules and regulations thereunder, as in effect from time to time, and
(b) all laws and regulations applicable to the Vessel and its operation in all trades and locations in which it operates or
is located from time to time; and the Vessel shall have on board as and when required thereby valid certificates of inspection
and all other certificates evidencing compliance therewith. Borrower shall obtain and file all certificates of financial responsibility
as legally required in all jurisdictions in which the Vessel is located from time to time. Borrower shall prepare and file all
pollution prevention and contingency plans and take all other steps required under all applicable laws concerning the prevention
and cleanup of environmental pollution, and the regulation of shipowners and vessels with respect to environmental matters. The
Vessel shall not be abandoned, and shall not carry any passenger, cargo, or other matter that will expose it to penalty, forfeiture
or capture. Borrower shall ensure that all reasonable precautions are taken to ensure that no illegal drugs or drug paraphernalia
are used or kept on board the Vessel, and shall otherwise comply with the anti-drug policies of the United States Government.
6.5
Operation
.
Unless otherwise agreed to in writing by Lender, granted or withheld in the exercise of its sole discretion, Borrower and Charterer
shall ensure that the Vessel shall on or before the Closing Date, and at all times thereafter, be dedicated to the performance
of the Cargill Charter, or the Time Charter and the Sub-Time Charter, as the case may be, shall not be taken to a zone that is
a declared war zone by any government or by any of the Vessel's war risk underwriters, and shall not be abandoned in a port or
place outside the United States. The Vessel satisfies, and shall continue to satisfy, the objective requirements for it to be utilized
under the Time Charter, the Sub-Time Charter and the Cargill Charter, all of which are in full force and effect.
6.6
Maintenance
.
The vessel has a valid classification certificate issued by Det Norske Veritas, in classification BULK CARRIER without outstanding
exceptions or recommendations. Borrower shall, at all times, and without cost or expense to Lender, maintain such classification
status, and maintain and preserve the Vessel as required in all applicable manufacturer's manuals, and in a safe and seaworthy
condition, and in such running order and repair as would be expected of a prudent, first-class shipowner, and in a condition, working
order and repair at least as good as such Vessel is in on the date of this Agreement, ordinary wear and tear excepted. Borrower
shall not make or permit to be made any material changes to the structure, type or speed of the Vessel, or to its propulsion system,
or make any alterations to the Vessel that would change its registered length, breadth, or depth, or its gross, net, deadweight,
or lightship tonnages, without first receiving written approval from Lender. Borrower may remove equipment from the Vessel free
and clear of the liens of the Bulk Beothuk Mortgage if (i) it simultaneously replaces such equipment with equipment of the
same or greater value, (ii) it causes all damage to the Vessel caused by such removal and replacement to be promptly repaired,
and (iii) such removal and replacement will not adversely affect the fair market value of the Vessel. Borrower shall cause
the Vessel to be surveyed and placed in dry dock when and as is required in order for it to maintain its classification status,
and to maintain all certificates of inspection and other certifications that it now has or is required to have in order to pursue
its intended trades.
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6.7
Access
and Surveys
. At all times Borrower shall afford Lender or its authorized representatives and surveyors full and complete access
to the Vessel for the purpose of inspecting it and its cargoes, and papers, and making copies of such papers, and shall provide
to Lender, within seven (7) days after being so requested, copies of all contracts, charterparties, policies of insurance, evidence
of club entries, and all other documents (including records that are in electronic form) pertaining to the Vessel or its operations.
Borrower shall provide to Lender prompt advance notice of all emergency dry-dockings of the Vessel, and fourteen (14) days advance
written notice of all non-emergency dry-dockings of the Vessel. If requested by Lender Borrower shall instruct the Vessel's classification
society to make available to Lender all of its records pertaining to the Vessel (including records that are in electronic form),
and to provide Lender with copies of all of the classification society's communications with Borrower, its managers or agents with
respect to the Vessel.
6.8
Seizure;
Requisition
. If the Vessel shall be Seized, Borrower, within thirty (30) days thereafter, shall cause the Vessel to be irrevocably
released and all Encumbrances thereon, other than the lien of the Mortgage, to be discharged by payment, performance, or the posting
of security therefor. In the event any of the foregoing occurs, Borrower agrees forthwith to notify Lender by facsimile or telegram,
confirmed by letter, at its address set forth in Section 9.4. In the event the Vessel shall be Seized and shall not be released
therefrom within thirty (30) days thereafter, Borrower hereby irrevocably authorizes and empowers Lender and severally each officer
of Lender in the name of Borrower (as attorney-in-fact, coupled with an interest) to apply for and receive possession of the Vessel,
with all rights and authority that Borrower might have, possess and exercise in any such event, but Lender and such officers shall
not be under any obligation to act in connection with the rights given in this Section. Borrower also authorizes and empowers Lender
and the officers above specified, severally, or their appointees, or any of them, to appear in the name of Borrower in any court
of any country or nation of the world where a complaint
in rem
or libel is pending against the Vessel, or where the Vessel
is Seized or is subject to Seizure and to take such actions as may seem proper toward the defense of such suit and the discharge
of any or all Encumbrances thereon or other relevant judgment or claim, and all expenditures made or so incurred shall be obligations
due from Borrower to Lender, shall be secured by the liens of the Bulk Beothuk Mortgage, the Bulk Cajun Mortgage and Bulk Discovery
Mortgage, and shall accrue interest at the Interest Rate or Default Rate, as in effect from time to time.
6.9
Insurance
.
Borrower shall obtain insurance for its assets and liabilities as would be customary for a business of its type. Without limiting
the foregoing:
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(a) Borrower
shall, while any of the Obligations, the Bulk Cajun Obligations or the Bulk Discovery Obligations are outstanding, or Lender has
any commitment to advance funds under this Agreement (whether or not there is a request for an advance outstanding), obtain and
maintain the following insurances with respect to the Vessel:
(i) Marine
hull and machinery insurance, and war risk hull and machinery insurance, in an amount not less than the full commercial value of
the Vessel, on a charter-free and lien-free basis, determined in a manner approved by Lender (which value shall not at any time
be an amount less than one hundred twenty percent (120%) of the principal amount of the Advance that is outstanding from time to
time);
(ii) Protection
and Indemnity insurance purchased through a protection and indemnity association that is a member of the International Group of
P & I Clubs, including, but not limited to, coverage for crew injuries, pollution liability including clean-up costs, wreck
removal, 4/4ths collision liability, third party bodily injury and property damage insurance and war risk protection and indemnity
insurance, in such amounts per occurrence as is currently available from the protection and indemnity associations that are members
of the International Group of P & I Clubs;
(iii) Workers
Compensation and Employers Liability insurance for each state in or from which the Vessel shall operate, if and as required by
law, and United States Longshore and Harbor Workers' Compensation Act insurance for statutory amounts;
(iv) A
separate policy of Mortgagee's Interest Insurance with Lender as the Named Insured with respect to loss of or damage to the Vessel
in an amount at least equal to one hundred twenty percent (120%) of the principal amount of the Advance that is outstanding from
time to time; and
(v) Insurance
as required by law, and insurance against any other risks to the Vessel or liabilities that could give rise to liens thereon as
from time to time required by Lender.
Borrower shall obtain and maintain all such insurances at its
own expense, and shall timely pay all premiums, dues, calls, assessments and other amounts and expenses thereunder, and issue or
procure all guaranties required by protection and indemnity associations with respect thereto. In the event Borrower fails to pay
such amounts, Lender shall have no responsibility to make any such payments, and no payment or undertaking to pay any such amounts
by Lender shall relieve the Borrower of its responsibility to make such payments or its responsibility under Section 7.2(c)
to reimburse Lender for all such amounts that Lender pays.
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(b) All
policies of insurance shall be maintained in forms approved by Lender, effected by an insurance broker approved by Lender, and
contain insuring covenants, deductible or franchise clauses, Lender clauses, and other terms and conditions satisfactory to Lender.
No policy shall be materially amended or terminated without obtaining the prior written consent of Lender. All policies, binders
and interim contracts of insurance shall provide for fourteen (14) days' prior written notice to be given to Lender by the underwriters
in the event of amendment or cancellation, except in the event of cancellation for nonpayment of premiums, in which event Lender
shall be furnished with not less than ten (10) days' notice of cancellation, and in the event of cancellation of war risk insurance,
in which event Lender shall be furnished with the same advance written notice of cancellation as the relevant policies shall provide
for notices to Borrower. Certifications of all insurances required hereunder, including certified copies of protection and indemnity
association certificates of entry shall be provided to Lender forthwith upon placement of all such insurances. Certified copies
of the originals of all policies, amendments, endorsements, letters of undertaking, binders and other interim insurance contracts
shall be deposited with Lender promptly upon placement thereof, and the originals thereof shall be furnished to Lender promptly
on request. Evidence of renewal of all insurances shall be furnished to Lender not less than fourteen (14) days prior to the expiration
of all of such insurances. Borrower shall furnish evidence satisfactory to Lender whenever it may require that all premiums, dues,
assessments and other charges with respect to the insurance required herein have been fully paid. At the option of Lender, and
without waiver of any default with respect thereto, any policies of insurance required herein and not timely obtained and properly
maintained by Borrower may be obtained and maintained by Lender at Borrower's expense.
(c) Borrower
shall provide to all underwriters of the insurances a Notice of Assignment, in form and substance satisfactory to Lender, which
shall be endorsed on all relevant polices and protection and indemnity association entries. All insurances shall name Lender as
an additional insured in addition to Borrower and as sole loss payee, pursuant to endorsements in substantially the form attached
to the aforementioned Notice of Assignment (including a customary protection and indemnity association letter of undertaking the
customary form issued by members of the International Group of P & I Clubs, except as to: (i) Mortgagee's Interest Insurance,
as to which Lender shall be the sole insured and sole loss payee, and (ii) the insurance required in Section 6.9(a)(iii)
and 6.9(a)(v). No assured or loss payees shall be added to any policy without obtaining the advance written consent of Lender.
All insurance required in Section 6.9 shall be endorsed to (i) waive the underwriters' rights of subrogation against
Lender, (ii) to provide that all such insurance is primary and non-contributory with respect to insurances placed by Lender,
and (iii) provide that Lender will not be responsible for premiums, calls, supplementary calls or similar payments. Concurrently
with each placement and, not more than fourteen (14) days before expiration of an insurance coverage that is required herein, renewal
or replacement of that insurance, Borrower shall provide to Lender a Brokers Opinion Letter, in form and substance satisfactory
to Lender, confirming that the insurance placed by such broker conforms to the insurance requirements herein in a customary form
reasonably acceptable to Lender.
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(d) In
the event of an actual total loss, a constructive total loss, or a compromised, agreed, or arranged total loss of the Vessel, Lender
shall apply insurance payments received on account of such loss as provided in Section 17 of the Bulk Beothuk Mortgage. Lender
shall have the sole right to tender abandonment of the Vessel to its underwriters on behalf of itself and Borrower. If there has
not occurred and there is not continuing an Event of Default at the time of tender of payment by the underwriters, in the event
of any other loss payable in an amount less than $500,000.00 under any hull and machinery insurance, war risk hull and machinery
insurance, or other insurance in respect of loss of or damage to the Vessel or any of its appurtenances, or sue and labor expenses
or defense costs insured thereunder, Lender shall instruct the underwriters to pay directly for the covered repairs, replacements,
expenses, or costs, or to reimburse Borrower or Lender therefor. If there has not occurred and there is not continuing an Event
of Default, and the Vessel is not an actual total loss, a constructive total loss, or a compromised, agreed, or arranged total
loss, in the event of any other loss payable in an amount equal to or greater than $500,000.00 under any hull and machinery insurance,
or war risk hull and machinery insurance, or increased value insurance in respect of loss of or damage to the Vessel or any of
its appurtenances, or sue and labor expenses or defense costs insured thereunder, in the exercise of its sole discretion, Lender
shall either instruct the underwriters to pay directly for the covered repairs, replacements, or sue and labor expenses or defense
costs insured thereunder or to reimburse Borrower or Lender therefor, or Lender may receive all such insurance proceeds and use
them to pay directly for the repairs, replacements, or sue and labor expenses or defense costs insured thereunder, or to reimburse
Borrower or Lender therefor. All claims for unrepaired damage shall be paid to Lender, which shall apply them as provided in Section
17 of the Bulk Beothuk Mortgage. In the event of any loss payable under any hull and machinery insurance, war risk hull and machinery
insurance, or increased value insurance not provided for above in this Section 6.9(d), in the exercise of it is sole discretion,
Lender may instruct the underwriters to pay directly for the covered repairs, replacements, expenses, or costs, or to reimburse
Borrower therefor, or Lender may, in the exercise of its sole discretion, receive all such insurance proceeds defray its own covered
expenses and apply the balance as provided in Section 17 of the Bulk Beothuk Mortgage. For the purpose of this clause, all hull
and machinery, war risk hull and machinery, and increased value insurance proceeds payable with respect to an occurrence and its
consequences shall be deemed to be proceeds of a single loss event.
(e) In
the event that insurance moneys become due under any protection and indemnity insurance or other liability insurance coverage,
including coverage for salvage, general average, or other liabilities covered by the relevant hull insurance policy, if there has
not occurred and there is not continuing an Event of Default at the time of tender of payment by the underwriters or protection
and indemnity association, Lender shall instruct the underwriters to pay Borrower such insurance proceeds as may be due to Borrower
on account of any liability covered by such insurance if Borrower has already paid the liability, or to pay the party in respect
of whom the liability was incurred, in exchange for an appropriate release of liability with respect thereto. At such time of tender
of payment, if an Event of Default has occurred and is continuing in the exercise of Lender's sole discretion and in lieu of the
foregoing, Lender shall be entitled to receive such insurance proceeds and may apply the proceeds thereof toward the discharge
or indemnification or reimbursement for the payment of the relevant liability, and the balance of the proceeds shall be applied
as provided in Section 17 of the Bulk Beothuk Mortgage.
(f) Borrower
shall promptly file all required and customary proofs of loss and claims under all insurances, and on any failure by Borrower to
do so, Lender may do so on its and Borrower's behalf, and is hereby irrevocably appointed as Borrower's attorney-in-fact, coupled
with an interest, to do so.
(g) In
the event the Vessel is Seized, Lender may, in lieu of the foregoing Sections 6.9(d) and (e), in the exercise of its sole
discretion, agree with any surety executing a surety bond releasing the Vessel from such attachment or arrest to hold for the benefit
of such surety any or all insurance proceeds under the policies of insurance on the Vessel as collateral security to indemnify
such surety against liability under such bond.
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(h) Borrower
shall not do any act or voluntarily suffer or permit any act to be done whereby any insurance shall or may be impaired, suspended,
or canceled, and shall not suffer or permit the Vessel to engage in any voyage or to engage in any trade or activity not permitted
under the policies of insurance at the time in effect without first covering the Vessel for such voyage, trade or activity with
insurances of the types, obtained from underwriters, and in the forms and amounts herein required.
(i) The
acquiescence by Lender in any noncompliance in the placement of insurance in one or more instances shall not establish a consent
or course of dealing with respect to such noncompliance in any other instances.
6.10
No
Charters to Prohibited Persons
. Borrower and Guarantors covenant and agree that the Vessel will not (a) be chartered to a Prohibited
Person, (b) make voyages to or from any Prohibited Country, and (c) be allowed to carry cargo from or destined to a Prohibited
Country.
6.11
Payment
of Charter Hire and Vessel Revenues
. Borrower and Guarantors shall procure that (a) all charter hire under the Cargill Charter
and all revenues earned by Phoenix from third parties for the employment of the Vessel shall be deposited into the Allseas Cash
Deposit Account, and (b) all such amounts deposited into the Allseas Cash Deposit Account with respect to the Vessel shall be retained
therein with the exception of (i) amounts necessary to pay customary voyage expenses incurred in the ordinary course of business
of the Vessel, and (ii) any amount equal to charter hire due under the Time Charter which shall be transferred to the Bulk Beothuk
Hire Account, such amount to be deemed payment of charter hire under the Sub-Time Charter, (x) for use in connection with the Vessel
and its operations in the ordinary course of business, and for no other purpose, and (y) any amounts due to Lender under this Agreement.
ARTICLE
VII
DEFAULT AND REMEDIES
7.1
Default
.
The occurrence of each of the following shall constitute an "
Event of Default
" as such term is used in this Agreement:
(a) Borrower
fails to make any payment of principal, interest or any other amount, as and when it becomes due to Lender under the Loan Documents,
including the Commitment Fee;
(b) any
representation or warranty made or to be made by Borrower or any other Person (other than Lender) in any Loan Document was false
or incorrect in any material respect when made or deemed made under the provisions of any Loan Document;
(c) any
of the Loan Documents, for any reason, cease to be in full force and effect or are declared to be null and void; or any Person
other than Lender that has executed a Loan Document denies that it has any or further liability or obligation under any Loan Document
which it has executed (or any provisions thereof) before full performance of all obligations thereunder;
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(d) a
Credit Party, Phoenix, or Allseas: (i) applies for or consents to or becomes subject to the appointment of a receiver, trustee
or liquidator of itself, or of all or any part of its assets, or any Collateral, or becomes subject to an administration order,
(ii) makes a general assignment for the benefit of creditors, (iii) becomes or is adjudicated insolvent, (iv) commences
any Debtor Relief Proceeding in any jurisdiction, (v) becomes subject to any involuntary Debtor Relief Proceeding in any jurisdiction
and such proceeding is not dismissed within sixty (60) days after it is commenced, (vi) enters into an arrangement with a
group of creditors for the restructuring of its obligations, (vii) shall fail to pay its debts generally as they become due,
(viii) if a corporation, limited liability company, or partnership, merges or consolidates with any Person, (ix) commences
a dissolution or liquidation proceeding or is dissolved or liquidates, (x) becomes the subject of any involuntary dissolution
or liquidation proceeding and any such proceeding is not dismissed within sixty (60) days after it is commenced, (xi) commences,
agrees to or is or becomes subject to any action taken for the purpose of effectuating any of the foregoing, (xii) changes
its name, and (xiii) if a corporation, limited liability company, or partnership, reorganizes, reclassifies or recapitalizes
its capital stock or any membership or partnership interests in it;
(e) the
shareholders, directors, or members of any Credit Party, Phoenix or Allseas adopt a resolution authorizing or approving of any
of the actions described in Section 7.1(d) with respect to a Credit Party;
(f) Borrower issues, redeems, purchases,
retires or otherwise acquires any shares of any class of any Equity Interest in itself, enters into any subscription agreement
or other agreement for the issuance of any shares in itself, or grants or issues any warrant, right or option pertaining thereto,
or incurs any debt or obligations or issues any security that is convertible into any of the foregoing;
(g) any
judgment shall be entered against a Credit Party, Phoenix, or Allseas in a Material amount that is not covered by liability insurance
with a deductible clause that has been approved by Lender in writing, and such judgment is not effectively stayed and remains undischarged
and unbonded for thirty (30) days;
(h) without
Lender's prior written consent any change shall occur in the legal structure of a Credit Party, Phoenix, or Allseas;
(i) (x)
a Credit Party, Phoenix or Allseas is or becomes in default under any loan agreement, promissory note, guaranty or other instrument
or agreement (or of any guarantee of the foregoing) with or in favor of Lender or any Affiliate of Lender; (y) or any Indebtedness
the original principal amount of which is in excess of $500,000 of a Credit Party (or that is guaranteed by a Credit Party) with
or in favor of an entity who is not Lender or an Affiliate of Lender is not paid in full when due, whether on maturity, upon acceleration,
or otherwise; (z) or Borrower or a Guarantor is or becomes in default under any preferred or other mortgage, deed of trust, assignment,
or other security agreement that secures any of its obligations with respect to any of the foregoing;
(j) any
other Indebtedness of a Credit Party, Phoenix or Allseas that is not subject to Section 7.1(i) in any Material amount is or
becomes due prematurely by reason of default; Borrower fails to make any Material payment thereunder on or before the due date
for such payment; or the security for any obligation of Borrower or a Guarantor, or any security therefor, becomes enforceable
against any Collateral or against a Material amount of any of its assets;
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(k) without
the written consent of the Lender (i) Claus Boggild does not own at least sixty-seven percent (67%) of the Equity Interest
in, and hold at least sixty-seven percent (67%) of the voting power in Lagoa Investments Ltd., and Edward Coll, Anthony Laura,
and Lagoa Investments Ltd. do not collectively own at least fifty-one percent (51%) of the Equity Interest in, and hold at least
fifty-one percent (51%) of the voting power in Holding Company; (ii) Holding Company does not own all of the Equity Interest
in and hold all of the voting power in Bulk Partners Holding Company Bermuda Ltd, a Bermuda company; (iii) Pledgor does
not own all of the Equity Interest in and hold all of the voting power in Borrower; and (iv) Holding Company does not, directly
or indirectly, own all of the Equity Interest in and hold all of the voting power in Charterer and Allseas;
provided,
the
death of any of Claus Boggild, Anthony Laura or Edward Coll shall not cause an Event of Default under this Section 7.1(k)
if there is not an Event of Default outstanding or that results therefrom under Section 7.1(l);
(l) any
of Claus Boggild, Anthony Laura, or Edward Coll becomes sufficiently disabled that he or they cannot effectively participate in
the management of Holding Company, or dies, and at least one of them, or two of them collectively, who are alive and not so disabled,
does not hold voting control over fifty-one percent (51%) of the shares of Holding Company;
(m) any
judicial or nonjudicial foreclosure of or other realization upon any pledge or assignment of, or other security interest in, or
other encumbrance of any shares of the capital stock of Borrower shall be commenced or occur;
(n) any
of the Time Charter, Sub-Time Charter, Technical Management Agreement, or Commercial Management Agreement have been or are assigned,
assumed, amended, renewed, replaced, or otherwise modified, or terminated without the prior written consent of Lender;
(o) a
material default by (x) Borrower occurs under any of the Time Charter, Cargill Charter, Technical Management Agreement, or Commercial
Management Agreement, (y) by Charterer under the Sub-Time Charter, or (z) any such contract is terminated prematurely;
(p) Any
party defaults under the Funds Deposit Agreement or any Manager's Undertaking;
(q) any
of Credit Parties or their Subsidiaries has a fiscal year-end that does not end on December 31;
(r) the
Vessel, the BULK CAJUN or the BULK DISCOVERY becomes subject to a Seizure and is not released therefrom within thirty (30) days
thereafter in the manner required in the applicable mortgage or mortgages granted by Borrower, Bulk Cajun or Bulk Discovery;
(s) the
Vessel, the BULK CAJUN or the BULK DISCOVERY becomes an actual total loss, or a constructive, compromised, arranged, or agreed
total loss, or there is a Requisition of the Vessel, and the Obligations are not paid in full and the balance of the proceeds,
if any, is not applied to the Bulk Cajun Obligations and/or the Bulk Discovery Obligations, within one hundred twenty (120) days
thereafter;
(t) any
Permit required in Section 4.19 or 5.15 is materially modified, becomes invalid, or is terminated;
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(u) the
occurrence of illegal activity which in the opinion of the Lender caused the forfeiture of or which subjects to forfeiture the
Vessel or any other Collateral;
(v) the
Vessel or other Collateral is placed in danger of being seriously damaged or becoming a total loss and is not removed from such
danger by Borrower forthwith;
(w) Pledgor
does not or shall not have good and marketable title to all of the shares of the Equity Interest in Borrower, and all Collateral
related thereto, and does not have or shall not hereafter retain good and marketable title thereto, subject to no Encumbrances
except Permitted Encumbrances;
(x) Allseas
does not or shall not have good and marketable title to the deposit account described in the Allseas Charge Over Cash Deposit,
and all Collateral related thereto, and does not have or shall not hereafter retain good and marketable title thereto, subject
to no Encumbrances except Permitted Encumbrances;
(y) Borrower
does not or shall not have good and marketable title to the deposit account described in the Borrower Charge Over Bulk Beothuk
Hire Account, and all Collateral related thereto, and does not have or shall not hereafter retain good and marketable title thereto,
subject to no Encumbrances except Permitted Encumbrances;
(z) without
Lender's prior written consent, all hire owed by Charterer to Borrower or by any sub-charterer from Charterer, as the case may
be, is not fully and timely paid into the Bulk Beothuk Hire Account;
(aa) the
Bulk Beothuk Mortgage is not registered with the Marshall Islands Registry such that it is and continues to be a duly perfected
mortgage and maritime lien under the laws of the Republic of the Marshall Islands, and creates a preferred mortgage on the Vessel
(as the term "preferred Mortgage" is defined at 46 U.S.C. § 31301(6)(B));
(bb) the
amendments to the Bulk Discovery Mortgage (as described in Section 3.1(k) hereof) and the Bulk Cajun Mortgage (as described in
Section 3.1(l) hereof) are not provisionally registered within (5) business days after the date hereof or within 120 days after
the date hereof permanently registered at the Panamanian Public Registry, such that they are and continue to be duly perfected
mortgages and maritime liens under the laws of the Republic of Panama, and create preferred mortgages on the BULK CAJUN or the
BULK DISCOVERY (as the term "preferred mortgage" is defined at 46 U.S.C. § 31301(6)(B)) and duly secure
all obligations under the Cross-Collateral Guaranty;
(cc) the
amendments to the Bulk Discovery Loan Documents and the Bulk Cajun Loan Documents are not entered into as required under Sections
3.1(k)(iii) and 3.1(l)(iii) hereof;
(dd) in a manner which is not otherwise specifically referenced in this Section 7.1, Borrower from time to time breaches or fails
to perform or observe any term, covenant or agreement contained in the Loan Documents, is or becomes in default thereunder, or
any further event of default occurs under any of the Loan Documents;
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(ee) any
amount due under the Cross-Collateral Guaranty is not paid on the date due in accordance with the terms of the Cross-Collateral
Guaranty or any Event of Default occurs under the Bulk Discovery Loan Documents or the Bulk Cajun Loan Documents.
7.2
Remedies
.
(a) Upon
the occurrence of:
(i) an
Event of Default constituting a default with respect to a payment of principal, interest, fees, expenses, or any other sum which
is payable to Lender, including but not limited to, any amount payable to Lender under the Cross-Collateral Guaranty, which continues
for longer than three (3) days after payment is due;
(ii) an
Event of Default consisting of: (A) a breach of an obligation with respect to obtaining or maintaining required insurance
or providing reasonable and prompt verification thereof, (B) an Event of Default with respect to Sections 5.4(vii), (viii),
(ix), 5.10, 6.3, 6.8, or 8.6, (C) an Event of Default described in Sections 7.1(d), (g), (h), (l), (m), (n), (p), (r),
(t), (u), (x), (y), (z), or (ee), (D) an Event of Default which, by its nature, is not capable of being fully remedied so
as to provide to Lender the practical benefits to which it or they are entitled under any of the Loan Documents with respect to
such Event of Default; or (E) an Event of Default which occurs with the knowledge of a Borrower as to which a notice required
to be given to Lender is not timely given; or
(iii) any
other Event of Default not specified in subsections (i) or (ii) above which is not fully remedied to the satisfaction of the Lender
within ten (10) days after it occurs,
Lender shall enjoy all rights, powers, and remedies which may
arise under the Loan Documents, or otherwise existing or arising by agreement, at law, in equity or in admiralty, including the
following: Lender may deem the principal of the Advance, interest thereon, and all other amounts then owing, accrued or accruing
with respect to the Advance immediately due and payable, and Lender may exercise all such rights, powers and remedies, without
presentments, demands, protests, or notices of any kind, all of which are hereby expressly waived by Borrower,
provided,
that in the event of an actual or deemed entry of an order for relief with respect to Borrower under the United States Bankruptcy
Code, as amended, the Obligations automatically shall become and be due and payable, without presentment, demand, protest or any
notice of any kind, all of which are hereby expressly waived by Borrower.
(b) All
rights, powers and authority granted to the Lender in any Loan Document may be exercised on its behalf by any agents or representatives
it appoints from time to time.
(c) On
the occurrence of an Event of Default Lender may, in its discretion, do any act or make any expenditures necessary to remedy such
default or preserve the value of or protect the Collateral, including entering the Vessel to make repairs, purchasing insurance,
discharging Encumbrances, or defending any lawsuit against the Vessel, and Borrower shall promptly reimburse Lender for all such
expenses, with interest at the Interest Rate or Default Rate, as in effect from time to time, for any and all expenditures so made
or incurred, and until Borrower has so reimbursed Lender for such expenditures; but Lender, though privileged so to do, shall be
under no obligation to Borrower to make any such expenditures nor shall the making thereof relieve Borrower of any default in that
respect.
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(d) The
rights, powers, and remedies provided in the Loan Documents or otherwise existing or arising by agreement, at law, in equity or
in admiralty, or otherwise, are cumulative. All rights, powers, and remedies may be exercised, in whole or in part, from time to
time, as often, and in any order as Lender chooses, and the exercise or the beginning of the exercise of any right, power, or remedy
shall not be construed to be an election of rights, powers, or remedies, or a waiver of the right to exercise at the same time
or thereafter any other right, power, or remedy. No delay or omission by Lender in the exercise of any right, power, or remedy
accruing upon any Event of Default shall impair any such right, power, or remedy or be construed to be a waiver of any right to
take advantage of any such future event or of any such past Default or Event of Default. In case Lender proceeds to enforce any
right, power, or remedy, and such enforcement is discontinued or abandoned for any reason or is determined adversely to Lender,
in whole or in part, then, and in any such case, at the option of Lender, in the exercise of its sole discretion, the relevant
parties shall be restored to their former positions and rights, all rights, powers, and remedies of Lender shall continue as if
no such proceedings had been taken and nothing shall be construed to be a waiver of any right, power, or remedy of Lender. The
acceptance by Lender of any security or any payment of or on account of the Obligations maturing after any Event of Default or
any payment on account of any past default shall not be construed to be a waiver of any right of Lender to take advantage of any
future Event of Default or of any past Event of Default not completely cured thereby. Each Encumbrance that exists or is granted
or otherwise arises pursuant to the Loan Documents is cumulative and not in lieu of any other such Encumbrances.
7.3
Legal
Actions
. All judicial actions by any party to enforce any provision of any or all of the Loan Documents shall, if requested
by Lender, be brought in or transferred to the United States District Court for the Southern District of New York or the state
courts of general jurisdiction sitting in the County of New York in the State of New York, or in the jurisdiction where relevant
Collateral is located or subject to
in rem
or
quasi in rem
proceedings from time to time. Borrower and the Guarantors
consent to the jurisdiction of all such courts over them under or in connection with this Agreement, the Bulk Cajun Loan Agreement
or the Bulk Discovery Loan Agreement, and hereby irrevocably waive any objection, including any objection to the laying of venue
or based on the grounds of forum non conveniens, which they may now or hereafter have to the bringing of any such action or proceeding
in such respective jurisdictions.
BORROWER AND GUARANTORS WAIVE THE RIGHT TO TRIAL BY JURY IN
EVERY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO THE LOAN DOCUMENTS, THE BULK CAJUN LOAN
DOCUMENTS AND THE BULK DISCOVERY LOAN DOCUMENTS. BORROWER AND GUARANTORS ACKNOWLEDGE THAT THE FOREGOING WAIVER IS A MATERIAL INDUCEMENT
TO LENDER ENTERING INTO THIS AGREEMENT AND THAT LENDER IS RELYING UPON THE FOREGOING WAIVER IN ITS DEALINGS WITH BORROWER AND GUARANTORS.
BORROWER AND GUARANTORS REPRESENT AND WARRANT THAT THEY HAVE REVIEWED, OR HAVE HAD THE OPPORTUNITY TO REVIEW, THE FOREGOING WAIVER
WITH THEIR LEGAL COUNSEL AND HAVE KNOWINGLY AND VOLUNTARILY WAIVED THEIR JURY TRIAL RIGHTS FOLLOWING CONSULTATION, OR THE OPPORTUNITY
TO CONSULT, WITH SUCH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL WITHOUT
A JURY BY THE COURT. BORROWER AND GUARANTORS HEREBY CERTIFY THAT NO REPRESENTATIVE OR AGENT OF LENDER, OR COUNSEL TO LENDER, HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT LENDER WOULD NOT, IN THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT
TO JURY TRIAL PROVISION.
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7.4
Service
of Process
. Service of process may be made on Borrower or Guarantors by mailing or delivering a copy of such process to the
Borrower or Guarantors in care of the Process Agent at the Process Agent's address specified in the Process Agent Appointment,
or to any new address of the Process Agent of which Lender becomes aware. Borrower and Guarantors hereby irrevocably authorize
and direct the Process Agent to accept such service on their behalf at such addresses. Process Agent is at liberty to change its
address to another address in the United States, but Lender is permitted to effect service upon Borrower and Guarantors by service
by mail or by service on any person of suitable age and discretion at the last address for Process Agent known by Lender at the
time. Not later than fifteen (15) days before the appointment of Process Agent is terminated for any reason, Borrower and Guarantors
shall appoint a successor that has an address in the United States and deliver to Lender a written acceptance of appointment of
a substitute process agent that contains an agreement in writing to give Lender not less than thirty (30) days' advance written
notice of any change of its address or any termination of its appointment (delivered to Lender's address specified in, or changed
as provided in Section 9.4 hereof). As an alternative method of service, the Borrower and Guarantors also irrevocably consent
to the service of any and all process, postage prepaid, in any such action or proceeding by mailing a copy of such process to the
Borrower and Guarantors at their addresses identified in or in accordance with Section 9.4. Nothing herein shall affect the
right to serve process in any manner permitted by law. The provisions of this section apply equally to process related to the Loan
Documents and to process related to the Bulk Cajun Loan Documents and the Bulk Discovery Loan Documents.
7.5
Judgment
.
If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder in any currency (the "
Original
Currency
") into another currency (the "
Other Currency
") the parties hereto agree, to the fullest extent
that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures
the Lender could purchase the Original Currency with the Other Currency in New York City on the second Business Day preceding that
on which final judgment is given. Upon receipt of payment in the Other Currency of the amount of such judgment, the Lender shall
convert such amount into the Original Currency on or as of the next Business Day in accordance with normal banking procedures.
If the amount is so converted at or as of that time is insufficient to discharge the entire amount (including accrued interest),
denominated in the Original Currency, that would be owing at the time to the Lender had no judgment been entered or fixed in the
Other Currency, the Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify Lender against
such loss.
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7.6
Right
of Set-Off
. Upon the occurrence and during the continuance of any Event of Default, Lender is hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits and investments (general
or special, time or demand, provisional or final) at any time held in any accounts, and other indebtedness at any time owed by
Lender, to or for the credit or the account of any Borrower or any Guarantor, against any or all of the obligations of the relevant
Borrower or Guarantor now or hereafter existing in favor of Lender, whether or not Lender shall have given any notice or made any
demand to the relevant Borrower or Guarantor, and although such obligations of the relevant Borrower or Guarantor may be unmatured.
Lender agrees to mail or transmit notice to the relevant Borrower or Guarantor on the day of each such set-off and application
made by Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application, nor
shall such failure subject Lender to any liability. The rights of Lender under this Section are in addition to other rights, powers,
and remedies (including, without limitation, other rights of set-off) which Lender may have.
ARTICLE
VIII
CONTINUING GUARANTY
8.1
Guaranty
.
Each Guarantor hereby unconditionally and irrevocably guarantees, as its separate and independent obligation, as principal obligor,
and not merely as a surety, the punctual payment and performance when due, whether at stated maturity, by acceleration, or otherwise,
of the Obligations. The obligations of each Guarantor and the Borrower are joint and several.
8.2
Guaranty
Absolute
. Each Guarantor guarantees that the Obligations shall be paid and performed strictly in accordance with the terms
of the Loan Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any
of such terms or the rights, powers, or remedies of Lender with respect thereto. This is a guaranty of payment, and not just of
collection. The liability of each Guarantor under this Agreement for the Obligations or otherwise shall be absolute and unconditional
irrespective of one or more of: (a) any lack of validity or enforceability of any Loan Document or any provision thereof;
(b) any change in the time, manner or place of payment of, or in any other term of, any or all of the Obligations; (c) any
waiver, termination, renewal, replacement, amendment or other modification of, or any consent to any departure from, any Loan Document
or any provision thereof; (d) any taking, exchange, release or non-perfection of any real or personal property security for
any or all of the Obligations; (e) any taking, waiver, release, amendment or other modification of, or any consent to departure
from, any other guaranty of or liability for any or all of the Obligations; (f) any manner of sale or other disposition of
any real or personal property security for any or all of the Obligations; (g) any manner of application of any real or personal
property security, or any proceeds of any such security, to any or all of the Obligations; (h) any change, restructuring or
termination of the structure or existence of Borrower, any other guarantor or other obligor, or any other Person; or (i) any
other circumstance (other than payment and performance of the Obligations in full) that might otherwise constitute a suretyship
or other defense available to either Guarantor. Each Guarantor acknowledges that it has received copies of the Loan Documents now
in existence, and has reviewed them to its satisfaction.
8.3
Waiver
.
With the exception of notices to which it is expressly entitled under applicable agreements, each Guarantor hereby waives its rights,
if any, to any notices of acceptance and any other notices with respect to any of the Obligations or this Agreement, and waives
all requirements that Lender protect, secure, perfect or insure any real or personal property security for any or all of the Obligations,
or any property subject thereto, or exhaust any right or take any action against Borrower or any other Person, or any security,
or Collateral. Lender shall have no obligation to marshal any present or future Collateral security for any of the Obligations
or to resort to any such Collateral security in any order.
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8.4
Subrogation
.
Each Guarantor shall not exercise any rights which it may acquire by way of subrogation under this Agreement, by any payment made
hereunder or otherwise, until all the Obligations shall have been paid and performed in full. If any amount shall be paid to a
Guarantor on account of such subrogation rights at any time when all the Obligations shall not have been paid and performed in
full, such amount shall be held in trust for the benefit of Lender and shall forthwith be paid to Lender to be credited and applied
to the Obligations, whether matured or unmatured, in accordance with Section 2.3.
8.5
Holding
Company Indemnification
. Holding Company shall indemnify and hold harmless Charterer from and against any and all liabilities
claims, actions, suits, judgments, costs, disbursements and expenses (including reasonable fees and expenses of legal counsel related
thereto) of any kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against Charterer as a result
of Charterer's obligations under this Article.
8.6
Subordination
.
(a) Neither
Guarantor shall make any loans or advances to Borrower, and Holding Company shall ensure that no Subsidiaries thereof shall make
any loans or advances to Borrower, in each case other than equity investments of capital. All Indebtedness of Borrower to each
Guarantor whether now existing or hereafter arising (the "
Subordinated Debt
") is hereby subordinated to full payment
and performance of the Obligations, and until then, Borrower shall not make, and neither Guarantor shall, without the prior written
consent from Lender (granted or withheld in the exercise of its sole discretion) accept any payment of an Indebtedness from Borrower.
All Encumbrances that either Guarantor may have or that would otherwise arise against any assets of Borrower, Bulk Cajun or Bulk
Discovery, including for any breach of the Time Charter, the Sub-Time Charter or the Cargill Charter, are hereby irrevocably subordinated
to the liens of the Bulk Beothuk Mortgage and the other security granted in the Loan Documents, and the liens of the Bulk Discovery
Mortgage, the Bulk Cajun Mortgage, and the other security granted for the obligations secured by each of them (the "
Subordinated
Liens
").
(b) Unless
otherwise permitted pursuant to this Agreement, all payments or distributions upon or with respect to the Subordinated Debt or
obligations secured by Subordinated Liens, including from Bankruptcy or Other Proceedings pertaining to any of them, whether through
payment, subrogation, or otherwise, shall be received in trust for the benefit of Lender, shall be segregated from other funds
and assets held by the recipient, and shall be forthwith paid to the Lender in the same form in which it was received (with any
necessary endorsement) to be applied (in the case of cash) to the Obligations in accordance with Section 2.3, or received
as collateral (in the case of non-cash property or securities) as security for, the payment of the Obligations, to be foreclosed
upon in the occurrence of an Event of Default as permitted by law.
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(c) If
any Bankruptcy or Other Proceeding is commenced by or against or otherwise occurs with respect to Borrower, any member or shareholder
of Borrower, any Person of which Borrower is a partner, joint venturer, or member, or any Subsidiary of Borrower, this Agreement
shall remain in effect, and Lender is hereby irrevocably authorized (in its own name or in the name of Holding Company or Charterer,
as the case may be), but shall have no obligation, to demand, sue for, collect, and receive every payment or distribution that
results from a Bankruptcy or Other Proceeding on account of any Subordinated Debt or obligations secured by Subordinated Liens,
and to give acquittance therefor, file claims and proofs of claim, and take such other action with respect thereto (including voting
the Subordinated Debt or obligations secured by Subordinated Liens, enforcing security therefor, and compromising claims therefor)
as it may deem necessary or advisable for the exercise or enforcement of any of the rights, powers, and remedies of the Lender
hereunder.
(d) For
so long as any of the Obligations remain outstanding the Guarantors shall duly and promptly take or refrain from taking such action
as the Lender may reasonably require: (i) unless otherwise permitted pursuant to this Agreement, to collect the Subordinated
Debt and obligations secured by Subordinated Liens and remit the proceeds thereof to Lender, file appropriate claims and proofs
of claim in respect of the Subordinated Debt or obligations secured by Subordinated Liens, (ii) to execute and deliver to
the Lender such powers of attorney, assignments, and other instruments as the Lender may require in order to enable the Lender
to enforce any or all claims with respect to, and security for, the Subordinated Debt and obligations secured by Subordinated Liens,
and (iii) to collect and receive all payments and distributions that may be payable or deliverable upon or with respect to
the Subordinated Debt and obligations secured by Subordinated Liens.
(e) For
so long as any of the Advance remains outstanding Guarantors shall not, without the prior written consent of Lender: (i) accelerate
or demand payment of any of the Subordinated Debt or obligations secured by Subordinated Liens; (ii) commence any legal proceedings
or arbitration proceedings to collect any of the Subordinated Debt or obligations secured by Subordinated Liens, (iii) exercise
any rights, powers, or remedies with respect to collection of the Subordinated Debt or obligations secured by Subordinated Liens;
(iv) cooperate with or stipulate to the commencement or continuation of any Bankruptcy or Other Proceeding with respect to
Borrower or any of its assets, (v) assist the Borrower with respect to any Bankruptcy or Other Proceedings pertaining to the
Borrower, or (vi) assign, transfer, or subject to an Encumbrance any Subordinated Debt or obligations secured by Subordinated
Liens.
(f) Borrower
shall not make any payment of any of the Subordinated Debt or obligations secured by Subordinated Liens without the written consent
of Lender previously obtained, which may be granted or withheld by Lender in the exercise of its sole discretion. None of the Subordinated
Debt or obligations secured by Subordinated Liens (or any agreements, instruments, or other evidence thereof) shall be amended
in a manner that would have an adverse effect on the rights, powers, or remedies of Lender under this Agreement. Borrower and Guarantors
agree to refrain from all acts which are in any way inconsistent with this Agreement or the rights of Lender hereunder. Borrower
and Guarantors agree to perform all further acts reasonably necessary to give full effect to this Agreement.
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(g) Guarantors
waive the right to assert the doctrine of marshalling of assets against the Lender.
(h) Each
Guarantor re-confirms its respective guaranties granted in favor of the Lender as set forth in Article VIII of the Bulk Discovery
Loan Agreement or Article VIII of the Bulk Cajun Loan Agreement, as the case may be.
ARTICLE
IX
MISCELLANEOUS
9.1
Loan
Documents, Administration and Collection Expenses
.Borrower shall pay or reimburse Lender for the preparation, negotiation and
execution of the Loan Documents (subject to the provisions of Section 3.1(m)(ii)), and all waivers under and amendments thereto
from time to time, and the reasonable fees and expenses of counsel for Lender in connection therewith, whether Borrower satisfies
the conditions precedent contained in Article III or not. Borrower shall pay or reimburse Lender for all costs and other expenses
incurred in connection with the drafting, negotiation, execution, delivery, filing, or recording of the Loan Documents, or the
enforcement, attempted enforcement, or preservation of any rights, powers, or remedies under the Loan Documents (including all
such costs and expenses incurred during any "workout" or restructuring in respect of the Obligations and during legal
proceedings, including Bankruptcy or Other Proceedings), and including all the reasonable fees and expenses of legal counsel. The
foregoing costs and expenses shall include all search, filing, recording, title insurance and appraisal charges and fees and stamp
and other taxes related thereto, and other out-of-pocket expenses incurred by Lender, and the cost of independent public accountants
and other outside experts retained by Lender.
9.2
Indemnification
.
Whether or not the transactions contemplated herein are consummated, Borrower shall indemnify and hold harmless Lender and its
Affiliates, directors, officers, employees, counsel, agents and attorneys-in-fact (collectively, the "
Indemnitee
")
from and against any and all liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits,
costs, disbursements and expenses (including reasonable fees and expenses of legal counsel related thereto) of any kind or nature
whatsoever which may at any time be imposed on, incurred by or asserted against any such Indemnitee in any way relating to or arising
out of or in connection with (a) the drafting, negotiation, execution, delivery, filing, recording, enforcement, performance
or administration of any Loan Document or any other document delivered in connection with the transactions contemplated thereby,
or the consummation of the transactions contemplated thereby, (b) the Advance or the use or proposed use of the proceeds thereof,
(c) the ownership and operation of the business and assets of Borrower, including if any assertion is made that Borrower,
any Indemnitee, or any other Persons were negligent with respect thereto, (d) any actual or alleged presence or release of
Hazardous Materials on or from any personal or real property currently or formerly owned or operated by Borrower or for its account,
or any Environmental Liability related in any way to Borrower or any of the Collateral, or (e) any actual or prospective claim,
litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort, strict liability, or
any other theory (including any investigation of, preparation for, or defense of any pending or threatened claim, litigation, investigation,
or proceeding) and regardless of whether any Indemnitee is a party thereto, in all cases, whether or not caused by or arising,
in whole or in part, out of the negligence of the Indemnitee; provided that such indemnity shall not, as to any Indemnitee, be
available to the extent that such liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits,
costs, disbursements and expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have
resulted primarily from the fraud, gross negligence or willful misconduct of an Indemnitee. The agreements in this Section shall
survive the performance of all the Obligations and termination of this Agreement.
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9.3
Amendments
and Waivers
. No amendment, modification, termination, or waiver of any provision of any of the Loan Documents, nor consent
to any departure therefrom, shall be effective unless the same shall be in writing and signed by Lender. Waivers or consents shall
be effective only in the specific instances and for the specific purposes for which they are given. The Loan Documents shall not
be deemed amended, qualified, or supplemented by any course of dealing. No notice to or demand on any Person in any instance shall
entitle any Person to any other or further notice or demand in similar or other circumstances.
9.4
Notices
.
All notices, requests, demands, directions and other communications between parties hereto shall be in writing and delivered by
hand, sent by overnight courier, or by facsimile, or mailed by certified mail, return receipt requested (postage prepaid), to the
applicable party at the addresses indicated below:
If to a Credit Party (and Allseas and Phoenix):
c/o Phoenix Bulk Carriers (US) LLC
(as agent)
109 Long Wharf, 2
nd
Floor
Newport, RI 02840
United States
Attn: Mr. Anthony Laura
Facsimile No.: (401) 846-1520
|
|
If to Lender:
|
GATX Corporation
|
580 California Street, Suite 1100
San Francisco, CA 94104
Attn: Contracts Administration
Facsimile No.: 415-955-3416
or, as to each party, at such other address as shall be designated
by such party on written notice to the other party otherwise complying as to form and delivery with terms of this paragraph. All
such notices, requests, demands, directions and other communications shall be effective on actual delivery, or, when mailed, shall
be effective on the third calendar day after being deposited in the U.S. mail, or, when sent by overnight courier, on the next
business day after being delivered to such overnight courier, or when transmitted by fax, shall be effective on transmission with
confirmed receipt of transmission, respectively.
9.5
Governing
Law
. The validity, performance, construction, interpretation, and effect of this Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York (excluding its laws relating to conflicts of law except for Sections
5-1401 and 5-1402 of the General Obligation Laws of New York), except as the same may be governed by the federal law of the United
States.
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9.6
Severability
.
If any provision of this Agreement, or the application to any circumstance, person or place, is held to be unenforceable, invalid
or void by a court or other tribunal of competent jurisdiction, such provision shall be severed therefrom or shall be reformed
only to the extent necessary to be enforceable to such circumstance, person or place; and such provision as applied to other circumstances,
persons or places, and the remainder of this Agreement, shall remain in full force and effect.
9.7
Assignment
.
No assignment, delegation or other transfer of this Agreement, in whole or in part, directly or indirectly, whether voluntarily,
involuntarily or by operation of law, or of any rights and obligations under this Agreement can be made by any party other than
Lender, without the prior written consent of the other party, which consent can be withheld in the exercise of its sole discretion.
Any purported assignment, transfer, or delegation in violation of this Section shall be void. Subject to the limits on assignment,
this Agreement shall be binding upon and inure to the benefit of the parties and their respective permitted successors and assigns.
This Agreement does not create and shall not be construed as creating any rights enforceable by any person not a party to this
Agreement. To the extent permitted by law, Lender may freely assign any or all of the Loan Documents, or assign or delegate any
or all of its rights and obligations arising under the Loan Documents to other parties or financial institutions, and may permit
other parties or financial institutions to participate in the Obligations and transactions evidenced by the Loan Documents, in
which event reference to Lender in such documents shall refer to Lender's successors, delegees, or assigns, and to such participants,
as appropriate. In that connection, Lender may disclose all documents and information which Lender now or hereafter may have relating
to the Loan Documents, the transactions evidenced thereby, Borrower, or its business.
9.8
Further
Assurances
. Each party hereto agrees to perform such further acts and to execute and deliver such additional written instruments
as may from time to time be reasonably required to provide, maintain and perfect the security contemplated in this Agreement, and
otherwise to carry out the intent, terms and conditions of this Agreement.
9.9
Authority
.
None of the obligations of any of the parties to this Agreement or to any of the other Loan Documents shall be affected in the
event that the execution and delivery of any or all of the Loan Documents on behalf of any other party was not duly authorized
by all necessary corporate or company action.
9.10
Survival
of Agreement
. This Agreement shall remain in full force and effect until all Obligations are satisfied in full. Notwithstanding
the preceding sentence, the provisions of Article VIII shall remain in full force and effect and binding on Holding Company and
Charterer until all Group Obligations are satisfied in full.
9.11
Complete
Agreement
. This Agreement, including all exhibits, schedules, and all additional documents herein or therein incorporated by
reference, expresses the complete understanding and agreement of the parties hereto with respect to its subject matter, all prior
oral and written agreements to the contrary notwithstanding, and all contemporaneous oral agreements notwithstanding.
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9.12
Counterparts
.
This Agreement may be executed in counterparts, all of which, taken together, shall constitute the entire Agreement. For purposes
of this Agreement, a facsimile or other electronic version of a party's signature, such as a .pdf, printed by a receiving facsimile
or printer shall be deemed an original signature.
[
Signatures
provided on next page
]
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IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.
|
|
GATX CORPORATION, as Lender
|
|
|
|
|
|
By:
|
|
|
|
Name:
|
Kevin Hillesland
|
|
|
Title:
|
Vice-President
|
|
|
|
|
|
BULK ATLANTIC LTD., as Borrower
|
|
|
|
|
|
|
By:
|
|
|
|
Name:
|
Deborah L. Davis
|
|
|
Title:
|
Director
|
|
|
|
|
|
|
BULK PARTNERS (BERMUDA) LTD., as
Holding Company
|
|
|
|
|
|
|
By:
|
|
|
|
Name:
|
Deborah L. Davis
|
|
|
Title:
|
Attorney-in-Fact
|
|
|
|
|
|
|
AMERICAS BULK TRANSPORT (BVI)
LIMITED, as Charterer
|
|
|
|
|
|
By:
|
|
|
|
Name:
|
Deborah L. Davis
|
|
|
Title:
|
Director
|
Signature Page to Loan and Guaranty Agreement
SCHEDULE 2.4
APPROVED APPRAISERS
Fearnleys AS
H. Clarkson & Co. Limited
Platou Shipbrokers
|
Loan and Guaranty Agreement
|
SCHEDULE 4.6
EQUITY INTERESTS IN HOLDING COMPANY
Bulk Partners (Bermuda) Ltd.
|
Shareholder
|
|
Number of Shares
|
|
Percentage
|
|
|
Citizenship
|
|
|
|
|
|
|
|
|
|
|
Ed Coll
|
|
38,643 (Common)
|
|
|
44.25
|
%
|
|
United States
|
|
|
|
|
|
|
|
|
|
|
|
Lagoa Investments Ltd.
|
|
34,277 (Common)
|
|
|
39.25
|
%
|
|
Bermuda
|
|
|
|
|
|
|
|
|
|
|
|
Anthony Laura
|
|
9,409 (Common)
|
|
|
10.77
|
%
|
|
United States
|
|
|
|
|
|
|
|
|
|
|
|
Anthony Laura Trust
|
|
5,000 (Common)
|
|
|
5.73
|
%
|
|
United States
|
|
|
|
|
|
|
|
|
|
|
|
Pangaea One L.P.
|
|
23,020.024 (Preferred)
|
|
|
33.10
|
%
|
|
United States
|
|
|
|
|
|
|
|
|
|
|
|
Pangaea One (Cayman) L.P.
|
|
12,686.847 (Preferred)
|
|
|
18.242
|
%
|
|
Cayman Islands
|
|
|
|
|
|
|
|
|
|
|
|
Pangaea One Parallel Fund L.P.
|
|
11,855.343 (Preferred)
|
|
|
17.047
|
%
|
|
Cayman Islands
|
|
|
|
|
|
|
|
|
|
|
|
Pangaea One Parallel Fund (B) L.P.
|
|
5,984.368 (Preferred)
|
|
|
8.605
|
%
|
|
United States
|
|
|
|
|
|
|
|
|
|
|
|
Ed Coll
|
|
6,920.00 (Preferred)
|
|
|
9.950
|
%
|
|
United States
|
|
|
|
|
|
|
|
|
|
|
|
Lago Investments Ltd.
|
|
6,920.00 (Preferred)
|
|
|
9.950
|
%
|
|
Bermuda
|
|
|
|
|
|
|
|
|
|
|
|
Anthony Laura
|
|
2,106.00 (Preferred)
|
|
|
3.106
|
%
|
|
United States
|
EQUITY INTERESTS IN PLEDGOR
Bulk Partners Holding Company Bermuda
Limited
|
Shareholder
|
|
Number of
Shares
|
|
|
Percentage
|
|
|
Citizenship
|
|
|
|
|
|
|
|
|
|
|
|
Bulk Partners (Bermuda) Ltd.
|
|
|
10,000
|
|
|
|
100
|
%
|
|
Bermuda
|
|
Loan and Guaranty Agreement
|
SCHEDULE 4.6 (continued)
EQUITY INTERESTS IN BORROWER
BULK ATLANTIC LTD.
|
Shareholder
|
|
Number of
Shares
|
|
|
Percentage
|
|
|
Citizenship
|
|
|
|
|
|
|
|
|
|
|
|
Bulk Partners Holding Company Bermuda Limited
|
|
|
10,000
|
|
|
|
100
|
%
|
|
Bermuda
|
SCHEDULE 4.6 (continued)
EQUITY INTERESTS IN CHARTERER
Americas Bulk Transport (BVI) Limited
|
Shareholder
|
|
Number of
Shares
|
|
|
Percentage
|
|
|
Citizenship
|
|
|
|
|
|
|
|
|
|
|
|
Bulk Partners Holding Company Bermuda Ltd.
|
|
|
1,000
|
|
|
|
100
|
%
|
|
Bermuda
|
BORROWER'S SUBSIDIARIES
(Direct and Indirect)
None
SUBSCRIPTION AGREEMENTS, ETC. FOR EQUITY
INTERESTS IN BORROWER
None
|
Loan and Guaranty Agreement
|
SCHEDULE 4.8
MATERIAL LEGAL ACTIONS
NONE
|
Loan and Guaranty Agreement
|
SCHEDULE 4.9
PERMITTED ENCUMBRANCES
Charters and Service Agreements
|
|
·
|
Sub-time charters, voyage charters, or contracts of affreightment entered into by Charterer for a period (including optional
renewals) of twelve (12) months or less, for employment of the Vessel in the international bulk cargo trade
|
Other Encumbrances
Maritime liens on the Vessel for:
(a) torts
that are covered by insurance that complies with the provisions of the Bulk Beothuk Mortgage; or
(b) crew's
wages, salvage, or for goods and services furnished to the Vessel in the ordinary course of Borrower's business and not in violation
of any provisions of the Loan Documents, none of which are overdue
provided,
Borrower may contest such Encumbrances in good
faith if appropriate reserves therefor are established and maintained consistently with GAAP, and security therefor is posted as
necessary to prevent the Seizure of the Vessel, or, if the Vessel is Seized with respect to a claim of such an Encumbrance, the
Vessel is released therefrom within thirty (30) days.
|
Loan and Guaranty Agreement
|
SCHEDULE 4.11
LOCATIONS
|
Entity
|
|
Chief Executive Office
|
|
Place of Business or Business Records
|
|
|
|
|
|
|
|
Borrower
|
|
3
rd
Floor – Par la Ville Place
|
|
c/o Phoenix Bulk Carriers (US) LLC
|
|
|
|
14 Par la Ville Road
|
|
109 Long Wharf, 2
nd
Floor
|
|
|
|
Hamilton HM08
|
|
Newport, RI 02840
|
|
|
|
Bermuda
|
|
|
|
|
|
|
|
|
|
Pledgor
|
|
3
rd
Floor – Par la Ville Place
|
|
c/o Phoenix Bulk Carriers (US) LLC
|
|
|
|
14 Par la Ville Road
|
|
109 Long Wharf, 2
nd
Floor
|
|
|
|
Hamilton HM08
|
|
Newport, RI 02840
|
|
|
|
Bermuda
|
|
|
|
|
|
|
|
|
|
Charterer
|
|
3
rd
Floor – Par la Ville Place
|
|
c/o Phoenix Bulk Carriers (US) LLC
|
|
|
|
14 Par la Ville Road
|
|
109 Long Wharf, 2
nd
Floor
|
|
|
|
Hamilton HM08
|
|
Newport, RI 02840
|
|
|
|
Bermuda
|
|
|
|
|
|
|
|
|
|
Allseas
|
|
3
rd
Floor – Par la Ville Place
|
|
c/o Phoenix Bulk Carriers (US) LLC
|
|
|
|
14 Par la Ville Road
|
|
109 Long Wharf, 2
nd
Floor
|
|
|
|
Hamilton HM08
|
|
Newport, RI 02840
|
|
|
|
Bermuda
|
|
|
All of the above companies have no place of business or business
records at any location in the United States, with the possible exception of:
|
|
c/o Phoenix Bulk Carriers (US) LLC
|
|
|
|
109 Long Wharf, 2
nd
Floor
|
|
|
|
Newport, RI 02840
|
|
|
Loan and Guaranty Agreement
|
EXHIBIT A
REQUEST FOR ADVANCE
Pursuant to Section 2.1 of the Loan and Guaranty Agreement dated
February __, 2013 (as assigned, assumed, amended, supplemented, renewed, restated, replaced, or otherwise modified (the "
Loan
Agreement
"), among GATX CORPORATION ("Lender") and BULK ATLANTIC LTD. ("
Borrower
"), BULK PARTNERS
(BERMUDA) LTD., and AMERICAS BULK TRANSPORT (BVI) LIMITED, please disburse the Advance on a Business Day on or about _______, 2013
as follows:
1. The
amount of $_____________ by wire transfer as follows:
_______________________
Branch: _____________
Account No.: _________________
ABA Routing No.: ________________
2. ____________________________________
None of Borrower's representations or warranties contained in
any of the Loan Documents are untrue, Borrower is in compliance with all of its covenants contained in the Loan Documents, and
no Default or Event of Default has occurred and is continuing under the Loan Documents.
Terms used herein that are defined in the Loan Agreement have
the meaning herein that they are given therein.
DATE: _____________, 2013
|
|
BULK ATLANTIC LTD.
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
Name:
|
|
|
|
|
Title:
|
|
|
Loan and Guaranty Agreement
|
EXHIBIT B
CERTIFICATE OF COMPLIANCE
The undersigned, in his or her capacity
as ____________________ of BULK ATLANTIC LTD. (the "
Borrower
"), pursuant to
Section 5.5(c)
of the Loan
and Guaranty Agreement dated as of February __, 2013 (as assigned, assumed, amended, supplemented, renewed, restated, replaced,
or otherwise modified (the "
Loan Agreement
"; the terms defined therein being used herein as therein defined) among
the Borrower, GATX CORPORATION ("
Lender
"), and the other parties named therein, does hereby certify that:
1. The
representations and warranties contained in
Article IV
of the Loan Agreement and in other places in the Loan Documents are
true and correct on and as of the date of this Certificate, except to the extent that such representations and warranties specifically
refer to an earlier date, in which case they are true and correct as of such earlier date.
2. No
Default or Event of Default exists.
IN WITNESS WHEREOF, the undersigned has
executed this Certificate of Compliance this ____ day of __________, 201_.
|
|
BULK ATLANTIC LTD.
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
Name:
|
|
|
|
|
Title:
|
|
|
Loan and Guaranty Agreement
|
Exhibit 10.9
A.1
Execution Version
LOAN AND GUARANTY AGREEMENT
Dated as of August 6, 2013
Among
GATX CORPORATION
,
as Lender,
BULK LIBERTY LTD.
,
as Borrower,
BULK PARTNERS (BERMUDA) LTD.
,
as Holding Company,
and
AMERICAS BULK TRANSPORT (BVI) LIMITED
,
as Charterer
TABLE OF CONTENTS
|
|
Page
|
|
|
|
|
ARTICLE I
DEFINITIONS AND CONSTRUCTION
|
1
|
|
1.1
|
Defined Terms
|
1
|
|
1.2
|
Currency
|
10
|
|
1.3
|
Accounting Terminology
|
10
|
|
1.4
|
Computation of Interest and Time Periods
|
11
|
|
1.5
|
Construction
|
11
|
|
ARTICLE II LOAN
|
12
|
|
2.1
|
Loan Advance.
|
12
|
|
2.2
|
Payments; Late Payments; Business Days
|
12
|
|
2.3
|
Application of Payments
|
13
|
|
2.4
|
Prepayment.
|
13
|
|
2.5
|
Taxes; Yield Protection; Illegality.
|
15
|
|
2.6
|
Wire Transfers
|
15
|
|
2.7
|
Renewal of Credit Facilities
|
16
|
|
2.8
|
Conditions
|
16
|
|
ARTICLE III
CONDITIONS PRECEDENT
|
16
|
|
3.1
|
Conditions Precedent to the Advance
|
16
|
|
3.2
|
Compliance with Loan Documents
|
25
|
|
3.3
|
Unfulfilled Conditions Precedent Become Ongoing Covenants
|
25
|
|
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
|
25
|
|
4.1
|
Company Matters
|
26
|
|
4.2
|
Legal Matters
|
26
|
|
4.3
|
Authorization; Validity and Enforceability
|
26
|
|
4.4
|
Lines of Business
|
27
|
|
4.5
|
Government Approvals
|
27
|
|
4.6
|
Ownership; Subsidiaries
|
27
|
|
4.7
|
Financial Condition
|
27
|
|
4.8
|
Legal Actions
|
27
|
|
4.9
|
Title and Encumbrances
|
27
|
|
4.10
|
Contracts
|
27
|
|
4.11
|
Place of Business
|
28
|
|
4.12
|
Disclosure
|
28
|
|
4.13
|
Laws and Regulations
|
28
|
|
4.14
|
Tax Status
|
28
|
|
4.15
|
Fiscal Year
|
28
|
|
4.16
|
Intellectual Property
|
28
|
|
4.17
|
ERISA Compliance
|
28
|
|
4.18
|
Environmental Compliance.
|
28
|
|
4.19
|
Vessel
|
29
|
|
4.20
|
Land
|
29
|
|
4.21
|
No Prohibited Persons
|
29
|
|
Loan and Guaranty Agreement
|
|
ARTICLE V
COVENANTS
|
29
|
|
5.1
|
Title and Liens.
|
29
|
|
5.2
|
Change in Business
|
30
|
|
5.3
|
Financial Covenants
|
30
|
|
5.4
|
Company Matters.
|
30
|
|
5.5
|
Financial Statements/Reporting Requirements
|
31
|
|
5.6
|
Fiscal Year
|
33
|
|
5.7
|
Accuracy of Financial Information
|
33
|
|
5.8
|
Access
|
33
|
|
5.9
|
Accounting Records
|
34
|
|
5.10
|
Status
|
34
|
|
5.11
|
Condition of Assets
|
34
|
|
5.12
|
Legal Compliance
|
34
|
|
5.13
|
ERISA Plans
|
34
|
|
5.14
|
Taxes
|
34
|
|
5.15
|
Permits
|
34
|
|
5.16
|
Intellectual Property
|
35
|
|
5.17
|
Arranger Fee
|
35
|
|
5.18
|
Compliance by Allseas and Phoenix
|
35
|
|
ARTICLE VI
VESSEL PROVISIONS
|
35
|
|
6.1
|
Vessel Registry
|
35
|
|
6.2
|
Ownership and Encumbrances
|
35
|
|
6.3
|
Transfers
|
36
|
|
6.4
|
Lawful Operation
|
36
|
|
6.5
|
Operation
|
37
|
|
6.6
|
Maintenance
|
37
|
|
6.7
|
Access and Surveys
|
37
|
|
6.8
|
Seizure; Requisition
|
38
|
|
6.9
|
Insurance
|
38
|
|
6.10
|
No Charters to Prohibited Persons
|
41
|
|
6.11
|
Payment of Charter Hire and Vessel Revenues
|
41
|
|
ARTICLE VII
DEFAULT AND REMEDIES
|
41
|
|
7.1
|
Default
|
41
|
|
7.2
|
Remedies.
|
45
|
|
7.3
|
Legal Actions
|
47
|
|
7.4
|
Service of Process
|
48
|
|
7.5
|
Judgment
|
48
|
|
7.6
|
Right of Set-Off
|
48
|
|
ARTICLE VIII
CONTINUING GUARANTY
|
49
|
|
8.1
|
Guaranty
|
49
|
|
8.2
|
Guaranty Absolute
|
49
|
|
8.3
|
Waiver
|
49
|
|
8.4
|
Subrogation
|
49
|
|
8.5
|
Holding Company Indemnification
|
50
|
|
8.6
|
Subordination.
|
50
|
|
ARTICLE IX
MISCELLANEOUS
|
52
|
|
9.1
|
Loan Documents, Administration and Collection Expenses
|
52
|
|
|
ii
|
Loan and Guaranty Agreement
|
|
9.2
|
Indemnification
|
52
|
|
9.3
|
Amendments and Waivers
|
52
|
|
9.4
|
Notices
|
53
|
|
9.5
|
Governing Law
|
53
|
|
9.6
|
Severability
|
53
|
|
9.7
|
Assignment
|
54
|
|
9.8
|
Further Assurances
|
54
|
|
9.9
|
Authority
|
54
|
|
9.10
|
Survival of Agreement
|
54
|
|
9.11
|
Complete Agreement
|
54
|
|
9.12
|
Counterparts
|
54
|
|
Schedules
|
|
|
|
|
|
Schedule 2.4
|
Approved Appraisers
|
|
Schedule 4.6
|
Shareholders
|
|
Schedule 4.8
|
Litigation
|
|
Schedule 4.9
|
Permitted Encumbrances
|
|
Schedule 4.11
|
Locations
|
|
Exhibits
|
|
|
|
|
|
Exhibit A
|
Request for Advance
|
|
Exhibit B
|
Certificate of Compliance
|
|
|
iii
|
Loan and Guaranty Agreement
|
LOAN AND GUARANTY AGREEMENT
THIS LOAN AND GUARANTY AGREEMENT ("
Agreement
")
is entered into as of the 6
th
day of August, 2013, between GATX CORPORATION, a New York corporation ("
Lender
"),
and BULK LIBERTY LTD., a Bermuda company ("
Borrower
"), BULK PARTNERS (BERMUDA) LTD., a Bermuda company ("
Holding
Company
"), and AMERICAS BULK TRANSPORT (BVI) LIMITED, a British Virgin Islands business company ("
Charterer
"),
with respect to the following facts:
A. Borrower
wishes to obtain from Lender and Lender wishes to provide to Borrower a term loan in the principal amount of U.S. $5,685,000.00
on the terms and conditions stated herein, in order to finance the vessel BULK LIBERTY (formerly known as KEN), to be re-registered
in the name of the Borrower under the laws and flag of the Republic of the Marshall Islands, Official No. 1875, IMO No. 9166871
(the "
Vessel
").
B. Holding
Company is the indirect owner of Borrower, and Charterer is the time charterer of the Vessel, in consideration of which Holding
Company and Charterer are guarantying the Borrower's obligations under this Agreement.
NOW, THEREFORE, in consideration of the
foregoing and the agreements of the parties hereto, and for other good and valuable consideration, the receipt of which the parties
hereby acknowledge, the parties hereto represent, warrant and agree as follows:
ARTICLE
I
DEFINITIONS AND CONSTRUCTION
1.1
Defined
Terms
. As used herein and in the schedules of this Agreement, the terms defined below shall have the definitions ascribed to
them below:
"
Advance
" has the meaning
given to it in Section 2.1(a).
"
Affiliate
" means, with
respect to a Person any other Person which directly or indirectly controls, is controlled by, or is under common control with,
such Person. "Control" "controlled by" and "under common control with" means direct or indirect possession
of the power to direct or cause the direction of management or policies (whether through ownership of voting securities, by contract
or otherwise);
provided that
control shall be conclusively presumed for this purpose when any Person or affiliated group
directly or indirectly owns ten percent (10%) or more of the securities or other Equity Interests having ordinary voting power
for the election of directors, managing general partners, trustees or managers of a Person.
"
Allseas Cash Deposit Account
"
has the meaning given to it in Section 3.1(i).
"
Allseas Charge Over Cash Deposit
"
has the meaning given to it in Section 3.1(a)(xiv).
"
Allseas
" means Allseas
Logistics Bermuda Ltd., a Bermuda company.
|
|
|
Loan and Guaranty Agreement
|
"
Applicable Law
" means
the laws of the country having jurisdiction over Lender, Borrower, the country of registry of the vessel, and the United States.
"
Banking Day
" means any
day on which commercial banks are open for general business (including dealings in foreign exchange and foreign currency markets)
in New York and Chicago.
"
Bankruptcy or Other Proceeding
"
means a Debtor Relief Proceeding; a dissolution, winding up, liquidation, or reorganization of a Person; an arrangement with a
Person's creditors or a composition of a Person or any of its debts; or an assignment for the benefit of creditors or any other
marshalling of the assets and liabilities of a Person.
"
Borrower Charge Over Bulk Liberty
Hire Account
" has the meaning given to it in Section 3.1(a)(xiii).
"
Borrower
" has the meaning
set forth in the first paragraph hereof.
"
Borrower's Earnings Assignment
Agreement
" has the meaning given to it in Section 3.1(a)(iii).
"
Bulk Atlantic
" means Bulk
Atlantic Ltd., a Bermuda company.
"
BULK BEOTHUK
" means the
vessel BULK BEOTHUK, Official No. 5017, registered in the Republic of the Marshall Islands and owned by Bulk Atlantic.
"
Bulk Beothuk Loan Agreement
"
means the Loan and Guaranty Agreement dated as of February 18, 2013 among Lender, Bulk Atlantic, Holding Company, and Charterer.
"
Bulk Beothuk Loan Documents
"
means the Bulk Beothuk Loan Agreement, the Bulk Beothuk Mortgage, and all other agreements, instruments, certificates, or other
documents under or related thereto.
"
Bulk Beothuk Mortgage
"
has the meaning given to it in Section 3.1(m)(i).
"
Bulk Beothuk Obligations
"
means all of the obligations of Bulk Atlantic under any Bulk Beothuk Loan Document, including but not limited to, the obligations
of Bulk Atlantic that are secured by the Bulk Beothuk Mortgage.
"
Bulk Cajun
" means Bulk
Cajun Bermuda Ltd., a Bermuda company.
"
BULK CAJUN
" means the
vessel BULK CAJUN, Official No. 43084-11, registered in Panama and owned by Bulk Cajun.
"
Bulk Cajun Loan Agreement
"
means the Loan and Guaranty Agreement dated as of October 20, 2011 among Lender, Bulk Cajun, Holding Company, and Charterer.
|
|
2
|
Loan and Guaranty Agreement
|
"
Bulk Cajun Loan Documents
"
means the Bulk Cajun Loan Agreement, the Bulk Cajun Mortgage, and all other agreements, instruments, certificates, or other documents
under or related thereto.
"
Bulk Cajun Mortgage
" has
the meaning given to it in Section 3.1(l)(i).
"
Bulk Cajun Obligations
"
means all of the obligations of Bulk Cajun under any Bulk Cajun Loan Document, including but not limited to, the obligations of
Bulk Cajun that are secured by the Bulk Cajun Mortgage.
"
Bulk Cajun Pledgor
" means
Bulk Fleet Bermuda Holding Company Ltd., a Bermuda company.
"
Bulk Discovery
" means
Bulk Discovery (Bermuda) Ltd., a Bermuda company.
"
BULK DISCOVERY
" means
the vessel BULK DISCOVERY, Official No. 42515-11, registered in Panama and owned by Bulk Discovery.
"
Bulk Discovery Loan Agreement
"
means the Loan and Guaranty Agreement dated as of February 25, 2011 among Lender, Bulk Discovery, Holding Company, and Charterer.
"
Bulk Discovery Loan Documents
"
means the Bulk Discovery Loan Agreement, the Bulk Discovery Mortgage, and all other agreements, instruments, certificates, or other
documents under or related thereto.
"
Bulk Discovery Mortgage
"
has the meaning given to it in Section 3.1(k)(i).
"
Bulk Discovery Obligations
"
means all of the obligations of Bulk Discovery under any Bulk Discovery Loan Document, including but not limited to, the obligations
of Bulk Discovery that are secured by the Bulk Discovery Mortgage.
"
Bulk Liberty Hire Account
"
has the meaning given to it in Section 3.1(h).
"
Bulk Liberty Mortgage
"
has the meaning given to it in Section 3.1(a)(ii).
"
Charterer
" has the meaning
set forth in the first paragraph hereof.
"
Charterer's Earnings Assignment
Agreement
" has the meaning given to it in Section 3.1(a)(v).
"
Closing Date
" means the
date the Advance is made upon satisfaction or waiver of the conditions precedent listed in Article III.
"
Code
" means the Internal
Revenue Code of 1986.
"
Collateral
" means personal
or real property, whether tangible or intangible, on which an Encumbrance is granted as security for any or all of the Obligations
outstanding from time to time under any Loan Document.
|
|
3
|
Loan and Guaranty Agreement
|
"
Commercial Management Agreement
"
means the Commercial Management Agreement for the Vessel between Borrower and Phoenix US dated as of July 12, 2013.
"
Commitment Fee
" has the
meaning given to it in Section 3.1(n).
"
Constitutional Documents
"
means the certificate of incorporation, memorandum of association and by-laws of a corporation, as the same may be amended, restated
or supplemented from time to time.
"
Credit Party
" means Borrower,
Pledgor, Holding Company, Charterer, or any Guarantor (including, but not limited to, Bulk Atlantic, Bulk Cajun and Bulk Discovery).
"
Cross-Collateral Guaranty
"
has the meaning given to it in Section 3.1(a)(xxxvii).
"
Debtor Relief Proceeding
"
means bankruptcy, insolvency, receivership dissolution, arrangement, reorganization, administration, debt relief or similar proceeding
pertaining to a Person.
"
Default Rate
" has the
meaning given to it in Section 2.1(c)(i).
"
Default
" means an event
or condition which, with the giving of notice, the passage of time, or both, would become an Event of Default.
"
EBITDA
" means, for any
period, for any Person, an amount equal to the Net Earnings of such Person for such period
plus
the following to the extent
deducted in calculating such Net Earnings: (i) the Interest Expense of such Person for such period, (ii) the provision
for federal, state, local and foreign income taxes payable by such Person for such period, and (iii) the amount of depreciation
and amortization expense deducted in determining such Net Earnings.
"
ED & F
" means ED &
F Man Shipping Limited.
"
ED & F Charter
" means
the Time Charter for the Vessel dated August 6, 2010, as amended by Addendum No. 1 thereto dated July 9, 2012, and as further amended
by Addendum No. 2 thereto dated April 11, 2013, between Borrower and ED & F, as novated by the Novation Agreement.
"
Encumbrance
" means any
lien, mortgage, pledge, assignment, security interest, liability for forfeiture, defeasance, lease, charter, right to possession
or services of the relevant property, option, right of first refusal with respect to the relevant property, restriction against
transferability or use, or other encumbrance whatsoever.
"
Environmental Law
" means
law relating to environmental, health, safety or land use matters applicable to any property.
"
Environmental Liability
"
means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties
or indemnities), that is directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the
generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any
Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment, or (e) any
contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the
foregoing.
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Loan and Guaranty Agreement
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"
Equity Interest
" means
stock in a corporation, a membership interest in a company, a general or limited partnership interest in a partnership, a beneficial
interest in a trust, or other equity interest in a Person.
"
ERISA Affiliate
" means
any trade or business (whether or not incorporated) under common control with Borrower or a Guarantor within the meaning of Section 414(b)
or (c) of the Code and Sections 414(m) and (o) of the Code.
"
ERISA
" means the Employee
Retirement Income Security Act of 1974 and any regulations issued pursuant thereto.
"
Event of Default
" has
the meaning given to it in Section 7.1.
"
Fixed Charges
" means,
for any period, for any Person, the sum of Interest Expense, operating lease payments, payments of the current portion of capital
leases, and payments of the current portion of long term Indebtedness, and distributions of equity made during the relevant period.
"
Funds Deposit Agreement
"
has the meaning given to it in Section 3.1(a)(xi).
"
GAAP
" means at any time
generally accepted accounting principles as then in effect in the United States, applied on a consistent basis.
"
Governmental Authority
"
includes all foreign and U.S. federal, national, state and local governments; government corporations, authorities, boards, commissions,
and entities; and all departments, ministries, agencies, bureaus, offices, and subdivisions of any of the foregoing.
"
Group Loan Documents
"
means, collectively, the Loan Documents, the Bulk Beothuk Loan Documents, the Bulk Discovery Loan Documents and the Bulk Cajun
Loan Documents.
"
Group Obligations
" means,
collectively, the Obligations, the Bulk Beothuk Obligations, the Bulk Discovery Obligations and the Bulk Cajun Obligations.
"
Guarantor
" means Holding
Company, Charterer, and each of the Borrower, Bulk Atlantic, Bulk Cajun and Bulk Discovery in its capacity as guarantor under the
Cross-Collateral Guaranty, and any other Person that grants Lender a guaranty for any of the Obligations, as the context requires.
"
Hazardous Materials
" means
all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including
petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious
or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.
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Loan and Guaranty Agreement
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"
Holding Company
" has the
meaning set forth in the first paragraph hereof.
"
Indebtedness
" means, for
any Person, (i) indebtedness for borrowed money; (ii) obligations evidenced by bonds, debentures, notes or other similar
instruments; (iii) obligations to pay the deferred purchase price of property or services; (iv) obligations as lessee
under leases which shall have been or should be, in accordance with GAAP, recorded as capital leases; (v) obligations as lessee
under Synthetic Lease Obligations; (vi) obligations with respect to undrawn letters of credit issued for the account of that
Person or under bonds or suretyship arrangements; (vii) all obligations arising under any swap transaction or other agreement
or arrangement designated to protect the Person against fluctuation in interest rates, currency exchange rates or commodity prices;
(viii) obligations to ordinary trade creditors which are more than ninety (90) days delinquent; (ix) liabilities in respect
of unfunded vested benefits under plans covered by Title IV of ERISA; (x) obligations under indemnification agreements in
favor of issuers of letters of credit (contingent or otherwise); and (xi) obligations under direct or indirect guaranties
or suretyship agreements in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise
to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (i)
through (x) above.
"
Indemnitee
" has the meaning
given to it in Section 9.2.
"
Interest Expense
" shall
mean for any period, for any Person, the aggregate amount of interest expense of such Person for such period as determined in accordance
with GAAP. Notwithstanding the foregoing, specific items of interest expense shall only be included in this definition to the extent
such items have been deducted from gross revenues in calculating the Net Earnings of such Person for such fiscal period.
"
Interest Rate
" has the
meaning given to it in Section 2.1(c)(i).
"
Investment
" means, as
to any Person, any acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of
capital stock or other securities of another Person, (b) a convertible loan or advance, or capital contribution to, purchase
or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership interest,
membership interest, joint venture interest, or other beneficial interest in such other Person, or (c) the purchase or other
acquisition (in one transaction or a series of transactions) of assets of another Person that constitute a business unit. For purposes
of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases
or decreases in the value of such Investment.
"
IRS
" means the United
States Internal Revenue Service.
"
Lender
" has the meaning
set forth in the first paragraph hereof.
"
Lender's Allowance
" means
the Lender's allowance described in Section 3.1(n)(ii).
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"
Loan Document
" means any
of: this Agreement, the Cross-Collateral Guaranty, the Omnibus Agreement, Bulk Liberty Mortgage, Borrower's Earnings Assignment
Agreement, Charterer's Earnings Assignment Agreement, Phoenix Earnings Assignment Agreement, Borrower Charge Over Bulk Liberty
Hire Account, Allseas Charge Over Cash Deposit, Funds Deposit Agreement, Manager's Undertaking, Shares Charge, Letter of Credit
and any other loan agreement, promissory note or other evidence of indebtedness related to this Agreement; and any ship or naval
mortgage, security agreement, assignment, deed of trust, pledge, or other security document; any guaranty; any subordination agreement,
or any other agreement, instrument, certificate, or other document; in each case whether heretofore, concurrently, or hereafter
entered into by any Person in connection with this Agreement.
"
Manager's Undertaking
"
means a Manager's Undertaking as described in Sections 3.1(a) (ix) or 3.1(a)(x).
"
Marshall Islands Registry
"
means the Office of the Maritime Administrator of the Republic of the Marshall Islands.
"
Material
" means, with
reference to the significance of a matter which is reasonably calculable in monetary terms, a change or effect related to such
matter which has a monetary consequence of $500,000.00 or more in amount.
"
Multiemployer Plan
" means
any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which Borrower, a Guarantor or any ERISA
Affiliate makes or is obligated to make contributions, or during the preceding three calendar years, has made or been obligated
to make contributions.
"
Net Earnings
" means, for
any period, for any Person, the net earnings of such Person for such period determined in accordance with GAAP for such period,
but not including the net after-tax amount of: (a) any gains or losses resulting from the disposition of capital assets (as
defined by GAAP) where the consideration paid in connection with such disposition is not paid in cash,
provided, however,
that when all or any portion of the consideration paid in connection with such disposition is received in cash, checks or other
cash equivalent financial instruments, such amount shall be recognized as gain or loss and included in the net earnings of such
Person in the fiscal period received; (b) any gains or income resulting from the write-up of assets; (c) any gains or
losses resulting from the acquisition of securities or the retirement or extinguishment of Indebtedness; (d) any losses from
the impairment of goodwill or other intangible assets required to be recognized under GAAP; (e) any losses from the impairment
or disposal of long-lived assets required to be recognized under GAAP; (f) any gains or losses arising from changes in accounting
principles; (g) any equity of such Person in the undistributed earnings of any Person which is not a Subsidiary; (h) any
earnings of any Person acquired by such Person through purchase, merger or consolidation or otherwise for any period prior to the
date of acquisition; (i) any deferred credit representing the excess of equity in any Subsidiary at the date of acquisition
over the cost of the investment in such Subsidiary; and (j) any extraordinary gains or losses.
"
Novation Agreement
" means
the Novation Agreement dated June 20, 2013, among Voyager Shipholding Corp., Borrower and ED & F.
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"
Obligations
" means all
obligations of Borrower to repay the Advance, to pay interest thereon, or to pay and perform other debts, liabilities, obligations,
covenants and duties, existing or arising under any Loan Document, whether direct or indirect (including those acquired by assumption),
absolute or contingent, due or to become due, now existing or hereafter arising, and including interest that accrues after the
commencement, by or against Borrower or any Person of which Borrower is a partner, joint venturer, or member, of any Debtor Relief
Proceeding in which such Person is the debtor in such proceeding.
"
Omnibus Agreement
" has
the meaning set forth in Section 3.1(a)(xxxviii).
"
Other Taxes
" has the meaning
given to it in Section 2.5(a)(ii).
"
Panamanian Public Registry
"
means the Panamanian Public Registry of Titles and Encumbrances of Vessels of the Panamanian Maritime Authority.
"
Permit
" means any authorization,
certificate, consent, approval, license, permit, waiver or exemption issued or granted by a Governmental Authority.
"
Permitted Encumbrance
"
has the meaning given to it in Section 4.9.
"
Pension Plan
" means any
"employee pension benefit plan" (as such term is defined in Section 3(2) of ERISA) that is sponsored or maintained by
Borrower, a Guarantor, or any ERISA Affiliate or to which Borrower, a Guarantor, or any ERISA Affiliate contributes or has an obligation
to contribute, or in the case of a multiple employer plan (as described in Section 4064(a) of ERISA) has made contributions
at any time during the immediately preceding five plan years.
"
Permitted Investments
"
means (i) U.S. Dollar demand deposits maintained in the United States with any commercial bank which has a combined capital
and surplus of at least $100,000,000.00; (ii) U.S. Dollar time deposits maintained in the United States with, or certificates
of deposit having a maturity of six months or less issued by, any commercial bank which has its head office in the United States
and which has a combined capital and surplus of at least $100,000,000.00; (iii) direct obligations of, or obligations unconditionally
guaranteed by, the United States Government and having a maturity of one year or less; or (iv) readily marketable commercial
paper having a maturity of six months or less, issued by any corporation organized and existing under the laws of the United States,
any state thereof, or the District of Columbia and rated A-1 by Standard & Poor's Corporation or P-1 by Moody's Investors Service,
Inc. (or, if neither such organization shall rate such commercial paper at any time, rated by any nationally recognized rating
organization in the United States with the highest rating assigned by such organization).
"
Person
" includes an individual
natural person, corporation, limited liability company, general or limited partnership, joint venture, association, trust, Governmental
Authority, and any other entity.
"
Phoenix
" means Phoenix
Bulk Carriers (BVI) Limited, a British Virgin Islands business company.
"
Phoenix Earnings Assignment Agreement
"
has the meaning given to it in Section 3.1(a)(vii).
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"
Phoenix US
" means Phoenix
Bulk Carriers (US) LLC, a Delaware limited liability company.
"
Plan
" means any "employee
benefit plan" (as such term is defined in Section 3(3) of ERISA) established by Borrower or any ERISA Affiliate.
"
Pledgor
" means Bulk Partners
Holding Company Bermuda Ltd., a Bermuda company.
"
Process Agent
" has the
meaning given to it in Section 3.1(a)(xv), and includes any successor thereto that is appointed as contemplated in Section 7.4.
"
Process Agent Appointment
"
has the meaning given to it in Section 3.1(a)(xv).
"
Prohibited Country
" means
(a) any state, country or jurisdiction which is subject to any United Nations Security Council Resolution, European Union Decision
or United States or other Applicable Law which would have the effect of prohibiting the sale, lease, charter, or voyage of the
Vessel to or from such country or otherwise cause the Lender or Borrower, to be in contravention of any Applicable Law to which
such party is subject; (b) any country to which voyages are not covered under the insurances required to be maintained by Borrower
herein; or (c) any country which Lender determines now or in the future due to a change in law or circumstances that voyages to
such country would materially prejudice the Lender’s ability to repossess the Vessel, or enforce the remedies or realize
the benefit of the Liens and rights established under this Agreement and the other Loan Documents. Lender has designated without
limitation Cuba, Iran, Syria, Sudan and North Korea as Prohibited Countries.
"
Prohibited Person
" means
any individual or entity: (a) with whom Lender or Borrower is prohibited or restricted in engaging in transactions or exporting
goods or services to under Applicable Law; (b) who is a resident of, or organized under the laws of or doing business in any Prohibited
Country; (c) who is designated on any United Nations Security Council Resolution or any European Union or United States list, order,
or other published designation of terrorists, narcotics traffickers, proliferators of weapons of mass destruction or other lists
of barred or restricted entities or individuals including without limitation the U.S. Treasury Specially Designated Nationals List.
"
Requisition
" means expropriation,
confiscation, requisition or acquisition of the title to or use of property, whether for full consideration or a consideration
less than full value, which is effected by any Governmental Authority or by any Person or Persons claiming to be or to represent
a Governmental Authority
"
Reportable Event
" means
any of the events set forth in Section 4043(c) of ERISA.
"
Request for Advance
" has
the meaning given to it in Section 2.1(a).
"
Seizure
" means an arrest,
repossession, taking into custody, detention or seizure by judicial or nonjudicial means (including attachment, garnishment, or
execution or levy), and "
Seize
" has a correlative meaning.
"
Shares Charge
" has the
meaning given to it in Section 3.1(a)(xii).
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"
Sub-Time Charter
" means
the sub-time charter between Charterer and Phoenix dated July 1, 2013.
"
Subordinated Debt
" has
the meaning given to it in Section 8.6(a).
"
Subordinated Liens
" has
the meaning given to it in Section 8.6(a).
"
Subsidiary
" means any
corporation, limited liability company, partnership, joint venture, association, trust or estate of which (or in which) the relevant
Person owns, directly or indirectly, ten percent (10%) or more of (i) the outstanding capital stock having ordinary voting
power to elect a majority of the Board of Directors of such corporation (irrespective of whether or not at the time capital stock
of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (ii) the
interest in the capital or profits of such limited liability company, partnership or joint venture, or association, or (iii) the
beneficial interest of such trust or estate.
"
Synthetic Lease Obligation
"
means the monetary obligation of a Person under (a) a so called synthetic, off-balance sheet or tax retention lease, or (b) an
agreement for the use or possession of property creating obligations that do not appear on the balance sheet of such Person but
which, upon the insolvency or bankruptcy of such Person, would be characterized as the indebtedness of such Person (without regard
to accounting treatment).
"
Taxes
" has the meaning
given to it in Section 2.5(a)(i).
"
Technical Management Agreement
"
means the Ship Management Agreement for the Vessel between Borrower and Seamar Management S.A. dated July 5, 2013.
"
Time Charter
" means the
time charter for the Vessel between Borrower and Charterer dated July 1, 2013.
"
United States
" means the
United States of America, its territories and possessions.
"
Vessel
" has the meaning
given to it in Recital A.
1.2
Currency
.
All references to dollars and all usage of the symbol "$" are references to U.S. Dollars.
1.3
Accounting
Terminology
. All accounting terms used in the Loan Documents shall be construed, and all financial records and reports prepared
or provided pursuant to the Loan Documents shall be prepared, in accordance with GAAP.
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1.4
Computation
of Interest and Time Periods
. Under the Loan Documents, interest shall accrue and be calculated at a rate per annum based on
the actual number of days elapsed and a 360-day year. Anything in the Loan Documents to the contrary notwithstanding, interest
shall not accrue thereunder at a rate in excess of the maximum rate, if any, that is permitted under applicable law, and shall
be deemed automatically capped at the relevant maximum rate in effect, if any, from time to time. At no time shall the interest
rate payable on the Advance, together with the late payment fees and prepayment fees that accrue under, and all other amounts payable
under the Loan Documents to the Lender, to the extent the same are construed to constitute interest, exceed the maximum rate of
interest that at any time may be contracted for, taken, charged or received by the Lender under the Loan Documents under applicable
law. If for any period during the term of this Agreement any amount paid to the Lender under the Loan Documents (to the extent
the same shall (but for the provisions of this Section) constitute or be deemed to constitute interest) would exceed the maximum
amount of interest permitted during such period, then such excess amount shall be applied or shall be deemed to have been applied
as a prepayment of the Advance in such order as the Lender shall determine. In computations of interest or time under this Agreement,
"from" means "from and excluding," and "to" or "through" means "to and including."
For the calculation of the duration of a monthly period, a month commencing on one numeric day of a calendar month shall end on
the same numeric day of the next calendar month, if any, or else the last day of the next calendar month.
1.5
Construction
.
In this Agreement, unless expressly stated otherwise: (a) references to articles, sections, exhibits and schedules, are references
to articles, sections, exhibits, and schedules of this Agreement, and references to "herein," "hereof," and
"hereto" are references to this Agreement as a whole; (b) the terms "include," "including" and
similar terms shall be construed as if followed by the words "but not limited to"; (c) the term "documents"
includes any and all instruments, documents, charters, leases, contracts, agreements, certificates, notices, reports, financial
statements and other writings, however evidenced, whether in physical or electronic form; (d) references to execution of documents
shall include obtaining notarial acknowledgements thereof in accordance with applicable law as required by Lender; (e) words
denoting the singular shall include the plural, and vice versa, and words denoting any gender shall include all genders; (f) captions
of articles and sections of this Agreement are inserted for convenience of reference only and shall not be considered in the interpretation
or construction of this Agreement; (g) references to agreements and other contractual instruments shall be deemed to include
such agreements and other instruments as assigned, assumed, amended, supplemented, renewed, restated, replaced, or otherwise modified
from time to time, but only to the extent that the assignments, assumptions, amendments, supplements, renewals, restatements, replacements,
novations, and other modifications are not prohibited by any Loan Document; and (h) references to the accrual of interest
include reference to the applicable loan margins and increases in interest relevant to an Event of Default, as provided in the
Loan Documents. In this Agreement "
law
" includes (i) all international, foreign, U.S. federal, state and
local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities,
including the interpretation or administration thereof by any Governmental Authority, court, administrative or other governmental
tribunal charged with the enforcement, interpretation or administration thereof, (ii) all applicable administrative orders,
directed duties, requests, and Permits of, or issued by, any Governmental Authority, in each case whether or not having the force
of law, and (iii) any particular law shall include all recodifications, amendments, consolidations, replacements, and supplements
thereto and thereof, and interpretations of such law by relevant Governmental Authorities. Each party to the Loan Documents has
had an opportunity to review and revise them, so the rule of construction to the effect that any ambiguities are to be resolved
against the drafting party shall not be employed in the interpretation or construction of the Loan Documents. Time is of the essence
of the Loan Documents.
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ARTICLE
II
LOAN
2.1
Loan
Advance
.
(a)
Loan
Advance
. Lender agrees, on the terms and conditions set forth herein, to advance to Borrower, in a single advance, $5,685,000.00
(the "
Advance
"); provided, the Advance shall in no event be greater than 60% of the acquisition cost of the Vessel,
as such acquisition cost is approved by the Lender in its sole discretion. The Advance shall be disbursed for the account of Borrower
in accordance with an executed request therefor in substantially the form attached hereto as
Exhibit A
("
Request
for Advance
").
(b)
Principal
Repayments
. The Advance shall be repaid in installments as follows: principal installments of $149,605 each shall be repaid
on every three-month anniversary date of the Closing Date, commencing with the six-month anniversary date of the Closing Date,
plus a balloon payment of $2,842,505 due with the final principal payment, until the principal of the Advance is fully repaid,
provided,
the final installment of all principal then outstanding, shall be repaid in full on August 6, 2018. Once repaid
no portion of the Advance may be reborrowed.
(c)
Interest
.
(i)
Interest
Rate
. Interest shall accrue on the outstanding principal of the Advance from the date the Advance is disbursed until the principal
is fully repaid, at a fixed rate (the "
Interest Rate
") consisting of the sum of (A) four and ten one-hundredths
percent (4.10%) plus (B) the sum of (x) the rate for U.S. Treasury obligations with a five-year remaining time to maturity,
as of the most recent rate published in the Federal Reserve H15 report, and (y) one and fifty one-hundredths percent (1.50%)
1
,
provided
,
however
, that after the occurrence and during the continuance of an Event of Default, in the exercise
of Lender's sole discretion, the Interest Rate shall be increased by five percent (5%) per annum (such resulting rate being the
"
Default Rate
"),
provided, further,
in no event shall the Advance or any other amount owing under the
Loan Documents accrue interest in excess of the maximum amount, if any, that is permitted by law. Interest shall accrue and be
calculated at a rate per annum based on the actual number of days elapsed and a 360-day year. Lender's determination of the Interest
Rate shall be conclusive absent manifest error.
(ii)
Interest
Payments
. On each date on which a payment of principal is due under this Agreement, Borrower shall also make payment of all
interest that has accrued and that remains unpaid as of that date.
2.2
Payments;
Late Payments; Business Days
. If any payment to be made by Borrower under the Loan Documents shall fall due on a day other
than a Business Day, payment shall be made on the next following Business Day. Principal payments made more than five (5) Business
Days' late shall incur a late payment fee of five percent (5%) of the amount that is late, which shall be due concurrently with
the late payment, without limiting Lender's rights to interest or default interest, or the right to exercise any of its other rights,
powers, and remedies for Default.
1
The actual fixed interest rate will be set two days prior to the Closing Date.
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2.3
Application
of Payments
. (a) Unless the application of payments received on account of the Obligations in advance of an Event of Default
are otherwise specified by another provision of the Loan Documents, if no Event of Default shall have occurred and be continuing,
all payments and other funds received on account of the Obligations (including insurance proceeds, proceeds of Requisition of the
Vessel, proceeds of disposition of or realization on Collateral, and other proceeds of collection), together with the proceeds
of any claims for damages for loss of or damage to Collateral received by the Lender pursuant to or under the terms of the Loan
Documents, shall be applied as follows:
first
, toward the payment
of the fees, costs and other expenses (including attorneys' fees and expenses), and interest thereon, that are owed by Borrower
and that are outstanding under the Loan Documents at the time, and, as required by Lender from time to time, to provide adequate
indemnity against Encumbrances claiming priority over Lender's security in any Collateral,
provided that
unless an Event
of Default has occurred and is continuing said sums shall not be used to satisfy or provide indemnity against or security for Permitted
Encumbrances;
second
, toward interest
that accrues on the Obligations;
third
, toward payment of
the principal of the Advance; and
fourth
, to the Borrower
or to whosoever may be entitled thereto.
(b) When
applied to the Advance, payments and prepayments shall be applied in the reverse order of the maturity of the installments thereof.
(c) If
an Event of Default shall have occurred and be continuing, all amounts received by the Lender from the Borrower or arising out
of any Collateral shall be applied in accordance with the terms of Section 17 of the Bulk Liberty Mortgage.
2.4
Prepayment.
(a)
Required
Prepayments
. At six-month intervals after the Closing Date Borrower shall provide to Lender a written appraisal of the Vessel
that is prepared by an appraiser listed in
Schedule 2.4
, and dated not more than fourteen days before it is given to Lender.
In lieu of the foregoing, or in the event that Borrower fails to timely deliver any required appraisal, the Lender may have the
Vessel appraised, at Borrower's expense, by an appraiser selected by Lender in the exercise of its sole discretion. In either event
the Borrower shall make the Vessel available for inspection (without being required to delay a departure for, or deviate from,
a voyage under the any charter or contract of affreightment, or to specially dry dock the Vessel), but for this purpose such an
inspection shall not be required unless requested by Lender. The appraiser shall determine the fair market value of the Vessel
on a lien- and charter- free basis, assuming a willing buyer and a willing seller not under a compulsion to sell. If that valuation
is an amount that is less than seventy percent (70%) of the outstanding principal of the Advance at the time the appraisal is made,
and if demanded to do so by Lender, Borrower shall, within sixty (60) days after receiving notice thereof and a copy of the appraisal,
either (i) prepay an amount such that, after such prepayment is first applied to outstanding interest at the time the prepayment
is made and the balance is applied to the principal of the Advance, the outstanding amount of the Advance shall not exceed seventy
percent (70%) of the appraised value of the Vessel, or (ii) Borrower shall provide further security to Lender that is of a
type, value, and that is subject to a first priority perfected security interest in favor of Lender, acceptable to Lender in the
exercise of its sole discretion.
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(b)
Voluntary
Prepayments
. Borrower may make voluntary prepayment of the Advance and all accrued unpaid interest thereon in whole but not
in part on the second, third, or fourth anniversary of the Closing Date (or the first Business Day thereafter), by first providing
to Lender sixty (60) days' advance written notice of Borrower's intention to do so. Once such notice is given for any prepayment,
Borrower is obligated to make such prepayment on the date so indicated.
(c)
Other
Prepayments; Prepayment Fee
. In the event the Advance (or any part thereof) is prepaid pursuant to Sections 2.4(a) or
(b), or as a result of receipt by Lender and application of proceeds of insurance, foreclosure or other realization on
Collateral, collection actions with respect to an Obligation, proceeds of Requisition, a payment from Bankruptcy or Other
Proceedings, prepayment compelled by law, or any other mandatory or involuntary prepayment, Borrower shall, concurrently with
Lender's receipt of such prepayment, pay a prepayment fee calculated as the difference between X and Y, with the variables X
and Y defined as follows:
X equals all future scheduled principal and interest
payments (from the date of prepayment through August 6, 2018) related to the portion of the Advance prepaid, reduced to present
value as of the prepayment date at the rate of three and 60/100
ths
percent (3.60%) per annum.
Y equals the amount of the Advance prepaid.
Borrower acknowledges that the prepayment fee is intended to
compensate the Lender and is not a penalty.
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2.5
Taxes;
Yield Protection; Illegality
.
(a)
Taxes
.
(i) All
payments by Borrower to or for the account of Lender under the Loan Documents shall be made free and clear of and without deduction
for present or future taxes, duties, levies, imposts, deductions, assessments, fees, withholdings or similar charges, and all liabilities
with respect thereto, excluding taxes imposed on or measured by Lender's net income or gross receipts, and franchise taxes imposed
on Lender (in lieu of net income taxes) by the jurisdiction (or any political subdivision thereof) under the laws of which Lender
is organized or maintains a lending office (all such non-excluded taxes, duties, levies, imposts, deductions, assessments, fees,
withholdings or similar charges, and liabilities being hereinafter referred to as "
Taxes
"). If Borrower shall
be required by any law to deduct any Taxes from or in respect of any sum payable under any Loan Document to Lender, (A) the
sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional
sums payable under this Section 2.5), Lender receives an amount equal to the sum it would have received had no such deductions
been made, (B) Borrower shall make such deductions, (C) Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law, and (D) within thirty (30) days after the date of such payment,
Borrower shall furnish to Lender the original or a certified copy of a receipt evidencing payment thereof. In the event and to
the extent that Lender receives, from an applicable taxing authority, a refund or credit for any Taxes so withheld and paid to
a Governmental Authority by Borrower and for which Borrower makes an additional payment to Lender under the foregoing clause (A),
Lender shall promptly make a refund to Borrower of the amount of such refund or credit.
(ii) Borrower
agrees to pay all present or future stamp taxes, court or documentary taxes, and other excise or property taxes or charges or similar
levies which arise from any payment made under any Loan Document or from the execution, delivery, performance, enforcement, filing
or registration of, or otherwise with respect to, any Loan Document (hereinafter referred to as "
Other Taxes
").
(iii) If
Borrower shall be required to deduct or pay any Taxes or Other Taxes from or in respect of any sum payable to Lender under any
Loan Document, Borrower shall also pay to Lender, at the times interest is paid, such additional amounts that Lender specifies
as necessary to preserve the after-tax yield (after factoring in all Taxes, Other Taxes, and taxes imposed on or measured by net
income or gross receipts, and franchise taxes) Lender would have received if such Taxes or Other Taxes had not been imposed.
(iv) Borrower
agrees to indemnify Lender for (A) the full amount of Taxes and Other Taxes (including any Taxes or Other Taxes imposed or
asserted by any jurisdiction on amounts payable under this Section 2.5) paid by Lender, (B) amounts otherwise payable under
this Section 2.5, and (C) all liabilities (including penalties, interest and expenses) arising therefrom or with respect thereto,
in each case whether or not such Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental
Authority. Payment under this Section (iv) shall be made within thirty (30) days after the date Lender makes a demand therefor.
(b)
Matters
Applicable to all Requests for Compensation
. A certificate of Lender claiming compensation under this Section 2.5 and setting
forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining
such amount, Lender may use any reasonable averaging and attribution methods.
(c)
Survival
.
All of Borrower's obligations under this Section 2.5 shall survive repayment of the Advance and all interest thereon.
2.6
Wire
Transfers
. If the Advance is, at Borrower's request, to be wire transferred to Borrower or any other Person, such transfer
shall be subject to all applicable law, including the policies of the Board of Governors of the Federal Reserve System. Borrower
acknowledges that as a result thereof, the transmission of the Advance may be significantly delayed.
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2.7
Renewal
of Credit Facilities
. Borrower acknowledges that any request that it makes for a renewal, extension, or replacement of the
credit facilities contained in this Agreement shall be granted or withheld by Lender in the exercise of Lender's sole discretion.
2.8
Conditions
.
Lender shall not be required to make the Advance unless at such time: all Conditions Precedent that are relevant to the Advance
have been timely fulfilled; none of the covenants, representations or warranties of Borrower or any other Person other than Lender
that are contained in the Loan Documents shall have been materially breached or shall be materially untrue; no Default or Event
of Default shall have occurred and be outstanding; no default shall have occurred and be outstanding under the Bulk Beothuk Loan
Agreement, the Bulk Discovery Loan Agreement or the Bulk Cajun Loan Agreement; there shall have been no Materially adverse change
in the businesses, assets, or liabilities of Holding Company since the effective date of its draft audited financial reports dated
or received by Lender on July 16, 2013, and its unaudited 1Q2013 financial report provided to Lender on May 21, 2013; and all other
requirements set forth in the Loan Documents shall be satisfied in all material respects; provided that any of the foregoing may
be waived by the Lender if done in writing. Other than as expressly set forth herein, Lender shall be under no obligation to make
advances to Borrower, and no other advances made by Lender apart from the requirements of this Agreement shall be deemed to establish
any contrary practice, course of dealing or obligation.
ARTICLE
III
CONDITIONS PRECEDENT
3.1
Conditions
Precedent to the Advance
. Lender's obligation to make the Advance under this Agreement shall be subject to the fulfillment,
on or before September 30, 2013 (or such later date as Lender approves in writing), of all of the following conditions precedent,
and all other conditions precedent that may be contained in any of the Loan Documents:
(a)
General
Documents
. Borrower shall furnish to Lender the following, in form and substance satisfactory to Lender, dated as of the Closing
Date, unless otherwise indicated below:
(i) this
Agreement executed by the parties hereto and the Request for Advance executed by the Borrower in substantially the form attached
hereto as
Exhibit A
;
(ii) a
First Preferred Ship Mortgage encumbering the Vessel, duly executed by Borrower, in form and substance satisfactory to Lender,
that has been notarized and that complies with all other formalities as required for recordation in the Marshall Islands Registry
(the "
Bulk Liberty Mortgage
");
(iii) an
Assignment of Charter, Earnings and Insurances (respecting the Time Charter and the ED & F Charter) executed by Borrower, in
form and substance satisfactory to Lender (the "
Borrower's Earnings Assignment Agreement
");
(iv) a
certification that an executed Notice of Assignment, in form and substance satisfactory to Lender, respecting the Borrower's Earnings
Assignment Agreement was delivered to Charterer, and an Acknowledgement and Agreement executed by Charterer, in form and substance
satisfactory to Lender;
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(v) an
Assignment of Charter, Earnings and Insurances executed by Charterer, in form and substance satisfactory to Lender (the "
Charterer's
Earnings Assignment Agreement
");
(vi) a
certification that an executed Notice of Assignment, in form and substance satisfactory to Lender, respecting the Charterer's Earnings
Assignment Agreement was delivered to Phoenix, and an Acknowledgement and Agreement executed by Phoenix, in form and substance
satisfactory to Lender;
(vii) an
Assignment of Earnings and Insurances executed by Phoenix, in form and substance satisfactory to Lender (the "
Phoenix Earnings
Assignment Agreement
");
(viii) a
copy of the ED & F Charter, including the Novation Agreement and evidence from Borrower to ED & F, in form acceptable to
Lender, that instructs ED & F to remit all charter hire to the Allseas Cash Deposit Account;
(ix) a
Manager's Undertaking executed by Seamar Management S.A., in form and substance satisfactory to Lender;
(x) a
Manager's Undertaking executed by Phoenix US, in form and substance satisfactory to Lender;
(xi) a
Funds Deposit Agreement executed by Borrower, Charterer, Phoenix, Allseas, and Lender, in form and substance satisfactory to Lender
(the "
Funds Deposit Agreement
");
(xii) a
Charge over Shares regarding all of the issued and outstanding shares of stock in Borrower, executed by Pledgor, in form and substance
satisfactory to Lender (the "
Shares Charge
"), and (A) a Shareholder's Proxy executed by Pledgor in substantially
the form attached to the Shares Charge, (B) a Share Transfer Form executed by Pledgor in substantially the form attached to
the Shares Charge that pertains to the shares subject to the Shares Charge, (C) all share certificates for all issued and
outstanding shares of stock of Borrower, (D) an Undertaking executed by Pledgor in substantially the form attached to the
Shares Charge, and (E) undated Director & Officer Resignation Letters executed by all of the directors and officers of
Borrower in substantially the form attached to the Shares Charge;
(xiii) a
Charge Over Bulk Liberty Hire Account executed by Borrower and Lender, in form and substance satisfactory to Lender (the "
Borrower
Charge Over Bulk Liberty Hire Account
"), and a letter executed by HSBC Bank Bermuda Limited respecting the Borrower Charge
Over Bulk Liberty Hire Account, in form and substance satisfactory to Lender;
(xiv) a
Charge Over Cash Deposit executed by Allseas and Lender, in form and substance satisfactory to Lender (the "
Allseas Charge
Over Cash Deposit
"), and a letter executed by HSBC Bank Bermuda Limited respecting the Allseas Charge Over Cash Deposit
Account, in form and substance satisfactory to Lender;
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(xv) an
irrevocable consent to appointment as registered agent for service of process on Borrower, Pledgor, Allseas, Phoenix, and the Guarantors,
executed by Leicht & Rein Tax Associates, Ltd., 570 Seventh Avenue, New York, New York 10018 ("
Process Agent
"),
in form acceptable to Lender ("
Process Agent Appointment
");
(xvi) copies
of the executed Time Charter, ED & F Charter, Technical Management Agreement, and Commercial Management Agreement certified
by an officer of Borrower or another individual acceptable to Lender, containing a certification that they are still in full force
and effect, and have not been amended or rescinded;
(xvii) a copy of the executed
Sub-Time Charter certified by an officer of Charterer or another individual acceptable to Lender, containing a certification that
it is still in full force and effect, and has not been amended or rescinded;
(xviii) certified
copies of all entries and filings in respect of each of Borrower, Holding Company, Pledgor, and Allseas on file in the Register
of Companies at the office of the Registrar of Companies in Hamilton, Bermuda;
(xix) copies,
certified by the secretaries of the respective companies or other individuals acceptable to Lender, of the Constitutional Documents
of each of Borrower, Holding Company, Pledgor, and Allseas, and of minutes of the meetings of the board of directors of each of
Borrower, Holding Company, Pledgor, and Allseas containing,
inter alia
, the unanimous resolutions of the directors of each
of such companies approving such companies' authorization of and entry into the Loan Documents to be executed on their behalf;
(xx) a
Certificate of Compliance issued by the Bermuda Registrar of Companies in respect of each of Borrower, Holding Company, Pledgor,
Allseas;
(xxi) a
certified copy of the Register of Shareholders in respect of each of Borrower, Holding Company, Pledgor, and Allseas;
(xxii) a
certified copy of the Register of Directors and Officers in respect of each of Borrower, Holding Company, Pledgor, and Allseas,
certified by their respective secretaries;
(xxiii) certified
copy of a current Foreign Exchange Letter issued by the Bermuda Monetary Authority with respect to each of Borrower, Holding Company,
Pledgor, and Allseas, certified by their respective secretaries;
(xxiv) a
certified copy of a current Tax Assurance issued by the Bermuda Registrar of Companies for the Minister of Finance in relation
to each of Borrower, Holding Company, Pledgor, and Allseas, certified by their respective secretaries;
(xxv) copies
of the Constitutional Documents and public records of Charterer obtained from the Registry of Corporate Affairs and the High Court
Registry of the British Virgin Islands and certified by the secretary of Charterer;
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(xxvi) copies
of the memorandum and articles of association and certificate of incorporation of Charterer certified by the secretary of Charterer;
(xxvii) copies
of the public information respecting Charterer revealed from a search of each of the Civil Index Book and the Commercial Book,
each from the date of the Charterer's incorporation, maintained by the British Virgin Islands' High Court Registry;
(xxviii) a certificate of the
secretary of the Charterer identifying, inter alia, the directors, officers, and shareholders of Charterer;
(xxix) a
copy certified by the secretary of the Charterer of the written resolutions of the directors of Charterer approving, inter alia,
the Charterer's authorization of and entry into the Loan Documents to be executed for and on behalf of Charterer;
(xxx) a
copy of the register of the members of Charterer certified by the secretary of Charterer;
(xxxi) a
copy of the register of the directors of Charterer certified by the secretary of Charterer;
(xxxii) a certificate of the secretary
of Phoenix, certifying and attaching:
(A) copies
of the Constitutional Documents and public records of Phoenix obtained from the Registry of Corporate Affairs and the High Court
Registry of the British Virgin Islands;
(B) copies
of the memorandum and articles of association and certificate of incorporation of Phoenix;
(C) a
copy of the written resolutions of the directors of Phoenix respecting, inter alia, Phoenix's authorization of and entry into the
Loan Documents to be executed for and on behalf of Phoenix;
(D) verifies
the incumbency and signature of the individual who executes Loan Documents on behalf of Phoenix; and
(E) copies
of the public information respecting Phoenix revealed from a search of each of the Civil Index Book and the Commercial Book, each
from the date of Phoenix's incorporation, maintained by the British Virgin Islands' High Court Registry;
(xxxiii) a Marshall Islands Foreign
Maritime Entity Certificate of Good Standing for the Borrower issued by the Marshall Islands Registry on or about the Closing Date;
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(xxxiv) certified true copies
of executed powers of attorneys appointing all attorneys-in-fact who execute Loan Documents on behalf of Borrower, Holding Company,
Pledgor, Bulk Cajun Pledgor, Allseas, Phoenix, Phoenix US, Bulk Discovery, Bulk Cajun, Bulk Atlantic, or Charterer;
(xxxv) certifications of the signatures
of all individuals who execute Loan Documents on behalf of Borrower, Holding Company, Pledgor, Allseas, Phoenix, Phoenix US, Bulk
Discovery, Bulk Cajun, Bulk Atlantic, or Charterer;
(xxxvi) legal opinions of counsel
in Bermuda, the British Virgin Islands, the Marshall Islands and Panama that are acceptable to Lender, in form acceptable to Lender,
regarding this Agreement and the transactions and matters contemplated therein;
(xxxvii) an amended and restated
guaranty given by (A) Bulk Discovery, with respect to the Obligations, the Bulk Beothuk Obligations and the Bulk Cajun Obligations,
and (B) Bulk Cajun, with respect to the Obligations, the Bulk Beothuk Obligations and the Bulk Discovery Obligations, (C) Bulk
Atlantic, with respect to the Obligations, the Bulk Discovery Obligations and the Bulk Cajun Obligations, and (D) the Borrower
with respect to the Bulk Beothuk Obligations, the Bulk Cajun Obligations and the Bulk Discovery Obligations, executed in form and
substance satisfactory to Lender (the "
Cross-Collateral Guaranty
");
(xxxviii) the Amended and Restated
Omnibus Agreement, executed by Lender, Borrower, Bulk Discovery, Bulk Cajun, Bulk Atlantic, Holding Company, Charterer, Pledgor,
Bulk Cajun Pledgor, Phoenix, Phoenix US, and Allseas, in form and substance satisfactory to Lender (the "
Omnibus Agreement
");
and
(xxxix) such other agreements,
instruments, documents, and certifications as Lender may reasonably require.
(b)
Vessel
Documents
. Lender shall have received:
(i) Copies
of the following documents respecting the Borrower's purchase of the Vessel (certified by Borrower as true, correct and complete):
(A) Memorandum
of Agreement dated 9th April 2013;
(B) Evidence
that the Vessel was registered immediately prior to purchase thereof by the seller thereof in the Marshall Islands registry free
and clear of all liens and encumbrances;
(C) Bill
of Sale in favor of the Borrower;
(D) Copy
of Permission for Sale issued by the Marshall Islands Registry to the Seller of the Vessel respecting the sale of the Vessel to
the Borrower; and
(E) Protocol
of Delivery and Acceptance.
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(ii) Copies
of the following documents that are duly issued, valid and current with respect to the Vessel:
(A) A
one (1) year validity Provisional Certificate of Registry and Radio License for the Vessel issued under the authority of the Republic
of the Marshall Islands in the name of the Borrower;
(B) Document
of Compliance issued under the International Convention for the Safety of Life at Sea, 1974;
(C) International Tonnage Certificate
(ITC) for the Vessel;
(D) International
Safety Management Certificate;
(E) International
Ship Security Certificate; and
(F) Confirmation of Class Certificate
issued by Nippon Kaiji Kyokai showing the Vessel's assigned class as BULK CARRIER and stating there are no recommendations.
(c)
Bulk
Liberty Mortgage Filing
. The Bulk Liberty Mortgage shall have been duly filed and recorded at the Marshall Islands Registry,
such that it creates a duly perfected preferred mortgage and maritime lien under the laws of the Republic of the Marshall Islands,
and creates a preferred mortgage on the Vessel (as the term "preferred mortgage" is defined at 46 U.S.C. § 31301(6)(B)),
subject to no Encumbrances thereon other than Permitted Encumbrances. Lender shall have received an original certificate of ownership
and encumbrance for the Vessel issued by the Marshall Islands Registry that indicates that Borrower is the sole owner of record
of the Vessel, that the Bulk Liberty Mortgage has been duly filed and recorded at the Marshall Islands Registry, and that there
are no outstanding Encumbrances of record at the Marshall Islands Registry that pertain to the Vessel.
(d)
Vessel
Items
. Lender shall have received the results of a survey of the Vessel, and certified copies of valid and unexpired documents
that indicate that the Vessel satisfies the requirements contained in Section 4.19, in each such case that are satisfactory to
Lender, in the exercise of its sole discretion. There shall have been no change in the condition of the Vessel or in the existence
aboard or condition of any equipment listed in such survey since the date of the surveyor's inspection thereof, except for ordinary
wear and tear.
(e)
Financing
Statements
. There shall have been duly filed in all jurisdictions of Lender's choice forms of Uniform Commercial Code financing
statements (or Company's Registry filings) and amendments thereto, as necessary, pertaining to Borrower, Bulk Discovery, Bulk Cajun,
Bulk Atlantic, Pledgor, Allseas, Phoenix, and Charterer as debtors, with respect to the Collateral, in forms required by Lender.
(f)
Perfection
.
Borrower, Bulk Discovery, Bulk Cajun, Bulk Atlantic, Pledgor, Allseas, Phoenix and Charterer shall furnish to Lender all other
evidence of the perfection of the security granted in the Loan Documents in all jurisdictions of Lender's choice, in form as it
may require, and evidence satisfactory to Lender that all such mortgages, assignments, and other security interests have the priority
required of them herein or in the relevant Loan Documents.
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(g)
Insurance
.
Borrower shall have furnished to all underwriters and protection and indemnity associations Notices of Assignment as required herein,
which shall have been duly endorsed on all policies and entries. Lender shall have been furnished with certified copies of all
policies of insurance and protection and indemnity association certificates of entry that Borrower is required to procure and maintain
pursuant to the Loan Documents, along with all required endorsements thereto, a letter of undertaking from the Vessel's protection
and indemnity association, and a letter from the Borrower's insurance broker as required herein. Lender shall have been furnished
with certified copies of all policies of insurance that Charterer obtains for which it is required to furnish documents pursuant
to the Charterer's Earnings Assignment Agreement (or of a certificate of entry in the case of a protection and indemnity association),
and all such documents that Charterer is required to furnish pursuant to the Charterer's Earnings Assignment Agreement. Charterer
shall have furnished to all underwriters and protection and indemnity associations Notices of Assignment as required therein, which
shall have been duly endorsed on all policies and entries. Borrower and Charterer shall have provided to Lender duplicate originals
of the Notices of Assignment respecting the Borrower's Earnings Assignment Agreement, the Charterer's Earnings Assignment Agreement,
and the Phoenix Earnings Assignment Agreement, in form and substance satisfactory to Lender.
(h)
Borrower
Bank Account
. Borrower shall have opened a demand deposit account with HSBC Bermuda Bank Limited for the purpose of receiving
from the Allseas Cash Deposit Account charter hire generated under the Time Charter, the Sub-Time Charter and the ED & F Charter
(the "
Bulk Liberty Hire Account
").
(i)
Allseas
Bank Account
. Allseas shall have opened a demand deposit account or confirmed that such demand deposit account exists, as the
case may be, with HSBC Bermuda Bank Limited for the purpose of receiving all revenues from any third party (including, but not
limited to ED & F) for employment of the Vessel (the "
Allseas Cash Deposit Account
").
(j) [not
used]
(k)
Bulk
Discovery Cross-Collateralization
.
(i) The
First Naval Mortgage granted by Bulk Discovery to Lender on the BULK DISCOVERY dated March 2, 2011 and recorded in the Panamanian
Public Registry under Microjacket: 35245 and Document: 1904846, on July 28, 2011, as amended by Amendment of Mortgage dated December
21, 2011, as further amended by Amendment of Mortgage dated January 10, 2012, and as restated and further amended by Amendment
of Mortgage dated March 4, 2013 (collectively, the "
Bulk Discovery Mortgage
") shall be further amended such that
(i) it acknowledges that an Event of Default shall be an event of default of Bulk Discovery under the Bulk Discovery Loan Agreement,
(ii) it secures the obligations of Bulk Discovery under the Cross Collateral Guaranty, and (iii) shall otherwise be in form satisfactory
to Lender in the exercise of its sole discretion. Such amendment shall be preliminarily filed and recorded at the Panamanian Public
Registry such that the Bulk Discovery Mortgage, as amended, is a duly perfected mortgage and maritime lien under the laws of the
Republic of Panama, and creates a preferred mortgage on the Vessel (as the term "preferred mortgage" is defined at 46 U.S.C.
§ 31301(6)(B)), subject to no Encumbrances thereon other than Permitted Encumbrances and the Bulk Discovery Mortgage,
as so further amended;
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(ii) Lender
shall have received a certified copy of a certificate of ownership and encumbrance for the BULK DISCOVERY issued by the Panamanian
Public Registry that indicates that Bulk Discovery is the sole owner of record of the BULK DISCOVERY, that the Bulk Discovery Mortgage
and the amendment thereto referred to in Section 3.1(k)(i) have been duly filed and recorded at the Panama Public Register Office,
and that there are no other outstanding Encumbrances of record at the Panama Public Register Office that pertain to the BULK DISCOVERY;
(iii) Each
of the Bulk Discovery Loan Documents shall be amended as Lender reasonably requires in order that the Group Obligations are completely
cross-collateralized; and
(iv) The
Lender shall have received copies of such corporate authorizations and other instruments and documents relating to amendments to
the Bulk Discovery Loan Documents as it may reasonably request.
(l)
Bulk
Cajun Cross-Collateralization
.
(i) The
First Naval Mortgage granted by Bulk Cajun to Lender on the BULK CAJUN dated October 21, 2011 and recorded in the Panamanian Public
Registry under Microjacket: 35900 and Document: 1905707, on March 13, 2012, as amended by Amendment of Mortgage dated December
21, 2011, and as restated and further amended by Amendment of Mortgage dated March 4, 2013 (collectively, the "
Bulk Cajun
Mortgage
") shall be further amended such that (i) it acknowledges that an Event of Default shall be an event of default
of Bulk Cajun under the Bulk Cajun Loan Agreement, (ii) it secures the obligations of Bulk Cajun under the Cross-Collateral Guaranty,
and (iii) shall otherwise be in form satisfactory to Lender in the exercise of its sole discretion. Such amendment shall be preliminarily
filed and recorded at the Panamanian Public Registry such that the Bulk Cajun Mortgage, as amended, is a duly perfected mortgage
and maritime lien under the laws of the Republic of Panama, and creates a preferred mortgage on the Vessel (as the term "preferred
mortgage" is defined at 46 U.S.C. § 31301(6)(B)), subject to no Encumbrances thereon other than Permitted Encumbrances
and the Bulk Cajun Mortgage, as so further amended;
(ii) Lender
shall have received a certified copy of a certificate of ownership and encumbrance for the BULK CAJUN issued by the Panamanian
Public Registry that indicates that Bulk Cajun is the sole owner of record of the BULK CAJUN, that the Bulk Cajun Mortgage and
the amendment thereto referred to in Section 3.1(l)(i) have been duly filed and recorded at the Panama Public Register Office,
and that there are no other outstanding Encumbrances of record at the Panama Public Register Office that pertain to the BULK CAJUN;
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(iii) Each
of the Bulk Cajun Loan Documents shall be amended as Lender reasonably requires in order that the Group Obligations are completely
cross-collateralized; and
(iv) The
Lender shall have received copies of such corporate authorizations and other instruments and documents relating to amendments to
the Bulk Cajun Loan Documents as it may reasonably request.
(m)
Bulk
Beothuk Cross-Collateralization
.
(i) The
First Preferred Ship Mortgage granted by Bulk Atlantic to Lender on the BULK BEOTHUK dated February 19, 2013 and recorded at the
Marshall Island Registry in Book PM 24, at Page 164, at 4:31 A.M. E.S.T, on February 19, 2013, (the "
Bulk Beothuk Mortgage
")
shall be amended such that (i) it acknowledges that an Event of Default shall be an event of default of Bulk Atlantic under the
Bulk Beothuk Loan Agreement, (ii) it secures the obligations of Bulk Cajun under the Cross-Collateral Guaranty, and (iii) shall
otherwise be in form satisfactory to Lender in the exercise of its sole discretion. Such amendment shall be filed and recorded
at the Marshall Islands Registry such that the Bulk Beothuk Mortgage, as amended, is a duly perfected mortgage and maritime lien
under the laws of the Republic of the Marshall Islands, and creates a preferred mortgage on the Vessel (as the term "preferred
mortgage" is defined at 46 U.S.C. § 31301(6)(B)), subject to no Encumbrances thereon other than Permitted Encumbrances
and the Bulk Beothuk Mortgage, as so amended;
(ii) Lender
shall have received a certified copy of a certificate of ownership and encumbrance for the BULK BEOTHUK issued by the Marshall
Islands Registry that indicates that Bulk Atlantic is the sole owner of record of the BULK BEOTHUK, that the Bulk Beothuk Mortgage
and the amendment thereto referred to in Section 3.1(m)(i) have been duly filed and recorded at the Marshall Islands Registry,
and that there are no other outstanding Encumbrances of record at the Marshall Islands Registry that pertain to the BULK BEOTHUK;
(iii) Each
of the Bulk Beothuk Loan Documents shall be amended as Lender reasonably requires in order that the Group Obligations are completely
cross-collateralized; and
(iv) The
Lender shall have received copies of such corporate authorizations and other instruments and documents relating to amendments to
the Bulk Beothuk Loan Documents as it may reasonably request.
(n)
Fees
and Expenses
.
(i) Borrower
shall have paid (A) a commitment fee of one percent (1%) of the Advance (the "
Commitment Fee
"), (B) Lender's
reasonable expenses incurred for inspecting and appraising the Vessel, (C) all filing and recording fees, and all stamp and
other taxes payable with respect to the consummation of the transactions as contemplated in this Agreement, and (D) Lenders'
reasonable attorneys' fees and other expenses incurred as of the Closing Date in connection with the transactions contemplated
in this Agreement.
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(ii) Notwithstanding
the above, Lender will be responsible for $25,000 in costs and expenses (the "
Lender's Allowance
") and payment
of the transactions costs described in Section 3.1(n)(i) shall be made as follows:
first
, by application of
the $25,000 deposit paid by the Borrower upon acceptance of the Term Sheet dated May 7, 2013 between the Lender and the Holding
Company;
second
, by the Lender, up
to the Lender's Allowance amount; and
third
, by the Borrower.
3.2
Compliance
with Loan Documents
. Without limiting the provisions of Section 2.8, it is a condition precedent to the Advance that
the representations and warranties of Borrower and Guarantors contained in the Loan Documents shall be true, and there shall be
no outstanding Default or Event of Default thereunder by any of the Loan Documents, and there shall not exist any Material adverse
condition with respect to a Credit Party that has not been contained in the most recent written information about them, their
assets, their businesses, and their financial condition that has not heretofore been disclosed to Lender in writing.
3.3
Unfulfilled
Conditions Precedent Become Ongoing Covenants
. Conditions Precedent specified in this Article III that, with the prior written
consent of the Lender in its sole discretion, remain unfulfilled as of the disbursement of the Advance shall survive and shall
be deemed ongoing covenants of Borrower, the performance of which shall be due on demand, unless they are waived by Lender in
writing. Borrower shall cause Allseas and Phoenix to comply with all Conditions Precedent, applicable to them respectively, specified
in this Article III.
ARTICLE
IV
REPRESENTATIONS AND WARRANTIES
The Credit Parties party thereto make the
following representations, warranties, and covenants in addition to those which may be contained elsewhere in the Loan Documents.
All of the following and such other representations, warranties, and covenants as such parties shall make in the other Loan Documents
are continuing representations and warranties and shall survive the Closing Date until all of the Obligations are fully performed:
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4.1
Company
Matters
. Each of Borrower, Pledgor, Allseas, Phoenix, and Holding Company is an exempted company incorporated under the laws
of Bermuda, and possesses the capacity to sue and be sued in its own name and is in good standing under the laws of Bermuda. Charterer
is an exempted company incorporated under the laws of the British Virgin Islands, and possesses the capacity to sue and be sued
in its own name and is in good standing under the laws of the British Virgin Islands. Each Credit Party, and each of Allseas, Phoenix,
Bulk Atlantic, Bulk Cajun and Bulk Discovery possesses all requisite power and authority to enter into, execute, deliver, and perform
its obligations under this Agreement and the other Loan Documents, the Bulk Beothuk Loan Documents, the Bulk Cajun Loan Documents,
and the Bulk Discovery Loan Documents, respectively, to which it is or is to become party pursuant to this Agreement and to take
all action as may be necessary to consummate the transactions contemplated thereby. The entry into, execution, delivery, and performance
by each Credit Party, and each of Allseas, Phoenix, Bulk Atlantic, Bulk Cajun and Bulk Discovery of the Loan Documents to which
it is, or, pursuant to this Agreement is to be a party, and the transactions contemplated thereby, have been duly authorized by
all necessary corporate action. This Agreement and the Loan Documents, and the other Group Loan Documents, in each case which this
Agreement contemplates that any of the Credit Parties, Allseas, Phoenix, Bulk Atlantic, Bulk Cajun or Bulk Discovery, respectively,
will execute have been duly executed by such Persons and constitute (or shall constitute when executed and delivered) legal, valid,
and binding obligations of such Persons, enforceable against them in accordance with their terms.
4.2
Legal
Matters
. The execution, delivery, and performance of the Loan Documents and the other Group Loan Documents to which any of
the Credit Parties, Allseas, Phoenix, Bulk Atlantic, Bulk Cajun or Bulk Discovery, respectively, are or are to become party do
not and will not (a) violate any provision of any law, rule, regulation, order, writ, judgment, injunction, decree, determination
or award presently in effect having applicability to any of them, or (b) result in a breach of or constitute a default under
any indenture, loan or credit agreement, or any other note, instrument, or agreement for borrowed money. None of the Credit Parties,
Allseas, Phoenix, Bulk Atlantic, Bulk Cajun or Bulk Discovery, respectively, are in Material violation of or Material default under
any such law, rule, order, writ, judgment, injunction, decree, determination, award, indenture, loan or credit agreement, or other
note, instrument, or agreement for borrowed money. The execution, delivery, and performance of the Loan Documents, and the other
Group Loan Documents, in each case to which each of the Credit Parties, Allseas, Phoenix, Bulk Atlantic, Bulk Cajun or Bulk Discovery,
respectively, is or is to become a party do not and will not violate its Constitutional Documents, are within its powers, and have
been duly authorized by all necessary company action.
4.3
Authorization;
Validity and Enforceability
. This Agreement has been duly executed on behalf of Borrower and Guarantors, and constitutes a
valid obligation of each of them, and is enforceable against each of them in accordance with its terms. Each Loan Document, and
each other Group Loan Document when executed and delivered by such of the Credit Parties, Allseas, Phoenix, Bulk Atlantic, Bulk
Cajun or Bulk Discovery, respectively, as are stated to be parties thereto, will be a legal, valid and binding obligation of such
Persons as are stated to be party thereto, enforceable against each such Person in accordance with its terms. This Agreement, each
Loan Document, and each other Group Loan Document is not subject to any claim, defense or right of offset or recoupment of any
kind whatsoever. None of the Credit Parties, Allseas, Phoenix, Bulk Atlantic, Bulk Cajun or Bulk Discovery, respectively, has any
claims, counterclaims or defenses against the Lender or any other Person that would or might affect (1) the validity, enforceability
or binding nature of any provision of any Loan Document, or any other Group Loan Document, or (2) the collectability of any
of the Obligations or any other Group Obligations, or any of the obligations of any Guarantor, Pledgor, Allseas, or Phoenix under
the Loan Documents, or of any of the parties to any other Group Loan Documents.
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4.4
Lines
of Business
. Borrower is engaged exclusively in the ownership and operation of the Vessel for operation in the international
bulk cargo trade, including to and from ports in the United States, and activities reasonably related thereto.
4.5
Government
Approvals
. No Permit from, or filing or registration with any Governmental Authority is or will be necessary to the valid execution,
delivery, or performance of the Loan Documents by the Credit Parties, Allseas or Phoenix.
4.6
Ownership;
Subsidiaries
. All Equity Interests in the Credit Parties are owned as set forth in
Schedule 4.6
. Borrower has no
Subsidiaries other than as set forth in
Schedule 4.6
. Except as has been disclosed to the Lender in
Schedule 4.6
,
there are no outstanding subscription agreements, membership interest or share purchase agreements, warrants, or options for any
Equity Interests in Borrower. Allseas and Phoenix are, directly or indirectly, wholly-owned subsidiaries of Holding Company and
Affiliates of Borrower.
4.7
Financial
Condition
. All financial information heretofore given to Lender by Borrower or any of its Affiliates pertaining to Borrower
or any other Person reasonably and accurately reflected the facts stated therein or represented thereby as of the dates of such
financial information, and was prepared in accordance with GAAP, and was otherwise prepared in a manner that is consistent with
the financial information with which Lender has been provided heretofore, except as otherwise expressly noted therein. At such
dates there were no omissions of material facts or materially erroneous statements therein or therefrom, as determined in accordance
with GAAP.
4.8
Legal
Actions
. There are no Material actions, suits, or proceedings pending or threatened against any of the Credit Parties, Bulk
Atlantic, Bulk Cajun or Bulk Discovery or any of their assets, before any court, administrative or other tribunal, arbitrator or
panel of arbitrators, or Governmental Authority except as set forth in
Schedule 4.8
hereto.
4.9
Title
and Encumbrances
. Borrower has good and marketable title to the Vessel and to all of the other Collateral except Collateral
owned by Pledgor, Charterer or Allseas. Pledgor has good and marketable title to all of the Equity Interest in Borrower, and all
Collateral related thereto. Charterer has good and marketable title to the Time Charter, all other Collateral described in the
Charterer's Earnings Assignment Agreement, and all Collateral related thereto. Allseas has good and marketable title to the deposit
account described in the Allseas Charge Over Cash Deposit and all Collateral related thereto. None of Borrower's assets or any
of the other Collateral are subject to any Encumbrances except (a) Encumbrances in favor of Lender, (b) Encumbrances
listed in
Schedule 4.9
, and (c) Encumbrances expressly permitted in any Loan Documents (each, a "
Permitted
Encumbrance
").
4.10
Contracts
.
The Time Charter, Sub-Time Charter, ED & F Charter, Technical Management Agreement, and Commercial Management Agreement are
in full force and effect, to the knowledge of the Credit Parties no parties thereto are in default thereunder, and no such contracts
have been assigned, assumed, amended, supplemented, renewed, restated, replaced, or otherwise modified.
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4.11
Place
of Business
. Borrower's, Charterer's and Allseas' offices where they keep their books and records pertaining to deposit accounts
and general intangibles owing or belonging to them are located at the address of Borrower stated in Section 9.4. For purposes
of the Uniform Commercial Code, the Borrower, Charterer, Pledgor and Allseas have only one place of business located at, or if
each has more than one place of business, the chief executive office where management decisions are taken is, as stated in
Schedule 4.11
.
4.12
Disclosure
.
All written statements, representations, and warranties made by any of the Credit Parties, Allseas, and Phoenix in the Loan Documents
or in any other Group Loan Documents are materially true, and do not omit any material facts on the date as of which such information
was stated or certified. All copies of documents, instruments or certificates delivered to Lender in connection herewith by any
Credit Party are true, correct and complete.
4.13
Laws
and Regulations
. The Credit Parties, Allseas, and Phoenix are in compliance with all applicable laws, except for any violation
of which would not subject any Collateral to forfeiture, could not subject any directors, officers, or shareholders of any of the
Credit Parties, Allseas, or Phoenix to imprisonment, and could not have a Material effect on the Credit Parties, Allseas, or Phoenix.
Borrower is not engaged and shall not engage in the business of purchasing or carrying margin stock (within the meaning of Regulation
U issued by the Board of Governors of the Federal Reserve System), or extending credit for the purpose of purchasing or carrying
margin stock. Borrower is not subject to the Investment Company Act of 1940, the Public Utility Holding Company Act of 1935, or
any other law that restricts entering into or performing any obligation of Borrower under any Loan Document.
4.14
Tax
Status
. The Credit Parties and their Subsidiaries have filed all tax returns and reports required to be filed, have made provision
in accordance with GAAP for the payment of all applicable and accrued or accruing foreign, U.S. federal, state and local taxes,
and have paid all such taxes which are due and payable.
4.15
Fiscal
Year
. The Credit Parties' and their Subsidiaries' fiscal years for accounting and tax purposes end on December 31.
4.16
Intellectual
Property
. The Credit Parties own or possess the right to use, all of the trademarks, service marks, trade names, and copyrights
that are reasonably necessary for the operation of their businesses, without conflict with the rights of any other Person, and
none own any patents, patent rights, franchises, or licenses or registered trademarks, service marks, trade names, copyrights,
or other intellectual property rights.
4.17
ERISA
Compliance
. No Credit Party or any ERISA Affiliate thereof has any Pension Plan or Multiemployer Plan.
4.18
Environmental
Compliance
.
(a) The
Credit Parties, Bulk Atlantic, Bulk Cajun and Bulk Discovery and their respective Subsidiaries are in compliance in all material
respects with the requirements of all applicable Environmental Laws, the violation of which could have a Material adverse effect
on their assets or business.
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(b) No
Hazardous Materials have been generated or manufactured on, transported to or from, treated at, stored at or discharged from or
on any real property or from a vessel, owned, leased or operated by any Credit Party, Bulk Atlantic, Bulk Cajun and Bulk Discovery
or any of their respective Subsidiaries, in violation of any Environmental Laws.
(c) None
of the Credit Parties, Bulk Atlantic, Bulk Cajun and Bulk Discovery or any of their respective Subsidiaries have received notice
or otherwise learned of any claim, demand, suit, action, proceeding, event, condition, report, directive, Encumbrance, violation,
non-compliance or investigation indicating or concerning any potential or actual liability or remedial action arising in connection
with any non-compliance with or violation of the requirements of any applicable Environmental Laws, or the presence of, or release
or threatened release of any Hazardous Materials on or from any real property, or from a vessel, owned, leased or operated by any
of the Credit Parties, Bulk Atlantic, Bulk Cajun and Bulk Discovery or any of their respective Subsidiaries.
4.19
Vessel
.
The Vessel (a) satisfies the criteria to conduct the business as described in Section 4.4, (b) measures 7,638 light ship tons
and 46,747 deadweight tons, (c) is in class BULK CARRIER of Nippon Kaiji Kyokai, and is so certified, without any outstanding
exceptions or recommendations, and (d) has, and Borrower has possession of, all required national and international certificates
of financial responsibility, and all other Permits that are required to conduct the business described in Section 4.4, including
all Permits required under the laws of the Marshall Islands and the United States for the carriage of cargo under the Time Charter,
Sub-Time Charter and ED & F Charter.
4.20
Land
.
Charterer and Phoenix own no real property in the British Virgin Islands.
4.21
No
Prohibited Persons
. Neither Borrower nor any Affiliate of Borrower, nor any person or entity that owns or controls any of them
is a Prohibited Person. For purposes of this clause "ownership" shall mean 50% or more interest or a controlling minority
interest. "Control" shall mean the ability to direct or affect the day-to-day business of Borrower or any Affiliate of
Borrower.
ARTICLE
V
COVENANTS
So long as any Obligations are outstanding
or Lender has any commitment to make the Advance hereunder, Borrower and Guarantors agree to comply with the following covenants
that are applicable to them unless otherwise agreed to in writing by Lender:
5.1
Title
and Liens
.
(a) On
the Closing Date , Borrower shall be the sole owner of the whole of the Vessel and other Collateral, except Collateral owned by
Pledgor, Charterer, or Allseas
,
and shall thereafter retain good and marketable title thereto, subject to no Encumbrances
except Permitted Encumbrances; and
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(b) On
the Closing Date, Charterer shall have good and marketable title to the Time Charter, all Collateral described in the Charterer's
Earnings Assignment Agreement, and all Collateral related thereto, and shall thereafter retain good and marketable title thereto,
subject to no Encumbrances except Permitted Encumbrances.
5.2
Change
in Business
. Borrower shall not engage in any trade or business in which it is not currently engaged utilizing only the Vessel.
Borrower shall not change the location of its chief executive office or the office where it keeps its books and records pertaining
to accounts and general intangibles owing or belonging to it without giving Lender at least thirty (30) days' advance written notice.
5.3
Financial
Covenants
. Borrower shall maintain a ratio of EBITDA to Fixed Charges for each fiscal year of not less than 1.2 : 1. Holding
Company shall at all times have shareholders' equity of not less than $10,000,000.00, determined in accordance with GAAP.
5.4
Company
Matters
.
(a) Without
the written consent of Lender previously obtained, Borrower shall not, and shall not allow any of its Subsidiaries to:
(i) make
any Investments except for Permitted Investments or Investments otherwise permitted by this Agreement;
(ii) incur
any Indebtedness (other than borrowing funds under this Agreement), make any loans or advances, or extend credit to any Person;
(iii) acquire
any Equity Interests, create any Subsidiaries, or contribute to the equity of any Person;
(iv) declare
or pay any dividends, distribute any equity, or make any other distributions to its shareholders or members;
(v) redeem
any Equity Interests;
(vi) change
its fiscal year or make any material change in its method of accounting;
(vii) merge,
consolidate or amalgamate with or into any other Person, change the legal nature of its form of entity, or change its jurisdiction
of formation;
(viii) liquidate
or dissolve;
(ix) sell
or dispose of any assets other than equipment that is obsolete, or worn out, or no longer necessary for the conduct of Borrower's
business or the operation of the Vessel, however, if such equipment that is disposed of is equipment of the Vessel, such equipment
shall be concurrently replaced with equipment of equal value;
(x) grant
any Encumbrance on any of its assets except Permitted Encumbrances; or
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(xi) incur
or pay any management fees or commissions to any Person other than pursuant to the current express provisions of the Technical
Management Agreement and the Commercial Management Agreement.
(b) Borrower
shall pay all of its obligations as they mature,
provided,
it may contest obligations in good faith if appropriate reserves
therefor are established and maintained consistently with GAAP, and security therefor is posted as may be required by Lender.
5.5
Financial
Statements/Reporting Requirements
. Each of Borrower (on a stand alone basis and on a consolidated basis as to it and its Subsidiaries,
if any) and Holding Company (on a consolidated basis) shall deliver to Lender, in form and detail satisfactory to Lender, the following
information and documents, which shall be accurate and complete in all material respects:
(a) As
soon as available but no later than seventy-five (75) days after the end of the each of its fiscal quarters, complete copies of
its financial statements, which shall include its balance sheet, income statement, a statement of changes in equity, and a statement
of cash flows for the preceding fiscal quarter, prepared in a level of detail as reasonably required by Lender, certified by its
chief financial officer or a representative acceptable to Lender as being complete and correct, and fairly presenting its and their
respective financial conditions and the results of its and their respective operations in all material respects;
provided
,
however
, that complete copies of its financial statements for the fiscal quarter ended June 30, 2013 shall be delivered
to Lender on or before August 15, 2013;
(b) As
soon as available but no later than one hundred eighty (180) days after the end of the each of its fiscal years, complete copies
of its financial statements, which shall include its balance sheet, income statement, a statement of changes in equity, and a statement
of cash flows for the preceding fiscal year, prepared in a level of detail as reasonably required by Lender, certified by its chief
financial officer or a representative acceptable to Lender as being complete and correct, and fairly presenting its and their respective
financial conditions and the results of its and their respective operations in all material respects, and which, as to Holding
Company, shall have been audited by an independent certified public accountant that has been selected with the written approval
of Lender; simultaneously with the financial statements described in this Section 5.5(b), Holding Company shall deliver a certificate
by its chief financial officer or a representative acceptable to Lender confirming that, as of the last day of the fiscal year
covered by such statements, the covenants set forth in Section 5.3 have been met, which are calculations evidencing such compliance,
in reasonable detail as is satisfactory to the Lender;
provided
,
however
, that complete copies of its financial statements
for each of the fiscal year 2011 and the fiscal year 2012 shall be delivered to Lender on or before September 30, 2013;
(c) On
each August 1 and February 1 of each year, a Certificate of Compliance executed by an officer of Borrower (or its authorized representative
approved by Lender) in substantially the form attached hereto as
Exhibit B
;
(d) Within
thirty (30) days after they are due to be filed under applicable law, as extended pursuant to any valid extensions, copies of the
income tax returns for Borrower and Guarantors in each relevant jurisdiction for each of their fiscal years ending after the date
of this Agreement, and, if filing extensions are requested, Borrower and Guarantors shall furnish Lender forthwith with copies
of all related extension applications and approvals;
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(e) Within
ten (10) days after becoming aware of any of the following, written notice to Lender of:
(i) all
Material breaches of contract to which Borrower is a party,
(ii) any
Material disputed account receivable,
(iii) the
institution of any litigation or arbitration to which Borrower is a party or which affects any of its assets (including by means
of counterclaim, cross claim, impleader, or interpleader), in which the claim against the Borrower or a Guarantor is in excess
of $1,000,000.00,
(iv) the
revocation, modification, rescission or failure to renew of any Permit issued to Borrower or the Vessel,
(v) the
occurrence of any Default or Event of Default, together with a detailed statement of the steps being taken by the defaulting party
to deal with any such Default or Event of Default,
(vi) any
change in the jurisdiction of a Credit Party's formation, or location of Borrower's or Charterer's chief executive office or the
office where it keeps its books and records pertaining to accounts and general intangibles owing or belonging to it, or of the
establishment of any new, or the discontinuance of any existing, place of business of Borrower or Charterer,
(vii) the
death or disablement of Edward Coll such that he may no longer effectively participate in the management of Holding Company,
(viii) the
occurrence of damage to the Vessel in excess of the amount of the deductible or franchise amount of the hull and machinery insurance
thereon; a total loss of the Vessel occurs; or an incident of salvage or general average occurs with respect to the Vessel,
(ix) after
receiving knowledge of a Requisition of the Vessel, or knowledge that a Governmental Authority intends to effect a Requisition
of the Vessel (which shall be accompanied by a copy of the relevant communications received),
(x) after
the occurrence of any discharge from the Vessel of any Hazardous Material into the environment,
(xi) after
receipt of any notice from any Governmental Authority of any illegal act, omission, or condition by or concerning the Vessel or
its officers, crew, or cargoes,
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(xii) if
any material requirement of any Governmental Authority or classification society with respect to the Vessel is made that is not
complied with, or any Governmental Authority or classification society issues a recommendation or exception with respect to a certification
or Permit pertaining to the Vessel that is not complied with or rectified (which shall be accompanied by a copy of the relevant
communications received), or if any classification certificate for the Vessel is terminated,
(xiii) if
the Vessel is Seized,
(xiv) any other matter which
has resulted or might result in a Material adverse change in the financial condition or business of Borrower.
(f) Such
other statements, lists or property and accounts, budgets, forecasts, reports or other financial information as are regularly made
or maintained by Borrower as Lender may from time to time request.
Borrower shall provide to Lender copies of all Form CG-2692
accident reports (and all similar reports filed outside the United States) within five (5) days after submitting them to the United
States Coast Guard, and copies of all periodic classification society, damage, and insurance surveys that are prepared for the
Vessel.
5.6
Fiscal
Year
. No Credit Party shall change its fiscal year, nor shall it permit any Subsidiary thereof to do so, without the advance
written consent of Lender.
5.7
Accuracy
of Financial Information
. All financial information hereafter given to Lender by Borrower, any Guarantor, or any accountant,
or other professional therefor pertaining to Borrower, any Guarantor, or any Subsidiary thereof shall reasonably and accurately
reflect the facts stated therein or represented thereby as of the dates of such financial information subject to, in the case of
non-fiscal year-end information, normal year-end adjustments, and shall be prepared in accordance with GAAP and otherwise in a
manner that is consistent with the financial information with which Lender has been provided heretofore. There shall be no omissions
of material facts therefrom, determined in accordance with GAAP, and there shall be no material and erroneous statements therein,
determined in accordance with GAAP.
5.8
Access
.
The Borrower and Guarantors, shall cause their presidents, chief executive officers, chief financial officers, and authorized
representatives (and Holding Company shall cause the presidents, chief executive officers, chief financial officers, and authorized
representatives of Allseas and Phoenix, and the Persons with custody of or control over the books and records referred to in Section
5.9 pertaining to Allseas and Phoenix) to be available during customary office hours at least once each fiscal quarter for a conference
with a representative of Lender for the purpose of discussing the financial affairs of Borrower (and any Subsidiaries of Borrower
that may exist from time to time), Guarantors, Allseas and Phoenix.
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5.9
Accounting
Records
. Borrower and Guarantors shall maintain, and shall cause their Subsidiaries to maintain, adequate books, accounts and
records of all of their financial transactions and their assets and businesses, and prepare all financial statements, all in accordance
with GAAP and in compliance with the regulations of every Governmental Authority or other regulatory body having jurisdiction over
it or them or its or their businesses. Borrower and Guarantors shall permit, and cause their Subsidiaries to permit, employees
or agents of Lender at such reasonable times as Lender may request to inspect their assets, including without limitation regular
collateral audits, and to examine, audit, and make copies and memoranda of its and their documents, books, accounts and records,
including those kept in electronic form. None of Borrowers or Guarantors shall make or permit any material change in their accounting
policies or reporting practices, and shall ensure that none of their Subsidiaries do so, except (i) as required by generally
accepted accounting principles, or (ii) with the prior written consent of the Lender, which consent shall not unreasonably
be withheld.
5.10
Status
.
Borrower and Guarantors shall maintain, and shall cause their Subsidiaries to maintain, in full force and effect their corporate
existences, and shall maintain their qualifications to do business as foreign corporations or as a foreign maritime entity in each
jurisdiction in which the character of the assets owned by them or the nature of their activities make such qualification necessary
to avoid a material adverse effect on them.
5.11
Condition
of Assets
. Borrower and Guarantors shall maintain all of their assets that are necessary or useful in the proper conduct of
its business in good working order and condition, normal wear and tear and excepted.
5.12
Legal
Compliance
. Borrower and Guarantors shall, and shall cause each of their Subsidiaries to, comply with the requirements of all
applicable law, and judicial, arbitral, and governmental rules, orders, writs, judgments, injunctions, decrees, determinations
and awards. Borrower and Charterer bear sole responsibility for compliance with or obtaining all Permits as may be necessary under
applicable contracts and law with respect to the security granted by them to Lender in the Collateral.
5.13
ERISA
Plans
. No Credit Party shall have, or permit any Subsidiary thereof to have, any Pension Plan or Multiemployer Plan.
5.14
Taxes
.
Prior to the date on which they became delinquent, Borrower and Guarantors shall duly pay, and discharge, and shall cause each
of their Subsidiaries to pay and discharge, all taxes, duties, levies, imposts, deductions, assessments, fees, withholdings, user
fees, and other governmental charges imposed upon them or upon their income or profits, upon its or their activities, or upon any
assets belonging to it or them,
provided,
such Persons may contest in good faith any such claims and taxes, duties, levies,
imposts, deductions, assessments, fees, withholdings, user fees, and other governmental charges if appropriate reserves therefor
are established and maintained consistently with GAAP,
and provided, further,
if an Encumbrance on Collateral arises in
respect thereto, Borrower or Guarantors shall post, or shall cause their relevant Subsidiaries to post, security sufficient to
ensure that the Governmental Authority asserting the claim, or any successor or assign thereof, will not enforce an Encumbrance
against the Collateral.
5.15
Permits
.
Borrower and Charterer shall obtain and maintain in full force and effect all of their Permits in effect on the date hereof or
on the Closing Date, and such others as are necessary to allow them to conduct the business contemplated in Section 4.4. Borrower
and Charterer shall not operate, and shall not allow the Vessel to be operated, without a Permit in violation of applicable law.
None of Borrower or Charterer shall sell, subject to any Encumbrance, or otherwise transfer any such Permit or any right, title,
or interest therein, thereto, or thereunder.
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5.16
Intellectual
Property
. Borrower and Guarantors shall not, sell, transfer, encumber, or otherwise dispose of any of its or their rights,
title, or interest in any trademarks, service marks, trade names, copyrights, patents, patent rights, franchises, licenses and
other intellectual property rights and assets that are reasonably necessary for the operation of its or their businesses, except
transfers of such property to Borrower.
5.17
Arranger
Fee
. Borrower shall fully and timely pay all arranger and broker fees, commissions, and expenses incurred in connection with
this loan transaction, if any.
5.18
Compliance
by Allseas and Phoenix
. Borrower and Guarantors shall cause Allseas and Phoenix to comply with all applicable covenants contained
in this Agreement and in the other Group Loan Documents to which either is a party.
ARTICLE
VI
VESSEL PROVISIONS
On, from and after the Closing Date, Borrower
represents, warrants, and agrees as follows (and shall cause all managers and operators of the Vessel to ensure compliance with
the following provisions on behalf of Borrower):
6.1
Vessel
Registry
. Borrower shall keep the Vessel fully documented under the Marshall Islands Registry, including all additional certifications
required for vessels of its type, tonnage and area of operation, under the laws of and international conventions approved by the
Republic of the Marshall Islands;
provided
,
however
, that the Borrower, at its sole cost and expense (including the
reasonable fees and expenses of legal counsel to the Lender), may transfer the Vessel to the Panamanian Public Registry upon not
less than thirty (30) days prior written notice to the Lender and upon such transfer shall keep the Vessel fully documented under
the Panamanian Public Registry in compliance with this Section 6.1,
provided
,
further
, that any such transfer of
the Vessel to the Panamanian Public Registry shall be subject to the Borrower putting in place, simultaneously with such transfer,
appropriate comparable security documentation in favor of and satisfactory to the Lender, including, but not limited to, the execution,
delivery and recordation at the Panama Public Register Office of a First Naval Mortgage covering the Vessel.
6.2
Ownership
and Encumbrances
. Borrower is, and shall continue to be, the sole owner of the whole of the Vessel free and clear of all Encumbrances
except Permitted Encumbrances, and is, and shall continue to be, lawfully possessed of the Vessel and warrants, and shall continue
to warrant, and shall defend its title to and possession thereof and every part thereof for the benefit of Lender against the claims
and demands of all persons whomsoever. No Encumbrances shall exist hereafter against the Vessel except for Permitted Encumbrances,
and none of Borrower or the master of the Vessel nor any other Persons has or shall have any right or authority to create, incur
or permit to be placed or imposed upon the Vessel, or any part of any of the Vessel, any Encumbrance whatsoever other than Permitted
Encumbrances. Borrower shall pay and discharge, or cause to be paid and discharged, when due and payable, from time to time, all
Encumbrances on the Vessel except when the continuation of such an Encumbrance is otherwise permitted in this Agreement.
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6.3
Transfers
.
There are no outstanding charters, contracts of affreightment, or other rights to possession of or services of the Vessel other
than as listed in
Schedule 4.9
. So long as any Obligations are outstanding hereunder, the Vessel shall remain time
chartered under the Time Charter and sub-time chartered under the Sub-Time Charter. Neither Borrower nor Charterer shall sell,
convey, mortgage, or further charter the Vessel (except as set forth in the prior sentence or
Schedule 4.9
) or any
portion thereof, or transfer any interest therein in any manner (including by grant of an option, right of first refusal, or restriction
on transferability), without the written consent of Lender being first obtained,
provided,
that Permitted Encumbrances
are permitted. Phoenix shall not enter into any sub-time charters, voyage charters, or contracts of affreightment for employment
of the Vessel in the international bulk cargo trade for a period (including optional renewals) exceeding twelve (12) months without
the prior written consent (not to be unreasonably withheld) of Lender, and provided any such contracts are assigned by Phoenix
to Lender substantially in the form of Borrower's Earnings Assignment Agreement. No such written consent to any such sale, conveyance,
mortgage, charter, or transfer shall be construed to be a waiver of this provision in respect to any subsequent proposed sale,
conveyance, mortgage, charter, or transfer. Borrower shall repay all of the Obligations concurrently with a sale or other transfer
of title to the Vessel in accordance with the terms of Section 2.3(a) if no Default or Event of Default shall have occurred and
be continuing. If at the time of sale, a Default or Event of Default shall have occurred and be continuing, all proceeds of sale
shall be applied in the manner and order specified in Section 17 of the Bulk Liberty Mortgage. Each other mortgage, charter, or
transfer shall be subject to the provisions of the Bulk Liberty Mortgage and the lien it creates. Borrower shall cause each existing
time charter, sub-time charter or contract of affreightment that has a remaining term of twelve (12) months or greater, including
any extension option, to be assigned to Lender by means of an assignment of charter, earnings and insurances (or other appropriate
form of assignment) substantially in the form of the Borrower's Earnings Assignment Agreement.
6.4
Lawful
Operation
. The Vessel and its operations shall at all times comply with (a) all laws of the Republic of the Marshall Islands
or the Republic of Panama, all applicable treaties and conventions, and all applicable rules and regulations thereunder, as in
effect from time to time, and (b) all laws and regulations applicable to the Vessel and its operation in all trades and locations
in which it operates or is located from time to time; and the Vessel shall have on board as and when required thereby valid certificates
of inspection and all other certificates evidencing compliance therewith. Borrower shall obtain and file all certificates of financial
responsibility as legally required in all jurisdictions in which the Vessel is located from time to time. Borrower shall prepare
and file all pollution prevention and contingency plans and take all other steps required under all applicable laws concerning
the prevention and cleanup of environmental pollution, and the regulation of shipowners and vessels with respect to environmental
matters. The Vessel shall not be abandoned, and shall not carry any passenger, cargo, or other matter that will expose it to penalty,
forfeiture or capture. Borrower shall ensure that all reasonable precautions are taken to ensure that no illegal drugs or drug
paraphernalia are used or kept on board the Vessel, and shall otherwise comply with the anti-drug policies of the United States
Government.
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6.5
Operation
.
Unless otherwise agreed to in writing by Lender, granted or withheld in the exercise of its sole discretion, Borrower and Charterer
shall ensure that the Vessel shall on or before the Closing Date, and at all times thereafter, be dedicated to the performance
of the ED & F Charter, or the Time Charter and the Sub-Time Charter, as the case may be, shall not be taken to a zone that
is a declared war zone by any government or by any of the Vessel's war risk underwriters, and shall not be abandoned in a port
or place outside the United States. The Vessel satisfies, and shall continue to satisfy, the objective requirements for it to be
utilized under the Time Charter, the Sub-Time Charter and the ED & F Charter, all of which are in full force and effect.
6.6
Maintenance
.
The vessel has a valid classification certificate issued by Nippon Kaiji Kyokai, in classification BULK CARRIER without outstanding
exceptions or recommendations. Borrower shall, at all times, and without cost or expense to Lender, maintain such classification
status, and maintain and preserve the Vessel as required in all applicable manufacturer's manuals, and in a safe and seaworthy
condition, and in such running order and repair as would be expected of a prudent, first-class shipowner, and in a condition, working
order and repair at least as good as such Vessel is in on the date of this Agreement, ordinary wear and tear excepted. Borrower
shall not make or permit to be made any material changes to the structure, type or speed of the Vessel, or to its propulsion system,
or make any alterations to the Vessel that would change its registered length, breadth, or depth, or its gross, net, deadweight,
or lightship tonnages, without first receiving written approval from Lender. Borrower may remove equipment from the Vessel free
and clear of the liens of the Bulk Liberty Mortgage if (i) it simultaneously replaces such equipment with equipment of the
same or greater value, (ii) it causes all damage to the Vessel caused by such removal and replacement to be promptly repaired,
and (iii) such removal and replacement will not adversely affect the fair market value of the Vessel. Borrower shall cause
the Vessel to be surveyed and placed in dry dock when and as is required in order for it to maintain its classification status,
and to maintain all certificates of inspection and other certifications that it now has or is required to have in order to pursue
its intended trades.
6.7
Access
and Surveys
. At all times Borrower shall afford Lender or its authorized representatives and surveyors full and complete access
to the Vessel for the purpose of inspecting it and its cargoes, and papers, and making copies of such papers, and shall provide
to Lender, within seven (7) days after being so requested, copies of all contracts, charterparties, policies of insurance, evidence
of club entries, and all other documents (including records that are in electronic form) pertaining to the Vessel or its operations.
Borrower shall provide to Lender prompt advance notice of all emergency dry-dockings of the Vessel, and fourteen (14) days advance
written notice of all non-emergency dry-dockings of the Vessel. If requested by Lender Borrower shall instruct the Vessel's classification
society to make available to Lender all of its records pertaining to the Vessel (including records that are in electronic form),
and to provide Lender with copies of all of the classification society's communications with Borrower, its managers or agents with
respect to the Vessel.
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6.8
Seizure;
Requisition
. If the Vessel shall be Seized, Borrower, within thirty (30) days thereafter, shall cause the Vessel to be irrevocably
released and all Encumbrances thereon, other than the lien of the Bulk Liberty Mortgage, to be discharged by payment, performance,
or the posting of security therefor. In the event any of the foregoing occurs, Borrower agrees forthwith to notify Lender by facsimile
or telegram, confirmed by letter, at its address set forth in Section 9.4. In the event the Vessel shall be Seized and shall not
be released therefrom within thirty (30) days thereafter, Borrower hereby irrevocably authorizes and empowers Lender and severally
each officer of Lender in the name of Borrower (as attorney-in-fact, coupled with an interest) to apply for and receive possession
of the Vessel, with all rights and authority that Borrower might have, possess and exercise in any such event, but Lender and such
officers shall not be under any obligation to act in connection with the rights given in this Section. Borrower also authorizes
and empowers Lender and the officers above specified, severally, or their appointees, or any of them, to appear in the name of
Borrower in any court of any country or nation of the world where a complaint
in rem
or libel is pending against the Vessel,
or where the Vessel is Seized or is subject to Seizure and to take such actions as may seem proper toward the defense of such suit
and the discharge of any or all Encumbrances thereon or other relevant judgment or claim, and all expenditures made or so incurred
shall be obligations due from Borrower to Lender, shall be secured by the liens of the Bulk Liberty Mortgage, the Bulk Beothuk
Mortgage, the Bulk Cajun Mortgage and Bulk Discovery Mortgage, and shall accrue interest at the Interest Rate or Default Rate,
as in effect from time to time.
6.9
Insurance
.
Borrower shall obtain insurance for its assets and liabilities as would be customary for a business of its type. Without limiting
the foregoing:
(a) Borrower
shall, while any of the Obligations, the Bulk Beothuk Obligations, the Bulk Cajun Obligations or the Bulk Discovery Obligations
are outstanding, or Lender has any commitment to advance funds under this Agreement (whether or not there is a request for an advance
outstanding), obtain and maintain the following insurances with respect to the Vessel:
(i) Marine
hull and machinery insurance, and war risk hull and machinery insurance, in an amount not less than the full commercial value of
the Vessel, on a charter-free and lien-free basis, determined in a manner approved by Lender (which value shall not at any time
be an amount less than one hundred twenty percent (120%) of the principal amount of the Advance that is outstanding from time to
time);
(ii) Protection
and Indemnity insurance purchased through a protection and indemnity association that is a member of the International Group of
P & I Clubs, including, but not limited to, coverage for crew injuries, pollution liability including clean-up costs, wreck
removal, 4/4ths collision liability, third party bodily injury and property damage insurance and war risk protection and indemnity
insurance, in such amounts per occurrence as is currently available from the protection and indemnity associations that are members
of the International Group of P & I Clubs;
(iii) Workers
Compensation and Employers Liability insurance for each state in or from which the Vessel shall operate, if and as required by
law, and United States Longshore and Harbor Workers' Compensation Act insurance for statutory amounts;
(iv) A
separate policy of Mortgagee's Interest Insurance with Lender as the Named Insured with respect to loss of or damage to the Vessel
in an amount at least equal to one hundred twenty percent (120%) of the principal amount of the Advance that is outstanding from
time to time; and
(v) Insurance
as required by law, and insurance against any other risks to the Vessel or liabilities that could give rise to liens thereon as
from time to time required by Lender.
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Borrower shall obtain and maintain all such insurances at its
own expense, and shall timely pay all premiums, dues, calls, assessments and other amounts and expenses thereunder, and issue or
procure all guaranties required by protection and indemnity associations with respect thereto. In the event Borrower fails to pay
such amounts, Lender shall have no responsibility to make any such payments, and no payment or undertaking to pay any such amounts
by Lender shall relieve the Borrower of its responsibility to make such payments or its responsibility under Section 7.2(c)
to reimburse Lender for all such amounts that Lender pays.
(b) All
policies of insurance shall be maintained in forms approved by Lender, effected by an insurance broker approved by Lender, and
contain insuring covenants, deductible or franchise clauses, Lender clauses, and other terms and conditions satisfactory to Lender.
No policy shall be materially amended or terminated without obtaining the prior written consent of Lender. All policies, binders
and interim contracts of insurance shall provide for fourteen (14) days' prior written notice to be given to Lender by the underwriters
in the event of amendment or cancellation, except in the event of cancellation for nonpayment of premiums, in which event Lender
shall be furnished with not less than ten (10) days' notice of cancellation, and in the event of cancellation of war risk insurance,
in which event Lender shall be furnished with the same advance written notice of cancellation as the relevant policies shall provide
for notices to Borrower. Certifications of all insurances required hereunder, including certified copies of protection and indemnity
association certificates of entry shall be provided to Lender forthwith upon placement of all such insurances. Certified copies
of the originals of all policies, amendments, endorsements, letters of undertaking, binders and other interim insurance contracts
shall be deposited with Lender promptly upon placement thereof, and the originals thereof shall be furnished to Lender promptly
on request. Evidence of renewal of all insurances shall be furnished to Lender not less than fourteen (14) days prior to the expiration
of all of such insurances. Borrower shall furnish evidence satisfactory to Lender whenever it may require that all premiums, dues,
assessments and other charges with respect to the insurance required herein have been fully paid. At the option of Lender, and
without waiver of any default with respect thereto, any policies of insurance required herein and not timely obtained and properly
maintained by Borrower may be obtained and maintained by Lender at Borrower's expense.
(c) Borrower
shall provide to all underwriters of the insurances a Notice of Assignment, in form and substance satisfactory to Lender, which
shall be endorsed on all relevant polices and protection and indemnity association entries. All insurances shall name Lender as
an additional insured in addition to Borrower and as sole loss payee, pursuant to endorsements in substantially the form attached
to the aforementioned Notice of Assignment (including a customary protection and indemnity association letter of undertaking in
the customary form issued by members of the International Group of P & I Clubs), except as to: (i) Mortgagee's Interest
Insurance, as to which Lender shall be the sole insured and sole loss payee, and (ii) the insurance required in Section 6.9(a)(iii)
and 6.9(a)(v). No assured or loss payees shall be added to any policy without obtaining the advance written consent of Lender.
All insurance required in Section 6.9 shall be endorsed to (i) waive the underwriters' rights of subrogation against
Lender, (ii) to provide that all such insurance is primary and non-contributory with respect to insurances placed by Lender,
and (iii) provide that Lender will not be responsible for premiums, calls, supplementary calls or similar payments. Unless
Lender shall otherwise agree, concurrently with each placement and, not more than fourteen (14) days before expiration of an insurance
coverage that is required herein, renewal or replacement of that insurance, Borrower shall provide to Lender a Brokers Opinion
Letter, in form and substance satisfactory to Lender, confirming that the insurance placed by such broker conforms to the insurance
requirements herein in a customary form reasonably acceptable to Lender.
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(d) In
the event of an actual total loss, a constructive total loss, or a compromised, agreed, or arranged total loss of the Vessel, Lender
shall apply insurance payments received on account of such loss as provided in Section 17 of the Bulk Liberty Mortgage. Lender
shall have the sole right to tender abandonment of the Vessel to its underwriters on behalf of itself and Borrower. If there has
not occurred and there is not continuing an Event of Default at the time of tender of payment by the underwriters, in the event
of any other loss payable in an amount less than $500,000.00 under any hull and machinery insurance, war risk hull and machinery
insurance, or other insurance in respect of loss of or damage to the Vessel or any of its appurtenances, or sue and labor expenses
or defense costs insured thereunder, Lender shall instruct the underwriters to pay directly for the covered repairs, replacements,
expenses, or costs, or to reimburse Borrower or Lender therefor. If there has not occurred and there is not continuing an Event
of Default, and the Vessel is not an actual total loss, a constructive total loss, or a compromised, agreed, or arranged total
loss, in the event of any other loss payable in an amount equal to or greater than $500,000.00 under any hull and machinery insurance,
or war risk hull and machinery insurance, or increased value insurance in respect of loss of or damage to the Vessel or any of
its appurtenances, or sue and labor expenses or defense costs insured thereunder, in the exercise of its sole discretion, Lender
shall either instruct the underwriters to pay directly for the covered repairs, replacements, or sue and labor expenses or defense
costs insured thereunder or to reimburse Borrower or Lender therefor, or Lender may receive all such insurance proceeds and use
them to pay directly for the repairs, replacements, or sue and labor expenses or defense costs insured thereunder, or to reimburse
Borrower or Lender therefor. All claims for unrepaired damage shall be paid to Lender, which shall apply them as provided in Section
17 of the Bulk Liberty Mortgage. In the event of any loss payable under any hull and machinery insurance, war risk hull and machinery
insurance, or increased value insurance not provided for above in this Section 6.9(d), in the exercise of it is sole discretion,
Lender may instruct the underwriters to pay directly for the covered repairs, replacements, expenses, or costs, or to reimburse
Borrower therefor, or Lender may, in the exercise of its sole discretion, receive all such insurance proceeds in order to defray
its own covered expenses and apply the balance as provided in Section 17 of the Bulk Liberty Mortgage. For the purpose of this
clause, all hull and machinery, war risk hull and machinery, and increased value insurance proceeds payable with respect to an
occurrence and its consequences shall be deemed to be proceeds of a single loss event.
(e) In
the event that insurance moneys become due under any protection and indemnity insurance or other liability insurance coverage,
including coverage for salvage, general average, or other liabilities covered by the relevant hull insurance policy, if there has
not occurred and there is not continuing an Event of Default at the time of tender of payment by the underwriters or protection
and indemnity association, Lender shall instruct the underwriters to pay Borrower such insurance proceeds as may be due to Borrower
on account of any liability covered by such insurance if Borrower has already paid the liability, or to pay the party in respect
of whom the liability was incurred, in exchange for an appropriate release of liability with respect thereto. At such time of tender
of payment, if an Event of Default has occurred and is continuing in the exercise of Lender's sole discretion and in lieu of the
foregoing, Lender shall be entitled to receive such insurance proceeds and may apply the proceeds thereof toward the discharge
or indemnification or reimbursement for the payment of the relevant liability, and the balance of the proceeds shall be applied
as provided in Section 17 of the Bulk Liberty Mortgage.
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(f) Borrower
shall promptly file all required and customary proofs of loss and claims under all insurances, and on any failure by Borrower to
do so, Lender may do so on its and Borrower's behalf, and is hereby irrevocably appointed as Borrower's attorney-in-fact, coupled
with an interest, to do so.
(g) In
the event the Vessel is Seized, Lender may, in lieu of the foregoing Sections 6.9(d) and (e), in the exercise of its sole
discretion, agree with any surety executing a surety bond releasing the Vessel from such attachment or arrest to hold for the benefit
of such surety any or all insurance proceeds under the policies of insurance on the Vessel as collateral security to indemnify
such surety against liability under such bond.
(h) Borrower
shall not do any act or voluntarily suffer or permit any act to be done whereby any insurance shall or may be impaired, suspended,
or canceled, and shall not suffer or permit the Vessel to engage in any voyage or to engage in any trade or activity not permitted
under the policies of insurance at the time in effect without first covering the Vessel for such voyage, trade or activity with
insurances of the types, obtained from underwriters, and in the forms and amounts herein required.
(i) The
acquiescence by Lender in any noncompliance in the placement of insurance in one or more instances shall not establish a consent
or course of dealing with respect to such noncompliance in any other instances.
6.10
No
Charters to Prohibited Persons
. Borrower and Guarantors covenant and agree that the Vessel will not (a) be chartered to a
Prohibited Person, (b) make voyages to or from any Prohibited Country, and (c) be allowed to carry cargo from or destined to a
Prohibited Country.
6.11
Payment
of Charter Hire and Vessel Revenues
. Borrower and Guarantors shall procure that (a) all charter hire under the ED & F Charter
shall be deposited into the Bulk Liberty Hire Account, (b) all revenues earned by Phoenix from third parties for the employment
of the Vessel shall be deposited into the Allseas Cash Deposit Account, and (c) all such amounts deposited into the Allseas Cash
Deposit Account with respect to the Vessel shall be retained therein with the exception of (i) amounts necessary to pay customary
voyage expenses incurred in the ordinary course of business of the Vessel, and (ii) any amount equal to charter hire due under
the Time Charter which shall be transferred to the Bulk Liberty Hire Account, such amount to be deemed payment of charter hire
under the Sub-Time Charter, (x) for use in connection with the Vessel and its operations in the ordinary course of business, and
for no other purpose, and (y) any amounts due to Lender under this Agreement.
ARTICLE
VII
DEFAULT AND REMEDIES
7.1
Default
.
The occurrence of each of the following shall constitute an "
Event of Default
" as such term is used in this Agreement:
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(a) Borrower
fails to make any payment of principal, interest or any other amount, as and when it becomes due to Lender under the Loan Documents,
including the Commitment Fee;
(b) any
representation or warranty made or to be made by Borrower or any other Person (other than Lender) in any Loan Document was false
or incorrect in any material respect when made or deemed made under the provisions of any Loan Document;
(c) any
of the Loan Documents, for any reason, cease to be in full force and effect or are declared to be null and void; or any Person
other than Lender that has executed a Loan Document denies that it has any or further liability or obligation under any Loan Document
which it has executed (or any provisions thereof) before full performance of all obligations thereunder;
(d) a
Credit Party, Phoenix, or Allseas: (i) applies for or consents to or becomes subject to the appointment of a receiver, trustee
or liquidator of itself, or of all or any part of its assets, or any Collateral, or becomes subject to an administration order,
(ii) makes a general assignment for the benefit of creditors, (iii) becomes or is adjudicated insolvent, (iv) commences
any Debtor Relief Proceeding in any jurisdiction, (v) becomes subject to any involuntary Debtor Relief Proceeding in any jurisdiction
and such proceeding is not dismissed within sixty (60) days after it is commenced, (vi) enters into an arrangement with a
group of creditors for the restructuring of its obligations, (vii) shall fail to pay its debts generally as they become due,
(viii) if a corporation, limited liability company, or partnership, merges or consolidates with any Person, (ix) commences
a dissolution or liquidation proceeding or is dissolved or liquidates, (x) becomes the subject of any involuntary dissolution
or liquidation proceeding and any such proceeding is not dismissed within sixty (60) days after it is commenced, (xi) commences,
agrees to or is or becomes subject to any action taken for the purpose of effectuating any of the foregoing, (xii) changes
its name, and (xiii) if a corporation, limited liability company, or partnership, reorganizes, reclassifies or recapitalizes
its capital stock or any membership or partnership interests in it;
(e) the
shareholders, directors, or members of any Credit Party, Phoenix or Allseas adopt a resolution authorizing or approving of any
of the actions described in Section 7.1(d) with respect to a Credit Party;
(f) Borrower issues, redeems, purchases,
retires or otherwise acquires any shares of any class of any Equity Interest in itself, enters into any subscription agreement
or other agreement for the issuance of any shares in itself, or grants or issues any warrant, right or option pertaining thereto,
or incurs any debt or obligations or issues any security that is convertible into any of the foregoing;
(g) any
judgment shall be entered against a Credit Party, Phoenix, or Allseas in a Material amount that is not covered by liability insurance
with a deductible clause that has been approved by Lender in writing, and such judgment is not effectively stayed and remains undischarged
and unbonded for thirty (30) days;
(h) without
Lender's prior written consent any change shall occur in the legal structure of a Credit Party, Phoenix, or Allseas;
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(i) (x)
a Credit Party, Phoenix or Allseas is or becomes in default under any loan agreement, promissory note, guaranty or other instrument
or agreement (or of any guarantee of the foregoing) with or in favor of Lender or any Affiliate of Lender; (y) or any Indebtedness
the original principal amount of which is in excess of $500,000 of a Credit Party (or that is guaranteed by a Credit Party) with
or in favor of an entity who is not Lender or an Affiliate of Lender is not paid in full when due, whether on maturity, upon acceleration,
or otherwise; (z) or Borrower or a Guarantor is or becomes in default under any preferred or other mortgage, deed of trust, assignment,
or other security agreement that secures any of its obligations with respect to any of the foregoing;
(j) any
other Indebtedness of a Credit Party, Phoenix or Allseas that is not subject to Section 7.1(i) in any Material amount is or
becomes due prematurely by reason of default; Borrower fails to make any Material payment thereunder on or before the due date
for such payment; or the security for any obligation of Borrower or a Guarantor, or any security therefor, becomes enforceable
against any Collateral or against a Material amount of any of its assets;
(k) without
the written consent of the Lender (i) Claus Boggild does not own at least sixty-seven percent (67%) of the Equity Interest
in, and hold at least sixty-seven percent (67%) of the voting power in Lagoa Investments Ltd., and Edward Coll, Anthony Laura,
and Lagoa Investments Ltd. do not collectively own at least fifty-one percent (51%) of the Equity Interest in, and hold at least
fifty-one percent (51%) of the voting power in Holding Company; (ii) Holding Company does not own all of the Equity Interest
in and hold all of the voting power in Bulk Partners Holding Company Bermuda Ltd, a Bermuda company; (iii) Pledgor does
not own all of the Equity Interest in and hold all of the voting power in Borrower; and (iv) Holding Company does not, directly
or indirectly, own all of the Equity Interest in and hold all of the voting power in Charterer and Allseas;
provided,
the
death of any of Claus Boggild, Anthony Laura or Edward Coll shall not cause an Event of Default under this Section 7.1(k)
if there is not an Event of Default outstanding or that results therefrom under Section 7.1(l);
(l) either
of Anthony Laura or Edward Coll becomes sufficiently disabled that either of them cannot effectively participate in the management
of Holding Company, or dies, and at least one of them, or Anthony Laura, Edward Coll and Claus Boggild collectively, who are alive
and not so disabled, does not hold voting control over fifty-one percent (51%) of the shares of Holding Company;
(m) any
judicial or nonjudicial foreclosure of or other realization upon any pledge or assignment of, or other security interest in, or
other encumbrance of any shares of the capital stock of Borrower shall be commenced or occur;
(n) any
of the Time Charter, Sub-Time Charter, Technical Management Agreement, or Commercial Management Agreement have been or are assigned,
assumed, amended, renewed, replaced, or otherwise modified, or terminated without the prior written consent of Lender;
(o) a
material default by (x) Borrower occurs under any of the Time Charter, ED & F Charter, Technical Management Agreement, or Commercial
Management Agreement, (y) by Charterer under the Sub-Time Charter, or (z) any such contract is terminated prematurely;
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(p) Any
party defaults under the Funds Deposit Agreement or any Manager's Undertaking;
(q) any
of Credit Parties or their Subsidiaries has a fiscal year-end that does not end on December 31;
(r) the
Vessel, the BULK BEOTHUK, the BULK CAJUN or the BULK DISCOVERY becomes subject to a Seizure and is not released therefrom within
thirty (30) days thereafter in the manner required in the applicable mortgage or mortgages granted by Borrower, Bulk Cajun or Bulk
Discovery;
(s) the
Vessel, the BULK BEOTHUK, the BULK CAJUN or the BULK DISCOVERY becomes an actual total loss, or a constructive, compromised, arranged,
or agreed total loss, or there is a Requisition of the Vessel, and the Obligations are not paid in full and the balance of the
proceeds, if any, is not applied to the Bulk Beothuk Obligations, the Bulk Cajun Obligations and/or the Bulk Discovery Obligations,
within one hundred twenty (120) days thereafter;
(t) any
Permit required in Section 4.19 or 5.15 is materially modified, becomes invalid, or is terminated;
(u) the
occurrence of illegal activity which in the opinion of the Lender caused the forfeiture of or which subjects to forfeiture the
Vessel or any other Collateral;
(v) the
Vessel or other Collateral is placed in danger of being seriously damaged or becoming a total loss and is not removed from such
danger by Borrower forthwith;
(w) Pledgor
does not or shall not have good and marketable title to all of the shares of the Equity Interest in Borrower, and all Collateral
related thereto, and does not have or shall not hereafter retain good and marketable title thereto, subject to no Encumbrances
except Permitted Encumbrances;
(x) Allseas
does not or shall not have good and marketable title to the deposit account described in the Allseas Charge Over Cash Deposit,
and all Collateral related thereto, and does not have or shall not hereafter retain good and marketable title thereto, subject
to no Encumbrances except Permitted Encumbrances;
(y) Borrower
does not or shall not have good and marketable title to the deposit account described in the Borrower Charge Over Bulk Liberty
Hire Account, and all Collateral related thereto, and does not have or shall not hereafter retain good and marketable title thereto,
subject to no Encumbrances except Permitted Encumbrances;
(z) without
Lender's prior written consent, all hire owed by Charterer to Borrower or by any sub-charterer to Charterer, as the case may be,
is not fully and timely paid into the Bulk Liberty Hire Account;
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(aa) the
Bulk Liberty Mortgage is not registered with the Marshall Islands Registry or the Panamanian Public Registry such that it is and
continues to be a duly perfected mortgage and maritime lien under the laws of the Republic of the Marshall Islands or the Republic
of Panama, as applicable, and creates a preferred mortgage on the Vessel (as the term "preferred Mortgage" is defined
at 46 U.S.C. § 31301(6)(B));
(bb) the
amendments to the Bulk Discovery Mortgage (as described in Section 3.1(k) hereof) and the Bulk Cajun Mortgage (as described in
Section 3.1(l) hereof) are not provisionally registered within (5) business days after the date hereof or within 120 days after
the date hereof permanently registered at the Panamanian Public Registry, such that they are and continue to be duly perfected
mortgages and maritime liens under the laws of the Republic of Panama, and create preferred mortgages on the BULK CAJUN or the
BULK DISCOVERY (as the term "preferred mortgage" is defined at 46 U.S.C. § 31301(6)(B)) and duly secure
all obligations under the Cross-Collateral Guaranty;
(cc) the
amendment to the Bulk Beothuk Mortgage (as described in Section 3.1(m) hereof) is not provisionally registered within (5) business
days after the date hereof at the Marshall Islands Registry, such that it is and continues to be a duly perfected mortgage and
maritime lien under the laws of the Republic of the Marshall Islands, or if the BULK BEOTHUK is transferred to the Panamanian Public
Registry, under the laws of the Republic of Panama, and creates a preferred mortgage on the BULK BEOTHUK (as the term "preferred
mortgage" is defined at 46 U.S.C. § 31301(6)(B)) and duly secure all obligations under the Cross-Collateral
Guaranty;
(dd) the
amendments to the Bulk Discovery Loan Documents, the Bulk Cajun Loan Documents and the Bulk Beothuk Loan Documents are not entered
into as required under Sections 3.1(k)(iii), 3.1(l)(iii) and 3.1(m)(iii) hereof;
(ee)
in a manner which is not otherwise specifically referenced in this Section 7.1, Borrower from time to time breaches or fails
to perform or observe any term, covenant or agreement contained in the Loan Documents, is or becomes in default thereunder, or
any further event of default occurs under any of the Loan Documents;
(ff) any
amount due under the Cross-Collateral Guaranty is not paid on the date due in accordance with the terms of the Cross-Collateral
Guaranty or any Event of Default occurs under the Bulk Beothuk Loan Documents, the Bulk Discovery Loan Documents or the Bulk Cajun
Loan Documents.
7.2
Remedies
.
(a) Upon
the occurrence of:
(i) an
Event of Default constituting a default with respect to a payment of principal, interest, fees, expenses, or any other sum which
is payable to Lender, including but not limited to, any amount payable to Lender under the Cross-Collateral Guaranty, which continues
for longer than three (3) days after payment is due;
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(ii) an
Event of Default consisting of: (A) a breach of an obligation with respect to obtaining or maintaining required insurance
or providing reasonable and prompt verification thereof, (B) an Event of Default with respect to Sections 5.4(vii), (viii),
(ix), 5.10, 6.3, 6.8, or 8.6, (C) an Event of Default described in Sections 7.1(d), (g), (h), (l), (m), (n), (p), (r),
(t), (u), (x), (y), (z), or (ff), (D) an Event of Default which, by its nature, is not capable of being fully remedied so
as to provide to Lender the practical benefits to which it or they are entitled under any of the Loan Documents with respect to
such Event of Default; or (E) an Event of Default which occurs with the knowledge of a Borrower as to which a notice required
to be given to Lender is not timely given; or
(iii) any
other Event of Default not specified in subsections (i) or (ii) above which is not fully remedied to the satisfaction of the Lender
within ten (10) days after it occurs,
Lender shall enjoy all rights, powers, and remedies which may
arise under the Loan Documents, or otherwise existing or arising by agreement, at law, in equity or in admiralty, including the
following: Lender may deem the principal of the Advance, interest thereon, and all other amounts then owing, accrued or accruing
with respect to the Advance immediately due and payable, and Lender may exercise all such rights, powers and remedies, without
presentments, demands, protests, or notices of any kind, all of which are hereby expressly waived by Borrower,
provided,
that in the event of an actual or deemed entry of an order for relief with respect to Borrower under the United States Bankruptcy
Code, as amended, the Obligations automatically shall become and be due and payable, without presentment, demand, protest or any
notice of any kind, all of which are hereby expressly waived by Borrower.
(b) All
rights, powers and authority granted to the Lender in any Loan Document may be exercised on its behalf by any agents or representatives
it appoints from time to time.
(c) On
the occurrence of an Event of Default Lender may, in its discretion, do any act or make any expenditures necessary to remedy such
default or preserve the value of or protect the Collateral, including entering the Vessel to make repairs, purchasing insurance,
discharging Encumbrances, or defending any lawsuit against the Vessel, and Borrower shall promptly reimburse Lender for all such
expenses, with interest at the Interest Rate or Default Rate, as in effect from time to time, for any and all expenditures so made
or incurred, and until Borrower has so reimbursed Lender for such expenditures; but Lender, though privileged so to do, shall be
under no obligation to Borrower to make any such expenditures nor shall the making thereof relieve Borrower of any default in that
respect.
(d) The
rights, powers, and remedies provided in the Loan Documents or otherwise existing or arising by agreement, at law, in equity or
in admiralty, or otherwise, are cumulative. All rights, powers, and remedies may be exercised, in whole or in part, from time to
time, as often, and in any order as Lender chooses, and the exercise or the beginning of the exercise of any right, power, or remedy
shall not be construed to be an election of rights, powers, or remedies, or a waiver of the right to exercise at the same time
or thereafter any other right, power, or remedy. No delay or omission by Lender in the exercise of any right, power, or remedy
accruing upon any Event of Default shall impair any such right, power, or remedy or be construed to be a waiver of any right to
take advantage of any such future event or of any such past Default or Event of Default. In case Lender proceeds to enforce any
right, power, or remedy, and such enforcement is discontinued or abandoned for any reason or is determined adversely to Lender,
in whole or in part, then, and in any such case, at the option of Lender, in the exercise of its sole discretion, the relevant
parties shall be restored to their former positions and rights, all rights, powers, and remedies of Lender shall continue as if
no such proceedings had been taken and nothing shall be construed to be a waiver of any right, power, or remedy of Lender. The
acceptance by Lender of any security or any payment of or on account of the Obligations maturing after any Event of Default or
any payment on account of any past default shall not be construed to be a waiver of any right of Lender to take advantage of any
future Event of Default or of any past Event of Default not completely cured thereby. Each Encumbrance that exists or is granted
or otherwise arises pursuant to the Loan Documents is cumulative and not in lieu of any other such Encumbrances.
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7.3
Legal
Actions
. All judicial actions by any party to enforce any provision of any or all of the Loan Documents shall, if requested
by Lender, be brought in or transferred to the United States District Court for the Southern District of New York or the state
courts of general jurisdiction sitting in the County of New York in the State of New York, or in the jurisdiction where relevant
Collateral is located or subject to
in rem
or
quasi in rem
proceedings from time to time. Borrower and the Guarantors
consent to the jurisdiction of all such courts over them under or in connection with this Agreement, the Bulk Beothuk Loan Agreement,
the Bulk Cajun Loan Agreement or the Bulk Discovery Loan Agreement, and hereby irrevocably waive any objection, including any
objection to the laying of venue or based on the grounds of forum non conveniens, which they may now or hereafter have to the
bringing of any such action or proceeding in such respective jurisdictions.
BORROWER AND GUARANTORS WAIVE THE RIGHT TO TRIAL BY JURY IN
EVERY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO THE LOAN DOCUMENTS, THE BULK BEOTHUK LOAN
DOCUMENTS, THE BULK CAJUN LOAN DOCUMENTS AND THE BULK DISCOVERY LOAN DOCUMENTS. BORROWER AND GUARANTORS ACKNOWLEDGE THAT THE FOREGOING
WAIVER IS A MATERIAL INDUCEMENT TO LENDER ENTERING INTO THIS AGREEMENT AND THAT LENDER IS RELYING UPON THE FOREGOING WAIVER IN
ITS DEALINGS WITH BORROWER AND GUARANTORS. BORROWER AND GUARANTORS REPRESENT AND WARRANT THAT THEY HAVE REVIEWED, OR HAVE HAD THE
OPPORTUNITY TO REVIEW, THE FOREGOING WAIVER WITH THEIR LEGAL COUNSEL AND HAVE KNOWINGLY AND VOLUNTARILY WAIVED THEIR JURY TRIAL
RIGHTS FOLLOWING CONSULTATION, OR THE OPPORTUNITY TO CONSULT, WITH SUCH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS AGREEMENT
MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL WITHOUT A JURY BY THE COURT. BORROWER AND GUARANTORS HEREBY CERTIFY THAT NO REPRESENTATIVE
OR AGENT OF LENDER, OR COUNSEL TO LENDER, HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT LENDER WOULD NOT, IN THE EVENT OF SUCH
LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION.
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7.4
Service
of Process
. Service of process may be made on Borrower or Guarantors by mailing or delivering a copy of such process to the
Borrower or Guarantors in care of the Process Agent at the Process Agent's address specified in the Process Agent Appointment,
or to any new address of the Process Agent of which Lender becomes aware. Borrower and Guarantors hereby irrevocably authorize
and direct the Process Agent to accept such service on their behalf at such addresses. Process Agent is at liberty to change its
address to another address in the United States, but Lender is permitted to effect service upon Borrower and Guarantors by service
by mail or by service on any person of suitable age and discretion at the last address for Process Agent known by Lender at the
time. Not later than fifteen (15) days before the appointment of Process Agent is terminated for any reason, Borrower and Guarantors
shall appoint a successor that has an address in the United States and deliver to Lender a written acceptance of appointment of
a substitute process agent that contains an agreement in writing to give Lender not less than thirty (30) days' advance written
notice of any change of its address or any termination of its appointment (delivered to Lender's address specified in, or changed
as provided in Section 9.4 hereof). As an alternative method of service, the Borrower and Guarantors also irrevocably consent
to the service of any and all process, postage prepaid, in any such action or proceeding by mailing a copy of such process to the
Borrower and Guarantors at their addresses identified in or in accordance with Section 9.4. Nothing herein shall affect the
right to serve process in any manner permitted by law. The provisions of this section apply equally to process related to the Loan
Documents and to process related to the Bulk Beothuk Loan Documents, the Bulk Cajun Loan Documents and the Bulk Discovery Loan
Documents.
7.5
Judgment
.
If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder in any currency (the "
Original
Currency
") into another currency (the "
Other Currency
") the parties hereto agree, to the fullest extent
that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures
the Lender could purchase the Original Currency with the Other Currency in New York City on the second Business Day preceding that
on which final judgment is given. Upon receipt of payment in the Other Currency of the amount of such judgment, the Lender shall
convert such amount into the Original Currency on or as of the next Business Day in accordance with normal banking procedures.
If the amount is so converted at or as of that time is insufficient to discharge the entire amount (including accrued interest),
denominated in the Original Currency, that would be owing at the time to the Lender had no judgment been entered or fixed in the
Other Currency, the Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify Lender against
such loss.
7.6
Right
of Set-Off
. Upon the occurrence and during the continuance of any Event of Default, Lender is hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits and investments (general
or special, time or demand, provisional or final) at any time held in any accounts, and other indebtedness at any time owed by
Lender, to or for the credit or the account of any Borrower or any Guarantor, against any or all of the obligations of the relevant
Borrower or Guarantor now or hereafter existing in favor of Lender, whether or not Lender shall have given any notice or made any
demand to the relevant Borrower or Guarantor, and although such obligations of the relevant Borrower or Guarantor may be unmatured.
Lender agrees to mail or transmit notice to the relevant Borrower or Guarantor on the day of each such set-off and application
made by Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application, nor
shall such failure subject Lender to any liability. The rights of Lender under this Section are in addition to other rights, powers,
and remedies (including, without limitation, other rights of set-off) which Lender may have.
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ARTICLE
VIII
CONTINUING GUARANTY
8.1
Guaranty
.
Each Guarantor hereby unconditionally and irrevocably guarantees, as its separate and independent obligation, as principal obligor,
and not merely as a surety, the punctual payment and performance when due, whether at stated maturity, by acceleration, or otherwise,
of the Obligations. The obligations of each Guarantor and the Borrower are joint and several.
8.2
Guaranty
Absolute
. Each Guarantor guarantees that the Obligations shall be paid and performed strictly in accordance with the terms
of the Loan Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any
of such terms or the rights, powers, or remedies of Lender with respect thereto. This is a guaranty of payment, and not just of
collection. The liability of each Guarantor under this Agreement for the Obligations or otherwise shall be absolute and unconditional
irrespective of one or more of: (a) any lack of validity or enforceability of any Loan Document or any provision thereof;
(b) any change in the time, manner or place of payment of, or in any other term of, any or all of the Obligations; (c) any
waiver, termination, renewal, replacement, amendment or other modification of, or any consent to any departure from, any Loan Document
or any provision thereof; (d) any taking, exchange, release or non-perfection of any real or personal property security for
any or all of the Obligations; (e) any taking, waiver, release, amendment or other modification of, or any consent to departure
from, any other guaranty of or liability for any or all of the Obligations; (f) any manner of sale or other disposition of
any real or personal property security for any or all of the Obligations; (g) any manner of application of any real or personal
property security, or any proceeds of any such security, to any or all of the Obligations; (h) any change, restructuring or
termination of the structure or existence of Borrower, any other guarantor or other obligor, or any other Person; or (i) any
other circumstance (other than payment and performance of the Obligations in full) that might otherwise constitute a suretyship
or other defense available to either Guarantor. Each Guarantor acknowledges that it has received copies of the Loan Documents now
in existence, and has reviewed them to its satisfaction.
8.3
Waiver
.
With the exception of notices to which it is expressly entitled under applicable agreements, each Guarantor hereby waives its rights,
if any, to any notices of acceptance and any other notices with respect to any of the Obligations or this Agreement, and waives
all requirements that Lender protect, secure, perfect or insure any real or personal property security for any or all of the Obligations,
or any property subject thereto, or exhaust any right or take any action against Borrower or any other Person, or any security,
or Collateral. Lender shall have no obligation to marshal any present or future Collateral security for any of the Obligations
or to resort to any such Collateral security in any order.
8.4
Subrogation
.
Each Guarantor shall not exercise any rights which it may acquire by way of subrogation under this Agreement, by any payment made
hereunder or otherwise, until all the Obligations shall have been paid and performed in full. If any amount shall be paid to a
Guarantor on account of such subrogation rights at any time when all the Obligations shall not have been paid and performed in
full, such amount shall be held in trust for the benefit of Lender and shall forthwith be paid to Lender to be credited and applied
to the Obligations, whether matured or unmatured, in accordance with Section 2.3.
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8.5
Holding
Company Indemnification
. Holding Company shall indemnify and hold harmless Charterer from and against any and all liabilities
claims, actions, suits, judgments, costs, disbursements and expenses (including reasonable fees and expenses of legal counsel related
thereto) of any kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against Charterer as a result
of Charterer's obligations under this Article.
8.6
Subordination
.
(a) No
Guarantor shall make any loans or advances to Borrower, and Holding Company shall ensure that no Subsidiaries thereof shall make
any loans or advances to Borrower, in each case other than equity investments of capital. All Indebtedness of Borrower to each
Guarantor whether now existing or hereafter arising (the "
Subordinated Debt
") is hereby subordinated to full payment
and performance of the Obligations, and until then, Borrower shall not make, and neither Guarantor shall, without the prior written
consent from Lender (granted or withheld in the exercise of its sole discretion) accept any payment of an Indebtedness from Borrower.
All Encumbrances that either Guarantor may have or that would otherwise arise against any assets of Borrower, Bulk Atlantic, Bulk
Cajun or Bulk Discovery, including for any breach of the Time Charter, the Sub-Time Charter or the ED & F Charter, are hereby
irrevocably subordinated to the liens of the Bulk Liberty Mortgage and the other security granted in the Loan Documents, and the
liens of the Bulk Discovery Mortgage, the Bulk Cajun Mortgage, the Bulk Beothuk Mortgage and the other security granted for the
obligations secured by each of them (the "
Subordinated Liens
").
(b) Unless
otherwise permitted pursuant to this Agreement, all payments or distributions upon or with respect to the Subordinated Debt or
obligations secured by Subordinated Liens, including from Bankruptcy or Other Proceedings pertaining to any of them, whether through
payment, subrogation, or otherwise, shall be received in trust for the benefit of Lender, shall be segregated from other funds
and assets held by the recipient, and shall be forthwith paid to the Lender in the same form in which it was received (with any
necessary endorsement) to be applied (in the case of cash) to the Obligations in accordance with Section 2.3, or received
as collateral (in the case of non-cash property or securities) as security for, the payment of the Obligations, to be foreclosed
upon in the occurrence of an Event of Default as permitted by law.
(c) If
any Bankruptcy or Other Proceeding is commenced by or against or otherwise occurs with respect to Borrower, any member or shareholder
of Borrower, any Person of which Borrower is a partner, joint venturer, or member, or any Subsidiary of Borrower, this Agreement
shall remain in effect, and Lender is hereby irrevocably authorized (in its own name or in the name of Holding Company or Charterer,
as the case may be), but shall have no obligation, to demand, sue for, collect, and receive every payment or distribution that
results from a Bankruptcy or Other Proceeding on account of any Subordinated Debt or obligations secured by Subordinated Liens,
and to give acquittance therefor, file claims and proofs of claim, and take such other action with respect thereto (including voting
the Subordinated Debt or obligations secured by Subordinated Liens, enforcing security therefor, and compromising claims therefor)
as it may deem necessary or advisable for the exercise or enforcement of any of the rights, powers, and remedies of the Lender
hereunder.
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(d) For
so long as any of the Obligations remain outstanding the Guarantors shall duly and promptly take or refrain from taking such action
as the Lender may reasonably require: (i) unless otherwise permitted pursuant to this Agreement, to collect the Subordinated
Debt and obligations secured by Subordinated Liens and remit the proceeds thereof to Lender, file appropriate claims and proofs
of claim in respect of the Subordinated Debt or obligations secured by Subordinated Liens, (ii) to execute and deliver to
the Lender such powers of attorney, assignments, and other instruments as the Lender may require in order to enable the Lender
to enforce any or all claims with respect to, and security for, the Subordinated Debt and obligations secured by Subordinated Liens,
and (iii) to collect and receive all payments and distributions that may be payable or deliverable upon or with respect to
the Subordinated Debt and obligations secured by Subordinated Liens.
(e) For
so long as any of the Advance remains outstanding Guarantors shall not, without the prior written consent of Lender: (i) accelerate
or demand payment of any of the Subordinated Debt or obligations secured by Subordinated Liens; (ii) commence any legal proceedings
or arbitration proceedings to collect any of the Subordinated Debt or obligations secured by Subordinated Liens, (iii) exercise
any rights, powers, or remedies with respect to collection of the Subordinated Debt or obligations secured by Subordinated Liens;
(iv) cooperate with or stipulate to the commencement or continuation of any Bankruptcy or Other Proceeding with respect to
Borrower or any of its assets, (v) assist the Borrower with respect to any Bankruptcy or Other Proceedings pertaining to the
Borrower, or (vi) assign, transfer, or subject to an Encumbrance any Subordinated Debt or obligations secured by Subordinated
Liens.
(f) Borrower
shall not make any payment of any of the Subordinated Debt or obligations secured by Subordinated Liens without the written consent
of Lender previously obtained, which may be granted or withheld by Lender in the exercise of its sole discretion. None of the Subordinated
Debt or obligations secured by Subordinated Liens (or any agreements, instruments, or other evidence thereof) shall be amended
in a manner that would have an adverse effect on the rights, powers, or remedies of Lender under this Agreement. Borrower and Guarantors
agree to refrain from all acts which are in any way inconsistent with this Agreement or the rights of Lender hereunder. Borrower
and Guarantors agree to perform all further acts reasonably necessary to give full effect to this Agreement.
(g) Guarantors
waive the right to assert the doctrine of marshalling of assets against the Lender.
(h) Each
Guarantor re-confirms its respective guaranties granted in favor of the Lender as set forth in Article VIII of the Bulk Beothuk
Loan Agreement, Article VIII of the Bulk Discovery Loan Agreement or Article VIII of the Bulk Cajun Loan Agreement, as the case
may be.
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ARTICLE
IX
MISCELLANEOUS
9.1
Loan
Documents, Administration and Collection Expenses
. Borrower shall pay or reimburse Lender for the preparation, negotiation
and execution of the Loan Documents (subject to the provisions of Section 3.1(n)(ii)), and all waivers under and amendments thereto
from time to time, and the reasonable fees and expenses of counsel for Lender in connection therewith, whether Borrower satisfies
the conditions precedent contained in Article III or not. Borrower shall pay or reimburse Lender for all costs and other expenses
incurred in connection with the drafting, negotiation, execution, delivery, filing, or recording of the Loan Documents, or the
enforcement, attempted enforcement, or preservation of any rights, powers, or remedies under the Loan Documents (including all
such costs and expenses incurred during any "workout" or restructuring in respect of the Obligations and during legal
proceedings, including Bankruptcy or Other Proceedings), and including all the reasonable fees and expenses of legal counsel.
The foregoing costs and expenses shall include all search, filing, recording, title insurance and appraisal charges and fees and
stamp and other taxes related thereto, and other out-of-pocket expenses incurred by Lender, and the cost of independent public
accountants and other outside experts retained by Lender.
9.2
Indemnification
.
Whether or not the transactions contemplated herein are consummated, Borrower shall indemnify and hold harmless Lender and its
Affiliates, directors, officers, employees, counsel, agents and attorneys-in-fact (collectively, the "
Indemnitee
")
from and against any and all liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits,
costs, disbursements and expenses (including reasonable fees and expenses of legal counsel related thereto) of any kind or nature
whatsoever which may at any time be imposed on, incurred by or asserted against any such Indemnitee in any way relating to or arising
out of or in connection with (a) the drafting, negotiation, execution, delivery, filing, recording, enforcement, performance
or administration of any Loan Document or any other document delivered in connection with the transactions contemplated thereby,
or the consummation of the transactions contemplated thereby, (b) the Advance or the use or proposed use of the proceeds thereof,
(c) the ownership and operation of the business and assets of Borrower, including if any assertion is made that Borrower,
any Indemnitee, or any other Persons were negligent with respect thereto, (d) any actual or alleged presence or release of
Hazardous Materials on or from any personal or real property currently or formerly owned or operated by Borrower or for its account,
or any Environmental Liability related in any way to Borrower or any of the Collateral, or (e) any actual or prospective claim,
litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort, strict liability, or
any other theory (including any investigation of, preparation for, or defense of any pending or threatened claim, litigation, investigation,
or proceeding) and regardless of whether any Indemnitee is a party thereto, in all cases, whether or not caused by or arising,
in whole or in part, out of the negligence of the Indemnitee; provided that such indemnity shall not, as to any Indemnitee, be
available to the extent that such liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits,
costs, disbursements and expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have
resulted primarily from the fraud, gross negligence or willful misconduct of an Indemnitee. The agreements in this Section shall
survive the performance of all the Obligations and termination of this Agreement.
9.3
Amendments
and Waivers
. No amendment, modification, termination, or waiver of any provision of any of the Loan Documents, nor consent
to any departure therefrom, shall be effective unless the same shall be in writing and signed by Lender. Waivers or consents shall
be effective only in the specific instances and for the specific purposes for which they are given. The Loan Documents shall not
be deemed amended, qualified, or supplemented by any course of dealing. No notice to or demand on any Person in any instance shall
entitle any Person to any other or further notice or demand in similar or other circumstances.
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9.4
Notices
.
All notices, requests, demands, directions and other communications between parties hereto shall be in writing and delivered by
hand, sent by overnight courier, or by facsimile, or mailed by certified mail, return receipt requested (postage prepaid), to the
applicable party at the addresses indicated below:
If to a Credit Party (and Allseas and Phoenix):
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c/o Phoenix Bulk Carriers (US) LLC
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(as agent)
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109 Long Wharf, 2
nd
Floor
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Newport, RI 02840
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United States
|
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|
Attn: Mr. Anthony Laura
|
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Facsimile No.: (401) 846-1520
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If to Lender:
|
GATX Corporation
|
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|
580 California Street, Suite 1100
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San Francisco, CA 94104
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Attn: Contracts Administration
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Facsimile No.: 415-955-3416
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or, as to each party, at such other address as shall be designated
by such party on written notice to the other party otherwise complying as to form and delivery with terms of this paragraph. All
such notices, requests, demands, directions and other communications shall be effective on actual delivery, or, when mailed, shall
be effective on the third calendar day after being deposited in the U.S. mail, or, when sent by overnight courier, on the next
business day after being delivered to such overnight courier, or when transmitted by fax, shall be effective on transmission with
confirmed receipt of transmission, respectively.
9.5
Governing
Law
. The validity, performance, construction, interpretation, and effect of this Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York (excluding its laws relating to conflicts of law except for Sections
5-1401 and 5-1402 of the General Obligation Laws of New York), except as the same may be governed by the federal law of the United
States.
9.6
Severability
.
If any provision of this Agreement, or the application to any circumstance, person or place, is held to be unenforceable, invalid
or void by a court or other tribunal of competent jurisdiction, such provision shall be severed therefrom or shall be reformed
only to the extent necessary to be enforceable to such circumstance, person or place; and such provision as applied to other circumstances,
persons or places, and the remainder of this Agreement, shall remain in full force and effect.
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|
53
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Loan and Guaranty Agreement
|
9.7
Assignment
.
No assignment, delegation or other transfer of this Agreement, in whole or in part, directly or indirectly, whether voluntarily,
involuntarily or by operation of law, or of any rights and obligations under this Agreement can be made by any party other than
Lender, without the prior written consent of the other party, which consent can be withheld in the exercise of its sole discretion.
Any purported assignment, transfer, or delegation in violation of this Section shall be void. Subject to the limits on assignment,
this Agreement shall be binding upon and inure to the benefit of the parties and their respective permitted successors and assigns.
This Agreement does not create and shall not be construed as creating any rights enforceable by any person not a party to this
Agreement. To the extent permitted by law, Lender may freely assign any or all of the Loan Documents, or assign or delegate any
or all of its rights and obligations arising under the Loan Documents to other parties or financial institutions, and may permit
other parties or financial institutions to participate in the Obligations and transactions evidenced by the Loan Documents, in
which event reference to Lender in such documents shall refer to Lender's successors, delegees, or assigns, and to such participants,
as appropriate. In that connection, Lender may disclose all documents and information which Lender now or hereafter may have relating
to the Loan Documents, the transactions evidenced thereby, Borrower, or its business.
9.8
Further
Assurances
. Each party hereto agrees to perform such further acts and to execute and deliver such additional written instruments
as may from time to time be reasonably required to provide, maintain and perfect the security contemplated in this Agreement, and
otherwise to carry out the intent, terms and conditions of this Agreement.
9.9
Authority
.
None of the obligations of any of the parties to this Agreement or to any of the other Loan Documents shall be affected in the
event that the execution and delivery of any or all of the Loan Documents on behalf of any other party was not duly authorized
by all necessary corporate or company action.
9.10
Survival
of Agreement
. This Agreement shall remain in full force and effect until all Obligations are satisfied in full. Notwithstanding
the preceding sentence, the provisions of Article VIII shall remain in full force and effect and binding on Holding Company and
Charterer until all Group Obligations are satisfied in full.
9.11
Complete
Agreement
. This Agreement, including all exhibits, schedules, and all additional documents herein or therein incorporated by
reference, expresses the complete understanding and agreement of the parties hereto with respect to its subject matter, all prior
oral and written agreements to the contrary notwithstanding, and all contemporaneous oral agreements notwithstanding.
9.12
Counterparts
.
This Agreement may be executed in counterparts, all of which, taken together, shall constitute the entire Agreement. For purposes
of this Agreement, a facsimile or other electronic version of a party's signature, such as a .pdf, printed by a receiving facsimile
or printer shall be deemed an original signature.
[
Signatures
provided on next page
]
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|
54
|
Loan and Guaranty Agreement
|
IN WITNESS WHEREOF, each of the parties
hereto has caused this Agreement to be executed by its duly authorized signatory, as of the date first above written.
|
|
GATX CORPORATION, as Lender
|
|
|
|
|
|
By:
|
|
|
|
|
Name: Kevin Hillesland
|
|
|
Title: Vice-President
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BULK LIBERTY LTD., as Borrower
|
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By:
|
|
|
|
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Name: Deborah L. Davis
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|
|
Title: Director
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BULK PARTNERS (BERMUDA) LTD., as Holding Company
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By:
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Name: Deborah L. Davis
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Title: Attorney-in-Fact
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AMERICAS BULK TRANSPORT (BVI) LIMITED, as Charterer
|
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By:
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Name: Deborah L. Davis
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Title: Director
|
Signature Page to Loan and Guaranty Agreement
SCHEDULE 2.4
APPROVED APPRAISERS
Fearnleys AS
H. Clarkson & Co. Limited
Platou Shipbrokers
|
|
|
Loan and Guaranty Agreement
|
SCHEDULE 4.6
EQUITY INTERESTS IN HOLDING COMPANY
Bulk Partners (Bermuda) Ltd.
|
Shareholder
|
|
Number of Shares
|
|
Percentage
|
|
Citizenship
|
|
|
|
|
|
|
|
|
|
Ed Coll
|
|
38,643 (Common)
|
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44.25%
|
|
United States
|
|
|
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Lagoa Investments Ltd.
|
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34,277 (Common)
|
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39.25%
|
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Bermuda
|
|
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Anthony Laura
|
|
9,409 (Common)
|
|
10.77%
|
|
United States
|
|
|
|
|
|
|
|
|
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Anthony Laura Trust
|
|
5,000 (Common)
|
|
5.73%
|
|
United States
|
|
|
|
|
|
|
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|
|
Pangaea One L.P.
|
|
23,020.024 (Preferred)
|
|
33.10%
|
|
United States
|
|
|
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Pangaea One (Cayman) L.P.
|
|
12,686.847 (Preferred)
|
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18.242%
|
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Cayman Islands
|
|
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|
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|
|
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|
Pangaea One Parallel Fund L.P.
|
|
11,855.343 (Preferred)
|
|
17.047%
|
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Cayman Islands
|
|
|
|
|
|
|
|
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|
Pangaea One Parallel Fund (B) L.P.
|
|
5,984.368 (Preferred)
|
|
8.605%
|
|
United States
|
|
|
|
|
|
|
|
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|
Ed Coll
|
|
6,920.00 (Preferred)
|
|
9.950%
|
|
United States
|
|
|
|
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Lago Investments Ltd.
|
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6,920.00 (Preferred)
|
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9.950%
|
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Bermuda
|
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Anthony Laura
|
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2,106.00 (Preferred)
|
|
3.106%
|
|
United States
|
EQUITY INTERESTS IN PLEDGOR
Bulk Partners Holding Company Bermuda
Limited
|
Shareholder
|
|
Number of
Shares
|
|
Percentage
|
|
Citizenship
|
|
|
|
|
|
|
|
|
|
Bulk Partners (Bermuda) Ltd.
|
|
10,000
|
|
100%
|
|
Bermuda
|
|
|
|
Loan and Guaranty Agreement
|
SCHEDULE 4.6 (continued)
EQUITY INTERESTS IN BORROWER
BULK LIBERTY LTD.
|
Shareholder
|
|
Number of
Shares
|
|
Percentage
|
|
Citizenship
|
|
|
|
|
|
|
|
|
|
Bulk Partners Holding Company Bermuda Limited
|
|
10,000
|
|
100%
|
|
Bermuda
|
EQUITY INTERESTS IN CHARTERER
Americas Bulk Transport (BVI) Limited
|
Shareholder
|
|
Number
of Shares
|
|
Percentage
|
|
Citizenship
|
|
|
|
|
|
|
|
|
|
Bulk Partners Holding Company Bermuda Ltd.
|
|
1,000
|
|
100%
|
|
Bermuda
|
BORROWER'S SUBSIDIARIES
(Direct and Indirect)
None
SUBSCRIPTION AGREEMENTS, ETC. FOR EQUITY
INTERESTS IN BORROWER
None
|
|
|
Loan and Guaranty Agreement
|
SCHEDULE 4.8
MATERIAL LEGAL ACTIONS
NONE
|
|
|
Loan and Guaranty Agreement
|
SCHEDULE 4.9
PERMITTED ENCUMBRANCES
Charters and Service Agreements
|
|
·
|
Sub-time charters, voyage charters, or contracts of affreightment entered into by Phoenix for a period (including optional
renewals) of twelve (12) months or less, for employment of the Vessel in the international bulk cargo trade
|
Other Encumbrances
Maritime liens on the Vessel for:
(a) torts
that are covered by insurance that complies with the provisions of the Bulk Liberty Mortgage; or
(b) crew's
wages, salvage, or for goods and services furnished to the Vessel in the ordinary course of Borrower's business and not in violation
of any provisions of the Loan Documents, none of which are overdue
provided,
Borrower may contest such Encumbrances in good
faith if appropriate reserves therefor are established and maintained consistently with GAAP, and security therefor is posted as
necessary to prevent the Seizure of the Vessel, or, if the Vessel is Seized with respect to a claim of such an Encumbrance, the
Vessel is released therefrom within thirty (30) days.
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Loan and Guaranty Agreement
|
SCHEDULE 4.11
LOCATIONS
|
Entity
|
|
Chief Executive Office
|
|
Place of Business or Business Records
|
|
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|
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|
Borrower
|
|
3
rd
Floor – Par la Ville Place
14 Par la Ville Road
Hamilton HM08
Bermuda
|
|
c/o Phoenix Bulk Carriers (US) LLC
109 Long Wharf, 2
nd
Floor
Newport, RI 02840
|
|
|
|
|
|
|
|
Pledgor
|
|
3
rd
Floor – Par la Ville Place
14 Par la Ville Road
Hamilton HM08
Bermuda
|
|
c/o Phoenix Bulk Carriers (US) LLC
109 Long Wharf, 2
nd
Floor
Newport, RI 02840
|
|
|
|
|
|
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Charterer
|
|
3
rd
Floor – Par la Ville Place
14 Par la Ville Road
Hamilton HM08
Bermuda
|
|
c/o Phoenix Bulk Carriers (US) LLC
109 Long Wharf, 2
nd
Floor
Newport, RI 02840
|
|
|
|
|
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|
|
Allseas
|
|
3
rd
Floor – Par la Ville Place
14 Par la Ville Road
Hamilton HM08
Bermuda
|
|
c/o Phoenix Bulk Carriers (US) LLC
109 Long Wharf, 2
nd
Floor
Newport, RI 02840
|
All of the above companies have no place of business or business
records at any location in the United States, with the possible exception of:
c/o Phoenix Bulk Carriers (US) LLC
109 Long Wharf, 2
nd
Floor
Newport, RI 02840
|
|
|
Loan and Guaranty Agreement
|
EXHIBIT A
REQUEST FOR ADVANCE
Pursuant to Section 2.1 of the Loan and Guaranty Agreement dated
August __, 2013 (as assigned, assumed, amended, supplemented, renewed, restated, replaced, or otherwise modified (the "
Loan
Agreement
"), among GATX CORPORATION ("Lender") and BULK LIBERTY LTD. ("
Borrower
"), BULK PARTNERS
(BERMUDA) LTD., and AMERICAS BULK TRANSPORT (BVI) LIMITED, please disburse the Advance on a Business Day on or about _______, 2013
as follows:
1. The
amount of $_____________ by wire transfer as follows:
_______________________
Branch: _____________
Account No.: _________________
ABA Routing No.: ________________
2. ____________________________________
None of Borrower's representations or warranties contained in
any of the Loan Documents are untrue, Borrower is in compliance with all of its covenants contained in the Loan Documents, and
no Default or Event of Default has occurred and is continuing under the Loan Documents.
Terms used herein that are defined in the Loan Agreement have
the meaning herein that they are given therein.
DATE: _____________, 2013
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BULK LIBERTY LTD.
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By:
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Name:
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Title:
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|
Loan and Guaranty Agreement
|
EXHIBIT B
CERTIFICATE OF COMPLIANCE
The undersigned, in his or her capacity
as ____________________ of BULK LIBERTY LTD. (the "
Borrower
"), pursuant to
Section 5.5(c)
of the Loan and
Guaranty Agreement dated as of August __, 2013 (as assigned, assumed, amended, supplemented, renewed, restated, replaced,
or otherwise modified (the "
Loan Agreement
"; the terms defined therein being used herein as therein defined) among
the Borrower, GATX CORPORATION ("
Lender
"), and the other parties named therein, does hereby certify that:
1. The
representations and warranties contained in
Article IV
of the Loan Agreement and in other places in the Loan Documents are
true and correct on and as of the date of this Certificate, except to the extent that such representations and warranties specifically
refer to an earlier date, in which case they are true and correct as of such earlier date.
2. No
Default or Event of Default exists.
IN WITNESS WHEREOF, the undersigned has
executed this Certificate of Compliance this ____ day of __________, 201_.
|
|
BULK LIBERTY LTD.
|
|
|
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|
|
By:
|
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|
|
|
Name:
|
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|
Title:
|
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|
Loan and Guaranty Agreement
|
Exhibit 10.10
Execution Version
Date: as of April 15, 2013
BULK PANGAEA LIMITED, BULK PATRIOT LTD.,
BULK JULIANA LTD. and BULK TRIDENT LTD.
as Joint and Several Borrowers
BULK PARTNERS (BERMUDA) LTD., BULK PARTNERS
HOLDING COMPANY BERMUDA LTD., and BULK FLEET BERMUDA HOLDING COMPANY LTD.
as Joint and Several Guarantors
THE BANKS AND FINANCIAL INSTITUTIONS
listed in Schedule 1
as Lenders
– and –
DVB BANK SE
as Agent
and as Security Trustee
LOAN AGREEMENT
relating to
a Senior Secured Post-Delivery Term Loan
Facility in
the initial principal amount of up to US$30,301,562.51
Watson, Farley & Williams
New York
INDEX
|
Clause
|
|
Page
|
|
|
|
|
|
1
|
INTERPRETATION
|
2
|
|
|
|
|
|
2
|
FACILITY
|
26
|
|
|
|
|
|
3
|
POSITION OF THE LENDERS
|
26
|
|
|
|
|
|
4
|
DRAWDOWN
|
28
|
|
|
|
|
|
5
|
INTEREST
|
30
|
|
|
|
|
|
6
|
INTEREST PERIODS
|
31
|
|
|
|
|
|
7
|
DEFAULT INTEREST
|
32
|
|
|
|
|
|
8
|
REPAYMENT AND PREPAYMENT
|
33
|
|
|
|
|
|
9
|
CONDITIONS PRECEDENT
|
35
|
|
|
|
|
|
10
|
REPRESENTATIONS AND WARRANTIES
|
38
|
|
|
|
|
|
11
|
GENERAL AFFIRMATIVE AND NEGATIVE COVENANTS
|
47
|
|
|
|
|
|
12
|
FINANCIAL COVENANTS
|
55
|
|
|
|
|
|
13
|
MARINE INSURANCE COVENANTS
|
56
|
|
|
|
|
|
14
|
SHIP COVENANTS
|
62
|
|
|
|
|
|
15
|
COLLATERAL MAINTENANCE RATIO
|
67
|
|
|
|
|
|
16
|
guarantee
|
68
|
|
|
|
|
|
17
|
PAYMENTS AND CALCULATIONS
|
71
|
|
|
|
|
|
18
|
APPLICATION OF RECEIPTS
|
73
|
|
|
|
|
|
19
|
APPLICATION OF EARNINGS
|
75
|
|
|
|
|
|
20
|
EVENTS OF DEFAULT
|
79
|
|
|
|
|
|
21
|
FEES AND EXPENSES
|
83
|
|
|
|
|
|
22
|
INDEMNITIES
|
84
|
|
|
|
|
|
23
|
NO SET-OFF OR TAX DEDUCTION; tax indemnity; FATCA
|
86
|
INDEX
|
Clause
|
|
Page
|
|
|
|
|
|
24
|
ILLEGALITY, ETC
|
91
|
|
|
|
|
|
25
|
INCREASED COSTS
|
91
|
|
|
|
|
|
26
|
SET-OFF
|
93
|
|
|
|
|
|
27
|
TRANSFERS AND CHANGES IN LENDING OFFICES
|
94
|
|
|
|
|
|
28
|
VARIATIONS AND WAIVERS
|
98
|
|
|
|
|
|
29
|
NOTICES
|
99
|
|
|
|
|
|
30
|
SUPPLEMENTAL
|
101
|
|
|
|
|
|
31
|
THE SERVICING BANKS
|
102
|
|
|
|
|
|
32
|
LAW AND JURISDICTION
|
106
|
|
|
|
|
|
33
|
WAIVER OF JURY TRIAL
|
107
|
|
|
|
|
|
34
|
PATRIOT ACT notice
|
107
|
|
EXECUTION PAGE
|
108
|
|
|
|
|
SCHEDULE 1 LENDERS AND COMMITMENTS
|
109
|
|
|
|
|
SCHEDULE 2 INTENTIONALLY OMITTED
|
110
|
|
|
|
|
SCHEDULE 3 DRAWDOWN NOTICE
|
111
|
|
|
|
|
SCHEDULE 4 CONDITION PRECEDENT DOCUMENTS
|
113
|
|
|
|
|
SCHEDULE 5 TRANSFER CERTIFICATE
|
119
|
|
|
|
|
SCHEDULE 6 INTENTIONALLY OMITTED
|
123
|
|
|
|
|
SCHEDULE 7 list of approved brokers
|
124
|
|
|
|
|
SCHEDULE 8 dvb loan administration form
|
125
|
|
|
|
|
SCHEDULE 9 FORM OF LETTER OF INSTRUCTION TO CLASSIFICATION SOCIETY
|
127
|
|
|
|
|
SCHEDULE 10 FORM OF CLASSIFICATION SOCIETY LETTER OF UNDERTAKING
|
129
|
|
|
|
|
appendix a FORM OF APPROVED MANAGER’S UNDERTAKING
|
131
|
|
|
|
|
appendix b FORM OF BORROWER ACCESSION AGREEMENT
|
132
|
INDEX
|
Clause
|
|
Page
|
|
|
|
|
appendix c-1 FORM OF COMPLIANCE CERTIFICATE (borrowers)
|
133
|
|
|
|
|
appendix c-2 FORM OF COMPLIANCE CERTIFICATE (BULK PARTNERS)
|
134
|
|
|
|
|
appendix d FORM OF EARNINGS ACCOUNT PLEDGE
|
135
|
|
|
|
|
appendix e FORM OF EARNINGS ASSIGNMENT
|
136
|
|
|
|
|
appendix f FORM OF FREIGHTS ACCOUNT PLEDGE
|
137
|
|
|
|
|
appendix g FORM OF GUARANTOR ACCESSION AGREEMENT
|
138
|
|
|
|
|
appendix h FORM OF INSURANCE ASSIGNMENT
|
139
|
|
|
|
|
appendix I-1 FORM OF MORTGAGE (PANAMA)
|
140
|
|
|
|
|
appendix I-2 FORM OF MORTGAGE (MARSHALL ISLANDS)
|
141
|
|
|
|
|
appendix J FORM OF NOTE
|
142
|
|
|
|
|
appendix K FORM OF SHAREs PLEDGE
|
143
|
|
|
|
|
appendix l TIME CHARTER AND TIME CHARTER GUARANTEE ASSIGNMENT
|
144
|
|
|
|
|
appendix M FORM OF TIME CHARTER EARNINGS ASSIGNMENT
|
145
|
|
|
|
|
appendix N-1 FORM OF UNDERTAKING AND AGREEMENT – BULK PATRIOT
|
146
|
|
|
|
|
appendix N-2 FORM OF UNDERTAKING AND AGREEMENT – BULK TRIDENT
|
147
|
THIS LOAN AGREEMENT (this “
Agreement
”)
is made as of April 15, 2013
AMONG
|
|
(1)
|
BULK PANGAEA LIMITED (“
Bulk Pangaea
”), BULK PATRIOT LTD. (“
Bulk Patriot
”),
BULK JULIANA LTD. (“
Bulk Juliana
”) and BULK TRIDENT LTD. (“
Bulk Trident
”), each a company
organized and existing under the laws of Bermuda whose registered office is at 3
rd
Floor, Par la Ville Place, 14 Par
la Ville Road, Hamilton HM08, Bermuda, as joint and several borrowers (together with any other person that becomes a borrower party
hereto pursuant to a Borrower Accession Agreement (as defined below), the “
Borrowers
”, and each separately a
“
Borrower
”, which expressions include their respective successors, transferees and assigns);
|
|
|
(2)
|
BULK PARTNERS (BERMUDA) LTD. (“
Bulk Partners
”), BULK PARTNERS HOLDING COMPANY
BERMUDA LTD. (“
Bulk Holdings
”) and BULK FLEET BERMUDA HOLDING COMPANY LTD. (“
Bulk Fleet
”),
each a company organized and existing under the laws of Bermuda whose registered office is at 3
rd
Floor, Par la Ville
Place, 14 Par la Ville Road, Hamilton HM08, Bermuda, as joint and several guarantors (together with any other person that becomes
a guarantor party hereto pursuant to a Guarantor Accession Agreement (as defined below), the “
Guarantors
”, and
each separately a “
Guarantor
”, which expressions include their respective successors, transferees and assigns);
|
|
|
(3)
|
THE BANKS AND FINANCIAL INSTITUTIONS listed in Schedule 1, as lenders (the “
Lenders
”,
which expression includes their respective successors, transferees and assigns);
|
|
|
(4)
|
DVB BANK SE, acting in such capacity through its office at Platz der Republik 6, 60325 Frankfurt
am Main, Germany, as agent for the Lenders (in such capacity, the “
Agent
”, which expression includes its successors,
transferees and assigns); and
|
|
|
(5)
|
DVB BANK SE, acting in such capacity through its office at Platz der Republik 6, 60325 Frankfurt
am Main, Germany, as security trustee for the Lenders (in such capacity, the “
Security Trustee
”, which expression
includes its successors, transferees and assigns).
|
BACKGROUND
|
|
(A)
|
The Lenders have agreed to make available to the Borrowers a senior secured post-delivery term
loan facility in the aggregate principal amount of up to $30,301,562.51 in respect of the refinancing of the Initial Ships,
provided
that
the foregoing amount may be increased by an amount to be agreed upon between the Lenders and the Borrowers to provide
for an Advance in respect of the acquisition of an Additional Ship.
|
|
|
(B)
|
The Lenders have agreed to share
pari passu
in the Collateral 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:
|
“
Acceptable Accounting
Firm
” means Ernst & Young LLP, or such other recognized accounting firm as the Agent may, with the consent of the
Majority Lenders, approve from time to time in writing, such approval not to be unreasonably withheld;
“
Account Bank
”
means HSBC Bank Bermuda Limited, acting through its office at 37 Front Street, Hamilton HM11, Bermuda;
“
Additional
Ship
” means any vessel which is:
(a) to be
acquired by a subsidiary of Bulk Partners;
(b) classed
with a Classification Society, free of overdue recommendations and conditions affecting that vessel’s class;
(c) to be
registered on an Approved Flag; and
(d) approved
by the Majority Lenders;
“
Advance
”
means the principal amount of each borrowing by the Borrowers under this Agreement;
“
Affiliate
”
means, as to any person, any other person that, directly or indirectly, controls, is controlled by or is under common control with
such person or is a director or officer of such person, and for purposes of this definition, the term “
control
”
(including the terms “
controlling
”, “
controlled by
” and “
under common control with
”)
of a person means the possession, direct or indirect, of the power to vote 20% or more of the Voting Stock of such person or to
direct or cause direction of the management and policies of such person, whether through the ownership of Voting Stock, by contract
or otherwise;
“
Agreed Form
”
means in relation to any document, that document in the form approved by the Agent with the consent of the Majority Lenders (such
consent not to be unreasonably withheld), or as otherwise approved in accordance with any other approval procedure specified in
any relevant provision of any Finance Document;
“
Allseas
”
means Allseas Logistics Bermuda Ltd., a Bermuda company;
“
Applicable Collateral
Maintenance Ratio
” has the meaning given in Clause 15.2;
“
Applicable Margin
”
means:
|
|
(a)
|
with respect to the Advance relating to each of BULK PANGAEA, BULK PATRIOT and BULK TRIDENT, 3.50%
per annum; and
|
|
|
(b)
|
with respect to the Advance relating to BULK JULIANA, 3.75% per annum;
|
“
Applicable Maturity
Date
” means:
|
|
(a)
|
with respect to the Advance relating to BULK PANGAEA, the earlier of January 19, 2017 and the date
on which the Advance relating to BULK PANGAEA is accelerated pursuant to Clause 20.4;
|
|
|
(b)
|
with respect to the Advance relating to BULK PATRIOT, the earlier of October 19, 2017 and the date
on which the Advance relating to BULK PATRIOT is accelerated pursuant to Clause 20.4;
|
|
|
(c)
|
with respect to the Advance relating to BULK JULIANA, the earlier of July 19, 2018 and the date
on which the Advance BULK JULIANA is accelerated pursuant to Clause 20.4; and
|
|
|
(d)
|
with respect to the Advance relating to BULK TRIDENT, the earlier of October 19, 2018 and the date
on which the Advance BULK TRIDENT is accelerated pursuant to Clause 20.4;
|
“
Approved Broker
”
means any of the companies listed on Schedule 7 or such other company proposed by the Borrowers which the Agent may, with the consent
of the Majority Lenders (such consent not to be unreasonably withheld), approve from time to time for the purpose of valuing a
Ship, who shall act as an expert and not as arbitrator and whose valuation shall be conclusive and binding on all parties to this
Agreement;
“
Approved Flag
”
means the Panamanian flag, the Marshall Islands flag or such other flag as the Agent may, with the consent of the Majority Lenders,
approve from time to time in writing as the flag on which a Ship shall be registered;
“
Approved Management
Agreement
” means, in relation to a Ship in respect of its commercial and/or technical management, a management agreement
between the Borrower that owns that Ship and the relevant Approved Manager in Agreed Form;
“
Approved Manager
”
means Phoenix Bulk (US), Seamar Management SA or any other company proposed by the Borrowers which the Agent may, with the consent
of the Majority Lenders (such consent not to be unreasonably withheld), approve from time to time as the technical and/or commercial
manager of a Ship;
“
Approved Manager’s
Undertaking
” means, in relation to a Ship, the letter executed and delivered by an Approved Manager, in the form set
out in Appendix A;
“
Availability Period
”
means the period commencing on the Effective Date and ending on the earlier of:
|
|
(a)
|
May 31, 2013 (or such later date as the Agent may, with the consent of the Majority Lenders, agree
with the Borrowers); and
|
|
|
(b)
|
the date on which the Total Commitments are fully borrowed, cancelled or terminated;
|
“
Bank Secrecy Act
”
means the United States Bank Secrecy Act of 1970, as amended;
“
Basel III
”
means any of the changes designed to strengthen any capital standards or introduce minimum liquidity or other requirements referenced
in the publication of the Groups of Governors and Heads of Supervision of the Basel Committee on Banking Supervision (the “
Basel
Committee
”) dated 16 December, 2010, or any subsequent paper or document published by the Basel Committee on any of those
requirements;
“
Borrower Accession
Agreement
” means an agreement providing for the accession of a person to this Agreement as a Borrower in the form set
out in Appendix B hereto;
“
BULK
JULIANA
” means the 2001-built motor vessel of 52,510 deadweight tons currently named “BULK JULIANA”, IMO
Number 9235854, and registered in the name of Bulk Juliana on Panamanian flag;
“
BULK
PANGAEA
” means the 1999-built motor vessel of 73,700 deadweight tons currently named “BULK PANGAEA”, IMO
Number 9187722, and registered in the name of Bulk Pangaea on Panamanian flag;
“
Bulk Partners Shareholders
”
means, as of the date hereof, Edward Coll, Anthony Laura, Lagoa Investments Ltd., a Bermuda company, Pangaea One, L.P., a Delaware
limited partnership, Pangaea One Parallel Fund (B), L.P., a Delaware limited partnership, Pangaea One (Cayman), L.P., a Cayman
Islands limited partnership, Pangaea One Parallel Fund, L.P., a Cayman Islands limited partnership, and up to ten other persons
who may be named by Bulk Partners as key personnel after the date of this Agreement,
provided that
such other persons shall
be employed by Bulk Partners or any of its subsidiaries at the time such other persons become Bulk Partners Shareholders, and,
if any such other person individually holds more than 10% of the shares of Bulk Partners at any time, Bulk Partners shall so notify
the Agent;
“
BULK
PATRIOT
” means the 1996-built motor vessel of 70,165 deadweight tons currently named “BULK PATRIOT”, IMO
Number 9115523, and registered in the name of Bulk Patriot on Panamanian flag;
“
BULK
TRIDENT
” means the 2006-built motor vessel of 52,514 deadweight tons currently named “BULK TRIDENT”, IMO
Number 9298545, and registered in the name of Bulk Trident on Marshall Islands flag;
“
Business Day
”
means a day on which banks are open in London, England, New York, New York and Frankfurt, Germany;
“
Capitalized Lease
”
means, as applied to any person, any lease of any property (whether real, personal or mixed) of which the discounted present value
of the rental obligations of such person, as lessee, in conformity with GAAP, is required to be capitalized on the balance sheet
of such person; and “
Capitalized Lease Obligation
” is defined to mean the rental obligations, as aforesaid,
under a Capitalized Lease;
“
Cash
Equivalents
” means:
|
|
(a)
|
securities issued or directly and fully guaranteed or insured by the United States of America or
any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support
thereof);
|
|
|
(b)
|
time deposits, certificates of deposit or deposits in the interbank market of any commercial bank
of recognized standing organized under the laws of the United States of America, any state thereof or any foreign jurisdiction
having capital and surplus in excess of $500,000,000; and
|
|
|
(c)
|
such other securities or instruments as the Majority Lenders shall agree in writing;
|
and in respect of both (a) and
(b) above, with a Rating Category of at least “A+” by S&P and “A” by Moody’s (or the equivalent
used by another Rating Agency), and in each case having maturities of not more than ninety (90) days from the date of acquisition;
“
Change of Control
”
means:
|
|
(a)
|
in respect of each of the Borrowers, the Guarantors (other than Bulk
Partners) and the Time Charterer, the occurrence of any act, event or circumstance that without prior written consent of the Majority
Lenders results in Bulk Partners owning directly or indirectly less than 100% of the issued and outstanding Equity Interests in
any of the Borrowers, the Guarantors (other than Bulk Partners) and the Time Charterer; and
|
|
|
(b)
|
in respect of Bulk Partners, the occurrence of any act, event or
circumstance that without prior written consent of the Majority Lenders results in the Bulk Partners Shareholders owning directly
or indirectly, individually or as a group, less than 100% of the issued and outstanding Equity Interests in Bulk Partners;
|
“
Charter
”
means, in relation to a Ship, any demise, time or consecutive voyage charter in respect of that Ship for a term which exceeds,
or which by virtue of any optional extensions may exceed, 12 months, in each case in Agreed Form, and for the avoidance of doubt,
the term “Charter” includes but is not limited to a Time Charter;
“
CISADA
” means
the United States Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010;
“
Classification Society
”
means, in relation to a Ship, Nippon Kaiji Kyokai, American Bureau of Shipping or such other first-class vessel classification
society that is a member of IACS that the Agent may, with the consent of the Majority Lenders (such consent not to be unreasonably
withheld), approve from time to time;
“
COAs
” mean,
collectively:
|
|
(a)
|
the Contract of Affreightment dated January 1, 2011 between Noranda Alumina LLC as shipper and
Phoenix Bulk Carriers (US) LLC, a Delaware limited liability company (“
Phoenix Bulk (US)
”), as owner;
|
|
|
(b)
|
the Contract of Affreightment dated January 1, 2011 between Phoenix Bulk (US) as shipper and the
Time Charterer as owner; and
|
|
|
(c)
|
the Contract of Affreightment dated March 10, 2012 between Atlantic Minerals Limited as shipper
and Phoenix Bulk Carriers (BVI) Limited, a British Virgin Islands company (“
Phoenix Bulk (BVI)
”), as owner;
|
“
Code
” means
the United States Internal Revenue Code of 1986, as amended, and the regulations promulgated and rulings issued thereunder;
“
Collateral
”
means all property (including, without limitation, any proceeds thereof) referred to in the Finance Documents that is or is intended
to be subject to any Security Interest in favor of the Security Trustee, for the benefit of the Lenders, securing the Secured Liabilities;
“
Commitment
”
means, in relation to a Lender, the amount set opposite its name in 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);
“
Compliance Certificate
”
means:
|
|
(a)
|
a certificate executed by an authorized person of a Borrower in the form set out in Appendix C-1
(Borrowers); and
|
|
|
(b)
|
a certificate executed by an authorized person of Bulk Partners in the form set out in Appendix
C-2 (Bulk Partners);
|
“Consolidated Debt Service
”
means, on a consolidated basis, the aggregate amount of principal and Consolidated Net Interest Expense paid or scheduled to be
paid by Bulk Partners on its consolidated Financial Indebtedness for the immediately preceding twelve month period;
“
Consolidated
Debt
Service Coverage Ratio
” means a fraction (expressed as a percentage, rounded up to the nearest tenth of a percent) where
(a) the numerator is Consolidated EBITDA and (b) the denominator is Consolidated Debt Service;
“
Consolidated
EBITDA
”
means, for any accounting period, the net income of Bulk Partners on a consolidated basis for that accounting period:
|
|
(a)
|
plus
, to the extent deducted in computing the consolidated
net income of Bulk Partners for that accounting period, the sum, without duplication, of:
|
|
|
(i)
|
all federal, state, local and foreign income taxes and tax distributions;
|
|
|
(ii)
|
Consolidated Net Interest Expense;
|
|
|
(iii)
|
depreciation, depletion, amortization of intangibles and other non-cash charges or non-cash losses
(including non-cash transaction expenses and the amortization of debt discounts) and any extraordinary losses not incurred in the
ordinary course of business; and
|
|
|
(iv)
|
any drydocking expenses;
|
|
|
(b)
|
minus
, to the extent added in computing the consolidated net
income of Bulk Partners for that accounting period, any non-cash income or non-cash gains and any extraordinary gains on asset
sales or otherwise not incurred in the ordinary course of business;
|
“
Consolidated
Leverage
Ratio
” means a fraction (expressed as a percentage, rounded up to the nearest tenth of a percent) where (a) the numerator
is a number equal to the consolidated Financial Indebtedness of Bulk Partners and (b) the denominator is Consolidated Net Worth;
“
Consolidated
Minimum
Liquidity
” means freely available and unencumbered cash and/or Cash Equivalents held by Bulk Partners on a consolidated
basis;
“
Consolidated
Net
Interest Expense
” means, on a consolidated basis, the aggregate of all interest, commitment and other fees, commissions,
discounts and other costs, charges or expenses accruing that are due from Bulk Partners during the relevant accounting period less
interest income received, determined in accordance with GAAP and as shown in the statement of income for Bulk Partners;
“
Consolidated
Net
Worth
” means total market adjusted equity of Bulk Partners on a consolidated basis;
“
Contractual Currency
”
has the meaning given in Clause 22.4;
“
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 or any Lender, whether as at the date of this Agreement or at any later time;
“
Currency Agreement
”
means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect a person
or any of its subsidiaries against fluctuations in currency values to or under which such person or any of its subsidiaries is
a party or a beneficiary on the date of this Agreement or becomes a party or a beneficiary thereafter;
“
Delivery Date
”
means the date of the scheduled acquisition by and delivery of an Additional Ship to the Borrower that will own such Additional
Ship;
“
Disbursement Authorization
”
has the meaning given in Clause 9.2(b);
“
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 Borrowers for such Advance to be made, or (as the context requires)
the date on which such Advance is actually made;
“
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 Borrower
owning that Ship, the Time Charterer 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 Borrower owning that Ship, the Time Charterer 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 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, in relation to a Ship, an account in the name of the Borrower owning that Ship with the Account Bank designated “[Name
of Ship] - Earnings Account”, or any other account (with the Account Bank or the Agent or with another bank or financial
institution acceptable to the Majority Lenders) which is designated as the Earnings Account in relation to that Ship for the purpose
of receiving (i) all charter hire and other amounts paid under the Time Charter for that Ship and (ii) the Excess Cash Flow for
that Ship;
“
Earnings Account Minimum
Balance
” means the minimum amount required to be retained in an Earnings Account pursuant to Clause 19.2(a) or (b), as
the case may be;
“
Earnings Account Pledge
”
means a pledge of the Earnings Account for a Ship, in the form set out in Appendix D;
“
Earnings Assignment
”
means, in relation to a Ship, an assignment of the Earnings and any Requisition Compensation of that Ship, in the form set
out in Appendix E;
“
Effective Date
”
means the date on which this Agreement is executed and delivered by the parties hereto;
“
Email
” has
the meaning given in Clause 29.1;
“
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,
|
and “
claim
”
means a claim for damages, compensation, indemnification, contribution, 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 and which involves a collision
or allision between a Ship and another vessel or object, or some other incident of navigation or operation, in any case, in connection
with which such Ship is actually or potentially liable to be arrested, attached, detained or injuncted and/or such Ship and/or
the Guarantors and/or the Borrower owning such Ship and/or any operator or manager of the Ship is at fault or allegedly at fault
or otherwise liable to any legal or administrative action; or
|
|
|
(c)
|
any other incident in which Environmentally Sensitive Material is released otherwise than from
a Ship and in connection with which such Ship is actually or potentially liable to be arrested and/or where the Guarantors and/or
the Borrower owning such Ship and/or any operator or manager of such 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;
“
Environmental Permit
”
means any permit, approval, identification number, license or other authorization required under any Environmental Law;
“
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;
“
Equity Interests
”
of any person means:
|
|
(a)
|
any and all shares and other equity interests (including common stock, preferred stock, limited
liability company interests and partnership interests) in such person; and
|
|
|
(b)
|
all rights to purchase, warrants or options or convertible debt (whether or not currently exercisable),
participations or other equivalents of or interests in (however designated) such shares or other interests in such person;
|
“
ERISA
” means
the United States Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated and rulings issued
thereunder;
“
ERISA Affiliate
”
means a trade or business (whether or not incorporated) that, together with Bulk Partners or any subsidiary of Bulk Partners, would
be deemed to be a single employer under Section 414 of the Code;
“
Estate
” has
the meaning assigned such term in Clause 31.1(b)(ii);
“
Event of Default
”
means any of the events or circumstances described in Clause 20.1;
“
Executive Order
”
means an executive order issued by the President of the United States of America;
“
Excess
Cash Flow
” means with respect to each Initial Ship, the amount of the Earnings for that Ship remaining in the Freights
Account after the payments referred to in Clause 19. 3 are made;
“
Fair
Market Value
” means, in relation to a Ship, the market value of such Ship at any date that is shown by either:
|
|
(a)
|
a single valuation prepared for and addressed to the Agent by an Approved Broker selected and appointed
by the Agent (which shall be Maritime Strategies International Ltd., Arrow London, SSY (New York) and Compass Maritime (New Jersey)
unless the Agent advises otherwise); or
|
|
|
(b)
|
if requested by the Borrowers, the average of two (2) valuations each prepared for and addressed
to the Agent by an Approved Broker, one selected by the Agent (which shall be Maritime Strategies International Ltd., Arrow London,
SSY (New York) and Compass Maritime (New Jersey) unless the Agent advises otherwise) and one selected by the Borrower,
provided
that
if there is a difference of or in excess of 10% between the two valuations, the Borrowers may, at their sole expense,
obtain a third valuation prepared for and addressed to the Agent by an Approved Broker, in which case the market value of such
Ship shall be the average of the three valuations obtained;
|
provided
that
if a range of market values is provided in a particular appraisal, then the market value in such appraisal shall be deemed
to be the mid-point within such range;
Each valuation
prepared by an Approved Broker shall be:
|
|
(ii)
|
as at a date not more than 14 days prior to the date such valuation is delivered to the Agent;
|
|
|
(iii)
|
on a “desk-top” basis without physical inspection of that Ship;
|
|
|
(iv)
|
on the basis of a sale for prompt delivery for cash on normal arm’s length commercial terms
as between a willing seller and a willing buyer, free of any existing charter or other contract of employment (and with no value
to be given to any pooling arrangements); and
|
|
|
(v)
|
after deducting the estimated amount of the usual and reasonable expenses which would be incurred
in connection with the sale;
|
“
FATCA
” means
Sections 1471 through 1474 of the Code and any regulations thereunder issued by the United States Treasury;
“
FATCA Deduction
”
means a deduction or withholding from a payment under any Finance Document required by or under FATCA;
“
FATCA Exempt Party
”
means a FATCA Relevant Party who is entitled under FATCA to receive payments free from any FATCA Deduction;
“
FATCA Non-Exempt Party
”
means a FATCA Relevant Party who is not a FATCA Exempt Party;
“
FATCA Non-Exempt Lender
”
means any Lender who is a FATCA Non-Exempt Party;
“
FATCA Relevant Party
”
means each Creditor Party and each Security Party;
“
Finance
Documents
” means:
|
|
(b)
|
the Earnings Account Pledges;
|
|
|
(c)
|
the Earnings Assignments;
|
|
|
(d)
|
the Freights Account Pledge;
|
|
|
(e)
|
the Insurance Assignments;
|
|
|
(i)
|
the Time Charter and Time Charter Guarantee Assignments;
|
|
|
(j)
|
the Time Charter Guarantees;
|
|
|
(k)
|
the Time Charterer Earnings Assignments;
|
|
|
(l)
|
the Undertakings and Agreements; and
|
|
|
(m)
|
any other document (whether creating a Security Interest or not) which is executed at any time
by any person as security for, or to establish any form of subordination or priorities arrangement in relation to, any amount payable
to the Lenders under this Agreement or any of the other documents referred to in this definition;
|
“
Financial
Indebtedness
” means, with respect to any person (the “
debtor
”) at any date of determination (without
duplication):
|
|
(a)
|
all obligations of the debtor for principal, interest or any other sum payable in respect of any
moneys borrowed or raised by the debtor;
|
|
|
(b)
|
all obligations of the debtor evidenced by bonds, debentures, notes or other similar instruments;
|
|
|
(c)
|
all obligations of the debtor in respect of any acceptance credit, guarantee or letter of credit
facility or equivalent made available to the debtor (including reimbursement obligations with respect thereto);
|
|
|
(d)
|
all obligations of the debtor to pay the deferred purchase price of property or services, which
purchase price is due more than six months after the date of placing such property in service or taking delivery thereto or the
completion of such services, except trade payables;
|
|
|
(e)
|
all Capitalized Lease Obligations of the debtor as lessee;
|
|
|
(f)
|
all Financial Indebtedness of persons other than the debtor secured by a Security Interest on any
asset of the debtor, whether or not such Financial Indebtedness is assumed by the debtor,
provided that
the amount of such
Financial Indebtedness shall be the lesser of (i) the fair market value of such asset at such date of determination and (ii) the
amount of such Financial Indebtedness;
|
|
|
(g)
|
all Financial Indebtedness of persons other than the debtor under any guarantee, indemnity or similar
obligation entered into by the debtor to the extent such Financial Indebtedness is guaranteed, indemnified, etc. by the debtor;
and
|
|
|
(h)
|
to the extent not otherwise included in this definition, obligations of the debtor under Currency
Agreements and Interest Rate Agreements 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.
|
The amount
of Financial Indebtedness of any debtor at any date shall be the outstanding balance at such date of all unconditional obligations
as described above and, with respect to contingent obligations, the maximum liability upon the occurrence of the contingency giving
rise to the obligation, as determined in conformity with GAAP,
provided that
(i) the amount outstanding at any time of any
Financial Indebtedness issued with an original issue discount is the face amount of such Financial Indebtedness less the remaining
unamortized portion of such original issue discount of such Financial Indebtedness at such time as determined in conformity with
GAAP, and (ii) Financial Indebtedness shall not include any liability for taxes;
“
Fiscal Year
”
means, in relation to any person, each period of one (1) year commencing on January 1 of each year and ending on December 31 of
such year in respect of which its accounts are or ought to be prepared;
“
Foreign Pension Plan
”
means any plan, fund (including without limitation, any superannuation fund) or other similar program established or maintained
outside the United States of America by Bulk Partners or any one or more of its subsidiaries primarily for the benefit of its or
their employees residing outside the United States of America, which plan, fund or other similar program provides, or results in,
retirement income, a deferral of income in contemplation of retirement or payments to be made upon termination of employment, and
which plan is not subject to ERISA or the Code;
“
Freights Account
”
means an account in the name of Allseas with the Account Bank designated as the Freights Account for the Initial Ships and any
Additional Ship(s), or any other account (with the Account Bank or the Agent or with another bank or financial institution acceptable
to the Majority Lenders) for the purpose of receiving all Earnings of each such Ship under either the COAs for such Ship or any
charter by the Time Charterer as disponent owner for such Ship, as applicable;
“
Freights
Account Pledge
” means a pledge of the Freights Account, in the form set out in Appendix F;
“
GAAP
” means
generally accepted accounting principles in the United States of America, including, without limitation, those set forth in the
opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by
a significant segment of the accounting profession;
“
Guaranteed Obligations
”
has the meaning given in Clause 16.1;
“
Guarantor Accession
Agreement
” means an agreement providing for the accession of a person to this Agreement as a Guarantor in the form set
out in Appendix G hereto;
“
IACS
” means
the International Association of Classification Societies;
“
Initial Ships
”
means, collectively, BULK PANGAEA, BULK PATRIOT, BULK JULIANA and BULK TRIDENT, and in the singular means any one of them;
“
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 respect of that Ship, the 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 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;
|
“
Insurance Assignment
”
means, in relation to a Ship, an assignment of the Insurances, in the form set out in Appendix H;
“
Interest Period
”
means a period determined in accordance with Clause 6;
“
Interest Rate Agreement
”
means any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement designed to protect a person or any of its subsidiaries against fluctuations in interest rates to or under which
such person or any of its subsidiaries is a party or a beneficiary on the date hereof or becomes a party or a beneficiary hereafter;
“
IRS
”
means the United States Internal Revenue Service or any successor taxing authority or agency of the United States government;
“
ISM Code
”
means the International Safety Management Code (including the guidelines on its implementation), adopted by the International Maritime
Organization, 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);
“
ISM Code Documentation
”
includes, in respect of a Ship:
|
|
(a)
|
the Document of Compliance and Safety Management Certificate issued pursuant to the ISM Code in
relation to that Ship within the periods specified by the ISM Code;
|
|
|
(b)
|
all other documents and data which are relevant to the safety management system and its implementation
and verification which the Agent may reasonably require; and
|
|
|
(c)
|
any other documents which are prepared or which are otherwise relevant to establish and maintain
that Ship’s compliance or the compliance of the Borrower that owns that Ship or the relevant Approved Manager with the ISM
Code which the Agent may reasonably require;
|
“
ISPS Code
”
means the International Ship and Port Facility Security Code as adopted by the International Maritime Organization, as the same
may be amended or supplemented from time to time;
“
ISPS Code Documentation
”
includes:
|
|
(b)
|
all other documents and data which are relevant to the ISPS Code and its implementation and verification
which the Agent may require;
|
“
ISSC
” means
a valid and current International Ship Security Certificate issued under the ISPS Code;
“
Lending Office
”
means, with respect to any Lender, the office of such Lender specified as its “Lending Office” under its name on Schedule
1 or in the relevant Transfer Certificate pursuant to which it became a Lender, or such other office of such Lender as such Lender
may from time to time specify to the Borrowers and the Agent in accordance with Clause 27.14;
“
LIBOR
” means,
in relation to any period for which a rate of interest is to be determined under any provisions of a Finance Document, the rate
which appears on Reuters BBA page LIBOR 01 screen at or about 11.00 am (London Time) on the relevant Quotation Date for a selected
interest period;
“
Liquidity
”
means the sum of (a) cash and (b) Cash Equivalents, in each case held by a Borrower on a freely available and unencumbered basis;
“
Loan
” means
the principal amount from time to time outstanding under this Agreement;
“
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 $500,000 or the equivalent in any other currency;
“
Majority Lenders
”
means:
|
|
(a)
|
before the Loan has been made, Lenders whose Commitments total 66.67% of the Total Commitments;
and
|
|
|
(b)
|
after the Loan has been made, Lenders whose Contributions total 66.67% of the Loan;
|
“
Margin Stock
”
has the meaning specified in Regulation U of the Board of Governors of the United States Federal Reserve System and any successor
regulations thereto, as in effect from time to time;
“
MOA
” means
the Memorandum of Agreement entered into between the Seller and a Borrower in respect of the sale and purchase of an Additional
Ship;
“
Moody’s
”
means Moody’s Investors Service, Inc., a subsidiary of Moody’s Corporation, and its successors;
“
Mortgage
”
means, in relation to a Ship, the first preferred Panamanian or Marshall Islands ship mortgage, as the case may be, on that Ship,
in the form set out in Appendix I-1 (Panama) or I-2 (Marshall Islands);
“
Multiemployer Plan
”
means, at any time, a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA to which a Borrower, a Guarantor
or any subsidiary of them or any ERISA Affiliate has any liability or obligation to contribute or has within any of the six preceding
plan years had any liability or obligation to contribute;
“
Non-indemnified Tax
”
means:
|
|
(a)
|
any tax on the net income of a Creditor Party (but not a tax on gross income or individual items
of income), whether collected by deduction or withholding or otherwise, which is levied by a taxing jurisdiction which:
|
|
|
(i)
|
is located in the country under whose laws such entity is formed (or in the case of a natural person
is a country of which such person is a citizen); or
|
|
|
(ii)
|
with respect to any Lender, is located in the country of its Lending Office; or
|
|
|
(iii)
|
with respect to any Creditor Party other than a Lender, is located in the country from which such
party has originated its participation in this transaction; or
|
|
|
(b)
|
any FATCA Deduction made on account of a payment to a FATCA Non-Exempt Party;
|
“
Note
” means
a promissory note of the Borrowers, payable to the order of the Agent, evidencing the aggregate indebtedness of the Borrowers under
this Agreement, in the form set out in Appendix J;
“
Notifying Lender
”
has the meaning given in Clause 24.1 or Clause 25.1 as the context requires;
“
OFAC
” means
the Office of Foreign Assets Control of the United States Department of the Treasury;
“
pari passu
”,
when used with respect to the ranking of any Financial Indebtedness of any person in relation to other Financial Indebtedness of
such person, means that each such Financial Indebtedness:
|
|
(a)
|
either (i) is not subordinated in right of payment to any other Financial Indebtedness of such
person or (ii) is subordinate in right of payment to the same Financial Indebtedness of such person as is the other and is so subordinate
to the same extent; and
|
|
|
|
|
|
|
(b)
|
is not subordinate in right of payment to the other or to any Financial Indebtedness of such person
as to which the other is not so subordinate;
|
“
PATRIOT Act
”
means the United States Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism
Improvement and Reauthorization Act of 2005 (H.R. 3199);
“
Payment Currency
”
has the meaning given in Clause 22.4;
“
Permitted Security
Interests
” means:
|
|
(a)
|
Security Interests created by the Finance Documents;
|
|
|
(b)
|
Security Interests for unpaid but not past due master’s and crew’s wages in accordance
with usual maritime practice;
|
|
|
(c)
|
Security Interests for salvage;
|
|
|
(d)
|
Security Interests arising by operation of law for not more than two (2) months’ prepaid
hire under any charter or other contract of employment in relation to a Ship not otherwise prohibited by this Agreement or any
other Finance Document;
|
|
|
(e)
|
Security Interests for master’s disbursements incurred in the ordinary course of trading
and any other Security Interests arising by operation of law or otherwise in the ordinary course of the operation, repair or maintenance
of a Ship,
provided
such Security Interests do not secure amounts more than 30 days overdue (unless the overdue amount is
being contested by the Borrower that owns such Ship in good faith by appropriate steps) and subject, in the case of Security Interests
for repair or maintenance, to Clause 14.13(h);
|
|
|
(f)
|
any Security Interest created in favor of a plaintiff or defendant in any proceedings or arbitration
as security for costs and expenses where the Borrower that owns the relevant Ship is actively prosecuting or defending such proceedings
or arbitration in good faith and such Security Interest does not (and is not likely to) result in any sale, forfeiture or loss
of a Ship;
|
|
|
(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)
|
Security Interests created by Bulk Fleet in connection with financings existing prior to the date
of this Agreement in respect of the Equity Interests of Bulk Discovery (Bermuda) Ltd., Bulk Cajun Bermuda Ltd. and Bulk Atlantic
Ltd.; and
|
|
|
(i)
|
Security Interests created by Allseas, Phoenix Bulk (BVI), Phoenix Bulk (US) or the Time Charterer
to secure the obligations in connection with a letter of credit dated on or about the date of this Agreement and issued by Rockland
Trust Company,
provided that
such the amount available under such letter of credit does not exceed $5,000,000;
|
provided that
the Security Interests described in paragraphs (b) through (g) above shall not exceed $500,000 in the aggregate at any time;
“
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)
|
the jurisdiction under the laws of which the company is incorporated or formed;
|
|
|
(b)
|
a jurisdiction in which the company has the center of its main interests or in which the company’s
central management and control is or has recently been exercised;
|
|
|
(c)
|
a jurisdiction in which the overall net income of the company is subject to corporation tax, income
tax or any similar tax;
|
|
|
(d)
|
a jurisdiction 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 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; or
|
|
|
(e)
|
a jurisdiction the courts of which have jurisdiction to make a winding up, administration or similar
order in relation to the company whether as a 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 (a) or (b) above;
|
“
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;
“
Plan
” means
any employee benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the
Code or Section 302 of ERISA, and in respect to which a Borrower, a Guarantor or any subsidiary of them or ERISA Affiliate is (or,
if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section
3(5) of ERISA;
“
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 (whether designated by name or by reason of being included in a class of persons) against whom Sanctions are directed;
“
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 two (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);
“
Rating Agencies
”
means:
|
|
(b)
|
if S&P or Moody’s or both of them are not making ratings of securities publicly available,
a nationally recognized United States rating agency or agencies, as the case may be, selected by the Agent with the consent of
the Majority Lenders, which will be substituted for S&P or Moody’s or both, as the case may be;
|
“
Rating Category
”
means:
|
|
(a)
|
with respect to S&P, any of the following categories (any of which may include a “+”
or “-”): AAA, AA, A, BBB, BB, B, CCC, CC, C and D (or equivalent successor categories);
|
|
|
(b)
|
with respect to Moody’s, any of the following categories: Aaa, Aa, A, Baa, Ba, B, Caa, Ca,
C and D (or equivalent successor categories); and
|
|
|
(c)
|
the equivalent of any such categories of S&P or Moody’s used by another Rating Agency,
if applicable;
|
“
Repayment Date
”
means a date on which a repayment is required to be made under Clause 8;
“
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
”;
“
S&P
”
means Standard & Poor’s Ratings Services, a division of The McGraw Hill Companies Inc., and its successors;
“
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 Council of the European Union, the United Nations or its Security
Council or the United Kingdom;
|
|
|
(c)
|
in respect of (i) a “national” of any “designated foreign country”, within
the meaning of the Foreign Assets Control Regulations or the Cuban Asset Control Regulations of the United States Department of
the Treasury, 31 C.F.R., Subtitle B, Chapter V, as amended, or (ii) a “specially designated national” listed by OFAC
or any regulations or rulings issued thereunder; or
|
|
|
(d)
|
otherwise imposed by any law or regulation or Executive Order by which any Creditor Party, the
Borrowers or any Guarantor is bound or, as regards a regulation, compliance with which is reasonable in the ordinary course of
business of any Creditor Party, the Borrowers or any Guarantor, including without limitation laws or regulations or Executive Orders
restricting loans to, investments in, or the export of assets to, foreign countries or entities doing business there;
|
provided
that
the laws and regulations described in paragraphs (a) and (d) shall be applicable only to the extent such laws and regulations
are not inconsistent with the laws and regulations of the United States of America;
“
Secured Liabilities
”
means all liabilities which 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 judgment relating to any Finance Documents; and for this purpose, there
shall be disregarded any total or partial discharge of these liabilities, or variation of their terms, which is effected by, or
in connection with, any bankruptcy, liquidation, arrangement or other procedure under the insolvency laws of any country;
“
Security Interest
”
means:
|
|
(a)
|
a mortgage, encumbrance, charge (whether fixed or floating) or pledge, any maritime or other lien
or privilege 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 Borrowers, the Guarantors, the Time Charterer, the Time Charter Guarantors, Allseas, Phoenix Bulk (BVI), Phoenix Bulk
(US) and any other person (except a Creditor Party) who, as a surety, guarantor, mortgagor, assignor or pledgor, as a party to
any subordination or priorities arrangement, or in any similar capacity, executes a Finance Document;
“
Security
Period
” means the period commencing on the date of this Agreement and ending on the date on which the Agent notifies
the Borrowers, the other Security Parties and the other Creditor Parties that:
|
|
(a)
|
all amounts which have become due for payment by the Borrowers or any other Security Party under
the Finance Documents have been paid;
|
|
|
(b)
|
no amount is owing or has accrued (without yet having become due for payment) under any Finance
Document;
|
|
|
(c)
|
neither the Borrowers nor any other Security Party has any future or contingent liability under
Clause 21, 22 or 23 or any other provision of this Agreement or another Finance Document; and
|
|
|
(d)
|
the Agent, the Security Trustee and the Majority Lenders do not reasonably consider that there
is a significant risk that any payment or transaction under a Finance Document would be set aside, or would have to be reversed
or adjusted, in any present or possible future bankruptcy of the Borrowers or another Security Party or in any present or possible
future proceeding relating to a Finance Document or any asset covered (or previously covered) by a Security Interest created by
a Finance Document;
|
“
Seller
” means,
in respect of an MOA, the seller of the Additional Ship named therein;
“
Seller’s Bank
”
has the meaning given in Clause 9.2(b);
“
Servicing Bank
”
means the Agent or the Security Trustee;
“
Shares Pledge
”
means a pledge of the Equity Interests of each Borrower, in the form set out in Appendix K;
“
Ship
” means,
as the context may require:
|
|
(a)
|
any Initial Ship; and
|
(b) any Additional Ship;
“
Substitute Basis
”
has the meaning given such term in Clause 5.5;
“
Time
Charter
” means:
|
|
(a)
|
in respect of BULK PANGAEA, a “hell or high water” time
charter party in Agreed Form between Bulk Pangaea as owner and the Time Charterer as charterer, the terms of which shall include,
among other things:
|
|
|
(i)
|
a charter period ending on the earlier of (i) January 10, 2017 or (ii) the full repayment of the
Advance relating to BULK PANGAEA;
|
|
|
(ii)
|
a minimum daily hire rate of not less than $11,250 payable in arrears; and
|
|
|
(iii)
|
certain provisions allowing Bulk Pangaea to claim additional payments and/or charter hire to:
|
|
|
(A)
|
repair a breach of the Applicable Collateral Maintenance Ratio; and
|
|
|
(B)
|
cover any excess operational expenses/daily running costs, principal and interest which, in the
aggregate, would exceed daily hire rate of $11,250;
|
|
|
(b)
|
in respect of BULK PATRIOT, a “hell or high water” time
charter party in Agreed Form between Bulk Patriot as owner and the Time Charterer as charterer, the terms of which shall include,
among other things:
|
|
|
(i)
|
a charter period ending on the earlier of (i) October 10, 2017 or (ii) the full repayment of the
Advance relating to BULK PATRIOT;
|
|
|
(ii)
|
a minimum daily hire rate of not less than $12,750 payable in arrears; and
|
|
|
(iii)
|
certain provisions allowing Bulk Patriot to claim additional payments and/or charter hire to:
|
|
|
(A)
|
repair a breach of the Applicable Collateral Maintenance Ratio; and
|
|
|
(B)
|
cover any excess operational expenses/daily running costs, principal and interest which, in the
aggregate, would exceed daily hire rate of $12,750;
|
|
|
(c)
|
in respect of BULK JULIANA, a “hell or high water” time
charter party in Agreed Form between Bulk Juliana as owner and the Time Charterer as charterer, the terms of which shall include,
among other things:
|
|
|
(i)
|
a charter period ending on the earlier of (i) July 10, 2018 or (ii) the full repayment of the Advance
relating to BULK JULIANA;
|
|
|
(ii)
|
a minimum daily hire rate of not less than $11,000 payable in arrears; and
|
|
|
(iii)
|
certain provisions allowing Bulk Juliana to claim additional payments and/or charter hire to:
|
|
|
(A)
|
repair a breach of the Applicable Collateral Maintenance Ratio; and
|
|
|
(B)
|
cover any excess operational expenses/daily running costs, principal and interest which, in the
aggregate, would exceed daily hire rate of $11,000; and
|
|
|
(d)
|
in respect of BULK TRIDENT, an “internal” time charter
party in Agreed Form between Bulk Trident as owner and the Time Charterer as charterer, the terms of which shall include, among
other things:
|
|
|
(i)
|
a charter period ending on the earlier of (i) August 30, 2014 or (ii) the full repayment of the
Advance relating to BULK TRIDENT;
|
|
|
(ii)
|
a minimum daily hire rate of not less than $10,615 (net) payable in arrears; and
|
|
|
(iii)
|
certain provisions allowing Bulk Trident to claim additional payments and/or charter hire to:
|
|
|
(A)
|
repair a breach of the Applicable Collateral Maintenance Ratio; and
|
|
|
(B)
|
cover any excess operational expenses/daily running costs, principal and interest which, in the
aggregate, would exceed daily hire rate of $10,615 (net);
|
“
Time Charter and Time
Charter Guarantee Assignment
”
means, in relation to a Ship, an assignment of the Time Charter and the Time Charter
Guarantee for such Ship, in the form set out in Appendix L;
“
Time Charter Guarantee
”
means, in respect of a Time Charter, a guarantee in Agreed Form in respect of the Time Charterer’s obligations under such
Time Charter made by the Time Charter Guarantors, jointly and severally, in favor of the Borrower that owns the Ship subject to
such Time Charter;
“
Time Charter Guarantors
”
means Bulk Partners, Bulk Holding and Bulk Fleet acting in such capacity, and in the singular means any one of them;
“
Time Charterer
”
means Americas Bulk Transport (BVI) Limited, a company organized and existing under the laws of British Virgin Islands;
“
Time Charterer Earnings
Assignment
” means, in respect of each Ship, an assignment by the Time Charterer of the Earnings and any Requisition Compensation
of such Ship, in the form set out in Appendix M;
“
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 one (1) year without any right to an extension), unless it is within one
(1) month redelivered to the full control of the Borrower owning that Ship; or
|
|
|
(c)
|
any arrest, capture, seizure or detention of that Ship (including any hijacking or theft) unless
it is within one (1) month redelivered to the full control of the Borrower owning that Ship;
|
“
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 Borrower owning
that Ship with the Ship’s insurers in which the insurers agree to treat the Ship as a total loss; and
|
|
|
(c)
|
in the case of any other type of total loss, on the date (or the most likely date) on which it
appears to the Agent that the event constituting the total loss occurred;
|
“
Transfer Certificate
”
has the meaning given in Clause 27.2;
“
Transferee Lender
”
has the meaning given in Clause 27.2;
“
Transferor Lender
”
has the meaning given in Clause 27.2;
“
UCC
” means
the Uniform Commercial Code of the State of New York;
“
Undertaking and Agreement
”
means:
|
|
(a)
|
in relation to BULK PATRIOT, the undertaking and agreement made by Bulk Patriot, the Time Charterer,
Phoenix Bulk (US) and Allseas, in the form set out in Appendix N-1; and
|
|
|
(b)
|
in relation to BULK TRIDENT, the undertaking and agreement made by Bulk Trident, the Time Charterer,
Phoenix Bulk (BVI) and Allseas, in the form set out in Appendix N-2; and
|
“
Voting Stock
”
of any person as of any date means the Equity Interests of such person that are at the time entitled to vote in the election of
the board of directors or similar governing body of such person.
|
|
1.2
|
Construction of certain terms.
In this Agreement:
|
“
approved
”
means, for the purposes of Clause 13, approved in writing by the Agent with the consent of the Majority Lenders;
“
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 corporation, limited liability company, partnership, joint venture, unincorporated association, joint stock company
and trust;
“
consent
”
includes an authorization, consent, approval, resolution, license, exemption, filing, registration, notarization and legalization;
“
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, Email or fax;
“
excess risks
”
means, in relation to a Ship, the proportion (if any) of claims for general average, salvage and salvage charges not recoverable
under the hull and machinery insurances in respect of that Ship in consequence of the value at which such Ship is assessed for
the purpose of such claims exceeding its insured value;
“
excess war risk P&I
cover
” means, in relation to a Ship, cover for claims only in excess of amounts recoverable under the usual war risk
cover including (but not limited to) hull and machinery, crew and protection and indemnity risks;
“
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 statute, regulation or resolution
of the United States of America, any state thereof, the Council of the European Union, the European Commission, the United Nations
or its Security Council or any other Pertinent Jurisdiction;
“
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 Borrower owning 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
natural persons; any company; any state, political sub-division of a state and local or municipal authority; and any international
organization;
“
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 that 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 Time Clauses (Hulls)(1/11/02 or 1/11/03) or clause 8 of the Institute Time Clauses (Hulls) (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 (either having the force of law or compliance with which
is reasonable in the ordinary course of business of the party concerned) of any governmental body, intergovernmental or supranational,
agency, department or regulatory, self-regulatory or other authority or organization;
“
subsidiary
”
has the meaning given in Clause 1.4;
“
successor
”
includes any person who is entitled (by assignment, novation, merger or otherwise) to any other person’s rights under this
Agreement or any other Finance Document (or any interest in those rights) or who, as administrator, liquidator or otherwise, is
entitled to exercise those rights; and in particular references to a successor include a person to whom those rights (or any interest
in those rights) are transferred or pass as a result of a merger, division, reconstruction or other reorganization of it or any
other person;
“
tax
” includes
any present or future tax, duty, impost, levy or charge of any kind which is imposed by any country, any state, any political sub-division
of a state or any local or municipal authority or any other governmental authority authorized to levy such tax (including any such
imposed in connection with exchange controls), and any related penalties, interest or fines; and
“
war risks
”
includes the risk of mines and all risks excluded by clause 29 of the Institute Hull Clauses (1/11/02 or 1/11/03) or clause 24
of the Institute Time clauses (Hulls) (1/11/1995) or clause 23 of the Institute Time Clauses (Hulls) (1/10/83).
|
|
1.3
|
Meaning of “month”.
A period of one or more “
months
”
ends on the day in the relevant calendar month numerically corresponding to the day of the calendar month on which the period started
(“
the numerically corresponding day
”), but:
|
|
|
(a)
|
on the Business Day following the numerically corresponding day if the numerically corresponding
day is not a Business Day or, if there is no later Business Day in the same calendar month, on the Business Day preceding the numerically
corresponding day; or
|
|
|
(b)
|
on the last Business Day in the relevant calendar month, if the period started on the last Business
Day in a calendar month or if the last calendar month of the period has no numerically corresponding day,
|
and “
month
”
and “
monthly
” shall be construed accordingly.
|
|
1.4
|
Meaning of “subsidiary”.
A company (S) is a subsidiary
of another company (P) if:
|
|
|
(a)
|
a majority of the issued Equity Interests in S (or a majority of the issued Equity Interests 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 Equity
Interests of S; or
|
|
|
(c)
|
P has the direct or indirect power to appoint or remove a majority of the directors (or equivalent)
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 in Clause 1.1 to a document being in the form of a particular Appendix include references
to that form with any modifications to that form which the Agent approves or reasonably requires with the consent of the Majority
Lenders and which are acceptable to the Borrowers;
|
|
|
(c)
|
references to, or to a provision of, any law or regulation include any amendment, extension, re-enactment
or replacement, whether made before the date of this Agreement or otherwise;
|
|
|
(d)
|
words denoting the singular number shall include the plural and vice versa; 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.
|
|
|
1.7
|
Accounting terms
. Unless otherwise specified herein, all accounting
terms used in this Agreement and in the other Finance Documents shall be interpreted, and all financial statements and certificates
and reports as to financial matters required to be delivered to any Creditor Party under this Agreement shall be prepared, in accordance
with GAAP as from time to time in effect.
|
|
|
1.8
|
Inferences regarding materiality
. To the extent that any representation,
warranty, covenant or other undertaking of a Security Party in this Agreement or any other Finance Document is qualified by reference
to those matters which are not reasonably expected to result in a “material adverse effect” or language of similar
import, no inference shall be drawn therefrom that any Creditor Party has knowledge or approves of any noncompliance by such Security
Party with any law or regulation.
|
|
|
2.1
|
Amount of facility.
Subject to the other provisions of this
Agreement, the Lenders severally agree to make available to the Borrowers a loan facility in the aggregate principal amount of
up to $30,301,562.51 in respect of the refinancing of the Initial Ships,
provided that
the foregoing amount may be increased
by an amount to be agreed upon between the Lenders and the Borrowers to provide for an Advance in respect of the acquisition of
an Additional Ship.
|
|
|
2.2
|
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.
|
|
|
2.3
|
Purpose of Advances.
The Borrowers undertake with each Creditor
Party to use each Advance only to partially finance or refinance the acquisition of a Ship to which such Advance relates.
|
|
|
2.4
|
Cancellation of Total Commitments.
Any portion of the Total
Commitments not disbursed to the Borrowers shall be cancelled and terminated automatically on the expiration of the Availability
Period.
|
|
|
3
|
POSITION OF THE LENDERS
|
|
|
3.1
|
Interests several.
The rights of the Lenders under this Agreement
are several.
|
|
|
3.2
|
Individual right of action.
Each Lender shall be entitled
to sue for any amount which has become due and payable by a Security Party to it under this Agreement without joining the Agent,
the Security Trustee or any other Lender as additional parties in the proceedings.
|
|
|
3.3
|
Proceedings requiring Majority Lender consent.
Except as provided
in Clause 3.2, no Lender may commence proceedings against 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 are several; and a failure of a Lender to perform its obligations under this Agreement shall not result in:
|
|
|
(a)
|
the obligations of the other Lenders being increased; nor
|
|
|
(b)
|
any Security Party or any other Lender being discharged (in whole or in part) from its obligations
under any Finance Document,
|
and in no circumstances shall
a Lender have any responsibility for a failure of another Lender to perform its obligations under this Agreement.
|
|
3.5
|
Replacement of a Lender.
|
|
|
(i)
|
any Lender becomes a Non-Consenting Lender (as defined in paragraph (c) below); or
|
|
|
(ii)
|
the Borrowers or any other Security Party becomes obliged in the absence of an Event of Default
to repay any amount in accordance with Clause 24 or to pay additional amounts pursuant to Clause 23 or Clause 25 to any Lender
in excess of amounts payable to other Lenders generally,
|
then the Borrowers
may, on 30 Business Days’ prior written notice to the Agent and such Lender, replace such Lender by requiring such Lender
to (and such Lender shall) transfer pursuant to Clause 27 all (and not part only) of its rights and obligations under this Agreement
to a Lender or other bank, financial institution, trust, fund or other entity (a “
Replacement Lender
”) selected
by the Borrowers, which is acceptable to the Agent with the consent of the Majority Lenders (other than the Lender the Borrowers
desires to replace), which confirms its willingness to assume and by its execution of a Transfer Certificate does assume all the
obligations of the transferring Lender (including the assumption of the transferring Lender’s participations on the same
basis as the transferring Lender) for a purchase price in cash payable at the time of transfer equal to the outstanding principal
amount of such Lender’s participation in the outstanding Advances and all accrued interest and/or breakages costs and other
amounts payable in relation thereto under the Finance Documents.
|
|
(b)
|
The replacement of a Lender pursuant to this Clause 3.5 shall be subject to the following conditions:
|
|
|
(i)
|
the Borrowers shall have no right to replace the Agent or the Security Trustee;
|
|
|
(ii)
|
neither the Agent nor any Lender shall have any obligation to the Borrowers to find a Replacement
Lender;
|
|
|
(iii)
|
in the event of a replacement of a Non-Consenting Lender such replacement must take place no later
than 30 days after the date the Borrowers notify the Non-Consenting Lender and the Agent of its intent to replace the Non-Consenting
Lender pursuant to Clause 3.5(a); and
|
|
|
(iv)
|
in no event shall the Lender replaced under this paragraph (b) be required to pay or surrender
to such Replacement Lender any of the fees received by such Lender pursuant to the Finance Documents.
|
|
|
(c)
|
For purposes of this Clause 3.5, in the event that:
|
|
|
(i)
|
the Borrowers or the Agent has requested the Lenders to give a consent in relation to or to agree
to a waiver or amendment of any provisions of the Finance Documents;
|
|
|
(ii)
|
the consent, waiver or amendment in question requires the approval of all Lenders; and
|
|
|
(iii)
|
Lenders whose Commitments aggregate more than 66.67% percent
of the Total Commitments have consented to or agreed to such waiver or amendment,
|
then any Lender
who does not and continues not to consent or agree to such waiver or amendment shall be deemed a “
Non-Consenting Lender
”.
|
|
4.1
|
Request for Advance.
Subject to the following conditions,
the Borrowers may request an Advance to be made by delivering to the Agent a completed Drawdown Notice not later than 10:00 a.m.
(New York City time) three (3) Business Days prior to the intended Drawdown Date.
|
|
|
4.2
|
Availability.
The conditions referred to in Clause 4.1 are
that:
|
|
|
(a)
|
the Drawdown Date must be a Business Day during the Availability Period;
|
|
|
(b)
|
the loan facility is divided into an Advance for each Ship as follows:
|
|
|
(i)
|
in the principle amount of up to $5,562,500 in respect of the refinancing of BULK PANGAEA;
|
|
|
(ii)
|
in the principle amount of up to $9,050,000 in respect of the refinancing of BULK PATRIOT;
|
|
|
(iii)
|
in the principle amount of up to $7,436,458.34 in respect of the refinancing of BULK JULIANA;
|
|
|
(iv)
|
in the principle amount of up to $9,562,500 in respect of the refinancing of BULK TRIDENT; and
|
|
|
(v)
|
in a principle amount to be agreed upon between the Lenders and the Borrowers in respect of the
financing of the acquisition of any Additional Ship;
|
|
|
(c)
|
the applicable conditions precedent stated in Clause 9 hereof shall have been satisfied or waived
as provided therein.
|
|
|
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, the Ship(s) to which such Advance relates and the Drawdown Date;
|
|
|
(b)
|
the amount of that Lender’s participation in the Advance; and
|
|
|
(c)
|
the duration of the first Interest Period.
|
|
|
4.4
|
Drawdown Notice irrevocable.
A Drawdown Notice must be signed
by a director, an officer or a duly authorized attorney-in-fact of the Borrowers and once served, a Drawdown Notice cannot be revoked
without the prior consent of the Agent, acting on the authority of the Majority Lenders.
|
|
|
4.5
|
Lenders to make available Contributions.
Subject to the provisions
of this Agreement, each Lender shall, before 10:00 a.m. (New York City time) on and with value on the Drawdown Date, make available
to the Agent for the account of the Borrowers the amount due from that Lender under Clause 2.2.
|
|
|
4.6
|
Disbursement of Advance.
Subject to the provisions of this
Agreement, the Agent shall on the Drawdown Date pay to the Borrowers the amounts which the Agent receives from the Lenders under
Clause 4.5 and that payment to the Borrowers shall be made:
|
|
|
(a)
|
to the account which the Borrowers specify 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 the account of a third party designated by the Borrowers in a Drawdown Notice shall constitute the making
of an Advance and the Borrowers shall at that time become indebted, as principal and direct obligor, to each Lender in an amount
equal to that Lender’s Contribution.
|
|
|
(a)
|
The obligation of the Borrowers to pay the principal of, and interest on, the Loan shall be evidenced
by the Note, which shall be dated the date of the first Drawdown Date.
|
|
|
(b)
|
Each Advance made by the Lenders to the Borrowers may be evidenced by a notation of the same made
by the Agent on the grid attached to the Note, which notation, absent manifest error, shall be
prima facie
evidence of the
amount of such Advance.
|
|
|
(c)
|
Each Lender shall record on its internal records the amount of its participation in each Advance
and each payment in respect thereof, and the unpaid balance of such participation in such Advance shall, absent manifest error
and to the extent not inconsistent with the notations made by the Agent on the grid attached to the Note, be as so recorded.
|
|
|
(d)
|
The failure of the Agent or any Lender to make any such notation shall not affect the obligation
of the Borrowers in respect of such Advance or the Loan nor affect the validity of any transfer by the Agent of the Note.
|
|
|
(e)
|
On receipt of satisfactory evidence that the Note has been lost, mutilated or destroyed and on
surrender of the remnants thereof, if any, the Borrowers will promptly replace the Note, without charge to the Creditor Parties,
with a similar Note. If such replacement Note replaces a lost Note it shall bear an endorsement to that effect. Any lost Note subsequently
found shall be surrendered to the Borrowers and cancelled. The Agent shall indemnify the Borrowers for any losses, claims or damages
resulting from the loss of such Note.
|
|
|
5.1
|
Normal rate of interest.
Subject to the provisions of this
Agreement, the rate of interest on each Advance in respect of an Interest Period shall be the aggregate of the Applicable Margin
and LIBOR applicable to such Advance for that Interest Period.
|
|
|
5.2
|
Payment of normal interest.
Subject to the provisions of this
Agreement, interest on an Advance in respect of each Interest Period shall be paid by the Borrowers on the last day of that Interest
Period.
|
|
|
5.3
|
Payment of accrued interest.
In the case of an Interest Period
longer than three (3) months, accrued interest shall be paid every three (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 Borrowers and each Lender of:
|
|
|
(a)
|
each rate of interest; and
|
|
|
(b)
|
the duration of each Interest Period (as determined under Clause 6.2),
|
as soon as
reasonably practicable after each is determined.
|
|
5.5
|
Non-availability of funds.
|
|
|
(a)
|
If the Agent, in its sole discretion, shall determine, by reason of circumstances affecting the
London interbank market generally, that adequate and reasonable means do not or will not exist for ascertaining the LIBOR applicable
to any Advance for any interest period, the Agent shall forthwith give notice of such determination to the Borrowers.
|
|
|
(b)
|
Not later than 15 days from the date of the notice required by Clause 5.5(a), the Agent and the
Borrowers shall enter into negotiations in good faith with a view to agreeing to an alternative mutually acceptable basis (the
“
Substitute Basis
”) for funding of such Advance (or the continued funding of such Advance), or such portion
thereof, and for determining the interest rate from time to time applicable thereto.
|
|
|
(c)
|
If at the expiry of 30 days from the date of the notice required by Clause 5.5(a) the Agent and
the Borrowers have agreed upon such Substitute Basis, it shall be retroactive to and take effect from the beginning of the then
current Interest Period and the Agent shall promptly notify the Lenders accordingly.
|
|
|
(d)
|
If at the expiry of 30 days from the date of the notice required by Clause 5.5(a) no such Substitute
Basis has been agreed, then the Borrowers shall have the right either:
|
|
|
(i)
|
to maintain the Advance, or such portion thereof, with such interest rate as the Agent may, from
time to time, determine and which rate shall reflect the cost to the Lenders of funding such Advance, or such portion thereof,
from alternative sources and the margin over such cost from time to time provided for hereunder; or
|
|
|
(ii)
|
to prepay the Advance, or such portion thereof, and accrued interest thereon at the rate or rates
applicable to such Advance during the immediately preceding Interest Period up to the date of payment, together with all costs
incurred by the Lenders to fund such Advance, or such portion thereof, during such 30 day period.
|
The Borrowers
shall on or prior to the end of such 30 day period notify the Agent in writing of the alternative which they have selected and,
if they select alternative (d)(ii) or if they fail to make any selection, in which case they shall be deemed to have selected alternative
(d)(ii), the Borrowers shall prepay such Advance (without premium or penalty but subject to any applicable prepayment fee under
Clause 8.9(c)), together with accrued interest thereon at the applicable rate plus the Applicable Margin on or prior to the end
of such 30 day period and thereupon the obligation of the Lenders to maintain the relevant Advance, or such portion thereof, shall
cease and the Total Commitments in respect of such Advance shall be cancelled. A selection (or a deemed selection) by the Borrowers
of alternative (d)(ii) shall be irrevocable and the Agent shall promptly notify the Lenders of the Borrowers’ intended prepayment.
|
|
5.6
|
Application of prepayment.
The provisions of Clause 8 shall
apply in relation to the prepayment made pursuant to Clause 5.5.
|
|
|
6.1
|
Commencement of Interest Periods.
The first Interest Period
applicable to an Advance shall commence on the 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
and 6.4, each Interest Period shall be 3 months or such other period as the Agent may, with the authorization of all the Lenders,
agree with the Borrowers pursuant to Clause 6.5.
|
|
|
6.3
|
Duration of Interest Periods for repayment installments.
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.
|
|
|
6.4
|
Non-availability of matching deposits for Interest Period selected.
If, after the Borrowers have selected and the Lenders have agreed an Interest Period longer than three (3) months pursuant to Clause
6.5, any Lender notifies the Agent by 11:00 a.m. (New York time) on the third Business Day before the commencement of the Interest
Period that it is not satisfied that deposits in Dollars for a period equal to the Interest Period will be available to it in the
London Interbank Market when the Interest Period commences, the Interest Period shall be of three (3) months.
|
|
|
6.5
|
Interest periods longer than 12 months.
Upon not less than
five (5) Business Days prior written notice from the Borrowers to the Agent, and subject to the agreement of all of the Lenders,
the interest rate of all or more than 50% of the Advance may be fixed for an Interest Period in excess of 12 months. The interest
rate will be the actual refinancing rate available to the Lenders (on a weighted average basis) for that Interest Period plus the
Applicable Margin.
|
|
|
7.1
|
Payment of default interest on overdue amounts.
A Security
Party shall pay interest in accordance with the following provisions of this Clause 7 on any amount payable by such Security Party
under any Finance Document which the Agent, the Security Trustee or any 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 20.4, 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 2.00 percent 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); and
|
|
|
(b)
|
the Applicable Margin plus, in respect of successive periods of any duration (including at call)
up to three (3) months which the Agent may, with the consent of the Majority Lenders, select from time to time:
|
|
|
(ii)
|
if the Agent determines that Dollar deposits for any such period are not being made available to
the Lenders 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 Lenders from such other sources as the Agent may from time to time determine.
|
|
|
7.4
|
Notification of interest periods and default rates.
The Agent
shall promptly notify the Lenders and each relevant Security Party 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 such Security Party is liable to pay such interest only with effect from the date of the Agent’s 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.
|
|
|
8
|
REPAYMENT AND PREPAYMENT
|
|
|
8.1
|
Amount of repayment installments.
The Borrowers shall repay
the Loan as follows:
|
|
|
(a)
|
with respect to the Advance relating to BULK PANGAEA, by 15 equal consecutive quarterly installments
of $346,875 each;
|
|
|
(b)
|
with respect to the Advance relating to BULK PATRIOT, by 18 consecutive quarterly installments
of $500,000 each for installment numbers 1 through 16, $387,500 for installment number 17 and $50,000 for the last quarterly installment;
|
|
|
(c)
|
with respect to the Advance relating to BULK JULIANA, by 22 consecutive quarterly installments
of $338,020.83 each for installment numbers 1 through 21 and $338,020.91 for the last quarterly installment; and
|
|
|
(d)
|
with respect to the Advance relating to BULK TRIDENT, by 22 equal consecutive quarterly installments
of $318,750 each, and a balloon payment in the amount of $2,550,000 together with the last quarterly repayment installment.
|
|
|
8.2
|
Repayment Dates.
The first installment of each Advance in
respect of an Initial Ship (other than BULK JULIANA) shall be repaid on July 19, 2013. The first installment of the Advance in
respect of BULK JULIANA shall be repaid on April 19, 2013. The last installment of each Advance in respect of an Initial Ship shall
be repaid on the Applicable Maturity Date for such Advance. The first installment of each Advance in respect of an Additional Ship
shall be repaid on the date falling three (3) months after the Drawdown Date of such Advance and the last installment on the Applicable
Maturity Date for such Advance.
|
|
|
8.3
|
Applicable Maturity Date.
On the relevant Applicable Maturity
Date, the Borrowers shall additionally pay to the Agent for the account of the Creditor Parties all other sums then accrued or
owing under any Finance Document to which they are a party in relation to such Advance.
|
|
|
8.4
|
Voluntary prepayment.
Subject to the following conditions,
the Borrowers may prepay the whole or any part of an Advance on the last day of an Interest Period.
|
|
|
8.5
|
Conditions for voluntary prepayment.
The conditions referred
to in Clause 8.4 are that:
|
|
|
(a)
|
a partial prepayment shall be $100,000 or a multiple of $100,000;
|
|
|
(b)
|
the Agent has received from the Borrowers at least five (5) Business Days’ prior written
notice specifying the Advance to be prepaid, the amount to be prepaid and the date on which the prepayment is to be made; and
|
|
|
(c)
|
the Borrowers have provided evidence satisfactory to the Agent that any consent required by the
Borrowers or any other Security Party in connection with the prepayment has been obtained and remains in force, and that any regulation
relevant to this Agreement which affects the Borrowers or any other Security Party has been complied with (which may be satisfied
by the Borrowers certifying that no consents are required and that no regulations need to be 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 authorization of the Majority Lenders, and the amount
specified in the prepayment notice shall become due and payable by the Borrowers 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 Borrowers under Clause 8.5(c).
|
|
|
8.8
|
Mandatory prepayment.
If a Ship is sold or becomes a Total
Loss, the Borrowers shall prepay in full the Advance related to that Ship:
|
|
|
(a)
|
in the case of a sale, on or before the date on which the sale is completed by delivery of the
Ship to the buyer; or
|
|
|
(b)
|
in the case of a Total Loss, on the earlier of the date falling 150 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.
|
|
|
8.9
|
Amounts payable on prepayment.
A voluntary prepayment under
Clause 8.4 and a mandatory prepayment under Clause 8.8 shall be made together with:
|
|
|
(a)
|
accrued interest (and any other amount payable under Clause 22 or otherwise) in respect of the
amount prepaid;
|
|
|
(b)
|
if the prepayment is not made on the last day of an Interest Period, any sums payable under Clause
22.1(b); and
|
|
|
(c)
|
the following prepayment fees as applicable:
|
|
|
(i)
|
in respect of the Advance relating to BULK PANGAEA:
|
|
|
(A)
|
3.00% of the prepaid amount in respect of any prepayment made in respect of the Advance related
to it prior to the first anniversary of the Drawdown Date of such Advance;
|
|
|
(B)
|
2.00% of the prepaid amount in respect of any prepayment made in respect of the Advance related
to it on or after the first anniversary of the Drawdown Date but prior to the second anniversary of the Drawdown Date of such Advance;
|
|
|
(C)
|
1.00% of the prepaid amount in respect of any prepayment made in respect of the Advance related
to it on or after the second anniversary of the Drawdown Date but prior to the third anniversary of the Drawdown Date of such Advance;
or
|
|
|
(D)
|
0.25% of the prepaid amount in respect of any prepayment made in respect of the Advance related
to it on or after the third anniversary of the Drawdown Date of such Advance;
|
|
|
(ii)
|
in respect of each Advance relating to BULK PATRIOT, BULK JULIANA and BULK TRIDENT:
|
|
|
(A)
|
2.00% of the prepaid amount in respect of any prepayment made in respect of the Advance related
to it prior to the first anniversary of the Drawdown Date of such Advance;
|
|
|
(B)
|
1.00% of the prepaid amount in respect of any prepayment made in respect of the Advance related
to it on or after the first anniversary of the Drawdown Date but prior to the second anniversary of the Drawdown Date of such Advance;
or
|
|
|
(C)
|
0.25% of the prepaid amount in respect of any prepayment made in respect of the Advance related
to it on or after the second anniversary of the Drawdown Date but prior to the third anniversary of the Drawdown Date of such Advance;
|
provided
that
no prepayment fee shall be payable:
|
|
(A)
|
in respect of prepayments made from Excess Cash Flow pursuant to Clause 19.3(c), 19.4(c), 19.5(b)(ii)
or 19.6(b)(ii);
|
|
|
(B)
|
in respect of a mandatory prepayment under Clause 8.8(a) if the Ship is sold to a person who is
not an Affiliate of the Borrowers;
|
|
|
(C)
|
in respect of a mandatory prepayment under Clause 8.8(b), 15.3 or 24.1(c);
|
|
|
(D)
|
in respect of a refinancing of a Ship by the Agent or any of its Affiliates; or
|
|
|
(E)
|
in respect of amounts paid pursuant to Clauses 8.9(a) and (b).
|
|
|
8.10
|
Application of partial prepayment.
Each partial prepayment
shall be applied against the repayment installments specified in Clause 8.1 in inverse order of maturity.
|
|
|
8.11
|
No reborrowing.
No amount prepaid may be reborrowed.
|
|
|
9.1
|
Documents, fees and no default.
Each Lender’s obligation
to contribute to an Advance is subject to the following conditions precedent:
|
|
|
(a)
|
that, on or before the service of any Drawdown Notice, the Agent receives (to the extent not previously
delivered to the Agent in connection with a previous Drawdown Notice):
|
|
|
(i)
|
the documents described in Part A of Schedule 4 in form and substance satisfactory to the Agent
and its lawyers; and
|
|
|
(ii)
|
such documentation and other evidence as is reasonably requested by the Agent or a Lender in order
for each to carry out and be satisfied with the results of all necessary “know your customer” or other checks which
it is required to carry out in relation to the transactions contemplated by this Agreement and the other Finance Documents, including
without limitation obtaining, verifying and recording certain information and documentation that will allow the Agent and each
of the Lenders to identify each Security Party in accordance with the requirements of the PATRIOT Act;
|
|
|
(b)
|
that, on each Drawdown Date but prior to the making of an Advance in respect of an Initial Ship,
the Agent receives or is satisfied that it will receive on the making of such Advance the documents described in Part B of Schedule
4 in form and substance satisfactory to it and its lawyers;
|
|
|
(c)
|
that in respect of an Advance for an Additional Ship:
|
|
|
(i)
|
the Borrower has advised the Agent at least 60 days prior to service of the Drawdown Notice for
such Advance of the identity of the proposed Additional Ship (and has provided the Agent with a copy of the MOA relative thereto
and all other documents and information as may be required by the Agent (acting with the authority of the Majority Lenders) to
decide whether to accept the such Additional Ship (with the Borrower acknowledging that the Agent acting with the authority of
the Majority Lenders shall be entitled to refuse, in its sole and absolute discretion, such a request));
|
|
|
(ii)
|
the Agent (acting with the authority of the Majority Lenders) has agreed to accept such proposed
Additional Ship; and
|
|
|
(iii)
|
on the Drawdown Date but prior to the making of an Advance in respect of such Additional Ship,
the Agent receives or is satisfied that it will receive on the making of such Advance the documents described in Part C of Schedule
4 in form and substance satisfactory to it;
|
|
|
(d)
|
that, on or before the service of the first Drawdown Notice, the Agent receives payment of the
fees referred to in Clause 21.1 and payment of the expenses referred to in Clause 21.2;
|
|
|
(e)
|
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 or would result from the borrowing
of the Advance;
|
|
|
(ii)
|
the representations and warranties in Clause 10 and those of the Borrowers or any other Security
Party which are set out in the other Finance Documents (other than those relating to a specific date) would be true and not misleading
if repeated on each of those dates with reference to the circumstances then existing; and
|
|
|
(iii)
|
there has been no material change in the consolidated financial condition, operations or business
prospects of the Borrowers or the Guarantors since the date on which the Borrowers and/or the Guarantors provided information concerning
those topics to the Agent and/or any Lender;
|
|
|
(iv)
|
there have been no material adverse global economic or political developments;
|
|
|
(v)
|
there have been no material adverse developments in the international money and capital markets;
and
|
|
|
(vi)
|
none of the Guarantors or any of their subsidiaries or Affiliates has launched any other facilities
or debt transactions into the international capital markets either publicly or privately,
|
and, in the case
of paragraphs (iii), (iv), (v) or (vi) in the sole opinion of the Lenders, which might prejudice either the successful and timely
syndication or performance of the loan facility contemplated by this Agreement;
|
|
(f)
|
that, if the Applicable Collateral Maintenance Ratio were applied immediately following the making
of such Advance, the Borrowers would not be required to provide additional Collateral or prepay part of the Loan under Clause 15;
and
|
|
|
(g)
|
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 authorization of the Majority Lenders,
request by notice to the Borrowers prior to the Drawdown Date.
|
|
|
9.2
|
Waiver of conditions precedent.
Notwithstanding anything in
Clause 9.1 to the contrary:
|
|
|
(a)
|
except with respect to the circumstances described in Clause 9.2(b), if the Agent, with the consent
of the Majority Lenders, permits an Advance to be borrowed before certain of the conditions referred to in Clause 9.1 are satisfied,
the Borrowers shall ensure that such conditions are satisfied within ten (10) Business Days after such Drawdown Date (or such longer
period as the Agent may specify); and
|
|
|
(b)
|
only if required under the terms of an MOA or another contract for the acquisition of an Additional
Ship, an Advance may be borrowed before the applicable conditions set forth in Clause 9.1 are satisfied and:
|
|
|
(i)
|
each Lender agrees to fund its Contribution on a day not more than five (5) Business Days prior
to the Delivery Date of that Ship; and
|
|
|
(ii)
|
the Agent shall on the date on which the Advance is funded (or as soon thereafter as practicable)
(A) preposition an amount equal to the aggregate principal amount of the Advance at a bank or other financial institution (the
“
Seller’s Bank
”) satisfactory to the Agent, which funds shall be held at the Seller’s Bank in the
name and under the sole control of the Agent or one of its Affiliates and (B) issue a SWIFT MT 199 or other similar communication
(each such communication, a “
Disbursement Authorization
”) authorizing the release of such funds by the Seller’s
Bank on the relevant Delivery Date upon receipt of a Protocol of Delivery and Acceptance in respect of such Ship duly executed
by the Seller and the Borrower owning such Ship and countersigned by a representative of the Agent;
|
provided
that
if delivery of the Ship does not occur within five (5) Business Days after the scheduled Delivery Date, the funds held
at the Seller’s Bank shall be returned to the Agent for further distribution to the Lenders.
For the avoidance
of doubt, the parties hereto acknowledge and agree that:
|
|
(1)
|
the date on which the Lenders fund the Advance constitutes the Drawdown Date in respect of such
Advance and all interest and fees thereon shall accrue from such date;
|
|
|
(2)
|
the Agent and the Lenders suspend fulfillment of the conditions precedent set forth in Schedule
4, Part C, Paragraphs 5, 8 and 9 solely for the time period on and between such Drawdown Date and the relevant Delivery Date, and
the Borrowers acknowledge and agree that fulfillment of such conditions precedent to the satisfaction of the Agent shall be required
as a condition precedent to the countersignature by a representative of the Agent of the Protocol of Delivery and Acceptance referred
to in Clause 9.2(b)(ii);
|
|
|
(3)
|
from the date the proceeds of the Advance are deposited at the Seller’s Bank to the Delivery
Date (or, if delivery of the Ship does not occur within the time prescribed in the Disbursement Authorization, the date on which
the funds are returned to the Agent for further distribution to the Lenders), the Borrowers shall be entitled to interest on the
Advance at the applicable rate, if any, paid by the Seller’s Bank for such deposited funds;
|
|
|
(4)
|
if the Ship is not delivered within the time prescribed in the Disbursement Authorization and the
proceeds of the Advance are returned to the Agent and distributed to the Lenders, (i) the Borrowers shall pay all accrued interest
and fees in respect of such returned proceeds on the date such proceeds are returned to the Agent and (ii) the relevant available
Commitment will be increased by an amount equal to the aggregate principal amount of the Loan proceeds so returned; and
|
|
|
(5)
|
if the Borrowers have instructed the Agent to convert the aggregate principal amount of the Advance
borrowed into a currency other than Dollars for deposit with the Seller’s Bank and the relevant Ship is not delivered within
the time prescribed in the Disbursement Authorization and the proceeds of the Advance are returned to the Agent for further distribution
to the Lenders, the Agent shall convert the aggregate principal amount of funds so returned back into Dollars and if such funds
are less than the Dollar amount of the aggregate principal amount of the Advance incurred on the relevant Drawdown Date, the Borrowers
shall immediately repay the difference and, in any event, the Borrowers shall pay any and all fees, charges and expenses arising
from such conversion.
|
|
|
10
|
REPRESENTATIONS AND WARRANTIES
|
|
|
10.1
|
General.
Each of the Borrowers and the Guarantors represents
and warrants to each Creditor Party as of the Effective Date and each Drawdown Date as follows.
|
|
|
10.2
|
Status.
Each Security Party is:
|
|
|
(a)
|
duly incorporated or formed and validly existing and in good standing under the law of its jurisdiction
of incorporation or formation; and
|
|
|
(b)
|
duly qualified and in good standing as a foreign company in each other jurisdiction in which it
owns or leases property or in which the conduct of its business requires it to so qualify or be licensed except where, in each
case, the failure to so qualify or be licensed and be in good standing could not reasonably be expected to have a material adverse
effect on its business, assets or financial condition or which may affect the legality, validity, binding effect or enforceability
of the Finance Documents,
and there are no proceedings or actions pending
or contemplated by any Security Party, or to the knowledge of the Borrowers or any Guarantor contemplated by any third party, seeking
to adjudicate such Security Party a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief
of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official
for it or for any substantial part of its property.
|
|
|
10.3
|
Company power; consents.
Each Security Party has the capacity
and has taken all action, and no consent of any person is required, for:
|
|
|
(a)
|
it to own or lease and operate its properties and to carry on its business as now conducted and
as proposed to be conducted;
|
|
|
(b)
|
it to execute each Finance Document to which it is or is to become a party and comply with its
obligations under each Finance Document to which it is or is to become a party;
|
|
|
(c)
|
it (in the case of a Borrower only) to execute the MOA to which it is or will be a party, to purchase
and pay for the relevant Ship under such MOA and register the relevant Ship in its name under an Approved Flag;
|
|
|
(d)
|
it (in the case of each Borrower, the Time Charterer and each Time Charter Guarantor only) to execute
each Time Charter and COA to which it is or will be a party, and comply with its obligations under each such each Time Charter
and COA to which it is or is to become a party;
|
|
|
(e)
|
it to grant the Security Interests granted by it pursuant to the Finance Documents to which it
is or is to become a party;
|
|
|
(f)
|
the perfection or maintenance of the Security Interests created by the Finance Documents (including
the first priority nature thereof); and
|
|
|
(g)
|
the exercise by any Creditor Party of their rights under any of the Finance Documents or the remedies
in respect of the Collateral pursuant to the Finance Documents,
|
except, in each case, for consents
which have been duly obtained, taken, given or made and are in full force and effect.
|
|
10.4
|
Consents in force.
All the consents referred to in Clause
10.3 remain in force and nothing has occurred which makes any of them liable to revocation.
|
|
|
(a)
|
Each Security Party owns (i) in the case of owned real property, good and marketable fee title
to and (ii) in the case of owned personal property, good and valid title to, or, in the case of leased real or personal property,
valid and enforceable leasehold interests (as the case may be) in, all of its properties and assets, tangible and intangible, of
any nature whatsoever, free and clear in each case of all Security Interests or claims, except for Permitted Security Interests.
|
|
|
(b)
|
Except for Permitted Security Interests, no Security Party has created or is contractually bound
to create any Security Interest on or with respect to any of its assets, properties, rights or revenues, and except as provided
in this Agreement no Security Party is restricted by contract, applicable law or regulation or otherwise from creating Security
Interests on any of its assets, properties, rights or revenues.
|
|
|
(c)
|
Each Borrower has received (or will receive on the relevant Delivery Date) all deeds, assignments,
waivers, consents, non-disturbance and attornment or similar agreements, bills of sale and other documents, and has duly effected
(or will duly effect on the Delivery Date) all recordings, filings and other actions necessary to establish, protect and perfect
such Borrower’s right, title and interest in and to the Ship owned or to be owned by it and other properties and assets (or
arrangements for such recordings, filings and other actions acceptable to the Agent shall have been made).
|
|
|
10.6
|
Legal validity; effective first priority Security Interests.
Subject to any relevant insolvency laws affecting creditors’ rights generally:
|
|
|
(a)
|
the Finance Documents to which each Security Party is a party, constitute or, as the case may be,
will constitute upon execution and delivery (and, where applicable, registration as provided for in the Finance Documents), such
Security Party’s legal, valid and binding obligations enforceable against it in accordance with their respective terms; and
|
|
|
(b)
|
the Finance Documents to which each Security Party is a party, create or, as the case may be, will
create upon execution and delivery (and, where applicable, registration as provided for in the Finance Documents), legal, valid
and binding first priority Security Interests enforceable in accordance with their respective terms over all the assets to which
they, by their terms, relate.
|
|
|
10.7
|
No third party Security Interests.
Without limiting the generality
of Clauses 10.5 and 10.6, at the time of the execution and delivery of each Finance Document:
|
|
|
(a)
|
the relevant Security Party 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 of each Finance Document, Time
Charter and COA, the borrowing of each Advance, and compliance with each Finance Document, Time Charter and COA, will not involve
or lead to a contravention of:
|
|
|
(a)
|
to the knowledge of any of the Borrowers or the Guarantors, any law or regulation; or
|
|
|
(b)
|
the constitutional documents of any Security Party; or
|
|
|
(c)
|
any contractual or other obligation or restriction which is binding on any Security Party or any
of its assets.
|
|
|
10.9
|
Status of Secured Liabilities.
The Secured Liabilities constitute
direct, unconditional and general obligations of each Security Party and rank (a) senior to all subordinated Financial Indebtedness,
including but not limited to shareholder loans, trade credit, and revolving credit facilities and (b) not less than
pari
passu
(as to priority of payment and as to security) with all other Financial Indebtedness of each Security Party.
|
|
|
(a)
|
All payments which a Security Party is liable to make under the Finance Documents to which it is
a party can properly be made without deduction or withholding for or on account of any tax payable under any law of any Pertinent
Jurisdiction.
|
|
|
(b)
|
Each Security Party has timely filed or has caused to be filed all tax returns and other reports
that it is required by law or regulation to file in any Pertinent Jurisdiction, and has paid or caused to be paid all taxes, assessments
and other similar charges that are due and payable in any Pertinent Jurisdiction, other than taxes and charges:
|
|
|
(i)
|
which (A) are not yet due and payable or (B) are being contested in good faith by appropriate proceedings
and for which adequate reserves have been established and as to which such failure to have paid such tax does not create any risk
of sale, forfeiture, loss, confiscation or seizure of a Ship or of criminal liability; or
|
|
|
|
|
|
|
(ii)
|
the
non-payment of which could not reasonably be expected to have a material adverse effect on the financial condition of such Security
Party.
|
The charges,
accruals, and reserves on the books of each Security Party respecting taxes are adequate in accordance with GAAP.
|
|
(c)
|
No material claim for any tax has been asserted against a Security Party by any Pertinent Jurisdiction
or other taxing authority other than claims that are included in the liabilities for taxes in the most recent balance sheet of
such person or disclosed in the notes thereto, if any.
|
|
|
(d)
|
The execution, delivery, filing and registration or recording (if applicable) of the Finance Documents
and the consummation of the transactions contemplated thereby will not cause any of the Creditor Parties to be required to make
any registration with, give any notice to, obtain any license, permit or other authorization from, or file any declaration, return,
report or other document with any governmental authority in any Pertinent Jurisdiction.
|
|
|
(e)
|
No taxes are required by any governmental authority in any Pertinent Jurisdiction to be paid with
respect to or in connection with the execution, delivery, filing, recording, performance or enforcement of any Finance Document.
|
|
|
(f)
|
The execution, delivery, filing, registration, recording, performance and enforcement of the Finance
Documents by any of the Creditor Parties will not cause such Creditor Party to be subject to taxation under any law or regulation
of any governmental authority in any Pertinent Jurisdiction of any Security Party.
|
|
|
(g)
|
It is not necessary for the legality, validity, enforceability or admissibility into evidence of
this Agreement or any other Finance Document that any stamp, registration or similar taxes be paid on or in relation to this Agreement
or any of the other Finance Documents.
|
|
|
10.11
|
No default.
No Event of Default or Potential Event of Default
has occurred or would result from the borrowing of the Advance.
|
|
|
10.12
|
Information.
All financial statements, information and other
data furnished by or on behalf of a Security Party to any of the Creditor Parties:
|
|
|
(a)
|
was true and accurate at the time it was given;
|
|
|
(b)
|
such financial statements, if any, have been prepared in accordance with GAAP and accurately and
fairly represent the financial condition of such Security Party as of the date or respective dates thereof and the results of operations
of such Security Party for the period or respective periods covered by such financial statements;
|
|
|
(c)
|
there are no other facts or matters the omission of which would have made or make any such information
false or misleading;
|
|
|
(d)
|
there has been no material adverse change in the financial condition, operations or business prospects
of any Security Party since the date on which such information was provided other than as previously disclosed to the Agent in
writing; and
|
|
|
(e)
|
none of the Security Parties has any contingent obligations, liabilities for taxes or other outstanding
financial obligations which are material in the aggregate except as disclosed in such statements, information and data.
|
|
|
10.13
|
No litigation.
No legal or administrative action involving
a Security Party (including any action relating to any alleged or actual breach of the ISM Code, the ISPS Code or any Environmental
Law) has been commenced or taken by any person, or, to the Borrowers’ or any Guarantor’s knowledge, is likely to be
commenced or taken which, in either case, would be likely to have a material adverse effect on the business, assets or financial
condition of a Security Party or which may affect the legality, validity, binding effect or enforceability of the Finance Documents.
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|
|
10.14
|
Intellectual property.
Except for those with respect to which
the failure to own or license could not reasonably be expected to have a material adverse effect, each Security Party owns or has
the right to use all patents, trademarks, permits, service marks, trade names, copyrights, franchises, formulas, licenses and other
rights with respect thereto, and have obtained assignment of all licenses and other rights of whatsoever nature, that are material
to its business as currently contemplated without any conflict with the rights of others.
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|
|
10.15
|
ISM Code and ISPS Code compliance.
Each Borrower has obtained
or will obtain or will cause to be obtained all necessary ISM Code Documentation and ISPS Code Documentation in connection with
the Ship owned or to be owned by it and its operation and will be or will cause such Ship and the Approved Manager to be in full
compliance with the ISM Code and the ISPS Code.
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|
|
10.16
|
Validity and completeness of MOAs, Time Charters, Time Charter
Guarantees and COAs.
|
|
|
(a)
|
To the extent entered into for the purchase of an Additional Ship, the relevant MOA for such Additional
Ship constitutes valid, binding and enforceable obligations of the Seller and the Borrower party thereto in accordance with its
terms and:
|
|
|
(i)
|
the copy of such MOA delivered to the Agent is a true and complete copy; and
|
|
|
(ii)
|
no amendments or additions to such MOA have been agreed nor has the relevant Borrower or Seller
party thereto waived any of their respective rights under such MOA.
|
|
|
(b)
|
Each Time Charter constitutes valid, binding and enforceable obligations of the Time Charterer
and the Borrower party thereto in accordance with its terms and:
|
|
|
(i)
|
the copy of such Time Charter delivered to the Agent before the date of this Agreement is a true
and complete copy; and
|
|
|
(ii)
|
no amendments or additions to such Time Charter have been agreed nor has the relevant Borrower
party thereto or the Time Charterer waived any of their respective rights under such Time Charter.
|
|
|
(c)
|
Each Time Charter Guarantee constitutes valid, binding and enforceable obligations of each of the
Time Charterer Guarantors in accordance with its terms and:
|
|
|
(i)
|
the copy of such Time Charter Guarantee delivered to the Agent before the date of this Agreement
is a true and complete copy; and
|
|
|
(ii)
|
no amendments or additions to such Time Charter Guarantee have been agreed nor has the relevant
Borrower waived any of its rights under such Time Charter Guarantee.
|
|
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(d)
|
Each COA constitutes valid, binding and enforceable obligations of each of Phoenix Bulk (BVI),
Phoenix Bulk (US) and/or the Time Charterer party thereto in accordance with its terms and:
|
|
|
(i)
|
the copy of such COA delivered to the Agent before the date of this Agreement is a true and complete
copy; and
|
|
|
(ii)
|
no amendments or additions to such COA have been agreed nor have any of Phoenix Bulk (BVI), Phoenix
Bulk (US) and/or the Time Charterer party thereto waived any of its rights under such COA.
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|
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10.17
|
No rebates etc.
There is no agreement or understanding to
allow or pay any rebate, premium, commission, discount or other benefit or payment (howsoever described) to the Borrowers or any
of their parents, subsidiaries or Affiliates, the Seller or any third party in connection with the relevant MOA, other than as
provided in such MOA and disclosed to the Agent in writing.
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|
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10.18
|
Compliance with law; Environmentally Sensitive Material.
Except
to the extent the following could not reasonably be expected to have a material adverse effect on the business, assets or financial
condition of any Security Party, or affect the legality, validity, binding effect or enforceability of the Finance Documents:
|
|
|
(a)
|
the operations and properties of each of the Security Parties comply with all applicable laws and
regulations, including without limitation Environmental Laws, all necessary Environmental Permits have been obtained and are in
effect for the operations and properties of each of the Security Parties and each of the Security Parties is in compliance in all
material respects with all such Environmental Permits; and
|
|
|
(b)
|
none of the Security Parties has been notified in writing by any person that it or any of its subsidiaries
or Affiliates is potentially liable for the remedial or other costs with respect to treatment, storage, disposal, release, arrangement
for disposal or transportation of any Environmentally Sensitive Material, except for costs incurred in the ordinary course of business
with respect to treatment, storage, disposal or transportation of such Environmentally Sensitive Material.
|
|
|
10.19
|
Ownership structure.
|
|
|
(a)
|
No Borrower has any subsidiaries.
|
|
|
(b)
|
All of the Equity Interests of each Borrower have been validly issued, are fully paid, non-assessable
and free and clear of all Security Interests and are owned beneficially and of record by Bulk Fleet.
|
|
|
(c)
|
All of the Equity Interests of each of the Time Charterer, Phoenix Bulk (US), Phoenix Bulk (BVI),
Allseas and Bulk Fleet have been validly issued, are fully paid, non-assessable and free and clear of all Security Interests and
are owned beneficially and of record by Bulk Holding.
|
|
|
(d)
|
All of the Equity Interests of Bulk Holding have been validly issued, are fully paid, non-assessable
and free and clear of all Security Interests and are owned beneficially and of record by Bulk Partners.
|
|
|
(e)
|
All of the Equity Interests of Bulk Partners have been validly issued, are fully paid, non-assessable
and free and clear of all Security Interests and are owned beneficially and of record by the Bulk Partners Shareholders.
|
|
|
(f)
|
None of the Equity Interests of any of the Security Parties are subject to any existing option,
warrant, call, right, commitment or other agreement of any character to which any of the Security Parties is a party requiring,
and there are no Equity Interests of any of the Security Parties outstanding which upon conversion or exchange would require, the
issuance, sale or transfer of any additional Equity Interests of any of the Security Parties or other Equity Interests convertible
into, exchangeable for or evidencing the right to subscribe for or purchase Equity Interests of any of the Security Parties except
for the rights of the Bulk Partners Shareholders to convert certain preferred shares of Bulk Partners into common stock of Bulk
Fleet.
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|
|
10.20
|
ERISA.
None of the Borrowers or the Guarantors maintains any
Plan, Multiemployer Plan or Foreign Pension Plan.
|
|
|
10.21
|
Margin Stock.
The Borrowers are not engaged in the business
of extending credit for the purpose of purchasing or carrying Margin Stock and no proceeds of any Advance will be used to buy or
carry any Margin Stock or to extend credit to others for the purpose of buying or carrying any Margin Stock.
|
|
|
10.22
|
Investment company, public utility, etc.
None of the Borrowers
is:
|
|
|
(a)
|
an “investment company,” or an “affiliated person” of, or “promoter”
or “principal underwriter” for, an “investment company,” as such terms are defined in the Investment Company
Act of 1940, as amended; or
|
|
|
(b)
|
a “public utility” within the meaning of the United States Federal Power Act of 1920,
as amended.
|
|
|
(a)
|
No Borrower is a Prohibited Person, no Borrower is owned or controlled by, or acting directly or
indirectly on behalf of or for the benefit of, a Prohibited Person and no Borrower owns or controls a Prohibited Person; and
|
|
|
(b)
|
No proceeds of any Advance shall be made available, directly or indirectly, to or for the benefit
of a Prohibited Person or otherwise shall be, directly or indirectly, applied in a manner or for a purpose prohibited by Sanctions.
|
|
|
10.24
|
No money laundering.
Without prejudice to the generality of
Clause 2.3, in relation to the borrowing by the Borrowers of an Advance, the performance and discharge of its obligations and liabilities
under the Finance Documents, and the transactions and other arrangements affected or contemplated by the Finance Documents to which
any Borrower is a party, each of the Borrowers confirms that:
|
|
|
(a)
|
it is acting for its own account;
|
|
|
(b)
|
it will use the proceeds of such Advance for its own benefit, under its full responsibility and
exclusively for the purposes specified in this Agreement; and
|
|
|
(c)
|
the foregoing will not involve or lead to a contravention of any law, official requirement or other
regulatory measure or procedure implemented to combat “money laundering” (as defined in Article 1 of Directive 2005/60/EC
of the European Parliament and of the Council) and comparable United States federal and state laws, including without limitation
the PATRIOT Act and the Bank Secrecy Act.
|
|
|
10.25
|
Ships.
As of the relevant Drawdown Date, each Ship will be:
|
|
|
(a)
|
in the sole and absolute ownership of the a Borrower and duly registered in such Borrower’s
name under the law of an Approved Flag, unencumbered save and except for the Mortgage thereon in favor of the Security Trustee
recorded against it and Permitted Security Interests;
|
|
|
(b)
|
seaworthy for hull and machinery insurance warranty purposes and in every way fit for its intended
service;
|
|
|
(c)
|
insured in accordance with the provisions of this Agreement and the requirements hereof in respect
of such insurances will have been complied with;
|
|
|
(d)
|
in class in accordance with the provisions of this Agreement and the requirements hereof in respect
of such classification will have been complied with; and
|
|
|
(e)
|
managed by an Approved Manager pursuant to an Approved Management Agreement.
|
|
|
10.26
|
Place of business.
For purposes of the UCC, each Security
Party (other than Phoenix Bulk (US)) has only one place of business located at, or, if it has more than one place of business,
the chief executive office from which it manages the main part of its business operations and conducts its affairs is located at:
|
Par la Ville Place
14 Par la Ville
Road
Hamilton HM08
Bermuda
None of the
Security Parties, other than Phoenix Bulk (US) has a place of business in the United States of America, the District of Columbia,
the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States of America.
Phoenix Bulk
(US) has only one place of business located at, or, if it has more than one place of business, the chief executive office from
which it manages the main part of its business operations and conducts its affairs is located at:
Phoenix Bulk
Carriers (US) LLC as agents
109 Long
Wharf, Second Floor
Newport,
Rhode Island 02840
|
|
10.27
|
Solvency.
In the case of each of the Borrowers and each of
the Guarantors:
|
|
|
(a)
|
the sum of its assets, at a fair valuation, does and will exceed its liabilities, including, to
the extent they are reportable as such in accordance with GAAP, contingent liabilities;
|
|
|
(b)
|
the present fair market saleable value of its assets is not and shall not be less than the amount
that will be required to pay its probable liability on its then existing debts, including, to the extent they are reportable as
such in accordance with GAAP, contingent liabilities, as they mature;
|
|
|
(c)
|
it does not and will not have unreasonably small working capital with which to continue its business;
and
|
|
|
(d)
|
it has not incurred, does not intend to incur and does not believe it will incur, debts beyond
its ability to pay such debts as they mature.
|
|
|
10.28
|
Borrowers’ business; Guarantors’ business.
From
the date of its incorporation until the date hereof, neither the Borrowers nor any of the Guarantors has conducted any business
other than in connection with, or for the purpose of, owning and operating the Ships.
|
|
|
10.29
|
Immunity; enforcement; submission to jurisdiction; choice of law.
|
|
|
(a)
|
Each Security Party is subject to civil and commercial law with respect to its obligations under
the Finance Documents, and the execution, delivery and performance by each Security Party of the Finance Documents to which it
is a party constitute private and commercial acts rather than public or governmental acts.
|
|
|
(b)
|
No Security Party or any of its properties has any immunity from suit, court jurisdiction, attachment
prior to judgment, attachment in aid of execution of a judgment, set-off, execution of a judgment or from any other legal process
in relation to any Finance Document.
|
|
|
(c)
|
It is not necessary under the laws of any Security Party’s jurisdiction of incorporation
or formation, in order to enable any Creditor Party to enforce its rights under any Finance Document or by reason of the execution
of any Finance Document or the performance by any Security Party of its obligations under any Finance Document, that such Creditor
Party should be licensed, qualified or otherwise entitled to carry on business in such Security Party’s jurisdiction of incorporation
or formation.
|
|
|
(d)
|
Other than the recording of the Mortgage in accordance with the laws of the Republic of Panama
or the laws of the Republic of the Marshall Islands, as the case may be, and such filings as may be required in a Pertinent Jurisdiction
in respect of certain of the Finance Documents, and the payment of fees consequent thereto, it is not necessary for the legality,
validity, enforceability or admissibility into evidence of this Agreement or any other Finance Document that any of them or any
document relating thereto be registered, filed recorded or enrolled with any court or authority in any Pertinent Jurisdiction.
|
|
|
(e)
|
The execution, delivery, filing, registration, recording, performance and enforcement of the Finance
Documents by any of the Creditor Parties will not cause such Creditor Party to be deemed to be resident, domiciled or carrying
on business in any Pertinent Jurisdiction of any Security Party or subject to taxation under any law or regulation of any governmental
authority in any Pertinent Jurisdiction of any Security Party.
|
|
|
(f)
|
Under the law of each Security Party’s jurisdiction of incorporation or formation, the choice
of the law of New York to govern this Agreement and the other Finance Documents to which New York law is applicable is valid and
binding.
|
|
|
(g)
|
The submission by the Borrowers and the Guarantors to the jurisdiction of the New York State courts
and the U.S. Federal court sitting in New York County pursuant to Clause 32.2(a) is valid and binding and not subject to revocation,
and service of process effected in the manner set forth in Clause 32.2(d) will be effective to confer personal jurisdiction over
the Borrowers and the Guarantors in such courts.
|
|
|
11
|
GENERAL AFFIRMATIVE AND NEGATIVE COVENANTS
|
|
|
11.1
|
Affirmative covenants.
From the first Drawdown Date until
the Total Commitments have terminated and all amounts payable hereunder have been paid in full each of the Borrowers and each of
the Guarantors, as the case may be, undertakes with each Creditor Party to comply or cause compliance with the following provisions
of this Clause 11.1 except as the Agent, with the consent of the Majority Lenders, may approve from time to time in writing, such
approval not to be unreasonably withheld:
|
|
|
(a)
|
Performance of obligations.
Each Security Party shall duly observe and perform its obligations
under each Time Charter, COA and Finance Document to which it is or is to become a party.
|
|
|
(b)
|
Notification of defaults (etc).
The Borrowers shall promptly notify the Agent, upon becoming
aware of the same, of:
|
|
|
(i)
|
the occurrence of an Event of Default or of any Potential Event of Default or any other event (including
any litigation) which might adversely affect any Security Party’s ability to perform its obligations under a Time Charter,
a COA or a Finance Document to which it is or is to become a party;
|
|
|
(ii)
|
any default, or any interruption in the performance whether or not the same constitutes a default
lasting more than 5 consecutive days, by any party to a Time Charter or a COA; and
|
|
|
(iii)
|
any damage or injury caused by or to a Ship in excess of $500,000.
|
|
|
(c)
|
Confirmation of no default.
The Borrowers will, within two (2) Business Days after service
by the Agent of a written request, serve on the Agent a notice which is signed by a director, an officer or a duly authorized person
of the Borrowers and which states that:
|
|
|
(i)
|
no Event of Default or Potential Event of Default has occurred; or
|
|
|
(ii)
|
no Event of Default or Potential Event of Default has occurred, except for a specified event or
matter, of which all material details are given.
|
The Agent may serve requests
under this Clause 11.1(c) from time to time but only if asked to do so by a Lender or Lenders having Contributions exceeding 10%
of the Loan or (if no Advances have been made) Commitments exceeding 10% of the Total Commitments, and this Clause 11.1(c) does
not affect the Borrowers’ obligations under Clause 11.1(b).
|
|
(d)
|
Notification of litigation.
The Borrowers will provide the Agent with details of any legal
or administrative action involving the Borrowers, any other Security Party, the Approved Manager or any Ship, the Earnings or the
Insurances as soon as such action is instituted or it becomes apparent to the Borrowers 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.
|
|
|
(e)
|
Provision of further information.
The Borrowers and each of the Guarantors will, as soon
as practicable after receiving the request, provide the Agent with any additional financial or other information relating to:
|
|
|
(i)
|
the Borrowers, the Guarantors, the Time Charterer, the Time Charter Guarantors, Allseas, Phoenix
Bulk (US) or Phoenix Bulk (BVI); or
|
|
|
(ii)
|
any other matter relevant to, or to any provision of, a Finance Document,
|
which may be reasonably requested
by the Agent, the Security Trustee or any Lender at any time.
|
|
(f)
|
Books of record and account; separate accounts.
|
|
|
(i)
|
Each of the Borrowers and the Guarantors shall keep separate and proper books of record and account
in which full and materially correct entries shall be made of all financial transactions and the assets and business of each of
the Borrowers and the Guarantors in accordance with GAAP, and the Agent shall have the right to examine the books and records of
each of the Borrowers and the Guarantors wherever the same may be kept from time to time as it sees fit, in its sole reasonable
discretion, or to cause an examination to be made by a firm of accountants selected by it,
provided that
any examination
shall be done without undue interference with the day to day business operations of the Borrowers or the Guarantors, as the case
may be.
|
|
|
(ii)
|
Each of the Borrowers and the Guarantors shall keep separate accounts and shall not co-mingle assets
with each other except for funds held in the Earnings Account or any other person.
|
|
|
|
|
|
|
(g)
|
Financial reports.
Each of the Borrowers and Bulk Partners, as the case may be, shall prepare
and deliver to the Agent:
|
|
|
(i)
|
as soon as practicable, but not later than:
|
|
|
(A)
|
120 days after the end of each Fiscal Year, an unaudited balance sheet as of the end of such period
and the related statements of profit and loss and changes in financial position for each Borrower, each in respect of such Fiscal
Year, all in reasonable detail, prepared in accordance with GAAP and certified as having been reviewed by its chief financial officer
(or equivalent);
|
|
|
(B)
|
180 days after the end of each Fiscal Year, an audited consolidated balance sheet as of the end
of such period and the related consolidated statements of profit and loss, cash flow statements and changes in financial position
for Bulk Partners, each in respect of such Fiscal Year, all in reasonable detail, prepared in accordance with GAAP and certified
as having been audited by an Acceptable Accounting Firm;
|
|
|
(ii)
|
within 75 days after the end of each of the first three quarters of each Fiscal Year, consolidated
financial statements in respect of Bulk Partners for such fiscal quarter (which statements shall include a recap of the Borrowers),
all in reasonable detail and prepared in accordance with GAAP, certified as having been reviewed by Bulk Partner’s chief
financial officer or designated representative;
|
|
|
(iii)
|
together with the financial statements that each of the Borrowers and Bulk Partners delivers in
(i) and (ii) above, a Compliance Certificate; and
|
|
|
(iv)
|
such other financial statements (including without limitation details of all off-balance sheet
and time charter hire commitments), annual budgets and projections as may be reasonably requested by the Agent, each to be in such
form as the Agent may reasonably request.
|
|
|
|
|
|
|
(h)
|
Appraisals of Fair Market Value.
The Borrowers shall cause the Fair Market Value of each
Ship to be reported to the Agent as follows:
|
|
|
(i)
|
at the Borrowers’ expense, on a semi-annual basis, for the first time approximately six (6)
months after the first Drawdown Date and every six (6) months thereafter;
|
|
|
(ii)
|
at the Lenders’ expense, at any time upon the request of the Agent (acting upon the instructions
of the Majority Lenders); and
|
|
|
(iii)
|
at the Borrowers’ expense, at any time upon the request of the Agent (acting upon the instructions
of the Majority Lenders) if a Potential Event of Default or an Event of Default has occurred and is continuing.
|
|
|
(i)
|
Taxes.
Each Security Party shall prepare and timely file all tax returns required to be
filed by it and pay and discharge all taxes imposed upon it or in respect of any of its property and assets before the same shall
become in default, as well as all lawful claims (including, without limitation, claims for labor, materials and supplies) which,
if unpaid, might become a Security Interest upon the Collateral or any part thereof, except in each case, for any such taxes (i)
as are being contested in good faith by appropriate proceedings and for which adequate reserves have been established, (ii) as
to which such failure to have paid does not create any risk of sale, forfeiture, loss, confiscation or seizure of a Ship or criminal
liability, or (ii) the failure of which to pay or discharge would not be likely to have a material adverse effect on the business,
assets or financial condition of the Borrowers or any other Security Party or to affect the legality, validity, binding effect
or enforceability of the Finance Documents.
|
|
|
(j)
|
Consents.
Each Security Party shall obtain or cause to be obtained, maintain in full force
and effect and comply with the conditions and restrictions (if any) imposed in connection with, every consent and do all other
acts and things which may from time to time be necessary or required for the continued due performance of all of its obligations
under any Time Charter, COA and Finance Document to which it is or is to become a party, and shall deliver a copy of all such consents
to the Agent promptly upon its request.
|
|
|
(k)
|
Compliance with applicable law.
Each Security Party shall comply in all material respects
with all applicable federal, state, local and foreign laws, ordinances, rules, orders and regulations now in force or hereafter
enacted, including, without limitation, all Environmental Laws and regulations relating thereto, the failure to comply with which
would be likely to have a material adverse effect on the financial condition of such Security Party or affect the legality, validity,
binding effect or enforceability of any Time Charter, COA and Finance Document to which it is or is to become a party.
|
|
|
(l)
|
Existence.
Each Security Party shall do or cause to be done all things necessary to preserve
and keep in full force and effect its existence in good standing under the laws of its jurisdiction of incorporation or formation.
|
|
|
(i)
|
Each Borrower shall conduct business only in connection with, or for the purpose of, owning and
chartering the Ship owned by it.
|
|
|
(ii)
|
Each Security Party shall conduct business in its own name and observe all corporate and other
formalities required by its constitutional documents.
|
|
|
(i)
|
Except to the extent the failure to do so could not reasonably be expected to have a material adverse
effect on the business, assets or financial condition of a Security Party or affect the legality, validity, binding effect or enforceability
of the Finance Documents, each Security Party shall maintain and preserve all of its properties that are used or useful in the
conduct of its business in good working order and condition, ordinary wear and tear excepted.
|
|
|
|
|
|
|
(ii)
|
Each Security Party shall obtain and maintain good and marketable title or the right to use or occupy all real and personal properties
and assets (including intellectual property) reasonably required for the conduct of its business.
|
|
|
(iii)
|
Each Security Party shall maintain and protect its intellectual property and conduct its business
and affairs without infringement of or interference with any intellectual property of any other person in any material respect
and shall comply in all material respects with the terms of its licenses.
|
|
|
(o)
|
Loan proceeds.
The Borrowers shall use the proceeds of each Advance solely to partially
finance or refinance the acquisition of a Ship.
|
|
|
(p)
|
Change of place of business.
The Borrowers shall notify the Agent promptly of any change
in the location of the place of business where any Security Party conducts its affairs and keeps its records.
|
|
|
(q)
|
Pollution liability.
Each Security Party shall take, or cause to be taken, such actions
as may be reasonably required to mitigate potential liability to it arising out of pollution incidents or as may be reasonably
required to protect the interests of the Creditor Parties with respect thereto.
|
|
|
(r)
|
Subordination of loans.
Each Borrower shall cause all loans made to it by any Affiliate,
parent or subsidiary or an Approved Manager and all sums and other obligations (financial or otherwise) owed by it to any Affiliate,
parent or subsidiary or an Approved Manager to be fully subordinated to all Secured Liabilities.
|
|
|
(s)
|
Asset control.
Each Borrower shall to the best of its knowledge and ability ensure that:
|
|
|
(i)
|
it is not owned or controlled by, or acting directly or indirectly on behalf of or for the benefit
of, a Prohibited Person and does not own or control a Prohibited Person; and
|
|
|
(ii)
|
no proceeds of any Advance shall be made available, directly or indirectly, to or for the benefit
of a Prohibited Person or otherwise shall be, directly or indirectly, applied in a manner or for a purpose prohibited by Sanctions.
|
|
|
(t)
|
Money laundering.
The Borrowers shall to the best of their knowledge and ability comply,
and cause each of its subsidiaries to comply, with any applicable law, official requirement or other regulatory measure or procedure
implemented to combat “money laundering” (as defined in Article 1 of Directive 2005/60/EC of the European Parliament
and of the Council) and comparable United States federal and state laws, including without limitation the PATRIOT Act and the Bank
Secrecy Act.
|
|
|
(u)
|
Pension Plans
. Promptly upon the institution of a Plan, a Multiemployer Plan or a Foreign
Pension Plan by any Borrower or any Guarantor, the Borrowers shall furnish or cause to be furnished to the Agent written notice
thereof and, if requested by the Agent or any Lender, a copy of such Plan, Multiemployer Plan or Foreign Pension Plan.
|
|
|
(v)
|
Information provided to be accurate.
All financial and other information which is provided
in writing by or on behalf of any Security Party under or in connection with any Finance Document shall be true and not misleading
and shall not omit any material fact or consideration.
|
|
|
(w)
|
Shareholder and creditor notices.
Each of the Borrowers and the Guarantors shall send the
Agent, at the same time as they are dispatched, copies of all communications which are dispatched to its (i) shareholders (or equivalent)
or any class of them or (ii) creditors generally.
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|
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(x)
|
Maintenance of Security Interests.
Each of the Borrowers and the Guarantors shall:
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|
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(i)
|
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
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|
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(ii)
|
without limiting the generality of paragraph (i), at its own cost, promptly register, file, record
or enroll 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.
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|
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(y)
|
“Know your customer” checks.
If:
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|
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(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;
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(ii)
|
any change in the status of any Borrower or any other Security Party after the date of this Agreement;
or
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|
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(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 the Agent or any Lender
(or, in the case of paragraph (iii), 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 Borrowers 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 (iii), 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 (iii), 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.
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(z)
|
Further assurances.
From time to time, at their expense, the Borrowers and each of the Guarantors
shall duly execute and deliver to the Agent, or cause the execution and delivery to the Agent of, such further documents and assurances
as the Majority Lenders or the Agent may request to effectuate the purposes of this Agreement, the other Finance Documents or obtain
the full benefit of any of the Collateral.
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|
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11.2
|
Negative covenants.
From the first Drawdown Date until the
Total Commitments have terminated and all amounts payable hereunder have been paid in full each of the Borrowers and each of the
Guarantors, as the case may be, undertakes with each Creditor Party to comply or cause compliance with the following provisions
of this Clause 11.2 except as the Agent, with the consent of the Majority Lenders, may approve from time to time in writing, such
approval not to be unreasonably withheld:
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|
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(a)
|
Security Interests.
None of the Borrowers or the Guarantors shall create, assume or permit
to exist any Security Interest whatsoever upon any of its properties or assets, whether now owned or hereafter acquired, except
for Permitted Security Interests.
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(b)
|
Sale of assets; merger.
No Security Party shall sell, transfer or lease (other than in connection
with a Charter) all or substantially all of its properties and assets, or enter into any transaction of merger or consolidation
or liquidate, windup or dissolve itself (or suffer any liquidation or dissolution)
provided that
(i) a Borrower may sell
the Ship owned by it pursuant to the terms of this Agreement and (ii) it shall not be a breach of this covenant for a Borrower
to dispose of up to 10% of its properties and assets.
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(c)
|
No contracts other than in ordinary course.
None of the Borrowers shall enter into any transactions
or series of related transactions with third parties other than in the ordinary course of its business.
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(d)
|
Affiliate transactions.
None of the Borrowers or the Guarantors shall enter into any transaction
or series of related transactions, whether or not in the ordinary course of business, with any Affiliate other than on terms and
conditions substantially as favorable to such Borrowers or Guarantor as would be obtainable by it at the time in a comparable arm’s-length
transaction with a person other than an Affiliate.
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|
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(e)
|
Change of business.
None of the Borrowers shall change the nature of its business or commence
any business other than in connection with, or for the purpose of, owning and chartering the Ship owned by it.
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(f)
|
Change of Control; Negative pledge.
None of the Borrowers or the Guarantors shall permit
any act, event or circumstance that would result in a Change of Control, and the Guarantors shall not permit any pledge or assignment
of its or a Borrower’s Equity Interests except in favor of the Security Trustee to secure the Secured Liabilities.
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(g)
|
Increases in capital.
None of the Guarantors shall permit an increase of its or a Borrower’s
capital by way of the issuance of any class or series of Equity Interests or create any new class of Equity Interests that is not
subject to a Security Interest to secure the Secured Liabilities.
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|
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(h)
|
Financial Indebtedness; Trade payables.
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|
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(i)
|
None of the Borrowers shall incur any Financial Indebtedness other than in respect of the Loan
and subordinated loans from a Guarantor or an Approved Manager or another Affiliate of the Borrowers permitted under Clause 11.1(r);
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|
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(ii)
|
None of the Borrowers shall incur unsecured trade credit exceeding $500,000 (exclusive of drydocking
expenses), with repayment terms not to exceed 60 days, on the Ship owned by it at any time; and
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(iii)
|
None of the Guarantors shall incur any guarantee obligations other than (A) in respect of this
Agreement, (B) performance guarantees not exceeding $2,000,000 (individually or in the aggregate) with a duration of not more than
one year, and (C) ship finance guarantees for the next 3 vessel acquisitions,
provided that
the loan advance does not exceed
60% of the fair market value of any said acquisition except the purchase of m/v GOOD PROVIDENCE.
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For purposes of this Clause 11.2(h),
“
performance guarantee
” means any guarantee provided by a Guarantor for any purpose save for securing a loan
for the part financing of a vessel acquisition; and “
ship finance guarantee
” means any guarantee provided by
the guarantor as part of the security package to secure a loan for the part financing of a vessel acquisition.
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|
(i)
|
None of the Borrowers shall declare or pay any dividends or return any capital to its equity holders
or authorize or make any other distribution, payment or delivery of property or cash to its equity holders, or redeem, retire,
purchase or otherwise acquire, directly or indirectly, for value, any interest of any class or series of its Equity Interests (or
acquire any rights, options or warrants relating thereto but not including convertible debt) now or hereafter outstanding, or repay
any subordinated loans to equity holders or set aside any funds for any of the foregoing purposes.
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|
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(ii)
|
None of the Guarantors shall declare or pay any dividends or return any capital to its equity holders
or authorize or make any other distribution, payment or delivery of property or cash to its equity holders, or redeem, retire,
purchase or otherwise acquire, directly or indirectly, for value, any interest of any class or series of its Equity Interests (or
acquire any rights, options or warrants relating thereto but not including convertible debt) now or hereafter outstanding, or repay
any subordinated loans to equity holders or set aside any funds for any of the foregoing purposes,
provided that
:
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|
|
(A)
|
Bulk Partners is permitted to pay cash dividends of not more than $2,000,000 per calendar year
so long as no Event of Default has occurred and is continuing and Bulk Partners is in compliance with the financial covenants of
Clause 12 applicable to it both before and after such dividend is paid; and
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|
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(B)
|
Bulk Partners is permitted to repay shareholder loans of not more than $5,000,000 per annum (including
accrued interest) so long as no Event of Default has occurred and is continuing and Bulk Partners is in compliance with the financial
covenants of Clause 12 applicable to it both before and after such repayment is made;
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|
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(j)
|
No amendment to MOA, Time Charters or Time Charter Guarantees.
None of the Borrowers shall
agree to any amendment or supplement to, or waive or fail to enforce, an MOA or any of its provisions or a Time Charter or any
of its provisions or a Time Charter Guarantee or any of its provisions.
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|
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(k)
|
Intentionally omitted.
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|
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(l)
|
Loans and investments.
None of the Borrowers shall make any loan or advance to, make any
investment in, or enter into any working capital maintenance or similar agreement with respect to any person, whether by acquisition
of Equity Interests or indebtedness, by loan, guarantee or otherwise.
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|
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(m)
|
Acquisition of capital assets.
None of the Borrowers shall acquire any capital assets (including
any vessel other than a Ship) by purchase, charter or otherwise,
provided that
for the avoidance of doubt nothing in this
Clause 11.2(m) shall prevent or be deemed to prevent capital improvements being made to a Ship.
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|
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(n)
|
Sale and leaseback.
None of the Borrowers shall enter into any arrangements, directly or
indirectly, with any person whereby it shall sell or transfer any of its property, whether real or personal, whether now owned
or hereafter acquired, if it, at the time of such sale or disposition, intends to lease or otherwise acquire the right to use or
possess (except by purchase) such property or like property for a substantially similar purpose.
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|
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(o)
|
Changes to Fiscal Year and accounting policies.
None of the Borrowers or the Guarantors
shall change its Fiscal Year or make or permit any change in accounting policies affecting (i) the presentation of financial statements
or (ii) reporting practices, except in either case in accordance with GAAP or pursuant to the requirements of applicable laws or
regulations.
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|
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(p)
|
Jurisdiction of incorporation or formation; Amendment of constitutional documents.
None
of the Borrowers or the Guarantors shall change the jurisdiction of its incorporation or formation or materially amend its constitutional
documents.
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|
|
(q)
|
Sale of Ship.
No Borrower shall consummate the sale of its Ship without paying or causing
to be paid all amounts due and owing under this Agreement and the other Finance Documents relating to the Advance for such Ship
prior to or simultaneously with the consummation of such sale;
provided
that the Applicable Collateral Maintenance Ratio
pursuant to Clause 15.2 shall be maintained at all times.
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|
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(r)
|
Change of location.
None of the Borrowers shall change the location of its chief executive
office or the office where its corporate records are kept or open any new office for the conduct of its business on less than thirty
(30) days prior written notice to the Agent.
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|
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(s)
|
No employees; VAT group.
|
|
|
(i)
|
None of the Borrowers shall have any employees other than the master, the officers and the crew
of the Ship owned by it.
|
|
|
(ii)
|
None of the Borrowers shall be or become a member of any VAT (value added tax) group.
|
|
|
12.1
|
General
. From the first Drawdown Date until the Total Commitments
have terminated and all amounts payable hereunder have been paid in full the Borrowers and Bulk Partners undertake with each Creditor
Party to comply or cause compliance with the following provisions of this Clause 12 except as the Agent, with the consent of the
Majority Lenders, may approve from time to time in writing, such approval not to be unreasonably withheld.
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|
|
12.2
|
Borrowers’ Minimum liquidity requirements.
|
|
|
(a)
|
Each Borrower shall at all times maintain Liquidity, including all amounts on deposit with any
bank, of not less than $350,000; and
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|
|
(b)
|
The Borrowers shall at all times maintain an aggregate on deposit in the Earnings Accounts of not
less than $2,000,000.
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|
|
12.3
|
Bulk Partners’ Consolidated Leverage Ratio.
Bulk Partners
shall maintain a Consolidated Leverage Ratio of not more than 200%.
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|
|
12.4
|
Bulk Partners’ Consolidated Debt Service Coverage Ratio.
From and after January 1, 2013, Bulk Partners shall maintain a Consolidated Debt Service Coverage Ratio of not less than 120% (on
a rolling four quarter basis, tested as of the last day of each fiscal quarter).
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|
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12.5
|
Bulk Partners’ Consolidated Net Worth.
Bulk Partners
shall maintain a Consolidated Net Worth of not less than $30,000,000 plus, with respect to any vessel purchased or leased by Bulk
Partners or its subsidiaries after the Effective Date, for so long as such vessels are legally or economically owned, 25% of the
purchase price or (finance) lease amount of such vessels.
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|
|
12.6
|
Bulk Partners’ Consolidated Minimum Liquidity.
Bulk
Partners shall maintain Consolidated Minimum Liquidity of not less than $10,000,000 plus $1,000,000 for every vessel purchased
or (finance) leased by Bulk Partners or its subsidiaries after the Effective Date.
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|
|
13
|
MARINE INSURANCE COVENANTS
|
|
|
13.1
|
General.
From the first Drawdown Date until the Total Commitments
have terminated and all amounts payable hereunder have been paid in full, each of the Borrowers undertakes with each Creditor Party
to comply or cause compliance with the following provisions of this Clause 13 except as the Agent, with the consent of the Majority
Lenders, may approve from time to time in writing, such approval not to be unreasonably withheld.
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|
|
13.2
|
Maintenance of obligatory insurances.
Each Borrower shall
keep the Ship owned by it insured at its expense for and against:
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|
|
(a)
|
hull and machinery risks, plus freight interest and hull interest and any other usual marine risks
such as excess risks;
|
|
|
(b)
|
war risks (including the London Blocking and Trapping addendum or similar arrangement);
|
|
|
(c)
|
full protection and indemnity risks (including liability for oil pollution 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), or other with written consent from the Agent;
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|
|
(d)
|
freight, demurrage & defense risks;
|
|
|
(e)
|
risks covered by mortgagee’s interest insurance (M.I.I.) (as provided in Clause 13.16 below);
|
|
|
(f)
|
risks covered by mortgagee’s interest additional perils (pollution) (M.A.P.) (as provided
in Clause 13.16 below); and
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|
|
(g)
|
[intentionally omitted];
|
|
|
(h)
|
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 opinion of the Security Trustee be reasonable for that Borrower
to insure and which are specified by the Security Trustee by notice to that Borrower (such as political risks and mortgage rights
insurance).
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|
|
13.3
|
Terms of obligatory insurances.
Each Borrower shall affect
such insurances in respect of the Ship owned by it:
|
|
|
(b)
|
in the case of the insurances described in (a), (b), (e) and (f) of Clause 13.2 shall each be for
at least the greater of:
|
|
|
(i)
|
when aggregated with the insured values of the other Ships then financed under this Agreement,
120% of the aggregate of the Loan; and
|
|
|
(ii)
|
the Fair Market Value of the Ship owned by it;
|
|
|
(c)
|
in the case of oil pollution liability risks, for an aggregate amount equal to the greater of $1,000,000,000
and 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 the full tonnage of the Ship owned
by it;
|
|
|
(e)
|
in relation to loss of hire insurance, for a daily amount equal to at least the daily running costs
and/or the daily hire rate under the Time Charter in respect of the Ship owned by it plus the daily debt service amount;
|
|
|
(f)
|
on approved terms; and
|
|
|
(g)
|
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 that are
members of the International Group of P&I Clubs.
|
|
|
13.4
|
Further protections for the Creditor Parties.
In addition
to the terms set out in Clause 13.3, each Borrower shall procure that the obligatory insurances affected by it shall:
|
|
|
(a)
|
subject always to paragraph (b), name that Borrower 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 that Borrower and every other named assured in proportion to the aggregate 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)
|
in the case of any obligatory insurances against any risks other than protection and indemnity
risks, and 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 first priority mortgagee and 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 the 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;
|
|
|
(f)
|
provide that the Security Trustee may make proof of loss if that Borrower fails to do so; and
|
|
|
(g)
|
provide that the deductible of the hull and machinery insurance is not higher that the amount agreed
upon and stated in the loss payable clause.
|
|
|
13.5
|
Renewal of obligatory insurances.
Each Borrower 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 Borrower proposes to renew that obligatory insurance and of the proposed terms
of renewal; and
|
|
|
(ii)
|
obtain the Security Trustee’s approval to the matters referred to in paragraph (i);
|
|
|
(b)
|
at least five (5) days before the expiry of any obligatory insurance, renew that obligatory insurance
in accordance with the Security Trustee’s 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.
Each Borrower
shall ensure that all approved brokers provide the Security Trustee with pro forma copies of all policies and cover notes relating
to the obligatory insurances which they are to affect 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 in accordance with the requirements of the Insurance Assignment for that Borrower’s Ship;
|
|
|
(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 or if they cease to act as brokers;
|
|
|
(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 Borrower 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
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|
|
(e)
|
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 will arrange for a separate policy to be issued in respect of that Ship forthwith upon being so requested
by the Security Trustee.
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|
|
13.7
|
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 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 the Ship.
|
|
|
13.8
|
Deposit of original policies.
Each Borrower 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.
Each Borrower 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.
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.
|
|
|
13.11
|
Compliance with terms of insurances.
No Borrower 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)
|
each Borrower shall take all necessary action and comply with all requirements which may from time
to time be applicable to the obligatory insurances, and (without limiting the obligation contained in Clause 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)
|
no Borrower shall make any changes relating to the classification or classification society or
manager or operator of the Ship owned by it unless approved by the underwriters of the obligatory insurances;
|
|
|
(c)
|
each Borrower shall make (and promptly supply copies to the 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
|
|
|
(d)
|
no Borrower 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.
No Borrower 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.
No Borrower 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.
Upon specific request
of the Security Trustee each Borrower shall provide the Security Trustee, at the time of each such communication, copies of all
written communications between that Borrower and:
|
|
|
(a)
|
the approved brokers;
|
|
|
(b)
|
the approved protection and indemnity and/or war risks associations;
|
|
|
(c)
|
the approved insurance companies and/or underwriters, which relate directly or indirectly to:
|
|
|
(i)
|
that Borrower’s obligations relating to the obligatory insurances including, without limitation,
all requisite declarations and payments of additional premiums or calls; and
|
|
|
(ii)
|
any credit arrangements made between that Borrower 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; and
|
|
|
(d)
|
any parties involved in case of a claim under any of insurances relating to that Borrower’s
Ship.
|
|
|
13.15
|
Provision of information.
In addition, each Borrower shall
promptly provide (and in no event less than five (5) days prior to a Drawdown Date) 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 that 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
|
Mortgagee’s interest, additional perils and political risk
insurances.
The Security Trustee shall be entitled from time to time to effect, maintain and renew (i) mortgagee’s interest
marine insurance, (ii) mortgagee’s interest additional perils insurance and/or (iii) mortgagee’s political risks /
rights insurance in such amounts (up to 120% of the Loan), on such terms, through such insurers and generally in such manner as
the Security Trustee may from time to time consider appropriate and the Borrowers, jointly and severally, 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.
|
|
|
13.17
|
Review of insurance requirements.
The Security Trustee may
and, on instruction of the Majority Lenders, shall review, at the expense of the Borrowers, the requirements of this Clause 13
from time to time in order to take account of any changes in circumstances after the date of this Agreement which are, in the opinion
of the Agent or the Majority Lenders significant and capable of affecting the relevant Borrower or a Ship and its insurance (including,
without limitation, changes in the availability or the cost of insurance coverage or the risks to which the relevant Borrower may
be subject.)
|
|
|
13.18
|
Modification of insurance requirements.
The Security Trustee
shall notify the Borrowers of any proposed modification under Clause 13.17 to the requirements of this Clause 13 which the Security
Trustee may or, on instruction of the Majority Lenders, shall reasonably consider appropriate in the circumstances and such modification
shall take effect on and from the date it is notified in writing to the Borrowers as an amendment to this Clause 13 and shall bind
the Borrowers accordingly.
|
|
|
13.19
|
Compliance with instructions.
The Security Trustee shall be
entitled (without prejudice to or limitation of any other rights which it may have or acquire under any Finance Document) to require
a Ship to remain at any safe port or to proceed to and remain at any safe port designated by the Security Trustee until the relevant
Security Party implements any amendments to the terms of the obligatory insurances and any operational changes required as a result
of a notice served under Clause 13.18.
|
|
|
14.1
|
General.
From the first Drawdown Date until the Total Commitments
have terminated and all amounts payable hereunder have been paid in full, each of the Borrowers and each of the Guarantors, as
the case may be, undertakes with each Creditor Party to comply or cause compliance with the following provisions of this Clause
14 except as the Agent, with the consent of the Majority Lenders, may approve from time to time in writing, such approval not to
be unreasonably withheld.
|
|
|
14.2
|
Ship’s name and registration.
Each Borrower shall:
|
|
|
(a)
|
keep the Ship owned by it registered in its name under the law of an Approved Flag;
|
|
|
(b)
|
not do, omit to do or allow to be done anything as a result of which such registration might be
cancelled or imperiled; and
|
|
|
(c)
|
not change the name or port of registry on which such Ship was registered when it became subject
to a Mortgage.
|
|
|
14.3
|
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;
|
|
|
(b)
|
so as to maintain the highest class for that Ship with the Classification Society, free of overdue
recommendations and conditions; and
|
|
|
(c)
|
so as to comply with all laws and regulations applicable to vessels registered under the law of
the Approved Flag on which that Ship is registered 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,
|
and the Borrowers
shall notify the Creditor Parties of the class and the Classification Society of a Ship not less than 15 days prior to the Drawdown
Date in respect of the Advance relating to such Ship.
|
|
14.4
|
Classification Society instructions and undertaking.
Each
Borrower shall instruct the Classification Society referred to in Clause 14.3(b) (and procure that the 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 that Borrower’s 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 Borrower and the Ship owned by it either (i) electronically (through the Classification
Society directly or by way of indirect access via such Borrower’s account manager and designating the Security Trustee as
a user or administrator of the system under its account) or (ii) in person at the offices of the Classification Society, and to
take copies of them electronically or otherwise;
|
|
|
(c)
|
to notify the Security Trustee immediately
in writing and by Email at
neil.mclaughlin@dvbbank.com
and at
techcom@dvbbank.com
if the Classification Society:
|
|
|
(i)
|
receives notification from that Borrower or any other person that that Ship’s Classification
Society is to be changed; or
|
|
|
(ii)
|
becomes aware of any facts or matters which may result in or have resulted in a condition of class
or a recommendation, or a change, suspension, discontinuance, withdrawal or expiry of that Ship’s class under the rules or
terms and conditions of that Borrower’s or that Ship’s membership of the Classification Society;
|
|
|
(d)
|
following receipt of a written request from the Security Trustee:
|
|
|
(i)
|
to confirm that that Borrower 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 Borrower 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.
|
|
|
14.5
|
Modification.
No Borrower shall make any modification or repairs
to, or replacement of, the Ship owned by it or equipment installed on that Ship which would or is reasonably likely to materially
alter the structure, type or performance characteristics of that Ship or materially reduce its value.
|
|
|
14.6
|
Removal of parts.
No Borrower shall remove any material part
of the Ship owned by it, or any item of equipment installed on, that Ship 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 favor of any person other than the Security Trustee and becomes on installation on that Ship,
the property of that Borrower and subject to the security constituted by the Mortgage,
provided that
a Borrower may install
and remove equipment owned by a third party if the equipment can be removed without any risk of damage to the Ship owned by it.
|
|
|
14.7
|
Surveys.
Each Borrower, at its sole expense, 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, at that Borrower’s sole expense, with copies of all survey
reports.
|
|
|
14.8
|
Inspection.
Each Borrower shall permit the Security Trustee
(by surveyors or other persons appointed by it for that purpose at the cost of the Borrowers) to board the Ship owned by it at
all reasonable times but not more than once per year unless an Event of Default has occurred and is continuing, to inspect its
condition or to satisfy themselves about proposed or executed repairs and shall afford all proper facilities for such inspections.
The Security Trustee shall use reasonable efforts to ensure that the operation of that Ship is not adversely affected as a result
of such inspections.
|
|
|
14.9
|
Prevention of and release from arrest.
Each Borrower shall
promptly discharge or contest in good faith with appropriate proceedings:
|
|
|
(a)
|
all liabilities which give or may give rise to maritime or possessory liens on or claims enforceable
against the Ship owned by it, the Earnings or the Insurances;
|
|
|
(b)
|
all taxes, dues and other amounts charged in respect of the Ship owned by it, the Earnings or the
Insurances; and
|
|
|
(c)
|
all other accounts payable whatsoever in respect of the Ship owned by it, the Earnings or the Insurances,
|
and, forthwith (and in no event
more than 14 days) 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 Borrower shall procure its release by providing bail or otherwise as the circumstances may require.
|
|
14.10
|
Compliance with laws etc.
Each Borrower shall:
|
|
|
(a)
|
comply, or procure compliance with, all laws or regulations:
|
|
|
(i)
|
relating to its business generally; or
|
|
|
|
|
|
|
(ii)
|
relating to the ownership,
employment, operation and management of the Ship owned by it,
|
including but not limited to
the ISM Code, the ISPS Code, all Environmental Laws and all Sanctions;
|
|
(b)
|
without prejudice to the generality of paragraph (a) above, not employ the Ship owned by it nor
allow its employment in any manner contrary to any laws or regulations, including but not limited to the ISM Code, the ISPS Code;
all Environmental Laws and all Sanctions; and
|
|
|
(c)
|
in the event of hostilities in any part of the world (whether war is declared or not), not cause
or permit the Ship owned by it to enter or trade to any zone which is declared a war zone by any government or by that Ship’s
war risks insurers unless the prior written consent of the Security Trustee has been given and that Borrower has (at its expense)
effected any special, additional or modified insurance cover which the Security Trustee may require.
|
|
|
14.11
|
Provision of information.
Each Borrower 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 Ship’s master and crew;
|
|
|
(c)
|
any expenses incurred, or likely to be incurred, in connection with the operation, maintenance
or repair of that Ship and any payments made in respect of that Ship;
|
|
|
(d)
|
any towages and salvages; and
|
|
|
(e)
|
that Borrower’s, the Approved Manager’s and that Ship’s compliance with the ISM
Code and the ISPS Code,
|
and, upon the Security Trustee’s
request, provide copies of any current Time Charter and Time Charter Guarantee relating to that Ship and copies of that Borrower’s
or the Approved Manager’s Document of Compliance.
|
|
14.12
|
Notification of certain events.
Each Borrower shall immediately
notify the Security Trustee by fax or Email, 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 condition 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 Security
Interest on that Ship or the Earnings or any requisition of that Ship for hire;
|
|
|
(e)
|
any intended dry docking of the Ship owned by it;
|
|
|
(f)
|
any Environmental Claim made against that Borrower 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 that Borrower, 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 that Borrower shall keep
the Security Trustee advised in writing on a regular basis and in such detail as the Security Trustee shall require of that Borrower’s,
the Approved Manager’s or any other person’s response to any of those events or matters.
|
|
14.13
|
Restrictions on chartering, appointment of managers etc.
No
Borrower 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 that Ship for a term which exceeds,
or which by virtue of any optional extensions may exceed, 12 months (except pursuant to a Time Charter);
|
|
|
(c)
|
enter into any charter in relation to that Ship under which more than two (2) months’ hire
(or the equivalent) is payable in advance;
|
|
|
(d)
|
charter that Ship otherwise than on bona fide arm’s length terms at the time when that Ship
is fixed;
|
|
|
(e)
|
appoint a manager of that Ship other than the Approved Manager or agree to any alteration to the
terms of the Approved Management Agreement;
|
|
|
(f)
|
de-activate or lay up that Ship;
|
|
|
(g)
|
change the Classification Society;
|
|
|
(h)
|
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 $500,000 (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 Security Interest on that Ship or the
Earnings for the cost of such work or for any other reason; or
|
|
|
(i)
|
permit the Ship owned by it to carry nuclear waste or material.
|
|
|
14.14
|
Copies of Charters; Charter Assignment; Earnings Assignment.
Provided that all approvals necessary under Clause 14.13 have been previously obtained, each Borrower shall:
|
|
|
(a)
|
furnish promptly to the Agent a true and complete copy of any Charter entered into by a Borrower
for the Ship owned by it, all other documents related thereto and a true and complete copy of each material amendment or other
modification thereof;
|
|
|
(b)
|
in respect of any such Charter entered into by a Borrower, execute and deliver to the Agent a charter
assignment in Agreed Form and use reasonable commercial efforts to cause the charterer to execute and deliver to the Security Trustee
a consent and acknowledgement to such charter assignment in the form required thereby; and
|
|
|
(c)
|
in respect of any contract for the employment of that Ship for a term which is or which by virtue
of any optional extensions therein contained would be reasonably likely to be of less than 12 months duration, execute and deliver
to the Agent an Earnings Assignment and use reasonable commercial efforts to cause the charterer to execute and deliver to the
Security Trustee a consent and acknowledgement to such Earnings Assignment in the form required thereby (if any).
|
|
|
14.15
|
Notice of Mortgage.
Each Borrower shall keep the Mortgage
registered against the Ship owned by it as a valid first preferred mortgage, carry on board that Ship a certified copy of the Mortgage
and place and maintain in a conspicuous place in the navigation room and the Master’s cabin of that Ship a framed printed
notice stating that such Ship is mortgaged by that Borrower to the Security Trustee.
|
|
|
14.16
|
Sharing of Earnings.
No Borrower shall enter into any agreement
or arrangement for the sharing of any Earnings.
|
|
|
14.17
|
ISPS Code.
Each Borrower 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 Ship’s compliance
with the ISPS Code comply with the ISPS Code; and
|
|
|
(b)
|
maintain for that Ship an ISSC; and
|
|
|
(c)
|
notify the Agent immediately in writing of any actual or threatened withdrawal, suspension, cancellation
or modification of the ISSC.
|
|
|
15
|
COLLATERAL MAINTENANCE RATIO
|
|
|
15.1
|
General.
From the first Drawdown Date until the Total Commitments
have terminated and all amounts payable hereunder have been paid in full, the Borrowers undertake with each Creditor Party to comply
with the following provisions of this Clause 15 except as the Agent, with the consent of the Majority Lenders, may approve from
time to time in writing, such approval not to be unreasonably withheld.
|
|
|
15.2
|
Applicable Collateral Maintenance Ratio.
If, at any time,
the Agent notifies the Borrowers that:
|
|
|
(a)
|
the aggregate Fair Market Value of the Ships; plus
|
|
|
(b)
|
the net realizable value of any additional Collateral previously provided under this Clause 15,
|
is below either
(i) 142.85 percent of the Loan at all times before any of BULK PANGAEA, BULK PATRIOT, BULK JULIANA or BULK TRIDENT is sold or becomes
a Total Loss or (ii) 200 percent of the Loan at all times after any of BULK PANGAEA, BULK PATRIOT, BULK JULIANA or BULK TRIDENT
is sold or becomes a Total Loss (such ratio being in either case the “
Applicable Collateral Maintenance Ratio
”),
the Agent (acting upon the instruction of the Majority Lenders) shall have the right to require the Borrowers to comply with the
requirements of Clause 15.3.
|
|
15.3
|
Provision of additional Collateral; prepayment
.
|
|
|
(a)
|
If the Agent serves a notice on the Borrowers under Clause 15.2, the Borrowers shall prepay such
part (at least) of the Loan as will eliminate the shortfall on or before the date falling one (1) month after the date on which
the Agent’s notice is served under Clause 15.2 (the “
Collateral Maintenance Prepayment
Date
”) unless
at least one (1) Business Day before the Collateral Maintenance
Prepayment Date it has provided, or ensured that a third
party has provided, additional Collateral which, in the opinion of the Majority Lenders, has a net realizable value at least equal
to the shortfall and which has been documented in such terms as the Agent may, with the authorization of the Majority Lenders,
approve or require.
|
|
|
(b)
|
Any prepayment made pursuant to Clause 15.3(a) shall be applied
pro rata
to each outstanding
Advance of the Loan at the time such prepayment is made.
|
|
|
15.4
|
Value of additional vessel security.
The net realizable value
of any additional Collateral which is provided under Clause 15.3 and which consists of a Security Interest over a vessel shall
be that shown by a valuation complying with the definition of Fair Market Value.
|
|
|
15.5
|
Valuations binding.
Any valuation under Clause 15.3 or 15.4
shall be binding and conclusive as regards the Borrowers and the Guarantors, as shall be any valuation which the Majority Lenders
make of any additional Collateral which does not consist of or include a Security Interest.
|
|
|
15.6
|
Provision of information.
The Borrowers shall promptly provide
the Agent and any Approved Broker or other expert acting under Clause 15.4 with any information which the Agent or the Approved
Broker or other expert may request for the purposes of the valuation; and, if the Borrowers fail to provide the information by
the date specified in the request, the valuation may be made on any basis and assumptions which the Approved Broker or the Majority
Lenders (or the expert appointed by them) consider prudent.
|
|
|
15.7
|
Payment of valuation expenses.
Without prejudice to the generality
of the Borrowers’ obligations under Clauses 21.2, 21.3 and 22.3, the Borrowers shall, on demand, pay the Agent the amount
of the fees and expenses of any Approved Broker or other expert instructed by the Agent under this Clause 15 and all legal and
other expenses incurred by any Creditor Party in connection with any matter arising out of this Clause 15.
|
|
|
16.1
|
Guarantee and indemnity.
In order to induce the Lenders to
make the Loan to the Borrowers, each Guarantor irrevocably and unconditionally jointly and severally:
|
|
|
(a)
|
guarantees, as a primary obligor and not merely as a surety, to each Creditor Party, the punctual
payment and performance by the Borrowers when due, whether at stated maturity, by acceleration or otherwise, of all Secured Liabilities
of the Borrowers, whether for principal, interest, fees, expenses or otherwise (collectively, the “
Guaranteed Obligations
”);
|
|
|
(b)
|
undertakes with each Creditor Party that whenever the Borrowers do not pay any Guaranteed Obligation
when due, such Guarantor shall immediately on demand pay that Guaranteed Obligation as if it were the primary obligor; and
|
|
|
(c)
|
indemnifies each Creditor Party immediately on demand against any cost, loss or liability suffered
or incurred by that Creditor Party (i) if any Guaranteed Obligation is or becomes unenforceable, invalid or illegal or (ii) by
operation of law as a consequence of the transactions contemplated by the Finance Documents. The amount of the cost, loss or liability
shall be equal to the amount which that Creditor Party would otherwise have been entitled to recover.
|
|
|
16.2
|
Continuing guarantee.
This guarantee:
|
|
|
(a)
|
is a continuing guarantee;
|
|
|
(b)
|
constitutes a guarantee of punctual performance and payment and not merely of collection;
|
|
|
(c)
|
is joint and several with any other guarantee given in respect of the Guaranteed Obligations and
shall not in any way be prejudiced by any other guarantee or security now or subsequently held by any Creditor Party in respect
of the Guaranteed Obligations;
|
|
|
(d)
|
shall remain in full force and effect until the later of the termination of the Total Commitments
and the payment and performance in full of the Guaranteed Obligations and all other amounts payable hereunder regardless of any
intermediate payment or discharge in whole or in part; and
|
|
|
(e)
|
shall be binding upon each Guarantor, its successors and permitted assigns.
|
|
|
16.3
|
Performance of Guaranteed Obligations; obligations
pari passu
.
|
|
|
(a)
|
Each Guarantor agrees that the Guaranteed Obligations will be performed and paid strictly in accordance
with the terms of the relevant Finance Document regardless of any law or regulation or order of any court:
|
|
|
(i)
|
affecting (A) any term of such Finance Document or the rights of any of the Creditor Parties with
respect thereto or (B) the Borrowers’ ability or obligation to make or render, or right of any Creditor Party to receive,
any payments or performance due thereunder; or
|
|
|
(ii)
|
which might otherwise constitute a defense to, or a legal or equitable discharge of, the Borrowers.
|
|
|
(b)
|
The obligations of each Guarantor under this guarantee shall rank
pari passu
with all other
unsecured obligations of such Guarantor.
|
|
|
16.4
|
Reinstatement.
If any payment of any of the Guaranteed Obligations
is rescinded, discharged, avoided or reduced or must otherwise be returned by a Creditor Party or any other person upon the insolvency,
bankruptcy or reorganization of a Borrower or any other Security Party or otherwise:
|
|
|
(a)
|
this guarantee shall continue to be effective or be reinstated, and the liability of each Guarantor
hereunder shall continue or be reinstated, as the case may be, as if the payment, discharge, avoidance or reduction had not occurred;
and
|
|
|
(b)
|
each Creditor Party shall be entitled to recover the value or amount of that payment from each
Guarantor, as if the payment, discharge, avoidance or reduction had not occurred.
|
|
|
16.5
|
Liability absolute and unconditional.
The obligations of each
Guarantor under this Clause 16 shall be irrevocable, absolute and unconditional and shall not be affected by an act, omission,
matter or thing which, but for this Clause, would reduce, release or prejudice any of its obligations under this Clause 16, and
each Guarantor hereby irrevocably waives any defenses it may now have or hereafter acquire in any way relating to, any or all of
the following:
|
|
|
(a)
|
any time, waiver or consent granted to, or composition with, any Security Party or other person;
|
|
|
(b)
|
the release of any other Security Party or any other person under the terms of any composition
or arrangement with any creditor of any Security Party;
|
|
|
(c)
|
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 Security Party 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 realize the full value of
any security;
|
|
|
(d)
|
any incapacity or lack of power, authority or legal personality of or dissolution or change in
the corporate or company structure or status of a Security Party or any other person (including without limitation any change in
the holding of such Security Party’s or other person’s Equity Interests);
|
|
|
(e)
|
any amendment to or replacement of a Finance Document or any other document or security;
|
|
|
(f)
|
any unenforceability, illegality or invalidity of any obligation of any Security Party or any other
person under any Finance Document or any other document or security;
|
|
|
(g)
|
any bankruptcy, insolvency or similar proceedings; or
|
|
|
(h)
|
any other circumstance whatsoever that might otherwise constitute a defense available to, or a
legal or equitable discharge of, any Security Party.
|
|
|
16.6
|
Waiver of promptness, etc.
Each of the Guarantors hereby unconditionally
and irrevocably waives promptness, diligence, notice of acceptance, presentment, demand for performance, notice of non-performance,
default, acceleration, protest or dishonor and any other notice with respect to any of the Guaranteed Obligations and this guarantee
and any requirement that a Creditor Party protect, secure, perfect or insure any Security Interest or any property subject thereto
or exhaust any right or take any action against any Security Party or any other person or entity or any Collateral.
|
|
|
16.7
|
Waiver of revocation, etc.
Each Guarantor hereby unconditionally
and irrevocably waives any right to revoke this guarantee.
|
|
|
16.8
|
Waiver of certain defenses.
Each Guarantor hereby unconditionally
and irrevocably waives:
|
|
|
(a)
|
any defense arising by reason of any claim or defense based upon an election of remedies by a Creditor
Party that in any manner impairs, reduces, releases or otherwise adversely affects the subrogation, reimbursement, exoneration,
contribution or indemnification rights of such Guarantor or other rights of such Guarantor to proceed against the Borrowers, any
of the other Security Parties, any other guarantor or any other person or entity or any Collateral; and
|
|
|
(b)
|
any defense based on any right of set-off or counterclaim against or in respect of the obligations
of such Guarantor hereunder.
|
|
|
16.9
|
Waiver of disclosure, etc.
Each Guarantor hereby unconditionally
and irrevocably waives any duty on the part of any Creditor Party to disclose to the Guarantors any matter, fact or thing relating
to the business, condition (financial or otherwise), operations, performance, properties or prospects of the Borrowers, any other
Security Party or any of their respective subsidiaries now or hereafter known by any Creditor Party.
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16.10
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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 before claiming from that Guarantor under this Clause 16. This waiver applies irrespective
of any law or any provision of a Finance Document to the contrary.
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16.11
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Acknowledgment of benefits.
Each Guarantor acknowledges that
it will receive substantial direct and indirect benefits from the financing arrangements contemplated by the Finance Documents
and that the waivers set forth in this Clause 16 are knowingly made in contemplation of such benefits.
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16.12
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Independent obligations.
The obligations of each Guarantor
under or in respect of this guarantee are independent of the Guaranteed Obligations or any other obligations of the Borrowers or
any other Security Party under or in respect of the Finance Documents, and a separate action or actions may be brought and prosecuted
against each Guarantor to enforce this guarantee irrespective of whether any action is brought against the Borrowers or any other
Security Party or whether the Borrowers or any other Security Party is joined in any such action or actions.
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16.13
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Deferral of Guarantors’ rights.
Until the Guaranteed
Obligations have been irrevocably paid and performed in full and unless the Agent otherwise directs, no Guarantor will exercise
any rights which it may have by reason of performance by it of its obligations under the Finance Documents:
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(a)
|
to be indemnified by another Security Party;
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(b)
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to claim any contribution from any other guarantor of any Security Party’s obligations under
the Finance Documents; and/or
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(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.
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16.14
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Limitation of liability.
Each of the Guarantors and the Creditor
Parties hereby confirms that it is its intention that the Guaranteed Obligations not constitute a fraudulent transfer or conveyance
for purposes of the United States Bankruptcy Code, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or
any similar law. To effectuate the foregoing intention, each of the Guarantors and the Creditor Parties hereby irrevocably agrees
that the Guaranteed Obligations guaranteed by each Guarantor shall be limited to such amount as will, after giving effect to such
maximum amount and all other (contingent or otherwise) liabilities of such Guarantor that are relevant under such laws and after
giving effect to any rights to contribution pursuant to any agreement providing for an equitable contribution among such Guarantor
and the other Guarantors, result in the Guaranteed Obligations of such Guarantor in respect of such maximum amount not constituting
a fraudulent transfer or conveyance.
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16.15
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Reliance of Creditor Parties.
Each of the Creditor Parties
has entered into this Agreement in reliance upon, among other things, this guarantee.
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17
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PAYMENTS AND CALCULATIONS
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17.1
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Currency and method of payments.
All payments to be made by
the Lenders or by the Security Parties under a Finance Document shall be made to the Agent or to the Security Trustee, in the case
of an amount payable to it:
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(a)
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by not later than 11:00 a.m. (New York City time) on the due date;
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(b)
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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);
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(c)
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in the case of an amount payable by a Lender to the Agent or by another Security Party to the Agent
or any Lender, to the account of the Agent at HSBC Bank USA, New York, New York, ABA No. 021001088, SWIFT ID No. MRMDUS33, for
credit to DVB Bank SE (Account No. 000.137.278), Reference: Bulk Partners Fleet Financing, or to such other account with such other
bank as the Agent may from time to time notify to the Borrowers, the other Security Parties and the other Creditor Parties; and
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(d)
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in the case of an amount payable to the Security Trustee, to such account as it may from time to
time notify to the Borrowers and the other Creditor Parties.
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17.2
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Payment on non-Business Day.
If any payment by a Security
Party under a Finance Document would otherwise fall due on a day which is not a Business Day:
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(a)
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the due date shall be extended to the next succeeding Business Day; or
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(b)
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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;
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and interest shall be payable
during any extension under paragraph (a) at the rate payable on the original due date.
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17.3
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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.
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17.4
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Distribution of payments to Creditor Parties.
Subject to Clauses
17.5, 17.6 and 17.7:
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(a)
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any amount received by the Agent under a Finance Document for distribution or remittance to a Lender
or the Security Trustee shall be made available by the Agent to that Lender 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 or the Security Trustee may have notified
to the Agent not less than five (5) Business Days previously; and
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(b)
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amounts to be applied in satisfying amounts of a particular category which are due to the Lenders
generally shall be distributed by the Agent to each Lender
pro rata
to the amount in that category which is due to it.
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17.5
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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, deduct and withhold
from that amount any sum which is then due and payable to the Agent from that Lender under any Finance Document or any sum which
the Agent is then entitled under any Finance Document to require that Lender to pay on demand.
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17.6
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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 Borrowers
or any Lender any sum which the Agent is expecting to receive for remittance or distribution to the Borrowers or that Lender until
the Agent has satisfied itself that it has received that sum.
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17.7
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Refund to Agent of monies not received.
If and to the extent
that the Agent makes available a sum to the Borrowers or a Lender, without first having received that sum, the Borrowers or (as
the case may be) the Lender concerned shall, on demand:
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(a)
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refund the sum in full to the Agent; and
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(b)
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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.
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17.8
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Agent may assume receipt.
Clause 17.7 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.
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17.9
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Creditor Party accounts.
Each Creditor Party shall maintain
accounts showing the amounts owing to it by the Borrowers and each other Security Party under the Finance Documents and all payments
in respect of those amounts made by the Borrowers and any other Security Party.
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17.10
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Agent’s 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 Borrowers and each other Security Party under the Finance Documents and all payments in respect of those amounts
made by the Borrowers and any other Security Party.
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17.11
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Accounts prima facie evidence.
If any accounts maintained
under Clauses 17.9 and 17.10 show an amount to be owing by the Borrowers or any other Security Party to a Creditor Party, those
accounts shall be prima facie evidence that that amount is owing to that Creditor Party.
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18
|
APPLICATION OF RECEIPTS
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18.1
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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:
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(a)
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FIRST: in or towards satisfaction of any amounts then due and payable under the Finance Documents
in the following order and proportions:
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(i)
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first
, in or towards satisfaction
pro rata
of all amounts then due and payable to
the Creditor Parties under the Finance Documents other than those amounts referred to at paragraphs (ii) and (iii) (including,
but without limitation, all amounts payable by the Borrowers under Clauses 21, 22 and 23 of this Agreement or by the Borrowers
or any other Security Party under any corresponding or similar provision in any other Finance Document);
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(ii)
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second
, 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
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(iii)
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third
, in or towards satisfaction
pro rata
of the Loan;
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(b)
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SECOND: in retention of an amount equal to any amount not then due and payable under any Finance
Document but which the Agent, by notice to the Borrowers, the other Security Parties and the other Creditor Parties, states in
its opinion will or may become due and payable in the future and, upon those amounts becoming due and payable, in or towards satisfaction
of them in accordance with the provisions of Clause 18.1(a); and
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(c)
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THIRD: provided that no Event of Default has occurred and is continuing, any surplus shall be paid
to the Borrowers or to any other person appearing to be entitled to it.
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18.2
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Variation of order of application.
The Agent may, with the
authorization of the Majority Lenders, by notice to the Borrowers, the other Security Parties and the other Creditor Parties provide
for a different manner of application from that set out in Clause 18.1 either as regards a specified sum or sums or as regards
sums in a specified category or categories.
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18.3
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Notice of variation of order of application.
The Agent may
give notices under Clause 18.2 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.
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18.4
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Appropriation rights overridden.
This Clause 18 and any notice
which the Agent gives under Clause 18.2 shall override any right of appropriation possessed, and any appropriation made, by the
Borrowers or any other Security Party.
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18.5
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Payments in excess of Contribution.
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(a)
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If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of
any right of set-off, counterclaim or otherwise) in excess of its Contribution, such Lender shall forthwith purchase from the other
Lenders such participation in their respective Contributions as shall be necessary to share the excess payment ratably with each
of them,
provided that
if all or any portion of such excess payment is thereafter recovered from such purchasing Lender,
such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the
extent of such recovery together with an amount equal to such Lender’s ratable share (according to the proportion of (a)
the amount of such Lender’s required repayment to (b) the total amount so recovered from the purchasing Lender) of any interest
or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered.
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(b)
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The Borrowers agree that any Lender so purchasing a participation from another Lender pursuant
to this Clause 18.5 may, to the fullest extent permitted by law, exercise all of its rights of payment (including the right of
set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrowers in the amount
of such participation.
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(c)
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Notwithstanding paragraphs (a) and (b) of this Clause 18.5, any Lender which shall have commenced
or joined (as a plaintiff) in an action or proceeding in any court to recover sums due to it under any Finance Document and pursuant
to a judgment obtained therein or a settlement or compromise of that action or proceeding shall have received any amount, such
Lender shall not be required to share any proportion of that amount with a Lender which has the legal right to, but does not, join
such action or proceeding or commence and diligently prosecute a separate action or proceeding to enforce its rights in the same
or another court.
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(d)
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Each Lender exercising or contemplating exercising any rights giving rise to a receipt or receiving
any payment of the type referred to in this Clause 18.5 or instituting legal proceedings to recover sums owing to it under this
Agreement shall, as soon as reasonably practicable thereafter, give notice thereof to the Agent who shall give notice to the other
Lenders.
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19
|
APPLICATION OF EARNINGS
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19.1
|
General.
From the first Drawdown Date until the Total Commitments
have terminated and all amounts payable hereunder have been paid in full, each of the Borrowers undertakes with each Creditor Party
to comply or cause compliance with the following provisions of this Clause 19 except as the Agent, with the consent of the Majority
Lenders, may approve from time to time in writing, such approval not to be unreasonably withheld.
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19.2
|
Funding of Earnings Accounts.
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(a)
|
With respect to BULK JULIANA, BULK PANGEA and BULK PATRIOT, on the Drawdown Date of the Advance
for each such Initial Ship, the Borrower that owns such Ship shall deposit not less than $500,000 into and shall at all times thereafter
during the Security Period retain not less than $500,000 in the Earnings Account for the Ship owned by such Borrower, and
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(b)
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With respect to BULK TRIDENT, on the Drawdown Date of the Advance in respect of such Initial Ship,
Bulk Trident shall deposit not less than $200,000 into the Earnings Account for such Initial Ship and shall, not later than December
31, 2013, increase such balance to not less than $500,000;
provided that
if the balance in such Earnings Account is less
than $500,000 on December 31, 2013, any Security Party may loan to Bulk Trident an amount sufficient to bring the balance in such
Earnings Account to $500,000,
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provided
that
the aggregate balance maintained in all of the Earnings Accounts on a consolidated basis shall be not less than $2,000,000
at all times during the Security Period.
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19.3
|
Application of Earnings.
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(a)
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For each Initial Ship, each Borrower undertakes with each Creditor Party to ensure that, subject
only to the provisions of the relevant Time Charter, COA, Earnings Assignment, Earnings Account Pledge, Freights Account Pledge
and Time Charterer Earnings Assignment, as applicable:
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(i)
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all Earnings of that Ship under either the COAs for such Ship or any charter by the Time Charterer
as disponent owner for such Ship are paid to the Freights Account; and
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(ii)
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Allseas pays from such Earnings of that Ship, as and when due, all voyage expenses (if applicable)
related to the commercial operation of that Ship; and
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(iii)
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Allseas pays from such Earnings of that Ship, as and when due, the amount necessary to pay the
charter hire for that Ship (or, if such Time Charter is no longer in existence, the amount necessary for the Borrower to satisfy
the debt service obligations in respect of the Advance under this Agreement relating to that Ship (principal, interest and fees)
as and when due under this Agreement and the amount necessary to pay all daily operating expenses of that Ship). Such transfer
shall be made to the Earnings Account for that Ship.
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19.4
|
Application of Excess Cash Flow.
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(a)
|
Bulk Trident undertakes with each Creditor Party to ensure that all Excess Cash Flow of the BULK
TRIDENT (i.e., any Earnings of the BULK TRIDENT remaining in the Freights Account after paying the voyage expenses and charter
hire) shall be transferred to the Bulk Trident Earnings Account and retained, subject to the following:
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(i)
|
Provided the applicable Earnings Account Minimum Balance is being maintained in the Bulk Trident
Earnings Account:
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(A)
|
if the Excess Cash Flow is in the aggregate more than $106,250 on the date falling three (3) months
after the Drawdown Date of the Advance in respect of the BULK TRIDENT, and at the end of each three (3) month period thereafter,
Bulk Trident shall make a prepayment in integrals of $106,250, to be applied in the aggregate to prepay, without any prepayment
fee otherwise required by Clause 8.9(c)), the repayment installments specified in Clause 8.1(b) in inverse order of maturity,
provided
that
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(B)
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if the Excess Cash Flow is in the aggregate less than $106,250 on the last day of the applicable
3 month period, all such Excess Cash Flow shall be retained in the Bulk Trident Earnings Account and Bulk Trident shall not be
required to make the prepayment specified above; and
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(C)
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if the Excess Cash Flow is in the aggregate more than $106,250 on the last day of the applicable
three (3) month Period (not including any amounts retained pursuant to Clause 19.4(a)(i)(B) above), all such Excess Cash Flow remaining
after the required prepayment of $106,250 is made shall be released to the Security Parties for general corporate purposes.
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(ii)
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It is understood that the following shall be paid from the Bulk Trident Earnings Account:
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(A)
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daily operating expenses (“OPEX”) of the BULK TRIDENT (crew costs, insurance, maintenance,
stores, lube oils, etc.);
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(B)
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amounts necessary to comply with the Collateral Maintenance Ratio;
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(C)
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excess expenses that exceed the daily charter hire rate.
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|
(b)
|
Bulk Patriot undertakes with each Creditor Party to ensure that all Excess Cash Flow of the BULK
PATRIOT (i.e., any Earnings of the BULK PATRIOT remaining in the Freights Account after paying the voyage expenses and charter
hire) shall be transferred to the Bulk Patriot Earnings Account and retained, subject to the following:
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|
(iii)
|
Provided the applicable Earnings Account Minimum Balance is being maintained in the Bulk Patriot
Earnings Account:
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|
|
(A)
|
if the Excess Cash Flow is in the aggregate more than $112,500 on the date falling three (3) months
after the Drawdown Date of the Advance in respect of the BULK PATRIOT, and at the end of each three (3) month period thereafter,
Bulk Patriot shall make a prepayment in integrals of $112,500, to be applied in the aggregate to prepay, without any prepayment
fee otherwise required by Clause 8.9(c)), the repayment installments specified in Clause 8.1(b) in inverse order of maturity,
provided
that
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(B)
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if the Excess Cash Flow is in the aggregate less than $112,500 on the last day of the applicable
3 month period, all such Excess Cash Flow shall be retained in the Bulk Patriot Earnings Account and Bulk Patriot shall not be
required to make the prepayment specified above; and
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(C)
|
if the Excess Cash Flow is in the aggregate more than $112,500 on the last day of the applicable
three (3) month Period (not including any amounts retained pursuant to Clause 19.4(b)(i)(B) above), all such Excess Cash Flow remaining
after the required prepayment of $112,500 is made shall be released to the Security Parties for general corporate purposes,
provided
further that
:
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|
(1)
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all charter hire has been paid; and
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(2)
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all expenses incurred, or likely to be incurred, in connection with the operation, maintenance
or repair of the BULK PATRIOT have been paid in full or for which adequate reserves have been made.
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|
(iv)
|
It is understood that the following shall be paid from the Bulk Patriot Earnings Account:
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|
|
(A)
|
daily operating expenses (“OPEX”) of the BULK PATRIOT (crew costs, insurance, maintenance,
stores, lube oils, etc.);
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|
(B)
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amounts necessary to comply with the Collateral Maintenance Ratio;
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|
(C)
|
excess expenses that exceed the daily charter hire rate.
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|
(c)
|
Bulk Juliana undertakes with each Creditor Party to ensure that all Excess Cash Flow of the BULK
JULIANA (i.e., any Earnings of the BULK JULIANA remaining in the Freights Account after paying the voyage expenses and charter
hire) shall be transferred to the Bulk Juliana Earnings Account and retained, subject to the following:
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|
(i)
|
Provided the applicable Earnings Account Minimum Balance is being maintained in the Bulk Juliana
Earnings Account:
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|
|
(A)
|
if the Excess Cash Flow is in the aggregate more than $100,000 on the date falling three (3) months
after the Drawdown Date of the Advance in respect of the BULK JULIANA, and at the end of each three (3) month period thereafter,
Bulk Juliana shall make a prepayment in integrals of $100,000, to be applied in the aggregate to prepay, without any prepayment
fee otherwise required by Clause 8.9(c)), the repayment installments specified in Clause 8.1(b) in inverse order of maturity,
provided
that
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|
(B)
|
if the Excess Cash Flow is in the aggregate less than $100,000 on the last day of the applicable
3 month period, all such Excess Cash Flow shall be retained in the Bulk Juliana Earnings Account and Bulk Juliana shall not be
required to make the prepayment specified above.
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|
(ii)
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It is understood that the following shall be paid from the Bulk Juliana Earnings Account:
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|
|
(A)
|
daily operating expenses (“OPEX”) of the BULK JULIANA (crew costs, insurance, maintenance,
stores, lube oils, etc.);
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|
(B)
|
amounts necessary to comply with the Collateral Maintenance Ratio;
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|
(C)
|
excess expenses that exceed the daily charter hire rate.
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|
(d)
|
Bulk Pangaea undertakes with each Creditor Party to ensure that all Excess Cash Flow of the BULK
PANGAEA (i.e., any Earnings of the BULK PANGAEA remaining in the Freights Account after paying the voyage expenses and charter
hire) shall be transferred to the Bulk Pangaea Earnings Account and retained, subject to the following:
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|
(i)
|
Provided the applicable Earnings Account Minimum Balance is being maintained in the Bulk Pangaea
Earnings Account:
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|
(A)
|
if the Excess Cash Flow is in the aggregate more than $100,000 on the date falling three (3) months
after the Drawdown Date of the Advance in respect of the BULK PANGAEA, and at the end of each three (3) month period thereafter,
Bulk Pangaea may, at its option, make a prepayment in integrals of $100,000, to be applied in the aggregate to prepay, without
any prepayment fee otherwise required by Clause 8.9(c)), the repayment installments specified in Clause 8.1(b) in inverse order
of maturity,
provided that
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(B)
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if the Excess Cash Flow is in the aggregate less than $100,000 on the last day of the applicable
3 month period, all such Excess Cash Flow shall be retained in the Bulk Pangaea Earnings Account and Bulk Pangaea shall not be
required to make the prepayment specified above; and
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|
(ii)
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It is understood that the following shall be paid from the Bulk Pangaea Earnings Account:
|
|
|
(A)
|
daily operating expenses (“OPEX”) of the BULK PANGAEA (crew costs, insurance, maintenance,
stores, lube oils, etc.);
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|
(B)
|
amounts necessary to comply with the Collateral Maintenance Ratio;
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|
(C)
|
excess expenses that exceed the daily charter hire rate.
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|
19.5
|
Location of Earnings Accounts and Freights Account
. Each of
the Borrowers shall promptly:
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|
|
(a)
|
comply, or cause the compliance, with any requirement of the Agent as to the location or re-location
of its Earnings Account or the Freights Account, and without limiting the foregoing, each of the Borrowers agrees to segregate,
or cause the segregation of, its Earnings Account from the banking platform on which their other accounts are located or designated
and the Freights Account from the banking platform on which the other bank accounts of Allseas are located or designated; and
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|
|
(b)
|
execute, or cause the execution of, any documents which the Agent specifies to create or maintain
in favor of the Security Trustee a Security Interest over (and/or rights of set-off, consolidation or other rights in relation
to) its Earnings Account and the Freights Account.
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|
|
19.6
|
Debits for expenses etc.
Upon the occurrence and during the
continuance of an Event of Default, the Agent shall be entitled (but not obliged) from time to time to debit the Earnings Accounts
and/or the Freights Account without prior notice in order to discharge any amount due and payable under Clause 21 or 22 to a Creditor
Party or payment of which any Creditor Party has become entitled to demand under Clause 21 or 22.
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|
19.7
|
Borrowers’ obligations unaffected.
The provisions of
this Clause 19 do not affect:
|
|
|
(a)
|
the liability of the Borrowers to make payments of principal and interest on the due dates required
by this Agreement or any other Finance Document; or
|
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|
|
|
|
|
(b)
|
any other liability or obligation of the Borrowers or any other Security Party under any Finance Document.
|
|
|
20.1
|
Events of Default.
An Event of Default occurs if:
|
|
|
(a)
|
any Borrower or any other Security Party fails to pay when due any sum payable under a Finance
Document or under any document relating to a Finance Document or, only in the case of sums payable on demand, within five (5) Business
Days after the date when first demanded; or
|
|
|
(b)
|
any breach occurs of any of Clauses 8.8, 9.2(a), 11.2(b), 11.2(e), 11.2(o), 11.2(p), 13 or 15.3;
or
|
|
|
(c)
|
any breach by any Borrower or any other Security Party occurs of any provision of a Finance Document
(other than a breach covered by paragraphs (a), (b), (d), (e) or (n) of this Clause 20.1) which, in the opinion of the Majority
Lenders, is capable of remedy, and such default continues unremedied 10 days after written notice from the Agent requesting action
to remedy the same; or
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|
|
(d)
|
subject to any applicable grace period specified in a Finance Document, any breach by any Borrower
or any other Security Party occurs of any provision of a Finance Document (other than a breach falling within paragraphs (a), (b),
(c) or (e) of this Clause 20.1); or
|
|
|
(e)
|
any representation, warranty or statement made or repeated by, or by an officer or director or
other authorized person of, a Borrower or any other 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; or
|
|
|
(f)
|
an event of default, or an event or circumstance which, with the giving of any notice, the lapse
of time or both would constitute an event of default, has occurred on the part of a Security Party under any contract or agreement
(other than the Finance Documents) to which such Security Party is a party (including without limitation a Time Charter or a COA),
and, in respect of any payment default, the value of which is or exceeds $250,000 (in the case of a Borrower) or $500,000 (in the
case of a Guarantor), and such event of default has not been cured within any applicable grace period,
provided that
any
event of default other than a payment default shall not be subject to the financial thresholds set forth in this paragraph (f);
or
|
|
|
(g)
|
any Financial Indebtedness of a Security Party is not paid when due (or if there is a grace period,
within such grace period) or, only in the case of sums payable on demand, when first demanded, except for any such Financial Indebtedness
which is being contested by such Security Party in good faith and through appropriate proceedings and in a manner that does not
involve any risk of sale, forfeiture, loss, confiscation or seizure of the Ship; or
|
|
|
(h)
|
any Security Party shall generally not pay its debts as such debts become due, or shall admit in
writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or
|
|
|
(i)
|
any proceeding shall be instituted by or against any Security Party seeking to adjudicate it a
bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition
of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry
of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial
part of its property, and solely in the case of an involuntary proceeding:
|
|
|
(i)
|
such proceeding shall remain undismissed or unstayed for a period of 60 days; or
|
|
|
(ii)
|
any of the actions sought in such involuntary proceeding (including, without limitation, the entry
of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any
substantial part of its property) shall occur; or
|
|
|
(j)
|
all or a material part of the undertakings, assets, rights or revenues of, or shares or other ownership
interest in, any Security Party are seized, nationalized, expropriated or compulsorily acquired by or under authority of any government;
or
|
|
|
(k)
|
a creditor attaches or takes possession of, or a distress, execution, sequestration or process
(each an
“action”
) is levied or enforced upon or sued out against, a material part of the undertakings, assets,
rights or revenues (the
“assets”
) of any Security Party in relation to a claim by such creditor which, in the
reasonable opinion of the Majority Lenders, is likely to materially and adversely affect the ability of such Security Party to
perform all or any of its obligations under or otherwise to comply with the terms of any Finance Document, Time Charter or COA
to which it is a party and such Security Party does not procure that such action is lifted, released or expunged within 20 Business
Days of such action being (i) instituted and (ii) notified to such Security Party; or
|
|
|
(l)
|
any judgment or order for the payment of money individually or in the aggregate in excess of $1,000,000
(exclusive of any amounts fully covered by insurance (less any applicable deductible) and as to which the insurer has acknowledged
its responsibility to cover such judgment or order) shall be rendered against a Security Party and such judgment shall not have
been vacated or discharged or stayed or bonded pending appeal within 30 days after the entry thereof or enforcement proceedings
shall have been commenced by any creditor upon such judgment or order; or
|
|
|
(m)
|
any Security Party ceases or suspends or threatens to cease or suspend the carrying on of its business,
or a part of its business which, in the opinion of the Majority Lenders, is material in the context of this Agreement, except in
the case of a sale or a proposed sale of the Ship by a Borrower; or
|
|
|
(n)
|
a Ship becomes a Total Loss or suffers a Major Casualty and (i) in the case of a Total Loss, insurance
proceeds are not collected or received by the Security Trustee from the underwriters within 150 days of the Total Loss Date; or
(ii) in the case of a Major Casualty, that Ship has not been otherwise repaired in a timely and proper manner; or
|
|
|
(o)
|
it becomes unlawful in any Pertinent Jurisdiction or impossible:
|
|
|
(i)
|
for 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;
|
|
|
(ii)
|
for the Agent, the Security Trustee or the Lenders to exercise or enforce any right under, or to
enforce any Security Interest created by, a Finance Document; or
|
|
|
(p)
|
any consent necessary to enable a Borrower to own, operate or charter the Ship owned by it or to
enable a Borrower or any other Security Party to comply with any provision which the Majority Lenders consider material of a Finance
Document or a Time Charter or a COA 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
|
|
|
(q)
|
any provision of a Finance Document which the Majority Lenders consider material 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
|
|
|
(r)
|
the security constituted by a Finance Document is in any way imperiled or in jeopardy; or
|
|
|
(s)
|
there occurs the cancellation or termination of any contract of employment for the Ship of more
than 12 months duration to which a Security Party is a party, including a Time Charter and a COA, unless such contract of employment
is replaced with a substitute contract of employment with the consent of the Lenders (such consent not to be unreasonably withheld);
or
|
|
|
(t)
|
any event occurs or any circumstances arise or develop including, without limitation:
|
|
|
(i)
|
a change in the financial position, state of affairs or prospects of any Security Party; or
|
|
|
(ii)
|
any accident or other event involving a Ship;
|
and the Majority Lenders reasonably
consider that there is a significant risk that a Security Party is, or will later become, unable to discharge its liabilities under
the Finance Documents as they fall due; or
|
|
(u)
|
there occurs or develops a change in the financial position, state of affairs or prospects of a
Security Party which, in the reasonable opinion of the Majority Lenders, has a material adverse effect on such Security Party’s
ability to discharge its liabilities under the Finance Documents, the Time Charters or the COAs as they fall due; or
|
|
|
(v)
|
the results of any survey or inspection of a Ship pursuant to Clause 14.7 or 14.8 are deemed unsatisfactory
by the Majority Lenders in their sole, reasonable discretion after giving due consideration to the type and age of that Ship and
whether such results adversely affect that Ship’s Fair Market Value or safe operation, unless such survey or inspection is
revised to the satisfaction of the Majority Lenders within 60 days of the date that a copy of the original inspection is delivered
by the Borrowers to the Agent; or
|
|
|
(w)
|
a Ship is off charter for a continuous period of 45 days at any time, or for an aggregate of 56
days in any 12 month period.
|
|
|
20.2
|
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 Borrowers a notice stating that the Commitments and all other obligations of each
Lender to the Borrowers under this Agreement are cancelled; and/or
|
|
|
(ii)
|
serve on the Borrowers a notice stating that the Loan, together with accrued interest and all other
amounts accrued or owing under this Agreement, are immediately due and payable or are due and payable on demand,
provided that
in the case of an Event of Default under either of Clauses 20.1(h) or (i), the Loan and all accrued interest and other amounts
accrued or owing hereunder shall be deemed immediately due and payable without notice or demand therefor; 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 authorization 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 are entitled to take under any Finance Document or
any applicable law to enforce the Security Interests created by this Agreement and any other Finance Document in any manner available
to it and in such sequence as the Security Trustee may, in its absolute discretion, determine.
|
|
|
20.3
|
Termination of Commitments.
On the service of a notice under
Clause 20.2(a)(i), the Commitments and all other obligations of each Lender to the Borrowers under this Agreement shall be cancelled.
|
|
|
20.4
|
Acceleration of Loan.
On the service of a notice under Clause
20.2(a)(ii), all or, as the case may be, the part of the Loan specified in the notice, together with accrued interest and all other
amounts accrued or owing from the Borrowers or any other 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.
|
|
|
20.5
|
Multiple notices; action without notice.
The Agent may serve
notices under Clauses 20.2(a)(i) and (ii) simultaneously or on different dates and it and/or the Security Trustee may take any
action referred to in Clause 20.2 if no such notice is served or simultaneously with or at any time after the service of both or
either of such notices.
|
|
|
20.6
|
Notification of Creditor Parties and Security Parties.
The
Agent shall send to each Lender, the Security Trustee and each Security Party a copy of the text of any notice which the Agent
serves on the Borrowers under Clause 20.2. Such notice shall become effective when it is served on the Borrowers, 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 Borrowers
or any Security Party with any form of claim or defense.
|
|
|
20.7
|
Creditor Party rights unimpaired.
Nothing in this Clause shall
be taken to impair or restrict the exercise of any right given to individual Lenders under a Finance Document or the general law;
and, in particular, this Clause is without prejudice to Clause 3.1.
|
|
|
20.8
|
Exclusion of Creditor Party liability.
No Creditor Party,
and no receiver or manager appointed by the Security Trustee, shall have any liability to any 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 realized from any asset comprised in such a Security Interest or for any reduction (however caused) in the value
of such an asset,
|
provided that
nothing
in this Clause 20.8 shall exempt a Creditor Party or a receiver or manager from liability for losses shown to have been directly
and mainly caused by the gross negligence or the willful misconduct of such Creditor Party’s own officers and employees or
( as the case may be) such receiver’s or manager’s own partners or employees.
|
|
21.1
|
Upfront and facility fees.
The Borrowers shall pay to the
Agent:
|
|
|
(a)
|
On or before the first Drawdown Date, an upfront fee of:
|
|
|
(i)
|
$100,000 in respect of the Advance relating to BULK PANGAEA; and
|
|
|
(ii)
|
$33,000 in respect of the Advance relating to each of BULK PATRIOT, BULK JULIANA and BULK TRIDENT,
|
each such upfront
fee to be payable to the Agent for its own account; and
|
|
(b)
|
on the Drawdown Date of each Advance and on each anniversary of the Drawdown Date of each Advance,
a facility fee of $10,000 for each Advance payable to the Agent for its own account.
|
|
|
21.2
|
Costs of negotiation, preparation etc.
The Borrowers 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, including, without limitation, the reasonable fees and disbursements of a Creditor
Party’s legal counsel and any local counsel retained by them.
|
|
|
21.3
|
Costs of variations, amendments, enforcement etc.
The Borrowers
shall pay to the Agent, on the Agent’s 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 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 Collateral provided or offered under Clause 15 or any other matter relating
to such Collateral; or
|
|
|
(d)
|
any step taken by the Security Trustee or a Lender with a view to the protection, exercise or enforcement
of any right or Security Interest created by a Finance Document or for any similar purpose.
|
There shall be recoverable under
paragraph (d) the full amount of all legal expenses, whether or not such as would be allowed under rules of court or any taxation
or other procedure carried out under such rules.
|
|
21.4
|
Documentary taxes.
The Borrowers shall promptly pay any tax
payable on or by reference to any Finance Document, and shall, on the Agent’s demand, fully indemnify each Creditor Party
against any claims, expenses, liabilities and losses resulting from any failure or delay by the Borrowers to pay such a tax.
|
|
|
21.5
|
Certification of amounts.
A notice which is signed by an officer
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.
|
|
|
22.1
|
Indemnities regarding borrowing and repayment of Loan.
The
Borrowers shall fully indemnify the Agent and each Lender on the Agent’s 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 Borrowers or any other Security Party 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 Borrowers on the amount concerned under Clause 7); or
|
|
|
(d)
|
the occurrence of an Event of Default or a Potential Event of Default and/or the acceleration of
repayment of the Loan under Clause 20.
|
It is understood
that the indemnities provided in this Clause 22.1 shall not apply to any claim cost or expense which is a tax levied by a taxing
authority on the indemnified party (which taxes are subject to indemnity solely as provided in Clause 23 below) but shall apply
to any other costs associated with any tax which is not a Non-indemnified Tax.
|
|
22.2
|
Breakage costs.
Without limiting its generality, Clause 22.1
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 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.
|
|
|
22.3
|
Miscellaneous indemnities.
The Borrowers 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 and mainly caused by the dishonesty or willful misconduct or gross
negligence of the officers or employees of the Creditor Party concerned.
Without prejudice to its generality,
this Clause 22.3 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, or as a consequence of any facsimile or
Email communication purporting to originate from any Security Party to any Creditor Party being made or delivered fraudulently
or without proper authorization.
|
|
22.4
|
Currency indemnity.
If any sum due from the Borrowers or any
other 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 Borrowers or any other 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 Borrowers 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 22.4, 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 22.4 creates a separate
liability of the Borrowers 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.
|
|
22.5
|
Intentionally omitted.
|
|
|
22.6
|
Certification of amounts.
A notice which is signed by an officer
of a Creditor Party, which states that a specified amount, or aggregate amount, is due to that Creditor Party under this Clause
22 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.
|
|
|
22.7
|
Sums deemed due to a Lender.
For the purposes of this Clause
22, a sum payable by the Borrowers to the Agent or the Security Trustee for distribution to a Lender shall be treated as a sum
due to that Lender.
|
|
|
23
|
NO SET-OFF OR TAX DEDUCTION; tax indemnity; FATCA
|
|
|
23.1
|
No deductions.
All amounts due from a Security Party 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 such Security Party is required
by law to make.
|
|
|
23.2
|
Grossing-up for taxes.
If a Security Party is required by
law to make a tax deduction from any payment:
|
|
|
(a)
|
such Security Party shall notify the Agent as soon as it becomes aware of the requirement;
|
|
|
(b)
|
such Security Party shall pay the tax deducted to the appropriate taxation authority promptly,
and in any event before any fine or penalty arises; and
|
|
|
(c)
|
except if the deduction is for collection or payment of a Non-indemnified Tax of a Creditor Party,
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.
|
|
|
23.3
|
Evidence of payment of taxes.
Within one (1) month after making
any tax deduction, the relevant Security Party shall deliver to the Agent documentary evidence satisfactory to the Agent that the
tax had been paid to the appropriate taxation authority.
|
|
|
23.4
|
Tax credits
. A Creditor Party which receives for its own account
a repayment or credit in respect of tax on account of which the Borrowers have made an increased payment under Clause 23.2 shall
pay to the Borrowers a sum equal to the proportion of the repayment or credit which that Creditor Party allocates to the amount
due from the Borrowers in respect of which the Borrowers 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 23.4 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 23.4 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 Borrowers 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
23.4 shall be conclusive and binding on the Borrowers and the other Creditor Parties.
|
|
|
23.5
|
Indemnity for taxes.
Each of the Borrowers and the Guarantors
hereby indemnifies and agrees to hold each Creditor Party harmless from and against all taxes other than Non-indemnified Taxes
levied on such Creditor Party (including, without limitation, taxes imposed on any amounts payable under this Clause 23.5) paid
or payable by such person, whether or not such taxes or other taxes were correctly or legally asserted. Such indemnification shall
be paid within 10 days from the date on which such Creditor Party makes written demand therefor specifying in reasonable detail
the nature and amount of such taxes or other taxes.
|
|
|
23.6
|
Exclusion from indemnity and gross-up for taxes.
The Borrowers
and the Guarantors shall not be required to indemnify any Creditor Party for a tax pursuant to Clause 23.5, or to pay any additional
amounts to any Creditor Party pursuant to Clause 23.2, to the extent that the tax is collected by withholding on payments (a “
Withholding
”)
and is levied by a Pertinent Jurisdiction of the payer and:
|
|
|
(a)
|
the person claiming such indemnity or additional amounts was not an original party to this agreement
and under applicable law (after taking into account relevant treaties and assuming that such person has provided all forms it may
legally and truthfully provide) on the date such person became a party to this Agreement a Withholding would have been required
on such payment,
provided that
this exclusion shall not apply to the extent such Withholding does not exceed the Withholding
that would have been applicable if such payment had been made to the person from whom such person acquired its rights under the
Agreement and this exclusion shall not apply to the extent that such Withholding exceeds the amount of Withholding that would have
been required under the law in effect on the date such person became a party to this Agreement; or
|
|
|
(b)
|
the person claiming such indemnity or additional amounts is a Lender who has changed its Lending
Office and under applicable law (after taking into account relevant treaties and assuming that such Lender has provided all forms
it may legally and truthfully provide) on the date such Lender changed its Lending Office Withholding would have been required
on such payment,
provided that
this exclusion shall not apply to the extent such Withholding does not exceed the Withholding
that would have been applicable to such payment if such Lender had not changed its Lending Office and this exclusion shall not
apply to the extent that the Withholding exceeds the amount of Withholding that would have been required under the law in effect
immediately after such Lender changed its Lending Office; or
|
|
|
(c)
|
in the case of a Lender, to the extent that Withholding would not have been required on such payment
if such Lender has complied with its obligations to deliver certain tax form pursuant to Section 23.7 below.
|
|
|
23.7
|
Delivery of tax forms.
|
|
|
(a)
|
Upon the reasonable request of the Borrowers, each Lender or transferee that is organized under
the laws of a jurisdiction outside the United States (a “
Non-U.S. Lender
”) shall deliver to the Agent and the
Borrowers two properly completed and duly executed copies of (as applicable) IRS Form W-8BEN, W-8ECI or W-8IMY or, upon request
of the Borrowers or the Agent, any subsequent versions thereof or successors thereto, in each case claiming such reduced rate (which
may be zero) of U.S. Federal withholding tax under Sections 1441 and 1442 of the Code with respect to payments of interest hereunder
as such Non-U.S. Lender may properly claim. In addition, in the case of a Non-U.S. Lender claiming exemption from U.S. Federal
withholding tax under Section 871(h) or 881(c) of the Code, such Non-U.S. Lender shall, when so requested by the Borrowers, provide
to the Agent and the Borrowers in addition to the W-8BEN required above a certificate representing that such Non-U.S. Lender is
not a bank for purposes of Section 881(c) of the Code, is not a 10-percent shareholder (within the meaning of Section 871(h)(3)(B)
of the Code) of the Borrowers and is not a controlled foreign corporation related to the Borrowers (within the meaning of Section
864(d)(4) of the Code), and such Non-U.S. Lender agrees that it shall promptly notify the Agent in the event any representation
in such certificate is no longer accurate.
|
|
|
(b)
|
In the event that Withholding taxes may be imposed under the laws of any Pertinent Jurisdiction
(other than the United States or any political subdivision or taxing jurisdiction thereof or therein) in respect of payments on
the Loan or other amounts due under this Agreement and if certain documentation provided by a Lender could reduce or eliminate
such Withholding taxes under the laws of such Pertinent Jurisdiction or any treaty to which the Pertinent Jurisdiction is a party,
then, upon written request by the Borrowers, a Lender that is entitled to an exemption from, or reduction in the amount of, such
Withholding tax shall deliver to the Borrowers (with a copy to the Agent), at the time or times prescribed by applicable law or
promptly after receipt of Borrowers’ request, whichever is later, such properly completed and executed documentation requested
by the Borrowers, if any, as will permit such payments to be made without withholding or at a reduced rate of withholding; provided
that such Lender is legally entitled to complete, execute and deliver such documentation and in such Lender’s reasonable
judgment such completion, execution or delivery would not materially prejudice the legal or commercial position of such Lender.
Notwithstanding the foregoing, nothing in Clause 23.7 shall require a Lender to disclose any confidential information (including,
without limitation, its tax returns or its calculations).
|
|
|
(c)
|
Each Lender shall deliver such forms as provided in this Clause 23.7 within 20 days after receipt
of a written request therefor from the Agent or Borrowers.
|
|
|
(d)
|
Notwithstanding any other provision of this Clause 23.7, a Lender shall not be required to deliver
any form pursuant to this Clause 23.7 that such Lender is not legally entitled to deliver.
|
|
|
23.8
|
Intentionally omitted.
|
|
|
(a)
|
Subject to paragraph (c) below, each FATCA Relevant Party confirms to each other FATCA Relevant
Party whether it is or is not a FATCA Exempt Party on the date hereof and thereafter within ten (10) Business Days of a reasonable
request by another FATCA Relevant Party shall:
|
|
|
(i)
|
confirm to that other party whether it is a FATCA Exempt Party or is not a FATCA Exempt Party;
and
|
|
|
(ii)
|
supply to the requesting party (with a copy to all other FATCA Relevant Parties) such other form
or forms (including IRS Form W-8 or Form W-9 or any successor or substitute form, as applicable) and any other documentation and
other information relating to its status under FATCA (including its applicable “passthru percentage” or other information
required under FATCA or other official guidance including intergovernmental agreements) as the requesting party reasonably requests
for the purpose of determining whether any payment to such party may be subject to any FACTA Deduction.
|
|
|
(b)
|
If a FATCA Relevant Party confirms to any other FATCA Relevant Party that it is a FATCA Exempt
Party or provides an IRS Form W-8 or W-9 to showing 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 so notify all other FATCA Relevant Parties reasonably promptly.
|
|
|
(c)
|
Nothing in this Clause 23.9 shall obligate any FATCA Relevant Party to do anything which would
or, in its reasonable opinion, might constitute a breach of any law or regulation, any policy of that party, any fiduciary duty
or any duty of confidentiality, or to disclose any confidential information (including, without limitation, its tax returns and
calculations);
provided that
nothing in this paragraph shall excuse any FATCA Relevant Party from providing a true complete
and correct IRS Form W-8 or W-9 (or any successor or substitute form where applicable). Any information provided on such IRS Form
W-8 or W-9 (or any successor or substitute forms) shall not be treated as confidential information of such party for purposes of
this paragraph.
|
|
|
(d)
|
If a FATCA Relevant Party fails to confirm its status or to supply forms, documentation or other
information requested in accordance the provisions of this agreement or the provided information is insufficient under FATCA, then:
|
|
|
(a)
|
such party shall be treated as if it were a FATCA Non-Exempt Party; and
|
|
|
(b)
|
if that party failed to confirm its applicable passthru percentage then such party shall be treated
for the purposes of the Finance Documents (and payments made thereunder) as if its applicable passthru percentage is 100%,
|
until (in each
case) such time as the party in question provides sufficient confirmation, forms, documentation or other information to establish
the relevant facts.
|
|
(a)
|
A FATCA Relevant Party making a payment to any FACTA Non-Exempt Party shall make such FATCA Deduction
as it determines is required by law and shall render payment to the IRS within the time allowed and in the amount required by FATCA.
|
|
|
(b)
|
If a FATCA Deduction is required to be made by any FATCA Relevant Party to a FACTA Non-Exempt Party,
the amount of the payment due from such FATCA Relevant Party shall be reduced by the amount of the FATCA Deduction reasonably determined
to be required by such FATCA Relevant Party.
|
|
|
(c)
|
Each FATCA Relevant Party shall promptly upon becoming aware that a FATCA Deduction is required
with respect to any payment owed to it (or that there is any change in the rate or basis of a FATCA Deduction) notify each other
FATCA Relevant Party accordingly.
|
|
|
(d)
|
Within thirty days of making either a FATCA Deduction or any payment required in connection with
that FATCA Deduction, the party making such FATCA Deduction shall deliver to the Agent for delivery to the party on account of
whom the FATCA Deduction was made evidence reasonably satisfactory to that party that the FATCA Deduction has been made or (as
applicable) any appropriate payment paid to the IRS.
|
|
|
(e)
|
A FATCA Relevant Party who becomes aware that it must make a FATCA Deduction in respect of a payment
to another FATCA Relevant Party (or that there is any change in the rate or basis of such FATCA Deduction) shall notify that party
and the Agent.
|
|
|
(f)
|
The Agent shall promptly upon becoming aware that it must make a FATCA Deduction in respect of
a payment to a Lender which relates to a payment by the Borrowers (or that there is any change in the rate or the basis of such
a FATCA Deduction) notify the Borrowers and the relevant Lender.
|
|
|
(g)
|
If a FATCA Deduction is made as a result of any Creditor Party failing to be a FATCA Exempt Party,
such party shall indemnify each other Creditor Party against any loss, cost or expense to it resulting from such FATCA Deduction.
|
|
|
23.11
|
FATCA mitigation.
Notwithstanding any other provision of this
Agreement, if a FATCA Deduction is or will be required to be made by any party under Clause 23.10 in respect of a payment to any
FATCA Non-Exempt Lender, the FATCA Non-Exempt Lender may either:
|
|
|
(a)
|
transfer its entire interest in the Loan to a U.S. branch or Affiliate, or
|
|
|
(b)
|
nominate one or more transferee lenders who upon becoming a Lender would be a FATCA Exempt Party,
by notice in writing to the Agent and the Borrower specifying the terms of the proposed transfer, and cause such transferee lender(s)
to purchase all of the FATCA Non-Exempt Lender’s interest in the Loan.
|
|
|
24.1
|
Illegality.
If it becomes unlawful in any applicable jurisdiction
for a Lender (the “
Notifying Lender
”) to perform any of its obligations as contemplated by this Agreement or
to fund or maintain its participation in any Advance:
|
|
|
(a)
|
the Notifying Lender shall promptly notify the Agent upon becoming aware of that event;
|
|
|
(b)
|
upon the Agent notifying the Borrowers and the other Creditor Parties, the Commitment of the Notifying
Lender will be immediately cancelled; and
|
|
|
(c)
|
the Borrowers shall repay the Notifying Lender’s participation in each Advance on the last
day of the Interest Period for each Advance occurring after the Agent has notified the Borrowers or, if earlier, the date specified
by the Notifying Lender in the notice delivered to the Agent (being no earlier than the last day of any applicable grace period
permitted by law).
|
|
|
24.2
|
Mitigation
. If circumstances arise which would result in a
notification under Clause 24.1 then, without in any way limiting the obligations of the Borrowers under Clause 24.1, the Notifying
Lender shall use reasonable commercial efforts 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.
|
|
|
25.1
|
Increased costs.
This Clause 25 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 Non-Indemnified tax); 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
”.
Notwithstanding anything herein
to the contrary, the Dodd-Frank Wall Street Reform and Consumer Protection Act, and all requests, rules, guidelines and directives
promulgated thereunder, are deemed to have been introduced or adopted after the date hereof, regardless of the date enacted or
adopted.
|
|
25.2
|
Meaning of “increased costs”.
In this Clause 25,
“
increased costs
” 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 having taken an assignment of rights under this Agreement, 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 Lender’s Contribution or (as the case may require) the proportion
of that cost attributable to the 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 23 or an item arising directly out of the implementation or application of
or compliance with Basel III or any other law or regulation which implements Basel III (whether such implementation, application
or compliance is by a government, regulator, Creditor Party or any of its affiliates).
For the purposes of this Clause
25.2 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.
|
|
25.3
|
Notification to Borrowers of claim for increased costs.
The
Agent shall promptly notify the Borrowers and the other Security Parties of the notice which the Agent received from the Notifying
Lender under Clause 25.1.
|
|
|
25.4
|
Payment of increased costs.
The Borrowers shall pay to the
Agent, on the Agent’s demand, for the account of the Notifying Lender the amounts which the Agent from time to time notifies
the Borrowers that the Notifying Lender has specified to be necessary to compensate the Notifying Lender for the increased cost.
|
|
|
25.5
|
Notice of prepayment.
If the Borrowers are not willing to
continue to compensate the Notifying Lender for the increased cost under Clause 25.4, the Borrowers may give the Agent not less
than 14 days’ notice of its intention to prepay the Notifying Lender’s Contribution at the end of an Interest Period.
|
|
|
25.6
|
Prepayment; termination of Commitment.
A notice under Clause
25.5 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 Borrowers shall prepay (without
premium or penalty but subject to any applicable prepayment fee under Clause 8.9(c)) the Notifying Lender’s Contribution,
together with accrued interest thereon at the applicable rate plus the Applicable Margin.
|
|
|
25.7
|
Application of prepayment.
Clause 8 shall apply in relation
to the prepayment.
|
|
|
26.1
|
Application of credit balances.
Upon the occurrence and during
the continuance of an Event of Default, each Creditor Party may without prior notice:
|
|
|
(a)
|
apply any balance (whether or not then due) which at any time stands to the credit of any account
in the name of the Borrowers or any of the Guarantors at any office in any country of that Creditor Party in or towards satisfaction
of any sum then due from the Borrowers or any of the Guarantors to that Creditor Party under any of the Finance Documents; and
|
|
|
(i)
|
break, or alter the maturity of, all or any part of a deposit of any Borrower or Guarantor;
|
|
|
(ii)
|
convert or translate all or any part of a deposit or other credit balance into Dollars; and
|
|
|
(iii)
|
enter into any other transaction or make any entry with regard to the credit balance which the
Creditor Party concerned considers appropriate.
|
|
|
26.2
|
Existing rights unaffected.
No Creditor Party shall be obliged
to exercise any of its rights under Clause 26.1; 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).
|
|
|
26.3
|
Sums deemed due to a Lender.
For the purposes of this Clause
26, a sum payable by the Borrowers or any of the Guarantors 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 Lender’s 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.
|
|
|
26.4
|
No Security Interest.
This Clause 26 gives the Creditor Parties a contractual right of set-off only, and does not create any Security Interest over any credit balance of the Borrowers or any of the Guarantors.
|
|
|
27
|
TRANSFERS AND CHANGES IN LENDING OFFICES
|
|
|
27.1
|
Transfer by Borrowers or Guarantors.
Neither the Borrowers
nor any of the Guarantors may, 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.
|
|
|
27.2
|
Transfer by a Lender.
Subject to Clause 27.4, a Lender (the
“
Transferor Lender
”) may at any time, without needing the consent of the Borrowers or any other Security Party,
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 trust, fund or other entity
(a “
Transferee Lender
”) which (i) is regularly engaged in or established for the purpose of making, purchasing
or investing in loans, securities or other financial assets or the securitization or similar transaction of that Transferor Lender’s
Contribution or Commitment and (ii) is not an Affiliate of the Borrowers, 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.
Notwithstanding the foregoing,
any rights and obligations of the Transferor Lender in its capacity as Agent or Security Trustee shall be determined in accordance
with Clause 31.
|
|
27.3
|
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 Borrowers, the other Security Parties, the
Security Trustee, each of the other Lenders;
|
|
|
(b)
|
on behalf of the Transferee Lender, send to the Borrowers and each other 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 and the Transferee Lender once it is satisfied it has
complied with all necessary “know your customer” or other similar checks under all applicable laws and regulations
to the transfer to that Transferee Lender.
|
|
27.4
|
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 27.3 on or before that date.
|
|
|
27.5
|
No transfer without Transfer Certificate.
Except as provided
in Clause 27.17, 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 Borrowers, any other Security Party, the Agent or the Security Trustee unless it is effected, evidenced
or perfected by a Transfer Certificate.
|
|
|
27.6
|
Lender re-organization; waiver of Transfer Certificate.
If
a Lender enters into any merger, de-merger or other reorganization as a result of which all its rights or obligations vest in a
successor, the Agent may, if it sees fit, by notice to the successor and the Borrowers and the Security Trustee waive the need
for the execution and delivery of a Transfer Certificate and, upon service of the Agent’s notice, the successor shall become
a Lender with the same Commitment and Contribution as were held by the predecessor Lender.
|
|
|
27.7
|
Effect of Transfer Certificate.
The effect of a Transfer Certificate
is 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 Lender’s title and of any rights or equities which the Borrowers or any
other Security Party had against the Transferor Lender;
|
|
|
(b)
|
the Transferor Lender’s 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 Certificate’s
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 transferor’s title and any rights or equities of the Borrowers or any other 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
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
Borrowers or any other Security Party referred to above include, but are not limited to, any right of set off and any other kind
of cross-claim.
|
|
27.8
|
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 27.4) of the Transfer Certificate; and the Agent shall make the register available for inspection by any Lender, the Security
Trustee and the Borrowers during normal banking hours, subject to receiving at least three (3) Business Days’ prior notice.
|
|
|
27.9
|
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.
|
|
|
27.10
|
Authorization of Agent to sign Transfer Certificates.
The
Borrowers, the Guarantors, the Security Trustee, each Lender irrevocably authorizes the Agent to sign Transfer Certificates on
its behalf.
|
|
|
27.11
|
Registration fee.
In respect of any Transfer Certificate,
the Agent shall be entitled to recover a registration fee of $5,000 from the Transferor Lender or (at the Agent’s option)
the Transferee Lender.
|
|
|
27.12
|
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 Borrowers, any other 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.
|
|
|
27.13
|
Disclosure of information.
Each of the Borrowers and the Guarantors
irrevocably authorizes each Creditor Party to give, divulge and reveal from time to time information and details relating to their
accounts, the Ships, the Finance Documents, the Loan or the Commitments to:
|
|
|
(a)
|
any private, public or internationally recognized authorities that are entitled to and have requested
to obtain such information;
|
|
|
(b)
|
the Creditor Parties’ respective head offices, branches and affiliates and professional advisors;
|
|
|
(c)
|
any other parties to the Finance Documents;
|
|
|
(d)
|
a rating agency or their professional advisors;
|
|
|
(e)
|
any person with whom such Creditor Party proposes to enter (or considers entering) into contractual
relations in relation to the Loan and/or its Commitment or Contribution; and
|
|
|
(f)
|
any other person regarding the funding, re-financing, transfer, assignment, sale, sub-participation
or operational arrangement or other transaction in relation to the Loan, its Contribution or its Commitment, including without
limitation, for purposes in connection with a securitization or any enforcement, preservation, assignment, transfer, sale or sub-participation
of any of such Creditor Parties’ rights and obligations;
|
provided
that
such Creditor Party has taken commercially reasonable efforts to ensure that any person to whom such Creditor Party passes
any information in accordance with the terms of this Clause 27.13 undertakes to maintain the confidentiality of such information
so as to protect any material non-public information of the Security Parties.
|
|
27.14
|
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.
|
|
|
27.15
|
Notification.
On receiving such a notice, the Agent shall
notify the Borrowers 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.
|
|
|
27.16
|
Intentionally omitted.
|
|
|
27.17
|
Security over Lenders’ rights.
In addition to the other
rights provided to Lenders under this Clause 27, each Lender may without consulting with or obtaining consent from the Borrowers
or any other Security Party, at any time charge, assign or otherwise create a Security Interest 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 Interest 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 Interest 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 Interest 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 Interest for the Lender as a party to any of the Finance Documents; or
|
|
|
(ii)
|
require any payments to be made by the Borrowers or any other Security Party 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
|
VARIATIONS AND WAIVERS
|
|
|
28.1
|
Variations, waivers etc. by Majority Lenders.
Subject to Clause
28.2, a document shall be effective to vary, waive, suspend or limit any provision of a Finance Document, or any Creditor Party’s
rights or remedies under such a provision or the general law, only if the document is signed, or specifically agreed to by fax
or Email, by the Borrowers, 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.
|
|
|
28.2
|
Variations, waivers etc. requiring agreement of all Lenders.
As regards the following, Clause 28.1 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 reduction in the Applicable Margin;
|
|
|
(b)
|
a postponement to the date for, or a reduction in the amount of, any payment of principal, interest,
fees or other sum payable under this Agreement or the Note;
|
|
|
(c)
|
an increase in any Lender’s Commitment;
|
|
|
(d)
|
a change to the definition of “
Majority Lenders
”;
|
|
|
(e)
|
a change to Clause 11.2 or 28.3;
|
|
|
(f)
|
any release of, or material variation to, a Security Interest, guarantee, indemnity or subordination
arrangement set out in a Finance Document; and
|
|
|
(g)
|
any other change or matter as regards which this Agreement or another Finance Document expressly
provides that each Lender’s consent is required.
|
|
|
28.3
|
Variations, waivers etc. relating to the Servicing Banks.
An amendment or waiver that relates to the rights or obligations of the Agent or the Security Trustee under Clause 31 may not be
effected without the consent of the Agent or the Security Trustee.
|
|
|
28.4
|
Exclusion of other or implied variations.
Except for a document
which satisfies the requirements of Clauses 28.1, 28.2 or 28.3, 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 Borrowers or another 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.
|
|
29.1
|
General.
Unless otherwise specifically provided, any notice
under or in connection with any Finance Document shall be given by letter, electronic mail (“
Email
”) or fax
and references in the Finance Documents to written notices, notices in writing and notices signed by particular persons shall be
construed accordingly.
|
|
|
29.2
|
Addresses for communications.
A notice by letter, Email or
fax shall be sent:
|
|
(a)
|
to the Borrowers:
|
Par la Ville Place
|
|
|
|
14 Par la Ville Road
|
|
|
|
Hamilton HM08
|
|
|
|
Bermuda
|
|
|
|
|
|
|
|
with a copy to:
|
|
|
|
|
|
|
|
Phoenix Bulk Carriers (US) LLC as agents
|
|
|
|
109 Long Wharf, Second Floor
|
|
|
|
Newport, Rhode Island 02840
|
|
|
|
|
|
|
|
Attention: Mr. Tony Laura
|
|
|
|
Facsimile: +401-846-1520
|
|
|
|
Email: tlaurahome@aol.com
|
|
|
|
|
|
(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 the Agent:
|
DVB Bank SE
|
|
|
|
Platz der Republik 6
|
|
|
|
60325 Frankfurt am Main
|
|
|
|
Germany
|
|
|
|
|
|
|
|
Attention: Loan Administration Manager
|
|
|
|
Facsimile: +49 69 97 50 4444
|
|
|
|
|
|
|
|
with a copy to:
|
|
|
|
|
|
|
|
DVB Bank SE
|
|
|
|
c/o DVB Transport (US) LLC
|
|
|
|
609 Fifth Avenue, 5th Floor
|
|
|
|
New York, New York 10017
|
|
|
|
|
|
|
|
Attention: Mr. Neil McLaughlin
|
|
|
|
Facsimile: +212-858-2676
|
|
|
|
Email: neil.mclaughlin@dvbbank.com
|
|
(d)
|
to the Security Trustee:
|
DVB Bank SE
|
|
|
|
Platz der Republik 6
|
|
|
|
60325 Frankfurt am Main
|
|
|
|
Germany
|
|
|
|
|
|
|
|
Attention: Loan Administration Manager
|
|
|
|
Facsimile: +49 69 97 50 4444
|
|
|
|
|
|
|
|
with a copy to:
|
|
|
|
|
|
|
|
DVB Bank SE
|
|
|
|
c/o DVB Transport (US) LLC
|
|
|
|
609 Fifth Avenue, 5th Floor
|
|
|
|
New York, New York 10017
|
|
|
|
|
|
|
|
Attention: Mr. Neil McLaughlin
|
|
|
|
Facsimile: +212-858-2676
|
|
|
|
Email: neil.mclaughlin@dvbbank.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 Borrowers, the Lenders
and the Security Parties.
|
|
29.3
|
Effective date of notices.
Subject to Clauses 29.4 and 29.5:
|
|
|
(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 Email shall be deemed to be served, and shall take effect, at the time
when it is actually received in readable form; and
|
|
|
(c)
|
a notice which is sent by fax shall be deemed to be served, and shall take effect, two (2) hours
after its transmission is completed.
|
|
|
29.4
|
Service outside business hours.
However, if under Clause 29.3
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 5:00 p.m. local time,
|
the notice shall (subject to
Clause 29.5) be deemed to be served, and shall take effect, at 9:00 a.m. on the next day which is such a business day.
|
|
29.5
|
Illegible notices.
Clauses 29.3 and 29.4 do not apply if the
recipient of a notice notifies the sender within one (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.
|
|
|
29.6
|
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.
|
|
|
29.7
|
Electronic communication between the Agent and a Lender.
Any
communication to be made between the Agent and a Lender under or in connection with the Finance Documents may be made by Email
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 Email 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 Email 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.
|
|
29.8
|
English language.
Any notice under or in connection with a
Finance Document shall be in English.
|
|
|
|
|
|
|
29.9
|
Meaning of “notice”
.
In this Clause 29, “
notice
”
includes any demand, consent, authorization, approval, instruction, waiver or other communication.
|
|
|
30.1
|
Rights cumulative, non-exclusive.
The rights and remedies
which the Finance Documents give to each Creditor Party are:
|
|
|
(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.
|
|
|
30.2
|
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.
|
|
|
30.3
|
Counterparts.
A Finance Document may be executed in any number
of counterparts.
|
|
|
30.4
|
Binding Effect.
This Agreement shall become effective on the
Effective Date and thereafter shall be binding upon and inure to the benefit of each of the parties hereto and their respective
successors and assigns.
|
|
|
31.1
|
Appointment and Granting.
|
|
|
(a)
|
The Agent
. Each of the Lenders appoints and authorizes (with a right of revocation) the
Agent to act as its agent hereunder and under any of the other Finance Documents with such powers as are specifically delegated
to the Agent by the terms of this Agreement and of any of the other Finance Documents, together with such other powers as are reasonably
incidental thereto.
|
|
|
(b)
|
The Security Trustee.
|
|
|
(i)
|
Authorization of Security Trustee
. Each of the Lenders and the Agent appoints and authorizes
(with a right of revocation) the Security Trustee to act as security trustee hereunder and under the other Finance Documents (other
than the Note) with such powers as are specifically delegated to the Security Trustee by the terms of this Agreement and such other
Finance Documents, together with such other powers as are reasonably incidental thereto.
|
|
|
(ii)
|
Granting Clause
. To secure the payment of all sums of money from time to time owing to the
Lenders under the Finance Documents, and the performance of the covenants of the Borrowers and any other Security Party herein
and therein contained, and in consideration of the premises and of the covenants herein contained and of the extensions of credit
by the Lenders, the Security Trustee does hereby declare that it will hold as such trustee in trust for the benefit of the Lenders
and the Agent, from and after the execution and delivery thereof, all of its right, title and interest as mortgagee in, to and
under the Mortgages and its right, title and interest as assignee and secured party under the other Finance Documents (the right,
title and interest of the Security Trustee in and to the property, rights and privileges described above, from and after the execution
and delivery thereof, and all property hereafter specifically subjected to the Security Interest of the indenture created hereby
and by the Finance Documents by any amendment hereto or thereto are herein collectively called the “
Estate
”);
TO HAVE AND TO HOLD the Estate unto the Security Trustee and its successors and assigns forever, BUT IN TRUST, NEVERTHELESS, for
the equal and proportionate benefit and security of the Lenders and the Agent and their respective successors and assigns without
any priority of any one over any other, UPON THE CONDITION that, unless and until an Event of Default under this Agreement shall
have occurred and be continuing, the relevant Security Party shall be permitted, to the exclusion of the Security Trustee, to possess
and use the Ships. IT IS HEREBY COVENANTED, DECLARED AND AGREED that all property subject or to become subject hereto is to be
held, subject to the further covenants, conditions, uses and trusts hereinafter set forth, and each Security Party, for itself
and its respective successors and assigns, hereby covenants and agrees to and with the Security Trustee and its successors in said
trust, for the equal and proportionate benefit and security of the Lenders and the Agent as hereinafter set forth.
|
|
|
(iii)
|
Acceptance of Trusts
. The Security Trustee hereby accepts the trusts imposed upon it as
Security Trustee by this Agreement, and the Security Trustee covenants and agrees to perform the same as herein expressed and agrees
to receive and disburse all monies constituting part of the Estate in accordance with the terms hereof.
|
|
|
31.2
|
Scope of Duties
. Neither the Agent nor the Security Trustee
(which terms as used in this sentence and in Clause 31.5 hereof shall include reference to their respective affiliates and their
own respective and their respective affiliates’ officers, directors, employees, agents and attorneys-in-fact):
|
|
|
(a)
|
shall have any duties or responsibilities except those expressly set forth in this Agreement and
in any of the Finance Documents, and shall not by reason of this Agreement or any of the Finance Documents be (except, with respect
to the Security Trustee, as specifically stated to the contrary in this Agreement) a trustee for a Lender;
|
|
|
(b)
|
shall be responsible to the Lenders for any recitals, statements, representations or warranties
contained in this Agreement or in any of the Finance Documents, or in any certificate or other document referred to or provided
for in, or received by any of them under, this Agreement or any of the other Finance Documents, or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any of the other Finance Documents or any other document referred
to or provided for herein or therein or for any failure by a Security Party or any other person to perform any of its obligations
hereunder or thereunder or for the location, condition or value of any property covered by any Security Interest under any of the
Finance Documents or for the creation, perfection or priority of any such Security Interest;
|
|
|
(c)
|
shall be required to initiate or conduct any litigation or collection proceedings hereunder or
under any of the Finance Documents unless expressly instructed to do so in writing by the Majority Lenders; or
|
|
|
(d)
|
shall be responsible for any action taken or omitted to be taken by it hereunder or under any of
the Finance Documents or under any other document or instrument referred to or provided for herein or therein or in connection
herewith or therewith, except for its own gross negligence or willful misconduct. Each of the Security Trustee and the Agent may
employ agents and attorneys-in-fact and neither the Security Trustee nor the Agent shall be responsible for the negligence or misconduct
of any such agents or attorneys-in-fact selected by it in good faith. Each of the Security Trustee and the Agent may deem and treat
the payee of a Note as the holder thereof for all purposes hereof unless and until a written notice of the assignment or transfer
thereof shall have been filed with the Agent.
|
|
|
31.3
|
Reliance
. Each of the Security Trustee and the Agent shall
be entitled to rely upon any certification, notice or other communication (including any thereof by telephone, telex, telefacsimile,
telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper person
or persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by the Security
Trustee or the Agent, as the case may be. As to any matters not expressly provided for by this Agreement or any of the other Finance
Documents, each of the Security Trustee and the Agent shall in all cases be fully protected in acting, or in refraining from acting,
hereunder or thereunder in accordance with instructions signed by the Majority Lenders, and such instructions and any action taken
or failure to act pursuant thereto shall be binding on all of the Lenders.
|
|
|
31.4
|
Knowledge.
Neither the Security Trustee nor the Agent shall
be deemed to have knowledge or notice of the occurrence of a Potential Event of Default or Event of Default (other than, in the
case of the Agent, the non-payment of principal of or interest on the Loan or actual knowledge thereof) unless each of the Security
Trustee and the Agent has received notice from a Lender or the Borrowers specifying such Potential Event of Default or Event of
Default and stating that such notice is a “Notice of Default”. If the Agent receives such a notice of the occurrence
of such Potential Event of Default or Event of Default, the Agent shall give prompt notice thereof to the Security Trustee and
the Lenders (and shall give each Lender prompt notice of each such non-payment). Subject to Clause 31.8 hereof, the Security Trustee
and the Agent shall take such action with respect to such Potential Event of Default or Event of Default or other event as shall
be directed by the Majority Lenders, except that, unless and until the Security Trustee and the Agent shall have received such
directions, each of the Security Trustee and the Agent may (but shall not be obligated to) take such action, or refrain from taking
such action, with respect to such Potential Event of Default or Event of Default or other event as it shall deem advisable in the
best interest of the Lenders.
|
|
|
31.5
|
Security Trustee and Agent as Lenders
. Each of the Security
Trustee and the Agent (and any successor acting as Security Trustee or Agent, as the case may be) in its individual capacity as
a Lender hereunder shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were
not acting as the Security Trustee or the Agent, as the case may be, and the term “Lender” or “Lenders”
shall, unless the context otherwise indicates, include each of the Security Trustee and the Agent in their respective individual
capacities. Each of the Security Trustee and the Agent (and any successor acting as Security Trustee and Agent, as the case may
be) and their respective affiliates may (without having to account therefor to a Lender) accept deposits from, lend money to and
generally engage in any kind of banking, trust or other business with the Guarantors and any of their subsidiaries or affiliates
as if it were not acting as the Security Trustee or the Agent, as the case may be, and each of the Security Trustee and the Agent
and their respective affiliates may accept fees and other consideration from the Borrowers for services in connection with this
Agreement or otherwise without having to account for the same to the Lenders.
|
|
|
31.6
|
Indemnification of Security Trustee and Agent.
The Lenders
severally agree, ratably in accordance with the aggregate principal amount of each Lender’s Contribution in the Loan, to
indemnify each of the Agent and the Security Trustee (to the extent not reimbursed under other provisions of this Agreement, but
without limiting the obligations of the Borrowers under said other provisions) for any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be
imposed on, incurred by or asserted against the Security Trustee or the Agent in any way relating to or arising out of this Agreement
or any of the other Finance Documents or any other documents contemplated by or referred to herein or therein or the transactions
contemplated hereby (including, without limitation, the costs and expenses which the Borrowers are to pay hereunder, but excluding,
unless an Event of Default has occurred and is continuing, normal administrative costs and expenses incident to the performance
of their respective agency duties hereunder) or the enforcement of any of the terms hereof or thereof or of any such other documents,
except that no Lender shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct
of the party to be indemnified.
|
|
|
31.7
|
Reliance on Security Trustee or Agent.
Each Lender agrees
that it has, independently and without reliance on the Security Trustee, the Agent or any other Lender, and based on such documents
and information as it has deemed appropriate, made its own credit analysis of the Borrowers and decision to enter into this Agreement
and that it will, independently and without reliance upon the Security Trustee, the Agent or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or
not taking action under this Agreement or any of the Finance Documents. None of the Security Trustee or the Agent shall be required
to keep itself informed as to the performance or observance by the Borrowers or the Guarantors of this Agreement or any of the
Finance Documents or any other document referred to or provided for herein or therein or to inspect the properties or books of
any Borrower or any Guarantor. Except for notices, reports and other documents and information expressly required to be furnished
to the Lenders by the Security Trustee or the Agent hereunder, neither the Security Trustee nor the Agent shall have any duty or
responsibility to provide a Lender with any credit or other information concerning the affairs, financial condition or business
of any Borrower, any Guarantor or any subsidiaries or affiliates thereof which may come into the possession of the Security Trustee,
the Agent or any of their respective affiliates.
|
|
|
31.8
|
Actions by Security Trustee and Agent.
Except for action expressly
required of the Security Trustee or the Agent hereunder and under the other Finance Documents, each of the Security Trustee and
the Agent shall in all cases be fully justified in failing or refusing to act hereunder and thereunder unless it shall receive
further assurances to its satisfaction from the Lenders of their indemnification obligations under Clause 31.6 against any and
all liability and expense which may be incurred by it by reason of taking or continuing to take any such action.
|
|
|
31.9
|
Resignation and Removal.
Subject to the appointment and acceptance
of a successor Security Trustee or Agent (as the case may be) as provided below, each of the Security Trustee and the Agent may
resign at any time by giving notice thereof to the Lenders and the Borrowers, and the Security Trustee or the Agent may be removed
at any time with or without cause by the Majority Lenders by giving notice thereof to the Agent, the Security Trustee, the Lenders
and the Borrowers. Upon any such resignation or removal, the Majority Lenders shall have the right to appoint a successor Security
Trustee or Agent, as the case may be. If no successor Security Trustee or Agent, as the case may be, shall have been so appointed
by the Lenders or, if appointed, shall not have accepted such appointment within 30 days after the retiring Security Trustee’s
or Agent’s, as the case may be, giving of notice of resignation or the Majority Lenders’ removal of the retiring Security
Trustee or Agent, as the case may be, then the retiring Security Trustee or Agent, as the case may be, may, on behalf of the Lenders,
appoint a successor Security Trustee or Agent. Upon the acceptance of any appointment as Security Trustee or Agent hereunder by
a successor Security Trustee or Agent, such successor Security Trustee or Agent, as the case may be, shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the retiring Security Trustee or Agent, as the case may
be, and the retiring Security Trustee or Agent shall be discharged from its duties and obligations hereunder. After any retiring
Security Trustee or Agent’s resignation or removal hereunder as Security Trustee or Agent, as the case may be, the provisions
of this Clause 31 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it
was acting as the Security Trustee or the Agent, as the case may be.
|
|
|
31.10
|
Release of Collateral.
Without the prior written consent of
the Majority Lenders, neither the Security Trustee nor the Agent will consent to any modification, supplement or waiver under any
of the Finance Documents nor without the prior written consent of all of the Lenders release any Collateral or otherwise terminate
any Security Interest under the Finance Documents, except that no such consent is required, and each of the Security Trustee and
the Agent is authorized, to release any Security Interest covering property if the Secured Liabilities have been paid and performed
in full or which is the subject of a disposition of property permitted hereunder or to which the Lenders have consented.
|
|
|
32.1
|
Governing law.
THIS AGREEMENT AND THE OTHER FINANCE DOCUMENTS
(EXCEPT AS OTHERWISE PROVIDED IN A FINANCE DOCUMENT) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK WITHOUT REGARD TO ITS CONFLICT OF LAW PRINCIPLES.
|
|
|
32.2
|
Consent to Jurisdiction.
|
|
|
(a)
|
Each of the Borrowers and the Guarantors hereby irrevocably and unconditionally submits, for itself
and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America
sitting in New York County, and any appellate court thereof, in any action or proceeding arising out of or relating to this Agreement
or any of the other Finance Documents to which such Security Party is a party or for recognition or enforcement of any judgment,
and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding
may be heard and determined in such New York State Court or, to the extent permitted by law, in such Federal court. Each of the
parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions
by suit on the judgment or in any other manner provided by law.
|
|
|
(b)
|
Nothing in this Clause 32.2 shall affect the right of a Creditor Party to bring any action or proceeding
against a Security Party or its property in the courts of any other jurisdictions where such action or proceeding may be heard.
|
|
|
(c)
|
Each of the Borrowers and the Guarantors hereby irrevocably and unconditionally waives to the fullest
extent it may legally and effectively do so:
|
|
|
(i)
|
any objection which it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or any other Finance Document to which it is a party in any New York State
or Federal court and the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court; and
|
|
|
(ii)
|
any immunity from suit, the jurisdiction of any court in which judicial proceedings may at any
time be commenced with respect to this Agreement or any other Finance Document or from any legal process with respect to itself
or its property (including without limitation attachment prior to judgment, attachment in aid of execution of judgment, set-off,
execution of a judgment or any other legal process), and to the extent that in any such jurisdiction there may be attributed to
such person such an immunity (whether or not claimed), such person hereby irrevocably agrees not to claim such immunity.
|
|
|
(d)
|
Each of the Borrowers and the Guarantors hereby agrees to appoint Leicht & Rein Tax Associates,
Ltd., with offices currently located at 570 Seventh Avenue, New York, NY 10018, as its designated agent for service of process
for any action or proceeding arising out of or relating to this Agreement or any other Finance Document. Each of the Borrowers
and the Guarantors also irrevocably consents to the service of any and all process in any such action or proceeding by the mailing
of copies of such process to its address specified in Clause 29.2. Each of the Borrowers and the Guarantors also agrees that service
of process may be made on it by any other method of service provided for under the applicable laws in effect in the State of New
York.
|
|
|
32.3
|
Creditor Party rights unaffected.
Nothing in this Clause 32
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.
|
|
|
32.4
|
Meaning of “proceedings”.
In this Clause 32, “
proceedings
”
means proceedings of any kind, including an application for a provisional or protective measure.
|
|
|
33.1
|
WAIVER.
EACH OF THE BORROWER, THE GUARANTORS AND THE CREDITOR
PARTIES MUTUALLY AND IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
|
|
|
34.1
|
PATRIOT Act Notice.
Each of the Agent and the Lenders hereby
notifies the Borrowers and the Guarantors that pursuant to the requirements of the
Patriot
Act and the policies and practices of the Agent and each Lender, the Agent and each of the Lenders is required to obtain, verify
and record certain information and documentation that identifies each Security Party, which information includes the name and address
of each Security Party and such other information that will allow the Agent and each of the Lenders to identify each Security Party
in accordance with the PATRIOT Act.
|
[SIGNATURE
PAGE FOLLOWS ON NEXT PAGE]
EXECUTION
PAGE
WHEREFORE, the parties
hereto have caused this Loan Agreement to be executed as of the date first above written.
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BULK PANGAEA LIMITED, as Borrower
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DVB BANK SE, as Lender, Agent and Security Trustee
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By:
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By:
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Name: Arthur E.M. Jones
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Name: Jane Freeberg Sarma
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Title: Director
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Title: Attorney-in-Fact
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BULK PATRIOT LTD., as Borrower
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By:
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Name: Arthur E.M. Jones
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Title: Director
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BULK JULIANA LTD., as Borrower
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By:
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Name: Arthur E.M. Jones
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Title: Director
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BULK TRIDENT LTD., as Borrower
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By:
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Name: Arthur E.M. Jones
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Title: Director
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BULK PARTNERS (BERMUDA) LTD.,
as Guarantor
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By:
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Name: Arthur E.M. Jones
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Title: Director
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BULK PARTNERS HOLDING COMPANY BERMUDA LTD.,
as Guarantor
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By:
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Name: Arthur E.M. Jones
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Title: Director
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BULK FLEET BERMUDA HOLDING COMPANY LTD.,
as Guarantor
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By:
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Name: Arthur E.M. Jones
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Title: Director
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SCHEDULE
1
LENDERS AND COMMITMENTS
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Lender
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Lending Office
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Commitment
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DVB BANK SE
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Platz der Republic 6
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$30,301,562.51
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60325 Frankfurt am Main
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Address for Notices
:
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Germany
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Platz der Republic 6
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60325 Frankfurt am Main
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Germany
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Attention: Loan Administration Manager
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Facsimile: +49 69 97 50 4444
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with a copy to:
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DVB Bank SE
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c/o DVB Transport (US) LLC
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609 Fifth Avenue, 5th Floor
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New York, New York 10017
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Attention: Neil McLaughlin
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Facsimile: +212-858-2676
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Email: neil.mclaughlin@dvbbank.com
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SCHEDULE
2
INTENTIONALLY OMITTED
SCHEDULE
3
DRAWDOWN NOTICE
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To:
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DVB Bank SE, as Agent
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Platz der Republic 6
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60325 Frankfurt am Main
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Germany
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Attention: Loans Administration Manager
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Cc:
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DVB Bank SE
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c/o DVB Transport (US) LLC
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609 Fifth Avenue, 5th Floor
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New York, New York 10017
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Attention: Neil McLaughlin
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Facsimile: +212-858-2676
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Email: neil.mclaughlin@dvbbank.com
|
[Date]
DRAWDOWN NOTICE
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1.
|
We refer to the loan agreement dated as
of [
l
] (the “
Loan
Agreement
”) among ourselves, as Borrowers, the Guarantors referred to therein, the Lenders referred to therein and
yourselves as Agent and as Security Trustee in connection with a facility of up to US$[
l
].
Terms defined in the Loan Agreement have their defined meanings when used in this Drawdown Notice.
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2.
|
We request to borrow as follows:
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(a)
|
Amount: US$[
l
]
to [refinance / finance] [name of Ship];
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(b)
|
Drawdown Date: [
l
];
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(c)
|
Duration of the first Interest Period shall be 3 months; and
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(d)
|
Payment
instructions:
|
[
l
]
|
|
3.
|
We represent and warrant that:
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(a)
|
no Event of Default or Potential Event of Default has occurred or would result from the borrowing
of the Advance;
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(b)
|
the representations and warranties in Clause 10 and those of the Borrowers or any other Security
Party which are set out in the other Finance Documents are true and not misleading as of the date of this Drawdown Notice and will
be true and not misleading as of the Drawdown Date, in each case with reference to the circumstances then existing;
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(c)
|
there has been no material change in the consolidated financial condition, operations or business
prospects of the Borrowers or the Guarantors since the date on which the Borrowers and/or the Guarantors provided information concerning
those topics to the Agent and/or any Lender which might prejudice either the successful and timely syndication or performance of
the loan facility contemplated by this Agreement;
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(d)
|
none of the Guarantors, the Borrowers or any of their respective subsidiaries or Affiliates has
launched any other facilities or debt transactions into the international capital markets either publicly or privately which might
prejudice either the successful and timely syndication or performance of the loan facility contemplated by this Agreement; and
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(e)
|
if the Applicable Collateral Maintenance Ratio were applied immediately following the making of
the Advance, the Borrowers would not be required to provide additional Collateral or prepay part of the Loan under Clause 15.
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4.
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This notice cannot be revoked without the prior consent of the Majority Lenders.
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5.
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We authorize you to deduct the outstanding fees and expenses referred to in Clause 21 from the
amount of the Loan.
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Name
Title
for and on behalf of
[NAMES OF BORROWERS]
SCHEDULE
4
CONDITION PRECEDENT DOCUMENTS
PART A
The following
are the documents referred to in Clause 9.1(a)(i):
|
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1.
|
A duly executed original of this Agreement and the DVB Loan Administration form attached as Schedule
8.
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2.
|
In respect of the Ship to be financed with the Advance to which such Drawdown Notice relates, a
copy of the Time Charter (and COA, if any) and all addenda and supplements thereto, in form and substance acceptable to the Agent
and certified as of a date reasonably near the date of the Drawdown Notice by a director, an officer, an authorized person or an
attorney-in-fact of the Borrower that owns or will own that Ship as being a true and correct copy thereof.
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3.
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Copies of certificates dated as of a date reasonably near the date of the Drawdown Notice, certifying
that each of the Security Parties is duly incorporated or formed and in good standing under the laws of its jurisdiction of incorporation
or formation.
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4.
|
Copies of the constitutional documents and each amendment thereto of each of the Security Parties,
certified as of a date reasonably near the date of the Drawdown Notice by a director, an officer, an authorized person or an attorney-in-fact
of such party as being a true and correct copy thereof.
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5.
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Copies of the resolutions of the directors (or equivalent governing body) and, where applicable,
the shareholders (or equivalent equity holders), of each Security Party authorizing the execution of each of Finance Document,
MOA, Time Charter and COA to which that Security Party is to be a party and, in the case of the Borrowers, authorizing a director,
an officer, an authorized person or an attorney-in-fact of the Borrowers to give the Drawdown Notice and other notices required
under the Finance Documents, in each case certified as of a date reasonably near the date of the Drawdown Notice by a director,
an officer, an authorized person or an attorney-in-fact of such party as being a true and correct copy thereof.
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6.
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An incumbency certificate in respect of the officers and directors (or equivalent) of each of the
Security Parties and signature samples of any signatories of such Security Parties to any Finance Document.
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7.
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The original or a certified copy of any power of attorney under which any Finance Document is executed
on behalf of a Security Party.
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8.
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Copies of all consents which a Security Party requires to enter into, or make any payment under,
any Finance Document, MOA, Time Charter or COA, each certified as of a date reasonably near the date of the Drawdown Notice by
a director, an officer, an authorized person or an attorney-in-fact of such party as being a true and correct copy thereof, or
certification by such director, officer, authorized person or attorney-in-fact that no such consents are required.
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9.
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Copies of any mandates or other documents required in connection with the opening or operation
of each of the Earnings Accounts and the Freights Account, each certified as of a date reasonably near the date of the Drawdown
Notice by a director, an officer, an authorized person or an attorney-in-fact of the Borrowers as being a true and correct copy
thereof.
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10.
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Documentary evidence that the capital structure of each of the Borrowers and the Guarantors is
satisfactory to and in the sole discretion of the Agent.
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11.
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Documentary evidence that the agent for service of process named in Clause 32 of this Agreement
has accepted its appointment.
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12.
|
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) for the making of an Advance in respect of an Initial Ship:
|
|
1.
|
A duly executed original of each Finance Document to be executed in respect of such Initial Ship
(and of each document required to be delivered by each Finance Document).
|
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|
2.
|
If the Drawdown Date is more than five (5) Business Days after the date of the Drawdown Notice,
a bringdown certificate of each of the Security Parties certifying as of the Drawdown Date as to the absence of any amendments
to the documents of such Security Party referred to in paragraphs 4, 5 and 6 of Part A since the date of the Drawdown Notice.
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3.
|
Certification by the Borrowers as of the date of the Drawdown Date for such Advance as to the matters
described in Clauses 9.1(e) (other than 9.1(e)(iv) and (v)) and 9.1(f).
|
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4.
|
Documentary evidence that:
|
|
|
(a)
|
in the case of each of BULK PANGAEA, BULK PATRIOT, BULK JULIANA, such Initial Ship is definitively
and permanently registered in the name of, as the case may be, Bulk Pangaea, Bulk Patriot or Bulk Juliana under the law and flag
of Panama;
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|
(b)
|
in the case of BULK TRIDENT, such Initial Ship is registered in the name of Bulk Trident under
the law and flag of the Republic of the Marshall Islands;
|
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(c)
|
in the case of each of BULK PANGAEA, BULK PATRIOT, BULK JULIANA, the Mortgage has been preliminarily
registered against the relevant Initial Ship to which such Advance relates as a valid first preferred ship mortgage in accordance
with the laws of the Republic of Panama;
|
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|
(d)
|
in the case of BULK TRIDENT, the Mortgage has been registered against such Initial Ship as a valid
first preferred ship mortgage in accordance with the laws of the Republic of the Marshall Islands;
|
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|
(e)
|
the Security Interests intended to be created by each of the Finance Documents required in connection
with such Initial Ship have been duly perfected under applicable law;
|
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|
(f)
|
the relevant Initial Ship is in the absolute and unencumbered ownership of the Borrower that owns
such Initial Ship save as contemplated by the Finance Documents;
|
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|
(g)
|
the relevant Initial Ship is insured in accordance with the provisions of Clause 13 of this Agreement
and all requirements therein in respect of insurances have been complied with;
|
|
|
(h)
|
the relevant Initial Ship maintains the highest class for vessels of its type with the Classification
Society free of any recommendations and qualifications (which status shall be established by a Confirmation of Class Certificate
issued by the Classification Society and dated a date reasonably near the Drawdown Date (
NB: a “Class Statement”
or similar instrument shall not be acceptable for purposes of this clause
)); and
|
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|
(i)
|
the Borrower that owns such Initial Ship has sent an instruction letter in the form of Schedule
9 hereto to the Classification Society as required under Clause 14.4 and that the Classification Society has executed the undertaking
in the form of Schedule 10 hereto as required by Clause 14.4.
|
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|
5.
|
Valuations of the Fair Market Value of the relevant Initial Ship, paid for by the Borrowers but
addressed to the Agent and the Lenders, stated to be for the purposes of this Agreement and dated not more than 14 days before
the Drawdown Date, which evidence an average Fair Market Value for such Initial Ship of not less than 142.85% of the Advance in
respect of such Initial Ship.
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|
6.
|
The following documents establishing that the relevant Initial Ship will, as from the Drawdown
Date, be managed by an Approved Manager on terms acceptable to the Agent:
|
|
|
(a)
|
a copy of each Approved Management Agreement, certified as of the Drawdown Date by a director,
an officer, an authorized person or an attorney-in-fact of the relevant Borrower as being a true and correct copy thereof;
|
|
|
(b)
|
an Approved Manager’s Undertaking executed by each Approved Manager in favor of the Agent;
and
|
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|
(c)
|
copies of each Approved Manager’s Document of Compliance and of the relevant Initial Ship’s
ISSC and Safety Management Certificate (together with any other details of the applicable safety management system which the Agent
requires), certified as of the Drawdown Date by a director, an officer, an authorized person or an attorney-in-fact of the relevant
Approved Manager as being a true and correct copy thereof.
|
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|
7.
|
A favorable opinion from an independent insurance consultant acceptable to the Agent on such matters
relating to the insurances for the relevant Initial Ship as the Agent may require.
|
|
|
8.
|
Delivery of technical information in respect of the relevant Initial Ship, in a form acceptable
to the Agent, including but not limited to (but only if available to the relevant Borrower): (i) full history of class, (ii) details
of statutory certificates, (iii) summaries of inspections (flag, port state control etc.) and (iv) any records of planned maintenance.
|
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|
9.
|
A certificate that the relevant Initial Ship is free from Asbestos/Glass Wool and nuclear products
(to be provided by the relevant Borrower on a best efforts basis but only if available to such Borrower).
|
|
|
10.
|
A favorable opinion of Watson, Farley & Williams (New York) LLP, New York, Delaware and Marshall
Islands counsel for the Creditor Parties, in form, scope and substance satisfactory to the Creditor Parties.
|
|
|
11.
|
Favorable legal opinions from lawyers appointed by the Borrowers or the Agent on such matters concerning
the laws of such relevant jurisdictions as the Agent may require (including without limitation the Marshall Islands, Panama, Bermuda
and the British Virgin Islands).
|
PART C
The following are the condition precedent
documents referred to in Clause 9.1(c) for the making of an Advance in respect of an Additional Ship:
|
|
1.
|
A copy of the MOA in respect of the Additional Ship (and all addenda and supplements thereto),
in form and substance acceptable to the Agent and certified as of a date reasonably near the date of the Drawdown Notice by a director,
an officer, an authorized person or an attorney-in-fact of the Borrower party thereto as being a true and correct copy thereof.
|
|
|
2.
|
Written acceptance by the Agent (acting on the authority of the Majority Lenders) of the Additional
Ship.
|
|
|
3.
|
A duly executed original of a Borrower Accession Agreement (and of each document required to be
delivered thereby).
|
|
|
4.
|
A duly executed original of an amendment of this Agreement in Agreed Form.
|
|
|
5.
|
A duly executed amendment of the existing Mortgage over each Ship (other than the Additional Ship
being financed) in Agreed Form.
|
|
|
6.
|
A duly executed original of each Finance Document required by the Agent to be executed in respect
of such Additional Ship (and of each document required to be delivered by each Finance Document).
|
|
|
7.
|
If the Drawdown Date is more than five (5) Business Days after the date of the Drawdown Notice,
a bringdown certificate of each of the Security Parties certifying as of the Drawdown Date as to the absence of any amendments
to the documents of such Security Party referred to in paragraphs 4, 5 and 6 of Part A since the date of the Drawdown Notice.
|
|
|
8.
|
Certification by the Borrowers as of the date of the Drawdown Date for such Advance as to the matters
described in Clauses 9.1(e) (other than 9.1(e)(iv) and (v)) and 9.1(f).
|
|
|
9.
|
Documentary evidence that:
|
|
|
(a)
|
the Additional Ship has been unconditionally delivered by the Seller to, and accepted by, the relevant
Borrower under the MOA, and the full purchase price payable under such MOA (in addition to the part to be financed by the Advance
in respect of such Additional Ship) has been duly paid;
|
|
|
(b)
|
the Additional Ship is definitively and permanently registered in the name of the relevant Borrower
under the law of an Approved Flag;
|
|
|
(c)
|
the Mortgage in respect of such Additional Ship has been duly registered (preliminarily or permanently)
or recorded against the Additional Ship as a valid first priority or preferred ship mortgage in accordance with the laws of an
Approved Flag;
|
|
|
(d)
|
the Security Interests intended to be created by each of the Finance Documents have been duly perfected
under applicable law;
|
|
|
(e)
|
the Additional Ship is in the absolute and unencumbered ownership of the relevant Borrower save
as contemplated by the Finance Documents;
|
|
|
(f)
|
the Additional Ship is insured in accordance with the provisions of this Agreement and all requirements
therein in respect of insurances have been complied with;
|
|
|
(g)
|
the Additional Ship maintains the highest class for vessels of its type with the Classification
Society free of any recommendations and qualifications (which status shall be established by an Interim Class Certificate issued
by the Classification Society and dated a date reasonably near the Drawdown Date (
NB: a “Class Statement” or similar
instrument shall not be acceptable for purposes of this clause
));
|
|
|
(h)
|
the relevant Borrower has sent an instruction letter in the form of Schedule 9 hereto to the Classification
Society as required under Clause 14.4 and that the Classification Society has executed the undertaking in the form of Schedule
10 hereto as required by Clause 14.4.
|
|
|
10.
|
A valuation of the Additional Ship, addressed to the Agent and the Lenders, stated to be for the
purposes of this Agreement and dated not earlier than 14 days before the Drawdown Date for such Advance, from two Approved Brokers
which show an average value for such Additional Ship of not less than 142.85 percent of the Advance in respect of such Additional
Ship.
|
|
|
11.
|
A survey report addressed to the Agent and the Lenders, stated to be for the purposes of this Agreement
and dated not more than 30 days before the Drawdown Date for such Advance from an independent marine surveyor selected by the Agent
in respect of the physical condition of the Additional Ship, which report shall confirm the condition of such Ship to the satisfaction
of the Agent and the Lenders, in their sole discretion.
|
|
|
12.
|
Copies of all documents signed or issued by the relevant Borrower and the Seller under or in connection
with the delivery of the Additional Ship under the terms of the MOA, certified as of the Drawdown Date for such Advance by a director,
an officer, an authorized person or an attorney-in-fact of such Borrower as being a true and correct copy thereof.
|
|
|
13.
|
To the extent not provided under paragraph 12, such documentary evidence as the Agent may require
in relation to the due authorization and execution by the Seller of (a) the MOA and (b) all documents executed by the Seller under
the MOA.
|
|
|
14.
|
The following documents establishing that the Additional Ship will, as from the Drawdown Date for
such Advance, be managed by the Approved Managers on terms acceptable to the Lenders, together with:
|
|
|
(a)
|
a copy of the Approved Management Agreement, certified as of the Drawdown Date for such Advance
by an officer of the relevant Borrower as being a true and correct copy thereof;
|
|
|
(b)
|
an Approved Manager’s Undertaking executed by each Approved Manager in favor of the Agent;
and
|
|
|
(c)
|
copies of the relevant Approved Manager’s Document of Compliance and of the Additional Ship’s
ISSC and Safety Management Certificate (together with any other details of the applicable safety management system which the Agent
requires), certified as of the Drawdown Date for such Advance by an officer of the relevant Borrower as being a true and correct
copy thereof.
|
|
|
15.
|
If the Additional Ship is changing its registry, documentary evidence that such Additional Ship
has been deleted from its current flag free from all registered encumbrances or, in the alternative, evidence that the Additional
Ship will be so deleted within such period as the Agent shall require and that, in any event, there are no encumbrances registered
against the Additional Ship on its current flag.
|
|
|
16.
|
A favorable 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.
|
|
|
17.
|
Delivery of technical information in respect of the Additional Ship, in a form acceptable to the
Agent, including but not limited to (but only if available to the relevant Borrower): (i) full history of class, (ii) details of
statutory certificates, (iii) summaries of inspections (flag, port state control etc.) and (iv) any records of planned maintenance.
|
|
|
18.
|
A certificate that the Additional Ship is free from Asbestos/Glass Wool and nuclear products (to
be provided by the relevant Borrower on a best efforts basis but only if available to such Borrower).
|
|
|
19.
|
A favorable opinion of Watson, Farley & Williams (New York) LLP, New York, Delaware and Marshall
Islands counsel for the Creditor Parties, in form, scope and substance satisfactory to the Creditor Parties.
|
|
|
20.
|
Favorable legal opinions from lawyers appointed by the Borrowers or the Agent on such matters concerning
the laws of such relevant jurisdictions as the Agent may require (including without limitation the Marshall Islands, Panama, Bermuda
and the British Virgin Islands).
|
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 Borrowers, each other Security Party, the
Security Trustee and each Lender, as defined in the Loan Agreement referred to below.
|
[Date]
|
|
1.
|
This Certificate relates to a Loan Agreement
dated as of [
l
] (as
amended or supplemented, the “
Loan Agreement
”) among (1) Bulk Pangaea Limited, Bulk Patriot Ltd., Bulk Juliana
Ltd. and Bulk Trident Ltd. (the “
Borrowers
”), (2) Bulk Partners (Bermuda) Ltd., Bulk Partners Holding Company
Ltd. and Bulk Fleet Bermuda Holding Company Ltd. (the “
Guarantors
”), (3) the banks and financial institutions
named therein as Lenders, (4) DVB Bank SE as Agent and (5) DVB Bank SE as Security Trustee for a loan facility of up to $[
l
].
|
|
|
2.
|
In this Certificate, terms defined in the Loan Agreement shall, unless the contrary intention appears,
have the same meanings when used in this Certificate and:
|
“
Relevant Parties
”
means the Agent, the Borrowers, each of the Guarantors, the Security Trustee and each Lender;
“
Transferor
”
means [full name] of [lending office];
“
Transferee
”
means [full name] of [lending office].
|
|
3.
|
The effective date of this Certificate
is [
l
],
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
Agreement and every other Finance Document in relation to [
l
]%
of its Contribution, which percentage represents $[
l
].
|
|
|
5.
|
[By virtue of this Certificate and Clause
27 of the Agreement, the Transferor is discharged [entirely from its Commitment which amounts to $[
l
]]
[from [
l
]% of its Commitment,
which percentage represents $[
l
]]
and the Transferee acquires a Commitment of $[
l
].]
|
|
|
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 27 of the 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 27 of the Agreement.
|
|
|
(a)
|
warrants to the Transferee and each Relevant Party that:
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|
(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
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(ii)
|
this Certificate is valid and binding as regards the Transferor;
|
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(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
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(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 Transferee’s title under this Certificate
or for a similar purpose.
|
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|
(a)
|
confirms that it has received a copy of the Agreement and each of the other Finance Documents;
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(b)
|
agrees that it will have no rights of recourse on any ground against the Transferor, the Agent,
the Security Trustee or any Lender in the event that:
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|
|
(i)
|
any of the Finance Documents prove to be invalid or ineffective;
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|
(ii)
|
the Borrowers or any other Security Party fails to observe or perform its obligations, or to discharge
its liabilities, under any of the Finance Documents;
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|
|
(iii)
|
it proves impossible to realize 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 any other Security Party under
any of the Finance Documents;
|
|
|
(c)
|
agrees that it will have no rights of recourse on any ground against the Agent, the Security Trustee
or any Lender in the event that this Certificate proves to be invalid or ineffective;
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|
(d)
|
warrants to the Transferor and each Relevant Party that:
|
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|
(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
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|
(ii)
|
that this Certificate is valid and binding as regards the Transferee; and
|
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|
(iii)
|
confirms the accuracy of the administrative details set out below regarding the Transferee.
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|
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 negligence or willful misconduct of the Agent’s
or the Security Trustee’s own officers or employees.
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|
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|
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]
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|
[Name of Transferee]
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|
By:
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|
By:
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|
Name:
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|
Name:
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|
Title:
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|
Title:
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|
Date:
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|
Date:
|
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|
|
|
|
Agent
|
|
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|
Signed for itself and for and on behalf of itself
|
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|
|
as Agent and for every other Relevant Party
|
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|
[Name of Agent]
|
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|
By:
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|
Name:
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|
Title:
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|
Date:
|
|
|
Administrative Details of Transferee
Name of Transferee:
Lending Office:
Contact Person
(Loan Administration Department):
Telephone:
Fax:
Contact Person
(Credit Administration Department):
Telephone:
Fax:
Account for payments:
Note
: This
Transfer Certificate alone may not be sufficient to transfer a proportionate share of the Transferor’s interest in the security
constituted by the Finance Documents in the Transferor’s or Transferee’s jurisdiction. It is the responsibility of
each Lender to ascertain whether any other documents are required for this purpose.
SCHEDULE
6
INTENTIONALLY OMITTED
SCHEDULE
7
list of approved brokers
Maritime Strategies International Ltd.
Arrow London
SSY (New York)
Compass Maritime (New Jersey)
V
essel
V
alue
SCHEDULE
8
dvb loan administration form
|
To:
|
DVB Bank SE, as Agent
|
|
|
Platz der Republic 6
|
|
|
60325 Frankfurt am Main
|
|
|
Germany
|
|
|
|
|
|
Attention: Transaction & Loan Services
|
|
|
|
|
Cc:
|
DVB Bank SE
|
|
|
c/o DVB Transport (US) LLC
|
|
|
609 Fifth Avenue, 5th Floor
|
|
|
New York, New York 10017
|
|
|
|
|
|
Attention: Neil McLaughlin
|
|
|
Facsimile: +212-858-2676
|
[Date]
Re: Providing financing to [Bulk Pangaea
Limited][Bulk Patriot Ltd.][Bulk Juliana Ltd.][Bulk Trident Ltd.] (the “
Company
”) in relation to m.v. [BULK
PANGAEA][BULK PATRIOT][BULK JULIANA][BULK TRIDENT] (the “
Financing
”).
We
refer to the Financing and a facility agreement (the “
Facility Agreement
”) dated as of [
l
]
and entered into between, inter alia, us, as borrowers and DVB Bank SE as Agent for and on behalf of the Lenders in relation to
the Financing. Terms and expressions not otherwise defined herein shall have the same meaning as defined in the Facility Agreement.
We hereby appoint the following persons
to act as our point of contact with regards to any issue arising in connection with the administration to the Facility Agreement
or any other documents related to the Financing:
1. [name], title
2. [name], title
3. [name], title
No other persons other than the [Directors]
[Officers] of the Company or the persons listed above (the “
Authorized Persons
”) are hereby authorized to request
any information from you regarding the Facility Agreement or any other matter related to the Financing or the Company or communicate
with you in any way regarding the forgoing in and under any circumstances.
For the avoidance of doubt, the following
are the Directors [and Officers] of the Company:
1. [name], title
2. [name], title
3. [name], title
4. [name], title
This list of authorized persons may only
be amended, modified or varied in writing by an Authorized Person with copy to the other Authorized Persons. We agree to indemnify
you and hold you harmless in relation to any information you provide to any Authorized Person. This letter shall be governed and
construed in accordance with New York law.
Yours sincerely
[Company]
SCHEDULE
9
FORM OF LETTER OF INSTRUCTION TO CLASSIFICATION SOCIETY
To: [NAME OF CLASSIFICATION SOCIETY]
Date: [
l
]
Dear Sirs:
Name
of ship: “[
l
]”
(the “Ship”)
Flag: [Panama][Marshall Islands]
IMO
Number: [
l
]
Name
of Owner: [
l
]
(the “Owner”)
Name of mortgagee: DVB BANK SE (the
“Mortgagee”)
We refer to the Ship, which is registered
in the ownership of the Owner, and which has been entered in and classed by [Name of Classification Society] (the “
Classification
Society
”).
The Mortgagee has agreed to provide financing
to the Owner upon condition that, among other things, the Owner and the Mortgagee issue this letter of instruction to the Classification
Society.
The Owner and the Mortgagee irrevocably
and unconditionally instruct and authorise the Classification Society (notwithstanding any previous instructions whatsoever which
the Owner may have given to the Classification Society to the contrary) as follows:
|
|
1
|
to send to the Mortgagee, following receipt of a written request from the Mortgagee, certified
true copies of all original certificates of class and other class records held by the Classification Society in relation to the
Ship;
|
|
|
2
|
to allow the Mortgagee (or its agents), at any time and from time to time, to inspect the original
class and related records of the Owner and the Ship at the offices of the Classification Society and to take copies of them and,
to the extent possible, to grant the Mortgagee electronic access to such records;
|
|
|
3
|
to notify the Mortgagee immediately by email to neil.mclaughlin@dvbbank.com and techcom@dvbbank.com
if the Classification Society:
|
|
|
(a)
|
receives notification from the Owner or any other person that the Ship’s classification society
is to be changed;
|
|
|
(b)
|
imposes a condition of class or issues a class recommendation in respect of the Ship;
|
|
|
(c)
|
becomes aware of any facts or matters which may result or have resulted in a change, suspension,
discontinuance, withdrawal or expiry of the Ship’s class under the rules or terms and conditions of the Owner’s or
the Ship’s membership of the Classification Society;
|
|
|
4
|
following receipt of a written request from the Mortgagee:
|
|
|
(a)
|
to confirm that the 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
|
|
|
(b)
|
if the Owner is in default of any of its contractual obligations or liabilities to the Classification
Society, to specify to the Mortgagee in reasonable detail the facts and circumstances of such default, the consequences thereof,
and any remedy period agreed or allowed by the Classification Society.
|
Notwithstanding the above instructions
given for the benefit of the Mortgagee, the Owner shall continue to be responsible to the Classification Society for the performance
and discharge of all its obligations and liabilities relating to or arising out of or in connection with the contract it has with
the Classification Society, and nothing in this letter should be construed as imposing any obligation or liability on the Mortgagee
to the Classification Society in respect thereof. The instructions and authorisations which are contained in this notice shall
remain in full force and effect until the Owner and the Mortgagee together give you notice in writing revoking them.
The Owner undertakes 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.
This letter and any non-contractual obligations
arising from or connected with it are governed by New York law.
|
|
|
|
|
For and on behalf of
|
|
|
|
NAME OF OWNER
|
|
|
|
|
|
|
|
|
|
|
|
For and on behalf of
|
|
|
|
DVB BANK SE
|
|
|
SCHEDULE
10
FORM OF CLASSIFICATION SOCIETY LETTER OF UNDERTAKING
|
To:
|
[Name of Owner]
|
|
|
Par la Ville Place
|
|
|
14 Par la Ville Road
|
|
|
Hamilton HM08
|
|
|
Bermuda
|
|
|
|
|
|
with a copy to:
|
|
|
|
|
|
Phoenix Bulk Carriers (US) LLC as agents
|
|
|
109 Long Wharf, Second Floor
|
|
|
Newport, Rhode Island 02840
|
|
|
|
|
|
Attention: Mr. Tony Laura
|
|
|
Facsimile: +401-846-1520
|
|
|
Email: tlaurahome@aol.com
|
|
|
|
|
|
-and-
|
|
|
|
|
|
DVB Bank SE
|
|
|
Platz der Republik 6
|
|
|
60325 Frankfurt am Main
|
|
|
Germany
|
|
|
|
|
|
Attention: Loan Administration Manager
|
|
|
Facsimile: +49 69 97 50 4444
|
|
|
|
|
|
with a copy to:
|
|
|
|
|
|
DVB Bank SE
|
|
|
c/o DVB Transport (US) LLC
|
|
|
609 Fifth Avenue, 5th Floor
|
|
|
New York, New York 10017
|
|
|
|
|
|
Attention: Mr. Neil McLaughlin
|
|
|
Facsimile: +212-858-2676
|
|
|
Email: neil.mclaughlin@dvbbank.com
|
Dated: [
l
]
Dear Sirs:
Name
of ship: “[
l
]”
(the “Ship”)
Flag: [Panama][Marshall Islands]
IMO
Number: [
l
]
Name
of Owner: [
l
]
(the “Owner”)
Name of mortgagee: DVB BANK SE (the
“Mortgagee”)
We,
[Name of Classification Society], hereby acknowledge receipt of a letter (a copy of which is attached hereto) dated [
l
]
sent to us by the Owner and the Mortgagee (together the “
Instructing Parties
”) regarding the Ship.
In consideration of the agreement by the
Mortgagee to approve the selection of American Bureau of Shipping (the receipt and adequacy of which is hereby acknowledged), we
undertake to comply with the instructions of the Instructing Parties contained in such letter.
This letter and any non-contractual obligations
arising out of or in connection with it shall be governed by New York law.
Yours faithfully
For and on behalf of
[NAME OF CLASSIFICATION SOCIETY]
appendix
a
FORM OF APPROVED MANAGER’S UNDERTAKING
appendix
b
FORM OF BORROWER ACCESSION AGREEMENT
appendix
c-1
FORM OF COMPLIANCE CERTIFICATE (borrowers)
appendix
c-2
FORM OF COMPLIANCE CERTIFICATE (BULK PARTNERS)
appendix
d
FORM OF EARNINGS ACCOUNT PLEDGE
appendix
e
FORM OF EARNINGS ASSIGNMENT
appendix
f
FORM OF FREIGHTS ACCOUNT PLEDGE
appendix
g
FORM OF GUARANTOR ACCESSION AGREEMENT
appendix
h
FORM OF INSURANCE ASSIGNMENT
appendix
I-1
FORM OF MORTGAGE (PANAMA)
appendix
I-2
FORM OF MORTGAGE (MARSHALL ISLANDS)
appendix
J
FORM OF NOTE
appendix
K
FORM OF SHAREs PLEDGE
appendix
l
TIME CHARTER AND TIME CHARTER GUARANTEE ASSIGNMENT
appendix
M
FORM OF TIME CHARTER EARNINGS ASSIGNMENT
appendix
N-1
FORM OF UNDERTAKING AND AGREEMENT – BULK PATRIOT
appendix
N-2
FORM OF UNDERTAKING AND AGREEMENT – BULK TRIDENT
Exhibit 10.11
LOAN AGREEMENT
October I.2011
Bulk Partners (Bermuda)
Ltd
P.O Box HM2257
Hamilton I1MJX
Bermuda
Mr Ed Coll, Lagoa Investments
Ltd., and Mr Anthony Laura ("the Lenders"), are pleased to confirm that, subject to the following terms and conditions.
they agree to make loans to Bulk Partners (Bermuda) Ltd. ("the Borrower") in the aggregate amount of US$l 0,000.000.
Th
e Notes:
The obligation to repay the loans shall
he evidenced by the three Promissory Notes (the "Notes") in substantially the form of Exhibit A hereto, dated the date
of the making of the loans, payable to the order of the Lenders in accordance with the repayment terms dictated by the Note.
The Interest:
The Note shall bear interest from its date,
payable annually as stipulated in the Notes, at a rate per annum (on the basis of a 360 day year for the actual number of days
involved) equal to eight percent. (8.00%) per annum. To the extent permitted by law, any payment of interest on the Notes not made
when due shall bear interest from the date when due until payment is made at a rate per annum equal to ten percent. (10%) per annum.
Optional Prepayment:
The Borrower shall have the right, on not
less than 7 days notice. to prepay the Notes in whole at any time or in part from time to time, together with accrued interest
on the principal being prepaid to the date of prepayment.
Representation and Warranties:
The Borrower represents and warrants that:
|
|
(a)
|
This Agreement constitutes, and the Note, when issued, will constitute, the valid and legally binding
obligations of the Borrower enforceable in accordance with their terms;
|
|
|
(h)
|
There is no provision of any mortgage, indenture contract, or agreement binding on the Borrower
or affecting its property; which would prohibit. conflict with, or in any way prevent the execution, delivery, or carrying out
the terms of this Agreement and of the Notes.
|
Conditions of Lending:
The obligation of the Lenders to make each
loan is subject to the following conditions precedent:
|
|
(a)
|
At the time of the loan (i) the Borrower shall have complied and
shall then be in compliance with all the terms. covenants and conditions of this Agreement which are binding upon it, (ii) there
shall have occurred no Event of Default as defined below and
no event which, with the giving of notice or the lapse of time,
or both, would constitute
an Event of Default and (iii) the representations and warranties contained
in this Agreement shall be true with the same effect as though such representations and
warranties had been made at the
time of the loan.
|
Covenants:
The Borrower agrees that so long as it
may borrow under this Agreement and until the payment in full of the Notes it will give prompt '• iitten notice to the Lenders
of the following:
(i) Any Event of Default as defiled
below and any event which with the giving of notice or the lapse of time. or both, would constitute an Event of Default.
(ii) Any material adverse change
in the business, properties, condition (financial or other) or operations. present or prospective. of the Borrower.
Events of Default:
If any of the following events (each an
"Event of Default") shall occur:
|
|
(a)
|
Default shall be made in any payment of interest on or principal of the Notes when demanded and
payable;
|
|
|
(b)
|
Default shall be made in the due observance or performance of any other term, covenant or agreement
contained in this Agreement;
|
|
|
(c)
|
Any representation or warranty made by the Borrower herein or any statement or representation made
in any certificate, report or other document delivered in connection herewith shall prove to have been misleading in any material
respect when made;
|
|
|
(d)
|
The Borrower makes an assignment for the benefit of creditors, files a petition in bankruptcy,
is adjudicated insolvent or bankrupt under any law or statute of any jurisdiction, whether now or hereafter in effect, or if there
is commenced against the Borrower any such proceeding which remains undismissed for a period of 30 days. or the Borrower by any
act indicates its consent to, approval of or acquiescence in any such proceeding or suffers any such receivership to continue undischarged
for a period of 30 days; or
|
|
|
(e)
|
One or more judgements against the Borrower or attachments against its property, which in the aggregate
exceed $50.000 or the operation or result of which could be to interfere materially and adversely with the conduct of the business
of the Borrower, remain unpaid. unstayed on appeal, undischarged, unbonded, or undismissed for a period of 30 days;
|
then the Notes shall become and be immediately
due and payable and the obligation of the Lenders to make any or further loans hereunder shall terminate upon declaration to that
effect delivered by the Lenders to the Borrower; provided. that upon the happening of any event specified in (d), no declaration
or other notice need be given.
Miscellaneous:
|
|
(a)
|
This Agreement and the rights and obligations of the parties hereunder shall he governed by the
laws of the islands of Bermuda, as to both interpretation and performance.
|
|
|
(b)
|
If any suit is instituted by the Lenders to enforce this Agreement or the Notes, the Borrower hereby
submits to jurisdiction and to the laying of venue in the Islands of Bermuda.
|
If you agree to the foregoing terms and
conditions, please signify your acceptance by signing, dating and returning to us the enclosed copy of this Agreement.
Yours faithfully,
For and on behalf of:-
ACCEPTED AND AGREED TO:
Dated: October 1, 2011
For and on behalf of :Bulk Partners (Bermuda) Ltd
Exhibit 10.12
LOAN AGREEMENT
THIS LOAN AGREEMENT
(the
“Agreement”
) is made on January 10
th
, 2013 between:
ASO 2020 Maritime S.A.
,
of Aquilino de la Guardia Street No. 8, IGRA Building, P.O. Box 0823 – 02435 Panama, Republic of Panama (the
“Lender”
)
Nordic Bulk Holding Company
Ltd
., of 3rd Floor, Par La Ville Place, 14 Par La Ville Road, Hamilton, Bermuda (the
“Borrower”
).
(the Lender and the Borrower
being from time to time, hereinafter referred to as the
“Parties”
).
WHEREAS
the Lender has
agreed to make available to the Borrower a loan of $ 12,683,333.33 upon and subject to the terms of this Agreement, as well as,
a certain subscription agreement concluded as of the date hereof between the Borrower, ST Shipping and Transport Pte. Ltd and Bulk
Fleet Bermuda Holding Company Limited (the "
Subscription Agreement
");
WHEREAS
the Parties wish
to document such transaction;
Terms Defined In this Agreement:
|
“Business Day”
|
means a day (other than a Saturday or a Sunday) on which banks are open for business in London, New York and Panama;
|
|
|
|
|
“Loan”
|
means the principal amount of the borrowing by the Borrower hereunder or (as the context requires) the principal amount thereof from time to time outstanding;
|
|
|
|
|
“Repayment Day”
|
means January 9
th
2023 or any prior date in accordance with Clause 4.1.
|
|
|
|
|
“Taxes”
|
includes all present and future taxes, levies, duties, deductions, charges, fees and withholdings of any nature impose, levied, collected, withheld or assessed by any country or any political sub-division taxing authority thereof: “Taxation” shall be construed accordingly.
|
Subject to
the terms of this Agreement, as well as, the Restructuring Agreement and in reliance on the representations and warranties of the
Borrower set out in Clause 7, the Lender has granted to the Borrower a loan of twelve million six hundred eighty three thousand
three hundred thirty three US Dollars and thirty three cents ($ 12,683,333.33) (the
“Loan”
).
The purpose of the Loan is to
provide financing for the Borrower’s activities and investments.
The Loan shall
be paid within one Business Day from the execution of this Agreement.
The Borrower
shall repay the Loan in full on the Repayment Date.
|
|
4.2.
|
Voluntary early payments
|
The Borrower
may prepay all or part of the Loan, however not in amounts or increments which less than $ 50,000 USD Fifty Thousand.
|
|
5.
|
INTEREST AND SUBORDINATION
|
The Loan is
interest free.
The Loan is
fully subordinated to a certain loan agreement concluded on 25.07.2012 between Bulk Nordic Odyssey LTD, Bulk Nordic Orion LTD and
DVB Bank SE.
All payments
to be made by Borrower hereunder shall be made to the Lender in US Dollars in same day funds on the due date to such account of
the Lender as the Lender may specify for this purpose.
All payments
to be made by the Borrower hereunder shall be made without set-off or counterclaim, or deduction due to any taxation, fees or penalties,
including but not limited to any withholding tax or Value Added Tax.
|
|
7.
|
REPRESENTATION AND WARRANTIES
|
|
|
7.1.
|
The Borrower makes the following representations and
warranties to and for the benefit of the Lender:
|
|
|
(i)
|
Status: It is a limited liability company, duly incorporated and validly existing under the laws
of Bermuda;
|
|
|
(ii)
|
Powers and authority: It has the power to enter into and perform, and has taken all necessary action
to authorize the entry into, performance and delivery of this Agreement and the transactions contemplated hereby;
|
|
|
(iii)
|
Legal validity: This Agreement constitutes its legal, valid and binding obligations enforceable
in accordance with the terms hereof;
|
|
|
(iv)
|
Non – conflict: The entry into and performance by it of, and the transactions contemplated
by, this Agreement do not and will not:
|
|
|
·
|
conflict with any law or regulation or
judicial or official order; or
|
|
|
·
|
conflict with the articles of association
of the Borrower; or
|
|
|
·
|
conflict with any mortgage, agreement
or other undertaking or instrument which is binding upon the Borrower or of its assets.
|
Except as otherwise
stated herein, all notices, requests, demands and other communications to, upon or by any party hereto shall be given or made in
writing or by registered post or facsimile transmission or e-mail and shall be duly given or made if dispatched in writing by registered
post or facsimile transmission or e-mail to the party to which such notice, request, demand or other communication is required
or permitted to be given or made under this Agreement, addressed as follows:
if to the Borrower
at
Third Floor,
Par La Ville Place
14 Par La Ville
Road
Hamilton, HM08
Bermuda
Tel: +1(0) 441-295-8313
Fax: +1(0) 441-292-1373
Email: sdurrant@consolidated.bm
if to the
Lender at:
To the attention
of: Mr. John P. Ioannidis
ASO 2020 Maritime
S.A.
c/o Olympic
Shipping and Management S.A.
8, Zephyrou
St. P. Phaleron
GR 175 64 Athens
Greece
Tel: +30 210
9498 353
Fax: +30 210
9498 364
Email: john.ioannidis@olyship.com
With a copy
to:
ASO Holdings
S.A.
Städtle
27
Vaduz, FL 9490
Lichtenstein
Attention:
Anthony S. Papadmitriou
Facsimile:
+00423 23 50 220
Email: asp@onassis.gr
Or at such
other addresses or facsimile number as may have been notified by the intended addressee to the other party by not less than five
(5) Business Days’ prior notice. Any notice or other communication hereunder required to be given in writing shall be duly
given by registered post or facsimile to be effective version for the purposes hereof. All such notices, requests, demands or other
communications, if duly given or made, shall be effective upon receipt.
The Lender
may at any time assign or transfer all or part of its right or obligations hereunder to any of its Affiliates, however he remains
responsible for the terms of such assignment to be identical to those of this Agreement.
This Agreement
constitutes, together with the Subscription Agreement, the whole agreement of the Parties in relation to its subject matter and
supersedes any previous agreement, representations, warranties or arrangements, allegations or promises (whether in writing or
oral) between them in relation to that matter (with the exception of the Restructuring Agreement). No modification of this Agreement
shall be effective unless it is made in writing and signed by both Parties.
This Agreement
is private and confidential and each Party undertakes that it shall not at any time disclose to any person or entity any information
or details in relation to this Agreement except as provided in next paragraph of this clause.
Each Party
may disclose information regarding this Agreement:
|
|
(i)
|
to its employees, officers, contracted representatives or contracted advisers who need to know
such information for the purposes of carrying out the Party’s obligations under this agreement. Each Party shall ensure that
its employees, officers, contracted representatives or contracted advisers to whom it discloses the other Party’s confidential
information comply with this clause 11; and
|
|
|
(ii)
|
as it may be obliged to do by operation of law, by court order or by any governmental or regulatory
authority.
|
This Agreement
and any dispute or claim (whether contractual or otherwise) arising out of or in connection with it or its subject matter shall
be governed by and construed solely in accordance with English law.
The Parties
irrevocably agree that the High Court of London located in London is to have exclusive jurisdiction to settle any dispute which
may arise out of or in connection with this Agreement and the documents to be entered into pursuant to it. The Parties irrevocably
submit to the jurisdiction of such courts and waive any objection to proceedings in any such court on the ground of venue or on
the ground that the proceedings have been brought in an inconvenient forum.
All banking
costs and charges related to the disbursement and repayment of the Loan shall be borne by the Borrower.
This Agreement
is made in English in two originals – one the Lender and one for the Borrower.
AS WITNESSED
WHEREOF
, the parties hereto have caused this Agreement to be signed in two copies on date first above written.
|
Signed by
(Name
& Signature)
|
|
|
|
|
|
for and on behalf of the
Lender
|
|
|
|
|
|
Signed by
(Name
& Signature)
|
|
|
|
|
|
for and on behalf of the
Borrower
|
|
Exhibit 10.13
LOAN AGREEMENT
THIS LOAN AGREEMENT
(the
“Agreement”
) is made on March 18
th
, 2013 between:
ASO 2020 Maritime S.A.
,
of Aquilino de la Guardia Street No. 8, IGRA Building, P.O. Box 0823 – 02435 Panama, Republic of Panama (the
“Lender”
)
Nordic Bulk Holding Company
Ltd
., of 3rd Floor, Par La Ville Place, 14 Par La Ville Road, Hamilton, Bermuda (the
“Borrower”
).
(the Lender and the Borrower
being from time to time, hereinafter referred to as the
“Parties”
).
WHEREAS
the Lender has
made available to the Borrower a loan of $ 12,683,333.33 upon and subject to the terms of a Loan Agreement dated 10.1.2013, as
well as, a certain subscription agreement concluded also on 10.1.2013 between the Borrower, ST Shipping and Transport Pte. Ltd
and Bulk Fleet Bermuda Holding Company Limited (the "
Subscription Agreement
");
WHEREAS
the Lender shall
make available to the Borrower a further amount of $ 2,173,333.33 upon and subject to the terms of this Agreement and the Subscription
Agreement;
Terms Defined In this Agreement:
|
“Business Day”
|
means a day (other than a Saturday or a Sunday) on which banks are open for business in London, New York and Panama;
|
|
|
|
|
“Loan”
|
means the principal amount of the borrowing by the Borrower hereunder or (as the context requires) the principal amount thereof from time to time outstanding;
|
|
|
|
|
“Repayment Day”
|
means January 9
th
2023 or any prior date in accordance with Clause 4.1.
|
|
|
|
|
“Taxes”
|
includes all present and future taxes, levies, duties, deductions, charges, fees and withholdings of any nature impose, levied, collected, withheld or assessed by any country or any political sub-division taxing authority thereof: “Taxation” shall be construed accordingly.
|
Subject to
the terms of this Agreement and in reliance on the representations and warranties of the Borrower set out in Clause 7, the Lender
has granted to the Borrower a further loan of Two Million One Hundred Seventy Three Thousand Three Hundred Thirty Three US Dollars
and thirty three cents ($ 2,173,333.33) (the
“Loan”
).
The purpose of the Loan is to
provide financing for the Borrower’s activities and investments.
The Loan shall
be paid within one Business Day from the execution of this Agreement.
The Borrower
shall repay the Loan in full on the Repayment Date.
|
|
4.2.
|
Voluntary early payments
|
The Borrower
may prepay all or part of the Loan without penalty prior to the Repayment Day, however not in amounts or increments with respect
to prepayment of less than all of the Loan which are less than Fifty Thousand US Dollars ($ 50,000).
|
|
5.
|
INTEREST AND SUBORDINATION
|
The Loan is
interest free.
The Loan is
fully subordinated to a certain loan agreement concluded on 25.07.2012 between Bulk Nordic Odyssey LTD, Bulk Nordic Orion LTD and
DVB Bank SE.
All payments
to be made by Borrower hereunder shall be made to the Lender in US Dollars in same day funds on the due date to such account of
the Lender as the Lender may specify for this purpose.
All payments
to be made by the Borrower hereunder shall be made without set-off or counterclaim, or deduction due to any taxation, fees or penalties,
including but not limited to any withholding tax or Value Added Tax.
|
|
7.
|
REPRESENTATION AND WARRANTIES
|
|
|
7.1.
|
The Borrower makes the following representations and warranties to and for the benefit of the Lender:
|
|
|
(i)
|
Status: It is a limited liability company, duly incorporated and validly existing under the laws
of Bermuda;
|
|
|
(ii)
|
Powers and authority: It has the power to enter into and perform, and has taken all necessary action
to authorize the entry into, performance and delivery of this Agreement and the transactions contemplated hereby;
|
|
|
(iii)
|
Legal validity: This Agreement constitutes its legal, valid and binding obligations enforceable
in accordance with the terms hereof;
|
|
|
(iv)
|
Non – conflict: The entry into and performance by it of, and the transactions contemplated
by, this Agreement do not and will not:
|
|
|
·
|
conflict with any law or regulation or
judicial or official order; or
|
|
|
·
|
conflict with the articles of association
of the Borrower; or
|
|
|
·
|
conflict with any mortgage, agreement
or other undertaking or instrument which is binding upon the Borrower or of its assets.
|
Except as otherwise
stated herein, all notices, requests, demands and other communications to, upon or by any party hereto shall be given or made in
writing or by registered post or facsimile transmission or e-mail and shall be duly given or made if dispatched in writing by registered
post or facsimile transmission or e-mail to the party to which such notice, request, demand or other communication is required
or permitted to be given or made under this Agreement, addressed as follows:
if to the Borrower
at
Third Floor,
Par La Ville Place
14 Par La Ville
Road
Hamilton, HM08
Bermuda
Tel: +1(0) 441-295-8313
Fax: +1(0) 441-292-1373
Email: sdurrant@consolidated.bm
if to the
Lender at:
To the attention
of: Mr. John P. Ioannidis
ASO 2020 Maritime
S.A.
c/o Olympic
Shipping and Management S.A.
8, Zephyrou
St. P. Phaleron
GR 175 64 Athens
Greece
Tel: +30 210
9498 353
Fax: +30 210
9498 364
Email: john.ioannidis@olyship.com
With a copy
to:
ASO Holdings
S.A.
Städtle
27
Vaduz, FL 9490
Lichtenstein
Attention:
Anthony S. Papadmitriou
Facsimile:
+00423 23 50 220
Email: asp@onassis.gr
Or at such
other addresses or facsimile number as may have been notified by the intended addressee to the other party by not less than five
(5) Business Days’ prior notice. Any notice or other communication hereunder required to be given in writing shall be duly
given by registered post or facsimile to be effective version for the purposes hereof. All such notices, requests, demands or other
communications, if duly given or made, shall be effective upon receipt.
The Lender
may at any time assign or transfer all or part of its right or obligations hereunder to any of its Affiliates, however he remains
responsible for the terms of such assignment to be identical to those of this Agreement.
This Agreement
constitutes, together with the Subscription Agreement, the whole agreement of the Parties in relation to its subject matter and
supersedes any previous agreement, representations, warranties or arrangements, allegations or promises (whether in writing or
oral) between them in relation to that matter (with the exception of the Restructuring Agreement). No modification of this Agreement
shall be effective unless it is made in writing and signed by both Parties.
This Agreement
is private and confidential and each Party undertakes that it shall not at any time disclose to any person or entity any information
or details in relation to this Agreement except as provided in next paragraph of this clause.
Each Party
may disclose information regarding this Agreement:
|
|
(i)
|
to its employees, officers, contracted representatives or contracted advisers who need to know
such information for the purposes of carrying out the Party’s obligations under this agreement. Each Party shall ensure that
its employees, officers, contracted representatives or contracted advisers to whom it discloses the other Party’s confidential
information comply with this clause 11; and
|
|
|
(ii)
|
as it may be obliged to do by operation of law, by court order or by any governmental or regulatory
authority.
|
This Agreement
and any dispute or claim (whether contractual or otherwise) arising out of or in connection with it or its subject matter shall
be governed by and construed solely in accordance with English law.
The Parties
irrevocably agree that the High Court of London located in London is to have exclusive jurisdiction to settle any dispute which
may arise out of or in connection with this Agreement and the documents to be entered into pursuant to it. The Parties irrevocably
submit to the jurisdiction of such courts and waive any objection to proceedings in any such court on the ground of venue or on
the ground that the proceedings have been brought in an inconvenient forum.
All banking
costs and charges related to the disbursement and repayment of the Loan shall be borne by the Borrower.
This Agreement
is made in English in two originals – one the Lender and one for the Borrower.
AS WITNESSED
WHEREOF
, the parties hereto have caused this Agreement to be signed in two copies on date first above written.
|
Signed by
(Name
& Signature)
|
|
|
|
|
|
for and on behalf of the
Lender
|
|
|
|
|
|
Signed by
(Name
& Signature)
|
|
|
|
|
|
for and on behalf of the
Borrower
|
|
Exhibit 10.14
LOAN AGREEMENT
THIS LOAN AGREEMENT
(the
“Agreement”
) is made on June 18
th
, 2013 between:
ASO 2020 Maritime S.A.
a company duly established and validly existing under the laws of Marshall Islands, under registration no. 60690 having its registered
office at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960 (the
“Lender”
)
Nordic Bulk Holding Company
Ltd
., of 3rd Floor, Par La Ville Place, 14 Par La Ville Road, Hamilton, Bermuda (the
“Borrower”
).
(the Lender and the Borrower
being from time to time, hereinafter referred to as the
“Parties”
).
WHEREAS
the Lender has
made available to the Borrower a loan of $ 12,683,333.33 on 10.1.2013;
WHEREAS
the Lender has
made available to the Borrower a loan of $ 2,173,333.33 on 18.3.2013;
WHEREAS
the Lender shall
make available to the Borrower a further amount of $ 2,173,334 upon and subject to the terms of this Agreement.
Terms Defined In this Agreement:
|
“Business Day”
|
means a day (other than a Saturday or a Sunday) on which banks are open for business in London, New York and Panama;
|
|
|
|
|
“Loan”
|
means the principal amount of the borrowing by the Borrower hereunder or (as the context requires) the principal amount thereof from time to time outstanding;
|
|
|
|
|
“Repayment Day”
|
means January 9
th
2023 or any prior date in accordance with Clause 4.1.
|
|
|
|
|
“Taxes”
|
includes all present and future taxes, levies, duties, deductions, charges, fees and withholdings of any nature impose, levied, collected, withheld or assessed by any country or any political sub-division taxing authority thereof: “Taxation” shall be construed accordingly.
|
Subject to
the terms of this Agreement and in reliance on the representations and warranties of the Borrower set out in Clause 7, the Lender
has granted to the Borrower a further loan of Two Million One Hundred Seventy Three Thousand Three Hundred Thirty Four US Dollars
($ 2,173,334) (the
“Loan”
).
The purpose of the Loan is to
provide financing for the Borrower’s activities and investments.
The Loan shall
be paid within one Business Day from the execution of this Agreement.
The Borrower
shall repay the Loan in full on the Repayment Date.
|
|
4.2.
|
Voluntary early payments
|
The Borrower
may prepay all or part of the Loan without penalty prior to the Repayment Day, however not in amounts or increments with respect
to prepayment of less than all of the Loan which are less than Fifty Thousand US Dollars ($ 50,000).
|
|
5.
|
INTEREST AND SUBORDINATION
|
The Loan is
interest free.
The Loan is
fully subordinated to a certain loan agreement concluded on 25.07.2012 between Bulk Nordic Odyssey LTD, Bulk Nordic Orion LTD and
DVB Bank SE.
All payments
to be made by Borrower hereunder shall be made to the Lender in US Dollars in same day funds on the due date to such account of
the Lender as the Lender may specify for this purpose.
All payments
to be made by the Borrower hereunder shall be made without set-off or counterclaim, or deduction due to any taxation, fees or penalties,
including but not limited to any withholding tax or Value Added Tax.
|
|
7.
|
REPRESENTATION AND WARRANTIES
|
|
|
7.1.
|
The Borrower makes the following representations and warranties to and for the benefit of the Lender:
|
|
|
(i)
|
Status: It is a limited liability company, duly incorporated and validly existing under the laws
of Bermuda;
|
|
|
(ii)
|
Powers and authority: It has the power to enter into and perform, and has taken all necessary action
to authorize the entry into, performance and delivery of this Agreement and the transactions contemplated hereby;
|
|
|
(iii)
|
Legal validity: This Agreement constitutes its legal, valid and binding obligations enforceable
in accordance with the terms hereof;
|
|
|
(iv)
|
Non – conflict: The entry into and performance by it of, and the transactions contemplated
by, this Agreement do not and will not:
|
|
|
·
|
conflict with any law or regulation or
judicial or official order; or
|
|
|
·
|
conflict with the articles of association
of the Borrower; or
|
|
|
·
|
conflict with any mortgage, agreement
or other undertaking or instrument which is binding upon the Borrower or of its assets.
|
Except as otherwise
stated herein, all notices, requests, demands and other communications to, upon or by any party hereto shall be given or made in
writing or by registered post or facsimile transmission or e-mail and shall be duly given or made if dispatched in writing by registered
post or facsimile transmission or e-mail to the party to which such notice, request, demand or other communication is required
or permitted to be given or made under this Agreement, addressed as follows:
if to the Borrower
at
Third Floor,
Par La Ville Place
14 Par La Ville
Road
Hamilton, HM08
Bermuda
Tel: +1(0) 441-295-8313
Fax: +1(0) 441-292-1373
Email: sdurrant@consolidated.bm
if to the
Lender at:
To the attention
of: Mr. John P. Ioannidis
ASO 2020 Maritime
S.A.
c/o Olympic
Shipping and Management S.A.
8, Zephyrou
St. P. Phaleron
GR 175 64 Athens
Greece
Tel: +30 210
9498 353
Fax: +30 210
9498 364
Email: john.ioannidis@olyship.com
With a copy
to:
ASO Holdings
S.A.
Städtle
27
Vaduz, FL 9490
Lichtenstein
Attention:
Anthony S. Papadmitriou
Facsimile:
+00423 23 50 220
Email: asp@onassis.gr
Or at such
other addresses or facsimile number as may have been notified by the intended addressee to the other party by not less than five
(5) Business Days’ prior notice. Any notice or other communication hereunder required to be given in writing shall be duly
given by registered post or facsimile to be effective version for the purposes hereof. All such notices, requests, demands or other
communications, if duly given or made, shall be effective upon receipt.
The Lender
may at any time assign or transfer all or part of its right or obligations hereunder to any of its Affiliates, however he remains
responsible for the terms of such assignment to be identical to those of this Agreement.
This Agreement
constitutes, together with the Subscription Agreement, the whole agreement of the Parties in relation to its subject matter and
supersedes any previous agreement, representations, warranties or arrangements, allegations or promises (whether in writing or
oral) between them in relation to that matter (with the exception of the Restructuring Agreement). No modification of this Agreement
shall be effective unless it is made in writing and signed by both Parties.
This Agreement
is private and confidential and each Party undertakes that it shall not at any time disclose to any person or entity any information
or details in relation to this Agreement except as provided in next paragraph of this clause.
Each Party
may disclose information regarding this Agreement:
|
|
(i)
|
to its employees, officers, contracted representatives or contracted advisers who need to know
such information for the purposes of carrying out the Party’s obligations under this agreement. Each Party shall ensure that
its employees, officers, contracted representatives or contracted advisers to whom it discloses the other Party’s confidential
information comply with this clause 11; and
|
|
|
(ii)
|
as it may be obliged to do by operation of law, by court order or by any governmental or regulatory
authority.
|
This Agreement
and any dispute or claim (whether contractual or otherwise) arising out of or in connection with it or its subject matter shall
be governed by and construed solely in accordance with English law.
The Parties
irrevocably agree that the High Court of London located in London is to have exclusive jurisdiction to settle any dispute which
may arise out of or in connection with this Agreement and the documents to be entered into pursuant to it. The Parties irrevocably
submit to the jurisdiction of such courts and waive any objection to proceedings in any such court on the ground of venue or on
the ground that the proceedings have been brought in an inconvenient forum.
All banking
costs and charges related to the disbursement and repayment of the Loan shall be borne by the Borrower.
This Agreement
is made in English in two originals – one the Lender and one for the Borrower.
AS WITNESSED
WHEREOF
, the parties hereto have caused this Agreement to be signed in two copies on date first above written.
|
Signed by
(Name
& Signature)
|
|
|
|
|
|
for and on behalf of the
Lender
|
|
|
|
|
|
Signed by
(Name
& Signature)
|
|
|
|
|
|
for and on behalf of the
Borrower
|
|
Exhibit 10.15
LOAN AGREEMENT
THIS LOAN AGREEMENT
(the
“Agreement”
) is made on January 10
th
, 2013 between:
ST Shipping and Transport
Pte. Ltd
., of 1 Temasek Avenue, #34-01 Millenia Tower, Singapore 039192 (the
“Lender”
)
Nordic Bulk Holding Company
Ltd
., of 3rd Floor, Par La Ville Place, 14 Par La Ville Road, Hamilton, Bermuda (the
“Borrower”
).
(the Lender and the Borrower
being from time to time, hereinafter referred to as the
“Parties”
).
WHEREAS
the Lender has
made available to the Borrower a loan of $ 12,500,000 upon and subject to the terms of this Agreement, a Subscription Agreement,
concluded as of the date hereof between the Lender, ASO Maritime S.A., and Bulk Fleet Bermuda Holding Company Limited ("BFB")
(the "
Subscription Agreement
"), as well as, a certain transfer restructuring agreement concluded as of the date
hereof between (the
“Restructuring Agreement”
);
WHEREAS
the Lender shall
make available to the Borrower a further amount of $ 4,350,000 upon and subject to the terms of this Agreement and the Subscription
Agreement;
WHEREAS
the Parties wish
to document such transaction;
Terms Defined In this Agreement:
|
“Business Day”
|
means a day (other than a Saturday or a Sunday) on which banks are open for business in London, New York and Panama;
|
|
|
|
|
“Loan”
|
means the principal amount of the borrowing by the Borrower hereunder or (as the context requires) the principal amount thereof from time to time outstanding;
|
|
|
|
|
“Repayment Day”
|
means January 9
th
2023 or any prior date in accordance with Clause 4.1.
|
|
|
|
|
“Taxes”
|
includes all present and future taxes, levies, duties, deductions, charges, fees and withholdings of any nature impose, levied, collected, withheld or assessed by any country or any political sub-division taxing authority thereof: “Taxation” shall be construed accordingly.
|
Subject to
the terms of this Agreement, as well as, the Restructuring Agreement and the Subscription Agreement and in reliance on the representations
and warranties of the Borrower set out in Clause 7, the Lender has granted to the Borrower a loan of twelve million five hundred
thousand US Dollars ($ 12,500,000) and shall grant to the Borrower a further loan of four million three hundred fifty thousand
US Dollars ($ 4,350,000) resulting to a total loan of sixteen million eight hundred fifty thousand ($ 16,850,000) (the
“Loan”
).
The purpose of the Loan is to
provide financing for the Borrower’s activities and investments.
An amount of
$ 12,500,000 out of the Loan has already been drawn down. A further amount of $ 4,350,000 shall be made available to the Borrower
and shall be drawn down within one Business Day from the execution of this Agreement, provided that the Borrower has repaid to
the Lender an amount of $ 4,166,166 from the amount already drawn down (such repayment to be applied against the Lender’s
obligation to make available and pay the $ 4,350,000 amount).
The Borrower
shall repay the Loan in full on the Repayment Date.
|
|
4.2.
|
Voluntary early payments
|
The Borrower
may prepay all or part of the Loan, however not in amounts or increments which less than $ 50,000 USD Fifty Thousand.
|
|
5.
|
INTEREST AND SUBORDINATION
|
The Loan is
interest free.
The Loan is
fully subordinated to a certain loan agreement concluded on 25.07.2012 between Bulk Nordic Odyssey LTD, Bulk Nordic Orion LTD and
DVB Bank SE.
All payments
to be made by Borrower hereunder shall be made to the Lender in US Dollars in same day funds on the due date to such account of
the Lender as the Lender may specify for this purpose.
All payments
to be made by the Borrower hereunder shall be made without set-off or counterclaim, or deduction due to any taxation, fees or penalties,
including but not limited to any withholding tax or Value Added Tax.
|
|
7.
|
REPRESENTATION AND WARRANTIES
|
|
|
7.1.
|
The Borrower makes the following representations and warranties to and for the benefit of the Lender:
|
|
|
(i)
|
Status: It is a limited liability company, duly incorporated and validly existing under the laws
of Bermuda;
|
|
|
(ii)
|
Powers and authority: It has the power to enter into and perform, and has taken all necessary action
to authorize the entry into, performance and delivery of this Agreement and the transactions contemplated hereby;
|
|
|
(iii)
|
Legal validity: This Agreement constitutes its legal, valid and binding obligations enforceable
in accordance with the terms hereof.
|
Except as otherwise
stated herein, all notices, requests, demands and other communications to, upon or by any party hereto shall be given or made in
writing or by registered post or facsimile transmission or e-mail and shall be duly given or made if dispatched in writing by registered
post or facsimile transmission or e-mail to the party to which such notice, request, demand or other communication is required
or permitted to be given or made under this Agreement, addressed as follows:
if to the Borrower
at
To the attention
of: Coal Freight Department
ST Shipping and
Transport Pte. Ltd
Millenia Tower
#34-01
1 Temasek Avenue
Singapore 39192
Tel: +65 6415
7700
Fax: +65 6235
7219
Email: tommy.lund@stshipping.com
With a copy
to:
Glencore International
AG
Baaremattstrasse
3
CH-6341 Baar
Switzerland
Attention: Coal
Department
Telephone: +41
41 709 2000
Fax: +41 41 709
3000
Email: baar.coalnotices@glencore.com;
richard.marshall@glencore.com;
matthew.weber@glencore.com
if to the Lender at
Third Floor,
Par La Ville Place
14 Par La Ville
Road
Hamilton, HM08
Bermuda
Tel: +1(0) 441-295-8313
Fax: +1(0) 441-292-1373
Email: sdurrant@consolidated.bm
Or at such
other addresses or facsimile number as may have been notified by the intended addressee to the other party by not less than five
(5) Business Days’ prior notice. Any notice or other communication hereunder required to be given in writing shall be duly
given by registered post or facsimile to be effective version for the purposes hereof. All such notices, requests, demands or other
communications, if duly given or made, shall be effective upon receipt.
The Lender
may at any time assign or transfer all or part of its right or obligations hereunder to any of its Affiliates, however he remains
responsible for the terms of such assignment to be identical to those of this Agreement.
This Agreement
constitutes, together with the Restructuring Agreement and the Subscription Agreement, the whole agreement of the Parties in relation
to its subject matter and supersedes any previous agreement, representations, warranties or arrangements, allegations or promises
(whether in writing or oral) between them in relation to that matter (with the exception of the Restructuring Agreement and the
Subscription Agreement). No modification of this Agreement shall be effective unless it is made in writing and signed by both Parties.
This Agreement
is private and confidential and each Party undertakes that it shall not at any time disclose to any person or entity any information
or details in relation to this Agreement except as provided in next paragraph of this clause.
Each Party
may disclose information regarding this Agreement:
|
|
(i)
|
to its employees, officers, contracted representatives or contracted advisers who need to know
such information for the purposes of carrying out the Party’s obligations under this agreement. Each Party shall ensure that
its employees, officers, contracted representatives or contracted advisers to whom it discloses the other Party’s confidential
information comply with this clause 11; and
|
|
|
(ii)
|
as it may be obliged to do by operation of law, by court order or by any governmental or regulatory
authority.
|
This Agreement
and any dispute or claim (whether contractual or otherwise) arising out of or in connection with it or its subject matter shall
be governed by and construed solely in accordance with English law.
The Parties
irrevocably agree that the High Court of London located in London is to have exclusive jurisdiction to settle any dispute which
may arise out of or in connection with this Agreement and the documents to be entered into pursuant to it. The Parties irrevocably
submit to the jurisdiction of such courts and waive any objection to proceedings in any such court on the ground of venue or on
the ground that the proceedings have been brought in an inconvenient forum.
All banking
costs and charges related to the disbursement and repayment of the Loan shall be borne by the Borrower.
This Agreement
is made in English in two originals – one the Lender and one for the Borrower.
AS WITNESSED
WHEREOF
, the parties hereto have caused this Agreement to be signed in two copies on date first above written.
|
Signed by
(
Name & Signature)
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|
|
|
|
|
for and on behalf of the
Lender
|
|
|
|
|
|
Signed by
(
Name & Signature)
|
|
|
|
|
|
for and on behalf of the
Borrower
|
|
Exhibit 10.16
LOAN AGREEMENT
October 16, 2013
Nordic Bulk Carriers AS
Tuborg Havnevej 19
Hellerup 2900
Denmark
THIS LOAN AGREEMENT (this ‘Agreement’)
is made as of October 16, 2013.
AMONG
|
|
(1)
|
Nordic Bulk Carriers AS, a company duly organized and existing under the laws of Denmark, as borrower
(the ‘Borrower’);
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|
|
(2)
|
Bulk Partners (Bermuda) Ltd., a company duly organized and existing under the laws of Bermuda,
as lender (the ‘Lender’)
|
WHEREAS, the Lender is pleased to confirm
that, subject to the following terms and conditions, they agree to make loans to the Borrower in the aggregate amount of up to
US $5,000,000.
The Notes
:
The obligation to repay the loans shall
be evidenced by the Promissory Notes (the ‘Notes’) in substantially the form of Exhibit A hereto, dated the date of
the making of the loans, payable to the order of the Lender in accordance with the repayment terms dictated by the Note.
Interest:
The Note shall bear interest from its date,
payable quarterly as stipulated in the Notes, at a rate per annum(on the basis of a 365 day year for the actual number of days
involved) equal to 5%.
Optional Prepayment:
The Borrower shall have the right, on not
less than 7 days notice, to prepay the Notes in whole at any time or in part from time to time, together with accrued interest
on the principal being prepaid to the date of prepayment.
Representation and Warranties:
The Borrower represents and warrants that:
|
|
(a)
|
This agreement constitutes the valid and legally binding obligations of the Borrower enforceable
in accordance with their terms,
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|
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(b)
|
There is no provision of any mortgage, indenture contract, or agreement binding on the Borrower
or affecting its property, which would prohibit, conflict with, or in any way prevent the execution, delivery, or carrying out
the terms of this Agreement and of the Notes.
|
Conditions of Lending
:
The obligation of the Lender to make each
loan is subject to the following conditions precedent:
|
|
(a)
|
At the time of the loan (i) the Borrower shall have complied and shall then be in compliance with
all the terms, covenants and conditions of this Agreement which are binding upon it, (ii) there shall have occurred no Event of
Default as defined below and no event which, with the giving of notice of the lapse of time, or both, would constitute an Event
of Default and (iii) the representations and warranties contained in this Agreement shall be true with the same effect as though
such representations and warranties had been made at the time of the loan.
|
Covenants:
The Borrower agrees that so long as it
may borrow under this Agreement and until the payment is full of the Notes it will give prompt written notice to the Lender of
the following:
|
|
(i)
|
Any event of Default as defined below and any event which with the giving of notice or the lapse
of time, or both, would constitute an Event of Default.
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|
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(ii)
|
Any material adverse change in the business, properties, condition (financial or other) or operations,
present or prospective, of the Borrower.
|
Events of Default:
If any of the following events (each an
“Event of Default”) shall occur:
|
|
(a)
|
Default shall be made if any payment of interest on or principal of the Notes when demanded and
payable;
|
|
|
(b)
|
Default shall be made in the due observance of performance of any other term, covenants or agreement
contained in this Agreement,
|
|
|
(c)
|
Any representation or warranty made by the Borrower herein or any statement or representation made
in any certificate, report or other document delivered in connection herewith shall prove to have been misleading in any material
respect when made;
|
|
|
(d)
|
The Borrower makes an assignment for the benefit of creditors, files a petition in bankruptcy,
is adjudicated insolvent or bankrupt under any law or statute of any jurisdiction, whether now or hereafter in effect, or if there
is commenced against the Borrower any such proceeding which remains undismissed for a period of 30 days, or the Borrower by any
act indicates its consent to, approval of or acquiescence in any such proceeding or suffers any such receivership to continue undischarged
for a period of 30 days; or
|
|
|
(e)
|
One or more judgments against the Borrower or attachments against its property, which in the aggregate
exceed $50,000 or the operations or results of which could be to interfere materially and adversely with the conduct of the business
of the Borrower, remain unpaid, unstayed on appeal, undischarged, unbonded, or undismissed for a period of 30 days;
|
then the Notes shall become and be immediately
due and payable and the obligation of the Lenders to make any or further loan hereunder shall terminate upon declaration to that
effect delivered by the Lenders to the Borrower, provided, that upon the happening of any event specified in (d), no declaration
or other notice need be given.
Miscellaneous:
|
|
(a)
|
This agreement and the rights and obligations of the parties hereunder shall be governed by the
laws of the Islands of Bermuda, as to both interpretation and performance.
|
|
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(b)
|
If any suit is instituted by the Lenders to enforce this Agreement or the Notes, the Borrower hereby
submits to jurisdiction and to the laying of venue in the Islands of Bermuda
|
If you agree to the foregoing terms and
conditions, please signify your acceptance by signing, dating and returning to us the enclosed copy of this Agreement.
|
ACCEPTED AND AGREED TO:
|
|
|
|
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|
|
NORDIC BULK CARRIERS A/S
|
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BULK PARTNERS (BERMUDA) LTD
|
|
as borrower
|
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as Lender
|
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|
|
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|
|
Mads Boye Petersen, Director
|
|
Gianni Del Signore, Controller
|
Exhibit 10.17
FACILITy AGREEMENT
TERM LOAN FACILITY OF USD 13,000,000
|
between
|
Nordic Bulk Bothnia Ltd. and Nordic Bulk Barents Ltd.
|
|
|
as Borrowers and Guarantors
|
|
|
|
|
and
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Bulk Partners (Bermuda) Ltd.
|
|
|
as Guarantor
|
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|
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and
|
Nordea Bank Danmark A/S
|
|
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as Lender
|
|
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and
|
Nordea Bank Danmark A/S
|
|
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as Agent
|
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|
|
|
re.
|
Financing of the vessels:
|
|
|
m.v. Nordic Bothnia and m.v. Nordic Barents
|
|
|
|
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dated
|
____ 2014
|
COPENHAGEN ÅRHUS LONDON BRUSSELS
KROMANN REUMERT, LAW FIRM
SUNDKROGSGADE 5, DK-2100 COPENHAGEN Ø,
DENMARK, TEL. +45 70 12 12 11, FAX +45 70 12 13 11
CONTENTS
|
1.
|
Background
|
1
|
|
2.
|
Definitions
|
1
|
|
3.
|
The FacilitY
|
14
|
|
4.
|
Purpose
|
15
|
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5.
|
Conditions for utilisation
|
15
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6.
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Utilisation
|
17
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7.
|
Interest
|
17
|
|
8.
|
Repayment
|
19
|
|
9.
|
Voluntary prepayment and cancellation
|
20
|
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10.
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Mandatory prepayment and cancellation
|
20
|
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11.
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General terms of prepayments and cancellations
|
21
|
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12.
|
Tax gross-up and Indemnities
|
21
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13.
|
FATCA
|
24
|
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14.
|
Increased costs
|
25
|
|
15.
|
Other Payment obligations
|
26
|
|
16.
|
Mitigation by the Lenders
|
28
|
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17.
|
Payment terms and procedures
|
28
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18.
|
guarantee
|
31
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19.
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Security
|
33
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20.
|
Representations and Warranties
|
34
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21.
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undertakings - The vessels
|
37
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22.
|
undertakings - insurance
|
42
|
|
23.
|
information Undertakings
|
45
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24.
|
Financial undertakings
|
46
|
|
25.
|
Other Undertakings
|
47
|
|
26.
|
Events of default
|
50
|
|
27.
|
The Agent
|
56
|
|
28.
|
Changes to the parties
|
58
|
|
29.
|
Notices
|
59
|
|
30.
|
Miscellaneous
|
60
|
|
31.
|
Law and Jurisdiction
|
60
|
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Schedule 1 - Conditions Precedent
|
63
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Schedule 2 - Payment Schedule
|
68
|
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Schedule 3 - List of Shipbrokers
|
69
|
|
Exhibit 1 - Form of Utilisation Request
|
70
|
|
Exhibit 2 - Form of Mortgage
|
71
|
|
Exhibit 3 - Form of Security Agreement
|
72
|
|
Exhibit 4 - Form of Manager's Undertaking
|
73
|
|
Exhibit 5 - Form of Share Charge
|
74
|
FACILITy AGREEMENT
TERM LOAN FACILITY OF USD 13,000,000
|
between
|
Nordic Bulk Bothnia Ltd. as Borrower and Guarantor
|
|
|
|
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And
|
Nordic Bulk Barents Ltd. as Borrower and Guarantor
|
|
|
|
|
And
|
Bulk Partners (Bermuda) Ltd. as Guarantor
|
|
|
|
|
And
|
Nordea Bank Danmark A/S as Lender
|
|
|
|
|
and
|
Nordea Bank Danmark A/S as Agent
|
THIS FACILITY AGREEMENT (the "Agreement") is made
by the above parties on ____ 2014.
|
|
1.1
|
The Vessels
. The Borrowers have entered into or will enter in a memorandum of agreement for the purchase of the Vessels
(as defined below).
|
|
|
1.2
|
The Facility
. The Lenders have agreed to grant the Facility to the Borrowers, subject to the terms and conditions of
this Agreement for the purpose of financing the Vessels.
|
|
|
1.3
|
The Charter Parties
. It is a condition for the Facility that the Vessels will be on time charter to Nordic Bulk Carrier
A/S for the full term of the Facility at a rate acceptable to the Lenders and with a profit split of at least 50/50 in favour of
the Borrowers.
|
|
|
1.4
|
The Technical Managers
. The existing technical management agreements for the Vessels will be transferred to the Borrowers
at their cost on delivery. It is assumed that the technical management of the Vessels will be transferred to Seamar Management
S.A. (a subsidiary of Bulk Partners (Bermuda) Ltd.) at a later stage.
|
|
|
2.1
|
Definitions
. In this Agreement, unless the context otherwise requires:
|
"
Additional Security
" means security
in such form as the Agent in its discretion may approve and which may be accepted by the Finance Parties as security for the Borrowers'
obligations under the Agreement;
"
Affiliate
" means in respect of
a company (the "Relevant Company")
|
|
a)
|
any Parent of the Relevant Company and any other Subsidiary of such Parent; and
|
|
|
b)
|
any Subsidiary of the Relevant Company;
|
"
Agent
" means Nordea Bank Danmark
A/S a company incorporated under the laws of Denmark with registration number 13522197 and having its registered office at Strandgade
3, 1401 København K and its successors and assignees;
"
Agreement
" means this facility
agreement including its Schedules as amended, supplemented and varied from time to time;
"
Applicable Margin
" means 2.50%
(two point fifty per cent) per annum;
"
Banking Day
" means a day on which
dealings are carried on in the Copenhagen interbank market and on which banks are open for all banking business in London and New
York.
"
Borrowers
" means
|
|
a)
|
Nordic Bulk Bothnia Ltd., a company incorporated under the laws of Bermuda with registration number 48365 and having its registered
office at 3rd Floor, Par la Ville Place, 14 Par la Ville Road, Hamilton HM08, Bermuda; and
|
|
|
b)
|
Nordic Bulk Barents Ltd, a company incorporated under the laws of Bermuda with registration number 48367 and having its registered
office at 3rd Floor, Par la Ville Place, 14 Par la Ville Road, Hamilton HM08, Bermuda;
|
"
Breakage Costs
" means the amount
(if any) by which:
|
|
a)
|
the interest (excluding the Applicable Margin) which a Lender should have received for the period from the date of receipt
of all or any part of its Participation in a Loan to the last day of the current Interest Period in respect of that Loan, had the
principal amount 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 received by it on deposit
with a leading bank in the relevant interbank market for a period starting on the Banking Day following receipt or recovery and
ending on the last day of the current Interest Period;
|
"
Charterer
" means Nordic Bulk Carriers
A/S, a company incorporated under the laws of Denmark with registration number 32081487 and having its registered office at Tuborg
Havnevej 4, 1., 2900 Hellerup;
"
Charter Parties
" means the time
charter parties entered into or to be entered into between each of the Borrowers and the Charterer and in respect of the Vessels,
such Charter Parties to be in a form and substance acceptable to the Agent.
"
Code
" means the US Internal Revenue
Code of 1986.
"
Commitment Period
" means the period
from the date of this Agreement to 31 January 2014 unless extended by the Lenders;
"
Commitment
" means USD 13,000,000
as repaid, reduced or cancelled in accordance with the Agreement;
"
Costs
" means all documented costs,
expenses, disbursements, payments, charges, losses, demands, claims, liabilities, penalties, fines, damages, judgments, orders,
sanctions, taxes, fees (including court fees and legal fees) and any other outgoings of whatever nature;
"
Deposit Accounts
" means the Borrowers'
USD bank accounts with account numbers 5036462207 (Nordic Bulk Bothnia Ltd.) and 5036462223 (Nordic Bulk Barents Ltd.) and IBAN
no.'s DK29200005036462207 (Nordic Bulk Bothnia Ltd.) and DK29200005036462223 (Nordic Bulk Barents Ltd.) held with the Agent;
"
Earnings
" means all money whatsoever
due or to become due to or for the account of any of the Borrowers or the Charterer at any time arising out of the use or operation
of the Vessels or any of them or otherwise in connection with the Vessels or any of them including (but not limited to) all freight,
hire, damages, liquidated damages, compensation, agreed compensation, passage money, demurrage, detention money and any other rights
or benefits:
|
|
a)
|
under any of the Charter Parties, any
Vessel Employment Contract or any Pool Agreement;
|
|
|
b)
|
in respect of any salvage or towage services;
|
|
|
c)
|
under any Insurance in respect of loss of Earnings; and/or
|
|
|
d)
|
in the event of requisition of the Vessels or any of them for hire;
|
"
Earnings Accounts
" means the Borrowers'
USD bank accounts with account numbers 5036462215 (Nordic Bulk Bothnia Ltd.) and 5036462231 (Nordic Bulk Barents Ltd.) and IBAN
no.'s DK1720005036462215 (Nordic Bulk Bothnia Ltd.) and DK29200005036462231 (Nordic Bulk Barents Ltd.) held with the Agent;
"
Environment
" means humans, animals,
plants and all other living organisms including the ecological systems of which they form part and the following media:
|
|
a)
|
air (including, without limitation, air within natural or man-made structures, whether above or below ground);
|
|
|
b)
|
water (including, without limitation, territorial, coastal and inland waters, water under or within land and water in drains
and sewers); and
|
|
|
c)
|
land (including, without limitation, land under water);
|
"
Environmental Claim
" means any
claim, proceeding, formal notice or investigation by any person in respect of any Environmental Law;
"
Environmental Law
" means any applicable
law or regulation which relates to:
|
|
a)
|
the pollution or protection of the Environment;
|
|
|
b)
|
the conditions of the workplace; or
|
|
|
c)
|
the generation, handling, storage, use, release or spillage of any substance which, alone or in combination with any other,
is capable of causing harm to the Environment, including, without limitation, any waste;
|
"
Environmental Permits
" means any
permit and other authorisation and the filing of any notification, report or assessment required under any Environmental Law for
the operation of the business of the Obligors;
"
Event of Default
" means any of
the events listed in Clause 26.1 (Events of Default);
"
Excess Cash
" means the Free Cash
of the Borrowers on each day falling 3 Banking Days before each Repayment Date less the interest and the instalment due under this
Agreement on such Repayment Date;
"
Facility
" means the term loan facility
as described in Clause 3.1 (The Facility) of the Agreement as the same may from time to time be reduced or cancelled;
"
Fair Market Value
" means the fair
market value of the Vessels which shall be determined at any such time as the Agent may determine based on the average of 2 (two)
valuations by independent sale and purchase shipbrokers as may from time to time be appointed by the Agent from the list set out
in Schedule 3 - List of Shipbrokers.
The valuations shall be made with or without physical
inspection of the Vessels (as the Agent may decide), on the basis of a sale for prompt delivery for cash at arm's length on normal
commercial terms as between a willing seller and a willing buyer, and on an "as is where is" basis free of any existing
charter or other contract of employment. If it is not possible for the shipbrokers to determine the market value on a willing seller/willing
buyer basis, the valuations shall be based on the shipbrokers estimates.
If any of the shipbrokers listed in Schedule 3 -
List of Shipbrokers are in the Agent’s discretion unable or unwilling to perform the valuation of the Vessels, or if either
of them ceases to conduct their business, the Agent shall appoint new shipbrokers.
"
FATCA
" means:
|
|
a)
|
sections 1471 to 1474 of the Code or any associated regulations or other official guidance;
|
|
|
b)
|
any treaty, law, regulation or other official guidance enacted in any other juris-diction, or relating to an intergovernmental
agreement between the US and any other jurisdiction, which (in either case) facilitates the implementation of paragraph (a) above;
or
|
|
|
c)
|
any agreement pursuant to the implementation of 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 int erest 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 2017;
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 2017,
|
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.
"
FATCA FFI
" means a foreign financial
institution as defined in section 1471(d)(4) of the Code which, if any Finance Party is not a FATCA Exempt Party, could be required
to make a FATCA Deduction.
"
FATCA payment
" means either:
|
|
a)
|
the increase in a payment made by an Obligor to a Finance Party under Clause 13.9 (FATCA Deduction and gross-up by Obligor)
or paragraph (b) of Clause 13.10 (FATCA Deduction by Finance Party); or
|
|
|
b)
|
a payment under paragraph (d) of Clause 13.10 (FATCA Deduction by Finance Party).
|
"
Final Repayment Date
" means 15
December 2019;
"
Finance Documents
" means the Agreement
and the Security Documents and any other document designated as a Finance Document by the Agent and the Borrowers;
"
Finance Parties
" means the Lenders
and the Agent;
"
Financial Indebtedness
" means any
indebtedness for or in respect of:
|
|
b)
|
any debit balances at banks or other financial institutions;
|
|
|
c)
|
any acceptance under any acceptance credit or bill discounting facility (or dematerialised equivalent);
|
|
|
d)
|
any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument;
|
|
|
e)
|
any financial or capital leases;
|
|
|
f)
|
receivables sold or discounted (other than any receivables to the extent they are sold on a non-recourse basis);
|
|
|
g)
|
any Treasury Transaction;
|
|
|
h)
|
any counter-indemnity obligation in respect of a guarantee, bond, standby or documentary letter of credit or any other instrument
issued by a bank or financial institution;
|
|
|
i)
|
any amount raised by the issue of redeemable shares which are redeemable;
|
|
|
j)
|
any amount of any liability under an advance or deferred purchase agreement if (i) one of the primary reasons behind entering
into the agreement is to raise finance or to finance the acquisition or construction of the asset or service in question or (ii)
the agreement is in respect of the supply of assets or services and payment is due more than 60 days after the date of supply;
|
|
|
k)
|
any amount raised under any other transaction (including any forward sale or purchase, sale and sale back or sale and leaseback
agreement) having the commercial effect of a borrowing or otherwise classified as borrowings under the GAAP; and
|
|
|
l)
|
the amount of any liability in respect of any guarantee for any of the items referred to in paragraphs a) to k) above.
|
"
Free Cash
" means any cash held
by any of the Borrowers on the Earnings Account with the Agent excluding any amounts on the Deposit Accounts.
"
Freight Account
" means the Charterer's
USD bank account with account number 5036462258 and IBAN no. DK29200005036462258 held with the Agent;
"
GAAP
" means generally accepted
accounting principles in the United States;
"
Guarantee
" means the guarantee
as set out in Clause 18.1 (Guarantee);
"
Guarantors
" means the Borrowers
and the Shareholder;
"
Indebtedness
" means the aggregate
of all amounts from time to time outstanding, due, owing or payable to the Finance Parties from any of the Obligors (whether as
principal or surety) whether actually or contingently under the terms of the Finance Documents and/or in connection therewith (including
without limitation by way of principal, interest, default interest, other fees, Breakage Costs, transaction and enforcement costs
(including legal fees) and any other Costs, Taxes, Tax indemnities, currency indemnities and any other indemnities and all claims
for damages and other Costs in respect of any Event of Default or any other breach or default by an Obligor under the Finance Documents);
"
Insurance
" means all policies and
contracts of insurance (including any Borrower's right under all entries in any protection and indemnity association or Club) which
are from time to time taken out by or on behalf of the Borrowers or any of them in respect of the Vessels (or any of them) or their
Earnings (including all the benefits thereof, any claims of whatsoever nature, and in all moneys or proceeds arising or payable
therefrom) including without limitation any and all Insurance taken out pursuant to Clause 22 (Undertakings - Insurance);
"
Interest Payment Date
" means each
Repayment Date;
"
Interest Period
" means each of
the Interest Periods as described in Clause 7.3 (Interest Periods) of the Agreement;
“
Interpolated Screen Rate
” means,
in relation to LIBOR for any Loan, the rate (rounded to the same number of decimal places as the three 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 that Loan; and
|
|
|
(b)
|
the applicable Screen Rate for the shortest period (for which that Screen Rate is available) which exceeds the Interest Period
of that Loan,
|
each as of 10.00 a.m. 2 (two) Banking Days before
the relevant Interest Period.
"
Lenders
" means Nordea Bank Danmark
A/S, a company incorporated under the laws of Denmark with registration number 13522197 and having its registered office at Strandgade
3, 1401 København K and any New Lender.
"
LIBOR
" means, in relation to any
Loan:
|
|
a)
|
the applicable Screen Rate; or
|
|
|
b)
|
(if no Screen Rate is available for the Interest Period of that Loan) the Interpolated Screen Rate for that Loan; or
|
as of 10.00 a.m. 2 (two) Banking Days before the
first day of the relevant Interest Period for the offering of deposits in the currency of that Loan and for a period comparable
to the Interest Period for that Loan.
"
Loan
" means each loan under the
Facility allocated to a Vessel as set out in Clause 3.2 (Loans) made or to be made to a Borrower or, as the case may be, the outstanding
principal amount of any such loan;
"
Management Agreement
"
means any agreement entered into by any Borrower for any technical or commercial management of any of the Vessels or for the administration
of any part of any Borrower's business;
"
Managers
" means
any corporate manager, technical manager or commercial manager (other than the Borrowers) nominated as corporate, commercial or
technical manager by the Borrowers and approved by the Lenders. Seamar Management S.A. has been approved as technical manager;
"
Market Disruption
" has the meaning
given to it in Clause 7.5 of the Agreement;
"
Mortgage
" means each of the first
priority ship mortgages granted or to be granted over the Vessels in favour of the Finance Parties and a deed of covenants collateral
thereto, if customary in the jurisdiction of the Ship Registry, in the form set out in Exhibit 2 - Form of Mortgage, or such other
form and substance satisfactory to the Agent;
"
New Lender
" shall have the meaning
set out in Clause 28.1 (Assignment by a Lender) of the Agreement;
"
Obligors
" means the Borrowers and
the Guarantors;
"
Parent
" means any person, company
or other entity, which directly or indirectly holds or controls the majority of the shares or voting rights in another company
or entity;
"
Participation
" means in relation
to a Lender, the part of the Loans made available or to be made available by that Lender and thereafter the part of the Loans owing
to that Lender from time to time;
"
Party
" means a party to this Agreement;
"
Permitted Liens
" means such maritime
liens, retention rights or similar rights against any of the Vessels in favour of third parties which may arise in the ordinary
course of operating any of the Vessels, provided however that such rights represent a Permitted Lien only if the underlying debt
or payment obligation (i) has not yet fallen due for payment, or (ii) has been contested in good faith by the Obligors by legal
action;
"
Pool Agreements
" means any agreement
or other arrangement entered into by any Borrower or the Charterer concerning the sharing of any Earnings and/or expenses relating
to any of the Vessels;
"
Potential Event of Default
" means
any event which with the giving of notice, lapse of time, determination of materiality or other condition would constitute an Event
of Default;
"
Prohibited Person
" means a person
that is:
|
|
a)
|
listed on, or owned or controlled by a person listed on, or acting on behalf of a person listed on, any Sanctions List;
|
|
|
b)
|
located in, incorporated under the laws of, or owned or (directly or indirectly) controlled by, or acting on behalf of, a person
located in or organised under the laws of a country or territory that is the target of country-wide or territory-wide Sanctions;
or
|
|
|
c)
|
otherwise a target of Sanctions (namely a person with whom a US person or other national under the jurisdiction of a Sanctions
Authority would be prohibited or restricted by law from engaging in trade, business or other activities).
|
"
Regulations
" means 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 of any regulatory, self-regulatory or other authority or organisation, including capital
adequacy requirements;
"
Repayment Date
" means each 15 March,
15 June, 15 September and 15 December. If a Repayment Date would otherwise not be a Banking Day, such Repayment Date shall be the
next succeeding Banking Day;
"
Sanctions
" means the economic sanctions,
laws, regulations, embargoes or restrictive measures administered, enacted or enforced by any Sanctions Authority (whether or not
any Obligor or any Affiliate of any Obligor is legally bound to comply with such laws, regulations, embargoes or measures).
"
Sanctions Authority
" means any
of:
|
|
a)
|
the United States of America;
|
|
|
b)
|
the United Nations; or
|
and includes any government entity of any of the
above, including, without limitation, the Office of Foreign Assets Control of the US Department of Treasury (OFAC), the United
States Department of State, the United Nations Security Council or the European Union.
"
Sanctions List
" means:
|
|
a)
|
the "Specially Designated Nationals and Blocked Persons" list maintained by OFAC;
|
|
|
b)
|
the Consolidated List of persons, groups and entities subject to the European Union financial sanctions; or
|
|
|
c)
|
any similar list maintained by, or public announcement of Sanctions designation made by, any other Sanctions Authority.
|
"
Schedules
" mean the Schedules to
the Agreement as listed under the content list of the Agreement;
"
Screen Rate
" means LIBOR, the British
Bankers' Association Interest Settlement Rate for the relevant currency and period displayed on the appropriate page of the Reuters
screen. If the agreed page is replaced or service ceases to be available, the Agent may specify another page or service displaying
the appropriate rate after consultation with the Shareholder and the Lenders.
"
Security Agreement
" means any security
agreement entered into or to be entered into between (i) the Borrowers, (ii) the Lenders, (iii) the Agent in the form set out in
Exhibit 3 - Form of Security Agreement or such other form as agreed by the Agent as amended, supplemented and varied from time
to time including its schedules;
"
Security Documents
" means the documents
listed in Clause 19.1 (Security Documents), and any other agreement or document that may be executed at any time by any Obligor
or any other person or entity as security for all or any part of the Indebtedness;
"
Security Interest
" means a mortgage,
charge, pledge, lien or other security interest securing any obligation of any person or any other agreement or arrangement having
similar effect;
"
Sellers
" means
|
|
a)
|
K/S Danskib 78, a company incorporated under the laws of Denmark with registration no. 31635098 and having its registered office
c/o Investeringsgruppen Danmark A/S, Tuborg Havnevej 18, 1, 2900 Hellerup, in respect of m.v. Nordic Bothnia; and
|
|
|
b)
|
K/S Danskib 80 a company incorporated under the laws of Denmark with registration no. 32151434 and having its registered office
c/o Investeringsgruppen Danmark A/S, Tuborg Havnevej 18 1, 2900 Hellerup, in respect of m.v. Nordic Barents.
|
"
Shareholder
" means Bulk Partners
(Bermuda) Ltd., a company incorporated under the laws of Bermuda with registration number 42004 and having its registered office
at 3rd Floor, Par la Ville Place, 14 Par la Ville Road, Hamilton HM08, Bermuda;
"
Ship Registry
" means the Panama
Ship Registry or such other ship registry as may be approved by the Lenders;
"
Subsidiary
" means a company or
other entity in which a person, a company or any other entity from time to time directly or indirectly holds or controls the majority
of the shares or the voting rights;
"
Taxes
" means all present and future
taxes, levies, imposts, duties, charges, fees, deductions and withholdings, and any restrictions and or conditions resulting in
a charge (other than taxes on the overall net income of the Lenders);
"
Total Loss
" means in relation to
a Vessel:
|
|
a)
|
the actual, agreed, constructive, compromised or arranged total loss of the Vessel;
|
|
|
b)
|
the abandonment or condemnation of the Vessel;
|
|
|
c)
|
the requisition for title or other compulsory acquisition, appropriation, expropriation, deprivation, forfeiture or confiscation
for any reason of the Vessel by any government entity or other competent authority, whether de jure or de facto;
|
|
|
d)
|
the hijacking, theft, capture or seizure of the Vessel, unless the Vessel be released and restored to the relevant Obligor
from such hijacking, theft, capture or seizure within 30 (thirty) days after the occurrence thereof;
|
“
Total Loss Date
” means, in relation
to a Vessel:
|
|
a)
|
in the case of an actual loss of such Vessel, the date on which it occurred or, if that is unknown, the date when such Vessel
was last heard of;
|
|
|
b)
|
in the case of a constructive, compromised, agreed or arranged total loss of such Vessel, 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 owner of such Vessel with such Vessel's insurers
in which the insurers agree to treat such Vessel 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;
|
"
Transfer
" shall have the meaning
set out in Clause 28.1 (Assignment by a Lender) of the Agreement;
"
Treasury Transactions
" means any
derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price.
"
Utilisation
" means a utilisation
of the Facility;
"
Utilisation Date
" means the Banking
Day upon which a Borrower has requested that a Loan be advanced to it or, as the context requires, the date on which such Loan
is actually advanced;
"
Utilisation Request
" means a notice
substantially in the form set out in Exhibit 1 - Form of Utilisation Request;
"
US Tax Obligor
" means:
|
|
a)
|
a Borrower which is resident for tax purposes in the United States of America; or
|
|
|
b)
|
an Obligor some or all of whose payments under the Finance Documents are from sources within the United States for US federal
income tax purposes.
|
"
Vessel Employment Contracts
" means
any bareboat, time or voyage charter, contract of affreightment, bill of lading, pooling arrangement or other contract for the
employment or operation of the Vessels or any of them or any other agreements concerning the transport of any cargo on board the
Vessels;
"
Vessels
" means each of the following
vessels:
|
Vessel
|
|
Owner
|
|
Ship Registry
|
|
IMO No.
|
|
m.v. Nordic Bothnia
|
|
Nordic Bulk Bothnia Ltd.
|
|
Panama
|
|
9079157
|
|
m.v. Nordic Barents
|
|
Nordic Bulk Barents Ltd.
|
|
Panama
|
|
9079169
|
and such other vessels as may, from time to time,
be approved by the Finance Parties and mortgaged in favour of the Finance Parties as security for the Indebtedness, in each case
until the Mortgage relating to such Vessel has been deleted in the appropriate Ship Registry (as far as such Vessel is concerned).
|
|
2.2
|
Construction
. In the Agreement, unless the context otherwise requires,
|
|
|
a)
|
the "
Agent
", any "
Finance Party
", any "
Lender
", any "
Obligor
"
or any "
Party
" shall be construed so as to include its successors in title, permitted assigns and permitted transferees;
|
|
|
b)
|
"
assets
" includes present and future properties, revenues and rights of every description;
|
|
|
c)
|
a "
Finance Document
" or any other agreement or instrument is a reference to that Finance Document or other
agreement or instrument as amended, novated, supplemented, extended or restated;
|
|
|
d)
|
"
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;
|
|
|
e)
|
references to a "
person
" includes any person, individual, firm, partnership, joint venture, company, corporation,
trust, fund, body corporate, unincorporated body of persons, or any state or any agency of a state or association (whether or not
having separate legal personality);
|
|
|
f)
|
a provision of law is a reference to that provision as amended or re-enacted;
|
|
|
g)
|
a time of day is a reference to Copenhagen time;
|
|
|
h)
|
words denoting the singular number shall include the plural and vice versa;
|
|
|
i)
|
all references to the Clauses, Schedules and Exhibits are references to the clauses, schedules and exhibits to this Agreement;
|
|
|
j)
|
clause and schedule headings are for ease of reference only and shall not be considered when construing the terms of the Agreement;
and
|
|
|
k)
|
an Event of Default is "
continuing
" if it has not been remedied or waived.
|
|
|
3.1
|
The Facility
. Subject to the terms of this Agreement, the Lenders agree to make available to the Borrowers a term loan
facility in the amount of USD 13,000,000 (in writing: United States Dollars thirteen million).
|
|
|
3.2
|
Loans
. A Loan will be allocated to each of the Vessels and borrowed by each of the Borrowers as follows:
|
|
Vessel
|
|
Loan
|
|
Borrower
|
|
m.v. Nordic Bothnia
|
|
USD 6,500,000
|
|
Nordic Bulk Bothnia Ltd.
|
|
m.v. Nordic Barents
|
|
USD 6,500,000
|
|
Nordic Bulk Barents Ltd
|
|
|
3.3
|
Finance Parties' obligations several
. The obligations of each Finance Party under the Finance Documents are several.
Failure by a Finance Party to perform its obligations does not affect the obligations of any other Finance Party or the Obligors
under the Finance Documents. No Finance Party is responsible for the obligations of any other Finance Party under the Finance Documents.
|
|
|
3.4
|
Force majeure
. A Finance Party can in no circumstances be made liable for damage or loss due to legal provisions, public
measures or the like, actual or imminent war or similar situations, revolt, civil unrest, lock-out, natural catastrophe, Acts of
God, computer breakdowns or acts or omissions by third parties, who are beyond such Finance Party's direct control, including strike,
boycott or blockades, all irrespective of whether such party is a party to conflicts arising and have given cause to such conflicts
and irrespective of whether conflicts arising affect only such Finance Party or any part of the functions of the Finance Party
in question.
|
|
|
3.5
|
Obligors' agent
. Each Obligor (other than the Shareholder), by its execution of this Agreement, irrevocably appoints
the Shareholder to act on its behalf as its agent in relation to the Finance Documents and irrevocably authorises:
|
|
|
a)
|
the Shareholder 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, in the case of a Borrower, Utilisation Requests), to make such agreements
and to effect the relevant amendments, supplements and variations capable of being given, made or effected by any Obligor notwithstanding
that they may affect the Obligor, without further reference to or the consent of that Obligor; and
|
|
|
b)
|
each Finance Party to give any notice, demand or other communication to that Obligor pursuant to the Finance Documents to the
Shareholder,
|
and in each case the Obligor shall be bound as though
the Obligor 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.
Every act, omission, agreement, undertaking, settlement,
waiver, amendment, supplement, variation, notice or other communication given or made by the Shareholder or given to the Shareholder
under any Finance Document on behalf of another Obligor or in connection with any Finance Document (whether or not known to any
other Obligor and whether occurring before or after such other Obligor became an Obligor under any Finance Document) shall be binding
for all purposes on that Obligor as if that Obligor had expressly made, given or concurred with it. In the event of any conflict
between any notices or other communications of the Shareholder and any other Obligor, those of the Shareholder shall prevail.
|
|
4.1
|
The purpose
. The amounts borrowed under the Facility shall be used for financing the Vessels in connection with the
Borrowers acquisition thereof from the Sellers.
|
|
|
5.
|
Conditions for utilisation
|
|
|
5.1
|
Maximum number of Utilisations
. The Facility may be drawn in two Loans, one in connection with the delivery of each
Vessel.
|
|
|
5.2
|
3 Banking Days prior to first Utilisation
. The Borrowers may not deliver a Utilisation Request and no Finance Party
shall be under any obligation to accept or act in accordance with a Utilisation Request unless the Agent has received, in form
and substance satisfactory to the Agent and all Lenders, all of the documents and other evidence listed in Part A of Schedule 1
- Conditions Precedent not later than 10.00 a.m., Copenhagen Time, 3 (three) Banking Days prior to the first Utilisation Date.
|
|
|
5.3
|
Simultaneously with each Utilisation
. No Lender has any obligation to make available any Loan in respect of a Vessel
unless the Agent has received, in form and substance satisfactory to the Agent all of the documents and other evidence listed in
Part B of Schedule 1 - Conditions Precedent in respect of such Vessel no later than simultaneously with the Utilisation of such
Loan.
|
|
|
5.4
|
Further conditions precedent
. The Lenders will only be obliged to make available their participation in a Utilisation
if on the date of the Utilisation Request and on the proposed Utilisation Date:
|
|
|
a)
|
the representations of the Obligors under the Finance Documents are true and accurate with respect to the circumstances existing
at that date and will in all material respects be true and correct immediately after the relevant Utilisation; and
|
|
|
b)
|
the position of the Obligors has not materially deteriorated financially or otherwise in the Agent's opinion; and
|
|
|
c)
|
no Event of Default or Potential Event of Default has occurred and is continuing or would result from the utilisation; and
|
|
|
d)
|
no unforeseen occurrences or changes in legislation or events outside the control of the Lenders either preventing the Lenders
from advancing or funding the Utilisation; and
|
|
|
e)
|
all fees and legal costs which have become due and payable under this Agreement have been paid; and
|
|
|
f)
|
the Agent has received such additional documents, opinions, certificates authorisations or assurances as the Agent may reasonably
require.
|
|
|
5.5
|
Waiver of conditions precedent
. The conditions specified in this Clause 5 (Conditions for Utilisation) are solely for
the benefit of the Lenders and may be waived in whole or in part and with or without conditions by the Agent.
|
|
|
5.6
|
Confirmation
. The Agent will promptly notify the Lenders when the Agent considers that the conditions have been satisfied
and the other Lenders shall at the request of the Agent confirm whether they consider such conditions precedent as being fulfilled.
|
|
|
6.1
|
Delivery of a Utilisation Request
. A Borrower may utilise the Facility by delivery to the Agent of a duly completed
Utilisation Request in the form set out in Exhibit 1 - Form of Utilisation Request not later than 10:00 a.m. Copenhagen time 3
(three) Banking Days prior to the proposed Utilisation Date, which must be a Banking Day.
|
If the conditions set out in this Agreement have
been met, the Lenders shall make each Loan available by the relevant Utilisation Date
|
|
6.2
|
Distribution of Loan proceeds
. The proceeds of each Loan shall first be used for payment directly to the Sellers towards
settlement of the purchase price for the relevant Vessel.
|
|
|
6.3
|
Cancellation of Commitment
. Any part of the commitment which is unutilised at the end of the Commitment Period shall
be immediately cancelled.
|
|
|
7.1
|
Interest rate
. Subject to Clause 7.5 (Market Disruption), the rate of interest applicable to each Loan for each Interest
Period applicable to such Loan shall be the rate per annum calculated by the Agent as the aggregate of USD 3 months LIBOR and the
Applicable Margin.
|
|
|
7.2
|
Payment of interest
. The Borrowers shall pay accrued interest on each Loan in arrears on each Interest Payment Date
in respect of such Loan.
|
|
|
7.3
|
Interest Periods
. Interest Periods for each Loan shall be determined as follows:
|
|
|
a)
|
Duration
. The Interest Periods in respect of each Loan shall be 3 (three) months or such other period as the Borrowers
and the Agent acting upon instructions of all Lenders may agree. Each three months Interest Period shall end on a Repayment Date.
|
|
|
b)
|
First Interest Period for each Loan
. Notwithstanding the aforesaid, the first Interest Period for each Loan shall be
from and including the Utilisation Date of such Loan to the first Repayment Date.
|
|
|
c)
|
Non-Banking Day
. If an Interest Period would otherwise end on a day, which is not a Banking Day, such Interest Period
shall end on the next succeeding Banking Day in that calendar month (if there is one) or the immediately preceding Banking Day
(if there is not).
|
|
|
d)
|
No corresponding day
. If an Interest Period commences on the last Banking Day of a calendar month or if there is no
corresponding day in the month in which it is to end, it shall end on the last Banking Day of the relevant calendar month.
|
|
|
e)
|
Final Repayment Date
. No Interest Period may extend beyond the Final Repayment Date.
|
|
|
f)
|
Notification
. The Agent will notify the Lenders of the Interest Periods and each rate of interest determined in accordance
with this Agreement upon the determination thereof.
|
|
|
7.4
|
Default rate
. If an Obligor fails to pay to any Finance Party any part of the Indebtedness due under the Finance Documents
promptly when due, the Obligor shall, from the date when such part of the Indebtedness fell due, pay interest on the unpaid sum
in the currency in which it fell due up to the date of actual payment, at a rate which is LIBOR plus a margin of 5 % (five per
cent) per annum for such interest periods as the Agent may decide. Any interest accruing under this Clause 7.4 shall be immediately
payable by the Obligor on demand by the Agent.
|
|
|
7.5
|
Market disruption
. If a Market Disruption Event occurs in relation to a Loan for any Interest Period, then the rate
of interest on each Lender's share of that Loan for the Interest Period shall be the percentage rate per annum which is the sum
of:
|
|
|
a)
|
the Applicable Margin; and
|
|
|
b)
|
the rate notified to the 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 that Loan from whatever source it may reasonably select.
|
In this Agreement "
Market Disruption Event
"
means:
|
|
a)
|
at or about noon 2 (two) Banking Days before commencement of the relevant Interest Period neither the Screen Rate nor the Interpolated
Screen Rate is available for the relevant currency and Interest Period; or
|
|
|
b)
|
before close of business in Copenhagen 2 (two) Banking Days before the relevant Interest Period, the Agent receives notification
from a Lender that the Lender determines that the cost to it for funding the Loan from whatever source it may select would be in
excess of LIBOR.
|
|
|
7.6
|
Alternative basis of interest or funding
. If a Market Disruption Event occurs and the Agent or the Shareholder so requires,
the Agent and the Shareholder shall enter into negotiations (for a period of not more than ten days) with a view to agreeing a
substitute basis for determining the rate of interest. Any alternative basis agreed pursuant to this Clause shall, be subject to
the consent of all the Lenders and the Shareholder.
|
|
|
8.1
|
Repayment
. Each Borrower shall repay each Loan on the Repayment Dates to the Lenders through the Agent by instalments,
each in an amount of USD 156,250, and a balloon payment of USD 2,750,000 payable on the Final Repayment Date as set out in Schedule
2 - Payment Schedule. The first instalment on each Loan shall be paid on 15 March 2014.
|
|
|
8.2
|
Cash sweep
. For each Borrower in respect of each Loan, commencing on 15 March 2014, any Excess Cash of such Borrower
on any Repayment Date (as calculated by the Agent three Banking Days prior to the relevant Repayment Date) in excess of USD 750,000
shall be applied towards prepayment of the relevant Loan, but shall not be subject to any Breakage Costs, considering that payment
is made on a Repayment Date.
|
Any such prepayment shall be applied
against the instalments on each Loan in inverse order of maturity, so that the balloon payment is prepaid first.
The cash sweep shall be made simultaneously
with the payment of instalments and interest on the relevant Repayment Date and the Obligors hereby authorise the Agent to apply
the Excess Cash as set out in this Clause 8.2.
Each Borrower shall no later than
two Banking Days prior to each Repayment Date provide the Agent with a calculation of the Excess Cash on such Repayment Date.
|
|
8.3
|
Profit split
. A 80/20 profit split has been agreed between the Borrowers and Lenders in respect of the proceeds from
the Borrowers' sale of the Vessels after:
|
|
|
a)
|
any brokers commissions related to such sales excluding any brokers commissions payable to the Shareholder or any of its Affiliates
in connection with such sale;
|
|
|
b)
|
repayment of the Loans and any other Indebtedness under this Agreement; and
|
|
|
c)
|
the Shareholder has received a return on the equity invested by the Shareholder in the Borrowers of 17.50% per annum.
|
Accordingly, 20% of any proceeds
from the sale of both of the Vessels after deduction of the amounts listed under a) to c) above shall be paid to the Agent for
the account of the Lenders.
On the date of completion of the
sale of a Vessel, the purchase price for the Vessel shall be paid in full into the applicable Deposit Account (subject to payment
of any broker fees agreed by the Agent) and be used firstly to repay the Indebtedness and secondly any excess amount shall be applied
towards payment of the amount set out in paragraph c) above and thirdly any excess amount shall be shared between the Lenders and
the Shareholder with 20% to the Lender and 80% to the Shareholder.
|
|
8.4
|
Final Repayment Day
. The Facility shall be repaid in full no later than on the Final Repayment Date of the Facility.
|
|
|
9.
|
Voluntary prepayment and cancellation
|
|
|
9.1
|
Voluntary prepayment
. A Borrower may, by giving the Agent not less than 14 (fourteen) Banking Days prior written notice,
prepay the whole or part of a Loan on an Interest Payment Date, provided that such prepayment is in a minimum amount of USD 1,000,000
(in writing: United States Dollars one million).
|
|
|
9.2
|
Voluntary cancellation
. A Borrower may, by giving the Agent not less than 14 (fourteen) Banking Days prior written notice,
cancel all or part of the Facility, but if in part, in a minimum of USD 1,000,000 (in writing: United States Dollars one million).
|
|
|
9.3
|
Notice irrevocable
. Any notice of prepayment or cancellation by a Borrower shall be irrevocable, shall specify the date
on which the prepayment or cancellation is to be made and the amount of the prepayment or cancellation, and shall oblige the relevant
Borrower to make that prepayment or cancellation. The Agent shall promptly notify the Lenders of receipt of any such notice.
|
|
|
10.
|
Mandatory prepayment and cancellation
|
|
|
10.1
|
Sale of a Vessel
. In the event of a sale of a Vessel, the Loan relating to such Vessel shall be automatically cancelled
and the relevant Borrower shall prepay the Loan relating to such Vessel in full no later than simultaneously with the transfer
of title to the Vessel. The remaining proceeds of such sale of a Vessel, if any, shall be applied to prepay and cancel the Loan
relating to the other Vessel.
|
|
|
10.2
|
Total Loss
. If a Vessel becomes a Total Loss, the Loan allocated to such Vessel shall be cancelled and the relevant
Borrower shall prepay the Loan relating to such Vessel, no later than:
|
|
|
a)
|
within 1 (one) month after the Total Loss Date in respect of such Total Loss, if and to the extent that such prepayment, in
the reasonable opinion of the Agent, is not covered by insurance proceeds payable in respect of such Total Loss; and
|
|
|
b)
|
if and to the extent such prepayment is covered by insurance in the reasonable opinion of the Agent, on the earlier of
|
|
|
i)
|
the date on which payment is received from the insurers and
|
|
|
ii)
|
6 (six) months after the Total Loss Date, provided, however, that such period shall be extended to 12 (twelve) months after
the Total Loss Date, if the Agent receives such confirmation of cover from the relevant insurers as the Agent may reasonably require.
|
The remaining insurance proceeds, if any, shall be
applied to prepay and cancel the Loan relating to the other Vessel.
|
|
10.3
|
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 any Loan:
|
|
|
a)
|
that Lender shall promptly notify the Agent upon becoming aware of that event;
|
|
|
b)
|
upon the Agent notifying the Borrowers, the Commitment of that Lender will be immediately cancelled; and
|
|
|
c)
|
the Borrowers shall repay that Lender's participation in the Loans made to the Borrowers on the last day of the Interest Period
for each Loan occurring after the Agent has notified the Borrowers or, if earlier, the date specified by the Lender in the notice
delivered to the Agent (being no earlier than the last day of any applicable grace period permitted by law).
|
To the extent possible pursuant to the relevant Regulation,
the affected Lender, the Agent and the Shareholder shall in good faith negotiate for a period of 30 (thirty) days in order to seek
to restructure the Facility to avoid any illegality.
|
|
11.
|
General terms of prepayments and cancellations
|
|
|
11.1
|
Application
. Except for prepayments or cancellations pursuant to Clauses 10.1 (Sale of a Vessel) and 10.2 (Total Loss),
any prepayment or cancellation of the Facility shall be applied against the individual Loans on a pro rata basis and shall reduce
the instalments (including the balloon) of each Loan in inverse order of maturity (i.e. the balloon payment first).
|
|
|
11.2
|
Additional payments
. Any prepayment under this Agreement (including prepayments under Clause 9 (Voluntary prepayment
or cancellation), Clause 10 (Mandatory prepayment or cancellation) and in case of an Event of Default shall be made together with
accrued interest on the amount prepaid, Breakage Costs and any other Indebtedness relating thereto, provided that no Breakage Costs
has to be paid subject to and in accordance with Clause 8.2 (Cash Sweep), considering that such payments are made on a Repayment
Date.
|
|
|
11.3
|
No utilisation of cancelled Facility
. The Borrowers may not utilise any part of the Facility, which have been cancelled.
|
|
|
11.4
|
No re-borrowing of Loans
. Any part of the Loans repaid or prepaid under this Agreement may not be re-borrowed.
|
|
|
12.
|
Tax gross-up and Indemnities
|
|
|
12.1
|
Definitions
. 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
).
|
|
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)
|
Each Obligor 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 Agent accordingly. Similarly, a Lender shall notify the Agent on becoming so aware
in respect of a payment payable to the Lender. If the Agent receives such notification from a Lender, it shall notify the Shareholder.
|
|
|
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.
|
|
|
a)
|
The relevant Obligor shall (within 3 (three) Banking Days of demand by the 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:
|
|
|
1.
|
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
|
|
|
2.
|
under the law of the jurisdiction in which that Finance Party's 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 is compensated for by an increased payment under Clause 12.2 (Tax gross-up), Clause
13.1 (FATCA Deduction and gross-up by Obligor) or paragraph b) of Clause 13.2 (FATCA Deduction by Finance Party); or
|
|
|
iii)
|
relates to a FATCA Deduction required to be made by a Party; or
|
|
|
iv)
|
is compensated for by a payment under paragraph d) of Clause 13.2
|
|
|
c)
|
A Protected Party making, or intending to make, a claim under paragraph a) above shall promptly notify the Agent of the event
which will give, or has given, rise to the claim, following which the Agent shall notify the Shareholder.
|
|
|
12.4
|
Tax Credit
. If an Obligor makes a Tax Payment and the relevant Finance Party determines that:
|
|
|
a)
|
a Tax Credit is attributable either to an increased payment of which that Tax Payment forms part, or to that Tax Payment; and
|
|
|
b)
|
that Finance Party has obtained, utilised and retained that Tax Credit,
|
the Finance Party shall pay an amount to the relevant
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 relevant Obligor.
|
|
12.5
|
Tax Credit and FATCA
. If an Obligor makes a FATCA Payment and the relevant Finance
Party determines that:
|
|
|
a)
|
a Tax Credit is attributable to an increased payment of which that FATCA Payment forms part, to that FATCA Payment or to a
FATCA Deduction in consequence of which that FATCA Payment was required; 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 FATCA Payment not been required to be made by the Obligor.
|
|
13.1
|
FATCA Deduction and gross-up by Obligor
. If an Obligor is required to make a FATCA
Deduction;
|
|
|
a)
|
that Obligor shall make that FATCA Deduction and any payment required in connection with that FATCA Deduction within the time
allowed and in the minimum amount required by FATCA.
|
|
|
b)
|
the amount of the payment due from that Obligor shall be increased to an amount which (after making any FATCA Deduction) leaves
an amount equal to the payment which would have been due if no FATCA Deduction had been required.
|
|
|
c)
|
the Shareholder shall promptly upon becoming aware that an Obligor must make a FATCA Deduction (or that there is any change
in the rate or the basis of a FATCA Deduction) notify the Agent accordingly. Similarly, a Finance Party shall notify the Agent
on becoming so aware in respect of a payment payable to that Finance Party. If the Agent receives such notification from a Finance
Party it shall notify the Shareholder and that Obligor.
|
|
|
d)
|
within thirty days of making either a FATCA Deduction or any payment required in connection with that FATCA Deduction, the
Obligor making that FATCA Deduction or payment shall deliver to the Agent for the Finance Party entitled to the payment evidence
reasonably satisfactory to that Finance Party that the FATCA Deduction has been made or (as applicable) any appropriate payment
paid to the relevant governmental or taxation authority.
|
|
|
13.2
|
FATCA Deduction by a Finance Party
. The Finance Parties may make a FATCA deduction
as set out below:
|
|
|
a)
|
Each Finance Party may make any FATCA Deduction it is required by FATCA to make, and any payment required in connection with
that FATCA Deduction, and no Finance 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. A Finance Party which becomes aware that
it must make a FATCA Deduction in respect of a payment to another Party (or that there is any change in the rate or the basis of
such FATCA Deduction) shall notify that Party and the Agent.
|
|
|
b)
|
If the Agent is required to make a FATCA Deduction in respect of a payment to a Finance Party under Clause 17.4 (Distributions
by the Agent) which relates to a payment by an Obligor, the amount of the payment due from that Obligor shall be increased to an
amount which (after the Agent has made such FATCA Deduction), leaves the Agent with an amount equal to the payment which would
have been made by the Agent if no FATCA Deduction had been required.
|
|
|
c)
|
The Agent shall promptly upon becoming aware that it must make a FATCA Deduction in respect of a payment to a Finance Party
under Clause 17.4 (Distributions by the Agent) which relates to a payment by an Obligor (or that there is any change in the rate
or the basis of such a FATCA Deduction) notify the Shareholder, the relevant Obligor and the relevant Finance Party.
|
|
|
d)
|
The Shareholder shall (within three Business Days of demand by the Agent) pay to a Finance Party an amount equal to the loss,
liability or cost which that Finance Party determines will be or has been (directly or indirectly) suffered by that Finance Party
as a result of another Finance Party making a FATCA Deduction in respect of a payment due to it under a Finance Document. This
paragraph shall not apply to the extent a loss, liability or cost is compensated for by an increased payment under paragraph (b)
above.
|
|
|
e)
|
A Finance Party making, or intending to make, a claim under paragraph (d) above shall promptly notify the Agent of the FATCA
Deduction which will give, or has given, rise to the claim, following which the Agent shall notify the Shareholder.
|
|
|
14.1
|
Increased costs
. Subject to Clause 14.4 below, the Borrowers shall, within 3 (three) Banking Days of a demand by the
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 or (iii) Basel III.
|
|
|
14.2
|
Definitions
. In Clause 14.1
|
"
Increased Costs
" means:
|
|
a)
|
a reduction in the rate of return from the Facility or on a Finance Party's (or its Affiliate's) 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.
“
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”.
|
|
|
14.3
|
Increased cost claims
. A Finance Party intending to make a claim pursuant to Clause 14.1 (Increased costs) shall notify
the Agent of the event giving rise to the claim, following which the Agent shall promptly notify the Shareholder.
|
Each Finance Party shall, as soon as practicable
after a demand by the Agent, provide a certificate confirming the amount of its Increased Costs.
|
|
14.4
|
Exceptions
. Clause 14.1 (Increased costs) does not apply to the extent any Increased Cost is:
|
|
|
a)
|
compensated for by Clause 12.2 (Tax gross up) or 12.3 (Tax indemnity);
|
|
|
b)
|
attributable to the wilful breach by the relevant Finance Party or its Affiliates of any law or regulation.
|
|
|
15.
|
Other Payment obligations
|
|
|
15.1
|
Currency indemnity
. The Obligors shall indemnify the Finance Parties against any Costs suffered as a result of a judgement
or award being awarded or enforced against any Obligor in any currency other than in the relevant currency in which such amount
is outstanding under the Finance Documents.
|
|
|
15.2
|
Breakage costs
. The Obligors shall, within 3 (three) Banking Days of demand by the Agent, pay to the Agent for the account
of each Lender, such Lender's Breakage Costs attributable to all or any part of a Loan being paid by the Obligors on a day other
than the last day of an Interest Period for that Loan.
|
|
|
15.3
|
VAT
. All amounts set out or expressed in a Finance Document to be payable by any Obligor to a Finance Party which (in
whole or in part) constitute the consideration for a supply or supplies for VAT purposes shall be deemed to be exclusive of any
VAT which is chargeable on such supply or supplies, and accordingly, if VAT is or becomes chargeable on any supply made by any
Finance Party to any Obligor under a Finance Document, that Obligor shall pay to the 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 such VAT (and such Finance Party shall
promptly provide an appropriate VAT invoice to such Obligor). If any amounts payable by the Obligors under this Agreement or any
fees of the Agent's suppliers (including any legal fees) are charged exclusive of VAT, the Obligors shall indemnify the Agent and
its suppliers (including its legal counsel) if it is later determined payments are subject to VAT. The Agent's suppliers (including
its legal counsel) shall be entitled to rely on this provision.
|
|
|
15.4
|
Other indemnities
. The Obligors shall, on demand from the Agent, indemnify the Finance Parties from and against any
Costs which may be suffered, incurred or paid by any of the Finance Parties at any time (whether before or after the repayment
of the Loans) relating to, or arising directly or indirectly from
|
|
|
a)
|
the occurrence of any Event of Default;
|
|
|
b)
|
a failure by an Obligor to pay any amount due under a Finance Document on its due date;
|
|
|
c)
|
any claw back or re-distribution of any payment received by a Finance Party pursuant to Clauses 17.5 (Clawback) or 17.7 (Redistribution);
|
|
|
d)
|
funding, or making arrangements to fund, its participation in a Loan requested by a Borrower 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 Finance Party alone);
|
|
|
e)
|
a Loan (or part of a Loan) not being prepaid in accordance with a notice of prepayment given by a Borrower;
|
|
|
f)
|
the Obligors' violation of any Regulations, including without limitation any environmental regulations; or
|
|
|
g)
|
any other claim, if such claim would not have been or been capable of being made or asserted against the Finance Parties if
they had not entered into the Finance Documents and/or exercised any of their rights and/or performed any of their obligations
thereunder, provided any such claim arises out of or in connection with the Facility.
|
|
|
15.5
|
Transaction and enforcement costs
. The Obligors shall on demand from the Agent, pay and indemnify the Finance Parties
against any reasonable Costs suffered, incurred or paid by the Finance Parties in connection with:
|
|
|
a)
|
the negotiation, preparation, execution, perfection, registration and filing of the Finance Documents and all documents and
agreements relating thereto;
|
|
|
b)
|
any amendment or variation of or any release, waiver or consent under any of the Finance Documents;
|
|
|
c)
|
the preservation, protection, enforcement or maintenance of, or attempt to preserve or enforce, any of the rights of the Finance
Parties under the Finance Documents and/or investigating any Event of Default or Potential Event of Default.
|
|
|
16.
|
Mitigation by the Lenders
|
|
|
16.1
|
Mitigation
. Each Finance Party shall, in consultation with the Shareholder, 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 10.3 (Illegality), Clause 12 (Tax Gross-up and Indemnities) or Clause 14.1 (Increased costs) including (but not limited
to) transferring its rights and obligations under the Finance Documents to another Affiliate or facility office. This Clause 16.1
does not in any way limit the obligations of any Obligor under the Finance Documents.
|
|
|
16.2
|
Indemnity
. The Obligors shall promptly 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 16.1 (Mitigation).
|
|
|
16.3
|
Limitation of obligations
. A Finance Party is not obliged to take any steps under Clause 16.1 (Mitigation) if,
in the opinion of that Finance Party (acting reasonably), to do so might be prejudicial to it.
|
|
|
17.
|
Payment terms and procedures
|
|
|
17.1
|
Payment through the Agent
. All payments by the Obligors to the Finance Parties or by the Finance Parties to the Obligors
under the Finance Documents shall be paid through the Agent.
|
|
|
17.2
|
Currency
. All payments of principal, interest and fees to be made by the Obligors shall be made in the currency of the
Loans. All payments of Costs shall be made in the currency in which the same were incurred. All other payments (if any) shall be
made in the currency of the Loans.
|
|
|
17.3
|
Due date
. All payments to be made by the Obligors or the Lenders hereunder shall be made for value on the due date in
immediately available funds to such account as the Agent may from time to time designate and at the time specified by the Agent
as being customary at the time for settlement of transactions in the relevant currency in the place of payment.
|
|
|
17.4
|
Distributions by the Agent
. Each payment received by the Agent under the Finance Documents for another Party shall be
made available by the Agent as soon as practicable after receipt to the Party entitled to receive payment in accordance with this
Agreement, to such account as that Party may notify to the Agent by not less than 5 (five) Banking Days' notice. Payments received
by the Agent for the account of the Lenders shall be distributed to the Lenders according to their respective Participation in
the Loans.
|
|
|
a)
|
Where a sum is to be paid to the Agent under the Finance Documents for another Party, the Agent is not obliged to pay that
sum to that other Party until it has been able to establish to its satisfaction that it has actually received that sum.
|
|
|
b)
|
If the Agent pays an amount to another Party and it proves to be the case that the 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 Agent shall on demand refund
the same to the Agent together with interest on that amount from the date of payment to the date of receipt by the Agent, calculated
by the Agent to reflect its cost of funds.
|
|
|
17.6
|
Application of payments
. If the Agent receives a payment that is insufficient to discharge all the amounts then due
and payable by an Obligor under the Finance Documents, the Agent shall apply that payment towards the obligations of that Obligor
under the Finance Documents in the following order:
|
|
|
a)
|
first
, in or towards payment pro rata of any unpaid fees, costs and expenses of the Agent under the Finance Documents;
|
|
|
b)
|
secondly
, in or towards payment pro rata of any accrued interest, fee or commission due but unpaid under this Agreement;
|
|
|
c)
|
thirdly
, in or towards payment pro rata of any principal due but unpaid under this Agreement; and
|
|
|
d)
|
fourthly
, in or towards payment pro rata of any other sum due but unpaid under the Finance Documents.
|
The Agent shall, if so directed by the Lenders, vary
the order set out in paragraphs a)-d) above.
The above will override any appropriation made by
an Obligor.
|
|
17.7
|
Redistribution
. If a Finance Party receives or recovers an amount (including by way of set off) from any Obligor other
than in accordance with Clause 17.1 (Payments through the Agent) in respect of the Finance Documents or any excess amount through
the Agent, such Finance Party shall promptly pay such amount to the Agent and the amount shall be redistributed in accordance with
this Agreement and any agreement between the Finance Parties, unless
|
|
|
a)
|
the receiving Finance Party has received or recovered an excess amount as a result of any legal action if the other Finance
Parties had an opportunity to participate in such action but did not (in which event the excess amount shall first be used to repay
the Indebtedness to the receiving Finance Party and secondly to repay the Indebtedness to the other Finance Parties); or
|
|
|
b)
|
the receiving Finance Party would not, after making any payment pursuant to this Clause 17.7, have a valid and enforceable
claim against the Obligors. The Finance Parties will make such transfers of the outstanding Indebtedness between the Finance Parties,
which shall be necessary to achieve the redistribution contemplated by this Clause 17.7.
|
In the event of redistribution by the Agent pursuant
to this Clause 17.7 of a payment received by a Finance Party from an Obligor, then as between the relevant Obligor and such Finance
Party, such redistributed amount will be treated as not having been paid by that Obligor.
|
|
17.8
|
Non Banking Day
. If any sum payable by the Obligors under this Agreement shall become due on a day which is not a Banking
Day, the due date shall be the next succeeding Banking Day in that calendar month (if there is one) or the preceding Banking Day
(if there is not).
|
|
|
17.9
|
Calculation of interest
. Any interest, commission or fee accruing under this Agreement shall be calculated on the basis
of the actual number of days elapsed and a year of 360 (three hundred and sixty) days.
|
|
|
17.10
|
No set-off by the Obligors
. All payments to be made by the Obligors under the Finance Documents shall be made without
set-off or counter-claim.
|
|
|
17.11
|
Set-off by the Finance Parties
. The Obligors authorise each of the Finance Parties (with notice) to apply any credit
balance (whether or not then due) which is at any time held by any of the Finance Parties for the account of any of the Obligors
at any office of any of the Finance Parties in any country in or towards satisfaction of any sum then due from any of the Obligors
to the Finance Parties under the Finance Documents (regardless whether such sum is due in another currency). The Finance Parties
are each authorised to use all or any part of any such credit balance to buy such other currencies as may be necessary to effect
such application.
|
|
|
17.12
|
Evidence of calculations
. The certificate of the Agent as to any calculation of any interest rate or any amount payable
pursuant to the Finance Documents shall be conclusive and binding upon the Obligors in the absence of manifest error and the Obligors
shall pay all interests and other amounts due under the Finance Documents in accordance therewith.
|
|
|
18.1
|
Guarantee
. Each Guarantor unconditionally and irrevocably, jointly and severally:
|
|
|
a)
|
guarantees as primary and jointly liable obligor (in Danish: solidarisk ansvarlig
selvskyldnerkautionist
) and not only
as surety, to the Finance Parties the due and punctual performance by each Borrower of all of its obligations under or in respect
of this Agreement and the other 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 Guarantor shall immediately on demand pay that amount as if it was the principal obligor (including without
limitation any principal, interest, prepayment fees, default interest, Breakage Costs and any other Costs in respect of any Event
of Default or any other breach or default under the Finance Documents or any other part of the Indebtedness; 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.
|
|
|
18.2
|
Limitation of Shareholder's Guarantee
. The Shareholder's obligations pursuant to the Guarantee provided pursuant to
this Clause 18 shall be limited to the Indebtedness at the time when the first call is made under the Guarantee less USD 5,500,000
(the "Shareholder's Guaranteed Amount"). After the first demand has been made under this Guarantee, the Shareholder's
Guaranteed Amount shall only be reduced by payments from the Shareholder, the Borrowers or any third party, provided, however,
the Shareholder's Guaranteed Amount shall not be reduced by any repayment or prepayment in connection with any sale of a Vessel
or any enforcement of proceeds from any enforcement of the Security Documents or any other Security. The Borrowers' obligations
under this Guarantee shall be unlimited.
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18.3
|
Immediate recourse
. The Finance Parties shall not be required to take any action against the Borrowers or any other
guarantor or enforce any other Security Documents before claiming from a Guarantor under this Guarantee.
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18.4
|
No limitation on number of demands
. Demands under this Guarantee may be made by the Agent on behalf of the Finance Parties
from time to time and there shall be no limitation on the number of demands which can be made hereunder.
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18.5
|
No discharge
. This Guarantee shall be effective as of the date hereof and shall continue in effect until the Indebtedness
have been paid in full. The obligations of each Guarantor under the Guarantee will not be affected by an act, omission, matter
or thing which, but for this Clause, would reduce, release or prejudice any of its obligations under the Guarantee (without limitation
and whether or not known to it or any Finance Party including:
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|
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a)
|
any time, waiver or consent granted to, or composition with, any Obligor or other person;
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b)
|
the release of any other Obligor or any other person under the terms of any composition or arrangement with any creditor of
any Obligor;
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c)
|
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 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;
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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;
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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;
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f)
|
any unenforceability, illegality or invalidity of any obligation of any person under any Finance Document or any other document
or security; or
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g)
|
any insolvency or similar proceedings.
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18.6
|
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 Finance 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 the Guarantee will continue or be reinstated as if the discharge, release or arrangement
had not occurred.
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18.7
|
Cash collateral
. If an Event of Default has occurred, the Agent, on behalf of the Finance Parties and without prejudice
to any other rights or remedies available under the Finance Documents or otherwise under law, shall be entitled to call immediately
an amount equal to the Indebtedness from the Guarantors and hold the proceeds in escrow as cash collateral in respect of the Borrowers'
performance under the Finance Documents.
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18.8
|
Subordination
. Any right of recourse by any Guarantor for any part of the Indebtedness paid by such Guarantor shall
be subordinated to the Indebtedness.
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18.9
|
Deferral of Guarantor's rights
. Until all of the Indebtedness has been irrevocably paid in full and unless the Agent
otherwise directs, no Guarantor will exercise any right of recourse or any other rights which it may have by reason of performance
by it of its obligations under the Guarantee set out in the Guarantee or any other obligations under the Finance Documents, including
any right:
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a)
|
to be indemnified by an Obligor;
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b)
|
to claim any contribution from any other guarantor of any Obligor's obligations under the Finance Documents;
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c)
|
to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights of the Finance Parties
under the Finance Documents or of any other guarantee or security taken pursuant to, or in connection with, the Finance Documents
by any Finance Party;
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d)
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to bring legal or other proceedings for an order requiring any Obligor to make any payment, or perform any obligation, in respect
of which any Guarantor has given a guarantee, undertaking or indemnity under the Guarantee;
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e)
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to exercise any right of set-off against any Obligor;
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f)
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to claim or prove as a creditor of any Obligor in connection with any bankruptcy or other insolvency proceedings in competition
with any Finance Party; and/or
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g)
|
to take any steps towards any insolvency proceedings against any Obligor.
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If a Guarantor receives any benefit, payment or distribution
in relation to such rights, it shall promptly pay or transfer the same to the Agent or as the Agent may direct for application
in accordance with this Agreement.
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18.10
|
Dividends
. In case of any Obligor's bankruptcy or any other insolvency proceedings against any Obligor, the Finance
Parties shall be entitled to receive all amounts by way of dividend or otherwise due from that Obligor's bankruptcy estate to the
other Obligors and all such amounts shall be paid to the Agent or as the Agent may direct for application in accordance with this
Agreement.
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18.11
|
No Security
. No Guarantor is entitled to obtain from any other Obligor any security for the Guarantor's right of recourse
or any other rights which it may have by reason of performance by it of its obligations under the Guarantee.
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19.1
|
Security Documents
. The Indebtedness shall, as long as any amount is payable or may become payable under this Agreement,
be secured by the following security duly executed and perfected and in a form and substance acceptable to the Agent (acting on
instructions of the Lenders):
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a)
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Guarantee
. The Guarantee from the Guarantors in the form as set out above in Clause 18 (Guarantee);
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b)
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Mortgages
. A first priority cross-collateralized Mortgage together with a negative pledge over each Vessel in the form
as set out in Exhibit 2 - Form of Mortgage;
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c)
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Assignment of Insurance
. A first priority assignment of all insurances of each Vessel from all parties holding an interest
in the insurances in the form as set out in Exhibit 3 - Form of Security Agreement;
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d)
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Assignment of Earnings
. A first priority assignment of all earnings of the Vessels by the Borrowers and the Charterer
including all Earnings under the Charter Parties, together with a negative pledge, such assignment and negative pledge to be notified
to the Charterer and any other charterers (including sub-charterers) chartering any Vessel for a period in excess of 12 (twelve)
months in the form as set out in Exhibit 3 - Form of Security Agreement;
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e)
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Pledge of accounts
. A first priority pledge of the Deposit Accounts, the Earnings Accounts and the Freight Account in
the form set out in Exhibit 3 - Form of Security Agreement;
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f)
|
Assignment of shareholder loan
. A first priority assignment of all debt owed by the Borrower to the Shareholder (in
the form set out in Exhibit 3 - Form of Security Agreement);
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g)
|
Charge of shares
. A first priority charge of the shares in the Borrowers in the form set out in Exhibit 5 - Form of
Share Charge;
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h)
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Managers' undertakings
. A manager's undertaking by the technical manager of the Vessels in the form as set out in Exhibit
4 - Form of Manager's Undertaking.
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19.2
|
Further assurances
. The Obligors shall execute, register and deliver such other additional pledge instruments, mortgages,
assignments and other security documents in favour of the Lenders as the Agent may from time to time reasonably request in order
to better perfect the security listed in Clause 19.1 (Security Documents).
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20.
|
Representations and Warranties
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20.1
|
Status, powers and business of the Obligors
. Each of the Obligors represents and warrants to the Finance Parties that:
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a)
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Incorporation
. It is a limited liability company duly incorporated and validly existing under the laws of its jurisdiction
of incorporation;
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b)
|
Legal, binding and enforceable obligations
. The Finance Documents to which it is a party have been duly executed and
constitute the legal, valid and binding obligations for it enforceable against it in accordance with their terms;
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c)
|
Authorisations and filings
. All authorisations, approvals, consents, licenses, exemptions, filings, registrations, notarisations
and other matters, official or otherwise, required by it in connection with the entering into, performance, validity, perfection
and enforceability of the Finance Documents and the transactions contemplated thereby have been obtained and are in full force
and effect;
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d)
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No conflict
. The entering into and performance of the Finance Documents and the transactions contemplated hereby and
thereby do not and will not conflict with (i) any Regulations, (ii) its memorandum and articles of association, or (iii) any agreement
or document to which it is a party or which is binding upon it or any of its assets;
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e)
|
No immunity
. It is subject to civil and commercial law with respect to its obligations under the Finance Documents,
and neither it nor any of its assets enjoy any right of immunity from set-off, suit or execution in respect of its obligations
under the Finance Documents;
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f)
|
No defaults
. No event has occurred which constitutes a default under and in respect of any material agreement or document
(including inter alia the Finance Documents) to which it is a party or by which it may be bound and no event has occurred which,
with the giving of notice, lapse of time, or determination of materiality may constitute a default under or in respect of any such
material agreement or document;
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g)
|
No Insolvency
. No bankruptcy or insolvency proceedings have been commenced or, to the knowledge of any Obligor, are
threatening in relation to an Obligor;
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h)
|
Anti-corruption law
. Each Obligor has conducted its businesses in compliance with applicable anti-corruption laws and
has instituted and maintained policies and procedures designed to promote and achieve compliance with such laws;
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|
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i)
|
Illegal or corrupt Practices
. No offer, gift or payment, consideration or benefit of any kind, which constitutes an
illegal or corrupt practice, has or will be made to anyone, either directly or indirectly, as an inducement or reward for the award
or execution of this Agreement or any of the Finance Documents or the performance of any of the transactions contemplated thereby;
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j)
|
No money laundering
. In relation to the borrowing by each relevant Borrower of the Loans, the performance and discharge
of each Obligor’s obligations and liabilities under the Finance Documents and/or the transactions and other arrangements
effected or contemplated by the Finance Documents to which it is a party (as applicable):
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i)
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it is acting for its own account;
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ii)
|
it will use the proceeds of the Loans for its own benefit under its full responsibility and exclusively for the purposes specified
in this Agreement; and
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|
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iii)
|
the foregoing will not involve or lead to a contravention of any law, official requirement or other regulatory measure or procedure
implemented to combat "money laundering" (as defined in Article 1 of Directive 2005/60/EC of the European Parliament
and of the Council).
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k)
|
Sanctions
. No Obligor nor any of their respective directors, officers or employees nor, to the knowledge of any Obligor,
any persons acting on any of their behalf:
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|
|
i)
|
is owned or controlled by, or acting directly or indirectly on behalf of or for the benefit of, a Prohibited Person;
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|
ii)
|
owns or controls a Prohibited Person;
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|
|
iii)
|
is in breach of Sanctions;
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|
|
l)
|
No litigation
. No action, suit, proceeding, litigation or dispute against it is currently taking place or pending or,
to its knowledge, threatened nor is there subsisting any judgment or award against it before any court, board of arbitration or
other body which, in either case, could or might result in any material adverse change in its business or condition (financial
or otherwise);
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|
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m)
|
Tax compliance
. It has to the best of its knowledge complied with all taxation laws in all relevant jurisdictions and
has paid all taxes and other amounts due to governments and other public bodies, and no material claims are being asserted against
it with respect to such taxes or other payments to public or governmental bodies;
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|
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n)
|
FATCA
. It is not a FATCA FFI or a US Tax Obligor.
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|
|
o)
|
No withholding
. All amounts payable by it under the Finance Documents may be made free and clear of and without deduction
for or on account of any tax or other duty due to a governmental or other public body;
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|
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p)
|
Annual accounts
. Its latest annual accounts (if any) are complete and correct and fairly present the assets and liabilities,
the financial position and the results of its operations and have been prepared in accordance with GAAP applied on a consistent
basis with its annual accounts and financial statements for previous years, unless changes to such accounting principles are required
by any Regulation;
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q)
|
Truth of information provided
. The information, exhibits or reports about it and its Subsidiaries furnished to the Finance
Parties by it prior to the execution of this Agreement are true and correct and do not contain any misstatement of fact or omit
to state a fact making such information, exhibits or reports materially misleading;
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|
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r)
|
No material adverse change.
Since the Shareholder's annual report for December 31, 2012 there has been no material adverse
change in its business, assets or financial condition, which has not been disclosed to the Lenders prior to the execution of this
Agreement;
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|
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s)
|
Pari Passu
. Its payment obligations under the Finance Documents 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;
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t)
|
Single purpose
. The Borrowers do not conduct any business or activity other than the ownership, chartering and operation
of the Vessels and have no fixed assets other than the Vessels owned by them;
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|
|
u)
|
Shareholder
. As of the first Utilisation the shares and voting rights in the Borrowers will be owned directly or indirectly
by 100 % (hundred per cent) by the Shareholder and no Security Interest has been granted over such shares except in favour of the
Finance Parties.
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20.2
|
Repetition
. The representations and warranties of each of the Obligors as set out in Clause 20.1 (Status, powers and
business of the Obligors) shall be deemed to be made by reference to the facts and circumstances then existing on
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|
|
a)
|
the date of each Utilisation Request; and
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|
|
b)
|
the date of each Utilisation; and
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|
|
c)
|
the first day of each Interest Period.
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|
|
21.
|
undertakings - The vessels
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|
|
21.1
|
Employment and management of the Vessels
. Each of the Borrowers undertakes that for so long as any part of the Indebtedness
remains outstanding, it shall (at its own cost) comply with the following undertakings:
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|
|
a)
|
Management Agreements
. It will ensure that the Vessels shall be commercially and technically managed by Managers acceptable
to the Lenders and the Borrowers shall provide the Lenders with Management Agreements for the Lenders' approval. Any material amendment
of any approved Management Agreements shall be subject to the prior written approval of the Lenders. No sub-management shall be
allowed without the prior written consent of the Lenders. If any Management Agreement is terminated the Borrowers shall enter into
a new Management Agreement with a new manager acceptable to the Lenders within the termination period set out in the relevant approved
Management Agreement or, if the approved Management Agreement is terminated with immediate effect after the termination.
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|
|
b)
|
Distribution of Earnings
. It will ensure that all gross Earnings and other payments to the Borrowers deriving from the
Vessels (excluding any commissions under any Vessel Employment Contracts or management fees under Management Agreements and/or
Pool Agreements approved by the Lenders) shall be paid directly from the relevant charterer or pool manager to the Borrowers' accounts
with the Agent.
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|
|
c)
|
Bareboat charterparties
. It will not permit the Vessels or any of them to be engaged on any bareboat charterparty nor
any sub-bareboat charterparty, without the prior written consent of the Agent. Any amendment, termination or extension of such
approved bareboat charterparty shall be subject to the Agent prior written approval.
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|
|
21.2
|
Other undertakings
. Each of the Borrowers undertakes that for so long as any part of the Indebtedness remains outstanding,
it shall (at its own cost) comply with the following undertakings:
|
|
|
a)
|
No sale
. It will not without the prior written consent by the Agent not to be unreasonably withheld sell or otherwise
dispose of its Vessels or any of them, the Earnings, the Insurance or any part thereof or interest therein, provided that no consent
shall be required for a sale of a Vessel if
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|
|
i)
|
the sale is on an arm's length basis on market terms to a third party which is not in any way affiliated with any of the Obligors;
|
|
|
ii)
|
the proceeds from the sale are applied in accordance with Clause 10.1;
|
|
|
iii)
|
all Indebtedness relating the Loan relating to the relevant Vessel is prepaid in full; and
|
|
|
iv)
|
no Event of Default or an Potential Event of Default has occurred.
|
|
|
b)
|
Negative Pledge
. It will not without the prior written consent of the Agent create any Security Interest over the Vessels
or any of them, the Insurance or Earnings or suffer the creation of any such Security Interest to or in favour of any person, except
as contemplated by the Security Documents and except for Permitted Liens.
|
|
|
c)
|
Maritime liens
. It will pay and discharge or cause to be paid and discharged or contest in good faith all debts, damages
and liabilities whatsoever which have given or may give rise to maritime or possessory liens on or claims enforceable against the
Vessels or any of them.
|
|
|
d)
|
Repairers' liens
. It will not without the prior written consent by the Agent not to be unreasonably withheld put any
Vessel into the possession of any person for the purpose of work being done upon such Vessel in an amount exceeding USD 500,000
(except for any costs for dry-docking, which have been specified in the Borrowers' budgets approved by the Lenders) and which may
cause any lien on the Vessel to be incurred unless such person shall first have given to the Agent in terms satisfactory to it
a written undertaking not to exercise any lien on the Vessel.
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|
|
e)
|
Flag or registration and name
. It shall ensure that the Vessels remains registered in the Ship Register and retains
the right to fly their flag and it will not make any changes in the registration or the flag or the name of the Vessels or any
of them without prior written consent of the Agent, such consent not to be unreasonably withheld.
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|
|
f)
|
Inspection
. It will permit each Lender or its representatives to inspect the Vessels at any time upon request by such
Lender and it will not in any way restrict any Lender’s or its representatives’ access to the Vessels and to all class
and insurance certificates and records whether or not being kept by third parties. The Borrowers shall pay the reasonable costs
of one inspection of each of the Vessels by any Lender per year and such additional inspections as such Lender may carry out at
any time after an Event of Default or a Potential Event of Default has occurred and is continuing.
|
|
|
g)
|
Class
. It will ensure that the Vessels shall maintain their class as approved by the Agent or a similar class with such
classification society as the Agent may have approved free of all overdue recommendations and qualifications of such classification
society or if recommendations or qualifications have been imposed to take all steps necessary for the removal of these within reasonable
time (and urgently if the nature of such recommendations or qualifications shall so require or if required by the Agent) and it
will forward a certified copy of the classification certificates to the Agent as often as the Agent may request. The Borrowers
will not change the class nor classification society of the Vessels or any of them without the prior written consent of the Agent,
such consent not to be unreasonably withheld.
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|
|
h)
|
Surveys
. It will submit or procure the Vessels to be submitted regularly to such periodical or other surveys as may
be required by applicable law, by insurers or for classification purposes and to supply to the Agent if the Agent shall so request
copies of any survey reports issued in respect thereof.
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|
|
i)
|
ISM and ISPS-Code
. It will arrange for and procure the punctual approval and certification of the management organisation
on shore and on board the Vessels and ensure that the Vessels are operated in accordance with the ISM-Code and ISPS-Code in force
from time to time and will promptly notify the Agent of any breach thereof.
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|
|
j)
|
Removal of parts
. No Borrower shall (in the case of any Vessel owned by it) remove any material part of the Vessel,
or any material item of equipment installed on, the Vessel 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 Finance Parties and becomes on installation on the Vessel the property of the
relevant Obligor and subject to the security constituted by the relevant Finance Documents.
|
|
|
k)
|
Third party owned equipment
. Equipment owned by a third party shall not be installed on a Vessel if it cannot be removed
without risk of causing damage to the structure or fabric of the Vessel or incurring significant expense.
|
|
|
l)
|
Prevention of and release from arrest
. Each Borrower shall promptly (or, in the case of (i) below, contest in good faith)
discharge:
|
|
|
i)
|
all liabilities which give or may give rise to maritime or possessory liens (including Permitted Liens) on or claims enforceable
against the Vessel owned by it or the Earnings or the Insurances of that Vessel;
|
|
|
ii)
|
all taxes, dues and other amounts charged in respect of the Vessel owned by it, its Earnings or its Insurances; and
|
|
|
iii)
|
all other outgoings whatsoever in respect of the Vessel owned by it, its Earnings or its Insurances,
|
and, as soon as practicable upon
receiving notice of the arrest or detention of a Vessel owned by it, or of its detention in exercise or purported exercise of any
lien or claim, that Obligor shall procure its release by providing bail or otherwise as the circumstances may require.
|
|
m)
|
Lay up
. The Vessels shall not be cold laid up or deactivated.
|
|
|
n)
|
Compliance
. It will ensure that the Vessels will comply with all relevant laws, regulations and requirements as are
applicable to ships (i) registered under the same flag as such Vessels and (ii) engaged in the same or similar service as such
Vessels are engaged in, including without limitation environmental laws and regulations, and will promptly notify the Agent of
any breach thereof.
|
|
|
o)
|
No illegal trade or trade outside insurance cover
. It will not operate the Vessels or any of them, or permit them to
be operated, in any illegal trade or in a geographical area outside the scope of any of their Insurance or in any way which may
jeopardise their insurance coverage, wholly or in part without first taking out additional insurance cover in respect of that employment
in all respect to the satisfaction of the Agent and the Borrowers will promptly notify the Agent of any new requirement imposed
by any broker, underwriter or association in relation to the Insurance.
|
|
|
p)
|
Limitations on employment in war zones
.
It will
not during hostilities (whether or not a state of war
shall formally have been declared and including, without limitation, any civil war) permit the Vessels or any of them to be employed
in carrying any goods which may be declared to be contraband of war or which may render the Vessels or any of them liable to confiscation,
seizure, detention or destruction, nor to permit the Vessels to enter any area which is declared a war zone by any governmental
authority or by the Vessels' insurers unless that employment or voyage is either (a) consented to in advance and in writing by
the underwriters of the Vessels' war risks insurance and fully covered by those insurance or (b) (to the extent not covered by
those insurance) covered by additional insurance taken out by the Borrowers at the Borrowers' expense, which additional insurance
shall be deemed to be part of the Insurance.
|
|
|
q)
|
Maintenance
. It will ensure that the Vessels will be maintained and be in a good and efficient state of repair consistent
with first class ship and management practice.
|
|
|
r)
|
Change of structure, type or speed
. It will not make changes to the Vessels which alters the structure type or speed
of the Vessels in any way, which may have a negative effect on the market value of such Vessels, unless otherwise agreed by the
Agent.
|
|
|
s)
|
Notification of damage and claims
. It will promptly notify the Agent of
|
|
|
i)
|
any intended dry docking of a Vessel or of a warm lay-up of a Vessel;
|
|
|
ii)
|
any damage to or alteration of the Vessels or any of them involving costs in excess of USD 500,000 regardless of whether the
costs are paid by insurers;
|
|
|
iii)
|
any legal proceedings or arbitration involving the Vessels or any of them or any Borrower where the amount claimed by any party
(ignoring any counterclaim or defence of set-off) exceeds or may reasonably be expected to exceed USD 500,000;
|
|
|
iv)
|
any environmental claims or incidents that in any material way affects it and/or the Vessels or any of them;
|
|
|
v)
|
any occurrence in consequence of which the Vessels or any of them have or may become a Total Loss;
|
|
|
vi)
|
any requisition of the Vessels or any of them;
|
|
|
vii)
|
any requirement or recommendation made by any insurer or classification society or by any competent authority which is not
complied with in accordance with its terms; and
|
|
|
viii)
|
any arrest, detention or seizure of the Vessels or any of them or any exercise or purported exercise of a lien on the Vessels
or any of them or the Earnings or any part thereof which is not lifted forthwith.
|
and inform the Agent of which steps
are being taken in this respect;
|
|
t)
|
Further information
. It will furnish the Agent without undue delay with all such information as the Agent may from time
to time reasonably require regarding the Vessels, their employment, position and engagements, including any particulars of all
towages and salvages and documents relating to all charters and other contracts for their employment, or otherwise howsoever concerning
the Vessels.
|
|
|
22.
|
undertakings - insurance
|
|
|
22.1
|
Insurance
. Each of the Borrowers undertakes that for so long as any part of the Indebtedness remains outstanding, it
shall (at its own cost) comply with the following undertakings:
|
|
|
a)
|
Required Insurance
. It will take out and maintain or procure to be taken out and maintained the following insurance
on its Vessels:
|
|
|
i)
|
Hull, machinery and equipment insurance (including hull interest insurance) (covering all fire and usual marine risks including
excess risks);
|
|
|
ii)
|
War risk insurance (covering damage to hull and deprivations and blocking and trapping and protection and indemnity risks with
a single and separate limit for the same amounts insured under war hull);
|
|
|
iii)
|
Protection and indemnity insurance (including freight interest and pollution risks); and
|
|
|
iv)
|
such additional insurance as a prudent shipowner would take out or as the Agent may reasonably require (including without limitation
establishing appropriate COFR coverage or other coverage taken out by first class shipowner when entering the territorial waters
of the United States);
|
|
|
b)
|
Mortgagee interest insurance and mortgagee additional perils insurance
. It will pay to the Agent on demand all reasonable
premiums and other amounts payable by the Agent in effecting and maintaining mortgagee interest insurance and mortgagee additional
perils (pollution) insurance in respect of the Vessels in the name of the Finance Parties on such terms and conditions and through
such brokers and with such insurers and underwriters as the Agent may in its discretion approve. The mortgagee interest insurance
and mortgagee additional perils insurance in respect of each of the Vessels shall be in an amount of not less than the higher of
(i) 110% (one hundred ten per cent) of the Loan relating to such Vessel and (ii) the market value of the Vessels as determined
by the Agent.
|
|
|
c)
|
Terms and insurers
. It will ensure that all Insurance to be taken out pursuant to this Clause 22.1 (Insurance) shall
be on terms satisfactory to the Agent and through such brokers (if any), insurance companies, war risks and/or protection and indemnity
associations as the Agent shall from time to time reasonably approve. Further, it will ensure that the insurers and/or brokers
undertake to hold the policies and the benefit of such Insurance, to the order of the Agent in accordance with the loss payable
clause. The Borrowers will not alter the terms of the Insurance nor allow any person to be co-assured under any of the Insurance
without the prior written consent of the Agent.
|
|
|
d)
|
Insurance sums
. It will ensure that the Insurance shall be denominated in the currency of the Loan and that the amount
insured in respect of each of the Vessels shall be:
|
|
|
i)
|
Hull & machinery (including hull interest) and war risk: The higher of (1) 120% (one hundred twenty per cent) of the Loan
relating to such Vessel and (2) the Fair Market Value of the Vessel as determined by the Agent;
|
|
|
ii)
|
Hull & machinery (excluding hull interest): At least 80% (eighty per cent) of the Fair Market Value of the Vessel determined
by the Agent;
|
|
|
iii)
|
Protection and indemnity insurance: The highest amount available (for the time being USD 1,000,000,000 for oil pollution liability).
|
|
|
e)
|
Renewal
. It will renew the Insurance at least 14 (fourteen) days before the relevant policies or contracts expire with
insurers and on terms acceptable to the Agent and procure that the brokers and/or any war risks and protection and indemnity association
with which the Insurance are effected, shall promptly confirm in writing to the Agent when each such renewal occurs.
|
|
|
f)
|
Premiums
. It will punctually pay all premiums, calls, contributions or other sums in respect of the Insurance and produce
all relevant receipts when so required by the Agent.
|
|
|
g)
|
Guarantees
. It will arrange for the execution of such guarantees as may from time to time be required by any protection
and indemnity or war risk association for or for the continuance of the Vessels' entry into such association.
|
|
|
h)
|
Fleet premium lien waiver
. If any of the Insurance form part of a fleet cover, it will procure that the brokers, underwriters,
protection and indemnity and/or war risks associations shall undertake to the Finance Parties that they shall neither set off against
any claim in respect of the Vessels, any premiums or calls due in respect of other vessels or in respect of other Insurance nor
cancel any of the Insurance by reason of non-payment of premiums or calls due in respect of other vessels or in respect of other
Insurance.
|
|
|
i)
|
Settlement of claims
. It will not without the prior written consent of the Agent settle, compromise or abandon any claim
under the Insurance for a Total Loss or a casualty which before deductibles exceeds USD 500,000 such consent not to be unreasonably
withheld.
|
|
|
j)
|
Collection of claims
. It will do all things necessary and provide all documents, evidence and information to enable
the Agent to collect or recover any moneys which shall at any time become payable to the Finance Parties according to the loss
payable clauses in respect of the Insurance. In the event of any claim in respect of any of the Insurance (other than in respect
of a Total Loss), if the Borrowers shall fail to reach agreement with any of the brokers, underwriters or associations for the
immediate restoration of the Vessels, or for payment to third parties, within such time as the Agent may stipulate, the Agent shall
be entitled to require payment to itself. In the event of any dispute arising between any Borrower and any broker, underwriter
or association with respect to any obligation to make any payment to the Borrower or to the Agent under or in connection with any
of the Insurance, or with respect to the amount of any such payment, the Agent shall be entitled to settle that dispute directly
with the broker, underwriter or association concerned. Any such settlement shall be binding on the Borrowers.
|
|
|
k)
|
Application of recoveries
. It will apply all sums receivable under the Insurance which are to be paid to it in accordance
with the loss payable clauses in repairing all damage and/or in discharging the liability in respect of which such sums shall have
been received.
|
|
|
l)
|
Policies and other information
. It will procure that the brokers, underwriters, protection and indemnity and war risks
associations shall promptly furnish the Agent with copies of the policies, insurance certificates, certificates of entry, rule
books and any changes thereto which may from time to time be issued in respect of the Insurance and it shall procure that letters
of undertaking in such form as the Agent may approve shall be issued to the Agent by the brokers through which the Insurance are
placed (or, in the case of protection and indemnity or war risk associations, by their managers) and it shall promptly furnish
the Agent with all such other information as it may from time to time reasonably require regarding the Insurance.
|
|
|
m)
|
Review of Insurance
. The Agent shall be entitled to review the requirements of this Clause 22.1 (Insurance) from time
to time in order to take account of changes in circumstances after the date of this Agreement (such changes in circumstances to
include, without limitation, changes in the financial position of the insurers, changes in the relevant Vessel's trading patterns,
changes in applicable law and changes in the price and availability of insurance coverage) and to require from the Borrowers such
modifications to the requirements of the Insurance as the Agent shall reasonably specify.
|
|
|
n)
|
Insurance report
. It will pay the reasonable costs of such reviews of the Insurance as the Agent may reasonably require,
such reviews to be conducted by an insurance broker appointed by the Agent. Such reviews will normally be carried out in connection
with the renewal of the Insurance, if new insurers and/or underwriters are appointed and/or in the event of a material change in
the terms of the insurance policies.
|
|
|
23.
|
information Undertakings
|
|
|
23.1
|
Financial Statements
. As long as any part of the Indebtedness remains outstanding, the Obligors undertake (at their
own cost) to supply to the Agent in sufficient copies for all the Lenders:
|
|
|
a)
|
Annual accounts
. As soon as they are available and in any event no later than 120 (hundred and twenty) days after the
end of each financial year, the audited financial statements of each Obligor for that financial year prepared in accordance with
GAAP applied on a consistent basis;
|
|
|
b)
|
Quarterly accounts
. As soon as they are available and in no event later than 45 (forty five) days after the end of each
financial quarter of the Shareholder's financial year, the Shareholder's consolidated un-audited quarterly financial statements
including cash flow analysis in a form acceptable to the Agent;
|
|
|
c)
|
Annual budgets and cash flow projections
. As soon as they are available and in no event later than 1 (one) month prior
to each financial year, the Shareholder's and the Borrowers' consolidated budgets and cash flow projections for such financial
year.
|
|
|
d)
|
Monthly management reports
. As soon as they are available and in no event later than 30 (thirty) days after the end
of each calendar month, the Borrowers undertake, if requested by the Agent (acting on behalf of the Lenders) to provide their consolidated
unaudited management reports for such calendar month in a form acceptable to the Agent, including a statement of the cash position
and available unused and drawn credit lines and a statement of profit and loss and management commentary, if any.
|
|
|
23.2
|
Additional information
. As long as any of the Indebtedness is outstanding, each Obligor undertakes (at its own costs)
that:
|
|
|
a)
|
Press releases
. It will promptly send to each Lender copies of all press releases and public statements made by it;
|
|
|
b)
|
Communication to creditors
. It will promptly send to the Agent copies of all communications generally submitted to its
creditors;
|
|
|
c)
|
Notification of Event of Default
. It will promptly notify the Agent and each of the Lenders of any Event of Default
or any event which with the giving of notice, lapse of time or upon determination of materiality may constitute an Event of Default;
|
|
|
d)
|
Litigation
. It will promptly upon becoming aware of them notify the Agent, the details of any litigation, arbitration
or administrative proceedings which are current, threatened or pending against any Obligor, and which, if adversely determined
would involve a liability, or a potential or alleged liability for any Obligor, exceeding USD 500,000;
|
|
|
e)
|
Further Information
. It will as soon as possible but in no event later than 1 (one) week after the Agent's request or
the request of any of the Lenders send to the Lenders by email or other means such other information (financial or otherwise) with
respect to the Group as any of the Lenders may from time to time reasonably request through the Agent;
|
|
|
f)
|
Questions and meetings
. It will answer any questions and participate in such meetings as the Lenders or any of them
may from time to time reasonably require through the Agent; and
|
|
|
g)
|
"Know your customer" checks
It will promptly upon the request of any Finance Party supply, or procure the
supply of, such documentation and other evidence as is requested by such Finance Party in order for such Finance Party or 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.
|
|
|
24.
|
Financial undertakings
|
|
|
24.1
|
Minimum value clause
. The Borrowers undertake if and so often as the aggregate of the Fair Market Value of the Vessels
fall below hundred per cent (100 %) of the Indebtedness less the value of any Additional Security provided pursuant to this Clause
24.1 (as calculated by the Agent) the Borrowers will within 10 (ten) days of being notified by the Agent of such requirement either:
|
|
|
a)
|
if the Agent (acting on instructions of the Lenders) agrees to accept Additional Security at the relevant time, the Borrowers
will provide the Lenders with such Additional Security; or
|
|
|
b)
|
prepay (subject to, and in accordance with, Clause 9.1 (Voluntary Prepayment)) such part of the Loans
|
which is necessary to ensure that the Fair Market
Value of the Vessels is equal to or exceeds 100% of the Indebtedness less the value of any Additional Security.
|
|
24.2
|
Valuation of the Vessels
. The Borrowers will pay the costs of semi-annual statements of the Fair Market Value which
shall be obtained by the Agent, and, if an Event of Default or a Potential Event of Default has occurred and is continuing, such
additional statements of the Fair Market Values as any Lender may require in their sole discretion. The valuations shall be performed
in May and November each year and shall each be based on the average of the valuations of 2 (two) shipbrokers from the list included
as Schedule 3 - List of Shipbrokers. If requested by the Lenders, the Agent may at any time at its discretion obtain additional
valuations at the cost of the Borrowers.
|
|
|
24.3
|
Minimum liquidity
. The Borrowers shall at all times as long as any part of the Indebtedness remains outstanding, ensure
that each Borrowers aggregate Free Cash shall be equal to or greater than USD 500,000 per Vessel, i.e. a total of USD 1,000,000,
as long as two Vessels are financed under this Agreement.
|
|
|
24.4
|
Docking reserve
. Each Borrower shall build up a reserve for docking costs in accordance
with the budgets for the Borrower to be approved by the Agent and shall pay the reserved amounts from the Earnings Account into
the Deposit Account. The amounts paid into the Deposit Accounts as docking reserves will be excluded from the calculation of the
cash sweep.
|
|
|
25.1
|
The business of the Obligors
. As long as any part of the Indebtedness remains outstanding, each of the Obligors undertakes
as follows (at its own cost):
|
|
|
a)
|
Business
. It will carry on its business in accordance with (i) careful and sound business practices, and (ii) all Regulations
applicable from time to time, including without limitation environmental rules and regulations, ISM and ISPS Codes and notify the
Agent immediately of any breach hereof;
|
|
|
b)
|
No other business
. It will not conduct any material business or activity other than ownership and operation of vessels
including activities incidental thereto without the prior written consent of the Agent (acting on the instructions of the Lenders),
such consent not to be unreasonably withheld;
|
|
|
c)
|
No change of business
. It will not cease all or a substantial part of its core business conducted on the date hereof;
|
|
|
d)
|
Authorisations
. It will obtain, maintain in full force and effect, and act in accordance with all material authorisations,
consents, licences, registrations or similar permissions required in connection with its performance of, or the validity or enforceability
of the Finance Documents and/or the transactions contemplated thereby;
|
|
|
e)
|
Agreements with Affiliates
. It will not enter into or make any material amendments to any agreement with any Affiliates
or enter into any new material business agreements with any Affiliates, except on an arms length basis on normal market terms;
|
|
|
f)
|
Environmental compliance
. It will:
|
|
|
|
|
|
|
i)
|
comply with all Environmental Law;
|
|
|
ii)
|
obtain, maintain and ensure compliance with all requisite Environmental Permits;
|
|
|
iii)
|
implement procedures to monitor compliance with and to prevent liability under any Environmental Law,
|
where failure to do so could or might result in
any material adverse change in its business or condition (financial or otherwise);
|
|
g)
|
Environmental claims
. It will promptly upon becoming aware of the same, inform the Agent in writing of:
|
|
|
i)
|
any Environmental Claim against any member of the Group which is current, pending or threatened; and
|
|
|
ii)
|
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, could or might result in any material adverse change in its business or condition (financial or otherwise);
|
|
h)
|
Tax compliance
. It will generally comply with all taxation laws in all relevant jurisdictions and pay all taxes and
other amounts due by it to governments and other public bodies and to ensure that no material claims will be asserted against it
with respect to such taxes or other payments to public or governmental bodies which, in either case, could or might result in any
material adverse change in its business or condition (financial or otherwise);
|
|
|
i)
|
Application of FATCA
. No Obligor shall become a FATCA FFI or a US Tax Obligor.
|
|
|
j)
|
No mergers
. It will not merge with another entity or demerge or split into different entities nor change its corporate
organisation and names without the prior written approval of the Agent (acting on instructions of the Lenders), such consent not
to be unreasonably withheld;
|
|
|
k)
|
Pari passu
. It will ensure that its obligations under the Finance Documents will rank at all times at least pari passu
with all its other existing or future indebtedness, obligations and liabilities actual or contingent from time to time (save those
as by law rank as preferential in a winding-up).
|
|
|
25.2
|
Single purpose
. As long as any part of the Indebtedness remains outstanding, each Borrower undertakes as follows (at
its own costs):
|
|
|
a)
|
No other business
. It will not conduct any business or activity other than ownership and operation of its Vessel including
activities incidental thereto;
|
|
|
b)
|
No subsidiaries or other investments
. It will not form or acquire any wholly or partly owned subsidiaries or make any
other investments. Any investment necessary or advisable in the daily maintenance and operation of the Vessels, shall not be considered
an investment;
|
|
|
c)
|
No employees
. It will not employ any employees;
|
|
|
d)
|
Chartering in
. It will not charter in any vessels;
|
|
|
e)
|
Prepayment to Managers
. It will not prepay the Managers except as required due to the ordinary operation of the Vessels
in accordance with the applicable Management Agreement, approved by the Agent.
|
|
|
f)
|
Financial Indebtedness
. It shall not incur or allow to remain outstanding any Financial Indebtedness, except pursuant
|
|
|
i)
|
the Finance Documents;
|
|
|
ii)
|
intragroup loans between the Borrowers; and
|
|
|
iii)
|
any shareholder loans from the Shareholder provided that such shareholder loans are fully subordinated to the Finance Documents
and are on terms preapproved by the Lenders.
|
|
|
g)
|
Loans or credit
. It shall not be a creditor in respect of any Financial Indebtedness except for intragroup loans between
the Borrowers.
|
|
|
h)
|
No Guarantees or indemnities
. It shall not incur or allow to remain outstanding any guarantee in respect of any obligation
of any person.
|
|
|
i)
|
Negative Pledge
. It will not create or permit to subsist any Security Interest over any of its assets or suffer the
creation of any such Security Interest to or in favour of any person, except for
|
|
|
i)
|
the Security Documents; and
|
|
|
j)
|
Treasury Transactions
. It shall not enter into any Treasury Transaction unless approved by the Lenders;
|
|
|
k)
|
Material agreements
. It will not terminate or make any material amendments to any material agreement to which it is
a party or enter into any new material agreements, provided however that it may enter into new charter agreements or new management
agreements permitted under this Agreement.
|
|
|
l)
|
Cash Management
. It will not open any bank accounts other than the Earnings Accounts and the Deposit Accounts and will
maintain all of its cash flows on such bank accounts and will ensure that all of its excess liquidity will be held in cash on such
bank accounts.;
|
|
|
m)
|
Dividends
. It will not
|
|
|
i)
|
declare, make or pay any dividend, charge, fee or other distribution (or interest on any unpaid dividend, charge, fee or other
distribution) (whether in cash or in kind) on or in respect of its share capital (or any class of its share capital);
|
|
|
ii)
|
repay or distribute any dividend or share premium reserve;
|
|
|
iii)
|
pay any management, advisory or other fee to or to the order of any of the shareholders of the Borrowers or any of their Affiliates
other than fees to the Managers, approved by the Agent; or
|
|
|
iv)
|
redeem, repurchase, decease, retire or repay any of its share capital or resolve to do so
|
except for when permitted by the Agent (acting on
instructions of the Lenders) in writing.
|
|
26.1
|
Events of Default
. An Event of Default shall be deemed to have taken place if (notwithstanding the reason why it has
occurred):
|
|
|
a)
|
Failure to pay - Finance Documents
. Any Obligor fails to pay when due any sum payable under any of the Finance Documents
(or any agreement entered into in connection with any of the Finance Documents), unless failure to pay is caused by administrative
or technical error and payment is made within 3 (three) Banking Days of its due date; or
|
|
|
b)
|
Incorrect or misleading information – before signing
. Any material information submitted by any Obligor or the
Charterer to any of the Finance Parties, prior to the execution of this Agreement is incorrect or misleading in any material respect;
or
|
|
|
c)
|
Incorrect or misleading information – after signing
. Any material information submitted by any Obligor or the
Charterer to any of the Finance Parties, after the execution of this Agreement is incorrect or misleading in any material respect,
unless
|
|
|
i)
|
such information has been given in good faith and
|
|
|
ii)
|
the breach is remedied no later than 7 (seven) days after the Obligor becomes aware of such breach and
|
|
|
iii)
|
no other Event of Default has occurred; or
|
|
|
d)
|
Breach of representations and warranties
. Any representation or warranty made by any Obligor in any Finance Document
or any certificate or statement delivered or made thereunder is incorrect or inaccurate in any material respect; or
|
|
|
e)
|
Breach of minimum value clause
. The Borrowers fails to provide Additional Security or prepay the outstanding Loans in
accordance with Clause 24.1 (Minimum value clause); or
|
|
|
f)
|
Breach of minimum liquidity
. Any breach of the required Free Cash in Clause 24.3 (Minimum Liquidity); or
|
|
|
g)
|
Insurances
. (i) Any Obligor breaches its insurance obligations under Clause 22 (Undertakings - Insurance) or (ii) any
of the Vessels are operated or employed contrary to the terms and conditions set out in the Insurances or (iii) a mortgagee interest
insurance cannot be obtained by the Obligors or the Lenders for reasons attributable to the Obligors; or
|
|
|
h)
|
Security jeopardized
. The security constituted by any of the Security Documents is imperilled or jeopardized in any
material way or any of the security granted under the Security Documents is or becomes invalid or unenforceable; or
|
|
|
i)
|
Breach of other obligations or undertakings
. Any other obligation of an Obligor or undertaking made by an Obligor in
any Finance Document (including without limitation the undertakings concerning the Vessels contained therein) or any certificate
or statement delivered under the said documents is breached, provided, however, that such breach shall not constitute an Event
of Default if
|
|
|
|
|
|
|
i)
|
the breach is capable of remedy; and
|
|
|
ii)
|
the breach is remedied to the satisfaction of the Agent within 7 (seven) days of the earlier of (i) any Obligor becoming aware
of the breach and (ii) a notice from the Agent specifying the breach was received by the Shareholder; or
|
|
|
j)
|
Charter Parties
. If at any time the Charter Parties are not renewed or the Charter Parties otherwise expires, are terminated
or cancelled for whatever reason, unless a substitute charter party with an acceptable charterer is entered into with the consent
of the Agent, which consent not to be unreasonably withheld, or the Borrower or the Charterer materially breach or terminate or
the Borrower waives any material right under any Charter Party; or
|
|
|
k)
|
Cross default – agreements with Finance Parties
. Any Obligor or any of its Affiliates has defaulted in any material
way or any other way which will allow for an acceleration of payment or enforcement of security under any agreement entered into
between such Obligor and any of the Finance Parties or any branch or an affiliate thereof; or
|
|
|
l)
|
Cross default - other agreements
. Any indebtedness in any amount of any Obligor or the Charterer in excess of, in aggregate,
USD 2,500,000 under any other agreements or documents:
|
|
|
i)
|
is not paid when due or within any applicable grace period, unless such indebtedness is not a Financial Indebtedness and is
being tested in good faith and for which adequate security is provided; or
|
|
|
ii)
|
is declared to be or otherwise becomes due and payable prior to its specified maturity by reason of a default; or
|
|
|
iii)
|
any creditor of any Obligor or the Charterer becomes entitled to declare any such indebtedness due and payable prior to its
specified maturity by reason of default; or
|
|
|
m)
|
Insolvency
. Any Obligor or the Charterer is or becomes insolvent; or
|
|
|
n)
|
Bankruptcy or insolvency events
. Any action, legal proceeding or other procedure or step is taken or any negotiation
is commenced with a creditor in relation to:
|
|
|
i)
|
the bankruptcy, a composition of debts, a suspension of payments, winding up, a moratorium of any indebtedness, dissolution,
administration, reorganisation or the insolvency of any Obligor or the Charterer (whether voluntary, mandatory or in any other
way); or
|
|
|
ii)
|
the appointment of a liquidator, receiver, administrator, administrative receiver, compulsory manager or other similar officer
in respect of any Obligor or the Charterer; or
|
|
|
o)
|
Creditor' process
. (i) Execution is levied against any Vessel or (ii) any Vessel is put up for compulsory sale or (iii)
any Vessel is arrested, attached or otherwise detained or (iv) any other asset of any Obligor or the Charterer with a value in
excess of USD 500,000 is arrested, attached or otherwise detained and any such execution, arrest, attachment or other detention
as referred to in (i)-(iv) is not lifted within 30 (thirty) days from its inception; or
|
|
|
p)
|
Unlawfulness and invalidity
. It is or becomes unlawful for an Obligor to perform any of its obligations under the Finance
Documents or any subordination created under the Finance Documents is or becomes unlawful; or
|
|
|
q)
|
Repudiation and rescission of agreements
. An Obligor or the Charterer rescinds or purports to rescind or repudiates
or purports to repudiate a Finance Document; or
|
|
|
r)
|
Material adverse change
. In the reasonable opinion of the Agent (acting on instructions of the Lenders) there has been
a material adverse change in (i) the ability of the Obligors to comply with their obligations under the Finance Documents, or (ii)
the business, financial condition or assets of the Obligors, in either event where such change is material when considering the
Obligors as a whole; or
|
|
|
s)
|
Changes to constitutive documents
. Without the prior written consent of the Agent such consent not to be unreasonably
withheld, any Obligor's articles of association or other constitutive documents are amended in any material way; or
|
|
|
t)
|
Ownership of shares
. At any time after the first Utilisation, the Shareholder is not the ultimate owner of all shares
and voting rights in the Borrowers, unencumbered except for the Security Interest in favour of the Finance Parties;
|
|
|
26.2
|
Action following an Event of Default
. Upon the occurrence of an Event of Default and at any time thereafter, so long
as any such Event of Default continues, the Agent (on behalf of the Lenders) may:
|
|
|
a)
|
by notice to the Shareholder declare the Indebtedness to be either immediately due and payable or payable by the Borrowers
upon demand whereupon the same shall become immediately due and payable or (as the case may be) payable on demand by the Agent;
and/or
|
|
|
b)
|
by notice to the Shareholder declare the Commitment terminated; and/or
|
|
|
c)
|
amend or select such Interest Periods for the Facility and/or convert the Indebtedness into such other currency as the Agent
may determine; and/or
|
|
|
d)
|
take any other action, exercise any other right or pursue any other remedy conferred upon the Agent and/or the Lenders by this
Agreement and/or by all or any of the Security Documents or by any applicable Regulation or otherwise as a consequence of such
Event of Default.
|
|
|
e)
|
take and enter into possession of the Vessels or any of them, at any time, where ever same may be, without legal process and
without being responsible for loss or damage (save for loss or damage caused by the Agent’s gross negligence or wilful misconduct)
and the Obligors or other person in possession or control of the Vessels or any of them shall forthwith upon demand of the Agent
surrender to the Agent possession and control of such Vessels; and/or
|
|
|
f)
|
by notice to the Obligors request the crew to be ordered to remain on board or abandon the Vessels or any of them, that the
masters of the Vessels or any of them be ordered to sail such Vessels or any of them to any port designated by the Agent and/or
that the Obligors do all such things as may be requested by the Agent; and/or
|
|
|
g)
|
discharge, compound, release or compromise claims in respect of the Vessels or any of them which have given or may give rise
to any charge or lien on the Vessels or any of them or which are or may be enforceable by proceedings against such Vessel; and/or
|
|
|
h)
|
upon written notice to the Obligors sell the Vessels or any of them without being responsible for loss or damage (save for
loss or damage caused by the Agent’s gross negligence or wilful misconduct) upon such terms and conditions as the Agent shall
deem best, free from any claim of or by the Obligors, at public auction or private sale at home or abroad and upon such terms as
the Agent in its absolute discretion may determine, provided that the purchase price for a private sale shall not be lower than
the net purchase price which in the Lenders' reasonable opinion could be obtained from an independent third party in the event
of an auction sale net of all costs and expenses which may be expected to accrue before and after such auction sale, including
without limitation any lay up costs, handling costs, administration costs, legal fees, court fees and liens; and/or
|
|
|
i)
|
manage the Vessels or any of them and, pending sale of the Vessels or any of them, to insure, maintain and repair the Vessels
or any of them, and to employ, sail or lay up the Vessels or any of them in such manner and for such period as the Agent, in its
absolute discretion shall deem expedient and for all the purposes aforesaid the Agent shall be entitled to do all acts and things
incidental or conducive thereto and in particular (but without prejudice to the generality of the foregoing) to enter into such
arrangements respecting the Vessels or any of them, their management, insurance, maintenance, repair, classification and employment
in all respects as if the Agent was the owner of the Vessels, but without being responsible for any loss (save for loss caused
by the Agent’s gross negligence or wilful misconduct) incurred as a result of the Agent doing or omitting to do any such
acts or things as aforesaid; and/or
|
|
|
j)
|
require that all policies, contracts, certificates of entry and other records relating to the Insurance (including details
of and correspondence concerning outstanding claims) be forthwith delivered to or to the order of the Agent; and/or
|
|
|
k)
|
notify the insurers, underwriters, clubs and associations providing Insurance for the Vessels or any of them that all payments
under the Insurance shall be paid to the Agent for the account of the Finance Parties; and/or
|
|
|
l)
|
if the Obligors fail to, effect or keep in force the Insurance on the Vessels or any of them and such entries in protection
and indemnity or war risks associations as the Agent in its discretion considers desirable and the Agent may (but shall not be
obliged to) pay any unpaid premiums, calls or contributions. The Obligors will reimburse the Agent from time to time on demand
for all such premiums, calls or contributions paid by the Agent, together with interest at the default interest rate set out in
the Agreement from the date of payment by the Agent until the date of reimbursement; and/or
|
|
|
m)
|
collect, recover, compromise and give a good discharge for any and all moneys or claims for moneys then outstanding or thereafter
arising under the Insurance or any of them or any requisition compensation and to permit any brokers through whom collection or
recovery is effected to charge the usual brokerage therefore, including making proof of loss if the Obligors fail to do so; and/or
|
|
|
n)
|
to submit the notice of assignment of Earnings to any charterers or users of the Vessels or any of them and to notify such
charterers or users that all Earnings shall be paid to the Agent for the account of the Secured Parties; and/or
|
|
|
o)
|
to take any and all steps with regard to the Accounts which the Agent may deem appropriate, including having amounts transferred
to any account nominated by the Agent; and/or
|
|
|
p)
|
exercise any other rights given under the Finance Documents; and/or
|
|
|
q)
|
enforce any and all statutory rights under any applicable law, including the Danish Administration of Justice Act; and/or
|
|
|
r)
|
recover from the Obligors on demand all expenses incurred or paid by the Finance Parties in connection with the exercise of
the powers referred to in this Clause 26.2.
|
This Clause 26.2 shall not limit
any other rights of the Agent or the other Finance Parties under this Agreement or any of the Security Documents.
The Agent may freely choose and decide whether and
if so, what part of the security constituted by the Security Documents shall be realised and which of its rights exercised.
|
|
26.3
|
Power of attorney - enforcement
. Each of the Obligors irrevocably appoints the Agent as its attorney with full power
and authority upon the occurrence of an Event of Default to act for the Obligor and in its name and on its behalf to do such things
and take such action as is set forth in Clause 26.2 (Action following an Event of Default), including without limitation to
|
|
|
a)
|
order the crew to remain on board the Vessels or any of them; and/or
|
|
|
b)
|
order the master of the Vessels or any of them to sail the Vessels or any of them to any safe port designated by the Agent;
and/or
|
|
|
c)
|
take possession of the Vessels or any of them; and/or
|
|
|
d)
|
sell the Vessels or any of them by public auction or private contract, at such place and upon such terms as the Agent may determine;
and/or
|
|
|
e)
|
collect and sign for any claims the Obligor may have regarding the Vessels or any of them; and/or
|
|
|
g)
|
employ the Vessels or any of them and/or
|
|
|
h)
|
lay up the Vessels or any of them.
|
|
|
26.4
|
Exclusion of liability
. The Agent shall not be responsible to the Obligors for any loss incurred by the Obligors as
a consequence of the Agent's exercise of the power of attorney prescribed in Clause 26.3 (Power of attorney - enforcement) except
where the Agent has acted grossly negligently or with wilful misconduct in the exercise of the power of attorney.
|
|
|
26.5
|
Separate powers of attorney
. If requested by the Agent at any time, the Obligors shall forthwith issue a separate document
evidencing the power of attorney prescribed in Clause 26.3 (Power of attorney - enforcement).
|
|
|
27.1
|
Appointment
. The Lenders appoint the Agent to act as their agent in connection with this Agreement and the Agent accepts
such appointment. The Lenders further appoint the Agent to act as their agent, representative and mortgagee under the Security
Documents and the Agent accepts such appointment.
|
|
|
27.2
|
Authorisation
. The Lenders:
|
|
|
a)
|
authorise the Agent to execute any Finance Documents, any Transfer and any other documents in the agreed form which are to
be executed by the Agent on the Lenders' behalf;
|
|
|
b)
|
authorise the Agent to exercise all rights, powers, authorities and discretions specifically given to the Agent by the terms
of this Agreement or otherwise, together with all such rights, powers and discretions as are incidental thereto;
|
|
|
c)
|
authorise the Agent to act as mortgagee and agent on behalf of the Finance Parties in accordance with the terms of the Security
Documents and to exercise all rights, powers, authorities and discretions specifically given to the Agent by the terms of the Security
Documents or otherwise, together with all such rights, powers and discretions as are incidental thereto; and
|
|
|
d)
|
authorise the Agent to release agreements in respect of Security Documents which is to be executed by the Agent on the Lenders'
behalf.
|
|
|
27.3
|
Relationship
. The relationship between the Agent and the other Finance Parties is that of principal and agent. The Agent
shall not be liable to any person for any breach by any of the Finance Parties of any provision of any of the Finance Documents
or for any breach of any other person of the terms of any of the Finance Documents.
|
|
|
27.4
|
Delegation
. The Agent may act under the Finance Documents through its personnel and agents but shall not delegate to
any agent any discretion granted to it hereunder.
|
|
|
27.5
|
Resignation
. The Agent may resign and appoint one of its affiliates as successor by giving notice to the Lenders and
the Shareholder. If the Agent does not appoint an affiliate as successor in the resignation notice, the Lenders may appoint a successor
Agent, subject to the approval of the Shareholder, such approval not to be unreasonably withheld. If the Lenders have not appointed
a successor within 60 (sixty) days after notice of resignation was given, the Agent may appoint a successor Agent after consultation
with the Lenders and subject to the approval of the Shareholder, such approval not to be unreasonably withheld. The resignation
of the Agent shall not take effect until a successor has been appointed. Any resignation and appointment of Agents shall be at
no costs to the Borrowers.
|
|
|
27.6
|
Process Agent
. Without prejudice to the use any other service permitted by law (i) each of the Obligors hereby irrevocably
appoints Nordic Bulk Carriers A/S, having its registered office at Tuborg Havnevej 4. 1, 2900 Hellerup, as its agents for service
of all legal processes and any document in any action (including, but no limited to any writ (in Danish "
stævning
")
in any proceedings before any court) arising out of or connected with this Agreement. Each of the Obligors agrees that any legal
processes and any document in any proceedings arising out of this Agreement may be served either to a duly appointed process agent
or in any other way permitted by law, and that both documents and proceedings served to a process agent and documents and proceedings
served in any other way permitted by law shall be deemed to have been properly served.
|
|
|
27.7
|
Assistance
. All rights and obligations of the Agent under the Finance Documents shall be transferred and assigned to
any successor Agent appointed pursuant to Clauses 27.5 (Resignation) and the Agent shall provide such documents and records and
provide such assistance as the successor Agent may reasonably request for the purposes of performing its functions as Agent under
the Finance Documents.
|
|
|
28.
|
Changes to the parties
|
|
|
28.1
|
Assignment by a Lender
. Subject to Clause 28.2 (Consent from the Lenders), a Lender (the "Existing Lender")
may at any time assign, transfer or have assumed all or part of its rights or obligations under the Finance Documents (a "
Transfer
")
to another bank or financial institution (the "New Lender").
|
|
|
28.2
|
Consent from the Lender
. The New Lender must be approved by the Lenders, unless the Transfer is to another Lender or
a company, branch or affiliate within the same group as a Lender.
|
|
|
28.3
|
Assurances by the Obligors
. The Obligors undertake to procure that in relation to any Transfer, the Obligors shall (at
the cost of the New Lender) at the request of the Agent execute such documents as may be in the discretion of the Agent be necessary
to ensure that the New Lender attains the benefit of the Finance Documents.
|
|
|
28.4
|
No transfer by the Obligors
. The Obligors may not assign or transfer any part of their rights and/or obligations under
the Finance Documents.
|
|
|
28.5
|
Disclosure of information
. A Finance Party may disclose the Finance Documents and any confidential information concerning
the Obligors to its Affiliates and advisors and provided that the relevant person undertakes to keep the relevant information confidential
as set out in this Clause 28.5 (Disclosure of information), to any person with whom it is proposing to enter, or has entered into,
any kind of transfer, participation or other agreement in relation to this Agreement. The Finance Documents and the confidential
information received by the Lenders concerning the Obligors shall not otherwise be disclosed to any third party unless such disclosure
(i) is required in connection with the perfection or enforcement of the Finance Documents, (ii) is permitted under this Agreement
or (iii) is necessary to protect the Finance Parties' rights under the Finance Documents, in the reasonable opinion of the Agent.
Subject always to any applicable Regulations, the restrictions in this provision Clause 28.5 shall not apply if an Event of Default
has occurred and is continuing. Furthermore, the restrictions in this Clause 28.5 shall not apply to any information, which (i)
is generally available to the public, (ii) was in the possession of the Lenders prior to its disclosure in connection with the
Finance Documents, (iii) is required to be disclosed pursuant to any applicable Regulation, or (iv) is required to be disclosed
in connection with any litigation, arbitration or other similar legal proceedings.
|
|
|
29.1
|
Notices in writing
. Any notices to be submitted in accordance with the Finance Documents shall be submitted by letter,
e-mail or fax to the following addresses or such addresses as such party may hereafter notify to the other parties hereto:
|
If to the Obligors:
Phoenix Bulk Carriers (US) LLC
Att.: Mr. Anthony Laura/Mr. Gianni DelSignore
E-mail: tlaurahome@aol.com/gdelsignore@phoenixbulkus.com
Fax: +401-846-1520
With copy to:
Nordic Bulk Carriers A/S
Attn.: Mr. Christian Bonfils
E-mail: cb@nordic-bulk.com
If to the Agent or Nordea Bank Danmark A/S in its
capacity as Lender:
Nordea Bank Danmark A/S
Strandgade 3
1401 København K
Att.: Jesper Stahl
E-mail: Jesper.stahl@nordea.com
Fax: (+45) 33 33 55 09
and in respect of any New Lender the address notified
by such New Lender.
|
|
29.2
|
Effectiveness of notices
. Any notice in respect of the Finance Documents shall be deemed to be duly made only:
|
|
|
a)
|
in the case of a letter, whether delivered in course of the post or by hand or by courier, at the date and time of its actual
delivery if delivered within normal business hours on a Banking Day at the place of receipt, otherwise at the commencement of normal
business on the next such Banking Day; or
|
|
|
b)
|
in the case of a facsimile transmission, at the time recorded together with the telephone dialling code of the receiving machine
on the message if such time is within normal business hours on a Banking Day at the place of receipt, otherwise at the commencement
of normal business hours on the next such Banking Day; or
|
|
|
c)
|
in the case of an e-mail, at the time of the receipt if such time is within normal business hours on a Banking Day at the place
of receipt, otherwise at the commencement of normal business hours on the next such Banking Day.
|
|
|
29.3
|
Irrevocable
. All notices submitted in accordance with the Finance Documents are irrevocable and binding upon the party
giving such notice.
|
|
|
29.4
|
Language
. Each notice or certificate to be given by one party to the other hereunder shall be given in the English language.
|
|
|
30.1
|
No implied waivers
. The Finance Parties' omission to claim any event as an Event of Default or to invoke any other rights
granted to the Finance Parties hereunder shall not result in the Finance Parties subsequently at any time not being entitled to
claim similar events as an Event of Default or invoke such rights.
|
|
|
30.2
|
Discrepancy
. In case of any discrepancy between this Agreement, the Schedules or the Security Documents, this Agreement
shall prevail.
|
|
|
30.3
|
Separable provisions
. The provisions of the Finance Documents are several and if any of the obligations of any Obligor
hereunder and thereunder shall be invalid or unenforceable in any respect in any jurisdiction, this shall not affect the validity
or enforceability of such obligation in any other jurisdiction or the validity or enforceability of the remaining obligations in
that or any other jurisdiction.
|
|
|
30.4
|
Amendments
. Any amendments to this Agreement and the Security Documents shall only be binding provided all the parties
hereto have approved such amendment in writing, except when otherwise provided herein.
|
|
|
30.5
|
Headings
. In this Agreement clause headings are for ease of reference only.
|
|
|
31.1
|
Law
. This Agreement shall be governed by Danish law.
|
|
|
31.2
|
Main jurisdiction
. Save as provided for in Clause 31.3 (Alternative jurisdictions), the City Court of Copenhagen (
Københavns
Byret
) shall have exclusive jurisdiction with respect to any dispute arising out of or in connection with this Agreement.
|
|
|
31.3
|
Alternative jurisdictions
. Clause 31.2 (Main jurisdiction) shall, however, not limit the right of the Finance Parties
to initiate proceedings against the Obligors or any of their assets or any of the securities constituted by the Security Documents
in any competent court of law, bailiff office or other forum for the purpose of enforcing the Finance Documents.
|
|
|
31.4
|
Agent's right to initiate proceedings
. The parties agree that the Agent has the right to enforce the Finance Documents
and to commence proceedings (including, without limitations, legal proceedings in any competent court or arbitration tribunal)
against the Obligors under the Finance Documents as agent for and on behalf of each of the other Finance Parties and it shall not
be necessary for any of the other Finance Parties to be joined as an additional party in any such proceedings for this purpose,
however each Finance Party shall be entitled to join in if it so wishes. This Clause 31.4 shall not prejudice the rights of the
Finance Parties to initiate proceedings under this Agreement.
|
|
|
31.5
|
Enforceability
. This Agreement is enforceable in accordance with Sections 478(1), number 5, and 478(4) of the Danish
Administration of Justice Act (
Retsplejelovens § 478, stk. 1, nr. 5 and stk. 4
) and similar provisions in any other
relevant jurisdiction.
|
IN WITNESS whereof the parties have entered into this Agreement
executed on the date first written above.
|
As Borrower,
|
|
|
|
Nordic Bulk Bothnia Ltd.
|
|
|
|
|
|
|
|
|
|
|
|
Name:
|
|
Name:
|
|
Capacity:
|
|
Capacity:
|
|
|
|
|
|
As Borrower,
|
|
|
|
Nordic Bulk Barents Ltd.
|
|
|
|
|
|
|
|
|
|
|
|
Name:
|
|
Name:
|
|
Capacity:
|
|
Capacity:
|
|
|
|
|
|
As Guarantor,
|
|
|
|
Bulk Partners (Bermuda) Ltd.
|
|
|
|
|
|
|
|
|
|
|
|
Name:
|
|
Name:
|
|
Capacity:
|
|
Capacity:
|
|
As Lender,
|
|
|
|
Nordea Bank Danmark A/S
|
|
|
|
|
|
|
|
|
|
|
|
Name:
|
|
Name:
|
|
Capacity:
|
|
Capacity:
|
|
|
|
|
|
As Agent,
|
|
|
|
Nordea Bank Danmark A/S
|
|
|
|
|
|
|
|
|
|
|
|
Name:
|
|
Name:
|
|
Capacity:
|
|
Capacity:
|
|
|
|
|
|
As Process Agent,
|
|
|
|
Nordic Bulk Carriers A/S
|
|
|
|
|
|
|
|
|
|
|
|
Name:
|
|
Name:
|
|
Capacity:
|
|
Capacity:
|
Schedule
1 - Conditions Precedent
PART A –
3 Banking Days prior to first
Utilisation
The Agreement
|
|
1.
|
The Agreement
. The Agreement duly executed by all parties thereto;
|
The Security Documents
|
|
2.
|
Security Agreement
. A duly executed Security Agreement in the form set out in Exhibit 3 - Form of Security Agreement,
including
|
|
|
a)
|
assignment of Insurances of the Vessels;
|
|
|
b)
|
assignment of the Earnings under the Charter Parties and all other Earnings of the Vessels;
|
|
|
c)
|
pledge of the Deposit Accounts;
|
|
|
d)
|
pledge of the Earnings Accounts;
|
|
|
e)
|
pledge of the Freight Account;
|
|
|
f)
|
assignment of the Subordinated Intra-Group Debt.
|
|
|
3.
|
Share charge
. A duly executed and perfected first priority charge of shares over the shares in each of the Borrowers;
|
|
|
4.
|
Registration of charges with companies register in Bermuda
. Evidence that the prescribed particulars of the Security
Documents entered into by Bermuda Obligors as received by the Lender have been filed with the Bermuda Registrar of Companies over
the assets of the relevant Bermuda Obligor in order to establish priority.
|
Miscellaneous
|
|
5.
|
Memorandum of agreement
. Each memorandum of agreement concerning the Borrowers' acquisition of the Vessels and any addenda
thereto duly executed by all parties thereto;
|
|
|
6.
|
KYC requirements
. Such documentation and other evidence as the Agent may require to comply with all necessary "know
your customer" in respect of the Obligors or other similar checks under all applicable laws and regulations including:
|
|
|
a)
|
full disclosure of structure and ownership of the Obligors as well as of relevant subsidiaries;
|
|
|
b)
|
the identity of the ultimate owner (any physical person effectively owning and/or controlling and/or benefitting from directly
or indirectly more than 25 % of any of the Obligors) shall be proven via acceptable documentation and the Agent shall receive certified
copies of documents of identification to include address and civil registration number if any regarding the ultimate owner - for
example passports;
|
|
|
c)
|
evidence that the Shareholder is the ultimate owner of the Borrowers;
|
|
|
d)
|
signatures on this Agreement and the Security Documents shall be verified and the signatories' identity including address and
civil registration number if any shall be documented via passports or other acceptable documentation;
|
|
|
e)
|
such other documentation and information as the Agent deems necessary and/or advisable in order to comply with any law and/or
regulation regarding money laundering and/or the financing of terrorist activities;
|
Corporate Documents
|
|
7.
|
Transcripts
. A copy of a transcript from the relevant companies register in respect of each of the Charterer;
|
|
|
8.
|
Articles of Association
. A copy of the Articles of Association in respect of the Charterer;
|
|
|
9.
|
Constitutional Documents
. Certified copies of the constitutional documents in respect of each of the Obligors, including
(as applicable or equivalent), but not limited to, the following: Certificate of Incorporation (and any certificates on change
of name), Memorandum of Association (and any memorandum of increase/decrease), bye-laws, foreign exchange letters and tax assurance
certificates;
|
|
|
10.
|
Board resolutions and other corporate action
. A copy of a board resolution by each Obligor and the Charterer and all
corporate actions taken by each of the Obligors and the Charterer in connection with the transactions contemplated by the Finance
Documents and the Charter Parties and evidencing the necessary approvals to enter into the Finance Documents and the Charter Parties
and schedules and exhibits thereto to which each of the Obligors and the Charterer
is a
party;
|
|
|
11.
|
Power of Attorney
. The originals of any powers of attorney issued in favour of any person executing any of the Finance
Documents and the Charter Parties on behalf of the Obligors
and the Charterer;
|
|
|
12.
|
Notarised and Legalised Power of Attorney
. The original duly executed, notarised and legalised powers of attorney granted
by each of the Obligors for the purpose of executing the Mortgages;
|
|
|
13.
|
Director/Secretary's Certificate
. A Director's or Secretary's Certificate attaching (i) the Constitutional Documents
(listed in Clause 7 above) (ii) the register of Directors and Officers of the relevant Obligors (iii) the register of members (shareholders)
in respect of the relevant Obligor (iv) confirming that the borrowing or guaranteeing of the total Commitment by the relevant Obligor
would not cause any borrowing or guaranteeing or similar limitations on the relevant Obligor to be exceeded and at the time of
entry into the Finance Documents the relevant Obligor could meet its obligations as they fall due, and (v) such other documents
required by the Lender;
|
|
|
14.
|
Certificate of Good Standing
. A copy of a Certificate of Good Standing or Certificate of Compliance in respect of each
of the Obligors;
|
|
|
15.
|
Shareholders' Register
. A copy of the register of the Charterer;
|
Insurances
|
|
a)
|
Cover notes
. Evidence that the Vessels are insured in accordance with the Security Agreement in the form of cover notes
and certificates of entry, and that all requirements therein in respect of the insurances have been complied with;
|
|
|
b)
|
Notice of assignment of Insurance
. Evidence that the brokers and/or insurers have been duly notified of the assignment
of Insurances contained in the Security Agreement;
|
|
|
c)
|
Letters of Undertaking
. Duly executed Letters of Undertakings issued by the insurers and/or brokers;
|
|
|
17.
|
Insurance Opinion
. If required by the Agent, an opinion from an insurance consultant of the Agent’s choice confirming
that all requirements in respect of the insurances on the Vessels have been complied with;
|
|
|
18.
|
MII and MAPP
. Evidence that mortgagee interest insurance and mortgagee additional perils pollution insurance have been
taken out for the Vessels at the cost of the Borrowers in respect of the Vessels in the names of the Finance Parties on such terms
and conditions and through such brokers and with such insurers and underwriters as the Agent may in its sole discretion approve
or arrange;
|
Ship Certificates
|
|
19.
|
Class Certificate
. A copy of the class certificate, including all annexes evidencing that each Vessel is classed to
the satisfaction of the Agent free of all overdue recommendations and qualifications of the classification society;
|
|
|
20.
|
Ship Certificates
. A copy of (i) the technical manager's DOC; (ii) each Vessel's SMC and ISSC (within 3 days of the
applicable Utilisation Date; and (iii) such other ISM certificates and documents which the Agent may request;
|
Management Agreements
|
|
21.
|
Management Agreements
. A copy of any technical or commercial management agreements for the Vessels duly executed by
all parties thereto and all exhibits, schedules and amendments thereto;
|
|
|
22.
|
Manager's Undertaking
. A duly executed manager's undertaking from Seamar Management S.A. in the form as set out in Exhibit
4 - Form of Manager's Undertaking.
|
Existing Time Charterers
|
|
23.
|
Profit split.
Evidence that the existing profit split payment withheld by the Charterer is paid to the Sellers or settled
as follows:
|
|
|
i)
|
The Charterer has paid the USD 534,000 to the Seller, K/S Danskib 78, relating to m.v. Nordic Bothnia (such amount being payable
when the memorandum of agreement on the Vessels is signed and deposit placed); and
|
|
|
ii)
|
The profit split payment relating to m.v. Nordic Barents is related to the dispute concerning an amount of approx. USD 1,000,000
between the Charterer and its sub-charterer. The dispute shall be settled before the first Utilisation, subject to the approval
of the Agent, and the profit split due to the Seller, K/S Danskib 80 shall be paid prior to the first Utilisation. Alternatively,
if the dispute has not been settled prior to the first Utilisation, the profit split shall be finally settled by the payment of
USD 200,000 from the Charterers to the Sellers at that date, and evidence shall be provided on that date, that a transfer has been
made.
|
New Time Charterers
|
|
24.
|
Charter period, minimum rate and profit split
. Duly executed Charter Parties for the Vessels between the Borrowers and
the Charterer for a 12 months charter period to be renewed on a 12 month rolling basis at a daily charter hire and a profit split
for the Borrowers acceptable to the Agent.
|
|
|
25.
|
Perfection of assignment of Charter Party
.
|
|
|
a)
|
Notice. Evidence that the assignment of Earnings contained in the Security Agreement has been duly perfected by notice to the
Charterers;
|
|
|
b)
|
Acknowledgment. A duly executed acknowledgement of the Assignment of the Charter Party by the Charterers;
|
PART B – Simultaneously
with the first Utilisation in respect of each loan related to a vessel
Delivery Documents
|
|
a)
|
Transfer documents
. A copy of the bill of sale, the protocol of delivery and acceptance and all other material documents
concerning the transfer of the relevant Vessel to the relevant Borrower evidencing the unconditional delivery of the Vessel by
the Sellers to and accepted by the Borrower; and
|
|
|
b)
|
Commercial Invoice
. A copy of the commercial invoice issued by the relevant Seller, evidencing the payment of the remaining
purchase price for the Vessel;
|
Mortgage and registration
|
|
27.
|
Mortgage
. Evidence that a first priority Mortgage in a form acceptable to the Agent has been or will immediately upon
drawdown be duly registered in the Ship Registry against the relevant Vessel;
|
|
|
28.
|
Transcript of Register
. Transcript of Register from the Ship Registry evidencing
|
|
|
a)
|
that the relevant Vessel is registered in the Ship Registry in the name of the relevant Borrower, free and clear of all liens,
mortgages and charges other than as contemplated by the Agreement; and
|
|
|
b)
|
that the relevant first priority Mortgage is registered against the relevant Vessel.
|
Miscellaneous
|
|
29.
|
Capitalisation of the Borrower
. Evidence that each Borrower has received equity in the form of share capital of at least
USD 1,500,000, of which USD 1,000,000 has been paid to the Sellers as part of the purchase price for the relevant Vessel, while
the remaining USD 500,000 remain in the relevant Borrower's accounts with the Agent as minimum liquidity.
|
Legal opinions
|
|
30.
|
Legal opinion
. Legal opinions issued by legal counsels approved by the Agent in a form and substance acceptable to the
Agent in respect of such jurisdictions as the Agent may require, including without limitation:
|
|
|
a)
|
Legal opinion issued by Kromann Reumert in respect of Danish law.
|
|
|
b)
|
Legal opinion issued by Bermuda legal counsel appointed by the Agent in respect of Bermuda law.
|
|
|
c)
|
Legal opinion issued by Panama legal counsel appointed by the Agent in respect of Panama law.
|
Schedule
2 - Payment Schedule
|
Payment Date
|
|
Amount
|
|
15 March 2014
|
|
USD 156,250
|
|
15 June 2014
|
|
USD 156,250
|
|
15 September 2014
|
|
USD 156,250
|
|
15 December 2014
|
|
USD 156,250
|
|
15 March 2015
|
|
USD 156,250
|
|
15 June 2015
|
|
USD 156,250
|
|
15 September 2015
|
|
USD 156,250
|
|
15 December 2015
|
|
USD 156,250
|
|
15 March 2016
|
|
USD 156,250
|
|
15 June 2016
|
|
USD 156,250
|
|
15 September 2016
|
|
USD 156,250
|
|
15 December 2016
|
|
USD 156,250
|
|
15 March 2017
|
|
USD 156,250
|
|
15 June 2017
|
|
USD 156,250
|
|
15 September 2017
|
|
USD 156,250
|
|
15 December 2017
|
|
USD 156,250
|
|
15 March 2018
|
|
USD 156,250
|
|
15 June 2018
|
|
USD 156,250
|
|
15 September 2018
|
|
USD 156,250
|
|
15 December 2018
|
|
USD 156,250
|
|
15 March 2019
|
|
USD 156,250
|
|
15 June 2019
|
|
USD 156,250
|
|
15 September 2019
|
|
USD 156,250
|
|
15 December 2019
|
|
USD 156,250 and a balloon payment of USD 2,750,000, a total of USD 2,906,250
|
Schedule 3
- List of Shipbrokers
|
|
1.
|
Simpson, Spence & Young Ltd
|
Exhibit
1 - Form of Utilisation Request
Exhibit
2 - Form of Mortgage
Exhibit
3 - Form of Security Agreement
Exhibit
4 - Form of Manager's Undertaking
Exhibit
5 - Form of Share Charge
Exhibit
10.18
Shareholders
Agreement
regarding Nordic
Bulk Holding Company Ltd., Bermuda
between and
among
ST Shipping
and Transport Pte. Ltd.
Bulk Fleet Bermuda
Holding Company Limited
and
ASO
2020 Maritime, S.A.
Dated 10 January,
2013
Index:
|
1
|
Definitions
|
5
|
|
2
|
Structure and Initial Funding of the Company
|
14
|
|
3
|
Objectives, Business and Future Funding of the Company
|
14
|
|
4
|
Management of the Company
|
23
|
|
5
|
Reserved Policy Matters
|
24
|
|
6
|
Management of the Vessels and of the Company
|
26
|
|
7
|
Dividend Policy
|
27
|
|
8
|
Information, Accounts, and Audit
|
28
|
|
9
|
Non-Assignability
|
29
|
|
10
|
Not a Partnership and No Restrictions
|
29
|
|
11
|
Duration
|
29
|
|
12
|
Sale of Shares, Change of Control and Termination
|
30
|
|
13
|
Deadlock
|
33
|
|
14
|
Agreement to Override the Articles
|
36
|
|
15
|
Notices
|
36
|
|
16
|
Announcements and Circulars
|
37
|
|
17
|
Loss of Vessel
|
38
|
|
18
|
Consequential Loss
|
38
|
|
19
|
Entire Agreement
|
38
|
|
20
|
Disputes
|
38
|
|
21
|
Governing Law and Dispute Resolution
|
38
|
|
22
|
Counterparts
|
40
|
SHAREHOLDERS
AGREEMENT
This
Shareholders Agreement (as amended, supplemented or otherwise modified from time to time, the "
Agreement
") is
made on 10
th
January, 2013 by and between:
|
|
(1)
|
ST
Shipping and Transport Pte. Ltd.
of 1 Temasek Avenue, #34-01 Millenia Tower, Singapore
039192 ("
STST
");
|
|
|
(2)
|
Bulk
Fleet Bermuda Holding Company Limited
of Third Floor, Par La Ville Place, 14 Par
La Ville Road, Hamilton, HM08, Bermuda ("
BFB
"); and
|
|
|
(3)
|
ASO
2020 Maritime S.A.
of Aquilino de la Guardia Street No. 8, IGRA Building, P.O. Box
0823 – 02435 Panama, Republic of Panama ("
ASO 2020
"),
|
Each
of STST, BFB and ASO 2020 may be referred to herein individually as a "
Shareholder
" or "
Party
"
and jointly as the "
Shareholders
" or "
Parties
".
RECITALS
A. STST,
BFB and ASO 2020 each own thirty-three and one-third percent (33.33%) of the issued and outstanding shares of Nordic Bulk Holding
Company Ltd., a company limited by shares that was duly formed and is validly existing pursuant to the laws of Bermuda (the "
Company
").
B. As
of the date of this Agreement, the Company owns one hundred percent (100%) of the issued and outstanding shares of Bulk Nordic
Odyssey Ltd. ("
BN Odyssey
") and Bulk Nordic Orion Ltd. ("
BN Orion
");
C. BN
Odyssey is the registered owning company of M/V Nordic Odyssey, IMO 9529451, 75,603 dead weight tonnes, built 2010 (the "
MV
Odyssey
");
D. BN
Orion is the registered owning company of M/V Nordic Orion, IMO 9529463, 75,603 dead weight tonnes, built 2011 (the "
MV
Orion
");
E. BN
Odyssey and BN Orion are joint and several borrowers under a loan agreement entered into with DVB Bank SE dated July 25, 2012,
in the principal amount of $40,000,000 ("
Existing DVB Loan
");
F. The
Company shall create two new wholly-owned subsidiaries, NewCo 1 ("
NewCo 1
") and NewCo 2 ("
NewCo 2
");
G. NewCo
1 shall enter into the Contract for Construction and Sale of D.W. 75,800 M.T. Type Bulk Carrier Hull No. 10758 ("
New-Build
1
") dated 9 January 2013 with Sumitomo Corporation, as contractor, and Oshima Shipbuilding Co., Ltd., as builder, attached
hereto in
Appendix 1
("
Shipbuilding Contract 1
"), pursuant to which NewCo 1 shall agree to purchase
and take delivery of New-Build 1 from Sumitomo Corporation for USD
32,625,000
;
H. NewCo
2 shall enter into the Contract for Construction and Sale of D.W. 75,800 M.T. Type Bulk Carrier Hull No. 10759 ("
New-Build
2
") dated 9 January 2013 with Sumitomo Corporation, as contractor, and Oshima Shipbuilding Co., Ltd., as builder, attached
hereto in
Appendix 2
("
Shipbuilding Contract 2
"), pursuant to which NewCo 2 shall agree to purchase
and take delivery of New-Build 2 from Sumitomo Corporation for USD
32,625,000
;
I. The
Company shall enter into the Option Contract with Sumitomo Corporation, as contractor, and Oshima Shipbuilding Co., Ltd., as builder,
attached hereto in
Appendix 3
("
Option Agreement
"), pursuant to which the Company or its designee
shall have the option to purchase two (2) additional new-build vessels ("
New-Build 3
” and "
New-Build
4
") pursuant to shipbuilding contracts ("
Shipbuilding Contract 3
" and "
Shipbuilding Contract
4
") containing substantially the same terms and conditions as Shipbuilding Contract 1 and Shipbuilding Contract 2;
J. If
the Company chooses to exercise its option to purchase New-Build 3 and New-Build 4 pursuant to the terms and conditions of the
Option Agreement, the Company shall create two new wholly-owned subsidiaries, NewCo 3 ("
NewCo 3
") and NewCo 4
("
NewCo 4
") and designate NewCo 3 and NewCo 4 as the purchasers of New-Build 3 and New-Build 4 under Shipbuilding
Contract 3 and Shipbuilding Contract 4, respectively; and
K. Each
of Glencore International plc and Bulk Partners (Bermuda) Ltd. shall jointly and severally guarantee the performance by NewCo
1, NewCo 2, NewCo 3 and NewCo 4 of all of their liabilities and responsibilities under Shipbuilding Contract 1, Shipbuilding Contract
2, Shipbuilding Contract 3 and Shipbuilding Contract 4, respectively, pursuant to guarantee letters in substantially similar form
to those guarantee letters attached hereto as
Appendix 4
.
RECITALS
WHEREAS
,
the Parties wish to set forth in this Agreement the details of the purpose, business, capitalization, organization and management
of the Company and its Subsidiaries.
AGREEMENT
NOW
THEREFORE
, in exchange for the mutual premises and consideration set forth herein, the sufficiency and receipt of which is
hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:
|
|
1.1
|
Subject
to Clause 1.2. herein, in this Agreement:
|
Additional
Acceptance
has the meaning given in clause 12.4.
Administrative
Directors
has the meaning given in clause 4.1.
Affiliate
means, in relation to any person, any person which directly or indirectly controls, is controlled by, or is controlled by
the same person as, such entity; in relation to individuals, an Affiliate shall also include the spouse and offsprings of that
individual and any entities controlled directly or indirectly by such persons. For purposes of this Agreement, Glencore International
AG ("
Glencore
"), Glencore International plc and Glencore Xstrata International plc are Affiliates of STST; NBC
and Bulk Partners (Bermuda) Ltd. are Affiliates of BFB; and ASO Holdings, Cartesian and Cooper are Affiliates of ASO 2020.
Annual
Budget
means the annual budget of the Company and its Subsidiaries
ASO
2020
means ASO 2020 Maritime S.A. of Aquilino de la Guardia Street No. 8, IGRA Building, P.O. Box 0823 – 02435 Panama,
Republic of Panama.
ASO
Holdings
means ASO Holdings S.A. of Aquilino de la Guardia Street No. 8, IGRA Building, P.O. Box 0823 – 02435 Panama,
Republic of Panama.
BFB
means Bulk Fleet Bermuda Holding Company Limited of Third Floor, Par La Ville Place, 14 Par La Ville Road, Hamilton, HM08,
Bermuda.
BN
Head Charterparty
means each of the BN Odyssey Head Charterparty and the BN Orion Head Charterparty, and may be referred to
jointly as the
BN Head Charterparties
.
BN
Odyssey
means Bulk Nordic Odyssey Ltd., whose registered office is at 3
rd
Floor, Par la Ville Place, 14 Par la
Ville Road, Hamilton HM08, Bermuda.
BN
Odyssey Booking Commission
means the booking commission payable by BN Odyssey to NBC referred to in clause 3.4.
BN
Odyssey Head Charterparty
means the charterparty in respect of the MV Odyssey between BN Odyssey and STST referred to in clause
3.2.
BN
Odyssey NBC Sub-Charterparty
means the sub-charterparty in respect of the MV Odyssey between STST and NBC referred to in clause
3.3.
BN
Odyssey Profit
has the meaning attributed to such term inclause 3.5.
BN
Odyssey Profit Share Amount
has the meaning attributed to such term in clause 3.5.
BN
Odyssey Profit Sharing Addendum
means the addendum to each of the BN Odyssey Head Charterparty and BN Odyssey NBC Sub-Charterparty
as referred to in clause 3.5.
BN
Odyssey Profit Sharing Addendum Supplement
has the meaning attributed to such term in clause 3.5.
BN
Odyssey Third Party Sub-Charterparties
means the sub-charterparties which NBC may enter into from time to time pursuant to
which certain third parties shall sub-charter the MV Odyssey from NBC at the then prevailing market rates, as referred to in clause
3.4.
BN
Orion
means Bulk Nordic Orion Ltd., whose registered office is at 3
rd
Floor, Par la Ville Place, 14 Par la Ville
Road, Hamilton HM08, Bermuda.
BN
Orion Booking Commission
means the booking commission payable by BN Orion to NBC referred to in clause 3.8.
BN
Orion Head Charterparty
means the charterparty in respect of the MV Orion between BN Orion and STST referred to in clause
3.6.
BN
Orion NBC Sub-Charterparty
means the sub-charterparty in respect of the MV Orion between STST and NBC referred to in clause
3.7.
BN
Orion Profit
means the amounts referred to in clause 3.9.
BN
Orion Profit Share Amount
means the amounts referred to in clause 3.9.
BN
Orion Profit Sharing Addendum
means the addendum to each of the BN Orion Head Charterparty and BN Orion NBC Sub-Charterparty
as referred to in clause 3.9.
BN
Orion Profit Sharing Addendum Supplement
has the meaning attributed to such term in clause 3.9.
BN
Orion Third Party Sub-Charterparties
means the sub-charterparties which NBC may enter into from time to time pursuant to which
certain third parties shall sub-charter the MV Orion from NBC at the then prevailing market rates, as referred to in clause 3.8.
Booking
Commission
means each of the BN Odyssey Booking Commission, the BN Orion Booking Commission, the NewCo 1 Booking Commission,
the NewCo 2 Booking Commission, the NewCo 3 Booking Commission, and the NewCo 4 Booking Commission, and may be referred to jointly
as the
Booking Commissions
.
Business
Day
means a day, other than a Saturday or a Sunday, when banks are open for business in Athens, Greece, Zug, Switzerland and
New York, United State of America.
Cartesian
collectively means Pangaea Two, LP, a Delaware limited partnership, and Pangaea Two Acquisition Holdings II, Limited, a Cayman
limited company (“PTAH”), together with any successor to PTAH or any transferee of PTAH that holds shares and Shareholder
Loans directly or indirectly, to the extent such successor or transferee is controlled by, or under common control with, Pangaea
Two, LP.
Cartesian
Bulk
collectively means collectively means Pangaea One, L.P., a Delaware limited partnership, and Pangaea One (Cayman), a
Cayman limited partnership, together with any successor to either of them or any transferee of either of them that holds Shares,
to the extent such successor or transferee is controlled by, or under common control with, Pangaea One, L.P.
Change
of Control
means with respect to:
|
|
(i)
|
an
event that results in any Person(s) other than Bulk Partners (Bermuda) Ltd., directly
or indirectly owning securities or voting power in BFB or otherwise being in a position
to exercise Control over BFB; or
|
|
|
(ii)
|
an
event that results in any Person(s) other than Edward Coll, Anthony Laura and Cartesian
Bulk being in a position to exercise Control over Bulk Partners (Bermuda) Ltd.;
|
|
|
(i)
|
an
event that results in any Person(s) other than Cooper, Cartesian and ASO Holdings directly
or indirectly owning securities or voting power in ASO 2020 or otherwise being in a position
to exercise Control over ASO2020;
|
|
|
(ii)
|
an
event that results in any Person(s) other than the Onassis Foundation being in a position
to exercise Control over ASO Holdings or ASO 2020;
|
|
|
(i)
|
an
event that results in any Person(s) other than Glencore, Glencore International plc or
Glencore Xstrata International plc directly or indirectly owning securities or voting
power in STST or otherwise being in a position to exercise Control over STST.
|
Cooper
collectively means Cooper Investment Fund LLC, a Delaware limited liability company, and Maritime Acquisition Investment LLC,
a Delaware limited liability company (“MAI”), together with any successor to MAI or any transferee of MAI that holds
shares and Shareholder Loans directly or indirectly, to the extent such successor or transferee is controlled by, or under common
control with, Cooper Investment Fund LLC.
Company
means Nordic Bulk Holding Company Ltd. of Third Floor, Par La Ville Place, 14 Par La Ville Road, Hamilton, HM08, Bermuda.
Company
Management Agreement
has the meaning given in clause 6.3.
Control
,
Controls
and
Controlled
means (a) ownership of at least fifty percent (50%) of the voting rights of a Person, (b)
the power to direct or cause the direction of the management and policies of a Person, or (c) the power to appoint a majority
(or more) of the board of directors of a Person.
Deadlock
has the meaning given in clause 13.1.
Deadlock
Notice
has the meaning given in clause 13.1.
Deadlock
Offer
has the meaning given in clause 13.2.
Deadlock
Offer Period
has the meaning given in clause 13.2.
Deadlock
Price
has the meaning given in clause 13.2.
Defaulting
Party
has the meaning given in clause 12.7.
Due
Date
has the meaning given in clause 3.31.
Encumbrance
means any mortgage, pledge, lien, encumbrance, charge, option, usufruct, right to acquire, right of pre-emption, assignment,
hypothecation or other third party security interest, including title retention arrangements or restrictions of transfer and any
agreement, arrangement or obligation to create any of the foregoing.
Existing
DVB Loan
means the loan agreement between BN Odyssey and BN Orion as joint and several borrowers and DVB Bank SE as agent
and security trustee dated July 25, 2012, in the principal amount of $40,000,000.
Financing
Agreement
has the meaning given in clause 3.31.
Financial
Indebtedness
means, with respect to any person, all indebtedness of such person including without limitation:
|
|
(i)
|
for
or in consideration of borrowed money or arising out of any credit facility or financial
accommodation; or
|
|
|
(ii)
|
for
the deferred purchase price of assets or services (other than trade payables arising
in the ordinary course of business); or
|
|
|
(iii)
|
arising
under any lease which would be capitalised on the balance sheet of the lessee in accordance
with IFRS (prepared on a consistent basis) or which is otherwise in substance a financing
lease; or
|
|
|
(iv)
|
arising
in respect of any debenture, bond, note, loan stock or other security, any acceptance
or documentary credit or any receivables sold or discounted other than on a non-recourse
basis; or
|
|
|
(v)
|
arising
under any other obligation or transaction which, in accordance with IFRS (prepared on
a consistent basis), has the commercial effect of borrowing.
|
Glencore
means Glencore International AG of Baarermattstrasse 3, 6341 Baar, Switzerland.
Government
Authority
means any central, provincial, state, municipal, county or regional governmental or quasi-governmental instrumentality,
and includes any ministry, department, commission, bureau, board, administrative or other agency or regulatory body or instrumentality
thereof.
Guarantee
Payment
has the meaning given in clause 3.31.
Guaranteeing
Shareholder Party
has the meaning given in clause 3.31.
Head
Charterparty
means each of the BN Odyssey Head Charterparty, the BN Orion Head Charterparty, the NewCo 1 Head Charterparty,
the NewCo 2 Head Charterparty, the NewCo 3 Head Charterparty, and the NewCo 4 Head Charterparty, and may be referred to jointly
as the
Head Charterparties
.
Indemnifying
Party
has the meaning given in clause 3.31.
MV
Odyssey
means M/V Nordic Odyssey, IMO 9529451, 75,603 dead weight tonnes, built 2010.
MV
Orion
means M/V Nordic Orion, IMO 9529463, 75,603 dead weight tonnes, built 2011.
NBC
means Nordic Bulk Carriers A/S of Tuborg Havnevej 19, DK-2900, Denmark.
NBC
Sub-Charterparty
means each of the BN Odyssey NBC Sub-Charterparty and the BN Orion NBC Sub-Charterparty and may be referred
to jointly as the
NBC Sub-Charterparties
.
Negotiation
Period
has the meaning given in clause 13.2.
Net
Asset Value
has the meaning given in clause 12.4.
New-Build
1
means the vessel to be purchased by NewCo 1 pursuant to Shipbuilding Contract 1, attached hereto as Appendix 1.
New-Build
2
means the vessel to be purchased by NewCo 1 pursuant to Shipbuilding Contract 1, attached hereto as Appendix 2.
New-Build
3
means the vessel to be purchased by NewCo 3 pursuant to Shipbuilding Contract 3 if the Company chooses to exercise its option
to purchase NewBuild 3 pursuant to the Option Agreement.
New-Build
4
means the vessel to be purchased by NewCo 4 pursuant to Shipbuilding Contract 4 if the Company chooses to exercise its option
to purchase NewBuild 4 pursuant to the Option Agreement.
NewCo
Head Charterparty
means each of the NewCo 1 Head Charterparty, the NewCo 2 Head Charterparty, the NewCo 3 Head Charterparty,
and the NewCo 4 Head Charterparty, and may be referred to jointly as the
NewCo Head Charterparties
.
NewCo
1
means the Subsidiary to be created by the Company and which shall enter into Shipbuilding Contract 1 and purchase New-Build
1.
NewCo
1 Booking Commission
means the booking commission payable by NewCo 1 to NBC referred to in clause 3.11.
NewCo
1 Head Charterparty
means the charterparty in respect of the New-Build 1 between NewCo 1 and NBC referred to in clause 3.10.
NewCo
1 Profit
means the amounts referred to in clause 3.12.
NewCo
1 Profit Share Amount
means the amounts referred to in clause 3.12.
NewCo
1 Profit Sharing Addendum
means the addendum to the NewCo 1 Head Charterparty as referred to in clause 3.12.
NewCo
1 Third Party Sub-Charterparties
means the sub-charterparties which NBC may enter into from time to time pursuant to which
certain third parties shall sub-charter the New-Build 1 from NBC at the then prevailing market rates, as referred to in clause
3.11.
NewCo
2
means the Subsidiary to be created by the Company and which shall enter into Shipbuilding Contract 2 and purchase New-Build
2.
NewCo
2 Booking Commission
means the booking commission payable by NewCo 2 to NBC referred to in clause 3.14.
NewCo
2 Head Charterparty
means the charterparty in respect of the New-Build 2 between NewCo 2 and NBC referred to in clause 3.13.
NewCo
2 Profit
means the amounts referred to in clause 3.15.
NewCo
2 Profit Share Amount
means the amounts referred to in clause 3.15.
NewCo
2 Profit Sharing Addendum
means the addendum to the NewCo 2 Head Charterparty as referred to in clause 3.15.
NewCo
2 Third Party Sub-Charterparties
means the sub-charterparties which NBC may enter into from time to time pursuant to which
certain third parties shall sub-charter the New-Build 2 from NBC at the then prevailing market rates, as referred to in clause
3.14.
NewCo
3
means the Subsidiary to be created by the Company if the Company chooses to exercise its option to purchase New-Build 3
and which shall enter into Shipbuilding Contract 3.
NewCo
3 Booking Commission
means the booking commission payable by NewCo 3 to NBC referred to in clause 3.17.
NewCo
3 Head Charterparty
means the charterparty in respect of the New-Build 3 between NewCo 3 and NBC referred to in clause 3.16.
NewCo
3 Profit
means the amounts referred to in clause 3.18.
NewCo
3 Profit Share Amount
means the amounts referred to in clause 3.18.
NewCo
3 Profit Sharing Addendum
means the addendum to the NewCo 3 Head Charterparty as referred to in clause 3.18.
NewCo
3 Third Party Sub-Charterparties
means the sub-charterparties which NBC may enter into from time to time pursuant to which
certain third parties shall sub-charter the New-Build 3 from NBC at the then prevailing market rates, as referred to in clause
3.17.
NewCo
4
means the Subsidiary to be created by the Company if the Company chooses to exercise its option to purchase New-Build 4
and which shall enter into Shipbuilding Contract 4.
NewCo
4 Booking Commission
means the booking commission payable by NewCo 4 to NBC referred to in clause 3.20.
NewCo
4 Head Charterparty
means the charterparty in respect of the New-Build 4 between NewCo 4 and NBC referred to in clause 3.19.
NewCo
4 Profit
means the amounts referred to in clause 3.21.
NewCo
4 Profit Share Amount
means the amounts referred to in clause 3.21.
NewCo
4 Profit Sharing Addendum
means the addendum to the NewCo 4 Head Charterparty as referred to in clause 3.21.
NewCo
4 Third Party Sub-Charterparties
means the sub-charterparties which NBC may enter into from time to time pursuant to which
certain third parties shall sub-charter the New-Build 4 from NBC at the then prevailing market rates, as referred to in clause
3.20.
Notice
to Offer
has the meaning given in clause 12.7.
Offer
Period
has the meaning given in clause 12.4.
Offeree/s
has the meaning given in clause 12.4.
Onassis
Foundation
means Alexander S. Onassis Foundation of Städtle 27, FL 9490 Vaduz, Liechtenstein
Option
Agreement
means the agreement referred to in Recital I and attached hereto as Appendix 3.
Optional
Suspensive Condition
has the meaning given in clause 12.4.
Person
means a natural person, a corporation, a partnership, a trust, a business trust, a joint stock company, an unincorporated
association, any Government Authority, and any other legal entity, including similar entities.
Profit
means each of the BN Odyssey Profit, the BN Orion Profit, the NewCo 1 Profit, the NewCo 2 Profit, the NewCo 3 Profit and the
NewCo 4 Profit, and may be referred to jointly as the
Profits
.
Profit
Share Amount
means each of the BN Odyssey Profit Share Amount, the BN Orion Profit Share Amount, the NewCo 1 Profit Share
Amount, the NewCo 2 Profit Share Amount, the NewCo 3 Profit Share Amount and the NewCo 4 Profit Share Amount, and may be referred
to jointly as the
Profit Share Amounts
.
Profit
Sharing Addendum
means each of the BN Odyssey Profit Sharing Addendum, the BN Orion Profit Sharing Addendum, the NewCo 1 Profit
Sharing Addendum, the NewCo 2 Profit Sharing Addendum, the NewCo 3 Profit Sharing Addendum and the NewCo 4 Profit Sharing Addendum,
as amended, supplemented and in force and effect and may be referred to jointly as the "
Profit Sharing Addenda
".
Recipient/s
has the meaning given in clause 13.2.
Recipient
Acceptance
has the meaning given in clause 13.2.
Recipient
Purchase Price
has the meaning given in clause 13.2.
Receipt
Date
has the meaning given in clause 12.4.
Sale
Price
has the meaning given in clause 12.4.
Sale
Shares and Loans
has the meaning given in clause 12.4.
Server
has the meaning given in clause 13.2.
Shareholder
Loans
means the zero-interest subordinated shareholder loans provided by the Shareholders to the Company, as referred to in
clauses 3.22.
Shipbuilding
Contract
means each of Shipbuilding Contract 1, Shipbuilding Contract 2, Shipbuilding Contract 3 and Shipbuilding Contract
4, and may be referred to jointly as the
Shipbuilding Contracts
.
Shipbuilding
Contract 1
means the shipbuilding contract to be entered into by NewCo 1, attached hereto as Appendix 1.
Shipbuilding
Contract 2
means the shipbuilding contract to be entered into by NewCo 2, attached hereto as Appendix 2.
Shipbuilding
Contract 3
means the shipbuilding contract to be entered into by NewCo 3 if NewCo 3 chooses to exercise its option to purchase
New-Build 3 pursuant to the Option Agreement, as referred to in Recital I.
Shipbuilding
Contract 4
means the shipbuilding contract to be entered into by NewCo 4 if NewCo 4 chooses to exercise its option to purchase
New-Build 4 pursuant to the Option Agreement, as referred to in Recital I.
STST
means ST Shipping and Transport Pte. Ltd. of 1 Temasek Avenue, #34-01 Millenia Tower, Singapore 039192.
Subscription
Agreement
means the Subscription Agreement entered into between and among the Shareholders on the date hereof.
Subsidiary
means each of BN Odyssey, BN Orion, NewCo 1, NewCo 2, NewCo 3 and NewCo 4, and may be referred to jointly as
Subsidiaries
.
Surplus
Offeree/s
has the meaning given in clause 12.4.
Surplus
Sale Shares and Loans
has the meaning given in clause 12.4.
Time
Charter Equivalent
means an amount calculated by taking voyage revenues, subtracting voyage expense and then dividing the
entire total by the total voyage duration in days reflecting delivery and redelivery points per customs of the trade. The time
charter equivalent is calculated as:
Voyage
Revenues – Voyage Expenses
Voyage
Duration in Days
This
definition is supplemented in the Profit Sharing Addenda.
Transition
Dividend
has the meaning given in Clause 7.3.
Vessel
means each of MV Odyssey, MV Orion, New-Build 1, New-Build 2, New-Build 3 and New-Build 4, and may be referred to jointly
as the
Vessels
.
|
|
1.2
|
Any terms
defined in this Agreement but used and differently defined in the BN Head Charter Party
and/or the NBC Sub-Charterparty shall have meaning attributed to such in the BN Head
Charter Party and/or the NBC Sub-Charterparty, respectively. The Parties shall use their
reasonable endeavours so that all such over-ridden clauses are identified and attached
as a supplement to the Agreement as soon as practical following the execution of the
Agreement.
|
|
|
2
|
Structure
and Initial Funding of the Company
|
|
|
2.1
|
On the date
hereof, the Parties each own one-third (33.33%) of the Company, and the Parties agree
that the Company shall be operated in a manner consistent with the objectives and principles
hereafter set forth in this Agreement.
|
|
|
2.2
|
On the date
hereof, the aggregate authorized and fully paid-up share capital of the Company is USD
40,000 divided into 10,000 ordinary shares of USD 4.00 each, held as follows:
|
|
–
|
STST
|
3333.33 ordinary
shares
|
|
|
|
|
|
–
|
BFB
|
3333.33 ordinary shares
|
|
|
|
|
|
–
|
ASO 2020
|
3333.33 ordinary shares
|
|
|
2.3
|
The Parties
agree that the costs and expenses incurred
on or from the date hereof
, and to be incurred, in connection with the administration
of the Company and its Subsidiaries shall, wherever practicable, be kept to a minimum.
Consequently, the Parties agree that they shall use all commercially reasonable endeavours
to maintain the structure of the Company in as simple a manner as possible, and the procedures
in connection with the administration of the Company and its Subsidiaries shall be maintained
so as to maximize the efficient and expeditious operation of the Company and its Subsidiaries.
|
|
|
2.4
|
Each Party
hereby undertakes to the other Parties to exercise the rights attaching to its shares
in the Company and to procure that the persons nominated by any of them as directors
of the Company shall exercise their powers in that capacity as such, so as to cause the
business of the Company to be carried on in the manner contemplated by this Agreement.
|
|
|
2.5
|
The Parties
agree that, unless otherwise mutually agreed in writing by all of the Parties, the Company
shall not issue any shares other than ordinary shares.
|
|
|
3
|
Objectives,
Business and Future Funding of the Company
|
|
|
3.1
|
The Parties
agree that the primary business objectives and purposes of the Company shall be to buy,
charter and sell the Vessels, and always in accordance to clause 4 hereof.
|
BN
Odyssey – Charter Agreements
|
|
3.2
|
On 17 April
2012, STST entered into the "
BN Odyssey Head Charterparty
" with BN Odyssey
(attached hereto in
Appendix 5)
pursuant to which STST chartered the MV
Odyssey for a period of five (5) years from BN Odyssey at the rate of USD 15,500 per
day plus any BN Odyssey Profit Share Amount earned pursuant to the BN Odyssey Profit
Sharing Addendum. Glencore has guaranteed the full and timely performance by STST of
any and all of its obligations and liabilities under the BN Odyssey Head Charterparty.
|
|
|
3.3
|
On 17 April,
2012, Nordic Bulk Carriers A/S ("
NBC
") entered into the "
BN
Odyssey NBC Sub-Charterparty
" with STST (attached hereto in
Appendix 6)
pursuant to which NBC sub-chartered from STST the MV Odyssey for a period of
five (5) years at the rate of USD 15,500 per day plus any BN Odyssey Profit Share Amount
earned pursuant to the BN Odyssey Profit Sharing Addendum. Bulk Partners (Bermuda) Ltd.
has guaranteed the full and timely performance by NBC of any and all of its obligations
and liabilities under the BN Odyssey NBC Sub-Charterparty.
|
|
|
3.4
|
During the
term of the BN Odyssey NBC Sub-Charterparty, NBC may enter into "
BN Odyssey Third
Party Sub-Charterparties
" from time to time pursuant to which certain third
parties shall sub-charter the MV Odyssey from NBC at the then prevailing market rates.
NBC shall earn a booking commission calculated as a percentage of all gross freights,
demurrages,
charter hires
,
and other revenues
("
BN Odyssey Booking Commission
") earned on
the BN Odyssey Third Party Sub-Charterparties which are voyage charters or time charters
during the period beginning on the delivery date of New-Build 1 and ending on the termination
date of the BN Odyssey NBC Sub-Charterparty. The BN Odyssey Booking Commission shall
be 1.00% of all gross freights, demurrages, charter hires and other revenues earned during
the BN Odyssey NBC Sub-Charterparty.
|
|
|
3.5
|
With respect
to BN Odyssey Third Party Sub-Charterparties (whether voyage charter or time charter),
to the extent that the Time Charter Equivalent returns which NBC earns exceed the Time
Charter Equivalent of USD 15,500 per day (such excess being the "
BN Odyssey Profit
"),
NBC and STST have agreed to share fifty percent (50%) of such BN Odyssey Profit with
BN Odyssey ("
BN Odyssey Profit Share Amount
") pursuant to the "
BN
Odyssey Profit Sharing Addendum
" included as an addendum to each of the BN Odyssey
Head Charterparty and BN Odyssey NBC Sub-Charterparty. The rules agreed in the BN Odyssey
Profit Sharing Addendum Supplement concluded as of the date hereof in the form attached
hereto in
Appendix 7
(“BN Odyssey Profit Sharing Addendum Supplement”
)
shall apply for the assessment, calculation and payment of the BN Odyssey Profit. For
the avoidance of doubt, any amount payable under the BN Odyssey NBC Sub-Charterparty
shall flow through the BN Odyssey Head Charterparty without any deduction or delay whatsoever
and thereafter will flow to the Company without any deduction or delay.
|
BN
Orion – Charter Agreements
|
|
3.6
|
On 17 April
2012, STST entered into the "
BN Orion Head Charterparty
" with BN Orion
(attached hereto in
Appendix 8)
pursuant to which STST chartered the MV
Orion for a period of five (5) years from BN Orion at the rate of USD 1
5,500 per day
plu
s any BN Orion Profit Share Amount earned pursuant to the BN Orion Profit Sharing
Addendum. Glencore has guaranteed the full and timely performance by STST of any and
all of its obligations and liabilities under the BN Orion Head Charterparty.
|
|
|
3.7
|
On 17 April,
2012, NBC entered into the "
BN Orion NBC Sub-Charterparty
" with STST
(attached hereto in
Appendix 9)
pursuant to which NBC sub-chartered from
STST the MV Orion for a period of five (5) years at the rate of USD 15,500 per day plus
any BN Orion Profit Share Amount earned pursuant to the BN Orion Profit Sharing Addendum.
Bulk Partners (Bermuda) Ltd. has guaranteed the full and timely performance by NBC of
any and all of its obligations and liabilities under the BN Orion Sub-Charterparty.
|
|
|
3.8
|
During the
term of the BN Orion NBC Sub-Charterparty, NBC may enter into "
BN Orion Third
Party Sub-Charterparties
" from time to time pursuant to which third parties
shall sub-charter the MV Orion from NBC at the then prevailing market rates. NBC shall
earn a booking commission calculated as a percentage of all gross freights
,
demurrages,
charter hires
, and other
revenues
("
BN Orion Booking Commission
") earned on the BN Orion
Third Party Sub-Charterparties which are voyage charters or time charters during the
period beginning on the delivery date of New-Build 1 and ending on the termination date
of the BN Orion NBC Sub-Charterparty. The BN Orion Booking Commission shall be 1.00%
of all gross freights, demurrages, charter hires and other revenues earned during the
BN Orion NBC Sub-Charterparty.
|
|
|
3.9
|
With respect
to BN Orion Third Party Sub-Charterparties (whether voyage charter or time charter),
to the extent that the Time Charter Equivalent returns which NBC earns exceed the Time
Charter Equivalent of USD 15,500 per day (such excess being the "
BN Orion Profit
"),
NBC and STST have agreed to share fifty percent (50%) of such BN Orion Profit with BN
Orion ("
BN Orion Profit Share Amount
") pursuant to the "
BN Orion
Profit Sharing Addendum
" included as an addendum to each of the BN Orion Head
Charterparty and BN Orion NBC Sub-Charterparty. The rules agreed in the BN Orion Profit
Sharing Addendum Supplement concluded as of the date hereof in the form attached hereto
in
Appendix 10
(“BN Orion Profit Sharing Addendum Supplement”
)shall
apply for the assessment, calculation and payment of the BN Orion Profit. For the avoidance
of doubt, any amount payable under the BN Orion NBC Sub-Charterparty shall flow through
the BN Orion Head Charterparty without any deduction or delay whatsoever and thereafter
will flow to the Company without any deduction or delay
|
NewCo
1 – Charter Agreements
|
|
3.10
|
Immediately
prior to the delivery date of New-Build 1, NBC shall enter into a "
NewCo 1 Head
Charterparty
" with NewCo 1 pursuant to which NBC shall charter from NewCo 1
the New-Build 1 for a period of five (5) years at the rate of USD 11,350 per day plus
any NewCo 1 Profit Share Amount earned pursuant to the NewCo 1 Profit Sharing Addendum.
Bulk Partners (Bermuda) Ltd. shall guarantee the full and timely performance by NBC of
any and all of its obligations and liabilities under the NewCo 1 Head Charterparty. Notwithstanding
the above principal terms, as well as, the terms of the NewCo 1 Profit Sharing Addendum
mentioned in clause 3.12 herein, the NewCo 1 Head Charterparty shall have the same content,
form and aspects with the BN Odyssey Head Charterparty.
|
|
|
3.11
|
During
the term of the NewCo 1 Head Charterparty, NBC may enter into "
NewCo 1 Third
Party Sub-Charterparties
" from time to time pursuant to which third parties
shall sub-charter the New-Build 1 from NBC at the then prevailing market rates. NBC shall
earn a booking commission calculated as a percentage of all gross freights
,
demurrages,
charter hires
, and
other revenues
("
NewCo 1 Booking Commission
") earned on the NewCo
1 Third Party Sub-Charterparties which are voyage charters or time charters during the
term of the NewCo 1 Head Charterparty. The NewCo 1 Booking Commission shall be 1.00%
of all gross freights
, demurrages,
charter hires
and other revenues
earned
during the NewCo 1 Head Charterparty.
|
|
|
3.12
|
With respect
to NewCo 1 Third Party Sub-Charterparties (voyage charter or time charter), to the extent
that the Time Charter Equivalent returns which NBC earns exceed the Time Charter Equivalent
of USD 11,350 per day (such excess being the "
NewCo 1 Profit
"), NBC
has agreed to share seventy-five percent (75%) of such NewCo 1 Profit with NewCo 1 ("
NewCo
1 Profit Share Amount
") pursuant to the "
NewCo 1 Profit Sharing Addendum
"
to be included as an addendum to the NewCo 1 Head Charterparty. The rules agreed in the
BN Odyssey Profit Sharing Addendum Supplement shall apply
mutatis mutandis
for
the assessment, calculation and payment of the NewCo 1 Profit.
|
NewCo
2 – Charter Agreements
|
|
3.13
|
Immediately
prior to the delivery date of New-Build 2, NBC shall enter into a "
NewCo 2 Head
Charterparty
" with NewCo 2 pursuant to which NBC shall charter from NewCo 2
the New-Build 2 for a period of five (5) years at the rate of USD 11,350 per day plus
any NewCo 2 Profit Share Amount earned pursuant to the NewCo 2 Profit Sharing Addendum.
Bulk Partners (Bermuda) Ltd. shall guarantee the full and timely performance by NBC of
any and all of its obligations and liabilities under the NewCo 2 Head Charterparty. Notwithstanding
the above principal terms, as well as, the terms of the NewCo 2 Profit Sharing Addendum
mentioned in clause 3.15 herein, the NewCo 2 Head Charterparty shall have the same content,
form and aspects with the BN Odyssey Head Charterparty.
|
|
|
3.14
|
During
the term of the NewCo 2 Head Charterparty, NBC may enter into "
NewCo 2 Third
Party Sub-Charterparties
" from time to time pursuant to which third parties
shall sub-charter the New-Build 2 from NBC at the then prevailing market rates. NBC shall
earn a booking commission calculated as a percentage of all gross freights
,
demurrages,
charter hires
, and other
revenues
("
NewCo 2 Booking Commission
") earned on the NewCo 2
Third Party Sub-Charterparties which are voyage charters or time charters during the
term of the NewCo 2 Head Charterparty. The NewCo 2 Booking Commission shall be 1.00%
of all gross freights
, demurrages,
charter hires
and other revenues
earned
during the NewCo 2 Head Charterparty.
|
|
|
3.15
|
With respect
to NewCo 2 Third Party Sub-Charterparties (voyage charter or time charter), to the extent
that the Time Charter Equivalent returns which NBC earns exceed the Time Charter Equivalent
of USD 11,350 per day (such excess being the "
NewCo 2 Profit
"), NBC
has agreed to share seventy-five percent (75%) of such NewCo 2 Profit with NewCo 2 ("
NewCo
2 Profit Share Amount
") pursuant to the "
NewCo 2 Profit Sharing Addendum
"
to be included as an addendum to the NewCo 2 Head Charterparty. The rules agreed in the
BN Odyssey Profit Sharing Addendum Supplement shall apply
mutatis mutandis
for
the assessment, calculation and payment of the NewCo 2 Profit.
|
NewCo
3 – Charter Agreements
|
|
3.16
|
Immediately
prior to the delivery date of New-Build 3, NBC shall enter into a "
NewCo 3 Head
Charterparty
" with NewCo 3 pursuant to which NBC shall charter from NewCo 3
the New-Build 3 for a period of five (5) years at the rate of USD 11,350 per day plus
any NewCo 3 Profit Share Amount earned pursuant to the NewCo 3 Profit Sharing Addendum.
NBC shall earn a 1.25% address commission pursuant to the terms of the NewCo 3 Head Charterparty.
Bulk Partners (Bermuda) Ltd. shall guarantee the full and timely performance by NBC of
any and all of its obligations and liabilities under the NewCo 3 Head Charterparty. Notwithstanding
the above principal terms, as well as, the terms of the NewCo 3 Profit Sharing Addendum
mentioned in clause 3.18 herein, the NewCo 3 Head Charterparty shall have the same content,
form and aspects with the BN Odyssey Head Charterparty
|
|
|
3.17
|
During
the term of the NewCo 3 Head Charterparty, NBC may enter into "
NewCo 3 Third
Party Sub-Charterparties
" from time to time pursuant to which third parties
shall sub-charter the New-Build 3 from NBC at the then prevailing market rates. NBC shall
earn a booking commission calculated as a percentage of all gross freights
,
demurrages,
charter hires
, and
other revenues
("
NewCo 3 Booking Commission
") earned on the NewCo
3 Third Party Sub-Charterparties which are voyage charters or time charters during the
term of the NewCo 3 Head Charterparty. The NewCo 3 Booking Commission shall be 1.00%
of all gross freights
, demurrages,
charter hires
and other revenues
earned
during the NewCo 3 Head Charterparty.
|
|
|
3.18
|
With respect
to NewCo 3 Third Party Sub-Charterparties (voyage charter or time charter), to the extent
that the Time Charter Equivalent returns which NBC earns exceed the Time Charter Equivalent
of USD 11,350 per day (such excess being the "
NewCo 3 Profit
"), NBC
has agreed to share seventy-five percent (75%) of such NewCo 3 Profit with NewCo 3 ("
NewCo
3 Profit Share Amount
") pursuant to the "
NewCo 3 Profit Sharing Addendum
"
to be included as an addendum to the NewCo 3 Head Charterparty. The rules agreed in the
BN Odyssey Profit Sharing Addendum Supplement shall apply
mutatis mutandis
for
the assessment, calculation and payment of the NewCo 3 Profit.
|
NewCo
4 – Charter Agreements
|
|
3.19
|
Immediately
prior to the delivery date of New-Build 4, NBC shall enter into a "
NewCo 4 Head
Charterparty
" with NewCo 4 pursuant to which NBC shall charter from NewCo 4
the New-Build 4 for a period of five (5) years at the rate of USD 11,350 per day plus
any NewCo 4 Profit Share Amount earned pursuant to the NewCo 4 Profit Sharing Addendum.
NBC shall earn a 1.25% address commission pursuant to the terms of the NewCo 4 Head Charterparty.
Bulk Partners (Bermuda) Ltd. shall guarantee the full and timely performance by NBC of
any and all of its obligations and liabilities under the NewCo 4 Head Charterparty. Notwithstanding
the above principal terms, as well as, the terms of the NewCo 4 Profit Sharing Addendum
mentioned in clause 3.21 herein, the NewCo 4 Head Charterparty shall have the same content,
form and aspects with the BN Odyssey Head Charterparty.
|
|
|
3.20
|
During
the term of the NewCo 4 Head Charterparty, NBC may enter into "
NewCo 4 Third
Party Sub-Charterparties
" from time to time pursuant to which third parties
shall sub-charter the New-Build 4 from NBC at the then prevailing market rates. NBC shall
earn a booking commission calculated as a percentage of all gross freights
,
demurrages,
charter hires
, and
other revenues
("
NewCo 4 Booking Commission
") earned on the NewCo
4 Third Party Sub-Charterparties which are voyage charters or time charters during the
term of the NewCo 4 Head Charterparty. The NewCo 4 Booking Commission shall be 1.00%
of all gross freights
, demurrages,
charter hires
, and other revenues
earned
during the NewCo 4 Head Charterparty.
|
|
|
3.21
|
With respect
to NewCo 4 Third Party Sub-Charterparties (voyage charter or time charter), to the extent
that the Time Charter Equivalent returns which NBC earns exceed the Time Charter Equivalent
of USD 11,350 per day (such excess being the "
NewCo 4 Profit
"), NBC
has agreed to share seventy-five percent (75%) of such NewCo 4 Profit with NewCo 4 ("
NewCo
4 Profit Share Amount
") pursuant to the "
NewCo 4 Profit Sharing Addendum
"
to be included as an addendum to the NewCo 4 Head Charterparty. The rules agreed in the
BN Odyssey Profit Sharing Addendum Supplement shall apply
mutatis mutandis
for
the assessment, calculation and payment of the NewCo 4 Profit.
|
Capital
Structure and Funding of the Company and its Subsidiaries
|
|
3.22
|
On the
date hereof, the capital structure of the Company is as follows:
|
|
|
-
|
USD
12,683,333.33
of zero-interest subordinated
shareholder loans provided by STST to the Company, USD
12,683,333.33
of zero-interest subordinated shareholder loans provided by BFB to the Company
and USD
12,683,333.33
of zero-interest
subordinated shareholder loans provided by ASO 2020 to the Company (together, the "
Shareholder
Loans
"); and
|
|
|
-
|
USD
40,000 of common equity (10,000 ordinary shares with a value of USD 4.00 per share).
|
|
|
3.23
|
On the
date hereof, the capital structure of the BN Odyssey is as follows:
|
|
|
-
|
USD
19,500,000.00 per the Existing DVB Loan;
|
|
|
-
|
USD
12,500,00.00 of zero-interest subordinated shareholder loans provided by the Company
to BN Odyssey; and
|
|
|
-
|
USD
10,000.00 of common equity (10,000 ordinary shares with a par value of USD 1.00 per share).
|
|
|
3.24
|
On the
date hereof, the capital structure of the BN Orion is as follows:
|
|
|
-
|
USD
19,500,000.00 per the Existing DVB Loan;
|
|
|
-
|
USD
12,500,00.00 of zero-interest subordinated shareholder loans provided by the Company
to BN Orion; and
|
|
|
-
|
USD
10,000.00 of common equity (10,000 ordinary shares with a par value of USD 1.00 per share).
|
|
|
3.25
|
Pursuant
to the terms and conditions of the Shipbuilding Contracts, the relevant Subsidiaries
of the Company will be required to pay Sumitomo Corporation cash deposits equal to 40%
of the purchase price of the relevant Vessel at certain dates prior to the delivery of
such Vessel. In order to fund the payment of deposits due to Sumitomo Corporation by
the Subsidiaries pursuant to the Shipbuilding Contracts, each Party hereby agrees to
provide the Company with additional Shareholder Loans in an amount equal to (i) the product
of (x) its
pro rata
shareholding percentage as at the due date of a deposit multiplied
by (y) the amount of such deposit, no later than one (1) week prior to the due date of
each relevant deposit. The Company shall on-lend the proceeds of such Shareholder Loans
to the relevant Subsidiary.
The first instalment
under the Shipbuilding Contracts has been funded in accordance with the Subscription
Agreement.
|
|
|
3.26
|
Pursuant
to the terms and conditions of the Shipbuilding Contracts, the relevant Subsidiaries
of the Company will be required to pay Sumitomo Corporation 60% of the purchase price
of the relevant Vessel upon delivery of the Vessel. In order to fund this final payment
instalment, the Company and its Subsidiaries intend to borrow the required funds from
third party financial institution/s pursuant to loan agreement/s containing terms and
conditions acceptable to the Parties. Glencore and Glencore International plc on one
hand, Bulk Partners (Bermuda) Ltd. on the other and Cooper, Cartesian and ASO Holdings
on the third hereby agree to guarantee the amounts due and owing to such third party
financial institution/s on a several basis reflecting the
pro rata
shareholding
percentages in the Company
inter se
of STST, BFB and ASO 2020, respectively.
The Parties agree to discuss in the future and in good faith the conditions
under which ASO Holdings, Cooper and Cartesian (severally in proportion to their ownership
in ASO 2020) may be released from their obligation to provide the above mentioned guarantee
or the obligations of an existing guarantee, subject in all cases to the consent of the
applicable creditor and the continuation of the obligations of ASO 2020 itself. To the
extent that the required funds for the final payment instalment cannot be borrowed from
third party financial institution/s on terms and conditions acceptable to the Parties,
each of the Parties hereby agrees that it shall fund the final instalment via additional
Shareholder Loans until such time as third party borrowing is available on terms acceptable
to all Parties.
|
|
|
3.27
|
Any further
funding requirements of the Company and its Subsidiaries shall be shared by the Parties
on a pro rata basis in accordance with each of the Parties' then outstanding percentage
ownership of ordinary shares as at the date of such funding, provided that all Parties
agree in accordance with Clause 5.1.(t) herein. The Parties shall agree from time to
time the amount and timing of any funding requirements of the Company, and whether each
funding shall take the form of (a) a subscription for additional ordinary shares to be
issued by the Company, (b) additional Shareholder Loans to the Company, or (c) such other
form as may be agreed by the Parties.
|
|
|
3.28
|
Notwithstanding
any other provisions in this Agreement, if:
|
|
|
(a)
|
a
default under a debt agreement of the Company and/or a Subsidiary has occurred or is
reasonably expected to occur in the immediate future (other than a Shareholder Loan)
and
the Company and/or a Subsidiary requires
additional funding in order to cure that default; or
|
|
|
(b)
|
additional
funds are needed for the sole purpose of paying the operating expenses of the Vessels
(including drydock expenses) as previously approved by the Parties in accordance with
the Annual Budget
|
each
Shareholder shall be required to, and shall, advance additional funds as Shareholder Loans to the Company to cure that default,
the amount of which shall be equal to the product of (i) such amount required to cure such default, and (ii) such Shareholder’s
then outstanding shareholding percentage at the time such additional funds are required to be paid.
|
|
3.29
|
Unless
agreed in writing by the Company and all of the Shareholders, identical terms and conditions
(other than name, date, and amount) shall apply to the Shareholder Loans provided by
each of the Shareholders to the Company from time to time, including, without limitation,
rate of interest, payment terms in respect of principal and interest, maturity date,
covenants and undertakings, events of default, or otherwise.
|
|
|
3.30
|
To the
extent a Party does not fund
within the time
set forth in the relevant notice
the full amount of its pro rata share of any
agreed funding amount as set forth in clauses 3.27 and 3.28, then each Party agrees that
any such failure to fund shall constitute a substantial breach of such Party's obligations
under this Agreement for purposes of clause 12.7 hereof.
|
|
|
3.31
|
Except
as expressly set forth herein, no Party shall be obliged to give any guarantee for the
Company’s or any of its Subsidiaries’ obligations. Notwithstanding the foregoing,
if:
|
|
|
(a)
|
a
Party (including each of its direct or indirect parent companies, in the case of STST,
Glencore, Glencore International plc and Glencore Xstrata International plc, in the case
of BFB, Bulk Partners (Bermuda) Ltd and in the case of ASO 2020, ASO Holdings, , , Cooper,
and Cartesian
,
is bound by any guarantee due and owing to any third party for the obligations of the
Company and/or its Subsidiaries (each, a "
Guaranteeing Shareholder Party
");
and
|
|
|
(b)
|
that
Guaranteeing Shareholder Party is at any date (even after that Guaranteeing Shareholder
Party has ceased to hold any shares) (the "
Due Date
") obliged to pay
any amount to the third party creditor in terms of such guarantee (each, a "
Guarantee
Payment
"),
|
then
the other Parties (including their direct or indirect parent companies, in the case of STST, Glencore, Glencore International
plc and Glencore Xstrata International plc; in the case of BFB, Bulk Partners (Bermuda) Ltd.; and in the case of ASO 2020, ASO
Holdings, Cooper, and Cartesian (the "
Indemnifying Party
") at the Due Date shall unconditionally and irrevocably
indemnify each Guaranteeing Shareholder Party against such Guarantee Payment in an amount equal to (i) the product of (x) its
pro rata
shareholding percentage as at the Due Date multiplied by (y) the amount of the Guarantee Payment, minus (ii) any
partial payments actually made by such Indemnifying Party on or prior to such Due Date. For the avoidance of doubt, but subject
to the terms of any loan agreement (including the DVB Loan), guarantee agreement (including any guarantees provided to Sumitomo
Corporation and/or Oshima Shipbuilding Co., Ltd. pursuant to the Shipbuilding Contracts) or similar agreement or document in respect
of the Company or a Subsidiary (each, a "
Financing Agreement
") to which such Party is a party as at the Due Date,
the shareholding percentage of a Party shall be 0 (zero) if that Party ceases to hold shares prior to the Due Date.
For
the avoidance of doubt,
(a) ASO
2020, on a joint and several basis, with the entities mentioned under paragraphs (b) & (c) below,
(b) ASO
Holding, on a several basis in proportion to its respective aggregate direct and indirect shareholding in ASO 2020;
;
and
(c) Cooper
and Cartesian, each on a several basis in proportion to their respective aggregate direct and indirect shareholding in ASO 2020,
hereby
confirm that they will fully indemnify STST, Glencore, Glencore International plc, BFB and Bulk Partners (Bermuda) Ltd. in respect
of any Guarantee Payments made by them in relation to: (a) the
Existing
DVB
Loan; and (b) the guarantees provided for the purposes of the Shipbuilding Contracts, pursuant to the guarantee letters attached
in Appendix 4 hereto.
|
|
3.32
|
To the
extent that an Indemnifying Party (and its direct or indirect parent companies set forth
in clause 3.31(a), as applicable) is unable to indemnify the Guaranteeing Shareholder
Party (or its direct or indirect parent companies as set forth in clause 3.31(a), as
applicable) in accordance with clause 3.31, and otherwise within 30 days after written
demand for payment from the Guaranteeing Shareholder Party, then such Guaranteeing Shareholder
Party shall be entitled to exercise one or more of the following remedies, either individually
or cumulatively, at its option:
|
|
|
(a)
|
the
Guaranteeing Shareholder Party shall be entitled to purchase all of the shares and Shareholder
Loans of the Company owned or controlled by the Indemnifying Party, by way of offset
against the value of the Indemnifying Party's unpaid obligation to the Guaranteeing Shareholder
Party arising pursuant to clause 3.31, calculated at a price equal to 80% of the Net
Asset Value (as defined in clause 12.4) of the shares and Shareholder Loans of the Company
owned or controlled by the Indemnifying Party, it being understood and agreed that if
the Guaranteeing Shareholder Party exercises this option, (i) to the extent that the
amount equal to 80% of the Net Asset Value of the shares and Shareholder Loans of the
Company owned or controlled by the Indemnifying Party exceeds the value of the Indemnifying
Party's unpaid obligation to the Guaranteeing Shareholder Party arising pursuant to clause
3.31, it shall pay any such excess amounts to the Indemnifying Party, or (ii) to the
extent that the value of the Indemnifying Party's unpaid obligation to the Guaranteeing
Shareholder Party arising pursuant to clause 3.31 exceeds the amount equal to 80% of
the Net Asset Value of the shares and Shareholder Loans of the Company owned or controlled
by the Indemnifying Party, it may seek to collect the deficiency from the Indemnifying
Party;
|
|
|
(b)
|
the
Guaranteeing Shareholder Party shall, subject to and to the extent permitted by the terms
of any Financing Agreement to which the Guaranteeing Shareholder Party is a party, be
subrogated to the rights of any third party financial institution that has provided loans
to the Company or a Subsidiary pursuant to one or more facility agreement/s; and/or
|
|
|
(c)
|
the
Guaranteeing Shareholder Party shall be entitled to exercise any and all other rights
and remedies available to it under this Agreement, any other agreement to which it and
the Indemnifying Party is a party, and/or applicable law.
|
|
|
3.33
|
The Company
and its Subsidiaries shall obtain and maintain all necessary and customary insurance
policies in respect of the Vessels and its business, including, without limitation, any
and all insurance policies as may be required by the terms of any Financing Agreement
entered into with any third party financial institution.
|
|
|
4
|
Management
of the Company
|
|
|
4.1
|
The board
of directors of the Company currently comprises 3 (three) directors (the "
Administrative
Directors
") each of whom is associated with the administration services provider
for the Company in Bermuda.
|
The
Company shall discharge
promptly after the signing
of this Agreement
the 3 (three) Administrative Directors, and each of STST, BFB and ASO 2020 shall be entitled to appoint
2 (two) nominees
to the Board, such that the board of directors of the Company
shall then consist of up to
6
(
six
)
directors. Each Party may replace
either or both of its nominees
to the Board
at any time.
At
the request of a Party, the chairman shall, on an alternating
annual basis, be either
a
BFB-designated nominee,
a
STST-designated nominee or
an
ASO 2020-designated nominee, with such
chairman initially to be selected by the requesting Party from its own respective
nominees
.
|
|
4.2
|
Meetings
of the board of directors of the Company shall be held at least once
per
quarter
, and more frequently in the discretion of the board of directors of the
Company at a time and place mutually agreed by the board of directors. The attendance
of one nominee of each Party will be required for a quorum.
|
|
|
4.3
|
The day-to-day
business affairs of the Company shall be managed in accordance with Clause 6.3 herein.
|
|
|
4.4
|
The provisions
of this Clause 4 shall apply
mutatis mutandis
to each of the Subsidiaries.
|
|
|
5
|
Reserved
Policy Matters
|
|
|
5.1
|
The Parties
agree that none of the following matters shall be undertaken by the Company or its Subsidiaries
after the date hereof, except by the prior written agreement of all of the Parties, each
acting for itself and not as a fiduciary to the other Parties:
|
|
|
(a)
|
the
creation or issuance of any shares or the grant or agreement to grant any option over
any shares of the Company or a Subsidiary and/or the issue of any obligations convertible
or exercisable into any such shares;
|
|
|
(b)
|
any
re-organisation of the share capital of the Company or a Subsidiary;
|
|
|
(c)
|
the
alteration, amendment or modification of the memorandum of association and/or the by-laws,
in each case in respect of the Company or a Subsidiary;
|
|
|
(d)
|
the
declaration or payment of any dividend or distribution
(other
than the Transition Dividend)
in respect of the shares or shareholder loans of
the Company or a Subsidiary;
|
|
|
(e)
|
the
sale, transfer or contribution of any property or assets either by a Party to the Company
or a Subsidiary, or to a Party by the Company or a Subsidiary, including, without limitation,
any Affiliates or subsidiaries of such Party, and the terms and conditions thereof;
|
|
|
(f)
|
the
sale
or Encumbrance
by the Company
of shares in a Subsidiary;
|
|
|
(g)
|
the
sale or purchase of, the grant of a purchase option to a third party over (other than
pursuant to the BN Odyssey NBC Sub-Charterparty with respect to a purchase option on
the MV Odyssey and the BN Orion NBC Sub-Charterparty with respect to a purchase option
on the MV Orion), the exercise of an option to purchase, or the grant of any mortgage,
charge or Encumbrance over, any Vessel (other than pursuant to the Existing DVB Loan)
or any other asset or property of the Company or a Subsidiary or of any interest therein;
|
|
|
(h)
|
subject
to 10.1(a), the chartering-in of any vessel by the Company or a Subsidiary
;
|
|
|
(i)
|
subject
to 10.1(a), the chartering–out
or sub-chartering
out
of any Vessel for a period exceeding 12 months by the Company or a Subsidiary;
|
|
|
(j)
|
the
giving of any guarantee or indemnity by the Company or a Subsidiary or by a Party on
behalf of the Company or a Subsidiary;
|
|
|
(k)
|
the
formation or acquisition of any new subsidiary or affiliate of the Company or a Subsidiary
(other than NewCo 1 and NewCo 2);
|
|
|
(l)
|
the
acquisition by the Company or a Subsidiary of any shares of any other company or the
participation by the Company or a Subsidiary in any partnership or joint venture;
|
|
|
(m)
|
the
incurrence of any Financial Indebtedness by the Company or a Subsidiary from any third
party;
|
|
|
(n)
|
the
lending of any monies by the Company or a Subsidiary (otherwise than by way of deposit
with a bank), including the lending of any monies by the Company to a Subsidiary or by
one Subsidiary to another Subsidiary;
|
|
|
(o)
|
the
disposal of any property or assets of the Company or a Subsidiary;
|
|
|
(p)
|
the
consolidation, amalgamation or merger of the Company or a Subsidiary with any other company,
entity, or person, or the split or spin-off of any Company or Subsidiary section;
|
|
|
(q)
|
the
appointment of the auditors of the Company or a Subsidiary;
|
|
|
(r)
|
any
transaction between the Company and/or a Subsidiary and a Party or any subsidiary or
Affiliate of such Party;
|
|
|
(s)
|
the
alteration, amendment or modification of any of the agreements referred to in clauses
3 and 6 hereof;
|
|
|
(t)
|
the
amount and timing of any additional funding requirements of the Company as per clause
3.27 hereof (for the avoidance of doubt, excluding additional funding requirements which
are mandatory pursuant to clause 3.28);
|
|
|
(u)
|
the
execution of any Shipbuilding Contracts by the Company and/or any of its Subsidiaries;
|
|
|
(v)
|
any
change in the business objectives of the Company;
|
|
|
(w)
|
any
change in the tax classification of the Company and/or any of its Subsidiaries;
|
|
|
(x)
|
any
action that affects the right of any Shareholder to appoint a board member;
|
|
|
(y)
|
the
approval of the Annual Budget (including any amendment thereof);
|
|
|
(z)
|
liquidation
or winding up of the Company and/or any of its Subsidiaries;
|
|
|
(aa)
|
listing
on any stock exchange of the Company and/or any of its Subsidiaries;
|
|
|
(bb)
|
piracy/environmental
risk issues to the extent not controlled by the Management Agreement, Head Charterparties,
or NBC Sub-Charterparties;
|
|
|
(cc)
|
hiring,
firing, or compensation of any employees; and
|
|
|
(dd)
|
the
initiation or settlement of any litigation by or against the Company or any of its Subsidiaries
exceeding 50.000 $U.S.
|
|
|
6
|
Management
of the Vessels and of the Company
|
|
|
6.1
|
The commercial
employment of the Vessels shall be stipulated according to the terms and conditions of
the Head Charterparties (including the relevant Profit Share Addenda) and the NBC Sub-Charterparties
(including the relevant Profit Share Addenda).
|
|
|
6.2
|
The technical
management of the Vessels shall be entrusted to Seamar Management S.A., pursuant to the
agreement attached hereto as
Appendix 11
. Any divergence from recommended
maintenance schedules will require the consent of all Parties.
|
|
|
6.3
|
The day-to-day
management of the Company's and Subsidiaries’ business affairs and the accounting
and preparation of periodic financial statements for the Company and Subsidiaries shall
be entrusted to Phoenix Bulk Management Bermuda Ltd., as administrative manager, on those
terms and conditions set out in company management agreement to be concluded in the form
agreed in
Appendix 12
attached hereto, subject to any alterations agreed
from time to time between the Company and/or Subsidiaries and all the Parties, (the
“Company
Management Agreement”
).
|
|
|
6.4
|
It is understood
that the technical management (clause 6.2) and day-to-day management (clause 6.3) is
not an exclusive right or agreement for any one of the Parties and shall be assigned
to and/or delegated as per agreement of the Parties. The commercial employment of the
Vessels shall be entrusted to NBC for so long as the NBC Sub-Charterparties and the NewCo
Head Charterparties are in effect.
|
|
|
6.5
|
The Parties
shall collaborate as far as possible on the technical aspects of the yard contracts,
the vessel construction, and their supervision. Each Party shall designate key contact
person(s) for technical matters. To the extent permitted by Sumitomo Corporation, as
contractor, and Oshima Shipbuilding Co., Ltd., as builder, each Party will have the right
to appoint an assistant to the owner’s representative to the yard regarding the
supervision of the new buildings from the stage of agreeing on specifications and drawings,
etc. to the actual building, sea trials and delivery, with full rights to attend in all
material meetings and sea trials, including the right to request through the owner’s
representative and receive all communications with the yard (correspondence, drawings,
specifications, results of sea trials, etc.) and information.
|
|
|
6.6
|
The
administrative management and technical management of all the vessels ultimately owned
by the Company will remain with the companies as provided above in clauses 6.2. and 6.3.
The terms of such management will be subject to the “arms-length interaction”
limitation and the Parties approval set forth above and will be fully disclosed in an
“open-book” fashion. Any divergence from recommended maintenance schedules
and generally accepted standards will require the consent of the Parties. The Parties
will receive copies of all vetting reports, class surveys etc upon their issuance. The
companies referred in clauses 6.2. and 6.3. and the Parties will ensure that the Company
and all of its Subsidiaries and affiliates maintain insurance of an appropriate level
and quality. Non-performance of the management services shall trigger a material default
under the respective management agreement. In such an event any Party may request the
other Parties to cooperate in removing the the defaulting managers (namely the companies
referred in clauses 6.2. and/or 6.3. as the case may be).
|
|
|
6.7
|
Each Party
will have the right to nominate its representative with the technical manager of the
ships with full access to all aspects of management information on operations, special
surveys, dry dockings, crewing, insurance, repairs and maintenance, etc., but without
interfering with the operations of the technical manager.
|
|
|
6.8
|
The
Company may enter into agreements with the Company’s Subsidiaries or affiliates,
the Parties or their Affiliates, or any of their respective directors or officers only
if (a) the commercial terms of such agreements are on an “arms length” basis
(b) such terms are disclosed in advance to all three Parties and (c) all three Parties
affirmatively approve such an agreement.
|
|
|
7.1
|
Subject
to clause 7.2, it shall be the policy of the Company and the Subsidiaries to pay regular
dividends, provided that the amount and timing of any dividends shall be determined by
the board of directors of the Company.
|
|
|
7.2
|
Notwithstanding
clause 7.1, each payment of a dividend by the Company or a Subsidiary shall be subject
to the following limitations:
|
|
|
(a)
|
the
terms and conditions contained in any Financing Agreement entered into by and between
the Company and/or a Subsidiary and its lenders (if applicable); and
|
|
|
(b)
|
prudent
and conservative business principles.
|
|
|
7.3
|
Each
of the Parties agree that a dividend shall be paid by BN Odyssey and BN Orion to STST
and BFB in an amount equal to the total net income earned by each of BN Odyssey and BN
Orion during the year ending December 31, 2012 based on the audited financial statements
of BN Odyssey and BN Orion (the "
Transition Dividend
"). The Transition
Dividend shall be paid from cash flow generated by the companies in 2013. Each of STST
and BFB shall receive fifty percent (50%) of the Transition Dividend at the same time.
The Parties shall take all necessary corporate action to declare and pay the Transition
Dividend. As of the date hereof, based on the unaudited management accounts of BN Odyssey
and BN Orion as of 31 December 2012, the Transition Dividends for BN Odyssey and BN Orion
are expected to be $1,154,601 and $1,046,106 (or $2,200,707 in aggregate).
|
|
|
8
|
Information,
Accounts, and Audit
|
|
|
8.1
|
The accounting
reference date of the Company and each Subsidiary shall be December 31 of each year.
|
|
|
8.2
|
The audited
accounts of the Company and each Subsidiary shall be prepared in accordance with U.S.
GAAP.
|
|
|
8.3
|
Each Party
will have access to all information of the Company (and any subsidiary thereof) and may
conduct the following, without limitation: (a) review of detailed draft annual budgets
and projections, submitted at least one month before the beginning of each financial
year; (b) review of detailed unaudited financial statements and full detailed management
information submitted on a quarterly basis; (c) review of detailed annual audited financial
statements, prepared by a reputable accounting firm according to IFRS or GAAP within
120 days from the end of each financial year; (d) review of such other information that
such Party requests to review; and (e) discuss the performance and operations of the
Company and its subsidiaries with the management of NBC, the administrative manager and
the technical manager on a quarterly basis.
|
|
|
9.1
|
Each Party
hereby undertakes with the other Parties that during the continuance of this Agreement
it shall not without the prior written consent of the other Parties mortgage, charge
or otherwise encumber the whole or any part of its shares or Shareholder Loans in the
Company or assign or otherwise purport to deal with the beneficial interest therein or
any right relating thereto separate from the legal ownership of such shares, except in
accordance with the terms and conditions of any Financing Agreement entered into between
the Company and/or a Subsidiary and its third party lenders (if applicable).
|
|
|
9.2
|
No Party
may without the prior written consent of the other Parties assign any of its rights or
obligations under this Agreement which is personal to the Parties.
|
|
|
10
|
Not
a Partnership and No Restrictions
|
|
|
10.1
|
Nothing
in this Agreement shall create a partnership or establish a relationship of principal
and agent or any other relationship of a similar nature between or among the Parties.
|
|
|
(a)
|
The
entering into of this Agreement does not imply any restrictions on the other business
activities of any of the Parties except as explicitly provided herein.
Each of BFB and ASO 2020 agrees that the Company shall have a right of first refusal
over BFB and ASO 2020 and their respective Affiliates (but, for the avoidance of doubt,
excluding Glencore and its Affiliates) on the acquisition or long term period charter
of more than twelve months of 1A and 1B ice-strengthened panamax dry-bulk vessels provided
both Glencore and ASO2020 agree to exercise such right of first refusal. Furthermore,
NBC and BFB agree that, to the extent NBC charters 1A or 1B ice-strengthened dry-bulk
vessels exceeding 45.000 DWT, that NBC shall operate on an “open-book” basis
to permit confirmation that such chartered vessels are not receiving preferential treatment.
For instance, each of the Parties shall (alone or together with any other of the Parties
or any third party) be free to purchase and operate vessels (excluding the acquisition
and long term period charter of 1A and 1B ice-strengthened panamax dry-bulk vessels as
described above) which may compete with the Vessel/s. Similarly, each of the Parties
is free to undertake on behalf of itself or third parties the technical or commercial
management of such vessels (subject to the open-book provisions described above)
.
|
|
|
11.1
|
This Agreement
shall come into force immediately upon its execution.
|
|
|
11.2
|
This Agreement
shall thereafter continue until terminated in accordance with the provisions of clause
12 or until it is expressly superseded by any amended shareholders agreement in respect
of the Company.
|
|
|
12
|
Sale
of Shares, Change of Control and Termination
|
|
|
12.1
|
Unless
otherwise agreed in writing by all of the Parties, the Parties shall not sell, place
encumbrances over, transfer or otherwise dispose of, grant any options over, issue any
debt which is convertible into equity in or list on any stock exchange, any right, title
or interest in the ordinary shares or Shareholder Loans of the Company except in accordance
with the provisions of this clause 12.
|
|
|
12.2
|
Unless
otherwise agreed in writing by all of the Parties, if a Change of Control occurs in relation
to any Party to this Agreement, such Party (the "
Defaulting Party
")
shall be deemed to be in substantial breach of its obligations hereunder, and, pursuant
to clause 12.7, the non-defaulting Parties shall be entitled to serve a Notice to Offer
on the Defaulting Party requiring such Defaulting Party to offer all of its shares and
Shareholder Loans in the Company to the non-defaulting Parties due to a substantial breach
of such Defaulting Party’s obligations hereunder (which breach remains unremedied
for a period of 15 (fifteen) days from the date of any notice in writing requiring such
breach to be remedied).
|
|
|
12.3
|
Unless
otherwise agreed, each of the Parties can only sell all of their shares and Shareholder
Loans in the Company in a single transaction. Each Party may only sell all of its shares
in the Company if in one and the same transaction it also sells, transfers or otherwise
assigns its Shareholder Loans in the Company. The sale shall be effected as set forth
in this clause 12.
|
|
|
12.4
|
In the
event that one of the Parties wishes to sell all of its shares and Shareholder Loans
in the Company, it shall be obliged to offer in writing such shares and Shareholder Loans
(the "
Sale Shares and Loans
") to the other Parties (the "
Offeree/s
")
at a price equal to the Net Asset Value of the Sale Shares and Loans (the "
Sale
Price
").
|
The
offer shall:
|
|
(a)
|
be
irrevocable and open for acceptance by the Offerees,
pro rata
to their shareholding
percentages in the Company
inter se
as at the date ("
Receipt Date
")
of receipt of the offer by the last receiving Offeree, for a period beginning on the
Receipt Date and ending five (5) Business Days after the earlier of (a) the date that
the Parties reach an agreement on the price of the Sale Shares and Loans pursuant to
this clause 12.4 or (b) the date of issuance of the auditors' opinion referred to in
this clause 12.4 ("
Offer Period
");
|
|
|
(b)
|
be
subject to the condition that the Offeree/s (whether individually or jointly) must accept
all (and not part only) of the Sale Shares and Loans; and
|
|
|
(c)
|
be
subject to the condition that the sale of the Sale Shares and Loans by the offering shareholder
to the Offeree/s will not trigger an event of default under a Financing Agreement,
|
At
the option of the offering shareholder, the offer may be subject to the suspensive condition that the offering shareholder and
its direct or indirect parent companies are released with immediate effect from any guarantees and indemnities that the offering
shareholder and its direct or indirect parent companies have provided to any third parties in respect of the obligations of the
Company and its Subsidiaries to third parties (the “
Optional Suspensive Condition
”).
If
an Offeree ("
Surplus Offeree/s
") accepts all of the Sale Shares and Loans offered to it (in other words, such
Offeree accepts its entire
pro rata
share of the Sale Shares and Loans based on its shareholding percentage as at the Receipt
Date) and in such acceptance also accepts ("
Additional Acceptance
") those Sale Shares and Loans ("
Surplus
Sale Shares and Loans
") which were offered to another Offeree to the extent not accepted by such other Offeree, then
such Surplus Sale Shares and Loans shall be deemed to have been offered to the Surplus Offeree/s
pro rata
to their respective
shareholding percentages in the Company
inter se
as at the offer date and shall to the extent of their Additional Acceptances
be deemed to have been accepted by the Surplus Offeree/s.
|
|
(a)
|
The
term "
Net Asset Value
" shall be (a) such price as may be mutually agreed
between the Parties, or (b) failing agreement between the Parties, such price as the
auditors of the Company acting as experts (and not as arbitrators) shall certify to be
in their opinion the net asset value of the Sale Shares and Loans based on the then outstanding
assets and liabilities (excluding Shareholder Loans) of the Company and its Subsidiaries
on a consolidated basis, calculated as soon as practically possible and based on US GAAP
accounting principles and practices, provided that (i) the auditors shall be required
to base their opinion on the average of 3 (three) independent shipbrokers' valuations
of the Vessels owned by the Company and its Subsidiaries at the time of valuation, such
valuation to be done without physical inspection of the Vessels on the basis of willing
seller/willing buyer and including the value of any charterparty entered into by the
Company and/or its Subsidiaries relating to the Vessels (such as the Head Charterparties,
including the relevant Profit Share Addenda), except if, pursuant to clause 12.7, the
non-defaulting Parties have served a Notice to Offer on the Defaulting Party requiring
such Defaulting Party to offer all of its shares and Shareholder Loans in the Company
to the non-defaulting Parties due to a substantial breach of such Defaulting Party’s
or such Defaulting Party’s Affiliates’ obligations hereunder (which breach
remains unremedied for a period of 15 (fifteen) days from the date of any notice in writing
requiring such breach to be remedied), then, at the sole option of the non-defaulting
Parties, the value of any charterparty entered into by the Company and/or its Subsidiaries
relating to the Vessels (such as the Head Charterparties, including the relevant Profit
Share Addenda) may be excluded from the valuation, and (ii) all costs incurred in connection
with the obtaining of the auditors' opinion and the shipbrokers' valuations shall be
borne by the offering shareholder.
|
|
|
12.5
|
If (a)
the Offeree/s accept the entire offer in respect of the Sale Shares and Loans (whether
individually or jointly) prior to the end of the Offer Period and (b) the offer is not
subject to the Optional Suspensive Condition, the Sale Price shall be paid for in cash
by such Offeree/s to the offering shareholder (against receipt of the un-encumbered Sale
Shares and Loans) within 60 (sixty) days of the expiry of the Offer Period, and such
Offeree/s shall, subject to compliance to the terms of any Financing Agreement in effect
at the relevant time, (i) use commercially reasonable efforts to (a) ensure that the
offering shareholder and its direct or indirect parent companies are released with immediate
effect from any guarantees and indemnities that the offering shareholder and its direct
or indirect parent companies have provided to any third parties in respect of the obligations
of the Company and its Subsidiaries to third parties, and (b) obtain all necessary consents
in respect of same, and (ii) ensure that if STST is the offering shareholder, the BN
Odyssey Head Charterparty (including the relevant Profit Share Addendum) and the BN Orion
Head Charterparty (including the relevant Profit Share Addendum) are terminated with
immediate effect, and that BN Odyssey and BN Orion are substituted as "Owners"
under the BN Odyssey NBC Sub-Charterparty (including the relevant Profit Share Addendum)
and the BN Orion NBC Sub-Charterparty (including the relevant Profit Share Addendum),
respectively, and (iii) ensure that if BFB is the offering shareholder, the Company Management
Agreement shall be terminated with immediate effect, but the Head Charterparties and
the NBC Sub-Charterparties (including the relevant Profit Sharing Addenda) shall continue
in accordance with the respective terms and conditions thereof. The offering shareholder
shall, upon the request of the other Parties and without further consideration, perform
all actions in a reasonable and timely manner which are required to effect the contract
terminations in accordance with sub-clauses (i), (ii) and (iii) above. If the Offeree/s
are unable to procure that the offering shareholder and its direct or indirect parent
companies are released with immediate effect from any guarantees and indemnities that
the offering shareholder and its direct or indirect parent companies have provided to
any third parties in respect of the obligations of the Company and its Subsidiaries to
third parties, then the remaining Shareholders and their respective direct or indirect
parent companies (as outlined in clause 3.31 for the Parties as of the date hereof) shall
unconditionally and irrevocably indemnify the offering Shareholder for any amounts it
or its direct or indirect parent companies pay in relation to any guarantees or indemnities
that the offering shareholder or its direct or indirect parent companies have provided
to any third parties in respect of the obligations of the Company and its Subsidiaries.
|
|
|
12.6
|
If (a)
the Offeree/s accept the entire offer in respect of the Sale Shares and Loans (whether
individually or jointly) prior to the end of the Offer Period (b) the offer is subject
to the Optional Suspensive Condition and (c) the Offeree/s have procured that the offering
shareholder and its direct or indirect parent companies are released with immediate effect
from any guarantees and indemnities that the offering shareholder and its direct or indirect
parent companies have provided to any third parties in respect of the obligations of
the Company and its Subsidiaries to third parties, the Sale Price shall be paid for in
cash by such Offeree/s to the offering shareholder (against receipt of the un-encumbered
Sale Shares and Loans) within 60 (sixty) days of the expiry of the Offer Period, and
and such Offeree/s shall (i) ensure that if STST is the offering shareholder, the BN
Odyssey Head Charterparty (including the relevant Profit Share Addendum) and the BN Orion
Head Charterparty (including the relevant Profit Share Addendum) are terminated with
immediate effect, and that BN Odyssey and BN Orion are substituted as "Owners"
under the BN Odyssey NBC Sub-Charterparty (including the relevant Profit Share Addendum)
and the BN Orion NBC Sub-Charterparty (including the relevant Profit Share Addendum),
respectively, and (ii) ensure that if BFB is the offering shareholder, the Company Management
Agreement shall be terminated with immediate effect, but the Head Charterparties and
the NBC Sub-Charterparties (including the relevant Profit Sharing Addenda) shall continue
in accordance with the respective terms and conditions thereof. The offering shareholder
shall, upon the request of the other Parties and without further consideration, perform
all actions in a reasonable and timely manner which are required to effect the contract
terminations in accordance with sub-clauses (i) and (ii).
|
|
|
12.7
|
In the
event that a Party or such Party’s Affiliates shall be in substantial breach of
its obligations hereunder, including, for the avoidance of doubt, the occurrence of a
Change of Control in relation to a Party or the breach of any obligations of a Party
or such Party’s Affiliates in respect of the Head Charterparties and NBC Sub-Charterparties
(which breach remains unremedied for a period of 15 (fifteen) days from the date of any
notice in writing requiring such breach to be remedied), any non-defaulting Party shall
be entitled to serve a notice in writing on the Party who has defaulted or whose affiliate
has defaulted (the "
Defaulting Party
") requiring such Defaulting Party
to offer its shares and Shareholder Loans in the Company to the non-defaulting Parties
at a price equivalent to eighty percent (80%) of their Net Asset Value (as defined in
clause 11.4) but otherwise on the terms and conditions set out in clause 11 (the "
Notice
to Offer
"). If the Defaulting Party fails for any reason whatsoever to offer
its shares and Shareholder Loans in the Company in the manner described above, the Defaulting
Party shall be deemed to have given such offer to the non-defaulting Parties on the expiration
of 15 (fifteen) days from the receipt of the written Notice to Offer from the non-defaulting
Parties referred to above.
|
|
|
13.1
|
In this
Agreement, "
Deadlock
" means a situation in which:
|
|
|
(a)
|
any
matter has been proposed by one Party to the other Parties which constitutes a Reserved
Policy Matter, and at the expiry of 15 days after such Reserved Policy Matter is proposed,
it has not been approved in accordance herewith or withdrawn; and
|
|
|
(b)
|
one
Party has given notice to the other Parties within 20 days following the end of the period
referred to in subparagraph (a) above informing the other Parties that it wishes to implement
the Deadlock procedure and specifying the matter giving rise to the Deadlock situation
(a "
Deadlock Notice
").
|
|
|
13.2
|
Following
delivery of a Deadlock Notice:
|
|
|
(a)
|
the
Parties shall, within 10 Business Days following the delivery of the Deadlock Notice,
meet to discuss the Deadlock in good faith in an effort to reach agreement on the matter
giving rise to the Deadlock within a further 10 Business Days (the "
Negotiation
Period
");
|
|
|
(b)
|
if
no agreement is reached during the Negotiation Period, then at any time during the 180
(one hundred and eighty) day period after the expiry of the Negotiation Period, any Party
(the "
Server
") shall be entitled, but shall not be obliged, to deliver
a written offer (the "
Deadlock Offer
") on each other Party (the "
Recipient/s
")
setting out a price at which the Server is willing either to sell all, but not part,
of the Company’s shares and Shareholder Loans held by the Server, or to buy all,
but not part, of the Company’s shares and Shareholder Loans held by each of the
Recipients (the "
Deadlock Price
"), accompanied by (a) a banker’s
guarantee, standby letter of credit or other form of proof of available funds for such
offer and (b) reasonable written proof that the Server can procure the release of any
guarantees and indemnities that each Recipient and its direct or indirect parent companies
have provided to any third parties in respect of the obligations of the Company and its
Subsidiaries to third parties, to the extent that the Recipient chooses to sell its shares
and Shareholder Loans to the Server. So long as that Deadlock Offer is not revoked, any
Deadlock Offer subsequently served by the Recipient on the Server shall be deemed null
and void. At any time within 15 (fifteen) days of the service of the Deadlock Offer (the
"
Deadlock Offer Period
"), each Recipient must by written notice either:
|
|
|
(i)
|
sell
all, and not part only, of the Company’s shares and Shareholder Loans held by the
Recipient at the Deadlock Price, and on such reasonable terms and conditions as determined
by the Recipient and set out in the Recipient’s notice letter (the "
Recipient
Acceptance
"), including that the Server shall procure the release of any guarantees
and indemnities that the Recipient and its direct or indirect parent companies have provided
to any third parties in respect of the obligations of the Company and its Subsidiaries
to third parties; or
|
|
|
(ii)
|
purchase
all, and not part only, of the Company’s shares and Shareholder Loans held by the
Server at the Deadlock Price, and on such terms and conditions as set out in the Recipient’s
notice letter which shall be accompanied by (a) a banker’s guarantee, standby letter
of credit or other form of proof of available funds for such offer and (b) reasonable
written proof that the Recipient can procure the release of any guarantees and indemnities
that the Server and its direct or indirect parent companies have provided to any third
parties in respect of the obligations of the Company and its Subsidiaries to third parties,
each reasonably acceptable to the Server (the "
Recipient Purchase Right
");
provided, however, if multiple Recipients give notice to purchase, then each Recipient
shall be entitled to purchase, on the same basis as set forth above, such percentage
of the Server's shares and Shareholder Loans which is equal to (x) each Recipient’s
then shareholding percentage, divided by (y) the aggregate shareholding percentage of
the Recipients.
|
|
|
(c)
|
in
the case of a Recipient Acceptance, the Server shall, within 15 (fifteen) days after
such notice from the Recipient served on the Server, (i) purchase the Company’s
shares and Shareholder Loans held by the Recipient and shall pay the Recipient an amount
equal to the Deadlock Price (for the avoidance of doubt, the transfer of the shares and
Shareholder Loans will not close until all of the relevant contract terminations in sub-clauses
(ii), (iii) and (iv) below have been completed in full), (ii) (a) ensure that the Recipient
and its direct or indirect parent companies are released from any guarantees and indemnities
that the Recipient and its direct or indirect parent companies have provided to third
parties in respect of the obligations of the Company and its Subsidiaries, and (b) obtain
all necessary consents in respect of same, and (iii) ensure that, if STST is the selling
shareholder, the BN Odyssey Head Charterparty (including the relevant Profit Share Addendum)
and the BN Orion Head Charterparty (including the relevant Profit Share Addendum) are
terminated with immediate effect, and that BN Odyssey and BN Orion are substituted as
"Owners" under the BN Odyssey NBC Sub-Charterparty (including the relevant
Profit Share Addendum) and the BN Orion NBC Sub-Charterparty (including the relevant
Profit Share Addendum), respectively, and (iv) ensure that, if BFB is the selling shareholder,
the Company Management Agreement shall be terminated with immediate effect, but the Head
Charterparties and the NBC Sub-Charterparties (including the relevant Profit Sharing
Addenda) shall continue in accordance with the respective terms and conditions thereof.
The Recipient shall, upon the request of the Server and without further consideration,
perform all actions in a reasonable and timely manner which are required to effect the
contract terminations in accordance with sub-clauses (ii), (iii) and (iv) above; and
|
|
|
(d)
|
in
the case of a Recipient Purchase Right, the Recipient shall, within 15 (fifteen) days
after such notice from the Recipient served on the Server, (i) purchase the Company’s
shares held by the Server and shall pay the Server an amount equal to the Deadlock Price
(for the avoidance of doubt, the transfer of the shares and Shareholder Loans will not
close until all of the relevant contract terminations in sub-clauses (ii), (iii) and
(iv) below have been completed in full), (ii) (a) ensure that the Server and its direct
or indirect parent companies are released from any guarantees and indemnities that the
Server and its direct or indirect parent companies have provided to financial institutions
in respect of the Company’s third party debt obligations, and (b) obtain all necessary
consents in respect of same, and (iii) ensure that if STST is the selling shareholder,
the BN Odyssey Head Charterparty (including the relevant Profit Share Addendum) and the
BN Orion Head Charterparty (including the relevant Profit Share Addendum) are terminated
with immediate effect, and that BN Odyssey and BN Orion are substituted as "Owners"
under the BN Odyssey NBC Sub-Charterparty (including the relevant Profit Share Addendum)
and the BN Orion NBC Sub-Charterparty (including the relevant Profit Share Addendum),
respectively, and (iv) ensure that, if BFB is the selling shareholder, the Company Management
Agreement shall be terminated with immediate effect, but the Head Charterparties and
the NBC Sub-Charterparties (including the relevant Profit Sharing Addenda) shall continue
in accordance with the respective terms and conditions thereof. The Server shall, upon
the request of the Recipient and without further consideration, perform all actions in
a reasonable and timely manner which are required to effect the contract terminations
in accordance with sub-clauses (ii), (iii) and (iv) above.
|
|
|
14
|
Agreement
to Override the Articles
|
|
|
14.1
|
In so far
as any provision of this Agreement shall conflict or be inconsistent with any of the
provisions of the by-laws of the Company or a Subsidiary, the provisions of this Agreement
shall prevail over such by-laws, and the Parties shall (on the request of any of them)
procure that such by-laws are amended to accord with the provisions of this Agreement.
|
|
|
15.1
|
Any notice
or other document to be given under this Agreement shall be in writing and shall be deemed
duly given if sent by email followed by recorded delivery post to the respective addresses
shown below. Any such notice shall be deemed to be served at the time when the same is
delivered to the office of the party to be served or on the third business day following
the day of posting.
|
|
|
15.2
|
The
contact details of BFB are as follows
:
|
Bulk
Fleet Bermuda Holding Company Limited
Third
Floor, Par La Ville Place
14
Par La Ville Road
Hamilton,
HM08
Bermuda
Attention:
Company Secretary
Telephone:
+1(0) 441-295-8313
Fax:
+1(0) 441-292-1373
Email:
sdurrant@consolidated.bm
The
contact details of STST are as follows
:
ST
Shipping and Transport Pte. Ltd
Millenia
Tower #34-01
1
Temasek Avenue
Singapore
39192
Attention:
Coal Freight Department
Telephone:
+65 6415 7700
Fax:
+65 6235 7219
Email:
tommy.lund@stshipping.com, baar.coalnotices@glencore.com
with
a copy to:
Glencore
International AG
Baarermattstrasse
3
CH-6341
Baar
Switzerland
Attention:
Coal Department
Telephone:
+41 41 709 2000
Fax: +41 41 709 3000
Email:
baar.coalnotices@glencore.com; richard.marshall@glencore.com;
matthew.weber@glencore.com
The
contact details of ASO 2020 are as follows
:
ASO
2020 Maritime S.A.
c/o
Olympic Shipping and Management S.A.
8,
Zephyrou St. P. Phaleron
GR
175 64 Athens Greece
Attention:
John P. Ioannidis
Facsimile:
+30 210 9498 364
e-mail: john.ioannidis@olyship.com
With
a copy to
:
ASO
Holdings S.A.
Städtle
27
Vaduz,
FL 9490 Lichtenstein
Attention:
Anthony S. Papadmitriou
Facsimile:
+00423 23 50 220
Email:
asp@onassis.gr
|
|
16
|
Announcements
and Circulars
|
|
|
16.1
|
The Parties
agree to keep the subject matter of this Agreement strictly private and confidential
and, accordingly, no press or other announcement shall be made in connection with the
subject matter of this Agreement by any Party without the prior written approval of the
other Parties. For the avoidance of doubt, NBC shall be entitled to market the Vessels
as within their fleet but without mentioning the Parties.
|
|
|
17.1
|
If a Vessel
owned by the Company or a Subsidiary becomes an actual or contructive total loss, then
the insurance proceeds in respect of that total loss paid to the Company or a Subsidiary
shall be applied in or towards repayment of any outstanding indebtedness to the lender
(if a financing or loan is in place) attributable to the Vessel that is the subject of
the total loss.
|
|
|
17.2
|
Any debts
remaining in the Company or a Subsidiary after attributing the insurance proceeds as
per clause 17.1 hereof shall be repaid by the Parties in proportion to their then outstanding
shareholding percentages in the Company.
|
|
|
17.3
|
Any surplus
remaining following the application of the insurance proceeds as contemplated in clause
17.1 shall be distributed to the Parties in proportion to their shareholding in case
of termination of the Company in accordance with clause 12, or reinvested in the Company
in such manner as the Parties may agree.
|
No
Party shall, in any circumstances be liable to the other Party for any special, indirect or consequential loss, including any
loss of profit, loss of revenue, loss of use or loss of contract arising out of a breach of any of the terms of this Agreement,
including without limitation any breach of any representation or warranty contained in this Agreement.
|
|
19
|
Entire
Agreement and Amendments
|
This
Agreement, together with the Subscription Agreement, sets forth the entire agreement and understanding among the Parties in relation
to the Company, and no Party has relied on any warranty or representation of the other Party except as expressly stated or referred
to in this Agreement or the Subscription Agreement. This Agreement (and for the avoidance of doubt, this Clause 19 as well) may
only be modified, amended or changed in any respect with the agreement of all Parties, in writing and duly signed.
Without
prejudice to clause 21, the Parties agree that they will endeavour to settle any disputes between them during open and friendly
negotiations, taking into account the business interests of all Parties.
|
|
21
|
Governing
Law and Dispute Resolution
|
|
|
21.1
|
This Agreement
and all contractual and/or non-contractual obligations arising out of or in connection
with it shall be governed by and construed in accordance with English law.
|
|
|
21.2
|
The Parties
irrevocably agree that the
High Court
of
London
located in London
is
to have exclusive jurisdiction to settle any dispute which may arise out of or
in connection with this Agreement and the documents to be entered into pursuant to it.
The Parties irrevocably submit to the jurisdiction of such courts and waive any objection
to proceedings in any such court on the ground of venue or on the ground that the proceedings
have been brought in an inconvenient forum.
|
|
|
21.3
|
Each of
the Parties hereby irrevocably and unconditionally appoints the person indicated in clause
21.4 to act as its agent to accept service of process in England in relation to all matters
arising out of this Agreement. Without limitation, upon any other available means of
service of process of any kind, any writ, judgement or other notice of legal process
shall be sufficiently served on a Party hereto if delivered to such agent. If the appointment
of an agent appointed by a Party for the purpose of this clause 20.3 shall cease for
any reason, the relevant Party shall promptly appoint another such agent and notify the
other Party of such appointment providing that any agent appointed hereunder shall be
a company incorporated in England or a law firm authorised to practise in England.
|
|
|
21.4
|
For the
purposes of Clause 21.3:
|
|
(a) BFB
appoints:
|
MFB
Solicitors
|
|
Fishmongers'
Chambers
|
|
|
1
Fishmongers' Hall Wharf
|
|
|
London
EC4R 3AE
|
|
|
Attn:
Mr. Andrew Wright
|
|
|
Tel:
+44 (0) 207 330 8000
|
|
|
Fax:
+44 (0) 207 256 6778
|
|
|
|
|
|
(b) STST
appoints:
|
Glencore UK Ltd
|
|
50
Berkeley Street
|
|
|
London
W1J 8HD
|
|
|
England
|
|
|
|
|
|
Attn:
Legal Department
|
|
|
Tel:
+41 41 709 2000
|
|
|
Fax:
+41 41 709 3000
|
|
|
|
|
|
(c) ASO
2020 appoints:
|
Olympic Agencies (UK) Ltd
|
|
|
Nash House,
|
|
Saint
George str
|
|
|
London
W1S 2FQ
|
|
|
England
|
|
|
Attn:
|
|
|
|
|
|
Tel:
+44 207 8626800
|
|
|
Fax:
+44 207 8626801
|
|
This
Agreement may be signed in counterparts, and all such counterparts taken together shall constitute one integrated Agreement.
(remainder
of page intentionally left blank)
IN WITNESS
WHEREOF
this Agreement has been executed and delivered by a duly authorized representative of each of the Parties on the day
and year first above written.
SHAREHOLDERS
OF THE COMPANY
ST SHIPPING
AND TRANSPORT PTE. LTD.
Signed by
____________________
for and on
behalf of
ST Shipping
and Transport Pte. Ltd.
BULK FLEET
BERMUDA HOLDING COMPANY LIMITED
Signed by
_____________________,
director
for and on
behalf of
Bulk Fleet
Bermuda Holding Company Limited
ASO 2020
MARITIME, S.A.
Signed by
_____________________,
director
for and on
behalf of
ASO 2020
Maritime, S.A.
Signed by
_____________________,
director
for and
on behalf of
ASO 2020
Maritime, S.A.
ACKNOWLEDGED
AND AGREED (FOR THE PURPOSES OF THE CLAUSES MENTIONED BELOW) AS
OF THIS 10
th
DAY OF JANUARY, 2013:
BULK PARTNERS
(BERMUDA) LIMITED
(for the purposes of Recital K and Clauses 1.1, 3.3, 3.7, 3.10, 3.13, 3.16, 3.19, 3.26, 3.31, 12.7 and 16.1)
Signed by
___________________,
director
for and on
behalf of
Bulk Partners
(Bermuda) Limited
NORDIC BULK
CARRIERS A/S
(for the purposes of Clauses 1.1, 3, 6.4, 8.3, 10.1, , 12.5, 12.6, 12.7, 13.2 and 16.1)
Signed by
_________________,
director
for and on
behalf of
Nordic Bulk
Carriers A/S
ASO HOLDINGS
S.A.
(for the purposes of Clauses 1.1, 3.26, 3.31, , 12.5, 12.7, and 16.1)
Signed by
_________________,
director
for and on
behalf of
ASO Holdings
S.A.
Signed by
_________________,
director
for and on
behalf of
ASO Holdings
S.A.
COOPER INVESTMENT
FUND LLC
(for the purposes of Clauses 1.1, 3.26, 3.31, , 12.5, 12.7 and 16.1)
|
By:
|
CIP Manager, LLC
|
|
|
|
Its Managing Member
|
|
|
|
|
|
|
By:
|
|
|
|
|
Name: Matthew P. Boyer
|
|
|
|
Title: Managing Director
|
|
|
|
|
|
|
By:
|
|
|
|
|
Name Adam J. Murphy
|
|
|
|
Title: Managing Director
|
|
for and on
behalf of
Cooper Investment
Fund LLC
MARITIME
ACQUISITION INVESTMENT LLC
(for the purposes of Clauses 1.1, 3.26, 3.31, , 12.5, 12.7 and 16.1)
|
By:
|
COOPER INVESTMENT FUND LLC
|
|
|
its Managing Member
|
|
|
|
|
By:
|
CIP Manager, LLC
|
|
|
its Managing Member
|
|
|
|
|
|
By:
|
|
|
|
|
Name: Matthew P. Boyer
|
|
|
|
Title: Managing Director
|
|
|
|
|
|
|
By:
|
|
|
|
|
Name Adam J. Murphy
|
|
|
|
Title: Managing Director
|
|
for and on
behalf of
Maritime
Acquisition Investment LLC
PANGAEA
TWO LP
(for the purposes of Clauses 1.1, 3.26, 3.31, , 12.5 12.7 and 16.1)
Pangaea Two,
LP
by: Pangaea
Two GP, LP, its General Partner
by: Pangaea
Two Admin GP, LLC, its General Partner
by:
___________________
Name:
Title:
For and on
behalf of
Pangaea
Two LP
PANGAEA
TWO ACQUISITION HOLDINGS II, LIMITED
(for the purposes of Clauses 1.1, 3.26, 3.31, , 12.5, 12.7 and 16.1)
Signed by
_________________,
director
for and on
behalf of
Pangaea
Two Acquisition Holdings II, Limited
GLENCORE
INTERNATIONAL AG
(for the purposes of Clauses 1.1, 3.2, 3.6, 3.26, 3.31, , 12.5 12.7 and 16.1)
Signed by
___________________
for and on
behalf of
Glencore
International AG
____________________
for and on
behalf of
Glencore
International AG
GLENCORE
INTERNATIONAL PLC
(for the purposes of Recital K and Clauses 1.1, 3.26, 3.31, , 12.5, 12.7 and 16.1)
Signed by
___________________
for and on
behalf of
Glencore
International plc
____________________
for and on
behalf of
Glencore
International plc
Exhibit 10.19
Shareholders Agreement
regarding Nordic Bulk Ventures Holding
Company Ltd., Bermuda
between and among
ST Shipping and Transport Pte. Ltd.
and
Bulk Fleet Bermuda Holding Company Limited
Dated 29 November 2013
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Index:
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1
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Definitions
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3
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2
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Structure and Initial Funding of the Company
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7
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3
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Objectives, Business and Future Funding of the Company
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8
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4
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Management of the Company
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12
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5
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Reserved Policy Matters
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12
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6
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Management of the Vessels and of the Company
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15
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7
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Dividend Policy
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17
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8
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Information, Accounts, and Audit
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17
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9
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Non-Assignability
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18
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10
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Not a Partnership and No Restrictions
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18
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11
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Duration
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19
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12
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Sale of Shares, Change of Control and Termination
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19
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13
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Deadlock
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23
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14
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Agreement to Override the Articles
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26
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15
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Notices
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26
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16
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Announcements and Circulars
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2
7
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17
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Loss of Vessel
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28
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18
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Consequential Loss
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28
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19
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Entire Agreement
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2
8
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20
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Disputes
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29
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21
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Governing Law and Dispute Resolution
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29
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22
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Counterparts
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30
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SHAREHOLDERS AGREEMENT
This Shareholders Agreement (as amended,
supplemented or otherwise modified from time to time, the "
Agreement
") is made on 29 November 2013 by and between:
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(1)
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ST Shipping and Transport Pte.
Ltd.
of 1 Temasek Avenue, #34-01 Millenia Tower, Singapore 039192 ("
STST
");
and
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(2)
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Bulk Fleet Bermuda Holding Company
Limited
of Third Floor, Par La Ville Place, 14 Par La Ville Road, Hamilton, HM08,
Bermuda ("
BFB
"),
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Each of STST and BFB may be referred to
herein individually as a "
Shareholder
" or "
Party
" and jointly as the "
Shareholders
"
or "
Parties
".
RECITALS
A. STST and BFB each own fifty percent
(50%) percent of the issued and outstanding shares of Nordic Bulk Ventures Holding Company Ltd., a company limited by shares that
was duly formed and is validly existing pursuant to the laws of Bermuda (the "
Company
").
RECITALS
WHEREAS
, the Parties wish to set
forth in this Agreement the details of the purpose, business, capitalization, organization and management of the Company.
AGREEMENT
NOW THEREFORE
, in exchange for
the mutual premises and consideration set forth herein, the sufficiency and receipt of which is hereby acknowledged, the Parties,
intending to be legally bound, hereby agree as follows:
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1.1
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Subject to Clause 1.2. herein, in
this Agreement:
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Administrative Directors
has the meaning given in clause 4.1.
Affiliate
means, in
relation to any person, any person which directly or indirectly controls, is controlled by, or is controlled by the same person
as, such entity; in relation to individuals, an Affiliate shall also include the spouse and offsprings of that individual and
any entities controlled directly or indirectly by such persons. For purposes of this Agreement, Glencore International AG ("
Glencore
"),
Glencore International plc and Glencore Xstrata plc are Affiliates of STST; and NBC, Bulk Partners (Bermuda) Ltd. and Phoenix
Bulk Management Bermuda Ltd. are Affiliates of BFB.
Annual Budget
means
the annual budget of the Company and its Subsidiaries.
BFB
means Bulk Fleet
Bermuda Holding Company Limited of Third Floor, Par La Ville Place, 14 Par La Ville Road, Hamilton, HM08, Bermuda.
Business Day
means a
day, other than a Saturday or a Sunday, when banks are open for business in New York, United States of America and Zug, Switzerland.
Change of Control
means
with respect to:
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(i)
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an event that results in any
Person(s) other than Bulk Partners (Bermuda) Ltd., directly or indirectly owning securities
or voting power in BFB or otherwise being in a position to exercise Control over BFB;
or
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(ii)
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an event that results in any
Person(s) other than Edward Coll, Anthony Laura and Cartesian Bulk being in a position
to exercise Control over Bulk Partners (Bermuda) Ltd.;
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(i)
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an event that results in any
Person(s) other than Glencore or Glencore Xstrata plc directly or indirectly owning securities
or voting power in STST or otherwise being in a position to exercise Control over STST.
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Commercial Management Agreement
has the meaning given in clause 6.1.
Company
means Nordic
Bulk Ventures Holding Company Ltd. of Third Floor, Par La Ville Place, 14 Par La Ville Road, Hamilton, HM08, Bermuda.
Company Management Agreement
has the meaning given in clause 6.3.
Control
,
Controls
and
Controlled
means (a) ownership of at least fifty percent (50%) of the voting rights of a Person, (b)
the power to direct or cause the direction of the management and policies of a Person, or (c) the power to appoint a majority
(or more) of the board of directors of a Person.
Deadlock
has the meaning
given in clause 13.1.
Deadlock Notice
has
the meaning given in clause 13.1.
Deadlock Offer
has the
meaning given in clause 13.2.
Deadlock Offer Period
has the meaning given in clause 13.2.
Deadlock Price
has the
meaning given in clause 13.2.
Defaulting Party
has
the meaning given in clause 12.7.
Due Date
has the meaning given in clause 3.7.
Encumbrance
means any mortgage, pledge, lien, encumbrance, charge, option, usufruct, right to acquire, right of pre-emption, assignment,
hypothecation or other third party security interest, including title retention arrangements or restrictions of transfer and any
agreement, arrangement or obligation to create any of the foregoing.
Financing Agreement
has
the meaning given in clause 3.7.
Financial Indebtedness
means,
with respect to any person, all indebtedness of such person including without limitation:
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(i)
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for
or in consideration of borrowed money or arising out of any credit facility or financial
accommodation; or
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(ii)
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for
the deferred purchase price of assets or services (other than trade payables arising
in the ordinary course of business); or
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(iii)
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arising
under any lease which would be capitalised on the balance sheet of the lessee in accordance
with IFRS (prepared on a consistent basis) or which is otherwise in substance a financing
lease; or
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(iv)
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arising
in respect of any debenture, bond, note, loan stock or other security, any acceptance
or documentary credit or any receivables sold or discounted other than on a non-recourse
basis; or
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(v)
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arising
under any other obligation or transaction which, in accordance with IFRS (prepared on
a consistent basis), has the commercial effect of borrowing.
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Glencore
means Glencore
International AG of Baarermattstrasse 3, 6341 Baar, Switzerland.
Government Authority
means any central, provincial, state, municipal, county or regional governmental or quasi-governmental instrumentality, and includes
any ministry, department, commission, bureau, board, administrative or other agency or regulatory body or instrumentality thereof.
Guarantee Payment
has
the meaning given in clause 3.7.
Guaranteeing Shareholder
Party
has the meaning given in clause 3.7.
Indemnifying Party
has
the meaning given in clause 3.7.
NBC
means Nordic Bulk
Carriers A/S of Tuborg Havnevej 19, DK-2900, Denmark.
Negotiation Period
has
the meaning given in clause 13.2.
Net Asset Value
has
the meaning given in clause 12.4.
Notice to Offer
has
the meaning given in clause 12.7.
Offer Period
has the
meaning given in clause 12.4.
Offeree
has the meaning
given in clause 12.4.
Optional Suspensive Condition
has the meaning given in clause 12.4.
Person
means a natural person, a corporation, a partnership, a trust, a business trust, a joint stock company, an unincorporated
association, any Government Authority, and any other legal entity, including similar entities.
Recipient
has the meaning
given in clause 13.2.
Recipient Acceptance
has the meaning given in clause 13.2.
Recipient Purchase Price
has the meaning given in clause 13.2.
Receipt Date
has the
meaning given in clause 12.4.
Sale Price
has the meaning
given in clause 12.4.
Sale Shares and Loans
has
the meaning given in clause 12.4.
Server
has the meaning
given in clause 13.2.
Shareholder Loans
means
the zero-interest subordinated shareholder loans provided by the Shareholders to the Company from time to time, as referred to
in clause 3.
STST
means ST Shipping
and Transport Pte. Ltd. of 1 Temasek Avenue, #34-01 Millenia Tower, Singapore 039192.
Subsidiary
means each
subsidiary of the Company, and may be referred to jointly as
Subsidiaries
.
Vessel
means each vessel
owned by the Company and/or its Subsidiaries.
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2
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Structure and Initial Funding of the Company
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2.1
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Promptly after the date hereof,
the Parties shall jointly own the Company on a 50/50 basis, and the Parties agree that
the Company shall be operated in a manner consistent with the objectives and principles
hereafter set forth in this Agreement.
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2.2
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On the date hereof, the Company
has a fully issued and paid-up share capital of USD 10,000 divided into 10,000 ordinary
shares of USD 1.00 each, which are held by BFB.
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2.3
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Promptly after the date of this Agreement
being signed by the Parties and the payment of USD 3,000,000.00 by STST to the Company
pursuant to clause 3.2, BFB shall arrange for the transfer of 50% of the ordinary shares
in the Company to STST, resulting in the ordinary shares of the Company being held as
follows:
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-
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STST
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5,000 ordinary shares
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-
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BFB
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5,000 ordinary shares
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2.4
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The Parties agree that the costs
and expenses incurred
on or from the date
hereof
, and to be incurred, in connection with the administration of the Company
and its Subsidiaries shall, wherever practicable, be kept to a minimum. Consequently,
the Parties agree that they shall use all commercially reasonable endeavours to maintain
the structure of the Company in as simple a manner as possible, and the procedures in
connection with the administration of the Company and its Subsidiaries shall be maintained
so as to maximize the efficient and expeditious operation of the Company and its Subsidiaries.
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2.5
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Each Party hereby undertakes to the
other Party to exercise the rights attaching to its shares in the Company and to procure
that the persons nominated by any of them as directors of the Company shall exercise
their powers in that capacity as such, so as to cause the business of the Company to
be carried on in the manner contemplated by this Agreement.
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2.6
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The Parties agree that, unless otherwise
mutually agreed in writing by all of the Parties, the Company shall not issue any shares
other than ordinary shares.
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3
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Objectives, Business and Future Funding
of the Company
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3.1
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The Parties agree that the primary
business objectives and purposes of the Company shall be to buy, charter and sell the
Vessels, and always in accordance to clause 3 hereof.
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3.2
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Promptly after the date hereof, each
Party shall provide USD 3,000,000.00 of zero-interest subordinated loans to the Company
("
Shareholder Loans
"), or USD 6,000,000.00 in total, in order to provide
initial working capital for the Company.
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3.3
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Any further funding requirements
of the Company and its Subsidiaries shall be shared by the Parties on a pro rata basis
in accordance with each of the Parties' then outstanding percentage ownership of ordinary
shares as at the date of such funding, provided that all Parties agree in accordance
with Clause 5.1.(t) herein. The Parties shall agree from time to time the amount and
timing of any funding requirements of the Company, and whether each funding shall take
the form of (a) a subscription for additional ordinary shares to be issued by the Company,
(b) additional Shareholder Loans to the Company, or (c) such other form as may be agreed
by the Parties.
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3.4
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Notwithstanding any other provisions
in this Agreement, if:
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(a)
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a default under a debt agreement
of the Company and/or a Subsidiary has occurred or is reasonably expected to occur in
the immediate future (other than a Shareholder Loan) and
the
Company and/or a Subsidiary requires additional funding in order to cure that default;
or
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(b)
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additional
funds are needed by the Company and/or a Subsidiary for the sole purpose of paying the
operating expenses of the Vessels (including drydock expenses) as previously approved
by the Parties in accordance with the Annual Budget
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each Shareholder
shall be required to, and shall, advance additional funds as Shareholder Loans to the Company to cure that default, the amount
of which shall be equal to the product of (i) such amount required to cure such default, and (ii) such Shareholder’s then
outstanding shareholding percentage at the time such additional funds are required to be paid.
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3.5
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Unless agreed in writing by the Company
and all of the Shareholders, identical terms and conditions (other than name, date, and
amount) shall apply to the Shareholder Loans provided by each of the Shareholders to
the Company from time to time, including, without limitation, rate of interest, payment
terms in respect of principal and interest, maturity date, covenants and undertakings,
events of default, or otherwise.
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3.6
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To the extent a Party does not fund
within the time set forth in the relevant
notice
the full amount of its pro rata share of any agreed funding amount as set
forth in clauses 3.3 and 3.4, then each Party agrees that any such failure to fund shall
constitute a substantial breach of such Party's obligations under this Agreement for
purposes of clause 12.7 hereof.
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3.7
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Except as expressly set forth herein,
no Party shall be obliged to give any guarantee for the Company’s or any of its
Subsidiaries’ obligations. Notwithstanding the foregoing, if:
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(a)
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a
Party (including each of its direct or indirect parent companies, in the case of STST,
Glencore and Glencore Xstrata plc, and in the case of BFB, Bulk Partners (Bermuda) Ltd.
,
is bound by any guarantee due
and owing to any third party for the obligations of the Company and/or its Subsidiaries
(each, a "
Guaranteeing Shareholder Party
"); and
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(b)
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that Guaranteeing Shareholder
Party is at any date (even after that Guaranteeing Shareholder Party has ceased to hold
any shares) (the "
Due Date
") obliged to pay any amount to the third
party creditor in terms of such guarantee (each, a "
Guarantee Payment
"),
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then the
other Party (including its direct or indirect parent companies, in the case of STST, Glencore and and Glencore Xstrata plc; and
in the case of BFB, Bulk Partners (Bermuda) Ltd. (the "
Indemnifying Party
") at the Due Date shall unconditionally
and irrevocably indemnify each Guaranteeing Shareholder Party against such Guarantee Payment in an amount equal to (i) the product
of (x) its
pro rata
shareholding percentage as at the Due Date multiplied by (y) the amount of the Guarantee Payment, minus
(ii) any partial payments actually made by such Indemnifying Party on or prior to such Due Date. For the avoidance of doubt, but
subject to the terms of any loan agreement, guarantee agreement or similar agreement or document in respect of the Company or
a Subsidiary (each, a "
Financing Agreement
") to which such Party is a party as at the Due Date, the shareholding
percentage of a Party shall be 0 (zero) if that Party ceases to hold shares prior to the Due Date.
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3.8
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To the extent that an Indemnifying
Party (and its direct or indirect parent companies set forth in clause 3.7(a), as applicable)
is unable to indemnify the Guaranteeing Shareholder Party (or its direct or indirect
parent companies as set forth in clause 3.7(a), as applicable) in accordance with clause
3.7, and otherwise within 30 days after written demand for payment from the Guaranteeing
Shareholder Party, then such Guaranteeing Shareholder Party shall be entitled to exercise
one or more of the following remedies, either individually or cumulatively, at its option:
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(a)
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the Guaranteeing Shareholder
Party shall be entitled to purchase all of the shares and Shareholder Loans of the Company
owned or controlled by the Indemnifying Party, by way of offset against the value of
the Indemnifying Party's unpaid obligation to the Guaranteeing Shareholder Party arising
pursuant to clause 3.7, calculated at a price equal to 80% of the Net Asset Value (as
defined in clause 12.4) of the shares and Shareholder Loans of the Company owned or controlled
by the Indemnifying Party, it being understood and agreed that if the Guaranteeing Shareholder
Party exercises this option, (i) to the extent that the amount equal to 80% of the Net
Asset Value of the shares and Shareholder Loans of the Company owned or controlled by
the Indemnifying Party exceeds the value of the Indemnifying Party's unpaid obligation
to the Guaranteeing Shareholder Party arising pursuant to clause 3.7, it shall pay any
such excess amounts to the Indemnifying Party, or (ii) to the extent that the value of
the Indemnifying Party's unpaid obligation to the Guaranteeing Shareholder Party arising
pursuant to clause 3.7 exceeds the amount equal to 80% of the Net Asset Value of the
shares and Shareholder Loans of the Company owned or controlled by the Indemnifying Party,
it may seek to collect the deficiency from the Indemnifying Party;
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(b)
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the Guaranteeing Shareholder
Party shall, subject to and to the extent permitted by the terms of any Financing Agreement
to which the Guaranteeing Shareholder Party is a party, be subrogated to the rights of
any third party financial institution that has provided loans to the Company or a Subsidiary
pursuant to one or more facility agreement/s; and/or
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(c)
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the Guaranteeing Shareholder
Party shall be entitled to exercise any and all other rights and remedies available to
it under this Agreement, any other agreement to which it and the Indemnifying Party is
a party, and/or applicable law.
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3.9
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The Company and its Subsidiaries
shall obtain and maintain all necessary and customary insurance policies in respect of
the Vessels and its business, including, without limitation, any and all insurance policies
as may be required by the terms of any Financing Agreement entered into with any third
party financial institution.
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4
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Management of the Company
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4.1
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The board of directors of the Company
currently comprises 3 (three) directors (the "
Administrative Directors
")
each of whom is associated with the administration services provider for the Company
in Bermuda.
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The
Company shall discharge
promptly after the signing of this Agreement
the
3 (three) Administrative Directors, and each of STST and BFB shall be entitled to appoint
2
(two) nominees
to the Board, such that the board of directors of the Company shall then consist of up to
4
(
four
) directors. Each Party may replace
either
or both of its nominees
to the Board at any time.
At
the request of a
Party, the chairman shall, on an alternating annual basis, be either
a
BFB-designated
nominee or
a
STST-designated nominee, with such chairman initially to be selected
by the requesting Party from its own respective
nominees
.
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4.2
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Meetings of the board of directors
of the Company shall be held at least once
per
quarter
, and more frequently in the discretion of the board of directors of the
Company at a time and place mutually agreed by the board of directors. The attendance
of one nominee of each Party will be required for a quorum.
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4.3
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The day-to-day business affairs of
the Company shall be managed in accordance with Clause 6.3 herein.
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4.4
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The provisions of this Clause 4 shall
apply
mutatis mutandis
to each of the Subsidiaries.
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5
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Reserved Policy Matters
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5.1
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The Parties agree that none of the
following matters shall be undertaken by the Company or its Subsidiaries after the date
hereof, except by the prior written agreement of the Parties, each acting for itself
and not as a fiduciary to the other Party:
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(a)
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the creation or issuance of
any shares or the grant or agreement to grant any option over any shares of the Company
or a Subsidiary and/or the issue of any obligations convertible or exercisable into any
such shares;
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(b)
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any re-organisation of the share
capital of the Company or a Subsidiary;
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(c)
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the alteration, amendment or
modification of the memorandum of association and/or the by-laws, in each case in respect
of the Company or a Subsidiary;
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(d)
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the declaration or payment of
any dividend or distribution in respect of the shares or shareholder loans of the Company
or a Subsidiary;
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(e)
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the sale, transfer or contribution
of any property or assets either by a Party to the Company or a Subsidiary, or to a Party
by the Company or a Subsidiary, including, without limitation, any Affiliates or subsidiaries
of such Party, and the terms and conditions thereof;
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(f)
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the sale
or
Encumbrance
by the Company of shares in a Subsidiary;
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(g)
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the sale or purchase of, the
grant of a purchase option to a third party over, the exercise of an option to purchase,
or the grant of any mortgage, charge or Encumbrance over, any Vessel or any other asset
or property of the Company or a Subsidiary or of any interest therein;
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(h)
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the
chartering-in of any vessel for a period exceeding six (6) months by the Company or a
Subsidiary
;
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(i)
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the chartering–out
of any Vessel for a period exceeding six (6) months by the Company or a Subsidiary;
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(j)
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the giving of any guarantee
or indemnity by the Company or a Subsidiary or by a Party on behalf of the Company or
a Subsidiary;
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(k)
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the formation or acquisition
of any new subsidiary or affiliate of the Company or a Subsidiary;
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(l)
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the acquisition by the Company
or a Subsidiary of any shares of any other company or the participation by the Company
or a Subsidiary in any partnership or joint venture;
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(m)
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the incurrence of any Financial
Indebtedness by the Company or a Subsidiary from any third party;
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(n)
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the lending of any monies by
the Company or a Subsidiary (otherwise than by way of deposit with a bank), including
the lending of any monies by the Company to a Subsidiary or by one Subsidiary to another
Subsidiary;
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(o)
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the disposal of any property
or assets of the Company or a Subsidiary;
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(p)
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the consolidation, amalgamation
or merger of the Company or a Subsidiary with any other company, entity, or person, or
the split or spin-off of any Company or Subsidiary section;
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(q)
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the appointment of the auditors
of the Company or a Subsidiary;
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(r)
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any transaction between the
Company and/or a Subsidiary and a Party or any subsidiary or Affiliate of such Party;
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(s)
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the alteration, amendment or
modification of any of the agreements referred to in clause 6 hereof (for the avoidance
of doubt, excluding, pursuant to clause 6.5, where there has been a
material
default under a management agreement and a Party has requested the other Party to cooperate
in removing the defaulting manager)
;
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(t)
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the amount and timing of any
additional funding requirements of the Company as per clause 3.3 hereof (for the avoidance
of doubt, excluding additional funding requirements which are mandatory pursuant to clause
3.4);
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(u)
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the execution of any shipbuilding
contracts by the Company and/or any of its Subsidiaries;
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(v)
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any change in the business objectives
of the Company;
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(w)
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any change in the tax classification
of the Company and/or any of its Subsidiaries;
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(x)
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any action that affects the
right of any Shareholder to appoint a board member;
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(y)
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the approval of the Annual Budget
(including any amendment thereof);
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(z)
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liquidation or winding up of
the Company and/or any of its Subsidiaries;
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(aa)
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listing on any stock exchange
of the Company and/or any of its Subsidiaries;
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(bb)
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hiring, firing, or compensation
of any employees; and
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(cc)
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the initiation or settlement
of any litigation by or against the Company or any of its Subsidiaries exceeding USD
fifty thousand (USD 50,000.00).
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6
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Management of the Vessels and of the
Company
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6.1
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The commercial employment of the
Vessels owned by the Company and/or its Subsidiaries shall be entrusted to Nordic Bulk
Carriers A/S ("
NBC
"), pursuant to an agreement substantially in the
form attached hereto as
Appendix 1
, subject to any alterations agreed from
time to time between the Company and/or Subsidiaries and all the Parties, (the
“Commercial
Management Agreement”
).
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6.2
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The technical management of any Vessels
owned by the Company and/or its Subsidiaries shall be entrusted to Seamar Management
S.A., pursuant to an agreement substantially in the form attached hereto as
Appendix
2
, subject to any alterations agreed from time to time between the Company and/or
Subsidiaries and all the Parties.
|
|
|
6.3
|
The day-to-day management of the
Company's and Subsidiaries’ business affairs and the accounting and preparation
of periodic financial statements for the Company and Subsidiaries shall be entrusted
to Phoenix Bulk Management Bermuda Ltd., as administrative manager, pursuant to an agreement
substantially in the form attached hereto as
Appendix 3
, subject to any
alterations agreed from time to time between the Company and/or Subsidiaries and all
the Parties, (the
“Company Management Agreement”
).
|
|
|
6.4
|
It is understood that the commercial
management (clause 6.1), technical management (clause 6.2) and day-to-day management
(clause 6.3) is not an exclusive right or agreement for any one of the Parties and shall
be assigned to and/or delegated as per agreement of the Parties.
|
|
|
6.5
|
The
commercial management, technical management and administrative management of all the
Vessels ultimately owned by the Company will remain with the companies as provided above
in clauses 6.1, 6.2 and 6.3, respectively. The terms of such management will be subject
to the “arms-length interaction” limitation and the Parties approval set
forth above and will be fully disclosed in an “open-book” fashion. Any divergence
from recommended maintenance schedules and generally accepted standards will require
the consent of the Parties. The Parties will receive copies of all vetting reports, class
surveys etc upon their issuance. The Parties shall procure, whether by instructing the
companies referred to in clauses 6.1, 6.2 and 6.3 or otherwise, that the Company and
all of its Subsidiaries and affiliates maintain insurance of an appropriate level and
quality. Non-performance of the management services shall trigger a material default
under the respective management agreement. In such an event any Party may request the
other Party to cooperate in removing the the defaulting managers (namely the companies
referred in clauses 6.1, 6.2 and/or 6.3 as the case may be).
|
|
|
6.6
|
Each Party will have the right
to nominate its representative with the technical manager of the ships with full access
to all aspects of management information on operations, special surveys, dry dockings,
crewing, insurance, repairs and maintenance, etc., but without interfering with the operations
of the technical manager.
|
|
|
6.7
|
The
Company may enter into agreements with the Company’s Subsidiaries or affiliates,
the Parties or their Affiliates, or any of their respective directors or officers only
if (a) the commercial terms of such agreements are on an “arms length” basis
(b) such terms are disclosed in advance to each Party and (c) each Party affirmatively
approve such an agreement.
|
|
|
7.1
|
Subject to clause 7.2, it shall be
the policy of the Company and the Subsidiaries to pay regular dividends, provided that
the amount and timing of any dividends shall be determined by the board of directors
of the Company.
|
|
|
7.2
|
Notwithstanding clause 7.1, each
payment of a dividend by the Company or a Subsidiary shall be subject to the following
limitations:
|
|
|
(a)
|
the terms and conditions contained
in any Financing Agreement entered into by and between the Company and/or a Subsidiary
and its lenders (if applicable); and
|
|
|
(b)
|
prudent and conservative business
principles.
|
|
|
8
|
Information, Accounts, and Audit
|
|
|
8.1
|
The accounting reference date of
the Company and each Subsidiary shall be December 31 of each year.
|
|
|
8.2
|
The audited accounts of the Company
and each Subsidiary shall be prepared in accordance with U.S. GAAP.
|
|
|
8.3
|
Each Party will have access to all
information of the Company (and any subsidiary thereof) and may conduct the following,
without limitation: (a) review of detailed draft annual budgets and projections, submitted
at least one month before the beginning of each financial year; (b) review of detailed
unaudited financial statements and full detailed management information submitted on
a quarterly basis; (c) review of detailed annual audited financial statements, prepared
by a reputable accounting firm according to IFRS or GAAP within 120 days from the end
of each financial year; (d) review of such other information that such Party requests
to review; and (e) discuss the performance and operations of the Company and its subsidiaries
with the management of NBC, the administrative manager and the technical manager on a
quarterly basis.
|
|
|
9.1
|
Each Party hereby undertakes with
the other Party that during the continuance of this Agreement it shall not without the
prior written consent of the other Party mortgage, charge or otherwise encumber the whole
or any part of its shares or Shareholder Loans in the Company or assign or otherwise
purport to deal with the beneficial interest therein or any right relating thereto separate
from the legal ownership of such shares, except in accordance with the terms and conditions
of any Financing Agreement entered into between the Company and/or a Subsidiary and its
third party lenders (if applicable).
|
|
|
9.2
|
No Party may without the prior written
consent of the Party assign any of its rights or obligations under this Agreement which
is personal to the Parties.
|
|
|
10
|
Not a Partnership and No Restrictions
|
|
|
10.1
|
Nothing in this Agreement shall
create a partnership or establish a relationship of principal and agent or any other
relationship of a similar nature between or among the Parties.
|
|
|
10.2
|
The entering into of this Agreement
does not imply any restrictions on the other business activities of either Party. For
instance, each of the Parties shall (alone or together with any other of the Parties
or any third party) be free to purchase and operate vessels which may compete with the
Vessel(s). Similarly, each of the Parties is free to undertake on behalf of itself or
third parties the technical or commercial management of such vessels.
|
|
|
11.1
|
This Agreement shall come into force
immediately upon its execution.
|
|
|
11.2
|
This Agreement shall thereafter
continue until terminated in accordance with the provisions of clause 12 or until it
is expressly superseded by any amended shareholders agreement in respect of the Company.
|
|
|
12
|
Sale of Shares, Change of Control
and Termination
|
|
|
12.1
|
Unless otherwise agreed in writing
by all of the Parties, the Parties shall not sell, place encumbrances over, transfer
or otherwise dispose of, grant any options over, issue any debt which is convertible
into equity in or list on any stock exchange, any right, title or interest in the ordinary
shares or Shareholder Loans of the Company except in accordance with the provisions of
this clause 12.
|
|
|
12.2
|
Unless otherwise agreed in writing
by all of the Parties, if a Change of Control occurs in relation to any Party to this
Agreement, such Party (the "
Defaulting Party
") shall be deemed to be
in substantial breach of its obligations hereunder, and, pursuant to clause 12.7, the
non-defaulting Party shall be entitled to serve a Notice to Offer on the Defaulting Party
requiring such Defaulting Party to offer all of its shares and Shareholder Loans in the
Company to the non-defaulting Party due to a substantial breach of such Defaulting Party’s
obligations hereunder (which breach remains unremedied for a period of 15 (fifteen) days
from the date of any notice in writing requiring such breach to be remedied).
|
|
|
12.3
|
Unless otherwise agreed, each Party
can only sell all of their shares and Shareholder Loans in the Company in a single transaction.
Each Party may only sell all of its shares in the Company if in one and the same transaction
it also sells, transfers or otherwise assigns its Shareholder Loans in the Company. The
sale shall be effected as set forth in this clause 12.
|
|
|
12.4
|
In the event that a Party wishes
to sell all of its shares and Shareholder Loans in the Company, it shall be obliged to
offer in writing such shares and Shareholder Loans (the "
Sale Shares and Loans
")
to the other Party (the "
Offeree
") at a price equal to the Net Asset
Value of the Sale Shares and Loans (the "
Sale Price
").
|
The offer
shall:
|
|
(a)
|
be irrevocable and open for acceptance
by the Offeree
as at the date of receipt of the offer by the Offeree ("
Receipt
Date
"), for a period beginning on the Receipt Date and ending five (5) Business
Days after the earlier of (a) the date that the Parties reach an agreement on the price
of the Sale Shares and Loans pursuant to this clause 12.4 or (b) the date of issuance
of the auditors' opinion referred to in this clause 12.4 ("
Offer Period
");
|
|
|
(b)
|
be subject to the condition that
the Offeree must accept all (and not part only) of the Sale Shares and Loans; and
|
|
|
(c)
|
be subject to the condition that
the sale of the Sale Shares and Loans by the offering shareholder to the Offeree will
not trigger an event of default under a Financing Agreement,
|
At the option
of the offering shareholder, the offer may be subject to the suspensive condition that the offering shareholder and its direct
or indirect parent companies are released with immediate effect from any guarantees and indemnities that the offering shareholder
and its direct or indirect parent companies have provided to any third parties in respect of the obligations of the Company and
its Subsidiaries to third parties (the “
Optional Suspensive Condition
”).
|
|
(a)
|
The term "
Net Asset
Value
" shall be (a) such price as may be mutually agreed between the Parties,
or (b) failing agreement between the Parties, such price as the auditors of the Company
acting as experts (and not as arbitrators) shall certify to be in their opinion the net
asset value of the Sale Shares and Loans based on the then outstanding assets and liabilities
(excluding Shareholder Loans) of the Company and its Subsidiaries on a consolidated basis,
calculated as soon as practically possible and based on US GAAP accounting principles
and practices, provided that (i) the auditors shall be required to base their opinion
on the average of 3 (three) independent shipbrokers' valuations of the Vessels owned
by the Company and its Subsidiaries at the time of valuation, such valuation to be done
without physical inspection of the Vessels on the basis of willing seller/willing buyer
and including the value of any charterparty entered into by the Company and/or its Subsidiaries
relating to the Vessels, and (ii) all costs incurred in connection with the obtaining
of the auditors' opinion and the shipbrokers' valuations shall be borne by the offering
shareholder.
|
|
|
12.5
|
If (a) the Offeree accepts the entire
offer in respect of the Sale Shares and Loans prior to the end of the Offer Period and
(b) the offer is not subject to the Optional Suspensive Condition, the Sale Price shall
be paid for in cash by such Offeree to the offering shareholder (against receipt of the
un-encumbered Sale Shares and Loans) within 60 (sixty) days of the expiry of the Offer
Period, and the Offeree shall, subject to compliance to the terms of any Financing Agreement
in effect at the relevant time, (i) use commercially reasonable efforts to (a) ensure
that the offering shareholder and its direct or indirect parent companies are released
with immediate effect from any guarantees and indemnities that the offering shareholder
and its direct or indirect parent companies have provided to any third parties in respect
of the obligations of the Company and its Subsidiaries to third parties, and (b) obtain
all necessary consents in respect of same, and (ii) ensure that if BFB is the offering
shareholder, the Commercial Management Agreement and the Company Management Agreement
shall be terminated with immediate effect. The offering shareholder shall, upon the request
of the other Party and without further consideration, perform all actions in a reasonable
and timely manner which are required to effect the contract terminations in accordance
with sub-clauses (i) and (ii). If the Offeree is unable to procure that the offering
shareholder and its direct or indirect parent companies are released with immediate effect
from any guarantees and indemnities that the offering shareholder and its direct or indirect
parent companies have provided to any third parties in respect of the obligations of
the Company and its Subsidiaries to third parties, then the remaining Shareholder and
its respective direct or indirect parent companies (as outlined in clause 3.7 for the
Parties as of the date hereof) shall unconditionally and irrevocably indemnify the offering
Shareholder for any amounts it or its direct or indirect parent companies pay in relation
to any guarantees or indemnities that the offering shareholder or its direct or indirect
parent companies have provided to any third parties in respect of the obligations of
the Company and its Subsidiaries.
|
|
|
12.6
|
If (a) the Offeree accept the entire
offer in respect of the Sale Shares and Loans prior to the end of the Offer Period, (b)
the offer is subject to the Optional Suspensive Condition, and (c) the Offeree has procured
that the offering shareholder and its direct or indirect parent companies are released
with immediate effect from any guarantees and indemnities that the offering shareholder
and its direct or indirect parent companies have provided to any third parties in respect
of the obligations of the Company and its Subsidiaries to third parties, the Sale Price
shall be paid for in cash by the Offeree to the offering shareholder (against receipt
of the un-encumbered Sale Shares and Loans) within 60 (sixty) days of the expiry of the
Offer Period, and the Offeree shall ensure that if BFB is the offering shareholder, the
Commercial Management Agreement and the Company Management Agreement shall be terminated
with immediate effect. The offering shareholder shall, upon the request of the other
Party and without further consideration, perform all actions in a reasonable and timely
manner which are required to effect such contract terminations.
|
|
|
12.7
|
In the event that a Party or such
Party’s Affiliates shall be in substantial breach of its obligations hereunder,
including, for the avoidance of doubt, the occurrence of a Change of Control in relation
to a Party or in respect of the Commercial Management Agreement or the Company Management
Agreement (which breach remains unremedied for a period of 15 (fifteen) days from the
date of any notice in writing requiring such breach to be remedied), the non-defaulting
Party shall be entitled to serve a notice in writing on the Party who has defaulted or
whose affiliate has defaulted (the "
Defaulting Party
") requiring such
Defaulting Party to offer its shares and Shareholder Loans in the Company to the non-defaulting
Party at a price equivalent to eighty percent (80%) of their Net Asset Value (as defined
in clause 12.4) but otherwise on the terms and conditions set out in clause 12 (the "
Notice
to Offer
"). If the Defaulting Party fails for any reason whatsoever to offer
its shares and Shareholder Loans in the Company in the manner described above, the Defaulting
Party shall be deemed to have given such offer to the non-defaulting Party on the expiration
of 15 (fifteen) days from the receipt of the written Notice to Offer from the non-defaulting
Party referred to above.
|
|
|
13.1
|
In this Agreement, "
Deadlock
"
means a situation in which:
|
|
|
|
|
|
|
(a)
|
any matter has been proposed
by a Party to the other Party which constitutes a Reserved Policy Matter, and at the
expiry of 15 days after such Reserved Policy Matter is proposed, it has not been approved
in accordance herewith or withdrawn; and
|
|
|
(b)
|
a Party has given notice to
the other Party within 20 days following the end of the period referred to in subparagraph
(a) above informing the other Party that it wishes to implement the Deadlock procedure
and specifying the matter giving rise to the Deadlock situation (a "
Deadlock
Notice
").
|
|
|
13.2
|
Following delivery of a Deadlock
Notice:
|
|
|
(a)
|
the Parties shall, within 10
Business Days following the delivery of the Deadlock Notice, meet to discuss the Deadlock
in good faith in an effort to reach agreement on the matter giving rise to the Deadlock
within a further 10 Business Days (the "
Negotiation Period
");
|
|
|
(b)
|
if no agreement is reached during
the Negotiation Period, then at any time during the 180 (one hundred and eighty) day
period after the expiry of the Negotiation Period, a Party (the "
Server
")
shall be entitled, but shall not be obliged, to deliver a written offer (the "
Deadlock
Offer
") on the other Party (the "
Recipient
") setting out a
price at which the Server is willing either to sell all, but not part, of the Company’s
shares and Shareholder Loans held by the Server, or to buy all, but not part, of the
Company’s shares and Shareholder Loans held by the Recipient (the "
Deadlock
Price
"), accompanied by (a) a banker’s guarantee, standby letter of credit
or other form of proof of available funds for such offer and (b) reasonable written proof
that the Server can procure the release of any guarantees and indemnities that the Recipient
and its direct or indirect parent companies have provided to any third parties in respect
of the obligations of the Company and its Subsidiaries to third parties, to the extent
that the Recipient chooses to sell its shares and Shareholder Loans to the Server. So
long as that Deadlock Offer is not revoked, any Deadlock Offer subsequently served by
the Recipient on the Server shall be deemed null and void. At any time within 15 (fifteen)
days of the service of the Deadlock Offer (the "
Deadlock Offer Period
"),
the Recipient must by written notice either:
|
|
|
(i)
|
sell all, and not part only,
of the Company’s shares and Shareholder Loans held by the Recipient at the Deadlock
Price, and on such reasonable terms and conditions as determined by the Recipient and
set out in the Recipient’s notice letter (the "
Recipient Acceptance
"),
including that the Server shall procure the release of any guarantees and indemnities
that the Recipient and its direct or indirect parent companies have provided to any third
parties in respect of the obligations of the Company and its Subsidiaries to third parties;
or
|
|
|
(ii)
|
purchase all, and not part
only, of the Company’s shares and Shareholder Loans held by the Server at the Deadlock
Price, and on such terms and conditions as set out in the Recipient’s notice letter
which shall be accompanied by (a) a banker’s guarantee, standby letter of credit
or other form of proof of available funds for such offer and (b) reasonable written proof
that the Recipient can procure the release of any guarantees and indemnities that the
Server and its direct or indirect parent companies have provided to any third parties
in respect of the obligations of the Company and its Subsidiaries to third parties, each
reasonably acceptable to the Server (the "
Recipient Purchase Right
");
|
|
|
(c)
|
in the case of a Recipient Acceptance,
the Server shall, within 15 (fifteen) days after such notice from the Recipient served
on the Server, (i) purchase the Company’s shares and Shareholder Loans held by
the Recipient and shall pay the Recipient an amount equal to the Deadlock Price (for
the avoidance of doubt, the transfer of the shares and Shareholder Loans will not close
until all of the relevant contract terminations in sub-clauses (ii) and (iii) below have
been completed in full), (ii) (a) ensure that the Recipient and its direct or indirect
parent companies are released from any guarantees and indemnities that the Recipient
and its direct or indirect parent companies have provided to third parties in respect
of the obligations of the Company and its Subsidiaries, and (b) obtain all necessary
consents in respect of same, and (iii) ensure that, if BFB is the selling shareholder,
the Commercial Management Agreement and the Company Management Agreement shall be terminated
with immediate effect. The Recipient shall, upon the request of the Server and without
further consideration, perform all actions in a reasonable and timely manner which are
required to effect the contract terminations in accordance with sub-clauses (ii) and
(iii) above; and
|
|
|
(d)
|
in the case of a Recipient Purchase
Right, the Recipient shall, within 15 (fifteen) days after such notice from the Recipient
served on the Server, (i) purchase the Company’s shares held by the Server and
shall pay the Server an amount equal to the Deadlock Price (for the avoidance of doubt,
the transfer of the shares and Shareholder Loans will not close until all of the relevant
contract terminations in sub-clauses (ii) and (iii) below have been completed in full),
(ii) (a) ensure that the Server and its direct or indirect parent companies are released
from any guarantees and indemnities that the Server and its direct or indirect parent
companies have provided to financial institutions in respect of the Company’s third
party debt obligations, and (b) obtain all necessary consents in respect of same, and
(iii) ensure that, if BFB is the selling shareholder, the Commercial Management Agreement
and the Company Management Agreement shall be terminated with immediate effect. The Server
shall, upon the request of the Recipient and without further consideration, perform all
actions in a reasonable and timely manner which are required to effect the contract terminations
in accordance with sub-clauses (ii) and (iii).
|
|
|
14
|
Agreement to Override the Articles
|
|
|
14.1
|
In so far as any provision of this
Agreement shall conflict or be inconsistent with any of the provisions of the by-laws
of the Company or a Subsidiary, the provisions of this Agreement shall prevail over such
by-laws, and the Parties shall (on the request of any of them) procure that such by-laws
are amended to accord with the provisions of this Agreement.
|
|
|
15.1
|
Any notice or other document to
be given under this Agreement shall be in writing and shall be deemed duly given if sent
by email followed by recorded delivery post to the respective addresses shown below.
Any such notice shall be deemed to be served at the time when the same is delivered to
the office of the party to be served or on the third business day following the day of
posting.
|
|
|
15.2
|
The contact details of BFB are
as follows
:
|
Bulk Fleet
Bermuda Holding Company Limited
Third Floor, Par La Ville Place
14 Par La Ville Road
Hamilton, HM08
Bermuda
Attention:
Company Secretary
Telephone: +1(0) 441-295-8313
Fax: +1(0)
441-292-1373
Email: sdurrant@consolidated.bm
The contact
details of STST are as follows
:
ST Shipping
and Transport Pte. Ltd
Millenia Tower #34-01
1 Temasek Avenue
Singapore 39192
Attention: Coal Freight Department
Telephone: +65 6415 7700
Fax: +65 6235
7219
Email: tommy.lund@stshipping.com,
baar.coalnotices@glencore.com
with a copy
to:
Glencore International
AG
Baarermattstrasse 3
CH-6341 Baar
Switzerland
Attention: Coal
Department
Telephone: +41 41 709 2000
Fax: +41 41
709 3000
Email: baar.coalnotices@glencore.com;
matthew.weber@glencore.com; angus.paul@glencore.com
|
|
16
|
Announcements and Circulars
|
|
|
16.1
|
The Parties agree to keep the subject
matter of this Agreement strictly private and confidential and, accordingly, no press
or other announcement shall be made in connection with the subject matter of this Agreement
by any Party without the prior written approval of the other Party. For the avoidance
of doubt, NBC shall be entitled to market the Vessels as within their fleet but without
mentioning the Parties.
|
|
|
17.1
|
If a Vessel owned by the Company
or a Subsidiary becomes an actual or contructive total loss, then the insurance proceeds
in respect of that total loss paid to the Company or a Subsidiary shall be applied in
or towards repayment of any outstanding indebtedness to the lender (if a financing or
loan is in place) attributable to the Vessel that is the subject of the total loss.
|
|
|
17.2
|
Any debts remaining in the Company
or a Subsidiary after attributing the insurance proceeds as per clause 17.1 hereof shall
be repaid by the Parties in proportion to their then outstanding shareholding percentages
in the Company.
|
|
|
17.3
|
Any surplus remaining following
the application of the insurance proceeds as contemplated in clause 17.1 shall be distributed
to the Parties in proportion to their shareholding in case of termination of the Company
in accordance with clause 12, or reinvested in the Company in such manner as the Parties
may agree.
|
No Party
shall, in any circumstances be liable to the other Party for any special, indirect or consequential loss, including any loss of
profit, loss of revenue, loss of use or loss of contract arising out of a breach of any of the terms of this Agreement, including
without limitation any breach of any representation or warranty contained in this Agreement.
|
|
19
|
Entire Agreement and Amendments
|
This Agreement
sets forth the entire agreement and understanding among the Parties in relation to the Company, and no Party has relied on any
warranty or representation of the other Party except as expressly stated or referred to in this Agreement. This Agreement (and
for the avoidance of doubt, this Clause 19 as well) may only be modified, amended or changed in any respect with the agreement
of all Parties, in writing and duly signed.
Without
prejudice to clause 21, the Parties agree that they will endeavour to settle any disputes between them during open and friendly
negotiations, taking into account the business interests of all Parties.
|
|
21
|
Governing Law and Dispute Resolution
|
|
|
21.1
|
This Agreement and all contractual
and/or non-contractual obligations arising out of or in connection with it shall be governed
by and construed in accordance with English law.
|
|
|
21.2
|
The Parties irrevocably agree that
the
High Court
of
London
located in London
is
to have
exclusive jurisdiction to settle any dispute which may arise out of or in connection
with this Agreement and the documents to be entered into pursuant to it. The Parties
irrevocably submit to the jurisdiction of such courts and waive any objection to proceedings
in any such court on the ground of venue or on the ground that the proceedings have been
brought in an inconvenient forum.
|
|
|
21.3
|
Each of the Parties hereby irrevocably
and unconditionally appoints the person indicated in clause 21.4 to act as its agent
to accept service of process in England in relation to all matters arising out of this
Agreement. Without limitation, upon any other available means of service of process of
any kind, any writ, judgement or other notice of legal process shall be sufficiently
served on a Party hereto if delivered to such agent. If the appointment of an agent appointed
by a Party for the purpose of this clause 21.3 shall cease for any reason, the relevant
Party shall promptly appoint another such agent and notify the other Party of such appointment
providing that any agent appointed hereunder shall be a company incorporated in England
or a law firm authorised to practise in England.
|
|
|
21.4
|
For the purposes of Clause 21.3:
|
|
|
(a)
|
BFB appoints:
|
MFB Solicitors
|
|
|
|
|
Fishmongers' Chambers
|
|
|
|
|
1 Fishmongers' Hall Wharf
|
|
|
London EC4R 3AE
|
|
|
Attn: Mr. Andrew Wright
|
|
|
Tel: +44 (0) 207 330 8000
|
|
|
Fax: +44 (0) 207 256 6778
|
|
|
(b)
|
STST appoints:
|
Glencore UK Ltd
|
|
|
|
|
50 Berkeley Street
|
|
|
|
|
London W1J 8HD
|
|
|
|
|
England
|
|
|
Attn: Legal Department
|
|
|
Tel: +41 41 709 2000
|
|
|
Fax: +41 41 709 3000
|
This Agreement
may be signed in counterparts, and all such counterparts taken together shall constitute one integrated Agreement.
(remainder of page
intentionally left blank)
IN WITNESS WHEREOF
this Agreement
has been executed and delivered by a duly authorized representative of each of the Parties on the day and year first above written.
SHAREHOLDERS OF THE COMPANY
ST SHIPPING AND TRANSPORT PTE. LTD.
Signed by
____________________
for and on behalf of
ST Shipping and Transport Pte. Ltd.
BULK FLEET BERMUDA HOLDING COMPANY
LIMITED
Signed by
_____________________, director
for and on behalf of
Bulk Fleet Bermuda Holding Company
Limited
ACKNOWLEDGED AND AGREED (FOR THE PURPOSES
OF THE CLAUSES MENTIONED BELOW) AS
OF THIS 29
th
DAY OF NOVEMBER,
2013:
BULK PARTNERS (BERMUDA) LIMITED
(for the purposes of Clauses 1.1, 3.7, 3.8, 12.7 and 16.1)
Signed by
___________________, director
for and on behalf of
Bulk Partners (Bermuda) Limited
GLENCORE INTERNATIONAL AG
(for
the purposes of Clauses 1.1, 3.7, 3.8, 12.7 and 16.1)
Signed by
___________________
for and on behalf of
Glencore International AG
____________________
for and on behalf of
Glencore International AG
GLENCORE XSTRATA PLC
(for the purposes
of Clauses 1.1, 3.7, 3.8, 12.7 and 16.1)
Signed by
___________________
for and on behalf of
Glencore Xstrata plc
____________________
for and on behalf of
Glencore Xstrata plc
Exhibit 15.1
Pangaea Logistics Solutions Ltd.
109 Long Wharf
Newport, RI 02840
We have reviewed, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the unaudited interim financial information of Pangaea Logistics Solutions
Ltd. for the three- and nine-month periods ended September 30, 2014 and 2013, as indicated in our report dated November 14, 2014;
because we did not perform an audit, we expressed no opinion on that information.
We are aware that our report referred to above is being used
in this Registration Statement of Pangaea Logistics Solutions Ltd. on Form S-1.
We also are aware that the aforementioned report, pursuant to
Rule 436(c) under the Securities Act of 1933, is not considered a part of the Registration Statement prepared or certified by an
accountant within the meaning of Sections 7 and 11 of that Act.
/s/ GRANT THORNTON
Boston, Massachusetts
February 4, 2015
Exhibit 15.2
Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549
February 4, 2015
Commissioners:
We are aware that our report dated
November 13, 2014 on our review of the interim financial statement of Nordic Bulk Holding ApS (the “Company”) for
the three and nine month periods ended September 30, 2014 and September 30, 2013, are included in this Registration Statement
of Pangaea Logistics Solutions Ltd., on Form S-1.
Very truly yours,
/s/ PricewaterhouseCoopers
Statsautoriseret Revisionspartnerselskab
PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab,
CVR No 33 77 12 31
Strandvejen 44, DK-2900 Hellerup
T: +45 3945 3945, F: +45 3945 3987, www.pwc.dk
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have issued our report dated May 5, 2014, with respect to
the consolidated financial statements of Pangaea Logistics Solutions Ltd. (f/k/a Bulk Partners (Bermuda) Ltd.) contained in the
Registration Statement and Prospectus. We consent to the use of the aforementioned report in the Registration Statement and Prospectus,
and to the use of our name as it appears under the caption "Experts."
/s/ GRANT THORNTON
Boston, MA
February 4, 2015
Exhibit 23.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
We hereby consent to the use in this
Registration Statement on Form S-1 of Pangaea Logistics Solutions Ltd. of our report
dated April 18
2014 relating to the financial statements of Nordic Bulk Holding ApS, which appears in such Registration Statement. We
also consent to the reference to us under the heading “Experts”
in
such Registration Statement.
/s/ PricewaterhouseCoopers
Statsautoriseret Revisionspartnerselskab
Copenhagen, Denmark
February 4, 2015
PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab,
CVR-nr. 33 77 12 31
Strandvejen 44, 2900 Hellerup
T: 3945 3945, F: 3945 3987, www.pwc.dk
