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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM 20-F

 

(Mark One)

 

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

  
 

OR

  

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

  

For the fiscal year ended December 31, 2021

  
 

OR

  

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

  

For the transition period from _________________ to _________________

  
 

OR

  

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

  

Date of event requiring this shell company report _________________

 

Commission file number 001-37889

 

TOP SHIPS INC.

(Exact name of Registrant as specified in its charter)

 
 

(Translation of Registrant’s name into English)

 

Republic of the Marshall Islands

(Jurisdiction of incorporation or organization)

 

1 Vasilisis Sofias and Megalou Alexandrou Str, 15124 Maroussi, Greece

(Address of principal executive offices)

 

Alexandros Tsirikos, (Tel) +30 210 812 8107, info@topships.org

1 Vasilisis Sofias and Megalou Alexandrou Str, 15124 Maroussi, Greece

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

 

 

1

 

 

Securities registered or to be registered pursuant to Section 12(b) of the Act.

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange

on which registered

Common Stock, par value $0.01 per share

 

TOPS

 

Nasdaq Capital Market

Preferred Stock Purchase Rights

   

Nasdaq Capital Market

 

Securities registered or to be registered pursuant to Section 12(g) of the Act.

 

NONE

(Title of class)

 

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

 

NONE

(Title of class)

 

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

 

As of December 31, 2021, 39,831,972 shares of common stock, par value $0.01 per share, 100,000 Series D Preferred Shares, par value $0.01 per share, and 13,452 Series E Preferred Shares, par value $0.01 per share, were outstanding.

 

Indicate by check mark if the registrant is well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

 

Yes

No

 

 

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

 

Yes

No

 

 

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Yes

No

 

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Sec.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

 

Yes

No

 

 

2

 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer  ☐

Accelerated filer  ☒

Non-accelerated filer  ☐

Emerging growth company ☐

 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

 

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

 

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

 

U.S. GAAP

International Financial Reporting Standards as issued by the International Accounting Standards Board

Other

 

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:

 

 

Item 17

Item 18

 

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Yes

No

 

 

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

 

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

 

Yes

No

 

 

3

 

 

 

TABLE OF CONTENTS

 

PART I

     

6

ITEM 1.

 

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

 

6

ITEM 2.

 

OFFER STATISTICS AND EXPECTED TIMETABLE

 

6

ITEM 3.

 

KEY INFORMATION

 

6

ITEM 4.

 

INFORMATION ON THE COMPANY

 

31

ITEM 4A.

 

UNRESOLVED STAFF COMMENTS

 

46

ITEM 5.

 

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

 

46

ITEM 6.

 

DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

 

55

ITEM 7.

 

MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

 

58

ITEM 8.

 

FINANCIAL INFORMATION.

 

61

ITEM 9.

 

THE OFFER AND LISTING.

 

62

ITEM 10.

 

ADDITIONAL INFORMATION

 

62

ITEM 11.

 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

76

ITEM 12.

 

DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

 

76

PART II

     

76

ITEM 13.

 

DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

 

76

ITEM 14.

 

MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

 

76

ITEM 15.

 

CONTROLS AND PROCEDURES

 

77

ITEM 16.

 

Reserved

 

79

ITEM 16A.

 

AUDIT COMMITTEE FINANCIAL EXPERT

 

79

ITEM 16B.

 

CODE OF ETHICS

 

79

ITEM 16C.

 

PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

79

ITEM 16D.

 

EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

 

79

ITEM 16E.

 

PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

 

79

ITEM 16F.

 

CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

 

79

ITEM 16G.

 

CORPORATE GOVERNANCE

 

80

ITEM 16H.

 

MINE SAFETY DISCLOSURE

 

80

ITEM 16I.   DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS   80

PART III

     

80

ITEM 17.

 

FINANCIAL STATEMENTS

 

80

ITEM 18.

 

FINANCIAL STATEMENTS

 

80

ITEM 19.

 

EXHIBITS

 

80

 

 

4

 

 

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

Matters discussed in this report may constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995, or the PSLRA, provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are statements other than statements of historical facts.

 

TOP Ships Inc. desires to take advantage of the safe harbor provisions of the PSLRA and is including this cautionary statement in connection with this safe harbor legislation. This annual report and any other written or oral statements made by us or on our behalf may include forward-looking statements, which reflect our current views with respect to future events and financial performance. When used in this annual report, statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as “anticipate,” “believe,” “expect,” “intend,” “estimate,” “forecast,” “project,” “plan,” “potential,” “continue,” “possible,” “likely,” “may,” “should,” and similar expressions identify forward-looking statements.

 

The forward-looking statements in this annual report are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management’s examination of historical operating trends, data contained in our records and other data available from third parties. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies that are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs or projections.

 

In addition to these assumptions and matters discussed elsewhere herein and in the documents incorporated by reference herein, important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the following:

 

 

our ability to maintain or develop new and existing customer relationships with major refined product importers and exporters, major crude oil companies and major commodity traders, including our ability to enter into long-term charters for our vessels;

 

 

our future operating and financial results;

 

 

our future vessel acquisitions, our business strategy and expected and unexpected capital spending or operating expenses, including any dry-docking, crewing, bunker costs and insurance costs;

 

 

our financial condition and liquidity, including our ability to obtain financing in the future to fund capital expenditures, acquisitions and other general corporate activities;

 

 

oil and chemical tanker industry trends, including fluctuations in charter rates and vessel values and factors affecting vessel supply and demand;

 

 

our ability to take delivery of, integrate into our fleet, and employ any newbuildings we may acquire or order in the future and the ability of shipyards to deliver vessels on a timely basis;

 

 

the aging of our vessels and resultant increases in operation and dry-docking costs;

 

 

the ability of our vessels to pass classification inspections and vetting inspections by oil majors and big chemical corporations;

 

 

significant changes in vessel performance, including increased vessel breakdowns;

 

 

the creditworthiness of our charterers and the ability of our contract counterparties to fulfill their obligations to us;

 

 

our ability to repay outstanding indebtedness, to obtain additional financing and to obtain replacement charters for our vessels, in each case, at commercially acceptable rates or at all;

 

 

changes to governmental rules and regulations or actions taken by regulatory authorities and the expected costs thereof;

 

 

our ability to comply with additional costs and risks related to our environmental, social and governance policies;

 

 

potential liability from litigation and our vessel operations, including discharge of pollutants;

 

 

changes in general economic and business conditions;

 

 

general domestic and international political conditions, potential disruption of shipping routes due to accidents, political events, including “trade wars,” piracy or acts by terrorists;

 

5

 

 

changes in production of or demand for oil and petroleum products and chemicals, either globally or in particular regions;

 

 

the strength of world economies and currencies, including fluctuations in charterhire rates and vessel values;

 

 

potential liability from future litigation and potential costs due to any environmental damage and vessel collisions;

 

 

the length and severity of epidemics and pandemics, including the ongoing global outbreak of the novel coronavirus (“COVID-19”) and its impact on the demand for commercial seaborne transportation and the condition of the financial markets; and

 

 

and other important factors described from time to time in the reports filed by us with the U.S. Securities and Exchange Commission, or the SEC.

 

You should not place undue reliance on forward-looking statements contained in this annual report because they are statements about events that are not certain to occur as described or at all. All forward-looking statements in this annual report are qualified in their entirety by the cautionary statements contained in this annual report.

 

Any forward-looking statements contained herein are made only as of the date of this annual report, and except to the extent required by applicable law or regulation we undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict all or any of these factors. Further, we cannot assess the impact of each such factor on our business or the extent to which any factor, or combination of factors, may cause actual results to be materially different from those contained in any forward-looking statement.

 

PART I

 

ITEM 1.         IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

 

Not Applicable.

 

ITEM 2.         OFFER STATISTICS AND EXPECTED TIMETABLE

 

Not Applicable.

 

ITEM 3.         KEY INFORMATION

 

Unless the context otherwise requires, as used in this annual report, the terms “Company,” “we,” “us,” and “our” refer to TOP Ships Inc. and all of its subsidiaries, and “TOP Ships Inc.” refers only to TOP Ships Inc. and not to its subsidiaries. We use the term deadweight ton, or dwt, in describing the size of vessels. Dwt, expressed in metric tons each of which is equivalent to 1,000 kilograms, refers to the maximum weight of cargo and supplies that a vessel can carry.  References to our “Fleet Manager” or “CSI” are to Central Shipping Inc, a related party of ours, which performs the day-to-day management of our fleet. Throughout this annual report, the conversion from Euros, or €, to U.S. dollars, or $, is based on the U.S. dollar/Euro exchange rate of 0.8794 as of December 31, 2021, unless otherwise specified.

 

A.         Reserved

 

B.         Capitalization and Indebtedness

 

Not Applicable.

 

C.         Reasons for the Offer and Use of Proceeds

 

Not Applicable.

 

D.         Risk Factors

 

The following risks relate principally to the industry in which we operate and our business in general. Any of these risk factors could materially and adversely affect our business, financial condition or operating results and the trading price of our common shares.

 

Summary of Risk Factors

 

 

The international tanker industry has historically been both cyclical and volatile and this may lead to reductions and volatility in our charter rates, our vessel values, our revenues, earnings and cash flow results.

 

6

 

 

Our financial results may be adversely affected by the ongoing outbreak of COVID-19, and the related governmental responses thereto.

 

 

Outbreaks of epidemic and pandemic diseases and governmental responses thereto could adversely affect our business

 

 

The international oil tanker industry has experienced volatile charter rates and vessel values and there can be no assurance that these charter rates and vessel values will not decrease in the near future.

 

 

Volatile economic conditions throughout the world could have an adverse impact on our operations and financial results.

 

 

The current state of the global financial markets and current economic conditions may adversely impact our results of operation, financial condition, cash flows and ability to obtain financing or refinance our existing and future credit facilities on acceptable terms, which may negatively impact our business.

 

 

Volatility of LIBOR and potential changes of the use of LIBOR as a benchmark could affect our profitability, earnings and cash flow.

 

 

We are subject to complex laws and regulations, including environmental regulations that can adversely affect the cost, manner or feasibility of doing business.

 

 

We are subject to international safety regulations and requirements imposed by classification societies 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.

 

 

Climate change and greenhouse gas restrictions may adversely impact our operations and markets.

 

 

Our vessels may suffer damage due to the inherent operational risks of the tanker industry and we may experience unexpected dry-docking costs, which may adversely affect our business and financial condition.

 

 

The market value of our vessels, and those we may acquire in the future, may fluctuate significantly, which could cause us to incur losses if we decide to sell them following a decline in their market values or we may be required to write down their carrying value, which will adversely affect our earnings.

 

 

An over-supply of tanker capacity may lead to reductions in charter hire rates and profitability.

 

 

If our vessels call on ports located in countries or territories that are the subject of sanctions or embargoes imposed by the U.S. government or other governmental authorities, it could lead to monetary fines or adversely affect our business, reputation and the market for our common shares.

 

 

Political instability, terrorist or other attacks, war, international hostilities and public health threats can affect the tanker industry, which may adversely affect our business.

 

 

The U.K.’s withdrawal from the European Union may have a negative effect on global economic conditions, financial markets and our business.

 

 

Acts of piracy on ocean-going vessels could adversely affect our business.

 

 

An economic slowdown or changes in the economic and political environment in the Asia Pacific region could have a material adverse effect on our business, financial condition and results of operations.

 

 

Increased inspection procedures and tighter import and export controls could increase costs and disrupt our business.

 

 

We rely on our information systems to conduct our business, and failure to protect these systems against security breaches could adversely affect our business and results of operations. Additionally, if these systems fail or become unavailable for any significant period of time, our business could be harmed.

 

 

Our financing facilities contain restrictive covenants that may limit our liquidity and corporate activities, and could have an adverse effect on our financial condition and results of operations.

 

 

Servicing current and future debt, including financings committed under sale and leaseback (“SLB”) agreements, will limit funds available for other purposes and impair our ability to react to changes in our business.

 

 

Our President, Chief Executive Officer and Director has significant influence over us, and a trust established for the benefit of his family may be deemed to beneficially own, directly or indirectly, 100% of our Series D and our Series E Preferred Shares, and an affiliate of his may be deemed to beneficially own 100% our Series F Preferred Shares, and thereby to control the outcome of matters on which our shareholders are entitled to vote.

 

 

We have been subject to litigation in the past and we may be subject to similar or other litigation in the future.

 

 

As of the date of this annual report our operating fleet consists of eight tankers. Any limitation in the availability or operation of these vessels could have a material adverse effect on our business, results of operations and financial condition.

 

 

We expect to be dependent on a limited number of customers for a large part of our revenues, and failure of such counterparties to meet their obligations could cause us to suffer losses or negatively impact our results of operations and cash flows.

 

7

 

 

If we fail to manage our planned growth properly, we may not be able to successfully expand our market share.

 

 

Delays or defaults by the shipyards in the construction of newbuildings could increase our expenses and diminish our net income and cash flows.

 

 

Our ability to obtain additional debt financing may be dependent on our ability to charter our vessels, the performance of our charters and the creditworthiness of our charterers.

 

 

The industry for the operation of tanker vessels and the transportation of oil, petroleum products and chemicals is highly competitive and we may not be able to compete for charters with new entrants or established companies with greater resources.

 

 

A limited number of financial institutions hold our cash.

 

 

We may be unable to attract and retain key management personnel and other employees in the international tanker shipping industry, which may negatively impact the effectiveness of our management and our results of operations.

 

 

If labor interruptions are not resolved in a timely manner, they could have a material adverse effect on our business, results of operations, cash flows, financial condition and available cash.

 

 

If we expand our business, we will need to improve our operations and financial systems and staff; if we cannot improve these systems or recruit suitable employees, our performance may be adversely affected.

 

 

A drop in spot charter rates may provide an incentive for some charterers to default on their charters, which could affect our cash flow and financial condition.

 

 

An increase in operating costs could decrease earnings and available cash.

 

 

The aging of our fleet may result in increased operating costs in the future, which could adversely affect our earnings.

 

 

Unless we set aside reserves or are able to borrow funds for vessel replacement, our revenue will decline at the end of a vessel’s useful life, which would adversely affect our business, results of operations and financial condition.

 

 

Purchasing and operating secondhand vessels may result in increased operating costs and vessels off-hire, which could adversely affect our earnings.

 

 

We may not have adequate insurance to compensate us if we lose any vessels that we acquire.

 

 

We may be subject to increased premium payments, or calls, as we obtain some of our insurance through protection and indemnity associations.

 

 

Increasing scrutiny and changing expectations from investors, lenders and other market participants with respect to our Environmental, Social and Governance (“ESG”) policies may impose additional costs on us or expose us to additional risks.

 

 

Technological innovation and quality and efficiency requirements from our customers could reduce our charter hire income and the value of our vessels.

 

 

The smuggling of drugs or other contraband onto our vessels may lead to governmental claims against us.

 

 

Maritime claimants could arrest our vessels or vessels we acquire, which could interrupt our cash flow.

 

 

Governments could requisition our vessels or vessels we acquire during a period of war or emergency, resulting in loss of earnings.

 

 

U.S. federal tax authorities could treat us as a “passive foreign investment company,” which could have adverse U.S. federal income tax consequences to U.S. shareholders.

 

8

 

 

We are subject to U.S. federal income tax on our U.S. source income, which will reduce our earnings.

 

 

We are a “foreign private issuer,” which could make our common shares less attractive to some investors or otherwise harm our stock price.

 

 

Our share price may continue to be highly volatile, which could lead to a loss of all or part of a shareholder’s investment.

 

 

There is no guarantee of a continuing public market for you to resell our common shares.

 

 

Nasdaq may delist our common shares from its exchange which could limit your ability to make transactions in our securities and subject us to additional trading restrictions.

 

 

We have issued common shares in the past through various transactions. Shareholders may experience significant dilution as a result of our offerings.

 

 

Future issuances or sales, or the potential for future issuances or sales, of our common shares may cause the trading price of our securities to decline and could impair our ability to raise capital through subsequent equity offerings.

 

 

Future issuance of common shares may trigger anti-dilution provisions in our Series E Preferred Shares and affect the interests of our common shareholders.

 

 

We are incorporated in the Republic of the Marshall Islands, which does not have a well-developed body of corporate law and as a result, shareholders may have fewer rights and protections under Marshall Islands law than under a typical jurisdiction in the United States.

 

 

It may not be possible for investors to serve process on or enforce U.S. judgments against us.

 

 

Our By-laws provide that the High Court of the Republic of Marshall Islands shall be the sole and exclusive forum for certain disputes between us and our shareholders, which could limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.

 

 

We may not achieve the intended benefits of having a forum selection provision if it is found to be unenforceable.

 

 

Anti-takeover provisions in our organizational documents could have the effect of discouraging, delaying or preventing a merger, amalgamation or acquisition, which could reduce the market price of our common shares.

 

 

We are dependent on our Fleet Manager to perform the day-to-day management of our fleet.

 

 

Our Fleet Manager is a privately held company and there may be limited or no publicly available information about it.

 

 

Our Fleet Manager may have conflicts of interest between us and its other clients.

 

RISKS RELATED TO OUR INDUSTRY

 

The international tanker industry has historically been both cyclical and volatile and this may lead to reductions and volatility in our charter rates, our vessel values, our revenues, earnings and cash flow results.

 

The international tanker industry in which we operate is cyclical, with attendant volatility in charter hire rates, vessel values and industry profitability. For tanker vessels, the degree of charter rate volatility has varied widely. Please see “—The international oil tanker industry has experienced volatile charter rates and vessel values and there can be no assurance that these charter rates and vessel values will not decrease in the near future.” Currently, all of our vessels are employed on time charters. However, changes in spot rates and time charter rates can affect the revenues we receive from operations in the event our charterers default or seek to renegotiate the charter hire, as well as the value of our vessels, even if our vessels are employed under long-term time charters. Our ability to re-charter our vessels on the expiration or termination of their time or bareboat charters and the charter rates payable under any renewal or replacement charters will depend upon, among other things, economic conditions in the tanker markets and several other factors outside of our control. If we enter into a charter when charter rates are low, our revenues and earnings will be adversely affected. A decline in charter hire rates will also likely cause the value of our vessels to decline.

 

Fluctuations in charter rates and vessel values result from changes in the supply and demand for vessels and changes in the supply and demand for oil, chemicals and other liquids our vessels carry. Factors affecting the supply and demand for our vessels are outside of our control and are unpredictable. The nature, timing, direction and degree of changes in the tanker industry conditions are also unpredictable.

 

9

 

Factors that influence demand for tanker vessel capacity include:

 

 

supply and demand for oil, petroleum products and chemicals carried;

 

 

changes in oil production and refining capacity resulting in shifts in trade flows for oil products;

 

 

the distance oil, petroleum products and chemicals are to be moved by sea;

 

 

global and regional economic and political conditions, including “trade wars” and developments in international trade, national oil reserves policies, fluctuations in industrial and agricultural production, armed conflicts and work stoppages;

 

 

increases in the production of oil in areas linked by pipelines to consuming areas, the extension of existing, or the development of new pipeline systems in markets we may serve, or the conversion of existing non-oil pipelines to oil pipelines in those markets;

 

 

environmental and other legal and regulatory developments;

 

 

economic slowdowns caused by public health events such as the ongoing COVID-19 pandemic;

 

 

currency exchange rates;

 

 

weather, natural disasters and other acts of God;

 

 

competition from alternative sources of energy, other shipping companies and other modes of transportation; and

 

 

international sanctions, embargoes, import and export restrictions, nationalizations, piracy and wars or other conflicts, including the war in Ukraine.

 

The factors that influence the supply of tanker capacity include:

 

 

the number of newbuilding deliveries;

 

 

current and expected newbuilding orders for vessels;

 

 

the scrapping rate of older vessels;

 

 

speed of vessel operation;

 

 

vessel freight rates, which are affected by factors that may affect the rate of newbuilding, swapping and laying up of vessels;

 

 

the price of steel and vessel equipment;

 

 

technological advances in the design and capacity of vessels;

 

 

potential conversion of vessels for alternative use;

 

 

changes in environmental and other regulations that may limit the useful lives of vessels;

 

 

port or canal congestion;

 

 

the number of vessels that are out of service at a given time, namely those that are laid-up, drydocked, awaiting repairs or otherwise not available for hire, including those that are in drydock for the purpose of installing exhaust gas cleaning systems, known as scrubbers; and

 

 

changes in global petroleum and chemical production.

 

The factors affecting the supply and demand for tankers have been volatile and are outside of our control, and the nature, timing and degree of changes in industry conditions are unpredictable. Market conditions have been volatile in recent years and continued volatility may reduce demand for transportation of oil, petroleum products and chemicals over longer distances and increase the supply of tankers, which may have a material adverse effect on our business, financial condition, results of operations, cash flows, ability to pay dividends and existing contractual obligations.

 

10

 

Our financial results may be adversely affected by the ongoing outbreak of COVID-19, and the related governmental responses thereto.

 

Since the beginning of calendar year 2020, the outbreak of COVID-19 that originated in China in late 2019 and that has spread to most nations around the globe has resulted in numerous actions taken by governments and governmental agencies in an attempt to mitigate the spread of the virus, including travel bans, quarantines, and other emergency public health measures, and a number of countries implemented lockdown measures. These measures have resulted in a significant reduction in global economic activity and extreme volatility in the global financial markets. If the COVID-19 pandemic continues on a prolonged basis or becomes more severe, the adverse impact on the global economy and the rate environment for tanker and other cargo vessels may deteriorate further and our operations and cash flows may be negatively impacted. Relatively weak global economic conditions during periods of volatility have and may continue to have a number of adverse consequences for tanker and other shipping sectors, including, among other things:

 

 

low charter rates, particularly for vessels employed on short-term time charters or in the spot market;

 

 

decreases in the market value of tanker vessels and limited second-hand market for the sale of vessels;

 

 

limited financing for vessels;

 

 

loan covenant defaults; and

 

 

declaration of bankruptcy by certain vessel operators, vessel owners, shipyards and charterers.

 

The COVID-19 pandemic and measures to contain its spread have negatively impacted regional and global economies and trade patterns in markets in which we operate, the way we operate our business, and the businesses of our charterers and suppliers. These negative impacts could continue or worsen, even after the pandemic itself diminishes or ends. Companies, including us or our Fleet Manager, have also taken precautions, such as requiring employees to work remotely and imposing travel restrictions, while some other businesses have been required to close entirely. Moreover, we face significant risks to our personnel and operations due to the COVID-19 pandemic. Our crews face risk of exposure to COVID-19 as a result of travel to ports in which cases of COVID-19 have been reported. Our shore-based personnel likewise face risk of such exposure, as we maintain offices in areas that have been impacted by the spread of COVID-19.

 

Measures against COVID-19 in a number of countries have restricted crew rotations on our vessels, which may continue or become more severe. As a result up to the date of this annual report, we experienced and may continue to experience disruptions to our normal vessel operations caused by increased deviation time associated with positioning our vessels to countries in which we can undertake a crew rotation in compliance with such measures. Delays in crew rotations have led to issues with crew fatigue and may continue to do so, which may result in delays or other operational issues. We have had and expect to continue to have days in which our vessels are unable to earn revenue in order to deviate to certain ports on which we would ordinarily not call during a typical voyage. We may also incur additional expenses associated with testing, personal protective equipment, quarantines, and travel expenses such as airfare costs in order to perform crew rotations in the current environment as well as related logistical complications associated with supplying our vessels with spares or other supplies. Up to the date of this annual report, the above-mentioned factors led to an increase in off-hire days and a slight increase in operating and voyage expenses and may continue to do so.

 

The COVID-19 pandemic and measures in place against the spread of the virus have led to a more difficult environment in which to dispose of vessels given difficulty to physically inspect vessels. The impact of COVID-19 has also resulted in reduced industrial activity in China with temporary closures of factories and other facilities, labor shortages and restrictions on travel. We believe these disruptions along with other seasonal factors, including lower demand for some of the cargoes we carry, have contributed to lower rates in the tanker industry up to the date of this annual report.

 

Epidemics may also affect personnel operating payment systems through which we receive revenues from the chartering of our vessels or pay for our expenses, resulting in delays in payments. Organizations across industries, including ours, are rightly focusing on their employees’ well-being, whilst making sure that their operations continue undisrupted and at the same time, adapting to the new ways of operating. As such employees are encouraged or even required to operate remotely which significantly increases the risk of cyber security attacks.

 

While it is still too early to fully assess the overall impact that COVID-19 will have on our financial condition and operations and on the tanker industry in general, we assess that the tanker charter rates have been reduced significantly as a result of COVID-19 and that the tanker industry in general and our Company specifically are likely to continue to be exposed to volatility in the near term.

 

The occurrence or continued occurrence of any of the foregoing events or other epidemics or an increase in the severity or duration of the COVID-19 or other epidemics could have a material adverse effect on our business, results of operations, cash flows, financial condition, value of our vessels, and ability to pay dividends.

 

Outbreaks of epidemic and pandemic diseases and governmental responses thereto could adversely affect our business

 

Public health threats, such as the COVID-19 outbreak (as described more fully above), influenza and other highly communicable diseases or viruses, outbreaks of which have from time to time occurred in various parts of the world in which we operate, including China, could adversely impact our operations, the timing of completion of any outstanding or future newbuilding projects, as well as the operations of our customers.

 

11

 

The international oil tanker industry has experienced volatile charter rates and vessel values and there can be no assurance that these charter rates and vessel values will not decrease in the near future.

 

The Baltic Dirty Tanker Index, or the BDTI, a U.S. dollar daily average of charter rates issued by the Baltic Exchange that takes into account input from brokers around the world regarding crude oil fixtures for various routes and oil tanker vessel sizes, has been volatile. For example, in 2021, the BDTI reached a high of 835 and a low of 492. The Baltic Clean Tanker Index, or BCTI, a comparable index to the BDTI but for petroleum product fixtures, has similarly been volatile. In 2021, the BCTI reached a high of 856 and a low of 432. Although the BDTI and BCTI were 1,744 and 993, respectively, as of April 12, 2022, there can be no assurance that the crude oil and petroleum products charter market will continue to increase, and the market could again decline. This volatility in charter rates depends, among other factors, on (i) the demand for crude oil and petroleum products, (ii) the inventories of crude oil and petroleum products in the United States and in other industrialized nations, (iii) oil refining volumes, (iv) oil prices, and (v) any restrictions on crude oil production imposed by the Organization of the Petroleum Exporting Countries, or OPEC, and non-OPEC oil producing countries.

 

If the charter rates in the oil tanker market decline from their current levels, our future earnings may be adversely affected, we may have to record impairment adjustments to the carrying values of our fleet and we may not be able to comply with the financial covenants in our loan agreements.

 

Volatile economic conditions throughout the world could have an adverse impact on our operations and financial results.

 

Among other factors, we face risks attendant to changes in economic environments, changes in interest rates, and instability in the banking and securities markets around the world.

 

The world economy continues to face a number of challenges. Concerns persist regarding the debt burden of certain European countries and their ability to meet future financial obligations and the overall stability of the euro. A renewed period of adverse development in the outlook for the financial stability of European countries, or market perceptions concerning these and related issues, could reduce the overall demand for oil and chemicals, and thus for shipping and our services, and thereby could affect our financial position, results of operations and cash available for distribution. In addition, turmoil and hostilities in the Middle East and other geographic areas and countries may negatively impact the world economy.

 

A general deterioration in the global economy may also cause a decrease in worldwide demand for certain goods and, thus, shipping. In the past, economic and governmental factors, together with concurrent declines in charter rates and vessel values, have had a material adverse effect on our results of operations, financial condition and cash flows, causing the price of our common shares to decline.

 

European countries have recently experienced relatively slow growth. Over the past several years, the credit markets in Europe have experienced significant contraction, deleveraging and reduced liquidity, and European authorities continue to implement a broad variety of governmental action and/or new regulation of the financial markets. Worldwide economic conditions have in the past impacted, and could in the future impact, lenders’ willingness to provide credit to us and our customers. If economic conditions in Europe preclude or limit financing, we may not be able to obtain financing on terms that are acceptable to us, or at all, even if conditions outside Europe remain favorable for lending.

 

The current state of the global financial markets and current economic conditions may adversely impact our results of operation, financial condition, cash flows and ability to obtain financing or refinance our existing and future credit facilities on acceptable terms, which may negatively impact our business.

 

Global financial markets and economic conditions have been, and continue to be, volatile. Beginning in February 2020, due in part to fears associated with the spread of COVID-19 (as more fully described above), global financial markets experienced volatility and a steep and abrupt downturn, followed by a recovery, which volatility may continue as the COVID-19 pandemic continues. Credit markets and the debt and equity capital markets have been distressed and the uncertainty surrounding the future of the global credit markets has resulted in reduced access to credit worldwide, particularly for the shipping industry. These issues, along with significant write-offs in the financial services sector, the re-pricing of credit risk and the uncertain economic conditions, have made, and may continue to make, it difficult to obtain additional financing. The current state of global financial markets and current economic conditions might adversely impact our ability to issue additional equity at prices that will not be dilutive to our existing shareholders or preclude us from issuing equity at all. Economic conditions and the economic slow-down resulting from COVID-19 and the intentional governmental responses to the virus may also adversely affect the market price of our common shares.

 

Also, as a result of concerns about the stability of financial markets generally, and the solvency of counterparties specifically, the availability and cost of obtaining money from the public and private equity and debt markets has become more difficult. 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 and other market participants, including equity and debt investors, and some have been unwilling to invest on attractive terms or even at all. Due to these factors, we cannot be certain that financing will be available if needed and to the extent required, or that we will be able to refinance our existing and future credit facilities, on acceptable terms or at all. If financing or refinancing is not available when needed, or is available only on unfavorable terms, we may be unable to meet our obligations as they 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. The ongoing COVID-19 outbreak has negatively impacted, and may continue to negatively impact, global economic activity, demand for energy, and funds flows and sentiment in the global financial markets. Continued economic disruption caused by the continued failure to control the spread of the virus could significantly impact our ability to obtain additional debt financing.

 

12

 

Volatility of LIBOR and potential changes of the use of LIBOR as a benchmark could affect our profitability, earnings and cash flow.

 

The London Interbank Offered Rate (“LIBOR”) is the subject of recent national, international and other regulatory guidance and proposals for reform. These reforms and other pressures may cause LIBOR to be eliminated or to perform differently than in the past. The consequences of these developments cannot be entirely predicted, but could include an increase in the cost of any of our future variable rate indebtedness and obligations. LIBOR has been volatile in the past, with the spread between LIBOR and the prime lending rate widening significantly at times. Currently four of our debt facilities have interest rates that fluctuate with changes in LIBOR and hence significant changes in LIBOR could have a material effect on the amount of interest payable on any future indebtedness, which in turn, could have an adverse effect on our financial condition.

 

Furthermore, the calculation of interest in most financing agreements in our industry has been based on published LIBOR rates. Due in part to uncertainty relating to the LIBOR calculation process, in recent years, it is likely that LIBOR will be phased out in the near future, maybe as soon as in 2022. As a result, lenders have insisted, and our lenders could in the future insist, on provisions that entitle the lenders, to replace published LIBOR as the base for the interest calculation with another equivalent rate negotiated between the parties and/or their cost-of-funds rate. The triggering of such provisions could significantly increase our lending costs, which would have an adverse effect on our profitability, earnings and cash flow. In addition, the banks currently reporting information used to set LIBOR will likely stop such reporting after 2021, when their commitment to reporting information ends. The Alternative Reference Rate Committee, a committee convened by the Federal Reserve that includes major market participants, has proposed an alternative rate to replace U.S. Dollar LIBOR: the Secured Overnight Financing Rate, or “SOFR.” The impact of such a transition from LIBOR to SOFR could be significant for us.

 

In order to manage any future exposure to interest rate fluctuations, we may from time to time use interest rate derivatives to effectively fix any floating rate debt obligations. No assurance can however be given that the use of these derivative instruments, if any, may effectively protect us from adverse interest rate movements. The use of interest rate derivatives may affect our results through mark to market valuation of these derivatives. Also, adverse movements in interest rate derivatives may require us to post cash as collateral, which may impact our free cash position. Interest rate derivatives may also be impacted by the transition from LIBOR to SOFR or other alternative rates.

 

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 will operate or are registered, which can significantly affect the operation of our vessels. These regulations include, but are not limited to the International Convention for the Prevention of Pollution from Ships of 1973, as from time to time amended and generally referred to as MARPOL, including the designation of Emission Control Areas, or ECAs, thereunder, the International Convention on Load Lines of 1966, the International Convention on Civil Liability for Oil Pollution Damage of 1969, generally referred to as CLC, the International Convention on Civil Liability for Bunker Oil Pollution Damage, or Bunker Convention, the International Convention for the Safety of Life at Sea of 1974, or SOLAS, the International Safety Management Code for the Safe Operation of Ships and for Pollution Prevention, or ISM Code, the International Convention for the Control and Management of Ships’ Ballast Water and Sediments, or the BWM Convention, the U.S. Oil Pollution Act of 1990, or OPA, the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, the U.S. Clean Water Act, the U.S. Clean Air Act, the U.S. Outer Continental Shelf Lands Act, the U.S. Maritime Transportation Security Act of 2002, or the MTSA, and European Union regulations. 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, 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. Under OPA, for example, owners, operators and bareboat charterers are jointly and severally strictly liable for the discharge of oil within the 200-mile exclusive economic zone around the United States. Events such as the 2010 explosion of the Deepwater Horizon and the subsequent release of oil into the Gulf of Mexico, or other events, may result in further regulation of the shipping industry, and modifications to statutory liability schemes, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. An oil spill could result in significant liability, including fines, penalties and criminal liability and remediation costs for natural resource damages under other federal, state and local laws, as well as third-party damages. We are required to satisfy insurance and financial responsibility requirements for potential oil (including marine fuel) spills and other pollution incidents. Although insurance covers 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, if any, in the future.

 

13

 

We are subject to international safety regulations and requirements imposed by classification societies 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, ship managers and bareboat charterers to develop and maintain an extensive “Safety Management System” that includes the adoption of a safety and environmental protection policy setting forth instructions and procedures for safe operation and describing procedures for dealing with emergencies. We expect that any vessels that we acquire in the future will be ISM Code-certified when delivered to us. The failure of a shipowner or bareboat charterer to comply with the ISM Code may subject it to increased liability, may invalidate existing insurance or decrease available insurance coverage for the affected vessels and may result in a denial of access to, or detention in, certain ports, including United States and European Union ports.

 

In addition, the hull and machinery of every commercial vessel must be classed by a classification society authorized by its country of registry. The classification society certifies that a vessel is safe and seaworthy in accordance with the applicable rules and regulations of the country of registry of the vessel and the International Convention for Safety of Life at Sea. If a vessel does not maintain its class and/or fails any annual survey, intermediate survey or special survey, the vessel will be unable to trade between ports and will be unemployable, which will negatively impact our revenues and results from operations.

 

Climate change and greenhouse gas restrictions may adversely impact our operations and markets.

 

Due to concern over the risk of climate change, a number of countries and the IMO have adopted, or are considering the adoption of, regulatory frameworks to reduce greenhouse gas emissions. These regulatory measures may include, among others, adoption of cap and trade regimes, carbon taxes, increased efficiency standards and incentives or mandates for renewable energy. Since January 1, 2020, IMO regulations have required vessels to comply with a global cap on the sulfur in fuel oil used on board of 0.5%, down from the previous cap of 3.5%. Additionally, in April 2018, nations at the MEPC 72 adopted an initial strategy to reduce greenhouse gas emissions from ships. The initial strategy identifies levels of ambition to reducing greenhouse gas emissions, including (1) decreasing the carbon intensity from ships through implementation of further phases of the EEDI for new ships; (2) reducing carbon dioxide emissions per transport work, as an average across international shipping, by at least 40% by 2030, pursuing efforts towards 70% by 2050, compared to 2008 emission levels; and (3) reducing the total annual greenhouse emissions by at least 50% by 2050 compared to 2008 while pursuing efforts towards phasing them out entirely.

 

Since January 1, 2020, ships have to either remove sulfur from emissions or buy fuel with low sulfur content, which may lead to increased costs and supplementary investments for ship owners. The interpretation of “fuel oil used on board” includes use in main engine, auxiliary engines and boilers. Shipowners may comply with this regulation by (i) using 0.5% sulfur fuels on board, which are available around the world but at a higher cost; (ii) installing scrubbers for cleaning of the exhaust gas; or (iii) by retrofitting vessels to be powered by liquefied natural gas, which may not be a viable option due to the lack of supply network and high costs involved in this process. While currently all our vessels have scrubbers installed, costs of compliance with these regulatory changes for any non-scrubber vessels we may acquire may be significant and may have a material adverse effect on our future performance, results of operations, cash flows and financial position.

 

In addition, although the emissions of greenhouse gases from international shipping currently are not subject to the Kyoto Protocol to the United Nations Framework Convention on Climate Change, which required adopting countries to implement national programs to reduce emissions of certain gases, or the Paris Agreement (discussed further below), a new treaty may be adopted in the future that includes restrictions on shipping emissions. Compliance with changes in laws, regulations and obligations relating to climate change affects the propulsion options in subsequent vessel designs and could increase our costs related to acquiring new vessels, operating and maintaining our existing vessels and require us to install new emission controls, acquire allowances or pay taxes related to our greenhouse gas emissions or administer and manage a greenhouse gas emissions program. Revenue generation and strategic growth opportunities may also be adversely affected.

 

Adverse effects upon the oil and gas industry relating to climate change, including growing public concern about the environmental impact of climate change, may also adversely affect demand for our services. For example, increased regulation of greenhouse gases or other concerns relating to climate change may reduce the demand for oil and gas in the future or create greater incentives for use of alternative energy sources. In addition, the physical effects of climate change, including changes in weather patterns, extreme weather events, rising sea levels, scarcity of water resources, may negatively impact our operations. Any long-term material adverse effect on the oil and gas industry could have a significant financial and operational adverse impact on our business that we cannot predict with certainty at this time.

 

14

 

Our vessels may suffer damage due to the inherent operational risks of the tanker industry and we may experience unexpected dry-docking costs, which may adversely affect our business and financial condition.

 

The operation of an ocean-going vessel carries inherent risks. Our vessels and their cargoes are at risk of being damaged or lost because of events such as marine disasters, bad weather and other acts of God, business interruptions caused by mechanical failures, grounding, fire, explosions and collisions, human error, war, terrorism, piracy, diseases (such as the ongoing outbreak of COVID-19), quarantine and other circumstances or events. These hazards may result in death or injury to persons, loss of revenues or property, the payment of ransoms, environmental damage, higher insurance rates, damage to our customer relationships or delay or re-routing, which may also subject us to litigation. In addition, the operation of tankers has unique operational risks associated with the transportation of oil or chemicals. An oil or chemical spill may cause significant environmental damage, and the costs associated with a catastrophic spill could exceed the insurance coverage available to us. Compared to other types of vessels, tankers are exposed to a higher risk of damage and loss by fire, whether ignited by a terrorist attack, collision, or other cause, due to the high flammability and high volume of the oil and chemicals transported in such tankers.

 

If our vessels suffer damage, they may need to be repaired at a dry-docking facility. The costs of dry-dock repairs are unpredictable and may be substantial. We may have to pay dry-docking costs that our insurance does not cover in full. The loss of earnings while these vessels are being repaired and repositioned, as well as the actual cost of these repairs, would decrease our earnings. In addition, space at dry-docking facilities is sometimes limited and not all dry-docking facilities are conveniently located. We may be unable to find space at a suitable dry-docking facility or our vessels may be forced to travel to a dry-docking facility that is not conveniently located to our vessels’ positions. The loss of earnings while these vessels are forced to wait for space or to travel to more distant dry-docking facilities would decrease our earnings.

 

The market value of our vessels, and those we may acquire in the future, may fluctuate significantly, which could cause us to incur losses if we decide to sell them following a decline in their market values or we may be required to write down their carrying value, which will adversely affect our earnings.

 

The fair market value of our vessels may increase and decrease depending on the following factors:

 

 

general economic and market conditions affecting the shipping industry;

 

 

prevailing level of charter rates;

 

 

competition from other shipping companies;

 

 

types, sizes and ages of vessels;

 

 

the availability of other modes of transportation;

 

 

supply and demand for vessels;

 

 

shipyard capacity;

 

 

cost of newbuildings;

 

 

price of steel;

 

 

number of tankers scrapped;

 

 

governmental or other regulations; and

 

 

technological advances.

 

If we sell any vessel at a time when vessel prices have fallen, the sale price may be less than the vessel’s carrying amount in our financial statements, in which case we will realize a loss. Vessel prices can fluctuate significantly, and in the case where the market value falls below the carrying amount, we will evaluate the vessel for a potential impairment adjustment. If the estimate of undiscounted cash flows, excluding interest charges, expected to be generated by the use of the vessel is less than its carrying amount, we may be required to write down the carrying amount of the vessel to its fair value in our financial statements and incur a loss and a reduction in earnings. During the year ended December 31, 2021, we incurred an impairment charge of $1.2 million in connection with the sale of one our vessels. See “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Critical Accounting Policies—Impairment of Vessels.”

 

15

 

An over-supply of tanker capacity may lead to reductions in charter hire rates and profitability.

 

The market supply of tankers is affected by a number of factors such as demand for energy resources, crude oil, petroleum products and chemicals, as well as strong overall economic growth of the world economy. If the capacity of new tankers delivered exceeds the capacity of such tankers being scrapped and lost, vessel capacity will increase, which could lead to reductions in charter rates. As of April 8, 2022, newbuilding orders have been placed for an aggregate of approximately 6.4% of the existing global tanker fleet with the bulk of deliveries expected during 2022.

 

An over-supply of oil tankers has already resulted in an increase in oil tanker charter hire rate volatility. If this volatility persists, we may not be able to find profitable charters for our vessels, which could have a material adverse effect on our business, results of operations, cash flows, financial condition and ability to pay dividends.

 

If our vessels call on ports located in countries or territories that are the subject of sanctions or embargoes imposed by the U.S. government or other governmental authorities, it could lead to monetary fines or adversely affect our business, reputation and the market for our common shares.

 

While our vessels have not called on ports located in countries or territories that are the subject of country-wide or territory-wide sanctions or embargoes imposed by the U.S. government or other governmental authorities (“Sanctioned Jurisdictions”) in violation of applicable sanctions or embargo laws, in 2021, and although we intend to maintain compliance with all applicable sanctions and embargo laws, and we endeavor to take precautions reasonably designed to ensure compliance with such laws, it is possible that, in the future, our vessels may call on ports in Sanctioned Jurisdictions in violation of applicable sanctions or embargo laws on charterers' instructions and without our consent. If such activities result in a violation of sanctions or embargo laws, we could be subject to monetary fines, penalties, or other sanctions, and our reputation and the market for our common shares could be adversely affected.

 

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 expanded over time.

 

In particular, the ongoing war in Ukraine could result in the imposition of further economic sanctions by the United States and the European Union against Russia. Current or future counterparties of ours may be affiliated with persons or entities that are or may be in the future the subject of sanctions imposed by the governments of the U.S., European Union, and/or other international bodies. If we determine that such sanctions require us to terminate existing or future contracts to which we, or our subsidiaries, are party or if we are found to be in violation of such applicable sanctions, our results of operations may be adversely affected or we may suffer reputational harm.

 

Although we believe that we have been in compliance with all applicable sanctions and embargo laws and regulations, and intend to maintain such compliance, 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. In addition, certain institutional investors may have investment policies or restrictions that prevent them from holding securities of companies that have contracts with countries identified by the U.S. government as state sponsors of terrorism. The determination by these investors not to invest in, or to divest from, our common shares may adversely affect the price at which our common shares trade. Moreover, our charterers may violate applicable sanctions and embargo laws and regulations as a result of actions that do not involve us or our vessels, and those violations could in turn negatively affect our reputation. Investor perception of the value of our common shares may also be adversely affected by the consequences of war, the effects of terrorism, civil unrest and governmental actions in countries or territories that we operate in.

 

Political instability, terrorist or other attacks, war, international hostilities and public health threats can affect the tanker industry, which may 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 available cash 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, Ukraine, and the South China Sea region and other geographic countries and areas, geopolitical events such as the withdrawal of the U.K. from the European Union, or “Brexit,” terrorist or other attacks, and war (or threatened war) or international hostilities, such as those between the United States and North Korea.

 

The war between Russia and Ukraine may lead to further regional and international conflicts or armed action. This war has disrupted supply chains and caused instability in the energy markets and the global economy, with effects on the tanker market, which has experienced volatility. The United States, United Kingdom and the European Union, among other countries, have announced sanctions against Russia, including sanctions targeting the Russian oil sector, among those a prohibition on the import of oil from Russia to the United States. The ongoing war could result in the imposition of further economic sanctions by the United States, the United Kingdom and the European Union against Russia, with uncertain impacts on the tanker market. While much uncertainty remains regarding the global impact of the war in Ukraine, it is possible that such tensions could adversely affect our business, financial condition, results of operation and cash flows. Furthermore, it is possible that third parties with whom we have charter contracts may be impacted by events in Russia and Ukraine, which could adversely affect our operations. Terrorist attacks such as those in Paris on November 13, 2015, Manchester on May 22, 2017, and the frequent incidents of terrorism in the Middle East, 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, including increased tensions between the U.S. and Iran, as well as the presence of U.S. or other armed forces in Iraq, Syria, 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. As a result of the above, insurers have increased premiums and reduced or restricted coverage for losses caused by terrorist acts generally. These uncertainties could also adversely affect our ability to obtain additional financing on terms acceptable to us or at all. Any of these occurrences could have a material adverse impact on our operating results, revenues and costs. Additionally, Brexit, or similar events in other jurisdictions, could impact global markets, including foreign exchange and securities markets; any resulting changes in currency exchange rates, tariffs, treaties and other regulatory matters could in turn adversely impact our business and operations.

 

16

 

Further, governments may turn to trade barriers to protect their domestic industries against foreign imports, thereby depressing shipping demand. In particular, leaders in the United States have indicated that the United States may seek to implement more protective trade measures. There is significant uncertainty about the future relationship between the United States, China and other exporting countries, including with respect to trade policies, treaties, government regulations and tariffs. For example, in January 2019, the United States announced expanded sanctions against Venezuela, which may have an effect on its oil output and in turn affect global oil supply. Protectionist developments, or the perception that they may occur, may have a material adverse effect on global economic conditions, and may significantly reduce global trade. Moreover, increasing trade protectionism may cause an increase in (a) the cost of goods exported from regions globally, (b) the length of time required to transport goods and (c) the risks associated with exporting goods. Such increases may significantly affect the quantity of goods to be shipped, shipping time schedules, voyage costs and other associated costs, which could have an adverse impact on the shipping industry, and therefore our charterers and their business, operating results and financial condition and could thereby affect their ability to make timely charter hire payments to us and to renew and increase the number of their time charters with us. This could have a material adverse effect on our business, results of operations, financial condition and our ability to pay any cash distributions to our stockholders.

 

In January 2020, in response to certain perceived terrorist activity, the United States launched an airstrike in Baghdad that killed a high-ranking Iranian general, increasing hostilities between the U.S. and Iran. This attack or further escalations between the U.S. and Iran that may follow, could result in retaliation from Iran that could potentially affect the shipping industry, through increased attacks on vessels in the Strait of Hormuz (which already experienced an increased number of attacks on and seizures of vessels lately), or by potentially closing off or limiting access to the Strait of Hormuz, where a significant portion of the world’s oil supply passes through. Any restriction on access to the Strait of Hormuz, or increased attacks on vessels in the area, could negatively impact our earnings, cash flow and results of operations.

 

In the past, political instability has also resulted in attacks on vessels, mining of waterways and other efforts to disrupt international shipping, particularly in the Arabian Gulf region. Acts of terrorism and piracy have also affected vessels trading in regions such as the South China Sea and the Gulf of Aden off the coast of Somalia. Any of these occurrences could have a material adverse impact on our future performance, results of operations, cash flows and financial position.

 

In addition, public health threats, such as the coronavirus, influenza and other highly communicable diseases or viruses, outbreaks of which have from time to time occurred in various parts of the world in which we operate, including China, could adversely impact our operations, and the operations of our customers.

 

The U.K.s withdrawal from the European Union may have a negative effect on global economic conditions, financial markets and our business.

 

On June 23, 2016, in a referendum vote commonly referred to as “Brexit” a majority of voters in the U.K. voted to exit the European Union. Since then, the U.K. and the EU negotiated the terms of a withdrawal agreement, which was approved in October 2019, ratified in January 2020 and effected in December 31, 2020. The U.K formally exited the European Union on January 31, 2020, although a transition period remained in place until December 2020 during which the U.K. was subject to the rules and regulations of the European Union while continuing to negotiate the parties’ relationship going forward, including trade deals. It is unclear what long-term economic, financial, trade and legal implications the withdrawal of the U.K. from the European Union would have and how such withdrawal would affect our business. In addition, Brexit may lead other European Union member countries to consider referendums regarding their European Union membership. Any of these events, along with any political, economic and regulatory changes that may occur could cause political and economic uncertainty and harm our business and financial results.

 

Brexit contributes to considerable uncertainty concerning the current and future economic environment. Brexit could adversely affect European or worldwide political, regulatory, economic or market conditions and could contribute to instability in global political institutions, regulatory agencies and financial markets.

 

Acts of piracy on ocean-going vessels could adversely affect our business.

 

Acts of piracy have historically affected ocean-going vessels trading in regions of the world such as the South China Sea, the Arabian Sea, the Red Sea, the Gulf of Aden off the coast of Somalia, South China Sea, Sulu Sea, Celebes Sea, the Indian Ocean and in particular, the Gulf of Guinea, region off Nigeria, which has experienced increased incidents of privacy in recent years. Sea piracy incidents continue to occur. Acts of piracy could result in harm or danger to the crews that man our vessels.  If insurers or the Joint War Committee characterize the regions in which our vessels are deployed as “war risk” zones or “war and strikes” listed areas, respectively, premiums payable for insurance coverage could increase significantly and such coverage may be more difficult to obtain if available at all. In addition, crew costs, including costs that may be incurred to the extent we employ onboard security guards, could increase in such circumstances. We may not be adequately insured to cover losses from these incidents, least of all for bearing the cost of the applicable deductible(s) or unforeseen charges/costs, which could have a material adverse effect on us. In addition, 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, results of operations, cash flows, financial condition and ability to pay dividends and may result in loss of revenues, increased costs and decreased cash flows to our customers, which could impair their ability to make payments to us under our charters.

 

17

 

An economic slowdown or changes in the economic and political environment in the Asia Pacific region could have a material adverse effect on our business, financial condition and results of operations.

 

We anticipate a significant number of the port calls made by our vessels will continue to involve the loading or discharging of cargoes in ports in the Asia Pacific region. As a result, any negative changes in economic conditions in any Asia Pacific country, particularly in China, may have a material adverse effect on our business, financial condition and results of operations, as well as our future prospects. Before the global economic financial crisis that began in 2008, China had one of the world’s fastest growing economies in terms of gross domestic product, or GDP, which had a significant impact on shipping demand. Although the year-over-year growth rate of China’s GDP was approximately 8.1% for the year ended December 31, 2021 the average GDP growth rate over the last ten years remains below pre-2008 levels. Furthermore, there is a rising threat of a Chinese financial crisis resulting from massive personal and corporate indebtedness and “trade wars”. The International Monetary Fund has warned that continuing geopolitical tensions, between the United States and China could derail recovery from the impacts of COVID-19. Although the United States and China signed a trade agreement in early 2020, as further described below, there is no assurance that the Chinese economy will not experience a significant contraction in the future.

 

Although state-owned enterprises still account for a substantial portion of the Chinese industrial output, in general, the Chinese government is reducing the level of direct control that it exercises over the economy through state plans and other measures. There is an increasing level of freedom and autonomy in areas such as allocation of resources, production, pricing and management and a gradual shift in emphasis to a “market economy” and enterprise reform. Limited price reforms were undertaken with the result that prices for certain refined petroleum products are principally determined by market forces. Many of the reforms are unprecedented or experimental and may be subject to revision, change or abolition based upon the outcome of such experiments. If the Chinese government does not continue to pursue a policy of economic reform, the level of imports to and exports from China could be adversely affected by changes to these economic reforms by the Chinese government, as well as by changes in political, economic and social conditions or other relevant policies of the Chinese government, such as changes in laws, regulations or export and import restrictions. Notwithstanding economic reform, the Chinese government may adopt policies that favor domestic shipping and tanker companies and may hinder our ability to compete with them effectively. For example, China imposes a tax for non-resident international transportation enterprises engaged in the provision of services of passengers or cargo, among other items, in and out of China using their own, chartered or leased vessels. The regulation may subject international transportation companies to Chinese enterprise income tax on profits generated from international transportation services passing through Chinese ports. This could have an adverse impact on our charterers’ business, operating results and financial condition and could thereby affect their ability to make timely charter hire payments to us and to renew and increase the number of their time charters with us. Moreover, an economic slowdown in the economies of the European Union and other Asian countries may further adversely affect economic growth in China and elsewhere.

 

In addition, concerns regarding the possibility of sovereign debt defaults by European Union member countries, including Greece, have in the past disrupted financial markets throughout the world, and may lead to weaker consumer demand in the European Union, the United States, and other parts of the world. The possibility of sovereign debt defaults by European Union member countries, including Greece, and the possibility of market reforms to float the Chinese renminbi, either of which development could weaken the Euro against the Chinese renminbi, could adversely affect consumer demand in the European Union. Moreover, the revaluation of the renminbi may negatively impact the United States’ demand for imported goods, many of which are shipped from China. Future weak economic conditions could have a material adverse effect on our business, results of operations and financial condition and our ability to pay dividends to our stockholders. Our business, financial condition, results of operations, as well as our future prospects, will likely be materially and adversely affected by another economic downturn in any of the aforementioned countries and regions.

 

Increased inspection procedures and tighter import and export controls could increase costs and disrupt our business.

 

International shipping is subject to various security and customs inspection and related procedures in countries of origin and destination. Inspection procedures can result in the seizure of, delay in the loading, off-loading or delivery of, the contents of our vessels or 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. Furthermore, changes to inspection procedures could also impose additional costs and obligations on our customers and may, in certain cases, render the shipment of certain types of cargo uneconomical or impractical. Any such changes or developments may have a material adverse effect on our business, financial condition, and results of operations.

 

18

 

We rely on our information systems to conduct our business, and failure to protect these systems against security breaches could adversely affect our business and results of operations. Additionally, if these systems fail or become unavailable for any significant period of time, our business could be harmed.

 

The efficient operation of our business is dependent on computer hardware and software systems both onboard our vessels and at our onshore offices. Information systems are vulnerable to security breaches by computer hackers and cyber terrorists. We rely on industry-accepted security measures and technology to securely maintain confidential and proprietary information kept on our information systems. However, these measures and technology may not adequately prevent cybersecurity breaches, the access, capture or alteration of information by criminals, the exposure or exploitation of potential security vulnerabilities, the installation of malware or ransomware, acts of vandalism, computer viruses, misplaced data or data loss. In addition, the unavailability of the information systems or the failure of these systems to perform as anticipated for any reason could disrupt our business and could result in decreased performance and increased operating costs, causing our business and results of operations to suffer. Any significant interruption or failure of our information systems or any significant breach of security could adversely affect our business, results of operations and financial condition, as well as our cash flows, including cash available for dividends to our stockholders.

 

Additionally, any changes in the nature of cyber threats might require us to adopt additional procedures for monitoring cybersecurity, which could require additional expenses and/or capital expenditures. Most recently, the war between Russia and Ukraine has been accompanied by cyber-attacks against the Ukrainian government and other countries in the region. It is possible that these attacks could have collateral effects on additional critical infrastructure and financial institutions globally, which could adversely affect our operations. It is difficult to assess the likelihood of such threat and any potential impact at this time.

 

RISKS RELATED TO OUR COMPANY

 

Our financing facilities contain restrictive covenants that may limit our liquidity and corporate activities, and could have an adverse effect on our financial condition and results of operations.

 

Our financing facilities either in the form of the bareboat charters in connection with the SLBs of our fleet or senior secured loan agreements contain, and any future financing facilities we may enter into are expected to contain, customary covenants, events of default and termination event clauses, including cross-default provisions and restrictive covenants and performance requirements that may affect our operational and financial flexibility. Such restrictions could affect, and in many respects limit or prohibit, among other things, our ability to incur additional indebtedness, pay dividends, create liens, sell assets, or engage in mergers or acquisitions. These restrictions could also limit our ability to plan for or react to market conditions or meet extraordinary capital needs or otherwise restrict corporate activities. There can be no assurance that such restrictions will not adversely affect our ability to finance our future operations or capital needs.

 

Our financing facilities require us to maintain specified financial ratios, satisfy financial covenants and contain cross-default clauses and other representations, including the following:

 

 

maintain a consolidated leverage ratio of not more than 75%;

 

 

maintain market adjusted total assets minus total liabilities of at least $60 million,

 

 

maintain minimum free liquidity of $0.5 million per operating vessel but not less than $4.0 million in aggregate; and

 

 

assure no change of control of the company takes place, except with the lessor’s/lender’s prior written consent.

 

As of December 31, 2021, we are in compliance with all covenants in our financing facilities.

 

As a result of the restrictions in our financing facilities, or similar restrictions in our future financing facilities, we may need to seek permission from the owners of our leased vessels or banks that finance our vessels in order to engage in certain corporate actions. Their interests may be different from ours and we may not be able to obtain their permission when needed. This may prevent us from taking actions that we believe are in our best interest, which may adversely impact our revenues, results of operations and financial condition.

 

A failure by us to meet our payment and other obligations, including our financial covenant requirements, could lead to defaults under our financing facilities or any future financing facilities. If we are not in compliance with our covenants and we are not able to obtain covenant waivers or modifications, the current or future owners of our leased vessels or the banks that finance our current of future vessels, as appropriate, could retake possession of our vessels or require us to pay down our indebtedness to a level where we are in compliance with our covenants or sell vessels in our fleet. Events beyond our control, including changes in the economic and business conditions in the shipping markets in which we operate, interest rate developments, changes in the funding costs of our banks, changes in vessel earnings and asset valuations and outbreaks of epidemic and pandemic of diseases, such as the ongoing outbreak of COVID-9, may affect our ability to comply with these covenants. We could lose our vessels if we default on our financing facilities, which would negatively affect our revenues, results of operations and financial condition.

 

19

 

Servicing current and future debt (including SLBs) will limit funds available for other purposes and impair our ability to react to changes in our business.

 

We must dedicate a portion of our cash flow from operations to pay the principal and interest on our indebtedness. These payments limit funds otherwise available for working capital, capital expenditures and other purposes. As of December 31, 2021, we had a total indebtedness of $153.3 million, excluding deferred finance fees. Our current or future debt could have other significant consequences on our operations. For example, it could:

 

 

increase our vulnerability to general economic downturns and adverse competitive and industry conditions;

 

 

require us to dedicate a substantial portion, if not all, of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate purposes;

 

 

limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

 

 

place us at a competitive disadvantage compared to competitors that have less debt or better access to capital;

 

 

limit our ability to raise additional financing on satisfactory terms or at all; and

 

 

adversely impact our ability to comply with the financial and other restrictive covenants of our current or future financing arrangements, which could result in an event of default under such agreements.

 

Furthermore, our current or future interest expense could increase if interest rates increase. If we do not have sufficient earnings, we may be required to refinance all or part of our current or future debt, sell assets, borrow more money or sell more securities, and we cannot guarantee that the resulting proceeds therefrom, if any, will be sufficient to meet our ongoing capital and operating needs.

 

Our President, Chief Executive Officer and Director has significant influence over us, and a trust established for the benefit of his family may be deemed to beneficially own, directly or indirectly, 100% of our Series D and our Series E Preferred Shares, and an affiliate of his may be deemed to beneficially own 100% our Series F Preferred Shares, and thereby to control the outcome of matters on which our shareholders are entitled to vote.

 

As of the date of this annual report, Lax Trust, which is an irrevocable trust established for the benefit of certain family members of our President, Chief Executive Officer and Director, Mr. Pistiolis, may be deemed to beneficially own, directly or indirectly, all of the 100,000 outstanding shares of our Series D Preferred Shares. Each Series D Preferred Share carries 1,000 votes. In addition, the Lax Trust, through Family Trading Inc., or Family Trading, may be deemed to beneficially own 13,452 Series E Preferred Shares held by Family Trading, which represent all of the Series E Preferred Shares that are currently outstanding and which are convertible into approximately 17,470,130 common shares as of April 13, 2022. Each Series E Preferred Share carries 1,000 votes. Africanus Inc., an affiliate of Mr. Pistiolis, may be deemed to beneficially own all of the 7,200,000 outstanding shares of our Series F Preferred Shares. Each Series F Preferred Share carries 10 votes.

 

By the Lax Trust’s beneficial ownership of 100% of our Series D Preferred Shares and Series E Preferred Shares, and Africanus Inc.’s beneficial ownership of 100% of our Series F Preferred Shares, as of the date of this annual report, the Lax Trust together with Africanus Inc. may be deemed to beneficially own 82.4% of our total voting power and to control the outcome of matters on which our shareholders are entitled to vote, including the election of our directors and other significant corporate actions. The interests of the Lax Trust, Africanus Inc. or the family of Mr. Pistiolis may be different from your interests.

 

As a prerequisite for the Navigare Lease (defined below), Mr. Pistiolis personally guaranteed the performance of the bareboat charters connected to the lease, under certain circumstances, and in exchange, we, among other things, amended the Certificate of Designations governing the terms of the Series D Preferred Shares, to adjust the voting rights per share of Series D Preferred Shares such that during the term of the Navigare Lease, the combined voting power controlled by Mr. Pistiolis and the Lax Trust does not fall below a majority of our total voting power, irrespective of any new common or preferred stock issuances, and thereby complying with a relevant covenant of the bareboat charters entered in connection with the Navigare Lease.

 

We have been subject to litigation in the past and we may be subject to similar or other litigation in the future.

 

We and certain of our current executive officers were defendants in purported class-action lawsuits pending in the U.S. District Court for the Eastern District of New York, brought on behalf of our shareholders. The lawsuits alleged violations of Sections 9, 10(b), 20(a) and/or 20A of the Securities Exchange Act of 1934, as amended, or the Exchange Act and Rule 10b-5 promulgated hereunder. In connection with these lawsuits, certain co-defendants requested that we indemnify and hold them harmless against all losses, including reasonable costs of defense, arising from the litigation, pursuant to the provisions of the Common Stock Purchase Agreement between us and Kalani.

 

On August 3, 2019 the Eastern District Court of New York dismissed the case with prejudice. On August 26, 2019, plaintiffs appealed the dismissal to the United States Court of Appeals for the Second Circuit. We filed our response briefs on November 26 and November 27, 2019, and plaintiffs/appellants filed their reply brief on December 11, 2019. The Court of Appeals held oral argument on March 10, 2020 and took the matter under advisement. On April 2, 2020, the Court of Appeals issued a summary order affirming the District Court’s decision dismissing Plaintiffs’ claims and denying leave to amend and the case was finally concluded in our favor.

 

20

 

We may, from time to time, be a party to other litigation in the normal course of business. Monitoring and defending against legal actions, whether or not meritorious, is time-consuming for our management and detracts from our ability to fully focus our internal resources on our business activities. In addition, our legal fees and costs incurred in connection with such activities and any legal fees of co-defendants for which we are deemed responsible may be significant and we could, in the future, be subject to judgments or enter into settlements of claims for significant monetary damages. A decision adverse to our interests could result in the payment of substantial damages and could have a material adverse effect on our cash flow, results of operations and financial position.

 

With respect to any litigation, our insurance may not reimburse us or may not be sufficient to reimburse us for the expenses or losses we may suffer in contesting and concluding such lawsuit. Furthermore, our insurance does not cover legal fees associated with co-defendants. Substantial litigation costs, including the substantial self-insured retention that we are required to satisfy before any insurance applied to the claim, or an adverse result in any litigation may adversely impact our business, operating results or financial condition.

 

As of the date of this annual report our operating fleet consists of eight tankers. Any limitation in the availability or operation of these vessels could have a material adverse effect on our business, results of operations and financial condition.

 

As of the date of this annual report, our operating fleet consists of one 50,000 dwt MR product tanker, five 157,000 dwt Suezmax crude oil tankers, and two 300,000 dwt Very Large Crude Carriers (VLCCs). Our MR product tanker is M/T Eco Marina Del Ray. Our Suezmax fleet consists of M/T Eco Bel Air, M/T Eco Beverly Hills, M/T Oceano CA, M/T Eco Malibu and M/T Eco West Coast. Our VLCC fleet consists of M/T Julius Caesar and M/T Legio X Equestris. Furthermore, we have a 50% interest in M/T Eco Yosemite Park and M/T Eco Joshua Park, two 50,000 dwt product tankers. If these vessels are unable to generate revenue as a result of off hire time, early termination of the applicable time charter or otherwise, our business, results of operations, financial condition and ability to pay dividends on our common shares could be materially adversely affected.

 

We expect to be dependent on a limited number of customers for a large part of our revenues, and failure of such counterparties to meet their obligations could cause us to suffer losses or negatively impact our results of operations and cash flows.

 

During 2021, 100% of our revenues derived from five charterers, BP Shipping Limited (“BP”), Clearlake Shipping Pte Ltd (“Clearlake”), Trafigura Maritime Logistics Pte Ltd (“Trafigura”), Dampskibsselskabet NORDEN A/S (“DS Norden A/S”), and Cargill International SA (“Cargill”). Such agreements subject us to counterparty risks. The ability of each of our counterparties to perform its obligations under a contract with us will depend on a number of factors that are beyond our control and may include, among other things, general economic conditions, the condition of the maritime industry, the overall financial condition of the counterparty, charter rates received for specific types of vessels, work stoppages or other labor disturbances, including as a result of the ongoing COVID-19 pandemic and various expenses. The combination of a reduction of cash flow resulting from declines in world trade, a reduction in borrowing bases under reserve-based credit facilities and the lack of availability of debt or equity financing may result in a significant reduction in the ability of charterers to make charter payments to us. In addition, in depressed market conditions, charterers and customers may no longer need a vessel that is then under charter or contract or may be able to obtain a comparable vessel at lower rates. As a result, charterers and customers may seek to renegotiate the terms of their existing charter agreements or avoid their obligations under those contracts. Should one of our counterparties fail to honor its obligations under agreements with us, we could sustain significant losses that could have a material adverse effect on our business, financial condition, results of operations and cash flows.

 

If we fail to manage our planned growth properly, we may not be able to successfully expand our market share.

 

We intend to continue to grow our fleet in the future in line with our strategy. Our future growth will primarily depend on our ability to:

 

 

generate excess cash flow for investment without jeopardizing our ability to cover current and foreseeable working capital needs (including debt service);

 

 

raise equity and obtain required financing for our existing and new operations;

 

 

locate and acquire suitable vessels;

 

 

identify and consummate acquisitions or joint ventures;

 

 

integrate any acquired business successfully with our existing operations;

 

 

our manager’s ability to hire, train and retain qualified personnel and crew to manage and operate our growing business and fleet;

 

 

enhance our customer base; and

 

 

manage expansion.

 

21

 

Growing any business by acquisition presents numerous risks such as undisclosed liabilities and obligations, difficulty in obtaining additional qualified personnel, managing relationships with customers and suppliers and integrating newly acquired operations into existing infrastructures. We may not be successful in executing our growth plans and we may incur significant additional expenses and losses in connection therewith.

 

Delays or defaults by the shipyards in the construction of newbuildings could increase our expenses and diminish our net income and cash flows.

 

As of the date of this annual report, we do not have any contracts for newbuilding vessels. We may enter into contracts for newbuilding vessels in the future. Vessel construction projects are generally subject to risks of delay that are inherent in any large construction project, which may be caused by numerous factors, including shortages of equipment, materials or skilled labor, unscheduled delays in the delivery of ordered materials and equipment or shipyard construction, failure of equipment to meet quality and/or performance standards, financial or operating difficulties experienced by equipment vendors or the shipyard, unanticipated actual or purported change orders, inability to obtain required permits or approvals, design or engineering changes and work stoppages and other labor disputes, adverse weather conditions or any other events of force majeure. Significant delays could adversely affect our financial position, results of operations and cash flows. Additionally, failure to complete a project on time may result in the delay of revenue from that vessel, and we may continue to incur costs and expenses related to delayed vessels, such as supervision expenses.

 

Our ability to obtain additional debt financing may be dependent on our ability to charter our vessels, the performance of our charters and the creditworthiness of our charterers.

 

Our inability to re-charter our vessels and the actual or perceived credit quality of our charterers, and any defaults by them, may materially affect our ability to obtain the additional capital resources that we will require to purchase additional vessels or may significantly increase our costs of obtaining such capital. Our inability to obtain financing, or receiving financing at a higher than anticipated cost, may materially affect our results of operation and our ability to implement our business strategy.

 

The industry for the operation of tanker vessels and the transportation of oil, petroleum products and chemicals is highly competitive and we may not be able to compete for charters with new entrants or established companies with greater resources.

 

We will employ our tankers and any additional vessels we may acquire in a highly competitive market that is capital intensive and highly fragmented. The operation of tanker vessels and the transportation of cargoes shipped in these vessels, as well as the shipping industry in general, is extremely competitive. Competition arises primarily from other vessel owners, including major oil companies as well as independent tanker shipping companies, some of whom have substantially greater resources than we do. Competition for the transportation of oil, petroleum products and chemicals can be intense and depends on price, location, size, age, condition and the acceptability of the vessel and its operators to the charterers. Due in part to the highly fragmented market, competitors with greater resources could enter and operate larger fleets through consolidations or acquisitions that may be able to offer better prices and fleets than us.

 

A limited number of financial institutions hold our cash.

 

A limited number of financial institutions, including institutions located in Greece, hold all of our cash. Our cash balances have been deposited from time to time with banks in Germany, Holland, Greece and Switzerland amongst others. Our cash balances are not covered by insurance in the event of default by these financial institutions. The occurrence of such a default could have a material adverse effect on our business, financial condition, results of operations and cash flows, and we may lose part or all of our cash that we deposit with such banks.

 

We may be unable to attract and retain key management personnel and other employees in the international tanker shipping industry, which may negatively impact the effectiveness of our management and our results of operations.

 

Our success depends to a significant extent upon the abilities and efforts of our management team. All of our executive officers are employees of Central Mare Inc., or Central Mare, a related party affiliated with the family of Mr. Evangelos J. Pistiolis, our President, Chief Executive Officer and Director, and we have entered into agreements with Central Mare for the compensation of Mr. Evangelos J. Pistiolis; Alexandros Tsirikos, our Chief Financial Officer and Director; Vangelis G. Ikonomou our Chief Operating Officer and Konstantinos Patis, our Chief Technical Officer. The loss of any of these individuals could adversely affect our business prospects and financial condition. Difficulty in hiring and retaining personnel could adversely affect our results of operations. We do not maintain “key man” life insurance on any of our officers.

 

If labor interruptions are not resolved in a timely manner, they could have a material adverse effect on our business, results of operations, cash flows, financial condition and available cash.

 

Our Fleet Manager, is responsible for recruiting, mainly through a crewing agent, the senior officers and all other crew members for our vessels and all other vessels we may acquire. 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 as we expect and could have a material adverse effect on our business, results of operations, cash flows, financial condition and available cash.

 

22

 

If we expand our business, we will need to improve our operations and financial systems and staff; if we cannot improve these systems or recruit suitable employees, our performance may be adversely affected.

 

Our current operating and financial systems may not be adequate if we implement a plan to expand the size of our fleet, and our attempts to improve those systems may be ineffective. If we are unable to operate our financial and operations systems effectively or to recruit suitable employees as we expand our fleet, our performance may be adversely affected.

 

A drop in spot charter rates may provide an incentive for some charterers to default on their charters, which could affect our cash flow and financial condition.

 

When we enter into a time charter or bareboat charter, rates under that charter are fixed throughout the term of the charter. If the spot charter rates in the tanker shipping industry become significantly lower than the time charter equivalent rates that some of our charterers are obligated to pay us under our then existing charters, the charterers may have incentive to default under that charter or attempt to renegotiate the charter. If our charterers fail to pay their obligations, we would have to attempt to re-charter our vessels at lower charter rates, and as a result we could sustain significant losses which could have a material adverse effect on our cash flow and financial condition, which would affect our ability to meet our current or future loans or current leaseback obligations. If our current or future lenders choose to accelerate our indebtedness and foreclose their liens, or if the owners of our leased vessels choose to repossess vessels in our fleet as a result of a default under the SLBs, our ability to continue to conduct our business would be impaired.

 

An increase in operating costs could decrease earnings and available cash.

 

Vessel operating costs include the costs of crew, fuel (for spot chartered vessels), provisions, deck and engine stores, insurance and maintenance and repairs, which depend on a variety of factors, many of which are beyond our control. Some of these costs, primarily relating to insurance and enhanced security measures, have been increasing. If any vessels we have or will acquire suffer damage, they may need to be repaired at a dry-docking facility. The costs of dry-docking repairs are unpredictable and can be substantial. Increases in any of these expenses could decrease our earnings and available cash.

 

The aging of our fleet may result in increased operating costs in the future, which could adversely affect our earnings.

 

In general, the cost of maintaining a vessel in good operating condition increases with the age of the vessel. As our fleet ages, operating and other costs will increase. In the case of bareboat charters, operating costs are borne by the bareboat charterer. Cargo insurance rates also increase with the age of a vessel, making older vessels less desirable to charterers. Governmental regulations, including environmental regulations, safety or other equipment standards related to the age of vessels may require expenditures for alterations or the addition of new equipment to our vessels and may restrict the type of activities in which our vessels may engage. As our fleet ages, market conditions might 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, our revenue will decline at the end of a vessels useful life, which would adversely affect our business, results of operations and financial condition.

 

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, which we estimate to be 25 years from the date of initial delivery from the shipyard. Our cash flows and income are dependent on the revenues earned by the chartering of our vessels to customers. If we are unable to replace the vessels in our fleet upon the expiration of their useful lives, our business, results of operations and financial condition will be materially and adversely affected.

 

Purchasing and operating secondhand vessels may result in increased operating costs and vessels off-hire, which could adversely affect our earnings.

 

We may expand our fleet through the acquisition of secondhand vessels. While we rigorously inspect previously owned or secondhand vessels prior to purchase, this does not normally provide us with the same knowledge about their condition and cost of any required (or anticipated) repairs that we would have had if these vessels had been built for and operated exclusively by us. Accordingly, we may not discover defects or other problems with such vessels prior to purchase. 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. Also, when purchasing previously owned vessels, we do not receive the benefit of warranties from the builders if the vessels we buy are older than one year. In general, the costs to maintain a vessel in good operating condition increase with the age and type of the vessel. In the case of chartered-in vessels, we run the same risks.

 

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.

 

23

 

We may not have adequate insurance to compensate us if we lose any vessels that we acquire.

 

We carry insurance for all vessels we acquire against those types of risks commonly insured against by vessel owners and operators. These insurances include hull and machinery insurance, protection and indemnity insurance (which includes environmental damage and pollution insurance coverage), freight demurrage and defense and war risk insurance. Reasonable insurance rates can best be obtained when the size and the age/trading profile of the fleet is attractive. As a result, rates become less competitive as a fleet downsizes.

 

In the future, we may not be able to obtain adequate insurance coverage at reasonable rates for the vessels we acquire. The insurers may not pay particular claims. Our insurance policies also contain deductibles for which we will be responsible as well as limitations and exclusions that may increase our costs or lower our revenue.

 

We may be subject to increased premium payments, or calls, as we obtain some of our insurance through protection and indemnity associations.

 

We may be subject to increased premium payments, or calls, in amounts based on our claim records and the claim records of our Fleet Manager as well as the claim records of other members of the protection and indemnity associations through which we receive insurance coverage for tort liability, including pollution-related liability. In addition, our protection and indemnity associations may not have enough resources to cover claims made against them. Our payment of these calls could result in significant expense to us, which could have a material adverse effect on our business, results of operations and financial condition.

 

Increasing scrutiny and changing expectations from investors, lenders and other market participants with respect to our Environmental, Social and Governance (ESG) policies may impose additional costs on us or expose us to additional risks.

 

Companies across all industries are facing increasing scrutiny relating to their ESG policies. Investor advocacy groups, certain institutional investors, investment funds, lenders and other market participants are increasingly focused on ESG practices and in recent years have placed increasing importance on the implications and social cost of their investments. The increased focus and activism related to ESG and similar matters may hinder access to capital, as investors and lenders may decide to reallocate capital or to not commit capital as a result of their assessment of a company’s ESG practices. Companies which do not adapt to or comply with investor, lender or other industry shareholder expectations and standards, which are evolving, or which are perceived to have not responded appropriately to the growing concern for ESG issues, regardless of whether there is a legal requirement to do so, may suffer from reputational damage and the business, financial condition, and/or stock price of such a company could be materially and adversely affected.

 

We may face increasing pressures from investors, lenders and other market participants, who are increasingly focused on climate change, to prioritize sustainable energy practices, reduce our carbon footprint and promote sustainability. As a result, we may be required to implement more stringent ESG procedures or standards so that our existing and future investors and lenders remain invested in us and make further investments in us. If we do not meet these standards, our business and/or our ability to access capital could be harmed.

 

Additionally, certain investors and lenders may exclude shipping companies, such as us, from their investing portfolios altogether due to environmental, social and governance factors.  These limitations in both the debt and equity capital markets may affect our ability to develop as our plans for growth may include accessing the equity and debt capital markets.  If those markets are unavailable, or if we are unable to access alternative means of financing on acceptable terms, or at all, we may be unable to implement our business strategy, which would have a material adverse effect on our financial condition and results of operations and impair our ability to service our indebtedness. Further, it is likely that we will incur additional costs and require additional resources to monitor, report and comply with wide ranging ESG requirements.  The occurrence of any of the foregoing could have a material adverse effect on our business and financial condition.

 

Technological innovation and quality and efficiency requirements from our customers could reduce our charter hire income and the value of our vessels.

 

Our customers, in particular those in the oil industry, have a high and increasing focus on quality and compliance standards with their suppliers across the entire supply chain, including the shipping and transportation segment. Our continued compliance with these standards and quality requirements is vital for our operations. Charter hire rates and the value and operational life of a vessel are determined by a number of factors including the vessel’s efficiency, operational flexibility and physical life. Efficiency includes speed, fuel economy and the ability to load and discharge cargo quickly. Flexibility includes the ability to enter harbors, utilize related docking facilities and pass through canals and straits. The length of a vessel’s physical life is related to its original design and construction, its maintenance and the impact of the stress of operations. If new vessels are built that are more efficient or more flexible or have longer physical lives than our vessels, competition from these more technologically advanced vessels could adversely affect the amount of charter hire payments we receive for our vessels, and the resale value of our vessels could significantly decrease which may have a material adverse effect on our future performance, results of operations, cash flows and financial position.

 

The smuggling of drugs or other contraband onto our vessels may lead to governmental claims against us.

 

Our vessels may call in ports where smugglers may attempt to hide drugs and other contraband on vessels, with or without the knowledge of crew members. To the extent our vessels are found with contraband, whether inside or attached to the hull of our vessel and whether with or without the knowledge of any of our crew, we may face governmental or other regulatory claims that could have an adverse effect on our business, results of operations, cash flows, financial condition and ability to pay dividends.

 

24

 

Maritime claimants could arrest our vessels or vessels we acquire, 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 that vessel for unsatisfied debts, claims or damages. In many jurisdictions, a maritime lienholder may enforce its lien by “arresting” or “attaching” a vessel through foreclosure proceedings. The arrest or attachment of one or more of our vessels or vessels we acquire could result in a significant loss of earnings for the related off-hire period. In addition, in jurisdictions where the “sister ship” theory of liability applies, a claimant may arrest 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. In countries with “sister ship” liability laws, claims might be asserted against us or any of our vessels for liabilities of other vessels that we own.

 

Governments could requisition our vessels or vessels we acquire during a period of war or emergency, resulting in loss of earnings.

 

A government could requisition vessels for title or hire. Requisition for title occurs when a government takes control of a vessel and becomes the owner. Requisition for hire occurs when a government takes control of a vessel and effectively becomes the charterer at dictated charter rates. Generally, requisitions occur during a period of war or emergency. Government requisition of any of our vessels or vessels we acquire could negatively impact our revenues should we not receive adequate compensation.

 

U.S. federal tax authorities could treat us as a passive foreign investment company, which could have adverse U.S. federal income tax consequences to U.S. shareholders.

 

A foreign corporation will be treated as a “passive foreign investment company,” or PFIC, for U.S. 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, 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. Income derived from the performance of services does not constitute “passive income” for this purpose. U.S. shareholders of a PFIC are subject to a disadvantageous U.S. federal income tax regime with respect to the income derived by the PFIC, the distributions they receive from the PFIC and the gain, if any, they derive from the sale or other disposition of their shares in the PFIC.

 

In general, income derived from the bareboat charter of a vessel should be treated as “passive income” for purposes of determining whether a foreign corporation is a PFIC, and such vessel should be treated as an asset which produces or is held for the production of “passive income.”  On the other hand, income derived from the time charter of a vessel should not be treated as “passive income” for such purpose, but rather should be treated as services income; likewise, a time chartered vessel should generally not be treated as an asset which produces or is held for the production of “passive income.”

 

We believe that we were not a PFIC for our 2014 through 2021 taxable years and do not expect to be treated as a PFIC in subsequent taxable years. 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.

 

Our U.S. shareholders may face adverse U.S. federal income tax consequences and certain information reporting obligations as a result of us being treated as a PFIC.  Under the PFIC rules, unless those shareholders make an election available under the Code (which election could itself have adverse consequences for such shareholders, as discussed below under “Taxation– U.S. Federal Income Consequences—U.S. Federal Income Taxation of U.S. Holders”), such shareholders would be liable to pay U.S. 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 their common shares, as if the excess distribution or gain had been recognized ratably over the shareholder’s holding period of the common shares.  See “Taxation —U.S. Federal Income Consequences—U.S. Federal Income Taxation of U.S. Holders” for a more comprehensive discussion of the U.S. federal income tax consequences to U.S. shareholders as a result of our status as a PFIC.

 

We are subject to U.S. federal income tax on our U.S. source income, which will reduce our earnings.

 

Under the U.S. 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 is characterized as U.S. source shipping income and such income is subject to a 4% U.S. federal income tax without allowance for deduction, unless that corporation qualifies for exemption from tax under Section 883 of the Code.

 

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We did not qualify for the tax exemption under Section 883 of the Code for our 2021 taxable year. Therefore, we and our subsidiaries are subject to an effective 2% U.S. federal income tax on the gross shipping income we derived during 2021 that is attributable to the transport of cargoes to or from the United States. We estimate the amount of this tax for our 2021 taxable year to be approximately $152,000.

 

We are a foreign private issuer, which could make our common shares less attractive to some investors or otherwise harm our stock price.

 

We are a “foreign private issuer,” as such term is defined in Rule 405 under the Securities Act of 1933, as amended, or the Securities Act. As a “foreign private issuer” the rules governing the information that we disclose differ from those governing U.S. corporations pursuant to the Securities Exchange Act of 1934, as amended, or the Exchange Act. We are not required to file quarterly reports on Form 10-Q or provide current reports on Form 8-K disclosing significant events within four days of their occurrence. In addition, our officers and directors are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act and related rules with respect to their purchase and sales of our securities. Our exemption from the rules of Section 16 of the Exchange Act regarding sales of common shares by insiders means that you will have less data in this regard than shareholders of U.S. companies that are subject to the Exchange Act. Moreover, we are exempt from the proxy rules, and proxy statements that we distribute will not be subject to review by the Commission. Accordingly there may be less publicly available information concerning us than there is for other U.S. public companies. These factors could make our common shares less attractive to some investors or otherwise harm our stock price.

 

 

RISKS RELATED TO OUR COMMON SHARES

 

Our share price may continue to be highly volatile, which could lead to a loss of all or part of a shareholders investment.

 

The market price of our common shares has fluctuated widely since our common shares began trading in July of 2004 on the Nasdaq Stock Market LLC.

 

The market price of our common shares is affected by a variety of factors, including:

 

•         fluctuations in interest rates;

•         fluctuations in the availability or the price of oil and chemicals;

•         fluctuations in foreign currency exchange rates;

•         announcements by us or our competitors;

•         changes in our relationships with customers or suppliers;

•         actual or anticipated fluctuations in our semi-annual and annual results and those of other public companies in our industry;

•         changes in United States or foreign tax laws;

•         actual or anticipated fluctuations in our operating results from period to period;

•         shortfalls in our operating results from levels forecast by securities analysts;

•         market conditions in the shipping industry and the general state of the securities markets;

•         business interruptions caused by the ongoing outbreak of COVID-19;

•         mergers and strategic alliances in the shipping industry;

•         changes in government regulation;

•         a general or industry-specific decline in the demand for, and price of, shares of our common shares resulting from capital market conditions independent of our operating performance;

•         the loss of any of our key management personnel;

•         our failure to successfully implement our business plan;

•         issuance of shares; and

•         stock splits / reverse stock splits.

 

In addition, over the last few years, the stock market has experienced price and volume fluctuations, including due to factors relating to the ongoing outbreak of COVID-19, and this volatility has sometimes been unrelated to the operating performance of particular companies. As a result, there is a potential for rapid and substantial decreases in the price of our common shares, including decreases unrelated to our operating performance or prospects. During 2021, the price of our common shares experienced a high of $3.89 in February and a low of $0.81 in December. This market and share price volatility relating to the effects of COVID -19, as well as general economic, market or political conditions, has and could further reduce the market price of our common shares in spite of our operating performance and could also increase our cost of capital, which could prevent us from accessing debt and equity capital on terms acceptable to us or at all.

 

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In addition, a possible “short squeeze” due to a sudden increase in demand of our common stock that largely exceeds supply may lead to further price volatility in our common shares. Investors may purchase our common shares to hedge existing exposure in our common shares or to speculate on the price of our common shares. Speculation on the price of our common shares may involve long and short exposures. To the extent aggregate short exposure exceeds the number of common shares available for purchase in the open market, investors with short exposure may have to pay a premium to repurchase our common shares for delivery to lenders of our common shares. Those repurchases may in turn, dramatically increase the price of our common shares until investors with short exposure are able to purchase additional common shares to cover their short position. This is often referred to as a “short squeeze.” Following such a short squeeze, once investors purchase the shares necessary to cover their short position, the price of our common shares may rapidly decline. A short squeeze could lead to volatile price movements in our shares that are not directly correlated to the performance or prospects of our company. 

 

There is no guarantee of a continuing public market for you to resell our common shares.

 

Our common shares currently trade on the Nasdaq Capital Market. We cannot assure you that an active and liquid public market for our common shares will continue and you may not be able to sell your common shares in the future at the price that you paid for them or at all. The price of our common shares may be volatile and may fluctuate due to factors such as:

 

 

actual or anticipated fluctuations in our quarterly and annual results and those of other public companies in our industry;

 

mergers and strategic alliances in the shipping industry;

 

market conditions in the shipping industry and the general state of the securities markets;

 

changes in government regulation;

 

shortfalls in our operating results from levels forecast by securities analysts; and

 

announcements concerning us or our competitors.

 

Further, a lack of trading volume in our stock may affect investors’ ability to sell their shares. Our common shares have periodically had low daily trading volumes in the market. As a result, investors may be unable to sell all or any of their shares in the desired time period, or may only be able to sell such shares at a significant discount to the previous closing price.

 

Nasdaq may delist our common shares from its exchange which could limit your ability to make transactions in our securities and subject us to additional trading restrictions.

 

On July 27, 2016, we transferred our Nasdaq listing from the Nasdaq Global Select Market to the Nasdaq Capital Market. Our common shares continue to trade on Nasdaq under the symbol “TOPS”. The Nasdaq Capital Market is a continuous trading market that operates in substantially the same manner as the Nasdaq Global Select Market. We then fulfilled the listing requirements of the Nasdaq Capital Market and the approval of the transfer cured our deficiency under Nasdaq Listing Rule 5450(b)(1)(C).

 

On June 27, 2017, we received written notification from Nasdaq, indicating that because the closing bid price of our common shares for the last 30 consecutive business days was below $1.00 per share, we no longer met the minimum bid price requirement for the Nasdaq Capital Market, set forth in Nasdaq Listing Rule 5450(a)(1). Pursuant to the Nasdaq Listing Rules, the applicable grace period to regain compliance was 180 days, or until December 26, 2017. We regained compliance on August 17, 2017.

 

On October 10, 2017, we received written notification from Nasdaq indicating that because the closing bid price of our common shares for the last 30 consecutive business days was below $1.00 per share, we no longer meet the minimum bid price requirement for the Nasdaq Capital Market, set forth in Nasdaq Listing Rule 5450(a)(1). Pursuant to the Nasdaq Listing Rules, the applicable grace period to regain compliance is 180 days, or until April 9, 2018. After requesting a grace period from Nasdaq, we regained compliance on April 11, 2018.

 

On March 11, 2019, we received written notification from Nasdaq, indicating that because the closing bid price of our common shares for the last 30 consecutive business days was below $1.00 per share, we no longer met the minimum bid price requirement for the Nasdaq Capital Market, set forth in Nasdaq Listing Rule 5450(a)(1). Pursuant to the Nasdaq Listing Rules, the applicable grace period to regain compliance is 180 days, or until September 9, 2019.

 

On August 22, 2019 we effectuated a 20 to 1 reverse stock split in order to regain compliance with Nasdaq Listing Rule 5450(a)(1). As a result, we regained compliance on September 5, 2019.

 

On December 26, 2019, we received a written notification from Nasdaq indicating that because the closing bid price of our common shares for the last 30 consecutive business days was below $1.00 per share, we no longer met the minimum bid price requirement under Nasdaq rules. On April 17, 2020 we received a written notification from Nasdaq granting an extension to the grace period for regaining compliance. On August 7, 2020 we effectuated a 25 to 1 reverse stock split in order to regain compliance with Nasdaq Listing Rule 5450(a)(1). As a result, we regained compliance on August 25, 2020.

 

On January 26, 2022, we received a written notification from Nasdaq indicating that because the closing bid price of our common shares for the last 30 consecutive business days was below $1.00 per share, we no longer met the minimum bid price requirement under Nasdaq rules. We regained compliance on March 22, 2022.

 

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A continued decline in the closing price of our common shares on Nasdaq could result in suspension or delisting procedures in respect of our common shares. The commencement of suspension or delisting procedures by an exchange remains, at all times, at the discretion of such exchange and would be publicly announced by the exchange. If a suspension or delisting were to occur, there would be significantly less liquidity in the suspended or delisted securities. In addition, our ability to raise additional necessary capital through equity or debt financing would be greatly impaired. Furthermore, with respect to any suspended or delisted common shares, we would expect decreases in institutional and other investor demand, analyst coverage, market making activity and information available concerning trading prices and volume, and fewer broker-dealers would be willing to execute trades with respect to such common shares. A suspension or delisting would likely decrease the attractiveness of our common shares to investors and constitutes a breach under certain of our credit agreements as well as constitutes an event of default under certain classes of our preferred stock and would cause the trading volume of our common shares to decline, which could result in a further decline in the market price of our common shares.

 

Finally, if the volatility in the market continues or worsens, it could have a further adverse effect on the market price of our common shares, regardless of our operating performance.

 

We have issued common shares in the past through various transactions. Shareholders may experience significant dilution as a result of our offerings.

 

We have already sold large quantities of our common shares pursuant to previous public and private offerings of our equity and equity-linked securities. We currently have an effective registration statement on Form F-3 (333-234281), for the registered sale of $200 million of our securities, of which we have sold $129.7 million. We also have 13,452 Series E Preferred Shares outstanding, which are convertible into approximately 17,470,130 shares as of April 13, 2022. All of the Series E Preferred Shares are held by Family Trading.

 

Purchasers of the common shares we sell, as well as our existing shareholders, will experience significant dilution if we sell shares at prices significantly below the price at which they invested. In addition, we may issue additional common shares or other equity securities of equal or senior rank in the future in connection with, among other things, debt prepayments, future vessel acquisitions, redemptions of our Series E Preferred Shares, or any future equity incentive plan, without shareholder approval, in a number of circumstances. Our existing shareholders may experience significant dilution if we issue shares in the future at prices below the price at which previous shareholders invested.

 

Our issuance of additional shares of common shares or other equity securities of equal or senior rank would have the following effects:

 

 

our existing shareholders’ proportionate ownership interest in us will decrease;

 

the amount of cash available for dividends payable on the shares of our common shares may decrease;

 

the relative voting strength of each previously outstanding common share may be diminished; and

 

the market price of the shares of our common shares may decline.

 

Future issuances or sales, or the potential for future issuances or sales, of our common shares may cause the trading price of our securities to decline and could impair our ability to raise capital through subsequent equity offerings.

 

We have issued a significant number of our common shares and we may do so in the future. Shares to be issued in future equity offerings could cause the market price of our common shares to decline, and could have an adverse effect on our earnings per share. In addition, future sales of our common shares or other securities in the public markets, or the perception that these sales may occur, could cause the market price of our common shares to decline, and could materially impair our ability to raise capital through the sale of additional securities.

 

The market price of our common shares could decline due to sales, or the announcements of proposed sales, of a large number of common shares in the market, including sales of common shares by our large shareholders, or the perception that these sales could occur. These sales or the perception that these sales could occur could also depress the market price of our common shares and impair our ability to raise capital through the sale of additional equity securities or make it more difficult or impossible for us to sell equity securities in the future at a time and price that we deem appropriate. We cannot predict the effect that future sales of common shares or other equity-related securities would have on the market price of our common shares.

 

Our Third Amended and Restated Articles of Incorporation, as amended, authorizes our Board of Directors to, among other things, issue additional shares of common or preferred stock or securities convertible or exchangeable into equity securities, without shareholder approval. We may issue such additional equity or convertible securities to raise additional capital. The issuance of any additional shares of common or preferred stock or convertible securities could be substantially dilutive to our shareholders. Moreover, to the extent that we issue restricted stock units, stock appreciation rights, options or warrants to purchase our common shares in the future and those stock appreciation rights, options or warrants are exercised or as the restricted stock units vest, our shareholders may experience further dilution. Holders of shares of our common shares have no preemptive rights that entitle such holders to purchase their pro rata share of any offering of shares of any class or series and, therefore, such sales or offerings could result in increased dilution to our shareholders.

 

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Future issuance of common shares may trigger anti-dilution provisions in our Series E Preferred Shares and affect the interests of our common shareholders.

 

The Series E Preferred Shares contain anti-dilution provisions that have been triggered by securities we have issued, including common shares, convertible preferred shares, and warrants, and could further be triggered by future issuances of the same or similar types of securities, depending on the offering price of equity issuances, the conversion price or formula of convertible shares or the exercise price or formula of warrants. Any issuance below the then applicable conversion price of the Series E Preferred Shares, could result in an adjustment downward of the Series E Preferred Shares conversion price and an increase in the number of common shares each Series E Share is converted into. These adjustments could affect the interests of our common shareholders and the trading price for our common shares. Furthermore the Series E Preferred Shares holders have the option to replace the fixed conversion price with a variable conversion price, namely 80% of the lowest daily Volume-Weighted Average Price (“VWAP”) of our common shares over the 20 consecutive trading days expiring on the trading day immediately prior to the date of delivery of a conversion notice (but in no event can this variable conversion price be less than $0.60 (“Floor Price”)) and purchase such proportionate number of shares based on the variable conversion price in effect on the date of conversion. If using the variable conversion price of the Series E Preferred Shares, as of April 13, 2022, the Series E Preferred Shares have a conversion price of $0.77 and are convertible into 17,470,130 common shares per Series E Share, as may be further adjusted. Moreover, future issuance of other equity or debt convertible into or issuable or exchangeable for common shares at a price per share less than the then current conversion price of the Series E Preferred Shares would result in similar adjustments.

 

We are incorporated in the Republic of the Marshall Islands, which does not have a well-developed body of corporate law, and as a result, shareholders may have fewer rights and protections under Marshall Islands law than under a typical jurisdiction in the United States.

 

Our corporate affairs are governed by our Third Amended and Restated Articles of Incorporation, as amended, our By-laws, and by the Marshall Islands Business Corporations Act, or the BCA. The provisions of the BCA resemble provisions of the corporation laws of a number of states in the United States. However, there have been few judicial cases in the Republic of the Marshall Islands interpreting the BCA. The rights and fiduciary responsibilities of directors under the law of the Republic of the Marshall Islands are not as clearly established as the rights and fiduciary responsibilities of directors under statutes or judicial precedent in existence in certain United States jurisdictions. Shareholder rights may differ as well. While the BCA does specifically incorporate the non-statutory law, or judicial case law, of the State of Delaware and other states with substantially similar legislative provisions, our public shareholders may have more difficulty in protecting their interests in the face of actions by management, directors or controlling shareholders than would shareholders of a corporation incorporated in a United States jurisdiction.

 

It may not be possible for investors to serve process on or enforce U.S. judgments against us.

 

We and all of our subsidiaries are incorporated in jurisdictions outside the U.S. and substantially all of our assets and those of our subsidiaries are located outside the U.S. In addition, all of our directors and officers are non-residents of the U.S., and all or a substantial portion of the assets of these non-residents 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, our subsidiaries or our directors and 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 or our subsidiaries are incorporated or where our assets or the assets of our subsidiaries are located (1) would enforce judgments of U.S. courts obtained in actions against us or our subsidiaries based upon the civil liability provisions of applicable U.S. federal and state securities laws or (2) would enforce, in original actions, liabilities against us or our subsidiaries based on those laws.

 

Our By-laws provide that the High Court of the Republic of Marshall Islands shall be the sole and exclusive forum for certain disputes between us and our shareholders, which could limit our shareholders ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.

 

Our By-laws provide that, unless the Company consents in writing to the selection of an alternative forum, the High Court of the Republic of Marshall Islands, shall be the sole and exclusive forum for (i) any shareholders’ derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s shareholders, (iii) any action asserting a claim arising pursuant to any provision of the Business Corporations Act of the Republic of the Marshall Islands, or (iv) any action asserting a claim governed by the internal affairs doctrine. This forum selection provision may limit a shareholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage lawsuits with respect to such claims.

 

We may not achieve the intended benefits of having a forum selection provision if it is found to be unenforceable.

 

Our By-laws include a forum selection provision as under the section herein entitled “Item 10. Additional Information—B. Memorandum and Articles of Association. However, the enforceability of similar forum selection provisions in other companies’ governing documents has been challenged in legal proceedings, and it is possible that in connection with any action a court could find the forum selection provision contained in our By-laws to be inapplicable or unenforceable in such action. If a court were to find the forum selection provision to be inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business, financial condition and results of operations.

 

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Anti-takeover provisions in our organizational documents could have the effect of discouraging, delaying or preventing a merger, amalgamation or acquisition, which could reduce the market price of our common shares.

 

Several provisions of our Third Amended and Restated Articles of Incorporation, as amended, and Amended and Restated By-laws could make it difficult for our shareholders to change the composition of our board of directors in any one year, preventing them from changing the composition of management. In addition, the same provisions may discourage, delay or prevent a merger or acquisition that shareholders may consider favorable.

 

These provisions include:

 

 

authorizing our Board of Directors to issue “blank check” preferred stock without stockholder approval;

 

providing for a classified Board of Directors with staggered, three-year terms;

 

prohibiting cumulative voting in the election of directors;

 

authorizing the removal of directors only for cause and only upon the affirmative vote of the holders of at least 80% of the outstanding shares of our capital stock entitled to vote for the directors;

 

prohibiting shareholder action by written consent unless the written consent is signed by all shareholders entitled to vote on the action;

 

limiting the persons who may call special meetings of shareholders;

 

establishing advance notice requirements for nominations for election to our Board of Directors or for proposing matters that can be acted on by shareholders at shareholder meetings; and

 

restricting business combinations with interested shareholders.

 

In addition, we have entered into a stockholders rights agreement that makes it more difficult for a third party to acquire a significant stake in the Company without the support of our Board of Directors. See “Item 10. Additional Information—B. Memorandum and Articles of Association—Stockholders Rights Agreement.”

 

The above anti-takeover provisions and the provisions of our stockholders rights agreement could substantially impede the ability of public shareholders to benefit from a change in control and, as a result, may adversely affect the market price of our common shares and your ability to realize any potential change of control premium.

 

 

RISKS RELATED TO OUR RELATIONSHIP WITH OUR FLEET MANAGER AND ITS AFFILIATES

 

We are dependent on our Fleet Manager to perform the day-to-day management of our fleet.

 

Our executive management team, provided by Central Mare, consists of Evangelos J. Pistiolis; Alexandros Tsirikos, our Chief Financial Officer and Director; Vangelis G. Ikonomou our Chief Operating Officer and Konstantinos Patis, our Chief Technical Officer. We subcontract the day-to-day vessel management of our fleet, including crewing, maintenance and repair to our Fleet Manager. Furthermore, upon delivery of any vessels we may acquire, we expect to subcontract their day-to-day management to our Fleet Manager. Our Fleet Manager is a related party affiliated with the family of Mr. Pistiolis. We are dependent on our Fleet Manager for the technical and commercial operation of our fleet as well as for all accounting and reporting functions and the loss of our Fleet Manager’s services or its failure to perform obligations to us could materially and adversely affect the results of our operations. If our Fleet Manager suffers material damage to its reputation or relationships it may harm our ability to:

 

 

continue to operate our vessels and service our customers;

 

renew existing charters upon their expiration;

 

obtain new charters;

 

obtain financing on commercially acceptable terms;

 

obtain insurance on commercially acceptable terms;

 

maintain satisfactory relationships with our customers and suppliers; and

 

successfully execute our growth strategy.

 

Our Fleet Manager is a privately held company and there may be limited or no publicly available information about it.

 

Our Fleet Manager is a privately held company. The ability of our Fleet Manager to provide services for our benefit will depend in part on its own financial strength. Circumstances beyond our control could impair our Fleet Manager’s financial strength, and there may be limited publicly available information about its financial condition. As a result, an investor in our common shares might have little advance warning of problems affecting our Fleet Manager, even though these problems could have a material adverse effect on us.

 

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Our Fleet Manager may have conflicts of interest between us and its other clients.

 

We subcontract the day-to-day vessel management of our fleet, including crewing, maintenance and repair to our Fleet Manager. Our Fleet Manager may provide similar services for vessels owned by other shipping companies, and it also may provide similar services to companies with which our Fleet Manager is affiliated. These responsibilities and relationships could create conflicts of interest between our Fleet Manager’s performance of its obligations to us, on the one hand, and our Fleet Manager’s performance of its obligations to its other clients, on the other hand. These conflicts may arise in connection with the crewing, supply provisioning and operations of the vessels in our fleet versus vessels owned by other clients of our Fleet Manager. In particular, our Fleet Manager may give preferential treatment to vessels owned by other clients whose arrangements provide for greater economic benefit to our Fleet Manager. These conflicts of interest may have an adverse effect on our results of operations.

 

ITEM 4.         INFORMATION ON THE COMPANY

 

A.         History and Development of the Company

 

Our predecessor, Ocean Holdings Inc., was formed as a corporation in January 2000 under the laws of the Republic of the Marshall Islands and renamed Top Tankers Inc. in May 2004. In December 2007, Top Tankers Inc. was renamed TOP Ships Inc. Our common shares are currently listed on Nasdaq under the symbol "TOPS." The current address of our principal executive office is 1 Vasilisis Sofias and Megalou Alexandrou Str, 15124 Maroussi, Greece. The telephone number of our registered office is +30 210 812 8107. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of the SEC's Internet site is http://www.sec.gov. The address of our Internet site is https://www.topships.org.

 

On January 11, 2019, we entered into a warrant exchange agreement with the sole holder of the warrants issued in a registered direct offering in October 2018 (the “2018 Warrants”) for the reduction of the exercise price of said warrants from $750 to $510. On the same date 300,000 2018 Warrants were exercised into 600 common shares. On February 5, 2019, we entered an amendment of the 2018 Warrants for the reduction of the exercise price of said warrants from $510 to $350. On the same date 714,285 2018 Warrants were exercised into 1,429 common shares. Between February 21 and February 25, 2019 the remaining 932,715 2018 Warrants were exercised into 1,865 common shares.

 

On January 30, 2019, we took delivery of M/T Eco California. On February 4, 2019 the vessel commenced its’ time charter agreement with Shell Tankers Singapore Private Limited (“Shell”). In November 2020, we sold this vessel (see below for further information.

 

On March 11, 2019, we received written notification from Nasdaq, indicating that because the closing bid price of our common shares for the last 30 consecutive business days was below $1.00 per share, we no longer met the minimum bid price requirement for the Nasdaq Capital Market, set forth in Nasdaq Listing Rule 5450(a)(1). We regained compliance on September 9, 2019.

 

On March 13, 2019, we took delivery of M/T Eco Marina Del Ray. On March 18, 2019 the vessel commenced its time charter agreement with Cargill and concurrently agreements were consummated for the vessel’s SLB to Cargill.

 

On April 1, 2019, we announced the sale of 27,129 newly issued Series E Preferred Shares at a price of $1,000 per share to Family Trading, in exchange for the full and final settlement of the loan facility between us and Family Trading dated December 23, 2015, as amended. For more information please see “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions” and “Item 10. Additional Information—B. Memorandum and Articles of Association.”

 

On April 5, 2019, we announced the delivery to us of the 157,000 dwt newbuilding Suezmax vessel M/T Eco Bel Air, constructed at the Hyundai Samho shipyard in South Korea.

 

On May 9, 2019, we announced the delivery to us of the 157,000 dwt newbuilding Suezmax vessel M/T Eco Beverly Hills, constructed at the Hyundai Samho shipyard in South Korea.

 

On July 15, 2019, we entered into SLBs with Oriental Fleet International Company Limited, a non-affiliated party, for M/T Stenaweco Excellence, and on August 30, 2019 for M/T Stenaweco Energy and M/T Stenaweco Evolution. The sale and leaseback of the M/T Stenaweco Excellence took place on July 15, 2019 and the sale and leasebacks of the M/T Stenaweco Energy and M/T Stenaweco Evolution took place on November 20, 2019. Prior to the aforementioned sale and lease backs, on November 20, 2019, we exercised the purchase options on the operating leases of the M/T Stenaweco Energy and M/T Stenaweco Evolution for a total of $47.9 million. Following the sales, we bareboat chartered back the three vessels for periods of ten years at bareboat hire rates comprising of financing principal based on straight-line amortization with a balloon payment at maturity plus interest based on the three months Libor plus 3.90% per day. As part of this transaction, we had continuous options to buy back the vessels at purchase prices stipulated in the bareboat agreements depending on when the option is exercised and at the end of the ten-year period we have an obligation to purchase the vessels. The gross proceeds from the sale of the M/T Stenaweco Excellence were $25.6 million and the total gross proceeds for the M/T Stenaweco Energy and M/T Stenaweco Evolution were $45.8 million.

 

From July 25, 2019 to March 19, 2020, we redeemed 33,798 of Series E Preferred Shares for an aggregate purchase price of $38.9 million.

 

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On July 31, 2019, all outstanding warrants that we issued on July 11, 2014 (the “2014 Warrants”) expired.

 

On August 22, 2019, we effected a 1-for-20 reverse stock split of our common shares. There was no change in the number of our authorized common shares. All share amounts in this report, not including amounts incorporated by reference, have been retroactively adjusted to reflect this reverse stock split.

 

On September 13, 2019, we closed an underwritten public offering of an aggregate of 63,200 common shares (or pre-funded warrants to purchase common shares in lieu thereof, the Pre-Funded Warrants), warrants, or the Traditional Warrants, to purchase up to 71,600 of our common shares and an overallotment option of up to 9,480 shares, together the September 2019 Transaction. This resulted in gross proceeds of $10.5 million before deducting underwriting discounts, commissions and other offering expenses. The gross proceeds include the partial exercise of 3,400 common shares of the underwriter’s over-allotment option granted in connection with the offering. From September 13 to December 31, 2019, 49,803 common shares were issued pursuant to the cashless exercise of 1,778,700 Traditional Warrants. The Traditional Warrants expired on December 31, 2019.

 

On October 14, 2019, we entered into a deed of Amendment for the AT Bank Bridge Facility Note dated March 22, 2019 in the amount of $10.5 million, or the AT Note, which among other things, extended the maturity date of the AT Bank Bridge Note for one year to March 31, 2021.

 

On November 6, 2019, we entered into a placement agent agreement with Maxim Group LLC relating to the sale of our securities, or the November 2019 Placement Agent Agreement. Pursuant to the November 2019 Placement Agent Agreement, we entered into a Securities Purchase Agreement, or the November 2019 Purchase Agreement, with certain institutional investors in connection with a registered direct offering of an aggregate of 168,000 of our common shares at a public offering price of $50.00 per share, registered on our Registration Statement on Form F-3 (333-215577), or the November 2019 Registered Offering. Concurrently with the November 2019 Registered Offering and pursuant to the November 2019 Purchase Agreement, we also commenced a private placement whereby we issued and sold Class A warrants to purchase up to 168,000 of our common shares, or the Class A Warrants, and Class B warrants to purchase up to 168,000 of our common shares, or the Class B Warrants.

 

On December 18, 2019, we purchased 100% of the issued and outstanding shares of Santa Catalina Inc., a Marshall Islands company that had entered into a new building contract for a high specification scrubber-equipped, 50,000 dwt MR product/chemical tanker to be named Eco Los Angeles delivered on February 10, 2020 from Hyundai Mipo Dockyard Co., Ltd. in South Korea. We acquired the shares from an entity affiliated with our Chief Executive Officer for an aggregate purchase price of $7.2 million. We also purchased 100% of the issued and outstanding shares of Santa Monica Inc., a Marshall Islands company that had entered into a new building contract for a high specification scrubber-equipped, 50,000 dwt MR product/chemical named Eco City of Angels delivered on February 17, 2020 from Hyundai Mipo Dockyard Co., Ltd. in South Korea. We acquired the shares from an entity affiliated with our Chief Executive Officer for an aggregate purchase price of $7.2 million. Following their delivery, both vessels entered into time charters with Trafigura for a firm duration of three years, with charterer’s option to extend for two additional years.

 

On December 26, 2019, we received a written notification from Nasdaq indicating that because the closing bid price of our common shares for the last 30 consecutive business days was below $1.00 per share, we no longer met the minimum bid price requirement under Nasdaq rules. On April 17, 2020 we received a written notification from Nasdaq granting an extension to the grace period for regaining compliance. On August 7, 2020 we effectuated a 25 to 1 reverse stock split in order to regain compliance with Nasdaq Listing Rule 5450(a)(1). As a result, we regained compliance on August 25, 2020.

 

On January 3, 2020, we announced that we agreed to sell two MR1 Product Tankers, the M/T Eco Fleet and the M/T Eco Revolution (each weighing 39,000 dwt) to unaffiliated third parties.  On January 14, 2020, the M/T Eco Revolution was delivered to its buyer and we received gross proceeds of $23.0 million, part of which were used to prepay in full the outstanding amount of $15.1 million under tranche A of our loan facility with ABN AMRO, or the ABN Facility.  On January 21, 2020, the M/T Eco Fleet was delivered to its buyer and we received $21.0 million, part of which were used to prepay in full the outstanding amount of $14.4 million under tranche B of the ABN Facility, resulting in the full prepayment of the ABN Facility. 

 

On February 10 and February 17, 2020 we took delivery of M/T Eco Los Angeles and M/T Eco City of Angels from the Hyundai Mipo Dockyard Co., Ltd. in South Korea respectively.

 

Between January 22 and February 21, 2020, all of the Class A Warrants (4,200,000 warrants) were exercised on a cashless basis into 67,200 of our common shares. No Class B Warrants were exercised prior to their expiration on May 7, 2021.

 

On February 12, 2020, we entered into an Equity Distribution Agreement with Maxim Group LLC, as sales agent, under which we could offer and sell, from time to time through Maxim, up to $5.0 million of our common shares. We completed the offering on March 4, 2020 and sold a total of 585,485 common shares.

 

On February 17, 2020, we announced the issuance of 16,004 Series E Preferred Shares to Family Trading, as settlement of the consideration outstanding for the purchase of the M/T Eco City of Angels and M/T Eco Los Angeles from Mr. Pistiolis, our President, Chief Executive Officer and Director, and for dividends payable to Family Trading Inc. under already outstanding Series E Preferred Shares.

 

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On February 21, 2020, we announced that our 50% owned subsidiaries which own M/T Holmby Hills and M/T Palm Springs entered into agreements to sell both vessels to unaffiliated third parties. On March 30, 2020, we announced the delivery of M/T Holmby Hills to an unaffiliated party.

 

On February 6, 2020, we announced that we agreed to sell two MR2 Product Tankers, the M/T Stenaweco Elegance and the M/T Palm Desert (each weighing 50,000 dwt) to unaffiliated third parties. On February 25, 2020, we announced the closing of the sale of the M/T Stenaweco Elegance and on March 23, 2020, we announced the conclusion of the sale of the M/T Palm Desert.

 

On March 11, 2020, we entered into an Equity Distribution Agreement with Maxim Group LLC, as sales agent, under which we could offer and sell, from time to time through Maxim, up to $5.0 million of our common shares.  We completed the offering on March 27, 2020 and sold a total of 2,107,708 common shares.

 

On March 30, April 15, April 27, April 28, May 14, May 19, June 7, June 10, June 14, June 23 and July 6, 2020, we closed registered direct offerings for the sale of an aggregate of 36,723,765 of our common shares for gross proceeds of $119.7 million with unaffiliated investors. Maxim acted as a placement agent for all of these registered direct offerings.

 

On April 20, 2020, we announced the closing of the sale of the MR Product Tanker, M/T Palm Springs, by our 50% owned subsidiary, Eco Nine Pte.

 

On April 24, 2020, we announced the purchase of 50% interests in two MR Product Tankers, M/T Yosemite Park and M/T Joshua Park from entities affiliated with our Chief Executive Officer for $27 million. Both vessels were delivered in March 2020 from Hyundai Mipo shipyard in South Korea.

 

On May 6, 2020 we purchased a 100% ownership interest in three Marshall Islands companies that each owned 100% interests in one scrubber-fitted 50,000 dwt one MR Product Tanker under construction in Hyundai Heavy Industries shipyard in South Korea, with attached time charters from entities affiliated with our Chief Executive Officer. The consideration amounted to $18 million and was scheduled to be paid in installments through the vessels’ delivery dates. The vessels, M/T Eco Van Nuys (Hull No 2789), M/T Eco Santa Monica (Hull No 2790) and M/T Eco Venice Beach (Hull No 2791) were scheduled to be delivered in the first quarter of 2021. In January 2021, we sold these three shipowning companies, as described below.

 

On May 28, 2020, we acquired for $22 million from a company affiliated with our Chief Executive Officer, or the Suezmax Seller, a 50% ownership interest in two Marshall Island companies that each had a newbuilding contract for the construction of one scrubber-fitted 157,000 dwt eco Suezmax tanker, the M/T Eco West Coast (Hull No 865) and the M/T Eco Malibu (Hull No 866), under construction in Hyundai Heavy Industries shipyard in South Korea, with attached time charters. The M/T Eco West Coast was delivered to us in March 2021 and commenced its time charter upon delivery. The M/T Eco Malibu was delivered in May 2021. We had the option to acquire the other 50% ownership interest in both vessels from the Suezmax Seller at the same price until July 15, 2020. On June 18, 2020, we exercised both purchase options for a consideration of $22 million.

 

On August 7, 2020, we effected a 1-for-25 reverse stock split of our common shares. There was no change in the number of our authorized common shares. All share amounts in this report, not including amounts incorporated by reference, have been retroactively adjusted to reflect this reverse stock split.

 

On August 17, 2020, we announced the authorization by our Board of Directors of a share repurchase program under which we could repurchase up to $5.1 million of our outstanding common shares, representing approximately 10% of our market capitalization as of August 14, 2020, for a period of three months (the “Repurchase Program”). No common stock purchases took place under the Repurchase Program.

 

On August 20, 2020, we announced that a company affiliated with our Chief Executive Officer, Mr. Pistiolis, purchased an aggregate of 100,000 of our common shares in the open market. In addition, we committed until August 21, 2021 that we would not (i) conduct any equity offerings, public or private; (ii) conduct any reverse stock splits; or (iii) pay any bonuses to our executive management. We also entered into a standstill agreement with Family Trading, pursuant to which Family Trading agreed not to convert any of its Series E Preferred Shares into common shares, other than in connection with a change of control of us.

 

On October 19, 2020, we announced the sale of M/T Stenaweco Excellence to an unaffiliated third party. The respective loan for which the vessel was collateral was fully prepaid.

 

On October 30, 2020, we announced the sale of M/T Stenaweco Energy to an unaffiliated third party. The respective loan for which the vessel was collateral was fully prepaid.

 

On November 6, 2020, we announced the sale of M/T Stenaweco Evolution to an unaffiliated third party. The respective loan for which the vessel was collateral was fully prepaid.

 

On November 13, 2020, we announced the sale of M/T Eco California to an unaffiliated third party. The respective loan for which the vessel was collateral was fully prepaid.

 

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On December 4, 2020, we announced the entrance into a refinancing facility for M/T Eco Beverly Hills and M/T Eco Bel Air pursuant to which the vessels were sold to unaffiliated third parties and leased back through bareboat charters for a period of 5 years.

 

On January 8, 2021, we announced the sale of the three shipowning companies that own M/T Eco Van Nuys (Hull No 2789), M/T Eco Santa Monica (Hull No 2790) and M/T Eco Venice Beach (Hull No 2791) to a related party affiliated with Mr. Evangelos J. Pistiolis in exchange for:

 

 

$10.0 million in cash.

 

 

100% ownership in a Marshall Islands company that was a party to a shipbuilding contract for a high specification scrubber fitted Suezmax Tanker delivered from Hyundai Samho shipyard in March 2022. The shipowning company is party to a time charter, starting from the vessel’s delivery, with a company affiliated with Mr. Evangelos J. Pistiolis, for a firm duration of five years at a gross daily rate of $32,450, with a charterer’s option to extend for two additional years at $33,950 and $35,450.

 

 

35% ownership in one Marshall Islands company that was a party to a shipbuilding contract for a high specification scrubber fitted VLCC tanker delivered from Hyundai Heavy Industries shipyard in January 2022. The shipowning company is party to a time charter, starting from the vessel’s delivery, with a major oil trader, for a firm duration of three years at a gross daily rate of $36,000, with a charterer’s option to extend for two additional years at $39,000 and $41,500.

 

 

35% ownership in one Marshall Islands company that was a party to a shipbuilding contract for a high specification scrubber fitted VLCC tanker delivered from Hyundai Heavy Industries shipyard in February 2022. The shipowning company is party to a time charter, starting from the vessel’s delivery, with a major oil trader, for a firm duration of three years at a gross daily rate of $35,750, with a charterer’s option to extend for two additional years at $39,000 and $41,500.

 

 

A forgiveness of $1.2 million in payables to the buyer.

 

The buyer would remain the guarantor on the shipbuilding contracts towards the shipyard and in addition, the buyer provided us with an option for a credit line up to 10% of the total shipbuilding cost at market terms, to be negotiated when the such option was to be exercised, amounting to $23.8 million.

 

On March 18, 2021, we entered into a credit facility with ABN Amro for $36.8 million for the financing of the vessel M/T Eco West Coast. This facility was drawn down in full. The credit facility is repayable in 24 consecutive quarterly installments of $0.62 million commencing in June 2021, plus a balloon installment of $22.0 million payable together with the last installment. The facility bears interest at LIBOR plus a margin of 2.50%.

 

On April 6, 2021, we took delivery of the vessel M/T Eco West Coast from the Hyundai Heavy Industries shipyard in South Korea.

 

On May 6, 2021, we entered into a senior debt facility with Alpha Bank of $38 million for the financing of the vessel M/T Eco Malibu. The loan is payable in 12 consecutive quarterly installments of $0.75 million followed by 12 consecutive quarterly installments of $0.63 million, commencing three months from draw down, and a balloon payment of $21.5 million payable together with the last installment. The facility bears interest at LIBOR plus a margin of 3.00%.

 

On May 11, 2021, we took delivery of the vessel M/T Eco Malibu from the Hyundai Heavy Industries shipyard in South Korea.

 

On September 1, 2021, we sold the M/T Nord Valiant to unaffiliated third parties for gross proceeds of $26.4 million, part of which were used to prepay in full the outstanding amount of the BoComm Leasing Facility.

 

On September 8, 2021, we issued 2,188 Series E Shares to Family Trading, as partial settlement of $2.2 million of the consideration outstanding from the VLCC Transaction.

 

On September 8, 2021 we purchased from a company affiliated with Mr. Evangelos J. Pistiolis (the “Seller”) for a consideration of $29.8 million an additional 65% ownership interest in each of Julius Caesar Inc. and Legio X Inc. (the “VLCC Companies”), each a party to shipbuilding contracts for VLCC Julius Caesar (Hull No. 3213) and VLCC Legio X Equestris (Hull No. 3214), respectively. Following this transaction (the “VLCC Transaction”), we became 100% owner of the VLCC Companies. The Seller remained the guarantor on the shipbuilding contracts towards the shipyard and in addition the Seller provided a financing option to the Company by remaining responsible to the shipyard for up to 20% of the shipbuilding cost per vessel (increased from 10%, as previously agreed on January 6, 2021), at our option, exercisable until each vessel’s delivery date.

 

On November 23, 2021 we entered into a credit facility with China Merchants Bank Financial Leasing Co. Ltd. ("CMBFL") for $108.0 million for the financing of the newbuilding vessels Julius Caesar (Hull No. 3213) and Legio X Equestris (Hull No. 3214). We drew down $54.0 million from the facility in January 2022 for the financing of the delivery of the M/T Julius Caesar and another $54.0 in March 2022 for the financing of the delivery of the M/T Legio X Equestris. For each of the vessels the credit facility is repayable in 32 consecutive quarterly installments of $0.7 million and a balloon payment of $32.4 million payable together with the last installment. The credit facility bears interest at LIBOR plus a margin of 2.60%.

 

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On November 24, 2021 we agreed to sell the M/T Eco Los Angeles and M/T Eco City of Angels to unaffiliated third parties for net proceeds after debt repayment of $18.6 million, with closing taking place on February 28 and March 15, 2022 respectively.

 

Recent Developments

 

On January 5, 2022, we entered into an unsecured credit facility for up to $20 million with Central Mare Inc. (the “Central Mare Unsecured Bridge Loan”), an affiliate of our CEO, in order to finance part of the shipbuilding cost of the 2 VLCCs. As of the date hereof, $9 million has been drawn down and subsequently repaid from proceeds from the sale of M/T Eco Los Angeles and the facility is now terminated. The maturity date of the loan was December 31, 2022. The principal terms of the loan included an arrangement fee of 2%, interest of 12% per annum and a commitment fee of 1.00% on the undrawn part of the facility.

 

On January 17, 2022, we entered into a stock purchase agreement with Africanus Inc, an affiliate of our CEO, for the sale of up to 7,560,759 newly-issued Series F Non-Convertible Perpetual Preferred Shares (“Series F Preferred Shares”), in exchange for (i) the assumption by Africanus Inc of an amount of $47.6 million of shipbuilding costs for its newbuilding vessels M/T Eco Oceano CA (Hull No. 871), M/T Julius Caesar (Hull No. 3213) and M/T Legio X Equestris (Hull No. 3214), and (ii) settlement of the Company’s remaining payment obligations relating to the VLCC Transaction, in an amount of up to $27.6 million. As of the date hereof, 7,200,000 Series F Preferred Shares have been issued, in connection with the deliveries of M/T Julius Caesar, M/T Legio X Equestris and M/T Eco Oceano Ca. and the settlement of $24.4 million of payment obligations relating to the VLCC Transaction. Please see our Report on Form 6-K filed on January 21, 2022 for a description of the terms of the Series F Preferred Shares.

 

On January 17, 2022 we took delivery of the vessel M/T Julius Caesar from the Hyundai Heavy Industries shipyard in South Korea.

 

On January 26, 2022, we received a notice from the Nasdaq Stock Market indicating that because the closing bid price of our common shares for the preceding 30 consecutive business days was below $1.00 per share, we no longer met the minimum bid price requirement for the Nasdaq Capital Market.  We regained compliance on March 22, 2022.

 

On February 14, 2022, the Company entered into time charter employment agreements with a major oil trader for M/T Eco Beverly Hills and for M/T Eco Bel Air, according to which upon completion of their current charters, the M/T Eco Beverly Hills and M/T Eco Bel Air will enter into a time charter for a minimum period of 20 months and a maximum period of 26 months (at charterers option) at daily rate of $24,000 per vessel. Charterers also have the option to further extend the time charter until December 1, 2025 for M/T Eco Beverly Hills and December 10, 2025 for M/T Eco Bel Air.

 

On February 22, 2022, we announced that, upon completion of their current charters during the first or second quarter of 2022, the M/T Eco Beverly Hills and M/T Eco Bel Air will enter into time charter employment with a major oil trader for a minimum period of 20 months and a maximum period of 26 months, at charterer’s option. Charterers also have the option to further extend the time charter until December 1, 2025 for M/T Eco Beverly Hills and December 10, 2025 for M/T Eco Bel Air. The daily rate for the entire period for both vessels is $24,000. On the same day we announced an amendment of a previously-agreed time charter with an affiliate of Evangelos Pistiolis which shall commence upon delivery of M/T Eco Oceano from Hyundai Samho shipyard, expected during the first quarter of 2022. According to the amendment, the firm period of the time charter employment is increased from 5 years to 15 years and the daily rate is reduced from $32,450 to $24,500.

 

On March 2, 2022, we took delivery of the vessel M/T Legio X Equestris from the Hyundai Heavy Industries shipyard in South Korea.

 

On March 2, 2022 we entered into a sale and leaseback with AVIC, for our newbuilding vessel Eco Oceano Ca (Hull No. 871) for total proceeds of $48.2 million. Consummation of the sale and leaseback took place on March 4, 2022. Following the sale, we have bareboat chartered back the vessel for a period of ten years at bareboat hire rates comprising of 40 consecutive quarterly installments of $0.68 million and a balloon payment of $21.1 million payable together with the last installment, plus interest based on the three months LIBOR plus 3.50%. As part of this transaction, we have continuous options to buy back the vessels at purchase prices stipulated in the bareboat agreements depending on when the option was exercised and at the end of the ten year period we have an obligation to buy back the vessels at a cost represented by the balloon payment.

 

On March 4, 2022, we took delivery of the vessel M/T Eco Oceano Ca from the Hyundai Samho shipyard in South Korea.

 

B.         Business Overview

 

We are an international owner and operator of modern, fuel efficient eco tanker vessels focusing on the transportation of crude oil, petroleum products (clean and dirty) and bulk liquid chemicals. Our operating fleet has a total capacity of 1,435,000 deadweight tonnes (“dwt”). As of the date of this annual report, our operating fleet consists of one 50,000 dwt product/chemical tanker, M/T Eco Marina Del Ray, five 157,000 dwt Suezmax tankers, the M/T Eco Bel Air, M/T Eco Beverly Hills, M/T Oceano CA, M/T Eco Malibu and M/T Eco West Coast, two 300,000 dwt Very Large Crude Carriers (VLCCs), M/T Julius Caesar and M/T Legio X Equestris, and we also own 50% interest in two 50,000 dwt product tankers, M/T Eco Yosemite Park and M/T Joshua Park. All of our vessels are IMO certified and are capable of carrying a wide variety of oil products including chemical cargos which we believe make our vessels attractive to a wide base of charterers.

 

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For more information, please see “Item 4. Information on the Company—A. History and Development of the Company—Recent Developments.”

 

We intend to continue to review the market in order to identify potential acquisition targets in line with our strategy.

 

We believe we have established a reputation in the international ocean transport industry for operating and maintaining vessels with high standards of performance, reliability and safety. We have assembled a management team comprised of executives who have extensive experience operating large and diversified fleets of tankers and who have strong ties to a number of national, regional and international oil companies, charterers and traders.

 

Our Fleet

 

The following tables present our fleet list as of the date of this annual report:

 

Operating MR Tanker Vessels on SLBs (treated as financings):

 

Name

Deadweight

Charterer

End of firm period

Charterers Optional Periods

Gross Rate fixed period/ options

M/T Eco Marina Del Ray

50,000

Cargill

March 2024

-

$15,100

 

Operating Suezmax Vessels on SLBs (treated as operating leases):

 

Name

Deadweight

Charterer

End of firm period

Charterers Optional Periods

Gross Rate fixed period/ options

M/T Eco Bel Air

157,000

Trafigura

March 2024

9 months

$24,000 / $24,000

M/T Eco Beverly Hills

157,000

BP Shipping Limited

May 2022

1+1 years

$24,500 / $27,500 / $29,000

 

Operating Suezmax Vessels on SLBs (treated as financings):

 

M/T Eco Oceano CA

157,000

Central Tankers Chartering Inc.

March 2037

none

$25,450

 

Operating Suezmax Vessels financed via senior loan facilities:

 

Name

Deadweight

Charterer

End of firm period

Charterers Optional Periods

Gross Rate fixed period/ options

M/T Eco West Coast

157,000

Clearlake

March 2024

1+1 years

$33,950 / $34,750 / $36,750

M/T Eco Malibu

157,000

Clearlake

May 2024

1+1 years

$33,950 / $34,750 / $36,750

 

Operating VLCC Vessels on SLBs (treated as financings):

 

Name

Deadweight

Charterer

End of firm period

Charterers Optional Periods

Gross Rate fixed period/ options

M/T Julius Caesar

300,000

Trafigura

January 2025

1+1 years

$36,000 / $39,000 / $41,500

M/T Legio X Equestris

300,000

Trafigura

February 2025

1+1 years

$35,750 / $39,000 / $41,500

 

Operating Joint Venture MR Tanker fleet (50% owned):

 

Name

Deadweight

Charterer

End of firm period

Charterers Optional Periods

Gross Rate fixed period/ options

M/T Eco Yosemite Park

50,000

Clearlake

March 2025

5+1+1 years

$17,400 / $18,650 / $19,900

M/T Eco Joshua Park

50,000

Clearlake

March 2025

5+1+1 years

$17,400 / $18,650 / $19,900

 

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All the vessels in our fleet are equipped with engines of modern design with improved Specific Fuel Oil Consumption (SFOC) and in compliance with the latest emission requirements, fitted with energy saving improvements in the hull, propellers and rudder as well as equipment that further reduces fuel consumption and emissions certified with an improved Energy Efficiency Design Index (Phase 2 compliance level as minimum). Vessels with this combination of technologies, introduced from certain shipyards, are commonly referred to as eco vessels. We believe that recent advances in shipbuilding design and technology makes these latest generation vessels more fuel-efficient than older vessels in the global fleet that compete with our vessels for charters, providing us with a competitive advantage. Furthermore, all of our vessels are fitted with ballast water treatment equipment and exhaust gas cleaning systems (scrubbers). 

 

Management of our Fleet

 

Our Fleet Manager provides all operational, technical and commercial management services for our fleet. Please see “Item 18. Financial Statements—Note 5—Transactions with Related Parties”.

 

Officers, Crewing and Employees

 

As of the date of this annual report we employ directly only one shore-based employee. Our executive officers and a number of administrative employees are provided according to an agreement with Central Mare. Please see “Item 18. Financial Statements—Note 5—Transactions with Related Parties”. In addition, our Fleet Manager is responsible for recruiting, mainly through a crewing agent, the senior officers and all other crew members for our vessels. We believe the streamlining of crewing arrangements will ensure that all our vessels will be crewed with experienced seamen that have the qualifications and licenses required by international regulations and shipping conventions.

 

The International Shipping Industry

 

The seaborne transportation industry is a vital link in international trade, with ocean going vessels representing the most efficient and often the only method of transporting large volumes of basic commodities and finished products. Demand for tankers is dictated by world oil demand and trade, which is influenced by many factors, including international economic activity; geographic changes in oil production, processing, and consumption; oil price levels; inventory policies of the major oil and oil trading companies; and strategic inventory policies of countries such as the United States, China and India.

 

Shipping demand, measured in tonne-miles, is a product of (a) the amount of cargo transported in ocean going vessels, multiplied by (b) the distance over which this cargo is transported. The distance is the more variable element of the tonne-mile demand equation and is determined by seaborne trading patterns, which are principally influenced by the locations of production and consumption. Seaborne trading patterns are also periodically influenced by geo-political events that divert vessels from normal trading patterns, as well as by inter-regional trading activity created by commodity supply and demand imbalances. Tonnage of oil shipped is primarily a function of global oil consumption, which is driven by economic activity as well as the long-term impact of oil prices on the location and related volume of oil production. Tonnage of oil shipped is also influenced by transportation alternatives (such as pipelines) and the output of refineries.

 

Demand for tankers and tonnage of oil shipped is primarily a function of global oil consumption, which is driven by economic activity, as well as the long-term impact of oil prices on the location and related volume of oil production. Global oil demand returned to limited growth in 2010 and has since been expanding at a modest pace, as a steady rise in Asia has outweighed decreasing demand in Europe and in the United States, with a notable exception for 2020 and 2021 in which years the COVID 19 epidemic dramatically reduced oil demand. According to the International Energy Agency, global oil demand for 2021 has increased to approximately 96.5 million barrels/day compared to approximately 91 million barrels/day during 2020.

 

We strategically monitor developments in the tanker industry on a regular basis and, subject to market demand, will seek to enter into shorter or longer time or bareboat charters according to prevailing market conditions.

 

We will compete for charters on the basis of price, vessel location, size, age and condition of the vessel, as well as on our reputation as an operator. We will arrange our time charters and bareboat charters through the use of brokers, who negotiate the terms of the charters based on market conditions. We will compete primarily with owners of tankers in the MR Product Tanker, Suezmax and VLCC class sizes. Ownership of tankers is highly fragmented and is divided among major oil companies and independent vessel owners.

 

Seasonality

 

Historically, oil trade and, therefore, charter rates increased in the winter months and eased in the summer months as demand for oil and oil products in the Northern Hemisphere rose in colder weather and fell in warmer weather. The tanker industry, in general, has become less dependent on the seasonal transport of heating oil than a decade ago as new uses for oil and oil products have developed, spreading consumption more evenly over the year. This is most apparent from the higher seasonal demand during the summer months due to energy requirements for air conditioning and motor vehicles. This seasonality may affect operating results. However, to the extent that our vessels are chartered at fixed rates on a long-term basis, seasonal factors will not have a significant direct effect on our business.

 

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Risk of Loss and Liability Insurance

 

General

 

The operation of any cargo vessel includes risks such as mechanical failure, physical damage, collision, property loss, cargo loss or damage and business interruption due to political circumstances in foreign countries, piracy incidents, hostilities and labor strikes. In addition, there is always an inherent possibility of marine disaster, including oil spills and other environmental mishaps, and the liabilities arising from owning and operating vessels in international trade. OPA, which imposes virtually unlimited liability upon shipowners, operators and bareboat charterers of any vessel trading in the exclusive economic zone of the United States for certain oil pollution accidents in the United States, has made liability insurance more expensive for shipowners and operators trading in the United States market. We carry insurance coverage as customary in the shipping industry. However, not all risks can be insured, specific claims may be rejected, and we might not be always able to obtain adequate insurance coverage at reasonable rates.

 

Hull and Machinery Insurance

 

We procure hull and machinery insurance, protection and indemnity insurance, which includes environmental damage and pollution insurance and war risk insurance and freight, demurrage and defense insurance for our fleet. We generally do not maintain insurance against loss of hire (except for certain charters for which we consider it appropriate), which covers business interruptions that result in the loss of use of a vessel.

 

Protection and Indemnity Insurance

 

Protection and indemnity insurance is provided by mutual protection and indemnity associations, or “P&I Associations,” and covers our third-party liabilities in connection with our shipping activities. This includes third-party liability and other related expenses of injury or death of crew, passengers and other third parties, 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. Protection and indemnity insurance is a form of mutual indemnity insurance, extended by protection and indemnity mutual associations, or “clubs.”

 

Our current protection and indemnity insurance coverage for pollution is $1 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. The International Group’s website states that the Pool provides a mechanism for sharing all claims in excess of US $10 million up to, currently, approximately US$8.2 billion. As a member of a P&I Association, which is a member of the International Group, we are subject to calls payable to the associations based on our claim records as well as the claim records of all other members of the individual associations and members of the shipping pool of P&I Associations comprising the International Group.

 

Environmental and Other Regulations in the Shipping Industry

 

Government regulation and laws significantly affect the ownership and operation of our fleet. We are subject to international conventions and treaties, national, state and local laws and regulations in force in the countries in which our 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 our vessels to both scheduled and unscheduled inspections. These entities include the local port authorities (applicable national authorities such as the United States Coast Guard (“USCG”), harbor master or equivalent), classification societies, flag state administrations (countries of registry) and charterers, particularly terminal operators. Certain of these entities require us to obtain permits, licenses, certificates and other authorizations for the operation of our vessels. Failure to maintain necessary permits or approvals could require us to incur substantial costs or result in the temporary suspension of the operation of one or more of our vessels.

 

Increasing environmental concerns have created a demand for vessels that conform to stricter environmental standards. We are required to maintain operating standards for all of our vessels that emphasize operational safety, quality maintenance, continuous training of our officers and crews and compliance with United States and international regulations. We believe that the operation of our vessels is in substantial compliance with applicable environmental laws and regulations and that our vessels have all material permits, licenses, certificates or other authorizations necessary for the conduct of our operations. However, because such laws and regulations frequently change and may impose increasingly stricter requirements, we cannot predict the ultimate cost of complying with these requirements, or the impact of these requirements on the resale value or useful lives of our vessels. In addition, a future serious marine incident that causes significant adverse environmental impact could result in additional legislation or regulation that could negatively affect our profitability.

 

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International Maritime Organization

 

The International Maritime Organization, the United Nations agency for maritime safety and the prevention of pollution by vessels (the “IMO”), adopted the International Convention for the Prevention of Pollution from Ships, 1973, as modified by the Protocol of 1978 relating thereto, collectively referred to as MARPOL 73/78 and herein as “MARPOL,” the International Convention for the Safety of Life at Sea of 1974 (“SOLAS Convention”), and the International Convention on Load Lines of 1966 (the “LL Convention”) and International Convention on Standards of Training, Certification and Watchkeeping for Seafarers (“STCW”). MARPOL establishes environmental standards relating to oil leakage or spilling, garbage management, sewage, air emissions, handling and disposal of noxious liquids and the handling of harmful substances in packaged forms. MARPOL is applicable to drybulk, tanker and LNG carriers, among other vessels, and is divided 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 in packaged form, respectively; Annexes IV and V relate to sewage and garbage management, respectively; and Annex VI, lastly, relates to air emissions. Annex VI was separately adopted by the IMO in September of 1997.

 

In 2013, the IMO’s Marine Environmental Protection Committee, or the “MEPC,” adopted a resolution amending MARPOL Annex I Condition Assessment Scheme, or “CAS.” These amendments became effective on October 1, 2014, and require compliance with the 2011 International Code on the Enhanced Programme of Inspections during Surveys of Bulk Carriers and Oil Tankers, or “ESP Code,” which provides for enhanced inspection programs. We may need to make certain financial expenditures to comply with these requirements.

 

Air Emissions

 

In September of 1997, the IMO adopted Annex VI to MARPOL to address air pollution from vessels. Effective May 2005, Annex VI sets limits on sulfur oxide and nitrogen oxide emissions from all commercial vessel exhausts and prohibits “deliberate emissions” of ozone depleting substances (such as halons and chlorofluorocarbons), emissions of volatile compounds from cargo tanks and the shipboard incineration of specific substances. Annex VI also includes a global cap on the sulfur content of fuel oil and allows for special areas to be established with more stringent controls on sulfur emissions, as explained below. Emissions of “volatile organic compounds” from certain vessels, and the shipboard incineration (from incinerators installed after January 1, 2000) of certain substances (such as polychlorinated biphenyls, or “PCBs”) are also prohibited. We believe that all our vessels are currently compliant in all material respects with these regulations.

 

The Marine Environment Protection Committee, or “MEPC,” adopted amendments to Annex VI regarding emissions of sulfur oxide, nitrogen oxide, particulate matter and ozone depleting substances, which entered into force on July 1, 2010. The amended Annex VI seeks to further reduce air pollution by, among other things, implementing a progressive reduction of the amount of sulfur contained in any fuel oil used on board ships. Effective January 1, 2020, there has been a global limit of 0.5% m/m sulfur oxide emissions (reduced from 3.50%). This limitation can be met by using low-sulfur compliant fuel oil, alternative fuels or certain exhaust gas cleaning systems. Ships are required to obtain bunker delivery notes and International Air Pollution Prevention (“IAPP”) Certificates from their flag states that specify sulfur content. Additionally, at MEPC 73, amendments to Annex VI to prohibit the carriage of bunkers above 0.5% sulfur on ships became effective on March 1, 2020. Additional amendments to Annex VI revising, among other terms, the definition of “Sulpher content of fuel oil” and “low-flashpoint fuel” and pertaining to the sampling and testing of onboard fuel oil, will become effective in 2022. These regulations subject ocean-going vessels to stringent emissions controls, and may cause us to incur substantial costs.

 

Sulfur content standards are even stricter within certain “Emission Control Areas,” or (“ECAs”). As of January 1, 2015, ships operating within an ECA were not permitted to use fuel with sulfur content in excess of 0.1% m/m. Amended Annex VI establishes procedures for designating new ECAs. Currently, the IMO has designated four ECAs, including specified portions of the Baltic Sea area, North Sea area, North American area and United States Caribbean Sea area. Ocean-going vessels in these areas will be subject to stringent emission controls and may cause us to incur additional costs. If other ECAs are approved by the IMO, or other new or more stringent requirements relating to emissions from marine diesel engines or port operations by vessels are adopted by the U.S. Environmental Protection Agency (“EPA”) or the states where we operate, compliance with these regulations could entail significant capital expenditures or otherwise increase the costs of our operations.

 

Amended Annex VI also establishes new tiers of stringent nitrogen oxide emissions standards for marine diesel engines, depending on their date of installation. Now Annex VI provides for a three-tier reduction in NOx emissions from marine diesel engines, with the final tier (or Tier III) to apply to engines installed on vessels constructed on or after January 1, 2016 and which operate in the North American ECA or the U.S. Caribbean Sea ECA as well as ECAs designated in the future by the IMO. At MEPC 70 and MEPC 71, the MEPC approved the North Sea and Baltic Sea as ECAs for nitrogen oxide for ships built on or after January 1, 2021. The EPA promulgated equivalent (and in some senses stricter) emissions standards in late 2009. Additionally, amendments to Annex II, which strengthen discharge requirements for cargo residues and tank washings in specified sea areas (including North West European waters, Baltic Sea area, Western European waters and Norwegian Sea), came into effect in January 2021.

 

As determined at the MEPC 70, the new Regulation 22A of MARPOL Annex VI became effective as of March 1, 2018 and requires ships above 5,000 gross tonnage to collect and report annual data on fuel oil consumption to an IMO database, with the first year of data collection commencing on January 1, 2019. The IMO intends to use such data as the first step in its roadmap (through 2023) for developing its strategy to reduce greenhouse gas emissions from ships, as discussed further below.

 

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As of January 1, 2013, MARPOL made mandatory certain measures relating to energy efficiency for ships. All ships are now required to develop and implement Ship Energy Efficiency Management Plans (“SEEMPS”), and new ships must be designed in compliance with minimum energy efficiency levels per capacity mile as defined by the Energy Efficiency Design Index (“EEDI”). Under these measures, by 2025, all new ships built will be 30% more energy efficient than those built in 2014.

 

We may incur costs to comply with these revised standards. Additional or new conventions, laws and regulations may be adopted that could require the installation of expensive emission control systems and could adversely affect our business, results of operations, cash flows and financial condition.

 

Safety Management System Requirements

 

The SOLAS Convention was amended to address the safe manning of vessels and emergency training drills.  The Convention of Limitation of Liability for Maritime Claims (the “LLMC”) sets limitations of liability for a loss of life or personal injury claim or a property claim against ship owners. We believe that our vessels are in substantial compliance with SOLAS and LLMC standards.

 

Under Chapter IX of the SOLAS Convention, or the International Safety Management Code for the Safe Operation of Ships and for Pollution Prevention (the “ISM Code”), our operations are also subject to environmental standards and requirements. The ISM Code requires the party with operational control of a vessel to develop an extensive safety management system that includes, among other things, the adoption of a safety and environmental protection policy setting forth instructions and procedures for operating its vessels safely and describing procedures for responding to emergencies. We rely upon the safety management system that we and our technical management team have developed for compliance with the ISM Code. The failure of a vessel owner or bareboat charterer to comply with the ISM Code may subject such party to increased liability, may decrease available insurance coverage for the affected vessels and may result in a denial of access to, or detention in, certain ports.

 

The ISM Code requires that vessel operators obtain a safety management certificate for each vessel they operate. This certificate evidences compliance by a vessel’s management with the ISM Code requirements for a safety management system. No vessel can obtain a safety management certificate unless its manager has been awarded a document of compliance, issued by each flag state, under the ISM Code. We have obtained applicable documents of compliance for our offices and safety management certificates for all of our vessels for which the certificates are required by the IMO. The document of compliance and safety management certificate are renewed as required.

 

Amendments to the SOLAS Convention Chapter VII apply to vessels transporting dangerous goods and require those vessels be in compliance with the International Maritime Dangerous Goods Code (“IMDG Code”). Effective January 1, 2018, the IMDG Code includes (1) updates to the provisions for radioactive material, reflecting the latest provisions from the International Atomic Energy Agency, (2) new marking, packing and classification requirements for dangerous goods and (3) new mandatory training requirements. Amendments to the IMDG Code relating to segregation requirements for certain substances, and classification and transport of carbon, following incidents involving the spontaneous ignition of charcoal, come into effect in June 2022.

 

The IMO has also adopted the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers (“STCW”). As of February 2017, all seafarers are required to meet the STCW standards and be in possession of a valid STCW certificate. Flag states that have ratified SOLAS and STCW generally employ the classification societies, which have incorporated SOLAS and STCW requirements into their class rules, to undertake surveys to confirm compliance.

 

Furthermore, recent action by the IMO’s Maritime Safety Committee and United States agencies indicate that cybersecurity regulations for the maritime industry are likely to be further developed in the near future in an attempt to combat cybersecurity threats. For example, effective January 2021, cyber-risk management systems must be incorporated by ship-owners and managers by 2021. This might cause companies to create additional procedures for monitoring cybersecurity, which could require additional expenses and/or capital expenditures. The impact of such regulations is hard to predict at this time.

 

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 an International Convention for the Control and Management of Ships’ Ballast Water and Sediments (the “BWM Convention”) in 2004. The BWM Convention entered into force on September 9, 2017. The BWM Convention requires ships to manage their ballast water to remove, render harmless or avoid the uptake or discharge of new or invasive aquatic organisms and pathogens within ballast water and sediments. 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, and require all ships to carry a ballast water record book and an international ballast water management certificate. 

 

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Specifically, ships over 400 gross tons generally must comply with a “D-1 standard,” requiring the exchange of ballast water only in open seas and away from coastal waters. The “D-2 standard” specifies the maximum amount of viable organisms allowed to be discharged, and compliance dates vary depending on the IOPP renewal dates. For most ships, compliance with the D-2 standard will involve installing on-board systems to treat ballast water and eliminate unwanted organisms. Ballast water management systems, which include systems that make use of chemical, biocides, organisms or biological mechanisms, or which alter the chemical or physical characteristics of the ballast water, must be approved in accordance with IMO Guidelines (Regulation D-3). Pursuant to the BWM Convention amendments that entered into force in October 2019, BWMS installed on or after October 28, 2020 shall be approved in accordance with BWMS Code, while BWMS installed before October 23, 2020 must be approved taking into account guidelines developed by the IMO or the BWMS Code. Costs of compliance with these regulations may be substantial. The cost of compliance could increase for ocean carriers and may have a material effect on our operations. However, many countries already regulate the discharge of ballast water carried by vessels from country to country to prevent the introduction of invasive and harmful species via such discharges. The U.S., for example, requires vessels entering its waters from another country to conduct mid-ocean ballast exchange, or undertake some alternate measure, and to comply with certain reporting requirements. Amendments to the BWM Convention concerning commissioning testing of BWMS will become effective in 2022.

 

The IMO also adopted the International Convention on Civil Liability for Bunker Oil Pollution Damage (the “Bunker Convention”) to impose strict liability on ship owners (including the registered owner, bareboat charterer, manager or operator) 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 LLMC). With respect to non-ratifying states, liability for spills or releases of oil carried as fuel in ship’s bunkers typically is determined by the national or other domestic laws in the jurisdiction where the events or damages occur.

 

Ships are required to maintain a certificate attesting that they maintain adequate insurance to cover an incident. In jurisdictions, such as the United States where the Bunker Convention has not been adopted, various legislative schemes or common law govern, and liability is imposed either on the basis of fault or on a strict-liability basis.

 

AntiFouling Requirements

 

In 2001, the IMO adopted the International Convention on the Control of Harmful Anti‑fouling Systems on Ships, or the “Anti‑fouling Convention.” The Anti‑fouling Convention entered into force in September 2008, and prohibits the use of organotin compound coatings to prevent the attachment of mollusks and other sea life to the hulls of vessels. Vessels of over 400 gross tons engaged in international voyages will also be required to undergo an initial survey before the vessel is put into service or before an International Anti‑fouling System Certificate is issued for the first time; and subsequent surveys when the anti‑fouling systems are altered or replaced. In 2023, amendments to the Anti-fouling Convention will come into effect which include controls on the biocide cybutryne; ships shall not apply or re-apply anti-fouling systems containing this substance from January 1, 2023. We have obtained Anti‑fouling System Certificates for all of our vessels that are subject to the Anti‑fouling Convention.

 

Compliance Enforcement

 

Noncompliance with the ISM Code or other IMO regulations may subject the ship owner or bareboat charterer to increased liability, may lead to decreases in available insurance coverage for affected vessels and may result in the denial of access to, or detention in, some ports. The USCG and European Union authorities have indicated that vessels not in compliance with the ISM Code by applicable deadlines will be prohibited from trading in U.S. and European Union ports, respectively. As of the date of this report, each of our vessels is ISM Code certified. However, there can be no assurance that such certificates will be maintained in the future. 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 our operations.

 

United States Regulations

 

The U.S. Oil Pollution Act of 1990 and the Comprehensive Environmental Response, Compensation and Liability Act

 

The U.S. Oil Pollution Act of 1990 (“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 or operate within the U.S., its territories and possessions or whose vessels operate in U.S. waters, which includes the U.S.’s territorial sea and its 200-nautical mile exclusive economic zone around the U.S. The U.S. has also enacted the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), which applies to the discharge of hazardous substances other than oil, except in limited circumstances, whether on land or at sea. OPA and CERCLA both define “owner and operator” in the case of a vessel as any person owning, operating or chartering by demise, the vessel. Both OPA and CERCLA impact our operations.

 

Under OPA, vessel owners and operators are “responsible parties” and are jointly, severally and strictly liable (unless the spill results solely from the act or omission of a third party, an act of God or an act of war) for all containment and clean-up costs and other damages arising from discharges or threatened discharges of oil from their vessels, including bunkers (fuel). OPA defines these other damages broadly to include:

 

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(i)

injury to, destruction or loss of, or loss of use of, natural resources and related assessment costs;

 

 

(ii)

injury to, or economic losses resulting from, the destruction of real and personal property;

 

 

(iv)

loss of subsistence use of natural resources that are injured, destroyed or lost;

 

 

(iii)

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;

 

 

(v)

lost profits or impairment of earning capacity due to injury, destruction or loss of real or personal property or natural resources; and

 

 

(vi)

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 November 12, 2019, the USCG adjusted the limits of OPA liability for a tank vessel, other than a single-hull tank vessel, over 3,000 gross tons liability to the greater of $2,300 per gross ton or $19,943,400 (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 as required by law where the responsible party knows or has reason to know of the incident; (ii) reasonably cooperate and assist as requested in connection with oil removal activities; or (iii) without sufficient cause, comply with an order issued under the Federal Water Pollution Act (Section 311 (c), (e)) or the Intervention on the High Seas Act.

 

CERCLA contains a similar liability regime whereby owners and operators of vessels are liable for cleanup, removal and remedial costs, as well as damages for injury to, or destruction or loss of, natural resources, including the reasonable costs associated with assessing the 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 each preserve the right to recover damages under existing law, including maritime tort law. OPA and CERCLA both require owners and operators of vessels to establish and maintain with the USCG evidence of financial responsibility sufficient to meet the maximum amount of liability to which the particular responsible person may be subject. Vessel owners and operators may satisfy their financial responsibility obligations by providing a proof of insurance, a surety bond, qualification as a self-insurer or a guarantee. We comply and plan to comply going forward with the USCG’s financial responsibility regulations by providing applicable certificates of financial responsibility.

 

The 2010 Deepwater Horizon oil spill in the Gulf of Mexico resulted in additional regulatory initiatives or statutes, including higher liability caps under OPA, new regulations regarding offshore oil and gas drilling and a pilot inspection program for offshore facilities. However, several of these initiatives and regulations have been or may be revised. For example, the U.S. Bureau of Safety and Environmental Enforcement’s (“BSEE”) revised Production Safety Systems Rule (“PSSR”), effective December 27, 2018, modified and relaxed certain environmental and safety protections under the 2016 PSSR. Additionally, the BSEE released a final Well Control Rule, which eliminated a number of provisions which could affect offshore drilling operations. Compliance with any new requirements of OPA and future legislation or regulations applicable to the operation of our vessels could negatively impact the cost of our operations and adversely affect our business.

 

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. 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. Moreover, some states have enacted legislation providing for unlimited liability for discharge of pollutants within their waters, although in some cases, states which have enacted this type of legislation have not yet issued implementing regulations defining vessel owners’ responsibilities under these laws. The Company intends to comply with all applicable state regulations in the ports where our vessels call.

 

We currently maintain pollution liability coverage insurance in the amount of $1 billion per incident for each of our vessels. If the damages from a catastrophic spill were to exceed our insurance coverage, that could have an adverse effect on our business and results of operation.

 

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Other United States Environmental Initiatives

 

The U.S. Clean Air Act of 1970 (including its amendments of 1977 and 1990) (“CAA”) requires the EPA to promulgate standards applicable to emissions of volatile organic compounds and other air contaminants. The CAA requires states to adopt State Implementation Plans, or “SIPs,” some of which regulate emissions resulting from vessel loading and unloading operations which may effect our vessels.

 

The U.S. Clean Water Act (“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. In 2015, the EPA expanded the definition of “waters of the United States” (“WOTUS”), thereby expanding federal authority under the CWA. In April 2020, the EPA and Department of the Army published the “Navigable Waters Protection Rule,” to finalize a revised WOTUS definition, which rule became effective in June 2020. However, in light of a court order issued by the U.S. District Court for the District of Arizona on August 30, 2021, the EPA and U.S. Army Corps of Engineers are interpreting WOTUS consistent with the pre-2015 regulatory regime. In November 2021, the EPA and U.S. Army Corps of Engineers announced the signing of a proposed rule to revise the definition of WOTUS, which proposes to put back into place the pre-2015 definition.

 

The EPA and the USCG have also enacted rules relating to ballast water discharge, compliance with which requires the installation of equipment on our vessels to treat ballast water before it is discharged or the implementation of other port facility disposal arrangements or procedures at potentially substantial costs, and/or otherwise restrict our vessels from entering U.S. Waters.  The EPA will regulate these ballast water discharges and other discharges incidental to the normal operation of certain vessels within United States waters pursuant to the Vessel Incidental Discharge Act (“VIDA”), which was signed into law on December 4, 2018 and will replace the 2013 Vessel General permit, or VGP, program (as discussed above) and current Coast Guard ballast water management regulations adopted under the U.S. National Invasive Species Act, or NISA, such as mid-ocean ballast exchange programs and installation of approved USCG technology for all vessels equipped with ballast water tanks bound for U.S. ports or entering U.S. waters.  Non-military, non-recreational vessels greater than 79 feet in length must continue to comply with the requirements of the VGP, including submission of a Notice of Intent (“NOI”) or retention of a PARI form and submission of annual reports. We have submitted NOIs for all our vessels where required. Compliance with the EPA, U.S. Coast Guard and state regulations could require the installation of ballast water treatment equipment on our vessels or the implementation of other port facility disposal procedures at potentially substantial cost, or may otherwise restrict our 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. 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. Criminal liability for pollution may result in substantial penalties or fines and increased civil liability claims. Regulation (EU) 2015/757 of the European Parliament and of the Council of 29 April 2015 (amended by Regulation (EU) 2016/2071 with respect to methods of calculating, inter alia, emission and consumption) governs the monitoring, reporting and verification of carbon dioxide emissions from maritime transport, and, subject to some exclusions, requires companies with ships over 5,000 gross tonnage to monitor and report carbon dioxide emissions annually, which may cause us to incur additional expenses. As of January 2019, large ships calling at EU ports have been required to collect and publish data on carbon dioxide emissions and other information. The system entered into force on 1 March 2018. July 2020 saw the European Parliament’s Committee on Environment, Public Health and Food Safety vote in favor of the inclusion of vessels of 5000 gross tons and above in the EU Emissions Trading System (in addition to voting for a revision to the monitoring, reporting and verification of CO2 emissions). In September 2020, the European Parliament adopted the proposal from the European Commission to amend the regulation on monitoring carbon dioxide emissions from maritime transport.

 

On 14th July 2021, the European Commission published a package of draft proposals as part of its ‘Fit for 55’ environmental legislative agenda and as part of the wider EU Green Deal growth strategy. The Proposals are not yet in final form and may be subject to amendment. There are two key initiatives relevant to maritime arising from the Proposals: (a) a bespoke emissions trading scheme for maritime (Maritime ETS) which is due to commence in 2023 and which is to apply to all ships above a gross tonnage of 5000; and (b) a FuelEU draft regulation which seeks to require all ships above a gross tonnage of 5000 to carry on board a ‘FuelEU certificate of compliance’ from 30 June 2025 as evidence of compliance with the limits on the greenhouse gas intensity of the energy used on-board by a ship and with the requirements on the use of on-shore power supply (OPS) at berth. More specifically, Maritime ETS is to apply gradually over the period from 2023- 2025. The cap under the ETS would be set by taking into account EU MRV system emissions data for the years 2018 and 2019, adjusted, from year 2021 and is to capture 100% of the emissions from intra-EU maritime voyages; 100% of emissions from ships at berth in EU ports; and 50% of emissions from voyages which start or end at EU ports (but the other destination is outside the EU). More recent proposed amendments signal that 100% of non-EU emissions may be caught if the IMO does not introduce a global market-based measure by 2028. Furthermore, the proposals envisage that all maritime allowances would be auctioned and there will be no free allocation. Both proposals are currently being negotiated and final drafts are expected in the summer of 2022.

 

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Responsible recycling and scrapping of ships is becoming an increasingly important issue for shipowners and charterers alike as the industry strives to replace old ships with cleaner, more energy efficient models. The recognition of the need to impose recycling obligations on the shipping industry is not new. In 2009, the IMO oversaw the creation of the Hong Kong Ship Recycling Convention (the “Hong Kong Convention”), which sets standards for ship recycling. Concerned at the lack of progress in satisfying the conditions needed to bring the Hong Kong Convention into force, the EU published its own Ship Recycling Regulation 1257/2013 (SRR) in 2013, with a view to facilitating early ratification of the Hong Kong Convention both within the EU and in other countries outside the EU. As the Hong Kong Convention has yet to come into force, the 2013 regulations are vital to responsible ship recycling in the EU. SRR requires that, from 31 December 2020, all existing ships sailing under the flag of EU member states and non-EU flagged ships calling at an EU port or anchorage must carry on-board an Inventory of Hazardous Materials (IHM) with a certificate or statement of compliance, as appropriate. For EU-flagged vessels, a certificate (either an Inventory Certificate or Ready for Recycling Certificate) will be necessary, while non-EU flagged vessels will need a Statement of Compliance.

 

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 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. Furthermore, the EU has implemented regulations requiring vessels to use reduced sulfur content fuel for their main and auxiliary engines. Since January 1, 2015, vessels have been required to burn fuel with sulfur content not exceeding 0.1% while within EU member states' territorial seas, exclusive economic zones and pollution control zones that are included in “SOx Emission Control Areas.” EU Directive (EU) 2016/802 establishes limits on the maximum sulfur content of gas oils and heavy fuel oil and contains fuel-specific requirements for ships calling at EU ports.

 

EU Directive 2004/35/CE (as amended) regarding the prevention and remedying of environmental damage addresses liability for environmental damage (including damage to water, land, protected species and habitats) on the basis of the “polluter pays” principle. Operators whose activities caused the environmental damage are liable for the damage (subject to certain exceptions). With regard to specified activities causing environmental damage, operators are strictly liable. The directive applies where damage has already occurred and where there is an imminent threat of damage. The directive requires preventative and remedial actions, and that operators report environmental damage or an imminent threat of such damage.

 

In 2021, the EU adopted a European Climate Law (Regulation (EU) 2021/1119), establishing the aim of reaching net zero greenhouse gas emissions in the EU by 2050, with an intermediate target of reducing greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels. In July 2021, the European Commission launched the Fit for 55 (described above) to support the climate policy agenda.

 

International Labour Organization

 

The International Labor Organization (the “ILO”) is a specialized agency of the UN that has adopted the Maritime Labor Convention 2006 (“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 tonnage or over and are either engaged in international trade. We believe that all our vessels are in substantial compliance with and are certified to meet MLC 2006.

 

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 (this task hanging been delegated to the IMO), which entered into force in 2005 and pursuant to which adopting countries have been required to implement national programs to reduce greenhouse gas emissions with targets extended through 2020. International negotiations are continuing with respect to a successor to the Kyoto Protocol, and restrictions on shipping emissions may be included in any new treaty. In December 2009, more than 27 nations, including the U.S. and China, signed the Copenhagen Accord, which includes a non-binding commitment to reduce greenhouse gas emissions. The 2015 United Nations Climate Change Conference in Paris resulted in the Paris Agreement, which entered into force on November 4, 2016 and does not directly limit greenhouse gas emissions from ships. The United States rejoined the Paris Agreement in February 2021.

 

At MEPC 70 and MEPC 71, a draft outline of the structure of the initial strategy for developing a comprehensive IMO strategy on reduction of greenhouse gas emissions from ships was approved. In accordance with this roadmap, in April 2018, nations at the MEPC 72 adopted an initial strategy to reduce greenhouse gas emissions from ships. The initial strategy identifies “levels of ambition” to reducing greenhouse gas emissions, including (1) decreasing the carbon intensity from ships through implementation of further phases of the EEDI for new ships (while the Ship Energy-Efficiency Management Plan is mandatory for all vessels); (2) reducing carbon dioxide emissions per transport work, as an average across international shipping, by at least 40% by 2030, pursuing efforts towards 70% by 2050, compared to 2008 emission levels; and (3) reducing the total annual greenhouse emissions by at least 50% by 2050 compared to 2008 while pursuing efforts towards phasing them out entirely. The initial strategy notes that technological innovation, alternative fuels and/or energy sources for international shipping will be integral to achieve the overall ambition. These regulations could cause us to incur additional substantial expenses.

 

44

 

As noted above, the 70th MEPC meeting in October 2016 adopted a mandatory data collection system (DCS) which requires ships above 5 000 gross tonnes to report consumption data for fuel oil, hours under way and distance travelled. Unlike the EU MRV (see below), the IMO DCS covers any maritime activity carried out by ships, including dredging, pipeline laying, ice-breaking, fish-catching and off-shore installations. The SEEMPs of all ships covered by the IMO DCS must include a description of the methodology for data collection and reporting. After each calendar year, the aggregated data are reported to the flag state. If the data have been reported in accordance with the requirements, the flag state issues a statement of compliance to the ship. Flag states subsequently transfer this data to an IMO ship fuel oil consumption database, which is part of the Global Integrated Shipping Information System (GISIS) platform. IMO will then produce annual reports, summarising the data collected. Thus, currently, data related to the GHG emissions of ships above 5 000 gross tonnes calling at ports in the European Economic Area (EEA) must be reported in two separate, but largely overlapping, systems: the EU MRV – which applies since 2018 – and the IMO DCS – which applies since 2019. The proposed revision of Regulation (EU) 2015/757 adopted on 4 February 2019 aims to align and facilitate the simultaneous implementation of the two systems however it is still not clear when the proposal will be adopted.

 

IMO’s MEPC 76 adopted amendments to Annex VI that will require ships to reduce their greenhouse gas emissions. Effective November 1, 2022, the Revised MARPOL Annex VI will enter into force. The revised Annex VI includes carbon intensity measures (requirements for ships to calculate their Energy Efficiency Existing Ship Index (EEXI) following technical means to improve their energy efficiency and to establish their annual operational carbon intensity indicator and rating. MEPC 76 also adopted guidelines to support implementation of the amendments.

 

In 2021, the EU adopted a European Climate Law (Regulation (EU) 2021/1119), establishing the aim of reaching net zero greenhouse gas emissions in the EU by 2050, with an intermediate target of reducing greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels. In July 2021, the European Commission launched the Fit for 55 (described above) to support the climate policy agenda.  

In the United States, the EPA issued a finding that greenhouse gases endanger the public health and safety, adopted regulations to limit greenhouse gas emissions from certain mobile sources, and proposed regulations to limit greenhouse gas emissions from large stationary sources. The EPA or individual U.S. states could enact environmental regulations that could negatively affect our operations.

 

Any passage of climate control legislation or other regulatory initiatives by the IMO, the EU, the U.S. or other countries where we operate, or any treaty adopted at the international level to succeed the Kyoto Protocol or Paris Agreement, that restricts emissions of greenhouse gases could require us to make significant expenditures which we cannot predict with certainty at this time. Even in the absence of climate control legislation, our business may be indirectly affected to the extent that climate change may result in sea level changes or certain weather events.

 

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 U.S. Maritime Transportation Security Act of 2002 (“MTSA”). To implement certain portions of the MTSA, the USCG issued regulations requiring the implementation of certain security requirements aboard vessels operating in waters subject to the jurisdiction of the United States and at certain ports and facilities, some of which are regulated by the EPA.

 

Similarly, Chapter XI-2 of the SOLAS Convention imposes detailed security obligations on vessels and port authorities and mandates compliance with the International Ship and Port Facilities Security Code (“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 (“ISSC”) from a recognized security organization approved by the vessel’s flag state. Ships operating without a valid certificate may be detained, expelled from or refused entry at port until they obtain an ISSC. The various requirements, some of which are found in the SOLAS Convention, include, for example, 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; on-board installation of ship security alert systems, which do not sound on the vessel but only alert the authorities on shore and our Fleet Manager; the development of vessel security plans; ship identification number to be permanently marked on a vessel’s hull; 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 compliance with flag state security certification requirements.

 

The USCG regulations, intended to align with international maritime security standards, exempt non-U.S. vessels from MTSA vessel security measures, provided such vessels have on board a valid ISSC that attests to the vessel’s compliance with the SOLAS Convention security requirements and the ISPS Code. Future security measures could have a significant negative financial impact on us. We intend to comply with the various security measures addressed by MTSA, the SOLAS Convention and the ISPS Code.

 

The cost of vessel security measures has also been affected by the escalation in the frequency of acts of piracy against ships, notably off the coast of Somalia, including the Gulf of Aden and Arabian Sea area. Substantial loss of revenue and other costs may be incurred as a result of detention of a vessel or additional security measures, and the risk of uninsured losses could significantly and negatively affect our business. Costs may be incurred in taking additional security measures in accordance with Best Management Practices to Deter Piracy, notably those contained in the BMP5 industry standard.

 

45

 

Inspection by Classification Societies

 

The hull and machinery of every commercial vessel must be classed by a classification society authorized by its country of registry. The classification society certifies that a vessel is safe and seaworthy in accordance with the applicable rules and regulations of the country of registry of the vessel and SOLAS. Most insurance underwriters make it a condition for insurance coverage and lending that a vessel be certified “in class” by a classification society which is a member of the International Association of Classification Societies, the IACS. The IACS has adopted harmonized Common Structural Rules, or “the Rules,” which apply to oil tankers and bulk carriers constructed on or after July 1, 2015. The Rules attempt to create a level of consistency between IACS Societies. All of our vessels are certified as being “in class” by all the applicable Classification Societies (e.g., DNV GL, American Bureau of Shipping, Lloyd’s Register of Shipping).

 

A vessel must undergo annual surveys, intermediate surveys, drydockings 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. Every vessel is also required to be drydocked every 30 to 36 months for inspection of the underwater parts of the vessel. If any vessel does not maintain its class and/or fails any annual survey, intermediate survey, drydocking or special survey, the vessel will be unable to carry cargo between ports and will be unemployable and uninsurable which could cause us to be in violation of certain covenants in our loan agreements. Any such inability to carry cargo or be employed, or any such violation of covenants, could have a material adverse impact on our financial condition and results of operations.

 

C.         Organizational Structure

 

We are a Marshall Islands corporation with principal executive offices located at 1 Vasilisis Sofias and Megalou Alexandrou Str, 15124 Maroussi, Greece. Our significant wholly-owned subsidiaries as of December 31, 2021 are listed in Exhibit 8.1 to this annual report on Form 20-F.

 

D.         Property, Plants and Equipment

 

For a list of the vessels of our fleet, please see “Item 4. Information on the Company—B. Business Overview—Our Fleet” above and for a description of our major encumbrances on our fleet please see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Debt Facilities”.

 

We do not own any real estate property.

 

ITEM 4A.      UNRESOLVED STAFF COMMENTS

 

None.

 

ITEM 5.         OPERATING AND FINANCIAL REVIEW AND PROSPECTS

 

The following presentation of management’s discussion and analysis is intended to discuss our financial condition, changes in financial condition and results of operations, and should be read in conjunction with our historical consolidated financial statements and their notes included in this annual report.

 

For a discussion of our results for the year ended December 31, 2020 compared to the year ended December 31, 2019, please see "Item 5 – Operating and Financial Review and Prospects – A. Operating Results – Results for the Year Ended December 31, 2020 Compared to the year ended December 31, 2019" contained in our annual report on Form 20-F for the year ended December 31, 2020, filed with the Securities and Exchange Commission on April 23, 2021.

 

This discussion contains forward-looking statements that reflect our current views with respect to future events and financial performance. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, such as those set forth in “Item 3. Key Information—Risk Factors” and elsewhere in this report.

 

Operating Results

 

Factors Affecting our Results of Operations

 

We believe that the important measures for analyzing trends in the results of our operations consist of the following:

 

Calendar days. We define calendar days as the total number of days the vessels were in our possession for the relevant period. Calendar days are an indicator of the size of our fleet during the relevant period and affect both the amount of revenues and expenses that we record during that period.

 

Available days. We define available days as the number of calendar days less the aggregate number of days that our vessels are off-hire due to scheduled repairs, or scheduled guarantee inspections in the case of newbuildings, vessel upgrades or special or intermediate surveys and the aggregate amount of time that we spend positioning our vessels. Companies in the shipping industry generally use available days to measure the number of days in a period during which vessels should be capable of generating revenues.

 

46

 

Operating days. We define operating days as the number of available days in a period less the aggregate number of days that our vessels are off-hire due to unforeseen technical circumstances. The shipping industry uses operating days to measure the aggregate number of days in a period that our vessels actually generate revenues.

 

Fleet utilization. We calculate fleet utilization by dividing the number of operating days during a period by the number of available days during that period. The shipping industry uses fleet utilization to measure a company’s efficiency in finding suitable employment for its vessels and minimizing the number of days that its vessels are off-hire for reasons other than scheduled repairs or scheduled guarantee inspections in the case of newbuildings, vessel upgrades, special or intermediate surveys and vessel positioning.

 

TCE Revenues / TCE Rates. We define TCE revenues as revenues minus voyage expenses. Voyage expenses primarily consist of port, canal and fuel costs that are unique to a particular voyage, which would otherwise be paid by a charterer under a time charter, as well as commissions. We believe that presenting revenues net of voyage expenses neutralizes the variability created by unique costs associated with particular voyages or the deployment of vessels on the spot market and facilitates comparisons between periods on a consistent basis. We calculate daily TCE rates by dividing TCE revenues by operating days for the relevant time period. TCE revenues include demurrage revenue, which represents fees charged to charterers associated with our spot market voyages when the charterer exceeds the agreed upon time required to load or discharge a cargo. The company's calculation of TCE may not be similar to other method of calculation of other companies.

 

In the shipping industry, economic decisions are based on vessels’ deployment upon anticipated TCE rates, and industry analysts typically measure shipping freight rates in terms of TCE rates. This is because under time-charter and bareboat contracts the customer usually pays the voyage expenses, while under voyage charters the ship-owner usually pays the voyage expenses, which typically are added to the hire rate at an approximate cost. Consistent with industry practice, we use TCE rates because it provides a means of comparison between different types of vessel employment and, therefore, assists our decision-making process.

 

In evaluating our financial condition, we focus on the below measures to assess our historical operating performance and we use future estimates of the same measures to assess our future financial performance. In assessing the future performance of our fleet, the greatest uncertainty relates to future charter rates at the expiration of a vessel’s present period employment, whether under a time charter or a bareboat charter. Decisions about future purchases and sales of vessels are based on the availability of excess internal funds, the availability of financing and the financial and operational evaluation of such actions and depend on the overall state of the shipping market and the availability of relevant purchase candidates.

 

The following table sets forth our selected other operating data for the periods indicated.

 

   

2017

   

2018

   

2019

   

2020

   

2021

 

FLEET DATA

                                       

Total number of vessels at end of period (including leased vessels)

    7.0       8.0       12.0       6.0       7.0  

Average number of vessels(1)

    6.8       7.3       11.1       9.5       7.1  

Total calendar days for fleet

    2,496       2,670       4,055       3,483       2,583  

Total available days for fleet

    2,495       2,668       4,032       3,442       2,579  

Total operating days for fleet

    2,491       2,663       3,959       3,363       2,500  

Total time charter days for fleet

    2,491       2,663       3,884       3,363       2,500  

Total spot (voyage) days for fleet

    -       -       75       -       -  

Fleet utilization

    99.81

%

    99.81

%

    98.17

%

    97.68

%

    96.93

%

 

   

2017

   

2018

   

2019

   

2020

   

2021

 

AVERAGE DAILY RESULTS

                                       

Time charter equivalent(2)

  $ 15,403     $ 15,031     $ 16,233     $ 17,314     $ 22,020  

Vessel operating expenses(3)

  $ 5,386     $ 5,552     $ 5,619     $ 6,037     $ 6,070  

General and administrative expenses(4)

  $ 2,323     $ 2,620     $ 427     $ 555     $ 752  

 

 (1)

Average number of vessels is the number of vessels that constituted our fleet (including chartered in vessels) for the relevant period, as measured by the sum of the number of days each vessel was a part of our fleet during the period divided by the number of calendar days in that period.

 

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(2)

Time charter equivalent rate, or TCE rate, is a measure of the average daily revenue performance of a vessel. Our definition of TCE may not be the same as reported by other companies in the shipping industry or other industries. Our method of calculating TCE rate is determined by dividing TCE revenues by operating days for the relevant time period. TCE revenues are revenues minus voyage expenses. Voyage expenses primarily consist of port, canal and fuel costs that are unique to a particular voyage, which would otherwise be paid by the charterer under a time charter contract, but are payable by us in the case of a voyage charter, as well as commissions. TCE revenues and TCE rate, which are non-U.S. GAAP measures, provide additional supplemental information in conjunction with shipping revenues, the most directly comparable U.S. GAAP measure. We use TCE rates and TCE revenues to compare period-to-period changes in our performance and it assists investors and our management in evaluating our financial performance. The following table below reflects the reconciliation of TCE revenues to revenues as reflected in the consolidated statements of operations and our calculation of TCE rates for the periods presented.

(3)

Daily vessel operating expenses, which include crew costs, provisions, deck and engine stores, lubricating oil, insurance, maintenance and repairs are calculated by dividing vessel operating expenses by fleet calendar days for the relevant time period.

(4)

Daily general and administrative expenses are calculated by dividing general and administrative expenses by fleet calendar days for the relevant time period.

 

U.S. dollars in thousands, except average daily time charter equivalent and total operating days

 

2017

   

2018

   

2019

   

2020

   

2021

 

On a consolidated basis

                                       

Total Revenues

  $ 39,363     $ 41,048     $ 66,088     $ 60,222     $ 56,367  

Less:

                                       

Voyage expenses

    (999

)

    (1,020

)

    (3,038

)

    (1,994

)

    (1,317

)

Time charter equivalent revenues

  $ 38,364     $ 40,028     $ 63,050     $ 58,228     $ 55,050  

Total operating days

    2,491       2,663       3,884       3,363       2,500  
                                         

Average Daily Time Charter Equivalent (TCE)

  $ 15,403     $ 15,031     $ 16,233     $ 17,314     $ 22,020  

 

Time Charter Revenues

 

Our Time charter revenues are driven primarily by the number and size of vessels in our fleet, the number of operating days during which our vessels generate revenues and the amount of daily charterhire that our vessels earn under charters, which, in turn, are affected by a number of factors, including our decisions relating to vessel acquisitions and disposals, the amount of time that we spend positioning our vessels, the amount of time that our vessels spend in dry-dock undergoing repairs, maintenance and upgrade work, the duration of the charter, the age, condition and specifications of our vessels, levels of supply and demand in the global transportation market for oil and oil products and other factors affecting spot market charter rates such as vessel supply and demand imbalances.

 

Vessels operating on period charters, time charters or bareboat charters provide more predictable cash flows, but can yield lower profit margins than vessels operating in the short-term, or spot, charter market during periods characterized by favorable market conditions. Vessels operating in the spot charter market, either directly or through a pool arrangement, could generate revenues that are less predictable, but could enable us to capture increased profit margins during periods of improvements in charter rates, although we could be exposed to the risk of declining charter rates, which could have a materially adverse impact on our financial performance. If we employ vessels on period charters, future spot market rates may be higher or lower than the rates at which we have employed our vessels on period time charters.

 

Under a time charter, the charterer typically pays us a fixed daily charter hire rate and bears all voyage expenses, including the cost of bunkers (fuel oil) and port and canal charges. We remain responsible for paying the chartered vessel’s operating expenses, including the cost of crewing, insuring, repairing and maintaining the vessel, the costs of spares and consumable stores, tonnage taxes and other miscellaneous expenses, and we also pay commissions to CSI, one or more unaffiliated ship brokers and to in-house brokers associated with the charterer for the arrangement of the relevant charter.

 

Under a bareboat charter, the vessel is chartered for a stipulated period of time, which gives the charterer possession and control of the vessel, including the right to appoint the master and the crew. Under bareboat charters, all voyage and operating costs are paid by the charterer.

 

As of the date of this annual report, we have bareboat chartered-in one product/chemical tanker, three Suezmax tankers and two VLCC tankers under our SLB arrangements which are accounted as financing and two suezmax crude oil tankers which are accounted as an operating lease. We may in the future operate vessels in the spot market until the vessels have been chartered under appropriate medium to long-term charters.

 

Voyage Expenses

 

Voyage expenses primarily consist of port charges, including canal dues, bunkers (fuel costs) and commissions. All these expenses, except commissions, are paid by the charterer under a time charter or bareboat charter contract. The amount of voyage expenses are primarily driven by the routes that the vessels travel, the amount of ports called on, the canals crossed and the price of bunker fuels paid.

 

Operating Lease Expenses

 

Operating lease expenses represent operating lease payments for vessels we have bareboat chartered-in via operating lease agreements.

 

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Vessel Operating Expenses

 

Vessel operating expenses include crew wages and related costs, the cost of insurance, expenses relating to repairs and maintenance, the costs of spares and consumable stores, tonnage taxes and value added tax, or VAT, and other miscellaneous expenses. We analyze vessel operating expenses on a U.S. dollar per day basis. Additionally, vessel operating expenses can fluctuate due to factors beyond our control, such as unplanned repairs and maintenance attributable to damages or regulatory compliance and factors which may affect the shipping industry in general, such as developments relating to insurance premiums, or developments relating to the availability of crew.

 

Dry-docking Costs

 

Dry-docking costs relate to regularly scheduled intermediate survey or special survey dry-docking necessary to preserve the quality of our vessels as well as to comply with international shipping standards and environmental laws and regulations. Dry-docking costs can vary according to the age of the vessel, the location where the dry-dock takes place, shipyard availability, local availability of manpower and material, and the billing currency of the yard. Please see “Item 18. Financial Statements—Note 2—Significant Accounting Policies.” In the case of tankers, dry-docking costs may also be affected by new rules and regulations. For further information please see “Item 4. Information on the Company—B. Business Overview—Environmental Regulations.”

 

Management FeesRelated Parties

 

As from January 1, 2019, we have outsourced to CSI a related party controlled by the family of Mr. Evangelos J. Pistiolis, all operational, technical and commercial functions relating to the chartering and operation of our vessels. We outsourced the above functions pursuant to a letter agreement between CSI and Top Ships Inc. and management agreements between CSI and our vessel-owning subsidiaries on the same date, and each new vessel that entered our fleet after that date entered into a management agreement with CSI. See “Item7. Major shareholders and related party transactions — B. Related Party Transactions”.

 

General and Administrative Expenses

 

Our general and administrative expenses include executive compensation paid to Central Mare for the compensation of our executive officers and a number of administrative staff, office rent, legal and auditing costs, regulatory compliance costs, other miscellaneous office expenses, non-cash stock compensation, and corporate overhead. Central Mare provides the services of the individuals who serve in the position of Chief Executive Officer, Chief Financial Officer, Chief Operating Officer and Chief Technical Officer as well as a number of administrative employees. For further information please see “Item 18. Financial Statements—Note 5—Transactions with Related Parties.”

 

A portion of our general and administrative expenses are denominated in Euros and are therefore affected by the conversion rate of the U.S. dollar versus the Euro.

 

Interest and Finance Costs

 

We incur interest expense on outstanding indebtedness under our loans and SLBs, which we include in interest and finance costs. We also incur finance costs in establishing those debt facilities and SLBs which are deferred and amortized over the period of the respective facility. The amortization of the finance costs is presented in interest and finance costs.

 

Main components of managing our business and main drivers of profitability

 

The management of financial, general and administrative elements involved in the conduct of our business and ownership of our vessels requires the following main components:

 

 

management of our financial resources, including banking relationships, i.e., administration of bank loans and bank accounts;

 

management of our accounting system and records and financial reporting;

 

administration of the legal and regulatory requirements affecting our business and assets; and

 

management of the relationships with our service providers and customers.

 

The principal factors that affect our profitability, cash flows and shareholders’ return on investment include:

 

charter rates and periods of charter hire for our tankers;

 

utilization of our tankers (earnings efficiency);

 

levels of our tanker’s operating expenses and dry-docking costs;

 

depreciation and amortization expenses;

 

financing costs; and

 

fluctuations in foreign exchange rates.

 

49

 

RESULTS OF OPERATIONS FOR THE FISCAL YEARS ENDED DECEMBER 31, 2020 AND 2021

 

The following table depicts changes in the results of operations for 2021 compared to 2020.

 

   

Year Ended December 31,

   

change

 
   

2020

   

2021

   

YE21 v YE20

 
                       $    

%

 

Total charter revenues

    60,222       56,367       (3,855 )     -6 %

Voyage expenses

    1,994       1,317       (677 )     -34 %

Operating lease Expense

    755       10,840       10,085       1336 %

Vessel operating expenses

    21,024       15,679       (5,345 )     -25 %

Dry-docking costs

    356       361       5       1 %

Vessel depreciation

    13,174       7,670       (5,504 )     -42 %

Management fees-related parties

    5,627       2,596       (3,031 )     -54 %

Other operating loss (Charter Termination Fees)

    4,800       -       (4,800 )     -100 %

General and administrative expenses

    1,932       1,943       11       1 %

Loss on sale of vessels

    12,355       -       (12,355 )     -100 %

Vessels Impairment charge

    -       1,160       1,160       100 %

Operating (loss) income

    (1,795 )     14,801       16,596       -925 %

Interest and finance costs

    (20,956 )     (6,998 )     13,958       -67 %

(Loss)/Gain on financial instruments

    (814 )     66       880       -108 %

Interest income

    34       -       (34 )     -100 %

Investment Accounts impairment charge

    -       -       -       -  

Equity gain in unconsolidated joint ventures

    713       747       34       5 %

Total other expenses, net

    (21,023 )     (6,185 )     14,838       -71 %

Net (loss)/income

    (22,818 )     8,616       31,434       -138 %

 

Year on Year Comparison of Operating Results

 

 

1.

Revenues, Voyage expenses, Other vessel operating expenses and Vessel Depreciation

 

Revenues, Voyage expenses, Other vessel operating expenses and Vessel Depreciation decreased mainly due to the decrease in the size of our fleet over the two comparable periods. During the year ended December 31, 2021 we employed on average 7.1 vessels, whilst in the same period of 2020 we employed on average 9.5 vessels, that resulted in decreases in all vessel related revenues and expenses. The decrease in revenues due to the decrease in the size of our fleet was partially offset by an increase in TCE rate in 2021 due to the employment of larger vessels when compared to 2020.

 

 

2.

Operating lease expenses

 

During the year ended December 31, 2021, Operating lease expenses increased by $10.1 million, or 1,336%, compared to the year ended December 31, 2020. This increase was due to the fact that operating lease expenses referred to the operating leases of M/T Eco Bel Air and M/T Eco Beverly Hills (the “Navigare Lease”) that only started on December 1 and 10, 2020 for M/T Eco Beverly Hills and M/T Eco Bel Air respectively.

 

 

3.

Management feesrelated parties

 

During the year ended December 31, 2021, management fees to related parties decreased by $3.0 million, or 54%, compared to the same period in 2020. This decrease was mainly due to a $2.5 million reduction in sale and purchase commissions as per our management agreement with Central Shipping Inc (“CSI”) due to the fact that in 2020 we sold 10 vessels while in 2021 we sold only one vessel and a $0.5 million decrease in management fees relating to the decrease in the size of our fleet over the two comparable periods.

 

 

4.

Interest and Finance Costs

 

During the year ended December 31, 2021, interest and finance costs decreased by $14.0 million, or 67%, compared to the same period in 2020 mainly due to a decrease of $8.3 million in interest costs, a decrease of $0.2 million in amortization of deferred financing fees and a decrease of $0.2 million of other financial costs, all relating to the reduction of the number of vessels in our fleet.

 

50

 

Furthermore this decrease was also due to the fact that in the year ended December 31, 2020 we incurred $5.8 million of interest and finance costs relating to the acceleration of amortization of the unamortized balance of deferred financing fees of the vessels sold during the year, while in the same period in 2021 we only accelerated the amortization of $0.3 million of unamortized balance of deferred financing fees relating to the sale of M/T Nord Valiant, resulting in a difference between the years amounting to $5.3 million.

 

 

5.

Vessels Impairment charge

 

During the year ended December 31, 2021, Vessels Impairment charges increased by $1.2 million, or 100%, compared to the same period in 2020 mainly due to fact that during the year ended December 31, 2021, in accordance with the provisions of relevant guidance, a vessel held for sale (M/T Nord Valiant) with a carrying amount of $27.0 million was written down to its fair value of $25.9 million, resulting in an impairment charge of $1.2 million. The vessel was sold on September 1, 2021.

 

 

6.

Other operating loss

 

In connection with vessel sales during the year ended 2020, on January 15, January 21, March 9 and October 20, 2020 we terminated the time charters of M/T Eco Fleet, M/T Stenaweco Elegance, M/T Eco Palm Desert and M/T Eco California and incurred time charter termination fees amounting to $0.5 million, $1.9 million, $1.7 million and $0.7 million respectively. In the respective period of 2021 we only sold one vessel (the M/T Nord Valiant) and no such termination fees were charged as the time charter contract of said vessel expired before the vessel’s sale.

 

 

7.

Loss on sale of vessels

 

During 2020 we sold the following vessels to unaffiliated third parties:

 

Vessel

Date Sold

 M/T Stenaweco Energy

29/10/2020

 M/T Stenaweco Evolution

03/11/2020

 M/T Ecofleet

21/01/2020

 M/T Eco Revolution

14/01/2020

 M/T Stenaweco Excellence

14/10/2020

 M/T Stenaweco Elegance

21/02/2020

 M/T Eco Palm Desert

19/03/2020

 M/T Eco California

09/11/2020

 M/T Eco Bel Air

10/12/2020

 M/T Eco Beverly Hills

01/12/2020

 

As a result of the abovementioned sales we recognized a loss from the disposal of vessels amounting to $12.4 million (Please see "Item 18. Financial Statements—Note 19— Loss on sale of vessels"). During the year ended December 31, 2021 we incurred no Losses from sales of vessels.

 

Our FleetIllustrative Comparison of Possible Excess of Carrying Value Over Estimated Charter-Free Market Value of Certain Vessels

 

In Note 2 to our consolidated financial statements included herein we discuss our policy for impairing the carrying values of our vessels. During the past few years, the market values of vessels have experienced particular volatility, with substantial declines in many vessel classes. As a result, the charter-free market value, or basic market value, of certain of our vessels may have declined below those vessels’ carrying value. However, we would not impair those vessels’ carrying value under our accounting impairment policy due to our belief that future undiscounted cash flows expected to be earned by such vessels over their operating lives would exceed such vessels’ carrying amounts. Furthermore during the year ended December 31, 2020 tanker values have been relatively stable while during the year ended December 31, 2021 tanker values have increased.

 

As of December 31, 2021, we believe that the basic charter-free market values of our owned operating vessels are higher than the vessels carrying value by approximately 11.6%.

 

Our estimates of basic charter-free market value assume that our vessels are all in good and seaworthy condition without need for repair and if inspected would be certified in class without notations of any kind. Our estimates are based on information available from various industry sources, including:

 

 

reports by industry analysts and data providers that focus on our industry and related dynamics affecting vessel values;

 

 

news and industry reports of similar vessel sales;

 

 

news and industry reports of sales of vessels that are not similar to our vessels where we have made certain adjustments in an attempt to derive information that can be used as part of our estimates;

 

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approximate market values for our vessels or similar vessels that we have received from shipbrokers, whether solicited or unsolicited, or that shipbrokers have generally disseminated;

 

 

offers that we may have received from potential purchasers of our vessels; and

 

 

vessel sale prices and values of which we are aware through both formal and informal communications with shipowners, shipbrokers, industry analysts and various other shipping industry participants and observers.

 

As we obtain information from various industry and other sources, our estimates of basic charter-free market values are inherently uncertain. In addition, vessel values are highly volatile; as such, actual results could differ from those estimates.

 

All of our vessels are currently employed under long-term, time charters, the majority of which are above-market. For more information, see “Business Overview—Our Fleet.” We believe that in a sale of a majority of our vessels with charters attached, we would receive a premium over the vessels’ charter-free market value.

 

We refer you to the risk factor entitled “The international oil tanker industry has experienced volatile charter rates and vessel values and there can be no assurance that these charter rates and vessel values will not decrease in the near future” and the discussion herein under the heading “Risks Related to Our Industry.”

 

Liquidity and Capital Resources

 

Since our formation, our principal sources of funds have been equity provided by our shareholders through equity offerings or at the market sales, operating cash flow, long-term borrowing including SLBs and short-term borrowings. Our principal use of funds has been capital expenditures to establish and grow our fleet, maintain the quality of our vessels, comply with international shipping standards and environmental laws and regulations and fund working capital requirements.

 

Our business is capital intensive and its future success will depend on our ability to maintain a high-quality fleet through the acquisition of newer vessels and the selective sale of older vessels. Our practice has been to acquire vessels using a combination of funds received from equity investors and bank debt including SLBs secured by title on our vessels.  Future acquisitions are subject to management’s expectation of future market conditions, our ability to acquire vessels on favorable terms and our liquidity and capital resources.

 

As of December 31, 2021, we had an indebtedness of $150.6 million, which after excluding unamortized financing fees amounts to a total indebtedness of $153.3 million. Also as of December 31, 2021, our contractual and other cash commitments primarily consisted of contractual commitments for the acquisition of our fleet totaling $213.4 million. Finally, as of December 31, 2021, our cash and cash equivalent balances amounted to $6.4 million, held in U.S. Dollar accounts, $4.0 million of which are classified as restricted cash.

 

As of the date of this annual report all contractual commitments for the acquisition of our fleet have been settled and the company has successfully taken delivery of all its newbuilding vessels.  Our cash flow projections indicate that cash on hand and cash to be provided by operating activities will be sufficient to cover the liquidity needs that become due in the twelve-month period ending one year after the financial statements' issuance.

 

Working Capital Requirements and Sources of Capital

 

As of December 31, 2021, we had a working capital deficit (current assets less current liabilities) of $31.8 million.

 

Our operating cash flow for the remainder of 2022 is expected to increase compared to the same period in 2021, as the contribution of the two VLCC tankers and the Suezmax tanker we have taken delivery of in the first quarter of 2022 will more than compensate the effect of the vessels sold in September 2021 and February 2022. Furthermore, as of the date of this annual report $24.4 million of Due to related parties, which were categorized as short term liabilities as of December 31, 2021 and have been the major factor resulting in our working capital deficit position, have been exchanged with 2,437,000 Series F Perpetual Preferred Shares (see “Item 4. Information on the Company—A. History and Development of the Company—Recent Developments.”).

 

Cash Flow Information

 

Cash and cash equivalents and restricted cash were $23.3 million and $6.4 million as of December 31, 2020 and 2021 respectively.

 

Net Cash from Operating Activities.

 

Net cash provided by operating activities increased by $10.1 million, or 168%, for 2021 to $16.1 million, compared to $6.0 million for 2020.

 

Adjustments to reconcile net income to net cash provided by operating activities for the year ended December 31, 2021 totaled $9.0 million. This consisted mainly of $7.7 million of depreciation expenses, $1.5 million Dividends from cumulative earnings of joint ventures, $1.2 million of impairment of vessels, $0.8 million of amortization and write offs of deferred financing costs, offset by $1.4 million of non-cash operating lease expenses $0.7 million in gains in unconsolidated joint ventures and $0.1 million of gains from the valuation of derivative financial instruments. The cash inflow from operations was offset by a $1.5 million decrease in current liabilities, offset by a $0.1 million increase in current assets.

 

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Non-cash adjustments to reconcile net loss to net cash provided by operating activities for the year ended December 31, 2020 totaled $29.8 million. This consisted mainly of $13.2 million of depreciation expenses, $12.4 million of losses from the sale of vessels, $6.3 million of amortization and write offs of deferred financing costs, $1.1 million of impairment of vessels held for sale and $0.8 million of unrealized losses from the valuation of derivative financial instruments, offset by $0.7 million in gains in unconsolidated joint ventures. The cash inflow from operations was offset by a $4.1 million decrease in current liabilities, offset by a $0.8 million increase in current assets.

 

Net Cash from Investing Activities.

 

Net cash used in investing activities in the period ended December 31, 2021 was $76.7 million, consisting of $115.6 million of cash paid for advances for vessels under construction, offset by $35.9 million net proceeds from sale and exchange of vessels and $3.0 million of return of investments in unconsolidated joint ventures.

 

Net cash provided by investing activities in the year ended December 31, 2020 was $181.3 million, consisting of $310.0 million net proceeds from sale of vessels and $19.6 million from the sale of investments in unconsolidated joint ventures (2017 Joint Venture (please see “Item 18. Financial Statements—Note 17— Investments in unconsolidated joint ventures”), offset by $120.8 million of cash paid for advances for vessels under construction and $27.5 million of cash paid for Investments in unconsolidated joint ventures (2020 Joint Venture).

 

Net Cash from Financing Activities.         

 

Net cash provided by financing activities in the period ended December 31, 2021 was $43.6 million, consisting of $74.8 million of proceeds from long term debt, offset by $28.3 million of principal payments and prepayments of debt, $1.8 million payments of dividends for Series E Shares and $1.1 million payments of financing costs.

 

Net cash used in financing activities in the year ended December 31, 2020 was $177.3 million, consisting of, $129.7 million of proceeds from equity offerings and $60.2 million of proceeds from long term debt. These inflows were offset by $252.1 of prepayments of long term debt, $60.9 million for consideration paid in excess of purchase price over book value of vessels, $24.6 million redemptions of Series E Shares, $17.4 million of scheduled debt repayments, $8.9 million of equity offering related costs, $1.9 million payments of financing costs and $1.4 million from the termination of Interest rate swaps.

 

Please see Item 5. “Operating and Financial Review and Prospects—A. Operating Results” in our Annual Report on Form 20-F, filed on April 23, 2021 where the 2019 cash flow information may be found.

 

Debt Facilities

 

For a more complete description of debt facilities entered into in the period ended December 31, 2021 as well as for a description of debt facilities entered before the period ended December 31, 2021 please see “Item 18. Financial Statements—Note 7—Debt.”.

 

2nd ABN Amro Facility

 

On March 18, 2021, we entered into a new credit facility with ABN Amro for $36.8 million for the financing of the vessel M/T Eco West Coast (Hull No 866). This facility was drawn down in full. The credit facility is repayable in 24 consecutive quarterly installments of $0.62 million commencing in June 2021, plus a balloon installment of $22.0 million payable together with the last installment. The facility bears interest at LIBOR plus a margin of 2.50%.

 

2nd Alpha Bank Facility

 

On May 6, 2021, we entered into a senior debt facility with Alpha Bank of $38 million for the financing of the vessel M/T Eco Malibu. The loan is payable in 12 consecutive quarterly installments of $0.75 million followed by 12 consecutive quarterly installments of $0.63 million, commencing three months from draw down, and a balloon payment of $21.5 million payable together with the last installment. The facility bears interest at LIBOR plus a margin of 3.00%.

 

Central Mare Unsecured Bridge Loan

 

On January 5, 2022 we entered into an unsecured credit facility for up to $20 million with an affiliate of Mr. Evangelos J. Pistiolis in order to finance part of the shipbuilding cost of our 2 VLCC newbuildings. As of the date of this annual report, $9 million has been drawn down. The facility maturity was December 31, 2022. The principal terms of the loan included an arrangement fee of 2%, interest of 12% per annum and a commitment fee of 1.00% on the undrawn part of the facility. The facility was fully repaid and terminated on March 4, 2022 from proceeds from the sale of the M/T Eco Los Angeles.

 

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Financings Committed under Sale and Leaseback Agreements

 

2nd CMBFL Sale and Leaseback

 

On November 23, 2021 we entered into an SLB with CMBFL, for our newbuilding vessels Julius Caesar (Hull No. 3213) and Legio X Equestris (Hull No. 3214). Consummation of the SLB took place on January 17 and March 2, 2022, respectively. Following the sale, we have bareboat chartered back the vessels for a period of eight years at bareboat hire rates comprising of 32 consecutive quarterly installments of $0.68 million and a balloon payment of $32.4 million payable together with the last installment, plus interest based on the three months LIBOR plus 2.60%. As part of this transaction, we have continuous options to buy back the vessels at purchase prices stipulated in the bareboat agreements depending on when the option was exercised and at the end of the eight year period we have an option to buy back the vessels at a cost represented by the balloon payment.

 

2nd AVIC Sale and Leaseback

 

On March 2, 2022 we entered into an SLB with AVIC, for our newbuilding vessel Eco Oceano Ca (Hull No. 871). Consummation of the SLB took place on March 4, 2022. Following the sale, we have bareboat chartered back the vessel for a period of ten years at bareboat hire rates comprising of 40 consecutive quarterly installments of $0.68 million and a balloon payment of $21.2 million payable together with the last installment, plus interest based on the three months LIBOR plus 3.50%. As part of this transaction, we have continuous options to buy back the vessels at purchase prices stipulated in the bareboat agreements depending on when the option was exercised and at the end of the ten year period we have an obligation to buy back the vessels at a cost represented by the balloon payment. The obligations of our subsidiary as charterer are secured by, among other things, an assignments of the vessel’s insurances and earnings and any sub-charters of the vessel, and a pledge of the charterer’s earnings account. We guaranteed the charterer’s obligations under the charter.

 

Covenant Compliance

 

As of December 31, 2021, we were in compliance with all covenants with respect to our bank loans and sale and leaseback agreements. The fair value of debt outstanding on December 31, 2021, after excluding unamortized financing fees, amounted to $147.2 million when valuing the Cargill and AVIC SLBs on the basis of the Commercial Interest Reference Rates as applicable on December 31, 2021.

 

Operating Leases

 

On December 1 and December 10, 2020, we sold and leased back M/T Eco Beverly Hills and M/T Eco Bel Air respectively to a third non-affiliated party (the “Navigare Lease”). Each vessel was chartered back on a bareboat basis for five years at a bareboat hire of $16,750 per day for the first two years, $14,000 per day for the next two years and $10,000 per day for the fifth year. We do not have any option nor obligation to buy back the vessels. The abovementioned sale and leaseback transactions contain, customary covenants and event of default clauses, including cross-default provisions, change of control provisions (whereby Mr. Evangelos J. Pistiolis may not control less than 50.1% of the voting rights of the Company) and restrictive covenants and performance requirements. Part of these covenants is a requirement to maintain a minimum liquidity of $4 million at all times which is certified bi-annually. As of December 31, 2021, we comply with all covenants of the Navigare Lease.

 

Please see “Item 18. Financial Statements—Note 6—Leases.” for more detailed information.

 

C.          Research and Development, Patents and Licenses, Etc.

 

Not applicable.

 

D.         Trend Information

 

For industry trends, refer to industry disclosure under “Item 4. Information on the Company—B. Business Overview.”

 

E.         Critical Accounting Estimates

 

The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of those financial statements requires us to make estimates and judgments that affect the reported amount of assets and liabilities, revenues and expenses and related disclosure of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions or conditions.

 

Critical accounting estimates are those that reflect significant judgments or uncertainties, and potentially result in materially different results under different assumptions and conditions. We have described below what we believe are our most critical accounting estimates that involve a higher degree of judgment and the methods of their application. For a description of all of our significant accounting estimates, see Note 2 to our consolidated financial statements included herein.

 

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Vessel depreciation. We record the value of our vessels at their cost (which includes the contract price, pre-delivery costs incurred during the construction of newbuildings, capitalized interest and any material expenses incurred upon acquisition such as initial repairs, improvements and delivery expenses to prepare the vessel for its initial voyage) less accumulated depreciation. We depreciate our vessels on a straight-line basis over their estimated useful lives, estimated to be 25 years from the date of initial delivery from the shipyard. Depreciation is based on cost of the vessel less its residual value which is estimated to be $300 per light-weight ton. A decrease in the useful life of the vessel or in the residual value would have the effect of increasing the annual depreciation charge.

 

A decrease in the useful life of the vessel may occur as a result of poor vessel maintenance performed, harsh ocean-going and weather conditions that the vessel is subject to, or poor quality of the shipbuilding yard. When regulations place limitations over the ability of a vessel to trade on a worldwide basis, the vessel’s useful life is adjusted at the date such regulations become effective. Weak freight markets may result in owners scrapping more vessels and scrapping them earlier due to unattractive returns. An increase in the useful life of the vessel may result from superior vessel maintenance performed, favorable ocean-going and weather conditions the vessel is subjected to, superior quality of the shipbuilding yard, or high freight rates which result in owners scrapping the vessels later due to attractive cash flows.

 

Impairment of vessels: We evaluate the existence of impairment indicators whenever events or changes in circumstances indicate that the carrying values of our long-lived assets are not recoverable. Such indicators of potential impairment include, vessel sales and purchases, business plans and overall market conditions. If there are indications for impairment present, we determine undiscounted projected net operating cash flows for each vessel and compare it to the vessel’s carrying value. If the carrying value of the related vessel exceeds its undiscounted future net cash flows, the carrying value is reduced to its fair value.

 

The carrying values of our vessels may not represent their fair market value 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 newbuildings.

 

Although we believe that the assumptions used to evaluate potential impairment are reasonable and appropriate, such assumptions are highly subjective. There can be no assurance as to how long charter rates and vessel values will remain at their current levels or whether they will improve or decrease by any significant degree. Charter rates may be at depressed levels for some time, which could adversely affect our revenue and profitability, and future assessments of vessel impairment.

 

In order to perform the undiscounted cash flow test, we make assumptions about future charter rates, commissions, vessel operating expenses, dry-dock costs, fleet utilization, scrap rates used to calculate estimated proceeds at the end of vessels’ useful lives and the estimated remaining useful lives of the vessels. These assumptions are based on historical trends as well as future expectations. The projected net operating cash flows are determined by considering the charter revenues from existing time charters for the fixed fleet days and an estimated daily time charter equivalent for the unfixed days (based on the ten year historical averages of the one-year, three-year and five-year time charter rates) over the remaining useful life of each vessel, which we estimate to be 25 years from the date of initial delivery from the shipyard. Expected outflows for scheduled vessels’ maintenance and vessel operating expenses are based on historical data, and adjusted annually assuming an average annual inflation derived from the most recent twenty-year average consumer price index. Effective fleet utilization, average commissions, dry-dock costs and scrap values are also based on historical data.

 

In 2020 tanker values were stable and in 2021 they increased and as a result in both years the charter-free market value of each vessel of our fleet was higher than its carrying amount. As such we had no indicators of potential impairment and did not perform the undiscounted cash flow test for any vessel of our fleet.

 

In December 2021 we classified two product tankers, M/T Eco Los Angeles and M/T Eco City of Angels as held for sale. Since their fair value less costs to sell exceeded their carrying amount the Company didn’t incur any impairment charges. The vessels were sold on February 28 and March 15, 2022 respectively to unaffiliated third parties for a total consideration of $73 million. Furthermore during the six months ended June 30, 2021, in accordance with the provisions of relevant guidance, we recognized the M/T Nord Valiant, the carrying amount of which as of June 30, 2021 amounted to $27.0 million, as held for sale and wrote it down to its fair value of $25.8 million, resulting in an impairment charge of $1.2 million. The vessel was sold on September 1, 2021 to unaffiliated third parties for a total consideration of $26.4 million.

 

Also see “Item 18. Financial Statements—Note 2— Significant Accounting Policies”. 

 

ITEM 6.         DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

 

A.         Directors and Senior Management

 

Set forth below are the names, ages and positions of our directors, executive officers and key employees. Members of our Board of Directors are elected annually on a staggered basis and each director elected holds office for a three-year term.

 

Officers are elected from time to time by vote of our Board of Directors and hold office until a successor is elected.

 

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Name

 

Age

 

Position

Evangelos J. Pistiolis

 

49

 

Director, President, Chief Executive Officer

Alexandros Tsirikos

 

48

 

Director, Chief Financial Officer

Konstantinos Patis

 

48

 

Chief Technical Officer

Vangelis G. Ikonomou

 

57

 

Chief Operating Officer

Konstantinos Karelas

 

49

 

Independent Non-Executive Director

Stavros Emmanuel

 

79

 

Independent Non-Executive Director

Paolo Javarone

 

48

 

Independent Non-Executive Director

 

Biographical information with respect to each of our directors and executives is set forth below.

 

Evangelos J. Pistiolis founded our Company in 2000, is our President and Chief Executive Officer, and has served on our Board of Directors since July 2004. Mr. Pistiolis graduated from Southampton Institute of Higher Education in 1999, where he studied shipping operations and from Technical University of Munich in 1994 with a bachelor’s degree in mechanical engineering. His career in shipping started in 1992 when he was involved with the day-to-day operations of a small fleet of drybulk vessels. From 1994 through 1995, he worked at Howe Robinson & Co. Ltd., a London shipbroker specializing in container vessels. While studying at the Southampton Institute of Higher Education, Mr. Pistiolis oversaw the daily operations of Compass United Maritime Container Vessels, a ship management company located in Greece.

 

Alexandros Tsirikos has served as our Chief Financial Officer since April 1, 2009. Mr. Tsirikos is a U.K. qualified Chartered Accountant (ACA) and has been employed with TOP Ships Inc. since July 2007 as our Corporate Development Officer. Prior to joining TOP Ships Inc., Mr. Tsirikos was a manager with PricewaterhouseCoopers, or PwC, where he worked as a member of the PwC Advisory team and the PwC Assurance team, thereby drawing experience both from consulting as well as auditing. As a member of PwC’s Advisory team, he led and participated in numerous projects in the public and the private sectors, including strategic planning and business modeling, investment analysis and appraisal, feasibility studies, costing and project management. As a member of the PwC’s Assurance team, Mr. Tsirikos was part of the International Financial Reporting Standards, or IFRS, technical team of PwC Greece and lead numerous IFRS conversion projects for listed companies. He holds a Master’s of Science in Shipping Trade and Finance from City University of London and a bachelor’s degree with honors in Business Administration from Boston University in the United States. He speaks English, French and Greek.

 

Konstantinos Patis has served as our Chief Technical Officer since January 2018. Mr. Patis holds a Master’s of Science and a Bachelor’s degree, both in Marine Engineering from the University of Newcastle upon Tyne in the UK, as well as a Bachelor’s degree in Naval Architecture from the Technological Educational Institute of Athens, in Greece. He started his carrier in 1997 acting as a Superintendent Engineer, thereafter as Fleet Manager and from 2014 as Technical Manager in various ship management companies in Greece, like Cyprus Sea Lines, Technomar Shipping, Aeolian Investments, Arion Shipping operating diverse fleets of Tankers, Bulk Carriers and Containers and was involved in the technical supervision, repairs, dry docks and construction of new projects.

 

Vangelis G. Ikonomou is our Chief Operating Officer. Prior to joining us, Mr. Ikonomou was the Commercial Director of Primal Tankers Inc. From 2000 to 2002, Mr. Ikonomou worked with George Moundreas & Company S.A. where he was responsible for the purchase and sale of second-hand vessels and initiated and developed a shipping industry research department. Mr. Ikonomou worked, from 1993 to 2000, for Eastern Mediterranean Maritime Ltd., a ship management company in Greece, in the commercial as well as the safety and quality departments. Mr. Ikonomou holds a Master’s degree in Shipping Trade and Finance from the City University Business School in London, a bachelor’s degree in Business Administration from the University of Athens in Greece and a Navigation Officer Degree from the Higher State Merchant Marine Academy in Greece.

 

Konstantinos Karelas has served on our Board of Directors and has been member of the Audit Committee since April 2014. Since 2008, Mr. Karelas has served as the President and CEO of Europe Cold Storages SA, one of the leading companies in the field of refrigeration logistics.

 

Stavros Emmanuel has served on our Board of Directors since December 31, 2017 and has been member of the Audit Committee since December 2018. Captain Stavros Emmanuel has 47 years of experience in the shipping industry and expertise in operation and chartering matters. He obtained a Naval Officers degree from ASDEN Nautical Academy of Aspropyrgos, Greece and earned a Master Mariners degree in 1971. He has worked in various management capacities at Compass United Maritime and Primal Tankers Inc. From 2004 to 2009 he was our Chief Operating Officer. After leaving us, Captain Stavros Emmanuel has been an independent advisor to various shipping companies.

 

Paolo Javarone has served on our Board of Directors since September 1, 2014. Mr. Javarone is a member of the Italian Shipbrokers Association. From 2015, Mr. Javarone has been working for Shipping 360 Ltd, a boutique shipbroking company with offices in London and Monaco and before that he has been working since 2000 for Sernavimar S.R.L., one of the most reputable shipbroking houses in Italy, which cooperates with many of the oil major companies and trading associations of the industry. From 1994 to 2000, Mr. Javarone worked for Genoa Sea Brokers in the tanker wing of the company specializing in clean petroleum products and edible markets. Previously, Mr. Javarone worked for S.a.n.a. Eur, a company based in Rome Italy, where he was tasked with supplying energy and offshore supply. Before S.a.n.a., Mr. Javarone worked for Sidermar di Navigazione S.P.A. in the dry cargo field. Mr. Javarone holds a Shipbroker degree from National Agents Association Shipbroking School in Italy and a degree in Shipping Economics and Law from Nautical Maritime School in Italy.

 

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B.         Compensation

 

On September 1, 2010, we entered into separate agreements with Central Mare, pursuant to which Central Mare furnishes our four executive officers as described below. During the fiscal year ended December 31, 2021, we paid to the members of our senior management and to our director’s aggregate compensation of $0.4 million. We do not have a retirement plan for our officers or directors and we did not issue any stock options or other securities to them as part of compensation for the fiscal year ended December 31, 2021.

 

Under the terms of the agreement for the provision of our Chief Executive Officer, we are obligated to pay annual base salary. The initial term of the agreement expired on August 31, 2014 and is automatically extended for successive one-year terms unless Central Mare or we provide notice of non-renewal at least sixty days prior to the expiration of the then applicable term.

 

If our Chief Executive Officer’s employment is terminated without cause, he is entitled to certain personal and household security costs. If he is removed from our Board of Directors or not re-elected, then his employment terminates automatically without prejudice to Central Mare’s rights to pursue damages for such termination. In the event of a change of control, the Chief Executive Officer is entitled to receive a cash payment of ten million Euros. The agreement also contains death and disability provisions. In addition, the Chief Executive Officer is subject to non-competition and non-solicitation undertakings.

 

Under the terms of the agreement for the provision of our Chief Operating Officer, we are obligated to pay annual base salary and additional incentive compensation as determined by our Board of Directors. The initial term of the agreement expired on August 31, 2011 and is automatically extended for successive one-year terms unless Central Mare or we provide notice of non-renewal at least sixty days prior to the expiration of the then applicable term. In the event of a change of control, he is entitled to receive a cash payment of three years’ annual base salary. The agreement also contains death and disability provisions. In addition, our Chief Operating Officer is subject to non-competition and non-solicitation undertakings.

 

Under the terms of the agreement for the provision of our Chief Financial Officer, we are obligated to pay annual base salary. The initial term of the agreement expired on August 31, 2012, and is automatically extended for successive one-year terms unless Central Mare or we provide notice of non-renewal at least sixty days prior to the expiration of the then applicable term.

 

If our Chief Financial Officer is removed from our Board of Directors or not re-elected, then his employment terminates automatically without prejudice to Central Mare’s rights to pursue damages for such termination. In the event of a change of control, our Chief Financial Officer is entitled to receive a cash payment equal to three years’ annual base salary. The agreement also contains death and disability provisions. In addition, our Chief Financial Officer is subject to non-competition and non-solicitation undertakings.

 

Under the terms of our agreement for the provision of our Chief Technical Officer, we are obligated to pay annual base salary. The initial term of the agreement expired on August 31, 2011, however the agreement is being automatically extended for successive one-year terms unless Central Mare or we provide notice of non-renewal at least sixty days prior to the expiration of the then applicable term. In the event of a change of control, the Chief Technical Officer is entitled to receive a cash payment equal to three years’ annual base salary. In addition, our Chief Technical Officer is subject to non-competition and non-solicitation undertakings.

 

C.         Board Practices

 

Our Board of Directors is divided into three classes. Members of our Board of Directors are elected annually on a staggered basis, and each director elected holds office for a three-year term. We currently have two executive directors and three independent non-executive directors. The term of our Class II directors, Paolo Javarone and Konstantinos Karelas, expires at the annual general meeting of shareholders in 2024. The term of our Class III director, Alexandros Tsirikos, expires at the annual general meeting of shareholders in 2022. The term of our Class I directors, Stavros Emmanuel and Evangelos J. Pistiolis expires at the annual general meeting of shareholders in 2023.

 

Committees of our Board of Directors

 

We currently have an audit committee composed of three independent members, who are responsible for reviewing our accounting controls and recommending to our Board of Directors, the engagement of our outside auditors. Konstantinos Karelas, Paolo Javarone and Stavros Emmanuel (Chairman), whose biographical details are included in Item 6 of this Annual Report, are the members of the audit committee, and our Board of Directors has determined that they are independent under the Nasdaq corporate governance rules.

 

Our compensation committee and nominating and governance committees are currently composed of the following three members: Konstantinos Karelas, Paolo Javarone and Stavros Emmanuel. The compensation committee carries out our Board of Directors’ responsibilities relating to compensation of our executive and non-executive officers and provides such other guidance with respect to compensation matters as the committee deems appropriate. The nominating and governance committee assists our Board of Directors in: (i) identifying, evaluating and making recommendations to our Board of Directors concerning individuals for selections as director nominees for the next annual meeting of stockholders or to otherwise fill vacancies on our Board of Directors; (ii) developing and recommending to our Board of Directors a set of corporate governance guidelines and principles applicable to us; and (iii) reviewing our overall corporate governance and recommending improvements to our Board of Directors from time to time.

 

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As a foreign private issuer, we are exempt from certain Nasdaq requirements that are applicable to U.S. domestic companies. For a listing and further discussion of how our corporate governance practices differ from those required of U.S. companies listed on Nasdaq, please see Item 16G of this Annual Report.

 

D.         Employees

 

We have only one direct employee while our four executive officers and a number of administrative employees are furnished to us pursuant to agreements with Central Mare, as described above. Our Fleet Manager ensures that all seamen have the qualifications and licenses required to comply with international regulations and shipping conventions, and that our vessels employ experienced and competent personnel. As of December 31, 2019, 2020 and 2021, we employed 269, 136, and 146 sea going employees, indirectly through our Fleet Managers.

 

E.         Share Ownership

 

The common shares beneficially owned by our directors and senior managers and/or companies affiliated with these individuals are disclosed in “Item 7. Major Shareholders and Related Party Transactions—A. Major Shareholders.”

 

ITEM 7.         MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

 

A.         Major Shareholders

 

The following table sets forth the beneficial ownership of our voting securities, comprised of our common shares, Series D Preferred Shares, Series E Preferred Shares, and Series F Preferred Shares, as of the date of this annual report, held by: (i) each person or entity that we know beneficially owns 5% or more of our common shares and (ii) all our executive officers, directors and key employees as a group. Beneficial ownership is determined in accordance with the SEC’s rules. In computing percentage ownership of each person, common shares subject to options held by that person that are currently exercisable or convertible, or exercisable or convertible within 60 days are deemed to be beneficially owned by that person. These shares, however, are not deemed outstanding for the purpose of computing the percentage ownership of any other person. All shareholders of common stock are entitled to one vote for each common share held, holders of our Series D Preferred Shares are entitled to 1,000 votes per Series D Preferred share held, holders of our Series E Preferred Shares are entitled to 1,000 votes per Series E Preferred share held, and holders of our Series F Preferred Shares are entitled to 10 votes per Series F Preferred share held.

 

Name and Address of Beneficial Owner(2)

Number of Shares Owned

Percentage of Class

 

Percentage of
Total Voting Power

Lax Trust (1)

100,000 Series D Preferred Shares (3)

 

100

%

 

50.4% 

 

13,452 Series E Preferred Shares

 

100

%

   

Africanus Inc. (1) 

7,200,000 Series F Preferred Shares

 

100

%

 

32.0%

Executive officers, directors and key employees

100,000 Common Stock

 

0.3

%

 

0.0%

____________

 

(1)

The above information is derived, in part, from the Schedule 13D/A filed with the SEC on April 1, 2022. The Lax Trust is an irrevocable trust established for the benefit of certain family members of Mr. Evangelos J. Pistiolis, our President, Chief Executive Officer and Director. The business address of the Lax Trust is Level 3, 18 Stanley Street, Auckland 1010, New Zealand. Africanus Inc. is an affiliate of Mr. Pistiolis. The business address of Africanus Inc. is 11 Kanari Street, 10671 Athens, Greece. The above percentage of total voting power is based on 225,283,972 eligible votes, which is calculated by taking the sum of (i) 39,831,972 common shares outstanding (one vote per common share held), (ii) 100,000,000 votes carried by the outstanding Series D Preferred Shares (1,000 votes per Series D Preferred Share held), (iii) 13,452,000 votes carried by the outstanding Series E Preferred Shares (1,000 votes per Series E Preferred Share held) and (iv) 72,000,000 votes carried by the outstanding Series F Preferred Shares (10 votes per Series F Preferred Share held). As of April 13, 2022, the 13,452 Series E Preferred Shares held by Family Trading may be converted to 17,470,130 common shares.

 

(2)

Morgan Stanley and Hudson Bay Management LP each reported holdings in excess of 5% on Schedule 13G or amendments to Schedule 13G during 2020. Due to subsequent issuances and sales of our common shares, we no longer believe these shareholders have at least a 5% interest in the Company based on the number of shares reported on each reporting persons Schedule 13G or any amendments thereto.

 

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(3)

As a prerequisite for the Navigare Lease, Mr. Evangelos J. Pistiolis personally guaranteed the performance of the bareboat charters entered in connection with the lease, under certain circumstances, and in exchange, we amended the Certificate of Designations governing the terms of the Series D Preferred Shares, to adjust the voting rights per share of Series D Preferred Shares such that during the term of the Navigare Lease, the combined voting power controlled by Mr. Evangelos J. Pistiolis and the Lax Trust does not fall below a majority of our total voting power, irrespective of any new common or preferred stock issuances, and thereby complying with a relevant covenant of the bareboat charters entered in connection with the Navigare Lease.

 

As of April 13, 2022, we had six shareholders of record, which were located in the United States and held an aggregate of 39,831,972 our common shares, representing 100% of our outstanding common shares. However, one of the U.S. shareholder of record is Cede & Co., which held 39,831,757 of our common shares. We believe that the shares held by Cede & Co. include common shares beneficially owned by both holders in the United States and non-U.S. beneficial owners. We are not aware of any arrangements the operation of which may at a subsequent date result in our change of control.

 

B.         Related Party Transactions

 

Please also see “Item 18. Financial Statements—Note 5—Transactions with Related Parties.”

 

(a) Central Mare Executive Officers and Other Personnel Agreements

 

On September 1, 2010, we entered into separate agreements with Central Mare, a related party affiliated with the family of our President, Chief Executive Officer and Director, Mr. Evangelos J. Pistiolis, pursuant to which Central Mare provides us with our executive officers (Chief Executive Officer, Chief Financial Officer, Chief Technical Officer and Chief Operating Officer).

 

The fees charged by and expenses relating to Central Mare for the years ended December 31, 2019, 2020 and 2021 are $0.3 million.

 

(b) Central Shipping Inc (CSI) Letter Agreement and Management Agreements

 

On January 1, 2019, we entered into a letter agreement with CSI (“CSI Letter Agreement”), a related party affiliated with the family of Mr. Evangelos J. Pistiolis and on the same date we entered into management agreements, or the CSI Management Agreements, between CSI and our vessel-owning subsidiaries respectively. The CSI Letter Agreement can only be terminated subject to an eighteen-month advance notice, subject to a termination fee equal to twelve months of fees payable under the CSI Letter Agreement.

 

Pursuant to the CSI Letter Agreement, as well as the CSI Management Agreements concluded between CSI and our vessel-owning subsidiaries, we pay a management fee of $572 per day per vessel for the provision of technical, commercial, operation, insurance, bunkering and crew management, commencing three months before the vessel is scheduled to be delivered by the shipyard. In addition, the CSI Management Agreements provide for payment to CSI of: (i) $520 per day for superintendent visits plus actual expenses; (ii) a chartering commission of 1.25% on all freight, hire and demurrage revenues; (iii) a commission of 1.00% on all gross vessel sale proceeds or the purchase price paid for vessels and (iv) a financing fee of 0.2% on derivative agreements and loan financing or refinancing. CSI also performs supervision services for all of our newbuilding vessels while the vessels are under construction, for which we pay CSI the actual cost of the supervision services plus a fee of 7% of such supervision services.

 

CSI provides, at cost, all accounting, reporting and administrative services. Finally, the CSI Letter Agreement provides for a performance incentive fee for the provision of management services to be determined at our discretion. The CSI Management Agreements have an initial term of five years, after which they will continue to be in effect until terminated by either party subject to an eighteen-month advance notice of termination. Pursuant to the terms of the CSI Management Agreements, all fees payable to CSI are adjusted annually according to the US Consumer Price Inflation (“CPI”) of the previous year and if CPI is less than 2% than a 2% increase is effected.

 

The fees charged by and expenses relating to CSI for the years ended December 31, 2020 and 2021 were $12.3 million and $5.7 million respectively. For the years ended December 31, 2020 and 2021, CSI also charged us newbuilding supervision related pass-through costs amounting to $1.0 and $1.2 million respectively.         

 

(c) Issuance of Series E Preferred Shares to Family Trading Inc (Family Trading)

 

On March 29, 2019 we entered into a stock purchase agreement with Family Trading pursuant to which we exchanged the outstanding principal, fees and interest of the Further Amended Family Trading Credit Facility with 27,129 Series E Preferred Shares. As of December 31, 2020, pursuant to the terms of the Series E Preferred Shares we owed $0.9 million of dividends to Family Trading. For more information about Series E Preferred Shares please see “Item 10. Additional Information—B. Memorandum and Articles of Association.

 

On June 30, 2019, we issued 1,029 Series E Shares for the payment of dividends accumulated since the original issuance of the Series E Preferred Shares through June 30, 2019.

 

From July 25, 2019 to March 19, 2020, we redeemed 33,798 of Series E Preferred Shares for an aggregate purchase price of $38.9 million.

 

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On February 17, 2020, we issued 16,004 Series E Preferred Shares to Family Trading, as settlement of the consideration outstanding for the purchase of the M/T Eco City of Angels and M/T Eco Los Angeles from Mr. Evangelos J. Pistiolis, and for dividends payable to Family Trading Inc. under already outstanding Series E Preferred Shares.

 

On June 30, 2020, we issued 900 Series E Preferred Shares to Family Trading, as settlement for dividends payable to Family Trading Inc. under already outstanding Series E Preferred Shares.

 

On August 20, 2020, we entered into a Standstill Agreement with Family Trading, pursuant to which Family Trading agreed not to convert any of its Series E Preferred Shares into Common Shares until August 20, 2021.

 

On September 8, 2021, pursuant to a Sale and Purchase Agreement between the Issuer and Zizzy Charter Co. dated September 8, 2021, we issued 2,188 Series E Preferred Shares to Family Trading as partial settlement of the consideration outstanding for the purchase of an additional 65% ownership interest in each of Julius Caesar Inc. and Legio X Inc., each a party to shipbuilding contracts for VLCC Julius Caesar and VLCC Legio X Equestris, respectively, from a party affiliated with Mr. Pistiolis.

 

(d) Vessel Acquisitions from affiliated entities

 

From January 31, 2018 to September 8, 2022 we entered into a series of transactions with a number of entities affiliated with Mr. Evangelos J. Pistiolis. As of December 31, 2021, we owe $27.6 million to the previous owners of the newbuilding vessels. For more information on these vessel acquisitions please see “Item 18. Financial Statements—Note 1— Basis of Presentation and General Information.” and “Item 4. Information On The Company - A. History and Development of the Company –Recent Developments.”

 

(e) Charter Parties with Central Tankers Chartering Inc (Central Tankers Chartering)

 

On May 4, 2020 we acquired from entities affiliated with Mr. Evangelos J. Pistiolis three Marshall Island companies that owned for the newbuilding vessels M/T Eco Van Nuys, M/T Eco Santa Monica and M/T Eco Venice Beach, due for delivery in the first quarter of 2021. These companies were each a party to a time charter party with Central Tankers Chartering, a related party affiliated with the family of Mr. Evangelos J. Pistiolis, The time charters were for a firm period of five years at a daily rate of $16,200 with two optional years at daily rates of $17,200 and $18,200 respectively, at Central Tankers Chartering’s option and would have commenced upon each vessel’s delivery from the shipyard in the first quarter of 2021. On January 6, 2021 the abovementioned companies were sold as part of the VLCC Transaction.

 

On January 6, 2021 we acquired a shipowning company from an entity affiliated with Mr. Evangelos J. Pistiolis that owned M/T Eco Oceano CA which was party to a time charter, with Central Tankers Chartering Inc, for a firm duration of five years at a gross daily rate of $32,450, with two optional years at $33,950 and $35,450 at Central Tankers Chartering’s option. The time charter commenced on the date of delivery. As of December 31, 2021, there were no amounts due to Central Tankers Chartering. On February 22, 2022 we amended the previously agreed time charter with Central Tankers Chartering and increased its firm period from 5 years to 15 years and reduced the daily rate from $32,450 to $24,500.

 

(f) Personal Guarantees by Mr. Evangelos J. Pistiolis and Related Amendments to the Series D Preferred Shares.

 

As a prerequisite for the Navigare Lease, Mr. Evangelos J. Pistiolis personally guaranteed the performance of the bareboat charters connected to the lease and in exchange, we agreed to indemnify him for any losses suffered as a result of the guarantee provided, and we amended the Certificate of Designations governing the terms of the Series D Preferred Shares, to adjust the voting rights per share of Series D Preferred Shares such that during the term of the Navigare Lease, the combined voting power controlled by Mr. Evangelos J. Pistiolis and the Lax Trust does not fall below a majority of our total voting power, irrespective of any new common or preferred stock issuances, and thereby complying with a relevant covenant of the bareboat charters entered in connection with the Navigare Lease. This personal guarantee comes into effect in the case 120 days have passed and we are still unable to pay down all amounts due under the Navigare Lease, with the exception of amounts due to Navigare due to a total loss, where in this case the personal guarantee will cover an amount equal to all unpaid charter hire and a further amount equivalent to all future charter hire that would have accrued from the date of the total loss up to the end of the charter period and is callable 200 days after the date of the total loss. Due to the related party nature of the transactions involving Mr. Evangelos J. Pistiolis, such transactions were unanimously approved by the Company’s Board of Directors, including all three independent directors.

 

(g) Issuance of Series F Preferred Shares to Africanus Inc.

 

On January 17, 2022, we entered into a stock purchase agreement with Africanus Inc., an affiliate of our CEO for the sale of up to 7,560,759 Series F Non-Convertible Perpetual Preferred Shares, par value $0.01, in exchange for (i) the assumption by Africanus Inc. of an amount of $48.0 million of shipbuilding costs for vessels M/T Eco Oceano CA (Hull No. 871), M/T Julius Caesar (Hull No. 3213) and M/T Legio X Equestris (Hull No. 3214), and (ii) settlement of our remaining payment obligations relating to the acquisition in September 8, 2021 of an additional 65% ownership interest in the newbuilding contracts for its 2 VLCCs, in an amount of up to $27.6 million. As of the date of this annual report 7,200,000 Series F Preferred Shares have been issued.

 

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(h) Central Mare Bridge Loan

 

On January 5, 2022 we entered into an unsecured credit facility for up to $20 million with an affiliate of Mr. Evangelos J. Pistiolis in order to finance part of the shipbuilding cost of our 2 VLCC newbuildings. As of the date of this annual report, $9 million were drawn down. The facility maturity was December 31, 2022. The principal terms of the loan include an arrangement fee of 2%, interest of 12% per annum and a commitment fee of 1.00% on the undrawn part of the facility. The facility was fully repaid and terminated on March 4, 2022 from proceeds from the sale of the M/T Eco Los Angeles.

 

C.         Interests of Experts and Counsel

 

Not applicable.

 

ITEM 8.         FINANCIAL INFORMATION.

 

A.         Consolidated Statements and Other Financial Information

 

See “Item 18—Financial Statements.”

 

Legal Proceedings

 

From time to time, we may be subject to legal proceedings and claims in the ordinary course of business, principally personal injury and property casualty claims. We expect that these claims would be covered by insurance, subject to customary deductibles. Those claims, even if lacking merit, could result in the expenditure of significant financial and managerial resources.

 

On August 1, 2017, we received a subpoena from the U.S. Securities and Exchange Commission (“SEC”) requesting certain documents and information in connection with offerings we made between February 2017 and August 2017. We provided the requested information to the SEC in response to that subpoena. On September 26, 2018 and on October 5, 2018 we received two additional subpoenas from the SEC requesting certain documents and information in connection with the previous subpoena we received on August 1, 2017. We provided the requested information to the SEC in response to these subpoenas. The SEC investigation is ongoing and we continue to cooperate with the SEC in its investigation. Our last communication with the SEC was in February 2019. We are unable to predict what action, if any, might be taken by the SEC or its staff as a result of this investigation or what impact, if any, the cost of responding to the SEC’s investigation or its ultimate outcome might have on our financial position, results of operations or liquidity.

 

On August 23, 2017, a purported securities class action complaint was filed in the United States District Court for the Eastern District of New York (No. 2:17-cv-04987(JFB)(SIL)) by Christopher Brady on behalf of himself and all others similarly situated against (among other defendants) us and two of our executive officers. The complaint was brought on behalf of an alleged class of those who purchased our common stock between January 17, 2017 and August 22, 2017, and alleges that we and two of our executive officers violated Sections 9, 10(b) and/or 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. On August 24, 2017, a second purported securities class action complaint was filed in the same court against the same defendants (No. 2:17-cv-05016 (JFB)(SIL)) which makes similar allegations and purports to allege violations of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder. By order dated July 20, 2018, the court consolidated the two actions under docket no. 2:17-cv-04987 and appointed lead plaintiffs for the consolidated action. On September 18, 2018, the plaintiffs filed a consolidated amended complaint. The amended complaint purports to be brought on behalf of shareholders who purchased our common stock between November 23, 2016 and April 3, 2018, makes allegations similar to those made in the original complaints, seeks similar relief as the original actions, and alleges that some or all the defendants violated sections 9, 10(b), 20(a), and/or 20A of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. All defendants filed motions to dismiss the amended complaint on March 25, 2019. Plaintiffs filed a consolidated opposition to defendants’ motions to dismiss on May 24, 2019. Defendants filed replies in further support of the motions to dismiss on June 28, 2019. In a Memorandum Decision and Order dated August 3, 2019, the Court granted defendants’ motions to dismiss under Rule 12(b)(6) and denied Plaintiffs’ request for leave to amend. On August 7, 2019, the Court entered judgment dismissing the case. Plaintiffs filed a notice of appeal on August 26, 2019. Plaintiffs/appellants filed their opening brief on the appeal on October 25, 2019. Defendants/appellees filed their response briefs on November 26 and November 27, 2019, and plaintiffs/appellants filed their reply brief on December 11, 2019. The Court of Appeals held oral argument on March 10, 2020 and took the matter under advisement. On April 2, 2020, the Court of Appeals issued a summary order affirming the District Court’s decision dismissing Plaintiffs’ claims and denying leave to amend and the case is now concluded in our favor.

 

By letter dated January 2, 2019, certain co-defendants in the class action litigation (Kalani Investments Ltd. (“Kalani”), Murchinson Ltd. and Marc Bistricer) requested that we indemnify and hold them harmless against all losses, including reasonable costs of defense, arising from the litigation, pursuant to the provisions of the Common Stock Purchase Agreement between us and Kalani. We acknowledged receipt of this indemnification request by letter dated February 20, 2019, and reserve all of our rights. 

 

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Dividend Distribution Policy

 

The declaration and payment of any future special dividends shall remain subject to the discretion of our Board of Directors and shall be based on general market and other conditions including our earnings, financial strength and cash requirements and availability. 

 

B.         Significant Changes

 

All significant changes have been included in the relevant sections.

 

ITEM 9.         THE OFFER AND LISTING.

 

Not applicable except for Item 9.A.4. and Item 9.C.

 

Share History and Markets

 

Since July 23, 2004, the primary trading market for our common shares has been Nasdaq on which our shares are now listed under the symbol “TOPS.”

 

ITEM 10.       ADDITIONAL INFORMATION

 

A.         Share Capital

 

Not applicable.

 

B.         Memorandum and Articles of Association

 

Purpose

 

Our purpose is to engage in any lawful act or activity for which corporations may now or hereafter be organized under the Marshall Islands Business Corporations Act, or BCA. Our Third Amended and Restated Articles of Incorporation and Amended and Restated By-Laws, as further amended, do not impose any limitations on the ownership rights of our shareholders.

 

Authorized Capitalization

 

Our authorized capital stock consists of 1,000,000,000 common shares, par value $0.01 per share, of which 39,831,972 shares were issued and outstanding as of the date of this annual report and 20,000,000 preferred shares with par value of $0.01, of which 100,000 Series D Preferred Shares, 13,452 Series E Preferred Shares, and 7,200,000 Series F Preferred Shares were issued and outstanding as of the date of this annual report. Our Board of Directors has the authority to establish such series of preferred stock and with such designations, preferences and relative, participating, optional or special rights and qualifications, limitations or restrictions as shall be stated in the resolution or resolutions providing for the issue of such preferred stock.

 

On September 14, 2016, we declared a dividend of one preferred share purchase right for each outstanding common share and adopted a shareholder rights plan, as set forth in a Stockholders Rights Agreement dated as of September 22, 2016, by and between us and Computershare Trust Company, N.A., as rights agent (now taken over by our new transfer agent, AST), described below under the section entitled “—Stockholders Rights Agreement”. In connection with the Stockholders Rights Agreement, we designated 1,000,000 shares as Series A Participating Preferred Stock, none of which are outstanding as of the date of this annual report.

 

Description of Common Shares

 

Each outstanding common share entitles the holder to one vote on all matters submitted to a vote of shareholders. Subject to preferences that may be applicable to any outstanding preferred shares, holders of common shares are entitled to receive ratably all dividends, if any, declared by our Board of Directors out of funds legally available for dividends. Upon our dissolution or liquidation or the sale of all or substantially all of our assets, after payment in full of all amounts required to be paid to creditors and to the holders of our preferred shares having liquidation preferences, if any, the holders of our common shares will be entitled to receive pro rata our remaining assets available for distribution. Holders of our common shares do not have conversion, redemption or preemptive rights to subscribe to any of our securities. The rights, preferences and privileges of holders of our common shares are subject to the rights of the holders of any preferred shares that we may issue in the future.

 

Description of Preferred Shares

 

Our Third Amended and Restated Articles of Incorporation authorize our Board of Directors to establish one or more series of preferred shares and to determine, with respect to any series of preferred shares, the terms and rights of that series, including the designation of the series, the number of shares of the series, the preferences and relative, participating, option or other special rights, if any, and any qualifications, limitations or restrictions of such series, and the voting rights, if any, of the holders of the series.

 

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Description of Series D Preferred Shares

 

On May 8, 2017, we issued 100,000 shares of Series D Preferred Shares to Tankers Family Inc., a company controlled by Lax Trust, which is an irrevocable trust established for the benefit of certain family members of Mr. Evangelos J. Pistiolis, for $1,000 pursuant to a stock purchase agreement. Each Series D Preferred Share has the voting power of one thousand (1,000) common shares.

 

On April 21, 2017, we were informed by ABN Amro Bank that we were in breach of a loan covenant that requires that any member of the family of Mr. Evangelos J. Pistiolis, maintain an ownership interest (either directly and/or indirectly through companies beneficially owned by any member of the Pistiolis family and/or trusts or foundations of which any member of the Pistiolis family are beneficiaries) of 30% of our outstanding Common Shares. ABN Amro Bank requested that either the family of Mr. Evangelos J. Pistiolis maintain an ownership interest of at least 30% of the outstanding common shares or maintain voting rights interests of above 50% in us. In order to regain compliance with the loan covenant, we issued the Series D Preferred Shares.

 

The Series D Preferred Stock has the following characteristics:

 

Conversion. The Series D Preferred Shares are not convertible into common shares.

 

Voting. Each Series D Preferred Share has the voting power of 1,000 common shares. As a prerequisite for the Navigare Lease, Mr. Evangelos J. Pistiolis personally guaranteed the performance of the bareboat charters entered in connection with the lease, under certain circumstances, and in exchange, we amended the Certificate of Designations governing the terms of the Series D Preferred Shares, to adjust the voting rights per share of Series D Preferred Shares such that during the term of the Navigare Lease, the combined voting power controlled by Mr. Evangelos J. Pistiolis and the Lax Trust does not fall below a majority of our total voting power, irrespective of any new common or preferred stock issuances, and thereby complying with a relevant covenant of the bareboat charters entered in connection with the Navigare Lease.

 

Distributions. The Series D Preferred Shares shall have no dividend or distribution rights.

 

Maturity. The Series D Preferred Shares shall expire and all outstanding Series D shares shall be redeemed by us for par value on the date that any financing facility with any financial institution, which requires that any member of the family of Mr. Evangelos J. Pistiolis maintains a specific minimum ownership or voting interest (either directly and/or indirectly through companies or other entities beneficially owned by any member of the Pistiolis family and/or trusts or foundations of which any member of the Pistiolis family are beneficiaries) of our issued and outstanding common shares, respectively, are fully repaid or reach their maturity date. The Series D Preferred Shares shall not be otherwise redeemable. Currently the SLBs with Bocomm Leasing, AVIC and Navigare, as well as the senior secured loan with ABN Amro have similar provisions that are satisfied via the existence of the Series D Shares.

 

Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of our Company, the Series D Preferred Shares shall have a liquidation preference of $0.01 per share.

 

The description of the Series D Convertible Preferred Shares is subject to and qualified in its entirety by reference to the Securities Purchase Agreement, Certificate of Designation of the Series D Preferred Shares, and Certificate of Amendment to the Certificate of Designation. Copies of the Securities Purchase Agreement and Certificate of Designation of the Series D Preferred Shares have been filed as exhibits to our Report on Form 6-K filed with the SEC on May 8, 2017. The Certificate of Amendment to the Certificate of Designation was filed as an exhibit to our Report on Form 6-K filed with the SEC on December 4, 2020.

 

Description of Series E Convertible Preferred Stock

 

On April 1, 2019, we announced the sale of 27,129 newly issued Series E Preferred Shares at a price of $1,000 per share to Family Trading in exchange for the full and final settlement of the loan facility between our Company and Family Trading dated December 23, 2015, as amended.

 

On June 30, 2019, we issued 1,029 Series E Shares for the payment of dividends accumulated since the original issuance of the Series E Preferred Shares through June 30, 2019.

 

From July 25, 2019 to March 19, 2020, we redeemed 33,798 of Series E Preferred Shares for an aggregate purchase price of $38.9 million. On February 17, 2020 we issued 16,004 Series E Preferred Shares to Family Trading Inc., as settlement of the consideration outstanding for the purchase of the M/T Eco City of Angels and M/T Eco Los Angeles from parties affiliated with Mr. Pistiolis, and for dividends payable to Family Trading Inc. under already outstanding Series E Preferred Shares. On June 30, 2020, we issued 900 Series E Preferred Shares to Family Trading, as settlement for dividends payable to Family Trading Inc. under already outstanding Series E Preferred Shares.

 

On August 20, 2020, we entered into a Standstill Agreement with Family Trading, pursuant to which Family Trading agreed not to convert any of its Series E Preferred Shares into Common Shares until August 20, 2021.

 

On September 8, 2021, pursuant to a Sale and Purchase Agreement between the Issuer and Zizzy Charter Co. dated September 8, 2021, we issued 2,188 Series E Preferred Shares to Family Trading as partial settlement of the consideration outstanding for the purchase of an additional 65% ownership interest in each of Julius Caesar Inc. and Legio X Inc., each a party to shipbuilding contracts for VLCC Julius Caesar and VLCC Legio X Equestris, respectively, from a party affiliated with Mr. Pistiolis.

 

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As of the date of this annual report, there were 13,452 shares of Series E Preferred Shares outstanding.

 

The Series E Preferred Shares have the following characteristics:

 

Conversion. Each holder of Series E Preferred Shares, at any time and from time to time, has the right, subject to certain conditions, to convert all or any portion of the Series E Preferred Shares then held by such holder into the Issuer’s Common Shares at the conversion rate then in effect. Each Series E Preferred Share is convertible into the number of the Issuer’s Common Shares equal to the quotient of $1,000 plus any accrued and unpaid dividends divided by the lesser of the following four prices (the “Series E Conversion Price”): (i) $500.00, (ii) 80% of the lowest daily VWAP of the Issuer's Common Shares over the twenty consecutive trading days expiring on the trading day immediately prior to the date of delivery of a conversion notice, (iii) the conversion price or exercise price per share of any of the Issuer’s then outstanding convertible shares or warrants, (iv) the lowest issuance price of the Issuer’s Common Shares in any transaction from the date of the issuance the Series E Perpetual Preferred Stock onwards, but in no event will the Series E Conversion Price be less than $0.60 (the “Floor Price”). The Floor Price is adjusted (decreased) in case of splits or subdivisions of our outstanding shares and is not adjusted in case of reverse stock splits or combinations of our outstanding shares. Finally, the Series E Conversion Price is subject to appropriate adjustment in the event of certain dividends and distributions, stock combinations, reclassifications or similar events affecting the Common Shares.

 

Limitations of Conversion. Holders of the shares of Series E Preferred Shares shall be entitled to convert the Series E Preferred Shares in full, regardless of the beneficial ownership percentage of the holder after giving effect to such conversion.

 

Voting.  The holders of Series E Preferred Shares are entitled to the voting power of one thousand (1,000) of our common shares.  The holders of Series E Preferred Shares and the holders of our common shares shall vote together as one class on all matters submitted to a vote of our shareholders. The holders of Series E Preferred Shares have no special voting rights and their consent shall not be required for taking any corporate action.

 

Distributions. The holders of Series E Preferred Shares are entitled to receive certain dividends and distributions paid to holders of Common Shares on an as-converted basis. Upon any liquidation, dissolution or winding up of our Company, the holders of Series E Preferred Shares shall be entitled to receive the net assets of our Company pari passu with the Common Shares.

 

Redemption.  We at our option shall have the right to redeem a portion or all of the outstanding Series E Preferred Shares. We shall pay an amount equal to one thousand dollars ($1,000) per each Series E Preferred Shares, or the Liquidation Amount, plus a redemption premium equal to fifteen percent (15%) of the Liquidation Amount being redeemed if that redemption takes place up to and including March 29, 2020 and twenty percent (20%) of the Liquidation Amount being redeemed if that redemption takes place after March 29, 2020, plus an amount equal to any accrued and unpaid dividends on such Preferred Shares (collectively referred to as the “Redemption Amount”). In order to make a redemption, we shall first provide one business day advance written notice to the holders of our intention to make a redemption, or the Redemption Notice, setting forth the amount it desires to redeem. After receipt of the Redemption Notice, the holders shall have the right to elect to convert all or any portion of its Series E Preferred Shares. Upon the expiration of the one business day period, we shall deliver to each holder the Redemption Amount with respect to the amount redeemed after giving effect to conversions effected during the notice period.

 

The Series E Preferred Shares shall not be subject to redemption in cash at the option of the holders thereof under any circumstance.

 

Dividends. The holders of outstanding Series E Preferred Shares shall be entitled to receive out of funds legally available for the purpose, semi-annual dividends payable in cash on the last day of June and December in each year (each such date being referred to herein as a “Semi Annual Dividend Payment Date”), commencing on the first Semi Annual Dividend Payment Date in an amount per share (rounded to the nearest cent) equal to fifteen percent (15%) per year of the liquidation amount of the then outstanding Series E Preferred Shares computed on the basis of a 365-day year and the actual days elapsed.

 

Accrued but unpaid dividends shall bear interest at fifteen percent (15%). Dividends paid on the Series E Preferred Shares in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. Our Board of Directors may fix a record date for the determination of holders of Series E Preferred Shares entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 30 days prior to the date fixed for the payment thereof.

 

Ranking. All shares of Series E Preferred Shares shall rank pari passu with all classes of our common shares.

 

The description of the Series E Preferred Shares is subject to and qualified in its entirety by reference to the Securities Purchase Agreement and Certificate of Designation of the Series E Preferred Shares. Copies of the Securities Purchase Agreement and Statement of Designation of the Series E Preferred Shares have been filed as exhibits to our Report on Form 6-K filed with the SEC on April 1, 2019.

 

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Description of Series F Preferred Shares

 

On January 17, 2022, we entered into a stock purchase agreement with Africanus Inc., an affiliate of our CEO for the sale of up to 7,560,759 Series F Non-Convertible Perpetual Preferred Shares, par value $0.01, in exchange for (i) the assumption by Africanus Inc. of an amount of $48.0 million of shipbuilding costs for vessels M/T Eco Oceano CA (Hull No. 871), M/T Julius Caesar and M/T Legio X Equestris (Hull No. 3214), and (ii) settlement of our remaining payment obligations relating to the acquisition in September 8, 2021 of an additional 65% ownership interest in the newbuilding contracts for its 2 VLCCs, in an amount of up to $27.6 million.

 

As of the date of this annual report 7,200,000 Series F Preferred Shares have been issued.

 

The Series F Preferred Shares have the following characteristics:

 

Voting.  The holders of Series F Preferred Shares are entitled to the voting power of ten (10) of our common shares per Series F Preferred Share.  The holders of Series F Preferred Shares and the holders of common shares shall vote together as one class on all matters submitted to a vote of shareholders. Except as required by law, the holders of Series F Preferred Shares have no special voting rights and their consent shall not be required for taking any corporate action.

 

Distributions. Upon any liquidation, dissolution or winding up of our Company, the holders of Series F Preferred Shares shall be entitled to receive the net assets of the Company pari passu with the Common Shares.

 

Redemption.  The Company at its option shall have the right to redeem a portion or all of the outstanding Series F Preferred Shares. Upon an optional redemption, the Company shall pay an amount equal to $10 per Series F Preferred Share redeemed (the “Liquidation Amount”), plus a redemption premium of 20% of the Liquidation Amount. The Series F Preferred Shares include a mandatory redemption provision tied to minimum voting requirements for the Company’s major shareholders, including affiliates of the CEO, pursuant to which if such minimum voting rights fall below 50% the Company is obliged to redeem the full amount of the then outstanding Series F Preferred Shares at a redemption premium of 40%, as detailed in the Certificate of Designation for the Series F Preferred Shares.

 

Dividends. The holders of outstanding Series F Preferred Shares shall be entitled to receive semi-annual dividends payable in cash at a rate of 13.5% per year of the Liquidation Amount of the then outstanding Series F Preferred Shares. In addition, a one-time cash dividend equal to 4.0% of the Liquidation Amount is payable to the Buyer 30 days following the issuance of Series F Preferred Shares.

 

Ranking. All shares of Series F Preferred Shares shall rank pari passu with the Company’s common shares.

 

Shareholder Meetings

 

Under our Amended and Restated By-Laws, annual shareholder meetings will be held at a time and place selected by our Board of Directors. The meetings may be held in or outside of the Marshall Islands. Special meetings of the shareholders, unless otherwise prescribed by law, may be called for any purpose or purposes at any time exclusively by our Board of Directors. Notice of every annual and special meeting of shareholders shall be given at least 15 but not more than 60 days before such meeting to each shareholder of record entitled to vote thereat.

 

Directors

 

Our directors are elected by a plurality of the votes cast at a meeting of the shareholders by the holders of shares entitled to vote in the election. Our Third Amended and Restated Articles of Incorporation and Amended and Restated By-laws, as further amended, prohibit cumulative voting in the election of directors.

 

Our Board of Directors must consist of at least one member and not more than twelve, as fixed from time to time by the vote of not less than 66 2/3% of the entire board. Each director shall be elected to serve until the third succeeding annual meeting of shareholders and until his successor shall have been duly elected and qualified, except in the event of his death, resignation, removal, or the earlier termination of his term of office. Our Board of Directors has the authority to fix the amounts which shall be payable to the members of our Board of Directors, and to members of any committee, for attendance at any meeting or for services rendered to us.

 

Classified Board

 

Our Amended and Restated Articles of Incorporation provide for the division of our Board of Directors into three classes of directors, with each class as nearly equal in number as possible, serving staggered, three-year terms. Approximately one-third of our Board of Directors will be elected each year. This classified board provision could discourage a third party from making a tender offer for our shares or attempting to obtain control of our company. It could also delay shareholders who do not agree with the policies of our Board of Directors from removing a majority of our Board of Directors for two years.

 

Election and Removal

 

Our Third Amended and Restated Articles of Incorporation and Amended and Restated By-Laws require parties other than our Board of Directors to give advance written notice of nominations for the election of directors. Our Third Amended and Restated Articles of Incorporation provide that our directors may be removed only for cause and only upon the affirmative vote of the holders of at least 80% of the outstanding shares of our capital stock entitled to vote for those directors. These provisions may discourage, delay or prevent the removal of incumbent officers and directors.

 

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Dissenters Rights of Appraisal and Payment

 

Under the BCA, our shareholders have the right to dissent from various corporate actions, including certain mergers or consolidations or sales of all or substantially all of our assets not made in the usual course of our business, and receive payment of the fair value of their shares, subject to exceptions. For example, the right of a dissenting shareholder to receive payment of the fair value of his shares is not available if for the shares of any class or series of shares, which shares at the record date fixed to determine the shareholders entitled to receive notice of and vote at the meeting of shareholders to act upon the agreement of merger or consolidation, were either (1) listed on a securities exchange or admitted for trading on an interdealer quotation system or (2) held of record by more than 2,000 holders. In the event of any further amendment of the articles, a shareholder also has the right to dissent and receive payment for his or her shares if the amendment alters certain rights in respect of those shares. The dissenting shareholder must follow the procedures set forth in the BCA to receive payment. In the event that we and any dissenting shareholder fail to agree on a price for the shares, the BCA procedures involve, among other things, the institution of proceedings in the High Court of the Republic of the Marshall Islands or in any appropriate court in any jurisdiction in which our shares are primarily traded on a local or national securities exchange. The value of the shares of the dissenting shareholder is fixed by the court after reference, if the court so elects, to the recommendations of a court-appointed appraiser.

 

Shareholders Derivative Actions

 

Under the BCA, any of our shareholders may bring an action in our name to procure a judgment in our favor, also known as a derivative action, provided that the shareholder bringing the action is a holder of common shares both at the time the derivative action is commenced and at the time of the transaction to which the action relates. On November 20, 2014, we amended our Amended and Restated By-Laws to provide that unless we consent in writing to the selection of alternative forum, the sole and exclusive forum for (i) any shareholders’ derivative action or proceeding brought on behalf of us, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other of our employees or our shareholders, (iii) any action asserting a claim arising pursuant to any provision of the BCA, or (iv) any action asserting a claim governed by the internal affairs doctrine shall be the High Court of the Republic of the Marshall Islands, in all cases subject to the court’s having personal jurisdiction over the indispensable parties named as defendants. This provision of our By-Laws does not apply to actions arising under U.S. federal securities laws.

 

Anti-takeover Provisions of our Charter Documents

 

Several provisions of our Third Amended and Restated Articles of Incorporation and Amended and Restated By-Laws may have anti-takeover effects. These provisions are intended to avoid costly takeover battles, lessen our vulnerability to a hostile change of control and enhance the ability of our Board of Directors to maximize shareholder value in connection with any unsolicited offer to acquire us. However, these anti-takeover provisions, which are summarized below, could also discourage, delay or prevent (1) the merger or acquisition of our company by means of a tender offer, a proxy contest or otherwise, that a shareholder may consider in its best interest and (2) the removal of incumbent officers and directors.

 

Business Combinations

 

Our Third Amended and Restated Articles of Incorporation include provisions which prohibit us from engaging in a business combination with an interested shareholder for a period of three years after the date of the transaction in which the person became an interested shareholder, unless:

 

 

prior to the date of the transaction that resulted in the shareholder becoming an interested shareholder, the Board approved either the business combination or the transaction that resulted in the shareholder becoming an interested shareholder;

 

 

upon consummation of the transaction that resulted in the shareholder becoming an interested shareholder, the interested shareholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced;

 

 

at or subsequent to the date of the transaction that resulted in the shareholder becoming an interested shareholder, the business combination is approved by the Board and authorized at an annual or special meeting of shareholders by the affirmative vote of at least 66 2/3% of the outstanding voting stock that is not owned by the interested shareholder; and

 

 

the shareholder became an interested shareholder prior to the consummation of the initial public offering.

 

Limited Actions by Shareholders

 

Our Third Amended and Restated Articles of Incorporation and our Amended and Restated By-Laws provide that any action required or permitted to be taken by our shareholders must be effected at an annual or special meeting of shareholders or by the unanimous written consent of our shareholders.

 

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Our Third Amended and Restated Articles of Incorporation and our Amended and Restated By-Laws provide that only our Board of Directors may call special meetings of our shareholders and the business transacted at the special meeting is limited to the purposes stated in the notice. Accordingly, a shareholder may be prevented from calling a special meeting for shareholder consideration of a proposal over the opposition of our Board of Directors and shareholder consideration of a proposal may be delayed until the next annual meeting.

 

Blank Check Preferred Stock

 

Under the terms of our Third Amended and Restated Articles of Incorporation, our Board of Directors has authority, without any further vote or action by our shareholders, to issue up to 20,000,000 shares of blank check preferred stock. Our Board of Directors may issue shares of preferred stock on terms calculated to discourage, delay or prevent a change of control of our company or the removal of our management.

 

Super-majority Required for Certain Amendments to Our By-Laws

 

On February 28, 2007, we amended our by-laws to require that amendments to certain provisions of our by-laws may be made when approved by a vote of not less than 66 2/3% of the entire Board of Directors. These provisions that require not less than 66 2/3% vote of our Board of Directors to be amended are provisions governing: the nature of business to be transacted at our annual meetings of shareholders, the calling of special meetings by our Board of Directors, any amendment to change the number of directors constituting our Board of Directors, the method by which our Board of Directors is elected, the nomination procedures of our Board of Directors, removal of our Board of Directors and the filling of vacancies on our Board of Directors.

 

Stockholders Rights Agreement

 

On September 14, 2016, our Board of Directors declared a dividend of one preferred share purchase right, or a Right, for each outstanding common share and adopted a shareholder rights plan, as set forth in the Stockholders Rights Agreement dated as of September 22, 2016, or the Rights Agreement, by and between us and Computershare Trust Company, N.A. (now taken over by our new transfer agent, AST), as rights agent.

 

The Board adopted the Rights Agreement to protect shareholders from coercive or otherwise unfair takeover tactics. In general terms, it works by imposing a significant penalty upon any person or group that acquires 15% or more of our outstanding common shares without the approval of our Board of Directors. If a shareholder’s beneficial ownership of our common shares as of the time of the public announcement of the rights plan and associated dividend declaration is at or above the applicable threshold, that shareholder’s then-existing ownership percentage would be grandfathered, but the rights would become exercisable if at any time after such announcement, the shareholder increases its ownership percentage by 1% or more.

 

The Rights may have anti-takeover effects. The Rights will cause substantial dilution to any person or group that attempts to acquire us without the approval of our Board of Directors. As a result, the overall effect of the Rights may be to render more difficult or discourage any attempt to acquire us. Because our Board of Directors can approve a redemption of the Rights for a permitted offer, the Rights should not interfere with a merger or other business combination approved by our Board.

 

For those interested in the specific terms of the Rights Agreement, we provide the following summary description. Please note, however, that this description is only a summary, and is not complete, and should be read together with the entire Rights Agreement, which is an exhibit to the Form 8-A filed by us on September 22, 2016 and incorporated herein by reference. The foregoing description of the Rights Agreement is qualified in its entirety by reference to such exhibit.

 

The Rights. The Rights trade with, and are inseparable from, our common shares. The Rights are evidenced only by certificates that represent our common shares. New Rights will accompany any new of our common shares issued after October 5, 2016 until the Distribution Date described below.

 

Exercise Price. Each Right allows its holder to purchase from us one one-thousandth of a share of Series A Participating Preferred Stock, or a Series A Preferred Share, for $50.00, or the Exercise Price, once the Rights become exercisable. This portion of a Series A Preferred Share will give the shareholder approximately the same dividend, voting and liquidation rights as would one common share. Prior to exercise, the Right does not give its holder any dividend, voting, or liquidation rights.

 

Exercisability. The Rights are not exercisable until ten days after the public announcement that a person or group has become an “Acquiring Person” by obtaining beneficial ownership of 15% or more of our outstanding common shares.

 

Certain synthetic interests in securities created by derivative positions—whether or not such interests are considered to be ownership of the underlying common shares or are reportable for purposes of Regulation 13D of the Exchange Act—are treated as beneficial ownership of the number of our common shares equivalent to the economic exposure created by the derivative position, to the extent our actual common shares are directly or indirectly held by counterparties to the derivatives contracts. Swaps dealers unassociated with any control intent or intent to evade the purposes of the Rights Agreement are excepted from such imputed beneficial ownership.

 

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For persons who, prior to the time of public announcement of the Rights Agreement, beneficially own 15% or more of our outstanding common shares, the Rights Agreement “grandfathers” their current level of ownership, so long as they do not purchase additional shares in excess of certain limitations.

 

The date when the Rights become exercisable is the “Distribution Date.” Until that date, our common share certificates (or, in the case of uncertificated shares, by notations in the book-entry account system) will also evidence the Rights, and any transfer of our common shares will constitute a transfer of Rights. After that date, the Rights will separate from our common shares and will be evidenced by book-entry credits or by Rights certificates that we will mail to all eligible holders of our common shares. Any Rights held by an Acquiring Person are null and void and may not be exercised.

 

Series A Preferred Share Provisions

 

Each one one-thousandth of a Series A Preferred Share, if issued, will, among other things:

 

 

not be redeemable;

 

 

entitle holders to quarterly dividend payments in an amount per share equal to the aggregate per share amount of all cash dividends, and the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in our common shares or a subdivision of the our outstanding common shares (by reclassification or otherwise), declared on our common shares since the immediately preceding quarterly dividend payment date; and

 

 

entitle holders to one vote on all matters submitted to a vote of our shareholders.

 

The value of one one-thousandth interest in a Series A Preferred Share should approximate the value of one common share.

 

Consequences of a Person or Group Becoming an Acquiring Person.

 

 

Flip In.  If an Acquiring Person obtains beneficial ownership of 15% or more of our common shares, then each Right will entitle the holder thereof to purchase, for the Exercise Price, a number of our common shares (or, in certain circumstances, cash, property or other of our securities) having a then-current market value of twice the Exercise Price. However, the Rights are not exercisable following the occurrence of the foregoing event until such time as the Rights are no longer redeemable by us, as further described below.

 

Following the occurrence of an event set forth in preceding paragraph, all Rights that are or, under certain circumstances specified in the Rights Agreement, were beneficially owned by an Acquiring Person or certain of its transferees will be null and void.

 

 

Flip Over. If, after an Acquiring Person obtains 15% or more of our common shares, (i) we merge into another entity; (ii) an acquiring entity merges into us; or (iii) we sell or transfer 50% or more of its assets, cash flow or earning power, then each Right (except for Rights that have previously been voided as set forth above) will entitle the holder thereof to purchase, for the Exercise Price, a number of our common shares of the person engaging in the transaction having a then-current market value of twice the Exercise Price.

 

 

Notional Shares. Shares held by affiliates and associates of an Acquiring Person, including certain entities in which the Acquiring Person beneficially owns a majority of the equity securities, and Notional Common Shares (as defined in the Rights Agreement) held by counterparties to a Derivatives Contract (as defined in the Rights Agreement) with an Acquiring Person, will be deemed to be beneficially owned by the Acquiring Person.

 

Redemption. Our Board of Directors may redeem the Rights for $0.01 per Right at any time before any person or group becomes an Acquiring Person. If our Board of Directors redeems any Rights, it must redeem all of the Rights. Once the Rights are redeemed, the only right of the holders of the Rights will be to receive the redemption price of $0.01 per Right. The redemption price will be adjusted if we have a stock dividend or a stock split.

 

Exchange. After a person or group becomes an Acquiring Person, but before an Acquiring Person owns 50% or more of our outstanding common shares, the Board may extinguish the Rights by exchanging one common share or an equivalent security for each Right, other than Rights held by the Acquiring Person. In certain circumstances, we may elect to exchange the Rights for cash or other of our securities having a value approximately equal to one common share.

 

Expiration. The Rights expire on the earliest of (i) September 22, 2026; or (ii) the redemption or exchange of the Rights as described above.

 

Anti-Dilution Provisions. The Board may adjust the purchase price of the Series A Preferred Shares, the number of Series A Preferred Shares issuable and the number of outstanding Rights to prevent dilution that may occur from a stock dividend, a stock split, or a reclassification of the Series A Preferred Shares or our common shares. No adjustments to the Exercise Price of less than 1% will be made.

 

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Amendments. The terms of the Rights and the Rights Agreement may be amended in any respect without the consent of the holders of the Rights on or prior to the Distribution Date. Thereafter, the terms of the Rights and the Rights Agreement may be amended without the consent of the holders of Rights, with certain exceptions, in order to (i) cure any ambiguities; (ii) correct or supplement any provision contained in the Rights Agreement that may be defective or inconsistent with any other provision therein; (iii) shorten or lengthen any time period pursuant to the Rights Agreement; or (iv) make changes that do not adversely affect the interests of holders of the Rights (other than an Acquiring Person or an affiliate or associate of an Acquiring Person).

 

Taxes. The distribution of Rights should not be taxable for federal income tax purposes. However, following an event that renders the Rights exercisable or upon redemption of the Rights, shareholders may recognize taxable income.

 

C.         Material Contracts

 

We refer you to “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Debt Facilities,” “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources— Financing Commitments under Sale and Leaseback Arrangements,” “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions”, “Item 18. Financial Statements—Note 5—Transactions with related parties”, “Item 18. Financial Statements—Note 6—Leases” and “Item 18. Financial Statements—Note 7—Debt” for a discussion of our material agreements that we have entered into outside the ordinary course of our business.

 

Certain of these material agreements that are to be performed in whole or in part at or after the date of this annual report are attached as exhibits to this annual report. Other than these contracts, we have no other material contracts, other than contracts entered into in the ordinary course of business, to which we are a party.

 

D.          Exchange controls

 

The Marshall Islands impose no exchange controls on non-resident corporations.

 

E.         Taxation

 

The following is a discussion of the material Marshall Islands and U.S. 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 and disposition of our common shares. The discussion of U.S. federal income tax matters is based on the U.S. Internal Revenue Code of 1986, as amended, or the Code judicial decisions, administrative pronouncements, and existing and proposed regulations issued by the U.S. Department of the Treasury, or the Treasury Regulations, all of which are subject to change, possibly with retroactive effect. 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, tax-exempt organizations, insurance companies, persons holding our common shares as part of a hedging, integrated, conversion or constructive sale transaction or a straddle, traders in securities that have elected the mark-to-market method of accounting for their securities, persons liable for the alternative minimum tax or the “base erosion and anti-avoidance” tax, dealers in securities or currencies, U.S. Holders, as defined below, whose functional currency is not the U.S. dollar, persons required to recognize income for U.S. federal income tax purposes no later than when such income is included on an “applicable financial statement” 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 own 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 U.S. federal, state, local or non-U.S. law of the ownership of common shares.

 

Marshall Islands Tax Consequences         

 

We are incorporated in the Republic of the Marshall Islands. Under current Marshall Islands law, we are not subject to tax on income or capital gains, and no Marshall Islands withholding tax will be imposed upon payments of dividends by us to our shareholders.

 

U.S. Federal Income Taxation of Our Company

 

Taxation of Operating Income: In General

 

Unless exempt from U.S. federal income taxation under the rules discussed below, a foreign corporation is subject to U.S. 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, cost sharing arrangement 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.”

 

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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 by law 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-U.S. 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 U.S. federal income tax.

 

In the absence of exemption from tax under Section 883 of the Code, 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 U.S. Federal Income Taxation

 

Under Section 883 of the Code and the regulations thereunder, we will be exempt from U.S. federal income tax on our U.S.-source shipping income if:

 

 

(1)

we are organized in a foreign country, or our country of organization, that grants an “equivalent exemption” to corporations organized in the United States; and

 

 

(2)

either

 

 

A.

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 (each such individual a “qualified shareholder” and such individuals collectively, “qualified shareholders”), which we refer to as the “50% Ownership Test,” or

 

 

B.

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 U.S. corporations, or in the United States, which we refer to as the “Publicly-Traded Test.”

 

The Marshall Islands, the jurisdiction where we and our ship-owning subsidiaries are incorporated, grants an “equivalent exemption” to U.S. corporations. Therefore, we will be exempt from U.S. federal income tax with respect to our U.S.-source shipping income if either the 50% Ownership Test or the Publicly-Traded Test is met.

 

In order to satisfy the 50% Ownership Test, a non-U.S. corporation must be able to substantiate that more than 50% of the value of its shares is owned, for at least half of the number of days in the non-U.S. corporation’s taxable year, directly or indirectly, by “qualified shareholders.” For this purpose, qualified shareholders are: (1) individuals who are residents (as defined in the Treasury Regulations) of countries, other than the United States, that grant an equivalent exemption, (2) non-U.S. corporations that meet the Publicly-Traded Test and are organized in countries that grant an equivalent exemption, or (3) certain foreign governments, non-profit organizations, and certain beneficiaries of foreign pension funds. In order for a shareholder to be a qualified shareholder, there generally cannot be any bearer shares in the chain of ownership between the shareholder and the taxpayer claiming the exemption (unless such bearer shares are maintained in a dematerialized or immobilized book-entry system as permitted under the Treasury Regulations). A corporation claiming the Section 883 exemption based on the 50% Ownership Test must obtain all the facts necessary to satisfy the IRS that the 50% Ownership Test has been satisfied (as detailed in the Treasury Regulations). We do not believe that we satisfied the 50% Ownership Test in 2021.

 

In order to satisfy the Publicly-Traded Test, Treasury 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, which are our sole class of issued and outstanding stock that is traded, is and we anticipate will continue to be “primarily traded” on the Nasdaq Capital Market. The Treasury Regulations also require that our stock be "regularly traded" on an established securities market. Under the Treasury Regulations, our stock will be considered to be "regularly traded" if one or more classes of our stock representing more than 50% of our outstanding shares, by total combined voting power of all classes of stock entitled to vote and by total combined value of all classes of stock, are listed on one or more established securities markets, which we refer to as the "listing threshold." Our common stock, which is listed on the Nasdaq Capital Market and is our only class of publicly-traded stock, did not constitute more than 50% of our outstanding shares by vote for the 2021 taxable year, and accordingly, we did not satisfy the listing threshold for the 2021 taxable year.

 

Therefore, we did not satisfy the requirements for the Section 883 exemption in 2021.

 

Taxation in the Absence of Exemption under Section 883 of the Code

 

To the extent the benefits of Section 883 of the Code are unavailable, our U.S.-source shipping income, to the extent not considered to be “effectively connected” with the conduct of a U.S. 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, which we refer to as the “4% gross basis tax regime.” Since under the sourcing rules described above, no more than 50% of our shipping income would be treated as being derived from U.S. sources, the maximum effective rate of U.S. federal income tax on our shipping income would never exceed 2% under the 4% gross basis tax regime. We estimate the amount of this tax for our 2021 taxable year to be approximately $152,000.

 

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To the extent the benefits of the exemption under Section 883 of the Code are unavailable and our U.S.-source shipping income is considered to be “effectively connected” with the conduct of a U.S. trade or business, as described below, any such “effectively connected” U.S.-source shipping income, net of applicable deductions, would be subject to the U.S. federal corporate income tax imposed at a current rate of 21%. In addition, we may be subject to the 30% “branch profits” tax on earnings effectively connected with the conduct of such U.S. trade or business, as determined after allowance for certain adjustments.

 

Our U.S.-source shipping income would be considered “effectively connected” with the conduct of a U.S. 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, or is leasing income that is attributable to such fixed place of business in the United States.

 

We do not currently have, nor 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 U.S. trade or business.

 

U.S. Taxation of Gain on Sale of Vessels

 

Regardless of whether we qualify for exemption under Section 883 of the Code, we will not be subject to U.S. federal income taxation with respect to gain realized on a sale of a vessel, provided the sale is considered to occur outside of the United States under U.S. federal income tax principles. In general, a sale of a vessel will be considered to occur outside of the United States for this purpose if title to the vessel, and risk of loss with respect to the vessel, pass to the buyer outside of the United States. It is expected that any sale of a vessel by us will be considered to occur outside of the United States or will otherwise not be subject to U.S. federal income taxation.

 

U.S. Federal Income Taxation of U.S. Holders

 

As used herein, the term “U.S. Holder” means a beneficial owner of our common shares that

 

 

is a U.S. citizen or resident, U.S. corporation or other U.S. entity taxable as a corporation, an estate the income of which is subject to U.S. federal income taxation regardless of its source, or a trust (i) if a court within the United States is able to exercise primary jurisdiction over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (ii) the trust has in effect a valid election to be treated as a United States person for U.S. federal income tax purposes;

 

 

owns the common shares as a capital asset, generally, for investment purposes; and

 

 

owns less than 10% of our common shares for U.S. federal income tax purposes.

 

   

If a partnership holds our common shares, the tax treatment of a partner of such partnership 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, or PFIC, below, any distributions made by us with respect to our common shares to a U.S. Holder will generally constitute dividends to the extent of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions in excess of such 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 U.S. 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” for purposes of computing allowable foreign tax credits for U.S. foreign tax credit purposes.

 

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Dividends paid on our common shares to a U.S. Holder who is an individual, trust or estate (a “U.S. Non-Corporate Holder”) will generally be treated as “qualified dividend income” that is taxable to such U.S. Non-Corporate Holder 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 Capital Market on which our common shares are traded); (2) we are not a PFIC for the taxable year during which the dividend is paid or the immediately preceding taxable year (as discussed in more detail below); (3) the U.S. Non-Corporate 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 become ex-dividend; and (4) the U.S. Non-Corporate Holder is not under an obligation to make related payments with respect to positions in substantially similar or related property.

 

We believe that we were not a PFIC for our 2014 through 2021 taxable years, and we do not expect to be a PFIC for subsequent taxable years. If we were treated as a PFIC for our 2021 or 2022 taxable year, any dividends paid by us during 2022 will not be treated as “qualified dividend income” in the hands of a U.S. Non-Corporate Holder. Any dividends we pay which are not eligible for the preferential rates applicable to “qualified dividend income” will be taxed as ordinary income to a U.S. Non-Corporate Holder.

 

Special rules may apply to any “extraordinary dividend,” generally, a dividend paid by us in an amount which is equal to or in excess of 10% of a shareholder’s adjusted tax basis in (or, in certain circumstances, fair market value of) a common share or dividends received within a one-year period that, in the aggregate, equal or exceed 20% of a shareholder’s adjusted tax basis (or fair market value upon the shareholder’s election) in a common share. 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. Non-Corporate 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

 

Subject to the discussion of our status as a PFIC below, 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 U.S.-source income or loss, as applicable, for U.S. foreign tax credit purposes. A U.S. Holder’s ability to deduct capital losses is subject to certain limitations.

 

3.8% Tax on Net Investment Income

 

A U.S. Holder that is an individual, estate, or, in certain cases, a trust, will generally be subject to a 3.8% tax on the lesser of (1) the U.S. Holder’s net investment income for the taxable year and (2) the excess of the U.S. Holder’s modified adjusted gross income for the taxable year over a certain threshold (which in the case of individuals is between $125,000 and $250,000).  A U.S. Holder’s net investment income will generally include distributions made by us which constitute a dividend for U.S. federal income tax purposes and gain realized from the sale, exchange or other disposition of our common shares.  This tax is in addition to any income taxes due on such investment income.

 

If you are a U.S. Holder that is an individual, estate or trust, you are encouraged to consult your tax advisors regarding the applicability of the 3.8% tax on net investment income to the ownership and disposition of our common shares.

 

Passive Foreign Investment Company Status and Significant Tax Consequences

 

Special U.S. federal income tax rules apply to a U.S. Holder that holds stock in a foreign corporation classified as a PFIC for U.S. federal income tax purposes. In general, we will be treated as a PFIC 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 PFIC, we will be treated as earning and owning our proportionate share of the income and assets, respectively, of any of our subsidiary corporations in which we own at least 25% of the value of the subsidiary’s stock. Income earned, or deemed earned, by us in connection with the performance of services would not constitute “passive income” for these purposes. 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.

 

In general, income derived from the bareboat charter of a vessel will be treated as “passive income” for purposes of determining whether we are a PFIC and such vessel will be treated as an asset which produces or is held for the production of “passive income.”  On the other hand, income derived from the time charter of a vessel should not be treated as “passive income” for such purpose, but rather should be treated as services income; likewise, a time chartered vessel should generally not be treated as an asset which produces or is held for the production of “passive income.”

 

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We believe that we were a PFIC for our 2013 taxable year because we believe that at least 50% of the average value of our assets consisted of vessels which were bareboat chartered and at least 75% of our gross income was derived from vessels on bareboat charter.

 

We believe that we were not a PFIC for our 2014 through 2021 taxable years because we had no bareboat chartered-out vessels and consequently no gross income from vessels on bareboat charter. Furthermore, based on our current assets and activities, we do not believe that we will be a PFIC for the subsequent taxable years. Although there is no legal authority directly on point, and we are not relying upon an opinion of counsel on this issue, our belief is based principally on the position that, for purposes of determining whether we are a passive foreign investment company, 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, in particular, the vessels, should not constitute passive assets for purposes of determining whether we were a passive foreign investment company. We believe there is substantial legal authority supporting our position consisting of case law and IRS pronouncements concerning the characterization of income derived from time charters and voyage charters as services income for other tax purposes. However, in the absence of any legal authority specifically relating to the statutory provisions governing passive foreign investment companies, the IRS 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.

 

If we are a PFIC for any taxable year, a U.S. Holder will be treated as owning his proportionate share of the stock of any of our subsidiaries which is a PFIC.  The PFIC rules discussed below will apply on a company-by-company basis with respect to us and each of our subsidiaries which is treated as a PFIC.

 

As discussed more fully below, if we were to be treated as a PFIC for any taxable year, a U.S. Holder would be subject to different U.S. federal income taxation rules depending on whether the U.S. Holder makes an election to treat us as a “Qualified Electing Fund,” which election is referred to as a “QEF Election.” As discussed below, 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, which election is referred to as a “Mark-to-Market Election”. A U.S. Holder holding PFIC shares that does not make either a “QEF Election” or “Mark-to-Market Election” will be subject to the Default PFIC Regime, as defined and discussed below in “Taxation—U.S. Federal Income Taxation of U.S. Holders—Taxation of U.S. Holders Not Making a Timely QEF or “Mark-to-Market” Election.”

 

If we were to be treated as a PFIC, a U.S. Holder would be required to file IRS Form 8621 to report certain information regarding us.

 

A U.S. Holder who held our common shares during any period in which we were treated as a PFIC and who neither made a QEF Election nor a Mark-to-Market Election may continue to be subject to the Default PFIC Regime, notwithstanding that we are no longer a PFIC. If you are a U.S. Holder who held our common shares during any period in which we were a PFIC but failed to make either of the foregoing elections, you are strongly encouraged to consult your tax advisor regarding the U.S. federal income tax consequences to you of holding our common shares in periods in which we are no longer a PFIC.

 

The 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 made by us to 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 PFIC by filing one copy of IRS Form 8621 with his United States federal income tax return and a second copy in accordance with the instructions to such form. It should be noted that if any of our subsidiaries is treated as a corporation for U.S. federal income tax purposes, a U.S. Holder must make a separate QEF Election with respect to each such subsidiary.

 

Taxation of U.S. Holders Making a Mark-to-Market Election

 

Making the Election.  Alternatively, if, as is anticipated, our common shares are treated as “marketable stock,” a U.S. Holder would be allowed to make a Mark-to-Market Election with respect to the common shares, provided the U.S. Holder completes and files IRS Form 8621 in accordance with the relevant instructions and related Treasury Regulations.  The common shares will be treated as “marketable stock” for this purpose if they are “regularly traded” on a “qualified exchange or other market.”  The common shares will be “regularly traded” on a qualified exchange or other market for any calendar year during which they are traded (other than in de minimis quantities) on at least 15 days during each calendar quarter.  The Nasdaq Capital Market should be treated as a “qualified exchange or other market” for this purpose.  However, it should be noted that a separate Mark-to-Market Election would need to be made with respect to each of our subsidiaries which is treated as a PFIC.  The stock of these subsidiaries is not expected to be “marketable stock.”  Therefore, a “mark-to-market” election is not expected to be available with respect to these subsidiaries.

 

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Current Taxation and Dividends.  If the Mark-to-Market 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 U.S. 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 its common shares over their 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.  Any income inclusion or loss under the preceding rules should be treated as gain or loss from the sale of common shares for purposes of determining the source of the income or loss.  Accordingly, any such gain or loss generally should be treated as U.S.-source income or loss for U.S. foreign tax credit limitation purposes.  A U.S. Holder’s tax basis in his common shares would be adjusted to reflect any such income or loss amount.  Distributions by us to a U.S. Holder who has made a Mark-to-Market Election generally will be treated as discussed above under “Taxation—U.S. Federal Income Taxation of U.S. Holders—Distributions.”

 

Sale, Exchange or Other Disposition.  Gain realized on the sale, exchange, redemption or other disposition of the common shares would be treated as ordinary income, and any loss realized on the sale, exchange, redemption 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 in income by the U.S. Holder.  Any loss in excess of such previous inclusions would be treated as a capital loss by the U.S. Holder.  A U.S. Holder’s ability to deduct capital losses is subject to certain limitations.  Any such gain or loss generally should be treated as U.S.-source income or loss for U.S. foreign tax credit limitation purposes.

 

Taxation of U.S. Holders Not Making a Timely QEF or Mark-to-Market Election

 

Finally, a U.S. Holder who does not make either a QEF Election or a Mark-to-Market Election with respect to any taxable year in which we are treated as a PFIC, or a U.S. Holder whose QEF Election is invalidated or terminated, or a Non-Electing Holder, would be subject to special rules, or the Default PFIC Regime, with respect to (1) any excess distribution (i.e., the portion of any distributions received by the Non-Electing Holder on the common shares in a taxable year in excess of 125% of the average annual distributions received by the Non-Electing Holder in the three preceding taxable years, or, if shorter, the Non-Electing Holder’s holding period for the common shares), and (2) any gain realized on the sale, exchange, redemption or other disposition of the common shares.

 

Under the Default PFIC Regime:

 

 

the excess distribution or gain would be allocated ratably over the Non-Electing Holder’s aggregate holding period for the common shares;

 

 

the amount allocated to the current taxable year and any taxable year before we became a PFIC 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 tax deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year.

 

Any distributions other than “excess distributions” by us to a Non-Electing Holder will be treated as discussed above under “Taxation—U.S. Federal Income Taxation of U.S. Holders—Distributions.”

 

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 the common shares.  If a Non-Electing Holder who is an individual dies while owning the common shares, such Non-Electing Holder’s successor generally would not receive a step-up in tax basis with respect to the common shares.

 

U.S. Federal Income Taxation of Non-U.S. Holders

 

A beneficial owner of our common shares (other than a partnership) 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 U.S. federal income tax or withholding tax on dividends received from us with respect to our common shares, unless that income is effectively connected with a trade or business conducted by the Non-U.S. Holder in the United States. If the Non-U.S. Holder is entitled to the benefits of a U.S. 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 U.S. federal income tax or withholding tax on any gain realized upon the sale, exchange or other disposition of our common shares, unless:

 

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the gain is effectively connected with a trade or business conducted by the Non-U.S. Holder in the United States. If the Non-U.S. Holder is entitled to the benefits of a U.S. 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 U.S. trade or business for U.S. 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 U.S. federal income tax in the same manner as discussed in the previous section relating to the taxation of U.S. Holders. In addition, in the case of a corporate Non-U.S. Holder, the earnings and profits of such Non-U.S. Holder that are attributable to effectively connected income, 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 U.S. 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. In addition, such payments will 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 IRS that you have failed to report all interest or dividends required to be shown on your U.S. 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 an applicable IRS Form W-8.

 

If you sell your common shares to or through a U.S. office of a broker, the payment of the proceeds is subject to both U.S. backup withholding and information reporting unless you certify that you are a non-U.S. person, under penalties of perjury, or you otherwise establish an exemption. If you sell your common shares through a non-U.S. office of a non-U.S. broker and the sales proceeds are paid to you outside the United States, then information reporting and backup withholding generally will not apply to that payment. However, U.S. information reporting requirements, but not backup withholding, will apply to a payment of sales proceeds, even if that payment is made to you outside the United States, if you sell your common shares through a non-U.S. office of a broker that is a U.S. 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 U.S. federal income tax liability by filing a refund claim with the IRS.

 

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 U.S. 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 shares are held through an account maintained with a U.S. 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 U.S. entity) that is required to file IRS Form 8938 does not file such form, the statute of limitations on the assessment and collection of U.S. federal income taxes of such holder for the related tax year may not close until three years after the date that the required information is filed.  U.S. Holders (including U.S. entities) and Non-U.S. Holders are encouraged to consult their own tax advisors regarding their reporting obligations under this legislation.

 

F.         Dividends and Paying Agents

 

Not applicable.

 

G.         Statement by Experts

 

Not applicable.

 

H.         Documents on Display

 

We file annual reports and other information with the SEC. Our SEC filings are available to the public at the web site maintained by the SEC at http://www.sec.gov, and the as well as on our website at http://www.topships.org.

 

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I.         Subsidiary Information

 

Not applicable.

 

ITEM 11.       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Our Risk Management Policy

 

Market risks relating to adverse movements in freight rates in the product tanker and crude oil tanker markets are minimized due to the fact that all the vessels in our fleet are under period employment earning fixed time charter rates. Our policy is to continuously monitor our exposure to other business risks, including the impact of changes in interest rates, currency rates, and bunker prices on earnings and cash flows. We assess these risks and, when appropriate, enter into derivative contracts with credit-worthy counterparties to minimize our exposure to the risks. With regard to bunker prices, as our employment policy for our vessels has been and is expected to continue to be with a high percentage of our fleet on period employment, we are not directly exposed with respect to those vessels to increases in bunker fuel prices, as these are the responsibility of the charterer under period charter arrangements.

 

Interest Rate Risk

 

As of the date of this report we are exposed to interest rate risk in relation to our floating rate indebtedness (See "Item 18. Financial Statements—Note 7—Debt"). Furthermore we may be subject to additional market risks relating to changes in interest rates when we take on additional indebtedness. As of December 31, 2021, our total indebtedness excluding unamortized financing fees was $153.3 million, of which $81.9 million refer to Cargill and AVIC SLB facilities, the interest rate of which does not fluctuate.

 

Based on the amount of our outstanding fluctuating interest rate indebtedness, as of December 31, 2021, a hypothetical one percentage point increase in the three month U.S. dollar LIBOR would increase our interest rate expense for 2022, on an annualized basis, by approximately $0.7 million. 

 

Foreign Exchange Rate Fluctuation

 

We generate all of our revenues in U.S. dollars but incur certain expenses in currencies other than U.S. dollars, mainly the Euro. During 2021, approximately 96.5% of our expenses were in U.S. Dollars, 3.1% were in Euro and approximately 0.4% were in other currencies than the U.S. dollar or Euro. For accounting purposes, expenses incurred in other currencies are converted into U.S. dollars at the exchange rate prevailing on the date of each transaction. We have not hedged currency exchange risks associated with our expenses and our operating results could be adversely affected as a result. We constantly monitor the U.S. dollar exchange rate and we try to achieve the most favorable exchange rates from the financial institutions we work with.

 

Based on our total expenses for the year ended December 31, 2021, and using as an average exchange rate of $1.183 to €1, a 5% decrease in the exchange rate to $1.1239 to €1 would result in an expense saving of approximately $0.07 million. Since we have no revenues in Euros an inverse 5% change in the exchange rate would lead to an equivalent additional expense of the same amount.

 

Based on our total expenses for the year ended December 31, 2020, and using as an average exchange rate of $1.1419 to €1, a 5% decrease in the exchange rate to $1.0848 to €1 would result in an expense saving of approximately $0.09 million. Since we have no revenues in Euros an inverse 5% change in the exchange rate would lead to an equivalent additional expense of the same amount.

 

ITEM 12.       DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

 

Not Applicable.

 

PART II

 

ITEM 13.       DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

 

Neither we nor any of our subsidiaries have been subject to a material default in the payment of principal, interest, a sinking fund or purchase fund installment or any other material default that was not cured within 30 days.

 

As of December 31, 2021, accrued and unpaid dividends under our Series E Preferred Shares held by Family Trading amounted to $968,000.

 

ITEM 14.       MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

 

On September 14, 2016, we have adopted a Stockholders Rights Agreement, pursuant to which each of our common shares includes one preferred stock purchase right that entitles the holder to purchase from us a unit consisting of one-thousandth of a share of our Series A Participating Preferred Stock if any third-party seeks to acquire control of a substantial block of our common shares without the approval of our Board of Directors. See “Item 10. Additional Information—B. Memorandum and Articles of Association—Stockholders Rights Agreement” included in this annual report for a description of our Stockholders Rights Agreement.

 

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Please also see “Item 10. Additional Information—B. Memorandum and Articles of Association” for a description of the rights of holders of our Series B and Series C Convertible Preferred Shares, Series D Preferred Shares, Series E Preferred Shares and Series F Preferred Shares relative to the rights of holders of our common shares.

 

ITEM 15.       CONTROLS AND PROCEDURES

 

a)          Disclosure Controls and Procedures

 

Management, under the supervision and with the participation of the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) or 15d-15(e) promulgated under the Exchange Act, as of December 31, 2021.

 

The term disclosure controls and procedures are defined under SEC rules as controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures.

 

Our management, including the chief executive and chief financial officer, recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, in the design and evaluation of our disclosure controls and procedures our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

 

Based on this evaluation, the chief executive officer and chief financial officer concluded that, as of December 31, 2021, our disclosure controls and procedures, which include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure, were effective in providing reasonable assurance that information that was required to be disclosed by us in reports we file or submit under the Exchange Act was recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.

 

b)          Managements Annual Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Exchange Act.

 

Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

 

 

Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

 

 

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of Company’s management and directors; and

 

 

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

 

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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within us have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Our management with the participation of our Chief Executive Officer and Chief Financial Officer assessed the effectiveness of our internal control over financial reporting as of December 31, 2021, based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. As a result of its assessment, the Chief Executive Officer and Chief Financial Officer concluded that our internal controls over financial reporting are effective as of December 31, 2021.

 

Deloitte Certified Public Accountants S.A. (“Deloitte”), our independent registered public accounting firm, has audited the Financial Statements included herein and our internal control over financial reporting and has issued an attestation report on the effectiveness of our internal control over financial reporting which is reproduced in its entirety in Item 15.C below

 

c)          Attestation Report of the Registered Public Accounting Firm

 

To the Board of Directors and Stockholders of

Top Ships Inc.,

Majuro, Republic of the Marshall Islands

 

Opinion on Internal Control over Financial Reporting

 

We have audited the internal control over financial reporting of Top Ships Inc. and subsidiaries (the “Company”) as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

 

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2021, of the Company and our report dated April 15, 2022, expressed an unqualified opinion on those financial statements.

 

Basis for Opinion

 

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Management’s Annual Report on Internal Control Over Financial Reporting”. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

 

Definition and Limitations of Internal Control over Financial Reporting

 

A company’s 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 for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

 

78

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

/s/ Deloitte Certified Public Accountants S.A.

 

Athens, Greece

 

April 15, 2022

 

d)          Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting that occurred during the period covered by this annual report that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.

 

ITEM 16.       Reserved

 

ITEM 16A.    AUDIT COMMITTEE FINANCIAL EXPERT

 

We have established an audit committee composed of three independent members that are responsible for reviewing our accounting controls and recommending to our Board of Directors the engagement of our outside auditors.

 

We do not believe it is necessary to have a financial expert, as defined in Item 407 of Regulation S-K, because our Board of Directors has determined that the members of the audit committee have the financial experience and other relevant experience necessary to effectively perform the duties and responsibilities of the audit committee.

 

ITEM 16B.    CODE OF ETHICS

 

Our Board of Directors has adopted a Corporate Code of Business Ethics and Conduct that applies to all employees, directors and officers, which complies with applicable guidelines issued by the SEC. The finalized Code of Ethics has been approved by our Board of Directors and was distributed to all employees, directors and officers. This document is available under the “Corporate Governance” tab in the “Investors Relations” section of our website at www.topships.org. We will also provide any person a hard copy of our code of ethics free of charge upon written request. Shareholders may direct their requests to the attention of Mr. Alexandros Tsirikos at our registered address and phone number.

 

ITEM 16C.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

Aggregate fees billed to us for the years ended December 2020 and 2021 represent fees billed by our principal accounting firm, Deloitte Certified Public Accountants S.A. (PCAOB No.: 1163), an independent registered public accounting firm and member of Deloitte Touche Tohmatsu, Limited. Audit fees represent compensation for professional services rendered for the audit of the consolidated financial statements, fees for the review of interim financial information as well as in connection with the review of registration statements and related consents and comfort letters and any other audit services required for SEC or other regulatory filings. For 2020 and 2021, no other non-audit, tax or other fees were charged.

 

U.S. dollars in thousands,

 

Year Ended

 
   

2020

   

2021

 

Audit Fees

    396.5       274.6  

 

Our audit committee pre-approves all audit, audit-related and non-audit services not prohibited by law to be performed by our independent auditors and associated fees prior to the engagement of the independent auditor with respect to such services.

 

ITEM 16D.    EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

 

Not applicable.

 

ITEM 16E.    PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

 

Not applicable.

 

ITEM 16F.     CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT

 

Not applicable.

 

79

 

ITEM 16G.    CORPORATE GOVERNANCE

 

We have certified to Nasdaq that our corporate governance practices are in compliance with, and are not prohibited by, the laws of the Republic of the Marshall Islands. Therefore, we are exempt from many of Nasdaq’s corporate governance practices other than the submission of a listing agreement, notification to Nasdaq of non-compliance with Nasdaq corporate governance practices, prohibition on disparate reduction or restriction of shareholder voting rights, and the establishment of an audit committee satisfying Nasdaq Listing Rule 5605(c)(3) and ensuring that such audit committee’s members meet the independence requirement of Listing Rule 5605(c)(2)(A)(ii). The practices we follow in lieu of Nasdaq’s corporate governance rules applicable to U.S. domestic issuers are as follows:

 

 

Audit Committee.  Nasdaq requires, among other things, that a listed company has an audit committee with a minimum of three independent members, at least one of whom meets certain standards of financial sophistication. As permitted under Marshall Islands law, our audit committee consists of three independent directors but we do not designate any one audit commit member as meeting the standards of financial sophistication.

 

 

As a foreign private issuer, we are not required to hold regularly scheduled board meetings at which only independent directors are present.

 

 

In lieu of obtaining shareholder approval prior to the issuance of designated securities, we will comply with provisions of the BCA, which allows our Board of Directors to approve share issuances.

 

As a foreign private issuer, we are not required to solicit proxies or provide proxy statements to Nasdaq pursuant to Nasdaq corporate governance rules or Marshall Islands law. Consistent with Marshall Islands law and as provided in our bylaws, we will notify our shareholders of meetings between 15 and 60 days before the meeting. This notification will contain, among other things, information regarding business to be transacted at the meeting. In addition, our bylaws provide that shareholders must give us between 120 and 180 days advance notice to properly introduce any business at a meeting of shareholders.

 

Other than as noted above, we are in compliance with all other Nasdaq corporate governance standards applicable to U.S. domestic issuers.

 

ITEM 16H.       MINE SAFETY DISCLOSURE

 

Not Applicable.

 

ITEM 16I.       DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

 

Not Applicable.

 

 

PART III

 

ITEM 17.         FINANCIAL STATEMENTS

 

See Item 18.

 

ITEM 18.         FINANCIAL STATEMENTS

 

The financial statements beginning on page F-1 are filed as a part of this annual report.

 

ITEM 19.         EXHIBITS

 

Number

Description of Exhibits

1.1

Third Amended and Restated Articles of Incorporation of TOP Ships Inc. (1)

   

1.2

Articles of Amendment to the Third Amended and Restated Articles of Incorporation, dated April 17, 2014 (2)

   

1.3

Articles of Amendment to the Third Amended and Restated Articles of Incorporation, dated February 15, 2016 (3)

   

1.4

Certificate of Correction to the Third Amended and Restated Articles of Incorporation, dated February 14, 2017 (4)

   

1.5

Articles of Amendment to the Third Amended and Restated Articles of Incorporation, dated May 10, 2017 (5)

   

1.6

Articles of Amendment to the Third Amended and Restated Articles of Incorporation, dated June 22, 2017  (6)

   

1.7

Articles of Amendment to the Third Amended and Restated Articles of Incorporation, dated August 2, 2017 (7)

   

 

80

 

1.8

Articles of Amendment to the Third Amended and Restated Articles of Incorporation, dated October 5, 2017 (8)

   

1.9

Articles of Amendment to the Third Amended and Restated Articles of Incorporation, dated March 23, 2018 (9)

   

1.10

Articles of Amendment to the Third Amended and Restated Articles of Incorporation, dated August 21, 2019 (10)

   

1.11

Articles of Amendment to the Third Amended and Restated Articles of Incorporation, dated August 7, 2020 (11)

   

1.12

Amended and Restated By-Laws of the Company (12)

   

1.13

Amendment No. 1 to the Amended and Restated By-Laws (13)

 

2.1

Form of Share Certificate (14)

   

2.2

Form of Class B Common Stock Purchase Warrant (15)

   

2.3

Certificate of Designations of Rights, Preferences and Privileges of Series A Participating Preferred Stock of TOP Ships Inc. (16)

   

2.4

Certificate of Designations of Rights, Preferences and Privileges of Series B Convertible Preferred Stock of TOP Ships Inc. (17)

   

2.5

Statement of Designations, Preferences and Rights of the Series C Convertible Preferred Stock of TOP Ships Inc.  (18)

   

2.6

Statement of Designations, Preferences and Rights of the Series D Preferred Stock of TOP Ships Inc. (19)

   

2.7

Certificate of Amendment to Certificate of Designation of Rights, Preferences and Privileges of Series D Preferred Stock of TOP Ships Inc. (20)

   

2.8

Statement of Designations of Rights, Preferences and Privileges of Series E Perpetual Convertible Preferred Stock of TOP Ships Inc. (21)

   

2.9

Statement of Designations of Rights, Preferences and Privileges of Series F Perpetual Preferred Stock of TOP Ships Inc. (22)

   

2.10

Description of Securities

   

4.1

TOP Ships Inc. 2015 Stock Incentive Plan (23)

   

4.2

Stockholders Rights Agreement with Computershare Trust Company, N.A., as Rights Agent as of September 22, 2016 (24)

   

4.3

Employment Agreement between TOP Ships Inc. and Central Mare Inc. dated September 1, 2010, regarding employment of Chief Technical Officer (25)

   

4.4

Employment Agreement between TOP Ships Inc. and Central Mare Inc. dated September 1, 2010, regarding employment of Executive Vice-President and Chairman (26)

   

4.5

Employment Agreement between TOP Ships Inc. and Central Mare Inc. dated September 1, 2010, regarding employment of President and Chief Executive Officer (27)

   

4.6

Employment Agreement between TOP Ships Inc. and Central Mare Inc. dated September 1, 2010, regarding employment of Chief Financial Officer (28)

   

4.7

Management Agreement dated as of January 1, 2019 with Central Shipping Inc., in respect of Hull 8242 (renamed Eco Marina Del Rey) (29)

   

4.8

Management Agreement dated as of January 1, 2019 with Central Shipping Inc., in respect of Hull S874 (TBN Eco Bel Air) (30)

 

4.9

Management Agreement dated as of January 1, 2019 with Central Shipping Inc., in respect of Hull S875 (TBN Eco Beverly Hills) (31)

   

 

81

 

4.10

Fifth Amendment to the Agreement for Provision of Personnel, dated January 1, 2019, between Top Ships Inc. and Central Mare Inc. (32)

   

4.11

Letter Agreement from Central Shipping Inc. to Top Ships Inc. dated as of January 1, 2019, in respect of provision of management services (33)

   

4.12

Note Purchase Deed among Top Ships Inc., Amsterdam Trade Bank N.V., the note purchasers party thereto, and Astarte International Inc., dated as of March 21, 2019 (34)

   

4.13

Deed of Amendment to the March 21, 2019 AT Bank Bridge Facility Note, between TOP Ships Inc. and dated October 14, 2019 (35)

   

4.14

Addendum No. 1 dated as of March 12, 2019 to MOA in respect of Hull No. 8242 (renamed Eco Marina Del Rey) (36)

   

4.15

Share Purchase Agreement, dated May 28, 2020, by and between Zizzy Charter Co. and Top Ships Inc., in relation to the M/T Eco Malibu and the M/T Eco West Coast (37)

   

4.16

Addendum, dated June 18, 2020, to the Share Purchase Agreement dated May 28, 2020, by Zizzy Carter Co. and Top Ships Inc., in relation to the M/T Eco Malibu and the M/T Eco West Coast (38)

   

4.17

Loan Agreement for a Secured Floating Interest Rate Loan Facility of up to $37,660,000, dated March 12, 2020, by and among Alpha Bank A.E., California 19 Inc. and California 20 Inc., in relation to the M/T Eco Yosemite Park and M/T Eco Joshua Park (39)

   

4.18

First Supplemental Agreement in relation to the Loan Agreement dated March 12, 2020, by and among Alpha Bank S.A, California 19 Inc., California 20 Inc., Central Mare Inc. and Top Ships Inc., in relation to the M/T Eco Yosemite Park and M/T Eco Joshua Park (40)

   

4.19

Corporate Guarantee, dated December 8, 2020, by and between Top Ships Inc. and Alpha Bank S.A., in respect of the obligations under the Loan Agreement dated March 12, 2020 (41)

   

4.20

Second Supplemental Agreement dated February 2, 2022, by and between Top Ships Inc. and Alpha Bank S.A., in respect of the obligations under the Loan Agreement dated March 12, 2020

   

4.21

Joint Venture Agreement, dated March 11, 2020, by and between Augustus Enterprises Inc., Just-C Limited and California 19 Inc. relating to the M/T Eco Yosemite Park (42)

   

4.22

Joint Venture Agreement, dated March 11, 2020, by and between Augustus Enterprises Inc., Just-C Limited and California 20 Inc. relating to the M/T Eco Joshua Park (43)

   

4.23

Loan Agreement for a Secured Floating Interest Rate Loan Facility of up to $38,000,000, dated May 6, 2021, by and among Alpha Bank S.A. and Athenean Empire Inc. in relation to the M/T Eco Malibu

   

4.24

Addendum No. 1 dated as of June 23, 2021 to MOA in respect of M/T Nord Valiant

   

4.25

Sale and Purchase Agreement dated September 8, 2021, by and between TOP Ships Inc. and Zizzy Charter Co., in relation to M/T Julius Caesar, and M/T Legio X Equestris.

   

4.26

Guarantee dated as of November 23, 2021 between TOP Ships Inc., as guarantor, and Sea 268 Leasing Co. Limited, as owner, in respect of M/T Julius Caesar

   

4.27

Bareboat Charter in respect of M/T Julius Caesar dated as of November 23, 2021

   

4.28

Guarantee dated as of November 23, 2021 between TOP Ships Inc., as guarantor, and Sea 269 Leasing Co. Limited, as owner, in respect of M/T Legio X Equestris

   

4.29

Bareboat Charter in respect of M/T Legio X Equestris dated as of November 23, 2021

   

4.30

Addendum No. 1 dated as of December 29, 2021 to MOA in respect of M/T Eco Los Angeles

   

4.31

Addendum No. 1 dated as of December 29, 2021 to MOA in respect of M/T Eco City of Angels

   

4.32

Bridge Loan between TOP Ships Inc. and Central Mare Inc. dated January 5, 2022

   

 

82

 

4.33

Stock Purchase Agreement dated January 17, 2022, by and between TOP Ships Inc. and Africanus Inc., in relation to M/T Eco Oceano CA, M/T Julius Caesar, and M/T Legio X Equestris (44)

   

4.34

Time Charter Party dated as of February 14, 2022 in respect of M/T Eco Bel Air

   

4.35

Time Charter Party dated as of February 14, 2022 in respect of M/T Eco Beverly Hills

   

4.36

Bareboat Charter in respect of M/T Eco Oceano CA, dated as of March 2, 2022

   

8.1

List of subsidiaries of the Company

   

12.1

Rule 13a-14(a)/15d-14(a) Certification of the Company’s Principal Executive Officer

   

12.2

Rule 13a-14(a)/15d-14(a) Certification of the Company’s Principal Financial Officer

   

13.1

Certification of the Company’s Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

   

13.2

Certification of the Company’s Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

   

15.1

Consent of Independent Registered Accounting Firm

   

101

The following materials from the Company’s Annual Report on Form 20-F for the fiscal year ended December 31, 2021, formatted in Inline eXtensible Business Reporting Language (iXBRL): (i) Consolidated Balance Sheets as of December 31, 2020 and 2021; (ii) Consolidated Statements of Comprehensive Income/(Loss) for the years ended December 31, 2019, 2020 and 2021; (iii) Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2019, 2020 and 2021; (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2020 and 2021; and (v) Notes to Consolidated Financial Statements

   

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

 

(1)

Incorporated by reference to Exhibit 99.2 of the Company’s Current Report on Form 6-K, filed on June 24, 2011.

(2)

Incorporated by reference to Exhibit 99.1 of the Company’s Current Report on Form 6-K, filed on April 18, 2014.

(3)

Incorporated by reference to Exhibit 1.3 of the Company’s Annual Report on Form 20-F, filed on April 26, 2016.

(4)

Incorporated by reference to Exhibit 1.4 of the Company’s Annual Report on Form 20-F, filed on March 29, 2018.

(5)

Incorporated by reference to Exhibit 1.5 of the Company’s Annual Report on Form 20-F, filed on March 29, 2018.

(6)

Incorporated by reference to Exhibit 1.6 of the Company’s Annual Report on Form 20-F, filed on March 29, 2018.

(7)

Incorporated by reference to Exhibit 1.7 of the Company’s Annual Report on Form 20-F, filed on March 29, 2018.

(8)

Incorporated by reference to Exhibit 1.8 of the Company’s Annual Report on Form 20-F, filed on March 29, 2018.

(9)

Incorporated by reference to Exhibit 1.9 of the Company’s Annual Report on Form 20-F, filed on March 29, 2018.

(10)

Incorporated by reference to Exhibit 99.2 of the Company’s Current Report on Form 6-K, filed on August 22, 2019.

(11)

Incorporated by reference to Exhibit 1.11 of the Company’s Annual Report on Form 20-F, filed on April 23, 2021.

(12)

Incorporated by reference to Exhibit 99.1 of the Company’s Current Report on Form 6-K filed on March 9, 2007.

(13)

Incorporated by reference to Exhibit 1 of the Company’s Current Report on Form 6-K filed on November 28, 2014.

(14)

Incorporated by reference to Exhibit 2.1 of the Company’s Annual Report on Form 20-F, filed on June 29, 2009.

(15)

Incorporated by reference to Exhibit 4 of the Company’s Current Report on Form 6-K, filed on November 7, 2019.

(16)

Incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 6-K, filed on September 22, 2016.

(17)

Incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 6-K, filed on November 23, 2016.

(18)

Incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 6-K, filed on February 21, 2017.

(19)

Incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 6-K, filed on May 8, 2017.

(20)

Incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 6-K, filed on December 4, 2020.

(21)

Incorporated by reference to Exhibit 99.2 of the Company’s Current Report on Form 6-K, filed on April 1, 2019.

(22)

Incorporated by reference to Exhibit 99.2 of the Company’s Current Report on Form 6-K, filed on January 21, 2022.

(23)

Incorporated by reference to Exhibit 4.1 of the Company’s Annual Report on Form 20-F, filed on April 26, 2016.

(24)

Incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 6-K, filed on September 22, 2016.

(25)

Incorporated by reference to Exhibit 4.5 of the Company’s Annual Report on Form 20-F, filed on March 29, 2018.

(26)

Incorporated by reference to Exhibit 4.6 of the Company’s Annual Report on Form 20-F, filed on March 29, 2018.

(27)

Incorporated by reference to Exhibit 4.7 of the Company’s Annual Report on Form 20-F, filed on March 29, 2018.

(28)

Incorporated by reference to Exhibit 4.8 of the Company’s Annual Report on Form 20-F, filed on March 29, 2018.

(29)

Incorporated by reference to Exhibit 4.105 of the Company’s Annual Report on Form 20-F, filed on March 28, 2019.

(30)

Incorporated by reference to Exhibit 4.108 of the Company’s Annual Report on Form 20-F, filed on March 28, 2019.

(31)

Incorporated by reference to Exhibit 4.113 of the Company’s Annual Report on Form 20-F, filed on March 28, 2019.

(32)

Incorporated by reference to Exhibit 4.115 of the Company’s Annual Report on Form 20-F, filed on March 28, 2019.

 

83

 

(33)

Incorporated by reference to Exhibit 4.116 of the Company’s Annual Report on Form 20-F, filed on March 28, 2019.

(34)

Incorporated by reference to Exhibit 4.118 of the Company’s Annual Report on Form 20-F, filed on March 28, 2019.

(35)

Incorporated by reference to Exhibit 4.46 of the Company’s Annual Report on Form 20-F, filed on April 10, 2020.

(36)

Incorporated by reference to Exhibit 4.119 of the Company’s Annual Report on Form 20-F, filed on March 28, 2019.

(37)

Incorporated by reference to Exhibit 4.23 of the Company’s Annual Report on Form 20-F, filed on April 23, 2021.

(38)

Incorporated by reference to Exhibit 4.24 of the Company’s Annual Report on Form 20-F, filed on April 23, 2021.

(39)

Incorporated by reference to Exhibit 4.25 of the Company’s Annual Report on Form 20-F, filed on April 23, 2021.

(40)

Incorporated by reference to Exhibit 4.26 of the Company’s Annual Report on Form 20-F, filed on April 23, 2021.

(41)

Incorporated by reference to Exhibit 4.27 of the Company’s Annual Report on Form 20-F, filed on April 23, 2021.

(42)

Incorporated by reference to Exhibit 4.30 of the Company’s Annual Report on Form 20-F, filed on April 23, 2021.

(43)

Incorporated by reference to Exhibit 4.31 of the Company’s Annual Report on Form 20-F, filed on April 23, 2021.

(44)

Incorporated by reference to Exhibit 99.3 of the Company’s Current Report on Form 6-K, filed on January 21, 2022.

 

 

SIGNATURES

 

 

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

 

 

TOP SHIPS INC.

 

(Registrant)

   

Date: April 15, 2022

By:

/s/ Evangelos J. Pistiolis

   

Evangelos J. Pistiolis

   

President, Chief Executive Officer, and Director

 

 

 

 

 

 

 

 

84

 

TOP SHIPS INC.

 

 

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

Page

Report of Independent Registered Public Accounting Firm

F-2

 

 

Consolidated Balance sheets as of December 31, 2020 and 2021

F-4

 

 

Consolidated Statements of Comprehensive (loss)/income for the years ended December 31, 2019, 2020 and 2021

F-5

 

 

Consolidated Statements of Stockholders' equity for the years ended December 31, 2019, 2020 and 2021

F-6

 

 

Consolidated Statements of Cash flows for the years ended December 31, 2019, 2020 and 2021

F-7

 

 

Notes to consolidated financial statements

F-8

   

 

 

 

 

 

 

 

 

 

F-1

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders of

Top Ships Inc.,

Majuro, Republic of the Marshall Islands

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of Top Ships Inc. and subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of comprehensive (loss)/income, mezzanine and stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

 

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated, March 31, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

Critical Audit Matter

 

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

 

Transactions with Related Parties Consideration in excess of the historical carrying value of the net assets acquired Refer to Note 1 to the financial statements

 

Critical Audit Matter Description

 

During 2021 the Company entered into transactions with a number of entities affiliated with the Company’s President, Chief Executive Officer and Director, Mr. Evangelos J. Pistiolis (“CEO”). In January 2021 the Company sold three companies that owned contracts for vessels under construction with attached time charters. These were exchanged with an entity affiliated with the Company’s CEO for cash, settlement of a related party liability, 100% interest in a vessel owning company and 35% interest in two additional vessel owning companies. In September 2021 the remaining 65% of the abovementioned two additional vessel owning companies were acquired for a consideration of $29.8 million. All three companies acquired, owned contracts for vessels under construction with attached time charters, at the time of acquisition.

 

F-2

 

The Company accounted for the acquisitions as a transfer of assets between entities under common control and has recognized the vessels at their historical carrying value at the date of transfer. The amount of the consideration in excess of the historical carrying value of the net assets acquired (“excess consideration over acquired assets”) is recognized as a reduction to the Company’s additional paid in capital.

 

The Company assessed the excess consideration over acquired assets by obtaining an independent valuation which was used to calculate the net present value of the attached time charters and the fair value of the vessels under construction.

 

We identified the excess consideration over acquired assets to be a critical audit matter because of the significant judgment involved in estimating the value of the vessels under construction, the attached time charters and the discount rate which was an unobservable input. This required significant audit effort and a high degree of auditor judgment when performing audit procedures to evaluate the reasonableness of the consideration in excess of historical carrying value. 

 

How the Critical Audit Matter Was Addressed in the Audit

 

Our audit procedures related to the excess consideration over acquired assets included the following:

 

 

We tested the effectiveness of controls over the Company’s assessment of excess consideration over acquired assets.

 

We evaluated the competence, capabilities and objectivity of the Company’s independent valuer.

 

We compared the Company’s valuation of the vessels under construction and attached time charters to industry data obtained from third party sources and used by market participants.

 

We involved our valuation specialists to assess the methodology used and to evaluate the reasonableness of the discount rate by developing an independent discount rate estimate.

 

/s/ Deloitte Certified Public Accountants S.A.

 

Athens, Greece

 

April 15, 2022

 

We have served as the Company's auditor since 2006.

 

F-3

 

 

 

TOP SHIPS INC.

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2020 AND 2021

 

(Expressed in thousands of U.S. Dollars - except share and per share data)

 

  

December 31,

  

December 31,

 
  

2020

  

2021

 

ASSETS

        
         

CURRENT ASSETS:

        
         

Cash and cash equivalents

  19,328   2,370 

Trade accounts receivable

  -   76 

Prepayments and other

  904   581 

Inventories

  514   671 

Vessels held for sale (Note 4c)

  24,340   71,636 

Total current assets

  45,086   75,334 
         

FIXED ASSETS:

        
         

Advances for vessels under construction (Note 4a)

  31,654   30,579 

Vessels, net (Note 4b)

  136,292   156,585 

Right of use assets from operating leases (Note 6)

  45,222   37,279 

Other fixed assets, net

  548   534 

Total fixed assets

  213,716   224,977 
         

OTHER NON CURRENT ASSETS:

        
         

Restricted cash (Note 6 and 7)

  4,000   4,000 

Investments in unconsolidated joint ventures (Note 17)

  28,230   24,477 

Deposit asset (Note 19)

  2,000   2,000 

Total non-current assets

  34,230   30,477 
         

Total assets

  293,032   330,788 
         

LIABILITIES AND STOCKHOLDERS EQUITY

        
         

CURRENT LIABILITIES:

        
         

Current portion of long-term debt (Note 7)

  5,324   7,205 

Debt related to vessels held for sale (Note 7)

  -   53,202 

Due to related parties (Note 5)

  5,159   29,755 

Accounts payable

  2,544   2,308 

Accrued liabilities

  959   1,145 

Unearned revenue

  2,074   3,658 

Current portion of derivative financial instruments (Note 14)

  66   - 

Current portion of Operating lease liabilities (Note 6)

  9,288   9,815 

Total current liabilities

  25,414   107,088 
         

NON-CURRENT LIABILITIES:

        
         

Non-current portion of long term debt (Note 7)

  99,295   90,163 

Non-current portion of Operating lease liabilities (Note 6)

  33,805   23,948 

Other non-current liabilities

  300   225 

Total non-current liabilities

  133,400   114,336 
         

COMMITMENTS AND CONTINGENCIES (Note 8)

  -   - 
         

Total liabilities

  158,814   221,424 
         

MEZZANINE EQUITY:

        

Preferred stock; 11,264 and 13,452 Series E Shares issued and outstanding at December 31, 2020 and 2021 with $0.01 par value (Note 16)

  13,517   16,142 

Total mezzanine equity

  13,517   16,142 
         

STOCKHOLDERS EQUITY:

        
         

Preferred stock, $0.01 par value; 20,000,000 shares authorized; of which 100,000 Series D Shares were outstanding at December 31, 2020 and 2021 (Note 9)

  1   1 

Common stock, $0.01 par value; 1,000,000,000 shares authorized; 39,831,972 shares issued and outstanding at December 31, 2020 and 2021 (Note 9)

  398   398 

Additional paid-in capital

  465,672   429,577 

Accumulated deficit

  (345,370)  (336,754)

Total stockholders equity

  120,701   93,222 
         

Total liabilities, mezzanine equity and stockholders equity

  293,032   330,788 

 

F-4

 

 

 

TOP SHIPS INC.

            
             

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)/INCOME

            

FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 and 2021

            

(Expressed in thousands of U.S. Dollars - except share and per share data)

            
  

2019

  

2020

  

2021

 

Revenues (including $1,311, $0 and $0 respectively, from related party) (Note 18 & 5)

  66,088   60,222   56,367 
             

EXPENSES:

            

Voyage expenses (including $829, $761 and $705 respectively, to related party) (Note 11)

  3,038   1,994   1,317 

Operating lease expense (Note 6)

  7,054   755   10,840 

Vessel operating expenses (including $247, $60 and $17 respectively, to related party) (Note 11)

  22,786   21,024   15,679 

Dry-docking costs

  399   356   361 

Vessel depreciation (Note 4b)

  12,392   13,174   7,670 

Management fees-related parties (Note 5)

  2,443   5,627   2,596 

General and administrative expenses (including $360, $360 and $360 respectively, to related party)(Note 5)

  1,730   1,932   1,943 

Other operating loss (Note 15)

  -   4,800   - 

Loss on sale of vessels (Note 6 and 19)

  -   12,355   - 

Impairment on vessels (Note 19)

  12,310   -   1,160 

Operating income/(loss)

  3,936   (1,795)  14,801 
             

OTHER EXPENSES:

            

Interest and finance costs (including $948, $0 and $0 respectively, to related party) (Note 12)

  (18,077)  (20,956)  (6,998)

Gain/(Loss) on derivative financial instruments (Note 14)

  1,601   (814)  66 

Interest income

  133   34   - 

Equity gain in unconsolidated joint ventures

  778   713   747 

Impairment on unconsolidated joint ventures (Note 17)

  (3,144)  -   - 

Total other expenses, net

  (18,709)  (21,023)  (6,185)
             

Net (loss) / income

  (14,773)  (22,818)  8,616 

Less: Deemed dividend for beneficial conversion feature of Series E Shares (Note 16)

  (9,339)  (1,067)  (900)

Less: Deemed dividend equivalents on Series E Shares related to redemption value (Note 16)

  (4,227)  (3,099)  (437)

Less: Series E Shares Dividend (Note 16)

  (2,650)  (1,796)  (1,883)

Net (loss) / income attributable to common shareholders

  (30,989)  (28,780)  5,396 
             

(Loss) / Earnings per common share, basic and diluted (Note 10)

  (264.63)  (1.22)  0.14 
             

Other comprehensive income

            

Effective portion of changes in fair value of interest swap contracts (Note 14)

  (1,361)  -   - 

Total other comprehensive (loss) / income

  (32,350)  (28,780)  5,396 

The accompanying notes are an integral part of these consolidated financial statements.

            

 

F-5

 

 

TOP SHIPS INC.

CONSOLIDATED STATEMENTS OF MEZZANINE AND STOCKHOLDERS EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 and 2021

(Expressed in thousands of U.S. Dollars except number of shares and per share data)

    Mezzanine Equity        Preferred Stock      

Common Stock

  

 

 

  

Accumulated

             
  

# of Shares

  

Mezzanine Equity

  

# of Shares

  

Par Value

  

# of Shares*

  

Par Value*

  

Additional

Paid-In

Capital*

  

Deficit

attributable to common stockholders

  

Non-controlling interest

  

Other comprehensive loss

  

Total

 

BALANCE, December 31, 2018

  -   -   100,000   1   46,034   -   412,059   ( 307,779)  -   -   104,281 

Net loss

         -   -   -   -   -   ( 14,773)  -   -   ( 14,773)

Stock-based compensation

                       ( 34)           ( 34)

Issuance of common stock due to exercise of 2018 and 2014 Warrants (Note 9)

              17,375   0   4,454            4,454 

Issuance of common stock pursuant to the September 2019 Common Stock Offering and associated Traditional Warrant exercises (Note 9)

              116,404   1   9,288            9,289 

Issuance of common stock pursuant to the November 2019 Registered Direct Offering (Note 9)

              168,000   2   7,640            7,642 

Initial measurement of Class B Warrants (Note 14)

                       ( 997)           ( 997)

Excess of consideration over acquired assets (Note 1)

                       ( 6,701)           ( 6,701)

Issuance of Series E Shares (Note 16)

  28,158   28,158                           - 

Redemptions on Series E Shares (Note 16)

  ( 12,434)  ( 14,302)                          - 

Deemed dividend for Series E (Note 16)

      9,339                             - 

Deemed dividend for Series E as part of exchange

                       ( 9,570)           ( 9,570)

Deemed dividend equivalents on Series E Shares issued during the period related to redemption value (Note 16)

      4,227                 ( 4,227)           ( 4,227)

Repurchase of beneficial conversion feature with debt extinguishment

                       ( 8,518)           ( 8,518)

Beneficial conversion feature of Series E convertible perpetual preferred stock (Note 16)

      ( 9,339)                9,339            9,339 

Series E Dividends (Note 16)

                       ( 2,650)           ( 2,650)

Reversal of equity offering costs accrued not payable

                       1,500            1,500 

Other comprehensive loss

                                ( 1,361)  ( 1,361)

BALANCE, December 31, 2019

  15,724   18,083   100,000   1   347,813   3   411,583   ( 322,552)  -   ( 1,361)  87,674 

Net loss

                          (22,818)        (22,818)

Stock-based compensation

                       (34)           (34)

Issuance of common stock pursuant to equity offerings (Note 9)

              39,416,959   394   120,784            121,178 

Cashless exercises of Class A Warrants (Note 9)

              67,200   1   (1)           - 

Issuance of Series E Shares (Note 16)

  14,350   14,350                           - 

Deemed dividend equivalents on Series E Shares issued during the period related to redemption value

      3,099                 (3,099)           (3,099)

Redemptions of Series E Shares (Note 16)

  (21,364)  (24,569)                          - 

Reversal of costs related to equity offerings

                       235            235 

Excess of consideration over carrying value of acquired assets (Note 1)

                       (62,000)           (62,000)

Dividends of Series E shares (Note 16)

  2,554   2,554               (1,796)           (1,796)

Beneficial conversion feature related to the issuance of Series E Shares

      (1,067)                1,067            1,067 

Deemed dividend related to beneficial conversion feature of Series E Shares

      1,067                 (1,067)           (1,067)

Reversal of Other comprehensive loss (Note 14)

                                1,361   1,361 

BALANCE, December 31, 2020

  11,264   13,517   100,000   1   39,831,972   398   465,672   (345,370)  -   -   120,701 

Net Income

                          8,616         8,616 

Stock-based compensation

                       (34)           (34)

Issuance of Series E Shares (Note 16)

  2,188   2,188                           - 

Deemed dividend equivalents on Series E Shares issued during the period related to redemption value

      437                 (437)           (437)

Dividends of Series E shares (Note 16)

                       (1,883)           (1,883)

Beneficial conversion feature related to the issuance of Series E Shares

      (900)                900            900 

Deemed dividend related to beneficial conversion feature of Series E Shares

      900                 (900)           (900)

Excess of consideration over carrying value of acquired assets (Note 1)

                       (33,741)           (33,741)

BALANCE, December 31, 2021

  13,452   16,142   100,000   1   39,831,972   398   429,577   (336,754)  -   -   93,222 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

*Adjusted to reflect the reverse stock split effected in August 2020 (see Note 1)

 

 

F-6

 

 

 

TOP SHIPS INC.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 and 2021

 

(Expressed in thousands of U.S. Dollars)

 
  

2019

  

2020

  

2021

 

Cash Flows from Operating Activities:

            

Net (loss) / income

  (14,773)  (22,818)  8,616 

Adjustments to reconcile net (loss)/income to net cash provided by operating activities:

            

Vessel depreciation

  12,392   13,174   7,670 

Other fixed assets depreciation

  50   36   14 

Equity (gains) in unconsolidated joint ventures

  (778)  (713)  (747)

Dividends from cumulative earnings of joint venture

  -   -   1,524 

Amortization and write off of deferred financing costs

  1,812   6,311   840 

Amortization of debt discount

  324   -   - 

Stock-based compensation expense

  (34)  (34)  (34)

Change in fair value of derivative financial instruments

  (1,457)  790   (66)
Amortization of Right of use assets from operating leases  5,727   543   7,943 

Impairment on unconsolidated joint ventures

  3,144   -   - 

Impairment on vessels

  12,310   -   1,160 

Loss on sale of other fixed assets

  -   36   - 

Loss on sale of vessels

  -   12,355   - 

(Increase)/Decrease in:

            

Trade accounts receivable

  173   642   (76)

Inventories

  (385)  334   (157)

Prepayments and other

  180   (198)  323 

Due from related parties

  75   -   - 

Increase/(Decrease) in:

            

Due to related parties

  (1,781)  2,097   (2,797)

Accounts payable

  1,462   (2,083)  (123)

Other non-current liabilities

  -   300   (75)

Accrued liabilities

  1,665   (2,803)  (207)

Unearned revenue

  3,337   (1,263)  1,584 
Operating lease liabilities  (4,249)  (666)  (9,331)

Net Cash provided by Operating Activities

  19,194   6,040   16,061 
             

Cash Flows used in Investing Activities:

            

Advances for vessels under construction and capitalized expenses

  (155,090)  (120,858)  (115,513)

Vessel acquisitions

  (48,140)  -   - 

Investments in unconsolidated joint ventures (2017 Joint Venture – see Note 17)

  -   19,555   - 

Investments in unconsolidated joint ventures (2020 Joint Venture – see Note 17)

  -   (27,454)  - 

Returns of investments in unconsolidated joint ventures (2020 Joint Venture – see Note 17)

  -   -   2,976 

Net proceeds from vessel sales

  -   310,016   35,886 

(Acquisitions) / Sales of other fixed assets, net

  (36)  35   - 

Net Cash (used in)/Provided by Investing Activities

  (203,266)  181,294   (76,651)
             

Cash Flows from Financing Activities:

            

Proceeds from debt

  252,969   60,200   74,800 

Proceeds from short-term debt

  6,760   -   - 

Principal payments and prepayments of debt

  (50,466)  (269,621)  (28,313)

Redemption of Series E Shares

  (14,302)  (24,568)  - 

Prepayment of short term debt

  (20,280)  -   - 

Consideration paid in excess of purchase price over book value of vessels

  -   (60,850)  - 

Proceeds from issuance of common stock

  18,892   129,660   - 

Proceeds from warrant exercises

  4,619   -   - 

Equity offering issuance costs

  (1,859)  (8,868)  - 

Payment of financing costs

  (6,647)  (1,851)  (1,076)

Derivative financial instrument termination payments

  (5)  (1,379)  - 

Dividends of Series E Shares

  -   -   (1,779)

Net Cash provided by/(used in) Financing Activities

  189,681   (177,277)  43,632 
             

Net increase/(decrease) in cash and cash equivalents and restricted cash

  5,609   10,057   (16,958)
             

Cash and cash equivalents and restricted cash at beginning of year

  7,662   13,271   23,328 
             

Cash and cash equivalents and restricted cash at end of the year

  13,271   23,328   6,370 
             

Cash breakdown

            

Cash and cash equivalents

  4,412   19,328   2,370 

Restricted cash, current

  859   -   - 

Restricted cash, non-current

  8,000   4,000   4,000 

SUPPLEMENTAL CASH FLOW INFORMATION

            
             

Capital expenditures included in Accounts payable/Accrued liabilities/Due to related parties

  533   388   1,530 

Interest paid, net of capitalized interest

  14,866   18,309   7,412 

Finance fees included in Accounts payable/Accrued liabilities/Due to related parties

  759   23   151 

Equity issuance costs included in liabilities

  386   -   - 

Unpaid Excess of consideration over carrying value of acquired assets included in Due to Related Parties (Note 1)

  6,701   1,150   27,562 

Beneficial conversion feature of Series E perpetual convertible preferred stock (Note 16)

  9,339   1,067   900 

Settlement of related party debt, interest, finance fees, Excess consideration over acquired assets, capital expenditures and dividends with issuance of Series E Shares (Note 16)

  28,158   16,904   2,188 

Dividends payable included in Due to related parties (Note 16)

  1,621   864   968 

Transfer of right of use asset balances after operating lease termination to Vessels, net

  3,800   -   - 

Carrying value of net assets of companies acquired (Note 1)

  7,649   -   8,933 

Reversal of equity offering costs not payable

  1,500   235   - 

Prepaid rent of Navigare Lease included in initial measurement

  -   2,006   - 

Deemed dividend equivalents on Series E Shares related to redemption value (Note 16)

  2,359   2,253   437 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

AS OF DECEMBER 31, 2020 AND 2021

AND FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 and 2021

(Expressed in thousands of United States Dollars except share, per share earnings and rate per day, unless otherwise stated)  

 

1.

Basis of Presentation and General Information:

 

The consolidated financial statements include the accounts of Top Ships Inc. (formerly Top Tankers Inc. and Ocean Holdings Inc.) and its wholly owned subsidiaries (collectively the “Company”). Ocean Holdings Inc. was formed on January 10, 2000, under the laws of Marshall Islands and was renamed to Top Tankers Inc. and Top Ships Inc. in May 2004 and December 2007, respectively. The Company is an international provider of worldwide oil, petroleum products and chemicals transportation services.

 

As of December 31, 2021, the Company was the sole owner of all outstanding shares of the following subsidiary companies. The following list is not exhaustive as the Company has other subsidiaries relating to vessels that have been sold and that remain dormant for the periods presented in these consolidated financial statements as well as intermediary companies that own shipowning companies that are 100% subsidiaries of the Company.

 

 

Companies

Date of

Incorporation

Country of

Incorporation

Activity

 

 Top Tanker Management Inc.

May 2004

Marshall Islands

Management company

 

 

Wholly owned Shipowning Companies (SPC) with vessels in operation during years ended December 31, 2019, 2020 and 2021

 

Date of

Incorporation

Country of

Incorporation

Vessel

Delivery Date

1

 Monte Carlo 71 Shipping Company Limited

 

June 2014

Marshall Islands

M/T Stenaweco Energy

July 2014 (sold in 2020)

2

 Monte Carlo One Shipping Company Ltd

 

June 2012

Marshall Islands

M/T Stenaweco Evolution

March 2015 (sold in 2020)

3

 Monte Carlo Seven Shipping Company Limited

 

April 2013

Marshall Islands

M/T Stenaweco Excellence

May 2016 (sold in 2020)

4

 Monte Carlo Lax Shipping Company Limited

 

May 2013

Marshall Islands

M/T Nord Valiant

August 2016 (sold in 2021)

5

 Monte Carlo 37 Shipping Company Limited

 

September 2013

Marshall Islands

M/T Eco Fleet

July 2015 (sold in 2020)

6

 Monte Carlo 39 Shipping Company Limited

 

December 2013

Marshall Islands

M/T Eco Revolution

January 2016 (sold in 2020)

7

 Eco Seven Inc.

 

February 2017

Marshall Islands

M/T Stenaweco Elegance

February 2017 (sold in 2020)

8

 Astarte International Inc.

 

April 2017

Marshall Islands

M/T Eco Palm Desert

September 2018 (sold in 2020)

9

 PCH77 Shipping Company Limited         

 

September 2017

Marshall Islands

M/T Eco California

January 2019 (sold in 2020)

10

 PCH Dreaming Inc.

 

January 2018

Marshall Islands

M/T Eco Marina Del Ray

March 2019

11

 South California Inc.

 

January 2018

Marshall Islands

M/T Eco Bel Air

April 2019 (sold in 2020)

12

 Malibu Warrior Inc.

 

January 2018

Marshall Islands

M/T Eco Beverly Hills

May 2019 (sold in 2020)

13

Santa Catalina Inc.

 

December 2018

Marshall Islands

M/T Eco Los Angeles

February 2020

14

Santa Monica Marine Inc.

 

December 2018

Marshall Islands

M/T Eco City of Angels

February 2020

15

Roman Empire Inc.

 

February, 2020

Marshall Islands

Eco West Coast

March 2021

16

Athenean Empire Inc.

 

February, 2020

Marshall Islands

Eco Malibu

May 2021

 

F- 8

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

AS OF DECEMBER 31, 2020 AND 2021

AND FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 and 2021

(Expressed in thousands of United States Dollars except share, per share earnings and rate per day, unless otherwise stated)

 

 

 

Wholly owned SPCs with vessels under construction during year ended December 31, 2021

 

Date of

Incorporation

Country of

Incorporation

Vessel

Delivery Date

1

Julius Caesar Inc.

 

May, 2020

Marshall Islands

Julius Caesar (Hull No. 3213)

January 2022

2

Legio X Inc.

 

December, 2020

Marshall Islands

Legio X Equestris (Hull No. 3214)

March 2022

3

Eco Oceano Ca Inc.

 

December, 2020

Marshall Islands

Eco Oceano Ca (Hull No. 871)

March 2022

 

As of December 31, 2019, 2020 and 2021, the Company was the owner of 50% of outstanding shares of the following companies.

         

 

SPC

Date of

Incorporation

Country of

Incorporation

Vessel

Built Date

1

 City of Athens Pte. Ltd.

November 2016

Singapore

M/T Eco Holmby Hills

March 2018 (sold in 2020)

2

 Eco Nine Pte. Ltd.

March 2015

Singapore

M/T Eco Palm Springs

May 2018 (sold in 2020)

3

California 19 Inc.

May 2019

Marshall Islands

M/T Eco Yosemite Park

March 2020

4

California 20 Inc.

May 2019

Marshall Islands

M/T Eco Joshua Park

March 2020

 

On December 18, 2019 the Company acquired 100% of the issued and outstanding shares of Santa Catalina Inc. and Santa Monica Inc. two Marshall Islands companies that had entered into new building contracts for two high specification 50,000 dwt Medium Range (“MR”) product/chemical tankers (M/T Eco Los Angeles and M/T Eco City of Angels) under construction at that time in Hyundai Mipo Dockyard Co., Ltd. in South Korea which were delivered in February 2020. The Company acquired the shares from an entity affiliated with the Company’s Chief Executive Officer, Director and President, Mr. Evangelos J. Pistiolis, for an aggregate purchase price of $14,350, of which $7,515 was paid upon purchase of the vessel owning companies and the remaining $6,835 was paid upon delivery of the vessels from the shipyard. The transaction specified that following each vessel’s delivery, each vessel was going to enter into a time charter with Trafigura Maritime Logistics Pte Ltd (“Trafigura”) for a firm duration of three years at a gross daily rate of $17,500, with a charterer’s option to extend for two additional years at $18,750 and $20,000, respectively. Both acquired companies had already advanced $7,515 of shipyard installments and $134 of capitalized expenses for the construction of said newbuilding vessels.

 

On May 6, 2020, the Company acquired for $18,000 from a company affiliated with Mr. Evangelos J. Pistiolis a 100% ownership interest in three Marshall Island companies (the “MR Transaction”) that each had a newbuilding contract for the construction of one scrubber-fitted 50,000 dwt eco MR product/chemical tanker, under construction at that time in Hyundai Mipo shipyard in South Korea, with attached time charters. The vessels, M/T Eco Van Nuys (Hull No 2789), M/T Eco Santa Monica (Hull No 2790) and M/T Eco Venice Beach (Hull No 2791) were scheduled to be delivered in the first quarter of 2021. Each of the three product tankers had time charters with Central Tankers Chartering Inc, a company affiliated with Mr. Evangelos J. Pistiolis, for a firm term of five years at a gross daily rate of $16,200, with a charterer’s option to extend for two additional years at $17,200 and $18,200 (see Note 5), scheduled to commence upon delivery of each vessel. Of the consideration payable, $16,850 was paid in the year ended December 31, 2020 and the remaining $1,150 was due on the vessels’ delivery date and was included in Due to related parties in the consolidated balance sheets as of December 31, 2020.

 

On May 28, 2020, the Company acquired for $22,000 from a company affiliated with Mr. Evangelos J. Pistiolis, or the Suezmax Seller, a 50% ownership interest in two Marshall Island companies (the “SPVs”) that each had a newbuilding contract for the construction of one scrubber-fitted 157,000 dwt eco Suezmax tanker, M/T Eco West Coast (Hull No 865) and M/T Eco Malibu (Hull No 866) under construction at that time  in Hyundai Heavy Industries shipyard in South Korea, with attached time charters with Clearlake Shipping Pte Ltd. The M/T’s Eco West Coast and Eco Malibu, scheduled to commence upon delivery of each vessel, were delivered on March 26 and May 11, 2021 respectively. The Company had the option to acquire the other 50% ownership interest in both vessels from the Seller at the same price until July 15, 2020. On June 18, 2020, the Company exercised both purchase options for a consideration of $22,000. Upon their delivery, both vessels entered into time charters with Clearlake Shipping Pte Ltd., for a firm term of three years at a gross daily rate of $33,950, with a charterer’s option to extend for two additional years at $34,750 and $36,750, respectively. The full amount of the consideration was paid in the year ended December 31, 2020.

 

F- 9

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

AS OF DECEMBER 31, 2020 AND 2021

AND FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 and 2021

(Expressed in thousands of United States Dollars except share, per share earnings and rate per day, unless otherwise stated)  

 

On January 6, 2021 the Company sold to a related party affiliated with Mr. Evangelos J. Pistiolis (the “Buyer”) three shipowning companies that own M/T Eco Van Nuys (Hull No 2789), M/T Eco Santa Monica (Hull No 2790) and M/T Eco Venice Beach (Hull No 2791) in exchange for:

 

 

$10,000 in cash.

 

100% ownership in a Marshall Islands company that was party to a shipbuilding contract for a high specification scrubber fitted Suezmax Tanker at the time under construction at Hyundai Samho shipyard that was delivered in March 2022 (M/T Eco Oceano Ca - Hull No 871). The shipowning company is party to a time charter, starting from the vessel’s delivery, with Central Tankers Chartering, a related party affiliated with the family of Mr. Evangelos J. Pistiolis, for a firm duration of five years at a gross daily rate of $32,450, with a charterer’s option to extend for two additional years at $33,950 and $35,450.

 

35% ownership in one Marshall Islands company that was a party to a shipbuilding contract for a high specification scrubber fitted VLCC tanker under construction at Hyundai Heavy Industries shipyard that was delivered in January 2022 (Julius Caesar - Hull No. 3213). The shipowning company is party to a time charter, starting from the vessel’s delivery, with a major oil trader, for a firm duration of three years at a gross daily rate of $36,000, with a charterer’s option to extend for two additional years at $39,000 and $41,500.

 

35% ownership in one Marshall Islands company that is party to a shipbuilding contract for a high specification scrubber fitted VLCC tanker at the time under construction at Hyundai Heavy Industries shipyard that was delivered in March 2022 (Legio X Equestris - Hull No. 3214). The shipowning company is party to a time charter, starting from the vessel’s delivery, with a major oil trader, for a firm duration of three years at a gross daily rate of $35,750, with a charterer’s option to extend for two additional years at $39,000 and $41,500.

 

A settlement of $1,150 in related party payables to the Buyer.

 

The Buyer remains the guarantor on the shipbuilding contracts towards the shipyard and in addition, the Buyer provided the Company with an option for a credit line up to 10% of the total shipbuilding cost at market terms, to be negotiated when the option is exercised, amounting to $23,815.

 

On September 8, 2021 the Company purchased from the Buyer for a consideration of $29,750 an additional 65% ownership interest in Julius Caesar Inc. - Hull No. 3213 and Legio X Inc. - Hull No. 3214 (the “VLCC Companies”). Following this transaction, the Company is the 100% owner of the VLCC Companies (see Notes 3 and 8 for related capital commitments assumed). The Buyer will remain the guarantor on the shipbuilding contracts towards the shipyard and in addition the Buyer will provide a financing option to the Company by remaining responsible to the shipyard for up to 20% of the shipbuilding cost per vessel (increased from 10%, as previously agreed on January 6, 2021,), at the option of the Company, to be exercised until each vessel’s delivery date.

 

Due to the abovementioned purchase of the remaining 65% of the VLCC Companies, which were initially accounted for as Investments in affiliates, the Company as of December 31, 2021 and for the year ended December 31, 2021 consolidates the VLCC Companies.

 

Each of the abovementioned transactions were approved by a special committee of the Company's board of directors (the “Special Committee”), of which all of the directors were independent and for each transaction the Special Committee obtained a fairness opinion relating to the consideration of each transaction from an independent financial advisor. The Company accounted for the abovementioned acquisitions as a transfer of assets between entities under common control and has recognized the vessels at their historical carrying amounts at the date of transfer.

 

The amount of the consideration given in excess of the historical carrying value of the net assets acquired is recognized as a reduction to the Company’s additional paid in capital and presented as Excess of consideration over the carrying value of acquired assets in the Company’s consolidated statement of stockholders' equity for the twelve months ended December 31, 2019, 2020 and 2021 respectively. An analysis of the consideration paid is presented in the table below:

 

As of December 31,

 

2019

  

2020

  

2021

 

Consideration

  14,350   62,000   29,750 

Carrying value of net assets of companies sold

  -   -   24,074 

Less: Carrying value of net assets of companies acquired

  (7,649)  -   (8,933)

Less: Consideration received in cash

  -   -   (10,000)

Less: Settlement of related party payables

  -   -   (1,150)

Excess of consideration over acquired assets

  6,701   62,000   33,741 

 

F- 10

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

AS OF DECEMBER 31, 2020 AND 2021

AND FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 and 2021

(Expressed in thousands of United States Dollars except share, per share earnings and rate per day, unless otherwise stated)  

 

On March 11, 2020, the World Health Organization declared the recent novel coronavirus (“COVID-19”) outbreak a pandemic. In response to the pandemic, many countries, ports and organizations, including those where the Company conducts a large part of its operations, have implemented measures to combat the pandemic, such as quarantines and travel restrictions. Such measures have caused and will likely continue to cause severe trade disruptions. During the years ended December 31, 2020 and 2021 we encountered certain prolonged delays embarking and disembarking crew onto our ships as a result of restrictions at ports placed by various countries due to COVID-19 resulting to an increase in off-hire days or approximately $487 and $519 respectively of reduction in revenue as well as a slight increase in operating expenses relating to crew as well as an increase in fuel expenses during off-hires in both periods.

 

The extent to which COVID-19 will impact the Company's future results of operations and financial condition, including possible vessel impairments, will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the virus and the additional actions to contain or treat its impact, among others the distribution of the vaccine.

 

On August 10, 2020 the Company effected a 1-for-25 reverse stock split of its common stock. There was no change in the number of authorized common shares of the Company, or the floor price of the Company’s Series E Shares and the Class B Warrants, or the number of votes of the Company’s Series D Shares. All numbers of common share and earnings per share amounts, as well as warrant shares eligible for purchase under the Company's warrants, exercise price of said warrants and conversion prices of the Company’s Series E Shares, in these consolidated financial statements have been retroactively adjusted to reflect this 1-for-25 reverse stock split.

 

 

2.

Significant Accounting Policies:

 

(a)Principles of Consolidation: The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the accounts and operating results of Top Ships Inc. and its subsidiaries referred to in Note 1. Intercompany balances and transactions have been eliminated on consolidation. Non-controlling interests are stated at the non-controlling interest’s proportion of the net assets of the subsidiaries where the Company has less than 100% interest. Subsequent to initial recognition the carrying amount of non-controlling interest is increased or decreased by the non-controlling interest’s share of subsequent changes in the equity of such subsidiaries. Total comprehensive income is attributed to a non-controlling interest even if this results in a deficit balance. Changes in the Company’s ownership interests in subsidiaries that do not result in the Company losing control over the subsidiaries are accounted for as equity transactions and the carrying amounts of the Company’s interests and the non-controlling interests are adjusted to reflect these changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to owners of the Company.
  
(b)Use of Estimates: 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. Significant estimates mainly include impairment of vessels, vessel useful lives and residual values and fair values of derivative instruments. Actual results may differ from these estimates.
  
(c)Foreign Currency Translation: The Company’s functional currency is the U.S. Dollar because all vessels operate in international shipping markets, and therefore primarily transact business in U.S. Dollars. The Company’s books of account are maintained in U.S. Dollars. Transactions involving other currencies during the year are converted into U.S. Dollars using the exchange rates in effect at the time of the transactions. At the balance sheet dates, monetary assets and liabilities, which are denominated in other currencies are translated to U.S. Dollars based on the year-end exchange rates and any gains and losses are included in the statement of comprehensive loss / (income).
  

 

F- 11

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

AS OF DECEMBER 31, 2020 AND 2021

AND FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 and 2021

(Expressed in thousands of United States Dollars except share, per share earnings and rate per day, unless otherwise stated)  

 

(d)Cash and Cash Equivalents: The Company considers highly liquid investments such as time deposits and certificates of deposit with an original maturity of three months or less to be cash equivalents.
  
(e)Restricted Cash: The Company considers amounts that are pledged, blocked, held as cash collateral, required to be maintained with a specific bank or be maintained by the Company as minimum cash under the terms of a loan agreement, as restricted and these amounts are presented separately on the balance sheets. In the event original maturities are shorter than twelve months, such deposits are presented as current assets while if original maturities are longer than twelve months, such deposits are presented as non-current assets.
  
(f)Trade Accounts Receivable, net: The amount shown as trade accounts receivable, net at each balance sheet date, includes estimated recoveries from charterers for hire billings, net of a provision for doubtful accounts. At each balance sheet date, all potentially uncollectible accounts are assessed individually, combined with the application of a historical recoverability ratio, for purposes of determining the appropriate provision for doubtful accounts. The Company assessed that it had no potentially uncollectible accounts and hence formed no provision for doubtful accounts at December 31, 2020 and 2021 respectively.
  
(g)Inventories: Inventories consist of lubricants and paints on board the vessels. Inventories are stated at the lower of cost and net realizable value. Cost, which consists of the purchase price, is determined by the first in, first out method.
  
(h)Vessel Cost: Vessels are stated at cost, which consists of the contract price, pre-delivery costs and capitalized interest incurred during the construction of new building vessels, and any material expenses incurred upon acquisition (improvements and delivery costs). Subsequent expenditures for conversions and major improvements are also capitalized when they appreciably extend the life, increase the earning capacity or improve the efficiency or safety of the vessels. Repairs and maintenance are charged to expense as incurred and are included in Vessel operating expenses in the consolidated statements of comprehensive (loss)/income.
  
(i)Impairment of Long-Lived Assets: The Company evaluates the existence of impairment indicators whenever events or changes in circumstances indicate that the carrying values of the Company’s long lived assets are not recoverable. Such indicators of potential impairment include, vessel sales and purchases, business plans, declines in the fair market value of vessels and overall market conditions. If there are indications for impairment present, the Company determines undiscounted projected net operating cash flows for each vessel and compares it to the vessel's carrying value. If the carrying value of the related vessel exceeds its undiscounted future net cash flows, the carrying value is reduced to its fair value, and the difference is recognized as an impairment loss. The impairment tests the Company conducted as of December 31, 2020 and 2021 showed that there are no impairment indications for any of the vessels held for use in the Company’s fleet.
  
(j)Vessel Depreciation: Depreciation is calculated using the straight-line method over the estimated useful life of the vessels, after deducting the estimated salvage value. Each vessel's salvage value is equal to the product of its lightweight tonnage and estimated scrap rate, of $300 per lightweight ton. Management estimates the useful life of the Company's vessels to be 25 years from the date of initial delivery from the shipyard. Second hand vessels are depreciated from the date of their acquisition through their remaining estimated useful life. When regulations place limitations over the ability of a vessel to trade on a worldwide basis, its useful life is adjusted at the date such regulations are adopted.
  
(k)Long Lived Assets Held for Sale: The Company classifies vessels as being held for sale when the following criteria are met: (a) management, having the authority to approve the action, commits to a plan to sell the asset, (b) the asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets, (c) an active program to locate a buyer and other actions required to complete the plan to sell the asset have been initiated, (d) the sale of the asset is probable and transfer of the asset is expected to qualify for recognition as a completed sale, within one year, (e) the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value, (f) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.
  
 Long-lived assets classified as held for sale are measured at the lower of their carrying amount or fair value less costs to sell. These vessels are not depreciated once they meet the criteria to be classified as held for sale. 
  
 Long-lived assets previously classified as held for sale that are classified as held and used are revalued at the lower of (a) the carrying amount of the asset before it was classified as held for sale, adjusted for any depreciation expense that would have been recognized had the asset been continuously classified as held and used and (b) the fair value of the asset at the date that the Company decided not to sell the asset.
  
(l) Other Fixed Assets, Net: Other fixed assets, net, consist of furniture, office equipment, and cars, stated at cost, which consists of the purchase/contract price less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful life of the assets as presented below:

 

Description

 

Useful Life (years)

 

Cars

  6 

Office equipment

  5 

Furniture and fittings

  5 

Computer equipment

  3 

 

F- 12

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

AS OF DECEMBER 31, 2020 AND 2021

AND FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 and 2021

(Expressed in thousands of United States Dollars except share, per share earnings and rate per day, unless otherwise stated)  

 

(m)Accounting for Dry-Docking Costs: All dry-docking and special survey costs are expensed in the period incurred.
  
(n)Financing Costs: Fees incurred and paid to the lenders for obtaining new loans or refinancing existing ones are recorded as a contra to debt and such fees are amortized to interest and finance costs over the life of the related debt using the effective interest method. Unamortized fees relating to loans repaid or refinanced are expensed when a repayment or refinancing is made and charged to interest and finance costs.
  
(o)Accounting for Revenue and Expenses: Revenues are generated from time charter arrangements. A time charter is a contract for the use of a vessel for a specific period of time and a specified daily charter hire rate, which is generally payable monthly in advance. Time charter revenue is only recognized when an agreement exists, the price is fixed, service is provided and the collection of the related revenue is reasonably assured. Revenue is shown net of address commissions, if applicable, payable directly to charterers under the relevant charter agreements. Address commissions represent a common market practice discount (sales incentive) on services rendered by the Company and no identifiable benefit is received in exchange for the consideration provided to the charterer. Commissions on time charter revenues are recognized on a pro rata basis over the duration of the period.
  
 The Company based on ASC 842 determined that all time charter-out contracts are considered operating leases and therefore fall under the scope of ASC 842 because: (i) the vessel is an identifiable asset; (ii) the Company as lessor, does not have substantive substitution rights; and (iii) the charterer, as lessee, has the right to control the use of the vessel during the term of the contract and derives the economic benefits from such use.
  
 Time charter revenue is recognized as earned on a straight-line basis over the term of the relevant time charter starting from the vessel’s delivery to the charterer, except for any off-hire period.  Revenue generated from variable lease payments is recognized in the period when changes in the facts and circumstances on which the variable lease payments are based occur. The Company elected to not separate the lease and non-lease components included in the time charter revenue because (i) the pattern of revenue recognition for the lease and non-lease components (included in the daily hire rate) is the same and (ii) the lease component would be classified as an operating lease. The daily hire rate represents the hire rate for a bare boat charter as well as the compensation for expenses incurred running the vessel such as crewing expense, repairs, insurance, maintenance and lubes. Both the lease and non-lease components are earned by passage of time. Under a time charter agreement, vessel operating expenses such as management fees, crew wages, provisions and stores, technical maintenance and insurance expenses and broker’s commissions are paid by the vessel owner, whereas voyage expenses such as bunkers, port expenses, agents’ fees, and extra war risk insurance are paid by the charterer. Vessel operating expenses are expensed as incurred. Unearned revenue represents cash received prior to year-end related to revenue applicable to periods after December 31 of each year.
  
 When vessels are acquired with time charters attached and the rates on such charters are below or above market on the acquisition date, the Company allocates the total cost between the vessel and the fair value of the attached time charter based on the relative fair values of the vessel and time charter acquired. The fair value of the attached time charter is computed as the present value of the difference between the contractual amount to be received over the term of the time charter and management’s estimates of the market time charter rate at the time of acquisition. The fair value of below or above market time charter is recognized as a liability or an intangible asset respectively and is amortized over the remaining period of the time charter as an increase or decrease to revenues.
  
 Where the time charter contains a profit or loss sharing arrangement, the profit or loss is recognized based on amounts earned or incurred as of the reporting date.
  
 The Company pays commissions to ship brokers and to the Company’s fleet manager (Note 5), a related party affiliated with the family of Mr. Evangelos J. Pistiolis, associated with arranging the Company’s charters. These brokers’ commissions are recognized over the related charter period and are included in voyage expenses.
  

 

F- 13

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

AS OF DECEMBER 31, 2020 AND 2021

AND FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 and 2021

(Expressed in thousands of United States Dollars except share, per share earnings and rate per day, unless otherwise stated)  

 

 Voyage charters
  
 In a voyage charter contract, the charterer hires the vessel to transport a specific agreed-upon cargo for a single voyage, which may contain multiple load ports and discharge ports. The consideration in such a contract is determined on the basis of a freight rate per metric ton of cargo carried or occasionally on a lump sum basis. The charter party generally has a minimum amount of cargo. The charterer is liable for any short loading of cargo or "dead" freight. The voyage contract generally has standard payment terms of 95% freight paid within three days after completion of loading. The voyage charter party generally has a "demurrage" or "despatch" clause. As per this clause, the charterer reimburses the Company for any potential delays exceeding the allowed laytime as per the charter party clause at the ports visited, which is recorded as demurrage revenue. Demurrage revenue is recognized starting from the point that is determined that the amount can be estimated and its collection is probable and on a straight line basis until the end of the voyage. Conversely, the charterer is given credit if the loading/discharging activities happen within the allowed laytime known as despatch resulting in a reduction in revenue and is recognized as the performance obligation is satisfied. In a voyage charter contract, the performance obligations begin to be satisfied once the vessel begins loading the cargo. The Company determined that its voyage charter contracts consist of a single performance obligation of transporting the cargo within a specified time period. Therefore, the performance obligation is met evenly as the voyage progresses and the revenue is recognized on a straight- line basis over the voyage days from the commencement of the loading of cargo to completion of discharge.
  
 The voyage contracts are considered service contracts which fall under the provisions of ASC 606 because the Company, as the shipowner, retains the control over the operations of the vessel such as directing the routes taken or the vessel speed. The voyage contracts generally have variable consideration in the form of demurrage or despatch.
  
 In a voyage charter contract, the Company bears all voyage related costs such as fuel costs, port charges and canal tolls. These costs are considered contract fulfillment costs because they are (1) incurred to fulfill a contract that the Company can specifically identify, (2) able to generate or enhance resources of the Company that will be used to satisfy performance of the terms of the contract, and (3) expected to be recoverable. The costs incurred during the period prior to commencement of loading the cargo, primarily bunkers, are deferred as they represent contract fulfillment costs and recorded as a current asset and are amortized on a straight-line basis as the related performance obligations are satisfied.
  
(p)Earnings / (Loss)  per Share: Basic earnings/(loss) per share are computed by dividing net income or loss available to common stockholders by the weighted average number of common shares outstanding during the year. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised. For purposes of calculating diluted earnings per share the denominator of the diluted earnings per share calculation includes the incremental shares assumed issued under the treasury stock method weighted for the period the non-vested shares were outstanding. The computation of diluted earnings per share also reflects the potential dilution that could occur if warrants to issue common stock were exercised, to the extent that they are dilutive, using the treasury stock method, the potential dilution that could occur if convertible preferred stock were converted, using the if-converted method as well as the potential dilution that could occur if the Company completed all sales pursuant to common stock purchase agreements, using the if-converted method. Finally net income or loss available to common stockholders, when computing basic earnings/(loss) per share, is reduced to reflect any deemed dividends on convertible preferred stock, weighted for the period the convertible preferred shares were outstanding.
  
(q)Derivatives and Hedging, Hedge Accounting: The Company records every derivative instrument (including certain derivative instruments embedded in other contracts) on the balance sheet as either an asset or liability measured at its fair value, with changes in the derivatives' fair value recognized in earnings unless specific hedge accounting criteria are met.
  
 At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy undertaken for the hedge. The documentation includes identification of the hedging instrument, hedged item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument’s effectiveness in offsetting exposure to changes in the hedged item’s cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in cash flows and are assessed on an ongoing basis to determine whether they actually have been highly effective throughout the financial reporting periods for which they were designated. Contracts which meet the criteria for hedge accounting are accounted for as cash flow hedges. A cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognized asset or liability, or a highly probable forecasted transaction that could affect profit or loss. The effective portion of the gain or loss on the hedging instrument is recognized directly as a component of “Accumulated other comprehensive income” in equity, while the ineffective portion, if any, is recognized immediately in current period earnings. The Company discontinues cash flow hedge accounting if the hedging instrument expires and it no longer meets the criteria for hedge accounting or designation is revoked by the Company. At that time, any cumulative gain or loss on the hedging instrument recognized in equity is kept in equity until the forecasted transaction occurs. When the forecasted transaction occurs, any cumulative gain or loss on the hedging instrument is recognized in the statement of income. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognized in equity is transferred to net profit or loss for the year as a component of “Gain/(Loss) on derivatives”.
  

 

F- 14

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

AS OF DECEMBER 31, 2020 AND 2021

AND FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 and 2021

(Expressed in thousands of United States Dollars except share, per share earnings and rate per day, unless otherwise stated)  

 

(r)Financial liabilities: Financial liabilities are classified as either financial liabilities at ‘fair value through the profit and loss’ (“FVTPL”) or ‘other financial liabilities’. Financial instruments classified as FVTPL are recognized at fair value in the balance sheet when the Company has an obligation to perform under the contractual provisions of those instruments. Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual arrangement. Changes in the fair value of financial instruments are recognized in earnings, except in the cases where these financial instruments fall under the guidance in ASC 815-40, where they are initially classified in equity and are initially measured at fair value in permanent equity and subsequent changes in fair value are not subsequently measured. Other financial liabilities (including borrowings and trade and other payables) are subsequently measured at amortized cost using the effective interest rate method.
  
(s)Segment Reporting: The Chief Operating Decision Maker (“CODM”), Mr. Evangelos J. Pistiolis, receives financial information and evaluates the Company’s operations by charter revenues and not by the length, type of vessel or type of ship employment for its customers or by geographical region as the charterer is free to trade the vessel worldwide and as a result, the disclosure of geographic information is impracticable. The CODM does not use discrete financial information to evaluate the operating results for each such type of charter or vessel. Although revenue can be identified for these types of charters or vessels, management cannot and does not identify expenses, profitability or other financial information for these various types of charters or vessels. As a result, management, including the CODM, reviews operating results solely by revenue per day and operating results of the fleet, and thus the Company has determined that it operates as one reportable segment.
  
(t)Leases:

 

 

Sale-leaseback transactions: In accordance with ASC 842, the Company, as seller-lessee, determines whether the transfer of an asset should be accounted for as a sale in accordance with ASC 606 (existence of a contract and satisfaction of performance obligation by transferring of the control of the asset). The existence of an option for the seller-lessee to repurchase the asset precludes the accounting for the transfer of the asset as a sale unless both of the following criteria are met: (1) the exercise price of the option is the fair value of the asset at the time the option is exercised; and (2) there are alternative assets, substantially the same as the transferred asset, readily available in the marketplace. If the transfer of the asset meets the criteria of sale, the Company, as seller-lessee recognizes the transaction price for the sale when the buyer-lessor obtains control of the asset, derecognizes the carrying amount of the underlying asset and accounts for the lease in accordance with ASC 842. If the transfer does not meet the criteria of sale, the Company does not derecognize the transferred asset, accounts for any amounts received as a financing arrangement and recognizes the difference between the amount of consideration received and the amount of consideration to be paid as interest.

 

 

Finance lease: The Company classifies a lease as a finance lease when the lease meets any of the following criteria at lease commencement:

 

i. 

The lease transfers ownership of the underlying asset to the lessee by the end of the lease term.

ii. 

The lease grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise.

iii. 

The lease term is for the major part of the remaining economic life of the underlying asset. However, if the commencement date falls at or near the end of the economic life of the underlying asset, this criterion shall not be used for purposes of classifying the lease.

 

F- 15

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

AS OF DECEMBER 31, 2020 AND 2021

AND FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 and 2021

(Expressed in thousands of United States Dollars except share, per share earnings and rate per day, unless otherwise stated)

 

  

 

iv. The present value of the sum of the lease payments and any residual value guaranteed by the lessee that is not already reflected in the lease payments equals or exceeds substantially all of the fair value of the underlying asset.
v. The underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term.

 

When none of these criteria are met the Company classifies the lease as an operating lease.

 

 

Operating lease- The Company as a lessee: The Company recognizes right-of-use assets (“ROU”) and corresponding lease liabilities for its operating leases. ROU assets and liabilities are recognized at the commencement date of an arrangement based on the present value of lease payments over the lease term. The operating lease ROU asset also includes any lease payments made to the lessor prior to lease commencement, less any lease incentives, and initial direct costs incurred. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term.

 

(u)Beneficial conversion feature: A beneficial conversion feature is defined as a non-detachable conversion feature that is in the money at the commitment date. The beneficial conversion feature guidance requires recognition of the intrinsic value of the option, which is the in-the- money portion of the conversion option, in equity, with an offsetting reduction to the carrying amount of the instrument. The resulting discount is amortized as a deemed dividend over either the life of the instrument, if a stated maturity date exists, or to the earliest conversion date, if there is no stated maturity date. If the earliest conversion date is immediately upon issuance, the dividend must be recognized at inception. When there is a subsequent change to the conversion ratio based on a future occurrence, the new conversion price may trigger the recognition of an additional beneficial conversion feature on occurrence.
  
(v)Investments in unconsolidated joint ventures: The Company's investments in unconsolidated joint ventures are accounted for using the equity method of accounting. Under the equity method of accounting, investments are stated at initial cost and are adjusted for subsequent additional investments and the Company's proportionate share of earnings or losses and distributions. The Company evaluates its investments in unconsolidated joint ventures for impairment when events or circumstances indicate that the carrying value of such investments may have experienced other than temporary decline in value below their carrying value. If the estimated fair value is less than the carrying value and is considered other than a temporary decline, the carrying value is written down to its estimated fair value and the resulting impairment is recorded in the Consolidated Statements of comprehensive (loss)/income.
  
(w)Other Comprehensive Income: The Company follows the provisions of guidance regarding reporting comprehensive income which requires separate presentation of certain transactions, such as unrealized gains and losses from effective portion of cash flow hedges, which are recorded directly as components of stockholders’ equity
  
(x)Impairment of Right of use assets from operating leases: The Company evaluates its Right of use assets from operating leases for potential impairment when it determines a triggering event has occurred. When a triggering event has occurred, the Company performs a test of recoverability by comparing the expected undiscounted future cash flows (including expected residual values) over the remaining lease terms to the carrying value of the Right of use asset. If the test of recoverability identifies a possible impairment, the Right of use asset’s fair value is measured in accordance with the fair value measurement framework. An impairment charge is recognized for the amount by which the carrying value of the Right of use asset exceeds its estimated fair value and would be recorded in the Consolidated Statements of comprehensive (loss)/income. For the years ended December 31, 2019, 2020, and 2021 there was no impairment in the Company’s Right of use assets from operating leases.
  
(y)Recent Accounting Pronouncements:

 

Accounting standards issued but not yet adopted

 

The Financial Accounting Standards Board (“FASB”) issued guidance, ASU 2020-06 Debt - Debt with Conversion and Other Options and Derivative and Hedging - Contracts in Entity’s Own Equity, which simplifies the accounting for convertible instruments. This guidance eliminates certain models that require separate accounting for embedded conversion features, in certain cases. Additionally, among other changes, the guidance eliminates certain of the conditions for equity classification for contracts in an entity’s own equity. The guidance also requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of share settlement for instruments that may be settled in cash or shares, except for certain liability-classified share-based payment awards. This guidance is required to be adopted by us in the period commencing January 1, 2022 and must be applied using either a modified or full retrospective approach. We are currently evaluating the impact this guidance will have on our consolidated financial statements.         

 

 

3.

Going Concern:

 

At December 31, 2021, the Company had a working capital deficit of $31,754 and for the year ended December 31, 2021 realized a net income of $8,616 and generated cash flow from operations of $16,061. In addition, as of December 31, 2021, the Company had remaining contractual commitments for the vessels it had contracted to acquire totaling $213,405.

 

F- 16

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

AS OF DECEMBER 31, 2020 AND 2021

AND FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 and 2021

(Expressed in thousands of United States Dollars except share, per share earnings and rate per day, unless otherwise stated)  

 

As of the date of this annual report all contractual commitments for the acquisition of the Company’s fleet have been settled and the company has successfully taken delivery of all abovementioned newbuilding vessels.

 

Furthermore, as of the date of this annual report $24,370 of Due to related parties, which were categorized as short term liabilities as of December 31, 2021 and have been the major factor resulting in the Company’s working capital deficit position, have been exchanged with 2,437,000 Series F Perpetual Preferred Shares (see Note 20).

 

Therefore, the Company believes it has the ability to continue as a going concern and finance its obligations as they come due via cash from operations over the next twelve months following the date of the issuance of these financial statements. Consequently, the consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

 

 

4(a)

Advances for vessels acquisitions / under construction:

 

An analysis of Advances for vessels acquisitions / under construction is as follows:

 

  

Advances for vessels acquisitions / under construction

 

Balance, December 31, 2019

  12,241 

— Advances paid

  117,203 

— Capitalized expenses

  3,509 

— Transferred to Vessels, net

  (76,959)

— Transferred to Assets held for sale

  (24,340)

Balance, December 31, 2020

  31,654 

— Advances paid

  119,656 

— Capitalized expenses

  5,915 

— Transferred to Vessels, net

  (126,646)

Balance, December 31, 2021

  30,579 

 

For the year ended December 31, 2020, the balance of Advances for vessels acquisitions / under construction relate to M/T West Coast (Hull No S865) and M/T Malibu (Hull No S866) and consist of $18,991 and $12,663 respectively, out of which $624 and $419, respectively relate to capitalized expenses.

 

For the year ended December 31, 2021, the balance of Advances for vessels acquisitions / under construction relate to M/T Eco Oceano Ca (Hull No. 871), M/T Julius Caesar (Hull No. 3213) and M/T Legio X Equestris (Hull No. 3214) and consist of $9,914, $10,422 and $10,243 respectively, out of which $892, $1,522 and $1,343, respectively relate to capitalized expenses.

 

 

4(b)

Vessels, net:

 

The amounts in the consolidated balance sheets are analyzed as follows:

 

  

Vessel Cost

  

Accumulated Depreciation

  

Net Book Value

 

Balance, December 31, 2019

  372,543   (18,597)  353,946 

— Transferred from advances for vessels acquisitions / under construction

  76,959   -   76,959 

— Disposals (see Note 19)

  (303,157)  21,718   (281,439)

— Depreciation

  -   (13,174)  (13,174)

Balance, December 31, 2020

  146,345   (10,053)  136,292 

— Transferred from advances for vessels under construction

  126,646   -   126,646 

— Transferred to Assets held for sale

  (76,959)  5,323   (71,636)

— Disposals (see Note 19)

  (32,531)  5,484   (27,047)

— Depreciation

  -   (7,670)  (7,670)

Balance, December 31, 2021

  163,501   (6,916)  156,585 

 

F- 17

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

AS OF DECEMBER 31, 2020 AND 2021

AND FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 and 2021

(Expressed in thousands of United States Dollars except share, per share earnings and rate per day, unless otherwise stated)  

 

In 2020 and 2021 the Company took delivery of the following vessels and hence advances paid and capitalized expenses relating to these vessels were transferred from Advances for vessels under construction to Vessels, net:

 

Vessel Name

Delivery Date

 

Yard Installments

  

Capitalized Expenses

  

Final Cost

 

M/T Eco Los Angeles

February 10, 2020

  37,659   835   38,494 

M/T Eco City of Angels

February 17, 2020

  37,659   806   38,465 

Subtotal 2020

  75,318   1,641   76,959 

M/T Eco West Coast

March 26, 2021

  61,723   1,618   63,341 

M/T Eco Malibu

May 11, 2021

  61,722   1,583   63,305 

Subtotal 2021

  123,445   3,201   126,646 

 

As of December 31, 2021 title of ownership is held by the relevant lenders in respect of vessels with a carrying value of $104,710 to secure the relevant sale and lease back financing transactions and in the case of vessels financed via bank loans vessels with a carrying value of $123,511 have been mortgaged as security under their respective loan facilities (see Note 7).

 

 

4(c)

Vessels held for sale:

 

As of December 31, 2020, the M/T’s Eco Van Nuys (Hull No 2789), Eco Santa Monica (Hull No 2790) and Eco Venice Beach (Hull No 2791) met the criteria to be classified as assets held for sale on December 31, 2020 according to guidance in ASC 360. Consequently, the Company has treated the vessels under construction as Assets held for sale. Since their fair value less costs to sell approximated their carrying amount the Company didn’t incur any impairment charges. As of December 31, 2020, the M/T’s Eco Van Nuys (Hull No 2789), Eco Santa Monica (Hull No 2790) and Eco Venice Beach (Hull No 2791) carrying amount was $8,187, $8,146 and $8,007 respectively. The vessels were sold on January 6, 2021 to a company affiliated with Mr. Evangelos J. Pistiolis (see Note 1).

 

As of December 31, 2021, the M/T’s Eco Los Angeles and Eco City of Angels met the criteria to be classified as assets held for sale according to guidance in ASC 360. Consequently, the Company has treated the vessels as vessels held for sale. Since their fair value less costs to sell were higher than their carrying amount the Company didn’t incur any impairment charges. As of December 31, 2021, each of the M/T’s Eco Los Angeles and Eco City of Angels carrying amount is $35,818. The vessels were sold on February 28 and March 15, 2022 to unaffiliated third parties (see Note 20).

 

 

5.

Transactions with Related Parties:

 

 (a) Central Mare Executive Officers and Other Personnel Agreements: On September 1, 2010, the Company entered into separate agreements with Central Mare, a related party affiliated with the family of Mr. Evangelos J. Pistiolis, pursuant to which Central Mare provides the Company with its executive officers (Chief Executive Officer, Chief Financial Officer, Chief Technical Officer and Chief Operating Officer).

 

As of December 31, 2020 and 2021 the amounts due to Central Mare were $29 and $32 respectively. This amount is presented in Due to related parties, on the consolidated balance sheets.

 

The fees charged by and expenses relating to Central Mare for the years ended December 31, 2019, 2020 and 2021 are as follows:         

 

  

Year Ended December 31,

  
  

2019

  

2020

  

2021

 

Presented in:

Executive officers and other personnel expenses

  360   360   360 

General and administrative expenses – Statement of comprehensive loss / (income)

Amortization of awarded shares*

  (34)  (34)  (34)

Management fees – related parties – Statement of comprehensive loss / (income)

Total

  326   326   326  
*As per the Company’s equity incentive plan, or the 2015 plan (currently null and void since due to the reverse stock splits of the Company’s stock the shares left to be vested are zero), the Company incurred an amortization gain of $34 relating to the amortization of the original fair value of the equity incentive plan recognized at inception, for each of the years ended December 31, 2019, 2020 and 2021.

 

 

F- 18

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

AS OF DECEMBER 31, 2020 AND 2021

AND FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 and 2021

(Expressed in thousands of United States Dollars except share, per share earnings and rate per day, unless otherwise stated)  

 

(b) Central Shipping Inc (CSI) Letter Agreement and Management Agreements: On January 1, 2019, the Company entered into a letter agreement with CSI (“CSI Letter Agreement”), a related party affiliated with the family of Evangelos J. Pistiolis and between January 1, 2019 and September 8, 2021 the Company entered into management agreements, or Management Agreements, between CSI and the Company’s vessel-owning subsidiaries. The CSI Letter Agreement can only be terminated subject to an eighteen-month advance notice, subject to a termination fee equal to twelve months of fees payable under the CSI Letter Agreement.

 

Pursuant to the CSI Letter Agreement, as well as the Management Agreements concluded between CSI and the Company’s vessel-owning subsidiaries, the Company pays a management fee of $572 per day per vessel for the provision of technical, commercial, operation, insurance, bunkering and crew management, commencing three months before the vessel is scheduled to be delivered by the shipyard. In addition, the Management Agreements provide for payment to CSI of: (i) $520 per day for superintendent visits plus actual expenses; (ii) a chartering commission of 1.25% on all freight, hire and demurrage revenues; (iii) a commission of 1.00% on all gross vessel sale proceeds or the purchase price paid for vessels and (iv) a financing fee of 0.2% on derivative agreements and loan financing or refinancing. CSI also performs supervision services for all of the Company’s newbuilding vessels while the vessels are under construction, for which the Company pays CSI the actual cost of the supervision services plus a fee of 7% of such supervision services.

 

CSI provides, at cost, all accounting, reporting and administrative services. Finally, the CSI Letter Agreement provides for a performance incentive fee for the provision of management services to be determined at the discretion of the Company’s Board of Directors. The management agreements have an initial term of five years, after which they will continue to be in effect until terminated by either party subject to an eighteen-month advance notice of termination. Pursuant to the terms of the management agreements, all fees payable to CSI are adjusted annually according to the US Consumer Price Inflation (“CPI”) of the previous year and if CPI is less than 2% then a 2% increase is effected. On September 15, 2021 the Company entered into an amendment to the CSI Letter Agreement, whereby the payment for the already agreed commission for sale and purchase of vessels in the case of the purchase of a vessel under construction is denoted as “Newbuilding vessels monitoring fee” and is payable as follows: 25% of the commission on the purchase of the newbuilding construction contract, 25% of the commission on the steel cutting of the newbuilding vessel, 25% of the commission on launching of the newbuilding vessel and 25% of the commission on the delivery of the newbuilding vessel to the Company (“steel cutting” and “launching” are newbuilding vessel construction milestones, evidenced by notices received by the shipyard).

 

As of December 31, 2020 and 2021, the amounts due to CSI were $3,116 and $1,193 respectively and are presented in Due to related parties, on the consolidated balance sheets.

 

The fees charged by and expenses relating to CSI for the years ended December 31, 2019, 2020 and 2021 are as follows:

 

  Year Ended December 31,  
  

2019

  

2020

  

2021

 

Presented in:

Management fees

  109   69   199 

Capitalized in Vessels, net / Advances for vessels acquisitions / under construction –Balance sheet

   2,237   1,953   1,477 

Management fees – related parties –Statement of comprehensive loss / (income)

Supervision services fees

  55   63   79 

Capitalized in Vessels, net / Advances for vessels acquisitions / under construction –Balance sheet

Superintendent fees

  247   60   17 

Vessel operating expenses –Statement of comprehensive loss / (income)

   172   198   255 

Capitalized in Vessels, net / Advances for vessels acquisitions / under construction –Balance sheet

Accounting and reporting cost

  240   330   360 

Management fees – related parties –Statement of comprehensive loss / (income)

Commission for sale and purchase of vessels

  -   3,377   793 

Management fees – related parties –Statement of comprehensive loss / (income)

      3,971   - 

Loss from vessel sales –Statement of comprehensive loss / (income)

      454   - 

Capitalized in Investments in unconsolidated joint ventures –Balance sheet

      1,017   - 

Capitalized in Right of use assets from operating leases – Balance Sheet

      -   264 

Impairment on vessels – Statement of comprehensive loss / (income)

Newbuilding vessels monitoring fee

  -   -   1,365 

Capitalized in Vessels, net / Advances for vessels acquisitions / under construction –Balance sheet

Financing fees

  263   -   150 

Net in Current and Non-current portions of long-term debt – Balance sheet

Commission on charter hire agreements

  829   761   705 

Voyage expenses - Statement of comprehensive loss / (income)

Total

  4,152   12,253   5,664  

 

F- 19

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

AS OF DECEMBER 31, 2020 AND 2021

AND FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 and 2021

(Expressed in thousands of United States Dollars except share, per share earnings and rate per day, unless otherwise stated)  

 

For the years ended December 31, 2019, 2020 and 2021 CSI charged the Company newbuilding supervision related pass-through costs amounting to $985, $967 and $1,207 respectively, which are not included in the table above and are presented within Vessels, net / Advances  for vessels acquisitions / under construction in the Company’s consolidated balance sheet.

 

(c) Issuance of Series E Shares to Family Trading Inc (Family Trading): On March 29, 2019 the Company entered into a stock purchase agreement with Family Trading, a related party owned by the Lax Trust, an irrevocable trust established for the benefit of certain family members of Mr. Evangelos J. Pistiolis, pursuant to which the Company exchanged the outstanding principal, fees and interest of the Further Amended Family Trading Credit Facility with 27,129 Series E Shares (defined below, also see Note 16). As of December 31, 2020 and 2021, dividends due to Family Trading were $864 and $968 and are presented in Due to related parties, on the consolidated balance sheets.

 

(d) Vessel Acquisitions from affiliated entities: From February 20, 2020 to September 8, 2021 the Company entered into a series of transactions with a number of entities affiliated with Mr. Evangelos J. Pistiolis (see Notes 1 and 5). As of December 31, 2020 and 2021, the Company owes $1,150 and $27,562 respectively to the previous owners of the newbuilding vessels presented in Due to related parties in the consolidated balance sheets.

 

(e) Charter Party with Central Tankers Chartering Inc (Central Tankers Chartering): On September 1, 2017 the Company entered into a time charter party with Central Tankers Chartering, a related party affiliated with the family of Mr. Evangelos J. Pistiolis, for the vessel M/T Eco Palm Desert delivered from Hyundai in September 2018. The time charter was for a firm period of three years at a daily rate of $14,750 with two optional years at daily rates of $15,250 and $15,750 respectively, at Central Tankers Chartering’s option. The time charter carried a 1.25% address commission payable to Central Tankers Chartering. In April 2019 the Company terminated the time charter party with Central Tankers Chartering without incurring any penalties and entered into a time charter agreement with Shell Tankers Singapore Private Limited (“Shell”) for a firm period of two years at a fixed daily rate of $13,300 plus a 50% profit share for earned rates over the fixed rate with one optional year at a daily rate of $13,950, at charterers option. Furthermore, as part of the MR Transaction (see Note 1) Central Tankers Chartering was the charterer of the vessels M/T Eco Van Nuys, M/T Eco Santa Monica and M/T Eco Venice Beach. The time charters were for a firm period of five years at a daily rate of $16,200 with two optional years at daily rates of $17,200 and $18,200 at Central Tankers Chartering’s option and would have commenced upon each vessel’s delivery from the shipyard in the first quarter of 2021. The vessels M/T Eco Van Nuys, M/T Eco Santa Monica and M/T Eco Venice Beach were exchanged as part of the VLCC Transaction on January 6, 2021 (see Note 1) and also as part of the VLCC Transaction, the M/T Eco Oceano (Hull No. 871) newbuilding vessel has a time charter party with Central Tankers Chartering for a firm period of five years at a gross daily rate of $32,450, with a charterer’s option to extend for two additional years at $33,950 and $35,450. As of December 31, 2020 and 2021, there are no amounts due to Central Tankers Chartering.

 

F- 20

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

AS OF DECEMBER 31, 2020 AND 2021

AND FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 and 2021

(Expressed in thousands of United States Dollars except share, per share earnings and rate per day, unless otherwise stated)  

 

(f) Personal Guarantees by Mr. Evangelos J. Pistiolis and Related Amendments to the Series D Preferred Shares: As a prerequisite for the Navigare Lease (defined below, see Note 6), Mr. Evangelos J. Pistiolis personally guaranteed the performance of the bareboat charters connected to the lease and in exchange, the Company agreed to indemnify him for any losses suffered as a result of the guarantee provided, and the Company amended the Certificate of Designations governing the terms of the Series D Preferred Shares (see Note 7), to adjust the voting rights per share of Series D Preferred Shares such that during the term of the Navigare Lease, the combined voting power controlled by Mr. Evangelos J. Pistiolis and the Lax Trust does not fall below a majority of the Company’s total voting power, irrespective of any new common or preferred stock issuances, and thereby complying with a relevant covenant of the bareboat charters entered in connection with the Navigare Lease. This personal guarantee comes into effect in the case 120 days have passed and the Company is still unable to pay down all amounts due under the Navigare lease, with the exception of amounts due to Navigare due to a total loss, where in this case the personal guarantee will cover an amount equal to all unpaid charter hire and a further amount equivalent to all future charter hire that would have accrued from the date of the total loss up to the end of the charter period and is callable 200 days after the date of the total loss. Due to the related party nature of the transactions involving Mr. Evangelos J. Pistiolis, such transactions were unanimously approved by our Board of Directors, including all three independent directors.

 

 

6.

Leases

 

A. Lease arrangements, under which the Company acts as the lessee

 

Bareboat Chartered-in Vessels:

 

On January 29, 2015 and March 31, 2015, the Company sold and leased back M/T Stenaweco Energy and M/T Stenaweco Evolution respectively. The vessels were chartered back on a bareboat basis for 7 years at a bareboat hire of $8,586 and $8,625 per day respectively. In addition, the Company had the option to buy back each vessel from the end of year 3 up to the end of year 7 at purchase prices stipulated in the bareboat agreement depending on when the option is exercised. On December, 18 and December 20, 2019, the Company exercised the purchase options and terminated the operating leases on its two bareboat chartered in vessels. The purchase option prices paid amounted to $23,871 and $24,063 for the M/T Stenaweco Energy the M/T Stenaweco Evolution respectively, not including fees and expenses related to the transfer of ownership.

 

On December 1 and December 10, 2020, the Company sold and leased back M/T Eco Beverly Hills and M/T Eco Bel Air respectively to a third non-affiliated party (the “Navigare Lease”). Each vessel was chartered back on a bareboat basis for five years at a bareboat hire of $16,750 per day for the first two years, $14,000 per day for the next two years and $10,000 per day for the fifth year. The Company does not have any option nor obligation to buy back the vessels. The abovementioned sale and leaseback transactions contain, customary covenants and event of default clauses, including cross-default provisions, change of control provisions (whereby Mr. Evangelos J. Pistiolis may not control less than 50.1% of the voting rights of the Company) and restrictive covenants and performance requirements. The Company must maintain a minimum liquidity of $4,000 at all times which is certified bi-annually. As of December 31, 2021, the Company complied with all covenants of the Navigare Lease.

 

The Company has treated the Navigare lease as an operating lease. An operating lease ROU asset amounting to $45,765 was recognized at the inception of the lease together with a lease liability of $43,759 based on the present value of lease payments over the lease term. The operating lease ROU asset also includes initial direct costs of $1,666 and deferred losses from the sale of the vessels of $340. The discount rate used to calculate the present value of lease payments was calculated by taking into account the original lease term and lease payments and was estimated to be 6.72% (same as the weighted average), which was the Company’s estimated incremental borrowing rate, that reflects the interest the Company would have to pay to borrow funds on a collateralized basis over a similar term and similar economic environment. Losses from the sale of these two vessels and initial direct costs which were included in the respective ROU assets are amortized on a straight-line basis over the duration of the lease and are included in operating lease expense in the statement of consolidated (loss)/income. The cash paid for operating leases with original terms greater than 12 months was $877 and $12,228 for the year ended December 31, 2020 and 2021 respectively. The revenue generated from vessels under operating leases with original terms greater than 12 months was $17,288 and $ 17,887 for the year ended December 31, 2020 and 2021 respectively.

 

F- 21

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

AS OF DECEMBER 31, 2020 AND 2021

AND FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 and 2021

(Expressed in thousands of United States Dollars except share, per share earnings and rate per day, unless otherwise stated)  

 

The Company's future minimum operating lease payments required to be made after December 31, 2021, relating to the bareboat chartered-in vessels M/T Eco Beverly Hills and M/T Eco Bel Air are as follows:

 

Year ending December 31,

 

Bareboat charter lease payments

 

2022

  12,084 

2023

  10,220 

2024

  10,038 

2025

  6,777 

Total

  39,119 

Less imputed interest

  (5,356)

Total Lease Liability

  33,763 

Presented as follows:

    

Short-term lease liability

  9,815 

Long-term lease liability

  23,948 

 

The average remaining lease term on our chartered-in contracts greater than 12 months is 47.2 months.

 

At the lease’s inception, the carrying amounts of the M/T Eco Beverly Hills and M/T Eco Bel Air were less than the vessels fair value, as this was determined by a third party broker valuation. Hence in accordance with ASC 842-40-30-1 that stipulates that sale-and-leaseback transactions are accounted for at fair value, the Company recognized a loss on the sale and leaseback transactions of $10,688 included in Loss on sale of vessels in the Company's consolidated statements of comprehensive (loss) / income.

 

B. Lease arrangements, under which the Company acts as the lessor

 

Charter agreements:

 

During the year ended December 31, 2021, the Company operated two vessels (M/T Eco Bel Air and M/T Eco Beverly Hills) under time charters with BP Shipping Limited, one vessel (M/T Nord Valiant) under a time charter with Dampskibsselskabet Norden A/S, one vessel (M/T Marina Del Ray) under a time charter with Cargill International SA, two vessels (M/T Eco West Coast and M/T Eco Malibu) with Clearlake Shipping Pte Ltd and two vessels (M/T Eco Los Angeles and M/T Eco City of Angels) under time charters with Trafigura Maritime Logistics Pte Ltd (“Trafigura”).

 

Furthermore, the Company has entered into a time charter party for its newbuilding vessel M/T Eco Oceano Ca (Hull No 871) with Central Tankers Chartering Inc (see Note 1 and 5), a company affiliated with Mr. Evangelos J. Pistiolis and into time charter parties for its newbuilding vessels M/T Julius Caesar (Hull No. 3213) and M/T Legio X Equestris (Hull No. 3214) with Trafigura (see Note 1). All the above mentioned time charter agreements will commence upon the respective vessels’ delivery.

 

Future minimum time-charter receipts of the Company’s vessels in operation as of December 31, 2021, based on commitments relating to non-cancellable time charter contracts as of December 31, 2021, are as follows (excluding vessels held for sale):

 

Year ending December 31,

 

Time Charter receipts

 

2022

  36,054 

2023

  30,296 

2024

  8,851 

Total

  75,201 

 

F- 22

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

AS OF DECEMBER 31, 2020 AND 2021

AND FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 and 2021

(Expressed in thousands of United States Dollars except share, per share earnings and rate per day, unless otherwise stated)  

 

Future minimum time-charter receipts of the Company’s vessels under construction as of December 31, 2021, are as follows (based on estimated delivery dates):

 

Year ending December 31,

 

Time Charter receipts

 

2022

  33,300 

2023

  38,033 

2024

  38,138 

2025

  14,565 

2026

  11,844 

2027

  2,012 

Total

  137,892 

 

In arriving at the minimum future charter revenues, an estimated 20 days off-hire time to perform scheduled dry-docking in the year the dry-docking is expected on each vessel has been deducted, and it has been assumed that no additional off-hire time is incurred, although there is no assurance that such estimate will be reflective of the actual off-hire in the future.

 

 

7.

Debt:

 

The amounts in the consolidated balance sheets are analyzed as follows (facility names defined below):

 

Bank / Vessel(s)

 

December 31,

 
  

2020

  

2021

 

Total long term debt:

        

2nd ABN Facility (M/T Eco West Coast)

  -   34,955 

2nd Alpha Bank Facility (M/T Eco Malibu)

  -   36,500 

BoComm Leasing Facility (M/T Nord Valiant)

  20,227   - 

Cargill Facility (M/T Eco Marina Del Ray)

  29,116   27,195 

AVIC Facility (M/T Eco Los Angeles and M/T Eco City of Angels), classified as of December 31, 2021 as Debt related to Vessels held for sale

  57,656   - 

Total long term debt

  106,999   98,650 

Less: Deferred finance fees

  (2,380)  (1,282)

Total long term debt net of deferred finance fees

  104,619   97,368 
         

Presented:

        

Current portion of long term debt

  5,324   7,205 

Long term debt

  99,295   90,163 
         

Debt related to Vessels held for sale:

        

AVIC Facility (M/T Eco Los Angeles and M/T Eco City of Angels)

  -   54,665 

Less: Deferred finance fees

  -   (1,463)

Debt related to Vessels held for sale net of deferred finance fees

  -   53,202 
         

Total Debt net of deferred finance fees

  104,619   150,570 

 

2nd ABN Facility

 

On March 18, 2021, the Company entered into a credit facility with ABN Amro for $36,800 for the financing of the vessel M/T Eco West Coast (Hull No 865). This facility was drawn down in full. The credit facility is repayable in 24 consecutive quarterly installments of $615 commencing in June 2021, plus a balloon installment of $22,040 payable together with the last installment.

 

The facility contains various covenants, including (i) an asset cover ratio of 125%, (ii) a ratio of total net debt to the aggregate market value of the Company’s fleet, current or future, of no more than 75% (iii) minimum free liquidity of $500 per delivered vessel owned/operated by the Company and (iv) market adjusted total assets of the Company minus total liabilities to be at least $60,000. Additionally, the facility contains restrictions on the shipowning company incurring further indebtedness or guarantees and change of control provisions (whereby Mr. Evangelos J. Pistiolis may not control less than 50.1% of the voting rights of the Company). It also restricts the shipowning company from paying dividends if such a payment will result in an event of default or in a breach of covenants under the loan agreement.

 

F- 23

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

AS OF DECEMBER 31, 2020 AND 2021

AND FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 and 2021

(Expressed in thousands of United States Dollars except share, per share earnings and rate per day, unless otherwise stated)

 

 

The facility is secured as follows:

 

•         First priority mortgage over M/T Eco West Coast;

•         Assignment of insurance and earnings of the mortgaged vessel;

•         Specific assignment of any time charters with duration of more than 12 months;

•         Corporate guarantee of the Company;

•         Pledge of the shares of the shipowning subsidiary;

•         Pledge over the earnings account of the vessel.

 

The facility bears interest at LIBOR plus a margin of 2.50%. The applicable LIBOR as of December 31, 2021 was approximately 0.10%.

 

2nd Alpha Bank Facility

 

On May 6, 2021, the Company entered into a credit facility with Alpha Bank for $38,000 for the financing of the vessel M/T Eco Malibu (Hull No 866). This facility was drawn down in full. The credit facility is repayable in 12 consecutive quarterly installments of $750 and 12 consecutive quarterly installments of $625, commencing three months from draw down, and a balloon payment of $21,500 payable together with the last installment.

 

The facility contains various covenants, including (i) an asset cover ratio of 125%, (ii) a ratio of total net debt to the aggregate market value of the Company’s fleet, current or future, of no more than 75% and minimum free liquidity of $500 per delivered vessel owned/operated by the Company. Additionally, the facility contains restrictions on the shipowning company incurring further indebtedness or guarantees and change of control provisions (whereby Mr. Evangelos J. Pistiolis may not control less than 50.1% of the voting rights of the Company). It also restricts the shipowning company from paying dividends if such a payment will result in an event of default or in a breach of covenants under the loan agreement.

 

The facility is secured as follows:

 

•         First priority mortgage over M/T Eco Malibu;

•         Assignment of insurance and earnings of the mortgaged vessel;

•         Specific assignment of any time charters with duration of more than 12 months;

•         Corporate guarantee of the Company;

•         Pledge of the shares of the shipowning subsidiary;

•         Pledge over the earnings account of the vessel.

 

The facility bears interest at LIBOR plus a margin of 3.00%. The applicable LIBOR as of December 31, 2021 was approximately 0.10%.

 

FINANCINGS COMMITTED UNDER SALE AND LEASEBACK AGREEMENTS

 

The majority of the below sale and leaseback agreements (“SLB”s) contain, customary covenants and event of default clauses, including cross-default provisions and restrictive covenants and performance requirements including (i) a ratio of total net debt to the aggregate market value of the Company’s fleet, current or future, of no more than 75% and (ii) minimum free liquidity of $500 per vessel at the guarantors level.

 

Additionally, all the SLBs contain restrictions on the relative shipowning company incurring further indebtedness or guarantees and paying dividends, if such dividend payment would result in an event of default or termination event under the SLB agreements.

 

All the below SLBs are secured mainly by the following:

 

•         Ownership of the vessel financed;

•         Assignment of insurances and earnings of the vessel financed;

•         Specific assignment of any time charters of the vessel financed with duration of more than 12 months;

•         Corporate guarantee of Top Ships Inc.;

•         Pledge of the shares of the relative shipowning subsidiary;

•         Pledge over the earnings account of the vessel financed.

 

F- 24

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

AS OF DECEMBER 31, 2020 AND 2021

AND FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 and 2021

(Expressed in thousands of United States Dollars except share, per share earnings and rate per day, unless otherwise stated)  

 

Cargill Facility

 

On June 29, 2018 the Company entered into a sale and leaseback agreement (“SLB”) and a 5 year time charter with Cargill, a non-affiliated party, for its newbuilding vessel M/T Eco Marina Del Ray (Hull No 8242) delivered in March 2019. Consummation of the SLB took place on the vessel’s delivery date. Following the sale, the Company has bareboat chartered back the vessel at a bareboat hire rate of $8,600 per day and simultaneously the vessel commenced its five year time charter with Cargill. As part of this transaction, the Company has the obligation to buy back the vessel at the end of the five year period for $22,680. The gross proceeds from the sale were $32,387.

 

The SLB with Cargill is accounted for as a financing transaction, as control remains with the Company and the M/T Eco Marina Del Ray will continue to be recorded as an asset on the Company’s balance sheet. In addition, the Company has an obligation to repurchase the vessel.

 

Bank of Communications Financial Leasing Company (BoComm Leasing) Facility

 

On December 21, 2018 the Company entered into an SLB with BoComm Leasing, a non-affiliated party, for M/T Nord Valiant and M/T Eco California. Consummation of the SLB took place on January 17, 2019 for M/T Nord Valiant and on January 31, 2019 for M/T Eco California. Following the sale, the Company has bareboat chartered back M/T Nord Valiant for five years and M/T Eco California for seven years at a bareboat hire rate of $5,875 per day and $6,550 per day respectively. As part of this transaction, the Company has continuous options to buy back the vessels at purchase prices stipulated in the bareboat agreement depending on when the option is exercised. The gross proceeds from the SLBs were $21,655 for M/T Nord Valiant and $24,140 for M/T Eco California.

 

The SLB with BoComm Leasing contains a covenant requiring that there is no change of control of the Company, save with the prior written consent of BoComm Leasing.

 

The SLB with BoComm Leasing is accounted for as a financing transaction, as control remains with the Company and M/T Nord Valiant and M/T Eco California will continue to be recorded as an asset on the Company’s balance sheet. In addition, the Company has continuous options to repurchase the vessels below fair value.

 

On November 9, 2020, the Company exercised its purchase option on the M/T Eco California for $22,520 and on the same date the vessel was sold to an unaffiliated third party. In connection with this exercise, the Company paid an early termination/prepayment fee of $674, which is included in Loss on sale of vessels in the consolidated statements of comprehensive (loss)/income. On September 1, 2021, the Company exercised its purchase option on the M/T Nord Valiant for $19,514 and on the same date the vessel was sold to an unaffiliated third party.

 

Avic International Leasing Co., Ltd ("AVIC") Facility

 

On September 30, 2019 the owning companies of the M/T Eco Los Angeles and M/T Eco City of Angels entered into an SLB with AVIC, a non-affiliated party, for their newbuilding vessels M/T Eco Los Angeles and M/T Eco City of Angels. Consummation of the SLB and drawdown of funds took place on the vessels delivery dates from the shipyard, namely on February 10 and February 17, 2020 respectively. Following the sale, the Company has bareboat chartered back the vessels for a period of ten years at a bareboat hire rate of $9,435 for the first 5 years and $9,090 for the next 5 years per day per vessel, with a balloon installment of $11,288 for each vessel on the final charter hire date. As part of this transaction, the Company has continuous options, after the second year, to buy back the vessels at purchase prices stipulated in the bareboat agreement depending on when the option is exercised and at the end of the ten year period it has an obligation to buy back the vessels at a cost represented by the balloon payment. The gross proceeds from the sale amounted to $60,200 for both vessels.

 

F- 25

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

AS OF DECEMBER 31, 2020 AND 2021

AND FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 and 2021

(Expressed in thousands of United States Dollars except share, per share earnings and rate per day, unless otherwise stated)  

 

The SLB with AVIC contains a covenant requiring that there is no change of control of the Company, save with the prior written consent of AVIC.

 

The SLB with AVIC was accounted for as a financing transaction, as control would remain with the Company and the vessels would continue to be recorded as assets on the Company’s balance sheet. In addition, the Company had the obligation to repurchase the vessels.

 

On December 31, 2021 the Company classified the M/T Eco Los Angeles and M/T Eco City of Angels as a Vessels held for sale (see Note 4c). Hence, the AVIC facility was also classified as short term in a separate balance sheet line from the other non-current portion of debt in the consolidated balance sheets.

 

On February 28 and March 15, 2022 the company exercised its purchase option on the M/T Eco Los Angeles and M/T Eco City of Angels respectively and purchased the vessels for $27,197 and $27,163 respectively. The vessels were sold on the same dates to unaffiliated third parties.

 

2nd CMBFL Facility

 

On November 23, 2021 the Company entered into an SLB with CMBFL, for its newbuilding vessels M/T Julius Caesar (Hull No. 3213) and M/T Legio X Equestris (Hull No. 3214). Consummation of the SLB took place on January 17 and March 2 2022, respectively. Following the sale, the Company has bareboat chartered back the vessels for a period of eight years at bareboat hire rates comprising of 32 consecutive quarterly installments of $675 and a balloon payment of $32,403 payable together with the last installment, plus interest based on the three months LIBOR plus 2.60%.

 

As part of this transaction, the Company has continuous options to buy back the vessels at purchase prices stipulated in the bareboat agreements depending on when the option was exercised and at the end of the eight year period it has an option to buy back the vessels at a cost represented by the balloon payment. The gross proceeds from the sale of the two vessels were $54,005 and $53,997 for M/T Julius Caesar (Hull No. 3213) and M/T Legio X Equestris (Hull No. 3214) respectively.

 

The 2nd CMBFL facility contains a covenant requiring that there is no change of control of the Company, save with the prior written consent of CMBFL.

 

The 2nd CMBFL facility was accounted for as a financing transaction, as control will remain with the Company and the two vessels will continue to be recorded as assets on the Company’s balance sheet. In addition, the Company has continuous options to repurchase the vessels below fair value.

 

Scheduled Principal Repayments: The Company’s annual principal payments required to be made after December 31, 2021 on its loan obligations, are as follows (including the financings under sale and leaseback agreements but excluding debt related to Vessels held for sale):

 

Years

    

December 31, 2022

  7,466 

December 31, 2023

  7,554 

December 31, 2024

  28,304 

December 31, 2025

  4,960 

December 31, 2026

  4,960 

December 31, 2027 and thereafter

  45,406 

Total

  98,650 

 

As of December 31, 2021, the Company was in compliance with all debt covenants with respect to its loans and credit facilities. The fair value of debt outstanding on December 31, 2021, after excluding unamortized financing fees, amounted to $147,246 when valuing the Cargill and AVIC Sale and Leasebacks on the basis of the Commercial Interest Reference Rates (“CIRR”s) as applicable on December 31, 2021, which is considered to be a Level 2 item in accordance with the fair value hierarchy.

 

Financing Costs: The net additions in deferred financing costs amounted to $1,115 and $1,204 during the years ended December 31, 2020 and 2021 respectively.

 

F- 26

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

AS OF DECEMBER 31, 2020 AND 2021

AND FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 and 2021

(Expressed in thousands of United States Dollars except share, per share earnings and rate per day, unless otherwise stated)  

 

 

8.

Commitments and Contingencies:

 

Legal proceedings:

 

Various claims, suits, and complaints, including those involving government regulations and product liability, arise in the ordinary course of the shipping business. As part of the normal course of operations, the Company's customers may disagree on amounts due to the Company under the provision of the contracts which are normally settled through negotiations with the customer. Disputed amounts are normally reflected in revenues at such time as the Company reaches agreement with the customer on the amounts due.

 

On August 1, 2017, the Company received a subpoena from the U.S. Securities and Exchange Commission (“SEC”) requesting certain documents and information in connection with offerings made by the Company between February 2017 and August 2017. The Company provided the requested information to the SEC in response to that subpoena. On September 26, 2018 and on October 5, 2018 the Company received two additional subpoenas from the SEC requesting certain documents and information in connection with the previous subpoena the Company received on August 1, 2017. The Company provided the requested information to the SEC in response to these subpoenas. The SEC investigation is ongoing and the Company continues to cooperate with the SEC in its investigation. The Company’s last communication with the SEC was in February 2019. The Company is unable to predict what action, if any, might be taken by the SEC or its staff as a result of this investigation or what impact, if any, the cost of responding to the SEC's investigation or its ultimate outcome might have on the Company's financial position, results of operations or liquidity. Hence the Company has not established any provision for losses relating to this matter.

 

 

Other than the cases mentioned above, the Company is not a party to any material litigation where claims or counterclaims have been filed against the Company other than routine legal proceedings incidental to its business.

 

Capital Expenditures under the Companys Newbuilding program:

 

On January 6 and on September 8, 2021 the Company entered into a series of transactions with a number of entities affiliated with Mr. Evangelos J. Pistiolis that led to the purchase of a number of vessels and newbuilding contracts (see Notes 1 and 5). As a result of these transactions, the Company has remaining contractual commitments as of December 31, 2021 for the acquisition of its fleet that are non-recourse to the Company as they are guaranteed by Central Mare Inc, a related party affiliated with the family of Mr. Evangelos J. Pistiolis, totaling $213,405, including $51,189, $81,108 and $81,108 pursuant to newbuilding agreements for M/T Eco Oceano Ca (Hull No. 871), M/T Julius Caesar (Hull No. 3213) and M/T Legio X Equestris (Hull No. 3214) respectively. All of these contractual commitments are payable in the first quarter of 2022.

 

As of the date of this annual report all contractual commitments for the acquisition of the Company’s fleet have been settled and the company has successfully taken delivery of all abovementioned newbuilding vessels.

 

Guarantee on performance of loans of the New 2020 Joint Venture

 

On December 10, 2020, the Company entered into a corporate guarantee agreement with Alpha Bank of Greece (which was amended on February 2, 2022) in respect of the obligations of its 50% subsidiary California 19 Inc. and California 20 Inc. under the Loan Agreement dated March 12, 2020 for a secured loan facility of $37,660 ($18,830 for each vessel) for the financing of M/T Eco Yosemite Park and M/T Eco Joshua Park (the “Alpha Corporate Guarantee”). The Company assigns zero probability of default to said loan agreements and hence has not established any provisions for losses relating to this matter.

 

Environmental Liabilities:

 

The Company accrues for the cost of environmental liabilities when management becomes aware that a liability is probable and is able to reasonably estimate the probable exposure. Currently, management is not aware of any such claims or contingent liabilities, which should be disclosed, or for which a provision should be established in the consolidated financial statements.

 

F- 27

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

AS OF DECEMBER 31, 2020 AND 2021

AND FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 and 2021

(Expressed in thousands of United States Dollars except share, per share earnings and rate per day, unless otherwise stated)  

 

 

9.

Common and Preferred Stock, Additional Paid-In Capital and Dividends:

 

Reverse stock split: On August 10, 2020 the Company effected a 1-for-25 reverse stock split of its common stock respectively. There was no change in the number of authorized common shares of the Company, or the floor price of the Company’s Series E Shares and the Class B Warrants, or the number of votes of the Company’s Series D Shares. All numbers of common share and earnings per share amounts, as well as warrant shares eligible for purchase under the Company's warrants, exercise price of said warrants and conversion prices of the Company’s Series E Shares, in these financial statements have been retroactively adjusted to reflect these reverse stock splits.

 

Series D preferred shares: On May 8, 2017, the Company issued 100,000 shares of Series D preferred shares (the “Series D shares”) to Tankers Family Inc., a company controlled by Lax Trust for one thousand dollars ($1,000) pursuant to a stock purchase agreement. The Series D shares are not convertible into common shares and each Series D share has the voting power of 1,000 common shares. The Series D shares have no dividend or distribution rights and shall expire and all outstanding Series D shares shall be redeemed by the Company for par value on the date that any financing facility with any financial institution, which contain covenants that require that any member of the family of Mr. Evangelos J. Pistiolis maintain a specific minimum ownership or voting interest (either directly and/or indirectly through companies or other entities beneficially owned by any member of the Pistiolis family and/or trusts or foundations of which any member of the Pistiolis family are beneficiaries) of the Company's issued and outstanding common shares, respectively, are fully repaid or reach their maturity date. The Series D shares shall not be otherwise redeemable and upon any liquidation, dissolution or winding up of the Company, the Series D shares shall have a liquidation preference of $0.01 per share. Currently the SLBs with BoComm Leasing and AVIC Leasing, the Alpha Corporate Guarantee and the Navigare Lease have similar provisions that are satisfied via the existence of the Series D Shares. As a prerequisite for the Navigare Lease, Mr. Evangelos J. Pistiolis guaranteed the performance of the bareboat charters, under certain circumstances, and in exchange, the Company agreed to indemnify him for any losses suffered as a result of the guarantee provided and in addition, the Company has amended the Certificate of Designation governing the terms of the Series D Shares, to adjust the voting rights per share of Series D Shares such that during the term of the Navigare Lease, the combined voting power controlled by Mr. Evangelos J. Pistiolis and the Lax Trust does not fall below a majority of the total voting power of the Company, irrespective of any new common or preferred stock issuances, and thereby complying with a relevant covenant of the bareboat charters entered in connection with the Navigare Lease. Due to the related party nature of the transactions involving Mr. Evangelos J. Pistiolis, such transactions were unanimously approved by the Company’s Board of Directors, including all three independent directors.

 

Issuance of common stock and warrants as part of the November 2019 Registered Direct Offering: On November 6, 2019, the Company entered into a placement agent agreement with Maxim Group LLC relating to the sale of the Company’s securities, or the Placement Agent Agreement. Pursuant to the Placement Agent Agreement, the Company entered into a Securities Purchase Agreement, with certain institutional investors in connection with a registered direct offering of an aggregate of 168,000 of the Company’s common shares at a public offering price of $50.00 per share, registered on the Company’s Registration Statement on Form F-3 (333-215577), or the Registered Offering. Concurrently with the Registered Offering and pursuant to the Purchase Agreement, the Company also commenced a private placement whereby the Company issued and sold class A warrants (or the “Class A Warrants”) to purchase up to 168,000 of the Company’s common shares and class B warrants (or the “Class B Warrants”) to purchase up to 168,000 of the Company’s common shares. The November 2019 Registered Direct Offering resulted in gross proceeds of $8,400 before deducting underwriting discounts, commissions and other offering expenses. The Class A Warrants and Class B Warrants were registered via a registration statement in form F1 that became effective on January 21, 2020.

 

During the year ended December 31, 2020, all outstanding Class A warrants (4,200,000 warrants) were exercised on a cashless basis into 67,200 of the Company’s common shares and no Class B Warrants were exercised. As of December 31, 2020 there were 4,200,000 Class B Warrants exercisable into 168,000 of the Company’s common shares with an exercise price of $1.00, that corresponded to the Class A Warrants floor price. The Class B Warrants entitled their holders to purchase 0.040 common shares upon a cash exercise. Each Class B Warrant was exercisable from the date of issuance up to May 7, 2021. No Class B Warrants were exercised in the year ended December 31, 2021.

 

Accounting Treatment of the Class B Warrants

 

As of the issuance date the fair value of the 4,200,000 Class B Warrants amounted to $0.2373 per warrant, using the Cox, Ross and Rubinstein Binomial methodology.

 

The fair value was considered by the Company to be classified as Level 3 in the fair value hierarchy since it was derived by unobservable inputs. The major unobservable input in connection with the valuation of the Company’s Class B Warrants was the volatility used in the valuation model. The annualized eighteen-month daily historical volatility that has been applied in the warrant valuation at inception was 134%. A 5% increase in the volatility applied would have led to an increase of 14% in the fair value of the Class B Warrants.

 

F- 28

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

AS OF DECEMBER 31, 2020 AND 2021

AND FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 and 2021

(Expressed in thousands of United States Dollars except share, per share earnings and rate per day, unless otherwise stated)  

 

The warrants issued in connection with the Company's follow-on offering provide for physical settlement requiring the Company to deliver shares to the holder of the warrants in exchange for cash. However, the warrants provide for a series of round down protection features that in accordance with ASU No. 2017-11 led to their classification as a liability since the settlement amount of the warrants may not equal the difference between the fair value of a fixed number of the Company shares and a fixed strike price. As a result, the fair value of the warrants was classified as a derivative liability and subsequent changes in fair value were recognized in the consolidated statements of comprehensive (loss)/income (see Note 14).

 

Dividends to common stock holders: No dividends were paid to common stock holders in the years ended December 31, 2019, 2020 and 2021.

 

 

10.

(Loss)/Earnings Per Common Share:

 

All shares issued are included in the Company's common stock and have equal rights to vote and participate in dividends and in undistributed earnings.

 

The components of the calculation of basic and diluted (loss) / earnings per share for the years ended December 2019, 2020 and 2021 are as follows:

 

  

Year Ended December 31,

 
  

2019

  

2020

  

2021

 

(Loss) / Net Income

  (14,773)  (22,818)  8,616 

Less: Deemed dividend for beneficial conversion feature of Series E Shares

  (9,339)  (1,067)  (900)

Less: Deemed dividend equivalents on Series E Shares related to redemption value

  (4,227)  (3,099)  (437)

Less: Dividend of Series E Shares

  (2,650)  (1,796)  (1,883)

(Loss) / gain attributable to common shareholders

  (30,989)  (28,780)  5,396 
             

(Loss) /Earnings per share:

            

Weighted average common shares outstanding, basic and dilutive

  117,104   23,517,479   39,831,972 

(Loss) / earnings per share, basic and diluted

  (264.63)  (1.22)  0.14 
             

Effect of dilutive securities:

            

Series E Shares

  -   -   12,716,351 

Weighted average common shares outstanding, diluted

  117,104   23,517,479   52,548,323 

 

For the years ended December 31, 2019, 2020 and 2021 no dilutive shares were included in the computation of diluted earnings per share because to do so would have been antidilutive for the period presented. Particularly for the year ended December 31, 2021 conversion was not assumed since such conversion would result in diluted earnings per share exceeding basic earnings per share.

 

 

11.

Voyage and Vessel Operating Expenses:

 

The amounts in the consolidated statements of comprehensive (loss)/income are as follows:

 

Voyage Expenses

 

Year Ended December 31,

 
  

2019

  

2020

  

2021

 

Port charges / other voyage expenses

  678   1   - 

Bunkers

  830   659   165 

Commissions (including $829, $761 and $705 respectively, to related party)

  1,530   1,334   1,152 

Total

  3,038   1,994   1,317 

 

F- 29

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

AS OF DECEMBER 31, 2020 AND 2021

AND FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 and 2021

(Expressed in thousands of United States Dollars except share, per share earnings and rate per day, unless otherwise stated)  

 

Vessel Operating Expenses

 

Year Ended December 31,

 
  

2019

  

2020

  

2021

 

Crew wages and related costs

  15,771   14,532   11,066 

Insurance

  1,180   1,194   1,026 

Repairs and maintenance (including $247, $60 and $17 respectively, to related party)

  1,528   1,259   747 

Spares and consumable stores

  4,148   3,861   2,530 

Registration and taxes (Note 13)

  159   178   310 

Total

  22,786   21,024   15,679 

 

 

12.

Interest and Finance Costs:

 

The amounts in the consolidated statements of comprehensive (loss)/income are analyzed as follows:

 

Interest and Finance Costs

 

Year Ended December 31,

 
  

2019

  

2020

  

2021

 

Interest on debt (including $928, $0 and $0, respectively, to related party)

  16,586   16,033   7,342 

Bank charges and loan commitment fees (including $20, $0 and $0, respectively, to related party)

  282   233   20 

Amortization and write-off of financing fees

  1,812   6,311   840 

Amortization of debt discount

  324   -   - 

Total

  19,004   22,577   8,202 

Less interest capitalized

  (927)  (1,621)  (1,204)

Total

  18,077   20,956   6,998 

 

 

13.

Income Taxes:

 

Marshall Islands and Greece does not impose a tax on international shipping income. Under the laws of Marshall Islands and Greece the countries of the companies' incorporation and vessels' registration, the companies are subject to registration and tonnage taxes, which have been included in Vessel operating expenses in the consolidated statements of comprehensive (loss)/income.

 

Under the United States Internal Revenue Code of 1986, as amended (the "Code"), the U.S. source gross transportation income of a ship-owning or chartering corporation, such as the Company, is subject to a 4% U.S. Federal income tax without allowance for deduction, unless that corporation qualifies for exemption from tax under Section 883 of the Code and the Treasury Regulations promulgated thereunder. U.S. source gross transportation income consists of 50% of the gross shipping income that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States.

 

Under Section 883 of the Code and the regulations thereunder, the Company will be exempt from U.S. federal income tax on our U.S.-source shipping income if:

 

(1) the Company is organized in a foreign country, or its country of organization, grants an “equivalent exemption” to corporations organized in the United States; and

 

(2) either

 

A. more than 50% of the value of the Company’s stock is owned, directly or indirectly, by individuals who are “residents” of the Company’s country of organization or of another foreign country that grants an “equivalent exemption” to corporations organized in the United States (each such individual a “qualified shareholder” and such individuals collectively, “qualified shareholders”), which the Company refers to as the “50% Ownership Test,” or

 

B. the Company’s stock is “primarily and regularly traded on an established securities market” in the Company’s country of organization, in another country that grants an “equivalent exemption” to U.S. corporations, or in the United States, which the Company refers to as the “Publicly-Traded Test.”

 

F- 30

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

AS OF DECEMBER 31, 2020 AND 2021

AND FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 and 2021

(Expressed in thousands of United States Dollars except share, per share earnings and rate per day, unless otherwise stated)  

 

The Marshall Islands, the jurisdiction where the Company and the Company’s ship-owning subsidiaries are incorporated, grants an “equivalent exemption” to U.S. corporations. Therefore, the Company will be exempt from U.S. federal income tax with respect to the Company’s U.S.-source shipping income if either the 50% Ownership Test or the Publicly-Traded Test is met.

 

Treasury 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. The Company’s common shares, which is the Company’s sole class of issued and outstanding stock that is traded, is and the Company anticipates will continue to be “primarily traded” on the Nasdaq Capital Market.

 

The Treasury Regulations also require that the Company’s stock be "regularly traded" on an established securities market. Under the Treasury Regulations, the Company’s stock will be considered to be "regularly traded" if one or more classes of the Company’s stock representing more than 50% of the Company’s outstanding shares, by total combined voting power of all classes of stock entitled to vote and by total combined value of all classes of stock, are listed on one or more established securities markets, which the Company refers to as the "listing threshold." The Company’s common stock, which is listed on the Nasdaq Capital Market and is the Company’s only class of publicly-traded stock, did not constitute more than 50% of the Company’s outstanding shares by value for the 2021 taxable year, and accordingly, the Company didn’t satisfy the 50% Ownership Test for the 2021 taxable year and hence the Company didn’t qualify for exemption from tax under Section 883 for the 2021 taxable year.

 

The Company for the 2021 taxable year is subject to an effective 2% United States federal tax on the U.S. source shipping income that is attributable to the transport of cargoes to or from the United States which is not considered an income tax. The amount of this tax for the year ended December 31, 2021 was $152 and it was recorded within "Vessel operating expenses" in the consolidated statements of comprehensive (loss)/income. For 2019 and 2020 the Company qualified for this exemption.

 

 

14.

Financial Instruments:

 

The principal financial assets of the Company consist of cash on hand and at banks, restricted cash, prepaid expenses and other receivables and long term deposits. The principal financial liabilities of the Company consist of long term loans, accounts payable due to suppliers, amounts due to related parties, accrued liabilities and warrants granted to third parties.

 

 

a)

Interest rate risk: The Company as of December 31, 2021 is subject to market risks relating to changes in interest rates, since the ABN and Alpha Bank financing facilities were subject to floating interest rates.

 

 

b)

Credit risk: Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist principally of cash. The Company places its temporary cash investments, consisting mostly of deposits, with high credit qualified financial institutions. The Company performs periodic evaluations of the relative credit standing of those financial institutions with which it places its temporary cash investments.

 

 

c)

Fair value: 

 

The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

 

Cash and cash equivalents and restricted cash are considered Level 1 items as they represent liquid assets with short term maturities. The Company considers its creditworthiness when determining the fair value of its liquid assets.

 

The fair value of interest rate swaps was determined using a discounted cash flow method taking into account current and future interest rates and the creditworthiness of both the financial instrument counterparty the Company and hence are considered Level 2 items in accordance with the fair value hierarchy. The Company paid a fixed rate and received a floating rate for these interest rate swaps. The fair values of these derivatives were derived principally from, or corroborated by, observable market data inputs included quoted prices for similar assets, liabilities (risk adjusted) and market-corroborated inputs, such as market comparables, interest rates, yield curves and other items that allowed values to be determined.

 

F- 31

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

AS OF DECEMBER 31, 2020 AND 2021

AND FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 and 2021

(Expressed in thousands of United States Dollars except share, per share earnings and rate per day, unless otherwise stated)  

 

The fair value of warrants was determined using the Cox, Ross and Rubinstein Binomial methodology and hence are considered Level 3 items in accordance with the fair value hierarchy.

 

The Company follows the accounting guidance for Fair Value Measurements. This guidance enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. The guidance requires assets and liabilities carried at fair value to be classified and disclosed in one of the following three categories:

 

Level 1: Quoted market prices in active markets for identical assets or liabilities;

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data;

Level 3: Unobservable inputs that are not corroborated by market data.

 

Interest rate swap agreements

 

The Company had entered into interest rate swap transactions to manage interest costs and the risk associated with changing interest rates with respect to its variable interest rate credit facilities. These interest rate swaps were pay-fixed, receive-variable interest rate swaps based on the USD LIBOR swap rate.

 

On January 17, 2019, as part of the prepayment of ABN Facility Tranche C, the Company unwound the interest rate swap with ABN Amro bank dated December 19, 2016 and realized a gain of $213. Furthermore, on July 15, 2019, as part of the prepayment of the NORD/LB facility, the Company unwound the interest rate swap with NORD/LB bank dated May 17, 2017 and realized a loss of $205. On January 16 and January 21, 2020, as part of the prepayment of the ABN Facility, the Company unwound its two remaining interest rate swaps with ABN Amro bank and realized a loss of $405. On February 21, 2020, as part of the prepayment of the Alpha Bank Facility, the Company unwound its interest rate swap with Alpha bank and realized a loss of $927, being the last interest rate swap of the Company. In both cases the resulting losses included losses resulting from the discontinuation of hedge accounting applied that were transferred from Other comprehensive income to Gain/(Loss) on Derivative financial instruments in the consolidated statements of comprehensive (loss)/income.

 

Class B Warrant liability

 

The Company's Class B Warrant derivatives outstanding as of December 31, 2020, were recorded at their fair values. As of December 31, 2020 the Company’s Class B Warrant derivatives consisted of 168,000 warrant shares outstanding, issued in connection with the Company’s November 2019 Registered Direct Offering that closed on November 7, 2019, as depicted in the following table:

 

Class B Warrants Outstanding

December 31, 2020

  

Class B Warrant Shares Outstanding

December 31, 2020

 

Original Term

 

Warrant Exercise Price*

  

Fair Value Liability

December 31, 2020

 
4,200,000   168,000 

18 months

 $1.00   66 

* Applying the Floor Price

 

On May 7, 2021 the Company’s outstanding Class B Warrants expired.

 

Recurring fair value measurements

 

The following table presents the fair value of those financial assets and liabilities measured at fair value on a recurring basis and their locations on the consolidated balance sheets, analyzed by fair value measurement hierarchy level:

 

      

Fair Value Measurement at Reporting Date

 

As of December 31, 2020

 

Total

  

Using Quoted Prices in

Active Markets for

Identical Assets

(Level 1)

  

Significant

Other

Observable

Inputs

(Level 2)

  

Significant

Other

Unobservable

Inputs

(Level 3)

 

Current liability (Class B Warrants)

  66   -   -   66 

 

F- 32

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

AS OF DECEMBER 31, 2020 AND 2021

AND FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 and 2021

(Expressed in thousands of United States Dollars except share, per share earnings and rate per day, unless otherwise stated)  

 

As of December 31, 2020, the Class B Warrants have been classified in current liabilities, due to the fact that they matured on May 7, 2021.

 

The following table sets forth a summary of changes in fair value of the Company’s level 3 fair value measurements for the years ended December 31, 2020 and 2021:

 

Closing balance December 31, 2019

  609 

Change in fair value of Class B Warrants, included in Gain/(Loss) on derivative financial instruments in the consolidated statements of comprehensive (loss)/income

  (543)

Closing balance December 31, 2020

  66 

Change in fair value of Class B Warrants, included in Gain/(Loss) on derivative financial instruments in the consolidated statements of comprehensive (loss)/income

  (66)

Closing balance December 31, 2021

  - 

 

Derivative Financial Instruments not designated as hedging instruments Class B Warrants:

 

The major unobservable input in connection with the valuation of the Company’s Class B Warrants is the volatility used in the valuation model, which is approximated by using four-month daily historical observations of the Company’s share price. The annualized four-month daily historical volatility that had been applied in the warrant valuation as of December 31, 2020 was 109%. A 5% increase in the volatility applied would have lead to an increase of 1% in the fair value of the Class B Warrants. The fair value of the Company’s Class B Warrants is considered by the Company to be classified as Level 3 in the fair value hierarchy since it was derived by unobservable inputs.

 

  

                  Quantitative information about Level 3 Fair Value Measurements

 

Derivative type

 

Fair Value at December 31, 2020

 

Balance Sheet Location

Valuation Technique

Significant Unobservable Input

 

Input Value December

31, 2020

 

Class B Warrants

  66 

Non-Current / Current liabilities –Derivative financial instruments

Cox, Ross and Rubinstein Binomial

Volatility

  109%

 

Location and amounts of derivative financial instruments fair values:

 

Information on the location and amounts of derivative financial instruments fair values in the balance sheet and derivative financial instrument losses in the statement of comprehensive loss / (income) are presented below:

 

  

Amount of gain/(loss) recognized in Statement of comprehensive loss / (income) located in Gain / (Loss) on derivate financial instruments

 
  

2019

  

2020

  

2021

 

Interest rate swaps- change in fair value

  (841)  (1,332)  - 

Interest rate swaps– realized gain/(loss)

  139   (25)  - 

2014 Warrants- change in fair value

  1,915   -   - 

Class B Warrants- change in fair value

  388   543   66 

Total

  1,601334   (814)334  66 

 

Derivative Financial Instruments designated as hedging instruments:

 

The components of accumulated other comprehensive loss included in the consolidated balance sheets consist of unrealized losses on cash flow hedges and are analyzed as follows:

 

  

Unrealized (Loss) on cash
flow hedges

 

Balance, December 31, 2019

  (1,361)

Termination of interest rate swap contracts

  1,361 

Balance, December 31, 2020

  - 

 

F- 33

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

AS OF DECEMBER 31, 2020 AND 2021

AND FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 and 2021

(Expressed in thousands of United States Dollars except share, per share earnings and rate per day, unless otherwise stated)

 

 

 

15.

Other operating loss

 

On January 15, January 21, March 9 and October 20, 2020 the Company terminated the time charters of M/T Eco Fleet, M/T Stenaweco Elegance, M/T Eco Palm Desert and M/T Eco California and incurred time charter termination fees amounting to $500, $1,850, $1,700 and $750 respectively.

 

 

16.

Mezzanine Equity

 

On March 29, 2019, the Company entered into a Stock Purchase Agreement with Family Trading for the sale of 27,129 newly issued perpetual convertible preferred shares (the “Series E Shares”) at a price of one thousand dollars ($1,000) per share. The proceeds of the sale were used for the full and final settlement of all amounts due under the Further Amended Family Trading Credit Facility. The issuance of the Series E Shares was approved by a committee of the Company’s board of directors, of which all of the directors were independent.

 

Each holder of Series E Shares, at any time, has the right, subject to certain conditions, to convert all or any portion of the Series E Shares then held by such holder into the Company’s common shares at the conversion rate then in effect. Each Series E Share is convertible into the number of the Company’s common shares equal to the quotient of one thousand dollars ($1,000) plus any accrued and unpaid dividends divided by the lesser of the following four prices (the “Series E Conversion Price”): (i) $500.00, (ii) 80% of the lowest daily VWAP of the Company’s common shares over the twenty consecutive trading days expiring on the trading day immediately prior to the date of delivery of a conversion notice, (iii) the conversion price or exercise price per share of any of the Company’s then outstanding convertible shares or warrants, (iv) the lowest issuance price of the Company’s common shares in any transaction from the date of the issuance the Series E Shares onwards, but in no event will the Series E Conversion Price be less than the floor price (currently at $0.60). The floor price is adjusted (decreased) in case of splits or subdivisions of the Company’s outstanding shares and is not adjusted in case of reverse stock splits or combinations of the Company’s outstanding shares. The holders of each Series E Share are entitled to the voting power of one thousand (1,000) common shares of the Company. Upon any liquidation, dissolution or winding up of the Company, the holders of Series E Shares shall be entitled to receive the net assets of the Company pari-passu with the common shareholders. Furthermore the Company at its option shall have the right to redeem a portion or all of the outstanding Series E Shares. The Company shall pay an amount equal to one thousand dollars ($1,000) per each Series E Share (the “Liquidation Amount”), plus a redemption premium equal to fifteen percent (15%) of the Liquidation Amount being redeemed if that redemption takes place up to and including March 29, 2020 and twenty percent (20%) of the Liquidation Amount being redeemed if that redemption takes place after March 29, 2020, plus an amount equal to any accrued and unpaid dividends on such Series E Shares (collectively referred to as the "Redemption Amount").

 

The Series E Shares shall not be subject to redemption in cash at the option of the holders thereof under any circumstance. Finally, the holders of outstanding Series E Shares shall be entitled to receive, semi-annual dividends payable in cash on the last day of June and December in each year (each such date being referred to herein as a "Semi Annual Dividend Payment Date"), commencing on the first Semi Annual Dividend Payment Date, being June 30, 2019 in an amount per share (rounded to the nearest cent) equal to fifteen percent (15%) per year of the liquidation amount of the then outstanding Series E Shares computed on the basis of a 365-day year and the actual days elapsed. Accrued but unpaid dividends shall bear interest at fifteen percent (15%). Dividends will not be payable in cash, if such payment violates any provision of any senior secured facility that the Company has entered or (as the case may be) will enter into, or any senior secured facility for which the Company has provided or (as the case may be) will provide a guarantee, for as long as such provisions, if any, remain in effect.

 

The Company determined that the Series E shares were more akin to equity than debt and that the above identified conversion feature, subject to adjustments, was clearly and closely related to the host instrument, and accordingly bifurcation and classification of the conversion feature as a derivative liability was not required. Given that the Series D and Series E preferred stock's holder (Lax Trust) controls a majority of the Company votes, the preferred equity is in essence redeemable at the option of the holder and hence has been classified in Mezzanine equity as per ASC 480-10-S99 “Distinguishing liabilities from Equity – SEC Materials”.

 

F- 34

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

AS OF DECEMBER 31, 2020 AND 2021

AND FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 and 2021

(Expressed in thousands of United States Dollars except share, per share earnings and rate per day, unless otherwise stated)  

 

On June 30, 2019, the Company issued 1,029 Series E Shares for the payment of dividends accumulated since the original issuance of the Series E Shares through June 30, 2019 and on December 31, 2019, the Company declared a dividend of $1,621 for the period July 1, 2019 through December 31, 2019, which as of December 31, 2019 remained unpaid and was included in Due to related parties in the consolidated Balance sheets. During the year ended December 31, 2019 from July 25 to December 2, 2019 the company redeemed 12,434 Series E Shares and paid a total of $14,302 to Family Trading, $1,868 of which refers to the 15% redemption premium embedded in each redemption that the Company classified as deemed dividend. On February 17, 2020 the Company issued 16,004 Series E Shares to Family Trading, as settlement of $14,350 of consideration then outstanding for the purchase of the M/T Eco City of Angels and M/T Eco Los Angeles from Mr. Evangelos J. Pistiolis, $1,621 of Series E Share dividends of the second half of 2019 and $32 of accrued interest on unpaid dividends from 2019. On September 8, 2021 the Company issued 2,188 Series E Shares to Family Trading, as partial settlement for $2,188 of the consideration payable for the VLCC Transaction (see Note 1).

 

At the initial issuance of Series E Shares, the Company recognized the beneficial conversion feature by allocating the intrinsic value of the conversion option, which is the number of shares of common stock available upon conversion multiplied by the difference between the effective conversion price per share and the fair value of the Company's common stock per share on the commitment date, to additional paid-in capital, resulting in a discount of $9,339 on the Series E convertible preferred stock. The Company amortized this beneficial conversion in full in the year ended December 31, 2019 as the beneficial conversion was immediately exercisable and has been recognized as a deemed dividend. As the Company is in an accumulated deficit position, the offsetting amount was amortized as a deemed dividend recorded against additional paid-in-capital. During the years ended December 31, 2020 and 2021, pursuant to issuances of Series E Shares, the Company recognized the beneficial conversion feature to additional paid-in capital, resulting in a discount of $1,067 and $900 respectively on the Series E Shares which has been recognized as a deemed dividend.

 

During the year ended December 31, 2020, but before March 29, 2020, the Company redeemed 21,364 Series E Shares and paid a total of $24,569 to Family Trading, $3,204 of which refers to the 15% redemption premium. During the year ended December 31, 2021 the Company didn’t redeem any Series E Shares.

 

As of December 31, 2021, upon conversion at the Series E Shares Conversion Price ($0.70) of 13,452 Series E Shares outstanding, Family Trading would receive 19,217,143 common shares.

 

After March 29, 2020 as per the original Series E Shares Statement of Designations all redemptions of Series E Shares will incur a redemption premium equal to twenty percent (20%) of the Liquidation Amount being redeemed instead of fifteen percent (15%). As of December 31, 2020 and 2021, the Company adjusted the carrying value of the Series E Shares to the maximum redemption amount, resulting in an increase of $2,253 and $437 respectively, which have been accounted as deemed dividend.

 

During the years ended December 31, 2020 and 2021 the Company declared $1,796 and $1,883 of dividends to the Series E Shares holder, out of which $900 were paid via the issuance of 900 Series E Shares and $968 remain payable and are included in Due to related parties in the consolidated Balance sheets.

 

 

17.

Investments in unconsolidated joint ventures

 

2017 Joint Venture

 

During the year ended December 31, 2019 the Company recorded its proportionate share of City of Athens and Eco Nine’s other comprehensive losses of $391 as a decrease to the Company’s Investments in unconsolidated joint ventures, with a corresponding increase in other comprehensive loss, in accordance with ASC 323-10-35-18. In December 2019, the Company wrote down its Investments in the 2017 Joint Venture to their fair value less costs to sell, resulting in an impairment charge of $3,144, pursuant to the Joint Ventures' plan to sell the vessels. Their fair value was based on a market approach, which was determined using the purchase consideration in the sale agreements with buyers for the vessels of the joint venture companies.

 

The Joint Venture’s vessels, the M/T Holmby Hills and the M/T Palm Springs were sold on March 26 and April 17, 2020 respectively. During the year ended December 31, 2020, the Company recognized a loss on the sale of its Investments in unconsolidated joint ventures amounting to $64, which is included in Equity gains in unconsolidated joint ventures (attributed to the 2017 Joint Venture) in the Company's consolidated statements of comprehensive (loss)/income. Net proceeds from the sale of the 2017 Joint Venture amounted to $19,555. The two companies that owned the vessels (City of Athens Pte. Ltd. and Eco Nine Pte. Ltd.) are in the final stages of dissolving.

 

F- 35

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

AS OF DECEMBER 31, 2020 AND 2021

AND FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 and 2021

(Expressed in thousands of United States Dollars except share, per share earnings and rate per day, unless otherwise stated)  

 

New 2020 Joint Venture

 

On April 24, 2020 the Company acquired from a company affiliated with Mr. Evangelos J. Pistiolis, or the MR Seller, a 50% interest in two vessel owning companies (California 19 Inc. and California 20 Inc.) that owned two scrubber-fitted 50,000 dwt eco MR product tankers, M/T Eco Yosemite Park and M/T Eco Joshua Park respectively for $27,000, representing the Company’s share of interest in the fair value of the net assets acquired. Both vessels were delivered in March 2020 to the MR Seller from Hyundai Mipo shipyard of South Korea. The MR Seller had already entered into two joint venture agreements, for the two vessels, each with an equal ownership interest of 50%, with Just-C Limited, a wholly owned subsidiary of Gunvor Group Ltd (the other 50% owner). The abovementioned acquisition was approved by a special committee of the Company's board of directors (the “JV Special Committee”), of which all of the directors were independent and for which the JV Special Committee obtained a fairness opinion relating to the consideration of the transaction from an independent financial advisor. Sale and purchase commissions due to CSI related to these investments amounting to $454 were accounted for as part of the investment.

 

Out of the purchase price of $27,000, $1,646 and $1,654 were recognized as excess of the purchase price over the underlying net book value (“Basis Differences”) for California 19 Inc. and California 20 Inc. respectively, attributed to the value assigned to the attached time charter. These Basis Differences are amortized over the duration of the firm period of the charter (5 years) and their amortization is included as a reduction in Gains in unconsolidated joint ventures. Furthermore $1,963 and $1,963 were also recognized as Basis Differences for California 19 Inc. and California 20 Inc. respectively, attributed to the fair market value over the carrying value of the vessels. These Basis Differences are amortized over the useful life of the vessels (25 years) and their amortization is also included as a reduction in Gains in unconsolidated joint ventures.

 

On March 12, 2020, California 19 Inc. together with California 20 Inc. entered into a loan agreement with Alpha Bank for a senior debt facility of $37,660 ($18,830 for each vessel). The loan has a term of five years and is payable on maturity via a balloon payment of $18,830 per vessel. The credit facility bears interest at LIBOR plus a margin of 3.00%. The facility carries customary covenants and restrictions, including the covenant that during the life of the facility, the market value of the vessels should be at least 200% of the facility outstanding and any shortfall should be covered by partial prepayments. Vessels are to be valued three times per year, every March, July and December. Provided that there is no breach of the above-mentioned covenant and no event of default has occurred and is continuing or would occur if such dividend distribution would take place, California 19 Inc. and California 20 Inc. may distribute dividends, without any consent from Alpha Bank. The loans are guaranteed by the Company in their entirety and this guarantee is not limited to the Company’s share of the net assets of California 19 Inc. and California 20 Inc (see Note 8). On April 22, 2021 California 19 Inc. and California 20 Inc. prepaid $330 each to reduce each of the outstanding loans to $18,500.

 

Each of the two product tankers are on time charters that commenced in March 2020 with Clearlake Shipping Pte Ltd, a subsidiary of Gunvor Group Ltd for a firm term of five years plus two additional optional years.

 

The Company's exposure is limited to its share of the net assets of California 19 Inc. and California 20 Inc., proportionate to its 50% equity interest in these companies. Generally, the Company will share the profits and losses, cash flows and other matters relating to its investments in California 19 Inc. and California 20 Inc. in accordance with its ownership percentage. The vessels are managed by CSI, pursuant to management agreements. The Company accounts for investments in joint ventures using the equity method since it has joint control over the investment.

 

A condensed summary of the financial information for equity accounted investments 50% owned by the Company shown on a 100% basis are as follows:

 

  

December 31, 2020

  

December 31, 2021

 
  

California 19 Inc.

  

California 20 Inc.

  

California 19 Inc.

  

California 20 Inc.

 

Current assets

  2,782   2,824   982   1,059 

Non-current assets

  37,952   37,980   36,532   36,560 

Current liabilities

  632   626   657   641 

Long-term liabilities

  18,637   18,632   18,350   18,346 

Net operating revenues

  4,955   4,766   6,272   6,068 

Net income

  1,120   1,142   1,760   1,368 

 

F- 36

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

AS OF DECEMBER 31, 2020 AND 2021

AND FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 and 2021

(Expressed in thousands of United States Dollars except share, per share earnings and rate per day, unless otherwise stated)  

 

During the year ended December 31, 2020, California 19 Inc. and California 20 Inc. didn’t declare nor pay any dividends. On May 6 and November 4, 2021 the Company received $1,500 and $859 of dividend from California 19 Inc and on May 6 and November 4, 2021 the Company received $1,500 and $641 of dividend from California 20 Inc..

 

Recognition of Gains in unconsolidated joint ventures for the 2020 Joint Venture for the years ended December 31, 2020 and 2021 are summarized below:

 

  

December 31, 2020

  

December 31, 2021

 
  

California 19 Inc.

  

California 20 Inc.

  

California 19 Inc.

  

California 20 Inc.

 

Net profit attributable to the Company

  652   670   880   684 

Amortization of Basis Differences

  (272)  (273)  (408)  (409)

Equity gains in unconsolidated joint ventures (attributed to the 2020 Joint Venture)

  380   397   472   275 

 

 

18.

Revenues

 

Revenues are comprised of the following:

 

  

2019

  

2020

  

2021

 

Time charter revenues

  61,695   60,222   56,367 

Time charter revenues from related parties

  1,311   -   - 

Voyage charter revenue

  3,082   -   - 

Total

  66,088   60,222   56,367 

 

The Company typically enters into time charters for periods ranging between three to five years and includes a charterer’s option to renew for a further two one-year periods at predetermined daily rates. Due to the volatility of the charter rates, the Company only accounts for the options when the charterer gives notice that the option will be exercised. In addition, the time charter agreements may contain variable consideration in terms of profit share. The profit share is paid on a quarterly basis and consists of 50% of the difference (if that is positive) between the average Timecharter equivalent rates for MR2 Product Tankers of a number of publicly listed shipping companies to the agreed base fixed rate of the respective time charter. In a time charter contract, the vessel is hired by the charterer for a specified period of time in exchange for consideration which is based on a daily hire rate. The charterer has the full discretion over the ports visited, shipping routes and vessel speed. The contract/charter party generally provides typical warranties regarding the speed and performance of the vessel. The charter party generally has some owner protective restrictions such that the vessel is sent only to safe ports by the charterer, subject always to compliance with applicable sanction laws, and carry only lawful or non-hazardous cargo. In a time charter contract, the Company is responsible for all the costs incurred for running the vessel such as crew costs, vessel insurance, repairs and maintenance and lubes. The charterer bears the voyage related costs such as bunker expenses, port charges and canal tolls during the hire period. The charterer generally pays the charter hire in advance of the upcoming contract period.

 

Included in Voyage charter revenue for the year ended December 31, 2019 is demurrage earned by the Company of $687. As of December 31, 2021, all of the Company’s vessels are employed under time charters.          

 

 

19.

Loss on sale of vessels:

 

During 2020 the Company sold the following vessels to unaffiliated third parties and collected the following gross proceeds:

 

Vessel

Date Sold

 

Selling Price (Gross)

 

M/T Stenaweco Energy

29-Oct-20

 $25,150 

M/T Stenaweco Evolution

03-Nov-20

 $26,150 

M/T Ecofleet

21-Jan-20

 $21,000 

M/T Eco Revolution

14-Jan-20

 $23,000 

M/T SW Excellence

14-Oct-20

 $27,008 

M/T Stenaweco Elegance

21-Feb-20

 $33,500 

M/T Eco Palm Desert

19-Mar-20

 $34,800 

M/T Eco California

09-Nov-20

 $30,600 

M/T Eco Bel Air

10-Dec-20

 $50,830 

M/T Eco Beverly Hills

01-Dec-20

 $50,830 

Total

 $322,868 

 

F- 37

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

AS OF DECEMBER 31, 2020 AND 2021

AND FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 and 2021

(Expressed in thousands of United States Dollars except share, per share earnings and rate per day, unless otherwise stated)  

 

The net proceeds from the abovementioned sales amounted to $310,016, after deducting $10,852 of expenses and $2,000 of maintenance deposits (please see below). Out of the abovementioned vessels, the M/T Eco Revolution and M/T Eco Fleet were presented under Assets held for sale in the Company’s December 31, 2019 Balance sheet and were written down to their fair value less costs to sell. As a result of the abovementioned sales the Company recognized a loss from the disposal of vessels amounting to $12,355, which is separately presented in the Company's consolidated statements of comprehensive (loss)/income. For each of the vessels M/T Eco Bel Air and M/T Eco Beverly Hills that were sold and leased back (see Note 6) the buyer withheld $1,000 as a maintenance deposit, accounted for as a deposit asset, to be released at the end of the lease term, in accordance with ASC 840-10-25-39B. The Company evaluated these maintenance deposits and has not assigned any probability of them not being returned.

 

On September 1, 2021 the Company sold M/T Nord Valliant, its last non-scrubber fitted tanker, to an unaffiliated third party for net proceeds of $25,887. During the six months ended June 30, 2021, in accordance with the provisions of relevant guidance, the Company recognized the vessel, the carrying amount of which as of June 30, 2021 amounted to $27,047, as held for sale and wrote it down to its fair value of $25,887, resulting in an impairment charge of $1,160, which is included in the consolidated statements of comprehensive (loss) / income for the year ended December 31, 2021. Since the value of the held for sale vessel (after it was written down to its fair value less costs to sell) was the same with the net proceeds from the sale, the Company didn’t recognize any losses from the sale of the M/T Nord Valiant.

 

Following the sale of the above product tankers, the Company as of December 31, 2021 has been left with only scrubber fitted vessels and only employs one product tanker vessel (the M/T Eco Marina Del Ray, the sale and lease back agreement with no option to purchase), thereby demonstrating its commitment towards larger crude oil carriers and latest technology scrubber fitted-vessels. Regarding the transaction of the M/T’s Eco Bel Air and Beverly Hills, the Company released equity while at the same time maintained its presence in the crude oil market, via the five-year Navigare Lease.

 

 

20.

Subsequent Events

                  

On January 5, 2022 the Company entered into an unsecured credit facility for up to $20,000 with Central Mare (the “Central Mare Bridge Loan”) in order to finance part of the cost of its newbuilding program. On January 6, 2022 the Company drew down $9,000. The facility’s maturity was December 31, 2022. The principal terms of the loan included an arrangement fee of 2%, interest of 12% per annum and a commitment fee of 1.00% on the undrawn part of the facility

 

F- 38

 

On January 17, 2022, the Company entered into a stock purchase agreement with Africanus Inc., an affiliate of Evangelos J. Pistiolis  for the sale of up to 7,560,759 newly-issued Series F Non-Convertible Perpetual Preferred Shares (“Series F Preferred Shares”), in exchange for (i) the assumption by Africanus Inc. of an amount of $47,630 of shipbuilding costs for its newbuilding vessels M/T Eco Oceano CA (Hull No. 871), M/T Julius Caesar (Hull No. 3213) and M/T Legio X Equestris (Hull No. 3214), and (ii) settlement of the Company’s remaining payment obligations relating to the VLCC Transaction, in an amount of up to $27,978. As of the date hereof, 7,200,000 Series F Preferred Perpetual Shares have been issued, in connection with the deliveries of M/T Julius Caesar, M/T Legio X Equestris and M/T Eco Oceano Ca and as a consideration for the settlement of $24,370 of Due to related parties. The holders of Series F Preferred Perpetual Shares are entitled to the voting power of ten of the Company’s common shares per Series F Preferred Perpetual Share. Upon any liquidation, dissolution or winding up of the Company, the holders of Series F Preferred Perpetual Shares shall be entitled to receive the net assets of the Company pari passu with the Company’s common shares. The Company at its option shall have the right to redeem a portion or all of the outstanding Series F Preferred Perpetual Shares at an amount equal to $10 per Series F Preferred Perpetual Share redeemed (the “Liquidation Amount”), plus a redemption premium of 20% of the Liquidation Amount. The Series F Preferred Perpetual Shares include a mandatory redemption provision tied to minimum voting requirements for the Company’s major shareholders, including affiliates of the CEO, pursuant to which if such minimum voting rights fall below 50% the Company is obliged to redeem the full amount of the then outstanding Series F Preferred Perpetual Shares at a redemption premium of 40%. The holders of outstanding Series F Preferred Perpetual Shares shall be entitled to receive semi-annual dividends payable in cash at a rate of 13.5% per year of the Liquidation Amount of the then outstanding Series F Preferred Perpetual Shares. In addition, a one-time cash dividend equal to 4.0% of the Liquidation Amount is payable days following each issuance of Series F Preferred Perpetual Shares. Finally the Series F Preferred Perpetual Shares are not convertible into the Company’s common shares under any circumstances.

 

On January 17, 2022 the Company took delivery of the vessel M/T Julius Caesar from the Hyundai Heavy Industries shipyard in South Korea. 

 

On February 14, 2022, the Company entered into time charter employment agreements with a major oil trader for M/T Eco Beverly Hills and for M/T Eco Bel Air, according to which upon completion of their current charters, the M/T Eco Beverly Hills and M/T Eco Bel Air will enter into a time charter for a minimum period of 20 months and a maximum period of 26 months (at charterers option) at daily rate of $24,000 per vessel. Charterers also have the option to further extend the time charter until December 1, 2025 for M/T Eco Beverly Hills and December 10, 2025 for M/T Eco Bel Air.

 

On February 22, 2022, the Company amended a previously-agreed time charter with an affiliate of Evangelos J. Pistiolis which commenced upon delivery of M/T Eco Oceano (Hull No. 871). According to the amendment, the firm period of the time charter employment is increased from 5 years to 15 years and the daily rate is reduced from $32,450 to $24,500.

 

On February 28 and March 15, 2022 the Company sold the M/T Eco Los Angeles and M/T Eco City of Angels respectively to unaffiliated third parties for net proceeds after debt repayment of $18,640. The net proceeds after senior debt repayment relating to the vessels were used to fund the Company’s newbuilding program and to repay the outstanding Central mare Bridge Loan facility, which was subsequently terminated.

 

On March 2, 2022, the Company took delivery of the vessel M/T Legio X Equestris from the Hyundai Heavy Industries shipyard in South Korea.

 

On March 2, 2022 the Company entered into a sale and leaseback with AVIC, for our newbuilding vessel Eco Oceano Ca (Hull No. 871) for total proceeds of $ 48,200. Consummation of the sale and leaseback took place on March 4, 2022. Following the sale, the Company has bareboat chartered back the vessel for a period of ten years at bareboat hire rates comprising of 40 consecutive quarterly installments of $678 and a balloon payment of $21,087 payable together with the last installment, plus interest based on the three months LIBOR plus 3.50%. As part of this transaction, the Company has continuous options to buy back the vessel at a purchase price stipulated in the bareboat agreement depending on when the option is exercised and at the end of the ten year period the Company has an obligation to buy back the vessel at a cost represented by the balloon payment.

 

On March 4, 2022, the Company took delivery of the vessel M/T Eco Oceano Ca from the Hyundai Samho shipyard in South Korea.

 

 

 

F-39

Exhibit 2.10

 

DESCRIPTION OF THE REGISTRANT'S SECURITIES REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934

 

As of the date of the annual report on Form 20-F of which this exhibit is a part, TOP Ships Inc. (the "Company") had common stock, par value $0.01 per share, and preferred stock purchase rights for each outstanding common share registered under Section 12 of the Securities Exchange Act of 1934, as amended.

 

The following description sets forth certain material terms and provisions of the Company's common stock. The following summary does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the applicable provisions of the Company's Third Amended and Restated Articles of Incorporation (the "Articles of Incorporation"), as amended, and the Amended and Restated By-laws (the "By-laws"), as amended, each of which is incorporated by reference as an exhibit to the annual report on Form 20-F of which this exhibit is a part. We encourage you to refer to our Articles of Incorporation and By-laws for additional information.

 

Authorized Capitalization

 

Our authorized capital stock consists of 1,000,000,000 common shares, par value $0.01 per share, of which 39,831,972 common shares were issued and outstanding as of the date of the annual report on Form 20-F of which this exhibit is a part, and 20,000,000 preferred shares with par value of $0.01, of which 100,000 Series D Preferred Shares, 13,452 Series E Preferred Shares, and 7,200,000 Series F Preferred Shares were issued and outstanding as of the date of the annual report on Form 20-F of which this exhibit is a part. Our Board of Directors has the authority to establish such series of preferred stock and with such designations, preferences and relative, participating, optional or special rights and qualifications, limitations or restrictions as shall be stated in the resolution or resolutions providing for the issue of such preferred stock.

 

Description of Common Shares

 

Under our Articles of Incorporation, our authorized capital stock consists of 1,000,000,000 common shares, par value $0.01 per share. The respective number of ordinary shares issued and outstanding as of the last day of the fiscal year for the annual report on Form 20-F to which this description is attached or incorporated by reference as an exhibit is provided on the cover page of such annual report on Form 20-F. Holders of our common shares do not have conversion, redemption or preemptive rights to subscribe to any of our securities. The rights, preferences and privileges of holders of our common shares are subject to the rights of the holders of any preferred shares that we may issue in the future.

 

Voting Rights

 

Each outstanding common share entitles the holder to one vote on all matters submitted to a vote of shareholders. Our directors are elected by a plurality of the votes cast at a meeting of the shareholders by the holders of shares entitled to vote in the election. Our Articles of Incorporation and By-laws, as further amended, prohibit cumulative voting in the election of directors.

 

Our Board of Directors must consist of at least one member and not more than twelve, as fixed from time to time by the vote of not less than 66 2/3% of the entire board. Each director shall be elected to serve until the third succeeding annual meeting of shareholders and until his successor shall have been duly elected and qualified, except in the event of his death, resignation, removal, or the earlier termination of his term of office. Our Board of Directors has the authority to fix the amounts which shall be payable to the members of our Board of Directors, and to members of any committee, for attendance at any meeting or for services rendered to us.

 

Our Articles of Incorporation provide for the division of our Board of Directors into three classes of directors, with each class as nearly equal in number as possible, serving staggered, three-year terms. Approximately one-third of our Board of Directors will be elected each year. This classified board provision could discourage a third party from making a tender offer for our shares or attempting to obtain control of our company. It could also delay shareholders who do not agree with the policies of our Board of Directors from removing a majority of our Board of Directors for two years.

 

 

 

Dividend Rights

 

Subject to preferences that may be applicable to any outstanding preferred shares, holders of common shares are entitled to receive ratably all dividends, if any, declared by our Board of Directors out of funds legally available for dividends.

 

Liquidation Rights

 

Upon our dissolution or liquidation or the sale of all or substantially all of our assets, after payment in full of all amounts required to be paid to creditors and to the holders of our preferred shares having liquidation preferences, if any, the holders of our common shares will be entitled to receive pro rata our remaining assets available for distribution.

 

Limitations on Ownership

 

Our Articles of Incorporation and By-Laws, as further amended, do not impose any limitations on the ownership rights of our shareholders.

 

Description of Preferred Stock Purchase Rights

 

On September 14, 2016, our Board of Directors declared a dividend of one preferred share purchase right, or a Right, for each outstanding common share and adopted a shareholder rights plan, as set forth in the Stockholders Rights Agreement dated as of September 22, 2016, or the Rights Agreement, by and between us and Computershare Trust Company, N.A. (now taken over by our new transfer agent, AST), as rights agent.

 

The Board adopted the Rights Agreement to protect shareholders from coercive or otherwise unfair takeover tactics. In general terms, it works by imposing a significant penalty upon any person or group that acquires 15% or more of our outstanding common shares without the approval of our Board of Directors. If a shareholder's beneficial ownership of our common shares as of the time of the public announcement of the rights plan and associated dividend declaration is at or above the applicable threshold, that shareholder's then-existing ownership percentage would be grandfathered, but the rights would become exercisable if at any time after such announcement, the shareholder increases its ownership percentage by 1% or more.

 

The Rights may have anti-takeover effects. The Rights will cause substantial dilution to any person or group that attempts to acquire us without the approval of our Board of Directors. As a result, the overall effect of the Rights may be to render more difficult or discourage any attempt to acquire us. Because our Board of Directors can approve a redemption of the Rights for a permitted offer, the Rights should not interfere with a merger or other business combination approved by our Board.

 

For those interested in the specific terms of the Rights Agreement, we provide the following summary description. Please note, however, that this description is only a summary, and is not complete, and should be read together with the entire Rights Agreement, which is an exhibit to the Form 8-A filed by us on September 22, 2016 and incorporated herein by reference. The foregoing description of the Rights Agreement is qualified in its entirety by reference to such exhibit.

 

The Rights. The Rights trade with, and are inseparable from, our common shares. The Rights are evidenced only by certificates that represent our common shares. New Rights will accompany any new of our common shares issued after October 5, 2016 until the Distribution Date described below.

 

Exercise Price. Each Right allows its holder to purchase from us one one-thousandth of a share of Series A Participating Preferred Stock, or a Series A Preferred Share, for $50.00, or the Exercise Price, once the Rights become exercisable. This portion of a Series A Preferred Share will give the shareholder approximately the same dividend, voting and liquidation rights as would one common share. Prior to exercise, the Right does not give its holder any dividend, voting, or liquidation rights.

 

Exercisability. The Rights are not exercisable until ten days after the public announcement that a person or group has become an "Acquiring Person" by obtaining beneficial ownership of 15% or more of our outstanding common shares.

 

 

 

Certain synthetic interests in securities created by derivative positions—whether or not such interests are considered to be ownership of the underlying common shares or are reportable for purposes of Regulation 13D of the

 

Exchange Act—are treated as beneficial ownership of the number of our common shares equivalent to the economic exposure created by the derivative position, to the extent our actual common shares are directly or indirectly held by counterparties to the derivatives contracts. Swaps dealers unassociated with any control intent or intent to evade the purposes of the Rights Agreement are excepted from such imputed beneficial ownership.

 

For persons who, prior to the time of public announcement of the Rights Agreement, beneficially own 15% or more of our outstanding common shares, the Rights Agreement "grandfathers" their current level of ownership, so long as they do not purchase additional shares in excess of certain limitations.

 

The date when the Rights become exercisable is the "Distribution Date." Until that date, our common share certificates (or, in the case of uncertificated shares, by notations in the book-entry account system) will also evidence the Rights, and any transfer of our common shares will constitute a transfer of Rights. After that date, the Rights will separate from our common shares and will be evidenced by book-entry credits or by Rights certificates that we will mail to all eligible holders of our common shares. Any Rights held by an Acquiring Person are null and void and may not be exercised.

 

Series A Preferred Share Provisions

 

Each one one-thousandth of a Series A Preferred Share, if issued, will, among other things:

 

 

not be redeemable;

 

 

entitle holders to quarterly dividend payments in an amount per share equal to the aggregate per share amount of all cash dividends, and the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in our common shares or a subdivision of the our outstanding common shares (by reclassification or otherwise), declared on our common shares since the immediately preceding quarterly dividend payment date; and

 

 

entitle holders to one vote on all matters submitted to a vote of our shareholders.

 

The value of one one-thousandth interest in a Series A Preferred Share should approximate the value of one common share.

 

Consequences of a Person or Group Becoming an Acquiring Person

 

 

Flip In.  If an Acquiring Person obtains beneficial ownership of 15% or more of our common shares, then each Right will entitle the holder thereof to purchase, for the Exercise Price, a number of our common shares (or, in certain circumstances, cash, property or other of our securities) having a then-current market value of twice the Exercise Price. However, the Rights are not exercisable following the occurrence of the foregoing event until such time as the Rights are no longer redeemable by us, as further described below.

 

Following the occurrence of an event set forth in preceding paragraph, all Rights that are or, under certain circumstances specified in the Rights Agreement, were beneficially owned by an Acquiring Person or certain of its transferees will be null and void.

 

 

Flip Over. If, after an Acquiring Person obtains 15% or more of our common shares, (i) we merge into another entity; (ii) an acquiring entity merges into us; or (iii) we sell or transfer 50% or more of its assets, cash flow or earning power, then each Right (except for Rights that have previously been voided as set forth above) will entitle the holder thereof to purchase, for the Exercise Price, a number of our common shares of the person engaging in the transaction having a then-current market value of twice the Exercise Price.

 

 

 

 

Notional Shares. Shares held by affiliates and associates of an Acquiring Person, including certain entities in which the Acquiring Person beneficially owns a majority of the equity securities, and

     
    Notional Common Shares (as defined in the Rights Agreement) held by counterparties to a Derivatives Contract (as defined in the Rights Agreement) with an Acquiring Person, will be deemed to be beneficially owned by the Acquiring Person.

 

Redemption. Our Board of Directors may redeem the Rights for $0.01 per Right at any time before any person or group becomes an Acquiring Person. If our Board of Directors redeems any Rights, it must redeem all of the Rights. Once the Rights are redeemed, the only right of the holders of the Rights will be to receive the redemption price of $0.01 per Right. The redemption price will be adjusted if we have a stock dividend or a stock split.

 

Exchange. After a person or group becomes an Acquiring Person, but before an Acquiring Person owns 50% or more of our outstanding common shares, the Board may extinguish the Rights by exchanging one common share or an equivalent security for each Right, other than Rights held by the Acquiring Person. In certain circumstances, we may elect to exchange the Rights for cash or other of our securities having a value approximately equal to one common share.

 

Expiration. The Rights expire on the earliest of (i) September 22, 2026; or (ii) the redemption or exchange of the Rights as described above.

 

Anti-Dilution Provisions. The Board may adjust the purchase price of the Series A Preferred Shares, the number of Series A Preferred Shares issuable and the number of outstanding Rights to prevent dilution that may occur from a stock dividend, a stock split, or a reclassification of the Series A Preferred Shares or our common shares. No adjustments to the Exercise Price of less than 1% will be made.

 

Amendments. The terms of the Rights and the Rights Agreement may be amended in any respect without the consent of the holders of the Rights on or prior to the Distribution Date. Thereafter, the terms of the Rights and the Rights Agreement may be amended without the consent of the holders of Rights, with certain exceptions, in order to (i) cure any ambiguities; (ii) correct or supplement any provision contained in the Rights Agreement that may be defective or inconsistent with any other provision therein; (iii) shorten or lengthen any time period pursuant to the Rights Agreement; or (iv) make changes that do not adversely affect the interests of holders of the Rights (other than an Acquiring Person or an affiliate or associate of an Acquiring Person).

 

Taxes. The distribution of Rights should not be taxable for federal income tax purposes. However, following an event that renders the Rights exercisable or upon redemption of the Rights, shareholders may recognize taxable income.

 

Description of Series D Preferred Shares

 

On May 8, 2017, we issued 100,000 shares of Series D Preferred Shares to Tankers Family Inc., a company controlled by Lax Trust, which is an irrevocable trust established for the benefit of certain family members of Mr. Evangelos J. Pistiolis, for $1,000 pursuant to a stock purchase agreement. Each Series D Preferred Share has the voting power of one thousand (1,000) common shares.

 

On April 21, 2017, we were informed by ABN Amro Bank that we were in breach of a loan covenant that requires that any member of the family of Mr. Evangelos J. Pistiolis, maintain an ownership interest (either directly and/or indirectly through companies beneficially owned by any member of the Pistiolis family and/or trusts or foundations of which any member of the Pistiolis family are beneficiaries) of 30% of our outstanding Common Shares. ABN Amro Bank requested that either the family of Mr. Evangelos J. Pistiolis maintain an ownership interest of at least 30% of the outstanding common shares or maintain voting rights interests of above 50% in us. In order to regain compliance with the loan covenant, we issued the Series D Preferred Shares.

 

The Series D Preferred Stock has the following characteristics:

 

Conversion. The Series D Preferred Shares are not convertible into common shares.

 

 

 

Voting. Each Series D Preferred Share has the voting power of 1,000 common shares. As a prerequisite for the Navigare Lease, Mr. Evangelos J. Pistiolis personally guaranteed the performance of the bareboat charters entered in connection with the lease, under certain circumstances, and in exchange, we amended the Certificate of Designations governing the terms of the Series D Preferred Shares, to adjust the voting rights per share of Series D Preferred Shares such that during the term of the Navigare Lease, the combined voting power controlled by Mr. Evangelos J. Pistiolis and the Lax Trust does not fall below a majority of our total voting power, irrespective of any new common or preferred stock issuances, and thereby complying with a relevant covenant of the bareboat charters entered in connection with the Navigare Lease.

 

Distributions. The Series D Preferred Shares shall have no dividend or distribution rights.

 

Maturity. The Series D Preferred Shares shall expire and all outstanding Series D shares shall be redeemed by us for par value on the date that any financing facility with any financial institution, which requires that any member of the family of Mr. Evangelos J. Pistiolis maintains a specific minimum ownership or voting interest (either directly and/or indirectly through companies or other entities beneficially owned by any member of the Pistiolis family and/or trusts or foundations of which any member of the Pistiolis family are beneficiaries) of our issued and outstanding common shares, respectively, are fully repaid or reach their maturity date. The Series D Preferred Shares shall not be otherwise redeemable. Currently the SLBs with Bocomm Leasing, AVIC and Navigare, as well as the senior secured loan with ABN Amro have similar provisions that are satisfied via the existence of the Series D Shares.

 

Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of our Company, the Series D Preferred Shares shall have a liquidation preference of $0.01 per share.

 

The description of the Series D Convertible Preferred Shares is subject to and qualified in its entirety by reference to the Securities Purchase Agreement, Certificate of Designation of the Series D Preferred Shares, and Certificate of Amendment to the Certificate of Designation. Copies of the Securities Purchase Agreement and Certificate of Designation of the Series D Preferred Shares have been filed as exhibits to our Report on Form 6-K filed with the SEC on May 8, 2017. The Certificate of Amendment to the Certificate of Designation was filed as an exhibit to our Report on Form 6-K filed with the SEC on December 4, 2020.

 

Description of Series E Convertible Preferred Stock

 

On April 1, 2019, we announced the sale of 27,129 newly issued Series E Preferred Shares at a price of $1,000 per share to Family Trading in exchange for the full and final settlement of the loan facility between our Company and Family Trading dated December 23, 2015, as amended.

 

On June 30, 2019, we issued 1,029 Series E Shares for the payment of dividends accumulated since the original issuance of the Series E Preferred Shares through June 30, 2019.

 

From July 25, 2019 to March 19, 2020, we redeemed 33,798 of Series E Preferred Shares for an aggregate purchase price of $38.9 million. On February 17, 2020 we issued 16,004 Series E Preferred Shares to Family Trading Inc., as settlement of the consideration outstanding for the purchase of the M/T Eco City of Angels and M/T Eco Los Angeles from parties affiliated with Mr. Pistiolis, and for dividends payable to Family Trading Inc. under already outstanding Series E Preferred Shares. On June 30, 2020, we issued 900 Series E Preferred Shares to Family Trading, as settlement for dividends payable to Family Trading Inc. under already outstanding Series E Preferred Shares.

 

On August 20, 2020, we entered into a Standstill Agreement with Family Trading, pursuant to which Family Trading agreed not to convert any of its Series E Preferred Shares into Common Shares until August 20, 2021.

 

On September 8, 2021, pursuant to a Sale and Purchase Agreement between the Issuer and Zizzy Charter Co. dated September 8, 2021, we issued 2,188 Series E Preferred Shares to Family Trading as partial settlement of the consideration outstanding for the purchase of an additional 65% ownership interest in each of Julius Caesar Inc. and Legio X Inc., each a party to shipbuilding contracts for VLCC Julius Caesar and VLCC Legio X Equestris, respectively, from a party affiliated with Mr. Pistiolis.

 

As of the date of the annual report on Form 20-F of which this exhibit is a part, there were 13,452 shares of Series E Preferred Shares outstanding.

 

 

 

The Series E Preferred Shares have the following characteristics:

 

Conversion. Each holder of Series E Preferred Shares, at any time and from time to time, has the right, subject to certain conditions, to convert all or any portion of the Series E Preferred Shares then held by such holder into the Issuer’s Common Shares at the conversion rate then in effect. Each Series E Preferred Share is convertible into the number of the Issuer’s Common Shares equal to the quotient of $1,000 plus any accrued and unpaid dividends divided by the lesser of the following four prices (the “Series E Conversion Price”): (i) $500.00, (ii) 80% of the lowest daily VWAP of the Issuer's Common Shares over the twenty consecutive trading days expiring on the trading day immediately prior to the date of delivery of a conversion notice, (iii) the conversion price or exercise price per share of any of the Issuer’s then outstanding convertible shares or warrants, (iv) the lowest issuance price of the Issuer’s Common Shares in any transaction from the date of the issuance the Series E Perpetual Preferred Stock onwards, but in no event will the Series E Conversion Price be less than $0.60 (the “Floor Price”). The Floor Price is adjusted (decreased) in case of splits or subdivisions of our outstanding shares and is not adjusted in case of reverse stock splits or combinations of our outstanding shares. Finally, the Series E Conversion Price is subject to appropriate adjustment in the event of certain dividends and distributions, stock combinations, reclassifications or similar events affecting the Common Shares.

 

Limitations of Conversion. Holders of the shares of Series E Preferred Shares shall be entitled to convert the Series E Preferred Shares in full, regardless of the beneficial ownership percentage of the holder after giving effect to such conversion.

 

Voting.  The holders of Series E Preferred Shares are entitled to the voting power of one thousand (1,000) of our common shares.  The holders of Series E Preferred Shares and the holders of our common shares shall vote together as one class on all matters submitted to a vote of our shareholders. The holders of Series E Preferred Shares have no special voting rights and their consent shall not be required for taking any corporate action.

 

Distributions. The holders of Series E Preferred Shares are entitled to receive certain dividends and distributions paid to holders of Common Shares on an as-converted basis. Upon any liquidation, dissolution or winding up of our Company, the holders of Series E Preferred Shares shall be entitled to receive the net assets of our Company pari passu with the Common Shares.

 

Redemption.  We at our option shall have the right to redeem a portion or all of the outstanding Series E Preferred Shares. We shall pay an amount equal to one thousand dollars ($1,000) per each Series E Preferred Shares, or the Liquidation Amount, plus a redemption premium equal to fifteen percent (15%) of the Liquidation Amount being redeemed if that redemption takes place up to and including March 29, 2020 and twenty percent (20%) of the Liquidation Amount being redeemed if that redemption takes place after March 29, 2020, plus an amount equal to any accrued and unpaid dividends on such Preferred Shares (collectively referred to as the “Redemption Amount”). In order to make a redemption, we shall first provide one business day advance written notice to the holders of our intention to make a redemption, or the Redemption Notice, setting forth the amount it desires to redeem. After receipt of the Redemption Notice, the holders shall have the right to elect to convert all or any portion of its Series E Preferred Shares. Upon the expiration of the one business day period, we shall deliver to each holder the Redemption Amount with respect to the amount redeemed after giving effect to conversions effected during the notice period.

 

The Series E Preferred Shares shall not be subject to redemption in cash at the option of the holders thereof under any circumstance.

 

Dividends. The holders of outstanding Series E Preferred Shares shall be entitled to receive out of funds legally available for the purpose, semi-annual dividends payable in cash on the last day of June and December in each year (each such date being referred to herein as a “Semi Annual Dividend Payment Date”), commencing on the first Semi Annual Dividend Payment Date in an amount per share (rounded to the nearest cent) equal to fifteen percent (15%) per year of the liquidation amount of the then outstanding Series E Preferred Shares computed on the basis of a 365-day year and the actual days elapsed.

 

Accrued but unpaid dividends shall bear interest at fifteen percent (15%). Dividends paid on the Series E Preferred Shares in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. Our Board of Directors may fix a record date for the determination of holders of Series E Preferred Shares entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 30 days prior to the date fixed for the payment thereof.

 

 

 

Ranking. All shares of Series E Preferred Shares shall rank pari passu with all classes of our common shares.

 

The description of the Series E Preferred Shares is subject to and qualified in its entirety by reference to the Securities Purchase Agreement and Certificate of Designation of the Series E Preferred Shares. Copies of the Securities Purchase Agreement and Statement of Designation of the Series E Preferred Shares have been filed as exhibits to our Report on Form 6-K filed with the SEC on April 1, 2019.

 

Description of Series F Preferred Shares

 

On January 17, 2022, we entered into a stock purchase agreement with Africanus Inc., an affiliate of our CEO for the sale of up to 7,560,759 Series F Non-Convertible Perpetual Preferred Shares, par value $0.01, in exchange for (i) the assumption by Africanus Inc. of an amount of $48.0 million of shipbuilding costs for vessels M/T Eco Oceano CA (Hull No. 871), M/T Julius Caesar and M/T Legio X Equestris (Hull No. 3214), and (ii) settlement of our remaining payment obligations relating to the acquisition in September 8, 2021 of an additional 65% ownership interest in the newbuilding contracts for its 2 VLCCs, in an amount of up to $27.6 million.

 

As of the date of the annual report on Form 20-F of which this exhibit is a part, 7,200,000 Series F Preferred Shares have been issued.

 

The Series F Preferred Shares have the following characteristics:

 

Voting.  The holders of Series F Preferred Shares are entitled to the voting power of ten (10) of our common shares per Series F Preferred Share.  The holders of Series F Preferred Shares and the holders of common shares shall vote together as one class on all matters submitted to a vote of shareholders. Except as required by law, the holders of Series F Preferred Shares have no special voting rights and their consent shall not be required for taking any corporate action.

 

Distributions. Upon any liquidation, dissolution or winding up of our Company, the holders of Series F Preferred Shares shall be entitled to receive the net assets of the Company pari passu with the Common Shares.

 

Redemption.  The Company at its option shall have the right to redeem a portion or all of the outstanding Series F Preferred Shares. Upon an optional redemption, the Company shall pay an amount equal to $10 per Series F Preferred Share redeemed (the “Liquidation Amount”), plus a redemption premium of 20% of the Liquidation Amount. The Series F Preferred Shares include a mandatory redemption provision tied to minimum voting requirements for the Company’s major shareholders, including affiliates of the CEO, pursuant to which if such minimum voting rights fall below 50% the Company is obliged to redeem the full amount of the then outstanding Series F Preferred Shares at a redemption premium of 40%, as detailed in the Certificate of Designation for the Series F Preferred Shares.

 

Dividends. The holders of outstanding Series F Preferred Shares shall be entitled to receive semi-annual dividends payable in cash at a rate of 13.5% per year of the Liquidation Amount of the then outstanding Series F Preferred Shares. In addition, a one-time cash dividend equal to 4.0% of the Liquidation Amount is payable to the Buyer 30 days following the issuance of Series F Preferred Shares.

 

Ranking. All shares of Series F Preferred Shares shall rank pari passu with the Company’s common shares.

 

Shareholder Meetings

 

Under our Amended and Restated By-Laws, annual shareholder meetings will be held at a time and place selected by our Board of Directors. The meetings may be held in or outside of the Marshall Islands. Special meetings of the shareholders, unless otherwise prescribed by law, may be called for any purpose or purposes at any time exclusively by our Board of Directors. Notice of every annual and special meeting of shareholders shall be given at least 15 but not more than 60 days before such meeting to each shareholder of record entitled to vote thereat.

 

 

 

Directors

 

Our directors are elected by a plurality of the votes cast at a meeting of the shareholders by the holders of shares entitled to vote in the election. Our Third Amended and Restated Articles of Incorporation and Amended and Restated By-laws, as further amended, prohibit cumulative voting in the election of directors.

 

Our Board of Directors must consist of at least one member and not more than twelve, as fixed from time to time by the vote of not less than 66 2/3% of the entire board. Each director shall be elected to serve until the third succeeding annual meeting of shareholders and until his successor shall have been duly elected and qualified, except in the event of his death, resignation, removal, or the earlier termination of his term of office. Our Board of Directors has the authority to fix the amounts which shall be payable to the members of our Board of Directors, and to members of any committee, for attendance at any meeting or for services rendered to us.

 

Classified Board

 

Our Amended and Restated Articles of Incorporation provide for the division of our Board of Directors into three classes of directors, with each class as nearly equal in number as possible, serving staggered, three-year terms. Approximately one-third of our Board of Directors will be elected each year. This classified board provision could discourage a third party from making a tender offer for our shares or attempting to obtain control of our company. It could also delay shareholders who do not agree with the policies of our Board of Directors from removing a majority of our Board of Directors for two years.

 

Election and Removal

 

Our Third Amended and Restated Articles of Incorporation and Amended and Restated By-Laws require parties other than our Board of Directors to give advance written notice of nominations for the election of directors. Our Third Amended and Restated Articles of Incorporation provide that our directors may be removed only for cause and only upon the affirmative vote of the holders of at least 80% of the outstanding shares of our capital stock entitled to vote for those directors. These provisions may discourage, delay or prevent the removal of incumbent officers and directors.

 

Dissenters Rights of Appraisal and Payment

 

Under the BCA, our shareholders have the right to dissent from various corporate actions, including certain mergers or consolidations or sales of all or substantially all of our assets not made in the usual course of our business, and receive payment of the fair value of their shares, subject to exceptions. For example, the right of a dissenting shareholder to receive payment of the fair value of his shares is not available if for the shares of any class or series of shares, which shares at the record date fixed to determine the shareholders entitled to receive notice of and vote at the meeting of shareholders to act upon the agreement of merger or consolidation, were either (1) listed on a securities exchange or admitted for trading on an interdealer quotation system or (2) held of record by more than 2,000 holders. In the event of any further amendment of the articles, a shareholder also has the right to dissent and receive payment for his or her shares if the amendment alters certain rights in respect of those shares. The dissenting shareholder must follow the procedures set forth in the BCA to receive payment. In the event that we and any dissenting shareholder fail to agree on a price for the shares, the BCA procedures involve, among other things, the institution of proceedings in the High Court of the Republic of the Marshall Islands or in any appropriate court in any jurisdiction in which our shares are primarily traded on a local or national securities exchange. The value of the shares of the dissenting shareholder is fixed by the court after reference, if the court so elects, to the recommendations of a court-appointed appraiser.

 

Shareholders Derivative Actions

 

Under the BCA, any of our shareholders may bring an action in our name to procure a judgment in our favor, also known as a derivative action, provided that the shareholder bringing the action is a holder of common shares both at the time the derivative action is commenced and at the time of the transaction to which the action relates. On November 20, 2014, we amended our Amended and Restated By-Laws to provide that unless we consent in writing to the selection of alternative forum, the sole and exclusive forum for (i) any shareholders’ derivative action or proceeding brought on behalf of us, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other of our employees or our shareholders, (iii) any action asserting a claim arising pursuant to any provision of the BCA, or (iv) any action asserting a claim governed by the internal affairs doctrine shall be the High Court of the Republic of the Marshall Islands, in all cases subject to the court’s having personal jurisdiction over the indispensable parties named as defendants. This provision of our By-Laws does not apply to actions arising under U.S. federal securities laws.

 

 

 

Anti-takeover Provisions of our Charter Documents

 

Several provisions of our Third Amended and Restated Articles of Incorporation and Amended and Restated By-Laws may have anti-takeover effects. These provisions are intended to avoid costly takeover battles, lessen our vulnerability to a hostile change of control and enhance the ability of our Board of Directors to maximize shareholder value in connection with any unsolicited offer to acquire us. However, these anti-takeover provisions, which are summarized below, could also discourage, delay or prevent (1) the merger or acquisition of our company by means of a tender offer, a proxy contest or otherwise, that a shareholder may consider in its best interest and (2) the removal of incumbent officers and directors.

 

Business Combinations

 

Our Third Amended and Restated Articles of Incorporation include provisions which prohibit us from engaging in a business combination with an interested shareholder for a period of three years after the date of the transaction in which the person became an interested shareholder, unless:

 

 

prior to the date of the transaction that resulted in the shareholder becoming an interested shareholder, the Board approved either the business combination or the transaction that resulted in the shareholder becoming an interested shareholder;

 

 

upon consummation of the transaction that resulted in the shareholder becoming an interested shareholder, the interested shareholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced;

 

 

at or subsequent to the date of the transaction that resulted in the shareholder becoming an interested shareholder, the business combination is approved by the Board and authorized at an annual or special meeting of shareholders by the affirmative vote of at least 66 2/3% of the outstanding voting stock that is not owned by the interested shareholder; and

 

 

the shareholder became an interested shareholder prior to the consummation of the initial public offering.

 

Limited Actions by Shareholders

 

Our Third Amended and Restated Articles of Incorporation and our Amended and Restated By-Laws provide that any action required or permitted to be taken by our shareholders must be effected at an annual or special meeting of shareholders or by the unanimous written consent of our shareholders.

 

Our Third Amended and Restated Articles of Incorporation and our Amended and Restated By-Laws provide that only our Board of Directors may call special meetings of our shareholders and the business transacted at the special meeting is limited to the purposes stated in the notice. Accordingly, a shareholder may be prevented from calling a special meeting for shareholder consideration of a proposal over the opposition of our Board of Directors and shareholder consideration of a proposal may be delayed until the next annual meeting.

 

Blank Check Preferred Stock

 

Under the terms of our Third Amended and Restated Articles of Incorporation, our Board of Directors has authority, without any further vote or action by our shareholders, to issue up to 20,000,000 shares of blank check preferred stock. Our Board of Directors may issue shares of preferred stock on terms calculated to discourage, delay or prevent a change of control of our company or the removal of our management.

 

Super-majority Required for Certain Amendments to Our By-Laws

 

On February 28, 2007, we amended our by-laws to require that amendments to certain provisions of our by-laws may be made when approved by a vote of not less than 66 2/3% of the entire Board of Directors. These provisions that require not less than 66 2/3% vote of our Board of Directors to be amended are provisions governing: the nature of business to be transacted at our annual meetings of shareholders, the calling of special meetings by our Board of Directors, any amendment to change the number of directors constituting our Board of Directors, the method by which our Board of Directors is elected, the nomination procedures of our Board of Directors, removal of our Board of Directors and the filling of vacancies on our Board of Directors.

 

 

 

 

Marshall Islands Company Considerations

 

Our corporate affairs are governed by our Articles of Incorporation and By-laws and by the BCA. The provisions of the BCA resemble provisions of the corporation laws of a number of states in the United States. While the BCA also provides that it is to be interpreted according to the laws of the State of Delaware and other states with substantially similar legislative provisions, there have been few, if any, court cases interpreting the BCA in the Marshall Islands and we cannot predict whether Marshall Islands courts would reach the same conclusions as courts in the United States. As a result, you may have more difficulty protecting your interests in the face of actions by our management, directors or controlling shareholders than would shareholders of a corporation incorporated in a U.S. jurisdiction which has developed a substantial body of case law. The following table provides a comparison between the statutory provisions of the BCA and the General Corporation Law of the State of Delaware relating to shareholders' rights.

 

Marshall Islands

 

Delaware

     

Shareholder Meetings

   
     

Held at a time and place as designated in the bylaws.

 

May be held at such time or place as designated in the certificate of incorporation or the bylaws, or if not so designated, as determined by the board of directors.

     

Special meetings of the shareholders may be called by the board of directors or by such person or persons as may be authorized by the articles of incorporation or by the bylaws.

 

Special meetings of the shareholders may be called by the board of directors or by such person or persons as may be authorized by the certificate of incorporation or by the bylaws.

     

May be held within or without the Marshall Islands.

 

May be held within or without Delaware.

     

Marshall Islands

 

Delaware

     

Notice:

 

Notice:

     

Whenever shareholders are required to take any action at a meeting, written notice of the meeting shall be given which shall state the place, date and hour of the meeting and, unless it is an annual meeting, indicate that it is being issued by or at the direction of the person calling the meeting. Notice of a special meeting shall also state the purpose for which the meeting is called.

 

Whenever shareholders are required to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, if any, date and hour of the meeting, and the means of remote communication, if any.

     

A copy of the notice of any meeting shall be given personally, sent by mail or by electronic mail not less than 15 nor more than 60 days before the meeting.

 

Written notice shall be given not less than 10 nor more than 60 days before the meeting.

     

Shareholders' Voting Rights

   
     

Unless otherwise provided in the articles of incorporation, any action required to be taken at a meeting of shareholders may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, is signed by all the shareholders entitled to vote with respect to the subject matter thereof, or if the articles of incorporation so provide, by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.

 

Any action required to be taken at a meeting of shareholders may be taken without a meeting if a consent for such action is in writing and is signed by shareholders having not fewer than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.

     

 

 

 

Any person authorized to vote may authorize another person or persons to act for him by proxy.

 

Any person authorized to vote may authorize another person or persons to act for him by proxy.

     

Unless otherwise provided in the articles of incorporation or bylaws, a majority of shares entitled to vote constitutes a quorum. In no event shall a quorum consist of fewer than one-third of the shares entitled to vote at a meeting.

 

For stock corporations, the certificate of incorporation or bylaws may specify the number of shares required to constitute a quorum but in no event shall a quorum consist of less than one-third of shares entitled to vote at a meeting. In the absence of such specifications, a majority of shares entitled to vote shall constitute a quorum.

     

 

When a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of any shareholders.

 

When a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of any shareholders.

     

The articles of incorporation may provide for cumulative voting in the election of directors.

 

The certificate of incorporation may provide for cumulative voting in the election of directors.

     

Marshall Islands

 

Delaware

     

Merger or Consolidation

   
     

Any two or more domestic corporations may merge into a single corporation if approved by the board and if authorized by a majority vote of the holders of outstanding shares at a shareholder meeting.

 

Any two or more corporations existing under the laws of the state may merge into a single corporation pursuant to a board resolution and upon the majority vote by shareholders of each constituent corporation at an annual or special meeting.

     

Any sale, lease, exchange or other disposition of all or substantially all the assets of a corporation, if not made in the corporation's usual or regular course of business, once approved by the board, shall be authorized by the affirmative vote of two-thirds of the shares of those entitled to vote at a shareholder meeting.

 

Every corporation may at any meeting of the board sell, lease or exchange all or substantially all of its property and assets as its board deems expedient and for the best interests of the corporation when so authorized by a resolution adopted by the holders of a majority of the outstanding stock of the corporation entitled to vote.

     

Any domestic corporation owning at least 90% of the outstanding shares of each class of another domestic corporation may merge such other corporation into itself without the authorization of the shareholders of any corporation.

 

Any corporation owning at least 90% of the outstanding shares of each class of another corporation may merge the other corporation into itself and assume all of its obligations without the vote or consent of shareholders; however, in case the parent corporation is not the surviving corporation, the proposed merger shall be approved by a majority of the outstanding stock of the parent corporation entitled to vote at a duly called shareholder meeting.

     

Any mortgage, pledge of or creation of a security interest in all or any part of the corporate property may be authorized without the vote or consent of the shareholders, unless otherwise provided for in the articles of incorporation.

 

Any mortgage or pledge of a corporation's property and assets may be authorized without the vote or consent of shareholders, except to the extent that the certificate of incorporation otherwise provides.

     

 

 

 

Directors

   
     

The board of directors must consist of at least one member.

 

The board of directors must consist of at least one member.

     

The number of board members may be changed by an amendment to the bylaws, by the shareholders, or by action of the board under the specific provisions of a bylaw.

 

The number of board members shall be fixed by, or in a manner provided by, the bylaws, unless the certificate of incorporation fixes the number of directors, in which case a change in the number shall be made only by an amendment to the certificate of incorporation.

     

 

 

If the board is authorized to change the number of directors, it can only do so by a majority of the entire board and so long as no decrease in the number shall shorten the term of any incumbent director.

 

If the number of directors is fixed by the certificate of incorporation, a change in the number shall be made only by an amendment of the certificate.

     

Removal:

 

Removal:

     

Any or all of the directors may be removed for cause by vote of the shareholders.

 

Any or all of the directors may be removed, with or without cause, by the holders of a majority of the shares entitled to vote unless the certificate of incorporation otherwise provides.

     

If the articles of incorporation or the bylaws so provide, any or all of the directors may be removed without cause by vote of the shareholders.

 

In the case of a classified board, shareholders may effect removal of any or all directors only for cause.

     

Marshall Islands

 

Delaware

     

Dissenters' Rights of Appraisal

   
     

Shareholders have a right to dissent from any plan of merger, consolidation or sale of all or substantially all assets not made in the usual course of business, and receive payment of the fair value of their shares. However, the right of a dissenting shareholder under the BCA to receive payment of the appraised fair value of his shares shall not be available for the shares of any class or series of stock, which shares or depository receipts in respect thereof, at the record date fixed to determine the shareholders entitled to receive notice of and to vote at the meeting of the shareholders to act upon the agreement of merger or consolidation, were either (i) listed on a securities exchange or admitted for trading on an interdealer quotation system or (ii) held of record by more than 2,000 holders. The right of a dissenting shareholder to receive payment of the fair value of his or her shares shall not be available for any shares of stock of the constituent corporation surviving a merger if the merger did not require for its approval the vote of the shareholders of the surviving corporation.

 

Appraisal rights shall be available for the shares of any class or series of stock of a corporation in a merger or consolidation, subject to limited exceptions, such as a merger or consolidation of corporations listed on a national securities exchange in which listed stock is offered for consideration is (i) listed on a national securities exchange or (ii) held of record by more than 2,000 holders.

     

A holder of any adversely affected shares who does not vote on or consent in writing to an amendment to the articles of incorporation has the right to dissent and to receive payment for such shares if the amendment:

   
     
 

Alters or abolishes any preferential right of any outstanding shares having preference; or

   
         
 

Creates, alters, or abolishes any provision or right in respect to the redemption of any outstanding shares; or

   
         

 

 

 

 

Alters or abolishes any preemptive right of such holder to acquire shares or other securities; or

   
         
 

Excludes or limits the right of such holder to vote on any matter, except as such right may be limited by the voting rights given to new shares then being authorized of any existing or new class.

   
         

Shareholder's Derivative Actions

   
     

An action may be brought in the right of a corporation to procure a judgment in its favor, by a holder of shares or of voting trust certificates or of a beneficial interest in such shares or certificates. It shall be made to appear that the plaintiff is such a holder at the time of bringing the action and that he was such a holder at the time of the transaction of which he complains, or that his shares or his interest therein devolved upon him by operation of law.

 

In any derivative suit instituted by a shareholder of a corporation, it shall be averred in the complaint that the plaintiff was a shareholder of the corporation at the time of the transaction of which he complains or that such shareholder's stock thereafter devolved upon such shareholder by operation of law.

     

A complaint shall set forth with particularity the efforts of the plaintiff to secure the initiation of such action by the board or the reasons for not making such effort.

 

Other requirements regarding derivative suits have been created by judicial decision, including that a shareholder may not bring a derivative suit unless he or she first demands that the corporation sue on its own behalf and that demand is refused (unless it is shown that such demand would have been futile).

     

Such action shall not be discontinued, compromised or settled, without the approval of the High Court of the Republic of the Marshall Islands.

   
     

Reasonable expenses including attorney's fees may be awarded if the action is successful.

   
     

Marshall Islands

 

Delaware

     

A corporation may require a plaintiff bringing a derivative suit to give security for reasonable expenses if the plaintiff owns less than 5% of any class of outstanding shares or holds voting trust certificates or a beneficial interest in shares representing less than 5% of any class of such shares and the shares, voting trust certificates or beneficial interest of such plaintiff has a fair value of  $50,000 or less.

   

 

 

 

 

 

Exhibit 4.20

 

 

 

 

Dated: 2 February, 2022

 

ALPHA BANK S.A.

 

(as Lender)

 

- and -

 

CALIFORNIA 19 INC. and

CALIFORNIA 20 INC.

(as joint and several Borrowers)

 

- and -

 

CENTRAL MARE INC.

TOP SHIPS INC.

(as Corporate Guarantors)

 

 

 

SECOND SUPPLEMENTAL AGREEMENT

in relation to a Loan Agreement dated 12th March, 2020

for a loan facility of (originally) US $37,660,000

 

 

 

 
exh420_logo.jpg
 
 

 

TABLE OF CONTENTS

 

CLAUSE 

HEADINGS        

PAGE
     
1.

DEFINITIONS

2
     
2.

REPRESENTATIONS AND WARRANTIES

3
     
3.

AGREEMENT OF THE LENDER

4
     
4.

CONDITIONS

4
     
5.

VARIATIONS TO THE PRINCIPAL AGREEMENT

5
     
6. RECONFIRMATION 8
     
7. CONTINUANCE OF PRINCIPAL AGREEMENT AND THE SECURITY DOCUMENTS 8
     
8. ENTIRE AGREEMENT AND AMENDMENT 8
     
9.

FEES AND EXPENSES

8
     
10. ASSIGNMENT 9
     
11.

MISCELLANEOUS

9
     
12.

LAW AND JURISDICTION

9

 

 

 

 

 

 

 

THIS SUPPLEMENTAL AGREEMENT (this Supplemental Agreement) is made this 2nd day of February, 2022;

 

B E T W E E N

 

 

(1)

ALPHA BANK S.A., (formerly known as ALPHA BANK A.E.) a banking société anonyme incorporated in and pursuant to the laws of the Hellenic Republic with its head office at 40 Stadiou Street, Athens GR 102 52, Greece, acting through its office at 93 Akti Miaouli, Piraeus, Greece (the “Lender”); and

 

 

(2)

 (a)CALIFORNIA 19 INC., a company duly incorporated in the Republic of the Marshall Islands having its registered office at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH 96960, as a Borrower (hereinafter called the Borrower A”, which expression shall include its successors), as a borrower; and

 

(b)         CALIFORNIA 20 INC., a company duly incorporated in the Republic of the Marshall Islands having its registered office at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH 96960, as a borrower (hereinafter called the “Borrower B, which expression shall include its successors),

 

as joint and several borrowers (hereinafter together called the “Borrowers” and singly a “Borrower”); and

 

 

(3)

CENTRAL MARE INC., a corporation incorporated in the Republic of the Marshall Islands, having its registered office at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH 96960, as Corporate Guarantor (the “First Corporate Guarantor” or the “Approved Manager”, each of which expressions shall include its successors); and

 

 

(4)

TOP SHIPS INC., a company duly incorporated in the Republic of the Marshall Islands having its registered office at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH 96960 and which is floating in the NASDAQ (hereinafter called the “Second Corporate Guarantor”, which expression shall include its successors),

 

IS SUPPLEMENTAL to a loan agreement dated 12th March, 2020 made between (i) the Lender as lender, and (ii) the Borrowers, as joint and several borrowers, as amended by a first supplemental agreement dated 8th December 2020 (the said loan agreement together with the said first supplemental agreement is hereinafter called the “Principal Agreement”) on the terms and conditions of which the Lender agreed to advance and has advanced to the Borrowers a secured floating interest rate term loan facility in the amount of up to United States Dollars Thirty seven million six hundred sixty thousand (US$37,660,000) (the “Loan”), for the purposes therein specified (the Principal Agreement as hereby amended and/or supplemented and as the same may hereinafter be amended and/or supplemented called the “Loan Agreement”).

 

W H E R E A S:

 

(A)         a Master Agreement (on the 2002 ISDA Master Agreement (Multicurrency-Crossborder) form) dated as of 12th March, 2020 has been entered into between the Borrowers, as Party B and the Lender, acting as Swap Bank, as Party A, whereunder the Borrowers may enter or have already entered, as the case may be, into certain Designated Transactions (as such term is defined in the said Master Agreement) pursuant to separate Confirmations (as such term is defined in the said Master Agreement) providing for, amongst other things, the payment of certain amounts by the Borrowers to the Swap Bank (the Master Agreement, the Schedule thereto, the Credit Support Annex and all Designated Transactions from time to time entered into or Confirmations exchanged under the Master Agreement and any amending, supplemental or replacement agreement are hereinafter called the “Master Agreement”)

 

 

 

1

 

(B)        the First Corporate Guarantor has executed an irrevocable and unconditional Corporate Guarantee dated 12th March, 2020 in favour of the Lender by way of security for all monies now or hereafter due or payable by the Borrowers to the Lender under or pursuant to the Loan Agreement and the other Finance Documents (the “First Corporate Guarantee”); and

 

(C)         the Second Corporate Guarantor has executed an irrevocable and unconditional Corporate Guarantee dated 8th December, 2020 in favour of the Lender by way of security for all monies now or hereafter due or payable by the Borrowers to the Lender under or pursuant to the Loan Agreement and the other Finance Documents (the “Second Corporate Guarantee”); and

 

(D)         the Approved Manager has executed two Approved Manager’s Undertakings, the first one dated 16th March, 2020 in respect of m/v ECO YOSEMITE PARK” and the other dated 26th March, 2020 in respect of m/v ECO JOSHUA PARK” (together, the “Approved Managers Undertakings”), as manager of the Vessels in favour of the Lender, whereby the Approved Manager has (inter alia) subordinated any claims it may have against the Borrowers (or either of them) and/or the Vessels (or either of them) to the claims of the Lender under the Loan Agreement, the Master Agreement and the other Finance Documents in security of the Outstanding Indebtedness.

 

(E)         the Borrowers hereby acknowledge and confirm that (a) the Lender, as lender, has advanced to the Borrowers, as joint and several borrowers, the full amount of the Commitment in the principal amount of United States Dollars Thirty seven million six hundred sixty thousand (US$37,660,000) and (b) as the date hereof the principal amount of United States Dollars Thirty Seven Million (US$37,000,000) in respect of the Loan remains outstanding; and

 

(F)         the Borrowers and the other Security Parties have requested the Lender to grant its consent to (inter alia) amendment of the Security Requirement, and the Lender has agreed thereto conditionally upon terms that the Principal Agreement shall be amended in the manner hereinafter set out in Clause 5 (Variations to the Principal Agreement) of this Supplemental Agreement.

 

NOW THEREFORE IT IS HEREBY AGREED AS FOLLOWS:

 

 

1.

DEFINITIONS


 

 

1.1

Defined terms and expressions 

 

Words and expressions defined in the Principal Agreement and not otherwise defined herein (including the Recitals hereto) shall have the same meanings when used in this Supplemental Agreement.

 

 

1.2

Additional definitions

 

In addition, in this Supplemental Agreement the words and expressions specified below shall have the meanings attributed to them below:

 

2

 

“Effective Date” means the date hereof or such earlier or later date as the Lender may agree in writing upon which all the conditions contained in Clause 5 (Variations to the Principal Agreement) shall have been satisfied and this Supplemental Agreement shall become effective;

 

“Loan Agreement” means the Principal Agreement as hereby amended and as the same may from time to time be further amended and/or supplemented;

 

“Corporate Guarantee Addendum” in relation to the Second Corporate Guarantee means the Addendum no. 1 to the Second Corporate Guarantee to be executed by the Second Personal Guarantor in form satisfactory to the Lender, whereby the Second Corporate Guarantee shall be amended and/or supplemented as therein provided;”

 

 

1.3

Application of interpretation provisions of Loan Agreement

 

Clause 1.3 (Interpretation) and Clause 1.4 (Construction of certain terms) of the Loan Agreement applies to this Supplemental Agreement as if it were expressly incorporated in it with any necessary modifications.

 

 

2.

REPRESENTATIONS AND WARRANTIES


 

 

2.1

Representations and warranties of the Principal Agreement

 

The Borrowers hereby, jointly and severally, represent and warrant to the Lender as at the date hereof that the representations and warranties set forth in the Principal Agreement and the Security Documents (updated mutatis mutandis to the date of this Supplemental Agreement) are (and will be on the Effective Date) true and correct as if all references therein to “this Agreement” were references to the Principal Agreement as amended and supplemented by this Supplemental Agreement.

 

 

2.2

Additional Representations and warranties

 

In addition to the above, the Borrowers, jointly and severally, hereby represent and warrant to the Lender as at the date of this Supplemental Agreement that:

 

 

a.

each of the Security Parties is duly formed, is validly existing and in good standing under the laws of the place of its incorporation has full power to carry on its business as it is now being conducted and to enter into and perform its obligations under the Principal Agreement, and this Supplemental Agreement and has complied with all statutory and other requirements relative to its business;

 

 

b.

all necessary licences, consents and authorities, governmental or otherwise under this Supplemental Agreement, and the Principal Agreement have been obtained and, as of the date of this Supplemental Agreement, no further consents or authorities are necessary for any of the Security Parties to enter into this Supplemental Agreement and the Corporate Guarantee Addendum, as applicable, or otherwise perform its obligations hereunder;

 

 

c.

this Supplemental Agreement and the Corporate Guarantee Addendum, as applicable, constitute the legal, valid and binding obligations of the Security Parties thereto enforceable in accordance with its terms;

 

 

d.

the execution and delivery of, and the performance of the provisions of this Supplemental Agreement and the Corporate Guarantee Addendum, as applicable, do not, and will not contravene any applicable law or regulation existing at the date hereof or any contractual restriction binding on any of the Security Parties or its respective constitutional documents;

 

 

3

 

 

e.

no action, suit or proceeding is pending or threatened against any of the Borrowers and the other Security Parties or their assets before any court, board of arbitration or administrative agency which could or might result in any material adverse change in the business or condition (financial or otherwise) of any of the Borrowers or the other Security Parties; and

 

 

f.

none of the Borrowers and the other Security Parties is and at the Effective Date will be in default under any agreement by which it is or will be at the Effective Date bound or in respect of any financial commitment, or obligation.

 

 

3.

AGREEMENT OF THE LENDER


 

The Lender, relying upon each of the representations and warranties set out in Clause 2 (Representations and warranties) hereby agrees with the Borrowers, subject to and upon the terms and conditions of this Supplemental Agreement and in particular, but without limitation, subject to the fulfilment of the conditions precedent set out in Clause 4 (Conditions), to consent to the amendment of the Principal Agreement in the manner more particularly set out in Clause 5 (Variations to the Principal Agreement).

 

 

4.

CONDITIONS


 

 

4.1

Conditions

 

The agreement of the Lender contained in Clause 3 (Agreement of the Lender) shall be expressly subject to the condition that the Lender shall have received on or before the Effective Date in form and substance satisfactory to the Lender and its legal advisers:

 

 

a.

a certificate of good standing or equivalent document issued by the competent authorities of the place of its incorporation in respect of each of the Borrowers and the other corporate Security Parties;

 

 

b.

a recent certificate of incumbency of each corporate Security Party issued by the appropriate authority or, as appropriate, signed by the secretary or a director thereof, stating the officers and the directors of each of them;

 

 

c.

if required by the Lender, resolutions duly passed by the Board of Directors, or the Sole Director as the case may be, of each of the Borrowers and the other Security Parties and resolutions passed at a meeting of the shareholders of each of the Borrowers and the other Security Parties (and of any corporate shareholder thereof) evidencing approval of this Supplemental Agreement and the Corporate Guarantee Addendum, as applicable, to which the relevant Security Party is or is to be a party and authorising appropriate officers or attorneys to execute the same and to sign all notices required to be given under this Supplemental Agreement and the Corporate Guarantee Addendum, as applicable, on its behalf or other evidence of such approvals and authorisations as shall be acceptable to the Lender;

 

 

d.

all documents evidencing any other necessary action or approvals or consents with respect to this Supplemental Agreement and the Corporate Guarantee Addendum, as applicable, evidencing approval of this Supplemental Agreement and the Corporate Guarantee Addendum, as applicable, and authorising appropriate officers or attorneys to execute the same and to sign all notices required to be given under this Supplemental Agreement and the Corporate Guarantee Addendum, as applicable, on its behalf or other evidence of such approvals and authorisations as shall be acceptable to the Lender;

 

4

 

 

e.

if required by the Lender, the original of any power(s) of attorney issued in favour of any person executing this Supplemental Agreement and the Corporate Guarantee Addendum, as applicable;

 

 

f.

all documents evidencing any other necessary action or approvals or consents with respect to this Supplemental Agreement and the Corporate Guarantee Addendum, as applicable;

 

 

g.

such favourable legal opinions from lawyers acceptable to the Lender and its legal advisors in this Supplemental Agreement as the Lender shall require; and

 

 

h.

the Corporate Guarantee Addendum, as applicable, duly executed by the respective parties thereto.

 

 

5.

VARIATIONS TO THE PRINCIPAL AGREEMENT


 

 

5.1

Amendments

 

In consideration of the agreement of the Lender contained in Clause 3 (Agreement of the Lender), the Borrowers hereby agree with the Lender that (subject to the satisfaction of the conditions precedent contained in Clause 4 (Conditions), the provisions of the Principal Agreement shall be varied and/or amended and/or supplemented as follows:

 

 

a.

with effect as from the Effective Date, the following new definitions shall be added to Clause 1.2 (Definitions) of the Principal Agreement reading as follows:

 

“Second Supplemental Agreement means the Second Supplemental Agreement dated …… 2022 supplemental to this Agreement executed and made between the Borrowers and the Lender, whereby this Agreement has been amended as therein provided.”;

 

 

b.

with effect as from the Effective Date, Clause 8.2(o) (No dividends or distribution) of the Principal Agreement shall have a new sub-paragraph (iv) added to it as follows:

 

“(iv)         there is no breach of any of the Financial Covenants set forth in Clause 8.10 (Financial Covenants - Compliance Certificate) and Clause 5.2 (Negative Undertakings) of the Guarantee of the Corporate Guarantor;

 

 

c.

with effect as from the Effective Date, Clause 8.10 (Financial covenants) of the Principal Agreement shall be deleted and substituted to read as follows:

 

5

 

“8.10         Financial covenants-Compliance Certificate

 

 

(a)

Financial covenants-Compliance Certificate: the Borrowers will ensure that:

 

 

(i)

for the duration of the Security Period, the Top Ships Groups consolidated financial position, based on the most recent Accounting Information to comply with the financial covenants set out below:

 

 

 

aa)

Corporate Liquidity: ensure that throughout the remainder of the Security Period, the Corporate Liquidity of Top Ships maintained with the Lending Office οr other financial institutions at any relevant time in unencumbered current or call accounts in the name of entities acceptable to the Lender will be, at the end of any Accounting Period, in an amount not less than Dollars Five hundred thousand ($500,000) per Fleet Vessel; (for clarification purposes, the Pledged Minimum Liquidity and any cash held in debt service reserve accounts and retention accounts (if any) shall be taken into account in the calculation and testing of this covenant) and

 

 

bb)

Corporate Leverage Ratio: the Leverage Ratio of the Top Ships Group, at the end of any Accounting Period, not higher than 0.75:1.0; and

 

 

(ii)

Compliance Certificate: a compliance certificate for each Accounting Period of Top Ships, commencing from 30 June 2021 signed by its Treasurer, is delivered to the Lender at six monthly intervals starting from 30 June, 2021 by the Borrowers within 180 days after the end of the respective Accounting Period, substantially in the form set out in Schedule 4, duly completed and supported by calculations setting out in reasonable detail the materials underling the statements made in such compliance certificate.

 

The Liquid Funds and the Leverage Ratio to be tested and confirmed to the Lender on each Financial Semester Testing Day starting from 30 June, 2021 on the basis of the semi-annual unaudited and annual audited Financial Statements and the Compliance Certificate to be delivered to the Lender as per Clause 8.1(f) (Financial statements).

 

 

(b)

Construction: The expressions used in this Clause 8.10 shall be construed in accordance with law and accounting principles internationally accepted as used in the Accounting Information produced in accordance with Clause 8.1(f) (Financial statements).

 

 

 

(c)

Definitions: For the purposes of this Agreement:

 

“Accounting Information means the annual audited consolidated financial statements of the Top Ships Group and the interim semi-annual un-audited financial statements of the Top Ships Group, to be provided by the Borrowers to the Lender in accordance with clause 8.10 (Financial Statements - Compliance Certificate);

 

“Accounting Period means each Financial Year and each half-year of each Financial Year falling during the Security Period for which the Accounting Information is required to be delivered to the Lender pursuant to Clause 8.10 (Financial Statements - Compliance Certificate);

 

“Cash and Cash Equivalents means, at any relevant time, the aggregate of cash in hand or on deposit with any prime international bank;

 

“Corporate Leverage Ratio means, in respect of an Accounting Period, the ratio of the Total Debt (after deducting all Cash and Cash Equivalents and restricted cash) to the aggregate Market Value of all Fleet Vessels provided however that the Fleet Vessels included in Total Assets should be adjusted to their market values which shall be acceptable to the Lender;

 

6

 

“Financial First Semester Testing Day means, 30 June in any year;

 

“Financial Second Semester Testing Day means, 31 December in any year;

 

“Financial Semester Testing Day means each of the Financial First Semester Testing Day and the Financial Second Semester Testing Day on which the Corporate Leverage Ratio of the Top Ships Group shall be tested as provided in this Clause 8.10 (together, the Financial Semester Testing Days);

 

“Fleet Market Value means, as of the date of calculation, the aggregate market value of all the Fleet Vessels as determined in accordance with the provisions (mutatis-mutandis) of Clause 8.5 (b) (Valuation of Vessels) of this Agreement;

 

“Fleet Vessels means, together, all of the vessels (including, but not limited to, the Vessels) from time to time owned or leased by members of the Top Ships Group which, at the relevant time, are included within the Total Assets of the Top Ships Group in the balance sheet of the Accounting Information (each a Fleet Vessel);

 

“Total Assets means, in respect of an Accounting Period, the aggregate value of all assets of the Top Ships Group included in the Accounting Information as current assets and the value of all investments and all other tangible and intangible assets of the Top Ships Group properly included in the Accounting Information as fixed assets in accordance with US GAAP; and

 

“Total Debt means, in respect of an Accounting Period, the aggregate on a consolidated basis of the Top Ships Group of all short term interest bearing bank debt included in the financial statements of the Top Ships Group under current liabilities plus the long term interest bearing bank debt.

 

5.2. Security Documents

         

With effect as from the Effective Date the definition “Security Documents” shall be deemed to include (a) the Security Documents as amended and/or supplemented in pursuance to the terms hereof, (b) the Corporate Guarantee Addendum and (c) any document or documents (including if the context requires the Loan Agreement) that may now or hereafter be executed as security for the repayment of the Loan, interest thereon and any other moneys payable by the Borrowers under the Principal Agreement and the Security Documents (as herein defined) as well as for the performance by the Borrowers and the other Security Parties (as herein defined) of all obligations, covenants and agreements pursuant to the Principal Agreement, this Supplemental Agreement, the Corporate Guarantee Addendum and/or the Security Documents.

 

 

5.3

Construction

 

With effect from the date hereof all references in the Principal Agreement to:

 

“this Agreement”, “hereunder” and the like and in the Security Documents to the “Loan Agreement” shall be construed as references to the Principal Agreement as amended and/or supplemented by this Supplemental Agreement.

 

 

7

 

 

6.

RECONFIRMATION


 

 

6.1

Reconfirmation of obligations

 

Each of the Borrowers hereby reconfirms its obligations under the Principal Agreement and its compliance with the covenants contained therein, as amended herein, of the Principal Agreement.

 

 

6.2

Acknowledgement

 

Each of the Security Parties acknowledges and agrees, for the avoidance of doubt, that each of the Security Documents to which it is a party and its obligations thereunder, shall remain in full force and effect notwithstanding the amendments made to the Principal Agreement by this Supplemental Agreement and the Corporate Guarantee Addendum and the waivers and other amendments agreed by the Lender in this Supplemental Agreement.

 

 

7.

CONTINUANCE OF PRINCIPAL AGREEMENT AND THE SECURITY DOCUMENTS


Save for the alterations to the Principal Agreement, and the Security Documents made or to be made pursuant to this Supplemental Agreement and the Corporate Guarantee Addendum, and such further modifications (if any) thereto as may be necessary to make the same consistent with the terms of this Supplemental Agreement and the Corporate Guarantee Addendum, the Principal Agreement shall remain in full force and effect and the security constituted by the Security Documents shall continue to remain valid and enforceable and the Borrowers hereby jointly and severally reconfirm their respective obligations under the Principal Agreement as hereby amended and under the Security Documents to which each of them is a party.

 

 

8.

ENTIRE AGREEMENT AND AMENDMENT


 

 

8.1

Entire Agreement

 

The Principal Agreement, the other Security Documents, and this Supplemental Agreement and the Corporate Guarantee Addendum represent the entire agreement among the parties hereto with respect to the subject matter hereof and supersede any prior expressions of intent or understanding with respect to this transaction and may be amended only by an instrument in writing executed by the parties to be bound or burdened thereby.

 

 

8.2

Supplemental Agreement - Application of Principal Agreement provisions

 

This Supplemental Agreement is supplementary to and incorporated in the Principal Agreement, all terms and conditions whereof, including, but not limited to, provisions on payments, calculation of interest and Events of Default, shall apply to the performance and interpretation of this Supplemental Agreement.

 

 

9.

FEES AND EXPENSES


 

9.1 Costs and expenses

 

The Borrowers covenant and agree to pay to the Lender upon demand and from time to time all reasonable and documented costs, charges, registration and recording fees, duties and expenses (including legal fees) incurred by the Lender in connection with the negotiation, preparation, execution and enforcement or attempted enforcement of this Supplemental Agreement and any document executed pursuant thereto and/or in preserving or protecting or attempting to preserve or protect the security created hereunder and/or under the Security Documents.

 

 

8

 

 

9.2

Stamp Duty

 

The Borrowers covenant and agree to pay and discharge all stamp duties, registration and recording fees and charges and any other charges whatsoever and wheresoever payable or due in respect of this Supplemental Agreement and/or any document executed pursuant hereto.

 

 

10.

ASSIGNMENT


 

The provisions of Clause 14 (Assignment, Transfer, Participation, Lending Office) of the Principal Agreement shall apply to this Supplemental Agreement as if the same were set out herein in full.

 

 

11.

MISCELLANEOUS


 

 

11.1

Incorporation of Loan Agreement provisions

 

Without prejudice to Clauses 6 (Reconfirmation), 7 (Continuance of Principal Agreement and the Security Documents) and 8 (Entire agreement and amendment) of this Supplemental Agreement, the provisions of Clauses 2.9 (Evidence), 15.7 (Invalidity of Terms) and 17.1 (Notices) of the Principal Agreement apply to this Supplemental Agreement as well and they are deemed to be repeated as if set forth in extenso herein.

 

11.2 Counterparts

         

This Supplemental Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument.

 

 

12.

LAW AND JURISDICTION


 

 

12.1

Governing Law

 

This Supplemental Agreement and any non-contractual obligations arising out of or in relation to it shall be governed by and construed in accordance with English law and the provisions of Clause 18 (Law and Jurisdiction) of the Principal Agreement shall apply mutatis mutandis to this Supplemental Agreement as if the same were set out herein in full.

 

 

12.2

Third Party Rights

 

A person who is not a party to this Supplemental Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce or to enjoy the benefit of any term of this Supplemental Agreement.

 

IN WITNESS whereof the parties hereto have caused this Supplemental Agreement to be duly executed the date first above written.

 

 

9

 

[Intentionally left blank]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10

 

 

EXECUTION PAGE

 

THE BORROWERS

 

  SIGNED by          )    
  Mr. Andreas Louka and     )    
  Mrs. Dimitra Karkaletsi    ) /s/ Andreas Louka  
  for and on behalf of       ) Attorney-in-fact  
  CALIFORNIA 19 INC.     )    
  of the Marshall Islands,    ) /s/ Dimitra Karkaletsi  
  in the presence of:        ) Attorney-in-fact  

 

  SIGNED by          )    
  Mr. Andreas Louka and     )    
  Mrs. Dimitra Karkaletsi    ) /s/ Andreas Louka  
  for and on behalf of       ) Attorney-in-fact  
  CALIFORNIA 20 INC.     )    
  of the Marshall Islands,    ) /s/ Dimitra Karkaletsi  
  in the presence of:        ) Attorney-in-fact  

 

THE CORPORATE GUARANTORS

 

  SIGNED by          )    
  Mr. Andreas Louka and     )    
  Mrs. Dimitra Karkaletsi    ) /s/ Andreas Louka  
  for and on behalf of       ) Attorney-in-fact  
  CENTRAL MARE INC.      )    
  of the Marshall Islands,    ) /s/ Dimitra Karkaletsi  
  in the presence of:        ) Attorney-in-fact  

 

  SIGNED by          )    
  Mr. Andreas Louka and     )    
  Mrs. Dimitra Karkaletsi    ) /s/ Andreas Louka  
  for and on behalf of       ) Attorney-in-fact  
  TOP SHIPS INC.  )    
  of the Marshall Islands,    ) /s/ Dimitra Karkaletsi  
  in the presence of:        ) Attorney-in-fact  

 

Witness to all above signatures:

 

/s/ Vasiliki Kouleri  

 Name: Vasiliki Kouleri

Address: 13 Defteras Merarchias Piraeus, Greece

Occupation: Attorney-at-Law

 

 

11

 

THE LENDER

 

  SIGNED by          )    
  Mr. Konstantinos Flokos and  )    
  Mrs. Chrysanthi Papathanasopoulou   ) /s/ Konstantinos Flokos  
  for and on behalf of       ) Attorney-in-fact  
  ALPHA BANK S.A.,   )    
  of Greece,  ) /s/ Chrysanthi Papathanasopoulo  
  in the presence of:        ) Attorney-in-fact  

 

/s/ Vasiliki Kouleri  

 Name: Vasiliki Kouleri

Address: Defteras Merarchias 13 Piraeus, Greece

Occupation: Attorney-at-law

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12
 

Exhibit 4.23

 

 

Private & confidential                                                                                                                                

 

 

 

 

Dated: 6th May, 2021

 

ALPHA BANK S.A.

 

(as Lender)

 

- and -

 

ATHENEAN EMPIRE INC.

 

(as Borrower)

 

 

LOAN AGREEMENT

for a secured floating interest rate loan facility of up to US$38,000,000

 

 

 

 

exh423.jpg

THEO V. SIOUFAS & CO.

LAW OFFICES

Piraeus

 

 

TABLE OF CONTENTS

 

CLAUSE

HEADINGS

PAGE

     

1.

PURPOSE, DEFINITIONS AND INTERPRETATION

1

2.

THE LOAN

24

3.

INTEREST

30

4.

REPAYMENT - PREPAYMENT

34

5.

PAYMENTS, TAXES AND COMPUTATION

37

6.

REPRESENTATIONS AND WARRANTIES

40

7.

CONDITIONS PRECEDENT

45

8.

UNDERTAKINGS

51

9.

EVENTS OF DEFAULT

65

10.

INDEMNITIES - EXPENSES – FEES

71

11.

SECURITY, APPLICATION, SET-OFF

77

12.

UNLAWFULNESS, INCREASED COST, BAIL-IN

80

13.

OPERATING ACCOUNT

82

14.

ASSIGNMENT, TRANSFER, PARTICIPATION, LENDING OFFICE

84

15.

MISCELLANEOUS

87

16.

NOTICES AND COMMUNICATIONS

90

17.

LAW AND JURISDICTION

92

     

 

 

SCHEDULES

 

 

1.

Form of Drawdown Notice

 

 

2.

Form of Insurance Letter

 

 

3.

Form of Compliance Certificate

 

 

4.

Form of Designation Notice

 

 

 

THIS AGREEMENT is dated the 6th day of May, 2021 and made BETWEEN:

 

(1)

ALPHA BANK S.A., a banking société anonyme incorporated in and pursuant to the laws of the Hellenic Republic with its head office at 40 Stadiou Street, Athens, Greece, acting, except as otherwise herein provided, through its office at 93 Akti Miaouli, Piraeus, Greece, as lender (hereinafter called the “Lender”, which expression shall include its successors and assignees); and

 

(2)

ATHENEAN EMPIRE INC., a corporation duly incorporated in the Republic of the Marshall Islands having its registered address at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960 (hereinafter called the “Borrower”, which expression shall include its successors

 

AND IT IS HEREBY AGREED as follows:

 

1.

PURPOSE, DEFINITIONS AND INTERPRETATION


 

1.1

Amount and Purpose

 

This Agreement sets out the terms and conditions upon and subject to which it is agreed that the Lender will make available to the Borrower a secured term loan facility in an aggregate amount of up to the lesser of (a) Dollars Thirty eight million ($38,000,000) representing 62% of the Contract Price of the Vessel and (b) 62% of the of the Market Value of the Vessel, as determined in accordance with Clause 11.3 (Valuation of Vessel) by valuation of the Vessel obtained maximum twenty (20) days prior to the Drawdown Date the Market Value , to be made available by way of one (1) Advance, to be used for the purposes of financing part of the Contract Price of the Vessel.

 

1.2

Definitions

 

Subject to Clause 1.3 (Interpretation) and Clause 1.4 (Construction of certain terms), in this Agreement (unless otherwise defined in the relevant Finance Document and unless the context otherwise requires) and the other Finance Documents each term or expression defined in the recital of the parties and in this Clause shall have the meaning given to it in the recital of the parties and in this Clause:

 

“Accounts Pledge Agreement means an agreement to be entered into between the Borrower and the Lender for the creation of a first priority pledge over the Operating Account in favour of the Lender, in form and substance as the Lender may approve or require, as the same may from time to time be amended and/or supplemented;

 

“Advance” means each borrowing of a portion of the Commitment by the Borrower or (as the context may require) the principal amount of such borrowing;

 

“Alternative Rate” means a rate agreed between the Lender and the Borrower on the basis of which (instead of LIBOR) the interest rate is determined pursuant to Clause 3.6 (Market disruption Non Availability);

 

“Approved Flag” means, in relation to the Vessel, the Marshall Islands flag or the Liberian flag or such other flag as the Lender may approve (in its reasonable discretion) as the flag on which the Vessel is or, as the case may be, shall be registered;

 

“Approved Flag State” means, in relation to the Vessel, the Republic of the Marshall Islands or the Republic of Liberia or such other country proposed in writing by the Borrower to the Lender and approved (in its reasonable discretion) by the Lender, as being the “Approved Flag State” of the Vessel for the purposes of the Finance Documents;

 

 

1

 

“Approved Commercial Manager” means for the time being Central Shipping Inc., a company lawfully incorporated and validly existing under the laws of the Republic of the Marshall Islands, or any other person appointed by the Borrower with the consent of the Lender, as the commercial and technical manager of the Vessel (with subcontracting of Technical Management to the Approved Technical Manager), and includes its successors in title;

 

“Approved Managers” means, for the time being, together, the Approved Commercial Manager and the Approved Technical Manager and “Approved Manager” means either of them, as the context may require;

 

“Approved Managers Undertaking” in relation to the Vessel means a undertaking and subordination to be executed by the relevant Approved Manager, as commercial or, as the case may be, technical manager of the Vessel, in favour of the Lender, such Approved Manager’s Undertaking to be in form and substance as the Lender may approve or require, as the same may from time to time be amended and/or supplemented (together, the “Approved Managers Undertakings”);

 

“Approved Shipbrokers” means Golden Destiny, Vessel’s Value (on line), Clarksons, SSY, Breamar ACM, Arrow Shipbroking Group, Fearnleys, Allied Shipbrokers, Howe Robinson or any other first class independent firm of internationally known shipbrokers, proposed by the Borrower and approved by the Lender and in the singular means any of them, as the context may require;

 

“Approved Technical Manager” means for the time being Central Mare Inc., a company lawfully incorporated and validly existing under the laws of the Republic of the Marshall Islands and having an office established in Greece pursuant to the Greek laws 378/68, 27/75, 2234/94, 3752/09 and 4150/13 (as amended and in force at the date hereof) at 1, Vassilissis Sofias Str. & Meg. Alexandrou Str., Maroussi, Attiki, Greece, or any other person appointed by the Borrower with the consent of the Lender, as the technical manager of the Vessel, and includes its successors in title;

 

“Assignable Charterparty” means any time or bareboat charterparty (irrespective of the duration of such charterparty) or contract of affreightment, agreement or related document in respect of the employment of the Vessel (including the entry of the Vessel in any pool irrespective of its duration) whether now existing or hereinafter entered into, for a period of more than twelve (12) months to be made between the Borrower or any person, firm or company on its behalf and any charterer (and shall include any addenda thereto), and includes the Clearlake Assignable Charterparty;

 

“Assignee” has the meaning ascribed thereto in Clause 14.3 (Assignment by the Lender);

 

“Availability Period” means the period starting on the date hereof and ending on the earlier of:

 

 

(a)

the Delivery Date of the Vessel;

 

 

(b)

the Termination Date; or

 

 

(c)

such earlier date (if any): (i) on which the whole Commitment has been advanced by the Lender to the Borrower, or (ii) on which the Commitment is reduced to zero pursuant to Clauses 3.6 (Market disruption  Non Availability), 9.2 (Consequences of Default  Acceleration), 12.1 (Unlawfulness) or any other Clause of this Agreement;

 

2

 

“Bail-In Action” means the exercise of any Write-down and Conversion Powers;

 

“Bail-In Legislation” means:

 

 

(a)

in relation to an EEA Member Country which has implemented, or which at any time implements, Article 55 of Directive 2014/59/EU establishing a framework for the recovery and resolution of credit institutions and investment firms, the relevant implementing law or regulation as described in the EU Bail-In Legislation Schedule from time to time; and

 

 

(b)

in relation to any other state, any analogous law or regulation from time to time which requires contractual recognition of any Write-down and Conversion Powers contained in that law or regulation;

 

“Banking Day” means any day on which banks and foreign exchange markets in New York, London, Piraeus and Athens and (with respect of the Delivery Date only) S, Korea and in each other country or place in or at which an act is required to be done under this Agreement in accordance with the usual practice of the Lender, are open for the transaction of business of the nature contemplated in this Agreement;

 

“Basel II Accord” means the ”International Convergence of Capital Measurement and Capital Standards, a Revised Framework” published by the Basel Committee on Banking Supervision in June 2004 in the form existing on the date of this Agreement;

 

“Basel II Approach” means either the Standardised Approach or the relevant Internal Ratings Based Approach (each as defined in the Basel II Accord) adopted by the Lender (or its holding company) for the purposes of implementing or complying with the Basel II Accord;

 

“Basel II Regulation” means (a) any law or regulation implementing the Basel II Accord (including the relevant provisions of CRD IV and CRR) to the extent only such law or regulation re-enacts and/or implements the requirement of the Basel II Accord but excluding any provision of such law or regulation implementing the Basel III Accord or (b) any Basel II Approach adopted by the Lender;

 

“Basel III Accord” means:

 

 

(a)

the agreements on capital requirements, 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;

 

“Basel III Regulation” means any law or regulation implementing the Basel III Accord save and to the extent that it re-enacts a Basel II Regulation;

 

“Beneficial Shareholder(s) means the person or persons disclosed to the Lender by an individual acceptable to the Lender as being the legal and beneficial owner or owners (either directly and/or through companies beneficially owned by such person or persons or members of his/her direct family and/or trusts or foundations of which such person or persons or members of his/her direct family are legal and beneficial owners) of 100% of the shares and voting rights in each of the Borrower and the Approved Managers;

 

3

 

“Borrowed Money” means Financial Indebtedness incurred in respect of (i) money borrowed or raised, (ii) any bond, note, loan stock, debenture or similar instrument, (iii) acceptance of documentary credit facilities, (iv) deferred payments for assets or services acquired, (v) rental payments under leases (whether in respect of land, machinery, equipment or otherwise) entered into primarily as a method of raising finance or of financing the acquisition of the asset leased, (vi) guarantees, bonds, stand-by letters of credit or other instruments issued in connection with the performance of contracts and (vii) guarantees or other assurances against financial loss in respect of Financial Indebtedness of any person falling within any of sub-paragraphs (i) to (vi) above;

 

“Borrower” means the Borrower as specified at the beginning of this Agreement;

 

“Break Costs” means all costs, losses, premiums or penalties incurred by the Lender in the circumstances contemplated by Clause 10.1 (Miscellaneous indemnities), or as a result of it receiving any prepayment of all or any part of the Loan (whether pursuant to Clause 4 (Repayment-Prepayment) or otherwise), or any other payment under or in relation to the Security Documents on a day other than the due date for payment of the sum in question, and includes (without limitation) any losses or costs incurred in liquidating or re-employing deposits from third parties acquired to effect or maintain the Loan;

 

“Builder” means Hyundai Heavy Industries Co., Ltd., a company organized and existing under the laws of Republic of Korea, having its principal office at 1000, Bangeojinsunhwan-doro, Dong-Fu, Ulsan, Korea, and includes its successors in title;

 

“Builders Certificate” means the certificate produced by the Builder evidencing (inter alia) completion of construction of the Vessel;

 

“Charterparty Assignment” means, in relation to the Vessel, an assignment of the rights of its Owner under the Clearlake Charterparty and after the termination thereof of any other Assignable Charterparty and any guarantee of such Assignable Charterparty executed or to be executed by the Borrower in favour of the Lender and the acknowledgement of notice of the assignment in respect of such Assignable Charterparty to be obtained (on best effort basis by the Borrower) in form and substance as the Lender may approve or require, as the same may from time to time be amended and/or supplemented and, “Charterparty Assignments” means all of them;

 

“Classification means the classification referred to in the Mortgage registered on the Vessel with the Classification Society or such other classification society as the Lender shall, at the request of the Borrower, has agreed in writing, shall be treated as the Classification Society for the purposes of the Finance Documents;

 

“Classification Society means for the purpose of the Finance Documents, the classification society designated in the Mortgage or such other classification society being a generally recognised first class classification society and member of the IACS which the Lender shall, at the request of the Borrower, have agreed upon in writing (such agreement not to be unreasonably withheld);

 

“Clearlake Assignable Charterparty” means the time charter dated 1 April, 2020 made between the Borrower, as owner and Clearlake Shipping Pte Ltd, of Singapore, as charterers (the “Charterer”), for the time-charter employment of the Vessel of the Borrower, for a period of about three (3) years +1+1 year (at Charterer’s option) at a rate of $33,950 per dayand $34,750 for year 1 of $36,750 , as amended from time to time;

 

4

 

“Commitment” means the amount which the Lender agreed to lend to the Borrower under Clause 2.1 (Commitment to Lend) as reduced by any relevant term of this Agreement;

 

“Commitment Letter means the Commitment Letter dated 17th March, 2021 addressed by the Lender to the Corporate Guarantor and accepted by them on 23rd March, 2021, and shall include any amendments or addenda thereto;

 

“Compulsory Acquisition means requisition for title or other compulsory acquisition, requisition, appropriation, expropriation, deprivation, forfeiture or confiscation for any reason of the Vessel, whether for full or part consideration, a consideration less than its proper value, a nominal consideration or without any consideration, which is effected by any Government Entity or other competent authority, or by any person or persons claiming to be or to represent any Government Entity, whether de jure or de facto, but shall exclude requisition for use or hire not involving requisition of title;

 

“Confirmation” and “Early Termination Date”, in relation to any continuing Designated Transaction, have the meanings given in the Master Agreement;

 

“Contract means the shipbuilding contract dated 17th December, 2019 made between the Central Group Inc., of Liberia (the “Original Buyer”), as ‘BUYER’, the Builder, as ‘BUILDER’, for the Vessel (Hull No. S866), as novated by a novation agreement dated 1st April, 2020 and made between the Original Buyer, the Borrower, as “NEW BUYER’ and the Builder, as ‘BUILDER’, relating to the construction by the Builder and the sale by the Builder to, and the purchase by, the Borrower of the Vessel, as the same may from time to time is amended and/or supplemented;

 

“Contract Price” in relation to the Vessel, means Sixty one million seven hundred twenty two thousand Dollars ($61,722,000) (which excludes the cost of the BUYER’s supplied items) or such other lesser or higher sum in Dollars as may be payable by the Borrower to the Builder pursuant to the Contract;

 

“Corporate Guarantee” means an irrevocable and unconditional guarantee given or, as the context may require, to be given by the Corporate Guarantor in form and substance satisfactory to the Lender as security for the Outstanding Indebtedness and any and all other obligations of the Borrower under this Agreement and the Security Documents, as the same may from time to time be amended and/or supplemented;

 

“Corporate Guarantor” means TOP SHIPS INC., a corporation incorporated in the Republic of the Marshall Islands, having its registered address at the Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands, MH96960 and/or any other person nominated by the Borrower and acceptable to the Lender which may give a Corporate Guarantee, and includes its successors in title;

 

“Corporate Guarantors Controlling Shareholders means in respect of the Borrower, the person or persons described in the Side letter as being the ultimate legal and beneficial owner or owners (either directly and/or through companies beneficially owned by such person or persons) of at least 50.1% of the voting rights attaching to those shares;

 

5

 

“CRD IV” means:

 

 

(i)

Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC, as amended, supplemented or restated; and

 

 

(c)

any other law or regulation which implements Basel III;

 

“Credit Support Document” means any document described as such in the Master Agreement and, where the context permits, any other document referred to in any Credit Support Document which has the effect of creating a Security Interest in favour of the Swap Bank;

 

“Credit Support Provider” means any person (other than the Borrower) described as such in the Master Agreement;

 

“CRR” means Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending regulation (EU) No. 648/2012, as amended, supplemented or restated;

 

Debt Service” in relation to any period means an amount (as conclusively certified by the Lender) which is equal to the aggregate amounts of principal and interest which the Borrower are obliged to pay to the Lender pursuant to this Agreement and the other Security Documents during that period;

 

“Default” means any means any event or circumstance specified in Clause 9.1 (Events) which would (with the expiry of a grace period, the giving of notice, the making of any determination under the Security Documents or any combination of any of the foregoing) would constitute an Event of Default;

 

“Default Rate” means that rate of interest per annum which is determined in accordance with the provisions of Clause 3.4 (Default Interest);

 

“Delivery” means the delivery of the Vessel by the Builder to, and the acceptance of the Vessel by, the Borrower pursuant to the Contract;

 

“Delivery Date” means the date upon which the Delivery of the Vessel occurs;

 

“Designated Transaction" means a Designated Transaction which fulfils the following requirements:

 

 

(a)

it is entered into by the Borrower pursuant to the Master Agreement with the Swap Bank which, at the time the Designated Transaction is entered into, is also a Lender and the Borrower's rights under the Master Agreement are subject to the Master Agreement Swap Assignment;

 

 

(b)

its purpose is the hedging of the Borrower’s exposure under this Agreement to fluctuations in LIBOR arising from the funding of the Loan (or any part thereof) for a period expiring no later than the Final Maturity Date; and

 

 

(c)

it is designated by the Borrower, by delivery by the Borrower to the Swap Bank of a notice of designation as a Designated Transaction for the purposes of the Finance Documents in the form of the Schedule 7 (Designation Notice) (or in any other form which the Swap Bank approves);

 

6

 

“DOC” means a document of compliance issued to an Operator in accordance with rule 13 of the ISM Code;

 

“Dollars (and the sign “$”) means the lawful currency for the time being of the United States of America;

 

“Drawdown Date” means the date, being a Banking Day, requested by the Borrower for the Loan to be made available, or (as the context requires) the date on which the Loan is actually made available;

 

“Drawdown Notice” means a notice substantially in the terms of Schedule 1 (Form of Drawdown Notice) (or in any other form which the Lender approves);

 

“Earnings” means all moneys whatsoever which are now, or later become, payable (actually or contingently) to the Borrower and which arise out of the use or operation of the Vessel, including (but not limited to) all freight, hire and passage moneys, compensation payable to the Borrower in the event of requisition of that for hire, remuneration for salvage and towage services, demurrage and detention moneys, contributions of any nature whatsoever in respect of general average, damages for breach (or payments for variation or termination) of any charterparty or other contract for the employment of that and any other earnings whatsoever due or to become due to the Borrower in respect of that and all sums recoverable under the Insurances in respect of loss of Earnings and includes, if and whenever that is employed on terms whereby any and all such moneys as aforesaid are pooled or shared with any other person, that proportion of the net receipts of the relevant pooling or sharing agreement which is attributable to that;

 

“EEA Member Country” means any member state of the European Union, Iceland, Liechtenstein and Norway;

 

“Environmental Affiliate” means any agent or employee of the Borrower or any other Relevant Party or any person having a contractual relationship with the Borrower or any other Relevant Party in connection with any Relevant Ship or her operation or the carriage of cargo thereon;

 

“Environmental Approval” means any consent, authorisation, licence or approval of any governmental or public body or authorities or courts applicable to any Relevant Ship or her operation or the carriage of cargo thereon and/or passengers therein and/or provisions of goods and/or services on or from the Relevant Ship required under any Environmental Law;

 

“Environmental Claim” means:

 

 

(a)

any claim by any governmental, judicial or regulatory authority which arises out of an Environmental Incident or which relates to any Environmental Law; or

 

 

(b)

any claim by any other person which relates to an Environmental Incident,

 

and “claim” means (i) a claim for damages, compensation, fines, penalties or any other payment of any kind which exceeds $700,000 or the equivalent in any other currency) per Vessel per incident or (ii) one or more claims for damages, compensation, fines, penalties or any other payment of any kind, the subject matter of which exceeds $700,000 (or the equivalent in any other currency) in aggregate, whether such claim or claims are in relation to one or both Vessel and whether resulting from one incident or a series of incidents;

 

“Environmental Incident” means (i) any release of Material of Environmental Concern from the Vessel, (ii) any incident in which Material of Environmental Concern is released from a vessel other than the Vessel and which involves collision between the Vessel and such other vessel or some other incident of navigation or operation, in either case, where the Vessel, the Owner or the Approved Managers (or either of them) is/are actually or allegedly at fault or otherwise liable (in whole or in part) or (iii) any incident in which Material of Environmental Concern is released from a vessel other than the Vessel and where the Vessel is actually or potentially liable to be arrested as a result and/or where the Borrower or the Approved Managers (or either of them) is/are actually or allegedly at fault or otherwise liable to any legal or administrative action;

 

7

 

“Environmental Laws” means all national, international and state laws, rules, regulations, treaties and conventions applicable to any Relevant Ship pertaining to the pollution or protection of human health or the environment including, without limitation, the carriage of Materials of Environmental Concern and actual or threatened emissions, spills, releases or discharges of Materials of Environmental Concern and actual or threatened emissions, spills, releases or discharges of Materials of Environmental Concern from any Relevant Ship (including, without limitation, the United States Oil Pollution Act of 1990 and any comparable laws of the individual States of the United States of America);

 

“EU Bail-In Legislation Schedule” means the document described as such and published by the Loan Market Association (or any successor person) from time to time;

 

“Event of Default” means any event or circumstance set out in Clause 9.1 (Events) or described as such in any other of the Finance Documents;

 

“Expenses” means the aggregate at any relevant time (to the extent that the same have not been received or recovered by the Lender) of:

 

 

(a)

all losses, liabilities, costs, charges, expenses, damages and outgoings of whatever nature, (including, without limitation, Taxes, repair costs, registration fees and insurance premiums, crew wages, repatriation expenses and seamen’s pension fund dues) suffered, incurred, charged to or paid or committed to be paid by the Lender in connection with the exercise of the powers referred to in or granted by any of the Finance Documents or otherwise payable by the Borrower in accordance with the terms of any of the Finance Documents;

 

 

(b)

the expenses referred to in Clause 10.2 (Expenses); and

 

 

(c)

interest on all such losses, liabilities, costs, charges, expenses, damages and outgoings from, in the case of Expenses referred to in sub-paragraph (b) above, the date on which such Expenses were demanded by the Lender from the Borrower and in all other cases, the date on which the same were suffered, incurred or paid by the Lender until the date of receipt or recovery thereof (whether before or after judgement) at the Default Rate (as conclusively certified by the Lender);

 

“FATCA” means:

 

 

(a)

sections 1471 to 1474 of the US Internal Revenue Code of 1986 (the “Code”) or any associated regulations or other associated official guidance;

 

 

(b)

any treaty, law, regulation or other official guidance enacted in any other jurisdiction, 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;

 

8

 

“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;

 

“Final Maturity Date” means the sixth (6th) anniversary of the Drawdown Date ;

 

“Finance Documents” means, together, this Agreement, the Master Agreement, the Security Documents, the Side Letter, the Insurance Letter and any other document designated as such by the Lender and the Borrower;

 

“Financial Indebtedness” means, in relation to a person (the “debtor”), a liability of the debtor:

 

 

(a)

for principal, interest or any other sum payable in respect of any moneys borrowed or raised by the debtor;

 

 

(b)

under any loan stock, bond, note or other security issued by the debtor;

 

 

(c)

under any acceptance credit, guarantee or letter of credit facility made available to the debtor;

 

 

(d)

under a financial lease, a deferred purchase consideration arrangement or any other agreement having the commercial effect of a borrowing or raising of money by the debtor;

 

 

(e)

under any interest or currency swap or any other kind of derivative transaction entered into by the debtor or, if the agreement under which any such transaction is entered into requires netting of mutual liabilities, the liability of the debtor for the net amount; or

 

 

(f)

under a guarantee, indemnity or similar obligation entered into by the debtor in respect of a liability of another person which would fall within (a) to (e) if the references to the debtor referred to the other person;

 

“Financial Year means, in relation to the Borrower, each period of one (1) year commencing on 1st January thereof in respect of which financial statements referred to in Clause 8.1(f) (Financial statements) are or ought to be prepared;

 

“First Repayment Date” means the date falling three (3) months from the Drawdown Date;

 

“Government Entity” means and includes (whether having a distinct legal personality or not) any national or local government authority, board, commission, department, division, organ, instrumentality, court or agency and any association, organisation or institution of which any of the foregoing is a member or to whose jurisdiction any of the foregoing is subject or in whose activities any of the foregoing is a participant;

 

“Governmental Withholdings” means withholdings and any restrictions or conditions resulting in any charge whatsoever imposed, either now or hereafter, by any sovereign state or by any political sub-division or taxing authority of any sovereign state;

 

9

 

“Group” means together the Borrower, the Corporate Guarantor and their respective direct or indirect Subsidiaries and all other shipping companies now or in the future substantially directly or indirectly owned and/or controlled by same beneficial interests as the Borrower , and “member of the Group” means any member of the Group;

 

“Insurance Letter” in relation to the Vessel means a letter from the Borrower in the form of Schedule 2 (Form of Insurance Letter);

 

“Insurances” means:

 

 

(a)

all policies and contracts of insurance and reinsurance, policies or contracts(including, without limitation, all entries of the Vessel in a protection and indemnity, hull and machinery, war risks or other mutual insurance association), effected in respect of the Vessel, its Earnings or otherwise in relation to it whether before, on or after the date of this Agreement; and

 

 

(b)

all rights (including, without limitation, any and all rights or claims which the Borrower owning the Vessel may have under or in connection with any cut-through clause relative to any reinsurance contract relating to the aforesaid policies or contracts of insurance) and other assets relating to, or derived from, any of the foregoing, including any rights to a return of a premium and any rights in respect of any claim whether or not the relevant policy, contract of insurance or entry has expired on or before the date of this Agreement;

 

“Interest Payment Date” means in respect of the Loan or any part thereof in respect of which a separate Interest Period is fixed the last day of the relevant Interest Period and in case of any Interest Period longer than three (3) months the date(s) falling at successive three (3) monthly intervals during such longer Interest Period and the last day of such Interest Period, provided, however, that if any of the aforesaid dates falls on a day which is not a Banking Day the Borrower shall pay the accrued interest on the first Banking Day thereafter unless the result of such extension would be to carry such Interest Payment Date over into another calendar month in which event such Interest Payment Date shall be the immediately preceding Banking Day;

 

“Interest Period” means in relation to the Loan or any part thereof, each period for the calculation of interest in respect of the Loan or such part ascertained in accordance with Clauses 3.2 (Selection of Interest Period) and 3.3 (Determination of Interest Periods);

 

“ISM Code” means in relation to its application to the Owner, the Vessel and their operation:

 

 

(a)

The International Management Code for the Safe Operation of Ships and for Pollution Prevention”, currently known or referred to as the “ISM Code”, adopted by the Assembly of the International Maritime Organisation by Resolution A. 741(18) on 4th November, 1993 and incorporated on 19th May, 1994 into chapter IX of the International Convention for the Safety of Life at Sea 1974 (SOLAS 1974); and

 

 

(b)

all further resolutions, circulars, codes, guidelines, regulations and recommendations which are now or in the future issued by or on behalf of the International Maritime Organisation or any other entity with responsibility for implementing the ISM Code, including without limitation, the “Guidelines on implementation or administering of the International Safety Management (ISM) Code by Administrations” produced by the International Maritime Organisation pursuant to Resolution A. 788(19) adopted on 25th November, 1995;

 

as the same may be amended, supplemented or replaced from time to time;

 

10

 

“ISM Code Documentation” includes:

 

 

(a)

the DOC and SMC issued by a classification society in all respects acceptable to the Lender in its absolute discretion pursuant to the ISM Code in relation to the Vessel within the period specified by the ISM Code;

 

 

(b)

all other documents and data which are relevant to the ISM SMS and its implementation and verification which the Lender may require by request; and

 

 

(c)

any other documents which are prepared or which are otherwise relevant to establish and maintain the Vessel’s or each Owner’s compliance with the ISM Code which the Lender may require by request;

 

“ISM SMS” means the safety management system which is required to be developed, implemented and maintained under the ISM Code;

 

“ISPS Code” means the International Ship and Port Security Code of the International Maritime Organization and includes any amendments or extensions thereto and any regulation issued pursuant thereto;

 

“ISSC” means an International Ship Security Certificate issued in respect of the Vessel pursuant to the ISPS Code;

 

“Lender” means the Lender as specified in the beginning of this Agreement, and includes its successors in title and transferees;

 

“Lending Office” means the office of the Lender appearing at the beginning of this Agreement or any other office of the Lender designated by the Lender as the Lending Office by notice to the Borrower;

 

“LIBOR” means, in relation to the Loan or any part of the Loan:

 

 

(a)

the applicable Screen Rate at or about 11.45 a.m. (London time) on the Quotation Day for Dollars and for a period equal in length to the Interest Period then applicable to the Loan or that part of the Loan; or

 

 

(b)

as otherwise determined pursuant to Clause3.6(d) (Alternative basis of interest or funding),

 

and if, in either case, that rate is less than zero, LIBOR shall be deemed to be zero;

 

“Loan” means the aggregate principal amount borrowed by the Borrower in respect of the Commitment or (as the context may require) the principal amount owing to the Lender under this Agreement at any time;

 

“Major Casualty means any casualty to the Vessel in respect whereof the claim or the aggregate of the claims against all insurers, before adjustment for any relevant franchise or deductible, exceeds the Major Casualty Amount;

 

“Major Casualty Amount means Seven hundred thousand Dollars ($700,000) or the equivalent in any other currency;

 

“Management Agreement means the management agreement made between the Borrower and the Approved Commercial Manager and the sub-management agreement made between the Approved Commercial Manager and the Approved Technical Manager providing (inter alia) for the relevant Approved Manager to manage the Vessel as therein provided, as amended, supplemented or substituted from time to time (together, the “Management Agreements”);

 

11

 

“MAPI have the meaning given in Clause 10.9 (MII & MAPI costs);

 

“Margin” means three per centum (3%) per annum;

 

“Market Value” means the market value of the Vessel as determined in accordance with Clause 8.5 (Security cover - Valuation of the Vessel);

 

“Master Agreement” means the Master Agreement (on the 2002 ISDA (Multicurrency - Crossborder) form as modified or any other form of master agreement relating to interest or currency exchange Designated Transactions) made or to be made between the Swap Bank and the Borrower, and includes the Schedule thereto, the Credit Support Annex and all Designated Transactions from time to time entered into and Confirmations from time to time exchanged under the Master Agreement and any amending, supplementing or replacement agreements made from time to time;

 

“Master Agreement Liabilities” means, at any relevant time, all liabilities actual or contingent, present or future, of the Borrower to the Swap Bank under the Master Agreement;

 

“Master Agreement Swap Assignment” means a security assignment executed or (as the context may require) to be executed by the Borrower in favour of the Lender, in form and substance satisfactory to the Swap Bank, as the same may from time to time be amended and/or supplemented;

 

“Material Adverse Change” means any event or series of events which, in the opinion of the Lender, is likely to have a Material Adverse Effect;

 

“Material Adverse Effect” means a material, in the opinion of the Lender, adverse effect on:

 

 

(a)

the business, property, assets, liabilities, operations or condition (financial or otherwise) of the Borrower and/or any Security Party;

 

 

(b)

the ability of the Borrower and/or any Security Party to (i) comply with or perform any of its obligations or (ii) discharge any of its liabilities, under any Finance Document as they fall due; or

 

 

(c)

the validity, legality or enforceability of any Finance Document or the rights and remedies of the Lender under any Finance Document;

 

“Material of Environmental Concern” means and includes pollutants, contaminants, toxic substances, oil as defined in the United States Oil Pollution Act of 1990 and all hazardous substances as defined in the United States Comprehensive Environmental Response, Compensation and Liability Act 1980;

 

“MII have the meaning given in Clause 10.9 (MII & MAPI costs);

 

“month” means a period beginning in one calendar month and ending in the next calendar month on the day numerically corresponding to the day of the calendar month on which it started, provided that (i) if the period started on the last Banking Day in a calendar month or if there is no such numerically corresponding day, it shall end on the last Banking Day in such next calendar month and (ii) if such numerically corresponding day is not a Banking Day, the period shall end on the next following Banking Day in the same calendar month but if there is no such Banking Day it shall end on the preceding Banking Day and “months” and “monthly” shall be construed accordingly;

 

12

 

“Mortgage means the first priotity/preferred ship mortgage on the Vessel to be executed by the Borrower in favour of the Lender in form and substance as the Lender may approve or require, as the same may from time to time be amended and/or supplemented;

 

“Operating Account” means the account to be opened and maintained in the name of the Borrower with the Lending Office or with any other branch of the Lender or any other office of the Lender or with such other bank as may be required by and at the discretion of the Lender pursuant to Clause 13.7 (Relocation of Accounts) and shall include any sub-accounts or call accounts (whether in Dollars or any other currency) opened under the same designation or any revised designation or number from time to time notified by the Lender to the Borrower;

 

“Operating Expenses means the total operating expenses of the Vessel, including, but not limited to, the expenses for operating, crewing, victualing, insuring, maintaining, repairing and generally trading the Vessel (and if applicable, voyage expenses), the expenses for spares, administration and management of the Vessel (inclusive of the management fees) as well as the reserves that the Owner, acting reasonably, consider necessary for the commercial operation of the Vessel and the costs of intermediate and special surveys and dry docking of the Vessel;

 

“Operator” means any person who is from time to time during the Security Period concerned in the operation of the Vessel and falls within the definition of “Company” set out in rule 1.1.2. of the ISM Code;

 

“Outstanding Indebtedness” means the aggregate of (a) the Loan and interest accrued and accruing thereon, (b) the Expenses, (c) the Master Agreement Liabilities, (d) all other sums of any nature (together with all interest on any of those sums) which from time to time may be payable by the Borrower to the Lender pursuant to the Finance Documents, whether actually or contingently, (d) any damages payable as a result of any breach by the Borrower of any of the Finance Documents and (e) any damages or other sums payable as a result of any of the obligations of the Borrower under or pursuant to any of the Finance Documents being disclaimed by a liquidator or any other person, or, where the context permits, the amount thereof for the time being outstanding;

 

“Owner” means the Borrower;

 

“Party” means a party to this Agreement;

 

“Permitted Security Interest” means:

 

 

(a)

Security Interests created by the Finance Documents;

 

 

(b)

liens for unpaid crew’s wages in accordance with usual maritime practice;

 

 

(c)

liens for salvage;

 

 

(d)

liens arising by operation of law for not more than 2 months’ prepaid hire under any charter in relation to the Vessel not prohibited by this Agreement;

 

 

(e)

liens for master’s disbursements incurred in the ordinary course of trading and any other lien arising by operation of law or otherwise in the ordinary course of the operation, repair or maintenance of the Vessel, provided such liens do not secure amounts more than 60 days overdue (unless the overdue amount is being contested in good faith by appropriate steps) and, in the case of liens for repair or maintenance, in case the Vessel is put in the possession of any person for the purpose of work being done upon her in an amount exceeding or likely to exceed the Major Casualty Amount provided that (i) either that person has first given to the Lender and in terms satisfactory to it a written undertaking not to exercise any lien on the Vessel or her earnings for the cost of such work or (ii) the previous consent of the Lender shall have been obtained;

 

13

 

 

(f)

any Security Interest created in favour of a plaintiff, claimant or defendant in any action of the court or tribunal before whom such action is brought as security for costs and expenses where the Borrower is prosecuting or defending such action in good faith by appropriate steps; and

 

 

(g)

Security Interests arising by operation of law in respect of taxes which are not overdue for payment other than taxes being contested in good faith by appropriate steps and in respect of which appropriate reserves have been made;

 

“Pledged Minimum Liquidity has the meaning ascribed thereto in Clause 8.1(j) (Pledged Minimum Liquidity);

 

“Protocol of Delivery and Acceptance” means the protocol of delivery and acceptance in respect of the Vessel executed and delivered or (as the context may require) to be executed and delivered by or on behalf of the Builder and the Borrower, evidencing the delivery and acceptance of the Vessel pursuant to the Contract, such protocol to be in a form satisfactory to the Lender;

 

“Quotation Day means, in relation to any Interest Period (or any other period for which an interest rate is to be determined under any provision of a Finance Document), the second day before the day on which quotations would ordinarily be given by leading lenders in the London interbank market for deposits in the currency in relation to which such rate is to be determined for delivery on the first day of that Interest Period or other period;

 

“Registry” means the offices of such registrar, commissioner or representative of the relevant Approved Flag State who is duly authorised to register the Vessel, the Owner’s title thereto and the Mortgage over the Vessel under the laws and flag of the Approved Flag State;

 

“Regulatory Agency” means the Government Entity or other organization in the relevant Approved Flag State which has been designated by the government of the relevant Approved Flag State to implement and/or administer and/or enforce the provisions of the ISM Code;

 

“Related Company means any company which is under the control of the Corporate Guarantor or any other entity which is a Subsidiary of the Corporate Guarantor and any Subsidiary of any such company or entity (together, the “Related Companies”);

 

“Relevant Jurisdiction” means any jurisdiction in which or where any Security Party is incorporated, resident, domiciled, has a permanent establishment, carries on, or has a place of business or is otherwise effectively connected;

 

“Relevant Nominating Body means any applicable central bank, regulator or other supervisory authority or a group of them, or any working group or committee sponsored or chaired by, or constituted at the request of, any of them or the Financial Stability Board;

 

“Relevant Party means the Borrower, the Borrower’ Related Companies, the Corporate Guarantor and the Corporate Guarantor’s Related Companies;

 

14

 

“Relevant Ship means each of the Vessel and any other vessel from time to time (whether before or after the date of this Agreement) owned, managed or crewed by, or chartered to, by any Relevant Party;

 

“Repayment Date” means each of the dates specified in Clause 4.1 (Repayment) on which the Repayment Instalments shall be payable by the Borrower to the Lender (together, the “Repayment Dates”);

 

“Repayment Instalment” means each of the instalments which becomes due for repayment by the Borrower to the Lender on a Repayment Date pursuant to Clause 4.1 (Repayment) (together, the “Repayment Instalments”);

 

“Replacement Benchmark” means a benchmark rate which is:

 

 

(a)

formally designated, nominated or recommended as the replacement for a Screen Rate by:

 

 

(i)

the administrator of that Screen Rate (provided that the market or economic reality that such benchmark rate measures is the same as that measured by that Screen Rate); or

 

 

(ii)

any Relevant Nominating Body,

 

and if replacements have, at the relevant time, been formally designated, nominated or recommended under both paragraphs, the "Replacement Benchmark" will be the replacement under paragraph (ii) above;

 

 

(b)

in the opinion of the Lender and the Borrower, generally accepted in the international loan markets as the appropriate successor to a Screen Rate; or

 

 

(c)

in the opinion of the Lender and the Borrower, an appropriate successor to a Screen Rate;

 

“Requisition Compensation” means all compensation or other moneys payable by reason of any Compulsory Acquisition or any arrest or detention of the Vessel in the exercise or purported exercise of any lien or claim;

 

“Resolution Authority” means any body which has authority to exercise any Write-down and Conversion Powers;

 

“Sanctions” means any economic, financial or trade sanctions laws, regulations, embargoes or other restrictive measures adopted, administered, enacted or enforced by any Sanctions Authority, or otherwise imposed by any law or regulation, compliance with which is reasonable in the ordinary course of business of the Borrower, any other Security Party and the Lender or to which the Borrower, any other Security Party and the Lender are subject to (which shall include without limitation, any extra-territorial sanctions imposed by law or regulation of the United States of America);

 

“Sanctions Authority” means:

 

 

(a)

the government of the United States of America;

 

 

(b)

the United Nations;

 

 

(c)

the European Union (or the governments of any of its member states);

 

 

(d)

the United Kingdom;

 

 

(e)

the relevant Approved Flag State; or

 

15

 

 

(f)

the respective governmental institutions and agencies of any of the foregoing including the Office of Foreign Assets Control of the U.S. Department of the Treasury (“OFAC”), the United States Department of State, the United States Department of Commerce and Her Majesty’s Treasury;

 

“Sanctions Restricted Jurisdiction” means any country or territory which is the target of country-wide or territory-wide Sanctions, including as at the date of this Agreement, Iran, Sudan, Syria, Crimea, North Korea and Cuba;

 

“Sanctions Restricted Person” means a person or Vessel:

 

 

(a)

that is, or is directly or indirectly, owned or controlled (as such terms are defined by the relevant Sanctions Authority) by, or acting on behalf of, one or more persons or entities on any list (each as amended, supplemented or substituted from time to time) of restricted entities, persons or organisations (or equivalent) published by a Sanctions Authority;

 

 

(b)

that is located or resident in or incorporated under the laws of, or owned or controlled by, a person located or resident in or incorporated under the laws of a Sanctions Restricted Jurisdiction; or

 

 

(c)

that is otherwise the target or subject of Sanctions;

 

“Screen Rate” means the London interbank offered rate administered by ICE Benchmark Administration Limited (or any other person which takes over the administration of that rate) for Dollars for the relevant period displayed (before any correction, recalculation or republication by the administrator) on page LIBOR01 or LIBOR02 of the Thomson Reuters screen (or any replacement Thomson Reuters page which displays that rate) or on the appropriate page of such other information service which publishes that rate from time to time in place of Thomson Reuters. If such page or service ceases to be available, the Lender may specify another page or service displaying the relevant rate after consultation with the Borrower;

 

“Screen Rate Replacement Event” means, in relation to a Screen Rate:

 

 

(a)

the methodology, formula or other means of determining that Screen Rate has, in the opinion of the Lender and the Borrower, materially changed;

 

 

(b)

(i)

 

(A)

the administrator of that Screen Rate or its supervisor publicly announces that such administrator is insolvent; or

 

(B)

information is published in any order, decree, notice, petition or filing, however described, or filed with a court, tribunal, exchange, regulatory authority or similar administrative, regulatory or judicial body which reasonably confirms that the administrator of that Screen Rate is insolvent,

   
  provided that, in each case, at that time, there is no successor administrator to continue to provide that Screen Rate;

 

 

(ii)

the administrator of that Screen Rate publicly announces that it has ceased or will cease, to provide that Screen Rate permanently or indefinitely and, at that time, there is no successor administrator to continue to provide that Screen Rate;

 

16

 

 

(iii)

the supervisor of the administrator of that Screen Rate publicly announces that such Screen Rate has been or will be permanently or indefinitely discontinued; or

 

 

(iv)

the administrator of that Screen Rate or its supervisor announces that that Screen Rate may no longer be used; or

 

 

(v)

in the opinion of the Lender and the Borrower, that Screen Rate is otherwise no longer appropriate for the purposes of calculating interest under this Agreement;

 

“Security Documents” means:

 

 

(a)

this Agreement,

 

 

(b)

the Accounts Pledge Agreement,

 

 

(c)

the Approved Manager’s Undertakings,

 

 

(d)

the Corporate Guarantee,

 

 

(e)

the General Assignment,

 

 

(f)

the Mortgage,

 

 

(g)

the Master Agreement Swap Assignment,

 

 

(h)

the Charterparty Assignment,

 

 

(i)

and any other agreement or document (whether creating an Security Interest or not) that may have been or shall from time to time after the date of this Agreement be executed to guarantee and/or secure all or any part of the Outstanding Indebtedness and/or any and all other obligations of the Borrower to the Lender pursuant to this Agreement and any other moneys from time to time owing or payable by the Borrower under or in connection with this Agreement and/or any of the other documents referred to in this definition, as each such document may from time to time be amended and/or supplemented, and “Security Document” means any of them as the context may require;

 

“Security Interest” means:

 

 

(a)

a mortgage, charge (whether fixed or floating), pledge, hypothecation, assignment or any maritime or other lien or any other security interest of any kind;

 

 

(b)

the security rights of a plaintiff under an action in rem; and

 

 

(c)

any trust arrangement or other economic arrangement or structure the effect of which is to create a security interest of any kind (including without limitation title transfer and/or retention arrangements having a similar effect);

 

“Security Party” means the Borrower, the Corporate Guarantor, and any other person (other than the Lender) who, as a surety or mortgagor, as a party to any subordination or priorities arrangement, or in any similar capacity, executes a document falling within the last paragraph of the definition of “Finance Documents”, and “Security Parties” means any or all of them as the context may require;

 

17

 

“Security Period” means the period commencing on the date of this Agreement and ending on the date on which the Lender notifies the Borrower, the Security Parties and the other Creditors that:

 

 

(a)

all amounts which have become due for payment by the Borrower or any Security Party under the Finance Documents have been paid;

 

 

(b)

no amount is owing or has accrued (without yet having become due for payment) under any Finance Document; and

 

 

(c)

neither the Borrower nor any Security Party has any future or contingent liability under Clauses 10 (Indemnities, Expenses, Fees), or 5.1 (No set-off or Counterclaims) or any other provision of this Agreement or another Finance Document;

 

“Security Requirement means the amount in Dollars (as certified by the Lender whose certificate shall, in the absence of manifest error, be conclusively binding on the Borrower) which is at any relevant time at least one hundred and twenty five percent (125%) of the aggregate of (i) the Loan and (ii) the Swap Exposure;

 

“Security Value means the amount in Dollars (as certified by the Lender whose certificate shall, in the absence of manifest error, be conclusive and binding on the Borrower) which, at any relevant time is during the Security Period, the aggregate of (i) the Market Value of the Vessel as most recently determined in accordance with Clause 8.5(b) (Valuation of the Vessel) and (ii) the market value of any additional security provided under Clause 8.6(a) (Security shortfall-Additional security) and accepted by the Lender (if any);

 

“Side Letter means a letter to be executed by the persons referred to therein and addressed to the Lender in form and substance satisfactory to the Lender;

 

“SMC” means a safety management certificate issued in respect of the Vessel in accordance with rule 13 of the ISM Code;

 

“Subsidiary” of a person means any other person directly or indirectly controlled by such person;

 

“Swap Bank means the Lender acting through its Lending Office or any other nominated office or branch as counter party in any Designated Transaction, or any successor;

 

“Swap Exposure” means, as at any relevant date, the amount certified by the Swap Bank to the Agent to be the aggregate net amount in Dollars (or such other currency, if such currency is permitted and specified under the relevant Designated Transactions) which would be payable by the Borrower to the Swap Bank under (and calculated in accordance with) section 6(e)(i) (Payments on Early Termination) of the Master Agreement if an Early Termination Date had occurred on the relevant date in relation to all continuing Designated Transactions entered into between the Borrower and the Swap Bank;

 

“Taxes” includes all present and future taxes, levies, imposts, duties, fees or charges of whatever nature together with interest thereon and penalties in respect thereof (except taxes concerning the Lender and imposed on the net income of the Lender) and “Taxation” shall be construed accordingly;

 

“Termination Date” means the 30th day of June, 2021;

 

18

 

“Total Loss means:

 

 

(a)

actual, constructive, compromised or arranged total loss of the Vessel; or

 

 

(b)

the Compulsory Acquisition of the Vessel; or

 

 

(c)

the condemnation, capture, seizure, confiscation, arrest or detention of the Vessel (other than where the same amounts to the Compulsory Acquisition of the Vessel) by any Government Entity, or by persons acting on behalf of any Government Entity, unless the Vessel be released and restored to the Borrower from such condemnation, capture, seizure, confiscation arrest or detention or within one hundred eighty (180) days after the occurrence thereof; and

 

 

(d)

the hijacking, capture, seizure or confiscation of the Vessel arising as a result of a piracy or related incident unless the Vessel be released and restored to the Borrower from such hijacking, capture, seizure or confiscation within one hundred eighty (180) days after the occurrence thereof;

 

"Total Loss Date" means,:

 

 

(a)

in the case of an actual loss of the Vessel, the date on which it occurred or, if that is unknown, the date when the Vessel was last heard of;

 

 

(b)

in the case of a constructive, compromised, agreed or arranged total loss of the Vessel, the earlier of:

 

 

(i)

one hundred eighty (180) days after the date on which 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 the Vessel with the Vessel's insurers in which the insurers agree to treat the Vessel as a total loss; and

 

 

(c)

in the case of any other type of total loss, on the date (or the most likely date) on which it appears to the Lender that the event constituting the total loss occurred;

 

“Transaction” has the meaning given in the Master Agreement;

 

“Transferee” has the meaning ascribed thereto in Clause 14.3 (Assignment by the Lender);

 

“Underlying Documents” means the Contract and the Management Agreement and “Underlying Document” means any of them, as the context may require; and

 

“UK Bail-In Legislation means (to the extent that the United Kingdom is not an EEA Member Country which has implemented, or implements, Article 55 BRRD) Part 1 of the United Kingdom Banking Act 2009 and any other law or regulation applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutes or their Affiliates (otherwise than through liquidation, administration or other insolvency proceedings);

 

“US” means the United States of America;

 

19

 

“US Tax Obligor” means:

 

 

(a)

a Security Party which is resident for tax purposes in the US; or

 

 

(b)

a Security Party some or all whose payments under the Finance Documents are from sources within the US for US federal income tax purposes;

 

“Vessel” means the approximately 158,000 dwt class crude oil carrier to be built by the Builder and sold by the Builder to the Borrower in accordance with the provisions of the Contract, which is identified during construction as Hull Number S866, to be registered after her Delivery in the ownership of the Borrower through the Registry under the laws and flag of the Republic of the Marshall Islands with the name “ECO MALIBU”, together with all her boats, engines, machinery tackle outfit spare gear fuel consumable and other stores belongings and appurtenances whether on board or ashore and whether now owned or hereafter acquired and all the additions, improvements and replacements in or on the above described vessel; and

 

“Write-down and Conversion Powers” means:

 

 

(a)

in relation to any Bail-In Legislation described in the EU Bail-In Legislation Schedule from time to time, the powers described as such in relation to that Bail-In Legislation in the EU Bail-In Legislation Schedule; and

 

 

(b)

in relation to any other applicable Bail-In Legislation:

 

 

(i)

any powers under that Bail-In Legislation to cancel, transfer or dilute shares issued by a person that is a bank or investment firm or other financial institution or affiliate of a bank, investment firm or other financial institution, to cancel, reduce, modify or change the form of a liability of such a person or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers; and

 

 

(ii)

any similar or analogous powers under that Bail-In Legislation; and

 

 

(c)

in relation to any UK Bail-In Legislation:

 

 

(i)

any powers under that UK Bail-In Legislation to cancel, transfer or dilute shares issued by a person that is a bank or investment firm or other financial institution or Affiliate of a bank, investment firm or other financial institution, to cancel, reduce, modify or change the form of a liability of such a person or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that UK Bail-In Legislation that are related to or ancillary to any of those powers; and

 

 

(ii)

any similar or analogous powers under that UK Bail-In Legislation.

 

20

 

1.3

Interpretation

 

In this Agreement:

 

 

(a)

subject to any specific provision of this Agreement or of any assignment and/or participation or syndication agreement of any nature whatsoever, reference to each of the parties hereto and to the other Finance Documents shall be deemed to be reference to and/or to include, as appropriate, their respective successors and permitted assigns;

 

 

(b)

where the context so admits, words in the singular include the plural and vice versa;

 

 

(c)

the words “including” and “in particular” shall not be construed as limiting the generality of any foregoing words;

 

 

(d)

references to (or to any specified provisions of) a Finance Document or any other agreement or instrument is a reference to that Finance Document or other agreement or instrument as it may from time to time be amended, restated, novated or replaced, however fundamentally, whether before the date of this Agreement or otherwise;

 

 

(e)

references to Clauses and Schedules are to be construed as references to the Clauses of, and the Schedules to, the relevant Finance Document and references to a Finance Document include all the terms of that Finance Document and any Schedules, Annexes or Appendices thereto, which form an integral part of same;

 

 

(f)

references to the opinion of the Lender or a determination or acceptance by the Lender or to documents, acts, or persons acceptable or satisfactory to the Lender or the like shall be construed as reference to opinion, determination, acceptance or satisfaction of the Lender at the sole discretion of the Lender, and such opinion, determination, acceptance or satisfaction of the Lender shall be conclusive and binding on the Borrower;

 

 

(g)

references to a “regulation” include any present or future regulation, rule, directive, requirement, request or guideline (whether or not having the force of law) of any governmental or intergovernmental body, agency, authority, central bank or government department or any self regulatory or other national or supra-national authority or organisation and includes (without limitation) any Basel II Regulation or Basel III Regulation;

 

 

(h)

references to any person include such person’s assignees and successors in title; and

 

 

(i)

references to or to a provision of, any law include any amendment, extension, re-enactment or replacement, whether made before the date of this Agreement or otherwise.

 

1.4

Construction of certain terms

 

In this Agreement:

 

“asset” includes every kind of property, asset, interest or right, including any present, future or contingent right to any revenues or other payment;

 

“company” includes any partnership, joint venture and unincorporated association;

 

21

 

“consent includes an authorisation, consent, approval, resolution, licence, exemption, filing, registration, notarisation and legalisation;

 

“contingent liability” means a liability which is not certain to arise and/or the amount of which remains unascertained;

 

"continuing", in relation to any Default or any Event of Default, means that the Default or the Event of Default has not been remedied or waived;

 

“control” of an entity means:

 

 

(a)

the power (whether by way of ownership of shares, proxy, contract, agency or otherwise) to:

 

 

(i)

cast, or control the casting of, more than 50 per cent of the maximum number of votes that might be cast at a general meeting of that entity; or

 

 

(ii)

appoint or remove all, or the majority, of the directors or other equivalent officers of that entity; or

 

 

(iii)

give directions with respect to the operating and financial policies of that entity with which the directors or other equivalent officers of that entity are obliged to comply; or

 

 

(b)

the holding beneficially of more than 50 per cent of the issued share capital of that entity (excluding any part of that issued share capital that carries no right to participate beyond a specified amount in a distribution of either profits or capital) (and, for this purpose, any Security Interest over the share capital shall be disregarded in determining the beneficial ownership of such share capital);

 

and “controlled” shall be construed accordingly;

 

“document” includes a deed; also a letter or fax;

 

“gross negligence" means a form of negligence which is distinct from ordinary negligence, in which the due diligence and care which are generally to be exercised have been disregarded to a particularly high degree, in which the plainest deliberations have not been made and that which should be most obvious to everybody has not been followed;

 

“guarantee” means any guarantee, letter of credit, bond, indemnity or similar assurance against loss, or any obligation, direct or indirect, actual or contingent, to purchase or assume any indebtedness of any person or to make an investment in or loan to any person or to purchase assets of any person where, in each case, such obligation is assumed in order to maintain or assist the ability of such person to meet its indebtedness and “guaranteed” shall be construed accordingly;

 

“law includes any form of delegated legislation, any order or decree, any treaty or international convention and any regulation or resolution of the Council of the European Union, the European Commission, the United Nations or its Security Council;

 

"legal or administrative action" means any legal proceeding or arbitration and any administrative or regulatory action or investigation;

 

“liability” includes every kind of debt or liability (present or future, certain or contingent), whether incurred as principal or surety or otherwise;

 

22

 

“person” includes any individual, firm, company, corporation, unincorporated body of persons or any state, political sub-division or any agency thereof and local or municipal authority and any international organisation;

 

“policy”, in relation to any insurance, includes a slip, cover note, certificate of entry or other document evidencing the contract of insurance or its terms;

 

“protection and indemnity risks” means the usual risks (including oil pollution and freight, demurrage and defence cover) covered by a protection and indemnity association which is a member of the International Group of P&I Clubs (including, without limitation, the proportion (if any) of any sums payable to any other person or persons in case of collision which are not recoverable under the hull and machinery policies by reason of the incorporation therein of Clause 1 of the Institute Time Clauses (Hulls) (1/10/83) or the Institute Amended Running Down Clause (1/10/71) or (with respect to insurances commencing on or after (1/11/95)) the Institute Time Clauses (1/11/95) which may be insured by entry with such association or any equivalent provision);

 

regulation” includes any regulation, rule, official directive, request or guideline whether or not having the force of law of any governmental, intergovernmental or supranational body, agency, department or regulatory, self‑regulatory or other authority or organisation;

 

“right” means any right, privilege, power or remedy, any proprietary interest in any asset and any other interest or remedy of any kind, whether actual or contingent, present or future, arising under contract or law, or in equity;

 

“successor” includes any person who is entitled (by assignment, novation, merger or otherwise) to any other person’s rights under this Agreement or any other Finance Document (or any interest in those rights) or who, as administrator, liquidator or otherwise, is entitled to exercise those rights; and in particular references to a successor include a person to whom those rights (or any interest in those rights) are transferred or pass as a result of a merger, division, reconstruction or other reorganisation of it or any other person;

 

"war risks" includes the risk of mines, piracy, blocking and trapping, missing vessel, confiscation, war P&I and all risks excluded by clause 29 of the International Hull Clauses (1/11/02 or 1/11/03), clause 24 of the Institute Time Clauses (Hulls)(1/11/95) or clause 23 of the Institute Time Clauses (Hulls) (1/10/83); and

 

“liquidation, winding up, dissolution, or administration of person or a receiver or administrative receiver or administrator” in the context of insolvency proceedings or security enforcement actions in respect of a person shall be construed so as to include any equivalent or analogous proceedings or any equivalent and analogous person or appointee (respectively) under the law of the jurisdiction in which such person is established or incorporated or any jurisdiction in which such person carries on business including (in respect of proceedings) the seeking or occurrences of liquidation, winding-up, reorganisation, dissolution, administration, arrangement, adjustment, protection or relief of debtors.

 

1.5

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.

 

1.6

Same meaning

 

Unless a contrary indication appears, a term used in any other Finance Document or in any notice given under or in connection with any Finance Document has the same meaning in that Finance Document or notice as in this Agreement.

 

23

 

1.7

Inconsistency

 

Unless a contrary indication appears, in the event of any inconsistency between the terms of this Agreement and the terms of any other Finance Document when dealing with the same or similar subject matter (other than as relates to the creation and/or perfection of security) are subject to the terms of this Agreement and, in the event of any conflict between any provision of this Agreement and any provision of any Finance Document (other than in relation to the creation and/or perfection of security) the provisions of this Agreement shall prevail.

 

1.8

Finance Documents

 

Where any other Finance Document provides that Clause 1.3 (Interpretation) and Clause 1.4 (Construction of certain terms), shall apply to that Finance Document, any other provision of this Agreement which, by its terms, purports to apply to all or any of the Finance Documents and/or any Security Party shall apply to that Finance Document as if set out in it but with all necessary changes.

 

2.

THE LOAN


 

2.1

Commitment to lend

 

The Lender, relying upon (inter alia) each of the representations and warranties set forth in Clause 6 (Representations and warranties) and in each of the Security Documents, agrees to lend to the Borrower, as Borrower, by way of one (1) Advance, and upon and subject to the terms of this Agreement the amount specified in Clause 1.1 (Amount and Purpose) and the Borrower shall apply all amounts borrowed under the Commitment in accordance with Clause 1.1 (Amount and Purpose).

 

2.2

Drawdown Notice irrevocable

 

A Drawdown Notice must be signed by a director or a duly authorised attorney-in-fact of the Borrower and shall be effective on actual receipt thereof by the Lender and, once served, it, subject as provided in Clause 3.6 (Market disruption Non Availability), cannot be revoked without the prior consent of the Lender.

 

2.3

Drawdown Notice and commitment to borrow

 

Subject to the terms and conditions of this Agreement, the Loan shall be made to the Borrower following receipt by the Lender from the Borrower of a Drawdown Notice not later than 10:00 a.m. (London time) on the second Banking Day before the date on which the drawdown is intended to be made.

 

2.4

Number of Advances agreed

 

The Loan shall be advanced to the Borrower in one (1) Advance and after the advance of the Loan any amount undrawn under the Commitment shall be cancelled and may not be borrowed by the Borrower at a later date.

 

2.5

Amount, Timing, limitation and purpose of the Loan

 

 

(a)

The Loan: The Loan shall be made to the Borrower in (1) Advance in an amount up to the lesser of (i) Dollars $38,000,000 representing 62% of the Contract Price of the Vessel and (b) 62% of the of the Market Value of the Vessel, as determined in accordance with Clause 11.3 (Valuation of Vessel) by valuation of the Vessel obtained maximum twenty (20) days prior to the Drawdown Date.

 

24

 

 

(b)

Application: The Borrower shall procure that:

 

 

(i)

the proceeds of the Loan shall be applied wholly in or towards payment to the Builder of the installment relating to the Delivery of the Vessel under the Contract;

 

 

(ii)

such payment to be effected by telegraphic transfer to the Builder’s bank for the account of the Builder in accordance with the terms of the Contract, subject always to the provisions of Clause 7.2 (Conditions precedent to the making of the Commitment).

 

 

(c)

Availability Period: No Advance may be drawn down after the last day of the Availability Period.

 

 

(d)

Conditions precedent: Drawdown of the Loan is subject to (i) fulfillment to the Lender's satisfaction of all of the relevant conditions precedent, (ii) nο Event of Default having occurred and being continuing and (iii) nο Event of Default shall occur as a result of the drawdown of the Loan. Thus, in relation to drawdown of the Loan, if any such Condition Precedent has not been fulfilled to the Lender’s satisfaction or any such Event of Default has occurred or any Event of Default shall occur as a result of the drawdown of the Loan and whilst the same is continuing, the Loan shall not be available for drawing. However, the Lender may, in its absolute discretion and by notice to the Borrower, waive compliance with any condition precedent or the occurrence of an Event of Default prior to disbursement, provided, always, that the Borrower hereby covenants in those circumstances to comply with such condition precedent or, as the case may be, to remedy such Event of Default within any period specified in such notice or subsequently notified to the Borrower, and failure to do so shall be deemed to constitute an Event of Default hereunder.

 

2.6

Disbursement of the Loan

 

 

(a)

Upon receipt of a Drawdown Notice in respect of the Loan complying with the terms of this Agreement:

 

 

(i)

the Lender shall on the date which is the third Business Day (as such term is defined in the Contract) or such other date as may be agreed in the Contract (the “deposit date”) before the date (the “expected Delivery Date”) upon which the Drawdown Notice indicates that the Loan is to be made, pay an amount equal to the Loan to an account (the “deposit account”) in the Lender’s name and/or to the order of the Lender, to be held in a suspence account in the name and to the order of the Lender with the Builder’s bank in accordance with the relevant clause of the Contract (hereinafter the “Builders Bank”);

 

 

(ii)

the principal amount (the “deposited amount”) of such funds will only be released to the Builder strictly in accordance with the Lender’s instructions set out in the SWIFT payment instructions (together herein, the “SWIFT Instructions”) of the Lender to the Builder’s Bank;

 

 

(iii)

the deposited amount so released may be used only for payment to the account of the Builder in satisfaction of the balance of the Contract Price of the Vessel ; and

 

25

 

 

(iv)

in the event that:

 

aa)

none of the said amount so remitted is released (whether on the expected Delivery Date or thereafter) in accordance with the SWIFT instructions or any part thereof is not so released, or

 

bb)

the Builder’s Bank fails to remit (or to order the remittance, as applicable) the said amount and any earned interest to the Operating Account and/or any other account designated by the Lender in accordance with the SWIFT Instructions:

   
  (1) the continued failure of the Builder’s Bank to comply with the SWIFT instructions shall be deemed to be an Event of Default for the purposes of this Agreement and (2) the Borrower shall forthwith upon demand by the Lender pay to the Lender such amounts that may be certified by the Lender as being the amount required to indemnify the Lender in respect of any cost of funding to the Lender in relation to the deposited amount from the date of payment thereof to the Builder’s Bank to the date of disbursement of the deposited amount to the Builder or the refund of the deposited amount to the Lender less the amount (if any) of the earned interest received by the Lender from the Builder’s Bank.

 

 

(v)

Without prejudice to the obligations of the Borrower to indemnify the Lender on demand, the Lender shall in good faith take proper steps diligently to seek recovery of the deposited amount from the Builder’ s Bank (provided that prior to taking such action the Borrower shall have agreed to indemnify the Lender for all costs and expenses which may be incurred in seeking recovery of such amount, including, without limitation, all legal fees and disbursements incurred) and if the Lender shall recover any part of the deposited amount (and provided that it has previously recovered full indemnification under Clause 2.6(a)(iv)) the Lender shall, so long as no Event of Default has occurred and is continuing, pay to the Borrower the amount so recovered after subtracting any tax suffered or incurred thereon or Expenses incurred by the Lender.

 

 

(vi)

The Lender shall have no liability whatsoever to the Borrower or any other person for any loss caused by the Builder’s Bank’s failure for any reason whatsoever to remit the said amount and any earned interest to the designated account or to comply fully in accordance with the SWIFT Instructions.

 

 

(vii)

Any amounts remitted by the Builder’s Bank to the Lender and returned pursuant to this Clause 2.6 will be applied as follows, and express authority is hereby given by the Borrower to the Lender to make such application, in case the purchase of the Vessel has been canceled or delayed these amounts shall be applied in or towards prepayment of the Outstanding Indebtedness in full, and the remaining amount (if any) shall be freely available to the Borrower;

 

26

 

 

(viii)

provided that if any such amount so returned is not a part of the amount of the Loan but part of the Borrower’s equity such amount shall be freely available to the Borrower.

 

The provisions of Clause 4.5 (Amounts payable on prepayment) shall apply to any prepayment of the Loan made under this Clause 2.6.

 

2.7

Disbursement

 

Upon receipt of a Drawdown Notice complying with the terms of this Agreement the Lender shall, subject to the provisions of Clause 7 (Conditions precedent), on the date specified in that Drawdown Notice, make the Loan available to the Borrower, and payment to the Borrower shall be made to the account which the Borrower specify in that Drawdown Notice. The Borrower acknowledges that payment of the Loan proceeds to the Builder in accordance with Clause 5.2 (Payment by the Lender) shall satisfy the obligation of the Lender to lend the Loan to the Borrower under this Agreement.

 

2.8

Application of proceeds

 

Without prejudice to the Borrower’ obligations under Clause 8.1(d) (Use of Loan proceeds), the Lender is not bound to monitor or verify the application of any amount borrowed pursuant to this Agreement and shall have no responsibility for the application of the proceeds of the Loan (or any part thereof) by the Borrower.

 

2.9

Termination date of the Commitment

 

Any part of the Commitment undrawn and uncancelled at the end of the Availability Period or, as the case may be, the Termination Date shall thereupon be automatically cancelled.

 

2.10

Evidence

 

It is hereby expressly agreed and admitted by the Borrower that abstracts or photocopies of the books of the Lender as well as statements of accounts or a certificate signed by an authorised officer of the Lender shall be conclusive binding and full evidence, save for manifest error, on the Borrower as to the existence and/or the amount of the at any time Outstanding Indebtedness, of any amount due under this Agreement, of the applicable interest rate or Default Rate or any other rate provided for or referred to in this Agreement, the Interest Period, the value of additional securities under Clause 8.6(d) (Valuation of Additional Security), the payment or non payment of any amount. Nevertheless, enforcement procedures or any other court or out-of-court procedure can be commenced by the Lender on the basis of the above mentioned means of evidence including written statements or certificates of the Lender.

 

2.11

Cancellation

 

The Borrower shall be entitled to cancel any undrawn part of the Commitment under this Agreement at no cost and without any penalty upon giving the Lender not less than five (5) Banking Days’ notice in writing to that effect, provided that no Drawdown Notice has been given to the Lender under Clause 2.3 (Drawdown Notice and commitment to borrow) for the full amount of the Commitment or in respect of the portion thereof in respect of which cancellation is required by the Borrower and provided further that the Arrangement Fee and Commitment Commisssion have duly paid by the Borrower to the Lender as provided in Clause 10.14 (Arrangement Fee and Commitment Commission). Any such notice of cancellation, once given, shall be irrevocable. Any amount cancelled may not be drawn. Notwithstanding any such cancellation pursuant to this Clause 2.11 the Borrower shall continue to be liable for any and all amounts due to the Lender under this Agreement including without limitation any amounts due to the Lender under Clause 10 (Indemnities - Expenses Fees).

 

27

 

2.12

No security or lien from other person

 

The Borrower has not taken or received, and the Borrower undertakes that until all moneys, obligations and liabilities due, owing or incurred by the Borrower under this Agreement and the Security Documents have been paid in full, the Borrower will not take or receive, any security or lien from any other person liable or for any liability whatsoever.

 

2.13

Disbursement of Commitment to Builders Bank

 

 

(a)

Notwithstanding the foregoing provisions of this Clause 2, in the event that the Commitment is required to be drawn down prior to the satisfaction of the requirements of Clause 7 (Conditions precedent) and remitted to the Builder’s Bank in accordance with relevant clause of the Contract (the “Builders Bank”), the Lender may in its absolute discretion agree to remit such amount to the Builder’s Bank prior to the satisfaction of the requirements of Clause 7 (Conditions precedent)  expressly subject to the following conditions:

 

 

(i)

such amount is remitted to the Builder’s Bank to be held by it in the Lender’s name (the “deposit account”) and to the order of the Lender or otherwise to a suspense account to the order of the Lender;

 

 

(ii)

the principal amount (the “deposited amount”) of such funds will only be released to the Builder strictly in accordance with the Lender’s instructions set out in the SWIFT MT199 with payment instructions (herein, the “SWIFT Instructions”) of the Lender to the Builder’s Bank which accompanied the SWIFT MT103 relevant to the remittance of the amount or any follow-up SWIFT MT199;

 

 

(iii)

the deposited amount so released may be used only for payment to the account of the Builder with the Builder’s Bank in satisfaction of the balance of the Contract Price of the Vessel; and

 

 

(iv)

in the event that:

 

aa)

none of the said amount so remitted is released (whether on the expected Delivery Date or thereafter) in accordance with the SWIFT instructions or any part thereof is not so released; and

 

bb)

the Builder’s Bank fails to remit the said amount and any earned interest (if any) to the Operating Account of the Borrower and/or any other account designated by the Lender in accordance with the SWIFT Instructions:

   
  (1) the continued failure of the Builder’s Bank to comply with the SWIFT instructions shall be deemed to be an Event of Default for the purposes of this Agreement and (2) the Borrower shall forthwith upon demand by the Lender pay to the Lender such amounts that may be certified by the Lender as being the amount required to indemnify the Lender in respect of the cost to the Lender of funding the deposited amount from the date of payment thereof to the Builder’s Bank to the date of disbursement of the deposited amount to the Builder or the refund of the deposited amount to the Lender less the amount (if any) of the earned interest received by the Lender from the Builder’s Bank. For this purpose, the cost of the Lender funding the deposited amount shall be deemed to be interest at a rate equal to the aggregate of (i) the Margin and (ii) LIBOR for comparable deposits on a call (day to day) basis.

 

 

 

28

 

 

(b)

Without prejudice to the obligations of the Borrower so to indemnify the Lender on demand, the Lender shall in good faith take reasonable and proper steps diligently to seek recovery of the deposited amount from the Builder’s Bank provided that prior to taking such action the Borrower shall have agreed to indemnify the Lender for all costs and expenses which may be incurred in seeking recovery of such amount, including, without limitation, all legal fees and disbursements reasonably and properly incurred) and if the Lender shall recover any part of the deposited amount (and provided that it has previously recovered full indemnification under Clause 2.13(a)(iv)) the Lender shall, so long as no Event of Default has occurred and is continuing, pay to the Borrower the amount so recovered after subtracting any tax suffered or incurred thereon or Expenses incurred by the Lender.

 

 

(c)

The Lender shall have no liability whatsoever to the Borrower or any other person for any loss caused by the Builder’s Bank’s failure for any reason whatsoever to remit the said amount and any earned interest to the designated account or to comply fully in accordance with the SWIFT Instructions.

 

 

(d)

Following the acquisition of the Vessel and save that no Event of Default exists under this Agreement, any amounts remitted by the Builder’s Bank to the Lender and returned pursuant to this Clause 2.13 will be applied in or towards prepayment of the Loan pursuant to Clause 4.2 (Voluntary prepayment), provided that if any such amount so returned is not a part of the amount of the Loan but part of the Borrower’s equity such amount shall be freely available to the Borrower.

 

 

(e)

The provisions of Clause 4.4 (Amounts payable on prepayment) shall apply to any prepayment of the Loan made under this Clause 2.13.

 

2.14

Hedging Strategy-Swap Designated Transactions

 

 

(a)

If, at any time during the Facility Period, the Borrower wish to enter into any Designated Transaction so as to hedge all or any part of its exposure under this Agreement to interest rate fluctuations), it shall advise the Lender in writing requesting the Lender’s consent, and no such transaction shall be concluded without the Lender’s prior written consent.

 

 

(b)

Any such Designated Transaction shall be entered into pursuant to the hedging strategy discussed with the Lender pursuant to Clause 2.14(a) and shall be concluded with the Swap Bank under the Master Agreement, provided, however, that no such swap Designated Transaction or such other derivative transaction shall be concluded with any other counterparty (other than the Lender) unless the Lender first agrees to it in writing. If and when any such Designated Transaction derivative transaction or instrument has been concluded or executed with the Swap Bank, it shall constitute a Designated Transaction, and the Borrower shall sign a Confirmation with the Swap Bank.

 

29

 

3.

INTEREST


 

3.1

Normal Interest Rate

 

The Borrower shall pay interest on the Loan (or as the case may be, each portion thereof to which a different Interest Period relates) in respect of each Interest Period (or part thereof) on each Interest Payment Date. The interest rate for the calculation of interest shall be the rate per annum determined by the Lender to be the aggregate of (i) the Margin and (ii) LIBOR for that Interest Period, unless there is an Alternative Rate in which case the interest rate for the calculation of interest shall be the rate per annum determined by the Lender to be the aggregate of (i) the Margin and (ii) the Alternative Rate.

 

3.2

Selection of Interest Period

 

 

(a)

Notice: The Borrower may by notice received by the Lender not later than 10:00 a.m. (London time) on the second Banking Day before the beginning of each Interest Period specify (subject to Clause 3.3 (Determination of Interest Periods) below) whether such Interest Period shall have a duration of one (1) or two (2) or three (3) months (or such other period as may be requested by the Borrower and as the Lender, may agree to). subject to market availability;

 

 

(b)

Non-availability of matching deposits for Interest Period selected: If, after the Borrower by notice to the Lender have selected an Interest Period longer than three (3) months, the Lender notifies the Borrower on the same Banking 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 such duration as the Lender may advise the Borrower in writing.

 

3.3

Determination of Interest Periods

 

Every Interest Period shall, subject to market availability to be conclusively determined by the Lender, be of the duration specified by the Borrower pursuant to Clause 3.2 (Selection of Interest Periods) but so that:

 

 

(a)

Initial Interest Period: the initial Interest Period applicable to the Loan will commence on the Drawdown Date and each subsequent Interest Period will commence forthwith upon the expiry of the preceding Interest Period;

 

 

(b)

Last Interest Period: the last Interest Period in respect of the Loan will terminate on the Final Maturity Date ;

 

 

(c)

Interest tranches: if any Interest Period would otherwise overrun one or more Repayment Dates, then, in the case of the last Repayment Date, such Interest Period shall end on such Repayment Date, and in the case of any other Repayment Date or Dates, the Loan shall be divided into parts so that there is one part equal to the amount of the Repayment Instalment due on each Repayment Date falling during that Interest Period and having an Interest Period ending on that Repayment Date and another part equal to the amount of the balance of the Loan having an Interest Period determined in accordance with Clause 3.2 (Selection of Interest Period) and the other provisions of this Clause 3.3;

 

30

 

 

(d)

Failure to notify: if the Borrower fail to specify the duration of an Interest Period in accordance with the provisions of Clause 3.2 (Selection of Interest Period) and this Clause 3.3, such Interest Period shall have a duration of three (3) months unless another period shall be shall be agreed between the Lender and the Borrower provided, always, that such period (whether of three (3) months or of different duration) shall comply with this Clause 3.3; and

 

 

(e)

Interest Period not readily available: if the Lender determines that the duration of an Interest Period specified by the Borrower in accordance with Clause 3.2 (Selection of Interest Period) is not readily available, then that Interest Period shall have such duration as the Lender, may determine;

 

provided, always, that:

 

 

(i)

any Interest Period which commences on the last day of a calendar month, and any Interest Period which commences on the day on which there is no numerically corresponding day in the calendar month during which such Interest Period is due to end, shall end on the last Banking Day of the calendar month during which such Interest Period is due to end; and

 

 

(ii)

if the last day of an Interest Period is not a Banking Day the Interest Period shall be extended until the next following Banking Day unless such next following Banking Day falls in the next calendar month in which case such Interest Period shall be shortened to expire on the preceding Banking Day.

 

3.4

Default Interest

 

 

(a)

Default interest: If the Borrower fail to pay any sum (including, without limitation, any sum payable pursuant to this Clause 3.4) on its due date for payment under any of the Finance Documents, the Borrower shall pay interest on such sum from the due date up to the date of actual payment (as well after as before judgement) at the rate determined by the Lender pursuant to this Clause 3.4. The period beginning on such due date and ending on such date of payment shall be divided into successive periods as selected by the Lender each of which (other than the first, which shall commence on such due date) shall commence on the last day of the preceding such period. The rate of interest applicable to each such period shall be the aggregate (as determined by the Lender) of (i) two per cent (2%) per annum, (ii) the Margin and (iii) LIBOR. Such interest shall be due and payable on the last day of each such period as determined by the Lender and each such day shall, for the purposes of this Agreement, be treated as an Interest Payment Date, provided that if such unpaid sum is of principal which became due and payable by reason of a declaration by the Lender under Clause 9.2 (Consequences of Default  Acceleration) or a prepayment pursuant to Clauses 4.2 (Voluntary Prepayment), 4.3 (Mandatory Prepayment), 12.1 (Unlawfulness) and 12.2 (Increased Cost) on a date other than an Interest Payment Date relating thereto, the first such period selected by the Lender shall be of a duration equal to the period between the due date of such principal sum and such Interest Payment Date and interest shall be payable on such principal sum during such period at a rate two per cent (2%) above the rate applicable thereto immediately before it fell due. If for the reasons specified in Clause 3.6 (Market disruption  Non Availability), the Lender is unable to determine a rate in accordance with the foregoing provisions of this Clause 3.4, interest on any sum not paid on its due date for payment shall be calculated at a rate determined by the Lender to be two per cent (2%) per annum above the aggregate of (i) the Margin and (ii) the Alternative Rate.

 

31

 

 

(b)

Compounding of default interest: Any such interest which is not paid at the end of the period by reference to which it was determined shall be compounded every 6 months and shall be payable on demand.

 

 

(c)

Application to Master Agreement: For the avoidance of doubt, this Clause 3.4 does not apply to any amount payable under any Master Agreement in respect of any continuing Designated Transaction in respect of that Master Agreement as to which section 2(e) (Default Interest; Other Amounts) of that Master Agreement shall apply.

 

3.5

Notification of Interest and interest rate

 

The Lender shall notify the Borrower promptly of the duration of each Interest Period and of each rate of interest determined by it under this Clause 3 without prejudice to the right of the Lender to make determinations at its sole discretion. In case that the Lender fails to notify the Borrower as above, such failure will not affect the validity of the determination of the Interest Period and Interest Rate made pursuant to this Clause 3 and neither constitute nor will be interpreted as if to constitute a breach of obligation of the Lender except in case of wilful misconduct.

 

3.6

 Market disruption  Non Availability

 

 

(a)

Market Disruption Event - Notification: If and whenever, at any time prior to the commencement of any Interest Period, the Lender (in its discretion) shall have determined (which determination shall be conclusive in the absence of manifest error) that a Market Disruption Event has occurred in relation to the Loan for any such Interest Period, then the Lender shall forthwith give notice thereof (a “Determination Notice”) to the Borrower stating the circumstances falling within Clause 3.6(c) (Meaning of Market Disruption Event) which have caused its notice to be given and the rate of interest on the Loan (or the relevant part thereof) for that Interest Period shall be the percentage rate per annum which is the sum of:

 

 

(i)

the Margin; and

 

 

(ii)

the rate which expresses as a percentage rate per annum the cost to the Lender of funding the Loan (or the relevant part thereof) from whatever source it may select.

 

 

(b)

Suspension of drawdown: If the Determination Notice is given before the Commitment (or a part thereof) is advanced, the Lender's obligation to make the Commitment (or a part thereof) available shall be suspended while the circumstances referred to in the Determination notice continue.

 

 

(c)

Meaning of Market Disruption Event”: In this Agreement “Market Disruption Event” means:

 

 

(i)

at or about noon on the Quotation Day for the relevant Interest Period no Screen Rate is available for LIBOR for Dollars; and/or

 

 

(ii)

before close of business in London on the Quotation Day for the relevant Interest Period, the Lender determines (in its sole discretion) that the cost to it of obtaining matching deposits in the London Interbank Market to fund the Loan (or the relevant part thereof) for such Interest Period would be in excess of the Screen Rate for such Interest Period; and

 

32

 

 

(iii)

before close of business in London on the Quotation Day for the relevant Interest Period, deposits in Dollars are not available to the Lender in the London Interbank Market in the ordinary course of business in sufficient amounts to fund the Loan (or the relevant part thereof) for such Interest Period.

 

 

(d)

Alternative basis of interest or funding:

 

 

(i)

If a Market Disruption Event occurs and the Lender or the Borrower so require, the Lender and the Borrower shall enter into negotiations and use reasonable endeavours to agree (for a period of not more than seven (7) days (the “Negotiation Period”)) after the giving of the relevant Determination Notice with a view to agreeing a substitute basis for determining the rate of interest.

 

 

(ii)

Any alternative basis agreed pursuant to paragraph (i) above shall be binding on the Lender and all Security Parties.

 

 

(e)

Alternative basis of interest in absence of agreement: If the Lender and the Borrower will not enter into negotiations as provided in Clause 3.6(d)(i) or if an alternative interest rate or alternative basis is not agreed within the Negotiation Period, and the relevant circumstances are continuing at the end of the Negotiation Period, then the Lender shall set the following Interest Period and an interest rate representing the cost of funding of the Lender in Dollars of the Loan (or the relevant part thereof) plus the Margin for such Interest Period; if the relevant circumstances are continuing at the end of the Interest Period so set by the Lender, the Lender shall continue to set the following Interest Period and an interest rate representing its cost of funding in Dollars of the Loan (or the relevant part thereof) plus the Margin for such Interest Period.

 

 

(f)

Notice of prepayment: If the Borrower does not agree with an interest rate set by the Lender under Clause 3.6(e) (Alternative basis of interest in absence of agreement), the Borrower may give the Lender not less than 5 Banking Days’ notice of its intention to prepay the Loan at the end of the interest period set by the Lender.

 

 

(g)

Prepayment; termination of Commitment: A notice under Clause 3.6(f) (Notice of prepayment) shall be irrevocable; and on the last Banking Day of the interest period set by the Lender, the Borrower, if the Commitment has already been advanced, shall prepay (without premium or penalty) the Loan, together with accrued interest thereon at the applicable rate plus the Margin and the balance of the Outstanding Indebtedness or, if the Commitment has not been advanced, the Commitment shall be reduced to zero and no Advance shall be made to the Borrower under this Agreement thereafter.

 

 

(h)

Application of prepayment: The provisions of Clause 4 (Repayment-Prepayment) shall apply in relation to the prepayment made hereunder.

 

3.7

Replacement of Screen Rate

 

 

(c)

If a Screen Rate Replacement Event has occurred in relation to the Screen Rate for dollars, any amendment or waiver which relates to:

 

 

(i)

providing for the use of a Replacement Benchmark in relation to that currency in place of that Screen Rate ; and

 

33

 

  (ii)

 

 

(1)

aligning any provision of any Finance Document to the use of that Replacement Benchmark;

 

(2)

enabling that Replacement Benchmark to be used for the calculation of interest under this Agreement (including, without limitation, any consequential changes required to enable that Replacement Benchmark to be used for the purposes of this Agreement);

 

(3)

implementing market conventions applicable to that Replacement Benchmark;

 

(4)

providing for appropriate fallback (and market disruption) provisions for that Replacement Benchmark; or

 

(5)

adjusting the pricing to reduce or eliminate, to the extent reasonably practicable, any transfer of economic value from one Party to another as a result of the application of that Replacement Benchmark (and if any adjustment or method for calculating any adjustment has been formally designated, nominated or recommended by the Relevant Nominating Body, the adjustment shall be determined on the basis of that designation, nomination or recommendation),

 

may be made with the consent of the Lender and the Borrower.

 

3.8

Interest rate hedging

 

The execution of the Master Agreement does not commit the Swap Bank to conclude Designated Transactions, or even to offer terms for doing so, but does provide a contractual framework within which Designated Transactions may be concluded and secured, assuming that the Swap Bank is willing to conclude any Designated Transaction at the relevant time and that, if that is the case, mutually acceptable terms can then be agreed at the relevant time.

 

4.

REPAYMENT - PREPAYMENT


 

4.1

Repayment

 

The Borrower shall and it is expressly undertaken by the Borrower to repay the Loan by (i) twenty four (24) consecutive quarterly Repayment Instalments to be repaid on each of the Repayment Dates, so that the first be repaid on the First Repayment Date and each of the subsequent ones consecutively falling due for payment on each of the dates falling three (3) months after the immediately preceding Repayment Date with the last (the 24th) of such Repayment Instalments falling due for payment on the Final Maturity Date and (b) a balloon instalment in the amount of Dollars Twenty one million five hundred thousand ($21,500,000) which shall be payable together with the last (the 24th) Repayment Instalment on the Final Maturity Date; subject to the provisions of this Agreement the amount of each such Repayment Instalment shall be as follows:

 

 

(a)

1st to 12th (both incl.) Dollars Seven hundred fifty thousand ($750,000); and

 

 

 

(b)

13th to 24th (both incl.) Dollars Six hundred twenty five thousand ($625,000);

 

34

 

Provided, always, that (i) if the last Repayment Date would otherwise fall after the applicable Final Maturity Date, such last Repayment Date shall be the applicable Final Maturity Date, (ii) in the event that the Commitment is not drawn down in full by the last day of the Availability Period, the amount of each of the Repayment Instalments and the Balloon Instalment shall be proportionally reduced, (iii) there shall be no Repayment Dates after the Final Maturity Date, (iv) on the last Final Maturity Date the Borrower shall also pay to the Lender any and all other monies then payable under this Agreement and the other Security Documents, and (v) if any of the Repayment Instalments or any other repayment instalment shall become due on a day which is not a Banking Day, the due date therefor shall be extended to the next succeeding Banking Day, unless such Banking Day falls in the next calendar month, in which event such due date shall be the immediately preceding Banking Day.

 

4.2

Voluntary Prepayment

 

The Borrower shall have the right, to prepay without penalty or prepayment fee part or all of the Loan, in each case together with all unpaid interest accrued thereon and all other sums of money whatsoever due and owing from the Borrower to the Lender hereunder or pursuant to the other Finance Documents and all interest accrued thereon, provided that:

 

 

(a)

the Lender shall have received from the Borrower not less than five (5) day’s prior notice in writing (which shall be irrevocable) of their intention to make such prepayment and specify the amount to be prepaid and the date on which such prepayment is to be made;

 

 

(b)

such prepayment may take place only on the last day of an Interest Period relating to the whole of the Loan;

 

 

(c)

each such prepayment shall be equal to One hundred thousand Dollars ($100,000) or a whole multiple thereof or the balance of the Loan;

 

 

(d)

any prepayment of less than the whole of the Loan will be applied in or towards repayment of the remaining Repayment Instalments pro-rata;

 

 

(e)

every notice of prepayment shall be effective only on actual receipt by the Lender, shall be irrevocable and shall oblige the Borrower to make such prepayment on the date specified;

 

 

(f)

the Borrower have provided evidence satisfactory to the Lender that any consent required by the Borrower or any Security Party in connection with the prepayment has been obtained and remains in force, and that any regulation relevant to this Agreement which affects the Borrower or any Security Party has been complied with;

 

 

(g)

no amount prepaid may be re-borrowed; and

 

 

(h)

the Borrower may not prepay the Loanor any part thereof or the Loan save as expressly provided in this Agreement;

 

Provided always that if the Borrower shall, subject always to Clause 4.2(a), make a prepayment on a Banking Day other than the last day of an Interest Period in respect of the whole of the Loan, it shall, in addition to the amount prepaid and accrued interest, pay to the Lender any amount which the Lender may certify is necessary to compensate the Lender for any Break Costs incurred by the Lender as a result of the making of the prepayment in question.

 

35

 

4.3

Mandatory Prepayment

 

The Borrower shall be obliged to prepay the Outstanding Indebteness in full on the relevant Prepayment Date (as hereinafter defined) (the "Prepayment "), in the following cases:

 

 

(a)

Prior to the advancing of the Loan: on the Vessel becoming a Total Loss or being sold, the obligation of the Lender to make available the Commitment (or any part thereof) to the Borrower shall immediately cease and the Commitment shall be reduced to zero and as a result of which the Commitment shall not be made available to the Borrower; or

 

 

(b)

After the Loan has been made:

 

 

(i)

Total Loss of the Vessel: On the Vessel becoming a Total Loss, then on the Prepayment Date, the Borrower shall pay to the Lender the the Outstanding Indebtedness in fulltogether with all sums payable by the Borrower to the Lender under Clause 4.5 (Amounts payable on prepayment) and the Borrower shall thereupon be obliged to make such repayment of the the Outstanding Indebtedness.

 

 

(ii)

Sale or refinance of the Vessel: In the event of a sale or other disposal of the Vessel or if the Borrower requests the Lender’s consent for the discharge of the Mortgage on the Vessel due to refinancing of the Vessel by any other bank or financial institution, the Borrower shall prepay to the Lender the the Outstanding Indebtedness in full on the Prepayment Date together with all sums payable by the Borrower to the Lender under Clause 4.5 (Amounts payable on prepayment) and the Borrower shall thereupon be obliged to make such prepayment of the Outstanding Indebtedness.

 

AND for the purpose of this Clause 4.3:

 

"Prepayment Date" means:

 

 

(i)

if the Vessel becomes a Total Loss, on the earlier of: (i) the date falling 180 days after the Total Loss Date (or such later date as the Lender may agree) and (ii) the date of receipt by the Lender of the proceeds of insurance relating to such Total Loss; and

 

 

(ii)

if the Vessel is sold, a date falling on or before the date on which the sale is completed by delivery of the Vessel to its buyer or, in the case of refinancing, the date on which the Lender discharges the Mortgage registered over the Vessel;

 

Provided, however, that the Borrower may not sell or enter into any agreement to sell or otherwise dispose of the Vessel without the prior written consent of the Lender (such consent not to be unreasonably withheld), unless no Event of Default has occurred and is continuing or will, on completion of such sale, occur and be continuing and provided, further, that the Lender is satisfied that on or immediately after the delivery of the Vessel to the relevant purchaser, the net sale proceeds of the Vessel will be not less than the amount of the Outstanding Indebtedness at the relevant time.

 

 

(c)

Notification: The Lender shall promptly notify to the Borrower the total additional amounts payable pursuant to the foregoing provisions of this Clause 4.3 and Clause 4.5 (Amounts payable on prepayment) within 30 days of the Vessel becoming a Total Loss and in the case of sale or other disposal or refinancing of the Vessel, prior to the expected date of completion of such sale or refinancing, and the Borrower shall be obliged to make such repayment of the Outstanding Indebtedness in full.

 

36

 

 

(d)

In all the above cases, the Borrower undertakes to channel all sale proceeds through the Lender.

 

4.4

Application by the Lender in case of mandatory prepayment

 

Any amount prepaid in accordance with Clause 4.3 (Mandatory Prepayment), which is less than the whole of the Outstanding Indebtedness, will be applied by the Lender in or towards prepayment/reduction of the Tranch relative to the Vessel so lost, sold or refinanced.

 

4.5

Amounts payable on prepayment

 

Any prepayment of all or part of the Loan under this Agreement shall be made together with:

 

 

(a)

accrued interest on the prepaid amount to the date of such prepayment (calculated, in the case of a prepayment pursuant to Clause 3.6 (Market disruption  Non Availability) at a rate equal to the aggregate of the Margin and the cost to the Lender of funding the Loan);

 

 

(b)

any additional amount payable under Clause 5.4 (Gross Up); 

 

 

(c)

all other sums payable by the Borrower to the Lender under this Agreement or any of the other Finance Documents including, without limitation, any amounts payable under Clause 10 (Indemnities - Expenses  Fees); and

 

 

(d)

in relation to any prepayment made on a date other than an Interest Payment Date in respect of the whole of the Loan, it shall, in addition to the amount prepaid and accrued interest, pay to the Lender any amount which the Lender may certify is necessary to compensate the Lender for any Break Costs incurred by the Lender as a result of the making of the prepayment in question.

 

5.

PAYMENTS, TAXES AND COMPUTATION


 

5.1

Payment - No set-off or Counterclaims

 

 

(a)

The Borrower hereby acknowledges that in performing obligations under this Agreement, the Lender will be incurring liabilities to third parties in relation to the funding of amounts to the Borrower, such liabilities matching the liabilities of the Borrower to the Lender and that it is reasonable for the Lender to be entitled to receive payments from the Borrower gross on the due date in order that the Lender is put in a position to perform its matching obligations to the relevant third parties. Accordingly, all payments to be made by the Borrower under this Agreement and/or any of the other Finance Documents shall be made in full, without any set-off or counterclaim whatsoever and, subject as provided in Clause 5.4 (Gross Up), free and clear of any deductions or withholdings or Governmental Withholdings whatsoever, as follows:

 

 

(i)

in Dollars (except for charges or expenses which shall be paid in the currency in which they are incurred), not later than 10:00 a.m. (London time) on the Banking Day (in Piraeus, Athens, London and New York City) on which the relevant payment is due under the terms of this Agreement; and

 

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(ii)

to such account and at such bank as the Lender may from time to time specify for this purpose by written notice to the Borrower, reference: “ATHENEAN Empire Inc./Loan Agreement dated: 6th May, 2021” provided, however, that the Lender shall have the right to change the place of account for payment, upon five (5) Banking Days’ prior written notice to the Borrower.

 

 

(b)

If at any time it shall become unlawful or impracticable for the Borrower to make payment under this Agreement to the relevant account or bank referred to in Clause 5.1(a), the Borrower may request and the Lender may agree to alternative arrangements for the payment of the amounts due by the Borrower to the Lender under this Agreement or the other Finance Documents.

 

5.2

Payment by the Lender

 

All sums to be advanced by the Lender to the Borrower under this Agreement shall be remitted in Dollars on the Drawdown Date to the account specified in the Drawdown Notice .

 

5.3

Payments on Banking Days

 

All payments due shall be made on a Banking Day. If the due date for payment (other than under the Master Agreement) falls on a day which is not a Banking Day, that payment due shall be made on the immediately following Banking Day unless such Banking Day falls in the next calendar month, in which case payments shall fall due and be made on the immediately proceeding Banking Day.

 

5.4

Gross Up

 

 

(a)

If at any time any law, regulation, regulatory requirement or requirement of any governmental authority, monetary agency, central bank or the like compels the Borrower to make payment subject to Governmental Withholdings (other than a FATCA Deduction), the Borrower shall pay to the Lender such additional amounts as may be necessary to ensure that there will be received by the Lender a net amount equal to the full amount which would have been received had payment not been made subject to such Governmental Withholdings. The Borrower shall indemnify the Lender against any losses or costs incurred by the Lender by reason of any failure of the Borrower to make any such deduction or withholding or by reason of any increased payment not being made on the due date for such payment. The Borrower shall, not later than thirty (30) days after each deduction, withholding or payment of any Governmental Withholdings (other than a FATCA Deduction), forward to the Lender official receipts and any other documentary receipts and any other documentary evidence required by the Lender in respect of the payment made or to be made of any deduction or withholding or Governmental Withholding (other than a FATCA Deduction). The obligations of the Borrower under this provision shall, subject to applicable law, remain in force notwithstanding the repayment of the Loan and the payment of all interest due thereon pursuant to the provisions of this Agreement.

 

 

(b)

For the avoidance of doubt, Clause 5.3(a) does not apply in respect of sums due from the Borrower to the Swap Bank under or in connection with the Master Agreement in respect of any continuing Designated Transaction as to which sums the provisions of section 2(d) (Deduction or Withholding for Tax) of the Master Agreement shall apply.

 

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5.5

Mitigation

 

If circumstances arise which would result in an increased amount being payable by the Borrower under this Clause then, without in any way limiting the rights of the Lender under this Clause, the Lender shall, if so requested by the Borrower, use reasonable endeavours to transfer the obligations, liabilities and rights under this Agreement and the other Security Documents to another office or financial institution not affected by the circumstances, but the Lender shall be under no obligation to take any such action if in its opinion, to do so would or might:

 

 

(a)

have an adverse effect on its business, operations or financial condition on the Lender; or

 

 

(b)

involve it in any activity which is unlawful or prohibited or any activity that is contrary to, or inconsistent, with any regulation of the Lender; or

 

 

(c)

involve the Lender in any expense (unless indemnified to its satisfaction) or tax disadvantage.

 

5.6

Tax credits

 

If the Lender receives for its own account a repayment or credit in respect of tax on account for which the Borrower has made an increased payment under Clause 5.4 (Gross-up), the Lender shall advise the Borrower of such repayment or credit and pay to the Borrower a sum equal to the repayment or credit received, provided, always, that:

 

 

(a)

nothing in this Clause shall oblige the Lender 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;

 

 

(b)

nothing in this Clause shall oblige the Lender to make a payment which exceed any repayment or credit in respect of tax on account of which the Borrower has made an increased payment under this Clause; and

 

any allocation or determination made by the Lender under or in connection with this Clause shall be binding on the Borrower

 

5.7

Loan Account

 

All sums advanced by the Lender to the Borrower under this Agreement and all interest accrued thereon and all other amounts due under this Agreement from time to time and all repayments and/or payments thereof shall be debited and credited respectively to a separate loan account maintained by the Lender in accordance with its usual practices in the name of the Borrower. The Lender may, however, in accordance with its usual practices or for its accounting needs, maintain more than one account, consolidate or separate them but all such accounts shall be considered parts of one single loan account maintained under this Agreement. In case that a ship mortgage in the form of Account Current is granted as security under this Agreement, the account(s) referred to in this Clause shall be the Account Current referred to in such mortgage.

 

5.8

Computation

 

All interest and other payments (other than under the Master Agreement) payable by reference to a rate per annum under this Agreement shall accrue from day to day and be calculated on the basis of actual days elapsed and a 360 day year.

 

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6.

REPRESENTATIONS AND WARRANTIES


 

6.1

Continuing representations and warranties

 

The Borrower represents and warrants to the Lender that;

 

 

(a)

Due Incorporation/Valid Existence: the Borrower and the other corporate Security Parties is duly incorporated and validly existing and in good standing under the laws of their respective countries of incorporation, and have power to own their respective property and assets, to carry on their respective business as the same are now being lawfully conducted and to purchase, own, finance and operate Vessel, or, as the case may be, manage Vessel, as well as to undertake the obligations which such Security Party has undertaken or shall undertake pursuant to the Finance Documents and does not have a place of business in the United Kingdom or the United States of America;

 

 

(b)

Due Corporate Authority: the Borrower and the other corporate Security Parties has power to execute, deliver and perform its obligations under the Finance Documents and the Underlying Documents to which is or is to be a party and to borrow the Commitment, to enter into Designated Transactions under each Master Agreement, and each of the other Security Parties has power to execute and deliver and perform its/his obligations under the Finance Documents and the Underlying Documents to which it/he is or is to be a party; all necessary corporate, shareholder and other action has been taken to authorise the execution, delivery and performance of the same and no limitation on the powers of the Borrower to borrow will be exceeded as a result of borrowing the Loan;

 

 

(c)

No litigation: no litigation or arbitration, tax claim or legal or administrative action or proceeding (including action relating to any alleged or actual breach of the ISM Code and the ISPS Code) involving a potential liability of the Borrower or any other Security Party in sums exceeding $700,000 per Borrower or any other Security Party is current or pending or (to its or its officers’ knowledge) threatened against the Borrower or any other Security Party, which, if adversely determined, would have a Material Adverse Effect;

 

 

(d)

No conflict with other obligations: the execution and delivery of, the performance of its obligations under, and compliance with the provisions of, the Finance Documents and the Underlying Documents by the relevant Security Parties will not (i) contravene any existing applicable law, statute, rule or regulation or any judgment, decree or permit to which the Borrower or any other Security Party is subject, (ii) conflict with, or result in any breach of any of the terms of, or constitute a default under, any agreement or other instrument to which the Borrower or any other Security Party is a party or is subject to or by which it or any of its property is bound, (iii) contravene or conflict with any provision of the memorandum and articles of association/articles of incorporation/by-laws/statutes or other constitutional documents of the Borrower or any other Security Party or (iv) result in the creation or imposition of or oblige the Borrower or any other Security Party to create any Security Interest (other than a Permitted Security Interest) on any of the undertakings, assets, rights or revenues of the Borrower or any other Security Party;

 

 

(e)

Financial Condition: to the knowledge of the officers/directors or shareholders of the Borrower the financial condition of the Borrower and of the other Security Parties has not suffered any material deterioration since that condition was last disclosed to the Lender;

 

40

 

 

(f)

No Immunity: neither the Borrower nor any other Security Party nor any of their respective assets are entitled to immunity on the grounds of sovereignty or otherwise from any legal action or proceeding (which shall include, without limitation, suit, attachment prior to judgement, execution or other enforcement);

 

 

(g)

Shipping Company: each of the Borrower and the Approved Managers is a shipping company involved in the owning or, as the case may be, managing of ships engaged in international voyages and earning profits in free foreign currency;

 

 

(h)

Licences/Authorisation: every consent, authorisation, license or approval of, or registration with or declaration to, governmental or public bodies or authorities or courts required by any Security Party to authorise, or required by any Security Party in connection with, the execution, delivery, validity, enforceability or admissibility in evidence of each of the Finance Documents and the Underlying Documents or the performance by each Security Party of its obligations under the Finance Documents and the Underlying Documents to which such Security Party is or is to be a party has been obtained or made and is in full force and effect and there has been no default in the observance of any of the conditions or restrictions (if any) imposed in, or in connection with, any of the same so far as the Borrower are aware;

 

 

(i)

Perfected Securities: when duly executed, the Finance Documents will create a perfected security interest in favour of the Lender, with the intended priority, over the assets and revenues intended to be covered, valid and enforceable against the Borrower and the other Security Parties;

 

 

(j)

No Notarisation/Filing/Recording: save for the registration of the Mortgage in the appropriate shipping Registry, it is not necessary to ensure the legality, validity, enforceability or admissibility in evidence of this Agreement or any of the other Finance Documents and the Underlying Documents that it or they or any other instrument be notarised, filed, recorded, registered or enrolled in any court, public office or elsewhere or that any stamp, registration or similar tax or charge be paid on or in relation to this Agreement or the other Finance Documents or any Underlying Documents;

 

 

(k)

Validity and Binding effect: the Finance Documents and the Underlying Documents constitute (or upon their execution - and in the case of the Mortgage upon its registration at the appropriate Registry - will constitute) valid and legally binding obligations of the relevant Security Parties enforceable against the Borrower and the other Security Parties in accordance with their respective terms and that there are no other agreements or arrangements which may adversely affect or conflict with the Finance Documents or the security thereby created;

 

 

(l)

Valid Choice of Law: the choice of law agreed to govern this Agreement and/or any other Finance Document and/or each of the Underlying Documents and the submission to the jurisdiction of the courts agreed in each of the Finance Documents and the Underlying Documents are or will be, on execution of the respective Finance Documents and the respective Underlying Documents, valid and binding on the Borrower and any other Security Party which is or is to be a party thereto; and

 

 

(m)

Shareholding

 

 

(i)

all the shares in the Borrower are legally and beneficially held directly or indirectly by the Corporate Guarantor and controlled by the Beneficial Shareholders disclosed to the Lender before signing of this Agreement; and

 

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(ii)

no change of control has been made directly or indirectly in the ownership, beneficial ownership, or management of the Borrower or the Corporate Guarantor or any share therein or of the Vessel as a result of which (a) less than 100% of the shares and voting rights in the Borrower remain in the legal and beneficial ownership of the Corporate Guarantor, (b) less than 100% of the shares and voting rights in the Approved Managers remain in the ultimate legal and beneficial ownership of the Beneficial Shareholders disclosed to the Lender at the negotiation of this Agreement and confirmed in writing on or before the date hereof and/or (b) less than 50.1% of the voting rights in the Corporate Guarantor remain in the ultimate legal and beneficial ownership of the Corporate Guarantor’s Controlling Shareholders, unless, in each case, otherwise permitted by the Lender.

 

6.2

Initial representations and warranties

 

The Borrower further represents and warrants to the Lender that:

 

 

(a)

Direct obligations - Pari Passu: the obligations of the Borrower under this Agreement are direct, general and unconditional obligations of the Borrower and rank at least pari passu with all other present and future unsecured and unsubordinated Financial Indebtedness of the Borrower with the exception of any obligations which are mandatorily preferred by law;

 

 

(b)

Information: all information, accounts, statements of financial position, exhibits and reports furnished by or on behalf of any Security Party to the Lender in connection with the negotiation and preparation of this Agreement and each of the other Finance Documents are true and accurate in all material respects and not misleading, do not omit material facts and all reasonable enquiries have been made to verify the facts and statements contained therein; there are no other facts the omission of which would make any fact or statement therein misleading and, in the case of accounts and statements of financial position, they have been prepared in accordance with generally accepted international accounting principles, standards and practices which have been consistently applied;

 

 

(c)

No Default: no Default or Termination Event (as defined in the Master Agreement) has occurred and is continuing;

 

 

(d)

No Taxes: no Taxes are imposed by deduction, withholding or otherwise on any payment to be made by any Security Party under this Agreement and/or any other of the Finance Documents and/or any of the Underlying Documents or are imposed on or by virtue of the execution or delivery of this Agreement and/or any other of the Finance Documents and/or any of the Underlying Documents or any document or instrument to be executed or delivered hereunder or thereunder. In case that any Tax exists now or will be imposed in the future, it will be borne by the Borrower;

 

 

(e)

No Default under other Financial Indebtedness: neither the Borrower nor any other Security Party is in Default under any agreement relating to Financial Indebtedness to which it is a party or by which it may be bound;

 

 

(f)

Ownership/Flag/Seaworthiness/Class/Insurance of the Vessel: the Vessel on the Drawdown Date will be:

 

 

(i)

in the absolute and free from Security Interests (other than in favour of the Lender) ownership of the Borrower who is and will on and after the Drawdown Date be the sole legal and beneficial owner of the Vessel;

 

42

 

 

(ii)

registered in the name of the Borrower through the relevant Registry of the port of registry of the relevant Approved Flag State under the laws and flag of the relevant Approved Flag State;

 

 

(iii)

operationally seaworthy and in every way fit for service;

 

 

(iv)

classed with a Classification Society member of IACS, which has been approved by the Lender in writing and such classification is and will be free of all requirements and recommendations of such Classification Society;

 

 

(v)

insured in accordance with the provisions of this Agreement and the Mortgage;

 

 

(vi)

managed by the Approved Managers; and

 

 

(vii)

in full compliance with the ISM and the ISPS Code;

 

 

(g)

No Charter: save for the Clearlake Charterparty and unless otherwise permitted in writing by the Lender, the Vessel will not, on or before the Drawdown Date, be subject to any charter or contract nor to any agreement to enter into any charter or contract which, if entered into after the Drawdown Date would have required the consent of the Lender under any of the Finance Documents and there will not on or before the Drawdown Date be any agreement or arrangement whereby the Earnings of the the Vessel may be shared with any other person;

 

 

(h)

No Security Interests: neither the Vessel nor her Earnings, Requisition Compensation or Insurances nor any other properties or rights which are, or are to be, the subject of any of the Security Documents nor any part thereof will, on the Drawdown Date be subject to any Security Interests other than Permitted Security Interests.

 

 

(i)

Compliance with Environmental Laws and Approvals: except as may already have been disclosed by the Borrower in writing to, and acknowledged in writing by, the Lender:

 

 

(i)

the Borrower and its Related Companies has/have complied with the provisions of all Environmental Laws;

 

 

(ii)

the Borrower and its Related Companies has/have obtained all Environmental Approvals and are in compliance with all such Environmental Approvals; and

 

 

(iii)

none of the Borrower and its Related Companies has received notice of any Environmental Claim that the Borrower and/or that Related Company is not in compliance with any Environmental Law or any Environmental Approval;

 

 

(j)

No Environmental Claims: except as may already have been disclosed by the Borrower in writing to, and acknowledged in writing by, the Lender:

 

 

(i)

there is no Environmental Claim pending or, to the best of the Borrowers’ knowledge and belief, threatened against the Borrower or the Vessel or any of the Borrower’s Related Companies or any other Relevant Ship; and

 

 

(ii)

there has been no emission, spill, release or discharge of a Material of Environmental Concern from the Vessel or any other Relevant Ship or any vessel owned by, managed or crewed by or chartered to the Owner which could give rise to an Environmental Claim;

 

43

 

 

(k)

Copies true and complete: the copies of the Contract, the Clearlake Assignable Charterparty and the Management Agreements delivered or to be delivered to the Lender pursuant to Clause 7.1 (Conditions precedent to the execution of this Agreement) are, or will when delivered be, true and complete copies of such documents; such documents will when delivered constitute valid and binding obligations of the parties thereto enforceable in accordance with their respective terms and there will have been no amendments or variations thereof or defaults thereunder and each of and the Contract and the Management Agreements is in full force and effect;

 

 

(l)

DOC and SMC: in relation to the Vessel, the DOC applicable to each Approved Manager and the SMC applicable to the Vessel are presently in full effect;

 

 

(m)

Compliance with ISM Code: the Vessel will comply on the Drawdown Date and the Operator complies with the requirements of the ISM Code and the SMC which has been or, as the case may be, shall be issued in respect of the Vessel shall remain valid on the Drawdown Date and thereafter throughout the Security Period;

 

 

(n)

Compliance with ISPS Code: each Owner has a valid and current ISSC in respect of the Vessel and it is and will be in full compliance with the ISPS Code; and the Vessel complies and will comply throughout the Security Period and the Operator complies and will comply throughout the Security Period with the requirements of the ISPS Code and that ISSC shall remain valid on the Drawdown Date and thereafter throughout the Security Period;

 

 

(o)

No Rebates: there will be no commissions, rebates premiums or other payments by or to or on account of the Borrower or any other Security Party or, to the knowledge of the Borrower, any other person in connection with the Contract other than as shall be disclosed to the Lender by the Borrower in writing;

 

 

(p)

No US Tax Obligor: none of the Security Parties is a US Tax Obligor;

 

 

(q)

Sanctions: no Security Party:

 

 

(i)

is a Sanctions Restricted Person;

 

 

(ii)

owns or controls directly or indirectly a Sanctions Restricted Person; or

 

 

(iii)

has a Sanctions Restricted Person serving as a director, officer or, to the best of its knowledge, employee; and

 

 

(iv)

no proceeds of the Loan shall be made available, directly or to the knowledge of the Borrower (after reasonable enquiry) indirectly, to or for the benefit of a Sanctions Restricted Person contrary to Sanctions or for transactions in a Sanctions Restricted Jurisdiction nor shall they be otherwise directly or indirectly, applied in a manner or for a purpose prohibited by Sanctions;

 

 

(r)

Taxes paid: the Owner has paid all taxes applicable to, or imposed on or in relation to itself, its business or the Vessel; and

 

 

(s)

Copies true and complete: the copies of the Contract and the Management Agreement delivered or to be delivered to the Lender pursuant to Clause 7.1 (Conditions precedent to the execution of this Agreement) are, or will when delivered be, true and complete copies of such documents; such documents will when delivered constitute valid and binding obligations of the parties thereto enforceable in accordance with their respective terms and there will have been no amendments or variations thereof or defaults thereunder and each of and the Contract and the Management Agreement is in full force and effect and nor shall any action been taken by the parties thereto which would in any way render such document inoperative or unenforceable.

 

44

 

6.3

Money laundering - acting for own account

 

the Borrower further represents and warrants and confirms to the Lender that it is the beneficiary for each part of the Loan made or to be made available to it and it will promptly inform the Lender by written notice if it is not, or ceases to be, the beneficiary and notify the Lender in writing of the name and the address of the new beneficiary/beneficiaries; the Borrower is aware that under applicable money laundering provisions, it has an obligation to state for whose account the Loan is obtained; the Borrower confirms that, by entering into this Agreement and the other Finance Documents and the Underlying Documents, it is acting on its own behalf and for its own account and it is obtaining the Loan for its own account. In relation to the borrowing by the Borrower of the Loan, the performance and discharge of its obligations and liabilities under this Agreement or any of the other Finance Documents and the transactions and other arrangements effected or contemplated by this Agreement or any of the Documents to which the Borrower is a party, it is acting for its own account and that the foregoing will not involve or lead to a contravention of any law, official requirement or other regulatory measure or procedure which has been implemented to combat “money laundering” (as defined in Article 1 of the Directive (91/308/EEC) of the Council of the European Community).

 

6.4

Representations Correct

 

At the time of entering into this Agreement all above representations and warranties or any other information given by the Security Parties to the Lender are true and accurate.

 

6.5

Repetition of Representations and Warranties

 

The representations and warranties in this Clause 6 (except in relation to the representations and warranties in Clause 6.2 (Initial representations and warranties)) shall be deemed to be repeated by the Borrower on and as of each day from the date of this Agreement until all moneys due or owing by the Security Parties or any of them under this Agreement and the Security Documents have been repaid in full as if made with reference to the facts and circumstances existing on each such day.

 

7.

CONDITIONS PRECEDENT


 

7.1

Conditions precedent to the execution of this Agreement

 

The obligation of the Lender to make the Commitment or any part thereof available shall be subject to the condition that the Lender, shall have received, not later than two (2) Banking Days before the day on which the Drawdown Notice in respect of the Commitment or such part thereof is given, the following documents and evidence in form and substance satisfactory to the Lender:

 

 

(a)

Constitutional Documents: a duly certified true copy of the Articles of Incorporation and By-Laws or the Memorandum and Articles of Association, or of any other constitutional documents, as the case may be, of each corporate Security Party;

 

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(b)

Certificates of incumbency: a recent certificate of incumbency of each corporate Security Party issued by the appropriate authority or as appropriate, signed by the secretary or a director of each of them respectively, stating the officers and the directors of each of them;

 

 

(c)

Shareholding: a statement to the Lender confirming the identity of the Corporate Guarantor’s Controlling Shareholders in line with “know your customer” procedures of the Lender for opening account purposes, who should be acceptable in all respects to the Lender; in the event that the Lender agrees (at its sole discretion) that a Security Party may have a corporate shareholder, the conditions set out in Sub-clauses (a) (Constitutional Documents), (b) (Certificates of incumbency), (d) (Resolutions) and (e) (Powers of Attorney) of this Clause 7.1 shall apply (mutatis mutandis) to such corporate shareholder;

 

 

(d)

Resolutions: minutes of separate meetings of the directors and (if required) shareholders of each of the Borrower and the Corporate Guarantor at which there was approved (inter alia) the entry into, execution, delivery and performance of this Agreement, the other Finance Documents, the Underlying Documents and any other documents executed or to be executed pursuant hereto or thereto to which the relevant Security Party is or is to be a party;

 

 

(e)

Powers of Attorney: the original of any power(s) of attorney and any further evidence of the due authority of any person signing this Agreement, the other Finance Documents and the Underlying Documents, and any other documents executed or to be executed pursuant hereto or thereto on behalf of any corporate person;

 

 

(f)

Consents: evidence that all necessary licences, consents, permits and authorisations (including exchange control ones) have been obtained by any Security Party for the execution, delivery, validity, enforceability, admissibility in evidence and the due performance of the respective obligations under or pursuant to this Agreement and the other Finance Documents;

 

 

(g)

Fees: evidence that the relevant fees referred to in Clause 10.14 (Arrangement Fee and Commitment Commission) have been paid in full;

 

 

(h)

DOC: a copy of the DOC applicable to each Approved Manager certified as true and in effect;

 

 

(i)

Management Agreement-Contract-Assignable Charterparty: a copy of each of the following documents certified as true and complete by the legal counsel of the Borrower:

 

 

(i)

each Management Agreement evidencing that the Vessel is managed by the relevant Approved Manager on terms acceptable to the Lender (such acceptance not to be unreasonably withheld);

 

 

(ii)

the Contract and all addenda thereto; and

 

 

(iii)

the Clearlake Assignable Charterparty,

 

each duly executed, certified as true and complete by the legal counsel of the Borrower;

 

 

(j)

Other documents: any other documents or recent certificates or other evidence which would be required by the Lender in relation to each Security Party evidencing that the relevant Security Party has been properly established, continues to exist validly and is in good standing; and

 

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(k)

Operating Account: evidence that the Operating Account havs been duly opened and all mandate forms and other legal documents required for the opening of an account under any applicable law, as well as signature cards and properly adopted authorizations have been duly delivered to and have been accepted by the compliance department of the Lender.

 

7.2

Conditions precedent to the making of the Commitment

 

The obligation of the Lender to make the Commitment (or any part thereof) is subject to the further condition that the Lender shall have received prior to the Drawdown Date or, where this is not possible, simultaneously with the disbursement of the Loan to the Builder on the Delivery Date:

 

 

(a)

Conditions precedent: evidence that the conditions precedent set out in Clause 7.1 (Conditions precedent to the execution of this Agreement) remain fully satisfied;

 

 

(b)

Drawdown Notice: the Drawdown Notice duly executed, issued and delivered to the Lender as provided in Clause 2.2 (Drawdown Notice and commitment to borrow);

 

 

(c)

Finance Documents: a duly executed original of the Master Agreement, the Master Agreement Swap Assignment, the Accounts Pledge Agreement, the Corporate Guarantee, the Mortgage, the General Assignment, the Approved Managers’ Undertakings, the Side Letter, the Charterparty Assignment and the Insurance Letter (and of each document to be executed and delivered pursuant thereto) and, where appropriate, duly registered with the Registry or any other competent authority (as required);

 

 

(d)

Notices of assignment:  duly executed notices of assignment substantially in the form prescribed by the Security Documents;

 

 

(e)

Confirmations from process agents: confirmation from any agents nominated in this Agreement and elsewhere in the other relevant Finance Documents for the acceptance of any notice or service of process, that they consent to such nomination;

 

 

(f)

No claim: evidence satisfactory to the Lender that neither the Builder nor any other party who may have a claim pursuant to the Contract has any claims against the Vessel or the Borrower and that there have been no breaches of the terms of the Contract or any default thereunder;

 

 

(g)

Invoice and receipt: an invoice from the Builder demanding the payment of the delivery instalment to be drawn down payable under the Contract;

 

 

(h)

Vessel conditions: evidence in form and substance satisfactory to the Lender:

 

 

(i)

Registration and Security Interests: the Vessel is or will be registered at the time of her Delivery in the name of the Borrower through the Registry under the laws and flag of the relevant Approved Flag State and that the Vessel and her Earnings, Insurances and Requisition Compensation are free of Security Interests save for Permitted Security Interests ; and

 

 

(ii)

Class confirmation: interim evidence from the Classification Society that the Vessel has been completed to its satisfaction, until permanent evidence becomes available, whereupon the latter must be provided; and

 

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(iii)

Insurances: the Vessel is insured in accordance with the insurance requirements provided for in this Agreement and the relevant Security Documents (in amounts not less than such sum which is at least equal to the greater of (i) the full Market Value of the Vessel and (ii) 125% of the amount of the Loan) together with an opinion from insurance consultants (appointed by the Lender at the Borrower’ expense) as to the adequacy of the insurances effected or to be effected in respect of the Vessel, to be followed by full copies of cover notes, policies, certificates of entry or other contracts of insurance and irrevocable authority is hereby given to the Lender at any time at its discretion to obtain copies of the policies, certificates of entry or other contracts of insurance from the insurers and/or obtain any information in relation to the Insurances relating to the Vessel;

 

 

(iv)

Insurers confirmations: all necessary confirmations from the insurers of the Vessel that they will issue letters of undertaking and endorse notice of assignment and loss payable clauses on the Insurances, in form and substance satisfactory to the Lender in its sole discretion and - in the event of fleet cover - accompanied by waivers for liens for unpaid premium of other Vessel managed by the relevant Approved Manager and which are not subject to any mortgage in favour of the Lender) and an opinion signed by an independent firm of marine insurance brokers appointed and/or approved by the Lender at the expenses of the Borrower confirming the adequacy of the Insurances maintained on the Vessel;

 

 

(i)

Access to class records: due authorisation in form and substance satisfactory to the Lender authorising the Lender to have access and/or obtain any copies of class records or other information at its discretion from the Classification Society of the Vessel, provided however, that the Lender shall not exercise such right unless and until an Event of Default has occurred and is continuing;

 

 

(j)

MII & MAPI: the MII and the MAPI shall have been effected by the Lender, but at the expense of the Borrower, as provided in Clause 10.9 (MII & MAPI costs);

 

 

(l)

Previous register; No Security Interests: evidence that no Security Interests are registered against the Vessel on her previous register, if any;

 

 

(m)

Title and no Security Interests: evidence that good title to the Vessel has passed to the Borrower and, prior to or simultaneously with the drawdown of the Loan, the Vessel has been or will, on the Delivery Date of the Vessel, be duly registered in the ownership of the Borrower with the Registry and under the laws and flag of the relevant Approved Flag State and that there is no Security Interest of any kind on the Vessel or against the Borrower created or permitted by any person on or relating to the relevant Contract other than Permitted Security Interests and otherwise as contemplated herein;

 

 

(n)

Fees and commissions: payment of any fees and commissions due from the Borrower to the Lender pursuant to the terms of Clause 10.14 (Arrangement Fee and Commitment Commission) or any other provision of the Security Documents;

 

 

(o)

Commercial invoice in respect of the Vessel: a commercial invoice or any other similar document addressed by the Builder to the Borrower in respect of the Contract Price and the Vessel and a receipt from the Builder or any other similar evidence evidencing the payment in full of the final instalment;

 

48

 

 

(p)

Builders Certificate: a certified true copy of the Builder’s Certificate in resect of the Vessel duly executed and delivered;

 

 

(q)

Security Parties process agent: a letter from each Security Party’s agent for receipt of service of proceedings referred to in the relevant Security Documents to which the relevant Security Party is a party, accepting its appointment under each of the relevant Security Documents;

 

 

(r)

Valuation: a valuation of the Vessel (dated not more than thirty (30) days prior to the Drawdown Date ) made on the basis specified in Clause 8.5(b) (Valuation of the Vessel) without taking into account the benefit of any Assignable Charterparty or any charterparty or other engagement concerning the Vessel, evidencing that the amount of the Loan does not exceed 62% of the Market Value of the Vessel;

 

 

(s)

Mortgage registration: evidence that the Mortgage has been or simultaneously with the Delivery of the Vessel will be registered against the Vessel through the Registry under the laws and flag of the relevant Approved Flag State;

 

 

(t)

Management Agreement: a copy, certified (in a certificate dated no earlier than five (5) Banking Days prior to the Drawdown Date) as a true and complete copy by an officer of the Borrower, of the Management Agreement; and

 

 

(u)

Acknowledgement of Receipt: a receipt in writing in form and substance satisfactory to the Lender including an acknowledgement and admission of the Borrower and the the Corporate Guarantor to the effect that the Commitment or relevant part thereof (as the case may be) was drawn by the Borrower and a declaration by the Borrower and the the Corporate Guarantor that all conditions precedent have been fulfilled, that there is no Event of Default and that all the representations and warranties are true and correct;

 

 

(v)

Legal opinions: draft opinion from lawyers appointed by the Lender as to all the matters referred to in Clause 6.1(a) (Due Incorporation/Valid Existence) and Clause 6.1(b) (Due Corporate Authority) and all such aspects of law as the Lender shall deem relevant to this Agreement and the other Finance Documents and any other documents executed pursuant hereto or thereto and any further legal or other expert opinion as the Lender at its sole discretion may require.

 

 

(w)

Approved Flag State opinion: draft opinion of legal advisers to the Lender on matters of the laws of the Approved Flag State of the Vessel;

 

 

(x)

Further opinions: such further opinions as the Lender may require;

 

 

(y)

Charterparty: a copy, certified as a true and complete copy, of the Clearlake Assignable Charterparty or any other Assignable Charterparty;

 

 

(z)

Trading certificates: copies of the trading certificates of the Vessel certified as true and complete by the legal counsel of the Borrower evidencing the same to be valid and in force;

 

 

(aa)

DOC: a copy of the DOC applicable to each Approved Manager certified as true and in effect;

 

 

(bb)

ISM Code and ISPS Code: a copy certified as a true and complete copy by an officer of the Borrower of the DOC issued to the Operator and either (i) the SMC for the Vessel or (ii) evidence satisfactory to the Lender that the Operator has applied to the relevant Regulatory Agency for an SMC for the Vessel to be issued pursuant to the ISM Code and the International Ship Security Certificate issued by the Approved Flag State in accordance with the ISPS Code for the Vessel; and

 

49

 

 

(cc)

ISPS Code compliance:

 

 

(i)

evidence satisfactory to the Lender that the Vessel is subject to a ship security plan which complies with the ISPS Code; and

 

 

(ii)

upon its issuance, a copy, certified as a true and complete copy of the ISSC for the Vessel; and

 

 

(dd)

Financial covenants: evidence satisfactory to the Lender, including, without limitation the Compliance Certificate, that the Corporate Guarantor complies fully with the requirements of Clause 8.8 (Financial Covenants - Compliance Certificate).

 

7.3

No change of circumstances

 

The obligation of the Lender to advance the Commitment or any part thereof is subject to the further condition that at the time of the giving of a Drawdown Notice and on advancing the Commitment:

 

 

(a)

Representations and warranties: the representations and warranties set out in Clause 6 (Representations and warranties) and in each of the other Finance Documents are true and correct on and as of each such time as if each was made with respect to the facts and circumstances existing at such time;

 

 

(b)

No Event of Default: no Event of Default shall have occurred and be continuing or would result from the drawdown of the Loan;

 

 

(c)

No change: the Lender shall be satisfied that (i) there has been no change in control directly or indirectly in the ownership, beneficial ownership, or management of any of the Borrower and the Approved Managers or any share therein or of the Vessel and (ii) at least 50.1% of the voting rights in the Corporate Guarantor remains in the ultimate legal and beneficial ownership of the Corporate Guarantor’s Controlling Shareholders and (iii) there has been no Material Adverse Change on any Security Party which Material Adverce Change might, in the opinion of the Lender, be detrimental to the interests of the Lender; and

 

 

(d)

No Market Disruption Event: none of the circumstances contemplated by Clause 3.6 (Market disruption  Non Availability) has occurred and is continuing.

 

7.4

Know your customer and money laundering compliance

 

The obligation of the Lender to advance the Commitment or any part thereof is subject to the further condition that the Lender, prior to or simultaneously with the drawdown, shall have received, to the extent required by any change in applicable law and regulation or any changes in the Lender’s own internal guidelines since the date on which the applicable documents and evidence were delivered to the Lender pursuant to Clause 8.10 (Know your customer and money laundering compliance), such further documents and evidence as the Lender shall require to identify the Borrower and the other Security Parties and any other persons involved or affected by the transaction(s) contemplated by this Agreement.

 

50

 

7.5

Further documents

 

Without prejudice to the provisions of this Clause 7 the Borrower hereby undertakes with the Lender to make or procure to be made such amendments and/or additions to any of the documents delivered to the Lender in accordance with this Clause 7 and to execute and/or deliver to the Lender or procure to be executed and/or delivered to the Lender such further documents as the Lender and its legal advisors may require to satisfy themselves that all the terms and requirements of this Agreement have been complied with.

 

7.6

Waiver of conditions precedent

 

The conditions specified in this Clause 7 are inserted solely for the benefit of the Lender and may be waived by the Lender in whole or in part and with or without conditions. Without prejudice to any of the other provisions of this Agreement, in the event that the Lender, in its sole and absolute discretion, makes the Commitment available to the Borrower prior to the satisfaction of all or any of the conditions referred to in Clauses 7.1 (Conditions precedent to the execution of this Agreement), 7.2 (Conditions precedent to the making of the Commitment) and 7.3 (No change of circumstances), the Borrower hereby covenants and undertakes to satisfy or procure the satisfaction of such condition or conditions by no later than fourteen (14) days after the Drawdown Date or within such longer period as the Lender may, in its sole and absolute discretion, agree to or specify.

 

8.

UNDERTAKINGS


 

8.1

General Undertakings

 

The Borrower undertakes with the Lender that, from the date of this Agreement and until the full and complete payment and discharge of the Outstanding Indebtedness, it will:

 

 

(a)

Notice on Material Adverse Change or Default: promptly inform the Lender upon becoming aware of any occurrence which might materially adversely affect the ability of any Security Party to perform its obligations under any of the Finance Documents and the Underlying Documents and, without limiting the generality of the foregoing, will inform the Lender of any Default forthwith upon becoming aware thereof and will from time to time, if so requested by the Lender, confirm to the Lender in writing that, save as otherwise stated in such confirmation, no Default has occurred and is continuing;

 

 

(b)

Notification of litigation: provide the Lender with details of any legal or administrative action involving the Borrower or the Owner, the Vessel, the Earnings or the Insurances in respect of the Vessel, any Security Party or either Approved Manager, as soon as such action is instituted, unless it is clear that the legal or administrative action cannot be considered material in the context of any Finance Document, and the Borrower shall procure that all reasonable measures are taken to defend any such legal or administrative action;

 

 

(c)

Consents and licenses: without prejudice to Clauses 6 (Representations and warranties) and 7 (Conditions precedent), obtain or cause to be obtained, maintain in full force and effect and comply in all material respects with the conditions and restrictions (if any) imposed in, or in connection with, every consent, authorisation, license or approval of governmental or public bodies or authorities or courts and do or cause to be done, all other acts and things which may from time to time be necessary or desirable under applicable law for the continued due performance of all the obligations of the Security Parties under each of the Finance Documents and the Underlying Documents;

 

51

 

 

(d)

Use of Loan proceeds: use the Loan exclusively for the purposes specified in Clause 1.1 (Amount and Purpose);

 

 

(e)

Pari passu: ensure that its obligations under this Agreement shall, without prejudice to the provisions of this Clause 8.1, at all times rank at least pari passu with all its other present and future unsecured and unsubordinated Financial Indebtedness with the exception of any obligations which are mandatorily preferred by law and not by contract;

 

 

(f)

Financial statements: furnish the Lender with (i) annual audited financial statements of the Corporate Guarantor and unaudited financial statements of the Borrower (which are part of the audited consolidated accounts of the Guarantor), in respect of the Financial Year to which they relate and prepared in accordance with US GAAP, as soon as practicable but not later than 180 days after the end of the financial period to which they relate, such obligation to commence with respect to the Financial Year ending 31st December, 2021 and (ii) a Compliance Certificate for the relevant Accounting Period of the Corporate Guarantor, commencing from 30 June, 2022 signed by its Treasurer;

 

 

(g)

Provision of further information: promptly, when requested, provide the Lender with such financial and other information and accounts relating to the business, undertaking, assets, liabilities, revenues, financial condition or affairs of any Security Party and such other further general information relating to any Security Party as the Lender from time to time may require;

 

 

(h)

Financial Information: provide the Lender from time to time as the Lender may request with information on all major financial developments such as sales and/or purchases of Vessel, new loans, refinancing restructuring of existing loans, contracts for term employments of vessels managed by the Approved Managers, the financial conditions, actual and projected for the following 12 month period, cash flow position, commitments and operations of the Borrower, including cash flow analysis and voyage accounts of the Vessel with a breakdown of running expenses showing net trading profit, trade payables and trade receivables, such financial details to be certified by an authorized signatory of the Borrower as to their correctness;

 

 

(i)

Information on the employment of the Vessel: provide the Lender from time to time as the Lender may request with information on the employment of the Vessel, as well as on the terms and conditions of any charterparty, contract of affreightment, agreement or related document in respect of the employment of the Vessel, such information to be certified by one of the directors of the Borrower as to their correctness;

 

 

(j)

Pledged Minimum Liquidity: procure that within two (2) months from the Delivery Date of the Vessel and throughout the remainder of the Security Period a minimum liquidity be maintained in the Operating Account pledged in favour of the Lender in an amount not less than (i) during the period the Vessel is time chartered under an Assignable Charterparty, Dollars Five hundred thousand ($500,000) and (ii) during any other period, Dollars One million ($1,000,000) (for the purposes of this Agreement such minimum liquidity shall be called herein the “Pledged Minimum Liquidity”),:

 

 

(k)

Banking operations: ensure that all banking operations in connection with the Vessel are carried out through the Lending Office of the Lender;

 

52

 

 

(l)

Subordination: ensure that all Financial Indebtedness of the Borrower to their respective shareholders or to any of its Related Companies is fully subordinated in writing to the rights of the Lender under the Finance Documents, and to subordinate to the rights of the Lender under the Finance Documents any Financial Indebtedness issued to it by its shareholders or by any of its Related Companies, in all cases pursuant to a subordination agreement acceptable to the Lender;

 

 

(m)

Obligations under Finance Documents etc.: duly and punctually perform each of the obligations expressed to be assumed by it under the Finance Documents and the Underlying Documents to which is or is to be a party;

 

 

(n)

Payment on demand: pay to the Lender on demand any sum of money which is payable by the Borrower to the Lender under this Agreement but in respect of which it is not specified in any other Clause when it is due and payable;

 

 

(o)

Compliance with Laws and Regulations: comply, or procure compliance with all laws or regulations relating to each Owner and/or the Vessel, its ownership, operation and management or to the business of the Borrower and cause this Agreement and the other Finance Documents to comply with and satisfy all the requirements and formalities established by the applicable laws to perfect this Agreement and the other Finance Documents as valid and enforceable Finance Documents;

 

 

(p)

Maintenance of Security Interests:

 

 

(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) above, at its own cost, promptly register, file, record or enrol any Finance Document with any court or authority in all Relevant Jurisdictions, pay any stamp, registration or similar tax in all Relevant Jurisdictions in respect of any Finance Document, give any notice or take any other step which may be or has become necessary or desirable for any Finance Document to be valid, enforceable or admissible in evidence or to ensure or protect the priority of any Security Interest which it creates;

 

 

(q)

Registered Office: maintain its registered office and place of business and keep its corporate documents and records at the address referred to in Clause 16.1 (Notices); and will not establish, or do anything as a result of which it would be deemed to have, a place of business in the United Kingdom or the United States of America;

 

 

(r)

Compliance with Covenants: duly and punctually perform all obligations under this Agreement and the other Finance Documents; and

 

 

(s)

No US Tax Obligor: procure that, unless otherwise agreed by the Lender, no Security Party shall become a US Tax Obligor.

 

8.2

Negative undertakings

 

The Borrower undertakes with the Lender that, from the date of this Agreement and so long as any moneys are owing under the Finance Documents and until the full and complete payment and discharge of the Outstanding Indebtedness, without the prior written consent of the Lender, it will:

 

53

 

 

(a)

Negative pledge:

 

 

(i)

upon Delivery of the Vessel, not cease to hold the legal title to the Vessel, her Insurances and Earnings, free from all Security Interests and other interests and rights of every kind, except for those created by the Finance Documents and the effect of the assignments contained in the General Assignment and any other Finance Documents; and

 

 

(ii)

not create or permit any Security Interest (other than a Permitted Security Interest) to subsist, arise or be created or extended over all or any part of its present or future undertakings, assets, rights or revenues (including, but not limited to, the Borrower’s rights against the Swap Bank under the Master Agreement or all or any part of the Borrower’s interest in any amount payable to the Borrower by the Swap Bank under the Master Agreement) to secure or prefer any present or future Financial Indebtedness or other liability or obligation of the Borrower or any other person other than in the normal course of its business of owning, financing and operating Vessel and owning or acquiring ship-owning companies;

 

 

(b)

No further Financial Indebtedness: not incur any further Financial Indebtedness nor authorise or accept any capital commitments (other than that normally associated with the day to day operations and trading) nor enter into any agreement for payment on deferred terms or hire agreement;

 

 

(c)

No merger: not merge or consolidate with any other person;

 

 

(d)

No disposals:

 

 

(i)

not sell, transfer, abandon, lend, lease or otherwise dispose of or cease to exercise direct control over any part (being either alone or when aggregated with all other disposals falling to be taken into account pursuant to this Clause 8.2(d) material in the opinion of the Lender in relation to the undertakings, assets, rights and revenues of the Borrower) of its present or future undertaking, assets, rights or revenues (otherwise than by transfers, sales or disposals for full consideration in the ordinary course of operations and trading) whether by one or a series of transactions related or not; and

 

 

(ii)

not transfer, lease or otherwise dispose of any debt payable to it or any other right (present, future or contingent right) to receive a payment, including any right to damages or compensation;

 

 

(e)

No acquisitions: not acquire any further assets other than the Vessel and rights arising under contracts entered into by or on behalf of the Borrower in the ordinary course of its business of owning, operating and chartering the Vessel;

 

 

(f)

No other business: not undertake any type of business other than its current business of owning, financing and operating Vessel and owning or acquiring ship-owning companies;

 

 

(g)

Investments: not make any investments in any person, asset, firm, corporation, joint venture or other entity;

 

 

(h)

No other obligations: not incur any liability or obligations except liabilities and obligations arising under the Finance Documents or the Underlying Documents or contracts entered into in the ordinary course of its business of owning, operating and chartering the Vessel (and for the purposes of this Clause 8.2(h) fees to be paid pursuant to the Management Agreement shall be considered as permitted obligations under the Finance Documents);

 

54

 

 

(i)

No borrowing: not incur any Borrowed Money except for Borrowed Money pursuant to the Finance Documents and the Underlying Documents (save for normal trade credit in the ordinary course of business);

 

 

(j)

No repayment of borrowings: not repay the principal of, or pay interest on or any other sum in connection with, any of its Borrowed Money except for Borrowed Money pursuant to the Finance Documents and the Underlying Documents (save for normal trade credit in the ordinary course of business);

 

 

(k)

No Payments: unless otherwise provided in this Agreement and the other Finance Documents (and then only to the extent expressly permitted by the same) not pay out any funds to any person except in connection with the administration of the Borrower, the construction of the Vessel and the operation and/or repair of the Vessel;

 

 

(l)

No guarantees: not issue any guarantees or indemnities or otherwise become directly or contingently liable for the obligations of any person, firm, or corporation except pursuant to the Finance Documents and except for, in the case of the Borrower, guarantees or indemnities from time to time required in the ordinary course by any protection and indemnity or war risks association with which the Vessel is entered, guarantees required to procure the release of the Vessel from any arrest, detention, attachment or levy or guarantees or undertakings required for the salvage of the Vessel or in the ordinary trade of the business;

 

 

(m)

No loans: not make any loans or advances to, or any investments in any person, firm, corporation, joint venture or other entity including (without limitation) any loan or advance or grant any credit (save for normal trade credit in the ordinary course of business) to any officer, director, stockholder or employee or any other company managed by the Approved Managers directly or through the Approved Managers or agree to do so, provided, always, that any loans of its shareholders to the Borrower shall be fully subordinated in writing to the Borrower's obligations under this Agreement and the other Finance Documents pursuant to a subordination agreement acceptable to the Lender;

 

 

(n)

No securities: not permit any Financial Indebtedness of the Borrower to any person (other than the Lender) to be guaranteed by any person (save, in the case of the Borrower, for guarantees or indemnities from time to time required in the ordinary course of business);

 

 

(o)

No dividends or distributions: it will not declare or pay any dividends or other distribution under any name or description upon any of the issued shares or otherwise dispose of any of its present or future assets, undertakings, rights or revenues (which are all assigned to the Lender) to any of the shareholders of the Borrower without the prior written consent of the Lender; Provided that, (i) if no Event of Default has occurred, (ii) if no Event of Default will result from the payment of such dividends or the making of any other form of distribution or disposal and (iii) if there is no breach of any of the Financial Covenants set forth in Clause 8.8 (Financial Covenants - Compliance Certificate) and Clause 5.3 (Financial undertakings) of the Guarantee of the Corporate Guarantor, the Borrower shall be entitled to declare or make payments of any dividends or distributions without the prior written consent of the Lender;

 

55

 

 

(p)

No Subsidiaries: not form or acquire any Subsidiaries;

 

 

(q)

No change of Business Structure: change the nature, organisation and conduct of the business of the Borrower or the Approved Managers as owner of the Vessel or, as the case may be, as managers of the Vessel or carry on any business other than the business carried on at the date of this Agreement;

 

 

(r)

No change of Legal Structure: ensure that none of the documents defining the constitution of either of the Borrower and the Corporate Guarantor shall be materially (in the Lender’s opinion) altered in any manner whatsoever;

 

 

(s)

No Security Interest of assets: other than Permitted Security Interests, not allow any part of its undertaking, property, assets or rights, whether present or future, to be mortgaged, charged, pledged, used as a lien or otherwise encumbered without the prior written consent of the Lender;

 

 

(t)

No change of control: ensure that no change shall be made directly or indirectly in the ownership, beneficial ownership, control or management of any of the Borrower, the Corporate Guarantor and the Approved Managers or any share therein, or the Vessel, as a result of which (i) less than 50.1% of the voting rights in of the Corporate Guarantor remain in the ultimate legal and beneficial ownership of the Corporate Guarantor’s Controlling Shareholders and confirmed in writing on or before the date hereof, (ii) less than 100% of the shares and voting rights in the Borrower remain in the legal and beneficial ownership of the Corporate Guarantor and (iii) less than 100% of the shares and voting rights in the Approved Manager remain in the ultimate legal and beneficial ownership of the Beneficial Shareholders disclosed to the Lender at the negotiation of this Agreement and confirmed in writing on or before the date hereof; and

 

 

(u)

Master Agreement Derivatives: not enter into any transaction in a derivative of any description whatsoever.

 

8.3

Undertakings concerning the Vessel

 

The Borrower undertakes with the Lender that, from the date of this Agreement and until the full and complete payment and discharge of the Outstanding Indebtedness, it will:

 

 

(a)

Conveyance on default: where the Vessel is (or is to be) sold in exercise of any power conferred on the Lender, it will execute, forthwith upon request by the Lender, such form of conveyance of the Vessel as the Lender may require;

 

 

(b)

Mortgage: it will execute, and procure the registration of the Mortgage over the Vessel under the laws and flag of the Approved Flag State immediately upon the drawdown of the Loan or on the Delivery Date;

 

 

(c)

Chartering: procure that the Borrower will, without the prior written consent of the Lender, let or agree the Vessel to be let:

 

 

(i)

on demise charter for any period; or

 

 

(ii)

(which shall not be unreasonably withheld) by any Assignable Charterparty; and

 

56

 

 

(iii)

otherwise than on bona fide arm’s length terms at the time when the Vessel is fixed;

 

 

(d)

Laid-up: not, without the prior written consent of the Lender, de-activate or lay up the Vessel;

 

 

(e)

Earnings: ensure and procure that, unless and until directed by the Lender otherwise (i) all the Earnings of the Vessel shall be paid to the Operating Account and (ii) the persons from whom the Earnings are from time to time due are irrevocably instructed to pay them to the Operating Account or to such account in the name of the Borrower as shall be from time to time determined by the Lender in accordance with the provisions hereof and of the relevant Security Documents;

 

 

(f)

No amendment to Assignable Charterparty: not, without the prior written consent of the Lender, waive or fail to enforce any Assignable Charterparty to which it is a party or any of its provisions, and will promptly notify the Lender of any material amendment or supplement to any Assignable Charterparty;

 

 

(g)

Approved Manager: not, without the prior written consent of the Lender, such consent not to be unreasonably withheld, (and then only subject to such conditions as the Lender may impose) agree or appoint a manager of the Vessel other than the Approved Managers;

 

 

(h)

Ownership/Management/Control: ensure that the Vessel is registered on the Drawdown Date in its ownership under the laws of the relevant Approved Flag State and thereafter ensure that the Vessel will maintain her registration, ownership, management, control and beneficial ownership;

 

 

(i)

Class: ensure that the Vessel will remain in class free of overdue recommendations or average damage affecting class or permitted by the Classification Society and provide the Lender on demand with copies of all class and trading certificates of the Vessel;

 

 

(j)

Insurances: ensure that all Insurances (as defined in the Mortgage/General Assignment) of the Vessel are maintained and comply with all insurance requirements specified in this Agreement and in the Mortgage and in case of failure to maintain the Vessel so insured, authorise the Lender (and such authorisation is hereby expressly given to the Lender) to have the right but not the obligation to effect such Insurances on its behalf (and in case that the Vessel remains in port for a period of over 3 months) to effect port risks insurances at the cost of the Borrower which, if paid by the Lender, shall be Expenses; the Lender shall be entitled to obtain once per year at Borrower’ expense an opinion from insurance consultants (appointed by the Lender at the Borrower’ expense) as to the adequacy of the insurances effected or to be effected in respect of the Vessel, Provided that (i) if an Event of Default has occurred and is continuing or (ii) if there has been any change in the insurance placement within such year or (iii) if there has been a Material Adverse Change of the financial condition of any of the insurers of any of the Vessel at the Lender’s sole opinion, the Lender shall be entitled to obtain at Borrower’ expense such opinion from such insurance consultants at any time it deems necessary;

 

 

(k)

Transfer/Security Interests: not, without the prior written consent of the Lender, agrees the Vessel or any share therein to be sold or otherwise disposed of or create or agree to create or permit to subsist any Security Interest over the Vessel (or any share or interest therein) other than Permitted Security Interests;

 

57

 

 

(l)

Not imperil Flag, Ownership, Insurances: ensure that the Vessel is maintained and trades in conformity with the laws of the relevant Approved Flag State, of its owning company or of the nationality of the officers, the requirements of the Insurances and nothing is done or permitted to be done which could endanger the flag of the Vessel or its unencumbered (other than Permitted Security Interests) ownership or its Insurances;

 

 

(m)

Mortgage Covenants: ensure that it always complies with all the covenants provided for in the Mortgage registered over the Vessel;

 

 

(n)

Assignment of Earnings: not assign or agree to assign otherwise than to the Lender the Earnings of the Vessel or any part thereof;

 

 

(o)

Sharing of Earnings: 

 

 

(i)

not enter into any agreement or arrangement for the sharing or pooling of any Earnings of the Vessel without the Lender’s prior written consent; and/or

 

 

(ii)

not enter into any agreement or arrangement for the postponement of any date on which any Earnings of the Vessel are due or the reduction of the amount of such Earnings or otherwise for the release or adverse alteration of any right of the Borrower to any Earnings of the Vessel; and/or

 

 

(iii)

not enter into any agreement or arrangement for the release of, or adverse alteration to, any guarantee or Security Interest relating to any Earnings of the Vessel;

 

 

(p)

Charter Assignment: ensure and procure that in the event of the Vessel being employed under an Assignable Charterparty, (a) the Lender shall be furnished forthwith with a certified copy of such Assignable Charterparty, forthwith after its execution and it shall execute and deliver to the Lender within fifteen (15) days of signing thereof a specific Charterparty Assignment in favour of the Lender of the benefit of such Assignable Charterparty and a notice of any such assignment addressed to the relevant charterer and endorsed with an acknowledgement of receipt by the relevant charterer, all in form and substance satisfactory to the Lender; or (b) alternatively at the discretion of the Lender, a copy of irrevocable instructions of the Borrower to the charterer for the payment of the hire to the Operating Account and/or a copy of the Assignable Charter with appropriate irrevocable notation;

 

 

(q)

No freight derivatives: not enter into or agree to enter into any freight derivatives or any other instruments which have the effect of hedging forward exposures to freight derivatives without the Lender’s consent;

 

 

(r)

Vessel inspection: permit the vessel to be inspected not more than once a year by surveyors or other persons appointed by it on its behalf to board the Vessel at all reasonable times (but in any event without interfering with the ordinary trading of the Vessel) for the purpose of inspecting her condition or for the purpose of satisfying itself with regard to proposed or executed repairs and to afford all proper facilities for such inspections and the costs (as supported by vouchers) of any and all such inspections shall be borne by the Borrower unless an Event of Default has occurred and is continuing ; 

 

 

(s)

Trading: use the Vessel only for civil merchant trading;

 

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(t)

Compliance with ISM Code: procure that each Approved Manager and any Operator:

 

 

(i)

will comply with and ensure that the Vessel and any Operator by no later than the Delivery Date of the Vessel complies with the requirements of the ISM Code, including (but not limited to) the maintenance and renewal of valid certificates pursuant thereto throughout the Security Period;

 

 

(ii)

immediately inform the Lender if there is any threatened or actual withdrawal of the Owner, either Approved Manager’s or an Operator’s DOC or the SMC in respect of the Vessel; and

 

 

(iii)

promptly inform the Lender upon the issue to the relevant Owner, either Approved Manager or any Operator of a DOC and to the Vessel of an SMC or the receipt by the Owner, either Approved Manager or any Operator of notification that its application for the same has been realised;

 

 

(u)

Compliance with ISPS Code: procure that the Approved Managers or the Operator will:

 

 

(i)

maintain at all times a valid and current ISSC in respect of the Vessel;

 

 

(ii)

immediately notify the Lender in writing of any actual or threatened withdrawal, suspension, cancellation or modification of the ISSC in respect of the Vessel; and

 

 

(iii)

procure that the Vessel will comply at all times with the ISPS Code;

 

 

(v)

Maintenance of legal and beneficial interest in the Vessel: hold the legal title to, and own the entire beneficial interest in the Vessel, its Insurances and Earnings, free from all Security Interests and other interests and rights of every kind, except for those created by the Finance Documents and the effect of assignments contained in the Finance Documents;

 

 

(w)

Compliance with Environmental Laws: comply with, and procure that all Environmental Affiliates of any Relevant Party comply with, all Environmental Laws including without limitation, requirements relating to manning and establishment of financial responsibility and to obtain and comply with, and procure that all Environmental Affiliates such Relevant Party obtain and comply with, all Environmental Approvals and to notify the Lender forthwith:

 

 

(i)

of any Environmental Claim for an amount or amounts in aggregate exceeding Seven hundred thousand Dollars ($700,000) made against any of the Vessel, any Relevant Ship and/or its Owner; and

 

 

(ii)

upon becoming aware of any incident which may give rise to an Environmental Claim and to keep the Lender advised in writing of the relevant Owner’s response to such Environmental Claim on such regular basis and in such detail as the Lender shall require.

 

 

(x)

War Risk Insurance cover: in the event of hostilities in any part of the world (whether war is declared or not), not cause or permit the Vessel to enter or trade to any zone which is declared a war zone by any government or by the Vessel's war risks insurers unless the prior written consent of the Lender has been given and that it has (at its expense) effected any special, additional or modified insurance cover which the Lender may approve or require.

 

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8.4

Validity of Securities - Earnings - Taxes etc.

 

The Borrower undertakes with the Lender that, from the date of this Agreement and until the full and complete payment and discharge of the Outstanding Indebtedness, it will:

 

 

(a)

Validity: ensure and procure that all governmental or other consents required by law and/or any other steps required for the validity, enforceability and legality of this Agreement and the other Finance Documents are maintained in full force and effect and/or appropriately taken;

 

 

(b)

Earnings: ensure and procure that, unless and until directed by the Lender otherwise (i) all the Earnings of the Vessel shall be paid to the Operating Account and (ii) the persons from whom the Earnings are from time to time due are irrevocably instructed to pay them to the Operating Account or to such account in the name of the Borrower as shall be from time to time determined by the Lender in accordance with the provisions hereof and of the relevant Security Documents;

 

 

(c)

Taxes: pay all Taxes, assessments and other governmental charges imposed on the Borrower when the same fall due, except to the extent that the same are being contested in good faith by appropriate proceedings and adequate reserves have been set aside for their payment if such proceedings fail;

 

 

(d)

Additional Documents: from time to time and within fifteen (15) days after the request of the Lender execute and deliver to the Lender or procure the execution and delivery to the Lender of all such documents as shall be deemed desirable at the discretion of the Lender for giving full effect to this Agreement, and for perfecting, protecting the value of or enforcing any rights or securities granted to the Lender under any one or more of this Agreement, the other Finance Documents and any other documents executed pursuant hereto or thereto and in case that any conditions precedent (with the Lender’s consent) have not been fulfilled prior to the Drawdown Date, such conditions shall be complied with within fifteen (15) Banking Days after the Lender’s written request (unless the Lender agrees otherwise in writing) and failure to comply with this covenant shall be an Event of Default.

 

8.5

Security cover - Valuation of the Vessel

 

 

(a)

Security shortfall  Additional security: If at any time during the Security Period, the applicable Security Value is less than the Security Requirement, the Lender may give notice to the Borrower requiring that such deficiency be remedied and then the Borrower shall (unless if the sole cause of such deficiency is the Total Loss of the Vessel and the Borrower are in full compliance with its obligations in relation to such Total Loss) either:

 

 

(i)

prepay (in accordance with Clause 4.2 (Voluntary prepayment) (but without regard to the requirement for five (5) days notice) within a period of thirty (30) Banking Days of the date of receipt by the Borrower of the Lender’s said notice such sum in Dollars as will result in the Security Requirement after such prepayment (taking into account any other repayment of the Loan made between the date of the notice and the date of such prepayment) being at least equal to the applicable Security Value; or

 

 

(ii)

within thirty (30) Banking Days of the date of receipt by the Borrower of the Lender’s said notice constitute to the satisfaction of the Lender such further security for the Loan as shall be acceptable to the Lender having a value for security purposes (as determined by the Lender in its absolute discretion) at the date upon which such further security shall be constituted which, when added to the applicable Security Value, shall not be less than the Security Requirement as at such date. Such additional security shall be constituted by:

 

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aa)

additional pledged cash deposits in favor of the Lender in an amount equal to such shortfall with the Lender and in an account and manner to be determined by the Lender; and/or

 

bb)

any other security acceptable to the Lender at its absolute discretion to be provided in a manner determined by the Lender.

 

 

(iii)

Any such additional security provided by the Lender shall be promptly released by the Lender once the Security Requirement ratio has been restored. The provisions of Clause 4.3 (Mandatory Prepayment in case of Total Loss or sale of the Vessel) and Clause 4.5 (Amounts payable on prepayment) shall apply to prepayments under Clause 8.6(a)(i).

 

 

(b)

Valuation of the Vessel: The Vessel shall, for the purposes of this Clause 8.6, be valued in Dollars at least once a year on or about the Financial Second Semester Testing Day and, if an Event of Default has occurred and is continuing, at any other time that the Lender may require, by one (1) Approved Shipbroker appointed by the Borrower and acceptable to the Lender, (such valuation to be made without, unless required by the Lender, physical inspection, and on the basis of a sale for prompt delivery for cash at arm’s length on normal commercial terms as between a willing buyer and a willing seller, without taking into account the benefit of any Assignable Charterparty or other engagement concerning the Vessel). The Lender and the Borrower agree to accept the valuation made by the Approved Shipbroker appointed as aforesaid as conclusive evidence of the Market Value of the Vessel at the date of such valuation and that such valuation shall constitute the Market Value of the Vessel for the purposes of this Clause 8.6. The value of the Vessel determined in accordance with the provisions of this Clause 8.6 shall be binding upon the Borrower and the Lender until such time as any further such valuation shall be obtained.

 

 

(c)

Information: The Borrower undertake to the Lender to provide the Lender and any such Approved Shipbrokers such information concerning the Vessel and its condition as such Approved Shipbrokers may reasonably require for the purpose of making any such valuation.

 

 

(d)

Costs: All costs in connection with the Lender obtaining any valuation of the Vessel referred to in Clause 8.5(b) (Valuation of the Vessel), and any valuation of any additional security at any time or necessitated and all legal and other expenses incurred by the Lender in connection with any matter arising out of this Clause 8.6 shall be borne by the Borrower.

 

 

(e)

Valuation of additional security: For the purpose of this Clause 8.6, the market value of any additional security provided or to be provided to the Lender shall be determined by the Lender in its absolute discretion without any necessity for the Lender assigning any reason thereto and if such security consists of a vessel shall be that shown by a valuation complying with the requirements of Clause 8.5(b) (Valuation of the Vessel) (whereas the costs shall be borne by the Borrower in accordance with Clause 8.6(c) (Costs)) or if the additional security is in the form of a cash deposit full credit shall be given for such cash deposit on a Dollar for Dollar basis.

 

 

(f)

Documents and evidence: In connection with any additional security provided in accordance with this Clause 8.6, the Lender shall be entitled to receive such evidence and documents of the kind referred to in Clause 7.1 (Conditions precedent to the execution of this Agreement) as may in the Lender’s opinion be appropriate and such favourable legal opinions as the Lender shall in its absolute discretion require.

 

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8.6

Sanctions

 

 

(a)

Without limiting Clause 8.7 (Compliance with laws etc.), the Borrower hereby undertakes with the Lender that, from the date of this Agreement and until the date that the Outstanding Indebtedness is paid in full, it shall ensure that the Vessel will not:

 

 

(i)

be used by or for the benefit of a Sanctions Restricted Person contrary to Sanctions; and/or

 

 

(ii)

used in trading in any Sanctions Restricted Jurisdiction or in any manner contrary to Sanctions; and/or

 

 

(iii)

traded in any manner which would trigger the operation of any sanctions limitation or exclusion clause (or similar) in the Insurances.

 

 

(b)

The Borrower shall:

 

 

(i)

not directly or to its knowledge (after reasonable enquiry) indirectly use or permit to be used all or any part of the proceeds of the Loan, or lend, contribute or otherwise make available such proceeds directly or to its knowledge (after reasonable enquiry) indirectly, to any person or entity (aa) to finance or facilitate any activity or transaction of or with any Sanctions Restricted Person contrary to Sanctions or in any Sanctions Restricted Jurisdiction, or (bb) in any other manner that would result in a violation of any Sanctions by any Party;

 

 

(ii)

shall not fund all or part of any payment under the Loan out of proceeds derived directly or to its knowledge (after reasonable enquiry) indirectly from any activity or transaction with a Sanctions Restricted Person contrary to Sanctions or in a Sanctions Restricted Jurisdiction or which would otherwise cause any party to be in breach of any Sanctions; and

 

 

(iii)

procure that no proceeds to its knowledge (after reasonable enquiry) from activities or business with a Sanctions Restricted Person contrary to Sanctions or in a Sanctions Restricted Jurisdiction are credited to any of the Accounts.

 

8.7

Compliance with laws etc.  

 

The Borrower shall:

 

 

(a)

comply, or procure compliance with all laws or regulations by the relevant Security Party:

 

 

(i)

relating to its respective business generally; and

 

 

(ii)

relating to the Vessel, its ownership, employment, operation, management and registration; and

 

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(iii)

all Sanctions; and

 

 

(b)

without limiting paragraph (a) above, not employ the Vessel nor allow its employment, operation or management in any manner contrary to any law or regulation which has or is likely to have a Material Adverse Effect on any of the Security Parties.

 

8.8

Financial covenants-Compliance Certificate

 

 

(a)

Financial covenants-Compliance Certificate: the Borrower will ensure that:

 

 

(i)

for the duration of the Security Period, the Corporate Guarantor’s consolidated financial position, based on the most recent Accounting Information to comply with the financial covenants set out below:

 

aa)

Corporate Liquidity: ensure that throughout the remainder of the Security Period, the Corporate Liquidity of the Corporate Guarantor’s maintained with the Lending Office οr other financial institutions at any relevant time in unencumbered current or call accounts in the name of entities acceptable to the Lender will be, at the end of any Accounting Period, in an amount not less than Dollars Five hundred thousand ($500,000) per Fleet Vessel; (for clarification purposes, the Pledged Minimum Liquidity and any cash held in debt service reserve accounts and retention accounts (if any) shall be taken into account in the calculation and testing of this covenant) and

 

bb)

Corporate Leverage Ratio: the Leverage Ratio of the Corporate Guarantor, at the end of any Accounting Period, not higher than 0.75:1.0; and

 

 

(ii)

Compliance Certificate: a compliance certificate for each Accounting Period of the Corporate Guarantor, commencing from 30 June 2021 signed by its Treasurer, is delivered to the Lender at six monthly intervals starting from 30 June, 2021 by the Borrower within 180 days after the end of the respective Accounting Period, substantially in the form set out in Schedule 3, duly completed and supported by calculations setting out in reasonable detail the materials underling the statements made in such compliance certificate.

 

The Liquid Funds and the Leverage Ratio to be tested and confirmed to the Lender on each Financial Semester Testing Day starting from 30 June, 2021 on the basis of the semi-annual unaudited and annual audited Financial Statements and the Compliance Certificate to be delivered to the Lender as per Clause 8.1(e) (Financial statements).

 

 

(b)

Construction: The expressions used in this Clause 8.6 shall be construed in accordance with law and accounting principles internationally accepted as used in the Accounting Information produced in accordance with Clause 8.1(e) (Financial statements).

 

 

(c)

Definitions: For the purposes of this Agreement:

 

“Accounting Information” means the annual audited consolidated financial statements of the Corporate Guarantor and the interim semi-annual un-audited financial statements of the Corporate Guarantor, to be provided by the Borrower to the Agent in accordance with clause 8.1(e) (Financial Statements - Compliance Certificate);

 

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“Accounting Period” means each Financial Year and each half-year of each Financial Year falling during the Security Period for which the Accounting Information is required to be delivered to the Lender pursuant to Clause 8.1(e) (Financial Statements - Compliance Certificate);

 

“Cash and Cash Equivalents means, at any relevant time, the aggregate of cash in hand or on deposit with any prime international bank;

 

“Corporate Leverage Ratio” means, in respect of an Accounting Period, the ratio of the Total Debt (after deducting all Cash and Cash Equivalents and restricted cash) to the aggregate Market Value of all Fleet Vessels provided however that the Fleet Vessels included in Total Assets should be adjusted to their market values which shall be acceptable to the Lender;

 

“Financial First Semester Testing Day” means, 30 June in any year;

 

“Financial Second Semester Testing Day” means, 31 December in any year;

 

“Financial Semester Testing Day means each of the Financial First Semester Testing Day and the Financial Second Semester Testing Day on which the Corporate Leverage Ratio of the Corporate Guarantor shall be tested as provided in this Clause 8.8 (together, the “Financial Semester Testing Days”);

 

“Fleet Market Value” means, as of the date of calculation, the aggregate market value of all the Fleet Vessels as determined in accordance with the provisions (mutatis-mutandis) of Clause 8.6(b) (Valuation of Vessel) of this Agreement;

 

“Fleet Vessels” means, together, all of the vessels (including, but not limited to, the Vessel) from time to time owned or leased by members of the Corporate Guarantor which, at the relevant time, are included within the Total Assets of the Corporate Guarantor in the balance sheet of the Accounting Information (each a “Fleet Vessel”);

 

“Total Assets” means, in respect of an Accounting Period, the aggregate value of all assets of the Corporate Guarantor included in the Accounting Information as “current assets” and the value of all investments and all other tangible and intangible assets of the Corporate Guarantor properly included in the Accounting Information as “fixed assets” in accordance with US GAAP; and

 

“Total Debt” means, in respect of an Accounting Period, the aggregate on a consolidated basis of the Corporate Guarantor of all short term interest bearing bank debt included in the financial statements of the Corporate Guarantor under current liabilities plus the long term interest bearing bank debt.

 

8.9

Covenants for the Securities Parties

 

The Borrower undertakes with the Lender that, from the date of this Agreement and until the full and complete payment and discharge of the Outstanding Indebtedness, it will ensure and procure that all other Security Parties and each of them duly and punctually comply, with the covenants in Clauses 8.1 (General), 8.3 (Undertakings concerning the Vessel), 8.4 (Validity of Securities - Earnings - Taxes etc.), 8.5 (Security cover - Valuation of the Vessel), 8.7 (Sanctions) and 8.8 (Compliance with laws etc.) which are applicable to them mutatis mutandis.

 

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8.10

Know your customer and money laundering compliance

 

The Borrower undertakes with the Lender that, from the date of this Agreement and until the full and complete payment and discharge of the Outstanding Indebtedness, it will provide the Lender, or procure the provision of, such documentation and other evidence as the Lender shall from time to time require, based on applicable law and regulations from time to time and the Lender’s own internal guidelines from time to time to identify each of the Borrower and the other Security Parties, including the disclosure in writing, in case of the Borrower and the Corporate Guarantor, of the Corporate Guarantor’s Controlling Shareholders and in the case of the other Security Parties, of the ultimate legal and beneficial owner or owners of such entities, and any other persons involved or affected by the transaction(s) contemplated by this Agreement in order for the 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.

 

8.11

Master Agreement

 

 

(a)

No dealings with Master Agreement: not assign, novate or in any other way transfer any of its rights or obligations under or pursuant to the Master Agreement, nor enter into any interest rate exchange or hedging agreement with anyone other than the Lender except Designated Transactions pursuant to the Master Agreement and other than on terms and conditions agreed between the Lender and the Borrower, nor any other agreement or commitment the effect of which is, in the opinion of the Lender, materially to prejudice the hedging of the Borrower’s interest rate risk effected by the Transactions from time to time entered into between the Borrower and the Lender; and

 

 

(b)

No amendment to Master Agreement:  not agree to any amendment or supplement to, or waive or fail to enforce, the Master Agreement or any of its provisions.

 

9.

EVENTS OF DEFAULT


 

9.1

Events

 

There shall be an Event of Default if:

 

 

(a)

Nonpayment: any Security Party fails to pay any sum payable by it under any of the Finance Documents and the Underlying Documents at the time, in the currency and in the manner stipulated in the Finance Documents and the Underlying Documents (and so that, for this purpose, sums payable on demand shall be treated as having been paid at the stipulated time if paid within five (5) Banking Days of demand and other sums due shall be treated as having been paid at the stipulated time if paid within two (2) Banking Days of its falling due); or

 

 

(b)

Breach of Insurance and certain other obligations: the Borrower fails to obtain and/or maintain the Insurances (as defined in, and in accordance with the requirements of, the Finance Documents) or if any insurer in respect of such Insurances cancels the Insurances or disclaims liability by reason, in either case, of mis‑statement in any proposal for the Insurances or for any other failure or default on the part of the Borrower or any other person or the Borrower commit any breach of or omit to observe any of the obligations or undertakings expressed to be assumed by them under Clause 8 (Covenants); or

 

 

(c)

Breach of other obligations: any Security Party commits any breach of or omits to observe any of its obligations or undertakings expressed to be assumed by it under any of the Finance Documents or any of the Underlying Documents (other than those referred to in Clauses 9.1(a) (Nonpayment) and 9.1(b) (Breach of Insurance and certain other obligations) above) and, in respect of any such breach or omission which in the opinion of the Lender is capable of remedy, such action as the Lender may require shall not have been taken within fifteen (15) days of the Lender notifying in writing the relevant Security Party of such default and of such required action; or

 

65

 

 

(d)

Misrepresentation: any representation or warranty made or deemed to be made or repeated by or in respect of any Security Party in or pursuant to any of the Finance Documents and the Underlying Documents or in any notice, certificate or statement referred to in or delivered under any of the Finance Documents and the Underlying Documents is or proves to have been incorrect or misleading in any material respect; or

 

 

(e)

Crossdefault: any Financial Indebtedness of any of the Borrower and the Corporate Guarantor relating to, in the case of the Borrower, Dollars Five hundred thousand ($500,000) and, in the case of the Corporate Guarantor, an amount exceeding Five million Dollars ($5,000,000) is not paid when due (unless contested in good faith) or any Financial Indebtedness of any of the Borrower and the Corporate Guarantor becomes (whether by declaration or automatically in accordance with the relevant agreement or instrument constituting the same) due and payable prior to the date when it would otherwise have become due (unless as a result of the exercise by such Security Party of a voluntary right of prepayment), or a lender of any of the Borrower and the Corporate Guarantor becomes entitled to declare any such Financial Indebtedness due and payable or any facility or commitment available to any of the Borrower and the Corporate Guarantor relating to Financial Indebtedness is withdrawn, suspended or cancelled by reason of any default (however described) of the person concerned unless the relevant Security Party shall have satisfied the Lender that such withdrawal, suspension or cancellation will not affect or prejudice in any way the relevant Security Party’s ability to pay its debts as they fall due, or any guarantee given by any of the Borrower and the Corporate Guarantor in respect of Financial Indebtedness relating to, in the case of the Borrower, Dollars Five hundred thousand ($500,000) and, in the case of the Corporate Guarantor, an amount exceeding Five million Dollars ($5,000,000) is not honoured when due and called upon; or

 

 

(f)

Legal process: any judgment or order made or commenced in good faith by a person against any of the Borrower and the Corporate Guarantor relating to, in the case of the Borrower, Dollars Five hundred thousand ($500,000) and, in the case of the Corporate Guarantor, an amount exceeding Five million Dollars ($5,000,000)  is not stayed or complied with within thirty (30) days or a good faith creditor attaches or takes possession of, or a distress, execution, sequestration or other bonafide process is levied or enforced upon or sued out against, any of the undertakings, assets, rights or revenues of any of the Borrower and the Corporate Guarantor and is not discharged within thirty (30) days; or

 

 

(g)

Insolvency: any Security Party becomes insolvent or stops or suspends making payments (whether of principal or interest) with respect to all or any class of its debts or announces an intention to do so; or

 

 

(h)

Reduction or loss of capital: a meeting is convened by any of the Borrower and the Corporate Guarantor for the purpose of passing any resolution to purchase, reduce or redeem any of its share capital other than redemptions of Series E Preffered Shares of the Corporate Guarantor held by the Corporate Guarantor’s controlling Shareholders; or

 

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(i)

Winding up: any petition is presented or other step is taken for the purpose of winding up any Security Party or an order is made or resolution passed for the winding up of any Security Party or a notice is issued convening a meeting for the purpose of passing any such resolution; or

 

 

(j)

Administration: any bonafide petition is presented or other step is taken for the purpose of the appointment of an administrator of any Security Party or the Lender believes that any such petition or other step is imminent or an administration order is made in relation to any Security Party; or

 

 

(k)

Appointment of receivers and managers: any administrative or other receiver is appointed of any Security Party or any part of its assets and/or undertaking or any other steps are taken to enforce any Security Interest over all or any part of the assets of any Security Party; or

 

 

(l)

Compositions: any steps are taken, or negotiations commenced, by any Security Party or by any of its creditors with a view to the general readjustment or rescheduling of all or part of its indebtedness or to proposing any kind of composition, compromise or arrangement involving such company and any of its creditors provided, however, that if the Borrower is able to provide such evidence as is satisfactory in all respects to the Lender that such rescheduling will not relate to any payment default or anticipated default the same shall not constitute an Event of Default; or

 

 

(m)

Analogous proceedings: there occurs, in relation to any Security Party, in any country or territory in which any of them carries on business or to the jurisdiction of whose courts any part of their assets is subject, any event which, in the opinion of the Lender, appears in that country or territory to correspond with, or have an effect equivalent or similar to, any of those mentioned in Clauses 9.1(f) (Legal process) to (l) (Compositions) (inclusive) or any Security Party otherwise becomes subject, in any such country or territory, to the operation of any law relating to insolvency, bankruptcy or liquidation; or

 

 

(n)

Cessation of business: any Security Party suspends or ceases or threatens to suspend or cease to carry on its business; or

 

 

(o)

Seizure: all or a material part of the undertaking, assets, rights or revenues of, or shares or other ownership interests in, any Security Party are seized, nationalised, expropriated or compulsorily acquired by or under the authority of any government; and the respective Security Party fails to procure for its release within a period of thirty (30) days; or

 

 

(p)

Consents etc.:  any consent, authorisation, licence or approval of, or registration with or declaration to, governmental or public bodies or authorities or courts required by any Security Party to authorise or otherwise in connection with, the execution, delivery, validity, enforceability or admissibility in evidence of this Agreement and/or any of the other Security Documents and/or any of the Underlying Documents or the performance by the Security Parties of their respective obligations under this Agreement and/or any of the other Finance Documents and/or any of the Underlying Documents is modified in a manner unacceptable to the Lender or is not granted or is revoked or terminated or expires and is not renewed or otherwise ceases to be in full force and effect; or

 

 

(q)

Invalidity: any of the Finance Documents shall at any time and for any reason become invalid or unenforceable or otherwise cease to remain in full force and effect, or if the validity or enforceability of any of the Finance Documents shall at any time and for any reason be contested by any Security Party which is a party thereto, or if any such Security Party shall deny that it has any, or any further, liability thereunder; or

 

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(r)

Unlawfulness: it becomes impossible or unlawful at any time for any Security Party, to fulfil any of the covenants and obligations expressed to be assumed by it in any of the Finance Documents or for the Lender to exercise the rights or any of them vested in it under any of the Finance Documents or otherwise; or

 

 

(s)

Repudiation: any Security Party repudiates any of the Finance Documents or does or causes or permits to be done any act or thing evidencing an intention to repudiate any of the Finance Documents; or

 

 

(t)

Security Interests enforceable: any Security Interest (other than Permitted Security Interests) in respect of any of the property (or part thereof) which is the subject of any of the Finance Documents becomes enforceable; or

 

 

(u)

Material Adverse Change: there occurs, in the opinion of the Lender, a Material Adverse Change on any of the Borrower and the other Security Parties or any other Security Party to the Lender in the negotiation of this Agreement, which might, in the opinion of the Lender, materially impair, delay or prevent the due fulfilment by any Security Party of any of its respective obligations or undertakings contained in this Agreement and/or any of the other Finance Documents and/or the ability of any of the Security Parties to perform its respective obligations under this Agreement and the Finance Documents to which it is or is to be a party and/or materially and adversely affect the security created by any of the Finance Documents; or

 

 

(v)

Arrest: either of the Vessel is arrested, confiscated, seized, taken in execution, impounded, forfeited, detained in exercise or purported exercise of any possessory lien or other claim or otherwise taken from the possession of its Owner and that Owner shall fail to procure the release of the Vessel within a period of forty five (45) days thereafter; or

 

 

(w)

Registration: the registration of either of the Vessel under the laws and flag of the relevant Approved Flag State is cancelled or terminated without the prior written consent of the Lender; if the Vessel is only provisionally registered on the Drawdown Date and is not permanently registered under the laws and flag of the Approved Flag State at least fifteen (15) days prior to the deadline for completing such permanent registration; or

 

 

(x)

Unrest: the Approved Flag State of the Vessel becomes involved in hostilities or civil war or there is a seizure of power in such Approved Flag State by unconstitutional means if, in any such case, (a) such event could in the opinion of the Lender be expected to have a Material Adverse Effect on the security constituted by any of the Finance Documents and (b) the relevant Owner has failed within thirty (30) days from receiving notice from the Lender to this effect (which notice shall have been sent following consultation with the Borrower) to (i) delete the Vessel from its Approved Flag State and (ii) re-register the Vessel under another Approved Flag State approved by the Lender in its sole discretion through a relevant Registry, in each case, at the Borrower’ cost and expense; or

 

 

(y)

Environment: any Relevant Party and/or either Approved Manager and/or any of their respective Environmental Affiliates fails to comply with any Environmental Law or any Environmental Approval or either of the Vessel or any Relevant Ship is involved in any incident which gives rise or which may give rise to any Environmental Claim, if in any such case, such non-compliance or incident or the consequences thereof could (in the opinion of the Lender) be expected to have a Material Adverse Effect on the Borrower or any other Security Party or on the security created by any of the Finance Documents; or

 

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(z)

P&I: any Security Party or any other person fails or omits to comply with any requirements of the protection and indemnity association or any other insurer with the Vessel has entered for insurance or is insured against protection and indemnity risks (including oil pollution risks) to the effect that any cover in relation to the Vessel (including without limitation, liability for Environmental Claims arising in jurisdictions where the Vessel operates or trades) is or may be liable to cancellation, qualification or exclusion at any time; or

 

 

(aa)

Beneficial Ownership: there has been any change of control directly or indirectly in the ownership, beneficial ownership, or management of any of the Borrower and the Corporate Guarantor or any share therein or the Vessel, as a result of which (i) less than 5o.1% of the voting rights in the Corporate Guarantor remain in the ultimate legal and beneficial ownership of the Corporate Guarantor’s Controlling Shareholders or (ii) less than 100% of the shares and voting rights in the Borrower remain in the legal and beneficial ownership of the Corporate Guarantor and (iii) less than 100% of the shares and voting rights in the Approved Managers remain in the ultimate legal and beneficial ownership of the Beneficial Shareholders disclosed to the Lender at the negotiation of this Agreement and confirmed in writing on or before the date hereof or the Vessel ceases to remain 100% owned by the Borrower;

 

 

(bb)

Change of Management: the Vessel ceases to be managed by the Approved Managers (or either of them) (for any reason other than the reason of a Total Loss or sale of the Vessel) without the approval of the Lender and the Borrower fails to appoint a new Approved Manager prior to the termination of the mandate with the previous Approved Manager acceptable to the Lender; or

 

 

(cc)

Deviation of Earnings: any Earnings of either of the Vessel are not paid to the Operating Account for any reason whatsoever (other than with the Lender’s prior written consent); or

 

 

(dd)

ISM Code and ISPS Code: (without prejudice to the generality of Clause 9.1(c) (Breach of other obligations)) for any reason whatsoever the provisions of Clause 8.4(t) (Compliance with ISM Code) and Clause 8.4(u) (Compliance with ISPS Code) are not complied with and the Vessel ceases to comply with the ISM Code or, as the case may be, the ISPS Code; or 

 

 

(ee)

Operating Account: any moneys are withdrawn from the Operating Account other than in accordance with Clauses 8.4(e) (Earnings) and 13 (Operating Account); or

 

 

(ff)

Sanctions:  (without prejudice to the generality of sub-Clause 9.1(c) (Breach of other obligations)) for any reason whatsoever the provisions of Clause 8.6 (Sanctions) and Clause 8.7 (Compliance with laws etc.) are not complied with; or

 

 

(d)

Finance Documents: any other event of default (as howsoever described or defined therein) occurs under the Finance Documents (or any of them) (other than the Master Agreement; or

 

 

(gg)

Master Agreement: any Event of Default or Termination Event (as howsoever described or defined in the Master Agreement) occurs under the Master Agreement.

 

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9.2

Consequences of Default  Acceleration

 

The Lender may without prejudice to any other rights of the Lender (which will continue to be in force concurrently with the following), at any time after the happening of an Event of Default and while the same is continuing:

 

 

(a)

by notice to the Borrower declare that the obligation of the Lender to make the Commitment (or any part thereof) available shall be terminated, whereupon the Commitment shall be reduced to zero forthwith; and/or

 

 

(b)

by notice to the Borrower declare that the Loan and all interest accrued and all other sums payable under the Finance Documents have become due and payable, whereupon the same shall, immediately or in accordance with the terms of such notice, become due and payable without any further diligence, presentment, demand of payment, protest or notice or any other procedure from the Lender which are expressly waived by the Borrower; and/or

 

 

(c)

put into force and exercise all or any of the rights, powers and remedies possessed by the Lender under this Agreement and/or under any other Finance Document and/or as mortgagee of the Vessel, mortgagee, chargee or assignee or as the beneficiary of any other property right or any other security (as the case may be) of the assets charged or assigned to it under the Finance Documents or otherwise (whether at law, by virtue of any of the Finance Documents or otherwise).

 

9.3

Multiple notices; action without notice

 

The Lender may serve notices under sub-Clauses (a) and (b) of Clause 9.2 (Consequences of Default Acceleration) simultaneously or on different dates and it may take any action referred to in that Clause if no such notice is served or simultaneously with or at any time after service of both or either of such notices, it being understood and agreed that the non-service of a notice in respect of an Event of Default hereunder, or under any of the Finance Documents (whether known to the Lender or not), shall not be construed to mean that the Event of Default shall cease to exist and bring about its lawful consequences.

 

9.4

Demand basis

 

If, pursuant to Clause 9.2(b), the Lender declares the Loan to be due and payable on demand, the Lender may by written notice to the Borrower (a) call for repayment of the Loan on such date as may be specified whereupon the Loan shall become due and payable on the date so specified together with all interest accrued and Commitment Commission and all other sums payable under this Agreement or (b) withdraw such declaration with effect from the date specified in such notice.

 

9.5

Proof of Default

 

It is agreed that (i) the non-payment of any sum of money in time will be proved conclusively by mere passage of time and (ii) the occurrence of this (non payment) shall be proved conclusively by a mere written statement of the Lender (save for manifest error and in absence of willful misconduct).

 

9.6

Exclusion of Lenders liability

 

Neither the Lender nor any receiver or manager appointed by the Lender, shall have any liability to the Borrower or a Security Party:

 

 

(a)

for any loss caused by an exercise of rights under, or enforcement of an Security Interest created by, a Finance Document or by any failure or delay to exercise such a right or to enforce such an Security Interest; or

 

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(b)

as mortgagee in possession or otherwise, for any income or principal amount which might have been produced by or realised from any asset comprised in such an Security Interest or for any reduction (however caused) in the value of such an asset,

 

except that this does not exempt the Lender or a receiver or manager from liability for losses shown to have been caused by the wilful misconduct of the Lender’s own officers and employees or (as the case may be) such receiver’s or manager’s own partners or employees.

 

10.

INDEMNITIES - EXPENSES  FEES


 

10.1

Miscellaneous indemnities

 

The Borrower shall on demand (and it is hereby expressly undertaken by the Borrower to) indemnify the Lender, without prejudice to any of the other rights of the Lender under any of the Finance Documents, against any loss (including loss of the Margin and any Break Costs) or expense which the Lender shall certify as sustained or incurred as a consequence of:

 

 

(a)

any default in payment by any of the Security Parties of any sum under any of the Finance Documents when due;

 

 

(b)

the occurrence of any Event of Default which is continuing;

 

 

(c)

(excluding loss of the Margin) any prepayment of the Loan or part thereof being made under Clauses 4.2 (Voluntary Prepayment) and 4.3 (Mandatory Prepayment), 8.6(d) (Valuation of Additional Security), Clause 12.1 (Unlawfulness) or Clause 12.4 (Option to prepay) or any other repayment of the Loan or part thereof being made otherwise than on an Interest Payment Date relating to the part of the Loan prepaid or repaid; or

 

 

(d)

the Loan not being advanced for any reason (excluding any default by the Lender and any reason specified in Clauses 3.6 (Market disruption  Non Availability), 4.3(a) (Total Loss of the Vessel) or 12.1 (Unlawfulness) after the Drawdown Notice in respect thereof has been given, including, in any such case, but not limited to, any loss or expense sustained or incurred in maintaining or funding the Loan or any part thereof or in liquidating or re-employing deposits from third parties acquired to effect or maintain the Loan or any part thereof.

 

 

(e)

The Borrower shall fully indemnify the Lender on its demand, without prejudice to any of its other rights under any of the Finance Documents, in respect of all claims, liabilities, losses or other Expenses which may be made or brought against or sustained or incurred by the Lender, in any country, as a result of or in connection with:

 

 

(i)

any action taken, or omitted or neglected to be taken, under or in connection with any Finance Document by the Lender or by any receiver appointed under a Finance Document;

 

 

(ii)

investigating any event which the Lender believes constitutes an Event of Default; or

 

 

(iii)

acting or relying on any notice, request or instruction which the Lender believes to be genuine, correct and appropriately authorised,

 

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other than claims, liabilities, losses or other Expenses, which are shown to have been directly and mainly caused by the willful misconduct of the officers or employees of the Lender.

 

Without prejudice to its generality, this Clause 10.1 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 and any Sanctions.

 

10.2

Expenses

 

The Borrower shall (and it is hereby expressly undertaken by the Borrower to) pay to the Lender on demand:

 

 

(a)

Initial and Amendment expenses: all expenses (including legal, printing and out-of-pocket expenses) incurred by the Lender in connection with the negotiation, preparation and execution of this Agreement and the other Finance Documents and of any amendment or extension of or the granting of any waiver or consent under this Agreement and/or any of the Finance Documents and/or in connection with any proposal by the Borrower to constitute additional security pursuant to Clause 8.6(a) (Valuation of Additional Security), whether any such security shall in fact be constituted or not;

 

 

(b)

Enforcement expenses: all expenses (including legal and out-of-pocket expenses) incurred by the Lender in contemplation of, or otherwise in connection with, the enforcement of, or preservation of any rights under, this Agreement and/or any of the other Finance Documents, or otherwise in respect of the moneys owing under this Agreement and/or any of the other Finance Documents or the contemplation or preparation of the above, whether they have been effected or not;

 

 

(c)

Legal costs: the legal costs of the Lender’s appointed lawyers, in respect of the preparation of this Agreement and the other Finance Documents as well as the legal costs of the foreign lawyers (if these are available) in respect of the registration of the Finance Documents or any search or opinion given to the Lender in respect of the Security Parties or the Vessel or the Finance Documents; the said legal costs shall be due and payable on the Drawdown Date; and

 

 

(d)

Other expenses: any and all other Expenses.

 

10.3

Value Added Tax

 

All fees and expenses payable pursuant to this Clause 10 shall be paid together with value added tax or any similar tax (if any) properly chargeable thereon. Any value added tax chargeable in respect of any services supplied by the Lender under this Agreement shall, on delivery of the value added tax invoice, be paid in addition to any sum agreed to be paid hereunder.

 

10.4

Stamp duty etc.

 

The Borrower shall pay any and all stamp, registration and similar taxes or charges (including those payable by the Lender) imposed by governmental authorities in relation to this Agreement and any of the other Finance Documents and the Underlying Documents, and shall indemnify the Lender against any and all liabilities with respect to, or resulting from delay or omission on the part of the Borrower to pay such stamp taxes or charges.

 

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10.5

Environmental Indemnity

 

The Borrower shall indemnify the Lender on demand and hold the Lender harmless from and against all costs, expenses, payments, charges, losses, demands, liabilities, actions, proceedings (whether civil or criminal) penalties, fines, damages, judgements, orders, sanctions or other outgoings of whatever nature which may be suffered, incurred or paid by, or made or asserted against the Lender at any time, whether before or after the repayment in full of principal and interest under this Agreement, relating to, or arising directly or indirectly in any manner or for any cause or reason out of an Environmental Claim made or asserted against the Lender if such Environmental Claim would not have been, or been capable of being, made or asserted against the Lender if it had not entered into any of the Finance Documents and/or exercised any of its rights, powers and discretions thereby conferred and/or performed any of its obligations thereunder and/or been involved in any of the transactions contemplated by the Finance Documents.

 

10.6

Currency Indemnity

 

 

(a)

If any sum due from the Borrower under any of the Finance Documents or any order or judgement given or made in relation hereto has to be converted from the currency (the “first currency”) in which the same is payable under the relevant Finance Document or under such order or judgement into another currency (the “second currency”) for the purpose of (i) making or filing a claim or proof against the Borrower or any other Security Party, as the case may be or (ii) obtaining an order or judgement in any court or other tribunal or (iii) enforcing any order or judgement given or made in relation to any of the Finance Documents, the Borrower shall (and it is hereby expressly undertaken by the Borrower to) indemnify and hold harmless the Lender from and against any loss suffered as a result of any difference between (a) the rate of exchange used for such purpose to convert the sum in question from the first currency into the second currency and (b) the rate or rates of exchange at which the Lender may in the ordinary course of business purchase the first currency with the second currency upon receipt of a sum paid to it in satisfaction, in whole or in part, of any such order, judgement, claim or proof. The term “rate of exchange” includes any premium and costs of exchange payable in connection with the purchase of the first currency with the second currency.

 

 

(b)

Application to Master Agreement: For the avoidance of doubt, Clause 10.6(a) (Currency indemnity) does not apply in respect of sums due from the Borrower to the Swap Bank under or in connection with the Master Agreement as to which sums the provisions of section 8 (Contractual Currency) of the Master Agreement shall apply.

 

10.7

Central Bank or European Central Bank reserve requirements indemnity

 

The Borrower shall on demand promptly indemnify the Lender against any cost incurred or loss suffered by the Lender as a result of its complying with the minimum reserve requirements of the European Central Bank and/or with respect to maintaining required reserves with the relevant national Central Bank to the extent that such compliance relates to the Commitment or deposits obtained by it to fund the whole or part of the Loan and to the extent such cost or loss is not recoverable by such Lender under Clause 12.2 (Increased cost).

 

10.8

Maintenance of the Indemnities

 

The indemnities contained in this Clause 10 shall apply irrespective of any indulgence granted to the Borrower or any other party from time to time and shall continue to be in full force and effect notwithstanding any payment in favour of the Lender and any sum due from the Borrower under this Clause 10 will be due as a separate debt and shall not be affected by judgement being obtained for any other sums due under any one or more of this Agreement, the other Finance Documents and any other documents executed pursuant hereto or thereto.

 

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10.9

MII & MAPI costs

 

The Borrower shall reimburse the Lender on demand for any and all costs incurred by the Lender (as conclusively certified by the Lender) in effecting and keeping effected (a) a Mortgagee’s Interest Insurance (herein “MII”) and (ii) a Mortgagee’s Interest Additional Perils (Pollution) Insurance policy (herein “MAPI”), each of which the Lender may at any time effect for an amount equal to 120% of the Loan and on such terms and with such insurers as shall from time to time be determined by the Lender, provided, however, that the Lender shall in its absolute discretion appoint and instruct in respect of any such MII and MAPI policy the insurance brokers in respect of such Insurance and provided, further, that in the event that the Lender effects any such Insurance on the basis of any mortgagee’s open cover, the Borrower shall pay on demand to the Lender its proportion of premium due in respect of the Vessel(s) for which such insurance cover has been effected by the Lender, and any certificate of the Lender in respect of any such premium due by the Borrower shall (save for manifest error) be conclusive and binding upon the Borrower.

 

10.10

Communications Indemnity

 

It is hereby agreed in connection with communications that:

 

 

(a)

Express authority is hereby given by the Borrower to the Lender to accept all tested or untested communications given by facsimile, or electronic mail or otherwise, regarding any or all of the notices, requests, instructions or other communications under this Agreement, subject to any restrictions imposed by the Lender relating to such communications including, without limitation (if so required by the Lender), the obligation to confirm such communications by letter.

 

 

(b)

The Borrower shall recognise any and all of the said notices, requests, instructions or other communications as legal, valid and binding, when these notices, requests, instructions or communications come from the fax number or electronic address mentioned in Clause 16.1 (Notices) or any other fax or electronic address usually used by it or its managing company(ies) and are duly signed or in case of emails are duly sent by the person appearing to be sending such notice, request, instruction or other communication.

 

 

(c)

The Borrower hereby assumes full responsibility for the execution of the said notices, requests, instructions or communications and promise and recognise that the Lender shall not be held responsible for any loss, liability or expense that may result from such notices, requests, instructions or other communications. It is hereby undertaken by the Borrower to indemnify in full the Lender from and against all actions, proceedings, damages, costs, claims, demands, expenses and any and all direct and/or indirect losses which the Lender may suffer, incur or sustain by reason of the Lender following such notices, requests, instructions or communications.

 

 

(d)

The Lender shall have the right to ask the Borrower to furnish any information the Lender may require to establish the authority of any person purporting to act on behalf of the Borrower for these notices, requests, instructions or communications but it is expressly agreed that there is no obligation for the Lender to do so. The Lender shall be fully protected in, and the Lender shall incur no liability to the Borrower for acting upon the said notices, requests, instructions or communications which were believed by the Lender in good faith to have been given by the Borrower or by any of its authorised representative(s).

 

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(e)

It is undertaken by the Borrower to use its best endeavours to safeguard the function and the security of the electronic and mechanical appliance(s) such as fax(es) etc., as well as the code word list, if any, and to take adequate precautions to protect such code word list from loss and to prevent its terms becoming known to any persons not directly concerned with its use. The Borrower shall hold the Lender harmless and indemnified from all claims, losses, damages and expenses which the Lender may incur by reason of the failure of the Borrower to comply with the obligations under this Clause 10.10.

 

10.11

Electronic communication

 

Any communication from the Lender made by electronic means will be sent unsecured and without electronic signature, however, the Borrower may request the Lender at any time in writing to change the method of electronic communication from unsecured to secured electronic mail communication.

 

 

(a)

The Borrower hereby acknowledge and accept the risks associated with the use of unsecured electronic mail communication including, without limitation, risk of delay, loss of data, confidentiality breach, forgery, falsification and malicious software. The Lender shall not be liable in any way for any loss or damage or any other disadvantage suffered by the Borrower resulting from such unsecured electronic mail communication.

 

 

(b)

If the Borrower or any other Security Party wish to cease all electronic communication, they shall give written notice to the Lender accordingly after receipt of which notice the Parties shall cease all electronic communication.

 

 

(c)

For as long as electronic communication is an accepted form of communication, the Parties shall:

 

 

(i)

notify each other in writing of their electronic mail address and/or any other information required to enable the sending and receipt of information by that means; and

 

 

(ii)

notify each other of any change to their respective addresses or any other such information supplied to them; and

 

 

(iii)

in case electronic communication is sent to recipients with the domain <@ loukapartners.com >, <@topships.org> and <@centralmare.com> the parties shall without undue delay inform each other if there are changes to the said domain or if electronic communication shall thereafter be sent to individual e-mail addresses.

 

10.12

FATCA Deduction

 

 

(a)

Each Party may make any FATCA Deduction it is required to make by FATCA, and any payment required in connection with that FATCA Deduction, and no Party shall be required to increase any payment in respect of which it makes such a FATCA Deduction or otherwise compensate the recipient of the payment for that FATCA Deduction.

 

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(b)

Each Party shall promptly, upon becoming aware that it must make a FATCA Deduction (or that there is any change in the rate or the basis of such FATCA Deduction), notify the Party to whom it is making the payment.

 

10.13

FATCA status

 

 

(a)

Subject to Clause 10.13(c) below, each party shall, within ten (10) Banking Days of a reasonable request by another party:

 

 

(i)

confirm to that other party whether it is:

 

(aa)

a FATCA Exempt Party; or

 

(bb)

not a FATCA Exempt Party; and

 

 

(ii)

supply to that other party such forms, documentation and other information relating to its status under FATCA (including its applicable passthru percentage or other information required under the Treasury Regulations or other official guidance including intergovernmental agreements) as that other party reasonably requests for the purposes of that other party's compliance with FATCA.

 

 

(b)

If a party confirms to another party pursuant to Clause 10.13(a)(i) above that it is a FATCA Exempt Party and it subsequently becomes aware that it is not, or has ceased to be a FATCA Exempt Party, that party shall notify that other party reasonably promptly.

 

 

(c)

Clause 10.13(a)(i) above shall not oblige the Lender to do anything which would or might in its opinion constitute a breach of:

 

 

(i)

any law or regulation;

 

 

(ii)

any policy of the Lender;

 

 

(iii)

any fiduciary duty; or

 

 

(iv)

any duty of confidentiality.

 

 

(d)

If a party fails to confirm its status or to supply forms, documentation or other information requested in accordance with Clause10.13(a) above (including, for the avoidance of doubt, where Clause 10.13(c) above applies), then:

 

 

(i)

if that party failed to confirm whether it is (and/or remains) a FATCA Exempt Party then such party shall be treated for the purposes of the Finance Documents as if it is not a FATCA Exempt Party; and

 

 

(ii)

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 the requested confirmation, forms, documentation or other information.

 

10.14

Arrangement fee and Commitment Commission

 

 

(a)

Arrangement Fee: The Borrower shall pay to the Lender an arrangement fee in an amount equal to 1% of the aggregate amount of the Commitment (the “Arrangement Fee”) payable on the Drawdown Date; and

 

 

(b)

Commitment commission: The Borrower shall pay to the Lender commitment commission (the “Commitment Commission”) in arrears on each of the dates falling at three monthly intervals from the 23rd March, 2021 until the earlier of (a) the last day of the Availability Period (b) the Drawdown Date and (c) the date of cancellation of the Commitment by the Borrower (the “Commitment Commission Period”) at the rate of 0.75% per annum on the daily undrawn and uncancelled amount of the Commitment, computed from the date of acceptance of the Commitment Letter (23rd March, 2021) (in the case of the first payment of commission) and from the date of the preceding payment of commission (in the case of each subsequent payment) until the last day of the Commitment Commission Period.

 

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(c)

Non-refundable: The Arrangement Fee and the Commitment Commission shall be payable by the Borrower to the Lender irrespective of utilisation/cancellation in part or in whole of the Commitment and/or non Delivery of the Vessel or sale of the Vessel prior to her Delivery to the Borrower and shall be non-refundable.

 

11.

SECURITY, APPLICATION, SET-OFF


 

11.1

Securities

 

As security for the due and punctual repayment of the Loan and payment of interest thereon as provided in this Agreement and of all other Outstanding Indebtedness, the Borrower shall ensure and procure that the following Finance Documents are duly executed and, where required, registered in favour of the Lender in form and substance satisfactory to the Lender at the time specified herein or otherwise as required by the Lender and ensure that such security consists of the Security Documents.

 

11.2

Maintenance of Securities

 

It is hereby undertaken by the Borrower that the Finance Documents shall both at the date of execution and delivery thereof and so long as any moneys are owing and/or due under this Agreement and/or under the other Finance Documents be valid and binding obligations of the respective Security Parties thereto and rights of the Lender enforceable in accordance with their respective terms and that they will, at the expense of the Borrower, execute, sign, perfect and do any and every such further assurance, document, act, omission or thing as in the opinion of the Lender may be necessary or desirable for perfecting the security contemplated or constituted by the Finance Documents.

 

11.3

Application of receipts

 

 

(a)

 Order of application: All moneys received by the Lender under or pursuant to any of the Finance Documents and expressed to be applicable in accordance with this Clause 11.3 shall be applied by the Lender in the following manner:

 

 

(i)

FIRST: in or towards satisfaction of any amounts then due and payable under the Finance Documents in the following order and proportions:

 

aa)

Firstly, in or towards payment of Expenses and all sums (including any Break Costs) other than principal or interest which may be due to the Lender under this Agreement, the Master Agreement (in respect of any Designated Transactions) and the other Security Documents other than those amounts referred to at paragraphs (bb) and (cc) below and the other Finance Documents or any of them at the time of application (including, but without limitation, all amounts payable by the Borrower under Clauses 11 (Indemnities-Expenses-Fees), 5.1 (Payments  No set-off or counterclaims) or 5.3 (Gross Up) or by the Borrower or any other Security Party under any corresponding or similar provision in any other Finance Document);

 

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bb)

Secondly, in or towards satisfaction pro rata of any and all amounts of interest or default interest then due and payable to the Lender under this Agreement any of the other Security Documents and the Master Agreement (in respect of any Designated Transactions) (and, for this purpose, the expression “interest” shall include any net amount which the Borrower shall have become liable to pay or deliver under section 9(h) of the Master Agreement (in respect of any Designated Transactions) but shall have failed to pay or deliver to the Lender at the time of application or distribution under this Clause 11.3);

 

cc)

Thirdly, in or towards satisfaction pro rata of the Loan and the Swap Exposure (in the case of the latter, calculated as at the actual Early Termination Date applying to each particular Designated Transaction, or if no such Early Termination Date shall have occurred, calculated as if an Early Termination Date occurred on the date of application or distribution hereunder) or any part thereof payable to the Lender under the Finance Documents;

 

 

(ii)

SECOND: in retention of an amount equal to any amount not then due and payable under any Finance Document (in the case of the Master Agreement, in respect of any Designated Transaction) but which the Lender, by notice to the Borrower and the other Security Parties, states in its opinion will either be 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 11.3(a); and

 

 

(iii)

THIRD: the surplus (if any), after the full and complete payment of the Outstanding Indebtedness, shall be paid to the Borrower or to any other person appearing to be entitled to it.

 

 

(b)

Notice of variation of order of application: The Lender may without notice to the Borrower and the Security Parties, provide, at its sole discretion, for a different order of application from that set out in Clause 11.3(a) (Order of application) either as regards a specified sum or sums or as regards sums in a specified category or categories, without affecting the obligations of the Borrower to the Lender.

 

 

(c)

Effect of variation notice: The Lender may give notices under Clause 11.3(b) (Notice of variation of order of application) 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 Banking Day before the date on which the notice is served.

 

 

(d)

Insufficient balance: For the avoidance of doubt, in the event that such balance is insufficient to pay in full the whole of the Outstanding Indebtedness, the Lender shall be entitled to collect the shortfall from the Borrower or any other person liable therefor.

 

 

(e)

Appropriation rights overridden: This Clause 11.3 and any notice which the Lender gives under Clause 11.3(b) (Notice of variation of order of application) shall override any right of appropriation possessed, and any appropriation made, by the Borrower or any other Security Party.

 

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11.4

Set off

 

Express authority is hereby given by the Borrower to the Lender without prejudice to any of the rights of the Lender at law, contractually or otherwise, at any time after an Event Default has occurred that is continuing and without prior notice to the Borrower:

 

 

(a)

to apply any credit balance (whether or not then due) standing upon any account of the Borrower with any branch or office of the Lender (including, without limitation, the Operating Account and in whatever currency) in or towards satisfaction of any sum due to the Lender from the Borrower under this Agreement and/or any of the other Finance Documents; and/or

 

 

(b)

for that purpose:

 

 

(i)

break, or alter the maturity of, all or any part of a deposit of the Borrower; and/or

 

 

(ii)

convert or translate all or any part of a deposit or other credit balance into Dollars, such conversion or translation to be made at the Lender’s market rate of exchange in its usual course of business for the purpose of the set-off; and/or

 

 

(iii)

enter into any other transaction or make any entry with regard to the credit balance which the Lender considers appropriate; and/or

 

 

(iv)

in the name of the Borrower and/or the Lender to do all such acts and execute all such documents as may be necessary or expedient to effect such application; and/or

 

 

(v)

to combine and/or consolidate all or any accounts in the name of the Borrower with the Lender.

 

 

(c)

Default under the Master Agreement: Without prejudice to its rights hereunder and/or under the Master Agreement, the Lender may at the same time as, or at any time after, any Default under this Agreement or the Borrower’s default under the Master Agreement, set off any amount due now or in the future from the Borrower to the Lender under this Agreement against any amount due from the Lender to the Borrower under the Master Agreement and apply the first amount in discharging the second amount. The effect of any set off under this Clause 11.4 shall be effective to extinguish or, as the case may require, reduce the liabilities of the Lender under the Master Agreement.

 

 

(d)

Rights additional: The rights conferred on the Lender by this Clause 11.4 shall be in addition to, and without prejudice to or limitation of, the rights of netting and set off conferred on the Lender by the Master Agreement. The Borrower acknowledges that the Lender shall be under no obligation to make any payment to the Borrower under or pursuant to the Master Agreement if, at the time that payment becomes due, there shall have occurred an Event of Default or Termination Event (as those terms are respectively defined in the Master Agreement).

 

 

(e)

Existing rights unaffected: The Lender shall not be obliged to exercise any right given by this Clause 11.4; and those rights shall be without prejudice and in addition to any right of set‑off, combination of accounts, charge, lien or other right or remedy to which the Lender is entitled (whether under the general law or any document). The Lender shall notify the Borrower forthwith upon the exercise of any right of set‑off giving full details in relation thereto.

 

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12.

UNLAWFULNESS, INCREASED COST, BAIL-IN


 

12.1

Unlawfulness

 

If any change in, or introduction of, any law, regulation or regulatory requirement or any request of any central bank, monetary, regulatory or other authority or any order of any court renders it unlawful or contrary to any such regulation, requirement, request or order for the Lender to advance the Commitment or the relevant part thereof (as the case may be) or to maintain or fund the Loan, notice shall be given promptly by the Lender to the Borrower whereupon the Commitment shall be reduced to zero and the Borrower shall be obliged to prepay the Loan either (i) forthwith or (ii) on a future specified date not being earlier than the latest date permitted by the relevant law or regulation, together with accrued interest thereon and Commitment Commission to the date of prepayment and all other sums payable by the Borrower under this Agreement.

 

12.2

Increased Cost

 

If the result of any change in, or in the interpretation, implementation or application of, or the introduction of, any law or any regulation (whether or not having the force of law, but, if not having the force of law, with which the Lender or, as the case may be, its holding company habitually complies), including (without limitation) those relating to Taxation, capital adequacy, liquidity, reserve assets, cash ratio deposits and special deposits or other banking or monetary controls or requirements which affect the manner in which the Lender allocates capital resources to its obligations hereunder (including, without limitation, those resulting from the implementation or application of or compliance with the Basel II Accord or the Basel III Accord or any Basel II Regulation or the Basel III Accord or any Basel III Regulation or any subsequent accord, approach or regulation thereto) (collectively, “Capital Adequacy Law”) or compliance by the Lender with any such Capital Adequacy Law or , is to:

 

 

(a)

increase the cost to, or impose an additional cost on, the Lender or its holding company in making or keeping the Commitment available or maintaining or funding all or part of the Loan; and/or

 

 

(b)

subject the Lender to Taxes or change the basis of Taxation of the Lender with respect to any payment under any of the Finance Documents (other than Taxes or Taxation on the overall net income, profits or gains of the Lender imposed in the jurisdiction in which its principal or lending office under this Agreement is located); and/or

 

 

(c)

reduce the amount payable or the effective return to the Lender under any of the Finance Documents; and/or

 

 

(d)

reduce the Lender’s or its holding company rate of return on its overall capital by reason of a change in the manner in which it is required to allocate capital resources to the Lender’s obligations under any of the Finance Document; and/or

 

 

(e)

require the Lender or its holding company to make a payment or forgo a return on or calculated by references to any amount received or receivable by it under any of the Finance Documents is required; and/or

 

 

(f)

require the Lender or its holding company to incur or sustain a loss (including a loss of future potential profits) by reason of being obliged to deduct all or part of the Commitment or the Loan from its capital for regulatory purposes,

 

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then and in each case (subject to Clause 12.5 (Exception)):

 

 

(a)

the Lender shall notify the Borrower in writing of such event promptly upon its becoming aware of the same; and

 

 

(b)

the Borrower shall on demand pay to the Lender the amount which the Lender specifies (in a certificate and supporting documents setting forth and evidencing the basis of the computation of such amount but not including any matters which the Lender or its holding company regards as confidential) is required to compensate the Lender and/or (as the case may be) its holding company for such liability to Taxes, cost, reduction, payment, foregone return or loss whatsoever.

 

For the purposes of this Clause 12 “holding company” means the company or entity (if any) within the consolidated supervision of which the Lender is included.

 

12.3

Claim for increased cost

 

The Lender will promptly notify the Borrower of any intention to claim indemnification pursuant to Clause 12.2 (Increased Cost) and such notification will be a conclusive and full evidence binding on the Borrower as to the amount of any increased cost or reduction and the method of calculating the same and the Borrower shall be allowed to rebut such evidence by any means of evidence save for witness. A claim under Clause 12.2 (Increased Cost) may be made at any time and must be discharged by the Borrower within seven (7) days of demand. It shall not be a defence to a claim by the Lender under this Clause 12.3 that any increased cost or reduction could have been avoided by the Lender. Any amount due from the Borrower under Clause 12.2 (Increased Cost) shall be due as a separate debt and shall not be affected by judgement being obtained for any other sums due under or in respect of this Agreement.

 

12.4

Option to prepay

 

If any additional amounts are required to be paid by the Borrower to the Lender by virtue of Clause 12.2 (Increased Cost), the Borrower shall be entitled, on giving the Lender not less than fourteen (14) days prior notice in writing, to prepay (without premium or penalty) the Loan and accrued interest thereon, together with all other Outstanding Indebtedness, on the next Repayment Date. Any such notice, once given, shall be irrevocable.

 

12.5

Exception

 

Nothing in Clause 12.2 (Increased Cost) shall entitle the Lender to receive any amount in respect of compensation for any such liability to Taxes, increased or additional cost, reduction, payment, foregone return or loss to the extent that the same is subject of an additional payment under Clause 5.4 (Gross Up).

 

12.6

Contractual recognition of bail-in

 

Notwithstanding any other term of any Finance Document or any other agreement, arrangement or understanding between the Parties, each Party acknowledges and accepts that any liability of any Party to any other Party under or in connection with the Finance Documents may be subject to Bail-In Action by the relevant Resolution Authority and acknowledges and accepts to be bound by the effect of:

 

 

(a)

any Bail-In Action in relation to any such liability, including (without limitation):

 

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(i)

a reduction, in full or in part, in the principal amount, or outstanding amount due (including any accrued but unpaid interest) in respect of any such liability;

 

 

(ii)

a conversion of all, or part of, any such liability into shares or other instruments of ownership that may be issued to, or conferred on, it; and

 

 

(iii)

a cancellation of any such liability; and

 

 

(b)

a variation of any term of any Finance Document to the extent necessary to give effect to any Bail-In Action in relation to any such liability.

 

12.7

Mitigation

 

If circumstances arise which would result in a notification under Clause 12.1 (Unlawfulness) or Clause 12.8 (Change of circumstances), then, without in any way limiting the rights of the Lender under this Clause, the Lender shall use reasonable endeavours to transfer all the Lender’s obligations, liabilities and rights under this agreement and the Finance Documents to another office or financial institution not affected by the circumstances but the Lender shall not be under any obligation to take any such action if, in its opinion, to do so 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 involve it in any expense (unless indemnified to its satisfaction) or tax disadvantage.

 

12.8

Change of circumstances

 

If any change in or in the interpretation of any applicable law or regulation, by any government or governmental authority or agency, makes it unlawful for the Lender to maintain or give effect to its obligations or to claim or receive any amount payable to the Lender under this Agreement, then the Lender may serve written notice on the Borrower declaring its obligations under this Agreement terminated in whole or in part, whereupon the same shall terminate forthwith and the Borrower will immediately repay the Loan and accrued interest to the date of prepayment together with all other Outstanding Indebtedness to the Lender pursuant to the terms of the notice.

 

13.

OPERATING ACCOUNT


 

13.1

General

 

The Borrower undertakes with the Lender that it will:

 

 

(a)

on or before the Drawdown Date open the Operating Account; and

 

 

(b)

procure that all moneys payable to the Borrower in respect of the Earnings of the Vessel shall, unless and until the Lender directs to the contrary pursuant to the General Assignment, be paid to the Operating Account, free from Security Interests and rights of set off other than those created by or under the Finance Documents and, shall be held there on trust for the Lender and shall be applied as provided in Clause 13.2 (Application of Earnings) .

 

13.2

Application of Earnings

 

Subject to the terms and conditions of the Accounts Pledge Agreement no monies shall be withdrawn from the Operating Account save as hereinafter provided. Subject to no Event of Default having occurred and being continuing, all monies paid to the Operating Account (whether being Earnings or not) after discharging the costs (if any) incurred by the Lender, in collecting such monies, shall be applied by the Lender as follows:

 

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(a)

firstly: in payment of any arrears of interest due and payable and any and all other sums whatsoever which are then due to the Lender hereunder (such sums to be paid in such order as the Lender may in its sole discretion elect);

 

 

(b)

secondly: in payment of the Operating Expenses of the Vessel; and

 

 

(c)

thirdly: any credit balance shall be available to the relevant Owner to be used for any purpose not inconsistent with such Owner’s other obligations under this Agreement;

 

provided however that the Lender shall be entitled, at its sole discretion, to withdraw the required amounts from the Operating Account or any time deposit substitute account under the same or different designation by breaking such time deposit in order to effect payment of any amount due under “firstly” and “secondly” above.

 

13.3

Interest

 

Any amounts for the time being standing to the credit of the Operating Account shall bear interest at the rate from time to time offered by the Lender to its customers for Dollar deposits of similar amounts and for periods similar to those for which such amounts are likely to remain standing to the credit of the Operating Account. Such interest shall, provided that (a) the foregoing provisions of this Clause 13 shall have been complied with and (b) no Event of Default (or event which, with the giving of notice and/or lapse of time or other applicable condition, might constitute an Event of Default) shall have occurred and is continuing, be released to the Borrower.

 

13.4

Drawings from Operating Account

 

After the occurrence of an Event of Default which is continuing the Lender shall not permit the Borrower to make any drawings from the Operating Account.

 

13.5

Authorisation

 

For the avoidance of doubt, the Lender shall be entitled (but not obliged) at any time, and to this respect the Lender is hereby authorised by the Borrower from time to time to debit the Operating Account, without notice to the Borrower, in order to discharge any amount due and payable to the Lender under the terms of this Agreement and the Security Documents or otherwise howsoever in connection with the Loan, including, without limitation, any payment of which the Lender has become entitled to demand under Clause 9.2 (Consequences of Default Acceleration).

 

13.6

Obligations unaffected

 

Nothing herein contained shall be deemed to affect:

 

 

(a)

the liability and absolute obligation of the Borrower to pay interest on and to repay the Loan as provided in Clauses 3 (Interest) and 4 (Repayment-Prepayment) or the Swap Exposure as provided in the Master Agreement nor shall they constitute or be construed as constituting a manner of postponement thereof; or

 

 

(b)

any other liability or obligation of the Borrower or any other Security Party under any Finance Document.

 

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13.7

Relocation of Operating Account

 

The Borrower undertakes with the Lender to comply with or cause to be complied with any written requirement of the Lender from time to time as to the location or re-location of the Operating Account and will from time to time enter into such documentation as the Lender may require in order to create or maintain a security interest in the Operating Account.

 

13.8

Application on Event of Default

 

Upon the occurrence of an Event of Default or at any time thereafter (whether or not notice of default has been given to the Borrower) when an Event of Default continues the Lender shall be entitled to set off and apply all sums standing to the credit of the Operating Account of the Borrower and accrued interest (if any) without notice to the Borrower in the manner specified in Clause 11.3 (Application of funds) (and express and irrevocable authority is hereby given by the Borrower to the Lender so to set off by debiting the Operating Account accordingly by the same.

 

13.9

No Security Interests

 

The Borrower hereby covenants with the Lender that the Operating Account and any moneys therein shall not be charged, assigned, transferred or pledged nor shall there be granted by the Borrower or suffered to arise any third party rights over or against the whole or any part of the Operating Account other than in favour of the Lender as promised herein and in the General Assignment.

 

13.10

Operation of Operating Account

 

The Operating Account shall be operated by the Borrower to the degree permitted by this Agreement in accordance with the Lender’s usual terms and conditions (full knowledge of which the Borrower hereby acknowledges) and subject to the Lender’s usual charges levied on such accounts and/or transactions conducted on such accounts (as from time to time notified by the Lender to the Borrower).

 

13.11

Release

 

Upon payment in full of all principal, interest and all other amounts due to the Lender under the terms of this Agreement and the other Finance Documents, any balance then standing to the credit of the Operating Account shall be released and paid to the Borrower or to whomsoever else may be entitled to receive such balance.

 

14.

ASSIGNMENT, TRANSFER, PARTICIPATION, LENDING OFFICE


 

14.1

Binding Effect

 

This Agreement shall be binding upon and inure to the benefit of the Lender and the Borrower and their respective successors and assigns.

 

14.2

No Assignment by the Borrower and the other Security Parties

 

Neither the Borrower nor any other Security Parties may assign or transfer any of its rights and/or obligations under this Agreement or any of the other Finance Documents or any documents executed pursuant to this Agreement and/or the other Finance Documents.

 

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14.3

Assignment by the Lender

 

The Lender may at any time without the consent or consultation with the Borrower and the other Security Parties, cause all or any part of its rights, benefits and/or obligations under this Agreement and the other Finance Documents to be assigned or transferred to (i) another branch, any Subsidiary or affiliate of, or company controlled by, the Lender, (ii) a member of the European Central Bank System, a credit institution, a financial services institution, a financial institution, an insurance company, a social security fund, a pension fund, an investment company/trust or a special purpose company established for the purposes of securitization, (iii) a capital investment company, hedge fund, financial intermediary or special purpose vehicle associated to any of them or (iii) a trust corporation, fund or other person which regularly engaged in or established for the purpose of making, purchasing or investing in loans, securities or other financial assets which are managed or serviced by the Lender (in each case an “Assignee” or a “Transferee”), provided in each case that (aa) the Assignee or Transferee, shall deliver to the Lender such undertaking as the Lender may approve, whereby it becomes bound by the terms of this Agreement and agrees to perform all or, as the case may be, part of the Lender’s obligations under this Agreement and (bb) the liabilities of the Borrower under this Agreement and any other Finance Document shall not be increased as a result of any such assignment or transfer and that in the event that the Borrower’ liabilities (actual or contingent) are increased, the Borrower shall not be liable for any such excess.

 

14.4

Participation

 

The Lender may at any time without the consent or consultation with the Borrower and the other Security Parties sub-participate all or any part of its rights, benefits and/or obligations under this Agreement and the other Finance Documents without the consent of, or consultation with or notice to the Borrower and the other Security Parties, provided that the liabilities of the Borrower under this Agreement and any other Finance Document shall not be increased as a result of any such sub-participation and that in the event that the Borrower’ liabilities (actual or contingent) are increased, the Borrower shall not be liable for any such excess.

 

14.5

Cost

 

Any cost of such assignment or transfer or granting sub-participation shall be for the account of the Lender and/or the Assignee, Transferee or sub-participant unless any such assignment, transfer or sub-participation is undertaken at the request of the Borrower, in which case any cost arising therefrom shall be for the account of the Borrower.

 

14.6

Documenting assignments and transfers

 

If the Lender assigns, transfers or in any other manner grants participation in respect of all or any part of its rights or benefits or transfers all or any of its obligations as provided in this Clause 14.6 the Borrower undertake, immediately on being requested to do so by the Lender, to enter at the expense of the Lender into and procure that each Security Party enters into such documents as may be necessary or desirable to transfer to the Assignee, Transferee or participant all or the relevant part of the interest of the Lender in the Finance Documents and all relevant references in this Agreement to the Lender shall thereafter be construed as a reference to the Lender and/or assignee, transferee or participant of the Lender to the extent of their respective interests and, in the case of a transfer of all or part of the obligations of the Lender, the Borrower shall thereafter look only to the Assignee, Transferee or participant in respect of that proportion of the obligations of the Lender under this Agreement assumed by such assignee, transferee or participant. Subject to the provisions of Clause 14.3 (Assignment by the Lender), the Borrower hereby expressly consents to any subsequent transfer of the rights and obligations of the Lender and undertakes that it shall join in and execute such supplemental or substitute agreements as may be necessary to enable the Lender to assign and/or transfer and/or grant participation in respect of its rights and obligations to another branch or to one or more banks or financial institutions in a syndicate or otherwise. The cost of any such assignment shall be borne by the Lender and/or the relevant Assignee or Transferee.

 

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14.7

Disclosure of information

 

The Lender may disclose to a prospective assignee, substitute or transferee or to any other person who may propose entering into contractual relations with the Lender in relation to this Agreement such information about the Borrower as the Lender shall consider appropriate if the Lender first procures that the relevant prospective assignee, substitute or transferee or other person (such person together with any prospective assignee, substitute or transferee being hereinafter described as the “Prospective Assignee”) shall undertake to the Lender to keep secret and confidential and shall not, without the consent of the Borrower, disclose to any third party any of the information, reports or documents supplied by the Lender provided, however, that the Prospective Assignee shall be entitled to disclose such information, reports or documents in the following situations:

 

 

(a)

in relation to any proceedings arising out of this Agreement or the other Finance Documents to the extent considered necessary by the Prospective Assignee to protect its interest; or

 

 

(b)

pursuant to a court order relating to discovery or otherwise; or

 

 

(c)

pursuant to any law or regulation or to any fiscal, monetary, tax, governmental or other competent authority; or

 

 

(d)

to its auditors, legal or other professional advisers.

 

In addition the Prospective Assignee shall be entitled to disclose or use any such information, reports or documents if the information contained therein shall have emanated in conditions free from confidentiality, bona fide from some person other than the Lender or the Borrower.

 

14.8

Changes in constitution or reorganisation of the Lender

 

For the avoidance of doubt and without prejudice to the provisions of Clause 14.1 (Binding Effect), this Agreement shall remain binding on the Borrower and the other Security Parties notwithstanding any change in the constitution of the Lender or its absorption in, or amalgamation with, or the acquisition of all or part of its undertaking or assets by, any other person, or any reconstruction or reorganisation of any kind, to the intent that this Agreement shall remain valid and effective in all respects in favour of any Assignee, Transferee or other successor in title of the Lender in the same manner as if such Assignee, Transferee or other successor in title had been named in this Agreement as a party instead of, or in addition to, the Lender.

 

14.9

Securitisation

 

The Lender may include all or any part of the Loan in a securitisation (or similar transaction) pursuant to Law 3156/2003, or any other relevant legislation introduced or enacted after the date of this Agreement, without the consent of, or consultation with, but after giving 30-day notice to the Borrower. The Borrower will assist the Lender as necessary to achieve a successful securitisation (or similar transaction) provided that the Borrower shall not be required to bear any third party costs related to any such securitisation (or similar transaction) and need only provide any such information which any third parties may reasonably require and provided further that the liabilities of the Borrower and the other Security Parties under this Agreement and any other Finance Document shall not be increased as a result of any such securitisation (or similar transaction).

 

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14.10

Lending Office

 

The Lender shall lend through its office at the address specified in the preamble of this Agreement or through any other office of the Lender selected from time to time by it through which the Lender wishes to lend for the purposes of this Agreement. If the office through which the Lender is lending is changed pursuant to this Clause 14.10, the Lender shall notify the Borrower promptly of such change and upon notification of any such transfer, the word “Lender” in this Agreement and in the other Finance Documents shall mean the Lender, acting through such branch or branches and the terms and provisions of this Agreement and of the other Finance Documents shall be construed accordingly.

 

15.

MISCELLANEOUS


 

15.1

Time of essence

 

Time is of the essence as regards every obligation of the Borrower under this Agreement.

 

15.2

Cumulative Remedies

 

The rights and remedies of the Lender contained in this Agreement and the other Finance Documents are cumulative and neither exclusive of each other nor of any other rights or remedies conferred by law.

 

15.3

No implied waivers

 

No failure, delay or omission by the Lender to exercise any right, remedy or power vested in the Lender under this Agreement and/or the other Finance Documents or by law shall impair such right or power, or be construed as a waiver of, or as an acquiescence in any default by the Borrower, nor shall any single or partial exercise by the Lender of any power, right or remedy preclude any other or further exercise thereof or the exercise of any other power, right or remedy. In the event of the Lender on any occasion agreeing to waive any such right, remedy or power, or consenting to any departure from the strict application of the provisions of this Agreement or of any other Finance Document, such waiver shall not in any way prejudice or affect the powers conferred upon the Lender under this Agreement and the other Finance Documents or the right of the Lender thereafter to act strictly in accordance with the terms of this Agreement and the other Finance Documents. No modification or waiver by the Lender of any provision of this Agreement or of any of the other Finance Documents nor any consent by the Lender to any departure therefrom by any Security Party shall be effective unless the same shall be in writing and then shall only be effective in the specific case and for the specific purpose for which given. No notice to or demand on any such party in any such case shall entitle such party to any other or further notice or demand in similar or other circumstances.

 

15.4

Recourse to other security

 

The Lender shall not be obliged to make any claim or demand or to resort to any Finance Document or other means of payment now or hereafter held by or available to it for enforcing this Agreement or any of the other Finance Documents against the Security Parties (or any of them) or any other person liable and no action taken or omitted by the Lender in connection with any such Finance Document or other means of payment will discharge, reduce, prejudice or affect the liability of any Security Party under this Agreement and the other Finance Documents to which it is, or is to be, a party.

 

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15.5

Integration of Terms

 

This Agreement contains the entire agreement of the parties and its provisions supersede the provisions of the Commitment Letter (save for the provisions thereof which relate to fees) and any and all other prior correspondence and oral negotiation by the parties in respect of the matters regulated by this Agreement.

 

15.6

Amendments

 

This Agreement and any other Finance Documents shall not be amended or varied in their respective terms by any oral agreement or representation or in any other manner other than by an instrument in writing of even date herewith or subsequent hereto executed by or on behalf of the parties hereto or thereto.

 

15.7

Severability of provisions

 

In the event of any provision contained in one or more of this Agreement, the other Finance Documents and any other documents executed pursuant hereto or thereto being invalid, illegal or unenforceable in any respect under any applicable law in any jurisdiction whatsoever, such provision shall be ineffective as to that jurisdiction only without affecting the remaining provisions hereof or thereof. If, however, this event becomes known to the Lender prior to the drawdown of the Commitment or of any part thereof the Lender shall be entitled to refuse drawdown until this discrepancy is remedied. In case that the invalidity of a part results in the invalidity of the whole Agreement, it is hereby agreed that there will exist a separate obligation of the Borrower for the prompt payment to the Lender of all the Outstanding Indebtedness. Where, however, the provisions of any such applicable law may be waived, they are hereby waived by the parties hereto to the full extent permitted by the law to the intent that this Agreement, the other Finance Documents and any other documents executed pursuant hereto or thereto shall be deemed to be valid binding and enforceable in accordance with their respective terms.

 

15.8

Language and genuineness of documents

 

 

(a)

Language: All certificates, instruments and other documents to be delivered under or supplied in connection with this Agreement or any of the other Finance Documents shall be in the English language (or such other language as the Lender shall agree).

 

 

(b)

Certification of documents: Any copies of documents delivered to the Lender shall be duly certified as true, complete and accurate copies by appropriate authorities or legal counsel practicing in Greece or otherwise as will be acceptable to the Lender at the sole discretion of the Lender.

 

 

(c)

Certification of signature: Signatures on Board or shareholder resolutions, Secretary’s certificates and any other documents are, at the discretion of the Lender, to be verified for their genuineness by appropriate Consul or other competent authority.

 

15.9

Further assurances

 

The Borrower undertakes that the Finance Documents shall both at the date of execution and delivery thereof and so long as any moneys are owing under any of the Finance Documents be valid and binding obligations of the respective parties thereto and enforceable in accordance with their respective terms and that it will, at its expense, execute, sign, perfect and do, and will procure the execution, signing, perfecting and doing by each of the other Security Parties of, any and every such further assurance, document, act or thing as in the opinion of the Lender may be necessary or desirable for perfecting the security contemplated or constituted by the Finance Documents.

 

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15.10

Inconsistency of Terms

 

In the event of any inconsistency or conflict between the provisions of this Agreement and the provisions of any other Finance Document the provisions of this Agreement shall prevail.

 

15.11

Counterparts

 

This Agreement may be executed in any number of counterparts and all such counterparts taken together shall be deemed to constitute but one and the same instrument.

 

15.12

Confidentiality

 

 

(a)

Each of the parties hereto agrees and undertakes to keep confidential any documentation and any confidential information concerning the business, affairs, directors or employees of the other which comes into its possession in connection with this Agreement and not to use any such documentation, information for any purpose other than for which it was provided.

 

 

(b)

The Borrower acknowledge and accept that the Lender may be required by law or that it may be appropriate for the Lender to disclose information and deliver documentation relating to the Borrower and the transactions and matters in relation to this Agreement and/or the other Finance Documents to governmental or regulatory agencies and authorities.

 

 

(c)

The Borrower acknowledges and accepts that in case of occurrence of any of the Events of Default which is continuing the Lender may disclose information and deliver documentation relating to the Borrower and the transactions and matters in relation to this Agreement and/or the other Finance Documents to third parties to the extent that this is necessary for the enforcement or the contemplation of enforcement of the Lender’s rights or for any other purpose for which in the opinion of the Lender, such disclosure would be useful or appropriate for the interests of the Lender or otherwise and the Borrower expressly authorise any such disclosure and delivery.

 

 

(d)

The Borrower acknowledges and accepts that the Lender may be prohibited or it may be inappropriate for the Lender to disclose information to the Borrower by reason of law or duties of confidentiality owed or to be owed to other persons.

 

 

(e)

This Clause 15.12 shall be: (i) in addition to all other duties of confidentiality imposed on the Lender and its professional advisers under applicable law; and (ii) subject to any other applicable provisions contained in this Agreement and the other Finance Documents.

 

15.13

Process of personal data

 

 

(a)

Process of personal data: The Borrower hereby confirms that it has been informed that its personal data and/or the personal data of its director(s), officer(s) and legal representative(s) (together the “personal data”) contained in this Agreement or the personal data that have been or will be lawfully received by the Lender in relation to this Agreement and the Finance Documents will be included at the personal data database maintained by the Lender as processing agent (Υπεύθυνη Επεξεργασίας) and will be processed by the Lender for the purpose of properly serving, supporting and monitoring their current business relationship.

 

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(b)

Process of personal data to Teiresias: The Borrower hereby expressly gives its consent to the communication for process in the meaning of law 2472/97 by the Lender of its personal data contained in this Agreement, the Finance Documents, in the Operating Account for onwards communication thereof to an inter-banking database record called “Teiresias” kept and solely used by banks and financial institutions. The Borrower is entitled at any relevant time throughout the Facility Period to revoke its consent given hereunder by written notice addressed to the Lender and the Registrar of “Teiresias A.E.” at 2, Alamanas street, 15125 Maroussi, Athens, Greece.

 

 

(c)

Duration of the process: The personal data process shall survive the termination of this Agreement for such period as it is required by the applicable law.

 

16.

NOTICES AND COMMUNICATIONS


 

16.1

Notices

 

Every notice, request, demand or other communication under the Agreement or, unless otherwise provided therein, any of the other Finance Documents shall:

 

 

(a)

be in writing delivered personally or by first-class prepaid letter (airmail if available), or shall be served through a process server or subject to Clause 10.10 (Communications Indemnity) and Clause 10.11 (Electronic Communication) by fax or electronic mail;

 

 

(b)

be deemed to have been received, subject as otherwise provided in this Agreement or the relevant Finance Document, in the case of fax or electronic mail, at the time of dispatch as per transmission report (provided, in either case, that if the date of despatch is not a business day in the country of the addressee it shall be deemed to have been received at the opening of business on the next such business day), and in the case of a letter when delivered or served personally or five (5) days after it has been put into the post; and

 

 

(c)

be sent:

 

 

(i)

if to be sent to any Security Party, to:

 

c/o Central Shipping Inc.,

1 Vas. Sofias & Meg. Alexandrou,

Marousi, Athens, Greece         

Facsimile No: +30 210 6141272         

1.1    Attention: Andreas Louka

E-mail: louka@loukapartners.com

 

and

 

 

(ii)

if to be sent to the Lender, to

 

ALPHA BANK S.A.

93 Akti Miaouli

185 38 Piraeus, Greece

Fax No.: +30210 42 90 268

Attention: The Manager

E-mail: shipdivision@alpha.gr

 

90

 

or to such other person, address fax number or electronic address as is notified by the relevant Security Party or the Lender (as the case may be) to the other parties to this Agreement and, in the case of any such change of address, or fax number or electronic address notified to the Lender, the same shall not become effective until notice of such change is actually received by the Lender and a copy of the notice of such change is signed by the Lender.

 

16.2

Effective date of notices

 

Subject to Clauses 17.3 (Service outside business hours) and 17.4 (Illegible notices):

 

 

(a)

a notice which is delivered personally or posted shall be deemed to be served, and shall take effect, at the time when it is delivered ; and

 

 

(b)

a notice which is sent by fax or electronic mail shall be deemed to be served, and shall take effect, two hours after its transmission is completed.

 

16.3

Service outside business hours

 

However, if under Clause 16.2 (Effective date of notices) a notice would be deemed to be served:

 

 

(a)

on a day which is not a Banking Day in the place of receipt; or

 

 

(b)

on such a Banking Day, but after 5 p.m. local time,

 

the notice shall (subject to Clause 16.4 (Illegible notices)) be deemed to be served, and shall take effect, at 9 a.m. on the next day which is such a Banking Day.

 

16.4

Illegible notices

 

Clauses 17.2 (Effective date of notices) and 17.3 (Service outside business hours) do not apply if the recipient of a notice notifies the sender within one hour after the time at which the notice would otherwise be deemed to be served that the notice has been received in a form which is illegible in a material respect.

 

16.5

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.

 

16.6

Effect of electronic communication

 

 

(a)

Any communication to be made between any two Parties under or in connection with the Finance Documents may be made by electronic mail or other electronic means (including, without limitation, by way of posting to a secure website) if those two Parties:

 

 

(i)

notify each other in writing of their electronic mail address and/or any other information required to enable the transmission of information by that means; and

 

91

 

 

(ii)

notify each other of any change to their address or any other such information supplied by them by not less than five Banking Days' notice.

 

 

(b)

Any such electronic communication as specified in paragraph (a) above to be made between a Security Party and the Lender may only be made in that way to the extent that those two Parties agree that, unless and until notified to the contrary, this is to be an accepted form of communication.

 

 

(c)

Any such electronic communication as specified in paragraph 0(a) above made between any two Parties will be effective only when actually received (or made available) in readable form and in the case of any electronic communication made by a Party to the Lender only if it is addressed in such a manner as the Lender shall specify for this purpose.

 

 

(d)

Any electronic communication which becomes effective, in accordance with paragraph (c) above, after 5.00 p.m. in the place in which the Party to whom the relevant communication is sent or made available has its address for the purpose of this Agreement shall be deemed only to become effective on the following Banking Day.

 

 

(e)

Any reference in a Finance Document to a communication being sent or received shall be construed to include that communication being made available in accordance with this Clause 16.6.

 

17.

LAW AND JURISDICTION


 

17.1

Governing Law

 

 

(a)

This Agreement and any non-contractual obligations connected with it shall be governed by and construed in accordance with English Law.

 

 

(b)

For the purposes of enforcement in Greece, it is hereby expressly agreed that English law as the governing law of this Agreement will be proved by an affidavit of a solicitor from an English law firm to be appointed by the Lender and the said affidavit shall constitute full and conclusive evidence binding on the Borrower but the Borrower shall be allowed to rebut such evidence save for witness.

 

17.2

Jurisdiction  

 

 

(a)

The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement or any non-contractual obligations connected with it (including a dispute regarding the existence, validity or termination of this Agreement and including claims arising out of tort or delict) (a “Dispute”). The Borrower irrevocably and unconditionally submits to the jurisdiction of such courts.

 

 

(b)

The Parties agree that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly no Party will argue to the contrary and waives any objections to the inconvenience of England as a forum.

 

92

 

 

(c)

This Clause 17.2 is for the benefit of the Lender only. As a result, the Lender shall not be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Lender may take concurrent proceedings in any number of jurisdictions.

 

17.3

Process Agent for English Proceedings

 

Without prejudice to any other mode of service allowed under any relevant law the Borrower irrevocably designates, appoints and empowers Messrs. Top Properties (London) Limited (attention: Mr. Dimosthenis Eleutheriadis) at their office for the time being at 247 Gray’s Inn Road, London WC1X8QZ, England (hereinafter called the “Process Agent for English Proceedings”), to receive for it and on its behalf, service of process issued out of the English courts in relation to any proceedings before the English courts in connection with any Finance Document, provided, however, that:

 

 

(a)

the Borrower hereby agrees and undertakes to maintain a Process Agent for English Proceedings throughout the Security Period and hereby agrees that in the event that if any Process Agent for English Proceedings is unable for any reason to act as agent for service of process, the Borrower must immediately (and in any event within ten (10) days of such event taking place) appoint another agent on terms acceptable to the Lender. Failing this, the Lender may appoint for this purpose a substitute Process Agent for English Proceedings and the Lender is hereby irrevocably authorised to effect such appointment on Borrower’ behalf. The appointment of such Process Agent for English Proceedings shall be valid and binding from the date notice of such appointment is given by the Lender to the Borrower in accordance with Clause 16.1 (Notices); and

 

 

(b)

the Borrower hereby agrees that failure by a Process Agent for English Proceedings to notify the Borrower of the process will not invalidate the proceedings concerned.

 

17.4

Proceedings in any other country

 

If it is decided by the Lender that any such proceedings should be commenced in any other country, then any objections as to the jurisdiction or any claim as to the inconvenience of the forum is hereby waived by the Borrower and it is agreed and undertaken by the Borrower to instruct lawyers in that country to accept service of legal process and not to contest the validity of such proceedings as far as the jurisdiction of the court or courts involved is concerned and the Borrower agrees that any judgment or order obtained in an English court shall be conclusive and binding on the Borrower and shall be enforceable without review in the courts of any other jurisdiction.

 

17.5

Process Agent (antiklitos) in Greece

 

MR. ANDREAS LOUKA, an Attorney-at-Law, presently, 1 Vas. Sofias & Meg. Alexandou Street Marousi GR 15124  Greece (hereinafter called the “Process Agent for Greek Proceedings”) is hereby appointed by the Borrower as agent to accept service, upon whom any judicial process in respect of proceedings in Greece may be served and any process notice, judicial or extra-judicial request, demand for payment, payment order, foreclosure proceedings, notarial announcement of claim, notice, request, demand or other communication under this Agreement or any of the Finance Documents. In the event that the Process Agent for Greek Proceedings (or any substitute process agent notified to the Lender in accordance with the foregoing) cannot be found at the address specified above (or, as the case may be, notified to the Lender), which will be conclusively proved by a deed of a process server to the effect that the Process Agent  for Greek Proceedings was not found at such address, any process notice, judicial or extra-judicial request, demand for payment, payment order, foreclosure proceedings, notarial announcement of claim or other communication to be sent to any Security Party may be validly served/notified in accordance with the relevant provisions of the Hellenic Code on Civil Procedure.

 

 

93

 

17.6

Third Party Rights

 

A person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce or to enjoy the benefit of any term of this Agreement.

 

17.7

Meaning of proceedings

 

In this Clause 17 “proceedings” means proceedings of any kind, including an application for a provisional or protective measure.

 

 

 

 

[Remainder of page intentionally left blank]

 

 

 

 

 

 

 

94

 

 

SCHEDULE 1

 

Form of Drawdown Notice

(referred to in Clause 2.2)

 

 

To:

ALPHA BANK S.A.

93 Akti Miaouli

185 38 Piraeus, Greece

 

[●] , 2021

 

Re:

US$38,000,000 Loan Agreement (the “Loan Agreement”) dated [●] May, 2021 made between (1) the Lender, as lender and (2) ATHENEAN Empire Inc., of the Marshall Islands (the “Borrower”), as Borrower.

 

1.

We refer to the Loan Agreement (terms defined in the Loan Agreement have their defined meanings when used in this Drawdown Notice) and hereby give you notice that we wish to draw the Commitment as follows:

 

 

(i)

The Loan: the [full amount]-[part] of the Commitment in the amount of [US$[●] (Dollars [●] million [●] hundred thousand)];

 

 

(ii)

Drawdown Date: [●], 2021;

 

 

(iii)

duration of relevant Interest Period: duration of the first Interest Period in respect of the Loan shall be [●] months; and

 

 

(iv)

Payment instructions: [in payment to the Operating Account numbered […………..] for further payment to the Builders Bank as per our instructions under separate cover for the purposes set out in Clause 1.1 (Amount and purpose) of the Loan Agreement].

 

2.

We confirm, represent and warrant that:

 

 

(i)

no event or circumstance has occurred and is continuing which constitutes a Default or will result from the borrowing of the Loan;

 

 

(ii)

the representations and warranties contained in Clause 6 (Representations and warranties) of the Loan Agreement and the representations and warranties contained in each of the other Finance Documents are true and correct at the date hereof as if made with respect to the facts and circumstances existing at such date;

 

 

(iii)

the borrowing to be effected by the drawing of the Loan will be within our corporate powers, has been validly authorised by appropriate corporate action and will not cause any limit on our borrowings (whether imposed by statute, regulation, agreement or otherwise) to be exceeded; and

 

 

(iv)

there has been no change in the ownership, management, operations or financial condition of any of the Security Parties from that previously disclosed to the Lender in writing other than .......... .......... .......... .......... .......... ..........

 

95

 

3.

This Drawdown Notice cannot be revoked without the prior consent of the Lender.

 

 

SIGNED by

)

 

Mrs.

)

 

for and on behalf of

)

 

ATHENEAN EMPIRE INC.,

 

of the Republic of the Marshall Islands,

_________________________

in the presence of:

Attorney-in-fact

     

 

 

Witness:    

Name:

[]  

Title:

Attorney-at-Law

 

Address:

[],

 
 

Piraeus, Greece

 

 

 

 

 

 

 

 

 

96

 

 

Schedule 2

 

Form of Insurance Letter

 

 

To:

 

[P&I Club]

 
    [●]  
    [●]  
       

From:

  [●]  
   

[●], 

 
   

[●] 

 

 

 

 

[●] 20[●]

 

Dear Sirs

 

m.v. “[●]” (the Vessel”)

 

We are obtaining loan finance from ALPHA BANK S.A. (the “Lender”) secured (inter alia) by a first ship mortgage over the Vessel. The Vessel's insurances will also be assigned to the Lender.

 

You are hereby authorised to send a copy of the Certificate of Entry for the Vessel to the Lender, c/o their lawyers, namely, Theo V. Sioufas & Co. Law Offices, of 13 Defteras Merarchias Street, 185 35 Piraeus, Greece. Further, you are also irrevocably authorised to provide the Lender from time to time with any other information whatsoever which they may require relating to the entry of the Vessel in the association.

 

This letter is governed by, and shall be construed in accordance with, English law.

 

 

 

_____________________________

 

For and on behalf of

[●]

97

 

 

Schedule 3

Form of Compliance Certificate

(referred to in Clause 8.1(e) and 16.11

 

 

 

To:

ALPHA BANK S.A.,

93 Akti Miaouli, Piraeus, Greece

(the “Lender”)

 

From:

TOP SHIPS INC., of the Marshall Islands

(the “Corporate Guarantor”)

 

Dated: [●], 20[●]

 

RE:

Loan Agreement dated [●] May, 2021 made between (1) ATHENEAN Empire Inc. (the “Borrower”) (2) the Lender, in respect of a loan facility of up to US$38,000,000 (the “Loan Agreement”).

 

Terms defined in the Loan Agreement shall have the same meaning when used herein.

 

I/We [●], [●] and [●], [each] being the Chief Financial Officer of the Borrower and the Corporate Guarantor, refer to Clause 8.1(e)(ii) of the Loan Agreement and hereby certify that, during the Accounting Period 01.01.20[…] to 31.12.20[…] and on the date hereof the Financial Covenants (Clause 16.11 of the Loan Agreement), are fully complied with:

 

1.

Financial Covenants:

 

 

(a)

Corporate Leverage Ratio: is [●]%; and

 

 

(b)

Corporate Liquidity: US$ [●]

 

2.

Default: [No Default has occurred and is continuing]

 

or

 

[The following Default has occurred and in continuing: [provide details of Default]. [The following steps are being taken to remedy it: [provide details of steps being taken to remedy Default]].

 

We attach hereto the necessary documents supported by calculations setting out in reasonable detail the materials underling the statements made in this Compliance Certificate.

 

 

Signed: ______________________         

Name: [………………………….]

Title: Chief Financial Officer/Director

 

98

 

 

Schedule 4

 

Form of Designation Notice

 

To:

PIRAEUS BANK S.A.,

4, Amerikis Street,

Athens, Greece         

(the “Lender”)

 

Dated: [●]

 

Dear Sirs

 

Re:

Loan agreement dated [●] May, 2021 (as amended and/or supplemented from time to time, the “Loan Agreement”) made between (inter alia) (i) ourselves, as Borrower, and (ii) the Lender in respect of a term loan facility in an amount of up to US$38,000,000.


 

We refer to:

 

1.

the Loan Agreement;

 

2

the Master Agreement dated as of [●] May, 2021 (the “Master Agreement”) made between ourselves and the Lender, as Swap Bank; and

 

3

a Confirmation delivered pursuant to the Master Agreement and addressed by the Lender to us.

 

In accordance with the terms of the Loan Agreement, we hereby give you notice of the said Confirmation and hereby confirm that the Transaction evidenced by it will be designated as a “Designated Transaction” for the purposes of the Loan Agreement and the other Finance Documents.

 

Yours faithfully

 

 

...............................................................

for and on behalf of

ATHENEAN EMPIRE INC.

 

 

99

 

 

EXECUTION PAGE

 

 

IN WITNESS whereof the parties hereto have caused this Agreement to be duly executed on the date first above written.

 

 

 

 

SIGNED by

)

   

Mr. Andreas Louka

)

   

for and on behalf of

)

   

ATHENEAN EMPIRE INC.,

)

   

of the Republic of the Marshall Islands,

/s/ Andreas Louka

 

in the presence of:

Attorney-in-fact

 
       

 

 

 

Witness:

/s/ Ourania Konstantinou

 

Name:

Ourania Konstantinou

 

Address: 

13 Defteras Merarchias

 
 

Piraeus, Greece

 

Occupation: 

t. Attorney-at-Law

 

 

 

 

SIGNED by

)

   

Mr. Konstantinos Flokos and

/s/ Konstantinos Flokos

 

Mrs. Chrysanthi Papathanasopoulou

)

Attorney-in-fact

 

for and on behalf of

)

   

ALPHA BANK S.A.,

)

   

of Greece,

)

   

in the presence of:

/s/ Chrysanthi Papathanasopoulou

 
    Attorney-in-fact  

 

 

 

Witness: 

/s/ Ourania Konstantinou

 

Name:

Ourania Konstantinou

 

Address: 

13 Defteras Merarchias

 
 

Piraeus, Greece

 

Occupation: 

t. Attorney-at-Law

 

 

 

 

100
 

Exhibit 4.24

 

ADDENDUM NO. 1

 

This Addendum No. 1 dated 23 June 2021 (the “Addendum”) to the Memorandum of Agreement dated April 20 2021 (the “MOA”) for the sale and purchase of the vessel “MT Nord Valiant” with IMO no. 9697909 (the “Vessel”) is made between:

 

 

(i)

MONTE CARLO LAX SHIPPING COMPANY LIMITED, company registration no. 61453 of Trust Company Complex, Ajeltake Road, Majuro, MH96960, Marshall Islands as sellers (the “Sellers”); and

 

 

(ii)

Dee4 VesselCo 7 K/S, company registration (CVR) no. 42 25 47 97, Amaliegade 33B, 1, DK- 1256 Copenhagen K,as buyers (the “Buyers”) as fully guaranteed by Dee4 Fund I Holding II K/S, company registration (CVR) no. 41 52 26 33, Amaliegade 33B, 1, DK-1256 Copenhagen K.

 

(together referred to as the “Parties” or in the singular a “Party”) IT IS HEREBY AGREED AND CONFIRMED as follows;

 

A)

Definitions:

 

Capitalised terms and definitions used in this Addendum shall have the meaning set out in the MOA, unless a contrary indication appears, and in addition:

 

“Buyers Nominated Flag State” means Danish (Danish International Register of Shipping “DIS”) or another suitable flag to be advised by the Buyers well in advance to the Sellers (state flag state).

 

“Owners” means Xiang T89 HK International Ship Lease Co., Limited.

 

B)

In exchange for payment of the Purchase Price the Sellers shall provide or arrange with the Owner for the provision of the following delivery documents to the Buyers:

 

1.

Two (2) original Legal Bill(s) of Sale in a form recordable in the Buyers’ Nominated Flag State, transferring title of the Vessel and stating that the Vessel is free from all charters, mortgages, encumbrances, arrests and maritime liens or any other debts whatsoever, and duly notarized (attesting as to the signatories’ identity and authority to sign on behalf of the Sellers) and duly legalized or apostilled;

   

2.

An original of the Resolution of the board of directors of the Sellers resolving and approving the sale of the Vessel to the Buyers as per the terms set out in the MOA and authorizing the execution and delivery on behalf of the Sellers of all documents, including but not limited to the Bill(s) of Sale and the Protocol of Delivery and Acceptance, under or in connection with the MOA and the appointment of the Sellers’ named attorney(s);

   

3.

Two (2) original Power of Attorney of the Sellers appointing one or more representatives to act on behalf of the Sellers and authorizing the Attorney(s)-in-Fact to, inter alia, execute the legal sale of the Vessel as per the terms of the MOA, to sign and deliver the MOA, any addenda thereto, the Protocol of Delivery and Acceptance and other requested documentation as per the terms of the MOA, including but not limited to the Bill(s) of Sale and execute any other documents related to the sale of the Vessel to the Buyers, receiving the Balance of the Purchase Price and any other amounts pursuant to the MOA, duly notarized and legalized or apostilled;

   

 

 

 

4.

[Two (2) original Power of Attorney of the Owners appointing one or more representatives to act on behalf of the Owners and authorizing the Attorney(s)-in-Fact to, inter alia, execute the legal sale of the Vessel as per the terms of the MOA, to sign and deliver the Protocol of Delivery and Acceptance and other requested documentation as per the terms of the MOA, including but not limited to the Bill(s) of Sale and execute any other documents related to the sale of the Vessel to the Buyers, receiving the Balance of the Purchase Price and any other amounts pursuant to the MOA, duly notarized and legalized or apostilled].

   

5.

One (1) certified true copy of Sellers’ Articles of Association (or similar constitution document), to be certified by a director of the Sellers.;

   

6.

One (1) Certificate or Transcript of Registry issued by the current flag state of the Vessel, evidencing the Sellers’ ownership of the Vessel and that the Vessel is free from registered encumbrances, mortgages and maritime liens, issued on the date of the delivery of the Vessel to be faxed or e-mailed by the Liberian registry at the closing meeting and the ship register of the Buyers Nominated Flag State with the original to be sent to the Buyers as soon as possible after delivery of the Vessel;

   

7.

One (1) original company Certificate of Goodstanding or equivalent from the Sellers’ corporate registry evidencing the incorporation of the company and the goodstanding of it, issued not earlier than ten (10) Banking Days prior to the date of delivery of the Vessel;

   

8.

One (1) original or electronic copy of Declaration of Class or (depending on the Classification Society) a Class Maintenance Certificate issued within five (5) Banking Days prior to expected date of delivery confirming that the Vessel’s Class is fully maintained and free of any condition/recommendation;

   

9.

One (1) original Certificate of Deletion of the Vessel from the Vessel’s Registry or in the event that the registry does not as a matter of practice issue such documentation immediately, a letter of undertaking from the Sellers to effect deletion from the Vessel's registry forthwith and with reasonable effort to provide an original certificate or other official evidence of deletion to the Buyers promptly and latest within five (5) Working Days (excluding panama public holiday) after the Purchase Price has been paid and the Vessel has been delivered;

   

10.

One (1) copy of the Vessel's Continuous Synopsis Record certifying the date on which the Vessel ceased to be registered with the Vessel’s registry, or, in the event that the registry does not as a matter of practice issue such certificate immediately, a written undertaking from the Sellers to provide a copy of this certificate promptly upon it being issued together with evidence of submission by the Sellers of a duly executed official form stating the date on which the Vessel shall cease to be registered with the Vessel's Registry, and the original to be provided to the Buyers latest within thirty (30) Working Days after the Purchase Price has been paid and the Vessel has been delivered;

   

11.

one (1) original Commercial Invoice for the Vessel containing the Sellers’ bank details in full and issued under Sellers’ letterhead and duly signed and dated by the Sellers’ attorney-in-fact, setting out the main particulars of the Vessel including make and type of the main engine as well the Purchase Price, marked “FULLY PAID”;

   

12.

One (1) original Commercial Invoice in respect of remaining bunkers and unused lubricating and hydraulic oils in storage tanks and unopened drums, stipulating prices and quantities, together with

   
  supporting invoices/documents pursuant to clause 22 of the MOA, duly signed and dated by the Sellers’ attorney-in-fact and, marked “FULLY PAID;
   

 

 

 

13.

One (1) original of the Sellers’ letter of confirmation that to the best of their knowledge:

 

 

-

the Vessel has not touched bottom since the Vessel’s last drydocking,

     
 

-

the Vessel is not boycotted or blacklisted by any nation, government, state or the Arab Boycott League and is not subject to any sanctions or prohibitions imposed by the USA, the EU (or any of its member states) or the UN, and that

     
 

-

the Sellers’ crew do not have any outstanding claim(s) against the Vessel at the time of delivery;

 

14.

Two (2) original Protocols of Re-delivery and Acceptance for documentary closing to be signed by the Owners as owners and the Sellers as charterers upon redelivery of the Vessel;

   

15.

Two (2) original Protocols of Delivery and Acceptance for documentary closing to be signed by authorized representatives of the Owners as sellers and Buyers as buyers upon delivery, stating the transfer of title, the date, time and place of delivery of the Vessel from the Sellers to the Buyers;

   

16.

Any additional documents as may reasonably be required by the competent authorities of the Buyers’ Nominated Flag State for the purpose of registering the Vessel, provided the Sellers are able to procure the documents and further provided the Buyers notify the Sellers of any such documents as soon as possible after the date of the MOA;

 

C)

At the time of delivery, the Buyers shall provide the Sellers with the following delivery documents:

   

1.

An extract of the Resolution of the board of directors of the Buyers resolving and approving the purchase of the Vessel from the Sellers as per the terms set out in the MOA and authorizing the execution and delivery on behalf of the Buyers of all documents under or in connection with the MOA and the appointment of the Buyers’ named attorney(s);

   

2.

One (1) original Power of Attorney of the Buyers appointing one or more representatives to act on behalf of the Buyers and authorizing the Attorney(s)-in-Fact to, inter alia, execute legal purchase of the Vessel as per the terms of the MOA, to sign the Protocol of Delivery and Acceptance and other requested documentation as per the terms of the MOA, and execute any other documents related to the purchase of the Vessel from the Sellers, and any other action necessary for the performance in general of the MOA, duly notarized and legalized or apostilled;

 

If any of the documents listed in Clauses (A) and (B) above are not in the English language they shall be accompanied by an English translation by an authorised translator or certified by a lawyer qualified to practice in the country of the translated language.

 

The Sellers and the Buyers shall exchange copies, drafts or samples of the documents listed in Clauses (A) and (B) above for review and comment by the other party not later than 10 working days, prior to the Vessel's intended date of readiness for delivery as notified by the Sellers pursuant to Clause 4(b) of the MOA.

 

Concurrent with the exchange of documents in Clauses (A) and (B) above, the Sellers shall also hand to the Buyers’ representative the classification certificate(s) as well as all plans, drawings and manuals, (excluding ISM manuals/reports, SSP (Ship Security Plan) and certificates exclusively for the Sellers including

 

 

 

SMC/DOC/ISSC/MLC and original certificates that must be returned to flag authorities and Class), which are on board the Vessel.

 

Other certificates which are on board the Vessel shall also be handed over to the Buyers unless the Sellers are required to retain same, in which case the Buyers have the right to take copies.

 

Technical documentation which may be in the Sellers' possession shall promptly after delivery be forwarded to the Buyers’ office at the Buyer’s expense, if they so request. The Sellers may keep the Vessel's log books, oil record books and maintenance records but the Buyers have the right to take copies of same.

 

Upon execution of this Addendum, the Sellers shall deliver the following (by email) to the Buyers in order for the Buyers’ to prepare the Vessel’s registration process with DIS:

 

 

(i)

a copy of all current CSRs; and

 

 

(ii)

a copy of the International Tonnage Certificate.

 

D)

All other terms and conditions of the MOA to remain unaltered and in full force and effect.

 

IN WITNESS WHEREOF, the Sellers and the Buyers have caused this Addendum to be duly executed by their authorized officers on the date first described above.

 

For and on behalf of

 

MONTE CARLO LAX SHIPPING COMPANY LIMITED

 

/s/ Andreas Louka                

Name: Andreas Louka         

Title: Attorney-in-fact         

 

 

For and on behalf of

 

Dee4 VesselCo 7 K/S

 

/s/ Carsten Mortensen          

Name: Carsten Mortensen

Title: Director

 
 

Exhibit 4.25

 

SALE AND PURCHASE AGREEMENT

 

This Sale and Purchase Agreement (this "Agreement") is entered into as of September 8th, 2021, by and between Top Ships Inc., a Marshall Islands corporation (the "Buyer"), and Zizzy Charter Co., a Marshall Islands corporation (the "Seller"). The Seller and the Buyer are sometimes referred to in this Agreement as a "Party" and collectively as the "Parties."

 

RECITALS

 

WHEREAS, the Seller owns 325 and 325 shares (together the "Shares") of capital stock, no par value, representing 65% of the issued and outstanding shares of capital stock of Julius Caesar Inc and Legio X Inc. respectively (together the “Investment Shares”);

 

WHEREAS, Julius Caesar Inc is a party to a shipbuilding contract for a very high specification scrubber fitted VLCC tanker currently under construction in Hyundai Heavy Industries (the “Shipyard”) with Hull number 3213 and expected delivery in January 2022. Upon its delivery from the Shipyard the VLCC tanker will enter into time charter employment with Trafigura Maritime Logistics Pte Ltd, Singapore, as per a time charter party agreement dated 15th December 2020, as amended, for a firm duration of three years at a gross daily rate of $36,000, with a charterer’s option to extend for two additional years at $39,000 and $41,500, respectively (“Company 1”);

 

WHEREAS, Legio X Inc (“Company 2” and together with Company 1 “The Companies”) is a party to a shipbuilding contract (together with the shipbuilding contract of Julius Caesar Inc the “Shipbuilding Contracts”) for a very high specification scrubber fitted VLCC tanker currently under construction in the Shipyard with Hull number 3214 and expected delivery in February 2022. Upon its delivery from the Shipyard the VLCC tanker will enter into time charter employment with Trafigura Maritime Logistics Pte Ltd, Singapore, as per a time charter party agreement dated 17th December 2020, as amended, for a firm duration of three years at a gross daily rate of $35,750, with a charterer’s option to extend for two additional years at $39,000 and $41,500, respectively (together with the time charter of Julius Caesar Inc the “Time Charters”);

 

WHEREAS, the total shipbuilding cost, as of the date of this agreement, is $89,761,120 for Hull 3213 and $89,758,120 for Hull 3214.

 

WHEREAS, the Seller desires to sell to the Buyer, and the Buyer desires to purchase from the Seller the Investment Shares.

 

WHEREAS, the disinterested directors of the Board of Directors of the Buyer (the “Board”) have unanimously determined that this Agreement and the transactions contemplated hereby and thereby are fair to and in the best interests of the Buyer and the shareholders of the Buyer.

 

NOW, THEREFORE, in consideration of the respective representations, warranties and agreements contained herein and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Parties hereby agree as follows:

 

ARTICLE I
PURCHASE AND SALE OF THE INVESTMENT AND PURCHASED SHARES; CLOSING

 

Section 1.1    Sale and Purchase of the Investment Shares. At the Closing (as defined below), subject to the terms and conditions herein contained, the Seller shall sell, convey, transfer, assign and deliver to the Buyer, and the Buyer shall purchase and acquire from the Seller, the Investment Shares, together with all rights and interests associated therewith.

 

Section 1.2    Consideration. In consideration of the sale, conveyance, transfer, assignment and delivery of the Investment Shares at Closing, the Buyer shall deliver to the Seller a consideration of $29.75 million (the "Consideration") payable as follows:

 

 

-

$2.18 million in the form of Series E Preferred Shares to be issued today to the name of Family Trading Inc.

 

 

-

$27.57 million payable in cash, up to 30 days after the delivery of the last vessel, to the following bank account:

 

CREDIT SUISSE AG

ZURICH, 8070, CH

ACCOUNT HOLDER: CENTRAL MARE INC.

ACCOUNT NUMBER: 2193917-92

IBAN (USD): CH91 0486 6219 3917 9200 0

SWIFT CODE: CRESCHZHXXX

 

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As part of this transaction the Seller agrees to provide finance by remaining responsible to the shipyard for up to 20% of the shipbuilding cost per vessel ($17.8 million per vessel) or $35.6 million in total, at the option of the Buyer, with such option to be exercised until each vessel’s delivery date. Following the exercise of the option, repayment of finance to the Seller is to take place via one single installment within 36 months from each vessel’s delivery. The cost of finance and financial covenants shall be agreed between the parties at the time of exercise and will take into account market terms for similar duration unsecured financings, however it is hereby agreed that in case the Buyer is delisted from NASDAQ it would constitute a default of the financing agreement. Finally, the Buyer will not provide any form of performance guarantee to the Shipyard as the Seller will remain the guarantor until both vessels are delivered by the Shipyard.

 

Section 1.3    Closing. The consummation of the sale and purchase of the Shares (the “Closing”) shall take place at the Representative Office of Top Ships Inc., 1 Vas. Sofias and Meg. Alexandrou Str 15124 Maroussi, Greece, on the date hereof, (the “Closing Date”).

 

Section 1.4    Deliverables. On the Closing Date, subject to the terms and conditions herein contained, the Seller shall deliver to the Buyer the Investment Shares free and clear of any and all charges, claims, conditions, encumbrances, equitable interests, liens, mortgages, options, pledges, rights of refusal, security interests or restrictions of any kind, including any restrictions on use, voting, transfer, receipt of income, or exercise of any other attribute of ownership, in each case of any nature whatsoever (not including any restrictions on the resale of the Investment Shares under the Securities Act of 1933, as amended (the "Securities Act") or under applicable state securities laws) (collectively, "Liens"), in certificated form, registered in the name of the Buyer or its designated nominee (or, if applicable, stock powers duly executed in blank, proper form for transfer), together with any necessary assignment documents in form and substance as reasonably requested by the Buyer.

 

ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE BUYER

 

The Seller represents and warrants to the Buyer and Buyer represents and warrants to the Seller that the statements in the following sections of this Article II are true and correct as of the date of this Agreement and as of the Closing Date:

 

Section 2.1    Organization and Good Standing. Each of the Parties and the Companies are duly organized, validly existing and in good standing under the laws of the Republic of the Marshall Islands and have all requisite corporate power and authority to own, lease, operate and hold their respective properties and assets and to conduct their respective business as is now conducted and as currently contemplated to be conducted, and is authorized to do business in all jurisdictions material to the conduct of its respective business. The Parties have delivered to each other complete and correct copies of the Articles of Incorporation, Bylaws or other charter documents ("Constitutional Documents") of the Companies, in each case, as currently in effect, together with copies of all minutes of meetings and resolutions of shareholders and directors of the Companies (the "Companies Corporate Records"). The Companies Corporate Records are accurate in all material respects and all corporate proceedings and actions reflected therein have been conducted or taken in compliance with all applicable laws and in compliance with the Companies Constitutional Documents. The Companies are not in default under or in violation of its Constitutional Documents.

 

Section 2.2    Authority and Enforceability. Each of the Parties have the full legal right and requisite corporate power and authority and has taken all action necessary in order to execute, deliver and perform fully its obligations under this Agreement and to consummate the transactions contemplated herein. This Agreement has been duly and validly authorized, executed and delivered by the Parties and constitutes a valid and binding obligation of the Parties, enforceable against it in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, fraudulent transfer, moratorium or other similar laws relating to or affecting the rights of creditors generally and by equitable principles, including those limiting the availability of specific performance, injunctive relief and other equitable remedies and those providing for equitable defense.

 

Section 2.3    Consents and Approvals; No Violation. Neither the execution and delivery of this Agreement by the Parties nor the consummation of the transactions contemplated by this Agreement will (i) conflict with or result in any breach of any provision of the Constitutional Documents of the Parties or the Companies; (ii) require any consent, approval, authorization or permit of, or filing with or notification to, any national, federal, regional, state, multi-state, municipal or other governmental authority of any nature, including any court, subdivision, agency, commission or authority thereof, or any quasi-governmental body exercising any regulatory or taxing authority (any such governmental authority or body, a "Governmental Body"), other than those that have been made or obtained; (iii) cause any of the Parties or the Companies to violate or contravene any provision of law, any rule or regulation of any Governmental Body, or any order, writ, judgment, injunction, decree, determination or award, binding upon or applicable to them or the Companies or their respective assets; (iv) result in a default (or give rise to any right of amendment, termination, cancellation, consent, acceleration or loss of a material benefit) under the terms, conditions or provisions of any loan or credit agreement, note, bond, mortgage, indenture, lease, sublease, license, obligation, commitment, purchase order or other agreement, commitment, instrument, permit, concession, or obligation, written or oral (each, a "Contract") to which the Parties or the Companies or any of their respective assets may be bound, except in such cases where the requisite waivers or consents have been obtained; or (v) result in the creation of any Lien upon any of the properties or assets of the Parties or the Companies under the terms, conditions or provisions of any Contract, instrument or other obligation to which the Parties or the Companies or any of their respective assets may be bound or affected.

 

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Section 2.4    No Litigation. There is no action, suit, claim, investigation, litigation, legal, administrative, arbitration or other proceeding pending against the Parties other than publicly disclosed or, to the knowledge of the other Party, threatened against the Parties, nor is any of the Parties subject to or bound by any outstanding orders, judgments, injunctions, awards or decrees of any Governmental Body, other than publicly disclosed, which questions the validity of this Agreement or any of the transactions contemplated hereby or any action taken or to be taken pursuant hereto or which seeks to prohibit, enjoin or otherwise challenge any of the transactions contemplated hereby.

 

Section 2.5    No Registration. The Shares exchanged pursuant to this Agreement are being acquired for investment purposes only and not with a view to any public distribution thereof in violation of any securities laws, and the Parties shall not offer to sell or otherwise dispose of the Shares so acquired by it in violation of any of the registration requirements of the Securities Act. The Parties acknowledge that it is able to fend for themselves, can bear the economic risk of its investments in the Shares, and have such knowledge and experience in financial and business matters renders them capable of evaluating the merits and risks of an investment in the Shares. The Parties understand that, when issued, none of the Shares will be registered pursuant to the Securities Act and that all of the Shares will constitute "restricted securities" under the federal securities laws of the United States. Each certificate for Shares shall bear the following legend:

 

"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES OR BLUE SKY LAWS, AND MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF (I) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND COMPLIANCE WITH SUCH STATE LAWS OR (II) AN APPLICABLE EXEMPTION THEREFROM AND AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED."

 

Section 2.6    Capitalization. The Companies are authorized to issue five hundred (500) shares each, without par value, of capital stock. The Shares represent all of the issued and outstanding shares of capital stock of the Companies. All of the Shares are duly authorized, validly issued, fully paid and non-assessable and are owned legally by the Parties. Other than this Agreement, there is no subscription, option, warrant, preemptive right, call right or other right, agreement or commitment of any nature relating to the voting, issuance, sale, delivery or transfer (including any right of conversion or exchange or right of first refusal under any outstanding security or other instruments) by the Parties of the Shares, and there is no obligation on the part of the Parties to grant, extend or enter into any of the foregoing. There are no outstanding or authorized stock appreciation, phantom stock, profit participation or similar rights with respect to the Shares or any other equity or voting interests in the Companies. No claim has been made or, to the knowledge of the Parties, threatened against the Parties or the Companies asserting that any person other than the Parties or its sole shareholders are the holders or beneficial owners of the Shares or any other equity or voting interests in the Companies.

 

Section 2.7    Ownership of the Investment Shares. The Seller is the sole legal owner and holder of, and has good, valid and marketable title to, the Investment Shares to be sold pursuant to this Agreement, free and clear of any Liens. At the Closing, the Seller will transfer, assign and deliver good and marketable title to the Investment Shares to the Buyer, free and clear of all Liens.

 

Section 2.8    Contracts. The Companies are not a party to any Contract other than the Shipbuilding Contracts and the Time Charters. The Companies have good and valid title to the Shipbuilding Contracts, free and clear of any Liens. The Companies are not in default under the Shipbuilding Contracts, nor does an event exist which, with the giving of notice or lapse of time or both, would constitute such a default. To the Parties knowledge, all other parties to the Shipbuilding Contracts are in compliance with the terms thereof. The Shipbuilding Contracts are in full force and effect and are enforceable against the Companies and the other parties thereto in accordance with its terms except as enforceability may be limited by bankruptcy, insolvency, fraudulent transfer, moratorium or other similar laws relating to or affecting the rights of creditors generally and by equitable principles, including those limiting the availability of specific performance, injunctive relief and other equitable remedies and those providing for equitable defense. No consent (including the consent of any Governmental Body) or other action is required in order for the Shipbuilding Contracts to remain in full force and effect, and for the Companies to fully exercise their rights thereunder, following the Closing. The Parties have delivered or made available to each other the true and complete copies, including all amendments and supplements thereof, of the Shipbuilding Contracts.

 

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Section 2.9    No Unlawful Payments. Neither the Parties nor the Companies, nor any director, shareholder, officer, agent, employee or other person associated with or acting on behalf of the Parties or the Companies, as applicable, has: (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; or (iii) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any supplier, customer, licensor, contractor, politician, government employee or other person.

 

Section 2.10    Full Disclosure. No representation or warranty by the Parties in this Agreement and no statement contained in any document or other writing furnished or to be furnished to the Parties pursuant to the provisions hereof, when considered with all other such documents or writings, contain or will contain any untrue statement of material fact or omits or will omit to state any material fact necessary in order to make the statements made herein or therein not misleading.

 

Section 2.11    Adequate Information. Each of the Parties (i) has sufficient knowledge and experience in business, financial and investment matters so as to be able to evaluate the risks and merits of the sale of the Investment Shares and of protecting its own interests in connection with the sale of the Investment Shares; (ii) is a sophisticated person with respect to the exchange of the Shares; (iii) has adequate information concerning the business and financial condition, prospects and plans of the Companies to make an informed decision regarding the exchange of the Shares; and (iv) has independently and without reliance upon the other Party member, and based on such information as the they have deemed appropriate, made its own analysis and decision to enter into this Agreement. The Parties acknowledges that the no member of the Parties have given to one another any investment advice or opinion on whether the sale or purchase of the Shares is prudent or suitable and no member of the Parties is relying on any representation or warranty by the other member of the Parties except as expressly set forth in this Agreement.

 

Section 2.12    No General Solicitation. Neither the Parties nor any nominee thereof has offered any Shares by any means of general solicitation or advertising (i) any advertisement, article, notice or other communication published in any newspaper, magazine, or similar media or broadcast over television or radio; or (ii) any seminar or meeting whose attendees have been invited by general solicitation or advertising.

 

Section 2.13    Independent Investigation. Each of the Parties has had the opportunity to conduct to its own satisfaction independent investigation, review and analysis of the business, operations, assets, liabilities, results of operations, financial condition and prospects of the Companies and, in making the determination to proceed with the transactions contemplated hereby, has relied solely on the results of its own independent investigation and the representations and warranties of the Parties set forth in Article II hereof and the other information provided by the Parties.

 

Section 2.14    Exemption from Registration. The Shares are being offered and sold pursuant to an exemption from the registration requirements of the Securities Act.

 

ARTICLE III

 

[PURPOSETLY LEFT BLANK]

 

ARTICLE IV
COVENANTS

 

Section 4.1    Conduct of Business Pending Closing. The Buyer and the Seller agree that between the date of the execution of this Agreement and the Closing Date, (i) the Parties shall, or shall cause the Companies to, conduct the business and maintain and preserve the assets of the Companies in the ordinary course of business; (ii) the Parties shall use their reasonable efforts to cause all of the representations and warranties in Article II hereof, to continue to be true and correct; and (iii) the Companies shall not incur any debt, or enter into any other Contract.

 

Section 4.2    Further Assurances. Each of the Parties shall execute, acknowledge and deliver or cause to be executed, acknowledged and delivered to each other such certificates, assignments or other instruments of ownership, transfer, assignment and conveyance, in form and substance reasonably satisfactory to the Parties, as shall be necessary to vest in each member of the Parties all of the right, title and interest in and to the Shares undertaken to be sold to the Buyer by the Seller and to the Seller by the Buyer pursuant to this Agreement, free and clear of all Liens, debts, dues and duties of whatsoever nature, and any other document reasonably requested by each member of the Parties in connection with this Agreement.

 

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Section 4.3    Governmental Filings. As promptly as practicable after the execution of this Agreement, each Party shall, in cooperation with the other, file any reports or notifications that may be required to be filed by it under applicable law, if any.

 

Section 4.4    Further Consents. After the Closing Date, the Parties shall obtain any consents or approvals or assist in any filings reasonably required in connection with the transactions contemplated hereby that are requested by each member of the Parties and that have not been previously obtained or made.

 

Section 4.5    Public Announcements. Neither Party shall, without the prior approval of the other Party, issue, or permit any of its partners, stockholders, directors, officers, employees, members, managers, agents to issue, any press release or other public announcement with respect to this Agreement or the transactions contemplated hereby, except as may be required by law, NASDAQ requirements or any Governmental Body to which the relevant Party is accountable.

 

ARTICLE V
CONDITIONS TO CLOSING

 

Section 5.1    Conditions to Obligations of Buyer. At the Closing, the obligation of the Buyer to buy the Investment Shares from the Seller is subject to the fulfillment at the Closing of the following conditions:

 

(a)    Accuracy of Buyer Representations and Warranties; Compliance. The representations and warranties of the Buyer contained in Article II of this Agreement shall be true and correct in all material respects at and as of the Closing Date as though then made, and Buyer shall have performed and complied in all material respects with all conditions and agreements required by this Agreement to be performed and complied with by it on or prior to the Closing Date.

 

(b)    Legal Investment. On the Closing Date, the purchase and sale of the Investment Shares shall be permitted by the laws and regulations of each relevant jurisdiction.

 

(c)    No Actions Pending. There shall be no suit, action, investigation, inquiry or other proceeding by any Governmental Body or other person or entity pending or threatened in writing that challenges, or has the effect of interfering with, the validity or legality of the transactions contemplated in this Agreement.

 

(d)    No Material Adverse Change. Between the date of the execution of this Agreement and the Closing Date, there shall not have been any material adverse change in the condition, financial or otherwise, or the business affairs or assets, of the Companies.

 

Section 5.2    Conditions to Obligations of Seller. The obligation of the Seller to sell the Investment Shares to the Buyer is subject to the fulfillment at the Closing of the following conditions:

 

(a)    Accuracy of Seller Representations and Warranties; Compliance. The representations and warranties of the Seller contained in Article II of this Agreement shall be true and correct in all material respects at and as of the Closing Date as though then made, and the Seller shall have performed and complied in all material respects, with all conditions and agreements required by this Agreement to be performed and complied with by it on or prior to the Closing Date.

 

(b)    Legal Investment. On the Closing Date, the purchase and sale of the Shares shall be permitted by the laws and regulations of each relevant jurisdiction.

 

(c)    No Actions Pending. There shall be no suit, action, investigation, inquiry or other proceeding by any Governmental Body or other person or entity pending or threatened in writing, other than publicly disclosed, that challenges, or has the effect of interfering with, the validity or legality of the transactions contemplated in this Agreement.

 

ARTICLE VI
MISCELLANEOUS

 

Section 6.1    Termination. This Agreement may be terminated at any time prior to the Closing Date:

 

(a)    by the mutual written agreement of the Seller and the Buyer;

 

(b)    by the Buyer if any of the conditions set forth in Section 5.1 hereof shall have become incapable of fulfillment, by reason other than the Buyer's negligent or willful failure to perform or observe in any material respect any of the covenants or agreements set forth herein to be performed or observed by the Buyer, and such conditions shall not have been waived by the Seller;

 

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(c)    by the Seller if any of the conditions set forth in Section 5.2 hereof shall have become incapable of fulfillment, by reason other than the Seller's negligent or willful failure to perform or observe in any material respect any of the covenants or agreements set forth herein to be performed or observed by the Seller, and such conditions shall not have been waived by the Buyer; or

 

Section 6.2    No further Liability. Subject to Section 6.4, if this Agreement is terminated in accordance with Section 6.1 hereof, (i) neither Party shall have any further obligation or liability under this Agreement, other than by reason of a breach or default by a Party hereunder; and (ii) any monies, instruments or documents of any Party held in escrow or transferred to the other Party in connection with the transactions contemplated herein with respect to which the Closing shall not have occurred shall be immediately returned to such Party. For the avoidance of doubt, any such termination shall not have any effect whatsoever on any transactions contemplated herein with respect to which the Closing has occurred.

 

Section 6.3    Indemnification. Each Party shall indemnify, defend and hold harmless the other Party, its managers, directors, officers, members, partners, shareholders, employees, attorneys, accountants, agents and representatives and their successors and assigns from and against all liabilities, losses, damages or expenses (including, without limitation, reasonable attorney's fees and disbursements) based upon or arising out of (i) any inaccuracy or breach of any representation or warranty of such indemnifying Party herein, and (ii) any breach of any covenant or agreement of such indemnifying Party herein.

 

Section 6.4    Survival. The representations, warranties, covenants and agreements of each of the Parties under this Agreement shall survive the Closing. Furthermore, Section 6.2 and Section 6.3 hereof shall survive the termination of this Agreement.

 

Section 6.5    Expenses. Each of the Parties agrees to pay its own expenses incident to this Agreement and the performance of its obligations hereunder, except as provided in Section 6.3.

 

Section 6.6    Assignment. This Agreement shall be binding on and inure to the benefit of the Parties hereto and their respective successors and permitted assigns, provided, however, that a party may not assign this Agreement without the prior written consent of the other party.

 

Section 6.7    Notices. Any notice, request, instruction or other document to be given hereunder by any Party to the other shall be in writing and delivered by hand or by an courier service or shall be sent by facsimile or electronic mail to the address for such Party set forth below:

 

If to the Buyer:

Top Ships Inc.
1 Vas. Sofias-and Meg Alexandrou Str
15124 Maroussi, Greece
Attention: Alexandros Tsirikos
Facsimile: +30210 8056441
Email: atsirikos@topships.org

 

If to the Seller:

Zizzy Charter Co.
Kanari 11
10676 Athens, Greece
Facsimile: +302108128320
Email: louka@loukapartners.com

   
   
   

With a copy (which shall not
constitute notice) to:

Watson Farley & Williams LLP
250 West 55th Street - 31st Floor

New York, New York 10019

Attention: Will Vogel

Email: WVogel@wfw.com

 

6

 

or to such other place and with such other copies as either Party may designate as to itself by written notice to the other. All such notices, requests, instructions or other documents shall be deemed to have been delivered (i) in the case of personal delivery or delivery by courier, on the date of such delivery, (ii) in the case of delivery by facsimile transmission or electronic mail, when receipt is acknowledged and (iii) in the case of mailing, on the third business day after the posting thereof. Whenever any notice is required to be given by law or this Agreement, a written waiver thereof signed by the Party entitled to such notice, whether before or after the time stated at which such notice is required to be given, shall be deemed equivalent to the giving of such notice.

 

Section 6.8      Entire Agreement; Amendments and Waivers. This Agreement constitutes the entire agreement between the Parties pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the Parties. No supplement, modification, amendment or waiver of this Agreement shall be binding unless executed in writing by each Party to the Agreement. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar) nor shall such waiver constitute a continuing waiver unless otherwise expressly provided.

 

Section 6.9      Headings. Headings contained in this Agreement are inserted only as a matter of convenience and in no way define, limit or extend the scope or intent of this Agreement or any provision hereof.

 

Section 6.10    Further Assurances. From and after the Closing, upon the request of a Party, the other Party will execute and deliver such instruments, documents or other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement.

 

Section 6.11    Choice of Law. This Agreement shall be construed and interpreted, and the rights of the Parties determined, in accordance with the laws of the State of New York, without regard to principles of conflicts of law.

 

Section 6.12    Jurisdiction. Each of the Seller and the Buyer (i) irrevocably submits to the co-exclusive jurisdiction of the United States District Court sitting in the Southern District of New York and the courts of the State of New York located in New York County for the purposes of any suit, action or proceeding arising out of or relating to this Agreement and (ii) waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceedings in improper.  Each of the Seller and the Buyer consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such Party at the address set forth in Section 6.7 and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing in this Section 6.12 shall affect or limit any right to serve process in any other manner permitted by law.

 

Section 6.13    WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREIN.

 

Section 6.14    Remedies. In addition to any remedies either Party may have in law, each Party shall be entitled to apply to any court of competent jurisdiction (without posting bond or other security) to enjoin any actual or threatened breach or default under this Agreement and shall also be entitled to seek specific performance of this Agreement. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to any Party at law or in equity or otherwise.

 

Section 6.15    Severability of Provisions. 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.

 

Section 6.16    No Third Party Beneficiary Rights. No provisions of this Agreement are intended, nor will be interpreted, to provide or create any third party beneficiary rights or other rights of any kind in any client, customer, affiliate, stockholder, member, or partner of any Party hereto or any other person or entity unless specifically provided otherwise herein, and, except as so provided, all provisions hereof will be personal solely between the Parties hereto.

 

Section 6.17    Counterparts. This Agreement may be executed in two or more counterparts, and all such counterparts shall be deemed an original, shall be construed together and shall constitute one and the same instrument. Facsimile or portable document format (PDF) signatures shall be treated as original signatures for all purposes hereunder.

 

(Signature Page Follows)

 

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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first written above.

 

 

BUYER:

   
 

TOP SHIPS INC.

   
 

By:

/s/ Alexandros Tsirikos

 

Name:

Alexandros Tsirikos

 

Title:

Director

     
     
     
 

SELLER:

   
 

ZIZZY CHARTER CO.

     
 

By:

/s/ Pinelopi Athanasia Platsouka

 

Name:

Pinelopi Athanasia Platsouka

 

Title:

Director

     
     

 

 

(Signature Page to Sale and Purchase Agreement)

 

 

SCHEDULE 1

 

1.         Shipbuilding Contracts with Hyundai Heavy Industries by and among the Companies for the construction of the Vessels; and

 

2.         Time charter parties, Julius Caesar Inc. and Legio X Inc. and Trafigura Maritime Logistics Pte Ltd, Singapore.

 

 

 

 

 

 

 

 

Exhibit 4.26

 

 

 

Dated      23 November      2021

 

 

 

 

TOP SHIPS INC.

as Guarantor

 

and

 

SEA 268 LEASING CO. LIMITED

as Owner

 

 

 

 

 

 

 

GUARANTEE

 

relating to
a Bareboat Charter of the vessel m.v. JULIUS CAESAR
dated       23 November       2021

 

 

 

 

 

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Index

 

   

Clause

Page

 
     

1

Interpretation

1

2

Guarantee

2

3

Liability as Principal and Independent Debtor

3

4

Expenses

3

5

Adjustment of Transactions

3

6

Payments

4

7

Interest

4

8

Subordination

4

9

Enforcement

5

10

Representations and Warranties

5

11

Undertakings

8

12

Judgments and Currency Indemnity

14

13

Supplemental

15

14

Assignment

17

15

Notices

17

16

Invalidity of Bareboat Charter

18

17

Governing Law and Enforcement

18

     

Schedules

   
     

Schedule 1 Form of compliance Certificate

20
     

Execution

   
     

Execution Page

 

21

 

 

 

THIS GUARANTEE is made on       23 November       2021

 

PARTIES

 

 

(1)

TOP SHIPS INC., a corporation incorporated under the laws of the Marshall Islands whose registered address is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands, MH96960 (the "Guarantor")

 

 

(2)

SEA 268 LEASING CO. LIMITED, a company incorporated under the laws of Hong Kong whose registered office is at 27/F, Three Exchange Square, 8 Connaught Place, Central, Hong Kong (the "Owner" which expression includes its successors and assigns)

 

BACKGROUND

 

 

(A)

By a bareboat charter dated      23 November      2021 (the "Bareboat Charter") and made between (i) the Owner, as owner and (ii) Julius Caesar Inc., a corporation incorporated under the laws of the Marshall Islands whose registered address is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands, MH96960, as charterer (the "Charterer"), the Owner has agreed to bareboat charter one (1) very large crude oil carrier to be named m.v. "Julius Caesar" and to be flagged in the Marshall Islands with hull no. 3213 (the "Vessel") to the Charterer pursuant to the terms and conditions contained therein.

     
 

(B)

The Guarantor is the shareholder of the Charterer and holds all of the issued and outstanding shares in the Charterer.

     
 

(C)

The execution and delivery to the Owner of this Guarantee is one of the conditions to the chartering of the Vessel under the Bareboat Charter.

     
 

(D)

This Guarantee is the Guarantee referred to in the Bareboat Charter.

 

OPERATIVE PROVISIONS

 

 

1

INTERPRETATION

     
 

1.1

Defined expressions

     
    Words and expressions defined in the Bareboat Charter shall have the same meanings when used in this Guarantee unless the context otherwise requires.

 

 

1.2

Construction of certain terms

     
    In this Guarantee:
     
    "bankruptcy" includes a liquidation, receivership or administration and any form of suspension of payments, arrangement with creditors or reorganisation under any corporate or insolvency law of any country.
     
    "Compliance Certificate" means a certificate in the form set out in Schedule 1 or in any other form approved by the Owner.
     
    "control" over a particular company means the power (whether by way of ownership of shares, proxy, contract, agency or otherwise) to:

 

 

 

 

(a)

cast, or control the casting of, more than 51 per cent, of the maximum number of votes that might be cast at a general meeting of such company;

     
 

(b)

appoint or remove all, or the majority, of the directors or other equivalent officers of such company; or

     
 

(c)

give directions with respect to the operating and financial policies of such company with which the directors or other equivalent officers of such company are obliged to comply.

     
    "Group" means the Guarantor and its subsidiaries from time to time.
     
    "Party" means a party to this Guarantee.
     
    "Relevant Person" means each "Relevant Person" as defined in the Bareboat Charter.
     
 

2

GUARANTEE

     
 

2.1

Guarantee and indemnity

     
    The Guarantor unconditionally and irrevocably:
     
 

(a)

guarantees the due payment of all amounts payable by each other Relevant Person under or in connection to each Leasing Document to which such Relevant Person is a party;

     
 

(b)

undertakes to pay to the Owner on the Owner's demand any such amount which is not paid by that Relevant Person when due and payable under or in connection to that Leasing Document;

     
 

(c)

guarantees the punctual performance by that Relevant Person of all that Relevant Person's obligations under or in connection with that Leasing Document; and

     
 

(d)

fully indemnifies the Owner on its demand in respect of all claims, expenses, liabilities and losses which are made or brought against or incurred by the Owner as a result of or in connection with any obligation or liability guaranteed by the Guarantor being or becoming unenforceable, invalid, void or illegal; and the amount recoverable under this indemnity shall be equal to the amount which the Owner would otherwise have been entitled to recover.

     
 

2.2

No limit on number of demands

     
    The Owner may serve more than one demand under Clause 2.1.
     
 

2.3

Guarantee of whole amount

     
    This Guarantee shall be construed and take effect as a guarantee of all amounts due to the Owner under the Leasing Documents to which each other Relevant Person is a party.
     
 

3

LIABILITY AS PRINCIPAL AND INDEPENDENT DEBTOR

 
 

3.1

Principal and independent debtor

     
    The Guarantor shall be liable under this Guarantee as a principal and independent debtor and accordingly it shall not have, as regards this Guarantee, any of the rights or defences of a surety.

 

2

 

 

3.2

Waiver of rights and defences

     
    Without limiting the generality of Clause 3.1, the Guarantor shall neither be discharged by, nor have any claim against the Owner in respect of:
     
 

(a)

any amendment or supplement being made to the Bareboat Charter or any other Leasing Document;

     
 

(b)

any arrangement or concession (including a rescheduling or acceptance of partial payments) relating to, or affecting, the Bareboat Charter or any other Leasing Document;

     
 

(c)

any release or loss (even though negligent) of any right or Security Interest created by any Leasing Document;

     
 

(d)

any failure (even though negligent) promptly or properly to exercise or enforce any such right or Security Interest, including a failure to realise for its full market value an asset covered by such a Security Interest; or

     
 

(e)

the Bareboat Charter or any other Leasing Document now being or later becoming void, unenforceable, illegal or invalid or otherwise defective for any reason, including a neglect to register it.

     
 

4

EXPENSES

     
 

4.1

Costs of preservation of rights, enforcement etc

     
    The Guarantor shall pay to the Owner on its demand the amount of all expenses (including, without limitation, legal fees) incurred by the Owner in connection with the enforcement of, or the preservation of any rights under this Guarantee or any other Leasing Document, including any advice, claim or proceedings relating to such matters.
     
 

4.2

Fees and expenses payable under Leasing Documents

     
    Clause 4.1 is without prejudice to the Guarantor's liabilities in respect of any other Relevant Person's obligations under any Leasing Document to which it is a party.
     
 

5

ADJUSTMENT OF TRANSACTIONS

     
 

5.1

Reinstatement of obligation to pay

     
    The Guarantor shall pay to the Owner on its demand any amount which the Owner is required, or agrees, to pay pursuant to any claim by, or settlement with, a trustee in bankruptcy of any other Relevant Person on the ground that any Leasing Document to which that Relevant Person is a party, or a payment by that Relevant Person, was invalid or unenforceable or on any similar ground.
     
 

6

PAYMENTS

     
 

6.1

Method of payments

     
    Any amount due under this Guarantee shall be paid:
     
 

(a)

in immediately available funds;

 

3

 

 

(b)

to such account as the Owner may from time to time notify to the Guarantor;

     
 

(c)

without any form of set‑off, cross‑claim or condition; and

     
 

(d)

free and clear of any tax deduction or withholding for or on account of any tax payable under any law of relevant jurisdictions except a tax deduction which the Guarantor is required by law to make.

     
 

6.2

Grossing-up for taxes

     
    If the Guarantor is required by law to make a tax deduction, the amount due to the Owner shall be increased by the amount necessary to ensure that the Owner receives and retains a net amount which, after the tax deduction, is equal to the full amount that it would otherwise have received.
     
 

6.3

Indemnity and evidence of payment of taxes

     
    The Guarantor shall fully indemnity the Owner on the Owner's demand in respect of all claims, expenses, liabilities and losses incurred by the Owner by reason of any failure of the Guarantor to make any tax deduction or by reason of any increased payment not being made on the due date for such payment in accordance with Clause 6.2. Within 30 days after making a tax deduction, that Guarantor shall deliver to the Owner any receipts, certificates or other documentary evidence satisfactory to the Owner that the tax had been paid to the appropriate taxation authority.
     
 

7

INTEREST

     
 

7.1

Accrual of interest

     
    Any amount due under this Guarantee shall carry interest after the date on which the Owner demands payment of it until it is actually paid, unless interest on that same amount also accrues under the Bareboat Charter.
     
 

7.2

Calculation of interest

     
    Interest under this Guarantee shall be calculated and accrue (as well after as before judgment) at the rate described in Clause 37.6 of the Bareboat Charter and otherwise in accordance with the terms thereof.
     
 

8

SUBORDINATION

     
 

8.1

Subordination of rights of Guarantor

     
    All rights which the Guarantor at any time has (whether in respect of this Guarantee or any other transaction) against each other Relevant Person or its assets shall be fully subordinated to the rights of the Owner under the Leasing Documents (or any of them), and in particular, the Guarantor shall not:
     
 

(a)

claim, or in a bankruptcy of that Relevant Person prove for, any amount payable to the Guarantor by that Relevant Person, whether in respect of this Guarantee or any other transaction;

     
 

(b)

take or enforce any Security Interest for any such amount;

 

4

 

 

(c)

claim to set-off any such amount against any amount payable by the Guarantor to that Relevant Person; or

     
 

(d)

claim any subrogation or other right in respect of any Leasing Document or any sum received or recovered by the Owner under such Leasing Document.

     
 

9

ENFORCEMENT

     
 

9.1

No requirement to commence proceedings against other Relevant Person

     
    The Owner will not need to commence any proceedings under, or enforce any Security Interest created by, the Bareboat Charter or any other Leasing Document before claiming or commencing proceedings under this Guarantee.
     
 

9.2

Conclusive evidence of certain matters

     
    However, as against the Guarantor:
     
 

(a)

any final and unappealable judgment or order of a court in England or any Relevant Jurisdiction or award of an arbitration tribunal in London in connection with the Bareboat Charter or any other Leasing Document; and

     
 

(b)

any statement or admission of any other Relevant Person in connection with the Bareboat Charter or any other Leasing Document,

     
    shall be binding and conclusive as to all matters of fact and law to which it relates.
     
 

10

REPRESENTATIONS AND WARRANTIES

     
 

10.1

General

     
    The Guarantor represents and warrants to the Owner and the Other Owner as of the date of this Guarantee, and on each day henceforth until the last day of the Security Period as follows.
     
 

10.2

Status

     
 

(a)

The Guarantor is duly incorporated and validly existing and in good standing under the laws of the Marshall Islands.

     
 

(b)

The Guarantor is not a FATCA foreign financial institution ("FFI") or a US Tax Obligor.

     
 

10.3

Corporate power

     
    The Guarantor has the corporate capacity, and has taken all corporate action and obtained all consents necessary for it:
     
 

(a)

to execute this Guarantee or any other Leasing Document to which it is a party; and

     
 

(b)

to make all the payments contemplated by, and to comply with, this Guarantee or any other Leasing Document to which it is a party.

 

5

 

 

10.4

Consents in force

     
    All the capacities, actions and consents referred to in Clause 10.3 remain in full force and nothing has occurred which makes any of them liable to revocation.
     
 

10.5

No conflicts

     
    The execution by the Guarantor of the Leasing Documents to which it is a party and its compliance with this Guarantee will not involve or lead to a contravention of:
     
 

(a)

any law or regulation applicable to it; or

     
 

(b)

the constitutional documents of the Guarantor; or

     
 

(c)

any contractual or other obligation or restriction which is binding on the Guarantor or any of its assets.

 

 

10.6

Legal, valid and binding obligations

     
    This Guarantee and the Leasing Document to which it is a party do now or will upon execution and delivery constitute the Guarantor's legal, valid and binding obligations enforceable against it in accordance with its terms and any relevant insolvency laws affecting creditors' rights generally.

 

 

10.7

Governing law

     
    The choice of governing law as stated in this Guarantee and the agreement by the Guarantor to refer disputes to the relevant courts or tribunals as stated herein are valid and binding against the Guarantor.

 

 

10.8

Immunity

     
    Neither the Guarantor nor any of its assets are entitled to immunity on the grounds of sovereignty or otherwise from any legal action or proceeding (which shall include, without limitation, suit, attachment prior to judgment, execution or other enforcement).

 

 

10.9

Pari passu ranking

     
    The obligations of the Guarantor under this Guarantee, are the direct, general and unconditional obligations of the Guarantor and rank at least pari passu with all other present and future unsecured and unsubordinated creditors of the Guarantor save for any obligation which is mandatorily preferred by law and not by virtue of any contract.

 

 

10.10

Legal or administrative action

     
    No legal or administrative action involving the Guarantor has been commenced or taken which would have required notification to the Owner under Clause 11.8.

 

 

10.11

No insolvency

     
    The Guarantor is not insolvent or in liquidation or administration or subject to any other formal or informal insolvency procedure, and no receiver, administrative receiver, administrator, liquidator, trustee or analogous officer has been appointed in respect of the Guarantor or all or material part of their assets.

 

6

 

 

10.12

Tax obligor and place of business

     
    The Guarantor is not a US Tax Obligor, and has not established a place of business in the United Kingdom or the United States of America.
     
 

10.13

No withholding taxes

     
    All payments which the Guarantor is liable to make under the Leasing Documents to which it is a party may be made without deduction or withholding for or on account of any tax payable under any law of relevant jurisdictions.
     
 

10.14

Taxes paid

     
    The Guarantor has paid all taxes applicable to, or imposed on or in relation to it, its business or except for those being contested in good faith with adequate reserves.
     
 

10.15

No default

     
    No Termination Event or Potential Termination Event has occurred nor is continuing or might reasonably be expected to result from the entry into and performance of this Guarantee or any other Leasing Document.
     
 

10.16

Information

     
    Any factual information provided by the Guarantor (or on its behalf) to the Owner was true and accurate in all material respects as at the date it was provided or as the date at which such information was stated; all accounts (audited and unaudited) delivered under Clause 11.3 satisfied the requirements of Clause 11.4; and there has been no Material Adverse Effect on the Guarantor from its position disclosed in the latest of those accounts.
     
 

10.17

No litigation

     
    No legal or administrative action involving the Guarantor has been commenced or taken or, to the 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 Guarantor.
     
 

10.18

Sanctions

     
 

(a)

No Relevant Person, nor any of their respective directors, officers, or employees, is a Prohibited Person.

     
 

(b)

Each Relevant Person, and their respective directors, officers, and employees is in compliance with all Sanctions laws, and none of them have been or are currently being investigated on compliance with Sanctions, they have not received notice or are aware of any claim, action, suit or proceeding against any of them with respect to Sanctions and they have not taken any action to evade the application of Sanctions.

     
 

(c)

No Relevant Person is in breach of any Anti-Money Laundering Laws, Anti-Terrorism Financing Laws and/or Business Ethics Laws and, to the extent required by applicable law, has instituted and maintained systems, controls, policies and procedures designed to:

 

7

 

 

(i)

prevent and detect incidences of bribery and corruption, money laundering and terrorism financing; and

     
 

(ii)

promote and achieve compliance with Anti-Money Laundering Laws, Anti-Terrorism Financing Laws and/or Business Ethics Laws including, but not limited to, ensuring thorough and accurate books and records, and utilization of best efforts to ensure that Affiliates acting on behalf of a Relevant Person shall act in compliance with Anti-Money Laundering Laws, Anti-Terrorism Financing Laws and Business Ethics Laws.

 

 

10.19

Environmental Laws

     
    All Environmental Laws relating to the ownership, operation and management of the Vessel and the business of each Relevant Person (as now conducted and as reasonably anticipated to be conducted in the future) have been complied with.
     
 

10.20

Environmental Claim

     
    No Environmental Claim has been made or threatened against any Relevant Person or otherwise in connection with the Vessel which is either (i) in excess of US$5,000,000 or (ii) has or is reasonably likely to have a Material Adverse Effect.
     
 

10.21

Environmental Incident

     
    No Environmental Incident has occurred and no person has claimed that an Environmental Incident has occurred.
     
 

10.22

Ownership of the Charterer

     
    The Charterer is legally and beneficially and indirectly wholly owned and controlled by the Guarantor.
     
 

10.23

Status of the Guarantor

     
 

(a)

Save for permitted under the Bareboat Charter, the shares of the Guarantor are traded on the NASDAQ or Over the Counter (OTC); and

     
 

(b)

the Guarantor is an entity reporting with the U.S. Securities and Exchange Commission.

     
 

11

UNDERTAKINGS

     
 

11.1

General

     
    The Guarantor undertakes with the Owner to comply with the following provisions of this Clause 11 at all times during the Security Period, except as the Owner may otherwise permit.
     
 

11.2

Information provided to be accurate

     
    All financial and other information which is provided by or on behalf of the Guarantor under or in connection with the Leasing Documents will be true and not misleading and will not omit any material fact or consideration.
     
 

11.3

Provision of financial statements

     
    The Guarantor will send to the Owner:
     
 

(a)

as soon as possible, but in no event later than one hundred and fifty (150) days after the end of each financial year of the Charterers, the audited annual financial statement accounts of the Charterers for that financial year as referred to in the Guarantor's audited consolidated annual financial statement accounts of the Guarantor for that financial year to be delivered under paragraph (c);

 

8

 

 

(b)

as soon as possible, but in no event later than ninety (90) days after the end of each half-year, the unaudited semi-annual accounts of the Charterers for that half-year;

     
 

(c)

as soon as possible, but in no event later than one hundred and fifty (150) days after the end of each financial year of the Guarantor, the audited consolidated annual financial statement accounts of the Guarantor for that financial year; and

     
 

(d)

as soon as possible, but in no event later than ninety (90) days after the end of each half-year, the semi-annual consolidated unaudited accounts of the Guarantor for that half-year certified as to their correctness by at least one director of the Guarantor.

     
 

11.4

Form of financial statements

     
    All accounts (audited and unaudited) delivered under Clause 11.3 will:
     
 

(a)

be prepared in accordance with all applicable laws and generally accepted accounting principles in the United States consistently applied;

     
 

(b)

give a true and fair view of (in respect of the audited accounts) or fairly representing (in the case of the management accounts) the state of affairs of the Group at the date of those accounts and of their profit for the period to which those accounts relate;

     
 

(c)

fully disclose or provide for all significant liabilities of the Group; and

     
 

(d)

If not in the English language, be accompanied by an English translation duly certified as to its correctness.

     
 

11.5

Shareholder and creditor notices

     
    The Guarantor will send the Owner, upon its request, copies of all communications which are despatched to the Guarantor's shareholders or creditors or any class of them.
     
 

11.6

Consents

     
    The Guarantor will obtain and promptly renew and will procure that each other Relevant Person obtains and promptly renews or procure the obtainment or renewal of and provide copies of, from time to time, any necessary consents, approvals, authorisations, licenses or permits of any regulatory body or authority for the transactions contemplated under each Leasing Document to which it is a party.
     
 

11.7

Valid obligations

     
    The Guarantor will at its own cost, and will procure that each other Relevant Person will:
     
 

(a)

do all that such Relevant Person reasonably can to ensure that any Leasing Document to which such Relevant Person is a party validly creates the obligations and the Security Interests which such Relevant Person purports to create; and

 

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(b)

without limiting the generality of paragraph (a), promptly register, file, record or enrol any Leasing Document to which such Relevant Person is a party with any court or authority in all Relevant Jurisdictions, pay any stamp duty, registration or similar tax in all Relevant Jurisdictions in respect of any Leasing Document to which such Relevant Person is a party, give any notice or take any other step which, is or has become necessary or desirable for any such Leasing Document to be valid, enforceable or admissible in evidence or to ensure or protect the priority of any Security Interest which such Relevant Person creates.

     
 

11.8

Notification of legal or administrative action

     
    The Guarantor will provide or will procure that each other Relevant Person provides the Owner with details of any legal or administrative action involving such Relevant Person or the Vessel that is likely to have a Material Adverse Effect as soon as such action is instituted or it becomes apparent is likely to be instituted and is likely to have a Material Adverse Effect.
     
 

11.9

Notification of damage or default

     
    The Guarantor:
     
 

(a)

will, and will procure that each other Relevant Person will, notify the Owner immediately of the occurrence of any damage and/or alteration caused to the Vessel by any reason whatsoever which results, or may be expected to result, in repairs on the Vessel which exceed $5,000,000; and

     
 

(b)

will, and will procure that each other Relevant Person will, notify the Owner immediately of the occurrence of any Termination Event,

     
    and will keep the Owner fully up-to-date with all developments and the Guarantor will, if so requested by the Owner, provide any such certificate signed by its authorised signatory, confirming that there exists no Potential Termination Event or Termination Event.
     
 

11.10

Additional information

     
    The Guarantor will, and will procure that each other Relevant Person will, as soon as practicable after receiving the request, provide the Owner with any additional financial or other information relating:
     
 

(a)

to themselves and/or the Vessel (including, but not limited to the condition, location and employment status of the Vessel); or

     
 

(b)

to any other matter relevant to, or to any provision of any Leasing Document to which it is a party,

     
    which may be reasonably requested by the Owner (or their financiers (if any)) at any time, provided that, in the case of information on the employment status of the Vessel, such information shall be in form and substance satisfactory to the Owner and shall be provided by the Charterers to the Owner at least once every six-monthly period during each calendar year.
     
 

11.11

Compliance with operational laws

     
    The Guarantor shall procure compliance, and will procure that each other Relevant Person will comply or procure compliance, with all laws or regulations relating to the Vessel and its construction, ownership, employment, operation, management and registration, including the ISM Code, the ISPS Code, all Environmental Laws and the laws of the Vessel's registry.

 

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11.12

Compliance with other laws

     
 

(a)

The Guarantor shall comply, and shall procure that each other Relevant Person will, comply with all applicable laws and regulations in respect of Sanctions, and in particular, the Charterers shall effect and maintain a sanctions compliance policy to ensure compliance with all such laws and regulations implemented from time to time.

     
 

(b)

The Guarantor:

 

 

(i)

shall, and shall procure that each other Relevant Person will, promptly notify the Owner of any non-compliance by any Relevant Person or their respective officers, directors, or employees with all laws and regulations relating to Sanctions, (including but not limited to notifying the Owner in writing immediately upon being aware that any Relevant Person or their respective shareholders, directors, officers or employees is a Prohibited Person or has otherwise become a target of Sanctions) as well as provide all information in relation to its business and operations which may be relevant for the purposes of ascertaining whether any of the aforesaid parties are in compliance with such laws.

     
 

(ii)

shall, and will procure that each other Relevant Person will, promptly notify the Owner of any non-compliance by any Relevant Person or their respective officers, directors, or employees with all laws and regulations relating to Anti-Money Laundering Laws, Anti-Terrorism Financing Laws and/or Business Ethics Laws as well as provide all information (once available) in relation to its business and operations which may be relevant for the purposes of ascertaining whether any of the aforesaid parties are in compliance with such laws.

 

 

(c)

The Guarantor shall procure that the Vessel shall not be employed, operated or managed in any manner which (i) is contrary to any Sanctions and in particular, the Vessel is not used by or to benefit any party which is a target of Sanctions or trade to any area or country where trading the Vessel to such area or country would constitute a breach of any Sanctions or published boycotts imposed by any of the United Nations, the European Union, the United States of America, the United Kingdom or the People's Republic of China (provided that operation or use of the Vessel by the Trafigura Charterer pursuant to the Trafigura Charter shall not in any case be deemed to be in breach or contrary to any published boycotts or sanctions imposed by the People's Republic of China) or (ii) would trigger the operation of any sanctions limitation or exclusion clause in any insurance documentation.

     
 

(d)

The Guarantor shall, and shall procure that each other Relevant Person and their respective officers, directors and employees, will:

 

 

(i)

conduct its business in compliance with all Anti-Money Laundering Laws, Anti-Terrorism Financing Laws and/or Business Ethics Laws;

     
 

(ii)

maintain systems, controls, policies and procedures designed to promote and achieve ongoing compliance with Anti-Money Laundering Laws, Anti-Terrorism Financing Laws and/or Business Ethics Laws; and

     
 

(iii)

in respect of the Charterers, not use, or permit or authorize any person to directly or indirectly use, the Opening Capital Balance for any purpose that would breach any Anti-Money Laundering Laws, Anti-Terrorism Financing Laws and/or Business Ethics Laws;

     
 

(iv)

not lend, invest, contribute or otherwise make available the Opening Capital Balance to or for any other person in a manner which would result in a violation of Anti-Money Laundering Laws, Anti-Terrorism Financing Laws and/or Business Ethics Laws.

 

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11.13

No Security Interests

     
    The Guarantor shall not, and shall procure that each other Relevant Person will not create, assume or permit to exist any Security Interest (other than any Permitted Security Interest) of any kind upon any Leasing Document to which such Relevant Person is a party, and if applicable, the Vessel.
     
 

11.14

Financial covenants

     
 

(a)

The Guarantor shall ensure that, at any time during the Security Period, the Guarantor's Leverage Ratio shall not be more than seventy five per cent (75%).

     
 

(b)

The Guarantor shall ensure that all time during the Security Period the Liquid Funds shall not be less than $500,000 multiplied by the number of the Fleet Vessels which are fully owned by the Guarantor ("100% Owned Vessels") or leased or operated (including those under a capital lease or operating lease with a purchase option at the end of the relevant charter period) by the Guarantor and/or any member of the Group.

     
    In this Guarantee:
     
   

"Leverage Ratio" means, at any date, the ratio (expressed as a percentage) of:

 

 

 

(a)

the Total Net Debt; and

     
 

(b)

the aggregate Market Value of all Fleet Vessels adjusted, in each case, to reflect the percentage of ownership by the Guarantor of each such Fleet Vessel.

 

    "Liquid Funds" means, at any time, cash at bank and credited to an account in the name of any member of the Group and to which the Guarantor is solely (or together with other members of the Group) beneficially entitled and for so long as such cash has not been blocked due to the existence and/or enforcement of any Security Interest held by any bank or any other third party or otherwise unless such cash is held in such account charged, as the case may be, by way of a floating charge for the purposes of meeting minimum liquidity requirements in the context of any financing arrangement of the Group.
     
    "Market Value" means, in relation to any Fleet Vessel at any relevant time (the "Market Value Test Date")

 

 

(a)

subject to sub-paragraph (b) below, the arithmetic mean of the valuations shown by two (2) valuation reports prepared:

 

 

(i)

on a date no later than thirty (30) days after the Market Value Test Date;

     
 

(ii)

with or without physical inspection of that Vessel;

     
 

(iii)

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,

 

12

 

  and such valuation shall be prepared by Approved Valuers one nominated by the Owners and one nominated by the Charterers.
     
 

(b)

if there is a discrepancy of five per cent. (5%) or more between the market valuations shown on the two valuation reports obtained pursuant to the above paragraph (using the lower valuation figure as the denominator), the arithmetic mean of the valuations shown by three (3) valuation reports each prepared on the same terms and conditions as set out under paragraph (b) above (except that the third valuation report additionally required under this sub-paragraph (b) shall be prepared by an Approved Valuer nominated by the Owners).

 

    "Total Net Debt" means, at any date, the aggregate Financial Indebtedness of the Group as per US GAAP as at such date, adjusted to include a percentage of the Financial Indebtedness of any joint venture with a minimum holding of 50 per cent by any member of the Group which is equal to the percentage of the Guarantor's ownership in such joint venture, minus the aggregate amount of all cash balances standing on such date to the credit of a bank account of any member of the Group, adjusted to include a percentage of the cash balances of any entity holding any Fleet Vessel (other than the 100% Owned Vessels) which is equal to the percentage of the Guarantor's and/or such member's ownership in that entity, but excluding any cash held by any bank or any other third party or otherwise which is subject to the existence and/or enforcement any Security Interest unless such cash is held in such account charged, as the case may be, by way of a floating charge for the purposes of meeting minimum liquidity requirements in the context of any financing arrangement of the Group.
     
    "US GAAP" means the generally accepted accounting principles in the United States.
     
 

11.15

Compliance Certificate

     
    The Guarantor shall supply to the Owner, a Compliance Certificate setting out (in reasonable detail) computations as to compliance with Clause 11.14 on each testing date, being 31st December in each calendar year; and each Compliance Certificate shall be signed by the Co-Chief Financial Officer of the Guarantor.
     
 

11.16

Negative Pledge

     
    The Guarantor shall:
     
 

(a)

procure that the Charterers will not create or permit to arise any Security Interest over any of its assets present or future except for the Permitted Security Interests.; and

     
 

(b)

procure that its liabilities under this Guarantee will rank at least pari passu with all its other present and future unsecured liabilities, except for liabilities which are mandatorily preferred by law.

     
 

11.17

No disposal of assets, change of business

     
    The Guarantor will not, and shall (at all times) procure that no other Relevant Person shall:

 

13

 

 

(a)

transfer, lease or otherwise dispose of all or a substantial part of their respective assets (or any of their assets, in the case of the Charterer), whether by one transaction or a number of transactions, whether related or not except in the usual course of their respective trading operations; or

     
 

(b)

make any substantial change (or any change, in the case of the Charterer) to the nature of their respective business or corporate structure from that existing as at the date of this Guarantee.

     
 

11.18

No merger etc

     
    The Guarantor shall not enter into any form of merger, sub-division, amalgamation, demerger, reorganization, corporate reconstruction or change of ownership, or change of voting control unless the Guarantor remains as the surviving entity after such merger, sub-division, amalgamation, demerger, reorganization, corporate reconstruction or change of ownership, or change of voting control and Clause 11.14 has been complied with.
     
 

11.19

FATCA

     
    The Guarantor shall not, and shall procure that no Relevant Person will become a FATCA FFI or US Tax Obligor.
     
 

11.20

No payment of dividend

     
    The Guarantor shall not declare, make or pay any dividend or other distribution (or interest on any unpaid dividend or other distribution) on or in respect of its share capital (whether in cash or in kind) upon the occurrence of a Termination Event described in Clause 49 of the Bareboat Charter.
     
 

11.21

Notification of Financial Indebtedness

     
    The Guarantor shall promptly notify the Owner if the Guarantor agrees to provide any new financial covenants to a creditor (or to amend existing ones such that they materially differ from the financial covenants under Clause 11.14 (Financial Covenants) of this Guarantee, placing such creditor in a position which is comparatively more favourable in terms of the financial covenants than the position of the Owner) under the agreements entered into or to be entered into in connection with any Financial Indebtedness owed by the Guarantor or Group member to such creditor and agrees that it will promptly enter into such necessary documentation as may be required to amend and supplement this Guarantee and any applicable Leasing Document so as to reflect and incorporate such more favourable financial covenants into this Guarantee and any applicable Leasing Document.
     
 

12

JUDGMENTS AND CURRENCY INDEMNITY

     
 

12.1

Judgments relating to Bareboat Charter and other Leasing Documents

     
    This Guarantee shall cover any amount payable by any other Relevant Person under or in connection with any judgment or award relating to the Bareboat Charter and any other Leasing Document.
     
 

12.2

Currency indemnity

     
    If any sum due from the Guarantor to the Owner under this Guarantee or under any order, judgment or award relating to this Guarantee has to be converted from the currency in which this Guarantee provided for the sum to be paid (the "Contractual Currency") into another currency (the "Payment Currency") for the purpose of:

 

14

 

 

(a)

making or lodging any claim or proof against the Guarantor, whether in its liquidation, any arrangement involving it or otherwise; or

     
 

(b)

obtaining an order, judgment or award from any court or other tribunal; or

     
 

(c)

enforcing any such order, judgment or award;

     
    the Guarantor shall indemnify the Owner against the loss arising when the amount of the payment actually received by the Owner is converted at the available rate of exchange into the Contractual Currency.
     
    In this Clause 12.2, the "available rate of exchange" means the rate at which the Owners are able at the opening of business (Shanghai time) on the Business Day after it receives the sum concerned to purchase the Contractual Currency with the Payment Currency.
     
 

13

SUPPLEMENTAL

     
 

13.1

Continuing guarantee

     
    This Guarantee shall remain in force as a continuing security interest at all times during the Security Period.
     
 

13.2

Rights cumulative, non-exclusive

     
    The Owner's rights under and in connection with this Guarantee are cumulative, may be exercised as often as appears expedient and shall not be taken to exclude or limit any right or remedy conferred by law.
     
 

13.3

No impairment of rights under Guarantee

     
    If the Owner omits to exercise, delays in exercising or invalidly exercises any of its rights under this Guarantee, that shall not impair that or any other right of the Owner under this Guarantee.
     
 

13.4

Severability of provisions

     
    If any provision of this Guarantee is or subsequently becomes void, illegal, unenforceable or otherwise invalid, that shall not affect the validity, legality or enforceability of its other provisions.
     
 

13.5

Guarantee not affected by other Security Interests

     
    This Guarantee shall not impair, nor be impaired by, any other guarantee or any right of set-off or netting or to combine accounts which the Owner may now or later hold in connection with the Bareboat Charter or any other Leasing Document.
     
 

13.6

Guarantor bound by Bareboat Charter and other Leasing Documents

     
    The Guarantor agrees with the Owner to be bound by all provisions of the Bareboat Charter and any other Leasing Document in the same way as if those provisions had been set out (with any necessary modifications) in this Guarantee.

 

15

 

 

13.7

Applicability of provisions of Guarantee to other rights

     
    Clauses 3 and 16 shall also apply to any right of set-off or netting or to combine accounts which the Guarantor creates by an agreement entered into at the time of this Guarantee or at any later time (notwithstanding that the agreement does not include provisions similar to Clauses 3 and 16), being an agreement referring to this Guarantee.
     
 

13.8

Third party rights

     
    A person who is not a party to this Guarantee has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce or to enjoy the benefit of any term of this Guarantee.
     
 

13.9

Counterpart

     
    This Guarantee may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of this Guarantee.
     
 

13.10

FATCA Information

     
 

(a)

Subject to paragraph (c) below, each Party shall, on the date of the Bareboat Charter, and thereafter within ten (10) Business Days of a reasonable request by the other Party:

 

 

(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 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 "pass thru percentage" or other information required under FATCA or other official guidance including intergovernmental agreements) as the requesting party reasonably requests for the purpose of the requesting party's compliance with FATCA.

 

 

(b)

If a Party confirms to any other Party that it is a FATCA Exempt Party or provides an IRS Form W-8 or W-9 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, or that the said form provided has ceased to be correct or valid, that party shall so notify all other Relevant Parties or provide the relevant revised form, as applicable, reasonably promptly.

     
 

(c)

Nothing in this Clause shall oblige a 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, however, that nothing in this paragraph shall excuse a 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 Party fails to confirm its status or to supply forms, documentation or other information requested in accordance with the provisions of this Charter or the provided information is insufficient under FATCA, then:

 

16

 

 

(i)

if that party failed to confirm whether it is (and/or remains) a FATCA Exempt Party then such party shall be treated for the purposes of this Charter and the Leasing Documents as if it is a FATCA Non-Exempt Party; and

     
 

(ii)

if that party failed to confirm its applicable passthru percentage then such party shall be treated for the purposes of this Charter and the Leasing 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.
     
 

14

ASSIGNMENT

     
 

14.1

Assignment by Owner

     
    Clause 63 of the Bareboat Charter shall apply to this Guarantee as if they were expressly incorporated herein with any necessary modifications including the references to "the Charterers" therein shall be references to "the Guarantor" when applied herein and references to "the Leasing Document" and "this Charter" therein shall be references to "this Guarantee" when applied herein.
     
 

14.2

The Guarantor may not assign any of its rights or transfer any of its rights or obligations under this Guarantee.

     
 

15

NOTICES

 

 

15.1

Notices to Guarantor

     
    Any notice or demand to the Guarantor under or in connection with this Guarantee shall be given by letter or fax or mail at:
     
    TOP SHIPS INC.
     
    Attention: Alexandros Tsirikos
     
    Email: atsirikos@topships.org
    Tel: +30 210 8128180
    Fax: +30 210 8056441
     
    or to such other address which the Guarantor may notify to the Owner.

 

 

15.2

Validity of demands

     
    A demand under this Guarantee shall be valid notwithstanding that it is served:
     
 

(a)

on the date on which the amount to which it relates is payable by the Relevant Person under the Leasing Document to which it is a party;

     
 

(b)

at the same time as the service of a notice under Clause 44 of the Bareboat Charter;

    and a demand under this Guarantee shall (i) be in writing; (ii) be signed by a duly authorised officer of the Owner and delivered to the Guarantor pursuant to the provisions under this Guarantee; (iii) make reference to this Guarantee; (iv) specifically identify the Charterer or any other Relevant Person and the Guaranteed Obligations to be paid and/or performed (as the case may be); and (v) set forth payment instructions in respect of any amount or amounts payable to the Owner.
     

 

17

 

 

15.3

Notices to Owner

     
    Any notice to the Owner under or in connection with this Guarantee shall be sent to the same address and in the same manner as notices to the Owner under Clause 44 of the Bareboat Charter.
     
 

16

INVALIDITY OF BAREBOAT CHARTER

     
 

16.1

Invalidity of Bareboat Charter or other Leasing Documents

     
    In the event of:
     
 

(a)

the Bareboat Charter or any other Leasing Document now being or later becoming, with immediate or retrospective effect, void, illegal, unenforceable or otherwise invalid for any other reason whatsoever, whether of a similar kind or not; or

     
 

(b)

without limiting the scope of paragraph (a), a bankruptcy of the Relevant Person party thereto, the introduction of any law or any other matter resulting in that Relevant Person being discharged from liability under the Bareboat Charter or other Leasing Document, or the Bareboat Charter or other Leasing Document ceasing to operate (for example, by interest ceasing to accrue);

     
    this Guarantee shall cover any amount which would have been or become payable under or in connection with the Bareboat Charter or other Leasing Document if the Bareboat Charter or other Leasing Document had been and remained entirely valid, legal and enforceable, or that Party had not suffered bankruptcy, or any combination of such events or circumstances, as the case may be, and the Charterer had remained fully liable under it for liabilities whether invalidly incurred or validly incurred but subsequently retrospectively invalidated; and references in this Guarantee to amounts payable by that Party under or in connection with the Bareboat Charter or other Leasing Document shall include references to any amount which would have so been or become payable as aforesaid.
     
 

17

GOVERNING LAW AND ENFORCEMENT

     
 

17.1

Governing law

     
    This Guarantee and any non-contractual obligations arising out of or in connection with it are governed by English law.
     
 

17.2

Arbitration

     
 

(a)

Any dispute arising out of or in connection with this Guarantee (including a dispute regarding the existence, validity or termination of this Guarantee or any non-contractual obligation arising out of or in connection with this Guarantee) (a "Dispute") shall be referred to and finally resolved by arbitration in London in accordance with the Arbitration Act 1996 or any statutory modification or re-enactment thereof save to the extent necessary to give effect to the provisions of this Clause 17. The arbitration shall be conducted in accordance with the London Maritime Arbitrators Association ("LMAA") Terms current at the time when the arbitration proceedings are commenced.

 

18

 

 

(b)

The reference shall be to three arbitrators. A party wishing to refer a Dispute to arbitration shall appoint its arbitrator and send notice of such appointment in writing to the other party requiring the other party to appoint its own arbitrator within 14 calendar days of that notice and stating that it will appoint its arbitrator as sole arbitrator unless the other party appoints its own arbitrator and gives notice that it has done so within the 14 days specified. If the other party does not appoint its own arbitrator and give notice that it has done so within the 14 days specified, the party referring a Dispute to arbitration may, without the requirement of any further prior notice to the other party, appoint its arbitrator as sole arbitrator and shall advise the other party accordingly. The award of a sole arbitrator shall be binding on both parties as if he had been appointed by agreement. Nothing herein shall prevent the parties agreeing in writing to vary these provisions to provide for the appointment of a sole arbitrator.

     
 

(c)

Where the reference is to three arbitrators the procedure for making appointments shall be in accordance with the procedure for full arbitration stated above.

     
 

(d)

The language of the arbitration shall be English.

     
 

(e)

In cases where neither the claim nor any counterclaim exceeds the sum of US$100,000 (or such other sum as the Parties may agree) the arbitration shall be conducted in accordance with the LMAA Small Claims Procedure current at the time when the arbitration proceedings are commenced.

 

IN WITNESS WHEREOF this GUARANTEE has been executed as a DEED and delivered on the date stated at the beginning of this GUARANTEE.

 

 

 

 

 

19

 

SCHEDULE 1

FORM OF COMPLIANCE CERTIFICATE

 

To:

 

SEA 268 LEASING CO. LIMITED

 

From:

 

TOP SHIPS INC.

 

Date: _______________

 

Guarantee dated [] 2021 (the "Guarantee") in respect of a bareboat charter for m.v. "JULIUS CAESAR"

 

Dear Sirs

 

 

1

We refer to the Guarantee. This is a Compliance Certificate. Terms defined in the Guarantee have the same meaning when used in this Compliance Certificate unless given a difference meaning in this Compliance Certificate.

 

 

2

We confirm that, as at the date hereof, no Termination Event has occurred and is continuing which has not been waived or remedied at the date hereof or if that is not the case, specifying the same and the steps, if any, being taken to remedy the same.

 

 

3

We confirm that, at any time during the Security Period, Leverage Ratio was not be more than 75 per cent (75%).

 

 

4

We confirm that all time during the Security Period the Liquid Funds was not be less than the aggregate of $500,000 multiplied by the number of the Fleet Vessels which are fully owned by the Guarantor or leased or operated (including those under a capital lease or operating lease with a purchase option at the end of the relevant charter period) by the Guarantor and/or any member of the Group. .

 

Yours faithfully

 

Signed: ___________________________

 

Co-Chief Financial Officer of

 

TOP SHIPS INC.

 

 

20

 

EXECUTION PAGE

 

GUARANTOR    
     
EXECUTED AS A DEED )  
by TOP SHIPS INC. ) /s/ Alexandros Tsirikos
acting by Alexandros Tsirikos )  
being an attorney-in-fact ) Attorney-in-fact
  )  
in the presence of:  )  
  )  
Witness' signature:  ) /s/ Dimitra Karkaletsi
Witness' name:  ) Dimitra Karkaletsi 
Witness' address: )

274, Loef. Salaminas – Salamina
Greece

     
     
     
     
OWNER    
     
SIGNED, SEALED AND DELIVERED )  
by SEA 268 LEASING CO. LIMITED ) /s/ Lin Chung Fai Simon
acting by Lin Chung Fai Simon )  
being an attorney-in-fact ) Attorney-in-fact
  )  
in the presence of: )  
  )  
  )  
  )  
Witness' signature: ) /s/ Wong Ho Ching
Witness' name:  ) Wong Ho Ching   
Witness' address:  )

Suites 4610-4619, Jardine House,
1 Connaught Place, Hong Kong

 

21

Exhibit 4.27

 

exh426_01.jpg
 
 

 

 
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exh426_03.jpg
 
 
 
 
 
 
 
 
 
 

 

exh426_04.jpg
 
 

 

exh426_05.jpg
 
 
 
 

 

exh426_06.jpg
 
 

 

exh426_07.jpg
 

 

exh426_08.jpg
 
 

 

exh426_09.jpg
 
 

 

exh426_10.jpg
 
 

 

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exh426_12.jpg
 

 

exh426_13.jpg
 
 

 

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exh426_15.jpg
 
 

 

ADDITIONAL CLAUSES TO BARECON 2001 DATED ___23 November________ 2021

 

 

32

CHARTER PERIOD

 

 

32.1

The period of this Charter (the "Charter Period") shall, subject to the terms of this Charter, continue for a period of ninety six (96) months starting from the Commencement Date.

 

 

32.2

Notwithstanding the fact that the Charter Period shall commence on the Commencement Date, this Charter shall be:

 

 

(a)

in full force and effect; and

 

 

(b)

valid, binding and enforceable against the parties hereto,

 

with effect from the date hereof until the end of the Charter Period (subject to the terms of this Charter).

 

 

33

CANCELLATION

 

 

33.1

If:

 

 

(a)

the Vessel is not delivered by the Charterers as sellers to the Owners as buyers under the MOA by the Cancelling Date (or such later date as the parties to the MOA may agree); or

 

 

(b)

the MOA expires, is cancelled, terminated, rescinded or suspended or otherwise ceases to remain in full force and effect for any reason (in whole or in part),

 

 

33.2

then this Charter shall immediately terminate and be cancelled (without prejudice to Clause 53 (Indemnities) and without the need for either the Owners or the Charterers to take any action whatsoever), provided that the Owners shall be entitled to retain all fees and expenses paid by the Charterers pursuant to Clause 42 (Fees and Expenses) (and without prejudice to Clause 42 (Fees and Expenses) and any clause of the MOA, if such fees have not been paid, the Charterers shall forthwith pay such fees and expenses to the Owners in accordance with Clause 42 (Fees and Expenses) and such payment shall be irrevocable and unconditional and is acknowledged by the Charterers to be proportionate as to amount, having regard to the legitimate interest of the Owners, in protecting against the Owners' risk of the Charterers failing to perform its obligations under this Charter. For the avoidance of doubt, the termination of the Charter shall not prejudice the operation of any provision of any Leasing Document which is expressed to survive the termination or cancellation of this Charter).

 

 

34

DELIVERY AND CHARTER OF VESSEL

 

 

34.1

This Charter is part of a transaction involving the sale, purchase and charter back of the Vessel and constitutes one of the Leasing Documents.

 

 

34.2

The obligation of the Owners to charter the Vessel to the Charterers hereunder is subject to and conditional upon:

 

 

(a)

the delivery to and acceptance by the Charterers as buyers of the Vessel under the Contract and the delivery to and acceptance by the Owners as buyers of the Vessel under the MOA;

 

 

1

 

 

(b)

no Potential Termination Event or Termination Event having occurred which is continuing from the date of this Charter to the last day of the Charter Period (inclusive);

 

 

(c)

the representations and warranties contained in Clause 45 (Representations and Warranties) being true and correct on the date hereof and each day thereafter until and including the last date of the Charter Period;

 

 

(d)

the Delivery occurring on or before the Cancelling Date; and

 

 

(e)

the Owners having received from the Charterers:

 

 

(i)

on or before the date falling three (3) Business Days prior to the Prepositioning Date, the documents or evidence set out in Part A of Schedule 2 in form and substance satisfactory to them; and

 

 

(ii)

on the Commencement Date and prior to or simultaneously with the Owners executing a dated and timed copy of the protocol of delivery and acceptance evidencing delivery of the Vessel under the MOA and a dated and timed copy of the Acceptance Certificate, the documents or evidence set out in Part B of Schedule 2 in form and substance satisfactory to them,

 

and if any of the documents listed in Schedule 2 are not in the English language then, where required by the Owners, they shall be accompanied by a certified English translation.

 

 

34.3

The conditions precedent specified in paragraph (e) of Clause 34.2 are inserted for the sole benefit of the Owners and may be waived or deferred in whole or in part and with or without conditions by the Owners.

 

 

34.4

On (A) delivery to and acceptance by the Charterers as buyers of the Vessel from the Builder under the Contract; and (B) delivery to and acceptance by the Owners (in their capacity as buyers) of the Vessel from the Charterers (in their capacity as sellers) under the MOA, the Vessel shall be deemed to have been delivered to, and accepted without reservation by, the Charterers under this Charter and the Charterers shall become and be entitled to the possession and use of the Vessel on and subject to the terms and conditions of this Charter on the same day as the delivery date of the Vessel under the MOA.

 

 

34.5

On Delivery, as evidence of the commencement of the Charter Period, the Charterers shall sign and deliver to the Owners, the Acceptance Certificate. The Charterers shall be deemed to have accepted the Vessel under this Charter, and the commencement of the Charter Period having started, on Delivery even if, for whatever reason, the Acceptance Certificate is not signed and/or the Charterers do not take actual possession of the Vessel at that time.

 

 

34.6

The Charterers shall not be entitled for any reason whatsoever to refuse to accept delivery of the Vessel under this Charter once the Vessel has been delivered to and accepted by the Owners (in their capacity as buyers) from the Charterers (in their capacity as sellers) under the MOA, and the Owners shall not be liable for any losses, costs or expenses whatsoever or howsoever arising including without limitation, any loss of profit or any loss or otherwise:

 

 

(a)

resulting directly or indirectly from any defect or alleged defect in the Vessel (including but not limited to any deficiency in seaworthiness, merchantability, classification, condition, design, quality, operation, performance, capacity or fitness for use or the eligibility of the Vessel for any particular trade or operation) or any failure of the Vessel; or

 

2

 

 

(b)

arising from any delay in the commencement of the Charter Period or any failure of the Charter Period to commence.

 

 

34.7

The Owners shall not be obliged to deliver the Vessel to the Charterers with any bunkers and unused lubricating oils and hydraulic oils and greases in storage tanks and unopened drums of the Vessel except for such items which are already on the Vessel on Delivery. The Owners shall not be responsible for the fitness, quality or quantity of any such bunkers and unused lubricating oils and hydraulic oils and greases and the Charterers shall make no claim against Owners in respect of the same.

 

 

34.8

The Charterers shall procure receipt by the Owners of the conditions subsequent set out in Part C of Schedule 2 in a form and substance satisfactory to the Owners within the time periods permitted therein.

 

 

35

QUIET ENJOYMENT

 

 

35.1

Provided that no Potential Termination Event, Termination Event or Total Loss has occurred, the Owners hereby agree not to disturb or interfere with the Charterers' lawful use, possession and quiet enjoyment of the Vessel during the Charter Period.

 

 

36

CHARTERHIRE AND ADVANCE CHARTERHIRE

 

 

36.1

In consideration of the Owners agreeing to charter the Vessel to the Charterers under this Charter at the request of the Charterers, the Charterers hereby irrevocably and unconditionally agree to pay to the Owners the Charterhire, the Advance Charterhire and all other amounts payable under this Charter in accordance with the terms of this Charter.

 

 

36.2

The Charterers shall pay to the Owners on the Commencement Date, an amount which is equal to the difference between the Purchase Price and the Opening Capital Balance as of the Commencement Date (the "Advance Charterhire").

 

 

36.3

The Charterers shall be deemed to have paid the Advance Charterhire to the Owners on the Commencement Date by the Owners (as buyers under the MOA) setting off an amount equal to the Advance Charterhire against a corresponding amount of the Purchase Price payable by the Owners to the Charterers (as sellers) under the MOA.

 

 

36.4

The Advance Charterhire shall not bear interest and shall be non-refundable.

 

 

36.5

Following Delivery and commencing from the Commencement Date, the Charterers shall pay Charterhire in arrears in quarterly instalments on each Payment Date. Each instalment shall consist of:

 

 

(a)

a capital element of Charterhire (the "Fixed Charterhire") to be calculated in the following manner:

 

 

(i)

A = 1/32 x B

 

 

(ii)

A is the amount of the Fixed Charterhire due on each such Payment Date.

 

 

(iii)

B is the difference between the Opening Capital Balance and the Final Purchase Option Price.

 

3

 

 

(b)

a variable element of Charterhire (the "Variable Charterhire") which shall be calculated by applying the aggregate of the (i) applicable Interest Rate for the relevant Hire Period and (ii) the Margin to the Owners' Costs on the immediately preceding Payment Date (or, in the case of the First Payment Date only, on the Commencement Date) for the relevant Hire Period ending on the relevant Payment Date by reference to the actual number of days elapsed.

 

 

36.6

Charterhire shall be payable in arrears on the following dates (each a "Payment Date"):

 

 

(a)

first instalment of Charterhire shall be payable on the date falling three (3) months after the Commencement Date (the "First Payment Date"); and

 

 

(b)

each subsequent instalment of Charterhire (other than the last instalment of Charterhire) shall be payable quarterly thereafter, with the final instalment of Charterhire payable on the last day of the Charter Period,

 

such that there is a total of thirty two (32) Payment Dates during the Charter Period.

 

 

36.7

Payment of Charterhire on any Payment Date shall be made in same day available funds and received by the Owners by not later than 4.00 pm (Beijing time). Any payment of Charterhire which is due to be made on a Payment Date which is not also a Business Day shall be made on the previous Business Day instead.

 

 

36.8

Time of payment of the Charterhire and any other payments by the Charterers under this Charter shall be of the essence of this Charter.

 

 

36.9

All payments of the Charterhire and any other moneys payable hereunder shall be made in Dollars.

 

 

36.10

All payments of the Charterhire and any other moneys payable hereunder shall be payable by the Charterers to the Owners' designated bank account as the Owners may notify the Charterers in writing from time to time.

 

 

36.11

Payment of the Charterhire and any other amounts under this Charter shall be at the Charterers' risk until receipt by the Owners.

 

 

36.12

The Vessel shall not at any time be deemed off-hire and the Charterers' obligation to pay the Charterhire and any other amounts payable in this Charter (including but not limited to the Termination Sum) in Dollars shall be absolute and unconditional under any and all circumstances and shall not be affected by any circumstances of any nature whatsoever including but not limited to:

 

 

(a)

(except in the case of the Advance Charterhire) any set off, counterclaim, recoupment, defence, claim or other right which the Charterers may at any time have against the Owners or any other person for any reason whatsoever including, without limitation, any act, omission or breach on the part of the Owners under this Charter or any other agreement at any time existing between the Owners and the Charterers;

 

 

(b)

any change, extension, indulgence or other act or omission in respect of any indebtedness or obligation of the Charterers, or any sale, exchange, release or surrender of, or other dealing in, any security for any such indebtedness or obligation;

 

 

(c)

any title defect or encumbrance or any dispossession of the Vessel by title paramount or otherwise;

 

4

 

 

(d)

any defect in the seaworthiness, condition, value, design, merchantability, operation or fitness for use of the Vessel or the ineligibility of the Vessel for any particular trade, or for registration or documentation under the laws of any relevant jurisdiction;

 

 

(e)

the Total Loss or any damage to or forfeiture or court marshall's or other sale of the Vessel if the Termination Sum or any part thereof remains due;

 

 

(f)

any libel, attachment, levy, detention, sequestration or taking into custody of the Vessel or any restriction or prevention of or interference with or interruption or cessation in, the use or possession thereof by the Charterers unless for such period where such arrest, detention or seizure is solely attributable to the fault of the Owners;  

 

 

(g)

any insolvency, bankruptcy, reorganization, arrangement, readjustment, dissolution, liquidation or similar proceedings by or against the Charterers and any other Relevant Person;

 

 

(h)

any invalidity, unenforceability, lack of due authorization or other defects, or any failure or delay in performing or complying with any of the terms and provisions of this Charter or any of the Leasing Documents by any party to this Charter or any other person;

 

 

(i)

any enforcement or attempted enforcement by the Owners of their rights under this Charter or any of the Leasing Documents executed or to be executed pursuant to this Charter;

 

 

(j)

any loss of use of the Vessel due to deficiency or default or strike of officers or crew, fire, breakdown, damage, accident, defective cargo or any other cause which would or might but for this provision have the effect of terminating or in any way affecting any obligation of the Charterers under this Charter; or

 

 

(k)

any prevention, delay, deviation or disruption in the use of the Vessel resulting from the wide outbreak of any viruses (including the 2019 novel coronavirus), including but not limited to those caused by:

 

 

(i)

closure of ports;

 

 

(ii)

prohibitions or restrictions against the Vessel calling at or passing through certain ports;

 

 

(iii)

restriction in the movement of personnel and/or shortage of labour affecting the operation of the Vessel or the operation of the ports (including stevedoring operations);

 

 

(iv)

quarantine regulations affecting the Vessel, its cargo, the crew members or relevant port personnel;

 

 

(v)

fumigation or cleaning of the Vessel; or

 

 

(vi)

any claims raised by any sub-charterer or manager of the Vessel that a force majeure event or termination event (or any other analogous event howsoever called) has occurred under the relevant charter agreement or management agreement (as the case may be) of the Vessel as a result of the outbreak of such viruses.

 

5

 

 

36.13

All stamp duty, value added tax (for the avoidance of doubt, including without limitation, goods and services tax), withholding or other taxes and import and export duties and all other similar types of charges which may be levied or assessed on or in connection with:

 

 

(a)

the operation of this Charter in respect of the hire and all other payments to be made pursuant to this Charter and the remittance thereof to the Owners; and

 

 

(b)

the import, export, purchase, delivery and re-delivery of the Vessel,

 

shall be borne by the Charterers. The Charterers shall pay, if applicable, value added tax and other similar tax levied on any Charterhire and other payments payable under this Charter by addition to, and at the time of payment of, such amounts. If any such taxes arise as a result of (i) the Owners being incorporated in Hong Kong and (ii) the introduction or alteration after the date of this Charter of a law in Hong Kong or an alteration after the date of this Charter in the manner in which a law in Hong Kong is interpreted or applied (the "Tax Changes"). Provided that if after the Owners and the Charterers having exercised reasonable endeavours to mitigate the effect of the Tax Changes (at the cost of the Charterers) following notification from the Owners to the Charterers regarding the occurrence of the Tax Changes such Tax Changes continue to have the same effect, the Charterers shall have the option to pay the Mandatory Sale Price to the Owners within thirty (30) days following such notice by the Owners, and this Charter shall terminate in accordance with the procedures set out in Clause 50.4.

 

 

37

CHANGES TO INTEREST RATE, DEFAULT INTEREST

 

 

37.1

If, in relation to any determination of the Interest Rate prior to a Screen Rate Replacement Event:

 

 

(a)

the Owners determine (which determination shall be conclusive and binding) that by reason of circumstances affecting the Relevant Interbank Market generally, adequate and fair means do not or will not exist for ascertaining LIBOR at the beginning of that Hire Period or the same does not reflect the cost of funding of the Owners; and

 

 

(b)

the Owners determine (which determination shall be conclusive and binding) that by reason of circumstances affecting the Relevant Interbank Market generally, deposits in Dollars in the required amount for the 3-month period commencing on the first day of that Hire Period are not available to it in the Relevant Interbank Market or from whatever sources it may select to obtain funds for that Hire Period,

 

the Owners shall promptly notify the Charterers accordingly.

 

 

37.2

Immediately following the notification referred to in Clause 37.1 above, the Owners and the Charterers shall negotiate in good faith with a view to agreeing upon a substitute basis for determining the Interest Rate for that Hire Period.

 

 

37.3

If a substitute basis is not so agreed pursuant to Clause 37.2 above or after the occurrence of a Screen Rate Replacement Event but prior to the making of any necessary amendment or waiver in accordance with Clause 37.4 below, the Interest Rate shall be the rate per annum equal to the cost certified and notified by the Owners, with relevant supporting evidence available to the Owners at the relevant time (expressed as an annual rate of interest) of funding the Owners' Costs during the relevant Hire Period (as reasonably determined by the Owners). It is hereby agreed that the Charterers shall have the option to pay the Mandatory Sale Price to the Owners within thirty (30) days following such notice by the Owners pursuant to this Clause 37.3, and this Charter shall terminate in accordance with the procedures set out in Clause 50.4.

 

6

 

 

37.4

If a Screen Rate Replacement Event has occurred in relation to the Screen Rate for dollars, the Owners are entitled to make any amendment or waiver to the terms of the Leasing Documents with the consent of the Charterers (at the Charterers' cost) which relates to:

 

 

(a)

providing for the use of a Replacement Benchmark in relation to Dollars in place of (or in addition to) that Screen Rate; and

 

 

(b)

 

 

(i)

aligning any provision of any Leasing Document to the use of that Replacement Benchmark;

 

 

(ii)

enabling that Replacement Benchmark to be used for the calculation of the Interest Rate under this Charter (including, without limitation, any consequential changes required to enable that Replacement Benchmark to be used for the purposes of this Charter);

 

 

(iii)

implementing market conventions applicable to that Replacement Benchmark;

 

 

(iv)

providing for appropriate fallback (and market disruption) provisions for that Replacement Benchmark; or

 

 

(v)

adjusting the pricing to reduce or eliminate, to the extent reasonably practicable, any transfer of economic value from one Party to another as a result of the application of that Replacement Benchmark (and if any adjustment or method for calculating any adjustment has been formally designated, nominated or recommended by the Relevant Nominating Body, the adjustment shall be determined on the basis of that designation, nomination or recommendation),

 

and pending any such amendment or waiver and the Replacement Benchmark being utilised under the Leasing Documents to calculate the Interest Rate, Clause 37.3 shall apply to the calculation of the Interest Rate.

 

 

37.5

If, as at 30 June 2022, this Charter provides that the rate of interest for the Owners' Cost in dollars is to be determined by reference to the Screen Rate for LIBOR:

 

 

(a)

a Screen Rate Replacement Event shall be deemed to have occurred on that date in relation to the Screen Rate for dollars; and

 

 

(b)

the Owners shall enter into negotiations in good faith with a view to agreeing the use of a Replacement Benchmark in relation to dollars in place of that Screen Rate from and including a date no later than 31 December 2022. It is hereby agreed that if the use of a Replacement Benchmark in relation to dollars is not so agreed, the Charterers shall have the option to pay the Mandatory Sale Price to the Owners by 31 January 2023, and this Charter shall terminate in accordance with the procedures set out in Clause 50.4.

 

 

37.6

If the Charterers fail to make any payment due under this Charter on the due date, they shall pay additional interest on such late payment at a rate which is equal to one per cent. (1%) per annum above the applicable Interest Rate for the relevant Hire Period and the Margin which shall apply prior to, during or following Delivery and shall accrue on a daily basis from the date on which such payment became due up to and excluding the date of payment thereof, and the Charterers and the Owners agree that such default rate is proportionate as to amount, having regard to the legitimate interest of the Owners, in protecting against the Owners' risk of the Charterers failing to perform its obligations under this Charter.

 

7

 

 

37.7

All interest (including default interest) and any other payments under this Charter 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 three hundred and sixty (360) days' year.

 

 

38

POSSESSION OF VESSEL

 

 

38.1

The Charterers shall not, without the prior written consent of the Owners, assign, mortgage or pledge the Vessel or any interest therein, its Earnings, Insurances and/or any Requisition Compensation and shall not permit the creation or existence of any Security Interest thereon (including for any monies paid in advance and not earned, and for any claims for damages arising from any breach by the Owners of this Charter and other amounts due to the Charterers under this Charter) except for the Permitted Security Interests.

 

 

38.2

The Charterers shall promptly notify any party (including, without limitation, the Trafigura Charterer or any other subcharterer of the Vessel) (as the Owners may request) in writing that the Vessel is the property of the Owners and the Charterers shall provide the Owners with a copy of such written notification and satisfactory evidence to the opinion of the Owners that such party has received such written notification.

 

 

38.3

If the Vessel is arrested, seized, impounded, forfeited, detained or taken out of their possession or control (whether or not pursuant to any distress, execution or other legal process), the Charterers shall procure the immediate release of the Vessel (whether by providing bail or procuring the provision of security or otherwise do such lawful things as the circumstances may require) and shall immediately notify the Owners of such event and shall indemnify the Owners against all losses, costs or charges incurred by the Owners by reason thereof in re-taking possession or otherwise in re-acquiring the Vessel. Without prejudice to the generality of the foregoing and Clause 52, the Charterers agree to indemnify the Owners against all consequences or liabilities arising from the master, officers or agents signing bills of lading or other documents.

 

 

38.4

If the Vessel is arrested or otherwise detained solely because of the Owners' direct actions or omissions and for reasons which are not in any part of a consequence of contributory negligence and/or wilful misconduct of any Approved Sub-charterer, a Relevant Person or any other member of the Group (or its affiliates), the Owners shall at their own expense take all reasonable steps to procure that the Vessel is released within a reasonable time.

 

 

38.5

The Charterers shall pay and discharge or cause the Trafigura Charterer or any other subcharterer of the Vessel to pay and discharge all obligations and liabilities whatsoever which have given or may give rise to liens on or claims enforceable against the Vessel. The Charterers shall take all steps to prevent (and shall procure that any subcharterer of the Vessel shall take all steps to prevent) an arrest (threatened or otherwise) of the Vessel.

 

 

39

INSURANCE

 

 

39.1

The Charterers shall procure that the insurances for the Vessel are effected:

 

 

(a)

in Dollars;

 

 

(b)

in the case of fire and usual hull and machinery, marine risks and war risks (including blocking and trapping), on an agreed value basis of at least the higher of (i) one hundred per cent (100%) of then applicable Market Value of the Vessel and (ii) one hundred and twenty per cent (120%) of the then prevailing Owners' Costs;

 

8

 

 

(c)

in the case of oil pollution liability risks for the Vessel, for an aggregate amount equal to the higher of (i) $1,000,000,000 or (ii) the highest level of cover from time to time available under protection and indemnity club entry and in the international marine insurance market;

 

 

(d)

in the case of protection and indemnity risks, in respect of the full tonnage of the Vessel and with a protection and indemnity club which is a member of the International Group of Protection and Indemnity Clubs;

 

 

(e)

with first class international insurers and/or underwriters acceptable to the Owners and having a Standard & Poor's rating of BBB+ or above, a Moody's rating of A or above or an AM Best rating of A- or above or otherwise acceptable to the Owners or, in the case of war risks through a protection and indemnity club which meets the requirements of paragraph (d) above; and

 

 

(f)

on terms and in form acceptable to the Owners and the Owners' Financiers (if any).

 

 

39.2

In addition to the terms set out in Clause 13(a) (Insurance and Repairs), the Charterers shall procure that the Obligatory Insurances shall:

 

 

(a)

subject always to paragraph (b), name the Charterers, the Approved Manager and the Owners (and if applicable the Owners' Financiers if so required by the Owners) as the only named assureds unless the interest of every other named assured or co-assured is limited:

 

 

(i)

in respect of any Obligatory Insurances for hull and machinery and war risks;

 

 

(1)

to any provable out-of-pocket expenses that they have incurred and which form part of any recoverable claim on underwriters; and

 

 

(2)

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 them); and

 

 

(ii)

in respect of any Obligatory Insurances for protection and indemnity risks, to any recoveries they are entitled to make by way of reimbursement following discharge of any third party liability claims made specifically against them,

 

and every other named assured or co-assured has undertaken in writing to the Owners or the Owners' Financiers (in such form as they may require) that any deductible shall be apportioned between the Charterers and every other named assured or co-assured (save for the Owners or the Owners' Financiers (if any)) in proportion to the gross claims made by or paid to each of them and that they shall do all things necessary and provide all documents, evidence and information to enable the Owners and the Owners' Financiers (if any) in accordance with the terms of the loss payable clause, to collect or recover any moneys which at any time become payable in respect of the Obligatory Insurances;

 

 

(b)

whenever the Owners' Financiers (if any) require:

 

 

(i)

in respect of fire and other usual marine risks and war risks, name (or be amended to name) the same as additional named assured for their rights and interests, warranted no operational interest and with full waiver of rights of subrogation against such financiers, but without such financiers thereby being liable to pay (but having the right to pay) premiums, calls or other assessments in respect of such insurance;

 

9

 

 

(ii)

in relation to protection and indemnity risks, name (or be amended to name) the same as additional insured or co-assured for their rights and interests to the extent permissible under the relevant protection and indemnity club rules; and

 

 

(iii)

name the same and the Owners as respectively the first ranking loss payee and the second ranking loss payee (and in the absence of any financiers, the Owners as first ranking loss payee) in accordance with the terms of the relevant loss payable clauses approved by the Owners' Financiers and the Owners with such directions for payment in accordance with the terms of such relevant loss payable clause, as the Owners and the Owners' Financiers (if any) may specify;

 

 

(c)

provide that all payments by or on behalf of the insurers under the Obligatory Insurances to the Owners and/or the Owners' Financiers (as applicable) shall be made without set-off, counterclaim, deductions or condition whatsoever;

 

 

(d)

provide that such Obligatory Insurances shall be primary without right of contribution from other insurances which may be carried by the Owners or the Owners' Financiers (if any);

 

 

(e)

provide that the Owners and/or the Owners' Financiers (if any) may make proof of loss if the Charterers fail to do so; and

 

 

(f)

provide that if any Obligatory Insurance is cancelled, or if any substantial change is made in the coverage which adversely affects the interest of the Owners and/or the Owners' Financiers (if any), or if any Obligatory Insurance is allowed to lapse for non-payment of premium, such cancellation, change or lapse shall not be effective with respect to the Owners and/or the Owners' Financiers (if any) for thirty (30) days after receipt by the Owners and/or the Owners' Financiers (if any) of prior written notice from the insurers of such cancellation, change or lapse.

 

 

39.3

The Charterers shall:

 

 

(a)

at least fifteen (15) days prior to Delivery (or such shorter period agreed by the parties), notify in writing the Owners of the terms and conditions of all Insurances (copied to the Owners' Financiers (if any) and the brokers or insurers with whom the Insurances are or will be placed);

 

 

(b)

at least fifteen (15) days before the expiry of any obligatory insurance or otherwise before the change of appointment of any brokers (or other insurers) and any protection and indemnity or war risks association through which Obligatory Insurances are taken from time to time pursuant to this Clause 39 (Insurance), notify the Owners (copied to the Owners' Financiers (if any)) of the brokers (or other insurers) and any protection and indemnity or war risks association through or with whom the Charterers propose to renew or obtain that Obligatory Insurance and of the proposed terms of such renewed or new insurance cover and obtain the Owners' approval to such matters;

 

 

(c)

at least seven (7) days before the expiry of any Obligatory Insurance, procure that such Obligatory Insurance is renewed or to be renewed on its expiry date in accordance with the provisions of this Charter;

 

 

(d)

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 or the effective date of the new insurance and protection and indemnity cover notify the Owners (copied to the Owners' Financiers (if any)) in writing of the terms and conditions of the renewal; and

 

10

 

 

(e)

as soon as practicable after the expiry of any Obligatory Insurance and within thirty (30) days after such expiry, deliver to the Owners a letter of undertaking as required by this Charter in respect of such Insurances for the Vessel as renewed pursuant to paragraph (c) of Clause 39.3 (Insurance) together with copies of the relevant policies or cover notes or entry certificates duly endorsed with the interest of the Owners and/or the Owners' Financiers (if any).

 

 

39.4

The Charterers shall ensure that all insurance companies and/or underwriters, and/or insurance brokers (if any) provide the Owners with copies (or upon the Owners' request, originals) of policies, cover notes and certificates of entry relating to the Obligatory Insurances which they are to effect or renew and letter or letters of undertaking in a form required by the Owners and/or the Owners' Financiers (if any) and including undertakings by the insurance companies and/or underwriters that:

 

 

(a)

they will have endorsed on each policy, immediately upon issuance, a loss payable clause and a notice of assignment complying with the provisions of this Charter and the Financial Instruments;

 

 

(b)

they will hold the benefit of such policies and such insurances, to the order of the Owners and/or the Owners' Financiers (if any) and/or such other party in accordance with the said loss payable clause;

 

 

(c)

they will advise the Owners and the Owners' Financiers (if any) promptly of any material change to the terms of the Obligatory Insurances of which they are aware;

 

 

(d)

(i) they will indicate in the letters of undertaking that they will immediately notify the Owners and the Owners' Financiers (if any) when any cancellation, charge or lapse of the relevant obligatory insurance occur and (ii) following a written application from the Owners and/or the Owners' Financiers (if any) not later than one (1) month before the expiry of the Obligatory Insurances they will notify the Owners and the Owners' Financiers (if any) not less than fourteen (14) days before the expiry of the obligatory insurances, in the event of their not having received notice of renewal instructions from the Charterers and, in the event of their receiving instructions to renew, they will promptly notify the Owners and the Owners' Financiers (if any) of the terms of the instructions; and

 

 

(e)

if any of the Obligatory Insurances form part of any fleet cover, the Charterers shall procure that the insurance broker(s), or leading insurer, as the case may be, undertakes to the Owners and the Owners' Financiers (if any) that such insurance broker or insurer will not set off against any sum recoverable in respect of a claim relating to the Vessel under such Obligatory Insurances any premiums due in respect of any other vessel under any fleet cover of which the Vessel forms a part or any premium due for other insurances, they waive any lien on the policies, or any sums received under them, which they might have in respect of such premiums, and they will not cancel such Obligatory Insurances by reason of non-payment of such premiums or other amounts, and will arrange for a separate policy to be issued in respect of the Vessel forthwith upon being so requested by the Owners and/or the Owners' Financiers (if any) and where practicable.

 

11

 

 

39.5

The Charterers shall ensure that any protection and indemnity and/or war risks associations in which the Vessel is entered provides the Owners and the Owners' Financiers (if any) with:

 

 

(a)

a copy of the certificate of entry for the Vessel as soon as such certificate of entry is issued;

 

 

(b)

a letter or letters of undertaking in such form as may be required by the Owners and the Owners' Financiers (if any) or in such association's standard form; and

 

 

(c)

a certified copy of each certificate of financial responsibility for pollution by oil or other Environmentally Sensitive Material issued by the relevant certifying authority in relation to the Vessel.

 

 

39.6

The Charterers shall ensure that all policies relating to Obligatory Insurances are deposited with the approved brokers (if any) through which the insurances are effected or renewed.

 

 

39.7

The Charterers shall procure that all premiums or other sums payable in respect of the Obligatory Insurances are punctually paid and produce all relevant receipts when so required by the Owners.

 

 

39.8

The Charterers 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.

 

 

39.9

The Charterers shall neither do nor omit to do (nor permit to be done or not to be done) any act or thing which would or might render any Obligatory Insurance invalid, void, voidable or unenforceable or render any sum payable under an Obligatory Insurance repayable in whole or in part; and, in particular:

 

 

(a)

the Charterers shall procure that all necessary action is taken and all requirements are complied with which may from time to time be applicable to the Obligatory Insurances, and (without limiting the obligations contained in this Clause 39) ensure that the Obligatory Insurances are not made subject to any exclusions or qualifications to which the Owners have not given their prior approval (unless such exclusions or qualifications are made in accordance with the rules of a protection and indemnity association which is a member of the International Group of Protection And Indemnity Clubs);

 

 

(b)

the Charterers shall not make or permit any changes relating to the classification or the classification society of the Vessel or, subject to procuring the provision of a replacement manager's undertaking in substantially the same form as the Manager's Undertaking, any changes to the manager or operator of the Vessel unless such changes have, if required, first been approved by the underwriters of the Obligatory Insurances, the Owners and the Owners' Financiers (if any);

 

 

(c)

the Charterers shall procure that all quarterly or other voyage declarations which may be required by the protection and indemnity risks association in which the Vessel is entered to maintain cover for trading to the United States of America and Exclusive Economic Zone (as defined in the United States Oil Pollution Act 1990 or any other applicable legislation) are made and the Charterers shall promptly provide the Owners with copies of such declarations and a copy of its valid certificate of financial responsibility; and

 

 

(d)

the Charterers shall not employ the Vessel, nor allow it to be employed, otherwise than in conformity with the terms and conditions of the Obligatory Insurances, without first obtaining the consent of the insurers and complying with any requirements (as to extra premium or otherwise) which the insurers specify.

 

12

 

 

39.10

The Charterers shall not make or agree to any alteration to the terms of any Obligatory Insurance nor waive any right relating to any Obligatory Insurance without the prior written consent of the Owners and the Owners' Financiers (if any).

 

 

39.11

The Charterers shall not settle, compromise or abandon any claim under any obligatory insurance for Total Loss or for a Major Casualty, and shall do all things necessary and provide all documents, evidence and information to enable the Owners to collect or recover any moneys which at any time become payable in respect of the Obligatory Insurances.

 

 

39.12

The Charterers shall provide the Owners upon written request (except that upon the occurrence of a Total Loss or a Major Casualty the Charterers shall provide the following immediately without the Owners' making any request), copies of:

 

 

(a)

all communications between the Charterers and:

 

 

(i)

the approved brokers;

 

 

(ii)

the approved protection and indemnity and/or war risks associations; and/or

 

 

(iii)

the approved insurers and/or underwriters, which relate directly or indirectly to:

 

 

(A)

the Charterers' obligations relating to the Obligatory Insurances including, without limitation, all requisite declarations and payments of additional premiums or calls; and

 

 

(B)

any credit arrangements made between the Charterers and any of the persons referred to in paragraphs (i) or (ii) above relating wholly or partly to the effecting or maintenance of the Obligatory Insurances; and

 

 

(b)

any communication with any party involved in case of a claim under any of the Vessel's insurances.

 

 

39.13

The Charterers shall promptly provide the Owners (or any persons which they may designate) with:

 

 

(a)

any information which the Owners or the Owners' Financiers (or any such designated person) request for the purpose of:

 

 

(i)

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

 

 

(ii)

effecting, maintaining or renewing any such insurances as are referred to in Clause 13(a) (Insurance and Repairs) or Clause 39 (Insurance) dealing with or considering any matters relating to any such insurances; and

 

 

(b)

copies of any communication between all parties involved in case of a claim under any of the Vessel's insurances exceeding the Major Casualty amount.

 

 

39.14

If one or more of the Obligatory Insurances are not effected and maintained with first class international insurers or are effected with an insurance or captive Subsidiary of the Owners or the Charterers, then the Charterers shall procure, at their own expense, that the relevant insurers maintain in full force and effect facultative reinsurances with reinsurers and through brokers, in each case, of recognised standing and acceptable in all respects to the Owners. Any reinsurance policy shall include, if and when permitted by law, a cut-through clause in a form acceptable to the Owners and/or the Owners' Financiers (if any). The Charterers shall procure that underwriters of the primary insurances assign each reinsurance to the relevant financiers in full, if required.

 

13

 

 

39.15

The Charterers shall upon demand fully indemnify the Owners (including if requested by the Owners, make direct payment to the relevant insurer or broker for the same) in respect of all premiums and other expenses which are incurred by:

 

 

(a)

the Owners in connection with or with a view to effecting, maintaining or renewing an innocent owners interest insurance and an innocent owners additional perils insurance or any similar protective shipowner insurance that is taken out in respect of the Vessel; and/or

 

 

(b)

the Owners' Financiers (if any) in connection with or with a view to effecting, maintaining or renewing a mortgagee's interest insurance, a mortgagee's additional perils insurance, all protection and indemnity insurance that is taken out in respect of the Vessel subject to the Owners' Financiers (if any) having provided to the Owners at the relevant time any form of loan facility to refinance the Vessel,

 

in the case as referred to in paragraph (a), in an amount not exceeding one hundred and twenty per cent (120%) of the Owners' Costs from time to time or in the case as referred to in paragraph (b), in an amount not exceeding one hundred and twenty per cent (120%) of the relevant outstanding loan amount from time to time and on such other terms, through such insurers and generally in such manner as the Owners or the Owners' Financiers (as the case may be) may from time to time consider appropriate.

 

 

39.16

The Charterers shall be solely responsible for and indemnify the Owners in respect of all loss or damage to the Vessel (insofar as the Owners shall not be reimbursed by the proceeds of any insurance in respect thereof) however caused occurring at any time or times before physical possession thereof is retaken by the Owners, with only reasonable wear and tear to the Vessel excepted.

 

 

39.17

The Charterers shall reimburse or indemnify the Owners for any expenses incurred or to be incurred by the Owners in obtaining a detailed report signed by an independent firm of marine insurance brokers approved by the Owners dealing with the Obligatory Insurances and stating the opinion of such firm as to the adequacy of the Obligatory Insurances:

 

 

(a)

when an agreed form of such detailed report satisfactory to the Owners is obtained as a condition precedent requirement under Schedule 2 of this Charter;

 

 

(b)

when the Owners procure the issuance of such detailed report no more than once every calendar year, unless a Termination Event has occurred in which case such reports may be procured at the Charterer's cost at any such time; and

 

 

(c)

further from time to time upon the Owners' demand where, in the Owners' opinion, at any time during the Charter Period there has been a material change in the terms of the Insurances and/or a change in the circumstances which would materially adversely affect the adequacy of the Obligatory Insurances.

 

 

39.18

The Charterers shall:

 

 

(a)

keep the Vessel insured at their expense against such other risks (other than loss of hire which shall be insured against upon an occurrence and during the continuance of a Termination Event) which the Owners or the Owners' Financiers consider reasonable for a prudent shipowner or operator to insure against for trading, management, operational and/or safety purposes at the relevant time (as notified by the Owners and having regard to the then existing available insurance cover and standard practice in the operation of vessels of the same type as the Vessel) and which risks are, at that time, generally insured against by owners or operators of vessels similar to the Vessel or of the same type as the Vessel; and

 

14

 

 

(b)

upon demand fully indemnify the Owners in respect of all premiums and other expenses incurred by the Owners in respect of any other insurances (other than loss of hire insurances which the Owners may take out upon an occurrence and during the continuance of a Termination Event) which the Owners deem necessary (having regard to the existing insurance cover and market practice for the trading, management, operation and safety of vessels of the same type) and takes out in respect of the Vessel.

 

 

40

WARRANTIES RELATING TO VESSEL

 

 

40.1

It is expressly agreed and acknowledged that the Owners are not the manufacturer or original supplier of the Vessel but that the Owners (in their capacity as buyers) have purchased the Vessel from the Charterers (in their capacity as sellers) pursuant to the MOA at the request of the Charterers, for the purpose of then chartering the Vessel to the Charterers hereunder and that no condition, term, warranty or representation of any kind is or has been given to the Charterers by or on behalf of the Owners in respect of the Vessel (or any part thereof).

 

 

40.2

All conditions, terms or warranties express or implied by the law relating to the specifications, quality, description, merchantability or fitness for any purpose of the Vessel (or any part thereof) or otherwise are hereby expressly excluded.

 

 

40.3

The Charterers agree and acknowledge that the Owners shall not be liable for any claim, loss, damage, expense or other liability of any kind or nature caused directly or indirectly by the Vessel or by any inadequacy thereof or the use or performance thereof or any repairs thereto or servicing thereof and the Charterers shall not by reason thereof be released from any liability to pay any Charterhire or other payment due under this Charter.

 

 

41

TERMINATION, REDELIVERY AND TOTAL LOSS

 

Termination

 

 

41.1

Upon termination of the leasing of the Vessel under this Charter pursuant to Clause 49.2, the Charterers shall be obliged to pay the Owners the Termination Sum on the Termination Date and it is hereby agreed by the parties hereto that:

 

 

(a)

without prejudice to paragraph (b) of Clause 41.10, the obligation to pay the Termination Sum is a continuing obligation and shall survive the termination of the leasing of the Vessel under this Charter and shall continue in full force and effect until irrevocably and unconditionally paid in full;

 

 

(b)

payment of the Termination Sum is deemed to be proportionate as to amount, having regard to the legitimate interest of the Owners, in protecting against the Owners' risk of the Charterers failing to perform its obligations under this Charter; and

 

 

(c)

the Termination Sum shall, depending on the nature of the Termination Event(s) on the basis of which the Owners serve a Termination Notice, be either an obligation to pay damages following acceptance by the Owners of a breach of condition by the Charterers or an obligation to pay an agreed sum in specified circumstances which do not involve a breach of contract by the Charterers.

 

15

 

 

41.2

If the Charterers fail to make any payment of the Termination Sum on the Termination Date, Clause 37.6 shall apply and the Owners shall be entitled to exercise their rights under Clauses 41.10 and 41.11.

 

 

41.3

Concurrently with the unconditional and irrevocable payment of the Termination Sum in full pursuant to the terms of this Charter, this Charter shall terminate and the Owners shall (save in the event of Total Loss or in the event that the Vessel has been sold or contracted to be sold pursuant to Clauses 41.10 and 41.11), at the cost of the Charterers, transfer the legal and beneficial ownership of the Vessel on an "as is where is" basis to the Charterers or their nominees free from any registered mortgages, encumbrances, liens, debts or claims incurred or permitted by the Owners (save for those liens, encumbrances and debts incurred by the Charterers or arising out of or in connection with this Charter), and shall execute a bill of sale and a protocol of delivery and acceptance evidencing the same and such sale shall be completed otherwise in accordance with paragraphs (a) and (b) of Clause 52.1.

 

 

41.4

The Charterers hereby undertake to indemnify the Owners against any claims incurred in relation to the Vessel prior to such transfer of ownership. Any taxes, notarial, consular and other costs, charges and expenses connected with closing of the Owners' register shall be for the Charterers' account.

 

 

41.5

On natural expiration of this Charter, unless the Purchase Option Price or the Mandatory Sale Price is paid by the Charterers in accordance with Clauses 51 or 50, the Charterers shall re-deliver the Vessel to the Owners in accordance with Clause 41.6 and shall ensure that they have fulfilled their obligations under this Charter and made payment of all Charterhire and all other moneys pursuant to the terms of this Charter. In such case, the Charterers shall give the Owners not less than 30/20/10/5 running days' preliminary notice of expected date and port or place of redelivery and not less than 5/3/2/1/ running days' definite notice of expected date and port or place of redelivery. Any changes thereafter in the Vessel's position shall be notified immediately to the Owners.

 

Redelivery

 

 

41.6

If the Charterers are required to redeliver the Vessel to the Owners pursuant to the terms of this Charter, the Vessel shall be redelivered and taken over safely afloat at a safe and accessible berth or anchorage in such location as the Owners may require (which, for the avoidance of doubt, shall exclude any war listed area declared by the Joint War Committee). The Charterers shall ensure that, at the time of redelivery to the Owners, the Vessel:

 

 

(a)

be in an equivalent class as she was as at the Commencement Date and without any recommendation or condition and with valid, unextended certificates for not less than six (6) months and free of average damage affecting the Vessel's classification and in the same or as good structure, state, condition and classification as that in which she was deemed on the Commencement Date, fair wear and tear not affecting the Vessel's classification excepted;

 

 

(b)

has passed her 5-year special survey (if applicable), and subsequent second intermediate surveys and drydock at the Charterers' time and expense without any recommendation or condition:

 

 

(c)

to the satisfaction of the Approved Classification Society; and

 

16

 

 

(d)

in the case of the 5-year special survey, to the reasonable satisfaction of an Owners' Surveyor appointed at the cost of the Charterers;

 

 

(e)

has her survey cycles up-to-date and trading and class certificate valid for at least the number of months agreed in Box 17;

 

 

(f)

be re-delivered to the Owners together with all spare parts and spare equipment as were on board at the time of Delivery, and any such spare parts and spare equipment on board at the time of re-delivery shall be taken over by the Owners free of charge;

 

 

(g)

be free of any cargo and Security Interest (save for the Security Interests granted pursuant to the Financial Instruments, if any);

 

 

(h)

be free of any crew and officers unless otherwise instructed by the Owners;

 

 

(i)

be free of any charter or other employment (unless the Owners wish to retain the continuance of any prevailing charter or as otherwise agreed by the Owners in their absolute discretion); and

 

 

(j)

have such amount of bunkers on board the Vessel as would be sufficient to enable the Vessel to sail to the nearest bunker port in compliance with all bunkering fuel content regulations then applicable in such place of redelivery.

 

 

41.7

The Charterers warrant that they will not permit (or request any sub-charterer not to permit) the Vessel to commence a voyage (including any preceding ballast voyage) which cannot reasonably be expected to be completed in time to allow redelivery of the Vessel within any time period required by Clause 41 (Termination, Redelivery and Total Loss). If the time of actual redelivery is after the date on which redelivery is required to take place pursuant to Clause 41 (the "Redelivery Date"), the Charterer shall, without prejudice to any other amounts payable under the Leasing Documents (including without limitation pursuant to Clause 41) pay to the Owners, as from the first date following the Redelivery Date and for each day until the date on which the Vessel is redelivered in accordance with the conditions Clause 41.6, the rate of hire equivalent to the higher of:

 

 

(a)

the prevailing market rate for the bareboat chartering of vessels of a similar type as the Vessel (as determined by an Approved Valuer appointed by the Owners); and

 

 

(b)

the prevailing market rate for the chartering of vessels of a similar type as the Vessel on the Index.

 

For the avoidance of doubt, all other terms, conditions and provisions of this Charter and the other Leasing Documents shall continue to apply during such period.

 

 

41.8

The Charterers shall provide the Owners' Surveyor with all such facilities and access to the Vessel as may be required to enable such Owners' Surveyor to conduct its survey of the Vessel and shall take all such actions as may be reasonably recommended by the Owners' Surveyor to ensure that the Vessel shall be redelivered in accordance with Clause 41.6. The Owners shall not be obliged to accept redelivery of the Vessel until the Owners are reasonably satisfied that all conditions for the redelivery of the Vessel under this Charter (including without limitation, Clause 41.6 and this Clause 41.8) are met, and the Vessel shall (if the redelivery is at the end of the Charter Period) continue to be on-hire under the terms of this Charter until such redelivery. The Owners reserve all rights to recover from the Charterers any costs, expense and/or liabilities incurred or suffered by them (including without limitation, the costs of any repairs which may be required to restore the Vessel to the condition required by Clause 41.6 as a result of the Vessel not being redelivered in accordance with the terms of this Charter).

 

17

 

 

41.9

The Owners shall, at the time of the redelivery of the Vessel, take over all bunkers, lubricating oil, unbroached provisions, paints, ropes, other consumable stores and spare parts in the Vessel at no cost to the Owners.

 

Non-payment of Termination Sum

 

 

41.10

Subject to the terms of any quiet enjoyment letter entered into with any sub charterers, the Charterers agree that should the Termination Sum not be paid on the Termination Date:

 

 

(a)

the Charterers' right to possess and operate the Vessel shall immediately cease and (without in any way affecting the Charterers' obligation to pay the Charterer the Termination Sum and comply with their other obligations under this Charter) the Charterers shall hold the Vessel as gratuitous bailee only to the Owners, the Charterers shall procure that the master and crew follow the orders and directions of the Owners and the Charterers shall, upon the Owners' request (at Owners' sole discretion), be obliged to immediately (and at the Charterers' own cost) redeliver the Vessel to the Owners at such ready and nearest safe port or location as the Owners may require and for the avoidance of doubt, any such redelivery shall not extinguish the Owners' right to recover the Termination Sum from the Charterers under this Charter;

 

 

(b)

the Owners shall be entitled (at Owners' sole discretion) to operate the Vessel as they may require and may create whatsoever interests thereon, including without limitation short term charterparties or any other form of short term employment contracts provided such contracts do not interfere with the Vessel's sale process, including relevant inspections, provided that the Earnings of the Vessel during such period less its operational expenses (which would include, without limitation, any costs in relation to the provision of bunkers and lubricating oils), (the "Net Trading Proceeds") shall be applied against the Termination Sum and any other amounts payable under the Leasing Documents pursuant to Clause 64 provided, that if such use of the Vessel results in the Owners suffering a loss then such losses shall be included in the indemnities contained in Clause 53 (Indemnities) and be added to the Termination Sum; and

 

 

(c)

the Owners shall be entitled (at Owners' sole discretion) to immediately thereafter sell the Vessel to any third party on arm's length terms taking into account the prevailing market conditions, provided that the Charterers may for a period not exceeding a total of sixty (60) days from the Termination Date (the "Nomination Period") nominate or identify a purchaser for the Vessel (a "Nominated Purchaser"). During the Nomination Period the Owners and the Charterers shall use their reasonable endeavours to market the Vessel and the Owners shall sell the Vessel to a Nominated Purchaser and subject to all of the following conditions being satisfied:

 

 

(i)

the Nominated Purchaser is acceptable to the Owners (such acceptability not to be unreasonably withheld or delayed); and

 

 

(ii)

the price to be paid by the Nominated Purchaser (after deducting any commissions, taxes and other costs of sale) is equal to or more than the applicable Termination Sum (unless otherwise agreed by the Owners in their absolute discretion);

 

and any net sale proceeds (after deducting all fees, taxes, disbursements and any other costs and expenses incurred or suffered by the Owners in connection with such sale) (the "Net Sales Proceeds") derived from any such sale to a Nominated Purchaser or any other person shall be applied towards reduction of the Termination Sum in accordance with Clause 64 (General Application of Proceeds). If the Net Sales Proceeds are not sufficient to settle the Termination Sum in full, the Charterers shall remain liable to pay the shortfall and default interest shall continue to accrue on the unpaid portion of the Termination Sum in accordance with Clause 37.6. Irrespective of any sales efforts, the Charterers have the right at all times, during the Nomination Period or until the Owners' Purchase (as referred to in Clause 41.11) is concluded or until any Third Party's Sale is concluded, to purchase the vessel with priority by paying the Termination Sum.

 

18

 

 

41.11

The Owners may, by written notice to the Charterers at any time after the Nomination Period, inform the Charterers of the Owners' intention to retain the Vessel instead of selling the Vessel under paragraph (c) of Clause 41.10 above, "Owners' Purchase", and in doing so, the Owners shall first obtain the Market Value of the Vessel (after deducting any commissions, taxes and costs which would be likely to be incurred in connection with a sale of the Vessel) and apply it towards the reduction of the Termination Sum in accordance with Clause 64 (General Application of Proceeds). If the Market Value (less such deductions) of the Vessel as at the date of the notice of the Owners' Purchase is less than the Termination Sum calculated as of the day of the notice of the Owners' Purchase, the Charterers shall remain liable to pay the shortfall to the Owners and default interest shall continue to accrue on the unpaid portion of the Termination Sum. If the Market Value (less such deductions) of the Vessel as at the date of such nomination is more than the Termination Sum calculated as of the day of the notice of the Owners' Purchase, the Owners shall pay the excess to Charterers within fifteen (15) days from the day of the notice of the Owners' Purchase in accordance with Clause 64 (General Application of Proceeds).

 

Total Loss

 

 

41.12

Throughout the Charter Period, the Charterer shall bear the full risk of any Total Loss of or any other damage to the Vessel howsoever arising. If the Vessel becomes a Total Loss after Delivery, the Charterer shall, subject to Clause 41.13, pay the Termination Sum to the Owners on the Total Loss Payment Date. Upon such receipt by the Owners of the Termination Sum, this Charter shall terminate (without prejudice to any provision of this Charter expressed to survive termination) but until such receipt, the Charterers shall remain liable to make all payments of Charterhire and all other amounts to the Owners under this Charter, notwithstanding that the Vessel has become a Total Loss.

 

 

41.13

Any Total Loss Proceeds unconditionally received by the Owners (or the Owners' Financiers in accordance with the terms of the relevant loss payable clause) shall be applied in accordance with Clause 64 (General Application of Proceeds) and shall satisfy the obligation of the Charterers to pay the Termination Sum to the extent received by the Owners (or the Owners' Financiers in accordance with the terms of the relevant loss payable clause). The obligation of the Charterers to pay the Termination Sum shall remain unaffected and exist regardless of whether any of the insurers have agreed or refused to meet or has disputed in good faith, the claim for Total Loss.

 

 

41.14

If the Total Loss Proceeds unconditionally received by the Owners (or the Owners' Financiers in accordance with the terms of the relevant loss payable clause) are less than the Termination Sum, the Charterers shall pay such shortfall to the Owner on the Total Loss Payment Date.

 

 

41.15

The Owners shall have no obligation to supply to the Charterers with a replacement vessel following the occurrence of a Total Loss.

 

19

 

 

42

FEES AND EXPENSES

 

 

42.1

In consideration of:

 

 

(a)

the Owners (in their capacity as buyers) purchasing the Vessel from the Charterers (in their capacity as sellers) in accordance with the terms of the MOA; and

 

 

(b)

the Owners subsequently chartering the Vessel to the Charterers in accordance with the terms of this Charter,

 

the Charterers agree to pay to the Owners a non-refundable arrangement fee (the "Arrangement Fee") in the amount and at the times agreed in the Fee Letter.

 

 

42.2

Without prejudice to any other rights of the Owners hereunder, the Charterers shall promptly pay to the Owners on written demand on a full indemnity basis all costs, charges and expenses incurred by the Owners in collecting any Charterhire or the Advance Charterhire or other payments not paid on the due date under this Charter and in remedying any other failure of the Charterers to observe the terms and conditions of this Charter.

 

 

42.3

All documented costs and expenses (including, but not limited to, third party legal costs) incurred by the Owners or Owners' legal counsel in the preparation, negotiation and execution of all documentation in relation to this Charter or any other Leasing Document (including without limitation any registration or filing expenses, all documented costs incurred by the Owners and all third party legal costs, expenses and other disbursement incurred by the Owners' legal counsels in connection with the same) shall be for the account of the Charterers (regardless of whether the transaction contemplated by the Leasing Documents actually completes).

 

 

42.4

All documented costs and expenses incurred by the Owners in relation to the acquisition, registration of title of the Vessel in the Owners' name in the Flag State together with any and all fees (including but not limited to any vessel registration and tonnage fees and the Owners' initial and ongoing registration and maintenance costs if required to be registered as a foreign maritime entity or the appointment of resident agents under the laws of the Flag State) payable by the Owners to register, maintain and/or renew such registration shall be for the account of the Charterers. Without prejudice to the foregoing, if the Flag State requires the Owners to establish a physical presence or office in the jurisdiction of such Flag State, all fees, costs and expenses payable by the Owners to establish and maintain such physical presence or office shall be for the account of the Charterers. The Charterers shall promptly provide the Owners with evidence of payment of the annual register/tonnage tax amounts payable to the Flag State or any other aforesaid costs, expenses and/or taxes when the same fall due.

 

 

42.5

All costs and expenses incurred by the Owners (including but not limited to legal fees) in relation to the transfer of title of the Vessel from the Owners to the Charterers and the re-delivery of the Vessel by the Charterers to the Owners pursuant to Clause 41 (Termination, Redelivery and Total Loss) shall be for the account of the Charterers.

 

 

42.6

If:

 

 

(a)

the Charterers request an amendment, waiver or consent;

 

 

(b)

the Charterers make a request to re-register the Vessel in another Flag State; or

 

20

 

 

(c)

an amendment is required to address the fact that the Screen Rate is not or is likely not to be available for Dollars,

 

the Charterers shall, on demand, reimburse the Owners for the amount of all documented costs and expenses (including third party legal fees) incurred by the Owners in responding to, evaluating, negotiating or complying with that request or requirement (including, for the avoidance of doubt, any amounts the Owners have to pay under the terms of the Financial Instruments).

 

 

42.7

The Charterers shall, on demand, pay to the Owners the amount of all documented costs and expenses (including third party legal fees) incurred by the Owners in connection with the enforcement of, or the preservation of any rights under, any Leasing Document, including, without limitation, any action brought by the Owners to arrest or recover possession of the Vessel, and with any proceedings instituted by or against the Owners as a consequence of it entering into a Leasing Document or enforcing those rights.

 

 

42.8

Notwithstanding anything to the contrary herein, the indemnities provided by the Charterers shall be provided in favour of the Owners and shall continue in full force and effect notwithstanding any breach of the terms of this Charter or termination of this Charter pursuant to the terms hereof.

 

 

43

NO WAIVER OF RIGHTS

 

 

43.1

No neglect, delay, act, omission or indulgence on the part of either party in enforcing the terms and conditions of this Charter or any other Leasing Document (to which they are party to) shall prejudice the strict rights of that party or be construed as a waiver thereof nor shall any single or partial exercise of any right of either party preclude any other or further exercise thereof.

 

 

43.2

No right or remedy conferred upon either party by this Charter or any other Leasing Document shall be exclusive of any other right or remedy provided for herein or by law and all such rights and remedies shall be cumulative.

 

 

44

NOTICES

 

 

44.1

Any notice, certificate, demand or other communication to be served, given made or sent under or in relation to this Charter shall be in English and in writing and (without prejudice to any other valid method or giving making or sending the same) shall be deemed sufficiently given or made or sent if sent by registered post or by email to the following respective address:

 

 

(a)

to the Owners:

SEA 268 LEASING CO., LIMITED
      21F, China Merchants Bank Building, No.1088, Lujiazui Ring Road, Shanghai, China
      Attention: Xiao Yue
      Email: xiao_yue@cmbchina.com / zyzlsceb@cmbchina.com
      Tel: +86 21 61061534

 

 

(b)

to the Charterers:

c/o TOP SHIPS INC.
      Attention: Alexandros Tsirikos
      Email: atsirikos@topships.org
      Tel: +30 210 8128180
      Fax: +30 210 8056441

 

or, if a party hereto changes its address or email address, to such other address or email address as that party may notify to the other.

 

21

 

 

44.2

Any such communication shall be deemed to have reached the party to whom it was addressed (a) when delivered (in case of a registered letter), or (b) when actually received in readable form (in case of an email). A notice or other such communication received on a non-working day or after 5.00 p.m. in the place of receipt shall be deemed to be served on the next following working day in such place.

 

 

45

REPRESENTATIONS AND WARRANTIES

 

 

45.1

The Charterers represent and warrant to the Owners as of the date hereof, and on each day during the Security Period, as follows:

 

 

(a)

100% of the issued and outstanding shares in the Charterers are legally, wholly and directly owned and controlled by the Guarantor and the Guarantor is controlled by companies affiliated with the family of Mr. Evangelos Pistiolis;

 

 

(b)

each Relevant Person or, to the best of its knowledge, the Approved Sub-charterer is duly incorporated and validly existing under the laws of its jurisdiction of its incorporation;

 

 

(c)

each Relevant Person or the Approved Sub-charterer has the corporate capacity, and has taken all corporate actions and obtained all consents, approvals, authorisations, licenses or permits necessary for it:

 

 

(i)

to execute each of the Leasing Documents to which it is a party; and

 

 

(ii)

to comply with and perform its obligations under each of the Leasing Documents to which it is a party;

 

 

(d)

all the consents, approvals, authorisations, licenses or permits referred to in paragraph (c) of Clause 45.1 (Representations and Warranties) remain in force and nothing has occurred which makes any of them liable to revocation;

 

 

(e)

each of the Leasing Documents and the Approved Sub-charter to which a Relevant Person or the Approved Sub-charterer is a party (as the case may be) constitutes such Relevant Person's or the Approved Sub-charterer's legal, valid and binding obligations enforceable against such party in accordance with its respective terms and any relevant insolvency laws affecting creditors' rights generally;

 

 

(f)

the entry into and performance by each Relevant Person (and in the case of sub-paragraph (ii) below, the Approved Sub-charterer) of, and the transactions contemplated by, each Leasing Document to which it (and in the case of sub-paragraph (ii) below, the Approved Sub-charterer) is a party do not and will not conflict with:

 

 

(i)

any law or regulation applicable to it (including Anti-Money Laundering Laws, Business Ethics Laws, Sanctions or laws relating to anti-trust or collusion and laws relating to human rights violation);

 

 

(ii)

the constitutional documents of such Relevant Person; and

 

 

(iii)

any agreement or instrument binding upon it or any of its assets or constitute a default or termination event (however described) under any such agreement or instrument;

 

22

 

 

(g)

there are no outstanding notices or demands from any governmental, quasi-governmental or public authority or instrumentality or any other person claiming authority in respect of the Vessel requiring any work or other action to be taken or the expenditure of any money to be taken in respect of the Vessel or any part thereof;

 

 

(h)

the Vessel is free of encumbrances and liens except for the Permitted Security Interests; no third party has any Security Interest, other than the Permitted Security Interests, or any other interest, right or claim over, in or in relation to the Vessel, this Charter or any moneys payable hereunder and/or any of the other Leasing Documents;

 

 

(i)

all payments which a Relevant Person is liable to make under any Leasing Document to which such Relevant Person is a party may be made by such party without deduction or withholding for or on account of any tax payable under the laws of its Relevant Jurisdiction;

 

 

(j)

no legal or administrative action involving a Relevant Person has been commenced or taken (including but not limited to actions involving any Environmental Claim but excluding the class action involving certain of the Guarantor's executive officers pending in the US District Court for the Eastern District of New York on behalf of certain shareholders of the Guarantor as described in the Guarantor's Annual Report on Form 20-F filed on 29 March 2018 with the United States Securities and Exchange Commission);

 

 

(k)

each Relevant Person has paid all taxes applicable to, or imposed on or in relation to it, its business or if applicable, the Vessel, except for those being contested in good faith with adequate reserves;

 

 

(l)

it is not necessary under the laws of the Relevant Jurisdictions that this Charter or any other Leasing Document be registered, filed, recorded, notarized or enrolled with any court or other authority in that jurisdiction or that any stamp, registration, notarial or similar taxes or fees be paid on or in relation to the Leasing Documents to which it is a party or the transactions contemplated by those Leasing Documents; the choice of governing law as stated in each Leasing Document to which a Relevant Person is a party and the agreement by such party to refer disputes to the relevant courts or tribunals as stated in such Leasing Document are valid and binding against such Relevant Person;

 

 

(m)

no Relevant Person nor any of their assets are entitled to immunity on the grounds of sovereignty or otherwise from any legal action or proceeding (which shall include, without limitation, suit, attachment prior to judgment, execution or other enforcement);  

 

 

(n)

the obligations of each Relevant Person under each Leasing Document to which it is a party, are the direct, general and unconditional obligations of such Relevant Person and rank at least pari passu with all other present and future unsecured and unsubordinated creditors of such Relevant Person save for any obligation which is mandatorily preferred by law and not by virtue of any contract;

 

 

(o)

each Leasing Document creates (or, once entered into, will create) the Security Interest which it is expressed to create with the ranking and priority it is expressed to have;

 

 

(p)

the Charterers and any other Relevant Person (i) are not US Tax Obligors and (ii) have not established a place of business in the United Kingdom or the United States of America;

 

 

(q)

no Relevant Person, Approved Manager, sub-charterer and no member of the Group:

 

 

(i)

is a Prohibited Person;

 

23

 

 

(ii)

is owned or controlled by or acting directly or indirectly on behalf of or for the benefit of, a Prohibited Person;

 

 

(iii)

owns or controls a Prohibited Person; or

 

 

(iv)

has a Prohibited Person serving as a director, officer or, to the best of its knowledge, employee;

 

 

(r)

no Relevant Person or any of their respective directors, officers, and employees or, to the best of its knowledge, the Approved Sub-charterer is in breach of applicable Sanctions laws, and none of them (i) has been or is currently being investigated on compliance with Sanctions, (ii) has received notice or is aware of any claim, action, suit or proceeding against any of them with respect to Sanctions and (iii) has taken any action to evade the application of Sanctions;

 

 

(s)

no Relevant Person is in breach of any Anti-Money Laundering Laws, Anti-Terrorism Financing Laws and/or Business Ethics Laws and each Relevant Person has instituted and maintained systems, controls, policies and procedures designed to:

 

 

(i)

prevent and detect incidences of bribery and corruption, money laundering and terrorism financing; and

 

 

(ii)

promote and achieve compliance with Anti-Money Laundering Laws, Anti-Terrorism Financing Laws and or Business Ethics Laws including, but not limited to, ensuring thorough and accurate books and records, and utilization of best efforts to ensure that Affiliates acting on behalf of a Relevant Person shall act in compliance with Anti-Money Laundering Laws, Anti-Terrorism Financing Laws and Business Ethics Laws,

 

 

(t)

that in relation to the Contract and any Approved Sub-Charter:

 

 

(i)

each copy of the Contract and that Approved Sub-Charter provided to the Owners is a true and complete copy of such document and there have been no amendments, supplements or variations to the same;

 

 

(ii)

all amounts due and payable to the Builder under the Contract on or prior to the date hereof have been fully and irrevocably paid to the Builder (receipt of which has been duly acknowledged by the Builder) and there are no outstanding amounts as at the date hereof which are due, owing or payable to the Builder thereunder;

 

 

(iii)

there are no unresolved disputes and/or pending claims for payment between the Builder and the Charterers in respect of the Contract and/or the Vessel and/or that Approved Sub-Charter; and

 

 

(iv)

each of the Trafigura Charterer, any other Approved Sub-Charterer and the Builder is fully aware of the transactions contemplated under the MOA and this Charter;

 

 

(v)

the Trafigura Charterer and any other Approved Sub-Charterer has consented to the assignment by the Charterers to the Owners of all their rights, interests and benefits in relation to the Trafigura Charter or, as the case may be, the relevant Approved Sub-Charter pursuant to the General Assignment;

 

 

(u)

the Vessel is not employed, operated or managed in any manner which (i) is contrary to any Sanctions and in particular, the Vessel is not used by or to benefit any party which is a target of Sanctions or trade to any area or country where trading the Vessel to such area or country would constitute a breach of any Sanctions or published boycotts imposed by any of the United Nations, the European Union, the United States of America, the United Kingdom or the People's Republic of China (provided that operation or use of the Vessel by the Trafigura Charterer pursuant to the Trafigura Charter shall not in any case be deemed to be in breach or contrary to any published boycotts or sanctions imposed by the People's Republic of China) or (ii) would trigger the operation of any sanctions limitation or exclusion clause in any insurance documentation;

 

24

 

 

(v)

none of the Relevant Persons nor any of their assets, in each case, has any right to immunity from set off, legal proceedings, attachment prior to judgment or other attachment or execution of judgement on the grounds of sovereign immunity or otherwise;

 

 

(w)

none of the Relevant Persons is insolvent, bankrupt or in liquidation, bankruptcy or administration or subject to any other formal or informal insolvency or bankruptcy procedure (including, without limitation, those referred to under paragraph (g) of Clause 49.1 (Termination Events) and for the avoidance of doubt including the presentation of a petition for commencing such procedures), and no receiver, administrative receiver, administrator, liquidator, trustee or analogous officer has been appointed in respect of the any Relevant Person or all or material part of their assets;

 

 

(x)

no Termination Event or Potential Termination Event is continuing or might reasonably be expected to result from the entry into and performance of this Charter or any other Leasing Document;

 

 

(y)

any factual information provided by any Relevant Person or the Trafigura Charterer (or on their behalf) to the Owners was true and accurate in all material respects as at the date it was provided or as at the date at which such information was stated;

 

 

(z)

none of the following events has occurred:

 

 

(i)

any default by the Charterers or the Trafigura Charterer under the terms of the Trafigura Charter;

 

 

(ii)

any default by the Charterers or the Builder under the terms of the Contract;

 

 

(iii)

breach of any Sanctions by any Relevant Person;

 

 

(iv)

upon delivery of the Vessel under the Contract, any casualty or occurrence (including damage caused to the Vessel for any reason whatsoever) which results, or may be expected to result, in repairs on the Vessel equal to or exceeding the Major Casualty amount; and

 

 

(v)

upon and after the commencement of the Charter Period, any casualty or occurrence (including damage caused to the Vessel for any reason whatsoever which results, or may be expected to result, in repairs on the Vessel) which amounts to Major Casualty and which are not being dealt with in accordance with the Leasing Documents (including without limitation in accordance with Clause 38 (Possession of Vessel) and the General Assignment);

 

 

(aa)

all Environmental Laws relating to the ownership, operation and management of the Vessel and the business of each Relevant Person (as now conducted and as reasonably anticipated to be conducted in the future) have been complied with;

 

25

 

 

(bb)

no Environmental Claim has been made or threatened against any Relevant Person or otherwise in connection with the Vessel which is either (i) in excess of US$5,000,000 or (ii) has or is reasonably likely to have a Material Adverse Effect; and

 

 

(cc)

no Environmental Incident has occurred and no person has claimed that an Environmental Incident has occurred.

 

 

46

UNDERTAKINGS

 

 

46.1

The Charterers undertake that they shall comply or procure compliance with the following undertakings during the Security Period:

 

 

(a)

the Charterers shall, on the Commencement Date, procure the delivery of the full legal and beneficial title (free of any Security Interests save for those created under a Leasing Document or Financial Instrument) in the Vessel to the Owners;

 

 

(b)

there shall be sent to the Owners:

 

 

(i)

as soon as possible, but in no event later than one hundred and fifty (150) days after the end of each financial year of the Charterers, the annual financial statement accounts of the Charterers for that financial year as referred to in the Guarantor's audited consolidated annual financial statement accounts of the Guarantor for that financial year to be delivered under subparagraph (b)(iii) of Clause 46.1;

 

 

(ii)

as soon as possible, but in no event later than ninety (90) days after the end of each half-year, the unaudited semi-annual accounts of the Charterers for that half-year;

 

 

(iii)

as soon as possible, but in no event later than one hundred and fifty (150) days after the end of each financial year of the Guarantor, the audited consolidated annual financial statement accounts of the Guarantor for that financial year; and

 

 

(iv)

as soon as possible, but in no event later than ninety (90) days after the end of each half-year, the semi-annual consolidated unaudited accounts of the Guarantor for that half-year certified as to their correctness by at least one director of the Guarantor;

 

and if any of the statements above are not in the English language then they shall be accompanied by an English translation and each set of financial statements delivered pursuant to this paragraph (b) shall be prepared using the generally accepted accounting principles in the United States and shall be certified by a duly authorised officer of the relevant company as giving a true and fair view (if audited) or fairly representing (if unaudited) its financial condition and operations as at the date as at which those financial statements were drawn;

 

 

(c)

they shall provide to the Owners, at the same time as they are despatched, copies of all notices and minutes relating to any of their extraordinary shareholders' meeting which are despatched to the Charterers' or the Guarantor's respective shareholders or creditors or any class of them, unless same are publicly available;

 

 

(d)

they will provide the Owners promptly upon becoming aware of them, the details of:

 

 

(i)

any litigation, arbitration or administrative proceedings or investigations relating to any alleged or actual breach of any Sanctions or Anti-Money Laundering Laws which are current or pending against any Relevant Person, Approved Manager, sub-charterer or other member of the Group;

 

26

 

 

(ii)

any litigation, arbitration or administrative proceedings or investigations relating to any other matters not referred to in paragraph (i) above (including proceedings or investigations relating to any alleged or actual breach of the ISM Code or of the ISPS Code) in relation to a Relevant Person; and

 

 

(iii)

any Termination Event or Potential Termination Event that has occurred (and the steps, if any, being taken to remedy it);

 

 

(e)

they will, promptly upon a request by the Owners, supply to the Owners a certificate signed by an officer on its behalf certifying that no Termination Event or Potential Termination Event has occurred (or if a Termination Event or Potential Termination Event has occurred, specifying the nature of the Potential Termination Event or Termination Event (and the steps, if any, being taken to remedy it));

 

 

(f)

they shall, and shall procure that each other Relevant Person will, obtain and promptly renew or procure the obtainment or renewal of and provide copies of, from time to time, any necessary consents, approvals, authorisations, licenses or permits of any regulatory body or authority for the transactions contemplated under each Leasing Document to which it is a party (including without limitation to sell, charter and operate the Vessel);

 

 

(g)

they shall not, and shall procure that each other Relevant Person will not, create, assume or permit to exist any Security Interest (other than any Permitted Security Interest) of any kind upon any Leasing Document to which such Relevant Person is a party, and if applicable, the Vessel;

 

 

(h)

they shall at their own cost and shall procure that each other Relevant Person will:

 

 

(i)

do all that such Relevant Person reasonably can to ensure that any Leasing Document to which such Relevant Person is a party validly creates the obligations and the Security Interests which such Relevant Person purports to create; and

 

 

(ii)

without limiting the generality of paragraph (i), promptly register, file, record or enroll any Leasing Document to which such Relevant Person is a party with any court or authority in all Relevant Jurisdictions, pay any stamp duty, registration or similar tax in all Relevant Jurisdictions in respect of any Leasing Document to which such Relevant Person is a party, give any notice or take any other step which, is or has become necessary or desirable for any such Leasing Document to be valid, enforceable or admissible in evidence or to ensure or protect the priority of any Security Interest which such Relevant Person creates;

 

 

(i)

they shall notify the Owners as soon as possible (but in any event no later than fifty nine (59) days prior to the expiry of the fixed period as per the Trafigura Charter), together with any evidence requested by the Owners, whether the Trafigura Charterer intends to and will (with irrevocable confirmation from the Trafigura Charterer) extend the charter period of the Trafigura Charter in accordance with the terms thereunder;

 

 

(j)

they shall, and shall procure that each other Relevant Person will (where applicable), notify the Owners as soon as they become aware of the occurrence of:

 

 

(i)

any default by either the Approved Sub-charterer or Charterers of the terms of the Approved Sub-charter;

 

27

 

 

(ii)

an event of default or termination event howsoever called under the terms of any Approved Sub-charter entitling either the Charterers or the Approved Sub-charterer to terminate the Approved Sub-charter;

 

 

(iii)

any default by any party of the terms of the Contract;

 

 

(iv)

any event entitling the Charterers or the Builder to rescind the Contract;

 

 

(v)

breach of any Sanctions; or

 

 

(vi)

any Potential Termination Event or a Termination Event,

 

and will keep the Owners fully up-to-date with all developments and the Charterers shall, if so requested by the Owners, provide any such certificate signed by at least one officer, confirming that there exists no Potential Termination Event or Termination Event;

 

 

(k)

they shall, and shall procure that each other Relevant Person will, on the sixth month anniversary of the Commencement Date and at six-monthly intervals thereafter and otherwise upon the Owners' and/or the Owners' Financiers (if any) request (acting reasonably) from time to time and as soon as practicable after receiving such request, provide the Owners with any additional financial or other information relating:

 

 

(i)

to the Vessel (including, but not limited to the management, employment, condition, class records, location and pooling arrangement of the Vessel) and, to their best knowledge having made due enquiry, to the Trafigura Charterer;

 

 

(ii)

the terms and conditions of any sub-charter together with any other information relating to such sub-charter; and

 

 

(iii)

to any other matter (which include without limitation, to their best knowledge having made due enquiry, any other matters relating to the Trafigura Charterer) which may be reasonably requested by the Owners (or the Owners' Financiers (if any)) at any time or which under the terms of the relevant Leasing Document may be sought from the person in possession of such information.

 

 

(l)

without prejudice to paragraph (t) of Clause 46.1 (Undertakings), comply, or procure compliance, and shall procure that each other Relevant Person will comply or procure compliance, with all laws or regulations relating to the Vessel and its construction, ownership, employment, operation, management and registration, including the ISM Code, the ISPS Code, all Environmental Laws and the laws of the Vessel's registry and shall procure that the Technical Manager and the Commercial Manager and the Vessel to be in the possession of proper trading certificates and other vessel related documents and to comply with other relevant laws and regulations;

 

 

(m)

the Vessel shall be maintained in the highest standard and classed with the Approved Classification Society and shall be free of all overdue recommendations, qualifications and conditions;

 

 

(n)

they shall not and ensure that neither the Other Charterer nor the Guarantor shall enter into any form of merger, sub-division, amalgamation, demerger, reorganization, corporate reconstruction or change of ownership, or change of voting control, in the case of the Guarantor, unless it remains as the surviving entity after such merger, sub-division, amalgamation, demerger, reorganization, corporate reconstruction or change of ownership, or change of voting control and clause 11.14 of the Guarantee is complied with;

 

28

 

 

(o)

they will comply, and will procure that each other Relevant Person, each other member of the Group or, will use best endeavours to procure that, the Approved Sub-charterer will comply, with all Sanctions and all laws and regulations relating to such Relevant Person, the Vessel and its construction, ownership, employment, operation, management and registration, including the ISM Code, the ISPS Code (including the maintenance of an ISSC), all Environmental Laws, all Anti-Money Laundering Laws, Business Ethics Laws and the laws of the Vessel's registry, and in particular, they shall effect and maintain a sanctions compliance policy which, inter alia, implements the recommendations of the Sanctions Advisory, to ensure compliance with all such laws and regulations implemented from time to time, including, without limitation they will, and will procure that (in the case of Approved Sub-charterer, use best endeavours to procure that) each other Relevant Person, each other member of the Group and the Approved Sub-charterer will:

 

 

(i)

conduct their activities in a manner consistent with US and UN sanctions, as applicable;

 

 

(ii)

have sufficient resources in place to ensure execution of and compliance with their own sanctions policies by their personnel, e.g., direct hires, contractors, and staff;

 

 

(iii)

ensure subsidiaries and affiliates comply with the relevant policies, as applicable;

 

 

(iv)

have relevant controls in place to monitor automatic identification system (AIS) transponders;

 

 

(v)

have controls in place to screen and assess onboarding or offloading cargo in areas they determine to present a high risk;

 

 

(vi)

have controls to assess authenticity of bills of lading, as necessary; and

 

 

(vii)

have controls in place consistent with the Sanctions Advisory;

 

 

(p)

without limiting paragraph (o) of Clause 46.1, they will procure that:

 

 

(i)

the Vessel shall not be constructed, operated, employed, managed, used by or for the benefit of a Prohibited Person;

 

 

(ii)

the Vessel shall not be employed in trading with any Prohibited Person or in any manner contrary to Sanctions;

 

 

(iii)

notwithstanding any other provision of this paragraph (p), the Vessel shall not be permitted to call at any port in any Prohibited Country or any area or country where trading in such area or country would constitute or would be reasonably expected to constitute a breach of Sanctions;

 

 

(iv)

the Vessel shall not be traded in any manner which would trigger the operation of any sanctions limitation or exclusion clause (or similar) in the Insurances or in any manner which would result or would reasonably be expected to result in any Relevant Person or the Owners becoming a Prohibited Person; and

 

29

 

 

(v)

that each charterparty in respect of the Vessel shall contain, for the benefit of the Owners, language which gives effect to the provisions of paragraph (p) of Clause 46.1 as regards Sanctions and of this Clause and which permits refusal of employment or voyage orders if compliance would result in a breach of Sanctions and which prohibits trading to any Prohibited Country;

 

 

(q)

they shall ensure that the Market Value of the Vessel will be tested at any of the following instances:

 

 

(i)

on or around the end of each calendar year starting from and including 31 December 2022 (each such date the "Market Value Test Date") and the Charterers shall procure valuation reports issued by the Approved Valuers evidencing such Market Value applicable to a Market Value Test Date to be delivered to the Owners no later than 30 days after the Market Value Test Date;

 

 

(ii)

if, in the opinion of the Owners, any volatile market fluctuations occurs that may affect the value of the Vessel or vessels of the similar type of the Vessel, at any time at the request of the Owners;

 

 

(iii)

at any time at the request of the Owners if the Owners have determined that the Market Value of the Vessel is likely to fall below an amount equal to 125% of the then applicable Owner's Cost; and

 

 

(iv)

upon the occurrence of a Potential Termination Event or Termination Event, at any time at the request of the Owners,

 

and in each case above the Charterers shall bear the fees and expenses of the Approved Valuers or reimburse the same to the Owners (as the case may be).

 

 

(r)

they shall notify the Owners immediately of:

 

 

(i)

as soon as they become aware, any Environmental Claim made against the Charterers or any subcharter of the Vessel in connection with the Vessel or any Environmental Incident;

 

 

(ii)

arrest or detention of the Vessel;

 

 

(iii)

any exercise or purported exercise of any lien on that Vessel or its Earnings or any requisition of that Vessel for hire;

 

 

(iv)

any damage caused to or alteration of the Vessel for any reason whatsoever which results, or may be expected to result, in repairs on the Vessel which exceed $5,000,000; or

 

 

(v)

any casualty or occurrence as a result of which the Vessel has become or is, by the passing of time or otherwise, likely to become, a Major Casualty;

 

 

(s)

they shall not permit the sub-chartering of the Vessel other than to any Approved Sub-Charter provided that if:

 

 

(i)

any such Approved Sub-charter is terminated and/or rescinded; and

 

 

(ii)

the Charterers comply with their obligations under subparagraph (z)(iii) of Clause 46.1,

 

then the Charterers shall be permitted to freely sub-charter the Vessel save for on a bareboat charter basis or a time charter basis exceeding or capable of exceeding twelve months in duration which would require Owner's prior approval and that any such sub-charter is assigned by the Charterers in favour of the Owners in form and substance satisfactory to the Owners;

 

30

 

 

(t)

they shall, and shall procure that each other Relevant Person will, comply with all applicable laws and regulations in respect of Sanctions, and in particular, the Charterers shall effect and maintain a sanctions compliance policy to ensure compliance with all such laws and regulations implemented from time to time;

 

 

(u)

they shall, and shall procure that each other Relevant Person and their respective officers, directors and employees, will:

 

 

(i)

conduct its business in compliance with all Anti-Money Laundering Laws, Anti-Terrorism Financing Laws and/or Business Ethics Laws;

 

 

(ii)

maintain systems, controls, policies and procedures designed to promote and achieve ongoing compliance with Anti-Money Laundering Laws, Anti-Terrorism Financing Laws and/or Business Ethics Laws;

 

 

(iii)

in respect of the Charterers, not use, or permit or authorize any person to directly or indirectly use, the Opening Capital Balance for any purpose that would breach any Anti-Money Laundering Laws, Anti-Terrorism Financing Laws and/or Business Ethics Laws;

 

 

(iv)

not lend, invest, contribute or otherwise make available the Opening Capital Balance to or for any other person in a manner which would result in a violation of Anti-Money Laundering Laws, Anti-Terrorism Financing Laws and/or Business Ethics Laws.

 

 

(v)

they shall, and shall procure that that each other Relevant Person will, promptly notify the Owners and provide all information in relation to its business and operations which may be relevant for the purposes of ascertaining whether they are in compliance with all applicable laws and regulations relating to Sanctions, and in particular, the Charterers shall notify the Owners in writing immediately upon being aware that any of the Charterers' shareholders, directors, officers or employees is a Prohibited Person or has otherwise become a target of Sanctions;

 

 

(w)

they shall not appoint or permit to be appointed any manager of the Vessel save for an Approved Manager on terms acceptable to the Owners and such Approved Manager has (prior to accepting its appointment entered into a Manager's Undertaking);

 

 

(x)

if at any time;

 

 

(i)

the shares of the Guarantor cease to trade on the NASDAQ or Over the Counter (OTC), the Charterers shall promptly, and in any event within thirty (30) days upon receiving written request from the Owners, provide, or ensure that a third party has provided, additional security acceptable to the Owners and documented in such terms as the Owners may require; or

 

 

(ii)

the Market Value of the Vessel falls below the amount equivalent to 125% of the then applicable Owners' Costs (the "LTV Breach" and the said difference between the Market Value of the Vessel and 125% of the then applicable Owners' Costs shall be referred to as the "shortfall"), the Charterers shall, promptly and in any event no later than the date falling thirty (30) days from the date which the valuations relating to the Vessel's Market Value are received by the Owners, at the Owners' discretion, either:

 

 

(A)

make payment in an amount such as to eliminate the shortfall which payment shall be deemed to be an advance payment of hire and credited against future instalment(s) of Fixed Charterhire (or part thereof) payable in inverse order of maturity; and/or

 

31

 

 

(B)

provide, or ensure that a third party has provided, additional Security Interests which, has a Market Value (in the case of a Security Interests over a vessel) or otherwise in the opinion of the Owners (in the case of Security Interests over any other asset) has a net realisable value at least equal to the shortfall and is acceptable to the Owners, and which is documented in such terms as the Owners may require.

 

 

(y)

save with the prior written consent of the Owners, they shall not, and shall procure that no other Relevant Person shall, agree or enter into any transaction, arrangement, document or do or omit to do anything which will have the effect of varying, amending, supplementing or waiving any term of the Trafigura Charter or any other Approved Sub-Charter;

 

 

(z)

they shall ensure that:

 

 

(i)

all Earnings and any other amounts received by them in connection with the Vessel are paid into the Operating Account;

 

 

(ii)

all operating expenses in connection with the Vessel are paid from the Operating Account or via the monthly budget from the manager's bank account which shall be credited from the Operating Account; and

 

 

(iii)

the credit balance in the Operating Account shall not at any time as from the Commencement Date be less than $500,000. Provided if,

 

 

(A)

the Trafigura Charterer does not exercise its option to extend the charter period of the Trafigura Charter beyond the third anniversary or, if such charter period extends beyond its third anniversary, the fourth anniversary of the charter period commencement date thereunder and the Charterers do not enter into a Substitute Charter or provide evidence (to the satisfaction of the Owners) relating to the entry into, and validity of, such Substitute Charter no later than one (1) month prior to the third anniversary and, if such charter period extends beyond its third anniversary, the fourth anniversary of the charter period commencement date of the Trafigura Charter (the "Notification Date"); or

 

 

(B)

a Substitute Charter has been entered into pursuant to (A) or a New Substitute Charter (as defined hereunder) has been entered into pursuant to this Clause and the charter period under such charter expires or is otherwise terminated prior to the end of the Charter Period and the Charterers do not enter into another replacing Substitute Charter (each such replacing Substitute Charter, the "New Substitute Charter") or provide evidence (to the satisfaction of the Owners) relating to the entry into, and validity of, such New Substitute Charter no later than one (1) month prior to the expiry or termination date of the then existing Substitute Charter (the "New Notification Date").

 

the Charterers shall maintain, as from (i) the Notification Date, in the case of paragraph (A) above or (ii) the New Notification Date, in the case of paragraph (B) above, a credit balance in the Operating Account of not less than $1,500,000. Nonetheless, if the Charterers subsequently enter into a Substitute Charter or a New Substitute Charter (as the case may be), the minimum credit balance requirement pursuant to this subparagraph (z)(iii) of Clause 46.1 shall be reduced to $500,000 as from the next immediate Payment Date;

 

32

 

 

(aa)

they shall not, and shall procure that the Guarantor shall not, make or pay any dividend or other distribution (in cash or in kind) in respect of its share capital following the occurrence of a Potential Termination Event or Termination Event;

 

 

(bb)

the Vessel shall be registered under the Flag State at all times;

 

 

(cc)

they shall be responsible for losses directly or indirectly arising out of the defects of the design of the Vessel and/or the Charterers' negligence in the supervision of the construction of the Vessel;

 

 

(dd)

they shall ensure that the Vessels to be maintained with all spare parts on board and on order and with all stores on board together with all records, logs, plans, operating manuals and drawings in relation to the Vessel or the Vessel's operations and/or maintenance;

 

 

(ee)

they shall, upon the request of the Owners and at the cost of the Charterers, on or before 31st July in each calendar year, supply or procure the supply to the Owners all information necessary in order for the Owners to comply with their or any Owners' Financiers' obligations under the Poseidon Principles in respect of the preceding year, including, without limitation, all ship fuel oil consumption data required to be collected and reported in accordance with Regulation 22A of Annex VI and any Statement of Compliance relating to the Vessel for the preceding calendar year and, for the avoidance of doubt, such information shall be "Confidential Information" for the purposes of Clause 56 (Confidentiality) but the Charterers acknowledge that, in accordance with the Poseidon Principles, such information will form part of the information published regarding the Owners' and/or Owners' Financiers' portfolio climate alignment; and

 

 

(ff)

save with the Owners' prior consent in writing, they shall not agree or enter into, and shall procure that the Builder does not agree or enter into, any transaction, arrangement, document or do or omit to do anything which will have the effect of varying, amending, supplementing or waiving any term of the Contract relating to the Builder's Warranties.

 

 

47

INSPECTION OF VESSEL

 

 

47.1

Without prejudice to Clause 47.2 (Inspection of Vessel) below, the Owners shall, after giving notice to the Charterers, be entitled to inspect or survey the Vessel or instruct a surveyor to carry out such survey on their behalf:

 

 

(a)

to ascertain the condition of the Vessel and satisfy themselves that the Vessel is being properly repaired and maintained;

 

33

 

 

(b)

in dry-dock if the Charterers have not dry-docked the Vessel in accordance with Clause 10(g) (Periodical Dry-Docking); and

 

 

(c)

for any other reason they consider necessary,

 

provided it does not unduly interfere with the normal commercial operation of the Vessel.

 

 

47.2

The Owners shall be entitled to exercise its rights of inspection or survey as described under Clause 47.1 once a year at the cost of the Charterers and at any other time at the cost of the Owners (and, except where inspection or survey is carried out pursuant to the following (a) or (b), without interference to the operation of the Vessel), save that (a) upon the occurrence of a Termination Event or Potential Termination Event or the occurrence of any major insurance claims which exceeds the Major Casualty amount in respect of the Vessel, the Owners shall have the right to inspect or survey the Vessel or instruct a duly authorized surveyor to carry out such survey on their behalf at any time (and for the avoidance of doubt, more than once a year) without prior notice to, and at the cost of, the Charterers; and (b) the Owners shall have the right to inspect or survey the Vessel or instruct a duly authorized surveyor to carry out such survey on their behalf at any time prior to the Commencement Date. The Charterers shall procure that the Owners can fully exercise such rights of inspection and survey.

 

 

47.3

The Charterers shall also permit the Owners to inspect the Vessel's log books whenever requested and shall whenever required by the Owners furnish them with full information regarding any casualties or other accidents or damage to the Vessel.

 

 

47.4

Except as otherwise provided under Clause 47.2, the costs and fees for any inspection and survey permitted under this Clause shall be paid by the Charterers.

 

 

47.5

All time used in respect of inspection, survey or repairs pursuant to this Clause shall be for the Charterers' account and form part of the Charter Period.

 

 

48

INTENTIONALLY DELETED

 

 

49

TERMINATION EVENTS

 

 

49.1

The Owners and the Charterers hereby agree that any of the following events shall constitute a Termination Event:

 

 

(a)

any Relevant Person fails to make any payment on the due date or on demand in accordance with the terms of any Leasing Document to which it is a party, unless such non-payment is caused by administrative or technical error and the relevant payment is made within three (3) Business Days (in the case of payment of Charterhire) or five (5) Business Days (in the case of any other payment, other than Charterhire) of the relevant due date;

 

 

(b)

the Charterers breach or omit to observe or perform any of their undertakings in paragraphs (a), (f), (g), (p), (j), (l), (r), (t), (u), (v), (x), (z)(iii), or (bb) of Clause 46.1 (Undertakings) or the Guarantor breaches or omits to observe or perform any of its undertakings or the financial covenants contained under clause 11.14 (Financial covenants) of the Guarantee;

 

 

(c)

the Charterers fail to obtain and/or maintain the Insurances required under Clause 39 (Insurance) in accordance with the provisions thereof (or any insurer in respect of such Insurances cancels the Insurances or disclaims liability with respect thereto);

 

34

 

 

(d)

any Relevant Person commits any other breach of, or omits to observe or perform, any of their other obligations or undertakings in this Charter or any Leasing Document (other than a breach referred to in paragraphs (a), (b) and (c) above) unless such breach or omission is in the opinion of the Owners, remediable and the Relevant Person remedies (or cause to remedy) such breach or omission to the satisfaction of the Owners within ten (10) Business Days of the occurrence of such breach or omission;

 

 

(e)

any representation or warranty made by any Relevant Person in or pursuant to any Leasing Document to which it is a party proves to be untrue or misleading when it is made;

 

 

(f)

any of the following occurs in relation to any Financial Indebtedness of any Relevant Person or any member of the Group:

 

 

(i)

any Financial Indebtedness of such entity is not paid when due or, if so payable, on demand after any applicable grace period has expired;

 

 

(ii)

any Financial Indebtedness of such entity becomes due and payable, or capable of being declared due and payable, prior to its stated maturity date as a consequence of any event of default and not as a consequence of the exercise of any voluntary right of prepayment;

 

 

(iii)

a lease, hire purchase agreement or charter creating any Financial Indebtedness of such entity is terminated by the lessor or owner as a consequence of any termination event or event of default (howsoever defined); or

 

 

(iv)

any overdraft, loan, note issuance, acceptance credit, letter of credit, guarantee, foreign exchange or other facility, or any swap or other derivative contract or transaction, relating to any Financial Indebtedness of such entity ceases to be available or becomes capable of being terminated or declared due and payable or cash cover is required or becomes capable of being required, as a result of any termination event or event of default (howsoever defined);

 

provided that no Termination Event will occur under this paragraph (f) in respect of (A) the Guarantor if the aggregate amount of Financial Indebtedness falling within sub-paragraphs (i) to (iv) above is less than US$10,000,000 (or its equivalent in any other currency or currencies) or (B) a Relevant Person (other than the Guarantor) if the aggregate amount of Financial Indebtedness falling within sub-paragraphs (i) to (iv) above is less than US$1,000,000 (or its equivalent in any other currency or currencies) for such Relevant Person;

 

 

(g)

any of the following occurs in relation to any Relevant Person or any member of the Group:

 

 

(i)

such entity becomes, in the opinion of the Owners, unable to pay their debts as they fall due;

 

 

(ii)

in respect of such entity, the value of its assets is less than its liabilities (taking into account contingent liabilities);

 

 

(iii)

any administrative or other receiver is appointed over all or a substantial part of the assets of such entity unless as part of a solvent reorganisation which has been approved by the Owners;

 

35

 

 

(iv)

such entity makes any formal declaration of bankruptcy or any formal statement to the effect that they are insolvent or likely to become insolvent, or a winding up or administration order is made in relation to such entity, or the members or directors of such entity pass a resolution to the effect that they should be wound up, placed in administration or cease to carry on business;

 

 

(v)

a petition is presented in any Relevant Jurisdiction for the winding up or administration, or the appointment of a provisional liquidator, of such entity;

 

 

(vi)

such entity petitions a court, or presents any proposal for, any form of judicial or non-judicial suspension or deferral of payments, reorganisation of their debt (or certain of their debt) or arrangement with all or a substantial proportion (by number or value) of their creditors or of any class of them or with a minority proportion (by number or value) of their creditors or of any class of them which would reasonably likely to have a Material Adverse Effect or any such suspension or deferral of payments, reorganisation or arrangement is effected by court order, contract or otherwise;

 

 

(vii)

any meeting of the members or directors of such entity is summoned for the purpose of considering a resolution or proposal to authorise or take any action of a type described in paragraph (iii), (iv), (v) or (vi);

 

 

(viii)

in any jurisdiction, any event occurs or any procedure is commenced which, in the opinion of the Owners, is similar to any of the foregoing referred to in (ii) to and including (vii) above; or

 

 

(ix)

any expropriation, attachment, sequestration, distress or execution or any analogous process in any jurisdiction which affects any asset or assets of such entity which is not discharged within fourteen (14) days;

 

 

(h)

a Relevant Person suspends or ceases or threatens to suspend or cease carrying on its business;

 

 

(i)

any consent, approval, authorisation, license or permit necessary to enable the Charterers or the Approved Sub-charterer to operate or charter the Vessel or any of Relevant Person to comply with any provision of Leasing Document (as the case may be) and/or to ensure that the obligations of any Relevant Person or the Approved Sub-charterer under any Leasing Document or the Approved Sub-charter (as applicable) are legal, valid, binding or enforceable (I) is not granted, (II) expires without being renewed, (III) is revoked or becomes liable to revocation or (IV) any condition of such a consent, approval, authorisation, license or permit is not fulfilled provided that, in the case of an Approved Sub-charter, this shall not constitute a "Termination Event" under this Clause 49.1 if (i) such Approved Sub-charter is replaced or remedied in the time required under and in accordance with subparagraphs (z)(iii)(A) or (z)(iii)(B) of Clause 46.1 (Undertakings) or (ii) the Charterers comply with their obligations under subparagraph (z)(iii) of Clause 46.1 (Undertakings);

 

 

(j)

any event or circumstance occurs which (in the opinion of the Owners) has or is reasonably likely to have a Material Adverse Effect;

 

 

(k)

this Charter or any Leasing Document or any Security Interest created by a Leasing Document:

 

 

(i)

is cancelled, terminated, rescinded or suspended or otherwise ceases to remain in full force and effect for any reason or no longer constitutes valid, binding and enforceable obligations of any party to that document for any reason whatsoever; or

 

36

 

 

(ii)

is amended or varied without the prior written consent of the Owners;

 

 

(l)

a Relevant Person or an Approved Sub-charterer rescinds or purports to rescind or repudiates or purports to repudiate a Leasing Document or an Approved Sub-charter (in the case of an Approved Sub-charter, (i) this is not replaced or remedied in the time required under and otherwise in accordance with subparagraphs (z)(iii)(A) or (z)(iii)(B) of Clause 46.1 (Undertakings) and (ii) the Charterers breach or omit to observe or perform their obligations under subparagraph (z)(iii) of Clause 46.1 (Undertakings));

 

 

(m)

the Security Interest constituted by any Leasing Document is in any way imperiled or in jeopardy;

 

 

(n)

any Termination Event (as defined in the Other Charter) occurs under the Other Charter;

 

 

(o)

the occurrence of any of the following events;

 

 

(i)

an event of default or termination event howsoever called under the terms of the Approved Sub-charter entitling either the Approved Sub-charterer or the Charterers to terminate the Approved Sub-charter and the Charterers breach or omit to observe or perform their obligations under subparagraph (z)(iii) of Clause 46.1 (Undertakings);

 

 

(ii)

if any Relevant Person or the Approved Sub-charterer:

 

 

(A)

is or becomes a Prohibited Person;

 

 

(B)

is owned or controlled by or acting directly or indirectly on behalf of or for the benefit of, a Prohibited Person;

 

 

(C)

owns or controls a Prohibited Person;

 

 

(D)

has a Prohibited Person serving as a director, officer or employee;;

 

 

(p)

Delivery does not occur on or prior to the Cancelling Date;

 

 

(q)

a Total Loss has occurred in respect of the Vessel or any damage has occurred in respect of the Vessel which, in the opinion of Owners, with the passage of time may result in a Total Loss of the Vessel or otherwise materially and adversely affects the value of the Vessel;

 

 

(r)

there is a merger, amalgamation, demerger or corporate reconstruction of the Charterer, the Other Charterers and the Guarantor without the Owners' prior written consent;

 

(s)

 

 

 

(i)

the shares of the Guarantor cease to trade on the NASDAQ or Over the Counter (OTC), unless the Charterers comply with their obligations under subparagraph (x)(i) of Clause 46.1 (Undertakings); or

 

 

(ii)

the Guarantor ceases being an entity reporting with the U.S. Securities and Exchange Commission;

 

 

(t)

there is a change in control of ownership or control of the Charterers or there is a change of voting control in the case of the Guarantor that set out in paragraph (a) of Clause 45.1 (Representations and Warranties) unless prior written consent from the Owners has been obtained prior to such change;

 

37

 

 

(u)

there is any occurrence of any litigation, arbitration or administrative proceedings or investigations involving a Relevant Person which has been commenced or taken and has been adversely determined and which would have or is reasonably likely to have a Material Adverse Effect.

 

 

49.2

Notwithstanding and without prejudice to Clause 33 (Cancellation), upon the occurrence of any Termination Event, the Owners may issue a written notice to the Charterers terminating this leasing of the Vessel under this Charter and demanding payment of the Termination Sum (the "Termination Notice"), whereupon the Charterers shall be obliged to pay the Termination Sum to the Owners on the date specified by the Owners in their sole discretion in the Termination Notice (the "Termination Date").

 

 

49.3

For the avoidance of doubt, notwithstanding any action taken by the Owners following a Termination Event, the Charterers shall remain liable for the outstanding obligations on their part to be performed under this Charter including but not limited to all insurance, operational and maintenance covenants until such time as the Vessel is redelivered to the Owners in accordance with Clause 41.6, or the title is transferred to the Charterers in accordance with Clause 41.3, the Vessel is sold in accordance with 41.10 or the Owners exercise the option set out in Clause 41.11.

 

 

49.4

Without limiting the generality of the foregoing or any other rights of the Owners, upon the occurrence of a Termination Event, the Charterers agree and acknowledge that the Owners shall have the sole and exclusive right and power to (i) settle, compromise, compound, adjust or defend any action, suit or proceeding relating to or pertaining to the Vessel and this Charter, (ii) make proof of loss, appear in and prosecute any action arising from any policy or policies of insurance maintained pursuant to this Charter, and settle, adjust or compromise any claims for loss, damage or destruction under, or take any other action in respect of, any such policy or policies and/or change or appoint a new manager for the Vessel and the appointment of any originally appointed manager may be terminated immediately without any recourse to the Owners.

 

 

49.5

Each Termination Event shall either be a breach of condition by the Charterers where it involves a breach of this Charter or any of the other Leasing Document by the Charterers or shall otherwise be an agreed terminating event, the occurrence of which gives rise to a right of the Owners to terminate the leasing of the Vessel under this Charter and to exercise its rights under this clause.

 

 

50

MANDATORY SALE

 

 

50.1

If it becomes unlawful in any applicable jurisdiction for the Owners to perform any of their obligations as contemplated by this Charter or the MOA to perform their obligations under the Financial Instruments, the Owners shall notify the Charterers of this event and the Charterers shall be required to pay the Mandatory Sale Price to the Owners within thirty (30) days following such notice by the Owners or, if earlier, the date specified by the Owners in the notice delivered to the Charterers (being no earlier than the last day of any applicable grace period permitted by law), and this Charter shall terminate in accordance with the procedures set out in Clause 50.4.

 

38

 

 

50.2

If it is or has become:

 

 

(a)

unlawful or prohibited, whether as a result of the introduction of a new law, an amendment to an existing law or a change in the manner in which an existing law is or will be interpreted or applied; or

 

 

(b)

contrary to, or inconsistent with, any regulation,

 

for any Relevant Person to maintain or give effect to any of its obligations under this Charter or any of the other Leasing Documents to which it is a party in the manner it is contemplated under such Leasing Document or any of the obligations of such Relevant Person under any Leasing Document to which it is a party are not or cease to be legal, valid, binding and enforceable, the Charterers shall be required to pay the Mandatory Sale Price to the Owners within thirty (30) days following such occurrence or, if earlier, a date specified by the Owners (being no earlier than the last day of any applicable grace period permitted by law), and this Charter shall terminate in accordance with the procedures set out in Clause 50.4.

 

 

50.3

If there is a breach of 46.1(j), 46.1(t), 46.1(u) or 46.1(v) in any such case on the basis that reference to "the People's Republic of China" applies to the definition of "Prohibited Person" or paragraph (e) of the definition of "Sanctions Authority" applies to the definition of "Sanctions Authority", the Charterers shall be required to pay the Mandatory Sale Price to the Owners within forty five (45) days following such occurrence or, if earlier, a date specified by the Owners (being no earlier than the last day of any applicable grace period permitted by law or the relevant official institution, agency or the government of the People's Republic of China) and this Charter shall terminate in accordance with the procedures set out in Clause 50.4.

 

 

50.4

If the Mandatory Sale Price becomes payable in accordance with Clause 36.13 (Charterhire and Advance Charterhire) or Clause 37.3 (Changes to Interest Rate, Default Interest) or Clause 37.5 or Clause 50.1 or Clause 50.2 or Clause 50.3 or Clause 54.5 (No Set-off or Tax Deduction), the same shall (in each such case) be payable in consideration of the purchase and transfer of the legal and beneficial title of the Vessel pursuant to Clause 52 (Sale of the Vessel). The day on which the Mandatory Sale Price is paid pursuant to Clause 36.13 (Charterhire and Advance Charterhire) or Clause 37.3 (Changes to Interest Rate, Default Interest) or Clause 50.1, Clause 50.2 or Clause 50.3 or Clause 54.5 (No Set-off or Tax Deduction) is a "Mandatory Sale Date" and such transfer of Vessel provided therein is a "Mandatory Sale".

 

 

51

PURCHASE OPTION

 

 

51.1

The Charterers shall have the option (the "Purchase Option") to purchase the Vessel on the first (1st) anniversary of the Commencement Date or any subsequent Purchase Option Date (as hereinafter defined) specified in the Purchase Option Notice (as hereinafter defined) at the applicable Purchase Option Price, subject to the other terms of this Clause 51 (Purchase Option).

 

 

51.2

The Purchase Option shall be exercisable only:

 

 

(a)

upon the Charterers providing not less than sixty (60) days' written notice (the "Purchase Option Notice") to purchase the Vessel on a date specified therein (the "Purchase Option Date") which shall fall on any Payment Date on or after the first (1st) anniversary of the Commencement Date or on the last day of the Charter Period (as the case may be) (unless otherwise agreed by the Owners); and

 

 

(b)

in the absence of the occurrence of a Potential Termination Event or a Termination Event which is continuing on or prior to either the date of the Purchase Option Notice or the Purchase Option Date.

 

39

 

 

51.3

The Purchase Option Notice shall be signed by a duly authorised officer or attorney of the Charterers and, once delivered to the Owners, will be irrevocable and the Charterers shall be bound to pay to the Owners the Purchase Option Price on the Purchase Option Date.

 

 

51.4

The sale of the Vessel pursuant to the Charterers' exercise of the Purchase Option shall be conducted in accordance with Clause 52 (Sale of the Vessel).

 

 

51.5

If the Charterers do not exercise the Purchase Option on or before the expiration of the Charter Period:

 

 

(a)

the Charterers shall pay the Option Premium to the Owners on the last day of the Charter Period;

 

 

(b)

the Charterers shall on the last day of the Charter Period re-deliver the Vessel to the Owners in accordance with Clause 41.6 (Termination, Redelivery and Total Loss) and shall ensure that they have fulfilled their obligations under this Charter and made payment of the Option Premium, all Charterhire and all other moneys pursuant to the terms of this Charter; and

 

 

(c)

the Owners shall be entitled (at Owners' sole discretion) to sell or operate the Vessel as they may require and may create whatsoever interests thereon, including without limitation sale and purchase agreements, charterparties or any other form of employment contracts.

 

 

51.6

For the avoidance of doubt, the Charterers agree that should the Option Premium not be paid or not be paid in full on its due date for payment under the terms of this Charter, any net proceeds deriving from the sale or operation of the Vessel by the Owners shall not be applied towards reduction of the unpaid Option Premium, Charterhire or any other moneys due pursuant to the terms of this Charter.

 

 

52

SALE OF THE VESSEL

 

 

52.1

The sale of the legal and beneficial interest and title in the Vessel pursuant to the Charterer's payment of the Termination Sum under Clause 41 (Termination, Redelivery and Total Loss), the Charterers' exercise of the Charterers' Purchase Option under Clause 51 (Purchase Option) or the completion of the Mandatory Sale under Clause 50 (Mandatory Sale) shall be on an "as is where is" and subject to the following terms and conditions:

 

 

(a)

no condition, warranty or representation of any kind is or has been given by or on behalf of the Owners in respect of the Vessel or any part thereof, and accordingly the Charterers confirm that they have not, in entering into this Charter, relied on any condition, warranty or representation by the Owners or any person on the Owners' behalf, express or implied, whether arising by law or otherwise in relation to the Vessel or any part thereof, including, without limitation, warranties or representations as to the description, suitability, quality, merchantability, fitness for any purpose, value, state, condition, appearance, safety, durability, design or operation of any kind or nature of the Vessel or any part thereof, and the benefit of any such condition, warranty or representation by the Owners is hereby irrevocably and unconditionally waived by the Charterers to the extent permissible under applicable law;

 

 

(b)

the Charterers hereby also waive any rights which they may have in tort in respect of any of the matters referred to under paragraph (a) above and irrevocably agree that the Owners shall have no greater liability in tort in respect of any such matter than they would have in contract after taking account of all of the foregoing exclusions. No third party making any representation or warranty relating to the Vessel or any part thereof is the agent of the Owners nor has any such third party authority to bind the Owners thereby. Notwithstanding anything contained above, nothing contained herein is intended to obviate, remove or waive any rights or warranties or other claims relating thereto which the Charterers (or their nominee) or the Owners may have against the manufacturer or supplier of the Vessel or any third party;

 

40

 

 

(c)

the Vessel shall be free from any registered mortgages incurred by the Owners (save for those mortgages, liens, encumbrances and debts arising out of or in connection with the Charter or the Leasing Documents or any other Permitted Security Interests);

 

 

(d)

the Purchase Option Price or the Termination Sum or the Mandatory Sale Price shall be paid by (or on behalf of) the Charterers to the Owners the Purchase Option Date or the Termination Date or the Mandatory Sale Date (as the case may be) together with unpaid amounts of Charterhire and other moneys owing by or accrued or due from the Charterers under this Charter on or prior to the Purchase Option Date or the Termination Date or the Mandatory Sale Date (as the case may be) which remain unpaid; and

 

 

(e)

concurrently with the Owners receiving irrevocable payment of the Purchase Option Price or, as the case may be, the applicable Termination Sum or the applicable Mandatory Sale Price and all other moneys payable under this Charter in full pursuant to the terms of this Charter, the Owners shall (save in the event of Total Loss) (at the Charterer's cost) transfer the legal and beneficial ownership of the Vessel on an "as is where is" basis to the Charterers or their nominees and shall (at the Charterers' cost) execute a bill of sale and a protocol of delivery and acceptance evidencing the same and any other document strictly necessary to transfer the title of the Vessel to the Charterers (and to the extent required for such purposes, the Vessel shall be deemed first to have been redelivered to the Owners), provided that the Owners shall not be obliged to transfer the legal and beneficial interest in the Vessel to the Charterers in any event unless the Owners are satisfied that no Termination Event has occurred and is continuing and all obligations, duties, liabilities and indemnities of the Charterers under the Leasing Documents have been fully performed and (if applicable) paid.

 

 

53

INDEMNITIES

 

 

53.1

The Charterers shall pay such amounts to the Owners, on the Owners' demand, in respect of all documented claims, expenses, liabilities, losses, fees (including but not limited to any vessel registration and tonnage fees or any tax incurred by the Owners as a result of the operation and/or trading of the Vessel) suffered or incurred by or imposed on the Owners arising from this Charter and any Leasing Document, including but not limited to (i) in connection with delivery, possession, performance, control, registration, repair, survey, insurance, maintenance, manufacture, purchase, ownership and operation of the Vessel by the Owners, (ii) costs related to the prevention or release of liens or detention of or requisition, use, operation or redelivery, sale or disposal of the Vessel or any part of it and (iii) enforcing the Owners' rights under this Charter or any Leasing Document, in each case of paragraphs (i) to (iii), whether prior to, during or after termination of the leasing of this Charter and whether or not the Vessel is in the possession or the control of the Charterers or otherwise. Without prejudice to its generality, this Clause 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, the MARPOL Protocol, any Environmental Law, any Sanctions or any Anti- Money Laundering Laws, Anti-Terrorism Financing Laws or Business Ethics Laws.

 

 

53.2

The Charterers agree to indemnify the Owners against all consequences or liabilities arising from the Master, officers or agents signing Bills of Lading or other documents.

 

41

 

 

53.3

In consideration of the Charterers requesting the Other Owner to charter the Other Vessel to the Other Charterer under the Other Charter, the Charterers hereby irrevocably and unconditionally undertake to pay immediately on demand from the Owners such amounts in respect of all claims, expenses, liabilities, losses, fees of every kind and nature and all other moneys due, owing and/or payable to the Other Owner under or in connection with the Other Charter, and to indemnify and hold the Other Owner harmless against all such moneys, costs, fees and expenses.

 

 

53.4

All rights which the Charterers have at any time (whether in respect of this Charter or any other transaction) against the Other Charterer or any Relevant Person shall be fully subordinated to the rights of the Owners under the Leasing Documents and until the end of this Charter and unless the Owners otherwise direct, the Charterers shall not exercise any rights which it may have (whether in respect of this Charter or any other transaction) by reason of performance by it of its obligations under the Leasing Documents or by reason of any amount becoming payable, or liability arising, under this Clause:

 

 

(a)

to be indemnified by the Other Charterer or such Relevant Person;

 

 

(b)

to claim any contribution from any third party providing security for, or any other guarantor of, the Other Charterer's or such Relevant Person's obligations under the Leasing Documents;

 

 

(c)

to take any benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights of the Other Charterers or such Relevant Person under the Leasing Documents or of any other guarantee or security taken pursuant to, or in connection with, the Leasing Documents by any of the aforesaid parties;

 

 

(d)

to bring legal or other proceedings for an order requiring the Other Charterers or such Relevant Person to make any payment, or perform any obligation, in respect of any Leasing Document;

 

 

(e)

to exercise any right of set-off against the Other Charterer or such Relevant Person; and/or

 

 

(f)

to claim or prove as a creditor of the Other Charterer or such Relevant Person,

 

and if the Charterers receive any benefit, payment or distribution in relation to such rights it shall hold that benefit, payment or distribution to the extent necessary to enable all amounts which may be or become payable to the Owners or the Other Owner by the Other Charterers or such Relevant Person under or in connection with the Leasing Documents to be repaid in full on trust for the Owners or the Other Owner and shall promptly pay or transfer the same to the Owners or the Other Owner as may be directed by the Owners.

 

 

53.5

The Charterers hereby irrevocably agree to indemnify and hold harmless the Owners against any claim, expense, liability or loss reasonably incurred by the Owners in liquidating or employing deposits from the Owners' Financiers or third parties to fund the acquisition of the Vessel pursuant to the MOA and the Contract.

 

 

53.6

Notwithstanding anything to the contrary herein (but subject and without prejudice to Clause 33 (Cancellation) ) and without prejudice to any right to damages or other claim which the Charterers may have at any time against the Owners under this Charter, the indemnities provided by the Charterers in favour of the Owners shall continue in full force and effect notwithstanding any breach of the terms of this Charter or termination of this Charter pursuant to the terms hereof or termination of this Charter by the Owners.

 

42

 

 

53.7

The obligations of the Charterers under this Clause 53 (Indemnities) and in respect of any Security Interest created pursuant to the Security Documents will not be affected or discharged by an act, omission, matter or thing which would reduce, release or prejudice any of its obligations under this Clause 53 or in respect of any Security Interest created pursuant to the Security Documents (without limitation and whether or not known to it or any Relevant Person) including:

 

 

(a)

any time, waiver or consent granted to, or composition with, any Relevant Person or other person;

 

 

(b)

the release of any other Relevant Person or any other person under the terms of any composition or arrangement with any creditor of a Relevant Person or any of its affiliates;

 

 

(c)

the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect or delay in perfecting, or refusal or neglect to take up or enforce, or delay in taking or enforcing any rights against, or security over assets of, any Relevant Person or other person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security;

 

 

(d)

any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of a Relevant Person or any other person;

 

 

(e)

any amendment, novation, supplement, extension, restatement (however fundamental and whether or not more onerous) or replacement of any Leasing Document or any other document or security;

 

 

(f)

any unenforceability, illegality or invalidity of any obligation of any person under any Security Document or any other document or security; or

 

 

(g)

any insolvency or similar proceedings.

 

 

54

NO SET-OFF OR TAX DEDUCTION

 

 

54.1

All Charterhire and any other payment made from the Charterers to enable the Owners to pay all amounts under a Leasing Document shall be paid punctually and:

 

 

(a)

without any form of set-off, cross-claim, condition or counterclaim;

 

 

(b)

free and clear of any tax deduction or withholding unless required by law; and

 

 

(c)

net of any bank charges or bank fees.

 

 

54.2

Without prejudice to Clause 54.1 (No Set-off or Tax Deduction), if the Owners are required by law to make a tax deduction from any payment:

 

 

(a)

the Owners shall notify the Charterers as soon as they become aware of the requirement; and

 

 

(b)

the amount due in respect of the payment shall be increased by the amount necessary to ensure that the Owners receive and retain (free from any liability relating to the tax deduction) a net amount which, after the tax deduction, is equal to the full amount which they would otherwise have received.

 

43

 

 

54.3

The Charterers shall (within three (3) Business Days of demand by Owners) pay to the Owners an amount equal to the loss, liability or cost which the Owners determine will be or has been (directly or indirectly) suffered for or on account of tax by the Owners in respect of a Leasing Document.

 

 

54.4

Clause 54.3 shall not apply:

 

 

(a)

with respect to any tax assessed on the Owners under the law of the jurisdiction in which the Owners are incorporated or, if different, the jurisdiction (or jurisdictions) in which the Owners are treated as resident for tax purposes 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 the Owners; or

 

 

(b)

to the extent a loss, liability or cost is compensated for by an increased payment under Clauses 55.2 or 55.3.

 

 

54.5

Notwithstanding any other provision to this Charter, if any deduction or withholding or other tax is or will be required to be made by the Charterers or the Owners in respect of a payment to the Owners as a result of the Tax Changes, the Owners and the Charterers shall use reasonable endeavours to mitigate the effect of the Tax Changes and have the right to transfer their interest in the Vessel (and this Charter) to any person nominated by the Owners and all costs in relation to such mitigation or transfer shall be for the account of the Charterers. Provided that if after the Owners and the Charterers having exercised reasonable endeavours to mitigate the effect of the Tax Changes (at the cost of the Charterers) following notification from the Owners to the Charterers regarding the occurrence of the Tax Changes such Tax Changes continue to have the same effect, the Charterers shall have the option to pay the Mandatory Sale Price to the Owners within thirty (30) days following such notice by the Owners, and this Charter shall terminate in accordance with the procedures set out in Clause 50.4.

 

 

54.6

If the Charterers compensate the Owners by an increased payment pursuant to Clauses 55.2 or 55.3 and the Owners determine that they have obtained and utilized a tax credit attributable to this increased payment, the Owners shall reimburse the Charterers that increased payment (or part thereof if the tax credit is attributable to only part of such increased payment).

 

 

55

INCREASED COSTS

 

 

55.1

This Clause 55 (Increased Costs) applies if the Owners notify the Charterers that they (or their financiers) consider that as a result of:

 

 

(a)

the introduction or alteration after the date of this Charter of a law or an alteration after the date of this Charter in the manner in which a law is interpreted or applied (excluding any effect which relates to the application to payments under this Charter of a tax on the Owners' overall net income); or

 

 

(b)

complying with any regulation (including any which relates to capital adequacy or liquidity controls or which affects the manner in which the Owners allocates capital resources to their obligations under this Charter) which is introduced, or altered, or the interpretation or application of which is altered, after the date of this Charter,

 

the Owners or a parent company of them (if any) has incurred or will incur an "increased cost".

 

44

 

 

55.2

In this Clause 55 (Increased Costs), "increased cost" means, in relation to the Owners:

 

 

(a)

an additional or increased cost incurred as a result of, or in connection with, the Owners or the Owners' parent company or the Owners' Financiers (if any) having entered into, or being a party to, this Charter, of funding or financing the acquisition of the Vessel pursuant to the MOA or performing their obligations under this Charter;

 

 

(b)

a reduction in the amount of any payment to the Owners under this Charter or in the effective return which such a payment represents to the Owners (if any) on their capital; or

 

 

(c)

an additional or increased cost of funding or financing the acquisition of the Vessel pursuant to the MOA,

 

and for the purposes of this Clause 55.2 (Increased Costs) the Owners may in good faith allocate or spread costs and/or losses among their assets and liabilities (or any class of their assets and liabilities) on such basis as they consider appropriate.

 

 

55.3

Subject to the terms of Clause 55.1 (Increased Costs), the Charterers shall pay to the Owners, upon receipt of the Owners' demand and any evidence thereto (where available to the Owners), the amounts which the Owners from time to time notify the Charterers to be necessary to compensate the Owners for the increased cost.

 

 

55.4

If any sum due from the Charterers to the Owners under this Charter or any other Leasing Document or under any order or judgment relating thereto has to be converted from the currency in which this Charter or such Leasing 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 Charterers, whether in their liquidation, any arrangement involving them or otherwise; or

 

 

(b)

obtaining an order or judgment from any court or other tribunal; or

 

 

(c)

enforcing any such order or judgment;

 

the Charterers shall indemnify the Owners against the loss arising when the amount of the payment actually received by the Owners is converted at the available rate of exchange into the Contractual Currency.

 

In this Clause 55.4, the "available rate of exchange" means the rate at which the Owners are able at the opening of business (Shanghai time) on the Business Day after it receives the sum concerned to purchase the Contractual Currency with the Payment Currency.

 

 

56

CONFIDENTIALITY

 

 

56.1

The Parties agree to keep the terms and conditions of this Charter and any other Leasing Documents (the "Confidential Information") strictly confidential, provided that a Party may disclose Confidential Information in the following cases:

 

 

(a)

it is already known to the public or becomes available to the public other than through the act or omission of the disclosing Party;

 

 

(b)

it is required to be disclosed under the applicable laws of any Relevant Jurisdiction, Stock Market regulation, the US Securities and Exchange Commission's rules or by a governmental order, decree, regulation or rule (provided that the disclosing Party shall give written notice of such required disclosure to the other Party prior to the disclosure);

 

45

 

 

(c)

in filings with a court or arbitral body in proceedings in which the Confidential Information is relevant and in discovery arising out of such proceedings;

 

 

(d)

to (or through) whom a Party assigns or transfers (or may potentially assign or transfer) all or any of its rights and/or obligations under one or more Leasing Document (as permitted by the terms thereof), provided that such person receiving Confidential Information shall undertake that it would not disclose Confidential Information to any other party save for circumstances arising which are similar to those described under this Clause or such other circumstances as may be permitted by all Parties;

 

 

(e)

to any permitted subcharterer of the Vessel provided that such person receiving Confidential Information shall undertake that it would not disclose Confidential Information to any other party save for circumstances arising which are similar to those described under this Clause or such other circumstances as may be permitted by all Parties;

 

 

(f)

to any of the following persons on a need to know basis:

 

 

(i)

a shareholder or an Affiliate of either Party or a party referred to in either paragraph (d) or (e) (including the employees, officers and directors thereof);

 

 

(ii)

professional advisers retained by a disclosing party; or

 

 

(iii)

persons advising on, providing or considering the provision of financing to the disclosing party or an Affiliate,

 

provided that the disclosing party shall exercise due diligence to ensure that no such person shall disclose Confidential Information to any other party save for circumstances arising which are similar to those described under this Clause or such other circumstances as may be permitted by all Parties;

 

 

(g)

with the prior written consent of all Parties; or

 

 

(h)

to any person which is a classification society or other entity which the Owners or the Owners' Financiers have engaged to make the calculations necessary to enable the Owners and/or the Owners' Financiers to comply with their reporting obligations under the Poseidon Principles.

 

 

57

RIGHTS OF THIRD PARTIES

 

No term of this Charter is enforceable under the Contracts (Rights of Third Parties) Act 1999 by a person who is not party to this Charter, save that the Other Owners may rely on the rights conferred on them under Clause 53.3 (Indemnities).

 

 

58

PARTIAL INVALIDITY

 

If, at any time, any provision of a Leasing Document is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions under the law of that jurisdiction nor the legality, validity or enforceability of such provision under the law of any other jurisdiction will in any way be affected or impaired.

 

46

 

 

59

SETTLEMENT OR DISCHARGE CONDITIONAL

 

 

59.1

Any settlement or discharge under any Leasing Document between the Owners and any Relevant Person shall be conditional upon no security or payment to the Owners by any Relevant Person or any other person being set aside, adjusted or ordered to be repaid, whether under any insolvency law or otherwise.

 

 

59.2

If the Owners consider that an amount paid or discharged by, or on behalf of, a Relevant Person or by any other person in purported payment or discharge of an obligation of that Relevant Person to the Owners under the Leasing Documents is capable of being avoided or otherwise set aside on the liquidation or administration of that Relevant Person or otherwise, then that amount shall not be considered to have been unconditionally and irrevocably paid or discharged for the purposes of the Leasing Documents.

 

 

60

IMMUNITY

 

The Charterers waive any rights of sovereign immunity which they or any of their properties may enjoy in any jurisdiction and subjects itself to civil and commercial law with respect to their obligations under this Charter or any other Leasing Document.

 

 

61

COUNTERPARTIES

 

This Charter and each other Leasing Document may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of this Charter or that Leasing Document, as the case may be.

 

 

62

FATCA

 

 

62.1

Defined terms

 

For the purposes of Clause 54 (No Set-off or Tax Deduction) and this Clause 62 (FATCA), the following terms shall have the following meanings:

 

"Code" means the United States Internal Revenue Code of 1986, as amended.

 

"FATCA" means:

 

 

(a)

sections 1471 to 1474 of the Code or any associated regulations;

 

 

(b)

any treaty, law or regulation of any other jurisdiction, or relating to an intergovernmental agreement between the US and any other jurisdiction, which (in either case) facilitates the implementation of any law or regulation referred to in paragraph (a) above; or

 

 

(c)

any agreement pursuant to the implementation of any treaty, law or regulation referred to in paragraphs (a) or (b) above with the IRS, the US government or any governmental or taxation authority in any other jurisdiction.

 

"FATCA Deduction" means a deduction or withholding from a payment under this Charter or the Leasing Documents required by or under FATCA.

 

"FATCA Exempt Party" means a Relevant Party that is entitled under FATCA to receive payments free from any FATCA Deduction.

 

"FATCA Non-Exempt Party" means any Relevant Party who is not a FATCA Exempt Party.

 

47

 

"IRS" means the United States Internal Revenue Service or any successor taxing authority or agency of the United States government.

 

"Relevant Party" means any of the parties to this Charter and the Leasing Documents (other than the Trafigura Charterer).

 

 

62.2

FATCA Information

 

 

(a)

Subject to paragraph (c) below, each Relevant Party shall, on the date of this Charter, and thereafter within ten Business Days of a reasonable request by another Relevant Party:

 

 

(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 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 "pass thru percentage" or other information required under FATCA or other official guidance including intergovernmental agreements) as the requesting party reasonably requests for the purpose of the requesting party's compliance with FATCA.

 

 

(b)

If a Relevant Party confirms to any other Relevant Party that it is a FATCA Exempt Party or provides an IRS Form W-8 or W-9 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, or that the said form provided has ceased to be correct or valid, that party shall so notify all other Relevant Parties or provide the relevant revised form, as applicable, reasonably promptly.

 

 

(c)

Nothing in this Clause shall oblige any 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, however, that nothing in this paragraph shall excuse any 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 Relevant Party fails to confirm its status or to supply forms, documentation or other information requested in accordance with the provisions of this Charter or the provided information is insufficient under FATCA, then:

 

 

(i)

if that party failed to confirm whether it is (and/or remains) a FATCA Exempt Party then such party shall be treated for the purposes of this Charter and the Leasing Documents as if it is a FATCA Non-Exempt Party; and

 

 

(ii)

if that party failed to confirm its applicable passthru percentage then such party shall be treated for the purposes of this Charter and the Leasing 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.

 

48

 

 

62.3

FATCA Deduction and gross-up by Relevant Party

 

 

(a)

If the representation made by the Charterers under paragraph (p) of Clause 45.1 (Representations and Warranties) proves to be untrue or misleading such that the Charterers are required to make a FATCA Deduction, the Charterers shall make the 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)

If the Charterers are required to make a FATCA Deduction then the Charterers shall increase the payment due from them to the Owners 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 Charterers shall promptly upon becoming aware that they must make a FATCA Deduction (or that there is any change in the rate or basis of a FATCA Deduction) notify the Owners accordingly. Within thirty (30) days of the Charterers making either a FATCA Deduction or any payment required in connection with that FATCA Deduction, the Charterers shall deliver to the Owners evidence satisfactory to the Owners that the FATCA Deduction has been made or (as applicable) any appropriate payment paid to the relevant governmental or taxation authority.

 

 

(d)

If the Owners are required to make a deduction or withholding from a payment under any Financial Instruments in respect of FATCA, and is required under such Financial Instrument to pay additional amounts in respect of such deduction or withholding, the amount of the payment due from the Charterers under this Charter shall be increased to an amount which, after such deduction or withholding and payment of additional amounts, leaves the Owners with an amount equal to the amount which it would have had remaining if it had not been required to pay additional amounts under such Financial Instruments.

 

 

62.4

FATCA Deduction by Owners

 

The Owners may make any FATCA Deduction they are required by FATCA to make, and any payment required in connection with that FATCA Deduction, and the Owners shall not be required to increase any payment in respect of which they make such a FATCA Deduction or otherwise compensate the recipient for that FATCA Deduction.

 

 

62.5

FATCA Mitigation

 

Notwithstanding any other provision to this Charter, if a FATCA Deduction is or will be required to be made by any party under Clause 62.3 (FATCA) in respect of a payment to the Owners as a result of the Owners not being a FATCA Exempt Party, the Owners shall have the right to transfer their interest in the Vessel (and this Charter) to any person nominated by the Owners and all costs in relation to such transfer shall be for the account of the Charterers.

 

 

63

ASSIGNMENT AND TRANSFER

 

 

63.1

The Charterers shall not assign this Charter except with the Owners' prior consent in writing.

 

 

63.2

The Owners may assign any of their rights or transfer by novation any of their rights and obligations under the Leasing Documents to any third party with the prior written consent of the Charterers (such consent not to be unreasonably withheld) provided that such consent shall not be required if such assignment and/or transfer is made (i) at such time following the occurrence of a Termination Event which is continuing or (ii) to an affiliate of the Owners. Provided always that, notwithstanding such assignment or transfer, this Charter will continue (or will be novated to the applicable new owner) on identical terms (save for logical, consequential or mutually agreed amendments). The Charterers shall be liable to the aforesaid new owner of the Vessel for its performance of all obligations under this Charter (as novated) after any such change of the registered ownership from the Owners to such new owner and the Charterers shall procure that any Relevant Person which is a party to a Leasing Document:

 

 

(a)

becomes liable to the new of owner of the Vessel for its performance of all obligations pursuant to such Leasing Document; and

 

49

 

 

(b)

enters into all necessary documents or takes any necessary actions required for such Leasing Document and any Security Interest created thereunder remaining in full force and effect (or to be novated and/or executed) as from the completion of the relevant sale...

 

 

63.3

Without limiting the generality of Clause 63.2:

 

 

(a)

 the Owners are entitled to enter into certain funding arrangements with their financier(s), including but not limited to, an affiliate of the Owners or any other banks and financial institutions acceptable to the Owners in their sole discretion (the "Mortgagee") provided that such funding arrangement shall not result in any adverse effect of the Charterers' rights and obligations under the Leasing Documents;

 

 

(b)

the Owners may do any of the following as security for the funding arrangements referred to in paragraph (a) above:

 

 

(i)

execute a ship mortgage over the Vessel or any other Financial Instrument in favour of a Mortgagee (or its agent, trustee or nominee);

 

 

(ii)

assign their rights and interests to, in or in connection with this Charter or any other Leasing Documents in favour of a Mortgagee (or its agent, trustee or nominee);

 

 

(iii)

assign their rights and interests to, in or in connection with the Insurances, the Earnings and the Requisition Compensation of the Vessel in favour of the Mortgagee (or its agent, trustee or nominee); and

 

 

(iv)

enter into any other document or arrangement which is necessary to give effect to such financing arrangements;

 

 

(c)

the Charterers undertake to comply, and provide such information and documents required to enable the Owners to comply, with all such instructions or directions in regard to the employment, insurances, operation, repairs and maintenance of the Vessel as laid down in any Financial Instrument or as may be directed from to time during the currency of this Charter by the Mortgagee (or its agent, trustee or nominee) in conformity with any Financial Instrument. The Charterers further agree and acknowledge all relevant terms, conditions and provisions of each Financial Instrument (if any) and agree to acknowledge this in writing in any form that may be required by the Mortgagee (or its agent, trustee or nominee); and

 

 

(d)

during the Charter Period a change in the registered or beneficial ownership of the Vessel or the Owners (by sale of shares in the Owners or other transactions having the same effect) may be effected without the Charterers' consent, provided always that, in the event of change in the registered or beneficial ownership of the Vessel, notwithstanding such change, this Charter would continue on identical terms (save for logical, consequential or mutually agreed amendments). The Guarantor and the Charterers shall (where applicable) remain jointly and severally liable to the aforesaid new owner of the Vessel for its performance of all obligations pursuant to this Charter after change of the registered and/or beneficial ownership of the Vessel or the Owners from the Owners to such new owner and agree and undertake to enter into any such usual documents as the Owners shall reasonably require to complete or perfect the transfer of the Vessel (with the benefit and burden of this Charter) pursuant to this Clause.

 

50

 

 

(e)

All expenses arising out of assignment or transfer of this Charter as per Clause 63 (Assignment and Transfer) shall be for the Owner's account subject to no Termination Event or Potential Termination Event having occurred or being continuing at the relevant time.

 

 

64

GENERAL APPLICATION OF PROCEEDS

 

 

64.1

Any Net Trading Proceeds, Net Sales Proceeds, Total Loss Proceeds, any proceeds realised by the Owners in connection with the enforcement of the Security Documents (unless otherwise specified in the Security Documents) and any proceeds received by the Owners from any Other Owner (as trustee for the Owners) shall be applied in the following order of application against amounts payable under the Leasing Documents:

 

 

(a)

firstly, in or towards any amounts outstanding under the Leasing Documents other than the Termination Sum (including but not limited to any costs and expenses incurred in the enforcement of the Security Documents, to the extent these are not covered under the Termination Sum);

 

 

(b)

secondly, in or towards satisfaction of the Charterers' obligation to pay the Termination Sum (or such portion of it that then remains unpaid) in any order of application in the amounts comprising the Termination Sum as the Owners may determine; and

 

 

(c)

thirdly, upon satisfaction in full of all amounts payable to the Owners under the Leasing Documents, in payment of any surplus to the Charterers, but subject always to the terms of the General Assignment.

 

 

65

GOVERNING LAW AND ENFORCEMENT

 

 

(a)

This Charter and any non-contractual obligations arising under or in connection with it, shall be governed by and construed in accordance with English law.

 

 

(b)

Any dispute arising out of or in connection with this Charter (including a dispute regarding the existence, validity or termination of this Charter or any non-contractual obligation arising out of or in connection with this Charter) (a "Dispute") shall be referred to and finally resolved by arbitration in London in accordance with the Arbitration Act 1996 or any statutory modification or re-enactment thereof save to the extent necessary to give effect to the provisions of this Clause 65 (Governing Law and Enforcement). The arbitration shall be conducted in accordance with the London Maritime Arbitrators Association ("LMAA") Terms current at the time when the arbitration proceedings are commenced.

 

 

(c)

The reference shall be to three arbitrators. A party wishing to refer a Dispute to arbitration shall appoint its arbitrator and send notice of such appointment in writing to the other party requiring the other party to appoint its own arbitrator within fourteen (14) calendar days of that notice and stating that it will appoint its arbitrator as sole arbitrator unless the other party appoints its own arbitrator and gives notice that it has done so within the fourteen (14) days specified. If the other party does not appoint its own arbitrator and give notice that it has done so within the fourteen (14) days specified, the party referring a Dispute to arbitration may, without the requirement of any further prior notice to the other party, appoint its arbitrator as sole arbitrator and shall advise the other party accordingly. The award of a sole arbitrator shall be binding on both parties as if he had been appointed by agreement. Nothing herein shall prevent the parties agreeing in writing to vary these provisions to provide for the appointment of a sole arbitrator.

 

51

 

 

(d)

Where the reference is to three arbitrators the procedure for making appointments shall be in accordance with the procedure for full arbitration stated above.

 

 

(e)

The language of the arbitration shall be English.

 

 

(f)

In cases where neither the claim nor any counterclaim exceeds the sum of US$100,000 (or such other sum as the Parties may agree) the arbitration shall be conducted in accordance with the LMAA Small Claims Procedure current at the time when the arbitration proceedings are commenced.

 

 

66

DEFINITIONS

 

 

66.1

In this Charter, unless as expressly defined otherwise, the following capitalized terms shall have the meanings ascribed to them below:

 

"Acceptance Certificate" means a certificate substantially in the form set out in Schedule 1 (Acceptance Certificate) to be signed by the Charterers at Delivery.

 

"Account Bank" means Joh. Berenberg, Gossler & Co. KG of Neuer Jungfernstieg 20, 20354 Hamburg, Germany or another designated third party bank acceptable to the Owners, in and/or through which all revenues and operating expenses of the Charterers shall be credited and/or transferred.

 

"Account Security" means the document creating security over the Operating Account made or to be made between the Charterers, the Other Charterers, the Owners and the Other Owners.

 

"Advance Charterhire" has the meaning as defined under Clause 36.2 (Charterhire and Advance Charterhire) of the Charter.

 

"Affiliate" means in relation to any person, a Subsidiary of that person or a Holding Company of that person or any other Subsidiary of that Holding Company.

 

"Annex VI" means Annex VI of the Protocol of 1997 to amend the International Convention for the Prevention of Pollution from Ships 1973 (Marpol), as modified by the Protocol of 1978 relating thereto.

 

"Anti-Money Laundering Laws" means all applicable financial record-keeping and reporting requirements, anti-money laundering statutes (including all applicable rules and regulations thereunder) and all applicable related or similar laws, rules, regulations or guidelines, of all jurisdictions including and without limitation, the United States of America, the European Union, the United Kingdom, the Republic of the Marshall Islands, Germany and the People's Republic of China (including Hong Kong for the avoidance of doubt) and which in each case are (a) issued, administered or enforced by any governmental agency having jurisdiction over any Relevant Person or the Owners; (b) of any jurisdiction in which any Relevant Person or Owner conducts business; or (c) to which any Relevant Person or Owner is subjected or subject to.

 

52

 

"Anti-Terrorism Financing Laws" means all applicable anti-terrorism laws, rules, regulations or guidelines of any jurisdiction, including and not limited to the United States of America or the People's Republic of China which are: (a) issued, administered or enforced by any governmental agency, having jurisdiction over any Relevant Person or the Owners; (b) of any jurisdiction in which any Relevant Person or the Owners conduct business; or (c) to which any Relevant Person or the Owners are subjected or subject to.

 

"Approved Classification Society" means Bureau Veritas, DVN-GL or such other first class international classification society which is a member of the International Association of Classification Societies and approved by the Owners in writing.

 

"Approved Manager" means the Commercial Manager or the Technical Manager.

 

"Approved Valuer" means Simpson Spence Young Shipbrokers, Clarksons Platou, Maersk Broker, Arrow ShipBrokers, Howe Robinson, Braemar ACM Ship Broking, Fearnleys or any other reputable shipbroker nominated by the Charterers and approved by the Owners from time to time.

 

"Approved Sub-charter" means the Trafigura Charter, the Substitute Charter or the New Substitute Charter (if applicable) or any other charter as may be approved by the Owners in writing in accordance with this Charter.

 

"Approved Sub-charterer" means the Trafigura Charterer and any sub-charterer under any other Approved Sub-charter.

 

"Arrangement Fee" has the meaning given to that term in Clause 42.1 (Fees and Expenses).

 

"Breakfunding Costs" means all breakfunding costs and expenses incurred or payable by the Owners pursuant to the relevant funding arrangement entered into by the Owners for the purpose of financing any part of the Purchase Price as a result of the receipt of an amount pursuant to this Charter on a day other than a Payment Date.

 

"Builder" means Hyundai Heavy Industries Co., Ltd., a company organised and existing under the laws of the Republic of Korea, having its registered office at 1000 Bangeojinsunhwan-doro, Dong-Gu, Ulsan, Korea.

 

"Builder's Warranties" means the guarantees and/or warranties provided by the Builder to the Charterers under Article IX of the Contract.

 

"Business Day" means a day on which banks are open for business in the principal business centres of Hong Kong, Shanghai, London, Germany and Greece and, in respect of a day on which a payment is required to be made or other dealing is due to take place under a Leasing Document in Dollars, also a day on which commercial banks are open in New York City.

 

"Business Ethics Law" means any laws, regulations and/or other legally binding requirements or determinations in relation to corruption, fraud, collusion, bid-rigging or anti-trust, human rights violations (including forced labour and human trafficking) which are issued, administered or enforced by the United States, United Kingdom, the European Union or applicable to any Relevant Person or the Owners or to any jurisdiction where activities are performed and which shall include but not be limited to (i) the United Kingdom Bribery Act 2010 and (ii) the United States Foreign Corrupt Practices Act 1977 and all rules and regulations under each of (i) and (ii).

 

53

 

"Buyers" means the Owners acting in their capacity as buyers under the MOA.

 

"Cancelling Date" shall have the same meaning as defined under the MOA.

 

"Commencement Date" means the date on which Delivery takes place

 

"Charter Period" means the period described in Clause 32.1 (Charter Period) unless it is terminated earlier in accordance with the provisions of this Charter.

 

"Charterhire" means each of, as the context may require, all of the instalments of hire payable hereunder on each applicable Payment Date comprising in each case both Fixed Charterhire and Variable Charterhire, as further detailed in Clause 36.5 (Charterhire and Advance Charterhire).

 

"Commercial Manager" means Central Shipping Inc., a corporation incorporated under the laws of Marshall Islands with registration number 98339 or any reputable management company designated by the Charterers and approved by the Owners in writing from time to time as the commercial manager of the Vessel.

 

"Contract" means a shipbuilding contract in respect of the construction and sale of the Vessel dated 19 May 2020 and entered into between the Builder as builder and the Charterers as buyer as may be further amended or supplemented from time to time, including by an addendum no.1 dated 19 May 2020.

 

"Contract Price" means the contract price under the Contract, as may be adjusted pursuant to the terms of the Contract.

 

"Delivery" means the delivery of the legal and beneficial ownership in the Vessel from the Owners to the Charterers hereunder.

 

"Dollars" and "$" mean the lawful currency for the time being of the United States of America.

 

"Document of Compliance" shall have the same meaning as ascribed under the ISM Code.

 

"Earnings" means all moneys whatsoever which are now, or later become, payable (actually or contingently) to the Charterers and which arise out of the use or operation of the Vessel, including (but not limited to):

 

 

(a)

except to the extent that they fall within paragraph (b),

 

 

(i)

all freight, hire and passage moneys;

 

 

(ii)

any compensation payable in the event of requisition of the Vessel for hire;

 

 

(iii)

any remuneration for salvage and towage services;

 

 

(iv)

any demurrage and detention moneys;

 

 

(v)

damages for breach (or payments for variation or termination) of any charterparty or other contract for the employment of the Vessel; and

 

 

(vi)

all moneys which are at any time payable under any Insurances in respect of loss of hire (if any); and

 

54

 

 

(b)

if and whenever the Vessel 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 the Vessel.

 

"Environmental Claim" means:

 

 

(a)

any claim by any governmental, judicial or regulatory authority or any other person which arises out of an Environmental Incident or an alleged Environmental Incident or which relates to any Environmental Law; or

 

 

(b)

any claim by any other person which relates to an Environmental Incident,

 

and "claim" means a claim for damages, compensation, fines, penalties or any other payment; an order or direction to take, or not to take, certain action or to desist from or suspend certain action; and any form of enforcement or regulatory action, including the arrest or attachment of any asset.

 

"Environmental Incident" means:

 

 

(a)

any release, emission, spill or discharge of Environmentally Sensitive Material whether within the Vessel or from the Vessel into any other vessel or into or upon the air, water, land or soils (including the seabed) or surface water; or

 

 

(b)

any incident in which Environmentally Sensitive Material is released, emitted, spilled or discharged into or upon the air, water, land or soils (including the seabed) or surface water from a vessel other than the Vessel and which involves a collision between the Vessel and such other vessel or some other incident of navigation or operation, in either case, in connection with which the Vessel is actually or potentially liable to be arrested, attached, detained or injuncted and/or the Vessel and/or any Relevant Person and/or any operator or manager of the Vessel is at fault or allegedly at fault or otherwise liable to any legal or administrative action; or

 

 

(c)

any other incident in which Environmentally Sensitive Material is released, emitted, spilled or discharged into or upon the air, water, land or soils (including the seabed) or surface water otherwise than from the Vessel and in connection with which the Vessel is actually or potentially liable to be arrested and/or where any Relevant Person and/or any operator or manager of the Vessel is at fault or allegedly at fault or otherwise liable to any legal or administrative action.

 

"Environmental Law" means any present or future law relating to pollution or protection of human health or the environment, to conditions in the workplace, to the carriage, generation, handling, storage, use, release or spillage of Environmentally Sensitive Material or to actual or threatened releases of Environmentally Sensitive Material.

 

"Environmentally Sensitive Material" means and includes all contaminants, oil, oil products, toxic substances and any other substance (including any chemical, gas or other hazardous or noxious substance) which is (or is capable of being or becoming) polluting, toxic or hazardous.

 

"Fee Letter" means the fee letter referred to under Clause 42.1 (Fees and Expenses) for payment of the Arrangement Fee.

 

55

 

"First Market Value" means the Market Value of the Vessel as at a date no earlier than thirty (30) days prior to the Commencement Date.

 

"Final Purchase Option Price" means an amount equal to 60 per cent. of the Opening Capital Balance.

 

"Financial Indebtedness" means, in relation to a person (the "debtor"), a liability of the debtor:

 

 

(a)

for principal, interest or any other sum payable in respect of any moneys borrowed or raised by the debtor;

 

 

(b)

under any loan stock, bond, note or other security issued by the debtor;

 

 

(c)

under any acceptance credit, guarantee or letter of credit facility made available to the debtor;

 

 

(d)

under a financial lease, a deferred purchase consideration arrangement (other than deferred payments for assets or services obtained on normal commercial terms in the ordinary course of business) or any other agreement having the commercial effect of a borrowing or raising of money by the debtor;

 

 

(e)

under any foreign exchange transaction, any interest or currency swap or any other kind of derivative transaction entered into by the debtor or, if the agreement under which any such transaction is entered into requires netting of mutual liabilities, the liability of the debtor for the net amount; or

 

 

(f)

under a guarantee, indemnity or similar obligation entered into by the debtor in respect of a liability of another person which would fall within paragraphs (a) to (e) if the references to the debtor referred to the other person.

 

"Financial Instruments" means the applicable loan or facility agreement entered into between the Owners (or their affiliate) and the Owners' Financiers and any mortgage, deed of covenants, assignment in respect of this Charter, assignment in respect of the Guarantees, assignment in respect of Earnings, Insurances and Requisition Compensation, manager's undertaking and subordination (including assignment of manager's interests in the Insurances) or any other financial security instruments granted by the Owners to the Owners' Financiers as security for the financing or refinancing of the Owners' acquisition of the Vessel.

 

"Flag State" means the flag state named in Box 5 of this Charter or any other state or jurisdiction approved in writing by the Owners (whose approval shall not be unreasonably withheld).

 

"Fleet Vessel" means any ship or vessel (including, but not limited to, the Vessel and the Other Vessel) from time to time wholly owned, leased under a capital lease, operating lease with a purchase option at the end of the relevant charter period, vessels owned under a joint venture agreement where the relevant member of the Group owns no less than 50 per cent. of the issued share capital of the jointly owned entity or controlled by the Guarantor (directly or indirectly) excluding, for the avoidance of doubt, any newbuilding vessels not delivered to the relevant member of the Group at the relevant time.

 

"General Assignment" means the general assignment executed or to be executed between the Charterers and the Owners in respect of the Vessel, pursuant to which the Charterers shall, inter alia, assign its rights under the Builder's Warranties, Insurances, Earnings and Requisition Compensation and any Approved Sub-Charter in respect of the Vessel, in favour of the Owners and in the agreed form agreed on or prior to signing of this Charter.

 

56

 

"Group" means the Guarantor and its Subsidiaries from time to time.

 

"Guarantee" means the guarantee entered into by the Guarantor in favour of the Owners securing, amongst others, the Charterers' obligations in connection with the Leasing Documents.

 

"Guarantor" means Top Ships Inc., a corporation incorporated under the laws of Marshall Islands and having its registered address at Trust Company Complex, Ajeltake Road, Ajeltake Islands, Majuro, Marshall Islands MH96960.

 

"Hire Period" means (i) in the case of the first Hire Period, the period commencing on the Commencement Date and ending on the First Payment Date; and (ii) in the case of each subsequent Payment Date, the period commencing on the last day of the preceding Hire Period and ending on the next occurring Payment Date.

 

"Holding Company" means, in relation to a person, any other person in relation to which it is a Subsidiary.

 

"IAPPC" means a valid international air pollution prevention certificate for the Vessel issued pursuant to the MARPOL Protocol.

 

"Index" means the Baltic Tanker Indices applicable to the Vessel.

 

"Insurances" means:

 

 

(a)

all policies and contracts of insurance, including entries of the Vessel in any protection and indemnity or war risks association, which are effected in respect of the Vessel or otherwise in relation to it whether before, on or after the date of this Charter; 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 Charter.

 

"Interest Rate" means:

 

 

(a)

subject to Clause 37.1 (Changes to Interest Rate, Default Interest), for any Hire Period of which the Quotation Day falls before the occurrence of a Screen Rate Replacement Event, LIBOR;

 

 

(b)

for any Hire Period of which the Quotation Day falls on or after the occurrence of a Screen Rate Replacement Event but before a Replacement Benchmark is implemented pursuant to Clause 37.4 (Changes to Interest Rate, Default Interest), in accordance with Clause 37.3 (Changes to Interest Rate, Default Interest) (unless otherwise agreed by the Owners); and

 

 

(c)

for any Hire Period of which the Quotation Day falls on or after a Replacement Benchmark is implemented pursuant to Clause 37.4 (Changes to Interest Rate, Default Interest), the rate of interest determined under the Replacement Benchmark.

 

57

 

"ISM Code" means the International Safety Management Code (including the guidelines on its implementation), adopted by the International Maritime Organisation Assembly as Resolutions A.741 (18) and A.788 (19), as the same may be amended or supplemented from time to time.

 

"ISPS Code" means the International Ship and Port Security Code as adopted by the Conference of Contracting Governments to the Safety of Life at Sea Convention 1974 on 13 December 2002 and incorporated as Chapter XI-2 of the Safety of Life at Sea Convention 1974, as the same may be supplemented or amended 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).

 

"ISSC" means a valid international ship security certificate for the Vessel issued pursuant to the ISPS Code.

 

"Leasing Documents" means this Charter, the MOA and the Security Documents.

 

"LIBOR" means, in relation to a Hire Period:

 

 

(a)

the applicable Screen Rate as of the Specified Time for dollars and for a period equal in length to the Hire Period; or

 

 

(b)

as otherwise determined pursuant to Clause 37 (Changes to Interest Rate, Default Interest),

 

and if, in either case, that rate is less than zero, LIBOR shall be deemed to be zero.

 

"Major Casualty" means any casualty to the Vessel in respect of which the claim or the aggregate of the claims against all insurers, before adjustment for any relevant franchise or deductible, exceeds $5,000,000 or the equivalent in any other currency.

 

"Management Agreement" means:

 

 

(a)

the technical and commercial management agreement made or to be made between the Approved Manager and the Charterers; or

 

 

(b)

such other management agreement subsequently entered into in respect of the Vessel as may be approved by the Owners (such approval not to be unreasonably withheld).

 

"Manager's Undertaking" means, in relation to an Approved Manager, the letter of undertaking from that Approved Manager subordinating the rights of such Approved Manager against the Vessel and the Charterers to the rights of the Owners under the Leasing Documents and the Owners' Financiers (if any) under (amongst others) the relevant Financial Instruments in an agreed form agreed on or prior to signing of this Charter.

 

"Mandatory Sale" has the meaning given to that term in Clause 50.4.

 

"Mandatory Sale Date" has the meaning given to that term in Clause 50.4.

 

"Mandatory Sale Price" means, in respect of the Mandatory Sale Date, the aggregate of:

 

 

(a)

the Owners' Costs prevailing as at the Mandatory Sale Date;

 

58

 

 

(b)

any Variable Charterhire accrued as at the date of payment of the Mandatory Sale Price;

 

 

(c)

(in case of Clause 36.13, Clause 37.3 or Clause 54.5) if the Mandatory Sale Date occurs on or before the third (3rd) anniversary of the Commencement Date, one per cent. (1.00%) of the Owners' Costs as at the relevant date;

 

 

(d)

any Breakfunding Costs;

 

 

(e)

any properly documented legal or other costs incurred by the Owners in connection with the exercise of the Mandatory Sale; and

 

aside from the amounts described under paragraphs (a) to (e) above, any other moneys due and owing under the Leasing Documents at the relevant Mandatory Sale Date.

 

"Margin" means two point six per cent. (2.6%) per annum.

 

"Market Value" means:

 

 

(a)

subject to sub-paragraph (b) below, the arithmetic mean of the valuations shown by two (2) valuation reports prepared:

 

 

(i)

on a date no later than thirty (30) days after the that Market Value Test Date;

 

 

(ii)

with or without physical inspection of that Vessel;

 

 

(iii)

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 such valuation shall be prepared by Approved Valuers one nominated by the Owners and one nominated by the Charterers.

 

 

(b)

if there is a discrepancy of five per cent. (5%) or more between the market valuations shown on the two valuation reports obtained pursuant to the above paragraph (using the lower valuation figure as the denominator), the arithmetic mean of the valuations shown by three (3) valuation reports each prepared on the same terms and conditions as set out under paragraph (b) above (except that the third valuation report additionally required under this sub-paragraph (b) shall be prepared by an Approved Valuer nominated by the Owners).

 

"MARPOL Protocol" means Annex VI (Regulations for the Prevention of Air Pollution from Ships) to the International Convention for the Prevention of Pollution from Ships 1973 (as amended in 1978 and 1997).

 

"Material Adverse Effect" means, in the opinion of the Owners, a material adverse effect on:

 

 

(a)

the business, operations, property, condition (financial or otherwise) or prospects of any Relevant Person or the Guarantor and its Subsidiaries as a whole;

 

 

(b)

the ability of any Relevant Person to perform its obligations under any Leasing Document to which it is a party; or

 

59

 

 

(c)

the validity or enforceability of, or the effectiveness or ranking of any Security Interests granted pursuant to any of the Leasing Documents or the rights or remedies of the Owners under any of the Leasing Documents.

 

"MOA" means the memorandum of agreement dated on or about the date of this Charter and made between the Owners (in their capacity as buyers) and the Charterers (in their capacity as sellers), pursuant to which the Charterers agree to sell and the Owners agree to purchase the Vessel upon the terms and conditions set out therein.

 

"Net Sales Proceeds" has the meaning given to it under Clause 41.10.

 

"Net Trading Proceeds" has the meaning given to it under Clause 41.10.

 

"Obligatory Insurances" means any insurances of the Vessel required to be effected by or on behalf of the Charterers pursuant to Clause 39 (Insurance).

 

"Opening Capital Balance" shall have the same meaning as defined under the MOA.

 

"Operating Account" means an account in the name of the Charterers with an Account Bank.

 

"Option Premium" means an amount of US$ 3,000,000.

 

"Original Financial Statements" means, with respect to the Charterers and the Guarantor, each of their financial statements (in the case of the Guarantor, audited) for the financial year ended 31 December 2020 (and if such statements are not in English, they shall be accompanied by a certified English translation).

 

"Original Jurisdiction" means, in relation to any Relevant Person, the jurisdiction under whose laws such Relevant Person incorporated or resided as at the date of this Charter.

 

"Other Charter" means the bareboat charterparty entered into between the Other Owner and the Other Charterer in respect of either of the Other Vessel.

 

"Other Charterer" means Legio X Inc..

 

"Other Leasing Documents" means the "Leasing Documents" as defined in the Other Charter, each, the "Other Leasing Document".

 

"Other Owner" means Sea 269 Leasing Co., Limited.

 

"Other Vessel" means the very large crude carrier having Builder's hull number 3214 and to be named Legio X Equestris.

 

"Owners' Costs" means, on any relevant date, (i) the Opening Capital Balance minus (ii) the aggregate Fixed Charterhire which has been paid by the Charterers and received by the Owners as at such date.

 

"Owners' Financier" means any financier providing financing or refinancing facilities to the Owners or any affiliate of the Owners in respect of the Owners' purchase and/or lease of the Vessel to the Charterers under the terms of the Leasing Documents.

 

"Owners' Surveyor" means the surveyor appointed by the Owners in accordance with Clause 7.

 

60

 

"Party" means a party to this Charter, namely the Owners or the Charterers.

 

"Payment Date" means each of the dates upon which Charterhire is to be paid by the Charterers to the Owners pursuant to Clauses 36.2, 36.5, 36.6 and 36.7 (Charterhire).

 

"Permitted Security Interest" means:

 

 

(a)

any Security Interest created by a Security Document or a Financial Instrument;

 

 

(b)

any lien for unpaid master's and crew's wages in accordance with the ordinary course of operation of the Vessel or in accordance with usual reputable maritime practice;

 

 

(c)

any lien for salvage;

 

 

(d)

any lien for master's disbursements incurred in the ordinary course of trading;

 

 

(e)

any other lien arising by operation of law or otherwise in the ordinary course of the operation, repair or maintenance of the Vessel provided such liens do not secure amounts more than thirty (30) days overdue;

 

 

(f)

any Security Interest created in favour of a plaintiff or defendant in any action of the court or tribunal before whom such action is brought as security for costs and expenses where the Owners are prosecuting or defending such action in good faith by appropriate steps; and

 

 

(g)

Security Interests arising by operation of law in respect of taxes which are not overdue or for payment of taxes which are overdue for payment but which are being contested by the Owners or the Charterers in good faith by appropriate steps and in respect of which adequate reserves have been made,

 

provided that the foregoing have not arisen due to the default or omission of any Relevant Person.

 

"Poseidon Principles" means the financial industry framework for assessing and disclosing the climate alignment of ship finance portfolios published in June 2019 as the same may be amended or replaced to reflect changes in applicable law or regulation or the introduction of or changes to mandatory requirements of the International Maritime Organisation from time to time.

 

"Potential Termination Event" means, an event or circumstance which, with the expiry of a grace period, the giving of any notice, the lapse of time and/or a determination of the Owners and/or the satisfaction of any other condition, would constitute a Termination Event.

 

"Prepositioning Date" shall have the same meaning as defined under the MOA.

 

"Prohibited Countries" means those countries and territories subject to country-wide or territory-wide Sanctions and/or trade embargoes from time to time during the Charter Period, in particular but not limited to pursuant to the U.S.'s Office of Foreign Assets Control of the U.S. Department of Treasury ("OFAC") or the United Nations.

 

"Prohibited Person" means any person, entity or any other party which is (i) located, domiciled, resident or incorporated in a Prohibited Country, and/or (ii) subject to any sanction administrated by the United Nations, the European Union, the United States and the U.S. Department of Treasury's Office of Foreign Assets Control ("OFAC"), the United Kingdom, Her Majesty's Treasury ("HMT") and the Foreign and Commonwealth Office of the United Kingdom, the Special Administrative Region of Hong Kong, the People's Republic of China and/or (iii) owned or controlled by or affiliated with persons, entities or any other parties as referred to in (i) and (ii).

 

61

 

"Purchase Option" means the purchase option referred to in Clause 51.1.

 

"Purchase Option Date" shall have the meaning ascribed thereto in Clause 51.2.

 

"Purchase Option Fee" means:

 

 

(a)

if the Purchase Option is exercised on or after the first (1st) anniversary of the Commencement Date and before the second (2nd) anniversary of the Commencement Date, one point eight per cent. (1.80%) of the Owners' Costs on the applicable Purchase Option Date;

 

 

(b)

if the Purchase Option is exercised on or after the second (2nd) anniversary of the Commencement Date and up to the third (3rd) anniversary, inclusive, of the Commencement Date, one point five per cent. (1.50%) of the Owners' Costs on the applicable Purchase Option Date;

 

 

(c)

if the Purchase Option is exercised after the third (3rd) anniversary of the Commencement Date zero per cent. (0%) of the Owners' Costs as at the applicable Purchase Option Date.

 

"Purchase Option Notice" shall have the meaning ascribed thereto in Clause 51.2.

 

"Purchase Option Price" means, in respect of any Purchase Option Date:

 

 

(a)

if the Purchase Option Date falls on any Payment Date on or after the first (1st) anniversary of the Commencement Date but prior to the last day of the Charter Period, the aggregate of:

 

 

(i)

the Owners' Costs prevailing as at the relevant Purchase Option Date;

 

 

(ii)

any Variable Charterhire accrued but unpaid as at the date of payment of the Purchase Option Price;

 

 

(iii)

any Purchase Option Fee;

 

 

(iv)

any Breakfunding Costs;

 

 

(v)

any documented legal or other costs incurred by the Owners in connection with the exercise of the Purchase Option under Clause 51 (Purchase Option); and

 

 

(vi)

aside from the amounts described under paragraphs (i) to (v) above, any other moneys due and owing under the Leasing Documents at the relevant Purchase Option Date,

 

 

(b)

if the Purchase Option Date falls on the last day of the Charter Period, the aggregate of:

 

 

(i)

the Final Purchase Option Price;

 

62

 

 

(ii)

any Charterhire accrued but unpaid as at the date of payment of the Purchase Option Price;

 

 

(iii)

any documented legal or other costs incurred by the Owners in connection with the exercise of the Purchase Option under Clause 51 (Purchase Option); and

 

 

(iv)

aside from the amounts described under paragraphs (i) to (iii) above, any other moneys due and owing under the Leasing Documents at the relevant Purchase Option Date.

 

"Purchase Price" has the meaning given to it in the MOA.

 

"Quotation Day" means, in relation to any Hire Period, two (2) Business Days before the first day of that Hire Period unless market practice differs in the Relevant Interbank Market in which case the Quotation Day will be determined by the Owners in accordance with market practice in the Relevant Interbank Market.

 

"Relevant Interbank Market" means the London interbank market or in the case of any Replacement Benchmark, any applicable replacement interbank market.

 

"Relevant Person" means each of the Charterers (for the avoidance of doubt, reference to Charterers here include the Charterers acting in their capacities as sellers under the MOA), the Guarantor, any Approved Manager which is an entity within the Group, any Approved Sub-charterer which is an entity within the Group and any other party providing security to the Owners in respect of the Charterers' obligations under this Charter pursuant to a Security Document (except any Approved Manager or sub-charterer which are not entities within the Group).

 

"Relevant Nominating Body" means any applicable central bank, regulator or other supervisory authority or a group of them, or any working group or committee sponsored or chaired by, or constituted at the request of, any of them or the Financial Stability Board.

 

"Replacement Benchmark" means a benchmark rate which is:

 

 

(a)

formally designated, nominated or recommended as the replacement for a Screen Rate by:

 

 

(i)

the administrator of that Screen Rate (provided that the market or economic reality that such benchmark rate measures is the same as that measured by that Screen Rate); or

 

 

(ii)

any Relevant Nominating Body,

 

and if replacements have, at the relevant time, been formally designated, nominated or recommended under both paragraphs, the "Replacement Benchmark" will be the replacement under paragraph (ii) above;

 

 

(b)

in the opinion of the Owners, generally accepted in the international or any relevant domestic syndicated loan markets as the appropriate successor to that Screen Rate; or

 

63

 

 

(c)

in the opinion of the Owners, an appropriate successor to a Screen Rate.

 

"Relevant Jurisdiction" means, in relation to each Relevant Person:

 

 

(a)

its Original Jurisdiction;

 

 

(b)

any jurisdiction where any property owned by it and charged under a Leasing Document is situated;

 

 

(c)

any jurisdiction where it conducts its business; and

 

 

(d)

any jurisdiction whose laws govern the perfection of any of the Leasing Documents entered into by it creating a Security Interest.

 

"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".

 

"Safety Management Certificate" shall have the same meaning as ascribed under the ISM Code.

 

"Sanctions" means any sanctions, embargoes, freezing provisions, prohibitions or other restrictions relating to trading, doing business, investment, exporting, financing or making assets available (or other activities similar to or connected with any of the foregoing):

 

 

(a)

imposed by law or regulation of a Sanctions Authority, to the extent applicable to this transaction; or

 

 

(b)

otherwise imposed by any applicable law or regulation by which any Relevant Person is bound or to which it is subject.

 

"Sanctions Authority" means:

 

 

(a)

the United Nations or its Security Council;

 

 

(b)

the United States;

 

 

(c)

the European Union or the Council of the European Union;

 

 

(d)

the United Kingdom;

 

 

(e)

the People's Republic of China (including for the avoidance of doubt, Hong Kong), provided that this paragraph (e) shall not apply to the Trafigura Charterer when the Vessel is chartered under the Trafigura Charter or the operation or use of the Vessel by the Trafigura Charterer (but not any further sub-lessee of the Vessel) when the Vessel is operated by the Trafigura Charterer (but not any further sub-lessee of the Vessel), in each case unless otherwise specified in Clause 50.3; and

 

 

(f)

the governments and official institutions or agencies of any of paragraphs (a) to (e) above, including the U.S. Department of the Treasury's Office of Foreign Assets Control, the United States Department of State, the U.S. Department of Commerce and the Hong Kong Monetary Authority and Her Majesty's Treasury.

 

64

 

"Sanctions Advisory" means the Sanctions Advisory for the Maritime Industry, Energy and Metals Sectors, and Related Communities issued May 14, 2020 by the US Department of the Treasury, Department of State and Coast Guard, as may be amended or supplemented, and any similar future advisory.

 

"Screen Rate" means the London interbank offered rate administered by ICE Benchmark Administration Limited (or any other person which takes over the administration of that rate) for dollars for the relevant period displayed on page LIBOR01 or LIBOR02 of the Thomson Reuters screen (or any replacement Thomson Reuters page which displays that rate) or on the appropriate page of such other information service which publishes that rate from time to time in place of Thomson Reuters. If such page or service ceases to be available, the Owners may specify another page or service displaying the relevant rate.

 

"Screen Rate Contingency Period" means twenty (20) days.

 

"Screen Rate Replacement Event" means, in relation to a Screen Rate:

 

 

(a)

the methodology, formula or other means of determining that Screen Rate has, in the opinion of the Owners, materially changed;

 

 

(b)

 

 

(i)

 

 

(A)

the administrator of that Screen Rate or its supervisor publicly announces that such administrator is insolvent; or

 

 

(B)

information is published in any order, decree, notice, petition or filing, however described, of or filed with a court, tribunal, exchange, regulatory authority or similar administrative, regulatory or judicial body which reasonably confirms that the administrator of that Screen Rate is insolvent,

 

provided that, in each case, at that time, there is no successor administrator to continue to provide that Screen Rate;

 

 

(ii)

the administrator of that Screen Rate publicly announces that it has ceased or will cease, to provide that Screen Rate permanently or indefinitely and, at that time, there is no successor administrator to continue to provide that Screen Rate;

 

 

(iii)

the supervisor of the administrator of that Screen Rate publicly announces that such Screen Rate has been or will be permanently or indefinitely discontinued; or

 

 

(iv)

the administrator of that Screen Rate or its supervisor announces that that Screen Rate may no longer be used; or

 

 

(c)

the administrator of that Screen Rate determines that that Screen Rate should be calculated in accordance with its reduced submissions or other contingency or fallback policies or arrangements and either:

 

 

(i)

the circumstance(s) or event(s) leading to such determination are not (in the opinion of the Owners) temporary; or

 

65

 

 

(ii)

that Screen Rate is calculated in accordance with any such policy or arrangement for a period no less than the Screen Rate Contingency Period; or

 

 

(d)

in the opinion of the Owners, that Screen Rate is otherwise no longer appropriate for the purposes of calculating interest under this Charter.

 

"Scheduled Delivery Date" has the meaning given to this term in the MOA.

 

"Secured Liabilities" means all present and future obligations and liabilities (whether actual or contingent and whether owed jointly or severally or in any other capacity whatsoever) of a Relevant Person to the Owners under or in connection with the Leasing Documents or any judgment relating to the Leasing 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 Documents" means the Guarantee, the Account Security, the Shares Security, the General Assignment, the Manager's Undertaking and any other document whether or not it creates a Security Interest which is executed as security for the obligations of the Charterers under or in connection with this Charter.

 

"Security Period" means the period commencing on the date of this Charter and ending on the date on which the Owners are satisfied that the Secured Liabilities have been irrevocably and unconditionally paid and discharged in full.

 

"Security Interest" means:

 

 

(a)

a mortgage, charge (whether fixed or floating) or pledge, lien, assignment, hypothecation or any other security interest of any kind or any other agreement or arrangement having the effect of conferring a security interest;

 

 

(b)

the security rights of a plaintiff under an action in rem; or

 

 

(c)

any other right which confers on a creditor or potential creditor a right or privilege to receive the amount actually or contingently due to it ahead of the general unsecured creditors of the debtor concerned; however 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.

 

"Shares Security" means the share charge entered into by the Guarantor (in its capacity as shareholder of the Charterers) creating a Security Interest over all its shares in the Charterers in favour of the Owners.

 

"Specified Time" means 11.00am London time on the Quotation Day.

 

"Statement of Compliance" means a Statement of Compliance related to fuel oil consumption pursuant to regulations 6.6 and 6.7 of Annex VI.

 

"Subsidiary" means a subsidiary within the meaning of section 1159 of the UK Companies Act 2006.

 

66

 

"Substitute Charter" means a time charter with a duration not less than one (1) year, with a daily charterhire not less than US$23,000 and with a charterer approved by the Owners in writing.

 

"Technical Manager" means Central Shipping Inc., a corporation incorporated under the laws of Marshall Islands with registration number 98339, Central Mare Inc., a corporation incorporated under the laws of Marshall Islands with registration number 32656 or any reputable management company designated by the Charterers approved by Trafigura Charterer, while on time charter to Trafigura Charterer, and the Owners, thereafter, in writing from time to time as the technical manager of the Vessel.

 

"Termination Event" means any event described in Clause 49.1 (Termination Events).

 

"Termination Fee" means:

 

 

(a)

if the Termination Sum is payable to the Owners before the second (2nd) anniversary of the Commencement Date, one point eight per cent. (1.80%) of the Owners' Costs as at the relevant date;

 

 

(b)

if the Termination Sum is payable to the Owners on or after the second (2nd) anniversary of the Commencement Date and up to the third (3rd) anniversary, inclusive, of the Commencement Date, one point five per cent. (1.50%) of the Owners' Costs as at the relevant date; and

 

 

(c)

if the Termination Sum is payable after the third (3rd) anniversary of the Commencement Date, one per cent. (1.00%) of the Owners' Costs as at the relevant date,

 

provided always that, if the Charterers' obligation to pay the Termination Sum arises (solely and directly) as a result of any breach under subparagraphs (q)(iv), (y) and (z)(i) of Clause 45.1 (Representations and Warranties), (j) and (o) of Clauses 46.1 (Undertakings) or paragraph (o) of Clause 49.1 (Termination Events) caused by the Approved Sub-charterer's acts or omissions, then the applicable Termination Fee shall be one per cent. (1.00%) of the Owners' Costs as at the relevant date.

 

"Termination Notice" has the meaning given to it under Clause 49.2.

 

"Termination Sum" means, in respect of any date (such date being referred to as the "Relevant Date" for the purposes of this definition only), the aggregate of (without double counting amounts that may be included in more than one sub-paragraph below):

 

 

(a)

the Owners' Costs prevailing as at the Relevant Date;

 

 

(b)

any Variable Charterhire accrued and unpaid as at the date of payment of the Termination Sum;

 

 

(c)

the Termination Fee;

 

 

(d)

any Breakfunding Costs;

 

 

(e)

any and all evidenced and documented direct costs, losses and liabilities incurred by the Owners as a result of the early termination of the leasing under this Charter including but not limited to any legal costs, any agency or broker fees incurred in attempting to re-charter or otherwise dispose of the Vessel;

 

67

 

 

(f)

any and all documented costs, losses and liabilities incurred by the Owners in locating, repossessing, recovering, repositioning, berthing, insuring and maintaining the Vessel and/or in collecting any payments due under this Charter and/or in obtaining the due performance of the obligations of the Charterers under this Charter or the other Leasing Documents; and

 

 

(g)

aside from the amounts described under paragraphs (a) to (f) above, any other moneys due and owing under the Leasing Documents at the Relevant Date including any default interest on amounts under (a) to (f) above,

 

"Termination Notice" has the meaning given in Clause 49.2 (Termination Events).

 

"Total Loss" means:

 

 

(a)

actual, constructive, compromised, agreed or arranged total loss of the Vessel;

 

 

(b)

any expropriation, confiscation, requisition or acquisition of the Vessel, whether for full consideration, a consideration less than its proper value, a nominal consideration or without any consideration, which is effected by any government or official authority or by any person or persons claiming to be or to represent a government or official authority (excluding a requisition for hire for a fixed period not exceeding one (1) year without any right to an extension) unless it is redelivered within twenty-one (21) days to the full control of the Owners or the Charterers; or

 

 

(c)

any arrest, capture, seizure or detention of the Vessel (including any hijacking or theft but excluding any event specified in paragraph (b) of this definition) unless it is redelivered within thirty (30) days to the full control of the Owners or the Charterers.

 

"Total Loss Date" means, in relation to the Total Loss of the Vessel:

 

 

(a)

in the case of an actual loss of the Vessel, the date on which it occurred;

 

 

(b)

in the case of a constructive, compromised, agreed or arranged total loss of the Vessel, the earlier of:

 

 

(i)

the date on which a notice of abandonment is given to the insurers;

 

 

(ii)

the date when the Vessel was last heard of; and

 

 

(iii)

the date of any compromise, arrangement or agreement made by or on behalf of the Charterers with the Vessel's insurers in which the insurers agree to treat the Vessel as a Total Loss; and

 

 

(c)

in the case of any expropriation, confiscation, requisition or acquisition of the Vessel whether for full consideration, a consideration less than its proper value, a nominal consideration or without any consideration, which is effected by any government or official authority or by any person or persons claiming to be or to represent a government or official authority (excluding a requisition for hire for a fixed period not exceeding one (1) year without any right to an extension), on the date on which the expropriation, confiscation, requisition or, as the case may be, the acquisition of the Vessel is completed by delivery of the Vessel to the relevant government or official authority or the person or persons claiming to be or to represent the relevant government or official authority unless it is redelivered within twenty-one (21) days to the full control of the Owners or the Charterers; and

 

68

 

 

(d)

in the case of any arrest, condemnation, capture, seizure or detention of the Vessel (including any hijacking or theft), unless it is redelivered within thirty (30) days to the full control of the Owners or the Charterers, the date falling on the expiration of such days.

 

"Total Loss Payment Date" means, following the occurrence of a Total Loss, the earlier of:

 

 

(a)

the date falling one hundred and twenty (120) days after the Total Loss Date or such later date as the Owners may agree; and

 

 

(b)

the date on which the Owners receive the Total Loss Proceeds.

 

"Total Loss Proceeds" means the proceeds of any policy or contract of insurance or any Requisition Compensation in each case arising in respect of a Total Loss.

 

"Trafigura Charter" means a time charter entered into between the Charterers and the Trafigura Charterer as time charterer dated 15 December 2020 in relation to the Vessel, as amended from time to time.

 

"Trafigura Charterer" means Trafigura Maritime Logistics Pte. Ltd. or any other nominee nominated as the charterers under the Trafigura Charter (which is acceptable to the Owners) in accordance with the terms of the Trafigura Charter.

 

"US" means the United States of America.

 

"US Tax Obligor" means (a) a person which is resident for tax purposes in the United States of America or (b) a person some or all of whose payments under the Leasing Documents are from sources within the United States for United States federal income tax purposes.

 

"Variable Charterhire" shall have the meaning as defined under paragraph (b) of Clause 36.5.

 

"Vessel" means the very large crude carrier having Builder's hull number 3213 and to be named Julius Caesar being constructed by the Builder under the Contract.

 

 

66.2

Construction

 

Unless a contrary indication appears, in this Charter:

 

"Approved Manager", "Builder", "Charterers", "Guarantor", "Relevant Person", or any other person shall be construed so as to include its successors in title, permitted assigns and permitted transferees to, or of, its rights and/or obligations under the Leasing Documents;

 

"agreed form" means, in relation to a document, such document in a form agreed in writing between the Owners and the Charterers and, if required by the Owners in their sole discretion, the Owners' Financiers;

 

"asset" includes every kind of property, asset, interest or right, including any present, future or contingent right to any revenues or other payment;

 

"company" includes any partnership, joint venture and unincorporated association;

 

69

 

"consent" means:

 

 

(a)

an authorisation, consent, approval, resolution, licence, exemption, filing, registration, notarisation and legalization; and

 

 

(b)

in relation to anything which will be prohibited or restricted by law if a governmental or official authority intervenes or acts in any way within a specified period after lodgment, filing, registration or notification, the expiry of that period without intervention or action.

 

"contingent liability" means a liability which is not certain to arise and/or the amount of which remains unascertained;

 

"continuing" means, in relation to any Termination Event, a Termination Event which has not been waived by the Owners and in relation to any Potential Termination Event, a Potential Termination Event which has not been waived by the Owners or remedied to the satisfaction of the Owners;

 

"control" over a particular company means the power (whether by way of ownership of shares, proxy, contract, agency or otherwise) to:

 

 

(a)

cast, or control the casting of, more than 51 per cent, of the maximum number of votes that might be cast at a general meeting of such company;

 

 

(b)

appoint or remove all, or the majority, of the directors or other equivalent officers of such company; or

 

 

(c)

give directions with respect to the operating and financial policies of such company with which the directors or other equivalent officers of such company are obliged to comply;

 

"document" includes a deed; also a letter, fax or telex;

 

"expense" means any kind of cost, charge or expense (including all legal costs, charges and expenses) and any applicable value added or other tax;

 

"gross negligence" means a form of negligence which is distinct from ordinary negligence, in which the due diligence and care which are generally to be exercised have been disregarded to a particularly high degree, in which the plainest deliberations have not been made and that which should be most obvious to everybody has not been followed.

 

"law" includes any order or decree, any form of delegated legislation, any treaty or international convention and any regulation or resolution of the Council of the European Union, the European Commission, the United Nations or its Security Council;

 

"legal or administrative action" means any legal proceeding or arbitration and any administrative or regulatory action or investigation;

 

"liability" includes every kind of debt or liability (present or future, and including contingent liabilities only in the case of paragraph (g)(ii) of Clause 49.1 (Termination Events), Clause 53 (Indemnities) and the definition of "Financial Indebtedness"), whether incurred as principal or surety or otherwise;

 

70

 

"months" shall be construed in accordance with Clause 66.3 (Meaning of "month");

 

"person" includes any company; any state, political sub-division of a state and local or municipal authority; and any international organisation;

 

"policy", in relation to any insurance, includes a slip, cover note, certificate of entry or other document evidencing the contract of insurance or its terms;

 

"protection and indemnity risks" means the usual risks covered by a protection and indemnity association which is a member of the International Group of Protection And Indemnity Clubs including pollution risks, extended passenger cover and the proportion (if any) of any sums payable to any other person or persons in case of collision which are not recoverable under the hull and machinery policies by reason of the incorporation in them of clause 6 of the International Hull Clauses (1/11/02 or 1/11/03), clause 8 of the Institute Time Clauses (Hulls)(1/10/83) or clause 8 of the Institute Time Clauses (Hulls) (1/11/1995) or the Institute Amended Running Down Clause (1/10/71) or any equivalent provision;

 

"regulation" includes any regulation, rule, official directive, request or guideline whether or not having the force of law of any governmental, intergovernmental or supranational body, agency, department or regulatory, self-regulatory or other authority or organisation; and

 

"tax" includes any present or future tax, duty, impost, levy or charge of any kind which is imposed by any state, any political sub-division of a state or any local or municipal authority (including any such imposed in connection with exchange controls), and any connected penalty, interest or fine.

 

 

66.3

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.

 

 

66.4

In this Charter:

 

 

(a)

references to a Leasing Document or any other document being in the form of a particular appendix or to any document referred to in the recitals include references to that form with any modifications to that form which the Owners and the Charterers approve;

 

 

(b)

references to, or to a provision of, a Leasing Document or any other document are references to it as amended or supplemented, whether before the date of this Charter or otherwise;

 

 

(c)

references to, or to a provision of, any law include any amendment, extension, re-enactment or replacement, whether made before the date of this Charter or otherwise; and

 

71

 

 

(d)

words denoting the singular number shall include the plural and vice versa.

 

 

66.5

Construction of Insurance terms

 

In this Charter:

 

"approved" means, for the purposes of Clause 39 (Insurance), approved in writing by the Owners.

 

"excess risks" means the proportion of claims for general average, salvage and salvage charges not recoverable under the hull and machinery policies in respect of the Vessel in consequence of its insured value being less than the value at which the Vessel is assessed for the purpose of such claims.

 

"obligatory insurances" means all insurances effected, or which the Charterers are obliged to effect, under Clause 39 (Insurance) or any other provision of this Clause or another Leasing Document.

 

"policy" includes a slip, cover note, certificate of entry or other document evidencing the contract of insurance or its terms.

 

"protection and indemnity risks" means the usual risks (including but not limited to freight, demurrage and defence cover) covered by a protection and indemnity association being a member of the International Group of Protection and Indemnity Clubs, including pollution risks and the proportion (if any) of any sums payable to any other person or persons in case of collision which are not recoverable under the hull and machinery policies by reason of the incorporation in them of clause 6 of the International Hull Clauses (1/11/02) (1/11/03), clause 8 of the Institute Time Clauses (Hulls) (1/10/83) (1/11/95) or the Institute Amended Running Down Clause (1/10/71) or any equivalent provision.

 

"war risks" includes the risk of mines and all risks excluded by clause 29 of the International Hull Clauses (1/11/02 or 1/11/03), clause 24 of the Institute Time Clauses (Hulls) (1/11/95) or clause 23 of the Institute Time Clauses (Hulls)(1/10/83).

 

 

66.6

Headings

 

In interpreting a Leasing Document or any provision of a Leasing Document, all clauses, sub-clauses and other headings in that and any other Leasing Document shall be entirely disregarded.

 

72

 

SCHEDULE 1

&NBSP;&NBSP;&NBSP;&NBSP;ACCEPTANCE CERTIFICATE

 

JULIUS CAESAR INC. (the "Charterers") hereby acknowledges that at [●] hours on [●], there was delivered to, and accepted by, the Charterers the Vessel known as m.v. "Julius Caesar", registered in the name of SEA 268 LEASING CO. LIMITED (the "Owners") under the flag of the Marshall Islands with IMO number 9912244 under a bareboat charter dated [●] (the "Charter") and made between the Owners and the Charterers and that Delivery (as defined in the Charter) thereupon took place and that, accordingly, the Vessel is and will be subject to all the terms and conditions contained in the Charter.

 

The Charterers warrant that the representations and warranties made by them in Clause 45 (Representation and Warranties) of the Charter remain correct and that no Termination Event (as defined in the Charter) has occurred and is continuing at the date of this Acceptance Certificate.

 

 

 

 

 

 

 

_______________________________

Name:

Title:

for and on behalf of

JULIUS CAESAR INC.

Dated:

 

 

 

73

 

SCHEDULE 2

 

PART A

 

The following are the documents referred to in Clause 34.2(e)(i):

 

 

1

Corporate Authority

 

 

1.1

A copy of the constitutional documents of each Relevant Person.

 

 

1.2

If required, a copy of the resolutions of the board of directors (or equivalent) of each Relevant Person:

 

 

(a)

approving the terms of, and the transactions contemplated by, the Leasing Documents to which it is a party and resolving that it execute the Leasing Documents to which it is a party;

 

 

(b)

authorizing a specified person or persons to execute the Leasing Documents to which it is a party on its behalf; and

 

 

(c)

authorising a specified person or persons, on its behalf, to sign and/or dispatch all documents and notices to be signed and/or dispatched by it under, or in connection with, the Leasing Documents to which it is a party.

 

 

1.3

If required, an original of the power of attorney of any party to a Leasing Document authorising a specified person or persons to execute the Leasing Documents to which it is a party.

 

 

1.4

If required, a specimen of the signature of each person authorized by the resolution referred to in paragraph 1.2 above.

 

 

1.5

If required, a copy of the resolutions signed by all the holder(s) of the issued shares of any Relevant Person, approving the terms of, and the transactions contemplated by such Leasing Document.

 

 

1.6

A certificate of an officer or authorized signatory of each Relevant Person certifying that each copy document relating to it specified in this Part A of Schedule 2 is correct, complete and in full force and effect as at a date no earlier than the date of this Agreement.

 

 

2

Documents and other security

 

 

2.1

A duly executed original of each Leasing Document (except the General Assignment and the Manager's Undertaking) and of each document to be delivered under each of them.

 

 

2.2

Agreed forms of the General Assignment and the Manager's Undertaking and of each document to be delivered under each of them.

 

 

2.3

Evidence that the Charterers' Operating Account have been opened and maintained with the Account Bank.

 

 

3

Valuation of Vessel

 

Valuation(s) of the Vessel, addressed to the Owners and dated not earlier than thirty (30) days before the Commencement Date indicating the First Market Value.

 

74

 

 

4

Legal opinion

 

 

4.1

An agreed form legal opinion by English legal advisers to the Owners on such matters on the laws of England in relation to the applicable documents listed in paragraphs 2.1 and 2.2 of Part A of this Schedule, in form and substance acceptable to the Owners.

 

 

4.2

Agreed forms of legal opinions by lawyers appointed by the Owners on such matters relating to the applicable documents listed in paragraphs 2.1 and 2.2 of Part A this Schedule, concerning the laws of the Republic of the Marshall Islands, Germany and such other relevant jurisdictions as the Owners may reasonably require, in form and substance acceptable to the Owners.

 

 

5

Vessel Insurances

 

 

5.1

Evidence that the Vessel is or will be on Delivery insured in the manner required under Clause 39 (Insurance).

 

 

5.2

Agreed form of letters of undertaking and certificates of entry (as the case may be) relating to insurances as set out in Clause 39 (Insurance) from the relevant insurer, insurance broker, protection and indemnity association or war risks association (as the case may be).

 

 

5.3

An insurance report by an insurance advisor appointed by the Owners (but at the cost of the Charterers) in an agreed form acceptable to the Owners.

 

 

6

Contract

 

 

6.1

A copy of the executed Contract, certified as true by an authorised signatory of the Charterers.

 

 

6.2

A copy, certified as true by a director of the Charterers, of:

 

 

(a)

the notification as referred to under Article VII paragraph 1 of the Contract from the Builder to the Charterers (in their capacity as buyers under the Contract) indicating the Scheduled Delivery Date (as defined under the MOA); and

 

 

(b)

the telefax or email from the Builder to the Charterers as referred to under Article X paragraph 3 of the Contract requesting payment of the Contract Delivery Instalment (as defined under the MOA).

 

 

6.3

A copy, certified as true by a director of the Charterers, of a letter issued by the Builder stating that all amounts due and payable to the Builder under the Contract (other than the Contract Delivery Instalment) has been paid and that no other disputes or pending claims exist under the Contract.

 

 

6.4

If applicable, documentary evidence that the Charterers (in their capacity as sellers) have complied with the requirements set out under Clause 22(a)(i) of the MOA.

 

 

7

Others

 

 

7.1

Evidence that the Arrangement Fee and all other fees, costs and expenses then due from the Charterers to the Owners under the Leasing Documents have been paid and received by the Owners.

 

 

7.2

A copy of the Management Agreement and any amendments thereto.

 

75

 

 

7.3

A copy of the Trafigura Charter and any amendments thereto.

 

 

7.4

Copies of the Document of Compliance of the Approved Technical Manager.

 

 

7.5

Copies of the Original Financial Statements.

 

 

7.6

Such evidence relating to the Relevant Person as the Owners may reasonably require for their (or their financiers) to be able to satisfy each of their "know your customer" or similar identification procedures in relation to the Leasing Documents.

 

 

7.7

A copy of any other consents, approvals, authorization or other document, opinion or assurance which the Owners consider to be reasonably desirable in connection with the entry into and performance of the transactions contemplated by any of the Leasing Documents or for the validity and enforceability of such documents.

 

 

7.8

Such other documents as the Owners may require by giving notice to the Charterers.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

76

 

 

PART B

 

The following are the documents referred to in Clause 34.2(e)(ii):

 

 

1

Corporate Authorisations/Confirmation

 

 

1.1

A certificate of an authorized signatory of each Relevant Person certifying that each copy document provided under paragraph 1 of Part A of Schedule 2 of the MOA remains correct, complete and in full force and effect as on the Commencement Date.

 

 

1.2

A certificate of an authorized signatory of the Charterers certifying that there is no Potential Termination Event or Termination Event has occurred and is continuing as of the Commencement Date.

 

 

2

Security Documents

 

 

2.1

Duly executed and dated copies of the General Assignment and each Manager's Undertaking and of each document to be delivered under it and evidence of their delivery within the timing prescribed under it.

 

 

2.2

Documentary evidence that the Security Interests intended to be created by each of the Security Documents have been duly perfected under applicable law or will be perfected under applicable law within the prescribed period contained in such Security Documents.

 

 

3

Vessel certificates

 

 

3.1

A copy of the Vessel's class certificate evidencing that the Vessel maintains its classification as set out in Article I of the Contract with the Approved Classification Society free of all recommendations and conditions.

 

 

3.2

Where applicable, a copy of any other certificate mandatorily required by the International Maritime Organisation or the Approved Classification Society.

 

 

3.3

Where applicable, a copy of the tonnage certificate of the Vessel.

 

 

3.4

Where applicable, safety construction, safety equipment, safety radio and load line certificates in respect of the Vessel.

 

 

3.5

Any other document required to be delivered by the Builder to the Buyers under the terms of the Contract (including the documents to be delivered by the Builder as set out under Article VII paragraph 3 of the Contract).

 

 

3.6

Documentary evidence that the Vessel has been delivered by the Builder to the Charterers pursuant to the terms of the Contract, where such documents shall include, in particular:

 

 

(a)

the original notarized and if required, legalised copies of the bill of sale and builder's certificate duly executed by the Builder (and where executed by an attorney of the Builder, together with such original notarized Builder's power of attorney); and

 

 

(b)

the original protocol of delivery and acceptance duly executed by the Builder and the Charterers.

 

77

 

 

4

Delivery and title registration of the Vessel

 

 

4.1

Documentary evidence that the Vessel:

 

 

(a)

will simultaneously upon Delivery definitively and permanently registered in the name of the Owners under the flag of the Flag State; and

 

 

(b)

will simultaneously upon Delivery in the absolute and unencumbered ownership of the Owners.

 

 

4.2

The commercial invoice of the Vessel.

 

 

5

Legal opinions

 

 

5.1

A signed legal opinion of Watson Farley & Williams, legal advisers to the Owners on such matters on the laws of England as may be satisfactory to the Owners.

 

 

5.2

Signed legal opinions by lawyers appointed by the Owners on such matters on the laws of the Marshall Islands and the Netherlands and any other jurisdictions as may be satisfactory to the Owners.

 

 

6

Contract Price

 

 

6.1

A copy, certified as true by a director of the Charterers, of:

 

 

(a)

the notification as referred to under Article VII paragraph 1‐ of the Contract from the Builder to the Charterers (in their capacity as buyers under the Contract) indicating the Scheduled Delivery Date (as defined under the MOA); and

 

 

(b)

the telefax or email from the Builder to the Charterers as referred to under Article X paragraph 2(e) of the Contract requesting payment of the Contract Delivery Instalment (as defined under the MOA).

 

 

6.2

To the extent not already provided pursuant to the other Parts of this Schedule, a letter issued by the Builder stating that all amounts due and payable to the Builder under the Contract (other than the Contract Delivery Instalment) has been paid and that no other disputes or pending claims exist under the Contract.

 

 

7

Others

 

The Owners being satisfied that all conditions precedent or documents or evidence specified in Schedule 1 to the MOA have been satisfied or provided in form and substance satisfactory to the Owners.

 

78

 

 

PART C

 

The following are the documents referred to in Clause 34.8:

 

 

1

Security Interests

 

Not later than five (5) Business Days after the Commencement Date, documentary evidence that the Security Interests intended to be created by each of the Security Documents have been duly perfected under applicable law (as applicable).

 

 

2

Legal opinions

 

Not later than three (3) Business Days after the Commencement Date, issued signed copies of the legal opinions referred to in paragraph 5 of Part B of Schedule 2 of this Charter.

 

 

3

Insurances

 

 

3.1

Not later than five (5) Business Days after the Commencement Date, receipt of copies of the executed letters of undertaking and certificates of entry (as the case may be) relating to insurances as set out in Clause 39 (Insurance) acknowledged by the relevant insurer, insurance broker, protection and indemnity association or war risks association (as the case may be), each in the agreed form under paragraph 5.2 of Part A of Schedule 2 of this Charter.

 

 

3.2

Not later than ten (10) Business Days after the Commencement Date, the signed insurance report in the form agreed under paragraph 5 of Part A of Schedule 2 of this Charter.

 

 

4

Others

 

 

4.1

No later than six (6) months after the Commencement Date, evidence that the Vessel has been permanently registered with the Flag State.

 

 

4.2

No later than three (3) Business Days after the Commencement Date, copies of the Vessel's Safety Management Certificate (together with any other details of the applicable Safety Management System which the Owners require) and of any other documents required under the ISM Code and the ISPS Code (including without limitation an ISSC and IAPPC).

 

 

 

79

 

EXECUTION PAGE

 

OWNERS

 

SIGNED by Lin Chung Fai Simon     )    
duly authorized Attorney-in-fact   ) /s/ Lin Chung Fai Simon  
for and on behalf of )    
SEA 268 LEASING CO. LIMITED   ) Attorney-in-fact  
       
in the presence of:  )    
       
Witness' signature: ) /s/ Wong Ho Ching  
       
Witness' name:  ) Wong Ho Ching  
       
Witness' address: ) Suites 4610-4619, Jardine House,  
    1 Connaught Place, Hong Kong  

 

CHARTERERS

 

SIGNED by Alexandros Tsirikos     )    
duly authorized Attorney-in-fact   ) /s/ Alexandros Tsirikos  
for and on behalf of )    
JULIUS CAESAR INC.  ) Attorney-in-fact  
       
in the presence of:  )    
       
Witness' signature: ) /s/ Dimitra Karkaletsi  
       
Witness' name:  ) Dimitra Karkaletsi  
       
Witness' address: ) 274, Leof. Salaminas – Salaminia  
    Greece  

 

 

 

 

 
80

Exhibit 4.28

 

 

Dated      23 November      2021

 

TOP SHIPS INC.

as Guarantor

 

and

 

SEA 269 LEASING CO. LIMITED

as Owner

 

 

 

 

 

GUARANTEE

 

relating to
a Bareboat Charter of the vessel m.v. LEGIO X EQUESTRIS
dated      23 November      2021

 

 

 

 

 

wfwlogo.jpg

 

 

 

Index

 

Clause

Page

 
     

1

Interpretation

1

2

Guarantee

2

3

Liability as Principal and Independent Debtor

3

4

Expenses

3

5

Adjustment of Transactions

3

6

Payments

4

7

Interest

4

8

Subordination

4

9

Enforcement

5

10

Representations and Warranties

5

11

Undertakings

8

12

Judgments and Currency Indemnity

14

13

Supplemental

15

14

Assignment

17

15

Notices

17

16

Invalidity of Bareboat Charter

18

17

Governing Law and Enforcement

18

     

Schedules

   
     

Schedule 1 Form of compliance Certificate

20
     

Execution

   
     

Execution Page

 

21

 

 

 

 

 

THIS GUARANTEE is made on      23 November      2021

 

PARTIES

 

 

(1)

TOP SHIPS INC., a corporation incorporated under the laws of the Marshall Islands whose registered address is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands, MH96960 (the "Guarantor")

     
 

(2)

SEA 269 LEASING CO. LIMITED, a company incorporated under the laws of Hong Kong whose registered office is at 27/F, Three Exchange Square, 8 Connaught Place, Central, Hong Kong (the "Owner" which expression includes its successors and assigns)

 

BACKGROUND

 

 

(A)

By a bareboat charter dated      23 November      2021 (the "Bareboat Charter") and made between (i) the Owner, as owner and (ii) Legio X Inc., a corporation incorporated under the laws of the Marshall Islands whose registered address is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands, MH96960, as charterer (the "Charterer"), the Owner has agreed to bareboat charter one (1) very large crude oil carrier to be named m.v. "Legio X Equestris" and to be flagged in the Marshall Islands with hull no. 3214 (the "Vessel") to the Charterer pursuant to the terms and conditions contained therein.

     
 

(B)

The Guarantor is the shareholder of the Charterer and holds all of the issued and outstanding shares in the Charterer.

     
 

(C)

The execution and delivery to the Owner of this Guarantee is one of the conditions to the chartering of the Vessel under the Bareboat Charter.

     
 

(D)

This Guarantee is the Guarantee referred to in the Bareboat Charter.

 

OPERATIVE PROVISIONS

 

 

1

INTERPRETATION

     
 

1.1

Defined expressions

     
    Words and expressions defined in the Bareboat Charter shall have the same meanings when used in this Guarantee unless the context otherwise requires.
     
 

1.2

Construction of certain terms

     
    In this Guarantee:
     
    "bankruptcy" includes a liquidation, receivership or administration and any form of suspension of payments, arrangement with creditors or reorganisation under any corporate or insolvency law of any country.
     
    "Compliance Certificate" means a certificate in the form set out in Schedule 1 or in any other form approved by the Owner.
     
    "control" over a particular company means the power (whether by way of ownership of shares, proxy, contract, agency or otherwise) to:

 

 

 

 

(a)

cast, or control the casting of, more than 51 per cent, of the maximum number of votes that might be cast at a general meeting of such company;

 

 

(b)

appoint or remove all, or the majority, of the directors or other equivalent officers of such company; or

 

 

(c)

give directions with respect to the operating and financial policies of such company with which the directors or other equivalent officers of such company are obliged to comply.

 

    "Group" means the Guarantor and its subsidiaries from time to time.
     
    "Party" means a party to this Guarantee.
     
    "Relevant Person" means each "Relevant Person" as defined in the Bareboat Charter.
     
 

2

GUARANTEE

     
 

2.1

Guarantee and indemnity

     
    The Guarantor unconditionally and irrevocably:
 
 

(a)

guarantees the due payment of all amounts payable by each other Relevant Person under or in connection to each Leasing Document to which such Relevant Person is a party;

     
 

(b)

undertakes to pay to the Owner on the Owner's demand any such amount which is not paid by that Relevant Person when due and payable under or in connection to that Leasing Document;

     
 

(c)

guarantees the punctual performance by that Relevant Person of all that Relevant Person's obligations under or in connection with that Leasing Document; and

     
 

(d)

fully indemnifies the Owner on its demand in respect of all claims, expenses, liabilities and losses which are made or brought against or incurred by the Owner as a result of or in connection with any obligation or liability guaranteed by the Guarantor being or becoming unenforceable, invalid, void or illegal; and the amount recoverable under this indemnity shall be equal to the amount which the Owner would otherwise have been entitled to recover.

     
 

2.2

No limit on number of demands

     
    The Owner may serve more than one demand under Clause 2.1.
     
 

2.3

Guarantee of whole amount

     
    This Guarantee shall be construed and take effect as a guarantee of all amounts due to the Owner under the Leasing Documents to which each other Relevant Person is a party.
     
 

3

LIABILITY AS PRINCIPAL AND INDEPENDENT DEBTOR

     
 

3.1

Principal and independent debtor

     
    The Guarantor shall be liable under this Guarantee as a principal and independent debtor and accordingly it shall not have, as regards this Guarantee, any of the rights or defences of a surety.

 

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3.2

Waiver of rights and defences

     
    Without limiting the generality of Clause 3.1, the Guarantor shall neither be discharged by, nor have any claim against the Owner in respect of:
     
 

(a)

any amendment or supplement being made to the Bareboat Charter or any other Leasing Document;

     
 

(b)

any arrangement or concession (including a rescheduling or acceptance of partial payments) relating to, or affecting, the Bareboat Charter or any other Leasing Document;

     
 

(c)

any release or loss (even though negligent) of any right or Security Interest created by any Leasing Document;

     
 

(d)

any failure (even though negligent) promptly or properly to exercise or enforce any such right or Security Interest, including a failure to realise for its full market value an asset covered by such a Security Interest; or

     
 

(e)

the Bareboat Charter or any other Leasing Document now being or later becoming void, unenforceable, illegal or invalid or otherwise defective for any reason, including a neglect to register it.

     
 

4

EXPENSES

     
 

4.1

Costs of preservation of rights, enforcement etc

     
    The Guarantor shall pay to the Owner on its demand the amount of all expenses (including, without limitation, legal fees) incurred by the Owner in connection with the enforcement of, or the preservation of any rights under this Guarantee or any other Leasing Document, including any advice, claim or proceedings relating to such matters.
     
 

4.2

Fees and expenses payable under Leasing Documents

     
    Clause 4.1 is without prejudice to the Guarantor's liabilities in respect of any other Relevant Person's obligations under any Leasing Document to which it is a party.
     
 

5

ADJUSTMENT OF TRANSACTIONS

     
 

5.1

Reinstatement of obligation to pay

     
    The Guarantor shall pay to the Owner on its demand any amount which the Owner is required, or agrees, to pay pursuant to any claim by, or settlement with, a trustee in bankruptcy of any other Relevant Person on the ground that any Leasing Document to which that Relevant Person is a party, or a payment by that Relevant Person, was invalid or unenforceable or on any similar ground.
     
 

6

PAYMENTS

     
 

6.1

Method of payments

     
    Any amount due under this Guarantee shall be paid:
     
 

(a)

in immediately available funds;

 

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(b)

to such account as the Owner may from time to time notify to the Guarantor;

     
 

(c)

without any form of set‑off, cross‑claim or condition; and

     
 

(d)

free and clear of any tax deduction or withholding for or on account of any tax payable under any law of relevant jurisdictions except a tax deduction which the Guarantor is required by law to make.

     
 

6.2

Grossing-up for taxes

     
    If the Guarantor is required by law to make a tax deduction, the amount due to the Owner shall be increased by the amount necessary to ensure that the Owner receives and retains a net amount which, after the tax deduction, is equal to the full amount that it would otherwise have received.
     
 

6.3

Indemnity and evidence of payment of taxes

     
    The Guarantor shall fully indemnity the Owner on the Owner's demand in respect of all claims, expenses, liabilities and losses incurred by the Owner by reason of any failure of the Guarantor to make any tax deduction or by reason of any increased payment not being made on the due date for such payment in accordance with Clause 6.2. Within 30 days after making a tax deduction, that Guarantor shall deliver to the Owner any receipts, certificates or other documentary evidence satisfactory to the Owner that the tax had been paid to the appropriate taxation authority.
     
 

7

INTEREST

     
 

7.1

Accrual of interest

     
    Any amount due under this Guarantee shall carry interest after the date on which the Owner demands payment of it until it is actually paid, unless interest on that same amount also accrues under the Bareboat Charter.
     
 

7.2

Calculation of interest

     
    Interest under this Guarantee shall be calculated and accrue (as well after as before judgment) at the rate described in Clause 37.6 of the Bareboat Charter and otherwise in accordance with the terms thereof.
     
 

8

SUBORDINATION

     
 

8.1

Subordination of rights of Guarantor

     
    All rights which the Guarantor at any time has (whether in respect of this Guarantee or any other transaction) against each other Relevant Person or its assets shall be fully subordinated to the rights of the Owner under the Leasing Documents (or any of them), and in particular, the Guarantor shall not:
     
 

(a)

claim, or in a bankruptcy of that Relevant Person prove for, any amount payable to the Guarantor by that Relevant Person, whether in respect of this Guarantee or any other transaction;

     
 

(b)

take or enforce any Security Interest for any such amount;

 

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(c)

claim to set-off any such amount against any amount payable by the Guarantor to that Relevant Person; or

     
 

(d)

claim any subrogation or other right in respect of any Leasing Document or any sum received or recovered by the Owner under such Leasing Document.

     
 

9

ENFORCEMENT

     
 

9.1

No requirement to commence proceedings against other Relevant Person

     
    The Owner will not need to commence any proceedings under, or enforce any Security Interest created by, the Bareboat Charter or any other Leasing Document before claiming or commencing proceedings under this Guarantee.
     
 

9.2

Conclusive evidence of certain matters

     
    However, as against the Guarantor:
     
 

(a)

any final and unappealable judgment or order of a court in England or any Relevant Jurisdiction or award of an arbitration tribunal in London in connection with the Bareboat Charter or any other Leasing Document; and

     
 

(b)

any statement or admission of any other Relevant Person in connection with the Bareboat Charter or any other Leasing Document,

     
    shall be binding and conclusive as to all matters of fact and law to which it relates.
     
 

10

REPRESENTATIONS AND WARRANTIES

     
 

10.1

General

     
    The Guarantor represents and warrants to the Owner and the Other Owner as of the date of this Guarantee, and on each day henceforth until the last day of the Security Period as follows.
     
 

10.2

Status

     
 

(a)

The Guarantor is duly incorporated and validly existing and in good standing under the laws of the Marshall Islands.

     
 

(b)

The Guarantor is not a FATCA foreign financial institution ("FFI") or a US Tax Obligor.

     
 

10.3

Corporate power

     
    The Guarantor has the corporate capacity, and has taken all corporate action and obtained all consents necessary for it:
     
 

(a)

to execute this Guarantee or any other Leasing Document to which it is a party; and

     
 

(b)

to make all the payments contemplated by, and to comply with, this Guarantee or any other Leasing Document to which it is a party.

 

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10.4

Consents in force

     
    All the capacities, actions and consents referred to in Clause 10.3 remain in full force and nothing has occurred which makes any of them liable to revocation.
     
 

10.5

No conflicts

     
    The execution by the Guarantor of the Leasing Documents to which it is a party and its compliance with this Guarantee will not involve or lead to a contravention of:
     
 

(a)

any law or regulation applicable to it; or

     
 

(b)

the constitutional documents of the Guarantor; or

     
 

(c)

any contractual or other obligation or restriction which is binding on the Guarantor or any of its assets.

     
 

10.6

Legal, valid and binding obligations

     
    This Guarantee and the Leasing Document to which it is a party do now or will upon execution and delivery constitute the Guarantor's legal, valid and binding obligations enforceable against it in accordance with its terms and any relevant insolvency laws affecting creditors' rights generally.
     
 

10.7

Governing law

     
    The choice of governing law as stated in this Guarantee and the agreement by the Guarantor to refer disputes to the relevant courts or tribunals as stated herein are valid and binding against the Guarantor.
     
 

10.8

Immunity

     
    Neither the Guarantor nor any of its assets are entitled to immunity on the grounds of sovereignty or otherwise from any legal action or proceeding (which shall include, without limitation, suit, attachment prior to judgment, execution or other enforcement).
     
 

10.9

Pari passu ranking

     
    The obligations of the Guarantor under this Guarantee, are the direct, general and unconditional obligations of the Guarantor and rank at least pari passu with all other present and future unsecured and unsubordinated creditors of the Guarantor save for any obligation which is mandatorily preferred by law and not by virtue of any contract.
     
 

10.10

Legal or administrative action

     
    No legal or administrative action involving the Guarantor has been commenced or taken which would have required notification to the Owner under Clause 11.8.
     
 

10.11

No insolvency

     
    The Guarantor is not insolvent or in liquidation or administration or subject to any other formal or informal insolvency procedure, and no receiver, administrative receiver, administrator, liquidator, trustee or analogous officer has been appointed in respect of the Guarantor or all or material part of their assets.

 

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10.12

Tax obligor and place of business

     
    The Guarantor is not a US Tax Obligor, and has not established a place of business in the United Kingdom or the United States of America.
     
 

10.13

No withholding taxes

     
    All payments which the Guarantor is liable to make under the Leasing Documents to which it is a party may be made without deduction or withholding for or on account of any tax payable under any law of relevant jurisdictions.
     
 

10.14

Taxes paid

     
    All payments which the Guarantor is liable to make under the Leasing Documents to which it is a party may be made without deduction or withholding for or on account of any tax payable under any law of relevant jurisdictions.
     
 

10.15

No default

     
    No Termination Event or Potential Termination Event has occurred nor is continuing or might reasonably be expected to result from the entry into and performance of this Guarantee or any other Leasing Document.
     
 

10.16

Information

     
    Any factual information provided by the Guarantor (or on its behalf) to the Owner was true and accurate in all material respects as at the date it was provided or as the date at which such information was stated; all accounts (audited and unaudited) delivered under Clause 11.3 satisfied the requirements of Clause 11.4; and there has been no Material Adverse Effect on the Guarantor from its position disclosed in the latest of those accounts.
     
 

10.17

No litigation

     
    No legal or administrative action involving the Guarantor has been commenced or taken or, to the 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 Guarantor.
     
 

10.18

Sanctions

     
 

(a)

No Relevant Person, nor any of their respective directors, officers, or employees, is a Prohibited Person.

     
 

(b)

Each Relevant Person, and their respective directors, officers, and employees is in compliance with all Sanctions laws, and none of them have been or are currently being investigated on compliance with Sanctions, they have not received notice or are aware of any claim, action, suit or proceeding against any of them with respect to Sanctions and they have not taken any action to evade the application of Sanctions.

     
 

(c)

No Relevant Person is in breach of any Anti-Money Laundering Laws, Anti-Terrorism Financing Laws and/or Business Ethics Laws and, to the extent required by applicable law, has instituted and maintained systems, controls, policies and procedures designed to:

 

 

(i)

prevent and detect incidences of bribery and corruption, money laundering and terrorism financing; and

 

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(ii)

promote and achieve compliance with Anti-Money Laundering Laws, Anti-Terrorism Financing Laws and/or Business Ethics Laws including, but not limited to, ensuring thorough and accurate books and records, and utilization of best efforts to ensure that Affiliates acting on behalf of a Relevant Person shall act in compliance with Anti-Money Laundering Laws, Anti-Terrorism Financing Laws and Business Ethics Laws.

 

 

10.19

Environmental Laws

     
    All Environmental Laws relating to the ownership, operation and management of the Vessel and the business of each Relevant Person (as now conducted and as reasonably anticipated to be conducted in the future) have been complied with.
     
 

10.20

Environmental Claim

     
    No Environmental Claim has been made or threatened against any Relevant Person or otherwise in connection with the Vessel which is either (i) in excess of US$5,000,000 or (ii) has or is reasonably likely to have a Material Adverse Effect.
     
 

10.21

Environmental Incident

     
    No Environmental Incident has occurred and no person has claimed that an Environmental Incident has occurred.
     
 

10.22

Ownership of the Charterer

     
    The Charterer is legally and beneficially and indirectly wholly owned and controlled by the Guarantor.
     
 

10.23

Status of the Guarantor

     
 

(a)

Save for permitted under the Bareboat Charter, the shares of the Guarantor are traded on the NASDAQ or Over the Counter (OTC); and

     
 

(b)

the Guarantor is an entity reporting with the U.S. Securities and Exchange Commission.

     
 

11

UNDERTAKINGS

     
 

11.1

General

     
    The Guarantor undertakes with the Owner to comply with the following provisions of this Clause 11 at all times during the Security Period, except as the Owner may otherwise permit.
     
 

11.2

Information provided to be accurate

     
    All financial and other information which is provided by or on behalf of the Guarantor under or in connection with the Leasing Documents will be true and not misleading and will not omit any material fact or consideration.
     
 

11.3

Provision of financial statements

     
    The Guarantor will send to the Owner:
     
 

(a)

as soon as possible, but in no event later than one hundred and fifty (150) days after the end of each financial year of the Charterers, the audited annual financial statement accounts of the Charterers for that financial year as referred to in the Guarantor's audited consolidated annual financial statement accounts of the Guarantor for that financial year to be delivered under paragraph (c);

 

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(b)

as soon as possible, but in no event later than ninety (90) days after the end of each half-year, the unaudited semi-annual accounts of the Charterers for that half-year;

     
 

(c)

as soon as possible, but in no event later than one hundred and fifty (150) days after the end of each financial year of the Guarantor, the audited consolidated annual financial statement accounts of the Guarantor for that financial year; and

     
 

(d)

as soon as possible, but in no event later than ninety (90) days after the end of each half-year, the semi-annual consolidated unaudited accounts of the Guarantor for that half-year certified as to their correctness by at least one director of the Guarantor.

     
 

11.4

Form of financial statements

     
    All accounts (audited and unaudited) delivered under Clause 11.3 will:
     
 

(a)

be prepared in accordance with all applicable laws and generally accepted accounting principles in the United States consistently applied;

     
 

(b)

give a true and fair view of (in respect of the audited accounts) or fairly representing (in the case of the management accounts) the state of affairs of the Group at the date of those accounts and of their profit for the period to which those accounts relate;

     
 

(c)

fully disclose or provide for all significant liabilities of the Group; and

     
 

(d)

If not in the English language, be accompanied by an English translation duly certified as to its correctness.

     
 

11.5

Shareholder and creditor notices

     
    The Guarantor will send the Owner, upon its request, copies of all communications which are despatched to the Guarantor's shareholders or creditors or any class of them.
     
 

11.6

Consents

     
    The Guarantor will obtain and promptly renew and will procure that each other Relevant Person obtains and promptly renews or procure the obtainment or renewal of and provide copies of, from time to time, any necessary consents, approvals, authorisations, licenses or permits of any regulatory body or authority for the transactions contemplated under each Leasing Document to which it is a party.
     
 

11.7

Valid obligations

     
    The Guarantor will at its own cost, and will procure that each other Relevant Person will:
     
 

(a)

do all that such Relevant Person reasonably can to ensure that any Leasing Document to which such Relevant Person is a party validly creates the obligations and the Security Interests which such Relevant Person purports to create; and

 

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(b)

without limiting the generality of paragraph (a), promptly register, file, record or enrol any Leasing Document to which such Relevant Person is a party with any court or authority in all Relevant Jurisdictions, pay any stamp duty, registration or similar tax in all Relevant Jurisdictions in respect of any Leasing Document to which such Relevant Person is a party, give any notice or take any other step which, is or has become necessary or desirable for any such Leasing Document to be valid, enforceable or admissible in evidence or to ensure or protect the priority of any Security Interest which such Relevant Person creates.

     
 

11.8

Notification of legal or administrative action

     
    The Guarantor will provide or will procure that each other Relevant Person provides the Owner with details of any legal or administrative action involving such Relevant Person or the Vessel that is likely to have a Material Adverse Effect as soon as such action is instituted or it becomes apparent is likely to be instituted and is likely to have a Material Adverse Effect.
     
 

11.9

Notification of damage or default

     
    The Guarantor:
     
 

(a)

will, and will procure that each other Relevant Person will, notify the Owner immediately of the occurrence of any damage and/or alteration caused to the Vessel by any reason whatsoever which results, or may be expected to result, in repairs on the Vessel which exceed $5,000,000; and

     
 

(b)

will, and will procure that each other Relevant Person will, notify the Owner immediately of the occurrence of any Termination Event,

     
    and will keep the Owner fully up-to-date with all developments and the Guarantor will, if so requested by the Owner, provide any such certificate signed by its authorised signatory, confirming that there exists no Potential Termination Event or Termination Event.
     
 

11.10

Additional information

     
    The Guarantor will, and will procure that each other Relevant Person will, as soon as practicable after receiving the request, provide the Owner with any additional financial or other information relating:
     
 

(a)

to themselves and/or the Vessel (including, but not limited to the condition, location and employment status of the Vessel); or

     
 

(b)

to any other matter relevant to, or to any provision of any Leasing Document to which it is a party,

     
    which may be reasonably requested by the Owner (or their financiers (if any)) at any time, provided that, in the case of information on the employment status of the Vessel, such information shall be in form and substance satisfactory to the Owner and shall be provided by the Charterers to the Owner at least once every six-monthly period during each calendar year.
     
 

11.11

Compliance with operational laws

     
    The Guarantor shall procure compliance, and will procure that each other Relevant Person will comply or procure compliance, with all laws or regulations relating to the Vessel and its construction, ownership, employment, operation, management and registration, including the ISM Code, the ISPS Code, all Environmental Laws and the laws of the Vessel's registry.

 

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11.12

Compliance with other laws

     
 

(a)

The Guarantor shall comply, and shall procure that each other Relevant Person will, comply with all applicable laws and regulations in respect of Sanctions, and in particular, the Charterers shall effect and maintain a sanctions compliance policy to ensure compliance with all such laws and regulations implemented from time to time.

     
 

(b)

The Guarantor:

 

 

(i)

shall, and shall procure that each other Relevant Person will, promptly notify the Owner of any non-compliance by any Relevant Person or their respective officers, directors, or employees with all laws and regulations relating to Sanctions, (including but not limited to notifying the Owner in writing immediately upon being aware that any Relevant Person or their respective shareholders, directors, officers or employees is a Prohibited Person or has otherwise become a target of Sanctions) as well as provide all information in relation to its business and operations which may be relevant for the purposes of ascertaining whether any of the aforesaid parties are in compliance with such laws.

     
 

(ii)

shall, and will procure that each other Relevant Person will, promptly notify the Owner of any non-compliance by any Relevant Person or their respective officers, directors, or employees with all laws and regulations relating to Anti-Money Laundering Laws, Anti-Terrorism Financing Laws and/or Business Ethics Laws as well as provide all information (once available) in relation to its business and operations which may be relevant for the purposes of ascertaining whether any of the aforesaid parties are in compliance with such laws.

 

 

(c)

The Guarantor shall procure that the Vessel shall not be employed, operated or managed in any manner which (i) is contrary to any Sanctions and in particular, the Vessel is not used by or to benefit any party which is a target of Sanctions or trade to any area or country where trading the Vessel to such area or country would constitute a breach of any Sanctions or published boycotts imposed by any of the United Nations, the European Union, the United States of America, the United Kingdom or the People's Republic of China (provided that operation or use of the Vessel by the Trafigura Charterer pursuant to the Trafigura Charter shall not in any case be deemed to be in breach or contrary to any published boycotts or sanctions imposed by the People's Republic of China) or (ii) would trigger the operation of any sanctions limitation or exclusion clause in any insurance documentation.

     
 

(d)

The Guarantor shall, and shall procure that each other Relevant Person and their respective officers, directors and employees, will:

 

 

(i)

conduct its business in compliance with all Anti-Money Laundering Laws, Anti-Terrorism Financing Laws and/or Business Ethics Laws;

     
 

(ii)

maintain systems, controls, policies and procedures designed to promote and achieve ongoing compliance with Anti-Money Laundering Laws, Anti-Terrorism Financing Laws and/or Business Ethics Laws; and

     
 

(iii)

in respect of the Charterers, not use, or permit or authorize any person to directly or indirectly use, the Opening Capital Balance for any purpose that would breach any Anti-Money Laundering Laws, Anti-Terrorism Financing Laws and/or Business Ethics Laws;

     
 

(iv)

not lend, invest, contribute or otherwise make available the Opening Capital Balance to or for any other person in a manner which would result in a violation of Anti-Money Laundering Laws, Anti-Terrorism Financing Laws and/or Business Ethics Laws.

 

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11.13

No Security Interests

     
    The Guarantor shall not, and shall procure that each other Relevant Person will not create, assume or permit to exist any Security Interest (other than any Permitted Security Interest) of any kind upon any Leasing Document to which such Relevant Person is a party, and if applicable, the Vessel.
     
 

11.14

Financial covenants

     
 

(a)

The Guarantor shall ensure that, at any time during the Security Period, the Guarantor's Leverage Ratio shall not be more than seventy five per cent (75%).

     
 

(b)

The Guarantor shall ensure that all time during the Security Period the Liquid Funds shall not be less than $500,000 multiplied by the number of the Fleet Vessels which are fully owned by the Guarantor ("100% Owned Vessels") or leased or operated (including those under a capital lease or operating lease with a purchase option at the end of the relevant charter period) by the Guarantor and/or any member of the Group.

     
    In this Guarantee:
     
    "Leverage Ratio" means, at any date, the ratio (expressed as a percentage) of:

 

 

(a)

the Total Net Debt; and

     
 

(b)

the aggregate Market Value of all Fleet Vessels adjusted, in each case, to reflect the percentage of ownership by the Guarantor of each such Fleet Vessel.

 

    "Liquid Funds" means, at any time, cash at bank and credited to an account in the name of any member of the Group and to which the Guarantor is solely (or together with other members of the Group) beneficially entitled and for so long as such cash has not been blocked due to the existence and/or enforcement of any Security Interest held by any bank or any other third party or otherwise unless such cash is held in such account charged, as the case may be, by way of a floating charge for the purposes of meeting minimum liquidity requirements in the context of any financing arrangement of the Group.
     
    "Market Value" means, in relation to any Fleet Vessel at any relevant time (the "Market Value Test Date")

 

 

(a)

subject to sub-paragraph (b) below, the arithmetic mean of the valuations shown by two (2) valuation reports prepared:

 

 

(i)

on a date no later than thirty (30) days after the Market Value Test Date;

     
 

(ii)

with or without physical inspection of that Vessel;

     
 

(iii)

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,

 

12

 

    and such valuation shall be prepared by Approved Valuers one nominated by the Owners and one nominated by the Charterers.

 

 

(b)

if there is a discrepancy of five per cent. (5%) or more between the market valuations shown on the two valuation reports obtained pursuant to the above paragraph (using the lower valuation figure as the denominator), the arithmetic mean of the valuations shown by three (3) valuation reports each prepared on the same terms and conditions as set out under paragraph (b) above (except that the third valuation report additionally required under this sub-paragraph (b) shall be prepared by an Approved Valuer nominated by the Owners).

 

    "Total Net Debt" means, at any date, the aggregate Financial Indebtedness of the Group as per US GAAP as at such date, adjusted to include a percentage of the Financial Indebtedness of any joint venture with a minimum holding of 50 per cent by any member of the Group which is equal to the percentage of the Guarantor's ownership in such joint venture, minus the aggregate amount of all cash balances standing on such date to the credit of a bank account of any member of the Group, adjusted to include a percentage of the cash balances of any entity holding any Fleet Vessel (other than the 100% Owned Vessels) which is equal to the percentage of the Guarantor's and/or such member's ownership in that entity, but excluding any cash held by any bank or any other third party or otherwise which is subject to the existence and/or enforcement any Security Interest unless such cash is held in such account charged, as the case may be, by way of a floating charge for the purposes of meeting minimum liquidity requirements in the context of any financing arrangement of the Group.
     
    "US GAAP" means the generally accepted accounting principles in the United States.
     
 

11.15

Compliance Certificate

     
    The Guarantor shall supply to the Owner, a Compliance Certificate setting out (in reasonable detail) computations as to compliance with Clause 11.14 on each testing date, being 31st December in each calendar year; and each Compliance Certificate shall be signed by the Co-Chief Financial Officer of the Guarantor.
     
 

11.16

Negative Pledge

     
    The Guarantor shall:

 

 

(a)

procure that the Charterers will not create or permit to arise any Security Interest over any of its assets present or future except for the Permitted Security Interests.; and

     
 

(b)

procure that its liabilities under this Guarantee will rank at least pari passu with all its other present and future unsecured liabilities, except for liabilities which are mandatorily preferred by law.

     
 

11.17

No disposal of assets, change of business

     
    The Guarantor will not, and shall (at all times) procure that no other Relevant Person shall:
     

 

13

 

 

(a)

transfer, lease or otherwise dispose of all or a substantial part of their respective assets (or any of their assets, in the case of the Charterer), whether by one transaction or a number of transactions, whether related or not except in the usual course of their respective trading operations; or

     
 

(b)

make any substantial change (or any change, in the case of the Charterer) to the nature of their respective business or corporate structure from that existing as at the date of this Guarantee.

     
 

11.18

No merger etc

     
    The Guarantor shall not enter into any form of merger, sub-division, amalgamation, demerger, reorganization, corporate reconstruction or change of ownership, or change of voting control unless the Guarantor remains as the surviving entity after such merger, sub-division, amalgamation, demerger, reorganization, corporate reconstruction or change of ownership, or change of voting control and Clause 11.14 has been complied with.
     
 

11.19

FATCA

     
    The Guarantor shall not, and shall procure that no Relevant Person will become a FATCA FFI or US Tax Obligor.
     
 

11.20

No payment of dividend

     
    The Guarantor shall not declare, make or pay any dividend or other distribution (or interest on any unpaid dividend or other distribution) on or in respect of its share capital (whether in cash or in kind) upon the occurrence of a Termination Event described in Clause 49 of the Bareboat Charter.
     
 

11.21

Notification of Financial Indebtedness

     
    The Guarantor shall promptly notify the Owner if the Guarantor agrees to provide any new financial covenants to a creditor (or to amend existing ones such that they materially differ from the financial covenants under Clause 11.14 (Financial Covenants) of this Guarantee, placing such creditor in a position which is comparatively more favourable in terms of the financial covenants than the position of the Owner) under the agreements entered into or to be entered into in connection with any Financial Indebtedness owed by the Guarantor or Group member to such creditor and agrees that it will promptly enter into such necessary documentation as may be required to amend and supplement this Guarantee and any applicable Leasing Document so as to reflect and incorporate such more favourable financial covenants into this Guarantee and any applicable Leasing Document.
     
 

12

JUDGMENTS AND CURRENCY INDEMNITY

     
 

12.1

Judgments relating to Bareboat Charter and other Leasing Documents

     
    This Guarantee shall cover any amount payable by any other Relevant Person under or in connection with any judgment or award relating to the Bareboat Charter and any other Leasing Document.
     
 

12.2

Currency indemnity

     
    If any sum due from the Guarantor to the Owner under this Guarantee or under any order, judgment or award relating to this Guarantee has to be converted from the currency in which this Guarantee provided for the sum to be paid (the "Contractual Currency") into another currency (the "Payment Currency") for the purpose of:

 

14

 

 

(a)

making or lodging any claim or proof against the Guarantor, whether in its liquidation, any arrangement involving it or otherwise; or

     
 

(b)

obtaining an order, judgment or award from any court or other tribunal; or

     
 

(c)

enforcing any such order, judgment or award;

     
    the Guarantor shall indemnify the Owner against the loss arising when the amount of the payment actually received by the Owner is converted at the available rate of exchange into the Contractual Currency.
     
    In this Clause 12.2, the "available rate of exchange" means the rate at which the Owners are able at the opening of business (Shanghai time) on the Business Day after it receives the sum concerned to purchase the Contractual Currency with the Payment Currency.
     
 

13

SUPPLEMENTAL

     
 

13.1

Continuing guarantee

     
    This Guarantee shall remain in force as a continuing security interest at all times during the Security Period.
     
 

13.2

Rights cumulative, non-exclusive

     
    The Owner's rights under and in connection with this Guarantee are cumulative, may be exercised as often as appears expedient and shall not be taken to exclude or limit any right or remedy conferred by law.
     
 

13.3

No impairment of rights under Guarantee

     
    If the Owner omits to exercise, delays in exercising or invalidly exercises any of its rights under this Guarantee, that shall not impair that or any other right of the Owner under this Guarantee.
     
 

13.4

Severability of provisions

     
    If any provision of this Guarantee is or subsequently becomes void, illegal, unenforceable or otherwise invalid, that shall not affect the validity, legality or enforceability of its other provisions.
     
 

13.5

Guarantee not affected by other Security Interests

     
    This Guarantee shall not impair, nor be impaired by, any other guarantee or any right of set-off or netting or to combine accounts which the Owner may now or later hold in connection with the Bareboat Charter or any other Leasing Document.
     
 

13.6

Guarantor bound by Bareboat Charter and other Leasing Documents

     
    The Guarantor agrees with the Owner to be bound by all provisions of the Bareboat Charter and any other Leasing Document in the same way as if those provisions had been set out (with any necessary modifications) in this Guarantee.

 

15

 

 

13.7

Applicability of provisions of Guarantee to other rights

     
    Clauses 3 and 16 shall also apply to any right of set-off or netting or to combine accounts which the Guarantor creates by an agreement entered into at the time of this Guarantee or at any later time (notwithstanding that the agreement does not include provisions similar to Clauses 3 and 16), being an agreement referring to this Guarantee.
     
 

13.8

Third party rights

     
    A person who is not a party to this Guarantee has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce or to enjoy the benefit of any term of this Guarantee.
     
 

13.9

Counterpart

     
    This Guarantee may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of this Guarantee.
     
 

13.10

FATCA Information

     
 

(a)

Subject to paragraph (c) below, each Party shall, on the date of the Bareboat Charter, and thereafter within ten (10) Business Days of a reasonable request by the other Party:

 

 

(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 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 "pass thru percentage" or other information required under FATCA or other official guidance including intergovernmental agreements) as the requesting party reasonably requests for the purpose of the requesting party's compliance with FATCA.

 

 

(b)

If a Party confirms to any other Party that it is a FATCA Exempt Party or provides an IRS Form W-8 or W-9 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, or that the said form provided has ceased to be correct or valid, that party shall so notify all other Relevant Parties or provide the relevant revised form, as applicable, reasonably promptly.

     
 

(c)

Nothing in this Clause shall oblige a 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, however, that nothing in this paragraph shall excuse a 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 Party fails to confirm its status or to supply forms, documentation or other information requested in accordance with the provisions of this Charter or the provided information is insufficient under FATCA, then:

 

16

 

 

(i)

if that party failed to confirm whether it is (and/or remains) a FATCA Exempt Party then such party shall be treated for the purposes of this Charter and the Leasing Documents as if it is a FATCA Non-Exempt Party; and

     
 

(ii)

if that party failed to confirm its applicable passthru percentage then such party shall be treated for the purposes of this Charter and the Leasing 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.
     
 

14

ASSIGNMENT

     
 

14.1

Assignment by Owner

     
    Clause 63 of the Bareboat Charter shall apply to this Guarantee as if they were expressly incorporated herein with any necessary modifications including the references to "the Charterers" therein shall be references to "the Guarantor" when applied herein and references to "the Leasing Document" and "this Charter" therein shall be references to "this Guarantee" when applied herein.
     
 

14.2

The Guarantor may not assign any of its rights or transfer any of its rights or obligations under this Guarantee.

     
 

15

NOTICES

     
 

15.1

Notices to Guarantor

     
    Any notice or demand to the Guarantor under or in connection with this Guarantee shall be given by letter or fax or mail at:
     
    TOP SHIPS INC.
     
    Attention: Alexandros Tsirikos
     
    Email: atsirikos@topships.org
    Tel: +30 210 8128180
    Fax: +30 210 8056441
     
    or to such other address which the Guarantor may notify to the Owner.
     
 

15.2

Validity of demands

     
    A demand under this Guarantee shall be valid notwithstanding that it is served:
     
 

(a)

on the date on which the amount to which it relates is payable by the Relevant Person under the Leasing Document to which it is a party;

     
 

(b)

at the same time as the service of a notice under Clause 44 of the Bareboat Charter;

     
    and a demand under this Guarantee shall (i) be in writing; (ii) be signed by a duly authorised officer of the Owner and delivered to the Guarantor pursuant to the provisions under this Guarantee; (iii) make reference to this Guarantee; (iv) specifically identify the Charterer or any other Relevant Person and the Guaranteed Obligations to be paid and/or performed (as the case may be); and (v) set forth payment instructions in respect of any amount or amounts payable to the Owner.

 

17

 

 

15.3

Notices to Owner

     
    Any notice to the Owner under or in connection with this Guarantee shall be sent to the same address and in the same manner as notices to the Owner under Clause 44 of the Bareboat Charter.
     
 

16

INVALIDITY OF BAREBOAT CHARTER

     
 

16.1

Invalidity of Bareboat Charter or other Leasing Documents

     
    In the event of:
     
 

(a)

the Bareboat Charter or any other Leasing Document now being or later becoming, with immediate or retrospective effect, void, illegal, unenforceable or otherwise invalid for any other reason whatsoever, whether of a similar kind or not; or

     
 

(b)

without limiting the scope of paragraph (a), a bankruptcy of the Relevant Person party thereto, the introduction of any law or any other matter resulting in that Relevant Person being discharged from liability under the Bareboat Charter or other Leasing Document, or the Bareboat Charter or other Leasing Document ceasing to operate (for example, by interest ceasing to accrue);

     
    this Guarantee shall cover any amount which would have been or become payable under or in connection with the Bareboat Charter or other Leasing Document if the Bareboat Charter or other Leasing Document had been and remained entirely valid, legal and enforceable, or that Party had not suffered bankruptcy, or any combination of such events or circumstances, as the case may be, and the Charterer had remained fully liable under it for liabilities whether invalidly incurred or validly incurred but subsequently retrospectively invalidated; and references in this Guarantee to amounts payable by that Party under or in connection with the Bareboat Charter or other Leasing Document shall include references to any amount which would have so been or become payable as aforesaid.
     
 

17

GOVERNING LAW AND ENFORCEMENT

     
 

17.1

Governing law

     
    This Guarantee and any non-contractual obligations arising out of or in connection with it are governed by English law.
     
 

17.2

Arbitration

     
 

(a)

Any dispute arising out of or in connection with this Guarantee (including a dispute regarding the existence, validity or termination of this Guarantee or any non-contractual obligation arising out of or in connection with this Guarantee) (a "Dispute") shall be referred to and finally resolved by arbitration in London in accordance with the Arbitration Act 1996 or any statutory modification or re-enactment thereof save to the extent necessary to give effect to the provisions of this Clause 17. The arbitration shall be conducted in accordance with the London Maritime Arbitrators Association ("LMAA") Terms current at the time when the arbitration proceedings are commenced.

 

18

 

 

(b)

The reference shall be to three arbitrators. A party wishing to refer a Dispute to arbitration shall appoint its arbitrator and send notice of such appointment in writing to the other party requiring the other party to appoint its own arbitrator within 14 calendar days of that notice and stating that it will appoint its arbitrator as sole arbitrator unless the other party appoints its own arbitrator and gives notice that it has done so within the 14 days specified. If the other party does not appoint its own arbitrator and give notice that it has done so within the 14 days specified, the party referring a Dispute to arbitration may, without the requirement of any further prior notice to the other party, appoint its arbitrator as sole arbitrator and shall advise the other party accordingly. The award of a sole arbitrator shall be binding on both parties as if he had been appointed by agreement. Nothing herein shall prevent the parties agreeing in writing to vary these provisions to provide for the appointment of a sole arbitrator.

     
 

(c)

Where the reference is to three arbitrators the procedure for making appointments shall be in accordance with the procedure for full arbitration stated above.

     
 

(d)

The language of the arbitration shall be English.

     
 

(e)

In cases where neither the claim nor any counterclaim exceeds the sum of US$100,000 (or such other sum as the Parties may agree) the arbitration shall be conducted in accordance with the LMAA Small Claims Procedure current at the time when the arbitration proceedings are commenced.

 

IN WITNESS WHEREOF this GUARANTEE has been executed as a DEED and delivered on the date stated at the beginning of this GUARANTEE.

 

 

 

 

 

 

 

19

 

SCHEDULE 1

FORM OF COMPLIANCE CERTIFICATE

 

To:

 

SEA 269 LEASING CO. LIMITED

 

From:

 

TOP SHIPS INC.

 

Date:                          

 

Guarantee dated [] 2021 (the "Guarantee") in respect of a bareboat charter for m.v. "LEGIO X EQUESTRIS"

 

Dear Sirs

 

 

1

We refer to the Guarantee. This is a Compliance Certificate. Terms defined in the Guarantee have the same meaning when used in this Compliance Certificate unless given a difference meaning in this Compliance Certificate.

 

 

2

We confirm that, as at the date hereof, no Termination Event has occurred and is continuing which has not been waived or remedied at the date hereof or if that is not the case, specifying the same and the steps, if any, being taken to remedy the same.

 

 

3

We confirm that, at any time during the Security Period, Leverage Ratio was not be more than 75 per cent (75%).

 

 

4

We confirm that all time during the Security Period the Liquid Funds was not be less than the aggregate of $500,000 multiplied by the number of the Fleet Vessels which are fully owned by the Guarantor or leased or operated (including those under a capital lease or operating lease with a purchase option at the end of the relevant charter period) by the Guarantor and/or any member of the Group. .

 

Yours faithfully

 

Signed: ___________________________

 

Co-Chief Financial Officer of

 

TOP SHIPS INC.

 

20

 

 

EXECUTION PAGE

 

GUARANTOR    
     
EXECUTED AS A DEED  )  
by TOP SHIPS INC. ) /s/ Alexandros Tsirikos
acting by Alexandros Tsirikos )  
being an attorney-in-fact  ) Attorney-in-fact
in the presence of: )  
  )  
  )  
Witness' signature: ) /s/ Dimitra Karkaletsi
Witness' name:  ) Dimitra Karkaletsi
Witness' address:  )

274, Loef. Salaminas – Salamina
Greece

     
     
     
OWNER    
     
SIGNED, SEALED AND DELIVERED  )  
by SEA 268 LEASING CO. LIMITED ) /s/ Lin Chung Fai Simon
acting by Lin Chung Fai Simon )  
being an attorney-in-fact   ) Attorney-in-fact
  )  
in the presence of:  )  
  )  
  )  
Witness' signature:  ) /s/ Wong Ho Ching
Witness' name:  ) Wong Ho Ching
Witness' address: )

Suites 4610-4619, Jardine House,
1 Connaught Place, Hong Kong

 

 

 

21

Exhibit 4.29

 

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exh428_07.jpg
 
 

 

exh428_08.jpg
 
 

 

 
exh428_09.jpg
 
 

 

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ADDITIONAL CLAUSES TO BARECON 2001 DATED ____23 November_________ 2021

 

 

32

CHARTER PERIOD

 

 

32.1

The period of this Charter (the "Charter Period") shall, subject to the terms of this Charter, continue for a period of ninety six (96) months starting from the Commencement Date.

 

 

32.2

Notwithstanding the fact that the Charter Period shall commence on the Commencement Date, this Charter shall be:

 

 

(a)

in full force and effect; and

 

 

(b)

valid, binding and enforceable against the parties hereto,

 

with effect from the date hereof until the end of the Charter Period (subject to the terms of this Charter).

 

 

33

CANCELLATION

 

 

33.1

If:

 

 

(a)

the Vessel is not delivered by the Charterers as sellers to the Owners as buyers under the MOA by the Cancelling Date (or such later date as the parties to the MOA may agree); or

 

 

(b)

the MOA expires, is cancelled, terminated, rescinded or suspended or otherwise ceases to remain in full force and effect for any reason (in whole or in part),

 

 

33.2

then this Charter shall immediately terminate and be cancelled (without prejudice to Clause 53 (Indemnities) and without the need for either the Owners or the Charterers to take any action whatsoever), provided that the Owners shall be entitled to retain all fees and expenses paid by the Charterers pursuant to Clause 42 (Fees and Expenses) (and without prejudice to Clause 42 (Fees and Expenses) and any clause of the MOA, if such fees have not been paid, the Charterers shall forthwith pay such fees and expenses to the Owners in accordance with Clause 42 (Fees and Expenses) and such payment shall be irrevocable and unconditional and is acknowledged by the Charterers to be proportionate as to amount, having regard to the legitimate interest of the Owners, in protecting against the Owners' risk of the Charterers failing to perform its obligations under this Charter. For the avoidance of doubt, the termination of the Charter shall not prejudice the operation of any provision of any Leasing Document which is expressed to survive the termination or cancellation of this Charter).

 

 

34

DELIVERY AND CHARTER OF VESSEL

 

 

34.1

This Charter is part of a transaction involving the sale, purchase and charter back of the Vessel and constitutes one of the Leasing Documents.

 

 

34.2

The obligation of the Owners to charter the Vessel to the Charterers hereunder is subject to and conditional upon:

 

 

(a)

the delivery to and acceptance by the Charterers as buyers of the Vessel under the Contract and the delivery to and acceptance by the Owners as buyers of the Vessel under the MOA;

 

 

1

 

 

(b)

no Potential Termination Event or Termination Event having occurred which is continuing from the date of this Charter to the last day of the Charter Period (inclusive);

 

 

(c)

the representations and warranties contained in Clause 45 (Representations and Warranties) being true and correct on the date hereof and each day thereafter until and including the last date of the Charter Period;

 

 

(d)

the Delivery occurring on or before the Cancelling Date; and

 

 

(e)

the Owners having received from the Charterers:

 

 

(i)

on or before the date falling three (3) Business Days prior to the Prepositioning Date, the documents or evidence set out in Part A of Schedule 2 in form and substance satisfactory to them; and

 

 

(ii)

on the Commencement Date and prior to or simultaneously with the Owners executing a dated and timed copy of the protocol of delivery and acceptance evidencing delivery of the Vessel under the MOA and a dated and timed copy of the Acceptance Certificate, the documents or evidence set out in Part B of Schedule 2 in form and substance satisfactory to them,

 

and if any of the documents listed in Schedule 2 are not in the English language then, where required by the Owners, they shall be accompanied by a certified English translation.

 

 

34.3

The conditions precedent specified in paragraph (e) of Clause 34.2 are inserted for the sole benefit of the Owners and may be waived or deferred in whole or in part and with or without conditions by the Owners.

 

 

34.4

On (A) delivery to and acceptance by the Charterers as buyers of the Vessel from the Builder under the Contract; and (B) delivery to and acceptance by the Owners (in their capacity as buyers) of the Vessel from the Charterers (in their capacity as sellers) under the MOA, the Vessel shall be deemed to have been delivered to, and accepted without reservation by, the Charterers under this Charter and the Charterers shall become and be entitled to the possession and use of the Vessel on and subject to the terms and conditions of this Charter on the same day as the delivery date of the Vessel under the MOA.

 

 

34.5

On Delivery, as evidence of the commencement of the Charter Period, the Charterers shall sign and deliver to the Owners, the Acceptance Certificate. The Charterers shall be deemed to have accepted the Vessel under this Charter, and the commencement of the Charter Period having started, on Delivery even if, for whatever reason, the Acceptance Certificate is not signed and/or the Charterers do not take actual possession of the Vessel at that time.

 

 

34.6

The Charterers shall not be entitled for any reason whatsoever to refuse to accept delivery of the Vessel under this Charter once the Vessel has been delivered to and accepted by the Owners (in their capacity as buyers) from the Charterers (in their capacity as sellers) under the MOA, and the Owners shall not be liable for any losses, costs or expenses whatsoever or howsoever arising including without limitation, any loss of profit or any loss or otherwise:

 

 

(a)

resulting directly or indirectly from any defect or alleged defect in the Vessel (including but not limited to any deficiency in seaworthiness, merchantability, classification, condition, design, quality, operation, performance, capacity or fitness for use or the eligibility of the Vessel for any particular trade or operation) or any failure of the Vessel; or

 

2

 

 

(b)

arising from any delay in the commencement of the Charter Period or any failure of the Charter Period to commence.

 

 

34.7

The Owners shall not be obliged to deliver the Vessel to the Charterers with any bunkers and unused lubricating oils and hydraulic oils and greases in storage tanks and unopened drums of the Vessel except for such items which are already on the Vessel on Delivery. The Owners shall not be responsible for the fitness, quality or quantity of any such bunkers and unused lubricating oils and hydraulic oils and greases and the Charterers shall make no claim against Owners in respect of the same.

 

 

34.8

The Charterers shall procure receipt by the Owners of the conditions subsequent set out in Part C of Schedule 2 in a form and substance satisfactory to the Owners within the time periods permitted therein.

 

 

35

QUIET ENJOYMENT

 

 

35.1

Provided that no Potential Termination Event, Termination Event or Total Loss has occurred, the Owners hereby agree not to disturb or interfere with the Charterers' lawful use, possession and quiet enjoyment of the Vessel during the Charter Period.

 

 

36

CHARTERHIRE AND ADVANCE CHARTERHIRE

 

 

36.1

In consideration of the Owners agreeing to charter the Vessel to the Charterers under this Charter at the request of the Charterers, the Charterers hereby irrevocably and unconditionally agree to pay to the Owners the Charterhire, the Advance Charterhire and all other amounts payable under this Charter in accordance with the terms of this Charter.

 

 

36.2

The Charterers shall pay to the Owners on the Commencement Date, an amount which is equal to the difference between the Purchase Price and the Opening Capital Balance as of the Commencement Date (the "Advance Charterhire").

 

 

36.3

The Charterers shall be deemed to have paid the Advance Charterhire to the Owners on the Commencement Date by the Owners (as buyers under the MOA) setting off an amount equal to the Advance Charterhire against a corresponding amount of the Purchase Price payable by the Owners to the Charterers (as sellers) under the MOA.

 

 

36.4

The Advance Charterhire shall not bear interest and shall be non-refundable.

 

 

36.5

Following Delivery and commencing from the Commencement Date, the Charterers shall pay Charterhire in arrears in quarterly instalments on each Payment Date. Each instalment shall consist of:

 

 

(a)

a capital element of Charterhire (the "Fixed Charterhire") to be calculated in the following manner:

 

 

(i)

A = 1/32 x B

 

 

(ii)

A is the amount of the Fixed Charterhire due on each such Payment Date.

 

 

(iii)

B is the difference between the Opening Capital Balance and the Final Purchase Option Price.

 

3

 

 

(b)

a variable element of Charterhire (the "Variable Charterhire") which shall be calculated by applying the aggregate of the (i) applicable Interest Rate for the relevant Hire Period and (ii) the Margin to the Owners' Costs on the immediately preceding Payment Date (or, in the case of the First Payment Date only, on the Commencement Date) for the relevant Hire Period ending on the relevant Payment Date by reference to the actual number of days elapsed.

 

 

36.6

Charterhire shall be payable in arrears on the following dates (each a "Payment Date"):

 

 

(a)

first instalment of Charterhire shall be payable on the date falling three (3) months after the Commencement Date (the "First Payment Date"); and

 

 

(b)

each subsequent instalment of Charterhire (other than the last instalment of Charterhire) shall be payable quarterly thereafter, with the final instalment of Charterhire payable on the last day of the Charter Period,

 

such that there is a total of thirty two (32) Payment Dates during the Charter Period.

 

 

36.7

Payment of Charterhire on any Payment Date shall be made in same day available funds and received by the Owners by not later than 4.00 pm (Beijing time). Any payment of Charterhire which is due to be made on a Payment Date which is not also a Business Day shall be made on the previous Business Day instead.

 

 

36.8

Time of payment of the Charterhire and any other payments by the Charterers under this Charter shall be of the essence of this Charter.

 

 

36.9

All payments of the Charterhire and any other moneys payable hereunder shall be made in Dollars.

 

 

36.10

All payments of the Charterhire and any other moneys payable hereunder shall be payable by the Charterers to the Owners' designated bank account as the Owners may notify the Charterers in writing from time to time.

 

 

36.11

Payment of the Charterhire and any other amounts under this Charter shall be at the Charterers' risk until receipt by the Owners.

 

 

36.12

The Vessel shall not at any time be deemed off-hire and the Charterers' obligation to pay the Charterhire and any other amounts payable in this Charter (including but not limited to the Termination Sum) in Dollars shall be absolute and unconditional under any and all circumstances and shall not be affected by any circumstances of any nature whatsoever including but not limited to:

 

 

(a)

(except in the case of the Advance Charterhire) any set off, counterclaim, recoupment, defence, claim or other right which the Charterers may at any time have against the Owners or any other person for any reason whatsoever including, without limitation, any act, omission or breach on the part of the Owners under this Charter or any other agreement at any time existing between the Owners and the Charterers;

 

 

(b)

any change, extension, indulgence or other act or omission in respect of any indebtedness or obligation of the Charterers, or any sale, exchange, release or surrender of, or other dealing in, any security for any such indebtedness or obligation;

 

 

(c)

any title defect or encumbrance or any dispossession of the Vessel by title paramount or otherwise;

 

4

 

 

(d)

any defect in the seaworthiness, condition, value, design, merchantability, operation or fitness for use of the Vessel or the ineligibility of the Vessel for any particular trade, or for registration or documentation under the laws of any relevant jurisdiction;

 

 

(e)

the Total Loss or any damage to or forfeiture or court marshall's or other sale of the Vessel if the Termination Sum or any part thereof remains due;

 

 

(f)

any libel, attachment, levy, detention, sequestration or taking into custody of the Vessel or any restriction or prevention of or interference with or interruption or cessation in, the use or possession thereof by the Charterers unless for such period where such arrest, detention or seizure is solely attributable to the fault of the Owners;  

 

 

(g)

any insolvency, bankruptcy, reorganization, arrangement, readjustment, dissolution, liquidation or similar proceedings by or against the Charterers and any other Relevant Person;

 

 

(h)

any invalidity, unenforceability, lack of due authorization or other defects, or any failure or delay in performing or complying with any of the terms and provisions of this Charter or any of the Leasing Documents by any party to this Charter or any other person;

 

 

(i)

any enforcement or attempted enforcement by the Owners of their rights under this Charter or any of the Leasing Documents executed or to be executed pursuant to this Charter;

 

 

(j)

any loss of use of the Vessel due to deficiency or default or strike of officers or crew, fire, breakdown, damage, accident, defective cargo or any other cause which would or might but for this provision have the effect of terminating or in any way affecting any obligation of the Charterers under this Charter; or

 

 

(k)

any prevention, delay, deviation or disruption in the use of the Vessel resulting from the wide outbreak of any viruses (including the 2019 novel coronavirus), including but not limited to those caused by:

 

 

(i)

closure of ports;

 

 

(ii)

prohibitions or restrictions against the Vessel calling at or passing through certain ports;

 

 

(iii)

restriction in the movement of personnel and/or shortage of labour affecting the operation of the Vessel or the operation of the ports (including stevedoring operations);

 

 

(iv)

quarantine regulations affecting the Vessel, its cargo, the crew members or relevant port personnel;

 

 

(v)

fumigation or cleaning of the Vessel; or

 

 

(vi)

any claims raised by any sub-charterer or manager of the Vessel that a force majeure event or termination event (or any other analogous event howsoever called) has occurred under the relevant charter agreement or management agreement (as the case may be) of the Vessel as a result of the outbreak of such viruses.

 

5

 

 

36.13

All stamp duty, value added tax (for the avoidance of doubt, including without limitation, goods and services tax), withholding or other taxes and import and export duties and all other similar types of charges which may be levied or assessed on or in connection with:

 

 

(a)

the operation of this Charter in respect of the hire and all other payments to be made pursuant to this Charter and the remittance thereof to the Owners; and

 

 

(b)

the import, export, purchase, delivery and re-delivery of the Vessel,

 

shall be borne by the Charterers. The Charterers shall pay, if applicable, value added tax and other similar tax levied on any Charterhire and other payments payable under this Charter by addition to, and at the time of payment of, such amounts. If any such taxes arise as a result of (i) the Owners being incorporated in Hong Kong and (ii) the introduction or alteration after the date of this Charter of a law in Hong Kong or an alteration after the date of this Charter in the manner in which a law in Hong Kong is interpreted or applied (the "Tax Changes"). Provided that if after the Owners and the Charterers having exercised reasonable endeavours to mitigate the effect of the Tax Changes (at the cost of the Charterers) following notification from the Owners to the Charterers regarding the occurrence of the Tax Changes such Tax Changes continue to have the same effect, the Charterers shall have the option to pay the Mandatory Sale Price to the Owners within thirty (30) days following such notice by the Owners, and this Charter shall terminate in accordance with the procedures set out in Clause 50.4.

 

 

37

CHANGES TO INTEREST RATE, DEFAULT INTEREST

 

 

37.1

If, in relation to any determination of the Interest Rate prior to a Screen Rate Replacement Event:

 

 

(a)

the Owners determine (which determination shall be conclusive and binding) that by reason of circumstances affecting the Relevant Interbank Market generally, adequate and fair means do not or will not exist for ascertaining LIBOR at the beginning of that Hire Period or the same does not reflect the cost of funding of the Owners; and

 

 

(b)

the Owners determine (which determination shall be conclusive and binding) that by reason of circumstances affecting the Relevant Interbank Market generally, deposits in Dollars in the required amount for the 3-month period commencing on the first day of that Hire Period are not available to it in the Relevant Interbank Market or from whatever sources it may select to obtain funds for that Hire Period,

 

the Owners shall promptly notify the Charterers accordingly.

 

 

37.2

Immediately following the notification referred to in Clause 37.1 above, the Owners and the Charterers shall negotiate in good faith with a view to agreeing upon a substitute basis for determining the Interest Rate for that Hire Period.

 

 

37.3

If a substitute basis is not so agreed pursuant to Clause 37.2 above or after the occurrence of a Screen Rate Replacement Event but prior to the making of any necessary amendment or waiver in accordance with Clause 37.4 below, the Interest Rate shall be the rate per annum equal to the cost certified and notified by the Owners, with relevant supporting evidence available to the Owners at the relevant time (expressed as an annual rate of interest) of funding the Owners' Costs during the relevant Hire Period (as reasonably determined by the Owners). It is hereby agreed that the Charterers shall have the option to pay the Mandatory Sale Price to the Owners within thirty (30) days following such notice by the Owners pursuant to this Clause 37.3, and this Charter shall terminate in accordance with the procedures set out in Clause 50.4.

 

6

 

 

37.4

If a Screen Rate Replacement Event has occurred in relation to the Screen Rate for dollars, the Owners are entitled to make any amendment or waiver to the terms of the Leasing Documents with the consent of the Charterers (at the Charterers' cost) which relates to:

 

 

(a)

providing for the use of a Replacement Benchmark in relation to Dollars in place of (or in addition to) that Screen Rate; and

 

 

(b)

 

 

(i)

aligning any provision of any Leasing Document to the use of that Replacement Benchmark;

 

 

(ii)

enabling that Replacement Benchmark to be used for the calculation of the Interest Rate under this Charter (including, without limitation, any consequential changes required to enable that Replacement Benchmark to be used for the purposes of this Charter);

 

 

(iii)

implementing market conventions applicable to that Replacement Benchmark;

 

 

(iv)

providing for appropriate fallback (and market disruption) provisions for that Replacement Benchmark; or

 

 

(v)

adjusting the pricing to reduce or eliminate, to the extent reasonably practicable, any transfer of economic value from one Party to another as a result of the application of that Replacement Benchmark (and if any adjustment or method for calculating any adjustment has been formally designated, nominated or recommended by the Relevant Nominating Body, the adjustment shall be determined on the basis of that designation, nomination or recommendation),

 

and pending any such amendment or waiver and the Replacement Benchmark being utilised under the Leasing Documents to calculate the Interest Rate, Clause 37.3 shall apply to the calculation of the Interest Rate.

 

 

37.5

If, as at 30 June 2022, this Charter provides that the rate of interest for the Owners' Cost in dollars is to be determined by reference to the Screen Rate for LIBOR:

 

 

(a)

a Screen Rate Replacement Event shall be deemed to have occurred on that date in relation to the Screen Rate for dollars; and

 

 

(b)

the Owners shall enter into negotiations in good faith with a view to agreeing the use of a Replacement Benchmark in relation to dollars in place of that Screen Rate from and including a date no later than 31 December 2022. It is hereby agreed that if the use of a Replacement Benchmark in relation to dollars is not so agreed, the Charterers shall have the option to pay the Mandatory Sale Price to the Owners by 31 January 2023, and this Charter shall terminate in accordance with the procedures set out in Clause 50.4.

 

 

37.6

If the Charterers fail to make any payment due under this Charter on the due date, they shall pay additional interest on such late payment at a rate which is equal to one per cent. (1%) per annum above the applicable Interest Rate for the relevant Hire Period and the Margin which shall apply prior to, during or following Delivery and shall accrue on a daily basis from the date on which such payment became due up to and excluding the date of payment thereof, and the Charterers and the Owners agree that such default rate is proportionate as to amount, having regard to the legitimate interest of the Owners, in protecting against the Owners' risk of the Charterers failing to perform its obligations under this Charter.

 

7

 

 

37.7

All interest (including default interest) and any other payments under this Charter 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 three hundred and sixty (360) days' year.

 

 

38

POSSESSION OF VESSEL

 

 

38.1

The Charterers shall not, without the prior written consent of the Owners, assign, mortgage or pledge the Vessel or any interest therein, its Earnings, Insurances and/or any Requisition Compensation and shall not permit the creation or existence of any Security Interest thereon (including for any monies paid in advance and not earned, and for any claims for damages arising from any breach by the Owners of this Charter and other amounts due to the Charterers under this Charter) except for the Permitted Security Interests.

 

 

38.2

The Charterers shall promptly notify any party (including, without limitation, the Trafigura Charterer or any other subcharterer of the Vessel) (as the Owners may request) in writing that the Vessel is the property of the Owners and the Charterers shall provide the Owners with a copy of such written notification and satisfactory evidence to the opinion of the Owners that such party has received such written notification.

 

 

38.3

If the Vessel is arrested, seized, impounded, forfeited, detained or taken out of their possession or control (whether or not pursuant to any distress, execution or other legal process), the Charterers shall procure the immediate release of the Vessel (whether by providing bail or procuring the provision of security or otherwise do such lawful things as the circumstances may require) and shall immediately notify the Owners of such event and shall indemnify the Owners against all losses, costs or charges incurred by the Owners by reason thereof in re-taking possession or otherwise in re-acquiring the Vessel. Without prejudice to the generality of the foregoing and Clause 52, the Charterers agree to indemnify the Owners against all consequences or liabilities arising from the master, officers or agents signing bills of lading or other documents.

 

 

38.4

If the Vessel is arrested or otherwise detained solely because of the Owners' direct actions or omissions and for reasons which are not in any part of a consequence of contributory negligence and/or wilful misconduct of any Approved Sub-charterer, a Relevant Person or any other member of the Group (or its affiliates), the Owners shall at their own expense take all reasonable steps to procure that the Vessel is released within a reasonable time.

 

 

38.5

The Charterers shall pay and discharge or cause the Trafigura Charterer or any other subcharterer of the Vessel to pay and discharge all obligations and liabilities whatsoever which have given or may give rise to liens on or claims enforceable against the Vessel. The Charterers shall take all steps to prevent (and shall procure that any subcharterer of the Vessel shall take all steps to prevent) an arrest (threatened or otherwise) of the Vessel.

 

 

39

INSURANCE

 

 

39.1

The Charterers shall procure that the insurances for the Vessel are effected:

 

 

(a)

in Dollars;

 

 

(b)

in the case of fire and usual hull and machinery, marine risks and war risks (including blocking and trapping), on an agreed value basis of at least the higher of (i) one hundred per cent (100%) of then applicable Market Value of the Vessel and (ii) one hundred and twenty per cent (120%) of the then prevailing Owners' Costs;

 

8

 

 

(c)

in the case of oil pollution liability risks for the Vessel, for an aggregate amount equal to the higher of (i) $1,000,000,000 or (ii) the highest level of cover from time to time available under protection and indemnity club entry and in the international marine insurance market;

 

 

(d)

in the case of protection and indemnity risks, in respect of the full tonnage of the Vessel and with a protection and indemnity club which is a member of the International Group of Protection and Indemnity Clubs;

 

 

(e)

with first class international insurers and/or underwriters acceptable to the Owners and having a Standard & Poor's rating of BBB+ or above, a Moody's rating of A or above or an AM Best rating of A- or above or otherwise acceptable to the Owners or, in the case of war risks through a protection and indemnity club which meets the requirements of paragraph (d) above; and

 

 

(f)

on terms and in form acceptable to the Owners and the Owners' Financiers (if any).

 

 

39.2

In addition to the terms set out in Clause 13(a) (Insurance and Repairs), the Charterers shall procure that the Obligatory Insurances shall:

 

 

(a)

subject always to paragraph (b), name the Charterers, the Approved Manager and the Owners (and if applicable the Owners' Financiers if so required by the Owners) as the only named assureds unless the interest of every other named assured or co-assured is limited:

 

 

(i)

in respect of any Obligatory Insurances for hull and machinery and war risks;

 

 

(1)

to any provable out-of-pocket expenses that they have incurred and which form part of any recoverable claim on underwriters; and

 

 

(2)

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 them); and

 

 

(ii)

in respect of any Obligatory Insurances for protection and indemnity risks, to any recoveries they are entitled to make by way of reimbursement following discharge of any third party liability claims made specifically against them,

 

and every other named assured or co-assured has undertaken in writing to the Owners or the Owners' Financiers (in such form as they may require) that any deductible shall be apportioned between the Charterers and every other named assured or co-assured (save for the Owners or the Owners' Financiers (if any)) in proportion to the gross claims made by or paid to each of them and that they shall do all things necessary and provide all documents, evidence and information to enable the Owners and the Owners' Financiers (if any) in accordance with the terms of the loss payable clause, to collect or recover any moneys which at any time become payable in respect of the Obligatory Insurances;

 

 

(b)

whenever the Owners' Financiers (if any) require:

 

 

(i)

in respect of fire and other usual marine risks and war risks, name (or be amended to name) the same as additional named assured for their rights and interests, warranted no operational interest and with full waiver of rights of subrogation against such financiers, but without such financiers thereby being liable to pay (but having the right to pay) premiums, calls or other assessments in respect of such insurance;

 

9

 

 

(ii)

in relation to protection and indemnity risks, name (or be amended to name) the same as additional insured or co-assured for their rights and interests to the extent permissible under the relevant protection and indemnity club rules; and

 

 

(iii)

name the same and the Owners as respectively the first ranking loss payee and the second ranking loss payee (and in the absence of any financiers, the Owners as first ranking loss payee) in accordance with the terms of the relevant loss payable clauses approved by the Owners' Financiers and the Owners with such directions for payment in accordance with the terms of such relevant loss payable clause, as the Owners and the Owners' Financiers (if any) may specify;

 

 

(c)

provide that all payments by or on behalf of the insurers under the Obligatory Insurances to the Owners and/or the Owners' Financiers (as applicable) shall be made without set-off, counterclaim, deductions or condition whatsoever;

 

 

(d)

provide that such Obligatory Insurances shall be primary without right of contribution from other insurances which may be carried by the Owners or the Owners' Financiers (if any);

 

 

(e)

provide that the Owners and/or the Owners' Financiers (if any) may make proof of loss if the Charterers fail to do so; and

 

 

(f)

provide that if any Obligatory Insurance is cancelled, or if any substantial change is made in the coverage which adversely affects the interest of the Owners and/or the Owners' Financiers (if any), or if any Obligatory Insurance is allowed to lapse for non-payment of premium, such cancellation, change or lapse shall not be effective with respect to the Owners and/or the Owners' Financiers (if any) for thirty (30) days after receipt by the Owners and/or the Owners' Financiers (if any) of prior written notice from the insurers of such cancellation, change or lapse.

 

 

39.3

The Charterers shall:

 

 

(a)

at least fifteen (15) days prior to Delivery (or such shorter period agreed by the parties), notify in writing the Owners of the terms and conditions of all Insurances (copied to the Owners' Financiers (if any) and the brokers or insurers with whom the Insurances are or will be placed);

 

 

(b)

at least fifteen (15) days before the expiry of any obligatory insurance or otherwise before the change of appointment of any brokers (or other insurers) and any protection and indemnity or war risks association through which Obligatory Insurances are taken from time to time pursuant to this Clause 39 (Insurance), notify the Owners (copied to the Owners' Financiers (if any)) of the brokers (or other insurers) and any protection and indemnity or war risks association through or with whom the Charterers propose to renew or obtain that Obligatory Insurance and of the proposed terms of such renewed or new insurance cover and obtain the Owners' approval to such matters;

 

 

(c)

at least seven (7) days before the expiry of any Obligatory Insurance, procure that such Obligatory Insurance is renewed or to be renewed on its expiry date in accordance with the provisions of this Charter;

 

 

(d)

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 or the effective date of the new insurance and protection and indemnity cover notify the Owners (copied to the Owners' Financiers (if any)) in writing of the terms and conditions of the renewal; and

 

10

 

 

(e)

as soon as practicable after the expiry of any Obligatory Insurance and within thirty (30) days after such expiry, deliver to the Owners a letter of undertaking as required by this Charter in respect of such Insurances for the Vessel as renewed pursuant to paragraph (c) of Clause 39.3 (Insurance) together with copies of the relevant policies or cover notes or entry certificates duly endorsed with the interest of the Owners and/or the Owners' Financiers (if any).

 

 

39.4

The Charterers shall ensure that all insurance companies and/or underwriters, and/or insurance brokers (if any) provide the Owners with copies (or upon the Owners' request, originals) of policies, cover notes and certificates of entry relating to the Obligatory Insurances which they are to effect or renew and letter or letters of undertaking in a form required by the Owners and/or the Owners' Financiers (if any) and including undertakings by the insurance companies and/or underwriters that:

 

 

(a)

they will have endorsed on each policy, immediately upon issuance, a loss payable clause and a notice of assignment complying with the provisions of this Charter and the Financial Instruments;

 

 

(b)

they will hold the benefit of such policies and such insurances, to the order of the Owners and/or the Owners' Financiers (if any) and/or such other party in accordance with the said loss payable clause;

 

 

(c)

they will advise the Owners and the Owners' Financiers (if any) promptly of any material change to the terms of the Obligatory Insurances of which they are aware;

 

 

(d)

(i) they will indicate in the letters of undertaking that they will immediately notify the Owners and the Owners' Financiers (if any) when any cancellation, charge or lapse of the relevant obligatory insurance occur and (ii) following a written application from the Owners and/or the Owners' Financiers (if any) not later than one (1) month before the expiry of the Obligatory Insurances they will notify the Owners and the Owners' Financiers (if any) not less than fourteen (14) days before the expiry of the obligatory insurances, in the event of their not having received notice of renewal instructions from the Charterers and, in the event of their receiving instructions to renew, they will promptly notify the Owners and the Owners' Financiers (if any) of the terms of the instructions; and

 

 

(e)

if any of the Obligatory Insurances form part of any fleet cover, the Charterers shall procure that the insurance broker(s), or leading insurer, as the case may be, undertakes to the Owners and the Owners' Financiers (if any) that such insurance broker or insurer will not set off against any sum recoverable in respect of a claim relating to the Vessel under such Obligatory Insurances any premiums due in respect of any other vessel under any fleet cover of which the Vessel forms a part or any premium due for other insurances, they waive any lien on the policies, or any sums received under them, which they might have in respect of such premiums, and they will not cancel such Obligatory Insurances by reason of non-payment of such premiums or other amounts, and will arrange for a separate policy to be issued in respect of the Vessel forthwith upon being so requested by the Owners and/or the Owners' Financiers (if any) and where practicable.

 

11

 

 

39.5

The Charterers shall ensure that any protection and indemnity and/or war risks associations in which the Vessel is entered provides the Owners and the Owners' Financiers (if any) with:

 

 

(a)

a copy of the certificate of entry for the Vessel as soon as such certificate of entry is issued;

 

 

(b)

a letter or letters of undertaking in such form as may be required by the Owners and the Owners' Financiers (if any) or in such association's standard form; and

 

 

(c)

a certified copy of each certificate of financial responsibility for pollution by oil or other Environmentally Sensitive Material issued by the relevant certifying authority in relation to the Vessel.

 

 

39.6

The Charterers shall ensure that all policies relating to Obligatory Insurances are deposited with the approved brokers (if any) through which the insurances are effected or renewed.

 

 

39.7

The Charterers shall procure that all premiums or other sums payable in respect of the Obligatory Insurances are punctually paid and produce all relevant receipts when so required by the Owners.

 

 

39.8

The Charterers 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.

 

 

39.9

The Charterers shall neither do nor omit to do (nor permit to be done or not to be done) any act or thing which would or might render any Obligatory Insurance invalid, void, voidable or unenforceable or render any sum payable under an Obligatory Insurance repayable in whole or in part; and, in particular:

 

 

(a)

the Charterers shall procure that all necessary action is taken and all requirements are complied with which may from time to time be applicable to the Obligatory Insurances, and (without limiting the obligations contained in this Clause 39) ensure that the Obligatory Insurances are not made subject to any exclusions or qualifications to which the Owners have not given their prior approval (unless such exclusions or qualifications are made in accordance with the rules of a protection and indemnity association which is a member of the International Group of Protection And Indemnity Clubs);

 

 

(b)

the Charterers shall not make or permit any changes relating to the classification or the classification society of the Vessel or, subject to procuring the provision of a replacement manager's undertaking in substantially the same form as the Manager's Undertaking, any changes to the manager or operator of the Vessel unless such changes have, if required, first been approved by the underwriters of the Obligatory Insurances, the Owners and the Owners' Financiers (if any);

 

 

(c)

the Charterers shall procure that all quarterly or other voyage declarations which may be required by the protection and indemnity risks association in which the Vessel is entered to maintain cover for trading to the United States of America and Exclusive Economic Zone (as defined in the United States Oil Pollution Act 1990 or any other applicable legislation) are made and the Charterers shall promptly provide the Owners with copies of such declarations and a copy of its valid certificate of financial responsibility; and

 

 

(d)

the Charterers shall not employ the Vessel, nor allow it to be employed, otherwise than in conformity with the terms and conditions of the Obligatory Insurances, without first obtaining the consent of the insurers and complying with any requirements (as to extra premium or otherwise) which the insurers specify.

 

12

 

 

39.10

The Charterers shall not make or agree to any alteration to the terms of any Obligatory Insurance nor waive any right relating to any Obligatory Insurance without the prior written consent of the Owners and the Owners' Financiers (if any).

 

 

39.11

The Charterers shall not settle, compromise or abandon any claim under any obligatory insurance for Total Loss or for a Major Casualty, and shall do all things necessary and provide all documents, evidence and information to enable the Owners to collect or recover any moneys which at any time become payable in respect of the Obligatory Insurances.

 

 

39.12

The Charterers shall provide the Owners upon written request (except that upon the occurrence of a Total Loss or a Major Casualty the Charterers shall provide the following immediately without the Owners' making any request), copies of:

 

 

(a)

all communications between the Charterers and:

 

 

(i)

the approved brokers;

 

 

(ii)

the approved protection and indemnity and/or war risks associations; and/or

 

 

(iii)

the approved insurers and/or underwriters, which relate directly or indirectly to:

 

 

(A)

the Charterers' obligations relating to the Obligatory Insurances including, without limitation, all requisite declarations and payments of additional premiums or calls; and

 

 

(B)

any credit arrangements made between the Charterers and any of the persons referred to in paragraphs (i) or (ii) above relating wholly or partly to the effecting or maintenance of the Obligatory Insurances; and

 

 

(b)

any communication with any party involved in case of a claim under any of the Vessel's insurances.

 

 

39.13

The Charterers shall promptly provide the Owners (or any persons which they may designate) with:

 

 

(a)

any information which the Owners or the Owners' Financiers (or any such designated person) request for the purpose of:

 

 

(i)

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

 

 

(ii)

effecting, maintaining or renewing any such insurances as are referred to in Clause 13(a) (Insurance and Repairs) or Clause 39 (Insurance) dealing with or considering any matters relating to any such insurances; and

 

 

(b)

copies of any communication between all parties involved in case of a claim under any of the Vessel's insurances exceeding the Major Casualty amount.

 

 

39.14

If one or more of the Obligatory Insurances are not effected and maintained with first class international insurers or are effected with an insurance or captive Subsidiary of the Owners or the Charterers, then the Charterers shall procure, at their own expense, that the relevant insurers maintain in full force and effect facultative reinsurances with reinsurers and through brokers, in each case, of recognised standing and acceptable in all respects to the Owners. Any reinsurance policy shall include, if and when permitted by law, a cut-through clause in a form acceptable to the Owners and/or the Owners' Financiers (if any). The Charterers shall procure that underwriters of the primary insurances assign each reinsurance to the relevant financiers in full, if required.

 

13

 

 

39.15

The Charterers shall upon demand fully indemnify the Owners (including if requested by the Owners, make direct payment to the relevant insurer or broker for the same) in respect of all premiums and other expenses which are incurred by:

 

 

(a)

the Owners in connection with or with a view to effecting, maintaining or renewing an innocent owners interest insurance and an innocent owners additional perils insurance or any similar protective shipowner insurance that is taken out in respect of the Vessel; and/or

 

 

(b)

the Owners' Financiers (if any) in connection with or with a view to effecting, maintaining or renewing a mortgagee's interest insurance, a mortgagee's additional perils insurance, all protection and indemnity insurance that is taken out in respect of the Vessel subject to the Owners' Financiers (if any) having provided to the Owners at the relevant time any form of loan facility to refinance the Vessel,

 

in the case as referred to in paragraph (a), in an amount not exceeding one hundred and twenty per cent (120%) of the Owners' Costs from time to time or in the case as referred to in paragraph (b), in an amount not exceeding one hundred and twenty per cent (120%) of the relevant outstanding loan amount from time to time and on such other terms, through such insurers and generally in such manner as the Owners or the Owners' Financiers (as the case may be) may from time to time consider appropriate.

 

 

39.16

The Charterers shall be solely responsible for and indemnify the Owners in respect of all loss or damage to the Vessel (insofar as the Owners shall not be reimbursed by the proceeds of any insurance in respect thereof) however caused occurring at any time or times before physical possession thereof is retaken by the Owners, with only reasonable wear and tear to the Vessel excepted.

 

 

39.17

The Charterers shall reimburse or indemnify the Owners for any expenses incurred or to be incurred by the Owners in obtaining a detailed report signed by an independent firm of marine insurance brokers approved by the Owners dealing with the Obligatory Insurances and stating the opinion of such firm as to the adequacy of the Obligatory Insurances:

 

 

(a)

when an agreed form of such detailed report satisfactory to the Owners is obtained as a condition precedent requirement under Schedule 2 of this Charter;

 

 

(b)

when the Owners procure the issuance of such detailed report no more than once every calendar year, unless a Termination Event has occurred in which case such reports may be procured at the Charterer's cost at any such time; and

 

 

(c)

further from time to time upon the Owners' demand where, in the Owners' opinion, at any time during the Charter Period there has been a material change in the terms of the Insurances and/or a change in the circumstances which would materially adversely affect the adequacy of the Obligatory Insurances.

 

 

39.18

The Charterers shall:

 

 

(a)

keep the Vessel insured at their expense against such other risks (other than loss of hire which shall be insured against upon an occurrence and during the continuance of a Termination Event) which the Owners or the Owners' Financiers consider reasonable for a prudent shipowner or operator to insure against for trading, management, operational and/or safety purposes at the relevant time (as notified by the Owners and having regard to the then existing available insurance cover and standard practice in the operation of vessels of the same type as the Vessel) and which risks are, at that time, generally insured against by owners or operators of vessels similar to the Vessel or of the same type as the Vessel; and

 

14

 

 

(b)

upon demand fully indemnify the Owners in respect of all premiums and other expenses incurred by the Owners in respect of any other insurances (other than loss of hire insurances which the Owners may take out upon an occurrence and during the continuance of a Termination Event) which the Owners deem necessary (having regard to the existing insurance cover and market practice for the trading, management, operation and safety of vessels of the same type) and takes out in respect of the Vessel.

 

 

40

WARRANTIES RELATING TO VESSEL

 

 

40.1

It is expressly agreed and acknowledged that the Owners are not the manufacturer or original supplier of the Vessel but that the Owners (in their capacity as buyers) have purchased the Vessel from the Charterers (in their capacity as sellers) pursuant to the MOA at the request of the Charterers, for the purpose of then chartering the Vessel to the Charterers hereunder and that no condition, term, warranty or representation of any kind is or has been given to the Charterers by or on behalf of the Owners in respect of the Vessel (or any part thereof).

 

 

40.2

All conditions, terms or warranties express or implied by the law relating to the specifications, quality, description, merchantability or fitness for any purpose of the Vessel (or any part thereof) or otherwise are hereby expressly excluded.

 

 

40.3

The Charterers agree and acknowledge that the Owners shall not be liable for any claim, loss, damage, expense or other liability of any kind or nature caused directly or indirectly by the Vessel or by any inadequacy thereof or the use or performance thereof or any repairs thereto or servicing thereof and the Charterers shall not by reason thereof be released from any liability to pay any Charterhire or other payment due under this Charter.

 

 

41

TERMINATION, REDELIVERY AND TOTAL LOSS

 

Termination

 

 

41.1

Upon termination of the leasing of the Vessel under this Charter pursuant to Clause 49.2, the Charterers shall be obliged to pay the Owners the Termination Sum on the Termination Date and it is hereby agreed by the parties hereto that:

 

 

(a)

without prejudice to paragraph (b) of Clause 41.10, the obligation to pay the Termination Sum is a continuing obligation and shall survive the termination of the leasing of the Vessel under this Charter and shall continue in full force and effect until irrevocably and unconditionally paid in full;

 

 

(b)

payment of the Termination Sum is deemed to be proportionate as to amount, having regard to the legitimate interest of the Owners, in protecting against the Owners' risk of the Charterers failing to perform its obligations under this Charter; and

 

 

(c)

the Termination Sum shall, depending on the nature of the Termination Event(s) on the basis of which the Owners serve a Termination Notice, be either an obligation to pay damages following acceptance by the Owners of a breach of condition by the Charterers or an obligation to pay an agreed sum in specified circumstances which do not involve a breach of contract by the Charterers.

 

15

 

 

41.2

If the Charterers fail to make any payment of the Termination Sum on the Termination Date, Clause 37.6 shall apply and the Owners shall be entitled to exercise their rights under Clauses 41.10 and 41.11.

 

 

41.3

Concurrently with the unconditional and irrevocable payment of the Termination Sum in full pursuant to the terms of this Charter, this Charter shall terminate and the Owners shall (save in the event of Total Loss or in the event that the Vessel has been sold or contracted to be sold pursuant to Clauses 41.10 and 41.11), at the cost of the Charterers, transfer the legal and beneficial ownership of the Vessel on an "as is where is" basis to the Charterers or their nominees free from any registered mortgages, encumbrances, liens, debts or claims incurred or permitted by the Owners (save for those liens, encumbrances and debts incurred by the Charterers or arising out of or in connection with this Charter), and shall execute a bill of sale and a protocol of delivery and acceptance evidencing the same and such sale shall be completed otherwise in accordance with paragraphs (a) and (b) of Clause 52.1.

 

 

41.4

The Charterers hereby undertake to indemnify the Owners against any claims incurred in relation to the Vessel prior to such transfer of ownership. Any taxes, notarial, consular and other costs, charges and expenses connected with closing of the Owners' register shall be for the Charterers' account.

 

 

41.5

On natural expiration of this Charter, unless the Purchase Option Price or the Mandatory Sale Price is paid by the Charterers in accordance with Clauses 51 or 50, the Charterers shall re-deliver the Vessel to the Owners in accordance with Clause 41.6 and shall ensure that they have fulfilled their obligations under this Charter and made payment of all Charterhire and all other moneys pursuant to the terms of this Charter. In such case, the Charterers shall give the Owners not less than 30/20/10/5 running days' preliminary notice of expected date and port or place of redelivery and not less than 5/3/2/1/ running days' definite notice of expected date and port or place of redelivery. Any changes thereafter in the Vessel's position shall be notified immediately to the Owners.

 

Redelivery

 

 

41.6

If the Charterers are required to redeliver the Vessel to the Owners pursuant to the terms of this Charter, the Vessel shall be redelivered and taken over safely afloat at a safe and accessible berth or anchorage in such location as the Owners may require (which, for the avoidance of doubt, shall exclude any war listed area declared by the Joint War Committee). The Charterers shall ensure that, at the time of redelivery to the Owners, the Vessel:

 

 

(a)

be in an equivalent class as she was as at the Commencement Date and without any recommendation or condition and with valid, unextended certificates for not less than six (6) months and free of average damage affecting the Vessel's classification and in the same or as good structure, state, condition and classification as that in which she was deemed on the Commencement Date, fair wear and tear not affecting the Vessel's classification excepted;

 

 

(b)

has passed her 5-year special survey (if applicable), and subsequent second intermediate surveys and drydock at the Charterers' time and expense without any recommendation or condition:

 

 

(c)

to the satisfaction of the Approved Classification Society; and

 

16

 

 

(d)

in the case of the 5-year special survey, to the reasonable satisfaction of an Owners' Surveyor appointed at the cost of the Charterers;

 

 

(e)

has her survey cycles up-to-date and trading and class certificate valid for at least the number of months agreed in Box 17;

 

 

(f)

be re-delivered to the Owners together with all spare parts and spare equipment as were on board at the time of Delivery, and any such spare parts and spare equipment on board at the time of re-delivery shall be taken over by the Owners free of charge;

 

 

(g)

be free of any cargo and Security Interest (save for the Security Interests granted pursuant to the Financial Instruments, if any);

 

 

(h)

be free of any crew and officers unless otherwise instructed by the Owners;

 

 

(i)

be free of any charter or other employment (unless the Owners wish to retain the continuance of any prevailing charter or as otherwise agreed by the Owners in their absolute discretion); and

 

 

(j)

have such amount of bunkers on board the Vessel as would be sufficient to enable the Vessel to sail to the nearest bunker port in compliance with all bunkering fuel content regulations then applicable in such place of redelivery.

 

 

41.7

The Charterers warrant that they will not permit (or request any sub-charterer not to permit) the Vessel to commence a voyage (including any preceding ballast voyage) which cannot reasonably be expected to be completed in time to allow redelivery of the Vessel within any time period required by Clause 41 (Termination, Redelivery and Total Loss). If the time of actual redelivery is after the date on which redelivery is required to take place pursuant to Clause 41 (the "Redelivery Date"), the Charterer shall, without prejudice to any other amounts payable under the Leasing Documents (including without limitation pursuant to Clause 41) pay to the Owners, as from the first date following the Redelivery Date and for each day until the date on which the Vessel is redelivered in accordance with the conditions Clause 41.6, the rate of hire equivalent to the higher of:

 

 

(a)

the prevailing market rate for the bareboat chartering of vessels of a similar type as the Vessel (as determined by an Approved Valuer appointed by the Owners); and

 

 

(b)

the prevailing market rate for the chartering of vessels of a similar type as the Vessel on the Index.

 

For the avoidance of doubt, all other terms, conditions and provisions of this Charter and the other Leasing Documents shall continue to apply during such period.

 

 

41.8

The Charterers shall provide the Owners' Surveyor with all such facilities and access to the Vessel as may be required to enable such Owners' Surveyor to conduct its survey of the Vessel and shall take all such actions as may be reasonably recommended by the Owners' Surveyor to ensure that the Vessel shall be redelivered in accordance with Clause 41.6. The Owners shall not be obliged to accept redelivery of the Vessel until the Owners are reasonably satisfied that all conditions for the redelivery of the Vessel under this Charter (including without limitation, Clause 41.6 and this Clause 41.8) are met, and the Vessel shall (if the redelivery is at the end of the Charter Period) continue to be on-hire under the terms of this Charter until such redelivery. The Owners reserve all rights to recover from the Charterers any costs, expense and/or liabilities incurred or suffered by them (including without limitation, the costs of any repairs which may be required to restore the Vessel to the condition required by Clause 41.6 as a result of the Vessel not being redelivered in accordance with the terms of this Charter).

 

17

 

 

41.9

The Owners shall, at the time of the redelivery of the Vessel, take over all bunkers, lubricating oil, unbroached provisions, paints, ropes, other consumable stores and spare parts in the Vessel at no cost to the Owners.

 

Non-payment of Termination Sum

 

 

41.10

Subject to the terms of any quiet enjoyment letter entered into with any sub charterers, the Charterers agree that should the Termination Sum not be paid on the Termination Date:

 

 

(a)

the Charterers' right to possess and operate the Vessel shall immediately cease and (without in any way affecting the Charterers' obligation to pay the Charterer the Termination Sum and comply with their other obligations under this Charter) the Charterers shall hold the Vessel as gratuitous bailee only to the Owners, the Charterers shall procure that the master and crew follow the orders and directions of the Owners and the Charterers shall, upon the Owners' request (at Owners' sole discretion), be obliged to immediately (and at the Charterers' own cost) redeliver the Vessel to the Owners at such ready and nearest safe port or location as the Owners may require and for the avoidance of doubt, any such redelivery shall not extinguish the Owners' right to recover the Termination Sum from the Charterers under this Charter;

 

 

(b)

the Owners shall be entitled (at Owners' sole discretion) to operate the Vessel as they may require and may create whatsoever interests thereon, including without limitation short term charterparties or any other form of short term employment contracts provided such contracts do not interfere with the Vessel's sale process, including relevant inspections, provided that the Earnings of the Vessel during such period less its operational expenses (which would include, without limitation, any costs in relation to the provision of bunkers and lubricating oils), (the "Net Trading Proceeds") shall be applied against the Termination Sum and any other amounts payable under the Leasing Documents pursuant to Clause 64 provided, that if such use of the Vessel results in the Owners suffering a loss then such losses shall be included in the indemnities contained in Clause 53 (Indemnities) and be added to the Termination Sum; and

 

 

(c)

the Owners shall be entitled (at Owners' sole discretion) to immediately thereafter sell the Vessel to any third party on arm's length terms taking into account the prevailing market conditions, provided that the Charterers may for a period not exceeding a total of sixty (60) days from the Termination Date (the "Nomination Period") nominate or identify a purchaser for the Vessel (a "Nominated Purchaser"). During the Nomination Period the Owners and the Charterers shall use their reasonable endeavours to market the Vessel and the Owners shall sell the Vessel to a Nominated Purchaser and subject to all of the following conditions being satisfied:

 

 

(i)

the Nominated Purchaser is acceptable to the Owners (such acceptability not to be unreasonably withheld or delayed); and

 

 

(ii)

the price to be paid by the Nominated Purchaser (after deducting any commissions, taxes and other costs of sale) is equal to or more than the applicable Termination Sum (unless otherwise agreed by the Owners in their absolute discretion);

 

and any net sale proceeds (after deducting all fees, taxes, disbursements and any other costs and expenses incurred or suffered by the Owners in connection with such sale) (the "Net Sales Proceeds") derived from any such sale to a Nominated Purchaser or any other person shall be applied towards reduction of the Termination Sum in accordance with Clause 64 (General Application of Proceeds). If the Net Sales Proceeds are not sufficient to settle the Termination Sum in full, the Charterers shall remain liable to pay the shortfall and default interest shall continue to accrue on the unpaid portion of the Termination Sum in accordance with Clause 37.6. Irrespective of any sales efforts, the Charterers have the right at all times, during the Nomination Period or until the Owners' Purchase (as referred to in Clause 41.11) is concluded or until any Third Party's Sale is concluded, to purchase the vessel with priority by paying the Termination Sum.

 

18

 

 

41.11

The Owners may, by written notice to the Charterers at any time after the Nomination Period, inform the Charterers of the Owners' intention to retain the Vessel instead of selling the Vessel under paragraph (c) of Clause 41.10 above, "Owners' Purchase", and in doing so, the Owners shall first obtain the Market Value of the Vessel (after deducting any commissions, taxes and costs which would be likely to be incurred in connection with a sale of the Vessel) and apply it towards the reduction of the Termination Sum in accordance with Clause 64 (General Application of Proceeds). If the Market Value (less such deductions) of the Vessel as at the date of the notice of the Owners' Purchase is less than the Termination Sum calculated as of the day of the notice of the Owners' Purchase, the Charterers shall remain liable to pay the shortfall to the Owners and default interest shall continue to accrue on the unpaid portion of the Termination Sum. If the Market Value (less such deductions) of the Vessel as at the date of such nomination is more than the Termination Sum calculated as of the day of the notice of the Owners' Purchase, the Owners shall pay the excess to Charterers within fifteen (15) days from the day of the notice of the Owners' Purchase in accordance with Clause 64 (General Application of Proceeds).

 

Total Loss

 

 

41.12

Throughout the Charter Period, the Charterer shall bear the full risk of any Total Loss of or any other damage to the Vessel howsoever arising. If the Vessel becomes a Total Loss after Delivery, the Charterer shall, subject to Clause 41.13, pay the Termination Sum to the Owners on the Total Loss Payment Date. Upon such receipt by the Owners of the Termination Sum, this Charter shall terminate (without prejudice to any provision of this Charter expressed to survive termination) but until such receipt, the Charterers shall remain liable to make all payments of Charterhire and all other amounts to the Owners under this Charter, notwithstanding that the Vessel has become a Total Loss.

 

 

41.13

Any Total Loss Proceeds unconditionally received by the Owners (or the Owners' Financiers in accordance with the terms of the relevant loss payable clause) shall be applied in accordance with Clause 64 (General Application of Proceeds) and shall satisfy the obligation of the Charterers to pay the Termination Sum to the extent received by the Owners (or the Owners' Financiers in accordance with the terms of the relevant loss payable clause). The obligation of the Charterers to pay the Termination Sum shall remain unaffected and exist regardless of whether any of the insurers have agreed or refused to meet or has disputed in good faith, the claim for Total Loss.

 

 

41.14

If the Total Loss Proceeds unconditionally received by the Owners (or the Owners' Financiers in accordance with the terms of the relevant loss payable clause) are less than the Termination Sum, the Charterers shall pay such shortfall to the Owner on the Total Loss Payment Date.

 

 

41.15

The Owners shall have no obligation to supply to the Charterers with a replacement vessel following the occurrence of a Total Loss.

 

19

 

 

42

FEES AND EXPENSES

 

 

42.1

In consideration of:

 

 

(a)

the Owners (in their capacity as buyers) purchasing the Vessel from the Charterers (in their capacity as sellers) in accordance with the terms of the MOA; and

 

 

(b)

the Owners subsequently chartering the Vessel to the Charterers in accordance with the terms of this Charter,

 

the Charterers agree to pay to the Owners a non-refundable arrangement fee (the "Arrangement Fee") in the amount and at the times agreed in the Fee Letter.

 

 

42.2

Without prejudice to any other rights of the Owners hereunder, the Charterers shall promptly pay to the Owners on written demand on a full indemnity basis all costs, charges and expenses incurred by the Owners in collecting any Charterhire or the Advance Charterhire or other payments not paid on the due date under this Charter and in remedying any other failure of the Charterers to observe the terms and conditions of this Charter.

 

 

42.3

All documented costs and expenses (including, but not limited to, third party legal costs) incurred by the Owners or Owners' legal counsel in the preparation, negotiation and execution of all documentation in relation to this Charter or any other Leasing Document (including without limitation any registration or filing expenses, all documented costs incurred by the Owners and all third party legal costs, expenses and other disbursement incurred by the Owners' legal counsels in connection with the same) shall be for the account of the Charterers (regardless of whether the transaction contemplated by the Leasing Documents actually completes).

 

 

42.4

All documented costs and expenses incurred by the Owners in relation to the acquisition, registration of title of the Vessel in the Owners' name in the Flag State together with any and all fees (including but not limited to any vessel registration and tonnage fees and the Owners' initial and ongoing registration and maintenance costs if required to be registered as a foreign maritime entity or the appointment of resident agents under the laws of the Flag State) payable by the Owners to register, maintain and/or renew such registration shall be for the account of the Charterers. Without prejudice to the foregoing, if the Flag State requires the Owners to establish a physical presence or office in the jurisdiction of such Flag State, all fees, costs and expenses payable by the Owners to establish and maintain such physical presence or office shall be for the account of the Charterers. The Charterers shall promptly provide the Owners with evidence of payment of the annual register/tonnage tax amounts payable to the Flag State or any other aforesaid costs, expenses and/or taxes when the same fall due.

 

 

42.5

All costs and expenses incurred by the Owners (including but not limited to legal fees) in relation to the transfer of title of the Vessel from the Owners to the Charterers and the re-delivery of the Vessel by the Charterers to the Owners pursuant to Clause 41 (Termination, Redelivery and Total Loss) shall be for the account of the Charterers.

 

 

42.6

If:

 

 

(a)

the Charterers request an amendment, waiver or consent;

 

 

(b)

the Charterers make a request to re-register the Vessel in another Flag State; or

 

20

 

 

(c)

an amendment is required to address the fact that the Screen Rate is not or is likely not to be available for Dollars,

 

the Charterers shall, on demand, reimburse the Owners for the amount of all documented costs and expenses (including third party legal fees) incurred by the Owners in responding to, evaluating, negotiating or complying with that request or requirement (including, for the avoidance of doubt, any amounts the Owners have to pay under the terms of the Financial Instruments).

 

 

42.7

The Charterers shall, on demand, pay to the Owners the amount of all documented costs and expenses (including third party legal fees) incurred by the Owners in connection with the enforcement of, or the preservation of any rights under, any Leasing Document, including, without limitation, any action brought by the Owners to arrest or recover possession of the Vessel, and with any proceedings instituted by or against the Owners as a consequence of it entering into a Leasing Document or enforcing those rights.

 

 

42.8

Notwithstanding anything to the contrary herein, the indemnities provided by the Charterers shall be provided in favour of the Owners and shall continue in full force and effect notwithstanding any breach of the terms of this Charter or termination of this Charter pursuant to the terms hereof.

 

 

43

NO WAIVER OF RIGHTS

 

 

43.1

No neglect, delay, act, omission or indulgence on the part of either party in enforcing the terms and conditions of this Charter or any other Leasing Document (to which they are party to) shall prejudice the strict rights of that party or be construed as a waiver thereof nor shall any single or partial exercise of any right of either party preclude any other or further exercise thereof.

 

 

43.2

No right or remedy conferred upon either party by this Charter or any other Leasing Document shall be exclusive of any other right or remedy provided for herein or by law and all such rights and remedies shall be cumulative.

 

 

44

NOTICES

 

 

44.1

Any notice, certificate, demand or other communication to be served, given made or sent under or in relation to this Charter shall be in English and in writing and (without prejudice to any other valid method or giving making or sending the same) shall be deemed sufficiently given or made or sent if sent by registered post or by email to the following respective address:

 

 

(a)

to the Owners:

SEA 269 LEASING CO., LIMITED
      21F, China Merchants Bank Building, No.1088, Lujiazui Ring Road, Shanghai, China
      Attention: Xiao Yue
      Email: xiao_yue@cmbchina.com / zyzlsceb@cmbchina.com
      Tel: +86 21 61061534

 

 

(b)

to the Charterers:

c/o TOP SHIPS INC.
      Attention: Alexandros Tsirikos
      Email: atsirikos@topships.org
      Tel: +30 210 8128180
      Fax: +30 210 8056441

 

or, if a party hereto changes its address or email address, to such other address or email address as that party may notify to the other.

 

21

 

 

44.2

Any such communication shall be deemed to have reached the party to whom it was addressed (a) when delivered (in case of a registered letter), or (b) when actually received in readable form (in case of an email). A notice or other such communication received on a non-working day or after 5.00 p.m. in the place of receipt shall be deemed to be served on the next following working day in such place.

 

 

45

REPRESENTATIONS AND WARRANTIES

 

 

45.1

The Charterers represent and warrant to the Owners as of the date hereof, and on each day during the Security Period, as follows:

 

 

(a)

100% of the issued and outstanding shares in the Charterers are legally, wholly and directly owned and controlled by the Guarantor and the Guarantor is controlled by companies affiliated with the family of Mr. Evangelos Pistiolis;

 

 

(b)

each Relevant Person or, to the best of its knowledge, the Approved Sub-charterer is duly incorporated and validly existing under the laws of its jurisdiction of its incorporation;

 

 

(c)

each Relevant Person or the Approved Sub-charterer has the corporate capacity, and has taken all corporate actions and obtained all consents, approvals, authorisations, licenses or permits necessary for it:

 

 

(i)

to execute each of the Leasing Documents to which it is a party; and

 

 

(ii)

to comply with and perform its obligations under each of the Leasing Documents to which it is a party;

 

 

(d)

all the consents, approvals, authorisations, licenses or permits referred to in paragraph (c) of Clause 45.1 (Representations and Warranties) remain in force and nothing has occurred which makes any of them liable to revocation;

 

 

(e)

each of the Leasing Documents and the Approved Sub-charter to which a Relevant Person or the Approved Sub-charterer is a party (as the case may be) constitutes such Relevant Person's or the Approved Sub-charterer's legal, valid and binding obligations enforceable against such party in accordance with its respective terms and any relevant insolvency laws affecting creditors' rights generally;

 

 

(f)

the entry into and performance by each Relevant Person (and in the case of sub-paragraph (ii) below, the Approved Sub-charterer) of, and the transactions contemplated by, each Leasing Document to which it (and in the case of sub-paragraph (ii) below, the Approved Sub-charterer) is a party do not and will not conflict with:

 

 

(i)

any law or regulation applicable to it (including Anti-Money Laundering Laws, Business Ethics Laws, Sanctions or laws relating to anti-trust or collusion and laws relating to human rights violation);

 

 

(ii)

the constitutional documents of such Relevant Person; and

 

 

(iii)

any agreement or instrument binding upon it or any of its assets or constitute a default or termination event (however described) under any such agreement or instrument;

 

22

 

 

(g)

there are no outstanding notices or demands from any governmental, quasi-governmental or public authority or instrumentality or any other person claiming authority in respect of the Vessel requiring any work or other action to be taken or the expenditure of any money to be taken in respect of the Vessel or any part thereof;

 

 

(h)

the Vessel is free of encumbrances and liens except for the Permitted Security Interests; no third party has any Security Interest, other than the Permitted Security Interests, or any other interest, right or claim over, in or in relation to the Vessel, this Charter or any moneys payable hereunder and/or any of the other Leasing Documents;

 

 

(i)

all payments which a Relevant Person is liable to make under any Leasing Document to which such Relevant Person is a party may be made by such party without deduction or withholding for or on account of any tax payable under the laws of its Relevant Jurisdiction;

 

 

(j)

no legal or administrative action involving a Relevant Person has been commenced or taken (including but not limited to actions involving any Environmental Claim but excluding the class action involving certain of the Guarantor's executive officers pending in the US District Court for the Eastern District of New York on behalf of certain shareholders of the Guarantor as described in the Guarantor's Annual Report on Form 20-F filed on 29 March 2018 with the United States Securities and Exchange Commission);

 

 

(k)

each Relevant Person has paid all taxes applicable to, or imposed on or in relation to it, its business or if applicable, the Vessel, except for those being contested in good faith with adequate reserves;

 

 

(l)

it is not necessary under the laws of the Relevant Jurisdictions that this Charter or any other Leasing Document be registered, filed, recorded, notarized or enrolled with any court or other authority in that jurisdiction or that any stamp, registration, notarial or similar taxes or fees be paid on or in relation to the Leasing Documents to which it is a party or the transactions contemplated by those Leasing Documents; the choice of governing law as stated in each Leasing Document to which a Relevant Person is a party and the agreement by such party to refer disputes to the relevant courts or tribunals as stated in such Leasing Document are valid and binding against such Relevant Person;

 

 

(m)

no Relevant Person nor any of their assets are entitled to immunity on the grounds of sovereignty or otherwise from any legal action or proceeding (which shall include, without limitation, suit, attachment prior to judgment, execution or other enforcement);  

 

 

(n)

the obligations of each Relevant Person under each Leasing Document to which it is a party, are the direct, general and unconditional obligations of such Relevant Person and rank at least pari passu with all other present and future unsecured and unsubordinated creditors of such Relevant Person save for any obligation which is mandatorily preferred by law and not by virtue of any contract;

 

 

(o)

each Leasing Document creates (or, once entered into, will create) the Security Interest which it is expressed to create with the ranking and priority it is expressed to have;

 

 

(p)

the Charterers and any other Relevant Person (i) are not US Tax Obligors and (ii) have not established a place of business in the United Kingdom or the United States of America;

 

 

(q)

no Relevant Person, Approved Manager, sub-charterer and no member of the Group:

 

 

(i)

is a Prohibited Person;

 

23

 

 

(ii)

is owned or controlled by or acting directly or indirectly on behalf of or for the benefit of, a Prohibited Person;

 

 

(iii)

owns or controls a Prohibited Person; or

 

 

(iv)

has a Prohibited Person serving as a director, officer or, to the best of its knowledge, employee;

 

 

(r)

no Relevant Person or any of their respective directors, officers, and employees or, to the best of its knowledge, the Approved Sub-charterer is in breach of applicable Sanctions laws, and none of them (i) has been or is currently being investigated on compliance with Sanctions, (ii) has received notice or is aware of any claim, action, suit or proceeding against any of them with respect to Sanctions and (iii) has taken any action to evade the application of Sanctions;

 

 

(s)

no Relevant Person is in breach of any Anti-Money Laundering Laws, Anti-Terrorism Financing Laws and/or Business Ethics Laws and each Relevant Person has instituted and maintained systems, controls, policies and procedures designed to:

 

 

(i)

prevent and detect incidences of bribery and corruption, money laundering and terrorism financing; and

 

 

(ii)

promote and achieve compliance with Anti-Money Laundering Laws, Anti-Terrorism Financing Laws and or Business Ethics Laws including, but not limited to, ensuring thorough and accurate books and records, and utilization of best efforts to ensure that Affiliates acting on behalf of a Relevant Person shall act in compliance with Anti-Money Laundering Laws, Anti-Terrorism Financing Laws and Business Ethics Laws,

 

 

(t)

that in relation to the Contract and any Approved Sub-Charter:

 

 

(i)

each copy of the Contract and that Approved Sub-Charter provided to the Owners is a true and complete copy of such document and there have been no amendments, supplements or variations to the same;

 

 

(ii)

all amounts due and payable to the Builder under the Contract on or prior to the date hereof have been fully and irrevocably paid to the Builder (receipt of which has been duly acknowledged by the Builder) and there are no outstanding amounts as at the date hereof which are due, owing or payable to the Builder thereunder;

 

 

(iii)

there are no unresolved disputes and/or pending claims for payment between the Builder and the Charterers in respect of the Contract and/or the Vessel and/or that Approved Sub-Charter; and

 

 

(iv)

each of the Trafigura Charterer, any other Approved Sub-Charterer and the Builder is fully aware of the transactions contemplated under the MOA and this Charter;

 

 

(v)

the Trafigura Charterer and any other Approved Sub-Charterer has consented to the assignment by the Charterers to the Owners of all their rights, interests and benefits in relation to the Trafigura Charter or, as the case may be, the relevant Approved Sub-Charter pursuant to the General Assignment;

 

 

(u)

the Vessel is not employed, operated or managed in any manner which (i) is contrary to any Sanctions and in particular, the Vessel is not used by or to benefit any party which is a target of Sanctions or trade to any area or country where trading the Vessel to such area or country would constitute a breach of any Sanctions or published boycotts imposed by any of the United Nations, the European Union, the United States of America, the United Kingdom or the People's Republic of China (provided that operation or use of the Vessel by the Trafigura Charterer pursuant to the Trafigura Charter shall not in any case be deemed to be in breach or contrary to any published boycotts or sanctions imposed by the People's Republic of China) or (ii) would trigger the operation of any sanctions limitation or exclusion clause in any insurance documentation;

 

24

 

 

(v)

none of the Relevant Persons nor any of their assets, in each case, has any right to immunity from set off, legal proceedings, attachment prior to judgment or other attachment or execution of judgement on the grounds of sovereign immunity or otherwise;

 

 

(w)

none of the Relevant Persons is insolvent, bankrupt or in liquidation, bankruptcy or administration or subject to any other formal or informal insolvency or bankruptcy procedure (including, without limitation, those referred to under paragraph (g) of Clause 49.1 (Termination Events) and for the avoidance of doubt including the presentation of a petition for commencing such procedures), and no receiver, administrative receiver, administrator, liquidator, trustee or analogous officer has been appointed in respect of the any Relevant Person or all or material part of their assets;

 

 

(x)

no Termination Event or Potential Termination Event is continuing or might reasonably be expected to result from the entry into and performance of this Charter or any other Leasing Document;

 

 

(y)

any factual information provided by any Relevant Person or the Trafigura Charterer (or on their behalf) to the Owners was true and accurate in all material respects as at the date it was provided or as at the date at which such information was stated;

 

 

(z)

none of the following events has occurred:

 

 

(i)

any default by the Charterers or the Trafigura Charterer under the terms of the Trafigura Charter;

 

 

(ii)

any default by the Charterers or the Builder under the terms of the Contract;

 

 

(iii)

breach of any Sanctions by any Relevant Person;

 

 

(iv)

upon delivery of the Vessel under the Contract, any casualty or occurrence (including damage caused to the Vessel for any reason whatsoever) which results, or may be expected to result, in repairs on the Vessel equal to or exceeding the Major Casualty amount; and

 

 

(v)

upon and after the commencement of the Charter Period, any casualty or occurrence (including damage caused to the Vessel for any reason whatsoever which results, or may be expected to result, in repairs on the Vessel) which amounts to Major Casualty and which are not being dealt with in accordance with the Leasing Documents (including without limitation in accordance with Clause 38 (Possession of Vessel) and the General Assignment);

 

 

(aa)

all Environmental Laws relating to the ownership, operation and management of the Vessel and the business of each Relevant Person (as now conducted and as reasonably anticipated to be conducted in the future) have been complied with;

 

25

 

 

(bb)

no Environmental Claim has been made or threatened against any Relevant Person or otherwise in connection with the Vessel which is either (i) in excess of US$5,000,000 or (ii) has or is reasonably likely to have a Material Adverse Effect; and

 

 

(cc)

no Environmental Incident has occurred and no person has claimed that an Environmental Incident has occurred.

 

 

46

UNDERTAKINGS

 

 

46.1

The Charterers undertake that they shall comply or procure compliance with the following undertakings during the Security Period:

 

 

(a)

the Charterers shall, on the Commencement Date, procure the delivery of the full legal and beneficial title (free of any Security Interests save for those created under a Leasing Document or Financial Instrument) in the Vessel to the Owners;

 

 

(b)

there shall be sent to the Owners:

 

 

(i)

as soon as possible, but in no event later than one hundred and fifty (150) days after the end of each financial year of the Charterers, the annual financial statement accounts of the Charterers for that financial year as referred to in the Guarantor's audited consolidated annual financial statement accounts of the Guarantor for that financial year to be delivered under subparagraph (b)(iii) of Clause 46.1;

 

 

(ii)

as soon as possible, but in no event later than ninety (90) days after the end of each half-year, the unaudited semi-annual accounts of the Charterers for that half-year;

 

 

(iii)

as soon as possible, but in no event later than one hundred and fifty (150) days after the end of each financial year of the Guarantor, the audited consolidated annual financial statement accounts of the Guarantor for that financial year; and

 

 

(iv)

as soon as possible, but in no event later than ninety (90) days after the end of each half-year, the semi-annual consolidated unaudited accounts of the Guarantor for that half-year certified as to their correctness by at least one director of the Guarantor;

 

and if any of the statements above are not in the English language then they shall be accompanied by an English translation and each set of financial statements delivered pursuant to this paragraph (b) shall be prepared using the generally accepted accounting principles in the United States and shall be certified by a duly authorised officer of the relevant company as giving a true and fair view (if audited) or fairly representing (if unaudited) its financial condition and operations as at the date as at which those financial statements were drawn;

 

 

(c)

they shall provide to the Owners, at the same time as they are despatched, copies of all notices and minutes relating to any of their extraordinary shareholders' meeting which are despatched to the Charterers' or the Guarantor's respective shareholders or creditors or any class of them, unless same are publicly available;

 

 

(d)

they will provide the Owners promptly upon becoming aware of them, the details of:

 

 

(i)

any litigation, arbitration or administrative proceedings or investigations relating to any alleged or actual breach of any Sanctions or Anti-Money Laundering Laws which are current or pending against any Relevant Person, Approved Manager, sub-charterer or other member of the Group;

 

26

 

 

(ii)

any litigation, arbitration or administrative proceedings or investigations relating to any other matters not referred to in paragraph (i) above (including proceedings or investigations relating to any alleged or actual breach of the ISM Code or of the ISPS Code) in relation to a Relevant Person; and

 

 

(iii)

any Termination Event or Potential Termination Event that has occurred (and the steps, if any, being taken to remedy it);

 

 

(e)

they will, promptly upon a request by the Owners, supply to the Owners a certificate signed by an officer on its behalf certifying that no Termination Event or Potential Termination Event has occurred (or if a Termination Event or Potential Termination Event has occurred, specifying the nature of the Potential Termination Event or Termination Event (and the steps, if any, being taken to remedy it));

 

 

(f)

they shall, and shall procure that each other Relevant Person will, obtain and promptly renew or procure the obtainment or renewal of and provide copies of, from time to time, any necessary consents, approvals, authorisations, licenses or permits of any regulatory body or authority for the transactions contemplated under each Leasing Document to which it is a party (including without limitation to sell, charter and operate the Vessel);

 

 

(g)

they shall not, and shall procure that each other Relevant Person will not, create, assume or permit to exist any Security Interest (other than any Permitted Security Interest) of any kind upon any Leasing Document to which such Relevant Person is a party, and if applicable, the Vessel;

 

 

(h)

they shall at their own cost and shall procure that each other Relevant Person will:

 

 

(i)

do all that such Relevant Person reasonably can to ensure that any Leasing Document to which such Relevant Person is a party validly creates the obligations and the Security Interests which such Relevant Person purports to create; and

 

 

(ii)

without limiting the generality of paragraph (i), promptly register, file, record or enroll any Leasing Document to which such Relevant Person is a party with any court or authority in all Relevant Jurisdictions, pay any stamp duty, registration or similar tax in all Relevant Jurisdictions in respect of any Leasing Document to which such Relevant Person is a party, give any notice or take any other step which, is or has become necessary or desirable for any such Leasing Document to be valid, enforceable or admissible in evidence or to ensure or protect the priority of any Security Interest which such Relevant Person creates;

 

 

(i)

they shall notify the Owners as soon as possible (but in any event no later than fifty nine (59) days prior to the expiry of the fixed period as per the Trafigura Charter), together with any evidence requested by the Owners, whether the Trafigura Charterer intends to and will (with irrevocable confirmation from the Trafigura Charterer) extend the charter period of the Trafigura Charter in accordance with the terms thereunder;

 

 

(j)

they shall, and shall procure that each other Relevant Person will (where applicable), notify the Owners as soon as they become aware of the occurrence of:

 

 

(i)

any default by either the Approved Sub-charterer or Charterers of the terms of the Approved Sub-charter;

 

27

 

 

(ii)

an event of default or termination event howsoever called under the terms of any Approved Sub-charter entitling either the Charterers or the Approved Sub-charterer to terminate the Approved Sub-charter;

 

 

(iii)

any default by any party of the terms of the Contract;

 

 

(iv)

any event entitling the Charterers or the Builder to rescind the Contract;

 

 

(v)

breach of any Sanctions; or

 

 

(vi)

any Potential Termination Event or a Termination Event,

 

and will keep the Owners fully up-to-date with all developments and the Charterers shall, if so requested by the Owners, provide any such certificate signed by at least one officer, confirming that there exists no Potential Termination Event or Termination Event;

 

 

(k)

they shall, and shall procure that each other Relevant Person will, on the sixth month anniversary of the Commencement Date and at six-monthly intervals thereafter and otherwise upon the Owners' and/or the Owners' Financiers (if any) request (acting reasonably) from time to time and as soon as practicable after receiving such request, provide the Owners with any additional financial or other information relating:

 

 

(i)

to the Vessel (including, but not limited to the management, employment, condition, class records, location and pooling arrangement of the Vessel) and, to their best knowledge having made due enquiry, to the Trafigura Charterer;

 

 

(ii)

the terms and conditions of any sub-charter together with any other information relating to such sub-charter; and

 

 

(iii)

to any other matter (which include without limitation, to their best knowledge having made due enquiry, any other matters relating to the Trafigura Charterer) which may be reasonably requested by the Owners (or the Owners' Financiers (if any)) at any time or which under the terms of the relevant Leasing Document may be sought from the person in possession of such information.

 

 

(l)

without prejudice to paragraph (t) of Clause 46.1 (Undertakings), comply, or procure compliance, and shall procure that each other Relevant Person will comply or procure compliance, with all laws or regulations relating to the Vessel and its construction, ownership, employment, operation, management and registration, including the ISM Code, the ISPS Code, all Environmental Laws and the laws of the Vessel's registry and shall procure that the Technical Manager and the Commercial Manager and the Vessel to be in the possession of proper trading certificates and other vessel related documents and to comply with other relevant laws and regulations;

 

 

(m)

the Vessel shall be maintained in the highest standard and classed with the Approved Classification Society and shall be free of all overdue recommendations, qualifications and conditions;

 

 

(n)

they shall not and ensure that neither the Other Charterer nor the Guarantor shall enter into any form of merger, sub-division, amalgamation, demerger, reorganization, corporate reconstruction or change of ownership, or change of voting control, in the case of the Guarantor, unless it remains as the surviving entity after such merger, sub-division, amalgamation, demerger, reorganization, corporate reconstruction or change of ownership, or change of voting control and clause 11.14 of the Guarantee is complied with;

 

28

 

 

(o)

they will comply, and will procure that each other Relevant Person, each other member of the Group or, will use best endeavours to procure that, the Approved Sub-charterer will comply, with all Sanctions and all laws and regulations relating to such Relevant Person, the Vessel and its construction, ownership, employment, operation, management and registration, including the ISM Code, the ISPS Code (including the maintenance of an ISSC), all Environmental Laws, all Anti-Money Laundering Laws, Business Ethics Laws and the laws of the Vessel's registry, and in particular, they shall effect and maintain a sanctions compliance policy which, inter alia, implements the recommendations of the Sanctions Advisory, to ensure compliance with all such laws and regulations implemented from time to time, including, without limitation they will, and will procure that (in the case of Approved Sub-charterer, use best endeavours to procure that) each other Relevant Person, each other member of the Group and the Approved Sub-charterer will:

 

 

(i)

conduct their activities in a manner consistent with US and UN sanctions, as applicable;

 

 

(ii)

have sufficient resources in place to ensure execution of and compliance with their own sanctions policies by their personnel, e.g., direct hires, contractors, and staff;

 

 

(iii)

ensure subsidiaries and affiliates comply with the relevant policies, as applicable;

 

 

(iv)

have relevant controls in place to monitor automatic identification system (AIS) transponders;

 

 

(v)

have controls in place to screen and assess onboarding or offloading cargo in areas they determine to present a high risk;

 

 

(vi)

have controls to assess authenticity of bills of lading, as necessary; and

 

 

(vii)

have controls in place consistent with the Sanctions Advisory;

 

 

(p)

without limiting paragraph (o) of Clause 46.1, they will procure that:

 

 

(i)

the Vessel shall not be constructed, operated, employed, managed, used by or for the benefit of a Prohibited Person;

 

 

(ii)

the Vessel shall not be employed in trading with any Prohibited Person or in any manner contrary to Sanctions;

 

 

(iii)

notwithstanding any other provision of this paragraph (p), the Vessel shall not be permitted to call at any port in any Prohibited Country or any area or country where trading in such area or country would constitute or would be reasonably expected to constitute a breach of Sanctions;

 

 

(iv)

the Vessel shall not be traded in any manner which would trigger the operation of any sanctions limitation or exclusion clause (or similar) in the Insurances or in any manner which would result or would reasonably be expected to result in any Relevant Person or the Owners becoming a Prohibited Person; and

 

29

 

 

(v)

that each charterparty in respect of the Vessel shall contain, for the benefit of the Owners, language which gives effect to the provisions of paragraph (p) of Clause 46.1 as regards Sanctions and of this Clause and which permits refusal of employment or voyage orders if compliance would result in a breach of Sanctions and which prohibits trading to any Prohibited Country;

 

 

(q)

they shall ensure that the Market Value of the Vessel will be tested at any of the following instances:

 

 

(i)

on or around the end of each calendar year starting from and including 31 December 2022 (each such date the "Market Value Test Date") and the Charterers shall procure valuation reports issued by the Approved Valuers evidencing such Market Value applicable to a Market Value Test Date to be delivered to the Owners no later than 30 days after the Market Value Test Date;

 

 

(ii)

if, in the opinion of the Owners, any volatile market fluctuations occurs that may affect the value of the Vessel or vessels of the similar type of the Vessel, at any time at the request of the Owners;

 

 

(iii)

at any time at the request of the Owners if the Owners have determined that the Market Value of the Vessel is likely to fall below an amount equal to 125% of the then applicable Owner's Cost; and

 

 

(iv)

upon the occurrence of a Potential Termination Event or Termination Event, at any time at the request of the Owners,

 

and in each case above the Charterers shall bear the fees and expenses of the Approved Valuers or reimburse the same to the Owners (as the case may be).

 

 

(r)

they shall notify the Owners immediately of:

 

 

(i)

as soon as they become aware, any Environmental Claim made against the Charterers or any subcharter of the Vessel in connection with the Vessel or any Environmental Incident;

 

 

(ii)

arrest or detention of the Vessel;

 

 

(iii)

any exercise or purported exercise of any lien on that Vessel or its Earnings or any requisition of that Vessel for hire;

 

 

(iv)

any damage caused to or alteration of the Vessel for any reason whatsoever which results, or may be expected to result, in repairs on the Vessel which exceed $5,000,000; or

 

 

(v)

any casualty or occurrence as a result of which the Vessel has become or is, by the passing of time or otherwise, likely to become, a Major Casualty;

 

 

(s)

they shall not permit the sub-chartering of the Vessel other than to any Approved Sub-Charter provided that if:

 

 

(i)

any such Approved Sub-charter is terminated and/or rescinded; and

 

 

(ii)

the Charterers comply with their obligations under subparagraph (z)(iii) of Clause 46.1,

 

then the Charterers shall be permitted to freely sub-charter the Vessel save for on a bareboat charter basis or a time charter basis exceeding or capable of exceeding twelve months in duration which would require Owner's prior approval and that any such sub-charter is assigned by the Charterers in favour of the Owners in form and substance satisfactory to the Owners;

 

30

 

 

(t)

they shall, and shall procure that each other Relevant Person will, comply with all applicable laws and regulations in respect of Sanctions, and in particular, the Charterers shall effect and maintain a sanctions compliance policy to ensure compliance with all such laws and regulations implemented from time to time;

 

 

(u)

they shall, and shall procure that each other Relevant Person and their respective officers, directors and employees, will:

 

 

(i)

conduct its business in compliance with all Anti-Money Laundering Laws, Anti-Terrorism Financing Laws and/or Business Ethics Laws;

 

 

(ii)

maintain systems, controls, policies and procedures designed to promote and achieve ongoing compliance with Anti-Money Laundering Laws, Anti-Terrorism Financing Laws and/or Business Ethics Laws;

 

 

(iii)

in respect of the Charterers, not use, or permit or authorize any person to directly or indirectly use, the Opening Capital Balance for any purpose that would breach any Anti-Money Laundering Laws, Anti-Terrorism Financing Laws and/or Business Ethics Laws;

 

 

(iv)

not lend, invest, contribute or otherwise make available the Opening Capital Balance to or for any other person in a manner which would result in a violation of Anti-Money Laundering Laws, Anti-Terrorism Financing Laws and/or Business Ethics Laws.

 

 

(v)

they shall, and shall procure that that each other Relevant Person will, promptly notify the Owners and provide all information in relation to its business and operations which may be relevant for the purposes of ascertaining whether they are in compliance with all applicable laws and regulations relating to Sanctions, and in particular, the Charterers shall notify the Owners in writing immediately upon being aware that any of the Charterers' shareholders, directors, officers or employees is a Prohibited Person or has otherwise become a target of Sanctions;

 

 

(w)

they shall not appoint or permit to be appointed any manager of the Vessel save for an Approved Manager on terms acceptable to the Owners and such Approved Manager has (prior to accepting its appointment entered into a Manager's Undertaking);

 

 

(x)

if at any time;

 

 

(i)

the shares of the Guarantor cease to trade on the NASDAQ or Over the Counter (OTC), the Charterers shall promptly, and in any event within thirty (30) days upon receiving written request from the Owners, provide, or ensure that a third party has provided, additional security acceptable to the Owners and documented in such terms as the Owners may require; or

 

31

 

 

(ii)

the Market Value of the Vessel falls below the amount equivalent to 125% of the then applicable Owners' Costs (the "LTV Breach" and the said difference between the Market Value of the Vessel and 125% of the then applicable Owners' Costs shall be referred to as the "shortfall"), the Charterers shall, promptly and in any event no later than the date falling thirty (30) days from the date which the valuations relating to the Vessel's Market Value are received by the Owners, at the Owners' discretion, either:

 

 

(A)

make payment in an amount such as to eliminate the shortfall which payment shall be deemed to be an advance payment of hire and credited against future instalment(s) of Fixed Charterhire (or part thereof) payable in inverse order of maturity; and/or

 

 

(B)

provide, or ensure that a third party has provided, additional Security Interests which, has a Market Value (in the case of a Security Interests over a vessel) or otherwise in the opinion of the Owners (in the case of Security Interests over any other asset) has a net realisable value at least equal to the shortfall and is acceptable to the Owners, and which is documented in such terms as the Owners may require.

 

 

(y)

save with the prior written consent of the Owners, they shall not, and shall procure that no other Relevant Person shall, agree or enter into any transaction, arrangement, document or do or omit to do anything which will have the effect of varying, amending, supplementing or waiving any term of the Trafigura Charter or any other Approved Sub-Charter;

 

 

(z)

they shall ensure that:

 

 

(i)

all Earnings and any other amounts received by them in connection with the Vessel are paid into the Operating Account;

 

 

(ii)

all operating expenses in connection with the Vessel are paid from the Operating Account or via the monthly budget from the manager's bank account which shall be credited from the Operating Account; and

 

 

(iii)

the credit balance in the Operating Account shall not at any time as from the Commencement Date be less than $500,000. Provided if,

 

 

(A)

the Trafigura Charterer does not exercise its option to extend the charter period of the Trafigura Charter beyond the third anniversary or, if such charter period extends beyond its third anniversary, the fourth anniversary of the charter period commencement date thereunder and the Charterers do not enter into a Substitute Charter or provide evidence (to the satisfaction of the Owners) relating to the entry into, and validity of, such Substitute Charter no later than one (1) month prior to the third anniversary and, if such charter period extends beyond its third anniversary, the fourth anniversary of the charter period commencement date of the Trafigura Charter (the "Notification Date"); or

 

 

(B)

a Substitute Charter has been entered into pursuant to (A) or a New Substitute Charter (as defined hereunder) has been entered into pursuant to this Clause and the charter period under such charter expires or is otherwise terminated prior to the end of the Charter Period and the Charterers do not enter into another replacing Substitute Charter (each such replacing Substitute Charter, the "New Substitute Charter") or provide evidence (to the satisfaction of the Owners) relating to the entry into, and validity of, such New Substitute Charter no later than one (1) month prior to the expiry or termination date of the then existing Substitute Charter (the "New Notification Date").

 

32

 

the Charterers shall maintain, as from (i) the Notification Date, in the case of paragraph (A) above or (ii) the New Notification Date, in the case of paragraph (B) above, a credit balance in the Operating Account of not less than $1,500,000. Nonetheless, if the Charterers subsequently enter into a Substitute Charter or a New Substitute Charter (as the case may be), the minimum credit balance requirement pursuant to this subparagraph (z)(iii) of Clause 46.1 shall be reduced to $500,000 as from the next immediate Payment Date;

 

 

(aa)

they shall not, and shall procure that the Guarantor shall not, make or pay any dividend or other distribution (in cash or in kind) in respect of its share capital following the occurrence of a Potential Termination Event or Termination Event;

 

 

(bb)

the Vessel shall be registered under the Flag State at all times;

 

 

(cc)

they shall be responsible for losses directly or indirectly arising out of the defects of the design of the Vessel and/or the Charterers' negligence in the supervision of the construction of the Vessel;

 

 

(dd)

they shall ensure that the Vessels to be maintained with all spare parts on board and on order and with all stores on board together with all records, logs, plans, operating manuals and drawings in relation to the Vessel or the Vessel's operations and/or maintenance;

 

 

(ee)

they shall, upon the request of the Owners and at the cost of the Charterers, on or before 31st July in each calendar year, supply or procure the supply to the Owners all information necessary in order for the Owners to comply with their or any Owners' Financiers' obligations under the Poseidon Principles in respect of the preceding year, including, without limitation, all ship fuel oil consumption data required to be collected and reported in accordance with Regulation 22A of Annex VI and any Statement of Compliance relating to the Vessel for the preceding calendar year and, for the avoidance of doubt, such information shall be "Confidential Information" for the purposes of Clause 56 (Confidentiality) but the Charterers acknowledge that, in accordance with the Poseidon Principles, such information will form part of the information published regarding the Owners' and/or Owners' Financiers' portfolio climate alignment; and

 

 

(ff)

save with the Owners' prior consent in writing, they shall not agree or enter into, and shall procure that the Builder does not agree or enter into, any transaction, arrangement, document or do or omit to do anything which will have the effect of varying, amending, supplementing or waiving any term of the Contract relating to the Builder's Warranties.

 

 

47

INSPECTION OF VESSEL

 

 

47.1

Without prejudice to Clause 47.2 (Inspection of Vessel) below, the Owners shall, after giving notice to the Charterers, be entitled to inspect or survey the Vessel or instruct a surveyor to carry out such survey on their behalf:

 

 

(a)

to ascertain the condition of the Vessel and satisfy themselves that the Vessel is being properly repaired and maintained;

 

33

 

 

(b)

in dry-dock if the Charterers have not dry-docked the Vessel in accordance with Clause 10(g) (Periodical Dry-Docking); and

 

 

(c)

for any other reason they consider necessary,

 

provided it does not unduly interfere with the normal commercial operation of the Vessel.

 

 

47.2

The Owners shall be entitled to exercise its rights of inspection or survey as described under Clause 47.1 once a year at the cost of the Charterers and at any other time at the cost of the Owners (and, except where inspection or survey is carried out pursuant to the following (a) or (b), without interference to the operation of the Vessel), save that (a) upon the occurrence of a Termination Event or Potential Termination Event or the occurrence of any major insurance claims which exceeds the Major Casualty amount in respect of the Vessel, the Owners shall have the right to inspect or survey the Vessel or instruct a duly authorized surveyor to carry out such survey on their behalf at any time (and for the avoidance of doubt, more than once a year) without prior notice to, and at the cost of, the Charterers; and (b) the Owners shall have the right to inspect or survey the Vessel or instruct a duly authorized surveyor to carry out such survey on their behalf at any time prior to the Commencement Date. The Charterers shall procure that the Owners can fully exercise such rights of inspection and survey.

 

 

47.3

The Charterers shall also permit the Owners to inspect the Vessel's log books whenever requested and shall whenever required by the Owners furnish them with full information regarding any casualties or other accidents or damage to the Vessel.

 

 

47.4

Except as otherwise provided under Clause 47.2, the costs and fees for any inspection and survey permitted under this Clause shall be paid by the Charterers.

 

 

47.5

All time used in respect of inspection, survey or repairs pursuant to this Clause shall be for the Charterers' account and form part of the Charter Period.

 

 

48

INTENTIONALLY DELETED

 

 

49

TERMINATION EVENTS

 

 

49.1

The Owners and the Charterers hereby agree that any of the following events shall constitute a Termination Event:

 

 

(a)

any Relevant Person fails to make any payment on the due date or on demand in accordance with the terms of any Leasing Document to which it is a party, unless such non-payment is caused by administrative or technical error and the relevant payment is made within three (3) Business Days (in the case of payment of Charterhire) or five (5) Business Days (in the case of any other payment, other than Charterhire) of the relevant due date;

 

 

(b)

the Charterers breach or omit to observe or perform any of their undertakings in paragraphs (a), (f), (g), (p), (j), (l), (r), (t), (u), (v), (x), (z)(iii), or (bb) of Clause 46.1 (Undertakings) or the Guarantor breaches or omits to observe or perform any of its undertakings or the financial covenants contained under clause 11.14 (Financial covenants) of the Guarantee;

 

 

(c)

the Charterers fail to obtain and/or maintain the Insurances required under Clause 39 (Insurance) in accordance with the provisions thereof (or any insurer in respect of such Insurances cancels the Insurances or disclaims liability with respect thereto);

 

34

 

 

(d)

any Relevant Person commits any other breach of, or omits to observe or perform, any of their other obligations or undertakings in this Charter or any Leasing Document (other than a breach referred to in paragraphs (a), (b) and (c) above) unless such breach or omission is in the opinion of the Owners, remediable and the Relevant Person remedies (or cause to remedy) such breach or omission to the satisfaction of the Owners within ten (10) Business Days of the occurrence of such breach or omission;

 

 

(e)

any representation or warranty made by any Relevant Person in or pursuant to any Leasing Document to which it is a party proves to be untrue or misleading when it is made;

 

 

(f)

any of the following occurs in relation to any Financial Indebtedness of any Relevant Person or any member of the Group:

 

 

(i)

any Financial Indebtedness of such entity is not paid when due or, if so payable, on demand after any applicable grace period has expired;

 

 

(ii)

any Financial Indebtedness of such entity becomes due and payable, or capable of being declared due and payable, prior to its stated maturity date as a consequence of any event of default and not as a consequence of the exercise of any voluntary right of prepayment;

 

 

(iii)

a lease, hire purchase agreement or charter creating any Financial Indebtedness of such entity is terminated by the lessor or owner as a consequence of any termination event or event of default (howsoever defined); or

 

 

(iv)

any overdraft, loan, note issuance, acceptance credit, letter of credit, guarantee, foreign exchange or other facility, or any swap or other derivative contract or transaction, relating to any Financial Indebtedness of such entity ceases to be available or becomes capable of being terminated or declared due and payable or cash cover is required or becomes capable of being required, as a result of any termination event or event of default (howsoever defined);

 

provided that no Termination Event will occur under this paragraph (f) in respect of (A) the Guarantor if the aggregate amount of Financial Indebtedness falling within sub-paragraphs (i) to (iv) above is less than US$10,000,000 (or its equivalent in any other currency or currencies) or (B) a Relevant Person (other than the Guarantor) if the aggregate amount of Financial Indebtedness falling within sub-paragraphs (i) to (iv) above is less than US$1,000,000 (or its equivalent in any other currency or currencies) for such Relevant Person;

 

 

(g)

any of the following occurs in relation to any Relevant Person or any member of the Group:

 

 

(i)

such entity becomes, in the opinion of the Owners, unable to pay their debts as they fall due;

 

 

(ii)

in respect of such entity, the value of its assets is less than its liabilities (taking into account contingent liabilities);

 

 

(iii)

any administrative or other receiver is appointed over all or a substantial part of the assets of such entity unless as part of a solvent reorganisation which has been approved by the Owners;

 

35

 

 

(iv)

such entity makes any formal declaration of bankruptcy or any formal statement to the effect that they are insolvent or likely to become insolvent, or a winding up or administration order is made in relation to such entity, or the members or directors of such entity pass a resolution to the effect that they should be wound up, placed in administration or cease to carry on business;

 

 

(v)

a petition is presented in any Relevant Jurisdiction for the winding up or administration, or the appointment of a provisional liquidator, of such entity;

 

 

(vi)

such entity petitions a court, or presents any proposal for, any form of judicial or non-judicial suspension or deferral of payments, reorganisation of their debt (or certain of their debt) or arrangement with all or a substantial proportion (by number or value) of their creditors or of any class of them or with a minority proportion (by number or value) of their creditors or of any class of them which would reasonably likely to have a Material Adverse Effect or any such suspension or deferral of payments, reorganisation or arrangement is effected by court order, contract or otherwise;

 

 

(vii)

any meeting of the members or directors of such entity is summoned for the purpose of considering a resolution or proposal to authorise or take any action of a type described in paragraph (iii), (iv), (v) or (vi);

 

 

(viii)

in any jurisdiction, any event occurs or any procedure is commenced which, in the opinion of the Owners, is similar to any of the foregoing referred to in (ii) to and including (vii) above; or

 

 

(ix)

any expropriation, attachment, sequestration, distress or execution or any analogous process in any jurisdiction which affects any asset or assets of such entity which is not discharged within fourteen (14) days;

 

 

(h)

a Relevant Person suspends or ceases or threatens to suspend or cease carrying on its business;

 

 

(i)

any consent, approval, authorisation, license or permit necessary to enable the Charterers or the Approved Sub-charterer to operate or charter the Vessel or any of Relevant Person to comply with any provision of Leasing Document (as the case may be) and/or to ensure that the obligations of any Relevant Person or the Approved Sub-charterer under any Leasing Document or the Approved Sub-charter (as applicable) are legal, valid, binding or enforceable (I) is not granted, (II) expires without being renewed, (III) is revoked or becomes liable to revocation or (IV) any condition of such a consent, approval, authorisation, license or permit is not fulfilled provided that, in the case of an Approved Sub-charter, this shall not constitute a "Termination Event" under this Clause 49.1 if (i) such Approved Sub-charter is replaced or remedied in the time required under and in accordance with subparagraphs (z)(iii)(A) or (z)(iii)(B) of Clause 46.1 (Undertakings) or (ii) the Charterers comply with their obligations under subparagraph (z)(iii) of Clause 46.1 (Undertakings);

 

 

(j)

any event or circumstance occurs which (in the opinion of the Owners) has or is reasonably likely to have a Material Adverse Effect;

 

 

(k)

this Charter or any Leasing Document or any Security Interest created by a Leasing Document:

 

 

(i)

is cancelled, terminated, rescinded or suspended or otherwise ceases to remain in full force and effect for any reason or no longer constitutes valid, binding and enforceable obligations of any party to that document for any reason whatsoever; or

 

36

 

 

(ii)

is amended or varied without the prior written consent of the Owners;

 

 

(l)

a Relevant Person or an Approved Sub-charterer rescinds or purports to rescind or repudiates or purports to repudiate a Leasing Document or an Approved Sub-charter (in the case of an Approved Sub-charter, (i) this is not replaced or remedied in the time required under and otherwise in accordance with subparagraphs (z)(iii)(A) or (z)(iii)(B) of Clause 46.1 (Undertakings) and (ii) the Charterers breach or omit to observe or perform their obligations under subparagraph (z)(iii) of Clause 46.1 (Undertakings));

 

 

(m)

the Security Interest constituted by any Leasing Document is in any way imperiled or in jeopardy;

 

 

(n)

any Termination Event (as defined in the Other Charter) occurs under the Other Charter;

 

 

(o)

the occurrence of any of the following events;

 

 

(i)

an event of default or termination event howsoever called under the terms of the Approved Sub-charter entitling either the Approved Sub-charterer or the Charterers to terminate the Approved Sub-charter and the Charterers breach or omit to observe or perform their obligations under subparagraph (z)(iii) of Clause 46.1 (Undertakings);

 

 

(ii)

if any Relevant Person or the Approved Sub-charterer:

 

 

(A)

is or becomes a Prohibited Person;

 

 

(B)

is owned or controlled by or acting directly or indirectly on behalf of or for the benefit of, a Prohibited Person;

 

 

(C)

owns or controls a Prohibited Person;

 

 

(D)

has a Prohibited Person serving as a director, officer or employee;;

 

 

(p)

Delivery does not occur on or prior to the Cancelling Date;

 

 

(q)

a Total Loss has occurred in respect of the Vessel or any damage has occurred in respect of the Vessel which, in the opinion of Owners, with the passage of time may result in a Total Loss of the Vessel or otherwise materially and adversely affects the value of the Vessel;

 

 

(r)

there is a merger, amalgamation, demerger or corporate reconstruction of the Charterer, the Other Charterers and the Guarantor without the Owners' prior written consent;

 

(s)

 

 

 

(i)

the shares of the Guarantor cease to trade on the NASDAQ or Over the Counter (OTC), unless the Charterers comply with their obligations under subparagraph (x)(i) of Clause 46.1 (Undertakings); or

 

 

(ii)

the Guarantor ceases being an entity reporting with the U.S. Securities and Exchange Commission;

 

 

(t)

there is a change in control of ownership or control of the Charterers or there is a change of voting control in the case of the Guarantor that set out in paragraph (a) of Clause 45.1 (Representations and Warranties) unless prior written consent from the Owners has been obtained prior to such change;

 

37

 

 

(u)

there is any occurrence of any litigation, arbitration or administrative proceedings or investigations involving a Relevant Person which has been commenced or taken and has been adversely determined and which would have or is reasonably likely to have a Material Adverse Effect.

 

 

49.2

Notwithstanding and without prejudice to Clause 33 (Cancellation), upon the occurrence of any Termination Event, the Owners may issue a written notice to the Charterers terminating this leasing of the Vessel under this Charter and demanding payment of the Termination Sum (the "Termination Notice"), whereupon the Charterers shall be obliged to pay the Termination Sum to the Owners on the date specified by the Owners in their sole discretion in the Termination Notice (the "Termination Date").

 

 

49.3

For the avoidance of doubt, notwithstanding any action taken by the Owners following a Termination Event, the Charterers shall remain liable for the outstanding obligations on their part to be performed under this Charter including but not limited to all insurance, operational and maintenance covenants until such time as the Vessel is redelivered to the Owners in accordance with Clause 41.6, or the title is transferred to the Charterers in accordance with Clause 41.3, the Vessel is sold in accordance with 41.10 or the Owners exercise the option set out in Clause 41.11.

 

 

49.4

Without limiting the generality of the foregoing or any other rights of the Owners, upon the occurrence of a Termination Event, the Charterers agree and acknowledge that the Owners shall have the sole and exclusive right and power to (i) settle, compromise, compound, adjust or defend any action, suit or proceeding relating to or pertaining to the Vessel and this Charter, (ii) make proof of loss, appear in and prosecute any action arising from any policy or policies of insurance maintained pursuant to this Charter, and settle, adjust or compromise any claims for loss, damage or destruction under, or take any other action in respect of, any such policy or policies and/or change or appoint a new manager for the Vessel and the appointment of any originally appointed manager may be terminated immediately without any recourse to the Owners.

 

 

49.5

Each Termination Event shall either be a breach of condition by the Charterers where it involves a breach of this Charter or any of the other Leasing Document by the Charterers or shall otherwise be an agreed terminating event, the occurrence of which gives rise to a right of the Owners to terminate the leasing of the Vessel under this Charter and to exercise its rights under this clause.

 

 

50

MANDATORY SALE

 

 

50.1

If it becomes unlawful in any applicable jurisdiction for the Owners to perform any of their obligations as contemplated by this Charter or the MOA to perform their obligations under the Financial Instruments, the Owners shall notify the Charterers of this event and the Charterers shall be required to pay the Mandatory Sale Price to the Owners within thirty (30) days following such notice by the Owners or, if earlier, the date specified by the Owners in the notice delivered to the Charterers (being no earlier than the last day of any applicable grace period permitted by law), and this Charter shall terminate in accordance with the procedures set out in Clause 50.4.

 

38

 

 

50.2

If it is or has become:

 

 

(a)

unlawful or prohibited, whether as a result of the introduction of a new law, an amendment to an existing law or a change in the manner in which an existing law is or will be interpreted or applied; or

 

 

(b)

contrary to, or inconsistent with, any regulation,

 

for any Relevant Person to maintain or give effect to any of its obligations under this Charter or any of the other Leasing Documents to which it is a party in the manner it is contemplated under such Leasing Document or any of the obligations of such Relevant Person under any Leasing Document to which it is a party are not or cease to be legal, valid, binding and enforceable, the Charterers shall be required to pay the Mandatory Sale Price to the Owners within thirty (30) days following such occurrence or, if earlier, a date specified by the Owners (being no earlier than the last day of any applicable grace period permitted by law), and this Charter shall terminate in accordance with the procedures set out in Clause 50.4.

 

 

50.3

If there is a breach of 46.1(j), 46.1(t), 46.1(u) or 46.1(v) in any such case on the basis that reference to "the People's Republic of China" applies to the definition of "Prohibited Person" or paragraph (e) of the definition of "Sanctions Authority" applies to the definition of "Sanctions Authority", the Charterers shall be required to pay the Mandatory Sale Price to the Owners within forty five (45) days following such occurrence or, if earlier, a date specified by the Owners (being no earlier than the last day of any applicable grace period permitted by law or the relevant official institution, agency or the government of the People's Republic of China) and this Charter shall terminate in accordance with the procedures set out in Clause 50.4.

 

 

50.4

If the Mandatory Sale Price becomes payable in accordance with Clause 36.13 (Charterhire and Advance Charterhire) or Clause 37.3 (Changes to Interest Rate, Default Interest) or Clause 37.5 or Clause 50.1 or Clause 50.2 or Clause 50.3 or Clause 54.5 (No Set-off or Tax Deduction), the same shall (in each such case) be payable in consideration of the purchase and transfer of the legal and beneficial title of the Vessel pursuant to Clause 52 (Sale of the Vessel). The day on which the Mandatory Sale Price is paid pursuant to Clause 36.13 (Charterhire and Advance Charterhire) or Clause 37.3 (Changes to Interest Rate, Default Interest) or Clause 50.1, Clause 50.2 or Clause 50.3 or Clause 54.5 (No Set-off or Tax Deduction) is a "Mandatory Sale Date" and such transfer of Vessel provided therein is a "Mandatory Sale".

 

 

51

PURCHASE OPTION

 

 

51.1

The Charterers shall have the option (the "Purchase Option") to purchase the Vessel on the first (1st) anniversary of the Commencement Date or any subsequent Purchase Option Date (as hereinafter defined) specified in the Purchase Option Notice (as hereinafter defined) at the applicable Purchase Option Price, subject to the other terms of this Clause 51 (Purchase Option).

 

 

51.2

The Purchase Option shall be exercisable only:

 

 

(a)

upon the Charterers providing not less than sixty (60) days' written notice (the "Purchase Option Notice") to purchase the Vessel on a date specified therein (the "Purchase Option Date") which shall fall on any Payment Date on or after the first (1st) anniversary of the Commencement Date or on the last day of the Charter Period (as the case may be) (unless otherwise agreed by the Owners); and

 

 

(b)

in the absence of the occurrence of a Potential Termination Event or a Termination Event which is continuing on or prior to either the date of the Purchase Option Notice or the Purchase Option Date.

 

39

 

 

51.3

The Purchase Option Notice shall be signed by a duly authorised officer or attorney of the Charterers and, once delivered to the Owners, will be irrevocable and the Charterers shall be bound to pay to the Owners the Purchase Option Price on the Purchase Option Date.

 

 

51.4

The sale of the Vessel pursuant to the Charterers' exercise of the Purchase Option shall be conducted in accordance with Clause 52 (Sale of the Vessel).

 

 

51.5

If the Charterers do not exercise the Purchase Option on or before the expiration of the Charter Period:

 

 

(a)

the Charterers shall pay the Option Premium to the Owners on the last day of the Charter Period;

 

 

(b)

the Charterers shall on the last day of the Charter Period re-deliver the Vessel to the Owners in accordance with Clause 41.6 (Termination, Redelivery and Total Loss) and shall ensure that they have fulfilled their obligations under this Charter and made payment of the Option Premium, all Charterhire and all other moneys pursuant to the terms of this Charter; and

 

 

(c)

the Owners shall be entitled (at Owners' sole discretion) to sell or operate the Vessel as they may require and may create whatsoever interests thereon, including without limitation sale and purchase agreements, charterparties or any other form of employment contracts.

 

 

51.6

For the avoidance of doubt, the Charterers agree that should the Option Premium not be paid or not be paid in full on its due date for payment under the terms of this Charter, any net proceeds deriving from the sale or operation of the Vessel by the Owners shall not be applied towards reduction of the unpaid Option Premium, Charterhire or any other moneys due pursuant to the terms of this Charter.

 

 

52

SALE OF THE VESSEL

 

 

52.1

The sale of the legal and beneficial interest and title in the Vessel pursuant to the Charterer's payment of the Termination Sum under Clause 41 (Termination, Redelivery and Total Loss), the Charterers' exercise of the Charterers' Purchase Option under Clause 51 (Purchase Option) or the completion of the Mandatory Sale under Clause 50 (Mandatory Sale) shall be on an "as is where is" and subject to the following terms and conditions:

 

 

(a)

no condition, warranty or representation of any kind is or has been given by or on behalf of the Owners in respect of the Vessel or any part thereof, and accordingly the Charterers confirm that they have not, in entering into this Charter, relied on any condition, warranty or representation by the Owners or any person on the Owners' behalf, express or implied, whether arising by law or otherwise in relation to the Vessel or any part thereof, including, without limitation, warranties or representations as to the description, suitability, quality, merchantability, fitness for any purpose, value, state, condition, appearance, safety, durability, design or operation of any kind or nature of the Vessel or any part thereof, and the benefit of any such condition, warranty or representation by the Owners is hereby irrevocably and unconditionally waived by the Charterers to the extent permissible under applicable law;

 

 

(b)

the Charterers hereby also waive any rights which they may have in tort in respect of any of the matters referred to under paragraph (a) above and irrevocably agree that the Owners shall have no greater liability in tort in respect of any such matter than they would have in contract after taking account of all of the foregoing exclusions. No third party making any representation or warranty relating to the Vessel or any part thereof is the agent of the Owners nor has any such third party authority to bind the Owners thereby. Notwithstanding anything contained above, nothing contained herein is intended to obviate, remove or waive any rights or warranties or other claims relating thereto which the Charterers (or their nominee) or the Owners may have against the manufacturer or supplier of the Vessel or any third party;

 

40

 

 

(c)

the Vessel shall be free from any registered mortgages incurred by the Owners (save for those mortgages, liens, encumbrances and debts arising out of or in connection with the Charter or the Leasing Documents or any other Permitted Security Interests);

 

 

(d)

the Purchase Option Price or the Termination Sum or the Mandatory Sale Price shall be paid by (or on behalf of) the Charterers to the Owners the Purchase Option Date or the Termination Date or the Mandatory Sale Date (as the case may be) together with unpaid amounts of Charterhire and other moneys owing by or accrued or due from the Charterers under this Charter on or prior to the Purchase Option Date or the Termination Date or the Mandatory Sale Date (as the case may be) which remain unpaid; and

 

 

(e)

concurrently with the Owners receiving irrevocable payment of the Purchase Option Price or, as the case may be, the applicable Termination Sum or the applicable Mandatory Sale Price and all other moneys payable under this Charter in full pursuant to the terms of this Charter, the Owners shall (save in the event of Total Loss) (at the Charterer's cost) transfer the legal and beneficial ownership of the Vessel on an "as is where is" basis to the Charterers or their nominees and shall (at the Charterers' cost) execute a bill of sale and a protocol of delivery and acceptance evidencing the same and any other document strictly necessary to transfer the title of the Vessel to the Charterers (and to the extent required for such purposes, the Vessel shall be deemed first to have been redelivered to the Owners), provided that the Owners shall not be obliged to transfer the legal and beneficial interest in the Vessel to the Charterers in any event unless the Owners are satisfied that no Termination Event has occurred and is continuing and all obligations, duties, liabilities and indemnities of the Charterers under the Leasing Documents have been fully performed and (if applicable) paid.

 

 

53

INDEMNITIES

 

 

53.1

The Charterers shall pay such amounts to the Owners, on the Owners' demand, in respect of all documented claims, expenses, liabilities, losses, fees (including but not limited to any vessel registration and tonnage fees or any tax incurred by the Owners as a result of the operation and/or trading of the Vessel) suffered or incurred by or imposed on the Owners arising from this Charter and any Leasing Document, including but not limited to (i) in connection with delivery, possession, performance, control, registration, repair, survey, insurance, maintenance, manufacture, purchase, ownership and operation of the Vessel by the Owners, (ii) costs related to the prevention or release of liens or detention of or requisition, use, operation or redelivery, sale or disposal of the Vessel or any part of it and (iii) enforcing the Owners' rights under this Charter or any Leasing Document, in each case of paragraphs (i) to (iii), whether prior to, during or after termination of the leasing of this Charter and whether or not the Vessel is in the possession or the control of the Charterers or otherwise. Without prejudice to its generality, this Clause 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, the MARPOL Protocol, any Environmental Law, any Sanctions or any Anti- Money Laundering Laws, Anti-Terrorism Financing Laws or Business Ethics Laws.

 

 

53.2

The Charterers agree to indemnify the Owners against all consequences or liabilities arising from the Master, officers or agents signing Bills of Lading or other documents.

 

41

 

 

53.3

In consideration of the Charterers requesting the Other Owner to charter the Other Vessel to the Other Charterer under the Other Charter, the Charterers hereby irrevocably and unconditionally undertake to pay immediately on demand from the Owners such amounts in respect of all claims, expenses, liabilities, losses, fees of every kind and nature and all other moneys due, owing and/or payable to the Other Owner under or in connection with the Other Charter, and to indemnify and hold the Other Owner harmless against all such moneys, costs, fees and expenses.

 

 

53.4

All rights which the Charterers have at any time (whether in respect of this Charter or any other transaction) against the Other Charterer or any Relevant Person shall be fully subordinated to the rights of the Owners under the Leasing Documents and until the end of this Charter and unless the Owners otherwise direct, the Charterers shall not exercise any rights which it may have (whether in respect of this Charter or any other transaction) by reason of performance by it of its obligations under the Leasing Documents or by reason of any amount becoming payable, or liability arising, under this Clause:

 

 

(a)

to be indemnified by the Other Charterer or such Relevant Person;

 

 

(b)

to claim any contribution from any third party providing security for, or any other guarantor of, the Other Charterer's or such Relevant Person's obligations under the Leasing Documents;

 

 

(c)

to take any benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights of the Other Charterers or such Relevant Person under the Leasing Documents or of any other guarantee or security taken pursuant to, or in connection with, the Leasing Documents by any of the aforesaid parties;

 

 

(d)

to bring legal or other proceedings for an order requiring the Other Charterers or such Relevant Person to make any payment, or perform any obligation, in respect of any Leasing Document;

 

 

(e)

to exercise any right of set-off against the Other Charterer or such Relevant Person; and/or

 

 

(f)

to claim or prove as a creditor of the Other Charterer or such Relevant Person,

 

and if the Charterers receive any benefit, payment or distribution in relation to such rights it shall hold that benefit, payment or distribution to the extent necessary to enable all amounts which may be or become payable to the Owners or the Other Owner by the Other Charterers or such Relevant Person under or in connection with the Leasing Documents to be repaid in full on trust for the Owners or the Other Owner and shall promptly pay or transfer the same to the Owners or the Other Owner as may be directed by the Owners.

 

 

53.5

The Charterers hereby irrevocably agree to indemnify and hold harmless the Owners against any claim, expense, liability or loss reasonably incurred by the Owners in liquidating or employing deposits from the Owners' Financiers or third parties to fund the acquisition of the Vessel pursuant to the MOA and the Contract.

 

 

53.6

Notwithstanding anything to the contrary herein (but subject and without prejudice to Clause 33 (Cancellation) ) and without prejudice to any right to damages or other claim which the Charterers may have at any time against the Owners under this Charter, the indemnities provided by the Charterers in favour of the Owners shall continue in full force and effect notwithstanding any breach of the terms of this Charter or termination of this Charter pursuant to the terms hereof or termination of this Charter by the Owners.

 

42

 

 

53.7

The obligations of the Charterers under this Clause 53 (Indemnities) and in respect of any Security Interest created pursuant to the Security Documents will not be affected or discharged by an act, omission, matter or thing which would reduce, release or prejudice any of its obligations under this Clause 53 or in respect of any Security Interest created pursuant to the Security Documents (without limitation and whether or not known to it or any Relevant Person) including:

 

 

(a)

any time, waiver or consent granted to, or composition with, any Relevant Person or other person;

 

 

(b)

the release of any other Relevant Person or any other person under the terms of any composition or arrangement with any creditor of a Relevant Person or any of its affiliates;

 

 

(c)

the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect or delay in perfecting, or refusal or neglect to take up or enforce, or delay in taking or enforcing any rights against, or security over assets of, any Relevant Person or other person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security;

 

 

(d)

any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of a Relevant Person or any other person;

 

 

(e)

any amendment, novation, supplement, extension, restatement (however fundamental and whether or not more onerous) or replacement of any Leasing Document or any other document or security;

 

 

(f)

any unenforceability, illegality or invalidity of any obligation of any person under any Security Document or any other document or security; or

 

 

(g)

any insolvency or similar proceedings.

 

 

54

NO SET-OFF OR TAX DEDUCTION

 

 

54.1

All Charterhire and any other payment made from the Charterers to enable the Owners to pay all amounts under a Leasing Document shall be paid punctually and:

 

 

(a)

without any form of set-off, cross-claim, condition or counterclaim;

 

 

(b)

free and clear of any tax deduction or withholding unless required by law; and

 

 

(c)

net of any bank charges or bank fees.

 

 

54.2

Without prejudice to Clause 54.1 (No Set-off or Tax Deduction), if the Owners are required by law to make a tax deduction from any payment:

 

 

(a)

the Owners shall notify the Charterers as soon as they become aware of the requirement; and

 

 

(b)

the amount due in respect of the payment shall be increased by the amount necessary to ensure that the Owners receive and retain (free from any liability relating to the tax deduction) a net amount which, after the tax deduction, is equal to the full amount which they would otherwise have received.

 

43

 

 

54.3

The Charterers shall (within three (3) Business Days of demand by Owners) pay to the Owners an amount equal to the loss, liability or cost which the Owners determine will be or has been (directly or indirectly) suffered for or on account of tax by the Owners in respect of a Leasing Document.

 

 

54.4

Clause 54.3 shall not apply:

 

 

(a)

with respect to any tax assessed on the Owners under the law of the jurisdiction in which the Owners are incorporated or, if different, the jurisdiction (or jurisdictions) in which the Owners are treated as resident for tax purposes 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 the Owners; or

 

 

(b)

to the extent a loss, liability or cost is compensated for by an increased payment under Clauses 55.2 or 55.3.

 

 

54.5

Notwithstanding any other provision to this Charter, if any deduction or withholding or other tax is or will be required to be made by the Charterers or the Owners in respect of a payment to the Owners as a result of the Tax Changes, the Owners and the Charterers shall use reasonable endeavours to mitigate the effect of the Tax Changes and have the right to transfer their interest in the Vessel (and this Charter) to any person nominated by the Owners and all costs in relation to such mitigation or transfer shall be for the account of the Charterers. Provided that if after the Owners and the Charterers having exercised reasonable endeavours to mitigate the effect of the Tax Changes (at the cost of the Charterers) following notification from the Owners to the Charterers regarding the occurrence of the Tax Changes such Tax Changes continue to have the same effect, the Charterers shall have the option to pay the Mandatory Sale Price to the Owners within thirty (30) days following such notice by the Owners, and this Charter shall terminate in accordance with the procedures set out in Clause 50.4.

 

 

54.6

If the Charterers compensate the Owners by an increased payment pursuant to Clauses 55.2 or 55.3 and the Owners determine that they have obtained and utilized a tax credit attributable to this increased payment, the Owners shall reimburse the Charterers that increased payment (or part thereof if the tax credit is attributable to only part of such increased payment).

 

 

55

INCREASED COSTS

 

 

55.1

This Clause 55 (Increased Costs) applies if the Owners notify the Charterers that they (or their financiers) consider that as a result of:

 

 

(a)

the introduction or alteration after the date of this Charter of a law or an alteration after the date of this Charter in the manner in which a law is interpreted or applied (excluding any effect which relates to the application to payments under this Charter of a tax on the Owners' overall net income); or

 

 

(b)

complying with any regulation (including any which relates to capital adequacy or liquidity controls or which affects the manner in which the Owners allocates capital resources to their obligations under this Charter) which is introduced, or altered, or the interpretation or application of which is altered, after the date of this Charter,

 

the Owners or a parent company of them (if any) has incurred or will incur an "increased cost".

 

44

 

 

55.2

In this Clause 55 (Increased Costs), "increased cost" means, in relation to the Owners:

 

 

(a)

an additional or increased cost incurred as a result of, or in connection with, the Owners or the Owners' parent company or the Owners' Financiers (if any) having entered into, or being a party to, this Charter, of funding or financing the acquisition of the Vessel pursuant to the MOA or performing their obligations under this Charter;

 

 

(b)

a reduction in the amount of any payment to the Owners under this Charter or in the effective return which such a payment represents to the Owners (if any) on their capital; or

 

 

(c)

an additional or increased cost of funding or financing the acquisition of the Vessel pursuant to the MOA,

 

and for the purposes of this Clause 55.2 (Increased Costs) the Owners may in good faith allocate or spread costs and/or losses among their assets and liabilities (or any class of their assets and liabilities) on such basis as they consider appropriate.

 

 

55.3

Subject to the terms of Clause 55.1 (Increased Costs), the Charterers shall pay to the Owners, upon receipt of the Owners' demand and any evidence thereto (where available to the Owners), the amounts which the Owners from time to time notify the Charterers to be necessary to compensate the Owners for the increased cost.

 

 

55.4

If any sum due from the Charterers to the Owners under this Charter or any other Leasing Document or under any order or judgment relating thereto has to be converted from the currency in which this Charter or such Leasing 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 Charterers, whether in their liquidation, any arrangement involving them or otherwise; or

 

 

(b)

obtaining an order or judgment from any court or other tribunal; or

 

 

(c)

enforcing any such order or judgment;

 

the Charterers shall indemnify the Owners against the loss arising when the amount of the payment actually received by the Owners is converted at the available rate of exchange into the Contractual Currency.

 

In this Clause 55.4, the "available rate of exchange" means the rate at which the Owners are able at the opening of business (Shanghai time) on the Business Day after it receives the sum concerned to purchase the Contractual Currency with the Payment Currency.

 

 

56

CONFIDENTIALITY

 

 

56.1

The Parties agree to keep the terms and conditions of this Charter and any other Leasing Documents (the "Confidential Information") strictly confidential, provided that a Party may disclose Confidential Information in the following cases:

 

 

(a)

it is already known to the public or becomes available to the public other than through the act or omission of the disclosing Party;

 

 

(b)

it is required to be disclosed under the applicable laws of any Relevant Jurisdiction, Stock Market regulation, the US Securities and Exchange Commission's rules or by a governmental order, decree, regulation or rule (provided that the disclosing Party shall give written notice of such required disclosure to the other Party prior to the disclosure);

 

45

 

 

(c)

in filings with a court or arbitral body in proceedings in which the Confidential Information is relevant and in discovery arising out of such proceedings;

 

 

(d)

to (or through) whom a Party assigns or transfers (or may potentially assign or transfer) all or any of its rights and/or obligations under one or more Leasing Document (as permitted by the terms thereof), provided that such person receiving Confidential Information shall undertake that it would not disclose Confidential Information to any other party save for circumstances arising which are similar to those described under this Clause or such other circumstances as may be permitted by all Parties;

 

 

(e)

to any permitted subcharterer of the Vessel provided that such person receiving Confidential Information shall undertake that it would not disclose Confidential Information to any other party save for circumstances arising which are similar to those described under this Clause or such other circumstances as may be permitted by all Parties;

 

 

(f)

to any of the following persons on a need to know basis:

 

 

(i)

a shareholder or an Affiliate of either Party or a party referred to in either paragraph (d) or (e) (including the employees, officers and directors thereof);

 

 

(ii)

professional advisers retained by a disclosing party; or

 

 

(iii)

persons advising on, providing or considering the provision of financing to the disclosing party or an Affiliate,

 

provided that the disclosing party shall exercise due diligence to ensure that no such person shall disclose Confidential Information to any other party save for circumstances arising which are similar to those described under this Clause or such other circumstances as may be permitted by all Parties;

 

 

(g)

with the prior written consent of all Parties; or

 

 

(h)

to any person which is a classification society or other entity which the Owners or the Owners' Financiers have engaged to make the calculations necessary to enable the Owners and/or the Owners' Financiers to comply with their reporting obligations under the Poseidon Principles.

 

 

57

RIGHTS OF THIRD PARTIES

 

No term of this Charter is enforceable under the Contracts (Rights of Third Parties) Act 1999 by a person who is not party to this Charter, save that the Other Owners may rely on the rights conferred on them under Clause 53.3 (Indemnities).

 

 

58

PARTIAL INVALIDITY

 

If, at any time, any provision of a Leasing Document is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions under the law of that jurisdiction nor the legality, validity or enforceability of such provision under the law of any other jurisdiction will in any way be affected or impaired.

 

46

 

 

59

SETTLEMENT OR DISCHARGE CONDITIONAL

 

 

59.1

Any settlement or discharge under any Leasing Document between the Owners and any Relevant Person shall be conditional upon no security or payment to the Owners by any Relevant Person or any other person being set aside, adjusted or ordered to be repaid, whether under any insolvency law or otherwise.

 

 

59.2

If the Owners consider that an amount paid or discharged by, or on behalf of, a Relevant Person or by any other person in purported payment or discharge of an obligation of that Relevant Person to the Owners under the Leasing Documents is capable of being avoided or otherwise set aside on the liquidation or administration of that Relevant Person or otherwise, then that amount shall not be considered to have been unconditionally and irrevocably paid or discharged for the purposes of the Leasing Documents.

 

 

60

IMMUNITY

 

The Charterers waive any rights of sovereign immunity which they or any of their properties may enjoy in any jurisdiction and subjects itself to civil and commercial law with respect to their obligations under this Charter or any other Leasing Document.

 

 

61

COUNTERPARTIES

 

This Charter and each other Leasing Document may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of this Charter or that Leasing Document, as the case may be.

 

 

62

FATCA

 

 

62.1

Defined terms

 

For the purposes of Clause 54 (No Set-off or Tax Deduction) and this Clause 62 (FATCA), the following terms shall have the following meanings:

 

"Code" means the United States Internal Revenue Code of 1986, as amended.

 

"FATCA" means:

 

 

(a)

sections 1471 to 1474 of the Code or any associated regulations;

 

 

(b)

any treaty, law or regulation of any other jurisdiction, or relating to an intergovernmental agreement between the US and any other jurisdiction, which (in either case) facilitates the implementation of any law or regulation referred to in paragraph (a) above; or

 

 

(c)

any agreement pursuant to the implementation of any treaty, law or regulation referred to in paragraphs (a) or (b) above with the IRS, the US government or any governmental or taxation authority in any other jurisdiction.

 

"FATCA Deduction" means a deduction or withholding from a payment under this Charter or the Leasing Documents required by or under FATCA.

 

"FATCA Exempt Party" means a Relevant Party that is entitled under FATCA to receive payments free from any FATCA Deduction.

 

"FATCA Non-Exempt Party" means any Relevant Party who is not a FATCA Exempt Party.

 

47

 

"IRS" means the United States Internal Revenue Service or any successor taxing authority or agency of the United States government.

 

"Relevant Party" means any of the parties to this Charter and the Leasing Documents (other than the Trafigura Charterer).

 

 

62.2

FATCA Information

 

 

(a)

Subject to paragraph (c) below, each Relevant Party shall, on the date of this Charter, and thereafter within ten Business Days of a reasonable request by another Relevant Party:

 

 

(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 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 "pass thru percentage" or other information required under FATCA or other official guidance including intergovernmental agreements) as the requesting party reasonably requests for the purpose of the requesting party's compliance with FATCA.

 

 

(b)

If a Relevant Party confirms to any other Relevant Party that it is a FATCA Exempt Party or provides an IRS Form W-8 or W-9 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, or that the said form provided has ceased to be correct or valid, that party shall so notify all other Relevant Parties or provide the relevant revised form, as applicable, reasonably promptly.

 

 

(c)

Nothing in this Clause shall oblige any 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, however, that nothing in this paragraph shall excuse any 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 Relevant Party fails to confirm its status or to supply forms, documentation or other information requested in accordance with the provisions of this Charter or the provided information is insufficient under FATCA, then:

 

 

(i)

if that party failed to confirm whether it is (and/or remains) a FATCA Exempt Party then such party shall be treated for the purposes of this Charter and the Leasing Documents as if it is a FATCA Non-Exempt Party; and

 

 

(ii)

if that party failed to confirm its applicable passthru percentage then such party shall be treated for the purposes of this Charter and the Leasing 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.

 

48

 

 

62.3

FATCA Deduction and gross-up by Relevant Party

 

 

(a)

If the representation made by the Charterers under paragraph (p) of Clause 45.1 (Representations and Warranties) proves to be untrue or misleading such that the Charterers are required to make a FATCA Deduction, the Charterers shall make the 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)

If the Charterers are required to make a FATCA Deduction then the Charterers shall increase the payment due from them to the Owners 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 Charterers shall promptly upon becoming aware that they must make a FATCA Deduction (or that there is any change in the rate or basis of a FATCA Deduction) notify the Owners accordingly. Within thirty (30) days of the Charterers making either a FATCA Deduction or any payment required in connection with that FATCA Deduction, the Charterers shall deliver to the Owners evidence satisfactory to the Owners that the FATCA Deduction has been made or (as applicable) any appropriate payment paid to the relevant governmental or taxation authority.

 

 

(d)

If the Owners are required to make a deduction or withholding from a payment under any Financial Instruments in respect of FATCA, and is required under such Financial Instrument to pay additional amounts in respect of such deduction or withholding, the amount of the payment due from the Charterers under this Charter shall be increased to an amount which, after such deduction or withholding and payment of additional amounts, leaves the Owners with an amount equal to the amount which it would have had remaining if it had not been required to pay additional amounts under such Financial Instruments.

 

 

62.4

FATCA Deduction by Owners

 

The Owners may make any FATCA Deduction they are required by FATCA to make, and any payment required in connection with that FATCA Deduction, and the Owners shall not be required to increase any payment in respect of which they make such a FATCA Deduction or otherwise compensate the recipient for that FATCA Deduction.

 

 

62.5

FATCA Mitigation

 

Notwithstanding any other provision to this Charter, if a FATCA Deduction is or will be required to be made by any party under Clause 62.3 (FATCA) in respect of a payment to the Owners as a result of the Owners not being a FATCA Exempt Party, the Owners shall have the right to transfer their interest in the Vessel (and this Charter) to any person nominated by the Owners and all costs in relation to such transfer shall be for the account of the Charterers.

 

 

63

ASSIGNMENT AND TRANSFER

 

 

63.1

The Charterers shall not assign this Charter except with the Owners' prior consent in writing.

 

49

 

 

63.2

The Owners may assign any of their rights or transfer by novation any of their rights and obligations under the Leasing Documents to any third party with the prior written consent of the Charterers (such consent not to be unreasonably withheld) provided that such consent shall not be required if such assignment and/or transfer is made (i) at such time following the occurrence of a Termination Event which is continuing or (ii) to an affiliate of the Owners. Provided always that, notwithstanding such assignment or transfer, this Charter will continue (or will be novated to the applicable new owner) on identical terms (save for logical, consequential or mutually agreed amendments). The Charterers shall be liable to the aforesaid new owner of the Vessel for its performance of all obligations under this Charter (as novated) after any such change of the registered ownership from the Owners to such new owner and the Charterers shall procure that any Relevant Person which is a party to a Leasing Document:

 

 

(a)

becomes liable to the new of owner of the Vessel for its performance of all obligations pursuant to such Leasing Document; and

 

 

(b)

enters into all necessary documents or takes any necessary actions required for such Leasing Document and any Security Interest created thereunder remaining in full force and effect (or to be novated and/or executed) as from the completion of the relevant sale...

 

 

63.3

Without limiting the generality of Clause 63.2:

 

 

(a)

 the Owners are entitled to enter into certain funding arrangements with their financier(s), including but not limited to, an affiliate of the Owners or any other banks and financial institutions acceptable to the Owners in their sole discretion (the "Mortgagee") provided that such funding arrangement shall not result in any adverse effect of the Charterers' rights and obligations under the Leasing Documents;

 

 

(b)

the Owners may do any of the following as security for the funding arrangements referred to in paragraph (a) above:

 

 

(i)

execute a ship mortgage over the Vessel or any other Financial Instrument in favour of a Mortgagee (or its agent, trustee or nominee);

 

 

(ii)

assign their rights and interests to, in or in connection with this Charter or any other Leasing Documents in favour of a Mortgagee (or its agent, trustee or nominee);

 

 

(iii)

assign their rights and interests to, in or in connection with the Insurances, the Earnings and the Requisition Compensation of the Vessel in favour of the Mortgagee (or its agent, trustee or nominee); and

 

 

(iv)

enter into any other document or arrangement which is necessary to give effect to such financing arrangements;

 

 

(c)

the Charterers undertake to comply, and provide such information and documents required to enable the Owners to comply, with all such instructions or directions in regard to the employment, insurances, operation, repairs and maintenance of the Vessel as laid down in any Financial Instrument or as may be directed from to time during the currency of this Charter by the Mortgagee (or its agent, trustee or nominee) in conformity with any Financial Instrument. The Charterers further agree and acknowledge all relevant terms, conditions and provisions of each Financial Instrument (if any) and agree to acknowledge this in writing in any form that may be required by the Mortgagee (or its agent, trustee or nominee); and

 

 

(d)

during the Charter Period a change in the registered or beneficial ownership of the Vessel or the Owners (by sale of shares in the Owners or other transactions having the same effect) may be effected without the Charterers' consent, provided always that, in the event of change in the registered or beneficial ownership of the Vessel, notwithstanding such change, this Charter would continue on identical terms (save for logical, consequential or mutually agreed amendments). The Guarantor and the Charterers shall (where applicable) remain jointly and severally liable to the aforesaid new owner of the Vessel for its performance of all obligations pursuant to this Charter after change of the registered and/or beneficial ownership of the Vessel or the Owners from the Owners to such new owner and agree and undertake to enter into any such usual documents as the Owners shall reasonably require to complete or perfect the transfer of the Vessel (with the benefit and burden of this Charter) pursuant to this Clause.

 

50

 

 

(e)

All expenses arising out of assignment or transfer of this Charter as per Clause 63 (Assignment and Transfer) shall be for the Owner's account subject to no Termination Event or Potential Termination Event having occurred or being continuing at the relevant time.

 

 

64

GENERAL APPLICATION OF PROCEEDS

 

 

64.1

Any Net Trading Proceeds, Net Sales Proceeds, Total Loss Proceeds, any proceeds realised by the Owners in connection with the enforcement of the Security Documents (unless otherwise specified in the Security Documents) and any proceeds received by the Owners from any Other Owner (as trustee for the Owners) shall be applied in the following order of application against amounts payable under the Leasing Documents:

 

 

(a)

firstly, in or towards any amounts outstanding under the Leasing Documents other than the Termination Sum (including but not limited to any costs and expenses incurred in the enforcement of the Security Documents, to the extent these are not covered under the Termination Sum);

 

 

(b)

secondly, in or towards satisfaction of the Charterers' obligation to pay the Termination Sum (or such portion of it that then remains unpaid) in any order of application in the amounts comprising the Termination Sum as the Owners may determine; and

 

 

(c)

thirdly, upon satisfaction in full of all amounts payable to the Owners under the Leasing Documents, in payment of any surplus to the Charterers, but subject always to the terms of the General Assignment.

 

 

65

GOVERNING LAW AND ENFORCEMENT

 

 

(a)

This Charter and any non-contractual obligations arising under or in connection with it, shall be governed by and construed in accordance with English law.

 

 

(b)

Any dispute arising out of or in connection with this Charter (including a dispute regarding the existence, validity or termination of this Charter or any non-contractual obligation arising out of or in connection with this Charter) (a "Dispute") shall be referred to and finally resolved by arbitration in London in accordance with the Arbitration Act 1996 or any statutory modification or re-enactment thereof save to the extent necessary to give effect to the provisions of this Clause 65 (Governing Law and Enforcement). The arbitration shall be conducted in accordance with the London Maritime Arbitrators Association ("LMAA") Terms current at the time when the arbitration proceedings are commenced.

 

 

(c)

The reference shall be to three arbitrators. A party wishing to refer a Dispute to arbitration shall appoint its arbitrator and send notice of such appointment in writing to the other party requiring the other party to appoint its own arbitrator within fourteen (14) calendar days of that notice and stating that it will appoint its arbitrator as sole arbitrator unless the other party appoints its own arbitrator and gives notice that it has done so within the fourteen (14) days specified. If the other party does not appoint its own arbitrator and give notice that it has done so within the fourteen (14) days specified, the party referring a Dispute to arbitration may, without the requirement of any further prior notice to the other party, appoint its arbitrator as sole arbitrator and shall advise the other party accordingly. The award of a sole arbitrator shall be binding on both parties as if he had been appointed by agreement. Nothing herein shall prevent the parties agreeing in writing to vary these provisions to provide for the appointment of a sole arbitrator.

 

51

 

 

(d)

Where the reference is to three arbitrators the procedure for making appointments shall be in accordance with the procedure for full arbitration stated above.

 

 

(e)

The language of the arbitration shall be English.

 

 

(f)

In cases where neither the claim nor any counterclaim exceeds the sum of US$100,000 (or such other sum as the Parties may agree) the arbitration shall be conducted in accordance with the LMAA Small Claims Procedure current at the time when the arbitration proceedings are commenced.

 

 

66

DEFINITIONS

 

 

66.1

In this Charter, unless as expressly defined otherwise, the following capitalized terms shall have the meanings ascribed to them below:

 

"Acceptance Certificate" means a certificate substantially in the form set out in Schedule 1 (Acceptance Certificate) to be signed by the Charterers at Delivery.

 

"Account Bank" means Joh. Berenberg, Gossler & Co. KG of Neuer Jungfernstieg 20, 20354 Hamburg, Germany or another designated third party bank acceptable to the Owners, in and/or through which all revenues and operating expenses of the Charterers shall be credited and/or transferred.

 

"Account Security" means the document creating security over the Operating Account made or to be made between the Charterers, the Other Charterers, the Owners and the Other Owners.

 

"Advance Charterhire" has the meaning as defined under Clause 36.2 (Charterhire and Advance Charterhire) of the Charter.

 

"Affiliate" means in relation to any person, a Subsidiary of that person or a Holding Company of that person or any other Subsidiary of that Holding Company.

 

"Annex VI" means Annex VI of the Protocol of 1997 to amend the International Convention for the Prevention of Pollution from Ships 1973 (Marpol), as modified by the Protocol of 1978 relating thereto.

 

"Anti-Money Laundering Laws" means all applicable financial record-keeping and reporting requirements, anti-money laundering statutes (including all applicable rules and regulations thereunder) and all applicable related or similar laws, rules, regulations or guidelines, of all jurisdictions including and without limitation, the United States of America, the European Union, the United Kingdom, the Republic of the Marshall Islands, Germany and the People's Republic of China (including Hong Kong for the avoidance of doubt) and which in each case are (a) issued, administered or enforced by any governmental agency having jurisdiction over any Relevant Person or the Owners; (b) of any jurisdiction in which any Relevant Person or Owner conducts business; or (c) to which any Relevant Person or Owner is subjected or subject to.

 

52

 

"Anti-Terrorism Financing Laws" means all applicable anti-terrorism laws, rules, regulations or guidelines of any jurisdiction, including and not limited to the United States of America or the People's Republic of China which are: (a) issued, administered or enforced by any governmental agency, having jurisdiction over any Relevant Person or the Owners; (b) of any jurisdiction in which any Relevant Person or the Owners conduct business; or (c) to which any Relevant Person or the Owners are subjected or subject to.

 

"Approved Classification Society" means Bureau Veritas, DVN-GL or such other first class international classification society which is a member of the International Association of Classification Societies and approved by the Owners in writing.

 

"Approved Manager" means the Commercial Manager or the Technical Manager.

 

"Approved Valuer" means Simpson Spence Young Shipbrokers, Clarksons Platou, Maersk Broker, Arrow ShipBrokers, Howe Robinson, Braemar ACM Ship Broking, Fearnleys or any other reputable shipbroker nominated by the Charterers and approved by the Owners from time to time.

 

"Approved Sub-charter" means the Trafigura Charter, the Substitute Charter or the New Substitute Charter (if applicable) or any other charter as may be approved by the Owners in writing in accordance with this Charter.

 

"Approved Sub-charterer" means the Trafigura Charterer and any sub-charterer under any other Approved Sub-charter.

 

"Arrangement Fee" has the meaning given to that term in Clause 42.1 (Fees and Expenses).

 

"Breakfunding Costs" means all breakfunding costs and expenses incurred or payable by the Owners pursuant to the relevant funding arrangement entered into by the Owners for the purpose of financing any part of the Purchase Price as a result of the receipt of an amount pursuant to this Charter on a day other than a Payment Date.

 

"Builder" means Hyundai Heavy Industries Co., Ltd., a company organised and existing under the laws of the Republic of Korea, having its registered office at 1000 Bangeojinsunhwan-doro, Dong-Gu, Ulsan, Korea.

 

"Builder's Warranties" means the guarantees and/or warranties provided by the Builder to the Charterers under Article IX of the Contract.

 

"Business Day" means a day on which banks are open for business in the principal business centres of Hong Kong, Shanghai, London, Germany and Greece and, in respect of a day on which a payment is required to be made or other dealing is due to take place under a Leasing Document in Dollars, also a day on which commercial banks are open in New York City.

 

"Business Ethics Law" means any laws, regulations and/or other legally binding requirements or determinations in relation to corruption, fraud, collusion, bid-rigging or anti-trust, human rights violations (including forced labour and human trafficking) which are issued, administered or enforced by the United States, United Kingdom, the European Union or applicable to any Relevant Person or the Owners or to any jurisdiction where activities are performed and which shall include but not be limited to (i) the United Kingdom Bribery Act 2010 and (ii) the United States Foreign Corrupt Practices Act 1977 and all rules and regulations under each of (i) and (ii).

 

53

 

"Buyers" means the Owners acting in their capacity as buyers under the MOA.

 

"Cancelling Date" shall have the same meaning as defined under the MOA.

 

"Commencement Date" means the date on which Delivery takes place

 

"Charter Period" means the period described in Clause 32.1 (Charter Period) unless it is terminated earlier in accordance with the provisions of this Charter.

 

"Charterhire" means each of, as the context may require, all of the instalments of hire payable hereunder on each applicable Payment Date comprising in each case both Fixed Charterhire and Variable Charterhire, as further detailed in Clause 36.5 (Charterhire and Advance Charterhire).

 

"Commercial Manager" means Central Shipping Inc., a corporation incorporated under the laws of Marshall Islands with registration number 98339 or any reputable management company designated by the Charterers and approved by the Owners in writing from time to time as the commercial manager of the Vessel.

 

"Contract" means a shipbuilding contract in respect of the construction and sale of the Vessel dated 20 May 2020 and entered into between the Builder as builder and Central Group Inc. as original buyer, as novated to the Charterers as new buyer pursuant to a novation agreement dated 17 December 2020, as may be further amended or supplemented from time to time, including by addenda no.1 & 2 both dated 20 May 2020.

 

"Contract Price" means the contract price under the Contract, as may be adjusted pursuant to the terms of the Contract.

 

"Delivery" means the delivery of the legal and beneficial ownership in the Vessel from the Owners to the Charterers hereunder.

 

"Dollars" and "$" mean the lawful currency for the time being of the United States of America.

 

"Document of Compliance" shall have the same meaning as ascribed under the ISM Code.

 

"Earnings" means all moneys whatsoever which are now, or later become, payable (actually or contingently) to the Charterers and which arise out of the use or operation of the Vessel, including (but not limited to):

 

 

(a)

except to the extent that they fall within paragraph (b),

 

 

(i)

all freight, hire and passage moneys;

 

 

(ii)

any compensation payable in the event of requisition of the Vessel for hire;

 

 

(iii)

any remuneration for salvage and towage services;

 

 

(iv)

any demurrage and detention moneys;

 

 

(v)

damages for breach (or payments for variation or termination) of any charterparty or other contract for the employment of the Vessel; and

 

 

(vi)

all moneys which are at any time payable under any Insurances in respect of loss of hire (if any); and

 

54

 

 

(b)

if and whenever the Vessel 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 the Vessel.

 

"Environmental Claim" means:

 

 

(a)

any claim by any governmental, judicial or regulatory authority or any other person which arises out of an Environmental Incident or an alleged Environmental Incident or which relates to any Environmental Law; or

 

 

(b)

any claim by any other person which relates to an Environmental Incident,

 

and "claim" means a claim for damages, compensation, fines, penalties or any other payment; an order or direction to take, or not to take, certain action or to desist from or suspend certain action; and any form of enforcement or regulatory action, including the arrest or attachment of any asset.

 

"Environmental Incident" means:

 

 

(a)

any release, emission, spill or discharge of Environmentally Sensitive Material whether within the Vessel or from the Vessel into any other vessel or into or upon the air, water, land or soils (including the seabed) or surface water; or

 

 

(b)

any incident in which Environmentally Sensitive Material is released, emitted, spilled or discharged into or upon the air, water, land or soils (including the seabed) or surface water from a vessel other than the Vessel and which involves a collision between the Vessel and such other vessel or some other incident of navigation or operation, in either case, in connection with which the Vessel is actually or potentially liable to be arrested, attached, detained or injuncted and/or the Vessel and/or any Relevant Person and/or any operator or manager of the Vessel is at fault or allegedly at fault or otherwise liable to any legal or administrative action; or

 

 

(c)

any other incident in which Environmentally Sensitive Material is released, emitted, spilled or discharged into or upon the air, water, land or soils (including the seabed) or surface water otherwise than from the Vessel and in connection with which the Vessel is actually or potentially liable to be arrested and/or where any Relevant Person and/or any operator or manager of the Vessel is at fault or allegedly at fault or otherwise liable to any legal or administrative action.

 

"Environmental Law" means any present or future law relating to pollution or protection of human health or the environment, to conditions in the workplace, to the carriage, generation, handling, storage, use, release or spillage of Environmentally Sensitive Material or to actual or threatened releases of Environmentally Sensitive Material.

 

"Environmentally Sensitive Material" means and includes all contaminants, oil, oil products, toxic substances and any other substance (including any chemical, gas or other hazardous or noxious substance) which is (or is capable of being or becoming) polluting, toxic or hazardous.

 

55

 

"Fee Letter" means the fee letter referred to under Clause 42.1 (Fees and Expenses) for payment of the Arrangement Fee.

 

"First Market Value" means the Market Value of the Vessel as at a date no earlier than thirty (30) days prior to the Commencement Date.

 

"Final Purchase Option Price" means an amount equal to 60 per cent. of the Opening Capital Balance.

 

"Financial Indebtedness" means, in relation to a person (the "debtor"), a liability of the debtor:

 

 

(a)

for principal, interest or any other sum payable in respect of any moneys borrowed or raised by the debtor;

 

 

(b)

under any loan stock, bond, note or other security issued by the debtor;

 

 

(c)

under any acceptance credit, guarantee or letter of credit facility made available to the debtor;

 

 

(d)

under a financial lease, a deferred purchase consideration arrangement (other than deferred payments for assets or services obtained on normal commercial terms in the ordinary course of business) or any other agreement having the commercial effect of a borrowing or raising of money by the debtor;

 

 

(e)

under any foreign exchange transaction, any interest or currency swap or any other kind of derivative transaction entered into by the debtor or, if the agreement under which any such transaction is entered into requires netting of mutual liabilities, the liability of the debtor for the net amount; or

 

 

(f)

under a guarantee, indemnity or similar obligation entered into by the debtor in respect of a liability of another person which would fall within paragraphs (a) to (e) if the references to the debtor referred to the other person.

 

"Financial Instruments" means the applicable loan or facility agreement entered into between the Owners (or their affiliate) and the Owners' Financiers and any mortgage, deed of covenants, assignment in respect of this Charter, assignment in respect of the Guarantees, assignment in respect of Earnings, Insurances and Requisition Compensation, manager's undertaking and subordination (including assignment of manager's interests in the Insurances) or any other financial security instruments granted by the Owners to the Owners' Financiers as security for the financing or refinancing of the Owners' acquisition of the Vessel.

 

"Flag State" means the flag state named in Box 5 of this Charter or any other state or jurisdiction approved in writing by the Owners (whose approval shall not be unreasonably withheld).

 

"Fleet Vessel" means any ship or vessel (including, but not limited to, the Vessel and the Other Vessel) from time to time wholly owned, leased under a capital lease, operating lease with a purchase option at the end of the relevant charter period, vessels owned under a joint venture agreement where the relevant member of the Group owns no less than 50 per cent. of the issued share capital of the jointly owned entity or controlled by the Guarantor (directly or indirectly) excluding, for the avoidance of doubt, any newbuilding vessels not delivered to the relevant member of the Group at the relevant time.

 

56

 

"General Assignment" means the general assignment executed or to be executed between the Charterers and the Owners in respect of the Vessel, pursuant to which the Charterers shall, inter alia, assign its rights under the Builder's Warranties, Insurances, Earnings and Requisition Compensation and any Approved Sub-Charter in respect of the Vessel, in favour of the Owners and in the agreed form agreed on or prior to signing of this Charter.

 

"Group" means the Guarantor and its Subsidiaries from time to time.

 

"Guarantee" means the guarantee entered into by the Guarantor in favour of the Owners securing, amongst others, the Charterers' obligations in connection with the Leasing Documents.

 

"Guarantor" means Top Ships Inc., a corporation incorporated under the laws of Marshall Islands and having its registered address at Trust Company Complex, Ajeltake Road, Ajeltake Islands, Majuro, Marshall Islands MH96960.

 

"Hire Period" means (i) in the case of the first Hire Period, the period commencing on the Commencement Date and ending on the First Payment Date; and (ii) in the case of each subsequent Payment Date, the period commencing on the last day of the preceding Hire Period and ending on the next occurring Payment Date.

 

"Holding Company" means, in relation to a person, any other person in relation to which it is a Subsidiary.

 

"IAPPC" means a valid international air pollution prevention certificate for the Vessel issued pursuant to the MARPOL Protocol.

 

"Index" means the Baltic Tanker Indices applicable to the Vessel.

 

"Insurances" means:

 

 

(a)

all policies and contracts of insurance, including entries of the Vessel in any protection and indemnity or war risks association, which are effected in respect of the Vessel or otherwise in relation to it whether before, on or after the date of this Charter; 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 Charter.

 

"Interest Rate" means:

 

 

(a)

subject to Clause 37.1 (Changes to Interest Rate, Default Interest), for any Hire Period of which the Quotation Day falls before the occurrence of a Screen Rate Replacement Event, LIBOR;

 

 

(b)

for any Hire Period of which the Quotation Day falls on or after the occurrence of a Screen Rate Replacement Event but before a Replacement Benchmark is implemented pursuant to Clause 37.4 (Changes to Interest Rate, Default Interest), in accordance with Clause 37.3 (Changes to Interest Rate, Default Interest) (unless otherwise agreed by the Owners); and

 

 

(c)

for any Hire Period of which the Quotation Day falls on or after a Replacement Benchmark is implemented pursuant to Clause 37.4 (Changes to Interest Rate, Default Interest), the rate of interest determined under the Replacement Benchmark.

 

57

 

"ISM Code" means the International Safety Management Code (including the guidelines on its implementation), adopted by the International Maritime Organisation Assembly as Resolutions A.741 (18) and A.788 (19), as the same may be amended or supplemented from time to time.

 

"ISPS Code" means the International Ship and Port Security Code as adopted by the Conference of Contracting Governments to the Safety of Life at Sea Convention 1974 on 13 December 2002 and incorporated as Chapter XI-2 of the Safety of Life at Sea Convention 1974, as the same may be supplemented or amended 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).

 

"ISSC" means a valid international ship security certificate for the Vessel issued pursuant to the ISPS Code.

 

"Leasing Documents" means this Charter, the MOA and the Security Documents.

 

"LIBOR" means, in relation to a Hire Period:

 

 

(a)

the applicable Screen Rate as of the Specified Time for dollars and for a period equal in length to the Hire Period; or

 

 

(b)

as otherwise determined pursuant to Clause 37 (Changes to Interest Rate, Default Interest),

 

and if, in either case, that rate is less than zero, LIBOR shall be deemed to be zero.

 

"Major Casualty" means any casualty to the Vessel in respect of which the claim or the aggregate of the claims against all insurers, before adjustment for any relevant franchise or deductible, exceeds $5,000,000 or the equivalent in any other currency.

 

"Management Agreement" means:

 

 

(a)

the technical and commercial management agreement made or to be made between the Approved Manager and the Charterers; or

 

 

(b)

such other management agreement subsequently entered into in respect of the Vessel as may be approved by the Owners (such approval not to be unreasonably withheld).

 

"Manager's Undertaking" means, in relation to an Approved Manager, the letter of undertaking from that Approved Manager subordinating the rights of such Approved Manager against the Vessel and the Charterers to the rights of the Owners under the Leasing Documents and the Owners' Financiers (if any) under (amongst others) the relevant Financial Instruments in an agreed form agreed on or prior to signing of this Charter.

 

"Mandatory Sale" has the meaning given to that term in Clause 50.4.

 

"Mandatory Sale Date" has the meaning given to that term in Clause 50.4.

 

58

 

"Mandatory Sale Price" means, in respect of the Mandatory Sale Date, the aggregate of:

 

 

(a)

the Owners' Costs prevailing as at the Mandatory Sale Date;

 

 

(b)

any Variable Charterhire accrued as at the date of payment of the Mandatory Sale Price;

 

 

(c)

(in case of Clause 36.13, Clause 37.3 or Clause 54.5) if the Mandatory Sale Date occurs on or before the third (3rd) anniversary of the Commencement Date, one per cent. (1.00%) of the Owners' Costs as at the relevant date;

 

 

(d)

any Breakfunding Costs;

 

 

(e)

any properly documented legal or other costs incurred by the Owners in connection with the exercise of the Mandatory Sale; and

 

aside from the amounts described under paragraphs (a) to (e) above, any other moneys due and owing under the Leasing Documents at the relevant Mandatory Sale Date.

 

"Margin" means two point six per cent. (2.6%) per annum.

 

"Market Value" means:

 

 

(a)

subject to sub-paragraph (b) below, the arithmetic mean of the valuations shown by two (2) valuation reports prepared:

 

 

(i)

on a date no later than thirty (30) days after the that Market Value Test Date;

 

 

(ii)

with or without physical inspection of that Vessel;

 

 

(iii)

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 such valuation shall be prepared by Approved Valuers one nominated by the Owners and one nominated by the Charterers.

 

 

(b)

if there is a discrepancy of five per cent. (5%) or more between the market valuations shown on the two valuation reports obtained pursuant to the above paragraph (using the lower valuation figure as the denominator), the arithmetic mean of the valuations shown by three (3) valuation reports each prepared on the same terms and conditions as set out under paragraph (b) above (except that the third valuation report additionally required under this sub-paragraph (b) shall be prepared by an Approved Valuer nominated by the Owners).

 

"MARPOL Protocol" means Annex VI (Regulations for the Prevention of Air Pollution from Ships) to the International Convention for the Prevention of Pollution from Ships 1973 (as amended in 1978 and 1997).

 

"Material Adverse Effect" means, in the opinion of the Owners, a material adverse effect on:

 

 

(a)

the business, operations, property, condition (financial or otherwise) or prospects of any Relevant Person or the Guarantor and its Subsidiaries as a whole;

 

59

 

 

(b)

the ability of any Relevant Person to perform its obligations under any Leasing Document to which it is a party; or

 

 

(c)

the validity or enforceability of, or the effectiveness or ranking of any Security Interests granted pursuant to any of the Leasing Documents or the rights or remedies of the Owners under any of the Leasing Documents.

 

"MOA" means the memorandum of agreement dated on or about the date of this Charter and made between the Owners (in their capacity as buyers) and the Charterers (in their capacity as sellers), pursuant to which the Charterers agree to sell and the Owners agree to purchase the Vessel upon the terms and conditions set out therein.

 

"Net Sales Proceeds" has the meaning given to it under Clause 41.10.

 

"Net Trading Proceeds" has the meaning given to it under Clause 41.10.

 

"Obligatory Insurances" means any insurances of the Vessel required to be effected by or on behalf of the Charterers pursuant to Clause 39 (Insurance).

 

"Opening Capital Balance" shall have the same meaning as defined under the MOA.

 

"Operating Account" means an account in the name of the Charterers with an Account Bank.

 

"Option Premium" means an amount of US$ 3,000,000.

 

"Original Financial Statements" means, with respect to the Charterers and the Guarantor, each of their financial statements (in the case of the Guarantor, audited) for the financial year ended 31 December 2020 (and if such statements are not in English, they shall be accompanied by a certified English translation).

 

"Original Jurisdiction" means, in relation to any Relevant Person, the jurisdiction under whose laws such Relevant Person incorporated or resided as at the date of this Charter.

 

"Other Charter" means the bareboat charterparty entered into between the Other Owner and the Other Charterer in respect of either of the Other Vessel.

 

"Other Charterer" means Julius Caesar Inc..

 

"Other Leasing Documents" means the "Leasing Documents" as defined in the Other Charter, each, the "Other Leasing Document".

 

"Other Owner" means Sea 268 Leasing Co., Limited.

 

"Other Vessel" means the very large crude carrier having Builder's hull number 3213 and to be named Julius Caesar.

 

"Owners' Costs" means, on any relevant date, (i) the Opening Capital Balance minus (ii) the aggregate Fixed Charterhire which has been paid by the Charterers and received by the Owners as at such date.

 

"Owners' Financier" means any financier providing financing or refinancing facilities to the Owners or any affiliate of the Owners in respect of the Owners' purchase and/or lease of the Vessel to the Charterers under the terms of the Leasing Documents.

 

60

 

"Owners' Surveyor" means the surveyor appointed by the Owners in accordance with Clause 7.

 

"Party" means a party to this Charter, namely the Owners or the Charterers.

 

"Payment Date" means each of the dates upon which Charterhire is to be paid by the Charterers to the Owners pursuant to Clauses 36.2, 36.5, 36.6 and 36.7 (Charterhire).

 

"Permitted Security Interest" means:

 

 

(a)

any Security Interest created by a Security Document or a Financial Instrument;

 

 

(b)

any lien for unpaid master's and crew's wages in accordance with the ordinary course of operation of the Vessel or in accordance with usual reputable maritime practice;

 

 

(c)

any lien for salvage;

 

 

(d)

any lien for master's disbursements incurred in the ordinary course of trading;

 

 

(e)

any other lien arising by operation of law or otherwise in the ordinary course of the operation, repair or maintenance of the Vessel provided such liens do not secure amounts more than thirty (30) days overdue;

 

 

(f)

any Security Interest created in favour of a plaintiff or defendant in any action of the court or tribunal before whom such action is brought as security for costs and expenses where the Owners are prosecuting or defending such action in good faith by appropriate steps; and

 

 

(g)

Security Interests arising by operation of law in respect of taxes which are not overdue or for payment of taxes which are overdue for payment but which are being contested by the Owners or the Charterers in good faith by appropriate steps and in respect of which adequate reserves have been made,

 

provided that the foregoing have not arisen due to the default or omission of any Relevant Person.

 

"Poseidon Principles" means the financial industry framework for assessing and disclosing the climate alignment of ship finance portfolios published in June 2019 as the same may be amended or replaced to reflect changes in applicable law or regulation or the introduction of or changes to mandatory requirements of the International Maritime Organisation from time to time.

 

"Potential Termination Event" means, an event or circumstance which, with the expiry of a grace period, the giving of any notice, the lapse of time and/or a determination of the Owners and/or the satisfaction of any other condition, would constitute a Termination Event.

 

"Prepositioning Date" shall have the same meaning as defined under the MOA.

 

"Prohibited Countries" means those countries and territories subject to country-wide or territory-wide Sanctions and/or trade embargoes from time to time during the Charter Period, in particular but not limited to pursuant to the U.S.'s Office of Foreign Assets Control of the U.S. Department of Treasury ("OFAC") or the United Nations.

 

61

 

"Prohibited Person" means any person, entity or any other party which is (i) located, domiciled, resident or incorporated in a Prohibited Country, and/or (ii) subject to any sanction administrated by the United Nations, the European Union, the United States and the U.S. Department of Treasury's Office of Foreign Assets Control ("OFAC"), the United Kingdom, Her Majesty's Treasury ("HMT") and the Foreign and Commonwealth Office of the United Kingdom, the Special Administrative Region of Hong Kong, the People's Republic of China and/or (iii) owned or controlled by or affiliated with persons, entities or any other parties as referred to in (i) and (ii).

 

"Purchase Option" means the purchase option referred to in Clause 51.1.

 

"Purchase Option Date" shall have the meaning ascribed thereto in Clause 51.2.

 

"Purchase Option Fee" means:

 

 

(a)

if the Purchase Option is exercised on or after the first (1st) anniversary of the Commencement Date and before the second (2nd) anniversary of the Commencement Date, one point eight per cent. (1.80%) of the Owners' Costs on the applicable Purchase Option Date;

 

 

(b)

if the Purchase Option is exercised on or after the second (2nd) anniversary of the Commencement Date and up to the third (3rd) anniversary, inclusive, of the Commencement Date, one point five per cent. (1.50%) of the Owners' Costs on the applicable Purchase Option Date;

 

 

(c)

if the Purchase Option is exercised after the third (3rd) anniversary of the Commencement Date zero per cent. (0%) of the Owners' Costs as at the applicable Purchase Option Date.

 

"Purchase Option Notice" shall have the meaning ascribed thereto in Clause 51.2.

 

"Purchase Option Price" means, in respect of any Purchase Option Date:

 

 

(a)

if the Purchase Option Date falls on any Payment Date on or after the first (1st) anniversary of the Commencement Date but prior to the last day of the Charter Period, the aggregate of:

 

 

(i)

the Owners' Costs prevailing as at the relevant Purchase Option Date;

 

 

(ii)

any Variable Charterhire accrued but unpaid as at the date of payment of the Purchase Option Price;

 

 

(iii)

any Purchase Option Fee;

 

 

(iv)

any Breakfunding Costs;

 

 

(v)

any documented legal or other costs incurred by the Owners in connection with the exercise of the Purchase Option under Clause 51 (Purchase Option); and

 

 

(vi)

aside from the amounts described under paragraphs (i) to (v) above, any other moneys due and owing under the Leasing Documents at the relevant Purchase Option Date,

 

62

 

 

(b)

if the Purchase Option Date falls on the last day of the Charter Period, the aggregate of:

 

 

(i)

the Final Purchase Option Price;

 

 

(ii)

any Charterhire accrued but unpaid as at the date of payment of the Purchase Option Price;

 

 

(iii)

any documented legal or other costs incurred by the Owners in connection with the exercise of the Purchase Option under Clause 51 (Purchase Option); and

 

 

(iv)

aside from the amounts described under paragraphs (i) to (iii) above, any other moneys due and owing under the Leasing Documents at the relevant Purchase Option Date.

 

"Purchase Price" has the meaning given to it in the MOA.

 

"Quotation Day" means, in relation to any Hire Period, two (2) Business Days before the first day of that Hire Period unless market practice differs in the Relevant Interbank Market in which case the Quotation Day will be determined by the Owners in accordance with market practice in the Relevant Interbank Market.

 

"Relevant Interbank Market" means the London interbank market or in the case of any Replacement Benchmark, any applicable replacement interbank market.

 

"Relevant Person" means each of the Charterers (for the avoidance of doubt, reference to Charterers here include the Charterers acting in their capacities as sellers under the MOA), the Guarantor, any Approved Manager which is an entity within the Group, any Approved Sub-charterer which is an entity within the Group and any other party providing security to the Owners in respect of the Charterers' obligations under this Charter pursuant to a Security Document (except any Approved Manager or sub-charterer which are not entities within the Group).

 

"Relevant Nominating Body" means any applicable central bank, regulator or other supervisory authority or a group of them, or any working group or committee sponsored or chaired by, or constituted at the request of, any of them or the Financial Stability Board.

 

"Replacement Benchmark" means a benchmark rate which is:

 

 

(a)

formally designated, nominated or recommended as the replacement for a Screen Rate by:

 

 

(i)

the administrator of that Screen Rate (provided that the market or economic reality that such benchmark rate measures is the same as that measured by that Screen Rate); or

 

 

(ii)

any Relevant Nominating Body,

 

and if replacements have, at the relevant time, been formally designated, nominated or recommended under both paragraphs, the "Replacement Benchmark" will be the replacement under paragraph (ii) above;

 

63

 

 

(b)

in the opinion of the Owners, generally accepted in the international or any relevant domestic syndicated loan markets as the appropriate successor to that Screen Rate; or

 

 

(c)

in the opinion of the Owners, an appropriate successor to a Screen Rate.

 

"Relevant Jurisdiction" means, in relation to each Relevant Person:

 

 

(a)

its Original Jurisdiction;

 

 

(b)

any jurisdiction where any property owned by it and charged under a Leasing Document is situated;

 

 

(c)

any jurisdiction where it conducts its business; and

 

 

(d)

any jurisdiction whose laws govern the perfection of any of the Leasing Documents entered into by it creating a Security Interest.

 

"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".

 

"Safety Management Certificate" shall have the same meaning as ascribed under the ISM Code.

 

"Sanctions" means any sanctions, embargoes, freezing provisions, prohibitions or other restrictions relating to trading, doing business, investment, exporting, financing or making assets available (or other activities similar to or connected with any of the foregoing):

 

 

(a)

imposed by law or regulation of a Sanctions Authority, to the extent applicable to this transaction; or

 

 

(b)

otherwise imposed by any applicable law or regulation by which any Relevant Person is bound or to which it is subject.

 

"Sanctions Authority" means:

 

 

(a)

the United Nations or its Security Council;

 

 

(b)

the United States;

 

 

(c)

the European Union or the Council of the European Union;

 

 

(d)

the United Kingdom;

 

 

(e)

the People's Republic of China (including for the avoidance of doubt, Hong Kong), provided that this paragraph (e) shall not apply to the Trafigura Charterer when the Vessel is chartered under the Trafigura Charter or the operation or use of the Vessel by the Trafigura Charterer (but not any further sub-lessee of the Vessel) when the Vessel is operated by the Trafigura Charterer (but not any further sub-lessee of the Vessel), in each case unless otherwise specified in Clause 50.3; and

 

 

(f)

the governments and official institutions or agencies of any of paragraphs (a) to (e) above, including the U.S. Department of the Treasury's Office of Foreign Assets Control, the United States Department of State, the U.S. Department of Commerce and the Hong Kong Monetary Authority and Her Majesty's Treasury.

 

64

 

"Sanctions Advisory" means the Sanctions Advisory for the Maritime Industry, Energy and Metals Sectors, and Related Communities issued May 14, 2020 by the US Department of the Treasury, Department of State and Coast Guard, as may be amended or supplemented, and any similar future advisory.

 

"Screen Rate" means the London interbank offered rate administered by ICE Benchmark Administration Limited (or any other person which takes over the administration of that rate) for dollars for the relevant period displayed on page LIBOR01 or LIBOR02 of the Thomson Reuters screen (or any replacement Thomson Reuters page which displays that rate) or on the appropriate page of such other information service which publishes that rate from time to time in place of Thomson Reuters. If such page or service ceases to be available, the Owners may specify another page or service displaying the relevant rate.

 

"Screen Rate Contingency Period" means twenty (20) days.

 

"Screen Rate Replacement Event" means, in relation to a Screen Rate:

 

 

(a)

the methodology, formula or other means of determining that Screen Rate has, in the opinion of the Owners, materially changed;

 

 

(b)

 

 

(i)

 

 

(A)

the administrator of that Screen Rate or its supervisor publicly announces that such administrator is insolvent; or

 

 

(B)

information is published in any order, decree, notice, petition or filing, however described, of or filed with a court, tribunal, exchange, regulatory authority or similar administrative, regulatory or judicial body which reasonably confirms that the administrator of that Screen Rate is insolvent,

 

provided that, in each case, at that time, there is no successor administrator to continue to provide that Screen Rate;

 

 

(ii)

the administrator of that Screen Rate publicly announces that it has ceased or will cease, to provide that Screen Rate permanently or indefinitely and, at that time, there is no successor administrator to continue to provide that Screen Rate;

 

 

(iii)

the supervisor of the administrator of that Screen Rate publicly announces that such Screen Rate has been or will be permanently or indefinitely discontinued; or

 

 

(iv)

the administrator of that Screen Rate or its supervisor announces that that Screen Rate may no longer be used; or

 

65

 

 

(c)

the administrator of that Screen Rate determines that that Screen Rate should be calculated in accordance with its reduced submissions or other contingency or fallback policies or arrangements and either:

 

 

(i)

the circumstance(s) or event(s) leading to such determination are not (in the opinion of the Owners) temporary; or

 

 

(ii)

that Screen Rate is calculated in accordance with any such policy or arrangement for a period no less than the Screen Rate Contingency Period; or

 

 

(d)

in the opinion of the Owners, that Screen Rate is otherwise no longer appropriate for the purposes of calculating interest under this Charter.

 

"Scheduled Delivery Date" has the meaning given to this term in the MOA.

 

"Secured Liabilities" means all present and future obligations and liabilities (whether actual or contingent and whether owed jointly or severally or in any other capacity whatsoever) of a Relevant Person to the Owners under or in connection with the Leasing Documents or any judgment relating to the Leasing 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 Documents" means the Guarantee, the Account Security, the Shares Security, the General Assignment, the Manager's Undertaking and any other document whether or not it creates a Security Interest which is executed as security for the obligations of the Charterers under or in connection with this Charter.

 

"Security Period" means the period commencing on the date of this Charter and ending on the date on which the Owners are satisfied that the Secured Liabilities have been irrevocably and unconditionally paid and discharged in full.

 

"Security Interest" means:

 

 

(a)

a mortgage, charge (whether fixed or floating) or pledge, lien, assignment, hypothecation or any other security interest of any kind or any other agreement or arrangement having the effect of conferring a security interest;

 

 

(b)

the security rights of a plaintiff under an action in rem; or

 

 

(c)

any other right which confers on a creditor or potential creditor a right or privilege to receive the amount actually or contingently due to it ahead of the general unsecured creditors of the debtor concerned; however 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.

 

"Shares Security" means the share charge entered into by the Guarantor (in its capacity as shareholder of the Charterers) creating a Security Interest over all its shares in the Charterers in favour of the Owners.

 

"Specified Time" means 11.00am London time on the Quotation Day.

 

"Statement of Compliance" means a Statement of Compliance related to fuel oil consumption pursuant to regulations 6.6 and 6.7 of Annex VI.

 

"Subsidiary" means a subsidiary within the meaning of section 1159 of the UK Companies Act 2006.

 

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"Substitute Charter" means a time charter with a duration not less than one (1) year, with a daily charterhire not less than US$23,000 and with a charterer approved by the Owners in writing.

 

"Technical Manager" means Central Shipping Inc., a corporation incorporated under the laws of Marshall Islands with registration number 98339, Central Mare Inc., a corporation incorporated under the laws of Marshall Islands with registration number 32656 or any reputable management company designated by the Charterers approved by Trafigura Charterer, while on time charter to Trafigura Charterer, and the Owners, thereafter, in writing from time to time as the technical manager of the Vessel.

 

"Termination Event" means any event described in Clause 49.1 (Termination Events).

 

"Termination Fee" means:

 

 

(a)

if the Termination Sum is payable to the Owners before the second (2nd) anniversary of the Commencement Date, one point eight per cent. (1.80%) of the Owners' Costs as at the relevant date;

 

 

(b)

if the Termination Sum is payable to the Owners on or after the second (2nd) anniversary of the Commencement Date and up to the third (3rd) anniversary, inclusive, of the Commencement Date, one point five per cent. (1.50%) of the Owners' Costs as at the relevant date; and

 

 

(c)

if the Termination Sum is payable after the third (3rd) anniversary of the Commencement Date, one per cent. (1.00%) of the Owners' Costs as at the relevant date,

 

provided always that, if the Charterers' obligation to pay the Termination Sum arises (solely and directly) as a result of any breach under subparagraphs (q)(iv), (y) and (z)(i) of Clause 45.1 (Representations and Warranties), (j) and (o) of Clauses 46.1 (Undertakings) or paragraph (o) of Clause 49.1 (Termination Events) caused by the Approved Sub-charterer's acts or omissions, then the applicable Termination Fee shall be one per cent. (1.00%) of the Owners' Costs as at the relevant date.

 

"Termination Notice" has the meaning given to it under Clause 49.2.

 

"Termination Sum" means, in respect of any date (such date being referred to as the "Relevant Date" for the purposes of this definition only), the aggregate of (without double counting amounts that may be included in more than one sub-paragraph below):

 

 

(a)

the Owners' Costs prevailing as at the Relevant Date;

 

 

(b)

any Variable Charterhire accrued and unpaid as at the date of payment of the Termination Sum;

 

 

(c)

the Termination Fee;

 

 

(d)

any Breakfunding Costs;

 

 

(e)

any and all evidenced and documented direct costs, losses and liabilities incurred by the Owners as a result of the early termination of the leasing under this Charter including but not limited to any legal costs, any agency or broker fees incurred in attempting to re-charter or otherwise dispose of the Vessel;

 

67

 

 

(f)

any and all documented costs, losses and liabilities incurred by the Owners in locating, repossessing, recovering, repositioning, berthing, insuring and maintaining the Vessel and/or in collecting any payments due under this Charter and/or in obtaining the due performance of the obligations of the Charterers under this Charter or the other Leasing Documents; and

 

 

(g)

aside from the amounts described under paragraphs (a) to (f) above, any other moneys due and owing under the Leasing Documents at the Relevant Date including any default interest on amounts under (a) to (f) above,

 

"Termination Notice" has the meaning given in Clause 49.2 (Termination Events).

 

"Total Loss" means:

 

 

(a)

actual, constructive, compromised, agreed or arranged total loss of the Vessel;

 

 

(b)

any expropriation, confiscation, requisition or acquisition of the Vessel, whether for full consideration, a consideration less than its proper value, a nominal consideration or without any consideration, which is effected by any government or official authority or by any person or persons claiming to be or to represent a government or official authority (excluding a requisition for hire for a fixed period not exceeding one (1) year without any right to an extension) unless it is redelivered within twenty-one (21) days to the full control of the Owners or the Charterers; or

 

 

(c)

any arrest, capture, seizure or detention of the Vessel (including any hijacking or theft but excluding any event specified in paragraph (b) of this definition) unless it is redelivered within thirty (30) days to the full control of the Owners or the Charterers.

 

"Total Loss Date" means, in relation to the Total Loss of the Vessel:

 

 

(a)

in the case of an actual loss of the Vessel, the date on which it occurred;

 

 

(b)

in the case of a constructive, compromised, agreed or arranged total loss of the Vessel, the earlier of:

 

 

(i)

the date on which a notice of abandonment is given to the insurers;

 

 

(ii)

the date when the Vessel was last heard of; and

 

 

(iii)

the date of any compromise, arrangement or agreement made by or on behalf of the Charterers with the Vessel's insurers in which the insurers agree to treat the Vessel as a Total Loss; and

 

 

(c)

in the case of any expropriation, confiscation, requisition or acquisition of the Vessel whether for full consideration, a consideration less than its proper value, a nominal consideration or without any consideration, which is effected by any government or official authority or by any person or persons claiming to be or to represent a government or official authority (excluding a requisition for hire for a fixed period not exceeding one (1) year without any right to an extension), on the date on which the expropriation, confiscation, requisition or, as the case may be, the acquisition of the Vessel is completed by delivery of the Vessel to the relevant government or official authority or the person or persons claiming to be or to represent the relevant government or official authority unless it is redelivered within twenty-one (21) days to the full control of the Owners or the Charterers; and

 

68

 

 

(d)

in the case of any arrest, condemnation, capture, seizure or detention of the Vessel (including any hijacking or theft), unless it is redelivered within thirty (30) days to the full control of the Owners or the Charterers, the date falling on the expiration of such days.

 

"Total Loss Payment Date" means, following the occurrence of a Total Loss, the earlier of:

 

 

(a)

the date falling one hundred and twenty (120) days after the Total Loss Date or such later date as the Owners may agree; and

 

 

(b)

the date on which the Owners receive the Total Loss Proceeds.

 

"Total Loss Proceeds" means the proceeds of any policy or contract of insurance or any Requisition Compensation in each case arising in respect of a Total Loss.

 

"Trafigura Charter" means a time charter entered into between the Charterers and the Trafigura Charterer as time charterer dated 17 December 2020 in relation to the Vessel, as amended from time to time.

 

"Trafigura Charterer" means Trafigura Maritime Logistics Pte. Ltd. or any other nominee nominated as the charterers under the Trafigura Charter (which is acceptable to the Owners) in accordance with the terms of the Trafigura Charter.

 

"US" means the United States of America.

 

"US Tax Obligor" means (a) a person which is resident for tax purposes in the United States of America or (b) a person some or all of whose payments under the Leasing Documents are from sources within the United States for United States federal income tax purposes.

 

"Variable Charterhire" shall have the meaning as defined under paragraph (b) of Clause 36.5.

 

"Vessel" means the very large crude carrier having Builder's hull number 3214 and to be named Legio X Equestris being constructed by the Builder under the Contract.

 

 

66.2

Construction

 

Unless a contrary indication appears, in this Charter:

 

"Approved Manager", "Builder", "Charterers", "Guarantor", "Relevant Person", or any other person shall be construed so as to include its successors in title, permitted assigns and permitted transferees to, or of, its rights and/or obligations under the Leasing Documents;

 

"agreed form" means, in relation to a document, such document in a form agreed in writing between the Owners and the Charterers and, if required by the Owners in their sole discretion, the Owners' Financiers;

 

"asset" includes every kind of property, asset, interest or right, including any present, future or contingent right to any revenues or other payment;

 

"company" includes any partnership, joint venture and unincorporated association;

 

69

 

"consent" means:

 

 

(a)

an authorisation, consent, approval, resolution, licence, exemption, filing, registration, notarisation and legalization; and

 

 

(b)

in relation to anything which will be prohibited or restricted by law if a governmental or official authority intervenes or acts in any way within a specified period after lodgment, filing, registration or notification, the expiry of that period without intervention or action.

 

"contingent liability" means a liability which is not certain to arise and/or the amount of which remains unascertained;

 

"continuing" means, in relation to any Termination Event, a Termination Event which has not been waived by the Owners and in relation to any Potential Termination Event, a Potential Termination Event which has not been waived by the Owners or remedied to the satisfaction of the Owners;

 

"control" over a particular company means the power (whether by way of ownership of shares, proxy, contract, agency or otherwise) to:

 

 

(a)

cast, or control the casting of, more than 51 per cent, of the maximum number of votes that might be cast at a general meeting of such company;

 

 

(b)

appoint or remove all, or the majority, of the directors or other equivalent officers of such company; or

 

 

(c)

give directions with respect to the operating and financial policies of such company with which the directors or other equivalent officers of such company are obliged to comply;

 

"document" includes a deed; also a letter, fax or telex;

 

"expense" means any kind of cost, charge or expense (including all legal costs, charges and expenses) and any applicable value added or other tax;

 

"gross negligence" means a form of negligence which is distinct from ordinary negligence, in which the due diligence and care which are generally to be exercised have been disregarded to a particularly high degree, in which the plainest deliberations have not been made and that which should be most obvious to everybody has not been followed.

 

"law" includes any order or decree, any form of delegated legislation, any treaty or international convention and any regulation or resolution of the Council of the European Union, the European Commission, the United Nations or its Security Council;

 

"legal or administrative action" means any legal proceeding or arbitration and any administrative or regulatory action or investigation;

 

"liability" includes every kind of debt or liability (present or future, and including contingent liabilities only in the case of paragraph (g)(ii) of Clause 49.1 (Termination Events), Clause 53 (Indemnities) and the definition of "Financial Indebtedness"), whether incurred as principal or surety or otherwise;

 

70

 

"months" shall be construed in accordance with Clause 66.3 (Meaning of "month");

 

"person" includes any company; any state, political sub-division of a state and local or municipal authority; and any international organisation;

 

"policy", in relation to any insurance, includes a slip, cover note, certificate of entry or other document evidencing the contract of insurance or its terms;

 

"protection and indemnity risks" means the usual risks covered by a protection and indemnity association which is a member of the International Group of Protection And Indemnity Clubs including pollution risks, extended passenger cover and the proportion (if any) of any sums payable to any other person or persons in case of collision which are not recoverable under the hull and machinery policies by reason of the incorporation in them of clause 6 of the International Hull Clauses (1/11/02 or 1/11/03), clause 8 of the Institute Time Clauses (Hulls)(1/10/83) or clause 8 of the Institute Time Clauses (Hulls) (1/11/1995) or the Institute Amended Running Down Clause (1/10/71) or any equivalent provision;

 

"regulation" includes any regulation, rule, official directive, request or guideline whether or not having the force of law of any governmental, intergovernmental or supranational body, agency, department or regulatory, self-regulatory or other authority or organisation; and

 

"tax" includes any present or future tax, duty, impost, levy or charge of any kind which is imposed by any state, any political sub-division of a state or any local or municipal authority (including any such imposed in connection with exchange controls), and any connected penalty, interest or fine.

 

 

66.3

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.

 

 

66.4

In this Charter:

 

 

(a)

references to a Leasing Document or any other document being in the form of a particular appendix or to any document referred to in the recitals include references to that form with any modifications to that form which the Owners and the Charterers approve;

 

 

(b)

references to, or to a provision of, a Leasing Document or any other document are references to it as amended or supplemented, whether before the date of this Charter or otherwise;

 

 

(c)

references to, or to a provision of, any law include any amendment, extension, re-enactment or replacement, whether made before the date of this Charter or otherwise; and

 

 

(d)

words denoting the singular number shall include the plural and vice versa.

 

71

 

 

66.5

Construction of Insurance terms

 

In this Charter:

 

"approved" means, for the purposes of Clause 39 (Insurance), approved in writing by the Owners.

 

"excess risks" means the proportion of claims for general average, salvage and salvage charges not recoverable under the hull and machinery policies in respect of the Vessel in consequence of its insured value being less than the value at which the Vessel is assessed for the purpose of such claims.

 

"obligatory insurances" means all insurances effected, or which the Charterers are obliged to effect, under Clause 39 (Insurance) or any other provision of this Clause or another Leasing Document.

 

"policy" includes a slip, cover note, certificate of entry or other document evidencing the contract of insurance or its terms.

 

"protection and indemnity risks" means the usual risks (including but not limited to freight, demurrage and defence cover) covered by a protection and indemnity association being a member of the International Group of Protection and Indemnity Clubs, including pollution risks and the proportion (if any) of any sums payable to any other person or persons in case of collision which are not recoverable under the hull and machinery policies by reason of the incorporation in them of clause 6 of the International Hull Clauses (1/11/02) (1/11/03), clause 8 of the Institute Time Clauses (Hulls) (1/10/83) (1/11/95) or the Institute Amended Running Down Clause (1/10/71) or any equivalent provision.

 

"war risks" includes the risk of mines and all risks excluded by clause 29 of the International Hull Clauses (1/11/02 or 1/11/03), clause 24 of the Institute Time Clauses (Hulls) (1/11/95) or clause 23 of the Institute Time Clauses (Hulls)(1/10/83).

 

 

66.6

Headings

 

In interpreting a Leasing Document or any provision of a Leasing Document, all clauses, sub-clauses and other headings in that and any other Leasing Document shall be entirely disregarded.

 

 

 

 

72

 

SCHEDULE 1

ACCEPTANCE CERTIFICATE

 

LEGIO X INC. (the "Charterers") hereby acknowledges that at [●] hours on [●], there was delivered to, and accepted by, the Charterers the Vessel known as m.v. "Legio X Equestris", registered in the name of SEA 269 LEASING CO. LIMITED (the "Owners") under the flag of the Marshall Islands with IMO number 9912256 under a bareboat charter dated [●] (the "Charter") and made between the Owners and the Charterers and that Delivery (as defined in the Charter) thereupon took place and that, accordingly, the Vessel is and will be subject to all the terms and conditions contained in the Charter.

 

The Charterers warrant that the representations and warranties made by them in Clause 45 (Representation and Warranties) of the Charter remain correct and that no Termination Event (as defined in the Charter) has occurred and is continuing at the date of this Acceptance Certificate.

 

 

 

 

_______________________________

Name:

Title:

for and on behalf of

LEGIO X INC.

Dated:

 

 

 

 

 

 

73

 

SCHEDULE 2

 

PART A

 

The following are the documents referred to in Clause 34.2(e)(i):

 

 

1

Corporate Authority

 

 

1.1

A copy of the constitutional documents of each Relevant Person.

 

 

1.2

If required, a copy of the resolutions of the board of directors (or equivalent) of each Relevant Person:

 

 

(a)

approving the terms of, and the transactions contemplated by, the Leasing Documents to which it is a party and resolving that it execute the Leasing Documents to which it is a party;

 

 

(b)

authorizing a specified person or persons to execute the Leasing Documents to which it is a party on its behalf; and

 

 

(c)

authorising a specified person or persons, on its behalf, to sign and/or dispatch all documents and notices to be signed and/or dispatched by it under, or in connection with, the Leasing Documents to which it is a party.

 

 

1.3

If required, an original of the power of attorney of any party to a Leasing Document authorising a specified person or persons to execute the Leasing Documents to which it is a party.

 

 

1.4

If required, a specimen of the signature of each person authorized by the resolution referred to in paragraph 1.2 above.

 

 

1.5

If required, a copy of the resolutions signed by all the holder(s) of the issued shares of any Relevant Person, approving the terms of, and the transactions contemplated by such Leasing Document.

 

 

1.6

A certificate of an officer or authorized signatory of each Relevant Person certifying that each copy document relating to it specified in this Part A of Schedule 2 is correct, complete and in full force and effect as at a date no earlier than the date of this Agreement.

 

 

2

Documents and other security

 

 

2.1

A duly executed original of each Leasing Document (except the General Assignment and the Manager's Undertaking) and of each document to be delivered under each of them.

 

 

2.2

Agreed forms of the General Assignment and the Manager's Undertaking and of each document to be delivered under each of them.

 

 

2.3

Evidence that the Charterers' Operating Account have been opened and maintained with the Account Bank.

 

 

3

Valuation of Vessel

 

Valuation(s) of the Vessel, addressed to the Owners and dated not earlier than thirty (30) days before the Commencement Date indicating the First Market Value.

 

74

 

 

4

Legal opinion

 

 

4.1

An agreed form legal opinion by English legal advisers to the Owners on such matters on the laws of England in relation to the applicable documents listed in paragraphs 2.1 and 2.2 of Part A of this Schedule, in form and substance acceptable to the Owners.

 

 

4.2

Agreed forms of legal opinions by lawyers appointed by the Owners on such matters relating to the applicable documents listed in paragraphs 2.1 and 2.2 of Part A this Schedule, concerning the laws of the Republic of the Marshall Islands, Germany and such other relevant jurisdictions as the Owners may reasonably require, in form and substance acceptable to the Owners.

 

 

5

Vessel Insurances

 

 

5.1

Evidence that the Vessel is or will be on Delivery insured in the manner required under Clause 39 (Insurance).

 

 

5.2

Agreed form of letters of undertaking and certificates of entry (as the case may be) relating to insurances as set out in Clause 39 (Insurance) from the relevant insurer, insurance broker, protection and indemnity association or war risks association (as the case may be).

 

 

5.3

An insurance report by an insurance advisor appointed by the Owners (but at the cost of the Charterers) in an agreed form acceptable to the Owners.

 

 

6

Contract

 

 

6.1

A copy of the executed Contract, certified as true by an authorised signatory of the Charterers.

 

 

6.2

A copy, certified as true by a director of the Charterers, of:

 

 

(a)

the notification as referred to under Article VII paragraph 1 of the Contract from the Builder to the Charterers (in their capacity as buyers under the Contract) indicating the Scheduled Delivery Date (as defined under the MOA); and

 

 

(b)

the telefax or email from the Builder to the Charterers as referred to under Article X paragraph 3 of the Contract requesting payment of the Contract Delivery Instalment (as defined under the MOA).

 

 

6.3

A copy, certified as true by a director of the Charterers, of a letter issued by the Builder stating that all amounts due and payable to the Builder under the Contract (other than the Contract Delivery Instalment) has been paid and that no other disputes or pending claims exist under the Contract.

 

 

6.4

If applicable, documentary evidence that the Charterers (in their capacity as sellers) have complied with the requirements set out under Clause 22(a)(i) of the MOA.

 

 

7

Others

 

 

7.1

Evidence that the Arrangement Fee and all other fees, costs and expenses then due from the Charterers to the Owners under the Leasing Documents have been paid and received by the Owners.

 

 

7.2

A copy of the Management Agreement and any amendments thereto.

 

75

 

 

7.3

A copy of the Trafigura Charter and any amendments thereto.

 

 

7.4

Copies of the Document of Compliance of the Approved Technical Manager.

 

 

7.5

Copies of the Original Financial Statements.

 

 

7.6

Such evidence relating to the Relevant Person as the Owners may reasonably require for their (or their financiers) to be able to satisfy each of their "know your customer" or similar identification procedures in relation to the Leasing Documents.

 

 

7.7

A copy of any other consents, approvals, authorization or other document, opinion or assurance which the Owners consider to be reasonably desirable in connection with the entry into and performance of the transactions contemplated by any of the Leasing Documents or for the validity and enforceability of such documents.

 

 

7.8

Such other documents as the Owners may require by giving notice to the Charterers.

 

 

 

 

 

 

 

 

 

 

 

 

 

76

 

 

PART B

 

The following are the documents referred to in Clause 34.2(e)(ii):

 

 

1

Corporate Authorisations/Confirmation

 

 

1.1

A certificate of an authorized signatory of each Relevant Person certifying that each copy document provided under paragraph 1 of Part A of Schedule 2 of the MOA remains correct, complete and in full force and effect as on the Commencement Date.

 

 

1.2

A certificate of an authorized signatory of the Charterers certifying that there is no Potential Termination Event or Termination Event has occurred and is continuing as of the Commencement Date.

 

 

2

Security Documents

 

 

2.1

Duly executed and dated copies of the General Assignment and each Manager's Undertaking and of each document to be delivered under it and evidence of their delivery within the timing prescribed under it.

 

 

2.2

Documentary evidence that the Security Interests intended to be created by each of the Security Documents have been duly perfected under applicable law or will be perfected under applicable law within the prescribed period contained in such Security Documents.

 

 

3

Vessel certificates

 

 

3.1

A copy of the Vessel's class certificate evidencing that the Vessel maintains its classification as set out in Article I of the Contract with the Approved Classification Society free of all recommendations and conditions.

 

 

3.2

Where applicable, a copy of any other certificate mandatorily required by the International Maritime Organisation or the Approved Classification Society.

 

 

3.3

Where applicable, a copy of the tonnage certificate of the Vessel.

 

 

3.4

Where applicable, safety construction, safety equipment, safety radio and load line certificates in respect of the Vessel.

 

 

3.5

Any other document required to be delivered by the Builder to the Buyers under the terms of the Contract (including the documents to be delivered by the Builder as set out under Article VII paragraph 3 of the Contract).

 

 

3.6

Documentary evidence that the Vessel has been delivered by the Builder to the Charterers pursuant to the terms of the Contract, where such documents shall include, in particular:

 

 

(a)

the original notarized and if required, legalised copies of the bill of sale and builder's certificate duly executed by the Builder (and where executed by an attorney of the Builder, together with such original notarized Builder's power of attorney); and

 

 

(b)

the original protocol of delivery and acceptance duly executed by the Builder and the Charterers.

 

77

 

 

4

Delivery and title registration of the Vessel

 

 

4.1

Documentary evidence that the Vessel:

 

 

(a)

will simultaneously upon Delivery definitively and permanently registered in the name of the Owners under the flag of the Flag State; and

 

 

(b)

will simultaneously upon Delivery in the absolute and unencumbered ownership of the Owners.

 

 

4.2

The commercial invoice of the Vessel.

 

 

5

Legal opinions

 

 

5.1

A signed legal opinion of Watson Farley & Williams, legal advisers to the Owners on such matters on the laws of England as may be satisfactory to the Owners.

 

 

5.2

Signed legal opinions by lawyers appointed by the Owners on such matters on the laws of the Marshall Islands and the Netherlands and any other jurisdictions as may be satisfactory to the Owners.

 

 

6

Contract Price

 

 

6.1

A copy, certified as true by a director of the Charterers, of:

 

 

(a)

the notification as referred to under Article VII paragraph 1‐ of the Contract from the Builder to the Charterers (in their capacity as buyers under the Contract) indicating the Scheduled Delivery Date (as defined under the MOA); and

 

 

(b)

the telefax or email from the Builder to the Charterers as referred to under Article X paragraph 2(e) of the Contract requesting payment of the Contract Delivery Instalment (as defined under the MOA).

 

 

6.2

To the extent not already provided pursuant to the other Parts of this Schedule, a letter issued by the Builder stating that all amounts due and payable to the Builder under the Contract (other than the Contract Delivery Instalment) has been paid and that no other disputes or pending claims exist under the Contract.

 

 

7

Others

 

The Owners being satisfied that all conditions precedent or documents or evidence specified in Schedule 1 to the MOA have been satisfied or provided in form and substance satisfactory to the Owners.

 

78

 

 

PART C

 

The following are the documents referred to in Clause 34.8:

 

 

1

Security Interests

 

Not later than five (5) Business Days after the Commencement Date, documentary evidence that the Security Interests intended to be created by each of the Security Documents have been duly perfected under applicable law (as applicable).

 

 

2

Legal opinions

 

Not later than three (3) Business Days after the Commencement Date, issued signed copies of the legal opinions referred to in paragraph 5 of Part B of Schedule 2 of this Charter.

 

 

3

Insurances

 

 

3.1

Not later than five (5) Business Days after the Commencement Date, receipt of copies of the executed letters of undertaking and certificates of entry (as the case may be) relating to insurances as set out in Clause 39 (Insurance) acknowledged by the relevant insurer, insurance broker, protection and indemnity association or war risks association (as the case may be), each in the agreed form under paragraph 5.2 of Part A of Schedule 2 of this Charter.

 

 

3.2

Not later than ten (10) Business Days after the Commencement Date, the signed insurance report in the form agreed under paragraph 5 of Part A of Schedule 2 of this Charter.

 

 

4

Others

 

 

4.1

No later than six (6) months after the Commencement Date, evidence that the Vessel has been permanently registered with the Flag State.

 

 

4.2

No later than three (3) Business Days after the Commencement Date, copies of the Vessel's Safety Management Certificate (together with any other details of the applicable Safety Management System which the Owners require) and of any other documents required under the ISM Code and the ISPS Code (including without limitation an ISSC and IAPPC).

 

 

 

79

 

EXECUTION PAGE

 

OWNERS

 

SIGNED by Lin Chung Fai Simon    

)

   

duly authorized Attorney-in-fact  

)

/s/ Lin Chung Fai Simon

 

for and on behalf of

)

   

SEA 269 LEASING CO. LIMITED  

)

Attorney-in-fact

 
       

in the presence of: 

)

   
       

Witness' signature:

)

/s/ Wong Ho Ching

 
       

Witness' name: 

)

Wong Ho Ching

 
       

Witness' address:

)

Suites 4610-4619, Jardine House,

 
   

1 Connaught Place, Hong Kong

 

 

CHARTERERS

 

SIGNED by Alexandros Tsirikos    

)

   

duly authorized Attorney-in-fact  

)

/s/ Alexandros Tsirikos

 

for and on behalf of

)

   

LEGIO X INC.  

)

Attorney-in-fact

 
       

in the presence of: 

)

   
       

Witness' signature:

)

/s/ Dimitra Karkaletsi

 
       

Witness' name: 

)

Dimitra Karkaletsi

 
       

Witness' address:

)

274, Leof. Salaminas – Salaminia

 
   

Greece

 

 

 

 

 

 
80

Exhibit 4.30

 
exh429_image1.jpg
 
 
 

Addendum to memorandum of agreement
regarding the ECO LOS ANGELES

 

This addendum (the “Addendum) is entered into on 29 December 2021 between:

 

(1)

SANTA CATALINA INC. of Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands, MH 96960 (the "Sellers"); and

 

(2)

Norden Asset Management A/S of Strandvejen 52, 2900 Hellerup, Denmark (the “Buyers).

 

(together referred to as the “Parties or in the singular a “Party).

 

1.

Background

1.1

The Sellers and the Buyers have on 24 November 2021 entered into a memorandum of agreement (as may be amended by any addenda from time to time) (the “MOA) regarding the sale of the vessel “ECO LOS ANGELES” with IMO no. 9877559 (the “Vessel).

 

1.2

The Vessel is currently bareboat chartered by the Sellers (as bareboat charterers) from Great Catalina Limited (the “Existing Owner) under a bareboat charter dated 30 September 2019 (as may be amended by any addenda from time to time) (the “Bareboat Charter).

 

1.3

The Bareboat Charter includes a purchase option allowing the Sellers to purchase the Vessel from the Existing Owner.

 

1.4

The Parties wish to change the payment mechanism agreed in the MOA to enable the Buyers to pay the BBC Purchase Price directly to the Existing Owner on behalf of the Sellers.

 

NOW IT IS HEREBY AGREED as follows:

 

2.

Definitions

2.1

Unless a contrary indication appears, a term defined in the MOA has the same mean‐ing in this Addendum.

 

3.

Purchase Price

3.1

Clause 1 of the MOA shall be amended as follows:

   
  “The Purchase Price is USD 36,500,000 (Thirty Six Million Five Hundred Thousand United States Dollars) consisting of USD 27,274,800 (the "BBC Purchase Price") plus USD 9,225.299 (the Balance").
   
  The BBC Purchase Price may change depending on the specific date of delivery of the Vessel. In case o f any reduction to the BBC Purchase Price compare to the above this reduction will be credited to the Balance.
   
  The, final BBC Purchase Price must be confirmed by the Sellers to the Buyer as soon as possible, but in any event no later than five (5) Banking Days prior to the expected date of delivery of the Vessel."

 

 

exh429_image1.jpg

 

4.

Payment

4.1

Clause 3 of the MOA shall be amended as follows:

   
  “On Delivery of the Vessel but not later than three (3) Banking Days after the date that Notice of Readiness has been given in accordance with Clause 5 (Time and place of delivery and notices):

 

 

(i)

The Deposit shall be released to the Sellers in accordance with the Comple‐tion Services Agreement and this Agreement; and

     
 

(ii)

The BBC Purchase Price shall he paid in full free of bank charges to the Existing Owners' Account in accordance with the Completion Services Agreement: and

     
  (Hi) The Balance of-the-Purchase-Price and all other sums payable on delivery by the Buyers to the Sellers under this Agreement shall be paid in full free of bank charges to the Sellers’ Account in accordance with the Completion Services Agreement.
     
  The Buyers shall lodge the Balance and all other sums payable on delivery in the Account of the Deposit Holder within three (3) Banking Days prior to the expected date of delivery of the Vessel. The release of the Deposit, the BBC Purchase Price, and Balance of the Purchase Price by the Deposit Holder shall be in accordance with the written release instructions executed jointly (in the case of the Deposit) and by the Buyers only (in the case of the BBC Purchase Price and the Balance Purchase-Price) in either case in an acceptable format to the Deposit Holder.
   
  The Deposit Holder to Provide in advance of the closing meeting drafts of the release instructions for Sellers and Buyers’ review (if required).”

 

5.

Guaranteed transfer

5.1

Upon payment of the BBC Purchase Price by the Buyers to the Existing Owners, the Sellers and Top Ships Inc (the “Guarantor”) hereby guarantee the successful transfer of the Vessel to the Buyers.

 

5.2

The Sellers and the Guarantor shall be liable to the Buyers for any and all costs and losses the Buyers may have as a result of the Vessel not being successfully transferred to the Buyers no later than on the day of the Buyers’ transfer of the BBC Purchase Price to the Existing Owners.

   
6 Miscellaneous
6.1 The provisions of the MOA shall, save as amended by this Addendum, be read and construed as one document with the Addendum and will, except as amended and supplemented by this Addendum, be deemed to continue in full force and effect.
   
6.2 This Addendum may be signed in any number of counterparts, all of which taken to¬gether shall constitute one and the same instrument.
   
6.3 This addendum shall become effective immediately upon full execution by the parties to it.

 

 

[Remainder of page intentionally left blank - signatures on following page]

 

 
exh429_image1.jpg

 

 

IN WITNESS WHEREOF, the Sellers, the Buyers, and the Guarantor have caused this Addendum to be duly executed by their authorized officers.

 

 

For and on behalf of SANTA CATALINA INC.

 

 

/s/ Alexandros Tsirikos

 

Name: Alexandros Tsirikos

Title: Director

 

 

 

For and on behalf of TOP SHIPS INC.

 

/s/ Alexandros Tsirikos

 

Name: Alexandros Tsirikos

Title: Director

 

 

 

For and on behalf of Norden Asset Management A/S

 

/s/ Henrik Lykkegaard Madsen

 

Name: Henrik Lykkegaard Madsen

Title: Chief Executive Officer and Director

 

Exhibit 4.31

exh429_image1.jpg

 

Addendum to memorandum of agreement
regarding the ECO CITY OF ANGELS

 

This addendum (the “Addendum) is entered into on 29 December 2021 between:

 

 

(1)

SANTA MONICA MARINE INC. of Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands, MH 96960 (the’’Sellers); and

 

 

(2)

Norden Asset Management A/S of Strandvejen 52, 2900 Hellerup, Denmark (the “Buyers).

 

(together referred to as the “Parties or in the singular a “Party).

 

1

Background

1.1

The Sellers and the Buyers have on 24 November 2021 entered into a memorandum of agreement (as may be amended by any addenda from time to time) (the “MOA) regarding the sale of the vessel “ECO CITY OF ANGELS” with IMO no. 9877561 (the “Vessel).

 

1.2

The Vessel is currently bareboat chartered by the Sellers (as bareboat charterers) from Great Monica Limited (the “Existing Owner) under a bareboat charter dated 30 September 2019 (as may be amended by any addenda from time to time) (the “Bareboat Charter).

 

1.3

The Bareboat Charter includes a purchase option allowing the Sellers to purchase the Vessel from the Existing Owner.

 

1.4

The Parties wish to change the payment mechanism agreed in the MOA to enable the Buyers to pay the BBC Purchase Price directly to the Existing Owner on behalf of the Sellers.

 

NOW IT IS HEREBY AGREED as follows:

 

2

Definitions

2.1

Unless a contrary indication appears, a term defined in the MOA has the same meaning in this Addendum.

 

3

Purchase Price

3.1

Clause 1 of the MOA shall be amended as  follows:

   
  “The Purchase Price is USD 36,500,000 (Thirty Six Million Five hundred Thousand United States Dollars) consisting of USD 27.274.800 (the "BBC Purchase Price") plus USD 9,225,299 (the, Balance").
   
  The BBC Purchase Price may change depending on the specific date of delivery of the Vessel. In case of any reduction to the BBC Purchase Price compare to the above this reduction will be credited to the Balance.
   
  The final BBC Purchase Price must be confirmed by the Sellers to the Buyer as soon as possible, but in any event no later than five (5) Banking Days prior to the expected date of delivery of the Vessel."

 

 

exh429_image1.jpg

 

4 Payment

4.1

Clause 3 of the MOA shall be amended as follows:

   
  “On Delivery of the Vessel but not later than three (3) Banking Days after the date that Notice of Readiness has been given in accordance with Clause 5 (Time and place of delivery and notices):

 

 

(i)

The Deposit shall be released to the Sellers in accordance with the Comple‐tion Services Agreement and this Agreement; and

     
 

(ii)

The BBC Purchase Trice shall be paid in full free, of bank charges to the Existing Owners Account in accordance with the Completion Services Agreement: and

     
 

(iii)

The Balance of the Purchase Price and all other sums payable on delivery by the Buyers to the Sellers under this Agreement shall be paid in full free of bank charges to the Sellers' Account in accordance with the Completion Services Agreement.

     
  The Buyers shall lodge the Balance and all other sums payable on delivery in the Account of the Deposit Holder within three (3) Banking Days prior to the ex‐pected date of delivery of the Vessel. The release of the Deposit, the. BBC Purchase Price, and Balance of the Purchase Price by the Deposit Holder shall be in accordance with the written release instructions executed jointly (in the case of the Deposit) and by the Buyers only (in the case of the BBC Purchase Price and the Balance Purchase Price) in either case in an acceptable format to the Deposit Holder.
   
  The Deposit Holder to provide in advance of the closing meeting drafts of the release instructions for Sellers and Buyers' review (if required)."

 

5

Guaranteed transfer

5.1

Upon payment of the BBC Purchase Price by the Buyers to the Existing Owners, the Sellers and Top Ships Inc (the "Guarantor") hereby guarantee the successful transfer of the Vessel to the Buyers.

 

5.2

The Sellers and the Guarantor shall be liable to the Buyers for any and all costs and losses the Buyers may have as a result of the Vessel not being successfully transferred to the Buyers no later than on the day of the Buyers' transfer of the BBC Purchase Price to the Existing Owners.

 

6

Miscellaneous

6.1

The provisions of the MOA shall, save as amended by this Addendum, be read and construed as one document with the Addendum and will, except as amended and supplemented by this Addendum, be deemed to continue in full force and effect.

 

6.2

This Addendum may be signed in any number of counterparts, all of which taken together shall constitute one and the same instrument.

   

 

 

 

exh429_image1.jpg
 
6.3 This Addendum shall become effective immediately upon full execution by the parties to it.

 

[Remainder of page intentionally left blank - signatures on following page]

 

 

 

 

 

 

 

 

 

 

 

exh429_image1.jpg

 

IN WITNESS WHEREOF, the Sellers, the Buyers, and the Guarantor have caused this Ad‐dendum to be duly executed by their authorized officers.

 

 

 

For and on behalf of SANTA MONICA MARINE INC.

 

/s/ Alexandros Tsirikos

 

Name: Alexandros Tsirikos

Title: Director

 

 

 

For and on behalf of TOP SHIPS INC.

 

/s/ Alexandros Tsirikos

 

Name: Alexandros Tsirikos

Title: Director

 

 

 

For and on behalf of Norden Asset Management A/S

 

/s/ Henrik Lykkegaard Madsen

 

Name: Henrik Lykkegaard Madsen

Title: Chief Executive Officer and Director

 

 
 

Exhibit 4.32

 

Date: January 5, 2022

 

Parties

 

I. "The Borrower": Top Ships Inc., of the Marshall Islands, Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960, duly represented by Mr. Alexandros Tsirikos, CFO/Director.
   
II. "The Lender": Central Mare Inc., of the Marshall Islands, Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960, duly represented by Dimosthenis Eleftheriadis, Director.

 

Interpretation

"Banking" or "Business day" means any day on which the banks generally and foreign exchange markets in Greece are open for business.

 

"Default" or "Event of Default" means any of the events specified in Section 13 whether or not any requirement for the giving of notice or the lapse of time or both or the happening of any other condition has been satisfied.

 

"the Loan" means the principal amount of USD 20,000,000 advanced in one or multiple tranches by June 30, 2022.

 

"Repayment Date" means the date on which the principal amount of the Loan is to be repaid in accordance with the provisions of Section 2 of this Agreement.

 

1. Purpose of Loan
  The Loan is to be used for working capital purposes of the Borrower.
   
2. Repayment
2.1 The Borrower undertakes to repay the principal amount of the Loan via one or multiple installments at his discretion until December 31, 2022.

 

Page 1 of 9

 

3. Mandatory Prepayment
3.1. In case of a successful offering the borrower is obliged to prepay the loan in full.
   
3.2. In case of change of control of the Borrower, the Borrower is obliged to immediately prepay the loan as per clause 2 above. For purposes of this agreement, “change of control” shall mean:

 

 

(i)

acquisition by any individual, entity or group of beneficial ownership of thirty percent (30%) or more either (A) the then-outstanding shares of common stock of Top Ships or (B) the combined voting power of the then-outstanding voting securities of Top Ships entitled to vote generally in the election of directors;

 

 

(ii)

consummation of a reorganization, merger or consolidation of Top Ships or the sale or other disposition of all or substantially all of the assets of Top Ships; or

 

 

(iii)

approval by the shareholders of Top Ships of a complete liquidation or dissolution of Top Ships.

 

4. Interest Rate - Default Interest
4.1  The rate of interest applicable to the Loan shall be eight per cent (12%) per annum.
   
4.2   In the event of failure by the Borrower to settle the Loan on the appointed date, the Borrower shall pay interest on such amount on demand from the date of such default up to the date of actual payment (as well after as before judgment) at an all-inclusive rate of 15% (the “Default Rate”). Any interest not paid when due shall be compounded every three months.
   
5.  Payments
5.1  All payments to be made by the Borrower shall be made at the free disposal of the Lender in freely transferable USD, by remitting funds to the account of the Lender or at such account as the Lender may have specified for such purpose.
   
5.2 All payments by the Borrower under this Agreement (whether in respect of principal, interest, or otherwise) shall be made in full, without any set-off, counterclaim or retention and free and clear of and without any deduction or withholding in respect of duties, taxes, charges, levies, or fees of any nature.

 

Page 2 of 9

 

   
5.3 In the event that the Borrower or the Lender is required by law to make any such deduction or withholding from any payment then the Borrower shall forthwith pay to the Lender such additional amounts as will result in the immediate receipt by the Lender of the full amount which would have been received hereunder had no deduction or withholding been made. The obligations set forth in this Section shall survive the termination of this Agreement and the repayment of the Loan.
   
6. Representations and warranties of the Borrower
  The Borrower represents and warrants that:
6.1 this Agreement constitutes a legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms. All consents, licenses, approvals, registrations, authorizations or declarations in the jurisdiction to which the Borrower is subject required to enable it to borrow hereunder and lawfully to enter into and perform and discharge its duties and liabilities under this Agreement have been obtained or made and are in full force and effect;
   
6.2  the signing and delivery of this Agreement and performance of any of the transactions contemplated in it will not contravene or constitute a default under any provision contained in any agreement, instrument, law, judgment, order, license, permit or consent by which the Borrower or any of its assets is bound or affected;
   
6.3  no condition, event or act has occurred and is continuing or would result from the making of the Loan which constitutes an Event of Default or a Default;
   
6.4 the Borrower is not in default under any agreement to which it is a party, or by which it may be bound and no litigation, arbitration or administrative proceedings are presently current or pending, or to the knowledge of the Borrower, threatened, which in any such case would have an adverse effect upon the Borrower to perform and observe the obligations and provisions binding upon him under this Agreement. Events of default described the Borrower’s public filings in relation to other financiers, are specifically excluded from this representation as the Lender is already aware of these circumstances.

 

Page 3 of 9

 

7.  Default
  On the occurrence of any of the events specified below the Lender may, by giving written notice cancel this Agreement and/or demand immediate repayment of the whole outstanding balance of the Loan and all accrued interest, and all costs and expenses and any other moneys due hereunder and
   
  the Lender may exercise its rights under any security which it holds:
  (a) If the Borrower fails to fulfill payment obligations arising hereunder and such failure continues to be unremedied for five days;
     
  (b) If the Borrower fails to observe or perform any of its obligations under this Agreement and such default continues to be unremedied for five days;
     
  (c) Any representation, warranty or statement which is made or deemed to have been made by the Borrower in this Agreement or in any certificate, statement, or notice provided under or in connection with this Agreement proves to be incorrect in any respect which the Lender deems material;
     
  (d)  If the Borrower fails to fulfill its obligations in respect of any other indebtedness for borrowed money to the extent that such indebtedness becomes repayable or capable of being declared repayable prior to its stated maturity;
     
  (e) If an order is made or resolution passed for the liquidation or the winding up of the Borrower other than for the purposes of amalgamation or reconstruction agreed to in writing by the Lender or if the Borrower makes or seeks to make any composition or arrangement with its creditors;
     
  (f)  If an encumbrancer takes possession of, or trustee, administrator, receiver or other similar officer is appointed in respect of all or any part of the business or assets of the Borrower or distress or any form of execution is levied or enforced upon any property of the Borrower;
     

 

Page 4 of 9

 

  (g) If the Borrower ceases or threatens to cease to carry on its business or substantially the whole of its business;
     
  (h)  If the Borrower becomes or is declared insolvent or bankrupt.
   
8. Fees
8.1 The Borrower shall pay to the Lender an arrangement fee of 2.00% on the Loan amount. Payment of the arrangement fee shall be made together with the drawdown of the Loan. The arrangement fee shall bear interest at the rate provided herein from the date of execution of this Agreement.
   
8.2 The Borrower shall pay all legal fees and expenses incurred in connection with the preparation, negotiation and conclusion of this Agreement.
   
8.3 The Borrower shall pay to the Lender a commitment fee of 1.00% on the undrawn part of the Loan. Payment of the commitment fee shall be made together with the repayment or prepayment of the Loan.
   
9. Stamp Duties
  The Borrower shall pay any and all stamp, registration and similar taxes and charges of whatsoever nature which may be payable or determined to be payable on, or in connection with, the execution, registration, notarization, performance or enforcement of this Agreement. The Borrower shall indemnify the Lender against any and all liabilities with respect to or resulting from delay or omission on the part of the Borrower to pay any such taxes.
   
10. No Waiver
  Time shall be of the essence of this Agreement but no failure to exercise nor any delay in exercising on the part of the Lender any right, power, privilege or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power, privilege or remedy prevent any further or other exercise thereof or the exercise of any other right, power, privilege or remedy. The rights and remedies herein provided are cumulative and not exclusive of any rights or remedies provided by law.
   

 

Page 5 of 9

 

11. Severance
  If at any time any one or more provisions hereof is or becomes invalid, illegal or unenforceable in any respect under any law, the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby.
   
12. Notices
  Every notice, request, demand or other communication under this Agreement shall:
  a) be in writing delivered personally or by fax or e-mail;
   
  b) be deemed to have been received, in the case of fax or e-mail, at the time of dispatch as per transmission report (provided that if the date of dispatch is not a business day it shall be deemed to have been received at the opening of business on the next such business day), and in the case of a letter when delivered or served personally; and
   
  c) be sent:
    (1) if to the Borrower
      Top Ships Inc.
      1, Vas. Sofias & Meg. Alexandrou Str.
      151 24 Maroussi
      Greece
      Tel. +30 210 8128180
      Fax +30 210 6141275
       
       
       
    (2) if to the Lender
      Central Mare Inc.
      11 Kanari Street
      106 71 Athens, Greece
      Tel. +30 210 8128320
      Fax +30 210 6141272
       
  or to such other person, address, fax number or e-mail as is notified by a Party (as the case may be) to the other Party to this Agreement.
   

 

Page 6 of 9

 

13. Assignment
13.1 Without prior written approval of the Lender (which the Lender may refuse at his absolute discretion) the Borrower shall not assign or transfer any rights and obligations under this Agreement.
   
13.2 The Lender may at any time at its discretion without the prior consent of the Borrower assign or transfer in whole or in part to a third party any rights, accessory rights and claims already existing or in future arising under this Agreement.
   
14. Confidentiality
14.1 Each of the parties hereto agree and undertake to keep confidential any documentation and any confidential information concerning the business, affairs, etc. which comes into its possession during this Agreement and not to use any such documentation, information for any purpose other than for which it was provided, unless required by US regulatory authorities or the NASDAQ stock market.
   
14.2 The Borrower acknowledges and accepts that the Lender may be required by law or that it may be appropriate for the Lender to disclose information and deliver documentation relating to the Borrower and the transactions and matters in relation to this Agreement to governmental or regulatory agencies and authorities.
   
14.3 The Borrower acknowledges and accepts that in case of occurrence of any of the Events of Default the Lender may disclose information and deliver documentation relating to the Borrower and the transactions and matters in relation to this Agreement to third parties (including in particular any technical advisors, accountants, any legal advisors) to the extend that this is necessary for the enforcement or the contemplation of enforcement of the Lender's rights or for any other purpose for which in the opinion of the Lender, such disclosure should be useful or appropriate for the interests of the Lender or otherwise and the Borrower expressly authorises any such disclosure and delivery.
   

 

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14.4 The Borrower acknowledges and accepts that the Lender may be prohibited or it may be inappropriate for the Lender to disclose information to the Borrower by reason of law or duties of confidentiality owed or to be owed to other persons.
   
15. Law and Jurisdiction
15.1 This Agreement shall be governed by and construed in accordance with English Law.
   
15.2 For the exclusive benefit of the Lender, the Borrower hereby irrevocably submits to the non-exclusive jurisdiction of the High Court of Justice in respect of any disputes which may arise out or in connection with this Agreement. The foregoing shall not limit the right of the Lender to start proceedings in any other country.
   
15.3 If it is decided by the Lender that any such proceedings should be commenced in any other country, then any objections as to the jurisdiction or any claim as to the inconvenience of the forum is hereby waived by the Borrower and it is agreed and undertaken by the Borrower to instruct lawyers in that country to accept service of legal process and not to contest the validity of such proceedings as far as the jurisdiction of the court or courts involved is concerned.

 

 

 

        

 

 

Page 8 of 9

 

 

IN WITNESS WHEREOF the parties have caused this Agreement to be executed as of the date first above written.

 

SIGNED for and on behalf of  )  
TOP SHIPS INC.   ) /s/ Alexandros Tsirikos
By Alexandros Tsirikos  )  
CFO/Director )  
Witness    
Signature:    
Full name:    
Address:    
Occupation:    
     
     
     
SIGNED for and on behalf of  )  
CENTRAL MARE INC.  )  
By Dimosthenis Eleftheriadis  ) /s/ Dimosthenis Eleftheriadis
Director  )  
Witness    
Signature:    
Full name:    
Address:    
Occupation:    

 

 

 

 

Page 9 of 9

Exhibit 4.34

 

 

Classified as PRIVATE AND CONFIDENTIAL

Code word for this Charter Party

"SHELLTIME 4"

Issued December 1984 amended December 2003

 

ORIGINAL

 

Time Charter Party

LONDON 14th February 2022

 

IT IS THIS DAY AGREED between Malibu Warrior Inc.

of Marshall Islands (hereinafter referred to as "Owners"), being owners of the

good motor/stream* vessel called Eco Beverly Hills (ex. Hull S875) IMO No. 9794068

(hereinafter referred to as "the Vessel") described as per Clause 1 hereof and Trafigura Maritime Logistics Pte Ltd.

of Singapore (hereinafter referred to as "Charterers"):

 

Description
and
Condition
of Vessel
 

1

As the date of delivery of the vessel under this charter and throughout the charter period:

  (a) she shall be classed by a Classification Society which is a member of the International Association of Classification Societies;
  (b) she shall be in every way fit to carry crude petroleum and/or its products THREE (3) grades of cargo always within vessel's natural segregation, Crude Petroleum Products, Crude condensate, Fuel oil(s) and/Dirty Petroleum Products, excluding any heated cargo, Carbon Black Feedstock, Low Sulphur Waxy Residues, Bitumen, Orimulsion, Asphalt and or Asphalt residue and always consistent with vessel's certification and design capabilities.
    Charts have the right to load five (5) grades of Crude Oil cargoes, always in compliance with Ship's Loadicator and Trim and Stability Booklet, provided that two (2) grades are to be compatible and Owner will not be held responsible for any kind of contamination between such compatible grades. Charterers responsibility to confirm cargo grades compatibility.

 

Charterers shall have the option to load and carry CPP (including but not limited to gasoil/ulsd /gasoline/jet) without option to trade the vessel in CPP. Always in compliance with the attached vessel's "Tank Coating Resistance List" provided by Paint Manufacturer and Shipyard (Vessel's PSPC COT Certified Coating System is BANNOH 1500 (QD)).

In such case, if any fresh water rinsing/ tank cleaning/ preparation for such cargoes, including any time (if needed) will be for charterers account.

 

 

(c)

she shall be tight, staunch, strong, in good order and condition, and in every way fit for the service, with her machinery, boilers, hull and other equipment (including but not limited to hull stress calculator, radar, computers and computer systems) in a good and efficient state:

 

(d)

her tanks, valves and pipelines shall be oil-tight;

 

(e)

she shall be in every way fitted for burning, in accordance with the grades specified in Clause 29 hereof:

 

(i)

at sea, fuel oil for main propulsion and fuel oil/marine gasoil diesel oil* for auxiliaries;

 

(ii)

in port, fuel oil/marine gasoil diesel oil* for auxiliaries;

 

(f)

she shall comply with the regulations in force so as to enable her to pass through the Suez and Panama Canals by day and night without delay;

 

(g)

she shall have on board all certificates, documents and equipment required from time to time by any applicable law to enable her to perform the charter service without delay;

 

(h)

she shall comply with the description in the OCIMF Harmonised Vessel Particulars Questionnaire appended hereto as Appendix A, provided however that if there is any conflict between the provisions of this questionnaire and any other provision, including this Clause 1, of this charter such other provisions shall govern;

  (i) her ownership structure, flag, registry, classification society and management company shall not be changed without Charterers prior consent which not to be unreasonably withheld:

 

Safety
Management
 

(j)

Owners will operate:

    (i) a safety management system certified to comply with the International Safety Management Code (ISM Code) for the Safe operation of Ships and for Pollution Prevention;
    (ii) a documented safe working procedures system (including procedures for the identification and mitigation of risks);
    (iii) a documented environmental management system;
    (iv) documented accident/incident reporting system complaint with flag state requirements;

 

 

 

Classified as PRIVATE AND CONFIDENTIAL

Code word for this Charter Party

"SHELLTIME 4"

Issued December 1984 amended December 2003

 

ORIGINAL

 

Charterers may at any time request an inspection of the relevant compliance documentation and/or safety management certificate and upon receipt of such a request the Owners shall forthwith provide the same.

 

 

(k)

Owners shall submit to Charterers a monthly written report detailing all accidents/incidents and environmental reporting requirements, in accordance with the Shell Safety and Environmental Monthly Reporting Template appended hereto as Appendix B;

 

(l)

Owners shall maintain Health Safety Environmental (HSE) records sufficient to demonstrate compliance with the requirements of their HSE system and of this charter. Charterers reserve the right to confirm compliance with HSE requirements by audit of Owners.

 

(m)

Owners will arrange at their expense for a SIRE inspection to be carried out at intervals of maximum minimum every 150 120 days six.

    months plus or minus thirty days provided vessel's trading patterns permit and SIRE Inspectors are available and SIRE regulations permit. Owners ensure that the vessel is always to have 6 months valid sire. SUCH SIRE INSPECTION ALWAYS TO BE A PHYSICAL DISCHARGE SIRE INSPECTION PROVIDED VESSEL TRADING PATTERN PERMITS THIS. OWNERS ALWAYS TO CONSULT CHARTERERS AND OBTAIN CHARTERERS CONSENT PRIOR TO DOING ANY OTHER SIRE INSPECTION THAN A PHYSICAL DISCHARGE INSPECTION, Owners will grant access of q88.com upon delivery of vessel to Charterers.
     
    VESSEL 2 3 (ECO BEVERLY HILLS AND ECO BELL AIR) BOTH VESSELS TO BE DELIVERED WITH VALID PHYSICAL DISCHARGE SIRE INSPECTIONS MAXIMUM 4 MONTHS OLD ON DELIVERY.

 

Shipboard
Personnel
and their
Duties
  2

 

 
  (a) At the date of delivery of the vessel under this charter and throughout the charter period:
    (i) she shall have a full and efficient complement of master, officers and crew for a vessel of her tonnage, who shall in any event be not less than the number required by the laws of the flag state and who shall be trained to operate the vessel and her equipment competently and safely;
    (ii) all shipboard personnel shall hold valid certificates of competence in accordance within the requirements of the law of the flag state;
    (iii) all shipboard personnel shall be trained in accordance with the relevant provisions of the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers, 1995 or any additions, modifications or subsequent versions thereof;
    (iv) there shall be on board sufficient personnel with a good working knowledge of the English language to enable cargo operations at loading and discharging places to be carried out efficiently and safely and to enable communications between the vessel and those loading the vessel or accepting discharge there from to be carried out quickly and efficiently.
    (v) the terms of employment of the vessels staff and crew will always remain acceptable to The International Transport Workers Federation and the vessel will at all times carry a Blue Card;
    (vi) the nationality of the vessels officers given in the OCIMF Vessel Particulars. Questionnaire referred to in Clause 1 (h) will not change without Charterers prior agreement.
  (b) Owners guarantee that throughout the charter service the master shall with the vessel's officers and crew, unless otherwise ordered by Charterers;
    (i) prosecute all voyages with the utmost despatch;
      (ii) render all customary assistance; and
      (iii) load and discharge cargo as rapidly as possible when required by Charterers or their agents to do so, by night or by day, but always in accordance with the laws of the place of loading or discharging (as the case may be) and in each case in accordance with any applicable laws of the flag state.
         

 

 

 

Classified as PRIVATE AND CONFIDENTIAL

Code word for this Charter Party

"SHELLTIME 4"

Issued December 1984 amended December 2003

 

ORIGINAL

 

Duty to

Maintain
  3  
 

(a)

Throughout the charter service Owners shall, whenever the passage of time, wear and tear or any event (whether or not coming within Clause 27 hereof) requires steps to be taken to maintain or restore the conditions stipulated in Clauses 1 and 2(a) exercise due diligence so to maintain or restore the vessel,

  (b) If at any time whilst the vessel is on hire under this charter the vessel fails to comply with the requirements of Clauses 1.2(a) or 10 then hire shall be reduced to the extent necessary to indemnify Charterers for such failure. If and to the extent that such failure affects the time taken by the vessel to perform any services under this charter, hire shall be reduced by an amount equal to the value, calculated at the rate of hire, of the time so lost.
    Any reduction of hire under this sub-Clause (b) shall be without prejudice to any other remedy available to Charterers, but where such reduction of hire is in respect of time lost, such time shall be excluded from any calculation under Clause 24.
  (c) If Owners are in breach of their obligation under Clause 3(a). Charterers may so notify Owners in writing and if, after the expiry of 30 days following the receipt by Owners of any such notice, Owners have failed to demonstrate to Charterers' reasonable satisfaction the exercise of due diligence as required in Clause 3(a), the vessel shall be off-hire, and no further hire payments shall be due, until Owners have so demonstrated that they are exercising such due diligence.
  (d) Owners shall advise Charterers immediately, in writing, should the vessel fail an inspection by, but not limited to, a government and/or port state authority, and /or terminal and/or major charter or similar tonnage, Owners shall simultaneously advise Charterers of their proposed course of action to remedy the defects which have caused the failure of such inspection.
    (e) If, in Charterers reasonably held view:
      (i) failure of an inspection, or,
      (ii) any serious finding of an inspection,
        referred to in Clause 3 (d) prevents normal commercial operations then Charterers have the option to place the vessel off-hire 30 days after from the date and time that the vessel fails such inspection, or becomes commercially inoperable, until the date and time that the vessel passes a re-inspection provided vessel's trading patterns permit a re-inspection and providing SIRE regulation permit by the same organization, or becomes commercially operable, which shall be in a position no less favourable to Charterers than at which she went off-hire. Charterers to make best endeavours to load one single voyage to enable Owners to carry out inspection concurrent with discharge.
    (f)   Furthermore, at any time while the vessel is off-hire for a period of more than 15 continuous days under this Clause 3 (with the exception of Clause 3 (d) and (e) (ii), Charterers have the option to terminate this charter by giving notice in writing with effect from the date on which such notice of termination is received by Owners or from any later date stated in such notice. This sub-Clause (f) is without prejudice to any rights of Charterers or obligations of Owners under this Charter or otherwise (including without limitation Charterers' right under Clause 21 hereof).

 

Period

Trading

Limits and

Safe Places

 

4

 

  (a) Owners agree to let and Charterers agree to hire the vessel for a period of minimum 20 months to maximum 26 months plus or minus days in Charterers option on final period. Optional period of balance period until 1st December 2025 with Charterers option +15/-30 days from this date. Optional period to be declared latest 60 days before 26 months expires, commencing from the time and date of delivery of the vessel, for the purpose of carrying all lawful merchandise (subject always to Clause 28) including in particular; As per vessels COF, Class and coating resistance table.
    In any part of the world, as Charterers shall direct, subject to the limits of the current British Institute Warranties and any subsequent amendments thereof.

 

 

 

Classified as PRIVATE AND CONFIDENTIAL

Code word for this Charter Party

"SHELLTIME 4"

Issued December 1984 amended December 2003

 

ORIGINAL

 

Trading area: trading worldwide, always within INL and any subsequent amendments thereof, excluding Alaska, Burma (Myanmar), Chinese river ports, Cuba, Eritrea, Iran, Israel, Lake Maracaibo, Orinoco River, inner ports and berths in Nigeria (except Port Harcourt, bonny and Lagos ports permitted provided vessel uses and anchors in the sea; else Gulf of Guinea clause incorporated in to this carter shall apply), North Korea, Somalia, South Sudan, Sudan or Syria, Turkish occupied Cyprus, war and warlike areas, any trade with or which involves Cuba or with any person (whether an individual or entity) who are incorporated and/or based and/or managed and/or operated from Cuba or acting on behalf of a person based in Cuba; or beneficially or legally owned (in whole or in part) or controlled by or acting on behalf of the Cuban government; or beneficially or legally owned or controlled by any person incorporated and/or based and/or managed and/or operated from Cuba. The Charter warrants that they shall not utilise the vessel or permit the vessel to be utilised in any trade: (a) which is unlawful AND/OR VIOLATES ANY US/US/EU SANCTIONS OR UN/US/EU BOYCOTT; or (b) with or which involves Iran, South Sudan, Sudan, Syria, North Korea or any other country over which the united states, or the European union, or the united nations, or other national supranational or international body/organization, maintain or impose an embargo, boycott, economic sanctions (including comprehensive country wide economic sanctions) or other restrictions, whenever enacted and in force; or (e) which involves the carriage of any cargo which originates in or is exported from or to such countries and/or any trade with or for any person (whether an individual or entity, including but not limited to all sub-charterers, shippers, receivers, other cargo interests) who are (i) incorporated and/or based and/or managed and/or operated from any such countries or otherwise acting on behalf of a person (whether an individual or entity) who is based within such country; or (ii) beneficially or legally owned (in whole or in part) or controlled by or acting on behalf of the government of such countries; or (iii) beneficially or legally owned or controlled by any person (whether an individual or entity) incorporated and/or based and/or managed and/or operated from such countries.

 

If sanctions are lifted against Venezuela or Iran, owners will consider calling but cannot confirm it nor guarantee it. The parties to discuss openly. Owners confirm no premiums will be asked to add Venezuela and/or Iran if/when sanctions are lifted provided P&I / Class / Flag allows to re-instate these countries in the trading range.

 

Notwithstanding the foregoing, but subject to Clause 35, Charterers may not order the vessel to ice-bound waters. Vessel shall not be required to force ice, nor follow ice-breaker(s). Vessel to trade always within INL and shall not be required to enter any Ice bond port, or any port where lights or lightships have been or are about to be withdrawn by reason of ice, or where there is risk in the ordinary cause of things the vessel will not be able on account of ice to safely enter the port or to depart after having completed loading or discharging or to any part of the world outside such limits provided that Owners consent thereto (such consent not to be unreasonably withheld) and that Charterers pay for any insurance premium required by the Vessel's underwriters as a consequence of such order.

 

 

(b)

Any time during which the vessel is off-hire under this charter may be added to the charter period in Charterers option up to the total amount of time spent off-hire. In such cases the rate of hire will be that prevailing at the time the vessel would, but for the provisions of this Clause, have been redelivered. Charterer's to declare whether or not they will exercise this option a minimum of 1 month day prior to the intended redelivery date or anniversary date of the charter, whichever occurs first.

 

(c)

Charterers shall use due diligence to ensure that the vessel is only employed between and at safe places (which expression when used in this charter shall include parts, berths, wharves, docks, anchorages, submarine lines, alongside vessels or lighters, and other locations including locations at sea) where she can safely lie always afloat. Notwithstanding anything contained in this or any other clause of this charter. Charterers do not warrant the safety of any place to which they order the vessel and shall be under no liability in respect thereof except for loss or damage caused by their failure to exercise due diligence as aforesaid. Subject as above, the vessel shall be loaded and discharged at any places as Charterers may direct, provided that Charterers shall exercise due diligence to ensure that any ship-to-ship transfer operations shall conform to standards not less than those set out in the latest published edition of the ICS/OCIMF Ship to Ship Transfer Guide.

 

(d)

Unless otherwise agreed, the vessel shall be delivered by Owners dropping outward pilot at dlosp one safe port Uke/med/usg/caribs/ag-korea range at Owners' option and redelivered to Owners dropping outward pilot at WW excl Australia/NZ if redelivered after firm period. IF OPTIONAL PERIOD DECLARED THE REDEL TO BE USAC/USG/UKC/MED/AG/SING-JAPAN RANGE as Charterers' option always within trading limits.

 

(e)

The vessel will deliver with virgin tanks (VSL. NO 2+3 WILL DELIVER WITH COTs free of last DPP cargo) AND FREE OF SLOPS and will redeliver with last 3 cargoes. DPP either Fuel oil or Crude oil, or Crude condensate of CPP UNL UND 2.5NPA in all tanks including slops, free of slops and washings generated by Charterers' trading of the vessel.

 

 

 

 

Classified as PRIVATE AND CONFIDENTIAL

Code word for this Charter Party

"SHELLTIME 4"

Issued December 1984 amended December 2003

 

ORIGINAL

 

 

(f)

Owners are required to give Charterers 30/20/15 approximate and then definite 10/7/5/3/2/1 days prior notice of delivery including port and last 3 cargoes. Charterers are required to give Owners 30/20/15 approximate days notice of re-delivery and then 10/7/5/3/2/1 definite days prior notice of redelivery including port and last 3 cargoes.

 

Laydays/

Cancelling

 

5

The vessel shall not be delivered to Charterers before 14th April 2022.

 

And Charterers shall have the option of cancelling this carter if the vessel is not ready and as their disposal on or before 30th June 2022.

 

Owners to
Provide
  6 Owners undertake to provide and to pay for all provisions, wages (including but not limited to all overtime payments), and shipping and discharging fees and all other expenses of the master, officers and crew; also, except as provided in Clauses 4 and 34 hereof, for all insurance on the vessel, for all deck, cabin and engine-room stores, and for water except fresh water used for cleaning of tanks between cargoes and/or for Charterers purpose. Charterers to provide fresh water if vessel doing coastal voyage or if vessel unable to generate fresh water due to Charterers trading patterns; for all drydocking overhaul, maintenance and
    repairs to the vessel; and for all fumigation expenses and de-rat certificates. Owners' obligations under this Clause 6 extend to all liabilities for customs or import duties arising at any time during the performance of this charter in relation to the personal effects of the master, officers and crew, and in relation to the stores, provisions and other matters aforesaid which Owners are to provide and pay for and Owners shall refund to Charterers any sums Charterers or their agents may have paid or have been compelled to pay in respect of any such liability. Any amounts allowable in general average for wages and provisions and stores shall be credited to Charterers in so far as such amounts are in respect of a Period when the vessel is co-hire.

 

Charterers to
Provide
  7  
 

(a)

Charterers shall provide and pay for all fuel (except fuel used for domestic services), towage and pilotage (whether compulsory or not. For the safety of navigation adequately qualified Deep Sea Pilots in the North Sea, English Channel, Skagerrak (IMO Resolution A. 1080(28)) and Malacca strait in laden condition (IMO SC/Cire.198) to be employed and be paid by the charterers even when not compulsory) and shall pay agency fees, port charges, commissions, expenses of loading and unloading cargoes, canal dues, tank cleaning chemicals, fresh water for tank cleaning (also, in case of prolonged anchor stay were vessel won't be able to produce FW by using the exhaust gas boiler/economiser, then fuel used for production of FW to be on charts account or charts to provide FW on their expense) cargo and cargo tank clean slop disposals, any and all taxes including withholding taxes and/or dues on hire payments, sub-hires, freight, sub-freights, vessel and cargoes however arising including from Charterers' employment of the vessel and all charges other than those payable by Owners in

      accordance with Clause 6 hereof, provided that all charges for the said items shall be for Owners' account when such items are consumed, employed or incurred for Owners' purposes or while the vessel is off-hire (unless such items reasonably relate to any service given or distance made good and taken into account under Clause 21 or 22); and provided further that any fuel used in connection with a general average sacrifice or expenditure shall be paid for by Owners.
    (b) In respect of bunkers consumed for Owners purposes these will be charged on each occasion by Charterers on a first-in-first-out basis valued on the prices actually paid by Charterers.
    (c) If the trading limits of this charter include ports in the United States of America and/or its protectorates then Charterers shall reimburse Owners for port specific charges relating to additional premiums charged by providers of oil pollution cover, when incurred by the vessel calling at ports in the United States of America and/or its protectorates in accordance with Charterers orders.

 

 

 

Classified as PRIVATE AND CONFIDENTIAL

Code word for this Charter Party

"SHELLTIME 4"

Issued December 1984 amended December 2003

 

ORIGINAL

 

Rate of
Hire
 

8

Subject as herein provided, Charterers shall pay for the use and hire of the vessel at the rate of United States Dollars GROSS 24,000 for the firm period and USD 24,000 for the optional period, from time and date of her delivery (local time UTC) to Charterers until the time and date of redelivery (local Time UTC) to Owners. Commission: 0,7% to Arrow Tankers payable by Owners. No addcom, 1.25% to CENTRAL Ship Chartering Inc. payable by owners/ Bare Boat Charterers.

 

Payment of
Hire
 

9

Subject to Clause 3 (c) and 3 (e), payment of hire shall be made in immediately available founds to:

    Account:
    TBA in United States Dollars per calendar month in advance on the last business day of the previous month free of bank charges, less: Except for 1st payment which is to be remitted within two (2) business days of receiving vessel's delivery certificate from Owners, including bankers ROB, and to cover time from delivery until end of month in progress."
    Charterers shall pay the hire and all other amounts payable to the Owner hereunder without deduction for any or all present and future taxes, levies, imposts, duties, charges, fees or withholdings of any nature levies by the authority of the domicile of the Charterers. However, provided such cause is proven attributable to Charterers.
      (i) any hire paid which Charterers reasonably estimate to relate to off-hire periods, and
      (ii) any amounts disbursed on Owners' behalf, any advances and commission thereon, and charges which are for Owners' account pursuant to any provision hereof, and
      (iii) any amount due or reasonably estimated to become due to Charterers under Clause 3 (c) or 24 hereof,
        any such adjustments to be made at the due date for the next monthly payment after the facts have been ascertained. Charterers shall not be responsible for any delay or error by Owners' bank in crediting Owners' account provided that Charterers have made proper and timely payment.
        In default of such proper and timely payment:
    (a) Owners shall notify Charterers of such default and Charterers shall within seven working days of such notice pay to Owners the amount due including interest, failing which Owners may withdraw the vessel from the service of Charterers without prejudice to any other rights Owners may have under this charter or otherwise; and
    (b) Interest on any amount due but not paid on the due date shall accrue from the date after that date up to and including the day when payment is made, at a rate per annum which shall be 1% above the U.S. Prime Interest Rate as published by the Chase Manhattan Bank in New York at 12.00 New York time on the due date, or, if no such interest rate is published on that day, the interest rate published on the next proceeding day on which such a rate was published, computed on the basis of a 360 day year of twelve 30-day months, compounded semi-annually.

 

Space
Available to
Charterers
 

10

The whole reach, burthen and decks of the vessel and any passenger accommodation (including Owner's suite) shall be at Charterers' disposal, reserving only proper and sufficient space for the vessel's master, officer, crew, tackle, apparel, furniture provisions and stores, provided that the weight of stores on board shall not, unless specially agreed, 400 metric tonnes at any time during the charter period.

 

Segregated
Ballast
 

11

In connection with the Council of the European Union Regulation on the Implementation of IMO resolution a747(18) Owners will ensure that the following entry is made on the International Tonnage Certification (1969) under the section headed "remarks";

    "The segregated ballast tanks comply with the Regulation 13 of Annex 1 of the International Convention for the prevention of pollution from ships, 1973 as modified by the Protocol of relating thereto, and the total tonnage of such tanks exclusively used for the carriage of segregated water ballast is *TBA*.  The reduced gross tonnage which should be used for the calculation of tonnage based fees is *TBA*".

 

 

 

 

Classified as PRIVATE AND CONFIDENTIAL

Code word for this Charter Party

"SHELLTIME 4"

Issued December 1984 amended December 2003

 

ORIGINAL

 

Instructions
And Logs
 

12

Charterers shall from time to time give the master all requisite instructions and sailing directions, and the master shall keep a full and correct log of the voyage or voyages, which Charterers or their agents may inspect as required.  The master shall when required furnish Charterers or their agents with a true copy of such log and with properly completed loading and discharging port sheets and voyage reports for each voyage and other returns as Charterers may require.  Charterers shall be entitled to take copies at Owners' expense of any such documents which are not provided by the master.

 

Bills of Lading   13    
 

(a)

The master (although appointed by Owners) shall be under the orders and direction of Charterers as regards employment of the vessel, agency and other arrangements, and shall sign Bills of Lading as Charterers or their agents may direct (subject always to Clause 35(a) and 40) without prejudice to this charter, Charterers hereby indemnify Owners against all consequences or liabilities that may arise;

    (i) From signing Bills of Lading in accordance with the directions of Charterers, or their agents, to the extent that the terms of such Bills of Lading fail to conform to the requirements of this charter, or (except as provided in Clause 13(b) from the master otherwise complying with Charterers or their agents order.
      (ii) from any irregularities in papers supplied by Charterers or their agents.
    (b) (b) If Charterers by telex, facsimile or other form of written communication that specifically refers to this Clause request Owners to discharge a quantity of cargo either without Bills of Lading and/or at a discharge place other than that named in a Bill of Lading and/or that is different from the Bill of Lading quantity, then Owner shall discharge such cargo in accordance with Charterer's instructions in consideration  of receiving the following indemnity which shall be deemed to be given by an authorised officer of the Charterers on each and every such occasion and which is limited in SEE ADDITIONAL CLAUSES 5,6 & 7 value to 200% of the CIF value of the cargo carried on board ;
      (i) Charterers shall indemnify Owners and Owners' servants and agents in respect of any liability loss or damage of whatsoever nature (including legal costs as between attorney or solicitor and client and associated expenses) which Owners may sustain by reason of delivering such cargo in accordance with Charterers' request.
      (ii) If any proceeding is commenced against Owners or any of Owners' servants or agent in connection with the vessel having delivered cargo in accordance with such request, Charterers shall provide Owners or any of Owners' servants or agents from time to time on demand with sufficient funds to defend the said proceedings.
      (iii) If the vessel or any other vessel or property belonging to Owners should eb arrested or detained, or if the arrest or detention thereof should be threatened, by reason of discharge in accordance with Charterers instruction as aforesaid, Charterers shall provide on demand such bail or other security as may be required to prevent such arrest or detention or to secure the release of such vessel or property and Charterers shall indemnify Owners in respect of any loss; damage or expenses caused by such arrest or detention whether or not same may be justified.
      (iv) Charterers shall, if called upon to do so at any time while such cargo is in Charterers' possession, custody or control, redeliver the same to Owners.
      (v) As soon as all original Bills of Lading for the above cargo which name as discharge port the place where delivery actually occurred shall have arrived and/or come into Charterers' possession, Charterers shall produce and deliver the same to Owners whereupon Charterers' liability hereunder shall cease.
        Provided however, if Charterers have not received all such original Bills of Lading by 24:00 hours on the day 36 calendar months after the date of discharge, that this indemnity shall terminate at that time unless before that time Charterers have received notice that:
        (1) Some person is making a claim in connection with Owners delivering Owners delivery cargo pursuant to Charterers request or,
        (2) Legal proceedings have been commended against Owners and/or carriers and/or Charterers and/or any of their respective servants or agents and/or the vessel for the same reason.
        (3) When Charterers have received such a notice, then this indemnity shall continue in force until such claim or legal proceedings are settled. Termination of this indemnity shall not prejudice any legal rights a party may have outside this indemnity,

 

 

 

 

Classified as PRIVATE AND CONFIDENTIAL

Code word for this Charter Party

"SHELLTIME 4"

Issued December 1984 amended December 2003

 

ORIGINAL

 

 

(vi)

Owner shall promptly notify Charterers if any person (other than a person to whom Charterers ordered cargo to be delivered claims to be entitled to such cargo and/or if the vessel or any other property belonging to Owners is arrested by reason of any such discharge or cargo,

 

(vii)

This indemnity shall be governed and construed in accordance with the English law and each and any dispute arising out of or in connection with this indemnity shall be the subject to the jurisdiction of the High Court of Justice of England.

 

(c)

Owners warrant that the Master will comply with orders to carry and discharge against one or more Bills of Lading from a set of original negotiable Bills of Lading should Charterers so require. See Additional Clause 14  Letter of Indemnity to be Given for Carrying one original of each set of bills of Lading on board.

 

Conduct of
Vessel's
Personnel
 

14

If Charterers complain of the conduct of the master or any of the officers or crew, Owners shall immediately investigate the complaint.  If the complaint proves to be well founded, Owners shall, without delay, make a change in the appointments and Owners shall in any even communicate the result of their investigations to Charterers as soon as possible.

 

Bunkers at
Delivery
and
Redelivery
 

15

Charterers shall accept and pay for all bunkers on board at the time of delivery, and Owners shall on redelivery (whether it occurs at the end of the charter or on the earlier termination of this charter) accept and pay for all bunkers remaining on board, at the price actually paid, on a first-in-first-out basis.  Such prices are to be supported by paid invoices.
    Vessel to be delivered to and redelivered from the charter with, at least, a quantity of bunkers on board sufficient to Reach the nearest main bunkering port including safety margin. Notwithstanding anything contained in the charter unless otherwise agreed between Owners and Charterers all bunkers on board the vessel shall, throughout the duration of this charter, remain the property of Charterers and can only be purchased on the terms specified in the charter at the end of the charter period or, if earlier, at the termination of the Charter.
         
Stevedores,
Pilots, Tugs
  16 Stevedores when required shall be employed and paid by Charterers, but this shall not relieve Owners from responsibility at all times for proper stowage, which must be controlled by the master who shall keep a strict account of all cargo loaded and discharged, Owners hereby indemnify Charterers, their servants and agents against all losses, claims, responsibilities and liabilities arising in any way whatsoever from the employment of pilots, tugboats or stevedores, who although employed by Charterers shall be deemed to be the servants of and in the service of Owners and under their instructions (even if such pilots, tugboat personnel or stevedores are in fact the servant of Charterers their agents or any affiliated company); provided, however, that
    (a) the foregoing indemnity shall not exceed the amount to which Owners would have been entitled to limit their liability if they had themselves employed such pilots, tugboats or stevedores, and
    (b) Charterers shall be liable for any damage to the vessel caused by or arising out of the use of stevedores, fair wear and tear excepted, to the extent that Owners are unable by the exercise of due diligence to obtain redress therefore from stevedores.
         
Super-
Numeraries
  17 Charterers may send representatives in the vessel's available accommodation upon any voyage made under this charter, Owners finding provisions and all requisites as supplied to officers, except alcohol.  Charterers paying at the rate of United States Dollars $30.00 15(fifteen) per day for each representative
    on board the vessel.  Subject to accommodation at their own risk and expense.  The representatives shall act as observers only and shall not interfere with the operation of the vessel.  Upon boarding the vessel the representatives shall be required to sign owners indemnity wording.
         

Sub-letting/
Assignment/

Novation

  18 Charterers may sub-let the vessel, but shall always remain responsible to Owners for due fulfilment of this charter. Additionally Charterers may assign or novate this charter to any company of the Trafigura Group of Companies.  Royal Dutch/Shell Group of Companies.
         
Final
Voyage
  19 If when a payment of hire is due hereunder Charterers reasonably expect to redeliver the vessel before the last sufficient hires next payment of hire would fall due, the fire to be paid shall be assessed on Charterers' reasonable estimate of the time necessary to complete Charterers' programme up to redelivery, and from which estimate Charterers may deduct amounts due or reasonably expected to become due for;
         

 

 

 

Classified as PRIVATE AND CONFIDENTIAL

Code word for this Charter Party

"SHELLTIME 4"

Issued December 1984 amended December 2003

 

ORIGINAL

 

 

(a)

disbursements on Owners' behalf or charges for Owners' account pursuant to any provision hereof, and

 

(b)

bunkers on board at redelivery pursuant to Clause 15.
Promptly after redelivery any overpayment shall be refunded by Owners or any underpayment made by Charterers If at any time this charter would otherwise terminate in accordance with Clause 4 the vessel is on a ballast voyage to a port of redelivery or is upon a laden voyage, Charterers shall continue to have the use of the vessel at the same rate and conditions as stand herein for as long as necessary to complete such ballast voyage, or to complete such laden and return to a port of redelivery as provided by this charter, as the case may be provided that when the Charterers issue the vessel final voyage orders it is reasonable to calculate that the vessel will complete the voyage within the Charter Party period.

 

Loss of
Vessel
  20 Should the Bessel be lost, this charter shall terminate and hire shall cease at noon on the day of her loss; should the vessel be a constructive total loss, this charter shall terminate and hire shall cease at noon on the day on which the vessel's underwriters agree that the vessel is a constructive total loss; should the vessel be missing, this charter shall terminate and hire shall cease at noon on the day on which she was last heard of. Any hire paid in advance and not earned shall be returned to Charterers and Owners shall reimburse Charterers for the value of the estimated quantity of bunkers on board at the time of termination, at the price paid by Charterers at the last bunkering port.
       
Off-hire   21  
   

(a)

On each and every occasion that there is loss of time (whether by way of interruption in the Vessel's service or, from reduction in the vessel's performance, or in any other manner);

 

(i)

due to deficiency of personnel or stores; repairs; gas-freeing for repairs; time in and waiting to enter dry dock for repairs; breakdown (whether partial or total) of machinery, boilers or other parts of the vessel or her equipment (including without limitation tank coatings); overhaul, maintenance or survey; collision, stranding, accident or damage to the vessel; or any other similar cause preventing the efficient working of the vessel; and such loss continues for more than three five consecutive hours (if resulting from interruption in the vessel's service) or cumulates to more than three five hours (if resulting from partial loss of service); or

 

(ii)

due to industrial action, refusal to sail, breach or orders or neglect of duty on the part of the master, officers or crew; or

 

(iii)

for the purpose of obtaining medical advice or treatment for or landing any sick or injured person (other than a Charterers' representative carried under Clause 17 hereof) or for the purpose of landing the body of any person (other than a Charterers' representative), and such loss continues for more than three five consecutive hours, or;

 

(iv)

due to any delay in quarantine (excepting cases of Ebola) arising from the master, officers or crew having had communication with the shore at any infected area without the written consent or instructions of Charterers or their agents, or to any detention by customs or other authorities caused by smuggling or other infraction of local law on the part of the master, officers, or crew; or

 

(v)

due to detention of the vessel by authorities at home or abroad attributable to legal action against or breach of regulations by the vessel, the vessel's owners, or Owners (unless brought about the act or neglect of Charterers); then;

    Without prejudice to Charterers' rights under Clause 3 or to any other rights of Charterers hereunder or otherwise, the vessel shall be off-hire from the commencement of such loss of time until she is again ready and in an efficient state to resume her service from a position not less favourable to Charterers than that at which such loss of time commenced; provided, however, that any service given or distance made good by the vessel whilst off-hire shall be taken into account in assessing the amount to be deducted from hire and provided that the vessel shall remain off-hire during any consequential loss of time.
 

(b)

If the vessel fails to proceed at any guaranteed speed pursuant to Clause 24, and such failure arises wholly or partly from any of the causes set out in Clause 21 (a) above, then the period for which the vessel shall be off-hire under this Clause 21 shall be the difference between;

    (i) the time the vessel would have required to perform the relevant service at such guaranteed speed, and
    (ii) the time actually taken to perform such service (including any loss of time arising from interruption in the performance of such service).
      For the avoidance of doubt, all time included under (ii) above shall be excluded from any computation under Clause 24.

 

 

 

 

Classified as PRIVATE AND CONFIDENTIAL

Code word for this Charter Party

"SHELLTIME 4"

Issued December 1984 amended December 2003

 

ORIGINAL

 

 

(c)

Further and without prejudice to the foregoing, in the event of the vessel deviating (which expression includes without limitation putting back, or putting into any port other than that to which she is bound under the instructions of Charterers) for any cause or purpose mentioned in Clause 21 (a), the vessel shall be off-hire from the commencement of such deviation until the time when she is again ready and in an efficient state to resume her service from a position not less favourable to Charterers than that at which the deviation commenced, provided, however, that any service given or distance made good by the vessel whilst so off-hire shall be taken into account in accessing the amount to be deducted from hire. If vessel, for any cause or purpose mentioned in Clause 21 (a), puts into any port other than the port to which she is bound on the instructions of  Charterers, the port charges, pilotage and other expenses at such port shall be borne by Owners. Should the vessel be driven into any port or anchorage by stress of weather hire shall continue to be due and payable during any time lost thereby.

 

(d)

If the vessel's flag state becomes engaged in International hostilities, and Charterers in consequence of such

    Hostilities find it commercially impracticable to employ the vessel and have given Owners written notice thereof then from the date of receipt by Owners of such notice until the termination of such commercial impracticability the vessel shall be off-hire and Owners shall have the right to employ the vessel on their own account.
    Time during which the vessel is off-hire under this charter shall count as part of the charter period except where Charterers declare their option to add off-hire periods under Clause 4 (b).
  (e) Time during which the vessel is off-hire under this charter shall count as part of the charter period except where Charterers declare their option to add off-hire periods under Clause 4 (b).
  (f) All references to time in this charter party shall be references to local time except where otherwise stated.

 

Periodical

Drydocking
  22    
 

(a)

Owners have the right and obligation to drydock the vessel at regular intervals of 3 (three) years as deemed appropriate by Owners and vessel's classification society that is at least once within a 5 year period and not exceeding 36 months during drydockings.

      On each occasion Owners shall propose to Charterers a date on which they wish to drydock the vessel, not less than 90 60 days before such date, and Charterers shall offer a port for such periodical drydocking and shall take all reasonable steps to make the vessel available as near to such date as practicable.
      Owners shall put the vessel in drydock as their expense as soon as practicable after Charterers place the vessel at Owners' disposal clear of cargo and cargo stops other than tank washings and residues. Owners shall be responsible for and pay for the disposal into reception facilitates of such tank washings and residues and shall have the right to retain any monies received therefor, without prejudice to any claim for loss or cargo under any Bill of Lading on this charter,
    (b) If a periodical drydocking is carried out in the port offered by Charterers (which must have suitable accommodation for the purpose and reception facilities for tank washings and residues), the vessel shall be off-hire from the time she arrives at such port until drydocking is completed and she is in every way ready to resume Charterers' service and is at the position at which she went off-hire or a position no less favourable to Charterers, whichever she first attains. However,
      (i) provided that Owner exercise due diligence in gas-freeing, any time lost in gas-freeing to the standard required for entry into drydock for cleaning and painting the hull shall not count as off-hire, whether lost on passage to the drydocking port or after arrival there (notwithstanding Clause 21), and
      (ii) any additional time lost in further gas-freeing to meet the standard required for hot work or entry to cargo tanks shall count as off-hire, whether lost on passage to the drydocking port or after arrival there.
        Any time which, but for sub-Clause (i) above, would be off-hire, shall not be included in any calculation under Clause 24.
        The expenses of gas-freeing, including without limitation the cost of bunkers, shall be for Owners account.

 

 

 

 

 

Classified as PRIVATE AND CONFIDENTIAL

Code word for this Charter Party

"SHELLTIME 4"

Issued December 1984 amended December 2003

 

ORIGINAL

 

 

(c)

If Owners require the vessel, instead of proceeding to be offered port, to carry out periodical drydocking at a special port selected by them, the vessel  shall be off-hire from the time when she is released to proceed to the special port until she next presents for loading in accordance with Charterers' instructions, provided, however, that Charterers shall credit Owners with the time which would have been taken on passage at the service speed had the vessel not proceeded to drydock. All fuel consumed shall be paid for by Owners but Charterers shall credit Owners with the value of the fuel which would have been used on such notional passage calculated at the guaranteed daily consumption for the service speed, and shall further credit Owners wish any benefit they may gain in purchasing bunkers at the special port.

  (d) Charterers shall, insofar as cleaning for periodical drydocking may have reduced the amount of tank-cleaning necessary to meet Charterers' requirements, credit Owners with the value of any bunkers which Charterers calculate to have been saved thereby, whether the vessel drydocks at an offered or a special port.

 

Ship
Inspection
 

23

Charterers shall have the right at any time during the charter period to make such inspection of the vessel as they may consider necessary. This right may be exercised as often and at such intervals as Charterers in their absolute discretion may determine and whether the vessel is in port or on passage. Owners affording all necessary co-operation and accommodation on board provided, however;

  (a) that neither the exercise nor the non-exercise, nor anything done or not done in the exercise or non-exercise, by Charterers of such right shall in any way reduce the master's or Owner's  authority over,  or responsibility to Charterers or third parties for, the vessel and every aspect of her operation, nor increase Charterers' responsibilities to Owners or third parties for the same; and;
  (b) that Charterers shall not be liable for any act, neglect or default by themselves their servants or agents in the exercise or non-exercise of the aforesaid right.
           

Detailed

Description
and
Performances
  24      
  (a) Owners guarantee that the Speed and consumption of the vessel shall be as follows:
    Average speed in knots Maximum average bunker consumption per day
     

Main propulsion

fuel oil/diesel oil

Auxiliaries

Fuel oil/diesel oil tonnes

      Laden Tonnes tonnes
           
      Ballast    

 

 

 

 

Classified as PRIVATE AND CONFIDENTIAL

Code word for this Charter Party

"SHELLTIME 4"

Issued December 1984 amended December 2003

 

ORIGINAL

 

      exh434.jpg
     

PER VESSEL DESCRIPTION PROVIDED FOR EACH SHIP

 

S/c as per attached (ABOVE) which includes consumption for scrubber.

 

Owner will guarantee consumptions as per attached for 13 knots laden and ballast AND 12.5+13.5 KTS LADEN and BALLAST.

 

FOLLOWING TO APPLY TO FIGURES IN CONSUMPTION TABLES:

 

All speed/consumption figures (12.5, 13, 13.5) are to be considered as WARRANTED FIGURES but about (+/- 0.5 knot for speed and +/- 5% for consumption) and always subject to no MORE THAN 0.5 KTS adverse currents max up to and including Beaufort force 4 and max sea state Douglas 3.

 

(ie delete reference to no swell, no adverse currents and delete "good weather and smooth seas" from table as these parameters are already defined as up to and including bf4 and dss3 and max 0.5kts adverse currents)

 

The average speeds and bunker consumptions shall for the purposes of this Clause 24 be calculated by reference to the observed distance from pilot station to pilot station full away on sea passage (FAOSP) till end of sea passage (EOSP) on all sea passages over 24 hours during each period stipulated in Clause 24 (c), but excluding any time during which the vessel is (or but for Clause 22 (b) (i) would be) off-hire and also excluding "Adverse Weather Periods", being (i) any periods during which reduction of speed is necessary for safety in congested waters or in poor visibility and/ or transiting canals, and/ or when complying with slow steaming instructions that may have been issued by Charterers (ii) any days, noon to noon, when winds exceed force 8.4 on the Beaufort Scale for more than 12 hours.

 

If at any time following the date upon which the vessel enters into service under this charter the performance of the vessel falls below the performance guaranteed in Clause 24 (a) as amended then if such shortfall results.

      (i) from a reduction in the average speed of the vessel, compared to the speed guaranteed in Clause 24 (a), then an amount equal to the value at the hire rate of the time so lost or gained, as the case may be, shall be deducted from or added to the hire paid;
      (ii) from an increase in the total bunkers consumed, compared to the speed guaranteed in Clause 24 (a) then an amount equal to the value at the hire rate of the time so lost or gained, as the case may be, shall be deducted from or added to the hire paid.
         
      The deduction from hire so calculated for laden and ballast mileage respectively shall be adjusted to take into account the mileage steamed in each such condition during Adverse Weather Periods, by dividing such deduction by the number of miles over which the performance has been calculated and multiplying by the same number of miles plus the miles steamed during the Adverse Weather Periods, in order to establish the total addition to or deduction from hire to be made for such period. Any overperformance to be credited against any underperformance if any.

 

 

 

Classified as PRIVATE AND CONFIDENTIAL

Code word for this Charter Party

"SHELLTIME 4"

Issued December 1984 amended December 2003

 

ORIGINAL

 

      Reduction of hire under the foregoing sub-Clause (b) shall be without prejudice to any other remedy available to Charterers.
    (c) Calculations under this Clause 24 shall be made for the yearly periods terminating on each successive anniversary of the date on which the vessel enters service, and for the period between the last such anniversary and the date of termination of this charter if less than a year. Claims in respect of reduction of hire arising under this Clause during the final year or part year of the charter period shall in the first instance be settled in accordance with Charterers' estimate made latest two months after two months before the end of the charter period. Any necessary adjustment after this charter terminates shall be made by payment to Owners to Charterers.
     

Over-performance not to be claimed by the Owners.

 

Above consumptions exclude manoeuvring within harbours, inland waterways, canals, etc. or under national lor international rules or regulations and are basis wind force not exceeding Beaufort 4.

 

and shall be pro-prated between the speeds shown.

 

The service speed of the vessel is 13.0 knots laden and 13 13.5 knots in ballast and in the absence of Charterers' orders to the contrary the vessel shall proceed at the service speed. However if more than one laden and one ballast speed are shown I the table above Charterers shall have the right to order the vessel to steam at any speed within the range set out in the table (the "ordered speed").

 

If the vessel is ordered to proceed at any speed other than the highest speed shown in the table, and the average speed actually attained by the vessel during the currency of such order exceeds such ordered speed plus 0.5 knots (the "maximum recognised speed"),then for the purpose of calculating a decrease of hire under this Clause 24 the maximum recognised speed shall be used in place of the average speed actually attained.

 

For the purposes of this charter the "guaranteed speed" at any time shall be the then current ordered speed or the service speed, as the case may be.

 

The average speeds and bunker consumption shall for he purposes of this Clause 24 be calculated by reference to the observed distance from pilot station to pilot station on all sea passages during each period stipulated in Clause 24 (c) but excluding  an time during which the vessel is (or but for Clause 22 (b) (i) would be) off-hire and also excluding "Adverse Weather Periods", being:

 

(i)

any periods during which reduction of speed is necessary for safety in congested waters in or poor visibility.

 

(ii)

Any days, noon to noon, when winds exceed force 8 on the Beaufort Scale for more than 12 hours.

 

 

(b)

If during any year from the date on which the vessel enters service (anniversary to anniversary) the vessel falls below or exceeds the performance guaranteed in Clause 24 (a) then if such shortfall or excess results:

    (i) from a reduction or an increase in the average speed of the vessel, compared to the speed guaranteed in Clause 24 (a), then an amount equal to the value at the hire rate of the time so lost or gained, as the case may be, shall in included in the performance calculation;
    (ii) from a reduction or an increase in the total bunkers consumed, compared to the total bunkers which would have been consumed had the vessel performed or guaranteed in Clause 24 (a) an amount equivalent to the value of the additional bunkers consumed or the bunkers saved, as the case may be, based on the average price paid by Charterers for the vessel's bunkers in such period, shall be included in the performance calculation.
      The results of the performance calculation for laden and ballast mileage respectively shall be adjusted to take into account the mileage or deduction by the number of miles over which the Performance has been calculated and multiplying by the same number of miles plus the miles steamed during the Adverse Weather Periods, in order to establish the total performance Calculation for such period.
      Reduction of hire under the foregoing sub Clause (b) shall be without prejudice to any other remedy available to Charterers.
       

 

 

 

Classified as PRIVATE AND CONFIDENTIAL

Code word for this Charter Party

"SHELLTIME 4"

Issued December 1984 amended December 2003

 

ORIGINAL

 

  (c) Calculations under this Clause 24 shall be made for the yearly periods terminating on each successive anniversary of the date on which the vessel enters service, and for the period between the last such anniversary and the date of termination of this charter if less than a year. Claims in respect of reduction of hire arising under this Clause during the final year or part year of the charter period shall in the first instance be settled in accordance with Charterers' estimate made two months before the end of the shorter period. Any necessary adjustment after this charter terminates shall be made by payment by Owners to Charterers by Charterers to owners as the case may require.
       
Salvage  

25

Subject to the provisions of Clause 21 hereof, all loss of time and all expenses (excluding any damage to or loss of the vessel or tortious liabilities to third parties) incurred in saving or attempting to save life or in successful or unsuccessful attempts at salvage shall be borne equally by Owners and Charterers provided that Charterers shall not be liable to contribute towards any salvage payable by Owners arising in any way out of services rendered under this Clause 25.

      All salvage and all proceeds from derelicts shall be divided equally between Owners and Charterers after deducting the master's, officers' and crew's share.
       
Lien   26 Owners shall have a lien upon all cargoes and all sub-hires freights, sub-freights and demurrage for any amounts due under this charter; and Charterers shall have a lien on the vessel for all monies paid in advance and not earned, and for all proven claims for damages arising from any breach by Owners of this charter.
       
Exceptions   27  
 

(a)

The vessel, her master and Owners shall not, unless otherwise in this charter expressly provided, be liable for any loss or damage or delay or failure arising or resulting from any act, neglect or default of the master, pilots, mariners or other servants of Owners in the navigation or management of the vessel; fire, unless caused by the actual fault or privity of Owners; collision or stranding; dangers and accidents of the sea; explosion, bursting of boilers, breakage of shafts or any latent defect in hull, equipment or machinery; provided, however, that Clause 1, 2, 3 and 24 hereof shall be unaffected by the foregoing. Further, neither the vessel, her master or owners, nor Charterers shall, unless otherwise in this charter expressly provided, be liable for any loss or damage or delay or failure in performance hereunder arising or resulting from act of God, act of war, seizure under legal process, quarantine restrictions, strikes, lock-outs, riots, restraints of labour, civil commotions or arrest or restraint of princes, rulers or people.

 

(b)

The vessel shall have liberty to sail with or without pilots, to tow or go to the assistance of vessels in distress and to deviate for the purpose of saving life or property.

 

(c)

Clause 27 (a) shall not apply to, or affect any liability of Owners or the vessel or any other relevant person in respect of;

    (i) loss or damage caused to any berth, jetty, dock, dolphin, buoy, mooring line, pipe or crane or other works or equipment whatsoever at or near any place to which the vessel may proceed under this charter, whether or not such works or equipment belong to Charterers, or
    (ii) any claim (whether brought by Charterers or any other person) arising out of any loss of or damage to or in connection with cargo. All such claims shall be subject to the Hague – Visby Rules or the Hague Rules or the Hamburg Rules, as the case may be, which ought pursuant to Clause 38 hereof to have been incorporated to the relevant Bill of Lading (whether or not such Rules were so incorporated) or, if no such Bill of Lading is issued, to the Hague – Visby Rules unless the Hamburg Rules compulsorily apply in which case to the Hamburg Rules.
  (d) In particular and without limitation, the foregoing subsections (a) and (b) of this Clause shall not apply to or in any way affect any provisions in this charter relating to off-hire or to reduction of hire.

 

 

Injurious
Cargoes
 

28

No acids, explosives or cargoes injurious to the vessel shall be shipped and without prejudice to the foregoing any damage to the vessel caused by the shipment of any such cargo, and the time taken to repair such damage, shall be for Charterers' account. No voyage shall be undertaken, nor any goods or cargoes loaded, that would expose the vessel to capture or seizure by rulers or governments.

 

 

 

 

Classified as PRIVATE AND CONFIDENTIAL

Code word for this Charter Party

"SHELLTIME 4"

Issued December 1984 amended December 2003

 

ORIGINAL

 

Grade of
Bunkers
 

29

Charterers shall supply fuel oil with a maximum viscosity of 380 centistokes at 50 degrees centigrade and/or marine diesel oil gasoil for main propulsion and fuel oil with a maximum viscosity of 380 centistokes at 50 degrees centigrade and/or diesel oil gasoil for the auxiliaries. If Owners require the vessel to be supplied with more expensive bunkers they shall be liable for the extra cost thereof.

    Charterers warrant that all bunkers provided by them in accordance herewith shall be of a quality complying with the latest ISO Standard 8217 for Marine Residual Fuels and Marine Distillate Fuels as Applicable PROVIDED AVAILABLE, IF NOT THEN CHARTERERS SHALL BE ALLOWED TO DELIVERY LESSER SPECS. OWNERS AGREE TO ASSESS BIO BUNKERS ON A CASE BY CASE BASIS IN GOOD FAITH AND ALLOW CHARTERERS TO SUPPLY BIO FUELS PROVIDED TECHNICALLY AND REGULATORY FEASIBLE.
       
Disbursements   30 Should the master require advances for ordinary disbursements at any port, Charterers or their agents shall make such advances to him, in consideration of which Owners shall pay a commission of two and a half per cent, and all such advances and commission shall be deducted from hire.
       
Laying-up   31 Charterers shall have the option, after consultation with Owners, of requiring Owners to lay up the vessel at a safe place nominated by Charterers, in which case the hire provided for under this charter shall be adjusted to reflect any nete increased in expenditure reasonably incurred or any net saving which should reasonably be made by Owners as a result of such lay-up. Charterers may exercise the said option any number of times during the charter period.
       
Requisition   32 Should the vessel be requisitioned by any government, de facto or de jure, during the period of this charter, the vessel shall be off-hire during the period of such requisition and may hire paid by such Governments in respect of such requisition period shall be for Owners' account. Any such requisition period shall count as part of the charter period.
       
Outbreak
of War
  33 If war or hostilities break out between any two THREE or more of the following countries: U.S.A, the countries or republics have been part of the former U.S.S.R (except the declaration of war or hostilities solely between any two THREE or more of the countries or republics having been part of former USSR shall be exempted), P.R.C., U.K., Netherlands, Singapore, Greece then both Owners and Charterers shall have the right to cancel this charter, including any countries whose flag is relevant to this contract. However, neither party shall be entitled to terminate this charter party on account of minor and/or local war like operations which shall not interfere with vessels trade. Such cancellation to be declared within a period of twenty days from the date in which the hull & machinery insurers officially report the outbreak of war. Cancellation shall be without financial penalty to either party.
       
Additional
War
Expenses
  34 If the vessel is ordered to trade in areas where there is war (de facto or de jure) or threat of war or if the area including transit thereof is subject to an additional premium by vessels underwriters, Charterers shall reimburse Owners for any additional insurance premia, against Owners written documentation, including but not limited to AWRP, War Loss of Hire, Kidnap and Ransom, crew bonuses and other expenses which are reasonably incurred by Owners as a consequence of such orders, provided that Charterers are given notice of such expenses as soon as practicable and in any event before such expenses are incurred, and provided further that Owners obtain from their insurers a waiver or any subrogated rights against Charterers in respect of any claims by Owners under their war risk insurance arising out of compliance with such orders.
    Any payments by Charterers under this clause will only be made against proven documentation.  Any discount or rebate refunded to Owners, for whatever reason, in respect of additional war risk premium shall be passed on to Charterers.
    If the Vessel is ordered to trade in areas where there is war (de facto or de jure) or threat of war.  Charterers shall arrange for and on behalf of Owners to insure the vessel against hull war risks in an amount equal to the insured value of the Vessel under her ordinary hull policy presently [US$ (please advise) on condition that Owners obtain from their insurers a waiver of any subrogated rights against Charterers in respect of any claims by Owners under their war risk insurance arising out of compliance with such orders.  Charterers shall pay only any provable additional INSURANCE PREMIA, cost of for any additional crew bonuses.  K&R PREMIUM, ADDITIONAL LOSS OF HIRE and other expenses which are reasonably incurred by Owners as a consequence of such orders provided that Charterers are given notice of such expenses as soon as practicable and in any event before such expenses are agreed by Owners.  For the avoidance of doubt any blocking and trapping.  loss of profit.  loss of hire.  loss of freight.  Or loss of bunkers insurance taken out by Owners in respect of the Vessel, shall be for Owners account. 

 

 

 

Classified as PRIVATE AND CONFIDENTIAL

Code word for this Charter Party

"SHELLTIME 4"

Issued December 1984 amended December 2003

 

ORIGINAL

 

         
      With reference to the Bimco war risk clause herein, it is understood and agreed that any payments made to owners by underwriters for loss of hire in case of seizure by pirates, shall be offset against any hire payments made by charts.
      List of requested documents below:
      - Copy of proof for insured value i.e. certificate or similar showing same
      - Original invoice from underwriters or insurance brokers invoice showing amount charged
      - Proof of discount granted or no claims bonus
         
War Risks   35    
  (a) The master shall not be required or bound to sign Bills of Lading for any place which in his or Owners’ reasonable opinion is dangerous or impossible for the vessel to enter or reach owing to any blockade, war, hostilities, warlike operations, civil war, civil commotions or revolutions.
    (b) If in the reasonable opinion of the master of Owners it becomes, for any of the reasons set out in Clause 35(a) or by the operation of international law, dangerous, impossible or prohibited for the vessel to reach or enter, or to load or discharge cargo at, any place to which the vessel has been ordered pursuant to this charter (a “place of peril”), then Charterers or their agents shall be immediately notified in writing or by radio messages, and Charterers shall thereupon have the right to order the cargo, or such part of it as may be affected, to be loaded or discharged, as the case may be, at any other place within the trading limits of this charter (provided such other place is not itself a place of peril).  If any place of discharge is or becomes a place of peril, and no orders have been received from Charterers or their agents within 48 hours after dispatch of such messages, then Owners shall be at liberty to discharge the cargo or such part of it as may be affected at any place which they or the master may in their or his discretion select within the trading limits of this charter and such discharge shall be deemed to be due fulfilment of Owners’ obligations under this charter so far as cargo so discharged is concerned.
    (c) The vessel shall have liberty to comply with any directions or recommendations as to departure, arrival, routes, ports of call, stoppages, destinations, zones, waters, delivery or in any other wise whatsoever given by the government of the state under whose flag the vessel sails or any other government or local authority or by any person or body acting or purporting to act as or with the authority of any such government or local authority including any de facto government or local authority or by any person or body acting or purporting to act as or with the authority of such government or local authority or by any committee or person having under the terms of the war risks insurance on the vessel the right to give any such directions or recommendations. If by reason of or in  compliance with any such directions or recommendations anything is done or is not done, such shall not be deemed a deviation. If by reason of or in compliance with any such direction or recommendation the vessel does not proceed to any place of discharge to which she has been ordered pursuant to this charter, the vessel may proceed to any place which the master or Owners in his or their discretion select and there discharge the cargo or such part of it as may be affected. Such discharge shall be deemed to be due fulfilment of Owners obligations under this charter so far as cargo or discharged is concerned.
      Charterers shall procure that all Bills of Lading issued under this charter shall contain the Chamber of Shipping War Risks Clause 1952 Provisions of Conwartime 2013.
Both to
Blame
Collision
Clause
  36 If the liability for any collision in which the vessel is involved while performing this charter falls to be determined in accordance with the laws of the United States of America, the following provision shall apply:
    "If the ship comes into collision with another ship as a result of the negligence of the other ship and any act, neglect or default of the master, mariner, pilot or the servants of the carrier in the navigation or in the management of the ship, the owners of the cargo carried hereunder will indemnify the carrier against all loss, or liability to the other or non-carrying ship or her owners in so far as such loss or liability represents loss of, or damage to, or any claim whatsoever of the owners of the said cargo, paid or be payable by the other non-carrying ship or her owners to the owners of the said cargo and set off, recouped or recovered by the other non-carrying ship or her owners as part of their claim against the carrying ship or carrier."

 

 

 

Classified as PRIVATE AND CONFIDENTIAL

Code word for this Charter Party

"SHELLTIME 4"

Issued December 1984 amended December 2003

 

ORIGINAL

 

      "The foregoing provisions shall also apply where the owners, operators or those in charge of any ship or ships or objects other than, or in addition to, the colliding ships or objects are at fault in respect of a collision or contact."
      Charterers shall procure that all Bills of Lading issued under this charter shall contain a provision in the foregoing terms to be applicable where the liability for any collision in which the vessel is involved falls to be determined in accordance with the laws of the United States of America.
         
New
Jason
Clause
  37 General average contributions shall be payable according to the York/Antwerp Rules, 1994, as amended from time to time, and shall be adjusted in London in accordance with English law and practice but should adjustment be made in accordance with the law and practice of the United States of America, the following provision shall apply:
    "In the event of accident, danger, damage or disaster before or after the commencement of the voyage, resulting from any cause whatsoever, whether due to negligence or not, for which, or for the consequence of which, the carrier is not responsible by statute, contract or otherwise, the cargo shippers, consignees or owners of the cargo shall contribute with the carrier in general average to the payment of any sacrifices, losses or expenses of a general average nature that may be made or incurred and shall pay salvage and special charges incurred in respect of the cargo."
      If a salving ship is owned or operated by the carrier, salvage shall be paid for as fully as if the said salving ship or ships belonged to strangers. Such deposit as the carrier or his agents may deem sufficient to cover the estimated contribution of the cargo and any salvage and special charges thereon shall, if required, be made by the cargo, shippers, consignees or owners of the cargo to the carrier before delivery."
      Charterers shall procure that all Bills of Lading issued under this charter shall contain a provision in the foregoing terms, to be applicable where adjustment of general average is made in accordance with the laws and practice of the United States of America.
Clause
Paramount
  38 Charterers shall procure that all Bills of Lading issued pursuant to this charter shall contain the following:
   

"(1) Subject to sub-clause (2) or (3) hereof, this Bill of Lading shall be governed by, and have effect subject to, the rules contained in the International Convention for the Unification of Certain Rules relating to Bills of Lading signed at Brussels on 25th August 1924 (hereafter the "Hague Rules") as amended by the Protocol signed at Brussels on 23rd February 1968 (hereafter the "Hague-Visby Rules"). Nothing contained herein shall be deemed to be either a surrender by the carrier of any of his rights or immunities or any increase of any of his responsibilities or liabilities under the "Hague-Visby Rules".

 

"(2) If there is a governing legislation which applies to the Hague Rules compulsorily to this Bill of Lading to the exclusion of the Hague-Visby Rules, then this Bill of Lading shall have effect subject to the Hague Rules. Nothing herein contained shall be deemed to be either a surrender by the carrier of any of his rights or immunities or an increase of any of his responsibilities or liabilities under the Hague Rules."

 

"(3) If there is governing legislation which applies the United Nations Convention on the Carriage of Goods by Sea 1978 (hereafter the Hamburg Rules) compulsorily to this Bill of Lading, to the exclusion of the Hague-Visby Rules, then Bill of Lading shall have effect subject to the Hamburg Rules. Nothing therein contained shall be deemed to be either a surrender by the carrier of any of his rights or immunities or an increase of any of his responsibilities or liabilities under the Hamburg Rules."

 

"(4) If any term of this Bill of Lading is repugnant to the Hague-Visby Rules, or Hague Rules, or Hamburg Rules, as applicable, such term shall be void to that extent but no further."

 

"Nothing in this Bill of Lading shall be construed as in any way restricting, excluding or waiving the right of any relevant party or person to limit his liability under any available legislation and/or law." This Charter shall be subject to Clause Paramount.
         
Insurance/
ITOPF
  39 Owners warrant that the vessel is now, and will, throughout the duration of the charter:
    (a) be owned or demise chartered by a member of the International Tanker Owners Pollution Federation Limited.

 

 

 

Classified as PRIVATE AND CONFIDENTIAL

Code word for this Charter Party

"SHELLTIME 4"

Issued December 1984 amended December 2003

 

ORIGINAL

 

      (b) be properly entered in BRITANNIA P&I Club P and I Club, being a member of the International Group of P and I Clubs;
      (c) have in place insurance cover for oil pollution for the maximum on offer through the International Group of P&I Clubs but always a minimum of United States Dollars 1,000,000,000 (one thousand million);
      (d) have in full force and effect Hull and Machinery insurance placed through reputable brokers on Institute Time Clauses or equivalent for the value of United States Dollars TBA as from time to time may be amended with Charterers approval, which shall not be unreasonably withheld.
     

Owners will provide, within a reasonable time following a request from Charterers to do so, documented evidence of compliance with the warranties given in this Clause 39.

           
    Owners will provide to Charterers within FIVE business days after this charterparty is concluded documented evidence of compliance with the warranties given in this clause 39. If documented evidence of compliance is not received by Charterers within that five business days Charterers have the right to cancel the charterparty within five business days thereafter.
           
Export
Restrictions
  40 The master shall not be required or bound to sign Bills of Lading for the carriage of cargo to any place to which export of such cargo is prohibited under the laws, rules or regulations of the country in which the cargo was produced and/or shipped.
    Charterers shall procure that all Bills of Lading issued under this charter shall contain the following clause:
      "If any laws, rules or regulations applied by the government of the country in which the cargo was produced and/or shipped, or any relevant agency thereof, impose a prohibition on export of the cargo to the place of discharge designated in or ordered under this Bill of Lading, carriers shall be entitled to require cargo owners forthwith to nominate an alternative discharge place for the discharge of the cargo, or such part of it as may be affected, which alternative place shall not be subject to the prohibition, and carriers shall be entitled to accept orders from cargo owners to proceed to and discharge at such alternative place. If Cargo owners fail to nominate an alternative place within 72 hours after they or their agents have received from carriers notice of such prohibition, carriers shall be at liberty to discharge the cargo or such part of it as may be affected by the prohibition at any safe place on which they or the master may in their or his absolute discretion decide and which is not subject to the prohibition, and such discharge shall constitute due performance of the contract contained in this Bill of Lading so far as the cargo so discharged is concerned".
      The foregoing provision shall apply mutates mutandis to this charter, the references to a Bill of Lading being deemed to be references to this charter.
           
Business
Principles
  41 Owners will co-operate with Charterers to ensure that the Business Principles, as amended from time to time, of the Royal Dutch/Shell Group of Companies, which are posted on the Shell Worldwide Web (www.Shell.com), are complied with.
           
Drugs and
Alcohol
  42      
    (a) Owners warrant that they have in force an active policy covering the vessel which meets or exceeds the standards set out in the "Guidelines for the Control of Drugs and Alcohol on Board Ship" as published by the Oil Companies International Marine Forum (OCIMF) dated January 1990 (or any subsequent modification, version, or variation of these guidelines) and that this policy will remain in force throughout the charter period, and owners will exercise due diligence to ensure the policy is complied with.
      (b) Owners warrant that the current policy concerning drugs and alcohol on board is acceptable to ExxonMobil and will remain so throughout the charter period.
           
Oil Major
Acceptability
  43 If, at any time during the charter period, the vessel becomes unacceptable to any Oil Major, Charterers shall have the right to terminate the charter.
         
           
Pollution and
Emergency
Response
  44 Owners are to advise Charterers or organizational details and names of Owners personnel together with their relevant telephone/facsimile/e-mail/telex numbers, including the names and contact details of Qualified Individuals for OPA 90 response, who may be contacted on a 24 hour basis in the event of oil spills or emergencies.

 

 

 

Classified as PRIVATE AND CONFIDENTIAL

Code word for this Charter Party

"SHELLTIME 4"

Issued December 1984 amended December 2003

 

ORIGINAL

 

           
ISPS
Code/US
MTSA 2002
  45      
    (a)    
      (i) From the date of coming into force of the International Code for the Security of Ships and of Port Facilities and the relevant amendments to Chapter XI of SOLAS (ISPS Code) and the US Maritime Transportation Security Act 2002 (MTSA) in relation to the Vessel and thereafter during the currency of this charter, Owners shall procure that both the Vessel and "the Company" (as defined by the ISPS Code) and the owner (as defined by the MTSA) shall comply with the requirements of the ISPS Code relating to the Vessel and "the Company" and the requirements of MTSA relating to the vessel and the owner. Upon request Owners shall provide documentary evidence of compliance with this Clause 45(a)(i).
      (ii) Except as otherwise provided in this charter, loss, damage, expense or delay, caused by failure on the part of Owners or "the Company"/owner to comply with the requirements of the ISPS Code/MTSA or this Clause shall be for Owners' account.
    (b)    
        (i) Charterers shall provide Owners/Master with their full style contact details and shall ensure that the contact details of all sub-charterers are likewise provided to Owners/Master. Furthermore, Charterers shall ensure that all sub-charter parties they enter into during the period of this charter contain the following provision:
          "The Charterers shall provide the Owners with their full style contact details and, where sub-letting is permitted under the terms of the charter party, shall ensure that the contact details of all sub-charterers are likewise provided to the Owners".
        (ii) Except as otherwise provided in this charter, loss, damage, expense or delay, caused by failure on the part of Charterers to comply with this sub-Clause 45(b) shall be for Charterers' account.
      (c) Notwithstanding anything else contained in this charter cost or expenses related to security regulations or measures required by the port facility or any relevant authority in accordance with the ISPS Code/MTSA including, but not limited to, security guards, launch services, tug escorts, port security fees or taxes and inspections, shall be for Charterers' account, unless such costs or expenses result solely from Owners' negligence in which case such costs or expenses shall be for Owners account. All measures required by Owners to comply with the security plan required by the ISPS Code/MTSA shall be for Owners' account.
      (d) Notwithstanding any other provision of this charter, the vessel shall not be off-hire where there is a loss of time caused by Charterers failure to comply with the ISPS Code/MTSA (when in force).
      (e) If either party makes any payment which is for the other party's account according to this Clause, the other party shall indemnify the paying party.
           
Law and
Litigation
  46 (a) This charter shall be construed and the relations between the parties determined in accordance with the laws of England.
    (b) All dispute arising under this charter shall be referred to Arbitration in London in accordance with the Arbitration Act 1996 (or any re-enactment or modification thereof for the time being in force) subject to the following appointment procedure:
      (i) The parties shall jointly appoint a sole arbitrator not later than 28 days after service of a request in writing by either party to do so.
        (ii) If the parties are unable or unwilling to agree the appointment of a sole arbitrator in accordance with (i) then each party shall appoint one arbitrator, in any event not later than 14 days after receipt of a further request in writing by either party to do so. The two arbitrators so appointed shall appoint a third arbitrator before any substantive hearing or forthwith if they cannot agree on a matter relating to the arbitration.

 

 

 

Classified as PRIVATE AND CONFIDENTIAL

Code word for this Charter Party

"SHELLTIME 4"

Issued December 1984 amended December 2003

 

ORIGINAL

 

        (iii) If a party fails to appoint an arbitrator within the time specified in (ii) (the Party in Default), the party who has duly appointed his arbitrator shall give notice in writing to the Party in Default that he proposes to appoint his arbitrator to act as sole arbitrator.
        (iv) If the Party in Default does not within 7 days of the notice given pursuant to (iii) make the required appointment and notify  the other party that he has done so the other party may appoint his arbitrator as sole arbitrator whose award shall be binding on both parties as if he had so appointed by agreement
        (v) Any Award of the arbitrator(s) shall be final and binding and not subject to appeal.
        (vi) For the purposes of this clause 46(b) any requests or notices in writing shall be sent by fax, e-mail or telex and shall be deemed received on the day of transmission.
      (c) It shall be a condition precedent to the right of any party to a stay of any legal proceedings in which maritime property has been, or may be, arrested in connection with a dispute under this Charter, that that party furnishes to the other party security to which that other party would have been entitled in such legal proceedings in the absence of a stay.
           
Confidentiality   47 All terms and conditions of this charter arrangement shall be kept private and confidential.
           
Construction   48 The side headings have been included in this charter for convenience of reference and shall in no way affect the construction hereof.
           

 

  Appendix A: OCIMF Vessel Particulars Questionnaire for the vessel, as attached, shall be incorporated herein.
  Appendix B: Shell Safety and Environmental Monthly Reporting Template, as attached, shall be incorporated herein.
  Additional Clauses: As attached, shall be incorporated herein.

 

 

 

SIGNED FOR OWNERS

  SIGNED FOR CHARTERERS  
  Malibu Warrior Inc.   Trafigura Maritime Logistics PTE Ltd.
         
 

FULL NAME

  FULL NAME  
  Evangelos Ikonomou      
         
  POSITION   POSITION  
  Attorney in fact      
         
  /s/ Evangelos Iokomou   /s/ V. Georgopoulos  

 

 

 

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022


Table of Content

 

A.  GENERAL TERMS 3
B.  TRAFIGURA ADDITIONAL TERMS TO SHELLTIME 4  3
49. ON HIRE/OFF HIRE SURVEYS 3
50. INSPECTIONS  3
51.  INSTRUCTIONS 4
52.  CONTACT DETAILS 5
53. TANK CLEANING 5
54.    OFF HIRE PROVISIONS  5
55.  PUMPING CLAUSE 5
56. DRUG AND ALCOHOL CLAUSE 6
57. SHIP-TO-SHIP LIGHTERING  6
58.   BUNKERS  7
59.  ETA/TRACKING 8
60.  ELIGIBILITY AND COMPLIANCE 9
61. OIL MAJORS APPROVAL 10
62.   INERT GAS SYSTEM 11
63. BALLAST CLAUSE 11
64.  BROKERAGE COMMISSION CLAUSE  11
65.  IN-TRANSIT LOSS CLAUSE 12
66.  RETURN INSURANCE CLAUSE   12
67.  CARGO RETENTION CLAUSE 12
68.  HEATING CLAUSE 12
69.  DELETED   13
70.  CHARTERPARTY ADMINISTRATION 13
71. CARGO OPERATIONS 13
72.  VESSEL MANAGEMENT CLAUSE 13
73.  AMS CLAUSE  14
74. EU Advance Cargo Declaration Clause For Time Charter Parties 14
75. SBT Clause  15
C. OWNERS ADDITIONAL CLAUSES  16
1. ISPS CLAUSE FOR TIME CHARTER PARTIES   16
2. BUNKER QUALITY & SUPPLY 17

 

 

1

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

3.  BUNKER FUEL SULPHUR CONTENT CLAUSE: 18
4. SANCTIONS RELATED TRADING EXCLUSION:   19
5.  Trafigura Sanctions Clause For Time Charterparties 19
6. BIMCO Designated Entities Clause  22
7. Gulf Of Guinea HRA 23
8.    STORAGE & UNDERWATER CLEANING CLAUSE 25
9.    WAR RISKS / PIRACY  25
10.  EBOLA CLAUSE 28
11. ICE CLAUSE  29
12. ANTI-BRIBERY, ANTI-CORRUPTION CLAUSE (ABC)  29
13.   SCRUBBER CLAUSE / EXHAUST GAS CLEANING SYSTEM   29
14.  BIMCO COVID-19 CREW CHANGE CLAUSE FOR TIME CHARTER PARTIES 2020:  30
15. INFECTIOUS DISEASE CLAUSE 31
16.  OWNERS UNDER KEEL CLEARANCE AND AIR CLEARANCE POLICY 33
17.  AGM Clause  33
18. AIRDRAFT 33
19. KYC  34
20. LOIs  34

 

 

 

 

 

2

 

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

 

TRAFIGURA ADDITIONAL CLAUSES AND AMENDMENTS TO SHELLTIME 4

 

(AS AMENDED DECEMBER 2003)

 

 

A.

GENERAL TERMS

 

 

1.

Charter to be based on Shelltime 4 Charter Party deleting any references to Shell International Trading and Shipping Company Limited and replacing with Trafigura Maritime Logistics Pte Ltd.

 

 

2.

All negotiations and details of this Charter are to remain private and confidential by all parties concerned, except so far as concerns such information as is required to be disclosed by either party to its employees, auditors, lawyers and affiliates who have a need to know such information in connection with the performance of this Charter, to any court or governmental authority requiring such, or to any other appropriate third party to the extent necessary to comply with any legal or governmental requirement or to give commercial effect to the Charter.

 

 

3.

In the event of a conflict of terms, the provisions of these Additional Clauses and Amendments to Shelltime 4 shall prevail over those of the standard Shelltime 4 form to the extent of such conflict but no further.

 

 

4.

In each and every case where there is reference in this Charter to correspondence by "telex", it shall be read as correspondence by "e-mail or telex".

 

 

B.

TRAFIGURA ADDITIONAL TERMS TO SHELLTIME 4

 

 

49.

ON HIRE/OFF HIRE SURVEYS

 

If required by the Charterers joint on hire/off hire surveys are to be carried out at the delivery and redelivery ports respectively by an independent surveyor acceptable to both parties to inspect the Vessel's condition and to ascertain the quantity of bunkers on board. The cost of and any time lost by reason of the surveys shall be shared equally between the Owners and the Charterers.

 

 

50.

INSPECTIONS

 

50.1     In addition to the joint on hire/off hire surveys and further to their rights of inspection as set out in clause 23 of this charterparty the Charterers' right to make such inspection of the Vessel as they may consider necessary includes but is not limited to the right to place on board the Vessel an inspector, surveyor and/or representative to inspect and/or test:
(i)       The Vessel's hull, machinery and equipment and living spaces;
(ii)      The Vessel's operational procedures both in port and at sea; and
(iii)     The Vessel's certificates, records and documents
to determine whether the Owners are complying in all respects with their obligations and that the Vessel is in full compliance with international, national, state or local conventions, laws, regulations and ordinances currently in force or which may come into force in respect of the waters and trading areas to which the Vessel may be ordered during the charter period. Any delay caused by such inspection or test will be for the Charterers' account but any repair or delay by reason of the Owners' non-compliance will be for the Owners' account.

 

 

3

 

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

50.2     The Charterers shall also have the right to require inspection of the Vessel's tanks at loading and/or discharging ports to ascertain the condition of the tanks, the quality of the cargo, water and residues on board. In that respect the Charterers' inspector, surveyor and/or representative has the right to ullage, inspect and take samples from the Vessel's cargo tanks, bunker tanks, void spaces and other non-cargo tanks. Depressurisation of the tanks to permit such inspection and/or ullaging shall be carried out under the supervision of the Vessel's Master in accordance with the recommendations in the latest edition of the International Safety Guide for Oil Tankers and Terminals.

 

50.3     The Charterers are further entitled from time to time during the charter period on reasonable notice to arrange for their representative(s) to attend the Owner's offices or the offices of the Owners' managers or managing agents as the case may be in order to audit, asses and/or investigate the Owners' policy, management, crewing and operations in relation to the services to be provided by the Vessel under this charter.

 

50.4     Any deficiencies determined by the Charterers, their representative(s), surveyor and/or inspector following any of the above audits, investigations, inspections and/or tests shall be corrected by the Owners at the Owners' time and expense within 30 days of the Charterers giving the Owners notice in writing of the deficiency. If the Owners do not correct the deficiency after the said 30 days the Charterers have the option to place the Vessel off hire until she is restored to or the Owners' policy, management, crewing and operations conform to the Charterers' reasonable satisfaction.
Any deficiencies identified basis above should be in accordance with Flag, Class, OCIMF standards. This is a quality assurance clause and will not be used for commercial purposes by the charterers.

 

50.5     Whether or not the Charterers exercise their rights under this clause, no action or inaction on their part shall be deemed to be a waiver of their rights and shall be without prejudice to any other remedy available to the Charterers.

 

 

51.

INSTRUCTIONS

 

51.1     Charterers will give the Master specific telexed or email instructions for each loading/discharging operation. These instructions will always include agents. All instructions will be signed by the Charterers' authorised person(s) and the Master will only take instructions from the Charterers by telex/email, or, if verbally, on receipt of telex confirmation by an authorised person. If the Master receives instructions either verbally or telexed from any person other than authorised by the Charterers, then the Master will contact the Charterers' authorised person(s) and report the situation verbally in the first instance, but always accompanied with a telex. If the Master is unable to reach the Charterers' authorised person(s) the Master will maintain the Vessel's position and keep trying to contact the Charterers' authorised person(s) until reached. On contact, the authorised person(s) will advise the Master verbally followed by telex how to proceed.

 

51.2     Vessels Loading: Sidi Kerir or Discharging: Ain Sukhna NOT APPLICABLE

 

 

4

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

 

52.

CONTACT DETAILS

 

The Master and Vessel may be contacted at any time using the following numbers and procedures:

 

[insert details]

 

 

53.

TANK CLEANING

 

53.1     On delivery and prior to all subsequent loadings the Vessel will be presented clean to the Charterers, Sub-Charterers and/or suppliers' inspector's satisfaction for the intended cargo. Without prejudice to the Charterers' rights of cancellation and/or other rights whatsoever in the event that the Vessel's tanks, pumps or lines are rejected due to lack of cleanliness the Vessel will be placed off hire for all time lost until her tanks, pumps or lines are finally accepted by the Charterers, Sub-Charterers and/or suppliers' inspector.

 

 

54.

OFF HIRE PROVISIONS

 

54.1     The Owners guarantee that prior to presentation of the Vessel and for the duration of this Charter Party, the officers and crew of the Vessel are employed under conditions acceptable to the ITF or equivalent

 

54.2     Without prejudice to the generality of that guarantee and the Charterers' right to seek damages in respect of its breach, in the event that the Vessel is boycotted, blockaded, blacklisted, subject to interference, subject to strike (legal or illegal), subject to stoppage of labour in any type or form, be it ship or shore labour, or denied or restricted in the use of port and/or discharging facilities and/or tug or pilotage assistance, all or any such events on account of ITF non-acceptability as aforesaid or otherwise, the Vessel's flag, registry, ownership, management, manning, wages or conditions of employment of her officers and/or crew or because of the previous trading of the Vessel or any other Vessel as aforesaid, hire shall cease for the time thereby lost, and the Owners will be responsible for and shall pay in the first instance all extra direct expenses, incurred arising therefrom, including but not limited to proceeding to an alternative berth or port and/or transhipping or otherwise forwarding any cargo to it place of delivery.

 

 

55.

PUMPING CLAUSE

 

The Owners warrant that throughout the charter period the Vessel will either discharge a full homogeneous cargo (whether homogenous or multi grade) within 24 hours (or pro rate time for part thereof) or maintain an average of 100 psi at the Vessel's manifold and the Owners warrant such minimum performance provided the receiving facilities permit and subject always to an obligation on the Owners to perform the Vessel's service with utmost despatch, always excluding drainage and stripping max 3 hours lines blowing and COW but max 3 hours per each grade. The discharge terminal has the right to gauge line pressure. If the Vessel fails to comply with the above warranties, the Charterers have the right to order the Vessel to be withdrawn from the berth in which case all time and expenses incurred are for the Owners' account until the Vessel re-berths and resumes discharge operations. Further, and alternatively, any delay by reason of the Vessel's failure to comply with the above warranties and any direct expenses arising therefrom including but not limited to terminal charges for berth occupancy shall be for the Owners' account. All pumping logs must be noted by the Vessel in the event of any restrictions imposed by the receiving terminal restricting/slowing discharge, duly signed by the Master and terminal and sent directly by the Vessel to the Charterers within one business day.

 

 

5

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

The above pumping performance should always be subject to:

A sufficient and adequate number / size of arms / hoses.
Homogeneous cargo and not multiple berths or barge discharge.
The cargo at discharge temperature does not have (i) kinematic viscosity exceeding 250 degrees Centistokes, or (ii) volatility which adversely affects the required net positive suction head of vessel's cargo pumps, or (iii) density exceeding 1,000 KG/m3.

 

 

56.

DRUG AND ALCOHOL CLAUSE

 

For the purposes of clause 42 of the Shelltime 4 form and the OCIMF Guidelines, alcohol impairment shall be defined as blood alcohol content of 40mg/100ml or greater; the appropriate seafarers to be tested shall all be Vessel's officers and the drug/alcohol testing and screening shall include random or unannounced testing in addition to routine medical examinations. An object of the policy shall be that the frequency of the random/unannounced testing is adequate to act as an effective abuse deterrent, and that all officers are tested at least once a year through a combined programme of random/unannounced testing and routine medical examinations. The Owners further warrant that if required by Charterers a full declaration has been passed on to the Exxon/Exxon affiliate which confirms that the Vessel operates under a Drug and Alcohol Policy which meets or exceeds the OCIMF Guidelines.

 

 

57.

SHIP-TO-SHIP LIGHTERING

 

57.1     The Charterers have the option to load or discharge the Vessel via ship-to-ship transfer either partially or totally at sea or at anchor or underway off any port that the Charterers may direct Vessel not to be employed in a continuous lighterage service unless agreed with Owners, which not to be unreasonably withheld.

 

57.2     The Owners warrant the Vessel is and will remain fully suitable for such lightering operations and that the operations shall be carried out in accordance with all applicable conventions, laws, regulations, rules and the like of any international, national, state or local government entity and in accordance with the procedures set out in the latest revised edition of the International Chamber of Shipping Oil Companies International Marine Forum Ship-to-Ship Transfer Guide (Petroleum) ("ICS/OCIMF Guidelines").

 

57.3     The Owners agree to allow supervisory personnel on board including but not limited to a Mooring Master to advise on the performance of the ship-to-ship transfer operation. It is understood, however, that the Master of the Vessel shall be responsible for the safe operation of the Vessel at all times throughout the transfer operation and for assuring that the requirements of any conventions, laws, regulations and rules, the ICS/OCIMF Guidelines and prudent seamanship are met. It is further understood and agreed that the crew of the Vessel will assist in handling fenders and cargo hoses as well as mooring and unmooring as required by the Mooring Master at no cost to the Charterers.

 

 

6

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

57.4     The Owners guarantee that the Vessel is capable of and will maintain a safe and reasonable stability during and after the lightering operation.

 

57.5     The Charterers will provide all fenders, hoses and any other equipment necessary to perform a safe lightering operation as per procedures set out in the latest revised edition of the International Chamber of Shipping Oil Companies International Marine Forum Ship-to-Ship Transfer Guide (Petroleum) ("ICS/OCIMF Guidelines") at the Charterers' time and expense.

 

 

58.

BUNKERS

 

58.1     The Charterers have the option to bunker the Vessel before delivery provided this does not interfere with the discharge operation or delay delivery.

 

58.2     The Vessel will be redelivered with about the same quantity of bunkers as on delivery excluding any bunkers taken for the Charterers' account before delivery subject to the requirement that there is a sufficient quantity of bunkers on board including safety margin to reach the nearest main bunkering port for a vessel of her size delete already covered in shelltime

 

58.3     At the time of delivery of the Vessel the Owners shall provide the Charterers with the bunker delivery note(s) of any fuels on board and shall place at the disposal of the Charterers any samples relating to the fuels on board.

 

58.4     Throughout the charter period the Charterers shall ensure that bunker delivery notes are presented to the Vessel on the delivery of fuel(s) and the Owners shall ensure that continuous drip samples are taken at the Vessel's bunker manifolds during the entire bunkering operation and sealed in the presence of competent representatives of the suppliers, the Charterers (at Charterers' option) and the owners one sample to be retained of each of the fuels supplied on the Vessel and two samples to be retained by the suppliers.

 

58.5     The samples shall be securely sealed and provided with labels showing the Vessel's name, identity of delivery facility, product name, delivery date and place and seal number, authenticated with the Vessel's stamp and signed by the suppliers' representative and the Master of the Vessel of his authorised representative.

 

58.6     The fuel samples shall be retained by the suppliers and the Vessel for 60 (sixty) days after the date of delivery or for whatever periods necessary in case a claim for any defect in the quality of the fuels is brought to the Charterers' attention prior to the expiry of that 60 (sixty) day period. In that respect any claim for any defect in quality of the fuels must be brought to the Charterers' attention immediately and in any event, within 60 days of delivery together with full details of the claim with supporting evidence failing which any such claim shall be deemed waived and shall be time barred regardless of whether the Owners were unaware of the grounds for a claim until a later date.

 

58.7     One sample will immediately after delivery be sent by Vessel's Master to the nearest DNV or similar well recognised laboratory for analysis, clearly identifying that the request for analysis comes from the Charterers. Any dispute regarding the quality of the fuels shall be settled by that analysis, the findings of which shall be conclusive evidence as to conformity or otherwise with the bunker fuel specification(s).

 

 

7

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

58.8     The Owners shall ensure that an Owners' representative witnesses bunker soundings and measurement of bunker quantities before and after delivery whether at the manifold, on shore or at the bunker barge tanks as determined by the suppliers and any complaint of an incorrect measurement of the quantity of fuel(s) delivered must be made both orally and in writing at the time of delivery and notified to all parties concerned immediately after delivery and noted in the delivery receipt at the time of delivery, failing which the suppliers' determination of quantity shall be final and conclusive and any claim to the contrary is deemed to be waived and absolutely barred.

 

 

59.

ETA/TRACKING

 

59.1     The Owners undertake that, unless the Charterers require otherwise, the Master shall email/telex, in the format provided by the Charterers, his noon position on every day during the currency of this charter. Furthermore, the Master will keep the Charterers fully advised of the Vessel's ETA of more than 6 hours immediately be notified to the Charterers.

 

59.2     Owners undertake that, unless the Charterers require otherwise, the Master shall advise Charterers:

 

 

i.

Immediately on leaving the final port of call on the previous voyage of the time and date of the vessel's expected arrival at the first loading port and shall further advise Charterers 72, 48, 36 and 24 hours before the expected arrival time/date.

 

 

ii.

Immediately after departure from the final loading port, of the vessel's expected time of arrival at the first discharging port or the area at sea to which the vessel has been instructed to proceed for wireless orders, and confirm or amend such advice not later than 72, 48, 36 and 24 hours before the vessel is due at such port or area;

 

 

iii.

Immediately of any variation of more than six hours from expected times of arrival at loading or discharging ports, Quoin Island or such area at sea to Charterers;

 

 

iv.

Immediately if any situation occurs after the date of this charter party which may result in tendering later than the cancelling date, or in damage to the vessel or cargo, or in tardy performance of the voyage.

 

59.3     For clause 59.2, of the loading range is Arabian Gulf, load port is defined as arrival off Quoin Island

 

59.4     The Owners further undertake that unless the Charterers require otherwise, the Master will follow all lawful voyage orders issued by the Charterers.

 

59.5     The Owners shall be responsible for any consequences or additional expenses arising as a result of non-compliance with this clause.

 

59.6     Charterer's communication details:

 

 

8

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

[insert details]

 

59.7     The Charterers nay from time to time throughout the charter period employ an Inmarsat C trading system on the Vessel provided this does not interfere with the Vessel's navigational system. All registration and communication costs relating to this tracking system will be for the Charterers' account. The Charterers will advise when the system is operative and confirm termination on completion of the charter. The Owners will supply the following information, which will form part of this clause:

Inmarsat C number (9 digits beginning with 4): [number to be inserted]

 

 

60.

ELIGIBILITY AND COMPLIANCE

 

60.1     Owners warrant that the Vessel is and shall remain throughout the duration of this charter in all respects eligible under all applicable conventions, laws, regulations, rules, ordinances, decrees, conventions and any other applicable directives of the country of the Vessel registry and of any international, national, state or local government entity including without limitation port and customs authorities for trading to and from any port or place within the trading limits set out in clause 4 of this charterparty. For the avoidance of doubt and without limitation such compliance includes compliance with the rules of the International Convention for the Prevention of Pollution from Ships (MARPOL 1973/1978) as amended, the International Convention of the Safety of Lives at Sea (SOLAS 1974/1978/1983) as amended, the US Oil Pollution Act of 1990 (OPA 90) as amended, the Comprehensive Environmental Response Compensation and Liability Act (CERCLA) as amended, the National Convention of Civil Liability for Oil Pollution Damage of 1992 as amended, the US Port and Safe Tanker Safety Act as amended and the US Federal Water Pollution Control Act as amended.

 

60.2     Owners warrant that from the date of delivery and throughout the charter period the Vessel shall have on board for inspection by the appropriate authorities all certificates, records, compliance letters and other documents required for the performance of this charterparty, including but not limited to, a US Coastguard Certificate of Financial Responsibility (Oil Pollution) (COFR) and the certificate required by Article VII of the International Convention on Civil Liability for Oil Pollution Damage 1992, as amended.

 

60.3     In the interest of safety, the owners warrant that the Master will observe recommendations as to traffic, separation and routing as issued from time to time by the International Maritime Organisation (IMO) or as promulgated by the state of the flag of the Vessel and/or the state in which the effective management of the Vessel is exercised.

 

60.4     Without prejudice to the Charterers' rights to terminate this charterparty for breach of any warranty set out in the above, the Vessel shall be off hire for any time lost during which she is not fully and freely available to the Charterers as a result of any failure to comply with this clause and any proven and direct losses, expenses or damages arising as a result of such failure shall be for the Owners' account.

 

USCG compliance

All time lost at any USA port, or at any port of USA controlled territories, waiting for USCG inspection and or for issuance of TVEL shall count in full as time on hire, unless the outcome of the USCG inspection will be such that the TVEL is not obtained and the vessel is prevented from proceeding to perform cargo operation in USA or their controlled territories only because of such reason. In such a case, the off hire to count from the USCG's rejection until the TVEL issuance.

 

 

9

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

All time lost and all costs for obtaining and maintaining valid uscg coc to be for owners account PROVIDED CHARTERERS HAVE ISSUES ORDERS TIMELY as per local port USCG requirements.

 

 

61.

OIL MAJORS APPROVAL

 

61.1     The Owners acknowledge that to trade effectively an oil tanker today, acceptance of the Vessel under the SIRE Vessel Inspections Programme by the major oil companies is essential and for a [gas or] chemical tanker acceptance also under the CDI Vessel Inspections Programme is essential. As such, it is a condition of this charterparty that on the day of delivery, unless a new build, the Vessel has been inspected under the CDI and SIRE Vessel Inspection Programme and by the major oil and chemical companies as required (separately and together "Inspection(s)") and to the best of Owners belief and knowledge is not unacceptable to any major oil company.

 

61.2     If the Vessel is a new build then it is a condition of this charterparty that the Owners shall arrange such Inspection(s) and obtain at least one CDI and / or SIRE report acceptable to the major oil and chemical companies as required within three weeks after delivery. Charterers to decide which inspection will be perform first. Such inspections always to be subject to the vessel's trading patterns, availability of inspectors and subject to OCIMF SIRE rules.

 

61.3     The Owners shall arrange such Inspections to maintain such acceptances for their account. Such Inspections will be co-ordinated between the Owners, the Charterers and relevant inspectors and, at the minimum, will be carried out within the intervals required in lines 42-43 of the Shelltime 4 form or any lesser intervals as required following inspection whichever is the lesser period.

 

61.4     If one (1) further Inspection is required in order to perform a contemplated voyage or for the Vessel to be eligible for contemplated business then such Inspection will be arranged by the Owners and co-ordinated between the Owners, the Charterers and the relevant inspectors and shall be for the Owners' Charterers account and it shall be the Owners' responsibility to ensure insofar as is physically possible that such Inspection takes place as required by the Charterers always subject to availability of inspectors, the Vessel's trading patterns and OCIMF SIRE rules.

 

61.5     The Owners shall on receipt of an Inspection report promptly make their appropriate investigation for the incurred observations and then provide comments on such report and the report itself available to the Charterers and arrange to have their comments entered into the respective databases.

 

61.6     In respect of a breach of paragraphs 61.1 and 61.2 above, in the event that the Vessel fails or ceases to be accepted following any such Inspections, the Owners shall forthwith rectify the situation to make the Vessel acceptable and arrange the Vessel's re-inspection within a maximum of four weeks, always subject to the vessel's trading patterns, availability of inspectors and subject to OCIMF SIRE rules, the cost of which shall be for the owners' account. The Vessel shall be off hire from 30 days after the time of such rejection and/or failure or cessation of acceptance until again acceptable and any proven and direct loss, damages, costs or expenses whatsoever arising out of such unacceptability and/or rejection shall be for the Owners' account. In the event the Vessel is not acceptable within after that four week period, the Charterers shall have the right to terminate the charter whether or not the Vessel has previously been acceptable to any oil major or chemical company.

 

 

10

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

61.7     If the vessel is placed off-hire by Charterers, Owners have the right to trade the vessel for their own account until the vessel again complies with this Clause. Thereafter the vessel shall go on-hire in a position not less favourable to Charterers than the position in which she went off-hire.

 

 

62.

INERT GAS SYSTEM

 

62.1     The Owners warrant that the Vessel is equipped with a fully functional, efficient and certified Inert Gas System ("IGS") which is in use on the date of delivery of the Vessel and shall so remain during the period of the charter and that the officers and crew on board on delivery and throughout the period of the charter are and will be experienced in the operation of the system. The Owners further warrant that the Vessel will arrive at load ports with cargo tanks inerted and that the tanks will remain inerted throughout the voyage and during discharge.

 

62.2     The Master may be requested by terminal personnel or independent inspectors to breach the IGS for the purposes of gauging, sampling, temperature determination and/or determining the quantity of cargo remaining on board after discharge. The Master shall comply with these requests consistent with the safe operation of the Vessel and all applicable laws, rules and regulations and the vessel shall remain on hire throughout.

 

62.3     Any proven and direct costs, delays or expenses resulting from non-compliance with this clause shall be for the Owners' account and the Vessel shall be off hire for any time so lost.

 

 

63.

BALLAST CLAUSE

 

The Owners warrant that the Vessel is able to ballast/deballast concurrently with cargo operations. Any time lost by the Vessel being unable to ballast/deballast concurrently with cargo operations will be for the Owners' account and deducted from hire unless such ballasting/deballasting concurrently with cargo operations is prohibited by local regulations.

 

 

64.

BROKERAGE COMMISSION CLAUSE

 

0.7%to Arrow Tankers payable by Owners. No addcom.

 

1.25% to CENTRAL Ship Chartering Inc. Payable by owners / Bare Boat Charterers

 

 

11

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

 

65.

IN-TRANSIT LOSS CLAUSE

 

In addition to any other rights which the Charterers may have, the Owners will be responsible for the full amount of any in-transit loss if in-transit loss exceeds 0.3% and the Charterers shall have the right to deduct from freight an amount equal to the FOB port of loading value of such lost cargo plus freight and insurance due with respect thereto provided Charterers can prove that they have suffered a corresponding loss and are the party with title to the cargo. In-transit loss is defined as the difference between net vessel volumes after loading at the loading port and before unloading at the discharge port based on ship's figures. Calculation is always to be based on same cargo temperature.

 

 

66.

RETURN INSURANCE CLAUSE

 

The Charterers are to have the benefit of any return insurance premium received by the Owners from underwriters (as and when received from underwriters) by reason of the vessel being in port for a minimum period of 30 days provided the Vessel is on hire.

 

 

67.

CARGO RETENTION CLAUSE

 

In the event that any cargo remains on board upon completion of discharge, the Charterers shall have the right to deduct from hire an amount equal to the FOB port loading value of such cargo plus voyage freight due with respect thereto, provided that the volume of cargo remaining on board is liquid pumpable and reachable by the Vessel's fixed pumps as determined by a mutually agreeable independent surveyor and further provided that Charterers can prove that they have suffered a corresponding loss and are the party with title to the cargo. Any action or lack of action in accordance with this provision shall be without prejudice to any rights or obligations of the Charterers.

 

 

68.

HEATING CLAUSE

 

The Owners warrant that the Vessel is fully fitted with tight and functioning heating coils in all cargo tanks and is capable of increasing cargo temperature and maintaining on passage, at the discharge port and during discharge the cargo at the loaded or increased temperature as agreed in this charterparty.

Vessel is capable of loading/discharging cargo at a max temperature of 74 degrees Centigrade.

Vessel can maintain loaded temperature, or raise cargo temperature up to max.

60 degrees Centigrade.

All consumptions for heating for charterers account.

 

 

12

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

 

69.

DELETED

 

 

70.

CHARTERPARTY ADMINISTRATION

 

A formal Charter Party shall be prepared and signed by Owners and Charterers. The Owners' broker shall prepare a Charter Party in the format similar to Shelltime 4, as modified by the recap fixture telex/email and bearing the same date.

 

This should be completed with 30 (thirty) working days after date of fixture.

 

 

71.

CARGO OPERATIONS

 

The vessel may be required to carry out one or more of the following cargo operations as Charterers may reasonably require from time to time, always provided that the vessel is capable of such operations and provided that any such operations are always in accordance with prevailing IMO/MARPOL legislation, OCIMF rules or regulations, any dyes/additives are in accordance with the vessel's tank coating manufacturers resistance list and guidelines, and vessel's specifications and characteristics, Charterers shall have the option at their time risk and expense to:

 

 

i.

Blend and/or circulate cargo onboard

 

 

ii.

Load dyed cargo, provided the dye is customarily used or is suitable for use in said cargo

 

 

iii.

Dye the cargo onboard the vessel provided this is carried out or supervised by qualified personnel

 

 

iv.

Blend additives to the cargo at any point during the voyage, provided that the additive is one which is customarily used or is suitable for use in said cargo and carried out or supervised by qualified personnel

 

 

v.

Carry on board the vessel drums or other suitable containers of additive

 

 

vi.

To breach vessel's natural segregation

 

 

vii.

To load and discharge freshwater or seawater shore line flush/plug before, during or after a loading operation

 

Upon receipt of Charterers' written instructions in respect of the foregoing, a Letter of Indemnity in the form of Owners P&I Club wording See Additional Clause 14

 

 

72.

VESSEL MANAGEMENT CLAUSE

 

Throughout the period of this Charter Party the Vessel's ownership structure, flag, registry, classification society, management company and nationality of officers shall not be changed, unless expressly agreed in writing by the Charterer which is not to be unreasonably withheld.

 

 

13

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

Owners shall notify Charterers of any proposed changes in writing at least 90 days prior to proposed implementation date.

 

 

73.

AMS CLAUSE

 

(a)    If the Vessel loads or carries cargo destined for the US or passing through US ports in transit, the Charterers shall comply with the current US Customs regulations (19 CFR 4.7) or any subsequent amendments thereto and shall undertake the role of carrier for the purposes of such regulations and shall, in their own name, time and expense:

 

i.    Have in place a SCAC (Standard Carrier Alpha Code);

ii.    Have in place an ICB (International Carrier Bond); and

 

iii.

Submit a cargo declaration by AMS (Automated Manifest System) to the US Customs.

 

(b)    The Owners shall provide all necessary information to the Charterers and/or their agents to enable the timely and accurate cargo declaration.

The Charterers shall assume liability for and shall indemnify, defend and hold harmless the owners against any loss and/or damage whatsoever (including consequential loss and/or damage) and/or any expenses, fines, penalties and all other claims of whatsoever nature, including but not limited to legal costs, arising from the Charterers' failure to comply with any of the provisions of this sub-clause. Should such failure result in any delay then, notwithstanding any provision in this Charter Party to the contrary, the vessel shall remain on hire.

 

(c)    The assumption of the role of carrier by the Charterer pursuant to this Clause and for the purpose of the US Customs Regulations (19 CFR 4.7) shall be without prejudice to the identity of carrier under any bill of lading, other contract, law or regulation.

 

 

74.

EU ADVANCE CARGO DECLARATION CLAUSE FOR TIME CHARTER PARTIES

 

(a)    If the Vessel loads cargo in any EU port or place destined for a port or place outside the EU or loads cargo outside the EU destined for an EU port or place, the Charterers shall comply with the current EU Advance Cargo Declaration Regulations (the Security Amendment to the Community Customs Code, Regulations 648/2005; 1875/2006; and 312/2009) or any subsequent amendments thereto and shall undertake the role of carrier for the purposes of such regulations and in their own name, time and expense shall:

 

 

(i)

Have in place an EORI number (Economic Operator Registration and Identification;

 

 

(ii)

Provide the Owners with a timely confirmation of (i) above as appropriate; and

 

 

14

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

 

(iii)

Submit an ENS (Entry Summary Declaration) cargo declaration electronically to the EU Member States' Customs and provide the Owners at the same time with a copy thereof.

 

(b)    The Charterers assume liability for and shall indemnify, defend and hold harmless the Owners against any direct loss and/or damage) and/or any expenses, fines, penalties and all other claims of whatsoever nature, including but not limited to legal costs, arising from the Charterers' failure to comply with any of the provisions pf sub-clause (a). Should such failure result in any delay then, notwithstanding any provision in this Charter Party to the contrary, the Vessel shall remain on hire.

 

(c)    The assumption of the role of carrier by the Charterers pursuant to this Clause and for the purpose of the EU Advance Cargo Declaration Regulations shall be without prejudice to the identity of carrier under any bill of lading, other contract, law or regulation.

 

 

75.

SBT CLAUSE

 

Owners warrant that the vessel complies with the Council of the European Union Regulation on the Implementation of IMO Resolution A747(18) which requires that the following entry is made on the International Tonnage Certificate (1969) under the section headed "remarks":-

"The segregated ballast tanks comply with the Regulation 13 of Annex 1 of the International Convention for the prevention of pollution from ships, 1973, as modified by the Protocol of 1978 relating thereto, and the total tonnage of such tanks exclusively used for the carriage of segregated water ballast is TBA.

The reduced gross tonnage which should be used for the calculations of tonnage fees is TBA".
 

15

 

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

 

C.

OWNERS ADDITIONAL CLAUSES

 

 

1.

ISPS CLAUSE FOR TIME CHARTER PARTIES:

 

1.     The Owners shall procure that both the Vessel and "the Company" (as defined by the International Code for the Security of Ships and of Port Facilities and the relevant amendments to Chapter XI of SOLAS ("the ISPS Code")) and the "Owner" (as defined by the US Maritime Transportation Security Act 2002 ("MTSA")) shall comply with the requirements of the ISPS Code relating to the Vessel and "the Company" and the requirements of the MTSA, if applicable, relating to the Vessel and the "Owner". Upon request the Owners shall provide a copy of the relevant International Ship Security Certificate (or the Interim International Ship Security Certificate) to the Charterers. The Owners shall provide the Charterers with the full style contact details of the Company Security Officer (CSO).

 

2.     Except as otherwise provided in this Charter Party, proven loss, damage, expense, hire payable or any time lost, excluding consequential loss, caused by failure on the part of the Owners or "the Company" to comply with the requirements of the ISPS Code or the MTSA if applicable, or this Clause shall be for the Owners' account.

 

3.     The Charterers shall provide the CSO and the Ship Security Officer (SSO)/Master with their full style contact details and any other information the owners require to comply with the ISPS and the MTSA if applicable. Additionally, where sub-letting is permitted under the terms of this Charter Party, Charterers shall ensure that the contact details of all sub-charterers are likewise provided to the SCO and the SSO/Master. Furthermore, the Charterers shall ensure that all sub-charter parties they enter into during the period of this Charter Party contain the following provision:

"The Charterers shall provide the Owners with their full style contact details, and where sub-letting is permitted under the terms of the charter party, shall ensure that the contact details of all sub-charterers are likewise provided to the Owners".

 

4.     Except as otherwise provided in this Charter Party, loss, damage, expense, hire or delay, excluding consequential loss, caused by failure on the part of the Charterers to comply with this Clause shall be for the Charterers' account.

 

5.     All time lost, costs, hire or expenses related to security regulations or measures required by the port facility or any relevant authority in accordance with the ISPS Code/MTSA including, but not limited to, security guards, launch services, tug escorts, port security fees or taxes and inspections, shall be shared equally between Owners and Charterers except where:-

 

5.1    Such costs or expenses are imposed, or hire as a result of Owners' or Charterers' failure to comply with clauses 6.1 and 6.3, (in which case the party whose failure to comply has caused such costs or expenses to be incurred or hire shall bear these), or

 

5.2    Unless such costs or expenses or hire result solely from the Owners' negligence (in which case the costs, expenses or hire shall be for Owners' account). All measures required by the Owners to comply with the Ship Security Plan shall be for the Owners' account.

 

 

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RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

6.     If either party makes any payment which is for the other party's account according to this Clause, the other party shall indemnify the paying party.

 

 

2.

BUNKER QUALITY & SUPPLY

 

The Charterer is to provide bunkers conforming to ISO8217 (2010) provided available and to make best endeavours to provide bunkers conforming to any later versions of ISO8217 where available and feasible.

Charterer to always have right to load High Sulphur bunkers to use only in Main and Auxiliary Engines, in conjunction with Sox Scrubber after implementation date established by IMO for the entry into force of the 0.5% global sulfur cap as described in MARPOL Annex VI (expected 1 January 2020).

 

1.     The Charterers shall supply bunkers of a quality suitable for burning in the Vessel's engines and auxiliaries and which conform to the specification(s) mutually agreed as set out at the top of this clause and under this Charter;

 

2.     In areas of the world where such bunkers are not available, ISO standards are exceeded or ISO standards cannot be guaranteed (for example in countries where local state oil company specifications apply), the Charterers must supply bunkers as available locally. In such circumstances the local bunker specifications are to meet with the Owners', or the Master's approval that is not to be unreasonably withheld. Any such bunkers are to be supplied at a minimum quantity for vessel to reach the next available bunkering port with suitable safety margin.

 

3.     At the time of delivery of the vessel, the Owners shall place at the disposal of the Charterers, the bunker delivery note(s) and any samples relating to the fuels existing on board.

 

4.     During the currency of the Charter, the Charterers shall ensure that bunker delivery notes are presented to the vessel on delivery of fuel(s) and that during bunkering, representative samples of the fuel(s) supplied shall be taken, including at the Vessel's bunkering manifold and sealed in the presence of competent representatives of the Vessel.

 

5.     The fuel samples shall be retained by the Vessel for 90 (ninety) days after the date of delivery or for whatever period necessary in the case of a prior dispute and any dispute as to whether the bunker fuels conform to the agreed specification(s) shall be settled by a joint analysis of a representative sample, which has been witnessed and signed by the bunkering ship or barge representative, at a laboratory acceptable to Owners and Charterers. The sample for testing shall be the sample which was collected at the Vessel's manifold and has its seal number endorsed on the Bunker Delivery Receipt. Th findings of this analysis shall be conclusive evidence as to conformity or otherwise with the bunker fuels specification(s).

 

6.     The Owner reserves its right to make a claim against the Charterer such to be time-barred unless notified by Owners to Charterers within 60 days of supply for any damage to the main engines or the auxiliaries caused by the use of unsuitable fuels or fuels not complying with the agreed specification(s) under this Charter. Additionally, if bunker fuels supplied do not conform with the mutually agreed specification(s) or otherwise prove unsuitable for burning on the ship's engines or auxiliaries the Owner shall not be held responsible for any reduction in the Vessel's speed performance and/or increased bunker consumption nor for any time lost and any other consequences.

 

 

17

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

 

Unless necessary for the safe operation of the vessel, fresh bunkers are not to be used and to be kept segregated onboard until quality test results are received by Owners.

 

Charterer is to supply bunkers always in conformity with sulphur content regulations worldwide.

 

 

3.

BUNKER FUEL SULPHUR CONTENT CLAUSE:

 

 

a.

Without prejudice to anything else contained in the Charter Party, the Charterer shall supply fuels each of such specification and grades to permit the vessel, at all times, to comply with the maximum sulphur content requirements of any emissions control zone, when the vessel is ordered to trade within that zone.

 

The Charterer also warrants that any bunker suppliers, bunker craft operators and bunker surveyors used by the Charterer to supply such fuels shall comply with Regulations 14 and 18 of MARPOL, Annex VI, including the Guidelines in respect of sampling and the provision of bunker delivery notes.

 

The Charterer shall indemnify, defend and hold harmless the Owner in respect of any loss, liability, delay, fines, costs or expenses arising or resulting from the Charterer's failure to comply with this Sub-clause (a).

 

 

b.

 Provided always that the Charterer has fulfilled its obligation in respect of the supply of fuels in accordance with Sub-clause (a) the Owner shall warrant that:

 

 

i)

The Vessel shall comply with Regulations 14 and 18 of Marpol Annex VI and with the requirements of any emission control zone; and

 

 

ii)

The Vessel shall be able to consume fuels of the required sulphur content when ordered by Charterer to trade within any such zone subject to having supplied the Vessel with fuels in accordance with Sub-clause (a), the Charterer shall not otherwise be liable for any loss, delay, fines, costs or expenses arising or resulting from the Vessel's failure to comply with Regulations 14 and 18 of MARPOL Annex VI.

 

 

c.

For purposes of the Clause, "emission control zone" shall mean zones as stipulated in MARPOL Annex VI and/or zones regulated by regional and/or national authorities such as, but not limited to, the EU and the US Environment Protection Agency.

 

 

d.

However, it is understood that while Charterers is to make best efforts to supply RMG 380, if unavailable then RMF 25 is acceptable in South Africa but maximum 300 metric tons IFO per each bunkering in South Africa. Additionally, Charterers may also bunker RMF 25 at other ports where similar circumstances apply subject to Owners' prior approval which shall not be unreasonably withheld.

 

 

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RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

 

 

4.

SANCTIONS RELATED TRADING EXCLUSION:

 

The Charterer warrants that they shall not utilise the Vessel or permit the Vessel to be utilised in any trade that violates us/un/eu sanctions, : (a) which is unlawful; or (b) with or which involves Iran, South Sudan, Sudan, Syria, North Korea or any other country over which the United States, or the European Union, or the United Nations, or other national, supranational or international body/organization, maintain or impose an embargo, boycott, economic sanctions (including comprehensive country wide economic sanctions) or other restrictions, whenever enacted and in force; or (c) which involves the carriage of any cargo which originates in or is exported from or to such countries and/or any trade with or for any person (whether an individual or entity, including but not limited to all sub-charterers, shippers, receivers, other cargo interests) who are (i) incorporated and/or based and/or managed and/or operated from any such countries or otherwise acting on behalf of a person (whether an individual or entity) who is based within such country; or (ii) beneficially or legally owned (in whole or in part) or controlled by or acting on behalf of the Government of such countries, or (iii) beneficially or legally owned or controlled by any person (whether an individual or entity) incorporated and/or based and/or managed and/or operated from such countries. Should sanctions on certain countries be terminated then such countries to be allowed in the trading range subject to not being in breach of the terms defined in the clause.

 

 

5.

Trafigura Sanctions Clause for Time Charterparties

 

 

1.1

Owners and Charterers respectively warrant that at the date of this fixture they are not and undertake that throughout the duration of this Charterparty they will not be:

 

(a)    the subject of Sanctions; or

 

 

(b)

an Affiliate of, or owned or controlled (whether individually or jointly) by a party or parties, which is/are the subject of Sanctions.

 

 

1.2

Each party warrants that, for the duration of the Charterparty, it shall comply with Sanctions applicable to it.

 

 

 

1.3

Notwithstanding anything in this clause to the contrary, neither Owners nor Charterers shall be required to do or omit to do anything which constitutes a violation of or would be in contravention of, or expose it to the Vessel to risk of designation pursuant to Sanctions applicable to it.

 

 

 

1.4

Owners warrant that:

 

(a)    As at the date of this Charterparty:

 

 

(i)

Owners are able to accept the instructions and perform all obligations contemplated under this Charterparty; and

 

 

(ii)

the vessel is able to accept the instructions and perform the services contemplated under this Charterparty.

 

 

19

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

 

(b)

the vessel shall before and at the beginning of this Charterparty and throughout the duration of this Charterparty not be the target of Sanctions, nor be owned or controlled (whether individually or jointly) by any party or parties which is/are the subject of Sanctions.

 

 

1.5

If at any time during the performance of this Charterparty any Sanctions are changed, or new Sanctions or other trade restrictions are imposed or become effective, or there is a change in the interpretation of Sanctions, which would result in performance of this Charterparty contravening the provisions of Clause 1.2 or 1.3 then:

 

 

(a)

either party shall be entitled to immediately suspend any affected performance obligation, providing the other party with written notification of the same, and, if appropriate, request for issue (as the case may be) alternative voyage orders, which shall be given promptly by Charterers, and

 

 

(i)

Charterers and Owners shall each be liable for 50% of all time for a period of up to 7 (seven) days following such written notification, pending receipt of Charterers' alternative voyage orders;

 

 

(ii)

thereafter, Charterers shall continue to pay hire and any additional costs that may be due as a result of any change in discharge port(s); and

 

 

(b)

if the circumstances resulting in such suspension continue for more than 7 (seven) days from the date of such written notice and provided that:

 

(i)    such circumstances are continuing; and

 

 

(ii)

the nature of the circumstances are such that they go to the root of the parties' ongoing obligations under this Charterparty, rendering it impossible for the parties to continue to perform their ongoing obligations under this Charterparty, and which cannot be overcome by the parties taking reasonable measures, whether by issuing revised voyage orders or otherwise, always provided such measures are not in contravention of Sanctions,

 

then either party shall be entitled to terminate the Charterparty with immediate effect on written notice to the other, save that if cargo is on board then, prior to such termination, the Vessel shall, provided such is not in contravention of Sanctions, be directed to a safe [port/place/terminal/berth] and there discharge the cargo (with termination effective on completion of discharge). Upon termination there shall be no further liability on either party save for any accrued rights or remedies including under this clause.

 

 

1.6

If at any time during the performance of this Charterparty, Owners become aware that Charterers are in breach of the warranties set out in Clause 1.1 and/or 1.2 (whether or not as a result of any action and/or omission) then:

 

 

20

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

 

(a)

Owners shall be entitled to immediately suspend any affected performance obligation, providing Charterers with written notification of the same, and, if appropriate, request alternative voyage orders which shall be given promptly by Charterers, and

 

 

(i)

Charterers shall be liable for all time pending Owners' receipt of Charterers' alternative voyage orders;

 

 

(ii)

thereafter, Charterers shall continue to pay hire and shall be liable for any losses that Owners suffer as a result of any change in discharge port(s); and

 

 

(b)

if the circumstances resulting in such suspension continue for more than 7 days from the date of Owners' written notice then, provided such circumstances are continuing, Owners shall be entitled to terminate the Charterparty with immediate effect on written notice to Charterers, save that of cargo is on board, then, prior to such termination, the Vessel shall, provided such is not in contravention of Sanctions, be directed to a safe port and there discharge the cargo (with termination effective on completion of discharge). Upon termination there shall be no further liability on either party save for any accrued rights or remedies including under this clause.

 

 

1.7

If at any time during the performance of this Charterparty, Charterers become aware that Owners are in breach of the warranties set out in Clause 1.1, 1.2 and/or 1.4 (whether or not as a result of any action and/or omission) then:

 

 

(a)

Charterers shall be entitled to immediately suspend any affected performance obligation, providing Charterers with written notification of the same, and, if appropriate, promptly issue alternative voyage orders to Owners, and:

 

 

(i)

Charterers shall not be obliged to pay hire pending issuance of Charterers' alternative voyage orders;

 

 

(ii)

thereafter, Charterers shall continue to pay hire and Owners shall be liable for any losses that Charterers suffer as a result of any change in discharge port(s); and

 

 

(b)

if the circumstances resulting in such suspension continue for more than 7 days from the date of Charterers' written notice then, provided such circumstances are continuing, Charterers shall be entitled to terminate the Charterparty with immediate effect on written notice to Owners, save that if cargo is on board, then prior to such termination, the Vessel shall, provided such is not in contravention of Sanctions, be directed to a safe port and there discharge the cargo (with termination effective on completion of discharge). Upon termination there shall be no further liability on either party save for any accrued rights or remedies including under this clause.

 

 

21

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

 

1.8

To the extent any payment would be in violation of or otherwise prohibited by Sanctions applicable to a party, any payment obligations arising prior to termination of the Charterparty (including but not limited to hire) which have been incurred but not yet paid shall continue to be suspended in compliance with Clause 1.3 above, and shall not be affected by such termination.

 

 

 

1.9

In the event that a payment arising pursuant to this Charterparty cannot be made in United States Dollars due to applicable laws or Sanctions, the parties shall review and mutually agree in writing the applicable payment settlement currency and the relative rate of exchange provided such does not contravene any Sanctions or applicable law, regulation or decree binding upon a party and shall amend or procure the amendment of the Charterparty accordingly. The rate of exchange is to be fixed using an internationally recognized and tradable daily fixation, the date of which shall be mutually agreed by the parties. If payment cannot be made in any currency by reason of Sanctions, the paying party shall place the amount of funds in an interest bearing account until it is able to remit such funds to the receiving party, and the paying party shall account to the receiving party for any interest earned on such funds.

 

 

 

1.10

For the purposes of this clause:

 

"Affiliate" means in relation to either party, any undertaking (as defined in section 1161 of the Companies Act 2006) which is a subsidiary undertaking or a parent undertaking (including the ultimate parent undertaking) of that party and any undertaking which is a subsidiary of such parent undertaking (subsidiary undertaking and parent undertaking are as defined in section 1162 of the Companies Act 2006).

 

"Sanctions" means economic or financial sanctions or trade embargoes or similar or equivalent restrictive measures imposed, administered, enacted or enforced from time to time by a government or governmental or inter-governmental body or organisation or other relevant sanctions authority (including but not limited to, those imposed by the UN, EU, Singapore or the US to the extent applicable).

 

"Sanctioned Entity" means any entity or individual appearing on any "specially designated nationals" or "blocked persons" lists, or any equivalent list(s) maintained and imposed by the relevant bodies and organisations of the United Nations, the European Union, the United Kingdom, the United States or any other jurisdiction applicable to a party.

 

 

6.

BIMCO Designated Entities

 

 

a)

The provisions of this clause shall apply in relation to any sanction, prohibition or restriction imposed on any specified persons, entities or bodies including the designation of specified vessels or fleets under United Nations Resolutions or trade or economic sanctions, laws or regulations of the European Union or the United States of America.

 

 

(b)

Owners and Charterers respectively warrant for themselves (and in the case of any sublet, Charterers further warrant in respect of any sub-charterers, shippers, receivers, or cargo interests) that at the date of this fixture and throughout the duration of this Charter Party they are not subject to any of the sanctions, prohibitions, restrictions or designation referred to in Sub-clause (a) which prohibit or render unlawful any performance under this Charter Party or any sublet or any Bills of Lading. Owners further warrant that the nominated vessel, or any substitute, is not a designated vessel.

 

 

22

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

 

(c)

If at any time during the performance of this Charter Party either party becomes aware that the other party is in breach of warranty as aforesaid, the party not in breach shall comply with the laws and regulations of any Government to which that party or the Vessel is subject and follow any orders or directions which may be given by any body acting with powers to compel compliance, including where applicable the Owners' flag state. In the absence of any such orders, directions, laws or regulations, the party not in breach may, in its option, terminate the Charter Party forthwith or, if cargo is on board, direct the Vessel to any safe port of that party's choice and there discharge the cargo or part thereof.

 

 

(d)

If, in compliance with the provisions of this Clause, anything is done or is not done, such shall not be deemed a deviation but shall be considered due fulfilment of this Charter Party.

 

 

(e)

Notwithstanding anything in this Clause to the contrary, Owners or Charterers shall not be required to do anything which constitutes a violation of the laws and regulations of any State to which either of them is subject.

 

 

(f)

Owners or Charterers shall be liable to indemnify the other party against any and all claims, losses, damage, costs and fines whatsoever suffered by the other party resulting from any breach of warranty as aforesaid.

 

 

(g)

Charterers shall procure that this Clause is incorporated into all sub-charters, contracts of carriage and Bills of Lading issued pursuant to this Charter Party.

 

 

7.

Gulf of Guinea HRA

 

 

(a)

Unless the local Terminal where the Vessel will berth is a private Terminal where no armed guards are allowed because or the Terminal have their own security procedure personnel and equipment and/or patrol boats. Owners shall retain the option to place local armed personnel together with unarmed security advisors from a Private Military and Security Company (a "PMSC") on board their vessel whilst she remains at berth and/or whilst she performs an STS operation. The local armed personnel shall be provided on board by the local military forces of the relevant littoral State with the assistance of the PMSC and the relevant costs for employing the PMSC advisors and the local armed guards shall be for Charterers' account. The PMSC shall be chosen and appointed by the Owners after they obtain the necessary approvals from their insurance underwriters and their flag state. Reasonable Costs to be market competitive and discussed with Trafigura prior to being required, unless dictated by terminal or government.

 

 

(b)

Charterers shall be liable to pay for all and any applicable AP's including War, War LoH up to 90 days and K&R AP's arising potentially under Owners' insurance policies, all possible crew bonuses and expenses for hardening materials and other anti-piracy materials, and any other expenses arising in connection with the vessel's call in the Gulf of Guinea HRA;

 

 

23

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

 

(c)

BMP4 and the IMO Interim guidelines for Piracy in WAF shall be followed at all times;

 

 

(d)

Vessel will not anchor in Nigerian except within Lagos port limits or in waters of neighbouring countries;

 

 

(e)

If required to wait for berthing or for the STS operation, vessel will proceed out to sea and wait drift in a location off the HRA, i.e. at 200NW from the coast approximately unless there is a secure terminal area where vessel can anchor close to the terminal.  Master will shift her drifting position frequently to avoid being a target of pirates; 200 miles

 

 

(f)

Vessel will berth / un-berth and/or will proceed in-ward/outward for the STS operation and to take onboard the armed guards only during day-light hours:

 

 

(g)

Since waiting period at Nigerian ports or the littoral states' ports can be very long, Charterer's must provide sufficient bunkers in advance;

 

 

(h)

Similarly, vessel must be provided with sufficient provision and fresh water to wait for approx. period of 1 months, while drifting;

 

 

(i)

Vessel will proceed in-ward only when the pilot is ready to board vessel and takes her to a designated berth and/or when the STS operation is about to commence;

 

 

(j)

If the cargo operations at berth or the STS operation is suspended for any reason and/or the vessel is asked to vacate berth, vessel to proceed to sea again, off the HRA at 200 NM from the coast approx.; 200 miles

 

 

(k)

Otherwise, the War Risks/Piracy clause as contained herein shall fully apply.

 

For Niger delta river ports within the Lagos to Ikang range, not including Lagos itself, Owners will arrange, through local port agents, armed patrol boats to assist and escort the vessel from the agreed position within territorial waters to the berth and from the berth to the agreed position within territorial waters.

Armed patrol boats will be regulated and approved by local and/or national naval and/or coastguard authorities. Charterers agree to reimburse these reasonable costs, in line with industry norms, to Owners upon Charterers receiving documented evidence and Owners invoice in relation to the same.

 

For Abidjan, Tema anchorage, provided that situation remains safe as of now with no Piracy incidents as per the feedback of Owners and Charterers independent security advisors,

Owners accept no guards needed and no reason to go 200 nm off.

The situation should be re-evaluated within the charter period each and every time Charterers would request the vessel to proceed in the area.

 

For Lome and Cotonou as long as security is arranged ship to stay at anchorage.

 

 

24

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

Owners to have the right to use armed guards and/or armed escort gunboat for any off-shore or port call within HRA however owners confirm that they do not need a dedicated escort boat to remain with vessel while loading at terminals in Nigeria or while waiting at a secure anchorage area by a terminal, provided the Terminal have their own security procedure personnel and equipment and/or patrol boats that will protect the vessel.

 

The armed gunboat to escort the vessel from entering of EEZ (approx. 200nm from nearest coast) until exit of EEZ (approx. 200nm from nearest coast). Reasonable and proportionate Costs always to be competitive and paid by the Charterers but to be discussed and agreed before it is arranged including a provider of arm guards and/or gunboat. Vessel will not enter HRA without such arm guards and/or gunboat arrangement and in place and will always remain on hire.

 

If there is no firm berthing schedule received from a local agent/terminal. Charterers can instruct the ship to remain outside of the HRA. However vessel always to follow charterers and local terminal instructions provided safe and in accordance with Clause 9 below.

 

 

8.

STORAGE & UNDERWATER CLEANING CLAUSE

 

CHARTERERS MAY USE THE VESSEL FOR STORAGE. ALWAYS AT A SAFE LOCATION AND WITHIN THE CHARTER PATY LIMITS, but excluding any War Risk Area or any Piracy Area where additional insurance premiums are charged by the Vessel's insurance underwriters.

WAFR and Fujairah is always to be included but any additional premiums to be for charterers account. However Clause 7. Gulf of Guinea HRA and 9. WAR RISKS / PIRACY always to apply. If applicable. OWNERS/MASTER TO HAVE THE RIGHT TO MOVE THE VESSEL AT CHARTERERS TIME AND COST FOR ANY REASON IF REQUIRED, INCLUDING FOR VICTUALLING, AND OTHER REQUIRED OWNER'S MATTERS PROVIDED CHARTERER IS ADVISED IN A TIMELY MANNER AND CONFIRMS THEIR AGREEMENT WHICH SHALL NOT BE UNREASONABLY WITHHELD IF VESSEL IS ORDERED IN TO STORAGE, CHARTERERS TO ARRANGE AND PAY FOR SUPPLY OF FRESH WATER AS THE VESSEL MAY REQUIRE FROM TIME TO TIME.

 

IF STORAGE IN ANY ONE LOCATION SHOULD BE LONGER THAN 30 DAYS, charterers shall HAVE THE RIGHT TO ALLOW THE VESSEL TO SAIL FOR A MAXIMUM OF 15 HRS FOR THE NOTIONAL REMOVAL OF HULL FOULING. DEPENDING ON THE LENGTH OF THE STORAGE PERIOD THIS SHALL BE ALLOWED MORE THAN ONCE AS REQUIRED. TIMING FOR SAMEALWAYS TO BE MUTUALLY AGREED BETWEEN OWNERS AND CHARTERERS at charterers time and expense.

 

IF VESSEL IS IDLE OR STORAGE AT ANY ONE LOCATION SHOULD BE LONGER THAN 25 CONSECUTIVE DAYS (TIME NOT TO RE-START IF THE VESSEL SAILS), THE SPEED AND CONSUMPTION WARRANTIES THEREAFTER SHALL NOT APPLY UNTIL OWNERS HAVE ARRANGED AT CHARTERERS' TIME AND EXPENSE FOR THE HULL TO BE SCRUBBED AND PROPELLER POLISHED IF DEEMED NECESSARY BY AN INDEPENDENT UNDERWATER SURVEY.

 

 

25

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

 

9.

WAR RISKS / PIRACY

 

(A)    THE VESSEL UNLESS THE WRITTEN CONSENT OF THE OWNERS BE FIRST OBTAINED, SHALL NOT BE ORDERED TO OR REQUIRED TO CONTINUE TO OR THROUGH, ANY PORT, PLACE, AREA OR ZONE (WHETHER OF LAND OR SEA), OR ANY WATERWAY OR CANAL, WHERE IT APPEARS THAT THE VESSEL, HER CARGO, CREW OR OTHER PERSONS ON BOARD THE VESSEL, IN THE REASONABLE JUDGEMENT OF THE MASTER AND/OR THE OWNERS, MAY BE OR ARE LIKELY TO BE EXPOSED TO ANY ACTUAL, THREATENED OR REPORTED ACTS OF PIRACY, WHETHER SUCH RISK OF PIRACY EXISTED AT THE TIME OF ENTERING INTO THIS CHARTER PARTY OR OCURRED THEREAFTER. SHOULD THE VESSEL BE WITHIN ANY SUCH PLACE AS AFORESAID, WHICH ONLY BECOMES DANGEROUS, OR IS LIKELY TO BE OR BECOME DANGEROUS, AFTER HER ENTRY INTO IT, SHE SHALL BE AT LIBERTY TO LEAVE IT.

 

(B)    IF THE OWNERS DO NOT GIVE THEIR CONSENT THEY SHALL IMMEDIATELY INFORM THE CHARTERERS AND THE CHARTERERS SHALL BE OBLIGED TO ISSUE ALTERNATIVE VOYAGE ORDERS and any time lost due to compliance with such orders shall not be considered off-hire. THE CHARTERERS SHALL INDEMNIFY THE OWNERS FOR ANY CLAIMS FROM HOLDERS OF BILLS OF LADING OR THIRD PARTIES CAUSED BY SUCH ORDERS.

 

Owners represent that they shall give consideration to known piracy risks inherent in customary trading routes, including Indian Ocean, Suez Canal transit and West Africa and Owners will always make best endeavours to proceed on customary routes in accordance with prevailing trade patterns always without prejudice to owners' rights under this clause, including owners' risk assessment of the particular customary route and the prevailing trade pattern.

 

(C)    IF THE OWNERS CONSENT OR IF THE VESSEL PROCEEDS TO OR THROUGH AN AREA EXPOSED TO RISK OF PIRACY THE OWNERS SHALL HAVE THE LIBERTY:

 

(I)    TO TAKE REASONABLE PREVENTIVE MEASURES TO PROTECT THE VESSEL, HER CREW AND CARGO INCLUDING BUT NOT LIMITED TO TAKING A REASONABLE ALTERNATIVE ROUTE, PROCEEDING IN CONVOY, USING ESCORTS, AVOIDING DAY OR NIGHT NAVIGATION, ADJUSTING SPEED OR COURSE, OR ENGAGING SECURITY PERSONNEL OR EQUIPMENT ON OR ABOUT THE VESSEL.,

 

(II)    TO COMPLY WITH THE ORDERS, DIRECTIONS OR RECOMMENDATIONS OF ANY UNDERWRITERS WHO HAVE THE AUTHORITY TO GIVE THE SAME UNDER THE TERMS OF THE INSURANCE;

 

 

26


RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

 

(III)    TO COMPLY WITH ALL ORDERS, DIRECTIONS, RECOMMENDATIONS OR ADVICE GIVEN BY THE GOVERNMENT OF THE NATION UNDER WHOSE FLAG THE VESSEL SAILS, OR OTHER GOVERNMENT TO WHOSE LAWS THE OWNERS ARE SUBJECT, OR ANY OTHER GOVERNMENT, BODY OR GROUP, INCLUDING MILITARY AUTHORITIES, WHATSOEVER ACTING WITH THE POWER TO COMPEL, COMPLIANCE WITH THEIR ORDERS OR DIRECTIONS;

 

(IV)    TO COMPLY WITH THE TERMS OF ANY RESOLUTION OF THE SECURITY COUNCIL OF THE UNITED NATIONS, THE EFFECTIVE ORDERS OF ANY OTHER SUPRANATIONAL BODY WHICH HAS THE RIGHT TO ISSUE AND GIVE THE SAME, AND WITH NATIONAL LAWS AIMED AT ENFORCING THE SAME TO WHICH THE OWNERS ARE SUBJECT, AND TO OBEY THE ORDERS AND DIRECTIONS OF THOSE WHO ARE CHARGED WITH THEIR ENFORCEMENT, AND THE CHARTERERS SHALL INDEMNIFY THE OWNERS FOR ANY CLAIMS FROM HOLDERS OF BILLS OF LADING OR THIRD PARTIES CAUSED BY SUCH ORDERS.

 

(D)    COSTS

(I)    IF THE VESSEL PROCEEDS TO OR THROUGH AN AREA WHERE DUE TO RISK OF PIRACY ADDITIONAL COSTS WILL BE INCURRED INCLUDING BUT NOT LIMITED TO ADDITIONAL INSURANCE, ADDITIONAL PERSONNEL, SECURITY PERSONNEL AND EQUIPMENT, AND PREVENTATIVE MEASURES TO AVOID PIRACY ATTACKS, SUCH COSTS SHALL BE FOR THE CHARTERERS' ACCOUNT. ANY TIME LOST WAITING FOR CONVOYS, FOLLOWING RECOMMENDED ROUTEING, TIMING, OR REDUCING SPEED OR TAKING MEASURES TO MINIMISE RISK, SHALL BE FOR THE CHARTERERS, AACOUNT AND THE VESSEL SHALL REMAIN ON HIRE;

 

(II)    IF THE OWNERS BECOME LIABLE UNDER THE EXISTING TERMS OF EMPLOYMENT TO PAY TO THE CREW ANY BONUS OR ADDITIONAL WAGES IN RESPECT OF SAILING INTO AN AREA WHICH IS DANGEROUS IN THE MANNER DEFINED BY THE SAID TERMS, THEN THE ACTUAL BONUS OR ADDITIONAL WAGES PAID SHALL BE REIMBURSED TO THE OWNERS BY THE CHARTERERS AT THE SAME TIME AS THE NEXT PAYMENT OF HIRE IS DUE, OR UPON REDELIVERY, WHICHEVER OCCURS FIRST;

 

(III)    IF THE UNDERWRITERS OF THE OWNERS' INSURANCES SHOULD REQUIRE PAYMENT OF ADDITIONAL PREMIUMS AND/OR CALLS BECAUSE, PURSUANT TO THE CHARTERERS' ORDERS, THE BESSEL IS WITHIN OR IS DUE TO ENTER AND REMAIN WITHIN, OR PASS THROUGH ANY AREA OR AREAS WHICH ARE SPECIFIED BY SUCH UNDERWRITERS AS BEING SUBJECT TO ADDITIONAL PREMIUMS BECAUSE OF PIRACY RISKS, THEN THE ACTUAL ADDITIONAL PREMIUMS including war risks, war loss of hire up to 180 days and kidnap and ransom premiums AND/OR CALLS PAID SHALL BE REIMBURSED BY THE CHARTERERS TO THE OWNERS AT THE SAME TIME AS THE NEXT PAYMENT OF HIRE IS DUE, OR UPON REDELIVERY, WHICHEVER OCCURS FIRST.

 

(E)    If the Vessel is attacked or seized by pirates any time lost shall be for the account of the Charterers and the Vessel shall remain on hire throughout the 181ST day when hire will cease to be paid. If the Vessel is seized the Owners shall keep the Charterers closely informed of the efforts made to have the Vessel released.

 

27

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022
 

(F)    If in compliance with this Clause anything is done or not done, such shall not be deemed a deviation, but shall be considered as due fulfilment of this Charter Party.

 

(G)    CHARTERERS WARRANT THAT THE TERMS OF THIS CLAUSE WILL BE INCORPORATED EFFECTIVELY INTO ANY BILL OF LADING PURSUANT TO THIS CHARTERPARTY.

 

OWNERS AND CHARTERERS ARE TO LIAISE 5 (FIVE) DAYS IN ADVANCE PRIOR TO PROCEEDING OF THE VESSEL TO A TRANSIT OF THE GULF OF ADEN, TO ESTABLISH OWNERS' REQUIREMENTS, WHICH MAY INCLUDE, BUT NOT BE LIMITED TO JOINING A CONVOY SYSTEM OR DEVIATING OR ALTERING THE TIMING OF THE VESSEL'S PASSAGE. VESSEL TO REMAIN ONHIRE, AND VESSEL PERFORMANCE CALCULATIONS ARE TO BE BASED ON ACTUAL MILES STEAMED, WITH ANY PERIODS OF ALTERED SPEED OR WAITING TIME UNDER THIS CLAUSE NOT TO BE INCLUDED IN PERFORMANCE CALCULATIONS. ANY EXTRA INSURANCE PREMIUM CLEARLY STATED AS ABOVE ARE FOR CHARTERERS ACCOUNT.

 

 

10.

EBOLA CLAUSE

 

a)    The Vessel shall not be obliged to proceed to or continue to or through or remain at any port, place, area or country (hereinafter "Affected Area") if in the reasonable opinion of the Owners the Affected Area may place the Vessel and crew or other persons on board the Vessel at risk by reason of the Ebola virus.

 

b)    If in accordance with and subject to the requirements of sub-clause (a) the Owners decide that the Vessel shall not proceed or continue to or through or remain in an Affected Area they must immediately inform the Charterers in writing. In that event the Charterers shall issue alternative voyage orders and shall indemnify the Owners in respect of any expenses arising therefrom and any claims from holders of the Bills of Lading, as a consequence of waiting for and/or performance of such orders. During any time waiting for or complying with such orders the vessel shall remain on hire.

 

c)    If notwithstanding their liberty to refuse to do so, Owners agree to or continue to or through or remain at any Affected Area, Owners shall not be deemed to have waived any of their existing rights under this charter party, save that where owners have agreed to proceed to or continue to or through or remain at an affected area under para (a) above, owners shall not be entitled to later refuse to do so unless there has been a material change in the risks faced.

 

d)    The Vessel shall have liberty to comply with all orders, directions, recommendations or advice of competent authorities and/or the Flag State of the Vessel in respect of arrival routes, ports of call, destinations, discharge of cargo, delivery, or in any other respect whatsoever relating to issues arising as a result of the Vessel being ordered to an Affected Area.

 

28


RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022
 

 

e)    Any additional costs and expenses incurred during the currency of the chapter directly resulting from the Vessel visiting an Affected Area such as screening, cleaning, fumigating and/or quarantining the Vessel and its crew for such diseases either in the Affected Area or at subsequent ports of call under the Charter and including the obtaining of medical treatment for any infected crew, shall be for the Charterers' account and the vessel shall remain on hire during periods of delay caused thereby in the affected area or any subsequent ports.

 

f)    If in compliance with this Clause anything is done or not done, such shall not be deemed a deviation, but shall be considered as due fulfilment of this Charter Party. In the event of a conflict between the provisions of this Clause and any implied or express provision of the Charter Party, this Clause shall prevail to the extent of such conflict but no further.

 

Any costs or delays from an infection arising from events prior to delivery on this charter or from owners matter and/or crew change always to be for owners account.

 

 

11.

ICE CLAUSE

 

Deleted

 

 

12.

ANTI-BRIBERY, ANTI-CORRUPTION CLAUSE (ABC)

 

1.1    each party

(i)    shall comply with all applicable anti-corruption laws and regulations, including without Limitation the us foreign corrupt practices act and the uk bribery act of 2010; and

(ii)    undertakes and warrants to the other party that, it has in place adequate procedures to ensure that, and its officers, directors, shareholders, employees, agents and other intermediaries, and any other person acting directly or indirectly on its behalf, shall not, directly or through third parties, give, promise or attempt to give, or approve or authorise the giving of, anything of value to any person or any entity for the purpose of:

 

(i)

securing any improper advantage in relation to this charterparty; or

(ii)    inducing or influencing a public official to take action or refrain from taking action in order for either party to obtain or retain business for either party; or

(iii)    inducing or influencing a public official to use his/her influence with any government or public international organization for such purpose; and

 

1.2    represents and warrants to the other that, having in place the necessary adequate procedures, it and its officers, directors, shareholders, employees, agents and other intermediaries, and any other person acting directly or indirectly on its behalf have not, prior to the date of this charterparty, been proven to have engaged in bribery or corruption in order to secure and/or retain any business for themselves or the other party, whether in connection with this charterparty or otherwise; and

 

1.3    each party agrees that it will not take or knowingly permit any action to be taken that would cause the other party to be in violation of any applicable anti-money laundering laws; and

 

1.4    shall have and shall maintain in place throughout the term of this agreement adequate policies and procedures to ensure compliance with the undertakings of this clause (including but not limited to including a suitable anti-corruption clause in sub-charterparties), and will enforce them where appropriate.

 

29


RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

Any costs or delays from an infection arising from events prior to delivery on this charter or from owners matter and/or crew change always to be for owners account.

 

 

13.

SCRUBBER CLAUSE / EXHAUST GAS CLEANING SYSTEM

 

 

1.1

Without prejudice to the generality of clause 6, the Vessel shall be delivered with fully functional Certified EGC Technology for her Main and Auxiliary Engines The vessel to always follow local legislation and regulations related to the use of the Exhaust Gas Cleaning System and Owners shall maintain the Certified EGC Technology in a thoroughly efficient state for and during the Charter Period. After 1st January 2020 any amount of sludge quantities generated as a result of higher than 0.5% Sulphur content in HFO supplied by charterers, to be disposed to shore facilities at charterers' cost and time.

 

 

 

1.2

In the event of a Breakdown:

 

 

a.

Owners shall immediately inform Charterers, advising the extent and expected duration of the Breakdown, and shall during the continuance of the Breakdown, provide the Charterer with reasonable updates.

 

 

b.

Charterers shall, of necessary and at Owners' written request, supply at the next convenient bunkering port fuel of such specification and grade that enables the Vessel's compliance with MARPOL Annex VI without use of the Certified EGC Technology. Such specification and grade to be notified in writing by Owners and to be in accordance the description in PART 1, Section 1.

 

 

c.

Owners shall indemnify Charterers in respect of any liability, loss damage or expense of whatsoever nature arising out of and/or in connection with any Breakdown, including (but not in any way limited to) any increased costs relating to fuel (whether pursuant to clause 18.2(b), or as a result of the Vessel burning more fuel or more fuel of a certain specification than would have been the case had there been no Breakdown).

 

 

d.

If any Breakdown continues or is expected to continue for 45 days, then without prejudice to any other rights Charterers may have under this Charter, Charterers shall have the option of terminating this Charter by giving notice in writing to Owners. Termination shall take effect from the date on which such notice is received by Owners or from any later date stated in such notice.

 

 

e.

Upon termination in accordance with this Clause, Owners shall forthwith remit to Charterers and hire paid in advance and not earned as at the date of termination and any other monies owing, including but not limited to the cost of bunkers on board at the time the Breakdown first occurred.

 

 

f.

For the purposes of this clause and clause 31, "Breakdown" means any situation where the Certified EGC Technology breaks down, becomes unusable, loses certification or no longer conforms to the relevant requirements of regulation 4 MARPOL Annex VI or such other Flag state accreditation or fails to provide effective equivalence to the requirements of regulations 14.1 of MARPOL Annex VI when burning fuel her Main and Auxiliary Engines with sulphur content in excess of 0.5%.

 

 

30

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022
 

 

14.

BIMCO COVID-19 CREW CHANGE CLAUSE FOR TIME CHARTER PARTIES 2020:

 

(a)    In addition to any other right to deviate under this contract, the Vessel shall have the liberty to deviate under this contract, the Vessel shall have the liberty to deviate for crew changes if COVID-19 related restrictions prevent crew changes from being conducted at the ports or places to which the Vessel has been ordered or within the scheduled port of call. Any deviation under this clause shall not be deemed to be an infringement or breach of this contract, and Owners shall not be liable for any loss or damage resulting therefrom. If Owners need to deviate a ship for crew change at the ports or places to which the vessel has been ordered or within the scheduled period of call, Owners always have to inform Charterers of intended crew changes in advance at least two weeks in advance prior to vessel departure a last discharge port including a name of port/place and details of crew to join a ship and requires charterers consent prior to it is arranged. Any cost including but not limited to port changes, bunker consumed is to be for Owners account and vessel is to be remained off-hire. (comments: in laden passage, it is beyond of our control to make a deviation to be made for crew change, hence, we are not in position to have this kind of commitment)

 

(b)    Owners shall exercise the right under subclause (a) above with due regard to Charterers' interests and shall notify Charterers in writing as soon as reasonably possible of any intended deviation for crew change purposes but always not later than two weeks in advance as described in (a)

 

(c)    Charterers shall procure that subclause (a) shall be incorporated into any sub charter parties, bills of lading, waybills, or other documents evidencing contracts of carriage issued pursuant to this Charter Party.

 

(d)    During the period of such deviation the Vessel shall:

 

 

(i)

* remain on hire, but at a reduced rate of the hire of USD...................per day. In the absence of an agreed amount, fifty percent (50%) of the hire rate shall apply. The cost of bunkers consumed shall be shared equally between Owners and Charterers.

 

(e)    While the Vessel is at the port of deviation all port changes, pilotage and other expenses arising out of such crew changes shall be for the Owners' account.

 

*(d)(i) and (d)(ii) are alternatives. Delete whichever is not applicable. In the absence of deletions alternative (d)(i) shall apply.

 

 

15.

INFECTIOUS DISEASE CLAUSE

 

 

(a)

For the purposes of this Clause, the words:

 


 

31

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022
 


"Disease" means a highly infectious or contagious disease that is seriously harmful to human health and/or which has been declared by the World Health Organisation to be a Public Health Emergency of International Concern (PHEIC).

 

"Affected Area" means any port or place where due to the previous occurrence of the Disease in the affected port, has been assessed by the World Health Organisation as "high" risk and there is a serious risk of exposure to the Vessel, crew or other persons on board to the Disease and/or to a serious risk of quarantine or other restrictions being imposed in connection with the Disease.

 

(b)    The Vessel shall not be obliged to proceed to or continue to or remain at any place which, in the reasonable judgement of the Master/Owners, is deemed to be confirmed as an Affected Area as defined by Clause (a).

 

(c)    If the Owners decide in accordance with Sub-clause (b) that the Vessel shall not proceed or continue to an Affected Area they shall immediately notify the Charterers.

 

(d)    If the Vessel is at any place that has which the Master in his reasonable judgement considers to have become an Affected Area, the Vessel may leave immediately, with or without cargo on board, after notifying and agreed by the Charterers. Vessel is to proceed to an alternative location as directed by the Charterers within 3 working days of receipt of the Owners' notification. The Vessel shall remain on hire throughout and the Charterers shall be responsible for all additional costs, expenses and liabilities incurred in connection with such orders/delivery of cargo.

 

(e)    In the event of Sub clause (c) or (d) the Charterers shall be obliged, notwithstanding any other terms of this Charter Party, to issue alternative voyage orders. If the Charterers do not issue such alternative voyage orders within forty eight (48) hours of receipt of the Owners' notification, the Owners may discharge any cargo already on board at any port or place. The Vessel shall remain on hire throughout and the Charterers shall be responsible for all additional costs, expenses and liabilities incurred in connection with such orders/delivery of cargo.

 

(f)    In any event, the Owners shall not be obliged to load cargo or to sign, and the Charterers shall not allow or authorise the issue on the Owner's behalf of bills of lading, waybills or other documents evidencing contracts of carriage for any Affected Area.

 

(g)    The Charterers shall indemnify the Owners for any direct costs, expenses or liabilities incurred by the Owners, including claims from holders of bills of lading, as a consequence of the Vessel waiting for and/or complying with the alternative voyage orders.

 

(h)    If, notwithstanding Sub-clauses (b) to (f), the Vessel does proceed to or continue to or remain at an Affected Area:

 

(i)    The Owners shall notify the Charterers of their decision but the Owners shall not be deemed to have waived any of their rights under this Charter Party.

 

(ii)    The Owners shall endeavour to take such reasonable measures in relation to the Disease as may from time to time be recommended by the World Health Organisation.

 

32

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022
 

(iii)    Any direct additional costs, expenses or liabilities whatsoever arising out of the Vessel visiting or having visited an Affected Area as per Charterers instruction, including but not limited to screening, cleaning, fumigating and/or quarantining the Vessel and its crew, shall be for the Charterers' account and the Vessel shall remain on hire throughout unless otherwise it was caused by crew or crew's misconduct.

 

(i)    The Vessel shall have liberty to comply with all orders, directions, recommendations or advice of competent authorities and/or the Flag State of the Vessel in respect of arrival, routes, ports of call, destinations, discharge of cargo, delivery or in any other respect whatsoever relating to issues arising as a result of the Vessel being or having been ordered to an Affected Area but always has to be discussed and agreed by Charterers in advance which is not to be unreasonably withheld. If there will be any fine, additional cost, penalty, loss of time, for vessel's compliance with Charterers orders against authorities instructions, etc as per above, same will be for Charterers Account.

 

(j)    If in compliance with this Clause anything is done or not done, such shall not be deemed a deviation, nor shall it be or give rise to an off-hire event, but shall be considered as due fulfilment of this Charter Party. In the event of a conflict between the provisions of this Clause and any implied or express provision of this Charter Party, this Clause shall prevail to the extent of such conflict, but no further.

 

(k)    The Charterers shall indemnify the Owners if after the currency of this Charter Party any direct delays, costs, expenses or liabilities whatsoever are incurred as a result of the Vessel having visited an Affected Area during the currency of this Charter Party by Charterer's instructions.

 

(l)    The Charterers will make best efforts to shall procure that this Clause shall be incorporated into all sub-charters and bills of lading, waybills or other documents evidencing contracts of carriage issued pursuant to this Charter Party.

 

Any costs or delays from an infection arising from events prior to delivery on this charter or from owners matter and/or crew change always to be for owners account.

 

 

16.

OWNERS UNDER KEEL CLEARANCE AND AIR CLEARANCE POLICY

 

Please see the attached Appendix 1.

 

 

17.

AGM Clause

 

In case vessel has called the past 2 years in a country that has been identified as source of Asian Gypsy Moth (AGM), owners are responsible to obtain relevant inspection certificate which has to state that vessel is free of AGM. In case vessel will call at such a country during the chartered period, owners will arrange for relevant inspection but associated costs will be on charts account.

 

 

18.

AIRDRAFT

 

Owners confirm Eco oceano Ca will be delivered with collapsible mast and max air draft 136ft in ballast condition

 

33


 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

For Eco Bel air and Eco Beverly Hills owners confirm that they within maximum 6 months from delivery owners will install collapsible mast their time and expensive to permanently comply easily with max 136 air draft in ballast condition. Until such modifications are made, owners do confirm both vessels will be able to comply with max 136ft air draft in ballast condition regardless via trim.

 

 

19.

KYC

 

TRAFIGURA KYC CLAUSE: OWNERS SHALL PROVIDE ALL KYC DOCUMENTATION REQUESTED BY TRAFIGURA UNDER POINT 1-4 HEREBELOW PROMPTLY UPON REQUEST. IF OWNERS DO NOT PASS TRAFIGURA KYC REQUIREMENTS TO TRAFIGURA'S SATISFACTION, OR FAIL TO PROVIDE ALL REQUESTED DOCUMENTATION, TRAFIGURA SHALL HAVE THE RIGHT (BUT NOT THE OBLIGATION) TO WITHHOLD PAYMENTS OF FRIEGHT / HIRE WITHOUT ANY LIABILITY UNTIL THE KYC REQUIREMENTS ARE MET.

 

 

20.

LOIs

 

LETTER OF INDEMNITY FOR BLENDING

 

To:                   [Insert name of Owners]                                                                   [insert date]

                     The Owners of the [insert name of ship]

                     [insert address]

 

Dear Sirs

 

Ship:                       [insert name of ship]

Charter Party:         [insert details & date]

Voyage:                  [insert load and discharge ports as stated in the bill of lading]

Cargo(es):               [quantity & type]

Bill of lading:          No. _______            dated_______         issued at _______

Bill of lading:          No. _______           dated _______         issued at _______

 

The above ship, under our charter & commercial operation, and in line with our instructions shall load/has loaded the following cargoes:

(i)         [Cargo quantity & type] in cargo tanks [number, location] shipped by [insert name of shipper] and consigned to [insert name of consignee or party to whose order the bill of lading is made out, as appropriate] for delivery at the port of [insert name of discharge port stated in the bill of lading]

(ii)         [Cargo quantity & type] in cargo tanks [number, location] shipped by [insert name of shipper] and consigned to [insert name of consignee or party to whose order the bill of lading is made out, as appropriate] for delivery at the port of [insert name of discharge port stated in the bill of lading]

We have requested you to blend the cargo loaded on the Vessel at …… and …… in the above tanks and we warrant and confirm that such operation shall be subject to compliance with relevant safety rules and the technical characteristics of the Vessel.

We warrant that the cargoes to be blended on board shall be stable and compatible and that no precipitation of solid deposits in cargo tanks, pipelines, pumps or valves will occur.

 

 

34

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

We undertake to return all three (3) original copies of all bills of lading issued in respect of the cargoes to be blended to Owners for cancellation. Upon return of the original bills of lading as aforesaid, Owners will issue replacement bills of lading in respect of the blended cargo, which state on their face:

i.          the details from the bill(s) of lading pursuant to which the cargoes were originally loaded, including the nature of the cargo, the original quantity loaded and the date and place of loading; and

ii.          the place and date that the blending took place.

 

In consideration of your complying with our request as aforesaid ("the Requested Activity"), we hereby agree as follows:

 

1. To indemnify you, your servants and agents and to hold all of your harmless in respect of any liability, loss, damage or expense of whatsoever nature and howsoever arising which you may sustain by reason of the Requested Activity as per our request and express instruction.

2. In the event of any proceedings being commenced against you, the vessel or any of your servants or agents in connection with or by reason of the Requested Activity as per our request and express instruction as aforesaid, to provide you or them on demand with sufficient fund to defend the same.

3. If, in connection with or by reason of the Requested Activity, the ship or any other ship or property in the same or associated ownership, management, possession or control, should be arrested or detained or should the arrest or detention thereof be threatened, or should there be any interference in the use or trading of the vessel (whether by virtue of a caveat being entered on the ship's registry or otherwise howsoever), to provide on demand such bail or other security as may be required to prevent such arrest or detention or to secure the release of such ship or property or to remove such interference and to indemnify you in respect of any liability, loss, damage or expense caused by such arrest or detention or threatened arrest or detention or such interference may be justified.

4. If, in connection with or by reason of the Requested Activity as aforesaid, the ship should be arrested or detained or should the arrest or detention thereof be threated, or should there be any interference in the use or trading of the vessel (whether by virtue of caveat being entered on the ship's registry or otherwise howsoever) to continue to pay all sums, dues, disbursements and expenses contractually required of us under the subject Charter Party dated ____ throughout any such period of delay whatsoever and we confirm vessel shall always remain on-hire throughout any and all such periods.

5. For the avoidance of doubt and without any limitation whatsoever, in the event that damage or discolouration of or to the cargo tank and/or pipeline coatings occurs or if as a result of incompatibility of either the cargoes being blended and/or any cargo residues present in the tanks, precipitation or lay down of solids arises; to indemnify you in respect of any and/or all costs incurred in repair and/or re-coating and/or cleaning of the tank and/or pipeline coatings.

6. The liability of each and every person under this indemnity shall be joint and several and shall not be conditional upon your proceedings first against and person, whether or not such person is part to or liable under this indemnity.

7. This indemnity shall be governed by and construed in accordance with English Law and each and every person liable under this indemnity shall at your request submit to the jurisdiction of the High Court of Justice of England. We therefore undertake that we will within 14 days of the receipt from you of a request so to do, instruct and authorise solicitors forthwith to accept on our behalf hereunder service of any proceedings that may be commenced by you, your servants, employees and agents against the requestor hereunder or any related company, employee, entity or asset thereof under the terms of this indemnity.

 

35

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

[Signed] ………….
For and on behalf of Charterers

 

 

36

 

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

 

 

LETTER OF INDEMNITY FOR ADDITIVES OR DYE CARGO

To:                   [insert name of Owners]                                                             [insert date]

                     The Owners of the [insert name of ship]

                     [insert address]

 

Dear Sirs

Ship:                       [insert name of ship]

Charter Party:         [insert details & date]

Voyage:                  [insert load and discharge ports as stated in the bill of lading]

Cargo(es):              [quantity & type]

Bill of lading:          No._______        dated _______       issued at _______

 

The above ship, under our charter & commercial operation, and in line with our instructions shall load/has loaded the following cargoes:

(i)          [Cargo quantity & type] in cargo tanks [number, location] shipped by [insert name of shipper] and consigned to [insert name of consignee or party to whose order the bill of lading is made out, as appropriate] for delivery at the port of [insert name of discharge port stated in the bill of lading]

(ii)         [Cargo quantity & type] in cargo tanks [number, location] shipped by [insert name of shipper] and consigned to [insert name of consignee or party to whose order the bill of lading is made out, as appropriate] for delivery at the port of [insert name of discharge port stated in the bill of lading]

 

We have requested you to permit our representative/surveyor to add, or dye [insert details] to the cargo in the tanks at [location] ("the Requested Activity"), and in consideration of your agreement to the agreement to the requested we hereby agree as follows:

 

We warrant that any cargo into which additives, or dye shall be introduced, shall be stable and compatible and that no precipitation of solid deposits in cargo tanks, pipes, pumps, valves will occur, and that any such additivisation, or dye shall be always in strict compliance with safety rules, and subject to the technical characteristics of the Vessel; and that any additional costs incurred as a result of additivisation, or dye operations shall be for our account.

 

In consideration of your complying with our request as aforesaid ("the Requested Activity"), we hereby agree as follows:

1. To indemnify you, your servants and agents and to hold all of you harmless in respect of any liability, loss, damage or expense of whatsoever nature which you may sustain by reason of the Requested Activity as per our request and express instruction.

2. In the event of any proceedings being commenced against you, the vessel or any of your servants or agents in connection with or by reason of the Requested Activity as per our request and express instruction as aforesaid, to provide you or them on demand with sufficient funds to defend the same.

3. If, in connection with or by reason of the Requested Activity, the ship, or any other ship or property in the same or associated ownership, management, possession or control, should be arrested or detained or should the arrest or detention thereof be threatened, or should there be any interference in the use or trading of the vessel (whether by virtue of a caveat being entered on the ship's registry or otherwise howsoever), to provide on demand such bail or other security as may be required to prevent such arrest or detention or to secure the release of such ship or property or to remove such interference and to indemnify you in respect of any liability, loss, damage or expense caused by such arrest or detention or threatened arrest or detention or such interference, whether or not such arrest or detention or threatened arrest or detention or such interference may be justified.


 

37

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

4. If, in connection with or by reason of the Requested Activity as aforesaid, the ship should be arrested or detailed or should the arrest or detention thereof be threatened, or should there be any interference in the use or trading of the vessel (whether by virtue of caveat being entered on the ship's registry or otherwise howsoever) to continue to pay all sums, dues, disbursements and expenses contractually required of us under the subject Charter Part dated_______    throughout any such period of delay whatsoever and we confirm vessel shall always remain on-hire throughout any and all such period.
5. For the avoidance of doubt and without any limitation whatsoever, in the event that damage or discolouration of or to the cargo tank and/or pipeline coatings occurs, to indemnify you in respect of any and/or all costs incurred in repair and/or all costs incurred in repair and/or re-coating and/or cleaning of the tank and/or pipeline coatings.
6. The liability of each and every person under this indemnity shall be joint and several and shall not be conditional upon your proceeding first against any person, whether or not such person is party to or liable under this indemnity.
7. This indemnity shall be governed by and construed in accordance with English Law and each and every person liable under this indemnity shall at your request submit to the jurisdiction of the High Court of Justice of England. We therefore undertake that we will within 14 days of the receipt from you of a request so to do, instruct and authorise solicitors forthwith to accept on our behalf hereunder service of any proceedings that may be commenced by you, your servants, employees and agents against the requestor hereunder or any related company, employee, entity or asset thereof under the terms of this indemnity.

 

 

[Signed]………………

For and on behalf of Charterers



 

38

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

LETTER OF INDEMNITY FOR CARRYING ADDITIVES/DYE DRUMS ON DECK

 

To:                  [insert name of Owners]                                                             [insert date]

                    The Owners of the [insert name of ship]

                    [insert address]

 

Dear Sirs

Ship:                       [insert name of ship]

Charter Party:         [insert details & date]

Voyage:                  [insert load and discharge ports as stated in the bill of lading]

Cargo(es):               [quantity & type]

Bill of lading:          No._______         dated _______       issued at _______

Bill of lading:          No. _______        dated _______       issued at _______

 

The above ship, under our charter & commercial operation, and in line with our instructions shall load/has loaded the following cargoes:

(i)          [Cargo quantity & type] in cargo tanks [number, location] shipped by [insert name of shipper] and consigned to [insert name of consignee or party to whose order the bill of lading is made out, as appropriate] for delivery at the port of [insert name of discharge port stated in the bill of lading]

(ii)         [Cargo quantity & type] in cargo tanks [number, location] shipped by [insert name of shipper] and consigned to [insert name of consignee or party to whose order the bill of lading is made out, as appropriate] for delivery at the port of [insert name of discharge port stated in the bill of lading]

We, [insert name of the requestor] , have requested you to carry the [insert details of additive/dye] additive or dye in drums/pales [insert number of pales/drums] that sum up to [insert total quantity in litters] on deck from load port to discharge port.

We hereby request you to follow our instructions and allow us and/or our agents and/or our servants and/or the shippers to load the above drums/pales onto the vessel and your crew to safely and properly stow them.

All appropriate shipping documents and MSDS will be delivered to the vessel.

In consideration of your complying with our request as aforesaid (“the Requested Activity”), we hereby agree as follows:

 

1. To indemnify you, your servants and agents and to hold all of you harmless in respect of any liability, loss, damage or expense of whatsoever nature which you may sustain by reason of the Requested Activity as per our request and express instruction.

2. In the event of any proceedings being commenced against you, the vessel or any of your servants or agents in connection with or by reason of the Requested Activity as per our request and express instruction as aforesaid, to provide you or them on demand with sufficient funds to defend the same.

3. If, in connection with or by reason of the Requested Activity, the ship, or any other ship or property in the same or associated ownership, management, possession or control, should be arrested or detained or should the arrest or detention thereof be threatened, or should there be any interference in the use or trading of the vessel (whether by virtue of a caveat being entered on the ship's registry or otherwise howsoever), to provide on demand such bail or other security as may be required to prevent such arrest or detention or to secure the release of such ship or property or to remove such interference and to indemnify you in respect of any liability, loss, damage or expense caused by such arrest or detention or threatened arrest or detention or such interference, whether or not such arrest or detention or threatened arrest or detention or such interference may be justified.


 

1


RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

4. If, in connection with or by reason of the Requested Activity as aforesaid, the ship should be arrested or detailed or should the arrest or detention thereof be threatened, or should there be any interference in the use or trading of the vessel (whether by virtue of caveat being entered on the ship's registry or otherwise howsoever) to continue to pay all sums, dues, disbursements and expenses contractually required of us under the subject Charter Part dated _____________          throughout any such period of delay whatsoever and we confirm vessel shall always remain on-hire throughout any and all such periods.

5. For the avoidance of doubt and without any limitation whatsoever, in the event that the drums/pales will damage by any cause and anyhow vessel’s equipment, to indemnify you in respect of any and/or all costs incurred in repair and/or re-coating and/or cleaning of the rails and/or deck and/or bulkheads and/or pipeline coatings. Owners will not be held liable for any damage by any cause on the drums/pales.

6. The liability of each and every person under this indemnity shall be joint and several and shall not be conditional upon your proceeding first against any person, whether or not such person is party to or liable under this indemnity.

7. This indemnity shall be governed by and construed in accordance with English Law and each and every person liable under this indemnity shall at your request submit to the jurisdiction of the High Court of Justice of England. We therefore undertake that we will within 14 days of the receipt from you of a request so to do, instruct and authorise solicitors forthwith to accept on our behalf hereunder service of any proceedings that may be commenced by you, your servants, employees and agents against the requestor hereunder or any related company, employee, entity or asset thereof under the terms of this indemnity.

 

[Signed]………………

 

For and on behalf of Charterers
 

2

 

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

LETTER OF INDEMNITY FOR SINGLE VALVE SEGREGATION

 

 

To:                           [insert name of Owners]                                                                    [insert date]

                             The Owners of the [insert name of ship]

                             [insert address]

 

Dear Sirs

 

Ship:                       [insert name of ship]

Charter Party:         [insert details & date]

Voyage:                  [insert load and discharge ports as stated in the bill of lading]

Cargo(es):              [quantity & type]

Bill of lading:         No. _______        dated  _______        issued at _______

 

The above ship, under our charter & commercial operation, and in line with our instructions shall load/has loaded the following cargoes:

(i)          [Cargo quantity & type] in cargo tanks [number, location] shipped by [insert name of shipper] and consigned to [insert name of consignee or party to whose order the bill of lading is made out, as appropriate] for delivery at the port of [insert name of discharge port stated in the bill of lading]

(ii)         [Cargo quantity & type] in cargo tanks [number, location] shipped by [insert name of shipper] and consigned to [insert name of consignee or party to whose order the bill of lading is made out, as appropriate] for delivery at the port of [insert name of discharge port stated in the bill of lading]

 

Although the cargoes shall be loaded always within the vessel's natural segregation, we hereby irrevocable acknowledge and accept that the above ship shall only maintain single valve segregation between the cargo tanks mentioned above and along the corresponding cargo line, during and throughout all cargo operations and all such time the above mentioned cargoes remain on-board the vessel.

Nonetheless we, [insert name of the requestor], hereby, request you to follow our instructions and allow us and/or our agents and/or our servants and/or the shippers to load, stow and discharge the above cargoes in and from the above referenced cargo tanks, despite the fact that only single valve segregation shall be maintained throughout such operations and the course of the voyage.

 

In consideration of your complying with our request as aforesaid ("the Requested Activity"), we hereby agree as follows:

1. To indemnify you, your servants and agents and to hold all of you harmless in respect of any liability, loss, damage or expense of whatsoever nature which you may sustain by reason of the Requested Activity as per our request and express instruction.

2. In the event of any proceedings being commenced against you, the vessel or any of your servants or agents in connection with or by reason of the Requested Activity as per our request and express instruction as aforesaid, to provide you or them on demand with sufficient funds to defend the same.

3. If, in connection with or by reason of the Requested Activity, the ship, or any other ship or property in the same or associated ownership, management, possession or control, should be arrested or detained or should the arrest or detention thereof be threatened, or should there be any interference in the use or trading of the vessel(whether by virtue of a caveat being entered on the ship's registry or otherwise howsoever), to provide on demand such bail or other security as may be required to prevent such arrest or detention or to secure the release of such ship or property or to remove such interference and to indemnify you in respect of any liability, loss, damage or expense or expense caused by such arrest or detention or threatened arrest or detention or such interference, whether or not such arrest or detention or threatened arrest or detention or such interference may be justified.


 

3

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

4. If, in connection with or by reason of the Requested Activity as aforesaid, the ship should be arrested or detained or should the arrest or detention thereof be threatened, or should there be any interference in the use of trading of the vessel (whether by virtue of caveat being entered on the ship's registry or otherwise howsoever) to continue to pay all sums, dues, disbursements and expenses contractually required of us under the subject Charter Party dated _______ throughout any such period of delay whatsoever and we confirm vessel shall always remain on-hire throughout any and all such periods.

5. For the avoidance of doubt and without any limitation whatsoever, in the event that damage or discolouration of or to the cargo tank and/or pipeline coatings occurs, to indemnify you in respect of any and/or all costs incurred in repair and/or re-coating and/or cleaning of the tank and/or pipeline coatings.

6. The liability of each and every person under this indemnity shall be joint and several and shall not be conditional upon your proceeding first against any person, whether or not such person is party to or liable under this indemnity.

7. This indemnity shall be governed by and construed in accordance with English Law and each and every person liable under this indemnity shall at your request submit to the jurisdiction of the High Court of Justice of England. We therefore undertake that we will within 14 days of the receipt so to do, instruct and authorise solicitors forthwith to accept on our behalf hereunder service of any proceedings that may be commenced by you, your servants, employees and agents against the requestor hereunder or any related company, employee, entity or asset thereof under the terms of this indemnity.

 

 

[Signed]……………………..

For and on behalf of Charterers
 

4

 

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

LETTER OF INDEMNITY FOR LINE SHARING

  

To:                          [insert name of Owners]                                                                   [insert date]

                           The Owners of the [insert name of ship]

                           [insert address]

 

Dear Sirs

 

Ship:                       [insert name of ship]

Charter Party:         [insert details & date]

Voyage:                  [insert load and discharge ports as stated in the bill of lading]

Cargo(es):              [quantity & type]

Bill of lading:         No. _______        dated _______        issued at _______

 

The above ship, under our charter & commercial operation, and in line with our instructions shall load/has loaded the following cargoes:

(i)          [Cargo quantity & type] in cargo tanks [number, location] shipped by [insert name of shipper] and consigned to [insert name of consignee or party to whose order the bill of lading is made out, as appropriate] for delivery at the port of [insert name of discharge port stated in the bill of lading]

(ii)         [Cargo quantity & type] in cargo tanks [number, location] shipped by [insert name of shipper] and consigned to [insert name of consignee or party to whose order the bill of lading is made out, as appropriate] for delivery at the port of [insert name of discharge port stated in the bill of lading]

 

Although the cargoes shall be loaded always within the vessel's natural segregation, we [insert name of the requestor], hereby request that the above cargo be loaded onboard into the ships cargo tanks [insert cargo tanks] by using same line [insert line no] from vessel's manifold until the vessel's cross over and we accept that there is a possibility of contamination between the above parcels (The Request).

 

In consideration of your complying with our request as aforesaid ("the Requested Activity"), were hereby agree as follows:

1. To indemnify you, your servants and agents and to hold all of you harmless in respect of any liability, loss, damage or expense of whatsoever nature which you may sustain by reason of the Requested Activity as per our request and express instruction.

2. In the event of any proceedings being commenced against you, the vessel or any of your servants or agents in connection with or by reason of the Requested Activity as per our request and express instruction as aforesaid, to provide you or them on demand with sufficient funds to defend the same.

3. If, in connection with or by reason of the Requested Activity, the ship, or any other ship or property in the same or associated ownership, management, possession or control, should be arrested or detained or should the arrest or detention thereof be threatened, or should there be any interference in the use or trading of the vessel(whether by virtue of a caveat being entered on the ship's registry or otherwise howsoever), to provide on demand such bail or other security as may be required to prevent such arrest or detention or to secure the release of such ship or property or to remove such interference and to indemnify you in respect of any liability, loss, damage or expense or expense caused by such arrest or detention or threatened arrest or detention or such interference, whether or not such arrest or detention or threatened arrest or detention or such interference may be justified.




 

5

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022



4. If, in connection with or by reason of the Requested Activity as aforesaid, the ship should be arrested or detained or should the arrest or detention thereof be threatened, or should there be any interference in the use of trading of the vessel (whether by virtue of caveat being entered on the ship's registry or otherwise howsoever) to continue to pay all sums, dues, disbursements and expenses contractually required of us under the subject Charter Party dated _________ throughout any such period of delay whatsoever and we confirm vessel shall always remain on-hire throughout any and all such periods.
5. For the avoidance of doubt and without any limitation whatsoever, in the event that damage or discolouration of or to the cargo tank and/or pipeline coatings occurs, to indemnify you in respect of any and/or all costs incurred in repair and/or re-coating and/or cleaning of the tank and/or pipeline coatings.

6. The liability of each and every person under this indemnity shall be joint and several and shall not be conditional upon your proceeding first against any person, whether or not such person is party to or liable under this indemnity.

7. This indemnity shall be governed by and construed in accordance with English Law and each and every person liable under this indemnity shall at your request submit to the jurisdiction of the High Court of Justice of England. We therefore undertake that we will within 14 days of the receipt so to do, instruct and authorise solicitors forthwith to accept on our behalf hereunder service of any proceedings that may be commenced by you, your servants, employees and agents against the requestor hereunder or any related company, employee, entity or asset thereof under the terms of this indemnity.

 

 

[Signed]……………………..

For and on behalf of Charterers
 

6

 

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

 

LETTER OF INDEMNITY FOR SHORE LINE FLUSHING/PLUGGING

 

To:                           [insert name of Owners]                                                                            [insert date]

                             The Owners of the [insert name of ship]

                             [insert address]

 

Dear Sirs

 

Ship:                       [insert name of ship]

Charter Party:         [insert details & date]

Voyage:                  [insert load and discharge ports as stated in the bill of lading]

Cargo(es):              [quantity & type]

Bill of lading:         No. _______        dated _______        issued at _______

 

The above ship, under our charter & commercial operation, and in line with our instructions shall load/has loaded the following cargoes:

(i)          [Cargo quantity & type] in cargo tanks [number, location] shipped by [insert name of shipper] and consigned to [insert name of consignee or party to whose order the bill of lading is made out, as appropriate] for delivery at the port of [insert name of discharge port stated in the bill of lading]

(ii)         [Cargo quantity & type] in cargo tanks [number, location] shipped by [insert name of shipper] and consigned to [insert name of consignee or party to whose order the bill of lading is made out, as appropriate] for delivery at the port of [insert name of discharge port stated in the bill of lading]

We have requested the Vessel to comply with the requirement of the Terminal and undertake line flushing and/or plugging at the commencement and/or end of cargo operations, which may extend to the receipt of shore line contents onto the Vessel and/or the discharge of seawater into the shore line ("the Requested Activity") and in consideration of your agreement to the requested activity we hereby agree as follows:

 

1. To indemnify you, your servants and agents and to hold all of you harmless in respect of any liability, loss, damage or expense of whatsoever nature which you may sustain by reason of the Requested Activity as per our request and express instruction.

2. In the event of any proceedings being commenced against you, the vessel or any of your servants or agents in connection with or by reason of the Requested Activity as per our request and express instruction as aforesaid, to provide you or them on demand with sufficient funds to defend the same.

3. If, in connection with or by reason of the Requested Activity, the ship, or any other ship or property in the same or associated ownership, management, possession or control, should be arrested or detained or should the arrest or detention thereof be threatened, or should there be any interference in the use or trading of the vessel(whether by virtue of a caveat being entered on the ship's registry or otherwise howsoever), to provide on demand such bail or other security as may be required to prevent such arrest or detention or to secure the release of such ship or property or to remove such interference and to indemnify you in respect of any liability, loss, damage or expense or expense caused by such arrest or detention or threatened arrest or detention or such interference, whether or not such arrest or detention or threatened arrest or detention or such interference may be justified.

4. If, in connection with or by reason of the Requested Activity as aforesaid, the ship should be arrested or detained or should the arrest or detention thereof be threatened, or should there be any interference in the use of trading of the vessel (whether by virtue of caveat being entered on the ship's registry or otherwise howsoever) to continue to pay all sums, dues, disbursements and expenses contractually required of us under the subject Charter Party dated _______ throughout any such period of delay whatsoever and we confirm vessel shall always remain on-hire throughout any and all such periods.


 

7

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022



5. For the avoidance of doubt and without any limitation whatsoever, in the event that damage or discolouration of or to the cargo tank and/or pipeline coatings occurs, to indemnify you in respect of any and/or all costs incurred in repair and/or re-coating and/or cleaning of the tank and/or pipeline coatings.

6. The liability of each and every person under this indemnity shall be joint and several and shall not be conditional upon your proceeding first against any person, whether or not such person is party to or liable under this indemnity.

7. This indemnity shall be governed by and construed in accordance with English Law and each and every person liable under this indemnity shall at your request submit to the jurisdiction of the High Court of Justice of England. We therefore undertake that we will within 14 days of the receipt so to do, instruct and authorise solicitors forthwith to accept on our behalf hereunder service of any proceedings that may be commenced by you, your servants, employees and agents against the requestor hereunder or any related company, employee, entity or asset thereof under the terms of this indemnity.

 

 

[Signed] …………………….

For and on behalf of Charterers

8

 

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

 

LETTER OF INDEMNITY FOR COMMINGLING

 

To:                            [insert name of Owners]                                                                     [insert date]

                             The Owners of the [insert name of ship]

                             [insert address]

 

Dear Sirs

 

Ship:                        [insert name of ship]

Charter Party:          [insert details & date]

Voyage:                   [insert load and discharge ports as stated in the bill of lading]

Cargo(es):               [quantity & type]

Bill of lading:          No. _______         dated _______         issued at _______

Bill of lading:          No. _______         dated _______        issued at _______

 

The above ship, under our charter & commercial operation, and in line with our instructions shall load/has loaded the following cargoes:

(i)          [Cargo quantity & type] in cargo tanks [number, location] shipped by [insert name of shipper] and consigned to [insert name of consignee or party to whose order the bill of lading is made out, as appropriate] for delivery at the port of [insert name of discharge port stated in the bill of lading]

(ii)         [Cargo quantity & type] in cargo tanks [number, location] shipped by [insert name of shipper] and consigned to [insert name of consignee or party to whose order the bill of lading is made out, as appropriate] for delivery at the port of [insert name of discharge port stated in the bill of lading]

We have requested you to comingle the cargo loaded on the Vessel at …….and……. in the above tanks and we warrant and confirm that such operation shall be subject to compliance with relevant safety rules and the technical characteristics of the Vessel.

We warrant that the cargoes to be comingled on board shall be stable and compatible and that no precipitation of solid deposits in cargo tanks, pipelines, pumps or valves will occur.

We undertake to return all three (3) original copies of all bills of lading issued in respect of the cargoes to be comingled to Owners for cancellation. Upon return of the original bills of lading as aforesaid, Owners will issue replacement bills of lading in respect of the comingled cargo, which state on their face:

i.          the details from the bill(s) of lading pursuant to which the cargoes were originally loaded, including the nature of the cargo, the original quantity loaded and the date and place of loading; and

ii.         the place and date that the comingling took place.

 

In consideration of your complying with our request as aforesaid ("the Requested Activity"), we hereby agree as follows:

 

1. To indemnify you, your servants and agents and to hold all of you harmless in respect of any liability, loss, damage or expense of whatsoever nature which you may sustain by reason of the Requested Activity as per our request and express instruction.

2. In the event of any proceedings being commenced against you, the vessel or any of your servants or agents in connection with or by reason of the Requested Activity as per our request and express instruction as aforesaid, to provide you or them on demand with sufficient funds to defend the same.



 

9

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 


3. If, in connection with or by reason of the Requested Activity, the ship, or any other ship or property in the same or associated ownership, management, possession or control, should be arrested or detained or should the arrest or detention thereof be threatened, or should there be any interference in the use or trading of the vessel(whether by virtue of a caveat being entered on the ship's registry or otherwise howsoever), to provide on demand such bail or other security as may be required to prevent such arrest or detention or to secure the release of such ship or property or to remove such interference and to indemnify you in respect of any liability, loss, damage or expense or expense caused by such arrest or detention or threatened arrest or detention or such interference, whether or not such arrest or detention or threatened arrest or detention or such interference may be justified.
4. If, in connection with or by reason of the Requested Activity as aforesaid, the ship should be arrested or detained or should the arrest or detention thereof be threatened, or should there be any interference in the use of trading of the vessel (whether by virtue of caveat being entered on the ship's registry or otherwise howsoever) to continue to pay all sums, dues, disbursements and expenses contractually required of us under the subject Charter Party dated _____ throughout any such period of delay whatsoever and we confirm vessel shall always remain on-hire throughout any and all such periods.

5. For the avoidance of doubt and without any limitation whatsoever, in the event that damage or discolouration of or to the cargo tank and/or pipeline coatings occurs, to indemnify you in respect of any and/or all costs incurred in repair and/or re-coating and/or cleaning of the tank and/or pipeline coatings.

6. The liability of each and every person under this indemnity shall be joint and several and shall not be conditional upon your proceeding first against any person, whether or not such person is party to or liable under this indemnity.

7. This indemnity shall be governed by and construed in accordance with English Law and each and every person liable under this indemnity shall at your request submit to the jurisdiction of the High Court of Justice of England. We therefore undertake that we will within 14 days of the receipt so to do, instruct and authorise solicitors forthwith to accept on our behalf hereunder service of any proceedings that may be commenced by you, your servants, employees and agents against the requestor hereunder or any related company, employee, entity or asset thereof under the terms of this indemnity.

 

 

[Signed] …………………….

For and on behalf of Charterers

10

 

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022


 

INT GROUP A

STANDARD FORM LETTER OF INDEMNITY TO BE GIVEN IN RETURN FOR DELIVERING CARGO WITHOUT PRODUCTION OF THE ORIGINAL BILL OF LADING

 

To:                             [insert name of Owners]                                                                       [insert date]

                              The Owners of the [insert name of ship]

                              [insert address]

 

Dear Sirs

 

Ship:                         [insert name of ship]

 

Voyage:                    [insert load and discharge ports as stated in the bill of lading]

 

Cargo:                      [insert description of cargo]

 

Bill of lading           [insert identification numbers, date and place of issue]

 

The above cargo was shipped on the above ship by [insert name of shipper] and consigned to [insert name of consignee or party to whose order the bill of lading is made out, as appropriate] for delivery at the port of [insert name of discharge port stated in the bill of lading] but the bill of lading has not arrived and we, [insert name of party requesting delivery], hereby request you to deliver the said cargo to "X [name of the specific party] or to such party as you believe to be or to represent X" or to be acting on behalf of X" at [insert place where delivery is to be made] without production of the original bill of lading.

 

In consideration of your complying with our above request, we hereby agree as follows:

 

1.

To indemnify you, your servant and agents and to hold all of you harmless in respect of any liability, loss, damage or expense of whatsoever nature which you may sustain by reason of delivery the cargo in accordance with our request.

 

2.

In the event of any proceedings being commenced against you or any of your servants or agents in connection with the delivery of the cargo as aforesaid, to provide you or them on demand with sufficient funds to defend the same.

 

3.

If, in connection with the delivery of the cargo as aforesaid, the ship, or any other ship or property in the same or associated ownership, management or control, should be arrested or detained or should the arrest or detention thereof be threatened, or should there be any interference in the use or trading of the vessel (whether by virtue of a caveat being entered on the ship's registry or otherwise howsoever), to provide on demand such bail or other security as may be required to prevent such arrest or detention or to secure the release of such shup or property or to remove such interference and to indemnify you in respect of any liability, loss, damage or expense caused by such arrest or detention or threatened arrest or detention or such interference may be justified.

 

4.

If the place at which we have asked you to make delivery is a bulk liquid or gas terminal or facility or another ship, lighter or barge, then delivery to such terminal, facility, ship, lighter or barge shall be deemed to be delivery to the party to whom we have requested you to make such delivery.

 

11

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

5.

As soon as all original bills of lading for the above cargo shall have come into our possession, to deliver the same to you, or otherwise to cause all original bills of lading to be delivered to you, whereupon our liability hereunder shall cease.

 

6.

The liability of each and every person under this indemnity shall be joint and several and shall not be conditional upon your proceeding first against any person, whether or not such person is part to or liable under this indemnity.

 

7.

This indemnity shall be governed by and construed in accordance with English law and each and every person liable under this indemnity shall at your request submit to the jurisdiction of the High Court of Justice of England.

 

 

Yours faithfully

For and on behalf of

[insert name of Requestor]

The Requestor

 

……………………………………..

Signature

12

 

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022
 

INT GROUP B

 

STANDARD FORM LETTER OF INDEMNITY TO BE GIVEN IN RETURN FOR DELIVERING CARGO AT A PORT OTHER THAN THAT STATED IN THE BILL OF LADING

 

To:                           [insert name of Owners]                                                                       [insert date]

                            The Owners of the [insert name of ship]

                            [insert address]

 

Dear Sirs

 

Ship:                       [insert name of ship]

 

Voyage:                   [insert load and discharge ports as stated in the bill of lading]

 

Cargo:                     [insert description of cargo]

 

Bill of lading          [insert identification numbers, date and place of issue]

 

The above cargo was shipped on the above ship by [insert name of shipper] and consigned to [insert name of consignee or party to whose order the bill of lading is made out, as appropriate] for delivery at the port of [insert name of discharge port stated in the bill of lading] but we, [insert name of party requesting substituted delivery], hereby request you to order the ship to proceed and deliver the said cargo at [insert name of substitute port or place of delivery] ["X [name of the specific party] or to such party as you believe to be or to represent X"] against production of at least one original bill of lading.

 

In consideration of your complying with our above request, we hereby agree as follows:

 

1. To indemnify you, your servants and agents and to hold all of you harmless in respect of any liability, loss, damage or expense of whatsoever nature which you may sustain by reason of the ship proceeding and giving delivery of the cargo against production of at least one original bill of lading in accordance with our request.

 

2. In the event of any proceeding being commenced against you or any of your servants or agents in connection with ship proceeding and giving delivery of the cargo as aforesaid, to provide you or them on demand with sufficient funds to defend the same.

 

3. If, in connection with the delivery of the cargo as aforesaid, the ship, or any other ship or property in the same or associated ownership, management or control, should be arrested or detained or should the arrest or detention thereof be threatened, or should there be any interference in the use or trading of the vessel (whether by virtue of a caveat being entered on the ship's registry or otherwise howsoever), to provide on demand such bail or other security as may be required to prevent such arrest or detention or to secure the release of such ship or property or to remove such interference and to indemnify you in respect of any liability, loss, damage or expense caused by such arrest or detention or threatened arrest or detention or such interference may be justified.

 

13



 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022
 

 

4. The liability of each and every person under this indemnity shall be joint and several and shall not be conditional upon your proceeding first against and person, whether or not such person is party to or liable under this indemnity.

 

5. This indemnity shall be governed by and construed in accordance with English law and each and every person liable under this indemnity shall at your request submit to the jurisdiction of the High Court of Justice of England.

 

 

 

Yours faithfully

For and on behalf of

[insert name of Requestor]

The Requestor

 

 

……………………………….

Signature

14

 

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022


 

INT GROUP C

 

STANDARD FORM LETTER OF INDEMNITY TO BE GIVEN IN RETURN FOR DELIVERING CARGO AT A PORT OTHER THAN THAT STATED IN THE BILL OF LADING AND WITHOUT PRODUCTION OF THE ORIGINAL BILL OF LADING

 

To:                           [insert name of Owners]                                                                    [insert date]

                             The Owners of the [insert name of ship]

                             [insert address]

 

Dear Sirs

 

Ship:                        [insert name of ship]

 

Voyage:                   [insert load and discharge ports as stated in the bill of lading]

 

Cargo:                     [insert description of cargo]

 

Bill of lading          [insert identification numbers, date and place of issue]

 

The above cargo was shipped on the above ship by [insert name of shipper] and consigned to [insert name of consignee or party to whose order the bill of lading is made out, as appropriate] for delivery at the port of [insert name of discharge port stated in the bill of lading] but we, [insert name of party requesting substituted delivery], hereby request you to order the ship to proceed and deliver the said cargo at [insert name of substitute port or place of delivery] ["X [name of the specific party] or to such party as you believe to be or to represent X or to be acting on behalf of X"] without production of the original bill of lading.

 

In consideration of your complying with our above request, we hereby agree as follows:

 

1.     To indemnify you, your servants and agents and to hold all of you harmless in respect of any liability, loss, damage or expense of whatsoever nature which you may sustain by reason of the ship proceeding and giving delivery of the cargo in accordance with our request.

 

2.     In the event of any proceedings being commenced against you or any of your servants or agents in connection with the ship proceeding and giving delivery of the cargo as aforesaid, to provide you or them on demand with sufficient funds to defend the same.

 

3.     If, in connection with the delivery of the cargo as aforesaid, the ship, or any other ship or property in the same or associated ownership, management or control, should be arrested or detained or should the arrest or detention thereof be threatened, or should there be any interference in the use of trading of the vessel (whether by virtue of a caveat being entered on the ship's registry or otherwise howsoever), to provide on demand such bail or other security as nay be required to prevent such arrest or detention or to secure the release of such ship or property or to remove such interference and to indemnify you in respect of any liability, loss damage or expense caused by such arrest or detention or threatened arrest or detention or such interference, whether or not such arrest or detention or threatened arrest or detention or such interference may be justified. If the place at which we have asked you to make delivery is a bulk liquid or gas terminal or facility, or another ship, lighter or barge, then delivery to such terminal, facility, ship, lighter or barge shall be deemed to be delivery to the party to whom we have requested you to make delivery.



 

15

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022




4.     As soon as all original bills of lading for the above cargo shall have come into our possession, to deliver the same to you, or otherwise to cause all original bills of lading to be delivered to you.

 

5.     The liability of each and every person under this indemnity shall be joint and several and shall not be conditional upon your proceeding first against any person, whether or not such person is party to or liable under this indemnity.

 

6.     This indemnity shall be governed by and construed in accordance with English law and each and every person liable under this indemnity shall at your request submit to the jurisdiction of the High Court of Justice in England.

 

Yours faithfully
For and on behalf of
[insert name of Requestor]
The Requestor

 

 

.......................................................
Signature
 

16

 

 

 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

LETTER OF INDEMNITY TO BE GIVEN FOR CARRYING ONE ORIGINAL OF EACH SET OF BILLS OF LADING ON BOARD

 

To:________________ [insert name of owners] of the ___ [insert name of the vessel]

 

Dear Sirs,

 

Ship:
Charterparty:
Voyage:
Cargo:
Bills of lading:

 

Date:

 

***

 

The above cargo was shipped on the above vessel by ______ and consigned to _______ for delivery at __________. We, ______________ , have allowed, through our loadport agents, for one original of each set of the aforementioned bills of lading (copies of which are attached to this LoI) to be placed on board this ship, retained by the Master and carried to the discharge port on board the ship.

 

We hereby request you therefore to instruct the Master to deliver the original bills of lading kept on board to our local discharge port agent, Messrs ________ , who will have such bills of lading endorsed by the lawful bill of lading holders, Messrs ____________ , and presented back to the Master for delivery of the cargo against the original bills of lading duly endorsed by the lawful holders. This request is deemed to also represent the instructions of each of the shippers under the aforementioned bills of lading.

 

In consideration of your complying with our above requests, we hereby agree, undertake, represent and warrant the following:

 

1.     That the reason for requesting you to carry one original of each set of the bills of lading on board the ship and to deliver same to our local discharge port agents as aforesaid is to facilitate prompt delivery of the cargo to the receivers at the discharge port(s).

 

2.     That we will ensure that lawful title to the cargo is properly passed to any intermediate buyers and/or holders of the bills of lading and/or the receivers at the discharge port(s), notwithstanding that one original of each set of the bills of lading has been retained on board the ship and delivered to our local discharge port agents as aforesaid.

 

3.     That we will take the utmost care in assisting the Master in identifying the party(ies) to whom the original of each set of the bills of lading should be delivered at the discharge port(s).

 

17

 


 

RIDER CLAUSES TO TIME CHARTER PARTY

M.T. "Eco Bel Air"

DATED 14th February 2022

 

4.     To indemnify you, your servants and agents and to hold all of you harmless in respect of any liability, loss, damage or expense of whatsoever nature which you may sustain by reason of the ship proceeding and giving delivery of the cargo in accordance with our above request, including any mis-delivery claims and/or claims in respect of the title to the cargo.

 

5.     In the event of any proceedings being commenced against you or any of your servants or agents in connection with the ship proceeding and giving delivery of the cargo as aforesaid, to provide you or them on demand with sufficient funds to defend the same.

 

6.     If, in connection with the delivery of the cargo as aforesaid, the ship, or any other ship or property in the same or associated ownership, management or control should be arrested or detained or should the arrest or detention thereof be threatened, or should there be any interference in the use or trading of the vessel (whether by virtue of a caveat being entered on the ship's registry or otherwise howsoever), to provide on demand such bail or other security as may be required to prevent such arrest or detention or to secure the release of such ship or property or to remove such interference and to indemnify you in respect of any liability, loss, damage or expense caused by such arrest or detention or threatened arrest or detention or such interference may be justified.

 

7.     To deliver all original bills of lading for the above cargo to you, or otherwise to cause all original bills of lading to be delivered to you.

 

8.     The liability of each and every person under this indemnity shall be joint and several and shall not be conditional upon your proceeding first against any person, whether or not such person is party to or liable under this indemnity.

 

9.     This indemnity shall be governed by and construed in accordance with English law and the arbitration/jurisdiction clause of the Charterparty shall be incorporated herein with logical amendments.

 

Yours faithfully

 

For and on behalf of

 

[insert name of requestor]

 

The Requestor

 

........................................................
Signature

 


 

 

18
 

 
 

Exhibit 4.35

 

  IT IS THIS DAY AGREED between South California Inc.
of Marshall Islands (hereinafter referred to as "Owners"), being owners of the
good motor/steam* vessel called Eco Bel Air (ex. Hull S874) - IMO No. 9794056
(hereinafter referred to as "the vessel") described as per Clause 1 hereof and Trafigura Maritime Logistics Pte. Ltd. of Singapore (hereinafter referred to as "Charterers")

 

Description and Condition of Vessel  

1.

At the date of delivery of the vessel under this charter and throughout the charter period:

 

(a)     she shall be classed by a Classification Society which is a member of the InternationalAssociation of Classification Societies;

 

(b)

she shall be in every way fit to carry crude petroleum and/or its products THREE (3) grades of cargo alwayswithin vessel's natural segregation, Crude Petroleum Products, Crude condensate, Fuel oil(s) and DirtyPetroleum Products, excluding any heated cargo, Carbon Black Feedstock, Low Sulphur Waxy ResiduesBitumen, Orlmulsion, Asphalt and or Asphalt residue and always consistent with vessel's certification andDesign capabilities.Charts have the right to load five (5) grades of Crude Oil cargoes, always in compliance with Ship'sLoadicator and Trim and Stability Booklet, provided that two (2) grades are to be compatible and Owner will  not to be held responsible for any kind of contamination between such compatible grades.  Charterersresponsibility to confirm cargo grades compatibility.

 

  Charterers shall have the option load and carry CPP (including but not limited to gasoil/ulsd/gasoline/jet) without LOI until  such a time where a DPP cargo is loaded onboard the ship after which charterers shall no longer have the option to trade the  vessel in CPP.  Always in compliance with the attached vessel's "Tank Coating Resistance List" provided by Paint  Manufacturer and Shipyard (Vessel's PSPC COT Certified Coasting System is BANNOH 1500 (QD)).
In such case, if any fresh water rinsing / tank cleaning . preparation for such cargoes, including any time (if needed) will be for charterers account. 

 

 

(c)

she shall be tight, staunch, strong, in good order and condition, and in every way fit for the  service, with her machinery, boilers, hull and other equipment (excluding but not limited to hull  stress calculator, radar, computers and computer systems) in a good and efficient state: 

     
 

(d)

her tanks, valves and pipelines shall be oil-tight; 

     
 

(e)

she shall be in every way fitted for burning, in accordance with the grades specified in Clause 29 hereof:

     
    (i) at sea, fuel oil for main propulsion and fuel oil/marine gasoil diesel oil* for auxiliaries;  
     
    (ii) in port, fuel oil/marine gasoil diesel oil * for auxiliaries;

 

 

(f)

she shall comply with the regulations in force so as to enable her to pass through the Suez and  Panama Canals by day and night without delay;  

     
 

(g)

she shall have on board all certificates, documents and equipment required from time to time by any applicable law to enable her to perform the charter service without delay;  

     
 

(h)

she shall comply with the description in the OCIMF Harmonised Vessel Particulars Questionnaire appended  hereto as Appendix A, provided however that if there is any conflict between the provisions of  this questionnaire and any other provision, including this Clause 1, of this charter such other  provisions shall govern;  

     
  (i) her ownership structure, flag, registry, classification society and management company shall not be changed without Charterers prior consent which not to be unreasonably withheld;
     
Safety (j) Owners will operate:
Management    
    (i) a safety management system certified to comply with the International Safety Management Code (ISM Code) for the Safe operation of Ships and for Pollution Prevention;

 

 

1

 

  (ii) a documented safe working procedures system (including procedures for the identification and mitigation of risks);
   
  (iii) a documented environmental management system;
   
  (iv) documented accident/incident report system compliance with flag state requirements

 

  Charterers may at any time request an inspection of the relevant compliance documentation and/or safety management certificate and upon receipt of such a request the Owners shall forthwith provide the same.

 

 

(k)

Owners shall submit to Charterers a monthly written report detailing all accidents/incidents and environmental reporting requirements. In accordance with the Shell Safety and Environmental Monthly Reporting Template appended hereto as Appendix B;

     
 

(l)

Owners shall maintain Health Safety Environment (HSE) records sufficient to demonstrate compliance with the requirements of their HSE system and of this charter, Charterers reserve the right to confirm compliance with HSE requirements by audit of Owners.  

     
 

(m)

Owners will arrange at their expense for a SIRE inspection to be carried out at intervals of maximum minimum 150 120 days six months plus or minus thirty days. provided vessel's trading patterns permit and SIRE inspectors are available and SIRE regulations permit.  Owners ensure that the vessel is always to have 6 months valid sire. SUCH SIRE INSPECTION ALWAYS TO BE A PHYSICAL DISCHARGE SIRE INSPECTION PROVIDED VESSEL TRADING PATTERN PERMITS THIS. OWNERS ALWAYS TO CONSULT CHARTERERS AND OBTAIN CHARTERERS CONSENT PRIOR TO DOING ANY OTHER SIRE INSPECTION THAN A PHYSICAL DISCHARGE INSPECTION. Owners will grant access of q88.com upon delivery of vessel to Charterers.   

     
    VESSEL 2+3 (ECO BEVERLY HILLS AND ECO BELL AIR) BOTH VESSELS TO BE DELIVERED WITH VALID PHYSICAL DISCHARE SIRE INSPECTIONS MAXIMUM 4 MONTHS OLD ON DELIVERY

 

 

 

Shipboard   2. (a)      At the date of delivery of the vessel under this charter and throughout the charter period:

Personnel

and their
Duties

(i)

she shall have a full and efficient complement of master, officers and crew for a  vessel of her tonnage, who shall in any event be not less than the number requiredby the laws of the flag state and who shall be trained to operate the vessel and her equipment competently and safely;

     
 

(ii)

all shipboard personnel shall hold valid certificates of competence in accordance within the requirements of the law of the flag state;

     
 

(iii)

all shipboard personnel shall be trained in accordance with the relevant provisions of the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers 1995 or any additional, modifications or subsequent versions thereof;

     
 

(iv)

there shall be on board sufficient personnel with a good working knowledge of the English language to enable cargo operations at loading and discharging places to be carried out efficiently and safely and to enable communications between the carried out quickly and efficiently.

     
 

(v)

the terms of employment of the vessels staff and crew will always remain acceptable to The International Transport Workers Federation and the vessel will at all times carry a Blue Card;

     
 

(vi)

the nationality of the vessels officers given int eh OCIMF Vessel Particulars Questionnaire referred to in Clause 1(h) will not change without Charterers prior agreement.

 

 

(b)

Owners guarantee that throughout the charter service the master shall with the vessel's officers and crew, unless otherwise ordered by Charterers;

 

  (i) prosecute all voyages with the utmost despatch;
     
  (ii) render all customary assistance; and
     
  (iii) load and discharge cargo as rapidly as possible when required by Charterers or their agents to do so, by night or by day, but always in accordance with the laws of the place of loading or discharging (as the case may be) and in each case in accordance with any applicable laws of the flag state. 

 

2

 

Duty to Maintain   3. (a)   throughout  the charter service Owners shall, whenever the passage of time, wear and tear or any event (whether or not coming within Clause 27 hereof) requires steps to be taken to maintain or restore the condition stipulated in Clauses 1 and 2(a), exercise due diligence so to maintain or restore the vessel. 

 

 

(b)

If at any time whilst the vessel is on hire under this charter the vessel fails to comply with the requirements of Clauses 1, 2(a) or 10 then hire shall be reduced to the extent necessary to indemnify Charterers for such failure.  If and to the extent that such failure affects the time taken by the vessel to perform any services under this charter, hire shall be reduced by an amount equal to the value, calculated at the rate of hire, of the time so lost. 
Any reduction of hire under this sub-Clause (b) shall be without prejudice to any other remedy available to Charterers, but where such reduction of hire is in respect of such time lost, such time shall be excluded from any calculation under Clause 24,

     
 

(c)

If Owners are in breach of their obligation under Clause 3(a), Charterers may so notify Owners in writing and if, after the expiry of 30 days following the receipt by Owners of any such notice, Owners have failed to demonstrate to Charterers' reasonable satisfaction the exercise of due diligence as required in Clause 3(a), the vessel shall be off-hire, and no further hire payments shall be due, until Owners have so demonstrated that they are exercising such due diligence,

     
 

(d)

Owners shall advise Charterers immediately, in writing should the vessel fail an inspection by, but not limited to, a government and/or port state authority, and/or terminal and/or major charter or similar tonnage, Owners shall simultaneously advise Charterers of their proposed course of action to remedy the defects which has caused the failure of such inspection.  

     
 

(e)

If, in Charterers reasonably held view;

 

  (i) failure of an inspection, or,
     
  (ii) any serious finding of an inspection,
     
    referred to in Clause 3(d), prevents normal commercial operations then Charterers have the option to place the vessel off-hire 30 days after from the date and time that the vessel fails such inspection, or becomes commercially inoperable, until the date and time that the vessel passes a re-inspection provided vessel's trading patterns permit a re-inspection and providing SIRE regulations permit by the same organization, or becomes commercially operable, which shall be in a position no less favourable to Charterers than at which she went off-hire.  Charterers to make best endeavours to load one single voyage to enable Owners to carry out inspection concurrent with discharge. 

 

  (f) Furthermore, at any time while the vessel is off-hire for a period of more than 15 continuous days under this Clause 3 (with the exception of Clause 3 (d) and (e)(ii), Charterers have the option to terminate this charter by giving notice in writing with effect from the date on which such notice of termination is received by Owners or from any later date stated in such notice.  This sub-Clause (f) is without prejudice to any rights of Charterers or obligations of Owners under this Charter or otherwise (including without limitation Charterers' right under Clause 21 hereof).

 

Period Trading Limits and Safe Places  

4.

(a)   Owners agree to let and Charterers agree to hire the vessel for a period of minimum 20 months to maximum 26 monthsplus or minus     days in Charterers option on final period.  Optional period of balance period until 10th December 2025 with Charterers option +15/-30 days from this date.  Optional period to be declared latest 60 days before 26 months expires. Commencing from the time and date of delivery of the vessel, for the purpose of carrying all lawful merchandise (subject always to Clause 28) including in particular; As per vessels COF, Class and coasting resistance table in any part of the world, as Charterers shall direct, subject to the limits of the current British Institute Warranties and any subsequent amendments thereof.  

 

Trading area: trading worldwide, always within INL and any subsequent amendments thereof, excluding Alaska, Burma (Myanmar), Chinese river ports, Cuba, Eritron, Iran, Israel,Lake Maracaibo, Orinoco River, inner ports and berths in Nigeria (except Port Harcourt, Bunny and Lagos ports permitted provided vessel uses and anchors in the sea; else Gulf of Guinea clause incorporated in to this charter shall apply), North Korea, Somalia, South Sudan, Sudan or Syria, Turkish occupied Cyprus, war and warlike areas, any trade with or which involved Cuba or with any person (whether an individual or entity) who are incorporated and/or based and/or managed and/or operated from Cuba or netting on behalf of a person based in Cuba; or beneficially or legally owned (in whole or in part) or controlled by or acting on begald of the Cuban government; or beneficially or legally owned or controlled by any person incorporated and/or based and/or managed and/or operated from Cuba.  The charterer warrants that they shall not utilise the vessel or permit the vessel to be utilised in any trade: (a) which is unlawful AND/OR VIOLATES ANY UN/US/EU SACTIONS OR UN/US/EU BOYCOTT; or (b) with or which involves Iran, South Sudan, Sudan, Syria, North Korea or any other country over which the united states, or the European union, or the united nations, or other national, supranational or international body/organization, maintain or impose an embargo, boycott, economic sanctions (including comprehensive country wise economic sanctions) or other restrictions, whenever enacted and in force; or (c) which involves the carriage of any cargo which originates in or is exported from or to such countries and/or any trade with or for any person (whether as an individual or entity, including but not limited to all sub-charterers, shuppers, recievers, other cargo interests) who are (i) incorporated and/or based and/or managed and/or operated from any such countries or otherwise netting on behfalf of a person (whether and individual or entity) who is based within such country; or (ii) beneficially or legally owned or controlled by any person (whether an individual or entity) incorporated and/or based and/or managed and/or operated from such countries.

 

3

 

      If sanctions are lifted against Venezuela or Iran, owners will consider calling but cannot confirm it nor guarantee it.  The parties to discuss openly. Owners confirm no premiums will be asked to add Venezuela and/or Iran if/when sanctions are lifted provided P&I /Class / Flag allows to re-instate these countries in the trading range.
       
      Notwithstanding the foregoing, but subject to Clause 35, Charterers may not order the vessel to ice-bound waters Vessel shall not  be required to force ice, nor follow ice-breaker(s).  Vessel to trade always within INL and shall not be required to enter any ice bond port, or any port where lights or lightships have been or are about to be withdrawn by reason of ice, or where there is risk in the ordinary cause of things the vessel will not be able on account of ice to safely enter the port or to depart after having completed loading or discharging or to any part of the world outside such limits provided that Owners consent thereto (such consent not to be unreasonably withheld) and that Charterers pay for any insurance premium required by the Vessel's underwriters as a consequence of such order. 

 

 

(b)

Any time during which the vessel if off-hire under this charter may be added to the charter period in Charterers option up to the total amount of time spent off-hire.  In such cases the rate of hire will be that prevailing at the time the vessel would, but for the provisions of this Clause, have been redelivered.  Charterer's to declare whether or not they will exercise this option a minimum of 1 month day prior to the intended redelivery date or anniversary date of the charter, whichever occurs first.  

     
 

(c)

Charterers shall use due diligence to ensure that the vessel is only employed between and at safe places (which expression when used in this charter shall include ports, berths, wharves, docks, anchorages, submarine lines, alongside vessels or lighters, and other locations including locations at sea) where she can safely lie always afloat.  Notwithstanding any contained in this or any other clause of this charter, Charterers do not warrant the safety of any place to which they order the vessel and shall be under no liability in respect thereof except for loss or damage caused by their failure to exercise due diligence as aforesaid.  Subject as above, the vessel shall be loaded and discharged at any places as Charterers may direct, provided that Charterers shall exercise due diligence to ensure that any ship-to-ship transfer operations shall conform to standard not less than those set out in the latest published edition of the ICS/OCIMF Ship-to-Ship Transfer Guide.

     
 

(d)

Unless otherwise agreed, the vessel shall be delivered by Owners dropping outward pilot at dlosp one safe port Uke/med/usg/caribs/ag-korea range at Owner's option and redelivered to Owners dropping outward pilot at  WW excl Australia/NZ if redelivery after firm period.  IF OPTIONAL PERIOD DECLARED THE REDEL TO BE USAC/USG/UKC/SING-JAPAN RANGE.  At Charterer's option always within trading limits.

     
 

(e)

The vessel will deliver with virgin tanks (VSL NO 2+3 WILL DELIVER WITH COTs free of last DPP cargo) AND FREE OF SLOPS and will redeliver with last 3 cargo(es) DPP either Fuel oil or Crude Oil, or Crude condensate of CPP UNL UND 2.5NPA in all tanks including slops, free of slops and washing generated by Charterer's trading of the vessel.

     

 

4

 

  (f) Owners are required to give Charterers 30/20/15 approximate and then definite 10/7/5/3/2/1 days prior notice of delivery including port and last cargoes.  Charterers are required to give Owners 30/20/15 approximate days notice of re-delivery and then 10/7/5/3/2/1 definite days prior notice of redelivery including port and last 3 cargoes. 

 

Laydays/ Cancelling   5. The vessel shall not be delivered to Charterers before 12th March 2022.
And Charterers shall have the option of cancelling this charter if the vessel is not ready and at their disposal on or before 30th May 2022.
       
Owners to Provide   6. Owners undertake to provide and to pay for all provisions, wages (including but not limited to all overtime payments).  And shipping and discharging fees and all other expenses of the master, officers and crew; also, except as provided in Clauses 4 and 34 hereof, for all insurance on the vessel, for all deck, cabin and engine-rooms stores, and for water except fresh water used for cleaning of tanks between cargoes and/or for Charterers purpose.  Charterers to provide fresh water if vessel doing coastal voyage or if vessel unable to generate fresh water due to Charterer trading patterns; for all drydocking, overhaul, maintenance and repairs to the vessel; and for all fumigation expenses and de-rate certificates.  Owners' obligations under this Clause 6 extend to all liabilities for customs or import duties arising at any time during the performance of this charter in relation to the personal effects of the master, officers and crew, and in relation to the stores, provisions and other matter aforesaid which Owners are to provide and pay for and Owners shall refund to Charterers any sums Charterers or their agents may have paid or been compelled to pay in respect of such liability, Any amounts allowable in general average for wages and provisions and stores shall be credited to Charterers insofar as such amounts are in respect of a Period when the vessel is on-hire. 
       
Charterers to Provide  

7.

(a)   Charterers shall provide and pay for all fuel (except fuel used for domestic services), towage and pilotage (whether compulsory or not.  For the safety of navigation adequately qualified Deep Sea Pilots in the North Sea, English Channel, Skagerrak (IMO Resolution A.1080(28)) and Malnecca strait in laden condition (IMO SC/Circ.198) to be employed and be paid by the charterers even when not compulsory) and shall pay agency fees, port changes, commissions, expenses of loading and unloading cargoes, canal dues, tank cleaning chemicals, fresh water for tank cleaning (also, in case of prolonged anchor stay were vessel won't be able to produce GW by using the exhaust gas boiler/economiser, then fuel used for production of FW to be charts account or charts to provide FW on their expense) cargo and cargo tank clean slops disposals, any and all taxes including withholding taxes and/or dues on hire payments, sub-hires, freight, sub-freights, vessel and cargoes however arising including from Charterers' employment of vessel and all charges other than those payable by Owners in accordance with Clause 6 hereof, provided that all charges for the said items shall be for Owners' account when such items are consumed, employed or incurred for Owners' purposes or while the vessel is off-hire (unless such items reasonably relate to any service given or distance made good and taken into account under Clause 21 or 22); and provided further than any fuel used in connection with a general average sacrifice or expenditure shall be paid for by Owners.

 

 

(b)

in respect of bunkers consumed for Owners purposes these will be charges on each occasion by Charterers on first-in-first-out basis valued on the prices actually paid by Charterers.

     
 

(c)

If the trading limits of this charter including ports in the United States of America and/or its protectorates then Charterers shall reimburse Owners for port specific chargers relation to additional premium charged by provider of oil pollution cover, when incurred by the vessel calling at ports in the United States of America and/or its protectorates in accordance with Charterers orders.  

 

Rate of Hire   8. Subject as herein provided.  Charters shall pay for the use and hire of the vessel at the rate of United States Dollar GROSS 24,000 for the firm period and USD 24,000 for optional period, from the time and date of her delivery (local time UTC) to Charterers until the time and date of redelivery (local Time UTC) to Owners.  Commission: 0,7% to Arrow Tankers payable by Owners. No addcom. 1.25% to CENTRAL Ship Chartering Inc. payable by owners / Bare Boat Charterers.
       
Payment of Hire   9. Subject to Clause 3 (c) and 3 (e) payment of hire shall be made in immediately available funds to:
Account: TBA
in United States Dollars per calendar month in advance on the last business days of the previous month free of bank charges, less: Except for 1st Hire Payment which is to be remitted within two (2) business days or receiving vessel's delivery certificate from Owners, including bunkers ROB, and to cover time from delivery until end of month in progress."

 

5

  Charerers shall pay the hire and all other amounts payable to the Owner hereunder without deduction for any or all present and future taxes, levies, imports, duties, charges, fees or withholdings of any nature levied by the authority of the domicile of the Charterers.  However, provided such cause is proven attributable to Charterers

 

  (i) any hire paid which Charterers reasonably estimate to relate to off-hire periods, and
     
  (ii) any amounts disbursed on Owners' behalf, any advances and commission thereon, and charges which are for Owners' account pursuant to any provision hereof, and
     
  (iii) any amounts due or reasonably estimated to become due to Charterers under Clause 3 (c) or 24 hereof,
     
    any such adjustments to be made at the due date for the next monthly payment after the facts have been ascertained.  Charterers shall not be responsible for any delay or error by Owners' bank in crediting Owners' account provided that Charterers have made proper and timely payment, In default of such proper and timely payment,

 

 

(a)

Owners shall notify Charterers of such default and Charterers of such default and Charterers shall within seven working days of receipt of such notice pay to Owners the amount due including interest, failing which Owners may withdraw the vessel from the service of Charterers without prejudice to any other rights Owner may have under this charter or otherwise; and

     
  (b) Interest on any amount due but not paid on the due date shall accrue from the date after that date up to and including the day when payment is made, at a rate per annum which shall be 1% above the U.S. Prime Interest Rate as published by the Chase Manhattan Bank in New York at 12.00 New York time on the due date, or, if no such interest rate is published on that day, the interest rate published on the next preceding day on which such a rate was published, computed on the basis of a 360 day year of twelve 30-day months, compounded semi-annually.

 

Space Available to Charterers   10. The whole reach, barthen and decks of the vessel and any passenger accommodation (including Owners’ suite) shall be at Charterers’ disposal, reserving only proper and sufficient space for the vessel’s master, officers, crew, tackle, apparel, furniture, provisions and stores, provided that the weight of stores on board shall not, unless specially agreed, exceed 400 metric tonnes at any time during the charter period.

 

Segregated Ballast  

11.

In connection with the Council of the European Union Regulation on the Implementation of IMO Resolution A747(18) Owners will ensure that the following entry is made on the International Tonnage Certificate (1969) under the section headed “remarks”:

      “The segregated ballast tanks comply with the Regulation 13 of Annex 1 of the International Conversion for the prevention of pollution from ships, 1973 as modified by the Protocol of 1978 relating thereto, and the total tonnage of such tanks exclusively used for the carriage of segregated water ballast is *TBA*.  The reduced gross tonnage which should be used for the calculation of tonnage based fees is *TBA*”.
       
Instructions and Logs   12. Charterers shall from time to time give the master all requisite instructions and sailing directions, and the master shall keep a full and correct log of the voyage or voyages, which Charterers or their agents may inspect as required.  The master shall when required furnish Charterers or their agents wish a true copy of such log and wish properly completed loading and discharging port sheets and voyage reports for each voyage and other returns as charterers may require.  Charterers shall be entitled to take copies at Owners expense of any such documents which are not provided by the master. 
       
Bills of Lading   13. (a) The master (although appointed by Owners) shall be under the orders and direction of charterers as regards employment of the vessel, agency and other arrangements, and shall sign Bills of Lading as Charterers or their agents may direct (Subject always to Clauses 35(a) and 40) without prejudice to this charter.  Charterers hereby indemnify Owners against all consequences or liabilities that may arise;

 

  (i) From signing Bills of Lading in accordance with the directions of Charterers, or their agents, to the extent that the terms of such Bills of Lading fail to conform to the requirements of this charter, or (except as provided in Clause 13(b) from the master otherwise complying with Charterers or their agents orders.

 

6

 

  (ii) from any irregularities in papers supplied by Charterers or their agents. 
     
(b)    (b) If Charterers by telex, facsimile or other form of written communication that specifically refers to this Clause request Owners to discharge a quantity of cargo either without Bills of Lading and/or at a discharge place other than that' named in a Bill of Lading and/or that is different from the Bill of Lading quantity, then Owners shall discharge such cargo in accordance with Charterers’ instructions and consideration of receiving the following indemnity which shall be deemed to be given by an authorised officer of the Charterers on each and every such occasion and which is limited in SEE ADDITIONAL CLAUSES 5, 6 & 7 
value to 200% of the CIF value of the cargo carried on board;
     
  (i) Charterers shall indemnify owners and owners servants and agents in respect of any liability loss or damage of whatsoever failure (including legal costs as between attorney or solicitor and client and associated expenses) which owners may sustain by reason of delivering such cargo in accordance with Charterers request.
     
  (ii) If any proceeding is commenced against Owners or any of Owners servants or agents in connection with the vessel having delivered cargo in accordance with such requests Charterers shall provide Owners or any of Owners servants or agents from time to time on demand with sufficient funds to defend the said proceedings.
     
  (iii) If the vessel or any other vessel or property belonging to Owners should be arrested or detained, or if the arrest or detention thereof should be threatened by reason of discharge in accordance with Charterers instruction as aforesaid, the charterers shall provide on demand such bail or other security as may be required to prevent such arrest or detention or to secure the release of such vessel or property and Charterers and shall indemnify Owners in respect of any loss, damage or expenses caused by such arrest or detention whether or not same may be justified.
     
  (iv) Charterers shall, if called upon to do so at anytime while such cargo is in Charterers possession, custody or control redeliver the same to Owners.
     
  (v) as soon as all original bills of lading for the above cargo which same as discharge port the place where delivery actually occured shall have arrived and or come into Charterers possession, Charterers Shall produce under delivered the same to owners whereupon charterers liability hereunder shall cease.
     
    Provided however, if charterers have not received all such original Bills of Lading by 24.00 hours on the day 36 calendar months after the date of discharge , that this indemnity shell terminates at that time unless before that time charterers have received from owners written notice that
     
    aaa) Some person is making a claim in connexion with owners delivering cargo pursuant to charterers request or,
     
    bbb)                Legal proceedings have been commenced against owners and/or carriers and/or charterers and/or any of their respective servants or agents and/or the vessel for the same reason.
     
    When doctors have received such a notice, then this indemnity shall continue in force until such claim or legal proceedings are settled. Termination of this indemnity shall not prejudice any legal rights apart in may have outside this indemnity.
     
  (vi) Owners shall promptly notify charters of any person bracket other than a person to him charterers ordered cargo to be delivered claims to be entitled to such cargo and/or at the vessel or any other property belonging to owners as arrested by reason of any such discharge of cargo.
     
  (vii) This indemnity shall be governed and construed in accordance with the English Law and each and every dispute arising out of or in connection with this indemnity shall be subject to the jurisdiction of the High Court of Justice of England.

 

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  (viii) Owners warned that the master will comply with orders to carry and discharge against one or more Bills of Lading from a set of original negotiable Bills of Lading should Charterers so require. See Additional Clause 14 - Letter of Indemnity to be Given for Carrying one original of each set of bills of Lading on board.

 

Conduct of Vessel's Personnel   14. If Charterers complain of the conduct of the master or any of the officers or crew, Owners shall immediately investigate the complaint. If the complaint proves to be well founded, Owner shall, without delay, make a change in the appointments and Owners shall in any event communicated the result of their investigations to Charterers as soon as possible.
       
Bunkers at Delivery and Redelivery  

15.

Charters gel accept and pay for all bunkers on board at the time of delivery, and owners shall on redelivery whether it occurs at the end of the charter or on the blank termination of this charter and accept and pay for all blank remaining on boards, at the price actually paid, on a first in first out basis. Such prices are to be supported by Payton voices.
Vessels to be delivered to and redelivered from the charter with, at least, a quantity of bunkers on board sufficient to reach the nearest main bunkering port including safety margin.
Notwithstanding any content in this charter unless otherwise agreed by Owners and Charterers all bunkers on board the vessel shall, throughout the
duration of this charter, remained the property of charterers and can only be purchased on the terms specified in the charter at the end of the charter. Or, if earlier, at the termination of the Charter.

       
Stevedores, Pilots, Tugs   16. Stevedores when required shall be employed and paid by charterers, but this shall not believe owners from responsibility at all times for progress to which, which must be controlled by the master shall keep a straight account of all cargo loaded and discharged. All owners hereby indemnified charterers, their servants and agents against all losses, claims, responsibilities and liabilities arising in anyway whatsoever from the employment of pilots, tugboats or Steve doors, who although employed by charterers shall be deemed to be the servants of and in the service of Owners and under their instructions (Even after such pilots, tugboat personnel or stevedores are in fact the servants of charterers their agents or any affiliated company); provided, however, that

 

 

(a)

the foregoing indemnity shall not exceed the amount to which owners would have been entitled to limit their liability if they had themselves employed such pilots, tugboats or stevedores, and

     
  (b) Charterers shall be liable for any damage to the vessel caused by or arising out of the use of stevedores, fair wear and tear acceptance, to the extent the owners are unable by the exercise of due diligence to obtain redress therefore from stevedores.

 

Super-Numeraries   17. Charterers may send representatives in the vessel’s available accommodation upon any voyage made under this charter, owners finding provisions and all requisites are supplied to officers, except alcohol. Charters paying at the rate of United States dollars $30.00 15 (fifteen) per day for each representative while on board the vessel. Subject to accommodation at their own risk and expense. The representative shall act as observers only and should not interfere with the operation of the vessel. Upon boarding the vessel the representatives shall be required to sign owners indemnity wording.
       
Sub-Letting/ Assignment/ Novation   18. Chargers may sublet the vessel, but shall always remain responsible to owners for dear fulfilment of this charter. Additionally charterers may assign or novate this charter to any company of the Trafigure Group of Companion. Royal Dutch/Shell Group of Companies.
       
Final Voyage  

19.

If when a payment of hire is due here under charterers reasonably expect to redeliver the vessel before the last sufficient hires new payment of hire would follow due, the hire to be paid shall be assessed on charterers reasonable estimate of the time necessary to complete charterers programme up to redelivery, and from which estimate charterers may deduct amounts to or reasonably expected to become due for,

 

  (a) Disbursements on owners’ Behalf or charges for owners account pursuant to any provision here of, and
     
  (b) Bunkers on board as redelivery pursuant to Clause 15.
     
    Promptly after redelivery any overpayment shall be refunded by owners or any underpayment made good by Charterers. If at the time this charter would otherwise terminates in accordance with Clause 4 the vessel is on a ballast voyage to a port of redelivery or as upon a laden voyage, charterers shall continue to have the use of the vessel at the same rate and conditions as stand here in for as long as necessary to complete such ballast voyage , or to complete such laden voyage and return to a portal redelivery as provided by this charter, as the case may be provided that when the charterers issue the vessel final voyage orders at is reasonable to calculate that official will complete the voyage within the Charter Party period.

 

8

 

Loss of Vessel   20. Should the vessel be lost, this charter shall terminate and higher Chelsea's at noon on the day of her loss; should the vessel be a constructive total loss this chapter shall terminate and hire shall cease at noon on the day on which the vessels under writers agree that the vessel is a constructive total loss; Should the vessel be missing, this charter shall terminate and higher shall cease at noon on the day on which she was last heard of. Any higher paid in advance and not errant shall be returned to charterers and owners shall reimburse charterers fixed the value of the estimated quantity of bunkers on board at the time of termination, at the price paid by charterers at the last bunkering port.
       
Off-hire  

21.

(a)   On each and every occasion that there is loss of time (whether by way of interruption and the vessel service or comment from production and the vessels performance, or in any other manner);

 

  (i) due to deficiency of personnel or stores; Repairs; Gas freezing for repairs; Time and aren't waiting to enter dry dock for repairs; Breakdown (whether partial or total) of machinery, boilers or other parts of the vessel or her equipment (including without limitation tank coatings); overall, maintenance or survey; Collision, stranding, accident or damage to the vessel; or any other similar cause preventing the efficient working of the vessel; and Search lost continues for more than three five consecutive hours (if resulting from interruption and the vessel’s service) or accumulates to more than three five hours (if resulting from partial loss of service); or
     
  (ii) due to industrial action, refusal to sail, breach or orders or neglect of duty on the part of the master, officers or crew; or
     
  (iii) for the purpose of obtaining medical advice or treatment for or lending any sick or injured person (other than a charterers representative carried under Clause 17 hereof) or for the purpose of landing the body of any person (other than a Charterers' representative), and such loss continues for more than three five consecutive hours; or;
     
  (iv) Due to any delay in quarantine (excepting cases of Ebola) arising from the master, officers or crew having had communication with the shore at any infected area without the written consent or instructions of charterers or their agents, or to any detention by customs or other authorities caused by smuggling or other infraction of local law on the part of the master, officers, or crew; or
     
  (v) due to the tension of the vessel by authorities at home or abroad attributable to legal action against or breach of regulations by the vessel , the vessels owners, or owners (unless brought about act or neglect of Charterers); then; Without prejudice to charterers rights under clause 3 or to any other rights of charterers here under or otherwise, the vessel shall be off-hire from the commencement of such loss of time until she is again ready and in an efficient state to resume her service from a position not less favourable to charterers than that at which such loss of time commenced; Provided, however, that any service given or distance made good by the vessel whilst off-hire shall be taken into account and assessing the amount to be deducted from hire and provided that the vessel shall remain off-hire during any consequential loss of time..

 

 

(b)

if the vessel fails to proceed at any guaranteed speed pursuant to Clause 24, and such failure arises wholly or partly from any of the causes set out and Clause 21(a) above, then the period for which the vessel shall be off-hire under this Clause 21 shall the difference between;

 

  (i) The time the vessel would have required to perform at the relevant service at such guaranteed speed, and
     
  (ii) the time actually taken to perform such service (including any loss of time arising from interruption in the performance of such service).  for the avoidance of doubt, all time included under (ii) above shall be excluded from any computation under Clause 24.

 

 

(c)

Further and without prejudice to the foregoing, in the event of the vessel deviating (which expression includes without limitation putting back, or putting into any port other than that to which she is bound under the instructions of charterers) for any cause or purpose mentioned in Clause 21(a), the vessel shall be off-hire from the commencement of such deviation until the time when she is again ready and an unofficial state to resume her service from a position not less favourable to charterers than that at which the deviation commenced, provided however, that any service given or distance made good by the vessel which so off-hire shall be taken into I count then assessing the amount to be deducted from hire.  S vessel, for any cause or purpose mentioned in Clause 21(a), puts into any port other than the ports to which she is bound on the instructions of charterers, the port charges, pilotage and other expenses at such ports shall be borne by owners.  shut the vessel be driven into any port or anchorage by stress of weather hire shall continue to be due and payable during anytime lost at thereby.

     

 

9

 

 

(d)

If the vessels flag states becomes engaged in International hostilities, and charters in consequence of such hostilities find it commercially impracticable to employ the vessel and have given owners written notice thereof then from the date of receipt by owners of such notice until the termination of such commercial impracticability the vessel shall be off-hire and owners shall have the rights to employ the vessel on their own account.

     
 

(e)

Time during which the vessel is off higher under this charter shall count as part of the charter. Except where charter is declared their option to add off hire periods under Clause 4(b).

     
  (f) All references to time in this charter party shall be references to local time except where otherwise stated.

 

Periodical Drydocking  

22.

(a)   Owners have the right and obligation to dry dock the vessel at regular intervals of 3 (three) years as deemed appropriate by owners and vessels classification society that is at least once within a 5 year period and not exceeding 36 months during drydockings. 

        On each occasion owners shall propose to charterers update on which they wish to dried up the vessel, not less than 90 60 days before such date, and charterers shall offer  a port for such periodical try talking and she'll take all reasonable steps to make the vessel available as near to such date as practicable.
         
        Owners shall put the vessel in dry dock at their expense as soon as practicable after charterers placed the vessel at owner's disposal clear of cargo and cargo slops other than tank washings and residues, owner shall be responsible for and pay for the disposal into reception facilities of such tank washings and residues and shall have the right to retain any monies received therefor, without prejudice to any claims for loss of cargo under any Bill of Lading or this charter.
         
      (b) If a periodical drydocking is carried out in the port offered by charterers (which must have suitable accommodation for the purpose and reception facilities for tank washings and residues), the vessel shall be off-hire from the time she arrives at such port until drydocking is completed and she is in every way ready to resume charterers service and is at the position at which she went off-hire or a position at no less favourable to charterers, whichever she first attains. However,

 

  (i) provided that owner exercise due diligence in gas-freeing, anytime lost in gas-freeing to the standard required for entry into dry dock for cleaning and painting at the hull shall not count as off-hire, whether lost on passage to the dry docking port or after arrival there (notwithstanding Clause 21), and
     
  (ii) any additional time lost in further gas-freeing to meet the standard required for hot work or entry to cargo tanks shall count as off-hire, whether lost on passage to the drydocking port or after arrival there.
     
    Any time which, but for sub-Clause (i) above, would it be off higher, shall not be included in any calculation under Clause 24. The expenses of gas-freeing, including without limitation at the cost of bunkers, shall be for Owners account. 

 

 

(c)

If Owners require the vessel, instead of proceeding to the offered ports, to carry out periodical drydocking at a special port selected by them, the vessel shall be off higher from the time when she is released to proceeds to the special port until she next presents for loading in accordance with charterers instructions, provided, however, that charterers shall credit owners with the time which would have been taken on passage at the service speed had the vessel not proceeded to drydock.  all feel consumed shall be paid for by owners but Charterers shall credit owners what's the value of the fuel which would have been used on such national passage calculated out of the guaranteed daily consumption for the service speed, and shall further credit Owners with any benefit to making and purchasing bunkers at the special port.

 

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  (d) Charterers shall, insofar as cleaning for periodical drydocking may have reduced the amount of tank-cleaning necessary to meet charterers requirements, credit owners with the value of any bunkers which Charterers calculate to have been saved thereby, whether the vessel dry docks as an offered or special port.

 

Ship Inspection  

23.

Charterers shall have the right at any time during the charter period to make such inspection of the vessel as they may consider necessary. This right may be exercised as often at that such intervals as charterers in their absolute discretion may determine whether the vessel is in port or on passage, owners affording all necessary co-operation and accommodation on board provided, however,

 

 

(a)

That's neither the exercise nor than an exercise, nor anything done or not done in the exercise or non-exercise, by Charterers of such right shell in anyway reduced the masters or owners authority over, or responsibility to Charterers or third parties for , the vessel and every aspect of her operation, nor increased Charterers’ responsibilities to owners or third parties for the same; and;

     
  (b) That Charterers shall not be liable for any act, neglect or default by themselves, their servants or agents in the exercise or non-exercise of the aforesaid right.

 

Detailed Description and Performance  

24.

Owners guarantee that the speed and consumption of the vessel shall be as follows:-

 

Average speed in knots

Maximum main propulsion fuel oil/diesel oil tonnes

Average bunker consumption per day auxiliaries fuel oil/diesel oil tonnes

Laden

__________/__________

__________/__________

__________

__________/__________

__________/__________

__________

__________/__________

__________/__________

Ballast

__________/__________

__________/__________

__________

__________/__________

__________/__________

__________

__________/__________

__________/__________

 

exh435_11a.jpg

 

  PER VESSEL DESCRIPTION PROVIDED FOR EACH SHIP
   
  S/c as per attached (ABOVE) which includes consumption for scrubber.
   
  Owner will guarantee consumptions as per attached for 13 knots laden and ballast AND 12.5 + 13.5 KTS LADEN AND BALLAST. 
   
  FOLLOWING TO APPLY TO FIGURES IN CONSUMPTION TABLES:
   
  All speed/consumption figures (12.5, 13, 13.5) are to be considered as WARRANTED FIGURES but about (+/- 0.5 knot for speed and +/- 5% for consumption) and always subject to no MORE THAN 0.5 KTS adverse currents mas up to and including Beaufort force 4 and max sea state Douglas 3.

 

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  (ie delete reference to no swell, no adverse currents and delete good weather and smooth seas from table as these parameters are already defined as up to and including a bf4 and DSS3 and max 0.5kts adverse currents)
   
  The average speeds on bunker consumptions shall for the purposes of this Clause 24 be calculated by reference to the observed distance from pilot station to pilot station fill away on sea passage (FAOSP) till end of sea passage (EOSP) on all sea passages over 2 four hours during each. Stipulated and Clause 24(c), but excluding anytime during which the vessel is or but for Clause 22(b)(i) would be off-hire and also excluding adverse weather periods, being (i) any periods during which reduction of speed as necessary for safety and congested waters or in poor visibility and/or transitioning canals, and/or when complying with slow steaming instructions that may have been assured by charterers (ii) any days, noon to noon, when winds exceed force 8 4 on the Beaufort scale for more than 12 hours.
   
  If at any time following the date upon which the vessel enters into service under this charter the performance of the vessel falls below the performance guaranteed in Clause 24 (a) as amended then if such shortfall results.

 

  (i) From a reduction in the average speed of the vessel, compared to the speed guaranteed and close to 4A then an amount equal to the value at the hire rate of that I'm so lostor gained, as the case may be, shall be deducted fromor added to the hire paid;
     
  (ii) from an increase in the total bunkers consumed, compared to the total bunkers which would have been consumed had the vessel performed as guaranteed in Clause 24 (a), an amount equivalent to the value of the additional bunkers consumed based on the average price paid by charterers for the vessel’s bunkers in such period, shall be deducted from the hire paid.
     
    The deduction from hire so calculated for laden and ballast mileage respectively shall be adjusted to take into account the mileage steamed and each such condition during Adverse Weather Periods, by dividing such deduction by the number of miles over which the Performance has been calculated and multiplying by the same number of miles plus the mile steamed during the adverse weather periods, and order to establish the total addition to or deduction from a higher to be made for such period.  Any over performance to be credited against any underperformance if any. 
     
    Reduction of hire under the foregoing sub-Clause (b) shall be without prejudice to any other remedy available to Charterers.

 

 

(b)

calculations under this Clause 24 shall be made for the yearly periods terminating on each successive anniversary of the date on which the vessel enters service, and for the periods between the last such anniversary and the date of termination of this charter if less than a year. Claims in respect of reduction of hire arising under this clause during the final year or part year of the charter period shall in the first instance be settled in accordance with Charterers' estimate made latest two months after two months before the end of the charter period.  Any necessary adjustments after this charter terminates shall be made by payment by Owners to Charterers

     
    Over-performance not to be claimed by the Owners.
     
    Above consumptions exclude manoeuvring within harbours, inland waterways, canals, exceptional.  Or under national or international rules or regulations and are basis wind force not exceeding Beaufort 4.
     
    And shall be pro-rated between the speeds shown.
     
    The service speed of the vessel is 13.0 knots laden and 13 13.5 knots in ballast and in the absence of Charterers' orders to the contrary the vessel shall proceed at the service speed.  However if more than one laden and one ballast speed are shown in the table above Charterers shall have the right to order the vessel to steam at any speed within the range set out in the table (the "ordered speed").
     
    If the vessel is ordered to proceed at any speed other than the highest speed shown in the table, and the average speed actually attained by the vessel during the currency off such order exceeds such ordered speed plus 0.5 knots (the "maximum speed" at any time shall be the then current ordered speed or the service speed, as the case may be.
     
    The average speeds and bunker consumption shall for the purposes of this Clause 24 be.calculated by reference to the observed distance from pilot station to pilot station on all sea passages during each period stipulzted in Clause 24 (e). but excluding any time which the vessel is (orbut for Clause 22(b) (i) would be ) off-hire and also excluding "Adverse Weather Periods", being:

 

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  (i) any periods during which reduction of speed is necessary for safety in congested waters or in poor visability
     
  (ii)   any days, noon to noon, when winds exceed force 8 on the Beautfort Scale for more than 12 hours.

 

 

(c)

If during any year from the date on which the vessel enters service (anniversary to anniversary) the vessel falls below or exceeds the performance guaranteed in Clause 24(a) then if such shortfall or excess results:

 

  (i)  from a reduction or an increase in the average speed of the vesse;, compared to the speed guaranteed in Clause 24(a), then an amount equal to the value at the hire rate of the time so lost or gained, as the ease may be, shall be included in the performance calculation;
     
  (ii)  from an increase or a decrease in the total bunkers consumed, compared to the total bunkers which would have been consumed had the vessel performed as guaranteed in Clause 24(a), an amount equivalent to the value of the additional bunkers consumed or the bunkers saved, as the case may be, based on the average price paid by Charterers for the vessel's bunkers in such period, shall be included in the performance calculation.

 

  The results of the performance calculation for laden and ballast milease respectively shall be adjusted to take into account the mileage steamed in such condition during Adverse Weather Periods, by dividing such addition or deduction by the number of miles over which the Performance has been calculated and multiplying by the same number of miles plus the miles steamed during the Averse Weather Periods, in order to establish the total performance Calculation for such period,
   
  Reduction of hire under the foregoing sub-Clause (b) shall be without prejudice to any other remedy available to Charterers.

         

 

(d)

Calculations under this Clause 24 shall be made for the yearly periods terminating on such successive anniversary of the date on which the vessel enters service, and for the period between the last such anniversary and the date of termination of this charter if less than a year, Claims in respect of reduction of hire arising under this Clause during the final year or part-year of the charter period shall in the first instance be settled in accordance with Charterers' estimate made two months before the end of the charter period. Any necessary adjustment after this charter terminates shall be made by payment by Owners to Charterers or by Charterers to owners as the case may require.

     
  (e) Owners and Charterers agree that this Clause 24 is assessed on the basis that Owners are not entitled to additional hire for performance in excess of the speeds and consumptions given in this Clause 24.

 

Salvage  

25.

Subject to the provisions of Clause 21 hereof, all loss of time and all expenses (excluding any damage to or loss of the vessel or tortious liabilities to third parties) incurred in saving or attempting to save life or in successful or unsuccessful attempts at salvage shall be borne equally by Owners and Charterers provided that Charterers shall not be liable to contribute toward any salvage payable by Owners arising in any way out of services rendered under this Clause 25.

       
      All salvage and all proceeds from derelicts shall be divided equally between Owners and Charterers after deducting the master's, officers' and crews' share.
       
Lien   26. Owners shall have a lien upon all cargoes and all sub-hires freights, sub-freights and demurrage for any amounts due under this charter; and Charterers shall have a lien on the vessel for all monies paid in advance and not earned, and for all proven claims for damages arising from any breach by Owners of this charter.
       
Exceptions  

27.

(a)   The vessel, her master and Owners shall not, unless otherwise in this charter expressly provided, be liable for any loss or damage or delay or failure arising or resulting from any act, neglect or default of the master, pilots, mariners or other servants of Owners in the navigation or management of the vessel; fire, unless caused by the actual fault or provity of Owners; collision or stranding; dangers and accidents of the sea; explosion, bursting of boilers, breaking of shafts or any latent defect in hull, equipment or machinery; provided, however, that Clauses 1, 2, 3 and 24 hereof shall be unaffected by the foregoing. Further, neither the vessel her master or owners, nor Charterers shall, unless otherwise in this charter expressly provided, be liable for any loss or damage or delay or failure in performance hereunder arising or resulting from act of God, act of war, seizure under legal process, quarantine restrictions, strikes, lock-outs, riots, restraints of labour, civil commotions or arrest or restraint of princes, rulers or people.

 

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(b)

The vessel shall have liberty to sail with or without pilots, to tow or to go to the assistance of vessels in distress and to deviate for the purpose of saving life or property.

     
 

(c)

Clause 27(a) shall not apply to, or affect any liability of Owners or the vessel or any other relevant person in respect of;

 

  (i) loss or damage caused to any berth, jetty, dock, dolphin, buoy, mooring line, pipe or crane or other works or equipment whatsoever at or near any place to which the vessel may proceed under this charter, whether or not such works or equipment belong to Charterers, or
     
  (ii)

any claim (whether brought by Charterers or any other person) arising out of any loss of or damage to or in connection with cargo. All such claims shall be subject to the Hague – Visby Rules or the Hague Rules or the Hamburg Rules, as the case may be, which ought pursuant to Clause 38 hereof to have been incorporated in the relevant Bill of Lading (whether or not such Rules were so incorporated) or, if no such Bill of Lading is issued, to the Hague – Visby Rules unless the Hamburg Rules compulsorily apply in which case to the Hamburg Rules.

 

  (d) In particular and without limitation, the foregoing subsections (a) and (b) of this Clause shall not apply to or in any way affect any provision in this charter relating to off-hire or to reduction of hire.

 

Injurious Cargoes   28. No acids, explosives or cargoes injurious to the vessel shall be shipped and without prejudice to the foregoing any damage to the vessel caused by the shipment of any such cargo, and the time taken to repair such damage, shall be for Charterers' account. No voyage shall be undertaken, nor any goods or cargoes loaded, that would expose the vessel to capture or seizure by rulers or governments.
       
Grade of Bunkers  

29.

Charterers shall supply fuel oil with a maximum viscosity of 380 centistokes at 50 degrees centigrade and/or marine diesel oil gasoil for main propulsion and fuel oil with a maximum viscosity of 380 centistokes at 50 degrees centigrade and/or diesel oil gasoil for the auxiliaries. If Owners require the vessel to be supplied with more expensive bunkers they shall be liable for the extra cost thereof.

       
      Charterers warrant that all bunkers provided by them in accordance herewith shall be of a quality complying with the latest ISO Standard 8217 for Marine Residual Fuels and Marine Distillate Fuels as Applicable PROVIDED AVAILABLE. IF NOT THEN CHARTERERS SHALL BE ALLOWED TO DELIVERY LESSER SPECS. OWNERS AGREE TO ASSESS BIO BUNKERS ON A CASE BY CASE BASIS IN GOOTH FAITH AND ALLOW CHARTERERS TO SUPPLY BIO FUELS PRIVIDED TECHNICALLY AND REGULATORY FEASIBLE.
       
Disbur-sements   30. Should the master require advances for ordinary disbursements at any port. Charterers or their agents shall make such advances to him, in consideration of which Owners shall pay a commission of two and a half per cent, and all such advances and commission shall be deducted from hire.
       
Laying-up   31. Charterers shall have the option, agyer consultation with Owners, of requiring Owners to lay up the vessel at a safe place nominated by Charterers, in which case the hire provided for under this charter shall be adjusted to reflect any not increased in expenditure reasonably incurred or any net saving which should reasonably be made by Owners as a result of such lay-up. Charterers may exercise the said option any number of times during rhe charter period.
       
Requisition   32. Should the vessel be requisitioned by any government, de facto or de jure, during the period of this charter, the vessel shall be off-hire during the period of such requisition, and any hire paid by such Governments in respect of such requisition period shall be for Owners' account. Any such requisition period shall count as part of the charter period.
       
Outbreak of War  

33.

If war or hostilities break out between any two THREE or more of the following countries: U.S.A., the countries or republics having been party of the former U.S.S.R. (except that declaration or war or hostilities solely between any two THREE or more of the countries or republics having been part of the former USSR shall be exempted), P.R.C., U.K., Netherlands, Singapore, Greece then both Owners and Charterers shall have the right to cancel this charter. Including any countries whose flag is relevant to this contract.  However, neither party shall be entitled to terminate this charter party on account of minor and/or local war-like operations which shall not interfere with vessels trade. Such cancellation to be declared within a period of twenty days from the date in which the hull & machinery insurers officially report the outbreak of war. Cancellation shall be without financial penalty to either party.

 

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Additional War Expenses  

34.

If the vessel is ordered to trade in areas where there is war (de facto or de jure) or threat of war or if the area including transit thereof is subject to an additional premium by vessels underwriters, Charterers shall reimburse Owners for any additional insurance premia, against Owners written documentation, including but not limited to AWRP, War Loss of Hire, Kidnap and Ransom, crew bonuses and other expenses which are reasonably incurred by Owners as a consequence of such orders, provided that Charterers are given notice of such expenses as soon as practicable and in any event before such expenses are incurred, and provided further that Owners obtain from their insurers a waiver or any subrogated rights against Charterers in respect of any claims by Owners under their war risk insurance arising out of compliance with such orders.

       
     

Any payments by Charterers under this clause will only be made against proven documentation. Any discount or rebate refunded to Owners, for whatever reason, in respect of additional war risk premium shall be passed on to Charterers.

       
      If the Vessel is ordered to trade in areas where there is a war (de facto or de jure) or threat or war. "Charterers shall arrange for and on behalf of Owners to insure the vessel against hull war risks in an amount equal to the insured value of the Vessel under her ordinary hull policy presently [USS (please advise) on condition that Owners obtain from their insurers a waiver of any subrograted rights against Charterers in respect of any claims by Owners under their war risk insurance arising out of compliance with such orders. Charterers shall pay only any provable additional INSURANCE PREMIA cost of for any additional crew bonuses, K&R PREMIUM, ADDITIONAL LOSS OF HIRE and other expenses which are reasonably incurred by Owners as a consequence of such orders provided that Charterers are given notice of such espenses as soonas practicable and in any event before such espenses are agreed by Owners. For the avoidance of doubt any "blocking and trapping", "loss of profit", "loss of hire", "loss of freight", or "loss of bunkers" insurance taken out by Owners in respect of the Vessel shall be for Owbers' account.
       
      With reference to the Bimco war risk clause herein, it is understood and agreed that any payments made to the owners by underwriters for loss of hire in case of seizure by pirates, shall be offset against any hire payments made by charts.
       
      List of requested documents below:
      - Copy of proof for insured value i.e. certificate or similar showing same
      - Original invoice from underwriters or insurance broker's invoice showing amount charged
      - Proof of discount granted or no claims bonus
       
War Risks   35. (a)   The master shall not be required or bound to sign Bills of Lading for any place in which his or Owners' reasonable opinion is dangerous or impossible for the vessel to enter or reach owing to any blockade, war, hostilities, warlike operations, civil war, civil commotions or revolutions.

 

 

(b)

If in the reasonable opinion of the master or Owners it becomes, for any of the reasons set out in Clause 35(a) or by the operation of international law, dangerous, impossible or prohibited for the vessel to reach or enter, or to load or discharge cargo at, any place to which the vessel has been ordered pursuant to this charter (a "place of peril"), then Charterers or their agents shall be immediately notified in writing or by radio messages, and the Charterers shall thereupon have the right to order the cargo, or such part of it as may be affected, to be loaded or discharged, as the case may be, at any other place within the trading limits of this charter (provided such other place is not itself a place of peril). If any place of discharge is or becomes a place of peril, and no orders have been received from Charterers or their agents within 48 hours after dispatch of such messages, then Owners shall be at liberty to discharge the cargo or such part of it as may be affected at any place which they or the master may in their or his discretion select within the trading limits of this charter and such discharge shall be deemed to be due fulfilment of Owners' obligations under this charter so far as cargo so discharged is concerned.

     
 

(c)

The vessel shall have liberty to comply with any directions or recommendations as to departure, arrival, routes, ports of call, stoppages, destinations, zones, waters, delivery or in any other wise whatsoever given by the government of the state under whose flag the vessel sails or any other government or local authority or by any person or body acting or purporting to act as or with the authority of any such government or local authority including any de facto government or local authority or by any person or body acting or purporting to act as or with the authority of any such government or local authority or by any committee or person having under the terms of the war risks insurance on the vessel the right to give any such directions or recommendations. If by reason of or in compliance with any such directions or recommendations anything is done or is not done, such shall not be deemed a deviation. If any reason of or in compliance with any such direction or recommendation the vessel does not proceed to any place of discharge to which she has been ordered pursuant to this charter, the vessel may proceed to any place which the master or Owners in his or their discretion select and there discharge the cargo or such part of it as may be affected. Such discharge shall be deemed to be due fulfilment of Owners obligations under this charter so far as cargo so discharged is concerned.

     
    Charterers shall procure that all Bills of Lading issued under this charter shall contain the Chamber of Shipping War Risks Clause 1952. Provisions of Conwartime 2013.

 

15

 

Both to  

36.

If the liability for any collision in which the vessel is involved while performing this charter falls to be determined in accordance with the laws of the United States of America, the following provision shall apply:

Blame      
Collision Clause     "If the ship comes into collision with another ship as a result of the negligence of the other ship and any act, neglect or default of the master, mariner, pilot or the servants of the carrier in the navigation or in the management of the ship, the owners of the cargo carried hereunder will indemnify the carrier against all loss, or liability to the other non-carrying ship or her owners in so far as such loss or liability represents loss of, or damage to, or any claim whatsoever of the owners of the said cargo and set off, recouped or recovered by the other non-carrying ship or her owners to the owners of the said cargo and set off, recouped or recovered by the other or non-carrying ship or her owners as part of their claim against the carrying ship or carrier."
       
      "The foregoing provisions shall also apply where the owners, operators or those in charge of any ship or ships or objects other than, or in addition to, the colliding ships or objects are at fault in respect of a collision or contact."
       
      Charterers shall procure that all Bills of Lading issued under this charter shall contain a provision in the foregoing terms to be applicable where the liability for any collision in which the vessel is involved falls to be determined in accordance with the laws of the United States of America.
       
New Jason Clause   37. General average contributions shall be payable according to the York/Antwerp Rues 1994, as amended from time to time, and shall be adjusted in London in accordance with English law and practice but should adjustment be made in accordance with the law and practice of the United States of America, the following provision shall apply:
       
      "In the event of accident, danger, damage or disaster before or after the commencement of the voyage, resulting from any cause whatsoever, whether due to negligence or not, for which, or for the consequence of which, the carrier is not responsible by statute, contract or otherwise, the cargo, shippers, consignees or owners of the cargo shall contribute with the carrier in general average to the payment of any sacrifices, losses or expenses of a general average nature that may be made or incurred and shall pay salvage and special charges incurred in respect of the cargo."
       
      "If a salving ship is owned or operated by the carrier, salvage shall be paid for as fully as if the said salving ship or ships belonged to strangers. Such deposit as the carrier or his agents may deem sufficient to cover the estimated contribution of the cargo and any salvage ad special charges thereon shall, if required, be made by the cargo, shippers, consignees or owners of the cargo to the carrier before delivery."
       
      Charterers shall procure that all Bills of Lading issued under this charter shall contain a provision in the foregoing terms, to be applicable where adjustment of general average is made in accordance with the laws and practice of the United States of America.
       
Clause   38. Charterers shall procure that all Bills of Lading issued pursuant to this charter shall contain the following:
Paramount      
      "(1) Subject to sub-clause (2) or (3) hereof, this Bill of Lading shall be governed by, and have effect subject to, the rules contained in the International Convention for the Unification of Certain Rules relating to Bills of Lading signed at Brussels on 25th August 1924 (hereafter the "Hague Rules") as amended by the Protocol signed at Brussels on 23rd February 1968 (hereafter the "Hague – Visby Rules"), Nothing contained herein shall be deemed to be either a surrender by the carrier of any of his rights or immunities or any increase of any of his responsibilities or liabilities under the "Hague-Visby Rules."
       
      "(2) If there is a governing legislation which applies the Hague Rules compulsorily to this Bill of Lading, to the exclusion of the Hague-Visby Rules, then this Bill of Lading shall have effect subject to the Hague Rules. Nothing herein contained shall be deemed to be either a surrender by the carrier of any of his rights or immunities or an increase of any of his responsibilities or liabilities under the Hague Rules."

 

16

 

       
      "(3) If there is a governing legislation which applies the United Nations Convention on the Carriage of Goods by Sea 1978 (hereafter the Hamburg Rules) compulsorily to this Bill of Lading, to the exclusion of the Hague-Visby Rules, then Bill of Lading shall have the effect subject to the Hamburg Rules. Noting therein contained shall be deemed to be either a surrender by the carrier of any of his rights or immunities or an increase of any of his responsibilities or liabilities under the Hamburg Rules."
       
      "(4) If any term of this Bill of Lading is repugnant to the Hague-Visby Rules, or Hague Rules, or Hamburg Rules, as applicable, such term shall be void to that extent but no further."
       
      "Nothing in this Bill of Lading shall be construed as in any way restricting, excluding or waiving the right of any relevant party or person to limit his liability under any available legislation and/or law." This Charter shall be subject to Clause Paramount.
       
Insurance/ ITOPF   39. Owners warrant that the vessel is now, and will, throughout the duration of the charter:
    (a) be owned or demise chartered by a member of the International Tanker Owners Pollution Federation Limited.
       
    (b)  be properly entered in BRITANNIA P&I Club P and I Club, being a member of the International Group of P and I Clubs;
       
    (c)  have in place insurance cover for oil pollution for the maximum on offer through the International Group of P&I Clubs but always a minimum of United States Dollars 1,00,000,000 (one thousand million);
       
    (d) have in full force and effect Hull and Machinery insurance placed through reputable brokers on Institute Time Clauses or equivalent for the value of United States Dollars TBA as from time to time may be amended with Charterers approval, which shall not be unreasonably withheld.
       
    Owners will provide, within a reasonable time following a request from Charterers to do so, documented evidence of compliance with the warranties given in this Clause 39.
     
    Owners will provide to Charterers within FIVE business days after this charterparty is concluded documented evidence of compliance with the warranties given in this clause 39. If documented evidence of compliance is not received by Charterers within that five business days, Charterers have the right to cancel the charterparty within five business days thereafter.
     
Export   40. The master shall not be required or bound to sign Bills of Lading for the carriage of cargo to any place to which export of such cargo is prohibited under the laws, rules or regulations of the country in which the cargo was produced and/or shipped.

 Restrictions

      Charterers shall procure that all Bills of Lading issued under this charter shall contain the following clause:
       
      "If any laws rules or regulations applied by the government of the country in which the cargo was produced and/or shipped, or any relevant agency thereof, impose a prohibition on export of the cargo to the place of discharge designated in or ordered under this Bill of Lading, carriers shall be entitled to require cargo owners forthwith to nominate an alternative discharge place for the discharge of the cargo, or such party of it as may be affected, which alternative place shall not be subject to the prohibition, and carriers shall be entitled to accept orders from cargo owners to proceed to and discharge at such alternative place. If cargo owners fail to nominate an alternative place within 72 hours after they or their agents have received from carriers such notice of such prohibition, carriers shall be at liberty to discharge the cargo or any such part of it as may be affected by the prohibition at any safe place on which they or the master may in their or his absolute discretion decide and which is not subject to the prohibition, and such discharge shall constitute due performance of the contract contained in this Bill of Lading so far as the cargo so discharged is concerned",
       
      The foregoing provision shall apply mutates mutandis to this charter, the references to a Bill of Lading being deemed to be references to this charter.
       
Business Principles   41. Owners will co-operate with Charterers to ensure that the Business Principles, as amended from time to time, of the Royal Dutch/Shell Group of Companies, which are posted on the Shell Worldwide Web (www.Shell.com), are complied with.
       
Drugs and Alcohol   42. (a)   Owners warrant that they have in force an active policy covering the vessel which meets or exceeds the standards set out in the "Guidelines for the Control of Drugs and Alcohol On Board Ship" as published by the Oil Companies International Marine Forum (OCIMF) dated January 1990 (or any subsequent modification, version, or variation of these guidelines) and that this policy will remain in force throughout the charter period, and Owners will exercise due diligence to ensure the policy is complied with.
       

 

17

 

      (b)   Owners warrant that the current policy concerning drugs and alcohol on board is acceptable to ExxonMobil and will remain so throughout the charter period.
       
Oil Major   43. If, at any time during the charter period, the vessel becomes unacceptable to any Oil Major, Charterers shall have the right to terminate the charter.

Acceptability

 

Pollution and   44. Owners are to advise Charterers of organisational details and names of Owners personnel together with their relevant telephone/facsimile/e-mail/telex numbers, including the names and contact details of Qualified Individuals for OPA 90 response, who may be contacted on a 24 hour basis in the event of oil spills or emergencies.

Emergency
Response

 

ISPS Code/ US MTSA 2002  

45.

(a)   (i)            From the date of coming into force of the International Code for the Security of Ships and of Port Facilities and the relevant amendments to Chapter XI of SOLAS (ISPS Code) and the US Maritime Transportation Security Act 2002 (MTSA) in relation to the Vessel and thereafter during the currency of this charter, Owners shall procure that both the Vessel and "the Company" (as defined by the ISPS Code) and the owner (as defined by the MTSA) shall comply with the requirements of the ISPS Code relating to the Vessel and "the Company" and the requirements of MTSA relating to the vessel and the owner. Upon request Owners shall provide documentary evidence of compliance with this Clause 45(a)(i).

              (ii) Except as otherwise provided in this charter, loss, damage, expense or delay, caused by failure on the part of the Owners or "the Company"/owner to comply with the requirements of the ISPS Code/MTSA or this Clause shall be for Owners' account.

 

 

(b)

(i)            Charterers shall provide Owners/Master with their full style contact details and shall ensure that the contact details of all sub-charterers are likewise provided to Owners/Master. Furthermore, Charterers shall ensure that all sub-charter parties they enter into during the period of this charter contain the following provision:

     
    "The Charterers shall provide the Owners with their full style contact details and, where sub-letting is permitted under the terms of the charter party, shall ensure that the contact details of all sub-charterers are likewise provided to the Owners".
     
    (ii) Except as otherwise provided in this charter, loss, damage, expense or delay caused by failure on the part of the Charterers to comply with this sub-Clause 45(b) shall be for Charterers' account.
     
 

(c)

Notwithstanding anything else contained in this charter costs or expenses related to country regulations or measures required by the port facility or any relevant authority in accordance with the ISPS Code MTSA including, but not limited to, security guards, launch services, tug escorts, port security fees or taxes and inspections, shall be for Charterers' account, unless such costs or expenses result solely from Owners' negligence in which case such costs or expenses shall be for Owners account. All measures required by Owners to comply with the security plan required by the ISPS Code MTSA shall be for Owners' account.

     
 

(d)

Notwithstanding any other provision of this charter, the vessel shall not be off-hire where there is a loss of time caused by Charterers failure to comply with the ISPS Code MTSA (when in force).

     
 

(e)

If either party makes any payment which is for the other party's account according to this Clause, the other party shall indemnify the paying party.

 

Law and Litigation  

46.

(a)    This charter shall be construed and the relations between the parties determined in accordance with the laws of England.

  (b) All dispute arising under this charter shall be referred to Arbitration in London in accordance with the Arbitration Act 1996 (or any re-enactment or modification thereof for the time being in force) subject to the following appointment procedure:

 

  (i) The parties shall jointly appoint a sole arbitrator not later than 28 days after service of a request in writing by either party to do so.
     

 

18

 

  (ii) If the parties are unable or unwilling to agree the appointment of a sole arbitrator in accordance with (i) then each party shall appoint one arbitrator, in any event not later than 14 days after receipt of a further request in writing by either party to do so. The two arbitrators so appointed shall appoint a third arbitrator before any substantive hearing or forthwith if they cannot agree on a matter relating to the arbitration.
     
  (iii) If a party fails to appoint an arbitrator within the time specified in (ii) (the Party in Default), the party who has duly appointed his arbitrator shall give notice in writing to the Party in Default that he proposes to appoint his arbitrator to act as sole arbitrator.
     
  (iv) If the Party in Default does not within 7 days of the notice given pursuant to (iii) make the required appointment and notify the other party that he has done so the other party may appoint his arbitrator as sole arbitrator whose award shall be binding on both parties as if he had so appointed by agreement.
     
  (v) Any Award of the arbitrator(s) shall be final and binding and not subject to appeal..
     
  (vi) For the purposes of this clause 46(b) any requests or notices in writing shall be sent by fax, e-mail or telex and shall be deemed received on the day of transmission.

 

  (c) It shall be a condition precedent to the right of any party to a stay of any legal proceedings in which maritime property has been, or may be, arrested in connection with a dispute under this Charter, that that party furnishes to the other party security to which that other party would have been entitled in such legal proceedings in the absence of a stay.

 

Confidentiality   47. All terms and conditions of this charter arrangement shall be kept private and confidential.
       
Construction  

48.

The side headings have been included in this charter for convenience of reference and shall in no way affect the construction hereof.

       
      Appendix A: OCIMF Vessel Particulars Questionnaire for the vessel, as attached, shall be incorporated herein.
       
      Appendix B: Shell Safety and Environment Monthly Reporting Template, as attached, shall be incorporated herein.
       
      Additional Clauses:     As attached, shall be incorporated herein.

 

19

 

 

 

SIGNED FOR OWNERS

 

South California Inc.

 

 

 

FULL NAME

 

/s/Evangelos Ikonomou

 

POSITION

 

Attorney in Fact

SIGNED FOR CHARTERERS

 

Trafigura Maritime Logistics PTE Ltd

 

 

 

FULL NAME

 

/s/V Georgopoulos

 

POSITION

 

                              

 

 

 

20

 

Table of Content

 

A.

GENERAL TERMS

3

B.

TRAFIGURA ADDITIONAL TERMS TO SHELLTIME 4

3

49.

ON HIRE/OFF HIRE SURVEYS

3

50.

INSPECTIONS

3

51.

INSTRUCTIONS

4

52.

CONTACT DETAILS

4

53.

TANK CLEANING

5

54.

OFF HIRE PROVISIONS

5

55.

PUMPING CLAUSE

5

56.

DRUG AND ALCOHOL CLAUSE

6

57.

SHIP-TO-SHIP LIGHTERING

6

58.

BUNKERS

7

59.

ETA/TRACKING

8

60.

ELIGIBILITY AND COMPLIANCE

9

61.

OIL MAJORS APPROVAL

10

62.

INERT GAS SYSTEM

11

63.

BALLAST CLAUSE

11

64.

BROKERAGE COMMISSION CLAUSE

11

65.

IN-TRANSIT LOSS CLAUSE

12

66.

RETURN INSURANCE CLAUSE

12

67.

CARGO RETENTION CLAUSE

12

68.

HEATING CLAUSE

12

69.

DELETED

13

70.

CHARTERPARTY ADMINISTRATION

13

71.

CARGO OPERATIONS

13

72.

VESSEL MANAGEMENT CLAUSE

13

73.

AMS CLAUSE

14

74.

EU Advance Cargo Declaration Clause for Time Charter Parties

14

75.

SBT Clause

15

C.

OWNERS ADDITIONAL CLAUSES

16

1.

ISPS CLAUSE FOR TIME CHARTER PARTIES:

16

2.

BUNKER QUALITY & SUPPLY:

17

3.

BUNKER FUEL SULPHUR CONTENT CLAUSE:

18

 

 

21

 

4.

SANCTIONS RELATED TRADING EXCLUSION:

19

5.

Trafigura Sanctions Clause for Time Charterparties

19

6.

BIMCO Designated Entities Clause

22

7.

Gulf Of Guinea HRA

23

8.

STORAGE & UNDERWATER CLEANING CLAUSE:

25

9.

WAR RISKS / PIRACY

25

10.

EBOLA CLAUSE:

28

11.

ICE CLAUSE

29

12.

ANTI-BRIBERY, ANTI-CORRUPTION CLAUSE (ABC)

29

13.

SCRUBBER CLAUSE/EXHAUST GAS CLEANING SYSTEM

29

14.

BIMCO COVID-19 CREW CHANGE CLAUSE FOR TIME CHARTER PARTIES 2020: 

30

15.

INFECTIOUS DISEASE CLAUSE:

31

16.

OWNERS UNDER KEEL CLEARANCE AND AIR CLEARANCE POLICY

33

17.

AGM Clause

31

18

AIRDRAFT

33

19.

KYC

34

20.

LOIs

34

 

 

 

 

 

 

 

 

 

22

 

TRAFIGURA ADDITIONAL CLAUSES AND AMENDMENTS TO SHELLTIME 4

(AS AMENDED DECEMBER 2003)

 

 

A.

GENERAL TERMS

 

 

1.

Charter to be based on Shelltime 4 Charter Party deleting any references to Shell International Trading and Shipping Company Limited and replacing with Trafigura Maritime Logistics Pte Ltd.

 

 

2.

All negotiations and details of this Charter are to remain private and confidential by all parties concerned, except so far as concerns such information as is required to be disclosed by either party to its employees, auditors, lawyers and affiliates who have a need to know such information in connection with the performance of this Charter, to any court of governmental authority requiring such, or to any other appropriate third party to the extent necessary to comply with any legal or governmental requirement or to give commercial effect to the Charter.

 

 

3.

In the event of a conflict of terms, the provisions of these Additional Clauses and Amendments to Shelltime 4 shall prevail over those of the standard Shelltime 4 form to the extent of such conflict but no further.

 

 

4.

In each and every case where there is reference in this Charter to correspondence by "telex", it shall be read as correspondence by "e-mail or telex".

 

 

B.

TRAFIGURA ADDITIONAL TERMS TO SHELLTIME 4

 

 

49.

ON HIRE/OFF HIRE SURVEYS

 

If required by the Charterers joint on hire/off hire surveys are to be carried out at the delivery and redelivery ports respectively by an independent surveyor acceptable to both parties to inspect the Vessel's condition and to ascertain the quantity of bunkers on board.  The cost of and any time lost by reason of the surveys shall be shared equally between the Owners and the Charterers.

 

 

50.

INSPECTIONS

 

 

50.1.

In addition to the joint on hire/off hire surveys and further to their rights of inspection as set out in clause 23 of this charterparty the Charterers' right to make such inspection of the Vessel as they may consider necessary includes but is not limited to the right to place on board the Vessel an inspector, surveyor and/or representative to inspect and/or test:


(i)         The Vessel's hull, machinery and equipment and living spaces;
(ii)        The Vessel's operational procedures both in port and at sea; and
(iii)       The Vessel's certificates, records and documents


to determine whether the Owners are complying in all respects with their obligations and that the Vessel is in full compliance with international, national, state or local conventions, laws, regulations and ordinances currently in force or which may come into force in respect of the waters and trading areas to which the Vessel may be ordered during the charter period.  Any delay caused by such inspection or test will be for the Charterers' account but any repair or delay by reason of the Owners' non-compliance will be for the Owners' account.

 

23

 

 

50.2.

The Charterers shall also have the right to require inspection of the Vessel's tanks at loading and/or discharging ports to ascertain the condition of the tanks, the quality of the cargo, water and residues on board.  In that respect the Charterers' inspector, surveyor and/or representative has the right to ullage, inspect and take samples from the Vessel's cargo tanks, bunker tanks, void spaces and other non-cargo tanks.  Depressurisation of the tanks to permit such inspection and/or ullaging shall be carried out under the supervision of the Vessel's Master in accordance with the recommendations in the latest edition of the International Safety Guide for Oil Tankers and Terminals.

 

 

50.3.

The Charterers are further entitled from time to time during the charter period on reasonable notice to arrange for their representative(s) to attend the Owner's offices or the offices of the Owners' managers or managing agents as the case may be in order to audit, asses and/or investigate the Owners' policy, management, crewing and operations in relation to the services to be provided by the Vessel under this charter.

 

 

50.4.

Any deficiencies determined by the Charterers, their representative(s), surveyor and/or inspector following any of the above audits, investigations, inspections and/or tests shall be corrected by the Owners at the Owners' time and expense within 30 days of the Charterers giving the Owners notice in writing of the deficiency.  If the Owners do not correct the deficiency after the said 30 days the Charterers have the option to place the Vessel off hire until she is restored to or the Owners' policy, management, crewing and operations conform to the Charterers' reasonable satisfaction.


Any deficiencies identified basis above should be in accordance with Flag, Class, OCIMF standards.  This is a quality assurance clause and will not be used for commercial purposes by the charterers.

 

 

50.5.

Whether or not the Charterers exercise their rights under this clause, no action or inaction on their part shall be deemed to be a waiver of their rights and shall be without prejudice to any other remedy available to the Charterers.

 

 

51.

INSTRUCTIONS

 

 

51.1.

Charterers will give the Master specific telexed or email instructions for each loading/discharging operation.  These instructions will always include agents.  All instructions will be signed by the Charterers' authorised person(s) and the Master will only take instructions from the Charterers by telex/email, or, if verbally, on receipt of telex confirmation by an authorised person.  If the Master receives instructions either verbally or telexed from any person other than authorised by the Charterers, then the Master will contact the Charterers' authorised person(s) and report the situation verbally in the first instance, but always accompanied with a telex.  If the Master is unable to reach the Charterers' authorised person(s) the Master will maintain the Vessel's position and keep trying to contact the Charterers' authorised person(s) until reached.  On contact, the authorised person(s) will advise the Master verbally followed by telex how to proceed.

 

 

51.2.

Vessels Loading: Sidi Kerir or Discharging: Ain Sukhna NOT APPLICABLE

 

 

24

 

 

52.

CONTACT DETAILS

 

The Master and Vessel may be contacted at any time using the following numbers and procedures:

 

[insert details]

 

 

53.

TANK CLEANING

 

 

53.1.

 On delivery and prior to all subsequent loadings the Vessel will be presented clean to the Charterers, Sub-Charterers and/or suppliers' inspector's satisfaction for the intended cargo.  Without prejudice to the Charterers' rights of cancellation and/or other rights whatsoever in the event that the Vessel's tanks, pumps or lines are rejected due to lack of cleanliness the Vessel will be placed off hire for all time lost until her tanks, pumps or lines are finally accepted by the Charterers, Sub-Charterers and/or suppliers' inspector.

 

 

54.

OFF HIRE PROVISIONS

 

 

54.1.

The Owners guarantee that prior to presentation of the Vessel and for the duration of this Charter Party, the officers and crew of the Vessel are employed under conditions acceptable to the ITF or equivalent

 

 

54.2.

Without prejudice to the generality of that guarantee and the Charterers' right to seek damages in respect of its breach, in the event that the Vessel is boycotted, blockaded, blacklisted, subject to interference, subject to strike (legal or illegal), subject to stoppage of labour in any type or form, be it ship or shore labour, or denied or restricted in the use of port and/or discharging facilities and/or tug or pilotage assistance, all or any such events on account of ITF non-acceptability as aforesaid or otherwise, the Vessel's flag, registry, ownership, management, manning, wages or conditions of employment of her officers and/or crew or because of the previous trading of the Vessel or any other Vessel as aforesaid, hire shall cease for the time thereby lost, and the Owners will be responsible for and shall pay in the first instance all extra direct expenses, incurred arising therefrom, including but not limited to proceeding to an alternative berth or port and/or transhipping or otherwise forwarding any cargo to it place of delivery.

 

 

55.

PUMPING CLAUSE

 

The Owners warrant that throughout the charter period the Vessel will either discharge a full homogeneous cargo (whether homogenous or multi grade) within 24 hours (or pro rate time for part thereof) or maintain an average of 100 psi at the Vessel's manifold and the Owners warrant such minimum performance provided the receiving facilities permit and subject always to an obligation on the Owners to perform the Vessel's service with utmost despatch, always excluding drainage and stripping max 3 hours lines blowing and COW but max 3 hours per each grade.  The discharge terminal has the right to gauge line pressure.  If the Vessel fails to comply with the above warranties, the Charterers have the right to order the Vessel to be withdrawn from the berth in which case all time and expenses incurred are for the Owners' account until the Vessel re-berths and resumes discharge operations.  Further, and alternatively, any delay by reason of the Vessel's failure to comply with the above warranties and any direct expenses arising therefrom including but not limited to terminal charges for berth occupancy shall be for the Owners' account.  All pumping logs must be noted by the Vessel in the event of any restrictions imposed by the receiving terminal restricting/slowing discharge, duly signed by the Master and terminal and sent directly by the Vessel to the Charterers within one business day.

 

25

 

The above pumping performance should always be subject to:

 

A sufficient and adequate number / size of arms / hoses.


Homogeneous cargo and not multiple berths or barge discharge.


The cargo at discharge temperature does not have (i) kinematic viscosity exceeding 250 degrees Centistokes, or (ii) volatility which adversely affects the required net positive suction head of vessel's cargo pumps, or (iii) density exceeding 1,000 KG/m3.

 

 

56.

DRUG AND ALCOHOL CLAUSE

 

For the purposes of clause 42 of the Shelltime 4 form and the OCIMF Guidelines, alcohol impairment shall be defined as blood alcohol content of 40mg/100ml or greater; the appropriate seafarers to be tested shall all be Vessel's officers and the drug/alcohol testing and screening shall include random or unannounced testing in addition to routine medical examinations.  An object of the policy shall be that the frequency of the random/unannounced testing is adequate to act as an effective abuse deterrent, and that all officers are tested at least once a year through a combined programme of random/unannounced testing and routine medical examinations.  The Owners further warrant that if required by Charterers a full declaration has been passed on to the Exxon/Exxon affiliate which confirms that the Vessel operates under a Drug and Alcohol Policy which meets or exceeds the OCIMF Guidelines.

 

 

57.

SHIP-TO-SHIP LIGHTERING

 

 

57.1.

The Charterers have the option to load or discharge the Vessel via ship-to-ship transfer either partially or totally at sea or at anchor or underway off any port that the Charterers may direct Vessel not to be employed in a continuous lighterage service unless agreed with Owners, which not to be unreasonably withheld.

 

 

57.2.

The Owners warrant the Vessel is and will remain fully suitable for such lightering operations and that the operations shall be carried out in accordance with all applicable conventions, laws, regulations, rules and the like of any international, national, state or local government entity and in accordance with the procedures set out in the latest revised edition of the International Chamber of Shipping Oil Companies International Marine Forum Ship-to-Ship Transfer Guide (Petroleum) ("ICS/OCIMF Guidelines").

 

 

57.3.

The Owners agree to allow supervisory personnel on board including but not limited to a Mooring Master to advise on the performance of the ship-to-ship transfer operation.  It is understood, however, that the Master of the Vessel shall be responsible for the safe operation of the Vessel at all times throughout the transfer operation and for assuring that the requirements of any conventions, laws, regulations and rules, the ICS/OCIMF Guidelines and prudent seamanship are met.  It is further understood and agreed that the crew of the Vessel will assist in handling fenders and cargo hoses as well as mooring and unmooring as required by the Mooring Master at no cost to the Charterers.

 

26

 

 

57.4.

The Owners guarantee that the Vessel is capable of and will maintain a safe and reasonable stability during and after the lightering operation.

 

 

57.5.

The Charterers will provide all fenders, hoses and any other equipment necessary to perform a safe lightering operation as per procedures set out in the latest revised edition of the International Chamber of Shipping Oil Companies International Marine Forum Ship-to-Ship Transfer Guide (Petroleum) ("ICS/OCIMF Guidelines") at the Charterers' time and expense.

 

 

58.

BUNKERS

 

 

58.1.

The Charterers have the option to bunker the Vessel before delivery provided this does not interfere with the discharge operation or delay delivery.

 

 

58.2.

The Vessel will be redelivered with about the same quantity of bunkers as on delivery excluding any bunkers taken for the Charterers' account before delivery subject to the requirement that there is a sufficient quantity of bunkers on board including safety margin to reach the nearest main bunkering port for a vessel of her size delete already covered in shelltime

 

 

58.3.

At the time of delivery of the Vessel the Owners shall provide the Charterers with the bunker delivery note(s) of any fuels on board and shall place at the disposal of the Charterers any samples relating to the fuels on board.

 

 

58.4.

Throughout the charter period the Charterers shall ensure that bunker delivery notes are presented to the Vessel on the delivery of fuel(s) and the Owners shall ensure that continuous drip samples are taken at the Vessel's bunker manifolds during the entire bunkering operation and sealed in the presence of competent representatives of the suppliers, the Charterers (at Charterers' option) and the Owners one sample to be retained of each of the fuels supplied on the Vessel and two samples to be retained by the suppliers.

 

 

58.5.

The samples shall be securely sealed and provided with labels showing the Vessel's name, identity of delivery facility, product name, delivery date and place and seal number, authenticated with the Vessel's stamp and signed by the suppliers' representative and the Master of the Vessel or his authorised representative.

 

 

58.6.

The fuel samples shall be retained by the suppliers and the Vessel for 60 (sixty) days after the date of delivery or for whatever periods necessary in case a claim for any defect in the quality of the fuels is brought to the Charterers' attention prior to the expiry of that 60 (sixty) day period.  In that respect any claim for any defect in quality of the fuels must be brought to the Charterers' attention immediately and, in any event, within 60 days of delivery together with full details of the claim with supporting evidence failing which any such claim shall be deemed waived and shall be time barred regardless of whether the Owners were unaware of the grounds for a claim until a later date.

 

 

58.7.

One sample will immediately after delivery be sent by Vessel's Master to the nearest DNV or similar well recognised laboratory for analysis, clearly identifying that the request for analysis comes from the Charterers.  Any dispute regarding the quality of the fuels shall be settled by that analysis, the finding of which shall be conclusive evidence as to conformity or otherwise with the bunker fuel specification(s).

 

27

 

 

58.8.

The Owners will ensure that an Owners' representative witnesses bunker soundings and measurement of bunker quantities before and after delivery whether at the manifold, on shore or at the bunker barge tanks as determined by the suppliers and any complaint of an incorrect measurement of the quantity of fuel(s) delivered must be made both orally and in writing at the time of delivery and notified to all parties concerned immediately after delivery and noted in the delivery receipt at the time of delivery, failing which the suppliers' determination of quantity shall be final and conclusive and any claim to the contrary is deemed to be waived and absolutely barred.

 

 

59.

ETA/TRACKING

 

 

59.1.

The Owners undertake that, unless the Charterers require otherwise, the Master shall email/telex, in the format provided by the Charterers, his noon position on every day during the currency of this charter.  Furthermore, the Master will keep the Charterers fully advised of the Vessel's ETA of more than 6 hours immediately be notified to the Charterers.

 

 

59.2.

Owners undertake that, unless Charterers require otherwise, the Master shall advise Charterers:

 

 

i.

Immediately on leaving the final port of call on the previous voyage of the time and date of the vessel's expected arrival at the first loading port and shall further advise Charterers 72, 48, 36, and 24 hours before the expected arrival time/date.

 

 

ii.

Immediately after departure from the final loading port, of the vessel's expected time of arrival at the first discharging port or the area at sea to which the vessel has been instructed to proceed for wireless orders, and confirm or amend such advice not later than 72, 48, 36 and 24 hours before the vessel is due at such port or area;

 

 

iii.

Immediately of any variation of more than six hours from expected times of arrival at loading or discharging ports, Quoin Island or such area at sea to Charterers;

 

 

iv.

Immediately if any situation occurs after the date of this charter party which may result in tendering later than the cancelling date, or in damage to the vessel or cargo, or in tardy performance of the voyage

 

 

59.3.

For clause 59.2, if the loading range is Arabian Gulf, load port is defined as arrival off Quoin Island

 

 

59.4.

The Owners further undertake that unless the Charterers require otherwise, the Master will follow all lawful voyage orders issued by the Charterers.

 

 

59.5.

The Owners shall be responsible for any consequences or additional expenses arising as a result of non-compliance with this clause.

 

 

59.6.

Charterer's communication details:
[insert details]

 

28

 

 

59.7.

The Charterers may from time to time throughout the charter period employ an Inmarsat C trading system on the Vessel provided this does not interfere with the Vessel's navigational system.  All registration and communication costs relating to this tracking system will be for the Charterers' account.  The Charterers will advise when the system is operative and confirm termination on completion of the charter.  The Owners will supply the following information, which will form part of this clause:


Inmarsat C number (9 digits beginning with 4): [number to be inserted]

 

 

60.

ELIGIBILITY AND COMPLIANCE

 

 

60.1.

Owners warrant that the Vessel is and shall remain throughout the duration of this charter in all respects eligible under all applicable conventions, laws, regulations, rules, ordinances, decrees, conventions and any other applicable directives of the country of the Vessel registry and of any international, national, state or local government entity including without limitation port and customs authorities for trading to and from any port or place within the trading limits set out in clause 4 of this charterparty.  For the avoidance of doubt and without limitation such compliance includes compliance with the rules of the International Convention for the Prevention of Pollution from Ships (MARPOL 1973/1978) as amended, the International Convention of the Safety of Lives at Sea (SOLAS 1974/1978/1983) as amended, the US Oil Pollution Act of 1990 (OPA 90) as amended, the Comprehensive Environmental Response Compensation and Liability Act (CERCLA) as amended, the National Convention of Civil Liability for Oil Pollution Damage of 1992 as amended, the US Port and Safe Tanker Safety Act as amended and the US Federal Water Pollution Control Act as amended.

 

 

60.2.

Owners warrant that from the date of delivery and throughout the charter period the Vessel shall have on board for inspection by the appropriate authorities all certificates, records, compliance letters and other documents required for the performance of this charterparty, including, but not limited to, a US Coastguard Certificate of Financial Responsibility (Oil Pollution) (COFR) and the certificate required by Article VII of the International Convention on Civil Liability for Oil Pollution Damage 1992, as amended.

 

 

60.3.

In the interests of safety, the Owners warrant that the Master will observe recommendations as to traffic, separation and routing as issued from time to time by the International Maritime Organisation (IMO) or as promulgated by the state of the flag of the Vessel and/or the state in which the effective management of the Vessel is exercised.

 

 

60.4.

Without prejudice to the Charterers' rights to terminate this charterparty for breach of any warranty set out in the above, the Vessel shall be off hire for any time lost during which she is not fully and freely available to the Charterers as a result of any failure to comply with this clause and any proven and direct losses, expenses or damages arising as a result of such failure shall be for the Owners' account.

 

 

29

 

USCG compliance

 

All time lost at any USA port, or at any port of USA controlled territories, waiting for USCG inspection and for issuance of TVEL, shall count in full as time on hire, unless the outcome of the USCG inspection will be such that the TVEL is not obtained and thevessel is prevented from proceeding to perform cargo operation in USA, or their controlled territories only because of such reason.  In such a case, the off hire to count from the USCG's rejection until the TVEL issuance.

 

All time lost and all costs for obtaining and maintaining valid uscg coc to be for owners account PROVIDED CHARTERERS HAVE ISSUES ORDERS TIMELY as per local port USCG requirements.

 

 

61.

OIL MAJORS APPROVAL

 

 

61.1.

The Owners acknowledge that to trade effectively an oil tanker today, acceptance of the Vessel under the SIRE Vessel Inspections Programme by the major oil companies is essential and for a [gas or] chemical tanker acceptance also under the CDI Vessel Inspections Programme is essential.  As such, it is a condition of this charterparty that on the day of delivery, unless a new build, the Vessel has been inspected under the CDI and SIRE Vessel Inspection Programme and by the major oil and chemical companies as required (separately and together "Inspection(s)") and to the best of Owners belief and knowledge is not unacceptable to any major oil company.

 

 

61.2.

If the Vessel is a new build then it is a condition of this charterparty that the Owners shall arrange such Inspection(s) and obtain at least one CDI and / or SIRE report acceptable to the major oil and chemical companies as required within three weeks after delivery.


Charterers to decide which inspection will be perform first. Such inspections always to be subject to the vessel's trading patterns, availability of inspectors and subject to OCIMF SIRE rules.

 

 

61.3.

The Owners shall arrange such Inspections to maintain such acceptances for their account.  Such Inspections will be co-ordinated between the Owners, the Charterers and relevant inspectors and, at the minimum, will be carried out within the intervals required in lines 42-43 of the Shelltime 4 form on any lesser intervals as required following inspection whichever is the lesser period.

 

 

61.4.

If one (1) further Inspection is required in order to perform a contemplated voyage or for the Vessel to be eligible for contemplated business then such Inspection will be arranged by the Owners and co-ordinated between the Owners, the Charterers and the relevant inspectors and shall be for the Owners' Charterers account and it shall be the Owners' responsibility to ensure insofar as is physically possible that such Inspection takes place as required by the Charterers always subject to availability of inspectors, the vessel's trading patterns and OCIMF SIRE rules.

 

 

61.5.

The Owners shall on receipt of an Inspection report promptly make their appropriate investigation for the incurred observations and then provide comments on such report and the report itself available to the Charterers and arrange to have their comments entered into the respective databases.

 

30

 

 

61.6.

In respect of a breach of paragraphs 61.1 and 61.2 above, in the event that the Vessel fails or ceases to be accepted following any such Inspections, the Owners shall forthwith rectify the situation to make the Vessel acceptable and arrange the Vessel's re-inspection within a maximum of four weeks, always subject to the vessel's trading patterns, availability of inspectors and subject to OCIMF SIRE rules, the cost of which shall be for the Owners' account.  The Vessel shall be off hire from 30 days after the time of such rejection and/or failure or cessation of acceptance until again acceptable and any proven and direct loss, damages, costs or expenses whatsoever arising out of such unacceptability and/or rejection shall be for the Owners' account.  In the event the Vessel is not acceptable within after that four week period, the Charterers shall have the right to terminate the charter whether or not the Vessel has previously been acceptable to any oil major or chemical company.

 

 

61.7.

If the vessel is placed off-hire by the Charterers, Owners have the right to trade the vessel for their own account until the vessel again complies with this Clause. Thereafter the vessel shall go on-hire in a position not less favorable to Charterers than the position in which she went off-hire.

 

 

62.

INERT GAS SYSTEM

 

 

62.1.

The Owners warrant that the Vessel is equipped with a fully functional, efficient and certified Inert Gas System ("IGS") which is in use on the date of delivery of the Vessel and shall so remain during the period of the charter and that the officers and crew on board on delivery and throughout the period of the charter are and will be experienced in the operation of the system.  The Owners further warrant that the Vessel will arrive at load ports with cargo tanks inerted and that the tanks will remain inerted throughout the voyage and during discharge.

 

 

62.2.

The Master may be requested by terminal personnel or independent inspectors to breach the IGS for the purposes of gauging, sampling, temperature determination and/or determining the quantity of cargo remaining on board after discharge.  The Master shall comply with these requests consistent with the safe operation of the Vessel and all applicable laws, rules and regulations and the vessel shall remain on hire throughout.

 

 

62.3.

Any proven and direct costs, delays or expenses resulting from non-compliance with this clause shall be for the Owners' account and the Vessel shall be off hire for any time so lost.

 

 

63.

BALLAST CLAUSE

 

The Owners warrant that the Vessel is able to ballast/deballast concurrently with cargo operations.  Any time lost by the Vessel being unable to ballast/deballast concurrently with cargo operations will be for the Owners' account and deducted from hire unless such ballasting/deballasting concurrently with cargo operations is prohibited by local regulations.

 

 

64.

BROKERAGE COMMISSION CLAUSE

 

0,7% to Arrow Tankers payable by Owners.  No addcom.

 

1.25% to CENTRAL Ship Chartering Inc. payable by owners / Bare Boat Charterers

 

31

 

 

65.

IN-TRANSIT LOSS CLAUSE

 

In addition to any other rights which the Charterers may have, the Owners will be responsible for the full amount of any in-transit loss if in-transit loss exceeds 0.3% and the Charterers shall have the right to deduct from freight an amount equal to the FOB port of loading value of such lost cargo plus freight and insurance due with respect thereto provided Charterers can prove that they have suffered a corresponding loss and are the party with title to the cargo.  In-transit loss is defined as the difference between net vessel volumes after loading at the loading port and before unloading at the discharge port based on ship's figures.  Calculation is always to be based on same cargo temperature.

 

 

66.

RETURN INSURANCE CLAUSE

 

The Charterers are to have the benefit of any return insurance premium received by the Owners from underwriters (as and when received from underwriters) by reason of the vessel being in port for a minimum period 30 days provided the Vessel is on hire.

 

 

67.

CARGO RETENTION CLAUSE

 

In the event that any cargo remains on board upon completion of discharge, the Charterers shall have the right to deduct from hire an amount equal to the FOB port loading value of such cargo plus voyage freight due with respect thereto, provided that the volume of cargo remaining on board is liquid pumpable and reachable by the Vessel's fixed pumps as determined by a mutually agreeable independent surveyor and further provided that Charterers can prove that they have suffered a corresponding loss and are the party with title to the cargo.  Any action or lack of action in accordance with this provision shall be without prejudice to any rights or obligations of the Charterers.

 

 

68.

HEATING CLAUSE

 

The Owners warrant that the Vessel is fully fitted with tight and functioning heating coils in all cargo tanks and is capable of increasing cargo temperature and maintaining on passage, at the discharge port and during discharge the cargo at the loaded or increased temperature as agreed in this charterparty.

 

Vessel is capable of loading/discharging cargo at a max temperature of 74 degrees Centigrade.

 

Vessel can maintain loaded temperature, or raise cargo temperature up to max. 60 degrees Centigrade.

 

All consumptions for heating for charterers account.

 

32

 

 

69.

DELETED

 

 

70.

CHARTERPARTY ADMINISTRATION

 

A formal Charter Party shall be prepared and signed by Owners and Charterers.  The Owners' broker shall prepare a Charter Party in the format similar to Shelltime 4, as modified by the recap fixture telex/email and bearing the same date.

This should be completed with 30 (thirty) working days after date of fixture.

 

 

71.

CARGO OPERATIONS

 

The vessel may be required to carry out one or more of the following cargo operations as Charterers may reasonably require from time to time, always provided that the vessel is capable of such operations and provided that any such operations are always in accordance with prevailing IMO/MARPOL legislation, OCIMF rules or regulations, and dyes/additives are in accordance with the vessel's tank coating manufacturers resistance list and guidelines, and vessel's specifications and characteristics, Charterers shall have the option at their time risk and expense to:

 

 

i.

Blend and/or circulate cargo onboard

 

 

 

ii.

Load dyed cargo, provided the dye is customarily used or is suitable for use in said cargo

 

 

iii.

Dye the cargo onboard the vessel provided this is carried out or supervised by qualified personnel

 

 

iv.

Blend additives to the cargo at any point during the voyage, provided that the additive is one which is customarily used or is suitable for use in said cargo and carried out or supervised by qualified personnel

 

 

v.

Carry on board the vessel drums or other suitable containers of additive

 

 

vi.

To breach vessel's natural segregation

 

 

vii.

To load and discharge freshwater or seawater shore line flush/plug before, during or after a loading operation

 

Upon receipt of Charterers' written instructions in respect of the foregoing, a Letter of Indemnity in the form of Owners P&I Club wording See Additional Clause 14

 

 

72.

VESSEL MANAGEMENT CLAUSE

 

Throughout the period of this Charter Party the Vessel's ownership structure, flag, registry, classification society, management company and nationality of officers shall not be changed, unless expressly agreed in writing by the Charterer which is not to be unreasonably withheld.

 

Owners shall notify Charterers of any proposed changes in writing at least 90 days prior to proposed implementation date.

 

33

 

 

73.

AMS CLAUSE

 

(a) If the Vessel loads or carries cargo destined for the US or passing through US ports in transit, the Charterers shall comply with the current US Customs regulations (19 CFR 4.7) or any subsequent amendments thereto and shall undertake the role of carrier for the purposes of such regulations and shall, in their own name, time and expense:

 

 

i.

Have in place a SCAC (Standard Carrier Alpha Code);

 

 

ii.

Have in place an ICB (International Carrier Bond); and

 

 

iii.

Submit a cargo declaration by AMS (Automated Manifest System) to the US Customs.

 

(b) The Owners shall provide all necessary information to the Charterers and/or their agents to enable the timely and accurate cargo declaration.

 

The Charterers shall assume liability for and shall indemnify, defend and hold harmless the Owners against any loss and/or damage whatsoever (including consequential loss and/or damage) and/or any expenses, fines, penalties and all other claims of whatsoever nature, including but not limited to legal costs, arising from the Charterers' failure to comply with any of the provisions of this sub-clause.  Should such failure result in any delay then, notwithstanding any provision in this Charter Party to the contrary, the vessel shall remain on hire.

 

(c) The assumption for the role of carrier by the Charterer pursuant to this Clause and for the purpose of the US Customs Regulations (19 CFR 4.7) shall be without prejudice to the identity of carrier under any bill of lading, other contract, law or regulation.

 

 

74.

EU Advance Cargo Declaration Clause for Time Charter Parties

 

(a) If the Vessel loads cargo in any EU port or place destined for a port or place outside the EU or loads cargo outside the EU destined for an EU port or place, the Charterers shall comply with the current EU Advance Cargo Declaration Regulations (the Security Amendment to the Community Customs Code, Regulations 648/2005; 1875/2006; and 312/2009) or any subsequent amendments thereto and shall undertake the role of carrier for the purposes of such regulations and in their own name, time and expense shall:

 

(i) Have in place an EORI number (Economic Operator Registration and Identification);

 

(ii) Provide the Owners with a timely confirmation of (i) above as appropriate; and

 

(iii) Submit an ENS (Entry Summary Declaration) cargo declaration electronically to the EU Member States' Customs and provide the Owners at the same time with a copy thereof.

 

(b) The Charterers assume liability for and shall indemnify, defend and hold harmless the Owners against any direct loss and/or damage whatsoever (excluding consequential loss and/or damage) and/or any expenses, fines, penalties and all other claims of whatsoever nature, including but not limited to legal costs, arising from the Charterers' failure to comply with any of the provisions of sub-clause (a). Should such failure result in any delay then, notwithstanding any provision in this Charter Party to the contrary, the Vessel shall remain on hire.

 

(c) The assumption of the role of carrier by the Charterers pursuant to this Clause and for the purpose of the EU Advance Cargo Declarations Regulations shall be without prejudice to the identity of carrier under any bill of lading, other contract, law or regulation.

 

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75.

SBT Clause

 

Owners warrant that the vessel complies with the Council of the European Union Regulation on the Implementation of IMO Resolution A747(18) which requires that the following entry is made on the International Tonnage Certificate (1969) under the section headed "remarks" ;-


"The segregated ballast tanks comply with the Regulation 13 of Annex 1 of the International Convention for the prevention of pollution from ships, 1973, as modified by the Protocol of 1978 relating thereto, and the total tonnage of such tanks exclusively used for the carriage of segregated water ballast is TBA.


The reduced gross tonnage which should be used for the calculations of tonnage fees is TBA"

 

 

 

 

 

 

 

 

 

 

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C.

OWNERS ADDITIONAL CLAUSES

 

  1.

ISPS CLAUSE FOR TIME CHARTER PARTIES:

 

 

1.

The Owners shall procure that both the Vessel and "the Company" (as defined by the International Code for the Security of Ships and of Port Facilities and the relevant amendments to Chapter XI of SOLAS ('the ISPS Code')) and the "Owner" (as defined by the US Maritime Transportation Security Act 2002 ('MTSA')) shall comply with the requirements of the ISPS Code relating to the Vessel and "the Company" and the requirements of the MTSA, if applicable, relating to the Vessel and the "Owner".  Upon request the Owners shall provide a copy of the relevant International Ship Security Certificate (or the Interim International Ship Security Certificate) to the Charterers.  The Owners shall provide the Charterers with the full style contact details of the Company Security Officer (CSO).

 

 

2.

Except as otherwise provided in this Charter Party, proven loss, damage, expense, hire payable or any time lost, excluding consequential loss, caused by failure on the part of the Owners or "the Company" to comply with the requirements of the ISPS Code or the MTSA if applicable, or this Clause shall be for the Owners' account.

 

 

3.

The Charterers shall provide the CSO and the Ship Security Officer (SSO)/Master with their full style contact details and any other information the Owners require to comply with the ISPS and the MTSA, if applicable.  Additionally, where sub-letting is permitted under the terms of this Charter Party, Charterers shall ensure that the contact details of all sub-charterers are likewise provided to the CSO and the SSO/Master. Furthermore, the Charterers shall ensure that all sub-charter parties they enter into during the period of this Charter Party contain the following provision:


"The Charterers shall provide the Owners with their full style contact details, and where sub-letting is permitted under the terms of the charter party, shall ensure that the contact details of all sub-charterers are likewise provided to the Owners".

 

 

4.

Except as otherwise provided in this Charter Party, loss, damage, expense, hire or delay, excluding consequential loss, caused by failure on the part of the Charterers to comply with this Clause shall be for the Charterers' account.

 

 

5.

All time lost, costs, hire or expenses related to security regulations or measures required by the port facility or any relevant authority in accordance with the ISPS Code/MTSA including, but not limited to, security guards, launch services, tug escorts, port security fees or taxes and inspections, shall be shared equally between Owners and Charterers except where:-

 

 

5.1.

Such costs or expenses are imposed, or hire as a result of Owners' or Charterers' failure to comply with clauses 6.1, and 6.3 (in which case the party whose failure to comply has caused such costs or expenses to be incurred or hire shall bear these), or

 

 

5.2.

Unless such costs or expenses or hire result solely from the Owners'
negligence (in which case the costs, expenses or hire shall be for the Owners' account).  All measures required by the Owners to comply with the Ship Security Plan shall be for the Owners' account.

 

36

 

 

6.

If either party makes any payment which is for the other party's account according to this Clause, the other party shall indemnify the paying party.

 

 

2.

BUNKER QUALITY & SUPPLY:

 

The Charterer is to provide bunkers conforming to ISO8217 (2010) provided available and to make best endeavours to provide bunkers confirming to any later versions of ISO8217 where available and feasible.

Charterer to always have right to load High Sulphur bunkers to use only in Main and Auxiliary Engines, in conjunction with SOx Scrubber after implementation date established by IMO for the entry into force of the 0.5% global sulfur cap as described in MARPOL Annex VI (expected 1 January 2020).

 

 

1.

The Charterers shall supply bunkers of a quality suitable for burning in the Vessel's engines and auxiliaries and which conform to the specification(s) mutually agreed as set out at the top of this clause and under this Charter;

 

 

2.

In the areas of the world where such bunkers are not available, ISO standards are exceeded or ISO standards cannot be guaranteed (for example in countries where local state oil company specifications apply), the Charterers must supply bunkers as available locally.  In such circumstances the local bunker specifications are to meet with the Owners', or the Master's, approval that is not to be unreasonably withheld.  Any such bunkers are to be supplied at a minimum quantity for vessel to reach the next available bunkering port with suitable safety margin.

 

 

3.

At the time of delivery of the vessel, the Owners shall place at the disposal of the Charterers, the bunker delivery note(s) and any samples relating to the fuels existing on board.

 

 

4.

During the currency of the Charter, the Charterers shall ensure that bunker delivery notes are presented to the vessel on delivery of fuel(s) and that during bunkering, representative samples of the fuel(s) supplied shall be taken, including at the Vessel's bunkering manifold and sealed in the presence of competent representatives of the Vessel.

 

 

5.

The fuel samples shall be retained by the Vessel for 90 (ninety) days after the date of delivery or for whatever period necessary in the case of a prior dispute and any dispute as to whether the bunker fuels conform to the agreed specification(s) shall be settled by a joint analysis of a representative sample, which has been witnessed and signed by the bunkering ship or barge representative, at a laboratory acceptable to Owners and Charterers.  The sample for testing shall be the sample which was collected at the Vessel's manifold and has its seal number endorsed on the Bunker Delivery Receipt.  The findings of this analysis shall be conclusive evidence as to conformity or otherwise with the bunker fuels specification(s).

 

 

6.

The Owner reserves its right to make a claim against the Charterer such to be time-barred unless notified by Owners to Charterers within 60 days of supply for any damage to the main engines or the auxiliaries caused by the use of unsuitable fuels or fuels not complying with the agreed specification(s) under this Charter.  Additionally, if bunker fuels supplied do not conform with the mutually agreed specification(s) or otherwise prove unsuitable for burning in the ship's engines or auxiliaries the Owner shall not be held responsible for any reduction in the Vessel's speed performance and/or increased bunker consumption nor for any time lost and any other consequences.

 

Unless necessary for the safe operation of the vessel, fresh bunkers are not to be used and to be kept segregated onboard until quality test results are received by Owners.

Charterer is to supply bunkers always in conformity with sulphur content regulations worldwide.

 

37

 

 

3.

BUNKER FUEL SULPHUR CONTENT CLAUSE:

 

a. Without prejudice to anything else contained in the Charter Party, the Charterers shall supply fuels each of such specification and grades to permit the vessel, at all times, to comply with the maximum sulphur content requirements of any emissions control zone, when the vessel is ordered to trade within that zone.

 

The Charterer also warrants that any bunker suppliers, bunker craft operators and bunker surveyors used by the Charterer to supply such fuels shall comply with Regulations 14 and 18 of MARPOL Annex VI, including the Guidelines in respect of sampling and the provision of bunker delivery notes.

 

The Charterer shall indemnify, defend and hold harmless the Owner in respect of any loss, liability, delay, fines, costs or expenses arising or resulting from the Charterer's failure to comply with this Sub-clause (a).

 

b. Provided always that the Charterer has fulfilled its obligation in respect of the supply of fuels in accordance with Sub-clause (a), the Owner shall warrant that:

 

i) The Vessel shall comply with Regulations 14 and 18 of Marpol Annex VI and with the requirements of any emission control zone; and

 

ii) The Vessel shall be able to consume fuels of the required sulphur content when ordered by Charterer to trade within any such zone subject to having supplied the Vessel with fuels in accordance with Sub-clause (a), the Charterer shall not otherwise be liable for any loss, delay, fines, costs or expenses arising or resulting from the Vessel's failure to comply with Regulations 14 and 18 of MARPOL Annex VI.

 

c) For purposes of the Clause, "emission control zone" shall mean zones as stipulated in MARPOL Annex VI and/or zones regulated by regional and/or national authorities such as, but not limited to, the EU and the US Environment Protection Agency.

 

d) However, it is understood that while Charterers is to make best efforts to supply RMG 380, if unavailable then RMF 25 is acceptable in South Africa but maximum 300 metric tons IFO per each bunkering in South Africa.  Additionally, Charterers may also bunker RMF 25 at other ports where similar circumstances apply subject to Owners' prior approval which shall not be unreasonably withheld.

 

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4.

SANCTIONS RELATED TRADING EXCLUSION:

 

The Charterer warrants that they shall not utilise the Vessel or permit the Vessel to be utilised in any trade that violates us/un/eu sanctions.  (a) which is unlawful; or (b) with or which involves Iran, South Sudan, Sudan, Syria, North Korea or any other country over which the United States, or the European Union, or the United Nations, other national, supranational or international body/organization, maintain or impose an embargo, boycott, economic sanctions (including (comprehensive country wide sanctions) or other restrictions, whenever enacted and in force; or (c) which involves the carriage of any cargo which originates in or is exported from or to such countries and/or any trade with or for any person (whether an individual or entity, including but not limited to all sub-charterers, shippers, receivers, other cargo interests) who are (i) incorporated and/or based and/or managed and/or operated from any such countries or otherwise acting on behalf of a person (whether an individual or entity) who is based within such country; or (ii) beneficially or legally owned (in whole or in part) or controlled by or acting on behalf of the Government of such countries; or (iii) beneficially or legally owned or controlled by any person (whether an individual or entity) incorporated and/or based and/or managed and/or operated from such countries. Should sanctions on certain countries be terminated then such countries to be allowed in the trading range subject to not being in breach of the terms defined in the clause.

 

 

5.

Trafigura Sanctions Clause for Time Charterparties

 

1.1       Owners and Charterers respectively warrant that at the date of this fixture they are not and undertake that throughout the duration of this Charterparty they will not be:

 

(a)  the subject of Sanctions; or

 

(b)  an Affiliate of, or owned or controlled (whether individually or jointly) by a party or parties, which is/are the subject of Sanctions.

 

1.2       Each party warrants that, for the duration of the Charterparty, it shall comply with Sanctions applicable to it.

 

1.3       Notwithstanding anything in this clause to the contrary, neither Owners nor Charterers shall be required to do or omit to do anything which constitutes a violation of or would be in contravention of, or expose it or the Vessel to risk of designation pursuant to Sanctions applicable to it.

 

1.4       Owners warrant that:

 

(a)  As at the date of this Charterparty:

 

(i)         Owners is able to accept the instructions and perform all obligations contemplated under this Charterparty; and

 

(ii)        the vessel is able to accept the instructions and perform the services contemplated under this Charterparty.

 

(b)  the vessel shall before and at the beginning of this Charterparty and throughout the duration of this Charterparty not be the target of Sanctions, nor be owned or controlled (whether individually or jointly) by any party or parties, which is/are the subject of Sanctions.

 

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1.5       If at any time during the performance of this Charterparty any Sanctions are changed, or new Sanctions or other trade restrictions are imposed or become effective, or there is a change in the interpretation of Sanctions, which would result in performance of this Charterparty contravening the provisions of Clause 1.2 or 1.3 then:

 

(a)  either party shall be entitled to immediately suspend any affected performance obligation, providing the other party with written notification of the same, and, if appropriate, request or issue (as the case may be) alternative voyage orders, which shall be given promptly by Charterers, and:

 

(i)         Charterers and Owners shall each be liable for 50% of all time for a period of up to 7 (seven) days following such written notification, pending receipt of Charterers' alternative voyage orders;

 

(ii)        thereafter, Charterers shall continue to pay hire and any additional costs that may be due as a result of any change in discharge port(s); and

 

(b)  if the circumstances resulting in such suspension continue for more than 7 (seven) days from the date of such written notice and provided that:

 

(i)         such circumstances are continuing; and

 

(ii)        the nature of the circumstances are such that they go to the root of the parties' ongoing obligations under this Charterparty, rendering it impossible for the parties to continue to perform their ongoing obligations under this Charterparty, and which cannot be overcome by the parties taking reasonable measures, whether by issuing revised voyage orders or otherwise, always provided such measures are not in contravention of Sanctions, then either party shall be entitled to terminate the Charterparty with immediate effect on written notice to the other, save that if cargo is on board then, prior to such termination, the Vessel shall, provided such is not in contravention of Sanctions, be directed to a safe [port/place/terminal/berth] and there discharge the cargo (with termination effective on completion of discharge).  Upon termination there shall be no further liability on either party save for any accrued rights or remedies including under this clause.

 

1.6       If at any time during the performance of this Charterparty, Owners become aware that Charterers are in breach of the warranties set out in Clause 1.1 and/or 1.2 (whether or not as a result of any action and/or omission) then:

 

(a)  Owners shall be entitled to immediately suspend any affected performance obligation, providing Charterers with written notification of the same, and, if appropriate, request alternative voyage orders which shall be given promptly by Charterers, and:

 

(i)         Charterers shall be liable for all time pending Owners' receipt of Charterers' alternative voyage orders;

 

(ii)        thereafter, Charterers shall continue to pay hire and shall be liable for any losses that Owners suffer as a result of any change in discharge port(s); and

 

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(b)  if the circumstances resulting in such suspension continue for more than 7 days from the date of Owners' written notice then, provided such circumstances are continuing, Owners shall be entitled to terminate the Charterparty with immediate effect on written notice to Charterers, save that if cargo is on board, then, prior to such termination, the Vessel shall, provided such is not in contravention of Sanctions, be directed to a safe port and there discharge the cargo (with termination effective on completion of discharge).  Upon termination there shall be no further liability on either party save for any accrued rights or remedies including under this clause.

 

1.7       If at any time during the performance of this Charterparty, Charterers become aware that Owners are in breach of the warranties set out in Clause 1.1, 1.2 and/or 1.4 (whether or not as a result of any action and/or omission) then:

 

(a)  Charterers shall be entitled to immediately suspend any affected performance obligation, providing Charterers with written notification of the same, and, if appropriate, promptly issue alternative voyage orders to Owners, and:

 

(i)         Charterers shall be obliged to pay hire pending issuance of Charterers' alternative voyage orders;

 

(ii)        thereafter, Charterers shall continue to pay hire and Owners shall be liable for any losses that Charterers suffer as a result of any change in discharge port(s); and

 

(b)  if the circumstances resulting in such suspension continue for more than 7 days from the date of Charterers' written notice then, provided such circumstances are continuing, Charterers shall be entitled to terminate the Charterparty with immediate effect on written notice to Owners, save that if cargo is on board, then, prior to such termination, the Vessel shall, provided such is not in contravention of Sanctions, be directed to a safe port and there discharge the cargo (with termination effective on completion of discharge).  Upon termination there shall be no further liability on either party save for any accrued rights or remedies including under this clause.

 

1.8       To the extent any payment would be in violation of or otherwise prohibited by Sanctions applicable to a party, any payment obligations arising prior to termination of the Charterparty (including but not limited to hire) which have been incurred but not yet paid shall continue to be suspended in compliance with Clause 1.3, above, and shall not be affected by such termination.

 

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1.9       In the event that a payment arising pursuant to this Charterparty cannot be made in United States Dollars due to applicable laws or Sanctions, the parties shall review and mutually agree in writing the applicable payment settlement currency and the relative rate of exchange provided such does not contravene any Sanctions or applicable law, regulation or decree binding upon a party and shall amend, or procure the amendment of the Charterparty accordingly.  The rate of exchange is to be fixed using an internationally recognized and tradable daily fixation, the date of which shall be mutually agreed by the parties. If payment cannot be made in any currency by reason of Sanctions, the paying party shall place the amount of funds in an interest bearing account until it is able to remit such funds to the receiving party, and the paying party shall account to the receiving party for any interest earned on such funds.

 

1.10     For the purposes of this clause:

 

"Affiliate" means in relation to either party, any undertaking (as defined in section 1161 of the Companies Act 2006) which is a subsidiary undertaking or a parent undertaking (including the ultimate parent undertaking) of that party and any undertaking which is a subsidiary of such parent undertaking (subsidiary undertaking and parent undertaking are as defined in section 1162 of the Companies Act 2006).

 

"Sanctions" means economic or financial sanctions or trade embargoes or similar or equivalent restrictive measures imposed, administered, enacted or enforced from time to time by a government or governmental or inter-governmental body or organisation or other relevant sanctions authority (including, but not limited to, those imposed by the UN, EU, Singapore or the US to the extent applicable).

 

"Sanctioned Entity" means any entity or individual appearing on any "specially designated nationals" or "blocked persons" lists, or any equivalent list(s) maintained and imposed by the relevant bodies and organisations of the United Nations, the European Union, the United Kingdom, the United States or any other jurisdiction applicable to a party.

 

 

6.

BIMCO Designated Entities Clause

 

a)  The provisions of this clause shall apply in relation to any sanction, prohibition or restriction imposed on any specified persons, entities or bodies including the designation of specified vessels or fleets under United Nations Resolutions or trade or economic sanctions, laws or regulations of the European Union or the United States of America.

 

b) Owners and Charterers respectively warrant for themselves (and in the case of any sublet, Charterers further warrant in respect of any sub-charterers, shippers, receivers, or cargo interests) that at the date of this fixture and throughout the duration of this Charter Party they are not subject to any of the sanctions, prohibitions, restrictions or designation referred to in Sub-clause (a) which prohibit or render unlawful any performance under this Charter Party or any sublet or any Bills of Lading.  Owners further warrant that the nominated vessel, or any substitute, is not a designated vessel.

 

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c)  If at any time during the performance of this Charter Party either party becomes aware that the other party is in breach of warranty as aforesaid, the party not in breach shall comply with the laws and regulations of any Government to which that party or the Vessel is subject, and follow any orders or directions which may be given by any body acting with powers to compel compliance, including where applicable the Owners’ flag State.  In the absence of any such orders, directions, laws or regulations, the party not in breach may, in its option, terminate the Charter Party forthwith or, if cargo is on board, direct the Vessel to any safe port of that party’s choice and there discharge the cargo or part thereof. 

 

d) If, in compliance with the provisions of this Clause, anything is done or is not done, such shall not be deemed a deviation but shall be considered due fulfilment of this Charter Party. 

 

e)  Notwithstanding anything in this Clause to the contrary, Owners or Charterers shall not be required to do anything which constitutes a violation of the laws and regulations of any State to which either of them is subject. 

 

f)  Owners or Charterers shall be liable to indemnify the other party against any and all claims, losses, damage, costs and fines whatsoever suffered by the other party resulting from any breach of warranty as aforesaid. 

 

g)  Charterers shall procure that this Clause is incorporated into all sub-charters, contracts of carriage and Bills of Lading issued pursuant to this Charter Party.

 

 

7.

Gulf Of Guinea HRA

 

a)  Unless the local Terminal where the Vessel will berth is a private Terminal where no armed guards are allowed because or the Terminal have their own security procedure personnel and equipment and/or patrol boats, Owners shall retain the option to place local armed personnel together with unarmed security advisors from a Private Military and Security Company (a “PMSC”) on board their vessel whilst she remains at berth and/or whilst she performs an STS operation.  The local armed personnel shall be provided on board by the local military forces of the relevant littoral State with the assistance of the PMSC and the relevant costs for employing the PMSC advisors and the local armed guards shall be for Charterers’ account.  The PMSC shall be chosen and appointed by the Owners after they obtain the necessary approvals from their insurance underwriters and their flag state.  Reasonable Costs to be market competitive and discussed with Trafigura prior to being required, unless dictated by terminal or government;

 

b) Charterers shall be liable to pay for all and any applicable APs, including War, War LoH up to 90 days and K&R APs arising potentially under Owners’ insurance policies, all possible crew bonuses and expenses for hardening materials and other anti-piracy materials, and any other expenses arising in connection with the vessel’s call in the Gulf of Guinea HRA;

 

c)  BMP4 and the IMO Interim guidelines for Piracy in WAF shall be followed at all times;

 

d) Vessel will not anchor in Nigerian except within Lagos port limits or in waters of neighbouring countries;

 

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e)  If required to wait for berthing or for the STS operation, vessel will proceed out to sea and wait/drift in a location off the HRA, i.e. at 200NM from the coast approximately unless there is a secure terminal area where vessel can anchor close to the terminal.  Master will shift her drifting position frequently to avoid being a target of pirates; 200 miles

 

f) Vessel will berth / un-berth and/or will proceed in-ward/outward for the STS operation and to take onboard the armed guards only during day-light hours;

 

g)  Since waiting period at Nigerian ports or the littoral states’ ports can be very long, Charterer’s must provide sufficient bunkers in advance;

 

h) Similarly, vessel must be provided with sufficient provision and fresh water to wait for approx. period of 1 months, while drifting;

 

i) Vessel will proceed in-ward only when the pilot is ready to board vessel and takes her to a designated berth and/or when the STS operation is about to commence;

 

j)  If the cargo operations at berth or the STS operation is suspended for any reason and/or the vessel is asked to vacate berth, vessel to proceed to sea again, off the HRA, at 200NM from the coast approx.; 200 miles

 

k) Otherwise, the War Risks/Piracy clause as contained herein shall fully apply.

 

For Niger delta river ports within the Lagos to Ikang range, not including Lagos itself, Owners will arrange, through local port agents, armed patrol boats to assist and escort the vessel from the agreed position within territorial waters to the berth and from the berth to the agreed position within territorial waters.

 

Armed patrol boats will be regulated and approved by local and/or national naval and/or coastguard authorities.  Charterers agree to reimburse these reasonable costs, in line with industry norms, to Owners upon Charterers receiving documented evidence and Owners invoice in relation to the same.

 

For Abidjan, Tema anchorage, provided that situation remains safe as of now with no Piracy incidents as per the feedback of Owners and Charterers independent security advisors, Owners accept no guards needed and no reason to go 200 nm off.

 

The situation should be re-evaluated within the charter period each and every time Charterers would request the vessel to proceed in the area. 

 

For Lome and Cotonou as long as security is arranged ship to stay at anchorage.

 

Owners to have the right to use armed guards and/or armed escort gunboat for any off-shore or port call within HRA however owners confirm that they do not need a dedicated escort boat to remain with vessel while loading at terminals in Nigeria or
while waiting at a secure anchorage area by a terminal, provided the Terminal have their own security procedure personnel and equipment and/or patrol boats that will protect the vessel. 

 

The armed gunboat to escort the vessel from entering of EEZ (approx. 200nm from nearest coast) until exit of EEZ (approx. 200nm from nearest coast).  Reasonable and proportionate Costs always to be competitive and paid by the Charterers but to be discussed and agreed before it is arranged including a provider of arm guards and/or gunboat.  Vessel will not enter HRA without such arm guards and/or gunboat arrangement agreed and in place and will always remain on hire. 

 

If there is no firm berthing schedule received from a local agent/terminal, Charterers can instruct the ship to remain outside of the HRA.  However vessel always to follow charterers and local terminal instructions provided safe and in accordance with Clause 9 below. 

 

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8.

STORAGE & UNDERWATER CLEANING CLAUSE:

 

CHARTERERS MAY USE THE VESSEL FOR STORAGE, ALWAYS AT A SAFE LOCATION AND WITHIN THE CHARTER PARTY LIMITS, but excluding any War Risk Area or any Piracy Area where additional insurance premiums are charged by the Vessels insurance underwriters.


WAFR and Fujairah is always to be included but any additional insurance premiums to be for charterers account.  However Clause 7. Gulf Of Guinea HRA and 9. WAR RISKS / PIRACY always to apply, if applicable.  OWNERS/MASTER TO HAVE

THE RIGHT TO MOVE THE VESSEL AT CHARTERERS TIME AND COST FOR ANY REASON IF REQUIRED, INCLUDING FOR VICTUALLING, AND OTHER REQUIRED OWNER’S MATTERS PROVIDED CHARTERER IS ADVISED IN A TIMELY MANNER AND CONFIRMS THEIR AGREEMENT WHICH SHALL NOT BE UNREASONABLY WITHELD.  IF VESSEL IS ORDERED IN TO STORAGE, CHARTERERS TO ARRANGE AND PAY FOR SUPPLY OF FRESH WATER AS THE VESSEL MAY REQUIRE FROM TIME TO TIME. 

 

IF STORAGE IN ANY ONE LOCATION SHOULD BE LONGER THAN 30 DAYS, charterers shall HAVE THE RIGHT TO ALLOW THE VESSEL TO SAIL FOR A MAXIMUM OF 15 HRS FOR THE NOTIONAL REMOVAL OF HULL FOULING.  DEPENDING ON THE LENGTH OF THE STORAGE PERIOD THIS SHALL BE ALLOWED MORE THAN ONCE AS REQUIRED.  TIMING FOR SAME ALWAYS TO
BE MUTUALLY AGREED BETWEEN OWNERS AND CHARTERERS at charterers time and expense. 

 

IF VESSEL IS IDLE OR STORAGE AT ANY ONE LOCATION SHOULD BE LONGER THAN 25 CONSECUTIVE DAYS (TIME NOT TO RE-START IF THE VESSEL SAILS), THE SPEED AND CONSUMPTION WARRANTIES THEREAFTER SHALL NOT APPLY UNTIL OWNERS HAVE ARRANGED AT CHARTERERS’ TIME AND EXPENSE FOR THE HULL TO BE SCRUBBED AND PROPELLER POLISHED IF DEEMED NECESSARY BY AN INDEPENDENT UNDERWATER SURVEY. 

 

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9.

WAR RISKS / PIRACY

 

(A) THE VESSEL, UNLESS THE WRITTEN CONSENT OF THE OWNERS BE FIRST OBTAINED, SHALL NOT BE ORDERED TO OR REQUIRED TO CONTINUE TO OR THROUGH, ANY PORT, PLACE, AREA OR ZONE (WHETHER OF LAND OR SEA), OR ANY WATERWAY OR CANAL, WHERE IT APPEARS THAT THE VESSEL, HER CARGO, CREW OR OTHER PERSONS ON BOARD THE VESSEL, IN THE REASONABLE JUDGEMENT OF THE MASTER AND/OR THE OWNERS, MAY BE,
OR ARE LIKELY TO BE, EXPOSED TO ANY ACTUAL, THREATENED OR REPORTED ACTS OF PIRACY, WHETHER SUCH RISK OF PIRACY EXISTED AT THE TIME OF ENTERING INTO THIS CHARTER PARTY OR OCCURRED THEREAFTER, SHOULD THE VESSEL BE WITHIN ANY SUCH PLACE AS AFORESAID, WHICH ONLY BECOMES DANGEROUS, OR IS LIKELY TO BE OR TO BECOME DANGEROUS, AFER HER ENTRY INTO IT, SHE SHALL BE AT LIBERTY TO LEAVE IT.

 

(B) IF THE OWNERS DO NOT GIVE THEIR CONSENT THEY SHALL IMMEDIATELY INFORM THE CHARTERERS AND THE CHARTERERS SHALL BE OBLIGED TO ISSUE ALTERNATIVE VOYAGE ORDERS and any time lost due to compliance with such orders shall not be considered off-hire.  The CHARTERERS SHALL INDEMNIFY THE OWNERS FOR ANY CLAIMS FROM HOLDERS OF BILLS OF LADING OR THIRD PARTIES CAUSED BY SUCH ORDERS.

 

Owners represent that they shall give consideration to known piracy risks inherent in customary trading routes, including Indian Ocean, Suez Canal transit and West Africa and Owners will always make best endeavors to proceed on customary routes in accordance with prevailing trade patterns always without prejudice to owners’ rights under this clause, including owners’ risk assessment of the particular customary route and the prevailing trade pattern. 

 

(C) IF THE OWNERS CONSENT OR IF THE VESSEL PROCEEDS TO OR THROUGH AN AREA EXPOSED TO RISK OF PIRACY THE OWNERS SHALL HAVE THE LIBERTY:

 

(I) TO TAKE REASONABLE PREVENTIVE MEASURES TO PROTECT THE VESSEL, HER CREW AND CARGO INCLUDING BUT NOT LIMITED TO TAKING A REASONABLE ALTERNATIVE ROUTE, PROCEEDING IN CONVOY, USING ESCORTS, AVOIDING DAY OR NIGHT NAVIGATION, ADJUSTING SPEED OR COURSE, OR ENGAGING SECURITY PERSONNEL OR EQUIPMENT ON OR ABOUT THE VESSEL,

 

(II) TO COMPLY WITH THE ORDERS, DIRECTIONS OR RECOMMENDATIONS OF ANY UNDERWRITERS WHO HAVE THE AUTHORITY TO GIVE THE SAME UNDER THE TERMS OF THE INSURANCE;

 

(III) TO COMPLY WITH ALL ORDERS, DIRECTIONS, RECOMMENDATIONS OR ADVICE GIVEN BY THE GOVERNMENT OF THE NATION UNDER WHOSE FLAG THE VESSEL SAILS, OR OTHER GOVERNMENT TO WHOSE LAWS THE OWNERS ARE SUBJECT, OR ANY OTHER GOVERNMENT, BODY OR GROUP, INCLUDING MILITARY AUTHORITIES, WHATSOEVER ACTING WITH THE POWER TO
COMPEL COMPLIANCE WITH THEIR ORDERS OR DIRECTIONS;

 

(IV) TO COMPLY WITH THE TERMS OF ANY RESOLUTION OF THE SECURITY COUNCIL OF THE UNITED NATIONS, THE EFFECTIVE ORDERS OF ANY OTHER SUPRANATIONAL BODY WHICH HAS THE RIGHT TO ISSUE AND GIVE THE SAME, AND WITH NATIONAL LAWS AIMED AT ENFORCING THE SAME TO WHICH THE OWNERS ARE SUBJECT, AND TO OBEY THE ORDERS AND DIRECTIONS OF THOSE WHO ARE CHARGED WITH THEIR ENFORCEMENT; AND THE CHARTERERS SHALL INDEMNIFY THE OWNERS FOR ANY CLAIMS FROM HOLDERS OF BILLS OF LADING OR THIRD PARTIES CAUSED BY SUCH ORDERS.

 

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(D) COSTS


(I)  IF THE VESSEL PROCEEDS TO OR THROUGH AN AREA WHERE DUE TO RISK OF PIRACY ADDITIONAL COSTS WILL BE INCURRED INCLUDING BUT NOT LIMITED TO ADDITIONAL INSURANCE, ADDITIONAL PERSONNEL, SECURITY PERSONNEL AND EQUIMENT, AND PREVENTATIVE MEASURES TO AVOID PIRACY ATTACKS, SUCH COSTS SHALL BE FOR THE CHARTERERS’ ACCOUNT.  ANY TIME LOST WAITING FOR CONVOYS, FOLLOWING RECOMMENDED ROUTEING, TIMING, OR REDUCING SPEED OR TAKING MEASURES TO MINIMISE RISK, SHALL BE FOR THE CHARTERERS’ ACCOUNT AND THE VESSEL SHALL REMAIN ON HIRE;

 

(II) IF THE OWNERS BECOME LIABLE UNDER THE EXISTING TERMS OF EMPLOYMENT TO PAY TO THE CREW ANY BONUS OR ADDITIONAL WAGES IN RESPECT OF SAILING INTO AN AREA WHICH IS DANGEROUS IN THE MANNER DEFINED BY THE SAID TERMS, THEN THE ACTUAL BONUS OR ADDITIONAL WAGES PAID SHALL BE REIMBURSED TO THE OWNERS BY THE CHARTERERS AT THE SAME TIME AS THE NEXT PAYMENT OF HIRE IS DUE, OR UPON REDELIVERY, WHICHEVER OCCURS FIRST;

 

(III) IF THE UNDERWRITERS OF THE OWNERS’ INSURANCES SHOULD REQUIRE PAYMENT OF ADDITIONAL PREMIUMS AND/OR CALLS BECAUSE, PURSUANT TO THE CHARTERERS’ ORDERS, THE VESSEL IS WITHIN, OR IS DUE TO ENTER AND REMAIN WITHIN, OR PASS THROUGH ANY AREA OR AREAS WHICH ARE SPECIFIED BY SUCH UNDERWRITERS AS BEING SUBJECT TO ADDITIONAL PREMIUMS BECAUSE OF PIRACY RISKS, THEN THE ACTUAL ADDITIONAL PREMIUMS including war risks, war loss of hire up to 180 days and kidnap and ransom premiums AND/OR CALLS PAID SHALL BE REIMBURSED BY THE CHARTERERS TO THE OWNERS AT THE SAME TIME AS THE NEXT PAYMENT OF HIRE IS DUE, OR UPON REDELIVERY, WHICHEVER OCCURS FIRST. 

 

(E) If the Vessel is attacked or seized by pirates any time lost shall be for the account of the Charterers and the Vessel shall remain on hire throughout until the 181ST day when hire will cease to be paid.  If the Vessel is seized the Owners shall keep the Charterers closely informed of the efforts made to have the Vessel released.

 

(F)  If in compliance with this Clause anything is done or not done, such shall not be deemed a deviation, but shall be considered as due fulfilment of this Charter Party.

 

(G) CHARTERERS WARRANT THAT THE TERMS OF THIS CLAUSE WILL BE INCORPORATED EFFECTIVELY INTO ANY BILL OF LADING ISSUED PURSUANT TO THIS CHARTERPARTY.

 

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OWNERS AND CHARTERERS ARE TO LIAISE 5 (FIVE) DAYS NI ADVANCE PRIOR TO PROCEEDING OF THE VESSEL TO A TRANSIT OF THE GULF OF ADEN, TO ESTABLISH OWNERS’ REQUIREMENTS, WHICH MAY INCLUDE, BUT NOT BE LIMITED TO, JOINING A CONVOY SYSTEM OR DEVIATING OR ALTERING THE TIMING OF THE VESSEL’S PASSAGE.  VESSEL TO REMAIN ONHIRE, AND VESSEL PERFORMANCE CALCULATIONS ARE TO BE BASED ON ACTUAL MILES STEAMED, WITH ANY PERIODS OF ALTERED SPEED OR WAITING TIME UNDER THIS CLAUSE NOT TO BE INCLUDED IN PERFORMANCE CALCULATIONS. ANY EXTRA INSURANCE PREMIUM CLEARLY STATED AS ABOVE ARE FOR CHARTERERS ACCOUNT.

 

 

10.

EBOLA CLAUSE:

 

a)  The Vessel shall not be obliged to proceed to or continue to or through or remain at any port, place, area or country (hereinafter "Affected Area") if in the reasonable opinion of the Owners the Affected Area may place the Vessel and crew or other persons on board the Vessel at risk by reason of the Ebola virus.

 

b) If in accordance with and subject to the requirements of sub-clause (a) the Owners decide that the Vessel shall not proceed or continue to or through or remain in an Affected Area they must immediately inform the Charterers in writing. In that event the Charterers shall issue alternative voyage orders and shall indemnify the Owners in respect of any expenses arising therefrom and any claims from holders of the Bills of Lading, as a consequence of waiting for and/or performance of such orders. During any time waiting for or complying with such orders the vessel shall remain on hire.

 

c)  If notwithstanding their liberty to refuse to do so, Owners agree to proceed to or continue to or through or remain at any Affected Area, Owners shall not be deemed to have waived any of their existing rights under this charter party, save that where owners have agreed to proceed to or continue to or through or remain at an affected area under para (a) above, owners shall not be entitled to later refuse to do so unless there has been a material change in the risks faced.

 

d) The Vessel shall have liberty to comply with all orders, directions, recommendations or advice of competent authorities and/or the Flag State of the Vessel in respect of arrival, routes, ports of call, destinations, discharge of cargo, delivery, or in any other respect whatsoever relating to issues arising as a result of the Vessel being ordered to an Affected Area.

 

e)  Any additional costs and expenses incurred during the currency of the charter directly resulting from the Vessel visiting an Affected Area, such as screening, cleaning, fumigating and/or quarantining the Vessel and its crew for such diseases either in the Affected Area or at subsequent ports of call under the Charter and including the obtaining of medical treatment for any infected crew, shall be for the Charterers' account and the vessel shall remain on hire during periods of delay caused thereby in the affected area or any subsequent ports.

 

f)  If in compliance with this Clause anything is done or not done, such shall not be deemed a deviation, but shall be considered as due fulfilment of this Charter Party. In the event of a conflict between the provisions of this Clause and any implied or express provision of the Charter Party, this Clause shall prevail to the extent of such conflict, but no further.

 

Any costs or delays from an infection arising from events prior to delivery on this charter or from owners matter and/or crew change always to be for owners account.

 

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11.

ICE CLAUSE

 

Deleted

 

 

12.

ANTI-BRIBERY, ANTI-CORRUPTION CLAUSE (ABC)

 

1.1 each party


(i) shall comply with all applicable anti-corruption laws and regulations, including without Limitation the us foreign corrupt practices act and the uk bribery act of 2010; and

 

(ii) undertakes and warrants to the other party that, it has in place adequate procedures to ensure that, it and its officers, directors, shareholders, employees, agents and other intermediaries, and any other person acting directly or indirectly on its behalf,  shall not, directly or through third parties, give, promise or attempt to give, or approve or authorise the giving of, anything of value to any person or any entity for the purpose of:

 

(i) securing any improper advantage in relation to this charterparty; or

 

(ii) inducing or influencing a public official to take action or refrain from taking action in order for either party to obtain or retain business for either party; or

 

(iii) inducing or influencing a public official to use his/her influence with any government or public international organization for such purpose; and

 

1.2 represents and warrants to the other that, having in place the necessary adequate procedures, it and its officers, directors, shareholders, employees, agents and other intermediaries, and any other person acting directly or indirectly on its behalf have not, prior to the date of this charterparty, been proven to have engaged in bribery or corruption in order to secure and/or retain any business for themselves or the other party, whether in connection with this charterparty or otherwise; and

 

1.3 each party agrees that it will not take or knowingly permit any action to be taken that would cause the other party to be in violation of any applicable of any applicable anti-money laundering laws; and

 

1.4 shall have and shall maintain in place throughout the term of this agreement adequate policies and procedures to ensure compliance with the undertakings of this clause (including but not limited to including a suitable anti-corruption clause in sub-charterparties), and will enforce them where appropriate.

 

Any costs or delays from an infection arising from events prior to delivery on this charter or from owners matter and/or crew change always to be for owners account.

 

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13.

SCRUBBER CLAUSE/EXHAUST GAS CLEANING SYSTEM

 

1.1    Without prejudice to the generality of clause 6, the Vessel shall be delivered with fully functional Certified EGC Technology for her Main and Auxiliary Engines The vessel to always follow local legislation and regulations related to the use of the Exhaust Gas Cleaning System and Owners shall maintain the Certified EGC Technology in a thoroughly efficient state for and during the Charter Period. After 1st January 2020 any amount of sludge quantities generated as a result of higher than 0.5% Sulphur content in HFO supplied by charterers, to be disposed to shore facilities at charterers' cost and time.

 

1.2       In the event of a Breakdown:

 

a.  Owners shall immediately inform Charterers, advising the extent and expected duration of the Breakdown, and shall during the continuance of the Breakdown, provide the Charterer with reasonable updates.

 

b.  Charterers shall, if necessary and at Owners' written request, supply at the next convenient bunkering port fuel of such specification and grade that enables the Vessel's compliance with MARPOL Annex VI without use of the Certified EGC Technology. Such specification and grade to be notified in writing by Owners and to be in accordance the description in PART 1, Section I.

 

c.  Owners shall indemnify Charterers in respect of any liability, loss, damage or expense of whatsoever nature arising out of and/or in connection with any Breakdown, including (but not in any way limited to) any increased costs
relating to fuel (whether pursuant to clause 18.2(b), or as a result of the Vessel burning more fuel or more fuel of a certain specification than would have been
the case had there been no Breakdown).

 

d.   If any Breakdown continues or is expected to continue for 45 days, then, without prejudice to any other rights Charterers may have under this Charter, Charterers shall have the option of terminating this Charter by giving notice in writing to Owners. Termination shall take effect from the date on which such notice is received by Owners or from any later date stated in such notice.

 

e.   Upon termination in accordance with this Clause, Owners shall forthwith remit to Charterers any hire paid in advance and not earned as at the date of termination and any other monies owing, including but not limited to the cost of bunkers on board at the time the Breakdown first occurred.

 

f.    For the purposes of this clause and clause 31, "Breakdown" means any situation where the Certified EGC Technology breaks down, becomes unusable, loses certification or no longer confirms to the relevant requirements of regulation 4 MARPOL Annex VI or such other Flag state accreditation, or fails to provide effective equivalence to the requirements of regulations 14.1 of MARPOL Annex VI when burning fuel her Main and Auxiliary Engines with sulphur content in excess of 0.5%.

 

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14.

BIMCO COVID-19 CREW CHANGE CLAUSE FOR TIME CHARTER PARTIES 2020:

 

(a)        In addition to any other right to deviate under this contract, the Vessel shall have the liberty to deviate for crew changes if COVID-19-related restrictions prevent crew changes from being conducted at the ports or places to which the Vessel has been ordered or within the scheduled period of call. Any deviation under this clause shall not be deemed to be an infringement or breach of this contract, and Owners shall not be liable for any loss or damage resulting therefrom. If Owners need to deviate a ship for crew change at the ports or places to which the vessel has been ordered or within the scheduled period of call, Owners always has to inform Charterers of intended crew changes in advance at least two weeks in advance prior to vessel departure a last discharge port including the name of port/place and details of crew to join a ship and requires charterers consent prior to it is arranged. Any cost including but not limited to port charges, bunker consumed is to be for Owners account and vessel is to be remained off-hire. (comments: in laden passage, it is beyond of our control to make a deviation to be made for a crew change, hence, we are not in position to have this kind of commitment).

 

(b)  Owners shall exercise the right under subclause (a) above with due regard to Charterers' interests and shall notify Charterers in writing as soon as reasonably possible of any intended deviation for crew change purposes but always not later than two weeks in advance as described in (a)

 

(c)        Charterers shall procure that subclause (a) shall be incorporated into any sub-charter parties, bills of lading, waybills, or other documents evidencing contracts of carriage issued pursuant to this Charter Party.

(d)  During the period of such deviation the Vessel shall:

 

(i)*       remain on hire, but at a reduced rate of the hire of USD………..per day. In the absence of an agreed amount, fifty percent (50%) of the hire rate shall apply. The cost of bunkers consumed shall be shared equally between Owners and Charterers.

 

(e)  While the Vessel is at the port of deviation all port charges, pilotage and other expenses arising out of such crew changes shall be for the Owners' account.

 

*(d)(i) and (d)(ii) are alternatives. Delete whichever is not applicable. In the absence of deletions alternative (d)(i) shall apply.

 

 

15.

INFECTIOUS DISEASE CLAUSE:

 

(a)        For the purposes of this Clause, the words:

 

"Disease" means highly infectious or contagious disease that is seriously harmful to human health and/or which has been declared by the World Health Organisation to be a Public Health Emergency of International Concern (PHEIC).

 

"Affected Area" means any port or place where due to the previous occurrence of the Disease in the affected port, has been assessed by the World Health Organization as "high" risk, and there is a serious risk of exposure to the Vessel, crew or other persons on board to the Disease and/or to a serious risk of quarantine or other restrictions being imposed in connection with the Disease.

 

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(b)  The Vessel shall not be obliged to proceed to or continue to or remain at any place which, in the reasonable judgement of the master/Owners, is deemed to be confirmed as an Affected Area as defined by Clause (a).

 

(c) If the Owners decide in accordance with Sub-clause (b) that the Vessel shall not proceed or continue to an Affected Area they shall immediately notify the Charterers.

 

(d) If the Vessel is at any place that has which the Master in his reasonable judgement considers to have become an Affected Area, the Vessel may leave immediately, with or
without cargo on board, after notifying and agreed by the Charterers. Vessel is to proceed to an alternative location as directed by the Charterers within 3 working days of receipt of the Owners' notification. The Vessel shall remain on hire throughout and the Charterers shall be responsible for all additional costs, expenses and liabilities incurred in connection with such orders/delivery of cargo.

 

(e)  In the event of Sub-clause (c) or (d) the Charterers shall be obliged, notwithstanding any other terms of this Charter Party, to issue alternative voyage orders. If the Charterers do not issue such alternative voyage orders within forty-eight (48) hours of receipt of the Owners' notification, the Owners may discharge any cargo already on board at any port or place. The Vessel shall remain on hire throughout and the Charterers shall be responsible for all additional costs, expenses and liabilities incurred in connection with such orders/delivery of cargo.

 

(f) In any event, the Owners shall not be obliged to load cargo or to sign, and the Charterers shall not allow or authorise the issue on the Owners' behalf of bills of lading, waybills or other documents evidencing contracts of carriage for any Affected Area.

 

(g) The Charterers shall indemnify the Owners for any direct costs, expenses or liabilities incurred by the Owners, including claims from holders of bills of lading, as a consequence of the Vessel waiting for and/or complying with the alternative voyage orders.

 

(h) If, notwithstanding Sub-clauses (b) to (f), the Vessel does not proceed to or continue to or remain at an Affected Area:

 

(i) The Owners shall notify the Charterers of their decision but the Owners shall not be deemed to have waived any of their rights under this Charter Party.

 

(ii)  The Owners shall endeavour to take such reasonable measures in relation to the Disease as may from time to time be recommended by the World Health Organisation.

 

(iii) Any direct additional costs, expenses or liabilities whatsoever arising out of the Vessel visiting or having visited an Affected Area as per Charterers instruction, including but not limited to screening, cleaning, fumigating and/or quarantining the Vessel and its crew, shall be for the Charterers' account and the Vessel shall remain on hire throughout unless otherwise it was caused by crew or crew's misconduct.

 

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(i) The Vessel shall have liberty to comply with all orders, directions, recommendations or advice of competent authorities and/or the Flag State of the Vessel in respect of arrival, routes, ports of call, destinations, discharge of cargo, delivery or in any other respect whatsoever relating to issues arising as a result of the Vessel being or having been ordered to an Affected Area but always has to be discussed and agreed by Charterers in advance which is not to be unreasonably withheld. If there will be any fine, additional cost, penalty, loss of time, for vessel's compliance with Charterers orders against authorities instructions, etc as per above, same will be for Charterers Account.

 

(j) If in compliance with this Clause anything is done or not done, such shall not be deemed a deviation, nor shall it be or give rise to an off-hire event, but shall be considered as due fulfilment of this Charter Party. In the event of a conflict between the provisions of this Clause and any implied or express provision of this Charter Party, this Clause shall prevail to the extent of such conflict, but no further.

 

(k) The Charterers shall indemnify the Owners if after the currency of this Charter Party any direct delays, costs, expenses or liabilities whatsoever are incurred as a result of the Vessel having visited an Affected Area during the currency of this Charter Party by Charterer's instructions.

 

(l) The Charters will make best efforts to shall procure that this Clause shall be incorporated into all sub-charters and bills of lading, waybills or other documents evidencing contracts of carriage issued pursuant to this Charter Party.

 

Any costs or delays from an infection arising from events prior to delivery on this charter or from the owners matter and/or crew change always to be for owners account.

 

 

16.

OWNERS UNDER KEEL CLEARANCE AND AIR CLEARANCE POLICY

 

Please see the attached Appendix 1.

 

 

17.

AGM CLAUSE

 

In case vessel has called the past 2 years in a country that has been identified as source of Asian Gypsy Moth (AGM), owners are responsible to obtain relevant inspection certificate which has to state that vessel is free of AGM. In case vessel will call at such a country during the chartered period, owners will arrange for relevant inspection but associated costs will be on charts account.

 

 

18.

AIRDRAFT

 

Owners confirm Eco oceano Ca will be delivered with collapsible mast and max air draft 136ft in ballast condition.

 

For Eco Bel Air and Eco Beverley Hills owners confirm that they within maximum 6 months from delivery owners will install collapsible mast their time and expensive to permanently comply easily with max 136 air draft in ballast condition. Until such modifications are made, owners do confirm both vessels will be able to comply with max 136ft air draft in ballast condition regardless via trim.

 

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19.

KYC

 

TRAFIGURA KYC CLAUSE: OWNERS SHALL PROVIDE ALL KYC DOCUMENTATION REQUESTED BY TRAFIGURA UNDER POINT 1-4 HERE – BELOW PROMPTLY UPON REQUEST. IF OWNERS DO NOT PASS TRAFIGURA KYC REQUIREMENTS TO TRAFIGURA'S SATISFACTION, OR FAIL TO PROVIDE ALL REQUESTED DOCUMENTATION, TRAFIGURA SHALL HAVE THE RIGHT (BUT NOT THE OBLIGATION) TO WITHHOLD PAYMENT OF FREIGHT/HIRE WITHOUT ANY LIABILITY UNTIL THE KYC REQUIREMENTS ARE MET.

 

 

20.

LOIs

 

LETTER OF INDEMNITY FOR BLENDING

 

To:       [insert name of Owners]                                                           [insert date]

The Owners of the [insert name of ship]

[insert address]

 

Dear Sirs,

Ship:                    [insert name of ship]

Charter Party:       [insert details & date]

Voyage:               [insert load and discharge ports as stated in the bill of lading]

Cargo(es):            [quantity & type]

Bill of lading:       No. _______ dated _______ issued at _______

Bill of lading:       No. _______ dated _______ issued at _______

 

The above ship, under our charter & commercial operation, and in line with our instructions shall load/has loaded the following cargoes:

 

  (i)

[Cargo quantity & type] in cargo tanks [number, location] shipped by [insert name of shipper] and consigned to [insert name of consignee or party to whose order the bill of lading is made out, as appropriate] for delivery at the port of [insert name of discharge port stated in the bill of lading]

   

 

  (ii)

[Cargo quantity & type] in cargo tanks [number, location] shipped by [insert name of shipper] and consigned to [insert name of consignee or party to whose order the bill of lading is made out, as appropriate] for delivery at the port of [insert name of discharge port stated in the bill of lading]

      

We have requested you to blend the cargo loaded on the Vessel at …….and…….in the above tanks and we warrant and confirm that such operation shall be subject to compliance with relevant safety rules and the technical characteristics of the Vessel.

We warrant that the cargoes to be blended on board shall be stable and compatible and that no precipitation of solid deposits in cargo tanks, pipelines, pumps or valves will occur.

 

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We undertake to return all three (3) original copies of all bills of lading issued in respect of the cargoes to be blended to Owners for cancellation. Upon return of the original bills of lading as aforesaid, Owners will issue replacement bills of lading in respect of the blended cargo, which state on their face:

 

 

i.

the details from the bill(s) of lading pursuant to which the cargoes were originally loaded, including the nature of the cargo, the original quantity loaded and the date and place of loading; and

 

 

ii.

the place and date that the blending took place.

 

In consideration of your complying with our request as aforesaid ("the Requested Activity"), we hereby agree as follows:

 

 

1.

To indemnify you, your servants and agents and to hold all of you harmless in respect of
any liability, loss, damage or expense of whatsoever nature and howsoever arising which you may sustain by reason of the Requested Activity as per our request and express instruction.

 

 

2.

In the event of any proceedings being commenced against you, the vessel or any of your servants or agents in connection with or by reason of the Requested Activity as per our request and express instruction as aforesaid, to provide you or them on demand with sufficient funds to defend the same.

 

 

3.

If, in connection with or by reason of the Requested Activity, the ship or any other ship or property in the same or associated ownership, management, possession or control, should be arrested or detained or should the arrest or detention thereof be threatened, or should there be any interference in the use or trading of the vessel (whether by virtue of a caveat being entered on the ship's registry or otherwise howsoever), to provide on demand such bail or other security as may be required to prevent such arrest or detention or to secure the release of such ship or property or to remove such interference and to indemnify you in respect of any liability, loss, damage or expense caused by such arrest or detention or threatened arrest or detention or such interference, whether or not such arrest or detention or threatened arrest or detention or such interference may be justified.

 

 

4.

If, in connection with or by reason of the Requested Activity as aforesaid, the ship should be arrested or detained or should the arrest or detention thereof be threatened, or should there be any interference in the use or trading of the vessel (whether by virtue of caveat being entered on the ship's registry or otherwise howsoever) to continue to pay all sums, dues, disbursements and expenses contractually required of us under the subject Charter Party dated _______ throughout any such period of delay whatsoever and we confirm vessel shall always remain on-hire throughout any and all such periods.

 

 

5.

For the avoidance of doubt and without any limitation whatsoever, in the event that damage or discolouration of or to the cargo tank and/or pipeline coatings occurs or if as a result of incompatibility of either the cargoes being blended and/or any cargo residues present in the tanks, precipitation or lay down of solids arises; to indemnify you in respect of any and/or all costs incurred in repair and/or re-coating and/or cleaning of the tank and/or pipeline coatings.

 

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6.

The liability of each and every person under this indemnity shall be joint and several and shall not be conditional upon your proceeding first against any person, whether or not such person is party to or liable under this indemnity.

 

 

7.

This indemnity shall be governed by and construed in accordance with English Law and each and every person liable under this indemnity shall at your request submit to the jurisdiction of the High Court of Justice of England. We therefore undertake that we will within 14 days of the receipt from you of a request so to do, instruct and authorise solicitors forthwith to accept on our behalf hereunder service of any proceedings that may be commenced by you, your servants, employees and agents against the requestor hereunder or any related company, employee, entity or asset thereof under the terms of this indemnity.

 

[Signed] ..................................


For and on behalf of Charterers

 

 

 

 

 

 

 

 

 

 

 

 

 

56

 

LETTER OF INDEMNITY FOR ADDITIVES OR DYE CARGO

 

To:                   [insert name of Owners]                                               [insert date]
                        The Owners of the [insert name of ship]
                        [insert address]

 

Dear Sirs
Ship:                [insert name of ship]
Charter Party:   [insert details & date]
Voyage:           [insert load and discharge ports as stated in the bill of lading]
Cargo(es):        [quantity & type]
Bill of lading:   No ____ dated ___ issued at _____

 

The above ship, under our charter & commercial operation, and in line with our instructions shall load/has loaded the following cargoes:

 

 

i.

[Cargo quantity & type] in cargo tanks [number, location] shipped by [insert name of shipper] and consigned to [insert name of consignee or party to whose order the bill of lading is made out, as appropriate] for delivery at the port of [insert name of discharge port stated in the bill of lading]

 

 

ii.

[Cargo quantity & type] in cargo tanks [number, location] shipped by [insert name of shipper] and consigned to [insert name of consignee or party to whose order the bill of lading is made out, as appropriate] for delivery at the port of [insert name of discharge port stated in the bill of lading]

 

We have requested you to permit our representative/surveyor to add, or dye [insert details] to the cargo in the tanks at [location] ("the Requested Activity" and in consideration of your agreement to the requested activity we hereby agree as follows:

 

We warrant that any cargo into which additives, or dye shall be introduced, shall be stable and compatible and that no precipitation of solid deposits in cargo tanks, pipes, pumps, valves will occur, and that any such additivisation, or dye shall be always in strict compliance with safety rules, and subject to the technical characteristics of the Vessel; and that any additional costs incurred as a result of additivisation, or dye operations shall be for our account.

 

In consideration of your complying with our request as aforesaid ("the Requested Activity"), we hereby agree as follows:-

 

 

1.

To indemnify you, your servants and agents and to hold all of you harmless in respect of any liability, loss, damage or expense of whatsoever nature which you may sustain by reason of the Requested Activity as per our request and express instruction.

 

 

2.

In the event of any proceedings being commenced against you, the vessel or any of your servants or agents in connection with or by reason of the Requested Activity as per our request and express instruction as aforesaid, to provide you or them on demand with sufficient funds to defend the same.

 

 

3.

If, in connection with or by reason of the Requested Activity, the ship, or any other ship or property in the same or associated ownership, management, possession or control, should be arrested or detained or should the arrest or detention thereof be threatened, or should there be any interference in the use or trading of the vessel (whether by virtue of a caveat being entered on the ship's registry or otherwise howsoever), to provide on demand such bail or other security as may be required to prevent such arrest or detention or to secure the release of such ship or property or to remove such interference and to indemnify you in respect of any liability, loss, damage or expense caused by such arrest or detention or threatened arrest or detention or such interference, whether or not such arrest or detention or threatened arrest or detention or such interference may be justified.

 

57

 

 

4.

If, in connection with or by reason of the Requested Activity as aforesaid, the ship should be arrested or detained or should the arrest or detention thereof be threatened, or should there be any interference in the use or trading of the vessel (whether by virtue of caveat being entered on the ship's registry or otherwise howsoever) to continue to pay all sums, dues, disbursements and expenses contractually required of us under the subject Charter Party dated _____ throughout any such period of delay whatsoever and we confirm vessel shall always remain on-hire throughout any and all such periods.

 

 

5.

For the avoidance of doubt and without any limitation whatsoever, in the event that damage or discolouration of or to the cargo tank and/or pipeline coatings occurs, to indemnify you in respect of any and/or all costs incurred in repair and/or re-coating and/or cleaning of the tank and/or pipeline coatings.

 

 

6.

The liability of each and every person under this indemnity shall be joint and several and shall not be conditional upon your proceeding first against any person, whether or not such person is party to or liable under this indemnity.

 

 

7.

This indemnity shall be governed by and construed in accordance with English Law and each and every person liable under this indemnity shall at your request submit to the jurisdiction of the High Court of Justice of England. We therefore undertake that we will within 14 days of the receipt from you of a request so to do, instruct and authorise solicitors forthwith to accept on our behalf hereunder service of any proceedings that may be commenced by you, your servants, employees and agents against the requestor hereunder or any related company, employee, entity or asset thereof under the terms of this indemnity.

 

[Signed] ..................................


For and on behalf of Charterers

 

 

 

 

 

 

 

 

 

58

 

LETTER OF INDEMNITY FOR CARRYING ADDITIVES/DYE DRUMS ON DECK

 

To:                   [insert name of Owners]                                               [insert date]
                        The Owners of the [insert name of ship]
                        [insert address]

 

Dear Sirs

Ship:                [insert name of ship]
Charter Party:   [insert details & date]
Voyage:           [insert load and discharge ports as stated in the bill of lading]
Cargo(es):        [quantity & type]
Bill of lading:   No ____ dated ___ issued at _____
Bill of lading:   No ____ dated ___ issued at _____

 

The above ship, under our charter & commercial operation, and in line with our instructions shall load/has loaded the following cargoes:

 

 

i.

[Cargo quantity & type] in cargo tanks [number, location] shipped by [insert name of shipper] and consigned to [insert name of consignee or party to whose order the bill of lading is made out, as appropriate] for delivery at the port of [insert name of discharge port stated in the bill of lading]

 

 

ii.

[Cargo quantity & type] in cargo tanks [number, location] shipped by [insert name of shipper] and consigned to [insert name of consignee or party to whose order the bill of lading is made out, as appropriate] for delivery at the port of [insert name of discharge port stated in the bill of lading]

 

We, [insert name of the requestor], have requested you to carry the [insert details of additive/dye] additive or dye in drums/pales [insert number of pales/drums] that sum up to [insert total quantity in litters] on deck from load port to discharge port.

 

We hereby request you to follow our instructions and allow us and/or agents and/or our servants and/or the shippers to load the above drums/pales onto the vessel and your crew to safely and properly stow them.

 

All appropriate shipping documents and MSDS will be delivered to the vessel.

 

In consideration of your complying with our request as aforesaid ("the Requested Activity"), we hereby agree as follows:

 

 

1.

To indemnify you, your servants and agents and to hold all of you harmless in respect of any liability, loss, damage or expense of whatsoever nature and howsoever arising which you may sustain by reason of the Requested Activity as per our request and express instruction.

 

 

2.

In the event of any proceedings being commenced against you, the Vessel or any of your servants or agents in connection with or by reason of the Requested Activity as per our request and express instruction as aforesaid, to provide you or them on demand with sufficient funds to defend the same.

 

 

3.

If, in connection with or by reason of the Requested Activity, the ship or any other ship or property in the same or associated ownership, management, possession or control, should
be arrested or detained or should the arrest or detention thereof be threatened, or should there be any interference in the use of trading of the vessel (whether by virtue of a caveat being entered on the ship's registry or otherwise howsoever), to provide on demand such bail or other security as may be required to prevent such arrest or detention or to secure the release of such ship or property or to remove such interference and to indemnify you in respect of any liability,

loss, damage or expense caused by such arrest or detention or threatened arrest or detention or such interference, whether or not such arrest or detention or threatened arrest or detention or such interference may be justified.

 

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4.

If, in connection with or by reason of the Requested Activity as aforesaid, the ship should be arrested or detained or should the arrest or detention thereof be threatened, or should there be any interference in the use or trading of the vessel (whether by virtue of caveat being entered on the ship's registry or otherwise howsoever) to continue to pay all sums, dues, disbursements and expenses contractually required of us under the subject Charter Party dated ______ throughout any such period of delay whatsoever and we confirm vessel shall always remain on-hire throughout any and all such periods.

 

 

5.

For the avoidance of doubt and without any limitation whatsoever, in the event that the drums/pales will damage by any cause and anyhow vessel's equipment, to indemnify you in respect of any and/or all costs incurred in repair and/or re-coating and/or cleaning of the rails and/or deck and/or bulkheads and/or pipeline coatings.  Owners will not be heard liable for any damage by any cause on the drums/pales.

 

 

6.

The liability of each and every person under this indemnity shall be joint and several and shall not be conditional upon your proceeding first against any person, whether or not such person is party to or liable under this indemnity.

 

 

7.

This indemnity shall be governed by and construed in accordance with English Law and each and every person liable under this indemnity shall at your request submit to the jurisdiction of the High Court of Justice of England.  We therefore undertake that we will within 14 days of the receipt from you of a request so to do, instruct and authorise solicitors forthwith to accept on our behalf hereunder service of any proceedings that may be commenced by you, your servants, employees and agents against the requestor hereunder or any related company, employee, entity or asset thereof under the terms of this indemnity.

 

[Signed] ..........................................

 

For and on behalf of Charterers

 

 

 

 

 

 

 

 

 

 

 

 

 

60

 

LETTER OF INDEMNITY FOR SINGLE VALVE SEGREGATION

 

To:                   [insert name of Owners]                                               [insert date]
                        The Owners of the [insert name of ship]
                        [insert address]

 

Dear Sirs

Ship:                [insert name of ship]
Charter Party:   [insert details & date]
Voyage:           [insert load and discharge ports as stated in the bill of lading]
Cargo(es):        [quantity & type]
Bill of lading:   No ____ dated ___ issued at _____

 

The above ship, under our charter & commercial operation, and in line with our instructions shall load/has loaded the following cargoes:

 

 

i.

[Cargo quantity & type] in cargo tanks [number, location] shipped by [insert name of shipper] and consigned to [insert name of consignee or party to whose order the bill of lading is made out, as appropriate] for delivery at the port of [insert name of discharge port stated in the bill of lading]

 

 

ii.

[Cargo quantity & type] in cargo tanks [number, location] shipped by [insert name of shipper] and consigned to [insert name of consignee or party to whose order the bill of lading is made out, as appropriate] for delivery at the port of [insert name of discharge port stated in the bill of lading]

 

Although the cargoes shall be loaded always within the vessel's natural segregation, we hereby irrevocably acknowledge and accept that the above ship shall only maintain single valve segregation between the cargo tanks mentioned above and along the corresponding cargo line, during and throughout all cargo operations and all such time the above mentioned cargoes remain on-board the vessel.

 

Nonetheless we, [insert name of the requestor], hereby request you to follow our instructions and allow us and/or our agents and/or our servants and/or the shippers to load, stow and discharge the above cargoes in and from the above referenced cargo tanks, despite the fact that only single valve segregation shall be maintained throughout such operations and the course of the voyage.

 

In consideration of your complying with our request as aforesaid ("the Requested Activity"), we hereby agree as follows:-

 

 

1.

To indemnify you, your servants and agents and to hold all of you harmless in respect of any liability, loss, damage or expense of whatsoever nature which you may sustain by reason of the Requested Activity as per our request and express instructions.

 

 

2.

In the event of any proceedings being commenced against you, the vessel or any of your servants or agents in connection with or by reason of the Requested Activity as per our request and express instruction as aforesaid, to provide you or them on demand with sufficient funds to defend the same.

 

 

3.

If, in connection with or by reason of the Requested Activity, the ship, or any other ship or property in the same or associated ownership, management, possession or control, should be arrested or detained or should the arrest or detention thereof be threatened, or should there be any interference in the use or trading of the vessel (whether by virtue of a caveat being entered on the ship's registry or otherwise howsoever), to provide on demand such bail or other security as may be required to prevent such arrest or detention or to secure the release of such ship or property or to remove such interference and to indemnify you in respect of any liability, loss, damage or expense caused by such arrest or detention or threatened arrest or detention or such interference, whether or not such arrest or detention or threatened arrest or detention or such interference may be justified.

 

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4.

If, in connection with or by reason of the Requested Activity as aforesaid, the ship should be arrested or detained or should the arrest or detention thereof be threatened or should there be any interference in the use or trading of the vessel (whether by virtue of caveat being entered on the ship's registry or otherwise howsoever) to continue to pay all sums, dues, disbursements and expenses contractually required of us under the subject Charter Party dated ______ throughout any such period of delay whatsoever and we confirm vessel shall always remain on-hire throughout any and all such periods.

 

 

5.

For the avoidance of doubt and without any limitation whatsoever, in the event that damage or discolouration of or to the cargo tank and/or pipeline coatings occurs, to indemnify you in respect of any and/or all costs incurred in repair and/or re-coating and/or cleaning of the tank and/or pipeline coatings.

 

 

6.

The liability of each and every person under this indemnity shall be joint and several and shall not be conditional upon your proceeding first against any person, whether or not such person is party to or liable under this indemnity.

 

 

7.

This indemnity shall be governed by and construed in accordance with English Law and each and every person liable under this indemnity shall at your request submit to the jurisdiction of the High Court of Justice of England. We therefore undertake that we will within 14 days of the receipt from you of a request so to do, instruct and authorise solicitors forthwith to accept on our behalf hereunder service of any proceedings that may be commenced by you, your servants, employees and agents against the requestor hereunder or any related company, employee, entity or asset thereof under the terms of this indemnity.

 

[Signed] ........................................        
For and on behalf of Charterers

 

 

 

 

 

 

 

 

 

 

62

 

LETTER OF INDEMNITY FOR LINE SHARING

 

To:                   [insert name of Owners]                                               [insert date]
                        The Owners of the [insert name of ship]
                        [insert address]

 

Dear Sirs

Ship:                [insert name of ship]
Charter Party:   [insert details & date]
Voyage:           [insert load and discharge ports as stated in the bill of lading]
Cargo(es):        [quantity & type]
Bill of lading:   No ____ dated ___ issued at _____

 

The above ship, under our charter & commercial operation, and in line with our instructions shall load the following cargoes:

 

 

i.

[Cargo quantity & type] in cargo tanks [number, location] shipped by [insert
name of shipper] and consigned to [insert name of consignee or party to whose order the bill of lading is made out, as appropriate] for delivery at the port of [insert name of discharge port stated in the bill of lading]

 

 

ii.

[Cargo quantity & type] in cargo tanks [number, location] shipped by [insert
name of shipper] and consigned to [insert name of consignee or party to whose order the bill of lading is made out, as appropriate] for delivery at the port of [insert name of discharge port stated in the bill of lading]

 

Although the cargoes shall be loaded always within the vessel's natural segregation, we [insert name of the requestor], hereby request that the above cargo be loaded onboard into the ships cargo tanks [insert cargo tanks] by using same line [insert line no] from vessel's manifold until the vessel's cross over and we accept that there is a possibility of contamination between the above parcels (the Request).

 

In consideration of your complying with our request as aforesaid ("the Requested Activity"), we hereby agree as follows:-

 

 

1.

To indemnify you, your servants and agents and to hold all of you harmless in respect of any liability, loss, damage or expense of whatsoever nature which you may sustain by reason of the Requested Activity as per our request and express instruction.

 

 

2.

In the event of any proceedings being commenced against you, the vessel or any of your servants or agents in connection with or by reason of the Requested Activity as per our request and express instruction as aforesaid, to provide you or them on demand with sufficient funds to defend the same.

 

 

3.

If, in connection with or by reason of the Requested Activity, the ship, or any other ship or property in the same or associated ownership, management, possession or control, should
be arrested or detained or should the arrest or detention thereof be threatened, or should there be any interference in the use or trading of the vessel (whether by virtue of a caveat being entered on the ship's registry or otherwise howsoever), to provide on demand such bail or other security as may be required to prevent such arrest or detention or to secure the release of such ship or property or to remove such interference and to indemnify you in respect of any liability, loss, damage or expense caused by such arrest or detention or threatened arrest or detention or
 

 

 

63
 
Exhibit 4.36
 
exh435hdr.jpg

 

1.    Shipbroker

N/A

2.     Place and date

 2 March 2022

3.    Owners/Place of business (Cl. 1)

Great Oceano Limited, a corporation incorporated and existing under the laws of the Republic of the Marshall Islands with entity number 112907 and its registered address at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960

4.    Bareboat Charterers/Place of business (Cl. 1)

Eco Oceano CA Inc., a corporation incorporated and existing under the laws of the Republic of Marshall Islands with entity number 107152 and its registered address at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH 96960

5.    Vessel’s name, call sign and flag (Cl. 1 and 3)

Eco Oceano CA IMO: 9794020

Call sign: V7A4722

Builder's Hull Number: S871

Flag: Marshall Islands or any other Pre-Approved Flag

6.     Type of Vessel

Crude Oil Tanker

7.    GT/NT

81,785/51,261

8.     When/Where built

Under construction / Hyundai Samho Heavy Industries Company Limited

9.     Total DWT (abt.) in metric tons on summer freeboard

157,285 MT at summer draft

10.  Classification Society (Cl. 3)

American Bureau of Shipping (ABS)

11.  Date of last special survey by the Vessel’s classification society

N/A

12.  Further particulars of Vessel (also indicate minimum number of months’ validity of class certificates agreed acc. to Cl. 3)

13.  Port or Place of delivery (Cl. 3)

As specified in the Building Contract

14. Time for delivery (Cl. 4)

See Clause 36

15. Cancelling date (Cl. 5)

See Clause 39

16.  Port or Place of redelivery (Cl. 15)

See Clause 46

17.  No. of months' validity of trading and class certificates upon redelivery (Cl. 15)

See Clause 47

18.  Running days’ notice if other than stated in Cl. 4

N/A

19.  Frequency of dry-docking (Cl. 10(g))

20.  Trading limits (Cl. 6)

Worldwide within International Navigating Limits, see also Clause 52.9(d)

21.  Charter period (Cl. 2)

See Clause 57

22.  Charter hire (Cl. 11)

See Clause 44

23.  New class and other safety requirements (state percentage of Vessel's insurance value acc. to Box 29)(Cl. 10(a)(ii))

N/A

24.  Rate of interest payable acc. to Cl. 11 (f) and, if applicable, acc. to PART IV

See Clause 44.4 - Clause 11 does not apply

25.  Currency and method of payment (Cl. 11)

Dollars / bank transfer - Clause 11 does not apply

26.  Place of payment; also state beneficiary and bank account (Cl. 11)

See Clause 44.2(e) - Clause 11 does not apply

27.  Bank guarantee/bond (sum and place) (Cl. 24) (optional)

See Clause 24

28.  Mortgage(s), if any (state whether 12(a) or (b) applies; if 12(b) applies state date of Financial Instrument and name of Mortgagee(s)/Place of business) (Cl. 12)

N/A

See Clause 48

29.  Insurance (hull and machinery and war risks) (state value acc. to Cl. 13(f) or, if applicable, acc. to Cl. 14(k)) (also state if Cl. 14 applies)

See Clause 45 - Clause 14 does not apply

30.  Additional insurance cover, if any, for Owners’ account limited to (Cl. 13(b) or, if applicable, Cl. 14(g))

See Clause 45

31.  Additional insurance cover, if any, for Charterers’ account limited to (Cl. 13(b) or, if applicable, Cl. 14(g))

See Clause 45

32.  Latent defects (only to be filled in if period other than stated in Cl. 3)

N/A

33.  Brokerage commission and to whom payable (Cl. 27)

N/A

 

Copyright © 2001 BIMCO. All rights reserved. Any unauthorised copying, duplication, reproduction or distribution of this BIMCO SmartCon document will constitute an infringement of BIMCO’s copyright. Explanatory notes are available from BIMCO at www.bimco.org.

 

 

 

 

34.  Grace period (state number of clear banking days) (Cl. 28)

See Clause 54 - Clause 28 does not apply

35.  Dispute Resolution (state 30(a), 30(b) or 30(c); If 30(c) agreed Place of Arbitration must be stated (Cl. 30)

(a) English law, London arbitration / See Clause 81

36.  War cancellation (indicate countries agreed) (Cl. 26(f))

N/A

37.  Newbuilding Vessel (Indicate with "yes" or "no" whether PART III applies) (optional)

Yes, Part III does not apply

38.  Name and place of Builders (only to be filled in If PART III applies)

N/A

39.  Vessel's Yard Building No. (only to be filled In If PART III applies)

N/A

40.  Date of Building Contract (only to be filled in if PART III applies)

N/A

41.  Liquidated damages and costs shall accrue to (state party acc. to Cl. 1)

a)         N/A

b)         N/A

c)         N/A

42.  Hire/Purchase agreement (Indicate with "yes" or "no" whether PART IV applies) (optional)

No, Part IV does not apply

43.  Bareboat Charter Registry (indicate with "yes" or "no" whether PART V applies) (optional)

No, Part V does not apply

44.  Flag and Country of the Bareboat Charter Registry (only to be filled in if PART V applies)

N/A

45.  Country of the Underlying Registry (only to be filled In if PART V applies)

N/A

46.  Number of additional clauses covering special provisions, if agreed

Clause 32 to 85

 

PREAMBLE - It is mutually agreed that this Contract shall be performed subject to the conditions contained in this Charter which shall include PART I and PART II. In the event of a conflict of conditions, the provisions of PART I shall prevail over those of PART II to the extent of such conflict but no further. It Is further mutually agreed that PART III and/or PART IV and/or PART V shall only apply and only form part of this Charter if expressly agreed and stated in Boxes 37, 42 and 43. If PART III and/or PART IV and/or PART V apply, It is further agreed that in the event of a conflict of conditions, the provisions of PART I and PART II shall prevail over those of PART III and/or PART IV and/or PART V to the extent of such conflict but no further.

 

Signature (Owners)

 

/s/ Yang Guangyi

YANG GUANGYI

Director

Signature (Charterers)

 

/s/ Alexandros Tsirikos

Alexandros Tsirikos

Attorney-in-fact

 

 

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EXECUTION VERSION

 

CONTENTS

Page

 

32.               

Definitions

1

33.               

Interpretations

16

34.               

Background

18

35.               

INTENTIONALLY OMITTED

18

36.               

Delivery

18

37.               

INTENTIONALLY OMITTED

19

38.               

Terms of delivery

19

39.               

Cancellation

20

40.               

Conditions precedent

20

41.               

Bunkers and luboils

24

42.               

Further maintenance and operation

24

43.               

Structural changes and alterations

25

44.               

Hire

26

45.               

Insurance

31

46.               

Redelivery

35

47.               

Redelivery conditions

35

48.               

Owners' mortgage

37

49.               

Diver's inspection at redelivery

38

50.               

Transport documents

38

51.               

Charterers' representations and warranties

38

52.               

Charterers' undertakings

43

53.               

Earnings Account

51

54.               

Termination Events

51

55.               

Assignment by charterers

57

56.               

Name of Vessel

58

57.               

Charter Period

58

58.               

Handling Fee

58

59.               

Purchase Option, Purchase Obligation and transfer of title

58

60.               

Sale of Vessel by the Owners

59

61.               

Total Loss

60

62.               

Additional payment obligations

61

63.               

Stamp duties and taxes

61

64.               

Operational notifiable events

61

65.               

Further indemnities

62

   

 

 

 

66.               

Set-off

64

67.               

Further assurances and undertakings

64

68.               

Cumulative rights

64

69.               

Day count convention

64

70.               

No waiver

64

71.               

Entire agreement

64

72.               

Invalidity

65

73.               

English language

65

74.               

No partnership

65

75.               

Notices

65

76.               

Conflicts

67

77.               

Survival of Charterers' obligations

67

78.               

Counterparts

67

79.               

Confidentiality

67

80.               

Third Parties Act

67

81.               

Law and jurisdiction

68

82.               

Conditions subsequent

68

83.               

FATCA

69

84.               

Grant of Security Interest

71

85.               

Application of Proceeds

73

SCHEDULE 1 FORM OF PROTOCOL OF DELIVERY AND ACCEPTANCE

74

SCHEDULE  2   FORM  OF  TITLE  TRANSFER   PROTOCOL  OF  DELIVERY  AND ACCEPTANCE

75

SCHEDULE 3 HIRE PAYMENT SCHEDULE

76

SIGNATURE PAGE

77

 

 

 

 

 

 

 

 

 

 

 

ADDITIONAL CLAUSES

TO BAREBOAT CHARTER FOR

M.V. ECO OCEANO CA

 

32.

Definitions

 

In this Charter:

 

"Account Bank" means:

 

 

(a)

in relation to the Earnings Account, ABN AMRO Bank N.V. of Amsterdam, The Netherlands; and

 

 

(b)

in relation to the Group Charterer's Earnings Account, Credit Suisse AG of Zurich, Switzerland,

 

or in each case, such other bank or financial institution as selected or designated by the Owners from time to time.

 

"Account Charge" means the account security deed in respect of the Earnings Account and all amounts from time to time standing to the credit to the Earnings Account from the Charterers in favour of the Owners.

 

"Actual Delivery Date" means the date of delivery of the Vessel by the Owners to the Charterers under this Charter.

 

“Advance Hire” means an amount which is the lowest of (a) US Dollars twelve million and one hundred thousand (US$12,100,000), (b) twenty per cent (20%) of the Purchase Price and (c) twenty per cent (20%) of the Initial Market Value of the Vessel.

 

"Affiliate" means, in relation to any entity, a Subsidiary of that entity, a Holding Company of that entity or any other Subsidiary of that Holding Company.

 

"Agreement Term" means the period commencing on the date of this Charter and terminating on the expiration of the Charter Period or such earlier or later date on which all money of any nature owed by the Obligors to the Owners under the Transaction Documents or otherwise in connection with the Vessel have been paid in full to the Owners and no obligations of the Obligors of any nature to the Owners or otherwise in connection with the Transaction Documents or with the Vessel remain unperformed or undischarged.

 

"AML Laws" means as to any person and in relation to money laundering or terrorism, the constitutional or organisational documents of such person, and any treaty, law (including the common law), statute, ordinance, code, rule, regulation, guidelines, licence, permit requirement, order or determination of an arbitrator or a court or other governmental authority and the interpretation or administration thereof, in each case applicable to or binding upon such person or any of its property or to which such person or any of its property is subject.

 

"Approved Broker" means each of Arrow Sale & Purchase (UK) Limited, Braemar ACM Shipbroking, Clarkson Platou, Maersk Broker A/S, Fearnleys, SSY, Howe Robinson, Lorentzen & Stemoco and any other reputable and independent ship brokers nominated by the Charterers and acceptable to the Owners (such acceptance not to be unreasonably withheld or delayed).

 

"Approved Managers" in relation to the Vessel, means:

 

 

(a)

Central Mare Inc., a corporation incorporated and existing under the laws of the Republic of the Marshall Islands with entity number 32656 and with its registered address at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Republic of the Marshall Islands, MH 96960, in respect of technical management (the “Technical Manager”); and

 

 

 

 

(b)

Central Shipping Inc., a corporation incorporated and existing under the laws of the Republic of the Marshall Islands with entity number 98339 and with its registered address at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Republic of the Marshall Islands, MH 96960, in respect of commercial management (the "Commercial Manager"),

 

or in either case, any other management company reasonably acceptable to the Owners (which acceptance shall not be unreasonably delayed) and appointed by the Charterers, and "Approved Manager" means any of them.

 

"Assumed Owners' Cost" means US Dollars forty eight million and four hundred thousand (US$48,400,000).

 

"Balloon Amount" means an amount which is the lowest of (a) US Dollars twenty one million and one hundred seventy five thousand (US$21,175,000), (b) thirty five per cent. (35%) of the Purchase Price and (c) thirty five per cent. (35%) of the Initial Market Value of the Vessel, or such other amount representing the Cost Balance as at the last day of the Charter Period.

 

"Break Costs" means all costs, reasonable losses, premiums or penalties incurred by the Owners as a result of the receipt by the Owners of any payment under or in relation to the Transaction Documents on a day other than the due date for payment of the sum in question.

 

"Builder" has the meaning given to such term in the MOA.

 

"Building Contract" has the meaning given to such term in the MOA.

 

"Building Contract Delivery Instalment" has the meaning given to such term in the MOA.

 

"Business Day" means a day (other than a Saturday or Sunday) on which banks and financial markets are open for business in Shanghai, the Netherlands, Athens, London and New York and (on or prior to the Actual Delivery Date) Korea.

 

"Cancelling Date" has the meaning given to such term in the MOA.

 

"Change of Control" means, in relation to the Charterers, the Charterers ceasing to be in the ownership and Control of (either directly or indirectly) the Pistiolis Family either directly or via the Charter Guarantor or, in relation to the Charterers or the Charter Guarantor, any circumstances in which Control of the Charterers or the Charter Guarantor passes from the Pistiolis Family who are in Control of the Charterers and the Charter Guarantor to a person or persons who is not or are not in Control of the Charterer and the Charter Guarantor as at the date of this Charter.

 

"Charter Group" means the Charterers, and the Charter Guarantor, including all of their respective Holding Company (if any) and Subsidiaries from time to time, and a "member of the Charter Group" means any one of them.

 

"Charter Guarantee" means the guarantee made or to be made by the Charter Guarantor in favour of the Owners in respect of the Charterers' obligations under this Charter.

 

"Charter Guarantor" means TOP SHIPS INC., a corporation incorporated and existing under the laws of the Republic of the Marshall Islands with entity number 3571 and with its registered address at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Republic of the Marshall Islands, MH 96960.

 

 

2

 

 

"Charter Period" has the meaning given to it in Clause 57.

 

"Charterers' Assignment" means the deed of assignment executed or to be executed (as the case may be) by the Charterers in favour of the Owners in relation to certain of the Charterers' rights and interest in and to (amongst other things) the Earnings, Insurances, Requisition Compensation, any Sub-Charter to which the Charterers are a party and the Builder’s warranties under the Building Contract.

 

"Classification Society" means the vessel classification society referred to in Box 10 (Classification Society) of this Charter, or DNV GL, Lloyd's Register of Shipping (LR), Bureau Veritas (BV), Korean Register of Shipping (KR), China Classification Society (CCS) or such other reputable classification society which the Owners may approve from time to time.

 

"Control" means, in respect of the Charterers and the Charter Guarantor, the power of a person to secure that the affairs of the Charterers and the Charter Guarantor are conducted in accordance with the wishes of that person:

 

 

(a)

by means of the holding of shares, or the possession of voting powers in or in relation to the Charterers and the Charter Guarantor; or

 

 

(b)

as a result of any powers conferred by the articles of association or any other document regulating the Charterers and the Charter Guarantor.

 

"Cost Balance" means at any relevant time during the Agreement Term, the Owners' Cost minus the aggregated Fixed Hire which has been paid by the Charterers and received by the Owners as at such date.

 

"Default Termination" means a termination of the Charter Period pursuant to the provisions of Clause 54 (Termination Events).

 

"Delivery Conditions" means the conditions set out in paragraph (b) of Clause 40 (Delivery Conditions).

 

“Delivery Payment (Builder)” has the meaning given to such term in the MOA. “Delivery Payment (Sellers)” has the meaning given to such term in the MOA. "Delivery Shortfall" has the meaning given to such term in the MOA. "Disruption Event" means either or both of:

 

 

(a)

a material disruption to those payment or communications systems or to those financial markets which are, in each case, required to operate in order for payments to be made in order for the transactions contemplated by the Transaction Documents to be carried out which disruption is not caused by, and is beyond the control of, any of the Parties; or

 

 

(b)

the occurrence of any other event which results in a disruption (of a technical or systems-related nature) to the treasury or payments operations of a Party preventing that, or any other Party:

 

 

(i)

from performing its payment obligations under the Transaction Documents; or

 

 

(ii)

from communicating with other Parties in accordance with the terms of the Transaction Documents,

3

 

 

and which (in either such case) is not caused by, and is beyond the control of, the Party whose operations are disrupted.

 

"Earnings" means all hires, freights, pool income and other sums payable to or for the account of the Charterers in respect of the Vessel including (without limitation) all remuneration for salvage and towage services, demurrage and detention moneys, contributions in general average, compensation in respect of any requisition for hire, and damages and other payments (whether awarded by any court or arbitral tribunal or by agreement or otherwise) for breach, termination or variation of any contract for the operation, employment or use of the Vessel.

 

"Earnings Account" means the US Dollar account in the name of the Charterers opened or to be opened with the relevant Account Bank, and includes any sub-account thereof and such account which is designated by the Owners as the earnings account for the purposes of this Charter.

 

"Environmental Approvals" means any present or future permit, licence, approval, ruling, variance, exemption or other authorisation required under the applicable Environmental Law.

 

"Environmental Claim" means any claim, proceeding or investigation by any person in respect of any Environmental Law.

 

"Environmental Incident" means:

 

 

(a)

any release, emission, spill or discharge from the Vessel or into or upon the air, sea, land or soils (including the seabed) or surface water of Environmentally Sensitive Material within or from the Vessel; or

 

 

(b)

any incident in which Environmentally Sensitive Material is released, emitted, spilled or discharged into or upon the air, sea, land or soils (including the seabed) or surface water from a vessel other than the Vessel and which involves a collision between the Vessel and such other vessel or some other incident of navigation or operation, in either case, in connection with which the Vessel is actually or potentially liable to be arrested, attached, detained or injuncted and/or the Vessel and/or any Obligor and/or any operator or manager of the Vessel is at fault or allegedly at fault or otherwise liable to any legal or administrative action; or

 

 

(c)

any other incident in which Environmentally Sensitive Material is released, emitted, spilled or discharged into or upon the air, sea, land or soils (including the seabed) or surface water otherwise than from the Vessel and in connection with which the Vessel is actually or potentially liable to be arrested and/or where any Obligor and/or any operator or manager of the Vessel is at fault or allegedly at fault or otherwise liable to any legal or administrative action, other than in accordance with an Environmental Approval.

 

"Environmentally Sensitive Material" means (i) oil and oil products and (ii) any other waste, pollutant, contaminant or other substance (including any liquid, solid, gas, ion, living organism or noise) that may be harmful to human health or other life or the environment or a nuisance to any person or that may make the enjoyment, ownership or other territorial control of any affected land, property or waters more costly for such person to a material degree.

 

"Environmental Law" means any applicable law and regulation in any jurisdiction in which any Obligor conducts business which relates to the pollution or protection of the environment or harm to or the protection of human health or the health of animals or plants.

 

"Environmental Permits" means any authorisation and the filing of any notification, report or assessment required under any Environmental Law for the operation of the business of any Obligor.

 

4

 

 

"Finance Document"" means any facility agreement,  security document, fee  letter and any other document designated as such by the Finance Parties and the Owners and which have been or may be (as the case may be) entered into between the Finance Parties and the Owners for the purpose of, among other things, financing or (as the case may be) refinancing all or any part of the Cost Balance.

 

"Finance Party"" means any bank or financial institution which is or will be party to a Finance Document (other than the Owners and other entities which may have agreed or be intended as debtors and/or obligors thereunder) and "Finance Parties" means two or more of them.

 

"Financial Indebtedness" means any obligation for the payment or repayment of money, whether present or future, actual or contingent, in respect of:

 

 

(a)

moneys borrowed;

 

 

(b)

any acceptance credit;

 

 

(c)

any bond, note, debenture, loan stock or similar instrument;

 

 

(d)

any finance, capital lease or operating leases for financing purposes;

 

 

(e)

receivables sold or discounted (other than on a non-recourse basis);

 

 

(f)

deferred payments for assets or services;

 

 

(g)

any derivative transaction protecting against or benefiting from fluctuations in any rate or price (and, when calculating the value of any derivative transaction, only the marked to market value shall be taken into account);

 

 

(h)

any amount raised under any other transaction (including any forward sale or purchase agreement) having the commercial effect of a borrowing according to the relevant account principles;

 

 

(i)

any counter-indemnity obligation in respect of a guarantee, indemnity, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution; and

 

 

(j)

the amount of any liability in respect of any guarantee or indemnity for any of the items referred to in (a) to (i).

 

"Fixed Hire " has the meaning given to it in Clause 44.1 (Hire), being, (a) in relation to each Hire Payment Date (other than the last Hire Payment Date), 1/40 of the difference between the Owners' Cost and the Balloon Amount and (b) in relation to the last Hire Payment Date, the Balloon Amount, and in each case, which may be revised and adjusted from time to time in accordance with the terms of this Charter.

 

"GAAP" means generally accepted accounting principles in the United States of America.

 

"Group Charter" means the time charterparty dated 3 July 2020 as amended and supplemented by an addendum dated 17 December 2020 and an addendum no.2 dated 22 February 2022 and entered into between the Charterers as disponent owner and the Group Charterer as charterer.

 

"Group Charterer" means CENTRAL TANKERS CHARTERING INC., a corporation incorporated and existing under the laws of the Republic of the Marshall Islands with entity number 92780 and with its registered address at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Republic of the Marshall Islands, MH 96960.

 

5

 

 

"Group Charterer's Assignment" means the deed of assignment executed or to be executed (as the case may be) by the Group Charterer in favour of the Owners in relation to certain of the Group Charterer's rights and interest in and to (amongst other things) the Group Charterer's Earnings, Requisition Compensation, any Sub-Charter to which the Group Charterer is a party.

 

"Group Charterer's Earnings" means all hires, freights, pool income and other sums payable to or for the account of the Group Charterer in respect of the Vessel including (without limitation) all remuneration for salvage and towage services, demurrage and detention moneys, contributions in general average, compensation in respect of any requisition for hire, and damages and other payments (whether awarded by any court or arbitral tribunal or by agreement or otherwise) for breach, termination or variation of any contract for the operation, employment or use of the Vessel.

 

"Group Charterer's Earnings Account" means the US Dollar account in the name of the Group Charterer opened or to be opened with the relevant Account Bank, and includes any sub-account thereof and such account which is designated by the Owners as the group charterer's earnings account for the purposes of this Charter.

 

"Group Charterer's Account Charge" means the account security deed in respect of the Group Charterer's Earnings Account and all amounts from time to time standing to the credit to the Group Charterer's Earnings Account from the Group Charterer in favour of the Owners.

 

"Handling Fee" has the meaning given to it in Clause 58 (Handling Fee).

 

Hire” means:

 

 

(a)

the Advance Hire, as further detailed in Clause 43A (Advance Hire); and

 

 

(b)

each of or, as the context may require, all of the instalments of hire payable under this Charter on each Hire Payment Date comprising in the case of each Hire Payment Date other than the last Hire Payment Date, both Fixed Hire and Variable Hire and in the case of the last Hire Payment Date, the Fixed Hire only, as further detailed in Clause 44.1 (Hire).

 

"Hire Payment Date" means the tenth (10th) day of the last month of each three (3) month period after the preceding Hire Payment Date (or if such date is not a Business Day, the immediately preceding Business Day), save that:

 

 

(a)

the first Hire Payment Date shall fall on the Actual Delivery Date;

 

 

(b)

the second Hire Payment Date shall fall on the date which is the tenth (10th) day of the last month of the three (3) month period after the Actual Delivery Date (or if such date is not a Business Day, the immediately preceding Business Day); and

 

 

(c

the last Hire Payment Date shall be the last day of the Charter Period (or if such date is not a Business Day, the immediately preceding Business Day).

 

"Hire Payment Schedule" means a payment schedule to be provided by the Owners to the Charterers in accordance with paragraph (b) of Clause 44.2 (Hire) and as the same may be amended from time to time pursuant to the terms of this Charter and which shall be appended as Schedule 3.

 

"Hire Period" means:

 

 

(a)

in respect of each Hire Payment Date (other than the last Hire Payment Date) the period commencing on such Hire Payment Date and ending on the next succeeding Hire Payment Date; and

 

6

 

 

(b)

in respect of the last Hire Payment Date, the period commencing on the second last Hire Payment Date and ending on the last day of the Charter Period.

 

"Holding Company" means, in relation to any entity, any other entity in respect of which it is a Subsidiary.

 

"IAPPC" means a valid international air pollution prevention certificate for the Vessel issued under Annex VI (Regulations for the Prevention of Air Pollution from Ships) to the International Convention for the Prevention of Pollution from Ships 1973 (as modified in 1978 and 1997).

 

"Indemnitee" has the meaning given to such term in Clause 65 (Further indemnities).

 

“Initial Market Value” has the meaning given to such term in Clause 52.30(a) (Valuation of Market Value).

 

"Initial Sub-Charters" means:

 

 

(a)

the time charter party made or to be made between the Group Charterer as owners and the relevant Initial Sub-Charterer as charterers (the "First Initial Sub-Charter"); and

 

 

(b)

a time charter party to be made between the Group Charterer or the Charterers as owners and the relevant Initial Sub-Charterer as charterers for the chartering of the Vessel by the Group Charterer or the Charterers (as the case may be) to such Initial Sub-Charterer upon natural expiration of the First Initial Sub-Charter or in accordance with Clause 54.1(j)(iv) (Recission, Repudiation, Termination and Cancellation) (in each case, a "Subsequent Initial Sub-Charter"),

 

and "Initial Charter" means any one of them. "Initial Sub-Charterers" means:

 

 

(a)

in relation to the First Initial Sub-Charter, Trafigura Maritime Logistics Pte Ltd., a company incorporated and existing under the laws of Singapore with its registered address at 10 Collyer Quay #29-01/05, Ocean Financial Centre, Singapore 049315; and

 

 

(b)

in relation to a Subsequent Initial Sub-Charter, such first class oil major company acceptable to the Owners,

 

and "Initial Sub-Charterer" means any one of them.

 

"Innocent Owners' Interest Insurances" means all policies and contracts of innocent owners' interest insurance, innocent owners' additional perils (oil pollution) insurance and any other insurance from time to time taken out by the Owners in relation to the Vessel.

 

"Insurances" means all policies and contracts of insurance which are from time to time taken out or entered into by the Charterers in respect of the Vessel or her Earnings or otherwise in connection with the Vessel or her Earnings, with the exception of Loss of Hire and Contingent Liability.

 

“Interest Rate” means:

 

 

(a)

subject to Clause 44.8(a), for any Hire Period of which the Quotation Day falls before the occurrence of a Screen Rate Replacement Event, LIBOR;

 

 

(b)

for any Hire Period of which the Quotation Day falls on or after the occurrence of a Screen Rate Replacement Event but before a Replacement Benchmark is implemented pursuant to Clause 44.8(d), in accordance with Clause 44.8(c) (unless otherwise agreed by the Owners); and

7

 

 

 

(c)

for any Hire Period of which the Quotation Day falls on or after a Replacement Benchmark is implemented pursuant to 44.8(d), the rate of interest determined under the Replacement Benchmark.

 

"ISM Code" means the International Safety Management Code (including the guidelines on its implementation), adopted by the International Maritime Organisation Assembly as Resolutions A.741 (18) (as amended by MSC 104 (73)) and A.913(22) (superseding Resolution A.788 (19)), as the same may be amended, supplemented or superseded 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 Company" means, at any given time, the company responsible for the Vessel's compliance with the ISM Code under paragraph 1.1.2 of the ISM Code.

 

"ISPS Code" means the International Ship and Port Facility Security Code adopted by the International Maritime Organisation (as the same may be amended, supplemented or superseded from time to time).

 

"ISPS Company" means, at any given time, the company responsible for the Vessel's compliance with the ISPS Code.

 

"ISSC" means a valid international ship security certificate for the Vessel issued under the ISPS Code.

 

"LIBOR" means:

 

 

(a)

the applicable Screen Rate as of the Specified Time for USD and for a period of three (3) months; or

 

 

(b)

as otherwise determined pursuant to Clause 44.8,

 

and if, in either case, that rate is less than zero, LIBOR will be deemed to be zero.

 

"Major Casualty Amount" means US Dollars one million and five hundred thousand (US$1,500,000) or the equivalent in any other currency or currencies.

 

"Management Agreement" means, in relation to the Vessel, the technical and/or commercial ship management agreement and/or layup management agreement executed or to be executed (as the case may be) between the relevant Approved Manager and the Charterers.

 

"Manager's Undertaking" means the deed of undertaking executed or to be executed by the relevant Approved Manager in favour of the Owners.

 

“Margin” means three point five per cent (3.5%) per annum.

 

"Market Value" means, in relation to the Vessel, the value as determined in accordance with Clause 52.30 (Valuation of Market Value).

 

"MARPOL" means the International Convention for the Prevention of Pollution from Ships adopted by the International Maritime Organisation (as the same may be amended, supplemented or superseded from time to time).

 

"Material Adverse Effect" means a material adverse change in, or a material adverse effect on:

 

8

 

 

(a)

the business or financial condition of the Charter Group taken as a whole;

 

 

(b)

the ability of the Obligors to perform and comply with their obligations under any Transaction Document or Project Document to which they are a party; or

 

 

(c)

the validity, legality or enforceability of this Charter, any other Transaction Document or any Project Document.

 

“MOA” means the memorandum of agreement dated on or around the date of this Charter between the Charterers as sellers and the Owners as buyers in respect of the Vessel.

 

"Mortgagees' Interest Insurances" means all policies and contracts of mortgagees' interest insurance, mortgagees' additional perils (oil pollution) insurance and any other insurance from time to time taken out by any Finance Party in relation to the Vessel.

 

"Necessary Authorisations" means all Authorisations of any person including any government or other regulatory authority required by applicable law to enable an Obligor to:

 

 

(a)

lawfully enter into and perform its obligations under the Transaction Documents and the Project Documents to which it is party;

 

 

(b)

ensure the legality, validity, enforceability or admissibility in evidence in England and, if different, its jurisdiction of incorporation, of such Transaction Documents and Project Documents to which it is party;

 

 

(c)

carry on its business from time to time; and

 

 

(d)

perform any provision of the Transaction Documents and Project Documents to which it is a party without being in breach of any provision of this Charter relating to Sanctions (if, but for the obtaining of such Authorisation, such Obligor would be prohibited from performing any provision of the Transaction Documents and Project Documents by reason of Sanctions).

 

"Obligor" means each of the Charterers, the Charter Guarantor, the Group Charterer, the Technical Manager, the Commercial Manager and any other person within the Charter Group that may be party to a Transaction Document from time to time (other than the Owners and any Account Bank).

 

"Owners' Cost" means an amount which is the lowest of (a) US Dollars forty eight million and four hundred thousand (US$48,400,000), (b) eighty per cent (80%) of the Purchase Price and (c) eighty per cent (80%) of the Initial Market Value of the Vessel.

 

"Party" means a party to this Charter.

 

"PDA" means the protocol of delivery and acceptance in relation to the Vessel to be executed between the Owners and the Charterers, substantially in the form contained in Schedule 1 (Form of Protocol of Delivery and Acceptance) hereto.

 

"Permitted Security Interest" means:

 

 

(a)

any Security Interest created or to be created in accordance with the Security Documents;

 

 

(b)

liens for unpaid master's and crew's wages in accordance with first class ship ownership and management practice;

 

 

(c)

liens for salvage;

 

9

 

 

(d)

liens for master's disbursements incurred in the ordinary course of trading;

 

 

(e)

any other lien arising by operation of law or otherwise in the ordinary course of the operation, repair or maintenance of the Vessel and not as a result of any default or omission by the Charterers, provided such liens do not secure amounts more than 21 days overdue (unless the overdue amount is being contested in good faith by appropriate steps);

 

 

(f)

any Security Interest arising by operation of law in respect of Taxes which are not overdue for payment or which are being contested in good faith by appropriate steps and in respect of which appropriate reserves have been made;

 

 

(g)

any liens securing obligations incurred in the ordinary course of trading and/or operating the Vessel and not more than 21 days overdue; and

 

 

(h)

any Security Interest which has the prior written approval of the Owners. "Pistiolis Family" means Evangelos Pistiolis and his immediate family members.

 

"Potential Termination Event" means an event or circumstance which, with the giving of any notice, the lapse of time, a determination of the Owners or any combination of the foregoing is a Termination Event.

 

"Pre-Approved Flag" or "Flag State" means the Republic of the Marshall Islands or other flag approved by the Owners.

 

"Prepositioning Date" has the meaning given to such term in the MOA.

 

"Project Documents" means the Building Contract, any Sub-Charter and the Management Agreements.

 

"Purchase Obligation Date" means the date on which the Owners shall transfer the legal and beneficial interest in the Vessel to the Charterers, and the Charterers shall purchase the Vessel, being the last day of the Charter Period.

 

"Purchase Obligation Price" means an amount equal to the aggregate as of the Purchase Obligation Date of (i) $100, (ii) any Break Costs, applicable only if this Charter is extended or terminated pursuant to Clauses 44 (Hire), 54 (Termination Events), 60 (Sale of the Vessel by the Owners) and 61 (Total Loss) and (iii) all other amounts payable under this Charter and the other Transaction Documents together with any applicable interest thereon.

 

"Purchase Option Date" has the meaning given to it in Clause 59 (Purchase option, purchase obligation and transfer of title).

 

"Purchase Option Price" means the amount due and payable by the Charterers to the Owners pursuant to Clause 59 (Purchase option, purchase obligation and transfer of title), being the aggregate of:

 

 

(a)

all Variable Hire accrued but unpaid under this Charter up to and including the Purchase Option Date;

 

 

(b)

the Cost Balance prevailing as at the Purchase Option Date (for the purpose of this definition, the “Applicable Cost Balance”); and

 

 

(c)

a prepayment fee in the amount of:

 

10

 

 

(i)

if the purchase option is exercised after the first anniversary of the Actual Delivery Date but on or before the third anniversary of the Actual Delivery Date, two per cent (2%) of the Applicable Cost Balance; or

 

 

(ii)

if the purchase option is exercised after the third anniversary of the Actual Delivery Date (and before the natural expiration of this Charter), point five per cent (0.5%) of the Applicable Cost Balance;

 

 

(d)

all Unpaid Sums due and payable together with interest accrued thereon pursuant to Clause 44.4 (Hire) from the due date for payment thereof up to the date of actual payment; and

 

 

(e)

any and all Break Costs (including any Break Costs under the Finance Documents) (excluding swap related expenses),

 

provided that if the Purchase Option Date is not a Hire Payment Date, a pro-rated amount of the Variable Hire paid on the immediately preceding Hire Payment Date for the period starting from the day after the Purchase Option Date until the end of that Hire Period shall be deducted from the Purchase Option Price.

 

"Purchase Price" has the meaning given to such term in the MOA.

 

"Quotation Day" means in relation to any period for which a Variable Hire or an interest rate is to be determined, the day falling five (5) Business Days before the first day of that period.

 

“Relevant Interbank Market” means the London interbank market or in the case of any Replacement Benchmark, any applicable replacement interbank market.

 

“Relevant Nominating Body” means any applicable central bank, regulator or other supervisory authority or a group of them, or any working group or committee sponsored or chaired by, or constituted at the request of, any of them or the Financial Stability Board.

 

"Remittance Conditions" means the conditions set out in paragraph (a) of Clause 40 (Remittance Conditions).

 

“Replacement Benchmark means a benchmark rate which is:

 

 

(a)

formally designated, nominated or recommended as the replacement for a Screen Rate by:

 

 

(i)

the administrator of that Screen Rate (provided that the market or economic reality that such benchmark rate measures is the same as that measured by that Screen Rate); or

 

 

(ii)

any Relevant Nominating Body,

 

and if replacements have, at the relevant time, been formally designated, nominated or recommended under both paragraphs, the "Replacement Benchmark" will be the replacement under paragraph (ii) above;

 

 

(b)

in the opinion of the Owners, generally accepted in the international or any relevant domestic syndicated loan markets as the appropriate successor to that Screen Rate; or

 

 

(c)

in the opinion of the Owners, an appropriate successor to a Screen Rate.

11

 

 

"Requisition Compensation" means all compensation or other money which may from time to time be payable to the Charterers as a result of the Vessel being requisitioned for title or in any other way compulsorily acquired (other than by way of requisition for hire).

 

"Restricted Party" means a person or entity that is (i) listed on, or owned or controlled by a person listed on, or acting on behalf of a person listed on, any Sanctions List; (ii) a national of, 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 (iii) otherwise a target of Sanctions ("target of Sanctions" signifying a person with whom a US person or other national of Sanctions Authority would be prohibited or restricted by law from engaging in trade, business or other activities).

 

"Sanctioned Country" means a country or territory whose government is the target of Sanctions or that is subject to comprehensive country-wide or territory-wide Sanctions.

 

"Sanctions" means the economic sanction laws, regulations, embargoes or restrictive measures administered, enacted or enforced by: (i) the United States government; (ii) the United Nations; (iii) the European Union or its Member States, including, without limitation, the United Kingdom; (iv) the People's Republic of China; or (v) the respective governmental institutions and agencies of any of the foregoing, including, without limitation, the Office of Foreign Assets Control of the US Department of Treasury ("OFAC"), the United States Department of State and Her Majesty's Treasury ("HMT"); (together, the "Sanctions Authorities").

 

"Sanctions List" means the "Specially Designated Nationals and Blocked Persons" list maintained by the OFAC, the Consolidated List of Financial Sanctions Targets and the Investment Ban List maintained by HMT, or any similar list maintained by, or public announcement of Sanctions designation made by, any of the Sanctions Authorities.

 

"Screen Rate" means the London interbank offered rate administered by ICE Benchmark Administration Limited (or any other person which takes over the administration of that rate) for US Dollars for 3-month period displayed (before any correction, recalculation or republication by the administrator) on page LIBOR01 of the Thomson Reuters screen (or any replacement Thomson Reuters page which displays that rate) or on the appropriate page of such other information service which publishes that rate from time to time in place of Thomson Reuters. If such page or service ceases to be available, the Owners may specify another page or service displaying the relevant rate.

 

“Screen Rate Replacement Event” means, in relation to a Screen Rate:

 

 

(a)

the methodology, formula or other means of determining that Screen Rate has, in the opinion of the Owners, materially changed;

 

 

(b)

 

 

 

(i)

 

 

 

(A)

the administrator of that Screen Rate or its supervisor publicly announces that such administrator is insolvent; or

 

 

(B)

information is published in any order, decree, notice, petition or filing, however described, of or filed with a court, tribunal, exchange, regulatory authority or similar administrative, regulatory or judicial body which reasonably confirms that the administrator of that Screen Rate is insolvent,

12

 

 

provided that, in each case, at that time, there is no successor administrator to continue to provide that Screen Rate;

 

 

(ii)

the administrator of that Screen Rate publicly announces that it has ceased or will cease, to provide that Screen Rate permanently or indefinitely and, at that time, there is no successor administrator to continue to provide that Screen Rate;

 

 

(iii)

the supervisor of the administrator of that Screen Rate publicly announces that such Screen Rate has been or will be permanently or indefinitely discontinued; or

 

 

(iv)

the administrator of that Screen Rate or its supervisor announces that that Screen Rate may no longer be used; or

 

 

(c)

the administrator of that Screen Rate determines that that Screen Rate should be calculated in accordance with its reduced submissions or other contingency or fallback policies or arrangements and either:

 

 

(i)

the circumstance(s) or event(s) leading to such determination are not (in the opinion of the Owners) temporary; or

 

 

(ii)

that Screen Rate is calculated in accordance with any such policy or arrangement for a period no less than the Screen Rate Contingency Period; or

 

 

(d)

in the opinion of the Owners, that Screen Rate is otherwise no longer appropriate for the purposes of calculating interest under this Charter.

 

"Security Interest" means a mortgage, charge, assignment, pledge, lien, or other security interest securing any obligation of any person or any other agreement or arrangement having a similar effect.

 

"Security Documents" means, in relation to the Vessel, the following:

 

 

(a)

the Charter Guarantee;

 

 

(b)

the Charterers' Assignment;

 

 

(c)

the Group Charterer's Assignment;

 

 

(d)

the Manager's Undertaking(s);

 

 

(e)

the Account Charge;

 

 

(f)

the Group Charterer's Account Charge;

 

 

(g)

the Shares Pledge;

 

 

(h)

(if applicable) any Subordination Agreement; and

 

 

(i)

any other document that may at any time be executed by any person creating, evidencing or perfecting any Security Interest to secure all or part of the Obligors' obligations under or in connection with the Transaction Documents,

 

and "Security Document" means any one of them.

 

"Settlement Date" means, following a Total Loss of the Vessel, the earliest of:

 

13

 

 

(a)

the date which falls 180 days after the date of occurrence of the Total Loss or, if such date is not a Business Day, the immediately preceding Business Day; and

 

 

(b)

the date on which the Owners receive the Total Loss Proceeds in respect of the Total Loss.

 

“Shares Pledge” means the deed of charge in respect of the shares in the Charterers executed or to be executed by the Charter Guarantor in favour of the Owners.

 

"SMC" means a valid safety management certificate issued for the Vessel by or on behalf of the Administration under paragraph 13.7 of the ISM Code.

 

"Specified Time" means 11:00 a.m. (London time) on the Quotation Day.

 

"Sub-Charter" means the Group Charter, the First Initial Sub-Charter or any other sub-charter (including any Subsequent Initial Sub-Charter) where approval is needed in accordance with Clause 51.

 

"Sub-Charterer" means an Initial Sub-Charterer or any other sub-charterer under a Sub- Charter (including the Group Charterer).

 

"Subsidiary" means a subsidiary within the meaning of section 1159 of the UK Companies Act 2006.

 

"Subordination Agreement" means a subordination agreement entered into or to be entered into by the relevant subordinated creditor, the Charterers and the Owners in agreed form.

 

"Tax" or "tax" means any present and future tax (including, without limitation, value added tax, consumption tax or any other tax in respect of added value or any income), levy, impost, duty or other charge or withholding of any nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same); and "Taxes", "taxes", "Taxation" and "taxation" shall be construed accordingly.

 

"Termination" means the termination at any time of the chartering of the Vessel under this Charter.

 

"Termination Event" means each of the events specified in Clause 54.1 (Termination Events).

 

"Termination Notice" means a written notice issued by the Owners to the Charterers in accordance with Clause 44.6 (Hire) or Clause 54.3 (Termination Events).

 

"Termination Payment Date" means:

 

 

(a)

in respect of a termination of this Charter in accordance with Clause 44.6 (Hire), the date specified in the Termination Notice served on the Charterers pursuant to that Clause having regard to the various remedy periods;

 

 

(b)

in respect of a Default Termination, the date specified in the Termination Notice served on the Charterers pursuant to Clause 54.3 (Termination Events) in respect of such Default Termination, which shall not be earlier than sixty (60) days after the date of such Termination Notice; and

 

 

(c)

in respect of a Total Loss Termination, the Settlement Date in respect of the Total Loss which gives rise to such Total Loss Termination.

 

"Termination Sum" means, in relation to a Termination Payment Date, the aggregate of:

 

14

 

 

(a)

all Variable Hire accrued but unpaid under this Charter up to and including the relevant Termination Payment Date;

 

 

(b.)

the Cost Balance prevailing as at the relevant Termination Payment Date (for the purpose of this definition, the “Applicable Cost Balance”);

 

 

(c)

all liabilities, losses costs and expenses (including, without limitation, legal fees) so incurred or suffered directly by the Owners in relation to repossessing the Vessel, any Termination Event which has occurred and/or terminating this Charter including, without prejudice to the generality of the foregoing, all liabilities, costs and expenses so incurred in recovering possession of, and in moving, storing, insuring and maintaining the Vessel and in carrying out any works or modifications required to cause the Vessel to conform with the provisions of Clause 47 in respect of redelivery of the Vessel under this Charter, together with interest accrued thereon pursuant to Clause 44.4 (Hire) from the date on which the relevant loss etc. was suffered by the Owners until the date of actual payment or reimbursement thereof (both before and after any relevant judgment or winding-up of the Charterers));

 

 

(d)

any and all Break Costs (including any Break Costs under the Finance Documents) (excluding swap related expenses);

 

 

(e)

all Unpaid Sums due and payable together with interest accrued thereon pursuant to Clause 44.4 (Hire) from the due date for payment thereof up to the date of actual payment; and

 

 

(f)

a fee in the amount of:

 

 

(i)

if the relevant Termination Payment Date falls on or before the first anniversary of the Actual Delivery Date, five per cent (5%) of the Applicable Cost Balance;

 

 

(ii)

if the relevant Termination Payment Date falls after the first anniversary of the Actual Delivery Date but on or before the third anniversary of the Actual Delivery Date, two per cent (2%) of the Applicable Cost Balance; or

 

 

(iii)

if the relevant Termination Payment Date falls after the third anniversary of the Actual Delivery Date (and before the natural expiration of this Charter), point five per cent (0.5%) of the Applicable Cost Balance,

 

provided that this paragraph (f) shall not apply to the calculation of Termination Sum payable under the following provisions:

 

 

(A)

Clause 44.6 (Hire), whereby it becomes unlawful or it is prohibited for the Owners to charter the Vessel pursuant to this Charter;

 

 

(B)

Clause 54.1(u) (Sanctions), whereby the occurrence of a Termination Event under this provision is attributable solely to the due performance and compliance by the Group Charterer and the relevant Initial Sub-Charterer of any provision of the First Initial Charter relating to Sanctions; or

 

 

(C)

Clause 61.3 (Total Loss).

 

"Third Parties Act" means the Contracts (Rights of Third Parties) Act 1999.

 

"Title Transfer PDA" means the protocol of delivery and acceptance in relation to the Vessel to be executed between the Owners and the Charterers, substantially in the form contained in Schedule 2 (Form of Title Transfer Protocol of Delivery and Acceptance) hereto.

 

"Total Loss" means during the Charter Period:

 

15

 

 

(a)

actual or constructive or compromised or agreed or arranged total loss of the Vessel;

 

 

(b)

the requisition for title or compulsory acquisition of the Vessel by any government or other competent authority (other than by way of requisition for hire); or

 

 

(c)

the capture, seizure, arrest, detention, hijacking, theft, condemnation as prize, confiscation or forfeiture of the Vessel (not falling within paragraph (b) of this definition), unless the Vessel is released and returned to the possession of the Owners or the Charterers within ninety (90) days after the capture, seizure, arrest, detention, hijacking, theft, condemnation as prize, confiscation or forfeiture in question,

 

and for the purpose of this Charter, (i) an actual Total Loss of the Vessel shall be deemed to have occurred at the date and time when the Vessel was lost but if the date of the loss is unknown the actual Total Loss shall be deemed to have occurred on the date on which the Vessel was last reported, (ii) a constructive Total Loss shall be deemed to have occurred at the date and time at which a notice of abandonment of the Vessel is given to the insurers of the Vessel and (iii) a compromised, agreed or arranged Total Loss shall be deemed to have occurred on the date of the relevant compromise, agreement or arrangement.

 

"Total Loss Proceeds" means the proceeds of the Insurances or any other compensation of any description in respect of a Total Loss.

 

"Total Loss Termination" means a termination of the Charter Period pursuant to the provisions of Clause 61 (Total Loss).

 

"Transaction Documents" means, together, this Charter, the MOA, the Security Documents, and such other documents as maybe designated as such by the Owners from time to time.

 

"Unpaid Sum" means any sum due and payable but unpaid by any Obligor under the Transaction Documents.

 

"US Dollars", "Dollars", "USD", "US$" and "$" each means available and freely transferable and convertible funds in lawful currency of the United States of America.

 

"US Tax Obligor" means:

 

 

(a)

an Obligor which is resident for tax purposes in the United States of America; or

 

 

(b)

an Obligor some or all of whose payments under the Transaction Documents to which it is a party are from sources within the United States for US federal income tax purposes.

 

"Valuation Report" means, in relation to the Vessel, a valuation report of the Vessel addressed to the Owners from an Approved Broker.

 

“Variable Hire” has the meaning given to it in Clause 44.1(b).

 

"Vessel" means the crude oil tanker named m.v. “ECO OCEANO CA” which is currently under construction by the Builder as more particularly described in Boxes 5 (Vessel's name, call sign and flag) to 10 (Classification Society) of this Charter.

 

33.

INTERPRETATIONS

 

 

(a)

In this Charter, unless the context otherwise requires, any reference to:

 

 

(i)

this Charter include the Schedules hereto and references to Clauses and Schedules are, unless otherwise specified, references to Clauses of and Schedules to this Charter and, in the case of a Schedule, to such Schedule as incorporated in this Charter as substituted from time to time;

16

 

 

 

(ii)

any statutory or other legislative provision shall be construed as including any statutory or legislative modification or re-enactment thereof, or any substitution therefor;

 

 

(iii)

the term "Vessel" includes any part of the Vessel;

 

 

(iv)

the "Owners", the "Charterers", any "Obligor", "Sub-Charterer" or any other person include any of their respective successors, permitted assignees and permitted transferees;

 

 

(v)

any agreement, instrument or document include such agreement, instrument or document as the same may from time to time be amended, modified, supplemented, novated or substituted;

 

 

(vi)

the "equivalent" in one currency (the "first currency") as at any date of an amount in another currency (the "second currency") shall be construed as a reference to the amount of the first currency which could be purchased with such amount of the second currency at the spot rate of exchange quoted by the People's Bank of China at or about 11:00 a.m. two (2) Business Days (being a day other than a Saturday or Sunday on which banks and foreign exchange markets are generally open for business in Beijing) prior to such date for the purpose of the first currency with the second currency for delivery and value on such date;

 

 

(vii)

"hereof", "herein" and "hereunder" and other words of similar import means this Charter as a whole (including the Schedules) and not any particular part hereof;

 

 

(viii)

"law" includes common or customary law and any constitution, decree, judgment, legislation, order, ordinance, regulation, rule, statute, treaty or other legislative measure in any jurisdiction or any present or future directive, regulation, request or requirement, or official or judicial interpretation of any of the foregoing, in each case having the force of law and, if not having the force of law, in respect of which compliance is generally customary;

 

 

(ix)

the word "person" or "persons" or to words importing persons include, without limitation, any state, divisions of a state, government, individuals, partnerships, corporations, ventures, government agencies, committees, departments, authorities and other bodies, corporate or unincorporated, whether having distinct legal personality or not;

 

 

(x)

the "winding-up", "dissolution", "administration", "liquidation", "insolvency", "reorganisation", "readjustment of debt", "suspension of payments", "moratorium" or "bankruptcy" (and their derivatives and cognate expressions) of any person shall each be construed so as to include the others and any equivalent or analogous proceedings or event under the laws of any jurisdiction in which such person is incorporated or any jurisdiction in which such person carries on business;

 

 

(xi)

"protection and indemnity risks" means the usual risks covered by a protection and indemnity association which is a member of the International Group of P&I Club, including pollution risks, extended passenger cover and the proportion (if any) of any sums payable to any other person or persons in case of collision which are not recoverable under the hull and machinery policies by reason of the incorporation in them of clause 6 of the International Hull Clauses (1/11/02 or 1/11/03), clause 8 of the Institute Time Clauses (Hull)(1/10/83) or clause 8 of the Institute Time Clauses (Hulls)(1/11/1995) or the Institute Amended Running Down Clause (1/10/71) or any equivalent provision;

17

 

 

 

(xii)

a Potential Termination Event is "continuing" if it has not been remedied or waived, and a Termination Event is “continuing” is if it has not been waived; and

 

 

(xiii)

words denoting the plural number include the singular and vice versa.

 

 

(b)

Headings are for the purpose of reference only, have no legal or other significance, and shall be ignored in the interpretation of this Charter.

 

 

(c)

A time of day (unless otherwise specified) is a reference to Beijing time.

 

34.

BACKGROUND

 

 

(a)

By the MOA, the Owners have agreed to purchase the Vessel from the Charterers subject to the terms and conditions therein.

 

 

(b)

Accordingly the parties hereby agree that the Owners' obligation to charter the Vessel to the Charterers under this Charter is subject to the effective transfer of ownership of the Vessel from the Charterers to the Owners pursuant to the MOA.

 

35.

INTENTIONALLY OMITTED

 

36.

DELIVERY

 

36.1

The obligation of the Owners to charter and deliver the Vessel to the Charterers hereunder is conditional upon:

 

 

(a)

the delivery of the Vessel to the Charterers by the Builder and acceptance of the Vessel by the Charterers pursuant to the Building Contract;

 

 

(b)

the simultaneous delivery of the Vessel to the Owners (in their capacity as buyers) by the Charterers (in their capacity as sellers) and acceptance of the Vessel by the Owners (in their capacity as buyers) pursuant to the MOA; and

 

 

(c)

the satisfaction of the conditions precedent set out in Clause 40 below and, in addition;

 

 

(i)

the representations and warranties contained in Clause 51 being true and correct on the Actual Delivery Date (unless otherwise specified);

 

 

(ii)

no Potential Termination Event or Termination Event having occurred which is continuing as at the Actual Delivery Date; and

 

 

(iii)

delivery occurring on or before the Cancelling Date,

 

whereupon the Charterers shall be deemed to have simultaneously accepted and taken delivery of the Vessel (without reservation) under this Charter whether or not the Charterers takes actual physical possession and/or use of the Vessel on the Actual Delivery Date.

 

36.2

On delivery, as evidence of the commencement of the Charter Period, the Parties shall sign the PDA. Nevertheless, the Charterers shall be deemed to have accepted the Vessel under this Charter, and the commencement of the Charter Period having started, on the Actual

18

 

 

Delivery Date even if, for whatever reason, the PDA is not signed and/or the Charterers do not take actual possession of the Vessel at that time.

 

37.

INTENTIONALLY OMITTED

 

38.

TERMS OF DELIVERY

 

38.1

The Charterers shall not be entitled for any reason whatsoever to refuse to accept delivery of the Vessel under this Charter once the Vessel has been delivered to an accepted by the Owners (in their capacity as buyers) from the Charterers (in their capacity as sellers) under the MOA, and the Charterers hereby acknowledge and agree that the Owners make no condition, term, representation, warranty, covenant, agreement or declaration, express or implied (and whether statutory or otherwise) as to the seaworthiness, merchantability, condition, design, operation, performance, class, capacity or fitness for use or as to the eligibility of the Vessel for any particular trade or operation or any other condition, term, representation or warranty whatsoever, express or implied, with respect to the Vessel. Acceptance of delivery by the Charterers or (as the case may be) deemed delivery of the Vessel to the Charterers under this Charter shall be irrevocable, final and conclusive proof and evidence that, for the purposes of the obligations and liabilities of the Owners hereunder or in connection herewith, the Vessel is at that time seaworthy, in accordance with the provisions of this Charter, in good working order and repair.

 

38.2

The Charterers hereby waive all their rights in respect of any condition, term, representation or warranty express or implied (and whether statutory or otherwise) on the part of the Owners and all their claims against the Owners howsoever and whenever the same may arise in respect of the Vessel or arising out of the operation or performance of the Vessel and the chartering thereof under this Charter (including in respect of the seaworthiness, condition, design, operation, fitness for use or otherwise with respect to the Vessel). In particular, and without prejudice to the generality of the foregoing, the Owners shall be under no liability whatever and howsoever arising in relation to any injury, death, loss, damage or delay of, or to, or in connection with the Vessel or any person or property whatsoever, whether on board the Vessel or elsewhere, irrespective of whether such injury, death, loss, damage or delay shall arise from the unseaworthiness of or any defect in the Vessel. For the purposes of this Clause “delay” shall include delay in relation to the Vessel. (whether in respect of delivery of the Vessel to the Charterers under this Charter or otherwise) or any other delay whatsoever. The Charterers acknowledge that no representation has been made or will be made by or on behalf of the Owners in relation to the Vessel or any part thereof.

 

To the extent permissible under applicable law, the Charterers also waive any rights which they may have in tort in respect of any of the matters referred to above in this Clause 38.2 excluding tort due to wilful misconduct or gross negligence and irrevocably agrees that the Owners shall have no greater liability in tort in respect of any such matter than it would have in contract after taking account of all the foregoing exclusions. No third party making any representation or warranty relating to the Vessel or any part of the Vessel is the agent or partner of the Owners nor has any such third party authority to bind the Owners thereby.

 

38.3

The Charterers agree that the Owners shall be under no liability to supply any replacement vessel or any piece or part thereof during any period when the Vessel is unusable or becomes a Total Loss and shall not be liable to the Charterers or any other person as a result of the Vessel being unusable or a Total Loss.

 

38.4

None of the Owners or their respective shareholders, affiliates, subsidiaries, consultants, agents and their respective shareholders, directors, officers, employees, or representatives shall be liable to the Charterers (including any of its assigns, novatees, successors, shareholders, affiliates, subsidiaries, consultants, agents, managers, clients and their respective shareholders, directors, officers, employees, or representatives) for (i) indirect, special, exemplary, punitive or consequential losses and damages, arising from, or relating to or in connection with this Charter (ii) and to the extent not covered by (i) above, the following, whether direct or indirect loss of profit, loss of production, loss of revenue, loss of time, loss of contracts or otherwise, in each case irrespective of cause (by contract, by law, in tort or otherwise) and notwithstanding the negligence, misconduct or breach (whether contractual, statutory or otherwise) save for (in each case) resulting from the gross negligence of wilful misconduct of such indemnified parties.

19

 

 

39.

CANCELLATION

 

If:

 

 

(a)

the Vessel is not delivered by the Charterers as sellers to the Owners as buyers under the MOA by the Cancelling Date (or such later date as the parties to the MOA may agree); or

 

 

(b)

the MOA expires, is cancelled, terminated, rescinded or suspended or otherwise ceases to remain in full force and effect for any reason (in whole or in part),

 

then this Charter shall immediately terminate and be cancelled, provided that the Owners shall be entitled to retain all fees paid by the Charterers pursuant to Clause 58 (Transaction Fees), Clause 62 (Additional payment obligations) and Clause 65 (Further indemnities) (and without prejudice to the said Clauses but if such fees have not been paid but are due and payable, the Charterers shall forthwith pay such fees to the Owners in accordance therewith) and such payment shall be irrevocable and unconditional and is acknowledged by the Charterers to be proportionate as to amount, having regard to the legitimate interest of the Owners, in protecting against the Owners’ risk of the Charterers failing to perform its obligations under this Charter. For the avoidance of doubt, the termination of the Charter shall not prejudice the operation of any provision of any Transaction Document which is expressed to survive the termination or cancelling of this Charter.

 

40.

CONDITIONS PRECEDENT

 

 

(a)

Remittance Conditions

 

Notwithstanding anything to the contrary in this Charter, the obligations of the Owners to preposition the Delivery Payment (Builder) with the Builder’s Bank and to remit the Delivery Payment (Sellers) with the Sellers' Bank, in each case pursuant to the MOA, to purchase and take delivery of the Vessel pursuant to the MOA and to charter the Vessel to the Charterers under this Charter are subject to and conditional upon the Owners' receipt of the following documents and evidence (in each case in form and substance acceptable to the Owners) not later than three (3) Business Days prior to the Prepositioning Date (or such other date as the Owners and the Charterers may agree):

 

 

(i)

an original of each of the following:

 

 

(A)

the duly executed Charter;

 

 

(B)

the duly executed MOA;

 

 

(C)

the duly executed Charter Guarantee;

 

 

(D)

the duly executed Shares Pledge;

 

 

(E)

(if applicable) the duly executed Subordination Agreement(s); and

 

 

(F)

the duly executed Account Charge;

 

20

 

 

(G)

all documents required by any of the Security Documents set out above, including but not limited to the notices and acknowledgement required under such Security Documents;

 

 

(ii)

agreed forms of the Charterer’s Assignment, the Group Charterer's Assignment and the Manager’s Undertaking(s);

 

 

(iii)

certified true copies of the constitutional documents (including but not limited to the articles of incorporation and bylaws (or equivalent documents)) (and all amendments thereto) of each Obligor and any other documents required to be filed or registered or issued under the laws of their jurisdiction of incorporation to establish their incorporation, together with any up-to-date corporate certificate to be issued by the competent authority of their jurisdiction which may be required by the Owners’ legal advisers for the purpose of issuing their legal opinions;

 

 

(iv)

certified true copies of written resolutions or (as the case may be), resolutions passed at separate meetings, in each case, of the board of directors and (if required by any legal advisors to the Owners) shareholders of each Obligor (or its sole member or general partners), evidencing its approval of the Transaction Documents and the Project Documents to which it is a party and authorising appropriate officers or attorneys to execute the same and to sign all notices required to be given hereunder or thereunder on its behalf or other evidence of such approvals and authorisations as shall be acceptable to the Owners;

 

 

(v)

if applicable, the original power of attorney of each Obligor under which any documents (including the Transaction Documents and Project Documents to which it is a party) are to be executed or transactions undertaken by that party;

 

 

(vi)

a certified list specifying the directors and officers of the Obligor (together with their respective specimen signatures);

 

 

(vii)

a certificate of an officer or authorized signatory of each Obligor certifying that each copy document relating to it specified in this Clause is correct, complete and in full force and effect as at the date of such certificate;

 

 

(viii)

if applicable, copies of all governmental and other consents, licences, approvals and authorisations as may be necessary to authorise the performance by each Obligor of its obligations under the Transaction Documents and Project Documents to which it is a party, and the execution, validity and enforceability of such Transaction Documents and Project Documents;

 

 

(ix)

certified copies of each of the duly executed Building Contract, Group Charter and Management Agreements, in each case together with all addenda, amendments or supplements;

 

 

(x)

evidence that the fees, costs and expenses then due from the Charterers pursuant to the MOA, this Charter (including the Handling Fee, and fees and expenses under Clauses 62 (Additional payment obligations) and 65 (Further indemnities)) have been paid or will be paid at such time as is agreed with the Owners;

 

 

(xi)

certified copy of a letter issued by the Builder stating that all amounts due and payable to the Builder under the Contract (other than the Building Contract Delivery Instalment) have been paid and that no other disputes or pending claims exist under the Building Contract;

 

21

 

 

(xii)

certified copy of the Builder’s notice under the Building Contract requesting payment of the Building Contract Delivery Instalment;

 

 

xiii.

(if applicable) evidence that the Charterers have paid, or made necessary arrangements to pay, the Delivery Shortfall to the Builder in accordance with paragraph (d) of clause 19 of the MOA;

 

 

(xiv)

agreed forms of legal opinions to be issued by legal advisers to the Owners in the following jurisdictions, each in form and substance satisfactory to and agreed by the Owners (acting reasonably) (or confirmation satisfactory to the Owners that such an opinion will be given):

 

 

(A)

England and Wales;

 

 

(B)

the Republic of the Marshall Islands;

 

 

(C)

the Netherlands;

 

 

(D)

Switzerland; and

 

 

(E)

such other jurisdictions as the Owners may reasonably consider necessary;

 

 

(xv)

evidence that the Vessel is (or will on the Actual Delivery Date) be insured in the manner required by the Transaction Documents;

 

 

(xvi)

agreed forms of letters of undertaking and certificates of entry (as the case may be) relating to insurances as set out in Clause 45 from the relevant insurer, insurance broker, protection and indemnity association or war risks association (as the case may be);

 

 

(xvii)

agreed form of the insurance report by an insurance advisor appointed by the Owners (but at the cost of the Charterers); and

 

 

(xviii)

two (2) Valuation Reports for calculation of the Initial Market Value made in accordance with Clause 52.30(a), dated no more than thirty (30) days prior to the Actual Delivery Date.

 

 

(b)

Delivery Conditions

 

Notwithstanding anything to the contrary in this Charter, the obligations of the Owners to release the Delivery Payment (Builder) to the Builder’s Bank and to remit the Delivery Payment (Sellers) to the Sellers' Bank in accordance with clause 19(b) of the MOA, to purchase and take delivery of the Vessel pursuant to the MOA and to charter the Vessel to the Charterers under this Charter are subject to and conditional upon the Owners' receipt of following documents and evidence (in each case in form and substance acceptable to the Owners) on or before the Actual Delivery Date (or such other date as the Owners and the Charterers may agree):

 

 

(i)

originals of the duly executed Charterers’ Assignment, the Group Charterer's Assignment and Manager’s Undertakings and all documents required by such Security Documents, including but not limited to the notices and acknowledgement required under such Security Documents, except for the following which will be provided to the Owners in accordance with Clause 82 (Conditions subsequent):

 

22

 

 

(A)

the letters of undertaking from the insurers, underwriters, protection and indemnity clubs and association which will be provided to the Owners, which will be required under the Charterers' Assignment;

 

 

(B)

the Group Charterer's Account Charge and all documents required by such Security Document; and

 

 

(C)

the acknowledgment by the relevant Initial Sub-Charterers to the assignment of the First Initial Sub-Charter, which will be required under the Group Charterer's Assignment;

 

 

(ii)

certified copies of:

 

 

(A)

the Approved Managers' current Document of Compliance (as such term is defined pursuant to the ISM Code);

 

 

(B)

(to the extent available) the Vessel's current IAPPC; and

 

 

(C)

a copy of the Vessel's classification confirmation certificate evidencing that it is free of all overdue recommendations and requirements from the Classification Society; and

 

 

(iii)

legal bill of sale in a form recordable in the Pre-Approved Flag to be executed by the Charterers, transferring title of the Vessel to the Owners and stating that the Vessel is free from all mortgages, encumbrances and maritime liens or any other debts whatsoever, duly notarially attested and legalised or apostilled, as required by the Pre-Approved Flag;

 

 

(iv)

the commercial invoice of the Vessel;

 

 

(v)

(if applicable) evidence that the Charterers have paid the Delivery Shortfall to the Builder in accordance with paragraph (d) of clause 19 of the MOA;

 

 

(vi)

evidence that the Vessel has been delivered by the Builder to the Charterers pursuant to the terms of the Building Contract, where such documents shall include, in particular:

 

 

(A)

the original notarized and if required, legalised copies of the bill of sale and builder’s certificate duly executed by the Builder (and where executed by an attorney of the Builder, together with such original notarized Builder’s power of attorney); and

 

 

(B)

the original protocol of delivery and acceptance duly executed by the Builder and the Charterers;

 

 

(vii)

any other document required to be delivered by the Builder to the Charterers (in their capacity as buyers) on delivery under the terms of the Building Contract;

 

 

(viii)

evidence that the Vessel will simultaneously upon Delivery (as defined in the MOA) be:

 

 

(A)

definitely and permanently registered in the name of the Owners under the law of the Pre-Approved Flag; and

 

 

(B)

in the absolute and unencumbered ownership of the Owners;

 

23

 

 

(ix)

evidence that the fees, costs and expenses then due from the Charterers pursuant to the MOA, this Charter (including the Handling Fee, and fees and expenses under Clauses 62 (Fees and expenses) and 65 (Further indemnities)) have been paid or will be paid at such time as is agreed with the Owners;

 

 

(x)

such other consent, licence, approval, authorisation or other document, opinion or assurance which are necessary in connection with the Obligors’ entry into and performance of the transactions contemplated by any of the Transaction Documents or for the validity and enforceability thereof (including, without limitation in relation to or for the purposes of any financing by the Owners);

 

 

(xi)

any additional documents as may be required by the competent authorities of the Pre-Approved Flag for the purpose of registering the Vessel in the Buyers’ name;

 

 

(xii)

evidence that the Vessel has been delivered by the Charterers to Group Charterer pursuant to the terms of the Group Charter; and

 

 

(xiii)

evidence that the terms of the First Initial Sub-Charter have been agreed between the Group Charterer and the relevant Initial Sub-Charterer.

 

 

(c)

If the Owners in their sole discretion agree to deliver the Vessel under this Charter to the Charterers before all of the documents and evidence required by this Clause 40 have been delivered to or to the order of the Owners, the Charterers undertake to deliver all outstanding documents and evidence to or to the order of the Owners no later than seven (7) Business Days after the Actual Delivery Date or such other date as specified by the Owners, acting in their sole discretion. The delivery of the Vessel by the Owners to the Charterers under this Charter shall not, unless otherwise notified by the Owners (acting in their sole discretion) to the Charterers in writing, be taken as a waiver of the Owners' right to require production of all the documents and evidenced required by this Clause 40.

 

41.

BUNKERS AND LUBOILS

 

41.1

At delivery the Charterers shall take over all bunkers, lubricating oil, hydraulic oil, greases, water and unbroached stores and provisions in the Vessel without cost.

 

41.2

To the extent that Clause 46 (Redelivery) applies, at redelivery the Owners shall take over all bunkers, unused lubricating oil, hydraulic oil, greases, water and unbroached provisions and other consumable stores in the Vessel without cost.

 

42.

FURTHER MAINTENANCE AND OPERATION

 

42.1

The good commercial maintenance practice under Clause 10 (Maintenance and Operation) of this Charter shall be deemed to include:

 

 

(a)

the maintenance and operation of the Vessel by the Charterers in accordance with (as the following are amended from time to time):

 

 

(i)

the relevant regulations, requirements and recommendations of the Classification Society;

 

 

(ii)

the relevant regulations, requirements and recommendations of the country and flag of the Vessel's registry;

 

24

 

 

(iii)

any applicable IMO regulations (including but not limited to the ISM Code, the ISPS Code and MARPOL);

 

 

(iv)

all other applicable laws or regulations; and

 

 

(v)

Charterers' current standard operations and maintenance manuals;

 

 

(b)

the maintenance and operation of the Vessel by the Charterers taking into account:

 

 

(i)

engine manufacturers' recommended maintenance and service schedules;

 

 

(ii)

builder's operations and maintenance manuals; and

 

 

(iii)

recommended maintenance and service schedules of all installed equipment and pipework.

 

42.2

In addition to the above, the Charterers covenant with the Owners to arrange online access to class records for the Owners as available to the Charterers.

 

42.3

Any equipment that is found not to be required on board as a result of law or regulation is either to be removed at the Charterers expense or to be maintained in operable condition.

 

42.4

The title to any equipment:

 

 

(a)

placed on board as a result of operational requirements of the Charterers shall automatically be deemed to belong to the Owners (unless hired from or belonging to a third party) immediately upon such placement, and such equipment may only be removed: (A) with the Owners' prior written consent, (B) at the Charterers' own expense, and (C) without damage to the Vessel; and

 

 

(b)

replaced, renewed or substituted shall remain with the Owners until the part or equipment which replaced it or the new or substitute part or equipment becomes property of the Owners.

 

42.5

Without prejudice to any other provisions under this Charter, the Charterers shall maintain, use and operate the Vessel with commercially reasonable care as if the Charterers were the owner of the same.

 

43.

STRUCTURAL CHANGES AND ALTERATIONS

 

43.1

Unless required by the Classification Society, compulsory legislation or pursuant to the terms of the First Initial Sub-Charter, the Charterers shall make no material structural changes in the Vessel or material changes in the machinery, engines, appurtenances or spare parts thereof without in each instance first securing the Owners' consent thereto, such consent not to be unreasonably withheld or delayed, provided that:

 

 

(a)

any such changes do not have a material adverse effect on the Vessel's certification or the Vessel's fitness for purpose;

 

 

(b)

any such changes will not materially diminish the value of the Vessel and/or have a material adverse effect on the safety, performance, value or marketability of the Vessel;

 

 

(c)

the Charterers shall bear all time, costs and expenses in relation to any such changes;

 

 

(d)

the Charterers shall furnish the Owners with:

 

 

(i)

copies of all plans in relation to such changes;

 

25

 

 

(ii)

if applicable, confirmation from the Classification Society that such changes will not adversely affect the class of the Vessel, provided always that such Classification Society agrees to issue such confirmation;

 

 

(iii)

one Valuation Report (at the Charterers' cost) on the Market Value of the Vessel after the implementation of such changes.

 

43.2

Upon the occurrence of any Termination Event which is continuing, if the Owners decide to retake possession of the Vessel, the Charterers shall at their expense restore the Vessel to its former condition unless the changes made are carried out:

 

 

(a)

to improve the performance, operation or marketability of the Vessel; or

 

 

(b)

as a result of a regulatory compliance.

 

43.3

Any improvement, structural changes or new equipment becoming necessary for the continued operation of the Vessel by reason of new class requirements or by compulsory legislation shall be for the Charterers' account and the Charterers shall not have any right to recover from the Owners any part of the cost for such improvements, changes or new equipment either during the Charter Period or, to the extent that Clause 46 (Redelivery) applies, at redelivery of the Vessel. The Charterers shall give written notice to the Owners of any such improvement, structural changes or new equipment.

 

43A.

ADVANCE HIRE

 

43A.1

In consideration of the Owners’ agreement to charter the Vessel to the Charterers pursuant to the terms hereof, the Charterers agree to pay to the Owners, on the first Hire Payment Date, the Advance Hire.

 

43A.2

The Charterers shall be deemed to have paid the Advance Hire to the Owners on the first Hire Payment Date by the Owners (as buyers under the MOA) setting off an amount equal to the Advance Hire against a corresponding amount of the Purchase Price payable by the Owners to the Charterers (as sellers) under the MOA.

 

43A.3

The Advance Hire shall not bear interest and shall be non-refundable.

 

44.

HIRE

 

44.1

In consideration of the Owners' agreement to charter the Vessel to the Charterers pursuant to the terms hereof, the Charterers agree to pay to the Owners Hire in advance on each Hire Payment Date, which shall comprise:

 

 

(a)

a fixed component (the “Fixed Hire”) which shall consist of forty (41) instalments, namely the Balloon Amount plus forty (40) instalments which each such instalment shall be calculated by (i) deducting the Balloon Amount from the Owners' Cost and (ii) dividing the difference by forty (40) (and, for the avoidance of doubt, the fortieth (40th) instalment shall be paid on the second last Hire Payment Date and the last instalment (being the Balloon Amount) shall be paid on the last Hire Payment Date); and

 

 

(b)

a variable component (the “Variable Hire”) which shall be calculated by applying the aggregate of (i) the applicable Interest Rate for the relevant Hire Period and (ii) the Margin, to the Cost Balance prevailing on such Hire Payment Date (which, for the purpose of the calculation of the Variable Hire, shall not be reduced by the Fixed Hire payable on such Hire Payment Date) for the actual number of days during the relevant Hire Period.

 

44.2

The Parties hereby agree that:

 

26

 

 

(a)

once the Owners' Cost is confirmed or upon any adjustment of the Fixed Hire (including the Balloon Amount) pursuant to the terms of this Charter, the Owners shall within reasonable time deliver to the Charters a Hire Payment Schedule at such time (including, without limitation, the Owners' Cost, the Fixed Hire (including the Balloon Amount) and the Cost Balance during the Agreement Period) reflecting such payment schedule and the resulting calculations for the Charterers' review and approval, which shall thereafter:

 

 

(i)

constitute the current Hire Payment Schedule; and

 

 

(ii)

save for manifest error, be conclusive evidence of the rate of Fixed Hire payable under this Charter;

 

 

(b)

for the avoidance of doubt and notwithstanding any provisions in this Clause 44 (Hire), the Charterers' obligation to pay Hire as calculated in accordance with the formula set out in Clause 44.1 above shall remain absolute and unconditional at all times, whether or not the Owners provide any Hire Payment Schedule;

 

 

(c)

all payments of Hire shall be paid in advance on each Hire Payment Date (prior to 16:00, Shanghai time) (in respect of which time is of the essence) with the first (1st) instalment falling due on the Actual Delivery Date;

 

 

(d)

any payment provided herein due on any day which is not a Business Day shall be payable on the following Business Day;

 

 

(e)

all payments under this Charter shall be made to the account notified by the Owners to the Charterers prior to the first Hire Payment Date (or such other account as the Owners may thereafter notify the Charterers from time to time) for credit to such account notified by the Owners;

 

 

(f)

following delivery of the Vessel to, and acceptance by, the Charterers under this Charter, the Vessel shall not be at any time deemed off-hire and the Charterers' obligation to pay Hire in accordance with this Clause 44 shall be absolute and unconditional under any and all circumstances and irrespective of any contingency whatsoever including but not limited to:

 

 

(i)

(except in the case of Advance Hire) any set-off, counterclaim, recoupment, defence or other right which the Charterers may have against the Owners, the Finance Parties or any other third party for any reason whatsoever including, without limitation, any act, omission or breach on the part of the Owners under this Charter or any other agreement at any time existing between the Owners and the Charterers (unless otherwise agreed between the Owners and the Charterers);

 

 

(ii)

any unavailability of the Vessel, for any reason, including but not limited to seaworthiness, value, condition, design, operation, merchantability or fitness for use or purpose of the Vessel or any apparent or latent defects in the Vessel or its machinery and equipment or the ineligibility of the Vessel for any particular use or trade or for registration of documentation under the laws of any relevant jurisdiction or lack of registration or the absence or withdrawal of any consent required under the applicable law of any relevant jurisdiction for the ownership, chartering, use or operation of the Vessel or any damage to the Vessel;

 

 

(iii)

any lack or invalidity of title or any other defect in title or any encumbrance or any dispossession of the Vessel by title paramount or otherwise;

 

27

 

 

(iv)

any failure or delay on the part of either party to this Charter, whether with or without fault on its part, in performing or complying with any of the terms, conditions or other provisions of this Charter;

 

 

(v)

any insolvency, bankruptcy, reorganisation, arrangement, readjustment of debt, dissolution, administration, liquidation or similar proceedings by or against the Owners or the Charterers or any other Obligors or any change in the constitution of the Owners or the Charterers or any other Obligors;

 

 

(vi)

any invalidity or unenforceability or lack of due authorisation of or any defect, or any failure or delay in performing or complying with any of the terms and provisions in this Charter or any of the Transaction Documents by any party to this Charter or any other person;

 

 

(vii)

any change, extension, indulgence or other act or omission in respect of any indebtedness or obligation of the Charterers, or any sale, exchange, release or surrender of, or other dealing in, any security for any such indebtedness or obligation;

 

 

(viii)

the Total Loss or any damage to or forfeiture or court marshall's or other sale of the Vessel if the Termination Sum or any part thereof remains due;

 

 

(ix)

any libel, attachment, levy, detention, sequestration or taking into custody of the Vessel or any restriction or prevention of or interference with or interruption or cessation in, the use or possession thereof by the Charterers;

 

 

(x)

any enforcement or attempted enforcement by the Owners of their rights under this Charter or any of the Transaction Documents executed or to be executed pursuant to this Charter;

 

 

(xi)

any loss of use of the Vessel due to deficiency or default or strike of officers or crew, fire, breakdown, damage, accident, defective cargo or any other cause which would or might but for this provision have the effect of terminating or in any way affecting any obligation of the Charterers under this Charter;

 

 

(xii)

any prevention, delay, deviation or disruption in the use of the Vessel resulting from the wide outbreak of any viruses (including the 2019 novel coronavirus), including but not limited to those caused by:

 

 

(A)

closure of ports;

 

 

(B)

prohibitions or restrictions against the Vessel calling at or passing through certain ports;

 

 

(C)

restriction in the movement of personnel and/or shortage of labour affecting the operation of the Vessel or the operation of the ports (including stevedoring operations);

 

 

(D)

quarantine regulations affecting the Vessel, its cargo, the crew members or relevant port personnel;

 

 

(E)

fumigation or cleaning of the Vessel; or

 

 

(F)

any claims raised by any sub-charterer or manager of the Vessel that a force majeure event or termination event (or any other analogous event howsoever called) has occurred under the relevant charter agreement or management agreement (as the case may be) of the Vessel as a result of the outbreak of such viruses; or

 

28

 

 

(xiii)

any other cause which would but for this provision have the effect of terminating or in any way affecting the obligations of the Charterers hereunder,

 

it being the intention of the parties that the provisions of this Clause 44, and the obligation of the Charterers to pay Hire and make any payments under this Charter, shall (save as expressly provided in this Clause 44) survive any frustration and that, save as expressly provided in this Charter, no moneys paid under this Charter by the Charterers to the Owners shall in any event or circumstance be repayable to the Charterers; and

 

 

(g)

all payments of Hire and all other Unpaid Sums to the Owners pursuant to this Charter and the other relevant Transaction Documents shall be made in immediately available funds in US Dollars, free and clear of, and without deduction or withholding for or on account of, any Taxes (unless otherwise agreed between the Owners and the Charterers).

 

44.3

In the event that the Charterers are required by any law or regulation to make any deduction or withholding on account of any taxes which arise as a consequence of any payment due under this Charter, then:

 

 

(a)

the Charterers shall notify the Owners promptly after they become aware of such requirement;

 

 

(b)

the Charterers shall remit the amount of such taxes to the appropriate taxation authority within three (3) Business Days or any other applicable shorter time limits and in any event prior to the date on which penalties attach thereto; and

 

 

(c)

such payment shall be increased by such amount as may be necessary to ensure that the Owners receive a net amount which, after deducting or withholding such taxes, is equal to the full amount which the Owners would have received had such payment not been subject to such taxes; and

 

 

(d)

the Charterers shall forward to the Owners evidence reasonably satisfactory to the Owners that any such taxes have been remitted to the appropriate taxation authority within thirty (30) days of the expiry of any time limit within which such taxes must be so remitted or, if earlier, the date on which such taxes are so remitted.

 

44.4

Without prejudice to sub-paragraph Clause 54.1(a) (Termination Events), if the Charterers fail to pay any amount payable by it under a Transaction Document on its due date, default interest shall accrue on a daily basis over the Unpaid Sum from the due date up to the date of actual payment (both before and after judgment) at a rate of 2% per annum above the applicable Interest Rate for the relevant Hire Period and the Margin. The Parties agree that such default rate is proportionate as to amount, having regard to the legitimate interest of the Owners, in protecting against the Owners’ risk of the Charterers failing to perform its obligations under this Charter.

 

44.5

In the event that this Charter is terminated for whatever reason, the Charterers' obligation to pay Hire, and any other Unpaid Sum which (in each case) has accrued and is due before, and which remains unpaid, at the date of such termination shall continue notwithstanding such termination.

 

44.6

In the event that it becomes unlawful or it is prohibited for either the Owners or the Charterers to charter the Vessel pursuant to this Charter, then the Owners and Charterers, if such new or changed law or regulation or such interpretation or application permit, shall notify the other party of the relevant event and negotiate in good faith for a period of thirty (30) days from the date of the receipt of the relevant notice by the other party to agree an alternative. If such agreement is not reached within such thirty (30)-day period, the Charterers agree that, in such circumstances, the Owners shall have the right to terminate this Charter by delivering to the Charterers a Termination Notice, whereupon the Charterers shall be obliged to pay to the Owners the Termination Sum in accordance with Clause 54.3 (Termination Events) and/or such other terms and conditions as may be specified in such Termination Notice and this Charter shall be terminated in accordance with Clause 54 (Termination Events).

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44.7

Subject to paragraph (c) below, the Charterers shall, within three (3) Business Days of a demand by the Owners, pay to the Owners the amount of any Increased Costs incurred by the Owners 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 Charter:

 

 

(a)

for the purpose of this Clause 44.7, "Increased Costs" means:

 

 

(i)

a reduction in the rate of return from the Hire or on the Owners' overall capital;

 

 

(ii)

an additional or increased cost; or

 

 

(iii)

a reduction of any amount due and payable under any Transaction Document,

 

which is incurred or suffered by the Owners to the extent that it is attributable to the Owners having entered into any Transaction Document or funding or performing its obligations under any Transaction Document;

 

 

(b)

the Owners shall notify the Charterers of any claim arising from this Clause (and of the event giving rise to such claim). The Owners shall, as soon as practicable after having made a demand in respect of such claim, provide a certificate confirming the amount of its Increased Costs as well as evidence supporting its calculation; and

 

 

(c)

this Clause does not apply to the extent any Increased Costs is:

 

 

(i)

compensated for by a payment made under Clause 44.3(c); or

 

 

(ii)

attributable to the wilful breach by the Owners of any law or regulation.

 

44.8

For the purpose of determining the Variable Hire:

 

 

(a)

If, in relation to any determination of the Interest Rate prior to a Screen Rate Replacement Event:

 

 

(i)

the Owners determine (which determination shall be conclusive and binding) that by reason of circumstances affecting the Relevant Interbank Market generally, adequate and fair means do not or will not exist for ascertaining LIBOR at the beginning of that Hire Period or the same does not reflect the cost of funding of the Owners; and

 

 

(ii)

the Owners determine (which determination shall be conclusive and binding) that by reason of circumstances affecting the Relevant Interbank Market generally, deposits in Dollars in the required amount for the 3-month period commencing on the first day of that Hire Period are not available to it in the Relevant Interbank Market or from whatever sources it may select to obtain funds for that Hire Period,

 

the Owners shall promptly notify the Charterers accordingly.

 

 

(b)

Immediately following the notification referred to in paragraph (a) above, the Owners and the Charterers shall negotiate in good faith with a view to agreeing upon a substitute basis for determining the Interest Rate for that Hire Period.

 

30

 

 

(c)

If a substitute basis is not so agreed pursuant to paragraph (b) above or after the occurrence of a Screen Rate Replacement Event but prior to the making of any necessary amendment or waiver in accordance with Clause (d) below, the Interest Rate shall be the rate per annum equal to the cost certified and notified by the Owners, with relevant supporting evidence available to the Owners at the relevant time (expressed as an annual rate of interest) of funding the Owners' Costs during the relevant Hire Period (as reasonably determined by the Owners).

 

 

(d)

If a Screen Rate Replacement Event has occurred in relation to the Screen Rate for dollars, the Owners are entitled to make any amendment or waiver to the terms of the Transaction Documents with the consent of the Charterers (at the Charterers' cost) which relates to:

 

 

(i)

providing for the use of a Replacement Benchmark in relation to Dollars in place of (or in addition to) that Screen Rate;

 

 

(ii)

aligning any provision of any Transaction Document to the use of that Replacement Benchmark;

 

 

(iii)

enabling that Replacement Benchmark to be used for the calculation of the Interest Rate under this Charter (including, without limitation, any consequential changes required to enable that Replacement Benchmark to be used for the purposes of this Charter);

 

 

(iv)

implementing market conventions applicable to that Replacement Benchmark;

 

 

(v)

providing for appropriate fallback (and market disruption) provisions for that Replacement Benchmark; and/or

 

 

(vi)

adjusting the pricing to reduce or eliminate, to the extent reasonably practicable, any transfer of economic value from one Party to another as a result of the application of that Replacement Benchmark (and if any adjustment or method for calculating any adjustment has been formally designated, nominated or recommended by the Relevant Nominating Body, the adjustment shall be determined on the basis of that designation, nomination or recommendation),

 

and pending any such amendment or waiver and the Replacement Benchmark being utilized under the Transaction Documents to calculate the Interest Rate, paragraph (c) above shall apply to the calculation of the Interest Rate.

 

 

(e)

If, as at 30 June 2022, this Charter provides that rate of interest for the Cost Balance in dollars is to be determined by reference to the Screen Rate for LIBOR:

 

 

(i)

a Screen Rate Replacement Event shall be deemed to have occurred on that date in relation to the Screen Rate for dollars; and

 

 

(ii)

the Owners shall enter into negotiations in good faith with a view to agreeing the use of a Replacement Benchmark in relation to dollars in place of that Screen Rate from and including a date no later than 31 December 2022.

 

45.

INSURANCE

 

45.1

During the Agreement Term, the Charterers shall at their expense keep the Vessel insured against fire and usual marine risks (including hull and machinery and excess risks), oil pollution liability risks, war and protection and indemnity risks (and any risks against which it is compulsory to insure for the operation for the Vessel) in US Dollars and in such market and on such terms as the Owners and the Finance Parties (if any) shall in writing approve in line with good shipping practice.

31

 

 

45.2

Such insurances shall be arranged by the Charterers to protect the interests of the Owners, the Charterers and (if any) the mortgagee of the Vessel or such other relevant Finance Party, and the Charterers shall be at liberty to protect under such insurances the interests of any Approved Manager.

 

45.3

Insurance policies shall cover the Owners, the Charterers and (if any) the Finance Parties according to their respective interests. Subject to the approval of the Owners (acting on the instructions or with the approval of the Finance Parties (in each case if applicable) and the insurers, the Charterers shall effect all insured repairs and shall undertake settlement and reimbursement from the insurers of all costs in connection with such repairs as well as insured charges, expenses and liabilities to the extent of coverage under the insurances herein provided for.

 

45.4

The Charterers shall also remain responsible for and to effect repairs and settlement of costs and expenses incurred thereby in respect of all other repairs not covered by the insurances and/or not exceeding any possible franchise(s) or deductibles provided for in the insurances.

 

45.5

The Charterers shall arrange that, at any time during the Agreement Term, the hull and machinery and war risks insurance shall be in an amount not less than the greater of:

 

 

(a)

an amount which equals one hundred and twenty per cent (120%) of the then current Cost Balance; and

 

 

(b)

the then current Market Value of the Vessel.

 

45.6

The terms of the hull and machinery insurance and the identity of the insurers shall be acceptable to the Owners and (if any) the Finance Parties. The Vessel shall be entered in a P&I Club which is a member of the International Group Association on customary terms and shall be covered against liability for pollution claims in an amount not less than one billion US Dollars (US$1,000,000,000). The P&I cover shall be placed with a P&I Club acceptable to the Owners and (if any) the Finance Parties. All insurances shall include customary protection in favour of the Owners and (if any) the Finance Parties as notice of cancellation and exclusion from liability for premiums or calls. The insurance policies or cover notes for the hull and machinery insurance shall name the Owners as co-assured, endorsing its rights and interests. The Owners shall be entered as a member for the P&I cover and war risks insurance.

 

45.7

The Charterers:

 

 

(a)

undertake to place the Insurances in such markets, in such currency, on such terms and conditions, and with such brokers, underwriters and associations as the Owners and, if applicable, the Finance Parties shall have previously approved in writing such approval not be unreasonably withheld; and

 

 

(b)

shall not alter the terms of any of the Insurances nor allow any person (except the Approved Manager) to be co-assured under any of the Insurances without the prior written consent of the Owners and, if applicable, the Finance Parties, and will supply the Owners and, if applicable, the Finance Parties from time to time on request with such information as the Owners and, if applicable, any Finance Party may in their discretion require with regard to the Insurances and the brokers, underwriters or associations through or with which the Insurances are placed.

 

45.8

The Charterers undertake duly and punctually to pay all premiums, calls and contributions, and all other sums at any time payable in connection with the Insurances, and, at their own expense, to arrange and provide any guarantees from time to time required by any protection and indemnity or war risks association. The Charterers shall provide the Owners and/or such Finance Party with (i) copies of all invoices issued by the brokers, underwriters or associations in respect of such premiums calls, contributions and other sums, and (ii) evidence satisfactory to the Owners and/or such Finance Party that such premiums, calls, contributions and other sums have been duly and punctually paid; that any such guarantees have been duly given; and that all declarations and notices required by the terms of any of the Insurances to be made or given by or on behalf of the Charterers to brokers, underwriters or associations have been duly and punctually made or given.

32

 

 

45.9

The Charterers will comply in all respects with all terms and conditions of the Insurances and will make all such declarations to brokers, underwriters and associations as may be required to enable the Vessel to operate in accordance with the terms and conditions of the Insurances. The Charterers will not do, nor permit to be done, any act, nor make, nor permit to be made, any omission, as a result of which any of the Insurances may become liable to be suspended, cancelled or avoided, or may become unenforceable, or as a result of which any sums payable under or in connection with any of the Insurances may be reduced or become liable to be repaid or rescinded in whole or in part. In particular, but without limitation, the Charterers will not permit the Vessel to be employed other than in conformity with the Insurances without first taking out additional insurance cover in respect of that employment in all respects to the satisfaction of the Owners and, if applicable, the Finance Parties, and the Charterers will promptly notify the Owners and, if applicable, the Finance Parties of any new requirement imposed by any broker, underwriter or association in relation to any of the Insurances.

 

45.10

The Charterers will endeavour and before the expiry of any of the Insurances renew them and shall as soon as reasonably thereafter (but in any event within fifteen (15) days after the relevant renewals) give the Owners and, if applicable, the Finance Parties such details of those renewals as the Owners and, if applicable, the Finance Parties may require.

 

45.11

The Charterers shall deliver to the Owners and, if applicable, the Finance Parties certified copies (and, if required by the Owners and/or (if applicable) any Finance Parties, the originals) of all policies, certificates of entry (endorsed with the appropriate loss payable clauses as may be required by the Owners and the Finance Parties from time to time) and other documents relating to the Insurances (including, without limitation, receipts for premiums, calls or contributions) and shall procure that letters of undertaking in such form as the Owners and, if applicable, the Finance Parties may approve shall be issued to the Owners and, if applicable, the Finance Parties by the brokers through which the Insurances are placed (or, in the case of protection and indemnity or war risks associations, by their managers). If the Vessel is at any time during the Agreement Term insured under any form of fleet cover, the Charterers shall procure that those letters of undertaking contain confirmation that the brokers, underwriters or association (as the case may be) will not set off claims relating to the Vessel against premiums, calls or contributions in respect of any other vessel or other insurance, and that the insurance cover of the Vessel will not be cancelled by reason of non-payment of premiums, calls or contributions relating to any other vessel or other insurance. Failing receipt of those confirmations, the Charterers will instruct the brokers, underwriters or association concerned to issue a separate policy or certificate for the Vessel in the sole name of the Charterers or of the Charterers' brokers as agents for the Charterers.

 

45.12

Upon the Owners' reasonable request, the Charterers shall provide the Owners and, if applicable, the Finance Parties with full information available to the Charterers regarding any casualty or other accident or damage to the Vessel, including, without limitation, any communication with all parties involved in case of a claim under any of the Insurances.

 

45.13

The Charterers agree that, at any time after the occurrence of a Termination Event which is continuing, the Owners and, if applicable, the Finance Parties shall be entitled to collect, sue for, recover and give a good discharge for all claims in respect of any of the Insurances; to pay collecting brokers the customary commission on all sums collected in respect of those claims; to compromise all such claims or refer them to arbitration or any other form of judicial or non- judicial determination; and otherwise to deal with such claims in such manner as the Owners and, if applicable, the Finance Parties shall in their discretion think fit.

 

33

 

45.14

Whether or not a Termination Event shall have occurred, the proceeds of any claim under any of the Insurances in respect of a Total Loss shall be paid and applied in accordance with Clause 61 (Total Loss).

 

45.15

In the event of any claim in respect of any of the Insurances (other than in respect of a Total Loss), if the Charterers shall fail to reach agreement with any of the brokers, underwriters or associations for the immediate restoration of the Vessel, or for payment to third parties, within such time as the Owners and, if applicable, the Finance Parties may stipulate, the Owners and, if applicable, the Finance Parties shall be entitled to require payment to itself. In the event of any dispute arising between the Charterers and any broker, underwriter or association with respect to any obligation to make any payment to the Charterers or to the Owners and/or (if applicable) the Finance Parties under or in connection with any of the Insurances, or with respect to the amount of any such payment, the Owners and/or (if applicable) the Finance Parties shall be entitled to settle that dispute directly with the broker, underwriter or association concerned. Any such settlement shall be binding on the Charterers.

 

45.16

The Charterers shall:

 

 

(a)

implement any recommendations contained in the reports issued following any condition surveys required by the protection and indemnity insurers within the relevant time limits, and provide evidence satisfactory to the Owners and, if applicable, the Finance Parties that the protection and indemnity insurers are satisfied that this has been done; and

 

 

(b)

in addition to the foregoing (if the Vessel is to trade in the United States of America Exclusive Economic Zone):

 

 

(i)

obtain and retain a certificate of financial responsibility under the United States Oil Pollution Act in form and substance satisfactory to the United States Coast Guard and provide the Owners with evidence of the same;

 

 

(ii)

procure that the protection and indemnity insurances do not contain a US Trading Exclusion Clause or any other analogous provision and provide the Owners with evidence that this is so; and

 

 

(iii)

comply strictly with any operational or structural regulations issued from time to time by any relevant authorities under the United States Oil Pollution Act so that at all times the Vessel falls within the provisions which limit strict liability under the said Act for oil pollution.

 

45.17

The Owners shall be at liberty to, in relation to the Vessel, take out Lessor's or Innocent Owners' Interest Insurance and Lessor's or Innocent Owners' Additional Peril (Pollution) insurance on such terms and conditions as the Owners may from time to time decide. The Charterers shall from time to time upon the Owners' demand reimburse the Owners for all costs, premiums and expenses paid or incurred by the Owners in connection with such Lessor's or Innocent Owners' Interest Insurance and Lessor's Innocent Owners' Additional Peril (Pollution) insurance, but only to the extent corresponding to each of the Lessor's or Owners' Interest Insurance or Lessor's Innocent Owners' Additional Peril (Pollution) insurance for an amount not exceeding one hundred and twenty per cent (120%) of the then current Cost Balance.

 

45.18

Any Finance Party shall be at liberty to take out a Mortgagees' Interest Insurance in relation to the Vessel on such terms and conditions as that Finance Party may from time to time decide. The Charterers shall from time to time upon the Owners' demand reimburse the Owners for all costs, premiums and expenses paid or incurred by the Owners or that Finance Party in connection with such Mortgagees' Interest Insurance, but only to the extent corresponding to each of the Mortgagee's Interest Insurance for an amount not exceeding one hundred and twenty per cent. (120%) of the amount then outstanding under any loan made available by the Finance Parties pursuant to any Finance Documents.

 

34

 

45.19

The Owners shall be at liberty to, in relation to the Vessel, take out freight, demurrage and defence cover or such other insurances as recommended by the Owners’ insurance advisor, shipping industry associations or regulatory institutions, on such terms and conditions as the Owners may from time to time decide. The Charterers shall from time to time upon the Owners' demand reimburse the Owners for all costs, premiums and expenses paid or incurred by the Owners in connection with such cover, but only to the extent corresponding to such cover for an amount not exceeding one hundred and twenty per cent (120%) of the then current Cost Balance.

 

45.20

The Charterers shall reimburse or indemnify the Owners for any expenses incurred or to be incurred by the Owners in obtaining a detailed report signed by an independent firm of marine insurance brokers approved by the Owners dealing with the Insurances and stating the opinion of such firm as to the adequacy of the Insurances:

 

 

(a)

when an agreed form of such detailed report satisfactory to the Owners is obtained as a Remittance Condition; and

 

 

(b)

further from time to time upon the Owners' demand where, in the Owners' opinion, at any time during the Agreement Period there has been a material change in the terms of the Insurances and/or a change in the circumstances which would materially adversely affect the adequacy of the Insurances.

 

46.

REDELIVERY

 

Upon the occurrence of any Termination Event which is continuing, subject to the terms of any quiet enjoyment letter entered into with any Sub-Charterers (other than the Group Charterer whereby no quiet enjoyment letter will be entered into in relation to the Group Charter), if the Owners decide to retake possession of the Vessel pursuant to Clause 54.3 (Termination Events), the Charterers' right to possess and operate the Vessel shall immediately cease and and (without in any way affecting the Charterers' obligation to pay the Charterer the Termination Sum and comply with their other obligations under this Charter) the Charterers shall hold the Vessel as gratuitous bailee only to the Owners, the Charterers shall procure that the master and crew follow the orders and directions of the Owners and the Charterers shall, at their own cost and expense and upon the Owners' request (at Owners' sole discretion), be obliged to immediately redeliver or cause to be redelivered the Vessel to the Owners at a safe, ice free port nominated solely by the Owners where the Vessel would be afloat at all times in a ready safe berth or anchorage, in accordance with Clauses 47 (Redelivery conditions) and 49 (Diver's inspection at redelivery). For the avoidance of doubt, any such redelivery shall not extinguish the Owners' right to recover the Termination Sum from the Charterers under this Charter.

 

47.

REDELIVERY CONDITIONS

 

 

(a)

In addition to Clause 46 (Redelivery), the condition of the Vessel shall at redelivery be as follows:

 

 

(i)

the Vessel shall be free of any class and statutory recommendations affecting its trading certificates;

 

 

(ii)

the Vessel must be redelivered with all equipment and spares or replacement items listed in the delivery inventory carried out pursuant to Clause 9 (Inventories, Oil and Stores) and any spare parts on board or on order for any equipment installed on the Vessel following delivery (provided that any such items which are on lease or hire purchase shall be replaced with items of an equivalent standard and condition fair wear and tear excepted); all records, logs, plans, operating manuals and drawings, spare parts onboard shall be included at the time of redelivery in connection with a transfer of the Vessel or such other items as are then in the possession of the Charterers shall be delivered to the Owners;

 

35

 

 

(iii)

the Vessel must be redelivered with all national and international trading certificates and hull/machinery survey positions for both class and statutory surveys free of any overdue recommendation and qualifications valid and un- extended for a period of at least three (3) months beyond the redelivery date;

 

 

(iv)

all of the Vessel's ballast tank coatings to be maintained in "Fair" (as such term (or its equivalent) may be defined and/or interpreted in the relevant survey report) condition as appropriate for the Vessel's age at the time of redelivery, fair wear and tear excepted;

 

 

(v)

the Vessel shall have passed any flag or class surveys or inspections due within three (3) months after the date of redelivery and have its continuous survey system up to date;

 

 

(vi)

the Vessel must be re-delivered with accommodation and common spaces for crew and officers substantially in the same condition as at the Actual Delivery Date, free of damage over and above fair wear and tear, clean and free of infestation and odours; with cargo spaces generally fit to carry the cargoes originally designed and intended for the Vessel; with main propulsion equipment, auxiliary equipment, cargo handling equipment, navigational equipment, etc., in such operating condition as provided for in this Charter;

 

 

(vii)

the Vessel shall be free and clear of all liens other than those created by, in favour of or on the instruction of the Owners;

 

 

(viii)

the condition of the cargo holds to be in accordance with the maintenance regime undertaken by the Charterers during the Charter Period since delivery with allowance for legitimate cargoes carried since the last major maintenance programme;

 

 

(ix)

the anti-fouling coating system applied at the last scheduled dry-docking shall be in accordance with prevailing regulations at the time of application;

 

 

(x)

the funnel markings and name (unless being maintained by the Owner following redelivery) shall be painted out by the Charterers; and

 

 

(xi)

recently taken lube oil samples for all major machinery shall be made available within one (1) week of redelivery and results forwarded to Owners' technical management for review.

 

 

(b)

At redelivery, the Charterers shall ensure that the Vessel shall meet the following performance levels (which where relevant shall be determined by reference to the Vessel's log books):

 

 

(i)

all equipment controlling the habitability of the accommodation and service areas to be in proper working order, fair wear and tear excepted; and

 

 

(ii)

available deadweight to be within one per cent (1%) of that achieved at delivery (as the same may be adjusted as a result of any upgrading of the Vessel carried out in accordance with this Charter (such adjustment to be agreed between the Owners and Charterers at the time such upgrading work is to be undertaken);

 

 

(c)

Without prejudice to Clause 49, the Owners and Charterers shall each appoint (at the Charterers' cost and expense) surveyors for the purpose of determining and agreeing in writing the condition of the Vessel at redelivery, and a final joint report as to the condition of the Vessel shall be drawn up together with a list of agreed deficiencies (if any) and the agreed costs of repairing or remedying such deficiencies.

 

36

 

 

(d)

The Charterers shall be obliged to repair any class items restricting the operation or trading of the Vessel prior to redelivery.

 

 

(e)

The Charterers shall be obliged to repair/remedy all such other deficiencies as are necessary to put the Vessel into the return condition required by this Clause 47.

 

 

(f)

The Charterers warrant that they will not permit (or request any sub-charterer not to permit) the Vessel to commence a voyage (including any preceding ballast voyage) which cannot reasonably be expected to be completed in time to allow redelivery of the Vessel within any time period required by the terms of this Charter. If the time of actual redelivery is after the date on which redelivery is required to take place in accordance with a Termination Notice issued pursuant to sub-paragraph (a)(i) of Clause 54.3 (Termination Event) (the "Redelivery Date"), the Charterer shall, without prejudice to any other amounts payable under the Transaction Documents (including without limitation pursuant to Clauses 46 (Redelivery), 47 (Redelivery conditions), 49 (Diver's inspection at redelivery) and 54 (Termination Events)) pay to the Owners, as from the first date following the Redelivery Date and for each day until the date on which the Vessel is redelivered in accordance with the conditions of this Clause 47, the rate of hire equivalent to the higher of:

 

 

(i)

the prevailing market rate for the bareboat chartering of vessels of a similar type as the Vessel (as determined by an Approved Broker appointed by the Owners); and

 

 

(ii)

the prevailing market rate for the chartering of vessels of a similar type as the Vessel on the Baltic Tanker Indices applicable to the Vessel; and

 

for the avoidance of doubt, all other terms, conditions and provisions of this Charter and the other Transaction Documents shall continue to apply during such period.

 

48.

OWNERS' MORTGAGE

 

48.1

If required by a Sub-Charterer (other than the Group Charterer), the Owners shall provide, or procure, as the case may be, a quiet enjoyment letter in wording to be reasonably agreed between the parties. The Charterers:

 

 

(a)

acknowledge that the Owners are entitled and do intend to enter or have entered into certain funding arrangements with the Finance Parties in order to finance part of the Owners' Cost, which funding arrangements may be secured, inter alia, by ship mortgages over the Vessel and (along with other related matters) the relevant Finance Documents (including any assignment of the Owners' rights under this Charter and the other Transaction Documents), the Charterers irrevocably consent to any such assignment of the Owners' rights under this Charter and the other Transaction Documents in favour of the Finance Parties;

 

 

(b)

irrevocably consent to any assignment in favour of the Finance Parties pursuant to the relevant Finance Documents of the Charterers' rights, interests and benefits in and to the Insurances, Earnings, Requisition Compensation and any guarantee in favour of the Charterers for the performance of the obligations of any Sub-Charterers under any Sub-Charter; and

 

 

(c)

acknowledge that, without prejudice to the foregoing, the Owners may assign, transfer or novate their rights under this Charter and the other Transaction Document to any third party with the prior written consent of the Charterers (which shall not be unreasonably withheld or delayed) provided that no prior written consent shall be required if a Potential Termination Event or a Termination Event has occurred and is continuing; and

 

37

 

 

(d)

without limiting the generality of Clause 52.14 (Charterers' undertakings), undertake to execute, provide or procure the execution or provision (as the case may be) of such further reasonably information or document as are necessary to effect the assignment(s) referred to in paragraph (a), (b) or (c) above.

 

49.

DIVER'S INSPECTION AT REDELIVERY

 

49.1

Unless the Vessel is returned in dry-dock, a diver's inspection is required to be performed at the time of redelivery.

 

49.2

The Charterers shall, at the written request of the Owners, arrange at the Charterers' time and expense for an underwater inspection by a diver approved by the Classification Society immediately prior to the redelivery.

 

49.3

A video film of the inspection shall be made. The extent of the inspection and the conditions under which it is performed shall be to the satisfaction of the Classification Society.

 

49.4

If damage to the underwater parts is found, the Charterers shall arrange, at their time and costs, for the Vessel to be dry-docked and repairs carried out to the satisfaction of the Classification Society.

 

49.5

If the conditions at the port of redelivery are unsuitable for such diver's inspection, the Charterers shall take the Vessel (in Owners' time but at Charterers' expense) to a suitable alternative place nearest to the redelivery port unless an alternative solution is agreed.

 

49.6

All costs relating to any diver's inspection shall be borne by the Charterers.

 

50.

TRANSPORT DOCUMENTS

 

The Charterers shall use their standard documents, waybills and conditions of carriage in the carriage of goods. Such documents, waybills and standard conditions shall comply with compulsory applicable legislation.

 

51.

CHARTERERS' REPRESENTATIONS AND WARRANTIES

 

51.1

The Charterers represent and warrant to the Owners on the date of this Charter and (by reference to the facts and circumstances then pertaining) on, the Actual Delivery Date and each Hire Payment Date as follows (except that (1) the representation and warranty contained in paragraphs (g) and (x) below shall only be made on the date of this Charter and on the Actual Delivery Date, and (2) the representations and warranties in paragraph (b) below shall only be made on the date of this Charter):

 

 

(a)

Status and due authorisation: each Obligor is a corporation, limited partnership or limited liability company duly incorporated or formed under the laws of its jurisdiction of incorporation or formation (as the case may be) with power to enter into the Transaction Documents and the Project Documents (to which it is a party) and to exercise its rights and perform its obligations under the Transaction Documents and the Project Documents (to which it is a party) and all corporate and other action required to authorise its execution of the Transaction Documents and the Project documents (to which it is a party) and its performance of its obligations thereunder has been duly taken;

 

 

(b)

No deductions or withholding: under the laws of the Obligors' respective jurisdictions of incorporation or formation in force at the date hereof, none of the Obligors will be required to make any deduction or withholding from any payment it may make under any of the Transaction Documents;

 

38

 

 

(c)

Claims pari passu: under the laws of the Obligors' respective jurisdictions of incorporation or formation in force at the date hereof, the payment obligations of each Obligor under each Transaction Document to which it is a party, rank at least pari passu with the claims of all other unsecured and unsubordinated creditors of such obligor save for any obligations which are preferred solely by any bankruptcy, insolvency or other similar laws of general application;

 

 

(d)

No Immunity: in any proceedings taken in any of the Obligors' respective jurisdictions of incorporation or formation in relation to any of the Transaction Documents, none of the Obligors will be entitled to claim for itself or any of its assets immunity from suit, execution, attachment or other legal process;

 

 

(e)

Governing law and judgments: in any proceedings taken in any of the Obligors' jurisdiction of incorporation or formation in relation to any of the Transaction Documents in which there is an express choice of the law of a particular country as the governing law thereof, that choice of law and any judgment or (if applicable) arbitral award obtained in that country will be recognised and enforced;

 

 

(f)

Validity and admissibility in evidence: as at the date hereof, all acts, conditions and things required to be done, fulfilled and performed in order (A) to enable each of the Obligors lawfully to enter into, exercise its rights under and perform and comply with the obligations expressed to be assumed by it in the Transaction Documents and the Project Documents to which it is a party, (B) to ensure that the obligations expressed to be assumed by each of the Obligors in the Transaction Documents and the Project Documents are legal, valid and binding, and (C) to make the Transaction Documents and the Project Documents to which it is a party admissible in evidence in the jurisdictions of incorporation or formation of each of the Obligors, have been done, fulfilled and performed;

 

 

(g)

No filing or stamp taxes: under the laws of the Obligors' respective jurisdictions of incorporation or formation in force at the date hereof, it is not necessary that any of the Transaction Documents to which it is a party be filed, recorded or enrolled with any court or other authority in its jurisdiction of incorporation or formation (other than the relevant maritime registry of the Pre-Approved Flag, to the extent applicable) or that any stamp, registration or similar tax be paid on or in relation to any of the Transaction Document;

 

 

(h)

Binding obligations: the obligations expressed to be assumed by each of the Obligors in the Transaction Documents and the Project Documents to which it is a party are legal and valid obligations, binding on each of them in accordance with the terms of such Transaction Documents and the Project Documents and no limit on any of their powers will be exceeded as a result of the borrowings, granting of security or giving of guarantees contemplated by such Transaction Documents and the Project Documents or the performance by any of them of any of their obligations thereunder;

 

 

(i)

No misleading information: to the best of its knowledge, any factual information provided by any Obligor to the Owners in connection with the Transaction Documents was true and accurate in all material respects as at the date it was provided and is not misleading in any material respect;

 

 

(j)

No winding-up: none of the Obligors has taken any corporate, limited liability company or limited partnership action nor have any other steps been taken or legal proceedings been started or (to the best of the Charterers' knowledge and belief) threatened against any Obligor for its winding-up, dissolution, administration or reorganisation or for the appointment of a receiver, administrator, administrative receiver, trustee or similar officer of it or of any or all of its assets or revenues which might have a Material Adverse Effect ;

 

39

 

 

(k)

Solvency:

 

 

(i)

None of the Obligors is unable, or admits or has admitted its inability, to pay its debts or has suspended making payments in respect of any of its debts;

 

 

(ii)

None of the Obligors by reason of actual or anticipated financial difficulties, has commenced, or intends to commence, negotiations with one or more of its creditors with a view to rescheduling any of its indebtedness;

 

 

(iii)

The value of the assets of each Obligor is not less than the liabilities of such Obligor (as the case may be) (taking into account contingent and prospective liabilities); and

 

 

(iv)

No moratorium has been, declared in respect of any indebtedness of any Obligor.

 

 

(l)

No material defaults:

 

 

(i)

Without prejudice to paragraph (ii) below, none of the Obligors are in breach of or in default under any agreement to which it is a party or which is binding on it or any of its assets to an extent or in a manner which might have a Material Adverse Effect; and

 

 

(ii)

No Potential Termination Event or Termination Event is continuing or might reasonably be expected to result from each Obligor's entry into and performance of each Transaction Document to which such Obligor is a party;

 

 

(m)

No material proceedings: no material action or administrative proceeding of or before any court, arbitral body or agency which is not covered by adequate insurance or which might have a Material Adverse Effect has been started;

 

 

(n)

Accounts: all financial statements relating to the Charterers and the Charter Guarantor required to be delivered under paragraph Clause 52.1 (Charterers' undertakings), were each prepared in accordance with GAAP, (in conjunction with the notes thereto) fairly represent the financial condition of the Charterers or the Charter Guarantor at the date as of which they were prepared and the results of their operations during the financial period then ended;

 

 

(o)

No obligation to create Security Interest: the execution of the Transaction Documents by the Obligors and their exercise of their rights and performance of their obligations thereunder will not result in the existence of nor oblige any Obligor to create any Security Interest over all or any of their present or future revenues or assets, other than pursuant to the Security Documents to which they are a party;

 

 

(p)

Non-conflict with other obligations: the execution of the Transaction Documents and the Project Documents by each of the Obligors and their exercise of their rights and performance of their obligations under any of the Transaction Documents and the Project Documents to which they are a party do not and will not conflict with:

 

 

(i)

any law or regulation applicable to such Obligor;

 

 

(ii)

the constitutional documents of such Obligor; or

 

 

(iii)

any agreement, instrument or treaty binding upon such Obligor or any such Obligor's assets or constitute a default or termination event (however described) under any such agreement, instrument or treaty;

 

40

 

 

(q)

Security: each of the Obligors is the legal and beneficial owner of all assets and other property which it purports to charge, mortgage, pledge, assign or otherwise secure pursuant to each Security Document and those Security Documents to which it is a party create and give rise to valid and effective security having the ranking expressed in those Security Documents;

 

 

(r)

Necessary authorisations: the Necessary Authorisations required by each Obligor are in full force and effect, and each Obligor is in compliance with the material provisions of each such Necessary Authorisation relating to it and, to the best of its knowledge, none of the Necessary Authorisations relating to it are the subject of any pending or threatened proceedings or revocation;

 

 

(s)

No money laundering: the performance of the obligations of the Obligors under the Transaction Documents and the Project Documents, will be for the account of members of the respective Obligor(s) and will not involve any breach by any of them of any law or regulatory measure relating to "money laundering" as defined in Article 1 of the Directive (2005/EC/60) of the European Parliament and of the Council of the European Communities;

 

 

(t)

Disclosure of material facts: the Charterers are not aware of any material facts or circumstances which have not been disclosed to the Owners and which might, if disclosed, have reasonably been expected to materially adversely affect the decision of a person considering whether or not to enter into the Transaction Documents;

 

 

(u)

Compliance with laws: each of the Obligors is in compliance with all applicable laws, including Environmental Laws, to which it may be subject and (to the best of its knowledge and belief) no circumstances have occurred which would prevent such compliance in a manner or to an extent which has or is reasonably likely to have a Material Adverse Effect. No Environmental Claim has been commenced or (to the best of the Charterers' knowledge and belief) is threatened against any Obligor where that claim has or is reasonably likely, if determined against that Obligor, to have a Material Adverse Effect;

 

 

(v)

Taxation

 

 

(i)

No Obligor is materially overdue in the filing of any Tax returns and no Obligor overdue in the payment of any amount in respect of Tax of one million US Dollars (US$1,000,000) (or its equivalent in any other currency) or more, save in the case of Taxes which are being contested in good faith.

 

 

(ii)

As far as the Charterers are aware, each of the Obligors (save for the Approved Manager) is resident for Tax purposes only in the jurisdiction of its incorporation.

 

 

w.

No Restricted Party

 

 

(i)

No Obligor, and none of its Subsidiaries and none of their respective directors, officers or employees or, to the best of the knowledge of each such Obligor, its agents (x) is a Restricted Party or is otherwise owned or controlled by or acting directly or indirectly on behalf of or for the benefit of, a Restricted Party; (y) owns or controls a Restricted Party; or (z) has received notice or are aware of any claim, action, suit, proceeding or investigation against any of them with respect to Sanctions.

 

 

(ii)

Each Obligor, its Subsidiaries and their respective directors, officers and employees and, to the best of the knowledge of each such Obligor its agents, are in compliance with Sanctions in all material respects and are not knowingly engaged in any activity that would reasonably be expected to result in such Obligor being designated as a Restricted Party.

41

 

 

 

(x)

No Material Adverse Effect: no event or circumstance which has occurred which has a Material Adverse Effect.

 

 

(y)

Status of Project Documents: The copies of the Project Documents delivered to the Owners are true and complete copies. The Project Documents constitute legal, valid, binding and enforceable obligations of the parties to them in accordance with their respective terms except insofar as enforcement may be limited by any applicable laws relating to bankruptcy, insolvency, administration and similar laws affecting creditors' rights generally and by principles of equity. No amendments or additions to the Project Documents have been agreed nor has any party to any Project Document waived any of its respective rights under that Project Document (except as those notified to the Owners in writing and, if consent of the Owners are required pursuant to this Charter, as consented to by the Owners).

 

 

(z)

Initial Sub-Charters: Commencing from the Actual Delivery Date, the Vessel is sub- chartered:

 

 

(i)

by the Charterers to the Group Charterer pursuant to the Group Charter for fifteen (15) years with a daily hire rate of US$24,500; and

 

 

(ii)

by the Group Charterer to the relevant Initial Sub-Charterer pursuant to the First Initial Sub-Charter for four (4) months plus three (3) years plus three (3) optional periods of one (1) year each at the relevant Initial Sub-Charterer's option exercisable latest by sixty (60) days before anniversary of the three (3) year period, plus or minus sixty (60) days on the final period only and with a daily hire rate of US$21,500 for the first two (2) month period, US$22,000 for the second two (2) month period, US$24,000 for the first year of the three (3) year period, US$25,000 for the second year of the three (3) year period, US$26,000 for the third year of the three (3) year period, US$26,500 for the first (1st) optional period, US$28,500 for the second (2nd) optional period and US$30,500 for the third optional period and a purchase option after the fifth (5th) anniversary of delivery at a purchase option price of US$68,000,000.

 

 

(aa)

Listing: The shares of the Charter Guarantor are traded on the NASDAQ Composite or Over the Counter (OTC) and the Charter Guarantor is an entity reporting with the United States Securities and Exchange Commission.

 

51.2

The representation and warranties of the Charterers contained in paragraphs (e), (f), (g), (h) and (p) of this Clause 51 are subject to:

 

 

(a)

the principle that equitable remedies are remedies which may be granted or refused at the discretion of the court;

 

 

(b)

the limitation of enforcement by laws relating to bankruptcy, insolvency, liquidation, reorganisation, court schemes, moratoria, administration and other laws generally affecting or limiting the rights of creditors;

 

 

(c)

the time barring of claims under any applicable limitation acts;

 

 

(d)

the possibility that a court may strike out provisions for a contract as being invalid for reasons of oppression, undue influence or similar; and

 

 

(e)

any other reservations or qualifications of law expressed in any legal opinions obtained by the Owners in connection with the Transaction Documents.

 

42

 

52.

CHARTERERS' UNDERTAKINGS

 

The undertaking and covenants in this Clause 52 remain in force for the duration of the Agreement Term.

 

52.1

Financial statements The Charterers shall, and shall procure the Charter Guarantor to each supply to the Owners (i) as soon as the same become available, but in any event within one hundred and eighty (180) days after the end of each of its financial years, the audited consolidated financial statements of the Charter Guarantor and the profit and loss accounts and balance sheets of the Charterers for that financial year, and (ii) as soon as the same become available, but in any event within ninety (90) days after the end of the first half-year of each financial year, the unaudited semi-annual consolidated financial statements of the Charter Guarantor and the profit and loss accounts and balance sheets of the Guarantor for that financial half-year.

 

52.2

Requirements as to financial statements Each set of financial statements delivered to the Owners under Clause 52.1in relation to the Charterers and the Charter Guarantor (each a "Notifying Party"):

 

 

(a)

shall be certified by an authorised signatory of the relevant Notifying Party as fairly representing its financial condition as at the date as at which those financial statements were drawn up; and

 

 

(b)

shall be prepared in accordance with GAAP.

 

52.3

Information The Charterers shall supply to the Owners:

 

 

(a)

promptly upon becoming aware of them, details of any material litigation, arbitration or administrative proceedings which are current, threatened or pending against any Obligor, and which, if adversely determined, are reasonably likely to have a Material Adverse Effect; and

 

 

(b)

promptly, such further information regarding the financial condition, business and operations of the Charterers or the Charter Guarantor as the Owners may reasonably request.

 

52.4

Maintenance of legal validity The Charterers shall, and shall procure each other Obligor will, comply with the terms of and do all that is necessary to maintain in full force and effect all Necessary Authorisations required in or by the laws and regulations of its jurisdiction of formation or incorporation and all other applicable jurisdictions, to enable it lawfully to enter into and perform its obligations under the Transaction Documents and to ensure the legality, validity, enforceability or admissibility in evidence of the Transaction Documents in its jurisdiction of incorporation or formation and all other applicable jurisdictions.

 

52.5

Notification of Potential Termination Event The Charterers shall promptly, upon becoming aware of the same, inform the Owners in writing of the occurrence of any Termination Event or Potential Termination Event (and the steps, if any, being taken to remedy this) and, upon receipt of a written request to that effect from the Owners, confirm to the Owners that, save as previously notified to the Owners or as notified in such confirmation, no Termination Event or Potential Termination Event is continuing or if a Termination Event or Potential Termination Event is continuing specifying the steps, if any, being taken to remedy it.

 

52.6

Claims pari passu The Charterers shall ensure that at all times the claims of the Owners against it under the Transaction Documents rank at least pari passu with the claims of all its other unsecured and subordinated creditors save those whose claims are preferred by any bankruptcy, insolvency, liquidation, winding-up or other similar laws of general application.

 

43

 

52.7

Necessary Authorisations Without prejudice to any specific provision of the Transaction Documents relating to a Necessary Authorisation, the Charterers shall, and shall procure each other Obligor to (i) obtain, comply with and do all that is necessary to maintain in full force and effect all Necessary Authorisations if a failure to do the same may cause a Material Adverse Effect; and (ii) promptly upon request, supply certified copies to the Owners of all Necessary Authorisations.

 

52.8

Compliance with applicable laws The Charterers shall, and shall procure each other Obligor will, comply with all applicable laws, including Environmental Laws, to which it may be subject (except as regards Restricted Parties to which Clause 52.9 applies, and anti-corruption and anti-bribery laws to which Clause 52.10 applies) if a failure to do the same may have a Material Adverse Effect.

 

52.9

Sanctions

 

 

(a)

No proceeds of the Purchase Price or any part of the Purchase Price shall be made available, directly or indirectly, to or for the benefit of a Restricted Party nor shall they be otherwise, directly or indirectly, applied in a manner or for a purpose prohibited by Sanctions, or to fund any activity in a Sanctioned Country or in any manner which would cause the Owners or any Finance Party to be in breach of or made subject to Sanctions, or at risk of being in breach of or made subject to Sanctions.

 

 

(b)

No Obligor shall fund all or any part of any payment or repayment of the Purchase Price out of proceeds directly or indirectly derived from any activity in a Sanctioned Country or any transaction with a Restricted Party, or out of proceeds directly or indirectly derived from any other transactions which would be prohibited by Sanctions or in any other manner which would cause the Owners or any Finance Party to be in breach of or made subject to Sanctions, or at risk of being in breach of or made subject to Sanctions and no such proceeds shall be paid into the Earnings Account, the Group Charterer's Earnings Account or the Owners’ bank account.

 

 

(c)

Each of the Obligors has implemented and shall maintain in effect a Sanctions compliance policy which is designed to ensure compliance by each such Obligor, its Subsidiaries and their respective directors, officers, employees and agents with Sanctions.

 

 

(d)

The Charterers shall procure:

 

 

(i)

that the Vessel shall not be used by or for the benefit of a Restricted Party or in trading to or from a Sanctioned Country unless it is a permissible trade which will not result in the Vessel becoming subject to Sanctions;

 

 

(ii)

that the Vessel shall not otherwise be used in any manner contrary to Sanctions, or in a manner that creates a risk that an Obligor, the Owners or any Finance Party will become a Restricted Party;

 

 

(iii)

that the Vessel shall not be used in trading in any manner that creates a risk that the Vessel will become subject to Sanctions;

 

 

(iv)

that the Vessel shall not be traded in any manner which would trigger the operation of any sanctions limitation or exclusion clause (or similar) in the Insurances; and

 

 

(v)

without prejudice to the above provisions, that each sub-charter in respect of the Vessel shall contain, for the benefit of the Charterers, language which gives effect to the provisions of this Charter relating to Sanctions and which sub- charter permits refusal of employment or voyage orders if non-compliance with such provisions either breaches, or risks breaching (in the opinion of the Charterers) Sanctions.

44

 

 

52.10

Anti-corruption and anti-bribery laws The Charterers shall, and shall procure each other Obligor will, conduct its business in compliance with applicable anti-corruption and anti-bribery laws.

 

52.11

Environmental compliance

 

The Charterers shall, and shall procure each other Obligor will:

 

 

(a)

comply with any Environmental Law;

 

 

(b)

obtain, maintain and ensure compliance with all requisite Environmental Approvals; and

 

 

(c)

implement procedures to monitor compliance with and to prevent liability under any Environmental Law,

 

where failure to do so has or is reasonably likely to have a Material Adverse Effect.

 

52.12

Environmental Claims The Charterers shall, promptly upon becoming aware of the same, inform the Owners in writing of:

 

 

(i)

any Environmental Claim against any Obligor or the Vessel which is current or pending; and

 

 

(ii)

any facts or circumstances which are reasonably likely to result in any Environmental Claim being commenced or threatened against any Obligor or the Vessel,

 

where the claim, if determined against such Obligor or the Vessel, has or is reasonably likely to have a Material Adverse Effect.

 

52.13

Taxation

 

 

(a)

The Charterers shall, and shall procure each other Obligor will, pay and discharge any Tax imposed upon it or its assets within the time period allowed without incurring penalties unless and only to the extent that:

 

 

(i)

such payment is being contested in good faith;

 

 

(ii)

adequate reserves are being maintained for such Tax and the costs required to contest them have been disclosed in its latest financial statements; and

 

 

(iii)

such payment can be lawfully withheld and failure to pay such Tax does not have or is not reasonably likely to have a Material Adverse Effect.

 

 

(b)

No Obligor may change its residence for Tax purposes.

 

52.14

Further assurance The Charterers shall, and shall procure each other Obligor will, at their own expense, promptly take all such action as the Owners may reasonably require for the purpose of perfecting or protecting any of the Owner's rights with respect to the security created or evidenced (or intended to be created or evidenced) by the Security Documents.

 

52.15

Other information The Charterers will promptly supply to the Owners such financial information and explanations as the Owners may from time to time reasonably require in connection with the Obligors (other than the Commercial Manager and the Technical Manager) and the Vessel.

 

45

 

52.16

Inspection of records The Charterers will permit the inspection of their financial records and accounts relating to the Transaction Documents on reasonable notice from time to time during business hours by the Owners or its nominee.

 

52.17

Merger and demerger The Charterers shall not, and shall procure that the Charter Guarantor shall not, enter into any amalgamation, merger, demerger or corporate restructuring without the prior written consent of the Owners (such consent not to be unreasonably withheld or delayed), and in the case of the Charter Guarantor, unless (a) it remains as the surviving entity after such amalgamation, merger, demerger or corporate restructuring and (b) there is (i) no breach of any of its undertakings or the financial covenants contained under clause 10.2 of the Charter Guarantee occurring as a result of the proposed amalgamation, merger, demerger or corporate restructuring and (ii) no Termination Event having occurred.

 

52.18

Transfer of assets The Charterers shall not, sell or transfer any of its material assets other than:

 

 

(a)

on arm's length terms to third parties where the net proceeds of sale are used as a prepayment hereunder; or

 

 

(b)

on arm's length terms to its Affiliates, which are and remain members of the Charter Group.

 

52.19

Change of business The Charterers shall not, without the prior written consent of the Owners, make any substantial change to the general nature of their shipping business from that carried on at the date of this Charter.

 

52.20

"Know your customer" checks If:

 

 

(a)

the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation made after the date of this Charter;

 

 

(b)

any change in the status of the Charterers or any other Obligor after the date of this Charter; or

 

 

(c)

a proposed assignment or transfer by Owners of any of its rights and obligations under this Charter,

 

obliges the Owners to comply with "know your customer" or similar identification procedures in circumstances where the necessary information is not already available to it, the Charterers shall promptly upon the request of the Owners supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Owners in order for the Owners 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 Transaction Documents.

 

52.21

Management of the Vessel The Charterers shall ensure that:

 

 

(a)

the Vessel is at all times technically and commercially managed by an Approved Manager;

 

 

(b)

unless (A) the Charterers have promptly informed the Owners in writing of any proposed change of an Approved Manager, and (B) the Owners have granted its prior written consent (which shall not be unreasonably withheld or delayed) to such proposed change, the Approved Manager shall not be changed to another entity;

 

 

(c)

the Approved Managers will provide a written confirmation confirming that, among other things, following the occurrence of Termination Event which is continuing, all claims of the Approved Managers against the Charterers shall be subordinated to the claims of the Owners or the Finance Parties (if applicable) under the Transaction Documents;

46

 

 

 

(d)

the Approved Managers shall, upon the Owners’ request, deliver on a semi-annual basis a ship management report and (if available) an in-house ship inspection report, all PSC/FSC/SIRE inspection deficiencies statistics and reports of any detention, pollution, injury casualty, major accident and/or machinery failure in respect of the Vessel, as well as their certificate of compliance; and

 

 

(e)

the terms of the Management Agreements shall not be varied without the Owners’ prior written consent.

 

52.22

Classification The Charterers shall ensure that the Vessel maintains the highest classification required for the purpose of the relevant trade of the Vessel which shall be with the Vessel's Classification Society, in each case, free from any material overdue recommendations and adverse notations affecting that the Vessel's class.

 

52.23

Certificate of financial responsibility The Charterers shall, if required, obtain and maintain a certificate of financial responsibility in relation to the Vessel which is to call at the United States of America.

 

52.24

Registration Without prejudice to Clause 10(d), the Charterers shall not change or permit a change to the flag of the Vessel during the duration of this Charter other than to a Pre-Approved Flag, such approval not to be unreasonably withheld or delayed. Any change to the flag of the Vessel shall be at the cost of the Charterers (which shall include any costs of the Finance Parties (if applicable)).

 

52.25

ISM, ISPS and Maritime Labour Convention Compliance The Charterers shall ensure that each ISM Company and ISPS Company complies in all material respects with the ISM Code and the ISPS Code, respectively, or any replacements thereof and in particular (without prejudice to the generality of the foregoing) shall ensure that such company holds (i) a valid and current Document of Compliance issued pursuant to the ISM Code, (ii) a valid and current SMC issued in respect of the Vessel pursuant to the ISM Code, and (iii) an ISSC in respect of the Vessel, and the Charterers shall promptly, upon request, supply the Owners with copies of the same. The Charterers shall at all time comply with the Maritime Labour Convention.

 

52.26

Chartering-in The Charterers shall not, during the duration of this Charter, without the prior written consent of the Owners, take any vessel on charter or other contract of employment (or agree to do so) except for vessels chartered in by the Charterers on a temporary basis to be provided to any Sub-Charterers in order to fulfil their obligations under the relevant Sub-Charter (in circumstances where the Vessel is not available for whatever reason).

 

52.27

Change of control

 

 

(a)

Unless with prior written consent of the Owners (which shall not be unreasonably withheld or delayed):

 

 

(i)

the Charterers shall remain a wholly-owned subsidiary of the Charter Guarantor; and

 

 

(ii)

each of the Charterers and the Charter Guarantor shall remain in the ownership and Control of (either directly or indirectly) the Pistiolis Family.

 

 

(b)

The Charterers shall ensure that during the duration of the Charter Period, no Change of Control shall occur without the prior written consent of the Owners (which shall not be unreasonably withheld or delayed).

 

47

 

52.28

Inspection of Vessel and inspection reports In the absence of a Termination Event, subject to there being no undue interference with the operation of the Vessel:

 

 

(a)

the Owners may at the Charterers' cost arrange for persons appointed by the Owners to board the Vessel once in each calendar year during the Charter Period to inspect the Vessel's state and condition, and the Charterers will (and will ensure that the Approved Managers will) provide all due and necessary assistance to facilitate such inspection; and

 

 

(b)

the Charterers shall, within five (5) Business Days' of the Owners' written demand, reimburse the Owners for all costs, fees and expenses reasonably incurred by the Owners in connection with the Owners' procuring or arranging the procurement of the relevant inspection report as to the condition of the Vessel,

 

provided always however that if a Termination Event has occurred and is continuing, the Owners may at any time and at the Charterers' cost conduct such inspection and the Charterers shall be deemed to have granted such permission and shall provide such necessary assistance to the Owners in respect of such inspection.

 

52.29

Sub-Charters

 

 

(a)

The Charterers will, where applicable, use best endeavours and forthwith execute and deliver any and all such other agreements, instruments and documents (including any novation agreement) as may be required by law or deemed necessary or desirable by the Owners to ensure that each of the Group Charter and the First Initial Sub-Charter which is in effect on the Actual Delivery Date remains in effect, so that all obligations previously owed by the Group Charterer to the Charterers under the Group Charter shall continue to be owed to the Charterers throughout the term of the Group Charter and the obligations previously owed by the relevant Initial Sub-Charterers to the Group Charterer under the First Initial Sub-Charterer shall continue to be owed to the Group Charterer throughout the term of the First Initial Sub-Charter.

 

 

(b)

Apart from the Group Charter and the First Initial Sub-Charter, the Charterers shall, and shall procure the Group Charterer will ensure, that there shall be no sub-charter (including but not limited to on a bareboat basis) of the Vessel without the consent of the Owners, such consent not to be unreasonably withheld save that (and subject to the foregoing) any sub-chartering contract of less than twelve (12) months (including optional extension periods) not made on a bareboat charter basis shall not require the consent of the Owners and further provided that, (i) the Charterers shall, and shall procure the Group Charterer will, use all reasonable endeavours to procure (if required) the consent of the Sub-Charterers with whom they are chartering with to the assignment of any Sub-Charter to the Owners, upon obtaining which (if the same is required) the Charterers shall, and shall procure the Group Charterer will, so assign that contract to the Owners by way of security for the Charterers' obligations under this Charter; and (ii) all sub-chartering documentation is promptly provided to the Owners, for its information.

 

 

(c)

The Charterers shall, and shall procure the Group Charterer will, notify the Owners promptly after they become aware of the expiry or early termination of any Sub-Charter to which they are respective a party.

 

52.30

Valuation of Market Value

 

 

(a)

The Charterers shall procure valuation of the Market Value of the Vessel to be made (and procure the delivery to the Owners of the Valuation Reports issued by the Approved Brokers), at the Charterers’ cost: (i) within thirty (30) days prior to the Actual Delivery Date (the Market Value so determined shall be the “Initial Market Value”), (ii) once every twelve (12) months during the Charter Period; and (iii) at such other times as the Owners may require in their absolute discretion (each such additional Valuation Reports to be at Owners' cost unless a Termination Event has occurred and is continuing following which such additional Valuation Reports shall be at the cost of the Charterers).

48

 

 

 

(b)

The Initial Market Value of the Vessel shall be the arithmetic average of desk-top valuations obtained from two (2) Approved Brokers with one selected by the Charterers and the other selected by the Owners prior to the Actual Delivery Date, and subsequently the annual Market Value of the Vessel shall be determined by valuation from one Approved Broker acceptable to the Owners during the Agreement Term (in each such case the Approved Brokers shall be acceptable to the Owners and the expenses of all such appointments shall be borne by the Charterers, except for any additional Valuation report required by the Owners in the absence of any Termination Event as provided in paragraph (a) above). Each such valuation shall be made with or without physical inspection of that Vessel and on the basis of a sale for prompt delivery for cash on normal arm's length commercial terms as between a willing buyer and a willing seller, free of any existing charter or other contract of employment.

 

 

(c)

If valuation is obtained in accordance with this Clause and the Market Value of the Vessel is less than one hundred and twenty per cent (120%) of the Cost Balance as at the date of such valuation (the "Required LTV Ratio"), the Charterers shall, within 5 days of the Owners’ notification of the same, either (i) prepay to the Owners in an amount equal to the shortfall as may be necessary to ensure that the Ratio does not exceed the Required LTV Ratio or (ii) provide or procure a third party to provide additional security which in the opinion of the Owners has a net realisable value at least equal to the shortfall and is acceptable to the Owners, and which is documented in such terms as the Owners may require.

 

 

(d)

If prepayment is elected under paragraph (c) above and after it is completed, the Fixed Hire (including the Balloon Amount) and the Cost Balance shall be adjusted pro rata on the basis of the proportion of the prepayment amount in relation to the Owners' Cost.

 

52.31

Transactions with Affiliates The Charterers shall procure that all transactions conducted or to be conducted between them and any of the Obligors or any of that Obligor's Affiliates will be on an arm's length commercial basis.

 

52.32

Project Documents

 

 

(a)

The Charterers shall:

 

 

(i)

without affecting its obligations under the applicable provisions of the Transaction Documents, perform and observe its obligations under the Project Documents and use its best endeavours to procure that each of the other parties to the Project Documents performs and observes its obligations under them;

 

 

(ii)

obtain and maintain in force, and promptly furnish certified copies to the Owners of, all licences, authorisations, approvals and consents, and do all other acts and things, which may from time to time be necessary or desirable for the continued due performance of its obligations under the Transaction Documents and the Project Documents or which may be required for the validity, enforceability or admissibility in evidence of the Transaction Documents and the Project Documents; and

 

 

(iii)

not, without the prior consent of the Owners, vary the terms of any Project Documents;

 

 

(b)

The Charterers shall not, without the prior consent of the Owners:

 

49

 

 

(i)

except as contemplated by this Charter, sell or agree to sell the Vessel (including a sale of the Vessel during her construction by way of an assignment, novation or other transfer of the Building Contract) or convey, assign, transfer, sell or otherwise dispose of or deal with any of its other real or personal property, assets or rights, whether present or future, in connection with the Vessel;

 

 

(ii)

waive or fail to enforce any provision of, or agree to any amendment or supplement to, any Project Document, save to the extent expressly permitted by the terms of any Transaction Document.

 

52.33

No dividends

 

The Charterers shall not, and shall procure that the Charter Guarantor shall not, make or pay any dividend or other distribution (in cash or in kind) in respect of its share capital following the occurrence of a Potential Termination Event or a Termination Event, or if such payment or distribution will result in the occurrence of a Potential Termination Event or a Termination Event.

 

52.34

Restrictions on further Financial Indebtedness and obligations

 

 

(a)

Except with the prior written consent of the Owners, the Charterers shall not create, incur, assume, suffer to exist or in any manner become or remain liable for any Financial Indebtedness or obligations, other than:

 

 

(i)

Financial Indebtedness or obligations normally associated with the day to day operation of the Vessel, or otherwise in the normal course of business;

 

 

(ii)

Financial Indebtedness or obligations under the Project Contracts to which they are parties and the Transaction Documents; and

 

 

(iii)

Financial Indebtedness or obligations, including all shareholders' and intercompany advances and loans, which by its terms is subordinate and subject in right of payment to the prior payment in full of the Financial Indebtedness under or pursuant to the Transaction Documents, as provided in paragraph (b) below or as otherwise evidenced by a Subordination Agreement; and

 

 

(b)

the Charterers shall, and shall procure that the other Obligors shall, acknowledge and undertake with the Owners that, so long as any Financial Indebtedness is outstanding under any Transaction Document, all shareholder's and intercompany advances and loans from time to time made to the Charterers:

 

 

(i)

are and shall be subordinated in all respects to all amounts owing and which may in future become owing by the Charterers under the Transaction Documents;

 

 

(ii)

shall not be repaid or be subject to payment of interest (although interest may accrue), provided that this sub-paragraph (b)(ii) shall not apply to repayment of Financial Indebtedness due to other member of the Charter Group which fall under sub-paragraph (a)(i) above;

 

 

(iii)

are and shall remain unsecured by any Security Interest over the whole or any part of the assets of the Charterers; and

 

 

(iv)

are not and shall not be capable of becoming subject to any right of set-off or counterclaim.

 

50

 

53.

EARNINGS ACCOUNT AND GROUP CHARTERER'S EARNINGS ACCOUNT

 

In addition to Clause 52 (Charterers' undertakings), the Charterers hereby undertake to the Owners that, throughout the Agreement Term:

 

 

(a)

they will deposit (and will procure any sub-charterers of the Vessel to pay) all of the Earnings received or receivable by the Charterers into the Earnings Account, free and clear of any costs, fees, expenses, disbursements, withholdings or deductions; and

 

 

(b)

they will procure the Group Charterer will deposit (and will procure any sub-charterers of the Vessel to pay) all of the Group Charterer's Earnings received or receivable by the Group Charterer into the Group Charterer's Earnings Account, free and clear of any costs, fees, expenses, disbursements, withholdings or deductions.

 

54.

TERMINATION EVENTS

 

54.1

Each of the following events shall constitute a Termination Event:

 

 

(a)

Failure to pay any Obligor (other than the Commercial Manager and the Technical Manager) fails to pay any amount due from it under any Transaction Document to which they are parties at the time, in the currency and otherwise in the manner specified therein provided that, if an Obligor can demonstrate to the reasonable satisfaction of the Owners that all necessary instructions were given to effect such payment and the non-receipt thereof is attributable solely to an administrative or technical error or an error in the banking system or a Disruption Event, then such payment shall instead be deemed to be due, solely for the purposes of this paragraph, within five (5) Business Days of the date on which it actually fell due under this Charter (if a payment of Hire) and seven (7) Business Days (if a sum payable on demand) ; or

 

 

(b)

Misrepresentation any representation or statement made by any Obligor in any Transaction Document to which it is a party or in any notice or other document, certificate or statement delivered by it pursuant thereto or in connection therewith is or proves to have been incorrect or misleading in any material respect, where the circumstances causing the same give rise to a Material Adverse Effect; or

 

 

(c)

Specific covenants any Obligor fails duly to perform or comply with any of the obligations expressed to be assumed by or procured by them under Clauses 52.27, 52.30 and 52.31; or

 

 

(d)

Other obligations any of the Obligors fails duly to perform or comply with any of the obligations expressed to be assumed by them in any Transaction Document (other than those referred to in paragraph (c) or any failure resulting in any Obligor, the Owners or the Vessel becoming subject to Sanctions, in relation to which paragraph (u) below shall apply) and such failure is not remedied within sixty (60) days after the earlier of (A) the Owners having given notice thereof to the relevant Obligor and (B) the Obligor becoming aware of such failure to perform or comply; or

 

 

(e)

Cross Default any of the following occurs in relation to any Financial Indebtedness of any Obligor:

 

 

(i)

any Financial Indebtedness of such entity is not paid when due or, if so payable, on demand after any applicable grace period has expired;

 

 

(ii)

any Financial Indebtedness of such entity becomes due and payable, or capable of being declared due and payable prior to its specified maturity as a consequence of any event of default and not as a consequence of the exercise of any voluntary right of prepayment;

 

51

 

 

(iii)

a lease, hire purchase agreement or charter creating any Financial Indebtedness of such entity is terminated by the lessor or owner as a consequence of any termination event or event of default (howsoever defined); or

 

 

(iv)

any overdraft, loan, note issuance, acceptance credit, letter of credit, guarantee, foreign exchange or other facility, or any swap or other derivative contract or transaction, relating to any Financial Indebtedness of such entity ceases to be available or becomes capable of being terminated or declared due and payable or cash cover is required or becomes capable of being required, as a result of any termination event or event of default (howsoever defined),

 

provided that no Termination Event will occur under this paragraph (e) in respect of:

 

 

(A)

the Charter Guarantor where the aggregate of all such Financial Indebtedness falling within sub-paragraphs (i) to (iv) above is less than US Dollars Ten Million (US$10,000,000) or its equivalent in any other currency or currencies and such default is remedied within 45 days after such default; or

 

 

(B)

an Obligor (other than the Charter Guarantor) where the aggregate of all such Financial Indebtedness falling within sub-paragraphs (i) to (iv) above is less than US Dollars One Million and Five Hundred Thousand (US$1,500,000) or its equivalent in any other currency or currencies and such default is remedied within forty five (45) days after such default; or

 

 

(f)

Insolvency and rescheduling any of the Obligors is unable to pay their debts as they fall due, commences negotiations with any one or more of their creditors with a view to the general readjustment or rescheduling of their indebtedness or makes a general assignment for the benefit of their creditors or a composition with their creditors; or

 

 

(g)

Winding-up any of the Obligors files for initiation of formal restructuring proceedings, is wound up or declared bankrupt or take any corporate action or other steps are taken or legal proceedings are started for their winding-up, dissolution, administration or re- organisation or for the appointment of a liquidator, receiver, administrator, administrative receiver, conservator, custodian, trustee or similar officer of them or of any or all of their revenues or assets or any moratorium is declared or sought in respect of any of their indebtedness; or

 

 

(h)

Execution or distress

 

 

(i)

any Obligor fails to comply with or pays any sum due from them (within 30 days of such amount falling due) under any final judgment or any final order made or given by any court or other official body of a competent jurisdiction in an aggregate in respect of (A) the Charter Guarantor, equal to or greater than US Dollars Ten Million (US$10,000,000) or its equivalent in any other currency and (B) an Obligor (other than the Charter Guarantor), equal to or greater than US Dollars One Million and Five Hundred Thousand (US$1,500,000) or its equivalent in any other currency, being a judgment or order against which there is no right of appeal or if a right of appeal exists, where the time limit for making such appeal has expired; or

 

 

(ii)

any execution or distress is levied against, or an encumbrancer takes possession of, the whole or any part of, the property, undertaking or assets of (A) the Charter Guarantor, in an aggregate amount equal to or greater than US Dollars Five Million (US$5,000,000) or its equivalent in any other currency and (B) an Obligor (other than the Charter Guarantor), equal to or greater than US Dollars One Million (US$1,000,000) or its equivalent in any other currency or currencies, other than any execution or distress which is being contested in good faith and which is either discharged within thirty (30) days or in respect of which adequate security has been provided within thirty (30) days to the relevant court or other authority to enable the relevant execution or distress to be lifted or released; or

 

52

 

 

(i)

Similar event any event occurs which, under the laws of any jurisdiction, has a similar or analogous effect to any of those events mentioned in paragraphs (f), (g) or (h) above; or

 

 

(j)

Recission, Repudiation, Termination and Cancellation

 

 

(i)

any of the Obligors rescinds or repudiates any Transaction Document to which it is a party or do or cause to be done any act or thing evidencing an intention to rescind or repudiate any such Transaction Document;

 

 

(ii)

the Charterers or the Group Charterer rescinds or purports to rescind or repudiates or purports to repudiate the Group Charter;

 

 

(iii)

the Group Charterer or the Charterers (as the case may be) or the relevant Initial Sub-Charterer rescinds or purports to rescind or repudiates or purports to repudiate an Initial Sub-Charter to which it is a party; or

 

 

(iv)

an Initial Sub-Charter is terminated, cancelled or repudiated by the Group Charterer or the Charterers (as the case may be) or the relevant Initial Sub- Charterer as a consequence of any termination event or event of default (howsoever defined therein),

 

provided that there shall not be a Termination Event under sub-paragraph (j)(iii) or (iv) (as the case may be) if a Subsequent Initial Sub-Charter is entered into for the Vessel with an Initial Sub-Charterer upon such terms and conditions acceptable to the Owners within forty-five (45) days of such termination, cancellation or repudiation;

 

 

(k)

Validity and admissibility at any time any act, condition or thing required to be done, fulfilled or performed in order:

 

 

(i)

to enable any of the Obligors lawfully to enter into, exercise their rights under and perform the material obligations expressed to be assumed by them in the Transaction Documents;

 

 

(ii)

to ensure that the material obligations expressed to be assumed by any of the Obligors in the Transaction Documents are legal, valid and binding;

 

 

(iii)

to make the Transaction Documents admissible in evidence in any applicable jurisdiction,

 

is not done, fulfilled or performed within thirty (30) days after notification from the Owners to the relevant Obligor requiring the same to be done, fulfilled or performed; or

 

 

(l)

Illegality at any time:

 

 

(i)

it is or becomes unlawful for any of the Obligors to perform or comply with any or all of their obligations under the Transaction Documents to which they are parties;

 

53

 

 

(ii)

any of the obligations of any of the Obligors under the Transaction Documents to which they are parties are not or cease to be legal, valid and binding; or

 

 

(iii)

any Security Interest created or purported to be created by the Security Documents ceases to be legal, valid, binding, enforceable or effective or is alleged by a party to such Security Document (other than the Owners) to be ineffective,

 

and, in each case, such illegality is not remedied or mitigated to the satisfaction of the Owners within forty five (45) days (or such longer period as the Owners may agree) after it has given notice thereof to the Charterers; or

 

 

(m)

Material adverse change at any time there shall occur any event or change which has a Material Adverse Effect in respect of any of the Obligors and such event or change, if capable of remedy, is not so remedied within thirty (30) days of the delivery of a notice confirming such event or change by the Owners to the Charterers; or

 

 

(n)

Conditions precedent if any of the conditions set out in Clause 40 (Conditions precedent) is not satisfied by the relevant time or such other time period specified by the Owners in their discretion; or

 

 

(o)

Revocation or modification of consents etc. if any Necessary Authorisation which is now or which at any time during the Agreement Term becomes necessary to enable an Obligor to comply with any of its obligations in or pursuant to any of the Transaction Documents or the Project Documents is revoked, withdrawn or withheld, or modified in a manner which the Owners reasonably consider is, or may be, prejudicial to the interests of Owners in a material manner, or if such Necessary Authorisation ceases to remain in full force and effect and not remedied with twenty (20) days; or

 

 

(p)

Cessation of business any of the Obligors ceases, or threatens to cease, to carry on all or a substantial part of its business; or

 

 

(q)

Curtailment of business if the business of any of the Obligors is wholly or materially curtailed by any intervention by or under authority of any government, or if all or a substantial part of the undertaking, property or assets of the Obligor is seized, nationalised, expropriated or compulsorily acquired by or under authority of any government or any of the Obligors disposes or threatens to dispose of a substantial part of their business or assets; or

 

 

(r)

Reduction of capital if any of the Obligors reduces their committed or subscribed capital other than in the course of regular finance or business activity; or

 

 

(s)

Environmental matters

 

 

(i)

any Environmental Claim is pending or made against any Obligors or in connection with the Vessel, where such Environmental Claim has a Material Adverse Effect;

 

 

(ii)

any actual Environmental Incident occurs in connection with the Vessel, where such Environmental Incident has a Material Adverse Effect; or

 

  (t)

Loss of property all or a substantial part of the business or assets of any of the Obligors is destroyed, abandoned, seized, appropriated or forfeited for any reason, and such occurrence in the reasonable opinion of the Owners has a Material Adverse Effect; or

 

  (u)

Sanctions any Obligor or any of their directors, officers or employees becomes a Restricted Party and no remedy is available within forty five (45) days (or such longer period as the Owners may agree) or any Sanctions are enacted against the Vessel or if the Vessel becomes otherwise subject to Sanctions;

54

 

 

  (v)

Arrest the Vessel is arrested or seized for any reason whatsoever (other than caused solely and directly by any action or omission from the Owners) unless the Vessel is released and returned to the possession of the Charterers within forty five (45) days of such arrest or seizure;

 

  (w)

Financial Covenants the Charter Guarantor fails to observe or perform any of its undertakings or the financial covenants contained under clause 10.2 of the Charter Guarantee; or

 

 

(x)

Listing The shares of the Charter Guarantor cease to trade on the NASDAQ Composite or Over the Counter (OTC), or the Charter Guarantor ceases being an entity reporting with the United States Securities and Exchange Commission.

 

54.2

The Owners and the Charterers agree that it is a fundamental term and condition of this Charter that no Termination Event shall occur during the Agreement Term. Without prejudice to the forgoing, the Owners may treat a Termination Event which is continuing as a breach of condition by the Charterers which involves a breach of this Charter by the Charterers or as an agreed terminating event, the occurrence of which (a) gives rise to a right of the Owners, in their absolute discretion, to terminate the chartering of the Vessel under this Charter by issuing a Termination Notice requiring the Charterers to pay to the Owners the Termination Sum in accordance with this Clause 54 and (b) will entitle the Owners to exercise all or any of the remedies set out below in this Clause 54.

 

 

(a)

At any time after occurrence of a Termination Event, the Owners shall be entitled to terminate this Charter forthwith by giving a Termination Notice to the Charterers demanding the Charterers (i) to redeliver the Vessel to Owners and/or (ii) pay the Termination Sum to the Owners on the Termination Payment Date.

 

 

(b)

The Charterers shall be obliged to pay the Owners the Termination Sum on the Termination Date and it is hereby agreed by the parties hereto that:

 

 

(i)

without prejudice to Clause 54.7, the obligation to pay the Termination Sum is a continuing obligation and shall survive the termination of the leasing of the Vessel under this Charter and shall continue in full force and effect until irrevocably and unconditionally paid in full;

 

 

(ii)

payment of the Termination Sum is deemed to be proportionate as to amount, having regard to the legitimate interest of the Owners, in protecting against the Owners' risk of the Charterers failing to perform its obligations under this Charter; and

 

 

(iii)

the Termination Sum shall, depending on the nature of the Termination Event(s) on the basis of which the Owners serve a Termination Notice, be either an obligation to pay damages following acceptance by the Owners of a breach of condition by the Charterers or an obligation to pay an agreed sum in specified circumstances which do not involve a breach of contract by the Charterers.

 

 

(c)

Notwithstanding paragraph (a) above, once the Termination Notice is sent to the Charterers, the Owners shall be entitled to (but not bound and without prejudice to the Charterers’ obligations hereunder) retake possession of the Vessel immediately on the date of the Termination Notice or any other date as specified by the Owners and the Charterers shall, on the Termination Payment Date, pay the Termination Sum to the Owners. In case the Charterers fail to pay the Termination Sum in full on the Termination Payment Date, default interest shall accrue on the unpaid portion of the Termination Sum in accordance with Clause 44.4 and the Owners shall be entitled to exercise the remedies as provided in Clause 54.7.

55

 

 

54.4

The Owners may demand that the Charterers pay to the Owners on the Termination Payment Date or such later date as the Owners shall specify (and without prejudice to any other rights, claims or remedies which the Owners may have under this Charter and applicable laws) the Termination Sum. If the Termination Sum paid by the Charterers under this Charter does not cover in full the Owners’ loss in connection with the relevant Termination Event and/or the termination of this Charter, the Owners shall be entitled to claim further compensation for their losses and for all reasonable expenses incurred together with any interest accrued thereon. The Owners shall not be under any liability whatsoever to the Charterers for loss or damage if any occasioned by the Charterers for the termination of this Charter unless such termination is wrongful.

 

54.5

 

 

(a)

Upon the irrevocable and unconditional receipt of the full amount of the Termination Sum by the Owners, the Owners will transfer to the Charterers or its nominee all of the Owners’ rights, title and interests in the Vessel on "as is-where is" basis and shall discharge the mortgage as may be created over the Vessel pursuant to the Finance Documents at the Charterers' cost, provided always that prior to such transfer or deletion (as the case may be), the Owners shall have received the letter of indemnity as referred to in Clause 59.6 below from the Charterers, and the Charterers shall have performed all their obligations in connection herewith and with the Vessel, including without limitation the full payment of all Unpaid Sums, taxes, charges, duties, costs and disbursements (including legal fees) in relation to the Vessel.

 

 

(b)

The Owners shall give the Charterers (or their nominee) no representations, warranties, agreements or guarantees whatsoever concerning or in connection with the Vessel, the Insurances, the Vessel's condition, state or class or anything related to the Vessel, expressed or implied, statutory or otherwise, and the Charterers shall not be entitled for any reason whatsoever to claim against the Owners for any losses, or any loss of profit resulting directly or indirectly from any defect or alleged defect in the Vessel. All registration, legal or other expenses whatsoever incurred in respect of the transfer of the title in the Vessel from the Owners to the Charterers or its nominee shall be for the account of the Charterers.

 

54.6

Notwithstanding the termination of this Charter pursuant to this Clause, the Charterers shall irrevocably and unconditionally continue to comply with its obligations under this Charter until the Owners have irrevocably and unconditionally received the Termination Sum and other sum payable by the Charterers to the Owners pursuant to this Charter in full.

 

54.7

If the Charterers fail to pay in full the Termination Sum and other sums payable under this Charter on the Termination Payment Date or such later date as the Owners shall specify pursuant to Clause 54.4:

 

 

(a)

the Parties shall first obtain three valuation reports from three Approved Brokers (each party appoint one Approved Broker and the third one to be appointed by the Parties jointly):

 

 

(i)

if the average of the three assessments of the Market Value of the Vessel (the "Average Termination Market Value") at that time is no less than the Termination Sum, subject to clause 54.8, the Owners shall be entitled (at Owners' sole discretion) to sell the Vessel in the open market appointing as sales brokers, among other parties, at least one of the three independent Approved Broker, free of any charter, lease or other engagement concerning the Vessel for such price and on such terms and conditions as they may, in their absolute discretion, think fit, but in any event within the price ranges provided by the three Approved Brokers; or the Charterers shall have the right to bring forward a buyer during the time that Owners are circulating the Vessel for sale and in case terms are better, including without limitation, the purchase price offered by such buyer, the Owners shall, subject to the Owners’ “know your customer” requirements and any restrictions relating to Sanctions, sell to the party brought forward by Charterers; and

56

 

 

 

(ii)

if the Average Termination Market Value at that time is less than the Termination Sum, then the Owners may, at any time they think fit in their absolute discretion, sell the Vessel in the open market. In any event, the Owners shall, as soon as practicable following the Termination Payment Date, obtain three valuation reports from three independent Approved Brokers of the Market Value of the Vessel and the average of the three report values, the Average Termination Market Value, shall be deducted from the Termination Sum of the Vessel.

 

 

(b)

where the Owners sell the Vessel in accordance with paragraph (a) above, an amount equal to the aggregate of the expenses, disbursements, taxes, costs and losses whatsoever as may have been incurred by the Owners in respect of the sale of the Vessel shall be deducted from the gross proceeds of the sale of the Vessel (the balance of the sale proceeds is referred to hereinafter as the "Net Sale Proceeds"); and

 

 

(c)

an amount equal to the Termination Sum plus all other amounts due and payable from the Charterers to the Owners hereunder, shall be deducted from the Net Sale Proceeds or the Average Termination Market Value, as the case maybe. If the Net Sale Proceeds or the Average Termination Market Value, as the case maybe, are insufficient to satisfy all amounts due and payable from the Charterers to the Owners hereunder, the Charterers shall pay the outstanding balance to the Owners. If there is any amount remaining from the Net Sale Proceeds or the Average Termination Market Value after the deduction of all the amounts due and payable by the Charterers to the Owners hereunder, the Owners shall pay the difference to the Charterers provided that if the Average Termination Market Value of the Vessel has been deducted from the Termination Sum in accordance with this paragraph (c) the Owners shall be entitled to any surplus following a subsequent sale of the Vessel.

 

54.8

Where the Owners intend to sell the Vessel in accordance with Clause 54.7, the Owners shall notify the Charterers in writing of the potential sale and the potential sale price of the Vessel (the “Proposed Owners Sale Price”) whereupon the Charterers (or their nominee, subject to the Owners’ “know your customer” requirements and any restrictions relating to Sanctions) may, within 15 days of such notification, purchase the Vessel and pay an amount which is at least equal to the Termination Sum. If the Charterers notify the Owners that they do not intend to purchase the Vessel or the Charterers do not respond to the Owners within 5 days’ period or the memorandum of agreement has not been agreed by the Owners and the Charterers' (or their nominee) or the deposit has not been remitted the nominated account under such memorandum of agreement within such 10 days’ period (or such longer period as the Owners may agree), the Owners may sell the Vessel on such terms as the Owners may deem fit.

 

54.9

Where the Owners decide to terminate this Charter and retake possession of the Vessel pursuant to this Clause 54, the Owners agree to appoint a reputable ship manager to oversee the operation of the Vessel while it is in the Owners' possession in accordance with prudent and sound commercial ship practices.

 

55.

ASSIGNMENT BY CHARTERERS

 

The Charterers shall not assign or transfer (whether by novation or otherwise) their rights and/or obligations under this Charter except with the Owners’ prior written consent.

 

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56.

NAME OF VESSEL

 

Without prejudice to Clause 10(d), provided that the prior written consent has been given by the Owners:

 

 

(a)

the name of the Vessel may be chosen by the Charterers; and

 

 

(b)

the Vessel may be painted in the colours, display the funnel insignia and fly the house flag as required by the Charterers.

 

57.

CHARTER PERIOD

 

The charter period under this Charter shall be one hundred and twenty (120) months commencing from the Actual Delivery Date, unless otherwise extended or terminated pursuant to Clauses 44.6 (Hire), 54 (Termination Events), 59.7 (Sale of the Vessel by the Owners) and 61 (Total Loss) (the “Charter Period”).

 

58.

HANDLING FEE

 

A non-refundable handling fee (the "Handling fee") equivalent to one per cent (1%) of the Assumed Owners’ Cost shall be paid by the Charterers to the Owners within five (5) Business Days of the date of this Charter.

 

59.

PURCHASE OPTION, PURCHASE OBLIGATION, TRANSFER OF TITLE AND PARTIAL PREPAYMENT

 

59.1

Subject to no Termination Events or Total Loss under Clause 61 (Total loss), the Charterers may, on or at any time after the first anniversary of the Actual Delivery Date, by at least 90 days prior written notice to the Owners, declare to the Owners their exercise of the option to purchase the Vessel or to cause their nominee (subject to the Owners’ “know your customer” requirements and any restrictions relating to Sanctions) to purchase the Vessel on a date specified therein (the "Purchase Option Date") by payment of the Purchase Option Price to the Owners. For the avoidance of doubt, the Charter Period will end immediately upon the Purchase Option Price having been irrevocably and unconditionally paid in full to the Owners.

 

59.2

If the Charterers have not exercised their rights under Clause 59.1 before the natural expiration of this Charter and subject to there being no Termination Event or Total Loss, the Charterers shall be obliged to purchase the Vessel or to cause their nominee (subject to the Owners’ “know your customer” requirements and any restrictions relating to Sanctions) to purchase the Vessel at the end of the Charter Period by payment of the Purchase Obligation Price and the Charterers shall pay the Purchase Obligation Price on the Purchase Obligation Date.

 

59.3

In exchange for the full payment of the Purchase Option Price (in the case of a purchase under Clause 59.1 above) or the Purchase Obligation Price (in the case of a purchase under Clause 59.2 above) and all sums due and payable to the Owners under the Transaction Documents and subject to compliance with the other conditions set out in this Clause, the Owners shall:

 

 

(a)

transfer title to and ownership of the Vessel to the Charterers (or their nominee) by delivering to the Charterers (in each case at the Charterers' costs):

 

 

(i)

a duly executed and notarised, legalised and/or apostilled (as applicable) bill of sale; and

 

 

(ii)

the Title Transfer PDA; and

 

 

(b)

(subject to the prior written consent of any Finance Party or its agent or permitted assigns and transferees (in each case as applicable)) use all reasonable endeavours to procure the discharge and release of any mortgage or Security Interest created by the Owners in relation to the Vessel pursuant to the Finance Documents at the Charterers' cost,

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provided always that prior to such transfer or deletion (as the case may be), the Owners shall have received the letter of indemnity as referred to in Clause 59.6 below from the Charterers, and the Charterers shall have performed all their obligations in connection herewith and with the Vessel, including without limitation the full payment of all Unpaid Sums, taxes, charges, duties, costs and disbursements (including legal fees) in relation to the Vessel.

 

59.4

The transfer in accordance with Clause 59.3 above shall be made in all respects at the Charterers' expense on an "as is, where is" basis and the Owners shall give the Charterers (or their nominee) no representations, warranties, agreements or guarantees whatsoever concerning or in connection with the Vessel, the Insurances, the Vessel's condition, state or class or anything related to the Vessel, expressed or implied, statutory or otherwise.

 

59.5

The Owners shall have no responsibility for the registrability of a bill of sale referred to in Clause 59.3 above executed by the Owners, as far as such bill of sale is prescribed in a generally acceptable form.

 

59.6

The Charterers shall, immediately prior to the receipt of the bill of sale, furnish the Owners with a letter of indemnity (in a form satisfactory to the Owners) whereby the Charterers and the Charter Guarantor shall state that, among other things, the Owners has and will have no interest, concern or connection with the Vessel after the date of such letter and that the Charterers and/or the Charter Guarantor shall indemnify the Owners and keep the Owners indemnified forever against any claims made by any person arising in connection with the Vessel.

 

59.7

Upon at least ninety (90) days' written notice, the Charterers shall have the option for one time only to make an one-off prepayment of up to US Dollars Five Million ($5,000,000) (by a minimum of US Dollars One Million (US$1,000,000) and in multiples thereof) after the first (1st) anniversary of the Actual Delivery Date and subject to such prepayment being made together with:

 

 

(a)

a prepayment fee in the amount of:

 

 

(i)

if the option of such partial prepayment is exercised is after the first anniversary of the Actual Delivery Date but on or before the third anniversary of the Actual Delivery Date, two per cent (2%) of the amount prepaid; or

 

 

(ii)

if the option of such partial prepayment is exercised after the third anniversary of the Actual Delivery Date (and before the natural expiration of this Charter), point five per cent (0.5%) of the amount prepaid; and

 

 

(b)

any and all Break Costs (including any Break Costs under the Finance Documents) (excluding swap related expenses) relating to such partial prepayment.

 

60.

SALE OF VESSEL BY THE OWNERS

 

During the Charter Period, the Owners shall not sell the Vessel unless (i) the Vessel is sold to an Affiliate of the Owners subject to Charterers’ consent not to be unreasonably withheld, or (ii) such sale is permitted by and made in accordance with Clause 54 (Termination Events) or (iii) in any other case, with the Charterers' prior written consent, provided that, in respect of a sale effected under (i) and (iii), such sale shall not increase the obligations of the Obligors under the Transaction Documents and any documentation required in connection with such sale shall be effected at the cost of the Owners. Notwithstanding the foregoing of this Clause (except for the sale permitted by and made in accordance with Clause 54 (Termination Events)), this Charter will continue to exist and be valid and effective on identical terms (save for logical and consequential amendments).

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61.

TOTAL LOSS

 

61.1

If circumstances exist giving rise to a Total Loss, the Charterers shall promptly notify the Owners of the facts of such Total Loss. If the Charterers wish to proceed on the basis of a Total Loss and advise the Owners thereof, the Owners shall agree to the Vessel being treated as a Total Loss for all purposes of this Charter. The Owners shall thereupon abandon the Vessel to the Charterers and/or execute such documents as may be required to enable the Charterers to abandon the Vessel to insurers and claim a Total Loss. Without prejudice to the obligations of the Charterers to pay to the Owners all monies then due or thereafter to become due under this Charter, if the Vessel shall become a Total Loss during the Charter Period, the Charter Period shall end on the Settlement Date (without prejudice to any provision of this Charter expressed to survive termination).

 

61.2

If the Vessel becomes a Total Loss during the Charter Period, the Charterers shall, on the Settlement Date, pay to the Owners the amount calculated in accordance with Clause 61.3.

 

61.3

On the Settlement Date, the Charterers shall pay to the Owners an amount equal to the Termination Sum as at the Termination Payment Date (provided that such amount payable shall be set off against the Total Loss Proceeds if they are irrevocably and unconditionally received by the Owners as referred to under Clause 61.4). The foregoing obligations of the Charterers under this Clause 61.3 shall apply regardless of whether or not any moneys are payable under any Insurances in respect of the Vessel, regardless of the amount payable thereunder, regardless of the cause of the Total Loss and regardless of whether or not any of the said compensation shall become payable.

 

61.4

All Total Loss Proceeds shall be paid to such account or accounts as the Owners may direct and shall be applied towards satisfaction of the Termination Sum and any other sums due and payable under the Transaction Documents. If the Total Loss Proceeds unconditionally received by the Owners (or any Finance Party in accordance with the terms of the relevant loss payable clause) are less than the Termination Sum, the Charterers shall remain liable for any shortfall which shall be paid to the Owners on the Settlement Date and default interest shall accrue thereon from the Settlement Date up to and including the date of actual payment in accordance with Clause 44.4. To the extent that there is any surplus after such application, such surplus shall be promptly returned to the Charterers.

 

61.5

The Charterers shall, at the Owners' request, provide satisfactory evidence, in the reasonable opinion of the Owners, as to the date on which the constructive total loss of the Vessel occurred pursuant to the definition of Total Loss.

 

61.6

Until unconditional receipt of the Termination Sum by the Owners in full, the Charterers shall remain liable to pay Hire and all other amounts to the Owners on the days and in the amounts required under this Charter notwithstanding that the Vessel shall become a Total Loss provided always that no further instalments of Hire shall become due and payable after the Termination Sum has been paid in full to the Owners.

 

61.7

The Owners shall have no obligation to supply to the Charterers with a replacement vessel following the occurrence of a Total Loss.

 

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62.

ADDITIONAL PAYMENT OBLIGATIONS

 

62.1

Subject always to Clause 62.2, the Charterers shall bear all costs, fees (including inspections, valuations, legal fees, insurance reports and registration expenses) and disbursements reasonably incurred by the Owners and the Charterers in connection with:

 

 

(a)

the negotiation, preparation and execution of this Charter and the other Transaction Documents;

 

 

(b)

the delivery of the Vessel under the MOA and this Charter;

 

 

(c)

preparation or procurement of any survey, inspections, tax or insurance advice;

 

 

(d)

all legal fees and other expenses reasonably arising out of or in connection with the exercising of the purchase option or the purchase obligation by the Charterers pursuant to Clause 59 (Purchase Option, purchase obligation and Transfer of title); and

 

 

(e)

such other activities relevant to the transaction contemplated herein.

 

62.2

Unless otherwise stated, the Charterers shall not bear any costs, fees (including legal fees) and disbursements incurred by the Owners in connection with:

 

 

(a)

any financing activities undertaken by the Owners, whether or not such financing activities are undertaken for the purposes of entering into this Charter or any other Transaction Documents except as contemplated under Clause 59.3 (Purchase Option, purchase obligation and Transfer of title); and

 

 

(b)

the incorporation, setting-up or continued operation of any special purpose vehicles or legal entities for the purposes of or in relation to this Charter or any other Transaction Documents (other than as may be required by the Pre-Approved Flag for the purpose of registering and maintaining the Owners’ ownership of the Vessel).

 

63.

STAMP DUTIES AND TAXES

 

The Charterers shall pay promptly all documented stamp, documentary or other like duties and taxes to which the Charter, the MOA and the other Transaction Documents may be subject or give rise and shall indemnify the Owners on demand against any and all liabilities with respect to or resulting from any delay on the part of the Charterers to pay such duties or taxes, provided that the Owners will procure that their tax residence is at all times in the most tax efficient jurisdiction for this transaction. If the parties determine that there is a more tax efficient jurisdiction, the Owners agree to reasonably consider to move the Owners’ tax residency to such jurisdiction at Charterers' cost.

 

64.

OPERATIONAL NOTIFIABLE EVENTS

 

The Owners are to be advised as soon the Charterers are aware of the occurrence of any of the following events:

 

 

(a)

when a material condition of class is applied by the Classification Society;

 

 

(b)

whenever the Vessel is arrested, confiscated, seized, requisitioned, impounded, forfeited or detained by any government or other competent authorities or any other persons;

 

 

(c)

whenever a class or flag authority refuses to issue or withdraw trading certification;

 

 

(d)

in the event of a fire requiring the use of fixed fire systems or collision / grounding;

 

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(e)

whenever the Vessel is planned for dry-docking in accordance with Clause 10(g) and whether routine or emergency;

 

 

(f)

the Vessel is taken under tow unless in the normal course of shipping operations;

 

 

(g)

any death or serious injury on board; or

 

 

(h)

any damage to the Vessel the repair costs of which (whether before or after adjudication) are likely to exceed the Major Casualty Amount; or

 

 

(i)

any notice, or the Charterers becoming aware, of any claim, action, suit, proceeding or investigation against any Obligor, any of its Subsidiaries or any of their respective directors, officers, employees or agents with respect to Sanctions.

 

65.

FURTHER INDEMNITIES

 

65.1

Whether or not any of the transactions contemplated hereby are consummated, the Charterers shall, indemnify, protect, defend and hold harmless the Owners and their respective officers, directors and employees (collectively, the "Indemnitees") throughout the Agreement Term from, against and in respect of, any and all liabilities, obligations, losses, damages, penalties, fines, fees, claims, actions, proceedings, judgement, order or other sanction, lien, salvage, general average, suits, costs, expenses and disbursements, including reasonable legal fees and expenses, of whatsoever kind and nature (collectively, the "Expenses"), imposed on, suffered or incurred by or asserted against any Indemnitee, in any way relating to, resulting from or arising out of or in connection with, in each case, directly or indirectly, any one or more of the following:

 

 

(a)

this Charter, any of the other Transaction Documents and the Project Documents, and any amendment, supplement or modification thereof or thereto requested by any Obligor;

 

 

(b)

the Vessel or any part thereof, including with respect to:

 

 

(i)

the ownership of, manufacture, design, possession, use or non-use, operation, maintenance, testing, repair, overhaul, condition, alteration, modification, addition, improvement, storage, seaworthiness, replacement, repair of the Vessel or any part (including, in each case, latent or other defects, whether or not discoverable and any claim for patent, trademark, or copyright infringement and all liabilities, obligations, losses, damages and claims in any way relating to or arising out of spillage of cargo or fuel, out of injury to persons, properties or the environment or strict liability in tort);

 

 

(ii)

any claim or penalty arising out of violations of applicable law by the Charterers or any Sub-Charterers;

 

 

(iii)

death or property damage of shippers or others;

 

 

(iv)

any liens in respect of the Vessel or any part thereof; or

 

 

(v)

any registration and/or tonnage fees (whether periodic or not) in respect of the Vessel payable to any registry of ships;

 

 

(c)

any breach of or failure to perform or observe, or any other non-compliance with, any covenant or agreement or other obligation to be performed by any Obligor under any Transaction Document to which it is a party or the falsity of any representation or warranty of any Obligor in any Transaction Document to which it is a party or the occurrence of any Termination Event;

 

62

 

 

(d)

in preventing or attempting to prevent the arrest, confiscation, seizure, taking and execution, requisition, impounding, forfeiture or detention of the Vessel, or in securing or attempting to secure the release of the Vessel in connection with the exercise of the rights of a holder of a lien created by the Charterers;

 

 

(e)

incurred or suffered by the Owners in:

 

 

(i)

procuring the delivery of the Vessel by the Charterers to the Owners under the MOA, and by the Owners to the Charterers under Clause 36 (Delivery);

 

 

(ii)

registering the Vessel at the registry of the Pre-Approved Flag;

 

 

(iii)

recovering possession of the Vessel following termination of this Charter under Clause 54 (Termination Events);

 

 

(iv)

arranging for a sale of the Vessel in accordance with Clause 54 (Termination Events) or 60 (Sale of the Vessel by the Owners); or

 

 

(v)

arranging for a transfer of the title of the Vessel in accordance with Clause 59 (Purchase Option, purchase obligation and transfer of title)

 

 

(f)

arising from the Master or officers of the Vessel or the Charterers' agents signing bills of lading or other documents;

 

 

(g)

in connection with:

 

 

(i)

the arrest, seizure, taking into custody or other detention by any court or other tribunal or by any governmental entity; or

 

 

(ii)

subjection to distress by reason of any process, claim, exercise of any rights conferred by a lien or by any other action whatsoever, of the Vessel which are expended, suffered or incurred as a result of or in connection with any claim or against, or liability of, the Charterers or any other member of the Charter Group, together with any costs and expenses or other outgoings which may be paid or incurred by the Owners in releasing the Vessel from any such arrest, seizure, custody, detention or distress.

 

Provided however that the Owners shall not be entitled to any indemnification or recompense pursuant to this Clause 65 for any liabilities, obligations, losses, damages, penalties, claims, actions, suits, fees, costs, expenses and disbursements incurred by the Owners as a consequence of any (A) wilful breach of this Charter by the Owners, or (B) arrest of the Vessel arising due to any action or omission on the part of the Owners.

 

65.2

The Charterers shall pay to the Owners promptly on the Owners' written demand the amount of all costs and expenses (including legal fees) incurred by the Owners in connection with the enforcement of, or the preservation of any rights under, any Transaction Document including (without limitation) (i) any losses, costs and expenses which the Owners may from time to time sustain, incur or become liable for by reason of the Owners being deemed by any court or authority to be an operator, or in any way concerned in the operation, of the Vessel and (ii) collecting and recovering the proceeds of any claim under any of the Insurances.

 

65.3

Without prejudice to any right to damages or other claim which either party may, at any time, have against the other hereunder, it is hereby agreed and declared that the indemnities of the Owners by the Charterers contained in this Charter shall continue in full force and effect for a period of twenty four (24) months after the Agreement Term.

 

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66.

SET-OFF

 

66.1

The Owners may set off any matured and/or contingent obligation due from the Charterers under the Transaction Documents (to the extent beneficially owned by the Owners) against any obligation (whether matured or not) owed by the Owners to the Charterers, regardless of the place of payment or currency of either obligation. If the obligations are in different currencies, the Owners may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.

 

66.2

The Charterers may not set off any matured and/or contingent obligation due from the Owners under the Transaction Documents (to the extent beneficially owned by the Charterers) against any obligation (whether matured or not) owed by the Charterers to the Owners, regardless of the place of payment or currency of either obligation.

 

67.

FURTHER ASSURANCES AND UNDERTAKINGS

 

67.1

Each Party shall make all applications and execute all other documents and do all other acts and things as may be necessary to implement and to carry out their obligations under, and the intent of, this Charter.

 

67.2

The Parties shall act in good faith to each other in respect of any dealings or matters under, or in connection with, this Charter.

 

68.

CUMULATIVE RIGHTS

 

The rights, powers and remedies provided in this Charter are cumulative and not exclusive of any rights, powers or remedies at law or in equity unless specifically otherwise stated.

 

69.

DAY COUNT CONVENTION

 

 

(a)

Other than Variable Hire, any interest, commission or fee accruing under a Transaction Document will accrue from day to day and is calculated on the basis of the actual number of days elapsed and a year of 360 days.

 

 

(b)

Variable Hire shall be payable in advance and will accrue and be calculated on the basis of the actual number of days during the relevant Hire Period in accordance with paragraph (b) of Clause 44.1 (Hire).

 

70.

NO WAIVER

 

No delay, failure or forbearance by a party to exercise (in whole or in part) any right, power or remedy under, or in connection with, this Charter will operate as a waiver. No waiver of any breach of any provision of this Charter will be effective unless that waiver is in writing and signed by the party against whom that waiver is claimed. No waiver of any breach will be, or be deemed to be, a waiver of any other or subsequent breach.

 

71.

ENTIRE AGREEMENT

 

71.1

This Charter contains all the understandings and agreements of whatsoever kind and nature existing between the Parties in respect of this Charter, the rights, interests, undertakings agreements and obligations of the Parties to this Charter and shall supersede all previous and contemporaneous negotiations and agreements.

 

71.2

This Charter may not be amended, altered or modified except by a written instrument executed by each of the parties to this Charter.

 

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72.

INVALIDITY

 

If any term or provision of this Charter or the application thereof to any person or circumstances shall to any extent be invalid or unenforceable the remainder of this Charter or application of such term or provision to persons or circumstances (other than those as to which it is already invalid or unenforceable) shall (to the extent that such invalidity or unenforceability does not materially affect the operation of this Charter) not be affected thereby and each term and provision of this Charter shall be valid and be enforceable to the fullest extent permitted by law.

 

73.

ENGLISH LANGUAGE

 

All notices, communications and financial statements and reports under or in connection with this Charter and the other Transaction Documents shall be in English language or, if in any other language, shall be accompanied by a translation into English. In the event of any conflict between the English text and the text in any other language, the English text shall prevail.

 

74.

NO PARTNERSHIP

 

Nothing in this Charter creates, constitutes or evidences any partnership, joint venture, agency, trust or employer/employee relationship between the parties, and neither party may make, or allow to be made any representation that any such relationship exists between the Parties. Neither Party shall have the authority to act for, or incur any obligation on behalf of, the other party, except as expressly provided in this Charter.

 

75.

NOTICES

 

75.1

Communications in writing; addresses

 

All communications (which expression includes any notice, demand, request, consent or other communication) to be made under or in connection with this Charter shall be made in writing and unless otherwise stated may be made by fax or letter or, subject to Clause 75.3 (Electronic communication), electronic mail and be addressed:

 

 

(a)

in the case of the Owners, to them at:

 

c/o AVIC INTERNATIONAL LEASING CO., LTD.

 

Address:           18/F, Hangrong Mansion,

1481 Guozhan Road,

Pudong, Shanghai 200126

The People's Republic of China

 

Telefax No.:     +86 21 5289 5389

 

Attn:                 Ms. Emily Chen / Ms. Zhang Yixin

 

Email:              chenzhengrong@chinaleasing.net / zhangyixin@chinaleasing.net

 

 

(b)

in the case of the Charterers, to them at:

 

c/o TOP SHIPS INC.

 

Address:           1, Vas. Sofias & Meg. Alexandrou Str.,

15124 Maroussi, Athens, Greece

 

Telefax No:        + 30 210 80 56 441

 

Telephone No:   + 30 210 81 28 180

 

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Attn:                 Alexandros Tsirikos

Email:               atsirikos@topships.org

 

or to such other address or fax number or department or officer as is notified by one Party to the other under this Charter by not less than five (5) Business Days' notice.

 

75.2

Delivery

 

 

(a)

Subject to paragraph (b) below, any communication or document made or delivered by one person to another under or in connection with this Charter will only be effective:

 

 

(i)

if by way of fax, when received in legible form;

 

 

(ii)

if by way of letter, when it has been left at the relevant address or five (5) Business Days after being deposited in the post postage prepaid in an envelope addressed to it at that address; or

 

 

(iii)

if by way of electronic mail, then in accordance with Clause 75.3 (Electronic communication),

 

and, if a particular department or officer is specified as part of its address details provided under Clause 75.1 (Communications in writing; addresses), if addressed to that department or officer.

 

 

(b)

Any communication or document to be made or delivered to the Owner will be effective only when actually received by the Owner and then only if it is expressly marked for the attention of the department or officer specified as part of its address details provided under Clause 75.1 (Communications in writing; addresses).

 

 

(c)

Any communication or document which becomes effective, in accordance with paragraph (a) or paragraph (b) above, on a non-working day or after 5:00 p.m. in the place of receipt shall be deemed only to become effective at the opening of business hours on the next working day in the place of receipt.

 

75.3

Electronic communication

 

Any communication to be made between the Parties under or in connection with this Charter may be made by electronic mail or other electronic means to the extent that the Parties agree that, unless and until notified to the contrary, this is to be an accepted form of communication and if the Parties:

 

 

(a)

notify each other in writing of their electronic mail address and/or any other information required to enable the sending and receipt of information by that means; and

 

 

(b)

notify each other of any change to their address or any other such information supplied by them by not less than five (5) Business Days' notice.

 

Any electronic communication made between the Parties will be effective only when actually received in readable form and in the case of any electronic communication made by the the Charterers to the Owners only if it is addressed in such a manner as the Owners shall specify for this purpose.

 

75.4

English language

 

All communications and documents to be given or delivered pursuant to or otherwise in relation to this Charter and the other Transaction Documents to which the Charterers are (or are to become) a party shall be in the English language or be accompanied by a certified English translation.

 

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76.

CONFLICTS

 

Unless stated otherwise, in the event of there being any conflict between the provisions of Clauses 1 (Definitions) to 31 (Notices) and the provisions of Clauses 32 (Definitions) to 85 (Application of Proceeds), the provisions of Clauses 32 (Definitions) to 85 (Application of Proceeds) shall prevail.

 

77.

SURVIVAL OF CHARTERERS' OBLIGATIONS

 

The termination of this Charter for any cause whatsoever shall not affect the right of the Owners to recover from the Charterers any money due to the Owners on or before the termination in consequence thereof (including, for the avoidance of doubt, any Termination Sum) and all other rights of the Owners (including but not limited to any rights, benefits or indemnities which are expressly provided to continue after the termination of this Charter) are reserved hereunder.

 

78.

COUNTERPARTS

 

This Charter may be executed in any number of counterparts and any single counterpart or set of counterparts signed, in either case, by all the parties hereto shall be deemed to constitute a full and original agreement for all purposes.

 

79.

CONFIDENTIALITY

 

79.1

The Parties shall maintain the information provided in connection with the Transaction Documents strictly confidential and agree to disclose to no person other than:

 

 

(a)

its board of directors, employees (only on a need to know basis), and shareholders, professional advisors and rating agencies;

 

 

(b)

as may be required to be disclosed under applicable law or stock market or other regulations or for the purpose of legal proceedings or required by any regulatory authorities;

 

 

(c)

in the case of the Owners, to any Finance Party or other actual or potential financier providing funding for the acquisition or refinancing of the Vessel;

 

 

(d)

in the case of the Charterers and the Group Charterer, to any Sub-Charterers in respect of obtaining any consent required under the terms of any Sub-Charter to which they are respectively a party; and

 

 

(e)

the managers, the classification society and flag authorities as may be necessary in connection with the transactions contemplated hereunder.

 

79.2

Any other disclosure by each Party shall be subject to the prior written consent of the other Party.

 

80.

THIRD PARTIES ACT

 

80.1

Any person which is an Indemnitee or a Finance Party from time to time and is not a party to this Charter shall be entitled to enforce such terms of this Charter as provided for in this Charter in relation to the obligations of the Charterers to such Indemnitee or (as the case may be) Finance Party, subject to the provisions of Clause 81 (Law and jurisdiction) and the Third Parties Act. The Third Parties Act applies to this Charter as set out in this Clause 80.

 

67

 

80.2

Save as provided above, a person who is not a party to this Charter has no right under the Third Parties Act to enforce or to enjoy the benefit of any term of this Charter.

 

81.

LAW AND JURISDICTION

 

81.1

This Charter and any non-contractual obligations arising from or in connection with it shall in all respects be governed by and interpreted in accordance with English law.

 

81.2

Any dispute, controversy or claim arising out of or relating to this Charter, including the existence, validity, interpretation, performance, breach or termination thereof or any dispute regarding non-contractual obligations arising out of or relating to it shall be referred to and finally resolved by London arbitration.

 

81.3

The governing law of this Clause 81 shall be English law.

 

81.4

Any dispute arising out of or in connection with this Charter shall be referred to arbitration in London in accordance with the Arbitration Act 1996 or any statutory modification or re- enactment thereof save to the extent necessary to give effect to the provisions of this Clause.

 

81.5

The arbitration shall be conducted in accordance with the London Maritime Arbitrations Association (LMAA). Terms current at the time when the arbitration proceedings are commenced.

 

81.6

The reference shall be to three (3) arbitrators. A party wishing to refer a dispute to arbitration shall appoint its arbitrator and send notice of such appointment in writing to the other party requiring the other party to appoint its own arbitrator within fourteen (14) calendar days of that notice and stating that it will appoint its arbitrator as sole arbitrator unless the other party appoints its own arbitrator and gives notice that it has done so within the fourteen (14) days specified.

 

81.7

If one party does not appoint its own arbitrator and give notice that it has done so within the fourteen (14) days specified, the party referring a dispute to arbitration may, without the requirement of any further prior notice to the other party, appoint its arbitrator as sole arbitrator and shall advise the other party accordingly. The award of a sole arbitrator shall be binding on both Parties as if the sole arbitrator had been appointed by agreement. Nothing herein shall prevent the Parties agreeing in writing to vary these provisions to provide for the appointment of a sole arbitrator.

 

81.8

Where the reference is to three (3) arbitrators the procedure for making appointments shall be in accordance with the procedure for full arbitration stated above.

 

81.9

The language of the arbitration shall be English.

 

81.10

In cases where neither the claim nor any counterclaim exceeds the sum of US$100,000 (or such other sum as the parties may agree) the arbitration shall be conducted in accordance with the LMAA Small Claims Procedures current at the time when the arbitration proceedings are commenced and the number of arbitrators shall be one (1).

 

82.

CONDITIONS SUBSEQUENT

 

82.1

Notwithstanding anything to the contrary in this Charter, the obligations of the Owners to charter, or continue to charter, the Vessel to the Charterers under this Charter shall be subject to the condition that the Owners shall have received the following documents and evidence in form and substance satisfactory to the Owners no later than three (3) Business Days after the Actual Delivery Date (unless otherwise specified):

 

 

(a)

a copy of the endorsed policy issued by the insurer in respect of the Vessel;

 

68

 

 

(b)

a copy of the duly signed letter of undertaking issued by all the relevant underwriters or insurance brokers in respect of the Vessel;

 

 

(c)

no later than fourteen (14) calendar days after the Actual Delivery Date:

 

 

(i)

originals of the duly executed Group Charterer's Account Charge and all documents required by such Security Document; and

 

 

(ii)

an original of the duly executed acknowledgement by the relevant Initial Sub- Charterer under the First Initial Sub-Charter in accordance with the Group Charterer's Assignment;

 

 

(d)

no later than one (1) calendar day after the Actual Delivery Date, a copy of the Vessel's certificate of ownership and encumbrance or transcript of register evidencing that the Vessel is registered in the name of the Owners free from any registered Security Interest;

 

 

(e)

the Vessel's current Safety Management Certificate (as such term is defined pursuant to the ISM Code);

 

 

(f)

(to the extent not already provided) the Approved Manager's current Document of Compliance (as such term is defined pursuant to the ISM Code);

 

 

(g)

the Vessel's current ISSC;

 

 

(h)

(to the extent not already provided) the Vessel's current IAPPC;

 

 

(i)

legal opinions and insurance reports issued by legal advisers and insurance advisers to the Owners respectively referred to in Clause 40(a), each in its agreed form; and

 

 

(j)

no later than seven (7) calendar days after the Actual Delivery Date:

 

 

(i)

a certified copy of the First Initial Sub-Charter, together with all addenda, amendments or supplements; and

 

 

(ii)

evidence that the Vessel has been delivered by the Group Charterer to the relevant Initial Sub-Charterer pursuant to the terms of the First Initial Sub- Charter.

 

83.

FATCA

 

83.1

Defined terms

 

For the purposes of this Clause 83 (FATCA), the following terms shall have the following meanings:

 

“Code” means the United States Internal Revenue Code of 1986, as amended.

 

“FATCA” means sections 1471 through 1474 of the Code and any Treasury regulations thereunder.

 

“FATCA Deduction” means a deduction or withholding from a payment under the Transaction Documents or the Project Documents required by or under FATCA.

 

“FATCA Exempt Party” means a Relevant Party that is entitled under FATCA to receive payments free from any FATCA Deduction.

 

69

 

 

“FATCA FFI” means a foreign financial institution as defined in section 1471(d)(4) of the Code which, if a Relevant Party is not a FATCA Exempt Party, could be required to make a FATCA Deduction.

 

“FATCA Non-Exempt Party” means any Relevant Party who is not a FATCA Exempt Party. “Relevant Party” means any of the parties to the Transaction Documents.

 

“IRS” means the United States Internal Revenue Service or any successor taxing authority or agency of the United States government.

 

83.2

FATCA Information

 

 

(a)

Subject to paragraph (iii) below, each Relevant Party shall, on the date of this Charter, and thereafter within ten (10) Business Days of a reasonable request by another Relevant Party:

 

 

(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 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 “pass thru percentage” or other information required under FATCA or other official guidance including intergovernmental agreements) as the requesting party reasonably requests for the purpose of the requesting party’s compliance with FATCA.

 

 

(b)

If a Relevant Party confirms to any other Relevant Party that it is a FATCA Exempt Party or provides an IRS Form W-8 or W-9 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 Relevant Parties reasonably promptly.

 

 

(c)

Nothing in this Clause 74 (FATCA) shall oblige any 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, however, that nothing in this paragraph shall excuse any 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 Relevant Party fails to confirm its status or to supply forms, documentation or other information requested in accordance with the provisions of this Charter or the provided information is insufficient under FATCA, then:

 

 

(i)

if that party failed to confirm whether it is (and/or remains) a FATCA Exempt Party then such party shall be treated for the purposes of the Transaction Documents as if it is a FATCA Non-Exempt Party; and

 

 

(ii)

if that party failed to confirm its applicable passthru percentage then such party shall be treated for the purposes of this Charter and the Transaction 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.

70

 

 

83.3

FATCA Deduction and gross-up by Relevant Party

 

 

(a)

If the representation made by the Charterers under Clause 51 (Charterers' representations and warranties) proves to be untrue or misleading such that the Charterers are required to make a FATCA Deduction, the Charterers shall make the 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)

If the Charterers are required to make a FATCA Deduction then the Charterers shall increase the payment due from them to the Owners 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 Charterers shall promptly upon becoming aware that they must make a FATCA Deduction (or that there is any change in the rate or basis of a FATCA Deduction) notify the Owners accordingly. Within thirty (30) days of the Charterers making either a FATCA Deduction or any payment required in connection with that FATCA Deduction, the Charterers shall deliver to the Owners evidence reasonably satisfactory to the Owners that the FATCA Deduction has been made or (as applicable) any appropriate payment paid to the relevant governmental or taxation authority.

 

 

(d)

If the Owners are required to make a deduction or withholding from a payment under the Finance Documents in respect of FATCA, which deduction or withholding would not have been required if a Relevant Person were not a US Tax Obligor or FATCA FFI, and are required under the Finance Documents (if any) to pay additional amounts in respect of such deduction or withholding, the amount of the payment due from the Charterers shall be increased to an amount which, after any such deduction or withholding and payment of additional amounts, leaves the Owners with an amount equal to the amount which it would have had remaining if it had not been required to pay additional amounts under such Finance Documents.

 

83.4

FATCA Deduction by Owners

 

The Owners may make any FATCA Deduction they are required by FATCA to make, and any payment required in connection with that FATCA Deduction, and the Owners shall not be required to increase any payment in respect of which it makes such a FATCA Deduction or otherwise compensate the recipient for that FATCA Deduction.

 

84.

GRANT OF SECURITY INTEREST

 

 

(a)

For purposes of Section 302A of the Marshall Islands Maritime Act of 1990, as amended (the "Act"), each of the parties hereby acknowledges and agrees that this Charter (a) shall be construed as a "financing charter" (as such term is defined in Section 112(7) of the Act and as such term is used in Section 302A of the Act) and the Charterers shall cause this Charter to be recorded in accordance with said Section 302A), and (b) is intended to be deemed under the Act a preferred mortgage over the Vessel granted by Charterers, as owner, in favour of Owners, as mortgagee.

 

 

(b)

In consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Charterers hereby grant, convey, mortgage, pledge, confirm, assign, transfer and set over the whole of the Vessel to the Owners, as mortgagee, as security for the Charterers' performance and observance of and compliance with all its obligations under, and the covenants, terms and conditions contained in, this Charter and the other Transaction Documents to which the Charterers are or may become a party.

71

 

 

 

(c)

For purposes of recording this Charter together under Section 302A of the Act as a financing charter:

 

 

(i)

the name of the Vessel is "ECO OCEANO CA";

 

 

(ii)

the Official Number of the Vessel is 9427;

 

 

(iii)

the date of this Charter is [●] 2022;

 

 

(iv)

the name and address of the Owners are:

 

GREAT OCEANO LIMITED, a corporation incorporated and existing under the laws of the Republic of the Marshall Islands with entity number 112907 whose registered address is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960

 

 

(v)

the name and address of the Charterers are:

 

ECO OCEANO CA INC., a corporation incorporated and existing under the laws of the Republic of the Marshall Islands with entity number 107152 whose registered address is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960

 

 

(vi)

the maximum aggregate of the nominal amount of all charter hire payments, termination payment, purchase obligation, purchase option or put option amounts payable, or which may become payable, under this Charter, Forty Eight Million Four Hundred Thousand Dollars (US$48,400,000) exclusive of any interest, indemnities, expenses or fees and performance of charter covenants.

 

 

(d)

The Charterers will place and at all times retain, a properly certified copy of the Charter on board the Vessel with the Vessel's papers, and will cause such certified copy of the Charter and the Vessel's registration document to be exhibited to any and all persons having business therewith which might give rise to any lien thereon, other than liens for crew's wages, general average and salvage. In addition, the Charterers will place and keep prominently displayed in the chart room and in the master's cabin of the Vessel in a conspicuous place, a notice, framed under glass, printed in plain type of such size that the paragraph of reading material shall cover a reasonable space acceptable to the Owners reading as follows:

 

"THIS VESSEL IS OWNED BY GREAT OCEANO LIMITED AND IS UNDER CHARTER TO ECO OCEANO CA INC. PURSUANT TO THE TERMS OF THE BAREBOAT CHARTER AGREEMENT DATED AS OF [●] 2022 (THE "CHARTER"). UNDER THE TERMS OF THE CHARTER, WHICH IS A FINANCING CHARTER UNDER THE MARITIME LAWS OF THE REPUBLIC OF THE MARSHALL ISLANDS, NEITHER THE CHARTERERS, NOR ANY SUB-CHARTERER, NOR THE MASTER NOR ANY OTHER PERSON HAS THE RIGHT, POWER OR AUTHORITY TO CREATE, INCUR OR PERMIT TO BE PLACED OR IMPOSED UPON THIS VESSEL ANY LIEN WHATSOEVER OTHER THAN PERMITTED LIENS AS DEFINED IN THE CHARTER."

 

 

(e)

The Charterers hereby consent and agree, at their sole cost and expense, to the recordation of the Charter under Section 302 of the Act and will perform all such acts as may be reasonably requested by the Owners to accomplish said recordation.

 

72

 

 

(f)

Without prejudice to paragraphs (a) to (e) above, to the extent law other than English law or Marshall Islands law is deemed to apply to this Charter and the Charterers are deemed owners of the Vessel, the Charterers and Owners hereby further agree as follows:

 

 

(i)

For the purpose of securing the obligations of the Charterers under this Charter and the other Transaction Documents to which the Charterers are or may become a party, the Owners and Charterers intend and agree that (i) this Charter shall be deemed to be a security agreement within the meaning of Article 9 of the Uniform Commercial Code (the "UCC") of the State of New York or of any other state of the United States of America is found to be applicable to the Charter, and (ii) pursuant to sub-paragraph

 

 

(ii)

of this paragraph (f) below, this Charter also creates a "security interest" under Section 1-203 of the UCC in all of the Charterers' right, title and interest in, to and under the Vessel and the Transaction Documents to which the Charterers are or may become a party (collectively, the "Collateral").

 

 

(ii)

To secure the obligations of the Charterers under this Charter and the other Transaction Documents to which the Charterers are or may become a party, the Charterers hereby grant to the Owners a lien on and security interest in and mortgage lien on all of the Collateral. The Charterers promptly shall take such action as may be necessary or advisable in the Owners' opinion to ensure that the lien, security interest and mortgage on the Collateral will be a perfected lien, security interest and mortgage of first priority under applicable law and will be maintained as such until payment and performance in full of all the obligations of the Charterers under the Transaction Documents to which the Charterers are or may become a party. Upon the occurrence and during the continuance of a Termination Event, the Owners shall have all rights and remedies under Clause 54 (Termination Events) of this Charter or otherwise provided to a secured creditor upon a default under the UCC or provided to a mortgagee of a ship under applicable law.

 

 

(iii)

The Charterers hereby consent and agree, at their sole cost and expense, to the filing of such UCC financing statements as the Owners may deem reasonably necessary to perfect the security interest intended to be created hereby and will perform all such acts as may be reasonably requested by the Owners to accomplish said perfection.

 

85.

APPLICATION OF PROCEEDS

 

Any Net Sale Proceeds, Total Loss Proceeds, any proceeds realised by the Owners in connection with the enforcement of the Security Documents (unless otherwise specified in the Security Documents) shall be applied in the following order of application against amounts payable under the Transaction Documents:

 

 

(a)

firstly, in or towards any amounts outstanding under the Transaction Documents other than the Termination Sum (including but not limited to any costs and expenses incurred in the enforcement of the Security Documents, to the extent these are not covered under the Termination Sum);

 

 

(b)

secondly, in or towards satisfaction of the Charterers' obligation to pay the Termination Sum (or such portion of it that then remains unpaid) in any order of application in the amounts comprising the Termination Sum as the Owners may determine; and

 

 

(c)

thirdly, upon satisfaction in full of all amounts payable to the Owners under the Transaction Documents, in payment of any surplus to the Charterers.

73

 

 

SCHEDULE 1

 

FORM OF PROTOCOL OF DELIVERY AND ACCEPTANCE

 

PROTOCOL OF DELIVERY AND ACCEPTANCE UNDER BAREBOAT CHARTER

 

It is hereby certified that pursuant to a bareboat charter dated                                                      and made between GREAT OCEANO LIMITED, a corporation incorporated and existing under the laws of the Republic of the Marshall Islands with entity number 112907 whose registered address is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960 (the "Owners") as owner and ECO OCEANO CA INC., a corporation incorporated and existing under the laws of the Republic of the Marshall Islands with entity number 107152 whose registered address is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960 (the "Bareboat Charterers") as bareboat charterer (as maybe amended and supplemented from time to time, the "Bareboat Charter") in respect of one (1) vessel named ECO OCEANO CA and registered under the laws and flag of the Marshall Islands with IMO number 9794020 (the "Vessel"), the Vessel is delivered for charter by the Owner to the Bareboat Charterer, and accepted by the Bareboat Charterer from the Owner at                           hours ([●] time) on the date hereof in accordance with the terms and conditions of the Bareboat Charter.

 

IN WITNESS WHEREOF, the Owners and the Bareboat Charterers have caused this PROTOCOL OF DELIVERY AND ACCEPTANCE to be executed by their duly authorised representative on this

day of               20[●] in [●].

 

 

THE OWNERS

 

by:      

 

_____________________________________

 

Name:

 

Title:

 

Date:

THE BAREBOAT CHARTERERS

 

by:      

 

_____________________________________

 

Name:

 

Title:

 

Date:

                                                  

 

 

 

74

 

 

SCHEDULE 2

 

FORM OF TITLE TRANSFER PROTOCOL OF DELIVERY AND ACCEPTANCE

 

PROTOCOL OF DELIVERY AND ACCEPTANCE FOR TITLE TRANSFER UNDER THE BAREBOAT CHARTER

Vessel [ ]

 

GREAT OCEANO LIMITED, a corporation incorporated and existing under the laws of the Republic of the Marshall Islands with entity number 112907 whose registered address is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960 (the "Owners") deliver to ECO OCEANO CA INC., a corporation incorporated and existing under the laws of the Republic of the Marshall Islands with entity number 107152 whose registered address is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960 (the "Bareboat Charterers") the Vessel described below and the Bareboat Charterers accept delivery of, title and risk to the Vessel pursuant to the terms and conditions of the bareboat charter dated                                        (as may be amended and supplemented from time to time, the "Bareboat Charter") and made between (1) the Owners and

(2) the Bareboat Charterers.

 

 

Name of Vessel:

ECO OCEANO CA

   

Flag:

Marshall Islands

   

Place of Registration:

Marshall Islands

   

IMO Number:

9794020

   

Gross Registered Tonnage:

[..]

   

Net Registered Tonnage:

[..]

   

Dated:

20[●]

   

At:

hours ([●] time)

 

Place of delivery:

 

 

THE OWNER

THE BAREBOAT CHARTERER

   

by:

by:

   
   
___________________________________ ___________________________________

Name:

Name:

   

Title:

Title:

   

Date:

Date:

 

 

 

75

 

 

SCHEDULE 3

 

HIRE PAYMENT SCHEDULE

 

Charterers:

ECO OCEANO CA INC.

 

Hire Payment Date

Cost Balance

Fixed Hire

Owners:

GREAT OCEANO LIMITED

   

$      48,199,784.00

 

Purchase Price:

60,249,730.00

 

04/03/2022

$      47,521,974.54

$        677,809.46

Advance Hire:

12,049,946.00

 

10/06/2022

$      46,844,165.08

$        677,809.46

Owners' Cost:

48,199,784.00

 

10/09/2022

$      46,166,355.62

$        677,809.46

Deposit:

-

 

10/12/2022

$      45,488,546.16

$        677,809.46

Balloon Amount:

21,087,405.50

 

10/03/2023

$      44,810,736.70

$        677,809.46

Margin:

3.50%

 

10/06/2023

$      44,132,927.24

$        677,809.46

Instalments:

41

 

10/09/2023

$      43,455,117.78

$        677,809.46

Delivery Date:

04/03/2022

 

10/12/2023

$      42,777,308.32

$        677,809.46

Date of this Charter:

   

10/03/2024

$      42,099,498.86

$        677,809.46

     

10/06/2024

$      41,421,689.40

$        677,809.46

     

10/09/2024

$      40,743,879.94

$        677,809.46

     

10/12/2024

$      40,066,070.48

$        677,809.46

     

10/03/2025

$      39,388,261.02

$        677,809.46

     

10/06/2025

$      38,710,451.56

$        677,809.46

     

10/09/2025

$      38,032,642.10

$        677,809.46

     

10/12/2025

$      37,354,832.64

$        677,809.46

     

10/03/2026

$      36,677,023.18

$        677,809.46

     

10/06/2026

$      35,999,213.72

$        677,809.46

     

10/09/2026

$      35,321,404.26

$        677,809.46

     

10/12/2026

$      34,643,594.80

$        677,809.46

     

10/03/2027

$      33,965,785.34

$        677,809.46

     

10/06/2027

$      33,287,975.88

$        677,809.46

     

10/09/2027

$      32,610,166.42

$        677,809.46

     

10/12/2027

$      31,932,356.96

$        677,809.46

     

10/03/2028

$      31,254,547.50

$        677,809.46

     

10/06/2028

$      30,576,738.04

$        677,809.46

     

10/09/2028

$      29,898,928.58

$        677,809.46

     

10/12/2028

$      29,221,119.12

$        677,809.46

     

10/03/2029

$      28,543,309.66

$        677,809.46

     

10/06/2029

$      27,865,500.20

$        677,809.46

     

10/09/2029

$      27,187,690.74

$        677,809.46

     

10/12/2029

$      26,509,881.28

$        677,809.46

     

10/03/2030

$      25,832,071.82

$        677,809.46

     

10/06/2030

$      25,154,262.36

$        677,809.46

     

10/09/2030

$      24,476,452.90

$        677,809.46

     

10/12/2030

$      23,798,643.44

$        677,809.46

     

10/03/2031

$      23,120,833.98

$        677,809.46

     

10/06/2031

$      22,443,024.52

$        677,809.46

     

10/09/2031

$      21,765,215.06

$        677,809.46

     

10/12/2031

$      21,087,405.50

$        677,809.56

     

04/03/2032

$                            -

$   21,087,405.50

76

 

 

SIGNATURE PAGE

 

ADDITIONAL CLAUSES
TO BAREBOAT CHARTER FOR
ECO OCEANO CA

 

THE OWNERS

 

THE CHARTERERS

     

GREAT OCEANO LIMITED

 

ECO OCEANO CA INC.

     

by:

 

by:

/s/ Yang Guangyi

 

/s/ Alexandros Tsirikos

     

Name: YANG GUANGYI

 

Name: ALEXANDROS TSIRIKOS

     

Title:  Director

 

Title:  ATTORNEY-IN-FACT

     

Date:  2 March 2022

 

Date:  2 March 2022

 

 

 

 

 

 

 

 

 

 

77

Exhibit 8.1

 

List of Subsidiaries

 

Subsidiary

Jurisdiction of Incorporation

Top Tanker Management Inc.

Marshall Islands

Monte Carlo LAX Shipping Company Limited

Marshall Islands

PCH Dreaming Inc.

Marshall Islands

South California Inc.

Marshall Islands

Malibu Warrior Inc.

Marshall Islands

Santa Catalina Inc.

Marshall Islands

Santa Monica Marine Inc.

Marshall Islands

Roman Empire Inc.

Marshall Islands

Athenean Empire Inc.

Marshall Islands

Eco Oceano Ca Inc.

Marshall Islands

Julius Caesar Inc.

Marshall Islands

Legio X Inc.

Marshall Islands

   

 

 

Exhibit 12.1

 

CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER

 

I, Evangelos J. Pistiolis, certify that:

 

1. I have reviewed this annual report on Form 20-F of Top Ships Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

 

4. The company's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting.

 

5. The company's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company's auditors and the audit committee of the company's board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company's ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control over financial reporting.

 

Date: April 15, 2022

 

/s/ Evangelos J. Pistiolis

Evangelos J. Pistiolis

Chief Executive Officer

(Principal Executive Officer)

 

Exhibit 12.2

 

CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER

 

I, Alexandros Tsirikos, certify that:

 

1. I have reviewed this annual report on Form 20-F of Top Ships Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

 

4. The company's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting.

 

5. The company's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company's auditors and the audit committee of the company's board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company's ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control over financial reporting.

 

Date: April 15, 2022

 

/s/ Alexandros Tsirikos

Alexandros Tsirikos

Chief Financial Officer

(Principal Financial Officer)

 

Exhibit 13.1

 

PRINCIPAL EXECUTIVE OFFICER CERTIFICATION

 

PURSUANT TO 18 U.S.C. SECTION 1350

 

In connection with this Annual Report of Top Ships Inc. (the "Company") on Form 20-F for the year ended December 31, 2021 as filed with the Securities and Exchange Commission (the "SEC") on or about the date hereof (the "Report"), I, Evangelos J. Pistiolis, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1)  The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2)  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request.

 

Date: April 15, 2022

 

/s/ Evangelos J. Pistiolis

Evangelos J. Pistiolis

Chief Executive Officer

(Principal Executive Officer)

 

Exhibit 13.2

 

PRINCIPAL FINANCIAL OFFICER CERTIFICATION

 

PURSUANT TO 18 U.S.C. SECTION 1350

 

In connection with this Annual Report of Top Ships Inc. (the "Company") on Form 20-F for the year ended December 31, 2021 as filed with the Securities and Exchange Commission (the "SEC") on or about the date hereof (the "Report"), I, Alexandros Tsirikos, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1)  The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2)  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request.

 

Date: April 15, 2022

 

/s/ Alexandros Tsirikos

Alexandros Tsirikos

Chief Financial Officer

(Principal Financial Officer)

 

Exhibit 15.1

 

 

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Deloitte Certified Public Accountants S.A.
3a Fragkokklisias & Granikou str.

Marousi Athens GR 151-25

Greece

Tel: +30 210 6781 100
www.deloitte.gr

 

 

Consent of Independent Registered Public Accounting Firm


 

We consent to the incorporation by reference in Registration Statement No. 333-234281 on Form F-3 of our reports dated April 15, 2022, relating to the consolidated financial statements of Top Ships Inc. and the effectiveness of Top Ships Inc.’s internal control over financial reporting, appearing in this Annual Report on Form 20-F for the year ended December 31, 2021.

 

/s/ Deloitte Certified Public Accountants S.A.

 

Athens, Greece

April 15, 2022

 

 

 

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