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As filed with the Securities and Exchange Commission on November 12, 2021.

Registration No. 333-260829

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

Pre-Effective

Amendment No. 1

to

Form F-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

Imperial Petroleum Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Republic of the Marshall Islands   4412   N/A

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification No.)

331 Kifissias Avenue

Erithrea 14561 Athens, Greece

(Address of principal executive offices)

 

 

Harry N. Vafias

331 Kifissias Avenue,

Erithrea 14561, Athens, Greece

Telephone: (011) (30) (210) 625 0001

Facsimile: (011) (30) (210) 625 0018

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

Puglisi & Associates

850 Library Avenue, Suite 204

Newark, Delaware 19711

(302) 738-6680

(Name, address and telephone number of agent for service)

 

 

Copies to:

Finn Murphy, Esq.

Morgan, Lewis & Bockius LLP

101 Park Avenue

New York, New York 10178

(212) 309-6000

 

 

Approximate date of commencement of proposed sale to the public:                     

As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are being offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.

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 7(a)(2)(B) of the Securities 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.

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title of Each Class of

Securities to be Registered

 

Amount

to be
Registered(1)

  Proposed
Maximum
Offering Price
Per Share
 

Proposed
Maximum
Aggregate

Offering Price

 

Amount of

Registration Fee

Common Stock, par value $0.01

8.75% Series A Cumulative Redeemable Perpetual Preferred Stock, par value $0.01

 

4,775,272 Common Shares

795,878 Series A Preferred
Shares

 

 

$25.00

 

$106,602,781(2)

 

$  19,896,950(2)

 

$  9,882.10

 

$  1,844.45

Total

          $126,499,731(2)   $11,726.55*

 

 

(1)

This registration statement relates to common shares, par value $0.01 per share, and 8.75% Series A Cumulative Redeemable Perpetual Preferred Shares, par value $0.01 per share, of Imperial Petroleum Inc. that will be distributed pro rata pursuant to a spin-off transaction to the holders of common stock, par value $0.01 per share, of StealthGas Inc. The amount of common shares and 8.75% Series A Cumulative Redeemable Perpetual Preferred Shares of Imperial Petroleum Inc. to be registered represents the maximum number of common shares and 8.75% Series A Cumulative Redeemable Perpetual Preferred Shares of Imperial Petroleum Inc. that will be distributed pro rata to the holders of StealthGas Inc. common stock upon consummation of the spin-off.

(2)

Consistent with Rule 457(f)(2) under the Securities Act of 1933, because there is no market for the shares being distributed, the filing fee has been computed based on the book value of Imperial Petroleum’s equity as of June 30, 2021, with the portion of the filing fee attributable to the 8.75% Series A Cumulative Redeemable Perpetual Preferred Stock based on the aggregate liquidation preference of such shares.

*

Previously Paid.

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION PRELIMINARY

PROSPECTUS DATED NOVEMBER 12, 2021

Distribution of 4,775,272 Common Shares and

795,878 8.75% Series A Cumulative Redeemable Perpetual

Preferred Shares of

IMPERIAL PETROLEUM INC.

to Stockholders of StealthGas Inc.

 

 

We are furnishing this prospectus to stockholders of StealthGas Inc. (“StealthGas”). We are currently a wholly-owned subsidiary of StealthGas. StealthGas will distribute all of our outstanding shares of common stock (“common shares”) and all of our outstanding shares of 8.75% Series A Cumulative Redeemable Perpetual Preferred Stock (“Series A Preferred Shares”) as a special distribution to holders of its common stock on a pro rata basis on or about December 3, 2021. The common shares and the Series A Preferred Shares will be issued separately but are being distributed together in the special distribution to holders of StealthGas common stock.

Stockholders of StealthGas will receive one Imperial Petroleum common share and one Imperial Petroleum Series A Preferred Share for every eight shares and forty-eight shares, respectively, of StealthGas common stock owned at the close of business on November 23, 2021. The distribution will be made on or about December 3, 2021. Fractional common shares and fractional Series A Preferred Shares will not be distributed. Instead, the distribution agent will aggregate fractional common shares and fractional Series A Preferred Shares, respectively, into whole shares, sell such whole shares in the open market at prevailing rates promptly after our common shares and Series A Preferred Shares, respectively, commence trading on the Nasdaq Capital Market, and distribute the net cash proceeds from the sales pro rata to each holder who would otherwise have been entitled to receive fractional common shares or fractional Series A Preferred Shares, as applicable, in the distribution.

We have applied to list our common shares on the Nasdaq Capital Market under the symbol “IMPP” and our Series A Preferred Shares on the Nasdaq Capital Market under the symbol “IMPPP.” Shares of StealthGas common stock will continue to trade on the Nasdaq Global Select Market under the symbol “GASS”. This distribution of our common shares and Series A Preferred Shares is the first public distribution of our shares, and prior to this distribution, there has been no public market for our common shares or our Series A Preferred Shares. Accordingly, we can provide no assurance to you as to what the market price of our common shares or our Series A Preferred Shares may be or how strong a secondary market for our common shares or our Series A Preferred Shares will develop.

We are an “emerging growth company” as that term is used in the Securities Act of 1933, as amended (the “Securities Act”), and, as such, we may elect to comply with certain reduced public company reporting requirements. See “Risk Factors” and “Prospectus Summary—Implications of Being an Emerging Growth Company.”

 

 

Investing in our common shares and Series A Preferred Shares involves risks. See “Risk Factors” beginning on page 26 of this prospectus for a discussion of information that should be considered in connection with an investment in our common shares and Series A Preferred Shares.

Neither the U.S. Securities and Exchange Commission (the “SEC”) nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

Delivery of the common shares and Series A Preferred Shares is expected to be made on or about December 3, 2021.

 

 

Prospectus dated                 , 2021.


Table of Contents

TABLE OF CONTENTS

 

     Page  

ABOUT THIS PROSPECTUS

     1  

FORWARD-LOOKING STATEMENTS

     1  

ENFORCEABILITY OF CIVIL LIABILITIES

     3  

PROSPECTUS SUMMARY

     7  

THE SPIN-OFF DISTRIBUTION

     15  

THE COMPANY

     22  

SUMMARY COMBINED CARVE-OUT FINANCIAL AND OTHER DATA

     23  

RISK FACTORS

     26  

CAPITALIZATION

     60  

SELECTED HISTORICAL FINANCIAL AND OTHER DATA

     61  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

     64  

BUSINESS

     83  

MANAGEMENT

     101  

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     106  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AFTER THE SPIN-OFF DISTRIBUTION

     109  

CERTAIN MARSHALL ISLANDS COMPANY CONSIDERATIONS

     111  

COMMON STOCK DIVIDEND POLICY

     115  

TAX CONSIDERATIONS

     116  

DESCRIPTION OF CAPITAL STOCK

     127  

SHARES ELIGIBLE FOR FUTURE SALE

     139  

PLAN OF DISTRIBUTION

     139  

SERVICE OF PROCESS AND ENFORCEMENT OF CIVIL LIABILITIES

     139  

LEGAL MATTERS

     140  

EXPERTS

     140  

WHERE YOU CAN FIND ADDITIONAL INFORMATION

     140  

OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

     141  

INDEX TO FINANCIAL STATEMENTS

     F-1  

 

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ABOUT THIS PROSPECTUS

You should rely only on the information contained in this prospectus and in any free writing prospectus filed with the SEC. We have not authorized anyone to provide you with different information or to make representations other than those contained in this prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making an offer to sell these securities in any jurisdiction where the offer is not permitted.

Unless otherwise indicated, references to “Imperial Petroleum,” the “Company,” “we,” “our,” “us” or similar terms refer to the registrant, Imperial Petroleum Inc., and its subsidiaries, except where the context otherwise requires.

FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements. These forward-looking statements include information about possible or assumed future results of our operations or our performance. Words such as “expects,” “intends,” “plans,” “believes,” “anticipates,” “estimates,” and variations of such words and similar expressions are intended to identify the forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. These statements involve known and unknown risks and are based upon a number of assumptions and estimates which are inherently subject to significant uncertainties and contingencies, many of which are beyond our control. Actual results may differ materially from those expressed or implied by such forward-looking statements. Forward-looking statements include, but are not limited to, statements regarding:

 

 

future operating or financial results;

 

 

global and regional economic and political conditions including the impact of the COVID-19 pandemic and efforts throughout the world to contain its spread, including effects on global economic activity, demand for seaborne transportation of oil and oil products, the ability and willingness of charterers to fulfill their obligations to us and prevailing charter rates, availability of shipyards performing scrubber installations, drydocking and repairs, changing vessel crews and availability of financing;

 

 

pending or recent acquisitions, business strategy and expected capital spending or operating expenses;

 

 

competition in the marine transportation industry;

 

 

shipping market trends, including charter rates, factors affecting supply and demand and world tanker fleet composition;

 

 

potential disruption of shipping routes due to accidents, diseases, pandemics, political events, piracy or acts by terrorists, including the impact of the COVID-19 pandemic and the ongoing efforts throughout the world to contain it;

 

 

ability to employ our vessels profitably;

 

 

performance by the counterparties to our charter agreements;

 

 

future refined petroleum product and oil prices and production;

 

 

future supply and demand for oil and refined petroleum products;

 

 

our financial condition and liquidity, including our ability to obtain financing in the future to fund capital expenditures, acquisitions and other general corporate activities, the terms of such financing and our ability to comply with covenants set forth in our financing arrangements;

 

 

performance by the shipyards constructing any newbuilding vessels we order; and

 

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expectations regarding vessel acquisitions and dispositions.

WE UNDERTAKE NO OBLIGATION TO PUBLICLY UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENTS CONTAINED IN THIS PROSPECTUS OR THE DOCUMENTS TO WHICH WE REFER YOU IN THIS PROSPECTUS, TO REFLECT ANY CHANGE IN OUR EXPECTATIONS WITH RESPECT TO SUCH STATEMENTS OR ANY CHANGE IN EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH ANY STATEMENT IS BASED, EXCEPT AS REQUIRED BY LAW.

 

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ENFORCEABILITY OF CIVIL LIABILITIES

We are incorporated under the laws of the Republic of the Marshall Islands and our principal executive offices are located outside the United States. Our directors and officers reside outside the United States. In addition, substantially all of our assets and the assets of our directors and officers are located outside the United States. As a result, it may not be possible for you to serve legal process within the United States upon us or any of these persons. It may also not be possible for you to enforce, both in and outside the United States, judgments you may obtain in United States courts against us or these persons in any action, including actions based upon the civil liability provisions of U.S. federal or state securities laws.

Furthermore, there is substantial doubt that courts in jurisdictions outside the U.S. (i) would enforce judgments of U.S. courts obtained in actions against us or our directors or officers based upon the civil liability provisions of applicable U.S. federal and state securities laws or (ii) would enforce, in original actions, liabilities against us or our directors or officers based on those laws.

MARKET DATA

The Company uses market data throughout this prospectus. The Company has obtained certain market data from publicly available information and industry publications. These sources generally state that the information they provide has been obtained from sources believed to be reliable, but the accuracy and completeness of the information are not guaranteed. The forecasts and projections are based on industry surveys and the preparers’ experience in the industry, and there is no assurance that any of the projections or forecasts will be achieved. The Company believes that the surveys and market research others have performed are reliable, but the Company has not independently verified this information.

 

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QUESTIONS AND ANSWERS ABOUT THE SPIN-OFF DISTRIBUTION

 

Q:

How many Imperial Petroleum common shares and Series A Preferred Shares will I receive?

 

A:

StealthGas will distribute to you one Imperial Petroleum common share and one Imperial Petroleum Series A Preferred Share for every eight shares and forty-eight shares, respectively, of StealthGas common stock that you own as of the close of business on November 23, 2021, the record date (the “Spin-Off Distribution”).

 

Q:

What are the Imperial Petroleum common shares and Series A Preferred Shares worth?

 

A:

The value of our common shares and our Series A Preferred Shares will be determined by their trading price after the Spin-Off Distribution. We do not know what the trading price of the common shares or the Series A Preferred Shares will be and we can provide no assurance as to value.

 

Q:

What will the relationship between StealthGas and Imperial Petroleum be after the Spin-Off Distribution?

 

A:

After the Spin-Off Distribution, StealthGas does not expect to own any of the Imperial Petroleum common shares or Series A Preferred Shares or otherwise have an ownership interest in Imperial Petroleum. StealthGas and Imperial Petroleum will be separate publicly traded companies, although, at the time of the Spin-Off Distribution, some of the directors and officers of StealthGas will hold similar positions at Imperial Petroleum.

 

Q:

What are the reasons for the Spin-Off Distribution?

 

A:

StealthGas is currently engaged in providing international seaborne transportation services to LPG producers and users, as well as crude oil and product tankers to oil producers, refineries and commodities traders, through ownership and operation of LPG carriers, product tankers and crude oil tankers. StealthGas intends to separate these two businesses. The separation began with a restructuring that established Imperial Petroleum as a new holding subsidiary company of StealthGas. StealthGas believes that its lines of business are not accurately valued in the capital market, and the Spin-Off Distribution will enable each company (StealthGas and Imperial Petroleum) to increase its business focus, alleviate market confusion and attract new investors.

The Spin-Off Distribution will result in two “pure play” companies: StealthGas will own only LPG carriers and Imperial Petroleum will own only product and crude oil tankers, although StealthGas and Imperial Petroleum may in the future consider expansion into other seaborne transportation sectors. Historically, “pure play” ship-owning companies have tended to trade at levels that suggest higher valuations than ship-owning companies with mixed asset classes. StealthGas and Imperial Petroleum expect that the Spin-Off Distribution will result in an increase of shareholder value if the aggregate trading value of the two separate entities exceeds that of the trading value of StealthGas’ common stock before the Spin-Off Distribution, as historical trends suggest. StealthGas and Imperial Petroleum also believe that the Spin-Off Distribution may better position both companies for potential sale or merger opportunities in the future.

In determining whether to effect the Spin-Off Distribution, the board of directors of StealthGas considered the costs and risks associated with the transaction, including those associated with preparing Imperial Petroleum to become a separate publicly traded company and the possibility that the trading value of the two separate entities after the Spin-Off Distribution may be less than the trading value of StealthGas’ common stock before the Spin-Off Distribution. Notwithstanding these costs and risks, the board of directors of StealthGas determined that a spin-off, in the form contemplated by the Spin-Off Distribution is in the best interests of StealthGas and its stockholders.

 

Q:

Will Imperial Petroleum common shares be listed on a securities exchange?

 

A:

Imperial Petroleum has applied to list its common shares on the Nasdaq Capital Market under the symbol “IMPP”.

 

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Q:

Will Imperial Petroleum Series A Preferred Shares be listed on a securities exchange?

 

A:

Imperial Petroleum has applied to list its Series A Preferred Shares on the Nasdaq Capital Market under the symbol “IMPPP”.

 

Q:

Will my StealthGas shares continue to be listed on a securities exchange?

 

A:

Yes. StealthGas’ common stock will continue to be listed on the Nasdaq Global Select Market under the symbol “GASS”. The number of shares of StealthGas common stock you own will not change as a result of the Spin-Off Distribution.

 

Q:

What are the U.S. federal income tax consequences to me of the Spin-Off Distribution?

 

A:

For U.S. federal income tax purposes, our distribution of common shares, Series A Preferred Shares and cash in lieu of fractional shares to you in the Spin-Off Distribution is not expected to qualify as a tax-free corporate division for U.S. federal income tax purposes and as a result is expected to be treated like other distributions from StealthGas. Consistent with this expected treatment, the total value of this Spin-Off Distribution, as well as your initial tax basis in our shares, will be determined by the trading price of our common shares and Series A Preferred Shares at the time of the Spin-Off Distribution. If you are a U.S. Holder (as defined under “Tax Considerations – United States Federal Income Taxation of U.S. Holders”), a portion of the value of this Spin-Off Distribution will be taxable to you as a dividend, to the extent of StealthGas’s current and accumulated earnings and profits as determined for U.S. federal income tax purposes, and the remainder, if any, will be a reduction in the adjusted tax basis in your shares of StealthGas common stock. The tax treatment of the Spin-Off Distribution is discussed in further detail below in “Tax Considerations – United States Federal Income Taxation of U.S. Holders.”

 

Q:

How will I receive Imperial Petroleum common shares and Series A Preferred Shares?

 

A:

StealthGas will deliver the 100% of the issued and outstanding common shares and Series A Preferred Shares to the distribution agent. American Stock Transfer & Trust Company, LLC will serve as distribution agent in connection with the Spin-Off Distribution and as transfer agent and registrar for Imperial Petroleum common shares and Series A Preferred Shares. See “Business – Mechanics of the Spin-Off Distribution.”

 

Q:

What do I have to do to receive my Imperial Petroleum common shares and Series A Preferred Shares?

 

A:

No action by you is required. If your shares of StealthGas common stock are held in a brokerage account, the Imperial Petroleum common shares and Series A Preferred Shares distributed to you will be credited to that account. If you hold shares of StealthGas common stock in certificated or book entry form, your ownership of Imperial Petroleum common shares and Series A Preferred Shares will be recorded in the books of our transfer agent and a statement evidencing your ownership will be mailed to you. Certificates representing Imperial Petroleum common shares or Series A Preferred Shares will not be issued in connection with the Spin-Off Distribution, but we may elect to issue certificates in the future.

 

Q:

How will fractional common shares and fractional Series A Preferred Shares be treated in the Spin-Off Distribution?

Fractional common shares and Series A Preferred Shares will not be distributed. Instead, for registered shareholders, the distribution agent will aggregate fractional common shares and fractional Series A Preferred Shares into whole shares, sell such whole shares in the open market at prevailing rates promptly after our common shares and Series A Preferred shares, respectively, commence trading on the Nasdaq Capital Market, and distribute the net cash proceeds from the sales, net of brokerage fees and other costs, pro rata to each holder who would otherwise have been entitled to receive fractional common shares or fractional Series A Preferred Shares in the distribution (net of any required withholding for taxes applicable to each holder). Holders of StealthGas common stock that hold their shares through a bank, broker, or nominee shall receive cash in lieu of fractional common shares and fractional Series A Preferred

 

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Shares, if any, determined in accordance with the policies of such bank, broker, or nominee. If a StealthGas shareholder holds fewer than (1) eight shares of StealthGas common stock as of the record date, it will not receive any of our common shares or (2) forty-eight shares of StealthGas common stock as of the record date, it will not receive any of our Series A Preferred Shares; however, the shareholder will receive a cash distribution from our distribution agent representing the proceeds from the sale of the fractional common shares and fractional Series A Preferred Shares to which the shareholder is entitled, net of brokerage fees and other costs. See “Business – Mechanics of the Spin-Off Distribution.” for a more detailed explanation. If you receive cash in lieu of fractional common shares or fractional Series A Preferred Shares, you will not be entitled to any interest on the payments. The receipt of cash in lieu of fractional common shares and fractional Series A Preferred Shares generally will be taxable to the recipient StealthGas shareholders that are subject to U.S. federal income tax as described in “Tax Considerations” below.

 

Q:

Are Shareholders of StealthGas entitled to appraisal rights in connection with the Spin-Off Distribution?

 

A:

No. Shareholders of StealthGas are not entitled to appraisal rights in connection with the Spin-Off Distribution.

 

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PROSPECTUS SUMMARY

This summary highlights information that appears later in this prospectus and is qualified in its entirety by the more detailed information and financial statements included elsewhere in this prospectus. This summary may not contain all of the information that may be important to you. As an investor or prospective investor, you should carefully review the entire prospectus, including the section of this prospectus entitled “Risk Factors” and the more detailed information that appears later in this prospectus before making an investment in our common shares and Series A Preferred Shares.

Unless otherwise indicated, references to “Imperial Petroleum,” the “Company,” “we,” “our,” “us” or similar terms refer to the registrant, Imperial Petroleum Inc., and its subsidiaries, except where the context otherwise requires. We use the term deadweight tons, or dwt, expressed in metric tons, each of which is equivalent to 1,000 kilograms, in describing the size of our vessels. Unless otherwise indicated, all references to “U.S. dollars,” “dollars,” “U.S. $” and “$” in this prospectus are to the lawful currency of the United States of America.

Explanatory Note

Imperial Petroleum Inc. was incorporated under the laws of the Republic of the Marshall Islands on May 14, 2021. The Company was incorporated by StealthGas to serve as the holding company of four subsidiaries that will be contributed by StealthGas to the Company (the “Subsidiaries” or “Imperial Petroleum Inc. Predecessor”) in connection with the Spin-Off Distribution. StealthGas will contribute these subsidiaries to the Company prior to the Spin-Off Distribution, and, as the sole shareholder of the Company, intends to distribute the Company’s common shares and Series A Preferred Shares to stockholders of StealthGas on a pro rata basis on or about December 3, 2021. Under the registration statement of which this prospectus forms a part, the Company is applying to register the distribution of its common shares and Series A Preferred Shares under the Securities Act of 1933. In addition, the Company has applied to have the common shares listed on the Nasdaq Capital Market under the ticker symbol “IMPP” and the Series A Preferred Shares listed on the Nasdaq Capital Market under the ticker symbol “IMPPP”. Upon consummation of the Spin-Off Distribution and the successful listing of our common shares on the Nasdaq Capital Market, the Company and StealthGas will be independent publicly traded companies with separate boards of directors and management, although, at the time of the Spin-Off Distribution, some of the directors and officers of StealthGas will hold similar positions at the Company.

The financial statements presented in this prospectus are carve-out financial statements. The carve-out financial statements in this prospectus include combined carve-out financial statements of the Imperial Petroleum Inc. Predecessor for the fiscal years ended December 31, 2019 and December 31, 2020 and the six months ended June 30, 2020 and 2021.

Unless otherwise indicated or required by the context in this prospectus, our disclosure assumes that the consummation of the Spin-Off Distribution has occurred. Although we will not acquire the four subsidiaries of StealthGas until shortly before the Spin-Off Distribution, the operating and other statistical information with respect to our business is presented as of June 30, 2021, unless otherwise indicated, as if we owned such business as of such date.

Overview

Imperial Petroleum Inc. was incorporated under the laws of the Republic of the Marshall Islands on May 14, 2021. The Company was incorporated by StealthGas to serve as the holding company of four

 

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subsidiaries that will be contributed by StealthGas to the Company in connection with the Spin-Off Distribution. StealthGas will contribute these subsidiaries to the Company prior to the Spin-Off Distribution, and, as the sole shareholder of the Company, intends to distribute all of the Company’s common shares and Series A Preferred Shares to holders of StealthGas common stock on a pro rata basis on or about December 3, 2021.

We are a provider of international seaborne transportation services to oil producers, refineries and commodities traders. As of the date of this prospectus, we own and operate a fleet of three medium range product tankers that carry refined petroleum products such as gasoline, diesel, fuel oil and jet fuel, as well as edible oils and chemicals, and one Aframax tanker which is used for carrying crude oil. The total cargo carrying capacity of our fleet is 255,804 dwt.

There currently is no existing public trading market for our common shares. However, we are in the process of applying to have our common shares listed on the Nasdaq Capital Market under the symbol “IMPP” and our Series A Preferred Shares listed on the Nasdaq Capital Market under the ticker symbol “IMPPP”. We make no representation that such application will be approved or that our common shares or Series A Preferred Shares will trade on such market, either now or at any time in the future. The successful listing of our common shares and of our Series A Preferred Shares on the Nasdaq Capital Market is subject to our fulfilling all of the requirements of the Nasdaq Capital Market.

Our Fleet

As of September 30, 2021 the profile and deployment of our fleet is the following:

 

Name

  Year
Built
    Country
Built
    Vessel Size
(dwt)
 

Vessel
Type

  Employment
Status
    Daily
Charter
Rate
    Expiration of
Charter(1)
 

Magic Wand(2)

    2008       Korea     47,000   MR product tanker     Time Charter     $ 12,250       May 2022  

Clean Thrasher

    2008       Korea     47,000   MR product tanker     Spot  

Falcon Maryam

    2009       Korea     46,000   MR product tanker     Bareboat     $ 7,800       September 2022  

Stealth Berana

    2010       Korea     115,804   Aframax oil tanker     Spot  
      255,804 dwt        

 

(1)

Earliest date charters could expire.

(2)

The charterer has an option to extend the charter for an additional year at a daily charter rate of $14,500.

We plan to expand our fleet by investing in vessels, which may include vessels in other seaborne transportation sectors in addition to the product and crude tanker sectors, under favorable market conditions; however, we do not currently have any agreements or commitments to acquire additional vessels. We also intend to take advantage of the cyclical nature of the market by buying and selling ships when we believe favorable opportunities exist. We will deploy our fleet on a mix of period charters, including time and bareboat charters which can last up to several years, and spot market charters, which generally last from one to six months, according to our assessment of market conditions. As of September 30, 2021, two of our product tankers are employed under time and bareboat charter contracts respectively. As of September 30, 2021, approximately 50% of our remaining ship capacity days in 2021 and approximately 25% of our ship capacity days in 2022 are under contract.

The Vafias family, of which our President and Chief Executive Officer, Harry Vafias, is a member, will be our largest stockholder upon completion of the Spin-off Distribution. The Vafias family has been active in shipping for over 40 years. The Vafias family formed Stealth Maritime Corporation S.A., or Stealth Maritime, in 1999 which, as our fleet manager, will be responsible for all aspects of our administration and operations. During 2020, StealthGas and affiliates of our Manager Stealth Maritime owned or partially owned in total 75 vessels (including 19 tankers).

 

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Management of Our Fleet

All of our vessels will be managed by Stealth Maritime, a company controlled by members of the Vafias family, of which our Chief Executive Officer and largest shareholder is a member. We will enter into a management agreement with Stealth Maritime, prior to the Spin-Off Distribution, pursuant to which Stealth Maritime will provide us with technical, administrative, commercial and certain other services. In relation to the technical services, Stealth Maritime will be responsible for arranging for the crewing of the vessels, the day to day operations, inspections and vetting, maintenance, repairs, drydocking and insurance. Administrative functions include but are not limited to accounting, back-office, reporting, legal and secretarial services. In addition, Stealth Maritime will provide services for the chartering of our vessels and monitoring thereof, freight collection, and sale and purchase. In providing most of these services, Stealth Maritime pays third parties and receives reimbursement from us. In addition, Stealth Maritime subcontracts technical management and crew management for some of our vessels to third parties, including Hellenic Manning Overseas Inc. and Bernard Shulte Management based in Athens. These technical managers are supervised by Stealth Maritime.

Our management agreement, which we will enter into prior to the Spin-Off Distribution, will be substantially similar to the management agreement between StealthGas and Stealth Maritime relating to our vessels that were previously owned by StealthGas, including providing for the same fee levels. Under our management agreement we will pay Stealth Maritime a fixed management fee of $440 per vessel operating under a voyage or time charter per day on a monthly basis in advance, pro-rated for the calendar days we own the vessels. We will pay a fixed fee of $125 per vessel per day for each of our vessels operating on bareboat charter. We will also be obligated to pay Stealth Maritime a fee equal to 1.25% of the gross freight, demurrage and charter hire collected from the employment of our vessels. Stealth Maritime will also earn a fee equal to 1.0% of the contract price of any vessel bought or sold by them on our behalf. Additional vessels that we may acquire in the future may be managed by Stealth Maritime or by other unaffiliated management companies.

The initial term of our management agreement with Stealth Maritime will expire on December 31, 2025; Unless six months’ notice of non-renewal is given by either party prior to the end of the then current term, this agreement will automatically extend for additional 12-month periods.

Market Opportunity

The Company believes that the following current tanker industry trends create attractive market opportunities:

 

   

Advancements in technology, tanker modification, globalization and macroeconomic events are major drivers affecting the global tanker shipping market, and demand for seaborne transportation.

 

   

The tanker market remained under substantial pressure in the first ten months of 2021 as the impacts of the pandemic especially in seaborne oil transportation continued to affect demand for tanker transportation. As a result, crude tanker dwt demand is expected to contract by 0.5% in full year 2021 while signs of improvement are projected to be seen in 2022 where crude tanker dwt demand is expected to increase by 6%. Demand for product tankers in dwt terms is expected to increase by around 9% in full year 2021 supported by increasing demand for oil products and by around 6% in 2022 as demand for oil transportation further recovers and OPEC+ output restrictions ease out. (Clarkson Research Services (Oil and Tanker Trades Outlook, October 2021)).

 

   

We believe that increased scrapping activity apparent in 2020 and in the first ten months of 2021 (11.92 million dwt in the first ten months of 2021 as compared with 3.45 million dwt in full year 2020 and 3.35 million dwt in 2019) will be a trend that will continue in the longer term, as it is estimated that 7.4% of the existing fleet in each of the major shipping segments

 

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is older than 20 years (Clarkson Research Services (Oil and Tanker Trades Outlook, October 2021)). Specifically, we believe that the aging of the tanker fleet in combination with tighter environmental regulations for vessels to reduce CO2 emissions will result in a constrained fleet supply growth.

With regards to the broader shipping industry, we believe that the changing landscape creates new investment opportunities:

 

   

The COVID-19 pandemic remission has had a positive impact on seaborne demand across industries and sectors. It is expected that trade volumes will grow more strongly in 2022, which combined with older less efficient vessels being scrapped, should improve freight rates and secondhand prices.

 

   

The market outlook is heavily supported by new regulations. The International Maritime Organization (IMO) has implemented new regulations in order to reduce CO2 intensity on the shipping industry by at least 40% by 2030, and greenhouse gas emissions by 50% by 2050. This demand for more environmental sustainability in supply chains has given rise to new services, technologies and business processes which create a new framework around shipping investments and opportunities across all shipping sectors.

We can provide no assurance that the industry dynamics described above will continue or that we will be able to expand our business. For further discussion of the risks that we face, see “Risk Factors” beginning on page 26 of this prospectus.

Our Competitive Strengths

We believe that we possess the following competitive strengths:

 

   

Experienced Management Team and Manager. Our management team has significant experience in all aspects of commercial, technical, operational and financial areas of our business. Our Chief Executive Officer, Harry Vafias, has over 20 years of experience in the shipping industry, including the tanker, gas and drybulk sectors. Mr. Vafias is a member of the Vafias family, which has been active in shipping for over 40 years. As noted above, the Vafias family formed Stealth Maritime, S.A., in 1999 which, as our fleet manager, will be responsible for all aspects of our administration and operations.

 

   

Cost Efficient Vessel Operations. We believe that we have developed a reputation as an efficient and dependable vessel manager that maintains high standards of operation, vessel technical condition, safety and environmental protection. We believe that by relying on the experience of our fleet manager, Stealth Maritime, we will continue to contain our operating costs by making available to us the operating efficiencies and economies of scale enjoyed by Stealth Maritime and by using Stealth Maritime’s shipping experience in supervising the operations of the technical managers it employs for our fleet. Our total daily operating expenses, including general and administrative expenses and excluding management fees and drydocking expenses, were $5,041 per vessel per day for the year ended December 31, 2020 and $5,405 for the six months ended June 30, 2021 (during which time we had one vessel on bareboat charter). We actively manage our fleet and strive to maximize utilization and minimize maintenance expenditures. For the years ended December 31, 2019 and 2020 and the six months ended June 30, 2021, our fleet operational utilization was 99.7%, 95.7% and 92.3%, respectively.

 

   

Strong Relationships with Customers and Financial Institutions. We believe our management team, Stealth Maritime and the Vafias family, which has been active in the tanker market since 1999, have developed strong industry relationships and have gained acceptance with charterers,

 

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lenders and insurers because of long-standing reputation for safe and reliable service and financial responsibility through various shipping cycles. We believe our ability to attract high-quality charterers is a result of our focus on fulfilling our customers’ expectations for efficiency and reliability. Key to maintaining our relationships with these companies are high standards of safety and consistency of service. Our vessels, office and operations routinely pass the industry’s strictest vetting standards, which enables us to charter our fleet with major oil companies, oil and petrochemical traders.

Our Business Strategy

Our business strategy is focused on providing consistent shareholder returns by timing and structuring acquisitions of vessels and by reliably, safely and efficiently operating our vessels. We continuously evaluate purchase and sale opportunities, as well as employment opportunities for our vessels. Key elements of the above strategy are:

 

   

Renew and Expand our Fleet. We expect to grow our fleet in a disciplined manner through timely and selective acquisitions of quality vessels. We perform in-depth technical and condition assessment review of each potential acquisition and only purchase vessels as market opportunities present themselves. We focus on purchasing secondhand vessels, newbuildings or newbuilding resales based on the evaluation of each investment option at the time it is made.

 

   

Optimize Charter Mix. In the current product tanker and crude oil tanker charter market, we are mainly focusing on short to medium term charters, including time and bareboat charters, of one or two years. As the charter market changes and we grow our fleet, we may continue to adjust our chartering strategy to include longer duration term charters or a higher percentage of spot market charters. We seek to charter our vessels to high quality charterers as we have done in the past such as national and independent oil companies, energy traders and industrial companies.

 

   

Operate a High Quality Fleet. Our primary focus is the operation of medium and large-sized product tankers and crude oil tankers, and as we grow our fleet in the future potentially add vessels in other seaborne transportation sectors that we assess as exhibiting favorable market conditions. We believe that owning a high quality fleet reduces operating costs, improves safety and provides us with a competitive advantage in securing favorable charters. We limit our acquisition of vessels to those that meet rigorous industry standards and that are capable of meeting the stringent certification requirements of major oil companies. We maintain the quality of our vessels by carrying out regular inspections, both while in port and at sea, and adopting a comprehensive maintenance program for each vessel.

 

   

Maintain Financial Flexibility. We intend to use bank debt to partly fund our vessel acquisitions and increase financial returns for our shareholders. We intend to manage our balance sheet to maintain an adequate level of liquidity and actively assess the level and maturity profile of debt we incur in light of the level of cash flow generated from our chartering strategy and our efficient operating cost structure. We will have moderate leverage upon completion of the Spin-Off Distribution, which we believe will well position us to obtain additional financing and grow our fleet by pursuing selective acquisitions.

Risk Factors Summary

An investment in our securities is subject to a number of risks, including risks related to our industry, business and corporate structure. The following summarizes some, but not all, of these risks. Please carefully

 

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consider all of the information discussed in “Risk Factors” in this prospectus for a more thorough description of these and other risks.

 

   

The cyclical nature of the demand for seaborne transportation of oil and petroleum products, which is currently at low levels, may lead to significant changes in our chartering and vessel utilization, which may result in difficulty finding profitable charters for our vessels.

 

   

Economic and political factors, including increased trade protectionism and tariffs and health pandemics, such as the COVID-19 pandemic, could materially adversely affect our business, financial position and results of operations.

 

   

The COVID-19 pandemic will continue to have negative consequences for the shipping industry, including demand for oil and charter rates, which may continue to negatively affect our results of operations.

 

   

The tanker industry is highly dependent upon the crude oil and petroleum products industries, with the level of availability and demand for oil and petroleum products.

 

   

An over-supply of ships may lead to a reduction in charter rates, vessel values and profitability.

 

   

Our operations outside the United States expose us to global risks, such as political conflict, terrorism and public health concerns, which may interfere with the operation of our vessels.

 

   

We are subject to regulation and liability under environmental, health and safety laws that could require significant expenditures.

 

   

The small size of our fleet and 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 are dependent on the ability and willingness of our charterers to honor their commitments to us for all our revenues.

 

   

We are exposed to the volatile spot market and charters at attractive rates may not be available when the charters for our vessels expire which would have an adverse impact on our revenues and financial condition.

 

   

Unless we set aside reserves for vessel replacement, at the end of a vessel’s useful life, our revenue will decline, which would adversely affect our cash flows and income.

 

   

The market values of our vessels may decrease, which could cause us to breach covenants in our expected loan agreements, and could have a material adverse effect on our business, financial condition and results of operations.

 

   

Our fleet’s average age is above the average age of the global tanker fleet, and as our vessels age we may have difficulty competing with younger, more technologically advanced tankers for charters from oil majors and other top-tier charterers.

 

   

The book value of our vessels is currently substantially higher than their market value, and if we sell a vessel at a time when vessel prices have not increased, the sale may be for less than the vessel’s carrying value, which would result in a reduction in our profits.

 

   

We depend on our manager, Stealth Maritime, to operate our business.

Corporate Structure

The Company is a wholly-owned subsidiary of StealthGas and will be the sole owner of all outstanding shares of the subsidiaries listed in Exhibit 21.1 hereto. After the completion of the Spin-Off Distribution, we will


 

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no longer be a subsidiary of StealthGas and we will own each of the vessels in our current fleet through direct wholly-owned subsidiaries. The following diagram depicts our organizational structure before and following the completion of the Spin-Off Distribution (omits certain dormant, non-vessel owning subsidiaries of StealthGas):

 

LOGO

 

LOGO

Corporate Information

Imperial Petroleum Inc. is a holding company existing under the laws of the Marshall Islands. Our principal executive offices are located at 331 Kifissias Avenue, Erithrea 14561 Athens, Greece. Our telephone number from the United States is 011 30 210 625 0001. We will establish a website prior to the completion of the Spin-Off Distribution at www.imperialpetro.com. The information on or linked to on our website is not a part of this prospectus.

Other Information

Because we are incorporated under the laws of the Republic of the Marshall Islands, you may encounter difficulty protecting your interests as shareholders, and your ability to protect your rights through the U.S. federal court system may be limited. Please refer to the sections entitled “Risk Factors” and “Service of Process and Enforcement of Civil Liabilities” for more information.

 

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Implications of Being an “Emerging Growth Company”

We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”). As such, we are eligible, for up to five years, to take advantage of certain exemptions from various reporting requirements that are applicable to other publicly traded entities that are not emerging growth companies. These exemptions include:

 

   

the ability to present more limited financial data, including presenting only two years of audited financial statements and only two years of selected financial data in the registration statement on Form F-1 of which this prospectus is a part;

 

   

not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”); and

 

   

not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board (“PCAOB”) regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis).

We may take advantage of these provisions until the last day of our fiscal year following the fifth anniversary of the completion of the Spin-Off Distribution, such earlier time that we are no longer an emerging growth company. As a result, we do not know if some investors will find our common shares less attractive. The result may be a less active trading market for our common shares, and the price of our common shares may become more volatile.

We will remain an emerging growth company until the earliest of: (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.07 billion; (ii) the last day of the fiscal year following the fifth anniversary of the date of this offering; (iii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common shares that are held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter; or (iv) the date on which we have issued more than $1 billion in non-convertible debt securities during any three-year period.

In addition, the JOBS Act provides that an “emerging growth company” can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption, and therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

 

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THE SPIN-OFF DISTRIBUTION

 

Distributing company

StealthGas Inc.

 

Distributed company

Imperial Petroleum Inc.

 

Shares to be distributed

All of our 4,775,272 outstanding common shares and all of our 795,878 outstanding Series A Preferred Shares. StealthGas does not expect to retain any of our common shares or Series A Preferred Shares.

 

Distribution ratio and record date

One of our common shares and one of our Series A Preferred Shares will be distributed for every eight shares and forty-eight shares, respectively, of StealthGas common stock owned of record at the close of business on the record date of November 23, 2021.

 

  Prior to the Spin-Off Distribution, StealthGas will deliver 100% of the Company’s issued and outstanding common shares and 100% of the Company’s issued and outstanding Series A Preferred Shares to the distribution agent. American Stock Transfer & Trust Company, LLC will serve as distribution agent in connection with the Spin-Off Distribution and as transfer agent and registrar for the Company’s common shares and Series A Preferred Shares. See “Business – Mechanics of the Spin-Off Distribution.”

 

Fractional shares

Fractional common shares and Series A Preferred Shares will not be distributed. Instead, for registered shareholders, the distribution agent will aggregate fractional common shares and fractional Series A Preferred Shares into whole shares, sell such whole shares in the open market at prevailing rates promptly after our common shares and Series A Preferred Shares, respectively, commence trading on the Nasdaq Capital Market, and distribute the net cash proceeds from the sales, net of brokerage fees and other costs, pro rata to each holder who would otherwise have been entitled to receive fractional common shares or fractional Series A Preferred Shares in the distribution (net of any required withholding for taxes applicable to each holder). Holders of StealthGas common stock that hold their shares through a bank, broker, or nominee shall receive cash in lieu of fractional common shares and fractional Series A Preferred Shares, if any, determined in accordance with the policies of such bank, broker, or nominee. If a StealthGas shareholder holds fewer than eight shares of StealthGas common stock as of the record date, it will not receive any of our common shares and if a StealthGas shareholder owns fewer than forty-eight shares of StealthGas common stock as of the record date it will not receive any of our Series A Preferred Shares; however, the shareholder will receive a cash distribution from our distribution agent representing the proceeds from the sale of the fractional common shares and fractional Series A Preferred Shares, as applicable, to which the shareholder is entitled, net of brokerage fees

 

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and other costs. See “Business – Mechanics of the Spin-Off Distribution” in this prospectus for a more detailed explanation. If you receive cash in lieu of fractional common shares or fractional Series A Preferred Shares, you will not be entitled to any interest on the payments. The receipt of cash in lieu of fractional common shares and Series A Preferred Shares generally will be taxable to the recipient StealthGas shareholders that are subject to U.S. federal income tax as described in “Tax Considerations” below.

 

No payment required

No holder of shares of StealthGas common stock will be required to make any payment, exchange shares or to take any other action in order to receive our common shares or our Series A Preferred Shares.

 

Distribution date

The Spin-Off Distribution date will be on or about December 3, 2021.

 

Federal income tax consequences

For U.S. federal income tax purposes, our distribution of common shares, Series A Preferred Shares and cash in lieu of fractional shares to you in the Spin-Off Distribution is not expected to qualify as a tax-free corporate division for U.S. federal income tax purposes and as a result is expected to be treated for tax purposes like other distributions from StealthGas for such purposes. The total value of this Spin-Off Distribution, as well as your initial tax basis in our shares, will be determined by the trading price of our common shares and Series A Preferred Shares at the time of the Spin-Off Distribution. If you are a U.S. Holder (as defined under “Tax Considerations – United States Federal Income Taxation of U.S. Holders”), a portion of the value of this Spin-Off Distribution will be taxable to you as a dividend, to the extent of StealthGas’s current and accumulated earnings and profits as determined under U.S. federal income tax principles, and the remainder, if any, will be a treated as reduction in the adjusted tax basis in your shares of StealthGas common stock. The tax treatment of the Spin-Off Distribution is discussed below at “Tax Considerations – United States Federal Income Taxation of U.S. Holders.”

 

  You are encouraged to consult your own tax advisors concerning the overall tax consequences arising in your own particular situation under United States federal, state, local or foreign law of the distribution and ownership of Imperial Petroleum common shares and Series A Preferred Shares and cash in lieu of fractional shares.

 

Background and Purpose of the Spin-Off Distribution

StealthGas currently owns and operates both LPG carriers, product tankers and crude oil tankers. The Spin-Off Distribution will result in two “pure play” companies: StealthGas will own LPG carriers, and the Company will own only product and crude oil tankers, although StealthGas and Imperial Petroleum may in the future consider expansion into other seaborne transportation sectors. Historically, “pure play” ship-owning companies have tended to trade at levels that suggest higher valuations than ship-owning companies with mixed

 

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asset classes. StealthGas and the Company expect that the Spin-Off Distribution will result in an increase of shareholder value if the aggregate trading value of the two separate entities exceeds that of the trading value of StealthGas before the Spin-Off Distribution, as historical trends suggest. StealthGas and Imperial Petroleum also believe that the Spin-Off Distribution may better position both companies for potential sale or merger opportunities in the future.

 

Conditions to the Spin-Off Distribution Occurring

The Spin-Off Distribution and the transfer of StealthGas’ product and crude oil tanker subsidiaries to us is subject to, among other things, the approval of StealthGas’ Board of Directors, our entry into our new senior secured credit facility and the application of borrowings thereunder to refinance the existing indebtedness of StealthGas securing the vessels comprising our fleet, approval of our request for our common shares and Series A Preferred Shares to be listed on Nasdaq and the effectiveness of the registration statement of which this prospectus forms a part.

 

  The fulfillment of the foregoing conditions will not create any obligation on the part of StealthGas to effect the Spin-Off Distribution. We are not aware of any material federal or state regulatory requirements that must be complied with or any material approvals that must be obtained, other than compliance with SEC rules and regulations and the declaration of effectiveness of the Registration Statement by the SEC, in connection with the distribution. StealthGas has the right not to complete the Spin-Off Distribution if, at any time, the board of directors of StealthGas determines, in its sole discretion, that the Spin-Off Distribution is not in the best interests of StealthGas or its stockholders, or that market conditions are such that it is not advisable to effect the Spin-Off Distribution.

 

Conflicts of interest

Our principal officers have affiliations with our Manager that could create conflicts of interest that are detrimental to us. Companies affiliated with our Manager or our officers and directors may acquire vessels that compete with our fleet. In addition, our officers will not devote all of their time to our business, and the fiduciary duties of our officers and directors may conflict with those of the officers and directors of StealthGas and its affiliates. See also “Risk Factors” beginning on page 26.

 

Distribution agent, transfer agent and registrar

American Stock Transfer & Trust Company, LLC will serve as distribution agent in connection with the Spin-Off Distribution and as transfer agent and registrar for our common shares and for our Series A Preferred Shares.

 

Listing

There is currently no public market for our common shares. We have applied to list our common shares on the Nasdaq Capital Market under the symbol “IMPP.” We expect trading will commence on a

 

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“when issued” basis on or around the record date. The successful listing of our common shares does not ensure that an active trading market for our common shares will be available to you.

 

  There is currently no public market for our Series A Preferred Shares. We have applied to list our Series A Preferred Shares on the Nasdaq Capital Market under the symbol “IMPPP.” We expect trading will commence on a “when issued” basis on or around the record date. The successful listing of our Series A Preferred Shares does not ensure that an active trading market for our Series A Preferred Shares will be available to you.

Below is a summary of certain principal terms of the Series A Preferred Shares. For a detailed description of the Series A Preferred Shares, please read “Description of Capital Stock—Series A Preferred Shares”.

 

Conversion, Exchange and Preemptive Rights

The Series A Preferred Shares will not have any conversion or exchange rights or be subject or entitled to preemptive rights.

Dividends

Dividends on Series A Preferred Shares will accrue and be cumulative from the date that the Series A Preferred Shares are originally issued and will be payable on each Dividend Payment Date (as defined below) when, as and if declared by our board of directors or any authorized committee thereof out of legally available funds for such purpose.

 

Dividend Payment Dates

March 30, June 30, September 30 and December 30 (each, a “Dividend Payment Date”) commencing December 30, 2021. If any Dividend Payment Date otherwise would fall on a day that is not a Business Day (as defined herein), declared dividends will be payable on the next day that is a Business Day without the accumulation of additional dividends.

 

Dividend Rate

The dividend rate for the Series A Preferred Shares will be 8.75% per annum per $25.00 of liquidation preference per share (equal to $2.1875 per annum per share). The dividend rate is not subject to adjustment.

 

Dividend Calculations

Dividends payable on the Series A Preferred Shares for any dividend period will be calculated based on a 360-day year consisting of twelve 30-day months.

 

Ranking

The Series A Preferred Shares will represent perpetual equity interests in us and, unlike our indebtedness, will not give rise to a claim for payment of a principal amount at a particular date. The Series A Preferred Shares will rank:

 

   

senior to our common shares and to each other class or series of capital stock established after the original issue date of the

 

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Series A Preferred Shares that is expressly made junior to the Series A Preferred Shares as to the payment of dividends and amounts payable upon liquidation, dissolution or winding-up, whether voluntary or involuntary (collectively, “Junior Securities”);

 

   

pari passu with any other class or series of capital stock established after the original issue date of the Series A Preferred Shares that is not expressly subordinated or senior to the Series A Preferred Shares as to the payment of dividends and amounts payable upon liquidation, dissolution or winding-up, whether voluntary or involuntary (collectively, “Parity Securities”); and

 

   

junior to (i) all of our indebtedness and other liabilities with respect to assets available to satisfy claims against us, and (ii) each class or series of capital stock expressly made senior to the Series A Preferred Shares as to the payment of dividends and amounts payable upon liquidation, dissolution or winding-up, whether voluntary or involuntary (such shares described in this clause (ii), collectively, “Senior Securities”).

 

Payment of Dividends

Dividends may be declared by our board of directors and paid on any date fixed by our board of directors, whether or not a Dividend Payment Date, to holders of the Series A Preferred Shares on the record date for such payment, which may not be more than 60 days, nor less than 15 days, before such payment date. Subject to the next succeeding sentence, if all accumulated dividends in arrears on all issued and outstanding Series A Preferred Shares and any Parity Securities have not been declared and paid, or sufficient funds for the payment thereof have not been set apart, payment of accumulated dividends in arrears will be made in order of their respective dividend payment dates, commencing with the earliest such payment date. If less than all dividends payable with respect to all Series A Preferred Shares and any Parity Securities are paid, any partial payment will be made pro rata with respect to the Series A Preferred Shares and any Parity Securities entitled to a dividend payment at such time in proportion to the aggregate amounts remaining due in respect of such shares at such time. Holders of the Series A Preferred Shares will not be entitled to any dividends, whether payable in cash, property or shares, in excess of full cumulative dividends. The holders of Series A Preferred Shares will not receive interest on unpaid dividends.

 

Optional Redemption

We may redeem, at our option, in whole or from time to time in part, the Series A Preferred Shares (i) on or after June 30, 2022 and prior to June 30, 2023, at a price equal to $26.00 per Series A Preferred Share, (ii) on or after June 30, 2023 and prior to June 30, 2024, at a price equal to $25.75 per Series A Preferred Share, (iii) on or after June 30, 2024 and prior to June 30, 2025, at a price equal to $25.50 per Series A Preferred Share, (iv) on or after June 30, 2025 and prior to June 30, 2026, at a price equal to $25.25 per Series A Preferred Share, and

 

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(v) on or after June 30, 2026, at a price equal to $25.00 per Series A Preferred Share, in each case plus an amount equal to all accumulated and unpaid dividends thereon to (but not including) the date of redemption, whether or not declared. Any such optional redemption may be effected only out of funds legally available for such purpose.

 

  We must provide not less than 30 days’ and not more than 60 days’ written notice of any such redemption.

 

Redemption Upon a Change of Control

If a “Change of Control” occurs, the Company shall have the right to redeem the Series A Preferred Shares, in whole but not in part, within 90 days of the occurrence of the Change of Control, at a price, prior to December 31, 2023, equal to $26.50 per Series A Preferred Share, plus accrued but unpaid dividends, whether or not declared (a “Change of Control Redemption”). On or after December 31, 2023, the redemption price with respect to a Change of Control Redemption will be the same as for an optional redemption as set forth under “Optional Redemption” above. See “Description of Series A Preferred Shares–Redemption Upon a Change of Control.”

 

Voting Rights

Holders of the Series A Preferred Shares generally have no voting rights. However, if and whenever dividends payable on the Series A Preferred Shares are in arrears for six or more quarterly periods, whether or not consecutive, holders of Series A Preferred Shares (voting together as a class with holders of any Parity Securities upon which like voting rights have been conferred and are exercisable) will, subject to certain exceptions, be entitled to elect one additional directors to serve on our board of directors unless the size of our board of directors already has been increased by reason of the election of a director by holders of Parity Securities upon which like voting rights have been conferred. This right will continue until we pay, or declare and set apart for payment, all cumulative dividends on the Series A Preferred Shares.

 

  Unless we have received the affirmative vote or consent of the holders of at least two-thirds of the outstanding Series A Preferred Shares, voting as a single class, we may not (i) adopt any amendment to our articles of incorporation or statement of designations, that adversely varies the preferences, powers or rights of the Series A Preferred Shares in any material respect, (ii) issue any Parity Securities if the cumulative dividends payable on outstanding Series A Preferred Shares are in arrears, or (iii) create or issue any Senior Securities.

 

 

Except as noted above, no vote or consent of the holders of Series A Preferred Shares is required for (i) creation or incurrence of any indebtedness, (ii) authorization or issuance of any Parity Securities or common shares or other Junior Securities, or (iii) authorization or issuance of any preferred shares of any series, including additional

 

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Series A Preferred Shares. Please read “Description of Series A Preferred Shares—Voting Rights.”

 

Fixed Liquidation Price

In the event of any liquidation, dissolution or winding-up of our affairs, whether voluntary or involuntary, holders of the Series A Preferred Shares will have the right to receive the liquidation preference of $25.00 per share plus an amount equal to all accumulated and unpaid dividends thereon to (but not including) the date of payment, whether or not declared, before any payments are made to holders of our common shares or any other Junior Securities.

 

Sinking Fund

The Series A Preferred Shares will not be subject to any sinking fund requirements.

 

Ratings

The Series A Preferred Shares will not be rated by any nationally recognized statistical rating organization.

 

Form

The Series A Preferred Shares will be issued and maintained in book-entry form registered in the name of the nominee of The Depository Trust Company, or DTC, except under limited circumstances.

 

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THE COMPANY

 

General

We were incorporated by StealthGas to serve as the holding company of four subsidiaries that will be contributed by StealthGas to the Company in connection with the Spin-Off Distribution.

 

Business

We are a provider of international seaborne transportation services to oil producers, refineries and commodities traders. As of the date of the Spin-Off Distribution, we will own and operate a fleet of three medium range product tankers that carry refined petroleum products such as gasoline, diesel, fuel oil and jet fuel, as well as edible oils and chemicals, and one Aframax tanker which is used for carrying crude oil.

 

Management

Mr. Harry N. Vafias is our President and Chief Executive Officer and Ifigeneia Sakellari is our Interim Chief Financial Officer. Our fleet is managed by Stealth Maritime S.A., a management company affiliated with the family of our Chief Executive Officer. See “Management.”

 

Dividends

The declaration and payment of dividends, if any, on our common shares will be subject to the discretion of our Board of Directors, the requirements of Marshall Islands law and restrictions in our loan agreements, and are subject to the priority of our Series A Preferred Shares. See “Common Shares Dividend Policy.”

 

  The dividend rate for the Series A Preferred Shares will be 8.75% per annum per $25.00 of liquidation preference per share (equal to $2.1875 per annum per share). The dividend rate is not subject to adjustment. Dividends accrue from the original issue date of the Series A Preferred Shares and are payable on March 30, June 30, September 30 and December 30, commencing December 30, 2021, when, as and if declared by our Board of Directors. See “Description of our Capital Stock – Series A Preferred Shares—Dividends.”

 

Risk factors

An investment in our common shares or Series A Preferred Shares involves substantial risks. You should read this prospectus carefully, including the section entitled “Risk Factors” and the combined financial statements and the related notes to those statements included elsewhere in this prospectus in connection with the distribution of the common shares and Series A Preferred Shares.

 

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SUMMARY COMBINED CARVE-OUT FINANCIAL AND OTHER DATA

The following table presents selected combined carve-out financial and other operating data for the periods and at the dates indicated. Our historical combined carve-out financial statements were prepared on a carve-out basis from the financial statements of our parent company, StealthGas. These carve-out financial statements include all assets, liabilities and results of operations of the four subsidiaries owned by us, formerly wholly-owned subsidiaries of StealthGas, for the periods presented.

The table should be read together with the section of this prospectus entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operation.” Excluding fleet data, the selected combined carve-out financial data of Imperial Petroleum Inc. Predecessor as of and for the years ended December 31, 2019 and 2020 is a summary of, is derived from, and is qualified by reference to, the audited combined carve-out financial statements of Imperial Petroleum Inc. Predecessor and notes thereto. Excluding fleet data, the selected combined carve-out financial data of Imperial Petroleum Inc. Predecessor as of June 30, 2021 and for the six months ended June 30, 2020 and 2021 is a summary of, is derived from, and is qualified by reference to, the unaudited combined carve-out financial statements of Imperial Petroleum Inc. Predecessor and notes thereto. The combined carve-out financial statements of Imperial Petroleum Inc. Predecessor have been prepared in accordance with U.S. generally accepted accounting principles, or “U.S. GAAP.”

Our combined carve-out statements of operations, balance sheets, shareholders’ equity and cash flows, together with the notes thereto, are included in the section of this prospectus entitled “Financial Statements” and should be read in their entirety.

Imperial Petroleum Inc. Predecessor – Summary of Selected Historical Financials

(in US Dollars except for Fleet Data and number of shares)

 

     Year Ended December 31,     Six Months Ended
June 30,
 
Statement of Operations Data    2019     2020     2020
(Unaudited)
    2021
(Unaudited)
 

Voyage revenues

     13,329,640       20,302,052       8,959,965       9,226,877  

Voyage expenses

     572,553       3,194,312       758,922       1,931,781  

Vessel operating expenses

     3,799,700       7,160,594       3,396,061       3,737,123  

Dry-docking costs

     22,265       935,565       20,775       —    

Vessel depreciation

     8,613,177       8,643,920       4,306,588       4,337,331  

Management fees-related party

     365,515       503,355       237,475       261,545  

General and administrative expenses-related party

     331,408       219,717       103,179       176,162  

(Loss)/income from operations

     (374,978     (355,411     136,965       (1,217,065

Other financing costs

     (7,663     (10,008     (8,632     (3,376

Other income/(expenses)

     7,457       (28,342     (369     (8,283

Net (loss)/income

     (375,184     (393,761     127,964       (1,228,724

 

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     As of December 31,      As of June 30,
2021
(Unaudited)
 
Balance Sheet Data    2019      2020  

Cash and cash equivalents

     8,802,847        6,451,524        3,282,775  

Current assets

     9,195,772        9,431,958        6,479,253  

Vessels, net

     136,410,967        128,689,447        124,300,316  

Total assets

     145,606,739        138,121,405        130,779,569  

Current liabilities

     1,925,168        4,059,482        4,279,838  

Total liabilities

     1,925,168        4,059,482        4,279,838  

Net parent investment

     143,681,571        134,061,923        126,499,731  

 

     Year Ended December 31,     Six Months Ended June 30,  
Cash Flow Data    2019     2020     2020
(Unaudited)
    2021
(Unaudited)
 

Net cash provided by operating activities

     8,573,456       8,867,595       5,093,147       3,307,319  

Net cash used in investing activities

     —         (728,000     —         (142,600

Net cash used in financing activities

     (4,168,177     (9,325,887     (5,681,621     (6,333,468

Imperial Petroleum Inc. Predecessor – Summary of Selected Historical Financials (continued)

 

     Year Ended December 31,     Six Months Ended June 30,  
Fleet Data            2019                     2020                     2020                     2021          

Average number of vessels(1)

     4.0       4.0       4.0       4.0  

Total voyage days for fleet(2)

     1,456       1,417       724       712  

Total time charter days for fleet(3)

     569       615       376       350  

Total bareboat charter days for fleet(3)

     880       446       262       181  

Total spot market days for fleet(4)

     7       356       86       181  

Total calendar days for fleet(5)

     1,460       1,464       728       724  

Fleet utilization(6)

     99.7     96.8     99.5     98.3

Fleet operational utilization(7)

     99.7     95.7     99.5     92.3
Average Daily Results    (In U.S. dollars per day per vessel)  

Adjusted average charter rate(8)

     8,762       12,073       11,327       10,246  

Vessel operating expenses(9)

     2,603       4,891       4,665       5,162  

General and administrative expenses(10)

     227       150       142       243  

Management fees(11)

     250       344       326       361  

Total daily operating expenses(12)

     2,830       5,041       4,807       5,405  

 

(1)

Average number of vessels is the number of owned vessels that constituted our fleet 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.

(2)

Our total voyage days for our fleet reflect the total days the vessels we operated were in our possession for the relevant periods, net of off-hire days associated with major repairs, drydockings or special or intermediate surveys.

(3)

Total time and bareboat charter days for fleet are the number of voyage days the vessels in our fleet operated on time or bareboat charters for the relevant period.

(4)

Total spot market charter days for fleet are the number of voyage days the vessels in our fleet operated on spot market charters for the relevant period.

(5)

Total calendar days are the total days the vessels we operated were in our possession for the relevant period including off-hire days associated with major repairs, drydockings or special or intermediate surveys.

 

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(6)

Fleet utilization is the percentage of time that our vessels were available for revenue generating voyage days, and is determined by dividing voyage days by fleet calendar days for the relevant period.

(7)

Fleet operational utilization is the percentage of time that our vessels generated revenue, and is determined by dividing voyage days excluding commercially idle days by fleet calendar days for the relevant period.

(8)

Adjusted average charter rate is a measure of the average daily revenue performance of a vessel on a per voyage basis. We determine the adjusted average charter rate by dividing voyage revenue net of voyage expenses by voyage days for the relevant time period. Voyage expenses primarily consist of port, canal and fuel costs that are unique to a particular voyage and are payable by us under a spot charter (which would otherwise be paid by the charterer under a time or bareboat charter contract), as well as commissions or any voyage costs incurred while the vessel is idle. Charter equivalent revenues and adjusted average charter rate are non-GAAP measures which provide additional meaningful information in conjunction with voyage revenues, the most directly comparable GAAP measure, because they assist Company management in making decisions regarding the deployment and use of its vessels and in evaluating their financial performance. They are also standard shipping industry performance measures used primarily to compare period-to-period changes in a shipping company’s performance despite changes in the mix of charter types (i.e., spot charters or time charters, but not bareboat charters) under which the vessels may be employed between the periods. Our calculation of charter equivalent revenues and adjusted average charter rate may not be comparable to that reported by other companies in the shipping or other industries. Under bareboat charters, we are not responsible for either voyage expenses, unlike spot charters, or vessel operating expenses, unlike spot charters and time charters; Reconciliation of charter equivalent revenues as reflected in the consolidated statements of operations and calculation of adjusted average charter rate follow:

 

     Year Ended December 31,      Six Months Ended  
     2019      2020      2020      2021  

Voyage revenues

   $ 13,329,640      $ 20,302,052      $ 8,959,965      $ 9,226,877  

Voyage expenses

   $ 572,553      $ 3,194,312      $ 758,922      $ 1,931,781  

Charter equivalent revenues

   $ 12,757,087      $ 17,107,740      $ 8,201,043      $ 7,295,096  

Total voyage days for fleet

     1,456        1,417        724        712  

Adjusted average charter rate

   $ 8,762      $ 12,073      $ 11,327      $ 10,246  

 

(9)

Vessel operating expenses, including related party vessel operating expenses, consist of crew costs, provisions, deck and engine stores, lubricating oil, insurance, maintenance and repairs, is calculated by dividing vessel operating expenses by fleet calendar days for the relevant time period.

(10)

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

(11)

Management fees are based on a fixed rate management fee of $440 per day for each vessel in our fleet under spot or time charter and a fixed rate fee of $125 per day for each of the vessels operating on bareboat charter. Daily management fees are calculated by dividing total management fees by fleet calendar days for the relevant period.

(12)

Total operating expenses, or “TOE”, is a measurement of our total expenses associated with operating our vessels. TOE is the sum of vessel operating expenses and general and administrative expenses. Daily TOE is calculated by dividing TOE by fleet calendar days for the relevant time period.

 

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RISK FACTORS

Any investment in our common shares and Series A Preferred Shares involves a high degree of risk. You should consider carefully the following factors, as well as the other information set forth in this prospectus, before making an investment in our common shares and Series A Preferred Shares. Some of the following risks relate principally to the industry in which we operate and our business in general. Other risks relate to the securities market for, and ownership of, our common shares and Series A Preferred Shares. Any of the described risks could significantly and negatively affect our business, financial condition, operating results and prices of our common shares and Series A Preferred Shares. The following risk factors describe the material risks that are presently known to us.

Industry Risk Factors

The tanker industry is cyclical and volatile, which may adversely affect our earnings and available cash flow.

The tanker industry is both cyclical and volatile in terms of charter rates and profitability. Periodic adjustments to the supply of and demand for crude oil and product tankers cause the industry to be cyclical in nature. We expect continued volatility in market rates for our vessels in the foreseeable future with a consequent effect on our short and medium-term liquidity. A worsening of current global economic conditions may cause tanker charter rates to decline and thereby adversely affect our ability to charter or re-charter our vessels and any renewal or replacement charters that we enter into, may not be sufficient to allow us to operate our vessels profitably. Fluctuations in charter rates and vessel values result from changes in the supply and demand for tanker capacity and changes in the supply and demand for oil and oil products. The factors affecting the supply and demand for tankers are outside of our control, and the nature, timing and degree of changes in industry conditions are unpredictable.

The factors that influence demand for tanker capacity include:

 

   

supply and demand for energy resources and oil and petroleum products;

 

   

regional availability of refining capacity and inventories compared to geographies of oil production regions;

 

   

national policies regarding strategic oil inventories (including if strategic reserves are set at a lower level in the future as oil decreases in the energy mix);

 

   

global and regional economic and political conditions, including armed conflicts, terrorist activities, embargoes and strikes;

 

   

currency exchange rates;

 

   

the distance over which oil and oil products are to be moved by sea;

 

   

changes in seaborne and other transportation patterns;

 

   

changes in governmental or maritime self-regulatory organizations’ rules and regulations or actions taken by regulatory authorities;

 

   

environmental and other legal and regulatory developments;

 

   

weather and natural disasters;

 

   

developments in international trade, including those relating to the imposition of tariffs;

 

   

competition from alternative sources of energy; and

 

   

international sanctions, embargoes, import and export restrictions, nationalizations and wars.

The factors that influence the supply of tanker capacity include:

 

   

supply and demand for energy resources and oil and petroleum products;

 

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demand for alternative sources of energy;

 

   

the number of newbuilding orders and deliveries, including slippage in deliveries;

 

   

the number of vessel casualties;

 

   

technological advances in tanker design and capacity;

 

   

the number of shipyards and ability of shipyards to deliver vessels;

 

   

availability of financing for new vessels and shipping activity;

 

   

the degree of scrapping or recycling rate of older vessels, depending, amongst other things, on scrapping or    recycling rates and international scrapping or recycling regulations;

 

   

price of steel and vessel equipment;

 

   

the number of conversions of tankers to other uses or conversions of other vessels to tankers;

 

   

the number of product tankers trading crude or “dirty” oil products (such as fuel oil);

 

   

the number of vessels that are out of service, namely those that are laid up, drydocked, awaiting repairs or otherwise not available for hire;

 

   

changes in government and industry environmental and other regulations that may limit the useful lives of tankers and environmental concerns and regulations;

 

   

product imbalances (affecting the level of trading activity);

 

   

developments in international trade, including refinery additions and closures;

 

   

port or canal congestion; and

 

   

speed of vessel operation.

In addition to the prevailing and anticipated freight rates, factors that affect the rate of newbuilding, scrapping and laying-up include newbuilding prices, secondhand vessel values in relation to scrap prices, costs of bunkers and other operating costs, costs associated with classification society surveys, normal maintenance costs, insurance coverage costs, the efficiency and age profile of the existing tanker fleet in the market, and government and industry regulation of maritime transportation practices, particularly environmental protection laws and regulations. These factors influencing the supply of and demand for shipping capacity are outside of our control, and we may not be able to correctly assess the nature, timing and degree of changes in industry conditions.

We anticipate that the future demand for our tankers will be dependent upon economic growth in the world’s economies, seasonal and regional changes in demand, changes in the capacity of the global tanker fleet and the sources and supply of oil and petroleum products to be transported by sea. Given the number of new tankers currently on order with shipyards, the capacity of the global tanker fleet seems likely to increase and there can be no assurance as to the timing or extent of future economic growth. Adverse economic, political, social or other developments could have a material adverse effect on our business and operating results.

Declines in oil and natural gas prices for an extended period of time, or market expectations of potential decreases in these prices, could negatively affect our future growth in the tanker sector. Sustained periods of low oil and natural gas prices typically result in reduced exploration and extraction because oil and natural gas companies’ capital expenditure budgets are subject to cash flow from such activities and are therefore sensitive to changes in energy prices. These changes in commodity prices can have a material effect on demand for our services, and periods of low demand can cause excess vessel supply and intensify the competition in the industry, which often results in vessels, particularly older and less technologically-advanced vessels, being idle for long periods of time. We cannot predict the future level of demand for our services or future conditions of the oil and natural gas industry. Any decrease in exploration, development or production expenditures by oil and natural gas companies could reduce our revenues and materially harm our business, results of operations and cash available for distribution.

 

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Various economic and political factors, including increased trade protectionism and tariffs and health pandemics, such as the COVID-19 pandemic, could materially adversely affect our business, financial position and results of operations, as well as our future prospects.

Our business and operating results have been, and will continue to be, affected by global and regional economic conditions. The recovery of the global economy from the severe decline in prior years remains subject to downside risks. In particular, an adverse change in economic conditions affecting China, Japan, India or Southeast Asia generally could have a negative effect on the demand for refined petroleum products and oil, thereby adversely affecting our business, financial position and results of operations, as well as our future prospects. In recent years China and India have been among the world’s fastest growing economies in terms of gross domestic product, and any economic slowdown in the Asia Pacific region particularly in China or India may adversely affect demand for seaborne transportation of refined petroleum products and oil demand and our results of operations. Moreover, any deterioration in the economy of the United States or the European Union (“EU”), may further adversely affect economic growth in Asia. In addition, although to date, the continuing adverse economic conditions in Greece have not had an adverse effect on our managers’ operations, the slow recovery of, and any renewed deterioration in, the Greek economy may result in the imposition of new regulations that may require us to incur new or additional compliance or other administrative costs and may require that we pay to the Greek government new taxes or other fees. Our business, financial position and results of operations, as well as our future prospects, could be adversely affected by adverse economic conditions in any of these countries or regions.

The imposition by the U.S., China or other governments of protectionist trade measures, including tariffs and other trade restrictions, the exit of the United Kingdom from the EU, the continuing war in Syria, renewed terrorist attacks around the world and the refugee crisis could also adversely affect global economic conditions and the world oil and petroleum markets and in turn the demand for seaborne transportation of these commodities. The global response to the emergence of a pandemic crisis such as the COVID-19 pandemic and the economic impact thereof adversely affected our financial performance in 2020, and could have a material adverse effect on our future financial performance, particularly for our vessels operating in the spot market and with charters expiring in the first half of 2022, if the recent improvement in global economic conditions and energy demand falters, due to vaccines and other measures failing to effectively contain the pandemic or otherwise.

Global economic conditions and disruptions in world financial markets, including renewed disruptions as a consequence of the current COVID-19 pandemic, and the resulting governmental action could have a material adverse impact on our results of operations, financial condition and cash flows.

Global financial markets and economic conditions have been disrupted and volatile at times over the past decade, including in 2020 and early 2021 as a result of the COVID-19 pandemic. While the global economy had improved in recent years, the recent outbreak of COVID-19 has dramatically disrupted the global economy. This may also prolong tight credit markets and potentially cause such conditions to become more severe. These issues, along with the limited supply of credit to the shipping industry and the re-pricing of credit risk and the difficulties currently experienced by financial institutions, have made, and will likely continue to make, it difficult to obtain financing, all of which could be exacerbated by the COVID-19 pandemic. As a result of the disruptions in the credit markets and higher capital requirements, many lenders had already in prior years increased margins on lending rates, enacted tighter lending standards, required more restrictive terms (including higher collateral ratios for advances, shorter maturities and smaller loan amounts), or refused to refinance existing debt on terms similar to existing debt or at all, which may also be further negatively impacted by the COVID-19 pandemic. Furthermore, certain banks that have historically been significant lenders to the shipping industry have reduced or ceased lending activities in the shipping industry in recent years. New banking regulations, including tightening of capital requirements and the resulting policies adopted by lenders, could further reduce lending activities. We may experience difficulties in obtaining financing commitments, or be unable to fully draw on the capacity under our committed credit facilities in the future, or refinance our credit facilities when our current facilities mature if our lenders are unwilling to extend financing to us or unable to

 

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meet their funding obligations due to their own liquidity, capital or solvency issues. We cannot be certain that financing will be available on acceptable terms or at all. In the absence of available financing, we also may be unable to take advantage of business opportunities or respond to competitive pressures.

The COVID-19 pandemic and the resulting disruptions to the international shipping industry and decreased energy demand may continue to negatively affect our business, financial performance and our results of operations, including our ability to obtain charters and financing.

The COVID-19 pandemic has led a number of countries, ports and organizations to take measures against its spread, such as quarantines and restrictions on travel. Such measures were taken initially in Chinese ports, where we conduct a significant amount of our operations, and expanded to other countries globally covering most ports where we conduct business. These measures have and will likely continue to cause severe trade disruptions due to, among other things, the unavailability of personnel, supply chain disruption, interruptions of production, delays in planned strategic projects and closure of businesses and facilities.

The COVID-19 pandemic has introduced uncertainty in a number of areas of our business, including our operational, commercial and financial activities. It also negatively impacted global economic activity and demand for energy, including refined petroleum products and oil, in the second half of 2020 and the first ten months of 2021, and despite some recovery recently, may continue to negatively impact global economic activity and demand for energy. The global response to the outbreak and the economic impact thereof, in particular decreased energy demand and lower oil prices, adversely affected our ability to secure charters at profitable rates in 2020 and 2021, and may continue to do so, particularly for our vessels operating in the spot market and with charters expiring in the first half of 2022 that may then operate in the spot market, as demand for additional charters may continue to be affected. These factors could also have a material adverse effect on the business of our charterers, which could adversely affect their ability and willingness to perform their obligations under our existing charters as well as decreasing demand for future charters. COVID-19 is also affecting oil major vetting processes, which could lead to the loss of oil major approvals to conduct business with us and in turn the loss of revenue under existing charters or future chartering opportunities.

Travel restrictions imposed on a global level also caused disruptions in scheduled crew changes on our vessels and delays in carrying out of certain hull repairs and maintenance during 2020, which disruptions could also continue to affect our operations. Our business and the shipping industry as a whole may continue to be impacted by a reduced workforce and delays of crew changes as a result of quarantines applicable in several countries and ports, as well as delays in the construction of newbuild vessels, scheduled drydockings, intermediate or special surveys of vessels and scheduled and unscheduled ship repairs and upgrades. In addition, any case of COVID-19 amongst crew, could result in a quarantine period for that vessel and, in turn, loss of charter hire and additional costs, as occurred for one of our vessels during the second quarter of 2021. Complications relating to changing crews due to restrictions in various ports throughout the world increased the costs related to these activities in 2020 and 2021 and may continue to do so. Prolongment of the COVID-19 pandemic could impact credit markets and financial institutions and result in increased interest rate spreads and other costs of, and difficulty in obtaining bank financing, our ability to finance the purchase price of vessel acquisitions, which could limit our ability to grow our business in line with our strategy.

A resurgence of the declines in the price of oil experienced in 2020 and early 2021, in part due to the COVID-19 outbreak, before some recent recovery, and changes in production by oil producing countries, could reduce demand for oil and oil products and generally lead to reduced production of oil. Reduced demand for oil and seaborne transportation of petroleum products and crude oil would have an adverse effect on our future growth and would harm our business, results of operations and financial condition.

Failure of the continued spread of the COVID-19 virus to be controlled, including due to the emergence of variants such as Delta, could significantly impact economic activity, and demand for petroleum products and crude oil shipping, which could further negatively affect our business, financial condition, results of operations and cashflows.

 

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The tanker industry is highly dependent upon the crude oil and petroleum products industries.

The employment of our subsidiaries’ vessels is driven by the availability of and demand for crude oil and petroleum products, the availability of modern tanker capacity and the scrapping, conversion, or loss of older vessels. Historically, the world oil and petroleum markets have been volatile and cyclical because of the many conditions and events that affect the supply, price, production and transport of oil, including:

 

   

increases and decreases in the demand and price for crude oil and petroleum products;

 

   

availability of crude oil and petroleum products;

 

   

demand for crude oil and petroleum product substitutes, such as natural gas, coal, hydroelectric power and other alternate sources of energy that may, among other things, be affected by environmental regulation;

 

   

actions taken by OPEC and major oil producers and refiners;

 

   

political turmoil in or around oil producing nations;

 

   

global and regional political and economic conditions;

 

   

developments in international trade;

 

   

international trade sanctions;

 

   

environmental factors;

 

   

natural catastrophes;

 

   

terrorist acts;

 

   

weather; and

 

   

changes in seaborne and other transportation patterns.

Despite turbulence in the world economy at times in recent years, worldwide demand for oil and oil products has continued to rise; however, the COVID-19 pandemic has caused demand for oil and oil products to stagnant. In the event that this recent softness persists and the long-term trend falters, the production of and demand for crude oil and petroleum products will encounter pressure which could lead to a decrease in shipments of these products and consequently this would have an adverse impact on the employment of our vessels and the charter rates that they command. Also, if oil prices decline to levels that are uneconomic for producers, it may lead to declining output. As a result of any reduction in demand or output, the charter rates that we earn from our vessels employed on charters related to market rates may decline, as they have since the second half of 2020, and possibly remain at low levels for a prolonged period.

An over-supply of ships may lead to a reduction in charter rates, vessel values and profitability.

The market supply of tankers is affected by a number of factors, such as supply and demand for energy resources, including oil and petroleum products, supply and demand for seaborne transportation of such energy resources, and the current and expected purchase orders for new-buildings. If the capacity of new tankers delivered exceeds the capacity of such vessel types being scrapped and converted to non-trading vessels, global fleet capacity will increase. If the supply of tanker capacity, for the vessel class sizes comprising our fleet in particular, increases, and if the demand for the capacity of such vessel types decreases, or does not increase correspondingly, charter rates could materially decline. A reduction in charter rates and the value of our vessels may have a material adverse effect on our results of operations.

 

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The market values of our vessels may remain at relatively low levels for a prolonged period and over time may fluctuate significantly. When the market values of our vessels are low, we may incur a loss on sale of a vessel or record an impairment charge, which may adversely affect our profitability and possibly lead to defaults under our loan agreements.

The market value of our vessels may fluctuate significantly, and these experienced significant declines during the economic crisis. Tanker values are currently at relatively low levels and remain well below the highs reached in 2007 and 2008. The market values of our vessels are subject to potential significant fluctuations depending on a number of factors including:

 

   

general economic and market conditions affecting the shipping industry;

 

   

age, sophistication and condition of our vessels;

 

   

types and sizes of vessels;

 

   

availability of other modes of transportation;

 

   

cost and delivery of schedules for new-buildings;

 

   

governmental and other regulations;

 

   

supply and demand for refined petroleum products;

 

   

the prevailing level of product tanker charter rates and crude oil tanker rates; and

 

   

technological advances.

The book value of our vessels is currently substantially higher than their market value. Although we believe that, with respect to each of these vessels, we will recover their carrying values at the end of their useful lives, based on their undiscounted cash flows, if we sell vessels at a time when vessel prices have not increased, the sale may be for less than the vessel’s carrying value in our financial statements, resulting in a reduction in profitability. Furthermore, if vessel values or anticipated future cash flows experience further declines, we may have to record an impairment adjustment in our financial statements, which would also result in a reduction in our profits. If the market value of our fleet declines, we may not be in compliance with certain provisions of our potential loan agreements and we may not be able to refinance our debt or obtain additional financing or, if instituted, pay dividends. If we are unable to pledge additional collateral, our lenders could accelerate our debt and foreclose on our fleet. The loss of our vessels would mean we could not run our business.

If we cannot meet our charterers’ quality and compliance requirements, including regulations or costs associated with the environmental impact of our vessels, we may not be able to operate our vessels profitably which could have an adverse effect on our future performance, results of operations, cash flows and financial position.

Customers, and in particular oil majors and large oil traders, have a high and increasing focus on quality, emissions and compliance standards with their suppliers across the entire value chain, including shipping and transportation. There is also increasing focus on the environmental footprint of marine transportation. Our continuous compliance with existing and new standards and quality requirements is vital for our operations. Related risks could materialize in multiple ways, including a sudden and unexpected breach in quality and/or compliance concerning one or more vessels and/or a continuous decrease in the quality concerning one or more tankers occurring over time. Moreover, continuously increasing requirements from oil and gas industry constituents can further complicate our ability to meet the standards. Any non-compliance by us, either suddenly or over a period of time, or an increase in requirements by our charterers above and beyond what we deliver, may have a material adverse effect on our future performance, results of operations, cash flows, financial position and our ability to pay cash dividends to our shareholders.

We are subject to regulation and liability under environmental laws that could require significant expenditures and affect our financial conditions and results of operations.

Our business and the operation of our vessels are materially affected by government regulation in the form of international conventions and national, state and local laws and regulations in force in the jurisdictions in

 

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which the vessels operate, as well as in the country or countries of their registration. These regulations include, but are not limited to the U.S. Oil Pollution Act of 1990, or OPA, that establishes an extensive regulatory and liability regime for the protection and cleanup of the environment from oil spills and applies to any discharges of oil from a vessel, including discharges of fuel oil (bunkers) and lubricants, the U.S. Clean Air Act, U.S. Clean Water Act and the U.S. Marine Transportation Security Act of 2002, and regulations of the International Maritime Organization, or the IMO, including the International Convention for the Prevention of Pollution from Ships of 1975, the International Convention for the Prevention of Marine Pollution of 1973, and the International Convention for the Safety of Life at Sea of 1974. To comply with these and other regulations, including the January 1, 2020 entry into force of the MARPOL Annex VI sulfur emission requirements instituting a global 0.5% (lowered from 3.5%) sulfur cap on marine fuels used by vessels not equipped with scrubbers and the International Convention for the Control and Management of Ships’ Ballast Water and Sediments (the “BWM Convention”), which requires vessels to install expensive ballast water treatment systems, we may be required to incur additional costs to meet maintenance and inspection requirements, to develop contingency plans for potential spills, and to obtain additional insurance coverage. Environmental laws and regulations are often revised, and we cannot predict the ultimate cost of complying with them, or the impact they may have on the resale prices or useful lives of our vessels. However, 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. Additional laws and regulations may be adopted which could limit our ability to do business or increase the cost of our doing business and which could materially adversely affect our operations. We are also required by various governmental and quasi-governmental agencies to obtain permits, licenses, certificates and financial assurances with respect to our operations. These permits, licenses, certificates and financial assurances may be issued or renewed with terms that could materially and adversely affect our operations.

The operation of our vessels is affected by the requirements set forth in the International Management Code for the Safe Operation of Ships and Pollution Prevention (“ISM Code”). The ISM Code requires ship owners and bareboat charterers to develop and maintain an extensive “Safety Management System” (“SMS”) that includes the adoption of a safety and environmental protection policy setting forth instructions and procedures for safe operation of the ship and describing procedures for dealing with emergencies. The failure of a ship owner or bareboat charterer to comply with the ISM Code may subject the owner or charterer to increased liability, may decrease available insurance coverage for the affected vessels, may result in a denial of access to, or detention in, certain ports or may result in a breach of our bank covenants. Currently, each of the vessels in our fleet is ISM Code-certified. Because these certifications are critical to our business, we place a high priority on maintaining them. Nonetheless, there is the possibility that such certifications may not be renewed.

We currently maintain for each of our vessels’ pollution liability insurance coverage in the amount of $1.0 billion per vessel, per incident. In addition, we carry hull and machinery and protection and indemnity insurance to cover the risks of fire and explosion. Under certain circumstances, fire and explosion could result in a catastrophic loss. We believe that our present insurance coverage is adequate, but not all risks can be insured, and there is the possibility that a specific claim may not be paid, or that we will not always be able to obtain adequate insurance coverage at reasonable rates. If the damages from a catastrophic spill exceed our insurance coverage, the effect on our business would be severe and could possibly result in our insolvency.

We believe that regulations of the shipping industry will continue to become more stringent and compliance with such new regulations will be more expensive for us as well as our competitors. Substantial violations of applicable requirements or a catastrophic spill from one of our vessels could have a material adverse impact on our financial condition and results of operations.

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

Due to concern over the risks of climate change, a number of countries and the IMO have adopted, or are considering the adoption of regulatory frameworks to reduce greenhouse gas emission from ships. These regulatory measures may include adoption of cap and trade regimes, carbon taxes, increased efficiency standards and incentives or mandates for renewable energy. Emissions of greenhouse gases from international shipping

 

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currently are not subject to the Kyoto Protocol to the United Nations Framework Convention on Climate Change, or the “Kyoto Protocol,” or any amendments or successor agreements, including the Paris Agreement adopted under the United Nations Framework Convention on Climate Change in December 2015, which contemplates commitments from each nation party thereto to take action to reduce greenhouse gas emissions and limit increases in global temperatures but did not include any restrictions or other measures specific to shipping emissions. However, restrictions on shipping emissions are likely to continue to be considered, and a new treaty may be adopted in the future that includes additional restrictions on shipping emissions to those already adopted under MARPOL. Compliance with future changes in laws and regulations relating to climate change could increase the costs of operating and maintaining our ships and could require us to install new emission controls, as well as acquire allowances, pay taxes related to our greenhouse gas emissions or administer and manage a greenhouse gas emissions program.

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 have an effect on demand for our services. For example, increased regulation of greenhouse gases or other concerns relating to climate change may reduce the demand for oil or refined petroleum products in the future or create greater incentives for use of alternative energy sources. Any long-term material adverse effect on the oil and gas industry could have significant financial and operational adverse impacts on our business that we cannot predict with certainty at this time.

Our vessels are subject to periodic inspections by a classification society.

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 Safety of Life at Sea Convention. Our fleet is currently classed with Lloyds Register of Shipping and Bureau Veritas.

A vessel must undergo annual surveys, intermediate surveys and special surveys. In lieu of a special survey, a vessel’s machinery may be on a continuous survey cycle, under which the machinery would be surveyed periodically over a five-year period. Our vessels are on special survey cycles for hull inspection and continuous survey cycles for machinery inspection. Every vessel is also required to be dry docked every two to three years for inspection of the underwater parts of such vessel. However, for vessels not exceeding 15 years that have means to facilitate underwater inspection in lieu of dry docking, the dry docking may be skipped and be conducted concurrently with the special survey.

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; we would then be in violation of covenants in our loan agreements and insurance contracts or other financing arrangements. This would adversely impact our operations and revenues.

Changes in fuel, or bunker, prices may adversely affect profits.

While we do not bear the cost of fuel or bunkers under time and bareboat charters, fuel is a significant expense in our shipping operations when vessels are deployed under spot charters. The cost of fuel, including the fuel efficiency or capability to use lower priced fuel, can also be an important factor considered by charterers in negotiating charter rates. Changes in the price of fuel may adversely affect our profitability. The price and supply of fuel is unpredictable and fluctuates based on events outside our control, including geopolitical developments, supply and demand for oil and gas, actions by the OPEC (“Organization Of Petroleum Exporting Countries”) and other oil and gas producers, war and unrest in oil producing countries and regions, regional production patterns and environmental concerns. Furthermore, fuel may become significantly more expensive in the future, which may reduce our profitability. In addition, the recent entry into force, on January 1, 2020, of the 0.5% global sulfur cap in marine fuels used by vessels that are not equipped with sulfur oxide (“SOx”) exhaust gas cleaning systems (“scrubbers”) under the International Convention for Prevention of Pollution from Ships (“MARPOL”) Annex VI may lead to changes in the production quantities and prices of different grades of marine fuel by

 

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refineries and introduces an additional element of uncertainty in fuel markets, which could result in additional costs and adversely affect our cash flows, earnings and results from operations.

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

Crew members, suppliers of goods and services to a vessel, shippers of cargo and others may be entitled to a maritime lien against that vessel for unsatisfied debts, claims or damages. In many jurisdictions, a maritime lien holder may enforce its lien by arresting a vessel through foreclosure proceedings. The arrest or attachment of one or more of our vessels could interrupt our cash flow and require us to pay large sums of funds to have the arrest lifted.

In addition, in some jurisdictions, such as South Africa, under the “sister ship” theory of liability, a claimant may arrest both the vessel which is subject to the claimant’s maritime lien and any “associated” vessel, which is any vessel owned or controlled by the same owner. Claimants could try to assert “sister ship” liability against one vessel in our fleet for claims relating to another of our ships or, possibly, another vessel managed by Stealth Maritime, as was the case with the arrest of one of our vessels in August 2015.

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

A government could requisition for title or seize our vessels. Requisition for title occurs when a government takes control of a vessel and becomes the owner. Also, a government could requisition our vessels for hire. 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 one or more of our vessels would adversely impact our operations and revenues, thereby resulting in loss of revenues.

Risks involved with operating ocean-going vessels could affect our business and reputation, which would adversely affect our revenues and stock price.

The operation of an ocean-going vessel carries inherent risks. These risks include the possibility of:

 

   

marine accident or disaster;

 

   

piracy and terrorism;

 

   

explosions;

 

   

environmental accidents;

 

   

pollution;

 

   

loss of life;

 

   

cargo and property losses or damage; and

 

   

business interruptions caused by mechanical failure, human error, war, political action in various countries, labor strikes or adverse weather conditions.

Any of these circumstances or events could increase our costs or lower our revenues. The involvement of our vessels in a serious accident could harm our reputation as a safe and reliable vessel operator and lead to a loss of business.

Our vessels may suffer damage and we may face unexpected repair costs, which could affect our cash flow and financial condition.

If our vessels suffer damages, they may need to be repaired at a shipyard facility. The costs of repairs are unpredictable and can be substantial. We may have to pay repair costs that our insurance does not cover. The loss of earnings while these vessels are being repaired and repositioned, as well as the actual cost of these repairs, would have an adverse effect on our cash flow and financial condition. We do not intend to carry business interruption insurance.

 

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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 Indian Ocean and in the Gulf of Aden, off the coast of Somalia. If these piracy attacks occur in regions in which our vessels are deployed and are characterized by insurers as “war risk” zones, as the Gulf of Aden continues to be, or Joint War Committee (JWC) “war and strikes” listed areas, premiums payable for such coverage, for which we are responsible with respect to vessels employed on spot charters, but not vessels employed on bareboat or time charters, could increase significantly and such insurance coverage may be more difficult to obtain. In addition, crew costs, including employing onboard security guards, could increase in such circumstances. We usually employ armed guards on board the vessels on time and spot charters that transit areas where Somali pirates operate. We may not be adequately insured to cover losses from these incidents, which could have a material adverse effect on us. In addition, detention hijacking as a result of an act of piracy against our vessels, or an increase in cost, or unavailability of insurance for our vessels, could have a material adverse impact on our business, financial condition and results of operations.

Our operations outside the United States expose us to global risks, such as political conflict, terrorism and public health concerns, which may interfere with the operation of our vessels.

We are an international company and primarily conduct our operations outside the United States. Changing economic, political and governmental conditions in the countries where we are engaged in business or where our vessels are registered affect us. In the past, political conflicts, particularly in the Arabian Gulf, resulted in attacks on vessels, mining of waterways and other efforts to disrupt shipping in the area. Continuing conflicts, instability and other recent developments in the Middle East and elsewhere, including recent attacks involving vessels and vessel seizures in the Strait of Hormuz and off the coast of Gibraltar, the recent attack on an Iranian tanker near the Saudi Arabian port city of Jeddah and the presence of U.S. or other armed forces in Syria and Afghanistan, may lead to additional acts of terrorism or armed conflict around the world, and our vessels may face higher risks of being attacked or detained, or shipping routes transited by our vessels, such as the Strait of Hormuz, may be otherwise disrupted. Acts of terrorism may increase with the continuing conflicts in the Middle East and North Africa, and therefore our vessels may face higher risks of being attacked. In addition, future hostilities or other political instability in regions where our vessels trade could affect our trade patterns and adversely affect our operations and performance. If certain shipping lanes were to close, such as Iran’s past threat to close the Strait of Hormuz, it could adversely affect the availability of, and the demand for crude oil and petroleum products. This would negatively affect our business and our customers’ investment decisions over an extended period of time. In addition, sanctions against oil exporting countries such as Iran, Syria and Venezuela, and the events in Ukraine and related sanctions against Russia, may also impact the availability of crude oil and petroleum products and which would increase the availability of applicable vessels, thereby impacting negatively charter rates. Changes in laws and regulations, including tax matters and their implementation by local authorities could affect our vessels chartered to customers in certain countries, including Chinese customers, as well as our vessels calling to ports in certain countries, including Chinese ports, and could have a material adverse effect on our business, results of operations and financial condition.

Terrorist attacks, or the perception that oil refineries and product tankers or crude oil tankers are potential terrorist targets, could materially and adversely affect the continued supply of refined petroleum products and crude oil to the United States and to other countries. Furthermore, future terrorist attacks could result in increased volatility of the financial markets in the United States and globally, and could result in an economic recession in the United States or the world. Any of these occurrences could have a material adverse impact on our operating results, revenues and costs.

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.

 

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

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

Our vessels may call on ports located in countries that are subject to sanctions and embargoes imposed by the U.S. or other governments, which could adversely affect our reputation and the market for our common stock.

From time to time on charterers’ instructions, our vessels have called and may again call on ports located in countries subject to sanctions and embargoes imposed by the United States government and countries identified by the United States government as state sponsors of terrorism, such as Iran, Syria and North Korea. The U.S. sanctions and embargo laws and regulations vary in their application, as they do not all apply to the same covered persons or proscribe the same activities, and such sanctions and embargo laws and regulations may be amended or strengthened over time. On January 16, 2016, “Implementation Day” for the Iran Joint Comprehensive Plan of Action (JCPOA), the United States lifted its nuclear-related secondary sanctions against Iran which prohibited certain conduct by non-U.S. companies and individuals that occurred entirely outside of U.S. jurisdiction involving specified industry sectors in Iran, including the energy, petrochemical, automotive, financial, banking, mining, shipbuilding and shipping sectors. By lifting the secondary sanctions against Iran, the U.S. government effectively removed U.S. imposed restraints on dealings by non-U.S. companies, such as our Company, and individuals with these formerly targeted Iranian business sectors.

Non-U.S. companies continued to be prohibited under U.S. sanctions from (i) knowingly engaging in conduct that seeks to evade U.S. restrictions on transactions or dealings with Iran or that causes the export of goods or services from the United States to Iran, (ii) exporting, re-exporting or transferring to Iran any goods, technology, or services originally exported from the U.S. and / or subject to U.S. export jurisdiction and (iii) conducting transactions with of the Iranian or Iran-related individuals and entities that remain or are placed in the future on OFAC’s list of Specially Designated Nationals and Blocked Persons (SDN List), notwithstanding the lifting of secondary sanctions. However, on August 6, 2018, the U.S. re-imposed an initial round of secondary sanctions and as of November 5, 2018, all of the secondary sanctions the U.S. had suspended under the JCPOA were re-imposed.

The U.S. government’s primary Iran sanctions have remained largely unchanged, including during the period from the JCPOA Implementation Day to the re-imposition of secondary sanctions in 2018, and as a consequence, U.S. persons also continue to be broadly prohibited from engaging in transactions or dealings with the Government of Iran and Iranian financial institutions, which effectively impacts the transfer of funds to, from, or through the U.S. financial system whether denominated in US dollars or any other currency.

We believe all of our vessels port calls have been made in full compliance with applicable economic sanctions laws and regulations, including those of the United States, the EU and other relevant jurisdictions. Our charter agreements include provisions that restrict trades of our vessels to countries targeted by economic sanctions unless such transportation activities involving sanctioned countries are permitted under applicable economic sanctions and embargo regimes. Our ordinary chartering policy is to seek to include similar provisions in all of our period charters. Prior to agreeing to waive existing charter party restrictions on carrying cargoes to or from ports that may implicate sanctions risks, we ensure that the charterers have proof of compliance with international and U.S. sanctions requirements, or applicable licenses or other exemptions.

Although we believe that we are in compliance with all applicable sanctions and embargo laws and regulations and intend to maintain such compliance, there can be no assurance that we will be in compliance in the future, particularly as the scope of certain laws may vary or may be subject to changing interpretations and

 

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we may be unable to prevent our charterers from violating contractual and legal restrictions on their operations of the vessels. Any such violation could result in fines or other penalties for us and could result in some investors deciding, or being required, to divest their interest, or not to invest, in the Company. Additionally, some investors may decide to divest their interest, or not to invest, in the Company simply because we do business with companies that do lawful business in sanctioned countries. 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 stock may also be adversely affected by the consequences of war, the effects of terrorism, civil unrest and governmental actions in these and surrounding countries.

Failure to comply with the U.S. Foreign Corrupt Practices Act and other anti-bribery legislation in other jurisdictions could result in fines, criminal penalties, contract terminations and an adverse effect on our business.

We operate in a number of countries through the world, including countries that may be known to have a reputation for corruption. We are committed to doing business in accordance with applicable anti-corruption laws and have adopted policies which are consistent and in full compliance with the U.S. Foreign Corrupt Practices Act of 1977 (the “FCPA”) and other anti-bribery laws. We are subject, however, to the risk that we, our affiliated entities or their respective officers, directors, employees and agents may take actions determined to be in violation of such anti-corruption laws, including the FCPA. Any such violation could result in substantial fines, sanctions, civil and/or criminal penalties, curtailment of operations in certain jurisdictions, and might adversely affect our business, results of operations or financial condition. In addition, actual or alleged violations could damage our reputation and ability to do business. Furthermore, detecting, investigating, and resolving actual or alleged violations is expensive and can consume significant time and attention of our senior management.

A cyber-attack could materially disrupt our business.

Our business operations could be targeted by individuals or groups seeking to sabotage or disrupt our information technology systems and networks, or to steal data. A successful cyber-attack could materially disrupt our operations, including the safety of our operations, or lead to unauthorized release of information or alteration of information on our systems. Any such attack or other breach of our information technology systems could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Risks Related To Our Business

Our fleet consists of four tankers. The small size of our fleet and 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.

Our fleet consists of three product tankers and one crude oil tanker. Unless and until we identify and acquire additional vessels, we will depend upon these four vessels for all of our revenue. If any of our vessels are unable to generate revenues as a result of off-hire time, early termination of the applicable charter or otherwise, our business, results of operations financial condition and ability to pay dividends on our common shares, if any, and Series A Preferred Shares could be materially adversely affected.

In addition, due to the relatively small size of our fleet we may face additional difficulty arranging debt financing from lenders to fund the expansion of our fleet, or refinance then existing debt upon maturity or otherwise, on favorable terms or at all and achieving acceptance from oil majors and other charterers, which increasingly seek to do business with established shipping companies with substantial resources.

We are dependent on the ability and willingness of our charterers to honor their commitments to us for all our revenues.

We derive all our revenues from the payment of charter hire by charterers of our vessels. The ability and

 

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willingness of each of our counterparties to perform their obligations under charter agreements 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 refined petroleum product tanker sector and in the case of our crude oil tanker the crude oil tanker sector, of the shipping industry and the overall financial condition of the counterparties, all of which may continue to be negatively impacted by the COVID-19 pandemic and related containment efforts. In addition, in depressed market conditions, charterers may seek to renegotiate their charters or may default on their obligations under charters and our charterers may fail to pay charter hire or attempt to renegotiate charter rates. Should a counterparty fail to honor its obligations under agreements with us, it may be difficult to secure substitute employment for such vessel, and any new charter arrangements we secure in the spot market or on bareboat or time charters could be at lower rates. If we lose a charter, we may be unable to re-deploy the related vessel on terms as favorable to us. We would not receive any revenues from such a vessel while it remained unchartered, but we may be required to pay expenses necessary to maintain the vessel in proper operating condition, insure it and service any indebtedness secured by such vessel. The failure by charterers to meet their obligations to us or an attempt by charterers to renegotiate our charter agreements could have a material adverse effect on our revenues, results of operations and financial condition.

Employment of our vessels on time or bareboat charters may prevent us from taking advantage of rising spot charter rates.

The spot market may fluctuate significantly based upon tanker, crude oil and refined petroleum product supply and demand. The factors affecting supply and demand for tankers, crude oil and refined petroleum products are outside of our control, and the nature, timing and degree of changes in industry conditions are unpredictable.

Although two of our vessels are currently operating in the spot market, we may seek to employ additional vessels in the spot market in the future. If we employ our vessels on time and bareboat charters, the charter rates for such vessels will be fixed for a specified time period. We cannot assure you that charter rates will not increase during the period of such employment. If our vessels are employed on time or bareboat charters during a period of rising spot market charter rates, we would be unable to pursue opportunities to charter our vessels at such higher charter rates.

Charters at attractive rates may not be available when the charters for our vessels expire, which would have an adverse impact on our revenues and financial condition.

As of September 30, 2021, one of our product tankers is employed on a fixed-rate time charter expiring in May 2022 while another of our product tankers is deployed on fixed rate bareboat charter expiring in September 2022. Our Aframax tanker and our remaining product tanker are operating in the spot market. We will be exposed to prevailing charter rates in the product and crude tanker sectors when these vessels’ existing charters expire, and to the extent the counterparties to our fixed-rate charter contracts fail to honor their obligations to us. The successful operation of our vessels in the competitive and highly volatile spot charter market will depend on, among other things, obtaining profitable spot charters, which depends greatly on vessel supply and demand, and minimizing, to the extent possible, time spent waiting for charters and time spent traveling unladen to pick up cargo. When the current charters for our fleet expire or are terminated, it may not be possible to re-charter these vessels at similar rates, or at all, or to secure charters for any vessels we agree to acquire at similarly profitable rates, or at all. As a result, we may have to accept lower rates or experience off hire time for our vessels, which would adversely impact our revenues, results of operations and financial condition.

We depend upon a few significant customers, due to the small size of our fleet, for our revenues. The loss of one or more of these customers could adversely affect our financial performance.

We derive a significant part of our revenue from a small number of charterers. For the year ended December 31, 2020, we had four customers from which we derived 80.9% of our revenues and for the six months ended June 30, 2021, we had 5 customers from which we derived 80.9% of our revenues. We anticipate a limited

 

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number of customers will continue to represent significant amounts of our revenue. If these customers cease doing business or do not fulfill their obligations under the charters of our vessels, due to the increasing financial pressure on these customers or otherwise, our results of operations and cash flows could be adversely affected. Further, if we encounter any difficulties in our relationships with these charterers, our results of operations, cash flows and financial condition could be adversely affected.

Technological innovation could reduce our charter hire income and the value of our vessels.

The charter hire rates and the value and operational life of a vessel are determined by a number of factors including the vessel’s efficiency, operational flexibility and physical life. Efficiency includes speed, fuel economy and the ability to load and discharge cargo quickly, including the ability to use alternative combustion fuels. 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. More technologically advanced tankers have been built since our vessels, which have an average age of 12.7 years as of September 30, 2021, were constructed and tankers with further advancements may be built that are even more efficient or more flexible or have longer physical lives, including new vessels powered by alternative fuels or which are otherwise perceived as more environmentally friendly by charterers. 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 could also result in impairment costs. In these circumstances, we may also be forced to charter our vessels to less creditworthy charterers, either because the oil majors and other top tier charters will not charter older and less technologically advanced vessels or will only charter such vessels at lower contracted charter rates than we are able to obtain from these less creditworthy, second tier charterers. Consequently, our results of operations and financial condition could be adversely affected.

The aging of our fleet may result in our vessels being less attractive to charterers and in increased operating costs in the future, which could adversely affect our earnings.

Our fleet’s average age, which was approximately 12.7 years, as of September 30, 2021, is above the average age of the global tanker fleet, and as our vessels age we may have difficulty competing with younger, more technologically advanced tankers for charters from oil majors and other top-tier charterers. In general, the costs to maintain a tanker in good operating condition increase with the age of the vessel. Older vessels are typically less fuel-efficient and more costly to maintain than more recently constructed tankers due to improvements in engine technology. Cargo insurance rates also increase with the age of a vessel, as do charterer’s concerns regarding the perceived reliability of the vessel’s technical performance. As a result, older vessels are generally less desirable to charterers, particularly oil majors and other top tier charterers.

Unless we set aside reserves for vessel replacement, at the end of a vessel’s useful life, our revenue will decline, which would adversely affect our cash flows and income.

As of September 30, 2021, the vessels in our fleet had an average age of approximately 12.7 years. Unless we maintain cash reserves for vessel replacement, we may be unable to replace the vessels in our fleet upon the expiration of their useful lives. We estimate the useful life of our vessels to be 25 years from the completion of their construction. Our cash flows and income are dependent on the revenues we earn by chartering our vessels to customers. If we are unable to replace the vessels in our fleet upon the expiration of their useful lives, our business, financial condition and results of operations may be materially adversely affected. Any reserves set aside for vessel replacement would not be available for other cash needs or dividends, if any.

Our new senior secured credit facility contains, and other further future financing arrangements may contain, restrictive covenants that may limit our liquidity and corporate activities.

We have entered into a new senior secured term loan facility with DNB (which we refer to as the “New Senior Secured Credit Facility”) in conjunction with the Spin-Off Distribution, which will, and other future financing arrangements may, impose, operating and financial restrictions on us. These restrictions may limit our ability to:

 

   

incur additional indebtedness;

 

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create liens on our assets;

 

   

sell capital stock of our subsidiaries;

 

   

make investments;

 

   

engage in mergers or acquisitions;

 

   

pay dividends; and

 

   

make capital expenditures.

The New Senior Secured Credit Facility requires us to maintain specified financial ratios, satisfy financial covenants and contain cross-default clauses. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations- New Credit Facility.” In addition, the New Senior Secured Credit Facility includes restrictions on the payment of dividends after June 30, 2022 in amounts exceeding 50% of our free cash flow in any rolling 12-month period without the lenders’ consent.

As a result of the restrictions in our New Senior Secured Credit Facility, or similar restrictions in our future financing arrangements we may enter into with respect to future vessels which we have yet to identify, we may need to seek permission from our lenders in order to engage in some corporate actions. Our lenders’ interests may be different from ours, and we may not be able to obtain 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 covenants and security coverage requirement, could lead to defaults under our secured loan agreements. Our lenders could then accelerate our indebtedness and foreclose on our fleet. The loss of our vessels would mean we could not run our business.

The market values of our vessels may decrease, which could cause us to breach covenants in our credit facilities, and could have a material adverse effect on our business, financial condition and results of operations.

Our New Senior Secured Credit Facility, which will be secured by liens on our vessels, contains various financial covenants, including requirements that relate to our financial condition, operating performance and liquidity. For example, we will be required to maintain a maximum consolidated leverage ratio that is based, in part, upon the market value of the vessels securing the applicable loan, as well as a minimum ratio of the market value of vessels securing a loan to the principal amount outstanding under such loan. The market value of product tankers and crude oil tankers is sensitive to, among other things, changes in the product tanker and crude oil tanker charter markets, respectively, with vessel values deteriorating in times when product tanker and crude oil tanker charter rates, as applicable, are falling and improving when charter rates are anticipated to rise. Lower charter rates in the product tanker and crude oil tanker markets coupled with the difficulty in obtaining financing for vessel purchases have adversely affected product tanker and Aframax tanker values. A continuation or worsening of these conditions would lead to a significant decline in the fair market values of our vessels, which may affect our ability to comply with these loan covenants. If the value of our vessels deteriorates, we may have to record an impairment adjustment in our financial statements which would adversely affect our financial results and could further hinder our ability to raise capital.

A failure to comply with our covenants and/or obtain covenant waivers or modifications could result in our lenders requiring us to post additional collateral, enhance our equity and liquidity, increase our interest payments or pay down our indebtedness to a level where we are in compliance with our loan covenants, sell vessels in our fleet or accelerate our indebtedness, which would impair our ability to continue to conduct our business. If our indebtedness is accelerated, we may not be able to refinance our debt or obtain additional financing and could lose our vessels if our lenders foreclose their liens. In addition, if we find it necessary to sell our vessels at a time when vessel prices are low, we will recognize losses and a reduction in our earnings, which could affect our ability to raise additional capital necessary for us to comply with our loan agreements.

 

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Our ability to obtain additional debt financing may be dependent on the performance of our then existing charters and the creditworthiness of our charterers, as well as the perceived impact of emissions by our vessels on the climate.

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 in order to purchase additional vessels or may significantly increase our costs of obtaining such capital. Our inability to obtain additional financing, or obtain financing at a higher than anticipated cost may materially affect our results of operation and our ability to implement our business strategy.

In 2019, a number of leading lenders to the shipping industry and other industry participants announced a global framework by which financial institutions can assess the climate alignment of their ship finance portfolios, called the Poseidon Principles, and additional lenders have subsequently announced their intention to adhere to such principles. If the ships in our fleet are deemed not to satisfy the emissions and other sustainability standards contemplated by the Poseidon Principles, or other Environmental Social Governance (ESG) standards required by lenders or investors, the availability and cost of bank financing for such vessels may be adversely affected.

A significant increase in our debt levels may adversely affect us and our cash flows.

As of June 30, 2021 we did not have any outstanding indebtedness; however, we are incurring approximately $28.0 million of indebtedness under our New Senior Secured Credit Facility in conjunction with the Spin-Off Distribution to refinance outstanding indebtedness of StealthGas secured by the four vessels that it is contributing to us. We would expect to incur further indebtedness in connection with any further expansion of our fleet. This increase in the level of indebtedness and the need to service the indebtedness may impact our profitability and cash available for growth of our fleet, working capital and dividends if any. In addition, dividend payments on our Series A Preferred Shares will reduce cash available for growth of our fleet, working capital and dividends, if any, on our common shares. Additionally, any increases in interest rate levels, currently at historically low levels, may increase the cost of servicing our indebtedness with similar results.

To finance our future fleet expansion program beyond our current fleet, we expect to incur additional secured debt. We have to dedicate a portion of our cash flow from operations to pay the principal and interest on our debt. These payments limit funds otherwise available for working capital, capital expenditures, and other purposes, including any distributions of cash to our stockholders, and our inability to service our debt could lead to acceleration of our debt and foreclosure on our fleet.

Moreover, carrying secured indebtedness exposes us to increased risks if the demand for oil or oil-related marine transportation decreases and charter rates and vessel values are adversely affected.

We are exposed to volatility in interest rates, and in particular the London Interbank Offered Rate (“LIBOR”)

The amounts outstanding under our New Senior Secured Credit Facility will be advanced at a floating rate, initially based on LIBOR, which can affect the amount of interest payable on our debt, and which, in turn, could have an adverse effect on our earnings and cash flow. In addition, interest rate benchmarks, including LIBOR, which was at low levels for an extended period of time, may potentially begin to increase from these levels. Our financial condition could be materially adversely affected at any time that we have not entered into interest rate hedging arrangements to hedge our exposure to the interest rates applicable to our credit facilities and any other financing arrangements we may enter into in the future. Even if we enter into interest rate swaps or other derivative instruments for the purpose of managing our interest rate exposure, our hedging strategies may not be effective and we may incur substantial losses.

 

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Increased regulatory oversight, uncertainty relating to the LIBOR calculation process and potential phasing out of LIBOR after 2023 may adversely affect the amounts of interest we pay under our debt arrangements and our results of operations.

The United Kingdom Financial Conduct Authority (“FCA”), which regulates LIBOR, has announced that it will phase-out LIBOR by the end of 2023. It is unclear whether an extension will be granted or new methods of calculating LIBOR will be established such that it continues to exist after 2023, or if alternative rates or benchmarks will be adopted. Various alternative reference rates are being considered in the financial community. The Secured Overnight Financing Rate has been proposed by the Alternative Reference Rate Committee, a committee convened by the U.S. Federal Reserve that includes major market participants and on which regulators participate, as an alternative rate to replace U.S. dollar LIBOR. However, it is not possible at this time to know the ultimate impact a phase-out of LIBOR may have, or how any such changes or alternative methods for calculating benchmark interest rates would be applied to any particular agreement containing terms based on LIBOR, such as the New Senior Secured Credit Facility, which generally have alternative calculation provisions, however, if implicated, these could also create additional risks and uncertainties. The changes may adversely affect the trading market for LIBOR based agreements, including our credit facilities and interest rate swaps. We may need to negotiate the replacement benchmark rate on our credit facilities and interest rate swaps, and the use of an alternative rate or benchmark may negatively impact our interest rate expense. Any other contracts entered into in the ordinary course of business which currently refer to, use or include LIBOR may also be impacted.

The derivative contracts we may enter into to hedge our exposure to fluctuations in interest rates could result in higher than market interest rates and charges against our income, as well as reductions in our stockholders’ equity.

We may enter into interest rate swaps for purposes of managing our exposure to fluctuations in interest rates applicable to indebtedness under our future credit facilities which are advanced at floating rates, as StealthGas has. Our hedging strategies, however, may not be effective and we may incur substantial losses if interest rates or currencies move materially differently from our expectations.

To the extent our interest rate swaps do not qualify for treatment as hedges for accounting purposes, we recognize fluctuations in the fair value of such contracts in our statement of operations. In addition, changes in the fair value of any derivative contracts that do qualify for treatment as hedges, are recognized in “Accumulated other comprehensive income” on our balance sheet. Our financial condition could also be materially adversely affected to the extent we do not hedge our exposure to interest rate fluctuations under our financing arrangements under which loans have been advanced at a floating rate.

In addition, we may enter in the future into foreign currency derivative contracts in order to hedge an exposure to foreign currencies related to shipbuilding contracts.

Any hedging activities we engage in may not effectively manage our interest rate and foreign exchange exposure or have the desired impact on our financial condition or results of operations.

Because we generate all of our revenues in U.S. dollars but incur a portion of our expenses in other currencies, exchange rate fluctuations could adversely affect our results of operations.

We generate all of our revenues in U.S. dollars and the majority of our expenses are also in U.S. dollars. However, a relatively small portion of our overall expenses, mainly executive compensation, is incurred in Euros. This could lead to fluctuations in net income due to changes in the value of the U.S. dollar relative to the other currencies, in particular the Euro. Expenses incurred in foreign currencies against which the U.S. dollar falls in value can thereby increase, decreasing our net income.

 

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We are dependent on our relationship with Stealth Maritime.

As of September 30, 2021, Stealth Maritime served as commercial and technical manager for all four vessels in our fleet. We are accordingly dependent upon our fleet manager, Stealth Maritime, for:

 

   

the administration, chartering and operations supervision of our fleet;

 

   

our recognition and acceptance as owners of product and crude oil carriers, including our ability to attract charterers;

 

   

our ability to obtain vetting approval from oil majors;

 

   

relations with charterers and charter brokers;

 

   

operational expertise; and

 

   

management experience.

The loss of Stealth Maritime’s services or its failure to perform its obligations to us properly for financial or other reasons could materially and adversely affect our business and the results of our operations, including the potential loss of oil major approvals to conduct business with us and in turn our ability to employ our vessels our charters with such oil majors. Although we may have rights against Stealth Maritime if it defaults on its obligations to us, you would have no recourse against Stealth Maritime. In addition, we might not be able to find a replacement manager on terms as favorable as those currently in place with Stealth Maritime. Further, we expect that we will need to seek approval from our lenders to change our manager. In addition, if Stealth Maritime suffers material damage to its reputation or relationships, including as a result of a spill or other environmental incident or an accident, or any violation or alleged violation of U.S., EU or other sanctions, involving ships managed by Stealth Maritime whether or not owned by us, it may harm the ability of our company or our subsidiaries to successfully compete in our industry.

Since our manager, Stealth Maritime, is a privately held company and there is little or no publicly available information about it, an investor could have little advance warning of potential financial and other problems that might affect our manager that could have a material adverse effect on us.

We would be materially adversely affected if our manager becomes unable or unwilling to provide services for our benefit at the level of quality they have provided such services to our vessels in the past and at comparable costs as they have charged with respect to our vessels while owned by StealthGas prior to the Spin-Off Distribution. If we were required to employ a ship management company other than our manager, we cannot offer any assurances that the terms of such management agreements and results of operations would be equally or more beneficial to us in the long term.

Our manager’s ability to render management services will depend in part on its own financial strength. Circumstances beyond our control could impair Stealth Maritime’s financial strength, and because it is a privately held company, information about its financial strength is not publicly available. As a result, our shareholders and we might have little advance warning of financial or other problems affecting our manager even though their financial or other problems could have a material adverse effect on our shareholders and us.

Our officers face conflicts in the allocation of their time to our business. In addition, the fiduciary duties of our officers and directors may conflict with those of the officers and directors of StealthGas and/or its affiliates.

Our Chief Executive Officer is involved in other business activities not associated with us, which may result in his spending less time than is appropriate or necessary to manage our business successfully. In particular, Mr. Vafias, who functions as our Chief Executive Officer and President, also provides services in similar capacities for StealthGas. Our officers are not required to work full-time on our affairs and also perform services for StealthGas and its affiliates. As a result, there could be material competition for the time and effort of our officers who also provide services to StealthGas and its affiliates, which could have a material adverse effect on our business, results of operations and financial condition. See “Management”.

 

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Our officers and directors have fiduciary duties to manage our business in a manner beneficial to us and our shareholders. However, our officers and directors also serve as executive officers and/or directors of StealthGas. As a result, these individuals have fiduciary duties to manage the business of StealthGas and its affiliates in a manner beneficial to such entities and their shareholders. Consequently, these officers and directors may encounter situations in which their fiduciary obligations to StealthGas and us are in conflict. There may also be other business opportunities for which StealthGas may compete with us such as hiring employees, acquiring other businesses, or entering into joint ventures, which could have a material adverse effect on our business.

Companies affiliated with us or our management, including StealthGas, Stealth Maritime and Brave Maritime, may manage or acquire vessels that compete with our fleet.

Entities affiliated with other members of the Vafias family own vessels that operate in various sectors of the shipping industry, including a number of product and crude oil tankers, which are managed by Stealth Maritime and/or Brave Maritime. It is possible that StealthGas, Stealth Maritime or other companies affiliated with the Vafias family or Stealth Maritime, including Brave Maritime, could, in the future, agree to acquire or manage additional vessels that compete directly with ours and may face conflicts between their own interests and their obligations to us. These conflicts may arise in connection with the chartering, purchase, sale and operations of the vessels in our fleet versus other vessels in which these persons or entities have an interest. Accordingly, our management and our manager might be faced with conflicts of interest with respect to their own interests and their obligations to us. These conflicts of interests may have an adverse effect on our business and your interests as stockholders.

We may enter into certain significant transactions with companies affiliated with members of the Vafias family which may result in conflicts of interests.

In addition to our management contract with Stealth Maritime, a company controlled by members of the Vafias family other than our Chief Executive Officer, from time to time we may enter into other transactions with companies affiliated with members of the Vafias family. Stealth Maritime also contracts for the crewing of vessels in our fleet with Hellenic Manning Overseas Inc., which is 25% owned by an affiliate of Stealth Maritime. Such transactions could create conflicts of interest that could adversely affect our business or your interests as holders of our common stock, as well as our financial position, results of operations and our future prospects.

As our fleet grows in size, we will have to improve our operations and financial systems, staff and crew; if we cannot maintain these systems or continue to recruit suitable employees, our business and results of operations may be adversely affected.

As we expand our fleet, we and Stealth Maritime will have to invest considerable sums in upgrading its operating and financial systems, as well as hiring additional well-qualified personnel to manage the vessels. In addition, as we expand our fleet, we will have to rely on our technical managers to recruit suitable additional seafarers and shoreside administrative and management personnel. Stealth Maritime and those technical managers may not be able to continue to hire suitable employees to the extent we continue to expand our fleet. Our vessels require a technically skilled staff with specialized training. If the technical managers’ crewing agents are unable to employ such technically skilled staff, they may not be able to adequately staff our vessels. If Stealth Maritime is unable to operate our financial and operations systems effectively or our technical managers are unable to recruit suitable employees as we expand our fleet, our results of operation and our ability to expand our fleet may be adversely affected.

 

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Delays in the delivery of any newbuilding or secondhand tankers we agree to acquire could harm our operating results.

Delays in the delivery of any new-building or second-hand vessels we may agree to acquire in the future, would delay our receipt of revenues generated by these vessels and, to the extent we have arranged charter employment for these vessels, could possibly result in the cancellation of those charters, and therefore adversely affect our anticipated results of operations. Although this would delay our funding requirements for the installment payments to purchase these vessels, it would also delay our receipt of revenues under any charters we arrange for such vessels. The delivery of newbuilding vessels could be delayed, other than at our request, because of, among other things, work stoppages or other labor disturbances; bankruptcy or other financial crisis of the shipyard building the vessel; hostilities, health pandemics such as COVID-19 or political or economic disturbances in the countries where the vessels are being built, including any escalation of tensions involving North Korea; weather interference or catastrophic event, such as a major earthquake, tsunami or fire; our requests for changes to the original vessel specifications; requests from our customers, with whom we have arranged any charters for such vessels, to delay construction and delivery of such vessels due to weak economic conditions and shipping demand and a dispute with the shipyard building the vessel.

In addition, the refund guarantors under the newbuilding contracts, which are banks, financial institutions and other credit agencies, may also be affected by financial market conditions in the same manner as our lenders and, as a result, may be unable or unwilling to meet their obligations under their refund guarantees. If the shipbuilders or refund guarantors are unable or unwilling to meet their obligations to the sellers of the vessels, this may impact our acquisition of vessels and may materially and adversely affect our operations and our obligations under our credit facilities. The delivery of any secondhand vessels could be delayed because of, among other things, hostilities or political disturbances, non-performance of the purchase agreement with respect to the vessels by the seller, our inability to obtain requisite permits, approvals or financing or damage to or destruction of the vessels while being operated by the seller prior to the delivery date.

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

As and when market conditions permit, we intend to continue to prudently grow our fleet over the long term. The acquisition of such additional vessels could impose significant additional responsibilities on our management and staff, and may necessitate that we, and they, increase the number of personnel. In the future, we may not be able to identify suitable vessels, acquire vessels on advantageous terms or obtain financing for such acquisitions. Any future growth will depend on:

 

   

locating and acquiring suitable vessels;

 

   

identifying and completing acquisitions or joint ventures;

 

   

integrating any acquired business successfully with our existing operations;

 

   

expanding our customer base; and

 

   

obtaining required financing.

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

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

Our success depends to a significant extent upon the abilities and efforts of our management team, including our Chief Executive Officer, Harry Vafias. In addition, Harry Vafias is a member of the Vafias family, which

 

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controls Stealth Maritime, our fleet manager. Our success will depend upon our and Stealth Maritime’s ability to hire and retain qualified managers to oversee our operations. 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 have employment agreements directly with our key personnel who are technically employees of Stealth Maritime, our fleet manager, although under our management agreement with Stealth Maritime, our relationship is governed by terms substantially similar to those typically included in employment agreements. We do not maintain “key man” life insurance on any of our officers.

In the highly competitive international product tanker and crude oil tanker markets, we may not be able to compete for charters with new entrants or established companies with greater resources.

We deploy our vessels in highly competitive markets that are capital intensive. Competition arises primarily from other vessel owners, some of which have greater resources than we do. Competition for the transportation of refined petroleum products and crude oil can be intense and depends on price, location, size, age, condition and the acceptability of the vessel and its managers to the charterers. Competitors with greater resources could enter and operate larger tanker fleets through consolidations or acquisitions, and many larger fleets that compete with us in each of these sectors may be able to offer more competitive prices and fleets.

Our lack of a diversified business could adversely affect us.

Unlike many other shipping companies, which may carry dry bulk, liquefied petroleum or natural gas, or goods shipped in containers, we currently depend primarily on the transport of refined petroleum products and crude oil. Substantially all of our revenue has been and is expected to be derived from this single source—the seaborne transport of refined petroleum products and crude oil. Due to our lack of a more diversified business model, adverse developments in the seaborne transport of refined petroleum products and crude oil and the market for refined petroleum products and oil have a significantly greater impact on our financial conditions and results of operations than if we maintained more diverse assets or lines of business.

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

Our examination of secondhand vessels, which may not include physical inspection prior to purchase, does not 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. Generally, we do not receive the benefit of warranties on secondhand vessels.

In general, the cost of maintaining a vessel in good operating condition increases with its age. As of September 30, 2021, the average age of the vessels in our fleet was approximately 12.7 years. Older vessels are typically less fuel efficient and more costly to maintain and operate than more recently constructed vessels due to improvements in engine technology. Cargo insurance rates increase with the age of a vessel, making older vessels less desirable to charterers.

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. If we sell vessels, the sales prices may not equal and could be less than their carrying values at that time and thereby negatively affect our profitability.

The shipping industry has inherent operational risks that may not be adequately covered by our insurance.

We procure hull and machinery insurance, protection and indemnity insurance, which include environmental damage and pollution insurance coverage, and war risk insurance for our fleet. While we endeavor

 

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to be adequately insured against all known risks related to the operation of our ships, there remains the possibility that a liability may not be adequately covered and we may not be able to obtain adequate insurance coverage for our fleet in the future. The insurers may also not pay particular claims. Even if our insurance coverage is adequate, we may not be able to timely obtain a replacement vessel in the event of a loss. Our insurance policies contain deductibles for which we will be responsible and limitations and exclusions which may increase our costs or lower our revenue. In addition, if one of our ships, or other ships managed by Stealth Maritime or Brave Maritime and owned by an affiliated entity of Stealth Maritime or Brave Maritime, were to incur significant costs from an accident, spill or other environmental liability, our insurance premiums and costs could increase significantly.

Our significant stockholders exert considerable influence on the outcome of matters on which our stockholders are entitled to vote and their interests may be different from yours.

Our major stockholder, our Chief Executive Officer, together with a company he controls, will own approximately 21.6% of our outstanding common shares upon consummation of the Spin-Off Distribution, based on the number of shares of common stock of StealthGas outstanding on September 30, 2021. Accordingly, this shareholder exerts considerable influence on the outcome of matters on which our shareholders are entitled to vote, including the election of our Board of Directors and other significant corporate actions. The interests of this stockholder may be different from yours. A number of other shareholders, none of which are affiliated with our Chief Executive Officer or one another, will also own significant percentages of our outstanding common shares. See the section of this prospectus entitled “Security Ownership Of Certain Beneficial Owners And Management After The Spin-Off Distribution.” For so long as a stockholder continues to own a significant percentage of our common shares, it will be able to significantly influence the composition of our Board of Directors and the approval of actions requiring shareholder approval through its voting power. Accordingly, during such period of time, such shareholder will have significant influence with respect to our management, business plans and policies, including the appointment and removal of our officers. This concentration of ownership may have the effect of delaying, deferring or preventing a change in control, merger, consolidation, takeover or other business combination involving us, and could also discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which could in turn have an adverse effect on the market price of our common shares.

We are a holding company, and we depend on the ability of our subsidiaries to distribute funds to us in order to satisfy our financial obligations or to make dividend payments.

We are a holding company and our subsidiaries, which are all wholly-owned by us, conduct all of our operations and own all of our operating assets. We have no significant assets other than the equity interests in our wholly-owned subsidiaries. As a result, our ability to make dividend payments to you depends on our subsidiaries and their ability to distribute funds to us. If we are unable to obtain funds from our subsidiaries, we may be unable or our Board of Directors may exercise its discretion not to pay dividends.

Obligations associated with being a public company require significant company resources and management attention.

Upon completion of the Spin-Off Distribution, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the other rules and regulations of the SEC, including the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley. Section 404 of Sarbanes-Oxley requires that we evaluate and determine the effectiveness of our internal control over financial reporting.

We work with our legal, accounting and financial advisors to identify any areas in which changes should be made to our financial and management control systems to manage our growth and our obligations as a public company. We evaluate areas such as corporate governance, corporate control, internal audit, disclosure controls and procedures and financial reporting and accounting systems. We will make changes in any of these and other areas, including our internal control over financial reporting, which we believe are necessary. However,

 

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these and other measures we may take may not be sufficient to allow us to satisfy our obligations as a public company on a timely and reliable basis. In addition, compliance with reporting and other requirements applicable to public companies do create additional costs for us and will require the time and attention of management. Our limited management resources may exacerbate the difficulties in complying with these reporting and other requirements while focusing on executing our business strategy. We may not be able to predict or estimate the amount of the additional costs we may incur, the timing of such costs or the degree of impact that our management’s attention to these matters will have on our business.

If management is unable to provide reports as to the effectiveness of our internal control over financial reporting, investors could lose confidence in the reliability of our financial statements, which could result in a decrease in the value of our common shares.

Under Section 404 of Sarbanes-Oxley, we are required to include in each of our annual reports on Form 20-F, beginning with the second such annual report on Form 20-F after the Spin –Off Distribution, a report containing our management’s assessment of the effectiveness of our internal control over financial reporting. If, in such annual reports on Form 20-F, our management cannot provide a report as to the effectiveness of our internal control over financial reporting as required by Section 404, investors could lose confidence in the reliability of our financial statements, which could result in a decrease in the value of our common shares and Series A Preferred Shares.

Risks Related to Taxation

If we were to be subject to corporate income tax in jurisdictions in which we operate, our financial results would be adversely affected.

We and our subsidiaries may be subject to tax in the jurisdictions in which we are organized or operate, reducing the amount of our net income and cash flows, including cash available for dividend payments. Under current Marshall Islands law, there is no income, corporate or profits tax or withholding tax, capital gains tax or capital transfer tax, estate or inheritance tax payable by us or our stockholders, other than stockholders ordinarily resident in the Republic of the Marshall Islands, if any. We believe that we should not be subject to tax under the laws of various countries, other than the United States, in which our subsidiaries’ vessels conduct activities or in which our subsidiaries’ customers are located. However, our belief is based on our understanding of the tax laws of those countries, and our tax position is subject to review and possible challenge by taxing authorities and to possible changes in law or interpretation. We cannot determine in advance the extent to which certain jurisdictions may require us to pay corporate income tax or to make payments in lieu of such tax. In addition, payments due to us from our subsidiaries’ customers may be subject to tax claims. In computing our tax obligation in these jurisdictions, we may be required to take various tax accounting and reporting positions on matters that are not entirely free from doubt and for which we have not received rulings from the governing authorities. We cannot assure you that upon review of these positions the applicable authorities will agree with our positions. A successful challenge by a tax authority could result in additional tax imposed on us or our subsidiaries, further reducing the cash available for distribution. In addition, changes in our operations or ownership could result in additional tax being imposed on us or our subsidiaries in jurisdictions in which operations are conducted.

In accordance with the currently applicable Greek law, foreign flagged vessels that are managed by Greek or foreign ship management companies having established an office in Greece are subject to duties towards the Greek state which are calculated on the basis of the relevant vessels’ tonnage. The payment of said duties exhausts the tax liability of the foreign ship owning company and the relevant manager against any tax, duty, charge or contribution payable on income from the exploitation of the foreign flagged vessel. As our manager is located in Greece, we will have to pay these duties. Our operations in Greece may be subjected to new regulations that may require us to incur new or additional compliance or other administrative costs, which may include requirements that we pay to the Greek government new taxes or other fees.

 

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In addition, China has enacted a new 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, including any stevedore, warehousing and other services connected with the transportation. The new regulation broadens the range of international transportation companies which may find themselves liable for Chinese enterprise income tax on profits generated from international transportation services passing through Chinese ports.

We may have to pay tax on United States-source income, which would reduce our earnings.

Under the United States Internal Revenue Code of 1986, as amended, or the Code, 50% of the gross shipping income of vessel owning or chartering corporations, such as our subsidiaries, that is attributable to transportation that begins or ends, but does not both begin and end, in the United States is characterized as United States-source shipping income. United States-source shipping income is subject to either a (i) 4% United States federal income tax without allowance for deductions or (ii) taxation at the standard United States federal income tax rates (and potentially to a 30% branch profits tax), unless derived by a corporation that qualifies for exemption from tax under Section 883 of the Code and the Treasury Regulations promulgated thereunder.

Generally, we and our subsidiaries will qualify for this exemption for a taxable year if our shares are treated as “primarily and regularly traded” on an established securities market in the United States. Our shares of common stock will be so treated if (i) the aggregate number of our shares of common stock traded during such year on an established securities market in the United States exceeds the aggregate number of our shares of common stock traded during that year on established securities markets in any other single country, (ii) either (x) our shares of common stock are regularly quoted during such year by dealers making a market in our shares or (y) trades in our shares of common stock are effected, other than in de minimis quantities, on an established securities market in the United States on at least 60 days during such taxable year and the aggregate number of our shares of common stock traded on an established securities market in the United States during such year equals at least 10% of the average number of our shares of common stock outstanding during such taxable year and (iii) our shares of common stock are not “closely held” during such taxable year. For these purposes, our shares of common stock will be treated as closely held during a taxable year if, for more than one-half the number of days in such taxable year, one or more persons each of whom owns either directly or under applicable attribution rules, at least 5% of our shares of common stock, own, in the aggregate, 50% or more of our shares of common stock, unless we can establish, in accordance with applicable documentation requirements, that a sufficient number of the shares of common stock in the closely-held block are owned, directly or indirectly, by persons that are residents of foreign jurisdictions that provide United States shipping companies with an exemption from tax that is equivalent to that provided by Section 883 to preclude other stockholders in the closely-held block from owning 50% or more of the closely-held block of shares of common stock.

We believe that after the Spin-Off Distribution, it will be the case, and may also be the case in the future, that, one or more persons each of whom owns, either directly or under applicable attribution rules, at least 5% of our shares of common stock own, in the aggregate, 50% or more of our shares of common stock. In such circumstances, we and our subsidiaries may qualify for the exemption provided in Section 883 of the Code only if a sufficient number of shares of the closely-held block of our shares of common stock were owned or treated as owned by “qualified shareholders” so it could not be the case that, for more than half of the days in the taxable year, the shares of common stock in the closely-held block not owned or treated as owned by qualified shareholders represented 50% or more of our shares of common stock. For these purposes, a “qualified shareholder” includes an individual that owns or is treated as owning shares of our common stock and is a resident of a jurisdiction that provides an exemption that is equivalent to that provided by Section 883 of the Code and certain other persons; provided in each case that such individual or other person complies with certain documentation and certification requirements set forth in the Section 883 regulations and designed to establish status as a qualified shareholder.

Our Chief Executive Officer, who will beneficially own approximately 21.6% of our outstanding common shares and 21.6% of our outstanding Series A Preferred Shares upon completion of the Spin-Off Distribution, has

 

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entered into an agreement with us regarding his compliance, and the compliance by certain entities that he controls and through which he owns our shares, with the certification procedures designed to establish status as a qualified shareholder. In certain circumstances, his compliance and the compliance of such entities he controls with the terms of that agreement may enable us and our subsidiaries to qualify for the benefits of Section 883 even where persons (each of whom owns, either directly or under applicable attribution rules, 5% or more of our shares) own, in the aggregate, more than 50% of our outstanding shares. However, his compliance and the compliance of such entities he controls with the terms of that agreement may not enable us or our subsidiaries to qualify for the benefits of Section 883. We or any of our subsidiaries may not qualify for the benefits of Section 883 for any year.

If we or our subsidiaries do not qualify for the exemption under Section 883 of the Code for any taxable year, then we or our subsidiaries would be subject for those years to the 4% United States federal income tax on gross United States shipping income or, in certain circumstances, to net income taxation at the standard United States federal income tax rates (and potentially also to a 30% branch profits tax). The imposition of such tax could have a negative effect on our business and would result in decreased earnings and cash flow.

We could become a “passive foreign investment company,” which would have adverse United States federal income tax consequences to United States holders and, in turn, us.

A foreign corporation will be treated as a “passive foreign investment company,” or PFIC, for United States federal income tax purposes if either (1) at least 75% of its gross income for any taxable year consists of certain types of “passive income” or (2) at least 50% of the average value of the corporation’s assets produce or are held for the production of those types of “passive income.” For purposes of these tests, “passive income” includes dividends, interest, and gains from the sale or exchange of investment property and rents and royalties other than rents and royalties which are received from unrelated parties in connection with the active conduct of a trade or business. For purposes of these tests, income derived from the performance of services does not constitute “passive income” and working capital and similar assets held pending investment in vessels will generally be treated as an asset which produces passive income. United States stockholders of a PFIC are subject to a disadvantageous United States federal income tax regime with respect to the income derived by the PFIC, the distributions they receive from the PFIC and the gain, if any, they derive from the sale or other disposition of their shares in the PFIC.

In connection with determining our PFIC status we treat and intend to continue to treat the gross income that we derive or are deemed to derive from our time chartering and voyage chartering activities as services income, rather than rental income. We believe that our income from time chartering and voyage chartering activities does not constitute “passive income” and that the assets that we own and operate in connection with the production of that income do not constitute assets held for the production of passive income. We treat and intend to continue to treat, for purposes of the PFIC rules, the income that we derive from bareboat charters as passive income and the assets giving rise to such income as assets held for the production of passive income. There is, however, no legal authority specifically under the PFIC rules regarding our current and proposed method of operation and it is possible that the Internal Revenue Service, or IRS, may not accept our positions and that a court may uphold such challenge, in which case we and certain of our subsidiaries could be treated as PFICs. In this regard we note that a federal court decision addressing the characterization of time charters concludes that they constitute leases for federal income tax purposes and employs an analysis which, if applied to our time charters, could result in our treatment and the treatment of our vessel-owning subsidiaries as PFICs. In addition, in making the determination as to whether we are a PFIC, we intend to treat the deposits that we make on our newbuilding contracts and that are with respect to vessels we do not expect to bareboat charter as assets which are not held for the production of passive income for purposes of determining whether we are a PFIC. We note that there is no direct authority on this point and it is possible that the IRS may disagree with our position.

On the basis of the foregoing assumptions, we do not believe that we will be a PFIC for 2021. This belief is based in part upon our beliefs regarding the value of the assets that we hold for the production of or in connection with the production of passive income relative to the value of our other assets. Should these beliefs turn out to be

 

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incorrect, then we and certain of our subsidiaries could be treated as PFICs for 2021. There can be no assurance that the U.S. Internal Revenue Service (“IRS”) or a court will not determine values for our assets that would cause us to be treated as a PFIC for 2021 or a subsequent year.

In addition, although we do not believe that we will be a PFIC for 2021, we may choose to operate our business in the current or in future taxable years in a manner that could cause us to become a PFIC for those years. Because our status as a PFIC for any taxable year will not be determinable until after the end of the taxable year, and depends upon our assets, income and operations in that taxable year, there can be no assurance that we will not be considered a PFIC for 2021 or any future taxable year.

If the IRS were to find that we are or have been a PFIC for any taxable year, our United States stockholders would face adverse United States tax consequences. Under the PFIC rules, unless those stockholders make an election available under the Code (which election could itself have adverse consequences for such stockholders, as discussed below under “Tax Considerations—United States Federal Income Taxation of United States Holders”), such stockholders would be liable to pay United States federal income tax at the then prevailing income tax rates on ordinary income plus interest upon excess distributions and upon any gain from the disposition of our common shares or Series A Preferred Shares, as if the excess distribution or gain had been recognized ratably over the stockholder’s holding period of our common shares or Series A Preferred Shares, as applicable. See “Tax Considerations—United States Federal Income Tax Consequences—United States Federal Income Taxation of United States Holders” for a more comprehensive discussion of the United States federal income tax consequences to United States stockholders if we are treated as a PFIC. As a result of these adverse tax consequences to United States stockholders, such a finding by the IRS may result in sales of our common shares or Series A Preferred Shares by United States stockholders, which could lower the price of our common shares and Series A Preferred Shares and adversely affect our ability to raise capital.

Risk Related to an Investment in a Marshall Islands Corporation

As a foreign private issuer we are entitled to claim exemptions from certain Nasdaq corporate governance standards, and if we elected to rely on these exemptions, you may not have the same protections afforded to stockholders of companies that are subject to all of the Nasdaq corporate governance requirements.

As a foreign private issuer, we are entitled to claim an exemption from many of Nasdaq’s corporate governance practices. Currently, our corporate governance practices comply with the Nasdaq corporate governance standards applicable to U.S. listed companies other than that we will only have two members on our audit committee whereas a domestic U.S. company would be required to have three members on its audit committee and, in lieu of obtaining shareholder approval prior to the issuance of certain designated securities issuances, the Company will comply with provisions of the Marshall Islands Business Corporations Act providing that the Board of Directors approves share issuances. To the extent we rely on these or other exemptions you may not have the same protections afforded to stockholders of companies that are subject to all of the Nasdaq corporate governance requirements.

We are incorporated in the Republic of the Marshall Islands, which does not have a well-developed body of corporate law or a bankruptcy act.

Our corporate affairs are governed by our articles of incorporation and bylaws and by the Marshall Islands Business Corporations Act, or 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 U.S. jurisdictions. Stockholder 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 stockholders may have more difficulty in protecting their interests in the face of actions by the management, directors or

 

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controlling stockholders than would stockholders of a corporation incorporated in a U.S. jurisdiction. The Marshall Islands has no established bankruptcy act, and as a result, any bankruptcy action involving our company would have to be initiated outside the Marshall Islands, and our public stockholders may find it difficult or impossible to pursue their claims in such other jurisdictions.

It may be difficult to enforce service of process and judgments against us and our officers and directors.

We are a Marshall Islands company, and our executive offices are located outside of the United States. All of our directors and officers reside outside of the United States, and most of our assets and their assets are located outside the United States. As a result, you may have difficulty serving legal process within the United States upon us or any of these persons. You may also have difficulty enforcing, both in and outside the United States, judgments you may obtain in the U.S. courts against us or these persons in any action, including actions based upon the civil liability provisions of U.S. federal or state securities laws. There is also substantial doubt that the courts of the Marshall Islands would enter judgments in original actions brought in those courts predicated on U.S., federal or state securities laws.

Risks Relating To Our Common Shares

Our common shares have never been publicly traded and there is no existing market for our common shares. An active trading market that will provide you with adequate liquidity for our common shares may not develop.

There is currently no public market for our common shares and, following the Spin-Off Distribution, 21.6% of our shares will be held by one shareholder and an aggregate of approximately 67.4% of our common shares will be held by six separate shareholders that are not affiliated with one another, which concentration of ownership could make it less likely that an active and liquid trading market for our common shares will develop on Nasdaq. We cannot predict the extent to which investor interest will lead to the development of an active and liquid trading market on Nasdaq for our common shares or, if such market develops, whether it will be maintained. The lack of an active trading market on Nasdaq and low trading volume for our common shares, may make it more difficult for you to sell our common shares and could lead to our share price becoming depressed or volatile. It is anticipated that on or shortly prior to the record date for the distribution of our common shares, trading of our common shares will begin on a “when-issued” basis on Nasdaq and such trading would continue up to and including the distribution date. However, there can be no assurance that an active trading market for our common shares on either Nasdaq or any other exchange will develop. If an active and liquid trading market does not develop, relatively small sales of our common shares could have a significant negative impact on the price of our common shares.

Following the Spin-Off Distribution, the aggregate trading value of Imperial Petroleum common shares and Series A Preferred Shares and StealthGas common stock may be less than the trading value of StealthGas’ common stock before the Spin-Off Distribution.

The Spin-Off Distribution will result in two “pure play” companies: StealthGas will own only LPG carriers and Imperial Petroleum will initially own only product and crude oil tankers, although StealthGas and Imperial Petroleum may in the future consider expansion into other seaborne transportation sectors. Historically, “pure play” companies have tended to trade at levels that suggest higher valuations than companies with mixed asset classes. Although we expect that the Spin-Off Distribution will result in an increase in shareholder value, the aggregate trading value of the two separate entities after the Spin-Off Distribution may be less than the trading value of StealthGas common stock before the Spin-Off Distribution.

If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, our share price and trading volume could decline.

As a newly-incorporated company, there is currently no analyst coverage of the Company. The trading market for our common shares and Series A Preferred Shares will depend, in part, upon the research and reports

 

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that securities or industry analysts publish about us or our business. We do not have any control over analysts as to whether they will cover us, and if they do, whether such coverage will continue. If analysts do not commence coverage of the Company, or if one or more of these analysts cease coverage of the Company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline. In addition, if one or more of the analysts who cover us downgrade our shares or change their opinion of our shares, our share price may likely decline.

Substantial sales of our common shares may occur in connection with the Spin-Off Distribution, which could cause our share price to decline.

Following the Spin-Off Distribution, all of our outstanding stock will be owned by the existing shareholders of StealthGas, and these existing shareholders will be free to sell common shares after the effective date of the registration statement of which this prospectus forms a part for any reason. The sales of significant amounts of our common shares, or the perception that this may occur, could result in a decline of the price of our common shares.

You may experience future dilution as a result of future equity offerings and other issuances of our common shares, preferred shares or other securities.

In order to raise additional capital, including to support our growth plans, or in connection with equity awards, strategic transactions or otherwise, we may in the future offer additional common shares, preferred shares, including Series A Preferred Shares, or other securities convertible into or exchangeable for our common shares, including convertible debt. We expect that a significant component of the financing for the planned expansion of our fleet will be through equity offerings. We cannot predict the size of future issuances or sales of our common shares, preferred shares or other securities, including those made in connection with future acquisitions or capital raising activities, or the effect, if any, that such issuances or sales may have on the market price of our common units. The issuance and sale of substantial amounts of common shares, preferred shares or other equity-linked securities, or announcement that such issuance and sales may occur, could adversely affect the market price of our common shares and our Series A Preferred Shares. In addition, we cannot assure you that we will be able to make future sales of our common shares, preferred shares or other securities in any other offering at a price per share that is equal to or greater than the price per share paid by investors, and investors purchasing shares or other securities in the future could have rights that are superior to existing shareholders. The issuance of additional common shares, preferred shares or other securities could adversely impact the trading price of our common shares and our Series A Preferred Shares.

The market price of our common shares may be subject to significant fluctuations.

The market price of our common shares may be subject to significant fluctuations as a result of many factors, some of which are beyond our control. Among the factors that could affect our stock price are:

 

   

actual or anticipated fluctuations in quarterly and annual variations in our results of operations;

 

   

changes in market valuations or sales or earnings estimates or publication of research reports by analysts;

 

   

changes in earnings estimates or shortfalls in our operating results from levels forecasted by securities analysts;

 

   

speculation in the press or investment community about our business or the shipping industry, and the product and crude oil tanker sector in particular;

 

   

changes in market valuations of similar companies and stock market price and volume fluctuations generally;

 

   

payment of dividends;

 

   

strategic actions by us or our competitors such as mergers, acquisitions, joint ventures, strategic alliances or restructurings;

 

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changes in government and other regulatory developments;

 

   

additions or departures of key personnel;

 

   

general market conditions and the state of the securities markets; and

 

   

domestic and international economic, market and currency factors unrelated to our performance.

The international tanker shipping industry has been highly unpredictable. In addition, the stock markets in general, and the markets for tanker shipping and shipping stocks in general, have experienced extreme volatility that has sometimes been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common shares. Our shares may trade at prices lower than you originally paid for such shares.

If our common shares do not meet the Nasdaq Capital Market’s minimum share price requirement, and if we cannot cure such deficiency within the prescribed timeframe, our common shares could be delisted.

Under the rules of the Nasdaq Capital Market, listed companies are required to maintain a share price of at least $1.00 per share. If the share price declines below $1.00 for a period of 30 consecutive business days, then the listed company has a cure period of at least 180 days to regain compliance with the $1.00 per share minimum. If the price of our common shares closes below $1.00 for 30 consecutive days, and if we cannot cure that deficiency within the 180-day timeframe, then our common shares could be delisted.

If the market price of our common shares is below $5.00 per share, under stock exchange rules, our shareholders will not be able to use such shares as collateral for borrowing in margin accounts. This inability to continue to use our common shares as collateral may lead to sales of such shares creating downward pressure and increased volatility in the market price of our common shares.

Our amended and restated articles of incorporation and amended and restated bylaws which will be in place at the time of the Spin-Off Distribution, will contain anti-takeover provisions that may discourage, delay or prevent (1) our merger or acquisition and/or (2) the removal of incumbent directors and officers and (3) the ability of public shareholders to benefit from a change in control.

Our amended and restated articles of incorporation and amended and restated bylaws, which will be in place at the time of the Spin-Off Distribution, will contain certain anti-takeover provisions. These provisions will include blank check preferred stock, the prohibition of cumulative voting in the election of directors, a classified Board of Directors, advance written notice for shareholder nominations for directors, removal of directors only for cause, advance written notice of shareholder proposals for the removal of directors and limitations on action by shareholders. These anti-takeover provisions, either individually or in the aggregate, may discourage, delay or prevent (1) our merger or acquisition by means of a tender offer, a proxy contest or otherwise, that a shareholder may consider in its best interest, (2) the removal of incumbent directors and officers, and (3) the ability of public shareholders to benefit from a change in control. These anti-takeover provisions could substantially impede the ability of shareholders to benefit from a change in control and, as a result, may adversely affect the market price of our common shares and shareholders’ ability to realize any potential change of control premium.

We are an emerging growth company and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common shares less attractive to investors.

We are an emerging growth company, as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. We cannot predict if investors will find our common shares less attractive because we may rely on these exemptions. If some investors find our common shares less attractive as a result, there may be a less active trading market for our common shares and our share price may be more volatile.

In addition, under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 for so long as we are an emerging growth company.

 

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For as long as we take advantage of the reduced reporting obligations, the information that we provide our shareholders may be different from information provided by other public companies.

Our common shares will rank junior to the Series A Preferred Shares with respect to dividends and amounts payable in the event of our liquidation.

Our common shares will rank junior to our Series A Preferred Shares with respect to the payment of dividends and amounts payable in the event of our liquidation, dissolution or winding-up. This means that, unless accumulated dividends have been paid or set aside for payment on all of our outstanding Series A Preferred Shares for all past completed dividend periods, no dividends may be declared or paid on our common shares subject to limited exceptions. Likewise, in the event of our voluntary or involuntary liquidation, dissolution or winding-up, no distribution of our assets may be made to holders of our common shares until we have paid to holders of our Series A Preferred Shares a liquidation preference equal to $25.00 per share plus accumulated and unpaid dividends. Accordingly, the Series A Preferred Shares may adversely affect the market price of the common shares.

Risks Related to our Series A Preferred Shares

The Series A Preferred Shares are a new issuance and do not have an established trading market, which may negatively affect their market value and your ability to transfer or sell your shares. An active trading market that will provide you with adequate liquidity for our Series A Preferred Shares may not develop. In addition, the lack of a fixed redemption date for our Series A Preferred Shares will increase your reliance on the secondary market for liquidity purposes.

There is currently no public market for our Series A Preferred Shares and, following the Spin-Off Distribution, approximately 21.6% of our Series A Preferred Shares will be held by one shareholder and an aggregate of 67.4% of our Series A Preferred Shares will be held by six separate shareholders that are not affiliated with one another, which concentration of ownership could make it less likely that an active and liquid trading market for our Series A Preferred Shares will develop on Nasdaq. In addition, since the securities have no stated maturity date, investors seeking liquidity will be limited to selling their shares in the secondary market absent redemption by us. We cannot predict the extent to which investor interest will lead to the development of an active and liquid trading market on Nasdaq for our Series A Preferred Shares or, if such market develops, whether it will be maintained. The lack of an active trading market on Nasdaq and low trading volume for our Series A Preferred Shares, may make it more difficult for you to sell our Series A Preferred Shares and could lead to our share price becoming depressed or volatile. It is anticipated that on or shortly prior to the record date for the distribution of our Series A Preferred Shares, trading of our Series A Preferred Shares will begin on a “when-issued” basis on Nasdaq and such trading would continue up to and including the distribution date. However, there can be no assurance that an active trading market for our Series A Preferred Shares on either Nasdaq or any other exchange will develop. If an active and liquid trading market does not develop, relatively small sales of our Series A Preferred Shares could have a significant negative impact on the price of our Series A Preferred Shares.

Substantial sales of our Series A Preferred Shares may occur in connection with the Spin-Off Distribution, which could cause the trading price of our Series A Preferred Shares to decline.

Following the Spin-Off Distribution, all of our outstanding stock will be owned by the existing shareholders of StealthGas, and these existing shareholders will be free to sell Series A Preferred Shares after the effective date of the registration statement of which this prospectus forms a part for any reason. The sales of significant amounts of our Series A Preferred Shares, or the perception that this may occur, could result in a decline of the price of our Series A Preferred Shares.

The Series A Preferred Shares represent perpetual equity interests.

The Series A Preferred Shares represent perpetual equity interests in us and, unlike our indebtedness, will not give rise to a claim for payment of a principal amount at a particular date. As a result, holders of the

 

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Series A Preferred Shares may be required to bear the financial risks of an investment in the Series A Preferred Shares for an indefinite period of time. In addition, the Series A Preferred Shares rank junior to all our indebtedness and other liabilities, and to any other senior securities we may issue in the future with respect to assets available to satisfy claims against us.

Our Series A Preferred Shares are subordinated to our debt, and your interests could be diluted by the issuance of additional preferred shares, including additional Series A Preferred Shares, and by other transactions.

Our Series A Preferred Shares are subordinate to all of our existing and future indebtedness. As of June 30, 2021 we did not have any outstanding indebtedness; however, we are incuring approximately $28.0 million of indebtedness under our New Senior Secured Credit Facility, which we have entered into in conjunction with the Spin-Off Distribution, to refinance outstanding indebtedness of StealthGas secured by the four vessels that it is contributing to us. This indebtedness will restrict, and our future indebtedness may include restrictions on, our ability to pay dividends on or redeem preferred shares, if an event of default has occurred or is continuing, and after June 30, 2022 pay dividends in amounts exceeding 50% of our free cash flow over the preceding 12-month period without our lenders’ consent. Our articles of incorporation, which will be in place at the time of the Spin-Off Distribution, will authorize the issuance of up to 200,000,000 preferred shares in one or more classes or series. The issuance of additional preferred shares on a parity with or senior to our Series A Preferred Shares would dilute the interests of the holders of our Series A Preferred Shares, and any issuance of preferred shares senior to our Series A Preferred Shares or of additional indebtedness could affect our ability to pay dividends on, redeem or pay the liquidation preference on our Series A Preferred Shares.

The amount of the liquidation preference applicable to the Series A Preferred Shares is fixed and you have no right to receive any greater payment.

The payment due upon liquidation is fixed at the liquidation preference of $25.00 per Series A Preferred Share, plus an amount equal to all accumulated and unpaid dividends thereon to the date of liquidation, whether or not declared. If, in the case of our liquidation, there are remaining assets to be distributed after payment of this amount, you have no right to receive or to participate in these amounts. In addition, if the market price of your Series A Preferred Shares is greater than the liquidation preference, you have no right to receive the market price from us upon our liquidation.

The terms of the Series A Preferred Shares do not restrict our ability to engage in certain transactions, including spin-offs, transfers of assets or the formation of a master limited partnership, joint venture or other entity that may involve issuance of interests to third-parties in a substantial portion of our assets.

Although the Statement of Designation with respect to the Series A Preferred Shares contains restrictions on our ability to dilute the value of your investment in the Series A Preferred Shares by issuing additional preferred shares ranking senior to the Series A Preferred Shares, we may engage in other transactions that will result in a transfer of value to third parties. We may elect to sell one or more of our vessels or vessel-owning subsidiaries, conduct a spin-off of such vessels or subsidiaries, or contribute such vessels or vessel-owning subsidiaries to a joint venture, master limited partnership or other entity on terms with which you do not agree or that are not in the best interests of the holders of Series A Preferred Shares. Any such transfer may reduce our asset base and our rights to cash flows related to the transferred assets. If we contribute assets to a joint venture or master limited partnership, the joint venture or master limited partnership may be owned by or issue equity securities to public or private investors, thereby reducing our percentage interest in such assets and in the related cash flows.

 

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Risk Factors Relating To The Spin-Off

Our historical financial information may not be representative of the results we would have achieved as a stand-alone public company and may not be a reliable indicator of our future results.

The historical financial information that we have included in this prospectus may not necessarily reflect what our financial position, results of operations or cash flows would have been had we been an independent entity during the periods presented or those that we will achieve in the future. The costs and expenses reflected in our historical financial information include an allocation for certain corporate functions historically provided by StealthGas, that may be different from the comparable expenses that we would have incurred had we operated as a stand-alone company. Our historical financial information does not reflect changes that will occur in our cost structure, financing and operations as a result of our transition to becoming a stand-alone public company, including potential increased costs associated with reduced economies of scale and increased costs associated with SEC reporting and Nasdaq requirements.

We have made allocations based upon available information and assumptions that we believe are reasonable to reflect these factors, among others, in our historical combined financial data. However, our assumptions may prove not to be accurate, and accordingly, the historical combined financial data presented in this prospectus forms a part should not be assumed to be indicative of what our financial condition or results of operations actually would have been as an independent publicly traded company nor to be a reliable indicator of what our financial condition or results of operations actually may be in the future.

We may have difficulty operating as an independent, publicly traded company.

As an independent, publicly traded company, we believe that our business will benefit from, among other things, allowing us to better focus our financial and operational resources on our specific business, allowing our management to design and implement corporate strategies and policies that are based primarily on the business characteristics and strategic decisions of our business, allowing us to more effectively respond to tanker industry dynamics. However, we may not be able to achieve some or all of the benefits that we believe we can achieve as an independent company in the time we expect, if at all. Because our business has previously operated as part of the wider StealthGas organization, we may not be able to successfully implement the changes necessary to operate independently and may incur additional costs that could adversely affect our business.

As an independent, publicly traded company, we may not enjoy the same benefits that it did as part of StealthGas.

There is a risk that, by separating from StealthGas, we may become more susceptible to market fluctuations and other adverse events than we would have been if we were still a part of the current StealthGas organizational structure. As part of StealthGas, we have been able to enjoy certain benefits from StealthGas’s operating diversity, available capital for investments and opportunities to pursue integrated strategies with StealthGas’s other businesses. As an independent, publicly traded company, we will not have similar diversity, available capital or integration opportunities and may not have similar access to capital markets.

Our ability to meet our capital needs may be harmed by the loss of financial support from StealthGas.

The loss of financial support from StealthGas could harm our ability to meet our capital needs. After the spin-off, we expect to obtain any funds needed in excess of the amounts generated by our operating activities through the capital markets or bank financing, and not from StealthGas. However, given the smaller relative size of our company as compared to StealthGas after the spin-off, we may incur higher debt servicing and other costs than we would have otherwise incurred as a part of StealthGas. Further, we cannot guarantee you that we will be able to obtain capital market financing or credit on favorable terms, or at all, in the future. We cannot assure you that our ability to meet our capital needs will not be harmed by the loss of financial support from StealthGas.

 

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As a newly-incorporated company, we may not have the surplus or net profits required by law to pay dividends.

We have not declared any dividends on our common shares and our Series A Preferred Shares and we may not make dividend payments in the future as we may not earn sufficient revenues or we may incur expenses or liabilities that would reduce or eliminate the cash available for distribution as dividends. Our loan agreements may also limit the amount of dividends we can pay under some circumstances.

The declaration and payment of any dividends on our common shares or Series A Preferred Shares will be subject at all times to the discretion of our Board of Directors. The timing and amount of dividends will depend on our earnings, financial condition, cash requirements and availability, restrictions in our loan agreements, growth strategy, charter rates in the tanker shipping industry, the provisions of Marshall Islands law affecting the payment of dividends and other factors. Marshall Islands law generally prohibits the payment of dividends other than from surplus (retained earnings and the excess of consideration received for the sale of shares above the par value of the shares), but, if there is no surplus, dividends may be declared out of the net profits (basically, the excess of our revenue over our expenses) for the fiscal year in which the dividend is declared or the preceding fiscal year. Marshall Islands law also prohibits the payment of dividends while a company is insolvent or if it would be rendered insolvent upon the payment of a dividend. As a newly incorporated company, we may not have the required surplus or net profits to pay dividends, or our Board of Directors may determine to not declare any dividends for the foreseeable future.

We do not expect the Spin-Off Distribution to qualify for tax-free treatment under Section 355 of the Code.

For U.S. federal income tax purposes, if a corporate division, such as the Spin-Off Distribution qualifies for tax-free treatment under Section 355 of the Code, the distribution of our common shares and Series A Preferred Shares to StealthGas’ stockholders would generally not be taxable as a distribution and shareholders would allocate a portion of their tax basis in their StealthGas shares to the common shares and Series A Preferred Shares received in the Spin-Off Distribution. We do not expect to satisfy all of the requirements of Section 355 of the Code, and as such we are not treating the Spin-Off Distribution as a tax-free corporate division for U.S. federal income tax purposes. Rather, the distribution of our common shares and Series A Preferred Shares and cash in lieu of fractional shares to StealthGas’ shareholders is expected to be taxable as a distribution for U.S. federal income tax purposes. The tax treatment of the Spin-Off Distribution is discussed below at “Tax Considerations – United States Federal Income Taxation of U.S. Holders”.

Our ability to seek a claim against StealthGas for potential liabilities relating to the operation of the vessels comprising our fleet prior to our separation from StealthGas and the Spin-Off Distribution may be limited.

In connection with the contribution to us by StealthGas of the subsidiaries that own the vessels comprising our fleet, we will agree to acquire the vessels in “as is”, “where is” condition and StealthGas will not be obligated to indemnify us for any claims made against us that arise out of or relate to the operation of the vessels comprising our fleet prior to the Spin-Off Distribution. Although we may be able to seek recourse against StealthGas in connection with claims relating to operation of the vessels comprising our fleet prior to our separation from StealthGas and the Spin-Off Distribution, there can be no assurance that such efforts would be successful. Any liabilities relating to such claims may be significant and could negatively impact our business, financial condition, cash flows and results of operations. See “Certain Relationships and Related Party Transactions – Contribution Agreement.”

Certain of our directors and executive officers are director and/or executive officers of StealthGas and own shares of its common stock, which could cause conflicts of interests.

Our President and Chief Executive Officer owns a substantial amount of StealthGas common stock. The interests of our President and Chief Executive Officer and other directors and officers in common stock of StealthGas and the presence of certain of StealthGas’s executives and directors on our board of directors could create, or appear to create, conflicts of interest with respect to matters involving both us and StealthGas that

 

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could have different implications for StealthGas than they do for us. As a result, we may be precluded from pursuing certain opportunities on which we would otherwise act, including growth opportunities.

We do not intend to adopt specific policies or procedures to address conflicts of interests that may arise as a result of certain of our directors and officers owning StealthGas common stock or our President and Chief Executive Officer and other directors being an executive officer and/or director of StealthGas. However, prior to consummation of the Spin-Off Distribution, we will adopt a Related Person Transactions Policy to provide guidance in identifying, reviewing and, where appropriate, approving or ratifying transactions with related persons.

 

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CAPITALIZATION

The following table sets forth our consolidated capitalization at June 30, 2021:

 

   

on an actual basis;

 

   

on an as adjusted basis to give effect from July 1, 2021 to the date of this prospectus of:

a) our incurrence of approximately $28.0 million of senior secured indebtedness, net of $0.2 million in debt issuance costs, which will be provided to StealthGas to repay its existing indebtedness collateralized by the four vessels to be contributed to us;

b) our issuance of 4,775,272 common shares, par value $0.01 per share, and 795,878 Series A Preferred Shares, par value $0.01 per share, in conjunction with the Spin-Off Distribution.

Please read “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Unaudited Pro Forma Financial Information” included elsewhere herein.

 

     As of June 30, 2021
(in U.S. Dollars)
 
     Actual      As Adjusted  

Debt(1):

     

Current portion of long term debt

   $ —        $ 4,765,152  
  

 

 

    

 

 

 

Total long term debt, net of current portion

     —          23,038,848  
  

 

 

    

 

 

 

Total debt

     —          27,804,000  
  

 

 

    

 

 

 

Parent company equity(2):

     

Parent company investment

   $ 126,499,731      $ —    

Capital stock

     —          47,753  

—Preferred Stock

     —          7,959  

—Additional paid-in capital

     —          98,640,019  

—Accumulated deficit

     —          —    
  

 

 

    

 

 

 

Total parent company equity

     126,499,731        98,695,731  
  

 

 

    

 

 

 

Total capitalization

   $ 126,499,731      $ 126,499,731  
  

 

 

    

 

 

 

 

  (1)

Debt will be secured by mortgages on all of our vessels.

 

  (2)

Under our amended and restated articles of incorporation, which will be in place at the time of the Spin-Off Distribution, we will be authorized to issue up to 2,000,000,000 common shares, par value $0.01 per share, of which 4,775,272 are expected to be issued and outstanding immediately after the Spin-Off Distribution, and 200,000,000 shares of preferred stock, par value $0.01 per share, of which 800,000 shares are expected to be designated as Series A Preferred Shares and 795,878 issued and outstanding immediately after the Spin-Off Distribution.

 

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SELECTED HISTORICAL FINANCIAL AND OTHER DATA

The following table presents selected combined carve-out financial and other operating data for the periods and at the dates indicated. Our historical combined carve-out financial statements were prepared on a carve-out basis from the financial statements of our parent company, StealthGas. These carve-out financial statements include all assets, liabilities and results of operations of the four subsidiaries owned by us, formerly wholly-owned subsidiaries of StealthGas, for the periods presented.

The table should be read together with the section of this prospectus entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operation.” Excluding fleet data, the selected combined carve-out financial data of Imperial Petroleum Inc. Predecessor as of and for the years ended December 31, 2019 and 2020 is a summary of, is derived from, and is qualified by reference to, the audited combined carve-out financial statements of Imperial Petroleum Inc. Predecessor and notes thereto. Excluding fleet data, the selected combined carve-out financial data of Imperial Petroleum Inc. Predecessor as of June 30, 2021 and for the six months ended June 30, 2020 and 2021 is a summary of, is derived from, and is qualified by reference to, the unaudited combined carve-out financial statements of Imperial Petroleum Inc. Predecessor and notes thereto. The combined carveout financial statements of Imperial Petroleum Inc. Predecessor have been prepared in accordance with U.S. generally accepted accounting principles, or “U.S. GAAP.”

Our combined carve-out statements of operations, balance sheets, shareholders’ equity and cash flows, together with the notes thereto, are included in the section of this prospectus entitled “Financial Statements” and should be read in their entirety.

Imperial Petroleum Inc. Predecessor – Summary of Selected Historical Financials

(in US Dollars except for Fleet Data and number of shares)

 

     Year Ended December 31,     Six Months Ended June 30,  
Statement of Operations Data    2019     2020     2020
(Unaudited)
    2021
(Unaudited)
 

Voyage revenue

     13,329,640       20,302,052       8,959,965       9,226,877  

Voyage expenses

     572,553       3,194,312       758,922       1,931,781  

Vessel operating expenses

     3,799,700       7,160,594       3,396,061       3,737,123  

Dry-docking costs

     22,265       935,565       20,775       —    

Vessel depreciation

     8,613,177       8,643,920       4,306,588       4,337,331  

Management fees-related party

     365,515       503,355       237,475       261,545  

General and administrative expenses-related party

     331,408       219,717       103,179       176,162  

(Loss)/income from operations

     (374,978     (355,411     136,965       (1,217,065

Other financing costs

     (7,663     (10,008     (8,632     (3,376

Other income/(expenses)

     7,457       (28,342     (369     (8,283

Net (loss)/income

     (375,184     (393,761     127,964       (1,228,724

 

     As of December 31,      As of June 30,  
Balance Sheet Data    2019      2020      2021
(Unaudited)
 

Cash and cash equivalents

     8,802,847        6,451,524        3,282,775  

Current assets

     9,195,772        9,431,958        6,479,253  

Vessels, net

     136,410,967        128,689,447        124,300,316  

Total assets

     145,606,739        138,121,405        130,779,569  

Current liabilities

     1,925,168        4,059,482        4,279,838  

Total liabilities

     1,925,168        4,059,482        4,279,838  

Net parent investment

     143,681,571        134,061,923        126,499,731  

 

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Imperial Petroleum Inc. Predecessor – Summary of Selected Historical Financials

     Year Ended December 31,     Six Months Ended June 30,  
Cash Flow Data    2019     2020     2020
(Unaudited)
    2021
(Unaudited)
 

Net cash provided by operating activities

     8,573,456       8,867,595       5,093,147       3,307,319  

Net cash used in investing activities

     —         (728,000     —         (142,600

Net cash used in financing activities

     (4,168,177     (9,325,887     (5,681,621    
(6,333,468

     Year Ended December 31,     Six Months Ended June 30,  
Fleet Data    2019     2020     2020     2021  

Average number of vessels(1)

     4.0       4.0       4.0       4.0  

Total voyage days for fleet(2)

     1,456       1,417       724       712  

Total time charter days for fleet(3)

     569       615       376       350  

Total bareboat charter days for fleet(3)

     880       446       262       181  

Total spot market days for fleet(4)

     7       356       86       181  

Total calendar days for fleet(5)

     1,460       1,464       728       724  

Fleet utilization(6)

     99.7     96.8     99.5     98.3

Fleet operational utilization(7)

     99.7     95.7     99.5     92.3
Average Daily Results                         
     (In U.S. dollars per day per vessel)  

Adjusted average charter rate(8)

     8,762       12,073       11,327       10,246  

Vessel operating expenses(9)

     2,603       4,891       4,665       5,162  

General and administrative expenses(10)

     227       150       142       243  

Management fees(11)

     250       344       326       361  

Total daily operating expenses(12)

     2,830       5,041       4,807       5,405  

 

(1)

Average number of vessels is the number of owned vessels that constituted our fleet 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.

 

(2)

Our total voyage days for our fleet reflect the total days the vessels we operated were in our possession for the relevant periods, net of off-hire days associated with major repairs, drydockings or special or intermediate surveys.

 

(3)

Total time and bareboat charter days for fleet are the number of voyage days the vessels in our fleet operated on time or bareboat charters for the relevant period.

 

(4)

Total spot market charter days for fleet are the number of voyage days the vessels in our fleet operated on spot market charters for the relevant period.

 

(5)

Total calendar days are the total days the vessels we operated were in our possession for the relevant period including off-hire days associated with major repairs, drydockings or special or intermediate surveys.

 

(6)

Fleet utilization is the percentage of time that our vessels were available for revenue generating voyage days, and is determined by dividing voyage days by fleet calendar days for the relevant period.

 

(7)

Fleet operational utilization is the percentage of time that our vessels generated revenue, and is determined by dividing voyage days excluding commercially idle days by fleet calendar days for the relevant period.

 

(8)

Adjusted average charter rate is a measure of the average daily revenue performance of a vessel on a per voyage basis. We determine the adjusted average charter rate by dividing voyage revenue less voyage expenses by voyage days for the relevant time period. Voyage expenses primarily consist of port, canal and fuel costs that are unique to a particular voyage and are payable by us under a spot charter (which would otherwise be paid by the charterer under a time or bareboat charter contract), as well as commissions or any voyage costs incurred while the vessel is idle. Charter equivalent revenues and adjusted average charter rate

 

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  are non-GAAP measures which provide additional meaningful information in conjunction with voyage revenues, the most directly comparable GAAP measure, because they assist Company management in making decisions regarding the deployment and use of its vessels and in evaluating their financial performance. They are also standard shipping industry performance measures used primarily to compare period-to-period changes in a shipping company’s performance despite changes in the mix of charter types (i.e., spot charters or time charters, but not bareboat charters) under which the vessels may be employed between the periods. Our calculation of charter equivalent revenues and adjusted average charter rate may not be comparable to that reported by other companies in the shipping or other industries. Under bareboat charters, we are not responsible for either voyage expenses, unlike spot charters, or vessel operating expenses, unlike spot charters and time charters; Reconciliation of charter equivalent revenues as reflected in the consolidated statements of operations and calculation of adjusted average charter rate follow:

 

     Year Ended December 31,      Six Months Ended June 30,  
     2019      2020      2020      2021  

Voyage revenues

   $  13,329,640      $ 20,302,052      $ 8,959,965      $ 9,226,877  

Voyage expenses

   $ 572,553      $ 3,194,312      $ 758,922      $ 1,931,781  

Charter equivalent revenues

   $ 12,757,087      $  17,107,740      $ 8,201,043      $ 7,295,096  

Total voyage days for fleet

     1,456        1,417        724        712  

Adjusted average charter rate

   $ 8,762      $ 12,073      $ 11,327      $ 10,246  

 

 

(9)

Vessel operating expenses, including related party vessel operating expenses, consist of crew costs, provisions, deck and engine stores, lubricating oil, insurance, maintenance and repairs, is calculated by dividing vessel operating expenses by fleet calendar days for the relevant time period.

 

(10)

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

 

(11)

Management fees are based on a fixed rate management fee of $440 per day for each vessel in our fleet under spot or time charter and a fixed rate fee of $125 per day for each of the vessels operating on bareboat charter. Daily management fees are calculated by dividing total management fees by fleet calendar days for the relevant period.

 

(12)

Total operating expenses, or “TOE”, is a measurement of our total expenses associated with operating our vessels. TOE is the sum of vessel operating expenses and general and administrative expenses. Daily TOE is calculated by dividing TOE by fleet calendar days for the relevant time period.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATION

The following presentation of management’s discussion and analysis of financial condition and results of operations should be read in conjunction with our historical combined carve-out financial statements of Imperial Petroleum Inc. Predecessor, accompanying notes thereto and other financial information, appearing elsewhere in this prospectus. Imperial Petroleum Inc. was incorporated under the laws of the Republic of the Marshall Islands on May 14, 2021, and has not commenced operations and has nominal assets or liabilities. 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 the section entitled “Risk Factors” and elsewhere in this prospectus. You should also carefully read the following discussion with “Risk Factors,” “Forward-Looking Statements,” and “Selected Historical Financial and Other Data.” The financial statements have been prepared in accordance with U.S. GAAP.

Throughout this report, all references to “we,” “our,” “us” and the “Company” refer to Imperial Petroleum Inc. and 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. Unless otherwise indicated, all references to “dollars” and “$” in this report are to, and amounts are presented in, U.S. dollars.

Overview

Imperial Petroleum Inc. was incorporated under the laws of the Republic of the Marshall Islands on May 14, 2021. The Company was incorporated by StealthGas to serve as the holding company of four subsidiaries that will be contributed by StealthGas to the Company in connection with the Spin-Off Distribution. StealthGas will contribute these subsidiaries to the Company prior to the Spin-Off Distribution, and, as the sole shareholder of the Company, intends to distribute the Company’s common shares and Series A Preferred Shares to holders of StealthGas common stock on a pro rata basis on or about December 3, 2021. Under the registration statement of which this prospectus forms a part, the Company is applying to register the distribution of the common shares and Series A Preferred Shares under the Securities Act of 1933. In addition, the Company has applied to have the common shares listed on the Nasdaq Capital Market under the ticker symbol “IMPP” and the Series A Preferred Shares listed on the Nasdaq Capital Market under the ticker symbol “IMPPP”. Upon consummation of the Spin-Off Distribution and the successful listing of the common shares on the Nasdaq Capital Market, the Company and StealthGas will be independent publicly traded companies with separate boards of directors and management, although, at the time of the Spin-Off Distribution, some of the directors and officers of StealthGas will hold similar positions at the Company.

The financial statements presented in this prospectus are carve-out financial statements. The carve-out financial statements in this prospectus represent combined carve-out financial statements of Imperial Petroleum Inc. Predecessor, which include the results of the entities being contributed to us in connection with the Spin- Off Distribution, the fiscal years ended December 31, 2019 and December 31, 2020 and the six months ended June 30, 2020 and 2021.

We are a provider of international seaborne transportation services to oil producers, refineries and commodities traders. As of the date of the Spin-Off Distribution, we will own and operate a fleet of three medium range product tankers that carry refined petroleum products such as gasoline, diesel, fuel oil and jet fuel, as well as edible oils and chemicals, and one Aframax tanker which is used for carrying crude oil. The total cargo carrying capacity of our fleet is 255,804 dwt.

There currently is no existing public trading market for our common shares or our Series A Preferred Shares. However, we are in the process of applying to have our common shares listed on the Nasdaq Capital

 

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Market under the symbol “IMPP” and to have the Series A Preferred Shares listed on the Nasdaq Capital Market under the ticker symbol “IMPPP”. We make no representation that such application will be approved or that our common shares or Series A Preferred Shares will trade on such market, either now or at any time in the future. The successful listing of our common shares and our Series A Preferred Shares on the Nasdaq Capital Market is subject to our fulfilling all of the requirements of the Nasdaq Capital Market.

We will actively manage the deployment of our fleet on a mix of period charters, including time and bareboat charters which can last up to several years, and spot market charters, which generally last from one to six months, according to our assessment of market conditions. Some of our vessels may participate in shipping pools, or, in some cases in contracts of affreightment. As of September 30, 2021, two of our product tankers are employed under a time charter and bareboat contract, respectively, expiring in 2022 and our Aframax tanker and remaining product tanker are operating in the spot market. As of September 30, 2021, approximately 50% of our remaining ship capacity days in 2021 and approximately 25% of our ship capacity days in 2022 are under contract.

Vessels operating on period charters, principally time and bareboat charters, provide more predictable cash flows but can yield lower profit margins than vessels operating in the spot market during periods characterized by favorable market conditions. Vessels operating in the spot market generate revenues that are less predictable but may enable us to achieve increased profit margins during periods of high rates in the charter market, although we are exposed to the risk of having to seek to employ our vessels at low prevailing rates in weak market conditions, which may have a materially adverse impact on our overall financial performance. Vessels operating in pools benefit from better scheduling, and thus increased utilization, and better access to contracts of affreightment due to the larger commercial operation of the pool. We are constantly evaluating opportunities to increase the number of our vessels deployed on period charters, in particular time charters, or to participate in shipping pools (if available for our vessels), however we only expect to enter into additional period charters or shipping pools if we can obtain contract terms that satisfy our criteria. We carefully evaluate the length and the rate of the time or bareboat charter contract at the time of fixing or renewing a contract considering market conditions, trends and expectations.

As described below under “—Results of Operations”, the mix of charters our vessels are deployed on, which affects our utilization, revenues, expenses and profitability, has differed in recent periods and over time we expect will continue to vary. Our fleet’s percentage of calendar days operating on time and bareboat period charters decreased significantly from over 99% in 2019, comprised of 60.3% bareboat days and 39.0% time charter days, to 72.5% in 2020, comprised of 30.5% bareboat days and 42.0% time charter days, with spot market days increasing from 0.5% to 24.3% and fleet operational utilization declining from 99.7% to 95.7% from 2019 to 2020, reflecting the expiration of two bareboat charters and the operation of the respective vessels in the spot market and on time charters. In the six months ended June 30, 2021, the percentage of our fleet’s total calendar days on which our vessels operated in the spot market slightly increased, to 25.0%, with bareboat charter days declining further to 25.0% and time charter days increasing to 48.3% and fleet operational utilization declining to 92.3%. Our spot presence has further increased significantly from those levels in the second half of 2021 as two vessels that came off expiring time charters have more recently been operating in the spot market. This reflects, principally, the weak conditions that have been prevailing in the product and crude oil tanker charter markets in 2021, in which circumstances we generally prefer not to lock-in our vessels for extended periods at the low rates currently available under time or bareboat period charters. Operating vessels in the spot market, however, can result in decreased utilization, revenues and profitability in weak charter markets, as compared to periods of stronger markets or employment on period charters entered into during more favorable market conditions. This has been the case for our vessels operating in the spot market in the second half of 2021 and may continue to be the case for our vessels until conditions in the crude oil and product tanker charter markets begin to improve. With any improvement in market conditions, we expect we will seek to employ our vessels on a higher percentage of period charters, principally time charters, if attractive rates become available.

Compared to operating in the spot market both time and bareboat period charters offer (1) higher utilization rates, particularly in weaker markets, (2) lower costs, particularly for bareboat charters under which

 

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we are not responsible for voyage or operating expenses, while under time charters we are responsible for operating expenses and in the spot market we are responsible for both voyage and operating expenses, and (3) may generate higher or lower revenues and profit margins depending on market conditions in the product and crude oil tanker charter markets, with generally higher rates than spot charters in weak markets and lower rates than spot charters in stronger markets, and at what point in the charter market cycle the bareboat or time charters were entered into. The proportion of time our fleet operates on bareboat charters versus time charters affects our revenues and expenses, as vessels employed on bareboat charters generate lower revenues and expenses, because under bareboat charters we are not responsible for either voyage expenses or, unlike time charters, operating expenses, and the charter rates for bareboat charters are correspondingly lower. Profit margins for vessels employed on bareboat charters are generally somewhat lower than time charters, reflecting the lack of exposure to operational risk and the risk of operating expense increases. See “—Basis of Presentation and General Information—Revenues” for additional information regarding the different types of charters on which we employ our vessels.

We will be evaluating vessel purchase opportunities to expand our fleet accretive to our earnings and cash flow. Additionally, we will consider selling certain of our vessels when favorable sales opportunities present themselves. If, at the time of sale, the carrying value is lower than the sales price, we will realize a gain on sale, which will increase our earnings, but if, at the time of sale, the carrying value of a vessel is more than the sales price, we will realize a loss on sale, which will negatively impact our earnings. Please see “—Critical Accounting Policies”, below, for a further discussion of the consequences of selling our vessels for amounts below their carrying values.

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 in a period during which each vessel in our fleet was in our possession including off-hire days associated with major repairs, dry dockings or special or intermediate surveys. Calendar days are an indicator of the size of our fleet over a period and affect both the amount of revenue and the amount of expense that we record during that period. In. We may also elect to sell additional vessels in our fleet from time to time.

 

   

Voyage days. We define voyage days as the total number of days in a period during which each vessel in our fleet was in our possession net of off-hire days associated with major repairs, dry dockings or special or intermediate surveys. The shipping industry uses voyage days (also referred to as available days) to measure the number of days in a period during which vessels are available to generate revenues.

 

   

Fleet utilization; Fleet operational utilization. We calculate fleet utilization by dividing the number of our voyage days during a period by the number of our calendar days during that period, and we calculate fleet operational utilization by dividing the number of our voyage days-excluding commercially idle days-during a period, by the number of our calendar days during that period. The shipping industry uses fleet utilization to measure a company’s efficiency in minimizing the amount of days that its vessels are off-hire for reasons such as scheduled repairs, vessel upgrades or drydockings and other surveys, and uses fleet operational utilization to also measure a company’s efficiency in finding suitable employment for its vessels.

 

   

Cyclicality. As of September 30, 2021, one of our product tankers is employed on a fixed -rate time charter expiring in May 2022 and another of our product tankers is employed on a bareboat charter expiring in September 2022. Our Aframax tanker and our remaining product tanker are employed in the spot market. Accordingly, we are exposed to prevailing charter rates in the product and crude tanker sectors when these vessels’ existing charters expire. Currently tanker charter market rates are at relatively low levels, reflecting the impact of the COVID-19 pandemic, which reduced demand for oil

 

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and in turn demand for the seaborne transportation of oil and oil products in the second half of 2020 and in the first ten months of 2021, and production cuts. While the global economy has begun to recover in parts of the world, driven in part by the availability of COVID-19 vaccines, and in turn energy demand and oil prices have shown some recent improvement, the success and timing of COVID-19 containment strategies remain uncertain, particularly in light of the emergence of variants such as Delta, and charter rates face significant downside risks, including in the event of renewed weakness in the global economy and lower demand for the seaborne transport of refined petroleum products and crude oil, particularly resulting from failure to contain the COVID-19 pandemic.

 

   

Seasonality. Two of our product tankers are currently deployed on short term period charters expiring in 2022, and our Aframax tanker and our remaining product tanker are operating in the spot market. The short term duration of these period charters and operation in the spot market, may expose us to seasonal changes in the tanker markets, which are typically stronger in the winter months as a result of increased oil consumption in the northern hemisphere but weaker in the summer months as a result of lower oil consumption in the northern hemisphere and refinery maintenance.

Our ability to control our fixed and variable expenses, including those for commission expenses, crew wages and related costs, the cost of insurance, expenses for repairs and maintenance, the cost of spares and consumable stores, tonnage taxes and other miscellaneous expenses also affect our financial results. Factors beyond our control, such as developments relating to market premiums for insurance and the value of the U.S. dollar compared to currencies in which certain of our expenses, primarily crew wages are denominated, can also cause our vessel operating expenses to increase. In addition, our net income is affected by any financing arrangements, including any interest rate swap arrangements.

Impact of COVID-19 on our Business

The spread of the COVID-19 virus, which was declared a pandemic by the World Health Organization in March 2020, has caused and will likely continue to cause substantial disruptions in the global economy and trade, including reduced demand for energy, with many countries, ports and organizations, including those where we conduct a large part of our operations, having implemented measures to combat the outbreak, such as quarantines and travel restrictions. It also negatively impacted global economic activity and demand for energy, including refined petroleum products and oil, in the second half of 2020 and the first half of 2021, and despite some recovery recently, may continue to negatively impact global economic activity and demand for energy. The global response to the outbreak and the economic impact thereof, in particular decreased energy demand and lower oil prices, adversely affected our ability to secure charters at attractive rates in 2020, and may continue to do so, particularly for our vessels operating in the spot market and with charters expiring in 2022, if the efforts to contain the pandemic are less effective than hoped and the recent improvement in energy demand falters, as demand for additional charters could continue to be affected. Our business, and the tanker shipping industry as a whole, is also likely to be impacted by delays in crew changes as well as delays in the construction of new-build vessels, scheduled dry-dockings, intermediate or special surveys of vessels and ship repairs and upgrades, as well as reducing the availability of financing. Complications relating to changing crews due to restrictions in various ports throughout the world increased the costs related to these activities in 2020, and may continue to do so in 2021. The extent to which COVID-19 will impact our future results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the duration and severity of the pandemic and the actions to contain or treat its impact.

In response to the pandemic, we have instituted enhanced safety protocols such as regular disinfection of our on-shore facilities, regular employee COVID-19 testing, digital temperature reading facilities, limitation of on-site visitors and travel, mandatory self-isolation of personnel returning from travel and replacing physical meetings with virtual meetings. We expect to continue such measures, which have not had a significant impact on our expenses, to some degree until the pandemic abates. In addition, the prevailing low interest rates have

 

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been at low levels in part due to actions taken by central banks to stimulate economic activity in the face of the pandemic.

Basis of Presentation and General Information

Revenues

Our voyage revenues are driven primarily by the number of vessels in our fleet, the number of voyage days during which our vessels generate revenues, the mix of charters our vessels are employed on and hire 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 age, condition and specifications of our vessels and the levels of supply and demand in the product tanker and crude oil tanker charter markets.

We employ our vessels under time, bareboat and spot charters. Bareboat charters provide for the charterer to bear the cost of operating the vessel and as such typically market rates for bareboat charters are lower than those for time charters. Vessels operating on period charters, principally time and bareboat charters, provide more predictable cash flows, but can yield lower profit margins than vessels operating in the spot charter market during periods characterized by favorable market conditions. As a result, during the time our vessels are committed on period charters we will be unable, during periods of improving charter markets, to take advantage of improving charter rates as we could if our vessels were employed only on spot charters. Vessels operating in the spot charter market generate revenues that are less predictable but may enable us to capture increased profit margins during periods of high rates in the charter market, although we are exposed to the risk of having to seek to employ our vessels at low prevailing rates in weak market conditions, and may have a materially adverse impact on our overall financial performance. If we commit vessels on period charters, future spot market rates may be higher or lower than those rates at which we have time chartered our vessels.

Voyage Expenses

Voyage expenses include port and canal charges, bunker (fuel oil) expenses and commissions. These charges and expenses increase in periods during which vessels are employed on the spot market, because under these charters, these expenses are for the account of the vessel owner. Under period charters, these charges and expenses, including bunkers (fuel oil) but excluding commissions which are always paid by the vessel owner, are paid by the charterer. Bunkers (fuel oil) accounted for 67.8% of total voyage expenses for the six months ended June 30, 2021, 50.6% of total voyage expenses for the year ended December 31, 2020 and 13.5% of total voyage expenses for the year ended December 31, 2019. Commissions on hire are paid to our manager Stealth Maritime and/or third-party brokers. Stealth Maritime receives a fixed brokerage commission of 1.25% on freight, hire and demurrage for each vessel based on our management agreement. As of September 30, 2021, we had two of our vessels operating in the spot market for which we pay voyage expenses.

Vessel Operating Expenses

Vessel operating expenses include crew wages and related costs, the cost of insurance, expenses for repairs and maintenance, the cost of spares and consumable stores, tonnage taxes and other miscellaneous expenses. Our ability to control these fixed and variable expenses, also affects our financial results. In addition, the type of charter under which our vessels are employed (time, bareboat or spot charter) also affects our operating expenses because we do not pay the operating expenses of vessels that we deploy on bareboat charters. Factors beyond our control, some of which may affect the shipping industry in general, including, for instance, developments relating to market prices for insurance and regulations related to safety and environmental matters may also cause these expenses to increase.

 

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Management Fees

During each of the six months ended June 30, 2021 and 2020 and the years ended December 31, 2019 and 2020, we paid Stealth Maritime, our fleet manager, a fixed rate management fee of $440 per day for each vessel in our fleet under spot or time charter and a fixed rate fee of $125 per day for each of the vessels operating on bareboat charter. These rates will remain the same after the Spin-off Distribution, under our new management agreement with Stealth Maritime. Our Manager also receives a fee equal to 1.0% calculated on the price stated in the relevant memorandum of agreement for any vessel bought or sold by them on our behalf. From these management fees paid to Stealth Maritime, Stealth Maritime pays one technical manager that is responsible for the technical management of some of our vessels that are not technically managed by Stealth Maritime on a day-to-day basis.

General and Administrative Expenses

We incur general and administrative expenses that consist primarily of legal fees, audit fees, office rental fees, officers and board remuneration or reimbursement, directors’ and officers’ insurance, listing fees and other general and administrative expenses. Our general and administrative expenses also include our direct compensation expenses and the value of non-cash executive services provided through, and other expenses arising from, our management agreement with Stealth Maritime, our directors’ compensation and the value of the lease expense for the space we rent from Stealth Maritime. For our compensation expenses, pursuant to our management agreement, we will initially reimburse Stealth Maritime for its payment of the compensation of our executive officers for the first 12 months following the spin- off and then our Board will agree upon any further management compensation. With regards to the carve-out financial statements of Imperial Petroleum Inc. Predecessor, an allocation of general and administrative expenses incurred by StealthGas Inc. has been included in General and administrative expenses based on the number of calendar days the vessels to be contributed operated under StealthGas Inc.’s fleet compared to the number of calendar days of the total StealthGas Inc.’s fleet. We expect the aggregate cash compensation to our officers in the first year following the Spin-Off Distribution to be approximately $0.3 million.

Inflation

Inflation has only a moderate effect on our expenses given current economic conditions. In the event that significant global inflationary pressures appear, these pressures would increase our operating, voyage, administrative and financing expenses.

Depreciation and Dry docking

The carrying value of our vessels includes the original cost of the vessels plus capitalized expenses since acquisition relating to improvements and upgrading of the vessels, less accumulated depreciation and less any impairment. We depreciate our vessels on a straight-line basis, from the date they were originally built over their estimated useful lives, determined to be 25 years. Depreciation is based on cost less the estimated scrap value of the vessels which equals $350 per light weight ton. We expense costs associated with dry dockings and special and intermediate surveys as incurred which may affect the volatility of our results. During 2020, we drydocked our Aframax tanker at a total cost of $0.9 million, while in 2019 we did not dry dock any vessels. We have no scheduled drydockings for 2021.

Interest Expense and Finance Costs

As of June 30, 2021 we did not have any outstanding indebtedness; however, we are incurring $28.0 million of indebtedness under our New Senior Secured Credit Facility, to refinance outstanding indebtedness of StealthGas secured by the four vessels that it is contributing to us, which will bear interest at a rate of LIBOR plus 1.95% per annum. See “Liquidity and Capital Resources—Credit Facilities.” We will incur

 

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interest expenses under this credit facility and any new credit facilities we enter into to finance or refinance the purchase price of additional vessels as described in the “—Liquidity and Capital Resources” section below. We will also incur financing costs in connection with establishing those facilities, which will be deferred and amortized over the period of the facility, which we will also include in interest expense.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations is based upon our combined 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 policies 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 policies that involve a high degree of judgment and the methods of their application. For a description of all of our significant accounting policies, see Note 2 to our combined carve-out financial statements included elsewhere herein.

Impairment or disposal of long-lived assets:

We follow the Accounting Standards Codification (“ASC”) Subtopic 360-10, “Property, Plant and Equipment” (“ASC 360-10”), which requires long-lived assets used in operations be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. On a quarterly basis, in case an impairment indicator exists, we perform an analysis of the anticipated undiscounted future net cash flows of our long-lived assets. If the carrying value of the related asset exceeds the undiscounted cash flows and the fair market value of the asset, the carrying value is reduced to its fair value and the difference is recorded as an impairment loss in the consolidated statement of operations.

We review certain indicators of potential impairment, such as vessel fair values, vessel sales and purchases, business plans and overall market conditions including any regulatory changes that may have a material impact on the vessel lives. The decline in the values of our vessels was considered to be an indicator of potential impairment. As of the end of each respective quarter of 2020, we performed step one, the undiscounted cash flow test as required by the ASC guidance. We determined undiscounted projected net operating cash flows for each vessel with carrying value exceeding its fair value and compared it to the vessel’s carrying value. This assessment was made at the individual vessel level since separately identifiable cash flow information for each vessel was available. In developing estimates of future cash flows to be generated over remaining useful lives of the vessels, we made assumptions about the future, such as: (1) vessel charter rates, (2) vessel utilization rates, (3) vessel operating expenses, (4) dry docking costs, (5) vessel scrap values at the end of vessels’ remaining useful lives and (6) the remaining useful lives of the vessels. These assumptions were based on historical trends as well as future expectations in line with our historical performance and our expectations for future fleet utilization under our current fleet deployment strategy, vessel sales and purchases, and overall market conditions.

Projected cash flows were determined for the vessels by considering the revenues from existing charters for those vessels that have long term employment, and revenue estimates based on nine-year historical average rates (base rate) for periods for which there is no charter in place. With regards to operating expenses, these were based on historical trends and utilization rate was assumed to be 94%. Such assumptions are highly subjective.

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 new-buildings.

 

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Sensitivity Analysis.

The impairment test is highly sensitive to variances in future charter rates. When we conducted the analysis of the impairment test as of June 30, 2021 and as of December 31, 2020 we also performed a sensitivity analysis related to the future cash flow estimates. Set forth below is an analysis, as of June 30, 2021 and as of December 31, 2020, of the percentage difference between the current average rates for our fleet compared with the base rates used in the impairment test as described above, as well as an analysis of the impact on our impairment analysis if we were to utilize the most recent five-year, three-year and one-year historical average rates, which shows the number of vessels whose carrying value would not have been recovered and the related impairment charge.

 

     Percentage difference
between
our average
6-month 2021
rates as compared
with the base rates
    5-year
historical
average rate
     3-year
historical
average rate
     1-year
historical
average rate
 
    No. of
vessels
     Amount
($ million)
     No. of
vessels
     Amount
($ million)
     No. of
vessels
     Amount
($ million)
 

Product Tankers

     -8.84     3        31.3        3        31.3        3        31.3  

Aframax Tanker

     -3.43     —          —          —          —          —          —    

 

     Percentage difference
between
our average 2020
rates as compared
with the base rates
    5-year
historical
average rate
     3-year
historical
average rate
     1-year
historical
average rate
 
    No. of
vessels
     Amount
($ million)
     No. of
vessels
     Amount
($ million)
     No. of
vessels
     Amount
($ million)
 

Product Tankers

     -20.45     3        34.6        3        34.6        3        34.6  

Aframax Tanker

     0.33     —          —          —          —          —          —    

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 by any significant degree. Charter rates may remain at relatively low levels for some time, or decline, which could adversely affect our revenue and profitability, and future assessments of vessel impairment.

Based on the carrying value of each of our vessels held for use as of June 30, 2021 and as of December 31, 2020 and what we believe the charter-free market values of each of these vessels was as of these dates, all four of our owned vessels in the water had current carrying values above their market values. We believe that the aggregate carrying value of these vessels, assessed separately, exceeds their aggregate charter-free market value by approximately $38 million, $42 million and $37 million as of June 30, 2021, December 31, 2020 and December 31, 2019, respectively. However, we believe that with respect to each of these four vessels, we will recover their carrying values at the end of their useful lives, based on their undiscounted cash flows.

Vessel depreciation:

We record the value of our vessels at their cost (which includes acquisition costs directly attributable to the vessel and expenditures made to prepare the vessel for its initial voyage) less accumulated depreciation and impairment, if any. We depreciate our vessels on a straight-line basis over their estimated useful lives, estimated to be 25 years from date of initial delivery from the shipyard. Depreciation is based on cost less the estimated scrap value of the vessels which equals $350 per light weight ton. We believe that a 25-year depreciable life is consistent with other product tanker and crude tanker vessel owners and reflects management’s intended use. Depreciation is based on cost less the estimated residual scrap value. An increase in the useful life of the vessel or in the residual value would have the effect of decreasing the annual depreciation charge and extending it into later periods. A decrease in the useful life of the vessel or in the residual value would have the effect of increasing the annual depreciation charge. No events or circumstances occurred in 2020 and during the 6-month period ended June 30, 2021 that would require us to revise estimates related to depreciation and such revisions are not expected to occur in the future.

 

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Implications of Being an Emerging Growth Company

We had less than $1.07 billion in revenue during our last fiscal year, which means that we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act, or JOBS Act. An emerging growth company may take advantage or specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include:

 

   

exemption from the auditor attestation requirement in the assessment of the emerging growth company’s internal controls over financial reporting under Section 404(b) of the Sarbanes-Oxley Act;

 

   

exemption from new or revised financial accounting standards applicable to public companies until such standards are also applicable to private companies; and

 

   

exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board, or the PCAOB, requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and financial statements.

We may take advantage of these provisions until the end of the fiscal year following the fifth anniversary of our initial public offering or such earlier time that we are no longer an emerging growth company. We will cease to be an emerging growth company if, among other things, we have more than $1.07 billion in “total annual gross revenues” during the most recently completed fiscal year. We may choose to take advantage of some, but not all, of these reduced burdens. For as long as we take advantage of the reduced reporting obligations, the information that we provide shareholders may be different from information provided by other public companies. We are choosing to “opt out” of the extended transition period relating to the exemption from new or revised financial accounting standards and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth public companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

Results of Operations

Six months ended June 30, 2021 compared to six months ended June 30, 2020

The average number of vessels in our fleet was 4.0 for each of the six months ended June 30, 2021 and the six months ended June 30, 2020.

REVENUES—Voyage revenues for the six months ended June 30, 2021 were $9.2 million compared to $9.0 million for the six months ended June 30, 2020 an increase of $0.2 million, primarily due to higher revenues stemming from our voyage charter revenues along with a reduction of our bareboat activity, which generate lower revenue, as our bareboat days declined in the first six months of 2021 when compared to the first six months of 2020 by 30.9%. Total calendar days for our fleet were 724 for the six months ended June 30, 2021 compared to 728 for the six months ended June 30, 2020. Of the total calendar days for the first six months of 2021, 181 or 25.0% were bareboat charter days, 350 or 48.3% were time charter days and 181 or 25.0% were spot days. This compares to 262 or 36.0% bareboat charter days, 376 or 51.6% were time charter days and 86 or 11.8% spot days in the first six months of 2020. Our fleet operational utilization was 92.3% and 99.5% for the six months ended June 30, 2021 and six months ended June 30, 2020 respectively.

VOYAGE EXPENSES—Voyage expenses were $1.9 million for the six months ended June 30, 2021 compared to $0.8 million for the six months ended June 30, 2020. This increase of voyage expenses by $1.1 million is attributable to the increase of spot presence. For the year ended June 30, 2021 our spot presence was 181 days compared to 86 days in the first six months of 2020. Voyage expenses consisted largely of bunker charges amounting to $1.3 million for the first six months of 2021, accounting for 68.4% of total voyage

 

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expenses. Voyage expenses also included port expenses of $0.4 million for the six months ended June 30, 2021, corresponding to 21.1% of total voyage expenses, and commission to third parties which were $0.3 million, equivalent to 15.8% of total voyage expenses for the six months ended June 30, 2021. For the six months ended June 30, 2020 our spot charter activity was limited hence total voyage expenses amounted to $0.8 million.

VESSEL OPERATING EXPENSES—Vessel operating expenses were $3.7 million for the six months ended June 30, 2021 compared to $3.4 million for the six months ended June 30, 2020, an increase of $0.3 million, or 8.8%. The increase in operating expenses was primarily due to the reduction in the number of our vessels on bareboat, since under bareboat charter arrangements we are not responsible for vessel operating expenses, and crew expenses related to COVID-19.

MANAGEMENT FEES—Management fees were $0.3 million for the six months ended June 30, 2021 compared to $0.2 million for the six months ended June 30, 2020, an increase of $0.1 million or 50%. The increase was due to the reduction of vessels under bareboat charter arrangements. The daily management fees per vessel did not change during these periods and remained at $440 per day for vessels under time and spot charter and $125 per day for vessels under bareboat charter.

GENERAL AND ADMINISTRATIVE EXPENSES—General and administrative expenses were $0.2 million for the six months ended June 30, 2021 and $0.1 million for the six months ended June 30, 2020.

DEPRECIATION—Depreciation expenses were $4.3 million for each of the six months ended June 30, 2021 and six months ended June 30, 2020, respectively.

NET LOSS/PROFIT—As a result of the above factors, we recorded a net loss of $1.2 million for the six months ended June 30, 2021 compared to a net profit of $0.1 million for the six months ended June 30, 2020.

Year ended December 31, 2020 compared to year ended December 31, 2019

The average number of vessels in our fleet was 4.0 for the year ended December 31, 2020 and the year ended December 31, 2019, respectively.

REVENUES—Voyage revenues for the year ended December 31, 2020 were $ 20.3 million compared to $13.3 million for the year ended December 31, 2019, an increase of $7.0 million, primarily due to higher revenues stemming from our time charter contracts along with a reduction of our bareboat activity, as our bareboat days declined in 2020 when compared to year 2019 by 49.3%, Total calendar days for our fleet were 1,464 for the year ended December 31, 2020 compared to 1,460 for the year ended December 31, 2019. Of the total calendar days in 2020, 446 or 30.5% were bareboat charter days, 615 or 42.0% were time charter days and 356 or 24.3% were spot days. This compares to 880 or 60.3% bareboat charter days, 569 or 39.0% were time charter days and 7 or 0.5% spot days in 2019. Our fleet operational utilization was 95.7% and 99.7% for the years ended December 31, 2020 and December 31, 2019, respectively.

VOYAGE EXPENSES—Voyage expenses were $3.2 million for the year ended December 31, 2020 compared to $0.6 million for the year ended December 31, 2019. This increase of voyage expenses by $2.6 million is attributable to the increase of spot presence. For the year ended December 31, 2020 our spot presence was 356 days compared to 7 days in the year 2019. Voyage expenses consisted largely of bunker charges amounting to $1.6 million for 2020, accounting for 50% of total voyage expenses. Voyage expenses also included port expenses of $0.8 million for the year ended December 31, 2020, corresponding to 25% of total voyage expenses, and commission to third parties which were $0.5 million, equivalent to 15.6% of total voyage expenses for year 2020. For the year ended December 31, 2019 our spot charter activity was very limited hence total voyage expenses amounted to $0.6 million which are significantly lower compared to the voyage expenses incurred for the year ended December 31, 2020.

 

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VESSEL OPERATING EXPENSES—Vessel operating expenses were $7.2 million for the year ended December 31, 2020 compared to $3.8 million for the year ended December 31, 2019, an increase of $3.4 million, or 89.5%. The increase in operating expenses was primarily due to the reduction in the number of our vessels on bareboat- since under bareboat charter arrangements we are not responsible for vessel operating expenses.

DRY DOCKING COSTS—Dry docking costs were $0.9 million for the year ended December 31, 2020 compared to $0.02 million for the year ended December 31, 2019, an increase of $0.88 million. Dry docking costs for the year ended December 31, 2020 related to the dry docking of our Aframax tanker.

MANAGEMENT FEES—Management fees were $0.5 million for the year ended December 31, 2020 compared to $0.4 million for the year ended December 31, 2019, an increase of $0.1 million or 25%. The increase was due to the reduction of vessels on bareboat. The daily management fees per vessel did not change during these periods and remained at $440 per day for vessels under time and spot charter and $125 per day for vessels under bareboat charter.

GENERAL AND ADMINISTRATIVE EXPENSES—General and administrative expenses for the year ended December 31, 2020 were $0.2 million compared to $0.3 million for the year ended December 31, 2019, a decrease of $0.1 million or 33.3%, mainly due to fact that for the year ended December 31, 2019 share based compensation expenses were incurred by StealthGas Inc. and allocated to the carve-out entities which was not the case for the year ended December 31, 2020 since all the shares awarded by StealthGas Inc. under its equity compensation plan vested in August 2019.

DEPRECIATION—Depreciation expenses for the year ended December 31, 2020 and the year ended December 31, 2019 were $8.6 million for each year.

NET LOSS—As a result of the above factors, we recorded a net loss of $0.4 million for the each of the years ended December 31, 2020 and December 31, 2019.

Recent Accounting Pronouncements

Please refer to Note 2 of the financial statements included elsewhere in this prospectus.

Liquidity and Capital Resources

As of June 30, 2021, we had cash and cash equivalents of $3.3 million and $1.2 million in restricted cash, classified as current assets.

Our principal sources of funds for our liquidity needs are cash flows from operations. Potential additional sources of funds include equity offerings and bank borrowings. Our principal use of funds has been to acquire our vessels, maintain the quality of our vessels, and fund working capital requirements.

Our liquidity needs, as of June 30, 2021, primarily relate to funding expenses for operating our vessels, any vessel improvements that may be required and general and administrative expenses.

As of June 30, 2021, we did not have any outstanding indebtedness; however, we are incurring approximately $28.0 million of indebtedness under our New Senior Secured Credit Facility, to refinance outstanding indebtedness of StealthGas secured by the four vessels that it is contributing to us. We believe that our working capital is sufficient for our present short-term liquidity requirements. We believe that, unless there is a major and sustained downturn in market conditions applicable to our specific shipping industry segment, our internally generated cash flows will be sufficient to fund our operations, including working capital requirements, for at least 12 months taking into account any possible capital commitments and debt service requirements.

 

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For a description of our New Senior Secured Credit Facility please refer to the discussion under the heading “—Credit Facilities” below.

Our dividend policy will also affect our liquidity position. See “Common Shares Dividend Policy.” We will also have approximately 795,878 Series A Preferred Shares outstanding after the Spin-Off Distribution, which will have a dividend rate of 8.75% per annum per $25.00 of liquidation preference per share.

Cash Flows

As of June 30, 2021, we had a working capital surplus of $2.2 million. Our cash balance amounted to $3.3 million and our restricted cash amounted to $1.2 million, as of June 30, 2021.

Net cash provided by operating activities—was $3.3 million for the six months ended June 30, 2021 and $5.1 million for the six months ended June 30, 2020. This represents the net amount of cash, after expenses, generated by chartering our vessels. Net cash provided by operating activities decreased in the six months ended June 30, 2021 compared to the six months ended June 30, 2020 by $1.8 million mainly due to the decrease of our charter equivalent revenues. Net cash provided by operating activities was $8.9 million for the year ended December 31, 2020 and $8.6 million for the year ended December 31, 2019. Net cash provided by operating activities increased in 2020 compared to 2019 by $0.3 million mainly due to inflows from our parent.

Net cash used in investing activities—was $0.1 million for the six months ended June 30, 2021 and $nil for the six months ended June 30, 2020. Net cash used in investing activities increased in the six months ended June 30, 2021 compared to the six months ended June 30, 2020 due to the costs relating to improvements incurred for our Aframax tanker. Net cash used in investing activities was an outflow of $0.7 million in 2020, while net cash used in investing activities was nil for the year ended December 31, 2019. Net cash used in investing activities increased in 2020 compared to 2019, mainly due to the investment of water ballast system installation on our Aframax tanker.

Net cash used in financing activities— As part of StealthGas, we are dependent upon StealthGas for the major part of our working capital and financing requirements as StealthGas uses a centralized approach to cash management and financing of its operations. Financial transactions are accounted for through the Net Parent Investment account. Accordingly, none of StealthGas’s cash and cash equivalents or debt at the corporate level have been assigned to us in the audited combined carve-out financial statements. Net Parent Investment represents StealthGas’s interest in our net assets and includes our cumulative losses as adjusted for cash distributions to and cash contributions from StealthGas. The related transactions with StealthGas are reflected in the accompanying combined carve-out statements of cash flows as a financing activity.

The increase in the cash outflows for financing activities in 2020 compared to 2019 is mainly attributed to the increase in net distributions to StealthGas from $3.8 million in 2019 to $9.2 million in 2020. The increase in the cash outflows for financing activities for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 is mainly attributed to the increase in net distributions to StealthGas from $5.6 million in the six months ended June 30, 2020 to $6.3 million in the six months ended June 30, 2021.

As and when we identify assets that we believe will provide attractive returns, we generally expect to enter into specific term loan facilities and borrow amounts under these facilities as the vessels are delivered to us. This is the primary driver of the timing and amount of cash provided to us by our financing activities, however, from time to time to bolster our cash position and take advantage of financing opportunities, including to refinance the acquisition cost of vessels acquired earlier, we may in the future borrow under credit facilities secured by previously unencumbered vessels in our then-existing fleet.

Credit Facilities

We operate in a capital intensive industry which requires significant amounts of investment, and we expect to fund a significant portion of this investment through long term debt. We will maintain debt levels we

 

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consider prudent based on our market expectations, cash flow, interest coverage and percentage of debt to capital. StealthGas, and the subsidiaries that own the four tankers that comprise our fleet, entered into credit facilities in connection with financing the acquisition of these vessels. We have entered into a senior secured credit facility with DNB to refinance the outstanding balances under these credit facilities that have been entered into by StealthGas for which the four tankers serve as security. See “—Senior Secured Credit Facility.”

Senior Secured Credit Facility. In connection with the planned refinancing and consolidation of StealthGas’ existing credit facilities collateralized by our vessels, we have entered into a new senior secured term loan facility with DNB (the “New Senior Secured Credit Facility”), in conjunction with the Spin-Off Distribution.

The New Senior Secured Credit Facility is for an amount equal to the lesser of (i) $28.0 million and (ii) 60% of the charter-free market value of the four vessels in our fleet, each of which will be mortgaged thereunder. Borrowings under the New Senior Secured Credit Facility will bear interest at an annual interest rate of LIBOR plus a margin of 1.95%. We will be required to repay principal amounts in semi-annual installments together with a balloon payment on the final maturity date, which will be the fifth anniversary of drawdown, based on an amortization profile of approximately 18 years.

The New Senior Secured Credit Facility will be secured by customary shipping industry collateral including mortgages and other security relating to our four vessels. The New Senior Secured Credit Facility contains the collateral coverage covenants and certain financial and other covenants and events of default described below, which are substantially similar to those contained in the existing credit facilities secured by our vessels.

Our New Senior Secured Credit Facility contains financial covenants requiring us to:

 

   

ensure that our leverage, which is defined as total debt net of cash/total market adjusted assets, does not at any time exceed 70%;

 

   

maintain a ratio of the aggregate market value of the vessels securing the loan to the principal amount outstanding under such loan (which we sometimes refer to as the value maintenance or security coverage clause) at all times in excess of 125%;

 

   

ensure that our ratio of EBITDA to interest expense over the preceding twelve months is at all times more than 2.5 times; and

 

   

maintain at the end of each quarter a free cash balance of $0.5 million per vessel for the first 24 months of the Company’s operation. Following the completion of the first two operating years and thereafter the required free cash- balance will be the higher of $1.0 million per vessel and $5.0 million aggregate cash balance.

Our New Senior Secured Credit Facility also requires that members of the Vafias family at all times own at least 10% of our outstanding capital stock and that it would be an event of default if Harry Vafias ceased to serve as an executive officer or director of our company or the Vafias family ceased to control our company.

Our New Senior Secured Credit Facility contains customary events of default with respect to us and our subsidiaries, including upon the non-payment of amounts due under the credit facility; breach of covenants; matters affecting the collateral under such facility; insolvency proceedings and the occurrence of any event that, in light of which, the lender considers that there is a significant risk that the borrowers are, or will later become, unable to discharge their liabilities as they fall due. Under the terms of our New Senior Credit Facility, we will be generally permitted to declare or pay cash dividends so long as we are not in default thereunder nor would be in default as a result of such dividend payment until June 30, 2022, and thereafter declare and pay dividends in amounts up to 50% of our free cash flow in any rolling 12-month period so long as we are not in default thereunder nor would be in default as a result of such dividend payment.

 

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Our New Senior Secured Credit Facility provides that upon the occurrence of an event of default, the lenders may require that all amounts outstanding under the credit facility be repaid immediately and terminate our ability to borrow under the credit facility and foreclose on the mortgages over the vessels and the related collateral. Our New Senior Secured Credit Facility is also contains cross-default clauses.

Capital Expenditures

We may make capital expenditures from time to time in connection with our vessel acquisitions. As of the date of this prospectus, we do not have any agreements to acquire additional vessels or for any other material capital expenditures. Please refer to section above “Liquidity and Capital Resources – Cash Flows” for a discussion of how we plan to cover our working capital requirements and possible capital commitments.

Trend Information

The tanker industry is both cyclical and volatile in terms of charter rates and profitability. Indicatively, during the ten-year period from the third quarter of 2011 through the second quarter of 2021, average earnings for an Aframax tanker fluctuated between $5,713 to $52,853 per day on a quarterly basis. Similarly, average MR tanker earnings fluctuated between $6,283 to $26,688 per day over the same period. Asset values are also subject to price fluctuations and market cyclicality. For example, the price of a 5-year-old Aframax tanker fluctuated between $27.0 million and $46.0 million during the ten-year period from the third quarter of 2011 through the second quarter of 2021 while the price of a 5-year-old MR tanker ranged between $22.0 million and $31.0 million over the same period.

In late 2019 and during the first half of 2020, tanker shipping charter rates reached near record highs driven mainly by extraordinary floating storage demand and dropped to less than operating cost levels by the end of the year. Specifically, average Aframax tanker earnings spiked over $50,000 per day in the fourth quarter of 2019 as compared to approximately $5,700 per day in the fourth quarter of 2020 and $7,648 per day in the second quarter of 2021. Similarly, average MR tanker earnings stood at approximately $20,000 per day in the fourth quarter of 2019 before dropping to approximately $6,400 per day in the fourth quarter of 2020 and stood at $6,880 in the second quarter of 2021.

Seaborne oil trade was severely affected by the impact of Covid-19 pandemic through disruptions arising from lockdowns in many countries and OPEC+ production cuts. Crude trade contracted by 6.5% to 295.1 million dwt in 2020 as compared to 315.7 million dwt in 2019. Similarly, products trade declined by approximately 10% to 113.8 million dwt in 2020 as compared to 126.9 million dwt in 2019.

The tanker market fundamentals remain challenging in the short term, with the impacts of the pandemic continuing to put pressure in tanker demand along with the unwinding of floating storage which stood at 4% of fleet capacity in June 2021 from 5% at the end of 2020 and 10% at the May 2020 peak. Overall, crude tanker dwt demand is projected to contract by 0.5% in the year 2021 and to increase by 6% in 2022, and product tanker demand is expected to increase by approximately 9% in 2021 supported by increasing demand for oil products and by around 6% in 2022 as demand for oil transportation recovers further and OPEC+ output restrictions ease out. The crude tanker trading fleet is expected to increase by approximately 4.5% in 2021 as further ships exit storage while the product tanker fleet is expected to increase by approximately 3%.

See “Business—The Tanker Industry.”

Off-Balance Sheet Arrangements

As of June 30, 2021, we did not have any off-balance sheet arrangements.

 

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Contractual Obligations and Commitments

Contractual obligations as of December 31, 2020 were:

 

     Payments due by period (in thousands)  
     Total      Less than 1
year (2021)
     1-3 years
(2022-2023)
     3-5 years
(2024-2025)
     More than 5 years
(After January 1,
2026)
 

Management fees(1)

   $ 840      $ 560      $ 280        —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 840      $ 560      $ 280      $ —        $ —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

Based on the management agreement of Imperial Petroleum Inc. Predecessor with Stealth Maritime, we pay Stealth Maritime $125 per vessel per day for vessels on bareboat charter and $440 per vessel per day for vessels not on bareboat charter for our existing fleet (but excluding our contracted vessels). We also pay 1.25% of the gross freight, demurrage and charter hire collected from employment of our ships and 1% of the contract price of any vessels bought or sold on our behalf.

Unaudited Pro Forma Condensed Combined Financial Information

The following unaudited pro forma condensed combined financial information is presented to illustrate the estimated pro forma effects of the Spin-Off Distribution based on the historical results of operations of Imperial Petroleum Inc. Predecessor.

The accompanying unaudited pro forma condensed combined financial information gives effect to transaction accounting adjustments that reflect the new debt to be incurred following the Spin-Off Distribution and to autonomous entity adjustments that reflect incremental expenses or other changes necessary to reflect Imperial Petroleum Inc. Predecessor’s financial condition and results of operations as if it were a separate stand-alone entity.

The management agreement that we will enter into with Stealth Maritime, prior to the Spin-Off Distribution, for technical, administrative, commercial and certain other services, will be on substantially the same terms as the management agreement between StealthGas and Stealth Maritime, including the same fee levels. Therefore no adjustment is necessary nor has any adjustment been made to the pro forma condensed combined financial information.

The unaudited pro forma condensed combined balance sheet gives effect to the Spin-Off Distribution as if it had occurred on June 30, 2021 and the unaudited pro forma condensed combined statements of operations give effect to the Spin-Off Distribution as if it had occurred on January 1, 2020.

The unaudited pro forma condensed combined financial information is provided for informational purposes only. The unaudited pro forma condensed combined financial information is not necessarily indicative of operating results that would have been achieved had the Spin-Off Distribution been completed at the dates indicated and does not intend to project the future financial results of Imperial Petroleum Inc. after the Spin-Off Distribution. The unaudited pro forma condensed combined balance sheet does not purport to reflect what the Company’s financial condition would have been had the Spin-Off Distribution been completed on June 30, 2021 or for any future or historical period.

The unaudited pro forma condensed combined financial information presented below should be read in conjunction with the following information:

 

   

Notes to the unaudited pro forma condensed combined financial information.

 

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Audited combined carve-out financial statements of Imperial Petroleum Inc. Predecessor as of and for the fiscal year ended December 31, 2020 included in this prospectus.

 

   

Unaudited condensed combined carve-out interim financial statements of Imperial Petroleum Inc. Predecessor as of and for the six months ended June 30, 2021 included in this prospectus.

 

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Unaudited Pro Forma Condensed Combined Balance Sheet

 

As of June 30, 2021

   Imperial
Petroleum Inc.
Predecessor
     Transaction
accounting
adjustments
    Notes     Autonomous
entity
adjustments
     Notes      Pro Forma
Combined
 

Assets

               

Current assets

               

Cash and cash equivalents

     3,282,775        —           —             3,282,775  

Restricted cash

     1,165,031        —           —             1,165,031  

Trade and other receivables

     1,469,806        —           —             1,469,806  

Inventories

     378,091        —           —             378,091  

Advances and prepayments

     183,550        —           —             183,550  
  

 

 

    

 

 

     

 

 

       

 

 

 

Total current assets

     6,479,253        —           —             6,479,253  
  

 

 

    

 

 

     

 

 

       

 

 

 

Non current assets

               

Vessels, net

     124,300,316        —           —             124,300,316  
  

 

 

    

 

 

     

 

 

       

 

 

 

Total non current assets

     124,300,316        —           —             124,300,316  
  

 

 

    

 

 

     

 

 

       

 

 

 

Total assets

     130,779,569        —           —             130,779,569  
  

 

 

    

 

 

     

 

 

       

 

 

 

Liabilities and equity

               

Current liabilities

               

Current portion of long-term debt

     —          4,765,152       3(a)       —             4,765,152  

Trade accounts payable

     1,041,483        —           —             1,041,483  

Payable to related party

     1,473,000        —           —             1,473,000  

Accrued liabilities

     303,573        —           —             303,573  

Customer deposits

     868,000        —           —             868,000  

Deferred income

     593,782        —           —             593,782  
  

 

 

    

 

 

     

 

 

       

 

 

 

Total current liabilities

     4,279,838        4,765,152         —             9,044,990  
  

 

 

    

 

 

     

 

 

       

 

 

 

Long-term debt, net of current portion

     —          23,038,848       3(a)             23,038,848  
  

 

 

    

 

 

     

 

 

       

 

 

 

Total non-current liabilities

     —          23,038,848         —             23,038,848  
  

 

 

    

 

 

     

 

 

       

 

 

 

Total liabilities

     4,279,838        27,804,000         —             32,083,838  

Parent company investment

     126,499,731        (126,499,731    

3(a),

3(e)

 

 

    —             —    

Common stock

     —          47,753       3 (e)       —             47,753  

Preferred stock

     —          7,959       3(e     —             7,959  

Additional paid-in capital

     —          98,640,019       3(e)       —             98,640,019  
  

 

 

    

 

 

     

 

 

       

 

 

 

Equity

     126,499,731        (27,804,000       —             98,695,731  
  

 

 

    

 

 

     

 

 

       

 

 

 

Total liabilities and equity

     130,779,569        —           —             130,779,569  
  

 

 

    

 

 

     

 

 

       

 

 

 

 

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Unaudited Pro Forma Condensed Combined Statement of Operations

 

     

For the year ended December 31, 2020

   Imperial
Petroleum
Inc.
Predecessor
    Transaction
accounting
adjustments
          Autonomous
entity
adjustments
    Notes     Pro Forma
Combined
 

Revenues

            

Revenues

     20,302,052       —           —           20,302,052  
  

 

 

   

 

 

     

 

 

     

 

 

 

Total revenues

     20,302,052       —           —           20,302,052  
  

 

 

   

 

 

     

 

 

     

 

 

 

Expenses

            

Voyage expenses

     2,944,071       —           —           2,944,071  

Voyage expenses – related party

     250,241       —           —           250,241  

Vessels’ operating expenses

     7,112,094       —           —           7,112,094  

Vessels’ operating expenses – related party

     48,500       —           —           48,500  

Dry-docking costs

     935,565       —           —           935,565  

Management fees – related party

     503,355       —           —           503,355  

General and administrative expenses

     219,717       300,000       3(d)       527,988       3(c)       1,047,705  

Depreciation

     8,643,920       —           —           8,643,920  
  

 

 

   

 

 

     

 

 

     

 

 

 

Total expenses

     20,657,463       300,000         527,988         21,485,451  
  

 

 

   

 

 

     

 

 

     

 

 

 

Loss from operations

     (355,411     (300,000       (527,988       (1,183,399
  

 

 

   

 

 

     

 

 

     

 

 

 

Other (expenses) / income

            

Interest and finance costs

     (10,008     (625,730     3(b)       —           (635,738

Interest income

     108       —           —           108  

Foreign exchange gain/(loss)

     (28,450     —           —           (28,450
  

 

 

   

 

 

     

 

 

     

 

 

 

Other expenses, net

     (38,350     (625,730       —           (664,080
  

 

 

   

 

 

     

 

 

     

 

 

 

Net loss

     (393,761     (925,730       (527,988       (1,847,479
  

 

 

   

 

 

     

 

 

     

 

 

 

Weighted average shares outstanding – basic and diluted

 

            4,775,272  

Loss per share

             3(f)       (75.15
Unaudited Pro Forma Condensed Combined Statement of Operations

 

     

For the 6-months ended June 30, 2021

   Imperial
Petroleum
Inc.
Predecessor
    Transaction
accounting
adjustments
          Autonomous
entity
adjustments
    Notes     Pro Forma
Combined
 

Revenues

            

Revenues

     9,226,877       —           —           9,226,877  
  

 

 

   

 

 

     

 

 

     

 

 

 

Total revenues

     9,226,877       —           —           9,226,877  
  

 

 

   

 

 

     

 

 

     

 

 

 

Expenses

            

Voyage expenses

     1,815,116       —           —           1,815,116  

Voyage expenses – related party

     116,665       —           —           116,665  

Vessels’ operating expenses

     3,695,123       —           —           3,695,123  

Vessels’ operating expenses – related party

     42,000       —           —           42,000  

Management fees – related party

     261,545       —           —           261,545  

General and administrative expenses

     176,162       150,000       3(d     263,994       3(c     590,156  

Depreciation

     4,337,331       —           —           4,337,331  
  

 

 

   

 

 

     

 

 

     

 

 

 

Total expenses

     10,443,942       150,000         263,994         10,857,936  
  

 

 

   

 

 

     

 

 

     

 

 

 

Loss from operations

     (1,217,065     (150,000       (263,994       (1,631,059
  

 

 

   

 

 

     

 

 

     

 

 

 

Other (expenses) / income

            

Interest and finance costs

     (3,376     (312,865     3(b)       —           (316,241

Interest income

     4       —           —           4  

Foreign exchange gain/(loss)

     (8,287     —           —           (8,287
  

 

 

   

 

 

     

 

 

     

 

 

 

Other expenses, net

     (11,659     (312,865       —           (324,524
  

 

 

   

 

 

     

 

 

     

 

 

 

Net loss

     (1,228,724     (462,865       (263,994       (1,955,583
  

 

 

   

 

 

     

 

 

     

 

 

 

Weighted average shares outstanding – basic and diluted

 

            4,775,272  

Loss per share

             3(f)       (59.18

 

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Notes to Unaudited Pro Forma Condensed Combined Financial Information

 

  1.

Description of the Spin-Off Distribution

As described more fully elsewhere in this prospectus, the Company was incorporated by StealthGas to serve as the holding company of four subsidiaries that will be contributed by StealthGas to the Company. StealthGas will contribute these subsidiaries to the Company, and, as the sole shareholder of the Company, intends to distribute the Company’s common shares and Series A Preferred Shares to stockholders of StealthGas on a pro rata basis.

 

  2.

Accounting Policies

For purposes of preparing the unaudited pro forma condensed combined financial information, the historical audited combined financial statements of Imperial Petroleum Inc. Predecessor were prepared under U.S. GAAP. The resulting pro forma condensed combined financial information has not been audited.

 

  3.

Pro Forma Adjustments

 

  (a)

Prior to the Spin-Off Distribution, we were dependent on StealthGas for financing requirements as StealthGas used a centralized approach. Accordingly, certain debt-related transactions were accounted for through the net parent investment account. In connection with the Spin-Off Distribution, we incurred $28,000,000 of indebtedness under our New Senior Secured Credit Facility, net of $196,000 in debt issuance costs, which bears interest at a LIBOR plus 1.95% and will be provided to StealthGas to repay its existing indebtedness which is secured by the four vessels that it is contributing to us.

 

  (b)

Represents the net increase to interest expense resulting from interest on the debt discussed in (a) above and the amortization of related debt issuance costs amounting to $586,530 and $39,200, respectively for the year ended December 31, 2020 and $293,265 and $19,600, respectively for the six months ended June 30, 2021. LIBOR used in the calculation of interest expense amounted to 0.14% which was the rate in effect on July 1, 2021.

 

  (c)

This adjustment reflects the incremental amounts, i.e. in excess of the amounts allocated in the historical combined financial statements, that we expect to reimburse Stealth Maritime:

  i)

to lease office space amounting to $77,839 for the year ended December 31, 2020 and $38,920 for the six months ended June 30, 2021,

 

  ii)

for its payment of the compensation of our executive officers following the Spin-Off Distribution amounting to $250,149 for the year ended December 31, 2020 and $125,074 for the six months ended June 30, 2021,

as well as the incremental costs relating to general and administrative expenses expected to be incurred as if Imperial Petroleum Inc. was a separate stand-alone entity amounting to $200,000 for the year ended December 31, 2020 and $100,000 for the six months ended June 30, 2021.

 

  (d)

This adjustment reflects estimated non-recurring expenses relating to accounting, legal and consulting fees that are directly attributable to the Spin-Off Distribution.

 

  (e)

This adjustment reflects the estimated issuance of 4,775,272 common shares, par value $0.01 per share, and 795,878 Series A preferred shares, par value $0.01 per share, with $25.00 of liquidation preference per share, as well as the return to StealthGas of the expected proceeds of our New Senior Secured Credit Facility amounting to $28,000,000, net of $196,000 in debt issuance costs.

 

  (f)

The calculation of Pro-forma loss per share takes into account the expected issuance of common shares of Imperial Petroleum Inc. as well as the expected preferred dividend attributable to the shareholders of our 8.75% Series A Preferred Shares of Imperial Petroleum Inc. amounting to $1,740,983 for the year ended December 31, 2020 and $870,492 for the six months ended June 30, 2021 assuming 795,878 Series A preferred shares will be issued.

 

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BUSINESS

History and Development of the Company

Imperial Petroleum Inc. was incorporated under the laws of the Republic of the Marshall Islands on May 14, 2021. The Company was incorporated by StealthGas to serve as the holding company of four subsidiaries that will be contributed by StealthGas to the Company in connection with the Spin-Off Distribution. StealthGas will contribute these subsidiaries to the Company prior to the Spin-Off Distribution, and, as the sole shareholder of the Company, intends to distribute all of the Company’s common shares and Series A Preferred Shares to holders of StealthGas common stock on a pro rata basis on or about December 3, 2021. Under the registration statement of which this prospectus forms a part, the Company is applying to register the distribution of the common shares and Series A Preferred Shares under the Securities Act of 1933. In addition, the Company has applied to have the common shares listed on the Nasdaq Capital Market under the ticker symbol “IMPP” and to have the Series A Preferred Shares listed on the Nasdaq Capital Market under the ticker symbol “IMPPP”. Upon consummation of the Spin-Off Distribution and the successful listing of the common shares on the Nasdaq Capital Market, the Company and StealthGas will be independent publicly traded companies with separate boards of directors and management, although, at the time of the Spin-Off Distribution, some of the directors and officers of StealthGas will hold similar positions at the Company.

We are a provider of international seaborne transportation services to oil producers, refineries and commodities traders. As of the date of the Spin-Off Distribution, we will own and operate a fleet of three medium range product tankers that carry refined petroleum products such as gasoline, diesel, fuel oil and jet fuel, as well as edible oils and chemicals, and one Aframax tanker which is used for carrying crude oil. The total cargo carrying capacity of our fleet is 255,804 dwt.

There currently is no existing public trading market for our common shares or Series A Preferred Shares. However, we are in the process of applying to have our common shares listed on the Nasdaq Capital Market under the symbol “IMPP” and the Series A Preferred Shares listed on the Nasdaq Capital Market under the ticker symbol “IMPPP”. We make no representation that such applications will be approved or that our common shares or Series A Preferred Shares will trade on such market, either now or at any time in the future. The successful listing of our common shares and Series A Preferred Shares on the Nasdaq Capital Market is subject to our fulfilling all of the requirements of the Nasdaq Capital Market.

Our principal executive offices are located at 331 Kifissias Avenue, Erithrea 14561 Athens, Greece. Our telephone number from the United States is 011 30 210 625 0001. We will establish a website prior to the completion of the Spin-Off Distribution, at www.imperialpetro.com. The information contained on or linked to from our website is not incorporated herein by reference.

Background and Purpose of the Spin-Off Distribution

The Company was incorporated on May 14, 2021 to serve as a holding company for all product tankers and crude oil tankers owned, directly or indirectly, by StealthGas. Before the Spin-Off Distribution, StealthGas owns and operates both LPG carriers and product tankers and crude oil tankers. Tankers generally have higher operating costs and a more volatile earnings profile than LPG carriers. After the Spin-Off Distribution, StealthGas will own only LPG carriers, and the Company will own only product tankers and crude oil tankers, although StealthGas and Imperial Petroleum may in the future consider expansion into other seaborne transportation sectors. Historically, “pure play” ship-owning companies generally have tended to trade at levels that suggest higher valuations than ship-owning companies with mixed asset classes, and it is expected that the valuation multiples for Imperial Petroleum – as it is in general with tanker companies – will be higher compared to that of StealthGas; although there can be no assurance that this will be the case. Since the Spin-Off Distribution will result in two “pure play” companies, StealthGas and the Company expects that the Spin-Off Distribution will result in an increase of shareholder value if the aggregate trading value of the two separate entities exceeds that of the trading value of StealthGas before the Spin-Off Distribution as historical trends

 

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suggest. The StealthGas Board of Directors received presentations from its financial advisor that noted the foregoing trends and information. After the Spin-Off Distribution, the Company expects that it will initially focus solely on product tankers and crude oil tankers, with the aim of acquiring additional vessels and growing; although it does not currently have any agreements or commitments to acquire additional vessels. StealthGas and Imperial Petroleum also believe that the Spin-Off Distribution may better position both companies for potential sale or merger opportunities in the future.

The Series A Preferred Shares have been created for inclusion as part of the consideration for the contribution of the subsidiaries owning the vessels in our fleet and will be distributed by StealthGas in the Spin-Off Distribution to attempt to mitigate the impact on the value received by StealthGas stockholders in the Spin-Off Distribution that could result from volatility or dislocations in the trading price of the Imperial Petroleum common shares as non-convertible preferred shares, such as the Series A Preferred Shares, generally trade in relation to their liquidation preference per share with less volatility than common shares and the Series A Preferred Shares will provide returns to holders through a visible and consistent dividend, at the stated dividend rate of 8.75%, while a dividend will not initially be paid on the Imperial Petroleum common shares.

Mechanics of the Spin-Off Distribution

Prior to effecting the Spin-Off Distribution, StealthGas will contribute to the Company its interests in four of its subsidiaries and related intercompany debts and obligations in exchange for 4,775,272 of our common shares and 795,878 of our Series A Preferred Shares, representing all of the Company’s issued and outstanding stock as of that time. StealthGas then intends to make a special dividend of 100% of the Company’s outstanding common shares and 100% of the Company’s outstanding Series A Preferred Shares to holders of StealthGas’ common stock as of the record date of the special dividend. Based on 38,202,181 shares of common stock of StealthGas outstanding as of the record date of the special dividend, we expect that holders of StealthGas common stock will receive one Imperial Petroleum common share and one Imperial Petroleum Series A Preferred Share for every eight shares and forty-eight shares, respectively, of common stock of StealthGas owned by such shareholders.

If a StealthGas shareholder holds (1) fewer than eight shares of StealthGas common stock as of the record date, it will not receive any of our common shares or (2) fewer than 48 shares of StealthGas common stock as of the record date, it will not receive any of our Series A Preferred Shares, because fractional common shares and Series A Preferred Shares will not be distributed to StealthGas shareholders. Instead, in the case of registered shareholders, the distribution agent will aggregate fractional common shares and fractional Series A Preferred Shares into whole shares, sell the whole shares into the open market at prevailing market prices and distribute the aggregate net cash proceeds of the sales, net of brokerage fees and other costs, pro rata, based on the fractional common share or fractional Series A Preferred Share, as applicable, such holder would otherwise be entitled to receive, to each holder who otherwise would have been entitled to receive a fractional share in the Spin-Off Distribution. Holders of StealthGas common stock that hold shares through a bank, broker, or nominee shall receive cash in lieu of fractional common shares or fractional Series A Preferred Shares, if any, determined in accordance with the policies of such bank, broker, or nominee. The distribution agent, in its sole discretion, without any influence by StealthGas or us, will determine when, how, through which broker dealer and at what price to sell the whole shares. Any broker-dealer used by the distribution agent will not be an affiliate of StealthGas or us. If you receive cash in lieu of fractional common shares or fractional Series A Preferred Shares, you will not be entitled to any interest on the payments.

The aggregate net cash proceeds of these sales generally will be taxable for U.S. federal income tax purposes. See “Tax Considerations” for an explanation of the tax consequences of the distribution. If you physically hold certificates for StealthGas common stock and are the registered holder, you will receive a check from the distribution agent in an amount equal to your pro rata share of the aggregate net cash proceeds of the sales. We estimate that it will take approximately eight business days from the distribution date for the distribution agent to complete the distributions of the aggregate net cash proceeds. If you hold your StealthGas

 

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common stock through a bank or brokerage firm, your bank or brokerage firm will receive, on your behalf, your pro rata share of the aggregate net cash proceeds from the sales and will electronically credit your account for your share of such proceeds. StealthGas shareholders should consult their bank or broker for further detail.

Prior to the Spin-Off Distribution, StealthGas will deliver 100% of the Company’s issued and outstanding common shares and 100% of the Company’s issued and outstanding Series A Preferred Shares to the distribution agent. American Stock Transfer & Trust Company, LLC will serve as distribution agent in connection with the Spin-Off Distribution and as transfer agent and registrar for the Company’s common shares and Series A Preferred Shares.

Holders of StealthGas’ common stock as of the close of business on November 23, 2021, will have Imperial Petroleum common shares and Series A Preferred Shares that they are entitled to receive issued to their account as follows:

 

   

Registered shareholders. If shares of StealthGas common stock are held directly through StealthGas’ transfer agent, American Stock Transfer & Trust Company, the holder is a registered stockholder. In this case, the distribution agent will credit the common shares and Series A Preferred Shares received in the Spin-Off Distribution by way of direct registration in book-entry form to a new account with the Company’s transfer agent. Registration in book-entry form refers to a method of recording share ownership where no physical stock certificates are issued to shareholders. Registered shareholders will be able to access information regarding their book-entry account holding their shares at                 .

 

   

Commencing on or shortly after the distribution date, the distribution agent will mail to registered shareholders an account statement that indicates the number of the Company’s common shares and Series A Preferred Shares that have been registered in book entry in the registered shareholder’s name. The Company expects it will take the distribution agent up to two weeks after the distribution date to complete the distribution of the common shares and Series A Preferred Shares and mail statements of holding to all registered shareholders.

 

   

“Street name” or beneficial shareholders. Most StealthGas shareholders hold their shares of StealthGas common stock beneficially through a bank, broker or other nominee. In these cases, the bank, broker or other nominee holds the shares in “street name” and records the shareholder’s name on its books. Shareholders who own shares of StealthGas common stock through a bank, broker or other nominee will have their accounts credited with the common shares and Series A Preferred Shares received in the Spin-Off Distribution on or shortly after the distribution date. The Company encourages such holders to contact their bank, broker or other nominee with any questions concerning the mechanics of having shares held in “street name.”

Holders of StealthGas common stock will not be required to pay for the common shares and Series A Preferred Shares of the Company received as the special dividend or to tender or surrender their StealthGas common stock. If a StealthGas shareholder holds shares of StealthGas at the close of business on the record date for the special dividend, the holder’s brokerage account (for shares held through a brokerage account) or account at the transfer agent (for shares held directly) will be credited with the appropriate number of shares of the Company on the distribution date of the special dividend, subject to the shareholder providing to StealthGas any required information and subject to the timing and receipt of any necessary regulatory and corporate approvals. The number of shares of StealthGas common stock owned by a shareholder of StealthGas will not change as a result of the special dividend, and the common stock of StealthGas will continue to trade on the Nasdaq Global Select Market under the symbol “GASS”.

U.S. holders of StealthGas shares will have an initial tax basis in the shares received in the Spin-Off Distribution that will be determined by the trading price of the common shares and the Series A Preferred Shares at the time of the Spin-Off Distribution. The tax treatment of the Spin-Off Distribution is discussed below in “Tax Considerations – United States Federal Income Taxation of U.S. Holders.”

 

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The Spin-Off Distribution and the transfer of StealthGas’ product and crude oil tanker vessel-owning subsidiaries to us is subject to, among other things, the approval of StealthGas’ Board of Directors, our entry into our new senior secured credit facility and the application of borrowings thereunder to refinance the existing indebtedness of StealthGas securing the vessels comprising our fleet, approval of our request for our common shares and Series A Preferred Shares to be listed on Nasdaq and the effectiveness of the registration statement of which this prospectus forms a part. The fulfillment of the foregoing conditions will not create any obligation on the part of StealthGas to effect the Spin-Off Distribution. We are not aware of any material federal or state regulatory requirements that must be complied with or any material approvals that must be obtained, other than compliance with SEC rules and regulations and the declaration of effectiveness of the Registration Statement by the SEC, in connection with the distribution. StealthGas has the right not to complete the Spin-Off Distribution if, at any time, the board of directors of StealthGas determines, in its sole discretion, that the Spin-Off Distribution is not in the best interests of StealthGas or its stockholders, or that market conditions are such that it is not advisable to effect the Spin-Off Distribution.

Business Overview

Our fleet consists of three medium range product tankers that carry refined petroleum products such as gasoline, diesel, fuel oil and jet fuel, as well as edible oils and chemicals, and one Aframax tanker which is used for carrying crude oil. The total cargo carrying capacity of our fleet is 255,804 dwt. Please see information in the section “Our Fleet”, below. During 2019, 2020 and the six months ended June 30, 2021, our tankers (then owned by StealthGas) had a fleet operational utilization of 99.7%, 95.7% and 92.3%, respectively, and we generated voyage revenues of $13.3 million, $20.3 million and $9.2 million, respectively.

Our business strategy is focused on providing consistent shareholder returns by carefully selecting the timing and the structure of our investments in vessels and by reliably, safely and competitively operating the vessels we own, through our affiliate, Stealth Maritime.

Our Fleet

As of September 30, 2021, the profile and deployment of our fleet is the following

 

Name   Year
Built
    Country
Built
    Vessel Size
(dwt)
  Vessel
Type
     Employment
Status
     Daily
Charter
Rate
     Expiration of
Charter(1)
 

Magic Wand(2)

    2008       Korea     47,000     MR product tanker        Time Charter      $ 12,250        May 2022  

Clean Thrasher

    2008       Korea     47,000     MR product tanker        Spot        

Falcon Maryam

    2009       Korea     46,000     MR product tanker        Bareboat      $ 7,800        September 2022  

Stealth Berana

    2010       Korea     115,804     Aframax oil tanker        Spot        
      255,804 dwt           

 

 

(1)

Earliest date charters could expire.

(2)

The charterer has an option to extend the charter for an additional year at a daily charter rate of $14,500.

We plan to expand our fleet by investing in vessels, which may include vessels in other seaborne transportation sectors in addition to the product and crude tanker sectors, under favorable market conditions; however, we do not currently have any agreements or commitments to acquire additional vessels. We also intend to take advantage of the cyclical nature of the market by buying and selling ships when we believe favorable opportunities exist. We will deploy our fleet on a mix of period charters, including time and bareboat charters which can last up to several years, and spot market charters, which generally last from one to six months, according to our assessment of market conditions.

 

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As of September 30, 2021, two of our product tankers are employed under time or bareboat charter contracts. As of September 30, 2021, approximately 50% of our remaining ship capacity days in 2021 and approximately 25% of our ship capacity days in 2022 are under contract.

We refer you to the risk factor entitled “The market values of our vessels may remain at relatively low levels for a prolonged period and over time may fluctuate significantly. When the market values of our vessels are low, we may incur a loss on sale of a vessel or record an impairment charge, which may adversely affect our profitability and possibly lead to defaults under our loan agreements” and the discussion in the section of this prospectus entitled “Risk Factors – Industry Risk Factors”.

Commercial and Technical Management of Our Fleet

Prior to the Spin-off Distribution, we will enter into a management agreement with Stealth Maritime, pursuant to which Stealth Maritime will provide us with technical, administrative, commercial and certain other services. Stealth Maritime is a leading ship-management company based in Greece, established in 1999 in order to provide shipping companies with a range of services. Our manager’s safety management system is ISM certified in compliance with IMO’s regulations by Lloyd’s Register. In relation to the technical services, Stealth Maritime will be responsible for arranging for the crewing of the vessels, the day to day operations, inspections and vetting, maintenance, repairs, dry-docking and insurance. Administrative functions include, but are not limited to accounting, back-office, reporting, legal and secretarial services. In addition, Stealth Maritime provides services for the chartering of our vessels and monitoring thereof, freight collection, and sale and purchase.

Under the management agreement with Stealth Maritime, which will be in place prior to the Spin-off Distribution, we will pay Stealth Maritime a fixed management fee of $440 per vessel operating under a voyage or time charter per day on a monthly basis in advance, pro-rated for the calendar days we own the vessels. We will pay a fixed fee of $125 per vessel per day for each of our vessels operating on bareboat charter. We will also be obligated to pay Stealth Maritime a fee equal to 1.25% of the gross freight, demurrage and charter hire collected from the employment of our vessels. Stealth Maritime will also earn a fee equal to 1.0% of the contract price of any vessel bought or sold by them on our behalf.

The initial term of our management agreement with Stealth Maritime will expire on December 31, 2025. Unless six months’ notice of non-renewal is given by either party prior to the end of the then current term, this agreement will automatically extend for additional 12-month periods.

For additional information about the management agreement, including the calculation of management fees, see “Related Party Transactions.”

Crewing and Employees

Stealth Maritime 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. In 2020 and to date in 2021, Hellenic Manning Overseas Inc, formerly known as Navis Maritime Services Inc. and in 2020 Jebsen Maritime Inc., both based in Manila, were responsible for providing the crewing of our fleet, under Stealth Maritime’s technical management (excluding our Aframax tanker for which crew management is provided by Bernard Shulte Management), to the extent that these vessels were not deployed on bareboat charters. These responsibilities include training, compensation, transportation and additional insurance of the crew.

Chartering of the Fleet

We, through Stealth Maritime, manage the employment of our fleet. We deploy our tankers on period charters, including time and bareboat charters that can last up to several years, and spot market charters (through

 

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voyage charters and short-term time charters), which generally last from one to six months, subject to market conditions. Time and bareboat charters are for a fixed period of time, but could also occasionally include optional periods giving charterers the right to extend the charter. A voyage charter is generally a contract to carry a specific cargo from a loading port to a discharging port for an agreed-upon total charge. Under voyage charters we pay for voyage expenses such as port, canal and fuel costs. Under a time charter the charterer pays for voyage expenses while under a bareboat charter the charterer pays for voyage expenses and operating expenses such as crewing, supplies, maintenance and repairs including special survey and dry-docking costs.

Vessels operating in the spot market generate revenues that are less predictable but may enable us to capture increased profit margins during periods of improvements in tanker charter rates, although we are then exposed to the risk of declining tanker charter rates. Typically spot market charters can last from a few days up to two months. If we commit vessels to period charters, future spot market rates may be higher or lower than those rates at which we have period chartered our vessels.

In formulating our chartering strategy, we evaluate past, present and future performance of the freight markets and balance the mix of our chartering arrangements in order to achieve optimal results for the fleet. As of September 30, 2021, two of our vessels were on a time charter and bareboat contract respectively expiring in 2022, and our Aframax tanker and our remaining product tanker are operating in the spot market.

Our tankers trade globally. Some of the areas where we usually operate are the Middle East- Far East range, the Mediterranean, North West Europe range, Africa, USA and Latin America. As freight rates usually vary between these areas as well as voyage and operating expenses, we evaluate such parameters when positioning our vessels for new employment.

Customers

Our assessment of a charterer’s financial condition and reliability is an important factor in negotiating employment for our vessels. Principal charterers include national, major and other independent energy companies and energy traders, and industrial users of those products. For the years ended December 31, 2019 and 2020 and the six months ended June 30, 2021, we had three, four and five customers account for 90.8%, 80.9% and 80.9%, respectively, of our total revenues. In addition, vessels under bareboat charter may be sub-chartered to third parties.

Our fleet’s average age is above the average age of the global tanker fleet, and as our vessels age we may have difficulty competing with younger, more technologically advanced tankers for charters from oil majors and other top-tier charterers. In these circumstances, we may also be forced to charter our vessels to less creditworthy charterers, either because the oil majors and other top tier charters will not charter older and less technologically advanced vessels or will only charter such vessels at lower contracted charter rates than we are able to obtain from other charterers.

Environmental and other Regulations

Government regulations significantly affect the ownership and operation of our vessels. They are subject to international conventions and national, state and local laws and regulations in force in the countries in which they may operate or are registered.

A variety of governmental and private entities subject our vessels to both scheduled and unscheduled inspections. These entities include the local port authorities (United States Coast Guard, harbor master or equivalent), classification societies, flag state administration (country of registry), charterers and particularly terminal operators. Certain of these entities require us to obtain permits, licenses, certificates and financial assurances 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 operation of one or more of our vessels.

 

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We believe that the heightened level of environmental and quality concerns among insurance underwriters, regulators and charterers is leading to greater inspection and safety requirements on all vessels and may accelerate the scrapping of older vessels throughout the industry. Increasing environmental concerns have created a demand for vessels that conform to the stricter environmental standards. We are required to maintain operating standards for all of our vessels that emphasize operational safety, quality maintenance, continuous training of our officers and crews and compliance with United States and international regulations. We believe that the operation of our vessels is in substantial compliance with applicable environmental laws and regulations. However, because such laws and regulations are frequently changed and may impose increasingly stricter requirements, any future requirements may limit our ability to do business, increase our operating costs, force the early retirement of one or more of our vessels, and/or affect their resale value, all of which could have a material adverse effect on our financial condition and results of operations.

Environmental Regulations—International Maritime Organization (“IMO”)

The IMO, the United Nations agency for maritime safety and the prevention of pollution by ships, has negotiated international conventions relating to pollution by ships. In 1973, IMO adopted the MARPOL, which has been periodically updated with relevant amendments. MARPOL addresses pollution from ships by oil, noxious liquid substances carried in bulk, harmful substances carried by sea in packaged form, sewage, garbage, and air emissions. Our vessels are subject to standards imposed by the IMO.

In September 1997, the IMO adopted MARPOL Annex VI to address air pollution from ships. Effective in May 2005, Annex VI set limits on SOx and nitrogen oxide (“NOx”) emissions from ship exhausts and prohibited deliberate emissions of ozone depleting substances, such as chlorofluorocarbons. Annex VI also included a global cap on the sulfur content of fuel oil and allowed for special areas to be established with more stringent controls on emissions. Options for complying with the requirements of Annex VI include use of low sulfur fuels, modifications to vessel engines, or the addition of post combustion emission controls. Annex VI has been ratified by some, but not all IMO member states. Vessels that are subject to Annex VI must obtain an International Air Pollution Prevention Certificate evidencing compliance with Annex VI.

In October 2008, the IMO adopted amendments to Annex VI, and the United States ratified the Annex VI amendments in October 2008. Beginning in 2011 the amendments required a progressive reduction of sulfur levels in bunker fuels to be phased in by 2020 and imposed more stringent NOx emission standards on marine diesel engines, depending on their date of installation. Since January 1, 2020, the amended Annex VI required that fuel oil contain no more than 0.50% sulfur. It is up to individual parties to MARPOL to enforce fines and sanctions, and several major port state regimes have announced plans to do so. We may incur costs to comply with the amended Annex VI requirements.

Our Aframax tanker has a scrubber installed, and we currently have no committed capital expenditure obligations or plans for the installation of scrubber on our three product tankers.

More stringent emission standards apply in coastal areas designated by the IMO as SOx Emission Control Areas, or ECAs, such as the Baltic and North Seas, United States (including Hawaii) and Canadian (including the French territories of St. Pierre and Miquelon) coastal areas, and the United States Caribbean Sea (including Puerto Rico and the US Virgin Islands). Similar restrictions apply in Icelandic and inland Chinese waters. Specifically, as of January 1, 2019, China expanded the scope of its Domestic Emission Control Areas to include all coastal waters within 12 nautical miles of the mainland. Vessels operating within an ECA or an area with equivalent standards must use fuel with a sulfur content that does not exceed 0.10%. Additionally, two new NOx ECAs, the Baltic Sea and the North Sea, will be enforced for ships constructed (keel laying) on or after January 1, 2021, or existing ships which replace an engine with “non-identical” engines, or install an “additional” engine. Other ECAs may be designated, and the jurisdictions in which our vessels operate may adopt more stringent emission standards independent of IMO. We have obtained International Air Pollution Prevention Certificates for all of our vessels and believe they are compliant in all material respects with current Annex VI requirements.

 

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Many countries have ratified and follow the liability plan adopted by the IMO and set out in the International Convention on Civil Liability for Oil Pollution Damage of 1969 (the “CLC”) (the United States, with its separate OPA regime described below, is not a party to the CLC). This convention generally applies to vessels that carry oil in bulk as cargo. Under this convention and depending on whether the country in which the damage results is a party to the 1992 Protocol to the CLC, the registered owner of a regulated vessel is strictly liable for pollution damage in the territorial waters or exclusive economic zone of a contracting state caused by the discharge of any oil from the ship, subject to certain defenses. Under an amendment to the 1992 Protocol that became effective on November 1, 2003, for vessels of 5,000 to 140,000 gross tons, liability per incident is limited to 4.51 million Special Drawing Rights (“SDR”) plus 631 SDR for each additional gross ton over 5,000. For a vessel over 140,000 gross tons, liability is limited to 89.77 million SDR. The SDR is an International Monetary Fund unit pegged to a basket of currencies. The right to limit liability under the CLC is forfeited where the spill is caused by the owner’s actual fault and, under the 1992 Protocol, where the spill is caused by the owner’s intentional or reckless conduct. Vessels trading in states that are parties to the CLC must provide evidence of insurance covering the liability of the owner. In jurisdictions where the CLC has not been adopted, various legislative schemes or common law regimes govern, and liability is imposed either on the basis of fault or in a manner similar to that convention. We believe that our protection and indemnity insurance will cover any liability under the CLC.

In 2001, the IMO adopted the International Convention on Civil Liability for Bunker Oil Pollution Damage, or the Bunker Convention, which imposes strict liability on ship owners for pollution damage caused by discharges of bunker oil in jurisdictional waters of ratifying states. The Bunker Convention also requires registered owners of ships over 1,000 gross tons to maintain insurance for pollution damage in an amount equal to the limits of liability under the applicable national or international limitation regime (but not exceeding the amount calculated in accordance with the Convention on Limitation of Liability for Maritime Claims of 1976, as amended). Because the Bunker Convention does not apply to pollution damage governed by the CLC, it applies only to discharges from any of our vessels that are not transporting oil. The Bunker Convention entered into force on November 21, 2008. Liability limits under the Bunker Convention were increased as of June 2015. In jurisdictions where the Bunker Convention has not been adopted, such as the United States, liability for spill or releases of oil from ship’s bunkers typically is determined by national or other domestic laws in the jurisdiction where the events occur.

Our product tankers may also become subject to the International Convention on Liability and Compensation for Damage in Connection with the Carriage of Hazardous and Noxious Substances by Sea adopted in 1996 as amended by the Protocol to the HNS Convention, adopted in April 2010 (2010 HNS Protocol) (collectively, the “2010 HNS Convention”), if it enters into force. The Convention creates a regime of liability and compensation for damage from hazardous and noxious substances (or HNS). The 2010 HNS Convention sets up a two-tier system of compensation composed of compulsory insurance taken out by ship owners and an HNS Fund that will come into play when the insurance is insufficient to satisfy a claim or does not cover the incident. Under the 2010 HNS Convention, if damage is caused by bulk HNS, claims for compensation will first be sought from the ship owner up to a maximum of 100 million SDR. If the damage is caused by packaged HNS or by both bulk and packaged HNS, the maximum liability is 115 million SDR. Once the limit is reached, compensation will be paid from the HNS Fund up to a maximum of 250 million SDR. The 2010 HNS Convention has not been ratified by a sufficient number of countries to enter into force, and at this time we cannot estimate with any certainty the costs of compliance with its requirements should it enter into force.

The IMO adopted the BWM Convention in February 2004. The Convention’s implementing regulations call for a phased introduction of mandatory ballast water exchange requirements, to be replaced in time with mandatory concentration limits. The BWM Convention took effect on September 8, 2017. Many of the implementation dates originally contained in the BWM Convention had already passed prior to its effectiveness, so that the period for installation of mandatory ballast water exchange requirements would be very short, with several thousand ships per year needing to install the systems. Consequently, the IMO Assembly passed a resolution in December 2013 revising the dates for implementation of the ballast water management

 

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requirements so that they are triggered by the entry into force date. In effect, this makes all vessels constructed before September 8, 2017 “existing” vessels, allowing for the installation of ballast water management systems on such vessels at the first renewal International Oil Pollution Prevention (“IOPP”) survey following entry into force of the BWM Convention. In July 2017, the implementation scheme was further changed to require vessels with IOPP certificates expiring between September 8, 2017 and September 8, 2019 to comply at their second IOPP renewal. All ships must have installed a ballast water treatment system by September 8, 2024. Each vessel in our current fleet has been issued or will be issued a ballast water management plan Statement of Compliance by the classification society with respect to the applicable IMO regulations and guidelines. The cost of compliance could increase for our vessels as a result of these requirements, although it is difficult to predict the overall impact of such a requirement on our operations.

The operation of our vessels is also affected by the requirements set forth in the ISM Code of the IMO. The ISM Code requires ship owners and bareboat charterers to develop and maintain an extensive SMS that includes the adoption of a safety and environmental protection policy setting forth instructions and procedures for safe operation and describing procedures for dealing with emergencies. Vessel operators must obtain a “Safety Management Certificate” from the government of the vessel’s flag state to verify that it is being operated in compliance with its approved SMS. The failure of a ship owner or bareboat charterer to comply with the ISM Code may subject such party to increased liability, decrease available insurance coverage for the affected vessels and result in a denial of access to, or detention in, certain ports. Currently, each of the vessels in our fleet is ISM code-certified. However, there can be no assurance that such certification will be maintained indefinitely.

The operations of our product tankers are subject to compliance with the IMO’s International Code for the Construction and Equipment of Ships carrying Dangerous Chemicals in Bulk (“IBC Code”) for chemical tankers built after July 1, 1986. The IBC Code includes ship design, construction and equipment requirements and other standards for the bulk transport of certain liquid chemicals. Amendments to the IBC Code pertaining to revised international certificates of fitness for the carriage of dangerous goods entered into force in June 2014, and additional requirements regarding stability, tank purging, venting and inerting requirements entered into force in January 2016. Further amendments to the IBC Code entered into force on January 1, 2021 including revisions to carriage requirements for products. We may need to make certain expenditures to comply with these amendments.

Environmental Regulations—The United States Oil Pollution Act of 1990 (“OPA”) and the U.S. Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”)

The United States Oil Pollution Act of 1990, or OPA, established an extensive regulatory and liability regime for the protection and cleanup of the environment from oil spills. OPA applies to discharges of any oil from a vessel, including discharges of fuel oil (bunkers) and lubricants. OPA affects all owners and operators whose vessels trade in the United States, its territories and possessions or whose vessels operate in United States waters, which include the United States’ territorial sea and its two hundred nautical mile exclusive economic zone. The United States has also enacted the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, which applies to the discharge of hazardous substances other than oil, whether on land or at sea. OPA and CERCLA both define “owner and operator” in the case of a vessel as any person owning, operating or chartering by demise, the vessel. Accordingly, both OPA and CERCLA impact our operations.

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

 

   

natural resources damage and the costs of assessment thereof;

 

   

real and personal property damage;

 

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net loss of taxes, royalties, rents, fees and other lost revenues;

 

   

lost profits or impairment of earning capacity due to property or natural resources damage; and

 

   

net cost of public services necessitated by a spill response, such as protection from fire, safety or health hazards, and loss of subsistence use of natural resources.

The current limits of OPA liability for double-hulled tank vessels larger than 3,000 gross tons are the greater of $2,300 per gross ton or $19,943,400, subject to adjustment for inflation by the United States Coast Guard every three years. These limits of liability do not apply if an incident was directly caused by violation of applicable United States federal safety, construction or operating regulations or by a responsible party’s gross negligence or willful misconduct, or if the responsible party fails or refuses to report the incident or to cooperate and assist in connection with oil removal activities.

OPA requires owners and operators of vessels over 300 gross tons to establish and maintain with the United States Coast Guard evidence of financial responsibility sufficient to meet their potential liabilities under the OPA. Under the United States Coast Guard regulations implementing OPA, vessel owners and operators may evidence their financial responsibility by showing proof of insurance, surety bond, self-insurance, or guaranty. Under the OPA regulations, an owner or operator of a fleet of vessels is required only to demonstrate evidence of financial responsibility in an amount sufficient to cover the vessels in the fleet having the greatest maximum liability under OPA.

CERCLA contains a similar liability regime whereby owners and operators of vessels are liable for cleanup, removal and remedial costs, as well as damage for injury to, or destruction or loss of, natural resources, including the reasonable costs associated with assessing same, and health assessments or health effects studies. There is no liability if the discharge of a hazardous substance results solely from the act or omission of a third party, an act of God or an act of war. Liability under CERCLA is limited to the greater of $300 per gross ton or $5 million for vessels carrying a hazardous substance as cargo and the greater of $300 per gross ton or $500,000 for any other vessel. These limits do not apply (rendering the responsible person liable for the total cost of response and damages) if the release or threat of release of a hazardous substance resulted from willful misconduct or negligence, or the primary cause of the release was a violation of applicable safety, construction or operating standards or regulations. The limitation on liability also does not apply if the responsible person fails or refused to provide all reasonable cooperation and assistance as requested in connection with response activities where the vessel is subject to OPA.

We currently maintain, for each of our vessels, pollution liability coverage insurance in the amount of $1 billion per vessel per incident. In addition, we carry hull and machinery and protection and indemnity insurance to cover the risks of fire and explosion. Under certain circumstances, fire and explosion could result in a catastrophic loss. While we believe that our present insurance coverage is adequate, not all risks can be insured, and there can be no guarantee that any specific claim will be paid, or that we will always be able to obtain adequate insurance coverage at reasonable rates. If the damages from a catastrophic spill exceeded our insurance coverage, it would have a severe effect on us and could possibly result in our insolvency.

OPA and CERCLA both require owners and operators of vessels to establish and maintain with the United States Coast Guard evidence of financial responsibility sufficient to meet the maximum amount of liability to which the particular responsible person may be subject as discussed above. Under the self-insurance provisions, the ship owner or operator must have a net worth and working capital, measured in assets located in the United States against liabilities located anywhere in the world, that exceeds the applicable amount of financial responsibility. We have complied with the United States Coast Guard regulations by providing a financial guaranty evidencing sufficient self-insurance.

OPA specifically permits individual states to impose their own liability regimes with regard to oil pollution incidents occurring within their boundaries, and some states have enacted legislation providing for unlimited

 

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liability for oil spills. In some cases, states, which have enacted such legislation, have not yet issued implementing regulations defining vessels owners’ responsibilities under these laws. We intend to comply with all applicable state regulations in the ports where our vessels call.

Environmental Regulations—Other Environmental Initiatives

The EU has adopted legislation that: (1) requires member states to refuse access to their ports to certain sub-standard vessels, according to vessel type, flag and number of previous detentions; (2) creates an obligation on member states to inspect at least 25% of vessels using their ports annually and provides for increased surveillance of vessels posing a high risk to maritime safety or the marine environment; (3) provides the EU with greater authority and control over classification societies, including the ability to seek to suspend or revoke the authority of negligent societies; and (4) requires member states to impose criminal sanctions for certain pollution events, such as the unauthorized discharge of tank washings. It is impossible to predict what additional legislation or regulations, if any, may be promulgated by the EU or any other country or authority.

On March 23, 2012, the United States Coast Guard adopted ballast water discharge standards under the U.S. National Invasive Species Act, or NISA. The regulations, which became effective on June 21, 2012, set maximum acceptable discharge limits for living organisms and established standards for ballast water management systems, and they are consistent with the requirements under the BWM Convention described above. The requirements are being phased in based on the size of the vessel and its next dry docking date. As of the date of this report, the United States Coast Guard has approved forty Ballast Water Treatment Systems. A list of approved equipment can be found on the Coast Guard Maritime Information Exchange web page. Several U.S. states, such as California, have also adopted more stringent legislation or regulations relating to the permitting and management of ballast water discharges compared to U.S. Environmental Protection Agency (“EPA”) regulations.

The U.S. Clean Water Act (“CWA”) prohibits the discharge of oil or hazardous substances in navigable waters and imposes strict liability in the form of penalties for any unauthorized discharges. The CWA also imposes substantial liability for the costs of removal, remediation and damages and complements the remedies available under OPA. Under EPA regulations we are required to obtain a CWA permit to discharge ballast water and other wastewaters incidental to the normal operation of our vessels if we operate within the three mile territorial waters or inland waters of the United States. This permit, which the EPA has designated as the Vessel General Permit for Discharges Incidental to the Normal Operation of Vessels, or VGP, incorporates the current United States Coast Guard requirements for ballast water management, as well as supplemental ballast water requirements, and includes requirements applicable to 26 specific discharge streams, such as deck runoff, bilge water and gray water. The United States Coast Guard and the EPA have entered into a memorandum of understanding which provides for collaboration on the enforcement of the VGP requirements. As a result, the United States Coast Guard includes the VGP as part of its normal Port State Control inspections. The EPA issued a VGP that became effective in December 2013. Among other things, it contained numeric ballast water discharge limits for most vessels and more stringent requirements for exhaust gas scrubbers and required the use of environmentally friendly lubricants. We have submitted NOIs (Notices Of Intent) for Discharges Incidental to the Normal Operation of a Vessel under the 2013 VGP to the U.S. EPA for all our ships trading in U.S. waters. The 2013 VGP was set to expire on December 13, 2018; however, its provisions will remain in effect until the regulations under the 2018 Vessel Incidental Discharge Act (“VIDA”) are final and enforceable. VIDA, signed into law on December 4, 2018, establishes a new framework for the regulation of vessel incidental discharges under CWA Section 312(p). VIDA requires the EPA to develop performance standards for those discharges within two years of enactment, and requires the United States Coast Guard to develop implementation, compliance, and enforcement regulations within two years of the EPA’s promulgation of its performance standards. All provisions of the 2013 VGP will remain in force and effect until the United States Coast Guard regulations under VIDA are finalized. On October 26, 2020, the EPA published a Notice of Proposed Rulemaking – Vessel Incident Discharge National Standards of Performance in the Federal Register for public comment. The comment period closed on November 25, 2020. Compliance with the EPA and United States

 

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Coast Guard ballast water management regulations could require the installation of equipment on our vessels to treat ballast water before it is discharged or the implementation of other port facility disposal arrangements at potentially substantial cost, or may otherwise restrict our vessels from entering United States waters.

Climate Control Initiatives

Although the Kyoto Protocol requires adopting countries to implement national programs to reduce emissions of greenhouse gases, emissions of greenhouse gases from international shipping are not currently subject to the Kyoto Protocol. The Kyoto Protocol was extended to 2020 at the 2012 United Nations Climate Change Conference, with the hope that a new climate change treaty would be adopted by 2015 and come into effect by 2020. The Paris Agreement adopted under the United Nations Framework Convention on Climate Change in December 2015 contemplates commitments from each nation party thereto to take action to reduce greenhouse gas emissions and limit increases in global temperatures but did not include any restrictions or other measures specific to shipping emissions. However, restrictions on shipping emissions are likely to continue to be considered and a new treaty may be adopted in the future that includes restrictions on shipping emissions. International or multi-national bodies or individual countries may adopt their own climate change regulatory initiatives. The IMO’s Marine Environment Protection Committee adopted two sets of mandatory requirements to address greenhouse gas emissions from shipping that entered into force in January 2013. The Energy Efficiency Design Index establishes minimum energy efficiency levels per capacity mile and applies to new vessels of 400 gross tons or greater. Currently operating vessels must develop and implement Ship Energy Efficiency Plans. By 2025, all new ships built must be 30% more energy efficient than those built in 2014, but it is likely that the IMO will increase these requirements such that new ships must be up to 50% more energy efficient than those built in 2014 by 2022. These new requirements could cause us to incur additional costs to comply. Draft MARPOL amendments released in November 2020 would build on the EEDI and SEEMP and require ships to reduce carbon intensity based on a new Energy Efficiency Existing Ship Index and reduce operational carbon intensity reductions based on a new operational carbon intensity indicator, in line with the IMO strategy which aims to reduce carbon intensity of international shipping by 40% by 2030. The draft amendments will be put forward for formal adoption at MEPC 76, to be held during 2021. The IMO is also considering the development of market-based mechanisms for limiting greenhouse gas emissions from ships, but it is impossible to predict the likelihood of adoption of such a standard or the impact on our operations. In April 2015, the EU adopted regulations requiring the monitoring and reporting of greenhouse gas emissions from marine vessels (of over 5,000 gross tons) which went into effect in January 2018. The EPA has issued a finding that greenhouse gas emissions endanger the public health and safety and has adopted regulations under the Clean Air Act to limit emissions of greenhouse gases from certain mobile sources and proposed regulations to limit greenhouse gas emissions from large stationary sources, although the mobile source regulations do not apply to greenhouse gas emissions from vessels. Any passage of climate control initiatives by the IMO, the EU or the individual countries in which we operate that limit greenhouse gas emissions from vessels could require us to limit our operations or make significant financial expenditures that we cannot predict with certainty at this time. Passage of climate control initiatives that affect the demand for oil may also materially affect our business. Even in the absence of climate control legislation and regulations, our business may be materially affected to the extent that climate change may result in sea level changes or more intense weather events.

On June 29, 2017, the Global Industry Alliance, or the GIA, was officially inaugurated. The GIA is a program, under the Global Environmental Facility-United Nations Development Program-IMO project, which supports shipping, and related industries, as they move towards a low carbon future. Organizations including, but not limited to, ship owners, operators, classification societies, and oil companies, signed to launch the GIA.

In addition, the United States is currently experiencing changes in its environmental policy, the results of which have yet to be fully determined. Additional legislation or regulation applicable to the operation of our ships that may be implemented in the future could negatively affect our profitability. Furthermore, recent action by the IMO’s Maritime Safety Committee and U.S. 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

 

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threats, as described below. This might cause companies to cultivate additional procedures for monitoring cybersecurity, which could require additional expenses and/or capital expenditures. However, the impact of such regulations is difficult to predict at this time.

Vessel Security Regulations

Since the terrorist attacks of September 11, 2001, there have been a variety of initiatives intended to enhance vessel security. On November 25, 2002, the Maritime Transportation Security Act of 2002, or MTSA, came into effect in the United States. To implement certain portions of the MTSA, in July 2003, the United States Coast Guard issued regulations requiring the implementation of certain security requirements aboard vessels operating in waters subject to the jurisdiction of the United States. Similarly, in December 2002, amendments to the International Convention for the Safety of Life at Sea, or SOLAS, created a new chapter of the convention dealing specifically with maritime security. The chapter went into effect in July 2004, and imposes various detailed security obligations on vessels and port authorities, most of which are contained in the newly created International Ship and Port Facilities Security or, ISPS, Code. Among the various requirements are:

 

   

on-board installation of automatic information systems, or AIS, to enhance vessel-to-vessel and vessel-to-shore communications;

 

   

on-board installation of ship security alert systems;

 

   

the development of vessel security plans; and

 

   

compliance with flag state security certification requirements.

The United States Coast Guard regulation’s aim to align with international maritime security standards exempted non-United States vessels from MTSA vessel security measures provided such vessels have on board, by July 1, 2004, a valid International Ship Security Certificate (“ISSC”) that attests to the vessel’s compliance with SOLAS security requirements and the ISPS Code. We have obtained ISSCs for all of our vessels and implemented the various security measures addressed by the MTSA, SOLAS and the ISPS Codes to ensure that our vessels attain compliance with all applicable security requirements within the prescribed time periods. We do not believe these requirements will have a material financial impact on our operations.

IMO Cyber Security

The Maritime Safety Committee, at its 98th session in June 2017, adopted Resolution MSC.428(98) - Maritime Cyber Risk Management in Safety Management Systems. The resolution encourages administrations to ensure that cyber risks are appropriately addressed in existing safety management systems (as defined in the ISM Code) no later than the first annual verification of the company’s Document of Compliance after January 1, 2021. Owners risk having ships detained if they have not included cyber security in the SMS of ships by January 1, 2021.

Vessel Recycling Regulations

The EU has adopted a regulation that seeks to facilitate the ratification of the IMO Recycling Convention and sets forth rules relating to vessel recycling and management of hazardous materials on vessels. In addition to new requirements for the recycling of vessels, the new regulation contains rules for the control and proper management of hazardous materials on vessels and prohibits or restricts the installation or use of certain hazardous materials on vessels. The new regulation applies to vessels flying the flag of an EU member state and certain of its provisions apply to vessels flying the flag of a third country calling at a port or anchorage of a member state. For example, when calling at a port or anchorage of a member state, a vessel flying the flag of a third country will be required, among other things, to have on board an inventory of hazardous materials that complies with the requirements of the new regulation and the vessel must be able to submit to the relevant

 

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authorities of that member state a copy of a statement of compliance issued by the relevant authorities of the country of the vessel’s flag verifying the inventory. The new regulation took effect on non-EU-flagged vessels calling on EU ports of call beginning on December 31, 2020.

Classification and Inspection

All our vessels are certified as being “in class” by a classification society member of the International Association of Classification Societies such as Lloyds Register of Shipping and Bureau Veritas. All new and secondhand vessels that we purchase must be certified prior to their delivery under our standard contracts and memoranda of agreement. If the vessel is not certified on the date of closing, we have no obligation to take delivery of the vessel. Most insurance underwriters make it a condition for insurance coverage that a vessel be certified as “in class” by a classification society that is a member of the International Association of Classification Societies. Every vessel’s hull and machinery is “classed” by a classification society authorized by its country of registry. The classification society certifies that the vessel has been built and maintained in accordance with the rules of such classification society and complies with applicable rules and regulations of the country of registry of the vessel and the international conventions of which that country is a member. Each vessel is inspected by a surveyor of the classification society every year—an annual survey, every two to three years—an intermediate survey, and every four to five years—a special survey. Vessels also may be required, as part of the intermediate survey process, to be dry-docked every 30 to 36 months for inspection of the underwater parts of the vessel and for necessary repairs related to such inspection; alternatively, such requirements may be dealt concurrently with the special survey.

In addition to the classification inspections, many of our customers, including the major oil companies, regularly inspect our vessels as a pre-condition to chartering voyages on these vessels. We believe that our well-maintained, high quality tonnage should provide us with a competitive advantage in the current environment of increasing regulations, and customer emphasis on quality of service.

All areas subject to surveys as defined by the classification society, are required to be surveyed at least once per class period, unless shorter intervals between surveys are prescribed elsewhere. The period between two subsequent surveys of each area must not exceed five years.

Vessels are dry docked for the special survey for inspection of the underwater parts and for repairs related to inspections. If any defects are found, the classification surveyor will issue a “recommendation” which must be rectified by the ship owner within the prescribed time limits.

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, hostilities and labor strikes. In addition, there is always an inherent possibility of marine disaster, including environmental mishaps, and the liabilities arising from owning and operating vessels in international trade. While we believe that our present insurance coverage is adequate, not all risks can be insured, and there can be no guarantee that any specific claim will be paid, or that we will always be able to obtain adequate insurance coverage at reasonable rates.

Hull and Machinery Insurance

We have obtained marine hull and machinery and war risk insurance, which include the risk of actual or constructive total loss, for all of our vessels. The vessels are each covered up to at least fair market value, with deductibles of $100,000 per vessel.

 

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We also maintain increased value insurance for most of our vessels. Under the increased value insurance, in case of total loss of the vessel, we will be able to recover the sum insured under the increased value policy in addition to the sum insured under the Hull and Machinery policy. Increased value insurance also covers excess liabilities which are not recoverable in full by the Hull and Machinery policies by reason of under insurance.

Protection and Indemnity Insurance

Protection and indemnity insurance, is a form of mutual indemnity insurance, which covers our third party liabilities in connection with our shipping activities. It is provided by non-profit-making protection and indemnity commonly known as P&I Associations or “clubs.” This insurance provides cover towards third-party liability and other related expenses of injury or death of crew, passengers and other third parties, loss or damage to cargoes, claims arising from collisions with other vessels, damage to third-party properties, pollution arising from oil or other substances, and salvage, towing and other related costs, including wreck removal.

Our current protection and indemnity insurance provides cover for Oil Pollution up to $1.0 billion per vessel per incident. The 13 P&I Associations that comprise the International Group insure approximately 90% of the world’s commercial tonnage and have entered into a pooling agreement to reinsure each association’s liabilities. Claims pooling between the clubs is regulated by the Pooling Agreement which defines the risks that can be pooled and how losses are to be shared between the participating clubs. The Pool provides a mechanism for sharing all claims in excess of US$10 million up to, approximately US$3.1 billion.

Under the current structure, clubs’ contributions to claims in the lower pool layer from $10 million to $50 million are assessed on a tripartite formula which takes account of each club’s contributing tonnage, premium and claims record. For claims falling in the upper pool layer from $50 million to $100 million, 7.5% is retained by the club bringing the claim and 92.5% is shared by all on a tonnage-weighted basis.

The International Group clubs arrange a common market reinsurance contract to provide reinsurance for claims which exceed the upper limit of the pool (US $100 million) up to an amount of US $3.1 billion any one claim (US $1 billion for Oil Pollution claims). It is said to be the largest single marine reinsurance contract in the market.

As members of Mutual P&I Associations, we may become subject to unbudgeted supplementary calls payable to the P&I Club depending on its financial year results that they are determined by 3 main parameters, i.e., their exposure from payment of claims, the income through premium and the income arising from investments. Our aim at every renewal is to conclude our P&I insurance with “A rated” P&I clubs as this, amongst other benefits, eliminates the risk of unbudgeted supplementary calls being imposed.

Competition

We operate in a highly competitive global market based primarily on supply and demand of vessels and cargoes. Ownership of medium range product tankers and crude oil tankers capable of transporting crude oil and refined petroleum products, such as gasoline, diesel, fuel oil and jet fuel, as well as edible oils and chemicals, is highly diversified and is divided among many independent tanker owners. Many oil companies and other oil trading companies, the principal charterers of our product tankers and crude oil tankers, also operate their own vessels and transport oil for themselves and third-party charterers in direct competition with independent owners and operators. Competition for charters, including for the transportation of oil and oil products, can be intense and depends on price as well as on the location, size, age, condition, specifications and acceptability of the vessel and its operator to the charterer and is frequently tied to having an available vessel with the appropriate approvals from oil majors. Principal factors that are important to our charterers include the quality and suitability of the vessel, its age, technical sophistication, safety record, compliance with IMO standards and the heightened industry standards that have been set by some energy companies, and the competitiveness of the bid in terms of overall price.

 

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Seasonality

Tanker markets are typically stronger in the winter months as a result of increased oil consumption in the northern hemisphere, but weaker in the summer months as a result of lower oil consumption in the northern hemisphere and refinery maintenance. In addition, unpredictable weather patterns in these months tend to disrupt vessel scheduling and supplies of certain commodities. As a result, our revenues may be stronger in fiscal quarters ended December 31 and March 31 and relatively weaker during the fiscal quarters ended June 30 and September 30.

The Tanker Industry

In broad terms, demand for oil and oil products traded by sea is primarily affected by global and regional economic conditions, as well as other factors such as changes in the location of productive capacity, and variations in regional prices. Demand for shipping capacity is a product of the physical quantity of the cargo (measured, depending on the cargo in terms of tons or cubic metrics), together with the distance the cargo is carried. Demand cycles move broadly in line with developments in the global economy, with growth rate of demand for products slowing significantly and becoming negative in some years in the period immediately after the onset of the global economic downturn in late 2008, before recovering gradually from 2011 with general improvement in the global macro-economic environment. Low crude prices between 2015 and 2017 induced greater consumption, which led to increased seaborne trade of crude oil as well as refined products. Growth in seaborne trade slowed in 2018 because of inventory drawdown in crude as well as refined products. In 2019, the decline in seaborne trade was on account of lower refinery runs and weaker economic growth. Refineries underwent maintenance in the first half of 2019 to prepare for low sulfur fuel oil and MGO demand related with IMO 2020 regulations on the control of Sulphur emission, while refinery runs were lower in the second half of 2019 due to weaker economic growth.

The outbreak of COVID-19 severely affected the demand for crude oil and refined petroleum products in 2020 as several major economies enforced lockdowns to contain the spread of the virus and mitigate the damage caused by the pandemic. Accordingly, the world seaborne tanker trade, including crude oil, oil products, and chemicals fell significantly. The decline in trade was mainly led by a sharp decline in both crude oil and oil products trade following restrictions enforced by authorities in several major economies. Oil demand and trade started recovering gradually in the second half of 2020 with the easing lockdown restrictions in many parts of the world. In 2020, 3,109 million tons of crude oil, products and vegetable oils/chemicals were moved by sea. Of this, crude shipments constituted 1,886 million tons of cargo, products 934 million tons, with the balance made up of other bulk liquids, including vegetable oils, chemicals and associated products.

Products trades have received a boost in the last decade as a result of developments in exploration and production activity in the U.S. Horizontal drilling and hydraulic fracturing have triggered a shale oil revolution and rising crude oil production has also ensured the availability of cheaper feedstocks to local refineries. As a result, the U.S. has become a major net exporter of products.

Crude oil is transported in uncoated vessels, which range upwards in size from 55,000 dwt. Products are carried predominantly in coated ships and include commodities such as gas oil, gasoline, jet fuel, kerosene and naphtha (often referred to as ‘clean products’), and fuel oil and vacuum gas oil (often referred to as ‘dirty products’). In addition, some product tankers are also able to carry bulk liquid chemicals and edible oils and fats if they have the appropriate International Maritime Organization (IMO) certification. These vessels are classified as product/chemical tankers, and as such, they represent a swing element in supply, having the ability to move between trades depending on market conditions. Clean petroleum products are therefore carried by non-IMO product tankers and IMO certified product/chemical tankers. IMO tankers will also carry, depending on their tank coatings, a range of other products including organic and inorganic bulk liquid chemicals, vegetable oils and animal fats and special products such as molasses.

Two other important factors are likely to affect product tanker supply in the future. The first is the requirement to retrofit Ballast Water Management Systems (BWTS) to existing vessels. In February 2004, the

 

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IMO adopted the International Convention for the Control and Management of Ships’ Ballast Water and Sediments. The IMO Ballast Water Management (BWM) Convention contains an environmentally protective numeric standard for the treatment of a ship’s ballast water before it is discharged. This standard, detailed in Regulation ‘D-2’ of the BWM Convention, sets out the numbers of organisms allowed in specific volumes of treated discharge water. The IMO ‘D-2’ standard is also the standard that has been adopted by the U.S. Coast Guard’s ballast water regulations and the U.S. EPA’s Vessel General Permit. The BWM Convention also contains an implementation schedule for the installation of IMO member state type approved treatment systems in existing ships and in new vessels, requirements for the development of vessel ballast water management plans, requirements for the safe removal of sediments from ballast tanks, and guidelines for the testing and type approval of ballast water treatment technologies. In July 2017, the IMO extended the regulatory requirement of compliance to the BWM Convention from September 8, 2017 to September 8, 2019. Vessels trading internationally will have to comply with the BWM Convention upon their next special survey after that date. Expenditure of this kind has become another factor impacting the decision to scrap older vessels after BWM Convention came into force in 2019.

The second factor that is likely to impact future vessel supply is the drive to control sulfur emission from ships. Heavy fuel oil (HFO) has been the main fuel of the shipping industry for many years. It is relatively inexpensive and widely available, but it is ‘dirty’ from an environmental point of view. The sulfur content of HFO consumed by ships has been about 3.5% until the end of 2019. It is the reason that maritime shipping accounts for 8% of global emissions of sulfur dioxide (SO2), an important source for acid rain, as well as respiratory diseases. In some port cities, such as Hong Kong, shipping is the largest single source of SO2 emissions, as well as emissions of particulate matter (PM), which are directly tied to the sulfur content of the fuel. One estimate suggests that PM emissions from maritime shipping led to 87,000 premature deaths worldwide in 2012.

Vessel chartering

Product tankers and crude oil tankers are ordinarily chartered either through a voyage charter or a time charter, under a longer term contract of affreightment (“COA”) or in pools. Under a voyage charter, the owner agrees to provide a vessel for the transport of cargo between specific ports in return for the payment of an agreed freight rate per ton of cargo or an agreed dollar lump sum amount. Voyage costs, such as canal and port charges and bunker expenses, are the responsibility of the owner. Under a time charter, the ship owner places the vessel at the disposal of a charterer for a given period of time in return for a specified rate (either hire per day or a specified rate per dwt capacity per month) with the voyage costs being the responsibility of the charterer. In both voyage charters and time charters, operating costs (such as repairs and maintenance, crew wages and insurance premiums), as well as drydockings and special surveys, are the responsibility of the ship owner. The duration of time charters varies, depending on the evaluation of market trends by the ship owner and by charterers. Occasionally, tankers are chartered on a bareboat basis. Under a bareboat charter, operations of the vessels and all operating costs are the responsibility of the charterer, while the owner only pays the financing costs of the vessel. A COA is another type of charter relationship where a charterer and a ship owner enter into a written agreement pursuant to which a specific cargo will be carried over a specified period of time. COAs benefit charterers by providing them with fixed transport costs for a commodity over an identified period of time. COAs benefit ship owners by offering ascertainable revenue over that same period of time and eliminating the uncertainty that would otherwise be caused by the volatility of the charter market. A shipping pool is a collection of similar vessel types under various ownerships, placed under the care of a single commercial manager. The manager markets the vessels as a single fleet and collects the earnings which are distributed to individual owners under a pre-arranged weighing system by which each participating vessel receives its share. Pools have the size and scope to combine voyage charters, time charters and COA with freight forward agreements for hedging purposes, to perform more efficient vessel scheduling thereby increasing fleet utilization.

Market cyclicality and trends

The international tanker shipping industry is cyclical and volatile, having reached historical highs in 2008 and historical lows in 2016. Charter rates improved in the first half of 2020; before declining sharply in the

 

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second half of 2020 and remaining at low levels in the first nine months of 2021. Tanker charter hire rates and vessel values for all tankers are influenced by the supply-demand dynamics of the tanker market. Demand for vessels depends on the international trade of oil and refined petroleum products, including the availability of crude oil. Also, in general terms, time charter rates are less volatile than spot rates as they reflect the fact that the vessel is fixed for a longer period of time. In the spot market, rates will reflect the immediate underlying conditions in vessel supply and demand, and are thus prone to more volatility.

At the same time, the supply of tankers vessels cannot be changed drastically in the short term as it takes about nine months to build a ship and, usually, there is a lag of, at least, fifteen to eighteen months between placing an order to build a vessel and its delivery. In the near term, supply is limited by the existing number of vessels and can only be adjusted by increasing or decreasing the operating speed of a vessel but various economic and operational factors could limit the range of such adjustments.

Typically, periods of high charter rates result in an increased rate of new vessel ordering, often more than what the demand levels warrant; these vessels begin to be delivered eighteen months or more later when demand growth for vessels may have slowed down thus creating oversupply and quick correction of charter rates. The cyclicality of charter rates is also reflected in vessel values.

Legal Proceedings

To our knowledge, there are no material legal proceedings to which we are a party or to which any of our properties are subject, other than routine litigation incidental to our business. In our opinion, the disposition of these lawsuits should not have a material impact on our consolidated results of operations, financial position and cash flows.

See Note 8 “Commitments and Contingencies” to the unaudited predecessor combined financial statements and Note 11 “Commitments and Contingencies” to the audited predecessor combined financial statements included elsewhere in this prospectus.

Properties

Other than our vessels, we do not own any material property.

 

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MANAGEMENT

Directors and Senior Management

The following sets forth the name and position of each of our directors and executive officers. The business address for each director and executive officer is the address of our principal executive office which is located at 331 Kifissias Avenue, Erithrea 14561, Athens, Greece.

 

Name

   Age   

Positions

   Year
Became
Director
   Year
Director’s
Current
Term
Expires

Harry N. Vafias

   43    Chief Executive Officer, President and Class I Director    2021    2024

John Kostoyannis*

   55    Class II Director    2021    2023

George Xiradakis*

   57    Class III Director    2021    2022

Ifigeneia (Fenia) Sakellari

   41    Interim Chief Financial Officer      

 

 

* Expected to be appointed at the effective time of the registration statement of which this prospectus forms a part.

Certain biographical information about each of these individuals is set forth below.

Harry N. Vafias has been a member of the Board of Directors and Chief Executive Officer and President of Imperial Petroleum since its inception on May 14, 2021. He has also been the President and Chief Executive Officer and a member of the Board of Directors of StealthGas since its inception in December 2004 and its Chief Financial Officer since January 2014. Mr. Vafias has been actively involved in the tanker and gas shipping industry since 1999. Mr. Vafias worked at Seascope, a leading ship brokering firm specializing in sale and purchase of vessels and chartering of oil tankers. Mr. Vafias also worked at Braemar, a leading ship brokering firm, where he gained extensive experience in tanker and dry cargo chartering. Seascope and Braemar merged in 2001 to form Braemar Seascope Group plc, a public company quoted on the London Stock Exchange and one of the world’s largest ship brokering and shipping service groups. From 2000 until 2004, he worked at Brave Maritime and Stealth Maritime, companies providing comprehensive ship management services, where Mr. Vafias headed the operations and chartering departments of Stealth Maritime and served as manager for the sale and purchase departments of both Brave Maritime and Stealth Maritime. Mr. Vafias graduated from City University Business School in the City of London in 1999 with a B.A. in Management Science and from Metropolitan University in 2000 with a Masters degree in Shipping, Trade and Transport.

John Kostoyannis will be appointed to our Board of Directors at the effective time of the registration statement of which this prospectus forms a part. He has also been a member of the Board of Directors of StealthGas since 2010. Mr. Kostoyannis is a Managing Director at Allied Shipbroking Inc., a leading shipbroking house in Greece, providing Sale and Purchase and Chartering services in the shipping industry. Before joining Allied Shipbroking, from 1991 until September 2001, Mr. Kostoyannis worked in several prominent shipbroking houses in London and Piraeus. He is a member of the Hellenic Shipbrokers Association. Mr. Kostoyannis graduated from the City of London Polytechnic in 1988 where he studied Shipping and Economics.

George Xiradakis will be appointed to our Board of Directors at the effective time of the registration statement of which this prospectus forms a part. Mr. Xiradakis is the founder and Managing Director of XRTC Business Consultants Ltd. (“XRTC”) (January 1999). The company was established in order to represent financial institutions in the Greek territory and initially acted as the exclusive Shipping Representative of Credit Lyonnais Group in Greece. XRTC expanded its scope as Financial and Advisor Consultant for Greek Shipping, offering its services in national and International Institutions and Organizations. From February 2005 to 2008, XRTC acted as shipping finance consultant of the French banking group NATIXIS. He is also the General

 

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Secretary of the Association of Banking and Financial Executives of Hellenic Shipping, Vice President of China Hellenic Chamber (HCCI), Vice President (International and Financial Relations) of the China-Greece Association. He served as the President of the International Propeller Club, Port of Piraeus from 2013 to 2019 and he acted as a VP of the International Propeller Club of the United States. He is now Emeritus President of International Propeller Club, Port of Piraeus, Emeritus Member of The Piraeus Chamber of Commerce & Industry, Member of the Mediterranean Committee of China Classification Society, Piraeus Marine Club, Hellenic Maritime Museum and Hellas Liberty Floating Museum etc. He has also been a Board Member of other US listed shipping companies.

Ifigeneia (Fenia) Sakellari is our Interim Chief Financial Officer. Ms. Sakellari has 17 years of experience in finance and has been a finance officer of StealthGas since 2015. Prior to this, Ms. Sakellari was employed for seven years with Piraeus Bank where she held positions in both its credit departments (corporate and project finance) and in its private equity investment arm. Ms. Sakellari holds a Bachelor Degree in Management Sciences from the London School of Economics and a Masters Degree in finance from SDA Bocconi.

We intend to appoint a permanent, full-time Chief Financial Officer by the second quarter of 2022. Our officers, including our President and Chief Executive Officer Harry Vafias, and the other individuals providing services to us or our subsidiaries may face a conflict regarding the allocation of their time between our business and the other business interests of StealthGas or its affiliates. The amount of time our officers and such other individuals providing services to us will allocate between our business and the business of StealthGas and its affiliates will vary from time to time depending on various circumstances and needs of the businesses, such as the level of strategic activity of each business. While there will be no formal requirements or guidelines for the allocation of time spent between our business and the other businesses they are involved in, the performance of their duties will be subject to the ongoing oversight of our board of directors.

Board of Directors

Upon completion of the Spin-Off Distribution, we will have three members on our board of directors. The board of directors may change the number of directors to not less than three, nor more than 12, by a vote of a majority of the entire board. Each director shall be elected to serve until the third succeeding annual meeting of stockholders and until his or her successor shall have been duly elected and qualified, except in the event of death, resignation or removal. A vacancy on the board created by death, resignation, removal (which may only be for cause), or failure of the stockholders to elect the entire class of directors to be elected at any election of directors or for any other reason, may be filled only by an affirmative vote of a majority of the remaining directors then in office, even if less than a quorum, at any special meeting called for that purpose or at any regular meeting of the board of directors. The current term of our Class I director expires in 2024, the term of our Class II director expires in 2023 and the term of our Class III director expires in 2022.

After the consummation of the Spin-Off Distribution, we will be a “foreign private issuer” under the securities laws of the United States and the rules of the Nasdaq Capital Market. Under the securities laws of the United States, “foreign private issuers” are subject to different disclosure requirements than U.S. domiciled registrants, as well as different financial reporting requirements. Under the Nasdaq Capital Market rules, a “foreign private issuer” is subject to less stringent corporate governance requirements. Subject to certain exceptions, the rules of the Nasdaq Capital Market permit a “foreign private issuer” to follow its home country practice in lieu of the listing requirements of the Nasdaq Capital Market. As permitted by these exemptions, as well as by our bylaws and the laws of the Marshall Islands, we currently intend to have an audit committee composed solely of two independent committee members, whereas a domestic U.S. public company would be required to have three such independent members. In addition, in lieu of obtaining shareholder approval prior to the issuance of designated securities, the Company will comply with provisions of the Marshall Islands Business Corporations Act, providing that the Board of Directors approves share issuances.

 

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Committees of the Board of Directors

The Board of Directors has established an Audit Committee, a Nominating and Corporate Governance Committee and a Compensation Committee. The members of the Audit Committee will be George Xiradakis (Chairman), and John Kostoyannis. The Nominating and Corporate Governance Committee will be John Kostoyannis (Chairman) and George Xiradakis . The Compensation Committee will be George Xiradakis (Chairman) and John Kostoyannis. Each of the directors on the Audit Committee has been determined by our Board of Directors to be independent.

Audit Committee

The Audit Committee is governed by a written charter, which is approved and annually adopted by the Board. The Board has determined that the members of the Audit Committee meet the applicable independence requirements of the SEC and the Nasdaq Stock Market, that all members of the Audit Committee fulfill the requirement of being financially literate and that George Xiradakis is an Audit Committee financial expert as defined under current SEC regulations.

The Audit Committee is appointed by the Board and is responsible for, among other matters overseeing the:

 

   

integrity of the Company’s financial statements, including its system of internal controls;

 

   

Company’s compliance with legal and regulatory requirements;

 

   

independent auditor’s qualifications and independence;

 

   

retention, setting of compensation for, termination and evaluation of the activities of the Company’s independent auditors, subject to any required shareholder approval; and

 

   

performance of the Company’s independent audit function and independent auditors,

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee is appointed by the Board and is responsible for, among other matters:

 

   

reviewing the Board structure, size and composition and making recommendations to the Board with regard to any adjustments that are deemed necessary;

 

   

identifying candidates for the approval of the Board to fill Board vacancies as and when they arise as well as developing plans for succession, in particular, of the chairman and executive officers;

 

   

overseeing the Board’s annual evaluation of its own performance and the performance of other Board committees;

 

   

retaining, setting compensation and retentions terms for and terminating any search firm to be used to identify candidates; and

 

   

developing and recommending to the Board for adoption a set of Corporate Governance Guidelines applicable to the Company and to periodically review the same.

Compensation Committee

The Compensation Committee is appointed by the Board and is responsible for, among other matters:

 

   

establishing and periodically reviewing the Company’s compensation programs;

 

   

reviewing the performance of directors, officers and employees of the Company who are eligible for awards and benefits under any plan or program and adjust compensation arrangements as appropriate based on performance;

 

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reviewing and monitoring management development and succession plans and activities;

 

   

reporting on compensation arrangements and incentive grants to the Board;

 

   

retaining, setting compensation and retention terms for, and terminating any consultants, legal counsel or other advisors that the Compensation Committee determines to employ to assist it in the performance of its duties; and

 

   

preparing any Compensation Committee report included in our annual proxy statement.

Code of Ethics

Prior to consummation of the Spin-Off Distribution, the Board of Directors will approve and adopt a code of ethics that complies with the applicable guidelines issued by the SEC, copies of which will be available on our website: www.imperialpetro.com under and upon written request by our stockholders at no cost.

Director and Executive Compensation

Our Chief Executive Officer who also serves as a Board Director will not receive additional compensation for his service as a director. Each independent director will receive annualized fees of $25,000 plus reimbursement of their out-of-pocket expenses incurred in attending meetings of our Board of Directors or any committee of our Board of Directors.

We have no direct employees. The services of our Chief Executive Officer and Interim Chief Financial Officer will be provided under the management agreement with Stealth Maritime initially for the first 12 months following the spin-off and then our Board will agree upon any additional management compensation. Stealth Maritime compensates each of these individuals for their services and we, in turn, reimburse Stealth Maritime for their compensation. We expect to pay to Stealth Maritime $0.3 million per year for the services of our executive officers. Prior to the Spin-Off Distribution, neither we nor Stealth Maritime has paid any compensation to our executive officers.

Our executive officers and directors will also be eligible to receive awards under our contemplated equity compensation plan described below under “—Equity Compensation Plan.” We have not granted any awards to directors or officers of the Company.

Equity Compensation Plan

Prior to completion of the Spin-Off Distribution, we expect to adopt an equity compensation plan. The equity compensation plan will be administered by the Board of Directors which can make awards totaling in aggregate up to 10% of the number of shares of common stock outstanding at the time any award is granted. Officers, directors and employees (including any prospective officer or employee) of the Company and its subsidiaries and affiliates and consultants and service providers to (including persons who are employed by or provide services to any entity that is itself a consultant or service provider to) the Company and its subsidiaries and affiliates will be eligible to receive awards under the equity incentive plan. Awards may be made under the expected equity compensation plan in the form of incentive stock options, non-qualified stock options, stock appreciation rights, dividend equivalent rights, restricted stock, unrestricted stock, restricted stock units and performance shares.

Employees

We have no salaried employees. Our manager employs and provides us with the services of our Chief Executive Officer, Interim Chief Financial Officer and any other management executives the Company may require. In each case their services are provided under the management agreement with Stealth Maritime. Stealth

 

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Maritime compensates each of these individuals for their services and we, in turn, reimburse Stealth Maritime for their compensation. For our compensation expenses, pursuant to our management agreement, we will initially reimburse Stealth Maritime for its payment of the compensation of our Chief Executive Officer and Chief Financial Officer for the first 12 months following the spin -off and then our Board will agree upon any further management compensation.

As of June 30, 2021, 33 officers and 41 crew members served on board the vessels in our fleet. However, these officers and crew are not directly employed by the Company.

 

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Pursuant to the Audit Committee Charter, our Audit Committee is responsible for establishing procedures for the approval of all related party transactions involving executive officers and directors. Our Code of Business Conduct and Ethics requires our Audit Committee to review and approve any “related party” transaction as defined in Item 7.B of Form 20-F before it is consummated.

Contribution Agreement

We will enter into the Contribution Agreement with StealthGas before the Spin-Off Distribution. The Contribution Agreement will set forth the agreements between us and StealthGas regarding the contribution of the subsidiaries owning the vessels comprising our initial fleet and the refinancing of the existing indebtedness of StealthGas securing the vessels comprising our fleet with borrowings under our New Senior Secured Credit Facility, which are the principal transaction necessary to separate us from StealthGas.

The Contribution Agreement will also provide for the settlement or extinguishment of certain liabilities and other obligations between us and StealthGas, if any. Following the Spin-Off Distribution, StealthGas and Imperial Petroleum will operate independently, and neither will have any ownership interest in the other nor will there be any ongoing relationships between StealthGas and Imperial Petroleum after the separation.

On the distribution date, StealthGas will distribute to its stockholders all 4,775,272 of our common shares and all 795,878 of our Series A Preferred Shares, with one of our common shares and one of our Series A Preferred Shares being distributed for every eight shares and forty-eight shares, respectively, of StealthGas common stock held by StealthGas stockholders.

The Contribution Agreement provides that the Spin-Off Distribution and the transfer of StealthGas’ product and crude oil tanker vessel-owning subsidiaries to us is subject to, among other things, the approval of StealthGas’ Board of Directors, our entry into our New Senior Secured Credit Facility and the application of borrowings thereunder to refinance the existing indebtedness of StealthGas securing the vessels comprising our fleet, approval of our request for our common shares and Series A Preferred Shares to be listed on Nasdaq and the effectiveness of the registration statement of which this prospectus forms a part. The fulfillment of the foregoing conditions will not create any obligation on the part of StealthGas to effect the Spin-Off Distribution. StealthGas has the right not to complete the Spin-Off Distribution if, at any time, the board of directors of StealthGas determines, in its sole discretion, that the Spin-Off Distribution is not in the best interests of StealthGas or its stockholders, or that market conditions are such that it is not advisable to effect the Spin-Off Distribution.

We and StealthGas will agree to take all actions reasonably necessary or desirable to consummate and make effective the transactions contemplated by the Contribution Agreement. The Contribution Agreement will provide that it may be terminated by StealthGas at any time prior to the separation by and in the sole discretion of StealthGas without the approval of us or the stockholders of StealthGas.

Any and all agreements, arrangements, commitments and understandings, between us and our subsidiaries and other affiliates, on the one hand, and StealthGas and its subsidiaries and other affiliates (other than us and our affiliates), on the other hand, will terminate as of the distribution date.

Management Affiliations

Harry Vafias, our president, chief executive officer and one of our directors, is an officer, director and the sole shareholder of Flawless Management Inc., our largest stockholder. He is also the son of the principal and founder of Brave Maritime, an affiliate of Stealth Maritime, which is our management company. Stealth Maritime may subcontract the technical management of some of our vessels to Brave Maritime in the future.

 

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Management and Other Fees

Prior to the completion of the Spin-Off Distribution, we will enter a management agreement with Stealth Maritime, pursuant to which Stealth Maritime will provides us with technical, administrative, commercial and certain other services, on substantially the same terms, including the same fee levels, as Stealth Maritime provides these services to the vessel-owning subsidiaries of StealthGas being contributed to us in connection with the Spin-Off Distribution. In relation to the technical services, Stealth Maritime is responsible for arranging for the crewing of the vessels, the day to day operations, inspections and vetting, supplies, maintenance, repairs, bunkering drydocking and insurance. Administrative functions include but are not limited to accounting, back-office, reporting, legal and secretarial services. In addition, Stealth Maritime provides services for the chartering of our vessels and monitoring thereof, freight collection, and sale and purchase. In providing most of these services, Stealth Maritime pays third parties and receives reimbursement from us. Under the management agreement Stealth Maritime subcontracts certain of its obligations.

Stealth Maritime also provides crew management services to certain of our vessels. The majority of these services have been subcontracted by Stealth Maritime to an affiliated ship-management company, Hellenic Manning Overseas Inc. (formerly known as Navis Maritime Services Inc.), which is 25% owned by an affiliate of Stealth Maritime. The Company pays to Stealth Maritime a fixed monthly fee of $2,500 per vessel for these crew management services, all of which fees are passed on to Hellenic Manning Overseas Inc. For the years ended December 31, 2019 and 2020, these crew management fees were nil and $35 thousands, respectively. As of June 1, 2021, two of our product tankers were being manned by Hellenic Manning Overseas Inc., while for our Aframax tanker, crewing services were provided by Bernard Shulte Management with a lumpsum monthly fee of $120 thousands. We are not responsible for crewing vessels deployed on bareboat charters, as one of our product tankers is currently deployed.

In the years ended December 31, 2019 and 2020 and the six months ended June 30, 2021, Stealth Maritime received a fixed management fee of $440 per vessel per day operating under a voyage or time charter, and a fixed fee of $125 per vessel per day for each of our vessels operating on bareboat charter, in each case, pro-rated for the calendar days vessels were owned, with respect to the vessels in our fleet. In addition, our manager arranges for supervision onboard the vessels, when required, by superintendent engineers and when such visits exceed a period of five days in a twelve-month period we are charged $500 for each additional day. We pay our manager, Stealth Maritime, a fee equal to 1.25% of the gross freight, demurrage and charter hire collected from the employment of our vessels. Stealth Maritime also receives a fee equal to 1.0% calculated on the price as stated in the relevant memorandum of agreement for any vessel bought or sold by them on our behalf. Under our management agreement with Stealth Maritime which will be in place prior to the Spin-Off Distribution, we will pay management fees and commissions at the same rate.

The above management fees for the years ended December 31, 2019 and 2020 were $0.4 million and $0.5 million, respectively, and for the six months ended June 30, 2020 and 2021 were $0.2 million and $0.3 million, respectively. We also paid $0.02 million and $0.01 million, respectively, in the years ended December 31, 2019 and 2020 and $0.01 million and $0.01 million in the six months ended June 30, 2020 and 2021 related to onboard supervision which were included in our operating expenses – related party. For the years ended December 31, 2019 and 2020, total brokerage commissions of 1.25% amounted to $0.17 million and $0.25 million, respectively, and for the six months ended June 30, 2020 and 2021, total brokerage commissions of 1.25% amounted to $0.11 million and $0.12 million, respectively, and in each period were included in voyage expenses – related party.

We will also reimburse Stealth Maritime for its payment for services related to our executive officers after the Spin-off Distribution.

Additional vessels that we may acquire in the future may be managed by Stealth Maritime or other unaffiliated management companies.

 

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The initial term of our management agreement with Stealth Maritime will expire on December 31, 2025 and will be extended on a year-to-year basis thereafter unless six-month written notice is provided prior to the expiration of the term.

Office Space

Stealth Maritime will provide the office space to us without charge for the first year after the completion of the Spin-Off Distribution, and thereafter the lease rate will be €5,000 per month.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AFTER THE SPIN-OFF DISTRIBUTION

The following table sets forth certain information regarding the beneficial ownership of our voting stock as a result of the Spin-Off Distribution by each person or entity known by us to be the beneficial owner of more than 5% of the outstanding shares of our common shares and our Series A Preferred Shares, each of our directors and executive officers, and all of our directors and executive officers and 5% holders as a group. All of our shareholders, including the shareholders listed in this table, are entitled to one vote for each common share held. Series A Preferred Shares generally have no voting rights, other than in very limited circumstances. See “Description of Series A Preferred Shares.”

Except as otherwise noted below, we based the share amounts on each person’s beneficial ownership of StealthGas common stock on September 30, 2021, giving effect to a Spin-Off Distribution at the distribution ratio of one Imperial Petroleum common share and one Imperial Petroleum Series A Preferred Share for every eight shares and forty-eight shares, respectively, of StealthGas common stock held by such person. As of September 30, 2021, StealthGas had approximately 38,202,181 shares of common stock outstanding. Information for certain holders is based on their latest filings with the Securities and Exchange Commission with respect to StealthGas common stock or information delivered to us.

 

     Common Shares
Beneficially Owned
    Series A Preferred
Shares Beneficially
Owned
 

Name of Beneficial Owner

   Number      Percentage     Number      Percentage  

Principal Stockholders

          

Flawless Management Inc.(1)

     888,181        18.6     148,030        18.6

Glendon Capital Management L.P.(2)

     812,349        17.0     135,391        17.0

MSDC Management, L.P.(3)

     439,581        9.2     73,263        9.2

Russell Investments Group, Ltd.(4)

     347,500        7.3     57,916        7.3

Redwood Capital Management, LLC(5)

     300,610        6.3     50,101        6.3

Renaissance Technologies LLC(6)

     287,600        6.0     47,933        6.0

Executive Officers and Directors

          

Harry N. Vafias(1)

     1,032,383        21.6     172,063        21.6

John Kostoyannis

     1,412        *       235        *  

George Xiradakis

     —          —         —          —    

Ifigeneia (Fenia) Sakellari

     399        *       66        *  

All executive officers and directors as a group
(four persons)

     1,034,194        21.6     172,364        21.6

 

*

Less than 1%.

 

(1)

The shares to be beneficially owned by Harry N. Vafias consist of, according to Amendment No. 2 to Schedule 13D jointly filed with the SEC on June 1, 2021 by Flawless Management Inc. and Harry N. Vafias with respect to shares of StealthGas common stock, Harry N. Vafias has sole voting power and sole dispositive power with respect to all shares beneficially owned by Flawless Management Inc. or directly by Mr. Vafias.

(2)

Based on filings made by Glendon Capital Management L.P. with the SEC with respect to shares of StealthGas common stock. According to these filings, these shares are directly owned by Glendon Opportunities Fund, L.P. (the “Fund”), Altair Global Credit Opportunities Fund LLC (the “Sub-Advised Fund”) and a separately managed account. According to these filings, (i) the Fund is beneficial owner of over 10% of the issuer’s securities on an individual basis, (ii) the Sub-Advised Fund and the separately managed account do not own 10% of the issuer’s securities on an individual basis and (iii) Glendon Capital Management LP is the investment manager to the Fund and the separately managed account and the investment sub-adviser to the Sub-Advised Fund, and may be deemed to beneficially own these securities under the Securities Exchange Act of 1934.

 

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(3)

According to Amendment No. 3 to a Schedule 13G jointly filed by and on behalf of each of MSDC Management, L.P. (“MSDC”) and MSD Credit Opportunity Master Fund, L.P. with the SEC on February 12, 2021 with respect to shares of StealthGas common stock, MSDC is the investment manager of, and may be deemed to beneficially own shares of common stock beneficially owned by, MSD Credit Opportunity Master Fund, L.P. and has sole voting power and joint dispositive power with respect to all such shares.

(4)

According to a Schedule 13G filed by Russell Investments Group, Ltd. on February 12, 2020 with respect to shares of StealthGas common stock.

(5)

According to Amendment No. 3 to a Schedule 13G jointly filed by and on behalf of each Redwood Capital Management, LLC, Redwood Capital Management Holdings, LP, Double Twins K, LLC, Redwood Master Fund, Ltd. and Ruben Kliksberg with respect to shares of StealthGas common stock, each may be deemed to have shared voting power and joint dispositive power with respect to all such shares, on February 16, 2021.

(6)

According to Amendment No. 1 to a Schedule 13G jointly filed by and on behalf of Renaissance Technologies LLC and Renaissance Technologies Holdings Corporation on February 11, 2021 with respect to shares of StealthGas common stock.

 

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CERTAIN MARSHALL ISLANDS COMPANY CONSIDERATIONS

Our corporate affairs are governed by our amended and restated articles of incorporation and amended and restated bylaws, which will be in place at the time of the Spin-Off Distribution, and by the BCA. You should be aware that the BCA differs in certain material respects from the laws generally applicable to U.S. companies incorporated in the State of Delaware. 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 Republic of the Marshall Islands and we cannot predict whether Republic of the Marshall Islands courts would reach the same conclusions as U.S. courts. Thus, you may have more difficulty in protecting your interests in the face of actions by the 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 Delaware General Corporation Law relating to shareholders’ rights.

 

Marshall Islands    Delaware

Shareholder Meetings and Voting Rights

 

Held at a time and place as designated or in the manner provided in the bylaws.    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 outside the Republic of the Marshall Islands.    May be held within or outside Delaware.
Notice:    Notice:
Whenever shareholders are required or permitted to take action at a meeting, written notice shall state the place, date and hour of the meeting and, unless it is the annual meeting, indicate that it is being issued by or at the direction of the person calling the meeting.    Whenever shareholders are required or permitted to take any action at a meeting, written notice shall state the place, if any, date and hour of the meeting and the means of remote communication, if any, by which shareholders may be deemed to be present and vote at the meeting.
A copy of the notice of any meeting shall be given not less than 15 nor more than 60 days before the meeting.    Written notice of any meeting shall be given not less than 10 nor more than 60 days before the date of the meeting.
Any action required or permitted to be taken by meeting of shareholders may be taken without meeting if consent is in writing and is signed by all the shareholders entitled to vote.    Unless otherwise provided in the certificate of incorporation, any action required or permitted to be taken at a meeting of shareholders may be taken without a meeting, without prior notice and without a vote if consent is in writing and signed by the holders of outstanding stock having the number of votes necessary to authorize or take action at a meeting.
Each shareholder entitled to vote may authorize another person to act for him by proxy.    Each shareholder entitled to vote may authorize another person or persons to act for each shareholder by proxy.

 

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Marshall Islands    Delaware

 

Unless otherwise provided in the articles of incorporation or bylaws, a majority of shares entitled to vote shall constitute a quorum but in no event shall a quorum consist of fewer than one-third of the shares entitled to vote at a meeting.    The certificate of incorporation or bylaws may specify the number necessary to constitute a quorum but in no event shall a quorum consist of less than one-third of the shares entitled to vote at the meeting. In the absence of such specifications, a majority of shares entitled to vote at the meeting 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.
Except as otherwise required by the BCA or the articles of incorporation, directors shall be elected by a plurality of the votes cast by holders of shares entitled to vote, and, except as required or permitted by the BCA or the articles of incorporation, any other corporate action shall be authorized by a majority of votes cast by holders of shares entitled to vote thereon    Unless otherwise specified in the certificate of incorporation or bylaws, directors shall be elected by a plurality of the votes of the shares entitled to vote on the election of directors, and, in all other matters, the affirmative vote of the majority of the shares entitled to vote on the subject matter shall be the act of the shareholders.
The articles of incorporation may provide for cumulative voting.    The certificate of incorporation may provide for cumulative voting.

Dissenters’ Rights of Appraisal

 

Shareholders have a right to dissent from a merger or consolidation or sale or exchange of all or substantially all assets not made in the usual and regular course of business, and receive payment of the fair value of their shares, subject to exceptions.    Appraisal rights shall be available for the shares of a corporation in a merger or consolidation, subject to exceptions.
A holder of any adversely affected shares who does not vote on or consent in writing to an amendment to the articles of incorporation has the right to dissent and to receive payment for such shares if the amendment:    The certificate of incorporation may provide that appraisal rights are available for shares as a result of an amendment to the certificate of incorporation, any merger or consolidation or the sale of all or substantially all of the assets.

Alters or abolishes any preferential right of any outstanding shares having preferences; or

  

Creates, alters, or abolishes any provision or right in respect to the redemption of any outstanding shares; 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.

  

 

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Marshall Islands    Delaware

Shareholders’ 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 a beneficial interest in such shares. 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 or 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.
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.    Delaware Court of Chancery Rule 23.1 governs the procedures for derivative actions by shareholders.
Such action shall not be discontinued, compromised or settled without the approval of the High Court of the Republic of the Marshall Islands.   
Attorney’s fees may be awarded if the action is successful.   
Corporation may require a plaintiff bringing a derivative suit to give security for reasonable expenses if the plaintiff owns less than 5% of any class of stock and the shares have a value of $50,000 or less.   

Directors

 

Board must consist of at least one member.    Board must consist of at least one member.
Removal:    Removal:

•  Any or all of the directors may be removed for cause by vote of the shareholders.

 

•  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.

  

•  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 except: (1) unless the certificate of incorporation otherwise provides, in the case of a corporation whose board is classified, stockholders may effect such removal only for cause, or (2) if the corporation has cumulative voting, if less than the entire board is to be removed, no director may be removed without cause if the votes cast against such director’s removal would be sufficient to elect such director if then cumulatively voted at an election of the entire board of directors, or, if there be classes of directors, at an election of the class of directors of which such director is a part.

Number of board members may be fixed by the bylaws, by the shareholders, or by action of the board under the specific provisions of a bylaw.   

 

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Number of board members may be changed by amendment of the bylaws, by the shareholders or by action of the board under specific provision of a bylaw; however if the board is authorized to change the number of directors, it can only do so by a majority of the entire board.    Number of board members shall be fixed by the bylaws, unless the certificate of incorporation fixes the number of directors, in which case a change in the number shall be made only by amendment of the certificate.

Duties of Directors

 

Members of a board of directors owe a fiduciary duty to the company to act honestly and in good faith with a view to the best interests of the company and to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.    The business and affairs of a corporation are managed by or under the direction of its board of directors. In exercising their powers, directors are charged with a fiduciary duty of care to protect the interests of the corporation and a fiduciary duty of loyalty to act in the best interests of its shareholders.

 

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COMMON SHARES DIVIDEND POLICY

We currently intend to retain our future earnings, if any, to fund the development and growth of our business. Our board of directors will, however, evaluate our dividend policy consistent with our cash flows and liquidity requirements and we may consider paying dividends depending on future performance of our business and financial condition. Declaration and payment of any future dividend is subject to the discretion of our Board of Directors. The timing and amount of dividend payments will be dependent upon our earnings, financial condition, cash requirements and availability, restrictions in our loan agreements, or other financing arrangements, the provisions of Marshall Islands law affecting the payment of distributions to stockholders and other factors, and will be subject to the priority of our Series A Preferred Shares. Because we are a holding company with no material assets other than the stock of our subsidiaries, our ability to pay dividends will depend on the earnings and cash flow of our subsidiaries and their ability to pay dividends to us. Marshall Islands law generally prohibits the payment of dividends other than from surplus or while a company is insolvent or would be rendered insolvent upon the payment thereof.

 

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TAX CONSIDERATIONS

The following is a discussion of the material Marshall Islands and United States federal income tax considerations applicable to Imperial Petroleum and U.S. Holders and Non-U.S. Holders, each as discussed below, of Imperial Petroleum common shares and Series A Preferred Shares.

Marshall Islands Tax Considerations

The following is the opinion of Reeder & Simpson, P.C., our counsel as to matters of the laws of the Republic of the Marshall Islands, and the current laws of the Republic of the Marshall Islands applicable to persons who do not reside in, maintain offices in or engage in business in the Republic of the Marshall Islands.

Imperial Petroleum is incorporated in the Marshall Islands. Under current Marshall Islands law, Imperial Petroleum is not subject to tax on income or capital gains, and no Marshall Islands withholding tax will be imposed upon payments of dividends by Imperial Petroleum to holders of its common shares or Series A Preferred Shares that are not residents or domiciled or carrying any commercial activity in the Marshall Islands. The holders of Imperial Petroleum common shares and Series A Preferred Shares will not be subject to Marshall Islands tax on the sale or other disposition of such common shares or Series A Preferred Shares or as a result of the receipt of our common shares and Series A Preferred Shares in the Spin-Off Distribution.

United States Federal Income Tax Consequences

The following are the material United States federal income tax consequences to Imperial Petroleum of its activities after the Spin-Off Distribution and of the receipt in the Spin-Off Distribution and ownership and disposition after the Spin-Off Distribution of our common shares and Series A Preferred Shares to U.S. Holders and Non-U.S. Holders, each as defined below. The following discussion of United States federal income tax matters is based on the Code, judicial decisions, administrative pronouncements, and existing and proposed regulations issued by the United States Department of the Treasury, or the Treasury Regulations, all as of the date of this prospectus, and all of which are subject to change, possibly with retroactive effect. This discussion is also based in part upon Treasury Regulations promulgated under Section 883 of the Code. The discussion below is based, in part, on the description of Imperial Petroleum’s business as described in “Business” above and assumes that Imperial Petroleum will conduct its business as described in that section.

United States Federal Income Taxation of Our Company

Taxation of Operating Income: In General

Unless exempt from United States federal income taxation under the rules discussed below, a foreign corporation is subject to United States federal income taxation in respect of any income that is derived from the use of vessels, from the hiring or leasing of vessels for use on a time, voyage or bareboat charter basis, from the participation in a pool, partnership, strategic alliance, joint operating agreement, code sharing 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 exclusive of certain U.S. territories and possessions constitutes income from sources within the United States, which we refer to as “U.S.-source shipping income.”

Shipping income attributable to transportation that both begins and ends in the United States is considered to be 100% from sources within the United States. We are not permitted 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-United States ports will be considered to be 100% derived from sources outside the United States. Shipping income derived from sources outside the United States will not be subject to any United States federal income tax.

 

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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 United States Federal Income Taxation

Under Section 883 of the Code and the Treasury Regulations thereunder, Imperial Petroleum will be exempt from United States federal income taxation on its U.S.-source shipping income if:

 

   

Imperial Petroleum is organized in a foreign country, or its country of organization, that grants an “equivalent exemption” to corporations organized in the United States; and

either

 

   

more than 50% of the value of Imperial Petroleum’s stock is owned, directly or indirectly, by “qualified shareholders,” individuals who are “residents” of a foreign country that grants an “equivalent exemption” to corporations organized in the United States, which we refer to as the “50% Ownership Test,” or

 

   

Imperial Petroleum’s stock is “primarily and regularly traded on an established securities market” in a country that grants an “equivalent exemption” to United States corporations, or in the United States, which we refer to as the “Publicly-Traded Test.”

The Marshall Islands jurisdiction where Imperial Petroleum and certain of its shipowning subsidiaries, are incorporated, and Liberia where its other shipowning subsidiaries are incorporated, grant an “equivalent exemption” to United States corporations. Therefore, Imperial Petroleum will be exempt from United States federal income taxation in any taxable year with respect to our U.S.-source shipping income if Imperial Petroleum satisfies either the 50% Ownership Test or the Publicly-Traded Test for such taxable year.

Imperial Petroleum does not expect that it will be able to satisfy the 50% Ownership Test for any taxable year due to the anticipated, widely-held nature of its stock.

Imperial Petroleum’s ability to satisfy the Publicly-Traded Test is discussed below.

The Treasury Regulations provide, in pertinent part, that the stock of a foreign corporation will be considered to be “primarily traded” on an established securities market in a country if the number of shares of each class of stock that is traded during the taxable year on all established securities markets in that country exceeds the number of shares in each such class that is traded during that year on established securities markets in any other single country. Imperial Petroleum common shares will be “primarily traded” on the Nasdaq Capital Market, which is an established securities market for these purposes.

Under the regulations, Imperial Petroleum common shares will be considered to be “regularly traded” on an established securities market if one or more classes of its stock representing more than 50% of our outstanding shares, by total combined voting power of all classes of stock entitled to vote and total value, is listed on the market (the “listing threshold”). Since Imperial Petroleum common shares and Series A Preferred Shares, which are Imperial Petroleum’s sole classes of stock, will be listed on the Nasdaq Capital Market, Imperial Petroleum will satisfy the listing threshold.

It is further required that with respect to each class of stock relied upon to meet the listing threshold (i) such class of the stock is traded on the market, other than in minimal quantities, on at least 60 days during the taxable year (or 1/6 of the days in the case of a short taxable year); and (ii) the aggregate number of shares of such class of stock traded on such market is at least 10% of the average number of shares of such class of stock outstanding during such year (or as appropriately adjusted in the case of a short taxable year). Imperial Petroleum expects satisfy the trading frequency and trading volume tests described in this paragraph. Even if this were not

 

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the case, the relevant Treasury regulations provide that the trading frequency and trading volume tests will be deemed satisfied by a class of stock if, as Imperial Petroleum expects to be the case with its common shares, such class of stock is traded on an established market in the United States, such as the Nasdaq Capital Market and such class of stock is regularly quoted by dealers making a market in such stock.

Notwithstanding the foregoing, the Treasury regulations provide that, in pertinent part, a non-U.S. corporation’s common stock will not be considered to be “regularly traded” on an established securities market for any taxable year if 50% or more of the outstanding shares of such corporation’s common stock is owned, actually or constructively under specified attribution rules, on more than half the days during the taxable year by persons who each own 5% or more of the common stock the corporation (the “5% Override Rule”).

For purposes of being able to determine the persons who own 5% or more of a corporation’s stock (“5% Shareholders”) the Treasury regulations permit a corporation to rely on Schedule 13-D and Schedule 13-D filings with the SEC to identify persons who have a 5% or more beneficial interest in such corporation’s common stock, which currently are our sole class of voting shares, or, if our Series A Preferred Shares are then entitled to vote, our Series A Preferred Shares. The Treasury regulations further provide that an investment company that is registered under the Investment Company Act of 1940, as amended, will not be treated as a 5% Stockholder for such purposes.

After the Spin-Off Distribution, it is possible that 5% Shareholders may own more than 50% of the Imperial Petroleum common shares. In the event the 5% Override Rule is triggered, the Treasury regulations provide that the 5% Override Rule will nevertheless not apply if Imperial Petroleum can establish that within the group of 5% Shareholders, there are sufficient 5% Shareholders that are considered to be “qualified shareholders” for purposes of Section 883 of the Code to preclude non-qualified 5% Shareholders in the closely-held group from owning 50% or more of the corporation’s common stock for more than half the number of days during the taxable year. To establish this exception to the 5% Override Rule, 5% Shareholders owning a sufficient number of our common shares would have to provide the Corporation with certain information in order to substantiate their status as qualified shareholders. If, after the Spin-Off Distribution, 5% Shareholders were to own more than 50% of the Imperial Petroleum common shares, there is no assurance that Imperial Petroleum would be able to satisfy the foregoing requirements.

Taxation in Absence of Exemption

If the benefits of Section 883 of the Code are unavailable for any taxable year, Imperial Petroleum’s U.S. source shipping income, to the extent not considered to be “effectively connected” with the conduct of a United States trade or business, as described below, will be subject to a 4% tax imposed by Section 887 of the Code on a gross basis, without the benefit of deductions (“4% gross basis tax regime”). Since under the sourcing rules described above, no more than 50% of our shipping income is treated as being derived from United States sources, the maximum effective rate of United States federal income tax on our shipping income will not exceed 2% under the 4% gross basis tax regime.

To the extent the benefits of the Section 883 of the Code are unavailable and Imperial Petroleum’s U.S. source shipping income is considered to be “effectively connected” with the conduct of a United States trade or business, as described below, any such “effectively connected” U.S. source shipping income, net of applicable deductions, would be subject to the United States federal corporate income tax currently imposed at rates of up to 21%. In addition, Imperial Petroleum may be subject to the 30% United States federal “branch profits” taxes on earnings effectively connected with the conduct of such trade or business, as determined after allowance for certain adjustments, and on certain interest paid or deemed paid attributable to the conduct of such United States trade or business.

 

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Imperial Petroleum’s U.S. source shipping income would be considered “effectively connected” with the conduct of a United States trade or business only if:

 

   

Imperial Petroleum has, or is considered to have, a fixed place of business in the United States involved in the earning of shipping income; and

 

   

Substantially all of Imperial Petroleum’s 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.

Imperial Petroleum does not intend to have, or permit circumstances that would result in having, any vessel operating to the United States on a regularly scheduled basis. Based on the foregoing and on the expected mode of Imperial Petroleum’s shipping operations and other activities, Imperial Petroleum believes that none of its U.S. source shipping income will be “effectively connected” with the conduct of a United States trade or business.

United States Taxation of Gain on Sale of Vessels

Regardless of whether Imperial Petroleum qualifies for exemption under Section 883 of the Code, Imperial Petroleum will not be subject to United States 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 United States 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 Imperial Petroleum will be considered to occur outside of the United States.

United States Federal Income Taxation of U.S. Holders

The following discussion represents the opinion of Morgan, Lewis & Bockius LLP regarding the material U.S. federal income tax consequences, subject to the limitations described below, to U.S. Holders (as defined below) of acquiring in the Spin-Off Distribution, and of owning and disposing after the Spin-Off Distribution, our common shares and Series A Preferred Shares, but it does not purport to be a comprehensive description of all tax considerations that may be relevant to a particular person.

As used herein, the term “U.S. Holder” means a beneficial owner of Imperial Petroleum common shares or Series A Preferred Shares that acquired such shares in the Spin-Off Distribution and that is a United States citizen or resident, United States corporation or other United States entity taxable as a corporation, an estate the income of which is subject to United States federal income taxation regardless of its source, or a trust if a court within the United States is able to exercise primary jurisdiction over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust, or the trust has in effect a valid election to be treated as a United States person.

This discussion does not purport to deal with the tax consequences of owning Imperial Petroleum common shares or Series A Preferred Shares to all categories of investors, some of which, such as dealers in securities, investors whose functional currency is not the United States dollar and investors that own, actually or under applicable constructive ownership rules, 10% or more of our common shares, may be subject to special rules. This discussion deals only with holders who hold Imperial Petroleum common shares or Series A Preferred Shares as a capital asset. You are encouraged to consult your own tax advisors concerning the overall tax consequences arising in your own particular situation under United States federal, state, local or foreign law of the ownership of Imperial Petroleum common shares and Series A Preferred Shares.

If a partnership holds Imperial Petroleum common shares or Series A Preferred Shares, the tax treatment of a partner will generally depend upon the status of the partner and upon the activities of the

 

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partnership. If you are a partner in a partnership holding our common shares or Series A Preferred Shares, you are encouraged to consult your tax advisor.

U.S. Federal Income Tax Treatment of the Spin-Off Distribution

Generally, any cash and the fair market value of property, such as Imperial Petroleum common shares and Series A Preferred Shares, that is distributed by a corporation to its shareholders will be treated as a distribution in respect of their stock, as described below. However, under Section 355 of the Code, a company may undergo a corporate division, such as the Spin-Off Distribution, and distribute stock of a controlled corporation, such as Imperial Petroleum when it was wholly-owned by StealthGas, on a tax-free basis if both the distributing and controlled corporations are treated as having been engaged in the conduct of an active trade or business for the prior five years and certain other requirements are met. Imperial Petroleum and StealthGas do not believe that both StealthGas and Imperial Petroleum are able to satisfy all of the requirements imposed by Section 355 of the Code to treat the Spin-Off Distribution as a tax-free corporate division for U.S. federal income tax purposes.

If Imperial Petroleum and StealthGas are able to satisfy the requirements of the Section 355 of the Code, a U.S. Holder that receives Imperial Petroleum common shares and Series A Preferred Shares in the Spin-Off Distribution will not be treated as receiving a taxable dividend, as described below, and a U.S. Holder that receives Imperial Petroleum common shares and Series A Preferred Shares will generally be required to allocate a portion of such holder’s tax basis in its StealthGas common stock to the Imperial Petroleum common shares and Series A Preferred Shares the holder received in the Spin-Off Distribution. The amount of that basis should be allocated in proportion to the relevant fair market values of the StealthGas common stock and Imperial Petroleum common shares and Series A Preferred Shares.

The remainder of this discussion will assume that the Spin-Off Distribution will not qualify as a tax-free corporate division for U.S. federal income tax purposes. U.S. Holders that receive Imperial Petroleum common shares and Series A Preferred Shares and cash in lieu of fractional shares in the Spin-Off Distribution will be treated as receiving a distribution from StealthGas in respect of their StealthGas stock. Any cash and the fair market value of property, including Imperial Petroleum common shares and Series A Preferred Shares, distributed will be treated as a dividend to the extent of the StealthGas’ current and accumulated earnings and profits, as determined under U.S. federal income tax principles. StealthGas expects that, as of the date of the Spin-Off Distribution, it will have a significant amount of current or accumulated earnings and profits for U.S. federal income tax purposes, although there is no certainty that this will be the case. To the extent that the cash and fair market value of property distributed in the Spin-Off Distribution exceeds such accumulated earnings or profits, for a U.S. Holder of StealthGas’ common stock, any cash and the fair market value of property distributed will be treated first as a non-taxable return of capital dollar-for-dollar until such holder’s adjusted tax basis in its StealthGas stock is $0, and thereafter as capital gain. Because StealthGas is not a United States corporation, U.S. Holders that are corporations will generally not be entitled to claim a dividends received deduction with respect to any distributions such corporate U.S. Holders receive. In addition, such U.S. Holders’ basis in the Imperial Petroleum common shares and Series A Preferred Shares received in the Spin-Off Distribution is equal to the fair market value as of the date of distribution of such shares. U.S. Holders should consult their personal tax advisor regarding the U.S. federal income tax consequences of the Spin-Off Distribution to them.

Distributions

Subject to the discussion of passive foreign investment companies below, any distributions made by Imperial Petroleum with respect to its common shares or Series A Preferred Shares to a U.S. Holder will generally constitute dividends, which may be taxable as ordinary income or “qualified dividend income” to the extent of Imperial Petroleum’s current or accumulated earnings and profits, as determined under United States federal income tax principles. Distributions in excess of Imperial Petroleum’s current or accumulated earnings

 

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and profits will be treated first as a nontaxable return of capital to the extent of the U.S. Holder’s tax basis their common shares or Series A Preferred Shares on a dollar-for-dollar basis and thereafter as capital gain. Because Imperial Petroleum is not a United States corporation, U.S. Holders that are corporations will generally not be entitled to claim a dividends received deduction with respect to any distributions such corporate U.S. Holders receive. Dividends paid with respect to the Imperial Petroleum common shares or Series A Preferred Shares will generally be treated as “passive category income” or, in the case of certain types of U.S. Holders, “general category income” for purposes of computing allowable foreign tax credits for United States foreign tax credit purposes.

Dividends paid on the Imperial Petroleum common shares or Series A Preferred Shares to a U.S. Holder who is an individual, trust or estate (a “U.S. Individual Holder”) are expected generally to be treated as “qualified dividend income” provided certain requirements are met. Qualified dividend income is taxable to such U.S. Individual Holders at preferential tax rates provided that (1) Imperial Petroleum is not a passive foreign investment company for the taxable year during which the dividend is paid or the immediately preceding taxable year (which as discussed below, Imperial Petroleum does not believe it is, has been or will be), (2) the Imperial Petroleum common shares or Series A Preferred Shares, as applicable, are readily tradable on an established securities market in the United States (such as the Nasdaq Capital Market, on which the Imperial Petroleum common shares will be listed), (3) the U.S. Individual Holder has owned the common shares or Series A Preferred Shares, as applicable, for more than 60 days in the 121-day period beginning 60 days before the date on which the common shares or Series A Preferred Shares, respectively, become ex-dividend, and (4) the U.S. Individual Holder is not under an obligation (whether pursuant to a short sale or otherwise) to make payments with respect to positions in similar or related property. There is no assurance that any dividends paid on the Imperial Petroleum common shares or Series A Preferred Shares will be eligible for these preferential rates in the hands of a U.S. Individual Holder. Any dividends paid by Imperial Petroleum that are not eligible for these preferential rates will be taxed as ordinary income to a U.S. Individual Holder.

Special rules may apply to any “extraordinary dividend”, which is generally a dividend paid by Imperial Petroleum in an amount which is equal to or in excess of ten percent (in the case of common shares) or five percent (in the case of Series A Preferred Shares) of a shareholder’s adjusted tax basis (or fair market value in certain circumstances) in Imperial Petroleum common shares or Series A Preferred Shares. If Imperial Petroleum pays an “extraordinary dividend” on its common shares or Series A Preferred Shares that is treated as “qualified dividend income,” then any loss derived by a U.S. Individual Holder from the sale or exchange of such common shares or Series A Preferred Shares will be treated as long-term capital loss to the extent of such dividend.

For foreign tax credit purposes, if at least 50 percent of our stock by voting power or by value is owned, directly, indirectly or by attribution, by United States persons, then, subject to the limitation described below, a portion of the dividends that we pay in each taxable year will be treated as U.S.-source income, depending in general upon the ratio for that taxable year of our U.S.-source earnings and profits to our total earnings and profits. The remaining portion of our dividends (or all of our dividends, if we do not meet the 50 percent test described above) will be treated as foreign-source income and generally will be treated as passive category income or, in the case of certain types of United States holders, general category income for purposes of computing allowable foreign tax credits for United States federal income tax purposes. However, if, in any taxable year, we have earnings and profits and less than ten percent of those earnings and profits are from United States sources, then, in general, dividends that we pay from our earnings and profits for that taxable year will be treated entirely as foreign-source income. Where a United States holder that is an individual receives a dividend on our shares that is a qualifying dividend (as described in the second preceding paragraph), special rules will apply that will limit the portion of such dividend that will be included in such individual’s foreign source taxable income and overall taxable income for purposes of calculating such individual’s foreign tax credit limitation.

Sale, Exchange or other Disposition of Common Shares and Series A Preferred Shares

Assuming Imperial Petroleum does not constitute a passive foreign investment company for any taxable year, a U.S. Holder generally will recognize taxable gain or loss for U.S. federal income tax purposes

 

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upon a sale, exchange or other disposition of Imperial Petroleum common shares or Series A Preferred 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 generally 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. Gain or loss realized by a United States holder on the sale or exchange of Series A Preferred Shares generally will be treated as U.S.-source gain or loss for United States foreign tax credit purposes. A United States holder’s ability to deduct capital losses against ordinary income is subject to certain limitations.

Passive Foreign Investment Company Status and Significant Tax Consequences

Special United States federal income tax rules apply to a U.S. Holder that holds stock in a foreign corporation classified as a passive foreign investment company, or PFIC, for United States federal income tax purposes. In general, Imperial Petroleum will be treated as a PFIC with respect to a U.S. Holder if, for any taxable year in which such holder held Imperial Petroleum common shares or Series A Preferred Shares, either:

 

   

at least 75% of Imperial Petroleum’s 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 Imperial Petroleum’s assets during such taxable year produce, or are held for the production of, passive income, which we refer to as “passive assets”.

For purposes of determining whether Imperial Petroleum is a PFIC, Imperial Petroleum will be treated as earning and owning our proportionate share of the income and assets, respectively, of any of its subsidiary corporations, in which Imperial Petroleum owns at least 25% of the value of the subsidiary’s stock. Income earned, or deemed earned, by Imperial Petroleum in connection with the performance of services would not constitute passive income. By contrast, rental income would generally constitute “passive income” unless Imperial Petroleum were treated under specific rules as deriving rental income in the active conduct of a trade or business.

Based on Imperial Petroleum’s anticipated operations and future projections, Imperial Petroleum does not believe that it is, nor does it expect to become, a PFIC with respect to any taxable year. Although there is no legal authority directly on point, and Imperial Petroleum is not relying upon an opinion of counsel on this issue, Imperial Petroleum’s belief is based principally on the position that, for purposes of determining whether Imperial Petroleum is a PFIC, the gross income Imperial Petroleum derives or is deemed to derive from the time chartering and voyage chartering activities of its wholly-owned subsidiaries should constitute services income, rather than rental income. Correspondingly, such income should not constitute passive income, and the assets that Imperial Petroleum or its 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 Imperial Petroleum is a PFIC. Imperial Petroleum believes there is substantial legal authority supporting its position consisting of case law and United States Internal Revenue Service (“IRS”), pronouncements concerning the characterization of income derived from time charters and voyage charters as services income for other tax purposes. However, there is also authority which characterizes time charter income as rental income rather than services income for other tax purposes. Moreover, in the absence of any legal authority specifically relating to the statutory provisions governing PFICs, the IRS or a court could disagree with Imperial Petroleum’s position. In addition, although Imperial Petroleum intends to conduct its affairs in a manner to avoid being classified as a PFIC with respect to any taxable year, there can be no assurance that the nature of Imperial Petroleum’s operations will not change in the future.

As discussed more fully below, if Imperial Petroleum were to be treated as a PFIC for any taxable year which included a U.S. Holder’s holding period in Imperial Petroleum common shares or Series A Preferred Shares, then such U.S. Holder would be subject to different U.S. federal income taxation rules depending on

 

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whether the U.S. Holder makes an election to treat Imperial Petroleum as a “qualified electing fund” (a “QEF election”). As an alternative to making a QEF election, a U.S. Holder should be able to make a “mark-to-market” election with respect to Imperial Petroleum common shares or Series A Preferred Shares, as discussed below. In addition, if Imperial Petroleum were to be treated as a PFIC, a U.S. Holder of Imperial Petroleum common shares or Series A Preferred Shares would be required to file annual information returns with the IRS.

In addition, if a U.S. Holder owns Imperial Petroleum common shares or Series A Preferred Shares and Imperial Petroleum is a PFIC, such U.S. Holder must generally file IRS Form 8621 with the IRS.

U.S. Holders Making a Timely QEF Election

A U.S. Holder who makes a timely QEF election with respect to Imperial Petroleum common shares or Series A Preferred Shares (an “Electing Holder”) would report for U.S. federal income tax purposes his pro rata share of Imperial Petroleum’s ordinary earnings and of Imperial Petroleum’s net capital gain, if any, for Imperial Petroleum’s taxable year that ends with or within the taxable year of the Electing Holder. Imperial Petroleum’s net operating losses or net capital losses would not pass through to the Electing Holder and will not offset Imperial Petroleum’s ordinary earnings or net capital gain reportable to the Electing Holder in subsequent years (although such losses would ultimately reduce the gain, or increase the loss, if any, recognized by the Electing Holder on the sale of his common shares). Distributions received from Imperial Petroleum by an Electing Holder are excluded from the Electing Holder’s gross income to the extent of the Electing Holder’s prior inclusions of Imperial Petroleum’s ordinary earnings and net capital gain. The Electing Holder’s tax basis in his common shares or Series A Preferred Shares would be increased by any amount included in the Electing Holder’s income. Distributions received by an Electing Holder, which are not includible in income because they have been previously taxed, would decrease the Electing Holder’s tax basis in Imperial Petroleum common shares or Series A Preferred Shares, as applicable. An Electing Holder would generally recognize capital gain or loss on the sale or exchange of Imperial Petroleum common shares or Series A Preferred Shares. In order for an Electing Holder to make a QEF election, we would need to provide such Electing Holder with annual information regarding Imperial Petroleum. If we were aware that we were to be treated as a PFIC for any taxable year, we current expect that we would provide each United States Holder with all necessary information, to the extent reasonably available, in order to make the QEF election described above with respect to our common shares and Series A Preferred Shares.

U.S. Holders Making a Timely Mark-to-Market Election

A U.S. Holder who makes a timely mark-to-market election with respect to Imperial Petroleum common shares or Series A Preferred Shares would include annually in the U.S. Holder’s income, as ordinary income, any excess of the fair market value of the common shares and Series A Preferred Shares at the close of the taxable year over the U.S. Holder’s then adjusted tax basis in the common shares or Series A Preferred Shares, respectively. The excess, if any, of the U.S. Holder’s adjusted tax basis at the close of the taxable year over the then fair market value of the common shares or Series A Preferred Shares would be deductible in an amount equal to the lesser of the amount of the excess or the net mark-to-market gains that the U.S. Holder included in income in previous years with respect to the common shares or Series A Preferred Shares, as applicable. A U.S. Holder’s tax basis in his common shares and Series A Preferred Shares would be adjusted to reflect any income or loss amount recognized pursuant to the mark-to-market election. A U.S. Holder would recognize ordinary income or loss on a sale, exchange or other disposition of the common shares or Series A Preferred Shares; provided, however, that any ordinary loss on the sale, exchange or other disposition may not exceed the net mark-to-market gains that the U.S. Holder included in income in previous years with respect to the common shares or Series A Preferred Shares, respectively.

U.S. Holders Not Making a Timely QEF Election or Mark-to-Market Election

A U.S. Holder who does not make a timely QEF Election or a timely mark-to-market election with respect to Imperial Petroleum common shares or Series A Preferred Shares (a “Non-Electing Holder”) would be

 

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subject to special rules with respect to (i) any “excess distribution” (generally, the portion of any distributions received by the Non-Electing Holder on the common shares or Series A Preferred 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 or Series A Preferred Shares), and (ii) any gain realized on the sale or other disposition of the common shares or Series A Preferred Shares. Under these rules, (i) the excess distribution or gain would be allocated ratably over the Non-Electing Holder’s holding period for the common shares or Series A Preferred Shares; (ii) the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which we were a PFIC, would be taxed as ordinary income; and (iii) the amount allocated to each of the other prior 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. If a Non-Electing Holder dies while owning Imperial Petroleum common shares or Series A Preferred Shares, the Non-Electing Holder’s successor would be ineligible to receive a step-up in the tax basis of those common shares or Series A Preferred Shares.

Unearned Income Medicare Contribution Tax

Certain U.S. Holders that are individuals, estates or trusts are required to pay an additional 3.8% tax on, among other things, dividends on and capital gains from the sale or other disposition of stock. U.S. Holders are encouraged to consult their own tax advisors regarding the effect, if any, of this tax on the ownership and disposition of our common shares and Series A Preferred Shares.

United States Federal Income Taxation of “Non-U.S. Holders”

A beneficial owner of Imperial Petroleum common shares or Series A Preferred Shares (other than a partnership) that is not a U.S. Holder is referred to herein as a “Non-U.S. Holder.”

U.S. Federal Income Tax Consequences of the Spin-Off Distribution

Non-U.S. Holders will not be subject to U.S. federal income taxation with respect to Imperial Petroleum common shares, the Imperial Petroleum Series A Preferred Shares or any cash received in the Spin-Off Distribution.

Dividends on Common Shares and Series A Preferred Shares

Non-U.S. Holders generally will not be subject to United States federal income tax or withholding tax on dividends received from Imperial Petroleum with respect to its common shares or with respect to its Series A Preferred Shares, unless such income is effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the United States. If the Non-U.S. Holder is entitled to the benefits of a United States income tax treaty with respect to those dividends, such 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 and Series A Preferred Shares

Non-U.S. Holders generally will not be subject to United States federal income tax or withholding tax on any gain realized upon the sale, exchange or other disposition of Imperial Petroleum common shares or of Series A Preferred Shares, unless:

 

   

such gain is effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the United States, if the Non-U.S. Holder is entitled to the benefits of a United States 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

 

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the Non-U.S. Holder is an individual who is present in the United States for 183 days or more during the taxable year of disposition and other conditions are met.

If the Non-U.S. Holder is engaged in a United States trade or business for United States federal income tax purposes, the income from the common shares or Series A Preferred Shares, including dividends and the gain from the sale, exchange or other disposition of the stock that is effectively connected with the conduct of that trade or business will generally be subject to regular United States federal income tax in the same manner as discussed in the previous section relating to the taxation of U.S. Holders. In addition, in the case of a corporate Non-U.S. Holder, its earnings and profits that are attributable to the effectively connected income, subject to certain adjustments, may be subject to an additional United States federal “branch profits” tax at a rate of 30%, or at a lower rate as may be specified by an applicable United States income tax treaty.

Backup Withholding and Information Reporting

In general, dividend payments, or other taxable distributions, made within the United States to you will be subject to information reporting requirements. Such payments will also be subject to backup withholding tax if a U.S. Individual Holder:

 

   

fails to provide an accurate taxpayer identification number;

 

   

is notified by the IRS that he failed to report all interest or dividends required to be shown on your United States federal income tax returns; or

 

   

in certain circumstances, fails 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 appropriate IRS Form W-8.

If a shareholder sells Imperial Petroleum common shares or Series A Preferred Shares to or through a United States office of a broker, the payment of the proceeds is subject to both United States backup withholding and information reporting unless the shareholder certifies that it is a non-U.S. person, under penalties of perjury, or the shareholder otherwise establishes an exemption. If a shareholder sells Imperial Petroleum common shares or Series A Preferred Shares through a non-United States office of a non-United States broker and the sales proceeds are paid outside the United States then information reporting and backup withholding generally will not apply to that payment. However, United States information reporting requirements, but not backup withholding, will apply to a payment of sales proceeds, even if that payment is made outside the United States, if a shareholder sells Imperial Petroleum common shares or Series A Preferred Shares through a non-United States office of a broker that is a United States person or has some other contacts with the United States.

Backup withholding is not an additional tax. Rather, a shareholder generally may obtain a refund of any amounts withheld under backup withholding rules that exceed the shareholder’s United States federal income tax liability by filing a refund claim with the IRS.

Individuals who are U.S. Holders (and to the extent specified in the applicable Treasury Regulations, certain individuals who are Non-U.S. Holders and certain United States entities) who hold “specified foreign financial assets” (as defined in Section 6038D of the Code and the applicable Treasury Regulations) are required to file IRS Form 8938 (Statement of Specified Foreign Financial Assets) with information relating to each such 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. Specified foreign financial assets would include, among other assets, Imperial Petroleum common shares and Series A Preferred Shares, unless Imperial Petroleum common shares or Series A Preferred Shares were held through an account maintained with a United States financial institution. Substantial penalties apply to any failure to timely file IRS Form 8938, unless the failure is shown to be due to reasonable cause and not due to willful neglect. Additionally, the statute of limitations on the assessment and collection of United States federal income tax with respect to a taxable year for

 

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which the filing of IRS Form 8938 is required may not close until three years after the date on which IRS Form 8938 is filed. U.S. Holders (including United States entities) and Non-U.S. Holders are encouraged to consult their own tax advisors regarding their reporting obligations under Section 6038D of the Code.

Imperial Petroleum encourages each shareholder to consult with his, her or its own tax advisor as to particular tax consequences to it of receiving, holding and disposing of Imperial Petroleum common shares and Series A Preferred Shares and of the Spin-Off Distribution, including the applicability of any state, local or foreign tax laws and any proposed changes in applicable law.

 

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DESCRIPTION OF CAPITAL STOCK

The following description of our capital stock summarizes the material terms and provisions of the capital stock offered under this prospectus. For the complete terms of our capital stock, please refer to to the forms of our amended and restated articles of incorporation and our amended and restated by-laws, which will be in place at the time of the Spin-Off Distribution and have been filed as an exhibit hereto. The Marshall Islands Business Corporations Act, or BCA, may also affect the terms of these securities.

Authorized Capitalization

Under our amended and restated articles of incorporation, which will be in place at the time of the Spin-Off Distribution, our authorized capital stock will consist of 2,000,000,000 shares of common stock, par value $0.01 per share, and 200,000,000 shares of preferred stock, par value $0.01 per share. All of our shares of stock are in registered form.

Common Stock

Under our amended and restated articles of incorporation, which will be in place at the time of the Spin-Off Distribution, we will be authorized to issue up to 2,000,000,000 shares of common stock, par value $0.01 per share, of which there are 500 shares issued and outstanding as of September 30, 2021. Each outstanding common share is entitled to one vote, either in person or by proxy, on all matters that may be voted upon by their holders at meetings of the shareholders. Holders of our common shares (i) have equal ratable rights to dividends from funds legally available therefore, if declared by the Board of Directors; (ii) are entitled to share ratably in all of our assets available for distribution upon liquidation, dissolution or winding up; and (iii) do not have preemptive, subscription or conversion rights or redemption or sinking fund provisions. All issued common shares when issued will be fully paid for and non-assessable.

Prior to the time of the Spin-Off Distribution, our stockholders will also approve the amendment of the Company’s amended and restated articles of incorporation to effect one or more reverse stock splits of the shares of our common stock issued and outstanding at the time of the reverse split at an exchange ratio of between one-for-two and one-for-five hundred, with the Board of Directors to determine, in its sole discretion, whether to implement any reverse stock split, as well as the specific timing and ratio, within such approved range of ratios; provided that any such split is implemented prior to the third anniversary of the Spin-Off Distribution.

Preferred Stock

Under our amended and restated articles of incorporation, which will be in place at the time of the Spin-Off Distribution, we will be authorized to issue up to 200,000,000 shares of preferred stock, par value $0.01 per share, of which no shares are issued and outstanding as of September 30, 2021 and of which 800,000 shares are expected to be designated as Series A Preferred Shares. The preferred stock may be issued in one or more series and our Board of Directors, without further approval from our shareholders, is authorized to fix the dividend rights and terms, conversion rights, voting rights, redemption rights, liquidation preferences and other rights and restrictions relating to any series. Issuances of preferred stock, while providing flexibility in connection with possible financings, acquisitions and other corporate purposes, could, among other things, adversely affect the relative voting power of the holders of our common shares. In connection with the Spin-Off Distribution, all of our outstanding Series A Preferred Shares will be distributed to holders of StealthGas common stock. See “Description of Series A Preferred Shares” below.

Distribution Agent, Transfer Agent and Registrar

American Stock Transfer & Trust Company, LLC will serve as distribution agent in connection with the Spin-Off Distribution and as transfer agent and registrar for Imperial Petroleum common shares and Series A Preferred Shares.

 

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Listing

We have applied to list our common shares on the Nasdaq Capital Market under the symbol “IMPP.”

We have applied to list our Series A Preferred Shares on the Nasdaq Capital Market under the symbol “IMPPP.”

Description of Series A Preferred Shares

The following description of the Series A Preferred Shares does not purport to be complete and is subject to, and qualified in its entirety by reference to the Statement of Designations designating the Series A Preferred Shares (the “Statement of Designations”) and setting forth the rights, preferences and limitations of the Series A Preferred Shares. A copy of the Statement of Designations may be obtained from us as described under “Where You Can Find Additional Information.” References to “Imperial Petroleum Inc.,” “we,” “our” and “us” refer specifically to Imperial Petroleum Inc.

General

The Series A Preferred Shares are a new series of preferred shares. Upon completion of the Spin-Off Distribution, there will be 800,000 Series A Preferred Shares authorized, and 795,878 Series A Preferred Shares issued and outstanding. We may, without notice to or consent of the holders of the then-outstanding Series A Preferred Shares, authorize and issue additional Series A Preferred Shares as well as Parity Securities and Junior Securities and, subject to the further limitations described under “—Voting Rights”,—Senior Securities.

The holders of our common shares are entitled to receive dividends out of assets legally available for that purpose at times and in amounts as our board of directors may from time to time determine. Upon the occurrence of a liquidation, dissolution or winding up the holders of common shares would be entitled to share ratably in the distribution of all of our assets remaining available for distribution after satisfaction of all our liabilities and payment to the holders of shares of any class or series of capital stock (including the Series A Preferred Shares) having preferential rights to receive distributions of our assets.

The Series A Preferred Shares will entitle the holders thereof to receive cumulative cash dividends when, as and if declared by our board of directors out of legally available funds for such purpose. No fractional Series A Preferred Shares will be issued. When issued and paid for in the manner described in this prospectus, the Series A Preferred Shares offered hereby will be fully paid and nonassessable. Each share of Series A Preferred Shares will have a fixed liquidation preference of $25.00 per share plus an amount equal to accumulated and unpaid dividends thereon to the date fixed for payment, whether or not declared. Please read “—Liquidation Rights.”

The Series A Preferred Shares will represent perpetual equity interests in us and, unlike our indebtedness, will not give rise to a claim for payment of a principal amount at a particular date. As such, the Series A Preferred Shares will rank junior to all of our indebtedness and other liabilities with respect to assets available to satisfy claims against us.

All the Series A Preferred Shares offered hereby will be represented by a single certificate issued to the Securities Depository (as defined below) and registered in the name of its nominee and, so long as a Securities Depository has been appointed and is serving, no person acquiring Series A Preferred Shares will be entitled to receive a certificate representing such shares unless applicable law otherwise requires or the Securities Depository resigns or is no longer eligible to act as such and a successor is not appointed. Please read “—Book-Entry System.”

The Series A Preferred Shares will not be convertible into common shares or other of our securities and will not have exchange rights or be entitled or subject to any preemptive or similar rights. The Series A Preferred

 

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Shares will not be subject to mandatory redemption or to any sinking fund requirements. The Series A Preferred Shares will be subject to redemption, in whole or from time to time in part, at our option commencing on June 30, 2022. Please read “—Redemption.”

Ranking

The Series A Preferred Shares will, with respect to dividend distributions and distributions upon the liquidation, winding-up and dissolution of our affairs, rank:

 

   

senior to all classes of our common shares, and to each other class or series of shares established after the initial issue date of the Series A Preferred Shares by our board of directors, the terms of which class or series expressly provide that it is made junior to the Series A Preferred Shares as to dividend distributions and distributions upon the liquidation, dissolution or winding-up of our affairs, whether voluntary or involuntary (collectively, the “Junior Securities”);

 

   

on a parity with any class or series of shares established after the initial issue date of the Series A Preferred Shares by our board of directors, the terms of which class or series are not expressly subordinated or senior to the Series A Preferred Shares as to dividend distributions and distributions upon the liquidation, dissolution or winding-up of our affairs, whether voluntary or involuntary (collectively, the “Parity Securities”); and

 

   

junior to (i) all of our indebtedness and other liabilities with respect to assets available to satisfy claims against us, and (ii) each class or series of capital stock expressly made senior to the Series A Preferred Shares as to the payment of dividends and amounts payable upon liquidation, dissolution or winding up, whether voluntary or involuntary (such shares described in this clause (ii), the “Senior Securities”).

Under the Statement of Designations, we may issue Junior Securities and Parity Securities from time to time in one or more series without the consent of the holders of the Series A Preferred Shares. Our board of directors has the authority to determine the preferences, powers, qualifications, limitations, restrictions and special or relative rights or privileges, if any, of any such series before the issuance of any shares of that series. Our board of directors will also determine the number of shares constituting each series of securities. Our ability to issue additional Senior Securities is limited as described under “—Voting Rights.”

Liquidation Preference

The holders of issued and outstanding Series A Preferred Shares will be entitled, in the event of any liquidation, dissolution or winding up of our affairs, whether voluntary or involuntary, to receive the liquidation preference of $25.00 per share in cash plus an amount equal to accumulated and unpaid dividends thereon to (but not including) the date fixed for payment of such amount (whether or not declared), and no more, before any distribution will be made to the holders of our common shares or any other Junior Securities. A consolidation or merger of us with or into any other entity, individually or in a series of transactions, will not be deemed a liquidation, dissolution or winding up of our affairs for this purpose. In the event that our assets available for distribution to holders of the issued and outstanding Series A Preferred Shares and any Parity Securities are insufficient to permit payment of all required amounts, our assets then remaining will be distributed among the Series A Preferred Shares and any Parity Securities, as applicable, ratably on the basis of their relative aggregate liquidation preferences. After payment of all required amounts to the holders of the outstanding shares of Series A Preferred Shares and Parity Securities, our remaining assets and funds will be distributed among the holders of the common shares and any other Junior Securities then issued and outstanding according to their respective rights.

Voting Rights

The Series A Preferred Shares will have no voting rights except as provided by Marshall Islands law and as follows. In the event that six quarterly dividends, whether consecutive or not, payable on Series A Preferred

 

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Shares are in arrears, the holders of Series A Preferred Shares will have the right, voting separately as a class together with holders of any other Parity Securities upon which like voting rights have been conferred and are exercisable, at the next meeting of shareholders called for the election of directors, to elect one member of our board of directors, and the size of our board of directors will be increased as needed to accommodate such change (unless the size of our board of directors already has been increased by reason of the election of a director by holders of Parity Securities upon which like voting rights have been conferred and with which the Series A Preferred Shares voted as a class for the election of such director). The right of such holders of Series A Preferred Shares to elect one member of our board of directors will continue until such time as all dividends accumulated and in arrears on the Series A Preferred Shares have been paid in full, at which time such right will terminate, subject to revesting in the event of each and every subsequent failure to pay six quarterly dividends as described above. Upon any termination of the right of the holders of the Series A Preferred Shares and any other Parity Securities to vote as a class for a director, the term of office of all directors then in office elected by such holders voting as a class will terminate immediately. Any director elected by the holders of the Series A Preferred Shares and any other Parity Securities shall each be entitled to one vote per director on any matter before our board of directors.

Unless we have received the affirmative vote or consent of the holders of at least two-thirds of the outstanding Series A Preferred Shares, voting as a single class, we may not (i) adopt any amendment to our articles of incorporation or Statement of Designations, that adversely varies the preferences, powers or rights of the Series A Preferred Shares in any material respect, (ii) issue any Parity Securities if the cumulative dividends payable on outstanding Series A Preferred Shares are in arrears, or (iii) create or issue any Senior Securities.

On any matter described above on which the holders of the Series A Preferred Shares are entitled to vote as a class, such holders will be entitled to one vote per share. The Series A Preferred Shares held by us or any of our subsidiaries or affiliates will not be entitled to vote.

Dividends

General

Holders of Series A Preferred Shares will be entitled to receive, when, as and if declared by our board of directors out of legally available funds for such purpose, cumulative cash dividends from the date the Spin-Off Distribution is consummated, which is expected to be December 3, 2021.

Dividend Rate

Dividends on Series A Preferred Shares will be cumulative, commencing upon consummation of the Spin-Off Distribution, and payable on each Dividend Payment Date, commencing December 30, 2021, when, as and if declared by our board of directors or any authorized committee thereof out of legally available funds for such purpose. Dividends on the Series A Preferred Shares will accrue at a rate of 8.75% per annum per $25.00 stated liquidation preference per Series A Preferred Shares. The dividend rate is not subject to adjustment.

Dividend Payment Date

The “Dividend Payment Dates” for the Series A Preferred Shares will be each March 30, June 30, September 30 and December 30, commencing December 30, 2021. Dividends will accumulate in each dividend period from and including the preceding Dividend Payment Date or the initial issue date, as the case may be, to but excluding, the applicable Dividend Payment Date for such dividend period. If any Dividend Payment Date otherwise would fall on a day that is not a Business Day, declared dividends will be paid on the immediately succeeding Business Day without the accumulation of additional dividends. Dividends on the Series A Preferred Shares will be payable based on a 360-day year consisting of twelve 30-day months.

“Business Day” means a day on which the Nasdaq Stock Market is open for trading and which is not a Saturday, a Sunday or other day on which banks in New York City are authorized or required by law to close.

 

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Payment of Dividends

Not later than the close of business, New York City time, on each Dividend Payment Date, we will pay those dividends, if any, on the Series A Preferred Shares that have been declared by our board of directors to the holders of such shares as such holders’ names appear on our share transfer books maintained by the Registrar and Transfer Agent on the applicable Record Date. The applicable record date (the “Record Date”), will be three Business Days immediately preceding the applicable Dividend Payment Date, except that in the case of payments of dividends in arrears, the Record Date with respect to a Dividend Payment Date will be such date as may be designated by our board of directors in accordance with our Bylaws then in effect and the Statement of Designations.

So long as the Series A Preferred Shares are held of record by the Securities Depository or its nominee, declared dividends will be paid to the Securities Depository in same-day funds on each Dividend Payment Date. The Securities Depository will credit accounts of its participants in accordance with the Securities Depository’s normal procedures. The participants will be responsible for holding or disbursing such payments to beneficial owners of the Series A Preferred Shares in accordance with the instructions of such beneficial owners.

No dividend may be declared or paid or set apart for payment on any Junior Securities (other than dividend payable solely in shares of Junior Securities) unless full cumulative dividends have been or contemporaneously are being paid or provided for on all issued and outstanding Series A Preferred Shares and any Parity Securities through the most recent respective dividend payment dates. Accumulated dividends in arrears for any past dividend period may be declared by our board of directors and paid on any date fixed by our board of directors, whether or not a Dividend Payment Date, to holders of the Series A Preferred Shares on the record date for such payment, which may not be more than 60 days, nor less than 15 days, before such payment date. Subject to the next succeeding sentence, if all accumulated dividends in arrears on all outstanding Series A Preferred Shares and any Parity Securities have not been declared and paid, or sufficient funds for the payment thereof have not been set apart, payment of accumulated dividends in arrears will be made in order of their respective dividend payment dates, commencing with the earliest. If less than all dividends payable with respect to all Series A Preferred Shares and any Parity Securities are paid, any partial payment will be made pro rata with respect to the Series A Preferred Shares and any Parity Securities entitled to a dividend payment at such time in proportion to the aggregate amounts remaining due in respect of such shares at such time. Holders of the Series A Preferred Shares will not be entitled to any dividend, whether payable in cash, property or stock, in excess of full cumulative dividends. No interest or sum of money in lieu of interest will be payable in respect of any dividend payment which may be in arrears on the Series A Preferred Shares.

Redemption

The Series A Preferred Shares will represent perpetual equity interests in us. We will have no obligation to redeem or repurchase any Series A Preferred Shares at any time.

Optional Redemption

We may redeem, at our option, in whole or from time to time in part, the Series A Preferred Shares (i) on or after June 30, 2022 and prior to June 30, 2023, at a price equal to $26.00 per Series A Preferred Share, (ii) on or after June 30, 2023 and prior to June 30, 2024, at a price equal to $25.75 per Series A Preferred Share, (iii) on or after June 30, 2024 and prior to June 30, 2025, at a price equal to $25.50 per Series A Preferred Share, (iv) on or after June 30, 2025 and prior to June 30, 2026, at a price equal to $25.25 per Series A Preferred Share, and (v) on or after June 30, 2026, at a price equal to $25.00 per Series A Preferred Share, plus, in each case, an amount equal to all accumulated and unpaid dividends thereon to (but not including) the date of redemption, whether or not declared. Any such optional redemption may be effected only out of funds legally available for such purpose.

 

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Redemption Upon a Change of Control

In connection with a Change of Control (as defined below), we may, at our option, redeem the Series A Preferred Shares, in whole but not in part, no later than 90 days after the first date on which such Change of Control occurs, at a redemption price of (1) if the “Change of Control” occurs prior to December 31, 2023, $26.50 per share and (2) if the “Change of Control” occurs on or after December 31, 2023 at the same redemption prices as apply to an optional redemption as set forth above under “Optional Redemption”, plus, in the case of either (1) or (2), an amount equal to all accumulated and unpaid dividends thereon to (but not including) the date of redemption, whether or not declared. Any such redemption may be effected only out of funds legally available for such purpose.

A “Change of Control” means the following events have occurred and are continuing:

 

   

the acquisition by any “person” or “group” (within the meaning of Section 13(d)(3) of the Exchange Act) of beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of purchases, mergers or other acquisition transactions of our shares entitling that person or group to exercise more than 50% of the total voting power of all of our shares entitled to vote generally in elections of directors (except that such person or group will be deemed to have beneficial ownership of all securities that such person or group has the right to acquire, whether such right is currently exercisable or is exercisable only upon the passage of time or occurrence of a subsequent condition); and

 

   

following the closing of any transaction referred to in the above bullet point, neither we nor the acquiring or surviving entity has a class of common securities (or American Depositary Receipts representing such securities) listed on the New York Stock Exchange (“NYSE”), the NYSE American or the NASDAQ Global Select Market, the NASDAQ Global Market or the NASDAQ Capital Market (collectively, “NASDAQ”) or listed or quoted on an exchange or quotation system that is a successor to the NYSE, the NYSE American or the NASDAQ.

Redemption Procedure

We will give notice of any redemption by mail, postage prepaid, not less than 30 days and not more than 60 days before the scheduled date of redemption, to the holders of any shares to be redeemed as such holders’ names appear on our share transfer books maintained by the Registrar and Transfer Agent at the address of such holders shown therein. Such notice shall state: (1) the redemption date, (2) the number of Series A Preferred Shares to be redeemed and, if less than all issued and outstanding Series A Preferred Shares are to be redeemed, the number (and the identification) of shares to be redeemed from such holder, (3) the redemption price, (4) the place where the Series A Preferred Shares are to be redeemed and shall be presented and surrendered for payment of the redemption price therefor, and (5) that dividends on the shares to be redeemed will cease to accumulate from and after such redemption date.

If fewer than all of the issued and outstanding Series A Preferred Shares are to be redeemed, the number of shares to be redeemed will be determined by us, and such shares will be redeemed pro rata or by lot as the Securities Depository shall determine, with adjustments to avoid redemption of fractional shares. So long as all Series A Preferred Shares are held of record by the Securities Depository or its nominee, we will give notice, or cause notice to be given, to the Securities Depository of the number of Series A Preferred Shares to be redeemed and the Securities Depository will determine the number of Series A Preferred Shares to be redeemed from the account of each of its participants holding such shares in its participant account. Thereafter, each participant will select the number of shares to be redeemed from each beneficial owner for whom it acts (including the participant, to the extent it holds Series A Preferred Shares for its own account). A participant may determine to redeem Series A Preferred Shares from some beneficial owners (including the participant itself) without redeeming Series A Preferred Shares from the accounts of other beneficial owners.

So long as the Series A Preferred Shares are held of record by the Securities Depository or its nominee, the redemption price will be paid by the Paying Agent to the Securities Depository on the redemption date. The

 

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Securities Depository’s normal procedures provide for it to distribute the amount of the redemption price in same-day funds to its participants who, in turn, are expected to distribute such funds to the persons for whom they are acting as agent.

If we give or cause to be given a notice of redemption, then we will deposit with the Paying Agent funds sufficient to redeem the Series A Preferred Shares as to which notice has been given by the close of business, New York City time, no later than the Business Day immediately preceding the date fixed for redemption, and will give the Paying Agent irrevocable instructions and authority to pay the redemption price to the holder or holders thereof upon surrender or deemed surrender (which will occur automatically if the certificate representing such shares is issued in the name of the Securities Depository or its nominee) of the certificates therefor. If notice of redemption shall have been given, then from and after the date fixed for redemption, unless we default in providing funds sufficient for such redemption at the time and place specified for payment pursuant to the notice, all dividends on such shares will cease to accumulate and all rights of holders of such shares as our shareholders will cease, except the right to receive the redemption price, including an amount equal to accumulated and unpaid dividends to (but not including) the date fixed for redemption, whether or not declared. We will be entitled to receive from the Paying Agent the interest income, if any, earned on such funds deposited with the Paying Agent (to the extent that such interest income is not required to pay the redemption price of the shares to be redeemed), and the holders of any shares so redeemed will have no claim to any such interest income. Any funds deposited with the Paying Agent hereunder by us for any reason, including, but not limited to, redemption of Series A Preferred Shares, that remain unclaimed or unpaid after two years after the applicable redemption date or other payment date, shall be, to the extent permitted by law, repaid to us upon our written request after which repayment the holders of the Series A Preferred Shares entitled to such redemption or other payment shall have recourse only to us.

If only a portion of the Series A Preferred Shares represented by a certificate has been called for redemption, upon surrender of the certificate to the Paying Agent (which will occur automatically if the certificate representing such shares is registered in the name of the Securities Depository or its nominee), the Paying Agent will issue to the holder of such shares a new certificate (or adjust the applicable book-entry account) representing the number of Series A Preferred Shares represented by the surrendered certificate that have not been called for redemption.

Notwithstanding any notice of redemption, there will be no redemption of any Series A Preferred Shares called for redemption until funds sufficient to pay the full redemption price of such shares, including all accumulated and unpaid dividends to the date of redemption, whether or not declared, have been deposited by us with the Paying Agent.

We and our affiliates may from time to time purchase the Series A Preferred Shares, subject to compliance with all applicable securities and other laws. Neither we nor any of our affiliates has any obligation or any present plan or intention, to purchase any Series A Preferred Shares. Any shares repurchased and cancelled by us will revert to the status of authorized but unissued preferred shares, undesignated as to series.

Notwithstanding the foregoing, in the event that full cumulative dividends on the Series A Preferred Shares and any Parity Securities have not been paid or declared and set apart for payment, we may not repurchase, redeem or otherwise acquire, in whole or in part, any Series A Preferred Shares or Parity Securities except pursuant to a purchase or exchange offer made on the same terms to all holders of Series A Preferred Shares and any Parity Securities. Common shares and any other Junior Securities may not be redeemed, repurchased or otherwise acquired unless full cumulative dividends on the Series A Preferred Shares and any Parity Securities for all prior and the then-ending dividend periods have been paid or declared and set apart for payment.

No Sinking Fund

The Series A Preferred Shares will not have the benefit of any sinking fund.

 

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Book-Entry System

All Series A Preferred Shares offered hereby will be represented by a single certificate issued to The Depository Trust Company (and its successors or assigns or any other securities depository selected by us), or the Securities Depository, and registered in the name of its nominee (initially, Cede & Co.). The Series A Preferred Shares offered hereby will continue to be represented by a single certificate registered in the name of the Securities Depository or its nominee, and no holder of the Series A Preferred Shares offered hereby will be entitled to receive a certificate evidencing such shares unless otherwise required by law or the Securities Depository gives notice of its intention to resign or is no longer eligible to act as such and we have not selected a substitute Securities Depository within 60 calendar days thereafter. Payments and communications made by us to holders of the Series A Preferred Shares will be duly made by making payments to, and communicating with, the Securities Depository. Accordingly, unless certificates are available to holders of the Series A Preferred Shares, each purchaser of Series A Preferred Shares must rely on (1) the procedures of the Securities Depository and its participants to receive dividends, distributions, any redemption price, liquidation preference and notices, and to direct the exercise of any voting or nominating rights, with respect to such Series A Preferred Shares and (2) the records of the Securities Depository and its participants to evidence its ownership of such Series A Preferred Shares.

So long as the Securities Depository (or its nominee) is the sole holder of the Series A Preferred Shares, no beneficial holder of the Series A Preferred Shares will be deemed to be a shareholder in our company. The Depository Trust Company, the initial Securities Depository, is a New York-chartered limited purpose trust company that performs services for its participants, some of whom (and/or their representatives) own The Depository Trust Company. The Securities Depository maintains lists of its participants and will maintain the positions (i.e., ownership interests) held by its participants in the Series A Preferred Shares, whether as a holder of the Series A Preferred Shares for its own account or as a nominee for another holder of the Series A Preferred Shares.

Investors in the Series A Preferred Shares who are not direct participants in The Depository Trust Company may hold their interests therein indirectly through organizations (including Euroclear System (“Euroclear”) and Clearstream Banking, N.A. (“Clearstream”)) which are direct participants. Euroclear and Clearstream will hold interests in the Series A Preferred Shares on behalf of their participants through customers’ securities accounts in their respective names on the books of their respective depositories, which are Euroclear Bank S.A./ N.V., as operator of Euroclear, and Citibank, N.A., as operator of Clearstream. All interests in the Series A Preferred Shares, including those held through Euroclear or Clearstream, may be subject to the procedures and requirements of The Depository Trust Company or any successor Securities Depository. Those interests held through Euroclear or Clearstream may also be subject to the procedures and requirements of such systems.

Cross-market transfers between direct participants in The Depository Trust Company, on the one hand, and Euroclear or Clearstream participants, on the other hand, will be effected through The Depository Trust Company in accordance with The Depository Trust Company’s rules on behalf of Euroclear or Clearstream, as the case may be, by their respective depositaries; however, such cross-market transactions will require delivery of instructions to Euroclear or Clearstream, as the case may be, by the counterparty in such system in accordance with the rules and procedures and within the established deadlines (Brussels time) of such system. Euroclear or Clearstream, as the case may be, will, if the transaction meets its settlement requirements, deliver instructions to its respective depositary to take action to effect final settlement on its behalf by delivering or receiving interests in the Series A Preferred Preference Shares in The Depository Trust Company, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to The Depository Trust Company. Euroclear participants and Clearstream participants may not deliver instructions directly to the depositories for Euroclear or Clearstream.

Because of time zone differences, the securities account of a Euroclear or Cleastream participant purchasing an interest in the single certificate representing the Series A Preferred Shares from a direct participant in The

 

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Depository Trust Company will be credited, and any such crediting will be reported to the relevant Euroclear or Clearstream participant, during the securities settlement processing day (which must be a business day for Euroclear and Clearstream) immediately following the settlement date of The Depository Trust Company. The Depository Trust Company has advised the issuer that cash received in Euroclear or Clearstream as a result of sales of interests in the single certificate representing the Series A Preferred Shares by or through a Euroclear or Clearstream participant to a direct participant in The Depository Trust Company will be received with value on the settlement date of The Depository Trust Company but will be available in the relevant Euroclear or Clearstream cash account only as of the business day for Euroclear or Clearstream following The Depository Trust Company’s settlement date.

Amended and Restated Articles of Incorporation and Amended and Restated Bylaws

Our articles of incorporation and our bylaws are filed as Exhibit 3.1 and Exhibit 3.2, respectively, hereto. Our amended and restated articles of incorporation and amended and restated bylaws are filed as Exhibit 3.3 and 3.4 respectively, hereto.

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 articles of incorporation and bylaws do not impose any limitations on the ownership rights of our stockholders.

Under our bylaws, annual stockholder meetings will be held at a time and place selected by our Board of Directors. The meetings may be held in or outside of the Marshall Islands. Special meetings may be called by the Board of Directors. Our Board of Directors may set a record date between 15 and 60 days before the date of any meeting to determine the stockholders that will be eligible to receive notice and vote at the meeting.

Directors.

Our directors are elected by a plurality of the votes cast at a meeting of the stockholders by the holders of shares entitled to vote in the election. There is no provision for cumulative voting.

The Board of Directors may change the number of directors by a vote of a majority of the entire board. Each director shall be elected to serve 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. The Board of Directors has the authority to fix the amounts which shall be payable to the members of our Board of Directors for attendance at any meeting or for services rendered to us.

Dissenters’ Rights of Appraisal and Payment.

Under the BCA, our stockholders have the right to dissent from various corporate actions, including any merger or sale of all or substantially all of our assets not made in the usual course of our business, and receive payment of the fair value of their shares. However, the right of a dissenting stockholder under the BCA to receive payment of the fair value of his shares is not 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 stockholders entitled to receive notice of and to vote at the meeting of the stockholders 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 stockholder 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 stockholders of the surviving corporation. In the event of any further amendment of our articles of incorporation, a stockholder also has the right to dissent and receive payment for his or her shares if the amendment alters certain rights in respect of those

 

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shares. The dissenting stockholder must follow the procedures set forth in the BCA to receive payment. In the event that we and any dissenting stockholder fail to agree on a price for the shares, the BCA procedures involve, among other things, the institution of proceedings in the circuit court in the judicial circuit in the Marshall Islands in which our Marshall Islands office is situated. The value of the shares of the dissenting stockholder is fixed by the court after reference, if the court so elects, to the recommendations of a court-appointed appraiser.

Stockholders’ Derivative Actions.

Under the BCA, any of our stockholders may bring an action in our name to procure a judgment in our favor, also known as a derivative action, provided that the stockholder bringing the action is a holder of common stock both at the time the derivative action is commenced and at the time of the transaction to which the action relates.

Anti-takeover Provisions of our Charter Documents.

Several provisions of our articles of incorporation and bylaws may have anti-takeover effects. These provisions are intended to avoid costly takeover battles, lessen our vulnerability to a hostile change of control and enhance the ability of our Board of Directors to maximize stockholder value in connection with any unsolicited offer to acquire us. However, these anti-takeover provisions, 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 stockholder may consider in its best interest and (2) the removal of incumbent officers and directors.

Blank Check Preferred Stock.

Under the terms of our articles of incorporation, our Board of Directors has authority, without any further vote or action by our stockholders, to issue up to 200,000,000 shares of blank check preferred stock, of which 800,000 will be designated Series A Preferred Shares and of which 795,878 will be issued and distributed in the Spin-Off Distribution. Our Board of Directors may issue shares of preferred stock on terms calculated to discourage, delay or prevent a change of control of our company or the removal of our management.

Classified Board of Directors.

Our articles of incorporation provide for a Board of Directors serving staggered, three-year terms. Approximately one-third of our Board of Directors will be elected each year. This classified board provision could discourage a third party from making a tender offer for our shares or attempting to obtain control of our company. It could also delay stockholders who do not agree with the policies of the Board of Directors from removing a majority of the Board of Directors for two years.

Election and Removal of Directors.

Our articles of incorporation and bylaws prohibit cumulative voting in the election of directors. Our bylaws require parties other than the Board of Directors to give advance written notice of nominations for the election of directors. Our bylaws also provide that our directors may be removed only for cause 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.

Calling of Special Meetings of Stockholders.

Our bylaws provide that special meetings of our stockholders may be called only by resolution of our Board of Directors.

 

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Advance Notice Requirements for Stockholder Proposals and Director Nominations.

Our bylaws provide that stockholders seeking to nominate candidates for election as directors or to bring business before an annual meeting of stockholders must provide timely notice of their proposal in writing to the corporate secretary.

Generally, to be timely, a stockholder’s notice must be received at our principal executive offices not less than 90 days or more than 120 days prior to the first anniversary date of the previous year’s annual meeting. If, however, the date of our annual meeting is more than 30 days before or 60 days after the first anniversary date of the previous year’s annual meeting, a stockholder’s notice must be received at our principal executive offices by the later of (i) the close of business on the 90th day prior to the annual meeting date or (ii) the close of business on the tenth day following the date on which such annual meeting date is first publicly announced or disclosed by us. Our bylaws also specify requirements as to the form and content of a stockholder’s notice. These provisions may impede stockholders’ ability to bring matters before an annual meeting of stockholders or make nominations for directors at an annual meeting of stockholders.

Business Combinations.

Our articles of incorporation prohibit us from engaging in a “business combination” with certain persons for three years following the date the person becomes an interested stockholder. Interested stockholders generally include:

 

   

persons who are the beneficial owners of 15% or more of the outstanding voting stock of the corporation; and

 

   

persons who are affiliates or associates of the corporation and who hold 15% or more of the corporation’s outstanding voting stock at any time within three years before the date on which the person’s status as an interested stockholder is determined.

Subject to certain exceptions, a business combination includes, among other things:

 

   

certain mergers or consolidations of the corporation or any direct or indirect majority-owned subsidiary of the company;

 

   

the sale, lease, exchange, mortgage, pledge, transfer or other disposition of assets having an aggregate market value equal to 10% or more of either the aggregate market value of all assets of the corporation, determined on a consolidated basis, or the aggregate value of all the outstanding stock of the corporation;

 

   

certain transactions that result in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder;

 

   

any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series, or securities convertible into the stock of any class or series, of the corporation that is owned directly or indirectly by the interested stockholder; and

 

   

any receipt by the interested stockholder of the benefit (except as a stockholder) of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation.

These provisions of our articles of incorporation do not apply to a business combination if:

 

   

before a person becomes an interested stockholder, the board of directors of the corporation approves the business combination or transaction in which the stockholder became an interested stockholder;

 

   

upon consummation of the transaction that resulted in the interested stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, other than certain excluded shares;

 

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following a transaction in which the person became an interested stockholder, the business combination is (a) approved by the board of directors of the corporation and (b) authorized at a regular or special meeting of stockholders, and not by written consent, by the vote of the holders of at least two-thirds of the voting stock of the corporation not owned by the stockholder; or

 

   

a transaction with a stockholder that was or became an interested stockholder at the time the Spin-Off Distribution was consummated.

Material Contracts

We will enter into a management agreement with Stealth Maritime prior to the Spin-Off Distribution, as described in “Related Party Transactions – Management Arrangements” and have entered into the New Senior Secured Credit Facility in conjunction with the Spin-Off Distribution, the expected terms of which are described in section of this prospectus entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Credit Facilities.”

There are no other material contracts, other than contracts entered into in the ordinary course of business, to which the Company or any of its subsidiaries is a party.

Quantitative and Qualitative Disclosures about Market Risk

In the normal course of business, we face risks that are non-financial or non-quantifiable. Such risks principally include country risk, credit risk and legal risk. Our operations may be affected from time to time in varying degrees by these risks but their overall effect on us is not predictable. We have identified the following market risks as those which may have the greatest impact upon our operations:

Interest Rate Fluctuation Risk

The international tanker shipping industry is capital intensive, requiring significant amounts of investment. Much of this investment is financed by long term debt. Our debt usually contains interest rates that fluctuate with LIBOR.

We will be subject to market risks relating to changes in interest rates because we will have floating rate debt outstanding, when we borrow under our New Senior Secured Credit Facility which is based on U.S. dollar LIBOR plus a specified margin. Our objective is to manage the impact of interest rate changes on our earnings and cash flow in relation to our borrowings and to this effect, when we deem appropriate, we use derivative financial instruments.

Inflation Risk

The general rate of inflation has been relatively low in recent years and as such its associated impact on costs has been minimal. We do not believe that inflation has had, or is likely to have in the foreseeable future, a significant impact on expenses. Should inflation increase, it will increase our expenses and subsequently have a negative impact on our earnings.

Foreign Exchange Rate Risk

The international shipping industry’s functional currency is the U.S. Dollar. We generate all of our revenues in U.S. dollars, but incurred approximately 14.9% and 16.6% of our vessel running, management, drydocking, voyage and any other expenses required for our operations in 2020 and the six months ended June 30, 2021, respectively, in currencies other than U.S. dollars. In addition, our vessel management fee is denominated in Euros. On December 31, 2020 and June 30, 2021, approximately 19.23% and 34.0%, respectively, of our outstanding accounts payable were denominated in currencies other than the U.S. dollar,

 

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mainly in Euros. We do not use currency exchange contracts to reduce the risk of adverse foreign currency movements but we believe that our exposure from market rate fluctuations is unlikely to be material. Net foreign exchange loss for the year ended December 31, 2020 was $0.03 million and for the six months ended June 30, 2021 was $0.01 million.

SHARES ELIGIBLE FOR FUTURE SALE

Our common shares and Series A Preferred Shares being distributed in the Spin-Off Distribution will be freely transferable, except for common shares and Series A Preferred Shares held by persons that are our “affiliates” as defined in the rules under the Securities Act of 1933. Affiliates are individuals or entities that control, are controlled by or are under common control with us, and may include our officers, directors and principal shareholders. Common shares and Series A Preferred Shares held by affiliates may only be sold pursuant to an effective registration statement under the Securities Act of 1933 or Rule 144 under the Securities Act of 1933. We cannot predict whether substantial amounts of our common shares or Series A Preferred Shares will be sold in the open market following the Spin-Off Distribution. Sales of substantial amounts of our common shares or Series A Preferred Shares in the public market, or the perception that substantial sales may occur, could lower the market price for our common shares and our Series A Preferred Shares.

PLAN OF DISTRIBUTION

Our common shares and Series A Preferred Shares will be distributed by StealthGas by the declaration and issuance of a distribution to holders of StealthGas’ common stock. The Spin-Off Distribution is conditioned on, among other things, the approval of StealthGas’ Board of Directors and obtaining various regulatory and third-party consents and approvals, including the approval of our request for our common shares and Series A Preferred Shares to be listed on Nasdaq and the effectiveness of the registration statement of which this prospectus forms a part. As of the date of this prospectus, StealthGas has 38,202,181 shares of common stock outstanding. StealthGas may sell additional shares of common stock and it may have a greater number of shares outstanding on the Spin-Off Distribution record date; but we do not expect the distribution ratio to change if this occurs.

The Spin-Off Distribution is not being underwritten by an investment bank or otherwise. The purpose of the Spin-Off Distribution is described in the section of this prospectus entitled “Business – Background and Purpose of the Spin-Off Distribution”. StealthGas will pay any fees or other expenses incurred in connection with the Spin-Off Distribution and the application for the listing of our common shares and Series A Preferred Shares on the Nasdaq Capital Market. We anticipate the aggregate fees and expenses in connection with the Spin-Off Distribution to be approximately $400,000.

SERVICE OF PROCESS AND ENFORCEMENT OF CIVIL LIABILITIES

We are a Marshall Islands corporation and our executive office is located outside of the United States in Athens, Greece.

Most of our directors and officers and those of our subsidiaries are residents of countries other than the United States. Substantially all of our and our subsidiaries’ assets and a substantial portion of the assets of our directors and officers are located outside the United States. As a result, it may be difficult or impossible for United States investors to effect service of process within the United States upon us, our directors or officers, our subsidiaries or to realize against us or them judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States.

 

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In addition, there is uncertainty as to whether the courts of the Marshall Islands would (1) recognize or enforce against us, or our directors or officers judgments of courts of the United States based on civil liability provisions of applicable U.S. federal and state securities laws; or (2) impose liabilities against us or our directors and officers in original actions brought in the Marshall Islands, based on these laws.

LEGAL MATTERS

Certain legal matters with respect to Marshall Islands law in connection with the Spin-Off Distribution will be passed upon for us by Reeder & Simpson P.C. Certain matters of U.S. Federal and New York law are being passed upon for us by Morgan, Lewis & Bockius LLP, New York, New York.

EXPERTS

The combined carve-out financial statements of Imperial Petroleum Inc. Predecessor as of and for the years ended December 31, 2019 and 2020 included in this prospectus have been audited by Deloitte Certified Public Accountants, S.A., an independent registered public accounting firm, as stated in their report appearing herein and elsewhere in this registration statement. Such combined carve-out financial statements are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.

The office of Deloitte Certified Public Accountants, S.A. is located at Fragoklissias 3a & Granikou Street, Maroussi, Athens 151 25, Greece.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the SEC a registration statement on Form F-1 regarding the common shares and Series A Preferred Shares being distributed pursuant to this prospectus. This prospectus does not contain all of the information found in the registration statement. For further information regarding us and the common shares and the Series A Preferred Shares being distributed pursuant to this prospectus, you may wish to review the full registration statement, including its exhibits.

Upon completion of the Spin-Off Distribution, we will be subject to the information requirements of the Securities Exchange Act of 1934, and, in accordance therewith, we will be required to file with the SEC annual reports on Form 20-F within four months of our fiscal year-end, and provide to the SEC other material information on Form 6-K. These reports and other information may be inspected and copied at the public reference facilities maintained by the SEC or obtained from the SEC’s website as provided above. We expect to make our periodic reports and other information filed with or furnished to the SEC available, free of charge, through our website, which will be operational after the Spin-Off Distribution, as soon as reasonably practicable after those reports and other information are electronically filed with or furnished to the SEC.

As a foreign private issuer, we are exempt under the Exchange Act from, among other things, certain rules prescribing the furnishing and content of proxy statements, and our executive officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we will not be required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act, including the filing of quarterly reports or current reports on Form 8-K. However, we intend to furnish or make available to our shareholders annual reports containing our audited financial statements prepared in accordance with U.S. GAAP and make available to our shareholders quarterly reports containing our unaudited interim financial information for the first three fiscal quarters of each fiscal year. Our annual report will contain a detailed statement of any transactions between us and our related parties.

 

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OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the main costs and expenses in connection with the Spin-Off Distribution, which we will be required to pay.*

 

SEC registration fee

   $ 11,726  

Nasdaq listing fee

   $ 55,000  

Legal fees and expenses

   $ 150,000  

Accounting fees and expenses

   $ 75,000  

Printing and engraving costs

   $ 25,000  

Transfer agent and distribution agent fees and other

   $ 15,000  

Miscellaneous

   $ 68,274  
  

 

 

 

Total

   $ 400,000  

 

* All amounts are estimated, except the SEC registration fee and Nasdaq listing fee.

 

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IMPERIAL PETROLEUM INC. PREDECESSOR.

COMBINED CARVE-OUT FINANCIAL STATEMENTS

Index to combined carve-out financial statements

 

     Pages  

UNAUDITED CONDENSED COMBINED INTERIM CARVE-OUT FINANCIAL STATEMENTS OF IMPERIAL PETROLEUM INC. PREDECESSOR

  

Unaudited condensed combined carve-out balance sheets as of December 31, 2020 and June 30, 2021

     F-2  

Unaudited condensed combined carve-out statements of operations for the six-month periods ended June 30, 2020 and 2021

     F-3  

Unaudited condensed combined carve-out statements of changes in net parent investment for the six-month periods ended June 30, 2020 and 2021

     F-4  

Unaudited condensed combined carve-out statements of cash flows for the six-month periods ended June 30, 2020 and 2021

     F-5  

Notes to the unaudited interim condensed combined carve-out financial statements

     F-6  

AUDITED COMBINED CARVE-OUT FINANCIAL STATEMENTS OF IMPERIAL PETROLEUM INC. PREDECESSOR

  

Report of Independent Registered Public Accounting Firm

     F-11  

Combined carve-out balance sheets as of December 31, 2019 and 2020

     F-12  

Combined carve-out statements of operations for the years ended December 31, 2019 and 2020

     F-13  

Combined carve-out statements of changes in net parent investment for the years ended December 31, 2019 and 2020

     F-14  

Combined carve-out statements of cash flows for the years ended December 31, 2019 and 2020

     F-15  

Notes to the combined carve-out financial statements

     F-16  

 

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Unaudited condensed combined carve-out balance sheets

(Expressed in United States dollars)

 

     As of December 31,
2020
     As of June 30,
2021
 

Assets

     

Current assets

     

Cash and cash equivalents

     6,451,524        3,282,775  

Restricted cash

     1,165,031        1,165,031  

Trade and other receivables

     665,875        1,469,806  

Other current assets

     173,930        —    

Inventories

     835,997        378,091  

Advances and prepayments

     139,601        183,550  
  

 

 

    

 

 

 

Total current assets

     9,431,958        6,479,253  
  

 

 

    

 

 

 

Non current assets

     

Vessels, net (Note 4)

     128,689,447        124,300,316  
  

 

 

    

 

 

 

Total non current assets

     128,689,447        124,300,316  
  

 

 

    

 

 

 

Total assets

     138,121,405        130,779,569  
  

 

 

    

 

 

 

Liabilities and net parent investment

     

Current liabilities

     

Trade accounts payable

     1,192,965        1,041,483  

Payable to related party (Notes 3 and 8)

     1,473,000        1,473,000  

Accrued liabilities

     390,923        303,573  

Customer deposits (Note 7)

     868,000        868,000  

Deferred income

     134,594        593,782  
  

 

 

    

 

 

 

Total current liabilities

     4,059,482        4,279,838  
  

 

 

    

 

 

 

Total liabilities

     4,059,482        4,279,838  
  

 

 

    

 

 

 

Commitments and contingencies (Note 8)

     
  

 

 

    

 

 

 

Net parent investment

     134,061,923        126,499,731  
  

 

 

    

 

 

 

Total liabilities and net parent investment

     138,121,405        130,779,569  
  

 

 

    

 

 

 

The accompanying notes are an integral part of these unaudited interim condensed combined carve-out financial statements.

 

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Imperial Petroleum Inc. Predecessor

Unaudited condensed combined carve-out statements of operations

(Expressed in United States dollars)

 

 

     For the six-month periods
ended June 30,
 
           2020                 2021        

Revenues

    

Revenues (Note 6)

     8,959,965       9,226,877  
  

 

 

   

 

 

 

Total revenues

     8,959,965       9,226,877  
  

 

 

   

 

 

 

Expenses

    

Voyage expenses

     647,397       1,815,116  

Voyage expenses – related party (Note 3)

     111,525       116,665  

Vessels’ operating expenses

     3,377,561       3,695,123  

Vessels’ operating expenses – related party (Note 3)

     18,500       42,000  

Dry-docking costs

     20,775       —    

Management fees – related party (Note 3)

     237,475       261,545  

General and administrative expenses – related party (Note 3)

     103,179       176,162  

Depreciation (Note 4)

     4,306,588       4,337,331  
  

 

 

   

 

 

 

Total expenses

     8,823,000       10,443,942  
  

 

 

   

 

 

 

Income/(Loss) from operations

     136,965       (1,217,065
  

 

 

   

 

 

 

Other (expenses) / income

    

Other finance costs

     (8,632     (3,376

Interest income

     105       4  

Foreign exchange loss

     (474     (8,287
  

 

 

   

 

 

 

Other expenses, net

     (9,001     (11,659
  

 

 

   

 

 

 

Net income/(loss)

     127,964       (1,228,724
  

 

 

   

 

 

 

The accompanying notes are an integral part of these unaudited interim condensed combined carve-out financial statements.

 

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Imperial Petroleum Inc. Predecessor

Unaudited condensed combined carve-out statements of changes in net parent investment

(Expressed in United States dollars)

 

 

     2020     2021  

Balance at January 1,

     143,681,571       134,061,923  
  

 

 

   

 

 

 

Net income/(loss)

     127,964       (1,228,724

Net transfers to parent

     (5,581,621     (6,333,468
  

 

 

   

 

 

 

Balance at June 30,

     138,227,914       126,499,731  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these unaudited interim condensed combined carve-out financial statements.

 

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Imperial Petroleum Inc. Predecessor

Unaudited condensed combined carve-out statements of cash flows

(Expressed in United States dollars)

 

 

     For the six-month periods
ended June 30,
 
     2020     2021  

Cash flows from operating activities:

    

Net income/(loss)

     127,964       (1,228,724

Adjustments to reconcile net income/(loss) to net cash provided by operating activities:

    

Depreciation

     4,306,588       4,337,331  

Changes in operating assets and liabilities:

(Increase)/decrease in

    

Trade and other receivables

     (678,263     (803,931

Other current assets

     (49,345     173,930  

Inventories

     (864,614     457,906  

Advances and prepayments

     (122,559     (43,949

Trade accounts payable

     1,082,465       (99,682

Payable to related party

     1,473,000       —    

Accrued liabilities

     50,928       55,250  

Deferred income

     (233,017     459,188  
  

 

 

   

 

 

 

Net cash provided by operating activities

     5,093,147       3,307,319  
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Vessel improvements

     —         (142,600
  

 

 

   

 

 

 

Net cash used in investing activities

     —         (142,600
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Net transfers to parent

     (5,581,621     (6,333,468

Customer deposits paid

     (100,000     —    
  

 

 

   

 

 

 

Net cash used in financing activities

     (5,681,621     (6,333,468
  

 

 

   

 

 

 

Net decrease in cash, cash equivalents and restricted cash

     (588,474     (3,168,749

Cash, cash equivalents and restricted cash at the beginning of the year

     8,802,847       7,616,555  
  

 

 

   

 

 

 

Cash, cash equivalents and restricted cash at the end of the period

     8,214,373       4,447,806  
  

 

 

   

 

 

 

Supplemental cash flow information:

    

Non cash investing activity – Vessel improvements included in liabilities

     371,800       —    

Reconciliation of cash, cash equivalents and restricted cash

    

Cash and cash equivalents

     7,049,342       3,282,775  

Restricted cash – Current assets

     1,165,031       1,165,031  
  

 

 

   

 

 

 

Total cash, cash equivalents and restricted cash shown in the statements of cash flows

     8,214,373       4,447,806  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these unaudited interim condensed combined carve-out financial statements.

 

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Imperial Petroleum Inc. Predecessor

Notes to the unaudited interim condensed combined carve-out financial statements

(Expressed in United States dollars)

 

 

1.

General Information and Basis of Presentation

Imperial Petroleum Inc. (“Imperial”), a wholly owned subsidiary of StealthGas Inc., was formed by StealthGas Inc. on May 14, 2021 under the laws of the Republic of the Marshall Islands. StealthGas Inc. plans to separate its crude and product tankers by transferring to Imperial its interest in the 4 subsidiaries noted below, each owning one tanker (collectively, “Imperial Petroleum Inc. Predecessor” or the “Company”). The Company’s fleet comprises 4 tankers consisting of 3 medium range (M.R.) type product tankers and one aframax crude oil tanker providing worldwide marine transportation services under long, medium or short-term charters.

The Company’s vessels are managed by Stealth Maritime Corporation S.A. (the “Manager”), a company controlled by members of the family of the Company’s Chief Executive Officer. The Manager, a related party, was incorporated in Liberia and registered in Greece on May 17, 1999 under the provisions of law 89/1967, 378/1968 and article 25 of law 27/75 as amended by article 4 of law 2234/94. (See Note 3).

The accompanying unaudited interim condensed combined carve-out financial statements include the 4 subsidiaries of StealthGas Inc. listed below for all periods presented. These financial statements are presented at amortized costs of the assets and the liabilities of the 4 vessel-owning companies from their dates of incorporation. All companies are incorporated under the laws of the Marshall Islands and Liberia.

The wholly owned subsidiaries of StealthGas Inc. which are included in the Company’s unaudited interim condensed combined carve-out financial statements are:

 

Company   

Date of

Incorporation

  

Name of Vessel

Owned by Subsidiary

   Dead Weight
Tonnage (“dwt”)
     Acquisition
Date

Clean Power Inc.

   5/2/2007    Magic Wand      47,000      9/1/2008

MR Roi Inc.

   5/2/2007    Clean Thrasher      47,000      27/2/2008

King of Hearts Inc.

   17/3/2008    Falcon Maryam      46,000      14/7/2009

Tankpunk Inc.

   6/1/2008    Stealth Berana      115,804      26/7/2010

These unaudited condensed combined carve-out financial statements have been prepared on a stand-alone basis and are derived from the unaudited condensed consolidated financial statements and accounting records of StealthGas Inc. The unaudited condensed combined financial statements reflect the financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) for interim financial information. Accordingly, the condensed consolidated balance sheet as of December 31, 2020 was derived from the audited financial statement, but it does not include all disclosures required by U.S. GAAP. These unaudited condensed combined carve-out financial statements and the accompanying notes should be read in conjunction with the Company’s combined carve-out financial statements for the year ended December 31, 2020.

These financial statements are presented as if such businesses had been combined throughout the periods presented. All intercompany accounts and transactions between the entities comprising the Company have been eliminated in the accompanying unaudited interim condensed combined carve-out financial statements.

The Company is dependent upon its parent, StealthGas Inc. for a major part of its working capital and financing requirements as StealthGas Inc. uses a centralized approach to cash management and financing of its operations. Financial transactions relating to the Company are accounted for through the net parent investment account. Accordingly, none of StealthGas Inc.’s cash and cash equivalents or debt and the related interest expense at the corporate level have been assigned to the Company in the unaudited interim condensed combined

 

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carve-out financial statements. Net parent investment represents StealthGas Inc.’s interest in the Company’s net assets and includes the Company’s cumulative earnings as adjusted for cash distributions to and cash contributions from StealthGas Inc. Transactions with StealthGas Inc. are reflected in the accompanying unaudited condensed combined carve-out statements of cash flows as a financing activity, in the combined carve-out changes in net parent investment as “Net transfers to parent” and in the Unaudited condensed combined carve-out balance sheets within “Net parent investment”.

The unaudited condensed combined carve-out statements of operations reflect expense allocations made to the Company by StealthGas Inc. for certain corporate functions and for shared services provided by StealthGas Inc. These allocations were made by StealthGas Inc. on a pro-rata basis. See Note 3 “Transactions with Related Parties – General and administrative expenses” for further information on expenses allocated by StealthGas Inc. Both the Company and StealthGas Inc. consider the basis on which the expenses have been allocated to be a reasonable reflection of the utilization of services provided to or the benefit received by the Company during the periods presented. Nevertheless, the unaudited interim condensed combined carve-out financial statements may not be indicative of the Company’s future performance and may not include all of the actual expenses that would have been incurred by the Company as an independent publicly traded company or reflect the Company’s financial position, results of operations and cash flows that would have been reported if the Company had been a stand-alone entity during the periods presented.

Coronavirus Outbreak: On March 11, 2020, the World Health Organization declared the 2019 Novel Coronavirus (the “2019-nCoV”) outbreak a pandemic. In response to the outbreak, many countries, ports and organizations, including those where the Company conducts a large part of its operations, have implemented measures to combat the outbreak, such as quarantines and travel restrictions, which may continue to cause trade disruptions and volatility in the commodity markets. The Company has experienced and may continue to experience lower tanker rates, as a result of the reduction of the global oil demand and additional costs to effect crew changes. To date there has not been any significant effect of 2019-nCoV on the Company’s operating activities The extent to which a new wave of the 2019-nCoV will impact the Company’s results of operations and financial condition will depend on future developments, which are uncertain and cannot be predicted, including among others, new information which may emerge concerning the severity of the virus and the effectiveness of the actions taken to contain or treat its impact or any resurgence or mutation of the virus, the availability and effectiveness of vaccines and their global deployment. Accordingly, an estimate of the future impact cannot be made at this time.

 

2.

Significant Accounting Policies

A discussion of the Company’s significant accounting policies can be found in the Company’s combined carve-out financial statements for the year ended December 31, 2020.

Recent Accounting Pronouncements:

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s combined financial statements.

 

3.

Transactions with Related Parties

The Manager provides the vessels with a wide range of shipping services such as chartering, technical support and maintenance, insurance, consulting, financial and accounting services, for a fixed daily fee of $440 per vessel operating under a voyage or time charter or $125 per vessel operating under a bareboat charter (the “Management fees”) and a brokerage commission of 1.25% on freight, hire and demurrage per vessel (the “Brokerage commissions”), as per the management agreement between the Manager and the Company. In

 

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addition, the Manager arranges for supervision onboard the vessels, when required, by superintendent engineers and when such visits exceed a period of five days in a twelve month period, an amount of $500 is charged for each additional day (the “Superintendent fees”).

Effective from 2020, the Manager provides crew management services to the vessels Magic Wand, Clean Thrasher and Falcon Maryam. These services have been subcontracted by the Manager to an affiliated ship-management company, Hellenic Manning Overseas Inc. (ex. Navis Maritime Services Inc.). The Company pays to the Manager a fixed monthly fee of $2,500 per vessel for these crew management services (the “Crew management fees”).

In addition, an allocation of general and administrative expenses incurred by StealthGas Inc. has been included in General and administrative expenses of the Company based on the number of calendar days the Company’s vessels operated under StealthGas Inc.’s fleet compared to the number of calendar days of the total StealthGas Inc.’s fleet. These expenses consisted mainly of executive compensation, office rent, investor relations and consultancy fees (the “General and administrative expenses”).

The balance with StealthGas Inc. at both December 31, 2020 and at June 30, 2021 was a liability of $1,473,000 (Note 8).

The amounts charged by the Company’s related parties comprised the following:

 

         For the six-month periods
ended June 30,
 
   

Location in statement of operations

       2020              2021      

Management fees

  Management fees – related party      237,475        261,545  

Brokerage commissions

  Voyage expenses – related party      111,525        116,665  

Superintendent fees

  Vessels’ operating expenses – related party      13,500        12,000  

Crew management fees

  Vessels’ operating expenses – related party      5,000        30,000  

General and administrative expenses

  General and administrative expenses      103,179        176,162  

 

4.

Vessels, net

An analysis of vessels, net is as follows:

 

     Vessel Cost      Accumulated
depreciation
     Net book value  

Balance as at January 1, 2021

   $ 231,766,688      $ (103,077,241    $ 128,689,447  
  

 

 

    

 

 

    

 

 

 

Depreciation for the period

     —          (4,337,331      (4,337,331

Reduction in vessels improvements

     (51,800      —          (51,800
  

 

 

    

 

 

    

 

 

 

Balance as at June 30, 2021

   $ 231,714,888      $ (107,414,572    $ 124,300,316  
  

 

 

    

 

 

    

 

 

 

As of December 31, 2020 and June 30, 2021, the Company performed an impairment review of its vessels, due to the prevailing conditions in the shipping industry. As undiscounted net operating cash flows exceeded each vessel’s carrying value, no impairment was recorded.

The Company’s vessels, together with the vessels owned by four other subsidiaries of StealthGas Inc., have been provided as collateral to secure bank loans of StealthGas Inc. which had an outstanding amount of $40,140,884 as of June 30, 2021 (2020: $45,286,000).

 

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5.

Fair Value of Financial Instruments and Concentration of Credit Risk

Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist principally of cash and cash equivalents, restricted cash, trade and other receivables, trade accounts payable and accrued liabilities. The Company limits its credit risk with respect to accounts receivable by performing ongoing credit evaluations of its customers’ financial condition and generally does not require collateral for its trade accounts receivable. The Company places its cash and cash equivalents, time deposits with high credit quality financial institutions. The Company performs periodic evaluations of the relative credit standing of those financial institutions.

Fair Value Disclosures: The Company has categorized assets and liabilities recorded at fair value based upon the fair value hierarchy specified by the guidance. The levels of fair value hierarchy are as follows:

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.

The carrying values of cash and cash equivalents, restricted cash, trade and other receivables, trade accounts payable and accrued liabilities are reasonable estimates of their fair value due to the short term nature of these financial instruments. Cash and cash equivalents are considered Level 1 items as they represent liquid assets with short-term maturities.

 

6.

Revenues

The amounts in the accompanying combined statements of operations are analyzed as follows:

 

     For the six-month periods
ended June 30,
 
     2020      2021  

Time charter revenues

     5,504,063        5,516,211  

Bareboat revenues

     1,659,695        1,299,313  

Voyage charter revenues

     1,758,236        2,397,404  

Other income

     37,971        13,949  
  

 

 

    

 

 

 

Total

     8,959,965        9,226,877  
  

 

 

    

 

 

 

The amount of revenue earned as demurrage relating to the Company’s voyage charters for the six-month periods ended June 30, 2020 and 2021 was $0.6 million and $0.7 million, respectively and is included within “Voyage charter revenues” in the above table.

As of December 31, 2020 and June 30, 2021, the Company recognized $173,930 and $nil, respectively, of contract fulfillment costs which mainly represent bunker expenses incurred prior to commencement of loading relating to the Company’s voyage charters. These costs are recorded in “Other current assets” in the unaudited condensed combined balance sheets.

As of December 31, 2020 and June 30, 2021, revenues relating to undelivered performance obligations of the Company’s voyage charters amounted to $774,269 and $nil, respectively. The Company recognized the undelivered performance obligation as of December 31, 2020 as revenues in the first quarter of 2021.

 

7.

Customer Deposits

These amounts represent deposits received from charterers as guarantees and are comprised as follows:

 

(a)

On October 12, 2015 an amount of $736,000 was received from the bareboat charterer of Product carrier “Clean Thrasher” which is equal to three-months hire. On May 30, 2019 the amount of $368,000 was paid

 

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  to the bareboat charterers. The remaining amount of $368,000 was kept as a guarantee for another vessel chartered to the same charterer.

 

(b)

On February 21, 2015 an amount of $1,820,700 was received from the bareboat charterer of Aframax tanker “Stealth Berana” which is equal to five-months hire. An amount of $1,220,700 was returned to the charterer at the end of the bareboat charter on March 7, 2018. The remaining amount of $600,000 was kept as a guarantee for the new bareboat charter which commenced on March 7, 2018. The bareboat charter ended during 2020 and an amount of $100,000 was returned to the charterer. As of June 30, 2021, the remaining guarantee was still held due to a dispute (Note 8).

 

8.

Commitments and Contingencies

 

   

From time to time the Company expects to be subject to legal proceedings and claims in the ordinary course of its business, principally personal injury and property casualty claims. Such claims, even if lacking merit, could result in the expenditure of significant financial and managerial resources. With regards to a charter party agreement of our Aframax tanker “Stealth Berana”, the Company commenced arbitration during 2020 in respect of all disputes arising under this agreement, including the claims of the charterers for alleged losses in connection with the redelivery of the vessel to the Company. The Company provided security for the claims of the charterers by way of a payment of $1,473,000 by StealthGas Inc. into an escrow account. The respective liability to StealthGas Inc. is included in “Payable to related party” in the combined balance sheet. As of December 31, 2020 and June 30, 2021, an amount of $1,165,031 was kept in the escrow account and is presented under current restricted cash in the combined balance sheets. Subsequent to June 30, 2021, the Company reached a settlement agreement with the charterers. Based on the settlement agreement, the Company paid to the charterers $400,000 from the funds held in the escrow account in full and final settlement of the claims of the charterers, including the liabilities of the Company due to the customer deposits (Note 7). The remaining funds held in the escrow account amounting to $765,031 were returned to StealthGas Inc.

 

   

Future minimum contractual charter revenues, gross of commissions, based on vessels committed to non-cancellable, time and bareboat charter contracts as of June 30, 2021, amount to $8,587,725 during the year ending June 30, 2022 and $631,800 during the year ending June 30, 2023.

 

9.

Subsequent Events

The Company evaluated subsequent events up to October 18, 2021, the date the unaudited interim condensed combined carve-out financial statements were available to be issued.

 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Imperial Petroleum Inc.

Opinion on the Financial Statements

We have audited the accompanying combined carve-out balance sheets of Imperial Petroleum Inc. Predecessor (the “Company”) as of December 31, 2019 and 2020, the related combined statements of operations, changes in net parent investments, and cash flows, for the years then ended, 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, 2019 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

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 Public Company Accounting Oversight Board (United States) (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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Deloitte Certified Public Accountants S.A.

Athens, Greece

August 3, 2021

We have served as the Company’s auditor since 2021.

 

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Imperial Petroleum Inc. Predecessor

Combined carve-out balance sheets

(Expressed in United States dollars)

 

 

     As of December 31,
2019
     As of December 31,
2020
 

Assets

     

Current assets

     

Cash and cash equivalents

     8,802,847        6,451,524  

Restricted cash

     —          1,165,031  

Trade and other receivables

     181,165        665,875  

Other current assets

     —          173,930  

Inventories

     131,476        835,997  

Advances and prepayments

     80,284        139,601  
  

 

 

    

 

 

 

Total current assets

     9,195,772        9,431,958  
  

 

 

    

 

 

 

Non current assets

     

Vessels, net (Note 4)

     136,410,967        128,689,447  
  

 

 

    

 

 

 

Total non current assets

     136,410,967        128,689,447  
  

 

 

    

 

 

 

Total assets

     145,606,739        138,121,405  
  

 

 

    

 

 

 

Liabilities and net parent investment

     

Current liabilities

     

Trade accounts payable

     523,108        1,192,965  

Payable to related party (Note 3)

     —          1,473,000  

Accrued liabilities (Note 6)

     75,668        390,923  

Customer deposits

     968,000        868,000  

Deferred income

     358,392        134,594  
  

 

 

    

 

 

 

Total current liabilities

     1,925,168        4,059,482  
  

 

 

    

 

 

 

Total liabilities

     1,925,168        4,059,482  
  

 

 

    

 

 

 

Commitments and contingencies (Note 11)

     
  

 

 

    

 

 

 

Net parent investment

     143,681,571        134,061,923  
  

 

 

    

 

 

 

Total liabilities and net parent investment

     145,606,739        138,121,405  
  

 

 

    

 

 

 

The accompanying notes are an integral part of these combined carve-out financial statements.

 

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Imperial Petroleum Inc. Predecessor

Combined carve-out statements of operations

(Expressed in United States dollars)

 

 

     For the years ended December 31,  
             2019                     2020          

Revenues

    

Revenues (Note 7)

     13,329,640       20,302,052  
  

 

 

   

 

 

 

Total revenues

     13,329,640       20,302,052  
  

 

 

   

 

 

 

Expenses

    

Voyage expenses

     405,965       2,944,071  

Voyage expenses – related party (Notes 3)

     166,588       250,241  

Vessels’ operating expenses (Note 8)

     3,775,700       7,112,094  

Vessels’ operating expenses – related party (Notes 3, 8)

     24,000       48,500  

Dry-docking costs

     22,265       935,565  

Management fees – related party (Note 3)

     365,515       503,355  

General and administrative expenses – related party (Note 3)

     331,408       219,717  

Depreciation (Note 4)

     8,613,177       8,643,920  
  

 

 

   

 

 

 

Total expenses

     13,704,618       20,657,463  
  

 

 

   

 

 

 

Loss from operations

     (374,978     (355,411
  

 

 

   

 

 

 

Other (expenses) / income

    

Other finance costs

     (7,663     (10,008

Interest income

     7,229       108  

Foreign exchange gain/(loss)

     228       (28,450
  

 

 

   

 

 

 

Other expenses, net

     (206     (38,350
  

 

 

   

 

 

 

Net loss

     (375,184     (393,761
  

 

 

   

 

 

 

The accompanying notes are an integral part of these combined carve-out financial statements.

 

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Imperial Petroleum Inc. Predecessor

Combined carve-out statements of changes in net parent investment

(Expressed in United States dollars)

 

 

     2019     2020  

Balance at January 1,

     147,856,932       143,681,571  
  

 

 

   

 

 

 

Net loss

     (375,184     (393,761

Net transfers to parent

     (3,800,177     (9,225,887
  

 

 

   

 

 

 

Balance at December 31,

     143,681,571       134,061,923  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these combined carve-out financial statements.

 

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Imperial Petroleum Inc. Predecessor

Combined carve-out statements of cash flows

(Expressed in United States dollars)

 

 

     For the years ended December 31,  
             2019                     2020          

Cash flows from operating activities:

    

Net loss

     (375,184     (393,761

Adjustments to reconcile net loss to net cash provided by operating activities:

    

Depreciation

     8,613,177       8,643,920  

Changes in operating assets and liabilities:

(Increase)/decrease in

    

Trade and other receivables

     123,699       (484,710

Other current assets

     —         (173,930

Inventories

     (70,990     (704,521

Advances and prepayments

     (8,451     (59,317

Trade accounts payable

     176,237       618,057  

Payable to related party

     —         1,473,000  

Accrued liabilities

     17,121       172,655  

Deferred income

     97,847       (223,798
  

 

 

   

 

 

 

Net cash provided by operating activities

     8,573,456       8,867,595  
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Vessel improvements

     —         (728,000
  

 

 

   

 

 

 

Net cash used in investing activities

     —         (728,000
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Net transfers to parent

     (3,800,177     (9,225,887

Customer deposits paid

     (368,000     (100,000
  

 

 

   

 

 

 

Net cash used in financing activities

     (4,168,177     (9,325,887
  

 

 

   

 

 

 

Net increase/(decrease) in cash, cash equivalents and restricted cash

     4,405,279       (1,186,292

Cash, cash equivalents and restricted cash at the beginning of the year

     4,397,568       8,802,847  
  

 

 

   

 

 

 

Cash, cash equivalents and restricted cash at the end of the year

     8,802,847       7,616,555  
  

 

 

   

 

 

 

Supplemental cash flow information:

    

Non cash investing activity – Vessel improvements included in liabilities

     —         194,400  

Reconciliation of cash, cash equivalents and restricted cash

    

Cash and cash equivalents

     8,802,847       6,451,524  

Restricted cash - Current assets

     —         1,165,031  
  

 

 

   

 

 

 

Total cash, cash equivalents and restricted cash shown in the statements of cash flows

     8,802,847       7,616,555  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these combined carve-out financial statements.

 

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Imperial Petroleum Inc. Predecessor

Notes to the combined carve-out financial statements

(Expressed in United States dollars)

 

 

1.

General Information

The accompanying combined carve-out financial statements include certain of the subsidiaries of StealthGas Inc. listed below for all periods presented and are presented at amortized costs of the assets and the liabilities of these vessel-owning companies from their dates of incorporation. All companies are incorporated under the laws of the Marshall Islands and Liberia.

Imperial Petroleum Inc. (“Imperial”), a wholly owned subsidiary of StealthGas Inc., was formed by StealthGas Inc. on May 14, 2021 under the laws of the Republic of the Marshall Islands. StealthGas Inc. plans to separate its crude and product tankers by transferring to Imperial its interest in 4 subsidiaries, each owning one tanker (collectively, “Imperial Petroleum Inc. Predecessor” or the “Company”). The Company’s fleet comprises 4 tankers consisting of 3 medium range (M.R.) type product tankers and one aframax crude oil tanker providing worldwide marine transportation services under long, medium or short-term charters.

The Company’s vessels are managed by Stealth Maritime Corporation S.A. (the “Manager”), a company controlled by members of the family of the Company’s Chief Executive Officer. The Manager, a related party, was incorporated in Liberia and registered in Greece on May 17, 1999 under the provisions of law 89/1967, 378/1968 and article 25 of law 27/75 as amended by article 4 of law 2234/94. (See Note 3).

The wholly owned subsidiaries of StealthGas Inc. which are included in the Company’s combined carve-out financial statements are:

 

Company   

Date of

Incorporation

  

Name of Vessel

Owned by Subsidiary

   Dead Weight
Tonnage (“dwt”)
     Acquisition
Date

Clean Power Inc.

   5/2/2007    Magic Wand      47,000      9/1/2008

MR Roi Inc.

   5/2/2007    Clean Thrasher      47,000      27/2/2008

King of Hearts Inc.

   17/3/2008    Falcon Maryam      46,000      14/7/2009

Tankpunk Inc.

   6/2/2008    Stealth Berana      115,804      26/7/2010

During 2019 and 2020, four charterers accounted for 10% or more of the Company’s revenues.

 

     Year ended December 31,  

Charterer

   2019     2020  

A

     57     34

B

     18     12

C

     16     —    

D

     —         21

E

     —         14

Coronavirus Outbreak: On March 11, 2020, the World Health Organization declared the 2019 Novel Coronavirus (the “2019-nCoV”) outbreak a pandemic. In response to the outbreak, many countries, ports and organizations, including those where the Company conducts a large part of its operations, have implemented measures to combat the outbreak, such as quarantines and travel restrictions, which may continue to cause trade disruptions and volatility in the commodity markets. The Company has experienced and may continue to experience lower tanker rates, as a result of the reduction of the global oil demand and additional costs to effect crew changes. Other than a decrease in market rates and increased crew cost during the second half of 2020, to date there has not been any significant effect of 2019-nCoV on the Company’s operating activities The extent to which a new wave of the 2019-nCoV will impact the Company’s results of operations and financial condition will depend on future developments, which are uncertain and cannot be predicted, including among others, new information which may emerge concerning the severity of the virus and the effectiveness of the actions taken to contain or treat its impact or any resurgence or mutation of the virus, the availability and effectiveness of vaccines and their global deployment. Accordingly, an estimate of the future impact cannot be made at this time.

 

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2.

Significant Accounting Policies

Basis of presentation: The accompanying combined carve-out financial statements include the accounts of the legal entities comprising the Company as discussed in Note 1. These combined carve-out financial statements have been prepared on a stand-alone basis and are derived from the consolidated financial statements and accounting records of StealthGas Inc. The combined financial statements reflect the financial position, results of operations and cash flows of the Company in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

These financial statements are presented as if such businesses had been combined throughout the periods presented. All intercompany accounts and transactions between the entities comprising the Company have been eliminated in the accompanying combined carve-out financial statements.

The Company is dependent upon its parent, StealthGas Inc. for a major part of its working capital and financing requirements as StealthGas Inc. uses a centralized approach to cash management and financing of its operations. Financial transactions relating to the Company are accounted for through the net parent investment account. Accordingly, none of StealthGas Inc.’s cash and cash equivalents or debt and the related interest expense at the corporate level have been assigned to the Company in the combined carve-out financial statements. Net parent investment represents StealthGas Inc.’s interest in the Company’s net assets and includes the Company’s cumulative earnings as adjusted for cash distributions to and cash contributions from StealthGas Inc. Transactions with StealthGas Inc. are reflected in the accompanying combined carve-out statements of cash flows as a financing activity, in the combined carve-out changes in net parent investment as “Net transfers to parent” and in the combined carve-out Balance Sheets within “Net parent investment”.

The combined carve-out statements of operations reflect expense allocations made to the Company by StealthGas Inc. for certain corporate functions and for shared services provided by StealthGas Inc. These allocations were made by StealthGas Inc. on a pro-rata basis. See Note 3 “Transactions with Related Parties”-“General and administrative expenses” for further information on expenses allocated by StealthGas Inc. Both the Company and StealthGas Inc. consider the basis on which the expenses have been allocated to be a reasonable reflection of the utilization of services provided to or the benefit received by the Company during the periods presented. Nevertheless, the combined carve-out financial statements may not be indicative of the Company’s future performance and may not include all of the actual expenses that would have been incurred by the Company as an independent publicly traded company or reflect the Company’s financial position, results of operations and cash flows that would have been reported if the Company had been a stand-alone entity during the periods presented.

Use of Estimates: The preparation of the accompanying combined carve-out 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 financial statements and the amounts of revenues and expenses recognized during the reporting period. Actual results could differ from those estimates.

Foreign Currency Translation: The functional currency of the Company is the U.S. Dollar because the Company’s vessels operate in international shipping markets, which utilize the U.S. Dollar as the functional currency. The accounting books of the Company 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 reflect the period end exchange rates. Resulting gains or losses are separately reflected in the accompanying combined statements of operations.

Cash and Cash Equivalents: The Company considers highly liquid investments such as time deposits and certificates of deposit with original maturity of three months or less to be cash equivalents.

 

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Restricted Cash: Restricted cash mainly reflects funds held in escrow (Note 11). In the event that the obligation relating to such funds is expected to be terminated within the next twelve months, these funds are classified as current assets; otherwise they are classified as non-current assets.

Trade Receivables: The amount shown as trade receivables includes estimated recoveries from charterers for hire, freight and demurrage billings, net of allowance for doubtful accounts. At each balance sheet date, all potentially un-collectible accounts are assessed individually for purposes of determining the appropriate provision for doubtful accounts. No provision for doubtful accounts was required for any of the periods presented.

Inventories: Inventories consist of bunkers (for vessels under voyage charter or on ballast or idle) and lubricants which are stated at the lower of cost and net realizable value. The cost is determined by the first-in, first-out method. The Company considers victualing and stores as being consumed when purchased and, therefore, such costs are expensed when incurred.

Vessels Acquisitions: Vessels are stated at cost less depreciation and impairment, if any. Cost consists of the contract price less discounts and any material expenses incurred upon acquisition (initial repairs, improvements, acquisition and expenditures made to prepare the vessel for its initial voyage). 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, or otherwise are charged to expenses as incurred.

Impairment or Disposal of Long-lived Assets: The Company follows the Accounting Standards Codification (“ASC”) Subtopic 360-10, “Property, Plant and Equipment” (“ASC 360-10”), which requires impairment losses to be recorded for long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than their carrying amounts. If indicators of impairment are present, the Company performs an analysis of the anticipated undiscounted future net cash flows of the related long-lived assets, quarterly. If the carrying value of the related asset exceeds the undiscounted cash flows, the carrying value is reduced to its fair value and the difference is recorded as an impairment loss in the combined statements of operations. Various factors including anticipated future charter rates, estimated scrap values, future dry-docking costs and estimated vessel operating costs are included in this analysis. These factors are based on historical trends as well as future expectations. Undiscounted cash flows are determined by considering the revenues from existing charters for those vessels that have long term employment and when there is no charter in place the estimates based on historical average rates. No impairment loss was identified and recorded for any of the periods presented.

Vessels’ Depreciation: The cost of each of the Company’s vessels is depreciated on a straight-line basis over the vessel’s remaining economic useful life, after considering the estimated residual value. Management estimates the useful life of each of the Company’s vessels to be 25 years, from the date of their construction.

Accounting for Special Survey and Dry-docking Costs: Special survey and dry-docking costs are expensed in the period incurred.

Accounting for Revenue and Related Expenses: The Company generates revenues from charterers for the charter hire of its vessels. Vessels are chartered on time charters, bareboat charters or voyage charters.

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 in advance. Operating costs incurred for running the vessel such as crew costs, vessel insurance, repairs and maintenance and lubricants are paid for by the Company under time charter agreements. A time charter generally provides typical warranties and owner protective restrictions. The performance obligations in a time charter are satisfied over the term of the contract beginning when the vessel is

 

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delivered to the charterer until it is redelivered back to the owner of the vessel. Some of the Company’s time charters may also contain profit sharing provisions, under which the Company can realize additional revenues in the event that spot rates are higher than the base rates in these time charters. A bareboat charter is a contract in which the vessel owner provides the vessel to the charterer for a fixed period of time at a specified daily rate, which is generally payable in advance, and the charterer generally assumes all risk and costs of operation during the bareboat charter period. The Company’s time charter and bareboat contracts are classified as operating leases pursuant to Accounting Standards Codification (“ASC”) 842 - Leases, and therefore do not fall under the scope of Accounting Standards Codification (“ASC”) 606 because (i) the vessel is an identifiable asset (ii) the owner of the vessel does not have substantive substitution rights and (iii) the charterer 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 and bareboat revenues are recognized when a charter agreement exists, the vessel is made available to the charterer and collection of the related revenue is reasonably assured. Time charter and bareboat charter revenues are recognized as earned on a straight-line basis over the term of the charter as service is provided. Revenues from profit sharing arrangements in time charters are recognized in the period earned. Under time charter agreements, all voyages expenses, except commissions are assumed by the charterer. Under bareboat charter agreements, the charterer further assumes all vessel operating expenses, dry-docking expenses and risk of operation.

Upon implementation of ASC 842, the Company elected to make use of a practical expedient for lessors, to not separate the lease and non-lease components included in the time charter revenue but rather to recognize operating lease revenue as a combined single lease component for all time charter contracts as the related lease component, the hire of a vessel, and the non-lease component, the fees for operating and maintaining the vessel, have the same timing and pattern of transfer (both the lease and non-lease components are earned by passage of time) and the predominant component is the lease.

A voyage charter is a contract, in which the vessel owner undertakes to transport a specific amount and type of cargo on a load port-to-discharge port basis, subject to various cargo handling terms. The Company accounts for a voyage charter when all the following criteria are met: (1) the parties to the contract have approved the contract in the form of a written charter agreement and are committed to perform their respective obligations, (2) the Company can identify each party’s rights regarding the services to be transferred, (3) the Company can identify the payment terms for the services to be transferred, (4) the charter agreement has commercial substance (that is, the risk, timing, or amount of the Company’s future cash flows is expected to change as a result of the contract) and (5) it is probable that the Company will collect substantially all of the consideration to which it will be entitled in exchange for the services that will be transferred to the charterer. The Company determined that its voyage charters consist of a single performance obligation which is met evenly as the voyage progresses and begins to be satisfied once the vessel is ready to load the cargo. The voyage charter party agreement generally has a demurrage clause according to which the charterer reimburses the vessel owner for any potential delays exceeding the allowed lay-time as per the charter party clause at the ports visited which is recorded as demurrage revenue. Revenues from voyage charters are recognized on a straight line basis over the voyage duration which commences once the vessel is ready to load the cargo and terminates upon the completion of the discharge of the cargo. Demurrage revenues are recognized when the amount can be estimated and its collection is probable. In voyage charters, vessel operating and voyage expenses are paid for by the Company. The voyage charters are considered service contracts which fall under the provisions of ASC 606 because the Company retains control over the operations of the vessels such as the routes taken or the vessels’ speed.

Deferred income represents cash received for undelivered performance obligations and deferred revenue resulting from straight-line revenue recognition in respect of charter agreements that provide for varying charter rates. The portion of the deferred revenue that will be earned within the next twelve months is classified as current liability and the remaining as long-term liability.

Vessel voyage expenses are direct expenses to voyage revenues and primarily consist of brokerage commissions, port expenses, canal dues and bunkers. Brokerage commissions are paid to shipbrokers for their

 

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time and efforts for negotiating and arranging charter party agreements on behalf of the Company and expensed over the related charter period and all the other voyage expenses are expensed as incurred except for expenses during the ballast portion of the voyage. Any expenses incurred during the ballast portion of the voyage (period between the contract date and the date of the vessel’s arrival to the load port) such as bunker expenses, canal tolls and port expenses are deferred and are recognized on a straight-line basis, in voyage expenses, over the voyage duration as the Company satisfies the performance obligations under the contract provided these costs 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 recovered from the charterer. These costs are considered ‘contract fulfillment costs’ and are included in ‘other current assets’ in the accompanying combined balance sheets.

Vessel operating expenses comprise all expenses relating to the operation of the vessel, including crewing, repairs and maintenance, insurance, stores, lubricants and other operating expenses. Vessel operating expenses are expensed as incurred.

Segment Reporting: The Company reports financial information and evaluates its operations by total charter revenues and not by the type of vessel, length of vessel employment, customer or type of charter. As a result, management, including the chief operating decision maker, reviews operating results solely by revenue per day and operating results of the fleet, and thus, the Company has determined that it operates under one reportable segment as well as one operating segment. Furthermore, when the Company charters a vessel to a charterer, the charterer is free to trade the vessel worldwide and, as a result, the disclosure of geographical information is impracticable.

Recent Accounting Pronouncements:

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s combined financial statements.

 

3.

Transactions with Related Parties

The Manager provides the vessels with a wide range of shipping services such as chartering, technical support and maintenance, insurance, consulting, financial and accounting services, for a fixed daily fee of $440 per vessel operating under a voyage or time charter or $125 per vessel operating under a bareboat charter (the “Management fees”) and a brokerage commission of 1.25% on freight, hire and demurrage per vessel (the “Brokerage commissions”), as per the management agreement between the Manager and the Company. In addition, the Manager arranges for supervision onboard the vessels, when required, by superintendent engineers and when such visits exceed a period of five days in a twelve month period, an amount of $500 is charged for each additional day (the “Superintendent fees”).

Effective from 2020, the Manager provides crew management services to the vessels Magic Wand, Clean Thrasher and Falcon Maryam. These services have been subcontracted by the Manager to an affiliated ship-management company, Hellenic Manning Overseas Inc. (ex. Navis Maritime Services Inc.). The Company pays to the Manager a fixed monthly fee of $2,500 per vessel (the “Crew management fees”).

In addition, an allocation of general and administrative expenses incurred by StealthGas Inc. has been included in General and administrative expenses of the Company based on the number of calendar days the Company’s vessels operated under StealthGas Inc.’s fleet compared to the number of calendar days of the total StealthGas Inc.’s fleet. These expenses consisted mainly of executive compensation, office rent, investor relations and consultancy fees (the “General and administrative expenses”).

The balance with StealthGas Inc. at December 31, 2019 and at December 31, 2020 was nil and a liability of $1,473,000, respectively (Note 11).

 

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The amounts charged by the Company’s related parties comprised the following:

 

         Year ended December 31,  
   

Location in statement of operations

       2019              2020      

Management fees

  Management fees – related party      365,515        503,355  

Brokerage commissions

  Voyage expenses – related party      166,588        250,241  

Superintendent fees

  Vessels’ operating expenses – related party      24,000        13,500  

Crew management fees

  Vessels’ operating expenses – related party      —          35,000  

General and administrative expenses

  General and administrative expenses      331,408        219,717  

 

4.

Vessels, net

An analysis of vessels, net is as follows:

 

     Vessel Cost      Accumulated
depreciation
     Net book value  

Balance as at January 1, 2019

   $ 230,844,288      $ (85,820,144    $ 145,024,144  
  

 

 

    

 

 

    

 

 

 

Depreciation for the year

     —          (8,613,177      (8,613,177
  

 

 

    

 

 

    

 

 

 

Balance as at December 31, 2019

   $ 230,844,288      $ (94,433,321    $ 136,410,967  
  

 

 

    

 

 

    

 

 

 

Acquisitions and improvements

     922,400        —          922,400  

Depreciation for the year

     —          (8,643,920      (8,643,920
  

 

 

    

 

 

    

 

 

 

Balance as at December 31, 2020

   $ 231,766,688      $ (103,077,241    $ 128,689,447  
  

 

 

    

 

 

    

 

 

 

As of December 31, 2019 and 2020, the Company performed an impairment review of its vessels, due to the prevailing conditions in the shipping industry. As a result of the impairment review, undiscounted net operating cash flows exceeded each vessel’s carrying value and therefore no impairment was recorded.

The additions in 2020 mainly relate to the installation of a ballast water treatment system for vessel Stealth Berana.

The Company’s vessels, together with the vessels owned by four other subsidiaries of StealthGas Inc., have been provided as collateral to secure bank loans of StealthGas Inc. which had an outstanding amount of $45,286,000 as of December 31, 2020.

 

5.

Fair Value of Financial Instruments and Concentration of Credit Risk

Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist principally of cash and cash equivalents, restricted cash, trade and other receivables, trade accounts payable and accrued liabilities. The Company limits its credit risk with respect to accounts receivable by performing ongoing credit evaluations of its customers’ financial condition and generally does not require collateral for its trade accounts receivable. The Company places its cash and cash equivalents, time deposits with high credit quality financial institutions. The Company performs periodic evaluations of the relative credit standing of those financial institutions.

Fair Value Disclosures: The Company has categorized assets and liabilities recorded at fair value based upon the fair value hierarchy specified by the guidance. The levels of fair value hierarchy are as follows:

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.

 

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The carrying values of cash and cash equivalents, restricted cash, trade and other receivables, trade accounts payable and accrued liabilities are reasonable estimates of their fair value due to the short term nature of these financial instruments. Cash and cash equivalents are considered Level 1 items as they represent liquid assets with short-term maturities.

 

6.

Accrued Liabilities

Accrued liabilities consist of the following:

 

     As of December 31,  
     2019      2020  

Voyage expenses

     73,546        170,607  

Vessel operating expenses

     2,122        220,316  
  

 

 

    

 

 

 

Total

   $ 75,668      $ 390,923  
  

 

 

    

 

 

 

 

7.

Revenues

The amounts in the accompanying combined statements of operations are analyzed as follows:

 

     Year ended December 31,  
     2019      2020  

Time charter revenues

     7,564,274        9,669,520  

Bareboat revenues

     5,766,868        2,967,678  

Voyage charter revenues

     —          7,626,883  

Other income/(expenses)

     (1,502      37,971  
  

 

 

    

 

 

 

Total

     13,329,640        20,302,052  
  

 

 

    

 

 

 

The amount of revenue earned as demurrage relating to the Company’s voyage charters for the years ended December 31, 2019 and 2020 was nil and $1.0 million, respectively and is included within “Voyage charter revenues” in the above table.

As of December 31, 2019 and 2020, the Company recognized $nil and $173,930, respectively, of contract fulfillment costs which mainly represent bunker expenses incurred prior to commencement of loading relating to the Company’s voyage charters. These costs are recorded in “Other current assets” in the combined balance sheets.

As of December 31, 2019 and 2020, revenues relating to undelivered performance obligations of the Company’s voyage charters amounted to $nil and $774,269, respectively. The Company recognized the undelivered performance obligation as of December 31, 2020 as revenues in the first quarter of 2021.

 

8.

Vessel Operating Expenses

The amounts in the accompanying combined statements of operations are analyzed as follows:

 

     Year ended December 31,  

Vessels’ Operating Expenses

   2019      2020  

Crew wages and related costs

     2,002,508        3,804,598  

Insurance

     159,969        290,866  

Repairs and maintenance

     452,857        1,227,639  

Spares and consumable stores

     692,845        1,015,100  

Miscellaneous expenses

     491,521        822,391  
  

 

 

    

 

 

 

Total

     3,799,700        7,160,594  
  

 

 

    

 

 

 

 

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9.

Income Taxes

Under the laws of the countries of the companies’ incorporation and/or vessels’ registration, the companies are not subject to tax on international shipping income, however, they are subject to registration and tonnage taxes, which have been included in Vessels’ operating expenses in the combined statements of operations.

Pursuant to the Internal Revenue Code of the United States (the “Code”), U.S. source income from the international operations of ships is generally exempt from U.S. tax if the company operating the ships meets certain requirements. Among other things, in order to qualify for this exemption, the company operating the ships must be incorporated in a country which grants an equivalent exemption from income taxes to U.S. corporations. The Company satisfies these initial criteria. In addition, these companies must be more than 50% owned by individuals who are residents, as defined, in the country of incorporation or another foreign country that grants an equivalent exemption to U.S. corporations. The Company also currently satisfies the more than 50% beneficial ownership requirement.

 

10.

Customer Deposits

These amounts represent deposits received from charterers as guarantees and are comprised as follows:

 

(a)

On October 12, 2015 an amount of $736,000 was received from the bareboat charterer of Product carrier “Clean Thrasher” which is equal to three-months hire. On May 30, 2019 the amount of $368,000 was paid to the bareboat charterers. The remaining amount of $368,000 was kept as a guarantee for another vessel chartered to the same charterer.

 

(b)

On February 21, 2015 an amount of $1,820,700 was received from the bareboat charterer of Aframax tanker “Stealth Berana” which is equal to five-months hire. An amount of $1,220,700 was returned to the charterer at the end of the bareboat charter on March 7, 2018. The remaining amount of $600,000 was kept as a guarantee for the new bareboat charter which commenced on March 7, 2018. The bareboat charter ended during 2020 and an amount of $100,000 was returned to the charterer. The remaining guarantee is still held due to a dispute (Note 11).

 

11.

Commitments and Contingencies

 

   

From time to time the Company expects to be subject to legal proceedings and claims in the ordinary course of its business, principally personal injury and property casualty claims. Such claims, even if lacking merit, could result in the expenditure of significant financial and managerial resources. With regards to a charter party agreement of our Aframax tanker “Stealth Berana”, the Company commenced arbitration during 2020 in respect of all disputes arising under this agreement, including the claims of the charterers for alleged losses in connection with the redelivery of the vessel to the Company. The Company provided security for the claims of the charterers by way of a payment of $1,473,000 by StealthGas Inc. into an escrow account. The respective liability to StealthGas Inc. is included in “Payable to related party” in the combined balance sheet. As of December 31, 2020, an amount of $1,165,031 was still kept in the escrow account and is presented under current restricted cash in the combined balance sheet. The Company is unable to predict the outcome of this case and its ultimate impact on the Company’s financial position, results of operations or liquidity. Hence the Company has not established any provision for losses relating to this case.

 

   

Future minimum contractual charter revenues, gross of commissions, based on vessels committed to non-cancellable, time and bareboat charter contracts as of December 31, 2020, amount to $4,499,900 during 2021.

 

12.

Subsequent Events

The Company evaluated subsequent events up to August 3, 2021, the date the combined carve-out financial statements were available to be issued.

 

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IMPERIAL PETROLEUM INC.

 

 

PROSPECTUS

 

 

                    , 2021

 

 

 


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PART II: INFORMATION NOT REQUIRED IN THE PROSPECTUS

Item 6. Indemnification of Directors and Officers

The bylaws of the Registrant provide that any person who is or was a director or officer of the Registrant, or is or was serving at the request of the Registrant as a director or officer of another, partnership, joint venture, trust or other enterprise, shall be entitled to be indemnified by the Registrant upon the same terms, under the same conditions, and to the same extent as authorized by Section 60 of the BCA, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Registrant, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.

Section 60 of the BCA provides as follows:

Indemnification of directors and officers.

(1) Actions not by or in right of the corporation. A corporation shall have the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of no contest, or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.

(2) Actions by or in right of the corporation. A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure judgment in its favor by reason of the fact that he is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by him or in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not, opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the corporation unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper.

(3) When director or officer successful. To the extent that a director or officer of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (1) or (2) of this section, or in the defense of a claim, issue or matter therein, he shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection therewith.

(4) Payment of expenses in advance. Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid in advance of the final disposition of such action, suit or proceeding as authorized by the board of directors in the specific case upon receipt of an undertaking by or on behalf of the director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation as authorized in this section.

 

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(5) Indemnification pursuant to other rights. The indemnification and advancement of expenses provided by, or granted pursuant to, the other subsections of this section shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office.

(6) Continuation of indemnification. The indemnification and advancement of expenses provided by, or granted pursuant to, this section shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

(7) Insurance. A corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director or officer of the corporation or is or was serving at the request of the corporation as a director or officer against any liability asserted against him and incurred by him in such capacity whether or not the corporation would have the power to indemnify him against such liability under the provisions of this section.

Item 7. Recent Sales of Unregistered Securities

None.

Item 8. Exhibits and Financial Statement Schedules

 

3.1    Articles of Incorporation of Imperial Petroleum Inc., as amended
3.2    Bylaws of Imperial Petroleum Inc.
3.3    Amended and Restated Articles of Incorporation of Imperial Petroleum Inc.
3.4    Amended and Restated Bylaws of Imperial Petroleum Inc.
3.5    Statement of Designation of 8.75% Series A Cumulative Redeemable Perpetual Preferred Stock
4.1    Specimen Common Stock Certificate
4.2    Specimen Series A Preferred Share Certificate
4.3    Contribution Agreement between Imperial Petroleum Inc. and StealthGas Inc.
5.1    Opinion of Reeder & Simpson LLP. P.C. as to the validity of the securities being registered
8.1    Opinion of Reeder & Simpson, P.C. with respect to certain Marshall Islands tax matters
8.2    Opinion of Morgan, Lewis & Bockius LLP with respect to certain U.S. tax matters
10.1    Management Agreement between Imperial Petroleum Inc. and Stealth Maritime S.A.
10.2    New Senior Secured Credit Facility
10.3    Equity Compensation Plan
14.1    Code of Business Conduct and Ethics
21.1*    Significant Subsidiaries of Imperial Petroleum Inc.
23.1    Consent of Deloitte Certified Public Accountants S.A.
23.2    Consent of Reeder & Simpson. P.C. (included in Exhibits 5.1 and 8.1)
23.3*    Consent of John Kostoyannis, Nominee for Director
23.4*    Consent of George Xiradakis, Nominee for Director
23.5    Consent of Morgan, Lewis & Bockius LLP (included in Exhibit 8.2)
24.1    Powers of Attorney (included in the signature pages hereto)

 

*

Previously filed.

 

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Item 9. Undertakings

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Athens, Greece on the 12th day of November, 2021.

 

IMPERIAL PETROLEUM INC.

(Registrant)

By:   /s/ Harry N. Vafias
Name:   Harry N. Vafias
Title:   Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Harry N. Vafias and Ifigeneia Sakellari, or either of them, with full power to act alone, his or her true lawful attorneys-in-fact and agents, with full powers of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any or all amendments or supplements to this registration statement, whether pre-effective or post-effective, including any subsequent registration statement for the same distribution which may be filed under Rule 462(b) under the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the SEC, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing necessary to be done, as fully for all intents and purposes as he or she might or could do in person hereby ratifying and confirming all that said attorneys-in-fact and agents, or his substitute, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities indicated on November 12, 2021

 

Signature    Title

/s/ Harry N. Vafias

   Chief Executive Officer and Director (Principal Executive Officer) Financial Officer and Principal Accounting Officer)

Harry N. Vafias

  

/s/ Ifigeneia Sakellari

   Interim Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

Ifigeneia Sakellari

  


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Authorized Representative

Pursuant to the requirements of the Securities Act of 1933, as amended, the undersigned, the duly authorized representative of the Registrant in the United States, has signed this registration statement on Form F-1 in the City of Newark, State of Delaware, on November 12, 2021.

 

 

Puglisi & Associates

By:

 

/s/ Donald J. Puglisi

Name:

  Donald J. Puglisi

Title:

  Managing Director

Exhibit 3.1

 

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ARTICLE OF INCORPPOATION IMPERIAL PETROLEUM INC. Reg. No. 109196 REPUBLIC OF THE MARSHALL ISLANDS


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REPUBLIC OF THE MARSHALL ISLANDS OFFICE OF THE REGISTRAR OF CORPORATIONS ENDORSEMENT CERTIFICATE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5 OF THE BUSINESS CORPORATIONS ACT OF THE REPUBLIC OF THE MARSHALL ISLANDS 1990 I CERTIFY that I have endorsed “FILED” upon the Original Articles of Incorporation of IMPERIAL PETROLEUM INC. Reg. No. 109196 as of May 14, 2021 being the date upon which existence of said corporation commenced. I FURTHER CERTIFY that a Duplicate of said Articles of Incorporation has been filed with this office. â–Given under my hand and seal on this May 14, 2021. Tanya Lawson Deputy Registrar of Corporations


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APOSTILLE (Hague Convention of 5 October 1961/ Convention de la Have du 5 Octobre 1961) 1. Country: The Republic of the Marshall Islands This Public Document 2. has been signed by T. Lawson 3. acting in the capacity of: Deputy Registrar, Republic of the Marshall Islands 4. bears the seal/stamp of: Registrar of Corporations, Republic of the Marshall Islands 5. at: Piraeus, Greece 6. on: May 14, 2021 7. by: Special Agent of the Republic of the Marshall Islands 8. Number: P-06515-05/2021 9. Seal /stamp: 10: Signature: figeneia Diamanti, Special Agent of the Republic of the Marshall Islands


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ARTICLES OF INCORPORATION

OF

IMPERIAL PETROLEUM INC.

INCORPORATED

IN

THE REPUBLIC OF THE MARSHALL ISLANDS

PURSUANT

TO

THE BUSINESS CORPORATIONS ACT

DUPLICATE COPY

This document was filed in accordance

with section 5 of the Business

Corporations Act on

NON RESIDENT

May 14, 2021

 

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Tanya Lawson

Deputy Registrar of Corporations

  


ARTICLES OF INCORPORATION

OF

IMPERIAL PETROLEUM INC.

PURSUANT TO THE MARSHALL ISLANDS BUSINESS CORPORATIONS ACT

The undersigned, for the purpose of forming a corporation pursuant to the provisions of the Marshall Islands Business Corporations Act, does hereby make, subscribe, acknowledge and file with the Registrar of Corporations this instrument for that purpose, as follows:

 

A.

The name of the Corporation shall be:

IMPERIAL PETROLEUM INC.

 

B.

The purpose of the Corporation is to engage in any lawful act or activity for which corporations may now or hereafter be organized under the Marshall Islands Business Corporations Act and without in any way limiting the generality of the foregoing, the corporation shall have the power:

(1) To purchase or otherwise acquire, own, use, operate, pledge, hypothecate, mortgage, lease, charter, sub-charter, sell, build, and repair steamships, motorships, tankers, sailing vessels, yachts, tugs, lighters, barges, and all other vessels and craft of any and all motive power whatsoever, including landcraft, and any and all means of conveyance and transportation by land or water, together with engines, boilers, machinery equipment and appurtenances of all kinds, including masts, sails, boats, anchors, cables, tackle, furniture and all other necessities thereunto appertaining and belonging, together with all materials, articles, tools, equipment and appliances necessary, suitable or convenient for the construction, equipment, use and operation thereof; and to equip, furnish, and outfit such vessels and ships.

(2) To engage in ocean, coastwise and inland commerce, and generally in the carriage of freight, goods, cargo in bulk, passengers, mail and personal effects by water between the various ports of the world and to engage generally in waterborne commerce.

(3) To purchase or otherwise acquire, own, use, operate, lease, build, repair, sell or in any manner dispose of docks, piers, quays, wharves, dry docks, warehouses and storage facilities of all kinds, and any property, real, personal and mixed, in connection therewith.

 

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(4) To act as ship’s husband, ship brokers, custom house brokers, ship’s agents, manager of shipping property, freight contractors, forwarding agents, warehousemen, wharfingers, ship chandlers, and general traders.

(5) To enter into, make and perform contracts of every kind and description with any person, firm, association, corporation, municipality, county, state, body politic, or government or colony or any dependency thereof.

(6) To appoint or act as an agent, broker, or representative, general or special, in respect of any or all of the powers expressed herein or implied hereby; to appoint agents, brokers or representatives.

(7) To carry on its business, to have one or more offices, and to exercise its powers in foreign countries, subject to the laws of the particular country.

(8) To borrow or raise money and contract debts, when necessary, for the transaction of its business or for the exercise of its corporate rights, privileges or franchise or for any other lawful purpose of its incorporation; to draw, make, accept, endorse, execute and issue promissory notes, bills of exchange, bonds, debentures, and other instruments and evidences of indebtedness either secured by mortgage, pledge, deed of trust, or otherwise, or unsecured.

(9) To give a guarantee not in furtherance of corporate purposes when authorized by majority vote of shareholders entitled to vote thereon and, when authorized by like vote, such guarantee may be secured by mortgage or pledge or creation of security interest in corporate property.

(10) To purchase or otherwise acquire, hold, own, mortgage, sell, convey, or otherwise dispose of real and personal property of every class and description.

(11) To apply for, secure by purchase or otherwise hold, use, sell, assign, lease, grant licenses in respect of, mortgage or otherwise dispose of letters patent, patent rights, licenses, privileges, inventions, improvements and processes, copyrights, trademarks, and trade names, relative to or useful in connection with any business of this corporation.

 

 

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(12) To purchase or otherwise acquire, underwrite, hold, pledge, turn to account in any manner, sell, distribute, or otherwise dispose of and generally to deal in, bonds, debentures, notes, evidences of indebtedness, shares of stock, warrants, rights, certificates, receipts or any other instruments or interests in the nature of securities created or issued by any person, partnership, firm, corporation, company, association, or other business organizations, foreign or domestic, or by any domestic or foreign governmental, municipal or other public authority, and exercise as holder or owner of any such securities all rights, powers and privileges in respect thereof; to do any and all acts and things for the preservation, protection, improvement and enhancement in value of any such securities and to aid by loan, subsidy, guaranty or otherwise those issuing, creating or responsible for any such securities; to acquire or become interested in any such securities by original subscription, underwriting, loan, participation in syndicates or otherwise, and irrespective of whether such securities be fully paid or subject to future payments; to make payments thereon as called for or in advance of calls or otherwise and to underwrite or subscribe for the same conditionally or otherwise and either with a view to resale or investment or for any other lawful purpose; and in connection therewith or otherwise to acquire and hold membership in or otherwise secure trading privileges on any board of trade, exchange or other similar institution where any securities are dealt in and to comply with the rules of any such institution; as used herein the term “securities” shall include bonds, debentures, notes, evidences of indebtedness, shares of stock, warrants, options, rights, certificates, receipts or any other instruments or interests in the nature of securities of any kind whatsoever which a corporation organized under the Business Corporations Act of the Republic of the Marshall Islands is legally permitted to acquire or deal in, by whomsoever issued or created; the term “person” shall include any person, partnership, firm, corporation, company, association or other business organization, domestic or foreign governmental, municipal or other public authority.

(13) To purchase or otherwise acquire, hold, pledge, turn to account in any manner, import, export, sell, distribute or otherwise dispose of, and generally to deal in, commodities and products (including any future interest therein) and merchandise, articles of commerce, materials, personal property and real property of every kind, character and description whatsoever, and any interest therein, either as principal or as a factor or broker, or as commercial, sales, business or financial agent or representative, general or special, or, to the extent permitted by the laws of the Marshall Islands, in any other capacity whatsoever for the account of any domestic or foreign person or public authority, and in connection therewith or otherwise to acquire trading privileges on any board of trade, exchange or other similar institution where any such products or commodities or personal or real property are dealt in, and to comply with the rules of any such institution.

 

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(14) To engage in any mercantile, manufacturing or trading business of any kind or character whatsoever and to do all things incidental to such business.

(15) To carry on the business of warehousing and all business incidental thereto, including the issuing of warehouse receipts, negotiable or otherwise, and the making of advances or loans upon the security of goods warehoused.

(16) To purchase, lease or otherwise acquire, hold, own, mortgage, pledge, hypothecate, build, erect, construct, maintain and operate, develop, improve and sell, lease or otherwise dispose of lands, and improvements, warehouses, factories, buildings, structures, piers, wharves, mills, dams, stores and dwellings and all other property and things of whatsoever kind and nature, real, personal or mixed, tangible or intangible, suitable or necessary in connection with any of the purposes hereinabove or hereinafter set forth, or otherwise deal with or in any such properties.

(17) To cause to be formed, merged, reorganized or liquidated, and to promote, take charge of, in any way permitted by law, the formation, merger, reorganization or liquidation of any person.

(18) To acquire all or any part of the good will, rights, property and business of any person, heretofore or hereafter engaged in any business similar to any business which the Corporation has power to conduct, to pay for the same in cash or in the securities of the Corporation or otherwise, to hold, utilize and in any manner dispose of the whole or any part of the rights and property so acquired, and to assume in connection therewith any liabilities of any such person, and conduct in any lawful manner the whole or any part of the business thus acquired.

(19) To make, enter into and carry out any arrangements with any person or public authority, to obtain therefrom or otherwise to acquire by purchase, lease, assignment or otherwise any powers, rights, privileges, immunities, franchises, guarantees, grants and concessions, to acquire, hold, own, exercise, exploit, dispose of and realize upon the same, and to undertake and prosecute any business dependent thereon provided it is such a business as this Corporation may engage in; and to promote, cause to be formed and aid in any way any person for any such purpose.

 

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(20) To make and issue trust receipts, deposit receipts, certificates of deposit, interim receipts, or any other receipts for, or certificates of deposit for, any securities or interest therein; to acquire and exercise any proxies or powers of attorney or other privileges pertaining to any securities or interest therein.

(21) To render advisory, investigatory, supervisory, managerial or other like services, permitted to corporations, in connection with the promotion, organization, reorganization, recapitalization, liquidation, consolidation or merger of any person or in connection with the issuance, underwriting, sale or distribution of any securities issued in connection therewith or incidental thereto; and to render general investment advisory or financial advisory or managerial services to any person or public authority.

(22) To cause or allow the legal title, or any legal or equitable estate, right or interest in any property, whether real, personal or mixed, owned, acquired, controlled or operated by the Corporation, to remain or to be vested or registered in the name of or operated by, any person, formed or to be formed, either upon trust for or as agents or nominees of, this Corporation, or upon any other proper terms or conditions which the Board of Directors may consider for the benefit of the Corporation.

(23) To enter into any lawful arrangements for sharing profits, union of interest, reciprocal concession or cooperation with any person or public authority, in the carrying on of any similar business which the Corporation is authorized to carry on, or any business or transaction deemed necessary, convenient or incidental to carrying out any of the purposes of the Corporation.

(24) To the extent suitable or necessary to carry out any of the purposes hereinbefore or hereinafter set forth, but only in so far as the same may be permitted to be done by a corporation organized under the Business Corporations Act of the Republic of the Marshall Islands, to buy, sell and deal in foreign exchange.

(25) To invest its uninvested funds and/or surplus from time to time to such extent as the Corporation may deem advisable in securities or in call and/or in time loans or otherwise, upon such security, if any, as the Board of Directors may determine, but the Corporation shall not engage in the banking business or exercise banking powers, and nothing in these Articles contained shall be deemed to authorize it to do so.

(26) To issue, purchase, hold, sell, transfer, reissue or cancel the shares of its own capital stock or any securities of the Corporation in the manner and to the extent now or hereafter permitted by the Business Corporations Act of the Republic of the Marshall Islands; and provided further that shares of its own capital stock owned by the Corporation shall not be voted upon directly or indirectly, nor counted as outstanding for the purpose of any stockholders’ quorum or vote.

 

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(27) To act in any and all parts of the world in any capacity whatsoever as agent, broker, or representative, general or special, for any person or public authority.

(28) To do any and all of the acts and things herein set forth, as principal, factor, agent, contractor, or otherwise, either alone or in company with others; and in general to carry on any other similar business which is incidental or conducive or convenient or proper to the attainment of the foregoing purposes or any of them and which is not forbidden by law; and to exercise any and all powers which now or hereafter may be lawful for the Corporation to exercise under the laws of the Marshall Islands; to establish and maintain offices and agencies wherever situated; and to exercise any or all of its corporate powers and rights.

 

C.

The registered address of the Corporation in the Marshall Islands is Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960. The name of the Corporation’s registered agent at such address is The Trust Company of the Marshall Islands, Inc.

 

D.

The aggregate number of shares of stock that the Corporation is authorized to issue is Five Hundred (500) registered share(s) without par value .

 

E.

The Corporation shall have every power which a corporation now or hereafter organized under the Marshall Islands Business Corporations Act may have.

 

F.

The name and address of the incorporator is;

 

Name

  

Post Office Address

   P.O. Box 1405
Majuro Nominees Ltd    Majuro
   Marshall Islands

 

G.

The Board of Directors as well as the shareholders of the Corporation shall have the authority to adopt, amend or repeal the bylaws of the Corporation.

 

H.

Corporate existence shall begin upon filing these Articles of Incorporation with the Registrar of Corporations as of the filing date stated on these Articles.

 

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IN WITNESS WHEREOF, I have executed this instrument on May 14, 2021.

 

by:   LOGO
 

James Myazoe, Authorized Signatory Majuro Nominees Ltd., Incorporator

On May 14, 2021, James Myazoe, known to me to be the individual described in and who executed the foregoing instrument, duly acknowledged that the execution thereof was his act and deed.

 

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   Denise M. Francis
   Special Agent
  
  
  
  
  
  

 

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ARTICLES OF AMENDMENT

TO

ARTICLES OF INCORPORATION

OF

IMPERIAL PETROLEUM INC.

Under Section 90 of the

Republic of the Marshall Islands Business Corporations Act

Imperial Petroleum Inc. (the “Corporation”), a corporation organized and existing under the Marshall Islands Business Corporations Act (“BCA”), certifies:

I. The name of the Corporation is

IMPERIAL PETROLEUM INC.

II. The date of filing of the Corporation’s Articles of Incorporation with the Registrar of Corporations of the Republic of the Marshall Islands was May 14, 2021.

III. The Articles of Incorporation of the Corporation are hereby amended by amending and restating Section D of the Articles of Incorporation such that Section D reads in its entirety as follows:

D: The aggregate number of shares of stock that the Corporation is authorized to issue is two billion two hundred million (2,200,000,000) registered shares with a par value of one cent (US $0.01), consisting of two billion (2,000,000,000) registered shares of common stock with a par value of one cent (US $0.01) (the “Common Stock”) and two hundred million (200,000,000) registered shares of preferred stock with a par value of one cent (US $0.01) (the “Preferred Stock”).

(a) Preferred Stock. The designations and the powers, preferences and rights, and the qualifications, limitations or restrictions thereof, in respect of the Preferred Stock are as follows:

The Board of Directors is expressly authorized, by resolution or resolutions, to provide, out of the unissued shares of the Preferred Stock, for series of the Preferred Stock. The Board of Directors has authority to fix, by resolution or resolutions, the following provisions of the shares thereof:

 

  (i)

the designation of such series, the number of shares that constitute such series;

 

  (ii)

whether the shares of such series shall have voting rights, in addition to any voting rights provided by law, and, if so, the terms of such voting rights (which may be special voting rights), whether the shares of such series shall have one vote per share or less than or more than one vote per share, whether the holders of such series shall be entitled to vote on


  certain matters as a separate class (which for such purpose may be comprised solely of such series or of such series and one or more other series or classes of stock of the Corporation), whether all the shares of such series entitled to vote on a particular matter shall be deemed to be voted on such matter in the manner that a specified portion of the voting power of the shares of such series or separate class are voted and the relation which such voting rights shall bear to the voting rights of any other class or any other series of this class;

 

  (iii)

the annual dividend rate (or method of determining such rate), if any, payable on such series, the basis on which such holders shall be entitled to receive dividends (which may include, without limitation, a right to receive such dividends as may be declared on the shares of such series by the Board of Directors, a right to receive such dividends, or any portion or multiple thereof, as may be declared on the Common Stock or any other class of stock or, in addition to or in lieu of any other right to receive dividends, a right to receive dividends at a particular rate or at a rate determined by a particular method, in which case such rate or method of determining such rate may be set forth), the form of such dividend, the conditions and the dates upon which such dividends shall be payable, and the preference or relation which such dividends shall bear to the dividends payable on any other class or any other series of this class;

 

  (iv)

whether dividends on the shares of such series shall be cumulative and, in the case of shares of a series having cumulative dividend rights, the date or dates (or method of determining the date or dates) from which dividends on the shares of such series shall be cumulative;

 

  (v)

whether the shares of such series shall be subject to redemption in whole or in part, at the option of the Corporation or at the option of the holder or holders thereof or upon the happening of a specified event or events and, if so, the times, the prices therefor (in cash, securities or other property or a combination thereof) and any other terms and conditions of such redemption;

 

  (vi)

the amount or amounts payable upon shares of such series upon, and the rights of the holders of such series in, the voluntary or involuntary liquidation, dissolution or winding up of the Corporation and the relative rights of priority, if any, upon payment of the shares of such series;

 

  (vii)

whether the shares of such series shall be subject to the operation of a retirement or sinking fund and, if so, the extent to which and the manner in which any such retirement or sinking fund shall be applied to the purchase or redemption of the shares of such series for retirement or other corporate purposes and the terms and provisions relative to the

 

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  operation thereof, including the price or prices (in cash, securities or other property or a combination thereof), the period or periods within which and any other terms and conditions upon which the shares of such series shall be redeemed or purchased, in whole or in part, pursuant to the operation of such retirement or sinking find;

 

  (viii)

whether the shares of such series shall be convertible into, or exchangeable for, at the option of the holder or the Corporation or upon the happening of a specified event, shares of stock of any other class or of any other series of this class or any other securities or property of the Corporation or any other entity, and, if so, the price or prices (in cash, securities or other property or a combination thereof) or the rate or rates of conversion or exchange and the method, if any, of adjusting the same;

 

  (ix)

the limitations and restrictions, if any, to be effective while any shares of such series are outstanding upon the payment of dividends or the making of other distributions on, and upon the purchase, redemption or other acquisition by the Corporation of, the Common Stock, any other series of the Preferred Stock or any other class of capital stock;

 

  (x)

the conditions or restrictions, if any, upon the creation of indebtedness of the Corporation or upon the issue of any additional stock, including additional shares of such series or of any other series of the Preferred Stock or of any other class of capital stock; and

 

  (xi)

any other powers, preferences or rights, or any qualifications, limitations or restrictions thereof.

Except as otherwise provided by such resolution or resolutions, all shares of the Preferred Stock shall be of equal rank. All shares of any one series of the Preferred Stock shall be identical in all respects to all other shares of such series, except that shares of any one series issued at different times may differ as to the dates from which dividends thereon shall be cumulative.

Except as otherwise provided by such resolution or resolutions, all shares of the Preferred Stock that are converted, redeemed, repurchased, exchanged or otherwise acquired by the Corporation shall be cancelled and retired and shall not be reissued.

For all purposes, these Articles of Incorporation shall include each statement of designation (if any) setting forth the terms of a series of the Preferred Stock.

(b) Options, Warrants and Other Rights. The Board of Directors is expressly authorized, by resolution or resolutions, to create and issue options, warrants and other rights from time to time entitling the holders thereof to purchase securities or other property of the Corporation or of any other entity, including any class or series of stock of the Corporation or of any other entity and whether or not in

 

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connection with the issuance or sale of any securities or other property of the Corporation, for such consideration (if any), at such times and upon such other terms and conditions as may be determined or authorized by the Board of Directors and set forth in one or more agreements or instruments. Among other things and without limitation, such terms and conditions may provide for the following:

 

  (i)

adjusting the number or exercise price of such options, warrants or other rights or the amount or nature of the securities or other property receivable upon exercise thereof in the event of a subdivision or combination of any securities, or a recapitalization, of the Corporation, the acquisition by any person of beneficial ownership of securities representing more than a designated percentage of the voting power of any outstanding series, class or classes of securities, a change in ownership of the Corporation’s securities or a merger, statutory share exchange, consolidation, reorganization, sale of assets or other occurrence relating to the Corporation or any of its securities, and restricting the ability of the Corporation to enter into an agreement with respect to any such transaction absent an assumption by another party or parties thereto of the obligations of the Corporation under such options, warrants or other rights;

 

  (ii)

restricting, precluding or limiting the exercise, transfer or receipt of such options, warrants or other rights by any person that becomes the beneficial owner of a designated percentage of the voting power of any outstanding series, class or classes of securities of the Corporation or any direct or indirect transferee of such a person, or invalidating or voiding such options, warrants or other rights held by any such person or transferee; and

 

  (iii)

permitting the Board of Directors (or certain directors specified or qualified by the terms of the governing instruments of such options, warrants or other rights) to call, redeem, repurchase, terminate or exchange such options, warrants or other rights.

This paragraph shall not be construed in any way to limit the power of the Board of Directors to create and issue options, warrants or other rights.

(c) Preemptive and Similar Rights. Except as otherwise provided in a statement of designation establishing the terms of a series of the Preferred Stock, no holder of shares of the Corporation shall, by reason thereof, have any preemptive or other preferential right to acquire, by subscription or otherwise, any unissued or treasury stock of the Corporation, or any other share of any class or series of the Corporation’s shares to be issued because of an increase in the authorized capital stock of the Corporation, or any bonds, certificates of indebtedness, debentures or other securities convertible into shares of the Corporation. However, the Board of Directors may issue or dispose of any such unissued or treasury stock, or any such additional authorized issue of new shares or securities convertible into shares upon such terms as the Board of Directors may, in its discretion, determine, without offering to shareholders then of record, or any class of shareholders, any thereof, on the same terms or any terms.

 

4


IV. Upon the filing of these Articles of Amendment with the Registrar of Corporations of the Republic of Marshall Islands, each share of common stock without par value authorized under the original Articles of Incorporation, which these Articles of Amendment amend, and which is outstanding immediately before the filing hereof, shall automatically, without further action on behalf of the Corporation or any holder of common stock without par value, be reclassified and converted, so that upon the filing hereof each outstanding share of common stock shall be converted to one validly, fully paid and non-assessable share of common stock, par value of one cent (US $0.01) per share, authorized hereunder.

V. This amendment to the Articles of Incorporation was duly adopted in accordance with Section 88(1) of the Marshall Islands Business Corporations Act (the “BCA”). The Board of Directors of the Corporation adopted resolutions by unanimous written consent in accordance with Section 55(4) of the BCA setting forth and declaring advisable that these Articles of Amendment be adopted. In lieu of a meeting and a vote of the shareholders of the Corporation, unanimous written consent to these Articles of Amendment has been given by the holders of all of the outstanding stock of the Corporation entitled to vote in accordance with Section 67 of the BCA and such consent has been filed with the minutes of the proceedings of shareholders of the Corporation.

 

5


IN WITNESS WHEREOF, Imperial Petroleum Inc. has caused these Articles of Amendment to its Articles of Incorporation to be signed as of the 5th day of November 2021, by its President, who hereby affirms and acknowledges, under penalty of perjury, that these Articles of Amendment are the act and deed of the Corporation and that the facts stated herein are true.

 

IMPERIAL PETROLEUM INC.

By:

 

/s/ Harry N. Vafias

Name:

 

Harry N. Vafias

Title:

 

President

 

6

Exhibit 3.2

BYLAWS

OF

IMPERIAL

PETROLEUM

INC.

As Adopted on 14th May 2021

ARTICLE I

OFFICES

The principal place of business of the Corporation shall be at such place or places as the Directors shall from time to time determine. The Corporation may also have an office or offices at such other places within or without the Marshall Islands as the Board of Directors may from time to time appoint or the business of the Corporation may require.

ARTICLE II

SHAREHOLDERS

Section 1. Annual Meeting: The annual meeting of shareholders of the Corporation shall be held on such day and at such time and place within or without the Marshall Islands as the Board of Directors may determine for the purpose of electing Directors and of transacting such other business as may properly be brought before the meeting.

Section 2. Special Meeting: Special meetings of shareholders, unless otherwise prescribed by law, may be called for any purpose or purposes at any time by the order of the Board of Directors or by the Secretary or any other designated officer whenever required in writing to do so by shareholders owning not less than one-tenth of all the outstanding shares of the Corporation entitled to vote at such meeting. Such request shall state the purpose or purposes of the proposed special meeting. Such meeting shall be held at such place and on such date and at such time as may be designated in the notice thereof by the officer of the Corporation calling any such meeting. The business transacted at any special meeting shall be limited to the purposes stated in the notice.

Section 3. Notice of Meetings: Notice of every annual and special meeting of shareholders, other than any meeting the giving of notice of which is otherwise prescribed by law, stating the date, time, place and purpose thereof, and in the case of special meetings, the name of the person or persons at whose direction the notice is being issued, shall be given personally or sent by mail, telefax, telegraph, cablegram, telex, or teleprinter at least fifteen (15) but not more that sixty (60) days before such meeting, to each shareholder of record entitled to vote thereat and to each shareholder of record who, by reason of any action proposed at such meeting would be entitled to have his/her/its shares appraised if such action were taken, and the notice shall include a statement of that purpose and to that effect. If mailed, notice shall


be deemed to have been given when deposited in the mail, directed to the shareholder at his/her/its address as the same appears on the record of shareholders of the Corporation or at such address as to which the shareholder has given notice to the Secretary. Notice of a meeting need not be given to any shareholder who submits a signed waiver without protesting prior to the conclusion thereof the lack of notice to him/her/it. If the Corporation shall issue any class of bearer shares, notice for all meetings shall be given in the manner provided in the Articles of Incorporation.

Section 4. Quorum: At all meetings of shareholders, except as otherwise expressly provided by law, there must be present either in person or by proxy shareholders holding at least a majority of the shares issued and outstanding and entitled to vote at such meeting in order to constitute a quorum, but if less than a quorum is present, a majority of those shares present either in person or by proxy shall have power to adjourn any meeting until a quorum shall be present.

Section 5. Voting: If a quorum is present, and except as otherwise expressly provided by law, the affirmative vote of a majority of the shares of stock represented at the meeting shall be the act of the shareholders. At any meeting of shareholders each shareholder entitled to vote any shares on any matter to be voted upon at such meeting shall be entitled to one vote on such matter for each such share, and may exercise such voting right whether in person or by proxy. Any action required or permitted to be taken at a meeting, may be taken without a meeting if a consent in writing, setting forth the action so taken, is signed by all of the shareholders entitled to vote with respect to the subject matter thereof.

Section 6. Fixing of Record Date: The Board of Directors may fix a time not more than sixty (60) nor less than fifteen (15) days prior to the date of any meeting of shareholders, or more than sixty (60) days prior to the last day on which the consent or dissent of shareholders may be expressed for any purpose without a meeting, as the time as of which shareholders entitled to notice of and to vote at such a meeting or whose consent or dissent is required or may be expressed for any purpose, as the case may be, shall be determined, and all persons who were holders of record of voting shares at such time and no others shall be entitled to notice of and to vote at such meeting or to express their consent or dissent, as the case may be. The Board of Directors may fix a time not exceeding sixty (60) days preceding the date fixed for the payment of any dividend, the making of any distribution, the allotment of any rights or the taking of any other action, as a record time for the determination of the shareholders entitled to receive any such dividend, distribution, or allotment or for the purpose of such other action.

ARTICLE III

DIRECTORS

Section 1. Number: The affairs, business, and property of the Corporation shall be managed by a Board of Directors to consist of at least one (1) Director. Within the limits fixed by these bylaws, the number of Directors may be determined either by the vote of a majority of the entire Board of Directors or by vote of the shareholders. The Directors need not be residents of the Marshall Islands or shareholders of the Corporation. Corporations may, to the extent permitted by law, be elected Directors.

Section 2. How Elected: Except as otherwise provided by law or Section 4 of this Article, the Directors of the Corporation (other than the first Board of Directors if named in the Articles of Incorporation or designated by the Incorporator) shall be elected at the annual meeting of shareholders. Each Director shall be elected to serve until the next annual meeting of shareholders and until his/her/its successor shall have been duly elected and qualified, except in the event of his/her/its death, resignation, removal, or the earlier termination of his/her/its term of office.

Section 3. Removal: Any or all of the Directors may be removed, with or without cause, by vote of the shareholders. Any Director may be removed for cause by action of the Board of Directors.


Section 4. Vacancies: Vacancies in the Board of Directors occurring by death, resignation, creation of new directorship, failure of the shareholders to elect the whole Board of Directors at any annual election of Directors, or for any other reason including removal of Directors for cause, may be filled either by the affirmative vote of a majority of the remaining Directors then in office, although less than a quorum, at any special meeting called for that purpose or at any regular meeting of the Board of Directors, except as otherwise prescribed by law or unless the Articles of Incorporation provide that such vacancies or newly created directorships shall be filled by vote of the shareholders. Vacancies occurring by removal of Directors without cause may be filled only by vote of the shareholders.

Section 5. Regular Meeting: Regular meetings of the Board of Directors may be held at such time and place as may be determined by resolution of the Board of Directors and no notice shall be required for any regular meeting. Except as otherwise provided by law, any business may be transacted at any regular meeting.

Section 6. Special Meeting: Special meetings of the Board of Directors may, unless otherwise prescribed by law, be called from time to time by the Secretary, or any officer of the Corporation who is also a Director. The Secretary or any other designated officer shall call a special meeting of the Board upon written request directed by any two (2) Directors stating the time, place, and purpose of such special meeting. Special meetings of the Board of Directors shall be held on a date and at such time and at such place as may be designated in the notice thereof by the officer calling the meeting.

Section 7. Notice of Special Meeting: Notice of the date, time and place of each special meeting of the Board of Directors shall be given to each Director at least forty-eight (48) hours prior to such meeting, unless the notice is given orally or delivered in person, in which case it shall be given at least twenty-four (24) hours prior to such meeting. For the purpose of this section, notice shall be deemed to be duly given to a Director if given personally (including by telephone) or if such notice is delivered to such Director by mail, telegraph, telefax, cablegram, telex, or teleprinter to his/her/its last known address. Notice of a meeting need not be given to any Director who submits a signed waiver of notice, whether before or after the meeting, or who attends the meeting without protesting, prior to the conclusion thereof, the lack of notice to him/her/it.

Section 8. Quorum: A majority of the directors at the time in office, present in person or by proxy or by communication equipment, shall constitute a quorum for the transaction of business.

Section 9. Voting: The vote of the majority of the Directors, present in person or by proxy, in communication by telefax or conference telephone, at a meeting at which a quorum is present shall be the act of the Directors. Any action required or permitted to be taken at a meeting may be taken without a meeting if all members of the Board of Directors consent thereto in writing.

Section 10. Compensation of Directors and Members of Committees: The Board of Directors may from time to time, in its discretion, fix the amounts which shall be payable to members of the Board of Directors and to members of any committee, for attendance at the meetings of the Board of Directors or of such committee and for services rendered to the Corporation.

ARTICLE IV

COMMITTEES

Section 1. Executive Committee and Other Committees: The Board of Directors may, by resolution or resolutions passed by a majority of the entire Board of Directors, designate from among its members an Executive Committee to consist of one (1) or more of the directors of the Corporation, which to the


extent provided in said resolution or resolutions, or in these bylaws, shall have and may exercise, to the extent permitted by law, the powers of the Board of Directors in the management of the business and affairs of the Corporation, and may have power to authorize the seal of the Corporation to be affixed to all papers which may require it. In addition, the Board of Directors may, by resolution or resolutions passed by a majority of the entire Board of Directors designate from among its members other committees to consist of one (1) or more of the directors of the Corporation, each of which shall perform such action and have such authority and powers as shall be delegated to it by said resolution or resolutions or as provided for in these bylaws, except that only the Executive Committee may have and exercise the powers of the Board of Directors. Members of the Executive Committee and any other committee shall hold office for such period as may be prescribed by the vote of a majority of the entire Board of Directors. Vacancies in membership of such committees shall be filled by vote of the Board of Directors. Committees may adopt their own rules of procedure and may meet at stated times or on such notice as they may determine. Each committee shall keep a record of its proceedings and report the same to the Board when requested.

ARTICLE V

OFFICERS

Section 1. Number and Designation: The Board of Directors shall appoint a Secretary. In addition, the Board of Directors may appoint such other officers as it may deem necessary. Officers may be of any nationality, need not be residents of the Marshall Islands and may be, but are not required to be, Directors. Officers may be natural persons, corporations or other business entities. Any two (2) or more offices may be held by the same person, corporation or business entity.

Officers shall be appointed annually by the Board of Directors at its first meeting following the annual election of Directors, but in the event of the failure of the Board of Directors to so appoint any officer, such officer(s) may be appointed at any subsequent meeting of the Board of Directors. The salaries of the officers and any other compensation paid to them shall be fixed from time to time by the Board of Directors. The Board of Directors may at any meeting appoint additional officers. Each officer shall hold office until the first meeting of the Board of Directors following the next annual election of Directors and until his/her/its successor shall have been duly appointed and qualified, except in the event of the earlier termination of his/her/its term of office, through death, resignation, removal or otherwise. Any officer may be removed by the Board of Directors at any time with or without cause. Any vacancy in an office may be filled for the unexpired portion of the term of such office by the Board of Directors at any regular or special meeting.

Section 2. President or Managing Director (if applicable): The President or Managing Director shall be the Chief Executive Officer of the Corporation and shall have general management of the affairs of the Corporation together with the powers and duties usually incident to the office of President or Managing Director, except as specifically limited by appropriate written resolution of the Board of Directors and shall have such other powers and perform such other duties as may be assigned to him/her/it by the Board of Directors. The President or Managing Director shall preside at all meetings of shareholders at which he/she/it is present and, if he/she/it is a Director, at all meetings of the Directors.

Section 3. Treasurer or Managing Director (if applicable): The Managing Director or, if there shall be no Managing Director, the Treasurer shall have general supervision over the care and custody of the funds, securities, and other valuable effects of the Corporation and shall deposit the same or cause the same to be deposited in the name of the Corporation in such depositories as the Board of Directors may designate, shall disburse the funds of the Corporation as may be ordered by the Board of Directors, shall have supervision over the accounts of all receipts and disbursements of the Corporation, shall, whenever required by the Board of Directors, render or cause to be rendered financial statements of the Corporation, shall have the power and perform the duties usually incident to the office of Treasurer, and shall have such powers and perform such other duties as may be assigned to him/her/it by the Board of Directors.


Section 4. Secretary: The Secretary shall act as Secretary of all meetings of the shareholders and of the Board of Directors at which he/she/it is present, shall have supervision over the giving and serving of notices of the Corporation, shall be the custodian of the corporate records and of the corporate seal, if any, of the Corporation, shall be empowered to affix the corporate seal to those documents, the execution of which, on behalf of the Corporation under its seal, is duly authorized and when so affixed may attest the same, and shall exercise the powers and perform such other duties as may be assigned to him/her/it by the Board of Directors or an authorized officer.

Section 5. Other Officers: Officers other than those described in Sections 2 through 4 of this Article shall exercise such powers and perform such duties as may be assigned to them by the Board of Directors.

Section 6. Bond: The Board of Directors shall have power to the extent permitted by law, to require any officer, agent or employee of the Corporation to give bond for the faithful discharge

of his/her/its duties in such form and with such surety or sureties as the Board of Directors may deem advisable.

ARTICLE VI

CERTIFICATES FOR SHARES

Section 1. Form and Issuance: The shares of the Corporation shall be represented by certificates in a form meeting the requirements of law and approved by the Board of Directors. Certificates shall be signed by any officer(s) and/or director(s) of the Corporation. These signatures may be facsimiles if the certificate is countersigned by a transfer agent other than the Corporation itself or its employees.

Section 2. Transfer: The Board of Directors shall have power and authority to make such rules and regulations as they may deem expedient concerning the issuance, registration and transfer of certificates representing shares of the Corporation’s stock, and may appoint transfer agents thereof.

Section 3. Lost, Stolen or Destroyed Stock Certificates: The Board of Directors may direct a new certificate or certificates of stock to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of the fact by the person claiming the certificate or certificates of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates to provide a bond to indemnify the Corporation against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or certificates.


ARTICLE VII

DIVIDENDS

Section 1. Declaration and Form: Dividends may be declared in conformity with law by, and at the discretion of, the Board of Directors at any regular or special meeting. Dividends may be declared and paid in cash, stock, or other property of the Corporation.

ARTICLE VIII

CORPORATE SEAL

Section 1. Corporate Seal: The seal of the Corporation, if any, shall be circular in form with the name of the Corporation in the circumference and such other appropriate legend as the Board of Directors may from time to time determine.

ARTICLE IX

FISCAL YEAR

Section 1. Fiscal Year; The fiscal year of the Corporation shall be such period of twelve (12) consecutive months as the Board of Directors may by resolution designate.

ARTICLE X

AMENDMENTS

Section 1. By the Shareholders: These bylaws may be amended, added to, altered or repealed or new bylaws may be adopted, at any regular or special meeting of the shareholders by the affirmative vote of the holders of a majority of the stock present and voting at such meeting provided notice that an amendment is to be considered and acted upon is inserted in the notice or waiver of notice of said meeting.

Section 2. By the Directors: If the Articles of Incorporation so provide, these bylaws may be amended, added to, altered or repealed or new bylaws may be adopted, at any regular or special meeting of the Board of Directors, by the affirmative vote of a majority of the entire Board of Directors, subject, however, to the power of the shareholders to alter, amend or repeal any bylaws as adopted.

Exhibit 3.3

STATEMENT TO AMEND AND RESTATE

ARTICLES OF INCORPORATION OF

IMPERIAL PETROLEUM INC.

UNDER SECTION 93 OF THE

BUSINESS CORPORATIONS ACT

The undersigned, Harry N. Vafias, Chief Executive Officer of Imperial Petroleum Inc., a corporation incorporated under the laws of the Republic of the Marshall Islands, for the purpose of amending and restating the Articles of Incorporation of said Corporation pursuant to section 93 of the Business Corporations Act (the “BCA”), hereby certifies that:

 

  1.

The name of the Corporation is:    IMPERIAL PETROLEUM INC.

 

  2.

The date of filing of the Corporation’s Articles of Incorporation with the Registrar of Corporations of the Republic of the Marshall Islands was May 14, 2021. Articles of Amendment were filed with the Registrar of Corporations of the Republic of the Marshall Islands on November 5, 2021.

 

  3.

The sections affected by the attached Amended and Restated Articles of Incorporation are as follows: a restatement and renumbering of Section A as Section FIRST, an amendment and renumbering of Section B as Section SECOND, an amendment and renumbering of Section C as Section THIRD, a restatement and renumbering of Section D as Section FOURTH, a restatement and renumbering of Section E as Section FIFTH, the omission of Sections F, G and H, and an addition of Sections SIXTH, SEVENTH, EIGHTH, NINTH and TENTH.

 

  4.

The Articles of Incorporation are hereby replaced by the Amended and Restated Articles of Incorporation attached hereto.

 

  5.

These Amended and Restated Articles of Incorporation were duly adopted in accordance with the provisions of Sections 88(1) and 93 of the BCA, the Board of Directors of the Corporation having adopted resolutions by unanimous written consent in accordance with Section 55(4) of the BCA setting forth and declaring advisable that these Amended and Restated Articles of Incorporation be adopted in their entirety. In lieu of a meeting and a vote of the shareholders of the Corporation, unanimous written consent to these Amended and Restated Articles of Incorporation has been given by the holders of all of the outstanding stock of the Corporation entitled to vote in accordance with Section 67 of the BCA and such consent has been filed with the minutes of the proceedings of shareholders of the Corporation.

*****

IN WITNESS WHEREOF, the undersigned has executed these Amended and Restated Articles of Incorporation on this ___ day of _________, 2021, and hereby affirms and acknowledges, under penalty of perjury, that these Amended and Restated Articles of Incorporation are the act and deed of the Corporation and that the facts stated herein are true.

 

 

Name: Harry N. Vafias
Title: Chief Executive Officer


AMENDED AND RESTATED ARTICLES OF INCORPORATION

OF

IMPERIAL PETROLEUM INC.

 

FIRST:

The name of the Corporation shall be:

IMPERIAL PETROLEUM INC.

 

SECOND:

The purpose of the Corporation is to engage in any lawful act or activity relating to the business of chartering, rechartering or operating tankers, drybulk carriers or other vessels or any other lawful act or activity customarily conducted in conjunction with shipping, and any other lawful act or activity approved by the Board of Directors of the Corporation (the “Board of Directors”).

 

THIRD:

The registered address of the Corporation in the Marshall Islands is Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960. The name of the Corporation’s registered agent at such address is The Trust Company of the Marshall Islands, Inc. However, the Board of Directors may establish branches, offices or agencies in any place in the world and may appoint legal representatives anywhere in the world.

 

FOURTH:

The aggregate number of shares of stock that the Corporation is authorized to issue is two billion two hundred million (2,200,000,000) registered shares with a par value of one cent (US $0.01), consisting of two billion (2,000,000,000) registered shares of common stock with a par value of one cent (US $0.01) (the “Common Stock”) and two hundred million (200,000,000) registered shares of preferred stock with a par value of one cent (US $0.01) (the “Preferred Stock”).

(a) Preferred Stock. The designations and the powers, preferences and rights, and the qualifications, limitations or restrictions thereof, in respect of the Preferred Stock are as follows:

The Board of Directors is expressly authorized, by resolution or resolutions, to provide, out of the unissued shares of the Preferred Stock, for series of the Preferred Stock. The Board of Directors has authority to fix, by resolution or resolutions, the following provisions of the shares thereof:

 

  (i)

the designation of such series, and the number of shares that constitute such series;

 

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  (ii)

whether the shares of such series shall have voting rights, in addition to any voting rights provided by law, and, if so, the terms of such voting rights (which may be special voting rights), whether the shares of such series shall have one vote per share or less than or more than one vote per share, whether the holders of such series shall be entitled to vote on certain matters as a separate class (which for such purpose may be comprised solely of such series or of such series and one or more other series or classes of stock of the Corporation), whether all the shares of such series entitled to vote on a particular matter shall be deemed to be voted on such matter in the manner that a specified portion of the voting power of the shares of such series or separate class are voted and the relation which such voting rights shall bear to the voting rights of any other class or any other series of this class;

 

  (iii)

the annual dividend rate (or method of determining such rate), if any, payable on such series, the basis on which such holders shall be entitled to receive dividends (which may include, without limitation, a right to receive such dividends as may be declared on the shares of such series by the Board of Directors, a right to receive such dividends, or any portion or multiple thereof, as may be declared on the Common Stock or any other class of stock or, in addition to or in lieu of any other right to receive dividends, a right to receive dividends at a particular rate or at a rate determined by a particular method, in which case such rate or method of determining such rate may be set forth), the form of such dividend, the conditions and the dates upon which such dividends shall be payable, and the preference or relation which such dividends shall bear to the dividends payable on any other class or any other series of this class;

 

  (iv)

whether dividends on the shares of such series shall be cumulative and, in the case of shares of a series having cumulative dividend rights, the date or dates (or method of determining the date or dates) from which dividends on the shares of such series shall be cumulative;

 

  (v)

whether the shares of such series shall be subject to redemption in whole or in part, at the option of the Corporation or at the option of the holder or holders thereof or upon the happening of a specified event or events and, if so, the times, the prices therefor (in cash, securities or other property or a combination thereof) and any other terms and conditions of such redemption;

 

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  (vi)

the amount or amounts payable upon shares of such series upon, and the rights of the holders of such series in, the voluntary or involuntary liquidation, dissolution or winding up of the Corporation and the relative rights of priority, if any, upon payment of the shares of such series;

 

  (vii)

whether the shares of such series shall be subject to the operation of a retirement or sinking fund and, if so, the extent to which and the manner in which any such retirement or sinking fund shall be applied to the purchase or redemption of the shares of such series for retirement or other corporate purposes and the terms and provisions relative to the operation thereof, including the price or prices (in cash, securities or other property or a combination thereof), the period or periods within which and any other terms and conditions upon which the shares of such series shall be redeemed or purchased, in whole or in part, pursuant to the operation of such retirement or sinking find;

 

  (viii)

whether the shares of such series shall be convertible into, or exchangeable for, at the option of the holder or the Corporation or upon the happening of a specified event, shares of stock of any other class or of any other series of this class or any other securities or property of the Corporation or any other entity, and, if so, the price or prices (in cash, securities or other property or a combination thereof) or the rate or rates of conversion or exchange and the method, if any, of adjusting the same;

 

  (ix)

the limitations and restrictions, if any, to be effective while any shares of such series are outstanding upon the payment of dividends or the making of other distributions on, and upon the purchase, redemption or other acquisition by the Corporation of, the Common Stock, any other series of the Preferred Stock or any other class of capital stock;

 

  (x)

the conditions or restrictions, if any, upon the creation of indebtedness of the Corporation or upon the issue of any additional stock, including additional shares of such series or of any other series of the Preferred Stock or of any other class of capital stock; and

 

  (xi)

any other powers, preferences or rights, or any qualifications, limitations or restrictions thereof.

 

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Except as otherwise provided by such resolution or resolutions, all shares of the Preferred Stock shall be of equal rank. All shares of any one series of the Preferred Stock shall be identical in all respects to all other shares of such series, except that shares of any one series issued at different times may differ as to the dates from which dividends thereon shall be cumulative.

Except as otherwise provided by such resolution or resolutions, all shares of the Preferred Stock that are converted, redeemed, repurchased, exchanged or otherwise acquired by the Corporation shall be cancelled and retired and shall not be reissued.

For all purposes, these Amended and Restated Articles of Incorporation shall include each statement of designation (if any) setting forth the terms of a series of the Preferred Stock.

(b) Options, Warrants and Other Rights. The Board of Directors is expressly authorized, by resolution or resolutions, to create and issue options, warrants and other rights from time to time entitling the holders thereof to purchase securities or other property of the Corporation or of any other entity, including any class or series of stock of the Corporation or of any other entity and whether or not in connection with the issuance or sale of any securities or other property of the Corporation, for such consideration (if any), at such times and upon such other terms and conditions as may be determined or authorized by the Board of Directors and set forth in one or more agreements or instruments. Among other things and without limitation, such terms and conditions may provide for the following:

 

  (i)

adjusting the number or exercise price of such options, warrants or other rights or the amount or nature of the securities or other property receivable upon exercise thereof in the event of a subdivision or combination of any securities, or a recapitalization, of the Corporation, the acquisition by any person of beneficial ownership of securities representing more than a designated percentage of the voting power of any outstanding series, class or classes of securities, a change in ownership of the Corporation’s securities or a merger, statutory share exchange, consolidation, reorganization, sale of assets or other occurrence relating to the Corporation or any of its securities, and restricting the ability of the Corporation to enter into an agreement with respect to any such transaction absent an assumption by another party or parties thereto of the obligations of the Corporation under such options, warrants or other rights;

 

  (ii)

restricting, precluding or limiting the exercise, transfer or receipt of such options, warrants or other rights by any person that becomes the beneficial owner of a designated percentage of the voting power of any outstanding series, class or classes of securities of the Corporation or any direct or indirect transferee of such a person, or invalidating or voiding such options, warrants or other rights held by any such person or transferee; and

 

5


  (iii)

permitting the Board of Directors (or certain directors specified or qualified by the terms of the governing instruments of such options, warrants or other rights) to call, redeem, repurchase, terminate or exchange such options, warrants or other rights.

This paragraph shall not be construed in any way to limit the power of the Board of Directors to create and issue options, warrants or other rights.

(c) Preemptive and Similar Rights. Except as otherwise provided in a statement of designation establishing the terms of a series of the Preferred Stock, no holder of shares of the Corporation shall, by reason thereof, have any preemptive or other preferential right to acquire, by subscription or otherwise, any unissued or treasury stock of the Corporation, or any other share of any class or series of the Corporation’s shares to be issued because of an increase in the authorized capital stock of the Corporation, or any bonds, certificates of indebtedness, debentures or other securities convertible into shares of the Corporation. However, the Board of Directors may issue or dispose of any such unissued or treasury stock, or any such additional authorized issue of new shares or securities convertible into shares upon such terms as the Board of Directors may, in its discretion, determine, without offering to shareholders then of record, or any class of shareholders, any thereof, on the same terms or any terms.

 

FIFTH:

The Corporation shall have every power which a corporation now or hereafter organized under the Business Corporations Act (the BCA”) may have.

 

SIXTH:

There shall be a minimum of three (3) directors and a maximum of fifteen (15) directors who shall constitute the Board of Directors. The number of directors constituting the Board of Directors shall be fixed from time to time by the Board of Directors.

The Board of Directors shall be divided into three classes, designated Class I, Class II and Class III, each of which will consist, as nearly as may be possible, of one-third of the total number of directors constituting the entire Board of Directors. Subject to the preceding sentence, upon the initial creation of the three classes and the creation of any new directorships thereafter, directors shall be assigned to each class in accordance with a resolution or resolutions adopted by the Board of Directors. The initial term of office of the Class I directors shall expire at the first annual meeting of shareholders following the registration of the Common Stock under the U.S. Securities Exchange Act of 1934, as amended (“Exchange Act Registration”), the initial term of office of the Class II directors shall expire at the second annual meeting of shareholders following the Exchange Act Registration, and the initial term of office of the Class III directors shall expire at the third annual meeting of shareholders following the Exchange Act Registration,

 

6


with each such class of directors to hold office until their successors have been duly elected and qualified. At each annual meeting of shareholders, directors elected to succeed the directors whose terms expire at such annual meeting shall be elected to hold office for a term expiring at the annual meeting of shareholders in the third year following the year of their election and until their successors have been duly elected and qualified. If the number of directors is changed, any increase or decrease shall be apportioned among the classes in such manner as the Board of Directors or shareholders of the Corporation shall determine, so as to be consistent with the first sentence of this paragraph, but no decrease in the number of directors may shorten the term of any incumbent director.

No director may be removed except both for cause and with the affirmative vote of the holders of not less than sixty-six and two-thirds percent (66-2/3%) of the voting power of all outstanding shares of stock of the Corporation entitled to vote generally in the election of directors, considered for this purpose as a single class.

Vacancies and newly created directorships resulting from any increase in the authorized number of directors or from any other cause (other than vacancies and newly created directorships which the holders of any class or classes of stock or series thereof are expressly entitled by these Amended and Restated Articles of Incorporation to fill or vacancies of directorships that the holders of any class or series of Preferred Stock are entitled to remove, or as otherwise required by law) shall be filled by, and only by, a vote of not less than the majority of the directors then in office, although less than a quorum, or by the sole remaining director. Any director appointed to fill a vacancy or a newly created directorship shall hold office until the annual meeting of shareholders next succeeding his or her appointment at which the term of office of the class of directors of the director which such director replaced or, in the case of a newly created directorship, to which such director was assigned expires and until his or her successor is elected and qualified or until his or her earlier resignation or removal.

Notwithstanding the foregoing, in the event that the holders of any class or series of the Preferred Stock shall be entitled, voting separately as a class, to elect any directors of the Corporation, then the number of directors that may be elected by such holders voting separately as a class shall be in addition to the number otherwise fixed pursuant to resolution of the Board of Directors, but in no event shall the combined number of directors be greater than the maximum number of directors permitted by these Amended and Restated Articles of Incorporation. Except as otherwise provided in the terms of such class or series, (i) the terms of the directors elected by such holders voting separately as a class shall expire at the annual meeting of shareholders next succeeding their election without regard to the classification of other directors and (ii) any director or directors elected by such holders voting separately as a class may be removed, with or without cause, by the holders of sixty-six and two-thirds percent (66-2/3%) of the voting power of all outstanding shares of stock of the Corporation entitled to vote separately as a class in an election of such directors.

 

7


Cumulative voting, as defined in Section 71(2) of the BCA, shall not be used to elect directors. Notwithstanding any other provisions of these Amended and Restated Articles of Incorporation or the bylaws of the Corporation (and notwithstanding the fact that some lesser percentage may be specified by law, these Amended and Restated Articles of Incorporation or the bylaws of the Corporation), the affirmative vote of the holders of sixty-six and two-thirds percent (66-2/3%) or more of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (considered for this purpose as one class) shall be required to amend, alter, change or repeal this Article SIXTH.

No director or officer of the Corporation shall have personal liability to the Corporation or its shareholders for monetary damages for breach of fiduciary duty as a director or officer, as appropriate, except, if required by the BCA, as then in effect; provided, however, that this paragraph shall not eliminate or limit the liability of a director or officer: (i) for any breach of the director’s or officer’s duty of loyalty to the Corporation or its shareholders; (ii) for acts or omissions not undertaken in good faith or which involve intentional misconduct or a knowing violation of law; or (iii) for any transaction from which the director or officer derived an improper personal benefit.

 

SEVENTH:

(a) The Corporation may not engage in any Business Combination with any Interested Shareholder for a period of three years following the time that such person became an Interested Shareholder, unless:

 

  (1)

prior to such time the Board of Directors approved either the Business Combination or the transaction which resulted in the shareholder becoming an Interested Shareholder;

 

  (2)

upon consummation of the transaction which resulted in the shareholder becoming an Interested Shareholder, the Interested Shareholder owned at least eighty-five percent (85%) of the voting stock of the Corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding (but not the outstanding voting stock owned by the Interested Shareholder) those shares owned (i) by persons who are directors and also officers and (ii) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer;

 

  (3)

at or subsequent to such time, the Business Combination is approved by the Board of Directors and authorized at an annual or special meeting of shareholders, and not by written consent, by the affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the outstanding voting stock that is not owned by the Interested Shareholder;

 

8


  (4)

the shareholder was prior to or became an Interested Shareholder upon the completion of the distribution of the Corporation’s Common Stock by the Corporation’s initial stockholder, StealthGas Inc. to its stockholders.

(b) The restrictions contained in this section shall not apply if:

 

  (1)

A shareholder becomes an Interested Shareholder inadvertently and (i) as soon as practicable divests itself of ownership of sufficient shares so that the shareholder ceases to be an Interested Shareholder; and (ii) would not, at any time within the three-year period immediately prior to a Business Combination between the Corporation and such shareholder, have been an Interested Shareholder but for the inadvertent acquisition of ownership; or

 

  (2)

The Business Combination is proposed prior to the consummation or abandonment of and subsequent to the earlier of the public announcement or the notice required hereunder of a proposed transaction which (i) constitutes one of the transactions described in the next succeeding sentence; (ii) is with or by a person who either was not an Interested Shareholder during the previous three years or who became an Interested Shareholder with the approval of the Board of Directors; and (iii) is approved or not opposed by a majority of the members of the Board of the Directors then in office (but not less than one) who were directors prior to any person becoming an Interested Shareholder during the previous three years or were recommended for election or elected to succeed such directors by a majority of such directors. The proposed transactions referred to in the preceding sentence are limited to:

 

  (i)

a merger or consolidation of the Corporation (except for a merger in respect of which, pursuant to the BCA, no vote of the shareholders of the Corporation is required);

 

  (ii)

a sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions), whether as part of a dissolution or otherwise, of assets of the Corporation or of any direct or indirect majority-owned subsidiary of the Corporation (other than to any direct or indirect wholly-owned subsidiary or to the Corporation) having an aggregate market value equal to fifty percent (50%) or more of either the aggregate market value of all of the assets of the Corporation determined on a consolidated basis or the aggregate market value of all the outstanding shares of the Corporation; or

 

9


  (iii)

a proposed tender or exchange offer for fifty percent (50%) or more of the outstanding voting stock of the Corporation.

The Corporation shall give not less than twenty (20) days notice to all Interested Shareholders prior to the consummation of any of the transactions described in clause (i) or (ii) of section (b)(2) of this Article SEVENTH.

(c) For the purpose of this Article SEVENTH only, the term:

 

  (1)

Affiliate” means a person that directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, another person.

 

  (2)

Associate,” when used to indicate a relationship with any person, means: (i) any corporation, partnership, unincorporated association or other entity of which such person is a director, officer or partner or is, directly or indirectly, the owner of twenty percent (20%) or more of any class of voting stock; (ii) any trust or other estate in which such person has at least a twenty percent (20%) beneficial interest or as to which such person serves as trustee or in a similar fiduciary capacity; and (iii) any relative or spouse of such person, or any relative of such spouse, who has the same residence as such person.

 

  (3)

Business Combination,” when used in reference to the Corporation and any Interested Shareholder of the Corporation, means:

 

  (i)

Any merger or consolidation of the Corporation or any direct or indirect majority-owned subsidiary of the Corporation with (A) the Interested Shareholder or any of its affiliates, or (B) with any other corporation, partnership, unincorporated association or other entity if the merger or consolidation is caused by the Interested Shareholder and a result of such merger or consolidation paragraph (a) of this Section SEVENTH is not applicable to the surviving entity;

 

  (ii)

Any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions), except proportionately as a shareholder of the Corporation, to or with the Interested Shareholder, whether as part of a dissolution or otherwise, of assets of the Corporation or of any direct or indirect majority-owned subsidiary of the Corporation which assets have an aggregate market value equal to ten percent (10%) or more of either the aggregate market value of all the assets of the Corporation determined on a consolidated basis or the aggregate market value of all the outstanding shares of the Corporation;

 

10


  (iii)

Any transaction which results in the issuance or transfer by the Corporation or by any direct or indirect majority-owned subsidiary of the Corporation of any shares, or any share of such subsidiary, to the Interested Shareholder or any affiliate or associate of the Interested Shareholder, except: (A) pursuant to the exercise, exchange or conversion of securities exercisable for, exchangeable for or convertible into shares of the Corporation, or shares of any such subsidiary, which securities were outstanding prior to the time that the Interested Shareholder became such; (B) pursuant to a merger with or into a direct or indirect wholly-owned subsidiary of the Corporation solely for purposes of forming a holding company incorporated under the BCA of which, as a result of the merger, the Corporation or its successor is a direct or indirect wholly-owned subsidiary incorporated or organized as a limited liability company under the laws of the Republic of the Marshall Islands and shareholders of the corporation do not recognize gain or loss for United States federal income tax or Marshall Islands income tax purposes as determined by the Board of Directors and, provided that, immediately following the effective time of the merger, the (x) directors of the Corporation immediately prior to the merger are the directors of the holding company, (y) the articles of incorporation and bylaws of the holding company contain provisions identical to the articles of incorporation and bylaws of the Corporation immediately prior to the effective time of the merger and (z) the organizational documents of the surviving entity are identical to the articles of incorporation of the Corporation immediately prior to the effective time of the merger (other than, in the case of clauses (y) and (z), provisions, if any, regarding the incorporator or incorporators, the corporate name, the registered office and agent, the initial board of directors and the initial subscribers for shares and such provisions contained in any amendment to the articles of incorporation as were necessary to effect a change, exchange, reclassification, subdivision, combination or cancellation of stock, if such change, exchange, reclassification, subdivision, combination or cancellation has become effective and, in the case of clause (z), references to members rather than shareholders, references to interests, units or the like rather than stock or shares, references to managers, managing members or

 

11


  other members of the governing body rather than directors), provided, however, that the organizational documents of the surviving entity shall contain provisions requiring that any act or transaction by or involving the surviving entity, other than the election or removal of directors or managers, managing members or other members of the governing body of the surviving entity, that requires for its adoption under the BCA (assuming such requirements were applicable to any surviving entity that is not a corporation) or its organizational documents the approval of the shareholders or members of the surviving entity shall, in addition, require the approval by the shareholders of the holding company (or any successor by merger) by the same vote as is required by the BCA and/or the organizational documents of the surviving entity; (C) pursuant to a dividend or distribution paid or made, or the exercise, exchange or conversion of securities exercisable for, exchangeable for or convertible into shares of the Corporation, or shares of any such subsidiary, which security is distributed, pro rata to all holders of a class or series of shares subsequent to the time the Interested Shareholder became such; (D) pursuant to an exchange offer by the Corporation to purchase shares made on the same terms to all holders of said shares; or (E) any issuance or transfer of shares by the Corporation; provided however, that in no case under items (C)-(E) of this subparagraph shall there be an increase in the Interested Shareholder’s proportionate share of any class or series of shares of the Corporation or of the voting stock of the Corporation;

 

  (iv)

Any transaction involving the Corporation or any direct or indirect majority-owned subsidiary of the Corporation which has the effect, directly or indirectly, of increasing the proportionate share of any class or series of shares, or securities convertible into any class or series of shares, of the Corporation or shares of any such subsidiary which is owned by the Interested Shareholder, except as a result of immaterial changes due to fractional share adjustments or as a result of any purchase or redemption of any shares not caused, directly or indirectly, by the Interested Shareholder; or

 

  (v)

Any receipt by the Interested Shareholder of the benefit, directly or indirectly (except proportionately as a shareholder of the Corporation), of any loans, advances, guarantees, pledges or other financial benefits (other than those expressly permitted in subparagraphs (i)-(iv) of this paragraph) provided by or through the Corporation or any direct or indirect majority-owned subsidiary of the Corporation.

 

12


  (4)

Control” including the terms “controlling,” “controlled by” and “under common control with,” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting stock, by contract or otherwise. A person who is the owner of twenty percent (20%) or more of the outstanding voting stock of any corporation, partnership, unincorporated association or other entity shall be presumed to have control of such entity, in the absence of proof by a preponderance of the evidence to the contrary. Notwithstanding the foregoing, a presumption of control shall not apply where such person holds voting stock, in good faith and not for the purpose of circumventing this provision, as an agent, bank, broker, nominee, custodian or trustee for one or more owners who do not individually or as a group have control of such entity.

 

  (5)

Interested Shareholder” means any person (other than the Corporation and any direct or indirect majority-owned subsidiary of the Corporation) that (i) is the owner of fifteen percent (15%) or more of the outstanding voting stock of the Corporation, or (ii) is an affiliate or associate of the Corporation and was the owner of fifteen percent (15%) or more of the outstanding voting stock of the Corporation at any time within the three-year period immediately prior to the date on which it is sought to be determined whether such person is an Interested Shareholder, and the affiliates and associates of such person; provided, however, that the term “Interested Shareholder” shall not include any person whose ownership of shares in excess of the fifteen percent (15%) limitation set forth herein is the result of action taken solely by the Corporation; provided that such person shall be an Interested Shareholder if thereafter such person acquires additional shares of voting stock of the Corporation, except as a result of further corporate action not caused, directly or indirectly, by such person. For the purpose of determining whether a person is an Interested Shareholder, the voting stock of the Corporation deemed to be outstanding shall include voting stock deemed to be owned by the person through application of paragraph (8) below, but shall not include any other unissued shares which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise.

 

  (6)

Person” means any individual, corporation, limited liability company, partnership, unincorporated association or other entity.

 

13


  (7)

Voting stock” means, with respect to any corporation, shares of any class or series entitled to vote generally in the election of directors and, with respect to any entity that is not a corporation, any equity interest entitled to vote generally in the election of the governing body of such entity. Every reference to a percentage of voting stock shall refer to such percentage of the votes of such voting stock.

 

  (8)

Owner” including the terms “own” and “owned,” when used with respect to any shares, means a person that individually or with or through any of its affiliates or associates:

 

  (i)

Beneficially owns such shares, directly or indirectly; or

 

  (ii)

Has (A) the right to acquire such shares (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise; provided, however, that a person shall not be deemed the owner of shares tendered pursuant to a tender or exchange offer made by such person or any of such person’s affiliates or associates until such tendered shares are accepted for purchase or exchange; or (B) the right to vote such shares pursuant to any agreement, arrangement or understanding; provided, however, that a person shall not be deemed the owner of any shares because of such person’s right to vote such shares if the agreement, arrangement or understanding to vote such shares arises solely from a revocable proxy or consent given in response to a proxy or consent solicitation made to 10 or more persons; or

 

  (iii)

Has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting (except voting pursuant to a revocable proxy or consent as described in item (B) of subparagraph (ii) of this paragraph), or disposing of such shares with any other person that beneficially owns, or whose affiliates or associates beneficially own, directly or indirectly, such shares.

(d) Any amendment of this Article SEVENTH shall not be effective until 12 months after the approval of such amendment at a meeting of the shareholders of the Corporation and shall not apply to any Business Combination between the Corporation and any person who became an Interested Shareholder of the Corporation at or prior to the time of such approval.

 

14


(e) Notwithstanding any other provisions of these Amended and Restated Articles of Incorporation or the bylaws of the Corporation (and notwithstanding the fact that some lesser percentage may be specified by law, these Amended and Restated Articles of Incorporation or the bylaws of the Corporation), the affirmative vote of the holders of sixty-six and two-thirds percent (66-2/3%) or more of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (considered for this purpose as one class) shall be required to amend, alter, change or repeal this Article SEVENTH.

 

EIGHTH:

If a meeting of shareholders is adjourned for lack of quorum on two successive occasions, at the next meeting there must be present either in person or by proxy shareholders of record holding at least forty-percent (40%) of the issued and outstanding stock and entitled to vote at such meeting in order to constitute a quorum.

 

NINTH:

The Corporation may transfer its corporate domicile from the Marshall Islands to any other place in the world.

 

TENTH:

In furtherance and not in limitation of the powers conferred by the BCA, the Board of Directors is expressly authorized to make, alter or repeal the bylaws of the Corporation.

[Remainder of page intentionally left blank

 

15

Exhibit 3.4

AMENDED AND RESTATED BY-LAWS

OF

IMPERIAL PETROLEUM INC.

A Marshall Islands Corporation

As Amended and Restated on

[•], 2021


TABLE OF CONTENTS

 

         Page  

ARTICLE I OFFICES

     1  

ARTICLE II STOCKHOLDERS

     1  

Section 1.

  ANNUAL MEETING      1  

Section 2.

  SPECIAL MEETINGS      1  

Section 3.

  NOTICE OF MEETINGS      2  

Section 4.

  ADJOURNMENTS      2  

Section 5.

  QUORUM      2  

Section 6.

  ORGANIZATION      3  

Section 7.

  CONDUCT OF MEETINGS      3  

Section 8.

  VOTING      3  

Section 9.

  VOTING PROCEDURES; INSPECTORS      4  

Section 10.

  CONSENT OF STOCKHOLDERS IN LIEU OF MEETING      4  

Section 11.

  FIXING OF RECORD DATE      4  

Section 12.

  ADVANCE NOTICE OF STOCKHOLDER NOMINEES FOR DIRECTOR AND OTHER STOCKHOLDER PROPOSALS      5  

ARTICLE III DIRECTORS

     10  

Section 1.

  NUMBER AND TERM OF OFFICE      10  

Section 2.

  REMOVAL      10  

Section 3.

  VACANCIES      11  

Section 4.

  REGULAR MEETINGS      11  

Section 5.

  SPECIAL MEETING      11  

Section 6.

  NOTICE OF MEETINGS      11  

Section 7.

  QUORUM      11  

Section 8.

  ORGANIZATION      11  

Section 9.

  INTERESTED DIRECTORS      11  

Section 10.

  VOTING      12  

Section 11.

  COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES      12  

ARTICLE IV COMMITTEES

     12  

ARTICLE V OFFICERS

     13  

Section 1.

  NUMBER AND DESIGNATION      13  

 

-i-


TABLE OF CONTENTS

(continued)

 

         Page  

Section 2.

  CHIEF EXECUTIVE OFFICER      13  

Section 3.

  CHIEF FINANCIAL OFFICER      13  

Section 4.

  CHAIRMAN AND VICE CHAIRMEN OF THE BOARD      14  

Section 5.

  THE PRESIDENT AND VICE PRESIDENTS      14  

Section 6.

  SECRETARY      14  

Section 7.

  TREASURER      14  

Section 8.

  OTHER OFFICERS      14  

Section 9.

  BOND      14  

ARTICLE VI CERTIFICATES FOR SHARES

     14  

Section 1.

  FORM AND ISSUANCE      14  

Section 2.

  TRANSFER      15  

Section 3.

  LOSS OF STOCK CERTIFICATES      15  

ARTICLE VII DIVIDENDS

     15  

Section 1.

  DECLARATION AND FORM      15  

Section 2.

  RECORD DATE      15  

ARTICLE VIII INDEMNIFICATION

     15  

Section 1.

  INDEMNIFICATION OF DIRECTORS AND OFFICERS IN THIRD PARTY PROCEEDINGS      15  

Section 2.

  INDEMNIFICATION OF DIRECTORS AND OFFICERS IN ACTIONS BY OR IN THE RIGHT OF THE CORPORATION      16  

Section 3.

  SUCCESSFUL DEFENSE      16  

Section 4.

  INDEMNIFICATION OF EMPLOYEES AND AGENTS      16  

Section 5.

  ADVANCE PAYMENT OF EXPENSES      17  

Section 6.

  LIMITATIONS ON INDEMNIFICATION      17  

Section 7.

  INDEMNIFICATION CLAIMS; DETERMINATION      18  

Section 8.

  PROCEDURES FOR THE DETERMINATION OF WHETHER STANDARDS HAVE BEEN SATISFIED      19  

Section 9.

  CONTRACT RIGHTS      20  

Section 10.

  NON-EXCLUSIVITY OF RIGHTS      20  

Section 11.

  SEVERABILITY      20  

Section 12.

  SUBROGATION      21  

 

-ii-


TABLE OF CONTENTS

(continued)

 

         Page  

Section 13.

  NO DUPLICATION OF PAYMENTS      21  

Section 14.

  INSURANCE      21  

Section 15.

  NO IMPUTATION      21  

Section 16.

  RELIANCE      21  

Section 17.

  CERTAIN DEFINITIONS      21  

Section 18.

  NOTICES      23  

ARTICLE IX CORPORATE SEAL

     23  

Section 1.

  FORM      23  

ARTICLE X FISCAL YEAR

     23  

Section 1.

  FISCAL YEAR      23  

ARTICLE XI MISCELLANEOUS PROVISIONS

     23  

Section 1.

  CHECKS, NOTES, ETC      23  

Section 2.

  LOANS      23  

Section 3.

  CONTRACTS      24  

Section 4.

  WAIVERS OF NOTICE      24  

ARTICLE XII AMENDMENTS

     24  

 

 

-iii-


IMPERIAL PETROLEUM INC.

AMENDED AND RESTATED BYLAWS

As Amended and Restated on [•], 2021

ARTICLE I

OFFICES

The principal place of business of Imperial Petroleum Inc., a corporation incorporated under the laws of the Marshall Islands (the “Corporation”), shall be at such place or places as the directors shall from time to time determine. The Corporation may also have an office or offices at such other places within or without the Marshall Islands as the Board of Directors (the “Board”) may from time to time appoint or the business of the Corporation may require.

ARTICLE II

STOCKHOLDERS

Section 1. ANNUAL MEETING. The annual meeting of stockholders of the Corporation shall be held on such date and at such time and place within or without the Marshall Islands, as may be fixed from time to time by resolution of the Board adopted by a majority of the total number of authorized directors (whether or not there exists any vacancies in previously authorized directorships at the time such resolution is presented to the Board for adoption), for the purpose of electing directors and for transacting such other business as may properly be brought before the meeting. The Chairman of the Board or, in the Chairman’s absence, another person designated by the Board shall act as the Chairman of all annual meetings of stockholders.

Section 2. SPECIAL MEETINGS. A special meeting of the stockholders, for the purpose of taking any action permitted by the stockholders under the Marshall Islands Business Corporations Act, as amended (the “MBCA”), and the Corporation’s Articles of Incorporation (the “Articles of Incorporation”), may be called at any time by the Board pursuant to a resolution adopted by a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any such resolution is presented to the Board for adoption). Except as may be set forth in the Articles of Incorporation, no other person or persons are permitted to call a special meeting. At any special meeting of the stockholders, only such business shall be conducted or considered as shall have been properly brought before the special meeting. To be properly brought before a special meeting, proposals of business must be (i) specified in the Corporation’s notice of meeting (or any supplement thereto) given by or at the direction of the Board, or (ii) otherwise properly brought before the special meeting by or at the direction of the Board. If the Chairman of the special meeting determines that business was not properly brought before the special meeting in accordance with the foregoing procedures, the Chairman shall declare to the meeting that the business was not properly brought before the meeting and such business shall not be transacted.


Section 3. NOTICE OF MEETINGS. Notice of every annual and special meeting of stockholders, other than any meeting the giving of notice of which is otherwise prescribed by law or the Articles of Incorporation, stating the date, time, place and purpose thereof, and in the case of special meetings, the name of the person or persons at whose direction the notice is being issued, shall be given personally (including by telephone) or sent by mail, telegraph, cablegram, telex, telecopy, electronic mail or other means deemed appropriate by the Board at least fifteen (15) but not more than sixty (60) days before such meeting, to each stockholder of record entitled to vote thereat and to each stockholder of record who, by reason of any action proposed at such meeting would be entitled to have his or her shares appraised if such action were taken, and the notice shall include a statement of that purpose and to that effect. If mailed, notice shall be deemed to have been given when deposited in the mail, directed to the stockholder at his, her or its address as the same appears on the record of stockholders of the Corporation or at such address as to which the stockholder has given notice to the Secretary. Notice of a meeting need not be given to any stockholder who submits a signed waiver of notice, whether before or after the meeting, or who attends the meeting without protesting prior to the conclusion thereof the lack of notice to him or her.

Section 4. ADJOURNMENTS. Whether or not a quorum shall be present, any meeting of stockholders, annual or special, may adjourn from time to time to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. If the meeting is adjourned for lack of quorum, notice of the new meeting shall be given to each stockholder of record entitled to vote at the meeting. If after an adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record on the new record date entitled to notice in Section 3 of this Article II. The Board may postpone any meeting of stockholders or cancel any annual or special meeting of stockholders by public announcement or disclosure prior to the time scheduled for the meeting.

Section 5. QUORUM. At all meetings of stockholders, except as otherwise expressly provided by law or the Articles of Incorporation, there must be present either in person or by proxy stockholders of record holding at least a majority of the shares issued and outstanding and entitled to vote at such meetings in order to constitute a quorum, but if less than a quorum is present, a majority of those shares present either in person or by proxy shall have power to adjourn any meeting until a quorum shall be present. Notwithstanding the previous sentence, at any meeting of stockholders at which the holders of any class of stock of the Corporation shall be entitled to vote separately as a class, the holders of a majority in number of the total outstanding shares of such class, present in person or represented by proxy, shall constitute a quorum for purposes of such class vote unless the representation of a different number of shares of such class shall be required by law, by the Articles of Incorporation or by these Bylaws.

 

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Section 6. ORGANIZATION. The Chief Executive Officer, or, in the absence of the Chief Executive Officer, the Chairman of the Board, shall call all meetings of the stockholders to order, and shall preside over and act as chairman of all such meetings. In the absence of the Chief Executive Officer and the Chairman of the Board, the members of the Board who are present shall elect a chairman of the meeting. The Secretary, or, in the Secretary’s absence, an Assistant Secretary, or in the absence of both the Secretary and Assistant Secretaries, a person appointed by the chairman of the meeting shall serve as secretary of the meeting. In the event that the Secretary presides at a meeting of the stockholders, an Assistant Secretary shall record the minutes of the meeting. It shall be the duty of the Secretary of the Corporation to prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of stockholders entitled to vote at such meeting, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder.

Section 7. CONDUCT OF MEETINGS. To the maximum extent permitted by law, the Board shall be entitled to make such rules or regulations for the conduct of meetings of stockholders as it shall deem necessary, appropriate or convenient. Subject to such rules and regulations of the Board, if any, the chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and take such action as, in the discretion of such chairman, are deemed necessary, appropriate or convenient for the proper conduct of the meeting. Such rules, regulations and procedures, whether adopted by the Board or prescribed by the chairman of the meeting, may include, without limitation, the following: (i) establishing an agenda for the meeting and the order for the consideration of the items of business on such agenda; (ii) restricting admission to the time set for the commencement of the meeting; (iii) limiting attendance at the meeting to stockholders of record of the Corporation entitled to vote at the meeting, their duly authorized proxies or other such persons as the chairman of the meeting may determine; (iv) limiting participation at the meeting on any matter to stockholders of record of the Corporation entitled to vote on such matter, their duly authorized proxies or other such persons as the chairman of the meeting may determine to recognize and, as a condition to recognizing any such participant, requiring such participant to provide the chairman of the meeting with evidence of his or her name and affiliation, whether he or she is a stockholder or a proxy for a stockholder, and the class and series and number of shares of each class and series of capital stock of the Corporation which are owned beneficially and/or of record by such stockholder; (v) limiting the time allotted to questions or comments by participants; (vi) determining when the polls should be opened and closed for voting; (vii) taking such actions as are necessary or appropriate to maintain order, decorum, safety and security at the meeting; (viii) removing any stockholder who refuses to comply with meeting procedures, rules or guidelines as established by the chairman of the meeting; (ix) adjourning the meeting to a later date, time and place announced at the meeting by the chairman; and (x) complying with any state and local laws and regulations concerning safety and security. Unless otherwise determined by the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

Section 8. VOTING. At any meeting of stockholders, with respect to a matter for which a stockholder is entitled to vote, each such stockholder shall be entitled to one vote for each share it holds, except as otherwise expressly provided by law or in the Articles of Incorporation. Each stockholder may exercise such voting right either in person or by proxy; provided, however, that no proxy shall be valid after the expiration of eleven months from the date such proxy was authorized unless otherwise provided in the proxy. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in the law of the Marshall Islands to support an irrevocable power. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting

 

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in person or by filing an instrument in writing revoking the proxy or another duly executed proxy bearing a later date with the Secretary of the Corporation. If a quorum is present, and except as otherwise expressly provided by law or the Articles of Incorporation and except with respect to the election of directors, the affirmative vote of a majority of the shares of stock represented at the meeting shall be the act of the stockholders. Subject to the rights of the holders of any series of preferred stock of the Corporation, directors shall be elected by a plurality of the votes cast at a meeting of stockholders by the stockholders entitled to vote in the election.

Shares of the stock of the Corporation belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes.

Section 9. VOTING PROCEDURES; INSPECTORS. The Corporation may, in advance of any meeting of stockholders, appoint one or more inspectors of election to act at the meeting and make a written report thereof. Each inspector, before entering upon the discharge of the duties of inspector, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of such person’s ability. The inspectors shall (a) ascertain the number of shares outstanding and the voting power of each; (b) determine the shares represented at the meeting and the validity of proxies and ballots; (c) count all votes and ballots; (d) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by them; and (e) certify their determination of the number of shares represented at the meeting, and their count of all votes and ballots.

Section 10. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Any action required or permitted to be taken by the stockholders of the Corporation, or any action which may be taken at a meeting of the stockholders, may be taken without a meeting if a consent in writing, setting forth the actions so taken, is signed by all the stockholders entitled to vote with respect to the subject matter thereof. Such consent shall have the same effect as a unanimous vote of stockholders, and may be stated as such in any articles or documents filed with a Registrar of Corporations. The consent shall be delivered to the Corporation by delivery to its registered office in the Marshall Islands, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation’s registered office shall be made by hand or by certified or registered mail, return receipt requested.

Section 11. FIXING OF RECORD DATE. For the purpose of determining the stockholders entitled to notice of and to vote at any meeting of stockholders, or to express consent to or dissent from any proposal without a meeting, or for any other action, the Board may fix a time not more than sixty (60) days prior to the date of for any such determination of stockholders, nor, in the case of a meeting of stockholders, less than fifteen (15) days before the date of such meeting.

 

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Section 12. ADVANCE NOTICE OF STOCKHOLDER NOMINEES FOR DIRECTOR AND OTHER STOCKHOLDER PROPOSALS.

(a) The matters to be considered and brought before any meeting of stockholders of the Corporation, including the nomination and election of directors, shall be limited to only those matters that are brought properly before the meeting in compliance with the procedures set forth in this Section 12 of Article II.

(b) In order to be properly brought before any annual meeting of stockholders, a matter must be (i) specified in the notice of annual meeting (or any supplement thereto) given by or at the direction of the Board, (ii) otherwise brought before the annual meeting by or at the direction of the Board or (iii) properly and timely brought before the annual meeting in compliance with the notice procedures specified in this Section 12 of Article II by a stockholder who holds of record stock of the Corporation (or by a person who holds such stock through a nominee or “street name” holder of record of such stock and can demonstrate to the Corporation such indirect ownership), both at the time of giving the notice provided for in this Section 12, as of the record date for the annual meeting and at the time of the annual meeting and is entitled to vote at the meeting on such matter (including any election of directors). In addition to any other requirements under applicable law, the Articles of Incorporation and these Bylaws, persons nominated by stockholders for election as directors of the Corporation and any other proposals by stockholders shall be properly brought before an annual meeting of stockholders only if notice of any such matter to be presented by a stockholder at such meeting (a “Stockholder Notice”) is delivered to the Secretary at the principal executive office of the Corporation not less than ninety (90) nor more than one hundred and twenty (120) days prior to the first anniversary date of the annual meeting for the preceding year. If (and only if) an annual meeting of stockholders is not scheduled to be held within a period that commences thirty (30) days before and ends sixty (60) days after such an anniversary date (an annual meeting date outside such period being referred to herein as an “Other Meeting Date”), the Stockholder Notice shall be given in the manner provided in these Bylaws by the later of (i) the close of business on the ninetieth (90th) day prior to such Other Meeting Date or (ii) the close of business on the tenth (10th) day following the date on which such Other Meeting Date is first publicly announced or disclosed by the Corporation.

(c) Any stockholder who gives a Stockholder Notice of any matter (including a nomination for director) proposed to be brought before an annual meeting of stockholders shall deliver, as part of the Stockholder Notice, the following: (i) the name and address of such stockholder and any Stockholder Associated Person (as herein defined); (ii) (A) the class or series and number of shares of the Corporation that are, directly or indirectly, owned of record or beneficially owned by such stockholder and any Stockholder Associated Person, documentary evidence of such record or beneficial ownership, and the date or dates such shares were acquired and the investment intent at the time such shares were acquired, (B) any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of securities of the Corporation or with a value derived in whole or in part from the value of any class or series of shares of the Corporation, whether or not such instrument or right shall be subject to settlement in the underlying class or series of capital stock of the Corporation or otherwise (a “Derivative Instrument”) directly or indirectly owned beneficially by each such

 

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stockholder or any Stockholder Associated Person and any other direct or indirect right held by each such stockholder or any Stockholder Associated Person to profit from, or share in any profit derived from, any increase or decrease in the value of securities of the Corporation, (C) any proxy, contract, arrangement, understanding, or relationship pursuant to which such stockholder or any Stockholder Associated Person has a right to vote any securities of the Corporation, (D) any contract, arrangement, understanding, relationship or otherwise pursuant to which each such stockholder or any Stockholder Associated Person has the opportunity, directly or indirectly, to profit or share in any profit derived from any decrease in the value of any security issued by the Corporation (a “Short Interest”), (E) any rights to dividends on the shares of the Corporation owned beneficially by such stockholder or any Stockholder Associated Person that are separated or separable from the underlying securities of the Corporation, (F) any proportionate interest in securities of the Corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which such stockholder or any Stockholder Associated Person is a general partner or, directly or indirectly, beneficially owns an interest in a general partner, and (G) any performance-related fees (other than an asset-based fee) that such stockholder or any Stockholder Associated Person is entitled to based on any increase or decrease in the value of securities of the Corporation or Derivative Instruments, if any, as of the date of such notice, including without limitation any such interests held by members of such stockholder’s or any Stockholder Associated Person’s immediate family sharing the same household (which information, in each case, shall be supplemented by such stockholder and any Stockholder Associated Person not later than ten (10) calendar days after the record date for the meeting to disclose such ownership as of the record date); (iii) a description of all arrangements or understandings between such stockholder and/or any Stockholder Associated Person and any other person or persons (naming such person or persons) in connection with the proposal of such business by such stockholder; (iv) whether and the extent to which any agreement, arrangement or understanding has been made, the effect or intent of which is to increase or decrease the voting power of such stockholder and/or any Stockholder Associated Person with respect to any securities of the Corporation, without regard to whether such transaction is required to be reported on a Schedule 13D or other form in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or any successor provisions thereto and the rules and regulations promulgated thereunder; and (v) any other information relating to such stockholder and/or any Stockholder Associated Person that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies or consents by such stockholder and/or any Stockholder Associated Person in support of any business or director nominations proposed to be brought before the meeting pursuant to rules and regulations promulgated under Section 14(a) of the Exchange Act or any successor provisions (assuming, for purposes of the Stockholder Notice, that such rules and regulations were applicable even if they are not).

(d) For purposes of these Bylaws, a “Stockholder Associated Person” shall mean with respect to any stockholder (A) any person controlling, directly or indirectly, or Acting in Concert with, such stockholder, (B) any beneficial owner of securities of the Corporation owned of record or beneficially by such stockholder, and (C) any person controlling, controlled by or under common control with such Stockholder Associated Person. For purposes of these Bylaws, a person shall be deemed to be “Acting in Concert” with another person if such person knowingly acts (whether or not pursuant to an express agreement, arrangement or understanding) in concert with, or towards a common goal relating to the management, governance or control of

 

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the Corporation in parallel with, such other person where (A) each person is conscious of the other person’s conduct or intent and this awareness is an element in their decision-making processes and (B) at least one additional factor suggests that such persons intend to act in concert or in parallel, which such additional factors may include, without limitation, exchanging information (whether publicly or privately and directly or indirectly, including through counsel), attending meetings, conducting discussions, or making or soliciting invitations to act in concert or in parallel; provided, that a person shall not be deemed to be Acting in Concert with any other person solely as a result of the solicitation or receipt of revocable proxies from such other person in response to a solicitation made pursuant to, and in accordance with, Section 14(a) of the Exchange Act by way of a proxy solicitation statement filed with the SEC on Schedule 14A. A person Acting in Concert with another person shall be deemed to be Acting in Concert with any third party who is also Acting in Concert with such other person.

(e) Any stockholder who wishes to nominate a person for election as a director of the Corporation at an annual meeting of stockholders shall deliver, as part of the Stockholder Notice, a statement in writing setting forth (i) the name of each person to be nominated, (ii) the number and class of all shares of stock of the Corporation each person owns of record and beneficially, as reported to the stockholder by the person, (iii) a description of all direct and indirect agreements, arrangements and understandings between the stockholder and/or any Stockholder Associated Person and each person being proposed as a nominee (or any of his or her respective affiliates and associates) and any other person or persons (naming such person or persons) pursuant to which the nominations are to be made by the stockholder, (iv) a description of all direct and indirect compensation, indemnification and other material agreements, arrangements, understandings or relationships between or among the stockholder and/ or any Stockholder Associated Person and each proposed nominee, his or her respective affiliates and associates and any other persons (naming such person or persons) with whom such proposed nominee (or any of his or her respective affiliates and associates) is Acting in Concert (as herein defined), including, without limitation, all information that would be required to be disclosed pursuant to Item 404 under Regulation S-K (assuming, for purposes of the Stockholder Notice, that such rules and regulations were applicable even if they are not) if such stockholder were the “registrant” for purposes of such rule and the proposed nominee were a director or executive officer of such registrant, (v) the information regarding the person that would be required to be included in a proxy statement, by the rules and regulations of the U.S. Securities and Exchange Commission (assuming, for purposes of the Stockholder Notice, that such rules and regulations were applicable even if they are not), for a nominee for election as a director in an election contest, (vi) the person’s signed consent to being named in the proxy statement as a nominee and to serving as a director if elected or re-elected, as the case may be, as a director of the Corporation, and (vii) a statement whether such stockholder or Stockholder Associated Person intends or is part of a group that intends to solicit proxies from stockholders in support of the election or re-election of such nominee(s).

(f) Any stockholder who gives a Stockholder Notice of any matter (other than a nomination for director) proposed to be brought before an annual meeting of stockholders shall deliver, as part of the Stockholder Notice, the following: (i) a description of the business desired to be brought before the meeting, including the text of the proposal or business and the text of any resolutions proposed for consideration and, in the event that such business includes a proposal to amend the Bylaws of the Corporation, the language of the proposed amendment, (ii)

 

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a brief written statement of the reasons why the stockholder favors the proposal, (iii) any material interest of such stockholder in the matter proposed (other than as a stockholder), if applicable, (iv) reasonably detailed description of all agreements, arrangements and understandings (A) between or among the stockholder and any Stockholder Associated Person or (B) between or among the stockholder or any Stockholder Associated Person and any other person or entity (including their names) in connection with the proposal of such business by such stockholder, including without limitation any agreements that would be required to be disclosed pursuant to Item 5 or Item 6 of a Schedule 13D that would be filed pursuant to the Exchange Act (regardless of whether the requirement to file a Schedule 13D is applicable to the stockholder or any Stockholder Associated Person or other person or entity), and (v) a representation whether such stockholder or any Stockholder Associated Person intends or is part of a group that intends (A) to deliver a proxy statement and/or form of proxy to the holders of at least the percentage of the Corporation’s outstanding capital stock required to approve or adopt the proposal or (B) otherwise to solicit proxies from stockholders in support of such proposal.

(g) As used in these Bylaws, shares “beneficially owned” shall mean all shares which a person is deemed to beneficially own pursuant to Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall in all events be deemed to beneficially own any shares of any class or series of the Corporation as to which such person has a right to acquire beneficial ownership at any time in the future.

(h) If a stockholder is entitled to vote only for a specific class or category of directors at an annual or special meeting of stockholders, the stockholder’s right to nominate a person for election as a director at the meeting shall be limited to such class or category of directors.

(i) Notwithstanding any provision of this Section 12 of Article II to the contrary, in the event that the number of directors to be elected to the Board at the next annual meeting of stockholders is increased by virtue of an increase in the size of the Board and either all of the nominees for director at the next annual meeting of stockholders or the size of the increased Board is not publicly announced or disclosed by the Corporation at least one hundred (100) days prior to the first anniversary of the preceding year’s annual meeting, a Stockholder Notice shall also be considered timely hereunder, but only with respect to nominees to stand for election at the next annual meeting as the result of any new positions created by such increase, if it is delivered to the Secretary at the principal place of business of the Corporation not later than the close of business on the tenth (10th) day following the first day on which all such nominees or the size of the increased Board shall have been publicly announced or disclosed by the Corporation.

(j) Except as provided in the immediately following sentence, no matter shall be properly brought before a special meeting of stockholders unless the matter shall have been brought before the meeting pursuant to the Corporation’s notice of such meeting. In the event the Corporation calls a special meeting of stockholders for the purpose of electing a director to the Board, any stockholder entitled to vote for the election of such director at such meeting may nominate a person for election to such position as is specified in the notice of such meeting, but only if the Stockholder Notice required by this Section 12 of Article II shall be delivered to the Secretary of the Corporation at the principal place of business of the Corporation not later than the close of business on the tenth (10th) day following the first day on which the date of the special meeting and either the names of all nominees proposed by the Board to be elected at such meeting or the number of directors to be elected shall have been publicly announced or disclosed.

 

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(k) A stockholder providing notice of any business proposed to be conducted, or the nomination of one or more candidates for election to the Board for consideration, at a meeting shall further update and supplement such notice, if necessary, from time to time, so that the information provided or required to be provided in such notice pursuant to this Section 12 shall be true and correct in all material respects, and such update and supplement shall be received by the Secretary of the Corporation not later than five (5) Business days following the occurrence of any event, development or occurrence which would cause the information provided to be not true and correct in all material respects.

(l) If the information submitted pursuant to this Section 12 by any stockholder proposing business for consideration at an annual or special meeting shall be inaccurate to any material extent, such information may be deemed not to have been provided in accordance with this Section 12. Upon written request by the Secretary, the Board or any committee thereof, any stockholder proposing business for consideration at an annual or special meeting shall provide, within seven (7) business days of delivery of such request (or such other period as may be specified in such request), written verification, satisfactory in the discretion of the Board, any committee thereof or any authorized officer of the Corporation, to demonstrate the accuracy of any information submitted by the stockholder pursuant to this Section 12. If a stockholder fails to provide such written verification within such period, the information as to which written verification was requested may be deemed not to have been provided in accordance with this Section 12.

(m) For purposes of this Section 12 of Article II, a matter shall be deemed to have been “publicly announced or disclosed” if the matter is disclosed in a press release reported by the (i) Dow Jones News Service, the Associated Press or a comparable U.S. national news service or (ii) in a document publicly filed by the Corporation with the U.S. Securities and Exchange Commission.

(n) In no event shall the adjournment of an annual meeting or a special meeting of stockholders, or any announcement thereof, commence a new period for the giving of notice as provided in this Section 12. This Section 12 of Article II shall not apply to any nomination of a director in an election in which only the holders of a particular class of stock of the Corporation (the holders of which may vote by written consent under the Articles of Incorporation), or a series thereof, are entitled to vote (unless otherwise provided in the terms of such stock).

(o) The chairman of any meeting of stockholders, in addition to making any other determinations that may be appropriate to the conduct of the meeting, shall have the power and duty to determine whether notice of nominees and other matters proposed to be brought before a meeting have been duly given in the manner provided in this Section 12 of Article II and, if not so given, shall direct and declare at the meeting that such nominees and other matters shall not be considered.

 

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(p) Notwithstanding the foregoing provisions of this Section 12, unless otherwise required by law, if the stockholder (or a qualified representative of the stockholder) does not appear at the annual or special meeting of stockholders of the Corporation to present a nomination or proposed business, such nomination shall be disregarded and such proposed business shall not be considered, notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes of this Section 12, to be considered a qualified representative of the stockholder, a person must be authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting of stockholders and such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, at the meeting of stockholders.

ARTICLE III

DIRECTORS

Section 1. NUMBER AND TERM OF OFFICE. The affairs, business and property of the Corporation shall be managed by a Board to consist of such number of directors as shall be fixed from time to time by a resolution passed by a majority of the entire Board. Except as otherwise provided by law or in Section 3 of this Article III, the directors of the Corporation shall be elected at each annual meeting of stockholders, to replace those directors whose terms expire at such annual meeting. Except as otherwise provided in Section 1 of this Article III, each Director shall be elected to serve until the third succeeding annual meeting of stockholders and until his or her successor shall have been duly elected and qualified, except in the event of his or her death, resignation, removal or the earlier termination of his or her term of office. No decrease in the number of directors shall shorten the term of any incumbent director. The directors need not be residents of the Marshall Islands or stockholders of the Corporation. Corporations may, to the extent permitted by law, be elected or appointed directors.

Section 2. REMOVAL. Any or all of the directors may be removed, with cause, by the affirmative vote of holders of eighty percent (80%) of the voting power of all the outstanding shares of stock of the Corporation entitled to vote generally in the election of directors, considered for this purpose as a single class. Notwithstanding the previous sentence, whenever any director shall have been elected by the holders of any class of stock of the Corporation voting separately as a class under the provisions of the Articles of Incorporation, such director may be removed and the vacancy filled only by the holders of eighty percent (80%) of the voting power of that class of stock voting separately as a class. Except as provided in the Articles of Incorporation, vacancies caused by any such removal or any vacancy caused by the death or resignation of any director or for any other reason, and any newly-created directorship resulting from any increase in the authorized number of directors, may be filled by, and only by, the affirmative vote of a majority of the directors then in office, although less than a quorum, and any director so elected to fill any such vacancy or newly created directorship shall hold office until the director’s successor is elected and qualified or until the director’s earlier resignation or removal. No director may be removed without cause by either the stockholders or the Board.

 

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Section 3. VACANCIES. Vacancies in the Board occurring by death, resignation, creation of new directorship, failure of the stockholders to elect the whole class of directors required to be elected at any annual election of directors or for any other reason, including removal of directors for cause, shall be filled only by the affirmative vote of a majority of the remaining directors then in office, although less than a quorum, at any special meeting called for that purpose or at any regular meeting of the Board.

Section 4. REGULAR MEETINGS. Regular meetings of the Board may be held at such time and place, within or without the Marshall Islands, as may be determined by resolution of the Board. No notice shall be required for any regular meeting. Except as otherwise provided by law, any business may be transacted at any regular meeting of the Board.

Section 5. SPECIAL MEETING. Special meetings of the Board may be called from time to time by the Chairman, the President, or any officer of the Corporation who is also a director. The President or the Secretary shall call a special meeting of the Board upon written request directed to either of them by any two directors stating the time, place and purpose of such special meeting. Special meetings of the Board shall be held on a date and at such time and at such place, within or without the Marshall Islands, as may be designated in the notice thereof by the officer calling the meeting.

Section 6. NOTICE OF MEETINGS. Notice of the date, time and place of each meeting of the Board shall be given to each Director at least forty-eight (48) hours prior to such meeting, unless the notice is given orally or delivered in person, in which case it shall be given at least twenty-four (24) hours prior to such meeting. For the purpose of this section, notice shall be deemed to be duly given to a Director if given to him or her personally (including by telephone) or if such notice be delivered to such Director by mail, telecopy, electronic mail or other electronic means to his or her last known address. Notice of a meeting need not be given to any Director who submits a signed waiver of notice, whether before or after the meeting, or who attends the meeting without protesting, prior to the conclusion thereof, the lack of notice to him or her.

Section 7. QUORUM. Subject to the provisions of Section 3 of this Article III, a majority of the directors at the time in office (but, unless the Board shall consist solely of one director, in no case less than one-third of total number of directors nor less than two directors), present in person or by proxy or communications equipment, shall constitute a quorum for the transaction of business.

Section 8. ORGANIZATION. The Chairman of the Board or, in the absence of the Chairman of the Board, the Chief Executive Officer shall preside at all meetings of the Board. In the absence of the Chairman of the Board and the Chief Executive Officer, a Chairman shall be elected from among the Directors present. The Secretary of the Corporation shall act as secretary of all meetings of the directors. In the absence of the Secretary of the Corporation, the Chairman may appoint any person to act as secretary of the meeting.

Section 9. INTERESTED DIRECTORS. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board or committee thereof which authorizes the contract or transaction, or solely

 

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because his or her or their votes are counted for such purpose, if: (i) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the Board or the committee and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, or, if the votes of the disinterested directors are insufficient to constitute an act of the Board as defined in Section 55 of the MBCA, by unanimous vote of the disinterested directors; or (ii) the material facts as to his or her relationship or interest and as to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (iii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board, a committee thereof or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board or of a committee which authorizes the contract or transaction.

Section 10. VOTING. The vote of the majority of the directors, present in person or by proxy or by means of communications equipment, at a meeting at which a quorum is present shall be the act of the directors. Unless otherwise restricted by the Articles of Incorporation or by these Bylaws, any action required or permitted to be taken at any meeting of the Board, or of any committee thereof, may be taken without a meeting if all members of the Board, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee, as the case may be.

Section 11. COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES. Directors shall receive such compensation for their services as directors and such reimbursement for their expenses of attendance at meetings of the Board and its committees as may be determined from time to time by resolution of the Board. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefore.

ARTICLE IV

COMMITTEES

The Board may, by resolution or resolutions passed by a majority of the entire Board, designate from among its members an executive committee to consist of one or more of the directors of the Corporation, which, to the extent provided in said resolution or resolutions, or in these Bylaws, shall have and may exercise, to the extent permitted by law, the powers of the Board in the management of the business and affairs of the Corporation, and may have power to authorize the seal of the Corporation to be affixed to all papers which may require it; provided, however, that no committee shall have the power or authority to (i) submit to stockholders of any action that requires stockholders’ approval by law, (ii) fill a vacancy in the Board or in a committee thereof, (iii) fix compensation of the directors for serving on the Board any other committee, (iv) amend or repeal any bylaw or adopt any new bylaw, or (v) amend or repeal any resolution of the entire Board which by its terms shall not be so amendable or repealable. In addition, the Board may designate from among its members other committees to consist of one or more of the directors of the Corporation, each of which shall perform such functions and have such authority and powers as shall be delegated to such committee by said resolution or resolutions or as provided for in these Bylaws subject to the prohibitions on the delegation of power and authority set forth in the preceding sentence. Members of the executive committee

 

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and any other committee shall hold office for such period as may be prescribed by the vote of the entire Board, subject, however, to removal at any time by the vote of the Board. Vacancies in membership of such committees shall be filled by vote of the Board. Committees may adopt their own rules of procedures and may meet at stated times or on such notice as they may determine. Each committee shall keep a record of its proceedings and report the same to the Board when required.

ARTICLE V

OFFICERS

Section 1. NUMBER AND DESIGNATION. The officers of the Corporation shall include a Chief Executive Officer and a Secretary and may include a Chairman of the Board, one or more Vice Chairmen of the Board, a President, a Treasurer, a Chief Financial Officer, one or more Vice-Presidents and such other officers, if any, as the Board may deem necessary. Officers may be of any nationality and need not be residents of the Marshall Islands. The officers shall be elected annually by the Board at its first meeting following the annual election of directors, but in the event of the failure of the Board to so elect any officer, such officer may be elected at any subsequent meeting of the Board. The salaries of officers and any other compensation paid to them shall be fixed from time to time by the Board. The Board may at any meeting elect additional officers. Each Officer shall hold office at the pleasure of the Board and may hold more than one office. Any officer may be removed by the Board at any time with or without cause. Any vacancy in an office may be filled for the unexpired position of the term of such office by the Board at any regular or special meeting. In addition to the powers and duties of the officers of the Corporation as set forth in these Bylaws, the officers shall have such authority and shall perform such duties as from time to time may be determined by the Board.

Section 2. CHIEF EXECUTIVE OFFICER. The Board shall designate one of the officers of the Corporation to be the Chief Executive Officer of the Corporation. Subject to the control of the Board, the Chief Executive Officer shall have general charge and control of all the business and affairs of the Corporation and shall have all powers and shall perform all duties incident to the position of Chief Executive Officer which may be required by law and such other duties as are required by the Board. The Chief Executive Officer shall make reports to the Board and to the stockholders, and shall see that all orders and resolutions of the Board and of any committee thereof are carried into effect. The Chief Executive Officer shall have such other powers and perform such other duties as may from time to time be assigned by these Bylaws or by the Board.

Section 3. CHIEF FINANCIAL OFFICER. The Board may designate one of the officers of the Corporation to be the Chief Financial Officer of the Corporation. Subject to the control of the Board and the Chief Executive Officer, the Chief Financial Officer shall have general charge and control of the financial affairs of the Corporation and shall have all powers and shall perform all duties incident to the position of Chief Financial Officer. The Chief Financial Officer shall act in a general executive capacity and assist the Chief Executive Officer in the administration and operation of the Corporation’s financial affairs. The Chief Financial Officer shall have such other powers and perform such other duties as may from time to time be assigned by these Bylaws or by the Board or the Chief Executive Officer.

 

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Section 4. CHAIRMAN AND VICE CHAIRMEN OF THE BOARD. The Board may elect a Chairman of the Board from among its members. The Chairman of the Board shall preside at all meetings of the Board and shall have all powers and may perform all duties incident to the office of Chairman of the Board which shall be required by law and shall have such other powers and perform such other duties as shall from time to time be assigned by these Bylaws or by the Board. The Board also may elect one or more Vice-Chairmen to act in the place of the Chairman upon his or her absence or inability to act.

Section 5. THE PRESIDENT AND VICE PRESIDENTS. The Board may elect a President and one or more Vice Presidents of the Corporation. Subject to the control of the Board and the Chief Executive Officer, the President and each Vice President shall have all powers and shall perform all duties incident to their respective offices which may be required by law and shall have such other powers and perform such other duties as may from time to time be assigned by these Bylaws or by the Board or the Chief Executive Officer.

Section 6. SECRETARY. The Board shall elect a Secretary who shall act as Secretary of all meetings of the stockholders and of the Board at which he or she is present, shall have supervision over the giving and serving of notices of the Corporation, shall be the custodian of the corporate records of the corporate seal of the Corporation, shall be empowered to affix the corporate seal to those documents, the execution of which, on behalf of the Corporation under its seal, is duly authorized and when so affixed may attest the same, and shall exercise the powers and perform such other duties as may be assigned to him or her by the Board or the President.

Section 7. TREASURER. The Board may elect a Treasurer who shall have general supervision over the care and custody of the funds, securities, and other valuable effects of the Corporation and shall deposit the same or cause the same to be deposited in the name of the Corporation in such depositories as the Board may designate, shall disburse the funds of the Corporation as may be ordered by the Board, shall have supervision over the accounts of all receipts and disbursements of the Corporation, shall, whenever required by the Board, render or cause to be rendered financial statements of the Corporation, shall have the power and perform the duties usually incident to the office of Treasurer, and shall have such powers and perform other duties as may be assigned to him or her by the Board or President.

Section 8. OTHER OFFICERS. The Board may elect other officers of the Corporation who may exercise such powers and perform such duties as may be assigned to them by the Board or the Chief Executive Officer.

Section 9. BOND. The Board shall have power to the extent permitted by law to require any officer, agent or employee of the Corporation to give bond for the faithful discharge of his or her duties in such form and with such surety as the Board may deem advisable.

ARTICLE VI

CERTIFICATES FOR SHARES

Section 1. FORM AND ISSUANCE. The shares of the Corporation shall be represented by certificates in form meeting the requirements of law, and not inconsistent with the Articles of Incorporation, and approved by the Board, unless the Board provides, by resolution,

 

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that some or all shares of any or all classes or series of stock shall be uncertificated. Certificates shall be signed by the Chairman of the Board, the President or Chief Executive Officer or a Vice-President and by the Secretary or any Assistant Secretary or the Treasurer or any Assistant Treasurer. These signatures may be facsimiles if the certificate is countersigned by a transfer agent or registered by a registrar other than the Corporation itself or its employee.

Section 2. TRANSFER. The Board shall have power and authority to make such rules and regulations as they may deem expedient concerning the issuance, registration and transfer of certificates representing shares of the Corporation’s stock, and may appoint transfer agents and registrars thereof.

Section 3. LOSS OF STOCK CERTIFICATES. The Board may direct a new certificate of stock to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the Board may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his or her legal representative, to advertise the same in such manner as it shall require and/or give the Corporation a bond in such sum as it may direct indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost or destroyed.

ARTICLE VII

DIVIDENDS

Section 1. DECLARATION AND FORM. Subject to the provisions of the Articles of Incorporation, dividends may be declared in conformity with applicable law by, and at the discretion of, the Board at any regular or special meeting. Dividends may be declared and paid in cash, stock or other property of the Corporation.

Section 2. RECORD DATE. The Board may fix a time not exceeding sixty (60) days preceding the date fixed for the payment of any dividend, the making of any distribution, the allotment of any rights or the taking of any other action, as a record time for the determination of the stockholders entitled to receive any such dividend, distribution, or allotment or for the purpose of such other action.

ARTICLE VIII

INDEMNIFICATION

Section 1. INDEMNIFICATION OF DIRECTORS AND OFFICERS IN THIRD PARTY PROCEEDINGS. Subject to the other provisions of this Article VIII, the Corporation shall indemnify and hold harmless, to the fullest extent permitted by the MBCA, as the same exists now or as it may be hereinafter amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment) any person (and the heirs, executors, administrators and estate of such person) who was or is a party or is threatened to be made a party to, or otherwise becomes involved in, a

 

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Proceeding (as hereinafter defined), other than an action by or in the right of the Corporation, by reason of the fact that the person is or was or has agreed to become a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, partner, manager, trustee or in any other capacity for another corporation, partnership, joint venture, limited liability company, trust, employee benefit plan or other enterprise, including service with respect to employee benefit plans maintained or sponsored by the Corporation (each, an “Other Enterprise”), or by reason of any action alleged to have been taken or omitted in such capacity (hereinafter, each of the foregoing persons, a “Covered Person”) against any and all Expenses (as defined in Section 17 of this Article VIII) actually and reasonably incurred by such person or on his or her behalf in connection with such Proceeding and any appeal therefrom, if the person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful.

Section 2. INDEMNIFICATION OF DIRECTORS AND OFFICERS IN ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. Subject to the other provisions of this Article VIII, the Corporation shall indemnify and hold harmless, to the fullest extent permitted by the MBCA, any Covered Person who was or is a party or is threatened to be made a party to, or otherwise becomes involved in, any Proceeding, by or in the right of the Corporation to procure judgment in its favor, against any and all Expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such Proceeding, and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the courts of the Marshall Islands or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the courts of the Marshall Islands or such other court shall deem proper.

Section 3. SUCCESSFUL DEFENSE. To the extent that a Covered Person has been successful on the merits or otherwise in defense of any Proceeding described in Section 1 or Section 2 of this Article VIII, or in defense of any claim, issue or matter therein, such person shall be indemnified against Expenses (as defined in Section 17 of this Article VIII) (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith.

Section 4. INDEMNIFICATION OF EMPLOYEES AND AGENTS. The Corporation may, to the extent authorized from time to time by the Board, provide rights to indemnification and to the advancement of expenses to employees and agents of the Corporation similar to those conferred in this Article VIII to directors and officers of the Corporation to the extent not prohibited by the MBCA or other applicable law. The Board shall have the power to delegate the determination of whether employees or agents shall be indemnified to such person or persons as the Board determines.

 

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Section 5. ADVANCE PAYMENT OF EXPENSES.

(a) Expenses (including attorneys’ fees) incurred by any Covered Person in defending any Proceeding shall be paid by the Corporation in advance of the final disposition of such Proceeding. Such advances shall be paid by the Corporation within ten (10) calendar days after the receipt by the Corporation of a statement or statements from the claimant requesting such advance or advances from time to time; provided, that if applicable law requires, the payment of such expenses incurred by a Covered Person in his or her capacity as a director or officer shall be made only upon delivery to the Corporation of an undertaking in writing (the “Undertaking”) by or on behalf of such Covered Person to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right of appeal (a “final disposition”) that such Covered Person is not entitled to be indemnified for such expenses under this bylaw or otherwise. The Covered Person’s undertaking to repay the Corporation any amounts advanced for Expenses shall not be required to be secured and shall not bear interest.

(b) Except as otherwise provided in the MBCA or this Section 5, the Corporation shall not impose on the Covered Person additional conditions to the advancement of Expenses or require from the Covered Person additional undertakings regarding repayment. Advancements of Expenses shall be made without regard to the Covered Person’s ability to repay the Expenses.

(c) Advancements of Expenses pursuant to this subsection shall not require approval of the Board or the stockholders of the Corporation, or of any other person or body. The Secretary shall promptly advise the Board in writing of the request for advancement of Expenses, of the amount and other details of the request and of the undertaking to make repayment provided pursuant to this Section 5.

(d) Advancements of Expenses to a Covered Person shall include any and all reasonable Expenses incurred pursuing an action to enforce this right of advancement, including Expenses incurred preparing and forwarding statements to the Corporation to support the advancements claimed.

(e) The right to advancement of Expenses shall not apply to (1) any action, suit or proceeding against an agent brought by the Corporation and approved by a majority of the authorized members of the Board which alleges willful misappropriation of corporate assets by such agent, wrongful disclosure of confidential information, or any other willful and deliberate breach in bad faith of such agent’s duty to the Corporation or its stockholders, or (2) any claim for which indemnification is excluded pursuant to these Bylaws including, but not limited to, Section 6 hereof.

Section 6. LIMITATIONS ON INDEMNIFICATION. Subject to the requirements in Section 3 of this Article VIII and the MBCA, the Corporation shall not be obligated to indemnify any person pursuant to this Article VIII in connection with any Proceeding (or any part of any Proceeding):

(a) for which payment has actually been made to or on behalf of such person under any statute, insurance policy, indemnity provision, vote or otherwise, except with respect to any excess beyond the amount paid;

 

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(b) initiated by such person against the Corporation or its directors, officers, employees, agents or other indemnitees, unless (1) the Board authorized the Proceeding (or the relevant part of the Proceeding) prior to its initiation, (2) the Corporation provides the indemnification, in its sole discretion, pursuant to the powers vested in the Corporation under applicable law, (3) otherwise required to be made under Section 7 of this Article VIII or (d) otherwise required by applicable law; or

(c) if prohibited by applicable law; provided, however, that if any provision or provisions of this Article VIII shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (1) the validity, legality and enforceability of the remaining provisions of this Article VIII (including, without limitation, each portion of any paragraph or clause containing any such provision held to be invalid, illegal or unenforceable, that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (2) to the fullest extent possible, the provisions of this Article VIII (including, without limitation, each such portion of any paragraph or clause containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

Section 7. INDEMNIFICATION CLAIMS; DETERMINATION.

(a) To obtain indemnification under this Article VIII, a Covered Person shall submit to the Corporation a written request, including therein or therewith such documentation and information as is reasonably available to the claimant and is reasonably necessary to determine whether and to what extent the claimant is entitled to indemnification. Upon written request by a claimant for indemnification, a determination (the “Determination”), if required by applicable law, with respect to the claimant’s entitlement thereto shall be made as follows: (i) by the Board by majority vote of a quorum consisting of Disinterested Directors (as defined in Section 17 of this Article VIII); (ii) if such a quorum of Disinterested Directors cannot be obtained, by majority vote of a committee duly designated by the Board (in which all directors, whether or not Disinterested Directors, may participate) consisting solely of two or more Disinterested Directors; (iii) if such a committee cannot be designated, by any Independent Counsel (as defined in Section 17 of this Article VIII) selected by the Board prescribed in (i) above or by the committee of the Board prescribed in (ii) above, in a written opinion to the Board, a copy of which shall be delivered to the claimant; or if a quorum of the Board cannot be obtained for (a) above and the committee cannot be designated under (b) above, selected by majority vote of the full Board (in which directors who are parties may participate); or (iv) if such Independent Legal Counsel determination cannot be obtained, by majority vote of a quorum consisting of stockholders who are not parties to such Proceeding, or if no such quorum is obtainable, by a majority vote of stockholders who are not parties to the Proceeding. If it is so determined that the claimant is entitled to indemnification, payment to the claimant shall be made within ten (10) calendar days after such determination.

(b) If a claim for indemnification under this Article VIII is not paid in full by the Corporation within thirty (30) calendar days after a written claim pursuant to Section 7(a) above has been received by the Corporation, or (ii) if a request for advancement of Expenses under this Article VIII is not paid in full by the Corporation within ten (10) calendar days after a statement pursuant to Section 5 above and the required Undertaking, if any, have been received

 

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by the Corporation, the claimant may at any time thereafter bring suit against the Corporation in a court of competent jurisdiction to recover the unpaid amount of the claim for indemnification or request for advancement of Expenses and, if successful in whole or in part, the claimant shall be entitled to be paid also any and all Expenses incurred in connection with prosecuting such claim. In any such suit, the Corporation shall, to the fullest extent not prohibited by law, have the burden of proving that the claimant is not entitled to the requested indemnification or advancement of Expenses. It shall be a defense to any such action that, under the MBCA or other applicable law, the claimant has not met the standard of conduct which makes it permissible for the Corporation to indemnify the claimant for the amount claimed or that the claimant is not entitled to the requested advancement of Expenses, but (except where the required Undertaking, if any, has not been tendered to the Corporation) the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Disinterested Directors, Independent Counsel or stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth under the MBCA or other applicable law, nor an actual determination by the Corporation (including its Disinterested Directors, Independent Counsel or stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.

(c) The termination of any Proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that the person’s conduct was unlawful.

(d) If a Determination shall have been made pursuant to Section 7(a) above that the claimant is entitled to indemnification, the Corporation shall be bound by such determination in any judicial proceeding commenced pursuant to Section 7(b) above.

(e) The Corporation shall be precluded from asserting in any judicial proceeding commenced pursuant to Section 7(b) above that the procedures and presumptions of this Bylaw are not valid, binding and enforceable and shall stipulate in such proceeding that the Corporation is bound by all the provisions of this Bylaw.

Section 8. PROCEDURES FOR THE DETERMINATION OF WHETHER STANDARDS HAVE BEEN SATISFIED.

(a) Costs. All costs of making the Determination shall be borne solely by the Corporation, including, but not limited to, the costs of legal counsel, proxy solicitations and judicial determinations. The Corporation shall also be solely responsible for paying (i) all reasonable Expenses incurred by the indemnified person to enforce the indemnification rights provided pursuant to this Article Eight, including, but not limited to, the costs incurred by the indemnified person to obtain court-ordered indemnification pursuant to Section 7 hereof regardless of the outcome of any such application or Proceeding, and (ii) all costs of defending any suits or Proceedings challenging payments to the indemnified person under these Bylaws.

 

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(b) Timing of the Determination. The Corporation shall use its best efforts to make the Determination contemplated by Section 7 hereof promptly.

(1) if the Determination is to be made by the Board or a committee thereof, such Determination shall be made not later than fifteen (15) business days after a written request for a Determination (a “Request”) is delivered to the Corporation by the Indemnitee;

(2) if the Determination is to be made by Independent Counsel, such Determination shall be made not later than thirty (30) days after a Request is delivered to the Corporation by the indemnified person; and

(3) if the Determination is to be made by the stockholders of the Corporation, such Determination shall be made not later than ninety (90) days after a Request is delivered to the Corporation by the indemnified person.

Section 9. CONTRACT RIGHTS. All of the rights conferred in this Article VIII, as to indemnification, advancement of Expenses and otherwise, shall be contract rights between the Corporation and each indemnified person to whom such rights are extended that vest at the commencement of such indemnified person’s service to or at the request of the Corporation and any repeal or modification thereof shall not affect any right or obligation then existing with respect to any state of facts then or previously existing or any action, suit, or proceeding previously or thereafter brought or threatened based in whole or in part upon any such state of facts. Such a contract right may not be modified retroactively without the consent of such indemnified person.

Section 10. NON-EXCLUSIVITY OF RIGHTS. The rights to indemnification and advancement of expenses provided by this Article VIII shall not be deemed exclusive of any other rights to which a person seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, insurance policy, vote of stockholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office, and shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors, administrators and estate of such a person. The Corporation is specifically authorized to enter into an agreement with any of its directors, officers, employees or agents providing for indemnification and advancement of expenses, including attorneys’ fees, that may change, enhance, qualify or limit any right to indemnification or advancement of expenses created by this Article VIII, to the fullest extent not prohibited by the MBCA or other applicable law.

Section 11. SEVERABILITY. If this Article VIII or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each present or former director or officer as to costs, charges and expenses (including attorneys’ fees), judgment, fines and amounts paid in settlement with respect to any Proceeding, including an action by or in the right of the Corporation, to the fullest extent permitted by any applicable portion of this Article VIII that shall not have been invalidated and to the fullest extent permitted by applicable law.

 

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Section 12. SUBROGATION. In the event of payment of indemnification to a person described in Section 1 of this Article VIII, the Corporation shall be subrogated to the extent of such payment to any right of recovery such person may have and such person, as a condition of receiving indemnification from the Corporation, shall execute all documents and do all things that the Corporation may deem necessary or desirable to perfect such right of recovery, including the execution of such documents necessary to enable the Corporation effectively to enforce any such recovery.

Section 13. NO DUPLICATION OF PAYMENTS. The Corporation shall not be liable under this Article VIII to make any payment in connection with any claim made against a person described in Section 1 of this Article VIII to the extent such person has otherwise received payment (under any insurance policy, bylaw, agreement or otherwise) of the amounts otherwise payable as indemnity hereunder.

Section 14. INSURANCE. The Corporation shall have the power to purchase and maintain, at its expense, insurance to protect itself and any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, partner, member, manager, trustee, employee, agent or other representative of an Other Enterprise against any expense, liability or loss asserted against such person and incurred by such person in any such capacity or arising out of such person’s status as such whether or not the Corporation would have the power to indemnify such person against such liability under applicable law or under the provisions of these Bylaws. To the extent that the Corporation maintains any policy or policies providing such insurance, each such current or former director or officer, and each such agent or employee to which rights to indemnification have been granted as provided in this Article VIII, shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage thereunder for any such current or former director, officer, employee or agent. The Corporation may create a trust fund, grant a security interest or use other means (including, without limitation, a letter of credit) to insure the payment of such sums as may become necessary to effect indemnification as provided herein.

Section 15. NO IMPUTATION. The knowledge and/or actions, or failure to act, of any other officer, director, employee or agent of the Corporation or an Other Enterprise shall not be imputed to an indemnified person for purposes of determining the right to indemnification under this Article VIII.

Section 16. RELIANCE. Persons who after the date of the adoption of Article VIII serve or continue to serve the Corporation in an Official Capacity or who, while serving in an Official Capacity, serve or continue to serve in an Official Capacity for an Other Enterprise, shall be conclusively presumed to have relied on the rights to indemnification and advancement of Expenses contained in this Article VIII.

Section 17. CERTAIN DEFINITIONS.

(a) The term “agent” includes a volunteer.

 

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(b) The term “Corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article VIII with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued.

(c) The term “Disinterested Director” means a director of the Corporation who is not and was not a party to the matter in respect of which indemnification is sought by the claimant.

(d) The term “Expenses” shall be broadly construed and shall include, without limitation, all direct and indirect losses, liabilities, expenses, including fees and expenses of attorneys, fees and expenses of accountants, fees and expenses of public relations consultants and other advisors, court costs, transcript costs, fees and expenses of experts, witness fees and expenses, travel expenses, printing and binding costs, telephone charges, delivery service fees, the premium, security for, and other costs relating to any bond (including cost bonds, appraisal bonds, or their equivalents), judgments, fines (including excise taxes assessed on a person with respect to an employee benefit plan) and amounts paid in settlement and all other disbursements or expenses of the types customarily incurred in connection with (i) the investigation, prosecution, defense, appeal or settlement of a Proceeding, (ii) serving as an actual or prospective witness, or preparing to be a witness in a Proceeding, or other participation in, or other preparation for, any Proceeding, (iii) any voluntary or required interviews or depositions related to a Proceeding, and (iv) responding to, or objecting to, a request to provide discovery in any Proceeding. Expenses shall also include any federal, state, local and foreign taxes imposed on such person as a result of the actual or deemed receipt of any payments under this Article VIII.

(e) The term “Independent Counsel” means a law firm, a member of a law firm, or an independent practitioner, that is experienced in matters of corporation law and shall include any person who, under the applicable standards of professional conduct then prevailing, would not have a conflict of interest in representing either the corporation or the claimant in an action to determine the claimant’s rights under this Article VIII.

(f) The term “Official Capacity” shall mean service as a director or officer of the Corporation or service, at the request of the Corporation while serving in an Official Capacity for the Corporation, as a director, officer, partner, member, manager, trustee, employee, agent or other representative of an Other Enterprise.

(g) The term “Proceeding” shall be broadly construed and shall include, without limitation, the investigation, preparation, prosecution, defense, settlement, arbitration and appeal of, and the giving of testimony in, any threatened, pending or completed action, suit, investigation, inquiry, hearing, arbitration, other alternative dispute mechanism or any other proceeding, whether civil, criminal, administrative, investigative, legislative or otherwise and whether formal or informal.

 

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(h) The term “serving at the request of the Corporation” includes any service as a director, officer, employee, or agent of the Corporation that imposes duties on such persons, including duties relating to an employee benefit plan and its participants or beneficiaries.

(i) The term “not opposed to the best interest of the Corporation” describes the actions of a person who acts in good faith and in a manner he reasonably believes to be in the best interests of the participants and beneficiaries of an employee benefit plan.

Section 18. NOTICES. Any notice, request or other communication required or permitted to be given to the Corporation under this Article VIII shall be in writing and either delivered in person or sent by mail or other method of delivery, or by e-mail or other electronic transmission, to the Secretary of the Corporation and shall be effective only upon receipt by the Secretary.

ARTICLE IX

CORPORATE SEAL

Section 1. FORM. The Seal of the Corporation, if any, shall be circular in form, with the name of the Corporation in the circumference and such other appropriate legend as the Board may from time to time determine.

ARTICLE X

FISCAL YEAR

Section 1. FISCAL YEAR. The fiscal year of the Corporation shall be such period of twelve consecutive months as the Board may by resolution designate from time to time.

ARTICLE XI

MISCELLANEOUS PROVISIONS

Section 1. CHECKS, NOTES, ETC. All checks, drafts, bills of exchange, acceptances, notes or other obligations or orders for the payment of money shall be signed and, if so required by the Board, countersigned by such officers of the Corporation and other persons as the Board from time to time shall designate. Checks, drafts, bills of exchange, acceptances, notes, obligations and orders for the payment of money made payable to the Corporation may be endorsed for deposit to the credit of the Corporation with a duly authorized depository by the Chairman of the Board, the President, any Vice President, the Treasurer, any Assistant Secretary, the Controller, any Assistant Controller and such other officers or persons, if any, as the Board from time to time may designate.

Section 2. LOANS. No loans and no renewals of any loans shall be contracted on behalf of the Corporation except as authorized by the Board. When authorized so to do, any officer or agent of the Corporation may effect loans and advances for the Corporation from any bank, trust company or other institution or from any firm, corporation or individual, and for such loans and advances may make, execute and deliver promissory notes, bonds or other evidences

 

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of indebtedness of the Corporation. When authorized so to do, any officer or agent of the Corporation may pledge, hypothecate or transfer, as security for the payment of any and all loans, advances, indebtedness and liabilities of the Corporation, any and all stocks, securities and other personal property at any time held by the Corporation, and to that end may endorse, assign and deliver the same. Such authority may be general or confined to specific instances.

Section 3. CONTRACTS. Except as otherwise provided by law or in these Bylaws or as otherwise directed by the Board, the Chairman of the Board, the President, any Vice President or the Treasurer shall be authorized to execute and deliver, in the name and on behalf of the Corporation, all agreements, bonds, contracts, deeds, mortgages, security agreements and other instruments, either for the Corporation’s own account or in a fiduciary or other capacity, and the seal of the Corporation, if appropriate, shall be affixed thereto by any of such officers or the Secretary or an Assistant Secretary. The Board, the Chairman of the Board, any Vice Chairman, the President or any Vice President designated by the Board may authorize any other officer, employee or agent to execute and deliver, in the name and on behalf of the Corporation, agreements, bonds, contracts, deeds, mortgages, security agreements and other instruments, either for the Corporation’s own account or in a fiduciary or other capacity, and, if appropriate, to affix the seal of the Corporation thereto. The grant of such authority by the Board or any such officer may be general or confined to specific instances.

Section 4. WAIVERS OF NOTICE. Whenever any notice whatever is required to be given by law, by the Articles of Incorporation or by these Bylaws to any person or persons, a waiver thereof in writing or by electronic transmission by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent thereto.

ARTICLE XII

AMENDMENTS

These Bylaws and any amendment thereof may be altered, amended or repealed, or new bylaws may be adopted by (i) the Board by resolution adopted by a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time such resolution is presented to the Board for adoption) acting at any special or regular meeting of the Board if, in addition to any other notice required by these Bylaws and other applicable requirements contained herein, notice of such amendment, alteration or repeal is contained in the notice or waiver of notice of such meeting, which notice shall also include, without limitation, the text of any such proposed amendment and/or any resolution calling for any such amendment, alteration or repeal, or (ii) the holders of two-thirds (66 2/3%) or more of the outstanding stock of the Corporation entitled to vote at any annual meeting or at any special meeting, provided, in the case of any special meeting only, in addition to any other notice required by these Bylaws and other applicable requirements contained herein, notice of such amendment, alteration or repeal is contained in the notice or waiver of notice of such meeting, which notice shall also include, without limitation, the text of any such proposed amendment and/or any resolution calling for any such amendment, alteration or repeal.

 

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Exhibit 3.5

STATEMENT OF DESIGNATION

OF THE

8.75% SERIES A CUMULATIVE REDEEMABLE PERPETUAL PREFERRED STOCK

(Par Value $0.01 Per Share)

OF

IMPERIAL PETROLEUM INC.

IMPERIAL PETROLEUM INC., a corporation organized and existing under the Business Corporations Act (the “BCA”) of the Marshall Islands (the “Corporation”), in accordance with the provisions of Section 35 thereof, does hereby certify that: The Board of Directors of the Corporation has adopted the following resolution creating a series of Preferred Stock (this and other capitalized terms shall have the same meaning as in the Articles of Incorporation, unless otherwise specified in this Statement of Designation (the “Statement of Designation”) or unless the context otherwise requires) of the Corporation designated as “8.75% Series A Cumulative Redeemable Perpetual Preferred Stock.”

RESOLVED, that a series of Preferred Stock, par value $0.01 per share, of the Corporation be and hereby is created, and that the designation and number of shares of such series, and the voting and other powers, preferences and relative, participating, optional or special rights and qualifications, limitations and restrictions thereof, of the shares of such series, are as follows:

Section 1. Designation and Amount: Securities Depositary.

(a) The distinctive serial designation of such series of Preferred Stock is “8.75% Series A Cumulative Redeemable Perpetual Preferred Stock” (the “Series A Preferred Stock”). Each share of Series A Preferred Stock shall be identical in all respects to every other share of Series A Preferred Stock, except as to the respective dates from which dividends may begin accruing, to the extent such dates may differ. The Series A Preferred Stock represents perpetual equity interests in the Corporation and shall not give rise to a claim for payment of a principal amount at a particular date.

(b) Securities Depositary. The Series A Preferred Stock may be issued in either certificated or uncertificated form. If issued in certificated form, the Series A Preferred Stock will be represented by a single certificate issued to the Securities Depositary and registered in the name of the Securities Depositary or its nominee, and no Holder of Series A Preferred Stock shall be entitled to receive a share certificate evidencing such shares, unless otherwise required by law or the Securities Depositary gives notice of its intention to resign or is no longer eligible to act as such and the Corporation shall have not selected a substitute Securities Depositary within 60 calendar days thereafter. So long as the Securities Depositary shall have been appointed and is serving, payments and communications made by the Corporation to Holders of the Series A Preferred Stock shall be made by making payments to, and communicating with, the Securities Depositary.

(c) Number of Shares. The authorized number of shares of Series A Preferred Stock shall be 800,000, subject to increase by filing a statement of designation with respect to such additional shares. Shares of Series A Preferred Stock that are purchased or otherwise acquired by the Corporation shall be cancelled and shall revert to authorized but unissued shares of Preferred Stock, undesignated as to series, as set forth in Section 4 hereof. Additional shares of Series A Preferred Stock may be issued after the Original Issue Date so long as all dividends accumulated and in arrears on the then outstanding shares of Series A Preferred Stock have been paid in full.

Section 2. Dividends and Distributions.

(a) Dividends. Dividends on each share of Series A Preferred Stock shall be cumulative and shall accrue at the Dividend Rate from the Original Issue Date (or, for any subsequently issued and newly outstanding shares, from the Dividend Payment Date immediately preceding the issuance date of such shares) until such time as the Corporation pays the dividend or redeems the shares in full in accordance with Section 6 below, whether or not such dividends shall have been declared, and whether or not there are profits, surplus, or other funds legally available for

 

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the payment of dividends. Holders of Series A Preferred Stock shall be entitled to receive dividends from time to time out of any assets of the Corporation legally available for the payment of dividends at the Dividend Rate per share, when, as, and if declared by the Board of Directors. Dividends, to the extent declared to be paid by the Corporation in accordance with this Statement of Designation, shall be paid quarterly on each Dividend Payment Date. Dividends shall accumulate in each Dividend Period from and including the preceding Dividend Payment Date (other than the initial Dividend Period, which shall commence on and include the Original Issue Date), to but excluding the next Dividend Payment Date for such Dividend Period. If any Dividend Payment Date otherwise would fall on a date that is not a Business Day, declared dividends shall be paid on the immediately succeeding Business Day without the accumulation of additional dividends. Dividends on the Series A Preferred Stock shall be payable based on a 360-day year consisting of twelve 30-day months.

(b) Payment and Priorities of Dividends. Not later than 5:00 p.m., New York City time, on each Dividend Payment Date, the Corporation shall pay those dividends, if any, on the Series A Preferred Stock that shall have been declared by the Board of Directors to the Holders of record of such shares as such Holders’ names appear on the stock transfer books of the Corporation maintained by the Registrar and Transfer Agent on the applicable Record Date. The applicable record date (the “Record Date”) for any dividend payment shall be three Business Days immediately preceding the applicable Dividend Payment Date, except that in the case of payments of dividends in arrears, the Record Date with respect to a Dividend Payment Date shall be such date as may be designated by the Board of Directors in accordance with the Corporation’s Bylaws and this Statement of Designation. No dividend shall be declared or paid or set apart for payment on any Junior Stock (other than a dividend payable solely in shares of Junior Stock) unless full cumulative dividends have been or contemporaneously are being paid or provided for on all outstanding shares of Series A Preferred Stock and any Parity Stock through the most recent respective dividend payment dates. Accumulated dividends in arrears for any past Dividend Period may be declared by the Board of Directors and paid on any date fixed by the Board of Directors, whether or not a Dividend Payment Date, to Holders of the Series A Preferred Stock on the record date for such payment, which may not be more than 60 days, nor less than 15 days, before such payment date. Subject to the next succeeding sentence, if all accumulated dividends in arrears on all outstanding shares of Series A Preferred Stock and any Parity Stock shall not have been declared and paid, or if sufficient funds for the payment thereof shall not have been set apart, payment of accumulated dividends in arrears on the Series A Preferred Stock and any such Parity Stock shall be made in order of their respective dividend payment dates, commencing with the earliest. If less than all dividends payable with respect to all shares of Series A Preferred Stock and any Parity Stock are paid, any partial payment shall be made pro rata with respect to the Series A Preferred Stock and any Parity Stock entitled to a dividend payment at such time in proportion to the aggregate dividend amounts remaining due in respect of such shares at such time. Holders of the Series A Preferred Stock shall not be entitled to any dividend, whether payable in cash, property or stock, in excess of full cumulative dividends. No interest or sum of money in lieu of interest shall be payable in respect of any dividend payment which may be in arrears on the Series A Preferred Stock. So long as the Series A Preferred Stock is held of record by the nominee of the Securities Depositary, declared dividends shall be paid to the Securities Depositary in same-day funds on each Dividend Payment Date.

Section 3. Voting Rights.

(a) General. The Series A Preferred Stock shall have no voting rights except as set forth in this Section 3 or as otherwise provided for by the BCA.

(b) Right to Elect Director. In the event that six quarterly dividends, whether consecutive or not, payable on the Series A Preferred Stock are in arrears, the Holders of the Series A Preferred Stock shall have the right, voting as a class together with holders of any Parity Stock upon which like voting rights have been conferred and are exercisable at the next meeting of shareholders called for the election of directors, to elect one member of the Board of Directors only, and the size of the Board of Directors shall be increased as needed to accommodate such change (unless the size of the Board of Directors already has been increased by reason of the election of a director by holders of Parity Stock upon which like voting rights have been conferred and with which the Series A Preferred Stock voted as a class for the election of such director). The right of such Holders of Series A Preferred Stock to elect one member of the Board of Directors shall continue until such time as all dividends accumulated and in arrears on the Series A Preferred Stock shall have been paid in full, at which time such right shall terminate, subject to revesting in the event of each and every subsequent failure to pay six quarterly dividends with respect to the Series A Preferred Stock as described above in this Section 3(b). Upon any termination of the right of the Holders of

 

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the Series A Preferred Stock and, if applicable, any other Parity Stock to vote as a class for such director, the term of office of the director then in office elected by such Holders and the holders of any such Parity Stock voting as a class shall terminate immediately. Any director elected by the Holders of the Series A Preferred Stock and, if applicable, any other Parity Stock shall be entitled to one vote on any matter before the Board of Directors and shall have one vote only. A person elected as a director pursuant to the foregoing provisions of this Section 3 shall be removed only by a resolution of the Holders of the Series A Preferred Stock, provided that where the holders of any Parity Stock voted together with the Holders of the Series A Preferred Stock as a class on the resolution for the election of the said person as a director, the holders of such Parity Stock shall also be entitled to vote together with the Holders of the Series A Preferred Stock as a class on any resolution for the removal of such director. Nothing in this Section 3 shall be construed as abrogating the power of the Board of Directors or the stockholders of the Corporation to remove any director for cause.

(c) Other Voting Rights.

(1) Unless the Corporation shall have received the affirmative vote or consent of the Holders of at least two-thirds of the outstanding shares of Series A Preferred Stock, voting as a single class, the Corporation may not adopt any amendment to the Articles of Incorporation that adversely alters the preferences, powers or rights of the Series A Preferred Stock.

(2) Unless the Corporation shall have received the affirmative vote or consent of the Holders of at least two-thirds of the outstanding shares of Series A Preferred Stock, voting as a single class together with holders of any other Parity Stock upon which like voting rights have been conferred and are exercisable, the Corporation may not (x) issue any Parity Stock if the cumulative dividends payable on outstanding Series A Preferred Stock are in arrears or (y) create or issue any Senior Stock.

(d) Voting Power. For any matter described in this Section 3 in which the Holders of the Series A Preferred Stock are entitled to vote as a class (whether separately or together with the holders of any Parity Stock), such Holders shall be entitled to one vote per Series A Preferred Share. Any shares of Series A Preferred Stock held by the Corporation or any of its subsidiaries or Affiliates shall not be entitled to vote and shall not be deemed outstanding for purposes of determining the number of shares of Series A Preferred Stock entitled to vote.

(e) No Vote or Consent in Other Cases. No vote or consent of Holders of Series A Preferred Stock shall be required for (i) the creation or incurrence of any indebtedness, (ii) the authorization or issuance of any Common Stock or other Junior Stock or (iii) except as expressly provided in paragraph (c)(2) above, the authorization or issuance of any Preferred Stock of the Corporation.

(f) Vote or Consent in Connection with Tender Offer. Any affirmative vote or consent may be obtained in connection with a tender offer.

Section 4. Reacquired Shares. Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors.

Section 5. Liquidation Rights.

(a) Liquidation Event. Upon the occurrence of any Liquidation Event, Holders of outstanding shares of Series A Preferred Stock shall be entitled to receive out of the assets of the Corporation or proceeds thereof legally available for distribution to shareholders of the Corporation, (i) after satisfaction of all liabilities, if any, to creditors of the Corporation, (ii) after all applicable distributions of such assets or proceeds being made to or set aside for the holders of any Senior Stock then outstanding in respect of distributions upon a Liquidation Event, (iii) concurrently with any applicable distributions of such assets or proceeds being made to or set aside for holders of any Parity Stock then outstanding in respect of distributions upon a Liquidation Event and (iv) before any distribution of such assets or proceeds is made to or set aside for the holders of Common Stock and any other classes or series of Junior Stock as to such distribution, a liquidating distribution or payment in full redemption of such Series A Preferred Stock in an amount equal to the Series A Liquidation Preference. For purposes of clarity, upon the occurrence of any

 

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Liquidation Event, (x) the holders of then outstanding Senior Stock shall be entitled to receive the applicable Liquidation Preference on such Senior Stock before any distribution shall be made to the Holders of the Series A Preferred Stock or any Parity Stock and (y) the Holders of outstanding Series A Preferred Stock shall be entitled to the Series A Liquidation Preference per share in cash concurrently with any distribution made to the holders of Parity Stock and before any distribution shall be made to the holders of Common Stock or any other Junior Stock. Holders of Series A Preferred Stock shall not be entitled to any other amounts from the Corporation, in their capacity as Holders of such shares, after they have received the Series A Liquidation Preference. The payment of the Series A Liquidation Preference shall be a payment in redemption of the Series A Preferred Stock such that, from and after payment of the full Series A Liquidation Preference, any such Series A Preferred Share shall thereafter be cancelled and no longer be outstanding.

(b) Partial Payment. If, in the event of any distribution or payment described in Section 5(a) above where the Corporation’s assets available for distribution to holders of the outstanding Series A Preferred Stock and any Parity Stock are insufficient to satisfy the applicable Liquidation Preference for such Series A Preferred Stock and Parity Stock, the Corporation’s then remaining assets or proceeds thereof legally available for distribution to shareholders of the Corporation shall be distributed among the Series A Preferred Stock and such Parity Stock, as applicable, ratably on the basis of their relative aggregate Liquidation Preferences. To the extent that the Holders of Series A Preferred Stock receive a partial payment of their Series A Liquidation Preference, such partial payment shall reduce the Series A Liquidation Preference of their Series A Preferred Stock, but only to the extent of such amount paid.

(c) Residual Distributions. After payment of the applicable Liquidation Preference to the holders of the outstanding shares of Series A Preferred Stock and any Parity Stock, the Corporation’s remaining assets and funds shall be distributed among the holders of the Common Stock and any other Junior Stock then outstanding according to their respective rights and preferences.

Section 6. Optional Redemption; Change of Control Redemption. (a) Optional Redemption. The Corporation shall have the right, at its option, at any time on or after June 30, 2022 to redeem the Series A Preferred Stock, in whole or from time to time in part, from any source of funds legally available for such purpose. Any such redemption shall occur on a date set by the Corporation (the “Optional Redemption Date”).

(b) Change of Control Redemption. Upon the occurrence of a “Change of Control” the Corporation shall have the right, at its option, to redeem the Series A Preferred Stock, in whole but not in part, not later than 90 days after the date the Change of Control occurs, from any source of funds legally available for such purpose. Subject to the preceding sentence, any such redemption shall occur on a date set by the Corporation (the “Change of Control Redemption Date”).

A “Change of Control” means the following events have occurred and are continuing:

 

   

the acquisition by any “person” or “group” (within the meaning of Section 13(d)(3) of the U.S. Securities Exchange Act of 1934, as amended) of beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of purchases, mergers or other acquisition transactions of the Corporation’s shares entitling that person or group to exercise more than 50% of the total voting power of all of the Corporation’s shares entitled to vote generally in elections of directors (except that such person or group will be deemed to have beneficial ownership of all securities that such person or group has the right to acquire, whether such right is currently exercisable or is exercisable only upon the passage of time or occurrence of a subsequent condition); and

 

   

following the closing of any transaction referred to in the above bullet point, neither the Corporation nor the acquiring or surviving entity has a class of common securities (or American Depositary Receipts representing such securities) listed on the New York Stock Exchange (“NYSE”), the NYSE American or the NASDAQ Global Select Market, the NASDAQ Global Market or the NASDAQ Capital Market (collectively, “NASDAQ”) or listed or quoted on an exchange or quotation system that is a successor to the NYSE, the NYSE American or the NASDAQ.

 

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(c) Redemption Price. The Corporation shall effect any such redemption by paying cash for each share of Series A Preferred Stock to be redeemed equal to (1) in the case of a redemption pursuant to Section 6(a), the Optional Redemption Price on such Optional Redemption Date and (2) in the case of a redemption pursuant to Section 6(b), the Change of Control Redemption Price on such Change of Control Redemption Date. So long as the Series A Preferred Stock is held of record by the nominee of the Securities Depositary, the Redemption Price shall be paid by the Paying Agent to the Securities Depositary on the Redemption Date.

(d) Redemption Notice. The Corporation shall give notice of any redemption by mail, postage prepaid, not less than 30 days and not more than 60 days before the scheduled Redemption Date, to the Holders of record (as of the 5:00 p.m. New York City time on the Business Day next preceding the day on which notice is given) of any Series A Preferred Stock to be redeemed as such Holders’ names appear on the Corporation’s stock transfer books maintained by the Registrar and Transfer Agent and at the address of such Holders shown therein. Such notice (the “Redemption Notice”) shall state: (1) the Redemption Date, (2) the number of shares of Series A Preferred Stock to be redeemed and, if less than all issued and outstanding shares of Series A Preferred Stock are to be redeemed, the number (and the identification) of shares to be redeemed from such Holder, (3) the Redemption Price, (4) the place where the shares of Series A Preferred Stock are to be redeemed and shall be presented and surrendered for payment of the Redemption Price therefor and (5) that dividends on the shares to be redeemed shall cease to accumulate from and after such Redemption Date.

(e) Effect of Redemption; Partial Redemption. If the Corporation elects to redeem fewer than all of the outstanding shares of Series A Preferred Stock, the number of shares to be redeemed shall be determined by the Corporation, and such shares shall be redeemed pro rata or by lot as the Securities Depositary shall determine, with adjustments to avoid redemption of fractional shares. The aggregate Redemption Price for any such partial redemption of the outstanding shares of Series A Preferred Stock shall be allocated correspondingly among the redeemed shares of Series A Preferred Stock. The shares of Series A Preferred Stock not redeemed shall remain outstanding and entitled to all the rights and preferences provided in this Statement of Designation (including the Corporation’s right, if it elects so, to redeem all or part of the Series A Preferred Stock outstanding at any relevant time in accordance with this Section 6 (including this paragraph (e)).

(f) Redemption Funds. If the Corporation gives or causes to be given a Redemption Notice, the Corporation shall deposit with the Paying Agent funds sufficient to redeem the Series A Preferred Stock as to which such Redemption Notice shall have been given, no later than 5:00 p.m. New York City time on the Business Day immediately preceding the Redemption Date, and shall give the Paying Agent irrevocable instructions and authority to pay the Redemption Price to the Holders of the Series A Preferred Stock to be redeemed upon surrender or deemed surrender (which shall occur automatically if the certificate representing such shares is issued in the name of the Securities Depositary or its nominee) of the certificate therefor as set forth in the Redemption Notice. If the Redemption Notice shall have been given, from and after the Redemption Date, unless the Corporation defaults in providing funds sufficient for such redemption at the time and place specified for payment pursuant to the Redemption Notice, all dividends on such Series A Preferred Stock to be redeemed shall cease to accumulate and all rights of Holders of such shares as the Corporation’s shareholders shall cease, except the right to receive the Redemption Price, and such shares shall not thereafter be transferred on the Corporation’s stock transfer books maintained by the Registrar and Transfer Agent or be deemed to be outstanding for any purpose whatsoever. The Corporation shall be entitled to receive from the Paying Agent the interest income, if any, earned on such funds deposited with the Paying Agent (to the extent that such interest income is not required to pay the Redemption Price of the Series A Preferred Stock to be redeemed), and the Holders of any shares so redeemed shall have no claim to any such interest income. Any funds deposited with the Paying Agent hereunder by the Corporation for any reason, including redemption of Series A Preferred Stock, that remain unclaimed or unpaid after two years after the applicable Redemption Date or other payment date, shall be, to the extent permitted by law, repaid to the Corporation upon its written request after which repayment the Holders of the Series A Preferred Stock entitled to such redemption or other payment shall have recourse only to the Corporation. Notwithstanding any Redemption Notice, there shall be no redemption of any shares of Series A Preferred Stock called for redemption until funds sufficient to pay the full Redemption Price of such shares shall have been deposited by the Corporation with the Paying Agent.

 

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(g) Certificate. Any share of Series A Preferred Stock that is redeemed or otherwise acquired by the Corporation shall be canceled and shall constitute Preferred Stock subject to designation by the Board of Directors as set forth in the Articles of Incorporation. If only a portion of the shares of Series A Preferred Stock represented by a certificate shall have been called for redemption, upon surrender of the certificate to the Paying Agent (which shall occur automatically if the certificate representing such shares is registered in the name of the Securities Depositary or its nominee), the Paying Agent shall issue to the Holder of such shares a new certificate (or adjust the applicable book-entry account) representing the number of shares of Series A Preferred Stock represented by the surrendered certificate that have not been called for redemption.

(h) Redemption Priority. In the event that full cumulative dividends on the Series A Preferred Stock and any Parity Stock shall not have been paid or declared and set apart for payment, the Corporation shall not be permitted to repurchase, redeem or otherwise acquire, in whole or in part, any Series A Preferred Stock or Parity Stock except pursuant to a purchase or exchange offer made on the same terms to all holders of Series A Preferred Stock and any Parity Stock. The Corporation shall not be permitted to redeem, repurchase or otherwise acquire any Common Stock or any other Junior Stock unless full cumulative dividends on the Series A Preferred Stock and any Parity Stock for all prior and the then-ending Dividend Periods shall have been paid or declared and set apart for payment.

Section 7. Rank. The Series A Preferred Stock shall be deemed to rank:

(a) Senior. Senior to (i) all classes of Common Stock and (ii) any other class or series of capital stock established after the Original Issue Date by the Board of Directors, the terms of which class or series do not expressly provide that it is made senior to or on parity with the Series A Preferred Stock as to dividend distributions and distributions upon any Liquidation Event (collectively referred to with the Common Stock as “Junior Stock”);

(b) Parity. On parity with any class or series of capital stock established after the Original Issue Date by the Board of Directors, the terms of which class or series are not expressly subordinated or senior to the Series A Preferred Stock as to dividend distributions and distributions upon any Liquidation Event (collectively referred to as “Parity Stock”); and

(c) Junior. Junior to any class or series of capital stock established after the Original Issue Date by the Board of Directors, the terms of which class or series expressly provide that it ranks senior to the Series A Preferred Stock as to dividend distributions and distributions upon any Liquidation Event (referred to as “Senior Stock”).

The Corporation may issue Junior Stock and, subject to (3)(c)(2) of this Statement of Designation, Parity Stock from time to time in one or more series without the consent of the holders of the Series A Preferred Stock. The Board of Directors has the authority to determine the preferences, powers, qualifications, limitations, restrictions and special or relative rights or privileges, if any, of any such Preferred Stock before the issuance of any shares of that series. The Board of Directors shall also determine the number of shares constituting each such series of securities.

Section 8. Definitions. As used herein with respect to the Series A Preferred Stock:

(a) “Affiliate” means, in regard to a specified Person, a Person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the Person specified. As used in this definition, “control” (including the terms controlling, controlled by and under common control with) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise.

(b) “Articles of Incorporation” means the articles of incorporation of the Corporation, as amended through the date hereof; as it may be further amended from time to time in a manner consistent with this Statement of Designation, and shall include this Statement of Designation.

(c) “BCA” has the meaning set forth in the introductory paragraph of this Statement of Designation.

(d) “Board of Directors” means the board of directors of the Corporation or, to the extent permitted by the Articles of Incorporation and the BCA, any authorized committee thereof.

 

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(e) “Business Day” means a day on which the Nasdaq is open for trading and which is not a Saturday, a Sunday or other day on which banks in New York City are authorized or required by law to close.

(f) “Bylaws” means the bylaws of the Corporation, as they may be amended from time to time.

(g) “Change of Control” shall have the meaning set forth in Section 6(b) of this Statement of Designation.

(h) “Change of Control Redemption Date” has the meaning set forth in Section 6(b) of this Statement of Designation.

(i) “Change of Control Redemption Price” means if the “Change of Control” occurs (1) prior to December 31, 2023, $26.50 per share of Series A Preferred Stock, (2) on or after December 31, 2023 and prior to June 30, 2024, a price equal to $25.75 per share of Series A Preferred Stock, (3) on or after June 30, 2024 and prior to June 30, 2025, a price equal to $25.50 per share of Series A Preferred Stock, (4) on or after June 30, 2025 and prior to June 30, 2026, a price equal to $25.25 per share of Series A Preferred Stock, and (5) on or after June 30, 2026, a price equal to $25.00 per share of Series A Preferred Stock, plus, in the case of either (1), (2), (3), (4) or (5), an amount equal to all accumulated and unpaid dividends thereon to, but not including, the redemption date, whether or not declared.

(j) “Common Stock” means each of the Corporation’s common stock, par value $0.01 per share, and any other outstanding class of common stock of the Corporation.

(k) “Corporation” has the meaning set forth in the introductory paragraph to this Statement of Designation.

(l) “Dividend Payment Date” means each March 30, June 30, September 30 and December 30 of each year, commencing December 30, 2021.

(m) “Dividend Period” means a period of time commencing on and including a Dividend Payment Date (other than the initial Dividend Period, which shall commence on and include the Original Issue Date) and ending on and including the calendar day next preceding the next Dividend Payment Date.

(n) “Dividend Rate” means a rate equal to 8.75% per annum of the Stated Series A Liquidation Preference per share.

(o) “Holder” means the Person in whose name the shares of Series A Preferred Stock are registered on the stock register of the Corporation maintained by the Registrar and Transfer Agent.

(p) “Junior Stock” has the meaning set forth in Section 7(a) of this Statement of Designation.

(q) “Liquidation Event” means the occurrence of a liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary. Neither the sale of all or substantially all of the property or business of the Corporation nor the consolidation or merger of the Corporation with or into any other Person, individually or in a series of transactions, shall be deemed a Liquidation Event.

(r) “Liquidation Preference” means, in connection with any distribution in connection with a Liquidation Event pursuant to Section 5(a) of this Statement of Designation and with respect to any holder of any class or series of capital stock of the Corporation, the amount otherwise payable to such holder in such distribution with respect to such class or series of capital stock (assuming no limitation on the assets of the Corporation available for such distribution), including an amount equal to any accrued but unpaid dividends thereon to the date fixed for such payment, whether or not declared (if the terms of the applicable class or series of capital stock of the Corporation so provide). For avoidance of doubt, for the foregoing purposes the Series A Liquidation Preference is the Liquidation Preference with respect to the Series A Preferred Stock.

(s) “Optional Redemption Date” has the meaning set forth in Section 6(a) of this Statement of Designation.

 

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(t) “Optional Redemption Price” means (i) on or after June 30, 2022 and prior to June 30, 2023, a price equal to $26.00 per share of Series A Preferred Stock, (ii) on or after June 30, 2023 and prior to June 30, 2024, a price equal to $25.75 per share of Series A Preferred Stock, (iii) on or after June 30, 2024 and prior to June 30, 2025, a price equal to $25.50 per share of Series A Preferred Stock, (iv) on or after June 30, 2025 and prior to June 30, 2026, a price equal to $25.25 per share of Series A Preferred Stock, and (v) on or after June 30, 2026, a price equal to $25.00 per share of Series A Preferred Stock, plus, in each case, an amount equal to all accumulated and unpaid dividends thereon to (but not including) the date of redemption, whether or not declared.

(u) “Original Issue Date” means the date a share of Series A Preferred Stock is first issued by the Corporation.

(v) “Parity Stock” has the meaning set forth in Section 7(b) of this Statement of Designation.

(w) “Paying Agent” means American Stock Transfer & Trust Company, acting in its capacity as paying agent for the Series A Preferred Stock, and its respective successors and assigns or any other payment agent appointed by the Corporation.

(x) “Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company, trust or entity.

(y) “Preferred Stock” means any of the Corporation’s capital stock, however designated, which entitles the holder thereof to a preference with respect to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation’s affairs, over shares of the Corporation’s Common Stock.

(z) “Record Date” has the meaning set forth in Section 2(b) of this Statement of Designation.

(aa) “Redemption Date” means either an Optional Redemption Date or a Change of Control Redemption Date, as applicable.

(bb) “Redemption Notice” has the meaning set forth in Section 6(d) of this Statement of Designation.

(cc) “Redemption Price” means either the Optional Redemption Price or the Change of Control Redemption Price, as applicable.

(dd) “Registrar” means American Stock Transfer & Trust Company, acting in its capacity as registrar for the Series A Preferred Stock, and its successors and assigns or any other registrar appointed by the Corporation.

(ee) “Securities Depositary” means The Depository Trust Company, and its successors or assigns or any other securities depositary selected by the Corporation.

(ff) “Senior Stock” has the meaning set forth in Section 7(c) of this Statement of Designation.

(gg) “Series A Liquidation Preference” means a liquidation preference for each share of Series A Preferred Stock initially equal to $25.00 per share, which liquidation preference shall be subject to (a) increase by the per share amount of any accumulated and unpaid dividends thereon to the date fixed for payment of such amount (whether or not such dividends shall have been declared) and (b) decrease upon a distribution in connection with a Liquidation Event described in Section 5 of this Statement of Designation which does not result in payment in full of the liquidation preference of such share of Series A Preferred Stock.

(hh) “Series A Preferred Stock” has the meaning set forth in the recitals of this Statement of Designation.

(ii) “Stated Series A Liquidation Preference” means an amount equal to $25.00 per share of Series A Preferred Stock.

 

8


(jj) “Statement of Designation” means this Statement of Designation relating to the Series A Preferred Stock, as it may be amended from time to time in a manner consistent with this Statement of Designation, the Articles of Incorporation, the Bylaws and the BCA.

(kk) “Transfer Agent” means American Stock Transfer & Trust Company, acting in its capacity as transfer agent for the Series A Preferred Stock, and its respective successors and assigns or any other transfer agent appointed by the Corporation.

For all purposes relevant to this Statement of Designation: the terms defined in the singular have a comparable meaning when used in the plural and vice versa; whenever the words “include,” “includes,” or “including” are used, they are deemed followed by the words “without limitation;” all references to number of shares, amounts per share, prices, and the like shall be subject to appropriate adjustment for stock splits, stock combinations, stock dividends and similar events; and, except as otherwise set forth in this Statement of Designation, if any event under this Statement of Designation occurs on a day that is not a Business Day, such event shall be deemed to occur on the first Business Day after such date.

Section 9. Fractional Shares. No Series A Preferred Stock may be issued in fractions of a share.

Section 10. No Sinking Fund. The Series A Preferred Stock shall not have the benefit of any sinking fund.

Section 11. Record Holders. To the fullest extent permitted by applicable law, the Corporation, the Registrar, the Transfer Agent and the Paying Agent may deem and treat the Holder of any share of Series A Preferred Stock as the true, lawful and absolute owner thereof for all purposes, and neither the Corporation nor the Registrar, the Transfer Agent or the Paying Agent shall be affected by any notice to the contrary.

Section 12. Notices. All notices or communications in respect of the Series A Preferred Stock shall be sufficiently given if given in writing and delivered in person or by first class mail, postage prepaid, or if given in such other manner as may be permitted in this Statement of Designation, in the Articles of Incorporation and Bylaws or by applicable law.

Section 13. Other Rights. The Series A Preferred Stock shall not have any voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth in this Statement of Designation or in the Articles of Incorporation or as provided by applicable law.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

9


IN WITNESS WHEREOF, the undersigned, being duly authorized thereto, does hereby affirm that this Statement of Designation is the act and deed of the Corporation and that the facts herein stated are true, and accordingly has hereunto set his hand this __________ day of ________, 2021.

IMPERIAL PETROLEUM INC.

 

By:  

 

  Name: Harry N. Vafias
  Title: Chief Executive Officer

 

10

Exhibit 4.1

COMMON STOCK

 

   CUSIP No. Y3894J 104
Certificate Number    Shares

IMPERIAL PETROLEUM INC.

FORMED UNDER THE LAWS OF THE REPUBLIC OF THE MARSHALL ISLANDS

THIS CERTIFIES THAT _______________________________________

is the owner of    _______________________________________________

FULLY-PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, PAR VALUE $0.01 PER SHARE, OF

Imperial Petroleum Inc. (hereinafter called the “Company”), transferable on the books of the Company by the holder hereof in person or by duly authorized attorney upon surrender of this Certificate properly endorsed. This Certificate and the shares represented hereby are issued and shall be held subject to all the provisions of the Articles of Incorporation, as amended, and Bylaws of the Corporation, to all of which each holder, by acceptance hereof, assents.

Witness the signatures of the duly authorized officers of the Company.

 

Dated                     , 2021    [Affix Corporate Seal]

 

 

  

 

Harry N. Vafias, Chief Executive Officer, President and Director    Ifigeneia (Fenia) Sakellari, Secretary

COUNTERSIGNED AND REGISTERED

AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC

TRANSFER AGENT AND REGISTRAR

 

By  

 

  Authorized Signature


IMPERIAL PETROLEUM INC. WILL FURNISH WITHOUT CHARGE TO EACH SHAREHOLDER WHO SO REQUESTS, A FULL STATEMENT OF THE DESIGNATION, RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF EACH CLASS OF SHARES OF THE COMPANY AUTHORIZED TO BE ISSUED AND THE DESIGNATION, RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF EACH SERIES, WHICH ARE FIXED AND THE AUTHORITY OF THE BOARD OF DIRECTORS TO DESIGNATE AND FIX THE RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF OTHER SERIES. SUCH REQUEST MAY BE MADE TO THE OFFICE OF THE SECRETARY OF THE COMPANY OR TO THE TRANSFER AGENT. THE BOARD OF DIRECTORS MAY REQUIRE THE OWNER OF A LOST OR DESTROYED SHARES CERTIFICATE, OR HIS LEGAL REPRESENTATIVES, TO GIVE THE COMPANY A BOND TO INDEMNIFY IT AND ITS TRANSFER AGENTS AND REGISTRARS AGAINST ANY CLAIM THAT MAY BE MADE AGAINST THEM ON ACCOUNT OF THE ALLEGED LOSS OR DESTRUCTION OF ANY SUCH CERTIFICATE.

The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:

 

TEN COM    —      as tenants in common    UNIF GIFT MIN ACT —   

 

   Custodian   

 

TEN ENT    —      as tenants by the entireties       (Cust)       (Minor)
JT TEN    —      as joint tenants with right    Under Uniform Gifts to Minors Act         
      of survivorship and not as      

 

      tenants in common          (State)   

Additional abbreviations may also be used though not in the above list.

For value received, ___________________________________ hereby sells, assigns and transfers unto

 

        PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE        .    
      

 

 

(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)

 

 

 

 

 

  

Shares

represented by the within Certificate, and does hereby irrevocably constitute and appoint

 

 

   Attorney
to transfer the said shares on the books of the within named Corporation with full power of substitution in the premises.

 

Dated      

 

   NOTICE:    THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.

 

SIGNATURE(S) GUARANTEED:  

 

 
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.  

 

2

Exhibit 4.2

8.75% SERIES A CUMULATIVE REDEEMABLE

PERPETUAL PREFERRED STOCK

 

   CUSIP No. Y3894J 112
Certificate Number    Shares

IMPERIAL PETROLEUM INC.

FORMED UNDER THE LAWS OF THE REPUBLIC OF THE MARSHALL ISLANDS

THIS CERTIFIES THAT

is the owner of     __________________________________________________________

FULLY-PAID AND NON-ASSESSABLE SHARES OF 8.75% SERIES A CUMULATIVE REDEEMABLE PERPETUAL PREFERRED STOCK, PAR VALUE $0.01 PER SHARE, OF

Imperial Petroleum Inc. (hereinafter called the “Company”), transferable on the books of the Company by the holder hereof in person or by duly authorized attorney upon surrender of this Certificate properly endorsed. This Certificate and the shares represented hereby are issued and shall be held subject to all the provisions of the Articles of Incorporation, as amended, and Bylaws of the Corporation and the Statement of Designation related to the 8.75% Series A Cumulative Redeemable Perpetual Preferred Stock and the amendments from time to time made thereto, to all of which each holder, by acceptance hereof, assents. The shares represented by this Certificate have limited voting rights.

Witness the signatures of the duly authorized officers of the Company.

 

Dated                     , 2021    [Affix Corporate Seal]

 

 

  

 

Harry N. Vafias, Chief Executive Officer, President and Director    Ifigeneia (Fenia) Sakellari, Secretary

COUNTERSIGNED AND REGISTERED

AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC

TRANSFER AGENT AND REGISTRAR

 

By  

 

  Authorized Signature


IMPERIAL PETROLEUM INC. WILL FURNISH WITHOUT CHARGE TO EACH SHAREHOLDER WHO SO REQUESTS, A FULL STATEMENT OF THE DESIGNATION, RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF EACH CLASS OF SHARES OF THE COMPANY AUTHORIZED TO BE ISSUED AND THE DESIGNATION, RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF EACH SERIES, WHICH ARE FIXED AND THE AUTHORITY OF THE BOARD OF DIRECTORS TO DESIGNATE AND FIX THE RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF OTHER SERIES. SUCH REQUEST MAY BE MADE TO THE OFFICE OF THE SECRETARY OF THE COMPANY OR TO THE TRANSFER AGENT. THE BOARD OF DIRECTORS MAY REQUIRE THE OWNER OF A LOST OR DESTROYED SHARES CERTIFICATE, OR HIS LEGAL REPRESENTATIVES, TO GIVE THE COMPANY A BOND TO INDEMNIFY IT AND ITS TRANSFER AGENTS AND REGISTRARS AGAINST ANY CLAIM THAT MAY BE MADE AGAINST THEM ON ACCOUNT OF THE ALLEGED LOSS OR DESTRUCTION OF ANY SUCH CERTIFICATE.

 

 

The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:

 

TEN COM    —      as tenants in common    UNIF GIFT MIN ACT —   

 

   Custodian   

 

TEN ENT    —      as tenants by the entireties       (Cust)       (Minor)
JT TEN    —      as joint tenants with right    Under Uniform Gifts to Minors Act         
      of survivorship and not as      

 

      tenants in common          (State)   

Additional abbreviations may also be used though not in the above list.

For value received, ___________________________________ hereby sells, assigns and transfers unto

 

        PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE        .    
      

 

 

(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)

 

 

 

 

 

  

Shares

represented by the within Certificate, and does hereby irrevocably constitute and appoint

 

 

   Attorney
to transfer the said shares on the books of the within named Corporation with full power of substitution in the premises.

 

Dated      

 

   NOTICE:    THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.

 

SIGNATURE(S) GUARANTEED:  

 

 
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.  

 

2

Exhibit 4.3

CONTRIBUTION AND DISTRIBUTION AGREEMENT

This contribution and distribution agreement (this “Agreement”) is entered into as of             , 2021, by and between StealthGas Inc., a Marshall Islands corporation (“StealthGas”), and Imperial Petroleum Inc., a Marshall Islands corporation (“Imperial Petroleum”). The foregoing shall be referred to individually as a “Party” and collectively as the “Parties.”

RECITALS

 

A.

StealthGas intends to transfer a portion of its fleet comprising its tankers to a wholly-owned subsidiary, which subsidiary will subsequently be spun off to current shareholders of StealthGas (the “Spin-Off”). Concurrently with the Spin-Off, StealthGas intends to list the shares of the subsidiary to be spun off on the Nasdaq Capital Market.

B. To accomplish the objectives and purposes in the preceding recital, the following actions have been taken prior to the date of this Agreement:

 

  (1)

StealthGas formed Imperial Petroleum pursuant to the Marshall Islands Business Corporation Act and contributed $1,000 in exchange for all of the outstanding shares of Imperial Petroleum;

 

  (2)

StealthGas owns all of the outstanding shares (the “Vessel-Owning Subsidiary Shares”) of (a) Clean Power Inc. (“CPI”), which owns the MR tanker vessel Magic Wand, (b) MR. Roi Inc. (“MRRI”), which owns the MR tanker vessel Clean Thrasher, (c) King of Hearts Inc. (“KHI”), which owns the MR tanker vessel Falcon Maryam and (d) Tankpunk Inc. (“TankPunk” and, together, with CPI, MRRI and KHI, the “Vessel-Owning Subsidiaries”), which owns the tanker Stealth Berana (the Magic Wand, the Clean Thrasher, the Falcon Maryam and the Stealth Berana, collectively, the “Vessels”).

C. Each of the following transactions shall occur in accordance with and pursuant to this Agreement:

(1) StealthGas will contribute all of the Vessel-Owing Subsidiary Shares to Imperial Petroleum as a capital contribution in exchange for 4,774,772 shares of common stock, par value $0.01 per share, of Imperial Petroleum (the “Imperial Petroleum Common Shares”) and 795,878 shares of 8.75% Series A Cumulative Redeemable Perpetual Preferred Stock, par value $0.01 per share, of Imperial Petroleum with a liquidation preference of $25.00 per share and the other terms set forth in the Statement of Designation, substantially in the form attached hereto as Exhibit A (the “Imperial Petroleum Preferred Shares” and, together with the Imperial Petroleum Common Shares, the “Imperial Petroleum Shares”);

 

(2)

Imperial Petroleum, as guarantor, and its subsidiaries, as borrowers, will enter into, and draw down $28.0 million under, a new senior secured term loan facility with DNB (the “IP Senor Secured Loan”) and pay a portion of such amount to StealthGas as a dividend;

 

(3)

StealthGas will distribute the Imperial Petroleum Common Shares and Imperial Petroleum Preferred Shares to its shareholders pro rata as a special dividend (the “Distribution”); and

 

(4)

The articles of incorporation and bylaws of the aforementioned entities will be amended and restated to the extent necessary to reflect the applicable matters set forth above and in Article I of this Agreement, to the extent required.

AGREEMENT

NOW, THEREFORE, in consideration of their mutual undertakings and agreements hereunder, the Parties undertake and agree as follows:

 

1


ARTICLE I

DEFINITIONS

Section 1.1 Definitions. As used in this Agreement, the following terms shall have the meanings set forth below:

Action” means any claim, demand, action, cause of action, suit, countersuit, arbitration, litigation, inquiry, proceeding or investigation by or before any Governmental Authority or any arbitration or mediation tribunal or authority.

Affiliate” means, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with, such specified Person; provided, however, that for purposes of this Agreement, no member of either Group shall be deemed to be an Affiliate of any member of the other Group. As used herein, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such entity, whether through ownership of voting securities or other interests, by contract or otherwise.

Agreement” means this Agreement, as the same may be modified, amended or supplemented from time to time.

Asset” means any right, property or asset, whether real, personal or mixed, tangible or intangible, of any kind, nature and description, whether accrued, contingent or otherwise, and wheresoever situated and whether or not carried or reflected, or required to be carried or reflected, on the books of any Person.

Consents” means any consents, waivers, notices, reports or other filings to be made, or any registrations, licenses, permits, authorizations to be obtained from, or approvals from, or notification requirements to, any third parties, including any Governmental Authority.

Contribution” has the meaning assigned to such term in the Recitals hereto.

Distribution” has the meaning assigned to such term in the Recitals hereto.

Distribution Agent” means American Stock Transfer & Trust Company LLC.

Distribution Agent Agreement” has the meaning assigned to such term in Section 3.1(b).

Distribution Date” means the date on which the Distribution shall be effected, such date to be determined by, or under the authority of, the Board of Directors of StealthGas in its sole and absolute discretion.

Effective Time” means the time at which the Distribution occurs on the Distribution Date.

Exchange Act” means the United States Securities Exchange Act of 1934, as amended, together with the rules and regulations promulgated thereunder.

Governmental Authority” means any federal, state, local, foreign or international court, government, department, commission, board, bureau or agency, or any other regulatory, self-regulatory, administrative or governmental organization or authority, including the Nasdaq Stock Market.

Law” means any applicable foreign, federal, national, state, provincial or local law (including common law), statute, ordinance, rule, regulation, code or other requirement enacted, promulgated, issued or entered into, or act taken, by a Governmental Authority.

Imperial Petroleum” has the meaning assigned to such term in the Preamble hereto.

Imperial Petroleum Articles of Incorporation” means the Amended and Restated Articles of Incorporation of Imperial Petroleum substantially in the form of Exhibit B hereto.

 

2


Imperial Petroleum Bylaws” means the Bylaws of Imperial Petroleum substantially in the form of Exhibit C hereto.

Imperial Petroleum Cash Dividend” means (i) the borrowing of $28.0 million under the new credit facility to be entered into by Imperial Petroleum, as guarantor, as its subsidiaries, as borrowers, as described in the Registration Statement and (ii) the distribution of a portion of the proceeds of such borrowing in one or more transactions.

Imperial Petroleum Common Shares” has the meaning assigned to such term in the Recitals hereto.

Imperial Petroleum Preferred Shares” has the meaning assigned to such term in the Recitals hereto.

Imperial Petroleum Shares” has the meaning assigned to such term in the Recitals hereto.

IP Senior Secured Loan” has the meaning assigned to such term in the Recitals hereto.

Nasdaq” means the Nasdaq Stock Market LLC.

Parties” has the meaning assigned to such term in the Preamble hereto.

Person” means any natural person, corporation, general or limited partnership, limited liability company or partnership, joint stock company, joint venture, association, trust, bank, trust company, land trust, business trust or other organization, whether or not a legal entity, and any Governmental Authority.

Prospectus” means the final prospectus contained in the Registration Statement and filed with the SEC under Rule 424(b).

Pre-Distribution Transactions” means, collectively, the Contribution and the Imperial Petroleum Cash Dividend.

Record Date” means the date to be determined by the Board of Directors of StealthGas as the record date for determining stockholders of StealthGas entitled to receive Imperial Petroleum Shares pursuant to the Distribution.

Registration Statement” means the Registration Statement on Form F-1 of Imperial Petroleum relating to the registration under the Securities Act of Imperial Petroleum Common Shares and Imperial Petroleum Preferred Shares, including any amendments or supplements thereto.

SEC” means the United States Securities and Exchange Commission.

Securities Act” means the U.S. Securities Act of 1933, as amended.

StealthGas” has the meaning assigned to such term in the Preamble hereto.

StealthGas Common Stock” has the meaning assigned to such term in the Recitals hereto.

.

Subsidiary” means, with respect to any Person, any other Person of which a Person (either alone or through or together with any other Subsidiary of such Person) owns, directly or indirectly, a majority of the stock or other equity interests the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity.

Vessels” has the meaning assigned to such term in the Recitals hereto.

Vessel-Owning Subsidiaries” has the meaning assigned to such term in the Recitals hereto.

Vessel-Owning Subsidiary Shares” has the meaning assigned to such term in the Recitals hereto.

 

3


ARTICLE II

THE PRE-DISTRIBUTION TRANSACTIONS

Section 2.1 Contributions and Specific Conveyances. On the applicable dates specified below and in any case on or prior to the Distribution Date (and prior to the Imperial Petroleum Cash Dividend and the Distribution), and subject to satisfaction or waiver of the conditions set forth in Section 2.3, the Parties acknowledge and agree that the following actions hereby occur in the following order:

 

  (a)

Contribution on the date of this Agreement by StealthGas of all right, title and interest in the Vessel-Owning Subsidiary Shares to Imperial Petroleum free and clear of all liens and encumbrances as a capital contribution;

 

  (b)

Delivery by Imperial Petroleum (i) of 4,774,772 Imperial Petroleum Common Shares to StealthGas on the date of this Agreement and (ii) of 795,878 Imperial Petroleum Preferred Shares to StealthGas on or prior to the Distribution Date, each in exchange for StealthGas’s capital contribution of all right, title and interest in the Vessel-Owning Subsidiary Shares to Imperial Petroleum pursuant to Section 2.1(a) of this Agreement; and such Imperial Petroleum Shares owned by StealthGas will constitute all of the issued and outstanding capital stock of Imperial Petroleum; and

 

  (c)

To further evidence the transfer of the Imperial Petroleum Shares or the Vessel-Owning Subsidiary Shares reflected in this Agreement, each party making such transfer will have, to the extent necessary, executed and delivered to the party receiving the Imperial Petroleum Shares or Vessel-Owning Subsidiary Shares, as applicable, certain conveyance, stock transfer form, assignment and bill of sale instruments (the “Specific Conveyances”). The Specific Conveyances shall evidence and perfect such transfer made by this Agreement and shall not constitute a second conveyance of any assets or interests therein and shall be subject to the terms of this Agreement.

 

  (d)

On or prior to the Distribution Date, Imperial Petroleum will, and will cause its applicable subsidiaries to, enter into and execute a management agreement with Stealth Maritime Corporation S.A. for administrative, commercial and technical management services, substantially in the form attached hereto as Exhibit D, which shall have an initial term expiring on December 31, 2025 and otherwise be on substantially the same terms, including the same fee levels, as the existing management agreement between StealthGas and Stealth Maritime Corporation S.A.

Section 2.2 Imperial Petroleum Cash Dividend. On the date of this Agreement (and in any case prior to the Distribution Date and the Distribution) and subject to the satisfaction or waiver of the conditions set forth in Sections 2.1 and 2.3, Imperial Petroleum shall effect the Imperial Petroleum Cash Dividend and StealthGas shall apply the proceeds it receives from the Imperial Petroleum Cash Dividend to repay the amounts outstanding under any loans collateralized by the Vessels or the Vessel-Owning Subsidiary Shares and other assets of the Vessel-Owning Subsidiaries.

Section 2.3 Conditions Precedent to Consummation of the Pre-Distribution Transactions. The obligations of the Parties to consummate each of the Pre-Distribution Transactions is subject to the prior or simultaneous satisfaction, or waiver by StealthGas in its sole and absolute discretion, of each of the following conditions:

(a) final approval of each of the Pre-Distribution Transactions shall have been given by the Board of Directors of StealthGas in its sole and absolute discretion; and

Each of the foregoing conditions is for the benefit of StealthGas and StealthGas may, in its sole and absolute discretion, determine whether to waive any such condition. Any determination made by StealthGas prior to any of the Pre-Distribution Transactions concerning the satisfaction or waiver of any or all of the conditions set forth in this Section 2.3 shall be conclusive and binding on the Parties.

 

4


ARTICLE III

THE DISTRIBUTION

Section 3.1 Actions Prior to the Distribution. Subject to the satisfaction or waiver of the conditions set forth in Section 3.3, the actions set forth in this Section 3.1 shall be taken prior to the Distribution Date.

(a) The Board of Directors of StealthGas shall establish the Distribution Date and any appropriate procedures in connection with the Distribution. StealthGas and Imperial Petroleum shall use commercially reasonable efforts to (i) cooperate with each other with respect to the preparation of the Registration Statement on Form F-1 relating to the registration under the Securities Act of Imperial Petroleum Common Shares and Imperial Petroleum Preferred Shares, including any amendments or supplements thereto, (ii) cause the Registration Statement to become effective under the Securities Act, and (iii) mail, promptly after effectiveness of the Registration Statement and on or promptly after the Record Date, and in any event prior to the Distribution Date, to the holders of StealthGas Common Stock as of the Record Date, the Prospectus.

(b) StealthGas shall enter into a distribution agent agreement (the “Distribution Agent Agreement”) with the Distribution Agent providing for, among other things, (i) the payment of the Distribution to the holders of StealthGas Common Stock in accordance with this Article III and the Distribution Agent Agreement, and (ii) the designation of Imperial Petroleum as a third party beneficiary.

(c) StealthGas and Imperial Petroleum shall deliver to the Distribution Agent (i) book-entry transfer authorizations for all of the outstanding shares of Imperial Petroleum Common Shares and Imperial Petroleum Preferred Shares to be distributed in connection with the payment of the Distribution and (ii) all information required to complete the Distribution on the basis set forth herein and under the Distribution Agent Agreement. Following the Distribution Date, upon the request of the Distribution Agent, Imperial Petroleum shall provide to the Distribution Agent book-entry transfer authorizations of Imperial Petroleum Common Stock that the Distribution Agent shall require in order to further effect the Distribution.

(d) Each of StealthGas and Imperial Petroleum shall execute and deliver to the other Party, or cause the appropriate members of its Group to execute and deliver to the other Party, any other document necessary to effect the transactions contemplated by this Agreement.

(e) StealthGas will establish the Record Date and give Nasdaq the required notice of the Record Date in compliance with Rule 10b-17 under the Exchange Act and Nasdaq rules.

(f) Each Party shall cooperate with the other Party to accomplish the Distribution and shall take any and all actions necessary or desirable to effect the Distribution.

(g) The Parties will take all actions and make all filings as StealthGas, in consultation with Imperial Petroleum but ultimately in its sole and absolute discretion, determines are necessary or appropriate, to cause the transfer or issuance of all material Consents in order for StealthGas and Imperial Petroleum to operate their respective Businesses independently of each other in the manner contemplated hereunder. Imperial Petroleum will prepare, file and use commercially reasonable efforts to make effective an application for listing of the Imperial Petroleum Common Shares and the Imperial Petroleum Preferred Shares on the Nasdaq Capital Market, subject to official notice of issuance.

(h) StealthGas shall, in its sole discretion, determine (i) whether to proceed with all or part of the Distribution, (ii) the Distribution Date, (iii) the timing and conditions to the Distribution and (iv) the terms thereof. StealthGas may, at any time and from time to time prior to the Effective Time, change the terms of the Distribution, including by delaying or accelerating the timing of the Distribution. StealthGas shall use good faith efforts to provide notice to Imperial Petroleum of any such change. StealthGas may select, for itself and for Imperial Petroleum, outside financial advisors, outside counsel, agents and the financial printer employed in connection with the transactions hereunder in its sole and absolute discretion.

(i) StealthGas and Imperial Petroleum shall take all actions necessary so that the Imperial Petroleum Articles of Incorporation and the Imperial Petroleum Bylaws shall be in effect at or prior to the Effective Time.

 

5


(j) StealthGas and Imperial Petroleum shall take all such actions as StealthGas, in consultation with Imperial Petroleum but ultimately in its sole and absolute discretion, determines are necessary or appropriate under applicable federal or state securities or blue sky laws of the United States (and any comparable laws under any foreign jurisdiction) in connection with the Distribution.

Section 3.2 The Distribution. Subject to the satisfaction or waiver of the conditions set forth in Section 3.3, the actions set forth in this Section 3.2 shall be taken on the Distribution Date.

(a) StealthGas shall effect the Distribution by causing all of the issued and outstanding shares of Imperial Petroleum Common Shares and Imperial Petroleum Preferred Shares beneficially owned by StealthGas to be distributed to record holders of shares of StealthGas Common Stock as of the Record Date, other than with respect to shares of StealthGas Common Stock held in the treasury of StealthGas, by means of a pro rata dividend of such Imperial Petroleum Common Shares and Imperial Petroleum Preferred Shares to such record holders of shares of StealthGas Common Stock, on the terms and subject to the conditions set forth in this Agreement.

(b) Each record holder of StealthGas Common Stock on the Record Date (or such holder’s designated transferee or transferees), other than in respect of shares of StealthGas Common Stock held in the treasury of StealthGas, will be entitled to receive in the Distribution, one (1) Imperial Petroleum Common Share with respect to every eight (8) shares of StealthGas Common Stock held by such record holder on the Record Date and one (1) Imperial Petroleum Preferred Share with respect to every forty-eight (48) shares of StealthGas Common Stock held by such record holder on the Record Date. StealthGas shall direct the Distribution Agent to distribute on the Distribution Date or as soon as reasonably practicable thereafter the appropriate number of Imperial Petroleum Common Shares and Imperial Petroleum Preferred Shares to each such record holder or designated transferee(s) of such holder of record.

(c) StealthGas shall direct the Distribution Agent to determine, as soon as is practicable after the Distribution Date, the number of fractional shares, if any, of Imperial Petroleum Common Shares and Imperial Petroleum Preferred Shares allocable to each holder of record of StealthGas Common Stock entitled to receive Imperial Petroleum Common Shares and Imperial Petroleum Preferred Shares, respectively, in the Distribution and to promptly thereafter aggregate all such fractional shares and sell the whole shares obtained thereby, in open market transactions or otherwise at the then-prevailing trading prices, and to cause to be distributed to each such holder, in lieu of any fractional share, such holder’s ratable share of the proceeds of such sale, after making appropriate deductions of the amounts required to be withheld for federal income tax purposes and after deducting an amount equal to all brokerage charges, commissions and transfer taxes attributed to such sale.

(d) Any Imperial Petroleum Common Shares or Imperial Petroleum Preferred Shares or cash in lieu of fractional shares with respect to Imperial Petroleum Common Shares or Imperial Petroleum Preferred Shares that remains unclaimed by any holder of record 180 days after the Distribution Date shall be delivered to Imperial Petroleum. Imperial Petroleum shall hold such Imperial Petroleum Common Shares, Imperial Petroleum Preferred Shares and/or cash for the account of such holder of record and any such holder of record shall look only to Imperial Petroleum for such Imperial Petroleum Common Shares, Imperial Petroleum Preferred Shares and/or cash, if any, in lieu of fractional share interests, subject in each case to applicable escheat or other abandoned property laws.

Section 3.3 Conditions to Distribution. The obligation of StealthGas to consummate the Distribution is subject to the prior or simultaneous satisfaction, or waiver by StealthGas, in its sole and absolute discretion, of each of the following conditions:

(a) final approval of the Distribution shall have been given by the Board of Directors of StealthGas, and the Board of Directors of StealthGas shall have declared the dividend of Imperial Petroleum Common Shares and of Imperial Petroleum Preferred Shares, each such action in its sole and absolute discretion;

(b) the Registration Statement shall have been filed with, and declared effective by, the SEC, and there shall be no stop-order in effect with respect thereto and the Prospectus shall have been mailed to StealthGas shareholders;

(c) the actions and filings necessary or appropriate under applicable federal and state securities laws of the United States (and any comparable laws under any foreign jurisdictions) in connection with the Distribution (including, if applicable, any actions and filings relating to the Registration Statement) and any other necessary and applicable Consents from any Governmental Authority shall have been taken, obtained and, where applicable, have become effective or been accepted, each as the case may be;

 

6


(d) the Imperial Petroleum Common Shares and Imperial Petroleum Preferred Shares to be delivered in the Distribution shall have been approved for listing on the Nasdaq Capital Market, subject to official notice of issuance;

(e) no order, injunction or decree issued by any Governmental Authority or other legal restraint or prohibition preventing the consummation of the Pre-Distribution Transactions or the Distribution or any of the other transactions contemplated by this Agreement shall have been threatened or be in effect;

(g) StealthGas shall have established the Record Date and shall have given the Nasdaq not less than ten (10) days’ advance notice of the Record Date in compliance with Rule 10b-17 under the Exchange Act and Nasdaq rules;

(h) the Distribution will not violate or result in a breach of Law or any material agreement;

(i) all material Consents required in connection with the transactions contemplated hereby (that are not referred to in Section 3.3(c)) shall have been received and be in full force and effect;

(j) each of the Pre-Distribution Transactions shall have been consummated in accordance with this Agreement;

(k) the Parties shall have performed or complied with all of their respective covenants, obligations and agreements contained herein as required to be performed or complied with prior to the Effective Time; and

(l) the Board of Directors of StealthGas shall have not determined that any event or development shall have occurred or exists, or might occur or exist, that makes it inadvisable to effect the Distribution.

Each of the foregoing conditions is for the sole benefit of StealthGas and StealthGas may, in its sole and absolute discretion, determine whether to waive any such condition. Any determination made by StealthGas, in its sole and absolute discretion, prior to the Distribution concerning the satisfaction or waiver of any or all of the conditions set forth in this Section 3.3 shall be conclusive and binding on the Parties. Each Party will use good faith efforts to keep the other Party apprised of its efforts with respect to, and the status of, each of the foregoing conditions.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF STEALTHGAS; DISCLAIMER

4.1 Representations and Warranties. StealthGas hereby represents and warrants that:

(a) Each of the Vessel-Owning Subsidiaries has been duly formed or incorporated and is validly existing in good standing under the laws of its respective jurisdiction of formation or incorporation and has all requisite power and authority to operate its assets, including the vessel owned by each such Vessel-Owning Subsidiary, and conduct its business as described in the Registration Statement;

(b) The execution and delivery of this Agreement and all documents, instruments and agreements required to be executed and delivered by it pursuant to this Agreement in connection with the completion of the transactions contemplated by this Agreement, have been duly authorized by all necessary actions by StealthGas and, to the extent applicable, each Vessel-Owning Subsidiary, and this Agreement has been duly executed and delivered by StealthGas and constitutes a legal, valid and binding obligation of StealthGas enforceable in accordance with its terms, except as may be limited by bankruptcy, insolvency, liquidation, reorganization, reconstruction and other similar laws of general application affecting the enforceability of remedies and rights of creditors and except that equitable remedies such as specific performance and injunction are in the discretion of a court;

 

7


(c) The execution, delivery and performance by it of this Agreement will not conflict with or result in any violation of or constitute a breach of any of the terms or provisions of, or result in the acceleration of any obligation under, or constitute a default under any provision of: (i) the articles of association, articles of incorporation or by-laws or other organizational documents of StealthGas or any of the Vessel-Owning Subsidiaries (the “StealthGas Parties” and each, a “StealthGas Party”); (ii) any lien, encumbrance, security interest, pledge, mortgage, charge, other claim, bond, indenture, agreement, contract, franchise license, permit or other instrument or obligation to which any StealthGas Party is a party or is subject or by which any of such StealthGas Party’s assets or properties may be bound; (iii) any applicable laws, statutes, ordinances, rules or regulations promulgated by a governmental authority, orders of a governmental authority, judicial decisions, decisions of arbitrators or determinations of any governmental authority or court; or (iv) any charter or vessel management agreement to which any StealthGas Party is a party or any material provision of any material contract to which a StealthGas Party is a party or by which a StealthGas Party’s properties are bound;

(d) Except as have already been obtained or that will be obtained in the ordinary course of business, no consent, permit, approval or authorization of, notice or declaration to or filing with any governmental authority or any other person, including those related to any environmental laws or regulations or the charters or vessel management agreements related to the vessels owned by the Vessel-Owning Subsidiaries, is required in connection with the execution and delivery by any StealthGas Party of this Agreement or the consummation by any StealthGas Party of the transactions contemplated hereunder;

(e) The Vessel-Owning Subsidiary Shares have been duly and validly issued, are fully paid and non-assessable and free of preemptive rights. StealthGas has, and will convey to Imperial Petroleum, good and valid title to the Vessel-Owning Subsidiary Shares which comprise all of the issued and outstanding shares in the Vessel-Owning Subsidiaries, free and clear of all mortgages, liens, security interests, covenants, options, claims, restrictions, or encumbrances of any kind. There are no outstanding options, warrants or other rights to acquire any shares of capital stock or securities convertible into or exercisable for the capital stock of any Vessel-Owning Subsidiary. With respect to the Vessel-Owning Subsidiary Shares, there is no further obligation to make any capital contribution to the applicable Vessel-Owning Subsidiary.

(f) There is no outstanding agreement, contract, option, commitment or other right or understanding in favor of, or held by, any person to acquire the Vessel-Owning Subsidiary Shares or the assets of the Vessel-Owning Subsidiaries, including but not limited to the Vessels, that has not been terminated or otherwise waived;

(g) Each of the charters to which each applicable Vessel-Owning Subsidiary is a party (as amended to the date of this Agreement) has been made available to Imperial Petroleum and is a valid and binding agreement of the Vessel-Owning Subsidiary party to such charter or agreement enforceable in accordance with its terms and, to the knowledge of such Vessel-Owning Subsidiary, of all other parties thereto enforceable in accordance with its terms;

(h) The Vessel-Owning Subsidiaries have fulfilled all material obligations required pursuant to the charters (described in (g) above) and the vessel management agreements to have been performed by them prior to the date of this Agreement and have not waived any material rights thereunder; and no material default or breach exists in respect thereof on their part or, to their knowledge, any of the other parties thereto and, to their knowledge, no event has occurred which, after giving of notice or the lapse of time, or both, would constitute such a material default or breach;

(i) Except for such liabilities, debts obligations, encumbrances, defects, restrictions or claims of a general nature and magnitude that would arise in connection with the operation of vessels of the same type as the Vessels in the ordinary course of business and as disclosed to Imperial Petroleum, there are no liabilities, debts or obligations of, encumbrances, defects or restrictions with respect to, or claims against the Vessel-Owning Subsidiaries or any of the assets owned by the Vessel-Owning Subsidiaries, including the Vessels (other than those arising under the credit facilities described in the annual report on Form 20-F of StealthGas filed with the Securities and Exchange Commission on April 27, 2021, as amended, to be repaid in full by StealthGas on the date hereof); and

 

8


(o) The Vessels are (i) adequate and suitable for use by the Vessel-Owning Subsidiaries in the Vessel-Owning Subsidiaries’ business as presently conducted by them in all material respects as described in the Registration Statement, ordinary wear and tear excepted; (ii) seaworthy in all material respects for hull and machinery insurance warranty purposes and is in good running order and repair; (iii) insured against all risks, and in amounts, consistent with common industry practices; (iv) in compliance with maritime laws and regulations; (v) duly registered under the flag of the Marshall Islands; and (vi) in compliance in all material respects with the requirements of its present class and classification society; and all class certificates of each of the Vessels are clean and valid and free of recommendations affecting class.

4.2 Disclaimer of Warranties. EXCEPT TO THE EXTENT PROVIDED IN THIS AGREEMENT OR IN ANY OTHER DOCUMENT EXECUTED OR DELIVERED IN CONNECTION WITH THIS AGREEMENT, THE PARTIES ACKNOWLEDGE AND AGREE THAT NONE OF THE PARTIES HAS MADE, DOES NOT MAKE, AND EACH SUCH PARTY SPECIFICALLY NEGATES AND DISCLAIMS, ANY REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS, AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS, IMPLIED OR STATUTORY, ORAL OR WRITTEN, PAST OR PRESENT, REGARDING (A) THE VALUE, NATURE, QUALITY OR CONDITION OF THE ASSETS OWNED BY THE VESSEL-OWNING SUBSIDIARIES, INCLUDING, WITHOUT LIMITATION, THE ENVIRONMENTAL CONDITION OF THE ASSETS GENERALLY, INCLUDING, WITHOUT LIMITATION, THE PRESENCE OR LACK OF HAZARDOUS SUBSTANCES OR OTHER MATTERS ON SUCH ASSETS, (B) THE INCOME TO BE DERIVED FROM SUCH ASSETS, (C) THE SUITABILITY OF SUCH ASSETS FOR ANY AND ALL ACTIVITIES AND USES THAT MAY BE CONDUCTED THEREON OR THEREWITH, (D) THE COMPLIANCE OF OR BY SUCH ASSETS OR THEIR OPERATION WITH ANY LAWS (INCLUDING WITHOUT LIMITATION ANY ZONING, ENVIRONMENTAL PROTECTION, POLLUTION OR LAND USE LAWS, RULES, REGULATIONS, ORDERS OR REQUIREMENTS), OR (E) THE HABITABILITY, MERCHANTABILITY, MARKETABILITY, PROFITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF SUCH ASSETS. EXCEPT TO THE EXTENT PROVIDED IN ANY OTHER DOCUMENT EXECUTED OR DELIVERED IN CONNECTION WITH THIS AGREEMENT, EACH PARTY ACKNOWLEDGES AND AGREES THAT SUCH PARTY HAS HAD THE OPPORTUNITY TO INSPECT THE ASSETS OF THE VESSEL-OWNING SUBSIDIARIES, AND SUCH PARTY IS RELYING SOLELY ON ITS OWN INVESTIGATION OF THE ASSETS OF THE VESSEL-OWNING SUBSIDIARIES AND NOT ON ANY INFORMATION PROVIDED OR TO BE PROVIDED BY THE OTHER PARTY. EXCEPT TO THE EXTENT PROVIDED IN ANY OTHER DOCUMENT EXECUTED OR DELIVERED IN CONNECTION WITH THIS AGREEMENT, EACH OF THE PARTIES HEREBY ACKNOWLEDGES THAT, TO THE MAXIMUM EXTENT PERMITTED BY LAW, THE ASSETS OWNED BY THE SUBSIDIARIES, AS PROVIDED FOR HEREIN, ARE CONVEYED ON AN “AS IS,” “WHERE IS” CONDITION WITH ALL FAULTS, AND THE ASSETS OF THE SUBSIDIARIES ARE CONVEYED SUBJECT TO ALL OF THE MATTERS CONTAINED IN THIS SECTION. THIS SECTION SHALL SURVIVE THE CONTRIBUTION AND CONVEYANCE OF THE VESSEL-OWNING SUBSIDIARY SHARES OR THE TERMINATION OF THIS AGREEMENT. THE PROVISIONS OF THIS SECTION HAVE BEEN NEGOTIATED BY THE PARTIES AFTER DUE CONSIDERATION AND ARE INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION OF ANY REPRESENTATIONS OR WARRANTIES, WHETHER EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT TO THE ASSETS OF THE VESSEL-OWNING SUBSIDIARIES THAT MAY ARISE PURSUANT TO ANY LAW NOW OR HEREAFTER IN EFFECT, OR OTHERWISE, EXCEPT AS SET FORTH IN THIS AGREEMENT OR ANY OTHER DOCUMENT EXECUTED OR DELIVERED IN CONNECTION WITH THIS AGREEMENT.

ARTICLE V

FURTHER ASSURANCES

5.1 Further Assurances. From time to time after the date of this Agreement, and without any further consideration, the Parties agree to execute, acknowledge and deliver all such additional deeds, assignments, bills of sale, conveyances, instruments, notices, releases, acquittances and other documents, and will do all such other acts and things, all in accordance with applicable Law, as may be necessary or appropriate (a) more fully to assure that the applicable Parties own all of the properties, rights, titles, interests, estates, remedies, powers and privileges granted by this Agreement, or which are intended to be so granted, (b) more fully and effectively to vest in the applicable Parties and their respective successors and assigns beneficial and record title to the interests contributed and assigned by this Agreement or intended so to be and (c) to more fully and effectively carry out the purposes and intent of this Agreement.

 

9


ARTICLE VI

TERMINATION

Section 6.1 Termination. This Agreement may be terminated by StealthGas in its sole discretion at any time prior to the consummation of the Distribution.

Section 6.2 Effect of Termination. In the event of any termination of this Agreement prior to consummation of the Distribution, neither Party (nor any of its directors or officers) shall have any liability or further obligation to the other Party.

ARTICLE VII

MISCELLANEOUS

7.1 Survival of Representations and Warranties. The representations and warranties of the Parties in this Agreement and in or under any documents, instruments and agreements delivered pursuant to this Agreement, will survive the completion of the transactions contemplated hereby regardless of any independent investigations that Imperial Petroleum may make or cause to be made, or knowledge it may have, prior to the date of this Agreement and will continue in full force and effect.

7.2 Costs. Imperial Petroleum shall pay any and all sales, use and similar taxes arising out of the contributions, conveyances and deliveries to be made hereunder, and shall pay all documentary, filing, recording, transfer, deed, and conveyance taxes and fees required in connection therewith.

7.3 Headings; References; Interpretation. All Article and Section headings in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any of the provisions hereof. The words “hereof,” “herein” and “hereunder” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement. All references herein to Articles and Sections shall, unless the context requires a different construction, be deemed to be references to the Articles and Sections of this Agreement, respectively. All personal pronouns used in this Agreement, whether used in the masculine, feminine or neuter gender, shall include all other genders, and the singular shall include the plural and vice versa. The use herein of the word “including” following any general statement, term or matter shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not non-limiting language (such as “without limitation,” “but not limited to,” or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that could reasonably fall within the broadest possible scope of such general statement, term or matter.

7.4 Successors and Assigns. The Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and assigns.

7.5 No Third Party Rights. The provisions of this Agreement are intended to bind the Parties as to each other and are not intended to and do not create rights in any other person or confer upon any other person any benefits, rights or remedies and no person is or is intended to be a third party beneficiary of any of the provisions of this Agreement.

7.6 Counterparts. This Agreement may be executed in any number of counterparts, all of which together shall constitute one agreement binding on the parties hereto.

 

10


7.7 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to any choice of law rules or provisions (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York. Each of the parties hereto submits to the exclusive jurisdiction of the United States District Court for the Southern District of New York (or, if jurisdiction in that court is not available, then any state court located within the Borough of Manhattan, City of New York) for any and all legal actions arising out of or in connection with this Agreement.

7.8 Severability. If any of the provisions of this Agreement are held by any court of competent jurisdiction to contravene, or to be invalid under, the laws of any governmental body having jurisdiction over the subject matter hereof, such contravention or invalidity shall not invalidate the entire Agreement. Instead, this Agreement shall be construed as if it did not contain the particular provision or provisions held to be invalid, and an equitable adjustment shall be made and necessary provision added so as to give effect, as nearly as possible, to the intention of the Parties as expressed in this Agreement at the time of execution of this Agreement.

7.9 Deed; Bill of Sale; Assignment. To the extent required and permitted by applicable law, this Agreement shall also constitute a “deed,” “bill of sale” or “assignment” of the Vessel-Owning Subsidiary Shares.

7.10 Amendment or Modification. This Agreement may be amended or modified from time to time only by the written agreement of all the Parties hereto.

7.11 Integration. This Agreement and the instruments referenced herein supersede all previous understandings or agreements among the Parties, whether oral or written, with respect to its subject matter hereof. This Agreement and such instruments contain the entire understanding of the Parties with respect to the subject matter hereof and thereof. No understanding, representation, promise or agreement, whether oral or written, is intended to be or shall be included in or form part of this Agreement unless it is contained in a written amendment hereto executed by the Parties hereto after the date of this Agreement.

[Remainder of Page Intentionally Left Blank]

 

11


IN WITNESS WHEREOF, this Contribution and Distribution Agreement has been duly executed by the parties set forth below.

 

STEALTHGAS INC.
        By:  

             

  Name: Harry N. Vafias
  Title: CEO and Director
IMPERIAL PETROLEUM INC.
        By:  

             

  Name: Harry N. Vafias
  Title: President and Director

 

12

Exhibit 5.1

REEDER & SIMPSON, P.C.

ATTORNEYS AT LAW

 

P.O. Box 601       RMI Tel.: +692-625-3602
RRE Commercial Center       Honolulu Tel.: +808-352-0749
Majuro, MH 96960—Marshall Islands       Email: dreeder.rmi@gmail.com

November 12, 2021

Imperial Petroleum Inc.

331 Kifissias Avenue

Erithrea 14561

Athens, Greece

Re: Imperial Petroleum Inc. – Form F-1 Registration Statement

Ladies and Gentlemen:

We are licensed to practice law in the Republic of the Marshall Islands (the “RMI”), and are members in good standing of the Bar of the RMI. We have acted as RMI counsel to Imperial Petroleum Inc. (the Company”), a corporation organized under the laws of the RMI, in connection with the Company’s Registration Statement on Form F-1 (Registration No. 333-260829) (the “Registration Statement”), as filed with the U.S. Securities and Exchange Commission (the “Commission”) on November 5, 2021, as thereafter amended or supplemented, with respect to the spin-off and registration under the Securities Act of 1933, as amended (the Act”), of the 4,775,272 shares of common stock, par value $0.01, of the Company (the “Common Shares”), and 795,878 shares of 8.75% Series A Cumulative Redeemable Perpetual Preferred Shares, par value $0.01, of the Company (the Series A Preferred Shares”).

In rendering this opinion, we have examined originals or electronic photocopies of: (i) the Registration Statement; (ii) the prospectus of the Company (the “Prospectus”), included in the Registration Statement; (iii) the Articles of Incorporation of the Company, and (iv) the statement of designation setting forth the terms of the Series A Preferred Shares (the “Statement of Designation”), to be filed with the RMI Registrar of Corporations; and (v) all such other documents, including certificates of public officials and representatives of the Company, as we have deemed necessary. In such examination, we have assumed the genuineness of all signatures, the legal capacity of all individuals who have executed any of the documents, the authenticity of all documents submitted to us as originals, the conformity with the original documents of all documents submitted to us as electronic photocopies and the accuracy of the factual representations made to us by officers and other representatives of the Company. As to any questions of fact material to our opinion, we have, when relevant facts were not independently established, relied upon the aforesaid certificates.

This opinion is limited to RMI law as of the date hereof. In rendering our opinion as to the valid existence in good standing of the Company, we have relied solely on a Certificate of Good Standing issued by the RMI Registrar of Corporations on November 11, 2021.

Based on the foregoing and having regard to legal considerations which we deem relevant, we are of the opinion that:


A. The Company is a corporation incorporated, validly existing and in good standing under the laws of the RMI.

B. The Common Shares have been duly authorized and when issued as contemplated in the Prospectus, will be validly issued, fully paid for and non-assessable.

C. The Series A Preferred Shares have been duly authorized and, upon the filing of the Statement of Designation with the RMI Registrar of Corporations and when issued as contemplated in the Prospectus, will be validly issued, fully paid for and non-assessable.

Except as otherwise defined herein, capitalized terms are used as defined in the Registration Statement.

We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of our name under the caption “Legal Matters” in the Registration Statement and the Prospectus. In giving this consent, we do not admit that we are acting within the category of persons whose consent is required under Section 7 of the Act.

Very truly yours,

/s/ Dennis J. Reeder

Reeder & Simpson, P.C.

Dennis J. Reeder

Exhibit 8.1

REEDER & SIMPSON, P.C.

ATTORNEYS AT LAW

 

P.O. Box 601      RMI Tel.: +692-625-3602
RRE Commercial Center      Honolulu Tel.: +808-352-0749
Majuro, MH 96960      Email: dreeder.rmi@gmail.com
Marshall Islands     

November 12, 2021

Imperial Petroleum Inc.

331 Kifissias Avenue

Erithrea 14561

Athens, Greece

Re: Imperial Petroleum Inc.– Registration Statement on Form F-1

Ladies and Gentlemen:

We have acted as Republic of the Marshall Islands (the “RMI”), counsel to Imperial Petroleum Inc., a corporation organized under the laws of the RMI (the “Company”), in connection with the Company’s Registration Statement on Form F-1 (Registration No. 333-260829) (the “Registration Statement”), as filed with the U.S. Securities and Exchange Commission (the “Commission”) on November 5, 2021, as thereafter amended or supplemented, and the prospectus (the “Prospectus”), included therein, with respect to the spin-off and registration under the Securities Act of 1933, as amended (the Act”), of the 4,775,272 shares of common stock, par value $0.01, of the Company, and 795,878 shares of 8.75% Series A Cumulative Redeemable Perpetual Preferred Shares, par value $0.01, of the Company.

In connection therewith, we have prepared the discussion regarding Marshall Islands tax consequences set forth in the Prospectus under the caption “Tax Considerations-Marshall Islands Tax Considerations” (the “Discussion”).

All statements of legal conclusions contained in the Discussion, unless otherwise noted, are our opinion with respect to the matters set forth therein as of the date of the Prospectus. In addition, we are of the opinion that the Discussion, with respect to those matters as to which no legal conclusions are provided, is an accurate discussion of such RMI tax matters (except for the representations and statements of fact of the Company included in the Discussion, as to which we express no opinion).

We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of our name in the Registration Statement and the Prospectus. This consent does not constitute an admission that we are an “expert” within the meaning of such term as used in the Securities Act of 1933, as amended, or the rules and regulations of the Commission issued thereunder.

 

Very truly yours,

/s/ Dennis J. Reeder

Dennis J. Reeder
Reeder & Simpson, P.C.

Exhibit 8.2

 

LOGO

November 12, 2021

Imperial Petroleum Inc.

331 Kifissias Avenue

Erithrea 14561

Athens, Greece

 

  Re:

Imperial Petroleum Inc. - Registration Statement on Form F-1

Ladies and Gentlemen:

We have acted as U.S. tax counsel to Imperial Petroleum Inc., a Marshall Islands corporation (the “Company”), in connection with the spinoff (the “Spin-Off”) and registration under the Securities Act of 1933, as amended (the “Act”), of the 4,775,272 shares of common stock, par value $0.01, of the Company (the “Common Stock”), and 795,878 shares of 8.75% Series A Cumulative Redeemable Perpetual Preferred Stock, par value $0.01, of the Company (the “Series A Preferred Stock”), pursuant to the Company’s Registration Statement on Form F-1 (Registration No. 333-260829), filed with the U.S. Securities and Exchange Commission (the “Commission”) on November 5, 2021, as thereafter amended or supplemented (the “Registration Statement”), and the prospectus (the “Prospectus”) included therein.

In rendering our opinion, we have considered the applicable provisions of the Internal Revenue Code of 1986, as amended (the “Code”), regulations promulgated thereunder by the U.S. Department of Treasury (the “Regulations”), pertinent judicial authorities, rulings of the Internal Revenue Service and such other authorities as we have considered relevant, in each case as in effect on the date hereof. It should be noted that the Code, Regulations, judicial decisions, administrative interpretations and other authorities are subject to change at any time, possibly with retroactive effect. A material change in any of the materials or authorities upon which our opinion is based could affect the conclusions set forth herein. There can be no assurance, moreover, that any opinion expressed herein will be accepted by the Internal Revenue Service, or if challenged, by a court.

Based upon the foregoing, although the discussion in the Registration Statement under the heading “Tax Considerations—United States Federal Income Taxation of U.S. Holders” does not purport to discuss all possible U.S. federal income tax consequences of the receipt in the Spin-Off distribution and ownership and disposition of the Company’s Common Stock and Series A Preferred Stock, we hereby confirm that the statements of U.S. federal income tax law (including the qualifications thereto) under such heading represent our opinion of the material U.S. federal income tax consequences of the receipt in the Spin-Off distribution and ownership and disposition of the Company’s Common Stock and Series A Preferred Stock, subject to certain assumptions expressly described in the Registration Statement under the headings “Tax Considerations—Material United States Federal Income Tax” and “Tax Considerations—United States Federal Income Taxation of U.S. Holders”.

We express no other opinion, except as set forth above. We disclaim any undertaking to advise you of any subsequent changes in the facts stated or assumed herein or subsequent changes in applicable law. Any changes in the facts set forth or assumed herein may affect the conclusions stated herein.

 

MORGAN, LEWIS & BOCKIUS LLP

101 Park Avenue

New York, NY 10178-0060

   LOGO  +1.212.309.6000
United States    LOGO  +1.212.309.6001


We hereby consent to the filing of this opinion with the Commission as Exhibit 8.2 to the Registration Statement. We also consent to the reference to our firm under the caption “Legal Matters” in the prospectus forming part of the Registration Statement. In giving this consent, we do not thereby admit that we are included in the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission.

We are admitted to practice in the State of New York, and we express no opinion as to matters governed by any laws other than the Federal laws of the United States of America.

Very truly yours,

/s/ Morgan, Lewis & Bockius LLP

Exhibit 10.1

MANAGEMENT AGREEMENT

This Management Agreement is made and entered into on             , 2021.

IMPERIAL PETROLEUM INC., a holding company registered and operating under the laws of the Republic of Marshall Islands having its registered address at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960 (hereinafter called “the Owner”), and

STEALTH MARITIME CORP. S.A., a company registered and operating under the laws of Liberia, which has established an office at Athens, Greece, P.O. BOX 52939, 145 10 KIFISSIA- under the provisions of Law 89/1967 as amended (hereinafter called “the Managers”), on the other hand.

WHEREAS, the Subsidiaries are the registered owners of the ships (the “Vessels”) particularly described in Schedule A annexed hereto, as such Schedule may be amended from time to time

WHEREAS, the Owners wish to entrust the management of the Vessel to the Managers upon the terms hereinafter set forth.

WHEREAS, the Managers main business is the operation of seagoing vessels and have the skills, know how and experience for the managing, operating and manning of seagoing vessels and agree to act as the Managers of the Vessels.

NOW THEREFORE, in consideration of the premises and of the mutual covenants hereinafter contained, it is hereby agreed as follows:

 

1.

The Owner hereby appoints the Managers and the Managers hereby agree to act as the Managers of the Vessels.

 

2.

The Managers undertake, on behalf of the Owner, to use their best endeavours and skills to provide the Services listed hereunder, in accordance with sound ship’s management practice, and to protect and promote the interests of the Owner in all matters relating to the provision of the services described hereunder.

 

3.

Subject to terms and conditions herein provided, during the period of this agreement the Managers will exercise their best endeavours to protect and promote the interests of the Owner and shall carry out in an economical and efficient manner, as Agents, for and on behalf of the Owner, the duties described hereunder, will provide to the Owner the services described hereunder, and will have authority to take such actions as the Managers may from time to time in their absolute discretion consider to be necessary to enable them to perform this Agreement in accordance with sound ship management practice.

 

1


4.

It is expressly agreed however, that the Managers in the performance of their duties and responsibilities under this Agreement shall be entitled to have regard to their overall responsibility in relation to all vessels as may from time to time be entrusted to their management and in particular, but without prejudice to the generality of the foregoing, the Managers shall be entitled to allocate available supplies, manpower and services in such manner as in the prevailing circumstances the Managers, in their absolute discretion, consider to be fair and reasonable.

 

5.

Nothing in this Agreement shall be construed so as to grant the Managers any interest in the Vessels, or in the profits resulting from her operation or to create between the Owner and the Managers any relationship other than that of “Principal” and “Agent”.

 

6.

Insurances

The Managers shall arrange through competent brokers such Hull and Machinery, Protection and Indemnity, War Risks and other insurance covers as the Owner shall have instructed or agreed, in particular as regards insured values, deductibles and franchises.

All insurances shall be in the joint names of the Owner and the Managers if the Managers so wish; however, unless otherwise agreed no liability to pay premiums or P and I calls shall be imposed on the Managers, notwithstanding P and I cover restrictions which would thereby result.

The Managers shall also be responsible for following up and maintaining in force and at all times valid all insurance policies and entries of the Vessels with P and I Associations and shall also advise, if necessary, of the need to take out additional insurance and entries in order that the Vessels is fully covered against risks which might occur from any voyage in a high risk area or from the carriage of dangerous or hazardous goods.

 

2


7.

Manning

The Managers shall directly or in co-operation with manning agents appointed by the Owner, select, provide and recruit adequate, competent and qualified crew for the Vessels, as required by the Owner. These manning services include but are not limited to the following:-

 

a)

Employment of Master, Officers and Crew of the Vessels;

 

b)

Arranging for transportation of the Crew including repatriation;

 

c)

Training of the Crew;

 

d)

Supervision of the efficiency of the Crew and administration of all other Crew matters, such as relief planning for the manning of the Vessels;

 

e)

Payroll arrangements (payment of crew earnings and other lawful earnings of the crew);

 

f)

Arrangement and administration of pensions and Crew insurance;

 

g)

Discipline and union negotiations, labour relations and labour welfare;

 

h)

Enforcement of appropriate standing orders;

 

i)

Victualling;

 

j)

Ship’s cash control;

It is expressly agreed that the seamen to be recruited will always be the employees of the Owners and that the Managers will not be responsible for “any damages” whatsoever (direct or indirect, physical, financial or consequential) affecting the Vessels and caused by any negligence, default or wilful misconduct of the crew members.

 

3


8.

Chartering

The Managers shall, in accordance with the Owner’s instructions, provide directly or through other independent brokers, chartering services which include but are not limited to seeking and negotiating employment for the Vessels and the conclusion (including the execution thereof) of Charterparties or other contracts relating to the employment of the Vessels.

 

9.

Technical Management

The Managers shall provide technical management, by supervising the maintenance, safety, classification certification and repairs of the Vessels so as to keep the Vessels in a suitable and efficient condition for her trading. This included but is not limited to the following functions:-

 

a)

Supervision of the maintenance and general efficiency of the Vessels;

 

b)

Arrangement and supervision of dry-dockings, repairs, alterations and the upkeep of the Vessels to standards required by the Owner, provided that the Managers shall be entitled to incur the necessary expenditure to ensure that the Vessel will comply with all requirements and recommendations of the Classification Society, with the Laws and Regulations of the Country of Registry of the Vessels and of the places where she trades and with all the appropriate Certificates for the Vessel’s trading as required by the International Regulations and that the Vessels Trading Certificates are effective and valid at all times;

 

c)

Appointment of surveyors and technical consultants as the Managers may consider from time to time to be necessary;

 

d)

Advising the Owner in advance regarding the dates that the Vessels are due for inspection or survey and about any recommendation made by the Vessels Classification Society during such inspection or survey.

 

4


10.

Operation

The Managers shall provide for the operation of the Vessels, which includes but is not limited to the following functions:-

 

a)

Issue voyage instructions;

 

b)

Appointment of Agents and/or sub-agents and/or protecting agents;

 

c)

Appointment of stevedores;

 

d)

Arrange cargo handling, loading and discharging of the Vessels;

 

e)

Arrangement of the surveying of cargoes;

 

f)

Provision of all other services incidental to the operation of the Vessels including, but not limited to, cargo handling, port activities, pilotage, towage, wharfage, dockage, canal transits, etc.

 

11.

Freight Collection and Freight Management.

The Managers shall provide freight management which included but is not limited to the following functions:-

 

a)

Calculation of hire and/or provision of voyage estimates and/or freight and/or demurrage and/or despatch monies due from or due to the Charterers of the Vessels;

 

b)

Collection of the Vessels income and in particular of all hire and/or freight revenues or all other monies of whatsoever kind to which the Owner may be entitled arising out of the employment of or otherwise in connection with the Vessels.

 

12.

Claims Handling

The Manager shall handle and settle all claims arising out of the operation of the Vessels and of the management services provided under this Agreement and shall keep the Owner informed regarding any incident of which the Managers become aware, which gives or may give rise to claims or disputes involving third parties. The Managers shall bring or defend actions, suits or proceedings on behalf of the Owner, in connection with matters entrusted to the Managers according to this Agreement.

 

5


More particularly, the Managers shall make, adjust, apportion, resist, defend, settle or abandon any claim by or on behalf of the Vessels or the Owner in respect of the insurance of the Vessels, machinery, apparel, fittings, freight earnings, demurrage, despatch, disbursements or any claim for salvage, towage, damages, average or any other claim arising under any contract which concerns the Vessels in any way or any claim which arises out of the operation of the Vessels and, in this respect, to appoint, on behalf of the Owner, lawyers to handle claims, to institute legal proceedings and to collect any such claims or monies on behalf of the Owner. However, in order to settle or abandon any claim advanced by the Owner in excess of US$ 200,000.-, the prior written consent of the Owner is necessary.

The managers shall also have power to obtain legal or technical or other outside expert advice in relation to the handling and settlement of claims and disputes or all other matters affecting the interest of the Owner in respect of the Vessels. Any costs incurred by the Managers in carrying out their obligations under this clause shall be reimbursed by the Owner.

The Owner shall arrange for the provision of any necessary guarantee, bond or security.

 

13.

Supplies/Provisions/Stores/Spares

The Managers shall arrange for the supply of provisions, stores, deck and engine spares, as required for the Vessels operation, maintenance and technical characteristics.

 

14.

Bunkering

The Managers shall arrange for the provision of bunker fuel, lubricants, etc., of the quality specified by the Owner as required for the trade of the Vessels.

 

6


15.

Accounting

The Managers shall establish an accounting system which meets the requirements of the Owner and shall provide regular accounting information, reports and records to the Owner.

The Managers shall also maintain the records of all income received, and costs and expenditures incurred hereunder as well as data necessary or proper for the settlement of accounts between the parties.

In particular, the Managers shall provide inter alia the following accounting services: -

 

a)

Budget, Funding of Vessels operation

(I) The Managers shall present to the Owner annually a budget for the following twelve months. The annual budget shall be prepared and submitted to the Owner not less than 2 months before the anniversary date of the commencement of the Agreement. The Owner shall indicate to the Managers their acceptance and approval of the annual budget within one month of presentation and in the absence of any such indication, it is presumed that the Owner approves said budget.

(II) The Managers shall follow as closely as possible the said budget in the running/operation of the Vessels. The Managers shall produce every three months a comparison between budgeted and actual income and expenditure of the Vessels.

(III) It is specifically agreed that the Managers will use the Vessels income to fund the Vessels running/operational costs. If the Vessels income is not sufficient to cover these costs then the Owner shall upon demand put the Managers in funds for all the Vessels expenses and the Managers shall in no circumstances be required to use or commit their own funds to finance the provisions of the management services.

 

7


b)

Income collected and Expenses paid on behalf of the Owner

All monies collected by the Managers on behalf of the Owner under the terms of this Agreement and all interest accrued thereon shall be held to the credit of the Owner.

All expenses incurred and payments made by the Managers under the terms of this Agreement on behalf of the Owner, including the Management fee, shall be debited against the Owner and shall be offset against monies collected as above.

In the event that the payments and expenses exceed the monies collected, the Owner shall immediately put the Managers in funds upon demand to cover all such payments and expenses.

 

c)

Financial Statements and Reports

The Managers will provide the Owner with a yearly balance sheet and a profit and loss account, according to which any existing profits may be paid to the Owner as per their request.

At the request of the Owner, the Managers may provide a six monthly interim/provisional profit and loss account, on the basis of which an interim payment of the profit may be arranged.

 

d)

Auditing

The Managers shall at all times maintain and keep true and correct accounts and shall make the same available for inspection and auditing by external auditors, that the Owner may appoint at their expense, at such times as may be mutually agreed.

 

8


16.

Management Fee

 

16.01

In consideration of the obligations undertaken by Managers under this Agreement, Owner shall pay to the Managers a commission fee equal to one and a quarter of one per cent (1.25%) calculated on the gross freight, demurrage and charter hire obtained for the employment of the Vessels on contracts or charter parties entered into by Managers during the term of this Agreement, payable to Managers on the dates when such freight demurrage of charter-hire, as the case may be, is paid or otherwise collected.

 

16.02

In addition to the commission fee due to Managers under Clause 16.01 above and, for as long as this Agreement is in effect, the Owner shall also pay to the Managers a Management Fee of US$ 440.- per day payable monthly in advance, for vessels operating in the spot market or on a time charter. For Vessels operating on bareboat charter, the Owner shall pay to the Managers a management fee of US $ 125.- per day per vessel.

 

16.03

In addition to the commission fee due to Managers under Clause 16.01 above Owner shall pay to the Managers a commission fee equal to one per cent (1.00%) calculated on the MOA price for the Vessels being bought or sold for and on behalf of the Owner.

 

16.04

The Managers shall at no extra cost to the Owner provide its own office accommodation, office staff and stationery.

 

16.05

In the event of the appointment of the Managers being terminated by the Owner or the Managers, the management fee payable to the Managers shall continue to be payable for a further period of three calendar months.

 

17.

Sale of Vessels

If the Owner sells any Vessel during the currency of the Agreement, the Managers shall, in accordance with the Owner’s instructions, supervise the sale of the Vessel, including the performance of the sale agreement, and the negotiation of the same, if so requested by the Owner.

 

18.

Compliance with Laws and Regulations

The Managers will not do or permit anything to be done which might cause any breach of infringement of the laws and regulations of the Country of Registry of the Vessels, and of the places where she trades.

 

9


19.

Managers’ Right to Sub-contract

The Managers shall be entitled to sub contract part of their obligations hereunder to third parties without the consent of the Owner.

 

20.

Responsibilities

 

a)

Force Majeure

Neither the Owner nor the Managers shall be under any responsibility/liability for any failure to perform any of their obligations hereunder by reason of any cause whatsoever of any nature or kind beyond their reasonable control.

 

b)

Liability to Owner

Without prejudice to sub-clause 17 above, the Managers shall be under no liability whatsoever to the Owner for any loss, damage, delay or expense of whatsoever nature, whether direct or indirect (including but not limited to loss of profit arising out of or in connection with the detention of or the delay to any Vessel) and howsoever arising in the course of the performance of the management services unless same is proved to have resulted solely from the gross negligence or wilful misconduct of the managers or their employees or agents or sub-contractors employed by them in connection with any Vessel, in which case the Managers’ liability for each incident or series of incidents giving rise to a claim or claims shall never exceed a total of ten times the annual management fee payable hereunder.

 

c)

Indemnity

The Owner hereby undertakes to keep the Managers and their employees, agents and sub-contractors indemnified and to hold them harmless against all actions, proceedings, claims, demands or liabilities whatsoever or howsoever arising which may be brought against them or incurred or suffered by them arising out of or in connection with the performance of the Agreement and against and in respect of all costs, loss, damages, and expenses, which the Managers may suffer or incur, during the course of the performance of this Agreement.

 

10


d)

Himalaya

It is hereby expressly agreed that no employee or agent of the Managers shall in any circumstances whatsoever be under any liability whatsoever to the Owner for any loss, damage or delay of whatsoever kind arising or resulting directly or indirectly from any act, neglect or default on his part, while acting in the course of or in connection with his employment and, every exception, limitation, condition and liberty herein contained and every right, exemption from liability, defence and immunity of whatsoever nature applicable to the Managers shall also be available and shall extend to protect every such employee or agent of the Managers acting as aforesaid.

 

21.

Inspection of Vessels

The Owner shall have the right at any time, after giving reasonable notice to the Managers, to inspect any Vessel for any reason they consider necessary.

 

22.

Termination of Agreement

This agreement has effect from today and shall continue until terminated by either party giving to the other notice in writing at the addresses stated above, in which event the Agreement shall terminate upon the expiration of a period of two months from the date upon which such notice was given.

Termination by Default

The Managers shall be entitled to terminate the Agreement forthright if any monies payable by the Owner shall not have been received in the Managers’ nominated account within ten days of payment having been requested in writing by the Managers.

This agreement shall furthermore terminate forthwith in the event of an order being made or resolution passed for the winding up, dissolution, liquidation or bankruptcy of either party (otherwise than for the purpose of reconstruction or amalgamation) or if a Receiver is appointed, or if it suspends payment, ceases to carry on business, or makes any special arrangement or composition with its creditors.

 

11


The Managers shall also be entitled to terminate the Agreement by notice in writing if, after receipt of written notice of objection thereto from the Managers, the Owner proceeds with employment of or continues to employ his Vessels in a trade or in a manner which is, in the opinion of the Managers, likely to be detrimental to their reputation as Managers or (otherwise done by virtue of ordinary business competition) by being prejudicial to the commercial interest of the Managers.

This Agreement shall be deemed to be terminated in case of the sale of all Vessels or if all Vessel becomes a total loss or is declared as a constructive or compromised or arranged total loss or is requisitioned.

For the purpose of the above sub-paragraph, the date upon which any Vessel is to be treated as having been sold or otherwise disposed of shall be the date on which the Owner ceases to be registered as Owner of the Vessel.

The Vessels shall not be deemed to be lost unless either she has become an actual total loss or agreement has been reached with her underwriters in respect of her constructive, compromised or arranged total loss, or if such agreement with her underwriters is not reached it is adjudged by a competent tribunal that a constructive loss of any Vessel has occurred.

The termination of this Agreement shall be without prejudice to all rights accrued due between the parties prior to the date of termination.

 

23.

Notices

Any communications may be sent by telefax, registered mail, personal or courier services to the following address:

 

STEALTH MARITIME CORP. S.A.

Address: P.O. BOX 52939

14610 N. Erithrea

Athens – Greece

Phone

Fax

  

:

:

:

  

(+30) 210 6252849 – 6252850

(+30) 210 6252817

 

12


24.

Law and Arbitration

This Agreement is governed by the Laws of England and any disputes arising therefrom shall be referred to Arbitration in London, one Arbitrator being appointed by each party with the power to appoint an Umpire in accordance with the Arbitration Acts 1950, 1979, 1996 or any statutory modification or re-enactment thereof for the time being in force.

IN WITNESS WHEREOF

The parties have caused this Agreement to be executed by their duly authorised officers, on the date above written.

 

For and on behalf of    For and on behalf of
IMPERIAL PETROLEUM INC.    MANAGERS STEALTH MARITIME

                                             

 

SAKELLARI FENIA

SECRETARY

  

                                                         

 

ANDRIOTIS ADAMANTIOS

 

13


SCHEDULE A

 

VESSEL

  

OWNING COMPANY

  

FLAG

   OFFICIAL
NUMBER
STEALTH BERANA    TANKPUNK INC.    LIBERIA    19903
MAGIC WAND    CLEAN POWER INC.    LIBERIA    17797
FALCON MARYAM    KING OF HEARTS INC.    LIBERIA    18241
CLEAN THRASHER    MR. ROI INC.    MARSHALL ISLANDS    3024

 

14

Exhibit 10.2

$28,000,000 Senior Secured Loan Agreement

 

Dated November 10, 2021

 

(1)   Tankpunk Inc.

 

MR Roi Inc.

Clean Power Inc.

King of Hearts Inc.

(as Borrowers)

 

(2)   Imperial Petroleum Inc.

(as Guarantor)

 

(3)   The Financial Institutions listed in Part I of Schedule 1

(as Original Lenders)

 

(4)   DNB (UK) Limited

(as Bookrunner)

 

(5)   DNB Bank ASA

(as Agent)

 

(6)   DNB Bank ASA

(as Swap Provider)

 

(7)   DNB Bank ASA

(as Security Agent)

 

LOGO


Contents

 

         Page  

Section 1

  Interpretation      2  

1

  Definitions and Interpretation      2  

Section 2

  The Loan      32  

2

  The Loan      32  

3

  Purpose      32  

4

  Conditions of Utilisation      32  

Section 3

  Utilisation      34  

5

  Advance      34  

Section 4

  Repayment, Prepayment and Cancellation      35  

6

  Repayment      35  

7

  Illegality, Prepayment and Cancellation      35  

Section 5

  Costs of Utilisation      39  

8

  Interest      40  

9

  Interest Periods      42  

10

  Changes to the Calculation of Interest      43  

11

  Fees      45  

Section 6

  Additional Payment Obligations      46  

12

  Tax Gross Up and Indemnities      46  

13

  Increased Costs      55  

14

  Other Indemnities      57  

15

  Mitigation by the Lenders      59  

16

  Costs and Expenses      60  

Section 7

  Accounts and Application of Earnings      62  

17

  Accounts      62  

18

  Additional Security      64  

19

  Guarantee and Indemnity      66  

Section 8

  Representations, Undertakings and Events of Default      69  


20

  Representations      69  

21

  Information Undertakings      75  

22

  Financial Covenants      78  

23

  General Undertakings      79  

24

  Events of Default      87  

Section 9

  Changes to Parties      92  

25

  Changes to the Lenders      92  

26

  Changes to the Obligors      98  

Section 10

  The Finance Parties      99  

27

  Role of the Agent, the Security Agent and the Bookrunner      99  

28

  Application of Proceeds      110  

29

  Conduct of Business by the Finance Parties      112  

30

  Sharing among the Finance Parties      112  

Section 11

  Administration      114  

31

  Payment Mechanics      114  

32

  Set-Off      117  

33

  Notices      117  

34

  Calculations and Certificates      119  

35

  Partial Invalidity      120  

36

  Remedies and Waivers      120  

37

  Amendments and Waivers      120  

38

  Confidentiality      128  

39

  Disclosure of Lender Details by Agent      132  

40

  Counterparts      133  

41

  Joint and Several Liability      134  

Section 12

  Governing Law and Enforcement      135  

42

  Governing Law      135  

43

  Enforcement      135  

Schedule 1

  The Parties      136  
 

Part I The Original Lenders

     136  


 

Part II The other Finance Parties

     136  
  Part III The Obligors      137  

Schedule 2

  Part I Conditions Precedent      138  
 

Part II Conditions Subsequent

     142  

Schedule 3

  Utilisation Request      143  

Schedule 4

  Form of Transfer Certificate      145  

Schedule 5

  Form of Assignment Agreement      148  

Schedule 6

  Compounded Rate Terms      152  

Schedule 7

  Daily non-cumulative compounded RFR rate      156  

Schedule 8

  Cumulative Compounded RFR rate      158  

Schedule 9

  Form of Compliance Certificate      159  

Signatures

       161  


Loan Agreement

Dated                    2021

Between:

 

(1)

Tankpunk Inc. (“Borrower A”) and MR Roi Inc. (“Borrower B”), each a company incorporated under the law of the Republic of Marshall Islands, with registered address at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, MH96960 Marshall Islands and Clean Power Inc. (“Borrower C”) and King of Hearts Inc. (“Borrower D”), each a company incorporated under the law of Liberia, with registered address at 80, Broad Street, Monrovia, Liberia as borrowers (together the “Borrowers” and each a “Borrower”) jointly and severally; and

 

(2)

Imperial Petroleum Inc., a company incorporated under the law of the Republic of Marshall Islands, with registered address at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, MH96960 Marshall Islands as guarantor (the Guarantor”); and

 

(3)

The Financial Institutions listed in Part I of Schedule 1 (The Parties), each acting through its Facility Office (together the “Original Lenders” and each an “Original Lender”); and

 

(4)

DNB (UK) Limited, acting as bookrunner through its office at 8th Floor, The Walbrook Building, 25 Walbrook, London, EC4N 8AF, the United Kingdom (in that capacity, the “Bookrunner”); and

 

(5)

DNB Bank ASA, acting as agent through its office at 8th Floor, The Walbrook Building, 25 Walbrook, London, EC4N 8AF, the United Kingdom (in that capacity, the “Agent”); and

 

(6)

DNB Bank ASA, acting as swap provider through its office at 8th Floor, The Walbrook Building, 25 Walbrook, London, EC4N 8AF, the United Kingdom (in that capacity, the “Swap Provider”); and

 

(7)

DNB Bank ASA, acting as security agent through its office at 8th Floor, The Walbrook Building, 25 Walbrook, London, EC4N 8AF, (in that capacity, the “Security Agent”).

It is agreed as follows:

 

Page 1


Section 1 Interpretation

 

1

Definitions and Interpretation

 

1.1

Definitions In this Agreement:

2018 Withdrawal Act” means the European Union (Withdrawal) Act 2018.

2020 Withdrawal Act” means the European Union (Withdrawal Agreement) Act 2020.

Account Holder” means DNB Bank ASA acting through its branch at 8th Floor, The Walbrook Building, 25 Walbrook, London, EC4N 8AF, the United Kingdom or any other bank or financial institution which at any time, with the Security Agent’s prior written consent, holds the Accounts.

Accounts” means the Earnings Accounts and the Retention Accounts.

Account Security Deed” means a first priority account security deed in respect of all amounts from time to time standing to the credit of the Accounts.

Additional Business Day” means any day specified as such in the Compounded Rate Terms.

Administration” has the meaning given to it in paragraph 1.1.3 of the ISM Code.

Adjusted EBITDA” means earnings before interest expenses, taxes, depreciation and amortization, net of impairment, of the Guarantor for the previous period of twelve months.

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 (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).

Approved Family Members” has the meaning given to it in the Approved Family Members Side Letter.

Approved Family Members Side Letter” means the letter addressed to the Agent from the Borrowers and the Guarantor identifying the Approved Family Members.

Approved Shipbroker” means each of Grieg Shipbrokers and Cass Technava Maritime S.A.

Assignments” means:

 

  (a)

a first priority deed of assignment of the (i) Insurances, (ii) Earnings, (iii) Requisition Compensation and (iv) in the case of Vessel D only, the Charter Rights, of the Vessels from the Borrowers;

 

  (b)

a first priority tripartite agreement including assignments of the Insurances and Requisition Compensation of Vessel D from the Charterer; and

 

Page 2


  (c)

the Master Agreement Proceeds Assignments.

Assignment Agreement” means an agreement substantially in the form set out in Schedule 5 (Form of Assignment Agreement) or any other form agreed between the relevant assignor and assignee.

Authorisation” means an authorisation, consent, approval, resolution, licence, exemption, filing, notarisation or registration.

Availability Period” means, in respect of each Tranche, the period from and including the date of this Agreement to and including 12 November 2021 or such later date as may be agreed by the Lenders.

Backstop Rate Switch Date” means the date (if any) specified as such in the Compounded Rate Terms, or any other date agreed as such between the Agent, the Majority Lenders and the Borrowers.

Balloon Payments” means the Tranche A Balloon Payment and the Tranche D Balloon Payment.

Break Costs” means the amount (if any) by which:

 

  (a)

in respect of any Term Rate Tranche, the interest which a Lender should have received for the period from the date of receipt of all or any part of its participation in a Tranche or an Unpaid Sum to the last day of the current Interest Period in respect of that Tranche or Unpaid Sum, had the principal amount or Unpaid Sum received been paid on the last day of that Interest Period exceeds the amount which that Lender would be able to obtain by placing an amount equal to the principal amount or Unpaid Sum received by it on deposit with a leading bank for a period starting on the Business Day following receipt or recovery and ending on the last day of the current Interest Period; or

 

  (b)

in respect of any Compounded Rate Tranche, any amount specified as such in the Compounded Rate Terms.

Business Day” means a day (other than a Saturday or Sunday) on which banks are open for general business in London and New York, and (in relation to (i) any date for payment or purchase of an amount relating to a Compounded Rate Tranche or (ii) the determination of the first day or the last day of any Interest Period for a Compounded Rate Tranche, or otherwise in relation to the determination of the length of such an Interest Period) which is an Additional Business Day for that Tranche or Unpaid Sum.

Capital Expenditure” means any expenditure treated (in accordance with GAAP) as capital expenditure on acquiring or maintaining vessels or advances of vessels under construction.

Central Bank Rate” has the meaning given to that term in the Compounded Rate Terms.

Central Bank Rate Adjustment” has the meaning given to that term in the Compounded Rate Terms.

 

Page 3


Change of Control” means an event where the Approved Family Members:

 

  (a)

cease to hold directly or indirectly in aggregate (i) at least 10% of the issued shares or of the issued shares with a right to vote in and of the Guarantor and (ii) in the event of a delisting or cessation of trading of the Guarantor on NASDAQ, the entirety of the issued shares of the Guarantor; or

 

  (b)

in the opinion of the Agent (acting on the instructions of the Majority Lenders, acting reasonably), cease to be involved in the management and control of the Guarantor including, but not limited to, holding an executive position on the board of directors of the Guarantor; or

 

  (c)

in the opinion of the Agent (acting on the instructions of the Majority Lenders, acting reasonably), cease to control, directly or indirectly, the conduct of the business of the Guarantor including but not limited to, giving directions with respect to the operating and financial policies of the Guarantor.

Charged Property” means all of the assets of the Obligors which from time to time are, or are expressed to be, the subject of the Security Documents.

Charter” means in respect of Vessel D, the bareboat charter dated 16 August 2017 on the terms and subject to the conditions of which Borrower D has bareboat chartered Vessel D to the Charterer.

Charterer” means in respect of Vessel D, Falcon Navigation Corp, a company incorporated under the law of Panama with its registered office at Torre Universal Building, 12th Floor, Federico Boyd Avenue, P.O. Box 8897, City of Panama, Panama.

Charter Rights” means the benefit of the Charter and any and all Earnings due and/or to become due to Borrower D under or pursuant to such Charter.

Closing Memorandum” means the closing memorandum dated November 2021 in respect of the refinancing of the Vessels.

Code” means the US Internal Revenue Code of 1986.

Commercial Manager” means:

 

  (a)

in respect of Vessel D, Falcon Navigation Shipmanagement SA, a company incorporated under the law of Liberia, with registered address at 80, Broad Street, Monrovia, Liberia or the Charterer;

 

  (b)

Stealth Maritime Corp. S.A. (also trading under the name Stealth Maritime Corporation S.A.), a company incorporated under the law of Liberia, with registered address at 80, Broad Street, Monrovia, Liberia; or

 

  (c)

another company controlled by the Approved Family Members or any other company which the Agent (acting on the instructions of the Majority Lenders) may approve from time to time as the commercial manager of a Vessel.

 

Page 4


Commitment” means:

 

  (a)

in relation to an Original Lender, the amount set opposite its name under the heading “Commitment” in Part I of Schedule 1 (The Parties) and the amount of any other Commitment transferred to it under this Agreement; and

 

  (b)

in relation to any other Lender, the amount of any Commitment transferred to it under this Agreement,

to the extent not cancelled, reduced or transferred by it under this Agreement.

Commitment Fee” means the commitment fee to be paid by the Borrowers to the Agent under Clause 11.1 (Commitment Fee).

Compliance Certificate” means a certificate substantially in the form set out in Schedule 9 (Form of Compliance Certificate).

Compounded Rate Interest Payment” means the aggregate amount of interest that:

 

  (a)

is, or is scheduled to become, payable under any Finance Document; and

 

  (b)

relates to a Compounded Rate Tranche.

Compounded Rate Supplement” means a document which:

 

  (a)

is agreed in writing by the Borrowers, the Agent (in its own capacity) and the Agent (acting on the instructions of the Majority Lenders);

 

  (b)

specifies the relevant terms which are expressed in this Agreement to be determined by reference to Compounded Rate Terms; and

 

  (c)

has been made available to the Borrowers and each Finance Party.

Compounded Rate Terms” means in relation to:

 

  (a)

a Tranche or an Unpaid Sum;

 

  (b)

an Interest Period for such a Tranche or Unpaid Sum (or other period for the accrual of commission or fees); or

 

  (c)

any term of this Agreement relating to the determination of a rate of interest in relation to such a Tranche or Unpaid Sum,

the terms set out in Schedule 6 (Compounded Rate Terms) or in any Compounded Rate Supplement.

Compounded Rate Tranche” means any Tranche of Unpaid Sum which is, or becomes, a “Compounded Rate Tranche” pursuant to Clause 8A (Rate Switch).

Compounded Reference Rate” means, in relation to any RFR Banking Day during the Interest Period of a Compounded Rate Tranche, the percentage rate per annum which is the aggregate of:

 

Page 5


  (a)

the Daily Non-Cumulative Compounded RFR Rate for that RFR Banking Day; and

 

  (b)

the applicable Credit Adjustment Spread.

Compounding Methodology Supplement” means, in relation to the Daily Non-Cumulative Compounded RFR Rate or the Cumulative Compounded RFR Rate, a document which:

 

  (a)

is agreed in writing by the Borrowers, the Agent (in its own capacity) and the Agent (acting on the instructions of the Majority Lenders);

 

  (b)

specifies a calculation methodology for that rate; and

 

  (c)

has been made available to the Borrowers and each Finance Party.

Confidential Information” means all information relating to any Obligor, any other member of the Group, the Finance Documents or the Loan of which a Finance Party becomes aware in its capacity as, or for the purpose of becoming, a Finance Party or which is received by a Finance Party in relation to, or for the purpose of becoming a Finance Party under, the Finance Documents or the Loan from either:

 

  (a)

any Obligor, any other member of the Group or any of their advisers; or

 

  (b)

another Finance Party, if the information was obtained by that Finance Party directly or indirectly from any Obligor, any other member of the Group or any of their advisers,

in whatever form, and includes information given orally and any document, electronic file or any other way of representing or recording information which contains or is derived or copied from such information but excludes information that:

 

  (i)

is or becomes public information other than as a direct or indirect result of any breach by that Finance Party of Clause 38 (Confidentiality); or

 

  (ii)

is identified in writing at the time of delivery as non-confidential by any Obligor, any other member of the Group or any of their advisers; or

 

  (iii)

is known by that Finance Party before the date the information is disclosed to it in accordance with (a) or (b) or is lawfully obtained by that Finance Party after that date, from a source which is, as far as that Finance Party is aware, unconnected with any Obligor or any other member of the Group and which, in either case, as far as that Finance Party is aware, has not been obtained in breach of, and is not otherwise subject to, any obligation of confidentiality.

Confidentiality Undertaking” means a confidentiality undertaking substantially in a recommended form of the Loan Market Association at the relevant time.

Confirmation” means a Confirmation exchanged or deemed to be exchanged between the Swap Provider and a Borrower as contemplated by a Master Agreement.

Credit Adjustment Spread” means, in respect of any Compounded Rate Tranche, any rate which is either:

 

Page 6


  (a)

specified as such in the Compounded Rate Terms; or

 

  (b)

determined by the Agent (or by any other Finance Party which agrees to determine that rate in place of the Agent) in accordance with the methodology specified in the Compounded Rate Terms.

Credit Support Document” means any document described as such in the Master Agreement and any other document referred to in any such document which has the effect of creating security in favour of any of the Finance Parties.

Credit Support Provider” means any person (other than a Borrower) described as such in the Master Agreement.

CTA” means the Corporation Tax Act 2009.

Cumulative Compounded RFR Rate” means, in relation to an Interest Period for a Compounded Rate Tranche, the percentage rate per annum determined by the Agent (or by any other Finance Party which agrees to determine that rate in place of the Agent) in accordance with the methodology set out in Schedule 8 (Cumulative Compounded RFR Rate) or in any relevant Compounding Methodology Supplement.

Current Assets” means the amount which is equal to the current assets of the Guarantor as shown in the Guarantor’s applicable consolidated financial statements (as provided in Clause 21.1 (Financial statements)).

Current Liabilities” means the amount which is equal to the current liabilities of the Guarantor as shown in the Guarantor’s applicable consolidated financial statements (as provided in Clause 21.1 (Financial statements)).

Daily Non-Cumulative Compounded RFR Rate” means, in relation to any RFR Banking Day during an Interest Period for a Compounded Rate Tranche, the percentage rate per annum determined by the Agent (or by any other Finance Party which agrees to determine that rate in place of the Agent) in accordance with the methodology set out in Schedule 7 (Daily Non-Cumulative Compounded RFR Rate) or in any relevant Compounding Methodology Supplement.

Daily Rate” means the rate specified as such in the Compounded Rate Terms.

Default” means an Event of Default or any event or circumstance which would (with the expiry of a grace period, the giving of notice, the making of any determination under the Finance Documents or any combination of any of the foregoing) be an Event of Default.

Defaulting Lender” means any Lender:

 

  (a)

which has failed to make its participation in a Utilisation available (or has notified the Agent or the Borrowers (which have notified the Agent) that it will not make its participation in a Utilisation available) by the Utilisation Date of that Utilisation in accordance with Clause 5.3 (Lenders’ participation);

 

  (b)

which has otherwise rescinded or repudiated a Finance Document; or

 

  (c)

with respect to which an Insolvency Event has occurred and is continuing,

 

Page 7


unless, in the case of (a):

 

  (i)

its failure to pay is caused by:

 

  (A)

administrative or technical error; or

 

  (B)

a Disruption Event; and

payment is made within three Business Days of its due date; or

 

  (ii)

the Lender is disputing in good faith whether it is contractually obliged to make the payment in question.

Delegate” means any delegate, agent, attorney or co-trustee appointed by the Security Agent.

Disruption Event” means either or both of:

 

  (a)

a material disruption to those payment or communications systems or to those financial markets which are, in each case, required to operate in order for payments to be made in connection with the Loan (or otherwise in order for the transactions contemplated by the Finance Documents to be carried out) which disruption is not caused by, and is beyond the control of, any of the Parties; or

 

  (b)

the occurrence of any other event which results in a disruption (of a technical or systems-related nature) to the treasury or payments operations of a Party preventing that, or any other Party:

 

  (i)

from performing its payment obligations under the Finance Documents; or

 

  (ii)

from communicating with other Parties in accordance with the terms of the Finance Documents,

and which (in either such case) is not caused by, and is beyond the control of, the Party whose operations are disrupted.

DOC” means, in relation to the ISM Company, a valid Document of Compliance issued for the ISM Company by the Administration under paragraph 13.2 of the ISM Code.

Earnings” means all hires, freights, passage moneys, pool income and other sums payable to or for the account of a Borrower in respect of a 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 a Vessel.

Earnings Accounts” means the bank accounts to be opened in the name of the Borrowers respectively with the Account Holder and each designated “an Earnings Account”.

 

Page 8


Encumbrance” means a mortgage, charge, assignment, pledge, lien or other security interest securing any obligation of any person or any other agreement or arrangement having a similar effect.

Environmental Approval” means any present or future permit, ruling, variance or other Authorisation required under Environmental Laws.

Environmental Claim” means any claim, proceeding, formal notice or investigation by any governmental, judicial or regulatory authority or any other person which arises out of an Environmental Incident or an alleged Environmental Incident or which relates to any Environmental Law and, for this purpose, “claim” includes a claim for damages, compensation, contribution, injury, fines, losses and penalties or any other payment of any kind, including in relation to clean-up and removal, whether or not similar to the foregoing; an order or direction to take, or not to take, certain action or to desist from or suspend certain action; and any form of enforcement or regulatory action, including the arrest or attachment of any asset.

Environmental Incident” means:

 

  (a)

any release, emission, spill or discharge into or upon the air, sea, land or soils (including the seabed) or surface water of Environmentally Sensitive Material within or from a 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 a Vessel and which involves a collision between a Vessel and such other vessel or some other incident of navigation or operation, in either case, in connection with which a Vessel is actually or potentially liable to be arrested, attached, detained or injuncted and a Vessel, any Obligor, any operator or manager of a Vessel or any combination of them is at fault or allegedly at fault or otherwise liable to any legal or administrative action; or

 

  (c)

any other incident in which Environmentally Sensitive Material is released, emitted, spilled or discharged into or upon the air, sea, land or soils (including the seabed) or surface water otherwise than from a Vessel and in connection with which a Vessel is actually or potentially liable to be arrested, attached, detained or injuncted and/or where any Obligor, any operator or manager of a Vessel or any combination of them is at fault or allegedly at fault or otherwise liable to any legal or administrative action, other than in accordance with an Environmental Approval.

Environmental Law” means any present or future law or regulation 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 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.

 

Page 9


ESR Regulations means the Republic of the Marshall Islands Economic Substance Regulations 2018, as might be amended and/or supplemented from time to time.

EU Ship Recycling Regulation” means:

 

  (a)

Regulation (EU) No 1275/2013 of the European Parliament and of the Council of 20 November 2013 on ship recycling and amending Regulation (EC) No 1013/2006 and Directive 2009/16/EC (Text with EEA relevance); and

 

  (b)

Regulation (EU) No. 1275/2013 adopted by the EU Parliament and the Council of the European Union on 20 November 2013 (as it forms part of the domestic law of the United Kingdom by virtue of the 2018 Withdrawal Act) in relation to UK flagged vessels.

Event of Default” means any event or circumstance specified as such in Clause 24 (Events of Default).

Facility Office” means:

 

  (a)

in respect of a Lender, the office or offices notified by that Lender to the Agent in writing on or before the date it becomes a Lender (or, following that date, by not less than five Business Days’ written notice) as the office or offices through which it will perform its obligations under this Agreement; or

 

  (b)

in respect of any other Finance Party, the office in the jurisdiction in which it is resident for tax purposes.

Facility Period” means the period beginning on the date of this Agreement and ending on the date when the whole of the Indebtedness has been paid in full and the Obligors have ceased to be under any further actual or contingent liability to the Finance Parties under or in connection with the Finance Documents.

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 (a); or

 

  (c)

any agreement pursuant to the implementation of any treaty, law or regulation referred to in (a) or (b) with the US Internal Revenue Service, the US government or any governmental or taxation authority in any other jurisdiction.

FATCA Application Date” means:

 

  (a)

in relation to a “withholdable payment” described in section 1473(1)(A)(i) of the Code (which relates to payments of interest and certain other payments from sources within the US), 1 July 2014; or

 

Page 10


  (b)

in relation to a “passthru payment” described in section 1471(d)(7) of the Code not falling within (a), the first date from which such payment may become subject to a deduction or withholding required by FATCA.

FATCA Deduction” means a deduction or withholding from a payment under a Finance Document required by FATCA.

FATCA Exempt Party” means a Party that is entitled to receive payments free from any FATCA Deduction.

Fee Letter” means any letter or letters dated on or about the date of this Agreement between the Agent and the Borrowers (or the Security Agent and the Borrowers) setting out any of the fees referred to in Clause 11 (Fees).

Finance Documents” means this Agreement, any Master Agreement, the Security Documents, any Compliance Certificate, any Utilisation Request, the Fee Letter, the Approved Family Members Side Letter, any Compounded Rate Supplement, any Compounding Methodology Supplement and any other document designated as such by the Agent and the Borrowers.

Finance Parties” means the Bookrunner, the Agent, the Security Agent, the Swap Provider and the Lenders.

Financial Indebtedness” means any indebtedness for or in respect of:

 

  (a)

moneys borrowed and debit balances at banks or other financial institutions;

 

  (b)

any acceptance under any acceptance credit or bill discounting facility (or dematerialised equivalent);

 

  (c)

any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument;

 

  (d)

the amount of any liability in respect of any lease or hire purchase contract, a liability under which would, in accordance with GAAP, be treated as a balance sheet liability;

 

  (e)

receivables sold or discounted (other than any receivables to the extent they are sold on a non-recourse basis);

 

  (f)

any Treasury Transaction (and, when calculating the value of that Treasury Transaction, only the marked to market value (or, if any actual amount is due as a result of the termination or close-out of that Treasury Transaction, that amount) shall be taken into account);

 

  (g)

any counter-indemnity obligation in respect of a guarantee, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution in respect of an underlying liability of an entity which is not an Obligor or a member of the Group which liability would fall within one of the other sections of this definition;

 

  (h)

any amount raised by the issue of shares which are redeemable (other than at the option of the issuer) before the end of the Facility Period or are otherwise classified as borrowings under GAAP;

 

Page 11


  (i)

any amount of any liability under an advance or deferred purchase agreement if (i) one of the primary reasons behind entering into the agreement is to raise finance or to finance the acquisition or construction of the asset or service in question or (ii) the agreement is in respect of the supply of assets or services and payment is due more than 30 days after the date of supply;

 

  (j)

any amount raised under any other transaction (including any forward sale or purchase, sale and sale back or sale and leaseback agreement) having the commercial effect of a borrowing or otherwise classified as borrowings under GAAP; and

 

  (k)

the amount of any liability in respect of any guarantee or indemnity for any of the items referred to in (a) to (j).

Free Cash Flow” means Adjusted EBITDA, less the sum of

 

  (a)

the change in (Current Assets less Current Liabilities); and

 

  (b)

Capital Expenditure.

GAAP” means generally accepted accounting principles in the United Kingdom or the United States, including IFRS.

Group” means the Guarantor, the Borrowers and each of their Subsidiaries for the time being.

Guarantee” means a guarantee and indemnity in respect of the obligations of each other Obligor granted by the Guarantor and contained in Clause 19 (Guarantee and Indemnity).

Holding Company” means, in relation to a person, any other person in respect of which it is a Subsidiary.

IAPPC” means a valid international air pollution prevention certificate for a Vessel issued under Annex VI.

IFRS” means international accounting standards within the meaning of the IAS Regulation 1606/2002 and/or section 474(1) of the Companies Act 2006 to the extent applicable to the relevant financial statements.

Indebtedness” means the aggregate from time to time of: the amount of the Loan outstanding; all accrued and unpaid interest on the Loan; and all other sums of any nature (together with all accrued and unpaid interest on any of those sums) payable to any of the Finance Parties under all or any of the Finance Documents.

Insolvency Event” in relation to an entity means that the entity:

 

  (a)

is dissolved (other than pursuant to a consolidation, amalgamation or merger);

 

  (b)

becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due;

 

Page 12


  (c)

makes a general assignment, arrangement or composition with or for the benefit of its creditors;

 

  (d)

institutes or has instituted against it, by a regulator, supervisor or any similar official with primary insolvency, rehabilitative or regulatory jurisdiction over it in the jurisdiction of its incorporation or organisation or the jurisdiction of its head or home office, a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors’ rights, or a petition is presented for its winding-up or liquidation by it or such regulator, supervisor or similar official;

 

  (e)

has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors’ rights, or a petition is presented for its winding-up or liquidation, and, in the case of any such proceeding or petition instituted or presented against it, such proceeding or petition is instituted or presented by a person or entity not described in (d) and:

 

  (i)

results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation; or

 

  (ii)

is not dismissed, discharged, stayed or restrained in each case within 30 days of the institution or presentation thereof;

 

  (f)

has exercised in respect of it one or more of the stabilisation powers pursuant to Part 1 of the Banking Act 2009 and/or has instituted against it a bank insolvency proceeding pursuant to Part 2 of the Banking Act 2009 or a bank administration proceeding pursuant to Part 3 of the Banking Act 2009;

 

  (g)

has a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger);

 

  (h)

seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all its assets (other than, for so long as it is required by law or regulation not to be publicly disclosed, any such appointment which is to be made, or is made, by a person or entity described in (d));

 

  (i)

has a secured party take possession of all or substantially all its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all its assets and such secured party maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within 30 days thereafter;

 

  (j)

causes or is subject to any event with respect to it which, under the applicable laws of any jurisdiction, has an analogous effect to any of the events specified in (a) to (i); or

 

Page 13


  (k)

takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts.

Insurances” means all policies and contracts of insurance (including all entries in protection and indemnity or war risks associations) which are from time to time taken out or entered into in respect of or in connection with a Vessel or her increased value or the Earnings and (where the context permits) all benefits under such contracts and policies, including all claims of any nature and returns of premium.

Intercompany Creditor” means any member of the Group as lender or creditor.

Intercompany Loan” means any loan made or to be made available to a Borrower by an Intercompany Creditor pursuant to an Intercompany Loan Agreement.

Intercompany Loan Agreement” means any loan agreement existing on a Utilisation Date or any loan agreement entered into during the Facility Period between an Intercompany Creditor as lender and a Borrower as borrower.

Intercompany Subordination Agreement” means any subordination and assignment agreement in respect of any Intercompany Loans entered into pursuant to Clause 4.1 (Initial conditions precedent) or Clause 23.17 (No Borrowings), in such form acceptable to the Agent.

Interest Payment Date” means each date for the payment of interest in accordance with Clause 8.2 (Payment of interest).

Interest Period” means each period determined in accordance with Clause 9 (Interest Periods) and, in relation to an Unpaid Sum, each period determined in accordance with Clause 8.3 (Default Interest).

Interpolated Screen Rate” means, in relation to LIBOR for any Term Rate Tranche, the rate which results from interpolating on a linear basis between:

 

  (a)

the applicable Screen Rate for the longest period (for which that Screen Rate is available) which is less than the relevant Interest Period; and

 

  (b)

the applicable Screen Rate for the shortest period (for which that Screen Rate is available) which exceeds the relevant Interest Period,

each as of 11.00 a.m. on the Quotation Day for dollars.

Inventory of Hazardous Materials” means a statement of compliance issued by the relevant classification society which includes a list of any and all materials known to be potentially hazardous utilised in the construction of that Vessel, which may be also referred to as a ‘list of hazardous materials’.

ISM Code” means the International Management Code for the Safe Operation of Ships and for Pollution Prevention.

ISM Company” means, at any given time, the company responsible for a 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.

 

Page 14


ISSC” means a valid international ship security certificate for a Vessel issued under the ISPS Code.

ITA” means the Income Tax Act 2007.

Joint Venture” means any joint venture entity, whether a company, unincorporated firm, undertaking, association, joint venture or partnership or any other entity.

Legal Opinion” means any legal opinion delivered to the Agent under Clause 4.1 (Initial conditions precedent) or Clause 4.3 (Conditions subsequent).

Legal Reservations” means:

 

  (a)

the principle that equitable remedies may be granted or refused at the discretion of a court and the limitation of enforcement by laws relating to insolvency, reorganisation and other laws generally affecting the rights of creditors;

 

  (b)

the time barring of claims under the Limitation Acts, the possibility that an undertaking to assume liability for or indemnify a person against non-payment of UK stamp duty may be void and defences of set-off or counterclaim;

 

  (c)

similar principles, rights and defences under the laws of any Relevant Jurisdiction; and

 

  (d)

any other matters which are set out as qualifications or reservations as to matters of law of general application in the Legal Opinions.

Lender” means:

 

  (a)

any Original Lender; and

 

  (b)

any bank, financial institution, trust, fund or other entity which has become a Party as a Lender in accordance with Clause 25 (Changes to the Lenders),

which in each case has not ceased to be a Party as such in accordance with the terms of this Agreement.

LIBOR” means, in relation to any Term Rate Tranche:

 

  (a)

the applicable Screen Rate; or

 

  (b)

(if no Screen Rate is available for the relevant Interest Period) the Interpolated Screen Rate; or

 

  (c)

(if (i) no Screen Rate is available for the currency of the Loan or (ii) no Screen Rate is available for the relevant Interest Period and it is not possible to calculate the Interpolated Screen Rate) the Reference Bank Rate,

as of 11.00 a.m. on the Quotation Day for dollars and for a period equal in length to the relevant Interest Period and, if that rate is less than zero, LIBOR shall be deemed to be zero.

 

Page 15


Limitation Acts” means the Limitation Act 1980 and the Foreign Limitation Periods Act 1984.

Loan” means the aggregate amount advanced or to be advanced by the Lenders to the Borrowers under Clause 2 (The Loan) or, where the context permits, the principal amount advanced and for the time being outstanding.

Lookback Period” means the number of days specified as such in the Compounded Rate Terms.

Majority Lenders” means a Lender or Lenders whose Commitments aggregate more than 662/3% of the Total Commitments (or, if the Total Commitments have been reduced to zero, aggregated more than 662/3% of the Total Commitments immediately prior to the reduction).

Management Agreements” means:

 

  (a)

the agreements for the commercial management of the Vessels entered or to be entered into between the Borrowers respectively and the relevant Commercial Manager; and

 

  (b)

the agreements for the technical management of the Vessels entered or to be entered into between the Borrowers respectively and the relevant Technical Manager.

Managers” means:

 

  (a)

in relation to the commercial management of the Vessel, the relevant Commercial Manager; and

 

  (b)

in relation to the technical management of the Vessel, the relevant Technical Manager.

Managers’ Undertakings” means written undertakings of the Managers whereby, throughout the Facility Period unless otherwise agreed by the Agent:

 

  (a)

they will remain the commercial or technical managers of the Vessels (as the case may be);

 

  (b)

they will not, without the prior written consent of the Agent, subcontract or delegate the commercial or technical management of the Vessels (as the case may be) to any third party;

 

  (c)

the interests of the Managers in the Insurances will be assigned to the Security Agent with first priority; and

 

  (d)

(following the occurrence of an Event of Default) all claims of the Managers against the Borrowers shall be subordinated to the claims of the Finance Parties under the Finance Documents.

Margin” means 1.95% per annum.

Market Value” has the meaning given to it in Clause 18.2 (Market Value and provision of valuations).

 

Page 16


Market Disruption Rate” means the rate (if any) specified as such in the Compounded Rate Terms.

Master Agreement” means any ISDA Master Agreement (or any other form of master agreement relating to interest or currency exchange transactions) entered into between the Swap Provider and a Borrower before or during the Facility Period, including each Schedule to any Master Agreement and each Confirmation exchanged under any Master Agreement.

Master Agreement Proceeds” means any and all sums due and payable to a Borrower under the Master Agreement following an Early Termination Date (subject always to all rights of netting and set-off contained in the Master Agreement) and all rights to require and enforce the payment of those sums.

Master Agreement Proceeds Assignment” means a first priority deed of assignment over the Master Agreement Proceeds.

Material Adverse Effect means in the reasonable opinion of the Majority Lenders a material adverse effect on:

 

  (a)

the business, operations, property, condition (financial or otherwise) or prospects of any Obligor or the Group taken as a whole; or

 

  (b)

the ability of any Obligor to perform its obligations under any Finance Document; or

 

  (c)

the validity or enforceability of, or the effectiveness or ranking of any Encumbrance granted or purporting to be granted pursuant to any of, the Finance Documents or the rights or remedies of any Finance Party under any of the Finance Documents.

Maximum Loan Amount” means the aggregate of Maximum Tranche A Amount, Maximum Tranche B Amount, Maximum Tranche C Amount and Maximum Tranche D Amount.

Maximum Tranche Amount” means the Maximum Tranche A Amount or the Maximum Tranche B Amount or the Maximum Tranche C Amount of the Maximum Tranche D Amount.

Maximum Tranche A Amount” means the lesser of (a) $10,278,000 and (b) 60% of the Market Value of Vessel A as evidenced by the Valuations received by the Agent under Clause 4.1 (Initial conditions precedent).

Maximum Tranche B Amount” means the lesser of (a) $5,736,000 and (b) 60% of the Market Value of Vessel B as evidenced by the Valuations received by the Agent under Clause 4.1 (Initial conditions precedent).

Maximum Tranche C Amount” means the lesser of (a) $5,736,000 and (b) 60% of the Market Value of Vessel C as evidenced by the Valuations received by the Agent under Clause 4.1 (Initial conditions precedent).

 

Page 17


Maximum Tranche D Amount” means the lesser of (a) $6,250,000 and (b) 60% of the Market Value of Vessel D as evidenced by the Valuations received by the Agent under Clause 4.1 (Initial conditions precedent).

Memorandum” means the summary memorandum dated 8 November 2021 prepared by the Borrowers setting out the details of the Restructuring.

Month” means a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month, except that:

 

  (a)

(subject to (c) below) if the numerically corresponding day is not a Business Day, that period shall end on the next Business Day in that calendar month in which that period is to end if there is one, or if there is not, on the immediately preceding Business Day;

 

  (b)

If there is no numerically corresponding day in the calendar month in which that period is to end, that period shall end on the last Business Day in that calendar month; and

 

  (c)

If an Interest Period begins on the last Business Day of a calendar month, that Interest Period shall end on the last Business Day in the calendar month in which that Interest Period is to end.

The above rules will only apply to the last Month of any period.

Mortgages” means the first preferred mortgages over the Vessels.

New Lender” has the meaning given to that term in Clause 25.1 (Assignments and transfers by the Lenders).

Non-Consenting Lender” has the meaning given to that term in Clause 37.5.4 (Replacement of Lender).

Obligor” means each Borrower, the Guarantor, the Managers (save for Falcon Navigation Shipmanagement SA), any other Credit Support Provider, or any other person who may at any time during the Facility Period be liable for, or provide security for, all or any part of the Indebtedness.

Operating Expenses” means expenses properly and reasonably incurred by a Borrower in connection with the operation, employment, maintenance, repair and insurance of a Vessel.

Original Financial Statements” means the audited consolidated financial statements of the Guarantor for the financial year ended 31 December 2020.

Original Jurisdiction” means, in relation to an Obligor, the jurisdiction under whose laws that Obligor is incorporated as at the date of this Agreement.

Partnership Agreement” means any agreement pursuant to which any Joint Venture is established or formed in relation to a Borrower, whether or not that Borrower is a party to such agreement.

Party” means a party to this Agreement.

 

Page 18


Permitted Disposal” means any sale, lease, licence, transfer or other disposal:

 

  (a)

of assets in exchange for other assets comparable or superior as to type, value and quality (other than an exchange of a non-cash asset for cash);

 

  (b)

of obsolete or redundant equipment for cash;

 

  (c)

arising as a result of any Permitted Encumbrance; and

 

  (d)

of a Vessel made in accordance with this Agreement.

Permitted Distribution” means:

 

  (a)

the payment of a dividend by a Borrower to the Guarantor provided that the payment is made when no Default is continuing or would occur immediately after the making of the payment;

 

  (b)

from the date of this Agreement until 30 June 2022, the payment of a preferred dividend by the Guarantor provided that the payment is made when no Default is continuing or would occur immediately after the making of the payment;

 

  (c)

from 1 July 2022, the payment of a dividend by the Guarantor of:

 

  (i)

up to 50% of the Free Cash Flow of the last four consecutive quarters; and

 

  (ii)

the balance of such Free Cash Flow with the prior consent of the Lenders (such consent not to be unreasonably withheld),

in each case provided that the payment is made when no Default is continuing or would occur immediately after the making of the payment;

 

  (d)

the payment of a dividend by the Guarantor to StealthGas Inc. in accordance with the Closing Memorandum; and

 

  (e)

the payment of a dividend by a Borrower to the Guarantor (or as the Guarantor may direct) in accordance with the Closing Memorandum.

Permitted Encumbrance” means:

 

  (a)

any Encumbrance which has the prior written approval of the Agent;

 

  (b)

any Encumbrance in favour of a Finance Party created or expressed to be created under or pursuant to or evidenced by the Security Documents;

 

  (c)

any Encumbrance arising by operation of law and in the ordinary course of trading (securing obligations not more than 30 days overdue) and not as a result of any default or omission by an Obligor; or

 

  (d)

any Quasi-Security arising as a result of a disposal which is a Permitted Disposal.

Prohibited Person” means any person (whether designated by name or by reason of being included in a class of persons) against whom Sanctions are directed.

 

Page 19


Quasi-Security” has the meaning given to that term in Clause 23.9 (Negative pledge).

Quotation Day” means, in relation to any period for which an interest rate is to be determined,

unless market practice differs in the Relevant Market, in which case the Quotation Day will be determined by the Agent in accordance with market practice in the Relevant Market (and if quotations would normally be given by leading banks in the Relevant Market on more than one day, the Quotation Day will be the last of those days).

Quoted Tenor” means, in relation to the Screen Rate for a Term Reference Rate, three or six Months.

Rate Switch Date” means the earlier of:

 

  (a)

the Backstop Rate Switch Date; and

 

  (b)

any Rate Switch Trigger Event Date.

Rate Switch Trigger Event” means in relation to the Screen Rate for the Term Reference Rate applicable to Term Rate Tranches:

 

  (a)

 

  (i)

the administrator of the Screen Rate or its supervisor publicly announces that such administrator is insolvent; or

 

  (ii)

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 the Screen Rate is insolvent,

provided that, in each case, at that time, there is no successor administrator to continue to provide the Screen Rate;

 

  (b)

the administrator of the Screen Rate publicly announces that it has ceased or will cease, to provide the Screen Rate for any Quoted Tenor permanently or indefinitely and, at that time, there is no successor administrator to continue to provide the Screen Rate for that Quoted Tenor;

 

  (c)

the supervisor of the administrator of the Screen Rate publicly announces that the Screen Rate has been or will be permanently or indefinitely discontinued for any Quoted Tenor;

 

  (d)

the administrator of the Screen Rate or its supervisor publicly announces that the Screen Rate for any Quoted Tenor may no longer be used;

 

  (e)

the supervisor of the administrator of the Screen Rate publicly announces or publishes information:

 

Page 20


  (i)

stating that the Screen Rate for any Quoted Tenor is no longer or, as of a specified future date, will no longer be, representative of the underlying market and the economic reality that it is intended to measure and that such representativeness will not be restored (as determined by such supervisor); and

 

  (ii)

with awareness that any such announcement or publication will engage certain triggers for fallback provisions in contracts which may be activated by any such pre-cessation announcement or publication.

Rate Switch Trigger Event Date” means:

 

  (a)

in the case of an occurrence of a Rate Switch Trigger Event described in paragraph (a) of the definition of “Rate Switch Trigger Event”, the date on which the relevant Screen Rate ceases to be published or otherwise becomes unavailable;

 

  (b)

in the case of an occurrence of a Rate Switch Trigger Event described in paragraphs (b), (c) or (d) of the definition of “Rate Switch Trigger Event”, the date on which the relevant Screen Rate for the relevant Quoted Tenor ceases to be published or otherwise becomes unavailable;

 

  (c)

in the case of an occurrence of a Rate Switch Trigger Event described in paragraph (a) of the definition of “Rate Switch Trigger Event”, the date on which the relevant Screen Rate for the relevant Quoted Tenor ceases to be representative of the underlying market and the economic reality that it is intended to measure (as determined by the supervisor of the administrator of such Screen Rate).

Receiver” means a receiver or receiver and manager or administrative receiver of the whole or any part of the Charged Property.

Reference Bank Rate” means the arithmetic mean of the rates (rounded upwards to five decimal places) as supplied to the Agent at its request by the Reference Banks in relation to LIBOR as either:

 

  (a)

if:

 

  (i)

the Reference Bank is a contributor to the applicable Screen Rate; and

 

  (ii)

it consists of a single figure,

the rate (applied to the relevant Reference Bank and the relevant currency and period) which contributors to the applicable Screen Rate are asked to submit to the relevant administrator; or

 

  (b)

in any other case, the rate at which the relevant Reference Bank could fund itself in the relevant currency for the relevant period with reference to the unsecured wholesale funding market.

 

Page 21


Reference Banks” means, in relation to LIBOR, the principal London offices of DNB Bank ASA and, in the event that there is a New Lender, the principal London office of DNB Bank ASA and such other bank as may be appointed by the Agent in consultation with the Borrowers, or (in either case) such other banks as may be appointed by the Agent in consultation with the Borrowers.

Related Fund” in relation to a fund (the “first fund”), means a fund which is managed or advised by the same investment manager or investment adviser as the first fund or, if it is managed by a different investment manager or investment adviser, a fund whose investment manager or investment adviser is an Affiliate of the investment manager or investment adviser of the first fund.

Relevant Documents” means the Finance Documents, the Management Agreements, the Closing Memorandum, the Memorandum, the Charter, any Partnership Agreement and each Obligor’s constitutional documents.

Relevant Market” means:

 

  (a)

prior to the Rate Switch Date, the London interbank market; and

 

  (b)

on or after the Rate Switch Date, the market specified as such in the Compounded Rate Terms.

Relevant Jurisdiction” means, in relation to an Obligor:

 

  (a)

its Original Jurisdiction;

 

  (b)

any jurisdiction where any asset (other than the Vessel) subject to or intended to be subject to a Security Document to be executed by it is situated;

 

  (c)

any jurisdiction where it conducts its business; and

 

  (d)

the jurisdiction whose laws govern the perfection of any of the Security Documents entered into by it.

Relevant Person” means:

 

  (a)

each member of the Group; and

 

  (b)

each of their directors, officers and employees.

Restricted Party” means a person that is:

 

  (a)

listed on any Sanctions List or targeted by Sanctions (whether designated by name or by reason of being included in a class of person); or

 

  (b)

located in or incorporated under the laws of any country or territory that is the target of comprehensive, country- or territory-wide Sanctions; or

 

  (c)

directly or indirectly owned or controlled by, or acting on behalf, at the direction or for the benefit of, a person referred to in (a) and/or (to the extent relevant under Sanctions) (b) above.

 

Page 22


Restructuring” means the corporate restructuring of the Borrowers and the Guarantor as contemplated in the Memorandum.

Repayment Date” means each date for payment of a Repayment Instalment in accordance with Clause 6 (Repayment).

Repayment Instalment” means any instalment of a Tranche to be repaid by the Borrowers under Clause 6 (Repayment) excluding any Balloon Payment.

Repeating Representations” means each of the representations set out in Clause 20.1.1 (Status) to Clause 20.1.6 (Governing law and enforcement), Clause 20.1.10 (No default) to Clause 20.1.19 (Pari passu ranking) and Clause 20.1.25 (Sanctions).

Reporting Day” means the day (if any) specified as such in the Compounded Rate Terms.

Reporting Time” means the relevant time (if any) specified as such in the Compounded Rate Terms.

Representative” means any delegate, agent, manager, administrator, nominee, attorney, trustee or custodian.

Requisition Compensation” means all compensation or other money which may from time to time be payable to a Borrower and/or the Charterer as a result of a Vessel being requisitioned for title or in any other way compulsorily acquired (other than by way of requisition for hire).

Retention Accounts” means a bank accounts to be opened in the names of the Borrowers respectively with the Account Holder and each designated “an Retention Account”.

RFR” means the rate specified as such in the Compounded Rate Terms.

RFR Banking Day” means any day specified as such in the Compounded Rate Terms.

Sanctions” means any applicable (to any Relevant Person and/or Finance Party as the context provides) laws, regulations or orders concerning any trade, economic or financial sanctions or embargoes.

Sanctions Authority” means the Norwegian State, the United Nations, the European Union, the Member States of the European Union, the United Kingdom, the United States of America and any of their respective legislative, executive, enforcement and/or regulatory authorities or bodies acting in connection with Sanctions.

Sanctions List” means:

 

  (a)

the lists of Sanctions designations and/or targets maintained by any Sanctions Authority; and/or

 

  (b)

any other Sanctions designation or target listed and/or adopted by a Sanctions Authority,

in all cases, as amended, supplemented or replaced from time to time.

 

Page 23


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 the relevant currency and period displayed on pages LIBOR01 or LIBOR02 of the Thomson Reuters screen (or any replacement Thomson Reuters page which displays that rate).

Secured Parties” means each Finance Party from time to time party to this Agreement and any Receiver or Delegate.

Security Documents” means the Mortgages, the Assignments, the Guarantee, the Account Security Deed, the Shares Securities, the Managers’ Undertakings and any other Credit Support Documents or (where the context permits) any one or more of them, and any other agreement or document which may at any time be executed by any person as security for the payment of all or any part of the Indebtedness.

Shares Securities” means first priority pledges of all the issued shares of the Borrowers.

SMC” means a valid safety management certificate issued for a Vessel by or on behalf of the Administration under paragraph 13.7 of the ISM Code.

Subsidiary” means a subsidiary undertaking within the meaning of section 1162 of the Companies Act 2006.

Tax” means any tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same).

Technical Manager” means:

 

  (a)

in respect of Vessel D, Falcon Navigation Shipmanagement SA, a company incorporated under the law of Liberia, with registered address at 80, Broad Street, Monrovia, Liberia;

 

  (b)

Stealth Maritime Corp. S.A. (also trading under the name Stealth Maritime Corporation S.A.), a company incorporated under the law of Liberia, with registered address at 80, Broad Street, Monrovia, Liberia or another company controlled by the Approved Family Members; or

 

  (c)

any other company which the Agent (acting on the instructions of the Majority Lenders) may approve from time to time as the technical manager of a Vessel.

Term Rate Tranche” means any Tranche or, if applicable, Unpaid Sum which is not a Compounded Rate Tranche.

Term Reference Rate” means LIBOR.

Termination Date” means the earlier of (i) the fifth anniversary of the first Utilisation Date and (ii) 22 October 2026.

Total Commitments” means the aggregate of the Commitments.

 

Page 24


Total Loss” means:

 

  (a)

an actual, constructive, arranged, agreed or compromised total loss of a Vessel; or

 

  (b)

the requisition for title or compulsory acquisition of a 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 a Vessel (not falling within (b)), unless that Vessel is released and returned to the possession of the relevant Borrower or the Charterer within 30 days after the capture, seizure, arrest, detention, hijacking, theft, condemnation as prize, confiscation or forfeiture in question.

Tranche” means each of Tranche A, Tranche B, Tranche C and Tranche D.

Tranche A” means the part of the Loan up to the Maximum Tranche A Amount advanced or to be advanced to the Borrowers by the Lenders in respect of Vessel A or, where the context permits, the aggregate principal amount so advanced and for the time being outstanding.

Tranche A Balloon Payment” means an amount of $2,940,000 in respect of Tranche A, or if a reduction pursuant to Clause 6.2 (Reduction of Repayment Instalments) is applicable that amount as so reduced.

Tranche B” means the part of the Loan up to the Maximum Tranche B Amount advanced or to be advanced to the Borrowers by the Lenders in respect of Vessel B or, where the context permits, the aggregate principal amount so advanced and for the time being outstanding.

Tranche C” means the part of the Loan up to the Maximum Tranche C Amount advanced or to be advanced to the Borrowers by the Lenders in respect of Vessel C or, where the context permits, the aggregate principal amount so advanced and for the time being outstanding.

Tranche D” means the part of the Loan up to the Maximum Tranche D Amount advanced or to be advanced to the Borrowers by the Lenders in respect of Vessel D or, where the context permits, the aggregate principal amount so advanced and for the time being outstanding.

Tranche D Balloon Payment” means an amount of $1,040,000 in respect of Tranche D, or if a reduction pursuant to Clause 6.2 (Reduction of Repayment Instalments) is applicable that amount as so reduced.

Transfer Certificate” means a certificate substantially in the form set out in Schedule 4 (Form of Transfer Certificate) or any other form agreed between the Agent and the Borrower.

Transfer Date” means, in relation to an assignment or a transfer, the later of:

 

  (a)

the proposed Transfer Date specified in the relevant Assignment Agreement or Transfer Certificate; and

 

Page 25


  (b)

the date on which the Agent executes the relevant Assignment Agreement or Transfer Certificate.

Treasury Transactions” means any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price.

Trust Property” means:

 

  (a)

all benefits derived by the Security Agent from any Finance Document; and

 

  (b)

all benefits arising under (including, without limitation, all proceeds of the enforcement of) each of the Security Documents,

excluding any benefits arising solely for the benefit of the Security Agent.

Unpaid Sum” means any sum due and payable but unpaid by any Obligor under the Finance Documents.

US” means the United States of America.

Utilisation” means any part of a Tranche advanced or to be advanced pursuant to a Utilisation Request.

Utilisation Date” means the date on which the relevant Utilisation is advanced under Clause 5 (Advance).

Utilisation Request” means a notice substantially in the form set out in Schedule 3 (Utilisation Request).

Valuation” has the meaning given to it in Clause 18.2 (Market Value and provision of valuations).

VAT” means:

 

  (a)

any value added tax imposed by the Value Added Tax Act 1994;

 

  (b)

any tax imposed in compliance with the Council Directive of 28 November 2006 on the common system of value added tax (EC Directive 2006/112); and

 

  (c)

any other tax of a similar nature, whether imposed in a member state of the European Union in substitution for, or levied in addition to, such tax referred to in (b)(a), or imposed elsewhere.

Vessels” means the following vessels and everything now or in the future belonging to her on board and ashore, currently registered under the respective flags set out below in the ownership of the respective Borrowers set out below:

 

Name of Vessel

  

IMO no

  

Flag

  

Borrower

“STEALTH BERANA”

Vessel A

   9437672    Liberia    Borrower A

“CLEAN THRASHER”

Vessel B

   9379155    Marshall Islands    Borrower B

“MAGIC WAND”

Vessel C

   9379143    Liberia    Borrower C

“FALCON MARYAM”

Vessel D

   9430260    Liberia    Borrower D

 

Page 26


VTL Coverage” has the meaning given to it in Clause 18.1 (VTL Coverage).

 

1.2

Construction Unless a contrary indication appears, any reference in this Agreement to:

 

  1.2.1

any “Lender”, any “Borrower”, the “Guarantor”, the “Bookrunner”, the “Agent”, the “Swap Provider”, any “Secured Party”, the “Security Agent”, any “Finance Party” or any “Party” shall be construed so as to include its successors in title, permitted assignees and permitted transferees to, or of, its rights and/or obligations under the Finance Documents;

 

  1.2.2

assets” includes present and future properties, revenues and rights of every description;

 

  1.2.3

Lender’s “cost of funds” in relation to its participation in a Tranche is a reference to the average cost (determined either on an actual or a notional basis) which that Lender would incur if it were to fund, from whatever source(s) it may reasonably select, an amount equal to the amount of that participation in that Tranche for a period equal in length to the Interest Period of that Tranche;

 

  1.2.4

a “Finance Document”, a “Security Document”, a “Relevant Document” or any other agreement or instrument is a reference to that Finance Document, Security Document, Relevant Document or other agreement or instrument as amended, novated, supplemented, extended or restated from time to time;

 

  1.2.5

a “group of Lenders” includes all the Lenders;

 

  1.2.6

guarantee” means (other than in Clause 19 (Guarantee and Indemnity)) 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;

 

  1.2.7

indebtedness” includes any obligation (whether incurred as principal or as surety) for the payment or repayment of money, whether present or future, actual or contingent;

 

  1.2.8

a “person” includes any individual, firm, company, corporation, government, state or agency of a state or any association, trust, joint venture, consortium, partnership or other entity (whether or not having separate legal personality);

 

Page 27


  1.2.9

a “regulation” includes any regulation, rule, official directive, request or guideline (whether or not having the force of law) of any governmental, intergovernmental or supranational body, agency, department or of any regulatory, self-regulatory or other authority or organisation;

 

  1.2.10

a provision of law is a reference to that provision as amended or re-enacted from time to time;

 

  1.2.11

a time of day (unless otherwise specified) is a reference to London time; and

 

1.3

Headings Section, Clause and Schedule headings are for ease of reference only.

 

1.4

Defined terms 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.

 

1.5

Default A Default (other than an Event of Default) is “continuing” if it has not been remedied or waived and an Event of Default is “continuing” if it has not been waived.

 

1.6

Reference to a page or screen A reference in this Agreement to a page or screen of an information service displaying a rate shall include:

 

  1.6.1

any replacement page of that information service which displays that rate; and

 

  1.6.2

the appropriate page of such other information service which displays that rate from time to time in place of that information service,

and, if such page or service ceases to be available, shall include any other page or service displaying that rate specified by the Agent after consultation with the Borrowers.

 

1.7

Reference to a Central Bank Rate A reference in this Agreement to a Central Bank Rate shall include any successor rate to, or replacement rate for, that rate.

 

1.8

Compounded Rate Supplement Any Compounded Rate Supplement overrides anything in:

 

  1.8.1

Schedule 6 (Compounded Rate Terms); or

 

  1.8.2

any earlier Compounded Rate Supplement.

 

1.9

Compounding Methodology Supplement A Compounding Methodology Supplement relating to the Daily Non-Cumulative Compounded RFR Rate or the Cumulative Compounded RFR Rate overrides anything relating to that rate in:

 

  1.9.1

Schedule 7 (Daily Non-Cumulative Compounded RFR Rate) or Schedule 8 (Cumulative Compounded RFR Rate), as the case may be;

 

Page 28


  1.9.2

any earlier Compounding Methodology Supplement.

 

1.10

Rate for a period equal in length The determination of the extent to which a rate is “for a period equal in length” to an Interest Period shall disregard any inconsistency arising from the last day of that Interest Period being determined pursuant to the terms of this Agreement.

 

1.11

Currency symbols and definitions$”, “USD and “dollars” denote the lawful currency of the United States of America.

 

1.12

Third party rights

 

  1.12.1

Unless expressly provided to the contrary in a Finance Document a person who is not a Party has no right under the Contracts (Rights of Third Parties) Act 1999 (the “Third Parties Act”) to enforce or to enjoy the benefit of any term of this Agreement.

 

  1.12.2

Notwithstanding any term of any Finance Document, the consent of any person who is not a Party is not required to rescind or vary this Agreement at any time.

 

  1.12.3

Any Receiver, Delegate or any person described in Clause 27.10.2 (Exclusion of liability) may, subject to this Clause 1.12 and the Third Parties Act, rely on any Clause of this Agreement which expressly confers rights on it.

 

1.13

Offer letter This Agreement supersedes the terms and conditions contained in any correspondence relating to the subject matter of this Agreement exchanged between any Finance Party and the Borrowers or their representatives before the date of this Agreement.

 

1.14

Contractual recognition of bail-in

 

  1.14.1

In this Clause 1.14:

Article 55 BRRD” means Article 55 of Directive 2014/59/EU establishing a framework for the recovery and resolution of credit institutions and investment firms.

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 BRRD, the relevant implementing law or regulation as described in the EU Bail-In Legislation Schedule from time to time;

 

  (b)

in relation to the United Kingdom, the UK Bail-In Legislation; and

 

  (c)

in relation to any state other than such an EEA Member and the United Kingdom, 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.

 

Page 29


EEA Member Country” means any member state of the European Union, Iceland, Liechtenstein and Norway.

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.

Resolution Authority” means any body which has authority to exercise any Write-down and Conversion Powers.

UK Bail-In Legislation” means Part I 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 institutions or their affiliates (otherwise than through liquidation, administration or other insolvency proceedings).

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

 

Page 30


  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.

 

  1.14.2

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):

 

  (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.

 

Page 31


Section 2 The Loan

 

2

The Loan

 

2.1

Amount Subject to the terms of this Agreement, the Lenders agree to make available to the Borrowers on a joint and several basis a term loan comprising all of the Tranches in an aggregate amount not exceeding the Maximum Loan Amount.

 

2.2

Finance Parties’ rights and obligations

 

  2.2.1

The obligations of each Finance Party under the Finance Documents are several. Failure by a Finance Party to perform its obligations under the Finance Documents does not affect the obligations of any other Party under the Finance Documents. No Finance Party is responsible for the obligations of any other Finance Party under the Finance Documents.

 

  2.2.2

The rights of each Finance Party under or in connection with the Finance Documents are separate and independent rights and any debt arising under the Finance Documents to a Finance Party from an Obligor is a separate and independent debt in respect of which a Finance Party shall be entitled to enforce its rights in accordance with Clause 2.2.3. The rights of each Finance Party include any debt owing to that Finance Party under the Finance Documents and, for the avoidance of doubt, any part of the Loan or any other amount owed by an Obligor which relates to a Finance Party’s participation in the Loan or its role under a Finance Document (including any such amount payable to the Agent on its behalf) is a debt owing to that Finance Party by that Obligor.

 

  2.2.3

A Finance Party may, except as specifically provided in the Finance Documents, separately enforce its rights under or in connection with the Finance Documents.

 

3

Purpose

 

3.1

Purpose The Borrowers shall apply the Loan towards part refinancing of the Vessels.

 

3.2

Monitoring No Finance Party is bound to monitor or verify the application of any amount borrowed pursuant to this Agreement.

 

4

Conditions of Utilisation

 

4.1

Initial conditions precedent

 

  4.1.1

The Lenders will only be obliged to comply with Clause 5.3 (Lenders’ participation) in relation to the advance of a Utilisation if, on or before the relevant Utilisation Date, the Agent has received all of the documents and other evidence listed in Part I of Schedule 2 (Conditions Precedent) in form and substance satisfactory to the Agent. The Agent shall notify the Borrowers and the Lenders promptly upon being so satisfied.

 

  4.1.2

Other than to the extent that the Majority Lenders notify the Agent in writing to the contrary before the Agent gives the notification described in Clause 4.1.1, the Lenders authorise (but do not require) the Agent to give that notification. The Agent shall not be liable for any damages, costs or losses whatsoever as a result of giving any such notification.

 

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4.2

Further conditions precedent

 

  4.2.1

The Lenders will only be obliged to advance a Utilisation if on the date of the relevant Utilisation Request and on the proposed Utilisation Date:

 

  (a)

no Default is continuing or would result from the advance of that Utilisation; and

 

  (b)

the representations made by the Borrowers and the Guarantor under Clause 20 (Representations) are true.

 

  4.2.2

The Lenders will only be obliged to advance a Utilisation if that Utilisation will not amount to more than 60% of the Market Value of the relevant Vessel nor increase the Loan to a sum in excess of the Maximum Loan Amount.

 

4.3

Conditions subsequent The Borrowers undertake to deliver or to cause to be delivered to the Agent the additional documents and other evidence listed in Part II of Schedule 2 (Conditions Subsequent) within the timeframe set out in Part II of Schedule 2 (Conditions Subsequent).

 

4.4

No waiver If the Lenders agree to advance a Utilisation to the Borrowers before all of the documents and evidence required by Clause 4.1 (Initial conditions precedent) have been delivered to or to the order of the Agent, the Borrowers undertake to deliver all outstanding documents and evidence to or to the order of the Agent no later than the date specified by the Agent (acting on the instructions of all the Lenders).

The advance of a Utilisation under this Clause 4.4 shall not be taken as a waiver of the Lenders’ right to require production of all the documents and evidence required by Clause 4.1 (Initial conditions precedent).

 

4.5

Form and content All documents and evidence delivered to the Agent under this Clause shall:

 

  4.5.1

be in form and substance acceptable to the Agent; and

 

  4.5.2

if required by the Agent, be certified, notarised, legalised or attested in a manner acceptable to the Agent.

 

4.6

Vessel specified References in Schedule 2 (Conditions Precedent and Subsequent) to “the Vessel” or to any person, document or date relating to a Vessel shall be deemed to relate solely to the Vessel specified in the relevant Utilisation Request or to any person, document or date relating to that Vessel respectively.

 

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Section 3 Utilisation

 

5

Advance

 

5.1

Delivery of a Utilisation Request The Borrowers may request a Tranche to be advanced in one Utilisation by delivery to the Agent of a duly completed Utilisation Request not more than ten Business Days before the proposed Utilisation Date and not later than 11.00 am (London time) five Business Days (or such other period as the Agent may agree) before the proposed Utilisation Date.

 

5.2

Completion of a Utilisation Request A Utilisation Request is irrevocable and will not be regarded as having been duly completed unless:

 

  5.2.1

it is signed by an authorised signatory of each Borrower;

 

  5.2.2

the proposed Utilisation Date is a Business Day within the Availability Period; and

 

  5.2.3

the proposed Interest Period complies with Clause 9 (Interest Periods).

 

5.3

Lenders’ participation

 

  5.3.1

Subject to Clauses 2 (The Loan), 3 (Purpose) and 4 (Conditions of Utilisation), each Lender shall make its participation in any Utilisation available by the relevant Utilisation Date through its Facility Office.

 

  5.3.2

The amount of each Lender’s participation in any Utilisation will be equal to the proportion borne by its Commitment to the Total Commitments.

 

5.4

Cancellation of Commitment The Total Commitments shall be cancelled at the end of the Availability Period to the extent that they are unutilised at that time.

 

5.5

Utilisation limit The Lenders will only be obliged to advance a Utilisation if:

 

  5.5.1

that Utilisation will not increase the Loan to a sum in excess of the Maximum Loan Amount; and

 

  5.5.2

that Utilisation will not cause the amount of the relevant Maximum Tranche Amount to be exceeded.

 

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Section 4 Repayment, Prepayment and Cancellation

 

6

Repayment

 

6.1

Repayment of each Tranche The Borrowers shall repay each Tranche to the Agent by ten consecutive half-yearly instalments each in the sum of:

 

  6.1.1

$733,800 in respect of Tranche A;

 

  6.1.2

$573,600 in respect of Tranche B;

 

  6.1.3

$573,600 in respect of Tranche C; and

 

  6.1.4

$521,000 in respect of Tranche D,

the first instalment falling due on the date which is six Months after the Utilisation Date of that Tranche and subsequent instalments falling due at consecutive intervals of six Months thereafter with the final instalment together with the relevant Balloon Payment (if any) plus any remaining balance of the Indebtedness falling due on the Termination Date.

 

6.2

Reduction of Repayment Instalments If the aggregate amount advanced to the Borrowers in respect of a Tranche is less than the relevant Maximum Tranche Amount, the amount of each Repayment Instalment and the relevant Balloon Payment in respect of the relevant Tranche shall be reduced pro rata to the amount actually advanced.

 

6.3

Reborrowing The Borrowers may not reborrow any part of the Loan which is repaid.

 

7

Illegality, Prepayment and Cancellation

 

7.1

Illegality If in any applicable jurisdiction it becomes unlawful (other than by reason of Sanctions) for a Lender to perform any of its obligations as contemplated by this Agreement or to fund or maintain its participation in the Loan or it becomes unlawful for any Affiliate of a Lender for that Lender to do so:

 

  7.1.1

that Lender shall promptly notify the Agent upon becoming aware of that event;

 

  7.1.2

upon the Agent notifying the Borrowers, the Commitment of that Lender will be immediately cancelled; and

 

  7.1.3

to the extent that the Lender’s participation has not been transferred pursuant to Clause 37.5 (Replacement of Lender), the Borrowers shall repay that Lender’s participation in the Loan on the last day of the current Interest Period or, if earlier, the date specified by the Lender in the notice delivered to the Agent and notified by the Agent to the Borrowers (being no earlier than the last day of any applicable grace period permitted by law).

 

7.2

Voluntary cancellation The Borrowers may, if they give the Agent not less than:

 

  (a)

in the case of a Term Rate Tranche, 5 Business Days’ (or such shorter period as the Majority Lenders may agree) prior notice; or

 

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  (b)

in the case of a Compounded Rate Tranche, 5 RFR Banking Days’ (or such shorter period as the Majority Lenders may agree) prior notice),

cancel the whole or any part (being a minimum amount of $1,000,000) of the undrawn amount of the Loan. Any cancellation under this Clause 7.2 shall reduce the Commitments of the Lenders rateably.

 

7.3

Voluntary prepayment of Loan The Borrowers may prepay the whole or any part of the Loan (but, if in part, being an amount that reduces the Loan by a minimum amount of $1,000,000) subject as follows:

 

  7.3.1

they give the Agent not less than:

 

  (a)

in the case of a Term Rate Tranche, 5 Business Days’ (or such shorter period as the Majority Lenders may agree) prior notice; or

 

  (b)

in the case of a Compounded Rate Tranche, 5 RFR Banking Days’ (or such shorter period as the Majority Lenders may agree) prior notice);

 

  7.3.2

the Loan may only be prepaid after the last day of the Availability Period; and

 

  7.3.3

any prepayment under this Clause 7.3 shall satisfy the obligations under Clause 6.1 (Repayment of Loan) being applied on a pro rata basis to the remaining Repayment Instalments and any applicable Balloon Payment in inverse order of maturity.

 

7.4

Right of cancellation and prepayment in relation to a single Lender

 

  7.4.1

If:

 

  (a)

any sum payable to any Lender by a Borrower or the Guarantor is required to be increased under Clause 12.2.3 (Tax gross-up); or

 

  (b)

any Lender claims indemnification from a Borrower or the Guarantor under Clause 12.3 (Tax indemnity) or Clause 13.1 (Increased costs),

the Borrowers may, while the circumstance giving rise to the requirement for that increase or indemnification continues, give the Agent notice of cancellation of the Commitment(s) of that Lender and their intention to procure the repayment of that Lender’s participation in the Loan.

 

  7.4.2

On receipt of a notice referred to in Clause 7.4.1 in relation to a Lender, the Commitment(s) of that Lender shall immediately be reduced to zero.

 

  7.4.3

On the last day of the Interest Period which ends after the Borrowers have given notice under Clause 7.4.1 in relation to a Lender (or, if earlier, the date specified by the Borrowers in that notice), the Borrowers shall repay that Lender’s participation in the Loan together with all interest and other amounts accrued under the Finance Documents.

 

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7.5

Mandatory prepayment on sale or Total Loss

 

  7.5.1

In this Agreement, “Prepayment Date” means:

 

  (a)

in the case of the sale of a Vessel, the time at and date on which the sale is completed; and

 

  (b)

in the case of a Total Loss of a Vessel, the earlier of (i) the date falling 90 days after the Total Loss Date and (ii) the date on which the proceeds of any such Total Loss are realised.

 

  7.5.2

If a Vessel is sold by a Borrower or becomes a Total Loss, the Borrowers shall prepay on the relevant Prepayment Date the higher of:

 

  (a)

the whole of the Tranche outstanding in respect of that Vessel; and

 

  (b)

the amount that is required to ensure that the Borrowers remain in compliance with the VTL Coverage as calculated on the relevant Prepayment Date and excluding, for the purpose of this calculation, the Market Value of the Vessel sold or that has become a Total Loss.

 

  7.5.3

For the purpose of Clause 7.5.2, the determination of the VTL Coverage will be based on:

 

  (a)

the last valuations of the remaining Vessels obtained by the Agent pursuant to Clause 18.2 (Market Value and provision of valuations); or

 

  (b)

if such last valuations predate the relevant Prepayment Date by more than 30 days, new valuations to be obtained by the Agent in accordance with the provisions of Clause 18.2 (Market Value and provision of valuations) on or before the relevant Prepayment Date.

 

  7.5.4

Any prepayment made in accordance with Clause 7.5.2(b) shall be applied in prepayment of the Tranches on a pro rata basis and in inverse order of maturity.

 

7.6

Mandatory prepayment on Change of Control If a Change of Control occurs, the Agent (Acting on the instructions of the Majority Lenders) may by not less than 10 Business Days’ notice to the Borrowers cancel the Loan and require that the Borrowers shall prepay the whole of the Loan upon written demand from the Agent.

 

7.7

Mandatory prepayment on breach of Sanctions If an Obligor does not comply with any obligation relating to Clause 20.1.25 (Sanctions) or Clause 23.2.2 (Compliance with laws) or Clause 23.25 (Sanctions), the Agent (Acting on the instructions of the Majority Lenders) may by not less than 10 Business Days’ notice to the Borrowers cancel the Loan and require that the Borrowers shall prepay the whole of the Loan upon written demand from the Agent

 

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7.8

Right of cancellation in relation to a Defaulting Lender If any Lender becomes a Defaulting Lender, the Borrowers may, at any time while the Lender continues to be a Defaulting Lender, give the Agent 10 Business Days’ notice of cancellation of the Commitment of that Lender. On that notice becoming effective, the Commitment of the Defaulting Lender shall immediately be reduced to zero. The Agent shall as soon as practicable after receipt of that notice notify all the Lenders.

 

7.9

Restrictions

 

  7.9.1

Any notice of prepayment or cancellation given under this Clause 7 shall be irrevocable and, unless a contrary indication appears in this Agreement, shall specify the date or dates upon which the relevant prepayment or cancellation is to be made and the amount of that prepayment or cancellation.

 

  7.9.2

Any prepayment under this Agreement shall be made together with accrued interest on the amount prepaid and, subject to any Break Costs, without premium or penalty.

 

  7.9.3

The Borrowers shall not repay, prepay or cancel all or any part of the Loan except at the times and in the manner expressly provided for in this Agreement.

 

  7.9.4

No amount of the Total Commitments cancelled under this Agreement may be subsequently reinstated.

 

  7.9.5

The Borrowers may not reborrow any part of the Loan which is prepaid.

 

  7.9.6

If the Agent receives a notice under this Clause 7 it shall promptly forward a copy of that notice to the Borrowers or the affected Lender, as appropriate.

 

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Section 5 Costs of Utilisation

 

8A

Rate Switch

 

8A.1

Switch to Compounded Rate Subject to Clause 8A.2 (Delayed switch for existing Term Rate Tranches), on and from the Rate Switch Date:

 

  8A.1.1

use of the Compounded Reference Rate will replace the use of the applicable Term Reference Rate for the calculation of interest; and

 

  8A.1.2

any Tranche or Unpaid Sum shall be a “Compounded Rate Tranche” and Clause 9.2 (Calculation of interest – Compounded Rate Tranches) shall apply to each such Tranche or Unpaid Sum.

 

8A.2

Delayed switch for existing Term Rate Tranches If the Rate Switch Date falls before the last day of an Interest Period for a Term Rate Tranche:

 

  8A.2.1

that Tranche shall continue to be a Term Rate Tranche for that Interest Period and Clause 8.1.1 (Calculation of interest – Term Rate Tranches) shall continue to apply to that Tranche for that Interest Period; and

 

  8A.2.2

on and from the first day of the next Interest Period (if any) for that Tranche

 

  (a)

that Tranche shall be a “Compounded Rate Tranche”; and

 

  (b)

Clause 8.1.2 (Calculation of interest – Compounded Rate Tranches) shall apply to that Tranche.

 

8A.3

Early termination of Interest Periods for existing Term Rate Tranches If:

 

  8A.3.1

an Interest Period for a Term Rate Tranche would otherwise end on a day which falls after the Rate Switch Date; and

 

  8A.3.2

prior to the date of selection of that Interest Period:

 

  (a)

the Backstop Rate Switch Date was scheduled to occur during that Interest Period; or

 

  (b)

notice of a Rate Switch Trigger Event Date for that currency falling during that Interest Period had been given pursuant to Clause 8A.4.1(b),

that Interest Period will instead end on the Rate Switch Date.

 

8A.4

Notification by Agent

 

  8A.4.1

Subject to Clause 8A.4.3, following the occurrence of a Rate Switch Trigger Event, the Agent shall:

 

  (a)

promptly upon becoming aware of the occurrence of that Rate Switch Trigger Event, notify the Borrowers and the Lenders of that occurrence; and

 

Page 39


  (b)

promptly upon becoming aware of the date of the Rate Switch Trigger Event Date applicable to that Rate Switch Trigger Event, notify the Borrowers and the Lenders of that date.

 

  8A.4.2

The Agent shall, promptly upon becoming aware of the occurrence of the Rate Switch Date, notify the Borrowers and the Lenders of that occurrence.

 

  8A.4.3

The Parties agree that the FCA Cessation Announcement constitutes a Rate Switch Trigger Event in relation to dollars, that the Rate Switch Trigger Event Date applicable to such Rate Switch Trigger Event will be 1 July 2023 and that the Agent is not under any obligation under Clause 8A.4.1 to notify any Party of such Rate Switch Trigger Event or Rate Switch Trigger Event Date resulting from the FCA Cessation Announcement.

 

  8A.4.4

For the purposes of Clause 8A.4.3, the “FCA Cessation Announcement” means the announcement on 5 March 2021 by the UK’s Financial Conduct Authority that all LIBOR settings will, as of certain specified future dates, either cease to be provided by any administrator or no longer be representative of the market and economic reality that they are intended to measure and that such representativeness will not be restored.

 

8

Interest

 

8.1

Calculation of interest

 

  8.1.1

Term Rate Tranches The rate of interest on each Term Rate Tranche for each relevant Interest Period is the percentage rate per annum which is the aggregate of the applicable:

 

  (a)

Margin; and

 

  (b)

Term Reference Rate.

 

  8.1.2

Compounded Rate Tranches 

 

  (a)

The rate of interest on each Compounded Rate Tranche for any day during each relevant Interest Period is the percentage rate per annum which is the aggregate of the:

 

  (i)

Margin; and

 

  (ii)

Compounded Reference Rate for that day.

 

  (b)

If any day during an Interest Period for a Compounded Rate Tranche is not an RFR Banking Day, the rate of interest on that Compounded Rate Tranche for that day will be the rate applicable to the immediately preceding RFR Banking Day.

 

  8.2

Payment of interest The Borrowers shall pay accrued interest on the Loan on the last day of each Interest Period (and, if the Interest Period is longer than three Months, on the dates falling at intervals of three Months after the first day of the Interest Period).

 

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  8.3

Default interest

 

  8.3.1

If a Borrower or the Guarantor fails to pay any amount payable by it under a Finance Document on its due date or if Clause 8.3.3 applies, interest shall accrue on the overdue amount from the due date up to the date of actual payment (both before and after judgment) at a rate which is 2% per annum higher than the rate which would have been payable if the overdue amount had, during the period of non-payment or default, constituted the Loan in the currency of the overdue amount for successive Interest Periods, each of a duration selected by the Agent (acting reasonably). Any interest accruing under this Clause 8.3 shall be immediately payable by the Borrowers or the Guarantor on demand by the Agent.

 

  8.3.2

Default interest (if unpaid) arising on an overdue amount will be compounded with the overdue amount at the end of each Interest Period applicable to that overdue amount but will remain immediately due and payable.

 

  8.3.3

If an Event of Default (other than an Event of Default specified in Clause 24.1.1 (Non-payment)) is continuing and provided a notice of such Event of Default has been sent by the Agent to the Borrowers, the Borrowers shall, if so demanded by the Agent, compensate the Lenders for the increased risk in relation to the Loan by paying interest on the Loan at a rate calculated in accordance with Clause 8.3.1 as if the whole of the outstanding Loan were an overdue amount. Any such interest shall accrue in accordance with Clause 34.3 (Day count convention) and be payable by the Borrowers in accordance with Clause 8.2 (Payment of interest) and shall be without prejudice to any other right or remedy any Finance Party may have under Clause 13 (Increased Costs) or Clause 24 (Events of Default).

 

8.4

Notification The Agent shall promptly notify the Borrowers of the determination of a rate of interest relating to a Term Rate Tranche.

 

  8.4.1

The Agent shall promptly upon a Compounded Rate Interest Payment being determinable, notify:

 

  (a)

the Borrowers of that Compounded Rate Interest Payment;

 

  (b)

each relevant Lender of the portion of that Compounded Rate Interest Payment which relates to that Lender’s participation in the relevant Compounded Rate Tranche; and

 

  (c)

the Lenders and the Borrowers of:

 

  (i)

each applicable rate of interest relating to the determination of that Compounded Rate Interest Payment; and

 

  (ii)

to the extent it is then determinable, the Market Disruption Rate (if any) relating to the relevant Compounded Rate Tranche.

This Clause 8.4.1 shall not apply to any Compounded Rate Interest Payment determined pursuant to Clause 10.4 (Cost of funds)

 

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  8.4.2

The Agent shall promptly notify the Borrowers of each Funding Rate relating to a Tranche.

 

  8.4.3

The Agent shall promptly notify the relevant Lenders and the Borrowers of the determination of a rate of interest relating to a Compounded Rate Tranche to which Clause 10.4 (Cost of funds) applies.

 

  8.4.4

This Clause 8.4 shall not require the Agent to make any notification to any Party on a day which is not a Business Day.

 

9

Interest Periods

 

9.1

Selection of Interest Periods The Borrowers may select in a written notice to the Agent the duration of an Interest Period for each Tranche subject as follows:

 

  9.1.1

each notice is irrevocable and must be delivered to the Agent by the Borrowers not later than 11.00 a.m. on the Quotation Day;

 

  9.1.2

if the Borrowers fail to give a notice in accordance with Clause 9.1.1, the relevant Interest Period will, subject to Clauses 9.2 (Interest Periods to meet Repayment Dates) and 9.4 (Non-Business Days), be three Months;

 

  9.1.3

subject to this Clause 9, the Borrowers may select an Interest Period of three or six Months or any other period agreed between the Borrowers and the Agent (acting on the instructions of all the Lenders);

 

  9.1.4

an Interest Period shall not extend beyond the Termination Date; and

 

  9.1.5

the first Interest Period in respect of a Utilisation shall start on the relevant Utilisation Date and end on the date which numerically corresponds to that Utilisation Date and each subsequent Interest Period for that Utilisation shall start on the last day of the preceding Interest Period and end on the date which numerically corresponds to that commencement date, except that if there is no numerically corresponding date in that Month, the Interest Period shall end on the last Business Day in that Month, subject to Clause 9.2 (Second and subsequent Utilisations) and Clause 9.3 (Interest Periods to meet Repayment Dates).

 

  9.1.6

No Interest Period for a Compounded Rate Tranche shall be longer than six Months.

 

9.2

Second and subsequent Utilisations If the second or any subsequent Utilisation is made otherwise than on the first day of an Interest Period for the balance of the Loan, there shall be a separate initial Interest Period for that Utilisation commencing on its Utilisation Date and expiring on the final date of the then current Interest Period for the balance of the Loan.

 

9.3

Interest Periods to meet Repayment Dates If an Interest Period will expire after the next Repayment Date in respect of the relevant Tranche, there shall be a separate Interest Period for a part of that tranche equal to the Repayment Instalment due on that next Repayment Date and that separate Interest Period shall expire on that next Repayment Date.

 

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9.4

Non-Business Days If an Interest Period would otherwise end on a day which is not a Business Day, that Interest Period will instead end on the next Business Day in that calendar month (if there is one) or the preceding Business Day (if there is not).

 

10

Changes to the Calculation of Interest

 

10.1

Calculation of Reference Bank Rate

 

  10.1.1

Subject to Clause 10.2 (Market disruption), if LIBOR is to be determined by reference to a Reference Bank Rate but a Reference Bank does not supply a quotation by 11.00 am on the Quotation Day, the Reference Bank Rate shall be calculated on the basis of the quotations of the remaining Reference Banks.

 

  10.1.2

If at or about noon on the Quotation Day for the relevant Interest Period LIBOR is to be determined by reference to the Reference Bank Rate and none or only one of the Reference Banks supplies a rate to the Agent to determine LIBOR for dollars, Clause 10.4 (Cost of funds) shall apply to the Loan for the relevant Interest Period.

 

10.2

Interest calculation if no RFR or Central Bank Rate If:

 

  10.2.1

there is no applicable RFR or Central Bank Rate for the purposes of calculating the Daily Non-Cumulative Compounded RFR Rate for an RFR Banking Day during an Interest Period for a Compounded Rate Tranche; and

 

  10.2.2

Cost of funds will apply as a fallback” is specified in respect of that Tranche in the Compounded Rate Terms for that Tranche,

then Clause 10.4 (Cost of funds) shall apply to that Tranche for that Interest Period.

 

10.3

Market disruption

 

  10.3.1

Term Rate Tranches In the case of a Term Rate Tranche, if before close of business in London on the Quotation Day for the relevant Interest Period, the Agent receives notifications from a Lender or Lenders (whose participations in the relevant Tranche exceed 50% of the relevant Tranche) that its cost of funds relating to its participation in the relevant Tranche from whatever source it may reasonably select would be in excess of LIBOR then Clause 10.4 (Cost of funds) shall apply to the relevant Tranche for the relevant Interest Period.

 

  10.3.2

Compounded Rate Tranches In the case of a Compounded Rate Tranche, if:

 

  (a)

a Market Disruption Rate is specified in the Compounded Rate Terms for that Tranche; and

 

  (b)

before the Reporting Time for that Tranche, the Agent receives notifications from a Lender or Lenders (whose participations in that Tranche exceed 50% of that Tranche) that its cost of funds relating to its participation in that Tranche would be in excess of that Market Disruption Rate,

 

Page 43


then Clause 10.4 (Cost of funds) shall apply to that Tranche for the relevant Interest Period.

 

10.4

Cost of funds

 

  10.4.1

If this Clause 10.4 applies to a Tranche for an Interest Period, neither Clause 8.1.1 (Calculation of interest - Term Rate Tranches) nor Clause 8.1.2 (Calculation of interest - Compounded Rate Tranches) shall apply to that Tranche for that Interest Period and the rate of interest on each Lender’s share of that Tranche for that Interest Period shall be the percentage rate per annum which is the sum of:

 

  (a)

the Margin; and

 

  (i)

the rate notified to the Agent by that Lender as soon as practicable, and in any event in relation to a Term Rate Tranche, within three Business Days of the first day of that Interest Period (or, if earlier, on the date falling three Business Days before the date on which interest is due to be paid in respect of that Interest Period); or

 

  (ii)

in relation to a Compounded Rate Tranche, by the Reporting Time for that Tranche,

to be that which expresses as a percentage rate per annum that Lender’s cost of funds relating to its participation in the relevant Tranche.

 

  10.4.2

If this Clause 10.4 applies and the Agent or the Borrowers so requires, the Agent and the Borrowers shall enter into negotiations (for a period of not more than thirty days) with a view to agreeing a substitute basis for determining the rate of interest.

 

  10.4.3

Any alternative basis agreed pursuant to Clause 10.4.2 shall, with the prior consent of all the Lenders and the Borrowers, be binding on all Parties.

 

  10.4.4

If an alternative basis is not agreed pursuant to Clause 10.4.2, the rate of interest shall continue to be determined in accordance with Clause 10.4.1.

 

10.5

Break Costs

 

  10.5.1

Subject to Clause 10.5.2, the Borrowers shall, within three Business Days of demand by a Finance Party, pay to that Finance Party its Break Costs (if any) attributable to all or any part of the Loan or Unpaid Sum being paid by the Borrowers on a day prior to the last day of an Interest Period for the Loan or Unpaid Sum.

 

  10.5.2

Clause 10.5.1 shall apply in respect of a Compounded Rate Tranche if an amount is specified as Break Costs in the Compounded Rate Terms.

 

  10.5.3

Each Lender shall, as soon as reasonably practicable after a demand by the Agent, provide a certificate confirming the amount of its Break Costs for any Interest Period respect of which they become, or may become, payable.

 

Page 44


11

Fees

 

11.1

Commitment Fee The Borrowers shall pay to the Agent (for the account of the Lenders in proportion to their Commitments) a fee computed at a per annum rate equal to 40% of the Margin on the undrawn amount of the relevant Tranche for the period from and including 2 November 2021 to and including the last day of the Availability Period.

The accrued commitment fee is payable on the last day of each successive period of three Months which ends during the Availability Period, on the last day of the Availability Period, on the Utilisation Date in respect of the final Tranche to be drawn and (on the cancelled amount of the relevant Lender’s Commitment) at the time the cancellation is effective.

 

11.2

Upfront fee The Borrowers shall pay to the Agent an upfront fee in the amount and at the times agreed in the Fee Letter.

 

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Section 6 Additional Payment Obligations

 

12

Tax Gross Up and Indemnities

 

12.1

Definitions In this Agreement:

Borrower DTTP Filing” means an HM Revenue & Customs’ Form DTTP2 duly completed and filed by the relevant Borrower, which:

 

  (a)

where it relates to a Treaty Lender that is an Original Lender, contains the scheme reference number and jurisdiction of tax residence stated opposite that Lender’s name in Part I of Schedule 1 (The Parties) and is filed with HM Revenue & Customs within 30 days of the date of this Agreement; or

 

  (b)

where it relates to a Treaty Lender that is not an Original Lender, contains the scheme reference number and jurisdiction of tax residence stated in respect of that Lender in the documentation which it executes on becoming a Party as a Lender and is filed with HM Revenue & Customs within 30 days of the relevant Transfer Date.

Protected Party” means a Finance Party which is or will be subject to any liability or required to make any payment for or on account of Tax in relation to a sum received or receivable (or any sum deemed for the purposes of Tax to be received or receivable) under a Finance Document.

Qualifying Lender” means a Lender which is beneficially entitled to interest payable to that Lender in respect of an advance under a Finance Document and is:

 

  (a)

a Lender which is a bank (as defined for the purpose of section 879 of the ITA) making an advance under a Finance Document and is within the charge to United Kingdom corporation tax as respects any payments of interest made in respect of that advance or would be within such charge as respects such payments apart from section 18A of the CTA; or in respect of an advance made under a Finance Document by a person that was a bank (as defined for the purpose of section 879 of the ITA) at the time that that advance was made and within the charge to United Kingdom corporation tax as respects any payments of interest made in respect of that advance; or

 

  (b)

a Lender which is:

 

  (i)

a company resident in the United Kingdom for United Kingdom tax purposes;

 

  (ii)

a partnership each member of which is:

 

  (A)

a company so resident in the United Kingdom; or

 

  (B)

a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account in computing its chargeable profits (within the meaning of section 19 of the CTA) the whole of any share of interest payable in respect of that advance that falls to it by reason of Part 17 of the CTA; or

 

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  (iii)

a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account interest payable in respect of that advance in computing the chargeable profits (within the meaning of section 19 of the CTA) of that company; or

 

  (c)

a Treaty Lender.

Tax Confirmation” means a confirmation by a Lender that the person beneficially entitled to interest payable to that Lender in respect of an advance under a Finance Document is either:

 

  (a)

a company resident in the United Kingdom for United Kingdom tax purposes;

 

  (b)

a partnership each member of which is:

 

  (i)

a company so resident in the United Kingdom; or

 

  (ii)

a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account in computing its chargeable profits (within the meaning of section 19 of the CTA) the whole of any share of interest payable in respect of that advance that falls to it by reason of Part 17 of the CTA; or

 

  (c)

a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account interest payable in respect of that advance in computing the chargeable profits (within the meaning of section 19 of the CTA) of that company.

Tax Credit” means a credit against, relief or remission for, or repayment of any Tax.

Tax Deduction” means a deduction or withholding for or on account of Tax from a payment under a Finance Document, other than a FATCA Deduction.

Tax Payment” means either the increase in a payment made by an Obligor to a Finance Party under Clause 12.2 (Tax gross-up) or a payment under Clause 12.3 (Tax indemnity).

Treaty Lender” means a Lender which:

 

  (a)

is treated as a resident of a Treaty State for the purposes of the Treaty; and

 

  (b)

does not carry on a business in the United Kingdom through a permanent establishment with which that Lender’s participation in the Loan is effectively connected.

 

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Treaty State” means a jurisdiction having a double taxation agreement (a “Treaty”) with the United Kingdom which makes provision for full exemption from tax imposed by the United Kingdom on interest.

UK Non-Bank Lender” means a Lender which is not an Original Lender and which gives a Tax Confirmation in the documentation which it executes on becoming a Party as a Lender.

Unless a contrary indication appears, in this Clause 12 a reference to “determines” or “determined” means a determination made in the absolute discretion of the person making the determination.

 

12.2

Tax gross-up

 

  12.2.1

Each Borrower and the Guarantor shall (and shall procure that each other Obligor will) make all payments to be made by it without any Tax Deduction, unless a Tax Deduction is required by law.

 

  12.2.2

The Borrowers shall promptly upon becoming aware that an Obligor must make a Tax Deduction (or that there is any change in the rate or the basis of a Tax Deduction) notify the Agent accordingly. Similarly, a Lender shall notify the Agent on becoming so aware in respect of a payment payable to that Lender. If the Agent receives such notification from a Lender it shall notify the Borrowers and that Obligor.

 

  12.2.3

If a Tax Deduction is required by law to be made by an Obligor, the amount of the payment due from that Obligor shall be increased to an amount which (after making any Tax Deduction) leaves an amount equal to the payment which would have been due if no Tax Deduction had been required.

 

  12.2.4

A payment shall not be increased under Clause 12.2.3 by reason of a Tax Deduction on account of Tax imposed by the United Kingdom, if on the date on which the payment falls due:

 

  (a)

the payment could have been made to the relevant Lender without a Tax Deduction if the Lender had been a Qualifying Lender, but on that date that Lender is not or has ceased to be a Qualifying Lender other than as a result of any change after the date it became a Lender under this Agreement in (or in the interpretation, administration, or application of) any law or Treaty or any published practice or published concession of any relevant taxing authority; or

 

  (b)

the relevant Lender is a Qualifying Lender solely by virtue of (b) of the definition of Qualifying Lender and:

 

  (i)

an officer of H.M. Revenue & Customs has given (and not revoked) a direction (a “Direction”) under section 931 of the ITA which relates to the payment and that Lender has received from the Obligor making the payment a certified copy of that Direction; and

 

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  (ii)

the payment could have been made to the Lender without any Tax Deduction if that Direction had not been made; or

 

  (c)

the relevant Lender is a Qualifying Lender solely by virtue of (b) of the definition of Qualifying Lender and:

 

  (i)

the relevant Lender has not given a Tax Confirmation to the Borrowers; and

 

  (ii)

the payment could have been made to the Lender without any Tax Deduction if the Lender had given a Tax Confirmation to the Borrowers, on the basis that the Tax Confirmation would have enabled the Borrowers to have formed a reasonable belief that the payment was an “excepted payment” for the purpose of section 930 of the ITA; or

 

  (d)

the relevant Lender is a Treaty Lender and the Obligor making the payment is able to demonstrate that the payment could have been made to that Lender without the Tax Deduction had that Lender complied with its obligations under Clause 12.2.7 or Clause 12.2.8 (as applicable).

 

  12.2.5

If an Obligor is required to make a Tax Deduction, the relevant Borrower or the Guarantor shall (and, in the case of any other Obligor, the Borrowers and the Guarantor shall procure that such other Obligor will) make that Tax Deduction and any payment required in connection with that Tax Deduction within the time allowed and in the minimum amount required by law.

 

  12.2.6

Within 30 days of making either a Tax Deduction or any payment required in connection with that Tax Deduction, the Borrowers or the Guarantor making that Tax Deduction shall (and, in the case of any other Obligor, the Borrowers and the Guarantor shall procure that such other Obligor will) deliver to the Agent for the Finance Party entitled to the payment a statement under section 975 of the ITA or other evidence reasonably satisfactory to that Finance Party that the Tax Deduction has been made or (as applicable) any appropriate payment paid to the relevant taxing authority.

 

  12.2.7

(a)Subject to (b), a Treaty Lender and each Borrower or the Guarantor which makes a payment to which that Treaty Lender is entitled shall co-operate in completing any procedural formalities necessary for that Borrower or the Guarantor to obtain authorisation to make that payment without a Tax Deduction.

 

  (b)

(i) A Treaty Lender which is an Original Lender and that holds a passport under the HMRC DT Treaty Passport scheme, and which wishes that scheme to apply to this Agreement, shall confirm its scheme reference number and its jurisdiction of tax residence opposite its name in Part I of Schedule 1 (The Parties); and

 

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  (ii)

a Treaty Lender which is not an Original Lender and that holds a passport under the HMRC DT Treaty Passport scheme, and which wishes that scheme to apply to this Agreement, shall confirm its scheme reference number and its jurisdiction of tax residence in the documentation which it executes on becoming a Party as a Lender,

and, having done so, that Lender shall be under no obligation pursuant to (a).

 

  12.2.8

If a Lender has confirmed its scheme reference number and its jurisdiction of tax residence in accordance with Clause 12.2.7(b) and:

 

  (a)

a Borrower making a payment to that Lender has not made a Borrower DTTP Filing in respect of that Lender; or

 

  (b)

a Borrower making a payment to that Lender has made a Borrower DTTP Filing in respect of that Lender but:

 

  (i)

that Borrower DTTP Filing has been rejected by HM Revenue & Customs;

 

  (ii)

HM Revenue & Customs has not given that Borrower authority to make payments to that Lender without a Tax Deduction within 60 days of the date of the Borrower DTTP Filing; or

 

  (iii)

HM Revenue & Customs has given that Borrower authority to make payments to that Lender without a Tax Deduction but such authority has subsequently been revoked or expired,

and in each case, that Borrower has notified that Lender in writing, that Lender and that Borrower shall co-operate in completing any additional procedural formalities necessary for that Borrower to obtain authorisation to make that payment without a Tax Deduction.

 

  12.2.9

If a Lender has not confirmed its scheme reference number and jurisdiction of tax residence in accordance with Clause 12.2.7(b), the Borrowers and the Guarantor shall not make a Borrower DTTP Filing or file any other form relating to the HMRC DT Treaty Passport scheme in respect of that Lender’s Commitment(s) or its participation in any Utilisation unless the Lender otherwise agrees.

 

  12.2.10

A Borrower shall, promptly on making a Borrower DTTP Filing, deliver a copy of that Borrower DTTP Filing to the Agent for delivery to the relevant Lender.

 

  12.2.11

A UK Non-Bank Lender which is an Original Lender gives a Tax Confirmation to the Borrowers by entering into this Agreement.

 

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  12.2.12

A UK Non-Bank Lender shall promptly notify the Borrowers and the Agent if there is any change in the position from that set out in the Tax Confirmation.

 

12.3

Tax indemnity

 

  12.3.1

Each Borrower and the Guarantor shall (within three Business Days of demand by the Agent) pay to a Protected Party an amount equal to the loss, liability or cost which that Protected Party determines will be or has been (directly or indirectly) suffered for or on account of Tax by that Protected Party in respect of a Finance Document.

 

  12.3.2

Clause 12.3.1 shall not apply:

 

  (a)

with respect to any Tax assessed on a Finance Party:

 

  (i)

under the law of the jurisdiction in which that Finance Party is incorporated or, if different, the jurisdiction (or jurisdictions) in which that Finance Party is treated as resident for tax purposes; or

 

  (ii)

under the law of the jurisdiction in which that Finance Party’s Facility Office is located in respect of amounts received or receivable in that jurisdiction,

if that Tax is imposed on or calculated by reference to the net income received or receivable (but not any sum deemed to be received or receivable) by that Finance Party; or

 

  (b)

to the extent a loss, liability or cost:

 

  (i)

is compensated for by an increased payment under Clause 12.2 (Tax gross-up);

 

  (ii)

would have been compensated for by an increased payment under Clause 12.2 (Tax gross-up) but was not so compensated solely because one of the exclusions in Clause 12.2.4 (Tax gross-up) applied; or

 

  (iii)

relates to a FATCA Deduction required to be made by a Party.

 

  12.3.3

A Protected Party making, or intending to make a claim under Clause 12.3.1 shall promptly notify the Agent of the event which will give, or has given, rise to the claim, following which the Agent shall notify the Borrowers.

 

  12.3.4

A Protected Party shall, on receiving a payment from a Borrower or the Guarantor under this Clause 12.3, notify the Agent.

 

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12.4

Tax Credit If an Obligor makes a Tax Payment and the relevant Finance Party determines that:

 

  12.4.1

a Tax Credit is attributable to an increased payment of which that Tax Payment forms part, to that Tax Payment or to a Tax Deduction in consequence of which that Tax Payment was required; and

 

  12.4.2

that Finance Party has obtained and utilised that Tax Credit,

that Finance Party shall pay an amount to the relevant Obligor which that Finance Party determines will leave it (after that payment) in the same after-Tax position as it would have been in had the Tax Payment not been made.

 

12.5

Lender status confirmation Each Lender which is not an Original Lender shall indicate, in the documentation which it executes on becoming a Party as a Lender, and for the benefit of the Agent and without liability to any Obligor, which of the following categories it falls in:

 

  12.5.1

not a Qualifying Lender;

 

  12.5.2

a Qualifying Lender (other than a Treaty Lender); or

 

  12.5.3

a Treaty Lender.

If such a Lender fails to indicate its status in accordance with this Clause 12.5 then that Lender shall be treated for the purposes of this Agreement (including by each Obligor) as if it is not a Qualifying Lender until such time as it notifies the Agent which category applies (and the Agent, upon receipt of such notification, shall inform the Borrowers). For the avoidance of doubt, the documentation which a Lender executes on becoming a Party as a Lender shall not be invalidated by any failure of a Lender to comply with this Clause 12.5.

 

12.6

Stamp taxes The Borrowers and the Guarantor shall pay and, within three Business Days of demand, indemnify each Finance Party against any cost, loss or liability that Finance Party incurs in relation to all stamp duty, registration and other similar Taxes payable in respect of any Finance Document.

 

12.7

VAT

 

  12.7.1

All amounts expressed to be payable under a Finance Document by any Party or any Obligor to a Finance Party which (in whole or in part) constitute the consideration for any supply for VAT purposes are deemed to be exclusive of any VAT which is chargeable on that supply, and accordingly, subject to Clause 12.7.2, if VAT is or becomes chargeable on any supply made by any Finance Party to any Party or any Obligor under a Finance Document and such Finance Party is required to account to the relevant tax authority for the VAT, that Party shall (or, where the relevant Obligor is not a Party, the Borrowers and the Guarantor shall procure that such Obligor will) pay to such Finance Party (in addition to and at the same time as paying any other consideration for such supply) an amount equal to the amount of the VAT (and such Finance Party must promptly provide an appropriate VAT invoice to the recipient of such supply).

 

  12.7.2

If VAT is or becomes chargeable on any supply made by any Finance Party (the “Supplier”) to any other Finance Party (the “Recipient”) under a Finance Document, and any Party other than the Recipient (the “Relevant

 

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  Party”) is required by the terms of any Finance Document to pay an amount equal to the consideration for that supply to the Supplier (rather than being required to reimburse or indemnify the Recipient in respect of that consideration):

 

  (a)

(where the Supplier is the person required to account to the relevant tax authority for the VAT) the Relevant Party must also pay to the Supplier (at the same time as paying that amount) an additional amount equal to the amount of the VAT. The Recipient must (where this Clause 12.7.2(a) applies) promptly pay to the Relevant Party an amount equal to any credit or repayment the Recipient receives from the relevant tax authority which the Recipient reasonably determines relates to the VAT chargeable on that supply; and

 

  (b)

(where the Recipient is the person required to account to the relevant tax authority for the VAT) the Relevant Party must promptly, following demand from the Recipient, pay to the Recipient an amount equal to the VAT chargeable on that supply but only to the extent that the Recipient reasonably determines that it is not entitled to credit or repayment from the relevant tax authority in respect of that VAT.

 

  12.7.3

Where a Finance Document requires any Party or Obligor to reimburse or indemnify a Finance Party for any cost or expense, that Party shall (or, where the relevant Obligor is not a Party, the Borrowers and the Guarantor shall procure that such Obligor will) reimburse or indemnify (as the case may be) such Finance Party for the full amount of such cost or expense, including such part thereof as represents VAT, save to the extent that such Finance Party reasonably determines that it is entitled to credit or repayment in respect of such VAT from the relevant tax authority.

 

  12.7.4

Any reference in this Clause 12.7 to any Party or Obligor shall, at any time when such person is treated as a member of a group for VAT purposes, include (where appropriate and unless the context otherwise requires) a reference to the representative member of such group at such time (the term “representative member” to have the same meaning as in the Value Added Tax Act 1994) or any equivalent person in any jurisdiction other than the United Kingdom.

 

  12.7.5

In relation to any supply made by a Finance Party to any Party or Obligor under a Finance Document, if reasonably requested by such Finance Party, that Party shall (or, where the relevant Obligor is not a Party, the Borrowers and the Guarantor shall procure that such Obligor will) promptly provide such Finance Party with details of that person’s VAT registration and such other information as is reasonably requested in connection with such Finance Party’s VAT reporting requirements in relation to such supply.

 

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12.8

FATCA information

 

  12.8.1

Subject to Clause 12.8.3, each Party shall, within ten Business Days of a reasonable request by another Party:

 

  (a)

confirm to that other Party whether it is:

 

  (i)

a FATCA Exempt Party; or

 

  (ii)

not a FATCA Exempt Party;

 

  (b)

supply to that other Party such forms, documentation and other information relating to its status under FATCA as that other Party reasonably requests for the purposes of that other Party’s compliance with FATCA; and

 

  (c)

supply to that other Party such forms, documentation and other information relating to its status as that other Party reasonably requests for the purposes of that other Party’s compliance with any other law, regulation, or exchange of information regime.

 

  12.8.2

If a Party confirms to another Party pursuant to Clause 12.8.1(a)(i) 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.

 

  12.8.3

Clause 12.8.1 shall not oblige any Finance Party to do anything, and Clause 12.8.1(c) shall not oblige any other Party to do anything, which would or might in its reasonable opinion constitute a breach of:

 

  (a)

any law or regulation;

 

  (b)

any fiduciary duty; or

 

  (c)

any duty of confidentiality.

 

  12.8.4

If a Party fails to confirm whether or not it is a FATCA Exempt Party or to supply forms, documentation or other information requested in accordance with Clause 12.8.1(a) or 12.8.1(b) (including, for the avoidance of doubt, where Clause 12.8.3 applies), then such Party shall be treated for the purposes of the Finance Documents (and payments under them) as if it is not a FATCA Exempt Party until such time as the Party in question provides the requested confirmation, forms, documentation or other information.

 

12.9

FATCA Deduction

 

  12.9.1

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.

 

  12.9.2

Each Party shall promptly, upon becoming aware that it must make a FATCA Deduction (or that there is any change in the rate or the basis of such FATCA Deduction) notify the Party to whom it is making the payment and, in addition, shall notify the Borrowers and the Agent and the Agent shall notify the other Finance Parties.

 

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13

Increased Costs

 

13.1

Increased costs Subject to Clause 13.3 (Exceptions), the Borrowers shall, within three Business Days of a demand by the Agent, pay to the Agent for the account of a Finance Party the amount of any Increased Costs incurred by that Finance Party or any of its Affiliates as a result of (i) the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation or (ii) compliance with any law or regulation made after the date of this Agreement or (iii) the implementation or application of or compliance with Basel III or CRD IV or any other law or regulation which implements Basel III or CRD IV (whether such implementation, application or compliance is by a government, regulator, that Finance Party or any of that Finance Party’s Affiliates).

In this Agreement:

 

  (a)

Basel III” means:

 

  (i)

the agreements on capital requirements, a leverage ratio and liquidity standards contained in “Basel III: A global regulatory framework for more resilient banks and banking systems”, “Basel III: International framework for liquidity risk measurement, standards and monitoring” and “Guidance for national authorities operating the countercyclical capital buffer” published by the Basel Committee on Banking Supervision in December 2010, each as amended, supplemented or restated;

 

  (ii)

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

 

  (iii)

any further guidance or standards published by the Basel Committee on Banking Supervision relating to “Basel III”.

 

  (b)

CRD IVmeans EU CRD IV and UK CRD IV.

 

  (c)

EU CRD IV” means:

 

  (i)

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; and

 

  (ii)

(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.

 

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  (d)

UK CRD IV” means:

 

  (i)

(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 it forms part of domestic law of the United Kingdom by virtue of the 2018 Withdrawal Act;

 

  (ii)

the law of the United Kingdom or any part of it, which immediately before IP Completion Day (as defined in the 2020 Withdrawal Act) implemented Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC and its implementing measures; and

 

  (iii)

direct EU legislation (as defined in the 2018 Withdrawal Act), which immediately before IP Completion Day (as defined in the 2020 Withdrawal Act) implemented EU CRD IV as it forms part of domestic law of the United Kingdom by virtue of the 2018 Withdrawal Act.

 

  (e)

Increased Costs” means:

 

  (i)

a reduction in the rate of return from the Loan or on a Finance Party’s (or its Affiliate’s) overall capital;

 

  (ii)

an additional or increased cost; or

 

  (iii)

a reduction of any amount due and payable under any Finance Document,

which is incurred or suffered by a Finance Party or any of its Affiliates to the extent that it is attributable to that Finance Party having entered into any Finance Document or funding or performing its obligations under any Finance Document.

 

13.2

Increased cost claims

 

  13.2.1

A Finance Party intending to make a claim pursuant to Clause 13.1 (Increased costs) shall notify the Agent of the event giving rise to the claim, following which the Agent shall promptly notify the Borrowers.

 

  13.2.2

Each Finance Party shall, as soon as practicable after a demand by the Agent, provide a certificate confirming the amount of its Increased Costs.

 

13.3

Exceptions Clause 13.1 (Increased costs) does not apply to the extent any Increased Cost is:

 

  13.3.1

attributable to a Tax Deduction required by law to be made by a Borrower or the Guarantor;

 

  13.3.2

attributable to a FATCA Deduction required to be made by a Party;

 

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  13.3.3

compensated for by Clause 12.3 (Tax indemnity) (or would have been compensated for under Clause 12.3 but was not so compensated solely because any of the exclusions in Clause 12.3 applied);

 

  13.3.4

attributable to the wilful breach by the relevant Finance Party or its Affiliates of any law or regulation; or

 

  13.3.5

attributable to the implementation or application of or compliance with the “International Convergence of Capital Measurement and Capital Standards, a Revised Framework” published by the Basel Committee on Banking Supervision in June 2004 in the form existing on the date of this Agreement (but excluding any amendment arising out of Basel III) (“Basel II”) or any other law or regulation which implements Basel II (whether such implementation, application or compliance is by a government, regulator, Finance Party or any of its Affiliates).

In this Clause 13.3, a reference to a “Tax Deduction” has the same meaning given to the term in Clause 12.1 (Definitions).

 

14

Other Indemnities

 

14.1

Currency indemnity If any sum due from a Borrower or the Guarantor under the Finance Documents (a “Sum”), or any order, judgment or award given or made in relation to a Sum, has to be converted from the currency (the “First Currency”) in which that Sum is payable into another currency (the “Second Currency”) for the purpose of:

 

  14.1.1

making or filing a claim or proof against that Borrower or the Guarantor (as the case may be); or

 

  14.1.2

obtaining or enforcing an order, judgment or award in relation to any litigation or arbitration proceedings,

that Borrower or the Guarantor (as the case may be) shall as an independent obligation, within three Business Days of demand, indemnify each Secured Party to whom that Sum is due against any cost, loss or liability arising out of or as a result of the conversion including any discrepancy between (a) the rate of exchange used to convert that Sum from the First Currency into the Second Currency and (b) the rate or rates of exchange available to that Secured Party at the time of its receipt of that Sum.

Each Borrower and the Guarantor waives any right it may have in any jurisdiction to pay any amount under the Finance Documents in a currency or currency unit other than that in which it is expressed to be payable.

 

14.2

Other indemnities

 

  14.2.1

The Borrowers shall, within three Business Days of demand, indemnify each Secured Party against any cost, loss or liability incurred by that Secured Party as a result of:

 

  (a)

the occurrence of any Event of Default;

 

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  (b)

a failure by an Obligor to pay any amount due under a Finance Document on its due date, including without limitation, any cost, loss or liability arising as a result of Clause 30 (Sharing among the Finance Parties);

 

  (c)

funding, or making arrangements to fund, its participation in a Utilisation requested by the Borrowers in a Utilisation Request but not made by reason of the operation of any one or more of the provisions of this Agreement (other than by reason of default or negligence by that Finance Party alone); or

 

  (d)

the Loan (or part of the Loan) not being prepaid in accordance with a notice of prepayment given by the Borrowers.

 

  14.2.2

The Borrowers shall promptly indemnify each Finance Party, each Affiliate of a Finance Party and each officer or employee of a Finance Party or its Affiliate (each such person for the purposes of this Clause 14.2 an “Indemnified Person”) against any cost, loss or liability incurred by that Indemnified Person pursuant to or in connection with any litigation, arbitration or administrative proceedings or regulatory enquiry, in connection with or arising out of the entry into and the transactions contemplated by the Finance Documents, having the benefit of any Encumbrance constituted by the Finance Documents or which relates to the condition or operation of, or any incident occurring in relation to, a Vessel, unless such cost, loss or liability is caused by the gross negligence or wilful misconduct of that Indemnified Person. Any Affiliate or any officer or employee of a Finance Party or its Affiliate may rely on this Clause 14.2 subject to Clause 1.12 (Third party rights) and the provisions of the Third Parties Act.

 

  14.2.3

Subject to any limitations set out in Clause 14.2.2, the indemnity in that Clause shall cover any cost, loss or liability incurred by each Indemnified Person in any jurisdiction:

 

  (a)

arising or asserted under or in connection with any law relating to safety at sea, the ISM Code, any Environmental Law or any Sanctions; or

 

  (b)

in connection with any Environmental Claim.

 

14.3

Indemnity to the Agent Each Borrower jointly and severally shall promptly indemnify the Agent against:

 

  14.3.1

any cost, loss or liability incurred by the Agent (acting reasonably) as a result of:

 

  (a)

investigating any event which it reasonably believes is a Default; or

 

  (b)

acting or relying on any notice, request or instruction which it reasonably believes to be genuine, correct and appropriately authorised; or

 

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  (c)

instructing lawyers, accountants, tax advisers, surveyors or other professional advisers or experts as permitted under this Agreement; and

 

  14.3.2

any cost, loss or liability (including, without limitation, for negligence or any other category of liability whatsoever) incurred by the Agent (otherwise than by reason of the Agent’s gross negligence or wilful misconduct) (or, in the case of any cost, loss or liability pursuant to Clause 31.11 (Disruption to Payment Systems etc.) notwithstanding the Agent’s negligence, gross negligence or any other category of liability whatsoever but not including any claim based on the fraud of the Agent) in acting as Agent under the Finance Documents.

 

14.4

Indemnity to the Security Agent Each Borrower and the Guarantor jointly and severally shall promptly indemnify the Security Agent and every Receiver and Delegate against any cost, loss or liability incurred by any of them as a result of:

 

  14.4.1

any failure by the Borrowers to comply with their obligations under Clause 16 (Costs and Expenses);

 

  14.4.2

acting or relying on any notice, request or instruction which it reasonably believes to be genuine, correct and appropriately authorised;

 

  14.4.3

the taking, holding, protection or enforcement of the Security Documents;

 

  14.4.4

the exercise of any of the rights, powers, discretions, authorities and remedies vested in the Security Agent and each Receiver and Delegate by the Finance Documents or by law;

 

  14.4.5

any default by any Obligor in the performance of any of the obligations expressed to be assumed by it in the Finance Documents; or

 

  14.4.6

acting as Security Agent, Receiver or Delegate under the Finance Documents or which otherwise relates to any of the Charged Property (otherwise, in each case, than by reason of the relevant Security Agent’s, Receiver’s or Delegate’s gross negligence or wilful misconduct).

 

14.5

Indemnity survival The indemnities contained in this Agreement shall survive repayment of the Loan.

 

15

Mitigation by the Lenders

 

15.1

Mitigation Each Finance Party shall, in consultation with the Borrowers, take all reasonable steps to mitigate any circumstances which arise and which would result in all or any part of the Loan ceasing to be available or any amount becoming payable under or pursuant to any of Clause 7.1 (Illegality), Clause 12 (Tax Gross Up and Indemnities) or Clause 13 (Increased Costs) including (but not limited to) transferring its rights and obligations under the Finance Documents to another Affiliate or Facility Office. The above does not in any way limit the obligations of any Obligor under the Finance Documents.

 

15.2

Limitation of liability The Borrowers shall promptly indemnify each Finance Party for all costs and expenses reasonably incurred by that Finance Party as a result of steps taken by it under Clause 15.1 (Mitigation). A Finance Party is not obliged to take any steps under Clause 15.1 if, in its opinion (acting reasonably), to do so might be prejudicial to it.

 

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16

Costs and Expenses

 

16.1

Transaction expenses The Borrowers shall promptly on demand pay the Agent, the Security Agent and the Bookrunner the amount of all costs and expenses (including legal fees) reasonably incurred by any of them (and, in the case of the Security Agent, by any Receiver or Delegate) in connection with:

 

  16.1.1

the negotiation, preparation, printing, execution, syndication and perfection of this Agreement and any other documents referred to in this Agreement;

 

  16.1.2

the negotiation, preparation, printing, execution and perfection of any other Finance Documents executed after the date of this Agreement;

 

  16.1.3

any other document which may at any time be required by a Finance Party to give effect to any Finance Document or which a Finance Party is entitled to call for or obtain under any Finance Document; and

 

  16.1.4

any discharge, release or reassignment of any of the Security Documents.

 

16.2

Amendment costs Subject to Clause 16.6 (Reference rate transition costs), if (a) an Obligor requests an amendment, waiver or consent or (b) an amendment is required pursuant to Clause 31.10 (Change of currency), the Borrowers shall, within three Business Days of demand, reimburse each of the Agent and the Security Agent for the amount of all costs and expenses (including legal fees) reasonably incurred by the Agent and the Security Agent (and, in the case of the Security Agent, by any Receiver or Delegate) in responding to, evaluating, negotiating or complying with that request or requirement.

 

16.3

Agent and Security Agent’s management time and additional remuneration Any amount payable to the Agent under Clause 14.3 (Indemnity to the Agent) or to the Security Agent under Clause 14.4 (Indemnity to the Security Agent) or to either of them under this Clause 16 or Clause 27.11 (Lenders’ indemnity to the Agent) shall include the cost of utilising the management time or other resources of the Agent or the Security Agent (as the case may be) and will be calculated on the basis of such reasonable daily or hourly rates as the Agent or the Security Agent may notify to the Borrowers and the Lenders, and is in addition to any other fee paid or payable to the Agent or the Security Agent.

 

16.4

Enforcement and preservation costs The Borrowers shall, within three Business Days of demand, pay to each Finance Party and each other Secured Party the amount of all costs and expenses (including legal fees) incurred by that Finance Party in connection with the enforcement of, or the preservation of any rights under, any Finance Document and any proceedings instituted by or against the Security Agent as a consequence of taking or holding the Security Documents or enforcing those rights including (without limitation) any losses, costs and expenses which that Finance Party or other Secured Party may from time to time sustain, incur or become liable for by reason of that Finance Party or other Secured Party being mortgagee of a Vessel and/or a lender to a Borrower, or by reason of that Finance Party or other Secured Party being deemed by any court or authority to be an operator or controller, or in any way concerned in the operation or control, of a Vessel.

 

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16.5

Other costs The Borrowers shall, within three Business Days of demand, pay to each Finance Party and each other Secured Party the amount of all sums which that Finance Party or other Secured Party may pay or become actually or contingently liable for on account of a Borrower in connection with a Vessel (whether alone or jointly or jointly and severally with any other person) including (without limitation) all sums which that Finance Party or other Secured Party may pay or guarantees which it may give in respect of the Insurances, any expenses incurred by that Finance Party or other Secured Party in connection with the maintenance or repair of a Vessel or in discharging any lien, bond or other claim relating in any way to a Vessel, and any sums which that Finance Party or other Secured Party may pay or guarantees which it may give to procure the release of a Vessel from arrest or detention.

 

16.6

Reference rate transition costs

The Borrowers shall, within three Business Days of demand, reimburse the Agent for the amount of all costs and expenses (including legal fees) reasonably incurred by the Agent in responding to, evaluating, negotiating or complying with any amendment or waiver requested or made pursuant to Clause 37.3 (Changes to reference rates).

 

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Section 7 Accounts and Application of Earnings

 

17

Accounts

 

17.1

Accounts

 

  17.1.1

The Borrowers shall maintain the Accounts with the Account Holder for the duration of the Facility Period free of Encumbrances and rights of set off other than those created by or under the Finance Documents.

 

  17.1.2

No Borrower shall open any bank account except for the Accounts.

 

17.2

Earnings Each Borrower shall procure that all Earnings and any Requisition Compensation are credited to its Earnings Account.

 

17.3

Withdrawals

 

  17.3.1

During the Facility Period, no sum may be withdrawn from an Earning Account without the prior written consent of the Security Agent, except for:

 

  (a)

Operating Expenses in respect of the relevant Vessel;

 

  (b)

transfers to that Borrower’s Retention Account made in accordance with Clause 17.4 (Transfers to Retention Account);

 

  (c)

Permitted Distributions;

 

  (d)

any amount or costs to be paid pursuant to a Finance Document; and

 

  (e)

any amount remaining to the credit of that Earnings Account following the making of any transfer listed in paragraphs (a) to (d),

provided that the Borrowers are in compliance with Clause 22 (Financial Covenants) and, in the case of (a), (c) and (e), no Default is continuing.

 

  17.3.2

During the Facility Period, no sum may be withdrawn from the Retention Account without the prior written consent of the Security Agent, except for payments in accordance with Clause 17.6 (Application of Retention Account).

 

  17.3.3

No Account shall be overdrawn as a result of a withdrawal made in accordance with this Clause 17.3.

 

17.4

Transfers to Retention Account On the day in each calendar month during the Facility Period which numerically corresponds to the Utilisation Date in respect of the Tranche relating to its Vessel (or, if there is no such day, on the last Business Day of that month), each Borrower shall transfer or cause to be transferred from its Earnings Account to its Retention Account:

 

  17.4.1

one-sixth of the amount of the Repayment Instalment due on the next Repayment Date (which shall be deemed to be the day for that transfer if that day is a Repayment Date); and

 

  17.4.2

one-sixth of:

 

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  (a)

in respect of a Term Rate Tranche, the amount of interest due on the next Interest Payment Date (which shall be deemed to be the day for that transfer if that day is an Interest Payment Date) divided by the number of months between the last Interest Payment Date (or, if none, the relevant Utilisation Date) and that next Interest Payment Date,

 

  (b)

in respect of a Compounded Rate Tranche, the estimated amount of interest in respect of that Tranche due on the next Interest Payment Date (which shall be deemed to be the day for that transfer if that day is an Interest Payment Date), as calculated by the Agent on the basis of the amount of interest paid on the previous Interest Payment Date and as notified by the Agent on the previous Interest Payment Date,

and the Borrowers irrevocably authorise the Security Agent to instruct the Account Holder to make those transfers if the Borrowers fail to do so on the relevant date.

 

17.5

Additional payments to Retention Account If for any reason the amount standing to the credit of the relevant Earnings Account is insufficient to make any transfer to the relevant Retention Account required by Clause 17.4 (Transfers to Retention Account), the Borrowers shall, without demand, procure that there is credited to that Retention Account, on the date on which the relevant amount would have been transferred from the relevant Earnings Account, an amount equal to the amount of the shortfall.

 

17.6

Application of Retention Account Each Borrower shall transfer or cause to be transferred from its Retention Account to the Agent for the account of the Lenders:

 

  17.6.1

on each Repayment Date, the amount of the Repayment Instalment then due; and

 

  17.6.2

on each Interest Payment Date, the amount of interest then due,

and the Borrowers irrevocably authorise the Security Agent to instruct the Account Holder to make those transfers if any Borrower fails to do so on the relevant date.

 

17.7

Borrowers’ obligations not affected If for any reason the amount standing to the credit of any Retention Account is insufficient to pay any Repayment Instalment or to make any payment of interest when due, the Borrowers’ obligation to pay that Repayment Instalment or to make that payment of interest shall not be affected.

 

17.8

Relocation of Accounts On and at any time after the occurrence of an Event of Default which is continuing, the Security Agent may without the consent of the Borrowers instruct the Account Holder to relocate any Account to any other branch of the Account Holder, without prejudice to the continued application of this Clause 17 and the rights of the Finance Parties under the Finance Documents.

 

17.9

Access to information The Security Agent (and its nominees) may from time to time during the Facility Period review the records held by the Account Holder (whether in written or electronic form) in relation to the Accounts, and the Borrowers irrevocably waive any right of confidentiality which may exist in relation to those records.

 

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17.10

Statements Without prejudice to the rights of the Security Agent under Clause 17.9 (Access to information), the Borrowers shall procure that the Account Holder provides to the Security Agent, no less frequently than each calendar month during the Facility Period, statements of account (in written or electronic form) showing all entries made to the credit and debit of each of the Accounts during the immediately preceding calendar month.

 

18

Additional Security

 

18.1

VTL Coverage

 

  18.1.1

If at any time the aggregate of (a) the Market Value of the Vessels and (b) the value of any additional security (such value to be (i) the face amount of the deposit (in the case of cash), (ii) determined conclusively by appropriate advisers appointed by the Agent (in the case of other charged assets other than a vessel), (iii) the Market Value of a vessel (in the case of a vessel), and (iv) determined by the Agent (in all other cases)) for the time being provided to the Security Agent under this Clause 18.1 is less than 125% of the amount of the aggregate of the Loan then outstanding (the “VTL Coverage”), the Borrowers shall, within 30 days of the Agent’s request, at the Borrowers’ option:

 

  (a)

pay to the Security Agent or to its nominee a cash deposit in the amount of the shortfall to be secured in favour of the Security Agent as additional security for the payment of the Indebtedness; or

 

  (b)

give to the Security Agent other additional security in amount and form acceptable to the Security Agent for a value determined in accordance with the first part of this Clause 18.1.1; or

 

  (c)

prepay the Loan in the amount of the shortfall.

 

  18.1.2

Clauses 6.3 (Reborrowing) and 7.9 (Restrictions) shall apply, mutatis mutandis, to any prepayment made under this Clause 18.1.

 

  18.1.3

Any prepayment under this Clause 18.1 shall satisfy the obligations under Clause 6.1 (Repayment of Loan) pro rata and in inverse order of maturity including in respect of any applicable Balloon Payment.

 

18.2

Market Value and provision of valuations

 

  18.2.1

The value of:

 

  (a)

a Vessel; or

 

  (b)

any other vessel over which additional security has been created or which is being offered as additional security in accordance with Clause 18.1 (VTL Coverage)

(either of the above a “Relevant Vessel”),

 

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shall be conclusively determined by the arithmetic average of the relevant number of Valuations delivered to the Agent pursuant to Clause 4.1 (Initial conditions precedent) or (as the case may be) this Clause 18.2 (the “Market Value”).

 

  18.2.2

For the purposes of determining the Market Value, a “Valuation” means a valuation of a Relevant Vessel addressed to the Agent (in form and substance acceptable to the Agent) certifying a value for that Relevant Vessel on the basis of a charter-free sale for prompt delivery for cash at arm’s length on normal commercial terms as between a willing seller and a willing buyer.

 

  18.2.3

For the purpose of undertaking the calculation to test compliance with the VTL Coverage pursuant to Clause 18.1 (VTL Coverage), each Borrower shall obtain and deliver to the Agent in June and December of each year during the Facility Period two Valuations, at least of one which shall be from an Approved Shipbroker and the other from any other Approved Shipbroker or a reputable, independent and first class firm of ship brokers approved by the Agent (including Clarksons, Braemar ACM, Fearnleys AS, Maersk Brokers, SSY, Arrow Valuations, Vessel Value or any other ship brokers acting on the instructions of the Majority Lenders), to evidence the Market Value of a Relevant Vessel. Any Valuation delivered to the Agent shall not be more than 14 days old as of the date on which it is received by the Agent.

 

  18.2.4

If the Borrowers do not deliver Valuations to the Agent in accordance with Clause 18.2.3, the Agent shall be entitled to obtain the requisite Valuations to evidence the Market Value of a Relevant Vessel.

 

  18.2.5

If the Valuations delivered to or obtained by the Agent pursuant to Clause 18.2.3 or (as the case may be) Clause 18.2.4 in respect of a Relevant Vessel differ by at least 10%, then a third Valuation of that Relevant Vessel may be obtained by the Agent from a shipbroker approved by the Majority Lenders (or the Agent shall instruct the Borrowers to obtain and deliver to the Agent a third Valuation from such shipbroker) and the Market Value of that Relevant Vessel shall be the arithmetic average of all three such Valuations.

 

  18.2.6

Additionally, the Agent shall at the request of the Majority Lenders be entitled to obtain a Valuation to evidence the Market Value of a Vessel for the purpose of Clause 18.1 (VTL Coverage) at any time and each such Valuation obtained shall be at the expense of the Lenders except where the Borrowers are by means of such Valuation shown to be in breach of that Clause.

 

  18.2.7

The Agent may at any time after a Default has occurred and is continuing at such frequency as it requires obtain a Valuation in evidence of the Market Value of a Relevant Vessel.

 

  18.2.8

All Valuations referred to in this Clause 18.2, except where specified in Clause 18.2.6, and all valuations to be obtained pursuant to Clause 4 (Conditions of Utilisation) shall be obtained at the cost and expense of the Borrowers and where the Agent has obtained such Valuations, the Borrowers shall within three Business Days of demand by the Agent pay to the Agent the amount of all such costs and expenses.

 

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19

Guarantee and Indemnity

 

19.1

Guarantee and indemnity The Guarantor irrevocably and unconditionally jointly and severally:

 

  19.1.1

guarantees to each Finance Party punctual performance by each other Obligor of all that Obligor’s obligations under the Finance Documents;

 

  19.1.2

undertakes with each Finance Party that whenever another Obligor does not pay any amount when due under or in connection with any Finance Document, that Guarantor shall immediately on demand pay that amount as if it was the principal obligor; and

 

  19.1.3

agrees with each Finance Party that if any obligation guaranteed by it is or becomes unenforceable, invalid or illegal, it will, as an independent and primary obligation, indemnify that Finance Party immediately on demand against any cost, loss or liability it incurs as a result of an Obligor not paying any amount which would, but for such unenforceability, invalidity or illegality, have been payable by it under any Finance Document on the date when it would have been due. The amount payable by the Guarantor under this indemnity will not exceed the amount it would have had to pay under this Clause 19 if the amount claimed had been recoverable on the basis of a guarantee.

 

19.2

Continuing Guarantee This guarantee is a continuing guarantee and will extend to the ultimate balance of sums payable by any Obligor under the Finance Documents, regardless of any intermediate payment or discharge in whole or in part.

 

19.3

Reinstatement If any discharge, release or arrangement (whether in respect of the obligations of any Obligor or any security for those obligations or otherwise) is made by a Finance Party in whole or in part on the basis of any payment, security or other disposition which is avoided or must be restored in insolvency, liquidation, administration or otherwise, without limitation, then the liability of the Guarantor under this Clause 19 will continue or be reinstated as if the discharge, release or arrangement had not occurred.

 

19.4

Waiver of defences The obligations of the Guarantor under this Clause 19 will not be affected by an act, omission, matter or thing which, but for this Clause 19.4, would reduce, release or prejudice any of its obligations under this Clause 19 (without limitation and whether or not known to it or any Finance Party) including:

 

  19.4.1

any time, waiver or consent granted to, or composition with, any Obligor or other person;

 

  19.4.2

the release of any other Obligor or any other person under the terms of any composition or arrangement with any creditor of any Obligor or any other member of the Group;

 

  19.4.3

the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, any Obligor or other person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security;

 

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  19.4.4

any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of an Obligor or any other person;

 

  19.4.5

any amendment, novation, supplement, extension restatement (however fundamental and whether or not more onerous) or replacement of a Finance Document or any other document or security including, without limitation, any change in the purpose of, any extension of or increase in any facility or the addition of any new facility under any Finance Document or other document or security;

 

  19.4.6

any unenforceability, illegality or invalidity of any obligation of any person under any Finance Document or any other document or security; or

 

  19.4.7

any insolvency or similar proceedings.

 

19.5

Guarantor intent Without prejudice to the generality of Clause 19.4 (Waiver of defences), the Guarantor expressly confirms that it intends that this guarantee shall extend from time to time to any (however fundamental) variation, increase, extension or addition of or to any of the Finance Documents and/or any facility or amount made available under any of the Finance Documents for the purposes of or in connection with any of the following: business acquisitions of any nature; increasing working capital; enabling investor distributions to be made; carrying out restructurings; refinancing existing facilities; refinancing any other indebtedness; making facilities available to new borrowers; any other variation or extension of the purposes for which any such facility or amount might be made available from time to time; and any fees, costs and/or expenses associated with any of the foregoing.

 

19.6

Immediate recourse The Guarantor waives any right it may have of first requiring any Finance Party (or any trustee or agent on its behalf) to proceed against or enforce any other rights or security or claim payment from any person before claiming from that Guarantor under this Clause 19. This waiver applies irrespective of any law or any provision of a Finance Document to the contrary.

 

19.7

Appropriations Until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents have been irrevocably paid in full, each Finance Party (or any trustee or agent on its behalf) may:

 

  19.7.1

refrain from applying or enforcing any other moneys, security or rights held or received by that Finance Party (or any trustee or agent on its behalf) in respect of those amounts, or apply and enforce the same in such manner and order as it sees fit (whether against those amounts or otherwise) and no Guarantor shall be entitled to the benefit of the same; and

 

  19.7.2

hold in an interest-bearing suspense account any moneys received from any Guarantor or on account of any Guarantor’s liability under this Clause 19.

 

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19.8

Deferral of Guarantors’ rights Until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents have been irrevocably paid in full and unless the Agent otherwise directs, no Guarantor shall exercise any rights which it may have by reason of performance by it of its obligations under the Finance Documents or by reason of any amount being payable, or liability arising, under this Clause 19:

 

  19.8.1

to be indemnified by an Obligor;

 

  19.8.2

to claim any contribution from any other guarantor of any Obligor’s obligations under the Finance Documents;

 

  19.8.3

to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights of the Finance Parties under the Finance Documents or of any other guarantee or security taken pursuant to, or in connection with, the Finance Documents by any Finance Party;

 

  19.8.4

to bring legal or other proceedings for an order requiring any Obligor to make any payment, or perform any obligation, in respect of which any Guarantor has given a guarantee, undertaking or indemnity under Clause 19.1 (Guarantee and indemnity);

 

  19.8.5

to exercise any right of set-off against any Obligor; and/or

 

  19.8.6

to claim or prove as a creditor of any Obligor in competition with any Finance Party.

If the Guarantor receives any benefit, payment or distribution in relation to such rights it shall hold that benefit, payment or distribution to the extent necessary to enable all amounts which may be or become payable to the Finance Parties by the Obligors under or in connection with the Finance Documents to be repaid in full on trust for the Finance Parties and shall promptly pay or transfer the same to the Agent or as the Agent may direct for application in accordance with Clause 31 (Payment mechanics).

 

19.9

Additional security This guarantee is in addition to and is not in any way prejudiced by any other guarantee or security now or subsequently held by any Finance Party.

 

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Section 8 Representations, Undertakings and Events of Default

 

20

Representations

 

20.1

Representations Each Borrower and the Guarantor makes the representations and warranties set out in this Clause 20 to each Finance Party on the date of this Agreement.

 

  20.1.1

Status Each of the Obligors:

 

  (a)

is a corporation, duly incorporated and validly existing under the law of its Original Jurisdiction and each of the Obligors incorporated in the Republic of the Marshall Islands is in compliance with ESR Regulations; and

 

  (b)

has the power to own its assets and carry on its business as it is being conducted.

 

  20.1.2

Binding obligations Subject to the Legal Reservations:

 

  (a)

the obligations expressed to be assumed by each of the Obligors in each of the Relevant Documents to which it is a party are legal, valid, binding and enforceable obligations; and

 

  (b)

(without limiting the generality of Clause 20.1.2(a)) each Security Document to which it is a party creates the security interests which that Security Document purports to create and those security interests are valid and effective.

 

  20.1.3

Non-conflict with other obligations The entry into and performance by each of the Obligors of, and the transactions contemplated by, the Relevant Documents do not and will not conflict with:

 

  (a)

any law or regulation applicable to such Obligor;

 

  (b)

the constitutional documents of such Obligor; or

 

  (c)

any agreement or instrument binding upon such Obligor or any of such Obligor’s assets or constitute a default or termination event (however described) under any such agreement or instrument.

 

  20.1.4

Power and authority

 

  (a)

Each of the Obligors has the power to enter into, perform and deliver, and has taken all necessary action to authorise its entry into, performance and delivery of, the Relevant Documents to which it is or will be a party and the transactions contemplated by those Relevant Documents.

 

  (b)

No limit on the powers of any Obligor will be exceeded as a result of the borrowing, grant of security or giving of guarantees or indemnities contemplated by the Relevant Documents to which it is a party.

 

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  20.1.5

Validity and admissibility in evidence All Authorisations required or desirable:

 

  (a)

to enable each of the Obligors lawfully to enter into, exercise its rights and comply with its obligations in the Relevant Documents to which it is a party or to enable each Finance Party to enforce and exercise all its rights under the Relevant Documents; and

 

  (b)

to make the Relevant Documents to which any Obligor is a party admissible in evidence in its Relevant Jurisdictions,

have been obtained or effected and are in full force and effect, with the exception only of the registrations referred to in Part II of Schedule 2 (Conditions Subsequent).

 

  20.1.6

Governing law and enforcement

 

  (a)

The choice of governing law of any Finance Document will be recognised and enforced in the Relevant Jurisdictions of each relevant Obligor.

 

  (b)

Any judgment obtained in relation to any Finance Document in the jurisdiction of the governing law of that Finance Document will be recognised and enforced in the Relevant Jurisdictions of each relevant Obligor.

 

  20.1.7

Insolvency No corporate action, legal proceeding or other procedure or step described in Clause 24.1.7 (Insolvency proceedings) or creditors’ process described in Clause 24.1.8 (Creditors’ process) has been taken or, to the knowledge of any Borrower or the Guarantor, threatened in relation to an Obligor or any other member of the Group; and none of the circumstances described in Clause 24.1.6 (Insolvency) applies to an Obligor or any other member of the Group.

 

  20.1.8

No filing or stamp taxes Under the laws of the Relevant Jurisdictions of each relevant Obligor it is not necessary that the Finance Documents be filed, recorded or enrolled with any court or other authority in any of those jurisdictions or that any stamp, registration, notarial or similar Taxes or fees be paid on or in relation to the Finance Documents or the transactions contemplated by the Finance Documents except registration of each Mortgage at the Ships Registry where title to the relevant Vessel is registered in the ownership of the relevant Borrower and payment of associated fees, which registrations, filings, taxes and fees will be made and paid promptly after the date of the relevant Finance Document.

 

  20.1.9

Deduction of Tax None of the Obligors is required under the law of its jurisdiction of incorporation to make any deduction for or on account of Tax from any payment it may make under any Finance Document to a Lender which is:

 

  (a)

a Qualifying Lender falling within (a) of the definition of Qualifying Lender; or, except where a Direction has been given under section 931 of the ITA in relation to the payment concerned, a Qualifying Lender falling within (b) of the definition of Qualifying Lender; or

 

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  (b)

a Treaty Lender and the payment is one specified in a direction given by the Commissioners of Revenue & Customs under Regulation 2 of the Double Taxation Relief (Taxes on Income) (General) Regulations 1970 (SI 1970/488).

 

  20.1.10

No default

 

  (a)

No Event of Default and, on the date of this Agreement and each Utilisation Date, no Default is continuing or is reasonably likely to result from the advance of any Utilisation or the entry into, the performance of, or any transaction contemplated by, any of the Relevant Documents.

 

  (b)

No other event or circumstance is outstanding which constitutes (or, with the expiry of a grace period, the giving of notice, the making of any determination or any combination of any of the foregoing, would constitute) a default or termination event (however described) under any other agreement or instrument which is binding on any of the Obligors or to which its assets are subject which has or is reasonably likely to have a Material Adverse Effect.

 

  20.1.11

No misleading information Save as disclosed in writing to the Agent and the Bookrunner prior to the date of this Agreement:

 

  (a)

all material information provided to a Finance Party by or on behalf of any of the Obligors or any other member of the Group on or before the date of this Agreement and not superseded before that date is accurate and not misleading in any material respect and all projections provided to any Finance Party on or before the date of this Agreement have been prepared in good faith on the basis of assumptions which were reasonable at the time at which they were prepared and supplied; and

 

  (b)

all other written information provided by any of the Obligors or any other member of the Group (including their advisers) to a Finance Party was true, complete and accurate in all material respects as at the date it was provided and is not misleading in any respect.

 

  20.1.12

Financial statements

 

  (a)

The Original Financial Statements were prepared in accordance with GAAP consistently applied.

 

  (b)

The unaudited Original Financial Statement of the Guarantor fairly represents the Group’s financial condition and results of operations for the relevant financial year.

 

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  (c)

The audited Original Financial Statement of each Borrower fairly represents that Borrower’s financial condition and results of operations during the relevant financial year.

 

  (d)

There has been no material adverse change in any Obligor’s assets, business or financial condition (or the assets, business or consolidated financial condition of the Group, in the case of the Guarantor) since the date of the Original Financial Statements.

 

  (e)

Each Obligor’s most recent financial statements delivered pursuant to Clause 21.1 (Financial statements):

 

  (i)

have been prepared in accordance with GAAP as applied to the Original Financial Statements; and

 

  (ii)

fairly represent its consolidated financial condition as at the end of, and its consolidated results of operations for, the period to which they relate.

 

  (f)

Since the date of the most recent financial statements delivered pursuant to Clause 21.1 (Financial statements) there has been no material adverse change in the assets, business or financial condition of any of the Obligors.

 

  20.1.13

No proceedings

 

  (a)

No litigation, arbitration or administrative proceedings or investigation of or before any court, arbitral body or agency which, if adversely determined, are reasonably likely to have a Material Adverse Effect have (to the best of its knowledge and belief (having made due and careful enquiry)) been started or threatened against any of the Obligors or any other member of the Group.

 

  (b)

No judgment or order of a court, arbitral body or agency which is reasonably likely to have a Material Adverse Effect has (to the best of its knowledge and belief (having made due and careful enquiry)) been made against any of the Obligors or any other member of the Group.

 

  20.1.14

No breach of laws None of the Obligors or any other member of the Group has breached any law or regulation which breach has or is reasonably likely to have a Material Adverse Effect.

 

  20.1.15

Environmental laws

 

  (a)

Each of the Obligors and each other member of the Group is in compliance with Clause 23.3 (Environmental compliance) and to the best of its knowledge and belief (having made due and careful enquiry) 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.

 

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  (b)

No Environmental Claim has been commenced or (to the best of its knowledge and belief (having made due and careful enquiry)) is threatened against any of the Obligors or any other member of the Group where that claim has or is reasonably likely, if determined against that Obligor or other member of the Group, to have a Material Adverse Effect.

 

  20.1.16

Taxation

 

  (a)

None of the Obligors nor any other member of the Group is materially overdue in the filing of any Tax returns or is overdue in the payment of any amount in respect of Tax.

 

  (b)

No claims or investigations are being, or are reasonably likely to be, made or conducted against any of the Obligors or any other member of the Group with respect to Taxes.

 

  (c)

Each of the Obligors and each other member of the Group is resident for Tax purposes only in its Original Jurisdiction.

 

  20.1.17

Anti-corruption law Each of the Obligors and each other member of the Group and each Affiliate of any of them has conducted its businesses in compliance with applicable anti-corruption laws and has instituted and maintained policies and procedures designed to promote and achieve compliance with such laws.

 

  20.1.18

No Encumbrance or Financial Indebtedness

 

  (a)

No Encumbrance or Quasi-Security exists over all or any of the present or future assets of any Borrower other than as permitted by the Finance Documents.

 

  (b)

None of the Borrowers have any Financial Indebtedness outstanding other than as permitted by this Agreement.

 

  20.1.19

Pari passu ranking The payment obligations of each of the Obligors under the Finance Documents to which it is a party rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally.

 

  20.1.20

No adverse consequences

 

  (a)

It is not necessary under the laws of the Relevant Jurisdictions of any of the Obligors or any other member of the Group:

 

  (i)

in order to enable any Finance Party to enforce its rights under any Finance Document; or

 

  (ii)

by reason of the execution of any Finance Document or the performance by it of its obligations under any Finance Document,

that any Finance Party should be licensed, qualified or otherwise entitled to carry on business in any of the Relevant Jurisdictions of any of the Obligors or any other member of the Group.

 

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  (b)

No Finance Party is or will be deemed to be resident, domiciled or carrying on business in any of the Relevant Jurisdictions of any of the Obligors or any other member of the Group by reason only of the execution, performance and/or enforcement of any Finance Document.

 

  20.1.21

Disclosure of material facts No Borrower is aware of any material facts or circumstances which have not been disclosed to the Agent and which might, if disclosed, have changed the decision of a person willing to make loan facilities of the nature contemplated by this Agreement available to the Borrowers.

 

  20.1.22

Completeness of Relevant Documents The copies of any Relevant Documents provided or to be provided by the Borrowers to the Agent in accordance with Clause 4 (Conditions of Utilisation) are, or will be, true and accurate copies of the originals and represent, or will represent, the full agreement between the parties to those Relevant Documents in relation to the subject matter of those Relevant Documents and there are no commissions, rebates, premiums or other payments due or to become due in connection with the subject matter of those Relevant Documents other than in the ordinary course of business or as disclosed to, and approved in writing by, the Agent.

 

  20.1.23

No immunity No Obligor or any of its assets is immune to any legal action or proceeding.

 

  20.1.24

Money laundering Any borrowing by a Borrower under this Agreement, and the performance of its obligations under this Agreement and under the other Finance Documents, will be for its own account and will not involve any breach by it of any law or regulatory measure relating to “money laundering” as defined in Article 1 of the Directive ((EU) 2015/849) of the European Parliament and of the Council of the European Communities (as it forms part of the domestic law of the United Kingdom by virtue of the 2018 Withdrawal Act).

 

  20.1.25

Sanctions No Relevant Person is:

 

  i.

a Restricted Party;

 

  ii.

in breach of Sanctions; or

 

  iii.

to its knowledge subject to any complaint, claim, proceeding, formal notice, investigation or other action by any regulatory or enforcement authority or third party concerning any Sanctions.

 

20.2

Repetition Each Repeating Representation is deemed to be made by each Borrower and the Guarantor by reference to the facts and circumstances then existing on the date of each Utilisation Request, each Utilisation Date and on the first day of each Interest Period.

 

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21

Information Undertakings

The undertakings in this Clause 21 remain in force for the duration of the Facility Period.

 

21.1

Financial statements Each Borrower and the Guarantor shall supply to the Agent in sufficient copies for all of the Lenders:

 

  21.1.1

in case of the Guarantor:

 

  (a)

as soon as the same become available, but in any event within 120 days after the end of each of its financial years the audited annual financial statements (consolidated) for that financial year; and

 

  (b)

as soon as the same become available, but in any event within 90 days after the end of the half-yearly period during each of its financial years, the semi-annual unaudited management accounts for that half-year; and

 

  21.1.2

in case of each Borrower, if requested by the Agent as soon as the same become available, but in any event within 90 days after the end of each of its financial years its unaudited financial statements (consolidated) for that financial year; and

 

21.2

Requirements as to financial statements

Each set of financial statements delivered pursuant to Clause 21.1 (Financial statements):

 

  21.2.1

shall be certified by the chief financial officer of the Guarantor as fairly representing its financial condition and operations as at the date as at which those financial statements were drawn up; and

 

  21.2.2

shall be prepared using GAAP, accounting practices and financial reference periods consistent with those applied in the preparation of the Original Financial Statements unless, in relation to any set of financial statements, it notifies the Agent that there has been a change in GAAP, the accounting practices or reference periods and its auditors deliver to the Agent:

 

  (a)

a description of any change necessary for those financial statements to reflect the GAAP, accounting practices and reference periods upon which the Original Financial Statements were prepared; and

 

  (b)

sufficient information, in form and substance as may be reasonably required by the Agent, to enable the Agent to determine whether Clause 22 (Financial Covenants) has been complied with and make an accurate comparison between the financial position indicated in those financial statements and the Original Financial Statements.

 

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Any reference in this Agreement to those financial statements shall be construed as a reference to those financial statements as adjusted to reflect the basis upon which the Original Financial Statements were prepared.

 

21.3

Compliance Certificate

 

  21.3.1

The Guarantor shall supply to the Agent, with each set of annual financial statements and each management accounts delivered pursuant to Clause 21.1.1 (Financial statements), a Compliance Certificate setting out (in reasonable detail) computations as to compliance with (i) Clause 22 (Financial Covenants) as at the date as at which those financial statements were drawn up and (ii) the Market Value of each Vessel.

 

  21.3.2

Each Compliance Certificate shall be signed by the chief financial officer of the Guarantor in the form agreed by the relevant Borrower, the Guarantor and all the Lenders before the date of this Agreement.

 

21.4

Information: miscellaneous Each Borrower and the Guarantor shall supply to the Agent (in sufficient copies for all the Lenders, if the Agent so requests):

 

  21.4.1

at the same time as they are dispatched, copies of all documents dispatched by that Borrower and the Guarantor to their shareholders generally (or any class of them) or to their creditors generally (or any class of them);

 

  21.4.2

promptly upon becoming aware of them, the details of any changes to the management of any Obligor or any other member of the Group;

 

  21.4.3

promptly upon becoming aware of them, the details of any litigation, arbitration or administrative proceedings which are current, threatened or pending against any Obligor or any other member of the Group and which, if adversely determined, are reasonably likely to have a Material Adverse Effect;

 

  21.4.4

promptly upon becoming aware of them, the details of any judgment or order of a court, arbitral body or agency which is made against any Obligor or any other member of the Group and which is reasonably likely to have a Material Adverse Effect;

 

  21.4.5

promptly, such information and documents as the Security Agent may reasonably require about the Charged Property and compliance of the Obligors with the terms of any Security Documents (including without limitation cash flow analyses and details of the operating costs of any Vessel); and

 

  21.4.6

promptly on request, such further information regarding the financial condition, assets and operations of any Obligor or any other member of the Group (including any requested amplification or explanation of any item in the financial statements, budgets or other material provided by any Obligor under this Agreement and an up to date copy of its shareholders’ register (or equivalent in its Original Jurisdiction)) as any Finance Party through the Agent may reasonably request.

 

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21.5

Notification of default

 

  21.5.1

Each Borrower and the Guarantor shall notify the Agent of any Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence.

 

  21.5.2

Promptly upon a request by the Agent, each Borrower shall supply to the Agent a certificate signed by two of its directors or senior officers on its behalf certifying that no Default is continuing (or if a Default is continuing, specifying the Default and the steps, if any, being taken to remedy it).

 

21.6

“Know your customer” checks

 

  21.6.1

If:

 

  (a)

the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation made after the date of this Agreement;

 

  (b)

any change in the status of an Obligor (or of a Holding Company of an Obligor) or the composition of the shareholders of an Obligor (or of a Holding Company of an Obligor) after the date of this Agreement; or

 

  (c)

a proposed assignment or transfer by a Lender of any of its rights and obligations under this Agreement to a party that is not a Lender prior to such assignment or transfer,

obliges the Agent or any Lender (or, in the case of Clause 21.6.1(c), any prospective new Lender) to comply with “know your customer” or similar identification procedures in circumstances where the necessary information is not already available to it, each Borrower shall promptly upon the request of the Agent or any Lender supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent (for itself or on behalf of any Lender) or any Lender (for itself or, in the case of the event described in Clause 21.6.1(c), on behalf of any prospective new Lender) in order for the Agent, such Lender or, in the case of the event described in Clause 21.6.1(c), any prospective new Lender to carry out and be satisfied it has complied with all necessary “know your customer” or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in the Finance Documents.

 

  21.6.2

Each Lender shall promptly upon the request of the Agent supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent (for itself) in order for the Agent to carry out and be satisfied it has complied with all necessary “know your customer” or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in the Finance Documents.

 

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22

Financial Covenants

 

22.1

In this Clause 22:

Adjusted EBITDA” means earnings before interest expenses, taxes, depreciation and amortization, net of impairment, of the Guarantor for the previous period of twelve months.

Cash” means cash in hand which is not subject to any charge back or other Encumbrance and to which the Guarantor has free, immediate and direct access.

Cash Equivalents” means the following where the Guarantor has free, immediate and direct access:

 

  (a)

any security issued directly or fully guaranteed or insured by the United States of America or any OECD government whose securities are readily marketable in London, Paris, Frankfurt or New York City, or any agency or instrumentality thereof;

 

  (b)

other readily marketable securities or other easily realisable investments having a rating of at least A from Standard and Poor’s Ratings Group or Moody’s Investors Service, Inc;

 

  (c)

any Eurodollar time deposit, overnight deposit or banker’s acceptance, issued by, or time deposit of a commercial banking institution which has, on a combined basis, capital, surplus and undivided profit of not less than $250,000,000 and has a Moody’s Agent Credit Service rating for short term bank deposits of at least P2;

 

  (d)

repurchase obligations with a term of not more than ninety (90) days for underlying securities of the types described in paragraph (a) above entered into with any commercial banking institution meeting the qualifications specified in paragraph (c) above;

 

  (e)

short term commercial paper issued by any person, having one of the top two investment ratings from either Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc;

 

  (f)

investments in money market funds substantially all of whose assets are comprised of securities of the types described in paragraphs (a) to (e) above; and

 

  (g)

deposits which are unrestricted as to withdrawal with commercial banking institutions meeting the criteria set forth in paragraph (c) above.

Interest Charges” means the aggregate amount of the accrued interest, commission, fees, discounts, prepayment fees, premiums or charges and other finance payments in respect of Borrowings whether paid, payable or capitalised by the Guarantor in respect of that Relevant Period:

 

  (a)

including any upfront fees or costs;

 

  (b)

including the interest (but not the capital) element of payments in respect of finance leases;

 

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  (c)

including any commission, fees, discounts and other finance payments payable by (and deducting any such amounts payable to) the Guarantor under any interest rate hedging arrangement.

Restricted Cash” means the amount shown as ‘Restricted Cash’ in the Guarantor’s applicable consolidated financial statements (as provided in Clause 21.1 (Financial statements)) only to the extent that such amount is deemed Restricted Cash for the purposes of clause 22.2.3.

Total Assets” means the amount which is equal to the total assets of the Guarantor as shown in the Guarantor’s applicable consolidated financial statements (as provided in Clause 21.1 (Financial statements)).

Total Liabilities” means the amount which is equal to the total liabilities of the Guarantor as shown in the Guarantor’s applicable consolidated financial statements (as provided in Clause 21.1 (Financial statements)).

 

22.2

The Guarantor shall ensure the following at all times during the Facility Period:

 

  22.2.1

the ratio of Total Liabilities to Total Assets shall not be more than 70%;

 

  22.2.2

the ratio of Adjusted EBITDA to Interest Charges shall not be less than 2.5:1; and

 

  22.2.3

 

  (a)

from 31 December 2021 until the second anniversary of the date of this Agreement, maintain Cash, Cash Equivalents and Restricted Cash to the higher of (i) $500,000 per vessel owned by any member of the Group and (iii) $2,500,000; and

 

  (b)

from the date of the second anniversary of the loan agreement until the end of the Facility Period, maintain Cash, Cash Equivalents and Restricted Cash to the higher of (i) $1,000,000 per vessel owned by any member of the Group and (iii) $5,000,000.

 

22.3

Should the Guarantor be party to any other facility agreement (or amend any existing facility agreement) with financial covenants which are more favourable to any lender(s) than those set out above, the Guarantor shall notify the Agent promptly of such fact with details of such covenants. If requested by any Lender, this Agreement shall be amended to contain the more favourable terms and conditions.

 

23

General Undertakings

The undertakings in this Clause 23 remain in force for the duration of the Facility Period.

 

23.1

Authorisations Each Borrower and the Guarantor shall promptly:

 

  23.1.1

obtain, comply with and do all that is necessary to maintain in full force and effect; and

 

  23.1.2

supply certified copies to the Agent of,

 

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any Authorisation required under any law or regulation of a Relevant Jurisdiction to:

 

  (a)

enable any Obligor to perform its obligations under the Finance Documents to which it is a party;

 

  (b)

ensure the legality, validity, enforceability or admissibility in evidence of any Finance Document; and

 

  (c)

enable any Obligor to carry on its business where failure to do so has or is reasonably likely to have a Material Adverse Effect.

 

23.2

Compliance with laws

 

  23.2.1

Each Borrower and the Guarantor shall comply (and shall procure that each other Obligor, each other member of the Group and each Affiliate of any of them will comply), in all respects with all laws to which it may be subject, if (except as regards Sanctions, to which Clause 23.2.2 applies, and anti-corruption laws, to which Clause 23.5 applies) failure so to comply has or is reasonably likely to have a Material Adverse Effect.

 

  23.2.2

Each Borrower and the Guarantor shall comply (and shall procure that each other Obligor, each other member of the Group and each Affiliate of any of them will comply) in all respects with all Sanctions.

 

23.3

Environmental compliance

Each Borrower and the Guarantor shall:

 

  23.3.1

comply with all Environmental Laws;

 

  23.3.2

obtain, maintain and ensure compliance with all requisite Environmental Approvals; and

 

  23.3.3

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.

 

23.4

Environmental Claims

Each Borrower and the Guarantor shall promptly upon becoming aware of the same, inform the Agent in writing of:

 

  23.4.1

any Environmental Claim against any of the Obligors which is current, pending or threatened; and

 

  23.4.2

any facts or circumstances which are reasonably likely to result in any Environmental Claim being commenced or threatened against any of the Obligors,

where the claim, if determined against that Obligor, has or is reasonably likely to have a Material Adverse Effect.

 

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23.5

Anti-corruption law

 

  23.5.1

Each Borrower and the Guarantor shall not (and shall procure that no other Obligor or any other member of the Group will) directly or indirectly use the proceeds of the Loan for any purpose which would breach the Bribery Act 2010, the United States Foreign Corrupt Practices Act of 1977 or other similar legislation in other jurisdictions.

 

  23.5.2

Each Borrower and the Guarantor shall (and shall procure that each other Obligor and each other member of the Group will):

 

  (a)

conduct its businesses in compliance with applicable anti-corruption laws; and

 

  (b)

maintain policies and procedures designed to promote and achieve compliance with such laws.

 

23.6

Taxation

 

  23.6.1

Each Borrower and the Guarantor shall (and shall procure that each other Obligor and each other member of the Group will) pay and discharge all Taxes imposed upon it or its assets within the time period allowed without incurring penalties unless and only to the extent that:

 

  (a)

such payment is being contested in good faith;

 

  (b)

adequate reserves are being maintained for those Taxes and the costs required to contest them which have been disclosed in its latest financial statements delivered to the Agent under Clause 21.1 (Financial statements); and

 

  (c)

such payment can be lawfully withheld.

 

  23.6.2

Neither any Borrower nor the Guarantor may change its residence for Tax purposes.

 

23.7

Evidence of good standing Each Borrower will from time to time, if applicable and if requested by the Agent, provide the Agent with evidence in form and substance satisfactory to the Agent that each Obligor remains in good standing.

 

23.8

Pari passu ranking Each Borrower and the Guarantor shall ensure that at all times any unsecured and unsubordinated claims of a Finance Party against it under the Finance Documents rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors except those creditors whose claims are mandatorily preferred by laws of general application to companies.

 

23.9

Negative pledge

In this Clause 23.9 “Quasi-Security” means an arrangement or transaction described in Clause 23.9.2.

Except as permitted under Clause 23.9.3:

 

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  23.9.1

No Borrower shall create nor permit to subsist any Encumbrance over any of its assets.

 

  23.9.2

No Borrower shall:

 

  (a)

sell, transfer or otherwise dispose of any of its assets on terms whereby they are or may be leased to or re-acquired by an Obligor or any other member of the Group;

 

  (b)

sell, transfer or otherwise dispose of any of its receivables on recourse terms;

 

  (c)

enter into any arrangement under which money or the benefit of a bank or other account may be applied, set-off or made subject to a combination of accounts; or

 

  (d)

enter into any other preferential arrangement having a similar effect,

in circumstances where the arrangement or transaction is entered into primarily as a method of raising Financial Indebtedness or of financing the acquisition of an asset.

 

  23.9.3

Clauses 23.9.1 and 23.9.2 do not apply to any Encumbrance or (as the case may be) Quasi-Security, which is a Permitted Encumbrance.

 

23.10

Disposals

 

  23.10.1

Except as permitted under Clause 23.10.2, no Borrower shall enter into a single transaction or a series of transactions (whether related or not) and whether voluntary or involuntary to sell, lease, transfer or otherwise dispose of any asset without the prior written consent of the Agent (acting on the instructions of the Majority Lenders).

 

  23.10.2

Clause 23.10.1 does not apply to any sale, lease, transfer or other disposal which is a Permitted Disposal.

 

23.11

Arm’s length basis

 

  23.11.1

Except as permitted under Clause 23.11.2, no Borrower shall enter into any transaction with any person except on arm’s length terms and for full market value.

 

  23.11.2

The following transactions shall not be a breach of this Clause 23.11: fees, costs and expenses payable under the Relevant Documents in the amounts set out in the Relevant Documents delivered to the Agent under Clause 4.1 (Initial conditions precedent) or agreed by the Agent.

 

23.12

Merger No Borrower shall enter into any amalgamation, demerger, merger, consolidation or corporate reconstruction.

 

23.13

Change of ownership or business

 

  23.13.1

No Borrower shall:

 

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  (a)

make or permit any change to its ownership; or

 

  (b)

(and shall procure that no other member of the Group shall), make any substantial change to the general nature of its business from that carried on at the date of this Agreement,

without the prior written consent of the Agent (acting on the instructions of the Lenders).

 

  23.13.2

The Borrowers shall not engage in any business other than the ownership and operation of the relevant Vessel without the prior written consent of the Agent (acting on the instructions of the Majority Lenders).

 

23.14

No other business No Borrower shall engage in any business other than the ownership, operation, chartering and management of the relevant Vessel and shall not own, charter-in, operate or manage any vessel or any other maritime asset other than the relevant Vessel.

 

23.15

No acquisitions No Borrower shall acquire a company or any shares or securities or a business or undertaking (or, in each case, any interest in any of them) or incorporate a company.

 

23.16

No Joint Ventures No Borrower shall:

 

  23.16.1

enter into, invest in or acquire (or agree to acquire) any shares, stocks, securities or other interest in any Joint Venture; or

 

  23.16.2

transfer any assets or lend to or guarantee or give an indemnity for or give security for the obligations of a Joint Venture or maintain the solvency of or provide working capital to any Joint Venture (or agree to do any of the foregoing).

 

23.17

No borrowings No Borrower shall incur or allow to remain outstanding any Financial Indebtedness except for:

 

  23.17.1

the Loan;

 

  23.17.2

any Intercompany Loan where (a) an Intercompany Subordination Agreement has been executed and delivered to the Agent to evidence that such Intercompany Loan is fully subordinated to the Loan so that no repayment of principal or interest can be made until the Indebtedness has been repaid in full on terms and conditions acceptable to the Agent, and (b) a Borrower and the Intercompany Creditor have delivered to the Agent such supporting and ancillary documentation (including but not limited to corporate authorities, process agent letters and legal opinions) in respect of such Intercompany Subordination Agreement as the Agent may reasonably request (the costs in respect of which shall be for the account of the Borrower); or

 

  23.17.3

trade credits made in the ordinary course of business in connection with the chartering, operation or repair of any Vessel.

 

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23.18

No substantial liabilities Except in the ordinary course of business, no Borrower shall incur any liability to any third party which is in the Agent’s opinion of a substantial nature.

 

23.19

No loans or credit No Borrower shall be a creditor in respect of any Financial Indebtedness unless it is a loan made in the ordinary course of business in connection with the chartering, operation or repair of the relevant Vessel.

 

23.20

No guarantees or indemnities No Borrower shall incur or allow to remain outstanding any guarantee in respect of any obligation of any person.

 

23.21

No dividends No Borrower shall:

 

  23.21.1

declare, make or pay any dividend, charge, fee or other distribution (or interest on any unpaid dividend, charge, fee or other distribution) (whether in cash or in kind) on or in respect of its share capital (or any class of its share capital) unless it is a Permitted Distribution;

 

  23.21.2

repay or distribute any share premium reserve;

 

  23.21.3

redeem, repurchase, defease, retire or repay any of its share capital or resolve to do so; or

 

  23.21.4

issue any new shares in its share capital or resolve to do so.

 

23.22

Inspection of records Each Borrower and the Guarantor will permit the inspection of its financial records and accounts from time to time by the Agent or its nominee.

 

23.23

No change in Relevant Documents Each Borrower and the Guarantor shall ensure that no Relevant Document which is not a Finance Document, or any other document delivered to the Agent pursuant to Clause 4.1 (Initial conditions precedent) or Clause 4.2 (Further conditions precedent) or Clause 4.3 (Conditions subsequent) is amended, varied, novated, supplemented or superseded and no term of any such document shall be waived or terminated.

 

23.24

Further assurance

 

  23.24.1

Each Borrower and the Guarantor shall (and shall procure that each other Obligor will) promptly do all such acts or execute all such documents (including assignments, transfers, mortgages, charges, notices and instructions) as the Security Agent may reasonably specify (and in such form as the Security Agent may reasonably require in favour of the Security Agent or its nominee(s)):

 

  (a)

to perfect any Encumbrance created or intended to be created under or evidenced by the Security Documents (which may include the execution of a mortgage, charge, assignment or other Encumbrance over all or any of the assets which are, or are intended to be, the subject of the Security Documents) or for the exercise of any rights, powers and remedies of the Security Agent or the Finance Parties provided by or pursuant to the Finance Documents or by law;

 

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  (b)

to confer on the Security Agent or confer on the Finance Parties an Encumbrance over any property and assets of that Borrower located in any jurisdiction equivalent or similar to the Encumbrance intended to be conferred by or pursuant to the Security Documents; and/or

 

  (c)

to facilitate the realisation of the assets which are, or are intended to be, the subject of the Security Documents.

 

  23.24.2

Each Borrower and the Guarantor shall (and shall procure that each other Obligor will) take all such action as is available to it (including making all filings and registrations) as may be necessary for the purpose of the creation, perfection, protection or maintenance of any Encumbrance conferred or intended to be conferred on the Security Agent or the Finance Parties by or pursuant to the Finance Documents.

 

23.25

Sanctions

 

  23.25.1

No Borrower nor the Guarantor shall (and shall procure that no other Relevant Person will) take any action, make any omission or use (directly or indirectly) any proceeds of the Loan, in a manner that:

 

  (a)

is a breach of Sanctions; and/or

 

  (b)

causes (or will cause) a breach of Sanctions by any Finance Party.

 

  23.25.2

No Security Party shall (and the Borrowers shall ensure that no other Relevant Person will) take any action or make any omission that results, or is reasonably likely to result, in it or any Finance Party becoming a Restricted Party.

 

23.26

Treasury Transactions

 

  23.26.1

The Borrowers may from time to time enter into Treasury Transactions with the Swap Provider relating to the interest rate exposure pursuant to this Agreement or any other derivative products relating to a Vessel or this Agreement subject always to the terms and conditions of the relevant Master Agreement.

 

  23.26.2

The Borrowers may enter into any Treasury Transaction with a counterparty that is not the Swap Provider provided that:

 

  (a)

the Swap Provider shall have first right of refusal in respect of any such Treasury Transactions; and

 

  (b)

no Encumbrance may be provided to such counterparty in respect of the obligations of the Borrowers pursuant to such Treasury Transactions.

 

23.27

Green scrapping The Borrowers and the Guarantor shall ensure that any dismantling, scrapping or recycling of the Vessels or any other vessel owned, controlled or managed by the Group shall be conducted (and if the Vessels or any other vessel owned, controlled or managed by the Group is sold for dismantling,

 

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  scrapping or recycling, the Borrowers and the Guarantor shall ensure that such buyer of that vessel will dismantle, scrap or recycle that vessel) in compliance with the provisions of The Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships, 2009 or EU Ship Recycling Regulation or both.

 

23.28

Green passport Each Borrower shall maintain an Inventory of Hazardous Materials in respect of its Vessel by the earlier of (i) the date specified by any regulatory requirement and (ii) the date of the next dry-docking of its Vessel.

 

23.29

Poseidon Principles

 

  23.29.1

In this Clause 23.29:

“Poseidon Principles” means the financial industry framework for assessing and disclosing the climate alignment of ship finance portfolios published on 18 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 Organization) from time to time.

Relevant Lender” means a Lender which has, at any time during the Facility Period, become a signatory to the Poseidon Principles.

Statement of Compliance” means a statement of compliance related to fuel oil consumption pursuant to regulations 6.6 and 6.7 of Annex VI.

 

  23.29.2

Each Borrower shall, upon the request of any Relevant Lender and at the cost of the Borrowers, on or before 31 July in each calendar year, supply or procure the supply to the Agent (for transmission to the applicable Relevant Lender) of all information necessary in order for any Relevant Lender to comply with its obligations under the Poseidon Principles in respect of the preceding calendar 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, in each case relating to its Vessel for the preceding calendar year, provided that no Relevant Lender shall publicly disclose such information with the identity of the relevant Vessel without the prior written consent of the relevant Borrower and, for the avoidance of doubt, such information shall be “Confidential lnformation” for the purposes of Clause 38.1 (Confidential Information) but each Borrower acknowledges that, in accordance with the Poseidon Principles, such information will form part of the information published regarding the applicable Relevant Lender’s portfolio climate alignment.

 

23.30

ESR Regulations

Borrower A and Borrower B shall comply in all respects with the ESR Regulations. Further, each Borrower shall endeavour to procure that each Obligor incorporated in the Republic of the Marshall Islands is in compliance with the ESR Regulations.

 

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23.31

Restructuring The Restructuring shall take effect within 30 days from the date of this Agreement.

 

24

Events of Default

 

24.1

Events of Default Each of the events or circumstances set out in this Clause 24.1 is an Event of Default.

 

  24.1.1

Non-payment An Obligor does not pay on the due date any amount payable by it under a Finance Document at the place at and in the currency in which it is expressed to be payable unless:

 

  (a)

its failure to pay is caused by:

 

  (i)

administrative or technical error; or

 

  (ii)

a Disruption Event; and

 

  (b)

payment is made within three Business Days of its due date.

 

  24.1.2

Other specific obligations

 

  (a)

Any requirement of Clause 22 (Financial Covenants) is not satisfied.

 

  (b)

An Obligor does not comply with any obligation in a Finance Document relating to the Insurances or with Clause 7.5 (Mandatory prepayment on sale or Total Loss) or with Clause 18.1 (Additional security) or with Clause 23.25 (Sanctions).

 

  24.1.3

Other obligations

 

  (a)

An Obligor does not comply with any provision of a Finance Document (other than those referred to in Clause 24.1.1 (Non-payment) and Clause 24.1.2 (Other specific obligations).

 

  (b)

No Event of Default under this Clause 24.1.3 will occur if the failure to comply is capable of remedy and is remedied within ten Business Days of the earlier of (i) the Agent giving notice to the Borrowers and (ii) the Borrowers becoming aware of the failure to comply.

 

  24.1.4

Misrepresentation Any representation or statement made or deemed to be made by an Obligor in any Finance Document or any other document delivered by or on behalf of an Obligor under or in connection with any Finance Document is or proves to have been incorrect or misleading when made or deemed to be made.

 

  24.1.5

Cross default

 

  (a)

Any Financial Indebtedness of an Obligor or of any other member of the Group is not paid when due nor within any originally applicable grace period.

 

  (b)

Any Financial Indebtedness of an Obligor or of any other member of the Group is declared to be, or otherwise becomes, due and payable prior to its specified maturity as a result of an event of default (however described).

 

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  (c)

Any commitment for any Financial Indebtedness of an Obligor or of any other member of the Group is cancelled or suspended by a creditor of an Obligor or of any other member of the Group as a result of an event of default (however described).

 

  (d)

Any creditor of an Obligor or of any other member of the Group becomes entitled to declare any Financial Indebtedness of an Obligor or of any other member of the Group due and payable prior to its specified maturity as a result of an event of default (however described).

 

  (e)

No Event of Default will occur under this Clause 24.1.5 if the aggregate amount of Financial Indebtedness or commitment for Financial Indebtedness falling within (a) to (d) is less than:

 

  (i)

$1,000,000 (or its equivalent in any other currency or currencies) in respect of an Obligor save for the Guarantor; and

 

  (ii)

$5,000,000 (or its equivalent in any other currency or currencies) in respect of the Guarantor.

 

  24.1.6

Insolvency

 

  (a)

An Obligor or any other member of the Group:

 

  (i)

is unable or admits inability to pay its debts as they fall due;

 

  (ii)

is deemed to, or is declared to, be unable to pay its debts under applicable law;

 

  (iii)

suspends or threatens to suspend making payments on any of its debts; or

 

  (iv)

by reason of actual or anticipated financial difficulties, commences negotiations with one or more of its creditors with a view to rescheduling any of its indebtedness.

 

  (b)

The value of the assets of an Obligor or any other member of the Group is less than its liabilities (taking into account contingent and prospective liabilities).

 

  (c)

A moratorium is declared in respect of any indebtedness of an Obligor or any other member of the Group. If a moratorium occurs, the ending of the moratorium will not remedy any Event of Default caused by that moratorium.

 

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  24.1.7

Insolvency proceedings Any corporate action, legal proceedings or other procedure or step is taken in relation to:

 

  (a)

the suspension of payments, a moratorium of any indebtedness, winding-up, dissolution, administration, bankruptcy or reorganisation (by way of voluntary arrangement, scheme of arrangement or otherwise) of an Obligor or any other member of the Group;

 

  (b)

a composition, compromise, assignment or arrangement with any creditor of an Obligor or any other member of the Group;

 

  (c)

the appointment of a liquidator, receiver, administrative receiver, administrator, compulsory manager, trustee or other similar officer in respect of an Obligor or any other member of the Group or any of its assets; or

 

  (d)

enforcement of any Encumbrance over any assets of an Obligor or any other member of the Group,

or any analogous procedure or step is taken in any jurisdiction.

This Clause 24.1.7 shall not apply to (i) any winding-up petition which is frivolous or vexatious and is discharged, stayed or dismissed within 14 days of commencement or (ii) any arrest or detention of a Vessel from which that Vessel is released within 14 days from the date of that arrest or detention.

 

  24.1.8

Creditors’ process Any expropriation, attachment, sequestration, distress or execution (or any analogous process in any jurisdiction) affects any asset or assets of an Obligor or any other member of the Group and is not discharged within 14 days.

 

  24.1.9

Unlawfulness and invalidity

 

  (a)

It is or becomes unlawful for an Obligor to perform any of its obligations under the Finance Documents or any Encumbrance created or expressed to be created or evidenced by the Security Documents ceases to be effective.

 

  (b)

Any obligation or obligations of any Obligor under any Finance Documents are not (subject to the Legal Reservations) or cease to be legal, valid, binding or enforceable and the cessation individually or cumulatively materially and adversely affects the interests of the Lenders under the Finance Documents.

 

  (c)

Any Finance Document ceases to be in full force and effect or any Encumbrance created or expressed to be created or evidenced by the Security Documents ceases to be legal, valid, binding, enforceable or effective or is alleged by a party to it (other than a Finance Party) to be ineffective.

 

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  24.1.10

Cessation of business An Obligor ceases, or threatens to cease, to carry on all or a substantial part of its business except as a result of a Permitted Disposal.

 

  24.1.11

Expropriation The authority or ability of an Obligor or any other member of the Group to conduct its business is limited or wholly or substantially curtailed by any seizure, expropriation, nationalisation, intervention, restriction or other action by or on behalf of any governmental, regulatory or other authority or other person in relation to an Obligor or any other member of the Group or any of its assets.

 

  24.1.12

Repudiation and rescission of agreements

 

  (a)

An Obligor rescinds or purports to rescind or repudiates or purports to repudiate a Finance Document or evidences an intention to rescind or repudiate a Finance Document.

 

  (b)

Subject to Clause 24.1.12(c), any party to any of the Relevant Documents that is not a Finance Document rescinds or purports to rescind or repudiates or purports to repudiate that Relevant Document in whole or in part where to do so has or is, in the reasonable opinion of the Majority Lenders, likely to have a material adverse effect on the interests of the Lenders under the Finance Documents.

 

  (c)

Any of the Management Agreements is terminated, cancelled or otherwise ceases to remain in full force and effect at any time prior to its contractual expiry date and is not immediately replaced by a similar agreement in form and substance satisfactory to the Majority Lenders.

 

  24.1.13

Conditions subsequent Any of the conditions referred to in Clause 4.3 (Conditions subsequent) is not satisfied within the time reasonably required by the Agent.

 

  24.1.14

Revocation or modification of Authorisation Any Authorisation of any governmental, judicial or other public body or authority which is now, or which at any time during the Facility Period becomes, necessary to enable any of the Obligors to comply with any of their obligations under any Finance Document is not obtained, is revoked, suspended, withdrawn or withheld, or is modified in a manner which the Agent considers is, or may be, prejudicial to the interests of any Finance Party, or ceases to remain in full force and effect.

 

  24.1.15

Reduction of capital A Borrower reduces its issued or subscribed capital.

 

  24.1.16

Challenge to registration The registration of a Vessel or a Mortgage is contested or becomes void or voidable or liable to cancellation or termination, or the validity or priority of a Mortgage is contested.

 

  24.1.17

War The country of registration of a Vessel becomes involved in war (whether or not declared) or civil war or is occupied by any other power and the Agent considers that, as a result, the security conferred by any of the Security Documents is materially prejudiced.

 

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  24.1.18

Master Agreement termination A notice is given by the Swap Provider under section 6(a) of a Master Agreement, or by any person under section 6(b)(iv) of a Master Agreement, in either case designating an Early Termination Date for the purpose of a Master Agreement, or a Master Agreement is for any other reason terminated, cancelled, suspended, rescinded, revoked or otherwise ceases to remain in full force and effect.

 

  24.1.19

Notice of determination The Guarantor gives notice to the Security Agent to determine any obligations under the relevant Guarantee.

 

  24.1.20

Litigation Any litigation, arbitration or administrative proceedings or investigations of, or before, any court, arbitral body or agency are started or threatened, or any judgment or order of a court, arbitral body or agency is made, in relation to the Relevant Documents or the transactions contemplated in the Relevant Documents or against an Obligor or its assets which have, or has, or are, or is, reasonably likely to have a Material Adverse Effect.

 

  24.1.21

Material adverse change Any event or circumstance occurs which the Majority Lenders reasonably believe has or is reasonably likely to have a Material Adverse Effect.

 

24.2

Acceleration While an Event of Default is continuing the Agent may, and shall if so directed by the Majority Lenders:

 

  24.2.1

by notice to the Borrowers:

 

  (a)

cancel the Total Commitments, at which time they shall immediately be cancelled;

 

  (b)

declare that all or part of the Loan, together with accrued interest, and all other amounts accrued or outstanding under the Finance Documents be immediately due and payable, at which time they shall become immediately due and payable; and/or

 

  (c)

declare that all or part of the Loan be payable on demand, at which time it shall immediately become payable on demand by the Agent on the instructions of the Majority Lenders; and/or

 

  24.2.2

exercise or direct the Security Agent to exercise any or all of its rights, remedies, powers or discretions under the Finance Documents.

 

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Section 9 Changes to Parties

 

25

Changes to the Lenders

 

25.1

Assignments and transfers by the Lenders Subject to this Clause 25, a Lender (the “Existing Lender”) may:

 

  25.1.1

assign any of its rights; or

 

  25.1.2

transfer by novation any of its rights and obligations,

under any Finance Document to another bank or financial institution or to a trust, fund or other entity which is regularly engaged in or established for the purpose of making, purchasing or investing in loans, securities or other financial assets (the “New Lender”).

 

25.2

Conditions of assignment or transfer

 

  25.2.1

An Existing Lender must consult with the Borrowers for no more than five days before it may make an assignment or transfer in accordance with Clause 25.1 (Assignments and transfers by the Lenders) only if the assignment or transfer is to a trust or fund unless that assignment or transfer is:

 

  (a)

to a fund which is a Related Fund of that Existing Lender; or

 

  (b)

made at a time when an Event of Default is continuing,

and in all other cases an Existing Lender shall not be obliged to consult with the Borrowers.

 

  25.2.2

An assignment will only be effective on:

 

  (a)

receipt by the Agent (whether in the Assignment Agreement or otherwise) of written confirmation from the New Lender (in form and substance satisfactory to the Agent) that the New Lender will assume the same obligations to the other Finance Parties and the other Secured Parties as it would have been under if it had been an Original Lender; and

 

  (b)

performance by the Agent of all necessary “know your customer” or other similar checks under all applicable laws and regulations in relation to such assignment to a New Lender, the completion of which the Agent shall promptly notify to the Existing Lender and the New Lender.

 

  25.2.3

A transfer will only be effective if the procedure set out in Clause 25.5 (Procedure for transfer) is complied with.

 

  25.2.4

If:

 

  (a)

a Lender assigns or transfers any of its rights or obligations under the Finance Documents or changes its Facility Office; and

 

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  (b)

as a result of circumstances existing at the date the assignment, transfer or change occurs, a Borrower or the Guarantor would be obliged to make a payment to the New Lender or Lender acting through its new Facility Office under Clause 12 (Tax Gross Up and Indemnities) or Clause 13 (Increased Costs),

then the New Lender or Lender acting through its new Facility Office is only entitled to receive payment under those Clauses to the same extent as the Existing Lender or Lender acting through its previous Facility Office would have been if the assignment, transfer or change had not occurred. This Clause 25.2.4 shall not apply:

 

  (c)

in respect of an assignment or transfer made in the ordinary course of the primary syndication of the Loan; or

 

  (d)

in relation to Clause 12.2 (Tax gross-up), to a Treaty Lender that has included a confirmation of its scheme reference number and its jurisdiction of tax residence in accordance with Clause 12.2.7(b)(ii) (Tax gross-up) if the Borrower making the payment has not made a Borrower DTTP Filing in respect of that Treaty Lender.

 

  25.2.5

Each New Lender, by executing the relevant Transfer Certificate or Assignment Agreement, confirms, for the avoidance of doubt, that the Agent has authority to execute on its behalf any amendment or waiver that has been approved by or on behalf of the requisite Lender or Lenders in accordance with this Agreement on or prior to the date on which the transfer or assignment becomes effective in accordance with this Agreement and that it is bound by that decision to the same extent as the Existing Lender would have been had it remained a Lender.

 

25.3

Assignment or transfer fee

 

  25.3.1

Subject to Clause 25.3.2, the New Lender shall, on the date upon which an assignment or transfer takes effect, pay to the Agent (for its own account) a fee of $3,000.

 

  25.3.2

No fee is payable pursuant to Clause 25.3.1 if:

 

  (a)

the Agent agrees that no fee is payable; or

 

  (b)

the assignment or transfer is made by an Existing Lender:

 

  (i)

to an Affiliate of that Existing Lender;

 

  (ii)

to a fund which is a Related Fund of that Existing Lender; or

 

  (iii)

in connection with primary syndication of the Loan.

 

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25.4

Limitation of responsibility of Existing Lenders

 

  25.4.1

Unless expressly agreed to the contrary, an Existing Lender makes no representation or warranty and assumes no responsibility to a New Lender for:

 

  (a)

the legality, validity, effectiveness, adequacy or enforceability of the Relevant Documents or any other documents;

 

  (b)

the financial condition of any Obligor;

 

  (c)

the performance and observance by any Obligor of its obligations under the Relevant Documents or any other documents; or

 

  (d)

the accuracy of any statements (whether written or oral) made in or in connection with any of the Relevant Documents or any other document,

and any representations or warranties implied by law are excluded.

 

  25.4.2

Each New Lender confirms to the Existing Lender and the other Finance Parties that it:

 

  (a)

has made (and shall continue to make) its own independent investigation and assessment of the financial condition and affairs of each Obligor and its related entities in connection with its participation in this Agreement and has not relied exclusively on any information provided to it by the Existing Lender in connection with any of the Relevant Documents; and

 

  (b)

will continue to make its own independent appraisal of the creditworthiness of each Obligor and its related entities while any amount is or may be outstanding under the Finance Documents or any Commitment is in force.

 

  25.4.3

Nothing in any Finance Document obliges an Existing Lender to:

 

  (a)

accept a re-transfer or re-assignment from a New Lender of any of the rights and obligations assigned or transferred under this Clause 25; or

 

  (b)

support any losses directly or indirectly incurred by the New Lender by reason of the non-performance by any Obligor of its obligations under the Relevant Documents or otherwise.

 

25.5

Procedure for transfer

 

  25.5.1

Subject to the conditions set out in Clause 25.2 (Conditions of assignment or transfer) a transfer is effected in accordance with Clause 25.5.3 when the Agent executes an otherwise duly completed Transfer Certificate delivered to it by the Existing Lender and the New Lender. The Agent shall, subject to Clause 25.2.2(b), as soon as reasonably practicable after receipt by it of a duly completed Transfer Certificate appearing on its face to comply with the terms of this Agreement and delivered in accordance with the terms of this Agreement, execute that Transfer Certificate.

 

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  25.5.2

The Agent shall only be obliged to execute a Transfer Certificate delivered to it by the Existing Lender and the New Lender once it is satisfied it has complied with all necessary “know your customer” or other similar checks under all applicable laws and regulations in relation to the transfer to such New Lender.

 

  25.5.3

Subject to Clause 25.9 (Pro rata interest settlement), on the Transfer Date:

 

  (a)

to the extent that in the Transfer Certificate the Existing Lender seeks to transfer by novation its rights and obligations under the Finance Documents each Borrower and the Guarantor and the Existing Lender shall be released from further obligations towards one another under the Finance Documents and their respective rights against one another shall be cancelled (being the “Discharged Rights and Obligations”);

 

  (b)

each Borrower and the Guarantor and the New Lender shall assume obligations towards one another and/or acquire rights against one another which differ from the Discharged Rights and Obligations only insofar as that Borrower and the Guarantor and the New Lender have assumed and/or acquired the same in place of that Borrower and the Guarantor and the Existing Lender;

 

  (c)

the Agent, the Security Agent, the Bookrunner, the New Lender and other Lenders shall acquire the same rights and assume the same obligations between themselves as they would have acquired and assumed had the New Lender been an Original Lender with the rights and/or obligations acquired or assumed by it as a result of the transfer and to that extent the Agent, the Security Agent, the Bookrunner and the Existing Lender shall each be released from further obligations to each other under the Finance Documents; and

 

  (d)

the New Lender shall become a Party as a “Lender”.

 

25.6

Procedure for assignment

 

  25.6.1

Subject to the conditions set out in Clause 25.2 (Conditions of assignment or transfer) an assignment may be effected in accordance with Clause 25.6.3 when the Agent executes an otherwise duly completed Assignment Agreement delivered to it by the Existing Lender and the New Lender. The Agent shall, subject to Clause 25.6.2, as soon as reasonably practicable after receipt by it of a duly completed Assignment Agreement appearing on its face to comply with the terms of this Agreement and delivered in accordance with the terms of this Agreement, execute that Assignment Agreement.

 

  25.6.2

The Agent shall only be obliged to execute an Assignment Agreement delivered to it by the Existing Lender and the New Lender once it is satisfied it has complied with all necessary “know your customer” or other similar checks under all applicable laws and regulations in relation to the assignment to such New Lender.

 

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  25.6.3

Subject to Clause 25.9 (Pro rata interest settlement), on the Transfer Date:

 

  (a)

the Existing Lender will assign absolutely to the New Lender its rights under the Finance Documents and in respect of any Encumbrance created or expressed to be created or evidenced by the Security Documents and expressed to be the subject of the assignment in the Assignment Agreement;

 

  (b)

the Existing Lender will be released from the obligations (the “Relevant Obligations”) expressed to be the subject of the release in the Assignment Agreement (and any corresponding obligations by which it is bound in respect of any Encumbrance created or expressed to be created or evidenced by the Security Documents); and

 

  (c)

the New Lender shall become a Party as a “Lender” and will be bound by obligations equivalent to the Relevant Obligations.

 

  25.6.4

Lenders may utilise procedures other than those set out in this Clause 25.6 to assign their rights under the Finance Documents (but not, without the consent of the relevant Obligor or unless in accordance with Clause 25.5 (Procedure for transfer), to obtain a release by that Obligor from the obligations owed to that Obligor by the Lenders nor the assumption of equivalent obligations by a New Lender) provided that they comply with the conditions set out in Clause 25.2 (Conditions of assignment or transfer).

 

25.7

Copy of Transfer Certificate or Assignment Agreement to Borrowers The Agent shall, as soon as reasonably practicable after it has executed a Transfer Certificate or an Assignment Agreement, send to the Borrowers a copy of that Transfer Certificate or Assignment Agreement.

 

25.8

Security over Lenders’ rights In addition to the other rights provided to Lenders under this Clause 25, each Lender may without consulting with or obtaining consent from any Obligor, at any time charge, assign or otherwise create Encumbrances in or over (whether by way of collateral or otherwise) all or any of its rights under any Finance Document to secure obligations of that Lender including, without limitation:

 

  25.8.1

any charge, assignment or other Encumbrance to secure obligations to a federal reserve or central bank; and

 

  25.8.2

any charge, assignment or other Encumbrance granted to any holders (or trustee or representatives of holders) of obligations owed, or securities issued, by that Lender as security for those obligations or securities,

except that no such charge, assignment or Encumbrance shall:

 

  (a)

release a Lender from any of its obligations under the Finance Documents or substitute the beneficiary of the relevant charge, assignment or Encumbrance for the Lender as a party to any of the Finance Documents; or

 

Page 96


  (b)

require any payments to be made by an Obligor other than or in excess of, or grant to any person any more extensive rights than, those required to be made or granted to the relevant Lender under the Finance Documents.

 

25.9

Pro rata interest settlement

 

  25.9.1

If the Agent has notified the Lenders that it is able to distribute interest payments on a “pro rata basis” to Existing Lenders and New Lenders then (in respect of any transfer pursuant to Clause 25.5 (Procedure for transfer) or any assignment pursuant to Clause 25.6 (Procedure for assignment) the Transfer Date of which, in each case, is after the date of such notification and is not on the last day of an Interest Period):

 

  (a)

any interest or fees in respect of the relevant participation which are expressed to accrue by reference to the lapse of time shall continue to accrue in favour of the Existing Lender up to but excluding the Transfer Date (“Accrued Amounts”) and shall become due and payable to the Existing Lender (without further interest accruing on them) on the last day of the current Interest Period (or, if the Interest Period is longer than six Months, on the next of the dates which falls at intervals of six Months after the first day of that Interest Period); and

 

  (b)

the rights assigned or transferred by the Existing Lender will not include the right to the Accrued Amounts, so that, for the avoidance of doubt:

 

  (i)

when the Accrued Amounts become payable, those Accrued Amounts will be payable for the account of the Existing Lender; and

 

  (ii)

the amount payable to the New Lender on that date will be the amount which would, but for the application of this Clause 25.9, have been payable to it on that date, but after deduction of the Accrued Amounts.

 

  25.9.2

In this Clause 25.9 references to “Interest Period” shall be construed to include a reference to any other period for accrual of fees.

 

  25.9.3

An Existing Lender which retains the right to the Accrued Amounts pursuant to this Clause 25.9 but which does not have a Commitment shall be deemed not to be a Lender for the purposes of ascertaining whether the agreement of any specified group of Lenders has been obtained to approve any request for a consent, waiver, amendment or other vote of Lenders under the Finance Documents.

 

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26

Changes to the Obligors

 

26.1

No assignment or transfer by Obligors No Obligor may assign any of its rights or transfer any of its rights or obligations under the Finance Documents.

 

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Section 10 The Finance Parties

 

27

Role of the Agent, the Security Agent and the Bookrunner

 

27.1

Appointment of the Agent

 

  27.1.1

Each of the Bookrunner and the Lenders appoints the Agent to act as its agent under and in connection with the Finance Documents and each of the Bookrunner, the Lenders and the Agent appoints the Security Agent to act as its security agent for the purpose of the Security Documents.

 

  27.1.2

Each of the Bookrunner and the Lenders authorises the Agent and each of the Bookrunner, the Lenders and the Agent authorises the Security Agent to perform the duties, obligations and responsibilities and to exercise the rights, powers, authorities and discretions specifically given to the Agent or the Security Agent (as the case may be) under or in connection with the Finance Documents together with any other incidental rights, powers, authorities and discretions.

 

  27.1.3

The Swap Provider appoints the Security Agent to act as its security agent for the purpose of the Security Documents and authorises the Security Agent to exercise the rights, powers, authorities and discretions specifically given to the Security Agent under or in connection with the Security Documents together with any other incidental rights, powers, authorities and discretions.

 

  27.1.4

Except in Clause 27.14 (Replacement of the Agent) or where the context otherwise requires, references in this Clause 27 to the “Agent” shall mean the Agent and the Security Agent individually and collectively and references in this Clause 27 to the “Finance Documents” or to any “Finance Document” shall not include the Master Agreement.

 

27.2

Instructions

 

  27.2.1

The Agent shall:

 

  (a)

unless a contrary indication appears in a Finance Document, exercise or refrain from exercising any right, power, authority or discretion vested in it as Agent in accordance with any instructions given to it by:

 

  (i)

all Lenders if the relevant Finance Document stipulates the matter is an all Lender decision; and

 

  (ii)

in all other cases, the Majority Lenders; and

 

  (b)

not be liable for any act (or omission) if it acts (or refrains from acting) in accordance with Clause 27.2.1(a).

 

  27.2.2

The Agent shall be entitled to request instructions, or clarification of any instruction, from the Majority Lenders (or, if the relevant Finance Document stipulates the matter is a decision for any other Lender or group of Lenders, from that Lender or group of Lenders) as to whether, and in what manner, it should exercise or refrain from exercising any right, power, authority or discretion and the Agent may refrain from acting unless and until it receives any such instructions or clarification that it has requested.

 

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  27.2.3

Save in the case of decisions stipulated to be a matter for any other Lender or group of Lenders under the relevant Finance Document and unless a contrary indication appears in a Finance Document, any instructions given to the Agent by the Majority Lenders shall override any conflicting instructions given by any other Parties and will be binding on all Finance Parties.

 

  27.2.4

The Agent may refrain from acting in accordance with any instructions of any Lender or group of Lenders until it has received any indemnification and/or security that it may in its discretion require (which may be greater in extent than that contained in the Finance Documents and which may include payment in advance) for any cost, loss or liability which it may incur in complying with those instructions.

 

  27.2.5

In the absence of instructions, the Agent may act (or refrain from acting) as it considers to be in the best interest of the Lenders.

 

  27.2.6

The Agent is not authorised to act on behalf of a Lender (without first obtaining that Lender’s consent) in any legal or arbitration proceedings relating to any Finance Document. This Clause 27.2.6 shall not apply to any legal or arbitration proceeding relating to the perfection, preservation or protection of rights under the Finance Documents or the enforcement of the Finance Documents.

 

27.3

Duties of the Agent

 

  27.3.1

The Agent’s duties under the Finance Documents are solely mechanical and administrative in nature.

 

  27.3.2

Subject to Clause 27.3.3, the Agent shall promptly forward to a Party the original or a copy of any document which is delivered to the Agent for that Party by any other Party.

 

  27.3.3

Without prejudice to Clause 25.7 (Copy of Transfer Certificate or Assignment Agreement to Borrowers), Clause 27.3.1 shall not apply to any Transfer Certificate or any Assignment Agreement.

 

  27.3.4

Except where a Finance Document specifically provides otherwise, the Agent is not obliged to review or check the adequacy, accuracy or completeness of any document it forwards to another Party.

 

  27.3.5

If the Agent receives notice from a Party referring to this Agreement, describing a Default and stating that the circumstance described is a Default, it shall promptly notify the Finance Parties.

 

  27.3.6

If the Agent is aware of the non-payment of any principal, interest, commitment fee or other fee payable to a Finance Party (other than the Agent, the Bookrunner or the Security Agent) under this Agreement it shall promptly notify the other Finance Parties.

 

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  27.3.7

The Agent shall have only those duties, obligations and responsibilities expressly specified in the Finance Documents to which it is expressed to be a party (and no others shall be implied).

 

27.4

Role of the Bookrunner Except as specifically provided in the Finance Documents, the Bookrunner has no obligations of any kind to any other Party under or in connection with any Finance Document.

 

27.5

No fiduciary duties

 

  27.5.1

Subject to Clause 27.12 (Trust) which relates to the Security Agent only, nothing in any Finance Document constitutes the Agent or the Bookrunner as a trustee or fiduciary of any other person.

 

  27.5.2

Neither the Agent nor the Bookrunner shall be bound to account to any Lender for any sum or the profit element of any sum received by it for its own account.

 

27.6

Business with Obligors and the Group The Agent and the Bookrunner may accept deposits from, lend money to and generally engage in any kind of banking or other business with any Borrower, any other Obligor or its Affiliate and any other member of the Group.

 

27.7

Rights and discretions of the Agent

 

  27.7.1

The Agent may:

 

  (a)

rely on any representation, communication, notice or document believed by it to be genuine, correct and appropriately authorised;

 

  (b)

assume that:

 

  (i)

any instructions received by it from the Majority Lenders, any Lenders or any group of Lenders are duly given in accordance with the terms of the Finance Documents; and

 

  (ii)

unless it has received notice of revocation, that those instructions have not been revoked; and

 

  (iii)

rely on a certificate from any person:

 

  (A)

as to any matter of fact or circumstance which might reasonably be expected to be within the knowledge of that person; or

 

  (B)

to the effect that such person approves of any particular dealing, transaction, step, action or thing,

as sufficient evidence that that is the case and, in the case of (A), may assume the truth and accuracy of that certificate.

 

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  27.7.2

The Agent may assume (unless it has received notice to the contrary in its capacity as agent for the Lenders or security agent for the Finance Parties (as the case may be)) that:

 

  (a)

no Default has occurred (unless it has actual knowledge of a Default arising under Clause 24.1 (Events of Default));

 

  (b)

any right, power, authority or discretion vested in any Party or the Majority Lenders has not been exercised; and

 

  (c)

any notice or request made by the Borrowers (other than a Utilisation Request) is made on behalf of and with the consent and knowledge of all the Obligors.

 

  27.7.3

The Agent may engage and pay for the advice or services of any lawyers, accountants, surveyors or other experts.

 

  27.7.4

Without prejudice to the generality of Clause 27.7.3 or Clause 27.7.5, the Agent may at any time engage and pay for the services of any lawyers to act as independent counsel to the Agent (and so separate from any lawyers instructed by the Lenders) if the Agent in its reasonable opinion deems this to be desirable.

 

  27.7.5

The Agent may rely on the advice or services of any lawyers, accountants, tax advisers, surveyors or other professional advisers or experts (whether obtained by the Agent or by any other Party) and shall not be liable for any damages, costs or losses to any person, any diminution in value or any liability whatsoever arising as a result of its so relying.

 

  27.7.6

The Agent may act in relation to the Finance Documents through its officers, employees and agents and the Agent shall not:

 

  (a)

be liable for any error of judgment made by any such person; or

 

  (b)

be bound to supervise, or be in any way responsible for any loss incurred by reason of misconduct, omission or default on the part, of any such person,

unless such error or such loss was directly caused by the Agent’s gross negligence or wilful misconduct.

 

  27.7.7

Unless a Finance Document expressly provides otherwise the Agent may disclose to any other Party any information it reasonably believes it has received as agent under this Agreement.

 

  27.7.8

Without prejudice to the generality of Clause 27.7.7, the Agent:

 

  (a)

may disclose; and

 

  (b)

on the written request of the Borrowers or the Majority Lenders shall, as soon as reasonably practicable, disclose,

the identity of a Defaulting Lender to the Borrowers and to the other Finance Parties.

 

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  27.7.9

Notwithstanding any other provision of any Finance Document to the contrary, neither the Agent nor the Bookrunner is obliged to do or omit to do anything if it would or might in its reasonable opinion constitute a breach of any law or regulation or a breach of a fiduciary duty or duty of confidentiality.

 

  27.7.10

The Agent is not obliged to disclose to any Finance Party any details of the rate notified to the Agent by any Lender or the identity of any such Lender for the purpose of Clause 10.2 (Market Disruption).

 

  27.7.11

Notwithstanding any provision of any Finance Document to the contrary, the Agent is not obliged to expend or risk its own funds or otherwise incur any financial liability in the performance of its duties, obligations or responsibilities or the exercise of any right, power, authority or discretion if it has grounds for believing the repayment of such funds or adequate indemnity against, or security for, such risk or liability is not reasonably assured to it.

 

27.8

Responsibility for documentation Neither the Agent nor the Bookrunner is responsible or liable for:

 

  27.8.1

the adequacy, accuracy and/or completeness of any information (whether oral or written) supplied by the Agent, the Bookrunner, an Obligor or any other person given in or in connection with any Relevant Document or the transactions contemplated in the Finance Documents;

 

  27.8.2

the legality, validity, effectiveness, adequacy or enforceability of any Relevant Document or any other agreement, arrangement or document entered into, made or executed in anticipation of or in connection with any Relevant Document; or

 

  27.8.3

any determination as to whether any information provided or to be provided to any Finance Party is non-public information the use of which may be regulated or prohibited by applicable law or regulation relating to insider dealing or otherwise.

 

27.9

No duty to monitor The Agent shall not be bound to enquire:

 

  27.9.1

whether or not any Default has occurred;

 

  27.9.2

as to the performance, default or any breach by any Party of its obligations under any Finance Document; or

 

  27.9.3

whether any other event specified in any Finance Document has occurred.

 

27.10

Exclusion of liability

 

  27.10.1

Without limiting Clause 27.10.2 (and without prejudice to any other provision of any Finance Document excluding or limiting the liability of the Agent) the Agent shall not be liable (including, without limitation, for negligence or any other category of liability whatsoever) for:

 

Page 103


  (a)

any damages, costs or losses to any person, any diminution in value, or any liability whatsoever arising as a result of taking or not taking any action under or in connection with any Finance Document or any Encumbrance created or expressed to be created or evidenced by the Security Documents, unless directly caused by its gross negligence or wilful misconduct;

 

  (b)

exercising, or not exercising, any right, power, authority or discretion given to it by, or in connection with, any Finance Document, any Encumbrance created or expressed to be created or evidenced by the Security Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with, any Finance Document or any Encumbrance created or expressed to be created or evidenced by the Security Documents;

 

  (c)

any shortfall which arises on the enforcement or realisation of the Trust Property; or

 

  (d)

without prejudice to the generality of Clauses 27.10.1(a), 27.10.1(b) and 27.10.1(c), any damages, costs or losses to any person, any diminution in value or any liability whatsoever arising as a result of:

 

  (i)

any act, event or circumstance not reasonably within its control; or

 

  (ii)

the general risks of investment in, or the holding of assets in, any jurisdiction,

including (in each case and without limitation) such damages, costs, losses, diminution in value or liability arising as a result of: nationalisation, expropriation or other governmental actions; any regulation, currency restriction, devaluation or fluctuation; market conditions affecting the execution or settlement of transactions or the value of assets (including any Disruption Event); breakdown, failure or malfunction of any third party transport, telecommunications, computer services or systems; natural disasters or acts of God; war, terrorism, insurrection or revolution; or strikes or industrial action.

 

  27.10.2

No Party (other than the Agent) may take any proceedings against any officer, employee or agent of the Agent in respect of any claim it might have against the Agent or in respect of any act or omission of any kind by that officer, employee or agent in relation to any Relevant Document and any officer, employee or agent of the Agent may rely on this Clause subject to Clause 1.12 (Third Party Rights) and the provisions of the Third Parties Act.

 

  27.10.3

The Agent will not be liable for any delay (or any related consequences) in crediting an account with an amount required under the Finance Documents to be paid by the Agent if the Agent has taken all necessary steps as soon as reasonably practicable to comply with the regulations or operating procedures of any recognised clearing or settlement system used by the Agent for that purpose.

 

Page 104


  27.10.4

Nothing in this Agreement shall oblige the Agent or the Bookrunner to carry out:

 

  (a)

any “know your customer” or other checks in relation to any person;

 

  (b)

any check on the extent to which any transaction contemplated by this Agreement might be unlawful for any Lender or for any Affiliate of any Lender,

on behalf of any Lender and each Lender confirms to the Agent and the Bookrunner that it is solely responsible for any such checks it is required to carry out and that it may not rely on any statement in relation to such checks made by the Agent or the Bookrunner.

 

  27.10.5

Without prejudice to any provision of any Finance Document excluding or limiting the Agent’s liability, any liability of the Agent arising under or in connection with any Finance Document or any Encumbrance created or expressed to be created or evidenced by the Security Documents shall be limited to the amount of actual loss which has been finally judicially determined to have been suffered (as determined by reference to the date of default of the Agent or, if later, the date on which the loss arises as a result of such default) but without reference to any special conditions or circumstances known to the Agent at any time which increase the amount of that loss. In no event shall the Agent be liable for any loss of profits, goodwill, reputation, business opportunity or anticipated saving, or for special, punitive, indirect or consequential damages, whether or not the Agent has been advised of the possibility of such loss or damages.

 

27.11

Lenders’ indemnity to the Agent

 

  27.11.1

Each Lender shall (in proportion to its share of the Total Commitments or, if the Total Commitments are then zero, to its share of the Total Commitments immediately prior to their reduction to zero) indemnify the Agent and every Receiver and Delegate, within three Business Days of demand, against any cost, loss or liability (including, without limitation, for negligence or any other category of liability whatsoever) incurred by any of them (otherwise than by reason of the relevant Agent’s, Receiver’s or Delegate’s gross negligence or wilful misconduct) (or, in the case of any cost, loss or liability pursuant to Clause 31.11 (Disruption to payment systems etc.) notwithstanding the Agent’s negligence, gross negligence or any other category of liability whatsoever but not including any claim based on the fraud of the Agent) in acting as Agent, Receiver or Delegate under, or exercising any authority conferred under, the Finance Documents (unless the relevant Agent, Receiver or Delegate has been reimbursed by an Obligor pursuant to a Finance Document).

 

Page 105


  27.11.2

Subject to Clause 27.11.3, the Borrowers shall immediately on demand reimburse any Lender for any payment that Lender makes to the Agent pursuant to Clause 27.11.1

 

  27.11.3

Clause 27.11.2 shall not apply to the extent that the indemnity payment in respect of which the Lender claims reimbursement relates to a liability of the Agent to an Obligor.

 

27.12

Trust The Security Agent agrees and declares, and each of the other Finance Parties acknowledges, that, subject to the terms and conditions of this Clause 27.12, the Security Agent holds the Trust Property on trust for the Finance Parties absolutely. Each of the other Finance Parties agrees that the obligations, rights and benefits vested in the Security Agent shall be performed and exercised in accordance with this Clause 27.12. The Security Agent shall have the benefit of all of the provisions of this Agreement benefiting it in its capacity as security agent for the Finance Parties, and all the powers and discretions conferred on trustees by the Trustee Act 1925 (to the extent not inconsistent with this Agreement). In addition:

 

  27.12.1

the Security Agent and any Delegate may indemnify itself or himself out of the Trust Property against all liabilities, costs, fees, damages, charges, losses and expenses sustained or incurred by it or him in relation to the taking or holding of any of the Trust Property or in connection with the exercise or purported exercise of the rights, trusts, powers and discretions vested in the Security Agent or any Delegate by or pursuant to the Security Documents or in respect of anything else done or omitted to be done in any way relating to the Security Documents;

 

  27.12.2

the other Finance Parties acknowledge that the Security Agent shall be under no obligation to insure any property nor to require any other person to insure any property and shall not be responsible for any loss which may be suffered by any person as a result of the lack or insufficiency of any insurance;

 

  27.12.3

the Finance Parties agree that the perpetuity period applicable to the trusts declared by this Agreement shall be the period of 125 years from the date of this Agreement;

 

  27.12.4

the Security Agent shall not be liable for any failure, omission, or defect in perfecting the security constituted or created by any Finance Document including, without limitation, any failure to register the same in accordance with the provisions of any of the documents of title of any Obligor to any of the assets thereby charged or effect or procure registration of or otherwise protect the security created by any Security Document under any registration laws in any jurisdiction and may accept without enquiry such title as any Obligor may have to any asset;

 

  27.12.5

the Security Agent shall not be under any obligation to hold any title deed, Finance Document or any other documents in connection with the Finance Documents or any other documents in connection with the property charged by any Finance Document or any other such security in its own possession or to take any steps to protect or preserve the same, and may permit any Obligor to retain all such title deeds, Finance Documents and other documents in its possession; and

 

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  27.12.6

save as otherwise provided in the Finance Documents, all moneys which under the trusts therein contained are received by the Security Agent may be placed on deposit in the name of or under the control of the Security Agent at such bank or institution (including the Security Agent) and upon such terms as the Security Agent may think fit pending application of those moneys in accordance with Clause 28 (Application of Proceeds).

The provisions of Part I of the Trustee Act 2000 shall not apply to the Security Agent or the Trust Property.

 

27.13

Resignation of the Agent

 

  27.13.1

The Agent may resign and appoint one of its Affiliates acting through an office as successor by giving notice to the other Finance Parties and the Borrowers.

 

  27.13.2

Alternatively the Agent may resign by giving 30 days’ notice to the other Finance Parties and the Borrowers, in which case the Majority Lenders (after consultation with the Borrowers) may appoint a successor Agent.

 

  27.13.3

If the Majority Lenders have not appointed a successor Agent in accordance with Clause 27.13.2 within 20 days after notice of resignation was given, the retiring Agent (after consultation with the Borrowers) may appoint a successor Agent.

 

  27.13.4

If the Agent wishes to resign because (acting reasonably) it has concluded that it is no longer appropriate for it to remain as agent and the Agent is entitled to appoint a successor Agent under Clause 27.13.3, the Agent may (if it concludes (acting reasonably) that it is necessary to do so in order to persuade the proposed successor Agent to become a party to this Agreement as Agent) agree with the proposed successor Agent amendments to this Clause 27 and any other term of this Agreement dealing with the rights or obligations of the Agent consistent with then current market practice for the appointment and protection of corporate trustees together with any reasonable amendments to the agency fee payable under this Agreement which are consistent with the successor Agent’s normal fee rates and those amendments will bind the Parties.

 

  27.13.5

The retiring Agent shall make available to the successor Agent such documents and records and provide such assistance as the successor Agent may reasonably request for the purposes of performing its functions as Agent under the Finance Documents. The Borrowers shall, within three Business Days of demand, reimburse the retiring Agent for the amount of all costs and expenses (including legal fees) properly incurred by it in making available such documents and records and providing such assistance.

 

  27.13.6

The Agent’s resignation notice shall only take effect upon the appointment of a successor and (in the case of the Security Agent) the transfer of all the Trust Property to that successor.

 

Page 107


  27.13.7

Upon the appointment of a successor, the retiring Agent shall be discharged from any further obligation in respect of the Finance Documents (other than its obligations under Clause 27.13.5) but shall remain entitled to the benefit of Clause 14.3 (Indemnity to the Agent) and this Clause 27 (and any agency fees for the account of the retiring Agent shall cease to accrue from (and shall be payable on) that date). Any successor and each of the other Parties shall have the same rights and obligations amongst themselves as they would have had if such successor had been an original Party.

 

  27.13.8

The Agent shall resign in accordance with Clause 27.13.2 (and, to the extent applicable, shall use reasonable endeavours to appoint a successor Agent pursuant to Clause 27.13.3) if on or after the date which is three months before the earliest FATCA Application Date relating to any payment to the Agent under the Finance Documents, either:

 

  (a)

the Agent fails to respond to a request under Clause 12.8 (FATCA information) and a Lender reasonably believes that the Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date;

 

  (b)

the information supplied by the Agent pursuant to Clause 12.8 (FATCA information) indicates that the Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date; or

 

  (c)

the Agent notifies the Borrowers and the Lenders that the Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date;

and (in each case) a Lender reasonably believes that a Party will be required to make a FATCA Deduction that would not be required if the Agent were a FATCA Exempt Party, and that Lender, by notice to the Agent, requires it to resign.

 

27.14

Replacement of the Agent

 

  27.14.1

After consultation with the Borrowers, the Majority Lenders may, by giving 30 days’ notice to the Agent replace the Agent by appointing a successor Agent.

 

  27.14.2

The retiring Agent shall (at the expense of the Lenders) make available to the successor Agent such documents and records and provide such assistance as the successor Agent may reasonably request for the purposes of performing its function as Agent under the Finance Documents.

 

  27.14.3

The appointment of the successor Agent shall take effect on the date specified in the notice from the Majority Lenders to the retiring Agent. As from this date, the retiring Agent shall be discharged from any further obligation in respect of the Finance Documents (other than its obligations under Clause 27.14.2 but shall remain entitled to the benefit of Clause 14.3 (Indemnity to the Agent) and this Clause 27 (and any agency fees for the account of the retiring Agent shall cease to accrue from (and shall be payable on) that date).

 

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  27.14.4

Any successor Agent and each of the other Parties shall have the same rights and obligations amongst themselves as they would have had if such successor had been an original Party.

 

27.15

Confidentiality

 

  27.15.1

In acting as agent for the Finance Parties, the Agent shall be regarded as acting through its agency division which shall be treated as a separate entity from any other of its divisions or departments.

 

  27.15.2

If information is received by another division or department of the Agent, it may be treated as confidential to that division or department and the Agent shall not be deemed to have notice of it.

 

27.16

Relationship with the Lenders

 

  27.16.1

Subject to Clause 25.9 (Pro rata interest settlement), the Agent may treat the person shown in its records as Lender at the opening of business (in the place of the Agent’s principal office as notified to the Finance Parties from time to time) as the Lender acting through its Facility Office:

 

  (a)

entitled to or liable for any payment due under any Finance Document on that day; and

 

  (b)

entitled to receive and act upon any notice, request, document or communication or make any decision or determination under any Finance Document made or delivered on that day,

unless it has received not less than five Business Days’ prior notice from that Lender to the contrary in accordance with the terms of this Agreement.

 

  27.16.2

Any Lender may by notice to the Agent appoint a person to receive on its behalf all notices, communications, information and documents to be made or dispatched to that Lender under the Finance Documents. Such notice shall contain the address, fax number and (where communication by electronic mail or other electronic means is permitted under Clause 33.5 (Electronic communication)) electronic mail address and/or any other information required to enable the transmission of information by that means (and, in each case, the department or officer, if any, for whose attention communication is to be made) and be treated as a notification of a substitute address, fax number, electronic mail address, department and officer by that Lender for the purposes of Clause 33.2 (Addresses) and Clause 33.5 (Electronic communication) and the Agent shall be entitled to treat such person as the person entitled to receive all such notices, communications, information and documents as though that person were that Lender.

 

27.17

Credit appraisal by the Lenders Without affecting the responsibility of any Obligor for information supplied by it or on its behalf in connection with any Relevant Document, each Lender confirms to the Agent and the Bookrunner that it has been, and will continue to be, solely responsible for making its own independent appraisal and investigation of all risks arising under or in connection with any Relevant Document including but not limited to:

 

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  27.17.1

the financial condition, status and nature of each Obligor;

 

  27.17.2

the legality, validity, effectiveness, adequacy or enforceability of any Relevant Document and any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Relevant Document;

 

  27.17.3

whether that Lender has recourse, and the nature and extent of that recourse, against any Party or any of its respective assets under or in connection with any Relevant Document, the transactions contemplated by the Relevant Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of under or in connection with any Relevant Document; and

 

  27.17.4

the right or title of any person in or to, or the value or sufficiency of any part of the Charged Property, the priority of any Encumbrance created or expressed to be created or evidenced by the Security Documents or the existence of any Encumbrance affecting the Charged Property.

 

27.18

Reference Banks If a Reference Bank (or, if a Reference Bank is not a Lender, the Lender of which it is an Affiliate) ceases to be a Lender, the Agent shall (in consultation with the Borrowers) appoint another Lender or an Affiliate of a Lender to replace that Reference Bank.

 

27.19

Agent’s management time Any amount payable to the Agent under Clause 14.3 (Indemnity to the Agent), Clause 14.4 (Indemnity to the Security Agent), Clause 16 (Costs and expenses) and Clause 27.11 (Lenders’ indemnity to the Agent) shall include the cost of utilising the Agent’s management time or other resources and will be calculated on the basis of such reasonable daily or hourly rates as the Agent may notify to the Borrowers and the Lenders, and is in addition to any fee paid or payable to the Agent under Clause 11 (Fees).

 

27.20

Deduction from amounts payable by the Agent If any Party owes an amount to the Agent under the Finance Documents the Agent may, after giving notice to that Party, deduct an amount not exceeding that amount from any payment to that Party which the Agent would otherwise be obliged to make under the Finance Documents and apply the amount deducted in or towards satisfaction of the amount owed. For the purposes of the Finance Documents that Party shall be regarded as having received any amount so deducted.

 

28

Application of Proceeds

 

28.1

Order of application Subject to Clause 28.2 (Prospective liabilities), all amounts from time to time received or recovered by the Security Agent pursuant to the terms of any Finance Document or in connection with the realisation or enforcement of all or any Encumbrance created or expressed to be created under the Security Documents (for the purposes of this Clause 28, the “Recoveries”) shall be held by the Security Agent on trust to apply them at any time as the Security Agent (in its discretion) sees fit, to the extent permitted by applicable law (and subject to the provisions of this Clause 28), in the following order:

 

Page 110


  28.1.1

in discharging any sums owing to the Security Agent, any Receiver or any Delegate;

 

  28.1.2

in payment of all costs and expenses incurred by the Agent or any Secured Party in connection with any realisation or enforcement of any Encumbrance created or expressed to be created under the Security Documents taken in accordance with the terms of this Agreement; and

 

  28.1.3

in payment to the Agent for application in accordance with Clause 31.5 (Partial payments).

 

28.2

Prospective liabilities Following enforcement of any Encumbrance created or expressed to be created under the Security Documents the Security Agent may, in its discretion, hold any amount of the Recoveries in an interest bearing suspense or impersonal account(s) in the name of the Security Agent with such financial institution (including itself) and for so long as the Security Agent shall think fit (the interest being credited to the relevant account) for later application under Clause 28.1 (Order of application) in respect of:

 

  28.2.1

any sum to the Security Agent, any Receiver or any Delegate; and

 

  28.2.2

any part of the Indebtedness,

that the Security Agent reasonably considers, in each case, might become due or owing at any time in the future.

 

28.3

Investment of proceeds Prior to the application of the proceeds of the Recoveries in accordance with Clause 28.1 (Order of application) the Security Agent may, in its discretion, hold all or part of those proceeds in an interest bearing suspense or impersonal account(s) in the name of the Security Agent with such financial institution (including itself) and for so long as the Security Agent shall think fit (the interest being credited to the relevant account) pending the application from time to time of those moneys in the Security Agent’s discretion in accordance with the provisions of this Clause 28.

 

28.4

Currency conversion

 

  28.4.1

For the purpose of, or pending the discharge of, any part of the Indebtedness the Security Agent may convert any moneys received or recovered by the Security Agent from one currency to another, at a market rate of exchange.

 

  28.4.2

The obligations of any Obligor to pay in the due currency shall only be satisfied to the extent of the amount of the due currency purchased after deducting the costs of conversion.

 

28.5

Permitted deductions The Security Agent shall be entitled, in its discretion:

 

  28.5.1

to set aside by way of reserve amounts required to meet, and to make and pay, any deductions and withholdings (on account of taxes or otherwise) which it is or may be required by any applicable law to make from any distribution or payment made by it under this Agreement; and

 

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  28.5.2

to pay all Taxes which may be assessed against it in respect of any of the Trust Property, or as a consequence of performing its duties, or by virtue of its capacity as Security Agent under any of the Finance Documents or otherwise (other than in connection with its remuneration for performing its duties under this Agreement).

 

28.6

Good discharge

 

  28.6.1

Any payment to be made in respect of the Indebtedness by the Security Agent may be made to the Agent on behalf of the Finance Parties and any payment made in that way shall be a good discharge, to the extent of that payment, by the Security Agent.

 

  28.6.2

The Security Agent is under no obligation to make the payments to the Agent under Clause 28.6.1 in the same currency as that in which the obligations and liabilities owing to the relevant Finance Party are denominated.

 

29

Conduct of Business by the Finance Parties

No provision of this Agreement will:

 

29.1

interfere with the right of any Finance Party to arrange its affairs (tax or otherwise) in whatever manner it thinks fit;

 

29.2

oblige any Finance Party to investigate or claim any credit, relief, remission or repayment available to it or the extent, order and manner of any claim; or

 

29.3

oblige any Finance Party to disclose any information relating to its affairs (tax or otherwise) or any computations in respect of Tax.

 

30

Sharing among the Finance Parties

 

30.1

Payments to Finance Parties If a Finance Party (a “Recovering Finance Party”) receives or recovers any amount from an Obligor other than in accordance with Clause 31 (Payment Mechanics) (a “Recovered Amount”) and applies that amount to a payment due under the Finance Documents then:

 

  30.1.1

the Recovering Finance Party shall, within three Business Days, notify details of the receipt or recovery, to the Agent;

 

  30.1.2

the Agent shall determine whether the receipt or recovery is in excess of the amount the Recovering Finance Party would have been paid had the receipt or recovery been received or made by the Agent and distributed in accordance with Clause 31 (Payment Mechanics), without taking account of any Tax which would be imposed on the Agent in relation to the receipt, recovery or distribution; and

 

  30.1.3

the Recovering Finance Party shall, within three Business Days of demand by the Agent, pay to the Agent an amount (the “Sharing Payment”) equal to such receipt or recovery less any amount which the Agent determines may be retained by the Recovering Finance Party as its share of any payment to be made, in accordance with Clause 31.5 (Partial payments).

 

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30.2

Redistribution of payments The Agent shall treat the Sharing Payment as if it had been paid by the relevant Obligor and distribute it between the Finance Parties (other than the Recovering Finance Party) (the “Sharing Finance Parties”) in accordance with Clause 31.5 (Partial payments) towards the obligations of that Obligor to the Sharing Finance Parties.

 

30.3

Recovering Finance Party’s rights On a distribution by the Agent under Clause 30.2 (Redistribution of payments) of a payment received by a Recovering Finance Party from an Obligor, as between the relevant Obligor and the Recovering Finance Party, an amount of the Recovered Amount equal to the Sharing Payment will be treated as not having been paid by that Obligor.

 

30.4

Reversal of redistribution If any part of the Sharing Payment received or recovered by a Recovering Finance Party becomes repayable and is repaid by that Recovering Finance Party, then:

 

  30.4.1

each Sharing Finance Party shall, upon request of the Agent, pay to the Agent for the account of that Recovering Finance Party an amount equal to the appropriate part of its share of the Sharing Payment (together with an amount as is necessary to reimburse that Recovering Finance Party for its proportion of any interest on the Sharing Payment which that Recovering Finance Party is required to pay) (the “Redistributed Amount”); and

 

  30.4.2

as between the relevant Obligor and each relevant Sharing Finance Party, an amount equal to the relevant Redistributed Amount will be treated as not having been paid by that Obligor.

 

30.5

Exceptions

 

  30.5.1

This Clause 30 shall not apply to the extent that the Recovering Finance Party would not, after making any payment pursuant to this Clause, have a valid and enforceable claim against the relevant Obligor.

 

  30.5.2

A Recovering Finance Party is not obliged to share with any other Finance Party any amount which the Recovering Finance Party has received or recovered as a result of taking legal or arbitration proceedings, if:

 

  (a)

it notified that other Finance Party of the legal or arbitration proceedings; and

 

  (b)

that other Finance Party had an opportunity to participate in those legal or arbitration proceedings but did not do so as soon as reasonably practicable having received notice and did not take separate legal or arbitration proceedings.

 

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Section 11 Administration

 

31

Payment Mechanics

 

31.1

Payments to the Agent On each date on which an Obligor or a Lender is required to make a payment under a Finance Document (other than the Master Agreement), that Obligor or that Lender shall make the same available to the Agent (unless a contrary indication appears in a Finance Document) for value on the due date at the time and in such funds specified by the Agent as being customary at the time for settlement of transactions in the relevant currency in the place of payment.

Payment shall be made to such account in the principal financial centre of the country of that currency with such bank as the Agent specifies.

 

31.2

Distributions by the Agent Each payment received by the Agent under the Finance Documents for another Party shall, subject to Clause 31.3 (Distributions to an Obligor) and Clause 31.4 (Clawback and pre-funding) be made available by the Agent as soon as practicable after receipt to the Party entitled to receive payment in accordance with this Agreement (in the case of a Lender, for the account of its Facility Office), to such account as that Party may notify to the Agent by not less than five Business Days’ notice with a bank specified by that Party in the principal financial centre of the country of that currency.

 

31.3

Distributions to an Obligor The Agent may (with the consent of an Obligor or in accordance with Clause 32 (Set-Off)) apply any amount received by it for that Obligor in or towards payment (on the date and in the currency and funds of receipt) of any amount due from that Obligor under the Finance Documents or in or towards purchase of any amount of any currency to be so applied.

 

31.4

Clawback and pre-funding

 

  31.4.1

Where a sum is to be paid to the Agent under the Finance Documents for another Party, the Agent is not obliged to pay that sum to that other Party (or to enter into or perform any related exchange contract) until it has been able to establish to its satisfaction that it has actually received that sum.

 

  31.4.2

Unless Clause 31.4.3 applies, if the Agent pays an amount to another Party and it proves to be the case that the Agent had not actually received that amount, then the Party to whom that amount (or the proceeds of any related exchange contract) was paid by the Agent shall on demand refund the same to the Agent together with interest on that amount from the date of payment to the date of receipt by the Agent, calculated by the Agent to reflect its cost of funds.

 

  31.4.3

If the Agent has notified the Lenders that it is willing to make available amounts for the account of a Borrower before receiving funds from the Lenders then if and to the extent that the Agent does so but it proves to be the case that it does not then receive funds from a Lender in respect of a sum which it paid to a Borrower:

 

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  (a)

the Agent shall notify the Borrowers of that Lender’s identity and the Borrower to whom that sum was made available shall on demand refund it to the Agent; and

 

  (b)

the Lender by whom those funds should have been made available or, if that Lender fails to do so, the Borrower to whom that sum was made available, shall on demand pay to the Agent the amount (as certified by the Agent) which will indemnify the Agent against any funding cost incurred by it as a result of paying out that sum before receiving those funds from that Lender.

 

31.5

Partial payments

 

  31.5.1

If the Agent or the Security Agent (as applicable) receives a payment that is insufficient to discharge all the amounts then due and payable by an Obligor under the Finance Documents (other than the Master Agreement), the Agent or the Security Agent (as applicable) shall apply that payment towards the obligations of that Obligor under the Finance Documents (other than the Master Agreement) in the following order:

 

  (a)

in or towards payment pro rata of any unpaid fees, costs and expenses of the Agent, the Security Agent, any Receiver or any Delegate under the Finance Documents;

 

  (b)

in or towards payment pro rata of any accrued interest, fee or commission due but unpaid under this Agreement;

 

  (c)

in or towards payment pro rata of any principal due but unpaid under this Agreement; and

 

  (d)

in or towards payment pro rata of any other sum due but unpaid under the Finance Documents,

provided that any part of the Indebtedness arising out of the Master Agreement shall be satisfied on a pari passu basis with any repayment of the principal of the Loan.

 

  31.5.2

The Agent shall, if so directed by the Majority Lenders, vary the order set out in Clauses 31.5.1(b) to 31.5.1(d).

 

  31.5.3

Clauses 31.5.1 and 31.5.2 will override any appropriation made by an Obligor.

 

31.6

No set-off by Obligors All payments to be made by an Obligor under the Finance Documents shall be calculated and be made without (and free and clear of any deduction for) set-off or counterclaim.

 

31.7

Business Days Any payment under the Finance Documents which is due to be made on a day that is not a Business Day shall be made on the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not).

During any extension of the due date for payment of any principal or Unpaid Sum under this Agreement interest is payable on the principal or Unpaid Sum at the rate payable on the original due date.

 

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31.8

Currency of account

 

  31.8.1

Subject to Clauses 31.8.2 to 31.8.5, dollars is the currency of account and payment for any sum due from an Obligor under any Finance Document.

 

  31.8.2

A repayment or payment of all or part of the Loan or an Unpaid Sum shall be made in the currency in which the Loan or Unpaid Sum is denominated, pursuant to this Agreement, on its due date.

 

  31.8.3

Each payment of interest shall be made in the currency in which the sum in respect of which the interest is payable was denominated, pursuant to this Agreement, when that interest accrued.

 

  31.8.4

Each payment in respect of costs, expenses or Taxes shall be made in the currency in which the costs, expenses or Taxes are incurred.

 

  31.8.5

Any amount expressed to be payable in a currency other than dollars shall be paid in that other currency.

 

31.9

Control account The Agent shall open and maintain on its books a control account in the name of each Borrower showing the advance of the Loan and the computation and payment of interest and all other sums due under this Agreement. The Borrowers’ obligations to repay the Loan and to pay interest and all other sums due under this Agreement shall be evidenced by the entries from time to time made in the control account opened and maintained under this Clause 31.9 and those entries will, in the absence of manifest error, be conclusive and binding.

 

31.10

Change of currency

 

  31.10.1

Unless otherwise prohibited by law, if more than one currency or currency unit are at the same time recognised by the central bank of any country as the lawful currency of that country, then:

 

  (a)

any reference in the Finance Documents to, and any obligations arising under the Finance Documents in, the currency of that country shall be translated into, or paid in, the currency or currency unit of that country designated by the Agent (after consultation with the Borrowers); and

 

  (b)

any translation from one currency or currency unit to another shall be at the official rate of exchange recognised by the central bank for the conversion of that currency or currency unit into the other, rounded up or down by the Agent (acting reasonably).

 

  31.10.2

If a change in any currency of a country occurs, this Agreement will, to the extent the Agent (acting reasonably and after consultation with the Borrowers) specifies to be necessary, be amended to comply with any generally accepted conventions and market practice in the Relevant Market and otherwise to reflect the change in currency.

 

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31.11

Disruption to payment systems etc. If either the Agent determines that a Disruption Event has occurred or the Agent is notified by the Borrowers that a Disruption Event has occurred:

 

  31.11.1

the Agent may, and shall if requested to do so by the Borrowers, consult with the Borrowers with a view to agreeing with the Borrowers such changes to the operation or administration of the Loan as the Agent may deem necessary in the circumstances;

 

  31.11.2

the Agent shall not be obliged to consult with the Borrowers in relation to any changes mentioned in Clause 31.11.1 if, in its opinion, it is not practicable to do so in the circumstances and, in any event, shall have no obligation to agree to any such changes;

 

  31.11.3

the Agent may consult with the Finance Parties in relation to any changes mentioned in Clause 31.11.1 but shall not be obliged to do so if, in its opinion, it is not practicable to do so in the circumstances;

 

  31.11.4

any such changes agreed upon by the Agent and the Borrowers shall (whether or not it is finally determined that a Disruption Event has occurred) be binding upon the Parties as an amendment to (or, as the case may be, waiver of) the terms of the Finance Documents notwithstanding the provisions of Clause 37 (Amendments and Waivers);

 

  31.11.5

the Agent shall not be liable for any damages, costs or losses to any person, any diminution in value or any liability whatsoever (including, without limitation, for negligence, gross negligence or any other category of liability whatsoever but not including any claim based on the fraud of the Agent) arising as a result of its taking, or failing to take, any actions pursuant to or in connection with this Clause 31.11; and

 

  31.11.6

the Agent shall notify the Finance Parties of all changes agreed pursuant to Clause 31.11.4.

 

32

Set-Off

 

32.1

Set-off A Finance Party may set off any matured obligation due from an Obligor under the Finance Documents (to the extent beneficially owned by that Finance Party) against any matured obligation owed by that Finance Party to that Obligor, regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies, the Finance Party may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.

 

32.2

Master Agreement rights The rights conferred on the Swap Provider by this Clause 32 shall be in addition to, and without prejudice to or limitation of, the rights of netting and set off conferred on the Swap Provider by each Master Agreement.

 

33

Notices

 

33.1

Communications in writing Any communication to be made under or in connection with the Finance Documents shall be made in writing and, unless otherwise stated, may be made by fax or letter.

 

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33.2

Addresses The address and fax number (and the department or officer, if any, for whose attention the communication is to be made) of each Party for any communication or document to be made or delivered under or in connection with the Finance Documents is:

 

  33.2.1

in the case of each Borrower, that identified with its name in Part III of Schedule 1 (The Parties);

 

  33.2.2

in the case of the Guarantor, that identified with its name in Part III of Schedule 1 (The Parties);

 

  33.2.3

in the case of each Lender, that notified in writing to the Agent on or prior to the date on which it becomes a Party; and

 

  33.2.4

in the case of the Swap Provider, that identified with its name in Part II of Schedule 1 (The Parties); and

 

  33.2.5

in the case of the Agent or the Security Agent, that identified with its name in Part II of Schedule 1 (The Parties),

or any substitute address, fax number, or department or officer as the Party may notify to the Agent (or the Agent may notify to the other Parties, if a change is made by the Agent) by not less than five Business Days’ notice.

 

33.3

Delivery Any communication or document made or delivered by one person to another under or in connection with the Finance Documents will only be effective:

 

  33.3.1

if by way of fax, when received in legible form; or

 

  33.3.2

if by way of letter, when it has been left at the relevant address or five Business Days after being deposited in the post postage prepaid in an envelope addressed to it at that address;

and, if a particular department or officer is specified as part of its address details provided under Clause 33.2 (Addresses), if addressed to that department or officer.

Any communication or document to be made or delivered to the Agent or the Security Agent will be effective only when actually received by the Agent or the Security Agent and then only if it is expressly marked for the attention of the department or officer identified with the Agent’s or the Security Agent’s signature below (or any substitute department or officer as the Agent or the Security Agent shall specify for this purpose).

All notices from or to an Obligor (save in respect of each Master Agreement) shall be sent through the Agent.

Any communication or document which becomes effective, in accordance with this Clause 33.3, after 5.00 p.m. in the place of receipt shall be deemed only to become effective on the following day.

 

33.4

Notification of address and fax number Promptly upon changing its address or fax number, the Agent shall notify the other Parties.

 

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33.5

Electronic communication

 

  33.5.1

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:

 

  (a)

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

 

  (b)

notify each other of any change to their address or any other such information supplied by them by not less than five Business Days’ notice.

 

  33.5.2

Any such electronic communication to be made between an Obligor and a Finance Party may only be made in that way to the extent that those two Parties agree that, unless and until notified to the contrary, this is to be an accepted form of communication.

 

  33.5.3

Any such electronic communication 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 Agent or the Security Agent only if it is addressed in such a manner as the Agent or the Security Agent shall specify for this purpose.

 

  33.5.4

Any electronic communication which becomes effective, in accordance with Clause 33.5.3, after 5.00 p.m. in the place in which the Party to whom the relevant communication is sent or made available has its address for the purpose of this Agreement shall be deemed only to become effective on the following day.

 

  33.5.5

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 33.5.

 

33.6

English language Any notice given under or in connection with any Finance Document must be in English. All other documents provided under or in connection with any Finance Document must be:

 

  33.6.1

in English; or

 

  33.6.2

if not in English, and if so required by the Agent, accompanied by a certified English translation and, in this case, the English translation will prevail unless the document is a constitutional, statutory or other official document.

 

34

Calculations and Certificates

 

34.1

Accounts In any litigation or arbitration proceedings arising out of or in connection with a Finance Document, the entries made in the accounts maintained by the Agent pursuant to Clause 31.9 (Control account) are prima facie evidence of the matters to which they relate.

 

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34.2

Certificates and determinations Any certification or determination by the Agent of a rate or amount under any Finance Document is, in the absence of manifest error, conclusive evidence of the matters to which it relates.

 

34.3

Day count convention and interest calculation 

 

  34.3.1

Any interest, commission or fee accruing under a Finance Document will accrue from day to day and the amount of any such interest, commission or fee is calculated:

 

  (a)

on the basis of the actual number of days elapsed and a year of 360 days (or, in any case where the practice in the Relevant Market differs, in accordance with that market practice); and

 

  (b)

subject to Clause 34.3.2, without rounding.

 

  34.3.2

The aggregate amount of any accrued interest, commission or fee which is, or becomes, payable by an Obligor under a Finance Document shall be rounded to two decimal places.

 

35

Partial Invalidity

If, at any time, any provision of a Finance Document is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of such provision under the law of any other jurisdiction will in any way be affected or impaired.

 

36

Remedies and Waivers

No failure to exercise, nor any delay in exercising, on the part of any Finance Party or Secured Party, any right or remedy under a Finance Document shall operate as a waiver of any such right or remedy or constitute an election to affirm any Finance Document. No election to affirm any Finance Document on the part of any Finance Party or Secured Party shall be effective unless it is in writing. No single or partial exercise of any right or remedy shall prevent any further or other exercise or the exercise of any other right or remedy. The rights and remedies provided in each Finance Document are cumulative and not exclusive of any rights or remedies provided by law.

 

37

Amendments and Waivers

 

37.1

Required consents

 

  37.1.1

Subject to Clause 37.2 (Exceptions) any term of the Finance Documents (other than the Master Agreement) may be amended or waived only with the consent of the Majority Lenders and the Borrowers and any such amendment or waiver will be binding on all Parties.

 

  37.1.2

The Agent may effect, on behalf of any Finance Party, any amendment or waiver permitted by this Clause 37.

 

  37.1.3

Without prejudice to the generality of Clauses 27.7.3, 27.7.4 and 27.7.5 (Rights and discretions of the Agent), the Agent may engage, pay for and rely on the services of lawyers in determining the consent level required for and effecting any amendment, waiver or consent under this Agreement.

 

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  37.1.4

Clause 25.9.3 (Pro rata interest settlement) shall apply to this Clause 37.

 

37.2

Exceptions

 

  37.2.1

Subject to Clause 37.3 (Changes to reference rate), an amendment, waiver or (in the case of a Security Document) a consent of, or in relation to, any term of any Finance Document that has the effect of changing or which relates to:

 

  (a)

the definition of “Approved Family Members”, “Majority Lenders” “Relevant Person”, “Restricted Party”, “Sanctions”, “Sanctions Authority” and “Sanctions List” in Clause 1.1 (Definitions);

 

  (b)

an extension to the date of payment of any amount under the Finance Documents;

 

  (c)

a reduction in the Margin or a reduction in the amount of any payment of principal, interest, fees or commission payable;

 

  (d)

a change in currency of payment of any amount under the Finance Documents;

 

  (e)

an increase in any Commitment, an extension of the Availability Period or any requirement that a cancellation of Commitments reduces the Commitments of the Lenders rateably;

 

  (f)

any provision which expressly requires the consent of all the Lenders;

 

  (g)

Clause 2.2 (Finance Parties’ rights and obligations), Clause 5.1 (Delivery of a Utilisation Request), Clause 7.1 (Illegality), Clause 7.5 (Mandatory prepayment on sale or Total Loss), Clause 20.1.25 (Sanctions), Clause 23.25 (Sanctions), Clause 25 (Changes to the Lenders), Clause 26 (Changes to the Obligors), this Clause 37, Clause 42 (Governing Law) or Clause 43.1 (Jurisdiction of English courts);

 

  (h)

(other than as expressly permitted by the provisions of any Finance Document) the nature or scope of:

 

  (i)

any Guarantee;

 

  (ii)

the Charged Property; or

 

  (iii)

the manner in which the proceeds of enforcement of the Security Documents are distributed; or

 

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  (i)

the release of any Guarantee or of any Encumbrance created or expressed to be created or evidenced by the Security Documents unless permitted under this Agreement or any other Finance Document or relating to a sale or disposal of an asset which is the subject of any Encumbrance created or expressed to be created or evidenced by the Security Documents where such sale or disposal is expressly permitted under this Agreement or any other Finance Document;

shall not be made, or given, without the prior consent of all the Lenders.

 

  37.2.2

An amendment or waiver which relates to the rights or obligations of the Agent, the Security Agent or the Bookrunner (each in their capacity as such) may not be effected without the consent of the Agent, the Security Agent or, as the case may be, the Bookrunner.

 

37.3

Changes to reference rates

 

  37.3.1

In this Clause 37.3:

Published Rate” means an RFR or the Screen Rate to any Quoted Tenor.

Published Rate Replacement Event” means, in relation to a Published Rate:

 

  (a)

the methodology, formula or other means of determining that Published Rate has materially changed;

 

  (b)

 

  (i)

 

  (A)

the administrator of that Published 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 Published Rate is insolvent,

provided that, in each case, at that time, there is no successor administrator to continue to provide that Published Rate:

 

  (ii)

the administrator of that Published Rate publicly announces that it has ceased or will cease, to provide that Published Rate permanently or indefinitely and, at that time, there is no successor administrator to continue to provide that Published Rate;

 

  (iii)

the supervisor of the administrator of that Published Rate publicly announces that such Published Rate has been or will be permanently or indefinitely discontinued; or

 

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  (iv)

the administrator of that Published Rate or its supervisor announces that that Published Rate may no longer be used; or

(c) in the opinion of the Majority Lenders and the Borrowers, that Published Rate is otherwise no longer appropriate for the purposes of calculating interest under this Agreement.

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 Reference Rate” means a benchmark rate which is:

i. formally designated, nominated or recommended as the replacement for a Published Rate by:

 

  (i)

the administrator of that Published Rate (provided that the market and economic reality that such reference rate measures is the same as that measured by that Published Rate); or

 

  (ii)

any Relevant Nominating Body,

and if replacements have, at the relevant time, been formally designated, nominated or recommended under both (i) and (ii), the “Replacement Reference Rate” will be the replacement under (ii);

 

  ii.

in the opinion of the Majority Lenders and the Borrowers, generally accepted in the international or any relevant domestic syndicated loan markets as the appropriate successor to that Published Rate; or

 

  iii.

in the opinion of the Majority Lenders and the Borrowers, an appropriate successor to a Published Rate.

 

  37.3.2

Subject to Clause 37.2.2 (Exceptions), if a Published Rate Replacement Event has occurred in relation to any Published Rate for a relevant currency, any amendment or waiver which relates to:

 

  (a)

providing for the use of a Replacement Reference Rate in relation to that currency in place of that Published Rate; and

 

  (b)

 

  (i)

aligning any provision of any Finance Document to the use of that Replacement Reference Rate;

 

  (ii)

enabling that Replacement Reference Rate to be used for the calculation of interest under this Agreement (including, without limitation, any consequential changes required to enable that Replacement Reference Rate to be used for the purposes of this Agreement);

 

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  (iii)

implementing market conventions applicable to that Replacement Reference Rate;

 

  (iv)

providing for appropriate fallback (and market disruption) provisions for that Replacement Reference Rate; 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 Reference Rate (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 Agent (acting on the instructions of the Majority Lenders) and the Borrowers.

 

  37.3.3

An amendment or waiver that relates to, or has the effect of, aligning the means of calculation of interest on a Compounded Rate Tranche under this Agreement to any recommendation of a Relevant Nominating Body which:

 

  (a)

relates to the use of a risk-free rate on a compounded basis in the international or any relevant domestic syndicated loan markets; and

 

  (b)

is issued on or after the date of this Agreement,

may be made with the consent of the Agent (acting on the instructions of the Majority Lenders) and the Borrowers.

 

  37.3.4

If any Lender fails to respond to a request for an amendment or waiver described in Clause 37.3.1 or Clause 37.3.2 within 30 days (or such longer time period in relation to any request which the Borrowers and the Agent may agree) of that request being made:

 

  (a)

its Commitment(s) shall not be included for the purpose of calculating the Total Commitments under the relevant Tranche when ascertaining whether any relevant percentage of Total Commitments has been obtained to approve that request; and

 

  (b)

its status as a Lender shall be disregarded for the purpose of ascertaining whether the agreement of any specified group of Lenders has been obtained to approve that request.

 

37.4

Excluded Commitments

If:

 

  37.4.1

any Defaulting Lender fails to respond to a request for a consent, waiver, amendment of or in relation to any term of any Finance Document or any other vote of Lenders under the terms of this Agreement within ten Business Days of that request being made; or

 

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  37.4.2

any Lender which is not a Defaulting Lender fails to respond to such a request (other than an amendment, waiver or consent referred to in Clauses 37.2.1(b), 37.2.1(c) and 37.2.1(e) (Exceptions)) or such a vote within ten Business Days of that request being made,

(unless, in either case, the Borrowers and the Agent agree to a longer time period in relation to any request):

 

  (a)

its Commitment(s) shall not be included for the purpose of calculating the Total Commitments when ascertaining whether any relevant percentage (including, for the avoidance of doubt, unanimity) of Total Commitments has been obtained to approve that request; and

 

  (b)

its status as a Lender shall be disregarded for the purpose of ascertaining whether the agreement of any specified group of Lenders has been obtained to approve that request.

 

37.5

Replacement of Lender

 

  37.5.1

If:

 

  (a)

any Lender becomes a Non-Consenting Lender (as defined in Clause 37.5.4); or

 

  (b)

a Borrower or any other Obligor becomes obliged to repay any amount in accordance with Clause 7.1 (Illegality) or to pay additional amounts pursuant to Clause 12.2 (Tax gross-up), Clause 12.3 (Tax Indemnity) or Clause 13.1 (Increased costs) to any Lender,

then the Borrowers may, on ten Business Days’ prior written notice to the Agent and such Lender, replace such Lender by requiring such Lender to (and, to the extent permitted by law, such Lender shall) transfer pursuant to Clause 25 (Changes to the Lenders) all (and not part only) of its rights and obligations under this Agreement to a Lender or other bank, financial institution, trust, fund or other entity selected by the Borrowers (a “Replacement Lender”), which confirms its willingness to assume and does assume all the obligations of the transferring Lender in accordance with Clause 25 (Changes to the Lenders) for a purchase price in cash payable at the time of transfer in an amount equal to the outstanding principal amount of such Lender’s participation in the outstanding Loan and all accrued interest (to the extent that the Agent has not given a notification under Clause 25.9 (Pro rata interest settlement)), Break Costs and other amounts payable in relation thereto under the Finance Documents.

 

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  37.5.2

The replacement of a Lender pursuant to this Clause 37.5 shall be subject to the following conditions:

 

  (a)

the Borrowers shall have no right to replace the Agent or Security Agent;

 

  (b)

neither the Agent nor the Lender shall have any obligation to the Borrowers to find a Replacement Lender;

 

  (c)

in the event of a replacement of a Non-Consenting Lender such replacement must take place no later than ten Business Days after the date on which that Lender is deemed a Non-Consenting Lender;

 

  (d)

in no event shall the Lender replaced under this Clause 37.5 be required to pay or surrender to such Replacement Lender any of the fees received by such Lender pursuant to the Finance Documents; and

 

  (e)

the Lender shall only be obliged to transfer its rights and obligations pursuant to Clause 37.5.1 once it is satisfied that it has complied with all necessary “know your customer” or other similar checks under all applicable laws and regulations in relation to that transfer.

 

  37.5.3

A Lender shall perform the checks described in Clause 37.5.2(e) as soon as reasonably practicable following delivery of a notice referred to in Clause 37.5.1 and shall notify the Agent and the Borrowers when it is satisfied that it has complied with those checks.

 

  37.5.4

In the event that:

 

  (a)

the Borrowers or the Agent (at the request of the Borrowers) has requested the Lenders to give a consent in relation to, or to agree to a waiver or amendment of, any provisions of the Finance Documents;

 

  (b)

the consent, waiver or amendment in question requires the approval of all the Lenders; and

 

  (c)

Lenders whose Commitments aggregate more than 662/3% of the Total Commitments (or, if the Total Commitments have been reduced to zero, aggregated more than 662/3% of the Total Commitments prior to that reduction) have consented or agreed to such waiver or amendment,

then any Lender who does not and continues not to consent or agree to such waiver or amendment shall be deemed a “Non-Consenting Lender”.

 

37.6

Disenfranchisement of Defaulting Lenders

 

  37.6.1

For so long as a Defaulting Lender has any Commitment, in ascertaining:

 

  (a)

the Majority Lenders; or

 

  (b)

whether:

 

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  (i)

any given percentage (including, for the avoidance of doubt, unanimity) of the Total Commitments; or

 

  (ii)

the agreement of any specified group of Lenders,

has been obtained to approve any request for a consent, waiver, amendment or other vote of Lenders under the Finance Documents, that Defaulting Lender’s Commitment will be reduced by the amount of its participation in the Loan it has failed to make available and, to the extent that that reduction results in that Defaulting Lender’s Commitment being zero, that Defaulting Lender shall be deemed not to be a Lender for the purposes of (i) and (ii).

 

  37.6.2

For the purposes of this Clause 37.6, the Agent may assume that the following Lenders are Defaulting Lenders:

 

  (a)

any Lender which has notified the Agent that it has become a Defaulting Lender;

 

  (b)

any Lender in relation to which it is aware that any of the events or circumstances referred to in (a), (b) or (c) of the definition of “Defaulting Lender” has occurred,

unless it has received notice to the contrary from the Lender concerned (together with any supporting evidence reasonably requested by the Agent) or the Agent is otherwise aware that the Lender has ceased to be a Defaulting Lender.

 

37.7

Replacement of a Defaulting Lender

 

  37.7.1

The Borrowers may, at any time a Lender has become and continues to be a Defaulting Lender, by giving ten Business Days’ prior written notice to the Agent and such Lender, replace such Lender by requiring such Lender to (and, to the extent permitted by law, such Lender shall) transfer pursuant to Clause 25 (Changes to the Lenders) all (and not part only) of its rights and obligations under this Agreement to a Lender or other bank, financial institution, trust, fund or other entity selected by the Borrowers (a “Replacement Lender”) which confirms its willingness to assume and does assume all the obligations, or all the relevant obligations, of the transferring Lender in accordance with Clause 25 (Changes to the Lenders) for a purchase price in cash payable at the time of transfer which is either:

 

  (a)

in an amount equal to the outstanding principal amount of such Lender’s participation in the outstanding Loan and all accrued interest (to the extent that the Agent has not given a notification under Clause 25.9 (Pro rata interest settlement), Break Costs and other amounts payable in relation thereto under the Finance Documents; or

 

  (b)

in an amount agreed between that Defaulting Lender, the Replacement Lender and the Borrowers and which does not exceed the amount described in (a).

 

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  37.7.2

Any transfer of rights and obligations of a Defaulting Lender pursuant to this Clause 37.7 shall be subject to the following conditions:

 

  (a)

the Borrowers shall have no right to replace the Agent or Security Agent;

 

  (b)

neither the Agent nor the Defaulting Lender shall have any obligation to the Borrowers to find a Replacement Lender;

 

  (c)

the transfer must take place no later than ten Business Days after the notice referred to in Clause 37.7.1;

 

  (d)

in no event shall the Defaulting Lender be required to pay or surrender to the Replacement Lender any of the fees received by the Defaulting Lender pursuant to the Finance Documents; and

 

  (e)

the Defaulting Lender shall only be obliged to transfer its rights and obligations pursuant to 37.7.1 once it is satisfied that it has complied with all necessary “know your customer” or other similar checks under all applicable laws and regulations in relation to that transfer to the Replacement Lender.

 

  37.7.3

The Defaulting Lender shall perform the checks described in Clause 37.7.2(e) as soon as reasonably practicable following delivery of a notice referred to in Clause 37.7.1 and shall notify the Agent and the Borrowers when it is satisfied that it has complied with those checks.

 

38

Confidentiality

 

38.1

Confidential Information Each Finance Party agrees to keep all Confidential Information confidential and not to disclose it to anyone, save to the extent permitted by Clause 38.2 (Disclosure of Confidential Information), Clause 38.3 (Disclosure to numbering service providers) and Clause 38.7 (Agent’s publication), and to ensure that all Confidential Information is protected with security measures and a degree of care that would apply to its own confidential information.

 

38.2

Disclosure of Confidential Information Any Finance Party may disclose:

 

  38.2.1

to any of its Affiliates and Related Funds and any of its or their officers, directors, employees, professional advisers, insurers, auditors, partners and Representatives such Confidential Information as that Finance Party shall consider appropriate if any person to whom the Confidential Information is to be given pursuant to this Clause 38.2.1 is informed in writing of its confidential nature and that some or all of such Confidential Information may be price-sensitive information except that there shall be no such requirement to so inform if the recipient is subject to professional obligations to maintain the confidentiality of the information or is otherwise bound by requirements of confidentiality in relation to the Confidential Information;

 

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  38.2.2

to any person:

 

  (a)

to (or through) whom it assigns or transfers (or may potentially assign or transfer) all or any of its rights and/or obligations under one or more Finance Documents or which succeeds (or which may potentially succeed) it as Agent or Security Agent and, in each case, to any of that person’s Affiliates, Related Funds, Representatives and professional advisers;

 

  (b)

with (or through) whom it enters into (or may potentially enter into), whether directly or indirectly, any sub-participation in relation to, or any other transaction under which payments are to be made or may be made by reference to, one or more Finance Documents and/or one or more Obligors and to any of that person’s Affiliates, Related Funds, Representatives and professional advisers;

 

  (c)

appointed by any Finance Party or by a person to whom Clause 38.2.2(a) or 38.2.2(b) applies to receive communications, notices, information or documents delivered pursuant to the Finance Documents on its behalf (including, without limitation, any person appointed under Clause 27.16.2 (Relationship with the Lenders));

 

  (d)

who invests in or otherwise finances (or may potentially invest in or otherwise finance), directly or indirectly, any transaction referred to in Clause 38.2.2(a) or 38.2.2(b);

 

  (e)

to whom information is required or requested to be disclosed by any court of competent jurisdiction or any governmental, banking, taxation or other regulatory authority or similar body, the rules of any relevant stock exchange or pursuant to any applicable law or regulation;

 

  (f)

to whom information is required to be disclosed in connection with, and for the purposes of, any litigation, arbitration, administrative or other investigations, proceedings or disputes;

 

  (g)

to whom or for whose benefit that Finance Party charges, assigns or otherwise creates Security (or may do so) pursuant to Clause 25.8 (Security over Lenders’ rights);

 

  (h)

who is a Party; or

 

  (i)

with the consent of the Borrowers;

in each case, such Confidential Information as that Finance Party shall consider appropriate if:

 

  (i)

in relation to Clauses 38.2.2(a), 38.2.2(b) and 38.2.2(c), the person to whom the Confidential Information is to be given has entered into a Confidentiality Undertaking except that there shall be no requirement for a Confidentiality Undertaking if the recipient is a professional adviser and is subject to professional obligations to maintain the confidentiality of the Confidential Information;

 

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  (ii)

in relation to Clause 38.2.2(d), the person to whom the Confidential Information is to be given has entered into a Confidentiality Undertaking or is otherwise bound by requirements of confidentiality in relation to the Confidential Information they receive and is informed that some or all of such Confidential Information may be price-sensitive information;

 

  (iii)

in relation to Clauses 38.2.2(e), 38.2.2(f) and 38.2.2(g), the person to whom the Confidential Information is to be given is informed of its confidential nature and that some or all of such Confidential Information may be price-sensitive information except that there shall be no requirement to so inform if, in the opinion of that Finance Party, it is not practicable so to do in the circumstances;

 

  38.2.3

to any person appointed by that Finance Party or by a person to whom Clause 38.2.2(a) or 38.2.2(b) applies to provide administration or settlement services in respect of one or more of the Finance Documents including without limitation, in relation to the trading of participations in respect of the Finance Documents, such Confidential Information as may be required to be disclosed to enable such service provider to provide any of the services referred to in this Clause 38.2.3 if the service provider to whom the Confidential Information is to be given has entered into a Confidentiality Undertaking; and

 

  38.2.4

to any rating agency (including its professional advisers) such Confidential Information as may be required to be disclosed to enable such rating agency to carry out its normal rating activities in relation to the Finance Documents and/or the Obligors if the rating agency to whom the Confidential Information is to be given is informed of its confidential nature and that some or all of such Confidential Information may be price-sensitive information.

 

38.3

Disclosure to numbering service providers

 

  38.3.1

Any Finance Party may disclose to any national or international numbering service provider appointed by that Finance Party to provide identification numbering services in respect of this Agreement, the Loan and/or one or more Obligors the following information:

 

  (a)

names of Obligors;

 

  (b)

country of domicile of Obligors;

 

  (c)

place of incorporation of Obligors;

 

  (d)

date of this Agreement;

 

  (e)

Clause 42 (Governing law);

 

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  (f)

the names of the Agent and the Bookrunner;

 

  (g)

date of each amendment and restatement of this Agreement;

 

  (h)

amount of Total Commitments;

 

  (i)

currencies of the Loan;

 

  (j)

type of Loan;

 

  (k)

ranking of the Loan;

 

  (l)

Termination Date;

 

  (m)

changes to any of the information previously supplied pursuant to (a) to (l); and

 

  (n)

such other information agreed between such Finance Party and that Obligor,

to enable such numbering service provider to provide its usual syndicated loan numbering identification services.

 

  38.3.2

The Parties acknowledge and agree that each identification number assigned to this Agreement, the Loan and/or one or more Obligors by a numbering service provider and the information associated with each such number may be disclosed to users of its services in accordance with the standard terms and conditions of that numbering service provider.

 

  38.3.3

Each Borrower represents that none of the information set out in Clauses 38.3.1(a) to 38.3.1(n) is, nor will at any time be, unpublished price-sensitive information.

 

  38.3.4

The Agent shall notify the Borrowers and the other Finance Parties of:

 

  (a)

the name of any numbering service provider appointed by the Agent in respect of this Agreement, the Loan and/or one or more Obligors; and

 

  (b)

the number or, as the case may be, numbers assigned to this Agreement, the Loan and/or one or more Obligors by such numbering service provider.

 

38.4

Entire agreement This Clause 38 constitutes the entire agreement between the Parties in relation to the obligations of the Finance Parties under the Finance Documents regarding Confidential Information and supersedes any previous agreement, whether express or implied, regarding Confidential Information.

 

38.5

Inside information Each of the Finance Parties acknowledges that some or all of the Confidential Information is or may be price-sensitive information and that the use of such information may be regulated or prohibited by applicable legislation including securities law relating to insider dealing and market abuse and each of the Finance Parties undertakes not to use any Confidential Information for any unlawful purpose.

 

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38.6

Notification of disclosure Each of the Finance Parties agrees (to the extent permitted by law and regulation) to inform the Borrowers:

 

  38.6.1

of the circumstances of any disclosure of Confidential Information made pursuant to Clause 38.2.2(e) (Disclosure of Confidential Information) except where such disclosure is made to any of the persons referred to in that Clause during the ordinary course of its supervisory or regulatory function; and

 

  38.6.2

upon becoming aware that Confidential Information has been disclosed in breach of this Clause 38.

 

38.7

Agent’s publication The Agent shall have the right, at its own expense, to publish information about its participation in and the agency and arrangement of this Loan and for such purpose may use the logo and trademark of each Borrower and the Guarantor in connection with such publication.

 

38.8

Continuing obligations The obligations in this Clause 38 are continuing and, in particular, shall survive and remain binding on each Finance Party for a period of 12 months from the earlier of:

 

  38.8.1

the date on which all amounts payable by the Obligors under or in connection with the Finance Documents have been paid in full and all Commitments have been cancelled or otherwise cease to be available; and

 

  38.8.2

the date on which such Finance Party otherwise ceases to be a Finance Party.

 

39

Disclosure of Lender Details by Agent

 

39.1

Supply of Lender details to Borrowers The Agent shall provide to the Borrowers within seven Business Days of a request by the Borrowers (but no more frequently than once per calendar month) a list (which may be in electronic form) setting out the names of the Lenders as at the date of that request, their respective Commitments, the address and fax number (and the department or officer, if any, for whose attention any communication is to be made) of each Lender for any communication to be made or document to be delivered under or in connection with the Finance Documents, the electronic mail address and/or any other information required to enable the transmission of information by electronic mail or other electronic means to and by each Lender to whom any communication under or in connection with the Finance Documents may be made by that means and the account details of each Lender for any payment to be distributed by the Agent to that Lender under the Finance Documents.

 

39.2

Supply of Lender details at Borrowers’ direction

 

  39.2.1

The Agent shall, at the request of the Borrowers, disclose the identity of the Lenders and the details of the Lenders’ Commitments to any:

 

  (a)

other Party or any other person if that disclosure is made to facilitate, in each case, a refinancing of the Financial Indebtedness arising under the Finance Documents or a material waiver or amendment of any term of any Finance Document; and

 

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  (b)

Obligor.

 

  39.2.2

Subject to Clause 39.2.3, the Borrowers shall procure that the recipient of information disclosed pursuant to Clause 39.2.1 shall keep such information confidential and shall not disclose it to anyone and shall ensure that all such information is protected with security measures and a degree of care that would apply to the recipient’s own confidential information.

 

  39.2.3

The recipient may disclose such information to any of its officers, directors, employees, professional advisers, auditors and partners as it shall consider appropriate if any such person is informed in writing of its confidential nature, except that there shall be no such requirement to so inform if that person is subject to professional obligations to maintain the confidentiality of the information or is otherwise bound by duties of confidentiality in relation to the information.

 

39.3

Supply of Lender details to other Lenders

 

  39.3.1

If a Lender (a “Disclosing Lender”) indicates to the Agent that the Agent may do so, the Agent shall disclose that Lender’s name and Commitment to any other Lender that is, or becomes, a Disclosing Lender.

 

  39.3.2

The Agent shall, if so directed by the Requisite Lenders, request each Lender to indicate to it whether it is a Disclosing Lender.

 

39.4

Lender enquiry If any Lender believes that any entity is, or may be, a Lender and:

 

  39.4.1

that entity ceases to have an Investment Grade Rating; or

 

  39.4.2

an Insolvency Event occurs in relation to that entity,

the Agent shall, at the request of that Lender, indicate to that Lender the extent to which that entity has a Commitment.

 

39.5

Lender details definitions In this Clause 39:

Investment Grade Rating” means, in relation to an entity, a rating for its long-term unsecured and non-credit-enhanced debt obligations of BBB- or higher by Standard & Poor’s Rating Services or Fitch Ratings Ltd or Baa3 or higher by Moody’s Investors Service Limited or a comparable rating from an internationally recognised credit rating agency.

Requisite Lenders” means a Lender or Lenders whose Commitments aggregate 15% (or more) of the Total Commitments (or if the Total Commitments have been reduced to zero, aggregated 15% (or more) of the Total Commitments immediately prior to that reduction).

 

40

Counterparts

Each Finance Document may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of the Finance Document.

 

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41

Joint and Several Liability

 

41.1

Nature of liability The representations, warranties, covenants, obligations and undertakings of the Borrowers contained in this Agreement shall be joint and several so that each Borrower shall be jointly and severally liable with all the Borrowers for all of the same and such liability shall not in any way be discharged, impaired or otherwise affected by:

 

  41.1.1

any forbearance (whether as to payment or otherwise) or any time or other indulgence granted to any other Borrower or any other Obligor under or in connection with any Finance Document;

 

  41.1.2

any amendment, variation, novation or replacement of any other Finance Document;

 

  41.1.3

any failure of any Finance Document to be legal valid binding and enforceable in relation to any other Borrower or any other Obligor for any reason;

 

  41.1.4

the winding-up or dissolution of any other Borrower or any other Obligor;

 

  41.1.5

the release (whether in whole or in part) of, or the entering into of any compromise or composition with, any other Borrower or any other Obligor; or

 

  41.1.6

any other act, omission, thing or circumstance which would or might, but for this provision, operate to discharge, impair or otherwise affect such liability.

 

41.2

No rights as surety Until the Indebtedness has been unconditionally and irrevocably paid and discharged in full, each Borrower agrees that it shall not, by virtue of any payment made under this Agreement on account of the Indebtedness or by virtue of any enforcement by a Finance Party of its rights under this Agreement or by virtue of any relationship between, or transaction involving, the relevant Borrower and any other Borrower or any other Obligor:

 

  41.2.1

exercise any rights of subrogation in relation to any rights, security or moneys held or received or receivable by a Finance Party or any other person; or

 

  41.2.2

exercise any right of contribution from any other Borrower or any other Obligor under any Finance Document; or

 

  41.2.3

exercise any right of set-off or counterclaim against any other Borrower or any other Obligor; or

 

  41.2.4

receive, claim or have the benefit of any payment, distribution, security or indemnity from any other Borrower or any other Obligor; or

 

  41.2.5

unless so directed by the Agent (when the relevant Borrower will prove in accordance with such directions), claim as a creditor of any other Borrower or any other Obligor in competition with any Finance Party

and each Borrower shall hold in trust for the Finance Parties and forthwith pay or transfer (as appropriate) to the Agent any such payment (including an amount equal to any such set-off), distribution or benefit of such security, indemnity or claim in fact received by it.

 

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Section 12 Governing Law and Enforcement

 

42

Governing Law

This Agreement and any non-contractual obligations arising out of or in connection with it are governed by English law.

 

43

Enforcement

 

43.1

Jurisdiction of English courts

 

  43.1.1

The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement (including a dispute relating to the existence, validity or termination of this Agreement or any non-contractual obligation arising out of or in connection with this Agreement) (a “Dispute”). Each Party agrees that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly no Party will argue to the contrary.

 

  43.1.2

Notwithstanding Clause 43.1.1, no Finance Party shall be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, any Finance Party may take concurrent proceedings in any number of jurisdictions.

 

43.2

Service of process

 

  43.2.1

Without prejudice to any other mode of service allowed under any relevant law, each Borrower and the Guarantor:

 

  (a)

irrevocably appoints Saville Notaries LLP currently with its registered office at 11 Old Jewry, London, EC2R 8DU as its agent for service of process in relation to any proceedings before the English courts in connection with any Finance Document; and

 

  (b)

agrees that failure by a process agent to notify that Borrower or the Guarantor (as the case may be) of the process will not invalidate the proceedings concerned.

 

  43.2.2

If any person appointed as an agent for service of process is unable for any reason to act as agent for service of process or terminates its appointment as agent for service of process, the relevant Borrower or the Guarantor (as the case may be) must immediately (and in any event within five days of such event taking place) appoint another agent on terms acceptable to the Agent. Failing this, the Agent may appoint another agent for this purpose.

This Agreement has been entered into on the date stated at the beginning of this Agreement.

 

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Schedule 1

The Parties

Part I

The Original Lenders

 

Name of Original Lender

   Commitment  

DNB (UK) Limited

   $ 28,000,000  

Part II

The other Finance Parties

 

The Agent

 

Address:8th Floor, The Walbrook Building, 25 Walbrook, London, EC4N 8AF, the United Kingdom

 

Fax no.: +44 207 283 6931

Department/Officer: CMOA

Email: cmoalondon@dnb.no

The Security Agent

 

Address: 8th Floor, The Walbrook Building, 25 Walbrook, London, EC4N 8AF, the United Kingdom

 

Fax no.: +44 207 283 6931

Department/Officer: CMOA

Email: cmoalondon@dnb.no

The Bookrunner

 

Address: 8th Floor, The Walbrook Building, 25 Walbrook, London, EC4N 8AF, the United Kingdom

 

Fax no.: +44 207 283 6931

Department/Officer: CMOA

Email: cmoalondon@dnb.no

The Swap Provider

 

Address:8th Floor, The Walbrook Building, 25 Walbrook, London, EC4N 8AF, the United Kingdom

 

Fax no.: +44 207 283 6931

Department/Officer: CMOA

Email: cmoalondon@dnb.no

 

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Part III

The Obligors

 

The Borrower

 

Address: c/o Stealth Maritime Corp. S.A., 331, Kifissias Avenue, Kifissia 14561, Greece

 

Fax no.: +30 21 062 52 817

Department/Officer: Legal Department

Email: legal@stealth.gr

The Guarantor

 

Address: c/o Stealth Maritime Corp. S.A., 331, Kifissias Avenue, Kifissia 14561, Greece

 

Fax no.: +30 21 062 52 817

Department/Officer: Legal Department

Email: legal@stealth.gr

 

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Schedule 2

Part I

Conditions Precedent

 

1

Obligors

 

  (a)

Constitutional documents Copies of the constitutional documents of each Obligor and the Charterer together with such other evidence as the Agent may reasonably require that each Obligor and the Charterer is duly incorporated in its country of incorporation and remains in existence with power to enter into, and perform its obligations under, the Relevant Documents to which it is or is to become a party.

 

  (b)

Certificates of good standing A certificate of good standing in respect of each Obligor and the Charterer (if such a certificate can be obtained).

 

  (c)

Board resolutions A copy of a resolution of the board of directors of each Obligor and the Charterer:

 

  (i)

approving the terms of, and the transactions contemplated by, the Relevant Documents to which it is a party and resolving that it execute those Relevant Documents; and

 

  (ii)

authorising a specified person or persons to execute those Relevant Documents (and all documents and notices to be signed and/or dispatched under those documents) on its behalf.

 

  (d)

Specimen signatures A specimen of the signature of each person actually executing any of the Relevant Documents pursuant to the resolutions referred to in (c).

 

  (e)

Shareholder resolutions A copy of a resolution signed by all the holders of the issued shares in each Obligor and the Charterer, approving the terms of, and the transactions contemplated by, the Relevant Documents to which that Obligor or the Charterer is a party.

 

  (f)

Officer’s certificates An original certificate of a duly authorised officer of each Obligor and the Charterer:

 

  (i)

certifying that each copy document relating to it specified in this Part I of Schedule 2 is correct, complete and in full force and effect;

 

  (ii)

setting out the names of the directors, officers and shareholders of that Obligor and the Charterer and the proportion of shares held by each shareholder;

 

  (iii)

confirming that borrowing or guaranteeing or securing, as appropriate, the Loan would not cause any borrowing, guarantee, security or similar limit binding on that Obligor and the Charterer to be exceeded; and

 

Page 138


  (iv)

confirming that there is no dispute under any of the Relevant Documents as between the parties to any such document.

 

  (g)

Powers of attorney The original notarially attested and legalised power of attorney of each of the Obligors and the Charterer under which the Relevant Documents to which it is or is to become a party are to be executed or transactions undertaken by that Obligor and the Charterer.

 

2

Security and related documents

 

  (a)

Vessel documents Photocopies, certified as true, accurate and complete by a director, the secretary or the legal advisers of the Borrower, of:

 

  (i)

the Management Agreements;

 

  (ii)

the Charter;

 

  (iii)

the Vessel’s current Safety Construction, Safety Equipment, Safety Radio and Load Line Certificates;

 

  (iv)

if applicable, evidence of the Vessel’s current Certificate of Financial Responsibility issued pursuant to the United States Oil Pollution Act 1990;

 

  (v)

the Vessel’s current SMC;

 

  (vi)

the ISM Company’s current DOC;

 

  (vii)

the Vessel’s current ISSC;

 

  (viii)

the Vessel’s current IAPPC;

 

  (ix)

the Vessel’s current Tonnage Certificate; and

 

  (x)

if available, the Vessel’s Inventory of Hazardous Materials,

in each case together with all addenda, amendments or supplements.

 

  (b)

Evidence of Borrower’s title On the Utilisation Date, a certificate of ownership and encumbrance (or equivalent) issued by the Registrar of Ships (or equivalent official) of the relevant flag confirming that (a) the Vessel is permanently registered under that flag in the ownership of the Borrower, (b) the Mortgage has been registered with first priority against the Vessel and (c) there are no further Encumbrances registered against the Vessel.

 

  (c)

Evidence of insurance Evidence that the Vessel is insured in the manner required by the Security Documents and that letters of undertaking will be issued in the manner required by the Security Documents, together with (if required by the Agent) the written approval of the Insurances by an insurance adviser appointed by the Agent.

 

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  (d)

Confirmation of class A Certificate of Confirmation of Class for hull and machinery confirming that the Vessel is classed with the highest class applicable to vessels of her type with Lloyd’s Register or such other classification society as may be acceptable to the Agent free of overdue recommendations affecting class, which is valid on the Utilisation Date.

 

  (e)

Valuation Two (or three, if applicable) Valuations of the Vessel addressed to the Agent from a broker acceptable to the Agent for the purposes of determining the Market Value of the Vessel, acceptable to the Agent.

 

  (f)

Security Documents The Security Documents, together with all other documents required by any of them, including, without limitation, (i) all notices of assignment and/or charge and evidence that those notices will be duly acknowledged by the recipients and (ii) (pursuant to the Shares Securities) all share certificates, certified copy share registers or registers of members, transfer forms, proxy forms, letters of resignation and letters of undertaking.

 

  (g)

Mandates Such duly signed forms of mandate, and/or other evidence of the opening of the Accounts, as the Security Agent may require.

 

  (h)

Earnings Account The credit of a minimum cash balance of $500,000 to each Earnings Account.

 

  (i)

Master Agreement The Master Agreements.

 

  (j)

Other Relevant Documents Copies of each of the Relevant Documents not otherwise comprised in the documents listed in this Part I of Schedule 2.

 

  (k)

Approved Family Members Side Letter The Approved Family Members Side Letter.

 

3

Legal opinions

The following legal opinions, each addressed to the Agent, or confirmation satisfactory to the Agent that such opinions will be given:

 

  (a)

a legal opinion of Stephenson Harwood LLP, legal advisers to the Agent as to English law substantially in the form distributed to the Lenders prior to signing this Agreement;

 

  (b)

a legal opinion of Hill Dickinson International, legal advisers to the Agent as to Marshall Islands law and Liberian law; and

 

  (c)

a legal opinion of Patton, Moreno & Asvat, legal advisors to the Agent as to Panamanian law.

 

4

Other documents and evidence

 

  (a)

Utilisation Request A duly completed Utilisation Request.

 

  (b)

Process agent Evidence that any process agent referred to in Clause 43.2 (Service of process) and any process agent appointed under any other Finance Document has accepted its appointment.

 

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  (c)

Other Authorisations A copy of any other Authorisation or other document, opinion or assurance which the Agent considers to be necessary or desirable (if it has notified the Borrowers accordingly) in connection with the entry into and performance of the transactions contemplated by any Relevant Document or for the validity and enforceability of any Relevant Document.

 

  (d)

Financial statements A copy of each of the Original Financial Statements.

 

  (e)

Fees The Fee Letter and evidence that the fees, costs and expenses then due from the Borrowers under Clause 11 (Fees) and Clause 16 (Costs and Expenses) have been paid or will be paid by the Utilisation Date.

 

  (f)

“Know your customer” documents Such documentation and other evidence as is reasonably requested by the Agent in order for the Lenders to comply with all necessary “know your customer” or similar identification procedures in relation to the transactions contemplated in the Finance Documents.

 

  (g)

Restructuring Such documentation or other evidence, opinion or assurance which the Agent considers to be necessary or desirable (if it has notified the Borrowers accordingly) in connection with the Restructuring.

 

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Part II

Conditions Subsequent

 

1

Letters of undertaking Within ten Business Days from the Utilisation Date, letters of undertaking in respect of the Insurances as required by the Security Documents together with copies of the relevant policies or cover notes or entry certificates duly endorsed with the interest of the Finance Parties.

 

2

Acknowledgements of notices Within three Business Days from the Utilisation Date, acknowledgements of all notices of assignment and/or charge given pursuant to the Security Documents.

 

3

Legal opinions Within three Business Days from the Utilisation Date, such of the legal opinions specified in Part I of this Schedule 2 as have not already been provided to the Agent.

 

4

“Know your customer” documents Within five Business Days from the Utilisation Date, any further documentation and other evidence as is reasonably requested by the Agent, and which has not been delivered to the Agent pursuant to paragraph 4(f) of Part I of this Schedule 2, in order for the Lenders to comply with all necessary “know your customer” or similar identification procedures in relation to the transactions contemplated in the Finance Documents.

 

5

ESR Regulations Each of the Obligors (if and when applicable) shall submit to the Agent documentary evidence that such Obligor has complied in all respects and remains in compliance with the ESR Regulations.

 

6

Restructuring Within 30 days, any documentation or other evidence, opinion or assurance which the Agent considers to be necessary or desirable (if it has notified the Borrowers accordingly) in connection with the Restructuring.

 

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Schedule 3

Utilisation Request

 

From:

Tankpunk Inc.

 

MR Roi Inc.

 

Clean Power Inc.

 

King of Hearts Inc.

 

To:

DNB Bank ASA

Dated: [             ] 2021

Dear Sirs

Tankpunk Inc., MR Roi Inc., Clean Power Inc. and King of Hearts Inc. – $28,000,000 Loan Agreement dated _________ 2021 (the “Agreement”)

 

1

We refer to the Agreement. This is a Utilisation Request. Terms defined in the Agreement have the same meaning in this Utilisation Request unless given a different meaning in this Utilisation Request.

 

2

We wish to make a Utilisation on the following terms:

 

Proposed Utilisation Date:    [                     ] (or, if that is not a Business Day, the next Business Day)
Currency of Utilisation:    USD
Amount:    [                     ]
Interest Period:    [3][6] months
Vessel:    Vessel [A][B][C][D]

 

3

We confirm that each condition specified in Clause 4.2 (Further conditions precedent) is satisfied on the date of this Utilisation Request.

 

4

The proceeds of the Utilisation should be paid to the following account:

[account details].

 

5

This Utilisation Request is irrevocable.

 

Yours faithfully

 

authorised signatory for

 

Tankpunk Inc.

 

Page 143


 

authorised signatory for

 

MR Roi Inc.

 

authorised signatory for

 

Clean Power Inc.

 

authorised signatory for

 

King of Hearts Inc.

 

Page 144


Schedule 4

Form of Transfer Certificate

 

To:

DNB Bank ASA (as Agent)

 

From:

[The Existing Lender] (the “Existing Lender”) and [The New Lender] (the “New Lender”)

Dated:

Tankpunk Inc., MR Roi Inc., Clean Power Inc. and King of Hearts Inc. – $28,000,000 Loan Agreement dated ______________ 2021 (the “Loan Agreement”)

 

1

We refer to the Loan Agreement. This agreement (the “Agreement”) shall take effect as a Transfer Certificate for the purposes of the Loan Agreement. Terms defined in the Loan Agreement have the same meaning in this Agreement unless given a different meaning in this Agreement.

 

2

We refer to Clause 25.5 (Procedure for transfer) of the Loan Agreement:

 

  (a)

The Existing Lender and the New Lender agree to the Existing Lender transferring to the New Lender by novation and in accordance with Clause 25.5 (Procedure for transfer) all of the Existing Lender’s rights and obligations under the Loan Agreement and the other Finance Documents which relate to that portion of the Existing Lender’s Commitment(s) and participations in the Loan under the Loan Agreement as specified in the Schedule.

 

  (b)

The proposed Transfer Date is [                                        ].

 

  (c)

The Facility Office and address, fax number and attention details for notices of the New Lender for the purposes of Clause 33.2 (Addresses) of the Loan Agreement are set out in the Schedule.

 

3

The New Lender expressly acknowledges the limitations on the Existing Lender’s obligations set out in Clause 25.4.1(c) (Limitation of responsibility of Existing Lenders) of the Loan Agreement.

 

4

The New Lender confirms, for the benefit of the Agent and without liability to any Obligor, that it is:

 

  (a)

[a Qualifying Lender other than a Treaty Lender;]

 

  (b)

[a Treaty Lender;]

 

  (c)

[not a Qualifying Lender].i

 

[5]

[The New Lender confirms that the person beneficially entitled to interest payable to that Lender in respect of an advance under a Finance Document is either:

 

i 

Delete as applicable – each New Lender is required to confirm which of these three categories it falls within.

 

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  (a)

a company resident in the United Kingdom for United Kingdom tax purposes;

 

  (b)

a partnership each member of which is:

 

  (i)

a company so resident in the United Kingdom; or

 

  (ii)

a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account in computing its chargeable profits (within the meaning of section 19 of the CTA) the whole of any share of interest payable in respect of that advance that falls to it by reason of Part 17 of the CTA; or

 

  (c)

a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account interest payable in respect of that advance in computing the chargeable profits (within the meaning of section 19 of the CTA) of that company.]ii

 

[5]

[The New Lender confirms that it holds a passport under the HMRC DT Treaty Passport scheme (reference number [                     ]) and is tax resident in [                     ]iii, so that interest payable to it by borrowers is generally subject to full exemption from UK withholding tax, and requests that the Agent notify the Borrowers that it wishes that scheme to apply to the Agreement.]iv

 

[6]

This Agreement may be executed in any number of counterparts and this has the same effect as if the signatures on the counterparts were on a single copy of this Agreement.

 

[7]

This Agreement and any non-contractual obligations arising out of or in connection with it are governed by English law.

 

[8]

This Agreement has been entered into on the date stated at the beginning of this Agreement.

 

Note:

The execution of this Transfer Certificate may not transfer a proportionate share of the Existing Lender’s interest in any Encumbrance created or expressed to be created or evidenced by the Security Documents in all jurisdictions. It is the responsibility of the New Lender to ascertain whether any other documents or other formalities are required to perfect a transfer of such a share in any jurisdiction and, if so, to arrange for execution of those documents and completion of those formalities.

 

ii 

Include if New Lender comes within (b) of the definition of Qualifying Lender in Clause 12.1 (Definitions).

iii 

Insert jurisdiction of tax residence.

iv 

Include if New Lender holds a passport under the HMRC DT Treaty Passport scheme and wishes that scheme to apply to the Agreement.

 

Page 146


The Schedule

Commitment/rights and obligations to be transferred

[insert relevant details]

[Facility Office address, fax number and attention details for notices and account details for payments,]

 

[Existing Lender]    [New Lender]
By:    By:

This Agreement is accepted as a Transfer Certificate for the purposes of the Loan Agreement by the Agent and the Transfer Date is confirmed as [                                         ].

DNB Bank ASA (as Agent)

By:

 

Page 147


Schedule 5

Form of Assignment Agreement

 

To:

DNB Bank ASA as Agent and Tankpunk Inc., MR Roi Inc., Clean Power Inc. and King of Hearts Inc. as Borrowers, for and on behalf of each Obligor

 

From:

[the Existing Lender] (the “Existing Lender”) and [the New Lender] (the “New Lender”)

Dated:

Tankpunk Inc., MR Roi Inc., Clean Power Inc. and King of Hearts Inc. – $28,000,000 Loan Agreement dated ______________ 2021 (the “Loan Agreement”)

 

1

We refer to the Loan Agreement. This is an Assignment Agreement. This agreement (the “Agreement”) shall take effect as an Assignment Agreement for the purpose of the Loan Agreement. Terms defined in the Loan Agreement have the same meaning in this Agreement unless given a different meaning in this Agreement.

 

2

We refer to Clause 25.6 (Procedure for assignment) of the Loan Agreement:

 

  (a)

The Existing Lender assigns absolutely to the New Lender all the rights of the Existing Lender under the Loan Agreement, the other Finance Documents and in respect of any Encumbrance created or expressed to be created or evidenced by the Security Documents which correspond to that portion of the Existing Lender’s Commitment(s) and participations in the Loan under the Loan Agreement as specified in the Schedule.

 

  (b)

The Existing Lender is released from all the obligations of the Existing Lender which correspond to that portion of the Existing Lender’s Commitment(s) and participations in the Loan under the Loan Agreement specified in the Schedule.

 

  (c)

The New Lender becomes a Party as a Lender and is bound by obligations equivalent to those from which the Existing Lender is released under paragraph (b).v

 

3

The proposed Transfer Date is [         ].

 

4

On the Transfer Date the New Lender becomes Party to the relevant Finance Documents as a Lender.

 

5

The Facility Office and address, fax number and attention details for notices of the New Lender for the purposes of Clause 33.2 (Addresses) of the Loan Agreement are set out in the Schedule.

 

v 

If the Assignment Agreement is used in place of a Transfer Certificate in order to avoid a novation of rights/obligations for reasons relevant to a civil jurisdiction, local law advice should be sought to check the suitability of the Assignment Agreement due to the assumption of obligations contained in paragraph 2(c). This issue should be addressed at Primary documentation stage. This footnote is not intended to be included in the scheduled form of Assignment Agreement in the signed Loan Agreement.

 

Page 148


6

The New Lender expressly acknowledges the limitations on the Existing Lender’s obligations set out in Clause 25.4.3 (Limitation of responsibility of Existing Lenders) of the Loan Agreement.

 

7

The New Lender confirms, for the benefit of the Agent and without liability to any Obligor, that it is:

 

  (a)

[a Qualifying Lender (other than a Treaty Lender);]

 

  (b)

[a Treaty Lender;]

 

  (c)

[not a Qualifying Lender]. vi

 

8

[The New Lender confirms that the person beneficially entitled to interest payable to that Lender in respect of an advance under a Finance Document is either:

 

  (a)

a company resident in the United Kingdom for United Kingdom tax purposes;

 

  (b)

a partnership each member of which is:

 

  (i)

a company so resident in the United Kingdom; or

 

  (ii)

a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account in computing its chargeable profits (within the meaning of section 19 of the CTA) the whole of any share of interest payable in respect of that advance that falls to it by reason of Part 17 of the CTA; or

 

  (c)

a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account interest payable in respect of that advance in computing the chargeable profits (within the meaning of section 19 of the CTA) of that company.]vii

 

9

[The New Lender confirms that it holds a passport under the HMRC DT Treaty Passport scheme (reference number [ ]) and is tax resident in [ ]*, so that interest payable to it by borrowers is generally subject to full exemption from UK withholding tax and hereby notifies the Borrowers that it wishes that scheme to apply to the Loan Agreement.]**

 

10

This Agreement acts as notice to the Agent (on behalf of each Finance Party) and, upon delivery in accordance with Clause 25.7 (Copy of Transfer Certificate or Assignment Agreement to Borrowers), to the Borrowers (on behalf of each Obligor) of the assignment referred to in this Agreement.

 

vi 

Delete as applicable—each New Lender is required to confirm which of these three categories it falls within.

vii 

Include only if New Lender is a UK Non-Bank Lender i.e. falls within (b) of the definition of Qualifying Lender in Clause 12.1 (Definitions).

* 

Insert jurisdiction of tax residence.

* 

Include if the New Lender holds a passport under the HMRC DT Treaty Passport scheme and wishes that scheme to apply to the Loan Agreement.

 

Page 149


11

This Agreement may be executed in any number of counterparts and this has the same effect as if the signatures on the counterparts were on a single copy of this Agreement.

 

12

This Agreement and any non-contractual obligations arising out of or in connection with it are governed by English law.

 

13

This Agreement has been entered into on the date stated at the beginning of this Agreement.

 

Note:

The execution of this Assignment Agreement may not transfer a proportionate share of the Existing Lender’s interest in any Encumbrance created or expressed to be created or evidenced by the Security Documents in all jurisdictions. It is the responsibility of the New Lender to ascertain whether any other documents or other formalities are required to perfect a transfer of such a share in any jurisdiction and, if so, to arrange for execution of those documents and completion of those formalities.

 

Page 150


The Schedule

Commitment/rights and obligations to be transferred by assignment, release and accession

[insert relevant details]

[Facility office address, fax number and attention details for notices and account details for payments]

 

[Existing Lender]    [New Lender]
By:    By:

This Agreement is accepted as an Assignment Agreement for the purposes of the Loan Agreement by the Agent and the Transfer Date is confirmed as [ ].

Signature of this Agreement by the Agent constitutes confirmation by the Agent of receipt of notice of the assignment referred to in this Agreement, which notice the Agent receives on behalf of each Finance Party.

DNB Bank ASA (as Agent)

By:

 

Page 151


Schedule 6

Compounded Rate Terms

 

Currency:    Dollars.
Cost of funds as a fallback:    Cost of funds will not apply as a fallback in the ordinary course.
Definitions   
Additional Business Days:    An RFR Banking Day.
Backstop Rate Switch Date:    30 June 2023.
Break Costs:    Shall not apply.
Business Day conventions (definition of “Month” and Clause 9.4 (Non-Business Days)):   

(a)    If any period is expressed to accrue by reference to a Month or any number of Months then, in respect of the last Month of that period:

 

i.    subject to paragraph iii below, if the numerically corresponding day is not a Business Day, that period shall end on the next Business Day in that calendar month in which that period is to end if there is one, or if there is not, on the immediately preceding Business Day;

 

ii.   if there is no numerically corresponding day in the calendar month in which that period is to end, that period shall end on the last Business Day in that calendar month; and

 

iii.    if an Interest Period begins on the last Business Day of a calendar month, that Interest Period shall end on the last Business Day in the calendar month in which that Interest Period is to end.

Central Bank Rate:

  

(b)    If an Interest Period would otherwise end on a day which is not a Business Day, that Interest Period will instead end on the next Business Day in that calendar month (if there is one) or the preceding Business Day (if there is not).

 

(a)    The short-term interest rate target set by the US Federal Open Market Committee as published by the Federal Reserve Bank of New York from time to time; or

 

(b)    if that target is not a single figure, the arithmetic mean of:

 

Page 152


  

(i)  the upper bound of the short-term interest rate target range set by the US Federal Open Market Committee and published by the Federal Reserve Bank of New York; and

 

(ii)   the lower bound of that target range.

Central Bank Rate Adjustment:    In relation to the Central Bank Rate prevailing at close of business in London on any RFR Banking Day, the 20% trimmed arithmetic mean (calculated by the Agent) of the Central Bank Rate Spread for the five most immediately preceding RFR Banking Days for which the RFR is available.
Central Bank Rate Spread:    In relation to any RFR Banking Day, the difference (expressed as a percentage rate per annum) calculated by the Agent of (a) the RFR for that RFR Banking Day and (b) the Central Bank Rate prevailing at close of business in London on that RFR Banking Day.
Credit Adjustment Spread:    The five-year historical median difference between LIBOR and the Compounded Reference Rate for the relevant tenor stated as a fixed percentage per annum, as published by Bloomberg as follows:

 

                              

LIBOR

  

Tenor

   Spread
adjustment
rate (%)
  USD    Up to and including 3 months    0.26161
  USD    Between 3 months up to and including 6 months    0.42826

 

Daily Rate:   

The “Daily Rate” for any RFR Banking Day is:

 

(a)    the RFR for that RFR Banking Day; or

 

(b)    if the RFR is not available for that RFR Banking Day, the percentage rate per annum which is the aggregate of:

 

(i)  the Central Bank Rate for that RFR Banking Day; and

 

(ii)   the applicable Central Bank Rate Adjustment; or

 

Page 153


               

 

(c)    if paragraph (b) above applies but the Central Bank Rate for that RFR Banking Day is not available, the percentage rate per annum which is the aggregate of:

 

(i)  the most recent Central Bank Rate for a day which is no more than 5 RFR Banking Days before that RFR Banking Day; and

 

(ii)   the applicable Central Bank Rate Adjustment,

 

rounded, in either case, to five decimal places and if, in either case, the aggregate of that rate and the applicable Credit Adjustment Spread is less than zero, the Daily Rate shall be deemed to be such a rate that the aggregate of the Daily Rate and the applicable Credit Adjustment Spread is zero.

Lookback Period:    Five RFR Banking Days.
Market Disruption Rate:   

The percentage rate per annum which is the aggregate of:

 

(a)    the Cumulative Compounded RFR Rate for the Interest Period of the relevant Tranche; and

 

(b)    the applicable Credit Adjustment Spread.

Relevant Market:    The market for overnight cash borrowing collateralised by US Government securities.
Reporting Day:    The Business Day which follows the day which is the Lookback Period prior to the last day of the Interest Period.
RFR:    The secured overnight financing rate (SOFR) administered by the Federal Reserve Bank of New York (or any other person which takes over the administration of that rate) published by the Federal Reserve Bank of New York (or any other person which takes over the publication of that rate).

 

Page 154


RFR Banking Day:   

A day other than:

 

(a)    a Saturday or Sunday; and

 

(b)    a day on which the Securities Industry and Financial Markets Association (or any successor organisation) recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in US Government securities.

Reporting Times   
Deadline for Lenders to report market disruption in accordance with Clause 10.3 (Market disruption)    Close of business in London on the Reporting Day for the relevant Tranche.
Deadline for Lenders to report their cost of funds in accordance with Clause 10.4 (Cost of funds)    Close of business on the date falling three Business Days after the Reporting Day for the relevant Tranche (or, if earlier, on the date falling three Business Days before the date on which interest is due to be paid in respect of the Interest Period for that Tranche).

 

Page 155


Schedule 7

Daily non-cumulative compounded RFR rate

The “Daily Non-Cumulative Compounded RFR Rate” for any RFR Banking Day “i” during an Interest Period for a Compounded Rate Tranche is the percentage rate per annum (without rounding, to the extent reasonably practicable for the Finance Party performing the calculation, taking into account the capabilities of any software used for that purpose)) calculated as set out below:

 

LOGO

where:

UCCDRi means the Unannualised Cumulative Compounded Daily Rate for that RFR Banking Day “i”;

UCCDRi-1 means, in relation to that RFR Banking Day “i”, the Unannualised Cumulative Compounded Daily Rate for the immediately preceding RFR Banking Day (if any) during that Interest Period;

dcc means 360 or, in any case where market practice in the Relevant Market is to use a different number for quoting the number of days in a year, that number;

ni” means the number of calendar days from, and including, that RFR Banking Day “i” up to, but excluding, the following RFR Banking Day; and

the “Unannualised Cumulative Compounded Daily Rate” for any RFR Banking Day (the “Cumulated RFR Banking Day”) during that Interest Period is the result of the below calculation (without rounding, to the extent reasonably practicable for the Finance Party performing the calculation, taking into account the capabilities of any software used for that purpose):

 

LOGO

where:

ACCDR means the Annualised Cumulative Compounded Daily Rate for that Cumulated RFR Banking Day;

tni” means the number of calendar days from, and including, the first day of the Cumulation Period to, but excluding, the RFR Banking Day which immediately follows the last day of the Cumulation Period;

Cumulation Period” means the period from, and including, the first RFR Banking Day of that Interest Period to, and including, that Cumulated RFR Banking Day;

dcc has the meaning given to that term above; and

 

Page 156


the “Annualised Cumulative Compounded Daily Rate” for that Cumulated RFR Banking Day is the percentage rate per annum (rounded to five decimal places) calculated as set out below:

 

LOGO

where:

d0” means the number of RFR Banking Days in the Cumulation Period;

Cumulation Period” has the meaning given to that term above;

i” means a series of whole numbers from one to d0, each representing the relevant RFR Banking Day in chronological order in the Cumulation Period;

DailyRatei-LP” means, for any RFR Banking Day “i” in the Cumulation Period, the Daily Rate for the RFR Banking Day which is the applicable Lookback Period prior to that RFR Banking Day “i”;

ni” means, for any RFR Banking Day “i” in the Cumulation Period, the number of calendar days from, and including, that RFR Banking Day “i” up to, but excluding, the following RFR Banking Day;

dcc has the meaning given to that term above; and

tni” has the meaning given to that term above.

 

Page 157


Schedule 8

Cumulative Compounded RFR rate

The “Cumulative Compounded RFR Rate” for any Interest Period for a Compounded Rate Tranche is the percentage rate per annum (rounded to the same number of decimal places as is specified in the definition of “Annualised Cumulative Compounded Daily Rate” in Schedule 7 (Daily Non-Cumulative Compounded RFR Rate)) calculated as set out below:

 

LOGO

where:

d0” means the number of RFR Banking Days in the Interest Period;

i” means a series of whole numbers from one to d0, each representing the relevant RFR Banking Day in chronological order in the Interest Period;

DailyRatei-LP” means for any RFR Banking Day “i” during the Interest Period, the Daily Rate for the RFR Banking Day which is the applicable Lookback Period prior to that RFR Banking Day “i”;

ni” means, for any RFR Banking Day “i”, the number of calendar days from, and including, that RFR Banking Day “i” up to, but excluding, the following RFR Banking Day;

dcc” means 360 or, in any case where market practice in the Relevant Market is to use a different number for quoting the number of days in a year, that number; and

d” means the number of calendar days in that Interest Period.

 

Page 158


Schedule 9 Form of Compliance Certificate

 

To:

DNB Bank ASA (as Agent)

 

From:

Imperial Petroleum Inc.

Dated:

Dear Sirs

Tankpunk Inc., MR Roi Inc., Clean Power Inc. and King of Hearts Inc. – $28,000,000 Loan Agreement dated ______________ 2021 (the “Loan Agreement”)

 

1

We refer to the Agreement. This is a Compliance Certificate. Terms defined in the Agreement have the same meaning when used in this Compliance Certificate unless given a different meaning in this Compliance Certificate.

 

2

The calculations are based on the following figures for the relevant period:

 

  2.1

[Cash, Cash Equivalents and Restricted Cash]: $[•]

 

  2.2

[Adjusted EBITDA]: $[•]

 

  2.3

[Interest Charges]: $[•]

 

  2.4

[Total Liabilities]: $[•]

 

  2.5

[Total Assets]: $[•]

 

3

We confirm that for the relevant period:

 

  3.1

the ratio of Total Liabilities to Total Assets is [ ]% (and is required to be not more than 70%);

 

  3.2

the ratio of Adjusted EBITDA to Interest Charges is [ ] (and is required to be not less than 2.5:1); and

 

  3.3

the Cash, Cash Equivalents and Restricted Cash of the Guarantor is $[ ] (and is required to be not less than [the higher of (i) $500,000 per vessel owned by any member of the Group and (iii) $2,500,000][the higher of (i) $1,000,000 per vessel owned by any member of the Group and (iii) $5,000,000].

 

4

We confirm that the LTV Coverage is [ ]% as at the date of this Compliance Certificate, based on the Market Value of the Vessels most recently determined in accordance with clause 18.2 of the Agreement.

 

5

[We confirm that no Default is continuing.]*

 

Signed:                                                  

 

 

* 

If this statement cannot be made, the certificate should identify any Default that is continuing and the steps, if any, being taken to remedy it.

 

Page 159


Chief Financial Officer

Imperial Petroleum Inc.

 

Page 160


Signatures

The Borrowers

 

Tankpunk Inc.    )
   )
By:/s/ Authorized Person    )
   )
MR Roi Inc.    )
   )
By: :/s/ Authorized Person    )
   )
Clean Power Inc.    )
   )
By: :/s/ Authorized Person    )
   )
King of Hearts Inc.    )
   )
By: :/s/ Authorized Person    )
   )
The Guarantor   
  
Imperial Petroleum Inc.    )
   )
By: :/s/ Authorized Person    )
   )
The Bookrunner   
  
DNB (UK) Limited    )
   )
By: :/s/ Authorized Person    )
   )

 

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The Agent

 

DNB Bank ASA    )
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By: :/s/ Authorized Person    )
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The Security Agent   
  
DNB Bank ASA    )
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By: :/s/ Authorized Person    )
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The Original Lenders   
  
DNB (UK) Limited    )
   )
By: :/s/ Authorized Person    )
  
The Swap Provider   
  
DNB Bank ASA    )
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By: :/s/ Authorized Person    )
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Exhibit 10.3

IMPERIAL PETROLEUM INC.

2021 EQUITY COMPENSATION PLAN

(Effective as of [    ], 2021)

1. Purpose of the Plan

The purpose of this Imperial Petroleum Inc. Equity Compensation Plan (the “Plan”) is to advance the interests of the Company and its stockholders by providing a means (a) to attract, retain, and reward directors, officers, other employees and persons who provide services to the Company and its Subsidiaries and directors, officers and employees of any Management Company, (b) to link compensation to measures of the Company’s performance in order to provide additional incentives, including stock-based incentives and cash-based incentives, to such persons for the creation of stockholder value, and (c) to enable such persons to acquire or increase a proprietary interest in the Company in order to promote a closer identity of interests between such persons and the Company’s stockholders.

2. Definitions

Capitalized terms used in the Plan and not defined elsewhere in the Plan shall have the meaning set forth in this Section.

2.1 “Award” means a compensatory award made under the Plan pursuant to which a Participant receives, or has the opportunity to receive, Shares or cash.

2.2 “Award Agreement” means a written document prescribed by the Committee and provided to a Participant evidencing the grant of an Award under the Plan.

2.3 “Beneficiary” means the person(s) or trust(s) entitled by will or the laws of descent and distribution to receive any rights with respect to an Award that survive such Participant’s death, provided that, if at the time of a Participant’s death, the Participant had on file with the Committee a written designation of a person(s) or trust(s) to receive such rights, then such person(s) (if still living at the time of the Participant’s death) or trust(s) shall be the “Beneficiary” for purposes of the Plan.

2.4 “Board” means the Board of Directors of the Company.

2.5 “Change of Control” shall mean the occurrence of any of the following:

(a) any “person” (as such term is used in Sections 3(a)(9) and 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) or “group” (within the meaning of Section 13(d)(3) of the Exchange Act), other than the Company, acquiring “beneficial ownership” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of more than fifty percent (50%) of the Voting Stock of the Company;

(b) the sale of all or substantially all of the Company’s assets in one or more related transactions to a “person” (as such term is used in Sections 3(a)(9) and 13(d) of the Exchange Act) other than such a sale to a subsidiary of the Company which does not involve a change in the equity holdings of the Company;

(c) any merger, consolidation, reorganization or similar event of the Company, as a result of which the holders of the Voting Stock of the Company immediately prior to such merger, consolidation, reorganization or similar event do not directly or indirectly hold at least fifty-one percent (51%) of the Voting Stock of the surviving entity;


(d) a majority of the members of the Board of Directors are no longer Continuing Directors; as used herein, a “Continuing Director” means any member of the Board of Directors who was a member of such Board of Directors on the date hereof and any person who becomes a director subsequent to such date whose election or nomination for election was supported by a majority of the directors who then comprised the Continuing Directors; or

(e) implementation of any plan of liquidation or dissolution providing for the distribution of all or substantially all of the Company’s assets.

For purposes of the Change of Control definition, the “Company” shall include any entity that succeeds to all or substantially all of the business of the Company and “Voting Stock” shall mean capital stock of any class or classes having general voting power, in the absence of specified contingencies, to elect the directors of a corporation.

Notwithstanding anything herein to the contrary, solely for the purposes of determining the timing of payment of any awards which constitute deferred compensation under Section 409A of the Code, to the extent applicable, a Change of Control shall not occur unless such Change of Control constitutes a change in the ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company under US Treasury Regulation 1.409A-3(i)(5).

2.6 “Code” means the United States Internal Revenue Code of 1986, as amended, including regulations thereunder and successor provisions and regulations thereto.

2.7 “Committee” means the Compensation Committee of the Board or such other committee appointed by the Board to administer the Plan or the Board, where the Board is acting as the Committee or performing the functions of the Committee, as set forth in Section 3.

2.8 “Company” means Imperial Petroleum Inc., a corporation domiciled in the Republic of The Marshall Islands.

2.9 “Dividend-Equivalent Right” means the right to receive an amount, which is determined by multiplying the number of Shares subject to the applicable Award by the per-Share cash dividend, or the per-Share value (as determined by the Committee) of any dividend in consideration other than cash, paid by the Company on Shares.

2.10 “Fair Market Value” means (a) the closing price of a Share on the date of calculation (or on the last preceding trading date if Shares were not traded on such date) if Shares are readily tradeable on a national securities exchange or other market system or (b) if Shares are not readily tradeable on a national securities exchange or other market system, the amount determined in good faith by the Committee as the fair market value per Share.

2.11 “Management Company” means any company that is providing administrative, commercial, technical or maritime services to, or for the benefit of, the Company, its subsidiaries and their vessels.

2.12 “Non-Employee Director” means an individual who is a member of the Board and is not otherwise employed by the Company, any Subsidiary or any Management Company.

 

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2.13 “Participant” means any person who has been granted an Award under the Plan.

2.14 “Share-Based Award” means an Award pursuant to which a Participant receives, or has the opportunity to receive, Shares, or receives, or has the opportunity to receive, cash, where the amount of cash is determined by reference to the value of a specific number of Shares. Share-Based Awards shall include, without limitation, Stock Options, Stock Appreciation Rights, restricted Shares, restricted units, Share units, performance units and bonus Shares.

2.15 “Shares” means shares of common stock of the Company and such other securities as may be substituted or resubstituted for Shares pursuant to Section 6.

2.16 “Subsidiary” means an entity that is, either directly or through one or more intermediaries, controlled by the Company.

3. Administration

3.1 Committee. The Plan shall be administered by the Committee. Other provisions of the Plan notwithstanding, the Board may perform any function of the Committee under the Plan, and that authority specifically reserved to the Board under the terms of the Plan, the Company’s Articles of Incorporation, By-Laws, or applicable law shall be exercised by the Board and not by the Committee. The Board shall serve as the Committee in respect of any Awards made to any director of the Company who is not otherwise employed by the Company.

3.2 Powers and Duties of Committee. In addition to the powers and duties specified elsewhere in the Plan, the Committee shall have full authority and discretion to:

(a) adopt, amend, suspend, and rescind such rules and regulations and appoint such agents as the Committee may deem necessary or advisable to administer the Plan;

(b) correct any defect or supply any omission or reconcile any inconsistency in the Plan and to construe and interpret the Plan and any Award, rules and regulations, Award Agreement, or other instrument hereunder;

(c) make determinations relating to eligibility for and entitlements in respect of Awards, and to make all factual findings related thereto; and

(d) make all other decisions and determinations as may be required under the terms of the Plan or as the Committee may deem necessary or advisable for the administration of the Plan. All determinations and decisions of the Committee shall be final and binding upon a Participant or any person claiming any rights under the Plan from or through any Participant, and the Participant or such other person may not further pursue his or her claim in any court of law or equity or other arbitral proceeding.

3.3 Delegation by Committee. Except to the extent prohibited by applicable law or the applicable rules of a stock exchange, the Committee may delegate, on such terms and conditions as it determines in its sole and absolute discretion, to one or more senior executives of the Company (i) the authority to make grants of Awards to officers (other than executive officers), employees of the Company, employees of any Subsidiary and employees of any Management Company and (ii) other administrative responsibilities. Any such allocation or delegation may be revoked by the Committee at any time.

 

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3.4 Limitation of Liability. Each member of the Committee shall be entitled to, in good faith, rely or act upon any report or other information furnished to him by any officer or other employee of the Company or any Subsidiary, the Company’s independent registered public accountants, or any executive compensation consultant, legal counsel, or other professional retained by the Company to assist in the administration of the Plan. No member of the Committee, nor any officer or employee of the Company acting on behalf of the Committee, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan, and all members of the Committee and any officer or employee of the Company acting on behalf of the Committee or members thereof shall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action, determination, or interpretation.

4. Limitations on Awards

4.1 Aggregate Number of Shares Available for Awards. Subject to Section 6, the aggregate number of Shares that may be issued with respect to Awards granted under the Plan shall not exceed 10% of the number of Shares issued and outstanding at the time any Award is granted.

4.2 Type of Shares Deliverable. The Shares delivered in connection with Awards may consist, in whole or in part, of authorized and unissued Shares, or Shares acquired in the market for the account of a Participant.

4.3 Share Counting. If and to the extent Stock Options or Stock Appreciation Rights granted under the Plan terminate, expire, or are canceled, forfeited, exchanged or surrendered without having been exercised, and if and to the extent that any other Awards payable in Shares are forfeited or terminated, or otherwise are not paid in full, the Shares reserved for such Awards shall again be available for purposes of the Plan. Shares surrendered in payment of the exercise price of a Stock Option, and shares withheld or surrendered for payment of taxes, shall not be available for re-issuance under the Plan. If Stock Appreciation Rights are exercised and settled in Shares, the full number of Shares subject to the Stock Appreciation Rights shall be considered issued under the Plan, without regard to the number of Shares issued upon settlement of the Stock Appreciation Rights. To the extent that Awards are designated in an Award Agreement to be paid in cash or are otherwise paid in cash, and not in Shares, such Awards shall not count against the share limit in Section 4.1.    For the avoidance of doubt, if Shares are repurchased by the Company on the open market with the proceeds of the exercise price of Stock Options, such shares may not again be made available for issuance under the Plan.

5. Awards

5.1 Eligibility. The Committee shall have the discretion to select Award recipients from among the following categories of eligible recipients: (a) individuals who are employees (including officers) of the Company, any Subsidiary or any Management Company, (b) Non-Employee Directors, (c) any other individual who provides substantial personal services to the Company or any Subsidiary, (d) any individual who has agreed to become an employee of the Company or a Subsidiary or any Management Company, provided that no such person may receive any payment or exercise any right relating to an Award until such person has commenced employment, and (e) individuals formerly employed by the Company or any Subsidiary as compensation in respect of their employment with the Company or any Subsidiary.

 

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5.2 Type of Awards. The Committee shall have the discretion to determine the type of Awards to be granted under the Plan. Such Awards may be in a form payable in either Shares or cash, including, but not limited to, options to purchase Shares (“Stock Options”), restricted Shares, bonus Shares, appreciation rights (“Stock Appreciation Rights”), share units, performance units and Dividend- Equivalent Rights. The Committee is authorized to grant Awards as a bonus, or to grant Awards in lieu of obligations of the Company or any Subsidiary to pay cash or grant other awards under other plans or compensatory arrangements (including under any employment agreement), to the extent permitted by such other plans or arrangements. Shares issued pursuant to an Award in the nature of a purchase right (e.g., Stock Options) shall be purchased for such consideration, paid for at such times, by such methods, and in such forms, including cash, Shares, or other consideration, as the Committee shall determine.

5.3 Terms and Conditions of Awards. The Committee shall determine the size of each Award to be granted (including, where applicable, the number of Shares to which an Award will relate), and all other terms and conditions of each such Award (including, but not limited to, any exercise price, base price, or purchase price, any restrictions or conditions relating to transferability, forfeiture, exercisability, or settlement of an Award, any schedule or performance conditions for the lapse of such restrictions or conditions, and accelerations or modifications thereof, and to the extent permitted by law, any restrictive covenant obligations (such as confidentiality, non-competition and non-solicitation covenants) and clawback or recoupment provisions, as the Committee may deem advisable, based in each case on such considerations as the Committee shall determine). Notwithstanding the foregoing but subject to Sections 5.6 and 6, (a) the price per Share at which Shares may be purchased upon the exercise of a Stock Option shall not be less than 100% of the Fair Market Value per Share on the date of grant of such Stock Option; (b) with respect to Stock Appreciation Rights, the base price per Share from which stock appreciation is measured shall not be less than 100% of the Fair Market Value of such Share on the date of grant of the Stock Appreciation Rights; and (c) Dividend-Equivalent Rights shall not be granted with respect to Stock Options or Stock Appreciation Rights. The Committee may determine whether, to what extent, and under what circumstances an Award may be settled, or the exercise price of an Award may be paid, in cash, Shares, other Awards, or other consideration, or an Award may be canceled, forfeited, or surrendered, except as otherwise provided in Section 5.4 below.

5.4 No Option Repricing; No Reloads. Except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, distribution (whether in the form of cash, Shares, other securities or property), stock split, extraordinary cash dividend, recapitalization, Change of Control, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Shares or other securities, or similar transactions), the Company may not, without obtaining stockholder approval, (a) amend the terms of outstanding Stock Options or Stock Appreciation Rights to reduce the exercise price of such outstanding Stock Options or base price of such Stock Appreciation Rights, (b) cancel outstanding Stock Options or Stock Appreciation Rights in exchange for Stock Options or Stock Appreciation Rights with an exercise price or base price, as applicable, that is less than the exercise price or base price of the original Stock Options or Stock Appreciation Rights or (c) cancel outstanding Stock Options or Stock Appreciation Rights with an exercise price or base price, as applicable, above the current stock price in exchange for cash or other securities. The Company will not grant any Stock Options or Stock Appreciation Rights with automatic reload features.

5.5 Stand-Alone, Additional, Tandem, and Substitute Awards. Subject to Section 5.4, Awards granted under the Plan may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with, or in substitution or exchange for, any other Award or any award granted under another plan of the Company, any Subsidiary, any Management Company or any business entity to be acquired by the Company or a Subsidiary, or any other right of a Participant to receive payment from the Company or any Subsidiary, including under any employment agreement.

 

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5.6 Change of Control. Unless otherwise set forth in an Award Agreement, Awards will vest upon a Change of Control, and any time periods, conditions or contingencies relating to the exercise or realization of, or lapse of restrictions under, any Award shall be automatically accelerated or waived so that if no exercise of the Award is required, the Award may be realized in full at the time of the occurrence of the Change of Control or if exercise of the Award is required, the Award may be exercised at the occurrence of the Change of Control.

6. Adjustments

If there is any change in the number or kind of Shares outstanding (a) by reason of a stock dividend, spinoff, recapitalization, stock split, or combination or exchange of Shares, (b) by reason of a merger, reorganization or consolidation, (c) by reason of a reclassification or change in par value, or (d) by reason of any other extraordinary or unusual event affecting the Company’s outstanding capital stock without the Company’s receipt of consideration, or if the value of outstanding Shares is substantially reduced as a result of a spinoff or the Company’s payment of an extraordinary dividend or distribution, the maximum number of Shares available for issuance under the Plan (including the limit on Shares which may be issued without regard to minimum vesting restrictions), the kind and number of Shares covered by outstanding Awards, the maximum number and kind of Shares for which any Participant may receive Awards in any year (to the extent applicable), the kind and number of Shares issued and to be issued under the Plan, and the price per Share or the applicable market value of such Awards and the exercise price, base price or purchase price relating to any Award shall be equitably adjusted by the Committee to reflect any increase or decrease in the number of, or change in the kind or value of, the issued shares of Company capital stock to preclude, to the extent practicable, the enlargement or dilution of rights and benefits under the Plan and such outstanding Awards; provided, however, that any fractional shares resulting from such adjustment shall be eliminated. In addition, the Committee is authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards (including cancellation of Awards in exchange for the intrinsic (i.e., in-the-money) value, if any, of the vested portion thereof, substitution of Awards using securities or other obligations of a successor or other entity, acceleration of the expiration date for Awards, or adjustment to performance goals in respect of Awards) in recognition of unusual or nonrecurring events affecting the Company, any Subsidiary or any business unit, including without limitation, the events described in the preceding sentence, or the financial statements of the Company or any Subsidiary, or in response to changes in applicable laws, regulations, or accounting principles. Any adjustments determined by the Committee shall be final, binding and conclusive.

7. General Provisions

7.1 Compliance with Laws and Obligations. The Company shall not be obligated to issue or deliver Shares in connection with any Award or take any other action under the Plan in a transaction subject to the registration requirements of any applicable securities law, any requirement under any listing agreement between the Company and any securities exchange or automated quotation system, or any other law, regulation, or contractual obligation of the Company, until the Company is satisfied that such laws, regulations, and other obligations of the Company have been complied with in full. Certificates representing Shares issued under the Plan will be subject to such stop-transfer orders and other restrictions as may be applicable under such laws, regulations, and other obligations of the Company, including any requirement that a legend or legends be placed thereon.

7.2 Limitations on Transferability. Awards and other rights under the Plan will not be transferable by a Participant except to a Beneficiary in the event of the Participant’s death (to the extent any such Award, by its terms, survives the Participant’s death), and, if exercisable, shall be exercisable during the lifetime of a Participant only by such Participant or his guardian or legal representative; provided, however, that such Awards and other rights may be transferred during the lifetime of the Participant to family members (and trusts or other entities for the benefit of Participants and family members) for purposes of the Participant’s estate planning, or to charities for charitable purposes (in each

 

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case, as determined by the Committee), and may be exercised by such transferees in accordance with the terms of such Award, but only if and to the extent permitted by the Committee. Awards and other rights under the Plan may not be pledged, mortgaged, hypothecated, or otherwise encumbered, and shall not be subject to the claims of creditors. A Beneficiary, transferee, or other person claiming any rights under the Plan from or through any Participant shall be subject to all terms and conditions of the Plan and any Award Agreement applicable to such Participant, except as otherwise determined by the Committee, and to any additional terms and conditions deemed necessary or appropriate by the Committee.

7.3 No Right to Continued Employment; Leaves of Absence. Neither the Plan, the grant of any Award, nor any other action taken hereunder shall be construed as giving any employee, consultant, director, or other person the right to be retained in the employ or service of the Company, any of its Subsidiaries or any Management Company (for the vesting period or any other period of time), nor shall it interfere in any way with the right of the Company or any of its Subsidiaries, or the right of any Management Company, to terminate any person’s employment or service at any time. Unless otherwise specified in the applicable Award Agreement, (a) an approved leave of absence shall not be considered a termination of employment or service for purposes of an Award under the Plan, (b) any Participant who is employed by or performs services for a Subsidiary shall be considered to have terminated employment or service for purposes of an Award under the Plan if such Subsidiary is sold or no longer qualifies as a Subsidiary of the Company, unless such Participant remains employed by the Company or another Subsidiary and (c) any Participant who is employed by, or serves as a director of, a Management Company shall be considered to have terminated employment or service for purposes of an Award under the Plan if such Management Company no longer provides services to the Company.

7.4 Taxes. The Company and any Subsidiary is authorized to withhold from any delivery of Shares in connection with an Award, any other payment relating to an Award, or any payroll or other payment to a Participant, amounts of withholding and other taxes due or potentially payable in connection with any transaction involving an Award, and to take such other action as the Committee may deem advisable to enable the Company, its Subsidiaries and Participants to satisfy obligations for the payment of withholding taxes and other tax obligations relating to any Award. This authority shall include authority to withhold Shares or receive or accept Shares or other consideration and to require Participants to make cash payments in satisfaction of withholding tax obligations. The Committee may, in its discretion and subject to such rules as the Committee may adopt, allow Participants to elect to have Share withholding applied to all or a portion of the tax withholding obligation arising in connection with any particular Award.

7.5 Changes to the Plan and Awards. The Board may amend, suspend, discontinue, or terminate the Plan or the Committee’s authority to grant Awards under the Plan without the consent of stockholders or Participants, except that any amendment shall be subject to the approval of the Company’s stockholders at or before the next annual meeting of stockholders for which the record date is after the date of such Board action if such stockholders approval is required by any applicable law, regulation or stock exchange rule, and the Board may otherwise, in its discretion, determine to submit other such amendments to stockholders for approval; provided, however, that, without the consent of an affected Participant, no such action may materially impair the rights of such Participant under any Award theretofore granted. Subject to Section 5.4, the Committee may amend, suspend, discontinue, or terminate any Award theretofore granted and any Award Agreement relating thereto; provided, however, that, without the consent of an affected Participant, no such action may materially impair the rights of such Participant under such Award. Any action taken by the Committee pursuant to Section 6 shall not be treated as an action described in this Section 7.5.

 

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7.6 No Right to Awards; No Shareholder Rights. No Participant or other person shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Participants, employees, consultants, or directors. No Award shall confer on any Participant any of the rights of a shareholder of the Company unless and until Shares are duly issued or transferred and delivered to the Participant in accordance with the terms of the Award.

7.7 Company Policies. All Awards made under the Plan shall be subject to any applicable clawback or recoupment policies, share trading policies and other policies that may be implemented by the Board from time to time.

7.8 Jurisdictional Provisions. The Committee may make Awards on such terms and conditions as the Committee deems appropriate to comply with the laws of any applicable jurisdiction, and the Committee may create such procedures, addenda and subplans and make such modifications as may be necessary or advisable to comply with such laws.

7.9 Unfunded Status of Awards; Creation of Trusts. The Plan is intended to constitute an “unfunded” plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award shall give any such Participant any rights that are greater than those of a general creditor of the Company; provided, however, that the Committee may authorize the creation of trusts or make other arrangements to meet the Company’s obligations under the Plan to deliver cash, Shares, other Awards, or other consideration pursuant to any Award, which trusts or other arrangements shall be consistent with the “unfunded” status of the Plan unless the Committee otherwise determines.

7.10 Nonexclusivity of the Plan. Neither the adoption of the Plan by the Board nor the submission of the Plan or of any amendment to stockholders for approval shall be construed as creating any limitations on the power of the Board to adopt such other compensatory arrangements as it may deem desirable, including the granting of awards otherwise than under the Plan, and such arrangements may be either applicable generally or only in specific cases.

7.11 Successors and Assigns. The Plan and Award Agreements may be assigned by the Company to any successor to the Company’s business. The Plan and any applicable Award Agreement shall be binding on all successors and assigns of the Company and a Participant, including any permitted transferee of a Participant, the Beneficiary or estate of such Participant and the executor, administrator or trustee of such estate, or any receiver or trustee in bankruptcy or representative of the Participant’s creditors.

7.12 Governing Law. The Plan and all Award Agreements shall be governed by and construed in accordance with the laws of the Republic of the Marshall Islands, without giving effect to any choice of law or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the Republic of the Marshall Islands.

7.13 Severability of Provisions. If any provision of the Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof, and the Plan shall be construed and enforced as if such provisions had not been included.

7.14 Section 409A. Notwithstanding the other provisions hereof, the Plan and the Awards are intended to comply with the requirements of Section 409A of the Code, to the extent applicable; provided, however, that in no event shall the Company be obligated to reimburse a Participant or Beneficiary for any additional tax (or related penalties and interest) incurred by reason of application of Section 409A of the Code. Notwithstanding anything herein to the contrary, in the event that any Awards constitute nonqualified deferred compensation under Section 409A of the Code, to the extent Section 409A is applicable, if (a) the Participant is a “specified employee” of the Company as of the specified employee

 

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identification date for purposes of Code Section 409A (as determined in accordance with the policies and procedures adopted by the Company) and (b) the delivery of any cash or Shares payable pursuant to an Award is required to be delayed for a period of six months after separation from service pursuant to Section 409A of the Code, such cash or Shares shall be paid within 15 days after the end of the six-month period. If the Participant dies during such six-month period, the amounts withheld on account of Section 409A shall be paid to the Participant’s Beneficiary within 30 days of the Participant’s death.

 

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Exhibit 14.1

IMPERIAL PETROLEUM INC. CODE OF BUSINESS CONDUCT AND ETHICS

The reputation and integrity of Imperial Petroleum Inc., its subsidiaries and its controlled affiliates (the “Company”) are valuable assets that are vital to the Company’s success.

This Code applies to all directors, officers, and offshore and onshore employees of the Company and its subsidiaries, and to all other persons who perform duties for, provide services to or act on behalf of the Company and its subsidiaries, whether or not they are directly employed by the Company or any such subsidiary and wherever they are located, including, but not limited to, the directors, officers, and employees of Stealth Maritime S.A. and Brave Maritime Corporation Inc. All persons subject to this Code are herein referred to as “Covered Persons.”

Each Covered Person, including each of the Company’s directors and officers, is responsible for conducting the Company’s business in a manner that demonstrates a commitment to the highest standards of integrity. No Code of Conduct can replace the thoughtful behavior of an ethical individual. The purpose of this Code is to focus Covered Persons on areas of ethical risk, provide guidance to help Covered Persons to recognize and deal with ethical issues, provide mechanisms for employees to report unethical conduct, and foster among Covered Persons a culture of honesty and accountability. Dishonest or unethical conduct or conduct that is illegal will constitute a violation of this Code, regardless of whether such conduct is specifically referenced herein.

The Company’s Board of Directors (the “Board”) is ultimately responsible for the implementation of the Code of Conduct. The Audit Committee in conjunction with the Internal Auditor, are responsible for the implementation and administration of the Code.

Questions regarding the application or interpretation of the Code of Conduct are inevitable. Covered Persons should feel free to direct questions to the Audit Committee or Internal Auditor. In addition, employees who observe, learn of, or, in good faith, suspect a violation of the Code, must immediately report the violation to the Internal Auditor, another member of the Company’s senior management, or to the Audit Committee of the Board of Directors. Employees who report violations or suspected violations in good faith will not be subject to retaliation of any kind. Reported violations will be investigated and addressed promptly and will be treated confidentially to the extent possible. A violation of the Code of Conduct may result in disciplinary action, up to and including termination of employment.

Requests for a waiver of a provision of the Code of Conduct must be submitted in writing to the Audit Committee for appropriate review, and an officer, director or appropriate Board committee will decide the outcome. For conduct involving an executive officer or Board member, only the Board or the Audit Committee of the Board, has the authority to waive a provision of the Code. In the event of an approved waiver involving the conduct of an officer or Board member, appropriate and prompt disclosure must be made to the Company’s shareholders as and to the extent required by listing standards or any other regulation.

The Audit Committee must review and approve any “related party” transaction as defined in Item 7.B of Form 20-F before it is consummated.

 

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Statements in the Code of Conduct to the effect that certain actions may be taken only with Company approval will be interpreted to mean that appropriate officers or Board directors must give prior written approval before the proposed action may be undertaken.

Employees will receive periodic communications on the contents and importance of the Code of Conduct and related policies and the manner in which violations must be reported and waivers must be requested. Each employee of the Company will be asked to certify on an annual basis that he/she is in full compliance with the Code of Conduct and related policy statements.

I. Violations of Law

A variety of laws apply to the Company and its operations, and some carry criminal penalties. These laws include banking regulations, securities laws, the laws of various countries, including laws relating to duties owed by corporate directors and officers. Examples of criminal violations of the law include: stealing, embezzling, misapplying corporate or bank funds, using threats, physical force or other unauthorized means to collect money; making a payment for an expressed purpose on the Company’s behalf to an individual who intends to use it for a different purpose; or making payments, whether corporate or personal, of cash or other items of value that are intended to influence the judgment or actions of political candidates, government officials or businesses in connection with any of the Company’s activities. The Company must and will report all suspected criminal violations to the appropriate authorities for possible prosecution, and will investigate, address and report, as appropriate, non-criminal violations.

Employees are prohibited from trading in securities while in possession of material inside information. Among other things, trading while in possession of material inside information can subject the employee to criminal or civil penalties.

Many jurisdictions in which the Company operates have customs, trade and financial controls to regulate the movement of goods, equipment, funds and property including technology and software. Whenever moving such items between jurisdictions, Covered Persons must ensure they complete the required paperwork and properly declare goods in transit. Additionally, in conducting the Company’s business, all Covered Persons are expected to comply with the U.S. Export Administration Regulations (EAR) and in particular with the EAR’s export licensing requirements and the EAR’s anti-boycott requirements.

The United States government, the European Community and many foreign governments have enacted anti-trust or competition laws. These are laws that are designed to ensure that the market for goods and services operates competitively and efficiently by prohibiting anti-competitive behavior. This behavior may include entering into anti-competitive agreements with competitors, including price fixing and bid rigging, imposing restrictions on customers or suppliers or exchanging competitively sensitive information with competitors. All Covered Persons must comply with such laws. In some countries, notably the United States and the United Kingdom, there are criminal offenses relating to competition law which means that as well as being fined personally individuals convicted of the most serious offences can also face imprisonment. In addition, even where some behaviour may be lawful (for example in a country that has not adopted anti-trust or competition laws), we will not enter into any arrangements with competitors that could harm the Company’s reputation.

 

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It is the Company’s policy to comply with all laws rules and regulations which apply to it. For compliance with certain laws, rules and regulations, the Company has adopted and implemented the compliance policies and procedures listed below, each of which is attached as an annex to this Code.

 

 

Insider Trading Policy;

 

 

Related Party Transaction Policy;

 

 

Anti-Bribery and Anti-Corruption Policy;

 

 

Anti-Money Laundering Policy;

 

 

Anti-Fraud Policy and Fraud Response Plan;

 

 

Sanctions Compliance Policy; and

 

 

Statement on Tax Compliance.

All relevant persons are expected to familiarize themselves with and abide by these compliance policies and procedures in connection with the conduct of the Company’s business.

II. Conflicts of Interest

A conflict of interest can occur or appear to occur in a wide variety of situations. Generally speaking, a conflict of interest occurs when the personal interest of an employee, officer or director, or of a member of his or her family, interferes with, has the potential to interfere with, or appears to interfere with the interests or business of the Company. For example, a conflict of interest could arise that makes it difficult for an employee, officer or director to perform corporate duties objectively and effectively where he/she is involved in a competing interest. Another such conflict may occur where an employee, officer or director or a family member receives a gift, a unique advantage, or an improper personal benefit as a result of the employee’s, officer’s or director’s position at the Company. Because a conflict of interest can occur in a variety of situations, you must keep the foregoing general principle in mind in evaluating both your conduct and that of others.

Outside Activities/Employment. Any outside activity, including employment, should not significantly encroach on the time and attention employees devote to their corporate duties, should not adversely affect the quality or quantity of their work, and should not make use of corporate equipment, facilities, or supplies, or imply (without the Company’s approval) the Company’s sponsorship or support. In addition, under no circumstances are employees permitted to compete with the Company, or take for themselves or their family members business opportunities that belong to the Company that are discovered or made available by virtue of their positions at the Company. Employees are prohibited from taking part in any outside employment without the Company’s prior approval.

 

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Civic/Political Activities. Employees are encouraged to participate in civic, charitable or political activities so long as such participation does not encroach on the time and attention they are expected to devote to their company-related duties. Such activities are to be conducted in a manner that does not involve the Company or its assets or facilities, and does not create an appearance of Company involvement or endorsement.

Loans to Employees. The Company will not make loans or extend credit guarantees to or for the personal benefit of officers, except as permitted by law. Loans or guarantees may be extended to other employees only with Company approval.

III. Fair Dealing

Each employee should deal fairly and in good faith with the Company’s customers, suppliers, regulators, business partners and others. No employee may take unfair advantage of anyone through manipulation, misrepresentation, inappropriate threats, fraud, abuse of confidential information, or other related conduct.

IV. Proper Use of Company Assets

Company assets, such as information, company-provided information technology and its contents, materials, supplies, time, intellectual property, facilities, software, and other assets owned or leased by the Company, or that are otherwise in the Company’s possession, may be used only for legitimate business purposes. The personal use of Company assets, without Company approval, is prohibited.

V. Delegation of Authority

Each Covered Person, and particularly each of the Company’s officers, must exercise due care to ensure that any delegation of authority is reasonable and appropriate in scope, and includes appropriate and continuous monitoring. No authority may be delegated to a Covered Person who the Company has reason to believe, through the exercise of reasonable due diligence, may have a propensity to engage in illegal activities.

VI. Handling Confidential Information

Covered Persons should observe the confidentiality of information that they acquire by virtue of their positions at the Company, including information concerning customers, suppliers, competitors, and other employees, except where disclosure is approved by the Company or otherwise legally mandated. Of special sensitivity is financial information, which should under all circumstances be considered confidential except where its disclosure is approved by the Company, or when it has been publicly available in a periodic or special report for at least two business days.

VII. Handling of Financial Information

U.S. federal law requires the Company to set forth guidelines pursuant to which the principal executive officer and senior financial employees perform their duties. Employees subject to this requirement include the principal executive officer, the principal financial officer, comptroller or principal accounting officer, and any person who performs a similar function. However, the Company expects that all employees who participate in the preparation of any part of the Company’s financial statements follow these guidelines:

 

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Act with honesty and integrity, avoiding violations of the code, including actual or apparent conflicts of interest with the Company in personal and professional relationships.

 

Disclose to the Internal Auditor any material transaction or relationship that reasonably could be expected to give rise to any violations of the code, including actual or apparent conflicts of interest with the Company.

 

Provide the Company’s other employees, consultants, and advisors with information that is accurate, complete, objective, relevant, timely, and understandable.

 

Endeavor to ensure full, fair, timely, accurate, and understandable disclosure in the Company’s periodic reports.

Comply with rules and regulations of various countries, state, provincial and local governments, and other appropriate private and public regulatory agencies.

 

Act in good faith, responsibly, and with due care, competence and diligence, without misrepresenting material facts or allowing your independent judgment to be subordinated.

 

Respect the confidentiality of information acquired in the course of your work except where you have Company approval or where disclosure is otherwise legally mandated. Confidential information acquired in the course of your work will not be used for personal advantage.

 

Share and maintain skills important and relevant to the Company’s needs.

 

Proactively promote ethical behavior among peers in your work environment.

 

Achieve responsible use of and control over all assets and resources employed or entrusted to you.

 

Record or participate in the recording of entries in the Company’s books and records that are accurate to the best of your knowledge.

The foregoing are set forth as guidelines for the principal executive officer and financial employees but, are, in fact, statements of mandatory conduct. Any violations of the Company’s foregoing may result in disciplinary action, up to and including termination of employment. It is the Company’s intention that this foregoing be its written code of ethics in accordance with U.S. Securities and Exchange Commission regulations. It is also important to note that U.S. federal law requires that any waiver of, or amendment to the requirements in this Section VII will be subject to public disclosure.

VIII. Discrimination And Harassment

The Company strives to maintain a workplace that is positive, productive and rewarding. Everyone is entitled to fair treatment, courtesy and respect. We will not tolerate any form of abuse or discrimination or harassment of any kind of employees, contractors, suppliers or any third parties we deal with. Derogatory comments based on any person’s sex, race, color, national origin, ancestry, citizenship, religion, age, physical or mental disability, medical condition, sexual orientation, gender identity, marital status, or any other characteristic protected by applicable law, unwelcome sexual advances or any similar types of behavior are strictly prohibited. Threats or acts of violence and physical intimidation are not permitted. The use of illegal drugs in the workplace will not be tolerated

 

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IX. Privacy And Personal Data

The Company abides by all applicable legal requirements protecting the privacy of personal information by ensuring that appropriate processes and systems are in place to safeguard access to this type of information. The Company respects sensitive information and protects its security, confidentiality, and integrity. All personal information is confidential and may not be disclosed except as permitted by law and applicable regulations. Access to personal information is strictly controlled on a ‘need to know’ basis and is used for legitimate business purposes only.

X. Records Retention

Covered Persons are expected to become familiar with the Company’s policies regarding retention of records applicable to them and to adhere to them. Covered Persons are instructed to refer to the Chairman of the Nominating and Corporate Governance Committee if they learn of pending, imminent or contemplated litigation or government investigation or have reason to believe that a violation of this policy has been committed.

XI. Environmental Issues

The Company’s commitment to the environment is paramount. The Company and its subsidiaries will comply with best practice in the industry in protecting the environment. It is the Company’s policy to meet or exceed all applicable regulatory requirements and to comply with best practice in the industry. Each Covered Person should work with respect for the environment and in accordance with this environmental policy. It is essential that everyone who deals with petroleum products, hazardous or toxic materials or other potential pollutants complies with environmental laws and regulations and follows the environmental and safety procedures specified in the Company’s training programs and compliance manuals.

XII. Safety, Health And Communication

The Company strives to provide each Covered Person with a safe and healthy work environment. Each Covered Person has responsibility for maintaining a safe and healthy workplace for all Covered Persons by following safety and health rules and practices and reporting accidents, injuries and unsafe equipment, practices or conditions.

Covered Persons must endeavor to contribute as much as possible of his or her own expertise and of the expertise drawn on from elsewhere within the Company. Free and open communication between Covered Persons is key for decision-making within the Company.

XIII. Modern Slavery

Modern Slavery involves the deprivation of a person’s liberty by another to exploit them for gain either personally or commercially. The Company is committed to a zero tolerance approach towards modern slavery in its business dealings and relationships.

 

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XIV. Ethics Hotline and Whistleblower Program

To report any violations of the Code of Conduct, including but not limited to operations, accounting, internal controls and any suspicion of fraud, either of the following methods may be used:

 

You may call the whistleblower hotline on + 30 210 62 500 17 and leave a voice message with the answering service. You may choose to remain anonymous, however, it will not be possible to obtain follow-up details necessary to investigate the matter. In either case, the information will be kept strictly confidential, thus there should be no fear of any form of retaliation.

The whistleblower hotline answering service is accessible only to the Chairman of the Audit Committee.

 

You may report any violations to the Internal Auditor by e-mail, or by a hard copy sealed note left on her desk. E-mail:

 

You may also report violations in writing and drop them off in the Whistleblower mailbox located on the ground floor of the Company’s premises.

The mailbox is accessible only to the Internal Auditor of the Company.

 

Any violations may also be communicated to the Audit Committee of Imperial Petroleum, at AuditCommittee@imperialpetroleum.com.

 

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Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the use in this Registration Statement on Form F-1 of our report dated August 3, 2021 relating to the financial statements of Imperial Petroleum Inc. Predecessor. We also consent to the reference to us under the heading “Experts” in such Registration Statement.

/s/ Deloitte Certified Public Accountants S.A

Athens, Greece

November 12, 2021