EX-4.34 17 dex434.htm LOAN AGREEMENT DATED MAY 5, 2008 Loan Agreement dated May 5, 2008

Exhibit 4.34

Date 5 May 2008

DALIAN STAR OWNERS INC.

as Borrower

- and -

THE BANKS AND FINANCIAL INSTITUTIONS

listed in Schedule 1

as Lenders

- and -

DRESDNER BANK AG in HAMBURG

as Agent and Security Trustee

- and -

DRESDNER BANK AG in HAMBURG and WESTLB AG

as Swap Banks and Joint Arrangers

 

 

LOAN AGREEMENT

 

 

relating to a term loan facility of up to US$90,000,000

to finance the acquisition of one 170,500 dwt bulk carrier with Hull No. 1001

currently under construction at Daehan Shipbuilding Co., Ltd, South Korea

WATSON, FARLEY & WILLIAMS

Piraeus

INDEX

 

Clause    Page

  1

    INTERPRETATION    1

  2

    FACILITY    14

  3

    POSITION OF THE LENDERS, SWAP BANKS AND MAJORITY LENDERS    14

  4

    DRAWDOWN    15

  5

    INTEREST    16

  6

    INTEREST PERIODS    18

  7

    DEFAULT INTEREST    19

  8

    REPAYMENT AND PREPAYMENT    20

  9

    CONDITIONS PRECEDENT    21

10

    REPRESENTATIONS AND WARRANTIES    22

11

    GENERAL UNDERTAKINGS    24

12

    CORPORATE UNDERTAKINGS    27

13

    INSURANCE    28

14

    SHIP COVENANTS    32

15

    SECURITY COVER    36

16

    PAYMENTS AND CALCULATIONS    37

17

    APPLICATION OF RECEIPTS    39

18

    APPLICATION OF EARNINGS    40

19

    EVENTS OF DEFAULT    40

20

    FEES AND EXPENSES    44

21

    INDEMNITIES    45

22

    NO SET-OFF OR TAX DEDUCTION    47

23

    ILLEGALITY, ETC    48

24

    INCREASED COSTS    48

25

    SET-OFF    50

26

    TRANSFERS AND CHANGES IN LENDING OFFICES    50

27

    VARIATIONS AND WAIVERS    53

28

    NOTICES    54

29

    SUPPLEMENTAL    55

30

    LAW AND JURISDICTION    56
SCHEDULE 1 LENDERS AND COMMITMENTS    57
SCHEDULE 2 DRAWDOWN NOTICE    58
SCHEDULE 3 CONDITION PRECEDENT DOCUMENTS    59
SCHEDULE 4 TRANSFER CERTIFICATE    62
SCHEDULE 5 MANDATORY COST FORMULA    66
EXECUTION PAGES    68

THIS AGREEMENT is made on 5 May 2008

BETWEEN

 

(1) DALIAN STAR OWNERS INC. as Borrower;

 

(2) THE BANKS AND FINANCIAL INSTITUTIONS listed in Schedule 1, as Lenders;

 

(3) DRESDNER BANK AG in HAMBURG, as Agent;

 

(4) DRESDNER BANK AG in HAMBURG, as Security Trustee;

 

(5) WESTLB AG and DRESDNER BANK AG in HAMBURG as Swap Banks; and

 

(6) WESTLB AG and DRESDNER BANK AG in HAMBURG, as Joint Arrangers.

BACKGROUND

 

(A) The Lenders have agreed to make available to the Borrower a facility of up to the lesser of (i) US$90,000,000 (Ninety million United States Dollars) and (ii) 65 per cent, of the Market Value of the Ship as determined in accordance with paragraph 5 of Part B of Schedule 3, Part B, for the purpose of financing the acquisition cost of the Ship (as such cost is determined by reference to the purchase price payable pursuant to the MO A).

 

(B) The Borrower may, if it wishes, from time to time hedge its exposure under this Agreement to interest rate fluctuations by entering into interest rate swap transactions with the Swap Banks.

 

(C) The Lenders and the Swap Banks have agreed to share pari passu in security to be granted to the Security Trustee pursuant to this Agreement.

IT IS AGREED as follows:

 

1 INTERPRETATION

 

1.1 Definitions. Subject to Clause 1.5, in this Agreement:

“Account Pledge” means the pledge creating security in respect of the Earnings Account in such form as the Agent may approve or require;

“Affected Lender” has the meaning given in Clause 5.6;

“Agency and Trust Deed” means the agency and trust deed executed or to be executed between the Borrower, the Lenders, the Swap Banks, the Agent and the Security Trustee in such form as the Agent may approve or require;

“Agent” means Dresdner Bank AG in Hamburg, acting in such capacity through its office at Jungfernstieg 22, 20354 Hamburg, Germany, or any successor of it appointed under clause 5 of the Agency and Trust Deed;

“Approved Broker” means each of Clarksons of St. Magnus House, 3 Lower Thames Street, London EC3R 6HE, England, or Fearnley AS, PO Box 1158, Sentrum, N-0107, Oslo, Norway and Ingenieubuero Weselmann of Steinhoeft 11,20459, Hamburg, Germany or any other company which the Agent may, with the authorisation of the Majority Lenders, approve from time to time as an Approved Broker under this Agreement;

 

1

“Approved Flag” means the Greek flag, the Maltese flag, the Cyprus flag, the Bahamas flag, the Panamanian flag, the Liberian flag, the Marshall Islands flag or such other flag as the Agent may, acting upon the instructions of all the Lenders, approve as the flag on which the Ship shall be registered;

“Approved Flag State” means Greece, Malta, Cyprus, Bahamas, Panama, Liberia, the Marshall Islands or any other country in which the Agent may, acting upon the instructions of all the Lenders, approve that the Ship be registered;

“Approved Manager” means Cardiff Marine Inc., a corporation incorporated in the Republic of Liberia and maintaining a ship management office at Omega Building, 80 Kifissias Avenue, Maroussi 151 25, Greece, or any other company which the Agent may, with the authorisation of the Majority Lenders, approve from time to time as the manager of the Ship;

“Availability Period” means the period commencing on the date of this Agreement and ending on:

 

  (a) the earlier to occur of (i) 31 July 2008 and (ii) the date falling 6 months from the date of this Agreement (or such later date as the Agent may, with the authorisation of the Lenders, agree with the Borrower); or

 

  (b) if earlier, the date on which the Total Commitments are fully borrowed, cancelled or terminated;

“Borrower” means Dalian Star Owners Inc., being a corporation incorporated in the Marshall Islands whose registered office is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960;

“Business Day” means a day on which banks are open in Athens, London and Hamburg and, in respect of a day on which a payment is required to be made under a Finance Document, also in New York City;

“Commitment” means, in relation to a Lender, the amount set opposite its name in Schedule 1, or, as the case may require, the amount specified in the relevant Transfer Certificate, as that amount may be reduced, cancelled or terminated in accordance with this Agreement (and “Total Commitments” means the aggregate of the Commitments of all the Lenders);

“Confirmation” and “Early Termination Date”, in relation to any continuing Designated Transaction, have the meanings given in each Master Agreement;

“Contractual Currency” has the meaning given in Clause 21.4;

“Contribution” means, in relation to a Lender, the part of the Loan which is owing to that Lender;

“Creditor Party” means the Agent, the Security Trustee, either Swap Bank or any Lender, whether as at the date of this Agreement or at any later time;

“Designated Transaction” means a Transaction which fulfils the following requirements:

 

  (a) it is entered into by the Borrower pursuant to a Master Agreement with a Swap Bank which, at the time the Transaction is entered into, is also a Lender;

 

2

  (b) its purpose is the hedging of the Borrower’s exposure under this Agreement to fluctuations in LIBOR arising from the funding of the Loan (or any part thereof) for a period expiring no later than the final Repayment Date; and

 

  (c) it is designated by the Borrower, by delivery by the Borrower to the Agent of a notice of designation, as a Designated Transaction for the purposes of the Finance Documents;

“Dollars” and “$” means the lawful currency for the time being of the United States of America;

“Drawdown Date” means the date requested by the Borrower for the Loan to be made, or (as the context requires) the date on which the Loan is actually made;

“Drawdown Notice” means a notice in the form set out in Schedule 2 (or in any other form which the Agent approves or reasonably requires);

“Earnings” means all moneys whatsoever which are now, or later become, payable (actually or contingently) to the Borrower or the Security Trustee and which arise out of the use, operation or sale of the Ship, including (but not limited to):

 

  (a) all freight, hire and passage moneys, compensation payable to the Borrower or the Security Trustee in the event of requisition of the Ship for hire, remuneration for salvage and towage services, demurrage and detention moneys and damages for breach (or payments for variation or termination) of any charterparty or other contract for the employment of the Ship;

 

  (b) all moneys which are at any time payable under Insurances in respect of loss of earnings; and

 

  (c) if and whenever the Ship is employed on terms whereby any moneys falling within paragraphs (a) or (b) are pooled or shared with any other person, that proportion of the net receipts of the relevant pooling or sharing arrangement which is attributable to the Ship;

“Earnings Account” means an account in the name of the Borrower with the Agent in Hamburg designated “Dalian Star Owners Inc. - Earnings Account” and any other account (with that or another office of the Agent or with a bank or financial institution other than the Agent) which is designated by the Agent as the Earnings Account for the purposes of this Agreement;

“Environmental Claim” means:

 

  (a) any claim by any governmental, judicial or regulatory authority which arises out of an Environmental Incident or an alleged Environmental Incident or which relates to any Environmental Law; or

 

  (b) any claim by any other person which relates to an Environmental Incident or to an alleged Environmental Incident,

and “claim” means a claim for damages, compensation, fines, penalties or any other payment of any kind whether or not similar to the foregoing; an order or direction to take, or not to take, certain action or to desist from or suspend certain action; and any form of enforcement or regulatory action, including the arrest or attachment of any asset;

 

3

“Environmental Incident” means:

 

  (a) any release of Environmentally Sensitive Material from the Ship; or

 

  (b) any incident in which Environmentally Sensitive Material is released from a vessel other than the Ship and which involves a collision between the Ship and such other vessel or some other incident of navigation or operation, in either case, in connection with which the Ship is actually or potentially liable to be arrested, attached, detained or injuncted and/or the Ship and/or the Borrower and/or any operator or manager of the Ship is at fault or allegedly at fault or otherwise liable to any legal or administrative action; or

 

  (c) any other incident in which Environmentally Sensitive Material is released otherwise than from the Ship and in connection with which the Ship is actually or potentially liable to be arrested and/or where the Borrower and/or any operator or manager of the Ship is at fault or allegedly at fault or otherwise liable to any legal or administrative action;

“Environmental Law” means any law relating to pollution or protection of the environment, to the carriage of Environmentally Sensitive Material or to actual or threatened releases of Environmentally Sensitive Material;

“Environmentally Sensitive Material” means oil, oil products and any other substance (including any chemical, gas or other hazardous or noxious substance) which is (or is capable of being or becoming) polluting, toxic or hazardous;

“Event of Default” means any of the events or circumstances described in Clause 19.1;

“Finance Documents” means:

 

  (a) this Agreement;

 

  (b) the Master Agreements;

 

  (c) the Agency and Trust Deed;

 

  (d) the Guarantee;

 

  (e) the Master Agreement Assignments;

 

  (f) the Deed of Covenant;

 

  (g) the General Assignment; (h) the Mortgage;

 

  (i) the Account Pledge; and

 

  (j) any other document (whether creating a Security Interest or not) which is executed at any time by the Borrower or any other person as security for, or to establish any form of subordination or priorities arrangement in relation to, any amount payable to the Lenders under this Agreement or any of the other documents referred to in this definition;

“Financial Indebtedness” means, in relation to a person (the “debtor”), a liability of the debtor:

 

  (a) for principal, interest or any other sum payable in respect of any moneys borrowed or raised by the debtor;

 

4

  (b) under any loan stock, bond, note or other security issued by the debtor;

 

  (c) under any acceptance credit, guarantee or letter of credit facility or dematerialised equivalent made available to the debtor;

 

  (d) under a financial lease, a deferred purchase consideration arrangement or any other agreement having the commercial effect of a borrowing or raising of money by the debtor;

 

  (e) under any foreign exchange transaction, any interest or currency swap or any other kind of derivative transaction entered into by the debtor or, if the agreement under which any such transaction is entered into requires netting of mutual liabilities, the liability of the debtor for the net amount; or

 

  (f) under a guarantee, indemnity or similar obligation entered into by the debtor in respect of a liability of another person which would fall within paragraphs (a) to (e) if the references to the debtor referred to the other person;

“Financial Year” means, in relation to the Group, each period of 1 year commencing on 1 January in respect of which its consolidated accounts are or ought to be prepared;

“GAAP” means generally accepted accounting principles as from time to time in effect in the United States of America;

“General Assignment” means a deed containing a general assignment of the Earnings, the Insurances, any Requisition Compensation of the Ship and an assignment by the Borrower of its rights under any charter and the charterer’s assignment of insurances in respect of the Ship in such form as the Agent may approve or require;

“Group” means the Guarantor and its subsidiaries (whether direct or indirect and including, but not limited to, the Borrower) from time to time during the Security Period and “member of the Group” shall be construed accordingly;

“Guarantee” means a guarantee issued by the Guarantor in such form as the Agent may approve or require;

“Guarantor” means Dryships Inc., a corporation incorporated in the Marshall Islands and having its registered office at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, The Marshall Islands MH 96960;

“IACS” means the International Association of Classification Societies;

“Insurances” means:

 

  (a) all policies and contracts of insurance, including entries of the Ship in any protection and indemnity or war risks association, which are effected in respect of the Ship, its Earnings or otherwise in relation to it; and

 

  (b) all rights and other assets relating to, or derived from, any of the foregoing, including any rights to a return of a premium;

“Interest Period” means a period determined in accordance with Clause 6;

“ISM Code” means:

 

  (a) ‘The International Management Code for the Safe Operation of Ships and for Pollution Prevention’, currently known or referred to as the ‘ISM Code’, adopted by the Assembly of the International Maritime Organisation by Resolution A.74I(18) on 4 November 1993 and incorporated on 19 May 1994 into chapter IX of the International Convention for the Safety of Life at Sea 1974 (SOLAS 1974); and

 

5

  (b) all further resolutions, circulars, codes, guidelines, regulations and recommendations which are now or in the future issued by or on behalf of the International Maritime Organisation or any other entity with responsibility for implementing the ISM Code, including without limitation, the ‘Guidelines on implementation or administering of the International Safety Management (ISM) Code by Administrations’ produced by the International Maritime Organisations pursuant to Resolution A.788(I9) adopted on 25 November 1995,

as the same may be amended, supplemented or replaced from time to time;

“ISM Code Documentation” includes:

 

  (a) the document of compliance (DOC) and safety management certificate (SMC) issued pursuant to the ISM Code in relation to the Ship within the periods specified by the ISM Code; and

 

  (b) all other documents and data which are relevant to the ISM SMS and its implementation and verification which the Agent may require; and

 

  (c) any other documents which are prepared or which are otherwise relevant to establish and maintain the Ship’s or the compliance of the Borrower with the ISM Code which the Agent may require;

“ISM SMS” means the safety management system for the Ship which is required to be developed, implemented and maintained under the ISM Code;

“ISPS Code” means the International Ship and Port Facility Security Code constituted pursuant to resolution A.924(22) of the International Maritime Organisation (“IMO”) now set out in Chapter XI-2 of the Safety of Life at Sea Convention (SOLAS) 1974 (as amended) and the mandatory ISPS Code as adopted by a Diplomatic Conference of the IMO on Maritime Security in December 2002 and includes any amendments or extensions to it and any regulation issued pursuant to it but shall only apply insofar as it is applicable law in the Approved Flag State and any jurisdiction on which the Ship is operated;

“ISPS Code Documentation” includes:

 

  (a) the International Ship Security Certificate issued pursuant to the ISPS Code in relation to the Ship within the period specified in the ISPS Code; and

 

  (b) all other documents and data which are relevant to the ISPS Code and its implementation and verification which the Agent may require;

“Joint Arrangers” means, together, WestLB AG having its registered office at Herzogstrasse 15 in 40217 Duesseldorf, Germany and acting through its London branch at

 

6

Woolgate Exchange, 25 Basinghall Street, London EC2V 5HA, England and Dresdner Bank AG in Hamburg, acting in such capacity through its office at Jungfernstieg 22, 20354 Hamburg, Germany;

“Lender” means, subject to Clause 26.6:

 

  (a) a bank or financial institution listed in Schedule 1 and acting through its branch indicated in Schedule 1 (or through another branch notified to the Borrower under Clause 26.14) unless it has delivered a Transfer Certificate or Certificates covering the entire amounts of its Commitment and its Contribution; and

 

  (b) the holder for the time being of a Transfer Certificate;

 

  “LIBOR” means, for an Interest Period:

 

  (a) the rate per annum equal to the offered quotation for deposits in Dollars for a period equal to, or as near as possible equal to, the relevant Interest Period which appears on Reuters BBA Page LIBOR 01 at or about 11.00 am (London time) on the second Business Day prior to the commencement of that Interest Period (and, for the purposes of this Agreement, “Reuters BBA Page LIBOR 01” means the display designated as “Reuters BBA Page LIBOR 01” on the Reuters Money News Service or such other page as may replace Reuters BBA Page LIBOR 01 on that service for the purpose of displaying rates comparable to that rate or on such other service as may be nominated by the British Bankers’ Association as the information vendor for the purpose of displaying the British Bankers’ Association Interest Settlement Rates for Dollars); or

 

  (b) if no rate is quoted on REUTERS BBA Page LIBOR 01, the rate per annum determined by the Agent to be the arithmetic mean of the rates per annum notified to the Agent by each Reference Bank to be the rate per annum at which deposits in Dollars are offered to that Reference Bank by leading banks in the London Interbank Market at or about 11.00 a.m. (London time) on the second Business Day prior to the commencement of that Interest Period for a period equal to that Interest Period and for delivery on the first Business Day of it;

“Loan” means the principal amount for the time being outstanding under this Agreement;

“Major Casualty” means any casualty to the Ship in respect of which the claim or the aggregate of the claims against all insurers, before adjustment for any relevant franchise or deductible, exceeds $500,000 or the equivalent in any other currency;

“Majority Lenders” means:

 

  (a) before the Loan has been made, Lenders whose commitments total 50.01 per cent, of the Total Commitments; and

 

  (b) after the Loan has been made Lenders whose contributions total 50,01 per cent, of the Loan;

“Mandatory Cost” means the percentage rate per annum calculated by the Lender in accordance with Schedule 5;

“Margin” means 1.20 per cent, per annum;

“Master Agreement” means each master agreement (on the 1992 ISDA (Multicurrency—Crossborder) form and including the Schedule thereto) made or to be made between the Borrower and a Swap Bank and includes all Designated Transactions from time to time entered into and Confirmations from time to time exchanged thereunder;

 

7

“Master Agreement Assignment” means in relation to each Master Agreement, the assignment of the Master Agreement in favour of the Security Trustee executed or to be executed by the Borrower, in such form as the Agent may approve or require;

“Market Value” means the market value of the Ship determined from time to time in accordance with Clause 15.3;

“MOA” means the memorandum of agreement dated 1 October 2007 made between the Seller and the Borrower pursuant to which the Seller has agreed to sell, and the Borrower has agreed to purchase, the Ship;

“Mortgage” means the first priority or, as the case may be, preferred ship mortgage on the Ship under the Approved Flag and deed of covenant collateral thereto (if applicable) in such form as the Agent may approve or require;

“Negotiation Period” has the meaning given in Clause 5.9;

“Payment Currency” has the meaning given in Clause 21.4;

“Permitted Security Interests” means:

 

  (a) Security Interests created by the Finance Documents;

 

  (b) liens for unpaid master’s and crew’s wages in accordance with usual maritime practice;

 

  (c) liens for salvage;

 

  (d) liens arising by operation of law for not more than 2 months’ prepaid hire under any charter in relation to the Ship not prohibited by this Agreement;

 

  (e) liens for master’s disbursements incurred in the ordinary course of trading and any other lien arising by operation of law or otherwise in the ordinary course of the operation, repair or maintenance of the Ship, provided such liens do not secure amounts more than 30 days overdue (unless the overdue amount is being contested by the Borrower in good faith by appropriate steps) and subject, in the case of liens for repair or maintenance, to Clause 14.13(g);

 

  (f) any Security Interest created in favour of a plaintiff or defendant in any proceedings or arbitration as security for costs and expenses while the Borrower is actively prosecuting or defending such proceedings or arbitration in good faith; and

 

  (g) Security Interests arising by operation of law in respect of taxes which are not overdue for payment or in respect of taxes being contested in good faith by appropriate steps and in respect of which appropriate reserves have been made;

“Pertinent Document” means:

 

  (a) any Finance Document;

 

  (b) any policy or contract of insurance contemplated by or referred to in Clause 13 or any other provision of this Agreement or another Finance Document;

 

  (c) any other document contemplated by or referred to in any Finance Document; and

 

8

  (d) any document which has been or is at any time sent by or to the Agent or the Security Trustee in contemplation of or in connection with any Finance Document or any policy, contract or document falling within paragraphs (b) or (c);

“Pertinent Jurisdiction”, in relation to a company, means:

 

  (a) England and Wales;

 

  (b) the country under the laws of which the company is incorporated or formed;

 

  (c) a country in which the company has the centre of its main interests or in which the company’s central management and control is or has recently been exercised;

 

  (d) a country in which the overall net income of the company is subject to corporation tax, income tax or any similar tax;

 

  (e) a country in which assets of the company (other than securities issued by, or loans to, related companies) having a substantial value are situated, in which the company maintains a permanent place of business, or in which a Security Interest created by the company must or should be registered in order to ensure its validity or priority; and

 

  (f) a country the courts of which have jurisdiction to make a winding up, administration or similar order in relation to the company or which would have such jurisdiction if their assistance were requested by the courts of a country referred to in paragraphs (b) or (c);

“Pertinent Matter” means:

 

  (a) any transaction or matter contemplated by, arising out of, or in connection with a Pertinent Document; or

 

  (b) any statement relating to a Pertinent Document or to a transaction or matter falling within paragraph (a);

and covers any such transaction, matter or statement, whether entered into, arising or made at any time before the signing of this Agreement or on or at any time after that signing;

“Potential Event of Default” means an event or circumstance which, with the giving of any notice, the lapse of time, a determination of the Majority Lenders and/or the satisfaction of any other condition, would constitute an Event of Default;

“Reference Banks” means, subject to Clause 26.16, the London branch of WestLB AG and Dresdner Bank AG in Hamburg;

“Relevant Person” has the meaning given in Clause 19.9;

“Repayment Date” means a date on which a repayment is required to be made under Clause 8;

“Requisition Compensation” includes all compensation or other moneys payable by reason of any act or event such as is referred to in paragraph (b) of the definition of “Total Loss”;

“Secured Liabilities” means all liabilities which the Borrower, the Security Parties or any of them have, at the date of this Agreement or at any later time or times, under or in

 

9

connection with any Finance Document or any judgment relating to any Finance Document; and for this purpose, there shall be disregarded any total or partial discharge of these liabilities, or variation of their terms, which is effected by, or in connection with, any bankruptcy, liquidation, arrangement or other procedure under the insolvency laws of any country;

“Security Interest” means:

 

  (a) a mortgage, charge (whether fixed or floating) or pledge, any maritime or other lien or any other security interest of any kind;

 

  (b) the security rights of a plaintiff under an action in rem; and

 

  (c) any arrangement entered into by a person (A) the effect of which is to place another person (B) in a position which is similar, in economic terms, to the position in which B would have been had he held a security interest over an asset of A; but this paragraph (c) does not apply to a right of set off or combination of accounts conferred by the standard terms of business of a bank or financial institution;

“Security Party” means the Guarantor, the Approved Manager and any other person (except a Creditor Party) who, as a surety or mortgagor, as a party to any subordination or priorities arrangement, or in any similar capacity, executes a document falling within the last paragraph of the definition of “Finance Documents”;

“Security Period” means the period commencing on the date of this Agreement and ending on the date on which the Agent notifies the Borrower, the Security Parties and the Lenders that:

 

  (a) all amounts which have become due for payment by the Borrower or any Security Party under the Finance Documents have been paid;

 

  (b) no amount is owing or has accrued (without yet having become due for payment) under any Finance Document;

 

  (c) neither the Borrower nor any Security Party has any future or contingent liability under Clause 20, 21 or 22 or any other provision of this Agreement or another Finance Document; and

 

  (d) the Agent, the Security Trustee and the Majority Lenders do not consider that there is a significant risk that any payment or transaction under a Finance Document would be set aside, or would have to be reversed or adjusted, in any present or possible future bankruptcy of the Borrower or a Security Party or in any present or possible future proceeding relating to a Finance Document or any asset covered (or previously covered) by a Security Interest created by a Finance Document;

“Security Trustee” Dresdner Bank AG in Hamburg, acting in such capacity through its office at Jungfernstieg 22, 20354 Hamburg, Germany, or any successor of it appointed under clause 5 of the Agency and Trust Deed;

“Seller” means Golden Nassim Inc., a corporation incorporated in Liberia whose registered office is at 80 Broad Street, Monrovia, Liberia;

“Ship” means the Capesize bulk carrier newbuilding of approximately 170,500 metric tons deadweight with Hull No. 1001 currently under construction by Daehan Shipbuilding Co., Ltd, South Korea and which is to be purchased by the Borrower pursuant to the MOA and registered in the name of the Borrower under an Approved Flag with the name “MYSTIC”;

 

10

“Swap Bank” means each of WestLB AG having its registered office at Herzogstrasse 15 in 40217 Duesseldorf, Germany and acting through its London branch at Woolgate Exchange, 25 Basinghall Street, London EC2V 5HA, England and Dresdner Bank AG in Hamburg, acting in such capacity through its office at Jungfernstieg 22, 20354 Hamburg, Germany, or any successor of it appointed under clause 5 of the Agency and Trust Deed;

“Swap Exposure” means, as at any relevant date, the amount certified by the Swap Banks to the Agent to be the aggregate net amount in Dollars which would be payable by the Borrower to the Swap Banks under (and calculated in accordance with) section 6(e) (Payments on Early Termination) of each Master Agreement if an Early Termination Date had occurred on the relevant date in relation to all continuing Designated Transactions entered into between the Borrower and the Swap Banks;

“Total Loss” means:

 

  (a) actual, constructive, compromised, agreed or arranged total loss of the Ship;

 

  (b) any expropriation, confiscation, requisition or acquisition of the Ship, whether for full consideration, a consideration less than its proper value, a nominal consideration or without any consideration, which is effected by any government or official authority or by any person or persons claiming to be or to represent a government or official authority (excluding a requisition for hire for a fixed period not exceeding 1 year without any right to an extension) unless it is within 1 month redelivered to the full control of the Borrower; and

 

  (c) any arrest, capture, seizure or detention of the Ship (including any hijacking or theft) unless it is within 1 month redelivered to the full control of the Borrower;

“Total Loss Date” means:

 

  (a) in the case of an actual loss of the Ship, the date on which it occurred or, if that is unknown, the date when the Ship was last heard of;

 

  (b) in the case of a constructive, compromised, agreed or arranged total loss of the Ship, the earliest of:

 

  (i) the date on which a notice of abandonment is given to the insurers; and

 

  (ii) the date of any compromise, arrangement or agreement made by or on behalf of the Borrower with the Ship’s insurers in which the insurers agree to treat the Ship as a total loss; and

 

  (c) in the case of any other type of total loss, on the date (or the most likely date) on which it appears to the Agent that the event constituting the total loss occurred;

“Transfer Certificate” has the meaning given in Clause 26.2;

“Transaction” has the meaning given in each Master Agreement; and

“Trust Property” has the meaning given in clause 3.1 of the Agency and Trust Deed.

 

1.2 Construction of certain terms. In this Agreement:

“approved” means, for the purposes of Clause 13, approved in writing by the Agent;

 

11

“asset” includes every kind of property, asset, interest or right, including any present, future or contingent right to any revenues or other payment;

“company” includes any partnership, joint venture and unincorporated association;

“consent” includes an authorisation, consent, approval, resolution, licence, exemption, filing, registration, notarisation and legalisation;

“contingent liability” means a liability which is not certain to arise and/or the amount of which remains unascertained;

“document” includes a deed; also a letter, fax or telex;

“excess risks” means the proportion of claims for general average, salvage and salvage charges not recoverable under the hull and machinery policies in respect of the Ship in consequence of its insured value being less than the value at which the Ship is assessed for the purpose of such claims;

“expense” means any kind of cost, charge or expense (including all legal costs, charges and expenses) and any applicable value added or other tax;

“law” includes any order or decree, any form of delegated legislation, any treaty or international convention and any regulation or resolution of the Council of the European Union, the European Commission, the United Nations or its Security Council;

“legal or administrative action” means any legal proceeding or arbitration and any administrative or regulatory action or investigation;

“liability” includes every kind of debt or liability (present or future, certain or contingent), whether incurred as principal or surety or otherwise;

“months” shall be construed in accordance with Clause 1.3;

“obligatory insurances” means all insurances effected, or which the Borrower is obliged to effect, under Clause 13 or any other provision of mis Agreement or another Finance Document;

“parent company” has the meaning given in Clause 1,4;

“person” includes any company; any state, political sub-division of a state and local or municipal authority; and any international organisation;

“policy”, in relation to any insurance, includes a slip, cover note, certificate of entry or other document evidencing the contract of insurance or its terms;

“protection and indemnity risks” means the usual risks covered by a protection and indemnity association managed in London, including pollution risks and the proportion (if any) of any sums payable to any other person or persons in case of collision which are not recoverable under the hull and machinery policies by reason of the incorporation in them of clause 1 of the Institute Time Clauses (Hulls)(l/10/83) or clause 8 of the Institute Time Clauses (Hulls)(l/l1/1995) or the Institute Amended Running Down Clause (1/10/71) or any equivalent provision;

“regulation” includes any regulation, rule, official directive, request or guideline whether or not having the force of law of any governmental, intergovernmental or supranational body, agency, department or regulatory, self-regulatory or other authority or organisation;

 

12

“subsidiary” has the meaning given in Clause 1.4;

“tax” includes any present or future tax, duty, impost, levy or charge of any kind which is imposed by any state, any political sub-division of a state or any local or municipal authority (including any such imposed in connection with exchange controls), and any connected penalty, interest or fine; and

“war risks” includes the risk of mines and all risks excluded by clause 23 of the Institute Time Clauses (Hulls)(l/10/83) or clause 24 of the Institute Time Clauses (Hulls) (1/11/1995).

 

1.3 Meaning of “month”. A period of one or more “months” ends on the day in the relevant calendar month numerically corresponding to the day of the calendar month on which the period started (“the numerically corresponding day”), but:

 

(a) on the Business Day following the numerically corresponding day if the numerically corresponding day is not a Business Day or, if there is no later Business Day in the same calendar month, on the Business Day preceding the numerically corresponding day; or

 

(b) on the last Business Day in the relevant calendar month, if the period started on the last Business Day in a calendar month or if the last calendar month of the period has no numerically corresponding day;

and “month” and “monthly” shall be construed accordingly.

 

1.4 Meaning of “subsidiary”, A company (S) is a subsidiary of another company (P) if:

 

(a) a majority of the issued shares in S (or a majority of the issued shares in S which carry unlimited rights to capital and income distributions) are directly owned by P or are indirectly attributable to P; or

 

(b) P has direct or indirect control over a majority of the voting rights attaching to the issued shares of S; or

 

(c) P has the direct or indirect power to appoint or remove a majority of the directors of S; or

 

(d) P otherwise has the direct or indirect power to ensure that the affairs of S are conducted in accordance with the wishes of P;

and any company of which S is a subsidiary is a parent company of S,

 

1.5 General Interpretation. In this Agreement:

 

(a) references in Clause 1.1 to a Finance Document or any other document being in a particular form include references to that form with any modifications to that form which the Agent (with the authorisation of the Majority Lenders in the case of substantial modifications) approves or reasonably requires;

 

(b) references to, or to a provision of, a Finance Document or any other document are references to it as amended or supplemented, whether before the date of this Agreement or otherwise;

 

(c) references to, or to a provision of, any law include any amendment, extension, re- enactment or replacement, whether made before the date of this Agreement or otherwise;

 

(d) words denoting the singular number shall include the plural and vice versa; and

 

(e) Clauses 1.1 to 1.5 apply unless the contrary intention appears.

 

13

1.6 Headings. In interpreting a Finance Document or any provision of a Finance Document, all clause, sub-clause and other headings in that and any other Finance Document shall be entirely disregarded.

 

2 FACILITY

 

2.1 Amount of facility. Subject to the other provisions of this Agreement, the Lenders shall make available to the Borrower a loan facility in a single advance of up to the lesser of (i) US$90,000,000 (Ninety million United States Dollars) and (ii) 65 per cent, of the Market Value of the Ship as determined in accordance with paragraph 5 of Schedule 3, Part B for the purpose of part-financing the acquisition cost of the Ship under the MOA.

 

2.2 Lenders’ participations in the Loan. Subject to the other provisions of this Agreement, each Lender shall participate in the Loan in the proportion which, as at the Drawdown Date, its Commitment bears to the Total Commitments.

 

2.3 Purpose of Loan. The Borrower undertakes with each Creditor Party to use the Loan only for the purpose stated in the preamble to this Agreement.

 

3 POSITION OF THE LENDERS, SWAP BANKS AND MAJORITY LENDERS

 

3.1 Interests of Lenders and Swap Banks several. The rights of the Lenders and the Swap Banks under this Agreement and each Master Agreement are several; accordingly:

 

(a) each Lender shall be entitled to sue for any amount which has become due and payable by the Borrower to it under this Agreement; and

 

(b) each Swap Bank shall be entitled to sue for any amount which has become due and payable by the Borrower to it under the Master Agreement to which that Swap Bank is a party,

without joining the Agent, the Security Trustee, any other Lender or the other Swap Bank as additional parties in the proceedings.

 

3.2 Proceedings by individual Lender or Swap Bank. However, without the prior consent of the Majority Lenders, no Lender and neither Swap Bank may bring proceedings in respect of:

 

(a) any other liability or obligation of the Borrower or a Security Party under or connected with a Finance Document or a Master Agreement; or

 

(b) any misrepresentation or breach of warranty by the Borrower or a Security Party in or connected with a Finance Document or a Master Agreement.

 

3.3 Obligations several. The obligations of the Lenders under this Agreement and of the Swap Banks under the Master Agreements are several; and a failure of a Lender to perform its obligations under this Agreement or of a Swap Bank to perform its obligations under the Master Agreement to which it is a party shall not result in:

 

(a) the obligations of the other Lenders being increased; nor

 

(b) the Borrower, any Security Party or any other Creditor Party being discharged (in whole or in part) from its obligations under any Finance Document;

 

14

and in no circumstances shall a Lender or a Swap Bank have any responsibility for a failure of another Lender or Swap Bank to perform its obligations under this Agreement or any Master Agreement.

 

3.4 Parties bound by certain actions of Majority Lenders. Every Lender, each Swap Bank, the Borrower and each Security Party shall be bound by:

 

(a) any determination made, or action taken, by the Majority Lenders under any provision of a Finance Document;

 

(b) any instruction or authorisation given by the Majority Lenders to the Agent or the Security Trustee under or in connection with any Finance Document; and

 

(c) any action taken (or in good faith purportedly taken) by the Agent or the Security Trustee in accordance with such an instruction or authorisation.

 

3.5 Reliance on action of Agent. However, the Borrower and each Security Party:

 

(a) shall be entitled to assume that the Majority Lenders have duly given any instruction or authorisation which, under any provision of a Finance Document, is required in relation to any action which the Agent has taken or is about to take; and

 

(b) shall not be entitled to require any evidence that such an instruction or authorisation has been given.

 

3.6 Construction. In Clauses 3.4 and 3.5 references to action taken include (without limitation) the granting of any waiver or consent, an approval of any document and an agreement to any matter.

 

4 DRAWDOWN

 

4.1 Request for Loan. Subject to the following conditions, the Borrower may request the Loan to be made by ensuring that the Agent receives a completed Drawdown Notice not later than 11.00 a.m. (Hamburg time) 2 Business Days prior to the intended Drawdown Date.

 

4.2 Availability. The conditions referred to in Clause 4.1 are that:

 

(a) the Drawdown Date has to be a Business Day during the Availability Period;

 

(b) the Loan shall be made available in a single amount and any amount undrawn in respect of the Loan shall be cancelled and may not be borrowed by the Borrower at a later date; and

 

(c) the aggregate amount of the Loan shall not exceed the Total Commitments;

 

4.3 Notification to Lenders of receipt of the Drawdown Notice. The Agent shall promptly notify the Lenders that it has received the Drawdown Notice and shall inform each Lender of:

 

(a) the amount of the Loan and the Drawdown Date;

 

(b) the amount of that Lender’s participation in the Loan; and

 

(c) the duration of the first Interest Period.

 

15

4.4 Drawdown Notice irrevocable. The Drawdown Notice must be signed by a director, an officer or an authorised attorney in fact of the Borrower; and once served, the Drawdown Notice cannot be revoked without the prior consent of the Agent, acting on the authority of the Majority Lenders.

 

4.5 Lenders to make available Contributions. Subject to the provisions of this Agreement, each Lender shall, on and with value on the Drawdown Date, make available to the Agent the amount due from that Lender on the Drawdown Date under Clause 2.2.

 

4.6 Disbursement of Loan. Subject to the provisions of this Agreement, the Agent shall on the Drawdown Date pay to the Borrower the amounts which the Agent receives from the Lenders under Clause 4.5; and that payment to the Borrower shall be made:

 

(a) to the account which the Borrower specifies in the Drawdown Notice; and

 

(b) in the like funds as the Agent received the payments from the Lenders.

 

4.7 Disbursement of Loan to third party. The payment by the Agent under Clause 4.6 to a third party specified in the Drawdown Notice shall constitute the making of the Loan and the Borrower shall at that time become indebted, as principal and direct obligors, to each Lender in an amount equal to that Lender’s Contribution.

 

5 INTEREST

 

5.1 Payment of normal interest. Subject to the provisions of this Agreement, interest on the Loan in respect of each Interest Period shall be paid by the Borrower on the last day of that Interest Period.

 

5.2 Normal rate of interest. Subject to the provisions of this Agreement, the rate of interest on the Loan in respect of an Interest Period shall be the aggregate of (i) the Margin, (ii) the Mandatory Cost (if any) and (iii) LIBOR for that Interest Period,

 

5.3 Payment of accrued interest. In the case of an Interest Period longer than 6 months, accrued interest shall be paid every 6 months during that Interest Period and on the last day of that Interest Period.

 

5.4 Notification of Interest Periods and rates of normal interest. The Agent shall notify the Borrower and each Lender of:

 

(a) each rate of interest; and

 

(b) the duration of each Interest Period;

as soon as reasonably practicable after each is determined.

 

5.5 Obligation of Reference Banks to quote. A Reference Bank which is a Lender shall use all reasonable efforts to supply the quotation required of it for the purposes of fixing a rate of interest under this Agreement.

 

5.6 Market disruption. The following provisions of this Clause 5 apply if:

 

(a) no rate is quoted on Reuters BBA Page LIBOR 01 and neither Reference Bank, before 1.00 p.m. (Hamburg time) on the second Business Day before the commencement of an Interest Period, provides a quotation to the Agent in order to fix LIBOR;

 

(b)

at least 1 Business Day before the start of an Interest Period, Lenders having Contributions together amounting to more than 50 per cent, of the Loan (or, if the Loan has not been made, Commitments amounting to more than 50 per cent, of the Total

 

16

 

Commitments) notify the Agent that LIBOR fixed by the Agent would not accurately reflect the cost to those Lenders of funding their respective Contributions (or any part of them) during the Interest Period in the London Interbank Market at or about 11.00 a.m. (London time) on the second Business Day before the commencement of the Interest Period; or

 

(c) at least 1 Business Day before the start of an Interest Period, the Agent is notified by a Lender (the “Affected Lender”) that for any reason it is unable to obtain Dollars in the London Interbank Market in order to fund its Contribution (or any part of it) during the Interest Period.

 

5.7 Notification of market disruption. The Agent shall promptly notify the Borrower and each of the Lenders stating the circumstances falling within Clause 5.6 which have caused its notice to be given.

 

5.8 Suspension of drawdown. If the Agent’s notice under Clause 5.7 is served before the Loan is made:

 

(a) in a case falling within Clauses 5.6(a) or (b), the Lenders’ obligations to make the Loan;

 

(b) in a case falling within Clause 5.6(c), the Affected Lender’s obligation to participate in the Loan;

shall be suspended while the circumstances referred to in the Agent’s notice continue,

 

5.9 Negotiation of alternative rate of interest. If the Agent’s notice under Clause 5.7 is served after the Loan is made, the Borrower, the Agent and the Lenders or (as the case may be) the Affected Lender shall use reasonable endeavours to agree, within the 30 days after the date on which the Agent serves its notice under Clause 5.7 (the “Negotiation Period”), an alternative interest rate or (as the case may be) an alternative basis for the Lenders or (as the case may be) the Affected Lender to fund or continue to fund their or its Contribution during the Interest Period concerned.

 

5.10 Application of agreed alternative rate of interest. Any alternative interest rate or an alternative basis which is agreed during the Negotiation Period shall take effect in accordance with the terms agreed.

 

5.11 Alternative rate of interest in absence of agreement. If an alternative interest rate or alternative basis is not agreed within the Negotiation Period, and the relevant circumstances are continuing at the end of the Negotiation Period, then the Agent shall, with the agreement of each Lender or (as the case may be) the Affected Lender, set an interest period and interest rate representing the cost of funding of the Lenders or (as the case may be) the Affected Lender in Dollars or in any available currency of their or its Contribution plus the Margin and the Mandatory Cost (if any); and the procedure provided for by this Clause 5.11 shall be repeated if the relevant circumstances are continuing at the end of the interest period so set by the Agent.

 

5.12 Notice of prepayment. If the Borrower does not agree with an interest rate set by the Agent under Clause 5.11, the Borrower may give the Agent not less than 10 Business Days* notice of its intention to prepay at the end of the interest period set by the Agent.

 

5.13 Prepayment; termination of Commitments. A notice under Clause 5.12 shall be irrevocable; the Agent shall promptly notify the Lenders or (as the case may require) the Affected Lender of the Borrower’s notice of intended prepayment; and:

 

(a) on the date on which the Agent serves that notice, the Total Commitments or (as the case may require) the Commitment of the Affected Lender shall be cancelled; and

 

17

(b) on the last Business Day of the interest period set by the Agent, the Borrower shall prepay (without premium or penalty) the Loan or, as the case may be, the Affected Lender’s Contribution, together with accrued interest thereon at the applicable rate plus the Margin and the Mandatory Cost (if any).

 

5.14 Application of prepayment. The provisions of Clause 8 shall apply in relation to the prepayment.

 

5.15 Designated Transactions under the Master Agreements. The Borrower and each Swap Bank agree that:

 

(a) the Borrower shall provide one or the other Swap Bank with a right of first refusal at any time to conclude Designated Transactions for the purpose of hedging the Borrower’s interest payment obligations under this Agreement. The Borrower agrees that signature of a Master Agreement does not commit either Swap Bank to conclude Designated Transactions, or even to offer terms for doing so, but does provide a contractual framework within which Designated Transactions may be concluded and secured, assuming that, in relation to each proposed Designated Transaction, mutually acceptable terms can then be agreed at the relevant time;

 

(b) Designated Transactions shall be concluded only for the purpose of hedging the Borrower’s interest payment obligations under this Clause 5 from LIBOR-based funding to longer-term fixed rate funding;

 

(c) the Borrower shall pay amounts required to meet its obligations under the maturing Designated Transactions and use the sums derived from such Designated Transactions to meet its interest payment obligations under this Clause 5; and

 

(d) no Designated Transaction shall be concluded which would result, at any time during the Security Period, in the notional principal amount of all Designated Transactions then current exceeding the amount of the Loan.

 

6 INTEREST PERIODS

 

6.1 Commencement of Interest Periods. The first Interest Period applicable to the Loan shall commence on the Drawdown Date and each subsequent Interest Period shall commence on the expiry of the preceding Interest Period.

 

6.2 Duration of normal Interest Periods. Subject to Clauses 6,3 and 6.4, each Interest Period shall be:

 

(a) 1, 3, 6 or 12 months as notified by the Borrower to the Agent not later than 11.00 a.m. (Hamburg time) 2 Business Days before the commencement of the Interest Period; or

 

(b) 3 months, if the Borrower fails to notify the Agent by the time specified in paragraph (a); or

 

(c) such other period as the Agent may, with the authorisation of all the Lenders, agree with the Borrower.

 

6.3 Duration of Interest Periods for repayment instalments. In respect of an amount due to be repaid under Clause 8 on a particular Repayment Date, an Interest Period shall end on that Repayment Date.

 

6.4

Non-availability of matching deposits for Interest Period selected. If, after the Borrower has selected and the Lenders have agreed an Interest Period longer than 6 months, any Lender notifies the Agent by 11.00 a.m. (Hamburg time) on the third Business Day before the commencement of the Interest Period that it is not satisfied that

 

18

 

deposits in Dollars for a period equal to the Interest Period will be available to it in the London Interbank Market when the Interest Period commences, the Interest Period shall be of 6 months.

 

7 DEFAULT INTEREST

 

7.1 Payment of default interest on overdue amounts. The Borrower shall pay interest in accordance with the following provisions of this Clause 7 on any amount payable by the Borrower under any Finance Document which the Agent, the Security Trustee or the other designated payee does not receive on or before the relevant date, that is:

 

(a) the date on which the Finance Documents provide that such amount is due for payment; or

 

(b) if a Finance Document provides that such amount is payable on demand, the date on which the demand is served; or

 

(c) if such amount has become immediately due and payable under Clause 19.4, the date on which it became immediately due and payable.

 

7.2 Default rate of interest. Interest shall accrue on an overdue amount from (and including) the relevant date until the date of actual payment (as well after as before judgment) at the rate per annum determined by the Agent to be 2 per cent, above:

 

(a) in the case of an overdue amount of principal, the higher of the rates set out at Clauses 7.3(a) and (b); or

 

(b) in the case of any other overdue amount, the rate set out at Clause 7.3(b).

 

7.3 Calculation of default rate of interest. The rates referred to in Clause 7.2 are:

 

(a) the rate applicable to the overdue principal amount immediately prior to the relevant date (but only for any unexpired part of any then current Interest Period applicable to it);

 

(b) the aggregate of the Mandatory Cost (if any) and the Margin plus, in respect of successive periods of any duration (including at call) up to 3 months which the Agent may select from time to time:

 

  (i) LIBOR; or

 

  (ii) if the Agent (after consultation with the Reference Banks) determines that Dollar deposits for any such period are not being made available to any Reference Bank by leading banks in the London Interbank Market in the ordinary course of business, a rate from time to time determined by the Agent by reference to the cost of funds to the Reference Banks from such other sources as the Agent (after consultation with the Reference Banks) may from time to time determine.

 

7.4 Notification of interest periods and default rates. The Agent shall promptly notify the Lenders and the Borrower of each interest rate determined by the Agent under Clause 7.3 and of each period selected by the Agent for the purposes of paragraph (b) of that Clause; but this shall not be taken to imply that the Borrower is liable to pay such interest only with effect from the date of the Agent’s notification.

 

7.5 Payment of accrued default interest. Subject to the other provisions of this Agreement, any interest due under this Clause shall be paid on the last day of the period by reference to which it was determined; and the payment shall be made to the Agent for the account of the Creditor Party to which the overdue amount is due.

 

19

7.6 Compounding of default interest. Any such interest which is not paid at the end of the period by reference to which it was determined shall thereupon be compounded.

 

7.7 Application to Master Agreements. For the avoidance of doubt this Clause 7 does not apply to any amount payable under a Master Agreement in respect of any continuing Designated Transaction as to which section 2(e) (Default Interest, Other Amounts) of each Master Agreement shall apply.

 

8 REPAYMENT AND PREPAYMENT

 

8.1 Amount of repayment instalments. The Borrower shall repay the Loan by 15 consecutive six-monthly repayment instalments:

 

(i) in the case of the first to the third repayment instalments (inclusive), in the amount of $10,000,000 each;

 

(ii) in the case of the fourth to the fourteenth repayment instalments (inclusive), in the amount of $3,000,000 each; and

 

(iii) in the case of the fifteenth repayment instalment, in the amount of $27,000,000

Provided that if the principal amount of the Loan drawdown by the Borrower is less than $90,000,000 each repayment instalment shall be reduced pro rata by an amount in aggregate equal to such undrawn amount.

 

8.2 Repayment Dates. The first instalment shall be repaid on the date falling 6 months after the Drawdown Date and the last instalment on the date falling 90 months after the Drawdown Date.

 

8.3 Final Repayment Date. On the final Repayment Date, the Borrower shall additionally pay to the Agent for the account of the Creditor Parties all other sums then accrued or owing under any Finance Document.

 

8.4 Voluntary prepayment. Subject to the following conditions, the Borrower may prepay the whole or any part of the Loan on the last day of an Interest Period,

 

8.5 Conditions for voluntary prepayment. The conditions referred to in Clause 8.4 are that:

 

(a) a partial prepayment shall be $500,000 or a multiple of $500,000;

 

(b) the Agent has received from the Borrower at least 5 days’ prior written notice specifying the amount to be prepaid and the date on which the prepayment is to be made (such date shall be the last day of an Interest Period); and

 

(c) the Borrower has provided evidence satisfactory to the Agent that any consent required by the Borrower or any Security Party in connection with the prepayment has been obtained and remains in force, and that any official regulation relevant to this Agreement which affects the Borrower or any Security Party has been complied with.

 

8.6 Effect of notice of prepayment. A prepayment notice may not be withdrawn or amended without the consent of the Agent, given with the authorisation of the Majority Lenders, and the amount specified in the prepayment notice shall become due and payable by the Borrower on the date for prepayment specified in the prepayment notice.

 

8.7 Notification of notice of prepayment. The Agent shall notify the Lenders promptly upon receiving a prepayment notice, and shall provide any Lender which so requests with a copy of any document delivered by the Borrower under Clause 8.5(c).

 

20

8.8 Mandatory prepayment. The Borrower shall be obliged to prepay the Loan in full if the Ship is sold or becomes a Total Loss:

 

(a) in the case of a sale, on or before the date on which the sale is completed by delivery of the Ship to the buyer; or

 

(b) in the case of a Total Loss, on the earlier of the date falling 120 days after the Total Loss Date and the date of receipt by the Security Trustee of the proceeds of insurance relating to such Total Loss.

 

8.9 Amounts payable on prepayment. A prepayment shall be made together with accrued interest (and any other amount payable under Clause 21 or otherwise) in respect of the amount prepaid and, if the prepayment is not made on the last day of an Interest Period together with any sums payable under Clause 21.1(b) but without premium or penalty.

 

8.10 Application of partial prepayment. Each partial prepayment made pursuant to Clause 8,4 shall be applied pro rata against the then outstanding repayment instalments.

 

8.11 No reborrowing. No amount prepaid in respect of the Loan may be reborrowed.

 

8.12 Unwinding of Designated Transactions. On or prior to any repayment or prepayment of the Loan under this Clause 8 or any other provision of this Agreement, the Borrower shall wholly or partially reverse, offset, unwind or otherwise terminate one or more of the continuing Designated Transactions to the extent necessary to ensure that the notional principal amount of the continuing Designated Transactions thereafter remaining does not and will not in the future (taking into account the scheduled amortisation) exceed the amount of the Loan as reducing from time to time thereafter pursuant to Clause 8.1.

 

9 CONDITIONS PRECEDENT

 

9.1 Documents, fees and no default. Each Lender’s obligation to contribute to the Loan is subject to the following conditions precedent:

 

(a) that, at least 2 Business Days before the service of the Drawdown Notice, the Agent receives the documents described in Part A of Schedule 3 in form and substance satisfactory to the Agent and its lawyers;

 

(b) that, on the Drawdown Date but prior to the making of the Loan, the Agent receives the documents described in Part B of Schedule 3 in form and substance satisfactory to it and its lawyers;

 

(c) that, on or before the service of the Drawdown Notice, the Agent receives the arrangement fee referred to in Clause 20.1 (a), (if any) accrued commitment fee payable pursuant to Clause 20.1(b) and has received payment of the expenses referred to in Clause 20.2;

 

(d) that both at the date of the Drawdown Notice and at the Drawdown Date:

 

  (i) no Event of Default or Potential Event of Default has occurred and is continuing or would result from the borrowing of the Loan;

 

  (ii) the representations and warranties in Clause 10 and those of the Borrower or any Security Party which are set out in the other Finance Documents would be true and not misleading if repeated on each of those dates with reference to the circumstances then existing; and

 

21

  (iii) none of the circumstances contemplated by Clause 5.6 has occurred and is continuing;

 

(e) that, if the ratio set out in Clause 15.1 were applied immediately following the making of the Loan, the Borrower would not be obliged to provide additional security or prepay part of the Loan under that Clause; and

 

(i) that the Agent has received, and found to be acceptable to it, any further opinions, consents, agreements and documents in connection with the Finance Documents which the Agent may, with the authorisation of the Majority Lenders, request by notice to the Borrower prior to the Drawdown Date.

 

9.2 Waiver of conditions precedent. If the Majority Lenders, at their discretion, permit the Loan to be borrowed before certain of the conditions referred to in Clause 9.1 are satisfied, the Borrower shall ensure that those conditions are satisfied within 5 Business days after the Drawdown Date (or such longer period as the Agent may, with the authorisation of the Majority Lenders, specify).

 

10 REPRESENTATIONS AND WARRANTIES

 

10.1 General. The Borrower represents and warrants to each Creditor Party as follows.

 

10.2 Status. The Borrower is duly incorporated and validly existing and in good standing under the laws of the Marshall Islands.

 

10.3 Share capital and ownership. The aggregate number of shares of stock that the Borrower is authorised to issue is 500 registered shares with a par value of twenty Dollars ($20) per share, all of which have been issued fully paid up and the legal title and beneficial ownership of all those shares is held, free of any Security Interest or other claim, by Dalian Star Shareholdings Inc.

 

10.4 Corporate power. The Borrower has the corporate capacity, and has taken all corporate action and obtained all consents necessary for it:

 

(a) to execute the MOA, to purchase and pay for the Ship under the MOA and register the Ship in its name under the Approved Flag;

 

(b) to execute the Finance Documents to which the Borrower is a party; and

 

(c) to borrow under this Agreement, to enter into Designated Transactions under each Master Agreement and to make all the payments contemplated by, and to comply with, those Finance Documents and each Master Agreement.

 

10.5 Consents in force. All the consents referred to in Clause 10.4 remain in force and nothing has occurred which makes any of them liable to revocation.

 

10.6 Legal validity; effective Security Interests. The Finance Documents to which the Borrower is a party, do now or, as the case may be, will, upon execution and delivery (and, where applicable, registration as provided for in the Finance Documents):

 

(a) constitute the Borrower’s legal, valid and binding obligations enforceable against the Borrower in accordance with their respective terms; and

 

(b) create legal, valid and binding Security Interests enforceable in accordance with their respective terms over all the assets to which they, by their terms, relate;

subject to any relevant insolvency laws affecting creditors’ rights generally.

 

22

10.7 No third party Security Interests. Without limiting the generality of Clause 10.6, at the time of the execution and delivery of each Finance Document:

 

(a) the Borrower will have the right to create all the Security Interests which that Finance Document purports to create; and

 

(b) no third party will have any Security Interest (except for Permitted Security Interests) or any other interest, right or claim over, in or in relation to any asset to which any such Security Interest, by its terms, relates.

 

10.8 No conflicts. The execution by the Borrower of each Finance Document to which it is a party, and the borrowing by the Borrower of the Loan, and its compliance with each Finance Document to which it is a party will not involve or lead to a contravention of:

 

(a) any law or regulation; or .

 

(b) the constitutional documents of the Borrower; or

 

(c) any contractual or other obligation or restriction which is binding on the Borrower or any of its assets.

 

10.9 No withholding taxes. All payments which the Borrower is liable to make under the Finance Documents to which it is a party may be made without deduction or withholding for or on account of any tax payable under any law of any Pertinent Jurisdiction.

 

10.10 No default. No Event of Default or Potential Event of Default has occurred and is continuing.

 

10.11 Information. All information which has been provided in writing by or on behalf of the Borrower or any Security Party to any Creditor Party in connection with any Finance Document satisfied the requirements of Clause 11.5; all audited and unaudited accounts which have been so provided satisfied the requirements of Clause 11.7; and there has been no material adverse change in the financial position or state of affairs of the Borrower from that disclosed in the latest of those accounts.

 

10.12 No litigation. No legal or administrative action involving the Borrower (including action relating to any alleged or actual breach of the ISM Code) has been commenced or taken or, to the Borrower’s knowledge, is likely to be commenced or taken which, in either case, would be likely to have a material adverse effect on the Borrower’s financial position or profitability.

 

10.13 Validity and completeness of MOA. The MOA constitutes valid, binding and enforceable obligations of the parties thereto in accordance with its terms and:

 

(a) the copy of the MOA delivered to the Agent before the date of this Agreement is a true and complete copy; and

 

(b) no amendments or additions to the MOA have been agreed nor has any party thereto waived any of their respective rights under the MOA.

 

10.14 No rebates etc. There is no agreement or understanding to allow or pay any rebate, premium, commission, discount or other benefit or payment (howsoever described) to the Borrower, the Seller or any third party in connection with the purchase by the Borrower of the Ship, other than as disclosed to the Lenders in writing on or prior to the date of this Agreement.

 

10.15 Compliance with certain undertakings. At the date of this Agreement, the Borrower is in compliance with Clauses 11.2, 11.4,11.9 and 11.14.

 

23

10.16 Taxes paid. The Borrower has paid all taxes applicable to, or imposed on or in relation to the Borrower, its business or the Ship.

 

10.17 ISM Code and ISPS Code compliance. All requirements of the ISM Code and the ISPS Code as they relate to the Borrower, the Approved Manager and the Ship have been complied with.

 

10.18 No money laundering. Without prejudice to the generality of Clause 2.3, in relation to the borrowing by the Borrower of the Loan, the performance and discharge of its obligations and liabilities under the Finance Documents, and the transactions and other arrangements effected or contemplated by the Finance Documents to which the Borrower is a party, the Borrower confirms that it is acting for its own account and that the foregoing will not involve or lead to contravention of any law, official requirement or other regulatory measure or procedure implemented to combat “money laundering” (as defined in Article 1 of the Directive (91/308/EEC) of the Council of the European Communities).

 

10.19 Provision of “know your customer” information. The Borrower will, as soon as practicable after receiving a request from the Agent, provide the Agent with any information required by it in relation to its “know your customer” regulations.

 

11 GENERAL UNDERTAKINGS

 

11.1 General. The Borrower undertakes with each Creditor Party to comply with the following provisions of this Clause 11 at all times during the Security Period except as the Agent may, with the authorisation of the Majority Lenders, otherwise permit.

 

11.2 Title; negative pledge. The Borrower will:

 

(a) hold the legal title to, and own the entire beneficial interest in the Ship, its Insurances and Earnings, free from all Security Interests and other interests and rights of every kind, except for those created by the Finance Documents and the effect of assignments contained in the Finance Documents and except for Permitted Security Interests; and

 

(b) not create or permit to arise any Security Interest (except for Permitted Security Interests) over any other asset, present or future including, but not limited to, the Borrower’s rights against a Swap Bank under a Master Agreement or all or any part of the Borrower’s interest in any amount payable to the Borrower by a Swap Bank under a Master Agreement; and

 

(c) procure that its liabilities under the Finance Documents to which it is a party do and will rank at least pari passu with all its other present and future unsecured liabilities, except for liabilities which are mandatorily preferred by law.

 

11.3 No disposal of assets. The Borrower will not transfer, lease or otherwise dispose of:

 

(a) all or a substantial part of its assets, whether by one transaction or a number of transactions, whether related or not; or

 

(b) any debt payable to it or any other right (present, future or contingent right) to receive a payment, including any right to damages or compensation,

 

11.4 No other liabilities or obligations to be incurred. The Borrower will not incur any liability or obligation except liabilities and obligations under the MOA and the Finance Documents to which it is a party and liabilities or obligations reasonably incurred in the ordinary course of operating and chartering the Ship.

 

24

11.5 Information provided to be accurate. All financial and other information which is provided in writing by or on behalf of the Borrower under or in connection with any Finance Document will be true and not misleading and will not omit any material fact or consideration.

 

11.6 Provision of financial statements. The Borrower will send to the Agent or procure that there is sent to the Agent:

 

(a) as soon as possible, but in no event later than 180 days after the end of each Financial Year of the Borrower (commencing with the Financial Year ended 31 December 2007), the audited consolidated accounts of the Group for that Financial Year and the unaudited management accounts of the Borrower (for the year ending in December 2008) and annually thereafter; and

 

(b) promptly after each reasonable request by the Agent, such further financial information about the Group, the Borrower, the Guarantor and/or the Ship including, but not limited to, charter arrangements, Financial Indebtedness, operating expenses and loan repayments profiles, as the Agent may require, to be prepared by a director or officer of the Borrower in a form acceptable to the Agent.

 

11.7 Form of financial statements. AH accounts (audited and unaudited) delivered under Clause 11.6 will:

 

(a) be prepared in accordance with all applicable laws and GAAP consistently applied;

 

(b) give a true and fair view of the state of affairs of the Group at the date of those accounts and of their profit for the period to which those accounts relate; and

 

(c) fully disclose or provide for all significant liabilities of the Group,

 

11.8 Shareholder and creditor notices. The Borrower will send the Agent, at the same time as they are despatched, copies of all communications which are despatched to the Borrower’s shareholders or creditors or any class of them.

 

11.9 Consents. The Borrower will maintain in force and promptly obtain or renew, and will promptly send certified copies to the Agent of, all consents required:

 

(a) for the Borrower to perform its obligations under any Finance Document to which it is a party;

 

(b) for the validity or enforceability of any Finance Document to which it is a party;

 

(c) for the Borrower to continue to own and operate the Ship, and the Borrower will comply with the terms of all such consents.

 

11.10 Maintenance of Security Interests. The Borrower will:

 

(a) at its own cost, do all that it reasonably can to ensure that any Finance Document validly creates the obligations and the Security Interests which it purports to create; and

 

(b) without limiting the generality of paragraph (a), at its own cost, promptly register, file, record or enrol any Finance Document with any court or authority in all Pertinent Jurisdictions, pay any stamp, registration or similar tax in all Pertinent Jurisdictions in respect of any Finance Document, give any notice or take any other step which, in the opinion of the Majority Lenders, is or has become necessary or desirable for any Finance Document to be valid, enforceable or admissible in evidence or to ensure or protect the priority of any Security Interest which it creates.

 

25

11.11 Notification of litigation. The Borrower will provide the Agent with details of any legal or administrative action involving the Borrower, any Security Party, the Approved Manager or the Ship, the Earnings or the Insurances as soon as such action is instituted or it becomes apparent to the Borrower that it is likely to be instituted, unless it is clear that the legal or administrative action cannot be considered material in the context of any Finance Document.

 

11.12 No amendment to MOA. The Borrower will not agree to any amendment or supplement to, or waive or fail to enforce, the MOA or any of its provisions.

 

11.13 No amendment to Master Agreements; Transactions. The Borrower will not:

 

(a) agree to any amendment or supplement to, or waive or fail to enforce, either Master Agreement or any of its provisions; or

 

(b) enter into any Transaction pursuant to a Master Agreement except Designated Transactions.

 

11.14 Principal place of business. The Borrower will maintain its place of business, and keep its corporate documents and records, at the address stated at the commencement of this Agreement; and the Borrower will not establish, or do anything as a result of which it would be deemed to have, a place of business in any country other than the Marshall Islands.

 

11.15 Confirmation of no default. The Borrower will, within 2 Business Days after service by the Agent of a written request, serve on the Agent a notice which is signed by an authorised signatory of the Borrower and which:

 

(a) states that no Event of Default or Potential Event of Default has occurred; or

 

(b) states that no Event of Default or Potential Event of Default has occurred, except for a specified event or matter, of which all material details are given.

The Agent may serve requests under this Clause 11.15 from time to time but only if asked to do so by a Lender or Lenders having Contributions exceeding 10 per cent, of the Loan or (if the Loan has not been made) Commitments exceeding 10 per cent of the Total Commitments; and this Clause 11.15 does not affect the Borrower’s obligations under Clause 11.16.

 

11.16 Notification of default. The Borrower will notify the Agent as soon as it becomes aware of:

 

(a) the occurrence of an Event of Default or a Potential Event of Default; or

 

(b) any matter which indicates that an Event of Default or a Potential Event of Default may have occurred,

and will keep the Agent fully up-to-date with all developments.

 

11.17 Provision of further information. The Borrower will, as soon as practicable after receiving the request, provide the Agent with any additional financial or other information relating:

 

(a) to it, any Security Party, the Ship, the Earnings or the Insurances; or

 

26

(b) to any other matter relevant to, or to any provision of, a Finance Document,

which may be requested by the Agent, the Security Trustee or any Lender at any time.

 

11.18 Provision of copies and translation of documents. The Borrower will supply the Agent with a sufficient number of copies of the documents referred to above to provide 1 copy for each Creditor Party; and if the Agent so requires in respect of any of those documents, the Borrower will provide a certified English translation prepared by a translator approved by the Agent.

 

11.19 General and administrative costs. The Borrower shall ensure that the payment of all the general and administrative costs of the Borrower in connection with the ownership and operation of the Ship (including, without limitation, the payment of the management fees) shall be fully subordinated to the payment obligations of the Borrower under this Agreement and the other Finance Documents throughout the Security Period.

 

12 CORPORATE UNDERTAKINGS

 

12.1 General. The Borrower also undertakes with each Creditor Party to comply with the following provisions of this Clause 12 at all times during the Security Period except as the Agent may, with the authorisation of the Majority Lenders, otherwise permit.

 

12.2 Maintenance of status. The Borrower will maintain its separate corporate existence and remain in good standing under the laws of the Marshall Islands.

 

12.3 Negative undertakings. The Borrower will not:

 

(a) carry on any business other than the ownership, chartering and operation of the Ship; or

 

(b) provide any form of credit or financial assistance to:

 

  (i) a person who is directly or indirectly interested in the Borrower’s share or loan capital; or

 

  (ii) any company in or with which such a person is directly or indirectly interested or connected;

or enter into any transaction with or involving such a person or company on terms which are, in any respect, less favourable to the Borrower than those which it could obtain in a bargain made at arms’ length;

 

(c) open or maintain any account with any bank or financial institution except accounts with the Agent and the Security Trustee for the purposes of the Finance Documents;

 

(d) issue, allot or grant any person a right to any shares in its capital or repurchase or reduce its issued share capital;

 

(e) acquire any shares or other securities other than US or UK Treasury bills and certificates of deposit issued by major North American or European banks, or enter into any transaction in a derivative other than Designated Transactions; and

 

(f) enter into any form of amalgamation, merger or de-merger or any form of reconstruction or reorganisation.

 

27

13 INSURANCE

 

13.1 General. The Borrower also undertakes with each Creditor Party to comply with the following provisions of this Clause 13 at all times during the Security Period except as the Agent may, with the authorisation of the Majority Lenders, otherwise permit.

 

13.2 Maintenance of obligatory insurances. The Borrower shall keep the Ship insured at its own expense against:

 

(a) fire and usual marine risks (including hull and machinery and excess risks);

 

(b) war risks (including protection and indemnity war risks);;

 

(c) protection and indemnity risks; and

 

(d) any other risks against which the Majority Lenders consider, having regard to practices and other circumstances prevailing at the relevant time, it would in the opinion of the Majority Lenders be reasonable for the Borrower to insure and which are specified by the Security Trustee by notice to the Borrower.

 

13.3 Terms of obligatory insurances. The Borrower shall effect such insurances:

 

(a) in Dollars;

 

(b) in the case of fire and usual marine risks and war risks, in an amount on an agreed value basis at least the greater of (i) the Market Value of the Ship and (ii) an amount which is equal to 120 per cent, of the Loan;

 

(c) in the case of oil pollution liability risks, for an aggregate amount equal to the highest level of cover from time to time available under basic protection and indemnity club entry (with the international group of protection and indemnity clubs) and the international marine insurance market (currently $1,000,000,000);

 

(d) in relation to protection and indemnity risks in respect of the full value and the full tonnage of the Ship ;

 

(e) on approved terms; and

 

(f) through approved brokers and with approved insurance companies and/or underwriters or, in the case of war risks and protection and indemnity risks, in approved war risks and protection and indemnity risks associations.

 

13.4 Further protections for the Creditor Parties. In addition to the terms set out in Clause 13.3, the Borrower shall procure that the obligatory insurances shall:

 

(a) whenever the Security Trustee requires, name (or be amended to name) the Security Trustee as additional named assured for its rights and interests, warranted no operational interest and with full waiver of rights of subrogation against the Security Trustee, but without the Security Trustee thereby being liable to pay (but having the right to pay) premiums, calls or other assessments in respect of such insurance;

 

(b) name the Security Trustee as loss payee with such directions for payment as the Security Trustee may specify;

 

(c) provide that all payments by or on behalf of the insurers under the obligatory insurances to the Security Trustee shall be made without set-off, counterclaim or deductions or condition whatsoever;

 

28

(d) provide that the insurers shall waive, to the fullest extent permitted by English law, their entitlement (if any) (whether by statute, common law, equity, or otherwise) to be subrogated to the rights and remedies of the Security Trustee in respect of any rights or interests (secured or not) held by or available to the Security Trustee in respect of the Secured Liabilities, until the Secured Liabilities shall have been fully repaid and discharged, except that the insurers shall not be restricted by the terms of this paragraph (d) from making personal claims against persons (other than the Borrower or any Creditor Party) in circumstances where the insurers have fully discharged their liabilities and obligations under the relevant obligatory insurances;

 

(e) provide that such obligatory insurances shall be primary without right of contribution from other insurances which may be carried by the Security Trustee or any other Creditor Party;

 

(f) provide that the Security Trustee may make proof of loss if the Borrower fails to do so; and

 

(g) provide that if any obligatory insurance is cancelled, or if any substantial change is made in the coverage which adversely affects the interest of the Security Trustee, or if any obligatory insurance is allowed to lapse for non-payment of premium, such cancellation, charge or lapse shall not be effective with respect to the Security Trustee for 30 days (or 7 days in the case of war risks) after receipt by the Security Trustee of prior written notice from the insurers of such cancellation, change or lapse.

 

13.5 Renewal of obligatory insurances. The Borrower shall:

 

(a) at least 14 days before the expiry of any obligatory insurance effected by it:

 

  (i) notify the Security Trustee of the brokers (or other insurers) and any protection and indemnity or war risks association through or with whom the Borrower proposes to renew that obligatory insurance and of the proposed terms of renewal; and

 

  (ii) obtain the Security Trustee’s approval to the matters referred to in paragraph (i);

 

(b) at least 14 days before the expiry of any obligatory insurance effected by it, renew that obligatory insurance in accordance with the Security Trustee’s approval pursuant to paragraph (a); and

 

(c) procure that the approved brokers and/or the war risks and protection and indemnity associations with which such a renewal is effected shall promptly after the renewal notify the Security Trustee in writing of the terms and conditions of the renewal.

 

13.6 Copies of policies; letters of undertaking. The Borrower shall ensure that all approved brokers provide the Security Trustee with pro forma copies of all policies relating to the obligatory insurances which they are to effect or renew and of a letter or letters or undertaking in a form required by the Security Trustee and including undertakings by the approved brokers that:

 

(a) they will have endorsed on each policy, immediately upon issue, a loss payable clause and a notice of assignment complying with the provisions of Clause 13.4;

 

(b) they will hold such policies, and the benefit of such insurances, to the order of the Security Trustee in accordance with the said loss payable clause;

 

(c) they will advise the Security Trustee immediately of any material change to the terms of the obligatory insurances;

 

29

(d) they will notify the Security Trustee, not less than 14 days before the expiry of the obligatory insurances, in the event of their not having received notice of renewal instructions from the Borrower or its agents and, in the event of their receiving instructions to renew, they will promptly notify the Security Trustee of the terms of the instructions; and

 

(e) they will not set off against any sum recoverable in respect of a claim relating to the Ship under such obligatory insurances any premiums or other amounts due to them or any other person whether in respect of the Ship or otherwise, they waive any lien on the policies, or any sums received under them, which they might have in respect of such premiums or other amounts, and they will not cancel such obligatory insurances by reason of non-payment of such premiums or other amounts, and will arrange for a separate policy to be issued in respect of the Ship forthwith upon being so requested by the Security Trustee.

 

13.7 Copies of certificates of entry. The Borrower shall ensure that any protection and indemnity and/or war risks associations in which the Ship is entered provides the Security Trustee with:

 

(a) a certified copy of the certificate of entry for the Ship;

 

(b) a letter or letters of undertaking in such form as may be required by the Security Trustee;

 

(c) where required to be issued under the terms of insurance/indemnity provided by the Borrower’s protection and indemnity association, a certified copy of each United States of America voyage quarterly declaration (or other similar document or documents) made by the Borrower in relation to the Ship in accordance with the requirements of such protection and indemnity association; and

 

(d) a certified copy of each certificate of financial responsibility for pollution by oil or other Environmentally Sensitive Material issued by the relevant certifying authority in relation to the Ship.

 

13.8 Deposit of original policies. The Borrower shall ensure that all policies relating to obligatory insurances effected by it are deposited with the approved brokers through which the insurances are effected or renewed.

 

13.9 Payment of premiums. The Borrower shall punctually pay all premiums or other sums payable in respect of the obligatory insurances effected by it and produce all relevant receipts when so required by the Security Trustee.

 

13.10 Guarantees. The Borrower shall ensure that any guarantees required by a protection and indemnity or war risks association are promptly issued and remain in full force and effect.

 

13.11 Compliance with terms of insurances. The Borrower shall not do nor omit to do (nor permit to be done or not to be done) any act or thing which would or might render any obligatory insurance invalid, void, voidable or unenforceable or render any sum payable under an obligatory insurance repayable in whole or in part; and, in particular:

 

(a) the Borrower shall take all necessary action and comply with all requirements which may from time to time be applicable to the obligatory insurances, and (without limiting the obligation contained in Clause 13.7(c)) ensure that the obligatory insurances are not made subject to any exclusions or qualifications to which the Security Trustee has not given its prior approval;

 

(b) the Borrower shall not make any changes relating to the classification or classification society or manager or operator of the Ship approved by the underwriters of the obligatory insurances;

 

30

(c) the Borrower shall make (and promptly supply copies to the Agent of) all quarterly or other voyage declarations which may be required by the protection and indemnity risks association in which the Ship is entered to maintain cover for trading to the United States of America and Exclusive Economic Zone (as defined in the United States Oil Pollution Act 1990 or any other applicable legislation); and

 

(d) the Borrower shall not employ the Ship, nor allow it to be employed, otherwise than in conformity with the terms and conditions of the obligatory insurances, without first obtaining the consent of the insurers and complying with any requirements (as to extra premium or otherwise) which the insurers specify.

 

13.12 Alteration to terms of insurances. The Borrower shall neither make nor agree to any alteration to the terms of any obligatory insurance nor waive any right relating to any obligatory insurance.

 

13.13 Settlement of claims. The Borrower shall not settle, compromise or abandon any claim under any obligatory insurance for Total Loss or for a Major Casualty, and shall do all things necessary and provide all documents, evidence and information to enable the Security Trustee to collect or recover any moneys which at any time become payable in respect of the obligatory insurances.

 

13.14 Provision of copies of communications. The Borrower shall provide the Security Trustee, at the time of each such communication, copies of all written communications between it and:

 

(a) the approved brokers; and

 

(b) the approved protection and indemnity and/or war risks associations; and

 

(c) the approved insurance companies and/or underwriters, which relate directly or indirectly to:

 

  (i) the Borrower’s obligations relating to the obligatory insurances including, without limitation, all requisite declarations and payments of additional premiums or calls; and

 

  (ii) any credit arrangements made between the Borrower and any of the persons referred to in paragraphs (a) or (b) relating wholly or partly to the effecting or maintenance of the obligatory insurances.

 

13.15 Provision of information. In addition, the Borrower shall promptly provide the Security Trustee (or any persons which it may designate) with any information which the Security Trustee (or any such designated person) requests for the purpose of:

 

(a) obtaining or preparing any report from an independent marine insurance broker as to the adequacy of the obligatory insurances effected or proposed to be effected; and/or

 

(b) effecting, maintaining or renewing any such insurances as are referred to in Clause 13.16 or dealing with or considering any matters relating to any such insurances;

and the Borrower shall, forthwith upon demand, indemnify the Security Trustee in respect of all fees and other expenses incurred by or for the account of the Security Trustee in connection with any such report as is referred to in paragraph (a).

 

13.16

Mortgagee’s interest and additional perils (pollution) insurances. The Security Trustee shall be entitled from time to time to effect, maintain and renew a mortgagee’s marine insurance in respect of the Ship and a mortgagee’s interest additional perils (pollution) insurance in respect of the Ship, each in such amounts, on such terms, through

 

31

 

such insurers and generally in such manner as the Security Trustee may from time to time consider appropriate and the Borrower shall upon demand fully indemnify the Security Trustee in respect of all premiums and other expenses which are incurred in connection with or with a view to effecting, maintaining or renewing any such insurance or dealing with, or considering, any matter arising out of any such insurance.

 

13.17 Review of insurance requirements. The Majority Lenders shall be entitled to review the requirements of this Clause 13 from time to time in order to take account of any changes in circumstances after the date of this Agreement which are, in the opinion of the Majority Lenders, significant and capable of affecting the Borrower or the Ship and its insurance (including, without limitation, changes in the availability or the cost of insurance coverage or the risks to which the Borrower may be subject), and may appoint insurance consultants in relation to this review at the cost of the Borrower.

 

13.18 Modification of insurance requirements. The Security Trustee shall notify the Borrower of any proposed modification under Clause 13.17 to the requirements of this Clause 13 which the Majority Lenders consider appropriate in the circumstances, and such modification shall take effect on and from the date it is notified in writing to the Borrower as an amendment to this Clause 13 and shall bind the Borrower accordingly.

 

13.19 Compliance with mortgagee’s instructions. The Security Trustee shall be entitled (without prejudice to or limitation of any other rights which it may have or acquire under any Finance Document) to require the Ship to remain at any safe port or to proceed to and remain at any safe port designated by the Security Trustee until the Borrower implements any amendments to the terms of the obligatory insurances and any operational changes required as a result of a notice served under Clause 13.18.

 

14 SHIP COVENANTS

 

14.1 General. The Borrower also undertakes with each Creditor Party to comply with the following provisions of this Clause 14 at all times during the Security Period except as the Agent, with the authorisation of the Majority Lenders, may otherwise permit.

 

14.2 Ship’s name and registration. The Borrower shall keep the Ship registered in its name under the Approved Flag; shall not do or allow to be done anything as a result of which such registration might be cancelled or imperilled; and shall not change the name or port of registry of the Ship.

 

14.3 Repair and classification. The Borrower shall keep the Ship in a good and safe condition and state of repair:

 

(a) consistent with first-class ship ownership and management practice;

 

(b) so as to maintain the highest class applicable to vessels of the same age, type and specification as such Ship at (or such other first-class classification society which is a member of IACS acceptable to the Agent) free of recommendations and conditions; and

 

(c) so as to comply with all laws and regulations applicable to vessels registered at ports where the Ship is registered or to vessels trading to any jurisdiction to which the Ship may trade from time to time, including but not limited to the ISM Code, the ISPS Code, the ISM Code Documentation and the ISPS Code Documentation.

 

32

14.4 Classification society undertaking. The Borrower shall instruct the classification society referred to in Clause 14.3(a) (and procure that the classification society undertakes with the Security Trustee):

 

(a) to send to the Security Trustee, following receipt of a written request from the Security Trustee, certified true copies of all original class records held by the classification society in relation to the Ship;

 

(b) to allow the Security Trustee (or its agents), at any time and from time to time, to inspect the original class and related records of the Borrower and the Ship at the offices of the classification society and to take copies of them;

 

(c) to notify the Security Trustee immediately in writing if the classification society:

 

  (i) receives notification from the Borrower or any person that the Ship’s classification society is to be changed; or

 

  (ii) becomes aware of any facts or matters which may result in or have resulted in a change, suspension, discontinuance, withdrawal or expiry of the Ship’s class under the rules or terms and conditions of the Borrower’s or the Ship’s membership of the classification society;

 

(d) following receipt of a written request from the Security Trustee:

 

  (i) to confirm that the Borrower is not in default of any of its contractual obligations or liabilities to the classification society and, without limiting the foregoing, that it has paid in full all fees or other charges due and payable to the classification society; or

 

  (ii) if the Borrower is in default of any of its contractual obligations or liabilities to the classification society, to specify to the Security Trustee in reasonable detail the facts and circumstances of such default, the consequences thereof, and any remedy period agreed or allowed by the classification society.

 

14.5 Modification. The Borrower shall not make any modification or repairs to, or replacement of, the Ship or equipment installed on it which would or might materially alter the structure, type or performance characteristics of the Ship or materially reduce its value.

 

14.6 Removal of parts. The Borrower shall not remove any material part of the Ship, or any item of equipment installed on, the Ship unless the part or item so removed is forthwith replaced by a suitable part or item which is in the same condition as or better condition than the part or item removed, is free from any Security Interest or any right in favour of any person other than the Security Trustee and becomes on installation on the Ship the property of the Borrower and subject to the security constituted by the Mortgage Provided that the Borrower may install equipment owned by a third party if the equipment can be removed without any risk of damage to the Ship.

 

14.7 Surveys. The Borrower shall submit the Ship regularly to all periodical or other surveys which may be required for classification purposes and, if so required by the Security Trustee provide the Security Trustee, with copies of all survey reports and shall allow the Security Trustee’s representatives to conduct a comprehensive inspection of the Ship’s records when and if required by the Security Trustee.

 

33

14.8 Inspection. The Borrower shall permit the Security Trustee (by surveyors or other persons appointed by it for that purpose) to board the Ship at all reasonable times to inspect its condition or to satisfy themselves about proposed or executed repairs and shall afford all proper facilities for such inspections and all costs and expenses in relation thereto shall be for the account of the Borrower Provided that so long as no Event of Default has occurred and is continuing at the relevant time and the Ship is found to be in a satisfactory condition (in the opinion of the Security Trustee) the Borrower shall be obliged to pay the fees and expenses of one inspection of the Ship in any calendar year.

 

14.9 Prevention of and release from arrest. The Borrower shall promptly discharge:

 

(a) all liabilities which give or may give rise to maritime or possessory liens on or claims enforceable against the Ship, the Earnings or the Insurances;

 

(b) all taxes, dues and other amounts charged in respect of the Ship, the Earnings or the Insurances; and

 

(c) all other outgoings whatsoever in respect of the Ship, the Earnings or the Insurances;

and, forthwith upon receiving notice of the arrest of the Ship, or of its detention in exercise or purported exercise of any lien or claim, the Borrower shall within 10 Business Days procure its release by providing bail or otherwise as the circumstances may require.

 

14.10 Compliance with laws etc. The Borrower shall:

 

(a) comply, or procure compliance with the ISM Code, all Environmental Laws, the ISPS Code and all other laws or regulations relating to the Ship, its ownership, operation and management or to the business of the Borrower;

 

(b) not employ the Ship nor allow its employment in any manner contrary to any law or regulation in any relevant jurisdiction including but not limited to the ISM Code and the ISPS Code; and

 

(c) in the event of hostilities in any part of the world (whether war is declared or not), not cause or permit the Ship to enter or trade to any zone which is declared a war zone by any government or by the Ship’s war risks insurers unless the prior written consent of the Security Trustee has been given and the Borrower has (at its expense) effected any special, additional or modified insurance cover which the Security Trustee may require.

 

14.11 Provision of information. The Borrower shall promptly provide the Security Trustee with any information which it requests regarding:

 

(a) the Ship, its employment, position and engagements;

 

(b) the Earnings and payments and amounts due to the master and crew of the Ship;

 

(c) any expenses incurred, or likely to be incurred, in connection with the operation, maintenance or repair of the Ship and any payments made in respect of the Ship;

 

(d) any towages and salvages;

 

(e)

its compliance, the Approved Manager’s compliance and the compliance of the Ship with the ISM Code and the ISPS Code,

 

34

 

and, upon the Security Trustee’s request, provide copies of any current charter relating to the Ship, of any current charter guarantee and copies of the ISM Code Documentation and the ISPS Code Documentation,

 

14.12 Notification of certain events. The Borrower shall immediately notify the Security Trustee by fax, confirmed forthwith by letter, of:

 

(a) any casualty which is or is likely to be or to become a Major Casualty;

 

(b) any occurrence as a result of which the Ship has become or is, by the passing of time or otherwise, likely to become a Total Loss;

 

(c) any requirement or recommendation made by any insurer or classification society or by any competent authority which is not immediately complied with;

 

(d) any arrest or detention of the Ship, any exercise or purported exercise of any lien on the Ship or its Earnings or any requisition of the Ship for hire;

 

(e) any intended dry docking of the Ship;

 

(f) any Environmental Claim made against the Borrower or in connection with the Ship, or any Environmental Incident;

 

(g) any claim for breach of the ISM Code or of the ISPS Code being made against the Borrower, the Approved Manager or otherwise in connection with the Ship; or

 

(h) any other matter, event or incident, actual or threatened, the effect of which will or could lead to the ISM Code or the ISPS Code not being complied with,

and the Borrower shall keep the Security Trustee advised in writing on a regular basis and in such detail as the Security Trustee shall require of the Borrower’s, the Approved Manager’s or any other person’s response to any of those events or matters.

 

14.13 Restrictions on chartering, appointment of managers etc. The Borrower shall not:

 

(a) let the Ship on demise charter for any period;

 

(b) enter into any time or consecutive voyage charter in respect of the Ship for a term which exceeds, or which by virtue of any optional extensions may exceed, 12 months;

 

(c) enter into any charter in relation to the Ship under which more than 2 months’ hire (or the equivalent) is payable in advance;

 

(d) charter the Ship otherwise than on bona fide arm’s length terms at the time when the Ship is fixed;

 

(e) appoint a manager of the Ship other than the Approved Manager or agree to any alteration to the terms of the Approved Manager’s appointment;

 

(f) de-activate or lay up the Ship; or

 

(g) put the Ship into the possession of any person for the purpose of work being done upon it in an amount exceeding or likely to exceed $500,000 (or the equivalent in any other currency) unless that person has first given to the Security Trustee and in terms satisfactory to it a written undertaking not to exercise any lien on the Ship or its Earnings for the cost of such work or for any other reason.

 

35

14.14 Notice of Mortgage. The Borrower shall keep the Mortgage registered against the Ship as a valid first priority mortgage, carry on board the Ship a certified copy of the Mortgage and place and maintain in a conspicuous place in the navigation room and the Master’s cabin of the Ship a framed printed notice stating that the Ship is mortgaged by the Borrower to the Security Trustee.

 

14.15 Sharing of Earnings. The Borrower shall not enter into any agreement or arrangement for the sharing of any Earnings.

 

15 SECURITY COVER

 

15.1 Minimum required security cover. Clause 15,2 applies if the Agent notifies the Borrower that:

 

(a) the Market Value of the Ship; plus

 

(b) the net realisable value of any additional security previously provided under this Clause 15;

is below 125 per cent, of the aggregate of the Loan and the Swap Exposure.

 

15.2 Provision of additional security; prepayment. If the Agent serves a notice on the Borrower under Clause 15.1, the Borrower shall, within 1 month after the date on which the Agent’s notice is served, either:

 

(a) provide, or ensure that a third party provides, additional security which, in the opinion of the Majority Lenders, has a net realisable value at least equal to the shortfall and is documented in such terms as the Agent may, with the authorisation of the Majority Lenders, approve or require; or

 

(b) prepay such part (at least) of the Loan as will eliminate the shortfall.

 

15.3 Valuation of Ship. The Market Value of the Ship at any date is that shown by the average of two valuations prepared:

 

(a) as at a date not more than 14 days previously;

 

(b) by an Approved Broker;

 

(c) with or without physical inspection of the Ship (as the Agent may require);

 

(d) on the basis of a sale for prompt delivery for cash on normal arm’s length commercial terms as between a willing seller and a willing buyer;

 

(e) with or without charter or other contract of employment at the reasonable option of the Agent; and

 

(f) after deducting the estimated amount of the usual and reasonable expenses which would be incurred in connection with the sale.

 

15.4 Value of additional vessel security. The net realisable value of any additional security which is provided under Clause 15.2 and which consists of a Security Interest over a vessel shall be that shown by a valuation complying with the requirements of Clause 15,3.

 

15.5 Valuations binding. Any valuation under Clause 15.2, 15.3 or 15.4 shall be binding and conclusive as regards the Borrower, as shall be any valuation which the Majority Lenders make of any additional security which does not consist of or include a Security Interest.

 

36

15.6 Provision of information. The Borrower shall promptly provide the Agent and any Approved Broker acting under Clause 15.3 or 15.4 with any information which the Agent or the Approved Broker may request for the purposes of the valuation; and, if the Borrower fails to provide the information by the date specified in the request, the valuation may be made on any basis and assumptions which the Approved Broker or the Majority Lenders (or the expert appointed by them) consider prudent.

 

15.7 Payment of valuation expenses. Without prejudice to the generality of the Borrower’s obligations under Clauses 20.2, 20.3 and 21.3, the Borrower shall, on demand, pay the Agent the amount of the fees and expenses of any Approved Broker instructed by the Agent under this Clause and all legal and other expenses incurred by any Creditor Party in connection with any matter arising out of this Clause Provided that prior to an Event of Default or Potential Event of Default the Borrower shall not be obliged to reimburse the Agent for more than one set of valuations of the Ship per calendar year and Provided further that such valuations show that the Borrower complies with the terms of Clause 15.1.

 

15.8 Application of prepayment. Clause 8 shall apply in relation to any prepayment pursuant to Clause 15.2(b).

 

16 PAYMENTS AND CALCULATIONS

 

16.1 Currency and method of payments. All payments to be made by the Lenders or by the Borrower under a Finance Document shall be made to the Agent or to the Security Trustee, in the case of an amount payable to it:

 

(a) by not later than 11.00 a.m. (New York City time) on the due date;

 

(b) in same day Dollar funds settled through the New York Clearing House Interbank Payments System (or in such other Dollar funds and/or settled in such other manner as the Agent shall specify as being customary at the time for the settlement of international transactions of the type contemplated by this Agreement);

 

(c) in the case of an amount payable by a Lender to the Agent or by the Borrower to the Agent or any Lender, to the account of the Agent at Dresdner Bank AG in Frankfurt for Dresdner Bank AG in Hamburg (swift code DRES DE FF 200, reference: Dalian Star Owners Inc.), or to such other account with such other bank as the Agent may from time to time notify to the Borrower and the other Creditor Parties; and

 

(d) in the case of an amount payable to the Security Trustee, to such account as it may from time to time notify to the Borrower and the other Creditor Parties.

 

16.2 Payment on non-Business Day. If any payment by the Borrower under a Finance Document would otherwise fall due on a day which is not a Business Day:

 

(a) the due date shall be extended to the next succeeding Business Day; or

 

(b) if the next succeeding Business Day falls in the next calendar month, the due date shall be brought forward to the immediately preceding Business Day;

and interest shall be payable during any extension under paragraph (a) at the rate payable on the original due date.

 

16.3 Basis for calculation of periodic payments. All interest and the commitment fee and any other payments under any Finance Document which are of an annual or periodic nature shall accrue from day to day and shall be calculated on the basis of the actual number of days elapsed and a 360 day year.

 

37

16.4 Distribution of payments to Creditor Parties. Subject to Clauses 16.5,16.6 and 16.7:

 

(a) any amount received by the Agent under a Finance Document for distribution or remittance to a Lender, a Swap Bank or the Security Trustee shall be made available by the Agent to that Lender, that Swap Bank or, as the case may be, the Security Trustee by payment, with funds having the same value as the funds received, to such account as the relevant Lender, the relevant Swap Bank or the Security Trustee may have notified to the Agent not less than 5 Business Days previously; and

 

(b) amounts to be applied in satisfying amounts of a particular category which are due to the Lenders or a Swap Bank generally shall be distributed by the Agent to each Lender or each Swap Bank pro rata to the amount in that category which is due to it.

 

16.5 Permitted deductions by Agent. Notwithstanding any other provision of this Agreement or any other Finance Document, the Agent may, before making an amount available to a Lender or a Swap Bank, deduct and withhold from that amount any sum which is then due and payable to the Agent from that Lender or that Swap Bank under any Finance Document or any sum which the Agent is then entitled under any Finance Document to require that Lender or that Swap Bank to pay on demand.

 

16.6 Agent only obliged to pay when monies received. Notwithstanding any other provision of this Agreement or any other Finance Document, the Agent shall not be obliged to make available to the Borrower or any Lender or any Swap Bank any sum which the Agent is expecting to receive for remittance or distribution to the Borrower, that Lender or that Swap Bank until the Agent has satisfied itself that it has received that sum.

 

16.7 Refund to Agent of monies not received. If and to the extent that the Agent makes available a sum to the Borrower, a Lender or a swap Bank, without first having received that sum, the Borrower or (as the case may be) the Lender or Swap Bank concerned shall, on the Agent’s written demand:

 

(a) refund the sum in full to the Agent; and

 

(b) pay to the Agent the amount (as certified by the Agent) which will indemnify the Agent against any funding or other loss, liability or expense incurred by the Agent as a result of making the sum available before receiving it.

 

16.8 Agent may assume receipt. Clause 16.7 shall not affect any claim which the Agent has under the law of restitution, and applies irrespective of whether the Agent had any form of notice that it had not received the sum which it made available.

 

16.9 Creditor Party accounts. Each Creditor Party shall maintain accounts showing the amounts owing to it by the Borrower and each Security Party under the Finance Documents and all payments in respect of those amounts made by the Borrower and any Security Party.

 

16.10 Agent’s memorandum account. The Agent shall maintain a memorandum account showing the amounts advanced by the Lenders and all other sums owing to the Agent, the Security Trustee and each Lender from the Borrower and each Security Party under the Finance Documents and all payments in respect of those amounts made by the Borrower and any Security Party.

 

16.11 Accounts prima facie evidence. If any accounts maintained under Clauses 16.9 and 16.10 show an amount to be owing by the Borrower or a Security Party to a Creditor Party, those accounts shall be prima facie evidence that amount is owing to that Creditor Party.

 

38

17 APPLICATION OF RECEIPTS

 

17.1 Normal order of application. Except as any Finance Document may otherwise provide, any sums which are received or recovered by any Creditor Party under or by virtue of any Finance Document shall be applied:-

 

.(a) FIRST: in or towards satisfaction of any amounts then due and payable under the Finance Documents in the following order and proportions:

 

  (i) first, in or towards satisfaction pro rata of all amounts then due and payable to the Creditor Parties under the Finance Documents other than those amounts referred to at paragraphs (ii) and (iii) (including, but without limitation, all amounts payable by the Borrower under Clauses 20, 21 and 22 of this Agreement or by the Borrower or any Security Party under any corresponding or similar provision in any other Finance Document);

 

  (ii) secondly, in or towards satisfaction pro rata of any and all amounts of interest or default interest payable to the Creditor Parties under the Finance Documents (and, for this purpose, the expression “interest” shall include any net amount which the Borrower shall have become liable to pay or deliver under section 2(e) (Obligations) of either Master Agreement but shall have failed to pay or deliver to the relevant Swap Bank at the time of application or distribution under this Clause 17); and

 

  (iii) thirdly, in or towards satisfaction pro rata of the Loan and the Swap Exposure of each Swap Bank (in the case of the latter, calculated as at the actual Early Termination Date applying to each particular Designated Transaction, or if no such Early Termination Date shall have occurred, calculated as if an Early Termination Date occurred on the date of application or distribution hereunder);

 

(b) SECONDLY: in retention of an amount equal to any amount not then due and payable under any Finance Document but which the Agent, by notice to the Borrower, the Security Parties and the other Creditor Parties, states in its opinion will or may become due and payable in the future and, upon those amounts becoming due and payable, in or towards satisfaction of them in accordance with the provisions of Clause 17.1 (a); and

 

(c) THIRDLY: any surplus shall be paid to the Borrower.

 

17.2 Variation of order of application. The Agent may, with the authorisation of the Majority Lenders, by notice to the Borrower, the Security Parties and the other Creditor Parties provide for a different manner of application from that set out in Clause 17.1 either as regards a specified sum or sums or as regards sums in a specified category or categories.

 

17.3 Notice of variation of order of application. The Agent may give notices under Clause 17.2 from time to time; and such a notice may be stated to apply not only to sums which may be received or recovered in the future, but also to any sum which has been received or recovered on or after the third Business Day before the date on which the notice is served.

 

17.4 Appropriation rights overridden. This Clause 17 and any notice which the Agent gives under Clause 17.2 shall override any right of appropriation possessed, and any appropriation made, by the Borrower or any Security Party.

 

39

18 APPLICATION OF EARNINGS

 

18.1 Payment of Earnings. The Borrower undertakes with each Creditor Party to ensure that throughout the Security Period:

 

(a) (subject only to provisions of the General Assignment), all the Earnings of the Ship are paid to the Earnings Account; and

 

(b) all payments by a Swap Bank to the Borrower under a Designated Transaction are paid to the Earnings Account.

 

18.2 Interest accrued on Earnings Account. Any credit balance on the Earnings Account shall bear interest at the rate from time to time offered by the Agent to its customers for Dollar deposits of similar amounts and for periods similar to those for which such balances appear to the Agent likely to remain on the Earnings Account.

 

18.3 Location of accounts. The Borrower shall promptly:

 

(a) comply with any reasonable requirement of the Agent as to the location or re-location of the Earnings Account

 

(b) execute any documents which the Agent specifies to create or maintain in favour of the Security Trustee a Security Interest over (and/or rights of set-off, consolidation or other rights in relation to) the Earnings Account.

 

18.4 Debits for expenses etc. The Agent shall be entitled (but not obliged) from time to time to debit the Earnings Account with prior notice to the Borower in order to discharge any amount due and payable under Clause 20 or 21 to a Creditor Party or payment of which any Creditor Party has become entitled to demand under Clause 20 or 21.

 

19 EVENTS OF DEFAULT

 

19.1 Events of Default. An Event of Default occurs if:

 

(a) the Borrower or any Security Party fails to pay when due or (if so payable) on demand any sum payable under a Finance Document or under any document relating to a Finance Document; or

 

(b) any breach occurs of Clause 9.2, 11.2, 11.3, 12.2, 12.3 or 15.1 or clauses 11.16 or 11.17 of the Guarantee; or

 

(c) any breach by the Borrower or any Security Party occurs of any provision of a Finance Document (other than a breach covered by paragraphs (a) or (b)) if, in the opinion of the Majority Lenders, such default is capable of remedy, and such default continues unremedied 10 days after written notice from the Agent requesting action to remedy the same; or

 

(d) (subject to any applicable grace period specified in the Finance Document) any breach by the Borrower or any Security Party occurs of any provision of a Finance Document (other than a breach covered by paragraphs (a), (b) or (c)); or

 

(e) any representation, warranty or statement made by, or by an officer of, the Borrower or a Security Party in a Finance Document or in the Drawdown Notice or any other notice or document relating to a Finance Document is untrue or misleading when it is made; or

 

(f) any of the following occurs in relation to any Financial Indebtedness of a Relevant Person:

 

  (i) any Financial Indebtedness of a Relevant Person is not paid when due or, if so payable, on demand; or

 

40

  (ii) any Financial Indebtedness of a Relevant Person becomes due and payable or capable of being declared due and payable prior to its stated maturity date as a consequence of any event of default; or

 

  (iii) a lease, hire purchase agreement or charter creating any Financial Indebtedness of a Relevant Person is terminated by the lessor or owner or becomes capable of being terminated as a consequence of any termination event; or

 

  (iv) any overdraft, loan, note issuance, acceptance credit, letter of credit, guarantee, foreign exchange or other facility, or any swap or other derivative contract or transaction, relating to any Financial Indebtedness of a Relevant Person ceases to be available or becomes capable of being terminated as a result of any event of default, or cash cover is required, or becomes capable of being required, in respect of such a facility as a result of any event of default; or

 

  (v) any Security Interest securing any Financial Indebtedness of a Relevant Person becomes enforceable; or

 

(g) any of the following occurs in relation to a Relevant Person:

 

  (i) a Relevant Person becomes, in the opinion of the Majority Lenders, unable to pay its debts as they fall due; or

 

  (ii) any assets of a Relevant Person are subject to any form of execution, attachment, arrest, sequestration or distress in respect of a sum of, or sums aggregating, $500,000 or more or the equivalent in another currency; or

 

  (iii) any administrative or other receiver is appointed over any asset of a Relevant Person; or

 

  (iv) a Relevant Person makes any formal declaration of bankruptcy or any formal statement to the effect that it is insolvent or likely to become insolvent, or a winding up or administration order is made in relation to a Relevant Person, or the members or directors of a Relevant Person pass a resolution to the effect that it should be wound up, placed in administration or cease to carry on business, save that this paragraph does not apply to a fully solvent winding up of a Relevant Person other than the Borrower or the Guarantor which is, or is to be, effected for the purposes of an amalgamation or reconstruction previously approved by the Majority Lenders and effected not later than 3 months after the commencement of the winding up; or

 

  (v) a petition is presented in any Pertinent Jurisdiction for the winding up or administration, or the appointment of a provisional liquidator, of a Relevant Person unless the petition is being contested in good faith and on substantial grounds and is dismissed or withdrawn within 30 days (or such longer period as the Agent may, in its sole and absolute discretion, agree or specify) of the presentation of the petition; or

 

  (vi)

a Relevant Person petitions a court, or presents any proposal for, any form of judicial or non-judicial suspension or deferral of payments, reorganisation of its debt (or substantial part of its debt) or arrangement with all or a substantial proportion (by number or value) of its creditors or of any class of them (save for in the case of the Corporate Guarantor non judicial suspension or deferral of payments, reorganisation of its debt (or substantial part of its debt) or arrangement which occurs in its ordinary course of its business and not as a result

 

41

 

of the Corporate Guarantor’s inability to meet its obligations and/or liabilities and having been indicated a priori to the Lenders) or any such suspension or deferral of payments, reorganisation or arrangement is effected by court order, contract or otherwise; or

 

  (vii) any meeting of the members or directors of a Relevant Person is summoned for the purpose of considering a resolution or proposal to authorise or take any action of a type described in paragraphs (iii), (iv), (v) or (vi); or

 

  (viii) in a Pertinent Jurisdiction other than England, any event occurs or any procedure is commenced which, in the opinion of the Majority Lenders, is similar to any of the foregoing; or

 

(h) the Borrower or any Security Party ceases or suspends carrying on its business or a part of its business which, in the opinion of the Majority Lenders, is material in the context of this Agreement; or

 

(i) it becomes unlawful in any Pertinent Jurisdiction or impossible:

 

  (i) for the Borrower or any Security Party to discharge any liability under a Finance Document or to comply with any other obligation which the Majority Lenders consider material under a Finance Document; or

 

  (ii) for the Agent, the Security Trustee, the Lenders or the Swap Banks to exercise or enforce any right under, or to enforce any Security Interest created by, a Finance Document; or

 

(j) any consent necessary to enable the Borrower to own, operate or charter the Ship or to enable the Borrower or any Security Party to comply with any provision which the Majority Lenders consider material of a Finance Document or the MOA is not granted, expires without being renewed, is revoked or becomes liable to revocation or any condition of such a consent is not fulfilled; or

 

(k) it appears to the Majority Lenders that, without their prior consent, a change has occurred or probably has occurred after the date of this Agreement in the ultimate beneficial ownership of any of the shares in the Borrower or in the ultimate control of the voting rights attaching to any of those shares; or

 

(l) any provision which the Majority Lenders consider material of a Finance Document proves to have been or becomes invalid or unenforceable, or a Security Interest created by a Finance Document proves to have been or becomes invalid or unenforceable or such a Security Interest proves to have ranked after, or loses its priority to, another Security Interest or any other third party claim or interest; or

 

(m) the security constituted by a Finance Document is in any way imperilled or in jeopardy; or

 

(n) the Ship ceases to be managed by the Approved Manager unless prior to such cessation the Borrower has appointed a substitute manager acceptable to the Lenders in all respects;

 

(o) any other event occurs or any other circumstances arise or develop including, without limitation:

 

  (i) a change in the financial position, state of affairs or prospects of the Borrower or the Guarantor; or

 

42

  (ii) any accident or other event involving the Ship or another vessel owned, chartered or operated by a Relevant Person;

in the light of which the Majority Lenders consider that there is a significant risk that the Borrower or the Guarantor are, or will later become, unable to discharge its or his liabilities under the Finance Documents as they fall due; or

 

(p) an Event of Default (as defined in Section 14 of each Master Agreement) occurs; or

 

(q) either Master Agreement is terminated, cancelled, suspended, rescinded or revoked or otherwise ceases to remain in the full force and effect for any reason except with the consent of the Majority Lenders.

 

19.2 Actions following an Event of Default. On, or at any time after, the occurrence of an Event of Default:

 

(a) the Agent may, and if so instructed by the Majority Lenders, the Agent shall:

 

  (i) serve on the Borrower a notice stating that the Commitments and all other obligations of each Lender to the Borrower under this Agreement are terminated; and/or

 

  (ii) serve on the Borrower a notice stating that the Loan, all accrued interest and all other amounts accrued or owing under this Agreement are immediately due and payable or are due and payable on demand; and/or

 

  (iii) take any other action which, as a result of the Event of Default or any notice served under paragraph (i) or (ii), the Agent and/or the Lenders are entitled to take under any Finance Document or any applicable law; and/or

 

(b) the Security Trustee may, and if so instructed by the Agent, acting with the authorisation of the Majority Lenders, the Security Trustee shall take any action which, as a result of the Event of Default or any notice served under paragraph (a) (i) or (ii), the Security Trustee, the Agent and/or the Lenders and/or the Swap Banks are entitled to take under any Finance Document or any applicable law.

 

19.3 Termination of Commitments. On the service of a notice under Clause 19.2(a)(i), the Commitments and all other obligations of each Lender to the Borrower under this Agreement shall terminate.

 

19.4 Acceleration of Loan. On the service of a notice under Clause 19.2(a)(ii), the Loan, all accrued interest and all other amounts accrued or owing from the Borrower or any Security Party under this Agreement and every other Finance Document shall become immediately due and payable or, as the case may be, payable on demand.

 

19.5 Multiple notices; action without notice. The Agent may serve notices under Clauses 19.2(a)(i) or (ii) simultaneously or on different dates and it and/or the Security Trustee may take any action referred to in Clause 19.2 if no such notice is served or simultaneously with or at any time after the service of both or either of such notices.

 

19.6 Notification of Creditor Parties and Security Parties. The Agent shall send to each Lender, the Security Trustee, each Swap Bank and each Security Party a copy or the text of any notice which the Agent serves on the Borrower under Clause 19.2; but the notice shall become effective when it is served on the Borrower, and no failure or delay by the Agent to send a copy or the text of the notice to any other person shall invalidate the notice or provide the Borrower or any Security Party with any form of claim or defence.

 

43

19.7 Lender’s rights unimpaired. Nothing in this Clause shall be taken to impair or restrict the exercise of any right given to individual Lenders or each Swap Bank under a Finance Document or the general law; and, in particular, this Clause is without prejudice to Clause 3.1.

 

19.8 Exclusion of Creditor Party liability. No Creditor Party, and no receiver or manager appointed by the Security Trustee, shall have any liability to the Borrower or a Security Party:

 

(a) for any loss caused by an exercise of rights under, or enforcement of a Security Interest created by, a Finance Document or by any failure or delay to exercise such a right or to enforce such a Security Interest; or

 

(b) as mortgagee in possession or otherwise, for any income or principal amount which might have been produced by or realised from any asset comprised in such a Security Interest or for any reduction (however caused) in the value of such an asset;

except that this does not exempt a Creditor Party or a receiver or manager from liability for losses shown to have been directly and mainly caused by the dishonesty or the wilful misconduct of such Creditor Party’s own officers and employees or (as the case may be) such receiver’s or manager’s own partners or employees.

 

19.9 Relevant Persons. In this Clause 19 a “Relevant Person” means the Borrower or any other Security Party.

 

19.10 Interpretation. In Clause 19.1(f) references to an event of default or a termination event include any event, howsoever described, which is similar to an event of default in a facility agreement or a termination event in a finance lease; and in Clause 19.1(g) “petition” includes an application.

 

20 FEES AND EXPENSES

 

20.1 Arrangement, commitment, agency fees. The Borrower shall pay to the Agent:

 

(a) on the date of this Agreement, an arrangement fee of an amount previously agreed in writing between the Agent and the Borrower, for distribution among the Lenders in the proportions agreed by the Agent and the Lenders; and

 

(b) in relation to the Loan, quarterly in arrears during the period from (and including) the date falling one month after the date of the Agreement to the earlier of (i) the Drawdown Date and (ii) the last day of the Availability Period and on the last day of that period for the account of the Lenders, a commitment fee at the rate of zero point two five per cent. (0.25%) per annum on the undrawn amount of the Loan, for distribution among the Lenders pro rata to their Commitments.

 

20.2 Costs of negotiation, preparation etc. The Borrower shall pay to the Agent on its demand the amount of all expenses incurred by the Agent or the Security Trustee in connection with the negotiation, preparation, execution or registration of any Finance Document or any related document or with any transaction contemplated by a Finance Document or a related document.

 

20.3 Costs of variations, amendments, enforcement etc. The Borrower shall pay to the Agent on the Agent’s demand, for the account of the Creditor Party concerned the amount of all expenses incurred by a Creditor Party in connection with:

 

(a) any amendment or supplement to a Finance Document, or any proposal for such an amendment to be made;

 

44

(b) any consent or waiver by the Lenders, the Majority Lenders or the Creditor Party concerned under or in connection with a Finance Document, or any request for such a consent or waiver;

 

(c) the valuation of any security provided or offered under Clause 15 or any other matter relating to such security;

 

(d) the opinion of the independent insurance consultant referred to in paragraph 7 of Part B of Schedule3; or

 

(e) any step taken by the Creditor Party concerned with a view to the protection, exercise or enforcement of any right or Security Interest created by a Finance Document or for any similar purpose.

There shall be recoverable under paragraph (e) the full amount of all legal expenses, whether or not such as would be allowed under rules of court or any taxation or other procedure carried out under such rules.

 

20.4 Documentary taxes. The Borrower shall promptly pay any tax payable on or by reference to any Finance Document, and shall, on the Agent’s demand, fully indemnify each Creditor Party against any claims, expenses, liabilities and losses resulting from any failure or delay by the Borrower to pay such a tax.

 

20.5 Certification of amounts. A notice which is signed by 2 officers of a Creditor Party, which states that a specified amount, or aggregate amount, is due to that Creditor Party under this Clause 20 and which indicates (without necessarily specifying a detailed breakdown) the matters in respect of which the amount, or aggregate amount, is due shall be prima facie evidence that the amount, or aggregate amount, is due.

 

21 INDEMNITIES

 

21.1 Indemnities regarding borrowing and repayment of Loan. The Borrower shall fully indemnify the Agent and each Lender on the Agent’s demand and the Security Trustee on its demand in respect of all claims, expenses, liabilities and losses which are made or brought against or incurred by that Creditor Party, or which that Creditor Party reasonably and with due diligence estimates that it will incur, as a result of or in connection with:

 

(a) the Loan not being borrowed on the date specified in the Drawdown Notice for any reason other than a default by the Lender claiming the indemnity;

 

(b) the receipt or recovery of all or any part of the Loan or an overdue sum otherwise than on the last day of an Interest Period or other relevant period;

 

(c) any failure (for whatever reason) by the Borrower to make payment of any amount due under a Finance Document on the due date or, if so payable, on demand (after giving credit for any default interest paid by the Borrower on the amount concerned under Clause 7);

 

(d) the occurrence and/or continuance of an Event of Default or a Potential Event of Default and/or the acceleration of repayment of the Loan under Clause 19;

and in respect of any tax (other than tax on its overall net income) for which a Creditor Party is liable in connection with any amount paid or payable to that Creditor Party (whether for its own account or otherwise) under any Finance Document.

 

21.2 Breakage costs. Without limiting its generality, Clause 21.1 covers any claim, expense, liability or loss, including a loss of a prospective profit, incurred by a Lender:

 

(a) in liquidating or employing deposits from third parties acquired or arranged to fund or maintain all or any part of its Contribution and/or any overdue amount (or an aggregate amount which includes its Contribution or any overdue amount); and

 

45

(b) in terminating, or otherwise in connection with, any interest and/or currency swap or any other transaction entered into (whether with another legal entity or with another office or department of the Lender concerned) to hedge any exposure arising under this Agreement or that part which the Lender concerned determines is fairly attributable to this Agreement of the amount of the liabilities, expenses or losses (including losses of prospective profits) incurred by it in terminating, or otherwise in connection with, a number of transactions of which this Agreement is one.

 

21.3 Miscellaneous indemnities. The Borrower shall fully indemnify each Creditor Party severally on their respective demands in respect of all claims, demands, proceedings, liabilities, taxes, losses and expenses of every kind (“liability items”) which may be made or brought against, or incurred by, the relevant Creditor Party, in any country, in relation to:

 

(a) any action taken, or omitted or neglected to be taken, under or in connection with any Finance Document by the Agent, the Security Trustee or any other Creditor Party or by any receiver appointed under a Finance Document;

 

(b) any other event, matter or question which occurs or arises at any time during the Security Period and which has any connection with, or any bearing on, any Finance Document, any payment or other transaction relating to a Finance Document or any asset covered (or previously covered) by a Security Interest created (or intended to be created) by a Finance Document;

other than liability items which are shown to have been caused by the gross negligence or the wilful misconduct of the relevant Creditor Party’s own officers or employees.

Without prejudice to its generality, this Clause 21.3 covers any claims, expenses, liabilities and losses which arise, or are asserted, under or in connection with any law relating to safety at sea, the ISM Code, the ISPS Code or any Environmental Law.

 

21.4 Currency indemnity. If any sum due from the Borrower or any Security Party to a Creditor Party under a Finance Document or under any order or judgment relating to a Finance Document has to be converted from the currency in which the Finance Document provided for the sum to be paid (the “Contractual Currency”) into another currency (the “Payment Currency”) for the purpose of:

 

(a) making or lodging any claim or proof against the Borrower or any Security Party, whether in its liquidation, any arrangement involving it or otherwise; or

 

(b) obtaining an order or judgment from any court or other tribunal; or

 

(c) enforcing any such order or judgment;

the Borrower shall indemnify the Creditor Party concerned against the loss arising when the amount of the payment actually received by that Creditor Party is converted at the available rate of exchange into the Contractual Currency.

In this Clause 21.4 the “available rate of exchange” means the rate at which the Creditor Party concerned is able at the opening of business (London time) on the Business Day after it receives the sum concerned to purchase the Contractual Currency with the Payment Currency.

 

46

This Clause 21.4 creates a separate liability of the Borrower which is distinct from its other liabilities under the Finance Documents and which shall not be merged in any judgment or order relating to those other liabilities.

 

21.5 Application of Master Agreements. For the avoidance of doubt, Clause 21.4 does not apply in respect of sums due from the Borrower to a Swap Bank under or in connection with a Master Agreement as to which sums the provisions of Section 8 (Contractual Currency) of each Master Agreement shall apply.

 

21.6 Certification of amounts. A notice which is signed by 2 officers of a Creditor Party, which states that a specified amount, or aggregate amount, is due to that Creditor Party under this Clause 21 and which indicates (without necessarily specifying a detailed breakdown) the matters in respect of which the amount, or aggregate amount, is due shall be prima facie evidence that the amount, or aggregate amount, is due.

 

21.7 Sums deemed due to a Lender. For the purposes of this Clause 21, a sum payable by the Borrower to the Agent or the Security Trustee for distribution to a Lender shall be treated as a sum due to that Lender.

 

22 NO SET-OFF OR TAX DEDUCTION

 

22.1 No deductions. All amounts due from the Borrower under a Finance Document shall be paid:

 

(a) without any form of set-off, cross-claim or condition; and

 

(b) free and clear of any tax deduction except a tax deduction which the Borrower is required by law to make.

 

22.2 Grossing-up for taxes. If the Borrower is required by law to make a tax deduction from any payment:

 

(a) the Borrower shall notify the Agent as soon as it becomes aware of the requirement;

 

(b) the Borrower shall pay the tax deducted to the appropriate taxation authority promptly, and in any event before any fine or penalty arises;

 

(c) the amount due in respect of the payment shall be increased by the amount necessary to ensure that each Creditor Party receives and retains (free from any liability relating to the tax deduction) a net amount which, after the tax deduction, is equal to the full amount which it would otherwise have received.

 

22.3 Evidence of payment of taxes. Within 1 month after making any tax deduction, the Borrower concerned shall deliver to the Agent documentary evidence satisfactory to the Agent that the tax had been paid to the appropriate taxation authority.

 

22.4 Exclusion of tax on overall net income. In this Clause 22 “tax deduction” means any deduction or withholding for or on account of any present or future tax except tax on a Creditor Party’s overall net income.

 

22.5 Application of Master Agreements. For the avoidance of doubt, Clause 22 does not apply in respect of sums due from the Borrower to a Swap Bank under or in connection with a Master Agreement as to which sums the provisions of Section 2(d) (Deduction or Withholding for Tax) of each Master Agreement shall apply.

 

47

23 ILLEGALITY, ETC

 

23.1 Illegality. This Clause 23 applies if a Lender (the “Notifying Lender”) notifies the Agent that it has become, or will with effect from a specified date, become:

 

(a) unlawful or prohibited as a result of the introduction of a new law, an amendment to an existing law or a change in the manner in which an existing law is or will be interpreted or applied; or

 

(b) contrary to, or inconsistent with, any regulation,

for the Notifying Lender to maintain or give effect to any of its obligations under this Agreement in the manner contemplated by this Agreement.

 

23.2 Notification of illegality. The Agent shall promptly notify the Borrower, the Security Parties, the Security Trustee and the other Lenders of the notice under Clause 23.1 which the Agent receives from the Notifying Lender.

 

23.3 Prepayment; termination of Commitment. On the Agent notifying the Borrower under Clause 23.2, the Notifying Lender’s Commitment shall terminate; and thereupon or, if later, on the date specified in the Notifying Lender’s notice under Clause 23.1 as the date on which the notified event would become effective the Borrower shall prepay the Notifying Lender’s Contribution in accordance with Clause 8.

 

23.4 Mitigation. If circumstances arise which would result in a notification under Clause 23.1 then, without in any way limiting the rights of the Notifying Lender under Clause 23.3, the Notifying Lender shall use reasonable endeavours to transfer its obligations, liabilities and rights under this Agreement and the Finance Documents to another office or financial institution not affected by the circumstances but the Notifying Lender shall not be under any obligation to take any such action if, in its opinion, to do would or might:

 

(a) have an adverse effect on its business, operations or financial condition; or

 

(b) involve it in any activity which is unlawful or prohibited or any activity that is contrary to, or inconsistent with, any regulation; or
(c) involve it in any expense (unless indemnified to its satisfaction) or tax disadvantage.

 

24 INCREASED COSTS

 

24.1 Increased costs. This Clause 24 applies if a Lender (the “Notifying Lender”) notifies the Agent that the Notifying Lender considers that as a result of:

 

(a) the introduction or alteration after the date of this Agreement of a law or an alteration after the date of this Agreement in the manner in which a law is interpreted or applied (disregarding any effect which relates to the application to payments under this Agreement of a tax on the Lender’s overall net income); or

 

(b) complying with any regulation (including any which relates to capital adequacy or liquidity controls or which affects the manner in which the Notifying Lender allocates capital resources to its obligations under this Agreement) which is introduced, or altered, or the interpretation or application of which is altered, after the date of this Agreement,

the Notifying Lender (or a parent company of it) has incurred or will incur an “increased cost”.

 

24.2 Meaning of “increase cost”. In this Clause 24, “increased cost” means, in relation to a Notifying Lender:

 

(a) an additional or increased cost incurred as a result of, or in connection with, the Notifying Lender having entered into, or being a party to, this Agreement or a Transfer Certificate, of funding or maintaining its Commitment or Contribution or performing its obligations under this Agreement, or of having outstanding all or any part of its Contribution or other unpaid sums;

 

48

(b) a reduction in the amount of any payment to the Notifying Lender under this Agreement or in the effective return which such a payment represents to the Notifying Lender or on its capital;

 

(c) an additional or increased cost of funding all or maintaining all or any of the advances comprised in a class of advances formed by or including the Notifying Lender’s Contribution or (as the case may require) the proportion of that cost attributable to the Contribution; or

 

(d) a liability to make a payment, or a return foregone, which is calculated by reference to any amounts received or receivable by the Notifying Lender under this Agreement;

but not an item attributable to a change in the rate of tax on the overall net Income of the Notifying Lender (or a parent company of it) or an item covered by the indemnity for tax in Clause 21.1 or by Clause 22 or an item arising directly out of the Implementation by the applicable authorities having jurisdiction over the Notifying Lender of the matters set out in the statement of the Basle Committee on Banking Regulations and Supervisory Practices dated July 1988 and entitled “International Convergence of Capital Measurement and Capital Standards”, to the extent and according to the timetable provided for in the statement.

For the purposes of this Clause 24.2 the Notifying Lender may in good faith allocate or spread costs and/or losses among its assets and liabilities (or any class of its assets and liabilities) on such basis as it considers appropriate.

 

24.3 Notification to Borrower of claim for increased costs. The Agent shall promptly notify the Borrower and the Security Parties of the notice which the Agent received from the Notifying Lender under Clause 24.1.

 

24.4 Payment of increased costs. The Borrower shall pay to the Agent, on the Agent’s demand, for the account of the Notifying Lender the amounts which the Agent from time to time notifies the Borrower that the Notifying Lender has specified to be necessary to compensate the Notifying Lender for the increased cost.

 

24.5 Notice of prepayment. If the Borrower is not willing to continue to compensate the Notifying Lender for the increased cost under Clause 24.4, the Borrower may give the Agent not less than 14 days’ notice of its intention to prepay the Notifying Lender’s Contribution at the end of an Interest Period.

 

24.6 Prepayment; termination of Commitment. A notice under Clause 24.5 shall be irrevocable; the Agent shall promptly notify the Notifying Lender of the Borrower’s notice of intended prepayment; and:

 

(a) on the date on which the Agent serves that notice, the Commitment of the Notifying Lender shall be cancelled; and

 

(b) on the date specified in its notice of intended prepayment, the Borrower shall prepay (without premium or penalty) the Notifying Lender’s Contribution, together with accrued interest thereon at the applicable rate plus the Margin and the Mandatory Cost (if any).

 

24.7 Application of prepayment. Clause 8 shall apply in relation to the prepayment.

 

49

25 SET-OFF

 

25.1 Application of credit balances. Each Creditor Party may without prior notice:

 

(a) apply any balance (whether or not then due) which at any time stands to the credit of any account in the name of the Borrower at any office in any country of that Creditor Party in or towards satisfaction of any sum then due from the Borrower to that Creditor Parry under any of the Finance Documents; and

 

(b) for that purpose:

 

  (i) break, or alter the maturity of, all or any part of a deposit of the Borrower;

 

  (ii) convert or translate all or any part of a deposit or other credit balance into Dollars;

 

  (iii) enter into any other transaction or make any entry with regard to the credit balance which the Creditor Party concerned considers appropriate.

 

25.2 Existing rights unaffected. No Creditor Party shall be obliged to exercise any of its rights under Clause 25.1; and those rights shall be without prejudice and in addition to any right of set-off, combination of accounts, charge, lien or other right or remedy to which a Creditor Party is entitled (whether under the general law or any document).

 

25.3 Sums deemed due to a Lender. For the purposes of this Clause 25, a sum payable by the Borrower to the Agent or the Security Trustee for distribution to, or for the account of, a Lender shall be treated as a sum due to that Lender; and each Lender’s proportion of a sum so payable for distribution to, or for the account of, the Lenders shall be treated as a sum due to such Lender.

 

25.4 No Security Interest. This Clause 25 gives the Creditor Parties a contractual right of set-off only, and does not create any equitable change or other Security Interest over any credit balance of the Borrower.

 

26 TRANSFERS AND CHANGES IN LENDING OFFICES

 

26.1 Transfer by Borrower. The Borrower may not, without the consent of the Agent, given on the instructions of all the Lenders transfer any of its rights, liabilities or obligations under any Finance Document.

 

26.2 Transfer by a Lender. Subject to Clause 26.4, a Lender (the “Transferor Lender”) may at any time after consultation with the Borrower, cause:

 

(a) its rights in respect of all or part of its Contribution; or

 

(b) its obligations in respect of all or part of its Commitment; or

 

(c) a combination of (a) and (b);

to be (in the case of its rights) transferred to, or (in the case of its obligations) assumed by, another bank or financial institution (a “Transferee Lender”) by delivering to the Agent a completed certificate in the form set out in Schedule 4 with any modifications approved or required by the Agent (a “Transfer Certificate”) executed by the Transferor Lender and the Transferee Lender.

However any rights and obligations of the Transferor Lender in its capacity as Agent or Security Trustee will have to be dealt with separately in accordance with the Agency and Trust Deed.

 

50

26.3 Transfer Certificate, delivery and notification. As soon as reasonably practicable after a Transfer Certificate is delivered to the Agent, it shall (unless it has reason to believe that the Transfer Certificate may be defective):

 

(a) sign the Transfer Certificate on behalf of itself, the Borrower, the Security Parties, the Security Trustee and each of the other Lenders and each Swap Bank;

 

(b) on behalf of the Transferee Lender, send to the Borrower and each Security Party letters or faxes notifying them of the Transfer Certificate and attaching a copy of it;

 

(c) send to the Transferee Lender copies of the letters or faxes sent under paragraph (b) above.

 

26.4 Effective Date of Transfer Certificate. A Transfer Certificate becomes effective on the date, if any, specified in the Transfer Certificate as its effective date, Provided that it is signed by the Agent under Clause 26.3 on or before that date.

 

26.5 No transfer without Transfer Certificate. No assignment or transfer of any right or obligation of a Lender under any Finance Document is binding on, or effective in relation to, the Borrower, any Security Party, the Agent or the Security Trustee unless it is effected, evidenced or perfected by a Transfer Certificate,

 

26.6 Lender re-organisation; waiver of Transfer Certificate. However, if a Lender enters into any merger, de-merger or other reorganisation as a result of which all its rights or obligations vest in another person (the “successor”), the Agent may, if it sees fit, by notice to the successor and the Borrower and the Security Trustee waive the need for the execution and delivery of a Transfer Certificate; and, upon service of the Agent’s notice, the successor shall become a Lender with the same Commitment and Contribution as were held by the predecessor Lender.

 

26.7 Effect of Transfer Certificate. A Transfer Certificate takes effect in accordance with English law as follows:

 

(a) to the extent specified in the Transfer Certificate, all rights and interests (present, future or contingent) which the Transferor Lender has under or by virtue of the Finance Documents are assigned to the Transferee Lender absolutely, free of any defects in the Transferor Lender’s title and of any rights or equities which the Borrower or any Security Party had against the Transferor Lender;

 

(b) the Transferor Lender’s Commitment is discharged to the extent specified in the Transfer Certificate;

 

(c) the Transferee Lender becomes a Lender with the Contribution previously held by the Transferor Lender and a Commitment of an amount specified in the Transfer Certificate;

 

(d) the Transferee Lender becomes bound by all the provisions of the Finance Documents which are applicable to the Lenders generally, including those about pro-rata sharing and the exclusion of liability on the part of, and the indemnification of, the Agent and the Security Trustee and, to the extent that the Transferee Lender becomes bound by those provisions (other than those relating to exclusion of liability), the Transferor Lender ceases to be bound by them;

 

(e) any part of the Loan which the Transferee Lender advances after the Transfer Certificate’s effective date ranks in point of priority and security in the same way as it would have ranked had it been advanced by the transferor, assuming that any defects in the transferor’s title and any rights or equities of the Borrower or any Security Party against the Transferor Lender had not existed;

 

51

(f) the Transferee Lender becomes entitled to all the rights under the Finance Documents which are applicable to the Lenders generally, including but not limited to those relating to the Majority Lenders and those under Clause 5.6 and Clause 20, and to the extent that the Transferee Lender becomes entitled to such rights, the Transferor Lender ceases to be entitled to them; and

 

(g) in respect of any breach of a warranty, undertaking, condition or other provision of a Finance Document or any misrepresentation made in or in connection with a Finance Document, the Transferee Lender shall be entitled to recover damages by reference to the loss incurred by it as a result of the breach or misrepresentation, irrespective of whether the original Lender would have incurred a loss of that kind or amount.

The rights and equities of the Borrower or any Security Party referred to above include, but are not limited to, any right of set off and any other kind of cross-claim,

 

26.8 Maintenance of register of Lenders. During the Security Period the Agent shall maintain a register in which it shall record the name, Commitment, Contribution and administrative details (including the lending office) from time to time of each Lender holding a Transfer Certificate and the effective date (in accordance with Clause 26.4) of the Transfer Certificate; and the Agent shall make the register available for inspection by any Lender, the Security Trustee and the Borrower during normal banking hours, subject to receiving at least 3 Business Days prior notice.

 

26.9 Reliance on register of Lenders. The entries on that register shall, in the absence of manifest error, be conclusive in determining the identities of the Lenders and the amounts of their Commitments and Contributions and the effective dates of Transfer Certificates and may be relied upon by the Agent and the other parties to the Finance Documents for all purposes relating to the Finance Documents.

 

26.10 Authorisation of Agent to sign Transfer Certificates. The Borrower, the Security Trustee, each Lender and each Swap Bank irrevocably authorise the Agent to sign Transfer Certificates on its behalf.

 

26.11 Registration fee. In respect of any Transfer Certificate, the Agent shall be entitled to recover a registration fee of $2,000 from the Transferor Lender or (at the Agent’s option) the Transferee Lender.

 

26.12 Sub-participation; subrogation assignment. A Lender may sub-participate all or any part of its rights and/or obligations under or in connection with the Finance Documents without the consent of, or any notice to, the Borrower, any Security Party, the Agent or the Security Trustee; and the Lenders may assign, in any manner and terms agreed by the Majority Lenders, the Agent and the Security Trustee, all or any part of those rights to an insurer or surety who has become subrogated to them.

 

26.13 Disclosure of information. A Lender may disclose to a potential Transferee Lender or sub-participant any information which the Lender has received in relation to the Borrower, any Security Party or their affairs under or in connection with any Finance Document, unless the information is clearly of a confidential nature,

 

26.14 Change of lending office. A Lender may change its lending office by giving notice to the Agent and the change shall become effective on the later of:

 

(a) the date on which the Agent receives the notice; and

 

(b) the date, if any, specified in the notice as the date on which the change will come into effect.

 

52

26.15 Notification. On receiving such a notice, the Agent shall notify the Borrower and the Security Trustee; and, until the Agent receives such a notice, it shall be entitled to assume that a Lender is acting through the lending office of which the Agent last had notice.

 

26.16 Replacement of Reference Bank. If any Reference Bank ceases to be a Lender or is unable on a continuing basis to supply quotations for the purposes of Clause 5 then, unless the Borrower, the Agent and the Majority Lenders otherwise agree, the Agent, acting on the instructions of the Majority Lenders, and after consulting the Borrower, shall appoint another bank (whether or not a Lender) to be a replacement Reference Bank; and, when that appointment comes into effect, the first-mentioned Reference Bank’s appointment shall cease to be effective.

 

27 VARIATIONS AND WAIVERS

 

27.1 Variations, waivers etc. by Majority Lenders. Subject to Clause 27.2, a document shall be effective to vary, waive, suspend or limit any provision of a Finance Document, or any Creditor Party’s rights or remedies under such a provision or the general law, only if the document is signed, or specifically agreed to by fax or telex, by the Borrower, by the Agent on behalf of the Majority Lenders, by the Agent and the Security Trustee in their own rights, and, if the document relates to a Finance Document to which a Security Party is party, by that Security Party.

 

27.2 Variations, waivers etc. requiring agreement of all Lenders. However, as regards the following, Clause 27.1 applies as if the words “by the Agent on behalf of the Majority Lenders” were replaced by the words “by or on behalf of every Lender and every Swap Bank”:

 

(a) a change in the Margin or in the definition of LIBOR;

 

(b) a change to the date for, the amount of, any payment of principal, interest, fees, or other sum payable under this Agreement;

 

(c) a change to any Lender’s Commitment;

 

(d) an extension of the Availability Period;

 

(e) a change to the definition of “Majority Lenders” or “Finance Documents”;

 

(f) a change to the preamble or to Clause 2, 3, 4, 5.1,17,18 or 30;

 

(g) a change to this Clause 27;

 

(h) any release of, or material variation to, a Security Interest, guarantee, indemnity or subordination arrangement set out in a Finance Document; and

 

(i) any other change or matter as regards which this Agreement or another Finance Document expressly provides that each Lender’s consent is required.

 

27.3 Exclusion of other or implied variations. Except for a document which satisfies the requirements of Clauses 27.1 and 27.2, no document, and no act, course of conduct, failure or neglect to act, delay or acquiescence on the part of the Creditor Parties or any of them (or any person acting on behalf of any of them) shall result in the Creditor Parties or any of them (or any person acting on behalf of any of them) being taken to have varied, waived, suspended or limited, or being precluded (permanently or temporarily) from enforcing, relying on or exercising:

 

(a) a provision of this Agreement or another Finance Document; or

 

53

(b) an Event of Default; or

 

(c) a breach by the Borrower or a Security Party of an obligation under a Finance Document or the general law; or

 

(d) any right or remedy conferred by any Finance Document or by the general law,

and there shall not be implied into any Finance Document any term or condition requiring any such provision to be enforced, or such right or remedy to be exercised, within a certain or reasonable time.

 

28 NOTICES

 

28.1 General. Unless otherwise specifically provided, any notice under or in connection with any Finance Document shall be given by letter, fax or telex; and references in the Finance Documents to written notices, notices in writing and notices signed by particular persons shall be construed accordingly,

 

28.2 Addresses for communications. A notice shall be sent:

 

(a)   to the Borrower:   

c/o Cardiff Marine Inc.

Omega Building

80 Kifissias Avenue

151 25 Maroussi

Athens

    

Fax No: +30 210809 0575

Attn: the Chief Financial Officer

(b)   to a Lender:    At the address below its name in Schedule 1 or (as the case may require) in the relevant Transfer Certificate,
(c)   to the Agent and Security Trustee:   

Dresdner Bank AG in Hamburg

Jungfernstieg 22

20354 Hamburg

Germany

    

Fax No: +49 (0)3501 4007

Attn: Anke Grahn

(d)   to the Swap Banks:   

Dresdner Bank AG in Hamburg

Jungfernstieg 22

20354 Hamburg

Germany

    

Fax No: +49 (0)3501 4007

Attn: Anke Grahn

     and
    

WestLB AG, London Branch

Woolgate Exchange

25 Basinghall Street

London EC 2V 5HA

    

United Kingdom

 

Fax No:+44 207 020 2002

Attn: Shipping Transportation

 

54

or to such other address as the relevant party may notify the Agent or, if the relevant party is the Agent or the Security Trustee, the Borrower, the Lenders, the Swap Banks and the Security Parties,

 

28.3 Effective date of notices. Subject to Clauses 28.4 and 28.5:

 

(a) a notice which is delivered personally or posted shall be deemed to be served, and shall take effect, at the time when it is delivered;

 

(b) a notice which is sent by telex or fax shall be deemed to be served, and shall take effect, 2 hours after its transmission is completed.

 

28.4 Service outside business hours. However, if under Clause 28.3 a notice would be deemed to be served:

 

(a) on a day which is not a business day in the place of receipt; or

 

(b) on such a business day, but after 5 p.m. local time;

the notice shall (subject to Clause 28.5) be deemed to be served, and shall take effect, at 9 a.m. on the next day which is such a business day.

 

28.5 Illegible notices. Clauses 28.3 and 28.4 do not apply if the recipient of a notice notifies the sender within 1 hour after the time at which the notice would otherwise be deemed to be served that the notice has been received in a form which is illegible in a material respect.

 

28.6 Valid notices. A notice under or in connection with a Finance Document shall not be invalid by reason that its contents or the manner of serving it do not comply with the requirements of this Agreement or, where appropriate, any other Finance Document under which it is served if:

 

(a) the failure to serve it in accordance with the requirements of this Agreement or other Finance Document, as the case may be, has not caused any party to suffer any significant loss or prejudice; or

 

(b) in the case of incorrect and/or incomplete contents, it should have been reasonably clear to the party on which the notice was served what the correct or missing particulars should have been.

 

28.7 English language. Any notice under or in connection with a Finance Document shall be in English.

 

28.8 Meaning of “notice”. In this Clause 28, “notice” includes any demand, consent, authorisation, approval, instruction, waiver or other communication.

 

29 SUPPLEMENTAL

 

29.1 Rights cumulative, non-exclusive. The rights and remedies which the Finance Documents give to each Creditor Party are:

 

(a) cumulative;

 

55

(b) may be exercised as often as appears expedient; and

 

(c) shall not, unless a Finance Document explicitly and specifically states so, be taken to exclude or limit any right or remedy conferred by any law.

 

29.2 Severability of provisions. If any provision of a Finance Document is or subsequently becomes void, unenforceable or illegal, that shall not affect the validity, enforceability or legality of the other provisions of that Finance Document or of the provisions of any other Finance Document.

 

29.3 Counterparts. A Finance Document may be executed in any number of counterparts.

 

29.4 Third party rights. A person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce or to enjoy the benefit of any term of this Agreement.

 

30 LAW AND JURISDICTION

 

30.1 English law. This Agreement shall be governed by, and construed in accordance with, English law.

 

30.2 Exclusive English jurisdiction. Subject to Clause 30.3, the courts of England shall have exclusive jurisdiction to settle any disputes which may arise out of or in connection with this Agreement.

 

30.3 Choice of forum for the exclusive benefit of the Creditor Parties. Clause 30.2 is for the exclusive benefit of the Creditor Parties, each of which reserves the right:

 

(a) to commence proceedings in relation to any matter which arises out of or in connection with this Agreement in the courts of any country other than England and which have or claim jurisdiction to that matter; and

 

(b) to commence such proceedings in the courts of any such country or countries concurrently with or in addition to proceedings in England or without commencing proceedings in England.

The Borrower shall not commence any proceedings in any country other than England in relation to a matter which arises out of or in connection with this Agreement.

 

30.4 Process agent. The Borrower irrevocably appoints Ince Process Agents Ltd. at its registered office for the time being, presently at International House, 1 St Katherine’s Way, London E1N 1UN, London, United Kingdom, to act as its agent to receive and accept on its behalf any process or other document relating to any proceedings in the English courts which are connected with this Agreement.

 

30.5 Creditor Party rights unaffected. Nothing in this Clause 30 shall exclude or limit any right which any Creditor Party may have (whether under the law of any country, an international convention or otherwise) with regard to the bringing of proceedings, the service of process, the recognition or enforcement of a judgment or any similar or related matter in any jurisdiction.

 

30.6 Meaning of “proceedings”. In this Clause 30, “proceedings” means proceedings of any kind, including an application for a provisional or protective measure.

THIS AGREEMENT has been entered into on the date stated at the beginning of this Agreement.

 

56

EXECUTION PAGES

 

BORROWER         

SIGNED by  LOGO

for and on behalf of

DALIAN STAR OWNERS INC.

   

)

)

)

    LOGO   
LENDERS         

SIGNED by  LOGO

for and on behalf of

DRESDNER BANK AG in

HAMBURG

   

)

)

)

)

    LOGO   

SIGNED by  LOGO

for and on behalf of

WESTLB AG

   

)

)

)

    LOGO   
SWAP BANKS         

SIGNED by  LOGO

for and on behalf of

DRESDNER BANK AG in

HAMBURG

   

)

)

)

)

    LOGO   

SIGNED by  LOGO

for and on behalf of

WESTLB AG

   

)

)

)

    LOGO   
AGENT         

SIGNED by  LOGO

for and on behalf of

DRESDNER BANK AG in

HAMBURG

   

)

)

)

)

    LOGO   
SECURITY TRUSTEE         

SIGNED by  LOGO

for and on behalf of

DRESDNER BANK AG in

HAMBURG

   

)

)

)

)

    LOGO   

 

68

JOINT ARRANGERS         

SIGNED by  LOGO

for and on behalf of

DRESDNER BANK AG in

HAMBURG

   

)

)

)

)

    LOGO   

SIGNED by  LOGO

for and on behalf of

WESTLB AG

   

)

)

)

    LOGO   

Witness to all the

above signatures

   

)

)

    LOGO   

 

Name: JOANNA DAVEY
Address:
LOGO

 

69