EX-10.19 57 c52273_ex10-19.htm
 
EXHIBIT 10.19
 
Private & Confidential
 
LOAN AGREEMENT
for a Multicurrency Loan of up to US$36,000,000
to
PEMER SHIPPING LTD

provided by
BAYERISCHE HYPO- UND VEREINSBANK AKTIENGESELLSCHAFT
 
norton
 

 
Contents
 
Clause
 
Page
     
1
Purpose and definitions
1
     
2
The Commitment and the Loan
10
     
3
Interest and Interest Periods
11
     
4
Currencies
13
     
5
Repayment and prepayment
15
     
6
Commitment commission, fees and expenses
18
     
7
Payments and taxes; accounts and calculations
19
     
8
Representations and warranties
20
     
9
Undertakings
24
     
10
Conditions
30
     
11
Events of Default
31
     
12
Indemnities
34
     
13
Unlawfulness and increased costs
35
     
14
Security and set-off
37
     
15
Accounts
38
     
16
Assignment, transfer and lending office
38
     
17
Notices and other matters
39
     
18
Governing law and jurisdiction
40
     
Schedule 1 Form of Drawdown Notice
41
   
Schedule 2 Documents and evidence required as conditions precedent
42
   
Schedule 3 Form of Mortgage
47
   
Schedule 4 Form of Deed of Covenant
48
   
Schedule 5 Form of General Assignment
49
   
Schedule 6 Form of Manager’s Undertaking
50
   
Schedule 7 Form of Master Swap Agreement
51
   
 

 
Schedule 8 Form of Master Agreement Security Deed
52
   
Schedule 9 Calculation of Additional Cost
53
 

 
THIS AGREEMENT is dated 7 March 2007 and made BETWEEN:
 
(1) PEMER SHIPPING LTD as Borrower; and
 
(2) BAYERISCHE HYPO- UND VEREINSBANK AKTIENGESELLSCHAFT as Bank.
 
IT IS AGREED as follows:
 
1
Purpose and definitions
 
1.1
Purpose
 
This Agreement sets out the terms and conditions upon and subject to which the Bank agrees to make available to the Borrower a loan of up to Thirty six million Dollars ($36,000,000), or the equivalent in Optional Currencies, to be used for the purpose of financing the acquisition of the Ship by the Borrower.
 
1.2
Definitions
 
In this Agreement, unless the context otherwise requires:
 
Account Pledges” means, together, the Cash Collateral Account Pledge, the Multicurrency Cash Collateral Account Pledge and the Operating Account Pledge;
 
Accounts” means, together, the Operating Account, the Cash Collateral Account and the Multicurrency Cash Collateral Account and includes any sub-accounts thereof and “Account” means any of them;
 
Additional Cost” means in relation to any period a percentage calculated for such period at an annual rate determined by the application of the formula set out in schedule 9;
 
Advance” means each separate portion of the Loan for the purposes of calculation of interest or, where the Loan is not divided into separate portions for such purpose, means the Loan;
 
Assignee” has the meaning ascribed thereto in clause 16.3;
 
Bank” means Bayerische Hypo- und Vereinsbank Aktiengesellschaft whose registered office is at Am Tucherpark 16, 13-80538, Munich, Germany, acting for the purposes of this Agreement through its office at 7 Heraklitou Street, 106 73 Athens, Greece (or of such other address as may last have been notified to the Borrower pursuant to clause 16.6) and includes its successors in title and Assignees and Transferees;
 
Banking Day” means a day (other than Saturday or Sunday) and:
 
 
(a)
for interest rate fixing purposes:
 
 
(i)
in relation to a rate fixing in respect of euro, a day on which the Trans-European Automated Real-Time Gross Settlement Express Transfer system (TARGET) is operating; or
 
 
(ii)
in relation to a rate fixing in respect of any other Optional Currency or Dollars, a day on which banks are open for business in the principal financial centre in, respectively, the jurisdiction of the relevant Optional Currency or, in the case of Dollars, New York City; and
 
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(b)
for all other purposes (including, but not limited to, payments and receiving notices):
 
 
(i)
on which banks are open for business in London, Munich and Athens; and
 
 
(ii)
in relation to payments in euros, a day on which banks are open for business in such other principal financial centre or centres of relevant Participating Member States as the Bank may nominate; or
 
 
(iii)
in relation to payments in any other Optional Currency or Dollars, a day on which banks are open for business in the principal financial centre in, respectively, the jurisdiction of the relevant Optional Currency or, in the case of Dollars, New York City;
 
Borrowed Money means Indebtedness in respect of (i) money borrowed or raised and debit balances at banks, (ii) any bond, note, loan stock, debenture or similar debt instrument, (iii) acceptance or documentary credit facilities, (iv) receivables sold or discounted (otherwise than on a non-recourse basis), (v) deferred payments for assets or services acquired, (vi) finance leases and hire purchase contracts, (vii) swaps, forward exchange contracts, futures and other derivatives, (viii) any other transaction (including without limitation forward sale or purchase agreements) having the commercial effect of a borrowing or raising of money or of any of (ii) to (vii) above and (ix) guarantees in respect of Indebtedness of any person falling within any of (i) to (viii) above;
 
Borrower means Pemer Shipping Ltd of 80 Broad Street, Monrovia, Republic of Liberia and includes its successors in title;
 
Borrower’s Security Documents means, at any relevant time, such of the Security Documents as shall have been executed by the Borrower at such time;
 
Cash Collateral Account means an interest bearing Dollar account of the Manager opened or (as the context may require) to be opened by the Manager with the Bank and includes any other account designated in writing by the Bank to be a Cash Collateral Account for the purposes of this Agreement;
 
Cash Collateral Account Pledge means a pledge executed or (as the context may require) to be executed by the Manager in favour of the Bank in respect of the Cash Collateral Account in such form as will be agreed between the Bank and the Borrower;
 
Cash Collateral Deposit means a deposit of Two million Dollars ($2,000,000) or the Equivalent Amount in an Optional Currency, made by the Borrower to the Cash Collateral Account;
 
Charter means any time charter or other contract of employment for the Ship for a period that exceeds twenty four (24) months’ duration and is entered into by the Borrower with a Charterer;
 
Charter Assignment means a first priority specific assignment of any Charter executed or (as the context may require) to be executed by the Borrower in favour of the Bank in such form as will be agreed between the Bank and the Borrower;
 
Charterer means any such person, company or organisation, which shall enter into a Charter in respect of the Ship during the Security Period (as defined in the Deed of Covenant);
 
Classification means the Ship’s present classification, “+100A1 Bulk Carrier, BC-A, Strengthened for Heavy Cargoes, Hold Nos. 2, 4 and 6 may be empty, ESP, ShipRight (SDA, FDA, CM), ESN, LI, *IWS,” +LMC, UMS and with descriptive notes: Shipright (SCM), Pt. Higher Tensile Steel” with the Classification Society or, should the Borrower elect to change the
 
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Classification, such other classification as the Bank shall, at the request of the Borrower, agree in writing shall be treated as the Classification for the purposes of the Security Documents;
 
Classification Society means the Ship’s present classification society, Lloyd’s Register of Shipping, or, should the Borrower elect to change the Classification Society such other classification society which the Bank shall, at the request of the Borrower, agree in writing shall be treated as the Classification Society for the purposes of the Security Documents;
 
Code” means the International Management Code for the Safe Operation of Ships and for Pollution Prevention constituted pursuant to Resolution A. 741 (18) of the International Maritime Organisation and incorporated into the International Convention for the Safety of Life at Sea 1974 (as amended) and includes any amendments or extensions thereto and any regulation issued pursuant thereto;
 
Commitment” means the amount which the Bank has agreed to lend to the Borrower under clause 2.1 as reduced by any relevant term of this Agreement;
 
Compulsory Acquisition means requisition for title or other compulsory acquisition, requisition, appropriation, expropriation, deprivation, forfeiture or confiscation for any reason of the Ship by any Government Entity or other competent authority, whether de jure or de facto, but shall exclude requisition for use or hire not involving requisition of title;
 
Credit Support Document has the meaning given to that expression in section 14 of the Master Swap Agreement and as set out in paragraph (f) of Part 4 of the Schedule to the Master Swap Agreement;
 
Credit Support Provider means any person defined as such in the Master Swap Agreement pursuant to section 14 of the Master Swap Agreement;
 
Deed of Covenant means the deed of covenant collateral to the Mortgage executed or (as the context may require) to be executed by the Borrower in favour of the Bank in the form set out in schedule 4 or in such other form as may be agreed between the Bank and the Borrower;
 
Default means any Event of Default or any event or circumstance which with the giving of notice or lapse of time or the satisfaction of any other condition (or any combination thereof) would constitute an Event of Default;
 
DOC means the document of compliance issued to an Operator in accordance with rule 13 of the Code;
 
Dollar Amount means (a) in relation to an Advance to be drawn down in Dollars or, as the case may be, in relation to the Loan if it is to be wholly drawn down in Dollars, the amount in Dollars so drawn down, (b) in relation to an Advance to be drawn down in an Optional Currency or, as the case may be, in relation to the Loan if it is to be wholly drawn down in an Optional Currency, the amount in Dollars specified in the Drawdown Notice which would be required to purchase the principal amount of that Advance or, as the case may be, the Loan as determined in accordance with clause 4.3 and (c) in relation to clause 5.1 where the Loan has been converted in whole or in part into one or more Optional Currencies pursuant to clause 4.4, the amount in Dollars which would have been outstanding had the Loan been originally drawn down in, and remained outstanding at all times in, Dollars, as reduced by any repayment or prepayment under this Agreement;
 
Dollars and “$” mean the lawful currency for the time being of the United States of America and in respect of all payments to be made under any of the Security Documents mean funds which are for same day settlement in the New York Clearing House Interbank Payments System (or
 
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such other U.S. dollar funds as may at the relevant time be customary for the settlement of international banking transactions denominated in U.S. dollars);
 
Drawdown Date means the date, being a Banking Day falling not later than the Termination Date, on which the Loan is, or is to be, drawn down;
 
Drawdown Notice means a notice substantially in the terms of schedule 1;
 
Encumbrance means any mortgage, charge (whether fixed or floating), pledge, lien, hypothecation, assignment, trust arrangement or security interest or other encumbrance of any kind securing any obligation of any person or any type of preferential arrangement (including without limitation title transfer and/or retention arrangements having a similar effect);
 
Environmental Affiliate” means any agent or employee of the Borrower or any person having a contractual relationship with the Borrower in connection with the Ship or its operation or the carriage of cargo and/or passengers thereon and/or the provision of goods and/or services on or from the Ship;
 
Environmental Approval means any consent, authorisation, licence or approval of any governmental or public body or authorities or courts applicable to the Ship or its operation or the carriage of cargo and/or passengers thereon and/or the provision of goods and/or services on or from the Ship required under any Environmental Law;
 
Environmental Claim means any and all enforcement, clean-up, removal or other governmental or regulatory actions or orders instituted or completed pursuant to any Environmental Law or any Environmental Approval together with claims made by any third party relating to damage, contribution, loss or injury, resulting from any actual or threatened emission, spill, release or discharge of a Pollutant from the Ship;
 
Environmental Laws means all national, international and state laws, rules, regulations, treaties and conventions applicable to the Ship pertaining to the pollution or protection of human health or the environment including, without limitation, the carriage of Pollutants and actual or threatened emissions, spills, releases or discharges of Pollutants;
 
Equivalent Amount means, as at any date, the equivalent in one currency of an amount in another currency as converted at the rate determined by the Bank to be the spot rate of exchange ruling on the London Foreign Exchange Market for the purchase of the former currency with the latter currency at or about 11:00 a.m. on the second Banking Day before such date;
 
EURIBOR shall mean, in relation to any amount in euros and any period, the offered rate for deposits for such amount and for such period which is:
 
 
(a)
the rate of interest for such period which appears on the Reuters page Euribor 01 (or such other page on the Reuters screen as may customarily be used from time to time to display EURIBOR rates) at or about 11:00 a.m. (Brussels time) on the Quotation Date for such period; or
 
 
(b)
if the relevant rate of EURIBOR cannot be determined in accordance with paragraph (a) above, the rate (rounded upwards if necessary to the nearest one sixteenth of one per cent) the Bank offers for deposits in an amount approximately equal to the amount in relation to which EURIBOR is to be determined for a period equivalent to such period to prime banks in the London Interbank Market at or about 11:00 am. (London time) on the Quotation Date for such period;
 
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euro and euros and “ mean the single currency of Participating Member States introduced in accordance with the provisions of Article 109(1)4 of the Treaty and in respect of all payments to be made under this Agreement in euro means immediately available, freely transferable funds;
 
Event of Default means any of the events or circumstances described in clause 11.1;
 
Flag State means the Republic of Cyprus or such other state or territory designated in writing by the Bank, at the request of the Borrower, as being the “Flag State” of the Ship for the purposes of the Security Documents;
 
Funding Cost means (i) in respect of the Loan or, as the case may be, any Advance to be advanced or outstanding in euros, EURIBOR or (ii) in respect of the Loan or, as the case may be, any Advance to be advanced or outstanding in Dollars or an Optional Currency (other than euro), LIBOR;
 
General Assignment means the assignment collateral to the Mortgage and the Deed of Covenant executed or (as the context may require) to be executed by the Borrower in favour of the Bank in the form set out in schedule 5 or in such other form as the Bank may in its absolute discretion require;
 
Government Entity means and includes (whether having a distinct legal personality or not) any national or local government authority, board, commission, department, division, organ, instrumentality, court or agency and any association, organisation or institution of which any of the foregoing is a member or to whose jurisdiction any of the foregoing is subject or in whose activities any of the foregoing is a participant;
 
Indebtedness means any obligation for the payment or repayment of money, whether as principal or as surety and whether present or future, actual or contingent;
 
Interest Payment Date means the last day of an Interest Period;
 
Interest Period means each period for the calculation of interest in respect of the Loan or, as the case may be, an Advance thereof ascertained in accordance with clauses 3.2 and 3.3;
 
ISPS Code means the International Ship and Port Facility Security Code constituted pursuant to resolution A.924(22) of the International Maritime Organisation now set out in Chapter XI-2 of the International Convention for the Safety of Life at Sea (SOLAS) 1974 (as amended) as adopted by a Diplomatic Conference of the International Maritime Organisation on Maritime Security in December 2002 and includes any amendments or extensions to it and any regulation issued pursuant to it;
 
ISSC means, an International Ship Security Certificate issued in respect of the Ship pursuant to the ISPS Code;
 
Japanese Yen and ¥ mean the lawful currency for the time being of Japan;
 
LIBOR means, in relation to a particular period, the rate for deposits of the relevant currency for a period equivalent to such period at or about 11:00 a.m. (London time) on the Quotation Date for such period as displayed on Reuters page LIBOR 01 (British Banks’ Association Interest Settlement Rates) (or such other page as may replace such page LIBOR 01 on such system or on any other system of the information vendor for the time being designated by the British Bankers’ Association to calculate the BBA Interest Settlement Rate (as defined in the British Bankers’ Association’s Recommended Terms and Conditions (“BBAIRS” terms) applicable at the time)), provided that if on such date no such rate is so displayed, LIBOR for such period shall be the rate (rounded upward if necessary to five decimal places) quoted by the Bank as the Bank’s
 
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offered rate for deposits of the relevant currency in an amount approximately equal to the amount in relation to which LIBOR is to be determined for a period equivalent to such period to prime banks in the London Interbank Market at or about 11:00 a.m. (London time) on the Quotation Date for such period;
 
Loan means the principal amount borrowed by the Borrower on the Drawdown Date or (as the context may require) the principal amount owing to the Bank under this Agreement at any relevant time;
 
Management Agreement means the agreement entered or (as the context may require) to be entered into (in a form and substance acceptable to the Bank in its sole discretion) between the Borrower and the Manager providing (inter alia) for the Manager to manage the Ship;
 
Manager means Safety Management Overseas S.A. of Edificio Torre Universal, Piso 12 Avenida Federico Boyd, P.O. Box 8807, Panama, Republic of Panama, or any other person appointed by the Borrower, with the prior written consent of the Bank, as the manager of the Ship and includes its successors in title;
 
Manager’s Undertaking means an undertaking and assignment executed or (as the context may require) to be executed by the Manager in favour of the Bank as a condition precedent to the approval of the Management Agreement, such undertaking to be in the form set out in schedule 6 or in such other form as the Bank may in its absolute discretion require;
 
Margin means zero point six five per cent (0.65%) per annum;
 
Master Agreement Security Deed means the deed executed or (as the context may require) to be executed by the Borrower in favour of the Bank in the form set out in schedule 8 or in such other form as the Bank may in its absolute discretion require;
 
Master Swap Agreement means the agreement made or (as the context may require) to be made between the Bank and the Borrower comprising an ISDA Master Agreement and the Schedule thereto in the form set out in schedule 7, and the Confirmations (as defined therein) supplemental thereto;
 
month means a period beginning in one calendar month and ending in the next calendar month on the day numerically corresponding to the day of the calendar month on which it started, provided that (i) if the period started on the last Banking Day in a calendar month or if there is no such numerically corresponding day, it shall end on the last Banking Day in such next calendar month and (ii) if such numerically corresponding day is not a Banking Day, the period shall end on the next following Banking Day in the same calendar month but if there is no such Banking Day it shall end on the preceding Banking Day and “months” and “monthly” shall be construed accordingly;
 
Mortgage means the first priority statutory mortgage of the Ship executed or (as the context may require) to be executed by the Borrower in favour of the Bank in the form set out in schedule 3 or in such other form as the Bank may in its absolute discretion require;
 
Multicurrency Cash Collateral Account means an interest bearing Dollar Account of the Manager opened or (as the context may require) to be opened by the Manager with the Bank, and includes any other account designated in writing by the Bank to be a Multicurrency Cash Collateral Account for the purposes of this Agreement;
 
Multicurrency Cash Collateral Account Pledge means the pledge executed or (as the context may require) to be executed by the Manager in favour of the Bank in respect of the Multicurrency Cash Collateral Account in such form as the Bank may in its absolute discretion require;
 
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Operating Account means an interest bearing Dollar account of the Manager opened or (as the context may require) to be opened by the Manager, with the Bank and includes any sub- accounts thereof and any other account designated in writing by the Bank to be an Operating Account for the purposes of this Agreement;
 
Operating Account Pledge means the pledge executed or (as the context may require) to be executed by the Manager in favour of the Bank in respect of the Operating Account in such form as the Bank may in its absolute discretion require;
 
Operator means any person who is from time to time during the Security Period (as defined in the Deed of Covenant) concerned in the operation of the Ship and falls within the definition of “Company” set out in rule 1.1.2 of the Code;
 
Optional Currency means any of Swiss Francs, Japanese Yen, euros or Sterling so long as each such currency is freely transferable, freely convertible into Dollars and dealt in on the London Interbank Market and, in respect of all payments to be made under any of the Security Documents in an Optional Currency, means immediately available freely transferable cleared funds in that Optional Currency and “Optional Currencies” means, together, all or any of them;
 
Participating Member State means a member state of the European Union that has adopted a single currency in accordance with the Treaty;
 
Permitted Encumbrance means any Encumbrance in favour of the Bank created pursuant to the Security Documents and Permitted Liens;
 
Permitted Liens means any lien on the Ship for master’s, officer’s or crew’s wages outstanding in the ordinary course of trading, any lien for salvage and any ship repairer’s or outfitter’s possessory lien for a sum not (except with the prior written consent of the Bank) exceeding the Casualty Amount (as defined in the Deed of Covenant);
 
Pollutant means and includes pollutants, contaminants, toxic substances, oil as defined in the United States Oil Pollution Act of 1990 and all hazardous substances as defined in the United States Comprehensive Environmental Response, Compensation and Liability Act 1980;
 
Quotation Date means, in relation to any period, the second Banking Day before the first day of such period;
 
Registry means the Department of Merchant Shipping, Limassol, Cyprus or, as the case may be, the offices of the Cyprus Consulate in Piraeus;
 
Regulatory Agency means the Government Entity or other organisation in the Flag State which has been designated by the government of the Flag State to implement and/or administer and/or enforce the provisions of the Code;
 
Related Company of a person means any Subsidiary of such person, any company or other entity of which such person is a Subsidiary and any Subsidiary of any such company or entity;
 
Relevant Jurisdiction means any jurisdiction in which or where any Security Party is incorporated, resident, domiciled, has a permanent establishment, carries on, or has a place of business or is otherwise effectively connected;
 
Repayment Dates means, subject to clauses 5.1.2 and 7.3, each of the dates falling at six (6) monthly intervals after the Drawdown Date up to and including the date falling one hundred and forty four (144) months after the Drawdown Date;
 
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Requisition Compensation means all sums of money or other compensation from time to time payable during the Security Period by reason of the Compulsory Acquisition of the Ship;
 
Security Documents means this Agreement, the Mortgage, the Deed of Covenant, the General Assignment, the Manager’s Undertaking, the Master Swap Agreement, the Master Agreement Security Deed, the Account Pledges, any Charter Assignment and any other documents as may have been or shall from time to time after the date of this Agreement be executed to guarantee and/or secure all or any part of the Loan, interest thereon and other moneys from time to time owing by the Borrower pursuant to this Agreement and/or the Master Swap Agreement (whether or not any such document also secures moneys from time to time owing pursuant to any other document or agreement);
 
Security Party means the Borrower, the Manager or any other person who may at any time be a party to any of the Security Documents (other than the Bank);
 
Security Requirement means the amount in Dollars (as certified by the Bank whose certificate shall, in the absence of manifest error, be conclusive and binding on the Borrower and the Bank) which shall be:
 
 
(a)
for the period commencing on the Drawdown Date and ending on the Third Anniversary, equal to one hundred and ten per cent (110%) of the amount which is the aggregate of (i) the Loan (or the Equivalent Amount in Dollars when the Loan or part thereof is denominated in an Optional Currency) and (ii) the cost (if any) (as certified by the Bank whose certificate shall, in the absence of manifest error, be conclusive and binding on the Borrower and the Bank) of terminating any Transaction entered into pursuant to the Master Swap Agreement; and
 
 
(b)
for the period commencing on the date falling immediately after the Third Anniversary and ending on the last day of the Security Period (as defined in the Deed of Covenant), equal to one hundred and twenty per cent (120%) of the amount which is the aggregate of (i) the Loan (or the Equivalent Amount in Dollars when the Loan or part thereof is denominated in an Optional Currency) and (ii) the cost (if any) (as certified by the Bank whose certificate shall, in the absence of manifest error, be conclusive and binding on the Borrower and the Bank) of terminating any Transaction entered into pursuant to the Master Swap Agreement;
 
Security Value means the amount in Dollars (as certified by the Bank whose certificate shall, in the absence of manifest error, be conclusive and binding on the Borrower and the Bank) which, at any relevant time, is the aggregate of (i) the value of the Ship as most recently determined in accordance with clause 9.2.2, (ii) the value of any additional security for the time being actually provided to the Bank pursuant to clause 9.2 as most recently determined in accordance with clause 9.2.5, (iii) the amount (if any) at the relevant time standing to the credit of the Cash Collateral Account and (iv) the amount (if any) at the relevant time standing to the credit of the Multicurrency Cash Collateral Account;
 
Ship means m.v. Pedhoulas Merchant, a bulk carrier of 82,214 dwt constructed at Tsuneishi Corporation at Tadotsu shipyard, registered in the name of the Borrower under the laws and flag of the Flag State with IMO number 9279800;
 
SMC means a safety management certificate issued in respect of a Ship in accordance with rule 13 of the Code;
 
Sterling and £ mean the lawful currency for the time being of the United Kingdom;
 
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Subsidiary of a person means any company or entity directly or indirectly controlled by such person, and for this purpose “control” means either the ownership of more than fifty per cent (50%) of the voting share capital (or equivalent rights of ownership) of such company or entity or the power to direct its policies and management, whether by contract or otherwise;
 
Swiss Francs or CHF mean the lawful currency for the time being of Switzerland;
 
Taxes includes all present and future taxes, levies, imposts, duties, fees or charges of whatever nature together with interest thereon and penalties in respect thereof and “Taxation” shall be construed accordingly;
 
Termination Date means 16 March 2007 or such later date as the Bank may in its absolute discretion agree in writing;
 
Third Anniversary means the date falling thirty-six (36) months from the Drawdown Date;
 
“Total Loss” means:
 
 
(a)
the actual, constructive, compromised or arranged total loss of the Ship; or
 
 
(b)
the Compulsory Acquisition of the Ship; or
 
 
(c)
the hijacking, theft, condemnation, capture, seizure, arrest, detention or confiscation of the Ship (other than where the same amounts to the Compulsory Acquisition of the Ship) by any Government Entity, or by persons acting or purporting to act on behalf of any Government Entity, unless the Ship be released and restored to the Borrower from such hijacking, theft, condemnation, capture, seizure, arrest, detention or confiscation within thirty (30) days after the occurrence thereof;
 
Transaction means a Transaction as defined in the introductory paragraph of the Master Swap Agreement;
 
Transferee has the meaning ascribed thereto in clause 16.4; and
 
Treaty means the Treaty establishing the European Economic Community, being the Treaty of Rome of 25 March 1957 as amended by the Single European Act 1986 and Maastricht Treaty (which was signed on 7 February 1992 and came into force on 1 November 1993) as amended, varied or supplemented from time to time.
 
1.3
Headings
 
Clause headings and the table of contents are inserted for convenience of reference only and shall be ignored in the interpretation of this Agreement.
 
1.4
Construction of certain terms
 
In this Agreement, unless the context otherwise requires:
 
1.4.1
references to clauses and schedules are to be construed as references to clauses of, and schedules to, this Agreement and references to this Agreement include its schedules;
 
1.4.2
references to (or to any specified provision of) this Agreement or any other document shall be construed as references to this Agreement, that provision or that document as in force for the time being and as amended in accordance with terms thereof, or, as the case may be, with the agreement of the relevant parties;
 
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1.4.3
references to a “regulation” include any present or future regulation, rule, directive, requirement, request or guideline (whether or not having the force of law) of any agency, authority, central bank or government department or any self-regulatory or other national or supra-national authority,
 
1.4.4
words importing the plural shall include the singular and vice versa;
 
1.4.5
references to a time of day are to London time;
 
1.4.6
references to a person shall be construed as references to an individual, firm, company, corporation, unincorporated body of persons or any Government Entity;
 
1.4.7
references to a “guarantee” include references to an indemnity or other assurance against financial loss including, without limitation, an obligation to purchase assets or services as a consequence of a default by any other person to pay any Indebtedness and “guaranteed” shall be construed accordingly; and
 
1.4.8
references to any enactment shall be deemed to include references to such enactment as re-enacted, amended or extended.
 
2
The Commitment and the Loan
 
2.1
Agreement to lend
 
The Bank, relying upon each of the representations and warranties in clause 8, agrees to lend to the Borrower upon and subject to the terms of this Agreement up to Thirty six million Dollars ($36,000,000) or the equivalent in Optional Currencies calculated in accordance with clause 4.
 
2.2
Drawdown
 
Subject to the terms and conditions of this Agreement, the Loan shall be advanced in full in one amount on the Drawdown Date following receipt by the Bank from the Borrower of a Drawdown Notice not later than 10 a.m. on the third Banking Day before the proposed Drawdown Date. A Drawdown Notice shall be effective on actual receipt by the Bank, shall specify the amount in Dollars and/or, as the case may be, Optional Currencies into which the Borrower wishes the Loan or an Advance thereof to be subdivided on such Drawdown Date and, once given, shall, subject as provided in clause 3.6.1, be irrevocable.
 
2.3
Amount
 
The principal amount specified in the Drawdown Notice for borrowing on the Drawdown Date shall, subject to the terms and conditions of this Agreement, not exceed Thirty six million Dollars ($36,000,000) or the equivalent in Optional Currencies, calculated in accordance with clause 4, which sum may be advanced in up to three Advances of different currencies in accordance with clause 4 provided that no Advance has a Dollar Amount of less than $1,000,000 on the Drawdown Date as a result. Each Advance shall be denominated in one currency only.
 
2.4
Availability
 
Upon receipt of a Drawdown Notice complying with the terms of this Agreement the Bank shall, subject to the provisions of clause 10, on the Drawdown Date make the Loan available to the Borrower in accordance with clause 7.2.
 
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2.5
Termination of Commitment
 
If the Loan is not drawn down by the Termination Date, the Commitment shall thereupon be automatically cancelled.
 
2.6
Application of Proceeds
 
Without prejudice to the Borrower’s obligations under clause 9.1.3, the Bank shall have no responsibility for the application of proceeds of the Loan by the Borrower.
 
3
Interest and Interest Periods
 
3.1
Normal interest rate
 
Subject to paragraph (i) of Part 5 of the Schedule to the Master Swap Agreement, the Borrower shall pay interest on each Advance, in the currency in which such Advance is outstanding, in respect of each Interest Period relating thereto on each Interest Payment Date (or, in the case of Interest Periods of more than six (6) months, by instalments, the first such instalment being payable six (6) months from the commencement of the relevant Interest Period and the subsequent instalments at intervals of six (6) months or, if shorter, the period from the date of the preceding instalment until the Interest Payment Date relative to such Interest Period) at the rate per annum determined by the Bank to be the aggregate of (a) the Margin, (b) the Additional Cost and (c) the Funding Cost for such Interest Period.
 
3.2
Selection of Interest Periods
 
Subject to paragraph (i) of Part 5 of the Schedule to the Master Swap Agreement, the Borrower may by notice received by the Bank not later than 10 a.m. on the fifth Banking Day before the beginning of each Interest Period in relation to each Advance specify whether such Interest Period shall have a duration (subject to availability which shall be determined solely by the Bank) of one (1), two (2), three (3), six (6), nine (9) or twelve (12) months or such other period as the Borrower may select and the Bank may, in its absolute discretion, agree.
 
3.3
Determination of Interest Periods
 
Subject to paragraph (i) of Part 5 of the Schedule to the Master Swap Agreement, every Interest Period shall be of the duration specified by the Borrower pursuant to clause 3.2 but so that:
 
3.3.1
the first Interest Period in respect of an Advance shall commence on the Drawdown Date and each subsequent Interest Period in respect of such Advance shall commence on the last day of the previous Interest Period in respect of such Advance;
 
3.3.2
if any Interest Period would otherwise overrun a Repayment Date, then, in the case of the last Repayment Date, such Interest Period shall end on such Repayment Date, and in the case of any other Repayment Date or Repayment Dates, the Advance or, if more than one, the aggregate of the Advances shall be divided into parts so that there is one part (in the case of more than one Advance to be calculated on pro-rata basis between the Advances in the aggregate Dollar Amount of all such Advances) in the amount of the repayment instalment due on each Repayment Date falling during that Interest Period and having an Interest Period ending on the relevant Repayment Date and another part (in the case of more than one Advance to be calculated on a pro-rata basis between the Advances in the aggregate Dollar Amount of all such Advances) in the amount of the balance of the Loan having an Interest Period ascertained in accordance with clause 3.2 and the other provisions of this clause 3.3 and the expression “Interest Period in respect of the Loan” when used in
 
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clause4 and elsewhere in this Agreement refers to the Interest Period in respect of the balance of the Loan;
 
3.3.3
if the Borrower fails to specify the duration of an Interest Period in accordance with the provisions of clause 3.2 and this clause 3.3 such Interest Period shall have a duration of six (6) months or such other period as shall comply with this clause 3.3.
 
3.4
Default interest
 
If the Borrower fails to pay any sum (including, without limitation, any sum payable pursuant to this clause 3.4) on its due date for payment under any of the Security Documents, the Borrower shall pay interest on such sum on demand from the due date up to the date of actual payment (as well after as before judgment) at a rate determined by the Bank pursuant to this clause 3.4. The period beginning on such due date and ending on such date of payment shall be divided into successive periods of not more than three (3) months as selected by the Bank each of which (other than the first, which shall commence on such due date) shall commence on the last day of the preceding such period. The rate of interest applicable to each such period shall be the aggregate (as determined by the Bank) of (a) one per cent (2%) per annum, (b) the Margin, (c) the Additional Cost and (d) the Funding Cost for such period and applicable to such sum. Such interest shall be due and payable on the last day of each such period as determined by the Bank and each such day shall, for the purposes of this Agreement, be treated as an Interest Payment Date, provided that if such unpaid sum is an amount of principal which became due and payable, by reason of a declaration by the Bank under clause 11.2.2 or a prepayment pursuant to clauses 5.3, 9.2.1(a) or 13.1, on a date other than an Interest Payment Date relating thereto, the first such period selected by the Bank shall be of a duration equal to the period between the due date of such principal sum and such Interest Payment Date and interest shall be payable on such principal sum during such period at a rate of one per cent (2%) above the rate applicable thereto immediately before it shall have become so due and payable. If, for the reasons specified in clause 3.6.1, the Bank is unable to determine a rate in accordance with the foregoing provisions of this clause 3.4, interest on any sum not paid on its due date for payment shall be calculated at a rate determined by the Bank to be one per cent (2%) per annum above the aggregate of the Margin and the cost of funds (including Additional Cost) to the Bank.
 
3.5
Notification of Interest Periods and interest rate
 
The Bank shall notify the Borrower promptly of the duration of each Interest Period and of each rate of interest determined by it under this clause 3.
 
3.6
Market disruption; non-availability
 
3.6.1
If and whenever, at any time prior to the commencement of any Interest Period, the Bank shall have determined (which determination shall, in the absence of manifest error, be conclusive):
 
(a)
that adequate and fair means do not exist for ascertaining LIBOR or, as the case may be, EURIBOR during such Interest Period; or
 
(b)
that deposits in Dollars are not available to the Bank in the London Interbank Market in the ordinary course of business in sufficient amounts to fund the Loan for such Interest Period;
 
the Bank shall forthwith give notice (a “Determination Notice”) thereof to the Borrower. A Determination Notice shall contain particulars of the relevant circumstances giving rise to its issue. After the giving of any Determination Notice the undrawn amount of the Commitment shall not be borrowed until notice to the contrary is given to the Borrower by the Bank.
 
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3.6.2
During the period of ten (10) days after any Determination Notice has been given by the Bank under clause 3.6.1, the Bank shall certify an alternative basis (the “Substitute Basis”) for maintaining the Loan. The Substitute Basis may (without limitation) include alternative interest periods, alternative currencies or alternative rates of interest but shall include a margin above the cost of funds (including Additional Cost), if any, to the Bank equivalent to the Margin. Each Substitute Basis so certified shall be binding upon the Borrower and shall take effect in accordance with its terms from the date specified in the Determination Notice until such time as the Bank notifies the Borrower that none of the circumstances specified in clause 3.6.1 continues to exist whereupon the normal interest rate fixing provisions of this Agreement shall apply.
 
4
Currencies
 
4.1
Selection of currencies
 
Subject to clause 4.2, if the Borrower so requests in the Drawdown Notice or, in any case other than drawdown of the Loan, by notice received by the Bank not later than 10 a.m. on the second Banking Day before the beginning of an Interest Period in respect of the Loan or, as the case may be, an Advance, the Loan or part thereof may be drawn down in Dollars or in an Optional Currency or, on the first day of such Interest Period, the Loan or such Advance may be converted from an Optional Currency into Dollars or from Dollars into an Optional Currency but, if no such request is received by the Bank, the Loan will be drawn down in Dollars or, as the case may be, the Loan or such Advance will remain outstanding in the currency in which it was outstanding during its immediately preceding Interest Period.
 
4.2
Limit on currencies; non-availability
 
4.2.1
The Loan or any part thereof may not be drawn down in and may not be converted into or remain outstanding in an Optional Currency if:
 
(a)
in consequence thereof there would be more than three (3) Advances outstanding at any time; or
 
(b)
in consequence thereof there would be more than two (2) Optional Currencies outstanding at any time; or
 
(c)
in consequence thereof an Advance shall be denominated in more than one currency; or
 
(d)
the amount to be converted is less than $1,000,000 or an integral multiple of $1,000,000; or
 
(e)
the Bank notifies the Borrower not later than 3 p.m. on the fourth Banking Day before the date on which the Loan or the relevant part thereof is to be drawn down or the beginning of the relevant Interest Period, that deposits of such Optional Currency are not readily available to the Bank in an amount comparable with the Loan or the relevant part thereof; or
 
(f)
the Bank determines (which determination shall be conclusive) at any time prior to 10 a.m. (local time in the place of payment) on the first day of the relevant Interest Period that by reason of any change in currency availability, currency exchange rates or exchange controls it is or will be impracticable for the Loan or the relevant part thereof to be drawn down in, converted into or remain outstanding in that Optional Currency; or
 
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(g)
a Default has occurred and is continuing; or
 
(h)
a Transaction is outstanding under the Master Swap Agreement,
 
accordingly,in any such event, the Loan or the relevant part thereof shall be drawn down in, remain outstanding in or be converted into Dollars.
 
4.3
Currency amounts on drawdown
 
4.3.1
Drawdown in Optional Currency
 
 
If the Loan is to be drawn down in full or in part in an Optional Currency, the Bank shall, subject to clauses 10.1 and 10.2, advance to the Borrower on the Drawdown Date the Equivalent Amount of such Optional Currency (as determined by the Bank) which can be purchased with the Dollar Amount of the Loan or the relevant part thereof as at the Drawdown Date.
 
4.3.2
Drawdown in Dollars
 
 
If the Loan or part thereof is to be drawn down in Dollars, the Bank shall, subject to clauses 10.1 and 10.2, advance to the Borrower on the Drawdown Date, the Dollar Amount of the Loan or such part thereof.
 
4.4
Currency amount on conversion
 
Subject to clause 4.2, in the event the Borrower requests the Bank (in accordance with clause 4.1) to convert an Advance into an, or another Optional Currency (the “new currency”) or from an Optional Currency into Dollars, the amount into which such Advance is to be converted shall be the Equivalent Amount in the new currency of the currency in which such Advance was outstanding immediately prior to conversion (after taking into account any repayment or prepayment due on the date of conversion).
 
4.5
Notional obligations
 
The obligation of the Bank to convert the Loan or, as the case may be, an Advance in accordance with clause 4.4 is notional only, and the same shall be deemed to be satisfied by the Bank making appropriate adjustments in the principal amount of the Loan in the account referred to in clause 7.7.
 
4.6
Currency Correction
 
Where at any time the Loan or an Advance is outstanding in one or more Optional Currencies and the Bank by notice given to the Borrower pursuant to clause 17 (a “Currency Correction Notice”) certifies to the Borrower (which Currency Correction Notice shall in the absence of manifest error be conclusive and binding on the Borrower) that the Equivalent Amount in Dollars of the Loan then outstanding (less any amount standing to the credit of the Multicurrency Cash Collateral Account) exceeds by ten per cent (10%) or more (the “excess amount”), the Dollar Amount on the date of such Currency Correction Notice, the Borrower shall, within five (5) Banking Days from the date of such Currency Correction Notice, pay to the Multicurrency Cash Collateral Account, an additional (to any amount already standing to the credit of the Multicurrency Cash Collateral Account before such deposit being made) amount in Dollars equal to the excess amount.
 
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4.7
Release of moneys in Multicurrency Cash Collateral Account
 
If at any time following a payment to the Multicurrency Cash Collateral Account in accordance with clause 4.6, the Equivalent Amount in Dollars of the Loan outstanding no longer exceeds one hundred and ten per cent (110%) of the Dollar Amount, the Bank shall, provided that (a) no Event of Default has occurred and is continuing and (b) the Security Value exceeds the Security Requirement at the time, release to the Manager the sums deposited in the Multicurrency Cash Collateral Account in accordance with clause 4.6 from the Multicurrency Cash Collateral Account. The Borrower shall procure that the Manager does not make any withdrawals from the Multicurrency Cash Collateral Account other than pursuant to this clause 4.7 and the terms of the Multicurrency Cash Collateral Account Pledge.
 
4.8
Incidental costs and expenses
 
All costs and expenses incidental to any currency conversion pursuant to this clause 4 shall be borne by the Borrower.
 
5
Repayment and prepayment
 
5.1
Repayment
 
5.1.1
Subject to the terms of this Agreement, the Borrower shall repay the Loan by twenty four consecutive instalments, one such instalment to be repaid on each of the Repayment Dates Subject to the provisions of this Agreement, the amount of each such instalment other than the last instalment shall be One million Dollars ($1,000,000) or the equivalent amount in an Optional Currency calculated in accordance with clause 5.7 and the amount of the last instalment shall be Thirteen million Dollars ($13,000,000) (comprising a balloon repayment of Twelve million Dollars ($12,000,000) and a repayment instalment of One million Dollars ($1,000,000)) or the equivalent amount in an Optional Currency calculated in accordance with clause 5.7 PROVIDED ALWAYS THAT should the Loan be, for any reason (including enforcement), fully repaid or prepaid, notwithstanding anything to the contrary in this Agreement and in particular the repayment profile provided in this clause 5.1.1 and the provisions of clauses 5.2 and 5.7, the Borrower shall pay to the Bank such an amount and in such currency or, as the case may be, currencies as is necessary to ensure that the Bank receives an amount equal to the Loan in the currencies outstanding immediately prior to the Loan being repaid or prepaid in full and the above repayment profile shall be disregarded for the purposes of such repayment or prepayment. If the Commitment is not drawn in full, the amount of each repayment instalment shall be reduced proportionately
 
5.1.2
The Borrower shall, at any time after the Third Anniversary have the right (subject to paragraphs (a) to (d) below) to request the Bank to defer the payment of up to two non-consecutive repayment instalments payable pursuant to clause 5.1.1 (other than the final instalment) in whole:
 
(a)
such option shall be exercisable by a written notice to the Bank from the Borrower which specifies the instalment to be deferred and which is received by the Bank at least fifteen (15) days before the Repayment Date upon which the relevant instalment falls due;
 
(b)
each such notice shall be irrevocable once given;
 
(c)
upon each occasion that an instalment is deferred pursuant to this proviso, the amount of the balloon repayment shall be increased by the amount of the relevant instalment deferred; and
 
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(d)
such option may only be exercised if (i) the written notice to the Bank has been received within the time period specified in paragraph (a) above and (ii) at the time the relevant notice is received by the Bank no Default has occurred.
 
5.2
Voluntary prepayment
 
The Borrower may prepay the Loan or any Advance thereof in whole or part (being One million Dollars ($1,000,000) or any larger sum which is an integral multiple of One million Dollars ($1,000,000) or, in each case, the equivalent in the relevant Optional Currency) without premium or penalty, on any Interest Payment Date relating to the part of the Loan or as the case may be, an Advance thereof being prepaid together with any amounts payable under clause 12 and accrued interest to the date of prepayment and any other sums then payable under this Agreement and/or the Master Swap Agreement and/or the other Security Documents or any of them in respect of the Loan or an Advance thereof calculated in accordance with clause 5.7.
 
5.3
Master Swap Agreement, Repayments and Prepayments
 
5.3.1
Notwithstanding any provision of the Master Swap Agreement to the contrary, in the case of a prepayment of all or part of the Loan (including, without limit, upon a Total Loss in accordance with clause 5.4 and under clause 9.2) then, subject to clause 5.3.2, the Bank shall be entitled but not obliged (and, where relevant, may do without the consent of the Borrower, where it would otherwise be required whether under the Master Swap Agreement or otherwise) to amend, re-book, supplement, cancel, close out, net out, terminate, liquidate, transfer or assign all or any part of the rights, benefits and obligations created by any Transaction and/or the Master Swap Agreement and/or to obtain or re-establish any hedge or related trading position in any manner and with any person the Bank in its absolute discretion may determine and both the Bank’s and the Borrower’s continuing obligations under any Transaction and/or Master Swap Agreement shall, unless agreed otherwise by the Bank, be calculated so far as the Bank considers it practicable by reference to the amended repayment schedule for the Loan taking into account the fact that less than the full amount of the Loan remains outstanding.
 
5.3.2
If less than the full amount of the Loan remains outstanding, following a prepayment under this Agreement and the Bank in its absolute discretion agrees, following a written request of the Borrower, that the Borrower may be permitted to maintain all or part of a Transaction in an amount not wholly matched with or linked to all or part of the Loan, the Borrower shall within ten (10) days of being notified by the Bank of such requirement, provide the Bank with, or procure the provision to the Bank of, such additional security as shall in the opinion of the Bank be adequate to secure the performance of such Transaction, which additional security shall take such form, be constituted by such documentation and be entered into between such parties, as the Bank in its absolute discretion may approve or require, and each document comprising such additional security shall constitute a Credit Support Document.
 
5.3.3
The Borrower shall on the first written demand of the Bank indemnify the Bank in respect of all losses, costs and expenses (including, but not limited to, legal costs and expenses) incurred or sustained by the Bank as a consequence of or in relation to the effecting of any matter or Transactions referred to in this clause 5.3.
 
5.3.4
Notwithstanding any provision of the Master Swap Agreement to the contrary, if for any reason a Transaction has been entered into but the Loan is not drawn down under this Agreement then, subject to clause 5.3.5 the Bank shall be entitled but not obliged (and, where relevant, may do so without the consent of the Borrower where it would otherwise be required whether under the Master Swap Agreement or otherwise) to amend, re-book, supplement, cancel, close out, net out, terminate, liquidate, transfer or assign all or any part of the rights, benefits and obligations created by such Transaction and/or the Master Swap
 
16

 
Agreement and/or to obtain or re-establish any hedge or related trading position in any manner and with any person the Bank in its absolute discretion may determine.
 
5.3.5
If a Transaction has been entered into but the Loan is not drawn down under this Agreement and the Bank in its absolute discretion agrees, following a written request of the Borrower, that the Borrower may be permitted to maintain all or part of a Transaction, the Borrower shall within ten (10) days of being notified by the Bank of such requirement, provide the Bank with, or procure the provision to the Bank of, such additional security as shall in the opinion of the Bank be adequate to secure the performance of such Transaction, which additional security shall take such form, be constituted by such documentation and be entered into between such parties, as the Bank in its absolute discretion may approve or require, and each document comprising such additional security shall constitute a Credit Support Document for the purposes of the Master Swap Agreement and/or otherwise.
 
5.3.6
Without prejudice to or limitation of the obligations of the Borrower under clause 5.3.3, in the event that the Bank exercises any of its rights under clauses 5.3.1, 5.3.2, 5.3.3 or 5.3.4 and such exercise results in all or part of a Transaction being terminated such Transaction or the part thereof terminated (which shall for the purposes hereof be treated as a separate Transaction) in each case shall be treated under the Master Swap Agreement in the same manner as if it were a Terminated Transaction (as defined in Section 14 of the Master Swap Agreement) pursuant to an Event of Default (as so defined in that Section 14) by the Borrower and, accordingly, the Bank shall be permitted to recover from the Borrower a payment for early termination calculated in accordance with the provisions of section 6(e)(i) of the Master Swap Agreement in respect of such Transaction.
 
5.4
Prepayment on Total Loss
 
On the Ship becoming a Total Loss or suffering damage or being involved in an incident which in the opinion of the Bank may result in the Ship being subsequently determined to be a Total Loss, the obligation of the Bank to advance the Loan shall immediately cease and the Commitment shall be reduced to zero. On the date falling ninety (90) days after that on which the Ship became a Total Loss or, if earlier, on the date upon which the insurance proceeds in respect of such Total Loss are, or Requisition Compensation is, received by the Borrower (or the Bank pursuant to the Security Documents), the Borrower shall prepay the Loan. For the purpose of this Agreement, a Total Loss shall be deemed to have occurred:
 
5.4.1
in the case of an actual total loss of the Ship on the actual date and at the time the Ship was lost or, if such date is not known, on the date on which the Ship was last reported;
 
5.4.2
in the case of a constructive total loss of the Ship, upon the date and at the time notice of abandonment of the Ship is given to the insurers of the Ship for the time being (provided a claim for total loss is admitted by such insurers) or, if such insurers do not forthwith admit such a claim, at the date and at the time at which either a total loss is subsequently admitted by the insurers or a total loss is subsequently adjudged by a competent court of law or arbitration tribunal to have occurred;
 
5.4.3
in the case of a compromised or arranged total loss, on the date upon which a binding agreement as to such compromised or arranged total loss has been entered into by the insurers of the Ship;
 
5.4.4
in the case of Compulsory Acquisition, on the date upon which the relevant requisition of title or other compulsory acquisition occurs; and
 
5.4.5
in the case of hijacking, theft, condemnation, capture, seizure, arrest, detention or confiscation of the Ship (other than where the same amounts to Compulsory Acquisition of
 
17

 
the Ship) by any Government Entity, or by persons purporting to act on behalf of any Government Entity, which deprives the Borrower of the use of the Ship for more than thirty (30) days, upon the expiry of the period of thirty (30) days after the date upon which the relevant hijacking, theft, condemnation, capture, seizure, arrest, detention or confiscation occurred.
 
5.5
Amounts payable on prepayment
 
Any prepayment of all or part of the Loan under this Agreement shall be made together with (a) accrued interest on the amount to be prepaid to the date of such prepayment, (b) any additional amount payable under clauses 7.6 or 13.2 and (c) all others sums payable by the Borrower to the Bank under this Agreement or any of the other Security Documents including, without limitation any accrued commitment commission payable under clause 6.1 and any amounts payable under clause 12.
 
5.6
Notice of prepayment; reduction of repayment instalments
 
No prepayment may be effected under clause 5.2 unless the Borrower shall have given the Bank at least thirty (30) Banking Days notice of its intention to make such prepayment. Every notice of prepayment shall be effective only on actual receipt by the Bank, shall be irrevocable, shall specify the amount to be prepaid and shall oblige the Borrower to make such prepayment on the date specified. No amount prepaid may be reborrowed and any amount prepaid pursuant to clause 5.2 shall be applied in reducing the repayment instalments under clause 5.1 in direct order of their due dates for payment whilst any amount prepaid pursuant to clause 5.8 shall be applied in reducing the repayment instalments under clause 5.1 in inverse order of their due dates for payment and any amount prepaid pursuant to clause 9.2.1 shall be applied in reducing the repayment instalments under clause 5.1 proportionately. The Borrower may not prepay the Loan or any part thereof save as expressly provided in this Agreement.
 
5.7
Currency amounts repayable
 
Save for the proviso of clause 5.1.1, each repayment or partial prepayment of any Advance and/or the Loan under this Agreement shall be made in the currency in which such Advance and/or the Loan was outstanding immediately prior to such repayment or prepayment and shall be in an amount equal to the Equivalent Amount in such currency.
 
5.8
Cash Collateral Deposit Prepayment
 
The Borrower undertakes to the Bank that immediately upon the Manager withdrawing moneys from the Cash Collateral Deposit pursuant to the provisions of clause 9.4, the Borrower shall prepay an amount of the Loan outstanding at the time of such withdrawal equal to the amount withdrawn by the Manager from the Cash Collateral Account.
 
6
Commitment commission, fees and expenses
 
6.1
Fees
 
The Borrower shall pay to the Bank:
 
6.1.1
a total fee of Thirty six thousand Dollars ($36,000) on the date of this Agreement; and
 
6.1.2
a commitment commission computed (a) from 1 June 2006 until 23 November 2006 at the rate of 0.15% per annum on the amount of $27,000,000 and (b) from 24 November 2006 until the earlier of (i) the Drawdown Date and (ii) the Termination Date at the rate of 0.15% per annum on the daily undrawn amount of the Commitment and in each case payable quarterly.
 
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The fee referred to in clause 6.1.1 and the commitment commission referred to in clause 6.1.2 shall be payable by the Borrower to the Bank, whether or not any part of the Commitment is ever advanced and shall, in either case, be non-refundable.
 
6.2
Expenses
 
The Borrower shall pay to the Bank on a full indemnity basis on demand all expenses (including legal, printing and out-of-pocket expenses) incurred by the Bank:
 
6.2.1
in connection with the negotiation, preparation, execution and, where relevant, registration of the Security Documents and of any amendment or extension of or the granting of any waiver or consent under, any of the Security Documents (including, for the avoidance of doubt, the Master Swap Agreement); and
 
6.2.2
in contemplation of, or otherwise in connection with, the enforcement of, or preservation of any rights under, any of the Security Documents (including, for the avoidance of doubt, the Master Swap Agreement), or otherwise in respect of the moneys owing under any of the Security Documents (including, for the avoidance of doubt, the Master Swap Agreement), together with interest at the rate referred to in clause 3.4 from the date on which such expenses were incurred to the date of payment (as well after as before judgment).
 
6.3
Value Added Tax
 
All fees and expenses payable pursuant to this clause 6 shall be paid together with value added tax or any similar tax (if any) properly chargeable thereon. Any value added tax chargeable in respect of any services supplied by the Bank under this Agreement shall, on delivery of the value added tax invoice, be paid in addition to any sum agreed to be paid hereunder.
 
6.4
Stamp and other duties
 
The Borrower shall pay all stamp, documentary, registration or other like duties or taxes (including any duties or taxes payable by the Bank) imposed on or in connection with any of the Management Agreement, the Security Documents (including, for the avoidance of doubt, the Master Swap Agreement), or the Loan and shall indemnify the Bank against any liability arising by reason of any delay or omission by the Borrower to pay such duties or taxes.
 
7
Payments and taxes; accounts and calculations
 
7.1
No set-off or counterclaim
 
Subject to paragraph (i) of Part 5 of the Schedule to the Master Swap Agreement, all payments to be made by the Borrower under any of the Security Documents shall be made in full, without any set-off or counterclaim whatsoever and, subject as provided in clause 7.6, free and clear of any deductions or withholdings, in Dollars or the relevant Optional Currency on the due date (for value on the day on which payment is due) to such account at such bank in such place as the Bank may from time to time specify for this purpose.
 
7.2
Payment by the Bank
 
All sums to be advanced on the Drawdown Date by the Bank to the Borrower under this Agreement shall be remitted in Dollars or the relevant Optional Currency to the account of the Borrower specified in the Drawdown Notice.
 
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7.3
Non-Banking Days
 
When any payment under any of the Security Documents would otherwise be due on a day which is not a Banking Day, the due date for payment shall be extended to the next following Banking Day unless such Banking Day falls in the next calendar month in which case payment shall be made on the immediately preceding Banking Day.
 
7.4
Calculations
 
All payments of interest in respect of the Loan and/or any Advance shall be made in the currency in which the Loan and/or such Advance is outstanding at the relevant time. All interest and other payments of an annual nature under any of the Security Documents shall accrue from day to day and be calculated on the basis of actual days elapsed and a 360 day year except for any part of the Loan denominated in Sterling where a 365 day year shall apply.
 
7.5
Certificates conclusive
 
Any certificate or determination of the Bank as to any rate of interest or any other amount pursuant to and for the purposes of any of the Security Documents shall, in the absence of manifest error, be conclusive and binding on the Borrower.
 
7.6
Grossing-up for Taxes
 
If at any time the Borrower is required to make any deduction or withholding in respect of Taxes from any payment due under any of the Security Documents, the sum due from the Borrower in respect of such payment shall be increased to the extent necessary to ensure that, after the making of such deduction or withholding, the Bank receives on the due date for such payment (and retains, free from any liability in respect of such deduction or withholding), a net sum equal to the sum which it would have received had no such deduction or withholding been required to be made and the Borrower shall indemnify the Bank against any losses or costs incurred by it by reason of any failure of the Borrower to make any such deduction or withholding or by reason of any increased payment not being made on the due date for such payment. The Borrower shall promptly deliver to the Bank any receipts, certificates or other proof evidencing the amounts (if any) paid or payable in respect of any deduction or withholding as aforesaid.
 
7.7
Loan account
 
The Bank shall maintain, in accordance with its usual practice, an account (which shall be the “Account Current” referred to in the Mortgage) evidencing the amounts from time to time lent by, owing to and paid to it under the Security Documents. Such account shall, in the absence of manifest error, be conclusive as to the amount from time to time owing by the Borrower under the Security Documents.
 
8
Representations and warranties
 
8.1
Continuing representations and warranties
 
The Borrower represents and warrants to the Bank that:
 
8.1.1
Due incorporation
 
the Borrower and each of the other Security Parties are duly incorporated and validly existing in good standing under the laws of their respective countries of incorporation, in the case of the Borrower as a Liberian corporation and in the case of the other Security Parties as
 
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companies having limited liability and have power to carry on their respective businesses as they are now being conducted and to own their respective property and other assets;
 
8.1.2
Corporate power
 
the Borrower has power to execute, deliver and perform its obligations under the Management Agreement and the Borrower’s Security Documents and to borrow the Commitment and each of the other Security Parties has power to execute and deliver and perform its obligations under the Security Documents to which it is or is to be a party; all necessary corporate, shareholder and other action has been taken to authorise the execution, delivery and performance of the same and no limitation on the powers of the Borrower to borrow will be exceeded as a result of borrowing the Loan;
 
8.1.3
Binding obligations
 
the Security Documents constitute or will, when executed, constitute valid and legally binding obligations of the relevant Security Parties enforceable in accordance with their respective terms;
 
8.1.4
No conflict with other obligations
 
the execution and delivery of, the performance of its obligations under, and compliance with the provisions of, the Management Agreement and the Security Documents by the relevant Security Parties will not (i) contravene any existing applicable law, statute, rule or regulation or any judgment, decree or permit to which the Borrower or any other Security Party is subject, (ii) conflict with, or result in any breach of any of the terms of, or constitute a default under, any agreement or other instrument to which the Borrower or any other Security Party is a party or is subject or by which it or any of its property is bound, (iii) contravene or conflict with any provision of the constitutional documents of the Borrower or any other Security Party or (iv) result in the creation or imposition of or oblige the Borrower or any of its Related Companies or any other Security Party to create any Encumbrance (other than a Permitted Encumbrance) on any of the undertakings, assets, rights or revenues of the Borrower or its Related Companies or any other Security Party;
 
8.1.5
No litigation
 
no litigation, arbitration or administrative proceeding is taking place, pending or, to the knowledge of the officers of the Borrower, threatened against the Borrower or any of its Related Companies or any other Security Party which could have a material adverse effect on the business, assets or financial condition of the Borrower or any of its Related Companies or any other Security Party;
 
8.1.6
No filings required
 
save for the registration of the Mortgage and the Deed of Covenant in the Ships Registry of the Republic of Cyprus it is not necessary to ensure the legality, validity, enforceability or admissibility in evidence of the Management Agreement or any of the Security Documents that they or any other instrument be notarised, filed, recorded, registered or enrolled in any court, public office or elsewhere in any Relevant Jurisdiction or that any stamp, registration or similar tax or charge be paid in any Relevant Jurisdiction on or in relation to the Management Agreement and the Security Documents, and each of the Management Agreement and the Security Documents is in proper form for its enforcement in the courts of each Relevant Jurisdiction;
 
8.1.7
Choice of law
 
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the choice of English law to govern the Management Agreement and the Security Documents (other than the Mortgage, the Deed of Covenant and the Account Pledges) and the choice of (i) Cypriot law to govern the Mortgage and the Deed of Covenant and (ii) Greek law to govern each of the Account Pledges and the submissions by the Security Parties to the non-exclusive jurisdiction of the English courts are valid and binding;
 
8.1.8
No immunity
 
neither the Borrower nor any other Security Party nor any of their respective assets is entitled to immunity on the grounds of sovereignty or otherwise from any legal action or proceeding (which shall include, without limitation, suit, attachment prior to judgement, execution or other enforcement); and
 
8.1.9
Consents obtained
 
every consent, authorisation, licence or approval of, or registration with or declaration to, governmental or public bodies or authorities or courts required by any Security Party to authorise, or required by any Security Party in connection with, the execution, delivery, validity, enforceability or admissibility in evidence of the Management Agreement and each of the Security Documents or the performance by each Security Party of its obligations under the Security Documents has been obtained or made and is in full force and effect and there has been no default in the observance of any of the conditions or restrictions (if any) imposed in, or in connection with, any of the same.
 
8.2
Initial representations and warranties
 
The Borrower further represents and warrants to the Bank that:
 
8.2.1
Pari passu
 
the obligations of the Borrower under this Agreement and the Master Swap Agreement are direct, general and unconditional obligations of the Borrower and rank at least pari passu with all other present and future unsecured and unsubordinated Indebtedness of the Borrower;
 
8.2.2
No default under other Indebtedness
 
neither the Borrower nor any of its Related Companies nor any other Security Party is (nor would with the giving of notice or lapse of time or the satisfaction of any other condition or combination thereof be) in breach of or in default under any agreement relating to Indebtedness to which it is a party or by which it may be bound;
 
8.2.3
Information
 
the information, exhibits and reports furnished by any Security Party to the Bank in connection with the negotiation and preparation of the Security Documents are true and accurate in all material respects and not misleading, do not omit material facts and all reasonable enquiries have been made to verify the facts and statements contained therein; there are no other facts the omission of which would make any fact or statement therein misleading;
 
8.2.4
No withholding Taxes
 
no Taxes are imposed by withholding or otherwise on any payment to be made by any Security Party under the Management Agreement or the Security Documents or are imposed on or by virtue of the execution or delivery by the Security Parties of the Management
 
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Agreement or the Security Documents or any other document or instrument to be executed or delivered under any of the Security Documents;
 
8.2.5
No Default
 
no Default has occurred and is continuing;
 
8.2.6
the Ship
 
the Ship will on the Drawdown Date be:
 
(a)
in the absolute ownership of the Borrower who will on and after the Drawdown Date be the sole, legal and beneficial owner of the Ship;
 
(b)
registered in the name of the Borrower through the Registry as a ship under the laws and flag of the Flag State;
 
(c)
operationally seaworthy and in every way fit for service; and
 
(d)
classed with the Classification free of all requirements and recommendations of the Classification Society;
 
8.2.7
Ship’s employment
 
the Ship is not and will not on or before the Drawdown Date be subject to any charter or contract or to any agreement to enter into any charter or contract which, if entered into after the date of the Deed of Covenant would have required the consent of the Bank and on or before the Drawdown Date there will not be any agreement or arrangement whereby the Earnings (as defined in the General Assignment) may be shared with any other person;
 
8.2.8
Freedom from Encumbrances
 
neither the Ship, nor her Earnings, Insurances or Requisition Compensation (each as defined in the General Assignment) nor the Accounts nor any other properties or rights which are, or are to be, the subject of any of the Security Documents nor any part thereof will be, on the Drawdown Date, subject to any Encumbrance;
 
8.2.9
Compliance with Environmental Laws and Approvals
 
except as may already have been disclosed by the Borrower in writing to, and acknowledged in writing by, the Bank:
 
(a)
the Borrower and to the best of the Borrower’s knowledge and belief (having made due enquiry) its Environmental Affiliates have complied with the provisions of all Environmental Laws;
 
(b)
the Borrower and to the best of the Borrower’s knowledge and belief (having made due enquiry) its Environmental Affiliates have obtained all Environmental Approvals and are in compliance with all such Environmental Approvals; and
 
(c)
neither the Borrower nor to the best of the Borrower’s knowledge and belief (having made due enquiry) any of its Environmental Affiliates has received notice of any Environmental Claim that the Borrower or any such Environmental Affiliate is not in compliance with any Environmental Law or any Environmental Approval;
 
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8.2.10
No Environmental Claims
 
except as may already have been disclosed by the Borrower in writing to, and acknowledged in writing by, the Bank, there is no Environmental Claim pending or, to the best of the Borrower’s knowledge and belief, threatened against the Borrower or the Ship or to the best of the Borrower’s knowledge and belief (having made due enquiry) any of its Environmental Affiliates;
 
8.2.11
No potential Environmental Claims
 
except as may already have been disclosed by the Borrower in writing to, and acknowledged in writing by, the Bank, there has been no emission, spill, release or discharge of a Pollutant from the Ship which could give rise to an Environmental Claim;
 
8.2.12
No material adverse change
 
there has been no material adverse change in the financial position of the Borrower or the Manager from that described by the Borrower to the Bank in the negotiation of this Agreement;
 
8.2.13
ISPS Code
 
As of the date of this Agreement, the Borrower shall have a valid and current ISSC in respect of the Ship and the Ship shall be in compliance with the ISPS Code; and
 
8.2.14
Copies true and complete
 
the copy of the Management Agreement delivered or to be delivered to the Bank pursuant to clause 10.1, is or will when delivered be, a true and complete copy of such document; such document will when delivered constitute valid and binding obligations of the parties thereto enforceable in accordance with its terms and there will have been no amendments or variations thereof or defaults thereunder.
 
8.3
Repetition of representations and warranties
 
On and as of the Drawdown Date and (except in relation to the representations and warranties in clause 8.2) on each Interest Payment Date the Borrower shall be deemed to repeat the representations and warranties in clauses 8.1 and 8.2 as if made with reference to the facts and circumstances existing on such day.
 
9
Undertakings
 
9.1
General
 
The Borrower undertakes with the Bank that, from the date of this Agreement and so long as any moneys are owing under any of the Security Documents and while all or any part of the Commitment remains outstanding, it will:
 
9.1.1
Notice of Default
 
promptly inform the Bank of any occurrence of which it becomes aware which might adversely affect the ability of any Security Party to perform its obligations under any of the Security Documents and, without limiting the generality of the foregoing, will inform the Bank of any Default forthwith upon becoming aware thereof and will from time to time, if so
 
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requested by the Bank, confirm to the Bank in writing that, save as otherwise stated in such confirmation, no Default has occurred and is continuing;
 
9.1.2
Consents and licences
 
without prejudice to clauses 8.1 and 10 obtain or cause to be obtained, maintain in full force and effect and comply in all material respects with the conditions and restrictions (if any) imposed in, or in connection with, every consent, authorisation, licence or approval of governmental or public bodies or authorities or courts and do, or cause to be done, all other acts and things which may from time to time be necessary or desirable under applicable law for the continued due performance of all the obligations of the Security Parties under each of the Security Documents;
 
9.1.3
Use of proceeds
 
use the Loan for its own benefit and under its full responsibility and exclusively for the purpose specified in clause 1.1;
 
9.1.4
Pari passu
 
ensure that its obligations under this Agreement and the Master Swap Agreement shall, without prejudice to the provisions of clause 10.2, at all times rank at least pari passu with all its other present and future unsecured and unsubordinated Indebtedness with the exception of any obligations which are mandatorily preferred by law and not by contract;
 
9.1.5
Financial statements
 
provide the Bank, within ninety (90) days of the last day of each calendar year, with unaudited management accounts for the Ship showing the income and expenditure of the Ship for such calendar year, the first such management accounts to be provided by end of March 2007 for the calendar year 2006;
 
9.1.6
Delivery of reports
 
deliver to the Bank as many copies as the Bank may reasonably require of every report, circular, notice or like document issued by the Borrower or the Manager to their respective shareholders or creditors generally;
 
9.1.7
Provision of further information
 
provide the Bank with such financial and other information concerning the Borrower and its affairs as the Bank may from time to time reasonably require;
 
9.1.8
Obligations under Security Documents
 
duly and punctually perform each of the obligations expressed to be assumed by it under the Borrower’s Security Documents;
 
9.1.9
Compliance with Code
 
procure that the Manager and/or any Operator complies with and ensures that the Ship complies with the requirements of the Code, including (but not limited to) the maintenance and renewal of valid certificates pursuant thereto throughout the Security Period (as defined in the Deed of Covenant);
 
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9.1.10
Withdrawal of DOC and SMC
 
procure that the Manager and/or any Operator will, immediately inform the Bank if there is any threatened or actual withdrawal of the Manager’s or Operator’s DOC or the SMC in respect of the Ship;
 
9.1.11
Issuance of DOC and SMC
 
procure that the Manager and/or any Operator will, promptly inform the Bank upon the issuance to the Manager or any Operator of a DOC and to the Ship of an SMC or the receipt by the Manager or any Operator of notification that its application for the same has been refused.
 
9.1.12
ISPS Code compliance
 
and will procure that the Manager or any Operator will, with effect on and from the date of this Agreement:
 
(a)
maintain at all times a valid and current ISSC in respect of the Ship;
 
(b)
immediately notify the Bank in writing of any actual or threatened withdrawal, suspension, cancellation or modification of the ISSC in respect of the Ship; and
 
(c)
procure that the Ship will comply at all times with the ISPS Code;
 
9.1.13
Employment
 
(a)
advise the Bank of any contract of employment for the Ship which is of a duration of more than twelve (12) months;
 
(b)
deliver to the Bank a copy of any Charter entered into;
 
(c)
(1) execute a Charter Assignment in respect of any Charter and (2) execute any notice of assignment required in connection therewith and promptly procure the acknowledgement of any such notice of assignment by the relevant Charterer; and
 
(d)
pay all legal and other costs incurred by the Bank in connection with any such Charter Assignment;
 
9.1.14
Banking operations
 
and will ensure that income in connection with the Ship will be deposited in the Operating Account; and
 
9.1.15
Know your customer information
 
provide the Bank with information concerning the corporate structure and financial affairs of the Borrower as the Bank may reasonably require.
 
9.2
Security value maintenance
 
9.2.1
Security shortfall
 
If at any time the Security Value shall be less than the Security Requirement, the Bank may give notice to the Borrower requiring that such deficiency be remedied and then the Borrower
 
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shall (unless the Ship has become a Total Loss) within a period of fifteen (15) days of the date of receipt by the Borrower of the Bank’s said notice either:
 
(a)
prepay such sum in Dollars as will result in the Security Requirement after such prepayment (taking into account any other repayment of the Loan made between the date of the notice and the date of such prepayment) being equal to the Security Value; or
 
(b)
constitute to the satisfaction of the Bank such further security for the Loan as shall be acceptable to the Bank having a value for security purposes (as determined by the Bank in its absolute discretion) at the date upon which such further security shall be constituted which, when added to the Security Value, shall not be less than the Security Requirement as at such date.
 
Clause 5.5 shall apply to prepayments under clause 9.2.1(a).
 
9.2.2
Valuation of Ship
 
The Ship shall at the discretion of the Bank from time to time, for the purposes of this clause 9.2, be valued in Dollars by an independent firm of shipbrokers appointed by the Bank in its sole discretion (each such valuation to be made without, unless required by the Bank, physical inspection and on the basis of a sale for prompt delivery for cash at arms length on normal commercial terms as between a willing buyer and a willing seller without taking into account the benefit of any charterparty or other engagement concerning the Ship). Such valuation shall constitute the value of the Ship for the purposes of this clause 9.2.
 
The value of the Ship determined in accordance with the provisions of this clause 9.2 shall be binding upon the parties hereto until such time as any further such valuations shall be obtained.
 
9.2.3
Information
 
The Borrower undertakes to the Bank to supply to the Bank and to any such shipbrokers such information concerning the Ship and its condition as such shipbrokers may reasonably require for the purpose of making any such valuation.
 
9.2.4
Costs
 
All costs in connection with the Bank obtaining any valuation of the Ship twice per calendar year and any valuation either of any additional security for the purposes of ascertaining the Security Value at any time or necessitated by the Borrower electing to constitute additional security pursuant to clause 9.2.1(b) twice per calendar year, shall be borne by the Borrower. Also the cost of additional valuations of the Ship shall be for the account of the Borrower, whilst an Event of Default has occurred and is continuing.
 
9.2.5
Valuation of additional security
 
For the purpose of this clause 9.2, the value of any additional security provided or to be provided to the Bank shall be determined by the Bank in its absolute discretion without any necessity for the Bank assigning any reason thereto.
 
9.2.6
Documents and evidence
 
In connection with any additional security provided in accordance with this clause 9.2, the Bank shall be entitled to receive such evidence and documents of the kind referred to in
 
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schedule 2 as may in the Bank’s opinion be appropriate and such favourable legal opinions as the Bank shall in its absolute discretion require.
 
9.2.7
Security release
 
If the Security Value:
 
(a)
at any time during the period commencing on the date of this Agreement and ending on the Third Anniversary, exceeds one hundred and ten per cent (110%) of the aggregate of (i) the Loan (or the Equivalent Amount in Dollars when the Loan or part thereof is denominated in one or more Optional Currencies) and (ii) the cost (if any) (as certified by the Bank whose certificate shall in the absence of manifest error, be binding on the Borrower) of terminating any Transaction entered into pursuant to the Master Agreement; and
 
(b)
at any time after the Third Anniversary, exceeds one hundred and twenty per cent (120%) of the aggregate of (i) the Loan (or the Equivalent Amount in Dollars when the Loan or part thereof is denominated in one or more Optional Currencies) and (ii) the cost (if any) (as certified by the Bank whose certificate shall in the absence of manifest error, be binding on the Borrower) of terminating any Transaction entered into pursuant to the Master Agreement,
 
and the Borrower shall previously have provided further security to the Bank pursuant to clause 9.2.1(b) then the Bank shall, as soon as reasonably practicable after receiving a written request from the Borrower to do so and subject to being indemnified to its satisfaction against the cost of doing so, release any such further security specified by the Borrower provided that the Bank is satisfied that, immediately following such release, the Security Value will be equal to or in excess of the Security Requirement.
 
9.3
Negative undertakings
 
The Borrower undertakes with the Bank that, from the date of this Agreement and so long as any moneys are owing under the Security Documents and while all or any part of the Commitment remains outstanding, it will not, without the prior written consent of the Bank:
 
9.3.1
Negative pledge
 
permit any Encumbrance (other than a Permitted Encumbrance) to subsist, arise or be created or extended over all or any part of its present or future undertakings, assets, rights or revenues (including, but not limited to the Borrower’s rights against the Bank under any Transaction and/or the Master Swap Agreement or all or part of the Borrower’s interest in any amounts payable to the Borrower by the Bank under such Transaction and/or the Master Swap Agreement) to secure or prefer any present or future Indebtedness or other liability or obligation of the Borrower or any other person;
 
9.3.2
No merger
 
merge or consolidate with any other person or enter into any demerger, amalgamation, restructuring or redomiciliation of any kind whatsoever;
 
9.3.3
Disposals
 
sell, transfer, abandon, lend or otherwise dispose of or cease to exercise direct control over any part (being either alone or when aggregated with all other disposals falling to be taken into account pursuant to this clause 9.3.3 material in the opinion of the Bank in relation to the
 
28

 
undertakings, assets, rights and revenues of the Borrower) of its present or future undertaking, assets, rights or revenues whether by one or a series of transactions related or not;
 
9.3.4
Other business
 
undertake any business other than the ownership and operation of the Ship and the chartering of the Ship to third parties;
 
9.3.5
Acquisitions
 
acquire any further assets other than the Ship and rights arising under contracts entered into by or on behalf of the Borrower in the ordinary course of its business of owning, operating and chartering the Ship;
 
9.3.6
Other obligations
 
incur any obligations except for obligations arising under the Management Agreement or the Security Documents or contracts entered into in the ordinary course of its business of owning, operating and chartering the Ship;
 
9.3.7
No borrowing
 
incur any Borrowed Money except for Borrowed Money pursuant to the Security Documents;
 
9.3.8
Repayment of borrowings
 
repay the principal of, or pay interest on or any other sum in connection with any of its Borrowed Money except for Borrowed Money pursuant to the Security Documents;
 
9.3.9
Guarantees
 
issue any guarantees or indemnities or otherwise become directly or contingently liable for the obligations of any person, firm, or corporation except pursuant to the Security Documents and except for guarantees or indemnities from time to time required in the ordinary course by any protection and indemnity or war risks association with which the Ship is entered, guarantees required to procure the release of such Ship from any arrest, detention, attachment or levy or guarantees or undertakings required for the salvage of the Ship;
 
9.3.10
Loans
 
make any loans or grant any credit (save for normal trade credit in the ordinary course of business) to any person or agree to do so;
 
9.3.11
Sureties
 
permit any Indebtedness of the Borrower to any person (other than the Bank) to be guaranteed by any person (save for guarantees or indemnities from time to time required in the ordinary course by any protection and indemnity or war risks association with which the Ship is entered, guarantees required to procure the release of the Ship from any arrest, detention, attachment or levy or guarantees or undertakings required for the salvage of the Ship);
 
9.3.12
Share capital and distribution
 
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purchase or otherwise acquire for value any shares of its capital or distribute any of its present or future assets, undertakings, rights or revenues to any of its shareholders provided however that, notwithstanding the provisions of this clause 9.3.12, the Borrower shall have the right to declare or pay cash dividends as long as no Event of Default has occurred and is continuing nor will an Event of Default occur because of such declaration or payment;
 
9.3.13
Shareholding and structure
 
permit any change in (a) the ultimate ownership of the shares in the Borrower and the Manager from that described to the Bank during the negotiation of this Agreement and (b) the corporate or legal or business structure of the Borrower and the Manager from that described to the Bank by the Borrower in the negotiation of this Agreement;
 
9.3.14
Subsidiaries
 
form or acquire any Subsidiaries;
 
9.3.15
Manager
 
appoint any manager of the Ship other than the Manager; and
 
9.3.16
Constitutional documents
 
make any change to its constitutional documents.
 
9.4
Cash Collateral Account Balance
 
The Borrower undertakes to procure that the Manager will deposit, on the date of this Agreement in the Cash Collateral Account, the Cash Collateral Deposit and maintain the same until the Third Anniversary following which, the Manager, only once per calendar year and only on an Interest Payment Date, shall be entitled to withdraw from the Cash Collateral Account such amount that following the said withdrawal the balance of the Cash Collateral Account shall be equal to the applicable fraction of the Cash Collateral Deposit (and for the purposes of this clause the expression “applicable fraction” means a fraction having as numerator the Equivalent Amount in Dollars of the Loan prior to such withdrawal and as denominator the original Dollar Amount of the Loan).
 
10
Conditions
 
10.1
Documents and evidence
 
The obligation of the Bank to make the Commitment available shall be subject to the condition that:
 
10.1.1
the Bank, or its duly authorised representative, shall have received, not later than two (2) Banking Days before the day on which the Drawdown Notice is given, the documents and evidence specified in Part 1 of schedule 2 in form and substance satisfactory to the Bank; and
 
10.1.2
the Bank, or its duly authorised representative, shall have received, on or prior to the Drawdown Date, the documents and evidence specified in Part 2 of schedule 2 in form and substance satisfactory to the Bank.
 
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10.2
General conditions precedent
 
The obligation of the Bank to make the Loan shall be subject to the further condition that, at the time of the giving of the Drawdown Notice, and at the time of the making of the Loan:
 
10.2.1
the representations and warranties contained in clauses 8.1 and 8.2 are true and correct on and as of each such time as if each was made with respect to the facts and circumstances existing at such time; and
 
10.2.2
no Default shall have occurred and be continuing or would result from the making of the Loan.
 
10.3
Waiver of conditions precedent
 
The conditions specified in this clause 10 are inserted solely for the benefit of the Bank and may be waived by the Bank in whole or in part and with or without conditions.
 
10.4
Further conditions precedent
 
Not later than five (5) Banking Days prior to the Drawdown Date and not later than five (5) Banking Days prior to each Interest Payment Date, the Bank may request and the Borrower shall, not later than two (2) Banking Days prior to such date, deliver to the Bank on such request further favourable certificates and/or opinions as to any or all of the matters which are the subject of clauses 8, 9, 10 and 11;
 
11
Events of Default
 
11.1
Events
 
There shall be an Event of Default if:
 
11.1.1
Non-payment: any Security Party fails to pay any sum payable by it under any of the Security Documents at the time, in the currency and in the manner stipulated in the Security Documents (and so that, for this purpose, sums payable on demand shall be treated as having been paid at the stipulated time if paid within three (3) Banking Days of demand); or
 
11.1.2
Master Swap Agreement: (i) an Event of Default or Potential Event of Default (in each case as defined in the Master Swap Agreement) has occurred and is continuing under the Master Swap Agreement or (ii) an Early Termination Date (as defined in the Master Swap Agreement) has occurred or been or become capable of being effectively designated under the Master Swap Agreement or (iii) a person entitled to do so gives notice of an Early Termination Date under section 6(b)(iv) of the Master Swap Agreement or (iv) the Master Swap Agreement is terminated, cancelled, suspended, rescinded or revoked or otherwise ceases to remain in full force and effect for any reason; or
 
11.1.3
Breach of Insurance and certain other obligations: the Borrower fails to obtain and/or maintain the Insurances (as defined in, and in accordance with the requirements of, the Security Documents) or if any insurer in respect of such Insurances cancels the Insurances or disclaims liability by reason, in either case, of mis-statement in any proposal for the Insurances or for any other failure or default on the part of the Borrower or any other person or the Borrower commits any breach of or omits to observe any of the obligations or undertakings expressed to be assumed by it under clauses 9.2, 9.3 or 9.4; or
 
11.1.4
Breach of other obligations: any Security Party commits any breach of or omits to observe any of its obligations or undertakings expressed to be assumed by it under any of the
 
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Security Documents (other than those referred to in clauses 11.1.1, 11.1.2 and 11.1.3 above) and, in respect of any such breach or omission which in the opinion of the Bank is capable of remedy, such action as the Bank may require shall not have been taken within fourteen (14) days of the Bank notifying the relevant Security Party of such default and of such required action; or
 
11.1.5
Misrepresentation: any representation or warranty made or deemed to be made or repeated by or in respect of any Security Party in or pursuant to any of the Security Documents or in any notice, certificate or statement referred to in or delivered under any of the Security Documents is or proves to have been incorrect or misleading in any material respect; or
 
11.1.6
Cross-default: any Indebtedness of the Borrower is not paid when due or any Indebtedness of the Borrower becomes (whether by declaration or automatically in accordance with the relevant agreement or instrument constituting the same) due and payable prior to the date when it would otherwise have become due (unless as a result of the exercise by the Borrower of a voluntary right of prepayment) or any creditor of the Borrower becomes entitled to declare any such Indebtedness due and payable or any facility or commitment available to the Borrower relating to Indebtedness is withdrawn, suspended or cancelled by reason of any default (however described) of the person concerned unless the Borrower shall have satisfied the Bank that such withdrawal, suspension or cancellation will not affect or prejudice in any way the Borrower’s ability to pay its debts as they fall due and fund its commitments, or any guarantee given by any Security Party in respect of Indebtedness is not honoured when due and called upon; or
 
11.1.7
Legal process: any judgment or order made against the Borrower is not stayed or complied with within seven (7) days or a creditor attaches or takes possession of, or a distress, execution, sequestration or other process is levied or enforced upon or sued out against, any of the undertakings, assets, rights or revenues of the Borrower and is not discharged within seven (7) days; or
 
11.1.8
Insolvency: the Borrower is unable or admits inability to pay its debts as they fall due; suspends making payments on any of its debts or announces an intention to do so; becomes insolvent; has assets the value of which is less than the value of its liabilities (taking into account contingent and prospective liabilities); or suffers the declaration of a moratorium in respect of any of its Indebtedness; or
 
11.1.9
Reduction or loss of capital: a meeting is convened by the Borrower for the purpose of passing any resolution to purchase, reduce or redeem any of its share capital; or
 
11.1.10
Winding up: any corporate action, legal proceedings or other procedure or step is taken for the purpose of winding up or an order is made or resolution passed for the winding up of the Borrower or a notice is issued convening a meeting for the purpose of passing any such resolution; or
 
11.1.11
Administration: any petition is presented, notice is given or other step is taken for the purpose of the appointment of an administrator of the Borrower or the Bank believes that any such petition or other step is imminent or an administration order is made in relation to the Borrower; or
 
11.1.12
Appointment of receivers and managers: any administrative or other receiver is appointed of the Borrower or any part of its assets and/or undertaking or any other steps are taken to enforce any Encumbrance over all or any part of the assets of the Borrower; or
 
11.1.13
Compositions: any corporate action, legal proceedings or other procedures or steps are taken, or negotiations commenced, by the Borrower or by any of its creditors with a view to
 
32

 
the general readjustment or rescheduling of all or part of its Indebtedness or to proposing any kind of composition, compromise or arrangement involving such company and any of its creditors; or
 
11.1.14
Analogous proceedings: there occurs, in relation to the Borrower, in any country or territory in which it carries on business or to the jurisdiction of whose courts any part of its assets is subject, any event which, in the reasonable opinion of the Bank, appears in that country or territory to correspond with, or have an effect equivalent or similar to, any of those mentioned in clauses 11.1.7 to 11.1.13 (inclusive) or any Security Party otherwise becomes subject, in any such country or territory, to the operation of any law relating to insolvency, bankruptcy or liquidation; or
 
11.1.15
Cessation of business: the Borrower suspends or ceases or threatens to suspend or cease to carry on its business; or
 
11.1.16
Seizure: all or a material part of the undertaking, assets, rights or revenues of, or shares or other ownership interests in, the Borrower are seized, nationalised, expropriated or compulsorily acquired by or under the authority of any government; or
 
11.1.17
Invalidity: any of the Security Documents shall at any time and for any reason become invalid or unenforceable or otherwise cease to remain in full force and effect, or if the validity or enforceability of any of the Security Documents shall at any time and for any reason be contested by any Security Party which is a party thereto, or if any such Security Party shall deny that it has any, or any further, liability thereunder; or
 
11.1.18
Unlawfulness: it becomes impossible or unlawful at any time for any Security Party, to fulfil any of the covenants and obligations expressed to be assumed by it in any of the Security Documents or for the Bank to exercise the rights or any of them vested in it under any of the Security Documents or otherwise; or
 
11.1.19
Repudiation: any Security Party repudiates any of the Security Documents or does or causes or permits to be done any act or thing evidencing an intention to repudiate any of the Security Documents; or
 
11.1.20
Encumbrances enforceable: any Encumbrance (other than Permitted Liens) in respect of any of the property (or part thereof) which is the subject of any of the Security Documents becomes enforceable; or
 
11.1.21
Material adverse change: there occurs, in the opinion of the Bank, a material adverse change in the financial condition of the Borrower by reference to the financial position of the Borrower as described by the Borrower to the Bank in the negotiation of this Agreement; or
 
11.1.22
Arrest: the Ship is arrested, confiscated, seized, taken in execution, impounded, forfeited, detained in exercise or purported exercise of any possessory lien or other claim or otherwise taken from the possession of the Borrower and the Borrower shall fail to procure the release of the Ship within a period of fourteen (14) days thereafter; or
 
11.1.23
Registration: the registration of the Ship under the laws and flag of the Flag State is canceled or terminated without the prior written consent of the Bank; or
 
11.1.24
Unrest: the Flag State becomes involved in hostilities or civil war or there is a seizure of power in the Flag State by unconstitutional means if, in any such case, such event could in the opinion of the Bank reasonably be expected to have a material adverse effect on the security constituted by any of the Security Documents; or
 
33

 
11.1.25
Environment: the Borrower and/or any of its Environmental Affiliates fails to comply with any Environmental Law or any Environmental Approval or the Ship is involved in any incident which gives rise or may give rise to an Environmental Claim if, in any such case, such non-compliance or incident or the consequences thereof could, in the opinion of the Bank, reasonably be expected to have a material adverse effect on the business, assets, operations, property or financial condition of the Borrower or any other Security Party or on the security constituted by any of the Security Documents; or
 
11.1.26
P&I: the Borrower or any other person fails or omits to comply with any requirements of the protection and indemnity association or other insurer with which the Ship is entered for insurance or insured against protection and indemnity risks (including oil pollution risks) to the effect that any cover (including, without limitation, any cover in respect of liability for Environmental Claims arising in jurisdictions where the Ship operates or trades) is or may be liable to cancellation, qualification or exclusion at any time; or
 
11.1.27
Ownership: there is any change in the ultimate ownership of the shares in the Borrower or the Manager from that described to the Bank in the negotiation of this Agreement; or
 
11.1.28
Material events: any other event occurs or circumstance arises which, in the opinion of the Bank, is likely materially and adversely to affect either (i) the ability of any Security Party to perform all or any of its obligations under or otherwise to comply with the terms of any of the Security Documents (including, for the avoidance of doubt,) the Master Swap Agreement) or (ii) the security created by any of the Security Documents.
 
11.2
Acceleration
 
The Bank may, without prejudice to any other rights of the Bank, at any time after the happening of an Event of Default so long as the same is continuing by notice to the Borrower declare that:
 
11.2.1
the obligation of the Bank to make the Commitment available shall be terminated, whereupon the Commitment shall be reduced to zero forthwith; and/or
 
11.2.2
the Loan and all interest and commitment commission accrued and all other sums payable under the Security Documents have become due and payable, whereupon the same shall, immediately or in accordance with the terms of such notice, become due and payable.
 
11.3
Demand basis
 
If, pursuant to clause 11.2.2, the Bank declares the Loan to be due and payable on demand, the Bank may by written notice to the Borrower (a) call for repayment of the Loan on such date as may be specified whereupon the Loan shall become due and payable on the date so specified together with all interest and commitment commission accrued and all other sums payable under this Agreement or (b) withdraw such declaration with effect from the date specified in such notice.
 
12
Indemnities
 
12.1
Miscellaneous indemnities
 
The Borrower shall on demand indemnify the Bank, without prejudice to any of the Bank’s other rights under any of the Security Documents, against any loss or expense which the Bank shall certify as sustained or incurred by it as a consequence of:
 
12.1.1
any default in payment by the Borrower of any sum under any of the Security Documents when due;
 
34

 
12.1.2
the occurrence of any other Event of Default;
 
12.1.3
any prepayment of the Loan or part thereof being made under clauses 5.3, 9.2 or 13.1, or any other repayment or prepayment of the Loan or part thereof being made otherwise than on an Interest Payment Date relating to the part of the Loan prepaid or repaid; or
 
12.1.4
the Loan or part thereof not being made for any reason (excluding any default by the Bank) after the Drawdown Notice has been given,
 
including, in any such case, but not limited to, any loss or expense sustained or incurred in maintaining or funding the Loan or any part thereof or in liquidating or re-employing deposits from third parties acquired to effect or maintain the Loan or any part thereof.
 
12.2
Currency indemnity
 
If any sum due from the Borrower under any of the Security Documents or any order or judgment given or made in relation thereto has to be converted from the currency (the “first currency”) in which the same is payable under the relevant Security Document or under such order or judgment into another currency (the “second currency”) for the purpose of (a) making or filing a claim or proof against the Borrower, (b) obtaining an order or judgment in any court or other tribunal or (c) enforcing any order or judgment given or made in relation to any of the Security Documents, the Borrower shall indemnify and hold harmless the Bank from and against any loss suffered as a result of any difference between (i) the rate of exchange used for such purpose to convert the sum in question from the first currency into the second currency and (ii) the rate or rates of exchange at which the Bank may in the ordinary course of business purchase the first currency with the second currency upon receipt of a sum paid to it in satisfaction, in whole or in part, of any such order, judgment, claim or proof. Any amount due from the Borrower under this clause 12.2 shall be due as a separate debt and shall not be affected by judgment being obtained for any other sums due under or in respect of any of the Security Documents and the term “rate of exchange” includes any premium and costs of exchange payable in connection with the purchase of the first currency with the second currency.
 
12.3
Environmental indemnity
 
The Borrower shall indemnify the Bank on demand and hold the Bank harmless from and against all costs, expenses, payments, charges, losses, demands, liabilities, actions, proceedings (whether civil or criminal), penalties, fines, damages, judgements, orders, sanctions or other outgoings of whatever nature which may be suffered, incurred or paid by, or made or asserted against the Bank at any time, whether before or after the repayment in full of principal and interest under this Agreement, relating to, or arising directly or indirectly in any manner or for any cause or reason whatsoever out of an Environmental Claim made or asserted against the Bank if such Environmental Claim would not have been, or been capable of being, made or asserted against the Bank if it had not entered into any of the Security Documents and/or exercised any of its rights, powers and discretions thereby conferred and/or performed any of its obligations thereunder and/or been involved in any of the transactions contemplated by the Security Documents.
 
13
Unlawfulness and increased costs
 
13.1
Unlawfulness
 
If it is or becomes contrary to any law or regulation for the Bank to advance the Loan or an Advance or to, maintain the Commitment or fund the Loan or an Advance the Bank shall promptly give notice to the Borrower whereupon (a) the Commitment shall be reduced to zero and (b) the Borrower shall be obliged to prepay the Loan either (i) forthwith or (ii) on a future specified date
 
35

 
not being earlier than the latest date permitted by the relevant law or regulation together with interest and commitment commission accrued to the date of prepayment and all other sums payable by the Borrower under this Agreement and/or the Master Swap Agreement;
 
13.2
Increased costs
 
If the result of any change in, or in the interpretation or application of, or the introduction of, any law or any regulation, request or requirement (whether or not having the force of law, but, if not having the force of law, with which the Bank or, as the case may be, its holding company habitually complies), including (without limitation) those relating to Taxation, capital adequacy, liquidity, reserve assets, cash ratio deposits and special deposits, is to:
 
13.2.1
subject the Bank to Taxes or change the basis of Taxation of the Bank with respect to any payment under any of the Security Documents (other than Taxes or Taxation on the overall net income, profits or gains of the Bank imposed in the jurisdiction in which its principal or lending office under this Agreement is located); and/or
 
13.2.2
increase the cost to, or impose an additional cost on, the Bank or its holding company in making or keeping the Commitment available or maintaining or funding all or part of the Loan; and/or
 
13.2.3
reduce the amount payable or the effective return to the Bank under any of the Security Documents; and/or
 
13.2.4
reduce the Bank’s or its holding company’s rate of return on its overall capital by reason of a change in the manner in which it is required to allocate capital resources to the Bank’s obligations under any of the Security Documents; and/or
 
13.2.5
require the Bank or its holding company to make a payment or forego a return on or calculated by reference to any amount received or receivable by the Bank under any of the Security Documents; and/or
 
13.2.6
require the Bank or its holding company to incur or sustain a loss (including a loss of future potential profits) by reason of being obliged to deduct all or part of the Commitment or the Loan from its capital for regulatory purposes,
 
then and in each such case (subject to clause 13.3);
 
(a)
the Bank shall notify the Borrower in writing of such event promptly upon its becoming aware of the same; and
 
(b)
the Borrower shall on demand pay to the Bank the amount which the Bank specifies (in a certificate setting forth the basis of the computation of such amount but not including any matters which the Bank or its holding company regards as confidential) is required to compensate the Bank and/or (as the case may be) its holding company for such liability to Taxes, cost, reduction, payment, foregone return or loss.
 
For the purposes of this clause 13.2 “holding company” means the company or entity (if any) within the consolidated supervision of which the Bank is included.
 
13.3
Exception
 
Nothing in clause 13.2 shall entitle the Bank to receive any amount in respect of compensation for any such liability to Taxes, increased or additional cost, reduction, payment, foregone return or
 
36

 
loss to the extent that the same is (a) taken into account in calculating the Additional Cost or (b) the subject of an additional payment under clause 7.6.
 
14
Security and set-off
 
14.1
Application of moneys
 
All moneys received by the Bank under or pursuant to any of the Security Documents and expressed to be applicable in accordance with the provisions of this clause 14.1 shall be applied by the Bank in the following manner:
 
14.1.1
first in or towards payment of all unpaid fees, commissions and expenses which may be owing to the Bank under any of the Security Documents (including, for the avoidance of doubt, the Master Swap Agreement);
 
14.1.2
secondly in or towards payment of any arrears of interest owing in respect of the Loan or any part thereof;
 
14.1.3
thirdly in or towards repayment of the Loan (whether the same is due and payable or not);
 
14.1.4
fourthly in or towards payment to the Bank for any loss suffered by reason of any such payment in respect of principal not being effected on an Interest Payment Date relating to the part of the Loan repaid;
 
14.1.5
fifthly, in or towards payment to the Bank of any sum owing to the Bank under the Master Swap Agreement;
 
14.1.6
sixthly in or towards payment to the Bank of any other sums owing to it under any of the other Security Documents; and
 
14.1.7
seventhly the surplus (if any) shall be paid to the Borrower or to whomsoever else may be entitled to receive such surplus.
 
14.2
Set-off
 
14.2.1
The Borrower authorises the Bank (without prejudice to any of the Bank’s rights at law, in equity or otherwise), at any time and without notice to the Borrower, to apply any credit balance to which the Borrower is then entitled standing upon any account of the Borrower with any branch of the Bank in or towards satisfaction of any sum due and payable from the Borrower to the Bank under any of the Security Documents. For this purpose, the Bank is authorised to purchase with the moneys standing to the credit of such account such other currencies as may be necessary to effect such application.
 
14.2.2
Without prejudice to its rights hereunder and/or under the Master Swap Agreement, the Bank may at the same time as, or at any time after, any Default under this Agreement or the Borrower’s default under the Master Swap Agreement, set-off any amount due now or in the future from the Borrower to the Bank under this Agreement against any amount due from the Bank to the Borrower under the Master Swap Agreement and apply the first amount in discharging the second amount. The effect of any set-off under this clause 14.2.2 shall be effective to extinguish or, as the case may require, reduce the liabilities of the Bank under the Master Swap Agreement. The Bank shall not be obliged to exercise any right given to it by this clause 14.2. The Bank shall notify the Borrower forthwith upon the exercise or purported exercise of any right of set-off giving full details in relation thereto.
 
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14.3
Further assurance
 
The Borrower undertakes that the Security Documents shall both at the date of execution and delivery thereof and so long as any moneys are owing under any of the Security Documents be valid and binding obligations of the respective parties thereto and rights of the Bank enforceable in accordance with their respective terms and that it will, at its expense, execute, sign, perfect and do, and will procure the execution, signing, perfecting and doing by each of the other Security Parties of, any and every such further assurance, document, act or thing as in the reasonable opinion of the Bank may be necessary or desirable for perfecting the security contemplated or constituted by the Security Documents.
 
14.4
Conflicts
 
In the event of any conflict between this Agreement and any of the other Borrower’s Security Documents, the provisions of this Agreement shall prevail.
 
15
Accounts
 
15.1
General
 
15.1.1
The Borrower undertakes with the Bank that it will procure that all moneys payable to the Borrower in respect of the Earnings (as defined in the General Assignment) of the Ship shall, unless and until the Bank directs to the contrary pursuant to clause 2.1.1 of the General Assignment, be paid to the Operating Account; and
 
15.1.2
The Borrower undertakes with the Bank that it will procure that the Manager on or before the Drawdown Date opens each of the Accounts;
 
15.2
Charging of Accounts
 
The Accounts and all amounts standing to the credit thereof shall be subject to the security constituted and the rights conferred by the Accounts Pledges.
 
16
Assignment, transfer and lending office
 
16.1
Benefit and burden
 
This Agreement shall be binding upon, and enure for the benefit of, the Bank and the Borrower and their respective successors.
 
16.2
No assignment by Borrower
 
The Borrower may not assign or transfer any of its rights or obligations under this Agreement.
 
16.3
Assignment by Bank
 
The Bank may assign all or any part of its rights under this Agreement or under any of the other Security Documents to any other bank or financial institution (an “Assignee) without the consent of the Borrower.
 
16.4
Transfer
 
The Bank may transfer all or any part of its rights, benefits and/or obligations under this Agreement and/or the Master Swap Agreement and/or any of the other Security Documents to
 
38

 
any one or more banks or other financial institutions (a “Transferee) without the consent of the Borrower.
 
16.5
Documenting assignments and transfers
 
If the Bank assigns all or any part of its rights or transfers all or any part of its rights, benefits and/or obligations as provided in clause 16.3 or 16.4, the Borrower undertakes, immediately on being requested to do so by the Bank and at the cost of the Bank, to enter into, and procure that the other Security Parties shall enter into, such documents as may be necessary or desirable to transfer to the Assignee or Transferee all or the relevant part of the Bank’s interest in the Security Documents and all relevant references in this Agreement to the Bank shall thereafter be construed as a reference to the Bank and/or its Assignee or Transferee (as the case may be) to the extent of their respective interests.
 
16.6
Lending office
 
The Bank shall lend through its office at the address specified above or through any other office of the Bank selected from time to time by it through which the Bank wishes to lend for the purposes of this Agreement. If the office through which the Bank is lending is changed pursuant to this clause 16.6, the Bank shall notify the Borrower promptly of such change.
 
16.7
Disclosure of information
 
The Bank may disclose to a prospective assignee, transferee or to any other person who may propose entering into contractual relations with the Bank in relation to this Agreement such information about the Borrower as the Bank shall consider appropriate.
 
17
Notices and other matters
 
17.1
Notices
 
Every notice, request, demand or other communication under this Agreement or (unless otherwise provided therein) under any of the other Security Documents shall:
 
17.1.1
be in writing delivered personally or by first-class prepaid letter (airmail if available) or facsimile transmission or other means of telecommunication in permanent written form,
 
17.1.2
be deemed to have been received, subject as otherwise provided in the relevant Security Document, in the case of a letter, when delivered personally or three (3) days after it has been put in to the post and, in the case of a facsimile transmission or other means of telecommunication in permanent written form, at the time of despatch (provided that if the date of despatch is not a business day in the country of the addressee or if the time of despatch is after the close of business in the country of the addressee it shall be deemed to have been received at the opening of business on the next such business day); and
 
17.1.3
be sent:
 
(a)
if to the Borrower at:
 
32 Karamanli Avenue
166 05 Voula
Greece
 
Fax no: +30 210 895 6900
Attention: George Papadopoulos
 
39

 
(b)
if to the Bank at:
 
Bayerische Hypo- und Vereinsbank Aktiengesellschaft
7 Heraklitou Street
Athens 106 73
Greece
 
Fax No: +30 210 412 6597
Attention: The Manager
 
or to such other address and/or numbers as is notified by one party to the other party under this Agreement.
 
17.2
No implied waivers, remedies cumulative
 
No failure or delay on the part of the Bank to exercise any power, right or remedy under any of the Security Documents shall operate as a waiver thereof, nor shall any single or partial exercise by the Bank of any power, right or remedy preclude any other or further exercise thereof or the exercise of any other power, right or remedy. The remedies provided in the Security Documents are cumulative and are not exclusive of any remedies provided by law.
 
17.3
English language
 
All certificates, instruments and other documents to be delivered under or supplied in connection with any of the Security Documents shall be in the English language or shall be accompanied by a certified English translation upon which the Bank shall be entitled to rely.
 
18
Governing law and jurisdiction
 
18.1
Law
 
This Agreement is governed by and shall be construed in accordance with English law.
 
18.2
Submission to jurisdiction
 
The Borrower agrees, for the benefit of the Bank, that any legal action or proceedings arising out of or in connection with this Agreement against the Borrower or any of its assets may be brought in the English courts. The Borrower irrevocably and unconditionally submits to the jurisdiction of such courts and irrevocably designates, appoints and empowers Cheeswrights at present of 10 Philpot Lane, London EC3M 8BR, England to receive for it and on its behalf, service of process issued out of the English courts in any such legal action or proceedings. The submission to such jurisdiction shall not (and shall not be construed so as to) limit the right of the Bank to take proceedings against the Borrower in the courts of any other competent jurisdiction nor shall the taking of proceedings in any one or more jurisdictions preclude the taking of proceedings in any other jurisdiction, whether concurrently or not. The parties further agree that only the Courts of England and not those of any other State shall have jurisdiction to determine any claim which the Borrower may have against the Bank arising out of, or in connection with, this Agreement.
 
18.3
Contracts (Rights of Third Parties) Act 1999
 
No term of this Agreement is enforceable under the Contracts (Rights of Third Parties) Act 1999 by a person who is not a party to this Agreement.
 
IN WITNESS whereof the parties to this Agreement have caused this Agreement to be duly executed on the date first above written.
 
40

 
Schedule 1
 
Form of Drawdown Notice
 
(referred to in clause 2.2)
 
[Date]
 
To:
Bayerische Hypo- und Vereinsbank Aktiengesellschaft
7 Heraklitou Street
Athens 106 73
Greece
 
Thirty six million Dollars ($36,000,000) Loan
Loan Agreement dated [•] 2007
 
We refer to the above Loan Agreement and hereby give you notice that we wish to draw down the Loan, namely Thirty six million Dollars ($36,000,000) on [·] [and select a first Interest Period in respect thereof of · months] [the first Interest Period in respect thereof to expire on {date}]. The funds should be credited to [name and number of account] with [details of bank in [New York] [principal financial centre for relevant Optional Currency] [in the following Advances].
 
Dollar Amount
 
Currency in which Advance is
to be outstanding
 
Interest Period
 
Please credit the funds to:
           
[l]
 
We confirm that:
 
(a)
no event or circumstance has occurred and is continuing which constitutes a Default;
 
(b)
the representations and warranties contained in clauses 8.1 and 8.2 of the Loan Agreement are true and correct at the date hereof as if made with respect to the facts and circumstances existing at such date;
 
(c)
the borrowing to be effected by the drawdown of the Loan will be within our corporate powers, has been validly authorised by appropriate corporate action and will not cause any limit on our borrowings (whether imposed by statute, regulation, agreement or otherwise) to be exceeded;
 
(d)
there has been no material adverse change in our financial position from that described by us to the Bank in the negotiation of the Loan Agreement; and
 
(e)
we will use the proceeds of the Loan for our benefit and under our full responsibility and exclusively for the purpose specified in the Loan Agreement.
 
Words and expressions defined in the Loan Agreement shall have the same meanings where used herein.
 

For and on behalf of
PEMER SHIPPING LTD
 
41

 
Schedule 2
 
Documents and evidence required as conditions precedent
 
(referred to in clause 10.1)
 
Part 1
 
1
Ship conditions
 
evidence that the Ship:
 
1.1
Registration and Encumbrances
 
is registered in the name of the Borrower through the Registry under the laws and flag of the Flag State and that the Ship and its Earnings, Insurances and Requisition Compensation (as defined in the General Assignment) are free of Encumbrances;
 
1.2
Classification
 
maintains the Classification free of all requirements and recommendations of the Classification Society; and
 
1.3
Insurance
 
is insured in accordance with the provisions of the Security Documents and all requirements of the Security Documents in respect of such insurance have been complied with (including without limitation, confirmation from the protection and indemnity association or other insurer with which the Ship is, or is to be, entered for insurance or insured against protection and indemnity risks (including oil pollution risks) that any necessary declarations required by the association or insurer for the removal of any oil pollution exclusion have been made and that any such exclusion does not apply to the Ship);
 
2
Constitutional documents
 
Photostat copies, certified by an officer of each Security Party as true, complete and up to date copies of all documents which contain or establish or relate to the constitution of that Security Party;
 
3
Corporate authorisations
 
copies of resolutions of the directors of the Borrower and of the directors and shareholders of each other Security Party approving such of the Security Documents to which such Security Party is, or is to be, party and authorising the signature, delivery and performance of such Security Party’s obligations thereunder, certified (in a certificate dated no earlier than five (5) Banking Days prior to the date of this Agreement) by an officer of such Security Party as:
 
 
(i)
being true and correct;
 
 
(ii)
being duly passed at meetings of the directors of such Security Party and of the shareholders of such Security Party each duly convened and held;
 
 
(iii)
not having been amended, modified or revoked; and
 
 
(iv)
being in full force and effect,
 
42

 
together with originals or certified copies of any powers of attorney issued by any Security Party pursuant to such resolutions;
 
4
Specimen signatures
 
copies of the signatures of the persons who have been authorised on behalf of each Security Party to sign such of the Security Documents to which such Security Party is, or is to be, party and to give notices and communications, including notices of drawing, under or in connection with the Security Documents, certified (in a certificate dated no earlier than five (5) Banking Days prior to the date of this Agreement) by an officer of such Security Party as being the true signatures of such persons;
 
5
Certificate of incumbency
 
a list of directors and officers of each Security Party specifying the names and positions of such persons, certified (in a certificate dated no earlier than five (5) Banking Days prior to the date of this Agreement) by an officer of such Security Party to be true, complete and up to date;
 
6
Borrower’s consents and approvals
 
a certificate (dated no earlier than five (5) Banking Days prior to the date of this Agreement) from an officer of the Borrower that no consents, authorisations, licences or approvals are necessary for the Borrower to authorise or are required by the Borrower in connection with the borrowing by the Borrower of the Loan pursuant to this Agreement or the execution, delivery and performance of the Borrower’s Security Documents;
 
7
Other consents and approvals
 
a certificate (dated no earlier than five (5) Banking Days prior to the date of this Agreement) from an officer of each Security Party (other than the Borrower) that no consents, authorisations, licences or approvals are necessary for such Security Party to guarantee and/or grant security for the borrowing by the Borrower of the Commitment pursuant to this Agreement and execute, deliver and perform the Security Documents insofar as such Security Party is a party thereto;
 
8
Certified Management Agreement
 
a copy, certified (in a certificate dated no earlier than five (5) Banking Days prior to the date of the Drawdown Notice) as a true and complete copy by an officer of the Manager of the Management Agreement;
 
9
Valuation
 
a valuation (dated not more than five (5) days prior to the date of the Drawdown Notice) of the Ship demonstrating that the market value of the Ship, determined in accordance with clause 9.2.2, is acceptable to the Bank;
 
10
Insurance opinion
 
an opinion from BankServe Insurance Services Limited insurance consultants to the Bank, on the insurances effected or to be effected in respect of the Ship upon and following the Drawdown Date;
 
43

 
11
Accounts
 
evidence that the Operating Account, the Cash Collateral Account and the Multicurrency Cash Collateral Account have been opened; and
 
12
Cash Collateral Account
 
evidence that the Cash Collateral Deposit has been made.
 
44

 
Part 2
 
1
Security Documents, letters and other documents
 
the Mortgage, the Deed of Covenant, the General Assignment, the Manager’s Undertaking, the Master Swap Agreement, the Master Agreement Security Deed, the Account Pledges and any Charter Assignment all duly executed;
 
2
Mortgage registration
 
evidence that the Mortgage and the Deed of Covenant have been registered against the Ship through the Registry under the laws and flag of the Flag State;
 
3
Notices of assignment
 
copies of duly executed notices of assignment required by the terms of the Security Documents and in the forms prescribed by the Security Documents;
 
4
Cyprus opinion
 
an opinion of Messrs. Chrysses Demetriades & Co., special legal advisers to the Bank on matters of Cyprus Law;
 
5
Liberian legal opinion
 
an opinion of Seward & Kissel LLP, special legal advisers to the Bank on matters of Liberian Law;
 
6
Greek legal opinion
 
an opinion of Law Office Gr. J. Timagenis, special legal advisers to the Bank, on matters of Greek law, the cost of which will be borne by the Bank;
 
7
Further opinions
 
any such further opinion as may be required by the Bank;
 
8
Borrower’s process agent
 
a letter from the Borrower’s agent for receipt of service of proceedings referred to in clause 18.2 accepting its appointment under the said clause and under each of the other Security Documents in which it is or is to be appointed as the Borrower’s agent;
 
9
Manager’s process agent
 
a letter from the Manager’s agent for receipt of service of proceedings referred to in clause 7.2 of the Manager’s Undertaking accepting its appointment under the said clause;
 
10
Registration forms
 
such statutory forms duly signed by the Borrower and the other Security Parties as may be required by the Bank to perfect the security contemplated by the Security Documents;
 
45

 
11
Manager’s confirmation
 
the Manager has confirmed in writing that the representations and warranties set out in clauses 8.2.9, 8.2.10 and 8.2.11 are true and correct;
 
12
Application for DOC and SMC
 
a certified copy of the DOC and evidence satisfactory to the Bank that the Operator has applied to the relevant Regulatory Agency for an SMC for the Ship to be issued pursuant to the Code within any time limit required or recommended by such Regulatory Agency;
 
13
ISPS Code
 
evidence satisfactory to the Bank that the Ship is subject to a ship security plan that complies with the ISPS Code and a copy of the ISSC for the Ship;
 
14
Fee
 
evidence that the fees due under clause 6.1 have been paid in full; and
 
15
Due Diligence
 
evidence that all information required in order for the Bank to complete its due diligence formalities required in connection with this Agreement has been provided and is satisfactory to the Bank in all respects.
 
46

 
Schedule 3
 
Form of Mortgage
 
47

 
Private & Confidential
 
Dated March 2007
 
 
PEMER SHIPPING LTD
 
(1)
 
 
and
 
 
 
BAYERISCHE HYPO- UND VEREINSBANK AKTIENGESELLSCHAFT
 
(2)
 
 
 
MORTGAGE AND DEED OF COVENANT
 
relating to m.v. Pedhoulas Merchant

norton
 

 
REPUBLIC OF CYPRUS
 
The Merchant Shipping (Registration of Ships, Sales and Mortgages) Law, 1963, (as amended).
 
FIRST STATUTORY MORTGAGE (TO SECURE ACCOUNT CURRENT)
(BODY CORPORATE)
 
I.M.O. No.
CALL SIGN
 
Name of Ship
 
Year of Registry or Date of
Provisional Registry/ Port of
Registry
         
9279800
C4JL2
 
Pedhoulas Merchant
 
92/2006, Limassol, Cyprus
         
Whether a Sailing, Steam or
Motor Ship
 
Horse Power of Engines, if any
     
Motor Ship
 
9400 kw

Metres
 
   
Length (Article 2(8))
222,55
Breadth (Regulation 2(3))
32,26
Moulded depth amidships to Upper Deck (Regulation 2(2))
20,03

Number of Tons
 
Gross: 43151
Net: 27614
   
and as described in more detail in the Certificate of the Surveyor and the Register Book.
 

 
WHEREAS there is an Account Current between PEMER SHIPPING LTD whose registered office is at 80 Broad Street, Monrovia, Liberia, (hereinafter sometimes called the “Mortgagor”) and BAYERISCHE HYPO- UND VEREINSBANK AKTIENGESELLSCHAFT, whose registered office is at Am Tucherpark 16, D-80538, Munich, Germany, acting for the purposes of this Deed through its office at 7 Heraklitou Street, 106 73 Athens, Greece (hereinafter sometimes called the “Mortgagee which expression shall include its successors, assignees and transferees), regulated by (i) a Loan Agreement (hereinafter, as the same may from time to time be amended, varied or supplemented called the “Loan Agreement) dated
March 2007 made between the Mortgagor and the Mortgagee, (ii) an ISDA Master Agreement (together with the Schedule thereto) dated March 2007 made between the Mortgagor and the Mortgagee (the said ISDA Master Agreement and Schedule thereto, as the same may from time to time be amended, varied or supplemented and all Confirmations (as therein defined) from time to time exchanged under the said ISDA Master Agreement hereinafter together referred to as the “Master Swap Agreement) and (iii) a Deed of Covenant bearing even date herewith made between the Mortgagor and the Mortgagee supplemental to this Mortgage (hereinafter, as the same may from time to time be amended, varied or supplemented called the “Deed of Covenant) and WHEREAS pursuant to the Loan Agreement the Mortgagor has agreed to execute this Mortgage in favour of the Mortgagee for the purposes of securing payment by the Mortgagor to the Mortgagee of all sums for the time being owing by the Mortgagor to the Mortgagee under the Loan Agreement, the Master Swap Agreement and the Deed of Covenant (as each of the same may from time to time hereafter be amended, varied or supplemented) in the manner and the times set forth therein and WHEREAS the amount of principal and interest due at any given time and the manner and time for payment can be ascertained by reference to the Loan Agreement, the Master Swap Agreement and the Deed of Covenant (each as so amended, varied or supplemented) and/or to the books of account or other accounting records of the Mortgagee.
 
NOW we the said PEMER SHIPPING LTD in consideration of the premises for ourselves and our successors, covenant with the said BAYERISCHE HYPO- UND VEREINSBANK AKTIENGESELLSCHAFT and its successors, assigns or transferees to pay to him, them or it the sums for the time being due to the Mortgagee whether by way of principal or interest or otherwise at the times and in the manner aforesaid.
 
AND for the purpose of better securing to the said BAYERISCHE HYPO- UND VEREINSBANK AKTIENGESELLSCHAFT and its successors and assigns the payment of such sums as last aforesaid, we the Mortgagor do hereby mortgage to the said BAYERISCHE HYPO- UND VEREINSBANK AKTIENGESELLSCHAFT all one hundred one hundredth (100/100th) shares, of which we are the owner in the Ship above particularly described and in her boats and appurtenances.
 
Lastly, we the Mortgagor for ourselves and our successors covenant with the Mortgagee and its successors, assigns or transferees that we have power to mortgage in the manner aforesaid the above mentioned shares, and that the same are free from encumbrances.
 

 
I N W I T N E S S WHEREOF this Mortgage has been duly executed the             day of             Two Thousand and Seven.
 
SIGNED, SEALED AND DELIVERED
)
 
as a DEED
)
 
by
)
 
as the duly authorised attorney-in-fact
)
 
of
)
 
PEMER SHIPPING LTD
)
___________________________
pursuant to a Power of Attorney
)
 
dated
)
 
in the presence of:-
)
 
__________________________________
 
MEMORANDUM OF RECORDING THE MORTGAGE
BY THE REGISTRAR OF CYPRUS SHIPS
 
Mortgage “                            ” entered in the Register on the              day of            at    hours pursuant to Section 31(3) of the Merchant Shipping (Registration of Ships, Sales and Mortgages) Law, 1963 (as amended).
 
________________________  (Seal)
Registrar of Cyprus Ships
 

 
INSTRUMENT OF TRANSFER OF MORTGAGE
 
WE, the within-mentioned in consideration of ______________________________ this day paid to us by _________________ of __________________ hereby transfer to him / them the  benefit of the within-written security.
 
IN WITNESS WHEREOF we have hereunto executed this Instrument of Transfer this ________ day of ___________
 
SIGNED, SEALED AND DELIVERED
)
by
)
as the duly authorised Attorney of
)
 
)
pursuant to a Power of Attorney
)
dated
)
in the presence of:-
)
 
_____________________________________
Name:
Title:
Seat:
of Consular Officer/Notary Public/Certifying Officer
 
MEMORANDUM OF RECORDING
OF TRANSFER OF MORTGAGE BY REGISTRAR OF CYPRUS SHIPS
 
Transfer of Mortgage “               ” entered in the Register on the __________ day of______________ 200____at ________ hours pursuant to Section 37 of the Merchant Shipping (Registration of Ships, Sales and Mortgages) Law, 1963, (as amended).
 
________________________    (Seal)
Registrar of Cyprus Ships
 

 
MEMORANDUM OF DISCHARGE OF MORTGAGE
 
RECEIVED all sums due / the sum of ______________________________________________  in discharge of the within-written security.
 
IN WITNESS WHEREOF we have hereunto executed this Memorandum this ____ day of _____________________

THE COMMON SEAL OF
)
 
 
)
 
was hereunto affixed
)
 
in the presence of:-
)
 
 
_________________________
 
_________________________
 
or
 
SIGNED, SEALED AND DELIVERED
)
 
by
)
 
and
)
 
as the duly authorised Attorney/
)
_________________________
Signatories of
)
 
 
)
_________________________
pursuant to a Power of Attorney/
)
 
Instruments of Procuration dated
)
 
in
)
 
the presence of:-
)
 
 
_________________________
Name:
Title:
Seat:
of Consular Officer/Notary Public/Certifying Officer
 
* Signature(s) and description of witnesses / sealing officers, i.e., Director, Secretary etc. (as the case may be).
 

 
Schedule 4
 
Form of Deed of Covenant
 
48

 
Private & Confidential
 
Dated March 2007
 
 
 
PEMER SHIPPING LTD
 
(1)
 
 
and
 
 
 
BAYERISCHE HYPO- UND VEREINSBANK AKTIENGESELLSCHAFT
 
(2)
 
 
MORTGAGE AND DEED OF COVENANT
 
relating to m.v. Pedhoulas Merchant
 
norton
 

 
REPUBLIC OF CYPRUS
 
The Merchant Shipping (Registration of Ships, Sales and Mortgages) Law, 1963, (as amended).
 
FIRST STATUTORY MORTGAGE (TO SECURE ACCOUNT CURRENT)
(BODY CORPORATE)
 
I.M.O. No.
CALL SIGN
 
Name of Ship
 
Year of Registry or Date of
Provisional Registry/Port of
Registry
         
9279800
C4JL2
 
Pedhoulas Merchant
 
92/2006, Limassol, Cyprus
         
Whether a Sailing, Steam or
Motor Ship
 
Horse Power of Engines,
if any
     
Motor Ship
 
9400 kw
 
Metres
 
   
Length (Article 2(8))
222,55
Breadth (Regulation 2(3))
32,26
20,03
 
Number of Tons
 
Gross: 43151
Net: 27614
   
and as described in more detail in the Certificate of the Surveyor and the Register Book.
 

 
WHEREAS there is an Account Current between PEMER SHIPPING LTD whose registered office is at 80 Broad Street, Monrovia, Liberia, (hereinafter sometimes called the “Mortgagor”) and BAYERISCHE HYPO- UND VEREINSBANK AKTIENGESELLSCHAFT, whose registered office is at Am Tucherpark 16, D-80538, Munich, Germany, acting for the purposes of this Deed through its office at 7 Heraklitou Street, 106 73 Athens, Greece (hereinafter sometimes called the “Mortgagee” which expression shall include its successors, assignees and transferees), regulated by (i) a Loan Agreement (hereinafter, as the same may from time to time be amended, varied or supplemented called the “Loan Agreement”) dated
March 2007 made between the Mortgagor and the Mortgagee, (ii) an ISDA Master Agreement (together with the Schedule thereto) dated March 2007 made between the Mortgagor and the Mortgagee (the said ISDA Master Agreement and Schedule thereto, as the same may from time to time be amended, varied or supplemented and all Confirmations (as therein defined) from time to time exchanged under the said ISDA Master Agreement hereinafter together referred to as the “Master Swap Agreement”) and (iii) a Deed of Covenant bearing even date herewith made between the Mortgagor and the Mortgagee supplemental to this Mortgage (hereinafter, as the same may from time to time be amended, varied or supplemented called the “Deed of Covenant”) and WHEREAS pursuant to the Loan Agreement the Mortgagor has agreed to execute this Mortgage in favour of the Mortgagee for the purposes of securing payment by the Mortgagor to the Mortgagee of all sums for the time being owing by the Mortgagor to the Mortgagee under the Loan Agreement, the Master Swap Agreement and the Deed of Covenant (as each of the same may from time to time hereafter be amended, varied or supplemented) in the manner and the times set forth therein and WHEREAS the amount of principal and interest due at any given time and the manner and time for payment can be ascertained by reference to the Loan Agreement, the Master Swap Agreement and the Deed of Covenant (each as so amended, varied or supplemented) and/or to the books of account or other accounting records of the Mortgagee.
 
NOW we the said PEMER SHIPPING LTD in consideration of the premises for ourselves and our successors, covenant with the said BAYERISCHE HYPO- UND VEREINSBANK AKTIENGESELLSCHAFT and its successors, assigns or transferees to pay to him, them or it the sums for the time being due to the Mortgagee whether by way of principal or interest or otherwise at the times and in the manner aforesaid.
 
AND for the purpose of better securing to the said BAYERISCHE HYPO- UND VEREINSBANK AKTIENGESELLSCHAFT and its successors and assigns the payment of such sums as last aforesaid, we the Mortgagor do hereby mortgage to the said BAYERISCHE HYPO- UND VEREINSBANK AKTIENGESELLSCHAFT all one hundred one hundredth (100/100th) shares, of which we are the owner in the Ship above particularly described and in her boats and appurtenances.
 
Lastly, we the Mortgagor for ourselves and our successors covenant with the Mortgagee and its successors, assigns or transferees that we have power to mortgage in the manner aforesaid the above mentioned shares, and that the same are free from encumbrances.
 

 
I N W I T N E S S WHEREOF this Mortgage has been duly executed the             day of             Two Thousand and Seven.
 
SIGNED, SEALED AND DELIVERED
)
 
as a DEED
)
 
by
)
 
as the duly authorised attorney-in-fact
)
 
of
)
 
PEMER SHIPPING LTD
)
____________________________
pursuant to a Power of Attorney
)
 
dated
)
 
in the presence of:-
)
 
_________________________________
 
MEMORANDUM OF RECORDING THE MORTGAGE
BY THE REGISTRAR OF CYPRUS SHIPS
 
Mortgage “                            ” entered in the Register on the              day of            at hours pursuant to Section 31(3) of the Merchant Shipping (Registration of Ships, Sales and Mortgages) Law, 1963 (as amended).
 
_______________________ (Seal)
Registrar of Cyprus Ships
 

 
INSTRUMENT OF TRANSFER OF MORTGAGE
 
WE, the within-mentioned in consideration of __________________ this day paid to us by______________ of ____________________ hereby transfer to him / them the benefit of the within-written security.
 
IN WITNESS WHEREOF we have hereunto executed this Instrument of Transfer this ___________________ day of_______________
 
SIGNED, SEALED AND DELIVERED
)
 
by
)
 
as the duly authorised Attorney of
)
 
 
)
 
pursuant to a Power of Attorney
)
 
dated
)
 
in the presence of:-
)
 
 
_______________________________________
Name:
Title:
Seat:
of Consular Officer/Notary Public/Certifying Officer
 
MEMORANDUM OF RECORDING
OF TRANSFER OF MORTGAGE BY REGISTRAR OF CYPRUS SHIPS
 
Transfer of Mortgage “               ” entered in the Register on the ________ day of __________ 200___at ________ hours pursuant to Section 37 of the Merchant Shipping(Registration of Ships, Sales and Mortgages) Law, 1963, (as amended).
 
________________________ (Seal)
Registrar of Cyprus Ships
 

 
MEMORANDUM OF DISCHARGE OF MORTGAGE
 
RECEIVED all sums due / the sum of __________________________________  in discharge of the within-written security.
 
IN WITNESS WHEREOF we have hereunto executed this Memorandum this ______ day of ____________________
 
THE COMMON SEAL OF
)
 
 
)
 
was hereunto affixed
)
 
in the presence of:-
)
 

_______________________
 
_______________________
 
or
 
SIGNED, SEALED AND DELIVERED
)
 
by
)
 
and
)
 
as the duly authorised Attorney/
)
________________________
Signatories of
)
 
 
)
________________________
pursuant to a Power of Attorney/
)
 
Instruments of Procuration dated
)
 
in
)
 
the presence of:-
)
 
 
_______________________
Name:
Title:
Seat:
of Consular Officer/Notary Public/Certifying Officer
 
* Signature(s) and description of witnesses / sealing officers, i.e., Director, Secretary etc. (as the case may be).
 

 
Contents
 
Clause
 
Page
     
1
Definitions
1
     
2
Representations and warranties
5
     
3
Mortgage of the Ship
6
     
4
Covenant to pay
6
     
5
Continuing security and other matters
6
     
6
Covenants
7
     
7
Powers of Mortgagee to protect security and remedy defaults
15
     
8
Powers of Mortgagee on Event of Default
16
     
9
Application of moneys
18
     
10
Remedies cumulative and other provisions
18
     
11
Costs and indemnity
19
     
12
Attorney
19
     
13
Further assurance
20
     
14
Notices
20
     
15
Counterparts
20
     
16
Severability of provisions
20
     
17
Law, jurisdiction and language
20
 

 
THIS DEED OF COVENANT is dated          March 2007 and made BETWEEN:
 
(1)
PEMER SHIPPING LTD whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia (the “Owner”); and
 
(2)
BAYERISCHE HYPO- UND VEREINSBANK AKTIENGESELLSCHAFT whose registered office is at Am Tucherpark 16, D-80538, Munich, Germany, acting for the purposes of this Deed through its office at 7 Heraklitou Street, 106 73 Athens, Greece (the “Mortgagee”).
 
WHEREAS:
 
(A)
the Owner is the sole, absolute and unencumbered, legal and beneficial owner of one hundred one hundredth (100/100th) shares in the Ship described in clause 1.2;
 
(B)
by a Loan Agreement dated            March 2007 and made between (1) the Owner (therein referred to as the “Borrower”) and (2) the Mortgagee (therein referred to as the “Bank”), the Mortgagee agreed (inter alia) to advance by way of a multicurrency loan to the Owner, upon the terms and conditions therein contained, a sum of up to Thirty six million Dollars ($36,000,000) or the Equivalent Amount in an Optional Currency or Optional Currencies;
 
(C)
by a Master Swap Agreement dated          March 2007 and made between (1) the Owner and (2) the Mortgagee, the Mortgagee agreed the terms and conditions upon which it would enter into an interest rate swap transaction or transactions with the Owner in respect of the Loan (whether in whole or in part as the case may be from time to time);
 
(D)
the Owner has executed in favour of the Mortgagee a statutory mortgage of even date herewith in account current form constituting a first priority Cyprus mortgage of one hundred one hundredth (100/100th) shares in the Ship; and
 
(E)
this Deed is supplemental to the Loan Agreement, the Master Swap Agreement and the Mortgage and to the security thereby created and is the Deed of Covenant referred to in the Loan Agreement but shall nonetheless continue in full force and effect notwithstanding any discharge of the Mortgage.
 
NOW THIS DEED WITNESSES AND IT IS HEREBY AGREED as follows:
 
1
Definitions
 
1.1
Defined expressions
 
Words and expressions defined in the Loan Agreement shall, unless the context otherwise requires or unless otherwise defined herein, have the same meanings when used in this Deed.
 
1.2
Definitions
 
In this Deed, unless the context otherwise requires:
 
Approved Brokers means such firm of insurance brokers, appointed by the Owner, as may from time to time be approved in writing by the Mortgagee for the purposes of this Deed;
 
Casualty Amount means Five hundred thousand Dollars ($500,000) (or the equivalent in any other currency);
 
Collateral Instruments means notes, bills of exchange, certificates of deposit and other negotiable and non-negotiable instruments, guarantees, indemnities and other assurances
 
1

 
against financial loss and any other documents or instruments which contain or evidence an obligation (with or without security) to pay, discharge or be responsible directly or indirectly for, any indebtedness or liabilities of the Owner or any other person liable and includes any documents or instruments creating or evidencing a mortgage, charge (whether fixed or floating), pledge, lien, hypothecation, assignment, trust arrangement or security interest of any kind;
 
Cyprus” means the Republic of Cyprus;
 
Earnings means all moneys whatsoever from time to time due or payable to the Owner during the Security Period arising out of the use or operation of the Ship including (but without limiting the generality of the foregoing) all freight, hire and passage moneys, income arising under pooling arrangements, compensation payable to the Owner 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;
 
Event of Default means any failure by the Owner or any other party to the Loan Agreement and the other Security Documents (other than the Mortgagee) to perform, observe, comply with or discharge any of the covenants, terms, conditions or obligations on their part to be performed, observed, complied with or discharged pursuant to the Loan Agreement and the other Security Documents or any of them in the manner, within the time (including the applicable grace period, if any) and otherwise in accordance with the terms and conditions of the Loan Agreement and the other Security Documents and includes, without limitation to the generality of the foregoing, any of the events set out in clause 11 of the Loan Agreement;
 
Expenses means the aggregate at any relevant time (to the extent that the same have not been received or recovered by the Mortgagee or any Receiver) of:
 
 
(a)
all losses, liabilities, costs, charges, expenses, damages and outgoings of whatever nature (including, without limitation, Taxes, repair costs, registration fees and insurance premiums) suffered, incurred or paid by the Mortgagee or any Receiver in connection with the exercise of the powers referred to in or granted by this Deed or otherwise payable by the Owner in accordance with clause 11; and
 
 
(b)
interest on all such losses, liabilities, costs, charges, expenses, damages and outgoings from the date on which the same were suffered, incurred or paid by the Mortgagee or any Receiver until the date of receipt or recovery thereof (whether before or after judgment) at a rate per annum calculated in accordance with clause 3.4 of the Loan Agreement (as conclusively certified by the Mortgagee or such Receiver, as the case may be);
 
Insurances means all policies and contracts of insurance (which expression includes all entries of the Ship in a protection and indemnity or war risks association) which are from time to time during the Security Period in place or taken out or entered into by or for the benefit of the Owner (whether in the sole name of the Owner or in the joint names of the Owner and the Mortgagee or otherwise) in respect of the Ship and her Earnings or otherwise howsoever in connection with the Ship and all benefits thereof (including claims of whatsoever nature and return of premiums);
 
Loan means the principal amount advanced by the Mortgagee to the Owner pursuant to the Loan Agreement or, as the context may require, the amount thereof at any time outstanding;
 
Loan Agreement” means the agreement dated           March 2007 mentioned in recital (B) hereto;
 
Loss Payable Clauses means the provisions regulating the manner of payment of sums receivable under the Insurances which are to be incorporated in the relevant insurance
 
2

 
documents, such provisions to be in the forms set out in schedule 1 to the General Assignment, or in such other forms as may from time to time be agreed in writing by the Mortgagee;
 
Master Swap Agreement” means the agreement made between the Mortgagee and the Owner dated          March 2007 mentioned in recital (C) hereto, comprising an ISDA Master Agreement and the Schedule thereto in the form or substantially in the form set out in schedule 7 to the Loan Agreement, together with any Confirmations (as defined therein) supplemental thereto;
 
Master Swap Agreement Liabilities means, at any relevant time, all liabilities actual or contingent, present or future, of the Owner to the Mortgagee under the Master Swap Agreement at such time;
 
Mortgage” means the statutory mortgage mentioned in recital (D);
 
Mortgaged Property” means:
 
 
(a)
the Ship;
 
 
(b)
the Insurances;
 
 
(c)
the Earnings; and
 
 
(d)
any Requisition Compensation;
 
Mortgagee includes the successors in title and assignees of the Mortgagee;
 
Notice of Assignment of Insurances means a notice of assignment in the form set out in schedule 2 to the General Assignment, or in such other form as may from time to time be required or agreed in writing by the Mortgagee;
 
Outstanding Indebtedness means the aggregate of the Loan, and interest accrued and accruing thereon, the Expenses, the Master Swap Agreement Liabilities and all other sums of money from time to time owing by the Owner to the Mortgagee, whether actually or contingently, under the Security Documents or any of them;
 
Owner includes the successors in title of the Owner;
 
Port of Registry means the Port of Limassol or such other port of registry approved in writing by the Mortgagee which the Ship is, or is to be registered on, at any relevant time hereafter;
 
Receiver means any receiver and/or manager appointed pursuant to clause 8.2;
 
Requisition Compensation means all sums of money or other compensation from time to time payable during the Security Period by reason of the Compulsory Acquisition of the Ship;
 
Security Documents means the Loan Agreement, this Deed, the Mortgage, the General Assignment, the Manager’s Undertaking, the Cash Collateral Account Pledge, the Multicurrency Cash Collateral Account Pledge, the Master Swap Agreement and the Master Agreement Security Deed and any other such document as is defined in the Loan Agreement as a Security Document or as may have been or may hereafter be executed to guarantee and/or secure all or any part of the Loan, interest thereon and other moneys from time to time owing by the Owner pursuant to the Loan Agreement and/or the Master Swap Agreement (whether or not such document also secures moneys from time to time owing pursuant to any other document or agreement);
 
3

 
Security Period means the period commencing on the date hereof and terminating upon discharge of the security created by the Security Documents by payment of all moneys payable thereunder;
 
Ship means the vessel Pedhoulas Merchant registered at the Port of Limassol under IMO Number 9279800 and includes any share or interest therein and her engines, machinery, boats, tackle, outfit, equipment, spare gear, fuel, consumable or other stores, belongings and appurtenances whether on board or ashore and whether now owned or hereafter acquired and also any and all additions, improvements and replacements hereafter made in or to such vessel or any part thereof or in or to her equipment and appurtenances aforesaid;
 
Total Loss” means:
 
 
(a)
the actual, constructive, compromised or arranged total loss of the Ship; or
 
 
(b)
the Compulsory Acquisition of the Ship; or
 
 
(c)
the hijacking, theft, condemnation, capture, seizure, arrest, detention or confiscation of the Ship (other than where the same amounts to the Compulsory Acquisition of the Ship) by any Government Entity, or by persons acting or purporting to act on behalf of any Government Entity, unless the Ship be released and restored to the Owner from such hijacking, theft, condemnation, capture, seizure, arrest, detention or confiscation within thirty (30) days after the occurrence thereof; and
 
United Kingdom” means Great Britain, Northern Ireland, the Channel Islands and the Isle of Man.
 
1.3
Insurance terms
 
In clause 6.1.1:
 
1.3.1
excess risks” means the proportion (if any) of claims for general average, salvage and salvage charges and under the ordinary collision clause not recoverable in consequence of the value at which the Ship is assessed for the purpose of such claims exceeding her insured value;
 
1.3.2
protection and indemnity risks” means the usual risks (including oil pollution and freight, demurrage and defence cover) covered by a United Kingdom protection and indemnity association or a protection and indemnity association which is managed in London (including, without limitation, the proportion (if any) of any sums payable to any other person or persons in case of collision which are not recoverable under the hull and machinery policies by reason of the incorporation therein of Clause 8 of the Institute Time Clauses Hulls) (1/11/95) or the Institute Amended Running Down Clause (1/10/71) or any equivalent provision); and
 
1.3.3
war risks” includes those risks covered by the standard form of English marine policy with Institute War and Strikes Clauses Hulls - (Time) (1/11/95) attached or similar cover.
 
1.4
Construction of Mortgage terms
 
In the Mortgage:
 
1.4.1
references to “interest” shall be construed as references to interest covenanted to be paid in accordance with clause 4.1.2 and any interest specified in paragraph (b) of the definition of “Expenses” in clause 1.2;
 
4

 
1.4.2
references to “principal” shall be construed as references to all moneys (other than interest) for the time being comprised in the Outstanding Indebtedness;
 
1.4.3
the expression “all sums for the time being owing by the Mortgagor to the Mortgagee” means the whole of the Outstanding Indebtedness; and
 
1.4.4
the expression “Account Current” means an account or accounts which shall be kept by the Owner with the Mortgagee and from which the Mortgagee may (without giving notice or making any demand) debit any part of the Outstanding Indebtedness.
 
1.5
Headings
 
Clause headings and the table of contents are inserted for convenience of reference only and shall be ignored in the interpretation of this Deed.
 
1.6
Construction of certain terms
 
In this Deed, unless the context otherwise requires:
 
1.6.1
references to clauses and schedules are to be construed as references to clauses of, and schedules to, this Deed and references to this Deed include its schedules;
 
1.6.2
references to (or to any specified provision of) this Deed or any other document shall be construed as references to this Deed, that provision or that document as in force for the time being and as amended in accordance with the terms thereof, or, as the case may be, with the agreement of the relevant parties;
 
1.6.3
words importing the plural shall include the singular and vice versa;
 
1.6.4
references to a person shall be construed as references to an individual, firm, company, corporation, unincorporated body of persons or any Government Entity;
 
1.6.5
references to a “guarantee shall include references to an indemnity or other assurance against financial loss including, without limitation, an obligation to purchase assets or services as a consequence of a default by any other person to pay any Indebtedness and “guaranteed shall be construed accordingly; and
 
1.6.6
references to statutory provisions shall be construed as references to those provisions as replaced or amended or re-enacted from time to time.
 
1.7
Conflict with Loan Agreement
 
This Deed shall be read together with the Loan Agreement but in case of any conflict between the two instruments, the provisions of the Loan Agreement shall prevail.
 
2
Representations and warranties
 
2.1
The Owner hereby represents and warrants to the Mortgagee that:
 
2.1.1
it is the sole, absolute, legal and beneficial owner of the Ship;
 
2.1.2
the Ship is not subject to any charter which, if entered into after the date of this Deed, would have required the consent of the Mortgagee under clause 6.1.15, and there is no existing or intended agreement or arrangement whereby the Earnings may be shared with any person other than the Mortgagee as provided in the General Assignment;
 
5

 
2.1.3
neither the Mortgaged Property nor any part thereof is subject to any Encumbrance save as constituted by the Mortgage and this Deed and the General Assignment or otherwise permitted by the terms of this Deed; and
 
2.1.4
it has power and is entitled to register the Ship under the laws and flag of Cyprus.
 
3
Mortgage of the Ship
 
By way of security for payment of the Outstanding Indebtedness the Owner as beneficial owner hereby mortgages and charges to and in favour of the Mortgagee all its rights, title and interest present and future in and to the Ship.
 
4
Covenant to pay
 
4.1
In consideration of the advance by the Mortgagee to the Owner on or before the date hereof of the total principal sum of Thirty six million Dollars ($36,000,000) or the Equivalent Amount in an Optional Currency or Optional Currencies (receipt of which sum the Owner hereby acknowledges) in accordance with the provisions of the Loan Agreement, the Owner hereby covenants with the Mortgagee:
 
4.1.1
to repay the Loan by the instalments and on the dates referred to and otherwise in the manner and upon the terms set out in the Loan Agreement;
 
4.1.2
to pay interest on the Loan, and on any overdue interest or other moneys payable under the Loan Agreement, at the rate or rates from time to time applicable thereto in the manner and upon the terms set out in the Loan Agreement;
 
4.1.3
to pay all other moneys payable by the Owner under the Security Documents or any of them at the times and in the manner therein specified; and
 
4.1.4
to pay and discharge to the Mortgagee the Master Swap Agreement Liabilities on their due date.
 
5
Continuing security and other matters
 
5.1
Continuing Security
 
The security created by the Mortgage and this Deed shall:
 
5.1.1
be held by the Mortgagee as a continuing security for the payment of the Outstanding Indebtedness and the performance and observance of and compliance by the Owner with all of the covenants, terms and conditions contained in the Security Documents to which the Owner is or is to be a party, express or implied and the security so created shall not be satisfied by any intermediate payment or satisfaction of any part of the amount hereby and thereby secured (or by any settlement of accounts between the Owner or any other person who may be liable to the Mortgagee in respect of the Outstanding Indebtedness or any part thereof and the Mortgagee);
 
5.1.2
be in addition to, and shall not in any way prejudice or affect, and may be enforced by the Mortgagee without prior recourse to, the security created by any other of the Security Documents or by any present or future Collateral Instruments, right or remedy held by or available to the Mortgagee or any right or remedy of the Mortgagee thereunder; and
 
5.1.3
not be in any way prejudiced or affected by the existence of any of the other Security Documents or any such Collateral Instrument, rights or remedies or by the same becoming
 
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wholly or in part void, voidable or unenforceable on any ground whatsoever or by the Mortgagee dealing with, exchanging, varying or failing to perfect or enforce any of the same, or giving time for payment or performance or indulgence or compounding with any other person liable.
 
5.2
Rights additional
 
All the rights, remedies and powers vested in the Mortgagee hereunder shall be in addition to and not a limitation of any and every other right, power or remedy vested in the Mortgagee under the Loan Agreement, this Deed, the other Security Documents or any Collateral Instrument or at law and all the powers so vested in the Mortgagee may be exercised from time to time and as often as the Mortgagee may deem expedient.
 
5.3
No enquiry
 
Neither the Mortgagee nor any Receiver shall be obliged to make any enquiry as to the nature or sufficiency of any payment received by it under the Mortgage and/or this Deed or to make any claim or take any action to collect any moneys hereby assigned or to enforce any rights or benefits hereby assigned to the Mortgagee or to which the Mortgagee may at any time be entitled under the Mortgage and/or this Deed.
 
5.4
Obligations of Owner and Mortgagee
 
The Owner shall remain liable to perform all the obligations assumed by it in relation to the Mortgaged Property and the Mortgagee shall be under no obligation of any kind whatsoever in respect thereof or be under any liability whatsoever in the event of any failure by the Owner to perform its obligations in respect thereof.
 
5.5
Discharge of Mortgage
 
Notwithstanding that this Deed is expressed to be supplemental to the Mortgage it shall continue in full force and effect after any discharge of the Mortgage.
 
6
Covenants
 
6.1
The Owner hereby covenants with the Mortgagee and undertakes throughout the Security Period:
 
6.1.1
Insurance
 
(a)
Insured risks, amounts and terms
 
to insure and keep the Ship insured free of cost and expense to the Mortgagee and in the sole name of the Owner or, if so required by the Mortgagee, in the joint names of the Owner and the Mortgagee (but without liability on the part of the Mortgagee for premiums or calls):
 
(i)
against fire and usual marine risks (including excess risks) and war risks, on an agreed value basis, in such amounts (but not in any event less than whichever shall be the greater of the market value of the Ship for the time being and One hundred and twenty per cent (120%) of the aggregate of (1) the Loan and (2) the Master Swap Agreement Liabilities) and upon such terms as shall from time to time be approved in writing by the Mortgagee; and
 
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(ii)
against protection and indemnity risks (including pollution risks for the highest amount in respect of which cover is or may become available for ships of the same type, size, age and flag as the Ship and a freight, demurrage and defence cover) for the full value and tonnage of the Ship (as approved in writing by the Mortgagee) and upon such terms as shall from time to time be approved in writing by the Mortgagee; and
 
(iii)
in respect of such other matters of whatsoever nature and howsoever arising in respect of which insurance would be maintained by a prudent owner of the Ship;
 
and to pay to the Mortgagee the cost (as conclusively certified by the Mortgagee) of:
 
(aa)
any mortgagee’s interest insurance which the Mortgagee may from time to time effect in respect of the Ship upon such terms and in such amounts (not exceeding at any relevant time One hundred and ten per cent (110%) of the aggregate of (1) the Loan minus any sums standing to the credit of the Cash Collateral Account) and (2) the Master Swap Agreement Liabilities, in each case at such time) as it shall deem desirable; and
 
(bb)
any other insurance cover which the Mortgagee may from time to time effect in respect of the Ship and/or in respect of its interest or potential third party liability as mortgagee of the Ship as the Mortgagee shall deem desirable having regard to any limitations in respect of amount or extent of cover which may from time to time be applicable to any of the other insurances referred to in this clause 6.1.1.
 
(b)
Approved brokers, insurers and associations
 
to effect the insurances aforesaid in such currency as the Mortgagee may approve and through the Approved Brokers and with such insurance companies and/or underwriters as shall from time to time be approved by the Mortgagee; provided however that the insurances against war risks and protection and indemnity risks may be effected by the entry of the Ship with such war risks and protection and indemnity associations as shall from time to time be approved by the Mortgagee;
 
(c)
Fleet liens, set-off and cancellation
 
if any of the insurances referred to in clause 6.1.1(a) form part of a fleet cover, to procure that the Approved Brokers shall undertake to the Mortgagee that they shall neither set-off against any claims in respect of the Ship any premiums due in respect of other vessels under such fleet cover or any premiums due for other insurances, nor cancel the insurance for reason of non-payment of premiums for other vessels under such fleet cover or of premiums for such other insurances, and shall undertake to issue a separate policy in respect of the Ship if and when so requested by the Mortgagee;
 
(d)
Payment of premiums and calls
 
punctually to pay all premiums, calls, contributions or other sums payable in respect of all such insurances and to produce all relevant receipts or other evidence of payment when so required by the Mortgagee;
 
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(e)
Renewal
 
at least fourteen (14) days before the relevant policies, contracts or entries expire, to notify the Mortgagee of the names of the brokers and/or the war risks and protection and indemnity associations proposed to be employed by the Owner or any other party for the purposes of the renewal of such insurances and of the amounts in which such insurances are proposed to be renewed and the risks to be covered and, subject to compliance with any requirements of the Mortgagee pursuant to this clause 6.1.1, to procure that appropriate instructions for the renewal of such insurances on the terms so specified are given to the Approved Brokers and/or to the approved war risks and protection and indemnity associations at least ten (10) days before the relevant policies. contracts or entries expire, and that the Approved Brokers and/or the approved war risks and protection and indemnity associations will at least seven (7) days before such expiry (or within such shorter period as the Mortgagee may from time to time agree) confirm in writing to the Mortgagee as and when such renewals have been effected in accordance with the instructions so given;
 
(f)
Guarantees
 
to arrange for the execution and delivery of such guarantees or indemnities as may from time to time be required by any protection and indemnity or war risks association;
 
(g)
Hull policy documents, notices, loss payable clauses and brokers’ undertakings
 
to deposit with the Approved Brokers (or procure the deposit of) all slips, cover notes, policies, certificates of entry or other instruments of insurance from time to time issued in connection with such of the insurances referred to in clause 6.1.1(a) as are effected through the Approved Brokers and procure that the interest of the Mortgagee shall be endorsed thereon by incorporation of the relevant Loss Payable Clause and, where the Insurances have been assigned to the Mortgagee, by means of a Notice of Assignment of Insurances (signed by the Owner and by any other assured who shall have assigned its interest in the Insurances to the Mortgagee) and that the Mortgagee shall be furnished with pro forma copies thereof and a letter or letters of undertaking from the Approved Brokers in such form as shall from time to time be required by the Mortgagee;
 
(h)
Associations’ loss payable clauses, undertakings and certificates
 
to procure that any protection and indemnity and/or war risks associations in which the Ship is for the time being entered shall endorse the relevant Loss Payable Clause on the relevant certificate of entry or policy and shall furnish the Mortgagee with a copy of such certificate of entry or policy and a letter or letters of undertaking in such form as shall from time to time be required by the Mortgagee;
 
(i)
Extent of cover and exclusions
 
to take all necessary action and comply with all requirements which may from time to time be applicable to the Insurances (including, without limitation, the making of all requisite declarations within any prescribed time limits and the payment of any additional premiums or calls) so as to ensure that the Insurances are not made subject to any exclusions or qualifications to which the Mortgagee has not given its prior written consent and are otherwise maintained on terms and conditions from time to time approved in writing by the Mortgagee;
 
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(j)
Information regarding insurances
 
to advise the Mortgagee of any changes in the terms and conditions of the insurance cover of the Ship in relation to the war risks insurances, the protection and indemnity insurances and the hull and machinery insurances and of any changes in the Approved Brokers and to obtain consent from the Mortgagee to such changes, and to further advise the Mortgagee of any claims in relation to the Ship and to provide the Mortgagee, as and when requested by the Mortgagee, information in relation to the progress of such claims and the settlement of these;
 
(k)
Independent report
 
if so requested by the Mortgagee, to furnish the Mortgagee from time to time with a detailed report signed by an independent firm of marine insurance brokers appointed by the Mortgagee dealing with the insurances maintained on the Ship and stating the opinion of such firm as to the adequacy thereof;
 
(l)
Collection of claims
 
to do all things necessary and provide all documents, evidence and information to enable the Mortgagee to collect or recover any moneys which shall at any time become due in respect of the Insurances;
 
(m)
Employment of Ship
 
not to employ the Ship or suffer the Ship to be employed otherwise than in conformity with the terms of the Insurances (including any warranties express or implied therein) without first obtaining the consent of the insurers to such employment and complying with such requirements as to extra premium or otherwise as the insurers may prescribe;
 
(n)
Application of recoveries
 
to apply all sums receivable under the Insurances which are paid to the Owner in accordance with the Loss Payable Clauses in repairing all damage and/or in discharging the liability in respect of which such sums shall have been received; and
 
(o)
Assignment of Insurances
 
forthwith upon being requested so to do by the Mortgagee, to assign to the Mortgagee (in such form as it may require) the Insurances and all benefits thereof;
 
6.1.2
Ship’s name and registration
 
not to change the name of the Ship and to procure that the Ship is permanently registered within ninety (90) days of the date of this Deed by filing with or producing to the Cyprus Ship Registry (and/or any other appropriate authorities) all such documents or things as they may require for such purpose and thereafter to keep the Ship registered as a Cyprus Ship at the Port of Limassol and not do or suffer to be done anything, or omit to do anything the doing or omission of which could or might result in such registration being forfeited or imperilled or which could or might result in the Ship being required to be registered otherwise than as a Cyprus ship at the Port of Limassol and not to register the Ship or permit its registration under any other flag or at any other port without the prior written consent of the Mortgagee;
 
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6.1.3
Repair
 
to keep the Ship in a good and efficient state of repair and procure that all repairs to or replacement of any damaged, worn or lost parts or equipment are effected in such manner (both as regards workmanship and quality of materials) as not to diminish the value of the Ship;
 
6.1.4
Modification; removal of parts; equipment owned by third parties
 
not without the prior written consent of the Mortgagee to, or suffer any other person to:
 
(a)
make any modification to the Ship in consequence of which her structure, type or performance characteristics could or might be materially altered or her value materially reduced; or
 
(b)
remove any material part of the Ship or any equipment the value of which is such that its removal from the Ship would materially reduce the value of the Ship without replacing the same with equivalent parts or equipment which are owned by the Owner free from Encumbrances; or
 
(c)
install on the Ship any equipment owned by a third party which cannot be removed without causing damage to the structure or fabric of the Ship;
 
6.1.5
Maintenance of class; compliance with regulations
 
to maintain the Classification as the class of the Ship and to comply with and ensure that the Ship at all times complies with the provisions of the Cyprus Merchant Shipping Laws and all regulations and requirements (statutory or otherwise) from time to time applicable to vessels registered at the Port of Limassol or otherwise applicable to the Ship;
 
6.1.6
Surveys
 
to submit the Ship to continuous surveys and such periodical or other surveys as may be required for classification purposes and to supply to the Mortgagee copies of all survey reports issued in respect thereof;
 
6.1.7
Inspection
 
to ensure that the Mortgagee, by surveyors or other persons appointed by it for such purpose, may board the Ship at all reasonable times for the purpose of inspecting her and to afford all proper facilities for such inspections and for this purpose to give the Mortgagee reasonable advance notice of any intended drydocking of the Ship (whether for the purpose of classification, survey or otherwise);
 
6.1.8
Prevention of and release from arrest
 
promptly to pay and discharge all debts, damages, liabilities and outgoings whatsoever which have given or may give rise to maritime, statutory or possessory liens on, or claims enforceable against, the Ship, her Earnings or Insurances or any part thereof and, in the event of a writ or libel being filed against the Ship, her Earnings or Insurances or any part thereof, or of any of the same being arrested, attached or levied upon pursuant to legal process or purported legal process or in the event of detention of the Ship in exercise or purported exercise of any such lien or claim as aforesaid, to procure the release of the Ship, her Earnings and Insurances from such arrest, detention attachment or levy or, as the case
 
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may be, the discharge of the writ or libel forthwith upon receiving notice thereof by providing bail or procuring the provision of security or otherwise as the circumstances may require;
 
6.1.9
Employment
 
not to employ the Ship or permit her employment in any manner, trade or business which is forbidden by international law, or which is unlawful or illicit under the law of any relevant jurisdiction, or in carrying illicit or prohibited goods, or in any manner whatsoever which may render her liable to condemnation in a prize court, or to destruction, seizure, confiscation, penalty or sanctions and, in the event of hostilities in any part of the world (whether war be declared or not), not to employ the Ship or permit her employment in carrying any contraband goods, or enter or trade to or to continue to trade in any zone which has been declared a war zone by any Government Entity or by the Ship’s war risks insurers unless the prior written consent of the Mortgagee is obtained and such special insurance cover as the Mortgagee may require shall have been effected by the Owner and at its expense;
 
6.1.10
Trading
 
(a)
advise the Mortgagee of any contract of employment for the Ship which is of a duration of more than twelve (12) months;
 
(b)
deliver to the Mortgagee a copy of any Charter entered into;
 
(c)
(1) execute a Charter Assignment in respect of any Charter and (2) execute any notice of assignment required in connection therewith and promptly procure the acknowledgement of any such notice of assignment by the relevant Charterer; and
 
(d)
pay all legal and other costs incurred by the Mortgagee in connection with any such Charter Assignment;
 
6.1.11
Notification of certain events
 
to notify the Mortgagee forthwith by fax thereafter confirmed by letter of:
 
(a)
any damage to the Ship requiring repairs the cost of which will or might exceed the Casualty Amount;
 
(b)
any occurrence in consequence of which the Ship has or may become a Total Loss;
 
(c)
any requisition of the Ship for hire;
 
(d)
any requirement or recommendation made by any insurer or the Classification Society or by any competent authority which is not, or cannot be, complied with in accordance with its terms;
 
(e)
any arrest or detention of the Ship or any exercise or purported exercise of a lien or other claim on the Ship or the Earnings or Insurances or any part thereof;
 
(f)
any petition or notice of meeting to consider any resolution to wind up the Owner (or any event analogous thereto under the laws of the place of its incorporation);
 
(g)
the occurrence of any Default; or
 
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(h)
the occurrence of any Environmental Claim against the Owner or the Ship or any incident, event or circumstances which may give rise to any such Environmental Claim;
 
6.1.12
Payment of outgoings and evidence of payments
 
promptly to pay all tolls, dues and other outgoings whatsoever in respect of the Ship and her Earnings and Insurances and to keep proper books of account in respect of the Ship and her Earnings and, as and when the Mortgagee may so require, to make such books available for inspection on behalf of the Mortgagee, and to furnish satisfactory evidence that the wages and allotments and the insurance and pension contributions of the Master and crew are being promptly and regularly paid and that all deductions from crew’s wages in respect of any applicable tax liability are being properly accounted for and that the Master has no claim for disbursements other than those incurred by him in the ordinary course of trading on the voyage then in progress;
 
6.1.13
Encumbrances
 
not without the prior written consent of the Mortgagee (and then only subject to such conditions as the Mortgagee may impose) to create or purport or agree to create or permit to arise or subsist any Encumbrance (other than Permitted Liens) over or in respect of the Ship, any share or interest therein or in any other part of the Mortgaged Property otherwise than to or in favour of the Mortgagee;
 
6.1.14
Sale or other disposal
 
not without the prior written consent of the Mortgagee (and then only subject to such conditions as the Mortgagee may impose) to sell, agree to sell, transfer, abandon or otherwise dispose of the Ship or any share or interest therein;
 
6.1.15
Chartering
 
not without the prior written consent of the Mortgagee (which the Mortgagee shall have full liberty to withhold) and, if such consent is given, only subject to such conditions as the Mortgagee may impose, to let the Ship:
 
(a)
on demise charter for any period;
 
(b)
on terms whereby more than two (2) months’ hire (or the equivalent) is payable in advance; or
 
(c)
below the market rate prevailing at the time when the Ship is fixed or other than on arms’ length terms;
 
6.1.16
Sharing of Earnings
 
not without the prior written consent of the Mortgagee (and then only subject to such conditions as the Mortgagee may impose) to enter into any agreement or arrangement whereby the Earnings may be shared with any other person;
 
6.1.17
Payment of Earnings
 
to procure that the Earnings are paid to the Mortgagee at all times if and when the same shall be or shall have become so payable in accordance with the Security Documents after the Mortgagee shall have directed pursuant to clause 2.1 of the General Assignment that the
 
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same shall be no longer receivable by the Owner and that any Earnings which are so payable and which are in the hands of the Owner’s brokers or agents are duly accounted for and paid over to the Mortgagee forthwith on demand;
 
6.1.18
Repairers’ liens
 
not without the prior written consent of the Mortgagee to put the Ship into the possession of any person for the purpose of work being done upon her in an amount exceeding or likely to exceed the Casualty Amount unless such person shall first have given to the Mortgagee in terms satisfactory to it, a written undertaking not to exercise any lien on the Ship or the Earnings for the cost of such work or otherwise;
 
6.1.19
Manager
 
not without the prior written consent of the Mortgagee to appoint a manager of the Ship other than the Manager, or terminate or amend the terms of the Management Agreement;
 
6.1.20
Registration of Mortgage
 
to cause the Mortgage to be duly registered and otherwise to comply with and satisfy all the requirements and formalities established by the laws of Cyprus and to perfect the Mortgage and this Deed as a valid and enforceable first priority statutory mortgage upon the Ship and to furnish to the Mortgagee from time to time such proof as the Mortgagee may reasonably request in order to satisfy itself that the Owner has complied with the provisions of this clause 6.1.20;
 
6.1.21
Notice of Mortgage
 
to place and at all times and places to retain a properly certified copy of the Mortgage and this Deed (which shall form part of the Ship’s documents) on board the Ship with her papers and cause such certified copy of the Mortgage and this Deed to be exhibited to any and all persons having business with the Ship which might create or imply any commitment or encumbrance whatsoever on or in respect of the Ship (other than a lien for crew’s wages and salvage) and to any representative of the Mortgagee and to place and keep prominently displayed in the navigation room and in the Master’s cabin of the Ship a framed printed notice in plain type reading as follows:
 
NOTICE OF MORTGAGE”
 
This Ship is subject to a first priority mortgage and deed of covenant in favour of BAYERISCHE HYPO- UND VEREINSBANK AKTIENGESELLSCHAFT of 7 Heraklitou Street, 106 75 Athens, Greece. Under the said mortgage and deed of covenant, neither the Owner nor any charterer nor the Master of this Ship has any right, power or authority to create, incur or permit to be imposed upon this Ship any commitments or encumbrances whatsoever other than for crew’s wages and salvage
 
and in terms of the said notice it is hereby agreed that save and subject as otherwise herein provided, neither the Owner nor any charterer nor the Master of the Ship nor any other person has any right, power or authority to create, incur or permit to be imposed upon the Ship any lien whatsoever other than for crew’s wages and salvage;
 
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6.1.22
Conveyance on default
 
where the Ship is (or is to be) sold in exercise of any power contained in this Deed or otherwise conferred on the Mortgagee, to execute, forthwith upon request by the Mortgagee, such form of conveyance of the Ship as the Mortgagee may require;
 
6.1.23
Anti-drug abuse
 
without prejudice to clause 6.1.9, to take all necessary and proper precautions to prevent any infringements of the Anti-Drug Abuse Act of 1986 of the United States of America or any similar legislation applicable to the Ship in any jurisdiction in or to which the Ship shall be employed or located or trade or which may otherwise be applicable to the Ship and/or the Owner and, if the Mortgagee shall so require, to enter into a “Carrier Initiative Agreement” with the United States Customs and Border Control and to procure that the same agreement (or any similar agreement hereafter introduced by any Government Entity of the United States of America) is maintained in full force and effect and performed by the Owner;
 
6.1.24
Compliance with Environmental Laws
 
to comply with, and procure that all Environmental Affiliates of the Owner comply with, all Environmental Laws including, without limitation, requirements relating to manning and establishment of financial responsibility and to obtain and comply with, and procure that all Environmental Affiliates of the Owner obtain and comply with, all Environmental Approvals; and
 
6.1.25
Compliance with Code
 
to procure that the Manager and any Operator will, comply with and ensure that the Ship and any Operator comply with the requirements of the Code, including (but not limited to) the maintenance and renewal of valid certificates pursuant thereto throughout the Security Period.
 
7
Powers of Mortgagee to protect security and remedy defaults
 
7.1
Protective action
 
The Mortgagee shall, without prejudice to its other rights, powers and remedies under any of the Security Documents, be entitled (but not bound) at any time, and as often as may be necessary, to take any such action as it may in its discretion think fit for the purpose of protecting or maintaining the security created by this Deed and the other Security Documents, and all Expenses attributable thereto shall be payable by the Owner on demand together with interest thereon at the rate provided for in clause 3.4 of the Loan Agreement from the date such expense or liability was incurred by the Mortgagee until the date of actual receipt whether before or after any relevant judgement.
 
7.2
Remedy of defaults
 
Without prejudice to the generality of the provisions of clause 7.1:
 
7.2.1
if the Owner fails to comply with any of the provisions of clause 6.1.1 the Mortgagee shall be entitled (but not bound) to effect and thereafter to maintain all such insurances upon the Ship as in its discretion it may think fit in order to procure the compliance with such provisions or alternatively, to require the Ship (at the Owner’s risk) to remain in, or to proceed to and remain in a port designated by the Mortgagee until such provisions are fully complied with;
 
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7.2.2
if the Owner fails to comply with any of the provisions of clauses 6.1.3, 6.1.5 or 6.1.6, the Mortgagee shall be entitled (but not bound) to arrange for the carrying out of such repairs, changes or surveys as it may deem expedient or necessary in order to procure the compliance with such provisions; and
 
7.2.3
if the Owner fails to comply with any of the provisions of clause 6.1.8 the Mortgagee shall be entitled (but not bound) to pay and discharge all such debts, damages, liabilities and outgoings as are therein mentioned and/or to take any such measures as it may deem expedient or necessary for the purpose of securing the release of the Ship in order to procure the compliance with such provisions
 
and the Expenses attributable to the exercise by the Mortgagee of any such powers shall be payable by the Owner to the Mortgagee on demand.
 
8
Powers of Mortgagee on Event of Default
 
8.1
Powers
 
Upon the happening of any Event of Default, the Mortgagee shall become forthwith entitled by notice given to the Owner in accordance with the provisions of clause 11.2 of the Loan Agreement to declare the Outstanding Indebtedness to be due and payable immediately or in accordance with such notice and to terminate the Master Swap Agreement, whereupon the Outstanding Indebtedness shall become so due and payable and (whether or not the Mortgagee shall have given any such notice) the Mortgagee shall become forthwith entitled, as and when it may see fit, to put into force and exercise in relation to the Mortgaged Property or any part thereof all or any of the rights, powers and remedies possessed by it as mortgagee of the Mortgaged Property (whether at law, by virtue of the Mortgage and this Deed or otherwise) and in particular (without limiting the generality of the foregoing):
 
8.1.1
to take possession of the Ship;
 
8.1.2
to require that all policies, contracts, certificates of entry and other records relating to the Insurances (including details of and correspondence concerning outstanding claims) be delivered forthwith to such adjusters and/or brokers and/or other insurers as the Mortgagee may nominate;
 
8.1.3
to collect, recover, compromise and give a good discharge for, all claims then outstanding or thereafter arising under the Insurances or any of them or in respect of any other part of the Mortgaged Property, and to take over or institute (if necessary using the name of the Owner) all such proceedings in connection therewith as the Mortgagee in its absolute discretion thinks fit, and, in the case of the Insurances, to permit the brokers through whom collection or recovery is effected to charge the usual brokerage therefor;
 
8.1.4
to discharge, compound, release or compromise claims in respect of the Ship or any other part of the Mortgaged Property which have given or may give rise to any charge or lien or other claim on the Ship or any other part of the Mortgaged Property or which are or may be enforceable by proceedings against the Ship or any other part of the Mortgaged Property;
 
8.1.5
to sell the Ship or any share or interest therein with or without prior notice to the Owner, and with or without the benefit of any charterparty, and free from any claim by the Owner (whether in admiralty, in equity, at law or by statute) by public auction or private contract, at such place and upon such terms as the Mortgagee in its absolute discretion may determine, with power to postpone any such sale, or otherwise to sell the Ship pursuant to the Mortgagee’s statutory power of sale under section 35 of the Merchant Shipping (Registration of Ships Sales and Mortgages) Law of 1963 (as amended) and without being answerable for any loss
 
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occasioned by such sale or resulting from postponement thereof and with power, where the Mortgagee purchases the Ship, to make payment of the sale price by making an equivalent reduction in the amount of the Outstanding Indebtedness in the manner referred to in clause 9.1;
 
8.1.6
to manage, insure, maintain and repair the Ship, and to employ, sail or lay up the Ship in such manner and for such period as the Mortgagee, in its absolute discretion, deems expedient accounting only for net profits arising from any such employment; and
 
8.1.7
to recover from the Owner on demand all Expenses incurred or paid by the Mortgagee in connection with the exercise of the powers (or any of them) referred to in this clause 8.1.
 
8.2
Receiver
 
8.2.1
Appointment
 
At any time after the Outstanding Indebtedness shall have become due and payable in accordance with a notice given by the Mortgagee to the Owner pursuant to clause 11.2 of the Loan Agreement, the Mortgagee shall be entitled (but not bound) by writing executed as a deed or under the hand of any Director or officer of the Mortgagee to appoint any person or persons to be a receiver and/or manager of the Mortgaged Property or any part thereof (with power to authorise any joint receiver and/or manager to exercise any power independently of any other joint receiver and/or manager) and may from time to time fix his remuneration, and may remove any receiver and/or manager so appointed and appoint another in his place. Any receiver and/or manager so appointed shall be the agent of the Owner and the Owner shall be solely responsible for his acts or defaults and for his remuneration, and such receiver and/or manager so appointed shall have all powers conferred by the United Kingdom Law of Property Act 1925 without the restrictions contained in sections 93 and 103 of that Act and, in addition, power on behalf of and at the cost of the Owner (notwithstanding any liquidation of the Owner) to do or omit to do anything which the Owner could do or omit to do in relation to the Mortgaged Property or any part thereof and in particular (but without prejudice to the generality of the foregoing) any such receiver and/or manager may exercise all the powers and discretions conferred on the Mortgagee by the Mortgage and this Deed.