SUBORDINATION AGREEMENT
This Subordination Agreement (this “Agreement”)
is made as of September 5, 2008 by and between Excel
Maritime Carriers Ltd., a Liberian corporation
(“Excel”), and Oceanaut, Inc., a Xxxxxxxx
Islands corporation (“Oceanaut”).
Recitals
A. Oceanaut has agreed to acquire four dry bulk carriers
(the “Vessel Acquisition”) for an aggregate
purchase price of US$352,000,000, pursuant to the terms and
conditions of four separate memoranda of agreement between
Oceanaut and the several sellers, each dated as of
August 20, 2008 (the “MOAs”).
B. The Vessel Acquisition will take place over the course
of several closings, the first of which is the initial closing
(the “Initial Closing”), at which time title
to, and delivery of, two vessels whose aggregate fair market
value will equal at least 80% of Oceanaut’s net assets
(excluding deferred underwriting discounts and commissions in
the amount of $4,500,000), will be transferred and effectuated
by the seller of each such vessel to Oceanaut’s nominated
subsidiary in accordance with the terms and conditions of each
MOA relating to each such vessel, such that the Company’s
initial business combination (as defined in its prospectus with
respect to its initial public offering) may be consummated.
C. After consummation of the Initial Closing, Oceanaut
intends to pay a quarterly dividend of at least US$0.28 per
share, or US$1.12 per share per year, payable with respect to
the fourth quarter of 2008 and quarterly thereafter, to the
holders of Oceanaut’s common shares, par value $0.0001 per
share (the “Common Shares”), subject to the
discretion of Oceanaut’s Board of Directors.
D. Excel and other parties entering into a similar
agreement have agreed that the number of Common Shares set forth
below their name on the signature page hereto (the
“Subordinated Shares”) will become subordinated
to the other Common Shares not owned by Excel with respect to
the receipt of dividends pursuant to the terms and conditions
set forth in this Agreement.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. Payment of Dividends to Holders of Common
Shares.
(a) Definitions. For the purpose
of this Section 1, the following definitions shall be used.
(i) Adjusted Operating
Surplus. “Adjusted Operating
Surplus” means, with respect to any period, Operating
Surplus generated with respect to such period (1) less any
net reduction in cash reserves for Operating Expenditures or
Maintenance Capital Expenditures with respect to such period to
the extent such reduction does not relate to an Operating
Expenditure or Maintenance Capital Expenditure made with respect
to such period, (2) plus any net increase in cash reserves
for Operating Expenditures or Maintenance Capital Expenditures
with respect to such period. Adjusted Operating Surplus does not
include the portion of Operating Surplus included in
clause (A) of the definition of Operating Surplus herein.
(ii) Base Dividend. “Base
Dividend” means US$0.28 per Common Share per calendar
quarter, subject to any adjustments as set forth in
subsection (f) below.
(iii) Capital
Expenditures. “Capital
Expenditures” includes every expenditure that is capital in
nature, including expansion capital expenditures, replacement
capital expenditures and Maintenance Capital Expenditures.
(iv) Change of
Control. “Change of Control” means
the occurrence of any of the following: (A) the sale,
lease, transfer, conveyance or other disposition (other than by
way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of Oceanaut’s
assets, properties or business; (B) the adoption by the
Board of Directors of a plan of liquidation or dissolution of
Oceanaut; (C) the consummation of any transaction, or a
series of related transactions (including, without limitation,
any merger or consolidation) the result of which is that any
“person” (as such term is used in
Section 13(d)(3) of the Securities Exchange Act of
1934) other than Excel, becomes the beneficial owner,
directly or indirectly, of more than 3,684,375 (as adjusted for
stock splits, stock dividends or similar events) of
Oceanaut’s shares of any class or series entitled to vote
generally in the election of directors, measured by voting power
rather than number of shares, and such number of shares held
exceeds the voting power of Excel; (D) if, at any time,
Oceanaut becomes insolvent, admits in writing its inability to
pay its debts as they become
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due, commits an act of bankruptcy, is adjudged or declared
bankrupt or makes an assignment for the benefit of creditors, a
proposal or similar action under the bankruptcy, insolvency or
other similar laws of the Xxxxxxxx Islands or any applicable
jurisdiction or commences or consents to proceedings relating to
it under any reorganization, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction;
(E) a change in directors after which a majority of the
members of the Board of Directors are not Continuing Directors;
(F) the consolidation of Oceanaut with, or the merger or
consolidation of Oceanaut with or into, any “person,”
or the consolidation of any “person” with, or the
merger or consolidation of any “person” with or into,
Oceanaut, in any such event pursuant to a transaction in which
any of the outstanding Common Shares are converted into or
exchanged for cash, securities or other property or receive a
payment of cash, securities or other property, other than any
such transaction where Oceanaut’s voting stock outstanding
immediately prior to such transaction is converted into or
exchanged for voting stock of the surviving or transferee
“person” constituting a majority of the outstanding
shares of such voting stock of such surviving or transferee
“person” immediately after giving effect to such
issuance.
(v) Closing Price. “Closing
Price” for any day means the last sale price on such day,
regular way, or in case no such sale takes place on such day,
the average of the closing bid and asked prices on such day,
regular way, as reported in the principal consolidated
transaction reporting system with respect to securities listed
on the principal National Securities Exchange on which the
Common Shares are listed or, if the Common Shares are not listed
on any National Securities Exchange, the last quoted price on
such day or, if not so quoted, the average of the high bid and
low asked prices on such day in the over-the-counter market then
in use, or, if on any such day the Common Shares are not quoted
by any such organization, the average of the closing bid and
asked prices on such day as furnished by a professional market
maker making a market in the Common Shares selected by the Board
of Directors, or if on any such day no market maker is making a
market in the Common Shares, the fair value of the Common Shares
on such day as determined by the Board of Directors.
(vi) Common Share
Arrearages. “Common Share
Arrearages” means the amount by which the Base Dividend in
any quarter during the Subordination Period exceeds the dividend
from Operating Surplus actually paid per Common Share (other
than the Subordinated Shares) issued and outstanding in such
quarter, on or after the Post-Initial Closing Trading Date,
cumulative for that quarter and all prior quarters during the
Subordination Period, and reduced by any dividends from
Operating Surplus on the Common Shares (other than the
Subordinated Shares) paid to reduce the Common Share Arrearages
pursuant to Section 1(d)(ii); provided that the unpaid
Common Share Arrearages will not accrue interest and provided
further that no Common Share Arrearages will accrue after the
distribution of any proceeds from any voluntary or involuntary
dissolution, liquidation or winding up of the affairs of
Oceanaut. The Subordinated Shares will not accrue any arrearages
during the Subordination Period.
(vii) Continuing
Directors. “Continuing Directors”
means, as of any date of determination, any member of the Board
of Directors who (1) was a member of the Board of Directors
immediately after the completion of the Initial Closing; or
(2) was nominated for election or elected to the Board of
Directors with the approval of a majority of the directors then
in office who were either directors immediately after the
completion of the Initial Closing or whose nomination or
election was previously so approved.
(viii) Contracted
Fleet. “Contracted Fleet” means the
ACHILLES II, the XXXX XX, the MEDI CEBU and the THREE STARS.
(ix) Current Market
Price. “Current Market Price” means
the average of the daily Closing Prices per Common Share for the
five (5) consecutive Trading Days immediately prior to such
date.
(x) Interim Capital
Transactions. “Interim Capital
Transactions” means the following transactions if they
occur prior to the liquidation of Oceanaut: (1) borrowings
other than working capital borrowings; (2) sales of equity
and debt securities of Oceanaut; (3) capital contributions;
(4) corporate reorganizations or restructurings;
(5) the termination of interest rate swap agreements;
(6) sales or other dispositions of vessels except to the
extent the proceeds from such dispositions exceed the initial
purchase price or contributed value of the vessel subject to the
disposition, which excess amount shall be treated as Operating
Surplus; and (7) sales or other dispositions of other
assets other than in the normal course of business.
(xi) Liquidating
Dividends. “Liquidating Dividends”
are dividends or any other distributions to the Common Shares
that are paid from any amount in excess of Operating Surplus.
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(xii) Maintenance Capital
Expenditures. “Maintenance Capital
Expenditures” means any cash capital expenditures incurred
after the Initial Closing to maintain vessels and other assets,
replacement of equipment on the vessels, repairs and similar
expenditures, but excluding capital expenditures related to
drydocking and capital expenditures for or related to the
acquisition of additional vessels, and including capital
expenditures for replacement of a vessel as a result of damage
or loss prior to normal retirement, net of any insurance
proceeds, warranty payments or similar property not treated as
cash receipts for purposes of calculating Operating Surplus.
(xiii) National Securities
Exchange. “National Securities
Exchange” means an exchange registered with the United
States Securities and Exchange Commission under
Section 6(a) of the United States Securities Exchange Act
of 1934, as amended, supplemented or restated from time to time,
and any successor to such statute.
(xiv) Operating
Expenditures. “Operating
Expenditures” are all cash expenditures, after the Initial
Closing, including but not limited to, operating expenses,
interest payments and taxes, but excluding:
(A) the repayment of borrowings;
(B) the repurchase of debt and equity securities;
(C) interest rate swap termination costs;
(D) expenses and taxes related to Interim Capital
Transactions;
(E) Capital Expenditures;
(F) expenses, costs and liabilities related to the Vessel
Acquisition; and
(G) payment of dividends.
(xv) Operating Surplus. For any
period “Operating Surplus” is:
(A) $20 million; plus
(B) all of Oceanaut’s cash receipts (including the
proportionate share of cash receipts of certain subsidiaries
which are not wholly-owned) since the Initial Closing, excluding
cash receipts from Interim Capital Transactions; plus
(C) interest (after giving effect to interest rate swap
agreements) paid on debt incurred and cash dividends paid on
equity securities issued by Oceanaut, in each case, to finance
all or any portion of the construction, replacement or
improvement of a capital asset such as vessels (other than
Oceanaut’s Contracted Fleet) during the period from such
financing until the earlier to occur of the date the capital
asset is put into service or the date that it is abandoned or
disposed of; plus
(D) interest (after giving effect to interest rate swap
agreements) paid on debt incurred and cash dividends paid on
equity securities issued by Oceanaut, in each case, to pay the
construction period interest on debt incurred, or to pay
construction period dividends on equity issued, to finance the
construction projects described in (C) above; less
(E) Operating Expenditures; less
(F) a reserve for the estimated cost of future drydockings;
less
(G) the amount of cash reserves (including the
proportionate share of cash reserves for certain subsidiaries
which are not wholly-owned) established by the Board of
Directors for future (1) Operating Expenditures and
(2) Maintenance Capital Expenditures.
The $20 million amount in (A) above may be increased
by the Board of Directors only if the Board of Directors
determines that such increase is necessary to allow it to pay
all or part of the Base Dividend on the Common Shares. This
$20 million amount cannot be increased in any period in
which a dividend on the Subordinated Shares is paid or is
otherwise payable from Operating Surplus.
For purposes of calculating Operating Surplus, any dividends
that are paid on the Preferred Shares will be treated as if they
were interest payments and not dividends.
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Notwithstanding the foregoing, the construction or application
of this definition of Operating Surplus as outlined above may be
adjusted in the case of any particular transaction or matter or
type of transaction or matter if the Board of Directors, with
the concurrence of Oceanaut’s audit committee, is of the
opinion that such an adjustment is necessary or appropriate to
further the overall purpose and intent of the definition of
Operating Surplus, so long as such adjustment will not adversely
affect the holders of Subordinated Shares.
(xvi) Preferred
Shares. “Preferred Shares” means
shares of Oceanaut’s preferred stock, par value $0.0001 per
share.
(xvii) Subordination
Period. “Subordination Period”
means the period from the Initial Closing (the
“Post-Initial Closing Trading Date”) and ending
on the first to occur of the following:
(A) the first day of any quarter ending after
September 30, 2013 in respect of which the quarterly
dividends paid by Oceanaut from Operating Surplus on all of the
Common Shares, including the Subordinated Shares, at least
equaled the Base Dividend for the immediately preceding
four-quarter period (the “Four-Quarter
Period”); and
(B) the occurrence of a Change of Control, in which case
the Subordination Period will be deemed to end immediately
preceding such occurrence.
Notwithstanding the foregoing, the Subordination Period will end
on the first day after the quarter ending March 31, 2011 if
the above test in (A) is met and the quarterly base
dividend increases by 30% to US$0.365 on all Common Shares,
including the Subordinated Shares.
(xviii) Trading Day. “Trading
Day” means a day on which the principal National Securities
Exchange on which the Common Shares are listed is open for the
transaction of business or, if the Common Shares are not listed
on any National Securities Exchange, a day on which banking
institutions in New York City in the United States generally are
open.
(b) Payment of Dividends on Common Shares During the
Subordination Period. During the
Subordination Period only, all dividends paid to shareholders
will be treated as either a dividend from Operating Surplus or a
Liquidating Dividend. The Board of Directors will treat all
dividends as dividends from Operating Surplus until the sum of
all dividends paid since the Initial Closing equals the amount
of Operating Surplus as of the most recent date of
determination. The Board of Directors will treat dividends paid
from any amount in excess of Operating Surplus as Liquidating
Dividends.
(c) Authority to Pay
Dividends. The Board of Directors, in its
sole discretion, may determine whether to declare and pay
dividends to the shareholders at any time. Subject to the rights
of any outstanding Preferred Shares, any dividends that are
declared and paid by the Board of Directors with respect to the
Common Shares must be declared and paid in accordance with the
provisions of this Section 1. Dividends shall be paid in
cash unless the Board of Directors has authorized a distribution
in kind. The Board of Directors shall determine the fair market
value of any dividend to be paid in kind. Any dividends to be
paid in kind (other than in the nature of a stock split) shall
then be declared and paid in accordance with the provisions of
this Section 1 as if the fair market value were cash.
(d) Dividends from Operating Surplus During
Subordination Period. Subject to the rights
of any outstanding Preferred Shares, dividends from Operating
Surplus, if any, for any quarter during the Subordination Period
will be declared and paid in the following manner:
(i) First, 100% of dividends to all of the Common Shares
other than the Subordinated Shares, pro rata, until each such
outstanding Common Share has been paid an amount equal to the
Base Dividend for that quarter;
(ii) Second, 100% of dividends in excess of those paid
pursuant to clause (i) above to all of the Common Shares
other than the Subordinated Shares, pro rata, until each such
outstanding Common Share has been paid an amount equal to any
Common Share Arrearages accrued and unpaid for any prior
quarters during the Subordination Period;
(iii) Third, 100% of dividends in excess of those paid
pursuant to clauses (i) and (ii) above to all of the
Subordinated Shares, pro rata, until each outstanding
Subordinated Share has been paid an amount equal to the Base
Dividend for that quarter;
(iv) Fourth, 100% of dividends to all outstanding Common
Shares, including the Subordinated Shares, pro rata; and
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(v) Notwithstanding the above, the Subordinated Shares
shall not be entitled to receive any dividends prior to those
paid with respect to the second quarter of 2010.
(e) Liquidating Dividends. Subject
to the rights of any outstanding Preferred Shares, Liquidating
Dividends shall be paid, pro rata, to the Common Shares.
(f) Adjustment of Base
Dividend. The Base Dividend is subject to
downward adjustment in the case of payment of Liquidating
Dividends. The Base Dividend will be reduced in the same
proportion that the Liquidating Dividend had to the fair market
value of the Common Shares prior to the payment of the dividend.
If the Common Shares are publicly traded on a National
Securities Exchange or market, the fair market value will be the
Current Market Price before the ex-dividend date. If the shares
are not publicly traded, the fair market value will be
determined by the Board of Directors. In addition, Oceanaut may
make a pro rata distribution of shares or may effect a
subdivision or combination of shares and any amounts calculated
on a per share basis (including, without limitation, the Base
Dividend and any Common Share Arrearages) or stated as a number
of shares shall be adjusted proportionately and appropriately as
determined by the Board of Directors.
2. Rights of Subordination Shares After the
Subordination Period. After the end of the
Subordination Period, the restrictions on the Subordinated
Shares shall terminate and the rights and privileges of such
shares shall be the same as those of the other Common Shares not
owned by Excel.
3. Transfer of Subordinated
Shares. If Excel transfers or disposes of any
Subordinated Shares during the Subordination Period, such shares
held by the transferee shall remain Subordinated Shares subject
to the terms and conditions of this Agreement.
4. Successors and
Assigns. This Agreement shall bind any
successors or assigns of Excel and Oceanaut.
5. Counterparts. This
Agreement may be executed in one or more counterparts, each of
which shall be deemed an original and all of which together
shall constitute one instrument.
6. Governing Law; Consent to
Jurisdiction. This Agreement shall be
governed by, and construed in accordance with, the internal laws
of the Xxxxxxxx Islands, without regard to principles of
conflicts of law. THE PARTIES HERETO HERBY WAIVE ANY RIGHT TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREIN,
INCLUDING CLAIMS BASED ON CONTRACT, TORT, BREACH OF DUTY AND ALL
OTHER COMMON LAW OR STATUTORY BASES. The parties hereto submit
to the exclusive jurisdiction of the state and federal courts
located in the City of New York, State of New York. If the jury
waiver set forth in this Section is not enforceable, then any
dispute, controversy or claim arising out of or relating to this
Agreement or any of the transactions contemplated herein will be
finally settled by binding arbitration in New York, New York in
accordance with the then-current Commercial Arbitration Rules of
the American Arbitration Association by one arbitrator appointed
in accordance with said rules. The arbitrator shall apply
Xxxxxxxx Islands law to the resolution of any dispute, without
reference to rules of conflicts of law or rules of statutory
arbitration. Judgment on the award rendered by the arbitrator
may be entered in any court having jurisdiction thereof.
Notwithstanding the foregoing, the parties may apply to any
court of competent jurisdiction for preliminary or interim
equitable relief, or to compel arbitration in accordance with
this paragraph. The expenses of the arbitration, including the
arbitrator’s fees and expert witness fees, incurred by the
parties to the arbitration, may be awarded to the prevailing
party, in the discretion of the arbitrator, or may be
apportioned between the parties in any manner deemed appropriate
by the arbitrator. Unless and until the arbitrator decides that
one party is to pay for all (or a share) of such expenses, both
parties shall share equally in the payment of the
arbitrator’s fees as and when billed by the arbitrator.
7. Entire Agreement. This
Agreement represents the entire agreement with respect to the
subject matter hereof, and supersedes all prior negotiations,
agreements and commitments. This Agreement may be amended only
by written instrument signed by each of Excel and Oceanaut.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement
as of the date first above written.
EXCEL MARITIME CARRIERS LTD.
By: /s/ Xxxxxxxx Xxxxxxx
Title: President and Chief Executive Officer
Number of Shares Subject to this Agreement:
By: /s/ Xxxxxxx Panayotides
Title: Chief Executive Officer
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