FACILITY AGREEMENT for a Reducing Revolving Credit Facility of (originally) up to US$91,000,000 to FREESEAS INC. provided by CREDIT SUISSE AG (formerly known as CREDIT SUISSE)

Exhibit 99.2

Private & Confidential

FACILITY AGREEMENT

for a

Reducing Revolving Credit Facility

of (originally) up to US$91,000,000

to

FREESEAS INC.

provided by

CREDIT SUISSE AG

(formerly known as CREDIT SUISSE)

 

LOGO

Contents

 

Clause    Page  
1   

Purpose and definitions

      1   
2   

The Commitment and the Advances

      19   
3   

Interest

      21   
4   

Repayment, reduction and cancellation

      22   
5   

Fees, commission and expenses

      27   
6   

Payments and taxes; accounts and calculations

      28   
7   

Representations and warranties

      29   
8   

Undertakings

      34   
9   

Conditions

      46   
10   

Events of Default

      47   
11   

Indemnities

      52   
12   

Unlawfulness and increased costs

      53   
13   

Security and set-off

      54   
14   

Assignment, transfer and lending office

      55   
15   

Notices and other matters

      57   
16   

Governing law and jurisdiction

      59   

Schedule 1 Form of Drawdown Notice

      60   

Schedule 2 Documents and evidence required as conditions precedent to the Commitment being made available

      61   

Schedule 3 Form of Compliance Certificate

      73   

THIS AGREEMENT is dated 24 December 2007 as amended and restated by a supplemental agreement dated 26 June 2008, as further amended and supplemented by a supplemental agreement dated 23 March 2009, a supplemental agreement 27 November 2009, a supplemental agreement dated 15 July 2011, a supplemental agreement dated 7 November 2011, four extension letters, three letters/agreements and two deferral letters and as amended and restated by a supplemental agreement dated 31 May 2012 as the same may have been further amended prior to 31 May 2012, and made BETWEEN:

 

  (1) FREESEAS INC. as Borrower; and

 

  (2) CREDIT SUISSE AG (formerly known as CREDIT SUISSE) 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 reducing revolving credit facility of up to Ninety one million Dollars ($91,000,000) for the purpose of:

 

  (a) assisting the Borrower in advancing intra-Group loans to the Initial Owners for the purpose of refinancing in full the Initial Owner’s existing Indebtedness secured on the Initial Ships; and

 

  (b) assisting the Borrower in advancing an intra-Group loan to the Additional Owner for the acquisition by it of the Additional Ship.

 

1.2 Definitions

In this Agreement, unless the context otherwise requires:

“Accounting Information” means the annual unaudited consolidated financial statements of the Group and the quarterly unaudited consolidated financial statements of the Group delivered by the Borrower to the Bank pursuant to clause 8.1.5;

“Accounting Period” means each financial year of the Borrower and each quarter of each financial year of the Borrower, for which Accounting Information is required to be delivered to the Bank pursuant to clause 8.1.5;

“Accounts” means together the Operating Accounts and the Retention Account and “Account” means any of them;

“Additional Charter” means a time charter or other contract of employment in respect of the Additional Ship entered into or (as the context may require) to be entered into by the Additional Owner, as owner, and with such person or company acceptable to the Bank in its discretion, as charterer, and which shall meet the following requirements:

 

  (a) it has a minimum tenor (without taking into account any options to extend) eighteen (18) months commencing from the drawdown of the first Advance to be drawn down under the Additional Tranche; and

 

  (b) it provides for a minimum net daily charter hire in all respects acceptable to the Bank; and

 

  (c) it is otherwise on such other terms and conditions, as shall be in all respects acceptable to the Bank;

 

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“Additional Funds Repayment Date” means, subject to clause 6.3, the date falling six (6) months after the Drawdown Date of the first Advance to be drawn down under the Additional Tranche;

“Additional Owner” means, Adventure Ten S.A. of Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Xxxxxxxx Islands MH96960 and includes its successors in title;

“Additional Ship” means the motor vessel Free Lady, a 50,246 dwt 2003-built bulk carrier registered in the ownership of the Additional Owner through the relevant Registry under the laws and flag of the relevant Flag State with IMO Number 9266188 which on 8 November 2011 was sold and delivered to third parties and has ceased to be a Ship under this Agreement;

“Additional Tranche” means the Original Tranche of up to $42,300,000 made available to the Borrower for the purpose of assisting the Borrower in advancing an intra-Group loan to the Additional Owner for the acquisition by it of the Additional Ship;

“Advance” means:

 

  (a) in relation to an Original Tranche and the part of the Commitment relating thereto at any time up to the Sixth Effective Date; or

 

  (b) in relation to a Tranche and the part of the Commitment relating thereto at any time after the Sixth Effective Date,

each borrowing by the Borrower of a portion of such part of the Commitment or (as the context may require) the principal amount of such borrowing for the time being outstanding, and “Advances” means any or all of them;

“Applicable Accounting Principles” means, at any relevant time, the most recent and up-to-date US GAAP applicable at that time;

“Assignee” has the meaning ascribed thereto in clause 14.3;

“Availability Period” means the period commencing on the date of this Agreement and ending on the earlier of (a) the date falling three (3) months prior to the Final Maturity Date, (b) the date on which the Commitment is reduced to zero pursuant to clauses 4.4, 10.2 or 12 and (c) the date on which the Commitment is cancelled in full pursuant to clause 4.7;

“Available Amount” means, at any relevant time and in relation to a Tranche, the amount by which the part of the Commitment relating to such Tranche exceeds the aggregate of all Advances of such Tranche outstanding at such time;

“Bank” means Credit Suisse AG (formerly known as Credit Suisse), a company incorporated in Switzerland with its registered office at Xxxxxxxxxxx 0, 0000 Xxxxxx, Xxxxxxxxxxx acting for the purposes of this Agreement through its branch at Xx. Xxxxx-Xxxxxx 0-0, 0000 Xxxxx, Xxxxxxxxxxx (or of such other address as may last have been notified to the other parties to this Agreement pursuant to clause 15.1.3) and includes its successors in title, Assignees or Transferees;

“Banking Day” means a day on which dealings in deposits in Dollars are carried on in the London Interbank Eurocurrency Market and (other than Saturday or Sunday) on which banks are open for business in London (England), Athens (Greece), Basel (Switzerland) and New York City (U.S.A.) (or any other relevant place of payment under clause 6);

“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

 

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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 FreeSeas Inc. of Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Xxxxxxxx Islands MH96960 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;

“Budget” means, in relation to each financial year, the forecast (including appropriate reserves) of Operating and G&A Expenses for all the Ships for that year (but also broken down on a per Ship basis and on a quarterly basis), submitted by the Borrower to the Bank in accordance with the terms of the Sixth Supplemental Agreement and/or this Agreement provided and to the extent that such forecast has been accepted and approved by the Bank in writing to be the Budget for that financial year;

“Cash and Cash Equivalents” means, at any date, the aggregate of any Dollar cash balance at that date on any current or deposit account with:

 

  (a) a prime international bank; or

 

  (b) any other banks but in an aggregate amount not exceeding $1,500,000,

which a member of the Group is entitled to withdraw, and which is free from Encumbrances, excluding any such amount to which the right of access or use by such entity is blocked or restricted;

“Charter Assignment” means, in relation to a Ship, a first priority specific assignment of any Security Charter of such Ship executed or (as the context may require) to be executed by the relevant Owner in favour of the Bank in such form as the Bank may require in its sole discretion and “Charter Assignments” means any of all of them;

“Charterer” means, in relation to a Security Charter, such person as shall be acceptable to the Bank which is the charterer of the relevant Ship under such Security Charter;

“Charters” means:

 

  (a) in relation to an Initial Ship, the Initial Charter relating to such Initial Ship; or

 

  (b) in relation to the Additional Ship, the Additional Charter,

and “Charter” means any or all of them;

“Classification” means, in relation to a Ship, the highest class available to a vessel of that Ship’s type with the relevant Classification Society or such other classification as the Bank shall, at the request of the Owner of such Ship, has agreed in writing shall be treated as the Classification in relation to such Owner’s Ship for the purposes of the relevant Ship Security Documents;

“Classification Society” means, in relation to a Ship, such classification society (being a member of the International Association of Classification Societies (“IACS”)) which the Bank shall, at the request of an Owner, agree in writing shall be treated as the Classification Society in relation to such Owner’s Ship for the purposes of the relevant Ship 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

 

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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 aggregate amount which the Bank has agreed to lend to the Borrower under clause 2.1 under all Tranches as reduced or cancelled by any relevant term of this Agreement and:

 

  (a) up to the Sixth Effective Date:

 

  (i) in respect of the Initial Tranche, it means $48,700,000; or

 

  (ii) in respect of the Additional Tranche, it means $42,300,000; and

 

  (b) with effect on and from the Sixth Effective Date and at all times thereafter:

 

  (i) in respect of the Free Goddess Tranche, it means $8,169,828;

 

  (ii) in respect of the Free Hero Tranche, it means $8,169,828; and

 

  (iii) in respect of the Free Jupiter Tranche, it means $20,110,344,

in each case as reduced or cancelled by any relevant term of this Agreement;

“Compliance Certificate” means a certificate in the form set out in 3;

“Compulsory Acquisition” means, in relation to a Ship, requisition for title or other compulsory acquisition, requisition, appropriation, expropriation, deprivation, forfeiture or confiscation for any reason of such 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;

“Confirmation” shall have, in relation to any continuing Designated Transaction, the meaning given to it in the Master Swap Agreement;

“Contract” means, in respect of the Additional Ship, the memorandum of agreement dated 10 March 2008 made between the Seller and the Additional Owner as amended and supplemented by Addendum No. 1 thereto dated 21 May 2008 made between the Seller and the Additional Owner, relating to the sale by the Seller and the purchase by the Additional Owner of the Additional Ship;

“Contact Price” means the purchase price for the Additional Ship payable under the Contract, being Sixty five million two hundred thousand Dollars ($65,200,000) or such other lower amount determined by the Bank to be the purchase price for the Additional Ship pursuant to the Contract;

“DB” means Deutsche Bank Nederland N.V. of De Entree 99-197, 1101 HE Amsterdam, The Netherlands and includes its successors in title and its assignees and transferees;

“DB Facility” means the loan facility made available to members of the Group under an agreement dated 1 December 2009 made between DB and certain members of the Group, as amended and/or supplemented and/or novated from time to time;

“Debt Service” means, in relation to each Excess Cash Calculation Period, the sum (calculated by the Bank pursuant to clause 8.5) to be the aggregate amount of principal, interest thereon and all other amounts which fell due and were paid by the Borrower to the Bank under this Agreement and the other Security Documents during that Excess Cash Calculation Period;

 

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“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;

“Deferral Letters” means, together, the letter dated 2 February 2012, the letter dated 25 April 2012 and any other letters addressed by the Bank to the Borrower dated prior to the date of the Sixth Supplemental Agreement, referring to the deferral of certain overdue amounts payable to the Bank;

“Delivery Date” means the date on which the Additional Ship is delivered to, and accepted by, the Additional Owner under the Contract;

“Designated Transaction” means a Transaction which is entered into by the Borrower with the Bank as contemplated by clause 2.7;

“DOC” means a document of compliance issued to an Operator in accordance with rule 13 of the Code;

“Dollars” and “$” mean the lawful currency 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 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, in relation to each Advance, any date, being a Banking Day falling within the Availability Period, on which an Advance is, or is to be, made available;

“Drawdown Notice” means, in relation to each Advance, a notice substantially in the form of schedule 1 in respect of such Advance;

“Early Termination Date” shall have, in relation to any continuing Designated Transaction, the meaning given to it in the Master Swap Agreement;

“Earnings” means, in relation to a Ship, all moneys whatsoever from time to time due or payable to the Owner owning such Ship during the Security Period arising out of the use or operation of such 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 of such Ship in the event of the requisition of such Ship for hire, remuneration for salvage and towage services, demurrage and detention moneys and damages for breach (of payments for variation or termination) of any charterparty or other contract for the employment of such Ship;

“EBITDA” means, in respect of an Accounting Period, the consolidated net pre-taxation profits of the Group as stated in the most recent Accounting Information relevant to such Accounting Period and all as adjusted by:

 

  (a) adding back Interest Expense;

 

  (b) taking no account of any exceptional or extraordinary item;

 

  (c) adding back depreciation and amortisation of assets;

 

  (d) taking no account of any other non-cash items, including (without limitation) any non-cash gain or loss on sale or cancellation of vessels, any unrealised gain or loss on derivative contracts, provisions for reasonably doubtful accounts, asset impairments, any gain or loss from equity investments, stock-based compensation or any gain or loss arising from any non-controlling interest; and

 

  (e) taking into account amortization of deferred revenue;

 

5

“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 any Security Party or any other Relevant Party or any person having a contractual relationship with a Security Party or any other Relevant Party in connection with any Relevant 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 such Relevant Ship;

“Environmental Approval” means any consent, authorisation, licence or approval of any governmental or public body or authorities or courts applicable to any Relevant Ship or its operation or the carriage of cargo and/or passengers thereon and/or the provision of goods and/or services on or from such Relevant 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 any Relevant Ship;

“Environmental Laws” means all national, international and state laws, rules, regulations, treaties and conventions applicable to any Relevant Ship pertaining to the pollution or protection of human health or the environment including, without limitation, the carriage of Pollutants and actual or threatened emissions, spills, releases or discharges of Pollutants;

“Event of Default” means any of the events or circumstances described in clause 10.1;

“Excess Cash” means, in relation to each Excess Cash Calculation Period, the amount (determined by the Bank pursuant to clause 8.5) which is equal to:

 

  (a) the aggregate of (i) the total Earnings paid to the Owners during such Excess Cash Calculation Period plus (ii) any cash balances standing to the credit of the Accounts as at the beginning of such Excess Cash Calculation Period; minus

 

  (b) the Debt Service for such Excess Cash Calculation Period; minus

 

  (c) the Operating and G&A Expenses actually incurred during such Excess Cash Calculation Period; minus

 

  (d) the aggregate of the Thresholds for all the Ships applicable at the end of the Excess Cash Calculation Period;

“Excess Cash Calculation Period” means each of the three (3) month periods ending on 31 March, 30 June, 30 September and 31 December of each financial year (but commencing with the 3-month period ending on 30 June 2012);

“Existing Facilities” means, together, the Facility, the FBB Facility and the DB Facility and “Existing Facility” means any of them;

“Existing Lenders” means, together, the Bank, FBB and DB and “Existing Lender” means any of them;

“Extension Letters” means, together, the extension letters dated 4 October 2011, 17 October 2011, 24 October 2011 and 31 October 2011 and the letters/agreements dated 4 August 2011, 6 September 2011 and 19 September 2011, all addressed to the Borrower by the Bank granting (inter alia) time extension to the Borrower to conclude a private sale of the Ships as agreed between the Borrower and the Bank in the Fifth Supplemental Agreement;

 

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“Facility” means the facility made available by the Bank to the Borrower under clause 2 of this Agreement;

“FBB” means FBB-First Business Bank S.A. of 00 Xxxx Xxxxxxx Xxxxxx & Xxxxxx Xxxxxx, 000 00 Xxxxxxx, Xxxxxx and includes its successors in title and its assignees and/or transferees;

“FBB Facility” means the loan facility made available to members of the Group under an agreement dated 15 December 2009 made between FBB and certain members of the Group, as amended and/or supplemented and/or novated from time to time;

“Fifth Effective Date” has the meaning given to “Effective Date” in the Fifth Supplemental Agreement;

“Fifth Supplemental Agreement” means the agreement dated 7 November 2011 made between (inter alios) (1) the Borrower, (2) the Owners, (3) the Manager and (4) the Bank amending and supplemental to this Agreement;

“Final Maturity Date” means 31 December 2015;

“First Mortgage Amendment” means each of the Mortgage Amendments referred to in the Fourth Supplemental Agreement and “First Mortgage Amendments” means any of them;

“First Supplemental Agreement” means the agreement dated 26 June 2008 made between (inter alios) (1) the Borrower, (2) the Owners, (3) the Manager and (4) the Bank supplemental to this Agreement;

“Flag State” means, in relation to each Ship, the Republic of Liberia or such other state or territory designated in writing by the Bank at the request of an Owner, as being the “Flag State” of such Owner’s Ship for the purposes, of the relevant Ship Security Documents;

“Fleet Market Value” means, as of the date of calculation, the aggregate market value of:

 

  (a) the Ships, as most recently determined pursuant to valuations obtained by the Bank (at the cost of the Borrower) and made in accordance with the provisions of clause 8.2.2; and

 

  (b) all other Fleet Vessels (other than the Ships), as most recently determined by the Bank in its discretion, pursuant to valuations made available to the Bank (at the cost of the Borrower) pursuant to clause 8.2.2;

“Fleet Vessels” means all the vessels (including, but not limited to, the Ships but excluding vessels under construction) from time to time owned by the members of the Group and “Fleet Vessel” means any of them;

“Fourth Supplemental Agreement” means the agreement dated 15 July 2011 made between (inter alios) (1) the Borrower, (2) the Owners, (3) the Manager and (4) the Bank amending and supplemental to this Agreement;

“Free Goddess” means the motor vessel Free Goddess, a 1995-built, 22,051 dwt bulk carrier, registered in the ownership of the Free Goddess Owner under the laws and flag of the relevant Flag State with IMO Number 9107045;

“Free Goddess Owner” means Adventure Five S.A. of Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Xxxxxxxx Islands MH96960 and includes its successors in title;

 

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“Free Goddess Tranche” means one of the three (3) Tranches into which the Loan and the Commitment is sub-divided, after the Sixth Effective Date, being a Tranche in the amount of $8,169,828 and related to Free Goddess;

“Free Hero” means the motor vessel Free Hero, a 1995-built, 24,318 dwt bulk carrier registered in the ownership of the Free Hero Owner under the laws and flag of the relevant Flag State with IMO Number 9111591;

“Free Hero Owner” means Adventure Six S.A. of Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Xxxxxxxx Islands MH96960 and includes its successors in title;

“Free Hero Tranche” means one of the three (3) Tranches into which the Loan and the Commitment is sub-divided after the Sixth Effective Date, being a Tranche in the amount of $8,169,828 and related to Free Hero;

“Free Jupiter” means the motor vessel Free Jupiter, a 2002-built, 47,777 dwt bulk carrier, registered in the ownership of the Free Jupiter Owner under the laws and flag of the relevant Flag State with IMO Number 9264037;

“Free Jupiter Owner” means Adventure Eight S.A. of Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Xxxxxxxx Islands MH96960 and includes its successors in title;

“Free Jupiter Tranche” means one of the three (3) Tranches into which the Loan and the Commitment is sub-divided after the Sixth Effective Date, being a Tranche in the amount of $20,110,344 and related to Free Jupiter;

“Funded Debt” means, at any relevant time, the sum (without duplication) of the Group’s liabilities:

 

  (a) in respect of principal for any moneys borrowed by any member of the Group under a credit or loan or bond facility;

 

  (b) under any loan stock, bond, note or obligations relating to joint venture liabilities outside the Group;

 

  (c) under any letter of credit facility made to any Group member;

 

  (d) under any finance lease or other agreement which shall have been or should be recorded in the relevant Accounting Information in accordance with the Applicable Accounting Principles consistently applied; or

 

  (e) as a result of guarantees given by a member of the Group;

“General Assignment” means:

 

  (a) in relation to each Initial Ship, each general assignment dated 28 December 2007 or (in the case of Free Jupiter) 14 April 2008, executed by the relevant Owner in favour of the Bank; or

 

  (b) in relation to the Additional Ship, a general assignment executed by the Additional Owner in favour of the Bank,

and “General Assignments” means any or all of them;

“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;

 

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“Group” means, together, the Borrower and its Subsidiaries from time to time (which, for the avoidance of doubt, shall include the Owners and the Manager) and “member of the Group” shall be construed accordingly;

“Hulls” means, together, Hull No. YZJ2010-944 and Hull No. YZJ2010-945 currently under construction at the Yard;

“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;

“Initial Charter” means:

 

  (a) in relation to Free Goddess, the charterparty contract made between the Free Goddess Owner and Navision Shipping Company A.S. as charterer (the “Free Goddess Charterer”) to be documented in a “BHTME” form time charterparty to be entered into between the Free Goddess Owner and the Free Goddess Charterer which contract is, as of 24 December 2007, incorporated in a final fixture recap agreed between the parties dated 23 August 2007;

 

  (b) in relation to Free Hero, the charterparty dated 4 December 2006 and made between (1) Ocean Phoenix Shipping Ltd. (the “Original Owner”) and (2) Armada Pacific Carriers (Singapore) Pte. Ltd. as charterer (the “Free Hero Charterer”) as amended and novated by a tripartite agreement dated 4 May 2007 and made between the Free Hero Owner, the Original Owner and the Free Hero Charterer; or

 

  (c) in relation to Free Jupiter, the charterparty contract made between (1) Korea Line Corporation (the “Free Jupiter Charterer”) and (2) the Free Jupiter Owner to be documented in a “BHPTIME” form time charterparty to be entered into between the Free Jupiter Owner and the Free Jupiter Charterer which contract is, as of 24 December 2007, incorporated in a confirmation email dated 26 June 2006 from the Free Jupiter Charterer’s brokers (Falcon Enterprises Inc.), addressed to the Free Jupiter Owner and responding to the Free Jupiter Owner’s message recapitulating the relevant fixture recap,

and “Initial Charters” means any or all of them;

“Initial Owner” means:

 

  (a) in relation to Free Goddess, the Free Goddess Owner;

 

  (b) in relation to Free Hero, the Free Hero Owner; or

 

  (c) in relation to Free Jupiter, the Free Jupiter Owner,

and “Initial Owners” means any or all of them;

“Initial Ship” means:

 

  (a) in relation to the Free Goddess Owner, Free Goddess;

 

  (b) in relation to the Free Hero Owner, Free Hero; or

 

  (c) in relation to the Free Jupiter Owner, Free Jupiter,

and “Initial Ships” means any or all of them;

“Initial Tranche” means the Original Tranche of up to $48,700,000 made available to the Borrower for the purpose of assisting the Borrower in advancing intra-Group loans to the Initial Owners for the refinancing in full of the existing Indebtedness of the Initial Owners secured on the Initial Ships;

 

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“Insurances” means, in relation to a Ship, all policies and contracts of insurance (which expression includes all entries of such 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 of such Ship (whether in the sole name of such Owner, or in the joint names of such Owner and the Bank or otherwise) in respect of such Ship and her Earnings or otherwise howsoever in connection with such Ship and all benefits thereof (including claims of whatsoever nature and return of premiums);

“Interest Expense” means, in respect of an Accounting Period, all interest and financing charges paid in cash by the Group, as stated in the most recent Accounting Information relevant to such Accounting Period;

“Interest Payment Date” means the last day of an Interest Period;

“Interest Period” means, in relation to an Advance, each period for the calculation of interest in respect of such Advance 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 Organization now set out in Chapter XI-2 of the International Convention for the Safety of Life at Sea 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 thereto and any regulation issued pursuant thereto;

“ISSC” means, in relation to a Ship, an International Ship Security Certificate issued in respect of such Ship pursuant to the ISPS Code;

“LIBOR” means, in relation to any amount and for any period, the offered rate (if any) for deposits of Dollars for such amount and for such period which is:

 

  (a) subject to paragraph (c), the rate for such period, appearing on Reuters page LIBOR 01 (British Bankers’ 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), at or about 11:00 a.m. (London time) on the Quotation Date; or

 

  (b) subject to paragraph (c), if on such date no such rate is displayed, the Bank’s offered rate for deposits of Dollars 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; or

 

  (c) if at any time and in respect of any period the interest rate applicable to the DB Facility is determined, whether directly or indirectly, by reference to any means other than the displayed rate referred to in paragraph (a) above, LIBOR for any such period shall be the rate which is determined by the Bank to be the cost of funding to the Bank for such period for deposits in Dollars in an amount approximately equal to the amount in relation to which LIBOR is to be determined,

provided however that if at any time the rate determined under paragraphs (a) or (b) or (c) above for any period is a negative figure, then LIBOR for that period shall be zero per cent (0%) per annum;

“Loan” means the aggregate principal amount owing to the Bank under this Agreement at any relevant time;

 

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“Management Agreement” means:

 

  (a) in relation to each Initial Ship, the management agreement dated 1 May 2007 made between the relevant Initial Owner and the Manager in respect of that Ship; or

 

  (b) in relation to the Additional Ship, the management agreement made or (as the context may require) to be made between the Additional Owner and the Manager in respect of that Ship in a from previously agreed in writing by the Bank,

in each case, providing for (inter alia) the Manager to carry out the technical and commercial management of the relevant Ship and “Management Agreements” means any or all of them;

“Manager” means, in relation to a Ship, Free Bulkers S.A. of Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Xxxxxxxx Islands MH96960, or such other person or persons as may be appointed from time to time as technical and commercial manager of such Ship with the prior written consent of the Bank and includes its successors in title;

“Manager’s Undertaking” means:

 

  (a) in relation to each Initial Ship, the undertaking and assignment in respect of that Initial Ship dated 28 December 2007 or (in respect of Free Jupiter) 14 April 2008 executed by the Manager in favour of the Bank;

 

  (b) in relation to the Additional Ship, the undertaking and assignment executed or (as the context may require) to be executed by the Manager in favour of the Bank in such form as the Bank may require in its sole discretion,

and “Manager’s Undertakings” means any or all of them;

“Margin” means:

 

  (a) from the date of this Agreement until 4 July 2011 (inclusive):

 

  (i) subject to paragraphs (ii) and (iii) below, one point two five per cent (1.25%) per annum;

 

  (ii) subject to paragraph (iii) below, for the period commencing on 24 March 2009 until 31 March 2010 (inclusive), two point two five per cent (2.25%) per annum; and

 

  (iii) for any period determined by the Bank during which the Security Value is higher than one hundred and sixty seven per cent (167%) of the sum of (A) the Loan and the Swap Exposure minus (B) any balance then standing to the credit of the Security Accounts or any of them, one per cent (1%) per annum;

 

  (b) from 5 July 2011 until the Sixth Effective Date (inclusive), three point two five per cent (3.25%) per annum;

 

  (c) from the period commencing on the first day after the Sixth Effective Date and ending on 31 March 2014 (inclusive), one per cent (1.00%) per annum; and

 

  (d) from 1 April 2014 and at all times thereafter:

 

  (i) subject to paragraph (ii) below, three point two five per cent (3.25%) per annum; or

 

  (ii) for any period determined by the Bank during which the Security Value is higher than one hundred and sixty seven per cent (167%) of the sum of (A) the Loan and the Swap Exposure minus (B) any balance then standing to the credit of the Security Accounts or any of them, two point seven five per cent (2.75%) per annum;

 

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“Master Agreement Security Deed” means the security deed dated 24 December 2007 executed by the Borrower in favour of the Bank;

“Master Swap Agreement” means the agreement dated 24 December 2007 made between the Bank and the Borrower comprising a 2002 ISDA Master Agreement (including the Schedule) and includes any Designated Transactions from time to time entered into and any Confirmations from time to time exchanged thereunder and governed thereby;

“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 (a) 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 (b) 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:

 

  (a) in relation to each Initial Ship, the first preferred Liberian ship mortgage over that Initial Ship executed by the relevant Initial Owner in favour of the Bank as amended by the relevant Mortgage Amendments; or

 

  (b) in relation to the Additional Ship, the first preferred Liberian Mortgage dated 7 July 2008 executed by the Additional Owner in favour of the Bank as amended by the relevant First Mortgage Amendment,

and “Mortgages” means any or all of them;

“Mortgage Amendments” means, together, the First Mortgage Amendments, the Second Mortgage Amendments and the Third Mortgage Amendments and “Mortgage Amendment” means any of them;

“Mortgaged Ship” means, at any relevant time, any Ship which is at such time subject to a Mortgage and/or the Earnings, Insurances and Requisition Compensation of which are subject to an Encumbrance pursuant to the relevant Ship Security Documents and a Ship shall for the purposes of this Agreement be deemed to be a Mortgaged Ship as from the date that the Mortgage of that Ship shall have been executed and registered in accordance with this Agreement until whichever shall be the earlier of (i) the payment in full of the amount required by the Bank to be paid pursuant to clause 4.4 following the sale or Total Loss of such Ship and (ii) the date on which all moneys owing under the Security Documents have been repaid in full;

“Operating and G&A Expenses” means, in respect of any period, the aggregate operating, insurance, repair and maintenance expenses of all the Ships (including pre-agreed general administration and management costs of the Owners and of the Borrower which are allocated and apportioned to the Ships (but not other Fleet Vessels)) that have been incurred or (as the context may require) are forecast by the Borrower to be incurred by it or the Owners during that period;

“Operating Account” means, in relation to each Owner and its Ship, a Dollar account of that Owner opened or (as the context may require) to be opened 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 that Owner and its Ship and “Operating Accounts” means any or all of them;

 

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“Operating Account Pledge” means, in relation to each Operating Account, a first priority account pledge over (inter alia) that Operating Account, executed or (as the context may require) to be executed by the relevant Owner and the Bank in such form as the Bank may require in its sole discretion and “Operating Account Pledges” means any or all of them;

“Operator” means any person who is from time to time during the Security Period concerned in the operation of a Ship and falls within the definition of “Company” set out in rule 1.1.2 of the Code;

“Original Tranche” means each of the tranches into which the Commitment and/or the Loan was initially sub-divided up to the Sixth Effective Date (being the Initial Tranche and the Additional Tranche) or (as the context may require) the principal amount thereof outstanding at any relevant time until the Sixth Effective Date, and:

 

  (a) in relation to the Initial Ships, it means the Initial Tranche; or

 

  (b) in relation to the Additional Ship, it means the Additional Tranche,

and “Original Tranches” means any or all of them;

“Owner” means, in relation to a Ship, the Owner of that Ship and “Owners” means any or all of them;

“Owner’s Guarantee” means:

 

  (a) in relation to each Initial Owner, the guarantee dated 28 December 2007 or (in respect of Free Jupiter) 14 April 2008 executed by that Initial Owner in favour of the Bank; or

 

  (b) in relation to the Additional Owner, the guarantee executed by the Additional Owner in favour of the Bank,

and “Owner’s Guarantees” means all of them;

“Permitted Encumbrance” means any Encumbrance in favour of the Bank created pursuant to the Security Documents and Permitted Liens;

“Permitted Liens” means, in relation to a Ship, any lien on such 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 Ship Security Documents for such Ship) for such Ship;

“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 Xxx 0000;

“Quotation Date” means, in relation to any period for which LIBOR is to be determined under this Agreement, the day falling two (2) Banking Days before the first day of such period, unless market practice differs in the London Interbank Market, which case the Quotation Date will be determined by the Bank in accordance with market practice in the London Interbank Market;

“Reduction Dates” means, subject to clause 6.3 and in relation to each Tranche (and the part of the Commitment relating thereto), 30 June 2014 and each of the dates falling at three (3) monthly intervals after 30 June 2014, up to and including the Final Maturity Date;

 

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“Registry” means, in relation to a Ship, such registrar, commissioner or representative of the relevant Flag State who is duly authorised and empowered to register such Ship, the relevant Owner’s title to such Ship and the relevant Mortgage under the laws and flag of the relevant Flag State;

“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;

“Relevant Party” means the Borrower, each of the Owners, any other Security Party and each member of the Group from time to time;

“Relevant Ship” means the Ships and any other vessel from time to time (whether before or after the date of this Agreement) owned, managed or crewed by, or chartered to, any Relevant Party;

“Requisition Compensation” means, in relation to a Ship, all sums of money or other compensation from time to time payable during the Security Period by reason of the Compulsory Acquisition of such Ship;

“Restis Family” means each of Xx Xxxxxx Xxxxxx and any of Xxx Xxxxx Xxxxx and/or Xx Xxxxxxx Xxxxx and/or Xx Xxxxx Xxxxx and includes their direct lineal descendants;

“Retention Account” means a Dollar account of the Borrower opened or (as the context may require) to be opened by the Borrower with the Bank and includes any sub-accounts thereof and any other account designated in writing by the Bank to be a Retention Account for the purposes of this Agreement;

“Retention Amount” means, in relation to each Tranche and in respect of any Retention Date for that Tranche, such sum as shall be the aggregate of:

 

  (a)

one-third (1/3rd) of the prepayment amount in respect of the relevant Tranche, which would fall due for payment pursuant to clause 4.3 of the Facility Agreement on the next Reduction Date for that Tranche after the relevant Retention Date, assuming that the Commitment in relation to the relevant Tranche were fully drawn on such Retention Date (but as reduced by any prior reductions made prior to such Retention Date); and

 

  (b) the applicable fraction (as hereinafter defined) of the aggregate amount of interest that would fall due for payment in respect of the relevant Tranche, during and at the end of each Interest Period for that Tranche current at the relevant Retention Date for that Tranche, assuming that the Commitment in relation to the relevant Tranche were fully drawn on such Retention Date (but as reduced by any prior reductions made prior to such Retention Date) and, for this purpose, the expression “applicable fraction” in relation to each Interest Period for a Tranche shall mean a fraction having a numerator of one and a denominator equal to the number of Retention Dates for that Tranche falling within the relevant Interest Period;

“Retention Dates” means, subject to clause 6.3, 30 June 2012 and each of the dates falling at monthly intervals thereafter and prior to the Final Maturity Date;

“Second Mortgage Amendment” means each of the Second Mortgage Amendments referred to in the Fifth Supplemental Agreement and “Second Mortgage Amendments” means any of them;

 

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“Second Supplemental Agreement” means the agreement dated 23 March 2009 made between (inter alios) (1) the Borrower, (2) the Owners, (3) the Manager and (4) the Bank supplemental to this Agreement;

“Security Accounts” means, at any relevant time, the Operating Accounts, the Retention Account and any bank accounts of the Borrower opened with the Bank, which are subject to an Encumbrance in favour of the Bank and designated by the Bank as “Security Accounts” for the purposes of this Agreement;

“Security Charter” means, in relation to a Ship, any time charter or other contract of employment for such Ship for a term which exceeds or, by virtue of any optional extensions therein contained, may exceed twelve (12) months’ duration which is entered into at any relevant time by the relevant Owner with a Charterer and which is in a form and substance acceptable to the Bank in all respects (including, for the avoidance of doubt, the Charters);

“Security Documents” means this Agreement, the Supplemental Agreements, the Extension Letters, the Deferral Letters, the Mortgage Amendments, the Master Swap Agreement, the Owner’s Guarantees, the Mortgages, the General Assignments, the Operating Accounts Pledges, the Manager’s Undertakings, the Master Agreement Security Deed, 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 any moneys from time to time owing by the Borrower to the Bank pursuant to this Agreement, interest thereon and other moneys from time to time owing by the Borrower or any other Security Party pursuant to this Agreement and/or any other Security Document (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, each Owner, 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 Period” means the period commencing on the date of this Agreement and terminating upon discharge of the security created by the Security Documents by payment of all moneys payable thereunder;

“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) which is at any relevant time:

 

  (a) during the period commencing on 1 April 2014 and ending on 30 September 2014, one hundred and fifteen per cent (115%) of the aggregate of:

 

  (i) the Loan at such time; plus

 

  (ii) the Swap Exposure at such time; minus

 

  (iii) the aggregate amount, if any, standing to the credit of the Security Accounts at such time;

 

  (b) during the period commencing on 1 October 2014 and ending on 31 March 2015, one hundred and twenty per cent (120%) of the aggregate of:

 

  (i) the Loan at such time; plus

 

  (ii) the Swap Exposure at such time; minus

 

  (iii) the aggregate amount, if any, standing to the credit of the Security Accounts at such time;

 

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  (c) after 31 March 2015, one hundred and thirty five per cent (135%) of the aggregate of:

 

  (i) the Loan at such time; plus

 

  (ii) the Swap Exposure at such time; minus

 

  (iii) the aggregate amount, if any, standing to the credit of the Security Accounts at such time;

“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) which, at any relevant time, is the aggregate of (a) the market value of the Mortgaged Ships as most recently determined in accordance with clause 8.2.2 and (b) market value of any additional security for the time being actually provided to the Bank pursuant to clause 8.2;

“Seller” means Melodia Maritime Pte. Ltd. of Singapore and includes its successors in title;

“Shareholders’ Equity” means, at the end of an Accounting Period, the amount of shareholders equity of the Group on a consolidated basis which would be included as shareholders equity in the consolidated balance sheet of the Group in accordance with Applicable Accounting Principles, as shown in the Accounting Information relevant to such Accounting Period;

“Ship” means, in relation to an Owner, the Initial Ship owned by that Owner, and “Ships” means any or all of them;

“Ship Security Documents” means, in relation to a Ship, the Mortgage, the General Assignment, any Charter Assignment and the Manager’s Undertaking in respect of such Ship;

“Sixth Effective Date” has the meaning ascribed to “Effective Date” in the Sixth Supplemental Agreement;

“Sixth Supplemental Agreement” means the agreement dated 31 May 2012 made between (inter alios) (1) the Borrower, (2) the Owners, (3) the Manager and (4) the Bank supplemental to this Agreement;

“SMC” means, in relation to a Ship, a safety management certificate issued in respect of such Ship in accordance with rule 13 of the Code;

“Stand-by Equity Facility” means the facility of up to Three million two hundred and eighteen thousand four hundred and eighty five United States Dollars (US$3,218,485) in respect of shares of common stock raised or (as the context may require) to be raised by the Borrower pursuant to the Standby Equity Distribution Agreement dated as of 11 May 2012 with YA Global Master SPV Ltd., which may be increased to Five million United States Dollars (5,000,000) either under a supplemental agreement to the said agreement or under an agreement with another financial investor;

“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;

“Supplemental Agreements” means, together, the First Supplemental Agreement, the Second Supplemental Agreement, the Third Supplemental Agreement, the Fourth Supplemental Agreement, the Fifth Supplemental Agreement and the Sixth Supplemental Agreement and “Supplemental Agreement” means any of them;

 

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

“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;

“Third Mortgage Amendment” means each of the Third Mortgage Amendments referred to in the Sixth Supplemental Agreement;

“Third Supplemental Agreement” means the agreement dated 27 November 2009 made between (inter alios) (1) the Borrower, (2) the Owners, (3) the Manager and (4) the Bank supplemental to this Agreement;

“Threshold” in respect of a Ship and at any relevant time of calculation, means:

 

  (a) $1,000,000, if:

 

  (i) the time of calculation falls within the period from the Sixth Effective Date until the earlier of (A) the date falling twelve (12) months thereafter and (B) the date of payment or settlement in full of the entire aged Trade Debt of that Ship; or

 

  (ii) at the time of calculation such Ship is due for special survey/dry docking within 12 months; or

 

  (b) $500,000 in all other cases not falling within paragraph (a) above;

“Total Liabilities” at the end of an Accounting Period, shall be the “Total Liabilities” of the Group as shown in the Accounting Information relevant to such Accounting Period;

“Total Loss” in relation to a Ship means:

 

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

 

  (b) the Compulsory Acquisition of such Ship; or

 

  (c) the hijacking, theft, condemnation, capture, seizure, arrest, detention or confiscation of such Ship (other than where the same amounts to the Compulsory Acquisition of such Ship) by any Government Entity, or by persons acting or purporting to act on behalf of any Government Entity, unless such Ship be released and restored to the relevant Owner from such hijacking, theft, condemnation, capture, seizure, arrest, detention or confiscation within thirty (30) days after the occurrence thereof;

“Trade Debt” means, at any relevant time and in relation to a Ship, Indebtedness of the Borrower or the relevant Owner arising from or in connection with the trading and operation of such Ship (excluding, for the avoidance of doubt, all Borrowed Money or other Indebtedness owing to the Bank under the Security Documents);

“Trade Debt Plan” has the meaning given to it in schedule 1, paragraph 9 of the Sixth Supplemental Agreement, as the same may be amended, updated and/or revised pursuant to clause 8.1.7(c), provided that the same (including any such amendment, revision or update) has been agreed to and accepted in writing by the Bank to be the “Trade Debt Plan” for the purposes of this Agreement and the Sixth Supplemental Agreement;

 

17

“Tranche” means each of the tranches into which the Commitment and/or the Loan is sub-divided or (as the context may require) the principal amount thereof outstanding at any relevant time, being:

 

  (a) up to the Sixth Effective Date, the Initial Tranche and the Additional Tranche; or

 

  (b) with effect from and after the Sixth Effective Date, the Free Hero Tranche, the Free Goddess Tranche and the Free Jupiter Tranche, and:

 

  (i) in relation to Free Goddess, it means the Free Goddess Tranche;

 

  (ii) in relation to Free Hero, it means the Free Hero Tranche; or

 

  (iii) in relation to Free Jupiter, it means the Free Jupiter Tranche,

and “Tranches” means any or all of them;

“Transaction” has the meaning given to it in the Master Swap Agreement;

“Transferee” has the meaning given to it in clause 14.4;

“Underlying Documents” means, together, any Security Charters, the Contract and the Management Agreements and “Underlying Document” means any of them;

“Varouxakis Family” means each of Mr Ion Varouxakis and/or his siblings and/or his parents and/or his wife and/or his direct lineal descendants; and

“Yard” means Jiangsu Yangzijiang Shipbuilding Co. Ltd. of Xx. 00 Xxxxxxxxx Xxxx, Xxxxxxxx, Xxxxxxx, 000000 Peoples’ Republic of China.

 

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 the terms thereof, or, as the case may be, with the agreement of the relevant parties;

 

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;

 

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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 Advances

 

2.1 Agreement to lend

Upon and subject to the terms of this Agreement, the Bank, relying upon each of the representations and warranties in clause 7, agrees to make available to the Borrower, during the Availability Period, a reducing revolving credit facility of up to Ninety one million Dollars ($91,000,000) in two (2) Original Tranches, comprising the Initial Tranche and the Additional Tranche.

 

2.2 Drawdown

Subject to the terms and conditions of this Agreement, each Advance shall be made available to the Borrower following receipt by the Bank from the Borrower of a Drawdown Notice for such Advance not later than 10:00 a.m. on the third Banking Day before the date on which the Borrower proposes such Advance is made. A Drawdown Notice shall be effective on actual receipt by the Bank shall specify the Original Tranche under which it is to be made and once given shall, subject as provided in clause 3.6.1, be irrevocable.

 

2.3 Timing and limitations of Tranches and Advances

 

2.3.1 The aggregate amount of the Loan shall not exceed $91,000,000.

 

2.3.2 The Borrower shall be entitled to draw down the Commitment in two (2) Original Tranches, comprising the Initial Tranche and the Additional Tranche.

 

2.3.3 The aggregate amount available under the Initial Tranche shall not exceed the lower of (a) $48,700,000 and (b) 50% of the acquisition cost of the Initial Ships by the Initial Owners (as evidenced by the relevant executed memoranda of agreement for such Ships) and shall be drawn down in up to two (2) Advances only, for the purpose of assisting the Borrower to advance intra-Group loans to the Initial Owners for the refinancing in full of their existing Indebtedness secured on the Initial Ships.

 

2.3.4 The aggregate amount available under the Additional Tranche shall not exceed the lower of (a) $42,300,000, (b) 64.87% of the Contract Price and (c) 75% of the market value of the Additional Ship as evidenced by the valuation made under schedule 2, Part 4 and shall be made available to the Borrower for the purpose of assisting the Borrower to advance an intra-Group loan to the Additional Owner for the acquisition of the Additional Ship under the Contract.

 

2.3.5 The Additional Tranche shall not be made available unless the Initial Tranche has been made available and (whether partly or fully) drawn down.

 

2.3.6 The Additional Tranche shall be drawn down originally in a single Advance and the Initial Tranche may be drawn down originally in two (2) Advances.

 

2.3.7 Each Advance of a Tranche shall be a minimum of Five million Dollars ($5,000,000) or the balance of the Available Amount for such Tranche, provided that no Advance of a Tranche may be drawn down on any day:

 

  (a) of an amount exceeding the Available Amount for such Tranche on such day; or

 

19

  (b) of an amount which, when added to the aggregate amount of the Loan outstanding on such day, would exceed sixty per cent (60%) of the Security Value; or

 

  (c) if a Default has occurred and is continuing on such day; or

 

  (d) if the number of Advances of such Tranche outstanding (taking into account the proposed Advance to be drawn down) would exceed one (1).

 

2.3.8 No Advance may be drawn down after 31 December 2007 if no Advance has been drawn down to that date.

 

2.3.9 No Advance may be drawn down after the last day of the Availability Period.

 

2.4 Availability

Upon receipt of a Drawdown Notice for an Advance complying with the terms of this Agreement, the Bank shall make such Advance available to the Borrower on the Drawdown Date for such Advance in accordance with clause 6.2. The Borrower acknowledges that payment in accordance with clause 6.2 of any Advance (or part thereof) to any lender of the existing Indebtedness of the Initial Owners secured on the Initial Ships or, as the case may be, to the Seller or the Borrower, shall satisfy the obligations of the Bank to lend such Advance (or the relevant part thereof) to the Borrower.

 

2.5 Termination of Commitment

Any part of the Commitment which remains undrawn and uncancelled by the last day of the Availability Period shall thereupon be automatically cancelled. The Commitment shall be reduced to zero (0) if no Advance has been drawn down by 31 December 2007.

 

2.6 Application of proceeds

Without prejudice to the Borrower’s obligations under clause 8.1.3, the Bank shall not have any responsibility for the application of the proceeds of the Loan or any part thereof by the Borrower.

 

2.7 Derivative transactions

 

2.7.1 If, at any time during the Security Period, the Borrower wishes to enter into any derivative transaction for any purpose whatsoever (including, without limitation, interest rate swap transactions so as to hedge all or any part of its exposure under this Agreement to interest rate fluctuations), it shall advise the Bank in writing.

 

2.7.2 Any such derivative transaction shall be concluded with the Bank under the Master Swap Agreement provided however that no such derivative transaction shall be concluded unless the Bank first agrees to it in writing. If and when any such derivative transaction has been concluded, it shall constitute a Designated Transaction, and the Borrower shall sign a Confirmation with the Bank.

 

2.8 No re-drawings; no reinstatement

Notwithstanding anything to the contrary contained in this Agreement, with effect from the date of the Fifth Supplemental Agreement, the Borrower and the Bank hereby agree, and have already agreed in the Fifth Supplemental Agreement, that:

 

  (a) any undrawn amounts of the Commitment have been cancelled;

 

  (b) any amounts of the Loan repaid or prepaid by the Borrower (whether before or after the date of the Fifth Supplemental Agreement and for whatever reason, whether on a voluntary or mandatory basis) may not be redrawn and a part of the Commitment equal to the amount of any such repayment or prepayment will be immediately cancelled on the date of such repayment or prepayment; and

 

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  (c) any part of the Commitment which is cancelled or reduced under the terms of this Agreement (including under the terms of the Fifth Supplemental Agreement, and whether before or after the date of the Fifth Supplemental Agreement and for whatever reason, whether on a voluntary or mandatory basis) may not be reinstated.

 

3 Interest

 

3.1 Normal interest rate

The Borrower shall pay interest on each Advance in respect of each Interest Period relating thereto on each Interest Payment Date (or, in the case of Interest Periods of more than three (3) months, by instalments, the first such instalment payable three (3) months from the commencement of the Interest Period and the subsequent instalments payable at intervals of three (3) months or, if shorter, the period from the date of the preceding instalment until the Interest Payment Date relative to such period) at the rate per annum determined by the Bank to be the aggregate of (a) the Margin and (b) LIBOR for such Interest Period.

 

3.2 Selection of Interest Periods

The Borrower may by notice received by the Bank not later than 10:00 a.m. on the second Banking Day before the beginning of each Interest Period specify whether such Interest Period shall have a duration of three (3) months, six (6) months, nine (9) months or twelve (12) months or such other period which the Bank determines (in its absolute discretion) is available in the London Interbank Market as the Borrower may select and the Bank may agree.

 

3.3 Determination of Interest Periods

Every Interest Period shall be of the duration specified by the Borrower pursuant to clause 3.2 but so that:

 

3.3.1 the initial Interest Period in respect of each Advance shall commence on the date such Advance is made and each subsequent Interest Period for such Advance shall commence on the last day of the previous Interest Period for such Advance;

 

3.3.2 if any Interest Period in respect of a Tranche (or an Advance of a Tranche) would otherwise overrun a Reduction Date for such Tranche, then, in the case of the last Reduction Date for such Tranche, such Interest Period shall end on such Reduction Date, and in the case of any other Reduction Date or Reduction Dates for such Tranche on which the Borrower will be required to make a prepayment pursuant to clause 4.3, the relevant Tranche (or any Advance thereof) shall be divided into parts so that there is one part in the amount of the prepayment amount due on each such Reduction Date falling during that Interest Period and having an Interest Period ending on the relevant Reduction Date and another part in the amount of the balance of the relevant Tranche (or Advance thereof) having an Interest Period ascertained in accordance with clause 3.2 and the other provisions of this clause 3.3; and

 

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 three (3) 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 (other than the Master Swap Agreement), the Borrower shall pay interest on such sum on demand

 

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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 six (6) 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) two per cent (2%) per annum, (b) the Margin and (c) LIBOR for such period. Default interest shall be due and payable on the last day of each such period as determined by the Bank pursuant to this clause 3.4 or, if earlier, on the date on which the sum in respect of which such default interest is accruing shall actually be paid. 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 two per cent (2%) per annum above the aggregate of the Margin and the cost of funds to the Bank.

 

3.5 Notification of interest rate

The Bank shall notify the Borrower promptly of each rate of interest (or, as the case may be default 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:

 

  (a) the Bank shall have determined (which determination shall, in the absence of manifest error, be conclusive) that adequate and fair means do not exist for ascertaining LIBOR during such Interest Period or that LIBOR does not accurately reflect the cost to the Bank of obtaining such deposits; 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 and uncancelled amount of the Commitment shall not be borrowed until notice to the contrary is given to the Borrower by the Bank.

 

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 “Alternative Basis”) for funding the Commitment or maintaining the Loan. The Alternative Basis may, at the Bank’s sole and unfettered discretion include (without limitation) alternative interest periods, alternative currencies or alternative rates of interest but shall include a margin above the cost of funds to the Bank equivalent to the Margin. The Alternative 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 Repayment, reduction and cancellation

 

4.1 Repayment

Without prejudice to the provisions of clause 4.3, the Borrower shall repay all the Advances under all Tranches in full on the Final Maturity Date.

 

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4.2 Voluntary prepayment

The Borrower may, upon giving to the Bank prior notice in writing of its intention to make such prepayment, prepay the Loan in whole or part (such part being in an amount of One million Dollars ($1,000,000) or any larger sum which is an integral multiple of One million Dollars ($1,000,000)) at any time without premium or penalty but subject always to its obligations under clauses 4.5 and 11.1.

 

4.3 Reductions of the Commitment and prepayment of the Advances and Tranches

 

4.3.1 The Commitment in respect of each Tranche as at the Sixth Effective Date (i.e. in the amount of $36,450,000), namely following the sub-division of the Loan and the Commitment referred to in clause 2.1 of the Sixth Supplemental Agreement (being $8,169,828 in respect of the Free Hero Tranche, $8,169,828 in respect of the Free Goddess Tranche and $20,110,344 in respect of the Free Jupiter Tranche), shall be reduced on each of the Reduction Dates for the relevant Tranche.

 

4.3.2 Subject to the provisions of this Agreement, the amount of each such reduction for the Free Hero Tranche shall be (a) $286,243 on each of the first to the sixth (inclusive) Reduction Dates for the Free Hero Tranche and (b) $6,452,370 on the final Reduction Date for the Free Hero Tranche (being the Final Maturity Date). For the avoidance of doubt, on the final Reduction Date for the Free Hero Tranche, the Commitment in respect of the Free Hero Tranche shall be reduced to zero.

 

4.3.3 Subject to the provisions of this Agreement, the amount of each such reduction for the Free Goddess Tranche shall be (a) $286,243 on each of the first to the sixth (inclusive) Reduction Dates for the Free Goddess Tranche and (b) $6,452,370 on the final Reduction Date for the Free Goddess Tranche (being the Final Maturity Date). For the avoidance of doubt, on the final Reduction Date for the Free Goddess Tranche, the Commitment in respect of the Free Goddess Tranche shall be reduced to zero.

 

4.3.4 Subject to the provisions of this Agreement, the amount of each such reduction for the Free Jupiter Tranche shall be (a) $350,200 on each of the first to the sixth (inclusive) Reduction Dates for the Free Jupiter Tranche and (b) $18,009,144 on the final Reduction Date for the Free Jupiter Tranche (being the Final Maturity Date). For the avoidance of doubt, on the final Reduction Date for the Free Jupiter Tranche, the Commitment in respect of the Free Jupiter Tranche shall be reduced to zero.

 

4.3.5 The Borrower shall prepay on each Reduction Date for a Tranche such part of such Tranche as shall ensure that:

 

  (a) the outstanding amount of the Advances under such Tranche (taking into account such prepayment),

will not exceed

 

  (b) the amount of the Commitment in respect of such Tranche (taking into account the reduction thereof on such Reduction Date in accordance with clause 4.3.2 or 4.3.3 or 4.3.4, as the case may be).

 

4.3.6 Without prejudice to the other provisions of this Agreement, on the Final Maturity Date the Borrower shall repay to the Bank in full any outstanding amount of the Tranches (and their Advances).

 

4.4 Prepayment and cancellation on Total Loss or sale; other mandatory prepayments

 

4.4.1 Before first drawdown

On an Initial Ship becoming a Total Loss (or suffering damage or being involved in an incident which in the opinion of the Bank may result in such Initial Ship being

 

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subsequently determined to be a Total Loss) or sold before any Advance of the Initial Tranche is drawn down, the obligation of the Bank to make available the Commitment (or part thereof) shall immediately cease and the Commitment shall be reduced to zero (0).

 

4.4.2 Mortgaged Ships

 

  (a) Subject to clause 4.4.2(b), if a Mortgaged Ship becomes a Total Loss or is sold (with the prior written consent of the Bank pursuant to the relevant Ship Security Documents), the Relevant Fraction of the Commitment shall be cancelled and/or the Borrower shall prepay the Relevant Fraction of the Loan.

 

  (b) Notwithstanding sub-paragraph (a) of this clause 4.4.2, if a Mortgaged Ship becomes a Total Loss or is sold (with the prior written consent of the Bank pursuant to the relevant Security Documents) and at that time an Event of Default shall have occurred and be continuing, then:

 

  (i) the Borrower shall prepay, on the Disposal Reduction Date for such Mortgaged Ship, such proportion of the Loan; and/or

 

  (ii) such part of the Commitment shall be forthwith cancelled,

in each case, as the Bank may require in its absolute discretion (and the provisions of this clause 4.4.2(b) shall prevail over the provisions of clause 4.4.2(a) as to the amounts to be cancelled and/or prepaid).

 

  (c) For the avoidance of doubt, it is hereby agreed that, for the purposes of clauses 4.4.2(a) and 4.4.2(b), the Borrower shall be required to make a prepayment of the Loan (or part thereof) in accordance with either of such clauses, only if, and to the extent that, following the Total Loss or sale of the relevant Mortgaged Ship and the reduction or cancellation of the Commitment required by either of such clauses, the aggregate amount of the Loan then outstanding would exceed the Commitment (taking into account the relevant reduction thereof).

 

4.4.3 Defined terms

For the purposes of this clause 4.4:

 

  (a) “Disposal Reduction Date” means:

 

  (i) in relation to a Mortgaged Ship which has become a Total Loss, its Total Loss Reduction Date; or

 

  (ii) in relation to a Mortgaged Ship which is sold in accordance with the provisions of the relevant Ship Security Documents, the date of (and immediately prior to) completion of such sale by the transfer of title to such Mortgaged Ship to the purchaser in exchange for payment of the relevant purchase price;

 

  (b) “Relevant Fraction” means, in relation to a Mortgaged Ship which has become a Total Loss or is sold, the fraction having (i) as numerator the market value of the relevant Mortgaged Ship lost or sold as most recently determined in accordance with clause 8.2.2 and (ii) as a denominator the market value of all the Mortgaged Ships (including the relevant Mortgaged Ship lost or sold) as most recently determined in accordance with clause 8.2.2; and

 

  (c) “Total Loss Reduction Date” means, in relation to a Mortgaged Ship which has become a Total Loss, the date which is the earlier of:

 

  (i) the date falling one hundred and twenty (120) days after that on which such Mortgaged Ship becomes a Total Loss; and

 

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  (ii) the date upon which insurance proceeds are, or Requisition Compensation is, received in respect of such Total Loss by the relevant Owner (or the Bank pursuant to the relevant Ship Security Documents).

 

4.4.4 Interpretation

For the purpose of this Agreement, a Total Loss shall be deemed to have occurred in relation to a Ship:

 

  (a) in the case of an actual total loss of such Ship, on the actual date and at the time such Ship was lost or, if such date is not known, on the date on which such Ship was last reported;

 

  (b) in the case of a constructive total loss of such Ship, upon the date and at the time notice of abandonment of such Ship is given to the insurers of such Ship for the time being;

 

  (c) in the case of a compromised or arranged total loss of such Ship, on the date upon which a binding agreement as to such compromised or arranged total loss has been entered into by the insurers of such Ship;

 

  (d) in the case of Compulsory Acquisition of such Ship, on the date upon which the relevant requisition of title or other compulsory acquisition occurs; and

 

  (e) in the case of hijacking, theft, condemnation, capture, seizure, arrest, detention or confiscation of such Ship (other than where the same amounts to Compulsory Acquisition of such Ship) by any Government Entity, or by persons purporting to act on behalf of any Government Entity, which deprives the relevant Owner of the use of such 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.

 

4.5 Amounts payable on prepayment

Any prepayment of all or part of the Loan under this Agreement shall be made together with:

 

4.5.1 accrued interest on the amount to be prepaid to the date of such prepayment;

 

4.5.2 any additional amount payable under clauses 6.6 or 12.2; and

 

4.5.3 all other sums payable by the Borrower to the Bank under this Agreement or any of the other Security Documents including, without limitation, any amount of the fee referred to in clause 5.1.4 which may remain unpaid at such time, any amount of the deferred payment of interest referred to in clause 8.10 which may remain unpaid at such time, any accrued commitment commission payable under clause 5.1.2 and any amounts payable under clause 11.

 

4.6 Notice of prepayment; reduction of repayment instalments; re-borrowing

 

4.6.1 No prepayment may be effected under clause 4.2 unless the Borrower shall have given the Bank at least fifteen (15) days’ notice of its intention to make such payment. Every notice of prepayment shall be effective only on actual receipt by the Bank, shall be irrevocable, shall specify the Tranche (or Tranches), the Advance (or Advances) and the amount thereof to be prepaid, the manner of application of such prepayment pursuant to clause 4.6. 2, and shall oblige the Borrower to make such prepayment on the date specified.

 

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4.6.2 Any amount to be prepaid pursuant to clause 4.2 shall be applied in prepayment of such Tranche (or Tranches), Advance (or Advances), and in such manner between them, as specified by the Borrower.

 

4.6.3 Any prepayment of the Loan made pursuant to clause 4.4.2 as a result of the Total Loss or sale of a Ship, shall be applied, first, in prepayment of the Tranche (and the Advances thereof) relevant to the Ship lost or sold and, secondly, prepayment of all other Tranches (and Advances thereof) proportionately as between them.

 

4.6.4 Any reduction of the Commitment made pursuant to clause 4.4.2 as a result of the Total Loss or sale of a Ship, shall be applied, first, in reduction of the part of the Commitment relating to the Tranche relevant to the Ship lost or sold and, secondly, in proportionate reduction of the Commitment in respect of all other Tranches.

 

4.6.5 The Borrower may not prepay the Loan or any part thereof save as expressly provided in this Agreement.

 

4.6.6 Amounts prepaid under this Agreement may not be re-borrowed.

 

4.6.7 For the avoidance of doubt, any amounts of the Commitment reduced or cancelled under any provisions of this Agreement (including pursuant to clauses 4.4, 8.2.1, 8.4 or 8.5) may not be re-instated.

 

4.6.8 Any prepayment of the Loan pursuant to clause 8.2.1 or clause 8.4 or clause 8.5 shall be applied in prepayment of all Tranches proportionately as between them.

 

4.6.9 Any reduction of the Commitment pursuant to clause 8.2.1 or clause 8.4 or clause 8.5 shall be applied in reduction of the Commitment relating to all Tranches proportionately as between the Tranches.

 

4.6.10 Any reduction of the Commitment in respect of a Tranche shall reduce proportionately the amounts thereof still required to be reduced on each Reduction Date for such Tranche pursuant to clause 4.3.

 

4.7 Cancellation of Commitment

The Borrower may, at any time during the Availability Period, by notice to the Bank cancel, with effect from a date not less than three (3) Banking Days after the receipt by the Bank of such notice, the whole or any part (being One million Dollars ($1,000,000)) or any larger sum which is an integral multiple of One million Dollars ($1,000,000)) of the Commitment, which is then available for drawing. Any such notice of cancellation, once given, shall be irrevocable and upon such cancellation taking effect the Commitment shall be reduced accordingly. On the date when any such cancellation takes effect, the Borrower shall pay to the Bank any accrued commitment commission on the part of the Commitment being cancelled and any other amounts then payable under clause 11.

 

4.8 Unwinding of Designated Transactions

On or prior to any repayment of all or part of the Loan (including, without limitation, pursuant to clauses 4.2, 4.3, 4.4, 8.2.1(a), 8.4 or 8.5 or any other provision of this Agreement), the Borrower shall, upon the request of the Bank wholly or partially reverse, offset, unwind, cancel, close out, net out or otherwise terminate one or more of the continuing Designated Transactions so that the notional principal amount of the continuing Designated Transactions thereafter remaining does not, and will not in the future, exceed the amount of the Loan as may be reducing from time to time thereafter.

 

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5 Fees, commission and expenses

 

5.1 Fees and commissions

The Borrower shall pay to the Bank:

 

5.1.1 on or prior to the date of this Agreement, an arrangement fee in the amount of $435,000;

 

5.1.2 (i) on the date of this Agreement, a management fee of $3,000, and (ii) on each of the dates falling at six (6) monthly intervals thereafter until the last day of the Security Period, a management fee of $1,000 per Mortgaged Ship as at the due date of each such payment;

 

5.1.3 on each of the dates falling at three (3) monthly intervals after the date of this Agreement until the last day of the Availability Period and on the last day of the Availability Period, commitment commission computed from 3 September 2007 (in the case of the first payment of commission) and from the due date of the preceding payment of commission (in the case of each subsequent payment), at the rate of zero point three zero per cent (0.30%) per annum on the daily undrawn and uncancelled amount of the Commitment; and

 

5.1.4 an amendment and restructuring fee in the amount of $1,822,500 at the time specified in clause 7.1 of the Sixth Supplemental Agreement (which fee is earned and accrued (and deemed earned and accrued) on the date of the Sixth Supplemental Agreement).

The fees and commission referred to in clause 5.1 shall be payable by the Borrower to the Bank whether or not any part of the Commitment is ever advanced and shall be, in each case, non-refundable.

It is the understanding and agreement of the parties hereto that the Bank has agreed to enter into the Sixth Supplemental Agreement, only on the basis of the fee arrangements and provisions set out in clause 5.1.4 above and clause 7.1 of the Sixth Supplemental Agreement. The Borrower and the Bank hereby agree and the Borrower hereby acknowledges that the fee and any amounts payable pursuant to clause 5.1.4 above and clause 7.1 of the Sixth Supplemental Agreement constitute an integral part of the transaction contemplated by the Sixth Supplemental Agreement as a whole and the Borrower hereby confirms that such provisions do not constitute a penalty imposed by the Bank on the Borrower.

 

5.2 Expenses

The Borrower shall pay to the Bank on a full indemnity basis on demand:

 

5.2.1 all expenses (including legal, printing and out-of-pocket expenses) incurred by the Bank 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; and

 

5.2.2 all expenses (including legal, printing and out-of-pocket expenses) incurred by the Bank in contemplation of, or otherwise in connection with, the enforcement of, or preservation of any rights under, any of the Security Documents, or otherwise in respect of the moneys owing under any of the Security Documents,

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).

 

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5.3 Value added tax

All fees and expenses payable pursuant to this clause 5 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.

 

5.4 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 Underlying Documents, the Security Documents, the Loan or any part thereof 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.

 

6 Payments and taxes; accounts and calculations

 

6.1 No set-off or counterclaim

The Borrower acknowledges that in performing its obligations under this Agreement, the Bank will be incurring liabilities to third parties in relation to the funding of amounts to the Borrower, such liabilities matching the liabilities of the Borrower to the Bank and that it is reasonable for the Bank to be entitled to receive payments from the Borrower gross on the due date in order that the Bank is put in a position to perform its matching obligations to the relevant third parties. 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 6.6, free and clear of any deductions or withholdings, in Dollars on the due date to such account at such Bank and in such place as the Bank may from time to time specify for this purpose.

 

6.2 Payment by the Bank

All sums to be advanced by the Bank to the Borrower under this Agreement shall be remitted in Dollars on the Drawdown Date for the relevant Advance and shall be paid by the Bank to the account specified in the Drawdown Notice for such Advance.

 

6.3 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 the Banking Day falls in the next calendar month in which case payment shall be made on the immediately preceding Banking Day.

 

6.4 Calculations

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 three hundred and sixty (360) day year.

 

6.5 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.

 

6.6 Grossing-up for Taxes

 

6.6.1

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 for the account of

 

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  the Bank, 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.

 

6.6.2 For the avoidance of doubt, clause 6.6.1 does not apply in respect of sums due from the Borrower to the Bank under or in connection with the Master Swap Agreement as to which sums the provisions of section 2(d) (Deduction or Withholding for Tax) of the Master Swap Agreement shall apply.

 

6.7 Loan account

The Bank shall maintain, in accordance with its usual practice, an account evidencing the amounts from time to time lent by, owing 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.

 

7 Representations and warranties

 

7.1 Continuing representations and warranties

The Borrower represents and warrants to the Bank that:

 

7.1.1 Due incorporation

each of the Borrower, the Owners and each of the other Security Parties is duly incorporated and validly existing in good standing under the laws of their respective countries of incorporation as a Xxxxxxxx Islands corporation or as a limited liability company (in the case of each of the other Security Parties), and have power to carry on their respective businesses as they are now being conducted and to own their respective property and other assets;

 

7.1.2 Corporate power

the Borrower has power to execute, deliver and perform its obligations under the relevant Underlying Documents and the Security Documents to which it is or is to be a party 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 and the Underlying 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 Advances or any of them;

 

7.1.3 Binding obligations

the Underlying Documents and 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;

 

7.1.4 No conflict with other obligations

the execution and delivery of, the performance of its obligations under, and compliance with the provisions of, the Underlying Documents and the Security Documents by the

 

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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 or any of its Related Companies to create any Encumbrance (other than a Permitted Encumbrance) on any of the undertakings, assets, rights or revenues of the Borrower or any of its Related Companies or any other Security Party;

 

7.1.5 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 or any of its Related Companies which could have a material adverse effect on the business, assets or financial condition of the Borrower or any other Security Party or any other member of the Group or the Group as a whole;

 

7.1.6 No filings required

save for the registration of each Mortgage under the laws of the relevant Flag State through the relevant Registry, it is not necessary to ensure the legality, validity, enforceability or admissibility in evidence of any of the Underlying Documents or 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 any of the Underlying Documents or the Security Documents and each of the Underlying Documents and the Security Documents is in proper form for its enforcement in the courts of each Relevant Jurisdiction;

 

7.1.7 Choice of law

the choice of (a) English law to govern the Underlying Documents and the Security Documents (other than the Mortgages and the Operating Account Pledges), (b) the laws of the relevant Flag State to govern each Mortgage and (c) the laws of Switzerland to govern the Operating Account Pledges, and the submissions by the Security Parties to the non-exclusive jurisdiction of the English courts or, in the case of the Operating Account Pledges, the courts or Zürich, are valid and binding;

 

7.1.8 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);

 

7.1.9 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 each of the Underlying Documents and each of the Security Documents to which it is a party or the performance by each Security Party of its obligations under the Underlying Documents and the Security Documents to which it is a party, has been obtained or made and is in full force and effect and there has been no default in the observance of any of the conditions or restrictions (if any) imposed in, or in connection with, any of the same;

 

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7.1.10 Shareholdings

 

  (a) each of the Owners is a wholly-owned direct Subsidiary of the Borrower, Mr Ion Varouxakis is the ultimate beneficial owner of no less than ten per cent (10%) of the total issued voting share capital of the Borrower and the Restis Family are the ultimate beneficial owners of such percentage of the total issued share capital of the Borrower as disclosed by the Borrower to the Bank in the negotiation of the Sixth Supplemental Agreement;

 

  (b) no person or persons acting in concert (other than Mr Ion Varouxakis and the Restis Family), is the ultimate beneficial owner of more than thirty per cent (30%) of the total issued voting share capital of the Borrower (and for the purposes of this paragraph (b) “persons acting in concert” shall have the meaning given to a “syndicate” or a “group” of persons in Section 13(d)(3) of the Securities Exchange Act 1934 (as amended) of the United States of America); and

 

  (c) all of the shares in the Manager are ultimately beneficially owned by Mr Ion Varouxakis and/or the Varouxakis Family; and

 

7.1.11 Financial statements correct and complete

the audited consolidated financial statements of the Group in respect of the financial year ended on 31 December 2006 as delivered to the Bank have been prepared in accordance with the Applicable Accounting Principles and present fairly and accurately the consolidated financial position of the Group as at such date and the consolidated results of the operations of the Group for the financial year ended on such date and, as at such date, neither the Group nor any member thereof had any significant liabilities (contingent or otherwise) or any unrealised or anticipated losses which are not disclosed by, or reserved against or provided for in, such financial statement.

 

7.2 Initial representations and warranties

The Borrower further represents and warrants to the Bank that:

 

7.2.1 Pari passu

the obligations of the Borrower under this Agreement are direct, general and unconditional obligations of the Borrower and rank at least pari passu with all other present and future unsecured and unsubordinated Indebtedness of the Borrower with the exception of any obligations which are mandatorily preferred by law and not by contract;

 

7.2.2 No default under other Indebtedness

neither the Borrower nor any other Security Party nor any other member of the Group 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;

 

7.2.3 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 (including each Budget) 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;

 

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7.2.4 No withholding Taxes

no Taxes are imposed by withholding or otherwise on any payment to be made by any Security Party under the Underlying Documents or the Security Documents or are imposed on or by virtue of the execution or delivery by the Security Parties of the Underlying Documents or the Security Documents or any other document or instrument to be executed or delivered under any of the Security Documents;

 

7.2.5 No Default

no Default has occurred and is continuing;

 

7.2.6 The Ships

each Ship will, on the date when the Mortgage over such Ship is registered, be:

 

  (a) in the absolute ownership of the relevant Owner who will, on and after such date, be the sole, legal and beneficial owner of such Ship;

 

  (b) permanently registered through the relevant Registry as a ship under the laws and flag of the relevant Flag State;

 

  (c) operationally seaworthy and in every way fit for service; and

 

  (d) classed with the relevant Classification free of all requirements and recommendations of the relevant Classification Society;

 

7.2.7 Ships’ employment

save for the relevant Charter, no Ship is nor will, on or before the date when the Mortgage over such Ship is registered, 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 relevant Ship Security Documents, would have required the consent of the Bank and, on or before the date when the Mortgage over such Ship is registered, there will not be any agreement or arrangement whereby the Earnings of such Ship may be shared with any other person;

 

7.2.8 Freedom from Encumbrances

none of the Ships, nor its Earnings, Insurances, Requisition Compensation nor the Operating Account of such Ship, nor the other 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 date when the Mortgage over such Ship is registered, subject to any Encumbrance (other than Permitted Liens);

 

7.2.9 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 the other Relevant Parties and, to the best of the Borrower’s knowledge and belief (having made due enquiry), their respective Environmental Affiliates have complied with the provisions of all Environmental Laws;

 

  (b) the Borrower and the other Relevant Parties and, to the best of the Borrower’s knowledge and belief (having made due enquiry), their respective Environmental Affiliates have obtained all Environmental Approvals and are in compliance with all such Environmental Approvals; and

 

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  (c) neither the Borrower nor any other Relevant Party nor, to the best of the Borrower’s knowledge and belief (having made due enquiry), any of their respective Environmental Affiliates have received notice of any Environmental Claim that the Borrower or any other Relevant Party or any such Environmental Affiliate is not in compliance with any Environmental Law or any Environmental Approval;

 

7.2.10 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 any of the Ships or any other Relevant Party or any other Relevant Ship or, to the best of the Borrower’s knowledge and belief (having made due enquiry), any of their respective Environmental Affiliates;

 

7.2.11 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 any of the Ships or any other Relevant Ship owned by, managed or crewed by or chartered to any Relevant Party nor, (having made due enquiry) to the best of the Borrower’s knowledge and belief, from any Relevant Ship owned by, managed or crewed by or chartered to any other Relevant Party, which could give rise to an Environmental Claim;

 

7.2.12 ISPS Code

on the date when the Mortgage over a Ship is registered, the Owner of such Ship shall have a valid and current ISSC in respect of such Ship and such Ship shall be in compliance with the ISPS Code;

 

7.2.13 No material adverse change

there has been no material adverse change in the financial position of the Security Parties or any of them or the consolidated financial position of the Group, from that described by the Borrower to the Bank in the negotiation of this Agreement;

 

7.2.14 Borrower’s own account

in relation to the borrowing by the Borrower of each Advance, the performance and discharge of its obligations and liabilities under the Security Documents and the transactions and other arrangements effected or contemplated by this Agreement, the Borrower is acting for its own account and that the foregoing will not involve or lead to a contravention of any law, official requirement or other regulatory measure or procedure which has been implemented by any relevant regulatory authority or otherwise to combat “money laundering” (as defined in Article 1 of the Directive (91/308/EEC) of the Council of the European Communities (as amended)) and/or article 305 bis of the Swiss Penal Code; and

 

7.2.15 Copies true and complete

the copies of the Underlying Documents delivered or to be delivered to the Bank pursuant to clause 9.1 are or will, when delivered, be true and complete copies of such documents; such documents constitute valid and binding obligations of the parties thereto enforceable in accordance with their terms and there have been no amendments or variations thereof or defaults thereunder.

 

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7.3 Repetition of representations and warranties

On and as of each Drawdown Date and (except in relation to the representations and warranties in clause 7.2) on each Interest Payment Date and on the Sixth Effective Date, the Borrower shall:

 

  (a) be deemed to repeat the representations and warranties in clauses 7.1 and 7.2 as if made with reference to the facts and circumstances existing on such day; and

 

  (b) be deemed to further represent and warrant to the Bank that the then latest audited financial statements delivered to the Bank under clause 8.1.5 (if any) have been prepared in accordance with the Applicable Accounting Principles and practices which have been consistently applied and present fairly and accurately the consolidated financial position of the Group as at the end of the financial period to which the same relate and the consolidated results of the operations of the Group for the financial period to which the same relate and, as at the end of such financial period, neither the Borrower nor any other member of the Group had any significant liabilities (contingent or otherwise) or any unrealised or anticipated losses which are not disclosed by, or reserved against or provided for in, such financial statements.

 

8 Undertakings

 

8.1 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:

 

8.1.1 Notice of Default

promptly inform the Bank of any occurrence of which it becomes aware which might materially and adversely affect the ability of any Security Party to perform its obligations under any of the Security Documents or the Underlying 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 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;

 

8.1.2 Consents and licences

without prejudice to clauses 7.1 and 9, 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;

 

8.1.3 Use of proceeds

use the Advances or any of them exclusively for the purposes specified in clauses 1.1 and 2.3;

 

8.1.4 Pari passu

ensure that its obligations under this Agreement shall, without prejudice to the provisions of clause 8.3, 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;

 

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8.1.5 Financial statements and Budget

 

  (a) prepare or cause to be prepared:

 

  (i) consolidated financial statements of the Group in accordance with the Applicable Accounting Principles consistently applied in respect of each financial year and cause the same to be reported on by its auditors; and

 

  (ii) unaudited consolidated financial statements of the Group in respect of each financial quarter in accordance with the Applicable Accounting Principles consistently applied in respect of each financial quarter,

and deliver to the Bank as many copies of the same as the Bank may reasonably require as soon as practicable but not later than one hundred and eighty (180) days (in the case of annual statements) or ninety (90) days (in the case of quarterly statements) after the end of the financial period to which they relate; and

 

  (b) prepare or cause to be prepared a Budget for the remaining part of the financial year ending on 31 December 2012 (namely from 1 July 2012 until 31 December 2012) and for each financial year thereafter, duly executed by the Borrower and in all respects acceptable to, and approved by, the Bank in writing and deliver an original of it to the Bank no later than 30 days before the beginning of the relevant financial year (and in the case of the financial year ending on 31 December 2012, on or before 15 June 2012), for acceptance and approval of it by the Bank;

 

8.1.6 Delivery of reports

deliver to the Bank as many copies as the Bank may reasonably require of every report, circular, notice, notification, filing or like document issued by the Borrower to its shareholders or creditors in general or filed, issued or submitted to NASDAQ or any related authority, at the same time as the same is issued, filed or submitted;

 

8.1.7 Provision of further information; compliance certificates

 

  (a) provide the Bank with such financial and other information concerning the Borrower, the other Security Parties, any other member of the Group, any Charterers, the Group and their respective commitments, operations and affairs, as the Bank may from time to time reasonably require; and

 

  (b) provide the Bank on each Reduction Date in relation to each Tranche, and at any other time requested by the Bank, with a certificate duly signed by authorised signatories of the Borrower confirming that no default (howsoever described therein) has occurred or is continuing under any loan, credit or other agreement relating to Borrowed Money and to which it or any other member of the Group is a party (including under the other Existing Facilities), and/or if a default (howsoever described therein) is continuing, specifying the default and the steps, if any, being taken to remedy it, including, without limitation, any waivers or extensions which have been agreed between the Existing Lenders of the other Existing Facilities and any member of the Group;

 

  (c) for as long as the entire Trade Debt of all the Ships remains in excess of $500,000 (even though continuously paid and reduced in accordance with the Trade Debt Plan), provide the Bank at the end of each calendar month with monthly updates of the actual Trade Debt of all the Ships and with a revised Trade Debt Plan in respect of the proposed settlement strategy and plan of such revised/updated Trade Debt of the Ships, for approval by the Bank;

 

  (d) provide the Bank at the end of each calendar month with amortisation and interest payment reports in connection with the other Existing Facilities;

 

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  (e) together with each set of financial statements of the Group in respect of an Accounting Period, deliver to the Bank:

 

  (i) a consolidated cash flow statement (if not already contained in the financial statements in respect of such Accounting Period);

 

  (ii) a comparative report duly signed by the Borrower and its Chief Financial Officer setting out the actual Operating and G&A Expenses incurred during the relevant Accounting Period as compared against the Operating and G&A Expenses for that Accounting Period forecast in the Budget of the financial year in which the Accounting Period is included;

 

  (iii) (but also at any other time requested by the Bank if a Default has occurred) a Compliance Certificate for that Accounting Period duly executed by the Borrower and counter-signed by the Chief-Financial Officer of the Borrower; and

 

  (f) within 10 Business Days after the last day of each Excess Cash Calculation Period, deliver to the Bank a certificate duly executed by the Borrower and its Chief Financial Officer, setting out the Borrower’s determination of Excess Cash for such period (which calculation however shall not be binding on the Bank);

 

8.1.8 Obligations under Security Documents

and will procure that each of the other Security Parties will, duly and punctually perform each of the obligations expressed to be assumed by it under the Security Documents and the Underlying Documents to which it is a party;

 

8.1.9 Compliance with Code

and will procure that any Operator will, comply with and ensure that each Ship and any Operator at all times 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;

 

8.1.10 Withdrawal of DOC and SMC

and will procure that any Operator will, immediately inform the Bank if there is any threatened or actual withdrawal of its Operator’s DOC or the SMC in respect of any Ship;

 

8.1.11 Issuance of DOC and SMC

and will procure that any Operator will, promptly inform the Bank upon the issuance to any Operator of a DOC and to each Ship of an SMC or the receipt by the relevant Owner or any Operator of notification that its application for the same has been refused;

 

8.1.12 ISPS Code compliance

and will procure that the Manager or any Operator will,

 

  (a) from the date when the Mortgage over a Ship is registered and at all times thereafter, maintain a valid and current ISSC respect of such Ship;

 

  (b) immediately notify the Bank in writing of any actual or threatened withdrawal, suspension, cancellation or modification of the ISSC in respect of any Ship; and

 

  (c) procure that, from the date when the Mortgage over a Ship is registered and at all times thereafter, such Ship complies with the ISPS Code;

 

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8.1.13 “KYC” requirements

deliver to the Bank such documents and evidence as the Bank shall from time to time require based on applicable laws and regulations or the Bank’s own internal guidelines, in each case relating to the verifications of identity and knowledge of the Bank’s customers;

 

8.1.14 Employment

without prejudice to the rights of the Bank under the provisions of the other Security Documents, advise the Bank promptly of any Security Charter being entered into in respect of a Ship and:

 

  (a) deliver a certified copy of each such Security Charter forthwith after its execution;

 

  (b) procure that the relevant Owner shall, forthwith after its execution:

 

  (i) execute a Charter Assignment of such Security Charter; and

 

  (ii) procure the service of any notice of assignment on the relevant Charterer or other counterparty and the acknowledgement of such notice by the relevant Charterer or other counterparty;

 

  (c) deliver to the Bank on demand made by it, such documents and evidence of the type referred to in schedule 2 to any such Charter Assignment, Security Charter or Charterer or any other related matter referred to in this clause 8.1.14, as the Bank may in its sole discretion require; and

 

  (d) pay on the Bank’s demand all legal and other costs incurred by the Bank in connection with or in relation to any such assignment or any other related matter referred to in this clause 8.1.14;

 

8.1.15 Minimum cash balances; Trade Debt

procure that:

 

  (a) from the date of this Agreement until the Sixth Effective Date, there are maintained in the Operating Accounts or any other Security Account minimum cash balances of no less than $375,000 per Mortgaged Ship;

 

  (b) following the Sixth Effective Date an amount of no less than $375,000 shall be used towards payment of Trade Debt of all the Ships strictly in accordance with the Trade Debt Plan and any balance then standing to the credit of such accounts shall be used as working capital of the Borrower and the Owners strictly in accordance with the provisions of this Agreement and the other Security Documents; and

 

  (c) the aged Trade Debt of all the Ships will be paid at all times strictly in accordance with the latest and more up-to-date Trade Debt Plan approved by the Bank in writing; and

 

8.1.16 Inspection

ensure that the Bank, by surveyors or other persons appointed by it (at the expense of the Borrower) for such purpose, may board any Ship at all reasonable times for the purpose of inspecting her and her records and to afford all proper facilities for such inspections and for this purpose to give the Bank reasonable advance notice of any intended drydocking of any Ship (whether for the purpose of classification, survey or otherwise).

 

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8.2 Security value maintenance

 

8.2.1 Security Shortfall

If at any time after 31 March 2014 the Security Value is less than the Security Requirement, the Bank shall give notice to the Borrower requiring that such deficiency be remedied and then the Borrower shall either:

 

  (a) prepay, within a period of fifteen (15) days of the date of receipt by the Borrower of the Bank’s said notice, such sum in Dollars as will result in the Security Requirement after such prepayment (taking into account any other prepayment of the Loan (or part thereof) made between the date of the notice and the date of such prepayment) being equal to the Security Value (and upon such prepayment being made, a part of the Commitment equal to the amount prepaid will also be cancelled forthwith); or

 

  (b) within fifteen (15) days of the date of receipt by the Borrower of the Bank’s said notice, constitute to the satisfaction of the Bank such further security for the Loan and any amounts owing under the Master Swap Agreement 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.

The provisions of clauses 4.5 and any relevant provisions of 4.6 shall apply to prepayments made under this clause 8.2.1(a).

 

8.2.2 Valuation of Ships

 

  (a) Each of the Mortgaged Ships and the other Fleet Vessels shall, for the purposes of this Agreement, be valued in Dollars as and when the Bank shall require (and at least twice in each calendar year on or around the date when annual and semi-annual Accounting Information is delivered by the Borrower to the Bank under this Agreement), by an independent and internationally recognised firm of shipbrokers appointed by the Bank in its sole discretion. Each such valuation shall be addressed to the Bank and made without, unless required by the Bank, physical inspection and on the basis of a sale for prompt delivery for cash at arm’s length on normal commercial terms as between a willing buyer and a willing seller without taking into account the benefit of any charterparty or other engagement concerning the Mortgaged Ship or (as the case may be) the relevant Fleet Vessel. Such valuation shall constitute the value of such Mortgaged Ship or (as the case may be) Fleet Vessel for the purposes of this clause 8.2 and the other provisions of this Agreement.

 

  (b) The Borrower shall be entitled to request the Bank to obtain a second valuation of a Mortgaged Ship (or, as the case may be, the relevant Fleet Vessel) by another independent and internationally recognised firm of shipbrokers appointed by the Bank in its sole discretion, such valuation to be made on the same basis described in paragraph (a) above. In the event of the Bank so obtaining a second such valuation for a Mortgaged Ship or (as the case may be) a Fleet Vessel, the arithmetic mean of the two (2) valuations shall constitute the value of such Mortgaged Ship or (as the case may be) the relevant Fleet Vessel for the purposes of this clause 8.2 and the other provisions of this Agreement.

 

  (c) The value of each Mortgaged Ship and each Fleet Vessel determined in accordance with the provisions of this clause 8.2 shall be binding upon the parties hereto until such time as any such further valuation shall be obtained.

 

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8.2.3 Information

The Borrower undertakes with the Bank to supply to the Bank and to any such firm of shipbrokers such information concerning each Mortgaged Ship and each Fleet Vessel and its condition as such firm of shipbrokers may require for the purpose of making any such valuation.

 

8.2.4 Costs

All costs in connection with the Bank obtaining any valuation of each of the Mortgaged Ships and each Fleet Vessel referred to in clause 8.2.2 and all costs in connection with any valuation of the Ships obtained pursuant to schedule 2, 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 8.2.1(b), shall be borne by the Borrower.

 

8.2.5 Valuation of additional security

For the purpose of this clause 8.2, the market 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.

 

8.2.6 Documents and evidence

In connection with any additional security provided in accordance with this clause 8.2, the Bank shall be entitled to receive such evidence and documents of the kind referred to in 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.

 

8.3 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, the Borrower will not:

 

8.3.1 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 undertaking, assets (including without limitation the shares of the Owners), rights or revenues to secure or prefer any present or future Indebtedness or other liability or obligation of any of the Security Parties or any other person;

 

8.3.2 No merger

merge or consolidate with any other company or person or enter into any de-merger, amalgamation, corporate reconstruction or corporate redomiciliation of any kind whatsoever;

 

8.3.3 Disposals

sell, transfer, abandon, lend or otherwise dispose of or cease to exercise direct control over any part of its present or future undertaking, assets (including without limitation the shares of the Owners), rights or revenues (otherwise than, by transfers, sales or disposals for full consideration in the ordinary course of trading) whether by one or a series of transactions related or not;

 

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8.3.4 Other business

undertake any business other than the ownership of shares of companies owning and operating ocean-going vessels and chartering the same to third parties;

 

8.3.5 No borrowing

incur any Borrowed Money except for Borrowed Money pursuant to the Security Documents;

 

8.3.6 Repayment of borrowings

repay or prepay the principal of, or pay interest on or any other sum in connection with, any of its Borrowed Money except for (a) Borrowed Money pursuant to the Security Documents and (b) Borrowed Money existing on the date of this Agreement advised by the Borrower to the Bank in writing prior to the date of this Agreement;

 

8.3.7 Loans

make any loans or grant any credit to any person or agree to do so save for normal trade credit in the ordinary course of business, or loans or advances made to any other member of the Group on an arm’s length basis and in the ordinary course of business;

 

8.3.8 Share capital and distribution

 

  (a) subject to paragraph (b) below, purchase or otherwise acquire for value any shares of its capital or declare or pay any dividends or distribute any of its present or future assets, undertaking, rights or revenues to any of its shareholders;

 

  (b) notwithstanding paragraph (a) above, the Borrower may pay dividends or other distributions in cash after 31 March 2014 and only in respect of a financial year and after the end of that financial year, provided however that:

 

  (i) at the time of such payment no Default has occurred or would occur as a result of such payment; and

 

  (ii) at the time of such payment the Security Value is not less than 135% of (i) the aggregate of the Loan and the Swap Exposure minus (ii) the amount, if any, standing to the credit of the Security Accounts; and

 

  (iii) between the Sixth Effective Date and the date of such payment of dividend or distribution, a part of the Loan which is not less than $11,300,000 has been prepaid and a part of the Commitment which is not less than $11,300,000 has been permanently reduced (in each case other than by operation of, or pursuant to the provisions of, clause 4.3 or clause 4.4 or clause 8.2.1); and

 

  (iv) the amount of such dividends or other distributions which are made pursuant to this paragraph (b) in respect of a financial year does not exceed 50% of the consolidated net profit of the Group for that financial year;

 

8.3.9 Shareholdings

change, cause, permit any change in, the legal ownership of any Owner, such that any of them ceases to be a wholly-owned direct Subsidiary of the Borrower;

 

8.3.10 Change of management

change, cause or permit any change in, its senior management;

 

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8.3.11 Constitutional documents

agree to any amendments or variation of its constitutional documents;

 

8.3.12 Operating costs / Capital expenditure

 

  (a) incur or pay, during any financial year, any expenditure which falls within the definition of Operating and G&A Expenses, if doing so would cause the actual Operating and G&A Expenses for a financial year to exceed the Operating and G&A Expenses forecast in the Budget for that financial year by more than 15% without the Bank’s prior written consent;

 

  (b) incur, and it will procure that no other members of the Group will incur, any capital expenditure (whether in a single transaction or a series of related transactions) in excess of $500,000 without the Bank’s prior written consent.

 

8.4 Equity, sub-debt - prepayment

 

8.4.1 The Borrower shall use its best endeavours to procure that, by no later than 31 March 2014, whether through a private placement transaction, a subordinated debt transaction, or a Borrower’s rights’ issue (but without taking into account the Stand-by Equity Facility), in any case carried out and concluded in form and substance in all respects approved by the Bank (and in the case of a private placement and/or subordinated debt transaction, with an investor or lender in all respects acceptable to the Bank in its absolute discretion), the Borrower will have raised an amount of not less than $25,000,000 in equity or subordinated debt (in any such case, the “Transaction”) (but without taking into account any proceeds raised by the Stand-by Equity Facility). In case the Transaction is in the form of a loan facility, such loan facility shall be fully subordinated, both as to payments and as to security (if any), to the Loan and all amounts due by the Security Parties under this Agreement and the Security Documents, and to the Encumbrances created by the Security Documents. The Bank shall advise the Borrower as to whether a proposed Transaction is acceptable to it within 2 Banking Days following receipt by the Bank of the Borrower’s relevant request together with all relevant details and description of the proposed Transaction.

 

8.4.2 Forthwith upon successful completion of a Transaction (as determined by the Bank), the Borrower shall prepay to the Bank and those of the other Existing Lenders (which are lenders under such of the other Existing Facilities which at that time have been successfully and conclusively restructured in accordance with clause 8.11 (together with the Facility, the “Restructured Facilities”) a part of the principal amount owing under the Facility and such other Existing Facilities as is equal (in aggregate) to one third (1/3rd) of the proceeds of the Borrower from the Transaction (the “Relevant Amount”).

 

8.4.3 As between the Facility and the other Restructured Facilities the Relevant Amount shall be applied proportionately by reference to the total outstanding amount of principal owing to the Bank and the other Existing Lenders under the Facility and the other Existing Facilities which are Restructured Facilities at the time when such prepayment falls due. The determination of such amounts shall be conclusively made by the Bank.

 

8.4.4 Consequently, on the date specified in clause 8.4.2, the Borrower shall prepay to the Bank a part of the Loan equal to its share of the Relevant Amount as calculated by the Bank in accordance with clause 8.4.3. The Borrower shall co-operate with the Bank by providing to it such information, data or other documents as the Bank may require for the purpose of making any such determination under clause 8.4.3 before the prepayment falls due. The Borrower shall keep the Bank informed as to the progress of any such Transaction or attempted or prospective Transaction, including the estimated closing date of such Transaction, and will notify the Bank immediately on the date that such closing has occurred, that it has so occurred.

 

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8.4.5 The remainder of any proceeds of the Transaction which are not required to be used by the Borrower in prepayment of the Facility and the other Existing Facilities in accordance with the provisions of this clause 8.4 above, shall be used:

 

  (a) first, forthwith upon receipt by the Borrower, towards payment of any aged Trade Debt of the Ships, until the Trade Debt of all the Ships and the trade debt of the other Fleet Vessels has been reduced to an aggregate amount of no more than $1,250,000 for all Fleet Vessels, and if such condition has been met,

 

  (b) secondly, at the Borrower’s discretion, towards payment of any amounts outstanding to the Yard in respect of, or on account of, or for the construction of the Hulls.

 

8.4.6 Any proceeds raised by the Borrower under the Stand-by Equity Facility shall be used forthwith upon receipt by the Borrower towards payment of aged Trade Debt of the Ships and/or any aged trade debt of the Fleet Vessels mortgaged as security under the other Existing Facilities which are then Restructured Facilities and/or any other obligations of the Borrower, in each case at the discretion of the Borrower after consultation with the Bank.

 

8.4.7 On the date when the Borrower has made to the Bank any prepayment referred to in this clause 8.4, the Commitment shall be reduced by an amount equal to any such prepayment amount and the part of the Commitment so reduced may not be reinstated.

 

8.5 Excess Cash recapture - prepayment

 

8.5.1 The Borrower hereby undertakes with the Bank to comply with the following provisions of this clause 8.5.1 at all times during the Security Period:

 

  (a) On or after the last day of each Excess Cash Calculation Period (and within 10 Banking Days after the relevant certificate of the Borrower has been delivered to the Bank under clause 8.1.7(f)), the Bank shall determine the Excess Cash for that Excess Cash Calculation Period. The Bank shall make such determination by reference to any information, documents, facts or data available to the Bank at that time, whether pursuant to the provisions of the Security Documents or otherwise. If the Bank determines that the Excess Cash for an Excess Cash Calculation Period is a positive figure it will notify the Borrower thereof and of the amount of such Excess Cash. In making such determination, the Bank may, in its absolute discretion, take into account the certificate of the Borrower delivered to the Bank under clause 8.1.7(f) in respect of that Excess Cash Calculation Period; but the Bank shall have no obligation whatsoever to wait until such certificate is delivered, or to rely on such certificate, nor shall such certificate be in any way binding or conclusive as against the Bank.

 

  (b) Forthwith after the Bank’s notification of positive Excess Cash in respect of an Excess Cash Calculation Period and in any event within 5 Banking Days thereafter, the Borrower shall prepay to the Bank such part of the Loan as is equal to that notified amount of Excess Cash (minus any sums which may be due by the Borrower under clause 4.5 as a result of, or in connection with, such prepayment). In the event that Excess Cash is not sufficient to both prepay the Loan and amounts owing under clause 4.5 as a result of such prepayment, then Excess Cash shall be applied in the following manner and order or priority:

 

  (i) first, in payment of the fee referred to in clause 5.1.4;

 

  (ii) secondly, in payment of any other amounts payable under clause 4.5 as a result of such prepayment; and

 

  (iii) thirdly, in prepayment of the Loan as set out in this clause 8.5.

 

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  (c) On the date of any prepayment of the Loan under this clause 8.5, the Commitment shall be reduced by an amount equal to the amount of such prepayment and the part of the Commitment so reduced may not be reinstated.

 

8.5.2 With effect from 31 March 2014 and at all times thereafter, the provisions of clause 8.5.1 shall not apply during any period (but not at any other time) when the Bank has notified the Borrower in writing that, and for so long as, the following conditions are both being met continuously during such period:

 

  (a) the Security Value is not less than 135% of (i) the aggregate of the Loan and the Swap Exposure minus (ii) the amount, if any, standing to the credit of the Security Accounts; and

 

  (b) as between the Sixth Effective Date and the date of such notification by the Bank, a part of the Loan which is not less than $11,300,000 has been prepaid and a part of the Commitment which is not less than $11,300,000 has been permanently reduced (in each case other than by operation of, or pursuant to the provisions of, clause 4.3 or clause 4.4 or clause 8.2.1).

 

8.6 Financial undertakings

 

8.6.1 The Borrower undertakes with the Bank that from the Sixth Effective Date 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 ensure that:

 

  (a) Consolidated leverage ratio

at the end of each Accounting Period falling between 1 January 2014 and 31 December 2015 (both inclusive), the ratio of Funded Debt to Shareholders’ Equity shall not be greater than 2.5:1.0;

 

  (b) Liquidity

it maintains (on a consolidated basis) on each day falling after 30 June 2014, Cash and Cash Equivalents in an amount equal to the higher of:

 

  (i) $2,500,000; and

 

  (ii) $500,000 per Fleet Vessel (including Mortgaged Ships) which is mortgaged as security under any of the DB Facility or the FBB Facility, if and to the extent that any such Existing Facility has been successfully and conclusively restructured as contemplated in clause 8.11;

 

  (c) Interest coverage ratio

the ratio of EBITDA to Interest Expense at the end of each Accounting Period:

 

  (i) falling between 1 January 2013 and 31 December 2013 (both inclusive), shall not be less than 2.0:1.0;

 

  (ii) falling between 1 January 2014 and 31 December 2014 (both inclusive), shall not be less than 3.5:1.0; and

 

  (iii) falling between 1 January 2015 and 31 December 2015 (both inclusive), shall not be less than 4.5:1.0;

 

8.6.2

For the purposes of this clause 8.6, all the terms defined in clause 1.2 and used in this clause 8.6, and other accounting terms used in this clause 8.6, are to be determined on a consolidated basis in respect of the Group and (except as items are expressly included or excluded in the relevant definition or provision) are used and shall be

 

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  construed in accordance with the Applicable Accounting Principles consistently applied and as determined from the relevant Accounting Information or any other information available to the Bank at any relevant time.

 

8.6.3 The compliance of the Borrower with the undertakings set out in clause 8.6.1 shall be determined by the Bank as at the end of each Accounting Period on the basis of calculations made by the Bank by reference to the Accounting Information relevant to such Accounting Period, and irrespective of when such Accounting Information is actually supplied to the Bank pursuant to clause 8.1.5.

 

8.6.4 Without prejudice to the other terms of this clause 8.6 and, in particular, the time when compliance with the financial undertakings of clause 8.6.1 is to be measured by the Bank pursuant to clause 8.6.3, the Borrower hereby undertakes that the financial undertakings of clause 8.6.1 will be complied with at all times during the whole term of each Accounting Period and throughout the Security Period.

 

8.6.5 For the purposes of this clause 8.6.1 no item shall be deducted or credited more than once in any calculation; and (b) any amount expressed in a currency other than Dollars shall be converted into Dollars in accordance with the Applicable Accounting Principles consistently applied.

 

8.7 Sanctions

 

8.7.1 The Borrower understands that the Bank is (be it due to applicable laws or be it due to internal rules and regulations) prohibited from conducting transactions (including finance transactions) with the government of or any person or entity owned or controlled by the government of “Restricted Countries” or “Restricted Persons”.

 

8.7.2 The Borrower confirms and undertakes that it shall not, and it will procure that no other Security Party will, transfer, make use of or provide the benefits of any money, proceeds or services provided by or received from the Bank to any Restricted Persons or conduct any business activity (such as entering into any ship acquisition agreement, any ship refinancing agreement and/or any charter agreement) related to a vessel, project, asset or otherwise for which money, proceeds or services have been received from the Bank with any Restricted Persons.

 

8.7.3 In this clause 8.7:

“Restricted Countries” means those countries subject to sanctions and/or trade embargoes, in particular but not limited to pursuant to the U.S.’s Office of Foreign Asset Control of the U.S. Department of Treasury (“OFAC”) including at the date of this Agreement, but without limitation, Cuba, Iran, Myanmar, North Korea, Sudan and Syria and any additional countries notified by the Bank to the Borrower based on respective sanctions being imposed by OFAC or any of the regulative bodies referred to in the definition of Restricted Persons.

“Restricted Persons” means persons, entities or any other parties (i) located, domiciled, resident or incorporated in Restricted Countries, and/or (ii) subject to any sanction administrated by the United Nations, the European Union, the State Secretariat for Economic Affairs of Switzerland (“SECO”), OFAC, HM Treasury of the United Kingdom, the Monetary Authority of Singapore (“MAS”) and the Hong Kong Monetary Authority (“HKMA”) and/or any other applicable country and/or (iii) owned or controlled by or affiliated with persons, entities or any other parties as referred to in (i) and (ii).

 

8.8 Most favoured nation

 

8.8.1

Without prejudice to the provisions of clause 8.3, the Borrower undertakes that it will not, and will procure that no other member of the Group will, agree to or grant or agree to grant any rights, security interests, Encumbrances, guarantees, interest rate, fees, commissions or any other provisions (including undertakings, representations, events of

 

44

  default, financial covenants, prepayment obligations or any other restrictions) to, for the benefit of, or in favour of, any lender (including the other Existing Lenders) or creditor of any Borrowed Money incurred by the relevant member of the Group, whether before, on or after the date of the Sixth Supplemental Agreement (the more favourable rights), which are in any respect more favourable to such lender or creditor than the provisions of this Agreement and the other Security Documents are in favour of the Bank.

 

8.8.2 Without prejudice to clause 8.8.1 and the consequences of their breach by the Borrower under clause 10, in the event and each time that the Borrower or any other member of the Group agree to, or grant, or agree to grant, any more favourable rights in breach of clause 8.8.1, the Borrower undertakes and agrees with the Bank:

 

  (a) to notify the Bank forthwith after the relevant agreement to, or the granting of or any agreement to grant (as the case may be), such more favourable rights;

 

  (b) to agree to, provide and grant, such more favourable rights also in favour of the Bank under or in connection with this Agreement and the other Security Documents (and the transactions contemplated thereunder), by entering into (and/or by procuring that any Security Party or any other person entering into) such documentation as the Bank shall reasonably require, immediately after the Bank’s request to the Borrower; and

 

  (c) any such more favourable rights shall in any event apply to this Agreement and the other Security Documents automatically from the time they are granted to any other creditor or creditors, and irrespective of whether the Borrower and the other Security Parties have complied with their other obligations under this clause 8.8, except if the Bank at any time advises the Borrower that such or certain of such more favourable rights will not so apply and always without prejudice to the terms and conditions of this Agreement and the other Security Documents.

 

8.9 Retention Account

The Borrower hereby undertakes with the Bank that throughout the Security Period:

 

8.9.1 on each Retention Date in respect of a Tranche, the Borrower shall pay to the Bank for credit to the Retention Account, the Retention Amount for such Retention Date in respect of such Tranche Provided however that, to the extent that there are moneys standing to the credit of any of the Operating Accounts, the Borrower shall procure that such moneys shall, up to an amount equal to the Retention Amount for that Tranche, be transferred from any of the Operating Accounts to the Retention Account on that Retention Date for such Tranche; and to that extent, the Borrower’s obligations to make the payments referred to in this clause 8.9.1 shall have been fulfilled upon such transfer being effected;

 

8.9.2 unless and until there shall occur an Event of Default, all Retention Amounts in respect of a Tranche credited to the Retention Account, together with interest from time to time accruing or at any time accrued thereon, shall be applied by the Bank (and the Borrower hereby irrevocably and unconditionally instructs and authorises the Bank so to apply the same) upon each Reduction Date for that Tranche, and on each day that interest is payable pursuant to clause 3.1 on or in respect of that Tranche, in or towards payment to the Bank of any prepayment then falling due under clause 4.3 in relation to such Tranche or (as the case may be) in or towards payment of the amount of interest then due in relation to such Tranche. Each such application by the Bank shall constitute a payment in or towards satisfaction of the Borrower’s corresponding payment obligations under this Agreement but shall be strictly without prejudice to the obligations of the Borrower to make any such payment to the extent that the aforesaid application by the Bank is insufficient to meet the same; and

 

8.9.3 unless the Bank otherwise agrees in writing, the Borrower shall not be entitled to withdraw any moneys from the Retention Account at any time and so long as any moneys are owing under this Agreement and the other Security Documents except as otherwise permitted by this clause 8.9.

 

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8.10 Outstanding interest

The Borrower and the Bank hereby agree that the unpaid interest amount of $449,078.12 due to the Bank as at the Sixth Effective Date (consisting of an amount of interest of $201,537.50 originally due to the Bank on 8 February 2012 and an amount of interest of $247,540.62 originally due to the Bank on 31 May 2012) shall be paid to the Bank on the date when the amendment and restructuring fee referred to in clause 5.1.4 falls due pursuant to the terms of this Agreement and the Sixth Supplemental Agreement.

 

8.11 Conditions Subsequent

The Borrower hereby undertakes (and in the case of clauses 8.11.2, 8.11.3 and 8.11.4, such undertaking is given on a best efforts basis by the Borrower) with the Bank that:

 

8.11.1 it shall provide the Bank, by no later than 31 July 2012 with irrevocable instructions to pay to Holland and Knight the amount of $21,598 and by no later than 31 August 2012 with irrevocable instructions to pay Xxxxxx Xxxx LLP the amount of € 5,000, all being legal fees and expenses of the Bank for the preparation of the Sixth Supplemental Agreement and other prior agreements between the Borrower and the Bank;

 

8.11.2 by no later than 30 June 2012, it shall provide the Bank with evidence of agreement (by final, unconditional and binding long term documentation) between the Borrower or any other member of the Group and DB, implementing the restructuring of the DB Facility on terms in all respects acceptable to the Bank in its absolute and unfettered discretion;

 

8.11.3 by no later than 30 August 2012, it shall provide the Bank with evidence of agreement (by final, unconditional and binding long term documentation) between the Borrower or any other member of the Group and FBB, implementing the restructuring of the FBB Facility on terms in all respects acceptable to the Bank in its absolute and unfettered discretion; and

8.11.4

 

  (a) from the date of the Sixth Supplemental Agreement and at all other times thereafter throughout the Security Period, no further payments whatsoever shall be made by the Borrower or any other member of the Group, whether to the Yard or any other person whatsoever, in respect of, or on account of, or for the construction of the Hulls other than as permitted in clause 8.4.5; and

 

  (b) no member of the Group shall have any further liabilities or obligations (i.e. beyond those already paid and discharged prior to the date of the Sixth Supplemental Agreement) in connection with the construction or acquisition of the Hulls or the Hulls in general (whether towards the Yard or to any other person whatsoever).

 

9 Conditions

 

9.1 Commitment

The obligation of the Bank to make the Commitment available shall be subject to the condition that the Bank or its duly authorised representative shall have received, not later than two (2) Banking Days before the date of this Agreement, the documents and evidence specified in Part 1 of schedule 2 in form and substance satisfactory to the Bank.

 

9.2 Initial Tranche - first Advance

The obligation of the Bank to make available the first Advance to be drawn down under the Initial Tranche, shall be subject to the condition that the Bank or its duly authorised

 

46

representative shall have received, on or prior to the drawdown of such Advance, the documents and evidence specified in Part 2 of schedule 2, in form and substance satisfactory to the Bank.

 

9.3 Initial Tranche - second Advance

The obligation of the Bank to make available the second Advance to be drawn down under the Initial Tranche, shall be subject to the condition that the Bank or its duly authorised representative shall have received, on or prior to the drawdown of such Advance, the documents and evidence specified in Part 3 of schedule 2, in form and substance satisfactory to the Bank.

 

9.4 Additional Tranche

The obligation of the Bank to make available the first Advance to be drawn down under the Additional Tranche, shall be subject to the condition that the Bank or its duly authorised representative shall have received, on or prior to the drawdown of such Advance, the documents and evidence specified in Part 4 of schedule 2 in respect of the Additional Ship in form and substance satisfactory to the Bank.

 

9.5 General conditions precedent

The obligation of the Bank to make any Advance available shall be subject to the further conditions that, at the time of the giving of the Drawdown Notice for such Advance, and at the time of the making of such Advance:

 

9.5.1 the representations and warranties contained in (i) clauses 7.1, 7.2 and 7.3(b) and (ii) clause 4 of each Owner’s Guarantee, 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;

 

9.5.2 no Default shall have occurred and be continuing or would result from the making of such Advance; and

 

9.5.3 in the case of Advances under the Additional Tranche, that the conditions set out in clauses 9.1.1, 9.1.2 and 9.1.3 have been satisfied.

 

9.6 Waiver of conditions precedent

The conditions specified in this clause 9 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.

 

9.7 Further conditions precedent

Not later than five (5) Banking Days prior to each Drawdown Date of an Advance 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 favourable opinions as to any or all of the matters which are the subject of clauses 7, 8, 9 and 10.

 

10 Events of Default

 

10.1 Events

There shall be an Event of Default if:

 

10.1.1 Non-payment: any Security Party fails to pay any sum payable by it under any of the Security Documents or the Underlying Documents at the time, in the currency and in the manner stipulated in the Security Documents or the Underlying Documents (and so that, for this purpose, sums payable on demand shall be treated as having been paid at the stipulated time if paid within three (3) Banking Days of demand); or

 

47

10.1.2 Master Swap Agreement: (a) an Event of Default or Potential Event of Default (in each case as defined in the Master Swap Agreement) has occurred and is continuing with the Borrower as the Defaulting Party (as defined in the Master Swap Agreement) under the Master Swap Agreement or (b) an Early Termination Date has occurred or been or become capable of being effectively designated under the Master Swap Agreement by the Bank or (c) 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

 

10.1.3 Breach of Insurances and certain other obligations: the relevant Owner or, as the case may be, the Manager fails to obtain and/or maintain the Insurances (in accordance with the requirements of the relevant Ship Security Documents) for any of the Mortgaged Ships or if any insurer in respect of any such Insurances cancels such Insurances or disclaims liability by reason, in either case, of mis-statement in any proposal for such Insurances or for any other failure or default on the part of any of the Owners 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 8.2, 8.3, 8.4, 8.5, 8.6, 8.7, 8.8, 8.9, 8.10 or 8.11 of this Agreement or any of the Owners commits any breach of or omits to observe any of the obligations or undertakings expressed to be assumed by it under clause 5 of the relevant Owner’s Guarantee; or

 

10.1.4 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 Security Documents to which it is a party or any of the Underlying Documents (other than those referred to in clauses 10.1.1, 10.1.2 and 10.1.3 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

 

10.1.5 Misrepresentation: any representation or warranty made or deemed to be made or repeated by or in respect of any Security Party to which it is a 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 to which it is a party or any of the Underlying Documents, is or proves to have been incorrect or misleading in any material respect; or

 

10.1.6 Cross-default: any Indebtedness of any Relevant Party (including, without limitation, any Indebtedness under any of the other Existing Facilities) is not paid when due or any Indebtedness of any Relevant Party (including, without limitation, any Indebtedness under any of the other Existing Facilities) 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 relevant Relevant Party of a voluntary right of prepayment), or the creditor of any Relevant Party becomes entitled to declare any such Indebtedness due and payable or any facility or commitment available to any Relevant Party relating to Indebtedness (including, without limitation, any Indebtedness under any of the other Existing Facilities) is withdrawn, suspended or cancelled by reason of any default (howsoever described) of the person concerned unless the Relevant Party shall have satisfied the Bank that such withdrawal, suspension or cancellation will not affect or prejudice in any way such Relevant Party’s ability to pay its debts as they fall due and fund its commitments, or any guarantee given by any Relevant Party in respect of Indebtedness (including, without limitation, any Indebtedness under any of the other Existing Facilities) is not honoured when due and called upon; or

 

10.1.7

Legal process: any judgment or order made against any Relevant Party is not stayed or complied with within fourteen (14) days (except where that Relevant Party is not obliged

 

48

  by law to comply with such order or judgment and is contesting it in good faith) 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 any Relevant Party and is not discharged within fourteen (14) days; or

 

10.1.8 Insolvency: any Relevant Party 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

 

10.1.9 Reduction or loss of capital: a meeting is convened by any Relevant Party for the purpose of passing any resolution to reduce or redeem any of its share capital or, in the case of any of the Owners or the Manager, to purchase any of its share capital; or

 

10.1.10 Winding up: any corporate action, legal proceedings or other procedure or step is taken for the purpose of winding-up any Relevant Party or an order is made or resolution passed for the winding up of any Relevant Party or a notice is issued convening a meeting for the purpose of passing any such resolution; or

 

10.1.11 Administration: any petition is presented, notice given or other step is taken for the purpose of the appointment of an administrator of any Relevant Party or the Bank believes that any such petition or other step is imminent or an administration order is made in relation to any Relevant Party; or

 

10.1.12 Appointment of receivers and managers: any administrative or other receiver is appointed of any Relevant Party 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 any Relevant Party; or

 

10.1.13 Compositions: any corporate action, legal proceedings or other procedures or steps are taken, or negotiations commenced, by any Relevant Party or by any of its creditors with a view to the general readjustment or rescheduling of all or part of its indebtedness or to proposing any kind of composition, compromise or arrangement involving such person and any of its creditors; or

 

10.1.14 Analogous proceedings: there occurs, in relation to any Relevant Party, in any country or territory in which any of them carries on business or to the jurisdiction of whose courts any part of their assets is subject, any event which, in the 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 10.1.7 to 10.1.13 (inclusive) or any Relevant Party otherwise becomes subject, in any such country or territory, to the operation of any law relating to insolvency, bankruptcy or liquidation; or

 

10.1.15 Cessation of business: any Relevant Party suspends or ceases or threatens to suspend or cease to carry on its business; or

 

10.1.16 Seizure: all or a material part of the undertaking, assets, rights or revenues of, or shares or other ownership interests in, any other Relevant Party are seized, nationalised, expropriated or compulsorily acquired by or under the authority of any government; or

 

10.1.17 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

 

10.1.18 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

 

49

10.1.19 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

 

10.1.20 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

 

10.1.21 Material adverse change: there occurs, in the reasonable opinion of the Bank, a material adverse change in the financial condition of any Security Party or any other member of the Group, or the Group as a whole, by reference to the financial statements of the Group referred to in clause 7.1.11 or from that described by any Security Party to the Bank in the negotiation of this Agreement or in the Sixth Supplemental Agreement, which, would in the opinion of the Bank materially impair the ability of the Security Parties (or any of them) to perform their respective obligations under this Agreement and to the Security Documents to which they are a party; or

 

10.1.22 Arrest: any Mortgaged 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 relevant Owner and the relevant Owner shall fail to procure the release of such Mortgaged Ship within a period of five (5) Banking Days thereafter; or

 

10.1.23 Registration: the registration of any Ship under the laws and flag of the relevant Flag State is cancelled or terminated without the prior written consent of the Bank or if such registration of such Ship is not renewed at least forty-five (45) days prior to the expiry of such registration; or

 

10.1.24 Unrest: the Flag State of any Ship becomes involved in hostilities or civil war or there is a seizure of power in such 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

 

10.1.25 Environment: the Borrower, any of the Owners and/or any other Relevant Party and/or any of their respective Environmental Affiliates fails to comply with any Environmental Law or any Environmental Approval or any of the Ships or any other Relevant 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 of its Related Companies or any other Relevant Party or the Group as a whole or on the security constituted by any of the Security Documents; or

 

10.1.26 P&I: the Borrower or any of the Owners or any other person fails or omits to comply with any requirements of the protection and indemnity association or other insurer with which any Ship is entered for insurance or insured against protection and indemnity risks (including all P&I risks) to the effect that any cover (including, without limitation, any cover in respect of liability for Environmental Claims arising in jurisdictions where any Ship operates or trades) is or may be liable to cancellation, qualification or exclusion at any time; or

 

10.1.27 Shareholdings:

 

  (a) any Owner ceases to be a wholly-owned direct Subsidiary of the Borrower; or

 

  (b)

at any relevant time there is any change in the ultimate beneficial ownership of any of the shares in the Borrower such that (i) Mr Ion Varouxakis ceases to be the

 

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  ultimate beneficial owner of at least 10% of the total issued voting share capital of the Borrower or (ii) the Restis Family cease to be the ultimate beneficial owners of such percentage of the total issued voting share capital of the Borrower as set out in clause 7.1.10 or (iii) any person or persons acting in concert (other than Mr Ion Varouxakis and the Restis Family) becomes the ultimate beneficial owner of more than 30% of the total issued voting share capital of the Borrower (and for the purposes of this paragraph (b) “persons acting in concert” shall have the meaning given to a “syndicate” or “group” of persons in Section 13(d)(3) of the Securities Exchange Act 1934 (as amended) of the United States of America); or

 

  (c) any of the shares of the Manager ceases to be ultimately beneficially owned by Mr Ion Varouxakis and/or the Varouxakis Family; or

 

10.1.28 Accounts: moneys are withdrawn (a) from any Operating Account other than in accordance with clause 5 of the relevant Owner’s Guarantee and/or (b) from the Retention Account other than in accordance with clause 8.9; or

 

10.1.29 Manager: any Ship ceases to be managed by the Manager without the prior written consent of the Bank; or

 

10.1.30 De-listing etc.: the shares of the Borrower are de-listed, or cease to trade or are suspended from trading (whether permanently or temporarily for longer than ten (10) consecutive days) on, NASDAQ; or

 

10.1.31 Charters: any Charter is cancelled, repudiated or terminated for any reason (other than by mere effluxion of time or the Total Loss of the relevant Ship); or

 

10.1.32 Free Jupiter: the second Advance of the Initial Tranche is not made and the conditions precedent specified in Part 3 of schedule 2 have not been delivered by the Borrower to the Bank by 30 May 2008; or

 

10.1.33 Licenses, etc: any license, authorisation, consent or approval at any time necessary to enable any Security Party to comply with its obligations under the Security Documents or the Underlying Documents is revoked or withheld or modified or is otherwise not granted or fails to remain in full force and effect or if any exchange control or other law or regulation shall exist which would make any transaction under the Security Documents or the Underlying Documents or the continuation thereof, unlawful or would prevent the performance by any Security Party of any term of any of the Security Documents or the Underlying Documents; or

 

10.1.34 Operating and G&A Expenses: the actual Operating and G&A Expenses in respect of a financial year, exceed at any time the Operating and G&A Expenses forecast in the Budget for that financial year by more than 15%; or

 

10.1.35 Material events: any other event occurs or circumstance arises which, in the reasonable 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 to which it is a party or (ii) the security created by any of the Security Documents.

 

10.2 Acceleration

The Bank may, without prejudice to any other rights of the Bank, at any time after the happening of an Event of Default by notice to the Borrower:

 

10.2.1 declare that the obligation of the Bank to make the Commitment available shall be terminated, whereupon the Commitment at the time shall be reduced to zero forthwith; and/or

 

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10.2.2 declare that 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; and/or

 

10.2.3 exercise any and all of its rights, remedies, powers or discretions under the Security Documents.

 

10.3 Demand basis

If, pursuant to clause 10.2.2, 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.

 

11 Indemnities

 

11.1 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 (including loss of Margin) or expense which the Bank shall certify as sustained or incurred by it as a consequence of:

 

11.1.1 any default in payment of any sum under any of the Security Documents when due;

 

11.1.2 the occurrence of any other Event of Default;

 

11.1.3 any prepayment of the Loan (or any part thereof) being made under clauses 4.2, 4.3, 4.4, 8.2.1(a), 8.4, 8.5 or 12.1 or any other prepayment or repayment of an Advance (or part thereof) being made otherwise than on an Interest Payment Date relating to the part of the Advance being prepaid or repaid; or

 

11.1.4 any Advance not being made for any reason (excluding any default by the Bank) after the Drawdown Notice for such Advance has been given,

including, in any such case, but not limited to any loss or expense sustained or incurred by the Bank in maintaining or funding the Commitment or any part thereof or in liquidating or re-employing deposits from third parties acquired to effect or maintain the Commitment or any part thereof or any other amount owing to the Bank.

 

11.2 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.

 

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Any amount due from the Borrower under this clause 11.2 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.

 

11.3 Environmental indemnity

The Borrower shall indemnify the Bank on demand and hold it 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.

 

11.4 Central Bank or European Central Bank reserve requirements indemnity

The Borrower shall on demand promptly indemnify the Bank against any cost incurred or loss suffered by the Bank as a result of its complying with the minimum reserve requirements of the European Central Bank and/or the Swiss Financial Market Supervisory Authority (FINMA), the Swiss National Bank and/or with respect to maintaining required reserves with the relevant national central bank to the extent that such compliance relates to the Commitment or the Loan or part thereof or deposits obtained by it to fund or maintain the whole or part of the Loan and such cost or loss is not recoverable by the Bank under clause 12.2.

 

12 Unlawfulness and increased costs

 

12.1 Unlawfulness

If it is or becomes contrary to any law or regulation for the Bank to make an Advance or maintain its Commitment or fund the Loan, 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 not being earlier than the latest date permitted by the relevant law or regulation together with interest accrued to the date of prepayment and all other sums payable by the Borrower under this Agreement and/or the Master Swap Agreement or either of them.

 

12.2 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:

 

12.2.1 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

 

12.2.2 increase the cost to, or impose an additional cost on, the Bank or its holding company in making or keeping the Loan available or maintaining or funding all or part of the Loan; and/or

 

53

12.2.3 reduce the amount payable or the effective return to the Bank under any of the Security Documents; and/or

 

12.2.4 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

 

12.2.5 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

 

12.2.6 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 Loan from its capital for regulatory purposes,

then and in each such case (subject to clause 12.3):

 

  (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 made at any time whether or not the Advances outstanding have been repaid, 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 12.2 “holding company” means the company or entity (if any) within the consolidated supervision of which the Bank is included.

 

12.3 Exception

Nothing in clause 12.2 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 loss to the extent that the same is the subject of an additional payment under clause 6.6.

 

13 Security and set-off

 

13.1 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 13.1 shall be applied in the following manner:

 

13.1.1 first, in or toward payment of all unpaid costs, expenses, fees (including, without limitation, the fee referred to in clause 5.1.4) and commitment commissions which may be owing to the Bank under any of the Security Documents;

 

13.1.2 secondly, in or towards payment of any arrears of interest owing in respect of the Loan or any part thereof;

 

13.1.3 thirdly, in or towards repayment of the Loan (whether the same is due and payable or not);

 

13.1.4 fourthly, in or towards payment to the Bank of any sum owing to it under the Master Swap Agreement;

 

54

13.1.5 fifthly, 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 or prepaid and which amounts are so payable under this Agreement;

 

13.1.6 sixthly, in or towards payment to the Bank of any other sums owing to it under any of the Security Documents; and

 

13.1.7 seventhly, the surplus (if any) shall be paid to the Borrower or to whomsoever else may be entitled to receive such surplus.

 

13.2 Set-off

 

13.2.1 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 such 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.

 

13.2.2 The Bank shall not be obliged to exercise any right given to it by this clause 13.2. 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.

 

13.2.3 Nothing in this clause 13.2 shall be effective to create an Encumbrance or any other security interest.

 

13.3 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.

 

13.4 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.

 

14 Assignment, transfer and lending office

 

14.1 Benefit and burden

This Agreement shall be binding upon, and enure for the benefit of, the Bank and the Borrower and their respective successors in title.

 

14.2 No assignment by Borrower

The Borrower may not assign or transfer any of its rights or obligations under this Agreement.

 

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14.3 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 prior consent of the Borrower (the Borrower hereby consenting to any such assignment).

 

14.4 Transfer

The Bank may transfer all or any part of its rights, benefits and/or obligations under this Agreement and/or any of the other Security Documents to any one or more banks or other financial institutions (a “Transferee”) without the prior consent of the Borrower (the Borrower hereby consenting to any such transfer).

 

14.5 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 14.3 or 14.4 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.

 

14.6 Lending office

The Bank shall lend through its office at the address specified in the definition of “Bank” in clause 1.2 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 14.6, the Bank shall notify the Borrower promptly of such change.

 

14.7 Disclosure of information

 

14.7.1 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 and the other Security Parties or any of them as the Bank shall consider appropriate; and

 

14.7.2 The Borrower authorises the Bank to disclose all information related or connected to:

 

  (a) the Ship or any other Fleet Vessel owned or operated by a member of the Group;

 

  (b) the negotiation, drafting and content of this Agreement and Security Documents;

 

  (c) the Loan; or

 

  (d) any member of the Group,

to any service provider (including but not limited to professional advisers, auditors, lawyers, accountants, surveyors, valuers, insurers, insurance advisers and brokers) which the Bank may in its discretion deem necessary or desirable in connection with this Agreement or any other Security Document.

 

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15 Notices and other matters

 

15.1 Notices

Every notice, request, demand or other communication under this Agreement or (unless otherwise provided therein) under any of the other Security Documents shall:

 

15.1.1 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;

 

15.1.2 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 five (5) 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

 

15.1.3 be sent:

 

  (a) if to the Borrower at:

c/o Free Bulkers S.A.

10, Xxxxxxxxxxx Xxxxxxxxx Xxxxxx

000 00 Xxxxxx

Xxxxxx

 

Fax No:   x00 000 000 0000
Att:   Mr Ion Varouxakis

 

  (b) if to the Bank at:

Credit Suisse AG (formerly known as Credit Suisse)

Xx. Xxxxx-Xxxxxx 0-0

X.X. Xxx 0000 Xxxxx

Xxxxxxxxxxx

 

Fax No:   x00 000 000 000
Att:   Xx Xxxxxxx Xxxxx

or to such other address and/or numbers as is notified by one party to the other party under this Agreement.

Further, the Bank and the Borrower hereby agree that any information, communications, documents or data may be sent by them via e-mail to each other, and to (or from) third parties involved in the provision of services. In particular, the Borrower is aware that:

 

  (a) the unencrypted information is transported over an open, publicly accessible network and can, in principle, be viewed by others, thereby allowing conclusions to be drawn about a banking relationship;

 

  (b) the information can be changed and manipulated by a third party;

 

  (c) the sender’s identity (sender of the e-mail) can be assumed or otherwise manipulated;

 

  (d) the exchange of information can be delayed or disrupted due to transmission errors, technical faults, disruptions, malfunctions, illegal interventions, network overload, the malicious blocking of electronic access by third parties, or other shortcomings on the part of the network provider. In certain situations, time-critical orders and instructions might not be processed on time;

 

57

  (e) the Bank assumes no liability for any loss incurred as a result of manipulation of any e-mail address or content nor is it liable for any loss incurred by the Borrower and any other Security Party due to interruptions and delays in transmission caused by technical problems; and

 

  (f) the Bank is entitled to assume that all the orders and instructions, and communications in general, received from the Borrower or a third party are from an authorized individual, irrespective of the existing signatory rights in accordance with the commercial register (or any other applicable equivalent document) or the specimen signature provided to the Bank. The Borrower shall further procure that all third parties referred to herein agree with the use of e-mails and are aware of the above terms and conditions related to the use of e-mail.

 

15.2 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.

 

15.3 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.

 

15.4 Waiver of Borrowers’ rights

The Borrower agrees 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 not, without the prior written consent of the Bank:

 

15.4.1 exercise any right of subrogation, reimbursement and indemnity against any Owner or any other person liable under the Security Documents, whether in respect of any Indebtedness or intra-Group loans or otherwise;

 

15.4.2 demand or accept repayment in whole or in part of any Indebtedness (including intra-Group loans) now or hereafter due to such Borrower from any Owner or from any other person liable under the Security Documents or demand or accept any guarantee, indemnity or other assurance against financial loss or any document or instrument created or evidencing an Encumbrance in respect of the same or dispose of the same;

 

15.4.3 take any steps to enforce any right against any Owner or any other person liable under the Security Documents in respect of any such moneys; or

 

15.4.4 claim any set-off or counterclaim against any Owner or any other person liable under the Security Documents or claiming or proving in competition with the Bank in the liquidation of any Owner or any other person liable under the Security Documents or have the benefit of, or share in, any payment from or composition with, any Owner or any other person liable under the Security Documents or any other Security Document now or hereafter held by the Bank for any moneys owing under this Agreement or for the obligations or liabilities of any other person liable but so that, if so directed by the Bank, it will prove for the whole or any part of its claim in the liquidation of any Owner or other person liable under the Security Documents on terms that the benefit of such proof and all money received by it in respect thereof shall be held on trust for the Bank and applied in or towards discharge of any moneys owing under this Agreement in such manner as the Bank shall deem appropriate.

 

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16 Governing law and jurisdiction

 

16.1 Law

This Agreement and any non-contractual relations connected with it are governed by, and shall be construed in accordance with, English law.

 

16.2 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 (including any non-contractual obligations 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 Messrs. Atlas Maritime Services Ltd. at present of Enterprise House, 000-000 Xxxxxx Xxxx, Xxxxxx X00 0XX, Xxxxxxx 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 (including any non-contractual obligations in connection with it).

 

16.3 Contracts (Rights of Third Parties) Xxx 0000

No term of this Agreement is enforceable under the Contracts (Rights of Third Parties) Xxx 0000 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.

 

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Schedule 1

Form of Drawdown Notice

(referred to in clause 2.2)

 

To:   Credit Suisse AG (formerly known as Credit Suisse)

  Xx. Xxxxx-Xxxxxx 0-0

  X.X. Xxx XX 0000

  Xxxxx

  Xxxxxxxxxxx

[—] 200[—]

US$91,000,000 Reducing Revolving Credit Facility

Facility Agreement dated 24 December 2007 as amended and restated by a supplemental agreement dated 26 June 2008, as further amended and supplemented by a supplemental agreement dated 23 March 2009, a supplemental agreement 27 November 2009, a supplemental agreement dated 15 July 2011, a supplemental agreement dated 7 November 2011, four extension letters, three letter/agreements and two deferral letters and as amended and restated by a supplemental agreement dated [—] 2012 (together, the “Facility Agreement”)

We refer to the above Facility Agreement and hereby give you notice that we wish to draw down an Advance of the [—] Tranche in the amount of $[—] on [                    ] 200[—] and select an Interest Period in respect thereof of [—] months. The funds should be credited to [name and number of account] with [details of bank in New York City].

We confirm that:

 

(a) no event or circumstance has occurred and is continuing which constitutes a Default;

 

(b) the representations and warranties contained (i) in clauses 7.1, 7.2 and 7.3(b) of the Facility Agreement and (ii) in clauses 4.1 and 4.2 of each executed Owner’s Guarantee, 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 such Advance will be within our corporate powers, has been validly authorised by appropriate corporate action and will not cause any limit on our borrowings (whether imposed by statute, regulation, agreement or otherwise) to be exceeded; and

 

(d) there has been no material adverse change in the financial position of ourselves or any Security Party or the Group, from that described by us or any other Security Party to the Bank in the negotiation of the Facility Agreement.

Words and expressions defined in the Facility Agreement shall have the same meanings where used herein.

 

 

For and on behalf of
FREESEAS INC.

 

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Schedule 2

Documents and evidence required as conditions precedent to the Commitment being made available

(referred to in clause 9.1)

 

1 Constitutional documents

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;

 

2 Corporate authorisations

copies of resolutions of the directors of each Security Party and officer’s certificates attaching extracts of the resolutions of the shareholders of each Security Party, approving such of the Underlying Documents and 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:

 

  (a) being true and correct;

 

  (b) 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;

 

  (c) not having been amended, modified or revoked; and

 

  (d) being in full force and effect,

together with originals or certified copies of any powers of attorney issued by any such Security Party pursuant to such resolutions;

 

3 Specimen signatures

copies of the signatures of the persons who have been authorised on behalf of each Security Party to sign such of the Underlying Documents and 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;

 

4 Certificates 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;

 

61

5 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 Advances pursuant to this Agreement or the execution, delivery and performance of the Borrower’s Security Documents;

 

6 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;

 

7 Xxxxxxxx Islands opinion

an opinion of Xxxxxxx & Xxxxxx, special legal advisers on matters of Xxxxxxxx Islands law to the Bank;

 

8 Operating Accounts

evidence that the Operating Accounts of the Initial Owners have been opened together with duly completed mandate forms in respect thereof and that there is a credit balance in each such Operating Account;

 

9 Security Documents

the Master Swap Agreement and the Master Agreement Security Deed, each duly executed by the relevant Security Parties;

 

10 Fees

evidence that any fees are under clause 5.1.1 have been paid in full;

 

11 Borrower’s process agent

a letter from the Borrower’s process agent for receipt of service of proceedings referred to in clause 16.2 accepting its appointment under the said clause and under each of the other Security Documents referred to in this Part 1 and in which it is or is to be appointed as the Borrower’s agent; and

 

12 Security Parties’ process agent

a letter from each Security Party’s agent for receipt of service of proceedings referred to in each of the Security Documents referred to in this Part 1 and in which it is or is to be appointed as such Security Party’s agent.

 

62

Part 2

Initial Tranche - first Advance

 

1 Drawdown Notice

The Drawdown Notice in respect of the first Advance to be drawn down under the Initial Tranche duly executed;

 

2 Conditions precedent

evidence that the conditions precedent set out in Part 1 of schedule 2 remain fully satisfied;

 

3 Ship conditions

evidence that each Initial Ship (other than Free Jupiter):

 

3.1 Registration and Encumbrances

is permanently registered in the name of the relevant Owner under the laws and flag of the relevant Flag State through the relevant Registry and that each such Initial Ship and its Earnings, Insurances and Requisition Compensation are free of Encumbrances;

 

3.2 Classification

maintains the relevant Classification free of all requirements and recommendations of the relevant Classification Society;

 

3.3 Insurance

is insured in accordance with the provisions of the relevant Ship Security Documents and all requirements of such Ship 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 each such Initial 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 each such Initial Ship); and

 

3.4 Initial Charter

has been delivered for service to the relevant charterer under the relevant Initial Charter;

 

4 Security Documents

the Owner’s Guarantee of each Initial Owner (other than the Free Jupiter Owner), the Operating Account Pledge in respect of the Operating Account of each such Initial Owner and the Ship Security Documents in respect of each Initial Ship (other than Free Jupiter), each duly executed;

 

5 Mortgage registration

evidence that the Mortgage over each Initial Ship (other than Free Jupiter) has been permanently registered against each such Initial Ship under the laws and flag of the relevant Flag State through the relevant Registry;

 

63

6 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 referred to in this Part 2;

 

7 Notices of assignment

copies of duly executed notices of assignment required by the terms of the relevant Ship Security Documents referred to in this Part 2 and in the forms prescribed by such Ship Security Documents;

 

8 Valuation

a valuation of each Initial Ship (other than Free Jupiter) made by one or (as the case may be) two shipbrokers in accordance with, and on the basis described in, clause 8.2.2, at the expense of the Borrower, such valuation to be made not earlier than thirty (30) days prior to the drawdown of the first Advance to be drawn down under the Initial Tranche;

 

9 Insurance opinion

an opinion (at the cost of the Borrower) from insurance consultants to the Bank on the Insurances effected or to be effected in respect of each Initial Ship (other than Free Jupiter) upon and following the first Drawdown Date;

 

10 SMC/DOC

a copy, certified (in a certificate dated no earlier than five (5) Banking Days prior to the date of this Agreement) as a true and complete copy by an officer of the Borrower of the DOC issued to the Operator of each Initial Ship (other than Free Jupiter) and the SMC for each such Initial Ship;

 

11 ISPS

 

  (a) evidence satisfactory to the Bank that each Initial Ship (other than Free Jupiter) is subject to a ship security plan which complies with the ISPS Code; and

 

  (b) a copy, certified (in a certificate dated no earlier than five (5) Banking Days prior to the first Drawdown Date) as a true and complete copy by an officer of the Borrower of the ISSC and the continuous synopsis record (as described in the ISPS Code) for each Initial Ship (other than Free Jupiter);

 

12 Fees

evidence that any fees and any commitment commission due under clause 5.1 have been paid in full;

 

13 Xxxxxxxx Islands opinion

an opinion of Cozen X’ Xxxxxx, special legal advisers on matters of Xxxxxxxx Islands law to the Bank;

 

14 Underlying Documents

a certified true copy of the Management Agreement and the Initial Charter in respect of each Initial Ship (other than Free Jupiter);

 

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15 Security Parties’ process agent

a letter from the relevant Security Parties’ agent for receipt of service of proceedings accepting its appointment under each of the Security Documents referred to in this Part 2 and in which it is or is to be appointed as the relevant Security Party’s agent;

 

16 Existing Indebtedness

evidence that the Indebtedness of the Initial Owners existing on the date of this Agreement and secured on the Initial Ships has been, or will be with the proceeds of the first Advance to be drawn down under the Initial Tranche, reduced to $28,000,000, the Initial Owners (other than the Free Jupiter Owner) have been released from their obligations in respect thereof and any security granted in respect thereof has been discharged (except in connection with Free Jupiter); and

 

17 Further matters/opinions

any such other matter or further opinion as may be required by the Bank.

 

65

Part 3

Initial Tranche - second Advance

 

1 Drawdown Notice

The Drawdown Notice in respect of the second Advance to be drawn down under the Initial Tranche duly executed;

 

2 Conditions precedent

evidence that the conditions precedent set out in Part 1 and Part 2 of schedule 2 remain fully satisfied;

 

3 Ship conditions

evidence that Free Jupiter:

 

3.1 Registration and Encumbrances

is permanently registered in the name of the relevant Owner under the laws and flag of the relevant Flag State through the relevant Registry and that Free Jupiter and its Earnings, Insurances and Requisition Compensation are free of Encumbrances;

 

3.2 Classification

maintains the relevant Classification free of all requirements and recommendations of the relevant Classification Society;

 

3.3 Insurance

is insured in accordance with the provisions of the relevant Ship Security Documents and all requirements of such Ship 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 Free Jupiter 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 Free Jupiter; and

 

3.4 Initial Charter

has been delivered for service to the relevant charterer under the relevant Initial Charter;

 

4 Security Documents

the Owner’s Guarantee of the Free Jupiter Owner, the Operating Account Pledge in respect of the Operating Account of the Free Jupiter Owner and the Ship Security Documents in respect of Free Jupiter, each duly executed;

 

5 Mortgage registration

evidence that the Mortgage over Free Jupiter has been permanently registered against such Ship under the laws and flag of the relevant Flag State through the relevant Registry;

 

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6 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 referred to in this Part 3;

 

7 Notices of assignment

copies of duly executed notices of assignment required by the terms of the relevant Ship Security Documents referred to in this Part 3 and in the forms prescribed by such Ship Security Documents;

 

8 Valuation

a valuation of Free Jupiter made by one or (as the case may be) two shipbrokers in accordance with, and on the basis described in, clause 8.2.2, at the expense of the Borrower, such valuation to be made not earlier than thirty (30) days prior to the drawdown of the second Advance to be drawn down under the Initial Tranche;

 

9 Insurance opinion

an opinion (at the cost of the Borrower) from insurance consultants to the Bank on the Insurances effected or to be effected in respect of Free Jupiter upon and following the Drawdown Date of the second Advance to be drawn down under the Initial Tranche;

 

10 SMC/DOC

a copy, certified (in a certificate dated no earlier than five (5) Banking Days prior to the date of this Agreement) as a true and complete copy by an officer of the Borrower of the DOC issued to the Operator of Free Jupiter and the SMC for such Ship;

 

11 ISPS

 

  (a) evidence satisfactory to the Bank that Free Jupiter is subject to a ship security plan which complies with the ISPS Code; and

 

  (b) a copy, certified (in a certificate dated no earlier than five (5) Banking Days prior to the Drawdown Date of the second Advance to be drawn down under the Initial Tranche) as a true and complete copy by an officer of the Borrower of the ISSC and the continuous synopsis record (as described in the ISPS Code) for Free Jupiter;

 

12 Fees

evidence that any fees and any commitment commission due under clause 5.1 have been paid in full;

 

13 Xxxxxxxx Islands opinion

an opinion of Cozen X’ Xxxxxx, special legal advisers on matters of Xxxxxxxx Islands law to the Bank;

 

14 Underlying Documents

a certified true copy of the Management Agreement and the Initial Charter in respect of Free Jupiter;

 

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15 Security Parties’ process agent

a letter from the relevant Security Parties’ agent for receipt of service of proceedings accepting its appointment under each of the Security Documents referred to in this Part 3 and in which it is or is to be appointed as the relevant Security Party’s agent;

 

16 Existing Indebtedness

evidence that the Indebtedness of the Initial Owners existing on the date of this Agreement and secured on the Initial Ships has been, or will be with the proceeds of the second Advance to be drawn down under the Initial Tranche repaid in full and any security granted in respect thereof has been discharged;

 

17 Dry-dock

evidence that Free Jupiter has completed its repairs in connection with its recent grounding and has left the dry-dock and resumed trading and any amounts due for such repairs have been settled in full by the relevant Owner and there is no dispute with the insurers, charterers or cargo interests of Free Jupiter in connection with any claims made as a result of such grounding and the insurers have paid any such claims (including to the Free Jupiter Owner); and

 

18 Further matters/opinions

any such other matter or further opinion as may be required by the Bank.

 

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Part 4

Additional Tranche

 

1 Drawdown Notice

The duly executed Drawdown Notice in respect of the first Advance (the “Relevant Advance”) to be drawn down under the Additional Tranche;

 

2 Constitutional Documents

copies, certified by an officer of the Additional Owner to purchase the Additional Ship as true, complete and up to date copies of all documents which contain or establish or relate to the constitution of the Additional Owner;

 

3 Corporate authorisations

copies of resolutions of the directors of the Additional Owner and the Manager and officer’s certificates attaching extracts of the resolutions of the shareholders of each such Security Party, approving such of the Underlying Documents and 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) by an officer of such Security Party as:

 

  (a) being true and correct;

 

  (b) 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;

 

  (c) not having been amended, modified or revoked; and

 

  (d) being in full force and effect,

together with originals or certified copies of any powers of attorney issued by any such Security Party pursuant to such resolutions;

 

4 Specimen signatures

copies of the signatures of the persons who have been authorised on behalf of the Additional Owner and the Manager to sign such of the Underlying Documents and the Security Documents referred to in this Part 4 and 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 the relevant Drawdown Notice) by an officer of such Security Party as being the true signatures of such persons;

 

5 Certificates of incumbency

a list of directors and officers of the Additional Owner and the Manager 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 the relevant Drawdown Notice) by an officer of such Security Party to be true, complete and up to date;

 

6 Consents and approvals

a certificate (dated no earlier than five (5) Banking Days prior to the date of the relevant Drawdown Notice) from an officer of the Additional Owner and the Manager that no

 

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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 Advances pursuant to this Agreement and execute, deliver and perform the Security Documents insofar as such Security Party is a party thereto;

 

7 Ship conditions

evidence that the Additional Ship:

 

7.1 Registration and Encumbrances

is provisionally or permanently registered in the name of the Additional Owner under the laws and flag of the relevant Flag State through the relevant Registry and that the Additional Ship and its Earnings, Insurances and Requisition Compensation are free of Encumbrances;

 

7.2 Classification

maintains the relevant Classification free of all requirements and recommendations of the relevant Classification Society;

 

7.3 Insurance

is insured in accordance with the provisions of the relevant Ship Security Documents and all requirements of such Ship 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 Additional 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 Additional Ship); and

 

7.4 Additional Charter

has been delivered for service to the relevant charterer under the Additional Charter;

 

8 Security Documents

the Owner’s Guarantee of the Additional Owner, the Operating Account Pledge in respect of the Operating Account of the Additional Ship and the Ship Security Documents in respect of the Additional Ship (including a Charter Assignment in respect of the Additional Charter), each duly executed;

 

9 Mortgage registration

evidence that the Mortgage over the Additional Ship has been permanently registered against the Additional Ship under the laws and flag of the relevant Flag State through the relevant Registry;

 

10 Registration forms

such statutory forms duly signed by the Additional Owner and the other Security Parties as may be required by the Bank to perfect the security contemplated by the relevant Security Documents referred to in this Part 4;

 

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11 Notices of assignment

copies of duly executed notices of assignment requested by the terms of the relevant Ship Security Documents referred to in this Part 4 and in the forms prescribed by such Ship Security Documents referred to in this Part 4;

 

12 Delivery documents

copies, certified by the Additional Owner to be true and complete, of the xxxx of sale, the protocol of delivery and acceptance, the relevant commercial invoice and any other relevant delivery documents exchanged in respect of the Additional Ship under the Contract;

 

13 Transfer of title

evidence that the transfer of title to the Additional Ship from the Seller to the Additional Owner has been duly recorded in the relevant Registry free from Encumbrances;

 

14 Valuations

a valuation of the Additional Ship made by one or (as the case may be) two shipbrokers in accordance with, and on the basis described in, clause 8.2.2, at the expense of the Borrower, such valuation to be made not earlier than thirty (30) days prior to the drawdown of the Relevant Advance;

 

15 Insurance opinion

an opinion (at the cost of the Borrower) from insurance consultants to the Bank on the insurances effected or to be effected in respect of the Additional Ship upon and following the drawdown of the Relevant Advance;

 

16 SMC/DOC

a copy, certified (in a certificate dated no earlier than five (5) Banking Days prior to the Drawdown Date of the Relevant Advance) as a true and complete copy by an officer of the Additional Owner of the DOC issued to the Operator of the Additional Ship and either (a) the SMC for the Additional Ship or (b) an application for the issuance of the SMC for the Additional Ship;

 

17 ISPS

 

  (a) evidence satisfactory to the Bank that the Additional Ship is subject to a ship security plan which complies with the ISPS Code; and

 

  (b) a copy, certified (in a certificate dated no earlier than five (5) Banking Days prior to the Drawdown Date of the Relevant Advance) as a true and complete copy by an officer of the Additional Owner of either (a) the ISSC or (b) an application for the issuance of the ISSC and the continuous synopsis record (as described in the ISPS Code) for the Additional Ship;

 

18 Fees

evidence that any fees and any commitment commission due under clause 5.1 have been paid in full;

 

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19 Legal opinions

an opinion of special legal advisers to the Bank on the laws of the Flag State of the Additional Ship and on the laws of the country of incorporation of the Additional Owner of the Additional Ship;

 

20 Underlying Documents

a certified true copy of the Contract, the Management Agreement and the Additional Charter in respect of the Additional Ship, duly executed;

 

21 Operating Account

evidence that the Operating Account of the Additional Owner has been duly opened together with duly completed mandate forms in respect thereof, and that there is a credit balance in such account;

 

22 Minimum fleet cover

evidence satisfactory to the Bank that at least 50% of all Mortgaged Ships (including the Additional Ship) by reference to their aggregate deadweight tons, are subject to time-charters with such charterers, and on such daily charter rates, as are acceptable to the Bank in its sole discretion;

 

23 Equity

any funds required to pay the remaining part of the Contract Price under the Contract which is not being financed by the Relevant Advance, have been deposited with the Bank at least three (3) days before the Drawdown Date of the Relevant Advance;

 

24 Security Parties’ process agent

a letter from the relevant Security Parties’ agent for receipt of service of proceedings accepting its appointment under each the said Security Documents referred to in this Part 4 in which it is or is to be appointed as the said Security Parties’ process agent; and

 

25 Further matter/opinions

any such other matters or further opinions as the Bank may require.

 

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Schedule 3

Form of Compliance Certificate

 

To:   CREDIT SUISSE AG

  (formerly known as CREDIT SUISSE)

  Xxxxxxxxxxx 0

  0000 Xxxxxx

  Xxxxxxxxxxx

 

From:   FREESEAS INC.

Dated: [—]

US$91,000,000 Reducing Revolving Credit Facility

Facility Agreement dated 24 December 2007, as amended and restated by a supplemental agreement dated 26 June 2008, as further amended and supplemented by a supplemental agreement dated 23 March 2009, a supplemental agreement 27 November 2009, a supplemental agreement dated 15 July 2011, a supplemental agreement dated 7 November 2011, four extension letters, three letter/agreements and two deferral letters and as amended and restated by a supplemental agreement dated [—] 2012 (together, the “Facility Agreement”)

Terms defined in the Facility Agreement shall have the same meaning when used herein.

We refer to clause 8.6 of the Facility Agreement and hereby certify that, as at [insert date of accounts] and on the date hereof:

 

1 Financial covenants

 

  (a) the ratio of Funded Debt to Shareholders’ Equity is [—]:1.0, in each case calculated as [shown in Appendix A], versus the required ratio of 2.5:1.0]; and

 

  (b) Cash and Cash Equivalents are in the amount of $[—] calculated as [shown in Appendix B], versus the required amount of $[—]; and

 

  (c) the ratio of EBITDA to Interest Expense for the Accounting Period ended on [—] is [—]:1.0, each case calculated as [shown in Appendix C] versus the required ratio of [—]:1.0].

[and we hereby confirm that the above comply with the provisions of clause 8.6 of the Facility Agreement.]

 

2 Default

[No Default has occurred and is continuing]

or

[The following Default has occurred and is continuing: [provide details of Default]. [The following steps are being taken to remedy it: [provide details of steps being taken to remedy Default]].

 

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Signed:  

 

  [Director[s]/Officer[s]] [or any other duly authorised representatives [as appropriate]]
  For and on behalf of:
  FREESEAS INC.

I hereby confirm and certify that the above statements are correct and complete.

 

Signed:  

 

  Chief Financial Officer
  For and on behalf of
  FREESEAS INC.

 

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Filed: June 12th, 2012
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