1
Exhibit 2.52
AGREEMENT FOR
A
U.S. $200,000,000 REDUCING REVOLVING
CREDIT FACILITY
TO BE MADE AVAILABLE TO
CERTAIN WHOLLY-OWNED SUBSIDIARIES OF
TEEKAY SHIPPING CORPORATION
ARRANGED AND UNDERWRITTEN BY
DEN NORSKE BANK ASA,
CHRISTIANIA BANK OG KREDITKASSE ASA, NEW YORK BRANCH,
and
THE BANK OF NOVA SCOTIA
as of January 26, 1998
1
2
INDEX
PAGE
CLAUSE 1 DEFINITIONS.................................................. 1
1.1 Defined Terms................................... 1
1.2 Construction.................................... 17
1.3 Accounting Terms................................ 17
CLAUSE 2 REPRESENTATIONS AND WARRANTIES............................... 17
2.1(a) Due Organization and Power...................... 17
2.1(b) Authorization and Consents...................... 17
2.1(c) Binding Obligations............................. 18
2.1(d) No Violation.................................... 18
2.1(e) No Immunity .................................... 18
2.1(f) Litigation...................................... 18
2.1(g) No Default...................................... 18
2.1(h) Charters........................................ 18
2.1(i) Vessel Ownership, Classification,
Seaworthiness and Insurance................... 19
2.1(j) Financial Statements............................ 19
2.1(k) Tax Returns and Payments........................ 20
2.1(l) Insurance....................................... 20
2.1(m) Offices......................................... 20
2.1(n) Foreign Trade Control Regulations............... 20
2.1(o) No Money Laundering............................. 21
3
2.1(p) Equity Ownership................................ 21
2.1(q) Environmental Matters........................... 21
2.1(r) Pending or Threatened Environmental
Claims....................................... 22
2.1(s) Potential Environmental Claims.................. 22
2.1(t) Compliance with ISM Code......................... 22
2.1(u) Threatened Withdrawal of DOC or SMC.............. 22
2.1(v) Limited Purpose.................................. 22
2.1(w) Survival......................................... 22
CLAUSE 3 ADVANCES...................................................... 23
3.1(a) Purposes......................................... 23
3.1(b) Making of the Advances........................... 23
3.1(c) Maximum Number of Advances....................... 23
3.2 Drawdown Notice.................................. 23
3.3 Effect of Drawdown Notices....................... 23
3.4 Notation of Advances............................. 24
CLAUSE 4 CONDITIONS PRECEDENT.......................................... 24
4.1 Conditions Precedent to Drawdown of
the Initial Advance............................ 24
4.2 Further Conditions Precedent..................... 27
4.3 Break Funding Costs.............................. 28
CLAUSE 5 REPAYMENT, REDUCTION AND PREPAYMENT .......................... 28
5.1 Repayment........................................ 28
5.2 Scheduled Reductions of the Credit
Facility....................................... 28
5.3 Prepayment; Reborrowing.......................... 28
5.4 Optional Permanent Reduction of Credit
Facility....................................... 28
5.5 Pro-rata Reduction of Commitments................ 29
CLAUSE 6 INTEREST AND RATE............................................. 29
6.1 Interest Rate; Default Rate...................... 29
6.2 Interest Periods................................. 29
6.3 Interest Payments................................ 29
6.4 Calculation of Interest.......................... 29
CLAUSE 7 PAYMENTS...................................................... 30
7.1 Place of Payments, No Set Off.................... 30
7.2 Tax Credits...................................... 31
CLAUSE 8 EVENTS OF DEFAULT.............................................. 32
8.1(a) Commitment Reduction, Commitment Commission
and Interest................................... 32
8.1(b) Other Payments................................... 32
8.1(c) Representations, etc............................. 32
8.1(d) Impossibility, Illegality........................ 32
8.1(e) Covenants........................................ 32
8.1(f) Indebtedness..................................... 33
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8.1(g) Stock Ownership.................................. 33
8.1(h) Default under the Security Documents............. 33
8.1(i) Bankruptcy....................................... 33
8.1(j) Sale of Assets................................... 33
8.1(k) Judgments........................................ 34
8.1(l) Inability to Pay Debts........................... 34
8.1(m) Financial Position............................... 34
8.1(n) Termination, Amendment or Assignment
of Charters.................................... 34
8.2 Indemnification.................................. 35
8.3 Application of Moneys............................ 35
CLAUSE 9 COVENANTS...................................................... 36
9.1 ................................................. 36
9.1(A)(i) Performance of Agreements........................ 36
9.1(A)(ii) Notice of Default; Change in
Classification of Vessel.......... 36
9.1(A)(iii) Obtain Consents.................................. 36
9.1(A)(iv) Financial Statements............................. 37
9.1(A)(v) Corporate Existence.............................. 37
9.1(A)(vi) Books, Records, etc.............................. 38
9.1(A)(vii) Inspection....................................... 38
9.1(A)(viii) Taxes............................... 38
9.1(A)(ix) Compliance with Statutes, etc.................... 38
9.1(A)(x) Environmental Matters............................ 39
9.1(A)(xi) ISM Code Matters................................. 39
9.1(A)(xii) Accountants...................................... 40
9.1(A)(xiii) Continue Charters................... 40
9.1(A)(xiv) Class Certificate................... 40
9.1(A)(xv) Maintenance of Properties........................ 40
9.1(A)(xvi) Vessel Management................... 41
9.1(A)(xvii) Limitation on Restricted
Payments...................................... 41
9.1(B)(i) Liens .................................... 42
9.1(B)(ii) Loans and Advances............................... 43
9.1(B)(iii) Limitation on Indebtedness....................... 43
9.1(B)(iv) Guarantees, etc.................................. 45
9.1(B)(v) Changes in Business.............................. 45
9.1(B)(vi) Use of Corporate Funds........................... 45
9.1(B)(vii) Issuance of Shares............................... 45
9.1(B)(viii) Consolidation, Merger............... 46
9.1(B)(ix) Changes in Offices or Names...................... 46
9.1(B)(x) Limitation on Transactions with
Shareholders and Affiliates.................... 46
9.1(B)(xi) Change of Flag................................... 47
9.1(B)(xii) Sale of Vessel................................... 47
9.2 Valuation of the Vessels......................... 47
9.3 Collateral Maintenance........................... 47
9.4 Reduction of Collateral.......................... 48
9.5 Inspection and Survey Reports.................... 49
CLAUSE 10 ASSIGNMENT................................................... 49
CLAUSE 11 ILLEGALITY, INCREASED COST,
NON-AVAILABILITY, ETC........................... 49
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11.1 Illegality .................................... 49
11.2 Increased Cost................................... 50
11.3 Non-Availability................................. 51
11.4 Determination of Losses.......................... 51
11.5 Compensation for Losses.......................... 51
CLAUSE 12 CURRENCY INDEMNITY........................................... 52
12.1 Currency Conversion.............................. 52
12.2 Change in Exchange Rate.......................... 52
12.3 Additional Debt Due.............................. 52
12.4 Rate of Exchange................................. 52
CLAUSE 13 FEES AND EXPENSES............................................ 52
13.1 Commitment Commission............................ 52
13.2 Agency Fee....................................... 53
13.3 Arrangement Fee.................................. 53
13.4 Underwriting Fee................................. 53
13.5 Expenses .................................... 53
CLAUSE 14 APPLICABLE LAW, JURISDICTION AND WAIVER...................... 54
14.1 Applicable Law................................... 54
14.2 Jurisdiction..................................... 54
14.3 WAIVER OF JURY TRIAL............................. 54
CLAUSE 15 THE ADMINISTRATIVE AGENT..................................... 54
15.1 Appointment of Administrative Agent.............. 54
15.2 Distribution of Payments......................... 55
15.3 Holder of Interest in Note....................... 55
15.4 No Duty to Examine, Etc.......................... 55
15.5 Administrative Agent as Lender................... 55
15.6(a) Obligations of Administrative Agent.............. 55
15.6(b) No Duty to Investigate........................... 55
15.7(a) Discretion of Administrative Agent............... 56
15.7(b) Instructions of Majority Lenders................. 56
15.8 Assumption re Event of Default................... 56
15.9 No Liability of Administrative Agent
or Lenders.................................. 56
15.10 Indemnification of Administrative Agent.......... 57
15.11 Consultation with Counsel........................ 57
15.12 Resignation...................................... 57
15.13 Representations of Lenders....................... 58
15.14 Notification of Event of Default................. 58
15.15 Annual Bank Meeting.............................. 58
CLAUSE 16 APPOINTMENT OF SECURITY TRUSTEE.............................. 58
CLAUSE 17 NOTICES AND DEMANDS.......................................... 59
17.1 Notices.......................................... 59
CLAUSE 18 MISCELLANEOUS................................................ 59
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18.1 Time of Essence.................................. 59
18.2 Unenforceable, etc., Provisions -
Effect .................................... 60
18.3 References....................................... 60
18.4 Further Assurances............................... 60
18.5 Prior Agreements, Merger......................... 60
18.5 Joint and Several Obligations.................... 60
18.7 Limitation of Liability.......................... 61
18.8 Entire Agreement, Amendments..................... 62
18.9 Headings .................................... 62
18.10 Original Syndication............................. 62
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SCHEDULE CONTENTS
1 The Borrowers
2 The Lenders and the Commitments
3 The Charters
4 The Vessels
EXHIBITS
A Promissory Note
B Guaranty
C Form of Mortgage
D Form of Earnings Assignment
E Form of Insurances Assignment
F Form of Consent and Agreement
G Form of Share Pledge
H Form of Accession Agreement
I Form of Assignment and Assumption Agreement
J Form of Drawdown Notice
K Form of Compliance Certificate
8
REDUCING REVOLVING CREDIT FACILITY AGREEMENT
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THIS REDUCING REVOLVING CREDIT FACILITY AGREEMENT is made the as of
the 26th day of January, 1998, and is by and among:
(1) Those certain Liberian corporations whose names and registered
addresses are set forth in Schedule 1 hereto and which are signatories
hereto, as joint and several borrowers, together with any additional
such borrower(s) made party hereto pursuant to an Accession Agreement
(as hereinafter defined) in accordance with the terms hereof
(together, the "Borrowers", each a "Borrower");
(2) Den norske Bank ASA ("DnB"), Christiania Bank og Kreditkasse ASA, New
York Branch ("CBK"), and The Bank of Nova Scotia ("BNS"), as joint
arrangers and underwriters (together, the "Joint Arrangers and
Underwriters", each a "Joint Arranger and Underwriter");
(3) The banks and financial institutions whose names and addresses are set
out in Schedule 2 hereto (together, the "Lenders", each a "Lender");
(4) DNB, as agent (the "Administrative Agent") and security trustee for
the Lenders; and
(5) CBK and BNS, as joint syndication agents (together, the "Syndication
Agents, each a "Syndication Agent").
WITNESSETH THAT:
1. DEFINITIONS
1.1 Defined Terms. In this Agreement the words and expressions specified below
shall, except where the context otherwise requires, have the meanings attributed
to them below:
"Acceptable Accounting Ernst & Young, or such other recognized
Firm" international accounting firm as shall
be approved by the Majority Lenders,
such approval not to be unreasonably
withheld;
"Accession Agreement" an agreement substantially in the form
of Exhibit H hereto pursuant to which a
wholly-owned subsidiary of the Guarantor
is made a Borrower in accordance with
the terms hereof;
"Adjusted Consolidated means the aggregate net income (or loss)
Net Income" of the Guarantor and its consolidated
Subsidiaries determined in accordance
with GAAP; provided that the following
items shall be excluded in computing
Adjusted Consolidated Net Income
(without duplication): (i) the effects
of foreign currency exchange adjustments
under GAAP, (ii) any gains or losses
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(on an after-tax basis) attributable to
vessel sales or to prepayment of
Indebtedness and (iii) any extraordinary
gains (or losses).
"Advance(s)" any amount advanced to the Borrowers
with respect to the Credit Facility or
(as the context may require) the
aggregate amount of all such Advances
for the time being outstanding;
"Affiliate" means with respect to any Person, any
other Person directly or indirectly
controlled by or under common control
with such Person. For the purposes of
this definition, "control" (including,
with correlative meanings, the terms
"controlled by" and "under common
control with") as applied to any Person
means the possession directly or
indirectly of the power to direct or
cause the direction of the management
and policies of that Person whether
through ownership of voting securities
or by contract or otherwise;
"Affiliate Vessel(s)" any vessel (other than the Vessels)
owned by an Affiliate of the Guarantor;
"Agents" the Administrative Agent and Syndication
Agents;
"Agreement" this Agreement as the same shall be
amended, modified or supplemented from
time to time;
"Applicable Rate" any rate of interest on the Advances
from time to time applicable pursuant to
Clause 6.1 hereof;
"Assignment and the Assignment and Assumption
Assumption Agreement(s) "Agreement(s) executed pursuant to
Clause 10 hereof substantially in the
form of Exhibit I hereto;
"Assignment Notices" a) the notices with respect to the
Earnings Assignments substantially
in the form set out in Exhibit 1
thereto or in such other form as
the Majority Lenders may agree;
b) the notices with respect to the
Insurances Assignments
substantially in the form set out
in Exhibit 3 thereto or in such
other form as the Majority Lenders
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may agree;
"Assignments" the Insurances Assignments and the
Earnings Assignments;
"Banking Day(s)" day(s) on which banks are open for the
transaction of business of the nature
required by this Agreement in Oslo,
Norway, London, England, Frankfurt,
Federal Republic of Germany, New York,
New York and Vancouver, Canada;
"Charter(s)" the charterparty agreements entered into
by each of the Borrowers with Palm
Shipping relating to such Borrower's
Vessel, the date of each of which is set
out in Schedule 3 hereto; or any
substitute charter acceptable to the
Majority Lenders in their sole
discretion;
"Code" the Internal Revenue Code of 1986, as
amended, and any successor statute and
regulations promulgated thereunder;
"Commitment Commission" a non-refundable fee to be paid to the
Administrative Agent, on behalf of the
Lenders, which shall be equal to (1) if
the Net Debt to Equity Ratio is greater
than 1.5:1, .30% per annum; (2)if the
Net Debt to Equity Ratio is equal to or
less than 1.5:1 but greater than 1:1,
.25% per annum; and (3) if the Net Debt
to Equity Ratio is equal to or less than
1:1, .20% per annum, as calculated as
provided in Clause 13.1 hereof; the
foregoing rate to be determined on the
date hereof, and be adjusted, if
necessary, as of the first Banking Day
following the receipt by the
Administrative Agent of the most recent
quarterly unaudited or annual audited
financial statements, as the case may
be, of the Guarantor together with the
Compliance Certificate of the Guarantor
(setting forth the Guarantor's
calculation of the Net Debt to Equity
Ratio);
"Commitment Reduction" the portion of the Credit Facility which
is to be reduced on the Reduction Dates
pursuant to Clause 5.2;
"Commitments" in relation to a Lender, the portion of
the Credit Facility set out opposite its
name in Schedule 2 hereto or, as the
12
case may be, in any relevant Assignment
and Assumption Agreement, as reduced
from time to time pursuant to the terms
of this Agreement;
"Compliance Certificate" has the meaning ascribed thereto in
Clause 9.1(A)(iv)(a) hereof;
"Consents" the Consent and Agreement to each of the
Earnings Assignments executed by Palm
Shipping, substantially in the form set
out in Exhibit F hereto;
"Consolidated EBITDA" means, with respect to any Person for
any period, the sum of (i) Income from
Vessel Operations, (ii) depreciation
expense and (iii) amortization expense,
as presented in the financial statements
of such Person;
"Consolidated Interest
Expense" is defined to mean, with respect to any
Person for any period, the aggregate
amount of (i) interest expense and (ii)
losses on marketable securities less
(iii) interest income and (iv) gains on
marketable securities as disclosed on
the financial statements of such Person;
- ----
"Credit Facility" an amount which on the Initial Drawdown
Date shall equal the lesser of (1) Two
Hundred Million United States Dollars
(U.S. $200,000,000) and (2) Sixty-Five
percent (65%) of the aggregate of the
FMV of the Vessels, which may be
advanced by the Lenders to the Borrowers
pursuant to this Agreement, as such
amount may be reduced from time to time
pursuant to the terms of this Agreement;
"Credit Facility Period" the period from the Drawdown Date of the
first Advance made under the Credit
Facility to the date upon which all
amounts owing under the Credit Facility
and all other amounts due to the
Administrative Agent, Security Trustee
and the Lenders pursuant to this
Agreement, the Note and the Security
Documents become repayable and are
repaid in full or are prepaid in full;
"Currency Agreement" means any foreign exchange contract,
currency swap agreement or other similar
agreement or arrangement designed to
protect the Guarantor or any of its
13
Subsidiaries against fluctuations in
currency values to or under which the
Guarantor or any of its Subsidiaries is
a party or a beneficiary on the date of
this Agreement or becomes a party or a
beneficiary thereafter.
"Default Rate" the rate per annum equal to the sum of
the Applicable Rate and three percent
(3%);
"DOC" means a document of compliance issued to
an Operator in accordance with rule 13
of the ISM Code;
"Dollars" and the the legal currency, at any relevant time
sign "$" hereunder, of the United States of
America and, in relation to all payments
hereunder, in same day funds settled
through the New York Clearing House
Interbank Payments System (or such other
Dollar funds as may be determined by the
Lenders to be customary for the
settlement in New York City of banking
transactions of the type herein
involved);
"Drawdown Date(s)" the dates, each being a Banking Day
falling not later than the day
immediately preceding the Maturity Date,
upon which the Borrowers have requested
that an Advance be made available as
provided by Clause 3 hereof;
"Drawdown Notice" shall have the meaning ascribed thereto
in Clause 3.2 hereof;
"Earnings Assignments" assignments in respect of the earnings
of each Vessel from any and all sources,
including, but not limited to, the
respective Charter relating to such
Vessel, to be executed by the relevant
Borrower in favor of the Security
Trustee pursuant to Clause 4.1(c)(iv)
hereof, substantially in the form of
Exhibit D hereto;
"Environmental Approvals" shall have the meaning ascribed thereto
in Clause 2.1(o) hereof;
"Environmental Claim" shall have the meaning ascribed thereto
in Clause 2.1(o) hereof;
"Environmental Laws" shall have the meaning ascribed thereto
in Clause 2.1(o) hereof;
"Equity" for any Person, such Person's
14
shareholders' equity (inclusive of
retained earnings) as reflected on such
Person's most recent quarterly unaudited
or annual audited financial statements,
as the case may be, as prepared in
accordance with GAAP;
"Event(s) of Default" any of the events set out in Clause 8
hereof;
"Fee Letter" the letter dated December 7, 1997
entered into by the Borrowers, the
Guarantor and the Joint Arrangers and
Underwriters in respect of the agency
fees, the underwriting fees and
arrangement fees referred to in Clause
13 hereof;
"FMV" with respect to a Vessel, Fair Market
Value as determined in accordance with
Clause 9.2 hereof;
"GAAP" shall have the meaning ascribed thereto
in Clause 1.3 hereof;
"Guarantor" Teekay Shipping Corporation, a
corporation organized and existing under
the laws of the Republic of Liberia;
"Guaranty" the guaranty in respect of the joint and
several obligations of the Borrowers
under this Agreement to be executed by
the Guarantor in favor of the Security
Trustee pursuant to Clause 4.1(d)(i)
hereof substantially in the form of
Exhibit B hereto;
"Income from
Vessel Operations" shall have the meaning given thereto in
the Guarantor's and Subsidiaries
Consolidated Statements of Income and
Retained Earnings;
"Indebtedness" means, with respect to any Person at any
date of determination (without
duplication), (i) all indebtedness of
such Person for borrowed money, (ii) all
obligations of such Person evidenced by
bonds, debentures, notes or other
similar instruments, (iii) all
obligations of such Person in respect of
letters of credit or other similar
instruments (including reimbursement
obligations with respect thereto), (iv)
all obligations of such Person to pay
the deferred and unpaid purchase price
15
of property or services, which purchase
price is due more than six months after
the date of placing such property in
service or taking delivery thereof or
the completion of such services, except
trade payables, (v) all obligations on
account of principal of such Person as
lessee under capitalized leases, (vi)
all indebtedness of other Persons
secured by a lien on any asset of such
Person, whether or not such indebtedness
is assumed by such Person; provided that
the amount of such indebtedness shall be
the lesser of (a) the fair market value
of such asset at such date of
determination and (b) the amount of such
indebtedness, (vii) all indebtedness of
other Persons guaranteed by such Person
to the extent such indebtedness is
guaranteed by such Person, and (viii) to
the extent not otherwise included in
this definition, the net obligations
under Currency Agreements and Interest
Rate Agreements. The amount of
Indebtedness of any Person at any date
shall be the outstanding balance at such
date of all unconditional obligations as
described above and, with respect to
contingent obligations, the maximum
liability upon the occurrence of the
contingency giving rise to the
obligation, provided that the amount
outstanding at any time of any
indebtedness issued with original issue
discount is the face amount of such
indebtedness less the remaining
unamortized portion of the original
issue discount of such indebtedness at
such time as determined in conformity
with GAAP; and provided further that
Indebtedness shall not include any
liability for federal, state, local or
other taxes;
"Initial Advance" the first Advance made pursuant to the
Agreement;
"Initial Drawdown Date" the date of the Initial Advance;
"Insurances Assignments" assignments in respect of the insurances
of each Vessel, to be executed by the
relevant Borrower in favor of the
Security Trustee pursuant to Clause
4.1(c)(iii) hereof, substantially in the
form of Exhibit E hereto;
"Interest Coverage Ratio" means, with respect to any Person on any
16
date, the ratio of (i) the aggregate
amount of Consolidated EBITDA of such
Person for the four fiscal quarters for
which financial information in respect
thereof is available immediately prior
to such date to (ii) the aggregate
Consolidated Interest Expense of such
Person during such four fiscal quarters.
In making the foregoing calculation, (A)
pro forma effect shall be given to (1)
any Indebtedness incurred subsequent to
the end of the four-fiscal-quarter
period referred to in clause (i) and
prior to such date (other than
Indebtedness incurred under a revolving
credit or similar arrangement to the
extent of the commitment thereunder (or
under any predecessor revolving credit
or similar arrangement) in effect on the
last day of such period), (2) any
Indebtedness incurred during such period
to the extent such Indebtedness is
outstanding at such date and (3) any
Indebtedness to be incurred on such
date, in each case as if such
Indebtedness had been incurred on the
first day of such four-fiscal-quarter
period and after giving pro forma effect
to the application of the proceeds
thereof as if such application had
occurred on such first day; (B)
Consolidated Interest Expense
attributable to interest on any
Indebtedness (whether existing or being
incurred) computed on a pro forma basis
and bearing a floating interest rate
shall be computed as if the rate in
effect on such date (taking into account
any Interest Rate Agreement applicable
to such Indebtedness if such Interest
Rate Agreement has a remaining term in
excess of 12 months) had been the
applicable rate of the entire period;
(C) there shall be excluded from
Consolidated Interest Expense any
Consolidated Interest Expense related to
any amount of Indebtedness that was
outstanding during such four-fiscal-
quarter period or thereafter but that is
not outstanding or is to be repaid on
the date, except for Consolidated
Interest Expense accrued (as adjusted
pursuant to clause (B)) during such
four-fiscal-quarter period under a
revolving credit or similar arrangement
to the extent of the commitment
17
thereunder (or under any successor
revolving credit or similar arrangement)
in effect on such date; and (D) pro
forma effect shall be given to asset
dispositions and asset acquisitions
(including giving pro forma effect to
the application of proceeds of any asset
disposition) that occur during such
four-fiscal-quarter period or thereafter
and prior to such date as if they had
occurred and such proceeds had been
applied on the first day of such
four-fiscal-quarter period; provided
that to the extent that clause (D) of
this sentence requires that pro forma
effect be given to an asset acquisition
or asset disposition, such pro forma
calculation shall be based upon the four
full fiscal quarters immediately
preceding such date of the Person, or
division or line of business of the
Person, that is acquired or disposed for
which financial information is
available; and provided further that for
purposes of determining the Interest
Coverage Ratio with respect to the
acquisition of a Vessel or the financing
thereof, the Guarantor may apply
Consolidated EBITDA for such Vessel
based upon historical earnings of such
Vessel or, if none, of its most
comparable Vessel during the applicable
four-fiscal-quarter period, or if, in
the good faith determination of the
Board of Directors, the Guarantor does
not have a comparable Vessel, based upon
industry average earnings for comparable
vessels;
"Interest Payment Date" the last day of each Interest Period
and, for Interest Periods longer than
three months, that day falling every
three months after the commencement
thereof until the end of such Interest
Periods; should any such day not be a
Banking Day the relevant Interest
Payment Date shall be the next following
Banking Day, unless such next following
Banking Day falls in the following
calendar month, in which case the
relevant Interest Payment Date shall be
the immediately preceding Banking Day;
"Interest Period(s)" with respect to each Advance, any period
by reference to which an interest rate
is determined pursuant to Clause 6.2
18
hereof;
"Interest Rate
Agreements" means any interest rate protection
agreement, interest rate future
agreement, interest rate option
agreement, interest rate swap agreement,
interest rate cap agreement, interest
rate collar agreement, interest rate
hedge agreement or other similar
agreement or arrangement designed to
protect the Guarantor or any of its
Subsidiaries against fluctuations in
interest rates to or under which the
Guarantor or any of its Subsidiaries is
a party or a beneficiary on the date of
this Agreement or becomes a party or a
beneficiary hereafter;
"ISM Code" means the International Safety
Management Code for the Safe Operating
of Ships and for Pollution Prevention
constituted pursuant to Resolution A.
741(18) of the International Maritime
Organization and incorporated into the
Safety of Life at Sea Convention and
includes any amendments or extensions
thereto and any regulation issued
pursuant thereto;
"LIBOR" in relation to Interest Periods of one
(1), three (3) or six (6) months, the
rate (rounded upward to the nearest
1/16th of one percent) for deposits of
Dollars for a period equivalent to such
period at or about 11:00 a.m. (London
time) on the second London Banking Day
before the first day of such period as
displayed on Telerate page 3750 (British
Bankers' Association Interest Settlement
Rates) (or such other page as may
replace such page 3750 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) dated August
1985)), provided that if on such date no
such rate is so displayed or if the
Interest Period is other than one (1),
three (3) or six (6) months, LIBOR for
such period shall be the arithmetic mean
(rounded upward if necessary to four
decimal places) of the rates
respectively quoted to the
19
Administrative Agent by each of the
Reference Banks at the request of the
Administrative Agent as the 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 second Banking Day
before the first day of such period;
"Majority Lenders" Lenders whose Commitments exceed
sixty-six and sixty seven hundredths
percent (66.67%) of total Commitments;
"Management
Agreement(s)" The agreement(s) entered into between
the Manager and each Borrower in respect
of the commercial and technical
management of the Borrowers' Vessels;
"Manager" Teekay Shipping Limited, a Bahamian
company and a Wholly Owned Subsidiary of
the Guarantor;
"Margin" (a) if the Net Debt to Equity Ratio is
greater than 1.5:1, the Margin shall be
.75% per annum; (b) if the Net Debt to
Equity Ratio is equal to or less than
1.5:1 but greater than 1:1, the Margin
shall be .60% per annum; and (c) if the
Net Debt to Equity Ratio is 1:1 or less,
the Margin shall be .50% per annum; the
Margin to be determined as of the date
hereof, and to be adjusted, if
necessary, as of the first Banking Day
following receipt by the Administrative
Agent of the most recent quarterly
unaudited or annual audited financial
statements, as the case may be, of the
Guarantor together with the Compliance
Certificate of the Guarantor (setting
forth the Guarantor's calculation of the
Net Debt to Equity Ratio);
"Materials of
Environmental Concern" shall have the meaning ascribed in
Clause 2.1(o) hereof;
"Maturity Date" the day which falls eight years from the
date on which the first Advance was
drawn under the Credit Facility; if such
day is not a Banking Day, the next
following Banking Day, unless such next
following Banking Day falls in the
following calendar month, in which case
20
the Maturity Date shall be the
immediately preceding Banking Day;
"Mortgages" the first priority statutory mortgages
and deeds of covenants collateral
thereto with respect to each Vessel to
be recorded on each Vessel and executed
by the relevant Borrower in favor of the
Security Trustee, pursuant to Clause
4.1(c)(ii) hereof, and to be
substantially in the form of Exhibit C
hereto;
"Net Debt" means (x) the sum of long term debt and
capital leases (including the current
portions) less (y) to the extent
positive, the sum of cash (including
cash held in retention accounts for the
payment of debt and cash pledged as
collateral against balance sheet
obligations) and marketable securities
exceeding the sum of the current portion
of long term debt and capital leases
(excluding the current portion of
Advances);
"Net Debt to Equity means, the ratio of the Guarantor's
Ratio" consolidated Net Debt to its
consolidated Equity as reflected on the
most recent quarterly unaudited or
annual audited financial statements, as
the case may be, as calculated by the
Guarantor, which calculation shall be
set forth in the Compliance Certificate
accompanying such financial statements,
and agreed by the Administrative Agent;
"Note" the promissory note, to be executed by
the Borrowers to the order of the
Security Trustee, pursuant to Clause
4.1(c)(i) hereof, to evidence the Credit
Facility substantially in the form of
Exhibit A hereto;
"Operator" means the Manager or such other Person
approved by the Majority Lenders who is
from time to time during the Credit
Facility Period concerned with the
operation of a Vessel and falls within
the definition of "Company" set out in
rule 1.1.2 of the ISM Code;
"Palm Shipping" Palm Shipping Inc., a corporation
organized and existing under the laws of
the Republic of Liberia and an Affiliate
of the Borrowers and a Wholly Owned
Subsidiary of the Guarantor;
21
"Person" means any individual, sole
proprietorship, corporation, partnership
(general or limited), limited liability
company, business trust, bank, trust
company, joint venture, association,
joint stock company, trust or other
unincorporated organization, whether or
not a legal entity, or any government or
agency or political subdivision thereof;
"Pledge(s)" the pledge(s) of the shares of the
Borrowers to be executed by the
Guarantor pursuant to Clause 4.1(d)(ii)
hereof, substantially in the form of
Exhibit G hereto;
"Reduction Date" means each of the dates falling at
intervals of six months after the first
Drawdown Date; if such day is not a
Banking Day, the next following Banking
Day, unless such next following Banking
Day falls in the following calendar
month, in which case the relevant
Reduction Date shall be the immediately
preceding Banking Day;
"Reference Banks" Christiania Bank og Kreditkasse ASA, Den
norske Bank ASA and The Bank of Nova
Scotia;
"Security Documents" the Guaranty, the Pledge, the Mortgages,
the Earnings Assignments, the Insurances
Assignments, the Assignment Notices, the
Consents, the Fee Letter and any other
documents that may be executed as
security for the Credit Facility and the
Borrowers' obligations in connection
therewith;
"Security Trustee" Den norske Bank ASA, in its capacity as
security trustee for each of the Joint
Arrangers and Underwriters and the
Lenders pursuant to Clause 16 hereof;
"SMC" means a safety management certificate
issued in respect of a Vessel in
accordance with rule 13 of the ISM Code;
"Subsidiary" means with respect to any Person, any
business entity of which more than 50%
(by number of votes of the voting stock
or other ownership interest having
voting power) is owned directly or
indirectly by such Person;
"Taxes" any present or future income or other
22
taxes, levies, duties, charges, fees,
deductions or withholdings of any nature
now or hereafter imposed, levied,
collected, withheld or assessed by any
taxing authority whatsoever;
"Total Loss" means:
(a) the actual, constructive, arranged,
agreed, or compromised total loss
of the Vessel;
(b) the requisition for title or other
compulsory acquisition or
forfeiture of the Vessel otherwise
than by requisition for hire;
(c) the capture, seizure, arrest,
detention or confiscation of the
Vessel by any government or by
persons acting or purporting to act
on behalf of any government unless
the Vessel be released from such
capture, seizure, arrest or
detention within two hundred ten
(210) days after the occurrence
thereof;
"Transaction Documents" this Agreement, the Note and the
Security Documents, any Accession
Agreement and any Assignment and
Assumption Agreement;
"Vessels" Each of the Vessels listed in Schedule 4
hereto, registered in the name of the
relevant Borrower as set forth in such
schedule and any other vessel subject to
a Mortgage granted by a Borrower which
is added hereto pursuant to an Accession
Agreement entered into in accordance
with the terms hereof;
"Wholly Owned" means, with respect to any Subsidiary of
any Person, such Subsidiary of such
Person if all of the outstanding common
stock or other similar equity ownership
interests (but not including preferred
stock) in such Subsidiary (other than
any director's qualifying share or
investments by foreign nationals
mandated by applicable law) is owned
directly or indirectly by such Person.
1.2 Construction. Words importing the singular number only shall include the
plural and vice versa. Words importing persons shall include companies, firms,
corporations, partnerships, unincorporated associations and their respective
successors and assigns.
23
- ---- -----
1.3 Accounting Terms. All accounting terms not specifically defined herein
shall be construed in accordance with generally accepted accounting principles
as in effect from time to time in the United States of America consistently
applied ("GAAP") and all financial statements submitted pursuant to this
Agreement shall be prepared in accordance with, and all financial data submitted
pursuant hereto shall be derived from financial statements prepared in
accordance with, GAAP.
2 REPRESENTATIONS AND WARRANTIES
2.1 In order to induce the Lenders, the Joint Arrangers and Underwriters,
the Agents and the Security Trustee to enter into this Agreement and to make the
Credit Facility available, each of the Borrowers hereby represents and warrants
(which representations and warranties shall survive the execution and delivery
of this Agreement and the Note and the drawdown of the Advances hereunder) that:
(a) Due Organization and Power. Each of the Borrowers, the
Guarantor and Palm Shipping is duly formed and validly existing in good standing
under the laws of its respective jurisdiction of incorporation, has duly
qualified and, insofar as the Borrowers are aware, is authorized to do business
as a foreign corporation in each jurisdiction wherein the nature of the business
transacted thereby makes such qualification necessary, has full power to carry
on its business as now being conducted and to enter into and perform its
respective obligations under the Transaction Documents to which it is or is to
be a party, and has complied with all statutory, regulatory and other
requirements relative to such business and such agreements the noncompliance
with which could reasonably be expected to have a material adverse effect on its
business, assets or operations, financial or otherwise;
(b) Authorization and Consents. All necessary corporate action
has been taken to authorize, and all necessary consents and authorities have
been obtained and remain in full force and effect to permit, each of the
Borrowers, the Guarantor and Palm Shipping to enter into and perform its
obligations under the Transaction Documents to which it is a party and, in the
case of the Borrowers, to borrow, service and repay the Advances and, as of the
date of this Agreement, no further consents or authorities are necessary for the
service and repayment of the Advances or any part of any thereof;
(c) Binding Obligations. The Transaction Documents constitute or,
when executed and delivered, will constitute, legal, valid and binding
obligations of each of the Borrowers, the Guarantor and Palm Shipping as is a
party thereto enforceable against each thereof as is a party thereto in
accordance with their terms, except to the extent that such enforcement may be
limited by equitable principles, principles of public policy or applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
generally the enforcement of creditors' rights;
(d) No Violation. The execution and delivery of, and the
performance of the provisions of, the Transaction Documents by each of the
Borrowers, the Guarantor and Palm Shipping as is a party thereto, do not, and
will not during the term of this Agreement, contravene any applicable law or
regulation existing at the date hereof or any contractual restriction binding on
any thereof or the articles of incorporation or by-laws (or equivalent document)
of any thereof;
24
(e) No immunity. None of the Borrowers nor the Guarantor nor any
of their respective assets are 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 judgment, execution or
other enforcement);
(f) Litigation. Except as otherwise disclosed in writing to the
Administrative Agent, on behalf of the Lenders, on or before the date hereof, no
action, suit or proceeding is pending or threatened against any of the
Borrowers, the Guarantor or Palm Shipping before or by any court, board of
arbitration or administrative agency which has a reasonable likelihood of
resulting in any material adverse change in the business or condition (financial
or otherwise) of the Borrowers, the Guarantor or Palm Shipping;
(g) No Default. None of the Borrowers nor the Guarantor nor
Palm Shipping is in default under any agreement by which it is bound, nor is any
thereof in default in respect of any financial commitment or obligation;
(h) Charters. Each Vessel is subject to a Charter. The certified
copies of the Charters delivered to the Administrative Agent on or prior to the
date of this Agreement are true and complete copies thereof and constitute
legal, valid and binding obligations of the parties thereto enforceable against
such parties in accordance with their respective terms, except to the extent
that such enforcement may be limited by equitable principles, principles of
public policy or applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting generally the enforcement of creditors' rights, and no
amendments thereof or variations thereto have been proposed or agreed prior to
the date hereof other than immaterial changes, details of which shall have been
forwarded to the Administrative Agent. The right of each Borrower to all moneys
payable under its respective Charter is not subject to any right of set-off or
counterclaim or any lien, charge, security interest, assignment or other
encumbrance except in favor of the Administrative Agent, the Security Trustee or
the Lenders. There are no material defaults on the part of any party to the
Charters and there is no accrued right of any Borrower to terminate its
respective Charter with Palm Shipping or of Palm Shipping to terminate any
Charter with any Borrower;
(i) Vessel Ownership, Classification, Seaworthiness and
Insurance. During the Credit Facility Period:
(i) each Vessel will be in the sole and absolute ownership
of the respective Borrower, unencumbered, save and
except for, the respective Mortgage and liens permitted
thereby, and duly registered in the name of the
respective Borrower under the laws and flag of the
Commonwealth of the Bahamas, as set forth in Schedule 4
hereto;
(ii) each Vessel will be classed in the highest
classification and rating for vessels of the same age
and type with the classification society set next to
its name in Schedule 4 hereto or such other
classification society which the Majority Lenders may
consent to in writing, without any outstanding
recommendations deemed material by the Majority
Lenders, except in the case of any Vessel which has
25
been damaged, of which damage the Borrower owning such
Vessel is diligently effecting repair, the nature,
extent and estimated cost of which damage have been
disclosed to the Lenders and found by the Lenders
unlikely to have a material adverse impact on such
Borrower's ability to perform its obligations
hereunder;
(iii) each Vessel will be operationally seaworthy and in
every way fit for service; and
(iv) each Vessel will be insured in accordance with the
provisions of its respective Mortgage and the
requirements thereof in respect of such insurances will
have been complied with;
(j) Financial Statements. Except as otherwise disclosed in
writing to the Lenders on or prior to the date hereof, all information and other
data furnished by the Borrowers and the Guarantor to the Lenders are complete
and correct, and all financial statements furnished by the Borrowers and the
Guarantor have been prepared in accordance with GAAP and accurately and fairly
present the financial condition of the parties covered thereby as of the
respective dates thereof and the results of the operations thereof for the
period or respective periods covered by such financial statements. Since such
date or dates there has been no material adverse change in the financial
condition or results of the operations of any of such parties and none thereof
has any contingent obligations, liabilities for taxes or other outstanding
financial obligations which are material in the aggregate except as disclosed in
such statements, information and data;
(k) Tax Returns and Payments. Each of the Borrowers and the
Guarantor has filed all tax returns required to be filed thereby and has paid
all taxes payable thereby which have become due, other than those not yet
delinquent or the nonpayment of which would not have a material adverse effect
on any such party, as the case may be, and except for those taxes being
contested in good faith and by appropriate proceedings or other acts and for
which adequate reserves have been set aside on its books;
(l) Insurance. Each of the Borrowers and the Guarantor has
insured its properties and assets against such risks and in such amounts as are
customary for companies engaged in similar businesses;
(m) Offices. Each of the chief executive office and chief place
of business of each of the Borrowers, the Guarantor and Palm Shipping and the
office in which the records relating to the earnings and insurances of the
Vessels are kept, is, and will continue to be, located at 4th Floor, Euro
Canadian Centre, Marlborough Street and Navy Lion Road, Nassau, the Bahamas;
none of the Borrowers maintains a place of business in Canada, the United States
or the United Kingdom;
(n) Foreign Trade Control Regulations. None of the transactions
contemplated herein will violate any of the provisions of the Foreign Assets
Control Regulations of the United States of America (Title 31, Code of Federal
Regulations, Chapter V, Part 500, as amended), any of the provisions of the
Cuban Assets Control Regulations of the United States of America (Title 31, Code
of Federal Regulations, Chapter V, Part 515, as amended), any of the provisions
of the Libyan Assets Control Regulations of the United States of
26
America (Title 31, Code of Federal Regulations, Chapter V, Part 550, as
amended), any of the provisions of the Iraqi Sanctions Regulations (Title 31,
Code of Federal Regulations, Chapter V, Part 575, as amended), any of the
provisions of the Federal Republic of Yugoslavia (Serbia and Montenegro) Assets
Control Regulations (Title 31, Code of Federal Regulations, Chapter V, Part 585
as amended) or any of the provisions of the Regulations of the United States of
America Governing Transactions in Foreign Shipping of Merchandise (Title 31,
Code of Federal Regulations, Chapter V, Part 505, as amended);
(o) No Money Laundering. With respect to (i) any drawings on the
Credit Facility under this Agreement, (ii) the performance and discharge of its
obligations and liability under any of the Transaction Documents to which it is
a party and (iii) any other arrangements effected or contemplated by the
Transactions Documents to which any Borrower is a party, each of the Borrowers
is acting for its own account and 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 to combat "money laundering" (as defined in
Article 1 of the Directive (91/308/EEC) of the Council of the European
Communities;
(p) Equity Ownership. Each of the Borrowers and Palm Shipping is
a Wholly Owned Subsidiary of the Guarantor. On the first Drawdown Date, none of
the Borrowers nor Palm Shipping will own any shares of capital stock,
partnership interest or any other direct or indirect equity interest in any
corporation, partnership or other entity;
(q) Environmental Matters. Except as heretofore disclosed in
writing to the Lenders (i) each of the Borrowers will, when required, be in full
compliance with all applicable United States federal and state, local, foreign
and international laws, regulations, conventions and agreements relating to
pollution prevention or protection of human health or the environment
(including, without limitation, ambient air, surface water, ground water,
navigable waters, waters of the contiguous zone, ocean waters and international
waters), including, without limitation, laws, regulations, conventions and
agreements relating to (1) emissions, discharges, releases or threatened
releases of chemicals, pollutants, contaminants, wastes, toxic substances,
hazardous materials, oil, hazardous substances, petroleum and petroleum products
and by-products ("Materials of Environmental Concern"), or (2) the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Materials of Environmental Concern ("Environmental Laws"); (ii) each
of the Borrowers will, when required, have all permits, licenses, approvals,
rulings, variances, exemptions, clearances, consents or other authorizations
required under applicable Environmental Laws ("Environmental Approvals") and
will, when required, be in full compliance with all Environmental Approvals
required to operate their business as then being conducted; (iii) none of the
Borrowers has received any notice of any claim, action, cause of action,
investigation or demand by any person, entity, enterprise or government, or any
political subdivision, intergovernmental body or agency, department or
instrumentality thereof, alleging potential liability for, or a requirement to
incur, investigatory costs, cleanup costs, response and/or remedial costs
(whether incurred by a governmental entity or otherwise), natural resources
damages, property damages, personal injuries, attorneys' fees and expenses, or
fines or penalties, in each case arising out of, based on or resulting from (1)
the presence, or release or threat of release into the environment, of any
Materials of Environmental Concern at any location, whether or not owned by such
person, or (2) circumstances forming the basis of any violation, or alleged
violation, of any Environmental Law or Environmental Approval ("Environmental
27
Claim") (other than Environmental Claims that have been fully and finally
adjudicated or otherwise determined and all fines, penalties and other costs, if
any, payable by the Borrowers in respect thereof have been paid in full or which
are fully covered by insurance (including permitted deductibles)); and (iv)
there are no circumstances that may prevent or interfere with such full
compliance in the future;
(r) Pending or Threatened Environmental Claims. Except as
heretofore disclosed in writing to the Lenders there is no Environmental Claim
pending or threatened against any Borrower;
(s) Potential Environmental Claims. Except as heretofore
disclosed in writing to the Lenders there are no past or present actions,
activities, circumstances, conditions, events or incidents, including, without
limitation, the release, emission, discharge or disposal of any Materials of
Environmental Concern, that could form the basis of any Environmental Claim
against any Borrower;
(t) Compliance with ISM Code. Each Vessel and any Operator
thereof will, prior to March 31, 1998, comply with the requirements of the ISM
Code, including (but not limited to) the maintenance and renewal of valid
certificates pursuant thereto;
(u) Threatened Withdrawal of DOC or SMC. There is no threatened
or actual withdrawal of any Operator's DOC or the SMC in respect of any Vessel;
(v) Limited Purpose. Each Borrower is a special purpose company
whose sole capital asset is its Vessel; no Borrower engages in any business
other than the owning of its Vessel and the chartering thereof to Palm Shipping;
and
(w) Survival. All representations and warranties made herein and
in any certificate or other document delivered pursuant hereto or in connection
herewith shall survive the making of the Advances and the issuance of the Note
to be issued by the Borrowers hereunder.
3 ADVANCES
3.1 (a) Purposes. The Lenders shall make the Initial Advance available to
the Borrowers for the purpose of repaying all existing Indebtedness in respect
of the Vessels and for general corporate purposes. Advances subsequent to the
Initial Advance made pursuant to this Agreement will be made available for
general corporate purposes.
(b) Making of the Advances. Each of the Lenders, relying upon each of
the representations and warranties set out in Clause 2, hereby severally and not
jointly agrees with the Borrowers that, subject to and upon the terms of this
Agreement, it will on the Drawdown Dates, the first of which shall occur on or
before February 6, 1998, make the Advances available through the Administrative
Agent to the Borrowers in an aggregate amount not to exceed its Commitment
ratably with the other Lenders according to their respective Commitments. The
maximum aggregate amount of all Advances which may be outstanding at any time
under the Agreement is the aggregate amount of the Credit Facility, as reduced
pursuant to Clause 5.2 hereof. The Initial Advance shall be in the minimum
amount of One Hundred Million Dollars ($100,000,000). All other Advances,
subject to the other terms and conditions hereof, shall be
28
in a minimum amount of Five Million Dollars ($5,000,000) and in multiples of One
Million Dollars ($1,000,000).
(c) Maximum Number of Advances. The maximum number of Advances
outstanding at any time under this Agreement shall be six (6).
3.2 Drawdown Notice. The Guarantor, on behalf of the Borrowers, shall, at
least three (3) Banking Days before a Drawdown Date, serve a notice, such notice
to be substantially in the form of Exhibit J hereto, (a "Drawdown Notice") on
the Administrative Agent which notice shall (a) be in writing addressed to the
Administrative Agent, (b) be effective on receipt by the Administrative Agent,
(c) specify the amount of the Advance to be drawn, (d) specify the Banking Day
on which the Advance is to be drawn, (e) identify the purpose(s) of each Advance
and the Borrower(s) on whose behalf the Advance is requested, (f) specify the
disbursement instructions and (g) be irrevocable.
3.3 Effect of Drawdown Notices. Each Drawdown Notice shall be deemed to
constitute a warranty by the Borrowers (a) that the representations and
warranties stated in Clause 2 (updated mutatis mutandis) are true and correct on
the date of such Drawdown Notice and will be true and correct on the relevant
Drawdown Date as if made on such date, and (b) that no Event of Default nor any
event which with the giving of notice or lapse of time or both would constitute
an Event of Default has occurred and is continuing.
- ------- --------
3.4 Notation of Advances. Each Advance made by the Lenders to the
Borrowers may be evidenced by a notation of the same made by the Administrative
Agent on the grid attached to the Note, which notation, absent manifest error,
shall be prima facie evidence of the amount of the relevant Advance.
- ----- -----
4 CONDITIONS PRECEDENT
4.1 Conditions Precedent to Drawdown of the Initial Advance. The
obligation of the Lenders to make the Initial Advance available to the Borrowers
under this Agreement shall be expressly subject to the following conditions
precedent:
(a) the Administrative Agent shall have received the following
documents in form and substance satisfactory to the Joint Arrangers and
Underwriters and their legal advisers:
(i) copies, certified as true and complete by an
officer of each of the Borrowers, the Guarantor
and Palm Shipping, of excerpts of resolutions of
each such company's board of directors (and, if
any necessary under appropriate law, shareholders)
evidencing approval of the Transaction Documents
to which such company is to be a party and
authorizing an appropriate officer or officers or
attorney-in-fact or attorneys-in-fact to execute
the same on its behalf;
29
(ii) copies, certified as true and complete by an
officer of each of the Borrowers, the Guarantor
and Palm Shipping or other applicable party, of
all documents evidencing any other necessary
action (including actions by such parties thereto
other than the Borrowers, the Guarantor or Palm
Shipping as may be required by the Lenders),
approvals or consents with respect to this
Agreement, the Note, the Security Documents and
the transactions contemplated hereby and thereby;
(iii) copies, certified as true and complete by an
officer of each of the Borrowers, the Guarantor
and Palm Shipping, of the articles or certificate
of incorporation and by-laws (or the equivalent
thereof) of each thereof;
(iv) good standing certificates or the equivalent
thereof with respect to each of the Borrowers, the
Guarantor and Palm Shipping issued by the
appropriate authorities of the respective
jurisdiction of incorporation of such parties;
(v) copies, certified as true and complete by an
officer of the relevant Borrower, of the Charter
and Management Agreement relating to its Vessel;
and
(vi) a Valuation (as defined in Clause 9.2 hereof) of
each Vessel for purposes of determining the amount
available under the Credit Facility on the Initial
Drawdown Date;
(b) the Administrative Agent shall have received evidence
satisfactory to the Joint Arrangers and Underwriters and their legal advisers
that:
(i) each of the Vessels is registered in the name of
such Borrower listed opposite its name in Schedule
4 under Bahamian flag and that each such Vessel is
free and clear of all liens and encumbrances of
record except for the Mortgage thereon in favor of
the Security Trustee;
(ii) each Vessel is classed in the highest
classification and rating for vessels of the same
age and type with the classification society
listed next to the Vessel in Schedule 4 or such
other classification society acceptable to the
Lenders without any material outstanding
recommendations;
(iii) each Vessel is operationally seaworthy and in
every way fit for service; and
(iv) each Vessel is insured in accordance with the
provisions of its respective Mortgage (evidence of
30
which shall include, without limitation, cover
notes, Certificates of Entry and brokers' letters
of undertaking and an opinion of an independent
insurance consultant retained by the Joint
Arrangers and Underwriters or such other evidence
as shall be reasonably satisfactory to the Joint
Arrangers and Underwriters) and all requirements
thereof in respect of such insurances have been
fulfilled;
(c) each Borrower shall have duly executed and delivered:
(i) the Note,
(ii) the Mortgage relating to its Vessel,
(iii) the Insurances Assignment relating to its Vessel,
(iv) the Earnings Assignment relating to its Vessel,
and
(v) the Assignment Notices relating to (c)(iii) and
(c)(iv) above;
(d) the Guarantor shall have duly executed and delivered:
(i) the Guaranty, and
(ii) the Pledge and related irrevocable proxies and
stock powers shall have delivered to the
Administrative Agent the undated resignations of
officers and directors required to be so delivered
pursuant to the Pledge;
(e) Palm Shipping shall have duly executed and delivered the
Consents;
(f) each of the Charters shall be in form and substance
satisfactory to the Joint Arrangers and Underwriters;
(g) the Administrative Agent shall have received payment in full
of all fees and expenses due to the Agents, the Joint Arrangers and Underwriters
and the Lenders on the date thereof including, without limitation, all fees and
expenses due under Clause 13 hereof;
(h) the Joint Arrangers and Underwriters shall have received
evidence satisfactory to it and its legal advisers that, save for the liens
created by the respective Mortgage, Earnings Assignment and Insurances
Assignment, there are no liens, charges or encumbrances of any kind whatsoever
on any Vessel or its earnings or insurances except as permitted hereby or by any
of the Security Documents;
(i) the Joint Arrangers and Underwriters shall be satisfied that
none of the Borrowers, the Guarantor, or Palm Shipping is subject to any
Environmental Claim which could have a material adverse effect on the business,
assets or results of operations of any thereof;
(j) the Joint Arrangers and Underwriters shall have received a
complete copy of (i) the consolidated audited financial report of the Guarantor
for the year ending March 31, 1997, which shall include at least the balance
sheet of such corporation as of the end of such year and the related statements
of income, cash flow and retained earnings for such year all in reasonable
31
detail, certified by an Acceptable Accounting Firm, together with their opinion
(containing no qualifications which the Lenders deem material) and (ii) the
balance sheets of the Guarantor, on a consolidated basis, for the end of each
quarter following March 31, 1997, and the related consolidated statements of
income, cash flow and retained earnings for such quarter, all in reasonable
detail, unaudited, but certified by the chief financial officer of the
Guarantor;
(k) the Borrowers shall have provided such evidence as the Joint
Arrangers and Underwriters may require documenting the current legal and
beneficial ownership of the shares of the Borrowers and Palm Shipping and the
legal ownership of the shares of the Guarantor; and
(l) the Joint Arrangers and Underwriters shall have received
opinions from (i) Watson, Farley & Williams, counsel to the Borrowers, the
Guarantor and Palm Shipping on matters of New York law, the Federal law of the
United States and Liberian law, (ii) Graham, Thompson & Co., special counsel to
the Joint Arrangers and Underwriters on Bahamian law, and (iii) Seward & Kissel,
special counsel to the Joint Arrangers and Underwriters, in each case in such
form as the Lenders may require, as well as such other legal opinions as the
Lenders shall have required as to all or any matters under the laws of the
United States of America, the State of New York and the Republic of Liberia
covering the representations and conditions which are the subjects of Clauses 2
and 4.
4.2 Further Conditions Precedent. The obligation of the Lenders to make
any Advance available to the Borrowers shall be expressly and separately from
the foregoing conditional upon, on the relevant Drawdown Date:
(a) the Administrative Agent having received a Drawdown Notice in
accordance with the terms of Clause 3.2;
(b) the representations stated in Clause 2 (updated mutatis
mutandis to such date) being true and correct as if made on that date;
(c) no Event of Default having occurred and being continuing and
no event having occurred and being continuing which, with the giving of notice
or lapse of time, or both, would constitute an Event of Default;
(d) the Lenders being satisfied that no Event of Default will
arise following the drawdown of the Advance in question by reason of the
drawdown of the Advance and that no event or state of affairs exists which
constitutes, in the reasonable opinion of the Lenders, a material risk that it
will be unlawful or impossible for the Borrowers or the Guarantor, or any other
of the parties thereto to make any payment or perform any material obligation as
required under the terms of this Agreement, the Note and the Security Documents
to which it is a party or any of them; and
(e) there having been no material adverse change in the financial
condition of the Guarantor since the date hereof.
4.3 Break Funding Costs. In the event that, on any date specified for the
making of an Advance in any Drawdown Notice, the Lenders shall not be obliged
under this Agreement to make such advance available under this Agreement, the
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Borrowers shall indemnify and hold the Lenders, or any of them, fully harmless
against any losses which the Lenders, or any of them, may sustain as a result of
borrowing or agreeing to borrow funds to meet the drawdown requirement in
respect thereof and the certificate of such Lender or Lenders shall, absent
manifest error, be conclusive and binding on the Borrowers as to the extent of
any such losses.
5 REPAYMENT, REDUCTION AND PREPAYMENT
5.1 Repayment. The Borrowers shall repay all outstanding Advances (subject
to such reduction and prepayments as hereinafter set forth) on the Maturity Date
and, to the extent required to comply with the limitations set forth in Clause
5.2 below, on each Reduction Date.
5.2 Scheduled Reductions of the Credit Facility. Subject to the following
provisions of this Clause 5, the Credit Facility shall be reduced on each of the
Reduction Dates by Ten Million Dollars ($10,000,000). On each Reduction Date,
each Lender's Commitment shall be reduced by an amount equal to the proportion
of the amount by which the total Credit Facility is to be so reduced on that
date which its Commitment bears to the total Commitments on that date.
Notwithstanding the foregoing, in the event the initial Advance under the Credit
Facility is not made on or prior to February 6, 1998, the Credit Facility and
Lenders' Commitments shall be reduced to zero.
5.3 Prepayment; Reborrowing. The Borrowers may prepay, upon five (5) day's
written notice, any outstanding Advance or any portion thereof, without penalty,
provided that such prepayment is made on the last day of the Interest Period of
such Advance. Each prepayment shall be in a minimum amount of Five Million
Dollars ($5,000,000) and shall be an integral multiple of One Million Dollar
($1,000,000). Subject to the limits and upon the conditions herein provided
(including the reduction of Commitments provided in Clause 5.2), the Borrowers
may from time to time prepay the Advances and thereafter re-borrow such Advances
or a portion thereof.
5.4 Optional Permanent Reduction of Credit Facility. The Borrowers shall
have the right, at any time and from time to time, to request, without penalty,
a permanent reduction in the Credit Facility, in the case of (a) any undrawn
portion of the Credit Facility at any time, provided that the Administrative
Agent receives five (5) days prior written notice of such request and (b) any
amounts outstanding under the Credit Facility, provided that (i) the
Administrative Agent receives five (5) days written notice of such request and
(ii) that such requested reduction occurs on the last day of the applicable
Interest Period(s). Each such permanent reduction shall be equal to or shall
exceed Five Million Dollars ($5,000,000) and shall be an integral multiple of
One Million Dollars ($1,000,000.)
5.5 Pro-rata Reduction of Commitments. If the Commitments of the Lenders
are reduced pursuant to Clauses 5.4 or 9.3 hereof or any other provision of this
Agreement, the Commitments shall be reduced on the Reduction Dates falling on or
after the date of such reduction by the same proportion as that by which the
amount of the aggregate of the Commitments of the Lenders is so reduced and the
remaining reductions pursuant to Clause 5.2 shall be adjusted proportionately to
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reflect such reduction.
6 INTEREST AND RATE
6.1 Interest Rate; Default Rate. Each Advance shall bear interest at the
Applicable Rate, which shall be the rate per annum equal to the aggregate of (a)
LIBOR for applicable Interest Period and (b) the Margin. Any amounts due under
this Agreement, including but not limited to, amounts payable at the time of a
Commitment Reduction, not paid when due, whether on a Reduction Date, by
acceleration or otherwise, shall bear interest thereafter at the Default Rate.
6.2 Interest Periods. With respect to each Advance, an Interest Period
shall be a period of one (1), three (3) or six (6) months, or such other period
as selected by the Guarantor on behalf of the Borrowers which is available to,
and accepted by, the Lenders upon at least three (3) Banking Days written notice
to the Administrative Agent prior to the drawdown thereof and the expiration of
any applicable Interest Period; provided, however, that the Guarantor may select
an Interest Period of one (1) month no more than three (3) times per annum and,
provided, further, that if the Administrative Agent fails to receive the
required notice as aforesaid, the duration of the applicable Interest Period
shall be three (3) months. The Guarantor may not select an Interest Period which
extends beyond the Maturity Date.
6.3 Interest Payments. The Borrowers agree to pay interest accrued on the
Advances, in arrears, on the Interest Payment Dates.
6.4 Calculation of Interest. All interest shall accrue from day to day and
be calculated on the actual number of days elapsed and on the basis of a three
hundred sixty (360) day year.
7 PAYMENTS
7.1 Place of Payments, No Set Off. (a) All payments to be made hereunder
by the Borrowers shall be made on the due dates of such payments to the
Administrative Agent at the office of its New York branch located at 200 Park
Avenue, New York, New York 10166-0396 or to such other branch of the
Administrative Agent as the Administrative Agent may direct, for the account of
the Lenders, without set-off or counterclaim and free from, clear of and without
deduction for, any Taxes, provided, however, that if the Borrowers shall at any
time be compelled by law to withhold or deduct any Taxes from any amounts
payable to the Lenders hereunder, then, subject to Clause 7.2, the Borrowers
shall pay such additional amounts in Dollars as may be necessary in order that
the net amounts received after withholding or deduction shall equal the amounts
which would have been received if such withholding or deduction were not
required and, in the event any withholding or deduction is made, whether for
Taxes or otherwise, the Borrowers shall promptly send to the Lenders such
documentary evidence with respect to such withholding or deduction as may be
required from time to time by the Lenders. Notwithstanding the preceding
sentence, the Borrowers shall not be required to pay additional amounts or
otherwise indemnify the Lenders for or on account of:
(i) Taxes based on or measured by the overall net income of any
34
Lender or Taxes in the nature of franchise taxes or taxes for the privilege of
doing business imposed by any jurisdiction or any political subdivision or
taxing authority therein unless such are imposed as a result of the activities
of the Borrowers within the relevant taxing jurisdiction;
(ii) Taxes imposed by any jurisdiction or any political subdivision or
taxing authority therein on any Lender that would not have been imposed but for
such Lender's being organized in or conducting business in or maintaining a
place of business in the relevant taxing jurisdiction, or engaging in activities
or transactions in the relevant taxing jurisdiction that are unrelated to the
transactions contemplated by the Transaction Documents, but only to the extent
such Taxes are not imposed as a result of the activities of any of the Borrowers
within the relevant taxing jurisdiction or the jurisdiction of any of the
Borrowers under the laws of the taxing jurisdiction;
(iii) Taxes imposed on or with respect to a Lender as a result of a
transfer, sale, assignment, or other disposition by such Lender of any interest
in any Transaction Document, any Note or any Vessel (other than a transfer
pursuant to an exercise of remedies upon an Event of Default);
(iv) Taxes imposed on, or with respect to, a transferee (or a
subsequent transferee) of an original Lender (and including as such a transferee
a Lender whose shares of stock have been transferred or the purchaser of a
participation in any Advance) to the extent of the excess of such Tax over the
amount of such Tax that would have been imposed on, or with respect to, such
original Lender had there not been a transfer, sale, assignment or other
disposition of the shares of such Lender or a transfer, sale, assignment or
other disposition by such original Lender of any interest in any Vessel, any
Note or any Transaction Document (in each case, other than any transfer pursuant
to the exercise of remedies as a result of an Event of Default that shall have
occurred and be continuing); or
(v) Taxes imposed on any Lender that would not have been imposed but
for any failure of such Lender to comply with any return filing requirement or
any certification, information, documentation, reporting or other similar
requirement known to such Lender, if such compliance is required to obtain or
establish relief or exemption from or reduction in such Taxes;
(b) In the event that any Borrower has actual knowledge that the
Borrowers are required to, or there arises in any Borrower's reasonable opinion
a substantial likelihood that the Borrowers will be required to, pay an
additional amount or otherwise indemnify any Lender for or on account of any Tax
pursuant to Clause 7.1(a), the Borrower will promptly notify the Administrative
Agent and each relevant Lender of the nature of such Tax, and shall furnish such
information to the Administrative Agent and such Lender with respect to such
Tax, as the Administrative Agent or such Lender may reasonably request. In the
event of any knowledge or opinion of a Borrower described in the preceding
sentence, the Borrowers, the Administrative Agent and each relevant Lender shall
consult in good faith to determine what may be required to avoid or reduce such
Tax, and shall each use reasonable efforts to avoid or reduce such Tax (so long
as such efforts do not, in the reasonable opinion of the relevant Lender, result
in any cost to such Lender or any modification of the terms or repayment of any
Advance).
7.2 Tax Credits. If any Lender obtains the benefit of a credit against
35
its liability for Taxes imposed by any taxing authority for all or part of the
Taxes as to which the Borrowers have paid additional amounts as aforesaid then
such Lender shall reimburse the Borrowers for the amount of the credit so
obtained. Each Lender shall use reasonable efforts in filing such tax return as
are necessary to obtain any such credit. In connection therewith, the Lenders
may consult with their legal advisers, all fees and expenses of which shall be
for the account of the Borrowers.
8 EVENTS OF DEFAULT
8.1 In the event that any of the following events shall occur and be
continuing:
(a) Commitment Reduction, Commitment Commission and Interest. Any
payment due at the time of a Commitment Reduction or any interest or Commitment
Commission due hereunder, or any payment or interest due under the Note or under
the Security Documents, is not paid on the due date; or
(b) Other Payments. Any fees or other amounts becoming payable to the
Agents, the Security Trustee, the Joint Arrangers and Underwriters or the
Lenders under this Agreement, under the Note, under the Security Documents or
under any of them is not paid on the due date or within three (3) Banking Days
after the date of demand (as the case may be); or
(c) Representations, etc. Any representation, warranty or other
statement made by the Borrower, the Guarantor or Palm Shipping in this Agreement
or in any of the Security Documents to which it is a party or in any other
instrument, document or other agreement delivered in connection herewith or
therewith proves to have been untrue or misleading in any material respect as at
the date as of which made; or
(d) Impossibility, Illegality. It becomes impossible or unlawful for
the Borrowers, the Guarantor, Palm Shipping or any of them to fulfill any of the
covenants and obligations contained herein, in the Note or in any of the
Security Documents to which it is a party or for the Agents, the Security
Trustee or the Lenders to exercise any of the rights vested in any of them
hereunder, under the Note or under any of the Security Documents and such
impossibility or illegality, in the reasonable opinion of the Agents, the
Security Trustee or the Majority Lenders, will have a material adverse effect on
their rights hereunder, under the Note or under any of the Security Documents or
on their right to enforce any thereof; or
(e) Covenants. The Borrowers, the Guarantor or Palm Shipping or any of
them defaults in the performance of any term, covenant or agreement contained in
this Agreement, in the Note or in any of the Security Documents to which they
are a party or in any of them, or in any other instrument, document or other
agreement delivered in connection herewith or therewith, or there occurs any
other event which constitutes a default under this Agreement, the Note or any of
the Security Documents, in each case other than an Event of Default referred to
elsewhere in this Clause 8.1, and such default, in the reasonable opinion of the
Majority Lenders, could have a material adverse effect on their rights
hereunder, under the Note or under any of the Security Documents or on their
right to enforce any thereof and continues unremedied for a period of thirty
(30) days; or
(f) Indebtedness. The Borrowers, the Guarantor, Palm Shipping or any
36
Wholly Owned Subsidiary of the Guarantor shall default in the payment when due
(subject to any applicable grace period), whether by acceleration or otherwise,
of any Indebtedness having an outstanding principal amount of $5,000,000 or more
or any party becomes entitled to enforce the security for any such Indebtedness
and such party shall take steps to enforce the same, unless such default or
enforcement is being contested in good faith and by appropriate proceedings or
other acts and the relevant Borrowers, the Guarantor, Palm Shipping or such
Wholly Owned Subsidiary of the Guarantor as the case may be, shall set aside on
its books adequate reserves with respect thereto, and so long as such default or
enforcement shall not subject any Vessel to material risk of forfeiture or loss;
or
(g) Stock Ownership. There is, without the prior written consent of
the Majority Lenders (i) any change in the legal or beneficial stock ownership
or the voting control of the Borrowers or (ii) any pledge of the shares of the
Borrowers in favor of a party other than the Security Trustee or (iii) less than
fifty-one percent (51%) of the issued and outstanding shares of the Guarantor is
held beneficially and of record by the Persons holding such shares as of the
date of this Agreement; or
(h) Default under the Security Documents. There is an event of default
under any of the Security Documents which shall have occurred and be continuing;
or
(i) Bankruptcy. The Borrowers, the Guarantor or Palm Shipping
commences any proceeding relating to any substantial portion of its property
under any reorganization, arrangement or readjustment of debt, dissolution,
winding up, adjustment, composition, bankruptcy or liquidation law or statute of
any jurisdiction, whether now or hereafter in effect ("Proceeding"), or there is
commenced against the Borrowers, the Guarantor or Palm Shipping any Proceeding
and such Proceeding remains undismissed or unstayed for a period of thirty (30)
days; or any receiver, trustee, liquidator or sequestrator of, or for, the
Borrowers, the Guarantor or Palm Shipping or any substantial portion of the
property of any thereof is appointed and is not discharged within a period of
thirty (30) days; or the Borrowers, the Guarantor or Palm Shipping by any act
indicates consent to or approval of or acquiescence in any Proceeding or to the
appointment of any receiver, trustee, liquidator or sequestrator of, or for,
itself or any substantial portion of its property; or
(j) Sale of Assets. The Borrowers, the Guarantor or Palm Shipping
ceases, or threatens to cease, its operations or sells or otherwise disposes of,
or threatens to sell or otherwise dispose of, all or substantially all of its
assets or all or substantially all of its assets are seized or otherwise
appropriated; or
(k) Judgments. Any judgment or order is made the effect whereof would
be to render ineffective or invalid this Agreement, the Note, the Security
Documents or any of them; or
(l) Inability to Pay Debts. Any of the Borrowers, the Guarantor or
Palm Shipping is unable to pay or admits its inability to pay its debts as they
fall due or if a moratorium shall be declared in respect of any Indebtedness
thereof; or
(m) Financial Position. Any change in the financial position of the
Guarantor which, in the reasonable opinion of the Majority Lenders, is
reasonably likely to have a material adverse effect on the ability of the
37
Borrowers, the Guarantor or Palm Shipping to perform its material obligations
under this Agreement, the Note, the Security Documents or the Charters; or
(n) Termination, Amendment or Assignment of Charters. Any of the
Charters is terminated, materially amended or modified or assigned (other than
pursuant to the Earnings Assignments) without the prior written consent of the
Majority Lenders, or any party to any thereof defaults or ceases to perform
thereunder for any reason whatsoever, then the Lenders' obligation to make the
Credit Facility available shall cease and the Majority Lenders may, by notice to
the Borrowers, declare the then outstanding Advances, accrued interest and any
other sums payable by the Borrowers hereunder, under the Note and under the
Security Documents immediately due and payable whereupon the same shall
forthwith be due and payable without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived; provided that upon the
happening of an event specified in subclauses (i) or (l) of this Clause 8.1, the
Note shall be immediately due and payable without declaration or other notice to
the Borrowers. In such event, the Lenders may proceed to protect and enforce
their rights by action at law, suit in equity or in admiralty or other
appropriate proceeding, whether for specific performance of any covenant
contained in this Agreement, in the Note or in any of the Security Documents, or
in aid of the exercise of any power granted herein or therein, or the Lenders
may proceed to enforce the payment of the Note when due or to enforce any other
legal or equitable right of the Lenders, or proceed to take any action
authorized or permitted under the terms of any of the Security Documents or by
applicable laws for the collection of all sums due, or so declared due, on the
Note, including, without limitation, the right to appropriate and hold or apply
(directly, by way of set-off or otherwise) to the payment of the obligations of
the Borrowers to the Lenders hereunder, under the Note and/or under any of the
Security Documents (whether or not then due) all moneys and other amounts of the
Borrowers, then or thereafter in possession of the Lenders, the balance of any
deposit account (demand or time, matured or unmatured) of the Borrowers, then or
thereafter with the Lenders and every other claim of the Borrowers, then or
thereafter against the Lenders.
8.2 Indemnification. The Borrowers agree to, and shall, indemnify and hold
the Agents, the Security Trustee and the Lenders harmless against any loss or
costs or expenses (including legal fees and expenses) which the Agents, the
Security Trustee and the Lenders sustains or incurs as a consequence of any
default in repayment of the principal amount of any of the Advances or interest
accrued thereon or any other amount payable hereunder, under the Note or under
the Security Documents (other than costs and expenses caused by the gross
negligence or wilful misconduct of the Agents, the Security Trustee or any
Lender) including, but not limited to, all actual losses incurred in liquidating
or re-employing fixed deposits made by third parties or funds acquired to effect
or maintain the Credit Facility or any part thereof. The Agents', Security
Trustee's or Lenders' certification of such costs and expenses shall, absent any
manifest error, be conclusive and binding on the Borrowers.
8.3 Application of Moneys. Except as otherwise provided in any Security
Document, all moneys received by the Administrative Agent, Security Trustee or
Lenders under or pursuant to this Agreement, the Note or any of the Security
Documents after the happening of any Event of Default (unless cured to the
satisfaction of the Majority Lenders) shall be applied by the Administrative
Agent in the following manner:
38
(i) first, in or towards the payment or reimbursement of any
expenses or liabilities incurred by the Agents, the Security
Trustee or the Lenders in connection with the ascertainment,
protection or enforcement of its rights and remedies
hereunder, under the Note and under any of the Security
Documents,
(ii) secondly, in or towards payment of any interest owing in
respect of the Advances or Commitment Commission,
(iii) thirdly, in or towards repayment of principal owing in
respect of the Advances,
(iv) fourthly, in or towards payment of all other sums which may
be owing to the Agents, the Security Trustee or the Lenders
under this Agreement, under the Note, the Fee Letter or
under any of the Security Documents, and
(v) fifthly, the surplus (if any) shall be paid to the Borrowers
or to whomsoever else may be entitled thereto.
9 COVENANTS
9.1 Each Borrower hereby covenants and undertakes with the Lenders that,
from the date hereof and so long as any principal, interest or other monies are
owing in respect of this Agreement, the Note, the Security Documents or any of
them:
A. The Borrowers will each:
(i) Performance of Agreements. Duly perform and observe, and
procure the observance and performance by all other parties
thereto (other than the Agents, the Security Trustee and the
Lenders) of, the terms of this Agreement, the Note and the
Security Documents;
(ii) Notice of Default; Change in Classification of Vessel.
Promptly inform the Administrative Agent of the occurrence
of (a) any Event of Default or of any event which with the
giving of notice or lapse of time, or both, would constitute
an Event of Default, (b) the withdrawal of any Vessel's
rating by its Classification Society or the issuance by the
Classification Society of any recommendation or notation
affecting class, (c) any litigation or governmental
proceeding pending or threatened against the Borrowers, Palm
Shipping, the Guarantor which could reasonably be expected
to have a material adverse effect on the business, assets,
operations, property or financial condition of any such
party and (d) any other event or condition of which it
becomes aware which is reasonably likely to have a material
adverse effect on its ability, or the ability of any other
party thereto, to perform its obligations under this
Agreement, the Note and the Security Documents or any of
them;
(iii) Obtain Consents. Without prejudice to Clause 2.1 and this
39
Clause 9.1, obtain every consent and do all other acts and
things which may from time to time be necessary or advisable
for the continued due performance of all its and any other
party's (other than the Agents', the Security Trustee's or
the Lenders') respective obligations under this Agreement,
the Note and the Security Documents;
(iv) Financial Statements. Deliver or cause to be delivered to
the Administrative Agent (with sufficient copies for
distribution to all of the Lenders):
(a) as soon as available but not later than ninety (90)
days after the end of each fiscal year of the Guarantor
complete copies of the financial reports of the Guarantor
(together with a Compliance Certificate substantially in the
form of Exhibit K hereto, signed by the Chief Financial
Officer of the Guarantor), on a consolidated basis, which
shall include at least the consolidated balance sheet of the
Guarantor as of the end of such year and the related
consolidated statements of income, cash flow and retained
earnings for such year, all in reasonable detail, certified
by an Acceptable Accounting Firm, together with their
opinion (without material qualifications) thereon;
(b) as soon as available but not later than forty-five
(45) days after the end of each of the first three quarters
of each fiscal year of the Guarantor, balance sheets of the
Guarantor, on a consolidated basis, as at the end of such
quarter and the related consolidated statements of income,
cash flow and retained earnings for such quarter, all in
reasonable detail, unaudited, but certified by the chief
financial officer of the Guarantor, together, in each
instance, with a Compliance Certificate, signed by such
chief financial officer of the Guarantor;
(c) as soon as available, copies of all reports,
statements or other instruments filed with the United States
Securities and Exchange Commission;
(d) such other statement or statements, lists of
property and accounts, budgets, forecasts, reports and
financial information with respect to the operation and
management of the Vessels and any other vessels owned or
operated directly or indirectly by or the Guarantor, as the
Administrative Agent may from time to time reasonably
request;
(v) Corporate Existence. Do or cause to be done, and procure
that the Guarantor and Palm Shipping shall do or cause to be
done, all things necessary to preserve and keep in full
force and effect their respective corporate existence, and
all licenses, franchises, permits and assets necessary to
the conduct of the business of each such corporation;
(vi) Books, Records, etc. Keep, and procure that the Guarantor
40
and Palm Shipping shall keep, proper books of record and
account into which full and correct entries shall be made,
in accordance with GAAP throughout the Credit Facility
Period;
(vii) Inspection. Allow, and procure that the Guarantor and Palm
Shipping shall allow, any representative or representatives
designated by the Lenders, subject to applicable laws and
regulations, to visit and inspect any of the properties of
any such party, and, on request, to examine the books of
account, records, reports and other papers (and to make
copies thereof and to take extracts therefrom) of each such
corporation and to discuss the affairs, finances and
accounts of each such corporation, with the officers and
executive employees of each such corporation all at such
reasonable times and as often as such Lender reasonably
requests;
(viii) Taxes. Pay and discharge, and cause the Guarantor and Palm
Shipping to pay and discharge, all taxes, assessments and
governmental charges or levies imposed upon each such
corporation or upon such corporation's income or property
prior to the date upon which penalties attach thereto;
provided, however, that such corporations shall not be
required to pay and discharge, or cause to be paid and
discharged, any such tax, assessment, charge or levy so long
as the legality or amount thereof shall be contested in good
faith and by appropriate proceedings or other acts and it
shall set aside on its books adequate reserves with respect
thereto, and so long as such deferment in payment shall not
subject any Vessel to material risk of forfeiture or loss;
(ix) Compliance with Statutes, etc. Do or cause to be done, and
procure that the Guarantor and Palm Shipping shall do or
cause to be done, all things necessary to comply with all
material laws, and the rules and regulations thereunder,
applicable to the Borrowers, the Guarantor and Palm Shipping
and including, without limitation, those laws, rules and
regulations relating to employee benefit plans and
environmental matters;
(x) Environmental Matters. Promptly upon the occurrence of any
of the following conditions, provide to the Administrative
Agent a certificate of the chief executive officer thereof,
specifying in detail the nature of such condition and the
Borrowers', the Guarantor's or Palm Shipping's proposed
response or the proposed response of any Environmental
Affiliate (as such term is hereinafter defined) of any
thereof, as the case may be: (a) the Borrowers', the
Guarantor's or Palm Shipping's receipt or the receipt by any
Environmental Affiliate of any thereof of any communication
whatsoever that alleges that such person is not in
compliance with any applicable environmental law or
environmental approval, if such noncompliance could
reasonably be expected to have a material adverse effect on
the business, assets, operations, property or financial
41
condition of the Borrowers, the Guarantor or Palm Shipping,
(b) knowledge by the Borrowers, the Guarantor or Palm
Shipping or any Environmental Affiliate of any thereof that
there exists any Environmental Claim pending or threatened
against any such person which could reasonably be expected
to have a material adverse effect on the business, assets,
operations, property or financial condition of the Guarantor
or (c) any release, emission, discharge or disposal of any
material that could form the basis of any Environmental
Claim against the Guarantor or any Environmental Affiliate
of any thereof if such Environmental Claim could reasonably
be expected to have a material adverse effec on the
business, assets, operations, property or financial
condition of the Guarantor. Upon the written request by the
Administrative Agent, each Borrower will submit, and procure
that the Guarantor and Palm Shipping shall submit, to the
Administrative Agent at reasonable intervals, a report
providing an update of the status of any issue or claim
identified in any notice or certificate required pursuant to
this subclause. For the purposes of this subclause,
"Environmental Claim" shall mean any claim under federal,
state and local environmental, health and safety laws,
statutes or regulations. "Environmental Affiliate" shall
mean any person or entity the liability of which for
Environmental Claims the Borrowers, the Guarantor or Palm
Shipping may have assumed by contract or operation of law;
(xi) ISM Code Matters. (a) and will procure that the relevant
Operator will, comply with, and ensure that (i) each
Affiliate Vessel will comply with the requirements of the
ISM Code by not later than July 1, 1998, and (ii) any
newly-acquired Affiliate Vessel will comply with the
requirements of the ISM Code within three months of its
acquisition, including (but not limited to) the maintenance
and renewal of valid certificates pursuant thereto
throughout the Credit Facility Period;
(b) and will procure that the Guarantor and any Operator
will, immediately inform the Administrative Agent if there
is any threatened or actual withdrawal of its, DOC or the
SMC in respect of any Vessel or any Affiliate Vessel; and
(c) and will procure that the Guarantor and relevant
Operator will, promptly inform the Administrative Agent upon
the issue to such Affiliate of the Guarantor or Operator of
a DOC and to any Affiliate Vessel of an SMC.
(xii) Accountants. Retain throughout the Credit Facility Period an
Acceptable Accounting Firm as its independent certified
accountants;
(xiii) Continue Charters. Continue to charter the Vessels to Palm
Shipping for the entire Credit Facility Period, and ensure
that the terms of such Charters include, inter alia, that
the payments of Palm Shipping to the Borrowers under the
Charters will, in the aggregate, be sufficient to cover all
payments of the Borrowers under this Agreement and any
42
operating and other expenses of such Borrower;
- ----- ----
(xiv) Class Certificate. Furnish, or cause to be furnished, to the
Administrative Agent, upon any change of a Vessel's
classification status or the issuance of a recommendation
affecting class by a Vessel's classification society or upon
the Administrative Agent's reasonable request (to be made no
more than once in any calendar year), a confirmation of
class certificate covering each Vessel and evidencing
compliance with the Mortgage;
(xv) Maintenance of Properties. Maintain, or cause to be
maintained, and keep, or cause to be kept, and procure that
the Guarantor and Palm Shipping shall maintain, or cause to
be maintained, and keep, or cause to be kept, all properties
used or useful in the conduct of its business in good
condition, repair and working order and supplied with all
necessary equipment and will cause to be made necessary
repairs, renewals and replacements thereof so that the
business carried on and in connection therewith and every
portion thereof may be properly and advantageously conducted
at all times. In addition, each Borrower shall cause its
Vessel to be drydocked as often as required by the Vessel's
classification society and as a prudent shipowner would
require;
(xvi) Vessel Management. Cause its Vessel to be managed by the
Manager or such ship manager selected by the Borrowers and
satisfactory to the Majority Lenders pursuant to a written
management agreement acceptable to the Majority Lenders;
(xvii) Limitation on Restricted Payments. Procure that the
Guarantor will not directly or indirectly declare or pay any
dividend or make any distribution on its capital stock (such
payments being defined as "Restricted Payments") if, at the
time of, and after giving effect to, the proposed Restricted
Payment: (A) a Default or Event of Default shall have
occurred and be continuing or (B) the aggregate amount
expended for all Restricted Payments (the amount so
expended, if other than in cash, to be determined in good
faith by the Board of Directors, whose determination shall
be conclusive and evidenced by a Board Resolution) after
June 30, 1996 shall exceed the sum of (1) 50% of the
aggregate amount of the Adjusted Consolidated Net Income (or
if Adjusted Consolidated Net Income is a loss one hundred
percent (100%) of such amount) of the Guarantor accrued on a
cumulative basis during the period (taken as one accounting
period) beginning October 1, 1996 and ending on the last day
of the last fiscal quarter preceding such date plus (2) the
aggregate net proceeds (including the fair market value of
non-cash proceeds as determined in good faith by the Board
of Directors) received by the Guarantor (including the
amount of any dividends re-invested in the capital stock of
the Guarantor) from the issuance and sale of capital stock
of the Guarantor (other than redeemable stock), including an
issuance or sale for cash or other
43
property upon the conversion of any Indebtedness of the
Guarantor subsequent to the date hereof, or from the
issuance of any options, warrants or other rights to acquire
capital stock of the Guarantor (in each case, exclusive of
any redeemable stock or any options, warrants or other
rights that are redeemable at the option of the holder, or
are required to be redeemed, prior to the Maturity Date)
plus (3) $50,000,000.
The foregoing provision shall not take into account, and
shall not be violated by reason of:
(a) the payment of any dividend within 60 days after the date of
declaration thereof if, at said date of declaration, such
payment would comply with the foregoing paragraph; or
(b) the repurchase, redemption or other acquisition by the
Guarantor of capital stock of the Guarantor in exchange for,
or out of the proceeds of a substantially concurrent
offering of, shares of capital stock of the Guarantor (other
than redeemable stock),
provided that, no Event of Default shall have occurred and
be continuing or occur as a consequence of the actions or
payments set forth therein.
B. None of the Borrowers, without the prior written consent of
Majority Lenders, will:
(i) Liens. Create, assume or permit to exist any mortgage,
pledge, lien, charge, encumbrance or any security interest
whatsoever upon any of such party's property or other
assets, real or personal, tangible or intangible, whether
now owned or hereafter acquired except:
(a) liens for taxes not yet payable for which adequate
reserves have been maintained;
(b) the Mortgages, the Assignments and other liens in
favor of the Security Trustee;
(c) liens, charges and encumbrances against their
respective Vessels permitted to exist under the terms of the
Mortgages;
(d) pledges of certificates of deposit or other cash
collateral securing the Borrowers' reimbursement obligations
in connection with letters of credit now or hereafter issued
for the account of the Borrowers in connection with the
establishment of the financial responsibility of the
Borrowers under 33 C.F.R. Part 130 or 46 C.F.R. Part 540, as
the case may be as the same may be amended or replaced; and
(e) other liens, charges and encumbrances incidental to
the conduct of the business of each such party or the
ownership of any such party's property and assets and which
do not in the aggregate materially detract from the value of
each such party's property or assets or materially impair
44
the use thereof in the operation of its business;
(ii) Loans and Advances. Make any loans or advances to, or any
investments in any person, firm, corporation, joint venture
or other entity (including, without limitation, any loan or
advance to any officer, director, stockholder, employee or
customer of any company affiliated with the Borrowers or the
Guarantor) except for advances and investments in the normal
course of its business and loans or advances to the
Guarantor;
(iii) Limitation on Indebtedness. (a) Incur, and shall procure
neither the Guarantor nor Palm Shipping will, incur any
Indebtedness excluding Indebtedness hereunder or in
connection herewith to the Agents, the Security Trustee or
the Lenders and Indebtedness existing on the date hereof;
provided that the Guarantor or any of its Subsidiaries may
incur Indebtedness if, after giving effect to the incurrence
of such Indebtedness and the receipt and application of the
proceeds therefrom, the Interest Coverage Ratio of the
Guarantor would be greater than 2:1.
Notwithstanding the foregoing, the Guarantor may incur each and all of
the following:
(I) Indebtedness in an aggregate principal amount such that the
aggregate principal amount of the Indebtedness of the
Guarantor outstanding immediately after such incurrence does
not exceed the aggregate principal amount of Indebtedness
existing on the date hereof;
(II) Indebtedness of the Guarantor to any Wholly-Owned
Subsidiary;
(III) Indebtedness issued in exchange for, or the net proceeds of
which are used to refinance or refund, outstanding
Indebtedness of the Guarantor, other than Indebtedness
incurred under clauses (I) or (V) of this paragraph and any
refinancings thereof, in an amount not to exceed the
principal amount so exchanged, refinanced or refunded (plus
premiums, accrued and unpaid interest, fees and expenses
thereon);
(IV) Indebtedness (A) in respect of performance, surety or appeal
bonds provided in the ordinary course of business, (B) under
Currency Agreements and Interest Rate Agreements; provided
that, in the case of Currency Agreements that relate to
other Indebtedness, such Currency Agreements do not increase
the Indebtedness of the obligor outstanding at any time
other than as a result of fluctuations in foreign currency
exchange rates or by reason of fees, indemnities and
compensation payable thereunder, and (C) arising from
agreements providing for indemnification, adjustment of
purchase price or similar obligations, or from Guarantees or
letters of credit, surety bonds or performance bonds
securing any obligations of the Guarantor pursuant to such
agreements, in any case incurred in connection with the
45
disposition of any business, assets of the Guarantor and not
exceeding the gross proceeds therefrom, other than
Guarantees of Indebtedness incurred by any Person acquiring
all or any portion of such business or assets of the
Guarantor for the purpose of financing such acquisition;
(V) Indebtedness in connection with the acquisition of any new
Wholly owned Subsidiary; provided that, with respect to this
Clause 9.1(B)(iii)(a)(V), after giving effect to the
Incurrence thereof, the Guarantor could incur at least $1.00
of Indebtedness pursuant to the first paragraph of this
Clause 9.1(B)(iii)(a); and
- --------
(VI) Indebtedness of Palm Shipping incurred in the ordinary
course of the operation of vessels or Indebtedness of Palm
Shipping to the Guarantor resulting from advances to Palm
Shipping by the Guarantor made in the ordinary course of
business;
(b) For purposes of determining any particular amount of
Indebtedness under this Clause 9.1(B)(iii), guarantees or
obligations with respect to letters of credit supporting
Indebtedness otherwise included in the determination of such
particular amount shall not be included. For purposes of
determining compliance with this Clause, (i) in the event that an
item of Indebtedness meets the criteria of more than one of the
types of Indebtedness described above in this Clause, the
Guarantor, in its sole discretion, shall classify such item of
Indebtedness and only be required to include the amount and type
of such Indebtedness in one of such clauses and (ii) the amount
of Indebtedness issued at a price that is less than the principal
amount thereof shall be equal to the amount of the liability in
respect thereof determined in conformity with GAAP.
Notwithstanding any other provision of this Clause, the maximum
amount of Indebtedness that the Guarantor may incur pursuant to
this Clause shall not be deemed to be exceeded due solely to
fluctuations in the exchange rates of currencies.
(c) The Guarantor shall not incur any Indebtedness that is
expressly subordinated to any other Indebtedness of the Guarantor
unless such Indebtedness, by its terms or the terms of any
agreement or instrument pursuant to which such Indebtedness is
issued or remains outstanding, is also expressly made subordinate
to the Indebtedness of the Guarantor under the Guaranty.
(iv) Guarantees, etc. Assume, guarantee or (other than in the ordinary
course of its business) endorse or otherwise become or remain
liable, in connection with any obligation of any person, firm,
company or other entity except for guaranties in favor of the
Lenders or the Security Trustee on behalf of the Lenders;
(v) Changes in Business. Change the nature of its business or
commence any other business;
(vi) Use of Corporate Funds. Pay out any funds to any company or
person except (a) in the ordinary course of business in
46
connection with the management of the business of the Borrowers
and the Guarantor, including the operation and/or repair of the
Vessels and (b) the servicing of the indebtedness to the Lenders;
(vii) Issuance of Shares. Issue or dispose of any shares of its own
capital stock to any person;
(viii) Consolidation, Merger. Consolidate with, or merge into any
corporation;
(ix) Changes in Offices or Names. Change the location of the chief
executive office of the Borrowers or the Guarantor, the office of
the chief place of business any such parties, the office of the
Borrowers in which the records relating to the earnings or
insurances of the Vessel are kept unless the Lenders shall have
received thirty (30) days prior written notice of such change;
(x) Limitation on Transactions with Shareholders and Affiliates. None
of the Borrowers will and will procure that neither the Guarantor
nor Palm Shipping will, directly or indirectly enter into, renew
or extend any transaction (including, without limitation, the
purchase, sale, lease or exchange of property or assets, or the
rendering of any service) or series of related transactions with
any holder (or any Affiliate of such holder) of 5% or more of any
class of capital stock of the Guarantor or with any Affiliate of
the Guarantor, except upon fair and reasonable terms no less
favorable to the Borrowers, the Guarantor or Palm Shipping, than
could be obtained, at the time of such transaction or series of
related transactions or at the time of the execution of the
agreement providing therefor, in a comparable arm's-length
transaction with a Person that is not such a holder or Affiliate.
The foregoing limitation does not limit, and shall not apply to:
(a) transactions or series of related transactions (I) approved by a
majority of the disinterested members of the Board of Directors
as fair to the Borrowers, the Guarantor or Palm Shipping, or (II)
for which the Borrowers, the Guarantor or Palm Shipping, as the
case may be, delivers to the Administrative Agent a written
opinion of a nationally recognized investment banking firm
stating that the transaction is fair to the Borrowers, the
Guarantor or Palm Shipping, as the case may be, from a financial
point of view;
(b) the payment of reasonable and customary regular fees to directors
of the Borrowers, the Guarantor or Palm Shipping, who are not
employees of the Borrowers, the Guarantor or Palm Shipping; or
(c) any Restricted Payments not prohibited by Clause 9.1(A)(xvi); or
(xi) Change of Flag. Change the flag of any Vessel or the management
of such Vessel; or
(xii) Sale of Vessel. Sell, transfer or otherwise dispose of a Vessel
other than in accordance with Clause 9.4 hereof.
47
9.2 Valuation of the Vessels. The aggregate fair market value ("FMV") of the
Vessels during the Credit Facility Period shall be greater than or equal to: (1)
for the first two years of the Credit Facility Period, a minimum of 120% of the
Credit Facility during such period, (2) for the third and fourth year of the
Credit Facility Period, a minimum of 125% of the Credit Facility during such
period and (3) for the fifth year of the Credit Facility Period and up to the
Maturity Date, a minimum of 130% of the Credit Facility during such period (the
"Relevant Percentages"). The FMV of each Vessel shall be determined at the
Administrative Agent's discretion, but no less frequently than annually, on the
basis of a valuation (the "Valuation") provided by the Administrative Agent. In
the event the Majority Lenders or the Borrowers disagree with the Administrative
Agent's Valuation, then the Borrowers and the Administrative Agent shall each
obtain a separate valuation (the "Additional Valuations") from separate
independent shipbrokers, and the FMV shall be determined to be the arithmetic
average of the Additional Valuations. The cost of all Additional Valuations
obtained hereunder shall be for the account of the Borrowers.
9.3 Collateral Maintenance. If the FMV of the Vessels, as determined pursuant to
Clause 9.2 falls below the Relevant Percentages, within a period of ten (10)
Banking Days following receipt by the Borrowers of written notice from the
Administrative Agent notifying the Borrower of such shortfall and specifying the
amount thereof (which amount shall, in the absence of manifest error, be deemed
to be conclusive and binding on the Borrowers) (a) the Borrowers shall deliver
to the Administrative Agent, upon its request, such additional collateral as may
be satisfactory to the Lenders, in their sole discretion (including the deposit
of cash in a cash collateral account maintained with the Administrative Agent),
such that the sum of (i) the value of the Vessels, as determined in accordance
with the latest Valuation delivered pursuant to Clause 9.2, and (ii) such
additional collateral (other than cash collateral) shall be greater or equal to
the Relevant Percentage of the Credit Facility less any cash collateral held by
the Administrative Agent in a cash collateral account or (b) the Lenders shall
reduce their Commitments hereunder and the Borrowers shall, if necessary, prepay
such Advances or part thereof (together with interest thereon) as shall result
in the FMV of the Vessels being not less than the Relevant Percentage of the
Credit Facility. The Commitments of the Lenders shall be reduced accordingly and
shall be adjusted proportionally to reflect such as required by Clause 5.5
hereof.
9.4 Reduction of Collateral. In the event of Total Loss of a Vessel or the sale
by a Borrower of its Vessel or the release of its Vessel from the lien of the
Mortgage thereon at the Borrower's request, upon such Total Loss or prior to or
simultaneously with such sale or other disposition either:
(a) the Credit Facility shall, on the date of Total Loss, sale or other
disposition, be reduced by, in the case of the Vessel being sold, the net sales
proceeds thereof and in the case of a Vessel suffering a Total Loss or being
otherwise released from the security package, the FMV thereof, provided that, if
the aggregate of the FMV of the remaining Vessels is more than 150% of the
Credit Facility, after giving effect to the reduction by the net sales proceeds
or FMV, as the case may be, the Credit Facility shall be reduced by only 50% of
such net sales proceeds or FMV, as the case may be. The remaining reductions
pursuant to Clause 5.2 shall be adjusted proportionately to reflect such
reduction; or
48
(b) a Borrower, pursuant to an Accession Agreement or otherwise,
substitutes a vessel approved by the Lenders or a vessel meeting all of the
following characteristics and pursuant to the following conditions:
(i) an Aframax tanker between 75,000 and 115,000 dead weight tons
(ii) built in or after 1988 but in no event more than two years older
than the Vessel sold or released;
(iii) complies with requirements of Clause 4.1(b) hereof;
(iv) has a FMV greater than or equal to the FMV of the Vessel sold or
released; and
(v) the relevant owner of the Vessel has, if relevant, executed an
Accession Agreement and has executed a counterpart of the Note, a
Mortgage, an Assignment of Earnings and an Assignment of
Insurances and the Guarantor has pledged the shares of such owner
in favor of the Security Trustee as provided with respect to each
other Borrower hereunder and has met the conditions, updated
mutadis mutandis, of Clauses 4.1(a), (b), (c), (d)(ii), (e), (f),
(g), (h), (i), (k) and (l).
Upon the satisfaction of the foregoing conditions of this Clause 9.4(b), the
Lenders shall release the Mortgage covering the Vessel to be sold, disposed of
or otherwise released and shall release the Borrower owning such Vessel from its
obligations hereunder.
(c) Notwithstanding the provisions of Clause 9.4(a) above, in the
event that upon a Vessel sale or other disposition the Borrowers deposit with
the Security Trustee cash collateral, on such terms as the Security Trustee may
require, in an amount equal to the net sale proceeds or FMV of the released
Vessel, as the case may be, on or prior to such sale or other disposition, the
reduction of the Credit Facility required by such Clause shall be deferred for
three (3) months. In the event that a Vessel suffers a Total Loss, the reduction
of the Credit Facility required by Clause 9.4(a) shall be deferred for three (3)
months without the deposit of cash collateral as required by the foregoing
sentence (unless the insurers of the Vessel suffering a Total Loss have declined
coverage for such Total Loss at any time prior to the expiration of such three
(3) month period). In the event the Borrowers have procured a substitute Vessel
as provided in Clause 9.4(b) above within said three (3) month period there
shall be no reduction of Commitment.
9.5 Inspection and Survey Reports. If the Lenders shall so request, the
Borrowers shall provide the Lenders with copies of all internally generated
inspection or survey reports on the Vessels.
10 ASSIGNMENT
This Agreement shall be binding upon, and inure to the benefit
of, the Borrowers, the Agents, the Security Trustee and the Lenders and their
respective successors and assigns, except that the Borrowers may not assign any
of their rights or obligations hereunder except as specifically provided herein.
The Lenders may, with the prior written consent of the Borrowers (such consent
not to be unreasonably withheld) assign a portion of their rights and
49
obligations under this Agreement to any one or more commercial lenders (the
expenses of the Lenders in connection with any such assignment shall be for
their own account), provided, however, in the event of any such assignment, such
assignment is to be made pursuant to an Assignment and Assumption Agreement
substantially in the form of Exhibit I hereto. The Borrowers will take all
reasonable actions requested by the Lenders to effect such assignment,
including, without limitation, the execution of a written consent to such
Assignment and Assumption Agreement.
11 ILLEGALITY, INCREASED COST, NON-AVAILABILITY, ETC.
11.1 Illegality. In the event that by reason of any change in any applicable
law, regulation or regulatory requirement or in the interpretation thereof any
of the Lenders reasonably concludes that it has become unlawful for such Lender
to maintain or give effect to its obligations as contemplated by this Agreement,
such Lender shall inform the Administrative Agent and the Borrowers to that
effect, whereafter the liability of such Lender to make its Commitment available
shall forthwith cease and the Borrowers shall be required to prepay the then
outstanding portion of such Lender's Advances immediately in accordance with and
subject to the provisions of Clause 11.4. In any such event, but without
prejudice to the aforesaid obligations of the Borrowers to prepay the Advances,
the Borrowers and such Lender shall negotiate in good faith with a view to
agreeing on terms for making its Commitment available from another jurisdiction
or otherwise restructuring the Credit Facility on a basis which is not unlawful
with respect to such Lender and the Joint Arrangers and Underwriters shall use
reasonable efforts to replace such Lender with a lender for which the making and
performance of the Agreement would not be illegal.
11.2 Increased Cost. If any change in applicable law, regulation or regulatory
requirement or in the interpretation or application thereof by any governmental
or other authority, shall:
(i) change the basis of taxation (excluding any change in the
rate of any Tax) to any of the Lenders of payments of
principal or interest or any other payment due or to become
due pursuant to this Agreement (other than a change in
taxation of the overall net income of such Lender effected
by the jurisdiction of organization or the jurisdiction of
the principal place of business of such Lender, the United
States of America, the State or City of New York or any
governmental subdivision or other taxing authority having
jurisdiction over the Lender (unless such jurisdiction is
asserted solely by reason of the activities of any of the
Borrowers) or such other jurisdiction where the Advances may
be repayable), or
(ii) impose, modify or deem applicable any reserve requirements
or require the making of any special deposits against or in
respect of any assets or liabilities of, deposits with or
for the account of, or loans by, the Lenders, or
(iii) impose on the Lenders any other condition affecting the
Credit Facility or any part thereof, and the result of the
foregoing is either to increase the cost to the Lenders of
making available or maintaining the Credit Facility or any
part thereof or to reduce the amount of any payment received
50
by the Lenders, then and in any such case if such increase
or reduction in the opinion of th Lenders materially affects
the interests of the Lenders under or in connection with
this Agreement, then:
(a) the Administrative Agent shall notify the Borrowers
of the happening of such event,
(b) the Borrowers agree forthwith upon demand to pay to
the Agents, Security Trustee or the Lenders such amount as
the Administrative Agent certifies to be necessary to
compensate the Agents, the Security Trustee or the Lenders
for such additional cost or such reduction, and
(c) any such demand as is referred to in sub-clause (b)
of this Clause 11.2 may be made by the Administrative Agent
at any time before or after any repayment of the Credit
Facility.
11.3 Non-Availability. If the Administrative Agent shall determine that, by
reason of circumstances affecting the London Interbank Market generally,
adequate and reasonable means do not or will not exist for ascertaining the
Applicable Rate for the Credit Facility or part thereof for any Interest Period,
the Administrative Agent shall give notice of such determination to the
Borrowers. The Borrowers and the Lenders shall then negotiate in good faith in
order to agree upon a mutually satisfactory interest rate and/or Interest Period
to be substituted for those which would otherwise have applied under this
Agreement. If the Borrowers and the Lenders are unable to agree upon such a
substituted interest rate and/or Interest Period within thirty (30) days of the
giving of such determination notice, the Lenders shall set an interest rate and
Interest Period to take effect from the expiration of the Interest Period in
effect at the date of determination, which rate shall be equal to the Margin
plus the cost to the Lenders of funding the Credit Facility. In the event the
state of affairs referred to in this Clause 11.3 shall extend beyond the end of
the Interest Period, the foregoing procedure shall continue to apply until
circumstances are such that the Applicable Rate may be determined pursuant to
Clause 6.
11.4 Determination of Losses. A certificate or determination notice of the
Administrative Agent, as to any of the matters referred to in this Clause 11
shall, absent manifest error, be conclusive and binding on the Borrowers.
11.5 Compensation for Losses. Where the Advances or a portion thereof are to be
prepaid by the Borrowers pursuant to Clause 11.1 the Borrowers agree
simultaneously with such prepayment to pay to the Agents, the Security Trustee
or the Lenders all accrued interest to the date of actual payment and all other
sums payable by the Borrowers to the Agents, the Security Trustee or the Lenders
pursuant to this Agreement without penalty or premium.
12 CURRENCY INDEMNITY
12.1 Currency Conversion. If for the purpose of obtaining or enforcing a
51
judgment in any court in any country it becomes necessary to convert into any
other currency (the "judgment currency") an amount due in Dollars under this
Agreement, the Note or any of the Security Documents then the conversion shall
be made, in the discretion of the Lenders, at the rate of exchange prevailing
either on the date of default or on the day before the day on which the judgment
is given or the order for enforcement is made, as the case may be (the
"conversion date"), provided that the Lenders shall not be entitled to recover
under this clause any amount in the judgment currency which exceeds at the
conversion date the amount in Dollars due under this Agreement, the Note and/or
any of the Security Documents.
12.2 Change in Exchange Rate. If there is a change in the rate of exchange
prevailing between the conversion date and the date of actual payment of the
amount due, the Borrowers shall pay such additional amounts (if any, but in any
event not a lesser amount) as may be necessary to ensure that the amount paid in
the judgment currency when converted at the rate of exchange prevailing on the
date of payment will produce the amount then due under this Agreement, the Note
and/or any of the Security Documents in Dollars; any excess over the amount due
received or collected by the Lenders shall be remitted to the Borrowers.
12.3 Additional Debt Due. Any amount due from the Borrowers under Clause 12.2
shall be due as a separate debt and shall not be affected by judgment being
obtained for any other sums due under or in respect of this Agreement, the Note
and/or any of the Security Documents.
12.4 Rate of Exchange. The term "rate of exchange" in this Clause 12 means the
rate at which the Lenders in accordance with their normal practices are able on
the relevant date to purchase Dollars with the judgment currency and includes
any premium and costs of exchange payable in connection with such purchase.
13 FEES AND EXPENSES
13.1 Commitment Commission. The Borrowers will pay the Commitment Commission on
the available but undrawn amount of the Credit Facility quarterly in arrears
commencing three months from the date hereof. The Commitment Commission shall
accrue from day to day and be calculated on the actual number of days elapsed
and a three hundred sixty (360) day year.
13.2 Agency Fee. The Borrowers shall pay to the Administrative Agent the agency
fee set forth in the Fee Letter.
13.3 Arrangement Fee. The Borrowers shall pay to the Joint Arrangers and
Underwriters the arrangement fee as set forth in the Fee Letter.
13.4 Underwriting Fee. The Borrowers shall pay to the Joint Arrangers and
Underwriters the underwriting fee as set forth in the Fee Letter.
13.5 Expenses. The Borrowers jointly and severally agree, whether or not the
transactions hereby contemplated are consummated, on demand to pay, or reimburse
52
the Agents, the Security Trustee and the Lenders for their payment of, the
reasonable expenses of the Agents, the Security Trustee and the Lenders incident
to said transactions (and in connection with any supplements, amendments,
waivers or consents relating thereto or incurred in connection with the
enforcement or defense of any of the Agents', Security Trustee's and Lenders'
rights or remedies with respect thereto or in the preservation of the Agents,
the Security Trustee's and the Lenders' priorities under the documentation
executed and delivered in connection therewith) including, without limitation,
all reasonable costs and expenses of preparation, negotiation, execution and
administration of this Agreement and the documents referred to herein, the
reasonable fees and disbursements of the Lenders' counsel in connection
therewith, including Seward & Kissel, as well as the reasonable fees and
expenses of any independent appraisers, surveyors, engineers and other
consultants retained by the Agents, the Security Trustee and the Lenders in
connection with this transaction, all reasonable costs and expenses, if any, in
connection with the enforcement of this Agreement, the Note and the Security
Documents and stamp and other similar taxes, if any, incident to the execution
and delivery of the documents (including, without limitation, the Note) herein
contemplated and to hold the Lenders free and harmless in connection with any
liability arising from the nonpayment of any such stamp or other similar taxes.
Such taxes and, if any, interest and penalties related thereto as may become
payable after the date hereof shall be paid immediately by the Borrowers to the
Agents, the Security Trustee or the Lenders, as the case may be, when liability
therefor is no longer contested by such party or parties or reimbursed
immediately by the Borrowers to such party or parties after payment thereof (if
the Agents, the Security Trustee or the Lenders, at their sole discretion,
choose to make such payment).
14 APPLICABLE LAW, JURISDICTION AND WAIVER
14.1 Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.
14.2 Jurisdiction. Each of the Borrowers hereby irrevocably submits to the
jurisdiction of the courts of the State of New York and of the United States
District Court for the Southern District of New York in any action or proceeding
brought against it by the Lenders under this Agreement or under any document
delivered hereunder and hereby irrevocably agrees that service of summons or
other legal process on it may be served by registered mail addressed thereto,
c/o Watson, Farley & Williams, 380 Madison Avenue, New York, New York 10017. The
service, as herein provided, of such summons or other legal process in any such
action or proceeding shall be deemed personal service and accepted by the
Borrowers as such, and shall be legal and binding upon the Borrowers for all the
purposes of any such action or proceeding. Final judgment (a certified or
exemplified copy of which shall be conclusive evidence of the fact and of the
amount of any indebtedness of the Borrowers to the Lenders) against the
Borrowers in any such legal action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment. The Borrowers will
advise the Lenders promptly of any change of address for the purpose of service
of process. Notwithstanding anything herein to the contrary, the Lenders may
bring any legal action or proceeding in any other appropriate jurisdiction.
14.3 WAIVER OF JURY TRIAL. IT IS MUTUALLY AGREED BY AND AMONG THE BORROWERS, THE
GUARANTOR, THE CO-ARRANGERS, THE AGENTS, THE SECURITY TRUSTEE AND THE
53
LENDERS THAT EACH OF THEM HEREBY WAIVES TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY HERETO AGAINST ANY OTHER
PARTY HERETO ON ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY
CONNECTED WITH THIS AGREEMENT, THE NOTE OR THE SECURITY DOCUMENTS.
15 THE ADMINISTRATIVE AGENT
15.1 Appointment of Administrative Agent. Each of the Lenders hereby irrevocably
appoints and authorizes the Administrative Agent (which for purposes of this
Clause 15 shall be deemed to include the Administrative Agent acting in its
capacity as Security Trustee pursuant to Clause 16 hereof) to take such action
as agent on its behalf and to exercise such powers under this Agreement, the
Note, and the Security Documents as are delegated to the Administrative Agent by
the terms hereof and thereof. Neither the Administrative Agent nor any of its
directors, officers, employees or agents shall be liable for any action taken or
omitted to be taken by it or them under this Agreement, the Notes, or the
Security Documents or in connection therewith, except for its or their own gross
negligence or wilful misconduct.
15.2 Distribution of Payments. Whenever any payment is received by the
Administrative Agent from the Borrowers for the account of the Lenders, or any
of them, whether of principal or interest on the Notes, commissions, fees under
Clauses 13.1 and 13.5, or otherwise, it will thereafter cause to be distributed
on the same day if received before 11 a.m. New York time, or on the next day if
received thereafter, like funds relating to such payment ratably to the Lenders
according to their respective Commitments , to be applied according to the terms
of this Agreement.
15.3 Holder of Interest in Note. The Administrative Agent may treat each Lender
as the holder of all of the interest of such Lender in the Note, as the case may
be, until written notice of transfer, in form and substance satisfactory to the
Administrative Agent, signed by such Lender shall have been filed with the
Administrative Agent.
15.4 No Duty to Examine, Etc. The Administrative Agent shall not be under a duty
to examine or pass upon the validity, effectiveness or genuineness of any of the
Security Documents or any instrument, document or communication furnished
pursuant to this Agreement or in connection therewith or in connection with any
Security Document, and the Administrative Agent shall be entitled to assume that
the same are valid, effective and genuine, have been signed or sent by the
proper parties and are what they purport to be.
15.5 Administrative Agent as Lender. With respect to that portion of the Credit
Facility made available by it, the Administrative Agent shall have the same
rights and powers hereunder as any other Lenders and may exercise the same as
though it were not the Administrative Agent, and the term "Lender" or "Lenders"
shall include the Administrative Agent in its capacity as a Lender. The
Administrative Agent and its affiliates may accept deposits from, lend money to
and generally engage in any kind of business with, the Borrower, and the
Guarantor as if it were not the Administrative Agent.
54
15.6 (a) Obligations of Administrative Agent. The obligations of the
Administrative Agent under this Agreement, under the Notes, and under the
Security Documents are only those expressly set forth herein and therein.
(b) No Duty to Investigate. The Administrative Agent shall not at any time
be under any duty to investigate whether an Event of Default, or an event which
with the giving of notice or lapse of time, or both, would constitute an Event
of Default, has occurred or to investigate the performance of this Agreement or
any of the Security Documents by the Borrowers or the Guarantor.
15.7 (a) Discretion of Administrative Agent. The Administrative Agent shall be
entitled to use its discretion with respect to exercising or refraining from
exercising any rights which may be vested in it by, and with respect to taking
or refraining from taking any action or actions which it may be able to take
under or in respect of, this Agreement, the Note, and the Security Documents,
unless the Administrative Agent shall have been instructed by the Majority
Lenders to exercise such rights or to take or refrain from taking such action;
provided, however, that the Administrative Agent shall not be required to take
any action which exposes the Administrative Agent to personal liability or which
is contrary to this Agreement or applicable law.
(b) Instructions of Majority Lenders. The Administrative Agent shall in all
cases be fully protected in acting or refraining from acting under this
Agreement, under the Note, under the Guaranty or under any Security Document in
accordance with the instructions of the Majority Lenders, and any action taken
or failure to act pursuant to such instructions shall be binding on all of the
Lenders.
15.8 Assumption re Event of Default. Except as otherwise provided in Clause
15.14 hereof, the Administrative Agent shall be entitled to assume that no Event
of Default, or event which with the giving of notice or lapse of time, or both,
would constitute an Event of Default, has occurred and is continuing, unless the
Administrative Agent has been notified by the Borrowers or the Guarantor of such
fact, or has been notified by a Lender that such Lender considers that an Event
of Default or such an event (specifying in detail the nature thereof) has
occurred and is continuing. In the event that the Administrative Agent shall
have been notified by the Borrowers or any Lender in the manner set forth in the
preceding sentence of any Event of Default or of an event which with the giving
of notice or lapse of time, or both, would constitute an Event of Default, the
Administrative Agent shall notify the Lenders and shall take action and assert
such rights under this Agreement, under the Notes, and under Security Documents
as the Majority Lenders shall request in writing.
15.9 No Liability of Administrative Agent or Lenders. Neither the Administrative
Agent nor any of the Lenders shall be under any liability or responsibility
whatsoever:
(A) To the Borrowers or the Guarantor or any other person or entity as a
consequence of any failure or delay in performance by, or any breach by, any
other Lenders or any other person of any of its or their obligations under this
Agreement or under any Security Document;
(B) To any Lender or Lenders, as a consequence of any failure or delay in
performance by, or any breach by, the Borrowers or the Guarantor of any of their
55
respective obligations under this Agreement, under the Notes, or under the
Security Documents; or
(C) To any Lender or Lenders, for any statements, representations or
warranties contained in this Agreement, in any Security Document or any Document
or instrument delivered in connection with the transaction hereby contemplated;
or for the validity, effectiveness, enforceability or sufficiency of this
Agreement, the Note, or any Security Document or any document or instrument
delivered in connection with the transactions hereby contemplated.
15.10 Indemnification of Administrative Agent. The Lenders agree to indemnify
the Administrative Agent (to the extent not reimbursed by the Borrowers or the
Guarantor), pro rata according to the respective amounts of their Commitments,
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever (including legal fees and expenses incurred in
investigating claims and defending itself against such liabilities) which may be
imposed on, incurred by or asserted against, the Administrative Agent in any way
relating to or arising out of this Agreement, the Note, or any Security
Document, any action taken or omitted by the Administrative Agent thereunder or
the preparation, administration, amendment or enforcement of, or waiver of any
provision of, this Agreement, the Note, or any Security Document, except that no
Lenders shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the Administrative Agent's gross negligence or
wilful misconduct.
15.11 Consultation with Counsel. The Administrative Agent may consult with legal
counsel selected by it and shall not be liable for any action taken, permitted
or omitted by it in good faith in accordance with the advice or opinion of such
counsel.
15.12 Resignation. The Administrative Agent may resign at any time by giving 60
days' written notice thereof to the Lenders and the Borrowers. Upon any such
resignation, the Lenders shall have the right to appoint a successor
Administrative Agent. If no successor Administrative Agent shall have been so
appointed by the Lenders and shall have accepted such appointment within 60 days
after the retiring Administrative Agent's giving notice of resignation, then the
retiring Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent which shall be a bank or trust company of recognized
standing. The appointment of any successor Administrative Agent shall be subject
to the prior written consent of the Borrowers (unless such successor
Administrative Agent is a Joint Arranger and Underwriter), such consent not be
unreasonably withheld. After any retiring Administrative Agent's resignation as
Administrative Agent hereunder, the provisions of this Clause 15 shall continue
in effect for its benefit with respect to any actions taken or omitted by it
while acting as Administrative Agent.
15.13 Representations of Lenders. Each Lender represents and warrants to each
other Lender and the Administrative Agent that:
(i) In making its decision to enter into this Agreement and to make its
56
portion of the Credit Facility available hereunder, it has independently taken
whatever steps it considers necessary to evaluate the financial condition and
affairs of the Borrowers and the Guarantor, that it has made an independent
credit judgment and that it has not relied upon any statement, representation or
warranty by any other Lender or the Administrative Agent; and
(ii) So long as any portion of its Commitments remain outstanding, it will
continue to make its own independent evaluation of the financial condition and
affairs of the Borrowers and the Guarantor.
15.14 Notification of Event of Default. The Administrative Agent hereby
undertakes to promptly notify the Lenders, and the Lenders hereby promptly
undertake to notify the Administrative Agent and the other Lenders, of the
existence of any Event of Default which shall have occurred and be continuing of
which the Administrative Agent or any Lender has actual knowledge.
15.15 Annual Bank Meeting. The Administrative Agent shall schedule an annual
bank meeting each year during the Credit Facility Period and shall choose the
location thereof. Each of the Lenders shall, at its own expense, use its
reasonable efforts to attend such meeting.
16 APPOINTMENT OF SECURITY TRUSTEE
Each of the Lenders irrevocably appoints the Security Trustee as
security trustee on their respective behalf with regard to the (i) security,
powers, rights, titles, benefits and interests (both present and future)
constituted by and conferred on the Lenders or any of them or for the benefit
thereof under or pursuant to this Agreement, the Note or any Security Documents
(including, without limitation, the benefit of all covenants, undertakings,
representations, warranties and obligations given, made or undertaken to any
Lender in the Agreement or any Security Document, (ii) all moneys, property and
other assets paid or transferred to or vested in any Lender or any agent of any
Lender or received or recovered by any Lender or any agent of any Lender
pursuant to, or in connection with, this Agreement, the Note or the Security
Documents whether from any Borrower or the Guarantor or any other person and
(iii) all money, investments, property and other assets at any time representing
or deriving from any of the foregoing, including all interest, income and other
sums at any time received or receivable by any Lender or any agent of any Lender
in respect of the same (or any part thereof). The Security Trustee hereby
accepts such appointment.
17 NOTICES AND DEMANDS
17.1 Notices. All notices, requests, demands and other communications to any
party hereunder shall be in writing (including prepaid overnight courier,
facsimile transmission or similar writing) and shall be given to the Borrowers
at the address or telecopy number set forth below and to the Lenders, the Agents
and the Security Trustee at their address and telecopy number set forth in
Schedule 2 or at such other address or telecopy number as such party may
hereafter specify for the purpose by notice to each other party hereto. Each
such notice, request or other communication shall be effective (i) if given by
telecopy, when such telecopy is transmitted to the telecopy number specified in
this Clause and telephonic confirmation of receipt thereof is obtained or (ii)
57
if given by mail, prepaid overnight courier or any other means, when received at
the address specified in this Clause or when delivery at such address is
refused.
If to the Borrowers:
c/o Teekay Shipping Limited
4th Floor
Euro Canadian Centre
Marlborough Street and Navy Lion Road
P.O. Box SS 6293
Nassau, Bahamas
Fax: (809) 328-7330
Attention: President
18 MISCELLANEOUS
18.1 Time of Essence. Time is of the essence of this Agreement but no failure or
delay on the part of the Lenders to exercise any power or right under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise by the Lenders of any power or right hereunder preclude any other or
further exercise thereof or the exercise of any other power or right. The
remedies provided herein are cumulative and are not exclusive of any remedies
provided by law.
18.2 Unenforceable, etc., Provisions - Effect. In case any one or more of the
provisions contained in this Agreement, in the Note or in any of the Security
Documents would, if given effect, be invalid, illegal or unenforceable in any
respect under any law applicable in any relevant jurisdiction, said provision
shall not be enforceable against the Borrowers, but the validity, legality and
enforceability of the remaining provisions herein or therein contained shall not
in any way be affected or impaired thereby.
18.3 References. References herein to Clauses and Schedules are to be construed
as references to clauses of, and schedules to, this Agreement.
18.4 Further Assurances. Each of the Borrowers agree that if this Agreement, the
Note or any of the Security Documents shall, in the reasonable opinion of the
Lenders, at any time be deemed by the Lenders for any reason insufficient in
whole or in part to carry out the true intent and spirit hereof or thereof, it
will execute or cause to be executed such other and further assurances and
documents as in the opinion of the Lenders may be required in order more
effectively to accomplish the purposes of this Agreement, the Note or any of the
Security Documents.
18.5 Prior Agreements, Merger. Any and all prior understandings and agreements
heretofore entered into between the Borrowers, the Guarantor and Palm Shipping
on the one part, and the Agents, the Security Trustee, the Joint Arrangers and
Underwriters or the Lenders, on the other part, in respect of the subject matter
of this Agreement whether written or oral (other than the Fee Letter), are
superseded by and merged into this Agreement and the other agreements (the forms
of which are exhibited hereto) to be executed and delivered in connection
58
herewith to which the Borrowers, the Guarantor and Palm Shipping, the Security
Trustee, the Joint Arrangers and Underwriters and/or the Agents and/or the
Lenders are parties, which alone fully and completely express the agreements
between the Borrowers, the Guarantor and Palm Shipping, the Security Trustee,
the Joint Arrangers and Underwriters the Agents and the Lenders.
18.6 Joint and Several Obligations. The obligations of the Borrowers under this
Agreement and under each provision hereof are joint and several whether or not
so specified in any provision hereof. Each Borrower shall be entitled to rights
of contribution as against the other Borrower, provided, however, that such
rights of contribution shall (a) not in any way condition or lessen the
liability of any Borrower as a joint and several borrower for the whole of the
obligations owed to the Lenders hereunder, under the Note or under the Security
Documents and (b) be fully subject and subordinate to the rights of the Lenders
hereunder, under the Note and under the Security Documents.
18.7 Limitation of Liability. Notwithstanding anything to the contrary contained
in this Agreement or any of the other Security Documents, in the event that any
court or other judicial body of competent jurisdiction determines that legal
principles of fraudulent conveyances, fraudulent transfers or similar concepts
are applicable in evaluating the enforceability against any particular Borrower
or its assets of this Agreement or any Security Document granted by such
Borrower as security for its obligations hereunder and that under such
principles, this Agreement or such Security Documents would not be enforceable
against such Borrower or its asset unless the following provisions of this
Clause 18.7 had effect, then, the maximum liability of each Borrower hereunder
(the "Maximum Liability Amount") shall be limited so that in no event shall such
amount exceed the lesser of (i) the Indebtedness and (ii)an amount equal to the
aggregate, without double counting, of (a) ninety-five percent (95%) of the such
Borrower's Adjusted Net Worth (as hereinafter defined) on the date hereof, or on
the date enforcement of this Agreement is sought (the "Determination Date"),
whichever is greater, (b) the aggregate fair value of such Borrower's
Subrogation and Contribution Rights (as hereinafter defined) and (c) the amount
of any Valuable Transfer (as hereinafter defined) to such Borrower, provided
that such Borrower's liability under this Agreement shall be further limited to
the extent, if any, required so that the obligations of such Borrower under this
Agreement shall not be subject to being set aside or annulled under any
applicable law relating to fraudulent transfers or fraudulent conveyances. In
determining the limitations, if any, on the amount of any of such Borrower's
obligations hereunder pursuant to the preceding sentence, any rights of
subrogation or contribution (collectively the "Subrogation and Contribution
Rights") which such Borrower may have on the Determination Date with respect to
any other guarantor of the Indebtedness under applicable law shall be taken into
account. As used in this Clause 18.7, "Indebtedness" of the Borrower shall mean,
all of the Borrower's present or future indebtedness whether for principal,
interest, fees, expenses or otherwise, to the Lenders under this Agreement and
the Security Documents. As used herein "Adjusted Net Worth" of the respective
Borrower shall mean, as of any date of determination thereof, an amount equal to
the lesser of (a) an amount equal to the excess of (i) the amount of the present
fair saleable value of the assets of such Borrower over (ii) the amount that
will be required to pay such Borrower's probable liability on its then existing
debts, including contingent liabilities, as they become absolute and matured,
and (b) an amount equal to (i) the excess of the sum of such Borrower's property
at a fair valuation over (ii) the amount of all liabilities of such Borrower,
contingent or otherwise, as such terms are construed in accordance with
59
applicable laws governing determinations of the insolvency of debtors. In
determining the Adjusted Net Worth of such Borrower for purposes of calculating
the Maximum Liability Amount for such Borrower, the liabilities of such Borrower
to be used in such determination pursuant to each clause (ii) of the preceding
sentence shall in any event exclude (a) the liability of such Borrower under
this Agreement and the Security Documents to which it is a party, (b) the
liabilities of such Borrower subordinated in right of payment to this Agreement
and (c) any liabilities of such Borrower for Subrogation and Contribution Rights
to any of the other guarantors. As used herein "Valuable Transfer" shall mean,
in respect of such Borrower, (a) all loans, advances or capital contributions
made to such Borrower with proceeds of the Credit Facility, (b) all debt
securities or other obligations of such Borrower acquired from such Borrower or
retired by such Borrower with proceeds of the Credit Facility, (c) the fair
market value of all property acquired with proceeds of the Credit Facility and
transferred, absolutely and not as collateral, to such Borrower, (d) all equity
securities of such Borrower acquired from such Borrower with proceeds of the
Credit Facility, and (e) the value of any other economic benefits in accordance
with applicable laws governing determinations of the insolvency of debtors, in
each such case accruing to such Borrower as a result of the Credit Facility and
this Agreement.
18.8 Entire Agreement; Amendments. This Agreement constitutes the entire
agreement of the parties hereto including all parties added hereto pursuant to
an Assignment and Assumption Agreement. This Agreement may be executed in any
number of counterparts, each of will shall be deemed an original, but all such
counterparts together shall constitute one and the same instrument. Any
provision of this Agreement may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed by the Borrowers and the
Majority Lenders (and, if the rights or duties of the Agents. the Joint
Arrangers and Underwriters, or the Security Trustee are affected thereby, by the
Agent, the Joint Arrangers and Underwriters, or the Security Trustee, as
applicable); provided that no amendment or waiver shall, unless signed by all
the Lenders, (i) increase or decrease the Commitment of any Lender or subject
any Lender to any additional obligation, (ii) reduce the principal of or rate of
interest on the Loan or any fees hereunder, (iii) postpone the date fixed for
any payment of principal of or interest on the Loan or any fees hereunder or for
any termination of any Commitment, (iv) amend Clause 10, (v) waive any condition
precedent to the making of the Loan, (vi) release or modify any collateral or
(vii) amend or modify this Clause 18.8 or otherwise change the percentage of the
Commitments or of the aggregate unpaid principal amount of the Loan, or the
number or category of Lenders, which shall be required for the Lenders or any of
them to take any action under this Clause or any other provision of this
Agreement.
18.9 Headings. In this Agreement, Clause headings are inserted for convenience
of reference only and shall not be taken into account in the interpretation of
this Agreement.
18.10 Original Syndication. Neither the Guarantor nor any of the Subsidiaries of
the Guarantor shall be involved in any other credit transactions involving
syndication other than as herein provided and as advised to, and consented to by
the Joint Arrangers and Underwriters prior to the date hereof, between the date
hereof and (i) the closure of syndication of the Credit Facility or (ii) the
Initial Drawdown Date, and those previously advised and agreed to by the Joint
60
Arrangers and Underwriters in writing. If during the period from the date hereof
to the Initial Drawdown Date there is any material adverse change in the
syndicated loans market which might prejudice the successful conclusion of the
transaction contained herein, the Borrowers and the Guarantor will discuss
alternative structures and/or pricing for the Credit Facility and, in the
absence of any agreement, the Joint Co-Arrangers and Underwriters may terminate
the availability of the Credit Facility.
IN WITNESS whereof the parties hereto have caused this
Agreement to be duly executed by their duly authorized representatives as of the
day and year first above written.
VANCOUVER SPIRIT INC.
By /s/Amy J. Bokinsky
Name: Amy J. Bokinsky
Title: Attorney-in-Fact
ELCANO SPIRIT INC.
By /s/Amy J. Bokinsky
Name: Amy J. Bokinsky
Title: Attorney-in-Fact
MUSASHI SPIRIT INC.
By /s/Amy J. Bokinsky
Name: Amy J. Bokinsky
Title: Attorney-in-Fact
VSSI APOLLO INC.
By /s/Amy J. Bokinsky
Name: Amy J. Bokinsky
Title: Attorney-in-Fact
VSSI SINGAPORE INC.
By /s/Amy J. Bokinsky
Name: Amy J. Bokinsky
Title: Attorney-in-Fact
VOLAR SPIRIT INC.
By /s/Amy J. Bokinsky
Name: Amy J. Bokinsky
Title: Attorney-in-Fact
VSSI CHALLENGER INC.
By /s/Amy J. Bokinsky
Name: Amy J. Bokinsky
Title: Attorney-in-Fact
SCHOUTEN SPIRIT INC.
By /s/Amy J. Bokinsky
Name: Amy J. Bokinsky
Title: Attorney-in-Fact
61
DEN NORSKE BANK ASA,
as Administrative Agent, Security
Trustee, Joint Arranger and
Underwriter and Lender
By /s/Theodore S. Jadick, Jr.
Name: Theodore S. Jadick, Jr.
Title: Attorney-in-Fact
CHRISTIANIA BANK OG KREDITKASSE ASA,
New York Branch,
as Joint Arranger and Underwriter,
Syndication Agent and Lender
By /s/Martin Lunder
Name: Martin Lunder
Title: First Vice-President
By /s/ Hans Christian Kjelsrud
Name: Hans Christian Kjelsrud
Title: First Vice-President
THE BANK OF NOVA SCOTIA,
as Joint Arranger and Underwriter,
Syndication Agent and Lender
By /s/
Name:
Title: Attorney-in-Fact
LANDESBANK SCHLESWIG-HOLSTEIN
GIROZENTRALE, as Lender
By /s/Lawrence Rutkowski
Name: Lawrence Rutkowski
Title: Attorney-in-Fact
HAMBURGISCHE LANDESBANK-
GIROZENTRALE-, as Lender
By /s/Lawrence Rutkowski
Name: Lawrence Rutkowski
Title: Attorney-in-Fact
VEREINS- UND WESTBANK AG,
as Lender
By /s/Monica Treitmeier-McCarthy
Name: Monica Treitmeier-McCarthy
Title: Attorney-in-Fact
SCHIFFSHYPOTHEKENBANK ZU LUBECK AG,
as Lender
By /s/Monica Treitmeier-McCarthy
Name: Monica Treitmeier-McCarthy
Title: Attorney-in-Fact
62
SKANDINAVISKA ENSKILDA BANKEN AB (PUBL),
as Lender
By /s/Amelia Sweetland
Name: Amelia Sweetland
Title: Attorney-in-Fact
DEUTSCHE SCHIFFSBANK AG,
as Lender
By /s/Amelia Sweetland
Name: Amelia Sweetland
Title: Attorney-in-Fact
63
CONSENT AND AGREEMENT
The undersigned, referred to in the foregoing Reducing
Revolving Credit Facility Agreement as the "Guarantor", hereby consents and
agrees to said Agreement and to the documents contemplated thereby and to the
provisions contained therein relating to conditions to be fulfilled and
obligations to be performed by the undersigned pursuant to or in connection with
said Agreement and agree particularly to be bound by the representations,
warranties and covenants relating to the undersigned contained in Clauses 2 and
9 of said Agreement to the same extent as if the undersigned were a party to
said Agreement.
TEEKAY SHIPPING CORPORATION
By /s/ John S.Osborne, Jr.
Name: John S.Osborne, Jr.
Title: Attorney-in-Fact
64
SCHEDULE 1
The Borrowers
Jurisdiction
Name of Incorporation Registered Address
---- ---------------- ------------------
VSSI Apollo Inc. The Republic of Liberia 80 Broad
Street
Monrovia, Liberia
VSSI Singapore Inc. The Republic of Liberia 80 Broad
Street
Monrovia, Liberia
VSSI Challenger Inc. The Republic of Liberia 80 Broad
Street
Monrovia, Liberia
Elcano Spirit Inc. The Republic of Liberia 80 Broad
Street
Monrovia, Liberia
Musashi Spirit Inc. The Republic of Liberia 80 Broad
Street
Monrovia, Liberia
Schouten Spirit Inc. The Republic of Liberia 80 Broad
Street
Monrovia, Liberia
Vancouver Spirit Inc. The Republic of Liberia 80 Broad
Street
Monrovia, Liberia
Volar Spirit Inc. The Republic of Liberia 80 Broad
Street
65
SCHEDULE 2
Lenders Facility Commitment
- ------- -------------------
Den norske Bank ASA $35,000,000
Stranden 21
0250 Oslo 2
Norway
Telecopy No.: 47-22-48-20-20
Christiania Bank og Kreditkasse ASA, $15,000,000
New York Branch
11 West 42nd Street, 7th Floor
New York, New York 10036
Telecopy No.: 212-827-4888
The Bank of Nova Scotia $25,000,000
Scotia House
33 Finsbury Square
London, EC2A 1BB
England
Telecopy No.: 44-171-454-9019
Deutsche Schiffsbank AG $25,000,000
Domshof 17
28195 Bremen
Federal Republic of Germany
Telecopy No.: 49-421-3235-39
Hamburgische Landesbank - Girozentrale $25,000,000
Gerhart - Hauptmann - Platz 50
20095 Hamburg
Federal Republic of Germany
Telecopy No.: 49-40-3333-3069
66
Landesbank Schleswig-Holstein Girozentrale $25,000,000
Martensdamm 6
24703 Kiel
Schleswig - Holstein
Federal Republic of Germany
Telecopy No.: 49-43-1900-1130
Skandinaviska Enskilda Banken AB (Publ) $20,000,000
2 Cannon Street
London EC4M 6XX
England
Telecopy No.: 44-171-329-4950
Schiffshypothekenbank zu Luebeck AG $20,000,000
Postfach 110311, D-20403 Hamburg
Ost-West-Strasse 74-74, D-20457
Hamburg
Federal Republic of Germany
Telecopy No.: 49-40-3701-4649/4550
Vereins-und Westbank AG $10,000,000
Shipping Department
Alter Wall 22
20457 Hamburg
Federal Republic of Germany
Telecopy No.: 49-40-3692-3696
67
SCHEDULE 3
The Charters
Vessel Owner Charterer Date of Charter
- ------ ----- --------- ---------------
M/T VANCOUVER SPIRIT Vancouver Spirit Inc. Palm Shipping Inc. July 1, 1992
M/T VICTORIA SPIRIT Elcano Spirit Inc. Palm Shipping Inc. January 5, 1993
M/T MUSASHI SPIRIT Musashi Spirit Inc. Palm Shipping Inc. January 5, 1993
M/T ONOZO SPIRIT VSSI Apollo Inc. Palm Shipping Inc. March 1, 1990
M/T PALMSTAR CHERRY VSSI Singapore Inc. Palm Shipping Inc. January 6, 1990
M/T PALMSTAR LOTUS Volar Spirit Inc. Palm Shipping Inc. August 1, 1991
M/T PALMSTAR POPPY VSSI Challenger Inc. Palm Shipping Inc. July 2, 1990
M/T TEEKAY SPIRIT Schouten Spirit Inc. Palm Shipping Inc. November 1, 1991
3. Amendment No. 1 to First Preferred Mortgage over MBC-1;
68
SCHEDULE 4
The Vessels
Place/Year Official Classification
Classification
Vessel Owner Flag Built Number Society Rating
- ------ ----- ---- ----------- -------- ---------------- -----------
M/T VANCOUVER SPIRIT Vancouver Spirit Inc. Bahamian Korea/1992 720789 DNV +1A1 Bulk Carrier
HC/E or Tanker
for Oil EO
M/T VICTORIA SPIRIT Elcano Spirit Inc. Bahamian Korea/1993 723135 DNV +1A1 Bulk Carrier
HC/E or Tanker
for Oil EO
M/T MUSASHI SPIRIT Musashi Spirit Inc. Bahamian Japan/1993 723161 NKK NS*, MNS* (MO)
ESP, IGS, COW
M/T ONOZO SPIRIT VSSI Apollo Inc. Bahamian Japan/1990 716225 NKK NS*, MNS* (MO)
ESP, IGS, COW
M/T PALMSTAR CHERRY VSSI Singapore Inc. Bahamian Japan/1990 715518 NKK NS*, MNS* (MO)
ESP, IGS, COW
M/T PALMSTAR LOTUS Volar Spirit Inc. Bahamian Japan/1991 720456 NKK NS*, MNS* (MO)
ESP, IGS, COW
M/T PALMSTAR POPPY VSSI Challenger Inc. Bahamian Japan/1990 716266 NKK NS*, MNS* (MO)
ESP, IGS, COW
M/T TEEKAY SPIRIT Schouten Spirit Inc. Bahamian Japan/1991 720496 NKK NS*, MNS* (MO)
ESP, IGS, COW
NKK = Nippon Kaiji Kyokai
LR = Lloyd's Register
ABS = American Bureau of Shipping
DNV = Det Norske Veritas