DEED OF COVENANTS
TO ACCOMPANY FIRST PRIORITY
STATUTORY MORTGAGE OF A SHIP
by
CALPETRO TANKERS (IOM) LIMITED
Shipowner
to
CALIFORNIA PETROLEUM TRANSPORT CORPORATION
Mortgagee
Dated _________ __, 1994
m/t ____________
Deed of Covenants, dated _________ __, 1994 (as amended or
supplemented from time to time, the "Deed"), from CalPetro Tankers (IOM)
Limited, a company incorporated with limited liability in the Isle of Man
whose registered office is at United House, 14-16 Nelson Street, Douglas, Isle
of Man, British Isles (hereinafter called "the Shipowner") to California
Petroleum Transport Corporation (the "Mortgagee").
WHEREAS, the Shipowner is the absolute and unencumbered owner of
the whole of the motor tanker "_____________" (the "Vessel") duly registered
in the name of the Shipowner under the laws and flag of Bermuda on ___________
__, 199_, built in 199_, having the following approximate dimensions and
tonnages: length ___ meters, breadth ____ meters, depth __ meters, gross
tonnage _______, net tonnage ________, and more particularly described in the
Certificate of Registration with Official Number _____ and with International
Code Signal ______ and home port of Hamilton, Bermuda;
WHEREAS, contemporaneously with the execution of this Deed there
has been executed and registered by the Shipowner in favor of the Mortgagee a
First Priority Statutory Bermudian Mortgage (to secure an account current)
(the "Statutory Mortgage") constituting a first priority statutory mortgage of
the whole of the Vessel and the Shipowner has agreed to execute this Deed
collateral thereto and to the security thereby created;
WHEREAS, in order to secure the prompt and due payment to the
Mortgagee of the Indebtedness (as defined herein) and any and all other sums
which may be or become due to the Mortgagee under or pursuant to the Loan
Agreements, this Deed, the Statutory Mortgage and any other Security Document
and also to secure the exact performance and observance and compliance with
all and any of the covenants and agreements and terms and conditions contained
in the Loan Agreements, this Deed, the Statutory Mortgage and in the other
Security Documents, the Shipowner has duly authorized the execution and
delivery of this Deed and the Statutory Mortgage in favor of the Mortgagee
under and pursuant to the laws of Bermuda.
NOW, THEREFORE, in consideration of the premises and of the
covenants herein contained, the parties hereto covenant and agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions.
Capitalized terms used in this Deed and the Statutory Mortgage and
not otherwise defined herein shall have the meanings assigned to such terms in
either Schedule 1 to this Deed or the Loan Agreements, and the definitions of
such terms shall be equally applicable to both the singular and the plural
forms of such terms.
ARTICLE II
SECURITY
Section 2.01 Security.
In order to secure the payment of the Indebtedness and the
repayment of any costs of foreclosure or of retaking the Vessel, and the
payment of all such other amounts as may hereafter become secured by this Deed
and Statutory Mortgage in accordance with the terms hereof and thereof, and to
secure the performance and observance of and compliance with the covenants,
terms and conditions contained in this Deed, the Statutory Mortgage, the Loan
Agreements, and the other Security Documents to which the Shipowner is a
party, the Shipowner has granted, conveyed, pledged and mortgaged to and in
favor of the Mortgagee, its successors and assigns the whole of the Vessel,
together with all of the boilers, engines, machinery, masts, spars, rigging,
boats, cables, anchors, chains, tackle, apparel, furniture, fittings, freights
and equipment thereunto appertaining or belonging, whether now owned or
hereafter acquired, whether on board or not, and all additions, improvements
and replacements hereafter made in or to the Vessel (the term "Vessel", as
used herein, shall include the Vessel together with all of the foregoing and
the Vessel's freights) forever upon the terms set forth in this Deed and the
Statutory Mortgage for the enforcement of the payment of the Indebtedness, the
payment of any costs of foreclosure or retaking of the Vessel and all such
other amounts as may hereafter become secured by this Deed and the Statutory
Mortgage in accordance with the terms hereof and thereof and to secure the
performance and observance of and compliance with the covenants, terms and
conditions contained in this Deed, the Statutory Mortgage and the Security
Documents, it being agreed that if any amount payable by the Shipowner under
either Loan Agreement is not paid on its due date (whether formally demanded
or not) the whole or the balance of the Indebtedness and all other amounts
payable under the Security Documents shall forthwith on demand become payable;
provided, however, and the conditions of these presents are such that, if the
Shipowner shall pay or cause to be paid to the Mortgagee all of the
Indebtedness as set forth in the Security Documents, and if the Shipowner
shall pay all such other amounts as may hereafter become secured by this
Mortgage and all expenses which the Mortgagee shall have paid or incurred to
protect the security granted hereunder, and if the Shipowner shall perform,
observe and comply with all and singular of the covenants, terms and
conditions in this Deed, the Statutory Mortgage, the Loan Agreements and the
other Security Documents contained, expressed or implied, to be performed,
observed or complied with by and on the part of the Shipowner or its
successors or assigns, all without delay or fraud and according to the true
intent and meaning hereof and therefor, then these presents and the rights of
the Mortgagee under this Mortgage and the other Security Documents shall cease
and, in such event, the Mortgagee agrees by accepting this Deed and the
Statutory Mortgage to execute, at the expense of the Shipowner, all such
documents as the Shipowner may reasonably require to discharge this Deed and
the Statutory Mortgage under the laws of Bermuda; otherwise this Deed and the
Statutory Mortgage shall remain in full force and effect; provided further,
however, the conditions of these presents are such that, if the Shipowner
shall satisfy or cause to be satisfied and pay or cause to be paid to the
Mortgagee all of the Serial Obligations, then these presents and the rights of
the Mortgagee under this Deed and the Statutory Mortgage and the other
Security Documents with respect to the Serial Loan Agreement shall cease and,
in such event, this Deed and the Statutory Mortgage shall secure all of the
Indebtedness other than the Serial Obligations.
Section 2.02 Indebtedness.
(a) The Shipowner acknowledges that pursuant to the Loan
Agreements it is jointly and severally liable with the Other Owners to the
Mortgagee in the original principal amount of Two Hundred Eighty-Six Million
Four Hundred Thousand United States Dollars (US$286,400,000). The Shipowner
shall repay the Obligations in accordance with terms and conditions of the
Loan Agreements with the last installment due and payable on _________, 2014.
The Shipowner further agrees to pay all other sums comprising the Indebtedness
in accordance with the terms, conditions and provisions in the Loan Agreements
and in this Deed and the Statutory Mortgage and to perform, observe and comply
with the covenants, terms and obligations and conditions on its part to be
performed, observed and complied with contained or implied herein and in the
Loan Agreements and in the other Security Documents.
(b) The Shipowner shall also pay to the Mortgagee upon the
Mortgagee's first written demand all stamp duties, registration and/or
recording fees, charges for certificates, valuation fees, costs and expenses
(including, the fees and expenses of its attorneys) of any nature whatsoever
incurred by the Mortgagee in connection with the preparation, completion,
execution and registration of this Deed and the Statutory Mortgage and all
other claims, expenses, costs, payments, disbursements, losses, damages or
liabilities which may be incurred by the Mortgagee by reason of the covenants
and conditions contained herein, in the Loan Agreements or in the other
Security Documents, together with interest thereon as herein or therein
provided, and confirms that such obligations are secured by this Deed and the
Statutory Mortgage.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties of the Shipowner.
The Shipowner hereby represents and warrants to the Mortgagee as
follows:
(a) The Shipowner (i) is a company duly formed, validly existing
and in good standing under the laws of the Isle of Man and (ii) is duly
authorized, to the extent necessary, to do business in each jurisdiction where
the character of its properties or the nature of its activities makes such
qualification necessary. The Shipowner has not engaged in any business or
activity other than as set forth in Section 5.04 of the Loan Agreements. The
Shipowner has all requisite corporate power and authority to own and operate
the property it purports to own and to carry on its business as now being
conducted and as proposed to be conducted in respect of the Vessel.
(b) The Shipowner has all necessary corporate power and authority
to execute, deliver and perform under this Deed and the Statutory Mortgage,
the Loan Agreements and each other Security Document to which it is a party.
(c) All action on the part of the Shipowner that is required for
the authorization, execution, delivery and performance of this Deed and the
Statutory Mortgage, the Loan Agreements and each other Security Document to
which it is a party, in each case has been duly and effectively taken; and the
execution, delivery and performance of this Deed, the Statutory Mortgage, the
Loan Agreements and each such other Security Document do not require the
approval or consent of any Person except for such consents and approvals as
have been obtained on or prior to the date hereof.
(d) This Deed, the Statutory Mortgage, the Loan Agreements and
each other Security Document to which the Shipowner is a party have been duly
executed and delivered by the Shipowner. Each of this Deed, the Statutory
Mortgage, the Loan Agreements and each other Security Document to which the
Shipowner is a party constitute a legal, valid and binding obligation of the
Shipowner, enforceable against it in accordance with the terms thereof, except
as such enforceability (i) may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting the
enforcement of creditors' rights and remedies generally and (ii) is subject to
general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).
(e) Neither the execution, delivery and performance of this Deed,
the Statutory Mortgage, the Loan Agreements or any other Security Document to
which the Shipowner is a party nor the consummation of any of the transactions
contemplated hereby or thereby nor performance of or compliance with the terms
and conditions hereof or thereof (i) contravenes any Requirement of Law
applicable to the Shipowner or to the Vessel, (ii) constitutes a default under
any Security Document or (iii) results in the creation or imposition of any
Liens on the Vessel (other than Permitted Liens) or results in the
acceleration of any obligation.
(f) The Shipowner is in compliance with and not in default under
any and all Requirements of Law applicable to the Shipowner and all terms and
provisions of this Deed, the Statutory Mortgage, the Loan Agreements and all
Security Documents.
(g) All Governmental Approvals which are required to be obtained
in the name of the Shipowner in connection with the operation and maintenance
of the Vessel and the execution, delivery and performance by the Shipowner of
this Deed and the Statutory Mortgage have been obtained and are in effect as
of the date hereof.
(h) There are no actions, suits or proceedings at law or in
equity or by or before any Governmental Authority now pending against the
Shipowner or the Vessel or, to the best of the Shipowner's knowledge,
threatened against the Shipowner or the Vessel or pending or threatened
against any property or other assets or rights of the Shipowner with respect
to the Vessel, this Deed, the Statutory Mortgage or any other Security
Document.
(i) The Shipowner is the sole and lawful owner of the whole of
the Vessel, free from all liens, security interests, mortgages, charges or
encumbrances (other than this Deed, the Statutory Mortgage and Permitted
Liens). The Shipowner shall defend for the benefit of the Mortgagee the title
and possession of the mortgaged property and every part thereof against the
claims and demands of all Persons.
(j) The Shipowner is, by this Deed and the Statutory Mortgage and
the recordation thereof, constituting in favor of the Mortgagee, among other
things, all the rights of a First Priority Statutory Mortgage of the Vessel to
secure the due and punctual payment of all amounts due and to become due to
the Mortgagee pursuant to the terms and conditions of this Deed, the Statutory
Mortgage, the Loan Agreements, the other Security Documents and the documents
contemplated hereby and thereby and the payment of all commissions and fees,
costs, charges, expenses, expenditures and interest owing to the Mortgagee
hereunder and thereunder, and the performance and observance of and compliance
with all the covenants, terms, conditions and provisions of this Deed, the
Statutory Mortgage, the Loan Agreements, the other Security Documents and the
documents contemplated hereby and thereby.
(k) No tax deficiencies and no past due obligations exist that
materially affect the operations of the Shipowner, except those contested in
good faith by appropriate proceedings for which adequate reserves with respect
to such claims so contested have been set aside on the books of the Shipowner.
(l) The Shipowner is not liable for any material amount of sales,
use or other similar tax in connection with the transactions described in this
Deed, the Statutory Mortgage, the Loan Agreements and the other Security
Documents.
ARTICLE IV
COVENANTS
So long as any of the Indebtedness is outstanding or any of its
obligations hereunder or under either Loan Agreement remain outstanding, the
Shipowner covenants and agrees, subject to Section 6.01, with the Mortgagee as
follows:
Section 4.01 Payment of Indebtedness.
The Shipowner shall repay to the Mortgagee the Indebtedness and at
all times shall keep, perform and observe the covenants, conditions and
agreements in this Deed, the Statutory Mortgage and the other Security
Documents contained, expressed or implied on its part to be kept performed and
observed for so long as any part of the Indebtedness remains outstanding.
Section 4.02 Corporate Existence.
The Shipowner is and shall remain a corporation qualified under
the laws of the Isle of Man.
Section 4.03 Insurance.
(a) The Shipowner, at its expense (including payment of all
premiums, costs and club calls, if any) shall effect or cause to be effected
the following insurances and keep the following in full force and effect:
(i) hull and machinery insurance equal to the greater of (i) the
Vessel's full commercial value and (ii) one hundred and fifteen percent
(115%) of the aggregate outstanding principal balance of the Term Loan
and the Serial Loan. Such Hull and Machinery insurance shall include
the "Institute Pollution Hazard Clause" and the "Institute Liner
Negligence and Additional Perils Clause". If the Vessel is laid up in
port for an extended period, then, with the prior written consent of the
Mortgagee, the Shipowner may obtain in lieu of the hull and machinery
insurance referred to in this Section 4.03(a)(i) port risk insurance
equal to the greater of (A) the Vessel's full commercial value or (B)
one hundred and fifteen per cent (115%) of the aggregate outstanding
principal balance of the Term Loan and Serial Loan. Such Port Risk
insurance shall be effected on Institute of London Underwriters
"Institute Port Risk Clauses" or American Institute "Port Risk
Endorsement";
(ii) war risk hull and machinery insurance (including risks of
mines) equal to the greater of (A) the Vessel's full commercial value or
(B) one hundred and fifteen percent (115%) of the aggregate outstanding
principal balance of the Term Loan and Serial Loan. Such war risk
insurance shall be effected with a War Risks Association approved by the
Mortgagee or on the full Institute of London Underwriters "Institute War
and Strikes Clauses" or American Institute "Hull War Risks and Strikes
Clauses";
(iii) mortgagee additional perils (oil pollution) insurance in an
amount equal to the aggregate outstanding principal amount of the Term
Loan and the Serial Loan related to the Vessel;
(iv) confiscation and requisition insurance to the extent and in
the circumstances that a prudent shipowner would obtain and maintain
such insurances;
(v) protection and indemnity insurance in the name of the
Shipowner, which shall include freight, demurrage and defense coverage
in an unlimited amount and coverage in respect of pollution risks for a
minimum of five hundred million dollars ($500,000,000) plus an
additional two hundred million dollars ($200,000,000) or such other
amount as may be then customary for prudent shipowners to maintain,
including coverage against liabilities to persons who have suffered any
loss, damage or injury whatsoever in connection with anything done or
not done by the Vessel, any charterer or the Shipowner in connection
with the Vessel or the employment or use thereof (including in
connection with any oil or other substance emanating from the Vessel or
any other vessel with which the Vessel may be involved in collision) and
against liability under the United States Oil Pollution Act of 1990
("OPA") or any re-enactment or modification thereof under the law of any
country into whose jurisdiction the Vessel is permitted to come under
the terms of the related charter;
(vi) such additional insurance as the Shipowner may deem
necessary; provided, however, that all such additional insurance,
including without limitation "disbursements," "increased value" or other
"total loss only" insurance shall not be in amounts in excess of those
permitted by the hull and machinery or war risk polices. Such hull and
machinery insurance shall be effected on Institute of London
Underwriters "Institute Time Clause - (Hulls)" or American Institute
"Time (Hulls) Clauses" including four-fourths (4/4ths) Running Down
Clause, except that three-fourths (3/4ths) Running Down Clause is
allowed provided the remaining one-fourth (1/4th) Running Down Clause is
fully covered by protection and indemnity insurance.
(vii) risks which are likely to arise due to the particular usage
and trading of the Vessel including all risks customarily and usually
covered by prudent shipowners; and
(viii)risks for which Bermuda may from time to time require
insurance or for which the Mortgagee may from time to time (after
receiving advice from its insurance advisers that a prudent shipowner
would obtain and maintain a type and amount of insurance for such risks)
require insurance.
Provided, however, that if the Vessel is subject to the Initial Charter
or an Acceptable Replacement Charter, the insurance requirements related to
the Initial Charter or Acceptable Replacement Charter will supersede the above
insurance requirements.
(b) All insurance taken out or effected in connection with the Vessel
pursuant to the provisions of Section 4.03(a) hereof shall be in a form and
upon terms acceptable to the Mortgagee and shall, without limitation, be
subject to the following:
(i) all such insurance shall be taken out in the name of the
Shipowner (other than Section 4.03 (a)(v)) with the Mortgagee's interest
noted on the policies and cover notes;
(ii) all such insurance shall be placed in the English or
American markets through first-class brokers and with first-class
underwriters, insurance companies, protection and indemnity associations
or protection and indemnity clubs. All insurance policies or entries
shall provide that they are payable in Dollars. All insurance policies
shall be valued policies and none shall provide for a deductible amount
in excess of One Hundred Thousand United States Dollars (US$100,000) or
such other amount as prudent shipowners of vessels similar to the Vessel
shall maintain. No insurance shall exclude liability for negligence of
the master, officers, crew or pilots. Each policy or entry shall
contain or be accompanied by a waiver, as against the Mortgagee, of any
and all premiums and calls for which the Mortgagee might otherwise be or
become liable as a loss payee or otherwise.
(iii) Each policy shall provide that it may not lapse, be
terminated, cancelled or materially modified without fourteen (14) days'
prior telex or telegraphic notice to the Mortgagee and any assignee,
except only such notice as war risk underwriters shall be required to
give pursuant to the automatic termination clause of current war risk
policies.
(iv) Each policy shall include a provision agreeing that no
breach of warranty or condition or want of due diligence on the part of
the Shipowner or any agent of such Shipowner shall defeat recovery of
any claim by the Collateral Trustee unless such provision shall conflict
with the available reinsurance arrangements of the issuers of such
policy.
(c) Each insurance policy taken out pursuant to Sections 4.03(a)(i)
through (iii) and Section 4.03(a)(v) through (vii) shall contain the following
notice of assignment and loss payable clause:
Notice of Assignment/Loss Payable Clause
California Petroleum Transport Corporation, as mortgagee
(the "Mortgagee"), and CalPetro Tankers (IOM) Limited (the
"Shipowner"), owner of the m.t. ____________ (the "Vessel"),
hereby give notice that by an assignment contained in an
Assignment of Earnings and Insurances, dated as of _________ __,
1994, between the Shipowner and the Mortgagee, the Shipowner
assigned to the Mortgagee as mortgagee of the Vessel, inter alia,
all of its right, title and interest under, to and in all policies
and contracts of insurance of whatsoever nature and all entries
with protection and indemnity clubs or societies now or hereafter
taken out in respect of the Vessel, its rights, disbursements,
profits or otherwise.
All claims payable shall be subject to the following
conditions:
(i) Any claim payable in respect of an actual or
constructive or arranged or agreed or compromised total loss, or
loss in the event of the confiscation, compulsory acquisition or
requisition of the Vessel, for title or use, by any government of
any country or any department, agency or representative thereof,
pursuant to any present or future law, proclamation, order, decree
or otherwise, shall be payable to the Mortgagee as mortgagee of
the Vessel, provided always that the written consent of the
Mortgagee shall be obtained prior to the arranged or agreed or
compromised total loss being agreed with the underwriters
(insurers);
(ii) All other claims shall be released to the repairer or
salvor for the repair, salvage or other charges involved or to the
Shipowner as reimbursement if it has fully repaired the damages
and paid all of the salvage and other charges;
Notwithstanding the foregoing, if there exists an Event of Default
under the First Priority Statutory Mortgage and Deed of Covenants
collateral thereto, dated _________ __, 1994, on the Vessel given
by the Shipowner in favor of the Mortgagee and the brokers and/or
underwriters (insurers) have been so notified by the Mortgagee, all
claims shall be payable to the Mortgagee as mortgagee of the
Vessel.
The underwriters (insurers) agree that the Mortgagee shall
be advised immediately of the variation or termination of this
policy (entry), and in the event of any failure by the Shipowner to
pay premiums (dues or Club calls) as and when due the Mortgagee
shall be given at least fourteen (14) days' prior telegraphic or
telex notice of the cancellation or material alteration of this
policy (entry).
The Mortgagee shall have no obligations whatsoever to pay
any premiums or costs (dues or Club calls), but shall have the
right to do so in the event of non-payment by the Shipowner. The
underwriters (insurers) shall promptly advise the Mortgagee of any
act of omission of which the Underwriters (insurers) are aware that
might void this policy (entry) or make the same invalid or
unenforceable in whole or in part.
(d) Each entry or insurance policy taken out pursuant to Section
4.01(a)(iv) shall bear the following Endorsement:
Endorsement
California Petroleum Transport Corporation, as mortgagee
(the "Mortgagee") and CalPetro Tankers (IOM) Limited (the
"Shipowner"), owner of the m.t. ____________ (the "Vessel"),
hereby give notice that by an assignment contained in an
Assignment of Earnings and Insurances, dated as of _________ __,
1994, between the Shipowner and the Mortgagee, the Shipowner
assigned to the Mortgagee as mortgagee of the Vessel all of its
right, title and interest under, to and in all policies and
contracts of insurance of whatsoever nature and all entries with
protection and indemnity clubs or societies now or hereafter taken
out in respect of the Vessel, its rights, disbursements, profits
or otherwise.
It is hereby noted that all claims shall be paid to the
Shipowner unless and until the Mortgagee shall have given notice
in writing that the Shipowner is in default under the First
Priority Statutory Mortgage and Deed of Covenants collateral
thereto, dated as of _________ __, 1994, on the Vessel given by
the Shipowner in favor of the Mortgagee in which event such claims
shall be payable to the Mortgagee as mortgagee of the Vessel. Any
modification of the terms of this insurance or cancellation or
termination by reason of nonpayment of premiums, dues,
assessments, contributions or other amounts which may become due
shall not become effective against the interests of the Mortgagee,
its successors or assigns until fourteen (14) days' prior
telegraphic or telex notice is given to the Mortgagee, its
successors or assigns of such modification, cancellation or
termination.
(e) Certified copies of all binders and cover notes or other
satisfactory written evidence showing that the required insurance of each type
has been placed, maintained or renewed and that the premiums thereon have been
paid shall be submitted to the Mortgagee on or before the date of this Deed
and the Statutory Mortgage and subsequently pro forma policies shall be
submitted for approval at least seven (7) days before liability under any
current or renewed insurance expires. No change shall be made in any
insurance without the prior written approval of the Mortgagee. Certified
copies of all policies, certificates of entry, contracts of insurance, cover
notes and renewals thereof shall be delivered to and held by the Mortgagee, and
the Shipowner shall furnish the Mortgagee with the original of the polices,
when and if requested by the Mortgagee. On the Closing Date, on each date the
Insurances are renewed as required by the terms hereof and each time there is
a significant change in the insurance coverage carried on the Vessel, the
Shipowner shall arrange for a detailed report signed by independent marine
insurance brokers acceptable to the Mortgagee, describing the insurance
coverage then carried and maintained on the Vessel (including the types of
risk covered by such polices, the amount insured thereunder and the expiration
date thereof) and stating that in the opinion of said insurance brokers such
insurance is adequate and reasonable for the protection of the Mortgagee and
that the Shipowner is in compliance with the insurance terms hereof.
(f) The Mortgagee is hereby authorized, but not required, in its own
name and/or the Shipowner's name to demand, collect, give receipt for and
prosecute all necessary actions in the courts to recover any and all insurance
monies which may become due and payable to the Shipowner under any insurance
required or permitted hereunder.
(g) If the Shipowner shall at any time fail to pay or to cause to be
paid when due any insurance premiums, club calls or other costs related to
obtaining or maintaining the insurance required hereunder, or to obtain any
required insurance or to deliver to the Mortgagee all policies, certificates
of entry, contracts of insurance, binders and cover notes and all renewals
thereof as required by the provisions of this Deed and the Statutory Mortgage,
the Mortgagee may, but shall not be required to, procure such insurances
and/or pay unpaid premiums and other costs, and the cost and expense thereof,
with interest at the Default Rate, shall be an indebtedness due from the
Shipowner to the Mortgagee secured by this Deed and the Statutory Mortgage and
shall be paid by the Shipowner promptly on demand.
(h) The Shipowner shall cause each of its insurance brokers to deliver
to the Mortgagee its undertaking substantially in the form of the letter
attached hereto as Exhibit A and made a part hereof.
(i) The Shipowner shall not do any act or cause or permit any act to
be done whereby any insurance shall be or may be suspended, impaired or
defeated.
(j) The Shipowner agrees to do all such things whatsoever and prepare,
execute and deliver all such documents whatsoever to enable the Mortgagee to
collect and recover any monies which may become due in respect of the policies
of insurance and entries and for that purpose (but without limitation) to
permit the Mortgagee if necessary to sue in the name of the Shipowner.
(k) The Shipowner agrees not to employ the Vessel or suffer the Vessel
to be employed otherwise than in conformity with the terms of the instruments
of insurance aforesaid (including any warranties express or implied therein)
without first obtaining the consent to such employment of the insurers and
complying with such requirements as to extra premium or otherwise as the
insurers may prescribe.
(l) The proceeds of any Insurances or entries shall be applied as
follows:
(i) Until the occurrence of an Event of Default:
(A) Any claim under any Insurances (other than in respect of a
Total Loss) or whether or not such claim is under the terms
of the relevant loss payable clause payable directly to the
Shipowner, shall be applied by the Shipowner in making good
the loss or damage in respect of which it has been paid to
the Shipowner in reimbursement of money expended by it for
such purpose; and
(B) Any claim in respect of protection and indemnity insurance
shall be paid directly to the person, firm or company to
which the liability covered by such insurance was incurred
or the Shipowner in reimbursement of moneys expended by it
in satisfaction of such liability;
provided always that for as long as the Charter in respect of the Vessel
remains in force, all payments other than in respect of a Total Loss
(which shall be made to the Mortgagee) shall be made to the Charterer.
(ii) Upon the occurrence of an Event of Default, subject as provided
above, any claim under any such insurance and entry shall be paid to the
Mortgagee, as assignee of the related Shipowner, and shall be applied by the
Mortgagee pursuant to the terms of the Charter unless the Charterer is in
default thereunder in which event the Mortgagee shall apply such proceeds
against payment of the Obligations.
(iii) Any claim under such insurance and entry in respect of a Total
Loss shall be paid to the Mortgagee, as assignee of the related Shipowner, and
shall be applied by the Mortgagee, after payment of the costs of collecting
such claim, as follows:
First: To the payment of all reasonable expenses and
charges, including the expenses of any taking, attorney's fees,
court costs and any other expenses or advances made or incurred by
the Mortgagee in the protection of its right or the pursuance of
its remedies under this Deed and the Statutory Mortgage, the Loan
Agreements or the other Security Documents;
Second: To the payment of all amounts due to the Mortgagee
in respect of taxes, indemnities, fees, expenses, premiums,
purchase of liens or otherwise under the provisions of this Deed
and the Statutory Mortgage;
Third: To the payment of interest on the Term Loan and
Serial Loan, pro rata, in accordance with their respective
outstanding balances, to but not including the Loss Date;
Fourth: To the payment to the Mortgagee in respect of
principal of the Term Loan and Serial Loan, pro rata, in
accordance with their respective outstanding balances; and
Fifth: To the payment of any surplus thereafter remaining
to the Shipowner or whomsoever may be lawfully entitled thereto.
Section 4.04 Defense of Title.
The Shipowner lawfully owns and is lawfully possessed of the
Vessel free from any Lien whatsoever except this Deed, the Statutory Mortgage
and Permitted Liens and shall warrant and defend the title and possession
thereto and to every part thereof for the benefit of the Mortgagee against the
claims and demands of all persons whomsoever.
Section 4.05 Discharge of Liens.
The Shipowner shall pay and discharge or cause to be paid and
discharged when due and payable unless contested in good faith from time to
time all debts, damages and liabilities whatsoever which may have given or may
give rise to maritime or possessory liens on or claims enforceable against the
Vessel and all taxes, assessments, governmental charges, fines and penalties
legally imposed on the Vessel or any income or proceeds therefrom or on the
Shipowner, the Earnings and in event of arrest of the Vessel pursuant to legal
process or in event of her detention in exercise or purported exercise of any
such lien as aforesaid to procure the release of the Vessel from such arrest
or detention as soon as possible upon receiving notice thereof but in any
event within fifteen (15) days of receiving such notice by providing bail or
otherwise as the circumstances may require.
Section 4.06. Liens.
(a) Neither the Shipowner nor its agent nor the master of the
Vessel nor any charterer of the Vessel has or shall have any right, power or
authority to create, incur or permit to be placed or imposed upon the property
or any part thereof subject or intended to be subject to this Deed and
Statutory Mortgage, any liens whatsoever without the prior written consent of
the Mortgagee, other than for Permitted Liens. A properly certified copy of
this Deed and the Statutory Mortgage shall be carried with the ship's papers
on board the Vessel, shall be exhibited to any person having business with the
Vessel which might give rise to any lien other than Permitted Liens and shall
be exhibited to any representative of the Mortgagee on demand.
(b) The Shipowner shall keep the Vessel free and clear of all
liens, security interests, charges or encumbrances (except for the Charter and
Permitted Liens).
Section 4.07 Use of Vessel.
(a) The Shipowner shall not cause or permit the Vessel to be
operated in such a way as to jeopardize the safety of the Vessel, its
Insurances or in any manner contrary to law, shall not engage in any unlawful
trade or violate any applicable law, rule or regulation of Bermuda or any
other jurisdiction in which the Vessel may operate from time to time or which
may otherwise be applicable to the Vessel or the Shipowner or carry any cargo
that shall expose the Vessel to penalty, confiscation, forfeiture, capture or
condemnation, and shall not do, suffer or permit to be done anything which can
or may injuriously affect the registration or enrolment of the Vessel under
the laws and regulations of Bermuda and shall at all times keep the Vessel
duly documented thereunder.
(b) The Shipowner shall not employ the Vessel or suffer her
employment in any trade or business which is forbidden by international law or
is otherwise illicit or in carrying illicit or prohibited goods or otherwise
use the Vessel in any manner whatsoever which renders her liable to
condemnation or to destruction, seizure or confiscation and in event of
hostilities in any part of the world (whether war is declared or not) not
allow the Vessel to enter any zone which is declared a war zone unless the
Mortgagee shall have first given its consent thereto in writing and there
shall have been effected by the Shipowner and at its expense such special
insurance cover as the Mortgagee may require.
(c) The Shipowner shall not, during hostilities (whether or not
a state of war shall have been formally declared) between any two or more
nations or in which the United Nations Organization may be involved, or during
any civil war, employ or permit the Vessel to be employed in any manner in
carrying any goods that shall or may be declared to be contraband of war or
that shall or may render her liable to confiscation, seizure, detention or
destruction unless prior to such employment special war risks policies
effected with such underwriters as the Mortgagee may approve and in all
respects to the satisfaction of the Mortgagee shall have been effected,
assigned and delivered to the Mortgagee.
(d) Upon request, the Shipowner shall give to the Mortgagee all
information regarding the Vessel, her position and engagements in the
possession of or available to the Shipowner.
(e) The Shipowner shall comply with and satisfy all of the
material provisions of any applicable law, regulation, proclamation or order
concerning financial responsibility for liabilities imposed on the Shipowner
or the Vessel with respect to pollution by any state or nation or political
subdivision thereof, including, if applicable, the United States Federal Water
Pollution Control Act, OPA and the United States Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), as any of the foregoing
may at any time be amended, and shall maintain all certificates or other
evidence of financial responsibility as may be required by any such law,
regulation, proclamation or order with respect to the trade in which the
Vessel is from time to time engaged and the cargo carried by it and shall upon
request, furnish the Mortgagee with evidence that the Shipowner has acted in
compliance with OPA and CERCLA.
Section 4.08 Notifications.
The Shipowner shall immediately notify the Mortgagee of:
(a) any marine disaster involving the Vessel that has occurred,
or any serious damage suffered by the Vessel (such notice by the
Shipowner to be given within twenty-four (24) hours after the event
shall have come to its knowledge and shall furnish the Mortgagee with
full information regarding any loss of life, other accidents or damage to
the Vessel), and in such event the Mortgagee shall have the right to
have an independent survey of the damage to the Vessel at the
Shipowner's expense provided that the same shall not cause any undue
delay in respect of the operation of the Vessel, and if such survey be
requested, the Shipowner shall lend all needed assistance.
(b) any occurrence in consequence whereof the Vessel has become
or is likely to become a Total Loss;
(c) any requirement or recommendation made by any insurer or
classification society or by any competent authority that is not
complied with immediately; and
(d) any complaint or libel filed against the Vessel, or any levy
against the Vessel, or the fact that the Vessel has been taken into
custody or detained by any proceedings in any court or tribunal or by
any government of any country or other authority, any arrest of the
Vessel or the exercise or purported exercise of any lien on the Vessel.
Section 4.09 Payment of Crew's Wages and Allotments.
The Shipowner shall promptly pay all tolls, dues and other
outgoings whatsoever in respect of the Vessel and, as and when the Mortgagee
may so require, furnish satisfactory evidence that the wages and allotment and
insurance and pension contributions of the Master and crew are being regularly
paid and that all deductions from crew's wages in respect of any tax liability
are being properly accounted for.
Section 4.10 Charter of Vessel.
The Shipowner shall not, without the prior written consent of the
Mortgagee, charter the Vessel by demise charter or by period, time or voyage
charter for any period other than to the Charterer under the Charter or any
other charterer under an Acceptable Replacement Charter. The Shipowner shall
not modify, amend or supplement the terms of the Charter without the prior
written consent of the Mortgagee.
Section 4.11 Maintenance of Vessel.
The Shipowner shall at all times and without cost or expense to
the Mortgagee or the Collateral Trustee maintain and preserve, or cause to be
maintained and preserved, the Vessel, her equipment and machinery in good
running order and repair so that the Vessel shall be, in so far as due
diligence can make her so, tight, staunch, strong and well and sufficiently
tackled, apparelled, furnished, equipped and in every respect seaworthy and in
good operating condition as will entitle her to the highest classification of
the Classification society or such other classification society of like
standing agreeable to the Mortgagee and the Trustee. The Vessel shall, and
the Shipowner covenants that it shall, at all times comply strictly with all
applicable laws, treaties and conventions of Bermuda and rules and regulations
issued thereunder and shall have on board as and when required by such rules
and regulations valid certificates showing compliance therewith. The
Shipowner shall not make or permit to be made any substantial change in the
structure, type or speed of the Vessel or change in any of her rigs without
first obtaining the written approval of the Mortgagee. The Shipowner shall
cause all repairs to and/or replacements of any damaged worn or lost parts or
equipment of the Vessel be effected in such manner both as regards workmanship
and quality of materials so as not to diminish the value or class of the
Vessel. The Shipowner shall submit the Vessel to such periodical or other
surveys as may be required for classification purposes and shall if so
required by the Mortgagee supply to the Mortgagee on request copies of all
surveys or reports issued in respect thereof.
Section 4.12 Statement of Classification Society.
The Shipowner shall furnish to the Mortgagee and the Collateral
Trustee annually from the date hereof a certificate by Det norske Veritas or
such other classification society acceptable to the Mortgagee and the
Collateral Trustee that such classification is maintained in the highest
category for ships of the same type as the Vessel free of recommendations and
notations which have not been complied with in accordance with their terms and
to furnish the Mortgagee from time to time and at any time upon demand with
all such information and copies of all such documents as the Mortgagee may
require concerning the classification of the Vessel.
Section 4.13 Surveys of Vessel.
The Shipowner shall submit the Vessel or cause the Vessel to be
submitted regularly to such periodical or other surveys as may be required for
classification purposes and if so required supply and cause to be supplied to
the Mortgagee copies of all survey reports issued in respect thereof.
Section 4.14 Access to Vessel.
The Shipowner shall use all reasonable endeavors to afford the
Mortgagee and such Persons as the Mortgagee shall from time to time appoint
for that purpose full and complete access to the Vessel at any time, on
reasonable notice and in a manner which shall not interfere with the Vessel's
trading requirements to view the state and condition thereof and her cargo and
papers and to ascertain whether the Vessel is being properly repaired and
maintained, and if default shall be made in keeping her in such good state of
repair and in such working order and condition as herein mentioned (without
prejudice however to any of the Mortgagee's rights under this Deed and the
Statutory Mortgage) the Mortgagee may (but shall not be obligated to) effect
such repairs as shall in its opinion be necessary, and the Shipowner shall on
demand repay to the Mortgagee every sum of money expended for the above
purpose with interest at the Default Rate.
Section 4.15 Books and Records.
The Shipowner shall keep proper books of account in respect of the
Vessel and as and when required by the Mortgagee make such books available for
inspection for the Mortgagee.
Section 4.16 Registration of Statutory Mortgage; Recordation of
Statutory Mortgage.
(a) The Shipowner shall not change the flag or port of
documentation of the Vessel or through any action or inaction cause the
registration of the Vessel under the laws of Bermuda to be void or voidable or
to lapse;
(b) The Shipowner shall cause this Statutory Mortgage to be
recorded or filed in a central office or at the home port of the Vessel and in
accordance with the applicable provisions of the law of Bermuda and will
otherwise comply with and satisfy all the requirements and formalities
established by the provisions of the law of Bermuda and any other pertinent
legislation of Bermuda to perfect this Statutory Mortgage as a valid and
enforceable first and preferred lien upon the Vessel and maintain this Deed as
a first priority assignment of, charge over, and security interest in the
Vessel or other property assigned thereunder and shall furnish to the
Mortgagee from time to time such evidence to the Mortgagee's satisfaction with
respect to the Shipowner's compliance with the provisions of this Section.
Section 4.17 Notice of Mortgage.
(a) The Shipowner shall at all times carry on board the Vessel a
duly certified copy of this Deed and a properly certified copy of the
Statutory Mortgage and any assignment thereof (which shall form a part of the
Vessel's papers) and cause the same to be shown to any person having business
with the Vessel which might create or imply any commitment or encumbrance
whatsoever on the Vessel and place and maintain in a frame in a conspicuous
place in the navigation room and in the cabin of the Master of the Vessel a
printed notice such that the printed area covers a space not less than six
inches wide by nine inches high in the following form:
"NOTICE OF FIRST MORTGAGE"
"This Vessel is owned by CalPetro Tankers (IOM) Limited and is
subject to a First Priority Statutory Mortgage and Deed of
Covenants collateral thereto in favor of California Petroleum
Transport Corporation, as mortgagee. Under the terms of said Deed,
neither the Shipowner nor any charterer nor the master of this
Vessel nor any other person has any power, right or authority
whatever to create incur or permit to be imposed on this Vessel
any lien or encumbrance except for Master's and crew's wages for
not more than three (3) months and salvage."
(b) Notwithstanding the requirement for the Shipowner to
maintain the Notice of Mortgage described in Section 4.17(a), so long as the
Charter is in effect, the Shipowner shall maintain the Notice of First
Mortgage described in Clause 14 of the Charter.
Section 4.18 Further Assurances.
(a) The Shipowner shall pay to the Mortgagee on demand on a full
indemnity basis all moneys whatsoever which the Mortgagee shall or may expend,
be put to or become liable for in or about the protection maintenance or
enforcement of the security created by this Deed, the Statutory Mortgage and
the other Security Documents or in or about the exercise by the Mortgagee of
any of the powers vested in the Mortgagee hereunder or thereunder including
any and all costs, charges, legal fees and expenses of the Mortgagee and shall
pay interest thereon at the Default Rate until the date of repayment by the
Shipowner both before and after judgment.
(b) The Shipowner shall do and permit to be done each and every
act or thing whatsoever which the Mortgagee may require to be done for the
purpose of enforcing the Mortgagee's rights hereunder and to allow the
Mortgagee to use the Shipowner's name as may be required for that purpose.
Section 4.19. Withholding Tax.
The Shipowner shall take any lawful action to the extent necessary
to prevent or avoid the imposition of any withholding taxes (other than any
withholding tax with respect to charterhire to the extent required to be paid
or reimbursed by any charterer pursuant to a charter) by any taxing
jurisdiction (including Bermuda) with respect to any payments under the
Obligations, including changing its jurisdiction of incorporation or
residence; provided however, that it shall not be required to take, or fail to
take, any action (i) if in the opinion of counsel such act or failure to act
would violate applicable law or (ii) if in the reasonable opinion of the
Shipowner the actions necessary to avoid or prevent imposition of such
withholding taxes would be unduly burdensome. For purposes of clause (ii) of
this paragraph a requirement to change the jurisdiction of the Shipowner's
incorporation or residence shall not be treated as unduly burdensome.
Section 4.20. Expenses.
The Shipowner shall upon demand pay to the Mortgagee (or as it may
direct) the amount of all investigation expenses, mortgage taxes, recording
charges, filing fees, revenue and documentary stamps and any other charges
incurred by the Mortgagee in connection with the preparation, completion or
registration of this Deed and the Statutory Mortgage, including without
limitation the reasonable expenses and fees of counsel to the Mortgagee.
Likewise any and all expenses incurred at any time by the Mortgagee with
respect to the mortgaged property or the protection or the enforcement of its
rights hereunder or thereunder, including without limitation the expenses and
fees of counsel to the Mortgagee, shall be paid by the Shipowner or, if paid by
the Mortgagee, shall be paid by the Shipowner promptly upon demand together
with interest thereon from the date of demand until such repayment at the
Default Rate in effect from time to time. The payment of all expenses and
other amounts under this Section 4.20 shall be secured by this Deed and the
Statutory Mortgage and no amounts payable by the Shipowner to the Mortgagee
under this Section 4.20 shall in any circumstances be repayable to the
Shipowner.
Section 4.21. Indebtedness.
The Shipowner will not directly or indirectly, create, incur,
issue, assume, guarantee or otherwise become directly or indirectly liable
with respect to, or become responsible for the payment of any indebtedness,
except for the obligations under the Shipowner's Loan Agreements.
Section 4.22. Business of Shipowner.
The Shipowner will not engage in any business other than the
ownership and operation of its Vessel as described herein and in accordance
with the Shipowner's charter and by-laws.
Section 4.23. No Bankruptcy Petition.
The Shipowner will not (i) commence any case, proceeding or other
action under any existing or future bankruptcy, insolvency or similar law
seeking to have an order for relief entered with respect to it, or seeking
reorganization, arrangement, adjustment, winding up, liquidation, dissolution,
composition or other relief with respect to its debt, (ii) seek appointment
of a receiver, trustee, custodian or other similar official for it or any part
of its assets, (iii) make a general assignment for the benefit of creditors or
(iv) take any action in furtherance of, or consenting or acquiescing in, any
of the foregoing.
Section 4.24. Consolidation, Merger and Sale of Assets.
The Shipowner shall not consolidate with, merge with or into, any
other Person or convey or transfer to any Person all or any part of the Vessel.
Section 4.25. Loans, Advances and Other Liabilities.
The Shipowner will not make any capital contributions, advances or
loans to, or investments or purchases of capital stock in, any Person, except
for Allowable Investments.
Section 4.26. Restricted Payment.
The Shipowner will not make any Restricted Payment except as set
forth in the Loan Agreements.
ARTICLE V
EVENTS OF DEFAULT; REMEDIES
Section 5.01 Events of Default.
The following shall constitute Events of Default hereunder:
(a) An Event of Default shall occur under either the Serial Loan
Agreement, the Term Loan Agreement or any Other Loan Agreement;
(b) Default in the payment of any sums payable under the Deed and the
Statutory Mortgage to the Mortgagee within two (2) Business Days
after such amount was due;
(c) Default by the Shipowner in the due observance or performance of
any covenant set forth in Sections 4.02, 4.03, 4.04, 4.06, 4.10,
4.16 and 4.26;
(d) Default in any material respect in the performance, or breach in
any material respect, of any covenant of the Shipowner (other than
Sections 4.02, 4.03, 4.04, 4.06, 4.10, 4.16 and 4.26) or if any
representation or warranty of the Shipowner made in the Deed or
the Statutory Mortgage or in any certificate or other writing
delivered pursuant thereto or in connection therewith with respect
to or affecting the Vessels shall prove to be inaccurate in any
material respect as of the time when the same shall have been
made, and, if such breach or default or inaccuracy is curable,
continuance of such default or breach or inaccuracy for a period
of 30 days after the earlier to occur of (a) actual knowledge of
such default, breach or inaccuracy by the Shipowner or (b) the
date on which there has been given by registered or certified mail
to the Shipowner by the Mortgagee a written notice thereof;
(e) The entry of a decree or order for relief by a court having
jurisdiction over the Shipowner and its assets in any involuntary
case under any applicable federal or state bankruptcy, insolvency,
or other similar law of any relevant jurisdiction now or hereafter
in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, or sequestrator (or other similar official)
for the Shipowner or for any substantial part of its property, or
ordering the winding up or liquidation of its respective affairs,
and the continuance of any such decree or order unstayed and in
effect for a period of 60 consecutive days;
(f) The commencement by the Shipowner of a voluntary case under any
applicable federal or state bankruptcy, insolvency, or other
similar law of any relevant jurisdiction now or hereafter in
effect in any jurisdiction, or the consent by the Shipowner to the
appointment of or taking possession by a receiver, liquidator,
assignee, custodian, trustee or sequestrator (or other similar
official) of the Shipowner or any substantial part of its
property, or the making by the Shipowner of any general assignment
for the benefit of creditors, or the failure by the Shipowner
generally to pay its debts as they become due, or the taking of
action by the Shipowner in furtherance of any such action;
(g) The Vessel is deemed a Total Loss and the insurance proceeds
thereof have not been received by the Mortgagee within 60 days
after the date on which the Vessel was deemed a Total Loss;
provided, however, if the Vessel is under charter to the Charterer
pursuant to the Charter, such an event shall be an Event of Default
under this Deed and the Statutory Mortgage if the Mortgagee has
not received the amount payable by the Charterer in the event of a
Total Loss pursuant to the Charter within 5 business days of the
date on which such amounts are due pursuant to the Charter;
(h) The Shipowner shall abandon the Vessel;
(i) A default (as described in Clause 18 of the Charter) shall have
occurred under the Charter; or
(j) This Deed and the Statutory Mortgage or any material provision
hereof or thereof shall be deemed invalidated in whole or in part
by any present or future law of Bermuda or decision of any
competent court.
Section 5.02 Remedies.
In the event any one or more Events of Default shall have occurred
and be continuing, then, in each and every such case the Mortgagee, shall have
the right to:
(a) declare immediately due and payable all of the Obligations (in
which case all of the same shall be immediately due), and bring
suit at law, in equity or in admiralty, as it may be advised, to
recover judgment for the Obligations and collect the same out of
any and all property of the Shipowner whether covered by the Deed,
the Statutory Mortgage or otherwise;
(b) exercise all of the rights and remedies in foreclosure and
otherwise given to mortgagees by the provisions of applicable law;
(c) take and enter into possession of the Vessel, at any time,
wherever the same may be, without court decision or other legal
process and without being responsible for loss or damage and the
Mortgagee may, without being responsible for loss or damage, hold,
lay-up, lease, charter, operate or otherwise use such Vessel for
such time and upon such terms as it may deem to be for its best
advantage, and demand, collect and retain all hire, freights,
earnings, issues, revenues, income, profits, return premiums,
salvage awards or recoveries, recoveries in general average, and
all other sums due or to become due in respect of such Vessel or in
respect of any insurance thereon from any person whomsoever,
accounting only for the net profits, if any, arising from such use
of the Vessel and charging upon all receipts from use of the
Vessel or from the sale thereof by court proceedings or by private
sale all costs, expenses, charges, damages or losses by reason of
such use, and if at any time the Mortgagee avails itself of the
right given to it to take the Vessel: (i) the Mortgagee shall have
the right to dock the Vessel for a reasonable time at any dock,
pier or other premises of the Shipowner without charge, or to dock
her at any other place at the cost and expense of the Shipowner,
and (ii) the Mortgagee shall have the right to require the
Shipowner to deliver, and the Shipowner shall on demand, at its
own cost and expense, deliver to the Mortgagee the Vessel as
demanded; and the Shipowner shall irrevocably instruct the master
of the Vessel so long as the Deed and the Statutory Mortgage are
outstanding to deliver the Vessel to the Mortgagee as demanded;
(d) sell the Vessel or any share therein with or without the benefit
of any charter party or other engagement by public auction or
private contract without legal process at any place in the world
and upon such terms as the Mortgagee in its absolute discretion
may determine with power to postpone any such sale and without
being answerable for any loss occasioned by such sale or resulting
from the postponement thereof and at any such public auction the
Mortgagee may become the purchaser and shall have the right to set
off the purchase price against the Obligations;
(e) to require that all policies, contracts and other records relating
to the Insurance (including details of and correspondence
concerning outstanding claims) be forthwith delivered to such
brokers as the Mortgagee may nominate;
(f) to collect, recover, compromise and give a good discharge for all
claims then outstanding or thereafter arising under any of the
Insurance and to take over or institute (if necessary using the
name of the Shipowner) all such proceedings in connection
therewith as the Mortgagee in its absolute discretion thinks fit
and to permit the brokers through whom collection or recovery is
effected to charge and retain the usual brokerage therefor;
(g) to discharge, compound, release or compromise claims in respect of
the Vessel which have given or may give rise to any charge or lien
on the Vessel or which are or may be enforceable by proceedings
against the Vessel under the laws of all countries to whose
jurisdiction the Vessel may from time to time become subject;
(h) pending sale of the Vessel to remove the Vessel or to require the
Vessel to be removed from any place where she may be or be lying
to any port, harbor, dock or other location for the purposes of
the Vessel docking, laying up, repair, management, employment,
maintenance, or sale or to preserve or maintain the Mortgagee's
security in the Vessel in such manner as the Mortgagee may in its
complete discretion deem necessary;
(i) to discharge, store, load, tranship and otherwise handle any cargo
for the time being on board the Vessel without liability to any
third party with regard thereto;
(j) pending sale of the Vessel to manage, insure, maintain and repair
the Vessel and to hold, lease, charter, operate, employ, lay up or
otherwise use the Vessel in such manner and for such period as the
Mortgagee in its absolute discretion deems expedient accounting
only for the net profits (if any) of such use and for the purposes
aforesaid the Mortgagee shall be entitled to do all acts and things
incidental or conducive thereto and in particular to enter into
such arrangements respecting the Vessel, her insurance,
management, maintenance, repair, classification and employment and
generally to do and cause to be done all such acts and things
whatsoever and to make all such arrangements whatsoever in respect
of the Vessel or the working of the same in all respects as if the
Mortgagee were the absolute and sole owner of the Vessel and
without being responsible for any loss and damage thereby
incurred; and
(k) to recover from the Shipowner on demand all expenses, payments,
disbursements, costs, losses and damages as may be incurred by the
Mortgagee whether the Mortgagee be in possession of the Vessel or
not or in exercise by the Mortgagee of any of the powers herein
contained together with interest thereon at the Default Rate and
such expenses, payments, disbursements, costs, losses and damages
together with the said interest thereon shall, until paid by the
Shipowner to the Mortgagee, be secured on the Vessel by this Deed
and the Statutory Mortgage.
Section 5.03 Sale of the Vessel.
(a) A sale of the Vessel made in pursuance of this Deed and the
Statutory Mortgage whether under the power of sale hereby granted or any
judicial proceedings shall operate to divest all right, title and interest of
any nature whatsoever of the Shipowner herein and thereto and shall bar the
Shipowner its successors and assigns and all persons claiming by through or
under them provided such sale is by auction and that nothing herein shall be
deemed to derogate from the Shipowner's duty to the Mortgagee. Upon any such
sale, the purchaser shall not be bound to see or inquire whether the
Mortgagee's power of sale has risen in the manner provided by the Deed and the
Statutory Mortgage and the sale shall be within the power of the Mortgagee and
the receipt of the Mortgagee for the purchase money shall effectively discharge
the purchaser who shall not be concerned with the manner of application of the
proceeds of sale or be in any way answerable or otherwise liable therefor.
The Mortgagee may bid for and purchase the Vessel and upon compliance with the
terms of sale may hold, retain and dispose of the Vessel without further
accountability therefor.
(b) The Shipowner hereby irrevocably appoints the Mortgagee and
its assigns as its true and lawful attorney with full power to act alone and
with full power of substitution until the due discharge of this Deed and the
Statutory Mortgage in accordance with the laws of Bermuda to make all
necessary transfers of the Vessel sold pursuant to Section 5.02, including,
without limitation, executing and delivering all instruments of assignment and
transfer or quitclaim as the Mortgagee may require and the Shipowner hereby
does ratify and confirm all that its said attorneys shall lawfully do by
virtue hereof. Nevertheless, the Shipowner shall if so requested by the
Mortgagee ratify and confirm any such sale by executing and delivering to the
purchaser or purchasers of the Vessel such proper bills of sale, conveyances,
instruments of assignment and transfer or quitclaim and releases as may be
designated in such request.
Section 5.04 Mortgagee as Attorney-in Fact.
The Mortgagee is hereby appointed attorney-in-fact of the
Shipowner and upon the Indebtedness becoming due and payable in the name of
the Shipowner to demand, collect, receive, compromise and sue for so far as
may be permitted by law all freights, hire, earnings, issues, revenues, income
and profits of the Vessel and all amounts due from underwriters under any
insurance thereon as payment of losses or as return premiums or otherwise
salvage awards and recoveries in general average or otherwise and all other
sums due or to become due upon the Indebtedness becoming due and payable in
respect of the Vessel or in respect of any insurance thereon from any person
whomsoever and to make and give and execute in the name of the Shipowner
acquittances, receipts, releases or other discharges for the same whether under
seal or otherwise and to endorse and accept in the name of the Shipowner all
checks, notes, drafts, warrants, agreements and all other instruments in
writing with respect to the foregoing.
Section 5.05 Appointment of Receiver; Powers of Receiver.
(a) Whenever any right to enter and take possession of the Vessel
accrues to the Mortgagee, the Mortgagee may require the Shipowner to deliver
and the Shipowner shall on demand at its own cost and expense deliver to the
Mortgagee the Vessel as demanded. If any legal proceedings shall be taken to
enforce any right under this Deed and the Statutory Mortgage, the Mortgagee
shall be entitled as a matter of right to the appointment of a receiver (the
"Receiver") of the Vessel and the freights, hire, earnings, issues, revenues,
income and profits due or to become due and arising from the operation thereof.
(b) Any Receiver appointed in Section 5.05(a) above shall have all the
powers conferred on a receiver by law but, without limiting these powers:
(i) the Receiver shall have all the powers given to the
Mortgagee hereunder of taking possession of, calling in,
collecting, converting into money and selling, leasing and
dealing with the Vessel and generally shall be entitled to
the same protection and to exercise the same powers and
discretions as are given to the Mortgagee hereunder and
shall also have such other of the powers and discretions
given to the Mortgagee hereunder as the Mortgagee may from
time to time confer to him;
(ii) the remuneration of the Receiver may be fixed by the
Mortgagee (and may be or include a commission calculated by
reference to the gross amount of all money received or
otherwise), but shall be payable out of the proceeds of the
Vessel;
(iii) the Receiver shall have power to make any payment and incur
any expenditure which the Mortgagee is by this Deed
expressly or impliedly authorized to make or incur. Any
expenses incurred by the Receiver in the exercise of any of
his powers hereunder may be paid or retained by him out of
any moneys coming into his hands as receiver or may be paid
by the Mortgagee, in which case they shall be treated as
expenses properly incurred by the Mortgagee;
(iv) the Receiver shall in the exercise of his powers,
authorities and discretions conform with the reasonable
directions from time to time made and given by the Mortgagee;
(v) the Mortgagee may from time to time determine what funds the
Receiver shall be at liberty to keep in hand with a view to
the performance of his duties as receiver.
(c) Notwithstanding any other provisions of this Deed and without
limiting and as an addition to the owners conferred upon the Receiver by the
laws of Bermuda, the Mortgagee or the Receiver (as the case may require) may,
upon the receipt by the Mortgagee of a notice of Default and at any time
thereafter, exercise against or in respect of the Shipowner and/or the Vessel
any of the rights, powers, privileges or discretions conferred from time to
time by the laws of any applicable jurisdiction.
(d) All moneys arising from the exercise of the powers of the Receiver
or the Mortgagee and all other moneys received by the Receiver or the
Mortgagee shall be applied in settlement of the Indebtedness in such manner
and in such order of priority as the Mortgagee may determine.
(e) The foregoing powers of appointment of a Receiver shall be in
addition to any statutory or other powers of the Mortgagee and the Receiver
shall in any event have and be entitled to exercise all the rights, powers and
remedies conferred upon the Mortgagee by this Deed and by law with respect to
the Vessel.
Section 5.06 Arrest or Detention of Vessel.
In the event that the Vessel shall be arrested or detained by any
marshal or other officer of any court of law, equity or admiralty jurisdiction
in any country or nation of the world or by any government or other authority
and shall not be released from arrest or detention within fifteen (15) days
from the date of arrest or detention, the Shipowner hereby authorizes and
empowers the Mortgagee, its successors or assigns, to apply for and receive
possession of or to take possession of the Vessel with all the rights and
powers that the Shipowner or its successors or assigns may have, possess and
exercise in any such event, and this power of attorney shall be irrevocable
and may be exercised not only by the Mortgagee but also by an assignee or
appointee of the Mortgagee with full power of substitution to the same extent
and effect as if such assignee or appointee has been named by express
designation.
Section 5.07 Defense of Suits.
The Shipowner also authorizes and empowers the Mortgagee, and its
successors, assigns and appointees, to appear in the name of the Shipowner,
and its successors and assigns, in any court of any country or nation of the
world where a suit is pending against the Vessel because of or on account of
any alleged lien against the Vessel from which the Vessel has not been
released and to take such proceedings and do such things as to them or any of
them may seem proper toward the defense of such suit and the discharge of such
lien, and all monies expended by them or any of them for the purpose of such
defense and/or discharge shall be a debt due from the Shipowner, and its
successors and assigns, to the Mortgagee, and its successors and assigns, and
payment thereof together with interest thereon at the Default Rate (to the
extent permitted by law) from time to time in effect shall be secured by the
lien of this Deed and the Statutory Mortgage in like manner and extent as if
the amount and description thereof were written herein.
Section 5.08 Cumulative Rights, Powers and Remedies.
(a) Each and every right, power and remedy herein given to the
Mortgagee shall be cumulative and shall be in addition to every other right,
power and remedy herein given or now or hereafter existing at law, in equity,
admiralty or by statute and each and every power and remedy whether herein
given or otherwise existing may be exercised from time to time and as often
and in such order as may be deemed expedient by the Mortgagee, and the
exercise or the beginning of the exercise of any right, power or remedy shall
not be construed to be a waiver of the right to exercise at the same time or
thereafter any other power or remedy.
(b) No delay or omission of the Mortgagee to exercise any right
or power vested in it under the Security Documents or any of them shall impair
such right or power or be construed as a waiver of or as acquiescence in any
default by the Shipowner, nor shall the acceptance by the Mortgagee of any
security or any payment on account of the Indebtedness, although made after
default, be deemed a waiver of any right arising out of any future default or
of any past default, and in the event of the Mortgagee at any time agreeing to
waive any such right or power such waiver shall be revocable by the Mortgagee
at any time and the right or power shall henceforth be again exercisable as
though there had been no such waiver.
(c) In the event the Mortgagee shall have proceeded to enforce
any right or pursue any power under this Deed and the Statutory Mortgage by
foreclosure, entry or otherwise and such proceedings shall have been
discontinued or abandoned for any reason, or shall have been determined
adversely to the Mortgagee, then and in every such case the Shipowner and the
Mortgagee shall be restored to their former positions and rights hereunder
with respect to the property subject or intended to be subject to this Deed
and the Statutory Mortgage and all rights, remedies and powers of the
Mortgagee shall continue as if no such proceedings had been taken.
Section 5.09 Application of Proceeds.
The proceeds of any sale made either under the power of sale
hereby granted to the Mortgagee or under a judgment or decree in any judicial
proceeding for the foreclosure of this Deed and the Statutory Mortgage or for
the enforcement of any remedy granted to the Mortgagee hereunder, or any net
earnings arising from the management, charter or other use of the Vessel by
the Mortgagee under any of the powers herein reserved, any amounts on deposit
to the credit of the Shipowner or the Mortgagee from earnings of the Vessel as
provided herein and any other moneys received by the Mortgagee pursuant to the
terms of this Deed and the Statutory Mortgage or in any proceeding hereunder
other than under Section 4.03(l)(ii), the application of which is not
elsewhere herein specifically provided for, shall be applied as follows:
First: To the payment of all reasonable expenses and
charges, including the expenses of any taking, attorney's fees,
court costs and any other expenses or advances made or incurred by
the Mortgagee in the protection of its right or the pursuance of
its remedies under the Loan Agreements, this Deed or the Statutory
Mortgage;
Second: To the payment of all amounts due to the Mortgagee
in respect of taxes, indemnities, fees, expenses, premiums,
purchase of liens or otherwise under the provisions of this Deed
and the Statutory Mortgage;
Third: To the payment of interest on the Term Loan and
Serial Loan, pro rata, in accordance with their respective
outstanding balances;
Fourth: To the payment of principal on the Term Loan and
Serial Loan, pro rata, in accordance with their respective
outstanding balance;
Fifth: To the payment of any amounts due and owing under the
Other Loans, pro rata, in the event of an acceleration of the
principal amount of such other loans; and
Sixth: To the payment of any surplus thereafter remaining
to the Shipowner or whomsoever may be lawfully entitled thereto.
The Shipowner has and shall have no personal liability or
obligation with respect to the amounts specified in paragraphs "FIRST" through
"FIFTH" above, which are payable solely from the income and proceeds received
by the Mortgagee from the Mortgagee's right, title and interest in and to the
Vessel.
Section 5.10 Mortgagee's Right to Remedy Defaults.
If the Shipowner shall default in the performance or observance of
any of the covenants in this Deed or the Statutory Mortgage on its part to be
performed or observed, the Mortgagee may in its discretion do any act or make
any expenditures necessary to remedy such default, and the Shipowner shall
promptly reimburse the Mortgagee, with interest at the Default Rate from time
to time in effect, for any and all expenditures so made or incurred and until
the Shipowner has so reimbursed the Mortgagee for such expenditures, the
amount thereof shall be a debt due from the Shipowner to the Mortgagee and
payment thereof shall be secured by the lien of this Deed and the Statutory
Mortgage in like manner and extent as if the amount and description thereof
were written herein, but the Mortgagee, although privileged to do so, shall
be under no obligation to the Shipowner to make any such expenditures and the
making thereof shall not relieve the Shipowner of any default in that or any
other respect. The Shipowner also shall reimburse the Mortgagee promptly with
interest at the rates referred to above for any and all advances and expenses
made or incurred by the Mortgagee at any time in taking the Vessel or
otherwise protecting its rights hereunder and for any and all damages
sustained by the Mortgagee from or by reason of any default or defaults of the
Shipowner.
Section 5.11 Delegation of Powers.
The Mortgagee may delegate to any person or persons all or any of
the trusts, powers or discretions vested in it pursuant to this Deed and the
Statutory Mortgage and any such delegations may be made upon such terms and
conditions and subject to such regulations (including power to sub-delegate)
as the Mortgagee may in its absolute discretion deem appropriate.
Section 5.12 Legal Actions.
In addition to the other provisions hereof for enforcement of the rights
of the Mortgagee under this Deed and the Statutory Mortgage, the Mortgagee
may, at its option, in the event of any default by the Shipowner, bring an
action, suit or other proceeding in rem against the Vessel to foreclose this
Deed and the Statutory Mortgage and sell the Vessel in any court in Bermuda
or any other country in which the Vessel may be found; or an action, suit or
other proceeding in personam against the Shipowner or any other person
obligated under the Loan Agreements or any of the Security Documents to
recover payment of any amount owing by the Shipowner or such other person
and/or to foreclose this Deed and the Statutory Mortgage and sell the Vessel
in any country in which the Vessel or the Shipowner or any person so obligated
may be found.
Section 5.13 Deed and Statutory Mortgage Subject to Rights of
Charterer under the Charter.
So long as the Charter is in effect, the rights of the Mortgagee
set forth in this Article V are and shall be subject to the rights of the
Charterer under the Charter. So long as the Charterer shall not be in default
under and pursuant to the terms of the Charter, the Charterer shall be
entitled to quiet enjoyment of the Vessel.
ARTICLE VI
MISCELLANEOUS PROVISIONS
Section 6.01 Performance by Charterer or Charterer Under an
Acceptable Replacement Charter.
(a) It is hereby agreed by the parties hereto that, for the
duration of the Charter, when the Charterer, or any charterer under an
Acceptable Replacement Charter, performs and discharges its obligations under
the Charter respecting the Vessel, such performance of the said obligations by
the Charterer shall be deemed to be proper and due performance of the same
obligations of the Shipowner under this Deed, the Statutory Mortgage, the
Assignment of Earnings and other Security Documents, notwithstanding that the
extent or manner of performance of the Shipowner's obligations may differ from
that of the Charterer under the Charter.
(b) So long as the Charter is in effect, to the extent the
Shipowner's approval under the Charter is not to be unreasonably withheld, the
approval by the Mortgagee under the corresponding provisions of this Deed also
shall not be unreasonably withheld.
(c) So long as the Charter is in effect, where any obligation
with respect to the Vessel is undertaken by the Shipowner under this Deed and
the Statutory Mortgage or any other of the Security Documents but such
obligation is not undertaken by the Charterer under the Charter, then the
Shipowner shall not be treated as in default under this Deed and the Statutory
Mortgage if such obligation cannot be performed by virtue of the Charter.
(d) So long as an Acceptable Replacement Charter is in effect,
the insurance coverage required under an Acceptable Replacement Charter or
maintained by the Shipowner or charterer in connection with any other charter
entered into after the termination of the related Initial Charter must be
sufficient to maintain the credit rating of the Term Mortgage Notes by the
Rating Agencies at least at the rating applicable to the Term Mortgage Notes
immediately prior to the effectiveness of such Acceptable Replacement Charter
or other charter.
Section 6.02 Discharge of Mortgage.
The Mortgagee agrees that upon payment of the Indebtedness it
shall at the expense of the Shipowner discharge this Deed and the Statutory
Mortgage and transfer or release to the Shipowner all insurance policies and
certificates of entry relating to the Vessel freed and discharged from the
provisions herein contained.
Section 6.03 Indemnity.
The Shipowner assumes liability for and agrees to indemnify the
Mortgagee and the Holders and their respective directors, officers, employees
and agents from and against any and all liabilities, losses, damages,
penalties, costs and expenses, including legal expenses, of whatsoever kind or
nature, imposed on or asserted against any of the Mortgagee and the Holders
and such directors, officers, employees and agents in any way relating to or
arising out of the Vessel or the use thereof at any time by any party (other
than by the Mortgagee after such time as the Mortgagee shall have taken
possession of the Vessel pursuant to Section 5.02), including, without
limitation, (i) latent and other defects whether or not discovered or
discoverable by the Shipowner or any other person, (ii) claims for patent,
trademark or copyright infringement, (iii) tort or damage claims of any kind,
(iv) claims or penalties arising from any violation of the laws of any country
or political subdivision thereof and (v) claims for environmental liability or
in any way relating to applicable environmental laws.
Section 6.04 Governing Law.
THIS DEED SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF
BERMUDA AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW.
Section 6.05 Severability.
If any provision of this Deed and the Statutory Mortgage is held
to be in conflict with any applicable statute or rule of law or is otherwise
held to be unenforceable for any reason whatsoever, such circumstances shall
not have the effect of rendering the provision in question inoperative or
unenforceable in any other case or circumstance, or of rendering any other
provision or provisions herein contained invalid, inoperative, or
unenforceable to any extent whatsoever.
The invalidity of any one or more phrases, sentences, clauses or
Sections of this Deed or the Statutory Mortgage, shall not affect the
remaining portions of this Deed and the Statutory Mortgage, or any part
thereof.
Section 6.06 Notices.
All demands, notices and communications hereunder shall be in
writing, personally delivered or mailed by certified mail-return receipt
requested, and shall be deemed to have been duly given upon receipt (a) in the
case of the Mortgagee, at the following address: California Petroleum
Transport Corporation, c/o JH Management Corporation, Room 6/9, One
International Place, Boston, Massachusetts 02110-2624, (b) in the case of the
Shipowner, at the following address: United House, 14-16 Nelson Street,
Douglas, Isle of Man, British Isles, or at other such address as shall be
designated by such party in a written notice to the other parties.
Section 6.07 Headings.
The captions or headings in this Deed are for convenience only and
in no way define, limit or describe the scope or intent of any provisions or
sections of this Deed or the Statutory Mortgage.
Section 6.08 General Interpretive Principles.
For purposes of this Deed except as otherwise expressly provided
or unless the context otherwise requires:
(a) the defined terms in this Deed shall include the plural as
well as the singular, and the use of any gender herein shall be deemed to
include any other gender;
(b) accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles as in effect on the date hereof;
(c) references herein to "Articles", "Sections", "Subsections",
"paragraphs", and other subdivisions without reference to a document are to
designated Articles, Sections, Subsections, paragraphs and other subdivisions
of this Deed;
(d) a reference to a Subsection without further reference to a
Section is a reference to such Subsection as contained in the same Section in
which the reference appears, and this rule shall also apply to paragraphs and
other subdivisions;
(e) the words "herein", "hereof", "hereunder" and other words of
similar import refer to this Deed and the Statutory Mortgage as a whole and
not to any particular provision; and
(f) the term "include" or "including" shall mean without
limitation by reason of enumeration.
Section 6.09 Successors and Assigns.
This Deed and the Statutory Mortgage shall inure to the benefit of
and be binding upon the Shipowner and the Mortgagee and their respective
successors and assigns.
Section 6.10 Consent to Jurisdiction.
Any legal suit, action or proceeding against the Shipowner arising
out of or relating to this Deed, the Statutory Mortgage, the Loan Agreements
or any other Security Document, or any transaction contemplated hereby or
thereby, may be instituted in any federal or state court in The City of New
York, State of New York and the Shipowner hereby waives any objection which it
may now or hereafter have to the laying of venue of any such suit, action or
proceeding, and the Shipowner hereby irrevocably submits to the jurisdiction
of any such court in any such suit, action or proceeding. The Shipowner
hereby irrevocably appoints and designates CT Corporation System, having an
address at 1633 Broadway, New York, New York, its true and lawful
attorney-in-fact and duly authorized agent for the limited purpose of accepting
service of legal process and the Shipowner agrees that service of process upon
such party shall constitute personal service of such process on the Shipowner.
The Shipowner shall maintain the designation and appointment of such
authorized agent until all amounts payable under this Deed, the Statutory
Mortgage, the Loan Agreements and the other Security Documents shall have been
paid in full. If such agent shall cease to so act, the Shipowner shall
immediately designate and appoint another such agent satisfactory to the
Mortgagee and shall promptly deliver to the Mortgagee evidence in writing of
such other agent's acceptance of such appointment.
Section 6.11 Payment.
All monies payable by the Shipowner to the Mortgagee shall be paid
in Dollars without deduction for or on account of any present or future taxes
or imposts whatsoever levied or assessed by or within any state or nation or
any political subdivision or taxing authority thereof or therein and the
Shipowner shall indemnify the Mortgagee against all such taxes or imposts.
The Shipowner shall, subject to the prior written approval of the Mortgagee
(such approval not to be unreasonably withheld), be entitled to take action in
the name of the Mortgagee at the Shipowner's expense against any taxing
authority in respect of any withholding or other taxes for which the Shipowner
have indemnified the Mortgagee, and the Mortgagee agrees to reasonably
cooperate with the Shipowner in taking such action. If as a result of any
such action any moneys are received that are attributable to such indemnified
taxes (including any interest thereon paid by such taxing authority) the same
shall be recovered by the Shipowner.
Section 6.12 No waiver of Preferred Status.
No provision of this Deed and the Statutory Mortgage shall be
deemed to be a stipulation that the Mortgagee waives the priority status of
the Statutory Mortgage given by the laws of Bermuda. Any provision of this
Mortgage which would otherwise constitute such a stipulation, to such extent,
shall have no force or effect.
Section 6.13 Conveyancing Act Restrictions.
The restriction on the right of consolidating mortgages imposed by
Section 29 of the Conveyancing Act of 1983 or any other statutory provision
having similar effect shall not apply to the mortgages hereby created or to be
created pursuant to this Deed.
IN WITNESS whereof the Shipowner has caused its common seal to be
hereunto affixed and the Mortgagee has duly executed this Deed on the day and
year first before written.
SCHEDULE 1
Defined Terms Used in the Deed
"Acceptable Replacement Charter" means any replacement charter which
satisfies each of the following requirements: (i) the charter is a bareboat
charter and requires that the charterer thereunder "gross up" charterhire
payments to indemnify and hold the Holders of the Securities harmless from any
withholding tax imposed on the charterhire payments or on the payments on the
Securities; (ii) the charterhire payments payable during the non-cancelable
term of such replacement charter, after giving effect to (1) any "gross up" of
such amounts as a result of any withholding tax on such charterhire payments,
(2) the receipt of the Termination Payment and (3) all fees and expenses
incurred in connection with the rechartering of the Vessel, provide sufficient
funds for the payment in full when due of (A) the Allocated Principal Amount
of the Term Mortgage Notes for the related Vessel and interest thereon in
accordance with the revised schedule of sinking fund and principal payments,
that is applicable upon termination of the related Initial Charter, (B) the
amount of Recurring Fees and Taxes for such Vessel, (C) the amount of
Management Fees and Technical Advisor's Fees for such Vessel, (D) the amount of
fees and expenses of the Indenture Trustee and Collateral Trustee allocable to
such Vessel and (E) an amount at least equal to 30% of the estimated amounts,
on a per annum basis, referred to in clauses (B), (C) and (D) above for
miscellaneous or unexpected expenses; and (iii) the Rating Agencies shall have
confirmed in writing to the Trustee that the terms and conditions of such
proposed charter will not result in the withdrawal or reduction of the then
current ratings of the Term Mortgage Notes.
"Allowable Investments" means for the Shipowner, its investment in the
Vessel and any Restricted Payment permitted to be made by the Shipowner and
certain obligations incurred in the ordinary course of the performance of the
Management Agreement.
"Assignment of Charter" means the assignment between the Shipowner and
the Mortgagee, as amended from time to time in accordance with the terms
thereof, together with the documents contemplated thereby, pursuant to which
the Shipowner assigns to the Mortgagee all of its right, title and interest
in, to and under the Initial Charter.
"Assignment of Earnings and Insurances" means the assignment between the
Shipowner and the Mortgagee, as amended from time to time in accordance with
the terms thereof, pursuant to which the Shipowner assigns to the Mortgagee
all of its right, title and interest in, to and under the freights and hires
(as well as any charters entered into after the Closing Date) with respect to
the Vessel.
"Assignment of Guarantee" means the assignment between the Shipowner and
the Mortgagee, as amended from time to time in accordance with the terms
thereof, pursuant to which the Shipowner assigns to the Mortgagee all of its
right, title and interest in, to and under the Chevron Guarantee.
"Business Day" means any day other than a Saturday, a Sunday or a day on
which banking institutions in New York, New York, or in the city and state
where the Trustee's principal offices are located, are authorized or are
obligated by law, executive order or governmental decree to be closed.
"Charter" means that certain Bareboat Charter, dated as of July 1, 1994,
between the Charterer and Shipowner.
"Charterer" means Chevron Transport Corporation.
"Classification society" means a private organization which has as its
purpose the supervision of vessels during their construction and afterward, in
respect to their seaworthiness and upkeep, and the placing of vessels in
grades or "classes" according to the society's rules for each particular type
of vessel.
"Closing Date" means _________, 1994.
"Code" means the United States Internal Revenue Code of 1986 and the
corresponding provisions of any successor statute.
"Collateral Trustee" means Chemical Trust Company of California.
"Compulsory Acquisition" means requisition for title or other compulsory
acquisition of the Vessel (otherwise than by requisition for hire), capture,
seizure, detention or confiscation of the Vessel by any other government or by
Persons acting or purporting to act on behalf of any government or
governmental authority.
"Default Period" means the period commencing the date any payment
hereunder was due to but not including the date such payment is paid in full.
"Default Rate" means a rate per annum for each day during the Default
Period until such payment shall be paid in full equal to 1.50% above LIBOR at
the commencement of such period.
"Dollar" or "$" means the lawful currency of the United States of
America.
"Earnings" includes all monies whatsoever due or to become due to the
Shipowner at any time arising out of the use or operation of the Vessel or
otherwise including (but without prejudice to the generality of the foregoing)
all sums due and payable to the Shipowner under and pursuant to the Charter
and all freight, hire and passage monies and compensation payable to the
Shipowner in the event of requisition of the Vessel for hire, remuneration for
salvage and towage, services, demurrage and detention moneys and any other
damages for breach (or payments for variation or termination) of any
charterparty or any contract of employment of the Vessel and all earnings of
the Vessel due or to become due to the Shipowner.
"Event of Default" means an Event of Default under Section ____ of the
Loan Agreement.
"Governmental Approval" means any authorization, consent, approval,
license, franchise, lease, ruling, permit, tariff, rate, certification,
exemption, filing or registration by or with any Governmental Authority
relating to the ownership of the Collateral or to the execution, delivery or
performance of the Loan Agreement or any Security Document.
"Governmental Authority" means the federal government, any state or
other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government and any other governmental entity with authority over the
Shipowner or operation of the Vessels.
"Indebtedness" means the payment, performance or other obligations of
any kind whatsoever of the Shipowner under and pursuant to the Loan Agreements
and the Security Documents, together with interest thereon, and all other sums
which may be or become due to the Deed and the Statutory Mortgagee under or
pursuant to the terms thereof and hereof.
"Insurance" means any policies and contracts of insurance and entries in
any protection and indemnity or war risks association which are effected by or
on behalf of the Shipowner in respect of the Vessel or otherwise in connection
with the Vessel, including but not limited to any insurance monies received by
the Shipowner pursuant to clauses 12 and 13 of the Charter and including all
claims and returns of premiums thereunder and including any compensation
payable by whomsoever to the Shipowner by virtue of requisition of the Vessel
for title or confiscation or seizure of the Vessel by any government or person
or agency purporting to act on behalf of any government.
"Issue of One Debenture" means each Issue of One Debenture between the
Shipowner and the Mortgagee, as amended from time to time in accordance with
the terms thereof, pursuant to which the Shipowner grants to the Mortgagee a
security interest in all of its assets.
"Law" means any statute, law, rule, regulation, ordinance, order, code,
policy or rule of common law, now or hereafter in effect, and any judicial or
administrative interpretation thereof by a Governmental Authority or
otherwise, including any judicial or administrative order, consent decree or
judgment.
"Lien" means any mortgage, lien (statutory or other), pledge, security
interest, encumbrance, claim, hypothecation, assignment for security, deposit
arrangement or preference or other security agreement of any kind or nature
whatsoever. For purposes of the Loan Agreement, a Person shall be deemed to
own subject to a Lien any property which it has acquired or holds subject to
the interest of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement.
"Loan Agreements" means, collectively, the Serial Loan Agreement and the
Term Loan Agreement.
"Management Agreement" means the management agreement between the
Shipowner, the Manager and Barber Ship Management Group.
"Manager" means the Person performing the duties of the Manager under the
Management Agreement, initially P.D. Gram & Co. ans.
"Obligations" means, collectively, the Serial Obligations and the Term
Obligations.
"Optional Termination Date" means either _________, 2005, ______ 2007 or
_____ 2009.
"Other Loan Agreements" means, collectively, the six loan agreements,
two each between the Mortgagee and each of the Other Owners relating to the
Other Loans.
"Other Loans" means each of the loans from California Petroleum
Transport Corporation to each of the Other Owners made on the Closing Date,
having an aggregate initial principal amount of $______________..
"Other Owners" means Calpetro Tankers (Bahamas I) Limited, Calpetro
Tankers (Bahamas II) Limited and Calpetro Tankers (Bahamas III) Limited.
"Payment Date" means each ________ and ______________ commencing
___________ 1994.
"Permitted Liens" means the Charter, liens for crew's wages accrued for
not more than three months or for collision or salvage, liens in favor of
suppliers of necessaries or other similar liens arising in the ordinary course
of its business (accrued for not more than three months) or liens for loss,
damage or expense, which are fully covered by insurance or, in respect of
which, a bond or other security has been posted by the Shipowner with the
appropriate court or other tribunal to prevent the arrest or secure the
release of the Vessel from arrest on account of such claim or lien; provided,
however, that so long as the Charter is in effect "Permitted Liens" shall mean
those liens, claims and encumbrances permitted under the Charter.
"Person" means an individual, a partnership, a corporation, a joint
venture, an unincorporated association, a joint-stock company, a trust, or
other entity or a government or any agency or political subdivision thereof.
"Proceeding" means any suit in equity, action at law, or other judicial
or administrative proceeding.
"Purchase Agreement" means the Purchase Agreement, dated as of
_________________, between the Shipowner and the Initial Charterer wherein the
Shipowner purchases the Vessel from the Initial Charterer.
"Rating Agencies" means Moody's Investors Service, Inc., Standard &
Poor's Rating Group and Duff & Phelps Credit Rating Co.
"Requirement of Law" means, as to any Person, the certificate of
incorporation and by-laws or partnership agreement or other organizational or
governing documents of such Person, and, any Law applicable to or binding upon
such Person or any of its properties or to which such Person or any of its
properties is subject.
"Security Documents" means the Loan Agreements, the Other Loan
Agreements, the Deed, the Statutory Mortgage, the Assignment of Charter, the
Assignment of Earnings and Insurances, the Assignment of Guarantee, the Stock
Pledge Agreement, the Assignment of Management Agreement, the Assignment of
Purchase Agreement, the Issue of One Debenture, collectively.
"Serial Loan" means the loan in the initial principal amount of
$________ made by the Mortgagee to the Shipowner under the Serial Loan
Agreement.
"Serial Loan Agreement" means the Loan Agreement, dated as of _________
1, 1994, between the Shipowner and the Mortgagee.
"Serial Obligations" means the payment, performance or obligations of
any kind or nature whatsoever by the Shipowner under and pursuant to the
Serial Loan Agreements, any Security Document and any instrument, agreement or
document referred to therein.
"Stock Pledge Agreement" means the Stock Pledge Agreement dated as of
______ 1, 1994, between the Mortgagee and California Tankers Investments
Limited.
"State" means any state of the United States of America and, in
addition, the District of Columbia.
"Term Loan" means the loan in the initial principal amount of $_________
made by the Mortgagee to the Shipowner under the Term Loan Agreement.
"Term Loan Agreement" means the Loan Agreement, dated as of _________ 1,
1994, between the Shipowner and the Mortgagee.
"Term Obligations" means the payment, performance or obligations of any
kind or nature whatsoever of the Shipowner under and pursuant to the Term Loan
Agreements, any Security Document and any instrument, agreement or document
referred to therein.
"Total Loss" means either (a) actual or constructive or compromised or
arranged total loss of the Vessel, (b) Compulsory Acquisition of the Vessel or
(c) if so declared by the Initial Charterer at any time and in its sole
discretion a requisition for hire of the Vessel for a period in excess of 180
days.
The Common Seal of )
Calpetro Tankers (IOM) )
Limited was hereunto )
affixed in the presence of )
- -----------------------------
Director
- -----------------------------
Director/Secretary
ACKNOWLEDGEMENT
STATE OF NEW YORK )
:ss.:
COUNTY OF NEW YORK )
On this day of _________ __ 1994_, before me personally came
__________________ to me known, and known to me to be the person who executed
the foregoing instrument, who being by me duly sworn, did depose and say that
he resides at ______________________________________ that he is the
attorney-in-fact for CalPetro Tankers (IOM) Limited the corporation described
in, and which executed the foregoing instrument; that it was so affixed by
order of the Board of Directors of said corporation and that he signed his
name thereto by like order.
EXHIBIT A
BROKER'S LETTER OF UNDERTAKING
(date)
_____________________
Re: CalPetro Tankers (IOM) Limited
Owner of m.t. (the "Vessel")
We confirm that we have effected insurances for the account of the
above Owner as set out in Appendix "A" attached hereto.
Pursuant to instructions received from CalPetro Tankers (IOM)
Limited (the "Owner"), and in consideration of your approving our appointment
as Brokers in connection with the insurances covered by this letter, we hereby
undertake:
1. to hold the Insurance Slips or Contracts, the Policies when
issued, and any renewals of such Policies or new Policies or
any Policies substituted (with your consent) therefor and
the benefit of the insurance thereunder to your order in
accordance with the terms of the Notice of Assignment and
Loss Payable Clause set out in Appendix "B" attached hereto;
and
2. to have endorsed on each and every Policy as and when the
same is issued a copy of the Notice of Assignment and Loss
Payable Clause in the form of Appendix "B" attached hereto
dated and signed by the Shipowner and acknowledged by
Underwriters in accordance with market practice; and
3. to advise you immediately of any material changes which may
be made to the terms of the insurances or if we cease to be
Brokers for purposes of said insurances; and
4. to advise you, not later than one month before expiry of
said insurances, in the event of our not having received
notice of renewal instructions from the Shipowner and/or its
agents, and in the event of our receiving instructions to
renew said insurances to advise you promptly of the details
thereof.
Our above undertakings are given subject to our lien on the
Policies for premiums for the Vessel and subject to our right of cancellation
on default in payment of such premiums. We undertake to advise you
immediately if any premiums are not paid to us by the applicable due date and
not to exercise such rights of cancellation without giving you (i) fourteen
(14) days' prior notice in writing, either by letter to the above address or
by telex or cable to ________________, respectively, and (ii) a reasonable
opportunity of paying any premiums outstanding except it is understood that in
the case of War Risks the terms of the Automatic Termination of Cover Clause
contained in the War Risks Policies shall override any undertakings given by
us as Brokers. We further undertake and agree that in the event of a total
loss of the Vessel, or an arranged, compromised or constructive total loss,
our lien on the Policies and the proceeds thereof shall be limited to any
other premiums or other amounts due in respect of Vessel or interest insured
under the Policies.
Notwithstanding the terms of the said Loss Payable clause and the
said Notice of Assignment, unless and until we receive notice from you to the
contrary, we shall be empowered to arrange for a collision and/or salvage
guaranty to be given in the event of bail being required in order to prevent
the arrest of the Vessel or to secure the release of the Vessel from arrest
following a casualty. We undertake to advise you immediately in the event of
our having arranged for a collision and/or salvage guaranty. Where a guaranty
has been given as aforesaid and the guarantor has paid an amount under the
guaranty in respect of such claim, there shall be payable directly to the
guarantor out of the proceeds of the said Policies an amount equal to the
amount so paid.
Finally, it is understood that all claims shall be collected
through us, as Brokers, and that in collecting such claims we are acting on
your behalf as assignee of the insurances covered by this letter.
Yours faithfully,
[insert name of Broker]
By:_______________________
Director
Table of Contents
Page No.
ARTICLE I
DEFINITIONS
Section 1.01 Definitions................................................... 1
ARTICLE II
SECURITY................................................................... 2
Section 2.01 Security...................................................... 2
Section 2.02 Indebtedness.................................................. 3
ARTICLE III
REPRESENTATIONS AND WARRANTIES............................................. 3
Section 3.01 Representations and Warranties of the Shipowner............... 3
ARTICLE IV
COVENANTS.................................................................. 5
Section 4.01 Payment of Indebtedness....................................... 6
Section 4.02 Corporate Existence........................................... 6
Section 4.03 Insurance..................................................... 6
Section 4.04 Defense of Title.............................................. 13
Section 4.05 Discharge of Liens............................................ 13
Section 4.06. Liens........................................................ 14
Section 4.07 Use of Vessel................................................. 14
Section 4.08 Notifications................................................. 15
Section 4.09 Payment of Crew's Wages and Allotments........................ 16
Section 4.10 Charter of Vessel............................................. 16
Section 4.11 Maintenance of Vessel......................................... 16
Section 4.12 Statement of Classification Society........................... 17
Section 4.13 Surveys of Vessel............................................. 17
Section 4.14 Access to Vessel.............................................. 17
Section 4.15 Books and Records............................................. 17
Section 4.16 Registration of Statutory Mortgage; Recordation of Statutory
Mortgage...................................................... 17
Section 4.17 Notice of Mortgage............................................ 18
Section 4.18 Further Assurances............................................ 18
Section 4.19 Withholding Tax.............................................. 19
Section 4.20 Expenses..................................................... 19
Section 4.21 Indebtedness................................................. 20
Section 4.22 Business of Shipowner......................................... 20
Section 4.23 No Bankruptcy Petition........................................ 20
Section 4.24 Consolidation, Merger and Sale of Assets..................... 20
Section 4.25 Loans, Advances and Other Liabilities......................... 20
Section 4.26 Restricted Payment............................................ 20
ARTICLE V
EVENTS OF DEFAULT; REMEDIES................................................ 21
Section 5.01 Events of Default............................................. 21
Section 5.02 Remedies...................................................... 22
Section 5.03 Sale of the Vessel............................................ 24
Section 5.04 Mortgagee as Attorney-in Fact................................. 25
Section 5.05 Appointment of Receiver....................................... 25
Section 5.06 Arrest or Detention of Vessel................................. 27
Section 5.07 Defense of Suits.............................................. 27
Section 5.08 Cumulative Rights, Powers and Remedies........................ 27
Section 5.09 Application of Proceeds....................................... 28
Section 5.10 Mortgagee's Right to Remedy Defaults.......................... 29
Section 5.11 Delegation of Powers.......................................... 30
Section 5.12 Legal Actions................................................. 30
Section 5.13 Deed and Statutory Mortgage Subject to Rights of Charterer under
the Charter.................................................... 30
ARTICLE VI
MISCELLANEOUS PROVISIONS................................................... 30
Section 6.01 Performance by Charter........................................ 30
Section 6.02 Discharge of Mortgage......................................... 31
Section 6.03 Indemnity..................................................... 31
Section 6.04 Governing Law................................................. 32
Section 6.05 Severability.................................................. 32
Section 6.06 Notices....................................................... 32
Section 6.07 Headings...................................................... 32
Section 6.08 General Interpretive Principles............................... 32
Section 6.09 Successors and Assigns........................................ 33
Section 6.10 Consent to Jurisdiction....................................... 33
Section 6.11 Payment....................................................... 34
Section 6.12 No waiver of Preferred Status................................. 34
Section 6.13 Conveyancing Act Restrictions................................. 34
ASSIGNMENT OF A FIRST PREFERRED SHIP MORTGAGE
THIS ASSIGNMENT OF THE FIRST PREFERRED SHIP MORTGAGE ("this Assignment")
is made the ___ day of _____________, 1994 by California Petroleum Transport
Corporation, a corporation organized under the laws of the State of Delaware
(herein called the "Assignor"), in favor of Chemical Trust Company of
California, a corporation organized under the laws of the State of California
(herein called the "Assignee").
W I T N E S S E T H T H A T:
WHEREAS:
(A) CalPetro Tankers (Bahamas III) Limited (herein called the
"Owner"), a corporation incorporated under the laws of the Commonwealth of The
Bahamas with its registered office at Mareva House, 4 George Street, Nassau,
Bahamas, has granted and executed a certain First Preferred Ship Mortgage
dated ____ __, 1994 (the "Mortgage") in favor of the Assignor in the amount
of U.S. $286,400,000 and interest and performance of mortgage covenants (the
"Outstanding Indebtedness") on the vessel m.t. William E. Crain, documented
under the laws of the Republic of Liberia, Official No. _______ (the
"Vessel"), the Mortgage having been recorded on _____________, 199__ at E.D.T.
in the Office of the Deputy Commissioner of Maritime Affairs of the Republic
of Liberia at New York, New York, in Book PM ____ at Page _____ to secure the
payment by the Owner to the Assignor of the Outstanding Indebtedness;
(B) The Assignor has agreed to execute and deliver to the Assignee
this Assignment, as security for the prompt and due payment to the Assignee of
certain securities issued by the Assignor, pursuant to two indentures attached
hereto as Exhibits A and B (the "Serial Indenture" and the "Term Indenture",
and collectively, the "Indentures"). Pursuant to the Serial Indenture dated
as of ____ 1, 1994, between the Assignor and the Assignee, the Assignor issued
the Serial First Preferred Mortgage Notes (the "Serial Notes") in the initial
amount of $168,500,000 and pursuant to the Term Indenture dated as of ____ 1,
1994, between the Assignor and the Assignee, the Assignor issued the Term
First Preferred Mortgage Notes in the initial amount of $117,900,000 (the
Serial Notes and the Term Notes, collectively, the "Securities"). This
Assignment is security for the due and prompt payment of the Securities and
any and all other sums which may be or become due to the Assignee and/or the
holders of the Securities under or pursuant to the Serial Indenture and the
Term Indenture, equally and ratably, and this Assignment and also to secure
the exact performance and observance and compliance with all and any of the
covenants and agreements and terms and conditions contained in the Serial
Indenture and the Term Indenture, equally and ratably, and this Assignment and
the other Security Documents (collectively, the "Indebtedness").
NOW, THEREFORE, in consideration of the premises and such other
consideration, the receipt and sufficiency of which is hereby acknowledged by
the Assignor:
1. Capitalized terms used in this Assignment and not otherwise
defined herein shall have the meanings assigned to such terms in
the Indentures, attached as Exhibits A and B hereto, and the
definitions of such terms shall be equally applicable to both the
singular and the plural forms of such terms.
2. The Assignor does hereby sell, assign, transfer and set over unto
the Assignee for the benefit of the assignee and its successors
and assigns, in consequence of the Assignment, all of the
assignor's right, title and interest in, to and under the Mortgage
and all of the assignor's right, title and interest in and to the
Vessel together with all of the boilers, engines, machinery,
masts, rigging, boats, anchors, chains, tackle, apparel,
furniture, fittings and equipment and all other appurtenances
thereto appertaining or belonging to the exclusive use of the
Vessel, whether now owned or hereafter acquired, whether on board
or not, all additions, improvements and replacements hereafter
made in or to the Vessel.
IN WITNESS WHEREOF, the Assignor has caused this Assignment to be
executed on the day and year first above written.
CALIFORNIA PETROLEUM
TRANSPORT CORPORATION
By: _______________
Name: _______________
Title:_______________
State of New York )
: ss.:
County of New York )
On the (date) day of (month), 1994, before me personally came
(attorney), to me known, who being by me duly sworn did depose and say that
he resides at (address); that he is an attorney-in-fact of California
Petroleum Transport Corporation, the corporation described in and which
executed the foregoing Assignment of Mortgage; and that he signed his name
thereto by order of the Board of Directors of said corporation.
__________________________
Notary Public