UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q 

(Mark One)

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2018

OR

 

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from          to         

 

Commission File Number        1-37836-1     

 

INTERNATIONAL SEAWAYS, INC.

(Exact name of registrant as specified in its charter)

 

MARSHALL ISLANDS		98-0467117
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

 

600 Third Avenue, 39th Floor, New York, New York		10016
(Address of principal executive offices)		(Zip Code)

 

(212) 578-1600
Registrant's telephone number, including area code

 

Former name, former address and former fiscal year, if changed since last report

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.                    YES x NO ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 

YES x NO ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ¨	Accelerated filer x	Emerging growth company x
Non-accelerated filer ¨	Smaller reporting company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ¨ NO x

 

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. YES x NO ¨

 

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date. The number of shares outstanding of the issuer’s common stock as of August 6, 2018: common stock, no par value 29,177,612 shares.

  

INTERNATIONAL SEAWAYS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

DOLLARS IN THOUSANDS

(UNAUDITED)

  

		June 30,				December 31,
		2018				2017
ASSETS
Current Assets:
Cash and cash equivalents		$	115,843			$	60,027
Voyage receivables, including unbilled of $59,015 and $54,701			62,408				58,187
Other receivables, including pool deposits of $6,000 and $0			10,391				4,411
Inventories			4,828				3,270
Prepaid expenses and other current assets			8,573				5,881
Current portion of derivative asset			1,738				16
Total Current Assets			203,781				131,792
Restricted cash			27,010				10,579
Vessels and other property, less accumulated depreciation of $317,584 and $307,010			1,405,577				1,104,727
Vessel held for sale, net			-				5,108
Deferred drydock expenditures, net			21,810				30,528
Total Vessels, Deferred Drydock and Other Property			1,427,387				1,140,363
Investments in and advances to affiliated companies			275,034				378,894
Long-term derivative asset			7,875				886
Other assets			5,393				1,970
Total Assets		$	1,946,480			$	1,664,484
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable, accrued expenses and other current liabilities		$	32,967			$	22,805
Payable to OSG			34				367
Payable associated with acquisition of assets			20,954				-
Current installments of long-term debt			48,492				24,063
Total Current Liabilities			102,447				47,235
Long-term debt			789,537				528,874
Other liabilities			3,955				2,721
Total Liabilities			895,939				578,830
Commitments and contingencies
Equity:
Capital - 100,000,000 no par value shares authorized; 29,177,612 and 29,089,865
shares issued and outstanding			1,307,645				1,306,606
Accumulated deficit			(228,657	)			(180,545	)
			1,078,988				1,126,061
Accumulated other comprehensive loss			(28,447	)			(40,407	)
Total Equity			1,050,541				1,085,654
Total Liabilities and Equity		$	1,946,480			$	1,664,484

 

 

 

See notes to condensed consolidated financial statements

 

 

INTERNATIONAL SEAWAYS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS

(UNAUDITED)

  

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2018				2017				2018				2017
Shipping Revenues:
Pool revenues, including $16,355, $2,702, $29,125 and $8,416
received from companies accounted for by the equity method		$	33,601			$	42,339			$	69,115			$	92,112
Time and bareboat charter revenues			6,608				14,442				14,521				31,792
Voyage charter revenues			16,700				15,176				25,251				36,803
			56,909				71,957				108,887				160,707
Operating Expenses:
Voyage expenses			6,897				2,677				10,074				7,295
Vessel expenses			31,528				35,373				68,186				69,101
Charter hire expenses			10,723				11,036				19,346				22,387
Depreciation and amortization			16,804				19,099				34,428				37,715
General and administrative			6,064				5,096				12,093				11,370
Third-party debt modification fees			1,302				7,939				1,302				7,939
Separation and transition costs			-				296				-				1,031
Gain on disposal of vessels and other property, net of impairments			(6,740	)			-				(167	)			-
Total operating expenses			66,578				81,516				145,262				156,838
(Loss)/income from vessel operations			(9,669	)			(9,559	)			(36,375	)			3,869
Equity in income of affiliated companies			8,822				13,866				17,162				27,472
Operating (loss)/income			(847	)			4,307				(19,213	)			31,341
Other expense			(4,863	)			(6,644	)			(4,184	)			(6,440	)
(Loss)/income before interest expense and income taxes			(5,710	)			(2,337	)			(23,397	)			24,901
Interest expense			(13,086	)			(9,278	)			(24,707	)			(18,445	)
(Loss)/income before income taxes			(18,796	)			(11,615	)			(48,104	)			6,456
Income tax provision			-				(4	)			(8	)			(8	)
Net (loss)/income		$	(18,796	)		$	(11,619	)		$	(48,112	)		$	6,448
Weighted Average Number of Common Shares Outstanding:
Basic			29,130,230				29,194,240				29,118,271				29,187,286
Diluted			29,130,230				29,194,240				29,118,271				29,221,779
Per Share Amounts:
Basic and diluted net (loss)/income per share		$	(0.65	)		$	(0.40	)		$	(1.65	)		$	0.22

 

 

 

See notes to condensed consolidated financial statements

 

 

INTERNATIONAL SEAWAYS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)/INCOME

DOLLARS IN THOUSANDS

(UNAUDITED)

  

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2018				2017				2018				2017
Net (Loss)/Income		$	(18,796	)		$	(11,619	)		$	(48,112	)		$	6,448
Other Comprehensive Income, net of tax:
Net change in unrealized losses on cash flow hedges			3,099				934				10,569				4,252
Defined benefit pension and other postretirement benefit plans:
Net change in unrecognized prior service costs			77				(42	)			36				(60	)
Net change in unrecognized actuarial losses			1,743				(433	)			1,355				(612	)
Other Comprehensive Income, net of tax			4,919				459				11,960				3,580
Comprehensive (Loss)/Income		$	(13,877	)		$	(11,160	)		$	(36,152	)		$	10,028

 

 

 

See notes to condensed consolidated financial statements

 

 

INTERNATIONAL SEAWAYS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

DOLLARS IN THOUSANDS

(UNAUDITED)

 

		Six Months Ended
		June 30,
		2018				2017
Cash Flows from Operating Activities:
Net (loss)/income		$	(48,112	)		$	6,448
Items included in net (loss)/income not affecting cash flows:
Depreciation and amortization			34,428				37,715
Loss on write-down of vessels			948				-
Amortization of debt discount and other deferred financing costs			2,651				3,930
Deferred financing costs write-off			2,273				7,020
Stock compensation, non-cash			1,525				1,733
Earnings of affiliated companies			(17,548	)			(27,243	)
Other – net			233				130
Items included in net (loss)/income related to investing and financing activities:
Gain on disposal of vessels and other property, net			(1,115	)			-
Loss on extinguishment of debt			1,295				-
Cash distributions from affiliated companies			35,863				10,103
Payments for drydocking			(2,701	)			(15,860	)
Insurance claims proceeds related to vessel operations			3,528				5
Changes in operating assets and liabilities:
(Increase)/decrease in receivables			(4,221	)			4,268
Decrease in payable to OSG			(333	)			(688	)
Decrease in deferred revenue			(903	)			(4,524	)
Net change in inventories, prepaid expenses and other current assets and
accounts payable, accrued expense, and other current and long-term liabilities			2,312				(9,243	)
Net cash provided by operating activities			10,123				13,794
Cash Flows from Investing Activities:
Expenditures for vessels and vessel improvements			(128,925	)			(18,583	)
Proceeds from disposal of vessels and other property			126,504				-
Expenditures for other property			(320	)			(374	)
Investments in and advances to affiliated companies, net			1,966				(104	)
Repayments of advances from joint venture investees			93,142				8,397
Net cash provided by/(used in) investing activities			92,367				(10,664	)
Cash Flows from Financing Activities:
Issuance of debt, net of issuance and deferred financing costs			72,924				486,302
Extinguishment of debt			(60,000	)			(458,416	)
Payments on debt			(42,770	)			(1,546	)
Cash paid to tax authority upon vesting of stock-based compensation			(397	)			(241	)
Net cash (used in)/provided by financing activities			(30,243	)			26,099
Net increase in cash, cash equivalents and restricted cash			72,247				29,229
Cash, cash equivalents and restricted cash at beginning of year			70,606				92,001
Cash, cash equivalents and restricted cash at end of period		$	142,853			$	121,230

 

 

 

See notes to condensed consolidated financial statements

 

 

INTERNATIONAL SEAWAYS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

DOLLARS IN THOUSANDS

(UNAUDITED)

 

										Accumulated
										Other
						Accumulated				Comprehensive
		Capital				Deficit				Loss				Total
Balance at January 1, 2018		$	1,306,606			$	(180,545	)		$	(40,407	)		$	1,085,654
Net loss			-				(48,112	)			-				(48,112	)
Other comprehensive income			-				-				11,960				11,960
Forfeitures of vested restricted stock awards			(486	)			-				-				(486	)
Compensation relating to restricted stock awards			416				-				-				416
Compensation relating to restricted stock units awards			695				-				-				695
Compensation relating to stock option awards			414				-				-				414
Balance at June 30, 2018		$	1,307,645			$	(228,657	)		$	(28,447	)		$	1,050,541
Balance at January 1, 2017		$	1,306,236			$	(74,457	)		$	(52,267	)		$	1,179,512
Net income			-				6,448				-				6,448
Other comprehensive income			-				-				3,580				3,580
Forfeitures of vested restricted stock awards			(242	)			-				-				(242	)
Compensation relating to restricted stock awards			447				-				-				447
Compensation relating to restricted stock units awards			882				-				-				882
Compensation relating to stock option awards			404				-				-				404
Balance at June 30, 2017		$	1,307,727			$	(68,009	)		$	(48,687	)		$	1,191,031

 

 

 

See notes to condensed consolidated financial statements

 

 

Note 1 — Basis of Presentation:

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements include the accounts of International Seaways, Inc. (“INSW”), a Marshall Islands corporation, and its wholly owned subsidiaries. The Company owns and operates a fleet of 53 oceangoing vessels, including six vessels that have been chartered-in under operating leases and six vessels in which the Company has interests through its joint ventures, engaged primarily in the transportation of crude oil and refined petroleum products in the International Flag trade through its wholly owned subsidiaries. Unless the context indicates otherwise, references to “INSW”, the “Company”, “we”, “us” or “our”, refer to International Seaways, Inc. and its subsidiaries.

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. They do not include all of the information and notes required by generally accepted accounting principles in the United States. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of the results have been included. Operating results for the three and six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018.

 

The condensed consolidated balance sheet as of December 31, 2017 has been derived from the audited financial statements at that date but does not include all of the information and notes required by generally accepted accounting principles in the United States for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

 

All intercompany balances and transactions within INSW have been eliminated. Investments in 50% or less owned affiliated companies, in which INSW exercises significant influence, are accounted for by the equity method.

 

Certain prior year amounts have been reclassified to conform to the current year presentation as described in Note 2, “Significant Accounting Policies.”

 

Dollar amounts, except per share amounts, are in thousands.

 

Note 2 — Significant Accounting Policies:

 

Cash, cash equivalents and Restricted cash — Interest-bearing deposits that are highly liquid investments and have a maturity of three months or less when purchased are included in cash and cash equivalents. Restricted cash of $27,010 and $10,579 as of June 30, 2018 and December 31, 2017, respectively, represents legally restricted cash relating to the Company’s 2017 Term Loan Facility, Sinosure Credit Facility, ABN Term Loan Facility, and 10.75% Unsecured Subordinated Notes (as defined in Note 9, “Debt”). Such restricted cash reserves are included in the non-current assets section of the consolidated balance sheet.

 

Concentration of Credit Risk — Financial instruments that potentially subject the Company to concentrations of credit risk are voyage receivables due from charterers and pools in which the Company participates. During the three and six months periods ended June 30, 2018 and 2017, the Company did not have any individual customers who accounted for 10% or more of its revenues apart from the pools in which it participates. The pools in which the Company participates accounted in aggregate for 86% and 89% of consolidated voyage receivables at June 30, 2018 and December 31, 2017, respectively.

 

Deferred finance charges — Finance charges, excluding original issue discount, incurred in the arrangement and / or amendments resulting in the modification of debt are deferred and amortized to interest expense on either an effective interest method or straight-line basis over the life of the related debt. Unamortized deferred finance charges of $483 relating to the 2017 Revolver Facility are included in other assets in the condensed consolidated balance sheet as of June 30, 2018. Unamortized deferred financing charges of $30,194 relating to the 2017 Term Loan Facility, Sinosure Credit Facility, ABN Term Loan Facility, 8.5% Senior Notes and 10.75% Subordinated Notes and (as defined in Note 9, “Debt”) and $23,626 relating to the 2017 Term Loan Facility and the 2017 Revolver Facility are included in long-term debt in the condensed consolidated balance sheets as of June 30, 2018 and December 31, 2017, respectively. Interest expense relating to the amortization of deferred financing charges amounted to $800 and $1,456 for the three and six months ended June 30, 2018, respectively, and $1,864 and $3,800 for the three and six months ended June 30, 2017, respectively.

 

 

Revenue and expense recognition — On January 1, 2018, the Company adopted the provisions of ASC 606, Revenue from Contracts with Customers (ASC 606). The guidance provides a unified model to determine how revenue is recognized. In doing so, the Company makes judgments including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price, and allocating the transaction price to each performance obligation. Revenues are recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company’s contract revenues consist of revenues from time charters, bareboat charters, voyage charters and pool revenues.

 

Revenues from time charters are accounted for as fixed rate operating leases with an embedded technical management service component and are recognized ratably over the rental periods of such charters. Bareboat charters are accounted for as operating leases and the associated revenue is recognized ratably over the rental periods of such charters.

 

Voyage charters contain a lease component if the contract (i) specifies a specific vessel asset; and (ii) has terms that allow the charterer to exercise substantive decision-making rights, which have an economic value to the charterer and therefore allow the charterer to direct how and for what purpose the vessel is used. Voyage charter revenues and expenses are recognized ratably over the estimated length of each voyage. For a voyage charter which contains a lease component, revenue and expenses are recognized based on a lease commencement-to-discharge basis and the lease commencement date is the latter of discharge of the previous cargo or voyage charter contract signing. For voyage charters that do not have a lease component, revenue and expenses are recognized based on a load-to-discharge basis. Accordingly, voyage expenses incurred during a vessel’s positioning voyage to a load port in order to serve a customer under a voyage charter not containing a lease are considered costs to fulfill a contract and are deferred and recognized ratably over the load-to-discharge portion of the contract.

 

Under voyage charters, expenses such as fuel, port charges, canal tolls, cargo handling operations and brokerage commissions are paid by the Company whereas, under time and bareboat charters, such voyage costs are paid by the Company’s customers.

 

For the Company’s vessels operating in pools, revenues and voyage expenses are pooled and allocated to each pool’s participants on a time charter equivalent (“TCE”) basis in accordance with an agreed-upon formula. Accordingly, the Company accounts for its agreements with commercial pools as variable rate operating leases with an embedded technical management service component. For the pools in which the Company participates, management monitors, among other things, the relative proportion of the Company’s vessels operating in each of the pools to the total number of vessels in each of the respective pools, and assesses whether or not the Company’s participation interest in each of the pools is sufficiently significant so as to determine that the Company has effective control of the pool.

 

In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under its agreements, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.

 

As the Company’s performance obligations are services which are received and consumed by its customers as it performs such services, revenues are recognized over time proportionate to the days elapsed since the service commencement compared to the total days anticipated to complete the service. The minimum duration of services is less than one year for each of the Company’s current contracts.

 

Demurrage earned during a voyage charter represents variable consideration. The Company estimates demurrage at contract inception using either the expected value or most likely amount approaches. Such estimate is reviewed and updated over the term of the voyage charter contract.

 

The Company has elected the practical expedient to expense costs to obtain a contract with a customer (e.g. broker commissions) as incurred rather than defer and amortize such costs as the amortization period would be expected to be one year or less.

 

See Note 14, “Revenue,” for additional disclosures on revenue recognition and the impact of adopting ASC 606 on January 1, 2018.

 

 

Recently Adopted Accounting Standards — In January 2017, the FASB issued ASU 2017-01, Business Combinations (ASC 805), which revises the definition of a business and puts in place a new framework to assist entities in evaluating whether an acquired set of assets and activities should be accounted for as an acquisition of a business or as a group of assets. Under the current business combinations guidance, there are three elements of a business: inputs, processes, and outputs. ​The new framework adds an initial screen to determine if substantially all of the fair value of the gross assets acquired is concentrated in a single asset or group of similar assets. If that screen is met, the set is not a business. The new framework also specifies the minimum required inputs and processes necessary to be a business. It removes the need to consider a market participant’s ability to replace missing elements when all of the inputs or processes that the seller used in operating a business were not obtained. What qualifies as an input and process remains substantially the same as in the prior guidance. While processes would typically be documented, the guidance clarifies that the intellectual capacity of an organized workforce could also qualify as a process. Administrative systems (e.g., billing, payroll) are typically not considered processes that significantly contribute to the creation of outputs. The new guidance narrows the definition of “outputs” to be consistent with how they are described in ASC 606. As a result, fewer sets will be considered to have outputs. The standard is effective for annual periods beginning after December 31, 2017 and interim periods within that reporting period. Upon adoption of this standard, the Company concluded that the acquisition of six VLCC tankers (see Note 5, “Vessels”) should be accounted for as an acquisition of a group of assets as substantially all of the fair value of the gross assets acquired was concentrated in vessel assets.

 

In May 2017, the FASB issued ASU 2017-09, Compensation—Stock Compensation (ASC 718), which provides guidance in regards to a change to the terms or conditions of a share-based payment award. An entity is required to account for the effects of a modification unless all the following are met: (1) the fair value of the modified award is the same as the fair value of the original award immediately before the original award is modified; (2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified; (3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The guidance is to be applied prospectively to an award modified on or after the adoption date. The standard is effective for annual periods beginning after December 31, 2017 and interim periods within that reporting period. The adoption of this accounting policy had no impact on the Company’s consolidated financial statements since there were no stock award modifications during the six months ended June 30, 2018.

 

In March 2017, the FASB issued ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (ASC 715), which requires that an employer classify and report the service cost component in the same line item or items in the statement of operations as other compensation costs arising from services rendered by the pertinent employees during the period and disclose by line item in the statement of operations the amount of net benefit cost that is included in the statement of operations. The other components of net benefit cost would be presented in the statement of operations separately from the service cost component and outside the subtotal of income from operations. The standard is effective for interim and annual periods beginning after December 31, 2017. The standard requires application using a retrospective transition method and allows a practical expedient that permits an employer to use the amounts disclosed in its pension and other postretirement benefit plan note for the prior comparative periods as the estimation basis for applying the retrospective presentation requirements. Such practical expedient was not utilized by the Company. The adoption of this accounting standard resulted in the reclassification of $116 and $234 of net actuarial gains and $202 and $404 of benefit obligation interest costs from the general and administrative expense line to the other expense and interest expense lines on the condensed consolidated statements of operations for the three and six months ended June 30, 2017, respectively. Net periodic pension costs comprised of $1,339 and $1,168 of net actuarial losses and $157 and $353 of benefit obligation interest costs, are included in the other expense and interest expense lines on the condensed consolidated statements of operations for the three and six months ended June 30, 2018, respectively.

 

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (ASC 230): Restricted Cash, which requires that amounts generally described as restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The standard is effective for annual periods beginning after December 31, 2017 and interim periods within that reporting period. The adoption of this accounting standard resulted in the inclusion of restricted cash of $10,579 at December 31, 2017 in the beginning-of-period amounts shown on the statement of cash flows for the six months ended June 30, 2018.

 

 

In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments (ASC 230), which amends the guidance in ASC 230 on the classification of certain cash receipts and payments in the statement of cash flows. The primary purpose of the ASU is to reduce the diversity in practice that has resulted from the lack of consistent principles on this topic with respect to (1) debt prepayment or debt extinguishment costs; (2) settlement of zero-coupon debt; (3) contingent consideration payments made after a business combination; (4) proceeds from the settlement of insurance claims; (5) proceeds from the settlement of corporate-owned life insurance policies; (6) distributions received from equity method investees; (7) beneficial interests in securitization transactions; and (8) separately identifiable cash flows and application of the predominance principle. The standard is effective for interim and annual periods beginning after December 31, 2017. The guidance requires application using a retrospective transition method. We adopted the standard for classification of distributions received from equity method investees using the cumulative equity earnings approach, which required the retrospective reclassification of distributions received from certain affiliated companies accounted for by the equity method, from investing activities to operating activities. As a result, $93,142 of the total distributions of $129,005 received from certain affiliated companies accounted for by the equity method during the six months ended June 30, 2018 is presented as a cash inflow from investing activities while the balance of $35,863 is presented as a cash inflow from operating activities, and $8,397 of the total distributions of $18,500 received from certain affiliated companies accounted for by the equity method during the six months ended June 30, 2017 is presented as a cash inflow from investing activities while the balance of $10,103 is presented as a cash inflow from operating activities. In addition, the adoption of this accounting standard resulted in the separate line presentation of $3,528 and $5 of insurance proceeds received for various claims arising from the normal operations of our vessel fleet, in the operating activities section of the condensed consolidated statement of cash flows for the six months ended June 30, 2018 and 2017, respectively.

 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (ASC 606), a standard that supersedes virtually all of the existing revenue recognition guidance in U.S. GAAP. The standard establishes a five-step model that applies to revenue earned from a contract with a customer. The standard’s requirements also apply to the sale of some non-financial assets that are not part of an entity’s ordinary activities (e.g., sales of property or plant and equipment). Extensive disclosures are required, including disaggregation of total revenue, information about performance obligations, changes in contract asset and liability account balances between periods and key judgments and estimates. The FASB has issued several amendments to the standard, including clarification of the accounting for licenses of intellectual property and identifying performance obligations. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the cumulative catch-up transition method). The new standard is effective for us beginning January 1, 2018 and we adopted the standard using the cumulative catch-up transition method. See Note 14, “Revenue,” for further information.

 

Recently Issued Accounting Standards — In February 2016, the FASB issued ASU 2016-02, Leases (ASC 842), which requires lessees to recognize most leases on the balance sheet. This is expected to increase both reported assets and liabilities. The standard will be effective for the first interim reporting period within annual periods beginning after December 15, 2018, although early adoption is permitted. Lessees and lessors will be required to apply the new standard at the beginning of the earliest period presented in the financial statements in which they first apply the new guidance, using a modified retrospective transition method. The requirements of this standard include a significant increase in required disclosures. In July 2018, the FASB issued ASU 2018-10, Leases (ASC 842), which provides clarifying guidance on ASU 2016-02.

 

Also, in July 2018, the FASB issued ASU 2018-11, Leases (ASC 842), which updates requirements related to transition relief on comparative reporting at adoption and separating components of a contract for lessors. This update provides another transition method in addition to the existing transition method by allowing entities to initially apply the new leases standard at the adoption date (January 1, 2019, for calendar year-end public business entities) and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. In addition, this update provides lessors with a practical expedient, by class of underlying asset, to not separate nonlease components from the associated lease component and, instead, to account for those components as a single component if the nonlease components otherwise would be accounted for under the new revenue guidance (ASC 606) and both of the following are met: (1) the timing and pattern of transfer of the nonlease components and associated lease component are the same; and (2) the lease component, if accounted for separately, would be classified as an operating lease. If lease and nonlease components are aggregated under this practical expedient, a lessor would account for the combined component as follows: if the nonlease components associated with the lease component are the predominant component of the combined component, an entity is required to account for the combined component in accordance with the new revenue guidance; otherwise, the entity must account for the combined component as an operating lease in accordance with the new leases guidance. If elected, the practical expedient will need to be applied consistently as an accounting policy by class of underlying asset. Additional disclosures are also required. For entities that have not adopted ASC 842 before the issuance of this update, the effective date and transition requirements for the amendments in this update related to separating components of a contract are the same as the effective date and transition requirements in ASU 2016-02. Upon adoption of ASC 842, management expects that based on our current portfolio of leases, there will be an increase in assets and liabilities on the consolidated balance sheet due to the recognition of right-of-use assets (Vessels and other property) and corresponding lease liabilities which may be material. We are in the process of implementing changes to our systems and processes in conjunction with our review of lease agreements. We will adopt ASC 842 effective January 1, 2019 and expect to elect certain available transitional practical expedients.

 

 

In September 2017, the FASB issued ASU 2017-13, Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments, which allows certain public business entities (“PBEs”) that otherwise would not meet the definition of a public business entity except for a requirement to include its financial statements or financial information in another entity’s filings with the SEC, to elect to use non-PBE transition dates for the sole purpose of adopting ASU No. 2016-02, Leases (ASC 842), and ASU No. 2014-09, Revenue from Contracts with Customers (ASC 606). Accordingly, all financial statements or financial information of the Company’s FSO and LNG joint ventures that may be included in the Company’s filings with the SEC pursuant to SEC Regulation S-X Rule 4-08(g), Summarized Financial Information of Subsidiaries Not Consolidated and 50 Percent or Less Owned Persons, and/or SEC Regulation S-X Rule 3-09, Separate Financial Statements of Subsidiaries Not Consolidated and 50 Percent or Less Owned Persons, will not reflect the adoptions of ASC 606 and ASC 842 until January 1, 2019 and January 1, 2020, respectively.

 

Note 3 — Earnings per Common Share:

 

Basic earnings per common share is computed by dividing earnings, after the deduction of dividends and undistributed earnings allocated to participating securities, by the weighted average number of common shares outstanding during the period.

 

The computation of diluted earnings per share assumes the issuance of common stock for all potentially dilutive stock options and restricted stock units not classified as participating securities. Participating securities are defined by ASC 260, Earnings Per Share, as unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents and are included in the computation of earnings per share pursuant to the two-class method.

 

Weighted average shares of unvested restricted common stock considered to be participating securities totaled 39,709 and 39,326 for the three and six months ended June 30, 2018, respectively, and 33,451 and 32,763 for the three and six months ended June 30, 2017, respectively. Such participating securities are allocated a portion of income, but not losses under the two-class method. As of June 30, 2018, there were 218,222 shares of restricted stock units and 400,785 stock options outstanding and considered to be potentially dilutive securities.

 

The components of the calculation of basic earnings per share and diluted earnings per share are as follows:

  

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2018				2017				2018				2017
Net (loss)/income		$	(18,796	)		$	(11,619	)		$	(48,112	)		$	6,448
Weighted average common shares outstanding:
Basic			29,130,230				29,194,240				29,118,271				29,187,286
Diluted			29,130,230				29,194,240				29,118,271				29,221,779

 

 

 

Reconciliations of the numerator of the basic and diluted earnings per share computations are as follows:

  

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2018				2017				2018				2017
Net (loss)/income allocated to:
Common Stockholders		$	(18,796	)		$	(11,619	)		$	(48,112	)		$	6,441
Participating securities			-				-				-				7
		$	(18,796	)		$	(11,619	)		$	(48,112	)		$	6,448

 

For the three and six months ended June 30, 2018 earnings per share calculations, there were no dilutive equity awards outstanding. For the three and six months ended June 30, 2017 earnings per share calculations, there were 0 and 34,493 dilutive equity awards outstanding, respectively. Awards of 611,246 and 304,710 for the three months ended June 30, 2018 and 2017, respectively, and 495,838 and 265,359 for the six months ended June 30, 2018 and 2017, respectively, were not included in the computation of diluted earnings per share because inclusion of these awards would be anti-dilutive.

 

Note 4 — Business and Segment Reporting:

 

The Company has two reportable segments: Crude Tankers and Product Carriers. The joint ventures with two floating storage and offloading service vessels are included in the Crude Tankers Segment. The joint venture with four LNG Carriers is included in Other. Adjusted (loss)/income from vessel operations for segment purposes is defined as (loss)/income from vessel operations before general and administrative expenses, third-party debt modification fees, separation and transition costs and gain on disposal of vessels and other property, net of impairments. The accounting policies followed by the reportable segments are the same as those followed in the preparation of the Company’s condensed consolidated financial statements.

 

Information about the Company’s reportable segments as of and for the three and six months ended June 30, 2018 and 2017 follows:

  

		Crude				Product
		Tankers				Carriers				Other				Totals
Three months ended June 30, 2018:
Shipping revenues		$	41,154			$	15,755			$	-			$	56,909
Time charter equivalent revenues			34,385				15,627				-				50,012
Depreciation and amortization			12,240				4,530				34				16,804
Gain on disposal of vessels and other property,
net of impairments			(4,055	)			(2,685	)			-				(6,740	)
Adjusted (loss)/income from vessel operations			(5,198	)			(4,149	)			304				(9,043	)
Equity in income of affiliated companies			4,709				-				4,113				8,822
Investments in and advances to affiliated companies
at June 30, 2018			152,604				13,583				108,847				275,034
Adjusted total assets at June 30, 2018			1,338,120				351,615				108,847				1,798,582
Three months ended June 30, 2017:
Shipping revenues		$	47,914			$	24,043			$	-			$	71,957
Time charter equivalent revenues			45,745				23,535				-				69,280
Depreciation and amortization			13,304				5,762				33				19,099
Adjusted income/(loss) from vessel operations			7,136				(3,171	)			(193	)			3,772
Equity in income of affiliated companies			10,258				-				3,608				13,866
Investments in and advances to affiliated companies
at June 30, 2017			268,863				15,342				87,904				372,109
Adjusted total assets at June 30, 2017			1,079,142				410,024				87,531				1,576,697

 

 

 

		Crude				Product
		Tankers				Carriers				Other				Totals
Six months ended June 30, 2018:
Shipping revenues		$	73,519			$	35,368			$	-			$	108,887
Time charter equivalent revenues			63,605				35,208				-				98,813
Depreciation and amortization			25,113				9,248				67				34,428
Loss/(gain) on disposal of vessels and other property,
including impairments			5,933				(6,100	)			-				(167	)
Adjusted (loss)/income from vessel operations			(17,222	)			(6,560	)			635				(23,147	)
Equity in income of affiliated companies			10,284				-				6,878				17,162
Expenditures for vessels and vessel improvements			127,510				1,415				-				128,925
Payments for drydockings			2,683				18				-				2,701
Six months ended June 30, 2017:
Shipping revenues		$	107,806			$	52,901			$	-			$	160,707
Time charter equivalent revenues			101,790				51,622				-				153,412
Depreciation and amortization			26,351				11,298				66				37,715
Adjusted income/(loss) from vessel operations			25,495				(1,138	)			(148	)			24,209
Equity in income of affiliated companies			20,173				-				7,299				27,472
Expenditures for vessels and vessel improvements			17,807				776				-				18,583
Payments for drydockings			12,160				3,700				-				15,860

 

Reconciliations of time charter equivalent (“TCE”) revenues of the segments to shipping revenues as reported in the condensed statements of operations follow:

 

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2018				2017				2018				2017
Time charter equivalent revenues		$	50,012			$	69,280			$	98,813			$	153,412
Add: Voyage expenses			6,897				2,677				10,074				7,295
Shipping revenues		$	56,909			$	71,957			$	108,887			$	160,707

 

Consistent with general practice in the shipping industry, the Company uses time charter equivalent revenues, which represents shipping revenues less voyage expenses, as a measure to compare revenue generated from a voyage charter to revenue generated from a time charter. Time charter equivalent revenues, a non-GAAP measure, provides additional meaningful information in conjunction with shipping revenues, the most directly comparable GAAP measure, because it assists Company management in making decisions regarding the deployment and use of its vessels and in evaluating their financial performance.

 

 

Reconciliations of adjusted (loss)/income from vessel operations of the segments to (loss)/income before income taxes, as reported in the condensed consolidated statements of operations follow:

 

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2018				2017				2018				2017
Total adjusted (loss)/income from vessel operations
of all segments		$	(9,043	)		$	3,772			$	(23,147	)		$	24,209
General and administrative expenses			(6,064	)			(5,096	)			(12,093	)			(11,370	)
Third-party debt modification fees			(1,302	)			(7,939	)			(1,302	)			(7,939	)
Separation and transition costs			-				(296	)			-				(1,031	)
Gain on disposal of vessels and other property, net of impairments			6,740				-				167				-
Consolidated (loss)/income from vessel operations			(9,669	)			(9,559	)			(36,375	)			3,869
Equity in income of affiliated companies			8,822				13,866				17,162				27,472
Other expense			(4,863	)			(6,644	)			(4,184	)			(6,440	)
Interest expense			(13,086	)			(9,278	)			(24,707	)			(18,445	)
(Loss)/income before income taxes		$	(18,796	)		$	(11,615	)		$	(48,104	)		$	6,456

 

Reconciliations of total assets of the segments to amounts included in the condensed consolidated balance sheets follow:

  

As of June 30,		2018				2017
Total assets of all segments		$	1,798,582			$	1,576,697
Corporate unrestricted cash and cash equivalents			115,843				121,230
Restricted cash			27,010				-
Other unallocated amounts			5,045				3,163
Consolidated total assets		$	1,946,480			$	1,701,090

 

Note 5 — Vessels:

 

Vessel Impairments

 

The Company gave consideration as to whether events or changes in circumstances had occurred since December 31, 2017 that could indicate that the carrying amounts of the vessels in the Company’s fleet may not be recoverable as of June 30, 2018. Factors considered included declines in valuations during 2018 for vessels of certain sizes and ages, any negative changes in forecasted near term charter rates, and an increase in the likelihood that the Company will sell certain of its vessels before the end of their estimated useful lives in conjunction with the Company’s fleet renewal program. The Company concluded that the increased likelihood of disposal prior to the end of their respective useful lives constituted impairment triggering events for one Panamax and two Aframaxes that were being actively marketed for sale as of June 30, 2018. In regard to the vessels in the Company’s fleet that are not currently being marketed for sale, the Company determined that the negative market developments did not rise to the level of impairment triggering events as of June 30, 2018. If such declines continue for a protracted period of time or worsen, we will re-evaluate whether these changes in industry conditions constitute impairment triggers for additional vessels in the Company’s fleet.

 

In developing estimates of undiscounted future cash flows for performing Step 1 of the impairment tests, the Company utilized weighted probabilities assigned to possible outcomes for each of the three vessels for which impairment trigger events were determined to exist. The Company entered into a memorandum of agreement for the sale of the Panamax vessel in early July 2018. Accordingly, a 100% probability was attributed to the vessel being sold before the end of its useful life. As the Company is considering selling the other two vessels as a part of its fleet renewal program, 50% probabilities were assigned to the possibility that the two Aframax vessels will be sold prior to the end of their respective useful lives. In estimating the fair value of the vessels for the purposes of Step 2 of the impairment tests, the Company considered the market approach by using the sales price per the memorandum of agreement discussed above. Based on the tests performed, the sum of the undiscounted cash flows for each of the two Aframax vessels was more than its carrying value as of June 30, 2018 and the sum of the undiscounted cash flows for the Panamax vessel was less than its carrying value as of June 30, 2018. Accordingly, an impairment charge totaling $948 was recorded for the Panamax vessel to write-down its carrying value to its estimated fair value at June 30, 2018.

 

 

Vessel Acquisitions and Deliveries

 

On June 14, 2018 (the “Closing Date”), the Company completed its previously announced acquisition of six 300,000 DWT VLCCs including one 2015-built and five 2016-built. The Company purchased the outstanding shares of Gener8 Maritime Subsidiary VII, Inc., a corporation incorporated under the laws of the Marshalls Islands and the sole member of six limited liability companies each of which holds title to a VLCC tanker (collectively, the "Six VLCCs") (such purchase, the "Transaction"). The Transaction was completed pursuant to the terms of the Stock Purchase and Sale Agreement (the "SPA") dated as of April 18, 2018, by and among Seaways Holding Corporation, a corporation incorporated under the laws of the Marshall Islands and a wholly-owned subsidiary of the Company, Euronav NV ("Euronav"), a corporation incorporated and existing under the laws of the Kingdom of Belgium, and Euronav MI II Inc. (as successor to Euronav MI Inc.), a corporation incorporated under the laws of the Marshall Islands and a wholly-owned subsidiary of Euronav. In accordance with ASC 2017-01, Business Combinations (Topic 805), this acquisition did not constitute the acquisition of a business, and therefore was accounted for as an asset acquisition. The purchase price for the Transaction was $434,000, inclusive of assumed debt secured by the Vessels (see Note 9, “Debt”). On the Closing Date, the Company paid to Euronav cash consideration of approximately $120,025, with the difference reflecting assumed debt and accrued interest thereon through the Closing Date. The Company’s estimate of the balance payable to Euronav for the other assets and liabilities of Gener8 Maritime Subsidiary VII, Inc. acquired is approximately $20,954 and is included in current liabilities in the condensed consolidated balance sheet as of June 30, 2018. This amount is subject to a final true-up, which is expected to be finalized and paid in the third quarter of 2018.

 

Vessel Sales

 

During the six months ended June 30, 2018, the Company recognized a net aggregate gain on disposal of vessels of $1,114 relating to (i) the sale of a 2002-built MR which was held-for-sale as of December 31, 2017; (ii) the sale of two 2004-built MRs, a 2000-built VLCC, and a 2001-built Aframax; (iii) the sale and leaseback of two 2009-built Aframaxes, and (iv) the sale of a 2003-built ULCC in conjunction with the acquisition of Six VLCCs.

 

In July 2018, the Company entered into memorandum of agreement for the sale of a 2002-built Panamax, which is expected to be delivered to the buyer during the second half of 2018. The Company expects to recognize a loss on such sale.

 

Note 6 — Equity Method Investments:

 

Investments in affiliated companies include joint ventures accounted for using the equity method. As of June 30, 2018, the Company had an approximate 50% interest in three joint ventures. One joint venture operates four LNG carriers (the “LNG Joint Venture”). The other two joint ventures - TI Africa Limited (“TI Africa”) and TI Asia Limited (“TI Asia”) - operate two Floating Storage and Offloading Service vessels that were converted from two ULCCs (collectively the “FSO Joint Venture”).

 

On March 29, 2018, the FSO Joint Venture executed an agreement on a $220,000 secured credit facility (the “FSO Loan Agreement”). The FSO Loan Agreement is among TI Africa and TI Asia, as joint and several borrowers, ABN AMRO Bank N.V. and ING Belgium SA/NV, as Lenders, Mandated Lead Arrangers and Swap Banks, and ING Bank N.V., as Agent and as Security Trustee. The FSO Loan Agreement provides for (i) a term loan of $110,000 (the “FSO Term Loan”), which is repayable in scheduled quarterly installments over the course of the two service contracts for the FSO Asia and FSO Africa with North Oil Company, maturing in July 2022 and September 2022, respectively, and (ii) a revolving credit facility of $110,000 (the “FSO Revolver”), which revolving credit commitment reduces quarterly over the course of the foregoing two service contracts. On April 26, 2018, the FSO Joint Venture drew down and distributed the entire $110,000 of proceeds of the FSO Term Loan to INSW, which has guaranteed the FSO Term Loan and which has used the proceeds for general corporate purposes, including to fund partially the agreement to purchase the Six VLCCs (See Note 5, “Vessels”). The FSO Joint Venture also borrowed the entire $110,000 available under the FSO Revolver and distributed the proceeds to Euronav on April 26, 2018, which has guaranteed the FSO Revolver. The FSO Term Loan and the FSO Revolver are secured by, among other things, a first preferred vessel mortgage on the FSO Africa and FSO Asia, an assignment of the service contracts for the FSO Africa and FSO Asia and the aforementioned guarantees of the FSO Term Loan by INSW and the guarantee of the FSO Revolver by Euronav. The FSO Loan Agreement has a financial covenant that the Debt Service Cover Ratio (as defined in the agreement) shall be equal or greater than 1.10 to 1.00. Approximately $104,402 was outstanding under the FSO Term Loan as of June 30, 2018. The FSO Joint Venture had no outstanding debt as of December 31, 2017. As of June 30, 2018, the maximum potential amount of future principal payments (undiscounted) that INSW could be required to make relating to equity method investees secured bank debt was $104,612 and the carrying value of the Company’s guaranty in the accompanying condensed consolidated balance sheet was $951.

 

 

Interest payable on the FSO Term Loan and on the FSO Revolver is three month, six month or twelve month LIBOR, as selected by the FSO Joint Venture, plus a 2.00% margin. The FSO Joint Venture has entered into swap transactions which fix the interest rate on the FSO Loan Agreement at a blended rate of approximately 4.858% per annum, effective as of June 29, 2018. The FSO Joint Venture has agreed to pay a commitment fee (“FSO Commitment Fee”) of 0.7% on any undrawn amount under the FSO Revolver. INSW has agreed to pay Euronav an amount equal to the first 0.3% of the 0.7% FSO Commitment Fee and, to the extent the FSO Revolver is fully drawn, to pay Euronav an amount equal to the first 0.3% of the amount of loan interest payable under the FSO Revolver. The interest rate swap covers a notional amount of $208,803 as of June 30, 2018. As of June 30, 2018, the FSO Joint Venture had a liability of $392 for the fair value of the swaps associated with the FSO Joint Venture. The Company’s share of the effective portion of such amounts, aggregating $196 at June 30, 2018 is included in accumulated other comprehensive loss in the accompanying balance sheet.

 

Investments in and advances to affiliated companies as reflected in the accompanying condensed consolidated balance sheet as of June 30, 2018 consisted of: FSO Joint Venture of $143,800, LNG Joint Venture of $108,847 and Other of $22,387 (which primarily relates to working capital deposits that the Company maintains for commercial pools in which it participates).

 

A condensed summary of the results of operations of the joint ventures follows:

  

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2018				2017				2018				2017
Shipping revenues		$	53,535			$	61,691			$	106,322			$	122,660
Ship operating expenses			(26,038	)			(26,406	)			(54,330	)			(52,601	)
Income from vessel operations			27,497				35,285				51,992				70,059
Other income			389				935				701				2,452
Interest expense			(10,386	)			(9,465	)			(18,766	)			(19,425	)
Income tax provision			(832	)			-				(1,827	)			-
Net income		$	16,668			$	26,755			$	32,100			$	53,086

 

See Note 11, “Related Parties,” for additional disclosures on guarantees INSW has issued in favor of its joint venture partners, lenders and/or customers.

 

Note 7 — Variable Interest Entities (“VIEs”):

 

As of June 30, 2018, the Company participates in seven commercial pools and three joint ventures. One of the pools and the two FSO joint ventures were determined to be VIEs. The Company is not considered a primary beneficiary of either the pool or the joint ventures.

 

The following table presents the carrying amounts of assets and liabilities in the condensed consolidated balance sheet related to the VIEs as of June 30, 2018:

  

		Condensed Consolidated Balance Sheet
Investments in Affiliated Companies		$	148,047

 

In accordance with accounting guidance, the Company evaluated its maximum exposure to loss related to these VIEs by assuming a complete loss of the Company’s investment in these VIEs. The table below compares the Company’s liability in the condensed consolidated balance sheet to the maximum exposure to loss at June 30, 2018:

  

		Condensed Consolidated Balance Sheet				Maximum Exposure to Loss
Other Liabilities		$	951			$	252,659

 

 

 

In addition, as of June 30, 2018, the Company had approximately $16,492 of trade receivables from the pool that was determined to be a VIE. These trade receivables, which are included in voyage receivables in the accompanying condensed consolidated balance sheet, have been excluded from the above tables and the calculation of INSW’s maximum exposure to loss. The Company does not record the maximum exposure to loss as a liability because it does not believe that such a loss is probable of occurring as of June 30, 2018.

 

Note 8 — Fair Value of Financial Instruments, Derivatives and Fair Value Disclosures:

 

The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

 

Cash and cash equivalents— The carrying amounts reported in the condensed consolidated balance sheet for interest-bearing deposits approximate their fair value.

 

Debt— The fair value of borrowings under the 2017 Term Loan Facility and the 8.50% Senior Notes is estimated based on quoted market prices. The carrying amount of the borrowings under Sinosure Credit Facility, the ABN Term Loan Facility and the 10.75% Subordinated Notes approximates the fair value based on the fact that these facilities closed during June 2018.

 

Interest rate swaps and caps— The fair values of interest rate swaps and caps are the estimated amounts that the Company would receive or pay to terminate the swaps or caps at the reporting date, which include adjustments for the counterparty’s or the Company’s credit risk, as appropriate, after taking into consideration any underlying collateral securing the swap or cap agreements. For interest rate caps and swaps, fair values are derived using valuation models that utilize the income valuation approach. These valuation models take into account contract terms such as maturity, as well as other inputs such as interest rate yield curves and creditworthiness of the counterparty.

 

ASC 820, Fair Value Measurements and Disclosures, relating to fair value measurements defines fair value and established a framework for measuring fair value. The ASC 820 fair value hierarchy distinguishes between market participant assumptions developed based on market data obtained from sources independent of the reporting entity and the reporting entity's own assumptions about market participant assumptions developed based on the best information available in the circumstances. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, essentially an exit price. In addition, the fair value of assets and liabilities should include consideration of non-performance risk, which for the liabilities described below includes the Company's own credit risk.

 

The levels of the fair value hierarchy established by ASC 820 are as follows:

 

Level 1- Quoted prices in active markets for identical assets or liabilities

 

Level 2- Quoted prices for similar assets and liabilities in active markets or inputs that are observable

 

Level 3- Inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

 

 

The estimated fair values of the Company’s financial instruments, other than derivatives that are not measured at fair value on a recurring basis, categorized based upon the fair value hierarchy, are as follows:

 

		Fair Value				Level 1				Level 2
June 30, 2018:
Cash and cash equivalents (1)		$	142,853			$	142,853			$	-
2017 Term Loan Facility			(479,688	)			-				(479,688	)
ABN Term Loan Facility			(28,463	)			-				(28,463	)
Sinosure Credit Facility			(305,073	)			-				(305,073	)
8.5% Senior Notes			(23,500	)			(23,500	)			-
10.75% Subordinated Notes			(30,000	)			-				(30,000	)
December 31, 2017:
Cash and cash equivalents (1)		$	70,606			$	70,606			$	-
2017 Term Loan Facility			(550,689	)			-				(550,689	)
2017 Revolver Facility			(30,227	)			-				(30,227	)

 

⁽¹⁾ Includes non-current restricted cash of $27,010 and $10,579 at June 30, 2018 and December 31, 2017, respectively.

 

Derivatives

 

The Company manages its exposure to interest rate volatility risk by using derivative instruments.

 

Interest Rate Risk

 

The Company uses interest rate caps and swaps for the management of interest rate risk exposure associated with changes in LIBOR interest rate payments due on its credit facilities. INSW is party to an interest rate cap agreement (“Interest Rate Cap”) with a major financial institution covering a notional amount of $300,000 to limit the floating interest rate exposure associated with the 2017 Term Loan. The Interest Rate Cap agreement is designated and qualified as a cash flow hedge and contains no leverage features. The Interest Rate Cap has a cap rate of 2.5% through the termination date of December 31, 2020. In July 2018, the Company amended the Interest Rate Cap agreement described above to increase the notional amount to $350,000 and increase the cap rate to 2.605%, effective July 31, 2018. The maturity date remained unchanged.

 

In June 2018, in conjunction with the Transaction (as described in Note 5, “Vessels”), the Company acquired a pay-fixed, receive-variable interest rate swap agreement (“Interest Rate Swap”) with a major financial institution that effectively fixes the interest rate on the entire variable interest rate borrowings outstanding under the Sinosure Credit Facility, which was $305,073 as of June 30, 2018. The Interest Rate Swap contains no leverage features and has a fixed rate of 2.047% through the termination date of March 21, 2022. In July 2018, the Company amended the interest rate swap agreement to increase the fixed rate to 2.99%, effective September 21, 2018. The maturity date of March 21, 2022 remained unchanged. In conjunction with such amendment, the Company received a cash settlement of $7,677 from the counterparty to the transaction.

 

The Company has elected to apply hedge accounting and designated its interest rate cap and interest rate swap as cash flow hedges.

 

Tabular disclosure of derivatives location

 

Derivatives are recorded on a net basis by counterparty when a legal right of offset exists. The following table presents information with respect to the fair values of derivatives reflected in the June 30, 2018 and December 31, 2017 balance sheets on a gross basis by transaction:

 

 

		Asset Derivatives						Liability Derivatives
		Balance Sheet						Balance Sheet
		Location		Amount				Location		Amount
June 30, 2018:
Derivatives designated as hedging instruments:
Interest rate cap:
Current portion		Current portion of derivative asset		$	317			Current portion of derivative liability		$	-
Long-term portion		Long-term derivative asset			2,130			Long-term derivative liability			-
Interest rate swaps:
Current portion		Current portion of derivative asset			1,420			Current portion of derivative liability			-
Long-term portion		Long-term derivative asset			5,744			Long-term derivative liability			-
Total derivatives designated as hedging instruments				$	9,611					$	-
December 31, 2017:
Derivatives designated as hedging instruments:
Interest rate cap:
Current portion		Current portion of derivative asset		$	16			Current portion of derivative liability		$	-
Long-term portion		Long-term derivative asset			886			Long-term derivative liability			-
Total derivatives designated as hedging instruments				$	902					$	-

 

 

The following tables present information with respect to gains and losses on derivative positions reflected in the condensed consolidated statements of operations or in the condensed consolidated statements of other comprehensive (loss)/income. 

 

The effect of cash flow hedging relationships recognized in other comprehensive income excluding amounts reclassified from accumulated other comprehensive loss (effective portion), including hedges of equity method investees, for the three and six months ended June 30, 2018 and 2017 follows:

 

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2018				2017				2018				2017
Interest rate swaps		$	367			$	(2,122	)		$	4,221			$	(2,392	)
Interest rate cap			534				-				1,546				-
Total		$	901			$	(2,122	)		$	5,767			$	(2,392	)

 

 

The effect of cash flow hedging relationships on the unaudited condensed consolidated statement of operations is presented excluding hedges of equity method investees. The effect of INSW’s cash flow hedging relationships on the unaudited condensed consolidated statement of operations for the six months ended June 30, 2018 and 2017 follows and there were no such activities for the three months ended June 30, 2018 and 2017:

  

		Statement of Operations
		Effective Portion of Gain/(Loss)
		Reclassified from
		Accumulated Other
For the six months ended		Comprehensive Loss						Ineffective Portion
				Amount of						Amount of
		Location		Gain/(Loss)				Location		Gain/(Loss)
June 30, 2018:
Interest rate cap		Interest expense		$	-			Interest expense		$	-
Interest rate swaps		Interest expense			-			Interest expense			-
Total				$	-					$	-
June 30, 2017:
Interest rate cap		Interest expense		$	(131	)		Interest expense		$	-
Total				$	(131	)				$	-

 

See Note 13, “Accumulated Other Comprehensive Loss,” for disclosures relating to the impact of derivative instruments on accumulated other comprehensive loss.

 

Fair Value Hierarchy

 

The following table presents the fair values, which are pre-tax, for assets and liabilities measured on a recurring basis (excluding investments in affiliated companies):

  

		Fair Value				Level 1				Level 2
Assets/(Liabilities) at June 30, 2018:
Derivative Assets (interest rate cap and swaps)		$	9,611			$	-			$	9,611	(1)
Assets/(Liabilities) at December 31, 2017
Derivative Assets (interest rate cap)		$	902			$	-			$	902	(1)

 

(1)

For interest rate caps and swaps, fair values are derived using valuation models that utilize the income valuation approach. These valuation models take into account contract terms such as maturity, as well as other inputs such as interest rate yield curves and creditworthiness of the counterparty and the Company.

 

 

The following table summarizes the fair values of assets for which an impairment charge was recognized for the three and six months ended June 30, 2018:

  

Description		Fair Value				Level 2				Total Impairment Charges
Assets:
Crude Tankers - Vessels held and used (1)(2)		$	7,025			$	7,025			$	(948	)

 

	(1)	Pre-tax impairment charge of $948 related to one vessel in the International Crude Tanker segment was recorded during the three-month period ended June 30, 2018.
	(2)	The fair value measurement of $7,025 at June 30, 2018 used to determine the impairment was based upon a market approach, which considered the expected sale price of the vessel based on an executed memorandum of agreement as discussed in Note 5, "Vessels". Because sales of vessels occur somewhat infrequently the expected sales prices are considered to be Level 2.

 

Note 9 — Debt:

 

Debt consists of the following:

  

		June 30,				December 31,
		2018				2017
2017 Term Loan, due 2022, net of unamortized discount
and deferred costs of $22,795 and $23,074		$	456,893			$	523,489
2017 Revolver Facility, net of unamortized deferred finance costs of $552			-				29,448
ABN Term Loan, due 2023, net of unamortized deferred
finance costs of $954			27,509				-
Sinosure Credit Facility, due 2027 - 2028, net of unamortized deferred
finance costs of $2,861			302,212				-
8.5% Senior Notes, due 2023, net of unamortized
deferred finance costs of $1,616			23,384				-
10.75% Subordinated Notes, due 2023, net of
unamortized deferred finance costs of $1,969			28,031				-
			838,029				552,937
Less current portion			(48,492	)			(24,063	)
Long-term portion		$	789,537			$	528,874

 

Capitalized terms used hereafter have the meaning given in these condensed consolidated financial statements or in the respective transaction documents referred to below, including subsequent amendments thereto.

 

2017 Debt Facilities

 

The 2017 Debt Facilities include a revolving credit facility of $50,000 (the “2017 Revolver Facility”) and (ii) a term loan of $550,000 (the “2017 Term Loan Facility” and together with the 2017 Revolver Facility, the “2017 Debt Facilities”). The 2017 Debt Facilities are secured by a first lien on substantially all of the assets of the Administrative Borrower and certain of its subsidiaries.

 

The 2017 Term Loan Facility matures on June 22, 2022, and the 2017 Revolver Facility matures on December 22, 2021. The maturity dates for the 2017 Debt Facilities are subject to acceleration upon the occurrence of certain events (as described in the credit agreement).

 

On March 21, 2018, the $30,000 outstanding balance under the 2017 Revolver Facility was repaid in full using proceeds from the sale of vessels sold during December 2017 and the first quarter of 2018.

 

 

On June 14, 2018, the Company entered into an amendment of the 2017 Debt Facilities (the “2017 Debt Facilities Second Amendment”). The amendment (i) increased the interest rate margin from 4.50% per annum to 5.00% per annum for loans determined by the Alternate Base Rate (as defined in the 2017 Debt Facilities) and from 5.50% per annum to 6.00% per annum for any loan determined by reference to the Adjusted LIBOR Rate (as defined in the 2017 Debt Facilities) and (ii) allowed a dividend of $110,000 to be made from the Company's FSO Joint Venture to the Company without incorporating such funds into the cash sweep provisions of the 2017 Debt Facilities, (iii) permitted the acquisition of Gener8 Maritime Subsidiary VII, Inc. and its subsidiaries as Unrestricted Subsidiaries (as defined in the 2017 Debt Facilities) and permitted those entities and their assets to be subject to the Sinosure Credit Facility (as defined below) and be subject to its liens and permitted the funding of the certain liquidity and other accounts in connection with that acquisition and (iv) made certain other amendments to covenants under the 2017 Debt Facilities. As a condition to the effectiveness of the 2017 Debt Facilities, the Company prepaid $60,000 of the amount outstanding under the 2017 Term Loan Facility together with a premium equal to 1% of the $60,000 prepayment and paid a fee to the lenders of 1% of the 2017 Debt Facilities outstanding after that repayment.

 

The 2017 Term Loan Facility amortizes in quarterly installments equal to 0.625% of the original principal amount of the loan for the quarterly installment due June 30, 2018 (paid July 2, 2018) and equal to 1.25% of the original principal amount of the loan reduced by the $60,000 prepayment described above for all quarterly installments thereafter. The 2017 Term Loan Facility is subject to additional mandatory annual prepayments in an aggregate principal amount of 75% of Excess Cash Flow, as defined in the credit agreement.

 

Management estimated that it will have no Excess Cash Flow under the 2017 Term Loan Facility for the year ended December 31, 2018 based on the actual results of the six months ended June 30, 2018 and the projection for the remainder of 2018. Accordingly, there is currently no mandatory prepayment expected during the first quarter of 2019.

 

As set forth in the 2017 Debt Facilities credit agreement, the 2017 Debt Facilities contain certain restrictions relating to new borrowings and INSW’s ability to receive cash dividends, loans or advances from ISOC and its subsidiaries that are Restricted Subsidiaries. As of June 30, 2018, permitted cash dividends that can be distributed to INSW by ISOC under the 2017 Term Loan Facility was $12,500.

 

The 2017 Debt Facilities have covenants to maintain the aggregate Fair Market Value (as defined in the credit agreement) of the Collateral Vessels at greater than or equal to $300,000 at the end of each fiscal quarter and to ensure that at any time, the outstanding principal amounts of the 2017 Debt Facilities and certain other secured indebtedness permitted under credit agreement minus the amount of unrestricted cash and cash equivalents does not exceed 65% of the aggregate Fair Market Value of the Collateral Vessels (as defined in the 2017 Debt Facilities) plus the aggregate Fair Market Value of certain joint venture equity interests and Gener8 Maritime Subsidiary VII, Inc. The Company had substantial headroom under this covenant as of June 30, 2018, with an estimated ratio of 42%.

 

Sinosure Credit Facility

 

As part of the Transaction, the Company financed the acquisition price of $434,000 with the assumption of debt secured by the six vessels under a China Export & Credit Insurance Corporation ("Sinosure") credit facility funded by The Export-Import Bank of China, Bank of China (New York Branch) and Citibank, N.A. The Company acceded as a guarantor to the Sinosure Credit Facility agreement originally dated November 30, 2015, as supplemented by a supplemental agreement dated December 28, 2015, as amended and restated by an amending and restating deed dated June 29, 2016, as supplemented by a supplemental agreement dated November 8, 2017, as supplemented by a consent, supplemental and amendment letter, dated April 2, 2018 (the facility agreement as of such date, the "Original Sinosure Facility") and as amended and restated by an amending and restating agreement dated June 13, 2018 (the "2018 Amending and Restating Agreement"), by and among Gener8 Maritime Subsidiary VII, Inc., Seaways Holding Corporation, a wholly owned subsidiary of the Company, the Company, Citibank, N.A. (London Branch), the Export-Import Bank of China and Bank of China (New York Branch) (and its successors and assigns) and certain other parties thereto (the "Sinosure Credit Facility"). The Sinosure Credit Facility is a term loan facility comprised of six loans, each secured by one of the six VLCCs. As of the Closing Date, it had a principal amount outstanding of $310,968 and bears interest at a rate of 3-month LIBOR plus a margin of 2%. Each loan under the Sinosure Facility requires quarterly amortization payments of 1²/₃% (based on the original outstanding amount of each Vessel loan) together with a balloon repayment payable on the termination date of each loan. Each of the loans under the Sinosure Credit Facility will mature 144 months after its initial utilization date. The 2018 Amending and Restating Agreement effects certain amendments to the Original Sinosure Facility as agreed between the parties thereto and necessitated by the Transaction. The Sinosure Credit Facility is guaranteed by the Company and Seaways Holding Corporation.

 

 

On the Closing Date, the Company paid to Euronav cash consideration of approximately $120,025, with the difference reflecting assumed debt and accrued interest thereon through the Closing Date. Supplemental cash flow information for the six months ended June 30, 2018 associated with the aforementioned non-cash assumption of debt in relation to the acquisition of six VLCCs aggregating $310,968 were non-cash investing activities and financing activities.

 

Under the Sinosure Credit Facility, the Obligors (as defined in the Sinosure Credit Facility) are required to comply with various collateral maintenance and financial covenants, including with respect to:

(i)

minimum security coverage, which shall not be less than 135% of the aggregate loan principal outstanding under the Sinosure Credit Facility. Any non-compliance with the minimum security coverage shall not constitute an event of default so long as within thirty days of such non-compliance, Gener8 Maritime Subsidiary VII, Inc. has either provided additional collateral or prepaid a portion of the outstanding loan balance to cure such non-compliance;

(ii)

maximum consolidated leverage ratio, which shall not be greater than 0.60 to 1.00 on any testing date occurring on or after June 30, 2018;

(iii)

minimum consolidated liquidity, under which unrestricted consolidated cash and cash equivalents shall be no less than $25,000 at any time and total consolidated cash and cash equivalents (including cash restricted under the Sinosure Credit Facility) shall not be less than the greater of $50,000 or 5.0% of Total Indebtedness (as defined in the Sinosure Credit Facility) or $9,000 (i.e., $1,500 per each VLCC securing the Sinosure Credit Facility); and

(iv)

interest expense coverage ratio, which for Seaways Holding Corporation, shall not be less than 2.00 to 1.00 during the period commencing on July 1, 2018 through June 30, 2019 and will be calculated on a trailing six, nine and twelve-month basis from December 31, 2018, March 31, 2019 and June 30, 2019, respectively. For the Company, the interest expense coverage ratio shall not be less than 2.25 to 1:00 for the period commencing on July 1, 2019 through June 30, 2020 and no less than 2.50 to 1:00 for the period commencing on July 1, 2020 and thereafter and shall be calculated on a trailing twelve-month basis. No event of default under this covenant will occur if the failure to comply is capable of remedy and is remedied within thirty days of the Facility Agent giving notice to the Company or (if earlier) any Obligor becoming aware of the failure to comply, and (i) if such action is being taken with respect to a Test Date falling on or prior to December 31, 2019, then such remedy shall be in the form of cash and cash equivalents being (or having been) deposited by Seaways Holding Corporation to the Minimum Liquidity Account within the thirty day period mentioned above in the manner and in the amounts required to remedy such breach as tested at the Seaways Holding Corporation level and (ii) if such action is being taken with respect to a Test Date falling on or after January 1, 2020, then any such remedy and the form of the same shall be considered and determined by the Lenders in their absolute discretion.

 

The Sinosure Credit Facility also requires the Company to comply with a number of covenants, including the delivery of quarterly and annual financial statements, budgets and annual projections; maintaining required insurances; compliance with laws (including environmental); compliance with ERISA: maintenance of flag and class of the collateral vessels; restrictions on consolidations, mergers or sales of assets; limitations on liens; limitations on issuance of certain equity interests; limitations on transactions with affiliates; and other customary covenants and related provisions.

 

As of June 30, 2018, the Company was in compliance with all such covenants that were in effect on such date.

 

ABN Term Loan Facility

 

On June 7, 2018, the Company entered into a credit agreement, secured by the Seaways Raffles, a VLCC tanker, by and among, inter alia, Seaways Shipping Corporation, a Marshall Islands corporation and wholly-owned indirect subsidiary of the Company, the Company (as a guarantor), another guarantor which is an indirect subsidiary of the Company, the lenders named therein and ABN AMRO Capital USA LLC as mandated lead arranger and facility agent (the "ABN Term Loan Facility"), for an aggregate principal amount of up to the lesser of (i) $29,150, and (ii) 55% of the fair market value of the Seaways Raffles. On June 12, 2018, the Company drew down approximately $28,463. The ABN Term Loan Facility bears interest at a rate of 3-month LIBOR plus a margin of 3.25% and is repayable in 19 quarterly installments of approximately $869 with a final balloon payment due on the maturity date in the second quarter of 2023. Additionally, the ABN Term Loan Facility includes certain financial covenants and is guaranteed by the Company. The Company's guarantee is unsecured. The Company used the proceeds from the ABN Term Loan Facility to fund a portion of the Transaction.

 

 

The ABN Term Loan Facility requires Seaways Shipping Corporation to maintain a minimum unrestricted cash balance of $825 per vessel and a balance of $2,500 and up to $2,100 in a debt service reserve accounts and a dry dock reserve account, respectively, and provides for a restriction on dividends unless minimum unrestricted cash levels are maintained and Seaways Shipping Corporation is in compliance with its covenants. The ABN Term Loan Facility also has a vessel value maintenance clause that requires the Company to ensure that the fair market value of the Seaways Raffles is at all times not less than 150% of the outstanding principal amount of the loan. The Company was in compliance with these covenants as of June 30, 2018.

 

The ABN Term Loan Facility also requires that the loan agreement be amended as soon as reasonably practical following the effective date of the loan to incorporate financial covenants (other than the vessel value maintenance covenant) included in other loan facilities or agreements evidencing indebtedness (with principal balances in excess of $50,000) to which the Company becomes a party, that are deemed to be materially more advantageous to the lenders under such agreements than those currently required by the ABN Term Loan Facility. The Company expects to execute such an amendment during the third quarter of 2018.

 

The ABN Term Loan Facility also requires the Company to comply with a number of covenants, including the delivery of quarterly and annual financial statements, budgets and annual projections; maintaining required insurances; compliance with laws (including environmental); compliance with ERISA: maintenance of flag and class of the Seaways Raffles; restrictions on consolidations, mergers or sales of assets; limitations on liens; limitations on issuance of certain equity interests; limitations on the payment of dividends or other distributions; limitations on transactions with affiliates; and other customary covenants and related provisions.

 

8.5% Senior Notes

 

On May 31, 2018, the Company completed a registered public offering of $25,000 aggregate principal amount of its 8.5% senior unsecured notes due 2023 (the “8.5% Senior Notes”), which resulted in aggregate net proceeds to the Company of approximately $23,363, after deducting commissions and estimated expenses. The Company used the net proceeds to fund the Transaction, to repay a portion of its outstanding 2017 Debt Facility and for general corporate purposes.

 

The Company issued the Notes under an indenture dated as of May 31, 2018 (the “Base Indenture”), between the Company and The Bank of New York Mellon, as trustee (the “Trustee”), as supplemented by a supplemental indenture dated as of May 31, 2018 (the “First Supplemental Indenture” and, together with the Base Indenture, the “Indenture”), between the Company and the Trustee. The Notes will mature on June 30, 2023 and bear interest at a rate of 8.50% per annum. Interest on the Notes will be payable in arrears on March 30, June 30, September 30 and December 30 of each year, commencing on September 30, 2018. The terms of the Indenture, among other things, limit the Company’s ability to merge, consolidate or sell assets.

 

The Company may redeem the Notes at its option, in whole or in part, at any time on or after June 30, 2020 at a redemption price equal to 100% of their principal amount, plus accrued and unpaid interest to, but excluding, the redemption date. In addition, if the Company undergoes a Change of Control (as defined in the Indenture) the Company may be required to repurchase all of the Notes at a purchase price equal to 101% of the principal amount of the Notes, plus accrued and unpaid interest (including additional interest, if any), to, but excluding, the repurchase date.

 

The Indenture contains certain restrictive covenants, including covenants that, subject to certain exceptions and qualifications, restrict our ability to make certain payments if a default under the Indenture has occurred and is continuing or will result therefrom and require us to limit the amount of debt we incur, maintain a certain minimum net worth and provide certain reports. The Indenture also provides for certain customary events of default (subject, in certain cases, to receipt of notice of default and/or customary grace or cure periods).

 

Pursuant to the limitation on borrowings covenant, the Company shall not permit Total Borrowings (as defined in the Indenture) to equal or exceed 70% of Total Assets (as defined in the Indenture). The Company shall also ensure that Net Worth (defined as Total Assets, less Intangible assets and Total Borrowings, as defined in the Indenture) exceeds $600,000 pursuant to the Minimum Net Worth covenant.

 

 

The Company was in compliance with financial covenants under the 8.5% Senior Notes as of June 30, 2018.

 

10.75% Subordinated Notes

 

On June 13, 2018, the Company completed the sale of $30,000 of its 10.75% subordinated step-up notes due 2023 (the "10.75% Subordinated Notes") in a private placement to certain funds and accounts managed by BlackRock, Inc. ("BlackRock") (the "Private Placement"). The 10.75% Subordinated Notes are unsecured and rank junior to the 8.5% Senior Notes, the Company's guarantees of the 2017 Debt Facilities, the ABN Term Loan Facility and Sinosure Credit Facility and other unsubordinated indebtedness of the Company. The Private Placement resulted in aggregate proceeds to the Company of approximately $28,003, after deducting fees paid to the purchasers of those notes and estimated expenses. The Company used the net proceeds from the Private Placement to fund a portion of the Transactions and the offer to prepay $60,000 of the 2017 Debt Facilities pursuant to the Second Amendment.

 

The 10.75% Subordinated Notes were issued under an indenture dated as of June 13, 2018 (the "Subordinated Notes Indenture"), between the Company and GLAS Trust Company LLC, as trustee (the "Subordinated Notes Trustee").

 

The 10.75% Subordinated Notes bear interest from June 13, 2018 at an annual rate of 10.75%; provided that the 10.75% Subordinated Notes shall bear interest at the rate of 13.00% per annum beginning on the earlier of (i) December 15, 2020 and (ii) if the Refinance Date (as defined below) has occurred, the later of the Refinance Date and June 15, 2020. Interest on the 10.75% Subordinated Notes is payable quarterly in arrears on the 15th day of March, June, September and December of each year, commencing on September 15, 2018.

 

The stated maturity date of the 10.75% Subordinated Notes is June 15, 2023; provided that in certain circumstances after the indebtedness outstanding under the 2017 Debt Facilities (as amended by the Second Amendment) ceases to be outstanding (such date, the "Refinance Date"), the stated maturity of the 10.75% Subordinated Notes will become June 15, 2022. The 10.75% Subordinated Notes may be redeemed, in whole or in part, at any time prior to June 15, 2020, at a redemption price equal to 100% of the aggregate principal amount of the 10.75% Subordinated Notes being redeemed, plus accrued and unpaid interest to, but not including, the date of redemption, plus a "make-whole" premium. On or after June 15, 2020, the 10.75% Unsecured Subordinated Notes may be redeemed at par, plus accrued and unpaid interest. The 10.75% Subordinated Notes have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act.

 

The Subordinated Notes Indenture contains covenants requiring the Company to maintain a minimum net worth similar to that required by the 8.5% Senior Notes. The Subordinated Notes Indenture also contains covenants restricting the ability of the Company and its subsidiaries to incur additional indebtedness, sell assets, incur liens, amend the 2017 Debt Facilities, enter into sale and leaseback transactions and enter into certain extraordinary transactions. In addition, the Subordinated Notes Indenture prohibits the Company from paying any dividends unless certain financial and other conditions are satisfied. The Subordinated Notes Indenture also contains events of default consistent with those under the 2017 Debt Facilities.

 

The Company was in compliance with the covenants under the Subordinated Notes Indenture as of June 30, 2018.

 

Interest Expense

 

Total interest expense, including amortization of issuance and deferred financing costs (for additional information related to deferred financing costs see Note 2, “Significant Accounting Policies”), commitment, administrative and other fees for all of the Company’s debt facilities, including the INSW Facilities (which were terminated in accordance with their terms on June 22, 2017), for the three and six months ended June 30, 2018 was $12,797 and $24,157, respectively, and for the three and six months ended June 30, 2017 was $8,982 and $17,717, respectively. Interest paid for the Company’s debt facilities, including the INSW Facilities for the three and six months ended June 30, 2018 was $13,633 and $23,591, respectively, and for the three and six months ended June 30, 2017 was $10,033 and $16,732, respectively.

 

 

Debt Modifications, Repurchases and Extinguishments

 

During the three and six months ended June 30, 2018, the Company incurred issuance costs aggregating $14,499 in connection with ABN Term Loan Facility, Sinosure Credit Facility, 8.5% Senior Notes, 10.75% Subordinated Notes, and 2017 Debt Facilities Second Amendment. Issuance costs paid to all lenders and third-party fees associated with the ABN Term Loan Facility, Sinosure Credit Facility, 8.5% Senior Notes, and 10.75% Subordinated Notes aggregating $7,486 were capitalized as deferred finance charges. Issuance costs paid to lenders and third-party fees associated with 2017 Debt Facilities Second Amendment totaled $7,013, of which $4,489 associated with lenders’ fees paid that were deemed to be a modification and third-party fees paid that were deemed to be an extinguishment were capitalized as deferred finance charges and the remaining $2,524 were expensed, of which $1,229 associated with third-party fees paid that were deemed to be a modification were included in third-party debt modification fees and $1,295 associated with lender fees paid that were deemed to be an extinguishment were included in other expense in the unaudited condensed consolidated statement of operations. In addition, an aggregate net loss of $2,273 for the three and six months ended June 30, 2018 recognized on the modification of the Company’s debt facilities, is included in other expense in the unaudited condensed consolidated statement of operations. The net loss reflects a write-off of unamortized original issue discount and deferred financing costs associated with the prepayment of $60,000 made in connection with the 2017 Debt Facilities Second Amendment, which was treated as a partial extinguishment. Issuance costs incurred and capitalized as deferred finance charges have been treated as a reduction of debt proceeds.

 

During the three and six months ended June 30, 2017, the Company incurred issuance costs aggregating $22,006 in connection with the 2017 Debt Facilities. Issuance costs paid to all lenders and third-party fees associated with lenders of the 2017 Debt Facilities who had not participated in the INSW Facilities aggregating $14,067 were capitalized as deferred finance charges. Third party fees associated with the First Amendment and with lenders of the 2017 Debt Facilities who had participated in the INSW Facilities aggregating $7,939 were expensed and are included in third-party debt modification fees in the unaudited condensed consolidated statement of operations. In addition, an aggregate net loss of $7,020 realized on the modification of the Company’s debt facilities for the three and six months ended June 30, 2017 is included in other expense in the unaudited condensed consolidated statement of operations. The net loss reflects a write-off of unamortized original issue discount and deferred financing costs associated with the INSW Facilities, which were treated as partial extinguishments.

 

Note 10 — Taxes:

 

The Company derives substantially all of its gross income from the use and operation of vessels in international commerce. The Company’s entities that own and operate vessels are primarily domiciled in the Marshall Islands, which do not impose income tax on shipping operations. The Company also has or had subsidiaries in various jurisdictions that perform administrative, commercial or technical management functions. These subsidiaries are subject to income tax based on the services performed in countries in which their offices are located; current and deferred income taxes are recorded accordingly.

 

A substantial portion of income earned by the Company is not subject to income tax. With respect to subsidiaries not subject to income tax in their respective countries of incorporation, no deferred taxes are provided for the temporary differences in the bases of the underlying assets and liabilities for tax and accounting purposes.

 

As of June 30, 2018, the Company believes it will qualify for an exemption from U.S. federal income taxes under Section 883 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”) and U.S. Treasury Department regulations for 2018, because less than 50 percent of the total value of the Company’s stock is held by one or more shareholders who own 5% or more of the Company’s stock for more than half of the days of 2018.

 

The Marshall Islands impose tonnage taxes, which are assessed on the tonnage of certain of the Company’s vessels. These tonnage taxes are included in vessel expenses in the accompanying condensed consolidated statements of operations.

 

As of June 30, 2018, and December 31, 2017, the Company has recognized a reserve for uncertain tax positions of $81 and $153, respectively, and accrued interest of $29 and $51, respectively, in accounts payable, accrued expenses and other current liabilities in the accompanying condensed consolidated balance sheets.

 

Note 11 — Related Parties:

 

Transition Services Agreement and Other Spin-off Related Activity

 

During the three and six months ended June 30, 2017, INSW earned fees totaling $6 and $61, respectively, for services provided to its former parent, Overseas Shipholding Group, Inc. (“OSG”) and incurred fees totaling $202 and $731, respectively, for services received from OSG including INSW’s share of the compensation costs of former OSG corporate employees providing services to one or both companies during the defined transitional period, which ended on June 30, 2017.

 

 

Payable to OSG aggregating $34 as of June 30, 2018 was related to a guarantee provided by OSG as described below. Payables to OSG aggregating $367 as of December 31, 2017 were primarily in relation to the spin-related agreements (Transition Services, Separation and Distribution and Employee Matters Agreements) between INSW and OSG and were paid in full during the first quarter of 2018.

 

Guarantees

 

The FSO Joint Venture is a party to a number of contracts: (a) the FSO Joint Venture is an obligor pursuant to a guarantee facility agreement dated as of July 14, 2017, by and among, the FSO Joint Venture, ING Belgium NV/SA, as issuing bank, and Euronav and INSW, as guarantors (the ‘‘Guarantee Facility’’); (b) the FSO Joint Venture is party to two service contracts with NOC (the ‘‘NOC Service Contracts’’) and (c) the FSO Joint Venture is a borrower under a $220,000 secured credit facility by and among TI Africa and TI Asia, as joint and several borrowers, ABN AMRO Bank N.V. and ING Belgium SA/NV, as Lenders, Mandated Lead Arrangers and Swap Banks, and ING Bank N.V., as Agent and as Security Trustee.

 

INSW severally guarantees the obligations of the FSO Joint Venture pursuant to the Guarantee Facility and severally guaranteed the obligations of the FSO Joint Venture to Maersk Oil Qatar AS (“MOQ”) under the MOQ service contracts, which contracts were novated to NOC in July 2017 (the ‘‘MOQ Guarantee’’) and severally guarantees the obligations of the FSO Joint Venture under the NOC Service Contracts. In addition, INSW continues the MOQ Guarantee for the period ended on the novation date of the service contracts for MOQ, which period will end when the Qatari authorities determine that the FSO Joint Venture has paid all Qatari taxes owed by the FSO Joint Venture under such service contracts for tax periods through the novation date.

 

The FSO Joint Venture drew down on a $220,000 credit facility in April 2018 (See Note 6, “Equity Method Investments”). The Company provided a guarantee for the $110,000 FSO Term Loan portion of the facility, which amortizes over the remaining terms of the NOC Service Contracts, which expire in July 2022 and September 2022. INSW’s guarantee of the FSO Term Loan has financial covenants that provide (i) INSW’s Liquid Assets shall not be less than the higher of $50,000 and 5% of Total Indebtedness of INSW, (ii) INSW shall have Cash of at least $30,000 and (iii) INSW is in compliance with the Loan to Value Test (as such capitalized terms are defined in the Company guarantee or in the case of the Loan to Value Test, as defined in the credit agreement underlying the Company’s 2017 Debt Facilities (see Note 9, “Debt”). As of June 30, 2018, the maximum potential amount of future principal payments (undiscounted) that INSW could be required to make relating to equity method investees secured bank debt was $104,612 and the carrying amount of the liability related to this guarantee was $951.

 

INSW maintains a guarantee in favor of Qatar Liquefied Gas Company Limited (2) (‘‘LNG Charterer’’) relating to certain LNG Tanker Time Charter Party Agreements with the LNG Charterer and each of Overseas LNG H1 Corporation, Overseas LNG H2 Corporation, Overseas LNG S1 Corporation and Overseas LNG S2 Corporation (such agreements, the ‘‘LNG Charter Party Agreements,’’ and such guarantee, the ‘‘LNG Performance Guarantee’’). INSW will pay QGTC an annual fee of $100 until such time that QGTC ceases to provide a guarantee in favor of the LNG charterer relating to performance under the LNG Charter Party Agreements.

 

OSG continues to provide a guarantee in favor of the LNG Charterer relating to the LNG Charter Party Agreements (such guarantees, the ‘‘OSG LNG Performance Guarantee’’). INSW will indemnify OSG for liabilities arising from the OSG LNG Performance Guarantee pursuant to the terms of the Separation and Distribution Agreement. In connection with the OSG LNG Performance Guarantee, INSW pays a $135 fee per year to OSG, which will increase to $145 per year in 2019 and will be terminated if OSG ceases to provide the OSG LNG Performance Guarantee.

 

Note 12 — Capital Stock and Stock Compensation:

 

The Company accounts for stock-based compensation expense in accordance with the fair value method required by ASC 718, Compensation – Stock Compensation. Such fair value method requires share-based payment transactions to be measured according to the fair value of the equity instruments issued.

 

 

Information regarding share-based compensation awards granted by INSW during 2018 follows:

 

Director Compensation - Restricted Common Stock

 

The Company awarded a total of 41,887 restricted common stock shares during the six months ended June 30, 2018 to its non-employee directors. The weighted average fair value of INSW’s stock on the measurement date of such awards was $18.62 per share. Such restricted share awards vest in full on the earlier of the next annual meeting of the stockholders or May 24, 2019, subject to each director continuing to provide services to INSW through such date. The restricted share awards granted may not be transferred, pledged, assigned or otherwise encumbered prior to vesting. Prior to the vesting date, a holder of restricted share awards otherwise has all the rights of a shareholder of INSW, including the right to vote such shares and the right to receive dividends paid with respect to such shares at the same time as common shareholders generally.

 

Management Compensation - Restricted Stock Units and Stock Options

 

During the six months ended June 30, 2018, the Company granted 55,536 time-based restricted stock units (“RSUs”) to certain senior officers. The weighted average grant date fair value of these awards was $17.46 per RSU. Each RSU represents a contingent right to receive one share of INSW common stock upon vesting. Each award of RSUs will vest in equal installments on each of the first three anniversaries of the grant date.

 

During the six months ended June 30, 2018, the Company awarded 55,534 performance-based RSUs to its senior officers. Each performance stock unit represents a contingent right to receive RSUs based upon the covered employees being continuously employed through the end of the period over which the performance goals are measured and shall vest as follows: (i) one-half of the target RSUs shall vest on December 31, 2020, subject to INSW’s return on invested capital (“ROIC”) performance in the three-year ROIC performance period relative to a target rate (the “ROIC Target”) set forth in the award agreements; and (ii) one-half of the target RSUs shall vest on December 31, 2020, subject to INSW’s three-year total shareholder return (“TSR”) performance relative to that of a performance peer group over a three-year performance period (“TSR Target”). Vesting is subject in each case to the Human Resources and Compensation Committee of the Company’s Board of Directors’ certification of achievement of the performance measures and targets no later than March 15, 2021. As of June 30, 2018, INSW management believes the ROIC Target performance condition is not probable of being achieved. Accordingly, no compensation costs has been recognized for these awards during the three months ended June 30, 2018. The weighted average grant date fair value of the awards with performance conditions was determined to be $17.46 per RSU. The weighted average grant date fair value of the TSR based performance awards, which have a market condition, was estimated using a Monte Carlo probability model and determined to be $18.87 per RSU.

 

In addition, in April 2018, the Company awarded an executive officer, 11,882 performance-based restricted stock units, representing 2018 tranche of the award originally made on February 14, 2017. The grant date fair value of the performance award was determined to be $17.46 per RSU. Each performance stock unit represents a contingent right to receive RSUs based upon certain performance related goals being met and the covered employees being continuously employed through the end of the period over which the performance goals are measured. These performance awards shall vest on December 31, 2018, subject to INSW’s ROIC performance for the year ended December 31, 2018 relative to a target rate (the “2018 ROIC Target”) set forth in the award agreement. Vesting is subject to INSW’s Human Resources and Compensation Committee’s certification of achievement of the performance measure and target no later than March 31, 2019. As of June 30, 2018, achievement of the performance condition in this award was determined to be not probable, and accordingly, compensation cost has not been recognized.

 

During the six months ended June 30, 2018, the Company awarded to certain of its senior officers an aggregate of 124,955 stock options. Each stock option represents an option to purchase one share of INSW common stock for an exercise price of $17.46 per share. Each stock option will vest in equal installments on each of the first three anniversaries of the award date. The weighted average grant date fair value of the options was $7.76 per option. The fair values of the options were estimated using the Black-Scholes option pricing model with inputs that include the INSW stock price, the INSW exercise price and the following weighted average assumptions: risk free interest rates of 2.67%, dividend yields of 0.0%, expected stock price volatility factor of .42, and expected lives at inception of six years. Stock options may not be transferred, pledged, assigned or otherwise encumbered prior to vesting. The stock options expire on the business day immediately preceding the tenth anniversary of the award date. If a stock option grantee’s employment is terminated for cause (as defined in the applicable Form of Grant Agreement), stock options (whether then vested or exercisable or not) will lapse and will not be exercisable. If a stock option grantee’s employment is terminated for reasons other than cause, the option recipient may exercise the vested portion of the stock option but only within such period of time ending on the earlier to occur of (i) the 90th day ending after the option recipient’s employment terminated and (ii) the expiration of the options, provided that if the optionee’s employment terminates for death or disability the vested portion of the option may be exercised until the earlier of (i) the first anniversary of employment termination and (ii) the expiration date of the options.

 

 

Share Repurchases

 

In connection with the settlement of vested restricted stock units, the Company repurchased 6,678 and 22,424 shares of common stock during the three and six months ended June 30, 2018, respectively, at an average cost of $17.84 and $17.71, respectively, per share (based on the market prices on the dates of vesting) from certain members of management to cover withholding taxes. The Company repurchased 787 and 12,992 shares of common stock during the three and six months ended June 30, 2017, respectively, at an average cost of $18.63 and $18.59, respectively, per share (based on the market prices on the dates of vesting) from certain members of management to cover withholding taxes.

 

On May 2, 2017, the Company’s Board of Directors approved a resolution authorizing the Company to implement a stock repurchase program. Under the program, the Company may opportunistically repurchase up to $30,000 worth of shares of the Company’s common stock from time to time over a 24-month period, on the open market or otherwise, in such quantities, at such prices, in such manner and on such terms and conditions as management determines is in the best interests of the Company. Shares owned by employees, directors and other affiliates of the Company will not be eligible for repurchase under this program without further authorization from the Board. No shares were repurchased under such program during the six months ended June 30, 2018.

 

Note 13 — Accumulated Other Comprehensive Loss:

 

The components of accumulated other comprehensive loss, net of related taxes, in the condensed consolidated balance sheets follow:

  

		June 30,				December 31,
		2018				2017
Unrealized losses on derivative instruments		$	(18,420	)		$	(28,989	)
Items not yet recognized as a component of net periodic benefit cost (pension plans)			(10,027	)			(11,418	)
		$	(28,447	)		$	(40,407	)

 

 

The changes in the balances of each component of accumulated other comprehensive loss, net of related taxes, during the three and six months ended June 30, 2018 and 2017 follow: 

 

		Unrealized losses on cash flow hedges				Items not yet recognized as a component of net periodic benefit cost (pension plans)				Total
Balance as of March 31, 2018		$	(21,519	)		$	(11,847	)		$	(33,366	)
Current period change, excluding amounts reclassified
from accumulated other comprehensive loss			901				141				1,042
Amounts reclassified from accumulated other
comprehensive loss			2,198				1,679				3,877
Total change in accumulated other comprehensive loss			3,099				1,820				4,919
Balance as of June 30, 2018		$	(18,420	)		$	(10,027	)		$	(28,447	)
Balance as of March 31, 2017		$	(36,999	)		$	(12,147	)		$	(49,146	)
Current period change, excluding amounts reclassified
from accumulated other comprehensive loss			(2,122	)			(475	)			(2,597	)
Amounts reclassified from accumulated other
comprehensive loss			3,056				-				3,056
Total change in accumulated other comprehensive loss			934				(475	)			459
Balance as of June 30, 2017		$	(36,065	)		$	(12,622	)		$	(48,687	)

 

 

		Unrealized losses on cash flow hedges				Items not yet recognized as a component of net periodic benefit cost (pension plans)				Total
Balance as of December 31, 2017		$	(28,989	)		$	(11,418	)		$	(40,407	)
Current period change, excluding amounts reclassified from
accumulated other comprehensive loss			5,767				(288	)			5,479
Amounts reclassified from accumulated other
comprehensive loss			4,802				1,679				6,481
Total change in accumulated other comprehensive loss			10,569				1,391				11,960
Balance as of June 30, 2018		$	(18,420	)		$	(10,027	)		$	(28,447	)
Balance as of December 31, 2016		$	(40,317	)		$	(11,950	)		$	(52,267	)
Current period change, excluding amounts reclassified from
accumulated other comprehensive loss			(2,392	)			(672	)			(3,064	)
Amounts reclassified from accumulated other
comprehensive loss			6,644				-				6,644
Total change in accumulated other comprehensive loss			4,252				(672	)			3,580
Balance as of June 30, 2017		$	(36,065	)		$	(12,622	)		$	(48,687	)

 

 

 

Amounts reclassified out of each component of accumulated other comprehensive loss follow:

 

		Three Months Ended								Six Months Ended
		June 30,								June 30,
Accumulated Other Comprehensive Loss Component		2018				2017				2018				2017				Statement of Operations Line Item
Unrealized losses on cash flow hedges:
Interest rate swaps entered into by the Company's																		Equity in income of
equity method joint venture investees		$	(2,198	)		$	(3,056	)		$	(4,802	)		$	(6,513	)		affiliated companies
Interest rate caps entered into by the Company's
subsidiaries			-				-				-				(131	)		Interest expense
Items not yet recognized as a component of net
periodic benefit cost (pension plans):
Net periodic benefit costs associated with
pension and postretirement benefit plans for
shore-based employees			(1,679	)			-				(1,679	)			-			Other income
																		Total before and
		$	(3,877	)		$	(3,056	)		$	(6,481	)		$	(6,644	)		after tax

 

At June 30, 2018, the Company expects that it will reclassify $6,357 (gross and net of tax) of net losses on derivative instruments from accumulated other comprehensive loss to earnings during the next twelve months due to the payment of variable rate interest associated with floating rate debt of INSW’s equity method investees and the interest rate cap and swaps held by the Company.

 

See Note 8, “Fair Value of Financial Instruments, Derivatives and Fair Value Disclosures,” for additional disclosures relating to derivative instruments.

 

Note 14 — Revenue:

 

On January 1, 2018, the Company adopted ASC 606 using the modified retrospective method applied to those contracts which were in progress as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under ASC 605.

 

Upon adoption of ASC 606, the timing and recognition of earnings from the pool arrangements and time charter/bareboat charter-out contracts to which the Company is party did not change significantly from previous practice. Depending on whether or not the underlying voyage charter has been determined to be a service only contract or a lease contract with a service component, there may be a change in the timing of revenue recognition under voyage charter contracts. Such change in timing of revenue recognition may have a material impact on the Company’s consolidated financial statements, depending on the number of voyage charters that are in progress at a reporting period end. As of December 31, 2017, only one of the Company’s vessels was operating on a voyage charter. A review of the terms of the voyage charter agreement resulted in the determination that it was a short-term lease contract because the charterer had substantive decision-making rights with respect to the load and discharge ports. We concluded there was no material cumulative catch up adjustment for this contract as the adoption of ASC 606 did not materially change the timing or the amount of the non-lease component of the revenue recognized ratably between contract signing date in November 2017 and the discharge of cargo in January 2018. As a result, there was no cumulative catch up adjustment recognized on January 1, 2018.

 

The adoption of ASC 606 had no impact to revenues for the three and six months ended June 30, 2018 as there was no non-lease voyage charter in progress as of June 30, 2018.

 

 

Revenue Recognition

 

In accordance with ASC 606, revenue is recognized when a customer obtains control of or consumes promised services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these services. See Note 2, “Significant Accounting Policies,” for additional detail on the Company’s accounting policies regarding revenue recognition and costs to obtain or fulfill a contract.

 

Disaggregation of Revenue

 

For purposes of determining the standalone selling price of the vessel lease and technical management service components of the Company’s contracts with customers, the Company concluded that the residual approach would be the most appropriate method to use given that vessel lease rates are highly variable depending on shipping market conditions, the duration of such charters, and the age of the vessel. The Company believes that the standalone transaction price attributable to the technical management service component is more readily determinable than the price of the lease component and, accordingly, the service component is estimated using observable data (such as fees charged by third-party technical managers) and the residual transaction price is attributed to the vessel lease.

 

The following table presents the Company’s revenue disaggregated by revenue source for the three and six months ended June 30, 2018.

 

		Crude				Product
		Tankers				Carriers				Other				Totals
Three months ended June 30, 2018:
Pool revenues
Vessel lease component		$	5,207			$	2,950			$	-			$	8,157
Technical management services component			13,189				12,255				-				25,444
Time and bareboat charter revenues
Vessel lease component			1,767				501				-				2,268
Technical management services component			4,340				-				-				4,340
Voyage charter revenues
Vessel lease component			6,160				49				-				6,209
Technical management services component			1,569				-				-				1,569
Lightering services component			8,922				-				-				8,922
Total shipping revenues		$	41,154			$	15,755			$	-			$	56,909
Six months ended June 30, 2018:
Pool revenues
Asset lease component		$	9,081			$	7,938			$	-			$	17,019
Technical management services component			25,715				26,381				-				52,096
Time and bareboat charter revenues
Asset lease component			4,043				996				-				5,039
Technical management services component			9,482				-				-				9,482
Voyage charter revenues
Asset lease component			8,840				53				-				8,893
Technical management services component			2,337				-				-				2,337
Lightering revenues			14,021				-				-				14,021
Total shipping revenues		$	73,519			$	35,368			$	-			$	108,887

 

 

Contract Balances

 

The following table provides information about receivables, contract assets and contract liabilities from contracts with customers, and significant changes in contract assets and liabilities balances.

 

		Voyage receivables - Billed receivables				Contract assets (Unbilled voyage receivables)				Contract liabilities (Deferred revenues and off hires)
Opening balance as of January 1, 2018		$	3,486			$	54,701			$	(1,775	)
Closing balance as of June 30, 2018			3,393				59,015				(904	)
Revenue recognized in the period from:
Amounts included in contract liability at the beginning
of the period		$	-			$	-			$	918

 

We receive payments from customers based on a distribution schedule, as established in our contracts. Contract assets relate to our conditional right to consideration for our completed performance under contracts and are recognized when the right to consideration becomes unconditional. Contract liabilities include payments received in advance of performance under contracts and are recognized when performance under the respective contract has been completed. Deferred revenues allocated to unsatisfied performance obligations will be recognized over time as the services are performed, which is expected to take place in 2018.

 

Performance Obligations

 

All of the Company's performance obligations, and associated revenue, are generally transferred to customers over time. The expected duration of services is less than one year.

 

Revenues from performance obligations satisfied in previous periods aggregating $2,213 and $2,503 was recognized during the three and six months ended June 30, 2018, respectively, and related to: (i) pool adjustments; (ii) change in estimate of performance obligations related to voyage charters; (iii) off hire adjustments related to time and bareboat charters; and (iv) recoveries in excess of insurance claims receivables accrued for in prior periods, which accounted for $1,748 of the activity during the three months ended June 30, 2018. These are all normal course adjustments that are common in the shipping industry when pool voyages are closed out and disputes or claims are settled.

 

Costs to Obtain or Fulfill a Contract

 

As of June 30, 2018, there were no unamortized deferred costs of obtaining or fulfilling a contract.

 

Note 15 — Leases:

 

1. Charters-in:

 

As of June 30, 2018, INSW had commitments to charter in four MR and two Aframax vessels. All of the charters-in, of which two are bareboat charters with expiry dates ranging from December 2023 to March 2024 and four are time charters with expiry dates ranging from December 2018 to June 2019, are accounted for as operating leases. Lease expense relating to charters-in is included in charter hire expenses in the condensed consolidated statements of operations. The future minimum commitments and related number of operating days under these operating leases are as follows:

 

Bareboat Charters-in:
At June 30, 2018		Amount				Operating Days
2018		$	3,165				368
2019			6,278				730
2020			6,295				732
2021			6,278				730
2022			6,278				730
Thereafter			6,828				794
Net minimum lease payments		$	35,122				4,084

 

 

Time Charters-in:
At June 30, 2018		Amount				Operating Days
2018		$	13,219				1,341
2019			4,683				353
Net minimum lease payments		$	17,902				1,694

 

The future minimum commitments for time charters-in exclude amounts with respect to vessels chartered-in where the duration of the charter was one year or less at inception but include amounts with respect to workboats employed in the Crude Tankers Lightering business which are cancellable upon 180 days’ notice. Time charters-in commitments have been reduced to reflect estimated days that the vessels will not be available for employment due to drydock because INSW does not pay charter hire when time chartered-in vessels are not available for its use. Certain of the charters in the above tables provide INSW with renewal and purchase options.

 

2. Charters-out:

 

At June 30, 2018, the future minimum revenues, before reduction for brokerage commissions, expected to be received on non-cancelable bareboat and time charters and the related revenue days (revenue days represent calendar days, less days that vessels are not available for employment due to repairs, drydock or lay-up) are as follows:

 

Time Charters-out:
At June 30, 2018		Amount				Revenue Days
2018		$	4,580				415
Future minimum revenues		$	4,580				415

 

Future minimum revenues do not include (1) the Company’s share of time charters entered into by the pools in which it participates, and (2) the Company’s share of time charters entered into by the joint ventures, which the Company accounts for under the equity method. Revenues from a time charter are not generally received when a vessel is off-hire, including time required for normal periodic maintenance of the vessel. In arriving at the minimum future charter revenues, an estimated time off-hire to perform periodic maintenance on each vessel has been deducted, although there is no assurance that such estimate will be reflective of the actual off-hire in the future.

 

Note 16 — Contingencies:

 

INSW’s policy for recording legal costs related to contingencies is to expense such legal costs as incurred. 

 

Multi-Employer Plans

 

The Merchant Navy Officers Pension Fund (“MNOPF”) is a multi-employer defined benefit pension plan covering British crew members that served as officers on board INSW’s vessels (as well as vessels of other owners). The trustees of the plan have indicated that, under the terms of the High Court ruling in 2005, which established the liability of past employers to fund the deficit on the Post 1978 section of MNOPF, calls for further contributions may be required if additional actuarial deficits arise or if other employers liable for contributions are not able to pay their share in the future. As the amount of any such assessment cannot currently be reasonably estimated, no reserves have been recorded for this contingency in INSW’s condensed consolidated financial statements as of June 30, 2018. The next deficit valuation is due March 31, 2019.

 

 

The Merchant Navy Ratings Pension Fund (“MNRPF”) is a multi-employer defined benefit pension plan covering British crew members that served as ratings (seamen) on board INSW’s vessels (as well as vessels of other owners) more than 20 years ago. Participating employers include current employers, historic employers that have made voluntary contributions, and historic employers such as INSW that have made no deficit contributions. Calls for contributions may be required if additional actuarial deficits arise or if other employers liable for contributions are unable to pay their share in the future. Based on the latest estimated deficit valuation using a measurement date of March 31, 2017, which was distributed to employers in February 2018, INSW recorded a reserve of £240 ($318) as of June 30, 2018 for a potential assessment by the trustees of the MNRPF. The Company expects to make a deficit payment in the second half of 2018.

 

Galveston Accident

 

In late September 2017, an industrial accident at a leased facility in Galveston resulted in fatalities to two temporary employees. In accordance with law, an investigation of the accident is currently underway by the Occupational Safety and Health Administration and local law enforcement. In addition, lawsuits relating to the accident, each of which claims damages in excess of $25,000 were filed in state court in Texas (Harris County District Court) and identified a subsidiary of the Company as one of several defendants. The lawsuits have been settled as to most of the original defendants, with the exception of the subsidiary, and the remaining disputes were removed to federal court in Texas (Southern District) in January 2018. The subsidiary has filed its answer to those complaints, generally denying the allegations and stating certain affirmative defenses, and separately filed an action for declaratory judgment in federal court in Texas (Southern District) seeking judgment that it does not owe contractual indemnification obligations to certain of the other original defendants (the “T&T Defendants”). The federal court overseeing the declaratory judgment action recently issued an order dismissing the case on the basis that it lacked subject-matter jurisdiction to hear the dispute. This was not a decision on the merits of the underlying contractual dispute. The subsidiary and its excess insurers, who are co-plaintiffs in the action, are preparing to file an appeal in the U.S. Fifth Circuit Court of Appeals. If successful, the case would return to federal court, while in the meantime, the T&T defendants may seek to initiate an action in a Texas state court to assert their contractual claims. The Company intends to vigorously defend these suits. Estimating an amount or range of possible losses resulting from litigation proceedings is inherently difficult and requires an extensive degree of judgment, particularly where the matters involve indeterminate claims for monetary damages and are in the stages of the proceedings where key factual and legal issues have not been resolved. Accordingly, the Company is currently unable to predict the ultimate timing or outcome of, or to reasonably estimate the possible loss or a range of possible loss resulting from, these matters.

 

Legal Proceedings Arising in the Ordinary Course of Business

 

The Company is a party, as plaintiff or defendant, to various suits in the ordinary course of business for monetary relief arising principally from personal injuries, wrongful death, collision or other casualty and to claims arising under charter parties and other contract disputes. A substantial majority of such personal injury, wrongful death, collision or other casualty claims against the Company are covered by insurance (subject to deductibles not material in amount). Each of the claims involves an amount which, in the opinion of management, should not be material to the Company’s financial position, results of operations and cash flows.

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q contains forward looking statements. Such forward-looking statements represent the Company’s reasonable expectation with respect to future events or circumstances based on various factors and are subject to various risks and uncertainties and assumptions relating to the Company’s operations, financial results, financial condition, business, prospects, growth strategy and liquidity. Accordingly, there are or will be important factors, many of which are beyond the control of the Company, that could cause the Company’s actual results to differ materially from those indicated in these statements. Undue reliance should not be placed on any forward-looking statements and consideration should be given to the following factors when reviewing any such statement. Such factors include, but are not limited to:

 

•	the highly cyclical nature of INSW’s industry;
•	fluctuations in the market value of vessels;
•	declines in charter rates, including spot charter rates or other market deterioration;
•	an increase in the supply of vessels without a commensurate increase in demand;
•	the impact of adverse weather and natural disasters;
•	the adequacy of INSW’s insurance to cover its losses, including in connection with maritime accidents or spill events;
•	constraints on capital availability;
•	changing economic, political and governmental conditions in the United States and/or abroad and general conditions in the oil and natural gas industry;
•	changes in fuel prices;
•	acts of piracy on ocean-going vessels;
•	terrorist attacks and international hostilities and instability;
•	the impact of public health threats and outbreaks of other highly communicable diseases;
•	the effect of the Company’s indebtedness on its ability to finance operations, pursue desirable business operations and successfully run its business in the future;
•	the Company’s ability to generate sufficient cash to service its indebtedness and to comply with debt covenants;
•	the Company’s ability to make additional capital expenditures to expand the number of vessels in its fleet, and to maintain all of its vessels and to comply with existing and new regulatory standards;
•	the availability and cost of third party service providers for technical and commercial management of the Company’s fleet;
•	fluctuations in the contributions of the Company’s joint ventures to its profits and losses;
•	the Company’s ability to renew its time charters when they expire or to enter into new time charters;
•	termination or change in the nature of the Company’s relationship with any of the commercial pools in which it participates and the ability of such commercial pools to pursue a profitable chartering strategy;
•	competition within the Company’s industry and INSW’s ability to compete effectively for charters with companies with greater resources;
•	the loss of a large customer or significant business relationship;
•	the Company’s ability to realize benefits from its past acquisitions or acquisitions or other strategic transactions it may make in the future;
•	increasing operating costs and capital expenses as the Company’s vessels age, including increases due to limited shipbuilder warranties or the consolidation of suppliers;
•	the Company’s ability to replace its operating leases on favorable terms, or at all;
•	changes in credit risk with respect to the Company’s counterparties on contracts;
•	the failure of contract counterparties to meet their obligations;
•	the Company’s ability to attract, retain and motivate key employees;
•	work stoppages or other labor disruptions by employees of INSW or other companies in related industries;
•	unexpected drydock costs;

 

 

•	the potential for technological innovation to reduce the value of the Company’s vessels and charter income derived therefrom;
•	the impact of an interruption in or failure of the Company’s information technology and communication systems upon the Company’s ability to operate;
•	seasonal variations in INSW’s revenues;
•	government requisition of the Company’s vessels during a period of war or emergency;
•	the Company’s compliance with complex laws, regulations and in particular, environmental laws and regulations, including those relating to the emission of greenhouse gases and ballast water treatment;
•	any non-compliance with the U.S. Foreign Corrupt Practices Act of 1977 or other applicable regulations relating to bribery or corruption;
•	the impact of litigation, government inquiries and investigations;
•	governmental claims against the Company;
•	the arrest of INSW’s vessels by maritime claimants;
•	changes in laws, treaties or regulations; and
•	the impact that Brexit might have on global trading parties;

 

The Company assumes no obligation to update or revise any forward-looking statements. Forward-looking statements in this Quarterly Report on Form 10-Q and written and oral forward-looking statements attributable to the Company or its representatives after the date of this Quarterly Report on Form 10-Q are qualified in their entirety by the cautionary statement contained in this paragraph and in other reports hereafter filed by the Company with the Securities and Exchange Commission.

 

General:

 

We are a provider of ocean transportation services for crude oil and refined petroleum products. We operate our vessels in the International Flag market. Our business includes two reportable segments: Crude Tankers and Product Carriers. For the three and six months ended June 30, 2018, we derived 69% and 64%, respectively, of our TCE revenues from our Crude Tankers segment, compared with 66% for the three and six months ended June 30, 2017. Revenues from our Product Carriers segment constituted the balance of our TCE revenues for both periods.

 

As of June 30, 2018, we owned or operated an International Flag fleet of 53 vessels aggregating 7.7 million deadweight tons (“dwt”) and 864,800 cubic meters (“cbm”), including six vessels that have been chartered-in under operating leases. Our fleet includes VLCC, Suezmax, Aframax and Panamax crude tankers and LR1, LR2 and MR product carriers. Through joint ventures, we have ownership interests in two FSO service vessels and four LNG Carriers (together the “JV Vessels”).

 

The Company’s revenues are highly sensitive to patterns of supply and demand for vessels of the size and design configurations owned and operated by the Company and the trades in which those vessels operate. Rates for the transportation of crude oil and refined petroleum products from which the Company earns a substantial majority of its revenues are determined by market forces such as the supply and demand for oil, the distance that cargoes must be transported, and the number of vessels expected to be available at the time such cargoes need to be transported. The demand for oil shipments is significantly affected by the state of the global economy, levels of U.S. domestic and international oil production and OPEC exports. The number of vessels is affected by newbuilding deliveries and by the removal of existing vessels from service, principally through storage, scrappings or conversions. The Company’s revenues are also affected by the mix of charters between spot (voyage charter) and long-term (time or bareboat charter). Because shipping revenues and voyage expenses are significantly affected by the mix between voyage charters and time charters, the Company manages its vessels based on TCE revenues. Management makes economic decisions based on anticipated TCE rates and evaluates financial performance based on TCE rates achieved. Other than the JV Vessels, the Company’s revenues are derived predominantly from spot market voyage charters and those vessels are predominantly employed in the spot market via market-leading commercial pools. We derived 87% and 86% of our total TCE revenues in the spot market for the three and six months ended June 30, 2018, respectively, compared with 80% for the three and six months ended June 30, 2017.

 

 

The following is a discussion and analysis of our financial condition as of June 30, 2018 and results of operations for the three and six months periods ended June 30, 2018 and 2017. You should consider the foregoing when reviewing the condensed consolidated financial statements and this discussion and analysis. You should read this section together with the condensed consolidated financial statements, including the notes thereto. This Quarterly Report on Form 10-Q includes industry data and forecasts that we have prepared based, in part, on information obtained from industry publications and surveys. Third-party industry publications, surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable. In addition, certain statements regarding our market position in this report are based on information derived from internal market studies and research reports. Unless we state otherwise, statements about the Company’s relative competitive position in this report are based on our management's beliefs, internal studies and management's knowledge of industry trends.

 

All dollar amounts are in thousands, except daily dollar amounts and per share amounts.

 

Operations and Oil Tanker Markets:

 

The International Energy Agency (“IEA”) estimates global oil consumption for the second quarter of 2018 at 98.9 million barrels per day (“b/d”) an increase of 1.0 million b/d, or 1.0%, over the same quarter in 2017. The estimate for global oil consumption for all of 2018 is 99.1 million b/d, an increase of 1.4% over 2017. OECD demand in 2018 is estimated to increase by 0.6% to 47.7 million b/d, while non-OECD demand is estimated to increase by 2.0% to 51.4 million b/d.

 

Global oil production in the second quarter of 2018 reached 99.2 million b/d, an increase of 2.3% from the second quarter of 2017. OPEC crude oil production averaged 32.2 million b/d in the second quarter of 2018, a decrease of 0.2 million b/d from the first quarter of 2018, and a decrease of 0.1 million b/d from the second quarter of 2017. Non-OPEC production increased by 2.3 million b/d to 60.1 million b/d in the second quarter of 2018 compared with the second quarter of 2017. Oil production in the U.S. increased by 0.5 million b/d from 10.0 million b/d in the first quarter of 2018 to 10.5 million b/d in the second quarter of 2018, which was 1.4 million b/d higher than in the second quarter of 2017.

 

U.S. refinery throughput decreased by about 0.2 million b/d to 17.1 million b/d in the second quarter of 2018 compared with the comparable quarter in 2017. U.S. crude oil imports increased by about 0.1 million b/d in the second quarter of 2018 compared with the comparable quarter of 2017, with imports from OPEC countries decreasing by 0.3 million b/d, a 7.8% decrease from the comparable quarter in 2017.

 

Chinese imports of crude oil continued to increase and reached a record 9.6 million b/d in April, declining to 9.2 million b/d and 8.4 million b/d in May and June, respectively, as teapot refiners began to slow down production.

 

During the second quarter of 2018, the International Flag tanker fleet of vessels over 10,000 deadweight tons (“dwt”) increased by 0.1 million dwt as the crude fleet decreased by 0.1 million dwt, with VLCCs and Suezmaxes each growing by 0.1 million dwt and Aframaxes declining by 0.3 million dwt. The product carrier fleet expanded by 0.2 million dwt. Year over year, the size of the tanker fleet increased by 6.6 million dwt with the largest increases in the Suezmax and MR sectors.

 

During the second quarter of 2018, the International Flag crude tanker orderbook decreased by 2.9 million dwt overall led by declines in the VLCC orderbook of 1.3 million dwt, with Suezmaxes and Aframaxes showing declines of 0.8 million dwt each. The product carrier orderbook increased by 0.5 million dwt.

 

From the end of the second quarter of 2017 through the end of the second quarter of 2018, the total tanker orderbook declined by 2.4 million dwt. The VLCC order book increased by 5.3 million dwt, a decline from the year-over-year increase at the end of the first quarter of 2018. The Panamax orderbook remained flat, while all other segments declined due to a combination of vessel deliveries combined with relatively fewer new orders placed during the period.

 

VLCC freight rates were poor during the quarter, generally below $10,000 per day throughout the quarter with a brief spike in June. Other crude segments were similarly weak during the quarter. This was primarily attributable to increased newbuilding deliveries further exacerbating the oversupply situation coupled with the reduced OPEC exports discussed above. The high current oil prices are also responsible for higher bunker prices, which has a negative effect on earnings, and for a market in backwardation, which eliminates storage opportunities for older tonnage in particular. Higher oil prices stemming from reduced OPEC production and strong demand have reduced inventories to below 5-year averages. OPEC’s announced intention to increase production has not yet impacted the tanker markets.

 

 

Update on Critical Accounting Policies:

 

The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, which require the Company to make estimates in the application of its accounting policies based on the best assumptions, judgments and opinions of management. For a description of all of the Company’s material accounting policies, see Note 2, “Summary of Significant Accounting Policies,” to the Company’s consolidated financial statements as of and for the year ended December 31, 2017 included in the Company’s Annual Report on Form 10-K. See Note 2, “Significant Accounting Policies,” to the accompanying condensed consolidated financial statements for any changes or updates to the Company’s critical accounting policies for the current period.

 

Results from Vessel Operations:

 

During the second quarter of 2018, results from vessel operations decreased by $110 to a loss of $9,669 from a loss of $9,559 in the second quarter of 2017. This decrease primarily resulted from reduced TCE revenues, offset to a large degree by a net gain on vessel disposals during the period of $6,740, as well as decreases in third-party debt modification fees, vessel expenses and depreciation and amortization.

 

TCE revenues decreased in the current quarter by $19,268, or 28%, to $50,012 from $69,280 in the second quarter of 2017. Approximately $17,660 of this decrease was due to a decline in average daily rates across the majority of INSW’s fleet sectors.

 

During the first six months of 2018, income from vessel operations decreased by $40,244 to a loss of $36,375 from income of $3,869 in the first six months of 2017. This decrease resulted primarily from a decline in TCE revenues, partially offset by reductions in third-party debt modification fees, depreciation and amortization and charter hire expense.

 

The decrease in TCE revenues in the first six months of 2018 of $54,599, or 36%, to $98,813 from $153,412 in the corresponding period of the prior year primarily reflected lower average daily rates across INSW’s fleet sectors, which accounted for approximately $49,871 of the overall decrease.

 

See Note 4, “Business and Segment Reporting,” to the accompanying condensed consolidated financial statements for additional information on the Company’s segments, including equity in income of affiliated companies and reconciliations of (i) time charter equivalent revenues to shipping revenues and (ii) adjusted (loss)/income from vessel operations for the segments to (loss)/income before income taxes, as reported in the condensed consolidated statements of operations.

 

Crude Tankers		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2018				2017				2018				2017
TCE revenues		$	34,385			$	45,745			$	63,605			$	101,790
Vessel expenses			(22,144	)			(21,605	)			(47,760	)			(42,101	)
Charter hire expenses			(5,199	)			(3,700	)			(7,954	)			(7,843	)
Depreciation and amortization			(12,240	)			(13,304	)			(25,113	)			(26,351	)
Adjusted (loss)/income from vessel operations (a)		$	(5,198	)		$	7,136			$	(17,222	)		$	25,495
Average daily TCE rate		$	14,644			$	22,976			$	13,785			$	25,173
Average number of owned vessels (b)			24.7				24.0				25.7				24.0
Average number of vessels chartered-in under operating leases			2.6				0.8				1.5				0.6
Number of revenue days: (c)			2,348				1,991				4,614				4,044
Number of ship-operating days: (d)
Owned vessels			2,251				2,184				4,653				4,344
Vessels bareboat chartered-in under operating leases			182				-				210				-
Vessels time chartered-in under operating leases (e)			6				-				6				-
Vessels spot chartered-in under operating leases (e)			49				68				57				117

 

(a)

Adjusted (loss)/income from vessel operations by segment is before general and administrative expenses, third-party debt modification fees, separation and transition costs and gain on disposal of vessels and other property, net of impairments.

(b)

The average is calculated to reflect the addition and disposal of vessels during the period.

(c)

Revenue days represent ship-operating days less days that vessels were not available for employment due to repairs, drydock or lay-up. Revenue days are weighted to reflect the Company’s interest in chartered-in vessels.

(d)

Ship-operating days represent calendar days.

(e)

Vessels spot chartered-in under operating leases are related to the Company’s Crude Tankers Lightering business.

 

 

The following tables provide a breakdown of TCE rates achieved for the three and six months ended June 30, 2018 and 2017, between spot and fixed earnings and the related revenue days. The information in these tables is based, in part, on information provided by the commercial pools in which the segment’s vessels participate, and excludes revenue and revenue days for which recoveries were recorded by the Company under its loss of hire insurance policies. 

 

		2018								2017
		Spot				Fixed				Spot				Fixed
		Earnings				Earnings				Earnings				Earnings
Three Months Ended June 30,
ULCC:
Average rate		$	-			$	-			$	-			$	32,176
Revenue days			4				-				-				91
VLCC:
Average rate		$	12,242			$	9,660			$	26,657			$	42,389
Revenue days			813				9				648				90
Suezmax:
Average rate		$	13,070			$	-			$	-			$	-
Revenue days			182				-				-				-
Aframax:
Average rate		$	11,061			$	-			$	12,962			$	-
Revenue days			526				-				628				-
Panamax:
Average rate		$	14,861			$	11,323			$	12,266			$	17,914
Revenue days			182				528				299				167
Six Months Ended June 30,
ULCC:
Average rate		$	-			$	-			$	-			$	37,352
Revenue days			94				-				-				181
VLCC:
Average rate		$	12,537			$	12,783			$	32,306			$	42,266
Revenue days			1,430				97				1,212				178
Suezmax:
Average rate		$	13,993			$	-			$	-			$	-
Revenue days			362				-				-				-
Aframax:
Average rate		$	10,494			$	-			$	14,299			$	-
Revenue days			1,079				-				1,213				-
Panamax:
Average rate		$	13,782			$	11,444			$	13,614			$	19,767
Revenue days			362				1,066				793				351

 

 

During the second quarter of 2018, TCE revenues for the Crude Tankers segment decreased by $11,360, or 25%, to $34,385 from $45,745 in the second quarter of 2017. Approximately $15,400 of such decrease resulted from the impact of lower average blended rates earned in all of the Crude Tanker fleet sectors, particularly in the VLCC fleet sector, which accounted for $13,280 of the overall decrease. Approximately $6,124 of the reduction in TCE revenues represents the impact of the Company’s only ULCC being idle for the entirety of the current quarter ahead of its sale at the end of June 2018 and a 2000-built VLCC being held-for-sale as of the end of January 2018 through its sale in April 2018. There was a larger disparity in the spot market rates earned by the Company’s modern and non-modern VLCCs in the current period versus in the second quarter of 2017. VLCCs aged 15 years or less earned an average daily rate of $15,407 per day as compared to the overall VLCC rate of $12,242 in the current period, while in the prior year’s period the VLCCs under 15 years of age earned an average daily rate of $27,496 per day as compared to the overall VLCC rate of $26,657 per day. The decline in TCE revenues also reflects a $976 decrease in revenue in the Crude Tankers Lightering business during the current quarter. Serving to partially offset the declines in revenue was a 540-day increase in VLCC, Suezmax and Panamax revenue days; such increases had the effect of increasing revenue during the current quarter by a total of $8,780 and reflected the acquisitions of two 2017-built Suezmaxes, each of which delivered to the Company in July 2017, one 2010-built VLCC which delivered to the Company in November 2017, and a 2015-built and five 2016-built VLCCs which delivered to the Company in June 2018. Also contributing to the increase in revenue days was a 255-day reduction in drydock days in the Panamax fleet as compared to the prior year’s period.

 

Vessel expenses increased by $539 to $22,144 in the current quarter from $21,605 in the second quarter of 2017. An increase of approximately $2,449 was attributable to the Suezmax and VLCC acquisitions discussed above. Such increase was offset to a large extent by decreases in average daily vessel expenses primarily relating to the timing of the delivery of spares, lube oils and stores and the Company’s ULCC being idle for the entire quarter. Charter hire expenses increased by $1,499 to $5,199 in the second quarter of 2018 from $3,700 in the second quarter of 2017 principally as a result of the Company executing sale and lease back transactions for two 2009-built Aframaxes in March 2018. The associated bareboat charters are for periods ranging from 70 to 73 months and contain purchase options executable by the Company, commencing at the end of the third year. Depreciation and amortization decreased by $1,064 to $12,240 in the second quarter of 2018 from $13,304 in the second quarter of 2017, principally due to the impact of reductions in vessel bases that resulted from impairment charges on thirteen vessels recorded in the third and fourth quarters of 2017. The vessel sales and sale and leaseback transactions described above also contributed to the decrease. Such declines were offset to a large degree by the deliveries of the Suezmaxes and VLCCs noted above and increased drydock amortization.

 

Excluding depreciation and amortization, and general and administrative expenses, operating income for the Crude Tankers Lightering business was $1,718 for the second quarter of 2018 compared to $2,609 for the second quarter of 2017. The decrease in the current quarter’s operating income as compared to prior year’s period primarily reflects lower margins earned on full service lighterings in the current period.

 

During the first six months of 2018, TCE revenues for the Crude Tankers segment decreased by $38,185, or 38%, to $63,605 from $101,790 in the first six months of 2017 principally as a result of significantly lower average blended rates in the VLCC, Aframax and Panamax sectors aggregating approximately $40,230. The decreases in revenue associated with the ULCC and 2000-built VLCC described above totaled $11,746 during the year-to-date period. Further contributing to the decrease was a $4,469 decrease in revenue in the Crude Tankers Lightering business during the current period. Partially offsetting the revenue decreases was an 825-day increase in revenue days for the VLCC, Aframax and Panamax sectors, which accounted for a revenue increase of approximately $14,862, and was driven by the same factors that resulted in the increased revenue days for such fleets in the quarter-to-date period described above.

 

Vessel expenses increased by $5,659 to $47,760 in the six months ended June 30, 2018 from $42,101 in the corresponding period of 2017. Approximately $4,830 of the increase was attributable to the Suezmax and VLCC acquisitions discussed above. The balance of the increase was primarily related to an increase in hull and machinery damage repairs and routine repairs, partially offset by lower drydock deviation costs and the timing of the delivery of spares. Charter hire expenses increased by $111 to $7,954 in the first six months of 2018 from $7,843 in the first six months of 2017 resulting from the impact of the Aframax sale and leaseback transactions discussed above, offset to a large degree by a decrease of $1,825 in the Crude Tankers Lightering business reflecting a lower number of full service lighterings. Depreciation and amortization decreased by $1,238 to $25,113 in the six months ended June 30, 2018 from $26,351 in the prior year’s period, principally resulting from the same factors which impacted the quarter-to-date period detailed above.

 

 

Excluding depreciation and amortization, and general and administrative expenses, operating income for the Crude Tankers Lightering business was $1,838 for the first six months of 2018 and $4,599 for the first six months of 2017. The decrease in the current period’s operating income as compared to prior year’s period primarily reflects fewer service-only and full service lighterings performed in the first quarter of 2018 as compared to the first quarter of 2017 as well as lower margins on full service lighterings.

 

Product Carriers		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2018				2017				2018				2017
TCE revenues		$	15,627			$	23,535			$	35,208			$	51,622
Vessel expenses			(9,722	)			(13,608	)			(21,129	)			(26,918	)
Charter hire expenses			(5,524	)			(7,336	)			(11,391	)			(14,544	)
Depreciation and amortization			(4,530	)			(5,762	)			(9,248	)			(11,298	)
Adjusted (loss)/income from vessel operations		$	(4,149	)		$	(3,171	)		$	(6,560	)		$	(1,138	)
Average daily TCE rate		$	9,841			$	10,616			$	10,335			$	11,831
Average number of owned vessels			13.3				18.0				13.9				18.0
Average number of vessels chartered-in under operating leases			5.3				6.8				5.7				6.7
Number of revenue days			1,588				2,217				3,407				4,363
Number of ship-operating days:
Owned vessels			1,208				1,638				2,518				3,258
Vessels bareboat chartered-in under operating leases			122				273				302				543
Vessels time chartered-in under operating leases			363				342				723				674

 

The following tables provide a breakdown of TCE rates achieved for the three and six months ended June 30, 2018 and 2017, between spot and fixed earnings and the related revenue days. The information is based, in part, on information provided by the commercial pools in which the segment’s vessels participate and excludes revenue and revenue days for which recoveries were recorded by the Company under its loss of hire insurance policies.

 

		2018								2017
		Spot				Fixed				Spot				Fixed
		Earnings				Earnings				Earnings				Earnings
Three Months Ended June 30,
LR2:
Average rate		$	12,585			$	-			$	10,149			$	-
Revenue days			91				-				91				-
LR1:
Average rate		$	16,001			$	-			$	10,889			$	16,239
Revenue days			364				-				107				247
MR:
Average rate		$	8,613			$	5,294			$	10,697			$	5,294
Revenue days			1,043				91				1,682				91
Six Months Ended June 30,
LR2:
Average rate		$	13,245			$	-			$	13,926			$	-
Revenue days			181				-				181				-
LR1:
Average rate		$	13,852			$	-			$	13,854			$	17,692
Revenue days			718				-				197				515
MR:
Average rate		$	10,060			$	5,294			$	11,620			$	5,391
Revenue days			2,327				181				3,289				182

 

 

 

During second quarter of 2018 TCE revenues for the Product Carriers segment decreased by $7,908, or 34%, to $15,627 from $23,535 in the second quarter of 2017. A 639-day decrease in MR revenue days in the current period, arising primarily as a result of the sales of five MRs between August 2017 and April 2018 and the redelivery of three MRs to their owners between December 2017 and June 2018 at the expiry of their respective bareboat charters, resulted in a $6,322 decline in TCE revenue. Declining average daily blended rates earned in the MR fleet also contributed $2,291 to the overall decrease. Serving to partially offset such declines was an aggregate $603 increase in revenue which resulted from increased daily rates earned in the LR1 and LR2 fleets.

 

Vessel expenses decreased by $3,886 to $9,722 in the current quarter from $13,608 in second quarter of 2017. The decrease was primarily driven by a 581-day decrease in owned and bareboat chartered-in days, which resulted from the vessel sales and redeliveries described above. Charter hire expenses decreased by $1,812 to $5,524 in the second quarter of 2018 from $7,336 in the second quarter of 2017. The decrease was due to the redeliveries discussed above along with decreases in the daily charter rates for the Company’s time chartered-in MR fleet, which were effective beginning in the third quarter of 2017. Depreciation and amortization decreased by $1,232 to $4,530 in the second quarter of 2018 from $5,762 in the second quarter of 2017. The decrease reflected the vessel sales noted above and reductions in vessel bases that resulted from impairment charges on two vessels recorded in the third quarter of 2017.

 

During the first six months of 2018, TCE revenues for the Product Carriers segment decreased by $16,414, or 32%, to $35,208 from $51,622 in the first six months of 2017. A 963-day decrease in MR revenue days driven by the sales and redeliveries discussed above contributed approximately $10,404 of the overall decrease. Period-over-period decreases in average daily blended rates earned by all Product Carrier fleet sectors, also accounted for a decrease in revenue of approximately $6,077.

 

Vessel expenses decreased by $5,789 to $21,129 in the first six months of 2018 from $26,918 in the first six months of 2017. Such variance was principally attributable to a 981-day decrease in owned and bareboat chartered-in days, as detailed above. Charter hire expenses decreased by $3,153 to $11,391 in the first six months of 2018 from $14,544 in the first six months of 2017, reflecting the redeliveries and rate decreases discussed above. Depreciation and amortization decreased by $2,050 to $9,248 in the first six months of 2018 from $11,298 in the first six months of 2017, resulting from the vessel sales and reductions in vessel bases described above.

 

General and Administrative Expenses:

 

During the second quarter of 2018, general and administrative expenses increased by $968 to $6,064 from $5,096 in the second quarter of 2017. This increase reflects (i) an increase of approximately $334 in compensation and benefits related costs resulting primarily from base salary increases and headcount increases between July 2017 and January 2018, (ii) a $254 increase in accounting, legal and consulting fees primarily due to the timing of a true-up of over-accrued accounting fees expense recognized during the second quarter of 2017 in conjunction with the transition to a new audit firm, and (iii) a decrease in foreign currency exchange gains.

 

For the six months ended June 30, 2018, general and administrative expenses increased by $723 to $12,093 from $11,370 for the same period in 2017. Increased compensation and benefits related costs associated with year-over-year increases in headcount and base salary increases for continuing employees account for $636 of the increase. The balance of the increase primarily relates to a decrease foreign currency exchange gains offset by a year-over-year decrease in accounting, legal and consulting fees of approximately $299.

 

Third-Party Debt Modification Fees

 

During the three and six months ended June 30, 2018, third-party legal and consulting fees associated with 2017 Debt Facilities Second Amendment totaling $1,302 were incurred and expensed. Third-party legal and consulting fees associated with the refinancing of the INSW Facilities aggregating $7,939 were incurred and expensed during the three and six months ended June 30, 2017. Such costs were expensed in accordance with the relevant accounting guidance which stipulates that third-party costs incurred in relation to debt modifications are to be expensed as incurred.

 

 

Equity in Income of Affiliated Companies:

 

During the second quarter of 2018, equity in income of affiliated companies decreased by $5,044 to $8,822 from $13,866 in the second quarter of 2017. This decrease was principally attributable to decreases in earnings from the two FSO joint ventures of $5,549, partially offset by an increase in earnings for the LNG joint venture of $505. Revenue generated by the FSO joint ventures during the second quarter of 2018 was lower than revenue generated during the second quarter of 2017, as charter rates in the five-year service contracts that commenced in the third quarter of 2017 are lower than the charter rates included in the service contracts under which the FSO joint ventures operated during the second quarter of 2017. In addition, interest expense for the two FSO joint ventures increased in the second quarter of 2018 as compared to the second quarter of 2017 as a result of drawdowns on debt facilities aggregating $220,000 during April 2018. Refer to Note 6, “Equity Method Investments,” to the accompanying condensed consolidated financial statements for additional information on the debt facilities entered into by the FSO joint ventures.

 

During the first six months of 2018, equity in income of affiliated companies decreased by $10,310 to $17,162 from $27,472 in the first six months of 2017. This decrease was principally attributable to decreases in earnings from the two FSO joint ventures and the LNG joint venture of $9,978 and $421, respectively. The decreases for the FSO joint ventures were driven by factors consistent with the items discussed above, and the decreased LNG joint venture earnings primarily related to reimbursements received from the joint venture’s charterer that were recognized during the six months ended June 30, 2017 for drydock expenditures incurred in years prior to 2017.

 

Interest Expense:

 

Interest expense was $13,086 for the three months ended June 30, 2018 compared with $9,278 for the three months ended June 30, 2017. Interest expense incurred on the debt facilities entered into by the Company during the second quarter of 2018 (as discussed in Note 9, “Debt,” in the accompanying condensed consolidated financial statements) accounted for $1,221 of the increase, and the balance of the increase was primarily due to the higher average interest rates and average outstanding principal balances under the 2017 Debt Facilities, which replaced the INSW Facilities in June 2017. Such increases were partially offset by a $550 reduction in amortization of deferred finance costs due to the lower average balance of unamortized deferred financing costs during the second quarter of 2018 compared to the second quarter of 2017.

 

Interest expense was $24,707 and $18,445 for the six months ended June 30, 2018 and 2017, respectively. The increase of $6,262 resulted from the same factors that drove the quarter-over-quarter variance described above.

 

Interest expense is expected to increase during the third quarter of 2018 over the second quarter of 2018, as the debt facilities entered into towards the end of the second quarter of 2018 will be outstanding for a full quarter.

 

Taxes:

 

The Company qualifies for an exemption from U.S. federal income taxes under Section 883 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”) and U.S. Treasury Department regulations for the 2018 calendar year as less than 50 percent of the total value of the Company’s stock has been held by one or more shareholders who own 5% or more of the Company’s stock for more than half of the days of 2018. There can be no assurance at this time that INSW will continue to qualify for the Section 883 exemption during and beyond calendar year 2018. Should the Company not qualify for the exemption in the future, INSW will be subject to U.S. federal taxation of 4% of its U.S. source shipping income on a gross basis without the benefit of deductions. Shipping income that is attributable to transportation that begins or ends, but that does not both begin and end, in the U.S. will be considered to be 50% derived from sources within the United States. Shipping income attributable to transportation that both begins and ends in the U.S. will be considered to be 100% derived from sources within the United States, but INSW does not engage in transportation that gives rise to such income.

 

 

EBITDA and Adjusted EBITDA:

 

EBITDA represents net (loss)/income before interest expense, income taxes and depreciation and amortization expense. Adjusted EBITDA consists of EBITDA adjusted for the impact of certain items that we do not consider indicative of our ongoing operating performance. EBITDA and Adjusted EBITDA are presented to provide investors with meaningful additional information that management uses to monitor ongoing operating results and evaluate trends over comparative periods. EBITDA and Adjusted EBITDA do not represent, and should not be considered a substitute for, net income or cash flows from operations determined in accordance with GAAP. EBITDA and Adjusted EBITDA have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analysis of our results reported under GAAP. Some of the limitations are:

 

	•	EBITDA and Adjusted EBITDA do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;
	•	EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs; and
	•	EBITDA and Adjusted EBITDA do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt.

 

While EBITDA and Adjusted EBITDA are frequently used by companies as a measure of operating results and performance, neither of those items as prepared by the Company is necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculation.

 

The following table reconciles net (loss)/income, as reflected in the condensed consolidated statements of operations, to EBITDA and Adjusted EBITDA:

 

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2018				2017				2018				2017
Net (loss)/income		$	(18,796	)		$	(11,619	)		$	(48,112	)		$	6,448
Income tax provision			-				4				8				8
Interest expense			13,086				9,278				24,707				18,445
Depreciation and amortization			16,804				19,099				34,428				37,715
EBITDA			11,094				16,762				11,031				62,616
Third-party debt modification fees and costs associated
with extinguishment of debt			1,302				7,939				1,302				7,939
Separation and transition costs			-				296				-				1,031
Gain on disposal of vessels, net of impairments			(6,740	)			-				(167	)			-
Write-off of deferred financing costs			2,273				7,020				2,273				7,020
Loss on extinguishment of debt			1,295				-				1,295				-
Adjusted EBITDA		$	9,224			$	32,017			$	15,734			$	78,606

 

 

Liquidity and Sources of Capital:

 

Our business is capital intensive. Our ability to successfully implement our strategy is dependent on the continued availability of capital on attractive terms. In addition, our ability to successfully operate our business to meet near-term and long-term debt repayment obligations is dependent on maintaining sufficient liquidity.

 

Liquidity

 

Working capital at June 30, 2018 was approximately $101,000 compared with $85,000 at December 31, 2017. Current assets are highly liquid, consisting principally of cash, interest-bearing deposits and receivables. Our cash and cash equivalents balances generally exceed Federal Deposit Insurance Corporation insured limits. We place our cash and cash equivalents in what we believe to be credit-worthy financial institutions. In addition, certain of our money market accounts invest in U.S. Treasury securities or other obligations issued or guaranteed by the U.S. government or its agencies, floating rate and variable demand notes of U.S. and foreign corporations, commercial paper rated in the highest category by Moody’s Investor Services and Standard & Poor’s, certificates of deposit and time deposits, asset-backed securities, and repurchase agreements.

 

 

The Company’s total cash increased by approximately $72,200 during the six months ended June 30, 2018. This increase reflects net proceeds from the sale of vessels of $126,504, net returns of capital and deposits received from affiliated companies of $95,108, proceeds from the issuance of debt, net of issuance costs, of $72,924, and cash provided by operating activities of $10,123. Such cash inflows were partially offset by $129,245 in expenditures for vessels and other property, $60,000 in prepayments of the 2017 Term Loan in conjunction with the 2017 Debt Facilities Second Amendment, $30,000 in repayment of the 2017 Revolver facility, $6,875 in scheduled amortization of the 2017 Term Loan, and $5,895 in scheduled amortization of the Sinosure Credit Facility.

 

As of June 30, 2018, we had total liquidity on a consolidated basis of $192,853 comprised of $142,853 of cash (including $27,010 of restricted cash) and $50,000 of undrawn revolver capacity.

 

Restricted cash of $27,010 as of June 30, 2018 represents legally restricted cash relating to the Sinosure Credit Facility, ABN Term Loan Facility, and the 10.75% Subordinated Notes. Such facilities stipulate that cash accounts be maintained which are limited in their use to pay expenses related to drydocking the vessels and service the debt facilities.

 

As of June 30, 2018, we had total debt outstanding (net of original issue discount and deferred financing costs) of $838,029 and a total debt to total capitalization of 44.4%, which compares with 33.7% at December 31, 2017.

 

Sources, Uses and Management of Capital

 

Net cash provided by operating activities in the six months ended June 30, 2018 was $10,123. In addition to future operating cash flows, our other current sources of funds are proceeds from issuances of equity securities, additional borrowings as permitted under our loan agreements and proceeds from the opportunistic sales of our vessels.

 

Our current uses of funds are to fund working capital requirements, maintain the quality of our vessels, purchase vessels, comply with international shipping standards and environmental laws and regulations, repurchase our outstanding shares and repay or repurchase our outstanding loan facilities. Seventy-five percent of Excess Cash Flow (as defined in the 2017 Debt Facilities credit agreement) must be used to prepay the outstanding principal balance of 2017 Term Loan Facility. To the extent permitted under the terms of the 2017 Debt Facilities we may also use cash generated by operations to finance capital expenditures to modernize and grow our fleet.

 

As set forth in the 2017 Debt Facilities credit agreement, the 2017 Debt Facilities contain certain restrictions relating to new borrowings and INSW’s ability to receive cash dividends, loans or advances from ISOC and its subsidiaries that are Restricted Subsidiaries. As of June 30, 2018, the permitted cash dividends that can be distributed to INSW by ISOC under the 2017 Term Loan Facility was $12,500.

 

As discussed in Note 5, “Vessels,” to the accompanying condensed consolidated financial statements, on April 18, 2018, the Company, entered into a stock purchase and sale agreement with Euronav for the purchase of the holding companies for six VLCCs from Euronav for an aggregate price of $434,000, inclusive of any assumed debt, in connection with the closing of Euronav’s acquisition of Gener8 Maritime, Inc. (the ‘Transaction”). In connection with the Transaction and in order to finance portions of the consideration in connection therewith, and for other general corporate purposes, as applicable, the Company completed the following transactions during the six months ended June 30, 2018:

 

(i)

Sale of five of its vessels comprising one VLCC tanker, one Aframax tanker, and three MR tankers (one of which the Company agreed to sell in 2017) for approximately $54,850 in net proceeds;

(ii)

Entry into sale-leaseback transactions yielding approximately $39,300 in net proceeds in respect of two Aframax tankers in the first quarter of 2018;

(iii)

Refinancing of its FSO Joint Venture – on March 29, 2018, the FSO Joint Venture entered into a $220,000 Senior Secured Credit Facility. Such agreement is made up of a term loan of $110,000 and a revolving credit facility of $110,000 available to the FSO Joint Venture. The FSO Joint Venture drew down the facility in full on April 26, 2018 and distributed $110,000 of the loan proceeds to the Company;

(iv)

Sale of $25,000 of its 8.50% notes (the "8.50% Senior Notes") in an SEC-registered offering in May 2018 (the "Public Offering");

(v)

Sale of $30,000 of its 10.75% subordinated step-up notes due 2023 (the "10.75% Subordinated Notes") in a private placement to certain funds and accounts managed by BlackRock, Inc. ("BlackRock") on June 13, 2018;

(vi)

Entry into a credit agreement, secured by the Seaways Raffles, a 2010-built VLCC tanker, and dated as of June 7, 2018, by and among Seaways Shipping Corporation, a Marshall Islands corporation and wholly-owned subsidiary of the Company, the Company (as a guarantor), certain other guarantors which are subsidiaries of the Company, lenders named therein and ABN AMRO Capital USA LLC as lead arranger and facility agent (the "ABN Term Loan Facility"), and the related drawdown thereunder on June 12, 2018;

 

 

(vii)

Entry into a second amendment (the "2017 Debt Facilities Second Amendment") of the Credit Agreement dated as of June 22, 2017 (as amended by that certain First Amendment to Credit Agreement dated as of July 24, 2017 and by the 2017 Debt Facilities Second Amendment, the "2017 Term Loan Facility"), by and among the Company, International Seaways Operating Corporation ("ISOC"), OIN Delaware LLC, the Subsidiary Guarantors from time to time party thereto, the Lenders from time to time party thereto, Jefferies Finance LLC, as administrative agent for the Lenders and as collateral agent and mortgage trustee for the Secured Parties, Skandinaviska Enskilda Banken AB (publ), as swingline lender with effect as of the Closing Date;

(viii)

The assumption of outstanding debt under the Sinosure Credit Facility (as defined below) with effect as of June 14, 2018; and

(ix)

Sale of the Seaways Laura Lynn, to Euronav in late June 2018 for approximately $32,300 in net proceeds.

 

ABN Term Loan Facility

 

On June 7, 2018, the Company entered into the ABN Term Loan Facility. Subsequently on June 12, 2018, the Company borrowed approximately $28,463 secured by the Seaways Raffles vessel. The ABN Term Loan Facility bears interest at a rate of 3-month LIBOR plus a margin of 3.25% and is repayable in 19 quarterly installments of approximately $869 with a balloon repayment payable on the maturity date in 2023. Additionally, the ABN Term Loan Facility includes certain financial covenants and is guaranteed by the Company. The Company's guarantee is unsecured. The Company used the proceeds from the ABN Term Loan Facility to fund a portion of the Transaction.

 

2017 Debt Facilities Second Amendment

 

On June 14, 2018, the Company entered into the 2017 Debt Facilities Second Amendment. The amendment (i) increased the interest rate margin from 4.50% per annum to 5.00% per annum for loans determined by the Alternate Base Rate (as defined in the 2017 Term Loan Facility) and from 5.50% per annum to 6.00% per annum for any loan determined by reference to the LIBOR Rate and (ii) allowed a dividend of $110,000 to be made from the Company's FSO Joint Venture to the Company without incorporating such funds into the cash sweep provisions of the 2017 Term Loan Facility, (iii) permitted the acquisition of the holding companies of the six VLCCs as Unrestricted Subsidiaries and permitted those entities and their assets to be subject to the Sinosure Credit Facility and be subject to its liens and permitted the funding of the certain liquidity and other accounts in connection with that acquisition and (iv) made certain other amendments to covenants under the 2017 Term Loan Facility. As a condition to the effectiveness of the 2017 Debt Facilities Second Amendment, the Company prepaid $60,000 of the amount outstanding under the facility together with a premium equal to 1% of the $60,000 prepayment and paid a fee to the lenders of 1% of the 2017 Term Loan Facility debt outstanding after that repayment.

 

Sinosure Credit Facility

 

As part of the Transaction, the Company acceded as a guarantor to that certain China Export & Credit Insurance Corporation ("Sinosure") facility agreement originally dated November 30, 2015, as supplemented by a supplemental agreement dated December 28, 2015, as amended and restated by an amending and restating deed dated June 29, 2016, as supplemented by a supplemental agreement dated November 8, 2017, as supplemented by a consent, supplemental and amendment letter, dated April 2, 2018 (the facility agreement as of such date, the "Original Sinosure Facility") and as amended and restated by an amending and restating agreement dated June 13, 2018 (the "2018 Amending and Restating Agreement"), by and among Gener8 Maritime Subsidiary VII, Inc., Seaways Holding Corporation, a wholly owned subsidiary of the Company, the Company, Citibank, N.A. (London Branch), The Export-Import Bank of China and Bank of China (New York Branch) (and its successors and assigns) and certain other parties thereto (the "Sinosure Credit Facility"). The Sinosure Credit Facility is a term loan facility comprised of six loans, each secured by one of the six VLCCs acquired. As of the June 14, 2018, it had a principal amount outstanding of approximately $310,968 and bears interest at a rate of LIBOR plus a margin of 2%. Each loan under the Sinosure Credit Facility requires quarterly amortization payments of 1²/₃% (based on the original outstanding amount of each Vessel loan) together with a balloon repayment payable on the termination date of each loan. Each of the loans under the Sinosure Credit Facility will mature 144 months after its initial utilization date. Additionally, the Sinosure Credit Facility contains certain financial covenants. The 2018 Amending and Restating Agreement effects certain amendments to the Original Sinosure Facility as agreed between the parties thereto and necessitated by the Transaction. The Sinosure Credit Facility is guaranteed by the Company and Seaways Holding Corporation.

 

 

8.5% Senior Notes

 

On May 31, 2018, the Company completed a registered public offering of $25,000 aggregate principal amount of its 8.50% senior unsecured notes due 2023 (the “8.5% Senior Notes”), which resulted in aggregate net proceeds to the Company of approximately $23,363, after deducting commissions and estimated expenses. The Company used the net proceeds to fund the Transaction, to repay a portion of its outstanding 2017 Term Loan Facility and for general corporate purposes.

 

The Company issued the Notes under an indenture dated as of May 31, 2018 (the “Base Indenture”), between the Company and The Bank of New York Mellon, as trustee (the “Trustee”), as supplemented by a supplemental indenture dated as of May 31, 2018 (the “First Supplemental Indenture” and, together with the Base Indenture, the “Indenture”), between the Company and the Trustee. The Notes will mature on June 30, 2023 and bear interest at a rate of 8.50% per annum. Interest on the Notes will be payable in arrears on March 30, June 30, September 30 and December 30 of each year, commencing on September 30, 2018. The terms of the Indenture, among other things, limit the Company’s ability to merge, consolidate or sell assets.

 

The Company may redeem the Notes at its option, in whole or in part, at any time on or after June 30, 2020 at a redemption price equal to 100% of their principal amount, plus accrued and unpaid interest to, but excluding, the redemption date. In addition, if the Company undergoes a Change of Control (as defined in the Indenture) the Company may be required to repurchase all of the Notes at a purchase price equal to 101% of the principal amount of the Notes, plus accrued and unpaid interest (including additional interest, if any), to, but excluding, the repurchase date.

 

The Indenture contains certain restrictive covenants, including covenants that, subject to certain exceptions and qualifications, restrict our ability to make certain payments if a default under the Indenture has occurred and is continuing or will result therefrom and require us to limit the amount of debt we incur, maintain a certain minimum net worth and provide certain reports. The Indenture also provides for certain customary events of default (subject, in certain cases, to receipt of notice of default and/or customary grace or cure periods).

 

10.75% Subordinated Notes

 

On June 13, 2018, the Company completed the Private Placement to certain funds and accounts managed by BlackRock. The 10.75% Subordinated Notes are unsecured and rank junior to the 8.5% Senior Notes, the Company's guarantees of the 2017 Term Loan Facility, the ABN Term Loan Facility and Sinosure Credit Facility and other unsubordinated indebtedness of the Company. The Private Placement resulted in aggregate proceeds to the Company of approximately $28,003, after deducting fees paid to the purchasers of those notes and estimated expenses. The Company used the net proceeds from the Private Placement, together with the net proceeds from the Public Offering, to fund a portion of the Transaction and the offer to prepay a portion of the obligation of ISOC under the Term Loan B Facility.

 

The 10.75% Subordinated Notes were issued under an indenture dated as of June 13, 2018 (the "Subordinated Notes Indenture"), between the Company and GLAS Trust Company LLC, as trustee (the "Subordinated Notes Trustee").

 

The 10.75% Subordinated Notes bear interest from June 13, 2018 at an annual rate of 10.75%; provided that the 10.75% Subordinated Notes shall bear interest at the rate of 13.00% per annum beginning on the earlier of (i) December 15, 2020 and (ii) if the Refinance Date (as defined below) has occurred, the later of the Refinance Date and June 15, 2020. Interest on the 10.75% Subordinated Notes is payable quarterly in arrears on the 15th day of March, June, September and December of each year, commencing on September 15, 2018.

 

The stated maturity date of the 10.75% Subordinated Notes is June 15, 2023; provided that in certain circumstances after the indebtedness outstanding under the 2017 Term Loan Facility (as amended by the 2017 Debt Facilities Second Amendment) ceases to be outstanding (such date, the "Refinance Date"), the stated maturity of the 10.75% Subordinated Notes will become June 15, 2022. The 10.75% Subordinated Notes may be redeemed, in whole or in part, at any time prior to June 15, 2020, at a redemption price equal to 100% of the aggregate principal amount of the 10.75% Subordinated Notes being redeemed, plus accrued and unpaid interest to, but not including, the date of redemption, plus a "make-whole" premium.  On or after June 15, 2020, the Subordinated Notes may be redeemed at par, plus accrued and unpaid interest.

 

 

The Subordinated Notes Indenture contains covenants restricting the ability of the Company and its subsidiaries to incur additional indebtedness, sell assets, incur liens, amend the 2017 Term Loan Facility, enter into sale and leaseback transactions and enter into certain extraordinary transactions. In addition, the Subordinated Notes Indenture prohibits the Company from paying any dividends unless certain financial and other conditions are satisfied. The Subordinated Notes Indenture also contains events of default consistent with those under the 2017 Term Loan Facility.

 

The 10.75% Subordinated Notes have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act.

 

Outlook

 

We believe our strong balance sheet continues to give us flexibility to actively pursue fleet renewal or potential strategic opportunities that may arise within the diverse sectors in which we operate and at the same time positions us to generate sufficient cash to support our operations over the next twelve months. We or our subsidiaries may in the future complete transactions consistent with achieving the objectives of our business plan.

 

Off-Balance Sheet Arrangements

 

As of June 30, 2018, the FSO Joint Venture and the LNG Joint Venture had total bank debt outstanding of $784,050, of which $679,648 was nonrecourse to the Company.

 

The FSO Joint Venture is a party to a number of contracts: (a) the FSO Joint Venture is an obligor pursuant to a guarantee facility agreement dated as of July 14, 2017, by and among, the FSO Joint Venture, ING Belgium NV/SA, as issuing bank, and Euronav and INSW, as guarantors (the ‘‘Guarantee Facility’’); (b) the FSO Joint Venture is party to two service contracts with NOC (the ‘‘NOC Service Contracts’’); and (c) the FSO Joint Venture is a borrower under a $220,000 secured credit facility by and among TI Africa and TI Asia, as joint and several borrowers, ABN AMRO Bank N.V. and ING Belgium SA/NV, as Lenders, Mandated Lead Arrangers and Swap Banks, and ING Bank N.V., as Agent and as Security Trustee.

 

INSW severally guarantees the obligations of the FSO Joint Venture pursuant to the Guarantee Facility and severally guarantees the obligations of the FSO Joint Venture to Maersk Oil Qatar AS (“MOQ”) under the MOQ service contracts, which contracts were novated to NOC in July 2017 (the ‘‘MOQ Guarantee’’) for the period beginning on the novation date and severally guarantees the obligations of the FSO Joint Venture under the NOC Service Contracts. In addition, INSW continues the MOQ Guarantee to MOQ for the period ended on the novation date of the service contracts for MOQ, which guarantee for such period will end when Qatari authorities determine that the FSO Joint Venture has paid all Qatari taxes owed by the FSO Joint Venture under such service contracts through the novation date.

 

The FSO Joint Venture drew down on a $220,000 secured credit facility on April 26, 2018 (See Note 6, “Equity Method Investments” to the accompanying condensed consolidated financial statements). The Company provided a guarantee for the $110,000 FSO Term Loan portion of the facility, which has an interest rate of LIBOR plus two percent and amortizes over the remaining terms of the NOC Service Contracts, which expire in July 2022 and September 2022. INSW’s guarantee of the FSO Term Loan has financial covenants that provide (i) INSW’s Liquid Assets shall not be less than the higher of $50,000 and 5% of Total Indebtedness of INSW, (ii) INSW shall have Cash of at least $30,000 and (iii) INSW is in compliance with the Loan to Value Test (as such capitalized terms are defined in the Company guarantee or in the case of the Loan to Value Test, as defined in the credit agreement underlying the Company’s 2017 Debt Facilities (see Note 9, “Debt,” to the accompanying condensed consolidated financial statements). The FSO Joint Venture has entered into floating-to-fixed interest rate swap agreements with the aforementioned Swap Banks, which cover the notional amounts outstanding under the FSO Loan Facility and pay fixed rates of approximately 4.858% and receive a floating rate based on LIBOR. These agreements have an effective date of June 29, 2018, and maturity dates ranging from July to September 2022. As of June 30, 2018, the maximum potential amount of future principal payments (undiscounted) that INSW could be required to make relating to equity method investees secured bank debt was $104,612 and the carrying value of the Company’s guaranty in the accompanying condensed consolidated balance sheet was $951.

 

 

INSW maintains a guarantee in favor of Qatar Liquefied Gas Company Limited (2) (‘‘LNG Charterer’’) relating to certain LNG Tanker Time Charter Party Agreements with the LNG Charterer and each of Overseas LNG H1 Corporation, Overseas LNG H2 Corporation, Overseas LNG S1 Corporation and Overseas LNG S2 Corporation (such agreements, the ‘‘LNG Charter Party Agreements,’’ and such guarantee, the ‘‘LNG Performance Guarantee’’). INSW will pay QGTC an annual fee of $100 until such time that QGTC ceases to provide a guarantee in favor of the LNG charterer relating to performance under the LNG Charter Party Agreements.

 

OSG continues to provide a guarantee in favor of the LNG Charterer relating to the LNG Charter Party Agreements (such guarantees, the ‘‘OSG LNG Performance Guarantee’’). INSW will indemnify OSG for liabilities arising from the OSG LNG Performance Guarantee pursuant to the terms of the Separation and Distribution Agreement. In connection with the OSG LNG Performance Guarantee, INSW will pay a $135 annual fee to OSG for 2018, which will increase to $145 in 2019 and will be terminated if OSG ceases to provide the OSG LNG Performance Guarantee.

 

In addition, and pursuant to an agreement between INSW and the trustees of the OSG Ship Management (UK) Ltd. Retirement Benefits Plan (the ‘‘Scheme’’), INSW guarantees the obligations of OSG Ship Management (UK) Ltd., a subsidiary of INSW, to make payments to the Scheme.

 

Aggregate Contractual Obligations

 

A summary of the Company’s long-term contractual obligations, excluding operating lease obligations for office space, as of June 30, 2018 follows:

 

																						Beyond
		2018				2019				2020				2021				2022				2022				Total
2017 Term Loan - floating rate(1)		$	38,020			$	61,880			$	59,964			$	57,853			$	405,975			$	-			$	623,692
ABN Term Loan - floating rate(2)			2,533				4,913				4,720				4,520				4,323				13,142				34,151
Sinosure Credit Facility - floating rate(3)			17,803				35,249				34,312				33,314				32,803				231,614				385,095
8.5% Senior Notes - fixed rate			1,240				2,125				2,125				2,125				2,125				26,063				35,803
10.75% Subordinated Notes - fixed rate			1,630				3,225				3,225				3,900				3,900				31,950				47,830
Operating lease obligations (4)
Bareboat Charter-ins			3,165				6,278				6,295				6,278				6,278				6,828				35,122
Time Charter-ins			13,219				4,683				-				-				-				-				17,902
Total		$	77,610			$	118,353			$	110,641			$	107,990			$	455,404			$	309,597			$	1,179,595

 

(1)

Amounts shown include contractual interest obligations of floating rate debt estimated based on the aggregate effective one-month LIBOR rate as of June 30, 2018 of 2.10% and applicable margins for the 2017 Term Loan Facility of 6.0%. Management estimates that no prepayment will be required for the 2017 Term Loan Facility as a result of estimated Excess Cash Flow for the year ended December 31, 2018. Amounts shown for the 2017 Term Loan Facility exclude any estimated repayment as a result of Excess Cash Flow.

 

(2)

Amounts shown include contractual interest obligations of floating rate debt estimated based on the aggregate effective three-month LIBOR rate as of June 30, 2018 of 2.33% and applicable margin for the ABN Term Loan facility of 3.25%.

 

(3)

Amounts shown include contractual interest obligations of floating rate debt estimated based on (i) the fixed rate stated in the related floating-to-fixed interest rate swap through the swap maturity date of March 21, 2022, or (ii) the effective three-month LIBOR rate as of June 30, 2018 of 2.33% for periods after the swap maturity date, plus the applicable margin for the Sinosure Credit Facility of 2.00%. The Company is a party to a floating-to-fixed interest rate swap covering a notional amount of $305,073 at June 30, 2018 that effectively converts the Company’s interest rate exposure under the Sinosure Credit Facility from a floating rate based on 3-month LIBOR to a fixed LIBOR rate of 2.047%.

 

 

 

(4)

As of June 30, 2018, the Company had charter-in commitments for six vessels on leases that are accounted for as operating leases. Certain of these leases provide the Company with various renewal and purchase options. The future minimum commitments for time charters-in have been reduced to reflect estimated days that the vessels will not be available for employment due to drydock.

 

Risk Management:

 

The Company is exposed to market risk from changes in interest rates, which could impact its results of operations and financial condition. The Company manages this exposure to market risk through its regular operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. To manage its interest rate risk in a cost-effective manner, the Company, from time-to-time, enters into interest rate swap or cap agreements, in which it agrees to exchange various combinations of fixed and variable interest rates based on agreed upon notional amounts or to receive payments if floating interest rates rise above a specified cap rate. The Company uses such derivative financial instruments as risk management tools and not for speculative or trading purposes. In addition, derivative financial instruments are entered into with a diversified group of major financial institutions in order to manage exposure to nonperformance on such instruments by the counterparties.

 

During the six months ended June 30, 2018, the Company was party to an Interest Rate Cap agreement with a major financial institution covering a notional amount of $300,000 to limit the floating interest rate exposure associated with the 2017 Term Loan. The Interest Rate Cap agreement contains no leverage features and had a cap rate of 2.5% through the termination date of December 31, 2020. Additionally, in June 2018, the Company acquired an Interest Rate Swap agreement with a major financial institution covering the entire currently outstanding notional amount of the Sinosure Credit Facility. The Interest Rate Swap agreement contains no leverage features and has a fixed rate of 2.047% through the termination date of March 21, 2022.

 

In July 2018, the Company amended the Interest Rate Cap agreement described above to increase the notional amount to $350,000 and increase the cap rate to 2.605%, effective July 31, 2018. The maturity date of December 31, 2020 remained unchanged. The amendment did not require a cash expenditure by the Company, as a portion of the “in-the-money” position of the original Interest Rate Cap agreement was utilized to increase the notional amount. The Company also amended the interest rate swap agreement in July 2018 to increase the fixed rate to 2.99%, effective September 21, 2018. The maturity date of March 21, 2022 remained unchanged. In conjunction with such amendment, the Company received a cash settlement of $7,677 from the counterparty to the transaction.

 

Available Information

 

The Company makes available free of charge through its internet website, www.intlseas.com, its Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the Securities and Exchange Commission.

 

The public may also read and copy any materials the Company files with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E. Washington D.C. 20549 (information on the operation of the Public Reference Room is available by calling the SEC at 1-800-SEC-0330). The SEC also maintains a web site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at https://www.sec.gov.

 

The Company also makes available on its website, its corporate governance guidelines, its code of business conduct, insider trading policy, anti-bribery and corruption policy and charters of the Audit Committee, the Human Resources and Compensation Committee and the Corporate Governance and Risk Assessment Committee of the Board of Directors. Neither our website nor the information contained on that site, or connected to that site, is incorporated by reference into this Quarterly Report on Form 10-Q.

 

 

Controls and Procedures

 

As of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on that evaluation, the Company’s management, including the CEO and CFO, concluded that the Company’s current disclosure controls and procedures were effective as of June 30, 2018 to ensure that information required to be disclosed by the Company in the reports the Company files or submits under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) accumulated and communicated to the Company’s management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting

 

There was no change in the Company’s internal control over financial reporting during the three months ending June 30, 2018 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

 

 

 

 

PART II – OTHER INFORMATION

 

Item 1.

Legal Proceedings

 

See Note 16, “Contingencies,” to the accompanying condensed consolidated financial statements for a description of the current legal proceedings, which is incorporated by reference in this Part II, Item 1.

 

Item 1A.

Risk Factors

 

In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our 2017 Form 10-K. The risks described in our 2017 Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. There have been no material changes in our risk factors from those disclosed in our 2017 Form 10-K, except for the following:

 

Risks Related to Our Company

 

INSW has incurred significant indebtedness which could affect its ability to finance its operations, pursue desirable business opportunities and successfully run its business in the future, all of which could affect INSW’s ability to fulfill its obligations under that indebtedness.

 

As of June 30, 2018, INSW had approximately $838 million of outstanding indebtedness, net of discounts and deferred finance costs. In addition, the FSO JV has borrowed $110 million under the FSO Term Loan and $110 million under the FSO Revolver, which is secured by substantially all of the assets of the FSO JV. The FSO Term Loan is guaranteed by the Company and the FSO Revolver is guaranteed by INSW’s JV partner. INSW’s substantial indebtedness and interest expense could have important consequences, including:

 

·

limiting INSW’s ability to use a substantial portion of its cash flow from operations in other areas of its business, including for working capital, capital expenditures and other general business activities, because INSW must dedicate a substantial portion of these funds to service its debt;

·

to the extent INSW’s future cash flows are insufficient, requiring the Company to seek to incur additional indebtedness in order to make planned capital expenditures and other expenses or investments;

·

limiting INSW’s ability to obtain additional financing in the future for working capital, capital expenditures, debt service requirements, acquisitions, and other expenses or investments planned by the Company;

·

limiting the Company’s flexibility and ability to capitalize on business opportunities and to react to competitive pressures and adverse changes in government regulation, and INSW’s business and industry;

·

limiting INSW’s ability to satisfy its obligations under its indebtedness;

·

increasing INSW’s vulnerability to a downturn in its business and to adverse economic and industry conditions generally;

·

placing INSW at a competitive disadvantage as compared to its less-leveraged competitors;

·

potentially limiting the Company’s ability to enter certain commercial pools;

·

limiting the Company’s ability, or increasing the costs, to refinance indebtedness; and

·

limiting the Company’s ability to enter into hedging transactions by reducing the number of counterparties with whom INSW can enter into such transactions as well as the volume of those transactions.

 

INSW’s ability to continue to fund its obligations and to reduce or refinance debt may be affected by among other things, the age of the Company’s fleet and general economic, financial market, competitive, legislative and regulatory factors. An inability to fund the Company’s debt requirements or reduce or refinance debt could have a material adverse effect on INSW’s business, financial condition, results of operations and cash flows.

 

Additionally, the actual or perceived credit quality of the Company’s or its pools’ charterers (as well as any defaults by them) could materially affect the Company’s ability to obtain the additional capital resources that it will require to purchase additional vessels or significantly increase the costs of obtaining such capital. The Company’s inability to obtain additional financing at an acceptable cost, or at all, could materially affect the Company’s results of operation and its ability to implement its business strategy.

 

 

The Company may not be able to generate sufficient cash to service all of its indebtedness and could in the future breach covenants in its credit facilities, notes and term loans.

 

The Company’s earnings, cash flow and the market value of its vessels vary significantly over time due to the cyclical nature of the tanker industry, as well as general economic and market conditions affecting the industry. As a result, the amount of debt that INSW can manage in some periods may not be appropriate in other periods and its ability to meet the financial covenants to which it is subject or may be subject in the future may vary. Additionally, future cash flow may be insufficient to meet the Company’s debt obligations and commitments. Any insufficiency could negatively impact INSW’s business.

 

The 2017 Debt Facilities contain certain restrictions relating to new borrowings as set forth in the loan agreement. In addition, the 2017 Debt Facilities have a covenant to maintain the aggregate Fair Market Value of the Collateral Vessels (each as defined in that loan agreement) at greater than or equal to $300.0 million at the end of each fiscal quarter and to ensure that at any time, the outstanding principal amounts of the 2017 Debt Facilities and certain other secured indebtedness permitted under credit agreement minus the amount of unrestricted cash and cash equivalents does not exceed 65% of the aggregate Fair Market Value of the Collateral Vessels plus the Fair Market Value of certain joint venture equity interests.

 

Additionally, the Sinosure Credit Facility and ABN Term Loan Facility each require the Company to comply with a number of covenants, including collateral maintenance and financial covenants, restrictions on consolidations, mergers or sales of assets, limitations on liens, limitations on issuance of certain equity interests, limitations on transactions with affiliates, and other customary covenants and related provisions. The ABN Term Loan Facility also requires that it be amended to incorporate financial covenants (other than the vessel value maintenance covenant) included in other loan facilities or agreements evidencing indebtedness (with principal balances in excess of $50 million), to which the Company is party to becomes a party, that are deemed to be materially more advantageous to the lenders under such other agreements than those currently required by the ABN Term Loan Facility. The Company expects to execute such an amendment during the third quarter of 2018.

 

The Senior Notes Indenture and Subordinated Notes Indenture each also contain certain restrictive covenants, including covenants that, subject to certain exceptions and qualifications, restrict our ability to make certain payments if a default under the Indenture has occurred and is continuing or will result therefrom and require us to limit the amount of debt we incur, maintain a certain minimum net worth and provide certain reports. Additionally, the Subordinated Notes Indenture contains a number of additional covenants restricting our ability to sell assets, incur liens, amend the 2017 Debt Facilities, enter into sale and leaseback transactions and enter into certain extraordinary transactions.

 

While the Company was in compliance with these requirements as of June 30, 2018, a decrease in vessel values or a failure to meet such requirements could cause the Company to breach certain covenants in its existing credit facilities, notes and term loans, or in future financing agreements that the Company may enter into from time to time. If the Company breaches such covenants and is unable to remedy the relevant breach or obtain a waiver, the Company’s lenders could accelerate its debt and lenders under the 2017 Debt Facilities, Sinosure Credit Facility and ABN Term Loan Facility could foreclose on the Company’s owned vessels.

 

A range of economic, competitive, financial, business, industry and other factors will affect future financial performance, and, accordingly, the Company’s ability to generate cash flow from operations and to pay debt and to meet the financial covenants under the 2017 Debt Facilities, the Sinosure Credit Facility and the Subordinated Notes Indenture. Many of these factors, such as charter rates, economic and financial conditions in the tanker industry and the global economy or competitive initiatives of competitors, are beyond the Company’s control. If INSW does not generate sufficient cash flow from operations to satisfy its debt obligations, it may have to undertake alternative financing plans, such as:

 

·

refinancing or restructuring its debt;

·

selling tankers or other assets;

·

reducing or delaying investments and capital expenditures; or

·

seeking to raise additional capital.

 

 

Undertaking alternative financing plans, if necessary, might not allow INSW to meet its debt obligations. The Company’s ability to restructure or refinance its debt will depend on the condition of the capital markets, its access to such markets and its financial condition at that time. Any refinancing of debt could be at higher interest rates and might require the Company to comply with more onerous covenants, which could further restrict INSW’s business operations. In addition, the terms of existing or future debt instruments may restrict INSW from adopting some alternative measures. These alternative measures may not be successful and may not permit INSW to meet its scheduled debt service obligations. The Company’s inability to generate sufficient cash flow to satisfy its debt obligations, to meet the covenants of its credit agreements and term loans and/or to obtain alternative financing in such circumstances, could materially and adversely affect INSW’s business, financial condition, results of operations and cash flows.

 

Risks Related to Our Industry

 

INSW conducts its operations internationally, which subjects it to changing economic, political and governmental conditions abroad that may adversely affect its business.

 

The Company conducts its operations internationally, and its business, financial condition, results of operations and cash flows may be adversely affected by changing economic, political and government conditions in the countries and regions where its vessels are employed, including:

 

·

regional or local economic downturns;

·

changes in governmental policy or regulation;

·

restrictions on the transfer of funds into or out of countries in which INSW or its customers operate;

·

difficulty in staffing and managing (including ensuring compliance with internal policies and controls) geographically widespread operations;

·

trade relations with foreign countries in which INSW’s customers and suppliers have operations, including protectionist measures such as tariffs and import or export licensing requirements;

·

general economic and political conditions, which may interfere with, among other things, the Company’s supply chain, its customers and all of INSW’s activities in a particular location;

·

difficulty in enforcing contractual obligations in non-U.S. jurisdictions and the collection of accounts receivable from foreign accounts;

·

different regulatory regimes in the various countries in which INSW operates;

·

inadequate intellectual property protection in foreign countries;

·

the difficulties and increased expenses in complying with multiple and potentially conflicting U.S. and foreign laws, regulations, security, product approvals and trade standards, anti-bribery laws, government sanctions and restrictions on doing business with certain nations or specially designated nationals;

·

import and export duties and quotas;

·

demands for improper payments from port officials or other government officials;

·

U.S. and foreign customs, tariffs and taxes;

·

currency exchange controls, restrictions and fluctuations, which could result in reduced revenue and increased operating expense;

·

international incidents;

·

transportation delays or interruptions;

·

local conflicts, acts of war, terrorist attacks or military conflicts;

·

changes in oil prices or disruptions in oil supplies that could substantially affect global trade, the Company’s customers’ operations and the Company’s business;

·

the imposition of taxes by flag states, port states and jurisdictions in which INSW or its subsidiaries are incorporated or where its vessels operate; and

·

expropriation of INSW’s vessels.

 

The occurrence of any such event could have a material adverse effect on the Company’s business.

 

 

Additionally, protectionist developments, or the perception they may occur, may have a material adverse effect on global economic conditions, and may significantly reduce global trade. Governments may turn to trade barriers to protect their domestic industries against foreign imports, thereby depressing shipping demand. In particular, leaders in the United States have indicated the United States may seek to implement more protective trade measures. There is currently significant uncertainty about the future relationship between the United States, China and other exporting countries, including with respect to trade policies, treaties, government regulations and tariffs. For example, on January 23, 2017, President Trump signed an executive order withdrawing the United States from the Trans-Pacific Partnership, a global trade agreement intended to include the United States, Canada, Mexico, Peru and a number of Asian countries. Further, President Trump has called for substantial changes to foreign trade policy with China and has recently raised, and has proposed to further raise in the future, tariffs on several Chinese goods in order to reverse what he perceives as unfair trade practices that have negatively impacted U.S. businesses. Increasing trade protectionism may cause an increase in the cost of goods exported from regions globally, particularly the Asia-Pacific region, the length of time required to transport goods and the risks associated with exporting goods. Such increases may significantly affect the quantity of goods to be shipped, shipping time schedules, voyage costs and other associated costs.

 

INSW must comply with complex non-U.S. and U.S. laws and regulations, such as the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and other local laws prohibiting corrupt payments to government officials; anti-money laundering laws; and competition regulations. Moreover, the shipping industry is generally considered to present elevated risks in these areas. Violations of these laws and regulations could result in fines and penalties, criminal sanctions, restrictions on the Company’s business operations and on the Company’s ability to transport cargo to one or more countries, and could also materially affect the Company’s brand, ability to attract and retain employees, international operations, business and operating results. Although INSW has policies and procedures designed to achieve compliance with these laws and regulations, INSW cannot be certain that its employees, contractors, joint venture partners or agents will not violate these policies and procedures. INSW’s operations may also subject its employees and agents to extortion attempts.

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

On May 2, 2017, the Company’s Board of Directors approved a resolution authorizing the Company to implement a stock repurchase program. The program allows the Company to opportunistically repurchase up to $30,000 worth of shares of the Company’s common stock from time to time over a 24-month period, on the open market or otherwise, in such quantities, at such prices, in such manner and on such terms and conditions as management determines is in the best interests of the Company. Shares owned by employees, directors and other affiliates of the Company will not be eligible for repurchase under this program without further authorization from the Board.

 

No shares were repurchased during the three months ended June 30, 2018. The maximum number of shares that may still be purchased under the program as of June 30, 2018 was 1,350,907 shares, which was determined by dividing the remaining buyback authorization ($26,823) by the average purchase price of common stock repurchased during 2017. Future buybacks under the stock repurchase program will be at the discretion of our Board of Directors and subject to limitations under the Company’s debt agreements.

 

Item 4.

Mine Safety Disclosures

 

Not applicable.

 

Item 5.

Other Information

 

Not applicable.

 

Item 6.

Exhibits

 

See Exhibit Index on page 58.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

	INTERNATIONAL SEAWAYS, INC.
	(Registrant)
Date:  August 8, 2018	/s/ Lois K. Zabrocky
	Lois K. Zabrocky
	Chief Executive Officer
Date:  August 8, 2018	/s/ Jeffrey D. Pribor
	Jeffrey D. Pribor
	Chief Financial Officer

 

 

 

 

EXHIBIT INDEX

 

2.1	Stock Purchase and Sale Agreement, dated April 18, 2018, by and among Euronav NV, Euronav MI Inc., and Seaways Holding Corporation (pursuant to Item 601(b)(2) of Regulation S-K, certain schedules and similar attachments have been omitted but will be furnished supplementally to the Commission upon request) (filed as exhibit 2.2 to the Registrant’s Registration Statement on Form S-3 (File No. 333-224313) filed on May 14, 2018 and incorporated herein by reference).
2.2	Guarantee of International Seaways, Inc., dated April 18, 2018, in favor of Euronav MI Inc. (filed as exhibit 2.3 to the Registrant’s Registration Statement on Form S-3 (File No. 333-224313) filed on May 14, 2018 and incorporated herein by reference).
4.1	Indenture, dated May 31, 2018, between International Seaways, Inc. and The Bank of New York Mellon, as trustee (filed as exhibit 4.1 to the Registrants’ Current Report on Form 8-K dated May 31, 2018 and incorporated by reference herein).
4.2	First Supplemental Indenture, dated May 31, 2018, between International Seaways, Inc. and The Bank of New York Mellon, as trustee (filed as exhibit 4.2 to the Registrants’ Current Report on Form 8-K dated May 31, 2018 and incorporated by reference herein).
4.3	Form of Global Note (included as Exhibit A to the First Supplemental Indenture filed as Exhibit 4.2).
4.4*	Indenture, dated June 13, 2018, between the Company and GLAS Trust Company LLC, as trustee.
4.5	Form of Notes (included as Exhibit A to Annex I to the Indenture filed as Exhibit 4.4).
10.1	$220 Million Senior Secured Credit Facility of TI Africa Limited and TI Asia Limited, as joint and several Borrowers, and ABN Amro Bank N.V. and ING Belgium SA/NV, as Mandated Lead Arrangers, dated March 29, 2018 (filed as exhibit 10.21 to the Registrant’s Registration Statement on Form S-3 (File No. 333-224313) filed on May 14, 2018 and incorporated herein by reference).
10.2	Guarantee, dated March 29, 2018, relating to $220 Million Senior Secured Credit Facility dated March 29, 2018 (filed as exhibit 10.22 to the Registrant’s Registration Statement on Form S-3 (File No. 333-224313) filed on May 14, 2018 and incorporated herein by reference).
10.3*	Credit agreement dated as of June 7, 2018, by and among Seaways Shipping Corporation, a Marshall Islands corporation and wholly-owned subsidiary of the Registrant, the Registrant (as a guarantor), certain other guarantors which are subsidiaries of the Registrant, lenders named therein and ABN AMRO Capital USA LLC as lead arranger and facility agent.
10.4*	Amending and Restating Agreement by and among Gener8 Maritime Subsidiary VII, Inc., Seaways Holding Corporation, a wholly owned subsidiary of the Company, the Company, Citibank, N.A. (London Branch), the Export-Import Bank of China and Bank of China (New York Branch) (and its successors and assigns) and certain other parties thereto.
10.5*	Second Amendment, dated as of June 14, 2018, to the Credit Agreement dated as of June 22, 2017, among the Registrant, OIN Delaware LLC, International Seaways Operating Corporation and certain of its subsidiaries as other guarantors, various lenders, Jefferies Finance LLC and JP Morgan Chase Bank, N.A., as joint lead arrangers, UBS Securities LLC, as joint bookrunner, DNB Markets Inc., Fearnley Securities AS, Pareto Securities Inc. and Skandinaviska Enskilda Banken AB (Publ) as co-managers, Jefferies Finance LLC, as administrative agent, syndication agent, collateral agent and mortgage trustee.
31.1*	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a), as amended.
31.2*	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a), as amended.

 

 

32*	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
EX-101.INS	XBRL Instance Document
EX-101.SCH	XBRL Taxonomy Extension Schema
EX-101.CAL	XBRL Taxonomy Extension Calculation Linkbase
EX-101.DEF	XBRL Taxonomy Extension Definition Linkbase
EX-101.LAB	XBRL Taxonomy Extension Label Linkbase
EX-101.PRE	XBRL Taxonomy Extension Presentation Linkbase

 

*

Filed herewith

 

 

Exhibit 4.4

 

Execution Version

 

INTERNATIONAL SEAWAYS, INC.

 

as Issuer

 

and

 

GLAS Trust Company LLC

 

as Trustee

 

INDENTURE

 

Dated as of June 13, 2018

 

 

Table of Contents

 

			Page
Article One
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.01.	Rules of Construction		1
SECTION 1.02.	Definitions		2
SECTION 1.03.	Compliance Certificates and Opinions		29
SECTION 1.04.	Form of Documents Delivered to Trustee		29
SECTION 1.05.	Acts of Holders		30
SECTION 1.06.	Notices, Etc., to Trustee, Issuer, any Guarantor and Agent		30
SECTION 1.07.	Notice to Holders; Waiver		31
SECTION 1.08.	Effect of Headings and Table of Contents		32
SECTION 1.09.	Successors and Assigns		32
SECTION 1.10.	Severability Clause		32
SECTION 1.11.	Benefits of Indenture		32
SECTION 1.12.	Governing Law; Submission to Jurisdiction		32
SECTION 1.13.	Legal Holidays		32
SECTION 1.14.	No Personal Liability of Directors, Managers, Officers, Employees and Stockholders		32
SECTION 1.15.	Counterparts		32
SECTION 1.16.	USA PATRIOT Act		33
SECTION 1.17.	Waiver of Jury Trial		33
SECTION 1.18.	Force Majeure		33
SECTION 1.19.	FATCA		33
Article Two
NOTE FORMS
SECTION 2.01.	Form and Dating		33
SECTION 2.02.	Execution, Authentication, Delivery and Dating		34
Article Three
THE NOTES
SECTION 3.01.	Title and Terms		34
SECTION 3.02.	Note Registrar, Transfer Agent and Paying Agent		35
SECTION 3.03.	Denominations		36
SECTION 3.04.	Temporary Notes		36
SECTION 3.05.	Registration of Transfer and Exchange		36
SECTION 3.06.	Mutilated, Destroyed, Lost and Stolen Notes		37
SECTION 3.07.	Payment of Interest; Interest Rights Preserved		37
SECTION 3.08.	Persons Deemed Owners		38
SECTION 3.09.	Cancellation		38
SECTION 3.10.	Computation of Interest		39

 

  

SECTION 3.11.	Transfer and Exchange		39
SECTION 3.12.	CUSIP, ISIN and Common Code Numbers		39
Article Four
SATISFACTION AND DISCHARGE
SECTION 4.01.	Satisfaction and Discharge of Indenture		39
SECTION 4.02.	Application of Trust Money		41
Article Five
REMEDIES
SECTION 5.01.	Events of Default		41
SECTION 5.02.	Acceleration of Maturity:  Rescission and Annulment		42
SECTION 5.03.	Collection of Indebtedness and Suits for Enforcement by Trustee		44
SECTION 5.04.	Trustee May File Proofs of Claim		45
SECTION 5.05.	Trustee May Enforce Claims Without Possession of Notes		46
SECTION 5.06.	Application of Money Collected		46
SECTION 5.07.	Limitation on Suits		46
SECTION 5.08.	Right of Holders to Bring Suit for Payment		47
SECTION 5.09.	Restoration of Rights and Remedies		47
SECTION 5.10.	Rights and Remedies Cumulative		47
SECTION 5.11.	Delay or Omission Not Waiver		47
SECTION 5.12.	Control by Holders		47
SECTION 5.13.	Waiver of Past Defaults		47
SECTION 5.14.	Waiver of Stay or Extension Laws		48
SECTION 5.15.	Undertaking for Costs		48
Article Six
THE TRUSTEE
SECTION 6.01.	Duties of the Trustee		48
SECTION 6.02.	Notice of Defaults		49
SECTION 6.03.	Certain Rights of Trustee		49
SECTION 6.04.	Trustee Not Responsible for Recitals or Issuance of Notes		51
SECTION 6.05.	May Hold Notes		52
SECTION 6.06.	Money Held in Trust		52
SECTION 6.07.	Compensation and Reimbursement		52
SECTION 6.08.	Corporate Trustee Required; Eligibility		53
SECTION 6.09.	Resignation and Removal; Appointment of Successor		53
SECTION 6.10.	Acceptance of Appointment by Successor		54
SECTION 6.11.	Merger, Conversion, Consolidation or Succession to Business		54
SECTION 6.12.	Appointment of Authenticating Agent		54

 

  

Article Seven
HOLDERS LISTS AND REPORTS BY TRUSTEE AND ISSUER
SECTION 7.01.	Issuer to Furnish Trustee Names and Addresses		56
SECTION 7.02.	Reports by Trustee		56
Article Eight
MERGER, CONSOLIDATION, AMALGAMATION OR SALE
OF ALL OR SUBSTANTIALLY ALL ASSETS
SECTION 8.01.	Issuer and Restricted Parties May Consolidate, Etc., Only on Certain Terms		56
Article Nine
SUPPLEMENTAL INDENTURES
SECTION 9.01.	Amendments or Supplements Without Consent of Holders		57
SECTION 9.02.	Amendments, Supplements or Waivers with Consent of Holders		58
SECTION 9.03.	Execution of Amendments, Supplements or Waivers		59
SECTION 9.04.	Effect of Amendments, Supplements or Waivers		59
SECTION 9.05.	Reference in Notes to Supplemental Indentures		59
SECTION 9.06.	Notice of Supplemental Indentures		59
Article Ten
COVENANTS
SECTION 10.01.	Payment of Principal, Premium, if any, and Interest		59
SECTION 10.02.	Maintenance of Office or Agency		59
SECTION 10.03.	Money for Notes Payments to Be Held in Trust		60
SECTION 10.04.	Organizational Existence		61
SECTION 10.05.	Payment of Taxes and Other Claims		61
SECTION 10.06.	Net Worth Maintenance		61
SECTION 10.07.	No Adverse Amendment		61
SECTION 10.08.	Statement by Officer as to Default		61
SECTION 10.09.	Reports and Other Information		62
SECTION 10.10.	Limitation on Restricted Payments		62
SECTION 10.11.	Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock		63
SECTION 10.12.	Liens		65
SECTION 10.13.	Limitations on Transactions with Affiliates		66
SECTION 10.14.	Limitations on Dividend and Other Payment Restrictions Affecting Restricted Parties		66
SECTION 10.15.	Sale and Leaseback Transactions		67
SECTION 10.16.	Business		67
SECTION 10.17.	Asset Sales		68
SECTION 10.18.	Additional Amounts		70
SECTION 10.19.	Distribution or Dividend from Operating Company.		71

 

  

Article Eleven
REDEMPTION OF NOTES
SECTION 11.01.	Right of Redemption		72
SECTION 11.02.	Optional Redemption for Changes in Withholding Taxes		72
SECTION 11.03.	Special Mandatory Redemption		73
SECTION 11.04.	Applicability of Article		73
SECTION 11.05.	Election to Redeem; Notice to Trustee		73
SECTION 11.06.	Selection by Trustee of Notes to Be Redeemed		73
SECTION 11.07.	Notice of Redemption		74
SECTION 11.08.	Deposit of Redemption Price		75
SECTION 11.09.	Notes Payable on Redemption Date		76
SECTION 11.10.	Notes Redeemed in Part		76
SECTION 11.11.	Sinking Fund; Open Market Purchases		76
Article Twelve
SUBORDINATION OF NOTES
SECTION 12.01.	Agreement to Subordinate		76
SECTION 12.02.	Liquidation, Dissolution, Bankruptcy		76
SECTION 12.03.	Acceleration of Payment of Notes		77
SECTION 12.04.	Subrogation		77
SECTION 12.05.	Relative Rights		77
SECTION 12.06.	Subordination May Not Be Impaired by Issuer		77
SECTION 12.07.	Rights of Trustee and Paying Agent		77
SECTION 12.08.	Distribution or Notice to Representative		78
SECTION 12.09.	Article Twelve Not to Prevent Events of Default or Limit Right to Accelerate		78
SECTION 12.10.	Trust Moneys Not Subordinated		78
SECTION 12.11.	Trustee Entitled to Rely		78
SECTION 12.12.	Trustee to Effectuate Subordination		78
SECTION 12.13.	Trustee Not Fiduciary for Holders of Senior Indebtedness of the Issuer		79
SECTION 12.14.	Reliance by Holders of Senior Indebtedness of the Issuer on Subordination Provisions		79
Article Thirteen
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 13.01.	Issuer’s Option to Effect Legal Defeasance or Covenant Defeasance		79
SECTION 13.02.	Legal Defeasance and Discharge		80
SECTION 13.03.	Covenant Defeasance		80
SECTION 13.04.	Conditions to Legal Defeasance or Covenant Defeasance		80
SECTION 13.05.	Deposited Money and U.S. Government Obligations To Be Held in Trust Other Miscellaneous Provisions		82
SECTION 13.06.	Reinstatement		82

 

 

APPENDIX, EXHIBITS AND SCHEDULES

 

ANNEX I ― Rule 144A / Regulation S / IAI

 

EXHIBIT 1 to Rule 144A / Regulation S / IAI — Form of Initial Note

 

EXHIBIT 2 to Rule 144A / Regulation S / IAI — Form of Transferee Letter of Representation

 

EXHIBIT A — Form of Incumbency Certificate

 

SCHEDULE 1 — Issue Date Restricted Parties

  

 

INDENTURE, dated as of June 13, 2018 (this “Indenture”), between INTERNATIONAL SEAWAYS, INC., a Marshall Islands corporation (“Issuer”) and GLAS Trust Company LLC, a limited liability company organized and existing under the laws of the state of New Hampshire, as Trustee.

 

RECITALS OF THE ISSUER

 

The Issuer has duly authorized the creation of an issue of 10.75% Step-Up Notes due 2023 issued on the date hereof (the “Notes”) and to provide therefor the Issuer has duly authorized the execution and delivery of this Indenture.

 

All things necessary have been done to make the Notes, when executed by the Issuer and authenticated and delivered hereunder and duly issued by the Issuer, the valid and legally binding obligations of the Issuer and to make this Indenture a valid and legally binding agreement of the Issuer, in accordance with their and its terms.

 

Each of the parties hereto is entering into this Indenture for the benefit of the other party and for the equal and ratable benefit of the Holders (as defined below) of the Notes.

 

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

 

For and in consideration of the premises and the purchase of the Notes by the Holders thereof, it is mutually covenanted and agreed, for the equal and ratable benefit of all Holders, as follows:

 

Article One

DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION

 

SECTION 1.01.         Rules of Construction. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires:

 

(1)         the terms defined in this Article have the meanings assigned to them in this Article, and words in the singular include the plural and words in the plural include the singular;

 

(2)         all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP (as herein defined);

 

(3)         the words “herein”, “hereof” and “hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision;

 

(4)         all references to Articles, Sections, Exhibits and Appendices shall be construed to refer to Articles and Sections of, and Exhibits and Appendices to, this Indenture;

 

(5)         “or” is not exclusive;

 

(6)         “including” means including without limitation; and

 

(7)         all references to the date the Notes were originally issued shall refer to the Issue Date.

 

 

SECTION 1.02.         Definitions.

 

“ABN Facility” means the senior secured term loan facility pursuant to that certain credit agreement, dated as of June 7, 2018, by and among Seaways Shipping Corporation, certain guarantors and lenders to be named therein and ABN AMRO Capital USA LLC as lead arranger and facility agent, as may be amended, restated, supplemented or otherwise modified from time to time.

 

“Acquisition” means the acquisition of six Very Large Crude Carrier (VLCC) vessels from Euronav MI Inc. pursuant to the Acquisition Agreement.

 

“Acquisition Agreement” means that certain Stock Purchase and Sale Agreement, dated as of April 18, 2018, by and among Euronav NV, Euronav MI Inc. and Seaways Holding Corporation.

 

“Act,” when used with respect to any Holder, has the meaning specified in Section 1.05 of this Indenture.

 

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise.

 

“Affiliate Transaction” has the meaning specified in Section 10.13 of this Indenture.

 

“Agent” means any Note Registrar, Transfer Agent, co-registrar, Paying Agent or other agent appointed in accordance with this Indenture to perform any function that this Indenture authorized such agent to perform.

 

“Appendix” has the meaning specified in Section 2.01 of this Indenture.

 

“Applicable Premium” means, with respect to any Note on any Redemption Date, the excess, if any, of (a) the present value at such Redemption Date of (i) the redemption price of such Note at June 15, 2020 (such redemption price being 100% of the principal amount of the Note to be redeemed), plus (ii) all required interest payments due on such Note through June 15, 2020 (excluding accrued but unpaid interest to the Redemption Date), computed by the Issuer on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) using a discount rate equal to the Treasury Rate as of such Redemption Date plus 50 basis points; over (b) the principal amount of such Note.

 

Calculation of the Applicable Premium will be made by the Issuer; provided that such calculation or the correctness thereof shall not be a duty or obligation of the Trustee.

 

“Applicable Premium Deficit” has the meaning specified in Section 4.01 of this Indenture.

 

“Approved Broker” means any of Compass Maritime Services, H. Clarkson & Co., Ltd., Charles R. Weber Company, Inc., Fearnleys, Braemar, Howe Robinson and Simpson Spence Young or any other independent shipbroker to be mutually agreed upon between the Administrative Agent under the Senior Credit Agreement and the Issuer.

 

“Asset Sale” has the meaning specified in Section 10.17 of this Indenture.

 

  

“Attributable Indebtedness” means, when used with respect to any Sale and Leaseback Transaction, as at the time of determination, the present value (discounted at a rate equivalent to the Issuer’s then-current weighted average cost of funds for borrowed money as at the time of determination, compounded on a semi-annual basis) of the total obligations of the lessee for rental payments (and substantially similar payments) during the remaining term of the lease included in any such Sale and Leaseback Transaction.

 

“Bank Product” means transactions under Hedging Agreements extended to the Issuer or any Restricted Party by a Bank Product Provider.

 

“Bank Product Agreements” shall mean those agreements entered into from time to time by the Issuer or any Restricted Party with a Bank Product Provider in connection with the obtaining of any of the Bank Products.

 

“Bank Product Obligations” shall mean (a) all Hedging Obligations pursuant to Hedging Agreements entered into with one or more of the Bank Product Providers, and (b) all amounts that the Administrative Agent or any Lender under the Senior Credit Facilities (as defined therein) is obligated to pay to a Bank Product Provider as a result of such Administrative Agent or such Lender purchasing participations from, or executing guarantees or indemnities or reimbursement obligations to, a Bank Product Provider with respect to the Bank Products provided by such Bank Product Provider to the Issuer or any Restricted Party; provided that, in order for any item described in clause (a) or (b) above, as applicable, to constitute “Bank Product Obligations,” the applicable Bank Product must have been provided on or after the Issue Date and the Administrative Agent under the Senior Credit Facilities shall have received a Bank Product Provider Letter Agreement from the applicable Bank Product Provider (and acknowledged by the Issuer or such Restricted Party) within 30 days after the date of the provision of the applicable Bank Product to the Issuer or any Restricted Party.

 

“Bank Product Provider” shall mean any Agent or any Lender under the Senior Credit Facilities (as defined therein) or any of their respective Affiliates (or any person who at the time the respective Bank Product Agreement was entered into by such person was such Agent, Lender or Affiliate under the Senior Credit Facilities); provided, however, that no such person shall constitute a Bank Product Provider with respect to a Bank Product unless and until the Administrative Agent under the Senior Credit Facilities shall have received a Bank Product Provider Letter Agreement from such person with respect to the applicable Bank Product (and acknowledged by the Issuer or such Restricted Party) within 30 days after the provision of such Bank Product to any Borrower or Subsidiary Guarantor under the Senior Credit Facilities (as defined therein).

 

“Bank Product Provider Letter Agreement” shall mean a letter agreement in form reasonably satisfactory to the Administrative Agent under the Senior Credit Facilities, duly executed by the applicable Bank Product Provider, the Issuer or the applicable Restricted Party, such Administrative Agent and, in any event, acknowledged by the Issuer or such Restricted Party.

 

“Bankruptcy Law” means Title 11, United States Bankruptcy Code of 1978, as amended, or any similar United States federal or state law and the law of any other jurisdiction relating to bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization or relief of debtors or any amendment to, succession to or change in any such law.

 

“Board” with respect to a Person means the board of directors (or similar body) of such Person or any committee thereof duly authorized to act on behalf of such board of directors (or similar body).

 

  

“Board Resolution” means a duly adopted resolution of the Board or any committee of such Board.

 

“Business Day” means each day which is not a Legal Holiday.

 

“Capital Lease” means, with respect to any Person, any lease of, or other arrangement conveying the right to use, any property by such person as lessee that has been or should be accounted for as a capital lease on a balance sheet of such person prepared in accordance with GAAP.

 

“Capital Lease Obligations” of any Person means the obligations of such person to pay rent or other amounts under any Capital Lease, any lease entered into as part of any Sale and Leaseback Transaction or any Synthetic Lease, or a combination thereof, which obligations are (or would be, if such Synthetic Lease or other lease were accounted for as a Capital Lease) required to be classified and accounted for as Capital Leases on a balance sheet of such person in accordance with GAAP as in effect on the Issue Date, and the amount of such obligations shall be the capitalized amount thereof (or the amount that would be capitalized if such Synthetic Lease or other lease were accounted for as a Capital Lease) determined in accordance with GAAP as in effect on the Issue Date.

 

“Capital Stock” means:

 

(1)         in the case of a corporation, corporate stock;

 

(2)         in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;

 

(3)         in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and

 

(4)         any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.

 

“Cash Equivalents” means, as of any date of determination and as to any Person, any of the following: (a) marketable securities issued, or directly, unconditionally and fully guaranteed or insured, by the United States or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than one year from the date of acquisition by such person, (b) marketable direct obligations issued by any state of the United States or any political subdivision of any such state or any public instrumentality thereof having maturities of not more than one year from the date of acquisition by such person and, at the time of acquisition, having one of the two highest ratings obtainable from either S&P or Moody’s, (c) time deposits and certificates of deposit of any commercial bank having, or which is the principal banking subsidiary of a bank holding company organized under the laws of the United States, any state thereof or the District of Columbia having, capital and surplus aggregating in excess of $500,000,000 and a rating of “A” (or such other similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act) with maturities of not more than one year from the date of acquisition by such person, (d) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (a) above entered into with any person meeting the qualifications specified in clause (c) above, which repurchase obligations are secured by a valid perfected security interest in the underlying securities, (e) commercial paper issued by any person incorporated in the United States rated at least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody’s, and in each case maturing not more than one year after the date of acquisition by such person, (f) investments in money market funds at least 90% of whose assets are comprised of securities of the types described in clauses (a) through (e) above, and (g) in the case of any Foreign Subsidiary only, instruments equivalent to those referred to in clauses (a) through (f) above denominated in a foreign currency, which are substantially equivalent in credit quality and tenor to those referred to above and customarily used by businesses for short term cash management purposes in any jurisdiction outside of the United States to the extent reasonably required in connection with any business conducted by any Foreign Subsidiary organized in such jurisdiction.

 

  

For the avoidance of doubt, any items identified as Cash Equivalents under this definition will be deemed to be Cash Equivalents under this Indenture regardless of the treatment of such items under GAAP.

 

“Cash Management Obligations” means (1) obligations of the Issuer or any Restricted Party in respect of any overdraft and related liabilities arising from treasury, depository, cash pooling arrangements and cash management or treasury services or any automated clearing house transfers of funds, (2) other obligations in respect of netting services, employee credit or purchase card programs and similar arrangements and (3) obligations in respect of any other services related, ancillary or complementary to the foregoing (including any overdraft and related liabilities arising from treasury, depository, cash pooling arrangements and cash management services, corporate credit and purchasing cards and related programs or any automated clearing house transfers of funds).

 

“Casualty Event” means any loss of title (other than through a consensual disposition of such property in accordance with this Agreement) or any loss of or damage to or any destruction of, or any condemnation or other taking (including by any Governmental Authority) of, any property of the Issuer or any Restricted Party. “Casualty Event” shall include any taking of all or any part of any Real Property, Vessel or Chartered Vessel of the Issuer or any Restricted Party or any part thereof, in or by condemnation or other eminent domain proceedings pursuant to any Legal Requirement, or by reason of the temporary requisition of the use or occupancy of all or any part of any Real Property, Vessel or Chartered Vessel of the Issuer or any Restricted Party or any part thereof by any Governmental Authority, or any settlement in lieu thereof.

 

“Change of Control” means the occurrence of one or more of the following events after the Issue Date:

 

(1) any “Person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), is or becomes the “Beneficial Owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that for purposes of this clause (1) such Person shall be deemed to have “Beneficial Ownership” of all shares that any such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the total voting power of the Voting Stock of the Issuer;

 

(2) the merger or consolidation of the Issuer with or into another Person or the merger of another Person with or into the Issuer, or the sale of all or substantially all the assets of the Issuer (determined on a consolidated basis) to another Person other than a transaction following which, in the case of a merger or consolidation transaction, holders of securities that represented 100% of the Voting Stock of the Issuer immediately prior to such transaction (or other securities into which such securities are converted as part of such merger or consolidation transaction) own directly or indirectly at least a majority of the voting power of the Voting Stock of the surviving Person in such merger or consolidation transaction immediately after such transaction and in substantially the same proportion as before the transaction; or

 

(3) Continuing Directors cease to constitute at least a majority of the Board.

 

  

“Chartered Vessels” means the vessels demise chartered by the Issuer or any Restricted Party from a third party.

 

“Code” means the Internal Revenue Code of 1986, as amended, or any successor thereto.

 

“consolidated” or “Consolidated” means, with respect to any Person, such Person on a consolidated basis in accordance with GAAP, but excluding from such consolidation any Unrestricted Subsidiary as if such Unrestricted Subsidiary were not an Affiliate of such Person.

 

“Consolidated Net Income” means, for any period, the consolidated net income (or loss) of the Issuer and the Restricted Parties for such period, determined on a consolidated basis in accordance with GAAP (after deduction for minority interests); provided, that there shall be excluded from such net income (to the extent otherwise included therein), without duplication:

 

(a)          the net income (or loss) for such period of any person (other than the Issuer) that is not a Restricted Party (including any Unrestricted Subsidiary) or that is accounted for by the equity method of accounting, except to the extent that cash in an amount equal to any such income has actually been received by the Issuer or (subject to clause (b) below) any Restricted Party from such person during such period (provided, however, the amount of the Second Amendment FSO JV Debt Dividend and the amount of the SPV VLCC Pre-Designation Sale Proceeds Dividend shall not be included in Consolidated Net Income to the extent that same otherwise would have been included therein pursuant to this clause (a));

 

(b)          the net income of any Restricted Party during such period to the extent that the declaration and/or payment of dividends or similar distributions by such Restricted Party of that income is not permitted by operation of the terms of its organizational documents or any agreement (other than this Indenture), instrument, Order or other Legal Requirement applicable to that Restricted Party or its equityholders during such period, except that the Issuer’s equity in the net loss of any such Restricted Party for such period shall be included in determining Consolidated Net Income; and

 

(c)          except for determinations expressly required to be made on a pro forma basis, the net income (or loss) of any person accrued prior to the date it becomes a Restricted Party of the Issuer or all or substantially all of the property of such person is acquired by the Issuer or any Restricted Party.

 

“Consolidated Total Assets” means, at any date of determination, the net book value of all assets of the Issuer and its Subsidiaries determined on a consolidated basis in accordance with GAAP on such date.

 

“Contingent Obligation” means, as to any person, any obligation, agreement, understanding or arrangement of such person guaranteeing any Indebtedness, leases or other obligations (“primary obligations”) of any other person (the “primary obligor”) in any manner, whether directly or indirectly, including any obligation agreement, understanding or arrangement of such person, whether or not contingent: (a) to purchase any such primary obligation or any property constituting direct or indirect security therefor; (b) to advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth, net equity, liquidity, level of income, cash flow or solvency of the primary obligor; (c) to purchase or lease property, securities or services primarily for the purpose of assuring the primary obligor of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation; (d) with respect to bankers’ acceptances, letters of credit and similar credit arrangements, until a reimbursement or equivalent obligation arises (which reimbursement obligation shall constitute a primary obligation); or (e) otherwise to assure or hold harmless the primary obligor of any such primary obligation against the payment of such primary obligation; provided, however, that the term “Contingent Obligation” shall not include endorsements of instruments for deposit or collection in the ordinary course of business or any product warranties given in the ordinary course of business or any obligation, agreement, understanding or arrangement of such person guaranteeing any obligation to make payments on Equity Interest or Disqualified Stock. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation, or portion thereof, in respect of which such Contingent Obligation is made (or, if less, the maximum amount of such primary obligation for which such person may be liable, whether singly or jointly, pursuant to the terms of the instrument, agreements or other documents or, if applicable, unwritten enforceable agreement, evidencing such Contingent Obligation) or, if not stated or determinable, the amount that can reasonably be expected to become an actual or matured liability in respect thereof (assuming such person is required to perform thereunder) as determined by such person in good faith.

 

  

“Continuing Director” means a director who either was a member of the Board on the Issue Date or who becomes a member of the Board subsequent to that date and whose election, appointment or nomination for election by the Issuer’s stockholders is duly approved by a majority of the continuing directors on the Board at the time of such approval, either by a specific vote or by approval of the proxy statement issued by the Issuer on behalf of the entire Board in which such individual is named as nominee for director.

 

“Contribution Notice” means a contribution notice issued by the Pensions Regulator under section 38 or section 47 of the Pensions Act 2004.

 

“Copyrights” means, collectively, with respect to a Person, all works of authorship (whether protected by statutory or common law copyright, whether established or registered in the United States or any other country or any political subdivision thereof, whether registered or unregistered and whether published or unpublished) and all copyright registrations and applications made by such Person, in each case, whether now owned or hereafter created or acquired by or assigned to such Person.

 

“Corporate Trust Office” means the principal corporate trust office of the Trustee, at which at any particular time its corporate trust business in relation to this Indenture shall be administered, which office at the date of execution of this Indenture is located at 230 Park Avenue, 10th Floor, New York, New York 10169, except that with respect to presentation of the Notes for payment or for registration of transfer or exchange, such term shall mean the office or agency of the Trustee at which, at any particular time, its corporate agency business in relation to this Indenture shall be conducted.

 

“Covenant Defeasance” has the meaning specified in Section 13.03 of this Indenture.

 

“Default” means any event that is, or after notice or lapse of time or both would become, an Event of Default.

 

“Defaulted Interest” has the meaning specified in Section 3.07(b) of this Indenture.

 

“Depository” means The Depository Trust Company, its nominees and their respective successors.

 

“Designated Senior Indebtedness” means any Indebtedness outstanding under the indenture governing the Existing Notes and, if such Indebtedness is no longer outstanding, any other Senior Indebtedness permitted under this Indenture, the principal amount of which is $100.0 million or more and that has been designated by the Issuer as “Designated Senior Indebtedness.”

 

  

“Disqualified Stock” means, with respect to any Person, any Capital Stock of such Person which, by its terms, or by the terms of any security into which it is convertible or for which it is putable or exchangeable, or upon the happening of any event, matures or is mandatorily redeemable (other than solely for Capital Stock of such Person that would not otherwise constitute Disqualified Stock, and other than solely as a result of a change of control, asset sale, casualty, condemnation or eminent domain) pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof (other than solely as a result of a change of control, asset sale, casualty, condemnation or eminent domain), in whole or in part, in each case prior to the date 91 days after the earlier of the maturity date of the Notes or the date the Notes are no longer outstanding; provided, however, that if such Capital Stock is issued to any plan for the benefit of employees of the Issuer or its Subsidiaries or by any such plan to such employees, such Capital Stock shall not constitute Disqualified Stock solely because it may be required to be repurchased by the Issuer or its Subsidiaries in order to satisfy applicable statutory or regulatory obligations or as a result of such employee’s termination, death or disability; provided, further, that any Capital Stock held by any future, current or former employee, director, officer, manager or consultant of the Issuer, any of its Subsidiaries or any other entity in which the Issuer or a Restricted Party has an Investment and is designated in good faith as an “affiliate” by the Board of the Issuer (or the compensation committee thereof) shall not constitute Disqualified Stock solely because it may be required to be repurchased by the Issuer or its Subsidiaries pursuant to any stockholders’ agreement, management equity plan, stock option plan or any other management or employee benefit plan or agreement or in order to satisfy applicable statutory or regulatory obligations.

 

“Domain Names” means all Internet domain names and associated uniform resource locator addresses.

 

“Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock, but excluding any debt security that is convertible into, or exchangeable for, Capital Stock.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

“ERISA Affiliate” means, with respect to any Person, any trade or business (whether or not incorporated) that, together with such person, is treated as a single employer under Section 414(b) or (c) of the Code (and, for purposes of Section 302 of ERISA and each “applicable section” under Section 414(t)(2) of the Code, under Section 414(b), (c), (m) or (o) of the Code), or under Section 4001 of ERISA.

 

“ERISA Event” means: (a) the occurrence of a “reportable event” within the meaning of Section 4043 of ERISA and the regulations issued thereunder with respect to any Pension Plan for which the requirement to provide notice to the PBGC has not been waived; (b) the failure to meet the minimum funding standard of Section 412 or 430 of the Code with respect to any Pension Plan (whether or not waived in accordance with Section 412(c) of the Code) or the failure to make by its due date a required installment under Section 430 of the Code with respect to any Pension Plan or the failure to make any required contribution to a Multiemployer Plan; (c) the provision by the administrator of any Pension Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such plan in a distress termination described in Section 4041(c) of ERISA; (d) the withdrawal by the Issuer, any Restricted Party or any of their ERISA Affiliates from any Pension Plan with two or more contributing sponsors or the termination of any such Pension Plan, in any case, resulting in liability to the Issuer, any Restricted Party or any of their ERISA Affiliates pursuant to Section 4063 or 4064 of ERISA; (e) the institution by the PBGC of proceedings to terminate any Pension Plan under Section 4042 of ERISA, or the occurrence of any event or condition which would reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (f) the imposition of liability on the Issuer, any Restricted Party or any of their ERISA Affiliates pursuant to Section 4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of ERISA; (g) the withdrawal of the Issuer, any Restricted Party or any of their ERISA Affiliates in a complete or partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan which withdrawal would reasonably be expected to result in liability to the Issuer, any Restricted Party or any of their ERISA Affiliates, or the receipt by the Issuer, any Restricted Party or any of their ERISA Affiliates of notice from any Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that it intends to terminate or has terminated under Section 4041A or 4042 of ERISA; (h) the imposition of a Lien pursuant to Section 430(k) of the Code or pursuant to ERISA with respect to any Pension Plan or a violation of Section 436 of the Code; or (i) the occurrence of a non-exempt prohibited transaction (within the meaning of Section 4975 of the Code or Section 406 of ERISA) which would reasonably be expected to result in liability to the Issuer, any Restricted Party or any of their ERISA Affiliates.

 

  

“Event of Default” has the meaning set forth in Section 5.01 of this Indenture.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended (with respect to the definitions of “Change of Control” only, as in effect on the Issue Date).

 

“Existing Notes” means the Issuer’s 8.50% Senior Notes due June 30, 2023.

 

“Fair Market Value” means, with respect to any Investment, asset, property or liability, the fair market value of such Investment, asset, property or liability as determined in good faith by the Board or senior management of the Issuer.

 

“FATCA” has the meaning set forth in Section 1.19 of this Indenture.

 

“Financial Support Direction” means a financial support direction issued by the Pensions Regulator under section 43 of the Pensions Act 2004.

 

“Foreign Subsidiary” means any Restricted Party that is not organized under the laws of the United States, any state thereof or the District of Columbia and any Restricted Party of such Foreign Subsidiary.

 

“GAAP” means generally accepted accounting principles in the United States, as in effect on March 31, 2018, applied on a consistent basis.

 

“Governmental Authority” means any federal, state, local or foreign (whether civil, administrative, criminal, military or otherwise) court, central bank or governmental agency, tribunal, authority, instrumentality, regulatory or self-regulatory, body or any subdivision thereof or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers of or pertaining to any government or any court, in each case whether associated with a state of the United States, the United States, or a foreign entity or government (including any supra-national bodies such as the European Union or the European Central Bank).

 

“guarantee” means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness or other obligations.

 

  

“Guarantor” means each Subsidiary of the Issuer that guarantees the Notes in accordance with the terms of this Indenture, until, in each case, such Person is released from its Note Guarantee in accordance with the terms of this Indenture.

 

“Hedging Agreement” means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, currency swap transactions, cross-currency rate swap transactions, currency options, cap transactions, floor transactions, collar transactions, spot contracts, futures contracts or other liabilities for the purchase or sale of currency or other commodities at a future date in the nature of a futures contract or any other similar transactions or any combination of any of the foregoing (including any options or warrants to enter into any of the foregoing), whether or not any such transaction is governed by, or otherwise subject to, any master agreement or any netting agreement, and (b) any and all transactions or arrangements of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement (or similar documentation) published from time to time by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such agreement or documentation, together with any related schedules, a “Master Agreement”), including any such obligations or liabilities under any Master Agreement.

 

“Hedging Obligations” means obligations under or with respect to Hedging Agreements.

 

“Hedging Termination Value” means, in respect of any one or more Hedging Agreements, after taking into account the effect of any netting agreements relating to such Hedging Agreements (to the extent, and only to the extent, such netting agreements are legally enforceable in Insolvency Proceedings against the applicable counterparty obligor thereunder), (i) for any date on or after the date such Hedging Agreements have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (ii) for any date prior to the date referenced in preceding clause (i), the amount(s) determined as the mark-to-market value(s) for such Hedging Agreements, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Hedging Agreements (which may include an Agent, a Lender or any Affiliate of an Agent or a Lender, in each case, under the Senior Credit Facilities).

 

“holder” means, with reference to any Indebtedness or other Obligations, any holder or lender of, or trustee or collateral agent or other authorized representative with respect to, such Indebtedness or Obligations, and, in the case of Hedging Obligations, any counter-party to such Hedging Obligations.

 

“Holder” means the Person in whose name a Note is registered on the Note Registrar’s books.

 

“incur” has the meaning specified in Section 10.11 of this Indenture.

 

“incurrence” has the meaning specified in Section 10.11 of this Indenture.

 

  

“Indebtedness” of any Person means, without duplication, (a) all obligations of such person for borrowed money; (b) all obligations of such person evidenced by bonds, debentures, notes, loan agreements or similar instruments; (c) all obligations of such person under conditional sale or other title retention agreements relating to property purchased by such person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property); (d) all obligations of such person issued or assumed as part of the deferred purchase price of property or services (excluding trade accounts payable and accrued obligations incurred in the ordinary course of business on normal trade terms and not overdue by more than 90 days); (e) all indebtedness secured by any Lien on property owned or acquired by such person (including indebtedness arising under conditional sales or other title retention agreements), whether or not the obligations secured thereby have been assumed, but limited to the lower of (i) the Fair Market Value of such property and (ii) the amount of the Indebtedness secured; (f) all Capital Lease Obligations, other Purchase Money Obligations and Synthetic Lease Obligations of such person; (g) all obligations of such person, contingent or otherwise, to purchase, redeem, retire or otherwise acquire for value any Equity Interests of such person, valued, in the case of a redeemable preferred Equity Interest, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends; (h) all Bank Product Obligations under Hedging Agreements valued at the Hedging Termination Value thereof; (i) all obligations of such person for the reimbursement of any obligor in respect of letters of credit, letters of guaranty, bankers’ acceptances and similar credit transactions; and (j) all Contingent Obligations of such person in respect of Indebtedness or obligations of others of the kinds referred to in clauses (a) through (i) above; provided that the term “Indebtedness” shall not include (i) preferred or prepaid revenues, (ii) purchase price holdbacks in respect of a portion of the purchase price of an asset to satisfy warranty or other unperformed obligations of the seller of such asset, (iii) any obligations constituting the exercise of appraisal rights and settlements of any claim of actions (whether actual, contingent or potential) with respect thereto, (iv) any Indebtedness of Holdings appearing on the balance sheet of any Borrower or any Subsidiary Guarantor, or solely by reason of push down accounting under GAAP, in each case, so long as neither the Issuer nor any Restricted Party has any obligation with respect thereto and the holder of such Indebtedness has no recourse to the Issuer or any Restricted Party with respect thereto, and (v) certain intercompany payment obligations. The Indebtedness of any person shall include the Indebtedness of any other entity (including any partnership in which such person is a general partner) to the extent such person is liable therefor as a result of such person’s ownership interest in or other relationship with such entity, except to the extent that terms of such Indebtedness expressly provide that such person is not liable therefor.

 

“Indenture” means this instrument as originally executed and as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof.

 

“Independent Financial Advisor” means an accounting, appraisal, investment banking firm or consultant of nationally recognized standing that is, in the good faith judgment of the Issuer, qualified to perform the task for which it has been engaged.

 

“Insolvency Proceeding” shall mean (i) any case, action or proceeding before any court or other Governmental Authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors, or (ii) any general assignment for the benefit of creditors, formal or informal moratorium, composition, marshaling of assets for creditors or other, similar arrangement in respect of its creditors generally or any substantial portion of its creditors, in each case, undertaken under United States federal or state or non-United States Legal Requirements, including the Bankruptcy Law.

 

“Intangible Assets” means, in respect of the Issuer as of a given date, the intangible assets of the Issuer of the types, if any, presented in the Issuer’s consolidated balance sheet.

 

“Intellectual Property” means any and all intellectual property rights recognized under applicable law, whether arising under United States laws or otherwise, including collectively, the Patents, Trademarks, Copyrights, Trade Secrets, Software and Domain Names and all causes of action for infringement thereof or unfair competition regarding the same.

 

  

“Interest Payment Date” means the Stated Maturity of an installment of interest on the Notes.

 

“Investments” means, with respect to any Person, all loans for borrowed money or credit (by way of guarantee, assumption of debt or otherwise) or advances to any other Person, or purchase or acquisition of any stock, bonds, notes, debentures or other obligations or securities of, or any other interest in, or any capital contribution to, any other Person, or purchase or ownership of a futures contract or liability for the purchase or sale of currency or other commodities at a future date in the nature of a futures contract.

 

“Issue Date” means June 13, 2018.

 

“Issuer” has the meaning specified in the preamble.

 

“Issuer Request” or “Issuer Order” means a written request or order signed in the name of the Issuer by an Officer thereof, and delivered to the Trustee.

 

“Joint Venture” means any Person other than a Subsidiary of the Issuer (i) in which the Issuer or any Restricted Party holds or acquired a beneficial ownership interest (by way of ownership of Equity Interests or other evidence of ownership) in excess of 20.00% of the Equity Interests of such person and (ii) which is engaged in a business permitted by Section 10.16.

 

“Junior Subordinated Indebtedness” means, with respect to the Notes, any Indebtedness of the Issuer which is by its terms subordinated in right of payment to the Notes.

 

“Legal Defeasance” has the meaning specified in Section 13.02 of this Indenture.

 

“Legal Holiday” means a Saturday, a Sunday or a day on which commercial banking institutions are not required to be open in the State of New York.

 

“Legal Requirements” means, as to any person, any treaty, law (including the common law), statute, ordinance, code, rule, regulation, guidelines, license, permit requirement, judgment, decree, verdict, order, consent order, consent decree, writ, declaration or injunction, policies and procedures, Order or determination of an arbitrator or a court or other Governmental Authority, and the interpretation or administration thereof, in each case applicable to or binding upon such person or any of its property or to which such person or any of its property is subject.

 

“Lien” means, with respect to any property, (a) any preferred ship mortgage, maritime lien, mortgage, deed of trust, lien (statutory or other), judgment lien, pledge, encumbrance, charge, assignment, hypothecation, deposit arrangement, security interest or encumbrance of any kind or any arrangement to provide priority or preference, in each of the foregoing cases whether voluntary or imposed or arising by operation of law, and any agreement to give any of the foregoing, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.

 

  

“Maturity” when used with respect to any Note, means the date on which the principal of such Note or an installment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, notice of redemption or otherwise.

 

“Moody’s” means Moody’s Investors Service, Inc. and any successor to its rating agency business.

 

“Multiemployer Plan” means a multiemployer plan within the meaning of Section 4001(a)(3) or Section 3(37) of ERISA and subject to Title IV of ERISA to which the Issuer, any Restricted Party or any of their ERISA Affiliates is making or obligated to make contributions or during the preceding five plan years, has made or been obligated to make contributions.

 

“Net Cash Proceeds” means: (a) with respect to any Asset Sale (other than any issuance or sale of Equity Interests by the issuer thereof), the proceeds thereof in the form of cash, Cash Equivalents and marketable securities (including any such proceeds received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable, or by the sale, transfer or other disposition of any non-cash consideration received in connection therewith or otherwise, but only as and when received) received by the Operating Company or any Restricted Subsidiary (including cash proceeds subsequently received (as and when received by the Operating Company or any Restricted Subsidiary) in respect of non-cash consideration initially received) net of (i) reasonable and customary selling expenses (including reasonable brokers’ fees or commissions, legal, accounting and other professional and transactional fees, survey costs, title insurance premiums, related search and recording charges, mortgage recording taxes and transfer and similar taxes and the Issuer’s good faith estimate of income taxes paid or payable in connection with such sale (after taking into account any available tax credits or deductions and any tax sharing arrangements)), (ii) amounts provided as a reserve, in accordance with GAAP, against (x) any liabilities under any indemnification obligations associated with such Asset Sale or (y) any other liabilities retained by the Operating Company or any Restricted Subsidiary associated with the properties sold in such Asset Sale (provided that, to the extent and at the time any such amounts are released from such reserve, such amounts shall constitute Net Cash Proceeds), and (iii) the principal amount, premium or penalty, if any, interest and other amounts on any Indebtedness for borrowed money that is secured by a Lien on the properties sold in such Asset Sale (so long as such Lien was permitted to encumber such properties under the Loan Documents at the time of such sale) and which is repaid with such proceeds (other than (x) any such Indebtedness assumed by the purchaser of such properties and (y) the Secured Indebtedness); and (b) with respect to any Casualty Event, the cash insurance proceeds, condemnation awards and other compensation received by the Operating Company or any Restricted Subsidiary in respect thereof, net of all reasonable costs and expenses incurred in connection with the collection of such proceeds, awards or other compensation in respect of such Casualty Event.

 

“Net Worth” means, as of a given date, the result of, without duplication: (a) Total Assets, less (b) Intangible Assets, less (c) Total Borrowings (without giving effect to any fair value adjustments pursuant to Accounting Standards Codification 820 of the Financial Accounting Standards Board).

 

“Non-Recourse Liabilities” means, in respect of the Issuer or any Subsidiary thereof as of a given date, the non-recourse liabilities as described in subparts (a)-(h) of the definition of Total Borrowings which neither the Issuer nor any other Subsidiary thereof provides any credit support of any kind to or is directly or indirectly liable as a guarantor or otherwise, other than a pledge of the equity interests in the Non-Recourse Subsidiary.

 

“Non-Recourse Subsidiary” means any Subsidiary of the Issuer that has only Non-Recourse Liabilities.

 

  

“Non-U.S. Plan” means any employee benefit plan, program, policy, arrangement or agreement maintained or contributed to by the Issuer or any Restricted Party with respect to employees, officers or directors employed, or otherwise engaged, outside the United States.

 

“Note Guarantee” means the guarantee by any Guarantor of the Issuer’s Obligations under this Indenture and the Notes.

 

“Note Register” and “Note Registrar” have the respective meanings specified in Section 3.02.

 

“Notes” has the meaning stated in the first recital of this Indenture and more particularly means any Notes authenticated and delivered under this Indenture.

 

“Notes Custodian” means the custodian with respect to a Global Note (as appointed by the Depository) or any successor person thereto, who shall initially be the Trustee.

 

“Obligations” means any principal, interest (including any interest accruing on or subsequent to the filing of a petition in bankruptcy, reorganization or similar proceeding at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable state, provincial, federal or foreign law), premium, penalties, fees, indemnifications, reimbursements (including reimbursement obligations with respect to letters of credit and bankers’ acceptances), damages and other liabilities, and guarantees of payment of such principal, interest, premium, penalties, fees, indemnifications, reimbursements, damages and other liabilities, payable under the documentation governing any Indebtedness; provided, that any of the foregoing (other than principal and interest) shall no longer constitute “Obligations” after payment in full of such principal and interest except to the extent such obligations are fully liquidated and non-contingent on or prior to such payment in full; provided, further, that Obligations with respect to the Notes shall not include fees, reimbursements or indemnifications in favor of the Trustee (which obligations with respect to such fees, reimbursements or indemnifications shall survive the payment in full of the principal of and interest on the Notes) or other third parties other than the Holders.

 

“Officer” means the Chairman of the Board, any Manager or Director, the Chief Executive Officer, the Chief Financial Officer, the Chief Operating Officer, the President, any Executive Vice President, Senior Vice President or Vice President, the Treasurer, the Controller or the Secretary or any other officer designated by any such individuals of the Issuer or any other Person, as the case may be.

 

“Officer’s Certificate” means a certificate signed on behalf of the Issuer by an Officer of the Issuer or on behalf of any other Person, as the case may be, that meets the requirements set forth in this Indenture and delivered to the Trustee.

 

“Operating Company” means International Seaways Operating Corporation, a Marshall Islands corporation and a direct wholly-owned subsidiary of the Issuer.

 

“Opinion of Counsel” means a written opinion from legal counsel who is reasonably acceptable to the Trustee (which opinion may be subject to customary assumptions and exclusions). The counsel may be an employee of, or counsel to, the Issuer.

 

“Order” means any judgment, decree, verdict, order, consent order, consent decree, writ, declaration or injunction.

 

  

“Outstanding”, when used with respect to Notes, means, as of the date of determination, all Notes theretofore authenticated and delivered under this Indenture, except:

 

(1)         Notes theretofore cancelled by the Trustee or delivered to the Trustee for cancellation;

 

(2)         Notes, or portions thereof, for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Issuer) in trust or set aside and segregated in trust by the Issuer (if the Issuer shall act as its own Paying Agent) for the Holders of such Notes; provided that, if such Notes are to be redeemed, written notice of such redemption has been duly given pursuant to this Indenture;

 

(3)         Notes, except to the extent provided in Sections 13.02 and 13.03, with respect to which the Issuer has effected Legal Defeasance or Covenant Defeasance as provided in Article Thirteen; and

 

(4)         Notes which have been paid pursuant to Section 3.06 or in exchange for or in lieu of which other Notes have been authenticated and delivered pursuant to this Indenture, other than any such Notes in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Notes are held by a Protected Purchaser in whose hands the Notes are valid obligations of the Issuer;

 

provided that, in determining whether the Holders of the requisite principal amount of Outstanding Notes have given any request, demand, authorization, direction, consent, notice or waiver hereunder Notes owned by the Issuer or its Affiliates shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in making such determination or in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes which a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded.

 

“Patents” means, collectively, with respect to a Person, all patents issued or assigned to and all patent applications and registrations made by such Person (whether established or registered or recorded in the United States or any other country or any political subdivision thereof).

 

“Paying Agent” means any Person (including the Issuer acting as Paying Agent) authorized by the Issuer to pay the principal of (and premium, if any) or interest on any Notes on behalf of the Issuer.

 

“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA.

 

“Pension Plan” means any Employee Benefit Plan subject to the provisions of Title IV of ERISA or Section 412 or 430 of the Code or Section 302 or 303 of ERISA which is maintained or contributed to by the Issuer, any Restricted Party or any of their ERISA Affiliates or to which the Issuer, any Restricted Party or any of their ERISA Affiliates has an obligation to contribute.

 

“Permitted Charter” means a charter to a third party:

 

(1)         which is a time charter, voyage charter, consecutive voyage charter or contract of affreightment;

 

  

(2)         which is entered into on bona fide arm’s length terms at the time at which the Vessel or Chartered Vessel is fixed; and

 

(3)         demise charters existing on the Issue Date.

 

“Permitted Hedging Agreement” shall mean any Hedging Agreement to the extent constituting a swap, cap, collar, forward purchase or similar agreements or arrangements dealing with interest rates or currency exchange rates, either generally or under specific contingencies, in each case entered into in the ordinary course of business and not for speculative purposes.

 

“Permitted Junior Securities” means:

 

(1)         Equity Interests in the Issuer, any Guarantor or any direct or indirect parent of the Issuer; or

 

(2)         unsecured debt securities that are subordinated to all Senior Indebtedness (and any debt securities issued in exchange for Senior Indebtedness) to substantially the same extent as, or to a greater extent than, the Notes and the related guarantees are subordinated to Senior Indebtedness under this Indenture; provided that the term “Permitted Junior Securities” shall not include any securities distributed pursuant to a plan of reorganization if the Indebtedness under the Senior Credit Facilities is treated as part of the same class as the Notes for purposes of such plan of reorganization; provided, further, that to the extent that any Senior Indebtedness of the Issuer or the Guarantors outstanding on the date of consummation of any such plan of reorganization is not paid in full in cash on such date, the holders of any such Senior Indebtedness not so paid in full in cash have consented to the terms of such plan of reorganization.

 

“Permitted Liens” means the following, without duplication:

 

(1)         Liens securing Obligations relating to any Indebtedness or other obligations of the Issuer or a Restricted Party owing to the Issuer or another Restricted Party permitted to be incurred in accordance with the covenant described under Section 10.11;

 

(2)         Liens in favor of the Issuer or the Trustee in respect of the Notes (for the avoidance of doubt, no such Liens exist as of the Issue Date);

 

(3)         Liens securing Indebtedness permitted to be incurred pursuant to Section 10.11(b)(3) and (6); provided that Liens securing Indebtedness permitted to be incurred pursuant to Section 10.11(b)(3) extend only to the assets purchased with the proceeds of such Indebtedness, accessions to such assets and the proceeds and products thereof, and any lease of such assets (including accessions thereto), the proceeds and the products thereof and customary security deposits in respect thereof;

 

(4)         inchoate Liens for taxes, assessments or governmental charges or levies not yet due and payable or delinquent and Liens for taxes, assessments or governmental charges or levies, which are immaterial or being contested in good faith by appropriate proceedings timely initiated and for which adequate reserves have been established in accordance with GAAP, which proceedings (or Orders entered in connection with such proceedings) have the effect of preventing the forfeiture or sale of the property subject to any such Lien;

 

  

(5)         Liens in respect of property (other than Vessels) of the Issuer or any Restricted Party imposed by law, which were incurred in the ordinary course of business and do not secure Indebtedness for borrowed money, such as carriers’, warehousemen’s, materialmen’s, landlords’, workmen’s, suppliers’, repairmen’s and mechanics’ Liens and other similar Liens arising in the ordinary course of business (including customary contractual landlords’ liens under operating leases entered into in the ordinary course of business), and (i) which do not in the aggregate materially and adversely affect the value of the property subject to such Lien, and do not materially impair the use thereof in the operation of the business of the Issuer or the respective Restricted Party, and (ii) which, if they secure obligations that are then due and unpaid, are being contested in good faith by appropriate proceedings timely initiated and for which adequate reserves have been established in accordance with GAAP, which proceedings (or Orders entered in connection with such proceedings) have the effect of preventing the forfeiture or sale of the property subject to any such Lien;

 

(6)         any Lien in existence on the Issue Date, any Lien securing Indebtedness permitted under Section 10.11(b)(1) and any Lien granted as a replacement or substitute therefor; provided, that any such replacement or substitute Lien that does not secure Indebtedness for borrowed money does not encumber any property other than the property subject thereto on the Issue Date;

 

(7)         Liens on Permitted Refinancing Indebtedness to the extent the Indebtedness being refinanced was secured and any replacement or substitute Lien does not encumber any property other than the property subject thereto being refinanced;

 

(8)         easements, rights-of-way, restrictions (including zoning restrictions), covenants, licenses, encroachments, protrusions, servitudes and other similar charges or encumbrances, and minor title deficiencies, in each case, on or with respect to any Real Property, whether now or hereafter in existence, not (i) securing Indebtedness, (ii) individually or in the aggregate materially impairing the value or marketability of such Real Property or (iii) individually or in the aggregate materially interfering with the ordinary conduct of the business of the Issuer and the Restricted Parties at or otherwise with respect to such Real Property;

 

(9)         Liens arising out of judgments, attachments or awards not resulting in an Event of Default and in respect of which the Issuer or such Restricted Party shall in good faith be diligently prosecuting an appeal or proceedings for review in respect of which there shall be secured a subsisting stay of execution pending such appeal or proceedings;

 

(10)        Liens (other than any Lien imposed by ERISA) (x) imposed by law or deposits made in connection therewith in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security legislation, (y) incurred in the ordinary course of business to secure the performance of tenders, statutory obligations (other than excise taxes), surety, performance, stay, customs and appeal bonds, statutory bonds, bids, leases, government contracts, trade contracts, performance and return of money bonds and other similar obligations (in each case, exclusive of obligations for the payment of Indebtedness) or (z) arising by virtue of deposits made in the ordinary course of business to secure liability for premiums to insurance carriers; provided, that with respect to the foregoing clauses (x), (y) and (z), such Liens are for amounts not yet due and payable or delinquent or, to the extent such amounts are so due and payable, such amounts are being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, which proceedings (or Orders entered in connection with such proceedings) have the effect of preventing the forfeiture or sale of the property subject to any such Lien;

 

  

(11)        leases of the properties of the Issuer or any Restricted Party, in each case entered into in the ordinary course of the Issuer’s or such Restricted Party’s business so long as such leases do not, individually or in the aggregate, (i) interfere in any material respect with the ordinary conduct of the business of the Issuer or any Restricted Party or (ii) materially impair the use (for its intended purposes) or the value of the property subject thereto;

 

(12)        Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by the Issuer or any Restricted Party in the ordinary course of business in accordance with the past practices of the Issuer or such Restricted Party;

 

(13)        Liens on property rented to, or leased by, the Issuer or any Restricted Party pursuant to a Sale and Leaseback Transaction; provided, that (i) such Sale and Leaseback Transaction is permitted by Section 10.15 of this Indenture, (ii) such Liens do not encumber any other property of the Issuer or any Restricted Party, and (iii) such Liens secure only the Attributable Indebtedness incurred in connection with such Sale and Leaseback Transaction;

 

(14)        bankers’ Liens, rights of setoff and other similar Liens existing solely with respect to cash and Cash Equivalents on deposit in one or more accounts maintained by the Issuer or any Restricted Party, in each case granted in the ordinary course of business in favor of the bank or banks with which such accounts are maintained, securing amounts owing to such bank with respect to cash management and operating account arrangements, including those involving pooled accounts and netting arrangements; provided, that, unless such Liens are non-consensual and arise by operation of applicable Legal Requirements, in no case shall any such Liens secure (either directly or indirectly) the repayment of any Indebtedness;

 

(15)        Liens on property of a person existing at the time such person is acquired or merged with or into or consolidated with the Issuer or any Restricted Party to the extent permitted hereunder; provided, that (x) such Liens (i) do not extend to property not subject to such Liens at the time of such acquisition, merger or consolidation (other than improvements thereon), (ii) are no more favorable to the lienholders than such existing Liens and (iii) are not created in anticipation or contemplation of such acquisition, merger or consolidation and (y) any Indebtedness that is secured by such Liens is permitted by Section 10.11 of this Indenture;

 

(16)        non-exclusive licenses of Intellectual Property granted by the Issuer or any Restricted Party in the ordinary course of business or that do not materially impair the conduct of the business of the Issuer or any Restricted Party or otherwise prohibit the collateral agent under the Senior Credit Facilities from obtaining a security interest in the Intellectual Property;

 

(17)        the filing of UCC financing statements solely as a precautionary measure in connection with operating leases or consignment of goods;

 

(18)        Liens of a collecting bank arising in the ordinary course of business under Section 4-208 of the UCC covering only the items being collected upon;

 

(19)        Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;

 

(20)        Liens in the ordinary course of business for dry-docking, maintenance, repairs and improvements to Vessels, crews’ wages, salvage (including contract salvage) and maritime Liens (other than in respect of Indebtedness);

 

  

(21)        with respect only to the Vessels, Liens arising by operation of law and fully covered (in excess of permitted deductibles) by the Required Insurance, such coverage to be confirmed upon the request of the collateral agent under the Senior Credit Facilities by the marine insurance broker placing the applicable Required Insurance;

 

(22)        Liens solely on any cash earnest money deposits made by the Issuer or any Restricted Party in connection with any letter of intent or purchase agreement in respect of any Investment permitted hereunder;

 

(23)        Liens arising pursuant to a Permitted Charter;

 

(24)        additional Liens of the Issuer and the Restricted Parties incurred in the ordinary course of business that (i) do not materially impair the use of such assets in the operation of the business of the Issuer or any Restricted Party and (ii) do not secure obligations in excess of $5,000,000 in the aggregate for all such Liens at any time;

 

(25)        Liens on Pool Financing Receivables and the proceeds thereof securing Pool Financing Indebtedness incurred pursuant to Section 10.11(b)(14);

 

(26)        Liens in favor of the account bank for the ABN Facility, in respect of its customary charges in maintaining the accounts thereunder or for reimbursement for reversal of any provisional credits granted by such account bank to such accounts, to the extent, in each case, that any of the obligors under the ABN Facility have not separately paid or reimbursed such account bank therefor;

 

(27)        Liens on insurance policies and the proceeds of insurance policies solely to the extent securing the Indebtedness permitted under the ABN Facility; and

 

(28)        Liens that are contractual rights of set-off or rights of pledge (under and pursuant to the general terms and conditions of the account bank for the ABN Facility) (i) relating to the establishment of depository relations with such account bank and not given in connection with the issuance of Indebtedness and (ii) relating to any pooled deposit or sweep accounts held with such account bank to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business.

 

For purposes of this definition, the term “Indebtedness” shall be deemed to include interest on such Indebtedness.

 

“Permitted Refinancing Indebtedness” means any Indebtedness of the Issuer or Restricted Party issued in exchange for, or the net proceeds of which are used to extend, renew, refund, refinance, replace, defease or discharge other Indebtedness of the Issuer or any Restricted Party permitted under this Indenture, as applicable; provided, that:

 

(1)         the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness being extended, renewed, refunded, refinanced, replaced, defeased or discharged (plus all accrued and unpaid interest on such Indebtedness being extended, renewed, refunded, refinanced, replaced, defeased or discharged and the amount of all fees and expenses, including premiums, incurred in connection therewith);

 

  

(2)         such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, renewed, refunded, refinanced, replaced, defeased or discharged;

 

(3)         if the Indebtedness being extended, renewed, refunded, refinanced, replaced, defeased or discharged is subordinated in right of payment to the Obligations, such Permitted Refinancing Indebtedness is subordinated in right of payment to the Obligations on terms at least as favorable to the holders of the Obligations as those contained in the documentation governing the Indebtedness being extended, renewed, refunded, refinanced, replaced, defeased or discharged;

 

(4)         such Permitted Refinancing Indebtedness is incurred by the Issuer or any Restricted Party who is the obligor on the Indebtedness being extended, renewed, refunded, refinanced, replaced, defeased or discharged and does not add any additional obligors or guarantors with respect thereto;

 

(5)         if such Permitted Refinancing Indebtedness is secured, it shall not be secured by any assets other than the assets that secured the Indebtedness being extended, renewed, refunded, refinanced, replaced, defeased or discharged;

 

(6)         such Permitted Refinancing Indebtedness has an amortization schedule requiring at least the same aggregate principal amount of repayments on a quarterly basis as the Indebtedness being extended, renewed, refunded, refinanced, replaced, defeased or discharged;

 

(7)         such Permitted Refinancing Indebtedness bears interest at a rate or spread no more than 75 basis points higher than the Indebtedness being extended, renewed, refunded, refinanced, replaced, defeased or discharged; and

 

(8)         if the Indebtedness being extended, renewed, refunded, refinanced, replaced, defeased or discharged is the Senior Credit Facility Obligations, such Permitted Refinancing Indebtedness has the same loan-to-value test covenant specified in Section 6.10(a) of the Senior Credit Agreement (except that the ratio shall be no greater than 75%).

 

“Person” means any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.

 

“Pool Financing” shall mean a financing arrangement entered into by a Pool Operator, as agent for the applicable Shipping Pool, on behalf of the members or participants therein with a third-party lender, which financing is secured by the Pool Financing Receivables of the Vessels in such Shipping Pool.

 

“Pool Financing Indebtedness” shall mean indebtedness incurred by a Pool Operator, as agent for the applicable Shipping Pool, on behalf of the members or participants therein, under and pursuant to a Pool Financing.

 

“Pool Financing Receivables” shall mean, with respect to a Vessel in a Shipping Pool, (I) Moneys (as defined in Section 1-201 of the UCC) and claims for payment due or to become due to the Issuer or a Restricted Subsidiary thereof that owns such Vessel, or to the Pool Operator of such Shipping Pool on such Vessel owner’s behalf, whether as charter hire, freights, passage moneys, proceeds of off-hire and loss of hire insurances, loans, indemnities, payments or otherwise, under, and all claims for damages arising out of any breach of, any time or voyage charter, affreightment or other contract for the use or employment of such Vessel and (II) all remuneration for salvage and towage services, demurrage and detention moneys and any other moneys whatsoever due or to become due to such Vessel owner, or the Pool Operator on such Vessel owner’s behalf, arising from the use or employment of such Vessel.

 

  

“Pool Operator” shall mean a third-party operator or manager of any Shipping Pool.

 

“Predecessor Note” of any particular Note means every previous Note evidencing all or a portion of the same debt as that evidenced by such particular Note; and, for the purposes of this definition, any Note authenticated and delivered under Section 3.06 in exchange for a mutilated Note or in lieu of a destroyed, lost or stolen Note shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Note.

 

“Preferred Stock” means any Equity Interest with preferential rights of payment of dividends or upon liquidation, dissolution, or winding up.

 

“Protected Purchaser” has the meaning specified in Section 3.06 of this Indenture.

 

“Purchase Money Obligations” means, for any Person, the obligations of such Person in respect of Indebtedness (including Capital Lease Obligations) incurred for the purpose of financing all or any part of the purchase price of any fixed or capital assets; provided, however, that (i) such Indebtedness is incurred within 120 days after such acquisition of such fixed or capital assets by such person and (ii) the amount of such Indebtedness (x) does not exceed the lesser of 65% of the Fair Market Value of such fixed or capital asset or the cost of the acquisition and (y) equals at least 50% of the lesser of the two amounts referred to in preceding clause (x).

 

“Real Property” means, collectively, all right, title and interest (including any leasehold, fee, mineral or other estate) in and to any and all parcels of or interests in real property owned, leased or operated by any Person, whether by lease, license or other means, together with, in each case, all easements, hereditaments and appurtenances relating thereto, all improvements and appurtenant fixtures and equipment, all general intangibles and contract rights and other property and rights incidental to the ownership, lease or operation thereof.

 

“Redemption Date” has the meaning specified in Section 11.01 of this Indenture.

 

“Redemption Price”, when used with respect to any Note to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture.

 

“Refinance Date” has the meaning specified in Section 3.01 of this Indenture.

 

“Regular Record Date” has the meaning specified in Section 3.01 of this Indenture.

 

“Representative” means any trustee, agent or representative (if any) for an issue of Senior Indebtedness of the Issuer.

 

“Required Insurance” means insurance of the type, deductibles and amounts as set forth in the Senior Credit Agreement.

 

“Responsible Officer” means any vice president, assistant vice president, any trust officer, or any assistant trust officer or any other officer of the Trustee within the Corporate Trust Office customarily performing functions similar to those performed by any of the above designated officers, and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject and, in each case, who shall have direct responsibility for the administration of this Indenture.

 

  

“Restricted Parties” means, collectively, the Operating Company and the Restricted Subsidiaries. Restricted Parties in existence as of the Issue Date are set forth in Schedule 1 hereto.

 

“Restricted Payments” has the meaning specified in Section 10.10 of this Indenture.

 

“Restricted Subsidiary” means, at any time, with respect to any Person, any direct or indirect Subsidiary of such Person (including any Foreign Subsidiary) that is not then an Unrestricted Subsidiary; provided, however, that upon the occurrence of an Unrestricted Subsidiary ceasing to be an Unrestricted Subsidiary, such Subsidiary shall be included in the definition of “Restricted Subsidiary.” Unless the context otherwise requires, any references to Restricted Subsidiary refer to a Restricted Subsidiary of the Operating Company.

 

“S&P” means S&P Global Ratings and any successor to its rating agency business.

 

“Sale and Leaseback Transaction” means any arrangement with any Person providing for the leasing by the Issuer or any Restricted Party of any real property or tangible personal property, which property has been or is to be sold or transferred by the Issuer or such Party to a third Person in contemplation of such leasing.

 

“SEC” means the U.S. Securities and Exchange Commission or any successor agency thereto.

 

“Secured Indebtedness” means any Indebtedness of the Issuer or any Restricted Party secured by a Lien.

 

“Securities Act” means the U.S. Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder.

 

“Senior Credit Agreement” means the Credit Agreement, dated as of June 22, 2017, by and among the Operating Company, as Administrative Borrower, OIN Delaware LLC, as Co-Borrower, the Issuer, as Holdings, the other guarantors party thereto, Jefferies Finance LLC, as Administrative Agent and Collateral Agent and the other agents and lenders party thereto, as amended as of the Issue Date and by the Second Amendment thereto after the Issue Date, and as further amended, supplemented or otherwise modified from time to time thereafter in accordance with the provisions thereof and hereof.

 

“Senior Credit Facilities” means, collectively, the credit facilities under the Senior Credit Agreement as the same may be in effect from time to time, including, in each case, any related notes, mortgages, letters of credit, guarantees, collateral documents, instruments and agreements executed in connection therewith, and any appendices, exhibits, annexes or schedules to any of the foregoing (as the same may be in effect from time to time) and any amendments, supplements, modifications, extensions, renewals, restatements, refundings, replacements, exchanges or refinancings thereof, in whole or in part, and any financing arrangements that amend, supplement, modify, extend, renew, restate, refund, replace, exchange or refinance any part thereof, including, without limitation, any such amended, supplemented, modified, extended, renewed, restated, refunding, replacement, exchanged or refinancing financing arrangement that increases the amount permitted to be borrowed or issued thereunder or alters the maturity thereof (provided that such increase in borrowings or issuance is permitted under Section 10.11) or adds Subsidiaries as additional borrowers or guarantors thereunder and whether by the same or any other agent, trustee, lender or group of lenders, investors, holders or otherwise.

 

  

“Senior Credit Facility Obligations” means the “Obligations” as defined in the Senior Credit Agreement.

 

“Senior Indebtedness” means:

 

(1)         all Indebtedness of the Issuer or any Guarantor outstanding under the Existing Notes (including interest accruing on or after the filing of any petition in bankruptcy or similar proceeding or for reorganization of the Issuer or any Guarantor (at the rate provided for in the documentation with respect thereto, regardless of whether or not a claim for post-filing interest is allowed in such proceedings)), and any and all other fees, expense reimbursement obligations, indemnification amounts, penalties, and other amounts (whether existing on the Issue Date or thereafter created or incurred) and all obligations of the Issuer or any Guarantor to reimburse any bank or other Person in respect of amounts paid under letters of credit, acceptances or other similar instruments;

 

(2)         all (a) Hedging Obligations (and guarantees thereof) and (b) Cash Management Obligations (and guarantees thereof); provided that such Hedging Obligations and Cash Management Obligations, as the case may be, are permitted to be incurred under the terms of this Indenture;

 

(3)         any other Indebtedness of the Issuer or any Guarantor permitted to be incurred under the terms of this Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is subordinated in right of payment to the Notes or any related Note Guarantee; and

 

(4)         all Obligations with respect to the items listed in the preceding clauses (1), (2) and (3);

 

provided, however, that Senior Indebtedness shall not include:

 

(a)          any obligation of such Person to the Issuer or any of its Subsidiaries;

 

(b)          any liability for federal, state, local or other taxes owed or owing by such Person;

 

(c)          any accounts payable or other liability to trade creditors arising in the ordinary course of business;

 

(d)          any Indebtedness or other Obligation of such Person which is subordinate or junior in right of payment to any other Indebtedness or other Obligation of such Person; or

 

(e)          that portion of any Indebtedness which at the time of incurrence is incurred in violation of this Indenture.

 

“Shipping Pool” shall mean a shipping pool arrangement in which a Vessel has been entered, or in which a Vessel is a member, together with other vessels owned or operated by third parties that are part of such shipping pool arrangement.

 

  

“Sinosure Facility Agreement” means the amended and restated facility agreement to be entered into after the Issue Date , by and among Gener8 Maritime Subsidiary VII Inc., as Borrower, Seaways Holding Corporation, as Parent Guarantor, the Company, as Holdings Guarantor, the other guarantors party thereto, Citibank, N.A., as Bookrunner and other agents and lenders party thereto, and as may be further amended, supplemented or otherwise modified from time to time thereafter in accordance with the provisions thereof.

 

“Software” means computer programs, object code, source code and supporting documentation, including, without limitation, “software” as such term is defined in the UCC and computer programs that may be construed as included in the definition of “goods” in the UCC.

 

“Solvent” means, with respect to any Person, that, as of the date of determination, (a) the fair value of the properties of such Person will exceed its debts and liabilities, subordinated, contingent or otherwise, (b) the present fair saleable value of the property of such Person will be greater than the amount that will be required to pay the probable liability of its debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured, (c) such Person generally will be able to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured, (d) such Person will not have unreasonably small capital with which to conduct its business in which it is engaged as such business is now conducted and is proposed, contemplated or about to be conducted following the Issue Date, and (e) such Person is not “insolvent” as such term is defined under any bankruptcy, insolvency or similar laws of any jurisdiction in which any person is organized. For the purposes of this definition, the amount of any contingent liability at any time shall be computed as the amount that, in light of all the facts and circumstances existing at such time represents the amount that can be reasonably expected to become an actual or matured liability.

 

“Special Mandatory Redemption” has the meaning specified in Section 11.03 of this Indenture.

 

“Special Mandatory Redemption Date” has the meaning specified in Section 11.03 of this Indenture.

 

“Special Mandatory Redemption Price” has the meaning specified in Section 11.03 of this Indenture.

 

“Special Record Date” for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 3.07(b).

 

“Specified Joint Venture” means Equity Interest of the Issuer and the Restricted Parties in the following Joint Ventures: (a) TI Africa Limited; (b) TI Asia Limited; and (c) OSG Nakilat Corporation.

 

“Stated Maturity”, when used with respect to any Note or any installment of principal thereof or interest thereon, means the date specified in such Note as the fixed date on which the principal of such Note or such installment of principal or interest is due and payable.

 

“Subordinated Indebtedness” means, with respect to the Notes, any Indebtedness of the Issuer which ranks equal in right of payment to the Notes.

 

“Subsidiary” means, with respect to any Person,

 

  

(1)         any corporation, association, or other business entity (other than a partnership, joint venture, limited liability company or similar entity) of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time of determination owned, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof; and

 

(2)         any partnership, joint venture, limited liability company or similar entity of which:

 

(a)          more than 50% of the capital accounts, distribution rights, total equity and voting interests or general or limited partnership interests, as applicable, are owned, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof whether in the form of membership, general, special or limited partnership or otherwise, and

 

(b)          such Person or any Restricted Party of such Person is a controlling general partner or otherwise controls such entity.

 

For the avoidance of doubt, any entity that is owned at a 50% or less level (as described above) shall not be a “Subsidiary” for any purpose under this Indenture, regardless of whether such entity is consolidated on the Issuer’s or any Restricted Party’s financial statements.

 

“Synthetic Lease” means, as to any Person, (a) any lease (including leases that may be terminated by the lessee at any time) of any property (i) that is accounted for as an operating lease under GAAP and (ii) in respect of which the lessee retains or obtains ownership of the property so leased for U.S. federal income tax purposes, other than any such lease under which such person is the lessor or (b)(i) a synthetic, off-balance sheet or tax retention lease, or (ii) an agreement for the use or possession of property (including a Sale and Leaseback Transaction), in each case under this clause (b), creating obligations that do not appear on the balance sheet of such person but which, upon the application of any Bankruptcy Law to such person, would be characterized as the indebtedness of such person (without regard to accounting treatment).

 

“Synthetic Lease Obligations” means, as to any Person, an amount equal to the capitalized amount of the remaining lease payments under any Synthetic Lease that would appear on a balance sheet of such person in accordance with GAAP if such obligations were accounted for as Capital Lease Obligations.

 

“Termination Event” has the meaning specified in Section 11.03 of this Indenture.

 

“Total Assets” means, in respect of the Issuer on a consolidated basis, as of a given date the aggregate of the following, without duplication: (a) all of the assets of the Issuer of the types presented on its consolidated balance sheet, less (b) cash and Cash Equivalents, less (c) Non-Recourse Liabilities, and less (d) assets under any vessel construction or ship purchase agreement (including novation and assignment and assumption agreements) that the Issuer is required to record on its books under GAAP even though the Issuer is no longer the legal owner of the vessel or legally obligated to take delivery of the vessel.

 

“Total Borrowings” means, in respect of the Issuer on a consolidated basis, as of a given date the aggregate of the following, without duplication:

 

  

(a)          the outstanding principal amount of any moneys borrowed; plus

 

(b)          the outstanding principal amount of any acceptance under any acceptance credit; plus

 

(c)          the outstanding principal amount of any bond, note, debenture or other similar instrument; plus

 

(d)          the book values of indebtedness under a lease, charter, hire purchase agreement or other similar arrangement which would, in accordance with GAAP, be treated as a finance or capital lease; plus

 

(e)          the outstanding principal amount of all moneys owing in connection with the sale or discounting of receivables (otherwise than on a non-recourse basis or which otherwise meet any requirements for de-recognition under GAAP); plus

 

(f)          the outstanding principal amount of any indebtedness arising from any deferred payment agreements arranged primarily as a method of raising finance or financing the acquisition of an asset (except trade payables); plus

 

(g)          any fixed or minimum premium payable on the repayment or redemption of any instrument referred to in clause (c) above; plus

 

(h)          the outstanding principal amount of any indebtedness of any person of a type referred to in the above clauses of this definition which is the subject of a guarantee given by the Issuer to the extent that such guaranteed indebtedness is determined and given a value in respect of the Issuer on a consolidated basis in accordance with GAAP; less

 

(i)          cash and Cash Equivalents; less

 

(j)          Non-Recourse Liabilities.

 

Notwithstanding the foregoing, “Total Borrowings” shall not include any of the following:

 

(a)          indebtedness or obligations arising from derivative transactions, such as protecting against interest rate or currency fluctuations;

 

(b)          indebtedness under any vessel construction or ship purchase agreement (including novation and assignment and assumption agreements) that the Issuer is required to record on its books under GAAP even though the Issuer is no longer the legal owner of the vessel or legally obligated to take delivery of the vessel;

 

(c)          preferred or prepaid revenues;

 

(d)          purchase price holdbacks in respect of a portion of the purchase price of an asset to satisfy warranty or other unperformed obligations of the seller of such asset; and

 

(e)          any obligations constituting the exercise of appraisal rights and settlements of any claim of actions (whether actual, contingent or potential) with respect thereto.

 

“Trade Secrets” shall mean all trade secrets or other proprietary and confidential information.

 

  

“Trademarks” means, collectively, with respect to a Person, all trademarks (including service marks), logos, certification marks, trade dress, corporate names and trade names, whether registered or unregistered, owned by or assigned to such Person and all registrations and applications for the foregoing (whether statutory or common law and whether established or registered in the United States or any other country or any political subdivision thereof), together with any and all goodwill associated therewith.

 

“Transactions” means the Acquisition, the financing transactions related thereto including the entry into the Sinosure Facility Agreement and related documents and the SPV VLCC Transactions as those terms are defined in the Senior Credit Agreement and the entry into the ABN Facility and related documents.

 

“Treasury Rate” means, as obtained by the Issuer, as of any Redemption Date, the weekly average rounded to the nearest 1/100^th of a percentage point (for the most recently completed week for which such information is available as of the date that is two business days prior to the Redemption Date) (provided that in the case of calculating the Applicable Premium in connection with a satisfaction and discharge of this Indenture or a legal defeasance or covenant defeasance under this Indenture, such weekly average shall be determined for the most recently completed week for which such information is available as of the date that is two business days prior to the date on which funds to pay the Notes are deposited with the Trustee) of the yield to maturity as of such Redemption Date of United States Treasury securities with a constant maturity (as compiled and published in Federal Reserve Statistical Release H.15 with respect to each applicable day during such week (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from such Redemption Date to June 15, 2020; provided, however, that if the period from such Redemption Date to June 15, 2020 is less than one year, the weekly average yield on actively traded United States Treasury securities adjusted to a constant maturity of one year will be used.

 

“Trust Indenture Act” or “TIA” means the Trust Indenture Act of 1939, as amended.

 

“Trustee” means GLAS Trust Company LLC until a successor replaces it and, thereafter, means the successor.

 

“Uniform Commercial Code” or “UCC” means the Uniform Commercial Code (or any similar or equivalent legislation) as in effect in any applicable jurisdiction.

 

“Unrestricted Subsidiary” means:

 

(1)         any Subsidiary of the Operating Company which at the time of determination is an Unrestricted Subsidiary (as designated by the Operating Company pursuant to the Senior Credit Agreement; provided, that before and after giving effect to such designation, the total assets of all Unrestricted Subsidiaries (excluding intercompany accounts with other Unrestricted Subsidiaries to be so designated at such time and investments in Subsidiaries of such Unrestricted Subsidiaries to be so designated at such time) shall be less than 1.00% of Consolidated Total Assets); provided further that, irrespective of the foregoing, any “Unrestricted Subsidiary” designated as such under the Senior Credit Agreement prior to Issue Date or in connection with the Transactions shall be designated as an Unrestricted Subsidiary hereunder; and

 

(2)         any Subsidiary of an Unrestricted Subsidiary.

 

“U.S. Government Obligations” means securities that are:

 

  

(1) direct obligations of, or obligations guaranteed by, the United States of America for the timely payment of which its full faith and credit is pledged; or

 

(2) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America,

 

which, in either case, are not callable or redeemable at the option of the issuers thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as custodian with respect to any such U.S. Government Obligations or a specific payment of principal of or interest on any such U.S. Government Obligations held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligations or the specific payment of principal of or interest on the U.S. Government Obligations evidenced by such depository receipt.

 

“U.S. Person” means a U.S. Person as defined in Rule 902(k) promulgated under the Securities Act.

 

“Vessel Appraisal” means a written desktop appraisal of each Collateral Vessel prepared by an Approved Broker.

 

“Vessels” shall mean the vessels owned by the Issuer or any Restricted Party.

 

“Vice President”, when used with respect to the Issuer or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title “vice president”.

 

“Voting Stock” of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of such Person.

 

“Weighted Average Life to Maturity” means, when applied to any Indebtedness at any date, the number of years obtained by dividing:

 

(i)          the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect of the Indebtedness, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by

 

(ii)         the then outstanding principal amount of such Indebtedness.

 

“Wholly-Owned Restricted Subsidiary” of any Person means a Wholly-Owned Subsidiary of such Person that is a Restricted Subsidiary.

 

“Wholly-Owned Subsidiary” of any Person means a Subsidiary of such Person, 100% of the outstanding Equity Interests of which (other than directors’ qualifying shares and shares issued to foreign nationals as required by applicable law) shall at the time be owned by such Person or by one or more Wholly-Owned Subsidiaries of such Person.

 

 

SECTION 1.03.         Compliance Certificates and Opinions

 

Upon any application or request by the Issuer to the Trustee to take or refrain from taking any action under this Indenture, the Issuer shall furnish to the Trustee an Officer’s Certificate stating that all conditions precedent, if any, provided for in this Indenture (including any covenant compliance which constitutes a condition precedent) relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished.

 

Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include:

 

(1)         a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto;

 

(2)         a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

 

(3)         a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and

 

(4)         a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with.

 

SECTION 1.04.         Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.

 

Any certificate or opinion of an officer of the Issuer may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or opinion may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Issuer stating that the information with respect to such factual matters is in the possession of the Issuer, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous.

 

Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.

 

 

SECTION 1.05.         Acts of Holders.

 

(a)          Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agents duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Issuer. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the “Act” of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Issuer, if made in the manner provided in this Section.

 

(b)          The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner that the Trustee deems sufficient.

 

(c)          The principal amount and CUSIP numbers of Notes held by any Person, and the date of holding the same, shall be proved by the Note Register.

 

(d)          If the Issuer shall solicit from the Holders any request, demand, authorization, direction, notice, consent, waiver or other Act, the Issuer may, at its option, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Issuer shall have no obligation to do so. Such record date shall be a date not earlier than the date 30 days prior to the first solicitation of Holders generally in connection therewith and not later than the date such solicitation is completed. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of Outstanding Notes have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the Outstanding Notes shall be computed as of such record date; provided, that no such authorization, agreement or consent by the Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than eleven months after the record date. Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Note shall bind every future Holder of the same Note and the Holder of every Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee, the Issuer or any Guarantor in reliance thereon, whether or not notation of such action is made upon such Note.

 

SECTION 1.06.         Notices, Etc., to Trustee, Issuer, any Guarantor and Agent. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with,

 

(1)         the Trustee by any Holder or by the Issuer or any Guarantor shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing via facsimile, email in PDF format or mailed, first class postage prepaid, or delivered by recognized overnight courier, to or with the Trustee at 230 Park Avenue, 10th Floor, New York, New York 10169, or

 

  

(2)         the Issuer or any Guarantor by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if made, given, furnished or delivered in writing via facsimile, or email in PDF or mailed, first class postage prepaid, or delivered by recognized overnight courier, to the Issuer or such Guarantor addressed to International Seaways, Inc., 600 Third Avenue, 39th Fl., New York, New York 10016, Attention: General Counsel or at any other address previously furnished in writing to the Trustee by the Issuer or such Guarantor.

 

A copy of all notices to any Agent shall be sent to the Trustee at the address shown above. Any Person may change its address by giving notice of such change as set forth herein.

 

SECTION 1.07.         Notice to Holders; Waiver. Where this Indenture provides for notice of any event to Holders by the Issuer or the Trustee, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and delivered electronically or mailed, first class postage prepaid, to each Holder affected by such event, at his address as it appears in the Note Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Notices given by first-class mail, postage prepaid, shall be deemed given five calendar days after mailing or transmitting; notices sent by overnight delivery service will be deemed given when delivered; and notices given electronically shall be deemed given when sent. Notice given in accordance with the procedures of the Depository will be deemed given on the date sent to the Depository. Any notices required to be given to the holders of Notes that are in global form will be given to the Depository in accordance with its customary procedures therefor.

 

The Trustee agrees to accept and act upon instructions or directions pursuant to this Indenture , pdf sent by unsecured email, facsimile transmission or other similar unsecured electronic methods, provided, however, that the Trustee shall have received an incumbency certificate listing persons designated to give such instructions or directions and containing specimen signatures of such designated persons, which such incumbency certificate shall be amended and replaced whenever a person is to be added or deleted from the listing and such direction shall be in a form reasonably acceptable to the Trustee. If the Issuer elects to give the Trustee as described in the immediately preceding sentence and the Trustee elects to act upon such instructions, the Trustee’s understanding of such instructions shall be deemed controlling. The Trustee shall not be liable for any losses, costs or expenses arising directly or indirectly from the Trustee’s reliance upon and compliance with such instructions notwithstanding such instructions conflict or are inconsistent with a subsequent written instruction. The Issuer agrees to assume all risks arising out of the use of such electronic methods to submit instructions and directions to the Trustee, including without limitation the risk of the Trustee acting on unauthorized instructions, and the risk of interception and misuse by third parties.

 

In case by reason of the suspension of or irregularities in regular mail service or by reason of any other cause, it shall be impracticable to mail notice of any event to Holders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice for every purpose hereunder.

 

Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.

 

  

SECTION 1.08.         Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience of reference only, are not intended to be considered a part hereof and shall not affect the construction hereof.

 

SECTION 1.09.         Successors and Assigns. All agreements of the Issuer in this Indenture and the Notes will bind its successors. All agreements of the Trustee in this Indenture will bind its successors.

 

SECTION 1.10.         Severability Clause. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

 

SECTION 1.11.         Benefits of Indenture. Nothing in this Indenture or in the Notes, express or implied, shall give to any Person, other than the parties hereto, any Paying Agent, any Note Registrar, any other Agent and their successors hereunder and the Holders any benefit or any legal or equitable right, remedy or claim under this Indenture.

 

SECTION 1.12.         Governing Law; Submission to Jurisdiction. This Indenture, the Notes and any Note Guarantee shall be governed by and construed in accordance with the laws of the State of New York. THE PARTIES HERETO AGREE TO SUBMIT TO THE JURISDICTION OF ANY UNITED STATES FEDERAL OR STATE COURT LOCATED IN THE BOROUGH OF MANHATTAN, IN THE CITY OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE NOTES.

 

SECTION 1.13.         Legal Holidays. In any case where any Interest Payment Date, Redemption Date or Stated Maturity or Maturity of any Note shall not be a Business Day, then (notwithstanding any other provision of this Indenture or of the Notes) payment of principal (or premium, if any) or interest or other required payment need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date, Redemption Date or at the Stated Maturity or Maturity; provided, that no interest shall accrue on such payment for the period from and after such Interest Payment Date, Redemption Date, Stated Maturity or Maturity, as the case may be.

 

SECTION 1.14.         No Personal Liability of Directors, Managers, Officers, Employees and Stockholders. No past, present or future director, manager, officer, employee, incorporator, member, partner or stockholder of the Issuer or any Guarantor or any of their parent companies or entities (other than the Issuer in respect of the Notes and any Guarantor in respect of its Note Guarantee, if any) shall have any liability for any obligations of the Issuer or the Guarantors under the Notes, any Note Guarantees or this Indenture or for any claim based on, in respect of, or by reason of such obligations or their creation. Each Holder by accepting Notes waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes.

 

SECTION 1.15.         Counterparts. This Indenture may be executed in any number of counterparts, each of which shall be original; but such counterparts shall together constitute but one and the same instrument. One signed copy is enough to prove this Indenture. The exchange of copies of this Indenture and of signature pages by facsimile or PDF transmission shall constitute effective execution and delivery of this Indenture as to the parties hereto and may be used in lieu of the original Indenture for all purposes. Signatures of the parties hereto transmitted by facsimile or PDF shall be deemed to be their original signatures for all purposes.

 

  

SECTION 1.16.         USA PATRIOT Act. The parties hereto acknowledge that in accordance with Section 326 of the USA PATRIOT Act, the Trustee, like all financial institutions and in order to help fight the funding of terrorism and money laundering, is required to obtain, verify, and record information that identifies each person or legal entity that establishes a relationship or opens an account. The Issuer agrees that it will provide the Trustee with information about the Issuer as the Trustee may reasonably request in order for the Trustee to satisfy the requirements of the USA PATRIOT Act.

 

SECTION 1.17.         Waiver of Jury Trial. EACH OF THE ISSUER, ANY GUARANTOR AND THE TRUSTEE AND EACH HOLDER OF A NOTE, BY ITS ACCEPTANCE THEREOF, THEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE, THE NOTES OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREBY OR HEREBY.

 

SECTION 1.18.         Force Majeure. In no event shall the Trustee be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services; it being understood that the Trustee shall use reasonable efforts that are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.

 

SECTION 1.19.         FATCA. In order to comply with Sections 1471 – 1474 of the Code, any current or future regulations or official interpretations thereof, any intergovernmental agreement between a non-U.S. jurisdiction and the United States with respect to the foregoing, any similar law or regulations adopted pursuant to such an intergovernmental agreement or any agreements entered into pursuant to Section 1471(b)(1) of the Code (“FATCA”) that a foreign financial institution, issuer, trustee, paying agent, or other party is or has agreed to be subject to related to this Indenture, the Issuer agrees (i) to use commercially reasonably efforts to provide to the Trustee sufficient information about the parties and/or transactions (including any modification to the terms of such transactions) that is reasonably requested by the Trustee so the Trustee can determine whether it has tax related obligations under FATCA, and (ii) that the Trustee shall be entitled to make any withholding or deduction from payments under this Indenture to the extent necessary to comply with FATCA for which the Trustee shall not have any liability. The terms of this paragraph shall survive the satisfaction and discharge of this Indenture.

 

Article Two

NOTE FORMS

 

SECTION 2.01.         Form and Dating. Provisions relating to the Notes are set forth in Annex I attached hereto (the “Appendix”) which is hereby incorporated in, and expressly made part of, this Indenture. The Notes and the Trustee’s certificate of authentication shall be substantially in the form of Exhibit 1 to the Appendix which is hereby incorporated in, and expressly made a part of, this Indenture. The Notes may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Issuer is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form reasonably acceptable to the Issuer). The terms of the Note set forth in the Appendix are part of the terms of this Indenture.

 

  

SECTION 2.02.         Execution, Authentication, Delivery and Dating. The Notes shall be executed on behalf of the Issuer by at least one Officer. The signature of any Officer on the Notes may be manual or facsimile signatures of the present or any future such authorized officer and may be imprinted or otherwise reproduced on the Notes.

 

Notes bearing the manual or facsimile signature of an individual who was at any time the proper Officer of the Issuer shall bind the Issuer, notwithstanding that such individual has ceased to hold such office prior to the authentication and delivery of such Notes or did not hold such office at the date of such Notes.

 

At any time and from time to time after the execution and delivery of this Indenture, the Issuer may deliver Notes executed by the Issuer to the Trustee for its manual authentication, together with an Issuer Order for the authentication and delivery of such Notes, and the Trustee in accordance with such Issuer Order shall authenticate and deliver such Notes.

 

On the Issue Date, the Issuer shall deliver the Notes in the aggregate principal amount of $30,000,000 executed by the Issuer to the Trustee for authentication, together with an Issuer Order for the authentication and delivery of such Notes, specifying the principal amount and registered holder of each Note, directing the Trustee to authenticate the Notes and deliver the same to the persons named in such Issuer Order and the Trustee in accordance with such Issuer Order shall manually authenticate and deliver such Notes. The Trustee shall receive an Officer’s Certificate and Opinion of Counsel of the Issuer as to such matters as it may reasonably require in connection with such authentication of Notes. Such Issuer Order shall specify the amount of Notes to be authenticated and the date on which the original issue of Notes is to be authenticated.

 

Each Note shall be dated the date of its authentication.

 

No Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Note a certificate of authentication substantially in the form provided for herein duly executed by the Trustee by manual signature of an authorized signatory, and such certificate upon any Note shall be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture.

 

Article Three

THE NOTES

 

SECTION 3.01.         Title and Terms. The aggregate principal amount of Notes which may be authenticated and issued under this Indenture is $30,000,000.

 

The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture, and the Issuer and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling.

 

  

The Notes shall be known and designated as the “10.75% Step-Up Notes due 2023” of the Issuer. The Stated Maturity of the principal of Notes shall be June 15, 2023; provided, that if the Indebtedness outstanding under the Senior Credit Agreement is extended, renewed, refunded, refinanced, replaced, defeased or discharged (such date, the “Refinance Date”), the Stated Maturity of the principal of Notes shall be June 15, 2022. The Notes shall bear interest at the rate of 10.75% per annum from the Issue Date, or from the most recent Interest Payment Date to which interest has been paid or duly provided for; provided, that the Notes shall bear interest at the rate of 13.00% per annum beginning on the earlier of (i) December 15, 2020 and (ii) if the Refinance Date has occurred, the later of the Refinance Date and June 15, 2020. Interest on the Notes shall be payable on September 15, 2018 and quarterly thereafter in arrears on March 15, June 15, September 15 and December 15 of each year, until the principal thereof is paid or duly provided for and to the Person in whose name the Note (or any Predecessor Note) is registered at the close of business (if applicable) on the March 1, June 1, September 1 and December 1 (whether or not a Business Day) immediately preceding such Interest Payment Date (each, a “Regular Record Date”). Any changes to the terms of the Notes under this Section 3.01 shall be evidenced by an Officer’s Certificate.

 

The principal of (and premium, if any) and interest on the Notes shall be payable at the office or agency of the Paying Agent maintained for such purpose as set forth in Section 3.02, or, at the option of the Issuer, payment of interest may be made by check mailed to the Holders at their respective addresses set forth in the Note Register of Holders or by wire transfer; provided that all payments of principal, premium, if any, and interest with respect to Notes represented by one or more Global Notes registered in the name of or held by the Depository or its nominee will be made in accordance with the Depository’s applicable procedures.

 

The Notes shall be redeemable as provided in Article Eleven.

 

SECTION 3.02.         Note Registrar, Transfer Agent and Paying Agent. The Issuer shall maintain one or more Paying Agents for the Notes in New York. The Issuer hereby appoints the Trustee as the initial Paying Agent.

 

The Issuer shall be responsible for making calculations called for under the Notes, including but not limited to determination of redemption price or other amounts payable on the Notes. The Issuer will make the calculations in good faith and, absent manifest error, its calculations will be final and binding on the Holders. The Issuer will provide a schedule of its calculations to the Trustee when requested by the Trustee, and the Trustee is entitled to rely conclusively on the accuracy of the Issuer’s calculations without independent verification. The Trustee shall forward the Issuer’s calculations to any Holder upon the written request of such Holder.

 

The Issuer will also maintain a registrar (the “Note Registrar”) with offices in New York. The Issuer will also maintain a transfer agent (each, a “Transfer Agent”) in New York. The Issuer hereby appoints the Trustee as the initial Note Registrar and Transfer Agent. The Note Registrar and the Transfer Agent shall keep a register of the Notes and of their transfer and exchange (the register maintained in such office or in any other office or agency designated pursuant to Section 10.02 being herein referred to as the “Note Register”) and will facilitate transfer of Notes on behalf of the Issuer. The Note Register shall be in written form or any other form capable of being converted into written form within a reasonable time. At all reasonable times, the Note Register shall be open to inspection by the Trustee. The Issuer may change the Paying Agents, the Note Registrars or the Transfer Agents without prior notice to the Holders. The Issuer may have one or more co-registrars and one or more additional paying agents. The term “Note Registrar” includes any co-registrars. For the avoidance of doubt, there shall only be one Note Register.

 

The Issuer shall enter into an appropriate agency agreement with any Note Registrar or Paying Agent not a party to this Indenture. The agreement shall implement the provisions of this Indenture that relate to such agent. The Issuer shall notify the Trustee in writing of the name and address of any such agent. If the Issuer fails to maintain a Note Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 6.07. The Issuer or any of its Subsidiaries may act as Paying Agent or Note Registrar.

 

  

The Issuer acknowledges that neither the Trustee nor any Agent makes any representations as to the interpretation or characterization of the transactions herein undertaken for tax or any other purpose, in any jurisdiction.

 

SECTION 3.03.         Denominations. The Notes shall be issuable only in registered form without coupons and only in minimum denominations of $2,000 and any integral multiples of $1,000 in excess thereof.

 

SECTION 3.04.         Temporary Notes. Pending the preparation of definitive Notes, the Issuer may execute, and upon Issuer Order the Trustee shall authenticate and deliver, temporary Notes which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Notes in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Notes may determine, as conclusively evidenced by their execution of such Notes.

 

If temporary Notes are issued, the Issuer will cause definitive Notes to be prepared without unreasonable delay. After the preparation of definitive Notes, the temporary Notes shall be exchangeable for definitive Notes upon surrender of the temporary Notes at the office or agency of the Issuer designated for such purpose pursuant to Section 10.02, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Notes, the Issuer shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Notes of authorized denominations. Until so exchanged, the temporary Notes shall in all respects be entitled to the same benefits under this Indenture as definitive Notes.

 

SECTION 3.05.         Registration of Transfer and Exchange.

 

Upon surrender for registration of transfer of any Note at the office or agency of the Issuer designated pursuant to Section 10.02, the Issuer shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Notes of any authorized denomination or denominations of a like aggregate principal amount.

 

At the option of the Holder, Notes may be exchanged for other Notes of any authorized denomination and of a like aggregate principal amount, upon surrender of the Notes to be exchanged at such office or agency. Whenever any Notes are so surrendered for exchange, the Issuer shall execute, and the Trustee shall authenticate and deliver, the Notes which the Holder making the exchange is entitled to receive.

 

All Notes issued upon any registration of transfer or exchange of Notes shall be the valid obligations of the Issuer, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Notes surrendered upon such registration of transfer or exchange.

 

Every Note presented or surrendered for registration of transfer or for exchange shall (if so required by the Issuer or the Note Registrar) be duly endorsed, or be accompanied by written instruments of transfer, in form satisfactory to the Issuer and the Note Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing.

 

No service charge shall be made for any registration of transfer or exchange or redemption of Notes, but the Issuer may require payment of a sum sufficient to cover any taxes, fees or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Notes, other than exchanges pursuant to Sections 2.02, 3.04, 9.05 or 11.10 not involving any transfer.

 

 

SECTION 3.06.         Mutilated, Destroyed, Lost and Stolen Notes. If (1) any mutilated Note is surrendered to the Trustee, or (2) the Issuer and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Note, and there is delivered to the Issuer and the Trustee such security or indemnity to save each of them harmless from any claim, loss, cost or liability resulting from such lost or stolen Note that is reasonably acceptable to the Trustee and the Issuer, then, in the absence of written notice to the Issuer or the Trustee that such Note has been acquired by a Protected Purchaser (as defined in Section 8-303 of the Uniform Commercial Code) (a “Protected Purchaser”), the Issuer shall execute and upon Issuer Order the Trustee shall authenticate and deliver, in exchange for any such mutilated Note or in lieu of any such destroyed, lost or stolen Note, a new Note of like tenor and principal amount, bearing a number not contemporaneously outstanding.

 

In case any such mutilated, destroyed, lost or stolen Note has become or is about to become due and payable, the Issuer in its discretion may, instead of issuing a new Note, pay such Note.

 

Upon the issuance of any new Note under this Section, the Issuer may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith.

 

Every new Note issued pursuant to this Section in lieu of any mutilated, destroyed, lost or stolen Note shall constitute an original additional contractual obligation of the Issuer, whether or not the mutilated, destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall be entitled to all benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder.

 

The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes.

 

SECTION 3.07.         Payment of Interest; Interest Rights Preserved.

 

(a)          Interest on any Note which is payable, and is punctually paid or duly provided for, shall be paid by the Issuer by 12:00 pm (New York City time) on any Interest Payment Date to the Person in whose name such Note (or one or more Predecessor Notes) is registered at the close of business (if applicable) on the Regular Record Date for such interest at the office or agency of the Issuer maintained for such purpose pursuant to Section 10.02; provided that, subject to Section 3.01 hereof, each installment of interest may at the Issuer’s option be paid by (1) mailing a check for such interest, payable to or upon the written order of the Person entitled thereto pursuant to Section 3.08, to the address of such Person as it appears in the Note Register or (2) transfer to an account maintained by the payee; provided that payment by wire transfer of immediately available funds shall be required with respect to principal of, premium on, if any, and interest on, all Notes in global form and all other Notes the Holders of which shall have provided wire transfer instructions to the Issuer and the Paying Agent; provided that for Notes not in global form the Paying Agent shall have received from the Holders satisfactory wire transfer instructions at least 10 calendar days prior to the related payment date and subject to surrender of the Note in the case of payments of principal and premium, if any.

 

(b)          Any interest on any Note which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date shall forthwith cease to be payable to the Holder on the Regular Record Date by virtue of having been such Holder, and such defaulted interest and (to the extent lawful) interest on such defaulted interest at the rate borne by the Notes (such defaulted interest and interest thereon herein collectively called “Defaulted Interest”) may be paid by the Issuer, at its election in each case, as provided in clause (1) or (2) below:

 

  

(1)         the Issuer may elect to make payment of any Defaulted Interest to the Persons in whose names the Notes (or their respective Predecessor Notes) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Issuer shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Note and the date of the proposed payment, and at the same time the Issuer shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Issuer of such Special Record Date, and in the name and at the expense of the Issuer, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be given in the manner provided for in Section 1.07, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so given, such Defaulted Interest shall be paid to the Persons in whose names the Notes (or their respective Predecessor Notes) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (2).

 

(2)         the Issuer may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange, if, after written notice given by the Issuer to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee.

 

(c)          Subject to the foregoing provisions of this Section, each Note delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Note shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Note.

 

SECTION 3.08.         Persons Deemed Owners. Prior to the due presentment of a Note for registration of transfer, the Issuer, any Guarantor, the Trustee and any agent of the Issuer or the Trustee may treat the Person in whose name such Note is registered as the owner of such Note for the purpose of receiving payment of principal of (and premium, if any) and (subject to Sections 3.05 and 3.07) interest on such Note and for all other purposes whatsoever, whether or not such Note be overdue, and none of the Issuer, any Guarantor, the Trustee or any agent of the Issuer or the Trustee shall be affected by notice to the contrary.

 

SECTION 3.09.         Cancellation. All Notes surrendered for payment, redemption, registration of transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be cancelled by the Trustee in accordance with its customary procedures. The Issuer may at any time deliver to the Trustee for cancellation any Notes previously authenticated and delivered hereunder which the Issuer may have acquired in any manner whatsoever, and may deliver to the Trustee (or to any other Person for delivery to the Trustee) for cancellation any Notes previously authenticated hereunder which the Issuer has not issued and sold, and all Notes so delivered shall be cancelled by the Trustee in accordance with its customary procedures. If the Issuer shall so acquire any of the Notes, however, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Notes unless and until the same are surrendered to the Trustee for cancellation. No Notes shall be authenticated in lieu of or in exchange for any Notes cancelled as provided in this Section, except as expressly permitted by this Indenture. All cancelled Notes held by the Trustee shall be disposed of by the Trustee in accordance with its customary procedures.

 

  

SECTION 3.10.         Computation of Interest. Interest on the Notes shall be computed on the basis of a 360-day year of twelve 30-day months.

 

SECTION 3.11.         Transfer and Exchange. The Notes shall be issued in registered form and shall be transferable only upon the surrender of a Note for registration of transfer. When a Note is presented to the Note Registrar or a co-registrar with a request to register a transfer, the Note Registrar shall register the transfer as requested if the requirements of this Indenture and Section 8-401(a) of the Uniform Commercial Code are met. When Notes are presented to the Note Registrar or a co-registrar with a request to exchange them for an equal principal amount of Notes of other denominations, the Note Registrar shall make the exchange as requested if the same requirements are met.

 

SECTION 3.12.         CUSIP, ISIN and Common Code Numbers. The Issuer in issuing the Notes may use CUSIP, ISINs and “Common Code” numbers (in each case, if then generally in use) in addition to serial numbers, and, if so, the Trustee shall use such CUSIP, ISINs and “Common Code” numbers in addition to serial numbers in notices of redemption, repurchase or other notices to Holders as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such CUSIP, ISINs and “Common Code” numbers either as printed on the Notes or as contained in any notice of a redemption or repurchase and that reliance may be placed only on the serial or other identification numbers printed on the Notes, and any such redemption or repurchase shall not be affected by any defect in or omission of such numbers. The Issuer will promptly notify the Trustee in writing of any change in the CUSIP, ISINs and “Common Code” numbers applicable to the Notes.

 

Article Four

SATISFACTION AND DISCHARGE

 

SECTION 4.01.         Satisfaction and Discharge of Indenture. This Indenture shall be discharged and cease to be of further effect as to all Notes and the Trustee, at the request and expense of the Issuer, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture when:

 

(1)         either:

 

(A)         all Notes theretofore authenticated and delivered (except (i) Notes which have been mutilated, destroyed, lost or stolen and which have been replaced or paid as provided in Section 3.06 and (ii) Notes for whose payment money has theretofore been deposited in trust with the Trustee or any Paying Agent or segregated and held in trust by the Issuer and thereafter repaid to the Issuer or discharged from such trust, as provided in Section 10.03) have been delivered to the Trustee for cancellation; or

 

  

(B)         

 

(i)          all Notes not theretofore delivered to the Trustee for cancellation (x) have become due and payable by reason of the making of a notice of redemption or otherwise; (y) will become due and payable within one year or (z) are to be called for redemption within one year under arrangements reasonably satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Issuer;

 

(ii)         the Issuer or any Guarantor has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders of the Notes, cash in U.S. dollars, U.S. Government Obligations, or a combination thereof, in an amount (including scheduled payments thereon) sufficient, in the opinion of an Independent Financial Advisor, to pay and discharge the entire Indebtedness on such Notes not theretofore delivered to the Trustee for cancellation, for principal, premium, if any, and accrued interest to the date of such deposit (in the case of Notes which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; provided, that upon any redemption that requires the payment of the Applicable Premium, the amount deposited shall be sufficient for purposes of this Indenture to the extent that an amount is deposited with the Trustee equal to the Applicable Premium calculated as of the date of the notice of redemption, with any deficit as of the date of redemption (any such amount the “Applicable Premium Deficit”) only required to be deposited with the Trustee on or prior to the date of redemption. Any Applicable Premium Deficit shall be set forth in an Officer’s Certificate delivered to the Trustee simultaneously with the deposit of such Applicable Premium Deficit that confirms that such Applicable Premium Deficit shall be applied toward such redemption;

 

(iii)        no Default or Event of Default (other than that resulting from borrowing funds to be applied to make such deposit or any similar and simultaneous deposit relating to other Indebtedness and, in each case, the granting of Liens in connection therewith) with respect to this Indenture or the Notes shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit shall not result in a breach or violation of, or constitute a default under any material agreement or material instrument (other than this Indenture) to which the Issuer or any Guarantor is a party or by which the Issuer or any Guarantor is bound (other than that resulting from borrowing funds to be applied to make such deposit and any similar and simultaneous deposit relating to other Indebtedness and, in each case, the granting of Liens in connection therewith); and

 

(iv)        the Issuer has delivered irrevocable instructions to the Trustee to apply the deposited money toward the payment of the Notes at maturity or the Redemption Date, as the case may be;

 

(2)         the Issuer has paid or caused to be paid all other sums payable by it under this Indenture; and

 

(3)         the Issuer has delivered to the Trustee an Officer’s Certificate and an Opinion of Counsel (which Opinion of Counsel may be subject to customary assumptions and exclusions), each stating that all conditions precedent herein to the satisfaction and discharge of this Indenture have been satisfied. Such Opinion of Counsel may rely on such Officer’s Certificate as to matters of fact, including clauses (B)(i), (ii), (iii) and (iv).

 

  

Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Issuer to the Trustee under Section 6.07, the obligations of the Issuer to any Authenticating Agent under Section 6.12 and, if money or U.S. Government Obligations shall have been deposited with the Trustee pursuant to clause (1)(B) of this Section 4.01, the obligations of the Trustee under Section 4.02 and the last paragraph of Section 10.03 shall survive such satisfaction and discharge.

 

SECTION 4.02.         Application of Trust Money. Subject to the provisions of the last paragraph of Section 10.03, all money or U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee pursuant to Section 4.01 shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Issuer acting as its own Paying Agent) of the principal (and premium, if any) and interest for whose payment such money or U.S. Government Obligations has been deposited with the Trustee; but such money or U.S. Government Obligations need not be segregated from other funds except to the extent required by law.

 

The Issuer shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to this Section 4.02 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the Outstanding Notes. The Trustee shall also deliver or pay to the Issuer from time to time upon Issuer Request any money or U.S. Government Obligations held by it which, in the opinion of an Independent Financial Advisor expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited to effect an equivalent satisfaction and discharge, as applicable, in accordance with this Article Four.

 

If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with Section 4.01 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Issuer’s and any Guarantor’s obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 4.01 until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with Section 4.01; provided that if the Issuer has made any payment of principal of (and premium, if any) or interest on any Notes because of the reinstatement of its obligations, the Issuer shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent.

 

Article Five

REMEDIES

 

SECTION 5.01.         Events of Default. “Event of Default”, wherever used herein, means any one of the following events:

 

(1)         default in payment when due and payable, upon redemption, acceleration or otherwise, of principal of, or premium, if any, on the Notes;

 

(2)         default for 30 days or more in the payment when due of interest on or with respect to the Notes;

 

(3)         failure by the Issuer or any Restricted Party for 30 days after receipt of written notice given by the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Notes (with a copy to the Trustee) to comply with any of its obligations, covenants or agreements (other than a default referred to in clauses (1) or (2) above) contained in this Indenture or the Notes;

 

  

(4)         failure by the Issuer or any Restricted Party to (i) pay any principal, premium or interest, regardless of amount, due in respect of any Indebtedness (other than the Obligations under this Indenture), when and as the same shall become due and payable beyond any applicable grace period or (ii) observe or perform any other term, covenant, condition or agreement contained in any agreement or instrument evidencing or governing any such Indebtedness if the effect of any failure referred to in this clause (ii) is to cause, or to permit the holder or holders of such Indebtedness or a trustee or other representative on its or their behalf (with or without the giving of notice, the lapse of time or both) to cause, such Indebtedness to become due prior to its stated maturity or become subject to a mandatory offer to purchase by the obligor; provided, that it shall not constitute an Event of Default pursuant to this clause (4) unless the aggregate amount of all such Indebtedness referred to in clauses (i) and (ii) equals or exceeds $25.0 million at any one time;

 

(5)         failure by the Issuer or any Restricted Party to pay final judgments aggregating in an amount equal to or in excess of $25.0 million (to the extent not covered by insurance as to which the insurer has been notified of such judgment or order and has not denied its obligation), which final judgments remain unpaid, undischarged, unstayed, unvacated or unbonded for a period of more than 30 consecutive days, or any action shall be legally taken by a judgment creditor to levy upon priorities of the Issuer or any Restricted Party to enforce such judgment;

 

(6)         an Insolvency Proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of the Issuer, or any Restricted Party or of a substantial part of the property of the Issuer or any Restricted Party, under the Bankruptcy Law, as now constituted or hereafter amended, or any other federal, state or foreign bankruptcy, insolvency, receivership or similar Legal Requirement, (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator, liquidator, rehabilitator or similar official for the Issuer or any Restricted Party a substantial part of the property of the Issuer or any Restricted Party; or (iii) the winding-up or liquidation of the Issuer or any Restricted Party; and such proceeding or petition shall continue undismissed for 60 days or an Order approving or ordering any of the foregoing shall be entered;

 

(7)         one or more ERISA Events shall have occurred that, when taken together with all other such ERISA Events that have occurred, or any event similar to the foregoing shall have occurred or exists with respect to a Non-U.S. Plan, including, but not limited to, the issue of a Financial Support Direction and/or a Contribution Notice or the winding-up of the Non-U.S. Plan, in any such case that would reasonably be expected to result in a material adverse effect on, or a material adverse change in, the condition (financial or otherwise), results of operations, business, properties, assets or liabilities (contingent or otherwise) of the Issuer and the Restricted Parties, taken as a whole; or

 

(8)         there shall have occurred a Change of Control.

 

SECTION 5.02.         Acceleration of Maturity: Rescission and Annulment.

 

(a)          If any Event of Default (other than an Event of Default specified in Section 5.01(6) above) occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the Outstanding Notes issued under this Indenture may declare the principal, premium, if any, interest and any other monetary obligations on all the Outstanding Notes to be due and payable immediately, by a notice in writing to the Issuer (and to the Trustee if given by Holders).

 

  

(b)          Upon the effectiveness of a declaration under Section 5.02(a), such principal and interest will be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising under Section 5.01(6), the principal of and interest on all Outstanding Notes will become due and payable without further action or notice. The Trustee shall have no obligation to accelerate the Notes if, in the reasonable judgment of the Trustee, acceleration is not in the best interest of the Holders.

 

(c)          At any time after a declaration of acceleration has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter provided in this Article, the Holders of a majority in aggregate principal amount of the Outstanding Notes, by written notice to the Issuer and the Trustee, may rescind and annul such declaration and its consequences, so long as such rescission and annulment would not conflict with any judgment of a court of competent jurisdiction, if:

 

(1)         the Issuer has paid or deposited with the Trustee a sum sufficient to pay:

 

(A)         all overdue interest on all Outstanding Notes,

 

(B)         all unpaid principal of (and premium, if any, on) any Outstanding Notes which has become due otherwise than by such declaration of acceleration, and interest on such unpaid principal at the rate borne by the Notes,

 

(C)         to the extent that payment of such interest is lawful, interest on overdue interest at the rate borne by the Notes, and

 

(D)         all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and

 

(2)         Events of Default, other than the non-payment of amounts of principal of (or premium, if any, on) or interest on Notes, which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 5.13,

 

provided that no such rescission shall affect any subsequent default or impair any right consequent thereon.

 

(d)          Notwithstanding the preceding paragraph, in the event of any Event of Default specified in Section 5.01(4), such Event of Default and all consequences thereof (excluding any resulting payment default, other than as a result of acceleration of the Notes) shall be annulled, waived and rescinded, automatically and without any action by the Trustee or the Holders, if within 20 days after such Event of Default arose:

 

(1)         the Indebtedness or guarantee that is the basis for such Event of Default has been discharged; or

 

(2)         the requisite holders thereof have rescinded or waived the acceleration, notice or action (as the case may be) giving rise to such Event of Default; or

 

(3)         the default that is the basis for such Event of Default has been cured.

 

  

(e)          If the Notes are accelerated or otherwise become due prior to their Stated Maturity, in each case, as a result of an Event of Default on or after June 15, 2020, the amount of principal of, accrued and unpaid interest and premium on the Notes that becomes due and payable shall equal the redemption price applicable with respect to an optional redemption of the Notes pursuant to Section 11.01(b), in effect on the date of such acceleration as if such acceleration were an optional redemption of the Notes accelerated. If the Notes are accelerated or otherwise become due prior to their Stated Maturity, in each case, as a result of an Event of Default prior to June 15, 2020, the amount of principal of, accrued and unpaid interest and premium on the Notes that becomes due and payable shall equal 100% of the principal amount of the Notes redeemed plus the Applicable Premium in effect on the date of such acceleration, as if such acceleration were an optional redemption of the Notes accelerated pursuant to Section 11.01(a).

 

(f)          Without limiting the generality of the foregoing, it is understood and agreed that if the Notes are accelerated or otherwise become due prior to their Stated Maturity, in each case, in respect of any Event of Default (including, but not limited to, upon the occurrence of a bankruptcy or insolvency event (including the acceleration of claims by operation of law)), the premium applicable with respect to an optional redemption of the Notes will also be due and payable, in cash, as though the Notes were optionally redeemed pursuant to Section 11.01 and shall constitute part of the Obligations under the Notes, in view of the impracticability and extreme difficulty of ascertaining actual damages and by mutual agreement of the parties as to a reasonable calculation of each Holder’s lost profits as a result thereof. Any premium payable above shall be presumed to be the liquidated damages sustained by each Holder as the result of the early redemption and the Company agrees that it is reasonable under the circumstances currently existing.

 

(g)          The premium shall also be payable in the event the Notes (and/or this Indenture) are satisfied or released by foreclosure (whether by power of judicial proceeding), deed in lieu of foreclosure or by any other means. THE ISSUER EXPRESSLY WAIVES (TO THE FULLEST EXTENT IT MAY LAWFULLY DO SO) THE PROVISIONS OF ANY PRESENT OR FUTURE STATUTE OR LAW THAT PROHIBITS OR MAY PROHIBIT THE COLLECTION OF THE FOREGOING PREMIUM IN CONNECTION WITH ANY SUCH ACCELERATION. The Issuer expressly agrees (to the fullest extent it may lawfully do so) that: (1) the premium is reasonable and is the product of an arm’s length transaction between sophisticated business people, ably represented by counsel; (2) the premium shall be payable notwithstanding the then prevailing market rates at the time payment is made; (3) there has been a course of conduct between Holders and the Issuer giving specific consideration in this transaction for such agreement to pay the premium; and (4) the Issuer shall be estopped hereafter from claiming differently than as agreed to in this paragraph. The Issuer expressly acknowledges that its agreement to pay the premium to Holders as herein described is a material inducement to Holders to purchase the notes.

 

SECTION 5.03.         Collection of Indebtedness and Suits for Enforcement by Trustee. The Issuer covenants that if:

 

(1)         default is made in the payment of any installment of interest on any Note when such interest becomes due and payable and such default continues for a period of 30 days, or

 

(2)         default is made in the payment of the principal of (or premium, if any, on) any Note at the Maturity thereof, the Issuer will, upon demand of the Trustee, pay to the Trustee for the benefit of the Holders of such Notes, the whole amount then due and payable on such Notes for principal (and premium, if any) and interest, and interest on any overdue principal (and premium, if any) and, to the extent that payment of such interest shall be legally enforceable, upon any overdue installment of interest, at the rate borne by the Notes, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.

 

  

If the Issuer fails to pay such amounts forthwith upon such demand, the Trustee, in its own name as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Issuer, any Guarantor or any other obligor upon the Notes and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Issuer, any Guarantor or any other obligor upon the Notes, wherever situated.

 

If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders under this Indenture and any Note Guarantees by such appropriate judicial proceedings as the Trustee shall deem necessary to protect and enforce any such rights, including seeking recourse against any Guarantor, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy, including seeking recourse against any Guarantor.

 

SECTION 5.04.         Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Issuer or any other obligor including any Guarantor, upon the Notes or the property of the Issuer or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Issuer for the payment of overdue principal, premium, if any, or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise,

 

(1)         to file and prove a claim for the whole amount of principal (and premium, if any) and interest owing and unpaid in respect of the Notes and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and

 

(2)         to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same;

 

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee hereunder.

 

Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. The Trustee may, on behalf of the Holders, vote for the election of a trustee in bankruptcy or similar official and be a member of a creditors’ committee or other similar committee.

 

  

SECTION 5.05.         Trustee May Enforce Claims Without Possession of Notes. All rights of action and claims under this Indenture or the Notes may be prosecuted and enforced by the Trustee without the possession of any of the Notes or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name and as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders in respect of which such judgment has been recovered.

 

SECTION 5.06.         Application of Money Collected. Any money or property collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest, upon presentation of the Notes and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid:

 

FIRST: To the payment of all amounts due the Trustee and the Agents and their respective agents and attorneys (including any predecessor Trustee or Agent) hereunder;

 

SECOND: To the payment of the amounts then due and unpaid for principal of (and premium, if any) and interest on the Notes in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Notes for principal (and premium, if any) and interest, respectively; and

 

THIRD: The balance, if any, to the Issuer or as a court of competent jurisdiction may direct in writing; provided that all sums due and owing to the Holders and the Trustee have been paid in full as required by this Indenture.

 

The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 5.06.

 

SECTION 5.07.         Limitation on Suits. Except to enforce the right to receive payment of principal, premium, if any, or interest when due, no Holder shall pursue any remedy with respect to this Indenture or the Notes, unless:

 

(1)         such Holder has previously given the Trustee written notice that an Event of Default is continuing;

 

(2)         Holders of at least 25% in aggregate principal amount of the total Outstanding Notes have requested the Trustee in writing to pursue the remedy;

 

(3)         Holders have offered and, if requested, provided to the Trustee indemnity or security reasonably satisfactory to the Trustee against any loss, liability or expense;

 

(4)         the Trustee has not complied with such request within 60 days after the receipt thereof and the offer of security or indemnity; and

 

(5)         Holders of a majority in aggregate principal amount of the total Outstanding Notes have not given the Trustee a direction inconsistent with such request within such 60-day period,

 

  

it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the Holders (it being further understood that the Trustee does not have an affirmative duty to ascertain whether or not such actions or forbearances are unduly prejudicial to such Holders).

 

SECTION 5.08.         Right of Holders to Bring Suit for Payment. Subject to Article Twelve and notwithstanding any other provision of this Indenture, the contractual right of any Holder of any outstanding Note to bring suit for the enforcement of any payment of principal of, premium, if any, and interest on such Note, on or after the respective due date expressed in such Note, shall not be impaired or affected without the consent of such Holder.

 

SECTION 5.09.         Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture or any Note Guarantee and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Issuer, any Guarantor, any other obligor of the Notes, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted.

 

SECTION 5.10.         Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes in the last paragraph of Section 3.06, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

 

SECTION 5.11.         Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Note to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be.

 

SECTION 5.12.         Control by Holders. The Holders of a majority in aggregate principal amount of the Outstanding Notes shall have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, or of exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow any direction that conflicts with law or this Indenture or that the Trustee determines is unduly prejudicial to the rights of any other Holder or would involve the Trustee in personal liability. The Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction.

 

SECTION 5.13.         Waiver of Past Defaults. Holders of a majority in aggregate principal amount of the then Outstanding Notes by notice to the Trustee may on behalf of the Holders of all the Notes waive any existing Default or Event of Default and its consequences under this Indenture (except (1) a continuing Default or Event of Default in the payment of interest on, premium, if any, or the principal of any such Note held by a non-consenting Holder, or (2) in respect of a covenant or provision hereof or in any Note Guarantee which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Note affected which shall require the consent of all Holders of the Notes) and rescind any acceleration and its consequences with respect to the Notes; provided such rescission would not conflict with any judgment of a court of competent jurisdiction.

 

  

Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon.

 

SECTION 5.14.         Waiver of Stay or Extension Laws. Each of the Issuer and any other obligor on the Notes covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and each of the Issuer and any other obligor on the Notes (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

 

SECTION 5.15.         Undertaking for Costs.

 

In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorney’s fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 5.15 does not apply to a suit by the Trustee, a suit by a Holder relating to right to payment hereof, or a suit by Holders of more than 10% in principal amount of the then Outstanding Notes.

 

Article Six

THE TRUSTEE

 

SECTION 6.01.         Duties of the Trustee.

 

(a)          Except during the continuance of an Event of Default,

 

(1)         the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

 

(2)         in the absence of gross negligence or willful misconduct on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions specifically required by any provision hereof to be provided to it, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture, but not to verify the contents thereof including the accuracy of any mathematical calculations.

 

  

(b)          If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the degree of care of a prudent Person under the circumstances in the conduct of such Person’s own affairs.

 

(c)          No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that

 

(1)         this paragraph (c) shall not be construed to limit the effect of paragraph (a) of this Section;

 

(2)         the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved in a court of competent jurisdiction that the Trustee was negligent in ascertaining the pertinent facts;

 

(3)         the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of a majority in aggregate principal amount of the Outstanding Notes relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture; and

 

(4)         No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers vested in it by this Indenture, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

 

(d)          Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section.

 

SECTION 6.02.         Notice of Defaults. Within 90 days after the occurrence of any Default or Event of Default hereunder is actually known to the Trustee, the Trustee shall transmit to the Holders notice of such Default or Event of Default hereunder known to the Trustee, unless such Default or Event of Default shall have been cured or waived; provided that, except in the case of a Default or Event of Default in the payment of the principal of (or premium, if any, on) or interest on any Note, the Trustee shall be protected in withholding such notice if and so long as the Trustee in good faith determines that the withholding of such notice is in the best interest of the Holders.

 

SECTION 6.03.         Certain Rights of Trustee.

 

(1)         The Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document (whether in original or facsimile form) believed by it to be genuine and to have been signed or presented by the proper party or parties.

 

(2)         Before the Trustee acts or refrains from acting, it may require an Officer’s Certificate or an Opinion of Counsel, or both. The Trustee will not be liable for any action it takes or omits to take in good faith reliance on such Officer’s Certificate or Opinion of Counsel.

 

  

(3)         Any request or direction of the Issuer mentioned herein shall be sufficiently evidenced by an Issuer Request or Issuer Order and any resolution of the Board may be sufficiently evidenced by a Board Resolution certified by the Secretary or an Assistant Secretary of the Issuer to have been duly adopted by the Board of the Issuer and to be in full force and effect on the date of such certification, and delivered to the Trustee.

 

(4)         Whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, conclusively rely upon an Officer’s Certificate or Opinion of Counsel.

 

(5)         The Trustee shall not be charged with knowledge of any fact, Default or Event of Default with respect to the Notes unless a Responsible Officer has actual knowledge of such or unless written notice of such fact, Default or Event of Default shall have been received by a Responsible Officer from the Issuer, any other obligor of the Notes or from Holders of at least 25% of the aggregate principal amount of the Notes and references this Indenture and the Notes. Delivery of any reports to the Trustee pursuant to Section 10.09 is for informational purposes only and the Trustee’s receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Issuer’s compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officer’s Certificates).

 

(6)         The Trustee may consult with counsel of its own selection and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with the advice or opinion of such counsel or Opinion of Counsel.

 

(7)         The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee security and indemnity reasonably satisfactory to it against any loss, liability or expense.

 

(8)         The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, or inquire as to the performance by the Issuer of any of its covenants in this Indenture or inquire as to the performance by the Issuer of any of its covenants in this Indenture, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Issuer, personally or by agent or attorney at the expense of the Issuer and shall incur no liability of any kind by reason of such inquiry or investigation.

 

(9)         The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder.

 

  

(10)        The Trustee shall not be liable for any action taken, suffered or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture.

 

(11)        The rights, privileges, protections, immunities and benefits given to the Trustee hereunder and under the Notes, including its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder whether as an Agent or otherwise, and each agent, custodian and other Person employed to act hereunder.

 

(12)        The Trustee may request that the Issuer deliver an Incumbency Certificate substantially in the form of Exhibit A hereto setting forth the names of individuals or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Incumbency Certificate may be signed by any person authorized to sign an Officer’s Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded.

 

(13)        The Trustee shall not be required to give any note, bond or surety in respect of the execution of the trusts and powers under this Indenture.

 

(14)        In no event shall the Trustee be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its reasonable control, including, without limitation, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunction of utilities, third-party communications or computer (software and hardware) services; it being understood that the Trustee shall use reasonable efforts which are consistent with accepted practices to resume performance as soon as practicable under the circumstances.

 

(15)        In no event shall the Trustee be responsible or liable for special, indirect, punitive or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.

 

(16)        The permissive right of the Trustee to take actions permitted by this Indenture shall not be construed as an obligation or duty to do so.

 

(17)        The Trustee shall have no duty to monitor, inquire as to or ascertain compliance with the Issuer’s covenants set forth herein, other than with respect to payments described in Section 10.01.

 

(18)        The Trustee may retain and act through agents in connection with the administration of this Indenture and shall have no liability or responsibility for the action or inaction of any agent appointed in good faith.

 

SECTION 6.04.         Trustee Not Responsible for Recitals or Issuance of Notes. The recitals contained herein and in the Notes, except for the Trustee’s certificates of authentication, shall be taken as the statements of the Issuer, and neither the Trustee nor any Agent assumes responsibility for their correctness. Neither the Trustee nor any Agent makes representations as to the validity or sufficiency of this Indenture or of the Notes, except that the Trustee represents that it is duly authorized to execute and deliver this Indenture, authenticate the Notes and perform its obligations hereunder. Neither the Trustee nor any Agent shall be accountable for the use or application by the Issuer of Notes or the proceeds thereof or any other documents used in connection with the sale or distribution of the Notes.

 

  

SECTION 6.05.         May Hold Notes. The Trustee, any Paying Agent, any Note Registrar or any other agent of the Issuer or of the Trustee, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Issuer with the same rights it would have if it were not the Trustee, Paying Agent, Note Registrar or such other agent; provided, that, if it acquires any conflicting interest (as such term is defined in the Trust Indenture Act), it must eliminate such conflict within 90 days, apply to the SEC for permission to continue or resign as Trustee.

 

SECTION 6.06.         Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Issuer.

 

SECTION 6.07.         Compensation and Reimbursement. The Issuer agrees:

 

(1)         to pay to the Trustee from time to time such compensation as shall be agreed in writing between the Issuer and the Trustee for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust);

 

(2)         except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as shall be determined to have been caused by its own gross negligence or willful misconduct; and

 

(3)         to indemnify the Trustee, and any predecessor Trustee for, and to hold it harmless against, any and all loss, liability, claim, damage or expense, including taxes (other than the taxes based on the income of the Trustee) incurred without gross negligence or willful misconduct on its part, arising out of or in connection with the acceptance or administration of this trust, including the reasonable costs and expenses of defending itself against any claim regardless of whether the claim is asserted by the Issuer, any Guarantor, a Holder or any other Person or liability in connection with the exercise or performance of any of its powers or duties hereunder, including the reasonable costs and expenses of enforcing this Indenture or any Note Guarantee against the Issuer or any Guarantor (including this Section 6.07).

 

The obligations of the Issuer under this Section to compensate the Trustee, to pay or reimburse the Trustee for expenses, disbursements and advances and to indemnify and hold harmless the Trustee shall constitute additional indebtedness hereunder and shall survive the satisfaction and discharge of this Indenture and resignation or removal of the Trustee. As security for the performance of such obligations of the Issuer, the Trustee shall have a lien prior to the Notes upon all property and funds held or collected by the Trustee as such, except funds held in trust solely for the benefit of the Holders entitled thereto for the payment of principal of (and premium, if any) or interest on particular Notes.

 

  

Without prejudice to any other rights available to the Trustee under applicable law, when the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 5.01(6), the expenses (including the reasonable charges and expenses of its counsel) of and the compensation for such services are intended to constitute expenses of administration under any applicable Bankruptcy Law. “Trustee” for the purposes of this Section 6.07 shall include any predecessor Trustee and the Trustee in each of its capacities hereunder and each Agent, any other agent, custodian and other person employed to act hereunder as permitted by this Indenture; provided, however, that the gross negligence or willful misconduct of any predecessor Trustee hereunder shall not affect the rights of any other successor Trustee hereunder (other than a successor Trustee that is successor by merger or consolidation to such predecessor Trustee).

 

The provisions of this Section shall survive the satisfaction and discharge of this Indenture and resignation or removal of the Trustee (or any Agent, as applicable).

 

SECTION 6.08.         Corporate Trustee Required; Eligibility. There shall be at all times a Trustee hereunder which shall be eligible to act as Trustee under TIA Section 310(a)(1) and shall be a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power and that is subject to supervision or examination by U.S. federal or state authorities. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of federal, State, territorial or District of Columbia supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article.

 

SECTION 6.09.         Resignation and Removal; Appointment of Successor.

 

(a)          No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 6.10.

 

(b)          The Trustee may resign at any time by giving 30 days’ prior written notice thereof to the Issuer. Upon receiving such notice of resignation, the Issuer shall promptly appoint a successor trustee by written instrument, a copy of which shall be delivered to the resigning Trustee and a copy to the successor Trustee. If the instrument of acceptance by a successor Trustee required by Section 6.10 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition, at the expense of the Issuer, any court of competent jurisdiction for the appointment of a successor Trustee.

 

(c)          The Trustee may be removed at any time by Act of the Holders of not less than a majority in principal amount of the Outstanding Notes, delivered to the Trustee and to the Issuer 30 days prior to the removal’s effectiveness. If the instrument of acceptance by a successor Trustee required by Section 6.10 shall not have been delivered to the Trustee within 30 days after the giving of such notice of removal, the Trustee being removed may petition, at the expense of the Issuer, any court of competent jurisdiction for the appointment of a successor Trustee.

 

(d)          If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Issuer shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Notes delivered to the Issuer and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed by the Issuer. If no successor Trustee shall have been so appointed by the Issuer or the Holders and accepted appointment in the manner hereinafter provided, the Trustee or any Holder who has been a bona fide Holder of a Note for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee.

 

  

(e)          the Issuer shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee to the Holders in the manner provided for in Section 1.07. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office.

 

SECTION 6.10.         Acceptance of Appointment by Successor.

 

(a)          Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Issuer and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on request of the Issuer or the successor Trustee, such retiring Trustee shall, upon payment of its charges and subject to its lien, if any, provided for in Section 6.07, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. Upon request of any such successor Trustee, the Issuer shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts.

 

(b)          No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be eligible under this Article and the resigning or removed Trustee shall have no liability or responsibility for the action or inaction of any successor Trustee.

 

SECTION 6.11.         Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder; provided such corporation shall be otherwise eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Notes shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Notes so authenticated with the same effect as if such successor Trustee had itself authenticated such Notes. In case at that time any of the Notes shall not have been authenticated, any successor Trustee may authenticate such Notes either in the name of any predecessor hereunder or in the name of the successor Trustee. In all such cases such certificates shall have the full force and effect which this Indenture provides for the certificate of authentication of the Trustee shall have; provided that, the right to adopt the certificate of authentication of any predecessor Trustee or to authenticate Notes in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation.

 

SECTION 6.12.         Appointment of Authenticating Agent. At any time when any of the Notes remain Outstanding, the Trustee may appoint one or more agents (each an “Authenticating Agent”) with respect to the Notes which shall be authorized to act on behalf of the Trustee to authenticate Notes and the Trustee shall give written notice of such appointment to all Holders of Notes with respect to which such Authenticating Agent will serve, in the manner provided for in Section 1.07. Notes so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Any such appointment shall be evidenced by an instrument in writing signed by an authorized signatory of the Trustee, and a copy of such instrument shall be promptly furnished to the Issuer. Wherever reference is made in this Indenture to the authentication and delivery of Notes by the Trustee or the Trustee’s certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Issuer.

 

  

Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to all or substantially all the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent; provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent.

 

An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Issuer. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Issuer. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Issuer and shall give written notice of such appointment to all Holders of Notes, in the manner provided for in Section 1.07. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section.

 

The Issuer agrees to pay to each Authenticating Agent from time to time such compensation for its services under this Section as shall be agreed in writing between the Issuer and such Authenticating Agent.

 

If an appointment is made pursuant to this Section, the Notes may have endorsed thereon, in addition to the Trustee’s certificate of authentication, an alternate certificate of authentication in the following form:

 

This is one of the Notes referred to in the within-mentioned Indenture.

 

	GLAS Trust Company LLC,
	as Trustee
Date: ___________________	By:
		as Authenticating Agent
	By:
		Authorized Signatory

 

  

Article Seven

HOLDERS LISTS AND REPORTS BY TRUSTEE AND ISSUER

 

SECTION 7.01.         Issuer to Furnish Trustee Names and Addresses. The Issuer will furnish or cause to be furnished to the Trustee:

 

(1)         semiannually, not more than 10 days after each Regular Record Date, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of such Regular Record Date; and

 

(2)         at such other times as the Trustee may reasonably request in writing, within 30 days after receipt by the Issuer of any such request, a list of similar form and content to that in clause (1) hereof as of a date not more than 15 days prior to the time such list is furnished;

 

provided that, if and so long as the Trustee shall be a Note Registrar, no such list need be furnished.

 

SECTION 7.02.         Reports by Trustee.

 

Within 60 days after December 31 of each year commencing with December 31, 2018, the Trustee shall transmit to the Holders of Notes (with a copy to the Issuer at the address specified in Section 1.06), in the manner and to the extent provided in TIA Section 313(c), a brief report dated as of such December 31 that complies with TIA Section 313(a), if so required by that Section. The Trustee also shall comply with TIA Section 313(b). A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange, if any, upon which the Notes are listed, with the SEC to the extent the Notes are registered, and with the Issuer. The Issuer will promptly notify the Trustee in writing when the Notes are listed on any stock exchange and any delisting thereof.

 

Article Eight

MERGER, CONSOLIDATION, AMALGAMATION OR SALE
OF ALL OR SUBSTANTIALLY ALL ASSETS

 

SECTION 8.01.         Issuer and Restricted Parties May Consolidate, Etc., Only on Certain Terms. The Issuer will not, and will not permit any Restricted Party to, wind up, liquidate or dissolve its affairs or enter into any transaction of merger or consolidation, except that the following shall be permitted:

 

(a)          disposition of assets in compliance with Section 10.17 of this Indenture;

 

(b)          any Solvent Restricted Party may merge or consolidate with or into the Issuer or another Restricted Party (so long as, (i) in the event the Operating Company is a party to such merger or consolidation, the Operating Company shall be the surviving person, and (ii) in any other case, a Restricted Subsidiary shall be the surviving person and shall remain, directly or indirectly, a Wholly-Owned Restricted Subsidiary of the Operating Company);

 

(c)          any Restricted Party may dissolve, liquidate or wind up its affairs at any time if such dissolution, liquidation or winding up would not reasonably be expected to be disadvantageous to the Holders in any material respect; and

 

  

(d)          Permitted Acquisitions as defined under the Senior Credit Agreement.

 

Article Nine

SUPPLEMENTAL INDENTURES

 

SECTION 9.01.         Amendments or Supplements Without Consent of Holders. The Issuer and the Trustee, without the consent of any Holder, may amend the Notes and this Indenture for any of the following purposes:

 

(1)         to cure any ambiguity, omission, mistake, defect or inconsistency;

 

(2)         to provide for uncertificated Notes in addition to or in place of certificated Notes;

 

(3)         to comply with Article Eight of this Indenture;

 

(4)         to provide for the assumption of the Issuer’s obligations to the Holders pursuant to the terms of this Indenture;

 

(5)         to make any change that would provide any additional rights or benefits to the Holders or that does not adversely affect the legal rights under this Indenture of any such Holder in any material respect;

 

(6)         to add covenants for the benefit of the Holders or to surrender any right or power conferred upon the Issuer;

 

(7)         to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act, if applicable;

 

(8)         to evidence and provide for the acceptance and appointment under this Indenture of a successor Trustee or a successor Paying Agent under this Indenture;

 

(9)         to add any Guarantor or a co-obligor of the Notes under this Indenture;

 

(10)        to make any amendment to the provisions of this Indenture relating to the transfer and legending of Notes as permitted by this Indenture, including, without limitation, to facilitate the issuance and administration of the Notes; provided, however, that such amendment does not materially and adversely affect the rights of Holders to transfer Notes;

 

(11)        to secure the Notes and/or any related Note Guarantee;

 

(12)        to release a Guarantor, if any, from its Note Guarantee pursuant to this Indenture when permitted or required by this Indenture;

 

(13)        to release and discharge any Lien securing the Notes when permitted by this Indenture (including pursuant to the second paragraph of Section 10.12); and

 

(14)        to comply with the rules of any applicable securities depositary.

 

  

SECTION 9.02.         Amendments, Supplements or Waivers with Consent of Holders.

 

(a)          With the consent of the Holders of at least a majority in aggregate principal amount of the then Outstanding Notes, other than Notes beneficially owned by the Issuer or its Affiliates, including consents or waivers obtained in connection with a purchase of, or tender offer or exchange offer for, the Notes, the Issuer, any Guarantor (with respect to any Note Guarantee to which it is a party or this Indenture) and the Trustee may amend or supplement this Indenture, the Notes or any Note Guarantee, and any existing Default or Event of Default or compliance with any provision of this Indenture, the Notes or any Note Guarantee may be waived; provided that, without the consent of each affected Holder, no such amendment, supplement or waiver shall, with respect to any Notes held by a non-consenting Holder:

 

(1)         reduce the principal amount of such Notes whose Holders must consent to an amendment, supplement or waiver;

 

(2)         reduce the principal of or change the Maturity of any such Note or reduce the premium payable upon the redemption of such Notes or change the time at which such Notes may be redeemed pursuant to Section 11.01; provided that any amendment to the minimum notice requirement may be made with the consent of the Holders of a majority in aggregate principal amount of the then Outstanding Notes;

 

(3)         reduce the rate of or change the time for payment of interest on any Note,

 

(4)         waive a Default or Event of Default in the payment of principal of or premium, if any, or interest on the Notes, except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Outstanding Notes and a waiver of the payment default that resulted from such acceleration, or in respect of a covenant or provision contained in this Indenture or any Note Guarantee which cannot be amended or modified without the consent of all affected Holders;

 

(5)         make any Note payable in money other than that stated therein;

 

(6)         make any change in Section 5.13 or the rights of Holders to receive payments of principal of or premium, if any, or interest on the Notes;

 

(7)         make any change in these amendment and waiver provisions;

 

(8)         amend the contractual right expressly set forth in this Indenture or any Note of any Holder to institute suit for the enforcement of any payment of principal, premium, if any, and interest on such Holder’s Notes on or after the due dates therefor; or

 

(9)         make any change to or modify the ranking of the Notes that would adversely affect the Holders.

 

(b)          It shall not be necessary for the consent of Holders under this Section 9.02 to approve the particular form of any proposed amendment or waiver, and it shall be sufficient if such consent approves the substance thereof.

 

  

SECTION 9.03.         Execution of Amendments, Supplements or Waivers. In executing, or accepting the additional trusts created by, any amendment, supplement or waiver permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be provided with, and shall be fully protected in relying upon, an Officer’s Certificate and Opinion of Counsel stating that the execution of such amendment, supplement or waiver is authorized and permitted by this Indenture and that such amendment, supplement or waiver is the legal, valid and binding obligation of the Issuer and any Guarantors party thereto, enforceable against them in accordance with its terms, subject to customary exceptions and qualifications, and complies with the provisions hereof. Guarantors may, but shall not be required to, execute supplemental indentures that do not modify such Guarantor’s Note Guarantee. The Trustee may, but shall not be obligated to, enter into any such amendment, supplement or waiver which affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise.

 

SECTION 9.04.         Effect of Amendments, Supplements or Waivers. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such amendment, supplement or waiver shall form a part of this Indenture for all purposes; and every Holder of Notes theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.

 

SECTION 9.05.         Reference in Notes to Supplemental Indentures. Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Issuer shall so determine, new Notes so modified as to conform, in the opinion of the Trustee and the Issuer, to any such supplemental indenture may be prepared and executed by the Issuer and authenticated and delivered by the Trustee in exchange for Outstanding Notes.

 

SECTION 9.06.         Notice of Supplemental Indentures. Promptly after the execution by the Issuer, any Guarantor and the Trustee of any supplemental indenture pursuant to the provisions of Section 9.02, the Issuer shall give notice thereof to the Holders of each Outstanding Note affected, in the manner provided for in Section 1.07, setting forth in general terms the substance of such supplemental indenture; provided that failure to give such notice shall not impair the validity of such supplemental indenture.

 

Article Ten

COVENANTS

 

SECTION 10.01.         Payment of Principal, Premium, if any, and Interest. The Issuer covenants and agrees for the benefit of the Holders that it will duly and punctually pay the principal of (and premium, if any) and interest on the Notes in accordance with the terms of the Notes and this Indenture. The Issuer shall pay interest on overdue principal at the rate specified therefor in the Notes, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful.

 

SECTION 10.02.         Maintenance of Office or Agency. The Issuer will maintain in The City of New York, an office or agency where Notes may be presented or surrendered for payment, where Notes may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Issuer in respect of the Notes and this Indenture may be served. The designated office of the Trustee shall be such office or agency of the Issuer in The City of New York, unless the Issuer shall designate and maintain some other office or agency for one or more of such purposes. The Issuer will give prompt written notice to the Trustee of any change in the location of such office or agency. If at any time the Issuer shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Issuer hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands.

 

  

The Issuer may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind any such designation; provided, that no such designation or rescission shall in any manner relieve the Issuer of its obligation to maintain an office or agency in The City of New York. The Issuer will give prompt written notice to the Trustee of any such designation or rescission and any change in the location of any such other office or agency.

 

SECTION 10.03.         Money for Notes Payments to Be Held in Trust. If the Issuer shall at any time act as its own Paying Agent, it will, on or before each due date of the principal of (or premium, if any) or interest on any of the Notes, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal of (or premium, if any) or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee in writing of its action or failure so to act.

 

Whenever the Issuer shall have one or more Paying Agents for the Notes, it will, on or before each due date of the principal of (or premium, if any) or interest on any Notes in accordance with Section 10.01, deposit with a Paying Agent a sum sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Issuer will promptly notify the Trustee in writing of such action or any failure so to act.

 

Each Paying Agent agrees:

 

(1)         that it will hold all sums received by it as Paying Agent for the payment of the principal of or interest on any Notes in trust for the benefit of the Holders or of the Trustee;

 

(2)         that it will give the Trustee notice of any failure by the Issuer to make any payment of the principal of or interest on any Notes and any other payments to be made by or on behalf of the Issuer under this Indenture or the Notes when the same shall be due and payable; and

 

(3)         that it will pay any such sums so held in trust by it to the Trustee forthwith upon the Trustee’s written request at any time during the continuance of the failure referred to in clause (2) above.

 

The Issuer may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Issuer Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Issuer or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Issuer or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such sums.

 

Any money deposited with the Trustee or any Paying Agent, or then held by the Issuer, in trust for the payment of the principal of (or premium, if any) or interest on any Note and remaining unclaimed for two years after such principal, premium or interest has become due and payable shall be paid to the Issuer on Issuer Request or (if then held by the Issuer) shall be discharged from such trust; and the Holder of such Note shall thereafter, as an unsecured general creditor, look only to the Issuer for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Issuer as trustee thereof, shall thereupon cease; provided, that the Issuer shall cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the Borough of Manhattan, The City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Issuer.

 

  

SECTION 10.04.         Organizational Existence. Subject to Article Eight, the Issuer will do or cause to be done all things necessary to preserve and keep in full force and effect its organizational existence and that of each Restricted Party and the rights and franchises of the Issuer and each Restricted Party to conduct business; provided, that the Issuer shall not be required to preserve any such right or franchise if the Board of the Issuer shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Issuer and its Subsidiaries, taken as a whole. For the avoidance of doubt, the Issuer and the Restricted Parties will be permitted to change their organizational form; provided that for so long as the Issuer is not a corporation, there will be a co-issuer of the Notes that is a corporation.

 

SECTION 10.05.         Payment of Taxes and Other Claims. The Issuer will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (1) all material taxes, assessments and governmental charges levied or imposed upon the Issuer or any Subsidiary or upon the income, profits or property of the Issuer or any Subsidiary and (2) all material lawful claims for labor, materials and supplies, which, if unpaid, might by law become a lien upon the property of the Issuer or any Subsidiary; provided, that the Issuer shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings and for which appropriate reserves, if necessary (in the good faith judgment of management of the Issuer) are being maintained in accordance with GAAP.

 

SECTION 10.06.         Net Worth Maintenance. The Issuer shall not permit its Net Worth to be less than $600,000,000 at any time.

 

SECTION 10.07.         No Adverse Amendment. The Issuer shall not, and shall cause each Restricted Party not to, directly or indirectly, amend or modify, or permit the amendment or modification of, any provision of the Senior Credit Agreement (as in effect on the Issue Date after giving effect to the Second Amendment thereto, but without giving effect to further amendments or modifications) (including any waivers thereunder) in any manner that is, or would reasonably be expected to be, adverse in any material respect to the interests of any Holder, including (i) any provision that may prohibit or restrict the Stated Maturity of the Notes, (ii) interest rate payable thereunder and (iii) Sections 2.10(b), 5.10, 5.11, 5.17, 6.04, 6.05, 6.06, 6.07, 6.08, 6.09, 6.10, 6.14 and 6.15 thereof.

 

SECTION 10.08.         Statement by Officer as to Default.

 

(a)          The Issuer will deliver to the Trustee within 120 days after the end of each fiscal year, an Officer’s Certificate stating that a review of the activities of the Issuer and the Restricted Parties during the preceding fiscal year has been made under the supervision of the signing officer with a view to determining whether it has kept, observed, performed and fulfilled, and has caused each of the Restricted Parties to keep, observe, perform and fulfill its obligations under this Indenture and further stating that, to the best of his or her knowledge, the Issuer during such preceding fiscal year has kept, observed, performed and fulfilled, and has caused each of the Restricted Parties to keep, observe, perform and fulfill each and every such covenant contained in this Indenture and no Default or Event of Default occurred during such year and at the date of such certificate there is no Default or Event of Default which has occurred and is continuing or, if such signers do know of such Default or Event of Default, the certificate shall describe its status, with particularity and that, to the best of his or her knowledge, no event has occurred and remains by reason of which payments on the account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action each is taking or proposes to take with respect thereto. The Officer’s Certificate shall also notify the Trustee should the Issuer elect to change the manner in which it fixes its fiscal year-end. For purposes of this Section 10.08(a), such compliance shall be determined without regard to any period of grace or requirement of notice under this Indenture.

 

  

(b)          When any Default has occurred and is continuing under this Indenture, the Issuer shall deliver to the Trustee by registered or certified mail or facsimile transmission an Officer’s Certificate specifying such event, notice or other action within 30 days of becoming aware of such Default and the steps to be taken to cure such Default.

 

SECTION 10.09.         Reports and Other Information.

 

(a)          Whether or not required by the rules and regulations of the SEC, so long as any Notes are outstanding, the Issuer shall provide to the Holders and the Trustee (i) copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may from time to time by rules and regulations prescribe) that the Issuer would be required to file with the SEC pursuant to Section 13 or Section 15(d) of the Exchange Act and (ii) cash and cash equivalents balance for each of the Issuer and the Operating Company, separately, for each quarterly and annual reporting period. The Issuer shall be deemed to have complied with the previous sentence to the extent that such information, documents and reports are filed with the SEC via EDGAR, or any successor electronic delivery procedure.

 

(b)          In addition, the Issuer shall furnish to prospective investors, upon their request, any information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act so long as the Notes are not freely transferable under the Securities Act.

 

(c)          To the extent any information is not provided within the time periods specified in this Section 10.09 and such information is subsequently provided, the Issuer shall be deemed to have satisfied its obligations with respect thereto at such time and any Default with respect thereto shall be deemed to have been cured.

 

(d)          The Trustee shall have no liability or responsibility for the filing, delivery, timeliness or content of any report required or delivered hereunder or in connection herewith (other than any report required under Section 7.02 hereof).

 

SECTION 10.10.         Limitation on Restricted Payments. The Issuer shall not directly:

 

(I)         declare or pay any dividend or make any payment or distribution on account of the Issuer’s Equity Interests, including any dividend or distribution payable in connection with any merger, amalgamation or consolidation other than dividends, payments or distributions by the Issuer payable solely in Equity Interests (other than Disqualified Stock) of the Issuer or in options, warrants or other rights to purchase such Equity Interests (other than Disqualified Stock);

 

(II)        redeem, purchase, repurchase, defease or otherwise acquire or retire for value any Equity Interests of the Issuer, including in connection with any merger, amalgamation or consolidation, in each case, held by a Person other than the Issuer;

 

  

(III)       make any principal payment on, or redeem, purchase, repurchase, defease, discharge or otherwise acquire or retire for value, in each case, prior to any scheduled repayment, sinking fund payment or maturity, any Junior Subordinated Indebtedness, other than the prepayment, redemption, purchase, repurchase, defeasance, discharge or other acquisition or retirement of Junior Subordinated Indebtedness in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of prepayment, redemption, purchase, repurchase, defeasance, discharge or acquisition or retirement;

 

(IV)        make any Investments, other than (a) Investments into the Operating Company; provided, that such Investment made with the proceeds of a debt issuance of the Issuer shall only be permitted to the extent it increases the Operating Company’s capacity to make distributions or dividend payments to the Issuer pursuant to any existing and future agreement or arrangement from time to time that restricts or prohibits the Operating Company to do so, including, but not limited to, the Senior Credit Agreement, (b) so long as no Event of Default then exists or would result therefrom, cash Investments in Subsidiaries for the purposes of or in connection with the winding down or liquidation of such Subsidiaries in an aggregate amount not to exceed $5,000,000 from the Issue Date, and (c) Investments existing on the Issue Date;

 

(all such payments and other actions set forth in clauses (I) through (IV) above (other than any exceptions thereto) being collectively referred to as “Restricted Payments”), unless, at the time of such Restricted Payment:

 

(1)         no Event of Default shall have occurred and be continuing or would occur as a consequence thereof; and

 

(2)         such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Issuer after the Issue Date is less than:

 

(a)          for the period beginning on the Issue Date until December 31, 2018, 50% of the Consolidated Net Income of the Issuer since the Issue Date at the time of such Restricted Payment, or, in the case such Consolidated Net Income for such period is a deficit, minus 100% of such deficit, or

 

(b)          for the period beginning on January 1, 2019 and thereafter, the greater of (x) $5.0 million per calendar year (unused amounts of which shall not be carried forward to the next calendar year) or (y) 50% of the Consolidated Net Income of the Issuer since the Issue Date at the time of such Restricted Payment, or, in the case such Consolidated Net Income for such period is a deficit, minus 100% of such deficit;

 

provided, that amounts permitted under foregoing clauses (a) and (b) shall not be duplicative.

 

The amount of all Restricted Payments (other than cash) will be the Fair Market Value on the date of the Restricted Payment of the assets or securities proposed to be transferred or issued by the Issuer pursuant to the Restricted Payment.

 

SECTION 10.11.         Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock.

 

(a)          The Issuer shall not, and shall not permit any Restricted Party to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise (collectively, “incur” and collectively, an “incurrence”) with respect to any Indebtedness and the Issuer shall not issue any shares of Disqualified Stock and shall not permit any Restricted Party to issue any shares of Disqualified Stock or any Restricted Party to issue Preferred Stock.

 

  

(b)          The foregoing limitations shall not apply to the following, without duplication:

 

(1)         Indebtedness of the Issuer and the Restricted Parties (x) in existence on the Issue Date and (y) incurred in connection with the Senior Credit Facilities;

 

(2)         Indebtedness of the Issuer and the Restricted Parties contemplated to be incurred in connection with the Transactions;

 

(3)         Indebtedness that is secured by a Lien in respect of Purchase Money Obligations incurred for the purpose of financing all or any part of the purchase price of Vessels or Chartered Vessels of the Issuer and the Restricted Parties, in an aggregate principal amount not to exceed $162,500,000 from the Issue Date; provided, that such Indebtedness has an amortization schedule no less restrictive and bears interest at a rate or spread no greater than as provided in the Senior Credit Agreement;

 

(4)         Permitted Refinancing Indebtedness;

 

(5)         additional amount of the Existing Notes issued pursuant to the option granted on May 24, 2018 by the Issuer to the underwriters of the offering of the Existing Notes, in an aggregate principal amount not to exceed $5,000,000;

 

(6)         Indebtedness under Hedging Obligations under Permitted Hedging Agreements, in each case entered into in the ordinary course of business and not for speculative purposes; provided, that if such Hedging Obligations relate to interest rates, (i) such Hedging Obligations relate to payment obligations on Indebtedness otherwise permitted to be incurred hereunder and (ii) the notional principal amount of such Hedging Obligations at the time incurred does not exceed the principal amount of the Indebtedness to which such Hedging Obligations relate;

 

(7)         Indebtedness in respect of bid, performance, customs or surety bonds issued for the account of the Issuer or any Restricted Party in the ordinary course of business, including guarantees or obligations of the Issuer or any Restricted Party with respect to letters of credit supporting such bid, performance, customs or surety obligations (in each case other than for an obligation for borrowed money), in an aggregate amount not to exceed $5,000,000 at any time outstanding;

 

(8)         Contingent Obligations (i) (x) of the Issuer in respect of Indebtedness of any Restricted Party and (y) of any Restricted Party in respect of Indebtedness of the Issuer or any other Restricted Party, in each case, to the extent that such Indebtedness is otherwise permitted to be incurred pursuant to this Section 10.11 (other than clause (i) of this Section 10.11(b)); provided, that if the Indebtedness to be guaranteed is subordinated to the Notes, then the guarantees permitted under this clause (8) shall be subordinated to the Notes to the same extent and on the same terms as the Indebtedness so guaranteed is subordinated to the Notes, and (ii) of the Issuer in respect of ordinary course commercial operations or charters relating to Vessels; provided, that obligations for borrowed money shall be excluded from this clause (ii);

 

(9)         Indebtedness arising in connection with endorsement of instruments for deposit in the ordinary course of business;

 

  

(10)        Indebtedness consisting of the financing of insurance premiums in the ordinary course of business;

 

(11)        Attributable Indebtedness permitted to be incurred under Section 10.15 hereof with respect to Sale and Leaseback Transactions;

 

(12)        Indebtedness of the Issuer or any Restricted Party in an aggregate principal amount not to exceed $5,000,000 at any time outstanding;

 

(13)        Indebtedness incurred in relation to (i) maintenance, repairs, refurbishments and replacements required to maintain the classification of any of the Vessels or Chartered Vessels owned, leased, time chartered or bareboat chartered to or by the Issuer or any Restricted Party in the ordinary course of business, (ii) dry-docking of any of the Vessels or Chartered Vessels owned or leased by the Issuer or any Restricted Party for maintenance, repair, refurbishment or replacement purposes in the ordinary course of business and (iii) Vessel or Chartered Vessel amendments or modifications required to allow worldwide trading and commercial acceptance by any potential charterer, in each case as required by any change after the Issue Date in applicable law or regulation;

 

(14)        Indebtedness consisting of Pool Financing Indebtedness in an aggregate principal amount not to exceed $75,000,000 at any time outstanding (which amount, for the avoidance of doubt, shall include the principal amount of all Indebtedness of the Issuer or any Restricted Party in respect of such Pool Financing Indebtedness for which it is liable, whether on a several basis, or on a joint and several basis with any other Person);

 

(15)        Indebtedness of the Issuer owing to a Restricted Party; provided, that any subsequent issuance or transfer of any Capital Stock or any other event which results in any such Restricted Party ceasing to be a Restricted Party or any other subsequent transfer of any such Indebtedness (except to the Issuer or another Restricted Party or any pledge of such Indebtedness constituting a Permitted Lien (but not foreclosure thereon)) shall be deemed, in each case, to be an incurrence of such Indebtedness (to the extent such Indebtedness is then outstanding) not permitted by this clause;

 

(16)        Indebtedness of a Restricted Party owing to the Issuer or another Restricted Party; provided, that any subsequent transfer of any such Indebtedness (except to the Issuer or another Restricted Party or any pledge of such Indebtedness constituting a Permitted Lien (but not foreclosure thereon)) shall be deemed, in each case, to be an incurrence of such Indebtedness (to the extent such Indebtedness is then outstanding) not permitted by this clause;

 

(17)        Indebtedness (i) resulting from a bank or other financial institution honoring a check, draft or similar instrument in the ordinary course of business or (ii) arising under or in connection with cash management services in the ordinary course of business; and

 

(18)        Indebtedness owed to any Person providing workers’ compensation, health, disability or other employee benefits or property, casualty or liability insurance, pursuant to reimbursement or indemnification obligations to such Person, in each case incurred in the ordinary course of business.

 

SECTION 10.12.         Liens. The Issuer shall not, and shall not permit any Restricted Party to, directly or indirectly, create, incur, assume or suffer to exist any Lien (except Permitted Liens) (each, a “Subject Lien”) that secures Obligations under any Indebtedness on any asset or property of the Issuer or any Restricted Party, unless the Notes are equally and ratably secured with (or, at the Issuer’s option or if such Subject Lien secures Junior Subordinated Indebtedness, on a senior basis to) the Obligations secured by such Subject Lien.

 

  

Any Lien created for the benefit of the Holders pursuant to the preceding paragraph shall provide by its terms that such Lien shall be automatically and unconditionally released and discharged upon the release and discharge of the Subject Lien that gave rise to the obligation to secure the Notes. In addition, in the event that a Subject Lien is or becomes a Permitted Lien, the Issuer may, at its option and without consent from any Holder, elect to release and discharge any Lien created for the benefit of the Holders pursuant to the preceding paragraph in respect of such Subject Lien.

 

SECTION 10.13.         Limitations on Transactions with Affiliates. The Issuer shall not, and shall not permit any Restricted Party to, enter into, directly or indirectly, any transaction or series of related transactions, whether or not in the ordinary course of business, with any Affiliate of the Issuer or any Restricted Party (an “Affiliate Transaction”), other than on terms and conditions at least as favorable to the Issuer or such Restricted Party as would reasonably be obtained by the Issuer or such Restricted Party at that time in a comparable arm’s-length transaction with a person other than an Affiliate, except that the following shall be permitted:

 

(a)          transactions between or among the Issuer and a Restricted Party or between or among Restricted Party or, in any case, any entity that becomes a Restricted Party as a result of such transaction;

 

(b)          Restricted Payments permitted under this Indenture;

 

(c)          reasonable and customary director, officer and employee compensation (including bonuses) and other benefits (including retirement, health, stock option and other benefit plans) and indemnification arrangements; and

 

(d)          the Transactions and the payment of all fees and expenses related to the Transactions.

 

SECTION 10.14.         Limitations on Dividend and Other Payment Restrictions Affecting Restricted Parties. The Issuer shall not, and shall not permit any Restricted Party to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or consensual restriction on the ability of any Restricted Party to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance, restriction or condition on the ability of any Restricted Party to (i) pay dividends or make any other distributions on its Equity Interests or any other interest or participation in its profits owned by the Issuer or any Restricted Party, or pay any Indebtedness owed to the Issuer or any Restricted Party, (ii) make loans or advances to any the Issuer or any Restricted Party or (iii) transfer any of its properties to the Issuer or any Restricted Party, except for such encumbrances, restrictions or conditions existing under or by reason of:

 

(1)         contractual encumbrances or restrictions in effect on the Issue Date;

 

(2)         contractual encumbrances and restrictions incurred or expected to be incurred in connection with the Transactions, including the Sinosure Facility Agreement and related documents and the ABN Facility and related documents;

 

(3)         this Indenture and the Notes;

 

  

(4)         applicable mandatory Legal Requirements;

 

(5)         customary provisions restricting subletting or assignment of any lease governing a leasehold interest of the Issuer or a Restricted Party;

 

(6)         customary provisions restricting assignment of any agreement entered into by the Issuer or a Restricted Party in the ordinary course of business;

 

(7)         customary restrictions and conditions contained in any agreement relating to the sale or other disposition of any property pending the consummation of such sale; provided, that (i) such restrictions and conditions apply only to the property to be sold, and (ii) such sale or other disposition is permitted hereunder;

 

(8)         any encumbrances, restrictions or conditions imposed by any amendments that are otherwise permitted by this Indenture of the contracts, instruments or obligations referred to in clauses (1) and (2) above; provided, that such amendments are not materially restrictive with respect to such encumbrances and restrictions than those prior to such amendment;

 

(9)         any agreement in effect at the time a person becomes a Restricted Subsidiary of the Operating Company, so long as such agreement was not entered into in connection with or in contemplation of such person becoming a Restricted Subsidiary of the Operating Company and such restriction does not apply to the Operating Company or any Restricted Subsidiary other than the Operating Company or such Restricted Subsidiary; or

 

(10)        Permitted Refinancing Indebtedness.

 

SECTION 10.15.         Sale and Leaseback Transactions. Enter into any arrangement, directly or indirectly, with any person whereby it shall sell or transfer any property used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property which it intends to use for substantially the same purpose or purposes as the property being sold or transferred (a “Sale and Leaseback Transaction”), unless (i) the sale of such property is entered into in the ordinary course of business and is made for cash consideration in an amount not less than the Fair Market Value of such property, (ii) the Sale and Leaseback Transaction is permitted by Section 10.17 and is consummated within 10 Business Days after the date on which such property is sold or transferred, (iii) any Liens arising in connection with its use of the property are permitted by clause (13) of the definition of “Permitted Liens”, (iv) the Sale and Leaseback Transaction would be permitted under Section 10.11, assuming the Attributable Indebtedness with respect to the Sale and Leaseback Transaction constituted Indebtedness under Section 10.11, and (v) the aggregate Attributable Indebtedness incurred with respect to all such Sale and Leaseback Transactions shall not exceed $5,000,000 at any time outstanding; provided, however, in no event shall the Issuer or any Restricted Party enter into a Sale and Leaseback Transaction with respect to a Collateral Vessel unless the Net Cash Proceeds therefrom either (A) have been used to prepay outstanding Obligations under the Senior Credit Facilities in accordance with the Senior Credit Agreement or (B) have been (x) reinvested or contracted to be reinvested to purchase new Collateral Vessels within 12 months following the date of such Sale and Leaseback Transaction or (y) in the case of the proceeds being contracted to be reinvested, such investment has occurred within 18 month following the date of such Sale and Leaseback Transaction. For the avoidance of doubt, this Section 10.15 shall not apply to any Sale and Leaseback Transaction in existence on the Issue Date.

 

SECTION 10.16.         Business. The primary business of the Issuer and its Subsidiaries, taken as a whole, shall be the direct or indirect ownership, management, operation, leasing or chartering of vessels for the transportation or storage of crude oil, refined petroleum products, chemicals and liquefied natural gas, for use for floating production, storage and offtake or floating storage and offtake and for any business incidental thereto.

 

  

SECTION 10.17.         Asset Sales. (a) The Issuer shall not, and shall not permit any Restricted Party to, directly or indirectly, effect any disposition of any property, except that the following shall be permitted (an “Asset Sale”):

 

(1)         dispositions of surplus, worn out or obsolete property (other than Vessels) by the Issuer or any Restricted Party in the ordinary course of business and the abandonment or other disposition of Intellectual Property of the Issuer or any Restricted Party that is, in the reasonable good faith judgment of the Issuer, no longer economically practicable to maintain or useful in the conduct of the business of the Issuer and the Restricted Parties taken as a whole;

 

(2)         other dispositions of property; provided, that

 

(A)         no Event of Default then exists or would result therefrom;

 

(B)         the Issuer and the Restricted Parties shall be in compliance, on a pro forma basis after giving effect to (x) such disposition (as well as all other dispositions since the last day of the most recently ended fiscal quarter of the Issuer and on or prior to the subject disposition) and (y) any purchases of vessels that became Collateral Vessels (and for which Vessel Appraisals were delivered to the Holders) during the period set forth in the parenthetical in preceding clause (x), with (A) the Loan to Value Test under the Senior Credit Agreement and (B) the financial covenant set forth in Section 6.10(b) of the Senior Credit Agreement for the most recently ended fiscal quarter of the Issuer as if such disposition (or dispositions and/or purchases) occurred on the last day of such fiscal quarter;

 

(C)         the aggregate consideration received in respect of all dispositions of property pursuant to this clause (3) shall not exceed $325,000,000; provided, however, to the extent that the Net Cash Proceeds (or a portion thereof) from any disposition of property pursuant to this clause (3) have been (i) reinvested or contracted to be reinvested to purchase new Collateral Vessels within 12 months following the date of such disposition or (ii) in the case of the proceeds being contracted to be reinvested, such investment has occurred within 18 month following the date of such disposition, the amount of such Net Cash Proceeds so reinvested shall refresh the original utilization of this basket to the extent of such Net Cash Proceeds so reinvested;

 

(D)         such dispositions of property are made for Fair Market Value and on an arms-length commercial basis; and

 

(E)         at least 75% of the consideration payable in respect of such disposition of property is in the form of cash or Cash Equivalents and is received at the time of the consummation of any such disposition;

 

(3)         leases of, or charter contracts in respect of, real or personal property (other than Sale and Leaseback Transactions) in the ordinary course of business and in accordance with the Senior Credit Agreement and the ABN Facility;

 

(4)         any disposition, issuance or sale in connection with the making of any Restricted Payment that is permitted to be made, and is made, under Section 10.10;

 

  

(5)         dispositions consisting of mergers and consolidations in compliance with Section 8.01;

 

(6)         sales of inventory in the ordinary course of business and dispositions of cash and Cash Equivalents in the ordinary course of business;

 

(7)         any disposition of property that constitutes a Casualty Event;

 

(8)         any disposition of property or assets, or issuance of securities by a Restricted Party, to the Issuer or by the Issuer or a Restricted Party to another Restricted Party;

 

(9)         grants of non-exclusive licenses or sublicenses in the ordinary course of business to use the Intellectual Property of the Issuer or any Restricted Party and technology or licenses or sublicenses related to such Intellectual Property and technology to the extent that such licenses or sublicenses do not materially impair the conduct of the business of the Issuer or any Restricted Party or otherwise prohibit the collateral agent under the Senior Credit Facilities from obtaining a security interest in the Intellectual Property or technology subject to such license or sublicense;

 

(10)        sales, forgiveness or other dispositions without recourse in the ordinary course of business of accounts receivable arising in the ordinary course of business in connection with the collection or compromise thereof but not as part of any financing transaction;

 

(11)        dispositions of Equity Interests in any Specified Joint Venture; provided, that (i) no Event of Default then exists or would result therefrom, (ii) such dispositions are made for Fair Market Value and on an arms-length commercial basis and (iii) at least 75% of the consideration payable in respect of such disposition is in the form of cash or Cash Equivalents and is received at the time of the consummation of any such disposition;

 

(12)        investments and dividends in compliance with Section 10.10; and

 

(13)        the sale of the Seaways Laura Lynn; provided that such sale occurs in accordance with the Senior Credit Agreement, including with respect to the use of proceeds thereunder.

 

(b)          Not later than five Business Days following the receipt by the Operating Company or any Restricted Subsidiary of any Net Cash Proceeds of any Asset Sale or Casualty Event with respect to collateral securing the Senior Credit Facilities, the Operating Company shall apply 100% of such Net Cash Proceeds in accordance with Section 2.10(b)(vi) and (d) thereof, without giving effect to the exception of $5,000,000 of Net Cash Proceeds per fiscal year provided in Section 2.10(b)(vi) thereof; provided, however, that any Net Cash Proceeds of any assets securing the ABN Facility shall be applied in accordance with the provisions thereunder.

 

  

SECTION 10.18.         Additional Amounts.

 

(a)          All payments made by or on behalf of the Issuer under or with respect to the Notes will be made free and clear of and without withholding or deduction for, or on account of, any present or future tax, duty, levy, impost, assessment or other governmental charge (including penalties, interest and other liabilities related thereto) (hereinafter “Taxes”) unless the withholding or deduction of such Taxes is then required by law. If any deduction or withholding for, or on account of, any Taxes imposed or levied by or on behalf of the government of the Republic of the Marshall Islands or any political subdivision or any authority or agency therein or thereof having power to tax, or any other jurisdiction in which the Issuer (including any successor entity) is organized or is otherwise resident for tax purposes, or any jurisdiction from or through which payment is made by the Issuer or its agent (including, without limitation, the jurisdiction of each Paying Agent) (each a “Specified Tax Jurisdiction”), will at any time be required to be made from any payments made under or with respect to the Notes. The Issuer will pay such additional amounts (the “Additional Amounts”) as may be necessary so that the net amount received in respect of such payments by a Holder (including Additional Amounts) after such withholding or deduction will not be less than the amount such Holder would have received if such Taxes had not been withheld or deducted; provided, however, that the foregoing obligation to pay Additional Amounts does not apply to:

 

(1)         any Taxes that would not have been so imposed but for the Holder or beneficial owner of the Notes having any present or former connection with the Specified Tax Jurisdiction including any such connection arising as a result of such Holder or beneficial owner (i) being organized under the laws of, or otherwise being or having been a domiciliary, citizen, resident or national thereof, (ii) being or having been engaged in a trade or business therein, (iii) having or having had its principal office located therein, (iv) maintaining a permanent establishment therein, (v) being or having been physically present therein, or (vi) otherwise having or having had some connection with the Specified Tax Jurisdiction (other than, in each case, any present or former connection arising as a result of the mere acquisition, ownership, holding, enforcement or receipt of payment in respect of the Notes);

 

(2)         any estate, inheritance, gift, sales, excise, transfer, personal property tax or similar tax, assessment or governmental charge;

 

(3)         any Taxes payable other than by deduction or withholding from payments under, or with respect to, the Notes;

 

(4)         any Taxes imposed that would not have been imposed but for a failure of the Holder or beneficial owner to comply with a written request of the Issuer or its agent addressed to the Holder to timely satisfy any applicable certification, documentation, information or other reporting requirement concerning the nationality, residence, identity or connection with the relevant Specified Tax Jurisdiction of the Holder or beneficial owner of a Note if such compliance is required as a precondition to relief or exemption from such Taxes;

 

(5)         any Taxes that would not have been so imposed but for the beneficiary of the payment having presented a Note for payment (in cases in which presentation is required) more than 30 days after the date on which such payment or such Note became due and payable or the date on which payment thereof is duly provided for, whichever is later (except to the extent that the Holder would have been entitled to Additional Amounts had the Note been presented on the last day of such 30-day period);

 

(6)         any Taxes imposed on or with respect to any payment by the Issuer to the Holder if such Holder is a fiduciary or partnership or Person other than the sole beneficial owner of such payment, to the extent that a beneficiary or settlor with respect to such fiduciary, a member of such partnership or the beneficial owner of such payment would not have been entitled to Additional Amounts had such beneficiary, settlor, member or beneficial owner been the actual Holder of such Note;

 

  

(7)         any Taxes imposed under Sections 1471 through 1474 of the Code, as of the issue date of the Notes (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), or any U.S. Treasury Regulations promulgated thereunder or official administrative interpretations thereof and any agreements entered into pursuant to Section 1471(b)(1) of the Code or any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement entered into in connection with the implementation of such sections of the Code; or

 

(8)         any combination of items (1) through (7) above.

 

(b)          If the Issuer becomes aware that it will be obligated to pay Additional Amounts with respect to any payment under or with respect to the Notes, the Issuer will deliver to the Trustee and Paying Agent at least 30 days prior to the date of that payment (unless the obligation to pay Additional Amounts arises after the 30th day prior to that payment date, in which case the Issuer will notify the Trustee and Paying Agent promptly thereafter but in no event later than two Business Days prior to the date of payment) an Officer’s Certificate stating the fact that Additional Amounts will be payable and the amount so payable. The Officer’s Certificate shall also set forth any other information necessary to enable the Paying Agent to pay Additional Amounts to Holders on the relevant payment date. The Trustee and Paying Agent will be entitled to rely solely on such Officer’s Certificate as conclusive proof that such payments are necessary. The Issuer will provide the Trustee and Paying Agent with documentation reasonably satisfactory to the Trustee and Paying Agent evidencing the payment of Additional Amounts.

 

(c)          The Issuer will make all withholdings and deductions required by law and will remit the full amount deducted or withheld to the relevant governmental authority on a timely basis in accordance with applicable law. As soon as practicable, the Issuer will provide the Trustee and Paying Agent with an official receipt or, if official receipts are not obtainable, other documentation reasonably satisfactory to the Trustee and Paying Agent evidencing the payment of the Taxes so withheld or deducted. Upon written request, copies of those receipts or other documentation, as the case may be, will be made available by the Trustee and Paying Agent to the Holders of the Notes.

 

(d)          Whenever in this Indenture or the Notes there is referenced, in any context, the payment of amounts based upon the principal amount of the Notes or of principal, interest or any other amount payable under, or with respect to, the Notes, such reference will be deemed to include payment of Additional Amounts as described under this Section 10.18 to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof.

 

(e)          The Issuer will pay any present or future stamp, court, issue, registration or documentary taxes or any other excise or property taxes, charges or similar levies that arise in any Specified Tax Jurisdiction from the execution, delivery, enforcement or registration of the Notes, this Indenture or any other document or instrument in relation thereof, or the receipt of any payments with respect to the Notes, and the Issuer will indemnify the Holders for any such taxes paid by such Holders.

 

SECTION 10.19.         Distribution or Dividend from Operating Company.

 

The Issuer shall cause the Operating Company to make a payment, distribution or dividend to the Issuer in an amount sufficient for the Issuer to satisfy its obligation to pay the interest on the Notes at the beginning of each quarterly period for which interest payments are required to be made pursuant to Section 3.01 of this Indenture.

 

  

Article Eleven

REDEMPTION OF NOTES

 

SECTION 11.01.         Right of Redemption. (a) At any time prior to June 15, 2020, the Issuer may, at its option and on one or more occasions, redeem all or a part of the Notes, upon notice as set forth in Section 11.07, at a redemption price equal to 100% of the principal amount of the Notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest, if any, to, but excluding, the date of redemption (any applicable date of redemption hereunder, the “Redemption Date”), subject to the right of Holders of record of Notes on the relevant Regular Record Date to receive interest due on the relevant Interest Payment Date falling on or prior to the Redemption Date.

 

(b) On and after June 15, 2020, the Issuer may, at its option and on one or more occasions, redeem the Notes, in whole or in part, upon notice as set forth in Section 11.07, at a Redemption Price equal to 100% of the principal amount of the Notes redeemed, plus accrued and unpaid interest thereon, if any, to, but excluding, the applicable Redemption Date, subject to the right of Holders of record of Notes on the relevant Regular Record Date to receive interest due on the relevant Interest Payment Date falling on or prior to the Redemption Date.

 

SECTION 11.02.         Optional Redemption for Changes in Withholding Taxes. The Issuer may redeem the Notes, at its option, at any time in whole but not in part, upon not less than 30 nor more than 60 days’ notice (which notice will be irrevocable), at a redemption price equal to 100% of the outstanding principal amount of Notes, plus accrued and unpaid interest (if any) to, but not including, the applicable Redemption Date and all Additional Amounts (if any) then due and which will become due on the applicable Redemption Date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant Interest Payment Date and Additional Amounts (if any) in respect thereof), in the event that the Issuer determines in good faith that the Issuer has become or would become obligated to pay, on the next date on which any amount would be payable with respect to the Notes, Additional Amounts and such obligation cannot be avoided by taking reasonable measures available to the Issuer (including making payment through a Paying Agent located in another jurisdiction), as a result of:

 

(a)          a change in or an amendment to the laws (including any regulations or rulings promulgated thereunder) of any Specified Tax Jurisdiction affecting taxation, which change or amendment is announced or becomes effective on or after the date of this Indenture; or

 

(b)          any change in or amendment to any official position of a taxing authority in any Specified Tax Jurisdiction regarding the application, administration or interpretation of such laws, regulations or rulings (including a holding, judgment or order by a court of competent jurisdiction), which change or amendment is announced or becomes effective on or after the date of this Indenture.

 

Notwithstanding the foregoing, no such notice of redemption for changes in withholding taxes may be given earlier than 60 days prior to the earliest date on which the Issuer would be obligated to pay Additional Amounts if a payment in respect of the Notes were then due. Before the Issuer publishes, mails or delivers notice of redemption of the Notes, the Issuer will deliver to the Trustee and Paying Agent (a) an Officer’s Certificate stating that the Issuer is entitled to effect such redemption and setting forth a statement of facts showing that the conditions precedent to the right of the Issuer to so redeem have occurred and (b) an opinion of independent legal counsel of recognized standing that the Issuer has or will become obligated to pay Additional Amounts as a result of the circumstances referred to in clause (a) or (b) of the preceding paragraph.

 

  

The Trustee and Paying Agent will accept and will be entitled to conclusively rely upon the Officer’s Certificate and opinion as sufficient evidence of the satisfaction of the conditions precedent described above, in which case they will be conclusive and binding on the Holders.

 

SECTION 11.03.         Special Mandatory Redemption. In the event the Termination Event occurs, the Issuer shall redeem all of the Notes (the “Special Mandatory Redemption”) at a price (the “Special Mandatory Redemption Price”) equal to 100% of the aggregate issue price of the Notes, plus accrued but unpaid interest, if any, from the Issue Date to, but excluding, the Special Mandatory Redemption Date (as defined below) (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date). Notice of the Special Mandatory Redemption shall be delivered by the Issuer, no later than one Business Day following the date on which the Termination Event occurs, to the Trustee and the Paying Agent, and shall provide that the Notes shall be redeemed on a date that is no later than the third Business Day after such notice is given by the Issuer (the “Special Mandatory Redemption Date”).

 

For the purposes of this Section 11.03, “Termination Event” means the abandonment or non-consummation of the Acquisition by the reason of non-compliance or non-performance by Euronav NV of its obligations under the Acquisition Agreement.

 

SECTION 11.04.         Applicability of Article. Redemption of Notes at the election of the Issuer or otherwise, as permitted or required by any provision of this Indenture, shall be made in accordance with such provision and this Article.

 

SECTION 11.05.         Election to Redeem; Notice to Trustee. In case of any redemption at the election of the Issuer, the Issuer shall, at least five Business Days before notice of redemption is required to be sent to Holders pursuant to Section 11.07 hereof (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee in writing of such Redemption Date and of the principal amount of Notes to be redeemed and setting forth the section of this Indenture pursuant to which the redemption shall occur; provided that no Opinion of Counsel pursuant to Section 1.03 or otherwise shall be required in connection with the delivery of such notice of redemption or redemption.

 

SECTION 11.06.         Selection by Trustee of Notes to Be Redeemed. With respect to any partial redemption or purchase of Notes made pursuant to this Indenture, selection of the Notes for redemption or purchase will be made on a pro rata basis to the extent applicable or by lot or by such method as the Trustee shall deem fair and appropriate; provided that if the Notes are represented by global Notes, interests in the Notes shall be selected for redemption or purchase by the Trustee in accordance with the standard procedures of the Depository therefor; provided, further, that no Notes of less than $2,000 can be redeemed or repurchased in part. Such Notes to be redeemed or purchased shall be selected, unless otherwise provided herein, at least 30 days but except as set forth in Section 11.07, not more than 60 days prior to the Redemption Date from the Outstanding Notes not previously called for redemption or purchase.

 

Notices of redemption or offers to purchase shall be delivered electronically or mailed by first-class mail, postage prepaid, at least 30 days, but except as set forth in Section 11.07 not more than 60 days before the purchase date or Redemption Date to each Holder at such Holder’s registered address or otherwise in accordance with the procedures of the Depository, except that redemption notices may be delivered or mailed more than 60 days prior to a Redemption Date if the notice is issued in connection with a defeasance of the Notes or a satisfaction and discharge of this Indenture or as specified in Section 11.07. If any Note is to be redeemed or purchased in part only, any notice of redemption or offers to purchase that relates to such Note shall state the portion of the principal amount thereof that has been or is to be redeemed or purchased.

 

  

The Trustee shall promptly notify the Issuer in writing of the Notes selected for redemption or purchase and, in the case of any Note selected for partial redemption or purchase, the principal amount thereof to be redeemed or purchased. Provisions of this Indenture that apply to Notes called for redemption or purchase also apply to portions of Notes called for redemption or purchase.

 

With respect to Notes represented by certificated notes, if any Notes are to be purchased or redeemed in part only, the Issuer will issue a new Note in a principal amount equal to the unredeemed or unpurchased portion of the original Note in the name of the Holder thereof upon cancellation of the original Note; provided that the new Notes will be only issued in minimum denominations of $2,000 and any integral multiple of $1,000 in excess thereof.

 

SECTION 11.07.         Notice of Redemption. The Issuer shall deliver electronically or mail by first-class mail, postage prepaid, notices of redemption at least 30 days (or such shorter period as is specified solely in respect of any Special Mandatory Redemption), but except as set forth in this Section 11.07, not more than 60 days before the purchase date or Redemption Date to each Holder at such Holder’s registered address or otherwise in accordance with the procedures of the Depository, except that redemption notices may be delivered or mailed more than 60 days prior to a Redemption Date if the notice is issued in connection with Article Four or Article Thirteen of this Indenture. Notices of redemption may be conditional.

 

All notices of redemption shall state:

 

(1)         the Redemption Date;

 

(2)         the Redemption Price, or if not then ascertainable, the manner of calculation thereof;

 

(3)         in the case of certificated Notes, if less than all Outstanding Notes are to be redeemed, the identification (and, in the case of a partial redemption, the principal amounts) of the particular Notes to be redeemed;

 

(4)         if any Note is to be redeemed or purchased in part only, the portion of the principal amount of that Note that is to be redeemed or purchased and that, after the Redemption Date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed or unpurchased portion of the original Note representing the same indebtedness to the extent not redeemed or purchased will be issued in the name of the Holder thereof upon cancellation of the original Note; provided that the new Notes will be only issued in denominations of $2,000 and any integral multiple of $1,000 in excess thereof;

 

(5)         that on the Redemption Date, the Redemption Price (and accrued interest, if any, to but not including the Redemption Date payable as provided in Section 11.09) will become due and payable upon each such Note, or the portion thereof, to be redeemed, and that interest thereon will cease to accrue on and after the Redemption Date,

 

(6)         any condition precedent to the redemption;

 

(7)         the place or places where such Notes are to be surrendered for payment of the Redemption Price and accrued but unpaid interest, if any,

 

(8)         the name and address of the Paying Agent,

 

  

(9)         that Notes called for redemption must be surrendered to the Paying Agent to collect the Redemption Price,

 

(10)        the CUSIP, ISIN or “Common Code” number and that no representation is made as to the accuracy or correctness of the CUSIP, ISIN or “Common Code” number, if any, listed in such notice or printed on the Notes, and

 

(11)        the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes are to be redeemed.

 

Notice of redemption of Notes to be redeemed at the election of the Issuer shall be given by the Issuer or, at the Issuer’s request and provision of such notice information five Business Days (unless a shorter notice shall be agreed to by the Trustee) prior to the date notice is to be given, by the Trustee in the name and at the expense of the Issuer.

 

Notice of any redemption of, or any offer to purchase, the Notes may, at the Issuer’s discretion, be given in connection with any transaction (or series of related transactions) and prior to the completion or the occurrence thereof, and any such redemption or purchase may, at the Issuer’s discretion, be subject to one or more conditions precedent, including, but not limited to, completion or occurrence of the related transaction or event, as the case may be. In addition, if such redemption or purchase is subject to satisfaction of one or more conditions precedent, such notice shall describe each such condition, and if applicable, shall state that, in the Issuer’s discretion, the redemption or purchase date may be delayed until such time (including more than 60 days after the date the notice of redemption or offer to purchase was mailed or delivered, including by electronic transmission) as any or all such conditions shall be satisfied or waived, or such redemption or purchase may not occur and such notice may be rescinded in the event that any or all such conditions shall not have been satisfied or waived by the redemption or purchase date or by the redemption or purchase date as so delayed, or such notice or offer may be rescinded at any time in the Issuer’s discretion if the Issuer reasonably believes that any or all of such conditions will not be satisfied or waived. In addition, the Issuer may provide in such notice or offer that payment of the redemption or purchase price and performance of the Issuer’s obligations with respect to such redemption or offer to purchase may be performed by another Person.

 

If any such condition precedent has not been satisfied, the Issuer shall provide written notice to the Trustee thereof. Upon receipt, the Trustee shall provide such notice to each Holder of the Notes in the same manner in which the notice of redemption was given.

 

SECTION 11.08.         Deposit of Redemption Price. On or prior to 12:00 pm (New York City time) any Redemption Date, the Issuer shall deposit with the Trustee or with a Paying Agent (or, if the Issuer is acting as its own Paying Agent, segregate and hold in trust as provided in Section 10.03) an amount of money sufficient to pay the Redemption Price or purchase price of, and accrued but unpaid interest, if any, on, all the Notes which are to be redeemed or purchased on such Redemption Date. Either the Trustee or the Paying Agent shall promptly return to the Issuer any money deposited with either the Trustee or the Paying Agent by the Issuer in excess of the amounts necessary to pay the Redemption Price of, and accrued and unpaid interest on, all Notes which are to be redeemed or purchased.

 

  

SECTION 11.09.         Notes Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Notes so to be redeemed shall, on the Redemption Date, become due and payable, unless such redemption is conditioned on the happening of a future event, at the Redemption Price therein specified (together with accrued but unpaid interest, if any, to the Redemption Date), and from and after such Redemption Date such Notes shall cease to bear interest (unless the Issuer shall default in the payment of the Redemption Price and accrued but unpaid interest, if any). Upon surrender of any such Note for redemption in accordance with said notice, such Note shall be paid by the Issuer at the Redemption Price, together with accrued but unpaid interest, if any, to, but excluding, the Redemption Date and such Notes shall be canceled by the Trustee; provided, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Notes, or one or more Predecessor Notes, registered as such at the close of business on the relevant Regular Record Dates according to their terms and the provisions of Section 3.07.

 

If any Note called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate borne by the Notes.

 

SECTION 11.10.         Notes Redeemed in Part. Any Note which is to be redeemed only in part (pursuant to the provisions of this Article) shall be surrendered at an office or agency of the Issuer maintained for such purpose pursuant to Section 10.02 (with, if the Issuer or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Issuer and the Trustee duly executed by, the Holder thereof or such Holder’s attorney duly authorized in writing), and the Issuer shall execute, and the Trustee shall authenticate and deliver to the Holder of such Note without service charge, a new Note or Notes, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Note so surrendered.

 

SECTION 11.11.         Sinking Fund; Open Market Purchases. The Issuer is not required to make any sinking fund payments with respect to the Notes. In addition, other than as required under Sections 10.15, the Issuer shall not be required to offer to repurchase or redeem or otherwise modify the terms of any of the Notes upon events involving, the Issuer or any of its Subsidiaries which may adversely affect the creditworthiness of the Notes. The Issuer and its Affiliates may at any time and from time to time purchase Notes in the open market in privately negotiated transactions or otherwise.

 

Article Twelve

SUBORDINATION OF NOTES

 

SECTION 12.01.         Agreement to Subordinate. The Issuer agrees, and each Holder by accepting a Note agrees, that the payment of all Obligations owing in respect of the Notes is subordinated in right of payment, to the extent and in the manner provided in this Article Twelve, to the prior payment in cash in full of all existing and future Senior Indebtedness of the Issuer in the event of a bankruptcy, reorganization or similar proceeding and that the subordination is for the benefit of and enforceable by the holders of such Senior Indebtedness. The Notes shall be senior in right of payment to all existing and future Junior Subordinated Indebtedness of the Issuer; and only Indebtedness of the Issuer that is Senior Indebtedness shall rank senior to the Notes in accordance with the provisions set forth herein. All provisions of this Article Twelve shall be subject to Section 12.10.

 

SECTION 12.02.         Liquidation, Dissolution, Bankruptcy. Upon any payment or distribution of the assets of the Issuer to creditors upon a total or partial liquidation or dissolution of the Issuer or in a reorganization of, or similar proceeding relating to, the Issuer or its property:

 

(1)         the holders of Senior Indebtedness of the Issuer shall be entitled to receive payment in full in cash of such Senior Indebtedness before Holders shall be entitled to receive any payment; and

 

  

(2)         until the Senior Indebtedness of the Issuer is paid in full in cash, any payment or distribution to which Holders would be entitled but for Article Twelve of this Indenture shall be made to holders of such Senior Indebtedness as their interests may appear, except that Holders may receive Permitted Junior Securities.

 

SECTION 12.03.         Acceleration of Payment of Notes. If payment of the Notes is accelerated because of an Event of Default, the Issuer shall promptly notify the holders of the Designated Senior Indebtedness of the Issuer or the Representative of such Designated Senior Indebtedness of the acceleration; provided that any failure to give such notice shall have no effect whatsoever on the provisions of this Article Twelve. If any Designated Senior Indebtedness is outstanding, neither the Issuer nor any Guarantors may pay the Notes until five Business Days after the Representatives of all the issues of Designated Senior Indebtedness receive notice of such acceleration and, thereafter, may pay the Notes only if this Indenture otherwise permits payment at that time.

 

SECTION 12.04.         Subrogation. After all Senior Indebtedness of the Issuer is paid in full and until the Notes are paid in full, Holders shall be subrogated (equally and ratably with all other Subordinated Indebtedness ranking pari passu with the Notes) to the rights of holders of such Senior Indebtedness to receive distributions applicable to such Senior Indebtedness. A distribution made under this Article Twelve to holders of such Senior Indebtedness that otherwise would have been made to Holders is not, as between the Issuer and the Holders, a payment by the Issuer on such Senior Indebtedness.

 

SECTION 12.05.         Relative Rights. This Article Twelve defines the relative rights of Holders and holders of Senior Indebtedness of the Issuer. Nothing in this Indenture shall:

 

(1)         impair, as between the Issuer and the Holders, the obligation of the Issuer, which is absolute and unconditional, to pay principal of and interest on the Notes in accordance with their terms;

 

(2)         prevent the Trustee or any Holder from exercising its available remedies upon a Default, subject to the rights of holders of Senior Indebtedness of the Issuer to receive payments or distributions otherwise payable to Holders and such other rights of such holders of Senior Indebtedness as set forth herein; or

 

(3)         affect the relative rights of the Trustee, the Agents, Holders and creditors of the Issuer other than their rights in relation to holders of Senior Indebtedness.

 

SECTION 12.06.         Subordination May Not Be Impaired by Issuer. No right of any holder of Senior Indebtedness of the Issuer to enforce the subordination of the Indebtedness evidenced by the Notes shall be impaired by any act or failure to act by the Issuer or by their failure to comply with this Indenture.

 

SECTION 12.07.         Rights of Trustee and Paying Agent. The Trustee or any Paying Agent may continue to make payments on the Notes and shall not be charged with knowledge of the existence of facts that would prohibit the making of any payments unless, not less than two Business Days prior to the date of such payment, a Responsible Officer of the Trustee receives notice satisfactory to it that payments may not be made under this Article Twelve. The Issuer, the Registrar, the Paying Agent, a Representative or a holder of Senior Indebtedness of the Issuer shall be entitled to give the notice; provided, however, that, if an issue of Senior Indebtedness of the Issuer has a Representative, only the Representative shall be entitled to give the notice.

 

  

The Trustee in its individual or any other capacity shall be entitled to hold Senior Indebtedness of the Issuer with the same rights it would have if it were not Trustee. The Registrar and the Paying Agent shall be entitled to do the same with like rights. The Trustee shall be entitled to all the rights set forth in this Article Twelve with respect to any Senior Indebtedness of the Issuer which may at any time be held by it, to the same extent as any other holder of such Senior Indebtedness; and nothing in Article Six shall deprive the Trustee of any of its rights as such holder. Nothing in this Article Twelve shall apply to claims of, or payments to, the Trustee under or pursuant to Section 6.07 hereof or any other Section of this Indenture.

 

SECTION 12.08.         Distribution or Notice to Representative. Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness of the Issuer, the distribution may be made and the notice given to their Representative (if any).

 

SECTION 12.09.         Article Twelve Not to Prevent Events of Default or Limit Right to Accelerate. The failure to make a payment pursuant to the Notes by reason of any provision in this Article Twelve shall not be construed as preventing the occurrence of a Default. Subject to Section 12.03 hereof, nothing in this Article Twelve shall have any effect on the right of the Holders or the Trustee to accelerate the maturity of the Notes.

 

SECTION 12.10.         Trust Moneys Not Subordinated. Notwithstanding anything contained herein to the contrary, any funds held by the Trustee or the proceeds of government securities held by the Trustee for the payment of principal of and interest on the Notes pursuant to Article Thirteen or Article Four hereof shall not be subordinated to the prior payment of any Senior Indebtedness of the Issuer or subject to the restrictions set forth in this Article Twelve, and none of the Holders shall be obligated to pay over any such amount to the Issuer or any holder of Senior Indebtedness of the Issuer or any other creditor of the Issuer; provided that the subordination provisions of this Article Twelve were not violated at the time the applicable amounts were deposited in trust pursuant to Article Four or Article Thirteen hereof, as the case may be.

 

SECTION 12.11.         Trustee Entitled to Rely. Upon any payment or distribution pursuant to this Article Twelve, the Trustee and the Holders shall be entitled to rely upon (a) any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in Section 12.02 hereof are pending, (b) a certificate of the liquidating trustee or agent or other Person making such payment or distribution to the Trustee or to the Holders or (c) the Representatives of Senior Indebtedness of the Issuer for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of such Senior Indebtedness and other Indebtedness of the Issuer, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article Twelve. In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any Person as a holder of Senior Indebtedness of the Issuer to participate in any payment or distribution pursuant to this Article Twelve, the Trustee shall be entitled to request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of such Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and other facts pertinent to the rights of such Person under this Article Twelve, and, if such evidence is not furnished, the Trustee shall be entitled to defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. The provisions of Sections 6.01 and 6.02 hereof shall be applicable to all actions or omissions of actions by the Trustee pursuant to this Article Twelve.

 

SECTION 12.12.         Trustee to Effectuate Subordination. Each Holder by its acceptance of a Note agrees to be bound by this Article Twelve and authorizes and expressly directs the Trustee, on its behalf, to take such action as may be necessary or appropriate, at the written direction of the Issuer, to effectuate the subordination between the Holders and the holders of Senior Indebtedness of the Issuer as provided in this Article Twelve and appoints the Trustee as attorney-in-fact for any and all such purposes.

 

  

SECTION 12.13.         Trustee Not Fiduciary for Holders of Senior Indebtedness of the Issuer. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness of the Issuer (or any party hereunder or in connection herewith) and shall not be liable to any such holders if it shall mistakenly pay over or distribute to Holders or the Issuer or any other Person, money or assets to which any holders of Senior Indebtedness of the Issuer shall be entitled by virtue of this Article Twelve or otherwise and shall have no liability or responsibility relating to the Senior Indebtedness, any of the Transactions or to any parties thereof.

 

SECTION 12.14.         Reliance by Holders of Senior Indebtedness of the Issuer on Subordination Provisions. Each Holder by accepting a Note acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Senior Indebtedness of the Issuer, whether such Senior Indebtedness was created or acquired before or after the issuance of the Notes, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness and such holder of such Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Indebtedness.

 

Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness of the Issuer may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders, without incurring responsibility to the Trustee or the Holders and without impairing or releasing the subordination provided in this Article Twelve or the obligations hereunder of the Holders to the holders of the Senior Indebtedness of the Issuer, do any one or more of the following:

 

(1)         change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Indebtedness of the Issuer, or otherwise amend or supplement in any manner Senior Indebtedness of the Issuer, or any instrument evidencing the same or any agreement under which Senior Indebtedness of the Issuer is outstanding;

 

(2)         sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness of the Issuer;

 

(3)         release any Person liable in any manner for the payment or collection of Senior Indebtedness of the Issuer; and

 

(4)         exercise or refrain from exercising any rights against the Issuer or any other Person.

 

Article Thirteen

LEGAL DEFEASANCE AND COVENANT DEFEASANCE

 

SECTION 13.01.         Issuer’s Option to Effect Legal Defeasance or Covenant Defeasance. The Issuer may, at its option, at any time, with respect to the Notes, elect to have either Section 13.02 or Section 13.03 be applied to all Outstanding Notes upon compliance with the conditions set forth below in this Article Thirteen.

 

  

SECTION 13.02.         Legal Defeasance and Discharge. Upon the Issuer’s exercise under Section 13.01 of the option applicable to this Section 13.02, each of the Issuer and the Guarantors shall be deemed to have been discharged from its respective obligations with respect to all Outstanding Notes and the Note Guarantees on the date the conditions set forth in Section 13.04 are satisfied (hereinafter, “Legal Defeasance”). For this purpose, such Legal Defeasance means that each of the Issuer and the Guarantors shall be deemed to have paid and discharged the entire indebtedness represented by the Outstanding Notes, which shall thereafter be deemed to be “Outstanding” only for the purposes of Section 13.05 and the other Sections of this Indenture referred to in (1) and (2) below, and the Note Guarantees and to have satisfied all its other obligations under such Notes, Note Guarantees and this Indenture insofar as such Notes are concerned (and the Trustee, at the expense of the Issuer, shall execute proper instruments acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (1) the rights of Holders to receive payments in respect of the principal of (and premium, if any, on) and interest on such Notes when such payments are due, solely out of the trust created pursuant to this Indenture, (2) the Issuer’s obligations with respect to such Notes under Sections 3.04, 3.05, 3.06, 10.02 and 10.03, (3) the rights, powers, trusts, duties and immunities of the Trustee hereunder, and the obligations of each of the Guarantors and the Issuer in connection therewith and (4) this Article Thirteen. Subject to compliance with this Article Thirteen, the Issuer may exercise its option under this Section 13.02 notwithstanding the prior exercise of its option under Section 13.03 with respect to the Notes.

 

SECTION 13.03.         Covenant Defeasance. Upon the Issuer’s exercise under Section 13.01 of the option applicable to this Section 13.03, each of the Issuer and the Guarantors shall be released from its respective obligations under any covenant contained in Section 8.01 and in Sections 10.04 through and including 10.19 with respect to the Outstanding Notes on and after the date the conditions set forth below are satisfied (hereinafter, “Covenant Defeasance”), and the Notes shall thereafter be deemed not to be “Outstanding” for the purposes of any direction, waiver, consent or declaration or Act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed “Outstanding” for all other purposes hereunder. For this purpose, such Covenant Defeasance means that, with respect to the Outstanding Notes, the Issuer or any Guarantor, as applicable, may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Sections 5.01(3), and as a result of such Covenant Defeasance, Sections 5.01(4) and 5.01(5), shall no longer be in effect but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby.

 

SECTION 13.04.         Conditions to Legal Defeasance or Covenant Defeasance. The following shall be the conditions to application of either Section 13.02 or Section 13.03 to the Outstanding Notes:

 

(1)         the Issuer must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in U.S. dollars, U.S. Government Obligations, or a combination thereof, in such amounts (including scheduled payments thereon) as will be sufficient, in the opinion of an Independent Financial Advisor, to pay the principal of, premium, if any, and interest due on the Notes on the stated maturity date or on the Redemption Date, as the case may be, of such principal, premium, if any, or interest on such Notes and the Issuer must specify whether such Notes are being defeased to maturity or to a particular Redemption Date; provided, that upon any redemption that requires the payment of the Applicable Premium, the amount deposited shall be sufficient for purposes of this Indenture to the extent that an amount is deposited with the Trustee equal to the Applicable Premium calculated as of the date of the notice of redemption, with any Applicable Premium Deficit only required to be deposited with the Trustee on or prior to the date of redemption. Any Applicable Premium Deficit shall be set forth in an Officer’s Certificate delivered to the Trustee simultaneously with the deposit of such Applicable Premium Deficit that confirms that such Applicable Premium Deficit shall be applied toward such redemption;

 

  

(2)         in the case of Legal Defeasance, the Issuer shall have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that, subject to customary assumptions and exclusions,

 

(A)         the Issuer has received from, or there has been published by, the United States Internal Revenue Service a ruling, or

 

(B)         since the issuance of the Notes, there has been a change in the applicable U.S. federal income tax law,

 

in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, subject to customary assumptions and exclusions, the Holders will not recognize income, gain or loss for U.S. federal income tax purposes, as applicable, as a result of such Legal Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;

 

(3)         in the case of Covenant Defeasance, the Issuer shall have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that, subject to customary assumptions and exclusions, the Holders will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Covenant Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;

 

(4)         no Default or Event of Default (other than that resulting from borrowing funds to be applied to make such deposit and any similar and simultaneous deposit relating to other Indebtedness, and, in each case the granting of Liens in connection therewith) shall have occurred and be continuing on the date of such deposit;

 

(5)         such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under any material agreement or material instrument (other than this Indenture) to which, the Issuer or any Guarantor is a party or by which the Issuer or any Guarantor is bound (other than that resulting from borrowing funds to be applied to make such deposit and any similar and simultaneous deposit relating to other Indebtedness and, in each case, the granting of Liens in connection therewith);

 

(6)         the Issuer shall have delivered to the Trustee an Officer’s Certificate stating that the deposit was not made by the Issuer with the intent of defeating, hindering, delaying or defrauding any creditors of the Issuer or any Guarantor or others; and

 

(7)         the Issuer shall have delivered to the Trustee an Officer’s Certificate and an Opinion of Counsel (which Opinion of Counsel may be subject to customary assumptions and exclusions) each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance, as the case may be, have been complied with.

 

  

SECTION 13.05.         Deposited Money and U.S. Government Obligations To Be Held in Trust Other Miscellaneous Provisions. Subject to the provisions of the last paragraph of Section 10.03, all cash and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee pursuant to Section 13.04 in respect of the Outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Issuer acting as its own Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal (and premium, if any) and interest, but such money or U.S. Government Obligations need not be segregated from other funds except to the extent required by law.

 

The Issuer shall pay and indemnify the Trustee (or Paying Agent) against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to Section 13.04 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the Outstanding Notes.

 

Anything in this Article Thirteen to the contrary notwithstanding, the Trustee shall deliver or pay to the Issuer from time to time upon Issuer Request any money or U.S. Government Obligations held by it as provided in Section 13.04 which, in the opinion of an Independent Financial Advisor expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance, as applicable, in accordance with this Article.

 

SECTION 13.06.         Reinstatement. If the Trustee or any Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with Section 13.05 by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Issuer’s and each Guarantor’s obligations under this Indenture and the Outstanding Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 13.02 or 13.03, as the case may be, until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with Section 13.05; provided that, if the Issuer makes any payment of principal of (or premium, if any) or interest on any Note following the reinstatement of its obligations, the Issuer shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent.

 

[Signature Pages Follow]

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the day and year first above written.

 

	INTERNATIONAL SEAWAYS, INC.
	By:	/s/ James D. Small
		Name:	James D. Small III
		Title:	Chief Administrative Officer, Senior Vice
			President, Secretary and General Counsel
	GLAS Trust Company LLC
	as Trustee
	By:	/s/ Martin Reed
		Name:	Martin Reed
		Title:	Vice President

 

[Signature Page to Indenture]

 

 

 

Exhibit 10.3

 

Execution Version

 

 

CREDIT AGREEMENT

 

dated as of

 

June 7, 2018

 

By and among

 

SEAWAYS SHIPPING CORPORATION,

as Borrower,

 

the INITIAL GUARANTORS, along with any Additional Guarantors who may become party hereto,

as Guarantors,

 

The LENDERS party hereto from time to time,

 

The SWAP BANKS party hereto from time to time,

 

and

 

ABN AMRO CAPITAL USA LLC,

as Security Trustee and Facility Agent

 

together with

 

ABN AMRO CAPITAL USA LLC,

as Mandated Lead Arranger

 

and

 

ABN AMRO CAPITAL USA LLC,

as Arranger and Bookrunner

 

 

 

TABLE OF CONTENTS

 

		Page
ARTICLE I
DEFINITIONS
1.01	Defined Terms	1
1.02	Terms Generally	26
1.03	Accounting Terms; Changes in GAAP	26
1.04	Rates	27
ARTICLE II
COMMITMENTS
2.01	Commitments	27
2.02	Loan and Borrowing.	27
2.03	Borrowing.	27
2.04	Funding of Borrowing	28
2.05	Interest Periods	28
2.06	Repayment	29
2.07	Prepayments	29
2.08	Cancellation of Commitments	30
2.09	Interest	30
2.10	Fees	31
2.11	Evidence of Debt	31
2.12	Payments Generally; Several Obligations of Lenders and Swap Banks	32
2.13	Sharing of Payments	33
2.14	Compensation for Losses	33
2.15	Increased Costs	33
2.16	Taxes	34
2.17	Inability to Determine Rates.	38
2.18	Illegality	38
2.19	Mitigation Obligations; Replacement of Lenders	39
2.20	Defaulting Lenders	40
2.21	Increases in Commitments	41
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.01	Existence, Qualification and Power	42
3.02	Authorization; No Contravention	43
3.03	Governmental Authorization; Other Consents	43
3.04	Execution and Delivery; Binding Effect	43
3.05	Financial Statements; No Material Adverse Effect	43
3.06	Litigation	44
3.07	No Material Adverse Effect; No Default	44
3.08	Property	44
3.09	Taxes	45

 

 

3.10	Disclosure	45
3.11	Compliance with Laws	45
3.12	ERISA Compliance	46
3.13	Environmental Matters	46
3.14	Margin Regulations	47
3.15	Investment Company, Public Utility	47
3.16	PATRIOT Act; Sanctions; Anti-Corruption	47
3.17	ISM Code and ISPS Code Compliance	47
3.18	Solvency	47
3.19	Place of Business	47
3.20	Ownership	48
3.21	Vessel	48
3.22	The Security Documents	48
3.23	Use of Proceeds	49
3.24	Labor Matters	49
3.25	Threatened Withdrawal of Document of Compliance, Safety Management Certificate or ISSC	49
3.26	Discharge of Term Loan B Liens	49
3.27	No Upstream Guarantor Accounts; Vessel Amounts	49
3.28	Beneficial Ownership Certification	49
ARTICLE IV
CONDITIONS OF LENDING
4.01	Conditions Precedent to the Closing Date	49
4.02	Conditions Precedent to the Drawdown Date	51
4.03	Conditions Precedent Relating to the Vessel and Security	52
ARTICLE V
AFFIRMATIVE COVENANTS
5.01	Financial Statements	54
5.02	Certificates; Other Information	55
5.03	Vessel Valuations	56
5.04	Vessel Value Maintenance	56
5.05	Notices	56
5.06	Preservation of Existence, Etc.	57
5.07	Employee Benefits	58
5.08	Maintenance of Properties	58
5.09	Insurances	58
5.10	Insurance Documentation; Letters of Undertaking; Certificates	59
5.11	Mortgagee’s Insurance	60
5.12	Maintenance of Security Interests	60
5.13	Earnings Payments	60
5.14	Payment of Obligations	60
5.15	Vessel Registration	61
5.16	Vessel Repair	61
5.17	Classification Society Instructions and Undertakings	61
5.18	Charters; Charter Assignments; Assignments of Earnings	61

 

 

5.19	Compliance with Laws	62
5.20	[Intentionally omitted]	62
5.21	Environmental Matters	62
5.22	Books and Records	62
5.23	Inspection Rights	62
5.24	Surveys	63
5.25	Notice of Mortgage	63
5.26	Inventory of Hazardous Materials	63
5.27	Material Agreements	63
5.28	Prevention of and Release from Arrest	63
5.29	Use of Proceeds	63
5.30	Subordination of Loans	63
5.31	Anti-Corruption Laws	63
5.32	“Know Your Customer” Documentation	64
5.33	Asset Control	64
5.34	Scrapping	64
5.35	Maintenance of Ratings	64
5.36	Sanctions	64
5.37	Vessel Amounts; Borrower Operating Account	64
5.38	Parent Covenants Relating to ISOC Share Pledge	64
ARTICLE VI
NEGATIVE COVENANTS
6.01	Indebtedness	67
6.02	Liens	68
6.03	Fundamental Changes	68
6.04	Restricted Payments	68
6.05	Investments	69
6.06	Transactions with Affiliates	69
6.07	Changes in Fiscal Periods	69
6.08	Changes in Nature of Business	69
6.09	Changes in Name; Organizational Documents Amendments	69
6.10	Place of Business	69
6.11	Change of Control; Negative Pledge	70
6.12	Restriction on Chartering	70
6.13	Lawful Use	70
6.14	Approved Manager	70
6.15	Insurances	70
6.16	Modification; Removal of Parts	71
6.17	Sanctions	71
6.18	No Upstream Guarantor Accounts	71
6.19	Swap Contracts.	71
ARTICLE VII
FINANCIAL COVENANTS
7.01	Financial Covenants	72
7.02	Debt Service Reserve Account	72

 

 

7.03	Dry Dock Reserve Account	72
7.04	Borrower Operating Account	72
ARTICLE VIII
GUARANTY
8.01	Guaranty	73
8.02	Obligations Unconditional	73
8.03	Reinstatement	74
8.04	Subrogation; Subordination	74
8.05	Remedies	74
8.06	Instrument for the Payment of Money	74
8.07	Continuing Guarantee	74
8.08	General Limitation on Guarantee Obligations	75
8.09	Right of Contribution	75
8.10	Set-off	75
8.11	Keepwell	75
8.12	Parallel Liability.	76
ARTICLE IX
EVENTS OF DEFAULT
9.01	Events of Default	76
9.02	Application of Payments	79
ARTICLE X
AGENCY
10.01	Appointment and Authority	80
10.02	Rights as a Lender	81
10.03	Exculpatory Provisions	81
10.04	Reliance by Agent	82
10.05	Delegation of Duties	82
10.06	Resignation of Agent	83
10.07	Non-Reliance on Agents and Other Lenders	83
10.08	No Other Duties	84
10.09	Facility Agent May File Proofs of Claim	84
10.10	Collateral and Guaranty Matters	84
ARTICLE XI
MISCELLANEOUS
11.01	Notices	85
11.02	Waivers; Amendments	87
11.03	Expenses; Indemnity; Damage Waiver	89
11.04	Successors and Assigns	90
11.05	Survival	93
11.06	Counterparts; Integration; Effectiveness; Electronic Execution	94

 

 

11.07	Severability	94
11.08	Right of Setoff	94
11.09	Governing Law; Jurisdiction; Etc.	95
11.10	WAIVER OF JURY TRIAL	95
11.11	Headings	96
11.12	Treatment of Certain Information; Confidentiality	96
11.13	PATRIOT Act	96
11.14	Interest Rate Limitation	97
11.15	Payments Set Aside	97
11.16	No Advisory or Fiduciary Responsibility	97
11.17	Acknowledgement and Consent to Bail-In of EEA Financial Institutions	98

 

 

SCHEDULES

 

SCHEDULE I -A		Lenders and Commitments
SCHEDULE I -B		Swap Banks
SCHEDULE II	-	Initial Guarantors
SCHEDULE III	-	Approved Brokers
SCHEDULE IV	-	Vessel
SCHEDULE V	-	Liens
SCHEDULE VI	-	Pre-approved Vessel Management Terms
EXHIBITS
EXHIBIT A	-	Form of Account Pledge
EXHIBIT B	-	Form of Assignment and Assumption
EXHIBIT C	-	Form of Assignment of Earnings
EXHIBIT D	-	Form of Assignment of Insurances
EXHIBIT E	-	Form of Borrowing Request
EXHIBIT F	-	Form of Charter Assignment
EXHIBIT G	-	Form of Guarantor Accession Agreement
EXHIBIT H	-	Form of Manager’s Undertaking
EXHIBIT I	-	[Intentionally omitted]
EXHIBIT J-1	-	Form of Borrower Share Pledge
EXHIBIT J-2		Form of ISOC Share Pledge
EXHIBIT K	-	[Intentionally omitted]
EXHIBIT L	-	Form of Vessel Mortgage
EXHIBIT M	-	Form of Note
EXHIBIT N-1	-	Form of U.S. Tax Compliance Certificate
EXHIBIT N-2	-	Form of U.S. Tax Compliance Certificate
EXHIBIT N-3	-	Form of U.S. Tax Compliance Certificate
EXHIBIT N-4	-	Form of U.S. Tax Compliance Certificate

 

 

This CREDIT AGREEMENT, dated as of June 7, 2018 (this “Agreement”), is made by and among SEAWAYS SHIPPING CORPORATION, as Borrower, the INITIAL GUARANTORS, along with any Additional Guarantors who may become party hereto, as Guarantors, the LENDERS party hereto, the SWAP BANKS party hereto, ABN AMRO CAPITAL USA LLC, as Mandated Lead Arranger, ABN AMRO CAPITAL USA LLC, as Arranger and Bookrunner, ABN AMRO CAPITAL USA LLC, as Security Trustee and ABN AMRO CAPITAL USA LLC, as Facility Agent.

 

PRELIMINARY STATEMENTS:

 

1.            The Lenders have agreed to make available to the Borrower a senior secured term loan facility in an aggregate principal amount of up to the lesser of (a) $29,150,000 and (b) fifty-five percent (55%) of the Fair Market Value of the Vessel for the purposes of financing, refinancing or reimbursing a part of the acquisition cost of the Vessel (including through the payment of distributions to the Parent) and for general corporate purposes.

 

2.            The Borrower is a wholly owned indirect subsidiary of the Parent, an Initial Guarantor. The Borrower is a wholly owned direct subsidiary of ISOC. The Upstream Guarantor, an Initial Guarantor, is a wholly owned direct subsidiary of the Borrower and the owner of the Vessel.

 

3.            As a condition to the obligation of the Lenders to make the credit facility available to the Borrower hereunder, the Initial Guarantors have agreed to guarantee, on the terms and conditions set forth herein, the obligations of the Borrower under this Agreement and any Secured Swap Contract.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein, the parties hereto hereby agree as follows:

 

ARTICLE I

DEFINITIONS

 

1.01         Defined Terms. As used in this Agreement, the following terms have the meanings specified below:

 

“Account Bank” means ABN AMRO Bank N.V., acting through its office at Gustav Mahlerlaan 10, 1082 PP Amsterdam, The Netherlands, or such other bank agreed to from time to time between the Facility Agent and the Borrower and subject to the specific consent of the Facility Agent.

 

“Account Pledge” means any first priority pledge of any of the Borrower Operating Account, the Dry Dock Reserve Account and the Debt Service Reserve Account in the form of Exhibit A, or any other form approved by the Facility Agent, with the consent of the Required Lenders (such consent not to be unreasonably withheld or delayed), in writing.

 

“Acquisition” means, as to any Person, the purchase or other acquisition (in one transaction or a series of transactions, including through a merger) of all of the equity interests of another Person or all or substantially all of the property, assets or business of another Person or of the assets constituting a business unit, line of business or division of another Person.

 

“Additional Guarantor” means any Wholly-Owned Subsidiary of the Borrower that is reasonably acceptable to the Required Lenders that shall become a party hereto as Guarantor by executing and delivering to the Facility Agent a Guarantor Accession Agreement, including (a) any such Person that is or shall be the owner of any Additional Vessel financed or to be financed by any Incremental Commitment pursuant to Section 2.21(a), and (b) any such Person providing additional Collateral to secure the Obligations.

 

 

“Additional Vessel” means any crude oil tanker vessel which is less than or equal to seven (7) years old and which may be acquired by an Additional Guarantor pursuant to Section 2.21(a).

 

“Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Facility Agent.

 

“Affected Interest Period” has the meaning specified in Section 2.17.

 

“Affected Lender” has the meaning specified in Section 2.17(b).

 

“Affiliate” means, with respect to a specified Person, another Person that directly or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

 

“Agent Parties” has the meaning specified in Section 11.01(d)(ii).

 

“Agreed Form” means, in relation to any document, such document in a form agreed by the Borrower and the Facility Agent (acting on the instructions of the Required Lenders).

 

“Agreement” has the meaning specified in the introductory paragraph hereof.

 

“Anti-Corruption Laws” has the meaning specified in Section 3.16(c).

 

“Applicable Law” means, as to any Person, all applicable Laws binding upon such Person or to which such a Person is subject.

 

“Applicable Percentage” means with respect to any Lender, the percentage of the Total Commitments represented by such Lender’s Commitment. If the Commitments have terminated or expired, the Applicable Percentages shall be determined based upon the Commitments most recently in effect, giving effect to any assignments.

 

“Approved Broker” means (a) the Persons listed on Schedule III, and (b) any other Person proposed by the Borrower which the Facility Agent may, with the consent of the Required Lenders (such consent not to be unreasonably withheld, conditioned or delayed), approve from time to time in writing.

 

“Approved Flag” means the flag of the Marshall Islands, Liberia or Panama or such other flag proposed by the Borrower which the Facility Agent may, with the prior written consent of the Required Lenders, approve from time to time in writing as the flag on which the Vessel shall be registered.

 

“Approved Fund” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

 

 

“Approved Manager” means (a) the Parent or any Affiliates thereof, (b) with respect to the commercial management of the Vessel, the Tankers International pool or any other reputable pool operator proposed by the Borrower which the Facility Agent may, with the consent of the Required Lenders (such consent not to be unreasonably withheld, conditioned or delayed), approve from time to time in writing as the commercial manager of the Vessel and (c) with respect to the technical management of the Vessel, V.Ships or any Affiliates thereof or any other Person proposed by the Borrower which the Facility Agent may, with the consent of the Required Lenders (such consent not to be unreasonably withheld, conditioned or delayed), approve from time to time in writing as the technical manager of the Vessel.

 

“Approved Pooling Arrangement” means, in respect of the Vessel, the Tankers International pool or any other pooling arrangement proposed by the Borrower which the Facility Agent may, with the consent of the Required Lenders (such consent not to be unreasonably withheld, conditioned or delayed), approve from time to time in writing.

 

“Arranger” means ABN AMRO Capital USA LLC in its capacity as arranger.

 

“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an Eligible Assignee (with the consent of any party whose consent is required by Section 11.04), and accepted by the Facility Agent, in substantially the form of Exhibit B or any other form approved by the Facility Agent.

 

“Assignment of Earnings” means, in relation to the Vessel, an assignment of the Earnings and any Requisition Compensation of the Vessel, in substantially the form of Exhibit C, or any other form approved by the Facility Agent.

 

“Assignment of Insurances” means, in relation to the Vessel, an assignment of the Insurances of the Vessel, in substantially the form of Exhibit D, or any other form approved by the Facility Agent.

 

“Attributable Indebtedness” means, when used with respect to any Capitalized Lease or Synthetic Lease Obligation, as at the time of determination, the present value (discounted at a rate equivalent to ISOC’s then-current weighted average cost of funds for borrowed money as at the time of determination, compounded on a semi-annual basis) of the total obligations of the lessee for rental payments (and substantially similar payments) during the remaining term of the lease included in any such transaction.

 

“Audited Financial Statements” means the audited consolidated balance sheet of the Parent and its Subsidiaries for the fiscal year ended December 31, 2017 and the related consolidated statements of income or operations, shareholders’ equity and cash flows for such fiscal year of the Parent and its Subsidiaries.

 

“Availability Period” means the period from and including the Closing Date to and including the Commitment Termination Date.

 

“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an EEA Financial Institution.

 

“Bail-In Legislation” means, with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule.

 

“Balloon Installment” has the meaning specified in Section 2.06(a)(ii).

 

 

“Beneficial Ownership Certification” means a certification regarding beneficial ownership as required by the Beneficial Ownership Regulation.

 

“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.

 

“Bookrunner” means ABN AMRO Capital USA LLC in its capacity as bookrunner.

 

“Borrower” means Seaways Shipping Corporation, a corporation incorporated and existing under the laws of the Republic of the Marshall Islands.

 

“Borrower Operating Account” means an account in the name of the Borrower with the Account Bank designated “Seaways Shipping Corporation – Borrower Operating Account”.

 

“Borrower Share Pledge” means a pledge of the Equity Interests of the Upstream Guarantor, in substantially the form of Exhibit J-1, or any other form approved by the Facility Agent.

 

“Borrowing” means a borrowing consisting of the Loan made by the Lenders under this Agreement.

 

“Borrowing Request” means a request for the Borrowing which shall be in substantially the form of Exhibit E, or any other form approved by the Facility Agent.

 

“Business Day” means any day that is not a Saturday, Sunday or other day that is a legal holiday under the laws of The Netherlands or the State of New York or is a day on which banking institutions in such state are authorized or required by Law to close; provided that, when used in connection with LIBOR, the term “Business Day” means any such day that is also a day on which dealings in Dollar deposits are conducted by and between banks in the London interbank market.

 

“Capitalized Lease” means each lease that has been or is required to be, in accordance with GAAP (as applicable on the date of this Agreement), recorded as a capitalized lease.

 

“Cash Equivalents” means:

 

(a)          direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof;

 

(b)          investments in certificates of deposit, banker’s acceptances and time deposits maturing within 180 days from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof that has a combined capital and surplus and undivided profits of not less than $500,000,000;

 

(c)          marketable short-term money market and similar highly liquid funds having a rating of at least P-1 or A-1 from either Moody’s or S&P, respectively (or, if at any time neither Moody’s nor S&P shall be rating such obligations, an equivalent rating from another Credit Rating Agency);

 

(d)          fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria described in clause (b) above; and

 

 

(e)          commercial paper rated at least P-1 by Moody’s or at least A-1 by S&P (or, if at any time neither Moody’s nor S&P shall be rating such obligations, an equivalent rating from another Credit Rating Agency) and in each case maturing within 12 months after the date of creation thereof.

 

“Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.

 

“Change of Control” means the occurrence of any act, event or circumstance without the prior written consent of the Required Lenders that: (a) in respect of the Upstream Guarantor, results in the Borrower owning directly less than one hundred percent (100%) of the issued and outstanding Equity Interests in the Upstream Guarantor; (b) in respect of the Borrower, results in the Parent owning directly or indirectly less than one hundred percent (100%) of the issued and outstanding Equity Interests in the Borrower; and (c) in respect of the Parent, results in a “person” or “group” (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act, but excluding any employee benefit plan of such person or group or its respective subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) becoming the ultimate “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act and including by reason of any change in the ultimate “beneficial ownership” of the Equity Interests of the Parent), directly or indirectly, of either (i) fifty percent (50%) or more of the total voting power of the voting Equity Interests of the Parent (calculated on a fully diluted basis) or (ii) fifty percent (50%) or more of the total economic interest of the Equity Interests of the Parent (calculated on a fully diluted basis).

 

“Charter Assignment” means, in relation to the Vessel, an assignment of any demise charter and any time or consecutive voyage charter for a term which exceeds, or by virtue of any optional extensions may exceed, twelve (12) months for the Vessel entered into by the Upstream Guarantor (other than a charter pursuant to an Approved Pooling Arrangement), in substantially the form of Exhibit F, or any other form approved by the Facility Agent.

 

“Classification Society” means, in relation to the Vessel, American Bureau of Shipping, DNV-GL, Lloyd’s Register of Shipping, Korean Register of Shipping, Nippon Kaiji Kyokai or Bureau Veritas or such other vessel classification society proposed by the Borrower that is a member of IACS that the Facility Agent may, with the prior consent of the Required Lenders (such consent not to be unreasonably withheld, conditioned or delayed), approve from time to time in writing.

 

“Closing Date” means the date of this Agreement.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Collateral” means all property (whether real or personal, including, without limitation, any proceeds thereof) with respect to which any security interests have been granted (or purport to be granted) pursuant to any Security Document.

 

 

“Commitment” means with respect to each Lender on any date, the commitment of such Lender to make the Loan if the Loan is required to be disbursed on such date, as such commitment may be reduced or increased from time to time pursuant to Section 11.04(b) or increased from time to time pursuant to Section 2.21. The initial amount of such Lender’s Commitment is set forth on Schedule I or in the Assignment and Assumption pursuant to which such Lender shall have assumed its Commitment, as applicable.

 

“Commitment Termination Date” means the date falling ten (10) Business Days after the Closing Date (or, as to any Incremental Commitment, the date falling sixty (60) days after the Incremental Commitment Effective Date), subject to extension as may be agreed between the Borrower and the Facility Agent (except that, if such date is not a Business Day, the Commitment Termination Date shall be the next Business Day).

 

“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute.

 

“Communications” has the meaning specified in Section 11.01(d)(ii).

 

“Connection Income Taxes” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.

 

“Contractual Obligation” means, as to any Person, any provision of any material agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

 

“Contribution Notice” means a contribution notice issued by the Pensions Regulator under section 38 or section 47 of the Pensions Act 2004.

 

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.

 

“Corresponding Liabilities means all present and future monetary liabilities and contractual and non-contractual monetary obligations of the Borrower to any Finance Party under or in connection with this Agreement, the other Loan Documents and any Secured Swap Contract, but excluding its Parallel Liability.

 

“Credit Rating Agency” means (a) Standard & Poor’s Financial Services LLC (“S&P”), (b) Moody’s Investors Service, Inc. (“Moody’s”), and (c) any other nationally recognized credit rating agency that evaluates the financial condition of issuers of debt instruments and then assigns a rating that reflects its assessment of the issuer's ability to make debt payments, to the extent consented to by the Facility Agent (such consent not to be unreasonably withheld, conditioned or delayed).

 

“Debt Service Reserve Account” means an account in the name of the Borrower with the Account Bank designated “Seaways Shipping Corporation – Debt Service Reserve Account”.

 

“Debtor Relief Laws” means the Bankruptcy Code of the United States of America, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect.

 

 

“Debtor Relief Plan” means a plan of reorganization or plan of liquidation pursuant to any Debtor Relief Laws.

 

“Default” means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time, or both, would be an Event of Default.

 

“Default Rate” means an interest rate (before as well as after judgment) equal to the applicable interest rate plus 2.00% per annum.

 

“Defaulting Lender” means, subject to Section 2.20(b), any Lender that (a) has failed to (i) fund all or any portion of its portions of the Loan within two Business Days of the date such portions of the Loan were required to be funded hereunder unless such Lender notifies the Facility Agent and the Borrower in writing that such failure is the result of such Lender’s determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in such writing) has not been satisfied, or (ii) pay to the Facility Agent or any other Lender any other amount required to be paid by it hereunder within two Business Days of the date when due, (b) has notified the Borrower or the Facility Agent in writing that it does not intend to comply with its funding obligations hereunder, or has made a public statement to that effect (unless such writing or public statement relates to such Lender’s obligation to fund the Loan hereunder and states that such position is based on such Lender’s determination that a condition precedent to funding (which condition precedent, together with any applicable default, shall be specifically identified in such writing or public statement) cannot be satisfied), (c) has failed, within three Business Days after written request by the Facility Agent or the Borrower, to confirm in writing to the Facility Agent and the Borrower that it will comply with its prospective funding obligations hereunder (provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such written confirmation by the Facility Agent and the Borrower), or (d) has, or has a direct or indirect parent company that has, (i) become the subject of a proceeding under any Debtor Relief Law, (ii) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity or (iii) become the subject of a Bail-in Action; provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any equity interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender. Any determination by the Facility Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through (d) above shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 2.20(b)) upon delivery of written notice of such determination to the Borrower and each Lender.

 

“Disposition” or “Dispose” means the sale, transfer, license, lease or other disposition of any property by any Person (including any sale and leaseback transaction and any issuance of Equity Interests by a Subsidiary of such Person), including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith.

 

 

“Disqualified Equity Interest” means any Equity Interest that, by its terms (or the terms of any security or other Equity Interests into which it is convertible or for which it is exchangeable), or upon the happening of any event or condition (a) matures or is mandatorily redeemable (other than solely for Equity Interests that are not Disqualified Equity Interests), pursuant to a sinking fund obligation or otherwise (except as a result of a change of control or asset sale so long as any rights of the holders thereof upon the occurrence of a change of control or asset sale event shall be subject to the prior repayment in full of the Loan and all other Obligations that are accrued and payable and the termination of the Commitments), (b) is redeemable at the option of the holder thereof, in whole or in part, (c) provides for scheduled payments of dividends in cash, or (d) is or becomes convertible into or exchangeable for Indebtedness or any other Equity Interests that would constitute Disqualified Equity Interests, in each case, prior to the date that is ninety-one days after the Maturity Date; provided that if such Equity Interests are issued pursuant to a plan for the benefit of employees of the Borrower or any Subsidiary or by any such plan to such employees, such Equity Interests shall not constitute Disqualified Equity Interests solely because they may be required to be repurchased by the Borrower or its Subsidiaries in order to satisfy applicable statutory or regulatory obligations or as a result of such employee’s termination, death or disability.

 

“Dollar” and “$” mean lawful money of the United States.

 

“Drawdown Date” means the date of the Borrowing which in any event shall be no later than the Commitment Termination Date.

 

“Dry Dock Reserve Account” means an account in the name of the Borrower with the Account Bank designated “Seaways Shipping Corporation – Dry Dock Reserve Account”.

 

“Early Termination Date” shall have the meaning given to that term in any relevant Master Agreement.

 

“Earnings” means, in relation to the Vessel, all moneys whatsoever which are now, or later become, payable (actually or contingently) to the Upstream Guarantor or the Security Trustee and which arise out of the use or operation of the Vessel, including (but not limited to):

 

(a)          except to the extent that they fall within paragraph (b) or are otherwise agreed with the prior written consent of the Facility Agent: (i) all freight, hire and passage moneys, (ii) compensation payable to the Upstream Guarantor or the Security Trustee in the event of requisition of the Vessel for hire, (iii) remuneration for salvage and towage services, (iv) demurrage and detention moneys, (v) damages for breach (or payments for variation or termination) of any charterparty or other contract for the employment of the Vessel, and (vi) all moneys which are at any time payable under Insurances in respect of loss of hire; and

 

(b)          if and whenever the Vessel is employed on terms whereby any moneys falling within paragraphs (a)(i) to (vi) are pooled or shared with any other person, that proportion of the net receipts of the relevant pooling or sharing arrangement which is attributable to the Vessel.

 

“EEA Financial Institution” means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.

 

“EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.

 

 

“EEA Resolution Authority” means any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.

 

“Eligible Assignee” means any Person that meets the requirements to be an assignee under Section 11.04(b)(i), (iii) and (iv) (subject to such consents, if any, as may be required under Section 11.04(b)(i)).

 

“Environmental Laws” means any and all Federal, state, local, and foreign statutes, Laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions, including all common law, relating to pollution or the protection of health, safety or the environment or the release of any materials into the environment, including those related to Hazardous Materials, air emissions, discharges to waste or public systems and health and safety matters.

 

“Environmental Liability” means any liability or obligation, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), directly or indirectly, resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment, disposal or permitting or arranging for the disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

 

“Equity Interests” means, as to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.

 

“ERISA” means the Employee Retirement Income Security Act of 1974.

 

“ERISA Affiliate” means any trade or business (whether or not incorporated) under common control with the Borrower within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code or Section 302 of ERISA).

 

“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) the failure by the Borrower or any ERISA Affiliate to meet all applicable requirements under the Pension Funding Rules or the filing of an application for the waiver of the minimum funding standards under the Pension Funding Rules; (c) the incurrence by the Borrower or any ERISA Affiliate of any liability pursuant to Section 4063 or 4064 of ERISA or a cessation of operations with respect to a Pension Plan within the meaning of Section 4062(e) of ERISA; (d) a complete or partial withdrawal by the Borrower or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization or insolvent (within the meaning of Title IV of ERISA); (e) the filing of a notice of intent to terminate a Pension Plan under, or the treatment of a Pension Plan amendment as a termination under, Section 4041 of ERISA; (f) the institution by the PBGC of proceedings to terminate a Pension Plan; (g) any event or condition that constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (h) the determination that any Pension Plan is in at-risk status (within the meaning of Section 430 of the Code or Section 303 of ERISA) or that a Multiemployer Plan is in endangered or critical status (within the meaning of Section 432 of the Code or Section 305 of ERISA); (i) the imposition or incurrence of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Borrower or any ERISA Affiliate; (j) the engagement by the Borrower or any ERISA Affiliate in a transaction that could be subject to Section 4069 or Section 4212(c) of ERISA; (k) the imposition of a lien upon the Borrower pursuant to Section 430(k) of the Code or Section 303(k) of ERISA; or (l) the making of an amendment to a Pension Plan that could result in the posting of bond or security under Section 436(f)(1) of the Code.

 

 

“Estate” has the meaning specified in Section 10.01(b)(ii).

 

“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.

 

“Event of Default” has the meaning specified in Section 9.01.

 

“Excluded Swap Obligations” means with respect to any Guarantor, any Swap Obligation if, and to the extent that, all or a portion of the guarantee of such Guarantor of, or the grant by such Guarantor of a security interest to secure, such Swap Obligation (or any Guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Guarantor’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act and the regulations thereunder at the time the guarantee of such Guarantor or the grant of such security interest becomes effective with respect to such related Swap Obligation. If a Swap Obligation arises under a Master Agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such guarantee or security interest is or becomes illegal.

 

“Excluded Taxes” means any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in the Loan or Commitment pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the Loan or Commitment (other than pursuant to an assignment request by the Borrower under Section 2.19(b)) or (ii) such Lender changes its lending office, except in each case to the extent that, pursuant to Section 2.16, amounts with respect to such Taxes were payable either to such Lender's assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its lending office, (c) Taxes attributable to such Recipient’s failure to comply with Section 2.16(g) and (d) any U.S. Federal withholding Taxes imposed under FATCA.

 

“Facility” means a senior secured term loan facility in the aggregate principal amount of the Total Commitments.

 

“Facility Agent” means ABN AMRO Capital USA LLC, in its capacity as facility agent under any of the Loan Documents, or any successor facility agent.

 

 

“Facility Agent’s Office” means the Facility Agent’s address and, as appropriate, account as set forth in Section 11.01(a)(iii), or such other address or account as the Facility Agent may from time to time notify to the Borrower and the Lenders.

 

“Fair Market Value” means, in relation to the Vessel, the market value of the Vessel at any date that is shown by the average of two (2) valuations each prepared for and addressed to the Facility Agent at the cost of the Borrower: (a) as at a date not more than 30 days prior to the date such valuation is delivered to the Facility Agent; (b) by Approved Brokers selected by the Borrower; (c) on a “desk-top” basis without physical inspection of the Vessel; and (d) on the basis of a sale for prompt delivery for cash on normal arm’s length commercial terms as between a willing seller and a willing buyer, free of any existing charter or other contract of employment or encumbrances (and with no value to be given to any pooling arrangements); provided that (i) if a range of market values is provided in a particular appraisal, then the market value in such appraisal shall be deemed to be the mid-point within such range, and (ii) if there is a difference of, or in excess of, ten percent (10%) between the two appraisals obtained, the Borrower may, at its sole expense, obtain a third appraisal from an Approved Broker appointed by the Facility Agent, with the value of the Vessel to be deemed the average of the three valuations obtained if a third appraisal is obtained.

 

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreements entered into pursuant to Section 1471(b)(1) of the Code and any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement, treaty or convention among Governmental Authorities entered into in connection with the implementation of the foregoing.

 

“FCPA” has the meaning specified in Section 3.16(c).

 

“Federal Funds Rate” shall mean for any day the rate per annum (based on a year of 360 days and actual days elapsed) which is the daily federal funds open rate as quoted by ICAP North America, Inc. (or any successor) as set forth on the Bloomberg Screen BTMM for that day opposite the caption “OPEN” (or on such other substitute Bloomberg Screen that displays such rate), or as set forth on such other recognized electronic source used for the purpose of displaying such rate as selected by the Facility Agent (an “Alternate Source”) (or if such rate for such day does not appear on the Bloomberg Screen BTMM (or any substitute screen) or on any Alternate Source, or if there shall at any time, for any reason, no longer exist a Bloomberg Screen BTMM (or any substitute screen) or any Alternate Source, a comparable replacement rate reasonably determined by Facility Agent at such time (which determination shall be conclusive absent manifest error); provided however, that if such day is not a Business Day, the Federal Funds Rate for such day shall be the “open” rate on the immediately preceding Business Day.

 

“Federal Reserve Board” means the Board of Governors of the Federal Reserve System of the United States.

 

“Fee Letters” means, collectively, the Upfront Fee Letter and the Structuring and Agency Fee Letter.

 

“Finance Party” means the Facility Agent, the Bookrunner, the Security Trustee, any Mandated Lead Arranger, the Arranger, any Lender and any Swap Bank, whether as at the date of this Agreement or at any later time.

 

“Financial Officer” means, as to any Person, the chief financial officer, principal accounting officer, treasurer or controller of such Person.

 

 

“Financial Support Direction” shall mean a financial support direction issued by the Pensions Regulator under section 43 of the Pensions Act 2004.

 

“First Repayment Date” means the date that is three (3) months after the Drawdown Date.

 

“Foreign Lender” means any Lender that is organized under the Laws of a jurisdiction other than the United States (or, in the case of a Lender that is classified for U.S. federal income tax purposes as an entity that is disregarded from another Person, such Lender if such Person is organized under the Laws of a jurisdiction other than the United States). For purposes of this definition, the United States, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

 

“Foreign Plan” means any employee pension benefit plan, program, policy, arrangement or agreement maintained or contributed to by the Borrower or any Subsidiary with respect to employees employed outside the United States (other than any governmental arrangement).

 

“Fund” means any Person (other than a natural Person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans, bonds and similar extensions of credit in the ordinary course of its activities.

 

“GAAP” means, subject to Section 1.03, United States generally accepted accounting principles as in effect as of the date of determination thereof.

 

“Governmental Authority” means the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

 

“Guarantee” means, as to any Person, (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation payable or performable by another Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other obligation of the payment or performance of such Indebtedness or other obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part) or (b) any Lien on any assets of such Person securing any Indebtedness or other obligation of any other Person, whether or not such Indebtedness or other obligation is assumed by such Person (or any right, contingent or otherwise, of any holder of such Indebtedness to obtain any such Lien); provided that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business. The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith. The term “Guarantee” as a verb has a corresponding meaning.

 

“Guaranteed Obligations” has the meaning specified in Section 8.01.

 

 

“Guarantor Accession Agreement” means an agreement providing for the accession of a Person to this Agreement as a Guarantor in substantially the form of Exhibit G, or in any other form approved by the Facility Agent.

 

“Guarantors” means, collectively, the Initial Guarantors and any Additional Guarantors that become a party hereto.

 

“Hazardous Materials” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes, and other substances or wastes of any nature regulated under or with respect to which liability or standards of conduct are imposed pursuant to any Environmental Law.

 

“Incremental Commitment” has the meaning specified in Section 2.21(a).

 

“Incremental Commitment Effective Date” has the meaning specified in Section 2.21(c).

 

“Incremental Lender” has the meaning specified in Section 2.21(b).

 

“Indebtedness” means, as to any Person at a particular time, without duplication:

 

(a)          all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;

 

(b)          all obligations of such Person for the reimbursement of any obligor in respect of letters of credit, bankers’ acceptances and similar credit transactions;

 

(c)          net obligations of such Person under any Swap Contract;

 

(d)          all obligations of such Person to pay the deferred purchase price of property or services (other than trade accounts payable and accrued obligations incurred in the ordinary course of business);

 

(e)          indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse;

 

(f)           all Attributable Indebtedness;

 

(g)          all obligations of such Person in respect of Disqualified Equity Interests; and

 

(h)          all Guarantees of such Person in respect of any of the foregoing.

 

 

For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, unless such Indebtedness is expressly made non-recourse to such Person. The amount of any net obligation under any Swap Contract on any date shall be deemed to be the Swap Termination Value thereof as of such date. The amount of any Indebtedness of any Person for purposes of clause (e) that is expressly made non-recourse or limited-recourse (limited solely to the assets securing such Indebtedness) to such Person shall be deemed to be equal to the lesser of (i) the aggregate principal amount of such Indebtedness and (ii) the fair market value of the property encumbered thereby as determined by such Person in good faith. The term “Indebtedness” shall not include (i) preferred or prepaid revenues, (ii) purchase price holdbacks in respect of a portion of the purchase price of an asset to satisfy warranty or other unperformed obligations of the seller of such asset, (iii) any obligations constituting the exercise of appraisal rights and settlements of any claim of actions (whether actual, contingent or potential) with respect thereto and (iv) any Indebtedness of the Parent appearing on the balance sheet of the Borrower or any Guarantor (other than the Parent), or solely by reason of push down accounting under GAAP, in each case, so long as neither the Borrower nor such Guarantor has any obligation with respect thereto and the holder of such Indebtedness has no recourse to the Borrower or such Guarantor with respect thereto.

 

“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of the Borrower or the Guarantors under any Loan Document and (b) to the extent not otherwise described in (a), Other Taxes.

 

“Indemnitee” has the meaning specified in Section 11.03(b).

 

“Information” has the meaning specified in Section 11.12.

 

“Initial Guarantors” means, collectively, the Persons listed on Schedule II.

 

“Insurances” means, in relation to the Vessel:

 

(a)          all policies and contracts of insurance, including entries of the Vessel in any protection and indemnity or war risks association, effected in respect of the Vessel, or otherwise in relation to the Vessel on or after the Drawdown Date; and

 

(b)          all rights and other assets relating to, or derived from, any of the foregoing, including any rights to a return of a premium, and any rights in respect of any claim made, on or after the Drawdown Date.

 

“Interest Period” means a period determined in accordance with Section 2.05.

 

“Interpolated Screen Rate” shall mean, in relation to LIBOR for the Loan or any part of it, the rate (rounded to the same number of decimal places as the two relevant Screen Rates) which results from interpolating on a linear basis between:

 

(a)          the applicable Screen Rate for the longest period (for which that Screen Rate is available) which is less than the relevant Interest Period of the Loan or relevant part of it; and

 

(b)          the applicable Screen Rate for the shortest period (for which that Screen Rate is available) which exceeds the relevant Interest Period of the Loan or relevant part of it,

 

each as of 11:00 a.m. London time on the Quotation Day for Dollars.

 

“Inventory of Hazardous Materials” means a document listing all potentially hazardous materials on board the Vessel or utilized in the construction of the Vessel, or other equivalent document acceptable to the Facility Agent, issued by a classification society being a member of the International Association of Classification Societies (“IACS”) pursuant to the Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships, 2009.

 

 

“Investment” means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of Equity Interests or debt or other securities of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of debt of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person and any arrangement pursuant to which the investor incurs Indebtedness of the type referred to in clause (h) of the definition of “Indebtedness” in respect of such other Person, or (c) the purchase or other acquisition (in one transaction or a series of transactions) of all or substantially all of the property and assets or business of another Person or assets constituting a business unit, line of business or division of such Person. For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment but giving effect to any returns or distributions of capital or repayment of principal actually received in case by such Person with respect thereto.

 

“IRS” means the United States Internal Revenue Service.

 

“ISM Code” means the International Safety Management Code (including the guidelines on its implementation), as adopted by the International Maritime Organization, as the same may be amended or supplemented from time to time (and the terms “safety management system”, “Safety Management Certificate” and “Document of Compliance” have the same meanings as are given to them in the ISM Code).

 

“ISM Code Documentation” includes, in respect of the Vessel:

 

(a)          the Document of Compliance and Safety Management Certificate issued pursuant to the ISM Code in relation to the Vessel within the periods specified by the ISM Code;

 

(b)          all other documents and data which are relevant to the safety management system and its implementation and verification which the Facility Agent may reasonably require; and

 

(c)          any other documents which are prepared or which are otherwise relevant to establish and maintain the Vessel’s compliance or the compliance of the Upstream Guarantor or the relevant Approved Manager of the Vessel with the ISM Code which the Facility Agent may reasonably require.

 

“ISOC” means International Seaways Operating Corporation, a corporation incorporated and existing under the laws of the Republic of the Marshall Islands.

 

“ISOC Share Pledge” means a pledge of the Equity Interests of the Borrower, in substantially the form of Exhibit J-2, or any other form approved by the Facility Agent.

 

“ISPS Code” means the International Ship and Port Facility Security Code, as adopted by the International Maritime Organization, as the same may be amended or supplemented from time to time.

 

“ISPS Code Documentation” includes:

 

(a)          the ISSC; and

 

(b)          all other documents and data which are relevant to the ISPS Code and its implementation and verification which the Facility Agent may reasonably require.

 

 

“ISSC” means a valid and current International Ship Security Certificate issued under the ISPS Code.

 

“Joinder Agreement” means a joinder or similar agreement entered into by any Person (including any Lender) under Section 2.21 pursuant to which such Person shall provide an Incremental Commitment hereunder and (if such Person is not then a Lender) shall become a Lender party hereto.

 

“Laws” means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of law.

 

“Lenders” means the Persons listed on Schedule I, Part A, any Person that becomes a party hereto pursuant to a Joinder Agreement, and any other Person that shall have become party hereto pursuant to an Assignment and Assumption, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption.

 

“Letters of Undertaking” has the meaning specified in Section 5.10(a).

 

“LIBOR” means, in relation to the Loan or any part of it: (a) the applicable Screen Rate; (b) if no Screen Rate is available for the relevant currency or the relevant Interest Period of the Loan or relevant part of it the Interpolated Screen Rate for the Loan or relevant part of it; or (c) if: (i) no Screen Rate is available for the relevant currency of the Loan or relevant part of it; or (ii) no Screen Rate is available for the relevant Interest Period of the Loan or relevant part of it and it is not possible to calculate an Interpolated Screen Rate for the Loan or relevant part of it, the Reference Bank Rate, as of, in the case of paragraphs (a) and (c) above, 11:00 a.m. London time on the Quotation Day for a period equal in length to the Interest Period of the Loan or relevant part of it and, if that rate is less than zero, LIBOR shall be deemed to be zero.

 

“Lien” means any mortgage, pledge, hypothecation, collateral assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to real property, and any financing lease having substantially the same economic effect as any of the foregoing).

 

“Loan” means the loan by the Lenders to the Borrower under Article II and, unless the context shall require otherwise, the term “Loan” shall also include any loans made pursuant to an Incremental Commitment.

 

“Loan Documents” means, collectively: (a) this Agreement, (b) any Guarantor Accession Agreement, (c) any Joinder Agreement, (d) any Notes, (e) any Security Document, (f) the Fee Letters, and (g) any other documents, certificates, instruments or agreements executed by or on behalf of a Security Party for the benefit of any Finance Party in connection herewith on or after the date hereof that are jointly designated by such Security Party and the Facility Agent as a “Loan Document”. Any reference in this Agreement or any other Loan Document to a Loan Document shall include all appendices, exhibits or schedules thereto, and all amendments, restatements, supplements or other modifications thereto, and shall refer to this Agreement or such Loan Document as the same may be in effect at any and all times such reference becomes operative.

 

 

“Major Casualty” means, in relation to the Vessel, any casualty to the Vessel in respect of which the claim or the aggregate of the claims against all insurers, before adjustment for any relevant franchise or deductible, exceeds $1,500,000 or the equivalent in any other currency;

 

“Manager’s Undertaking” means, in relation to the Vessel, the letter executed and delivered by an Approved Manager, in substantially the form of Exhibit H, or any other form approved by the Facility Agent.

 

“Mandated Lead Arranger” means ABN AMRO Capital USA LLC, in its capacity as mandated lead arranger.

 

“Margin” means 3.25% per annum.

 

“Margin Stock” means margin stock within the meaning of Regulation T, Regulation U and Regulation X.

 

“Master Agreement” means the 1992 ISDA Master Agreement or 2002 ISDA Master Agreement, in the form published by the International Swaps and Derivatives Association, Inc., if any, between the Borrower and a Swap Bank, together with any Schedule thereto, Credit Support Documents thereunder and Confirmations thereunder, in each case, between the Borrower and such Swap Bank.

 

“Master Agreement Assignment” means, in relation to each Master Agreement constituting Collateral, an assignment of such Master Agreement, in Agreed Form.

 

“Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect on, the operations, business, properties, liabilities (actual or contingent) or condition (financial or otherwise) of the Borrower and its Subsidiaries taken as a whole, or (b) a material adverse effect on (i) the ability of the Borrower and its Subsidiaries taken as a whole to perform the Obligations, (ii) the legality, validity, binding effect or enforceability against any Obligor or ISOC of the Loan Documents to which it is a party or (iii) the rights, remedies and benefits available to, or conferred upon, the Facility Agent or any Lender under any Loan Documents.

 

“Maturity Date” means the date falling on the earlier of five (5) years after (i) May 28, 2018 and (ii) the Drawdown Date.

 

“Maximum Rate” has the meaning specified in Section 11.14.

 

“Multiemployer Plan” means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate makes or is obligated to make contributions, during the preceding five plan years has made or been obligated to make contributions, or has any liability.

 

“Multiple Employer Plan” means a Plan with respect to which the Borrower or any ERISA Affiliate is a contributing sponsor, and that has two or more contributing sponsors at least two of whom are not under common control, as such a plan is described in Section 4064 of ERISA.

 

“Non-Consenting Lender” means any Lender that does not approve any consent, waiver or amendment that (a) requires the approval of all or all affected Lenders in accordance with the terms of Section 11.02 and (b) has been approved by the Required Lenders.

 

 

“Non-Defaulting Lender” means, at any time, each Lender that is not a Defaulting Lender at such time.

 

“Note” means a promissory note executed by the Borrower in favor of a Lender in accordance with Section 2.11(b).

 

“Obligations” means all advances to, and debts, liabilities, obligations, covenants and duties of, the Borrower arising under any Loan Document or any Secured Swap Contract or otherwise with respect to the Loan, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against the Borrower or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding. Without limiting the foregoing, the Obligations include (a) the obligation to pay principal, interest, charges, expenses, fees, indemnities and other amounts payable by the Borrower under any Loan Document, (b) the obligation of the Borrower to reimburse any amount in respect of any of the foregoing that the Facility Agent or any Lender, in each case in its sole discretion, may elect to pay or advance on behalf of the Borrower in accordance with this Agreement or any other Loan Document, and (c) obligations under a Secured Swap Contract.

 

“Obligor Materials” has the meaning specified in Section 11.01(e).

 

“Obligors” means, collectively, the Borrower and the Guarantors, and “Obligor” means any of them as the context may require.

 

“Operating Expenses” means expenses properly and reasonably incurred by the Borrower or the Upstream Guarantor in connection with the operation, management, employment, maintenance, repair, drydocking, crewing, victualing and insurance of the Vessel and any pooling expenses of the Vessel or voyage expenses of the Vessel, including bunker and lubricating oil expenses, port fees, agents fees and commissions, cargo loading and unloading expenses, canal charges and any additional insurance cover.

 

“Organizational Documents” means (a) as to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction), (b) as to any limited liability company, the certificate or articles of formation or organization and operating or limited liability agreement and (c) as to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.

 

“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or having sold or assigned an interest in any portion of the Loan or any Loan Document).

 

“Other Taxes” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 2.19(b)).

 

 

“Parallel Liability” means the Borrower’s undertaking pursuant to Section 8.12.

 

“Parent” means International Seaways, Inc., a corporation incorporated and existing under the laws of the Republic of the Marshall Islands.

 

“Participant” has the meaning specified in Section 11.04(d).

 

“Participant Register” has the meaning specified in Section 11.04(d).

 

“PATRIOT Act” means the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)).

 

“PBGC” means the Pension Benefit Guaranty Corporation.

 

“Pension Act” means the Pension Protection Act of 2006.

 

“Pension Funding Rules” means the rules of the Code and ERISA regarding minimum funding standards and minimum required contributions (including any installment payment thereof) to Pension Plans and Multiemployer Plans and set forth in, with respect to plan years ending prior to the effective date of the Pension Act, Section 412 of the Code and Section 302 of ERISA, each as in effect prior to the Pension Act and, thereafter, Sections 412, 430, 431, 432 and 436 of the Code and Sections 302, 303, 304 and 305 of ERISA.

 

“Pension Plan” means any employee pension benefit plan (including a Multiple Employer Plan, but excluding a Multiemployer Plan) that is maintained or is contributed to by the Borrower or any ERISA Affiliate and is either covered by Title IV of ERISA or is subject to the minimum funding standards under Section 412 of the Code.

 

“Pensions Regulator” shall mean the body corporate called the Pensions Regulator established under Part 1 of the Pensions Act 2004.

 

“Permitted Lien” has the meaning specified in Section 6.02.

 

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

 

“Pertinent Jurisdiction” means, in relation to a Person:

 

(a)          the jurisdiction under the laws of which the Person is incorporated or formed;

 

(b)          a jurisdiction in which the Person has the center of its main interests or in which the Person’s central management and control is or has recently been exercised;

 

(c)          a jurisdiction in which the overall net income of the Person is subject to corporation tax, income tax or any similar tax;

 

 

(d)          a jurisdiction in which assets of the Person (other than securities issued by, or loans to, related Persons) having a substantial value are situated, in which the Person maintains a branch or permanent place of business, or in which a Lien created by the Person must or should be registered in order to ensure its validity or priority; or

 

(e)          a jurisdiction the courts of which have jurisdiction to make a winding up, administration or similar order in relation to the Person whether as a main or territorial or ancillary proceeding or which would have such jurisdiction if their assistance were requested by the courts of a country referred to in paragraphs (a) or (b) above.

 

“Plan” means any employee benefit plan within the meaning of Section 3(3) of ERISA, maintained for employees of the Borrower or any Subsidiary, or any such plan to which the Borrower or any Subsidiary is required to contribute on behalf of any of its employees or with respect to which the Borrower has any liability.

 

“Platform” means Debt Domain, Intralinks, Syndtrak, DebtX or a substantially similar electronic transmission system.

 

“Prepayment Notice” means a notice by the Borrower to prepay all or any portion of the Loan, which shall be in such form as the Facility Agent may approve.

 

“Prohibited Person” means a person:

 

(a)          listed on or owned or controlled by a person listed on any Sanctions List;

 

(b)          located in, organized under the laws of or owned or controlled by, or acting on behalf of, a person located in or organised under the laws of a country or territory which is a subject of country-wide or territory-wide Sanctions (including, without limitation, at the date of this Agreement, Crimea, Cuba, Iran, North Korea and Syria); or

 

(c)          otherwise a subject of Sanctions.

 

“Public Lender” has the meaning specified in Section 11.01(e).

 

“Qualified ECP Guarantor” means, in respect of any Swap Obligation, each Guarantor that has total assets exceeding $10,000,000 at the time the relevant guarantee or grant of the relevant security interest becomes effective with respect to such Swap Obligation or such other person as constitutes an “eligible contract participant” under the Commodity Exchange Act or any regulations promulgated thereunder and can cause another person to qualify as an “eligible contract participant” at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

 

“Quotation Day” shall mean, in relation to any period for which an interest rate is to be determined, two Business Days in New York, before the first day of that period.

 

“Recipient” means (a) the Facility Agent, or (b) any Lender, as applicable.

 

“Reference Bank Rate” shall mean the arithmetic mean of the rates (rounded upwards to four decimal places) as supplied to the Facility Agent at its request by the Reference Banks in relation to LIBOR, as the rate at which the relevant Reference Bank could borrow funds in the London interbank eurodollar market, in the relevant currency and for the relevant period, were it to do so by asking for and then accepting interbank offers for deposits in reasonable market size in that currency and for that period.

 

 

“Reference Banks” shall mean, such consenting money center banks that are leading international banks and are not affiliated with the Facility Agent as may be appointed by the Facility Agent to act in such capacity in consultation with the Borrower from time to time.

 

“Register” has the meaning specified in Section 11.04(c).

 

“Regulation T” means Regulation T of the Federal Reserve Board, as in effect from time to time and all official rulings and interpretations thereunder or thereof.

 

“Regulation U” means Regulation U of the Federal Reserve Board, as in effect from time to time and all official rulings and interpretations thereunder or thereof.

 

“Regulation X” means Regulation X of the Federal Reserve Board, as in effect from time to time and all official rulings and interpretations thereunder or thereof.

 

“Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees, administrators, managers, advisors and representatives of such Person and of such Person’s Affiliates.

 

“Relevant Date” has the meaning specified in Section 2.07(b)(iii).

 

“Removal Effective Date” has the meaning specified in Section 10.06(b).

 

“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30 day notice period has been waived.

 

“Required Lenders” means, at any time, Lenders having Total Credit Exposures representing at least sixty-six and two-thirds percent (66 2/3%) of the Total Credit Exposures of all Lenders. The Total Credit Exposure of any Defaulting Lender shall be disregarded in determining Required Lenders at any time.

 

“Requisition” means: (a) any expropriation, confiscation, requisition or acquisition of the Vessel, whether for full consideration, a consideration less than its proper value, a nominal consideration or without any consideration, which is effected by any government or official authority or by any person or persons claiming to be or to represent a government or official authority (excluding a requisition for hire for a fixed period not exceeding one year without any right to an extension) unless it is within 30 days redelivered to the full control of the Upstream Guarantor; and (b) any capture or seizure of the Vessel (including any hijacking or theft) unless it is within 30 days redelivered to the full control of the Upstream Guarantor.

 

“Requisition Compensation” includes all compensation or other moneys payable by reason of any Requisition.

 

“Resignation Effective Date” has the meaning specified in Section 10.06(a).

 

“Responsible Officer” means (a) the chief executive officer, president, senior vice president, vice president or a Financial Officer of the relevant Obligor, (b) solely for purposes of the delivery of incumbency certificates and certified Organizational Documents and resolutions pursuant to Section 4.01(a), any officer of the relevant Obligor and (c) solely for purposes of the Borrowing Request, prepayment notices and notices for Commitment terminations or reductions given pursuant to Article II, any officer of the Borrower. Any document delivered hereunder that is signed by a Responsible Officer of the relevant Obligor shall be conclusively presumed to have been authorized by all necessary corporate, partnership or other action on the part of the relevant Obligor and such Responsible Officer shall be conclusively presumed to have acted on behalf of the relevant Obligor.

 

 

“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interest of any Person, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such Equity Interest, or on account of any return of capital to such Person’s shareholders, partners or members (or the equivalent Persons thereof).

 

“Sanctions” means any trade, economic or financial sanctions laws, regulations, embargoes, restrictive measures or other sanctions administered, enacted or enforced by a Sanctions Authority.

 

“Sanctions Authority” means:

 

(a)          the Security Council of the United Nations;

 

(b)          the United States;

 

(c)          the United Kingdom;

 

(d)          the European Union;

 

(e)          any member state of the European Union (including, without limitation, The Netherlands);

 

(f)           any country in which any Obligor is organized, resident or conducts business; and

 

(g)          the governments and official institutions or agencies of any of paragraphs (a) through (f) above, including without limitation the U.S. Office of Foreign Assets Control, the U.S. Department of State and Her Majesty's Treasury.

 

“Sanctions Event” has the meaning specified in Section 5.36.

 

“Sanctions List” means the Specially Designated Nationals and Blocked Persons list maintained by the U.S. Office of Foreign Assets Control, the Consolidated List of Financial Sanctions Targets maintained by Her Majesty’s Treasury, or any similar list maintained by, or public announcement of a Sanctions designation made by, a Sanctions Authority, each as amended, supplemented or substituted from time to time.

 

“Screen Rate” means the London interbank offered rate administered by ICE Benchmark Administration Limited (or any other Person which takes over the administration of that rate) for Dollars and the relevant period displayed (before any correction, recalculation or republication by the administrator) on pages LIBOR01 or LIBOR02 of Bloomberg or the Thomson Reuters screen (or any replacement page which displays that rate) or on the appropriate page of such other information service that publishes that page from time to time in place of such pages. If the agreed pages are replaced or service ceases to be available, the Facility Agent may specify another page or service displaying the appropriate rate after consultation with the Borrower and the Lenders.

 

 

“SEC” means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.

 

“Secured Swap Contract” means a Swap Contract between the Borrower and a Swap Bank.

 

“Security Documents” means, collectively: (a) any Charter Assignment (as applicable), (b) any Account Pledge, (c) any Assignment of Earnings, (d) any Assignment of Insurances, (e) any Manager’s Undertaking, (f) any Master Agreement Assignment (as applicable), (g) any Share Pledge, (h) any Subordination Agreement (as applicable), (i) any Vessel Mortgage, and (j) and each other security document or pledge agreement delivered in accordance with applicable local Laws to grant a valid, enforceable, perfected security interest (with the priority required under the Loan Documents) in any property as Collateral for the Obligations, and all UCC or other financing statements or instruments of perfection required with respect thereto.

 

“Security Party” means the Obligors and any other Person (except a Finance Party and an Approved Manager which is not an Affiliate of the Borrower or the Guarantors) who, as a surety, guarantor, mortgagor, assignor or pledgor, as a party to any subordination or priorities arrangement, or in any similar capacity, executes a Loan Document.

 

“Security Trustee” means ABN AMRO Capital USA LLC, in its capacity as security trustee pursuant to Section 10.01(b) and under any of the Loan Documents, or any successor security trustee.

 

“Share Pledge” means (a) the ISOC Share Pledge and (b) the Borrower Share Pledge, or either of them.

 

“Solvent” means, as to any Person as of any date of determination, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person, (b) the present fair saleable value of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay such debts and liabilities as they mature and (d) such Person is not engaged in a business or a transaction, and is not about to engage in a business or a transaction, for which such Person’s property would constitute an unreasonably small capital. The amount of any contingent liability at any time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

 

“Specified Loan Party” means any Security Party that is not then an “eligible contract participant” under the Commodity Exchange Act (determined prior to giving effect to Section 8.11).

 

“Springing Maturity Date” means the date falling three (3) months before the Term Loan Maturity Date (as defined in the Term Loan B) with respect to the Initial Term Loans (as defined in the Term Loan B); provided that if such date is not a Business Day, the Springing Maturity Date shall be deemed to be the next succeeding Business Day.

 

“Structuring and Agency Fee Letter” means the letter agreement, dated June 7, 2018, between the Borrower and the Facility Agent, as may be amended, restated, modified or supplemented from time to time, in respect of (a) the structuring fees to be paid by the Borrower to the Facility Agent for distribution the the Bookrunner and (b) the agency fees to be paid by the Borrower to the Facility Agent.

 

 

“Subordinated Debt” has the meaning specified in Section 5.30.

 

“Subordination Agreement” has the meaning specified in Section 5.30.

 

“Subsidiary” of a Person means a corporation, partnership, limited liability company, association or joint venture or other business entity of which a majority of the Equity Interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time owned or the management of which is controlled, directly, or indirectly through one or more intermediaries, by such Person. Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Borrower.

 

“Swap Bank” means any Person that is a Lender or Finance Party or any Affiliate of a Lender or Finance Party at the time it enters into any Secured Swap Contract with the Borrower (or at the time a Secured Swap Contract is assigned to such Person), including those initially listed in Schedule I, Part B hereto, in its capacity as a party to a Secured Swap Contract.

 

“Swap Contract” means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any Master Agreement, including any such obligations or liabilities under any Master Agreement.

 

“Swap Obligation” means, with respect to any Guarantor, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of Section 1a(47) of the Commodity Exchange Act;

 

“Swap Termination Value” means, as to any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined by the relevant Swap Bank in accordance with its customary practices.

 

“Synthetic Lease Obligation” means the monetary obligation of a Person under (a) a so-called synthetic, off-balance sheet or tax retention lease or (b) an agreement for the use or possession of property creating obligations that do not appear on the balance sheet of such Person but, upon the insolvency or bankruptcy of such Person, would be characterized as the indebtedness of such Person (without regard to accounting treatment).

 

 

“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

 

“Term Loan B” means the credit agreement dated as of June 22, 2017 (as amended, amended and restated or otherwise modified from time to time), made by, among others, ISOC, as administrative borrower, OIN Delaware LLC, as co-borrower, the Parent, as holdings, the guarantors from time to time party thereto, Jefferies Finance LLC, as administrative agent and collateral agent, and Skandinaviska Enskilda Banken AB (publ), as swingline lender and issuing bank, in an aggregate principal amount of up to $600,000,000.

 

“Term Loan B Liens” means Liens relating to the Vessel and its earnings, insurances and charter, in each case, in connection with the Term Loan B, existing on the Closing Date and to be discharged prior to or simultaneous with the Borrowing.

 

“Total Credit Exposure” means, as to any Lender at any time, the unused Commitments and the aggregate principal amount of the outstanding portion of the Loan of such Lender at such time.

 

“Total Commitments” means up to the lower of (i) 55% of the Fair Market Value of the Vessel on the Closing Date and (ii) the aggregate of the Commitments, being a maximum of $29,150,000 on the Closing Date.

 

“Total Loss” means: (a) actual, constructive, compromised, agreed or arranged total loss of the Vessel; or (b) any Requisition of the Vessel.

 

“Total Loss Date” means, in relation to the Total Loss of the Vessel: (a) in the case of an actual loss of the Vessel, the date on which it occurred or, if that is unknown, the date when the Vessel was last heard of; (b) in the case of a constructive, compromised, agreed or arranged total loss of the Vessel, the earlier of: (i) the date on which a notice of abandonment is given to the insurers; and (ii) the date of any compromise, arrangement or agreement made by or on behalf of the Borrower and/or the Upstream Guarantor who owns the Vessel with the Vessel’s insurers in which the insurers agree to treat the Vessel as a total loss; and (c) in the case of any other type of Total Loss, the date (or the most likely date) on which it appears to the Facility Agent acting reasonably that the event constituting the total loss occurred.

 

“United States” and “U.S.” mean the United States of America.

 

“Upfront Fee Letter” means the letter agreement, dated June 7, 2018, between the Borrower and the Facility Agent, as may be amended, restated, modified or supplemented from time to time, in respect of the upfront fees to be paid by the Borrower to the Facility Agent for distribution among the Lenders.

 

“Upstream Guarantor” means Second Katsura Tanker Corporation, a corporation incorporated and existing under the laws of the Republic of the Marshall Islands.

 

“U.S. Borrower” means the Borrower if it is a U.S. Person.

 

“U.S. Person” means any Person that is a “United States Person” as defined in Section 7701(a)(30) of the Code.

 

 

“U.S. Tax Compliance Certificate” has the meaning specified in Section 2.16(g)(ii)(B)(3).

 

“Vessel Mortgage” means, in relation to the Vessel, the first priority or first preferred mortgage on the Vessel, in substantially the form of Exhibit L, or any other form approved by the Facility Agent.

 

“Vessel” means the vessel identified in Schedule IV.

 

“Wholly-Owned” means, as to a Subsidiary of a Person, a Subsidiary of such Person all of the outstanding Equity Interests of which (other than (a) director’s qualifying shares and (b) shares issued to foreign nationals to the extent required by Applicable Law) are owned by such Person and/or by one or more Wholly-Owned Subsidiaries of such Person.

 

“Withholding Agent” means the Borrower and the Facility Agent.

 

“Write-Down and Conversion Powers” means, with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule.

 

1.02        Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be construed to have the same meaning and effect as the word “shall.” Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) the words “herein,” “hereof” and “hereunder,” and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement, (e) any reference to any law or regulation herein shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (f) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

 

1.03

Accounting Terms; Changes in GAAP.

 

(a)          Accounting Terms. Except as otherwise expressly provided herein, all accounting terms not otherwise defined herein shall be construed in conformity with GAAP. Financial statements and other information required to be delivered by the Borrower to the Lenders pursuant to Sections 5.01(a), 5.01(b) and 5.01(c) shall be prepared in accordance with GAAP as in effect at the time of such preparation. Notwithstanding the foregoing, for purposes of determining compliance with any covenant (including the computation of any financial covenant) contained herein, Indebtedness of the Borrower and its Subsidiaries shall be deemed to be carried at one hundred percent (100%) of the outstanding principal amount thereof, and the effects of FASB ASC 825 and FASB ASC 470-20 on financial liabilities shall be disregarded.

 

 

(b)          Changes in GAAP. If the Borrower notifies the Facility Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Facility Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith.

 

1.04       Rates. The Facility Agent does not warrant, nor accept responsibility, nor shall the Facility Agent have any liability with respect to the administration, submission or any other matter related to the rates in the definition of “LIBOR” or with respect to any comparable or successor rate thereto.

 

ARTICLE II

COMMITMENTS

 

2.01       Commitments. Subject to the terms and conditions set forth herein, each Lender severally agrees to make the Loan to the Borrower in one (1) Borrowing on any Business Day during the Availability Period in an aggregate principal amount not to exceed such Lender’s Commitment; provided however that after giving effect to the Loan the total amount of the Loan made shall not exceed the Total Commitments. The Borrowing shall be applied to finance, refinance or reimburse a part of the acquisition cost (including through the payment of distributions to the Parent) of the Vessel and for general corporate purposes. Any amounts repaid, prepaid or cancelled may not be reborrowed.

 

2.02       Loan and Borrowing.

 

(a)          The Loan shall be made in one (1) Borrowing (as described in Section 2.01 above) ratably by the Lenders in accordance with their respective Commitments.

 

2.03       Borrowing.

 

(a)          Notice by Borrower. The Borrowing shall be made upon the Borrower’s irrevocable notice to the Facility Agent which may be given by a Borrowing Request. The Borrowing Request must be received by the Facility Agent not later than 11:00 a.m. (New York City time) three (3) Business Days prior to the requested date of the Borrowing.

 

(b)          Content of Borrowing Request. The Borrowing Request for the Borrowing pursuant to this Section shall specify the following information: (i)  the aggregate amount of the requested Borrowing; (ii) the date of the requested Borrowing (which shall be a Business Day); (iii) the Interest Period therefor; and (iv) the location and number of the Borrower’s account, or such other account as the Borrower may specify in the Borrowing Request, to which funds are to be disbursed.

 

(c)          Notice by Facility Agent to Lenders. Promptly following receipt of the Borrowing Request, the Facility Agent shall advise each Lender of the details thereof and the amount of such Lender’s portion of the Loan to be made as part of the requested Borrowing (which shall be the Applicable Percentage of the amount specified in the Borrowing Request).

 

(d)          Failure to Elect. If no Interest Period is specified with respect to the requested Borrowing, the Borrower shall be deemed to have selected an Interest Period of three (3) months’ duration.

 

 

2.04       Funding of Borrowing.

 

(a)          Funding by Lenders. Each Lender shall make the amount of its portion of the Loan available to the Facility Agent in immediately available funds at the Facility Agent’s Office not later than 1:00 p.m. (New York time) on the Business Day specified in the applicable Borrowing Request. Upon satisfaction of the applicable conditions set forth in Article IV, the Facility Agent shall make all funds so received available to the Borrower in like funds as received by the Facility Agent either by (i) crediting the Borrower Operating Account on the books of the Facility Agent with the amount of such funds or (ii) wire transfer of such funds, in each case in accordance with the instructions provided to the Facility Agent by the Borrower.

 

(b)          Presumption by Facility Agent. Unless the Facility Agent shall have received notice from a Lender, prior to the proposed date of the Borrowing that such Lender will not make available to the Facility Agent such Lender’s share of the Borrowing, the Facility Agent may assume that such Lender has made such share available on such date in accordance with Section 2.04(a) and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Facility Agent, then the applicable Lender and the Borrower severally agree to pay to the Facility Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Facility Agent, at (i) in the case of a payment to be made by such Lender, the greater of the Federal Funds Rate and a rate determined by the Facility Agent in accordance with banking industry rules on interbank compensation, and (ii) in the case of a payment to be made by the Borrower, the interest rate applicable to the respective Borrowing, as determined pursuant to Section 2.09. If the Borrower and such Lender shall pay such interest to the Facility Agent for the same or an overlapping period, the Facility Agent shall promptly remit to the Borrower the amount of such interest paid by the Borrower for such period. If such Lender pays its share of the Borrowing to the Facility Agent, then the amount so paid shall constitute such Lender’s portion of the Loan included in the Borrowing. Any payment by the Borrower shall be without prejudice to any claim the Borrower may have against a Lender that shall have failed to make such payment to the Facility Agent.

 

(c)          Disbursement of Borrowing to Third Party. To the extent requested in writing by the Borrower, the payment by the Facility Agent to a Person other than the Borrower shall constitute the making of the relevant Borrowing and the Borrower shall at that time become indebted, as principal and direct obligor, to each Lender in an amount equal to that Lender’s participation in that Borrowing.

 

2.05         Interest Periods. The Loan comprising the Borrowing initially shall be specified in the Borrowing Request and shall have the Interest Period specified in the Borrowing Request. The first Interest Period for the Borrowing shall commence on the date of the Borrowing and shall end on the numerically corresponding day in the calendar month that is three (3) months thereafter or any other period agreed between the Borrower and Lenders, as specified in the Borrowing Request. Thereafter, the duration of each Interest Period shall be (a) three (3) months or (b) such other period as the Borrower may propose, upon notice received by the Facility Agent not later than 11:00 a.m. (New York City time) three (3) Business Days prior to the first day of such Interest Period, and as the Facility Agent may, with the authorization of all the Lenders, agree with the Borrower; provided, however, (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day; (ii) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period; and (iii) any Interest Period selection made by the Borrower shall be irrevocable, and if the Borrower fails to select an Interest Period in accordance with this Section 2.05, then, subject to the above proviso, the Borrower shall be deemed to have selected an Interest Period of three months.

 

 

2.06       Repayment.

 

(a)          Amounts. The Borrower shall repay the principal amount of the Borrowing by:

 

(i)          equal consecutive quarterly principal repayment installments of an amount equal to $890,000; and

 

(ii)         a final balloon payment (the “Balloon Installment”) in an amount equal to the outstanding principal amount of the Borrowing and any other amounts outstanding on the Maturity Date;

 

provided that if the Borrowing is made in a principal amount of less than $29,150,000, then the quarterly repayment installments and the Balloon Installment for the Borrowing specified in this Section 2.06(a) shall be reduced pro rata by the undrawn amount.

 

(b)          Repayment Dates. Each quarterly principal repayment installment in respect of the Borrowing shall be repaid (i) commencing on the First Repayment Date and (ii) every three (3) months thereafter commencing on the date which is three (3) months after the First Repayment Date, provided that the Balloon Installment in respect of the Borrowing shall be repaid on the Maturity Date.

 

(c)          Maturity Date. On the Maturity Date, the Borrower shall additionally pay to the Facility Agent for the account of the Finance Parties all other sums then accrued and owing under any Loan Document and any Secured Swap Contract.

 

2.07       Prepayments.

 

(a)          Optional Prepayments. The Borrower may, upon notice to the Facility Agent, at any time and from time to time prepay the Borrowing in whole or in part without premium or penalty, except for payments owed pursuant to Section 2.10(c), subject to the requirements of this Section.

 

(i)          Notices. Each such notice pursuant to this Section shall be in the form of a written Prepayment Notice, appropriately completed and signed by a Responsible Officer of the Borrower, and must be received by the Facility Agent not later than 11:00 a.m. (New York City time) five (5) Business Days before the date of prepayment. Each Prepayment Notice shall specify (x) the prepayment date and (y) the principal amount of the Borrowing or portion thereof to be prepaid. Promptly following receipt of any such notice relating to the Borrowing, the Facility Agent shall advise the applicable Lenders of the contents thereof. Each Prepayment Notice shall be irrevocable.

 

(ii)         Amounts. Each partial prepayment shall be in an aggregate principal amount of at least $1,000,000. Any amounts prepaid may not be reborrowed.

 

(b)          Mandatory Prepayments.

 

(i)          If the Vessel is sold or becomes a Total Loss, the Borrower shall on the Relevant Date prepay the amount of the Borrowing outstanding at such time in full.

 

 

(ii)         If a Change of Control occurs in respect of the Borrower, the Upstream Guarantor or the Parent, the Borrower shall on the Relevant Date prepay the amount of the Borrowing outstanding at such time in full.

 

(iii)        The Borrower shall on the Springing Maturity Date prepay the amount of the Borrowing outstanding at such time in full and shall additionally pay to the Facility Agent for the account of the Finance Parties all other sums then accrued and owing under any Loan Document and any Secured Swap Contract; provided, however, that no prepayment pursuant to this Section 2.07(b)(iii) shall be required if (1) the Initial Term Loans (as defined in the Term Loan B) are refinanced or otherwise prepaid before the Springing Maturity Date or (2) the Springing Maturity Date shall fall on or after the Maturity Date.

 

(iv)         In this Section 2.07(b), “Relevant Date” means: (1) in the case of a sale of the Vessel, on the date on which the sale is completed by delivery of the Vessel to its buyer, (2) in the case of a Total Loss of the Vessel, on the earlier of: (x) the date falling 180 days after the Total Loss Date, and (y) the date of receipt by the Security Trustee of the Requisition Compensation or proceeds of insurance relating to such Total Loss and (3) in the case of a Change of Control, the date such Change of Control occurs.

 

(c)          Application.

 

(i)          Each prepayment of the Borrowing pursuant to Section 2.07(a) shall be applied pro rata to the repayment installments (including the Balloon Installment) for the Borrowing specified in Section 2.06.

 

(ii)         Each prepayment made to satisfy Section 5.04 shall be applied against the repayment installments specified in Section 2.06(a) in inverse order of maturity starting with the Balloon Installment.

 

(iii)        Prepayments shall be accompanied by accrued interest to the extent required by Section 2.09, together with any additional amounts required pursuant to Section 2.14; provided, however, that with respect to prepayment under Section 2.07(b)(iii), no additional amounts shall be required to be paid pursuant to Section 2.14(a).

 

2.08       Cancellation of Commitments. Any unused portion of the Commitments shall be cancelled by the Facility Agent without further notice to the Borrower. Any amounts cancelled may not be reinstated.

 

2.09       Interest.

 

(a)          Interest Rate. The Loan or any part of the Loan shall bear interest at a rate per annum equal to the sum of the aggregate of the Margin plus LIBOR for the relevant Interest Period as in effect from time to time.

 

(b)          Default Interest. Notwithstanding the foregoing, (i) upon the occurrence and during the continuance of any Event of Default under Section 9.01(a), (b), (g) or (h), the Loan shall bear interest, after as well as before judgment, at a rate per annum equal to the applicable Default Rate, and (ii) without duplication of any amounts payable pursuant to preceding clause (i), overdue principal and, to the extent permitted by applicable law, overdue interest, in respect of the Loan shall bear interest, after as well as before judgment, at a rate per annum equal to the applicable Default Rate from time to time.

 

 

(c)          Payment Dates. Accrued interest on the Loan shall be payable on the last day of each Interest Period applicable thereto and at such other times as may be specified herein; provided that (i) interest accrued pursuant to paragraph (b) of this Section shall be payable on demand and (ii) in the event of any repayment or prepayment of the Loan, accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment. If an Interest Period is longer than three (3) months, the Borrower shall also pay interest then accrued on the Loan or the relevant part of the Loan on the dates falling at three-month intervals after the first day of the Interest Period.

 

(d)          Interest Computation. All interest hereunder shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

 

2.10       Fees.

 

(a)          Upfront Fees. The Borrower agrees to pay to the Facility Agent, for distribution among the Lenders, upfront fees as set forth in the Upfront Fee Letter.

 

(b)          Structuring Fees and Agency Fees. The Borrower agrees to pay to the Facility Agent (i) structuring fees for distribution to the Bookrunner and (ii) agency fees, in each case as set forth in the Structuring and Agency Fee Letter.

 

(c)          Prepayment Fees. Upon voluntary prepayment of the Loan (or any part thereof) pursuant to Section 2.07(a) after the Closing Date but prior to the date which is the first anniversary thereof, the Borrower agrees to pay to the Facility Agent for distribution among the Lenders a prepayment fee at a rate equal to 1.00% of the amount voluntarily prepaid. From the date which is the first anniversary of the Closing Date and at all times thereafter, no prepayment fee shall be payable by the Borrower for any amount voluntarily prepaid.

 

2.11       Evidence of Debt.

 

(a)          Maintenance of Records. Each Lender shall maintain in accordance with its usual practice records evidencing the indebtedness of the Borrower to such Lender resulting from the Loan made by such Lender. The Facility Agent shall maintain the Register in accordance with Section 11.04(c). The entries made in the records maintained pursuant to this paragraph (a) shall be prima facie evidence absent manifest error of the existence and amounts of the obligations recorded therein. Any failure of any Lender or the Facility Agent to maintain such records or make any entry therein or any error therein shall not in any manner affect the obligations of the Borrower under this Agreement and the other Loan Documents. In the event of any conflict between the records maintained by any Lender and the records maintained by the Facility Agent in such matters, the records of the Facility Agent shall control in the absence of manifest error.

 

(b)          Promissory Notes. Upon the request of any Lender made through the Facility Agent, the Borrower shall prepare, execute and deliver in favor of such Lender a promissory note to such Lender in the form of Exhibit M, or any other form approved by the Facility Agent, which shall evidence such Lender’s portion of the Loan in addition to such records required under Section 2.11(a).

 

 

2.12       Payments Generally; Several Obligations of Lenders and Swap Banks.

 

(a)          Payments by Borrower. All payments to be made by the Borrower hereunder and the other Loan Documents shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein, all such payments shall be made to the Facility Agent, for the account of the respective Lenders to which such payment is owed, at the Facility Agent’s Office in immediately available funds not later than 12:00 noon (New York City time) on the date specified herein. All amounts received by the Facility Agent after such time on any date shall be deemed to have been received on the next succeeding Business Day and any applicable interest or fees shall continue to accrue. The Facility Agent will promptly distribute to each Lender its ratable share (or other applicable share as provided herein) of such payment in like funds as received by wire transfer to such Lender’s applicable lending office (or otherwise distribute such payment in like funds as received to the Person or Persons entitled thereto as provided herein). If any payment to be made by the Borrower shall fall due on a day that is not a Business Day, payment shall be made on the next succeeding Business Day and such extension of time shall be reflected in computing interest or fees, as the case may be; provided that, if such next succeeding Business Day would fall after the Maturity Date, payment shall be made on the immediately preceding Business Day. Except as otherwise expressly provided herein, all payments hereunder or under any other Loan Document shall be made in Dollars.

 

(b)          Application of Insufficient Payments. Subject to Section 7.02, if at any time insufficient funds are received by and available to the Facility Agent to pay fully all amounts of principal, interest, fees and other amounts then due hereunder, such funds shall be applied (i) first, to pay interest, fees and other amounts then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, to pay principal then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal then due to such parties.

 

(c)          Presumptions by Facility Agent. Unless the Facility Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Facility Agent for the account of the Lenders hereunder that the Borrower will not make such payment, the Facility Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders, as the case may be, the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders, as the case may be, severally agrees to repay to the Facility Agent forthwith on demand the amount so distributed to such Lender, with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Facility Agent, at the greater of the Federal Funds Rate and a rate determined by the Facility Agent in accordance with banking industry rules on interbank compensation.

 

(d)          Deductions by Facility Agent. If any Lender shall fail to make any payment required to be made by it pursuant to Section  2.04(b), 2.13 or 11.03(c), then the Facility Agent may, in its discretion and notwithstanding any contrary provision hereof, (i) apply any amounts thereafter received by the Facility Agent for the account of such Lender for the benefit of the Facility Agent, as applicable, to satisfy such Lender’s obligations to the Facility Agent until all such unsatisfied obligations are fully paid or (ii) hold any such amounts in a segregated account as cash collateral for, and application to, any future funding obligations of such Lender under any such Section, in the case of each of clauses (i) and (ii) above, in any order as determined by the Facility Agent in its discretion.

 

(e)          Several Obligations of Lenders and Swap Banks. The obligations of the Lenders hereunder to make the Loan, to fund participations in the Loan and to make payments pursuant to Section 11.03(c) are several and not joint. The failure of any Lender to make any portion of the Loan or to fund any such participation or to make any such payment on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its portion of the Loan, to purchase its participations or to make its payment under Section 11.03(c). The obligations of the Swap Banks hereunder and under the Swap Contracts are several and not joint.

 

 

2.13       Sharing of Payments. If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its portion of the Loan or participations in the Loan or other obligations hereunder resulting in such Lender receiving payment of a proportion of the aggregate amount of its portion of the Loan or participations in the Loan and accrued interest thereon or other such obligations greater than its pro rata share thereof as provided herein, then the Lender receiving such greater proportion shall (a) notify the Facility Agent of such fact, and (b) purchase (for cash at face value) participations in the Loan and such other obligations of the other Lenders, or make such other adjustments as shall be equitable, so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective portions of the Loan and participations in the Loan and other amounts owing them; provided that:

 

(i)          if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest; and

 

(ii)         the provisions of this Section 2.13 shall not be construed to apply to (x) any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement (including the application of funds arising from the existence of a Defaulting Lender) or (y) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its portion of the Loan to any assignee or participant, other than to the Borrower or any Subsidiary thereof (as to which the provisions of this paragraph shall apply).

 

The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under Applicable Law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation.

 

2.14       Compensation for Losses. In the event of (a) the payment of any principal of the Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b)  the failure to borrow, continue or prepay on the date specified in any notice delivered pursuant hereto or (c ) the assignment of the Loan or any part thereof other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 2.19(b), then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event. Such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest that would have accrued on the principal amount of the Loan had such event not occurred, at the interest rate that would have been applicable to the Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow or continue, for the period that would have been the Interest Period for the Loan), over (ii) the amount of interest that would accrue on such principal amount for such period at the interest rate that such Lender would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the London interbank eurodollar market. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof.

 

2.15       Increased Costs.

 

(a)          Increased Costs Generally. If any Change in Law shall:

 

(i)          impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender;

 

 

(ii)         subject any Recipient to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described in clauses (b) through (d) of the definition of Excluded Taxes and (C) Connection Income Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or

 

(iii)        impose on any Lender or the London interbank market any other condition, cost or expense (other than Taxes) affecting this Agreement or portions of the Loan made by such Lender or participation therein;

 

and the result of any of the foregoing shall be to increase the cost to such Lender or such other Recipient of making, converting to, continuing or maintaining any portion of the Loan or of maintaining its obligation to make any such portion of the Loan, or to increase the cost to such Lender or to reduce the amount of any sum received or receivable by such Lender or other Recipient hereunder (whether of principal, interest or any other amount) then, upon request of such Lender or other Recipient, the Borrower will pay to such Lender or other Recipient, as the case may be, such additional amount or amounts as will compensate such Lender or other Recipient, as the case may be, for such additional costs incurred or reduction suffered.

 

(b)          Capital Requirements. If any Lender determines that any Change in Law affecting such Lender or any lending office of such Lender or such Lender’s holding company, if any, regarding capital or liquidity requirements, has or would have the effect of reducing the rate of return on such Lender’s capital or on the capital of such Lender’s holding company, if any, as a consequence of this Agreement, the Commitments of such Lender or the portions of the Loan made by such Lender, to a level below that which such Lender or such Lender’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s policies and the policies of such Lender’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender, as the case may be, such additional amount or amounts as will compensate such Lender or such Lender’s holding company for any such reduction suffered.

 

(c)          Certificates for Reimbursement. A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section and delivered to the Borrower, shall be conclusive absent manifest error. The Borrower shall pay such Lender, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof.

 

(d)          Delay in Requests. Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender pursuant to this Section for any increased costs incurred or reductions suffered more than nine months prior to the date that such Lender, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions, and of such Lender’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the nine-month period referred to above shall be extended to include the period of retroactive effect thereof).

 

2.16       Taxes.

 

(a)          Defined Terms. For purposes of this Section, the term “Applicable Law” includes FATCA.

 

 

(b)          Payments Free of Taxes. Any and all payments by or on account of any obligation of the Borrower or the Guarantors under any Loan Document shall be made without deduction or withholding for any Taxes, except as required by Applicable Law. If any Applicable Law (as determined in the good faith discretion of an applicable Withholding Agent) requires the deduction or withholding of any Tax from any such payment by a Withholding Agent, then the applicable Withholding Agent shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with Applicable Law and, if such Tax is an Indemnified Tax, then the sum payable by the Borrower or the Guarantors (as applicable) shall be increased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this Section 2.16) the applicable Recipient receives an amount equal to the sum it would have received had no such deduction or withholding been made.

 

(c)          Payment of Other Taxes by Borrower. The Borrower shall timely pay to the relevant Governmental Authority in accordance with Applicable Law, or at the option of the Facility Agent timely reimburse it for the payment of, any Other Taxes.

 

(d)          Indemnification by Borrower. The Obligors shall indemnify each Recipient, within 10 days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 2.16) payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender (with a copy to the Facility Agent), or by the Facility Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.

 

(e)          Indemnification by the Lenders. Each Lender shall severally indemnify the Facility Agent, within 10 days after demand therefor, for (i) any Indemnified Taxes attributable to such Lender (but only to the extent that the Obligors have not already indemnified the Facility Agent for such Indemnified Taxes and without limiting the obligation of the Obligors to do so), (ii) any Taxes attributable to such Lender’s failure to comply with the provisions of Section 11.04(d) relating to the maintenance of a Participant Register and (iii) any Excluded Taxes attributable to such Lender, in each case, that are payable or paid by the Facility Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by the Facility Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the Facility Agent to set off and apply any and all amounts at any time owing to such Lender under any Loan Document or otherwise payable by the Facility Agent to such Lender from any other source against any amount due to the Facility Agent under this paragraph (e).

 

(f)           Evidence of Payments. As soon as practicable after any payment of Taxes by an Obligor to a Governmental Authority pursuant to this Section 2.16, such Obligor shall deliver to the Facility Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Facility Agent.

 

 

(g)          Status of Lenders. (i) Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to the Borrower and the Facility Agent, at the time or times reasonably requested by the Borrower or the Facility Agent, such properly completed and executed documentation reasonably requested by the Borrower or the Facility Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by the Borrower or the Facility Agent, shall deliver such other documentation prescribed by Applicable Law or reasonably requested by the Borrower or the Facility Agent as will enable the Borrower or the Facility Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in paragraphs (g)(ii)(A), (ii)(B) and (ii)(D) of this Section 2.16) shall not be required if in the Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.

 

(ii)         Without limiting the generality of the foregoing, in the event that the Borrower is a U.S. Borrower,

 

(A)         any Lender that is a U.S. Person shall deliver to the Borrower and the Facility Agent on or about the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Facility Agent), executed copies of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding tax;

 

(B)         any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Facility Agent (in such number of copies as shall be requested by the recipient) on or about the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Facility Agent), whichever of the following is applicable:

 

(1)         in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party (x) with respect to payments of interest under any Loan Document, executed copies of IRS Form W-8BEN or IRS Form W-8BEN-E establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN or IRS Form W-8BEN-E establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;

 

(2)         executed copies of IRS Form W-8ECI;

 

(3)         in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of Exhibit N-1 to the effect that such Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of the Borrower within the meaning of Section 871(h)(3)(B) of the Code, or a “controlled foreign corporation” related to the Borrower as described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y) executed copies of IRS Form W-8BEN or IRS Form W-8BEN-E; or

 

 

(4)         to the extent a Foreign Lender is not the beneficial owner, executed copies of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN, IRS Form W-8BEN-E, a U.S. Tax Compliance Certificate substantially in the form of Exhibit N-2 or Exhibit N-3, IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit N-4 on behalf of each such direct and indirect partner;

 

(C)         any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Facility Agent (in such number of copies as shall be requested by the recipient) on or about the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Facility Agent), executed copies of any other form prescribed by Applicable Law as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by Applicable Law to permit the Borrower or the Facility Agent to determine the withholding or deduction required to be made; and

 

(D)         if a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Facility Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Facility Agent such documentation prescribed by Applicable Law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Facility Agent as may be necessary for the Borrower and the Facility Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount, if any, to deduct and withhold from such payment. Solely for purposes of this clause (D), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

 

Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower and the Facility Agent in writing of its legal inability to do so.

 

(h)          Treatment of Certain Refunds. If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 2.16 (including by the payment of additional amounts pursuant to this Section 2.16), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section 2.16 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this paragraph (h) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this paragraph (h), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this paragraph (h) the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. This paragraph shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.

 

 

(i)           Tax Returns. This Section 2.16 shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.

 

(j)           Survival. Each party's obligations under this Section 2.16 shall survive the resignation or replacement of the Facility Agent or any assignment of rights by, or the replacement of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all obligations under any Loan Document.

 

2.17       Inability to Determine Rates. If, on or prior to the first day of any Interest Period (an “Affected Interest Period”):

 

(a)          the Facility Agent determines (which determination shall be conclusive and binding on the Borrower) that, by reason of circumstances affecting the London interbank eurodollar market, LIBOR cannot be determined pursuant to the definition thereof, or

 

(b)           a Lender or Lenders whose participations in the Loan or the relevant part of the Loan exceed 50% of the Loan or the relevant part of the Loan (the “Affected Lender”) determine that for any reason the cost to such Lender or Lenders of funding the Loan or such part of the Loan from the London interbank eurodollar market or, if cheaper, from whatever source it may reasonably select would be in excess of LIBOR for the relevant Interest Period,

 

the Facility Agent will promptly so notify the Borrower and each Lender and the rate of interest on the Affected Lender’s share of the Loan or the relevant part of the Loan for the relevant Interest Period shall be the percentage rate per annum which is the sum of:

 

(i)          the Margin; and

 

(ii)         the rate notified to the Facility Agent by that Affected Lender as soon as practicable and in any event before interest is due to be paid in respect of that Interest Period to be that which expresses as a percentage rate per annum the cost to the relevant Affected Lender of funding its participation in the Loan or that part of the Loan from whatever source it may reasonably select.

 

2.18       Illegality. Notwithstanding any other provision of this Agreement, if the introduction of or any change in or in the interpretation of any Law or regulation makes it unlawful, or any central bank or other Governmental Authority asserts that it is unlawful, for any Lender to perform its obligations hereunder to make the Loan or to fund or maintain the Loan or any portion thereof hereunder, then, upon written notice by the Facility Agent to the Borrower, the Facility Agent and the Borrower shall negotiate in good faith to agree on terms for that Lender to continue the Loan or any portion thereof on a basis which is not unlawful. If no agreement shall be reached between the Borrower and the Facility Agent within a period which in the sole discretion of the Facility Agent is reasonable (such period to be no less than thirty (30) days), the Facility Agent shall be entitled to give notice to the Borrower that the obligation of that Lender to make or maintain the Loan or any portion thereof, as the case may be, shall be forthwith terminated and the amount of that Lender’s Commitment shall be reduced accordingly, and thereupon the aggregate outstanding principal amount of the Loan or any relevant portion thereof, as the case may be, shall become due and payable in full, together with accrued interest thereon and other sums payable hereunder, and such amounts as the Borrower shall be obligated to reimburse that Lender pursuant to Section 11.03(b) if earlier prepayment is required by any Law, regulation and/or regulatory requirement; provided, however, that, before making any such demand, that Lender shall designate a different lending office for monitoring the Loan if the making of such a designation would avoid the need for giving such notice and demand and would not, in the judgment of that Lender, be otherwise disadvantageous to that Lender.

 

 

2.19       Mitigation Obligations; Replacement of Lenders.

 

(a)          Designation of a Different Lending Office. If any Lender requests compensation under Section 2.15, or requires the Borrower to pay any Indemnified Taxes or additional amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.16, then such Lender shall (at the request of the Borrower) use reasonable efforts to designate a different lending office for funding or booking its portion of the Loan hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.15 or 2.16, as the case may be, in the future, and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

 

(b)          Replacement of Lenders. If any Lender requests compensation under Section 2.15, or if the Borrower is required to pay any Indemnified Taxes or additional amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.16 and, in each case, such Lender has declined or is unable to designate a different lending office in accordance with paragraph (a) of this Section, or if any Lender is a Defaulting Lender or a Non-Consenting Lender, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Facility Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 11.04), all of its interests, rights (other than its existing rights to payments pursuant to Section 2.15 or Section 2.16) and obligations under this Agreement and the related Loan Documents to an Eligible Assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that:

 

(i)          the Borrower shall have paid to the Facility Agent the assignment fee (if any) specified in Section 11.04;

 

(ii)         such Lender shall have received payment of an amount equal to the outstanding principal of its portion of the Loan, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 2.14 and Section 11.03(a)) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts);

 

(iii)        in the case of any such assignment resulting from a claim for compensation under Section 2.15 or payments required to be made pursuant to Section 2.16, such assignment will result in a reduction in such compensation or payments thereafter;

 

(iv)         such assignment does not conflict with Applicable Law; and

 

(v)          in the case of any assignment resulting from a Lender becoming a Non-Consenting Lender, the applicable assignee shall have consented to the applicable amendment, waiver or consent.

 

 

A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

 

Notwithstanding anything in this Section to the contrary, the Lender that acts as the Facility Agent may not be replaced hereunder except in accordance with the terms of Section 10.06.

 

2.20       Defaulting Lenders.

 

(a)          Defaulting Lender Adjustments. Notwithstanding anything to the contrary contained in this Agreement, if any Lender becomes a Defaulting Lender, then, until such time as such Lender is no longer a Defaulting Lender, to the extent permitted by Applicable Law:

 

(i)          Waivers and Amendments. Such Defaulting Lender’s right to approve or disapprove any amendment, waiver or consent with respect to this Agreement shall be restricted as set forth in the definition of Required Lenders and Section 11.02(b).

 

(ii)         Defaulting Lender Waterfall. Any payment of principal, interest, fees or other amounts received by the Facility Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Article IX or otherwise) or received by the Facility Agent from a Defaulting Lender pursuant to Section 11.08 shall be applied at such time or times as may be determined by the Facility Agent as follows: first, to the payment of any amounts owing by such Defaulting Lender to the Facility Agent hereunder; second, as the Borrower may request (so long as no Default or Event of Default exists), to the funding of any portion of the Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Facility Agent; third, if so determined by the Facility Agent and the Borrower, to be held in a deposit account and released pro rata in order to satisfy such Defaulting Lender’s potential future funding obligations with respect to the Loan under this Agreement; fourth, to the payment of any amounts owing to the Lenders as a result of any judgment of a court of competent jurisdiction obtained by any Lender against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; fifth, so long as no Default or Event of Default exists, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent jurisdiction obtained by the Borrower against such Defaulting Lender as a result of such Defaulting Lender's breach of its obligations under this Agreement; and sixth, to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that if (x) such payment is a payment of the principal amount of the Loan in respect of which such Defaulting Lender has not fully funded its appropriate share, and (y) such portions of the Loan were made at a time when the relevant conditions set forth in Article IV were satisfied or waived, such payment shall be applied solely to pay the portions of the Loan of all Non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any portions of the Loan of such Defaulting Lender until such time as all portions of the Loan are held by the Lenders pro rata in accordance with the Commitments. Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender pursuant to this Section shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto.

 

(iii)        Commitment Fees. No Defaulting Lender shall be entitled to receive any commitment fee for any period during which that Lender is a Defaulting Lender (and the Borrower shall not be required to pay any such fee that otherwise would have been required to have been paid to that Defaulting Lender).

 

 

(b)          Defaulting Lender Cure. If the Borrower, the Facility Agent and each Lender agree in writing that a Lender is no longer a Defaulting Lender, the Facility Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein, that Lender will, to the extent applicable, purchase at par that portion of outstanding Loan of the other Lenders or take such other actions as the Facility Agent may determine to be necessary to cause the Loan to be held pro rata by the Lenders in accordance with the Commitments, whereupon such Lender will cease to be a Defaulting Lender; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while that Lender was a Defaulting Lender; and provided, further, that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender.

 

(c)          Termination of Defaulting Lender. The Borrower may terminate the unused amount of the Commitment of any Lender that is a Defaulting Lender upon not less than five Business Days’ prior notice to the Facility Agent (which shall promptly notify the Lenders thereof), and in such event the provisions of Section 2.20(a)(ii) will apply to all amounts thereafter paid by the Borrower for the account of such Defaulting Lender under this Agreement (whether on account of principal, interest, fees, indemnity or other amounts); provided that (i) no Event of Default shall have occurred and be continuing, and (ii) such termination shall not be deemed to be a waiver or release of any claim the Borrower, the Facility Agent or any Lender may have against such Defaulting Lender.

 

2.21       Increases in Commitments.

 

(a)          Request for Increase. The Borrower may, by notice to the Facility Agent (who shall promptly notify the Lenders), request up to six (6) increases in the Commitments to finance the acquisition of one or more Additional Vessels owned or to be owned by one or more Additional Guarantors (each such increase, an “Incremental Commitment”); provided that such increases shall be in an aggregate amount not exceeding an amount equal to the lesser of (i) $70,850,000 and (ii) fifty-five percent (55%) of the aggregate Fair Market Value of any Additional Vessels to be financed by the Incremental Commitments; provided further that  (A) such Incremental Commitments shall be uncommitted by the Lenders and subject to the approval of each Lender that agrees to provide an Incremental Commitment, (B) any such Incremental Commitment shall be subject to (x) the prior written consent of each Lender that agrees to provide an Incremental Commitment and (y) the entry into by the Borrower and the other Security Parties of documentation amending and/or supplementing this Agreement and the other Loan Documents as the Facility Agent may reasonably require, (C) any such request may not be made on or after the date which is eighteen (18) months after the Closing Date and (D) any such Incremental Commitment shall be on terms and conditions substantially the same as this Agreement.

 

(b)          Incremental Lenders. An Incremental Commitment may be provided by any existing Lender or other Person, in each case, that is an Eligible Assignee (each such existing Lender or other Person that agrees to provide an Incremental Commitment, an “Incremental Lender”); provided that each Incremental Lender shall be subject to the consent of the Facility Agent (not to be unreasonably withheld). Notwithstanding anything herein to the contrary, no Lender shall have any obligation to agree to increase its Commitment, or to provide an Incremental Commitment, pursuant to this Section and any election to do so shall be in the sole discretion of such Lender.

 

(c)          Terms of Incremental Commitments. The Facility Agent and the Borrower shall determine the effective date for such increase pursuant to this Section (an “Incremental Commitment Effective Date”) and, if applicable, the final allocation of such increase among the Persons providing such increase.

 

 

In order to effect such increase, the Borrower, the Guarantors, the applicable Incremental Lender(s) and the Facility Agent (but no other Lenders or Persons) shall enter into one or more Joinder Agreements and/or such other documents as the Facility Agent may reasonably require, each in form and substance reasonably satisfactory to the Facility Agent, pursuant to which the applicable Incremental Lender(s) will provide the Incremental Commitment(s).

 

Effective as of the applicable Incremental Commitment Effective Date, subject to the terms and conditions set forth in this Section, each Incremental Commitment shall be a Commitment (and not a separate facility hereunder), and each Incremental Lender providing such Incremental Commitment shall be, and have all the rights of, a Lender, for all purposes of this Agreement.

 

(d)          Conditions to Effectiveness. Notwithstanding the foregoing, any increase in the Commitments pursuant to this Section shall not be effective with respect to any Incremental Lender unless:

 

(i)          no Default or Event of Default shall have occurred and be continuing on the Incremental Commitment Effective Date and after giving effect to such increase;

 

(ii)         at least two valuations, each dated no more than 30 days prior to the Incremental Commitment Effective Date, addressed to the Facility Agent (at the expense of the Borrower) by Approved Brokers indicating the Fair Market Value of the Vessel and each of the Additional Vessels to be financed by the Incremental Commitment;

 

(iii)        the Facility Agent shall have received the documents described in paragraphs (a) and (c) above; and

 

(iv)         the Facility Agent shall have received such legal opinions and other documents reasonably requested by the Facility Agent in connection therewith.

 

As of such Incremental Commitment Effective Date, upon the Facility Agent’s receipt of the documents required by this paragraph (d), the Facility Agent shall record the information contained in the applicable Joinder Agreement(s) in the Register and give prompt notice of the increase in the Commitments to the Borrower and the Lenders (including each Incremental Lender).

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES

 

In order to induce the Lenders to enter into this Agreement and to make the Loan, each of the Obligors, jointly and severally, represents and warrants to each Finance Party as of the Closing Date, as of the Drawdown Date and on the first day of each Interest Period (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct in all material respects only as of such specified date):

 

3.01       Existence, Qualification and Power. Each Obligor (a) is duly organized or formed, validly existing and, as applicable, in good standing under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power and authority and all requisite governmental licenses, authorizations, consents and approvals to (i) own or lease its assets and carry on its business and (ii) execute, deliver and perform its obligations under the Loan Documents to which it is a party or any of the transactions contemplated hereby and thereby, and (c) is duly qualified and in good standing as a foreign company in each other jurisdiction in which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed, except in each case referred to in clause (b)(i) or (c), to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.

 

 

3.02       Authorization; No Contravention. The execution, delivery and performance by each Obligor of each Loan Document to which it is party have been duly authorized by all necessary corporate or other organizational action, and do not and will not (a) contravene the terms of its Organizational Documents, (b) conflict with or result in any breach or contravention of, or the creation of any Lien (except Permitted Liens) under, or require any payment to be made under (i) any material Contractual Obligation to which such Obligor is a party or affecting such Obligor or the properties of such Obligor or (ii) any material order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Obligor or property belonging thereto is subject or (c) violate any Law in any material respect.

 

3.03       Governmental Authorization; Other Consents. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with the execution, delivery or performance by, or enforcement against, any Obligor of this Agreement or any other Loan Document to which it is a party, except for (a) the filing of Uniform Commercial Code financing statements or other similar filing or instruments under the laws of any applicable jurisdiction, (b) the Vessel Mortgage recording requirements under the relevant jurisdiction of the Vessel’s registration, (c) such approvals, consents, exemptions, authorizations, actions, notices or filings that have been duly obtained, taken or made and are in full force and effect and (d) such approvals, consents, exemptions, authorizations, actions, notices or filings that the failure of which to obtain or perform would not reasonably be expected to have a Material Adverse Effect.

 

3.04       Execution and Delivery; Binding Effect. This Agreement has been, and each other Loan Document, when delivered hereunder, will have been, duly executed and delivered by each Obligor party thereto. Except as such enforceability may be limited by bankruptcy, insolvency, reorganization, receivership, moratorium or other Laws affecting creditors’ rights generally and by general principles of equity, the Loan Documents to which each Obligor is a party, constitute or, as the case may be, will constitute upon execution and delivery (and, where applicable, registration as provided for in the Loan Documents), such Obligor’s legal, valid and binding obligations enforceable against it in accordance with their respective terms.

 

3.05       Financial Statements; No Material Adverse Effect.

 

(a)          Financial Statements. The Audited Financial Statements were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein, and fairly present in all material respects the financial condition of the Parent and its Subsidiaries as of the date thereof and their results of operations and cash flows for the period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein. The unaudited consolidated balance sheet of the Parent and its Subsidiaries, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for the fiscal quarter ended on September 30, 2017 were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein, and fairly present in all material respects the financial condition of the Parent and its Subsidiaries, as of the date thereof and their results of operations and cash flows for the period covered thereby, subject to the absence of footnotes and to normal year-end audit adjustments.

 

(b)          No Material Adverse Change. Since December 31, 2017, there has been no event or circumstance that, either individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect.

 

 

3.06       Litigation. Except as disclosed in the Parent’s Annual Report on Form 10-K filed with the SEC for the fiscal year ended December 31, 2017, there are no actions, suits, proceedings, claims, disputes or, to the knowledge of the Obligors, investigations pending or, to the knowledge of the Obligors, threatened, at Law, in equity, in arbitration or before any Governmental Authority, by or against any Obligor or any Subsidiary or against any of their properties or revenues that (a) either individually or in the aggregate could reasonably be expected to have a Material Adverse Effect or (b) purport to affect or pertain to this Agreement or any other Loan Document or any of the transactions contemplated hereby.

 

3.07       No Material Adverse Effect; No Default. No Obligor is in default under or with respect to any Contractual Obligation that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. As of the Closing Date, no Default has occurred and is continuing or would result from the consummation of the transactions contemplated by this Agreement or any other Loan Document.

 

3.08       Property.

 

(a)          Ownership of Properties.

 

(i)          As of the Drawdown Date, neither the Borrower, the Upstream Guarantor nor ISOC has created or is contractually bound to create any security interest on or with respect to any of its assets, properties, rights or revenues, in each case, constituting Collateral, except for Permitted Liens, and except as provided in this Agreement neither the Borrower, the Upstream Guarantor nor ISOC is restricted by contract, applicable law or regulation or otherwise from creating security interests on any of its assets, properties, rights or revenues, in each case, constituting Collateral.

 

(ii)         As of the Drawdown Date, each of the Borrower, the Upstream Guarantor and ISOC has received all deeds, assignments, waivers, consents, non-disturbance and attornment or similar agreements, bills of sale and other documents, and has duly effected all recordings, filings and other actions, necessary to establish, protect and perfect its right, title and interest in and to the Vessel (with respect to the Upstream Guarantor) and the other properties and assets owned by it, in each case, constituting Collateral (or arrangements for such recordings, filings and other actions acceptable to the Facility Agent shall have been made).

 

(iii)        Without limiting the generality of Section 3.22 and paragraph (ii) of this Section, at the time of the execution and delivery of each Security Document: (a) the relevant Obligor or ISOC will have the right to create all the security interests which that Security Document purports to create; and (b) no third party will have any Liens (except for Permitted Liens) or any other interest, right or claim over, in or in relation to any asset to which any such Lien, by its terms, relates.

 

(b)          Intellectual Property. Except for those with respect to which the failure to own or license could not reasonably be expected to have a Material Adverse Effect, each Obligor owns or has the right to use all patents, trademarks, permits, service marks, trade names, copyrights, franchises, formulas, licenses and other rights with respect thereto, and have obtained assignment of all licenses and other rights of whatsoever nature, that are material to its business as currently contemplated without any conflict with the rights of others.

 

 

3.09       Taxes.

 

(a)          The Obligors have each filed all Federal, state and other tax returns and reports required to be filed by or on behalf of such Obligors, and have paid all Federal, state and other taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable, except (a) Taxes that are being contested in good faith by appropriate proceedings diligently conducted and for which adequate reserves are being maintained in accordance with GAAP or (b) to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect.

 

(b)          No material claim for any tax has been asserted against any Obligor by any taxing authority other than claims that are included in the liabilities for taxes in the most recent balance sheet of such person or disclosed in the notes thereto, if any.

 

(c)          The execution, delivery, filing and registration or recording (if applicable) of the Loan Documents and the consummation of the transactions contemplated thereby will not cause any of the Finance Parties to be required to make any registration with, give any notice to, obtain any license, permit or other authorization from, or file any declaration, return, report or other document with any governmental authority in any Pertinent Jurisdiction.

 

(d)          No taxes are required by any governmental authority in any relevant Pertinent Jurisdiction to be paid with respect to or in connection with the execution, delivery, filing, recording, performance or enforcement of any Loan Document other than (a) nominal documentary stamp taxes in connection with the submission of any Loan Document to a court in any Pertinent Jurisdiction, (b) court fees consequent upon litigation in any Pertinent Jurisdiction, and (c) applicable mortgage recording fees in connection with the recording of the Vessel Mortgage in accordance with the relevant Pertinent Jurisdiction of the Vessel’s registration.

 

(e)          It is not necessary for the legality, validity, enforceability or admissibility into evidence of this Agreement or any other Loan Document that any stamp, registration or similar taxes be paid on or in relation to this Agreement or any of the other Loan Documents.

 

(f)           Each of the Borrower and the Upstream Guarantor has been a disregarded entity for federal income tax purposes since formation.

 

3.10       Disclosure. As of the Closing Date, each Obligor has disclosed to the Facility Agent all agreements, instruments and corporate or other restrictions to which such Obligor is subject, and all other matters known to it, that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. The reports, financial statements, certificates and other written information (other than projected or pro forma financial information) furnished by or on behalf of any Obligor to the Facility Agent or any Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder or under any other Loan Document (as modified or supplemented by other information so furnished), taken as a whole, do not contain any material misstatement of fact or omit to state any material fact necessary to make the statements therein (when taken as a whole), in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected or pro forma financial information, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time of preparation and delivery (it being understood that such projected information may vary from actual results and that such variances may be material).

 

3.11       Compliance with Laws. Each of the Obligors is in compliance with the requirements of all Laws (including Environmental Laws) and all orders, writs, injunctions and decrees applicable to it or to its properties, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted or (b) the failure to so comply, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

 

 

3.12       ERISA Compliance.

 

(a)          Except as could not reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect, (i) each Plan is in compliance with the applicable provisions of ERISA, the Code and other Federal or state Laws and (ii) each Plan that is intended to be a qualified plan under Section 401(a) of the Code has received a favorable determination letter or opinion letter from the IRS to the effect that the form of such Plan is qualified under Section 401(a) of the Code and the trust related thereto has been determined by the IRS to be exempt from Federal income tax under Section 501(a) of the Code, or an application for such a letter is currently being processed by the IRS, and, to the knowledge of the Obligors, nothing has occurred that would prevent or cause the loss of such tax-qualified status.

 

(b)          There are no pending or, to the knowledge of the Obligors, threatened or contemplated claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. To the knowledge of the Obligors, there has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that, either individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect.

 

(c)          No ERISA Event has occurred, and neither any Obligor nor any ERISA Affiliate is aware of any fact, event or circumstance that, either individually or in the aggregate, could reasonably be expected to constitute or result in an ERISA Event with respect to any Pension Plan.

 

(d)          The present value of all accrued benefits under each Pension Plan (based on those assumptions used to fund such Pension Plan) did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the value of the assets of such Pension Plan allocable to such accrued benefits by a material amount. As of the most recent valuation date for each Multiemployer Plan, the potential liability of any Obligor or any ERISA Affiliate for a complete withdrawal from such Multiemployer Plan (within the meaning of Section 4203 or Section 4205 of ERISA), when aggregated with such potential liability for a complete withdrawal from all Multiemployer Plans, is zero.

 

(e)          To the extent applicable, each Foreign Plan has been maintained in compliance with its terms and with the requirements of any and all applicable requirements of Law and has been maintained, where required, in good standing with applicable regulatory authorities, except to the extent that the failure to so comply could not reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect. Neither the Borrower nor any Subsidiary thereof has incurred any material obligation in connection with the termination of or withdrawal from any Foreign Plan. The present value of the accrued benefit liabilities (whether or not vested) under each Foreign Plan that is funded, determined as of the end of the most recently ended fiscal year of the Borrower or Subsidiary thereof, as applicable, on the basis of actuarial assumptions, each of which is reasonable, did not exceed the current value of the property of such Foreign Plan by a material amount, and for each Foreign Plan that is not funded, the obligations of such Foreign Plan are properly accrued.

 

3.13       Environmental Matters. Except with respect to any matters that, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, no Obligor (a) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (b) knows of any basis for any permit, license or other approval required under any Environmental Law to be revoked, canceled, limited, terminated, modified, appealed or otherwise challenged, (c) has or could reasonably be expected to become subject to any Environmental Liability, (d) has received notice of any claim, complaint, proceeding, investigation or inquiry with respect to any Environmental Liability (and no such claim, complaint, proceeding, investigation or inquiry is pending or, to the knowledge of any Obligor, is threatened or contemplated) or (e) knows of any facts, events or circumstances that could give rise to any basis for any Environmental Liability of any Obligor.

 

 

3.14       Margin Regulations. The Borrower is not engaged and will not engage, principally or as one of its important activities, in the business of purchasing or carrying Margin Stock, or extending credit for the purpose of purchasing or carrying Margin Stock, and no part of the proceeds of the Borrowing hereunder will be used to buy or carry any Margin Stock. Following the application of the proceeds of the Borrowing, not more than twenty-five percent (25%) of the value of the assets (either of the Borrower only or of the Borrower and its Subsidiaries on a consolidated basis) will be Margin Stock.

 

3.15       Investment Company, Public Utility. None of the Obligors is (a) an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company,” as such terms are defined in the Investment Company Act of 1940, as amended; or (b) a “public utility” within the meaning of the United States Federal Power Act of 1920, as amended.

 

3.16       PATRIOT Act; Sanctions; Anti-Corruption.

 

(a)          PATRIOT Act. To the extent applicable, each of the Obligors is in compliance in all material respects with (i) the Trading with the Enemy Act, as amended, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended), and any other enabling legislation or executive order relating thereto, and (ii) the PATRIOT Act.

 

(b)          Sanctioned Persons. None of the Obligors or any director, officer, employee or, to the knowledge of the Borrower, agent of the Obligors or any other Person acting on behalf of the Obligors is a Person that is, or is owned or controlled by Persons that are: (A) the subject of Sanctions or (B) located, organized or resident in a country or territory that is, or whose government is, the subject of Sanctions, including Crimea, Cuba, Iran, North Korea and Syria.

 

(c)          Anti-Corruption Laws. None of the Obligors or any director, officer, employee or, to the knowledge of the Borrower, agent of the Obligors or any other Person acting on behalf of the Obligors has taken any action, directly or indirectly, that would result in a violation by such Person of the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder (the “FCPA”) or any other applicable anti-corruption law (collectively, “Anti-Corruption Laws”). The Obligors have instituted and maintain policies and procedures designed to ensure continued compliance by the Obligors and their respective directors, officers, employees and agents with Anti-Corruption Laws and Sanctions.

 

3.17       ISM Code and ISPS Code Compliance. The Upstream Guarantor has obtained or will obtain or will cause to be obtained all necessary ISM Code Documentation and ISPS Code Documentation in connection with the Vessel owned or to be owned by it and the Vessel’s operation and will be or will cause the Vessel and the Approved Manager to be in full compliance with the ISM Code and the ISPS Code.

 

3.18       Solvency. The Obligors taken as a whole are Solvent.

 

3.19       Place of Business.

 

(a)          For the purposes of the Uniform Commercial Code only, each Obligor has its chief executive office at c/o International Seaways Ship Management, LLC, 600 Third Avenue, 39^th Floor, New York, New York 10016.

 

 

(b)          From the date of its incorporation or formation, as the case may be, until the date hereof, neither the Borrower nor any of the Guarantors has conducted any business other than in connection with, or related to, the acquisition and disposition, ownership, and operation of vessels.

 

3.20       Ownership.

 

(a)          All of the issued and outstanding Equity Interests of the Borrower have been validly issued, are fully paid and non-assessable and free and clear of all security interests (other than Permitted Liens) and are owned, directly or indirectly, beneficially by the Parent. All of the issued and outstanding Equity Interests of the Upstream Guarantor have been validly issued, are fully paid and non-assessable and free and clear of all security interests (other than Permitted Liens) and are owned beneficially and of record by the Borrower.

 

(b)          None of the Equity Interests of the Borrower or Upstream Guarantor are subject to any existing option, warrant, call, right, commitment or other agreement of any character to which the Borrower or Upstream Guarantor is a party requiring, and there are no Equity Interests of the Borrower or Upstream Guarantor outstanding which upon conversion or exchange would require, the issuance, sale or transfer of any additional Equity Interests of the Borrower or Upstream Guarantor or other Equity Interests convertible into, exchangeable for or evidencing the right to subscribe for or purchase Equity Interests of the Borrower or Upstream Guarantor.

 

3.21       Vessel. As of the Drawdown Date, the Vessel will be: (a) in the sole and absolute ownership of the Upstream Guarantor and duly registered in the Upstream Guarantor’s name under the law of the Approved Flag, unencumbered save and except for the Vessel Mortgage thereon in favor of the Security Trustee registered against it and Permitted Liens; (b) seaworthy for hull and machinery insurance warranty purposes and in every way fit for its intended service; (c) insured in accordance with the provisions of this Agreement and the requirements hereof in respect of such insurances will have been complied with; (d) in class in accordance with the provisions of this Agreement, free of any overdue recommendations, and the requirements hereof in respect of such classification will have been complied with; and (e) managed by an Approved Manager pursuant to a technical or commercial management agreement. As of the Drawdown Date, the Upstream Guarantor is qualified in all material respects to own, lease or operate the Vessel under the laws of its jurisdiction of incorporation and the law of the Approved Flag. As of the Drawdown Date, there is no pending or, to the knowledge of any Obligor, threatened condemnation, confiscation, requisition, purchase, seizure or forfeiture of, or any taking of title to, the Vessel.

 

3.22       The Security Documents.

 

(a)          Subject to any applicable exceptions set forth herein, upon execution and delivery of each Security Document, there will be created in favor of the Facility Agent or, as the case may be, the Security Trustee, for the benefit of the Finance Parties, a legal, valid and enforceable (except as such enforceability may be subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting creditors’ rights generally, regardless of whether considered in a proceeding in equity or at law) Lien on, and security interest in, the Collateral described herein and therein and (i) when all financing statements or the other filings in appropriate form are filed and maintained in the appropriate offices as may be required under applicable Laws and (ii) upon the taking of possession or control by the Facility Agent or, as the case may be, the Security Trustee, of such Collateral with respect to which a security interest may be perfected only by possession or control (which such possession or control shall be given to the Facility Agent or, as the case may be, the Security Trustee, to the extent required by any Security Document), the Liens created under such Security Document will constitute a fully perfected Lien on all right, title and interest of the applicable Obligors as of the date of execution of said Security Document, in such Collateral, in each case prior and superior in right to any other Person, other than with respect to Permitted Liens.

 

 

(b)          The Vessel Mortgage, upon execution and delivery thereof, will be effective to create, in favor of the Security Trustee, for its benefit and the benefit of the Finance Parties, a legal, valid and enforceable first priority or first preferred ship mortgage Lien on the Vessel and the proceeds thereof, subject only to Permitted Liens, and when the Vessel Mortgage is recorded or registered in accordance with the laws of the jurisdiction of the relevant Approved Flag, the Vessel Mortgage shall constitute a fully perfected first priority or first preferred ship mortgage Lien on the Vessel, subject to no Liens other than Permitted Liens.

 

3.23       Use of Proceeds. Each Obligor will use the proceeds of the Loan solely for purposes set forth in the Preliminary Statements hereof. No part of the proceeds of the Loan will be used, directly or, to the knowledge of the Obligors, indirectly, in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of the FCPA or any other applicable anti-corruption law.

 

3.24       Labor Matters. There are no strikes, lockouts or slowdowns against any Obligor pending or, to the knowledge of the Obligors, threatened that have resulted in, or would reasonably be expected to result in, a Material Adverse Effect. The hours worked by and payments made to employees of any Obligor have not been in violation of the Fair Labor Standards Act of 1938, as amended, or any other applicable Laws dealing with such matters in any manner that has resulted in, or would reasonably be expected to result in, a Material Adverse Effect. All payments due from any Obligor, or for which any claim may be made against any Obligor, on account of wages and employee health and welfare insurance and other benefits, have been paid or accrued as a liability on the books of such Obligor, except to the extent that the failure to do so has not resulted in, and would not reasonably be expected to result in, a Material Adverse Effect.

 

3.25       Threatened Withdrawal of Document of Compliance, Safety Management Certificate or ISSC. As of the Drawdown Date, there is no actual or, to the knowledge of the Obligors, threatened withdrawal of (a) the Document of Compliance, (b) the Safety Management Certificate or (c) the ISSC, with respect to the Vessel.

 

3.26       Discharge of Term Loan B Liens. As of the Drawdown Date and prior to or simultaneous with the Borrowing, the Term Loan B Liens will be discharged.

 

3.27       No Upstream Guarantor Accounts; Vessel Amounts. The Upstream Guarantor does not hold any account at any bank or financial institution. All sums payable to the Upstream Guarantor in respect of the Vessel are paid into the Borrower Operating Account.

 

3.28       Beneficial Ownership Certification. As of the Closing Date, the information included in the Beneficial Ownership Certification is true and correct in all respects.

 

ARTICLE IV

CONDITIONS OF LENDING

 

4.01       Conditions Precedent to the Closing Date. The obligation of each Lender to make the Loan is subject to the conditions precedent that, on or before the Closing Date, the Facility Agent shall have received, in form and substance satisfactory to the Facility Agent and each Lender (unless otherwise specified):

 

 

(a)          certified copies of the resolutions of the boards of directors of each of the Obligors (and the shareholders of the Upstream Guarantor) and ISOC approving each Loan Document and each other document contemplated thereby to which any Obligor or ISOC is or is to be a party, and of all documents evidencing other necessary corporate or company action and governmental approvals of each Obligor, if any, with respect to such Loan Documents and other documents to which it is or is to be a party;

 

(b)          a certificate of an officer of each Obligor and ISOC certifying the names and true signatures of the respective officers and directors of each Obligor and ISOC and the names and true signatures of the respective attorneys-in-fact of each Obligor and ISOC authorized to sign each Loan Document and each other document contemplated thereby to which it is or is to be a party;

 

(c)          a copy of the Organizational Documents of each Obligor and ISOC and each amendment thereto, certified (as of a date reasonably near the Closing Date) by an officer of such Obligor and ISOC as being a true and correct copy thereof;

 

(d)          an original or a certified copy of any power of attorney under which any Loan Document is executed on behalf of an Obligor or ISOC;

 

(e)          a copy of a certificate of goodstanding of each Obligor and ISOC dated as of a date reasonably near the Closing Date, certifying that such Obligor and ISOC is duly incorporated and in good standing under the laws of its jurisdiction of incorporation;

 

(f)           copies of all consents which an Obligor and ISOC requires to enter into, or make any payment under any Loan Document, each certified as of a date reasonably near the Closing Date by an authorized person of such party as being a true and correct copy thereof, or certification by such authorized person that no such consents are required;

 

(g)          such documentation and other evidence as is reasonably requested by the Facility Agent or a Lender in order for each to carry out and be satisfied with the results of all necessary “know your customer” or other checks which it is required to carry out in relation to the transactions contemplated by this Agreement and the other Loan Documents, including without limitation obtaining, verifying and recording certain information and documentation that will allow the Facility Agent and each of the Lenders to identify each Security Party in accordance with the requirements of the PATRIOT Act;

 

(h)          a duly executed original of each Loan Document not otherwise referred to in this Article IV in effect on the Closing Date, or any other document in effect on the Closing Date required to be delivered by any such Loan Document if not otherwise referred to in this Article IV;

 

(i)           at least five (5) days prior to the Closing Date, a Beneficial Ownership Certification in relation to any Obligor that qualifies as a “legal entity customer” under the Beneficial Ownership Regulation;

 

(j)           [reserved];

 

(k)          a satisfactory review by the Facility Agent’s counsel of the equity structure of the Borrower and each Guarantor; and

 

(l)           such documents and evidence as any Lender shall reasonably require, based on Applicable Law and such Lender’s own internal guidelines, relating to such Lender’s knowledge of its customers.

 

 

4.02       Conditions Precedent to the Drawdown Date. The obligation of each Lender to make the Loan is subject to the following conditions precedent having been satisfied (or waived in writing by the Facility Agent with the written consent of the Required Lenders) on or prior to the Drawdown Date:

 

(a)          the Facility Agent shall have received the Borrowing Request as required by Section 2.03;

 

(b)          the Borrower shall have paid the fees, costs and expenses due and payable pursuant to Section 2.10 and any other fees, costs and expenses due and payable pursuant hereto;

 

(c)          the Facility Agent shall have received forecasts included in an annual budget prepared by management of the Borrower pursuant to Section 5.01(d);

 

(d)          a favorable opinion of legal counsel for the Obligors and ISOC, in respect of the Loan Documents (including, without limitation, the Vessel Mortgage) executed in connection with the making of the Borrowing and as to such other matters as the Facility Agent may reasonably request addressed to the Facility Agent and all other Finance Parties in form and substance satisfactory to the Facility Agent;

 

(e)          evidence that, if the tests set out in Article VII or Section 5.04 were applied immediately following the making of the Borrowing, the Borrower would not be obliged to provide additional security or repay part of the Loan as therein provided (determined on the basis of the most recent valuation for the Vessel delivered pursuant to Section 5.03);

 

(f)           no Default shall have occurred and be continuing;

 

(g)          the representations and warranties contained in Article III shall be true and correct in all material respects on and as of the Drawdown Date, except to the extent that such representations and warranties specifically refer to an earlier date;

 

(h)          the Facility Agent shall have received on or before the Borrowing, a certificate of an officer of each Obligor and ISOC, in form and substance reasonably satisfactory to the Facility Agent, dated as of the Drawdown Date (the statements made in such certificate shall be true on and as of the Drawdown Date), certifying that each document it is required to provide in connection with the Borrowing is in full force and effect as at the Drawdown Date;

 

(i)           evidence that the Borrower has duly opened the Borrower Operating Account, the Debt Service Reserve Account and the Dry Dock Reserve Account and has delivered to the Facility Agent all resolutions, signature cards and other documents or evidence required in connection with the opening, maintenance and operation of such accounts with the Account Bank, and evidence that (i) the Borrower Operating Account has been funded with $1,250,000 in respect of the Vessel; (ii) the Debt Service Reserve Account has been funded with $2,500,000 and (iii) the Dry Dock Reserve Account has been funded with $1,260,000;

 

(j)           in accordance with Section 5.03, at least two valuations of the Fair Market Value of the Vessel, paid for by the Borrower but addressed to the Facility Agent and dated not more than 30 days before service of the Closing Date;

 

(k)          to the extent required by any change in applicable law and regulation or any changes in any Lender’s own internal guidelines since the date on which the applicable documents and evidence were delivered to the Facility Agent pursuant to Section 4.01(k), such further documents and evidence as the Facility Agent shall reasonably require relating to each Lender’s knowledge of its customers;

 

 

(l)           a copy of the bill of sale in respect of the Vessel, duly executed by the relevant seller (certified by an officer of the Upstream Guarantor to be a true, correct and complete copy thereof); and

 

(m)         if requested by a Lender, any Note, duly executed by the Borrower.

 

The making of the Borrowing hereunder shall be deemed to be a representation and warranty by the Obligors on the Drawdown Date as to the facts specified in clauses (e) and (f) of this Section 4.02.

 

4.03       Conditions Precedent Relating to the Vessel and Security. Without prejudice to Sections 4.01 and 4.02, the obligation of each Lender to make the Loan is subject to the following further conditions precedent having been satisfied (or waived in writing by the Facility Agent with the written consent of the Required Lenders) on or prior to the Drawdown Date: the Facility Agent shall have received on or before the Drawdown Date the following, each dated as of the Borrowing (unless otherwise specified), in form and substance reasonably satisfactory to the Lenders (unless otherwise specified):

 

(a)          the Vessel Mortgage relating to the Vessel, duly executed by the Upstream Guarantor;

 

(b)          the Assignment of Earnings relating to the Vessel, duly executed by the Upstream Guarantor;

 

(c)          the Assignment of Insurances relating to the Vessel, duly executed by the Upstream Guarantor, together with a signed notice of assignment, substantially in the form attached thereto;

 

(d)          if applicable, a Charter Assignment relating to the Vessel, duly executed by the Upstream Guarantor, together with a signed notice of assignment, substantially in the form attached thereto;

 

(e)          Manager’s Undertakings relating to the Vessel, duly executed by each Approved Manager (other than the Tankers International pool as commercial manager) of the Vessel;

 

(f)           the Borrower Share Pledge and the ISOC Share Pledge, duly executed by the Borrower and by ISOC respectively;

 

(g)          an Account Pledge, duly executed by the Borrower with respect to the Borrower Operating Account, the Dry Dock Reserve Account and the Debt Service Reserve Account;

 

(h)          if applicable, a Master Agreement Assignment, duly executed by the Borrower;

 

(i)           evidence of insurance in respect of the Vessel naming the Facility Agent as loss payee and, with respect to hull and machinery insurances, as co-assured with such responsible and reputable insurance companies or associations, and in such amounts and covering such risks, as is required pursuant to this Agreement and the Vessel Mortgage;

 

(j)           if applicable, any Subordination Agreements, duly executed by the Borrower or the Upstream Guarantor;

 

 

(k)          the Letter of Undertaking relating to the Vessel, provided by the relevant approved broker and with such approved insurance companies and/or underwriters;

 

(l)           a favorable opinion from an independent insurance consultant reasonably acceptable to the Facility Agent on such matters relating to the insurances for the Vessel as the Facility Agent may reasonably require;

 

(m)         a Certificate of Ownership and Encumbrance (or equivalent) issued by the maritime administrator for the Marshall Islands (or other relevant authority) stating that the Vessel is owned by the Upstream Guarantor and that there are on record no Liens on the Vessel except the Vessel Mortgage;

 

(n)          evidence of the completion of all other recordings and filings of, or with respect to, the Security Documents executed in connection with the making of the Borrowing that the Facility Agent may reasonably deem necessary or desirable in order to perfect and protect the Liens created thereby, including under the Uniform Commercial Code of New York or such other jurisdiction where the relevant Guarantor or ISOC and/or any Collateral may be located;

 

(o)          a copy of a certificate duly issued by the Classification Society, dated within seven (7) days of the Borrowing, to the effect that the Vessel has received the highest classification and rating for vessels of the same age and type, free of all overdue recommendations and overdue notations of the Classification Society affecting class;

 

(p)          evidence that the Vessel will, as from the Drawdown Date, be managed by an Approved Manager on terms reasonably acceptable to the Facility Agent, together with copies of the Document of Compliance and Safety Management Certificate issued pursuant to the ISM Code and the ISSC issued pursuant to the ISPS Code in respect of the Vessel;

 

(q)          a copy of any charter for a term which exceeds, or by virtue of any optional extensions may exceed, twelve (12) months to which the Vessel is subject as of the Drawdown Date, and a copy of any pooling charter to which the Vessel is subject as of the Drawdown Date, certified as of a date reasonably near the Drawdown Date by an authorized person of the Upstream Guarantor as being a true and correct copy thereof;

 

(r)           evidence that the Inventory of Hazardous Materials relating to the Vessel is in place; and

 

(s)          such other certificates relating to the Vessel, or the operation thereof, as may be reasonably requested by the Facility Agent.

 

ARTICLE V

AFFIRMATIVE COVENANTS

 

Until the Commitments have expired or been terminated and all Obligations shall have been paid in full (other than contingent indemnification or reimbursement obligations), the Borrower and each of the Guarantors, as the case may be, covenants and agrees with each Finance Party that:

 

 

5.01       Financial Statements. The Borrower will furnish to the Facility Agent:

 

(a)          as soon as available, and in any event (i) with respect to the Parent and its Subsidiaries and ISOC and its Subsidiaries, within 90 days after the end of each fiscal year (commencing with the fiscal year ending on December 31, 2018) and (ii) with respect to the Borrower and its Subsidiaries, within 120 days after the end of each fiscal year (commencing with the fiscal year ending on December 31, 2018), a consolidated balance sheet of each of (x) the Parent and its Subsidiaries, (y) ISOC and its Subsidiaries and (z) the Borrower and its Subsidiaries as at the end of such fiscal year and the related consolidated statements of income or operations, shareholders’ equity and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, (A) in the case of the Parent and its Subsidiaries and the Borrower and its Subsidiaries, audited and accompanied by a report and opinion of independent public accountants of nationally recognized standing, which report and opinion shall be prepared in accordance with generally accepted auditing standards (and shall not be subject to any “going concern” or like qualification, exception or explanatory paragraph or any qualification, exception or explanatory paragraph as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition, results of operations, shareholders’ equity and cash flows of each of the Parent and its Subsidiaries and the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, and (B) in the case of ISOC and its Subsidiaries, unaudited and certified by a Financial Officer of ISOC as fairly presenting in all material respects the financial condition, results of operations, shareholders’ equity and cash flows of ISOC and its Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject only to normal year-end audit adjustments and the absence of notes;

 

(b)          as soon as available, but in any event (i) with respect to the Parent and its Subsidiaries and ISOC and its Subsidiaries, within 45 days after the end of each of the first three fiscal quarters of each fiscal year (commencing with the fiscal quarter ending on June 30, 2018), and (ii) with respect to the Borrower and its Subsidiaries, within 60 days after the end of each of the first three fiscal quarters of each fiscal year (commencing with the fiscal quarter ending on June 30, 2018), a consolidated balance sheet of each of (x) the Parent and its Subsidiaries, (y) ISOC and its Subsidiaries and (z) the Borrower and its Subsidiaries as at the end of such fiscal quarter, the related consolidated statements of income or operations, shareholders’ equity and cash flows for such fiscal quarter and for the portion of the Parent’s, ISOC’s or the Borrower’s fiscal year then ended, in each case setting forth in comparative form, as applicable, the figures for the corresponding fiscal quarter of the previous fiscal year and the corresponding portion of the previous fiscal year, unaudited and certified by a Financial Officer of each of the Parent, ISOC and the Borrower as fairly presenting in all material respects the financial condition, results of operations, shareholders’ equity and cash flows of each of the Parent and its Subsidiaries, ISOC and its Subsidiaries and the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject only to normal year-end audit adjustments and the absence of notes;

 

(c)          as soon as available, but in any event (i) with respect to the Parent and its Subsidiaries, within 30 days after the end of each fiscal month (commencing with the fiscal month ending on June 30, 2018) and (ii) with respect to the Borrower and its Subsidiaries, within 40 days after the end of each fiscal month (commencing with the fiscal month ending on June 30, 2018), a consolidated balance sheet of each of (x) the Parent and its Subsidiaries and (y) the Borrower and its Subsidiaries as at the end of such fiscal month, the related consolidated statements of income or operations, shareholders’ equity and cash flows for such fiscal month and for the portion of the Parent’s or the Borrower’s fiscal year then ended, in each case setting forth in comparative form, as applicable, the figures for the corresponding fiscal month of the previous fiscal year and the corresponding portion of the previous fiscal year, unaudited and certified by a Financial Officer of each of the Parent and the Borrower as fairly presenting in all material respects the financial condition, results of operations, shareholders’ equity and cash flows of each of the Parent and its Subsidiaries and the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject only to normal year-end audit adjustments and the absence of notes; and

 

 

(d)          as soon as available, but in any event (i) with respect to the Parent and its Subsidiaries, within 45 days after the end of each fiscal year, and (ii) with respect to the Borrower and its Subsidiaries, within 45 days after the end of each fiscal year, forecasts contained in the budget prepared by management of each of the Parent and its Subsidiaries and the Borrower and its Subsidiaries and a summary of material assumptions used to prepare such forecasts, in form reasonably satisfactory to the Facility Agent, including projected statements of income or operations on a quarterly basis for such fiscal year.

 

5.02       Certificates; Other Information. The Borrower will deliver to the Facility Agent:

 

(a)          concurrently with the delivery of the financial statements referred to in Sections 5.01(a) and (b), a duly completed certificate signed by a Responsible Officer of the Borrower (i) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto and (ii) setting forth reasonably detailed calculations demonstrating (i) at the end of each fiscal quarter, compliance with Article VII and (ii) at the end of the second and fourth fiscal quarters of each fiscal year only, compliance with Section 5.04;

 

(b)          promptly after the furnishing thereof, copies of any material request or notice received by the Borrower or the Upstream Guarantor, or any statement or report furnished by the Borrower or the Upstream Guarantor to any holder of debt securities of the Borrower or the Upstream Guarantor, pursuant to the terms of any indenture, loan or credit or similar agreement and not otherwise required to be furnished pursuant hereto;

 

(c)          promptly after following request therefor, copies of any detailed audit reports, management letters or recommendations submitted to the board of directors (or the audit committee of the board of directors) of the Borrower by independent accountants in connection with the accounts or books of the Borrower or the Upstream Guarantor, or any audit of any of them, as the Facility Agent or any Lender (through the Facility Agent) may from time to time reasonably request;

 

(d)          promptly following any request by the Security Trustee therefor, with any information which the Security Trustee (or any such designated person) reasonably requests for the purpose of: (i) obtaining or preparing any report from an independent marine insurance broker as to the adequacy of the obligatory insurances effected or proposed to be effected; and/or (ii) effecting, maintaining or renewing any such insurances or dealing with or considering any matters relating to any such insurances;

 

(e)          promptly following any request therefor, such other information regarding: (i) the operations, business, properties, liabilities (actual or contingent), condition (financial or otherwise) or prospects of any Obligor, (ii) the Vessel, its employment, position and engagements, Earnings, payments and amounts due to its master and crew, expenses incurred, towages and salvages, or its charter or management, or (iii) compliance with the terms of the Loan Documents, as the Facility Agent, Security Trustee, or any Lender (through the Facility Agent) may from time to time reasonably request.

 

 

Documents required to be delivered pursuant to Section 5.01(a) or (b) (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and, if so delivered, shall be deemed to have been delivered on the date (i) on which such materials are publicly available as posted on the Electronic Data Gathering, Analysis and Retrieval system (EDGAR); or (ii) on which such documents are posted on the Borrower’s behalf on an Internet or intranet website, if any, to which each Lender and the Facility Agent have access (whether a commercial, third-party website or whether sponsored by the Facility Agent). The Facility Agent shall have no obligation to request the delivery of or to maintain paper copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by the Borrower with any such request by a Lender for delivery, and each Lender shall be solely responsible for timely accessing posted documents or requesting delivery of paper copies of such document to it and maintaining its copies of such documents.

 

5.03       Vessel Valuations. The Borrower, at its expense, shall procure at least two (but no more than three) written appraisal reports each to be made by an Approved Broker, each dated no earlier than 30 days prior to its delivery to the Facility Agent, permitting the calculation of the Fair Market Value of the Vessel (a) for inclusion with the certificate required to be delivered under Section 5.02(a) concurrent with the second and fourth quarterly financial statements to be delivered under Section 5.01(b) and (b) on or before the date on which the Borrower elects to increase the Commitments pursuant to Section 2.21(a); provided, however, that during the existence and continuance of an Event of Default, the Security Trustee and the Facility Agent acting reasonably may obtain an unlimited number of additional written appraisal reports to be made by an Approved Broker at the Borrower’s expense in any 12-month period;

 

5.04       Vessel Value Maintenance. Each Obligor will ensure that the aggregate Fair Market Value of the Vessel (plus the market value of any additional security for the time being actually provided to the Lenders pursuant to this Section 5.04) is at all times not less than one hundred fifty percent (150%) of the aggregate outstanding principal amount of the Loan. If the Obligors at any time shall not be in compliance with the preceding sentence, then within thirty (30) days of being notified by the Facility Agent of such noncompliance (which notification shall be conclusive and binding on the Obligors), the Obligors shall (a) prepay (subject to, and in accordance with Section 2.07, provided, however, no prepayment fee shall apply under Section 2.10) such part of the Loan as will ensure compliance with this Section 5.04; or (b) provide the Security Trustee with, or procure the provision to the Lenders of, such additional security as shall in the opinion of the Required Lenders be adequate to make up such deficiency, which additional security shall take such form, be constituted by such documentation and be entered into between such parties as the Required Lenders in their absolute discretion may approve or require (and, if the Obligors do not make proposals reasonably satisfactory to the Required Lenders in relation to such additional security within five (5) days of the date of the Facility Agent’s notification to the Obligors aforesaid, the Obligors shall be deemed to have elected to prepay in accordance with (a) above).

 

5.05       Notices. The Borrower will promptly notify the Facility Agent of:

 

(a)          the occurrence of any Default;

 

(b)          the filing or commencement of any action, suit, investigation or proceeding by or before any arbitrator or Governmental Authority against or affecting any Obligor or any Affiliate thereof including pursuant to any applicable Sanctions or Environmental Laws, that could reasonably be expected to result in a Material Adverse Effect;

 

(c)          the occurrence of any ERISA Event that, either individually or together with any other ERISA Events, could reasonably be expected to result in a Material Adverse Effect;

 

 

(d)          notice of any action arising under any Environmental Law or of any noncompliance by any Obligor with any Environmental Law or any permit, approval, license or other authorization required thereunder that, if adversely determined, could reasonably be expected to result in a Material Adverse Effect;

 

(e)          any material change in accounting or financial reporting practices by the Borrower or any Subsidiary, other than as permitted by Section 1.03(b);

 

(f)           any occurrence as a result of which the Vessel has become or is, by the passing of time or otherwise, likely to become a Total Loss;

 

(g)          any material requirement or condition made by any insurer or classification society or by any competent authority which is not promptly complied with;

 

(h)          any arrest or detention of the Vessel, any exercise or purported exercise of any security interest on the Vessel or the Earnings or any requisition of the Vessel for hire;

 

(i)           any intended dry docking of the Vessel;

 

(j)           any claim for breach of the ISM Code or the ISPS Code being made against any Obligor, the Approved Manager or otherwise in connection with the Vessel;

 

(k)          any other matter, event or incident, actual or threatened, the effect of which will or could reasonably be expected to lead to the ISM Code or the ISPS Code not being complied with in respect of the Vessel;

 

(l)          any casualty which is or is reasonably likely to become a Major Casualty;

 

(m)         any matter or development that has had or could reasonably be expected to have a Material Adverse Effect; and

 

(n)         any change in the information provided in the Beneficial Ownership Certification that would result in a change to the list of beneficial owners identified in sections (C) or (D) of such certification.

 

Each notice delivered under this Section shall be accompanied by a statement of a Responsible Officer of the Borrower setting forth the details of the occurrence requiring such notice and stating what action the Borrower has taken and proposes to take with respect thereto.

 

5.06       Preservation of Existence, Etc. Each Obligor will (a) preserve, renew and maintain in full force and effect its legal existence and good standing under the Laws of the jurisdiction of its incorporation; (b) take all reasonable action to maintain all rights, licenses, permits, privileges and franchises necessary or desirable for (i) such Obligor to perform its obligations under this Agreement and all other Loan Documents to which it is a party and (ii) the operation of the Vessel, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; and (c) preserve or renew all of its registered patents, trademarks, trade names and service marks, the non-preservation of which could reasonably be expected to have a Material Adverse Effect.

 

 

5.07       Employee Benefits. Each Obligor will (a) comply with all applicable Laws, including the applicable provisions of ERISA, those relating to any Foreign Plan and the Code, with respect to all Plans and, as applicable, all Foreign Plans, except where such non- compliance would not be reasonably expected to result in a Material Adverse Effect and (b) furnish to the Facility Agent, upon request, copies of (i) annual report (Form 5500 Series) filed by any Obligor or any of its ERISA Affiliates with the Employee Benefits Security Administration with respect to each Pension Plan sponsored or maintained by any Obligor, (ii) the most recent actuarial valuation report for each such Pension Plan or Foreign Plan, (iii) all notices received by any Obligor or any of its Subsidiaries from a Multiemployer Plan sponsor or any governmental agency concerning an ERISA Event, (iv) such other information, documents or governmental reports or filings related to any Pension Plan, Foreign Plan or Multiemployer Plan as the Facility Agent shall reasonably request, (v) any Financial Support Direction or Contribution Notice received by the Parent or a Subsidiary of the Parent, and (vi) any warning notice or other document or letter received by the Parent or a Subsidiary of the Parent from the Pensions Regulator, that may lead to the issue of a Financial Support Direction or a Contribution Notice.

 

5.08       Maintenance of Properties. Each Obligor will (a) maintain, preserve and protect all of its properties and equipment, other than the Vessel, necessary in the operation of its business in good working order and condition (ordinary wear and tear excepted) and (b) make all necessary repairs thereto and renewals and replacements thereof, except to the extent, in either case, that the failure to do so could not reasonably be expected to have a Material Adverse Effect.

 

5.09       Insurances. Each Obligor will:

 

(a)          maintain with financially sound and reputable insurance companies, insurance with respect to any of its properties, other than the Vessel, and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts (after giving effect to any self-insurance reasonable and customary for similarly situated Persons engaged in the same or similar businesses as such Obligor) as are customarily carried under similar circumstances by such Persons;

 

(b)          keep the Vessel insured at its expense against: (i) fire and usual marine risks (including hull and machinery, hull interest/increased value, freight interest and excess risks); (ii) war risks (including terrorism, piracy, and confiscation); (iii) protection and indemnity risks (including maximum cover for pollution liabilities); and (iv) any other risks against which the Required Lenders reasonably consider, having regard to practices and other circumstances prevailing at the relevant time, it would be commercially reasonable for the Upstream Guarantor to insure and which are specified by the Security Trustee by notice in writing to the Upstream Guarantor;

 

(c)          affect such insurances in respect of the Vessel:

 

(i)          (A) in Dollars; (B) in each case, in an amount on an agreed value basis at least the greater of: (1) the Fair Market Value of the Vessel and (2) one hundred twenty percent (120%) of the aggregate outstanding amount of the Loan; (C) in respect of any obligatory insurances for hull and machinery, in an amount on an agreed value basis at least the greater of: (1) the aggregate outstanding amount of the Loan and (2) eighty percent (80%) of the Fair Market Value of the Vessel, while the remaining cover may be taken out as hull interest and/or freight interest insurance; (D) in the case of oil pollution liability risks, for an aggregate amount equal to the highest level of cover from time to time available under basic protection and indemnity club entry and in the international marine insurance market; (E) in relation to protection and indemnity risks in respect of the full tonnage of the Vessel; (F) on approved terms; and (G) through approved brokers and with approved insurance companies and/or underwriters or, in the case of war risks and protection and indemnity risks, in approved war risks and protection and indemnity risks associations that are members of the International Group of P&I Clubs, such approval not to be unreasonably withheld or delayed;

 

 

(ii)         (A) subject always to paragraph (B), name the Upstream Guarantor as the sole named assured unless the interest of every other named assured is limited: (1) in respect of any obligatory insurances for hull and machinery and war risks; to any provable out-of-pocket expenses that it has incurred and which form part of any recoverable claim on underwriters; and to any third party liability claims where cover for such claims is provided by the policy (and then only in respect of discharge of any claims made against it); and (2) in respect of any obligatory insurances for protection and indemnity risks, to any recoveries it is entitled to make by way of reimbursement following discharge of any third party liability claims made specifically against it; and every other named assured has undertaken in writing to the Security Trustee (in such form as it requires) that any deductible shall be apportioned between the Upstream Guarantor and every other named assured in proportion to the aggregate claims made or paid by each of them and that it shall do all things necessary and provide all documents, evidence and information to enable the Security Trustee to collect or recover any moneys which at any time become payable in respect of the obligatory insurances; (B) whenever the Security Trustee requires, name (or be amended to name) the Security Trustee as additional named assured for its rights and interests, warranted no operational interest and with full waiver of rights of subrogation against the Security Trustee, but without the Security Trustee thereby being liable to pay (but having the right to pay) premiums, calls or other assessments in respect of such insurance; (C) name the Security Trustee as loss payee with such directions for payment as the Security Trustee may specify; (D) provide that all payments by or on behalf of the insurers under the obligatory insurances to the Security Trustee shall be made without set-off, counterclaim or deductions or condition whatsoever; (E) provide that the obligatory insurances shall be primary without right of contribution from other insurances which may be carried by the Security Trustee or any other Finance Party; and (F) provide that the Security Trustee may make proof of loss if the Upstream Guarantor fails to do so;

 

(d)          (i) at least 21 days before the expiry of any obligatory insurance: (A) notify the Security Trustee of the brokers (or other insurers) and any protection and indemnity or war risks association through or with whom the Upstream Guarantor proposes to renew that obligatory insurance and of the proposed terms of renewal; and (B) obtain the Security Trustee’s approval to the matters referred to in paragraph (A); (ii) at least 14 days before the expiry of any obligatory insurance, renew that obligatory insurance in accordance with the Security Trustee’s approval pursuant to paragraph (i); and (iii) procure that the approved brokers and/or the war risks and protection and indemnity associations with which such a renewal is effected shall promptly after the renewal notify the Security Trustee in writing of the terms and conditions of the renewal;

 

(e)          ensure that any guarantees required by a protection and indemnity or war risks association are promptly issued and remain in full force and effect; and

 

(f)           punctually pay all premiums or other sums payable in respect of the obligatory insurances and produce all relevant receipts when so required by the Security Trustee.

 

5.10       Insurance Documentation; Letters of Undertaking; Certificates. Each Obligor will:

 

(a)          ensure that all approved brokers and with approved insurance companies and/or underwriters provide the Security Trustee with pro forma copies of all policies relating to the obligatory insurances which they are to affect or renew and of a letter or letters or undertaking in a form reasonably required by the Security Trustee and including undertakings by the approved brokers and with approved insurance companies and/or underwriters (“Letters of Undertaking”) that: (i) they will have endorsed on each policy, immediately upon issue, a loss payable clause and a notice of assignment in accordance with the requirements of the Assignment of Insurances for the Vessel; (ii) they will hold such policies, and the benefit of such insurances, to the order of the Security Trustee in accordance with the said loss payable clause; (iii) they will advise the Security Trustee immediately of any material change to the terms of the obligatory insurances or if they cease to act as brokers; (iv) they will notify the Security Trustee, not less than 14 days before the expiry of the obligatory insurances, in the event of their not having received notice of renewal instructions from the Upstream Guarantor or its agents; and (vi) they will not set off against any sum recoverable in respect of a claim relating to the Vessel under such obligatory insurances any premiums or other amounts due to them or any other person whether in respect of the Vessel or otherwise, they waive any lien on the policies, or any sums received under them, which they might have in respect of such premiums or other amounts, and they will not cancel such obligatory insurances by reason of nonpayment of such premiums or other amounts, and will arrange for a separate policy to be issued in respect of the Vessel forthwith upon being so requested by the Security Trustee;

 

 

(b)          as of the Drawdown Date and thereafter upon the Required Lenders’ written request therefor, such request to be made only following a material change to the insurance terms, ensure that the Facility Agent is provided with a favorable opinion from an independent insurance consultant acceptable to the Facility Agent on such matters relating to the insurances for the Vessel as the Required Lenders may require; and

 

(c)          ensure that any protection and indemnity and/or war risks associations in which the Vessel is entered provides the Security Trustee with: (i) a certified copy of the certificate of entry for the Vessel; and (ii) a letter or letters of undertaking in the form customarily provided by the International Group of P&I Clubs.

 

5.11       Mortgagee’s Insurance. The Security Trustee shall, to the extent commercially available, effect, maintain and renew (i) mortgagee’s interest marine insurance and/or (ii) mortgagee’s interest additional perils insurance in such amounts (not to exceed one hundred twenty percent (120%) of the Loan), on such terms, through such insurers and generally in such manner as the Security Trustee may from time to time consider necessary and the Obligors, jointly and severally, shall upon demand fully indemnify the Security Trustee in respect of all documented premiums and other reasonable documented out-of-pocket expenses which are incurred in connection with or with a view to effecting, maintaining or renewing any such insurance or dealing with, or considering, any matter arising out of any such insurance.

 

5.12       Maintenance of Security Interests. Each Obligor will: (a) at its own cost, take all reasonable actions to ensure that any Security Document to which it is a party validly creates the obligations and the security interests which it purports to create; and (b) without limiting the generality of paragraph (a), at its own cost, promptly register, file, record or enroll any Security Document to which it is a party with any court or authority in all relevant jurisdictions, pay any stamp, registration or similar tax in all relevant jurisdictions in respect of any Security Document to which it is a party, give any notice or take any other step which, in the reasonable opinion of the Security Trustee, acting with the instruction of the Required Lenders, is or has become necessary for any Security Document to which it is a party to be valid, enforceable or admissible in evidence or to ensure or protect the priority of any security interest which it creates.

 

5.13       Earnings Payments. Each of the Borrower and the Upstream Guarantor shall deposit and cause to be deposited all of its Earnings into the Borrower Operating Account.

 

5.14       Payment of Obligations. Each Obligor will pay, discharge or otherwise satisfy as the same shall become due and payable, all of its material obligations and liabilities, including Tax liabilities, unless the same are being contested in good faith by appropriate proceedings diligently conducted and adequate reserves in accordance with GAAP are being maintained by such Obligor, and timely file all Tax returns, except to the extent that the failure to do so would not reasonably be expected to have a Material Adverse Effect. Each of the Borrower and the Upstream Guarantor shall remain a disregarded entity for U.S. federal income tax purposes.

 

 

5.15       Vessel Registration. The Upstream Guarantor shall: (a) keep the Vessel registered in its name under the law of an Approved Flag; (b) not do, omit to do or allow to be done anything as a result of which such registration might be cancelled or imperiled; and (c) not, without the prior written consent of the Facility Agent (such consent not to be unreasonably withheld or delayed), change the name of the Vessel or port of registry on which the Vessel was registered when it became subject to a Vessel Mortgage.

 

5.16       Vessel Repair. The Upstream Guarantor shall keep the Vessel in a good and safe condition and state of repair: (a) consistent with first class ship ownership and management practice; (b) so as to maintain the highest class for the Vessel with the Classification Society, free of material overdue recommendations, adverse notations and conditions affecting the Vessel’s class; and (c) so as to comply with all laws and regulations applicable to vessels registered under the law of the Approved Flag on which the Vessel is registered or to vessels trading to any jurisdiction to which the Vessel may trade from time to time, including but not limited to the ISM Code and the ISPS Code.

 

5.17       Classification Society Instructions and Undertakings. The Upstream Guarantor shall instruct the Classification Society (and procure that the Classification Society undertakes with the Security Trustee): (a) to send to the Security Trustee, following receipt of a written request from the Security Trustee, certified true copies of all original class records held by the Classification Society in relation to the Vessel; (b) to allow the Security Trustee (or its agents), at any time and from time to time, to inspect the original class and related records of the Upstream Guarantor and the Vessel either (i) electronically (through the Classification Society directly or by way of indirect access via the Borrower’s account manager and designating the Security Trustee as a user or administrator of the system under its account) or (ii) in person at the offices of the Classification Society, and to take copies of them electronically or otherwise; (c) to notify the Security Trustee promptly in writing if the Classification Society: (i) receives notification from the Upstream Guarantor or any other person that the Vessel’s Classification Society is to be changed; or (ii) becomes aware of any facts or matters which may result in or have resulted in a condition of class or a recommendation, or a change, suspension, discontinuance, withdrawal or expiry of the Vessel’s class under the rules or terms and conditions of the Upstream Guarantor’s or the Vessel’s membership of the Classification Society; (d) following receipt of a written request from the Security Trustee: (i) to confirm that the Upstream Guarantor is not in default of any of its Contractual Obligations or liabilities to the Classification Society and, without limiting the foregoing, that it has paid in full all fees or other charges due and payable to the Classification Society; and (ii) if the Upstream Guarantor is in default of any of its Contractual Obligations or liabilities to the Classification Society, to specify to the Security Trustee in reasonable detail the facts and circumstances of such default, the consequences of such default, and any remedy period agreed or allowed by the Classification Society.

 

5.18       Charters; Charter Assignments; Assignments of Earnings. The Upstream Guarantor shall: (a) furnish promptly to the Facility Agent a true and complete copy of any demise charter and any time or consecutive voyage charter for a term which exceeds, or by virtue of any optional extensions may exceed, twelve (12) months for the Vessel (other than a charter pursuant to an Approved Pooling Arrangement), all other documents related thereto and a true and complete copy of each material amendment or other modification thereof; and (b) in respect of any such charter, execute and deliver to the Facility Agent a Charter Assignment and use commercially reasonable efforts to cause the charterer to execute and deliver to the Facility Agent a consent and acknowledgement to such Charter Assignment in the form required thereby and, in connection with such Charter Assignment, upon the Upstream Guarantor’s reasonable request, the Security Trustee may enter into with such charterer a quiet enjoyment agreement in Agreed Form (subject at all times to the consent of the Security Trustee which consent may be granted or withheld at the sole discretion of the Security Trustee) on customary terms in respect of such charter including such terms as may reasonably be requested by such charterer.

 

 

5.19       Compliance with Laws. Each Obligor will comply with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its business generally or to the ownership, employment, operation and management of the Vessel, including but not limited to the ISM Code and the ISPS Code.

 

5.20       [Intentionally omitted]

 

5.21       Environmental Matters. Each Obligor will (a) except to the extent that the failure to do so would not reasonably be expected to have a Material Adverse Effect, comply with all Environmental Laws, (b) except to the extent that the failure to do so would not reasonably be expected to have a Material Adverse Effect, obtain, maintain in full force and effect and comply with any permits, licenses or approvals required for the Vessel facilities or operations of any Obligor, and (c) conduct and complete any investigation, study, sampling or testing, and undertake any corrective, cleanup, removal, response, remedial or other action necessary to identify, report, remove and clean up all Hazardous Materials present or released at, on, in, under or from any of the Vessel facilities or real properties of any Obligor.

 

5.22       Books and Records. Each Obligor will maintain, and cause to be maintained, proper books of record and account, in which full, true and correct entries, in conformity with GAAP as in effect from time to time, consistently applied shall be made of all financial transactions and matters involving the assets and business of such Obligor.

 

5.23       Inspection Rights. The Borrower and the Upstream Guarantor will:

 

(a)          permit representatives and independent contractors of the Facility Agent to visit and inspect any of its properties, to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss its affairs, finances and accounts with its directors, officers, and independent public accountants, all at the reasonable expense of the Borrower or Upstream Guarantor, as applicable, and at such reasonable times during normal business hours not more than once during any fiscal year of the Borrower or the Upstream Guarantor following 15 Business Days’ prior notice by the Facility Agent (acting on instructions of the Required Lenders); and

 

(b)          upon request of the Facility Agent acting on the instructions of the Required Lenders, permit the Security Trustee (by surveyors or other persons appointed by it for that purpose at the cost of the Borrower or the Upstream Guarantor) to board the Vessel, at all reasonable times with prior notice to the Upstream Guarantor of no less than 15 Business Days before the date of drydocking to inspect the Vessel’s condition or to satisfy themselves about proposed or executed repairs and shall afford all proper facilities for such inspections, one (1) such inspection per year to be at the reasonable expense of the Borrower, after which such additional inspections to be at the expense of the Lenders;

 

provided that, other than with respect to such visits and inspections during the occurrence and continuation of an Event of Default, the Facility Agent and the Lenders shall not exercise such rights more often than one (1) time during any calendar year; provided, further, that when an Event of Default has occurred and is continuing the Facility Agent, the Security Trustee or any Lender (or any of their respective representatives or independent contractors) may do any of the foregoing under this Section at the expense of the Borrower or the Upstream Guarantor, as applicable, and at any time during normal business hours with advance notice.

 

 

5.24       Surveys. The Upstream Guarantor, at its sole expense, shall submit the Vessel regularly to all periodical or other surveys which may be required for classification purposes and, if so required by the Security Trustee, provide the Security Trustee, at the Upstream Guarantor’s sole expense, with copies of all survey reports.

 

5.25       Notice of Mortgage. The Upstream Guarantor shall keep the Vessel Mortgage recorded against the Vessel as a valid first priority or preferred mortgage, carry on board the Vessel a certified copy of the Vessel Mortgage and place and maintain in a conspicuous place in the navigation room and the master’s cabin of the Vessel a framed printed notice stating that the Vessel is mortgaged by the Upstream Guarantor to the Security Trustee.

 

5.26       Inventory of Hazardous Materials. The Upstream Guarantor will, at all times after the Drawdown Date (inclusive), procure that the Vessel maintains and carries on board an Inventory of Hazardous Materials, or equivalent document acceptable to the Facility Agent.

 

5.27       Material Agreements. Each Obligor will comply with all contracts (including any charter contracts) and other agreements to which any Obligor is a party, except where the failure to do so would not reasonably be expected to result in a Material Adverse Effect.

 

5.28       Prevention of and Release from Arrest. The Upstream Guarantor shall promptly discharge: (a) all liabilities which give or may give rise to maritime or possessory liens on or claims enforceable against the Vessel, the Earnings or the Insurances; (b) all taxes, dues and other amounts charged in respect of the Vessel, the Earnings or the Insurances; and (c) all other accounts payable whatsoever in respect of the Vessel, the Earnings or the Insurances, and, forthwith upon receiving notice of the arrest of the Vessel, or of its detention in exercise or purported exercise of any lien or claim, the Upstream Guarantor shall procure its release by providing bail or otherwise as the circumstances may require within 45 days of such arrest or detention.

 

5.29       Use of Proceeds. Each Obligor will use the proceeds of the Loan only for the purposes set forth in Section 3.23.

 

5.30       Subordination of Loans. Neither the Borrower nor the Upstream Guarantor shall incur indebtedness extended by an Affiliate (collectively, the “Subordinated Debt”), unless such Subordinated Debt, including all sums and other obligations (financial or otherwise) owed by such entity under such indebtedness is fully subordinated to all Obligations pursuant to a subordination agreement in Agreed Form which provides that such loans and other obligations shall be unsecured and subject and subordinate to the prior payment in full of the Obligations (other than contingent indemnification or reimbursement obligations) (a “Subordination Agreement”); provided, however, that the Borrower and the Upstream Guarantor may not make payments of principal or interest on Subordinated Debt unless, after giving effect thereto, the Borrower delivers to the Facility Agent a certificate of an officer, confirming that (A) excluding balances standing to the credit of the Debt Service Reserve Account and the Dry Dock Reserve Account, the Borrower shall have cash or Cash Equivalents on a consolidated basis in an amount not less than $1,500,000 per vessel (with respect to the Vessel and any Additional Vessels); (B) the Borrower shall be in compliance with Articles V, VI and VII; and (C) the Debt Service Reserve Account contains a balance of not less than $2,500,000.

 

5.31       Anti-Corruption Laws. Each Obligor will maintain in effect policies and procedures designed to promote compliance by such Obligor and its respective directors, officers, employees, and agents with the FCPA and any other applicable anti-corruption laws.

 

 

5.32       “Know Your Customer” Documentation. Each Obligor will produce such documents and evidence as the Facility Agent and each Lender shall from time to time require, based on applicable law and regulations from time to time and the Lender’s own internal guidelines from time to time relating to each Lender’s knowledge of its customers.

 

5.33       Asset Control.

 

(a)          Each Obligor shall ensure that: (a) it is not (i) owned, directly or indirectly, by one or more Prohibited Persons in the aggregate, or (ii) controlled by a Prohibited Person, or (iii) acting directly on behalf of a Prohibited Person to the extent such action would be prohibited if the Obligor were resident or organized in the United States, the European Union or the United Kingdom; (b) it does not own or control a Prohibited Person; (c) it is not acting indirectly for the benefit of a Prohibited Person to the extent that such action would be prohibited if the Obligor were resident or organized in the United States, the European Union or the United Kingdom; and (d) no proceeds of the Borrowing (i) shall be made available directly or indirectly to a Prohibited Person to the extent that such action by such Obligor would be prohibited if the Obligor were resident or organized in the United States, the European Union or the United Kingdom or (ii) otherwise shall be directly or indirectly applied in a manner or for a purpose prohibited by Sanctions.

 

(b)          Each Obligor shall ensure that no proceeds from any activity or dealing with a Prohibited Person are credited to any bank account held with any Finance Party or any Affiliate of a Finance Party, to the extent crediting such bank account would lead to non-compliance by it, any Finance Party or any Affiliate of a Finance Party with any applicable Sanctions.

 

5.34       Scrapping. The Borrower shall use reasonable efforts to develop and implement a policy that any scrapping of the Vessel is conducted in compliance with the Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships, 2009, and with the guidelines issued by the International Maritime Organization in connection with such Convention.

 

5.35       Maintenance of Ratings. Use commercially reasonable efforts to maintain (but not maintain a specific rating) (a) a public corporate family rating of the Parent from Moody’s (or, any other Credit Rating Agency if Moody’s ceases to provide a rating for the Parent) and (b) a public corporate credit rating of the Parent from S&P (or any other Credit Rating Agency if S&P ceases to provide a rating for the Parent); it being understood that “commercially reasonable efforts” shall, in any event, include the payment by the Parent of customary rating agency fees and cooperation by the Parent with information and data requests by Moody’s and S&P (or any other Credit Rating Agency, as applicable) in connection with their ratings process.

 

5.36       Sanctions. If any Obligor or its Affiliates obtains any actual knowledge or receives any written notice of a breach of Section 3.16(b) or other violation of any Sanctions of such Persons described therein (a “Sanctions Event”), the Borrower shall (a) promptly give written notice to the Facility Agent of such Sanctions Event and (b) comply with all Sanctions with respect to such Sanctions Event (regardless of whether the Person that is the subject of such Sanctions is located within the jurisdiction of the United States of America.

 

5.37       Vessel Amounts; Borrower Operating Account. The Upstream Guarantor shall cause all amounts payable to the Upstream Guarantor in respect of the Vessel to be paid into the Borrower Operating Account.

 

5.38       Parent Covenants Relating to ISOC Share Pledge. The Parent shall procure that, with respect to the ISOC Share Pledge:

 

(a)          ISOC shall deliver or cause to be delivered to the Security Trustee any and all certificates, instruments or other documents representing or evidencing the Pledged Interests (as defined in the ISOC Share Pledge) on or prior to the date of the ISOC Share Pledge;

 

 

(b)          upon delivery to the Security Trustee, (i) any certificate, instrument or document representing or evidencing the Pledged Interests (as defined in the ISOC Share Pledge) shall be accompanied by undated stock powers duly executed in blank in the form attached to the ISOC Share Pledge as Exhibit A thereto or other undated instruments of transfer reasonably satisfactory to the Security Trustee and duly executed in blank and by such other instruments and documents as the Security Trustee may reasonably request and (ii) all other property comprising part of the Pledged Collateral (as defined in the ISOC Share Pledge) shall be accompanied by proper instruments of assignment, if applicable, duly executed by ISOC, as pledgor, and such other instruments or documents as the Security Trustee may reasonably request;

 

(c)          ISOC shall take the same actions referred to in clauses (i) and (ii) of this Section 5.38 with respect to any other Equity Interests (as defined in the ISOC Share Pledge) in the Borrower, as issuer, obtained in the future by ISOC forthwith upon the receipt thereof by ISOC;

 

(d)          ISOC will continue to be the direct owner, beneficially and of record, of the Pledged Interests (as defined in the ISOC Share Pledge) as owned by ISOC, except to the extent that the transfer thereof is permitted under this Agreement;

 

(e)          ISOC will make no assignment, pledge, hypothecation or transfer of, or create or permit to exist any security interest in or other Lien on, the Pledged Collateral (as defined in the ISOC Share Pledge), other than as permitted under this Agreement;

 

(f)           subject to section 2.05 of the ISOC Share Pledge (Voting Rights; Dividends and Interest, Etc.), ISOC will cause any and all Pledged Collateral (as defined in the ISOC Share Pledge), whether for value paid by ISOC or otherwise, to be forthwith deposited with the Security Trustee and pledged or collaterally assigned to the Security Trustee;

 

(g)          except for (i) restrictions and limitations imposed by this Agreement or securities laws generally and (ii) customary restrictions, encumbrances and limitations in joint venture agreements and similar arrangements, the Pledged Collateral (as defined in the ISOC Share Pledge) will continue to be freely transferable and assignable, and none of the Pledged Collateral (as defined in the ISOC Share Pledge) will be subject to any option, right of first refusal, shareholders agreement, charter or by-law provisions or contractual restriction of any nature that could reasonably be expected to prohibit, impair, delay or otherwise adversely affect the pledge of the Pledged Collateral (as defined in the ISOC Share Pledge) under the ISOC Share Pledge, the sale or disposition thereof pursuant to the ISOC Share Pledge or the exercise by the Security Trustee of its rights and remedies under the ISOC Share Pledge;

 

(h)          ISOC will not create, incur, assume or permit to exist, and will defend its title or interest to the Pledged Collateral (as defined in the ISOC Share Pledge) or in the Pledged Collateral (as defined in the ISOC Share Pledge ) against any and all Liens, however arising, of all Persons whomsoever (other than Permitted Liens);

 

(i)           in respect of any Pledged Collateral (as defined in the ISOC Share Pledge) acquired after the date of the ISOC Share Pledge, ISOC shall, promptly thereafter, take any and all such additional action necessary to protect and perfect a legal and valid first priority Lien on such after-acquired Pledged Collateral (as defined in the ISOC Share Pledge);

 

(j)           except with the prior written consent of the Security Trustee which consent may be granted or withheld at the sole discretion of the Security Trustee, ISOC shall cause the Borrower:

 

 

(i)          except as permitted under the Loan Documents, not to make any dividend with respect to its shares or directly or indirectly redeem, purchase or otherwise acquire any of its shares, or issue, sell or in any way dispose of any of its shares or any rights therein or thereto, including options and warrants, or to make any transfer with respect thereto;

 

(ii)         except as permitted under the Loan Documents, not to amend or modify its articles of incorporation or by-laws;

 

(iii)        not to issue any additional shares; and

 

(iv)         not to enter into any agreement or make any commitment to take any of the types of action described in subparagraphs (i) through (iii) above;

 

(k)          ISOC shall promptly after the signing of the ISOC Pledge notify the Borrower, as issuer, in accordance with the form of notice contained in Exhibit B to the ISOC Share Pledge, that the Pledged Collateral (as defined in the ISOC Share Pledge) has been pledged to the Security Trustee pursuant to the provisions of the ISOC Share Pledge, and in which notice ISOC shall instruct the Borrower, as issuer, to make appropriate notations in the books and records of the Borrower, as issuer, in accordance with the form of notice and instructions contained in Exhibit B to the ISOC Share Pledge. ISOC shall cause the Borrower, as issuer, to confirm receipt of said notice and its compliance with said instructions by signing and delivering to the Security Trustee, a copy of a document substantially in the form of Exhibit B to the ISOC Share Pledge;

 

(l)          upon execution of the ISOC Share Pledge, ISOC shall cause to be delivered to the Security Trustee a signed but undated resignation letter and a related letter of authority in the forms set out in Exhibit C and Exhibit D, respectively, to the ISOC Share Pledge, signed by each of the directors and officers of the Borrower;

 

(m)         ISOC shall promptly notify the Security Trustee of the appointment of any new directors or officers of the Borrower, as issuer, and, promptly following that new person’s appointment, deliver to the Security Trustee a letter or letters of resignation in the form set out in Exhibit C to the ISOC Share Pledge and related letter or letters of authority in the form set out in Exhibit D to the ISOC Share Pledge duly signed by each such additional person;

 

(n)          following the occurrence and during the continuance of an Enforcement Event (as defined in the ISOC Share Pledge), ISOC will promptly give to the Security Trustee copies of any notices or other communications received by it with respect to the Pledged Stock (as defined in the ISOC Share Pledge) in its capacity as the registered owner thereof;

 

(o)          with respect to section 2.05(a)(i) of the ISOC Share Pledge, ISOC’s rights and powers described therein shall not be exercised in any manner that will materially and adversely affect the Security Trustee’s Lien against the Pledged Stock (as defined in the ISOC Share Pledge) as granted under the ISOC Share Pledge or the rights and remedies of the Security Trustee under the ISOC Share Pledge or any other Loan Document in respect of the Pledged Stock (as defined in the ISOC Share Pledge) or the ability of the Security Trustee to exercise the same;

 

(p)          with respect to section 2.05(a)(ii) of the ISOC Share Pledge, if any non-cash dividends, interest, principal or other distributions that would constitute the Pledged Stock (as defined in the ISOC Share Pledge), whether resulting from a subdivision, combination or reclassification of the outstanding Equity Interests (as defined in the ISOC Share Pledge) of the Borrower, as issuer, or received in exchange for the Pledged Stock (as defined in the ISOC Share Pledge) or any part thereof, or in redemption thereof, or as a result of any merger, consolidation, acquisition or other exchange of assets to which the Borrower, as issuer, may be a party or otherwise, is received by ISOC, it shall not be commingled by ISOC with any of its other funds or property but shall be held separate and apart therefrom, shall be held in trust for the benefit of the Security Trustee and shall be forthwith delivered to the Security Trustee in the same form as so received (with any necessary endorsement or instrument of assignment requested by the Security Trustee); and

 

 

(q)          all dividends, interest, principal or other distributions received by ISOC contrary to the provisions of Section 2.05(b) of the ISOC Share Pledge shall be held in trust for the benefit of the Security Trustee, shall be segregated from other property or funds of ISOC and shall be forthwith delivered to the Security Trustee upon demand in the same form as so received (with any necessary endorsement or instrument of assignment).

 

ARTICLE VI

NEGATIVE COVENANTS

 

Until the Commitments have expired or been terminated and all Obligations have been paid in full (other than contingent indemnification or reimbursement obligations), the Obligors covenant and agree with the Finance Parties that:

 

6.01       Indebtedness. Neither the Borrower nor the Upstream Guarantor will create, incur, assume or suffer to exist any Indebtedness, except:

 

(a)          Indebtedness under the Loan Documents;

 

(b)          Indebtedness owing to any Affiliate, subject to the provisions of Section 5.30;

 

(c)          Indebtedness (i) resulting from a bank or other financial institution honoring a check, draft or similar instrument in the ordinary course of business or (ii) arising under or in connection with cash management services in the ordinary course of business;

 

(d)          Indebtedness owed to any Person providing workers’ compensation, health, disability or other employee benefits or property, casualty or liability insurance, pursuant to reimbursement or indemnification obligations to such Person, in each case incurred in the ordinary course of business;

 

(e)          Indebtedness in respect of letters of credit, performance bonds, bid bonds, appeal bonds, surety bonds and similar obligations, in each case provided in the ordinary course of business;

 

(f)           any Indebtedness relating to judgments that do not constitute an Event of Default;

 

(g)          Indebtedness constituting trade credits and other Indebtedness incurred in the ordinary course of business (i) not exceeding 30 days overdue, and (ii) in an aggregate amount not exceeding $2,000,000 per vessel (with respect to the Vessel and any Additional Vessels) at any time outstanding; and

 

(h)          Indebtedness relating to Swap Contracts (including, for the avoidance of doubt, any forward fuel contracts).

 

 

6.02       Liens. Neither the Borrower nor the Upstream Guarantor will create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, including, with respect to the Upstream Guarantor, the Vessel, whether now owned or hereafter acquired, other than the following (each a “Permitted Lien”):

 

(a)          Liens securing Indebtedness permitted under Section 6.01(a), 6.01(g) and 6.01(h);

 

(b)          Liens existing on the date hereof (including, but not limited to, the Term Loan B Liens), such Liens (except any Liens listed on Schedule V) to be discharged prior to or simultaneous with the Borrowing;

 

(c)          Liens arising in the ordinary course of business (including carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens imposed by law) securing Indebtedness and other obligations (i) not exceeding 30 days overdue, and (ii) in an aggregate amount not exceeding $2,000,000 per vessel (with respect to the Vessel and any Additional Vessels) at any time outstanding;

 

(d)          Liens in favor of the Account Bank in respect of its customary charges in maintaining the Borrower Operating Account, Dry Dock Reserve Account and Debt Service Reserve Account or any of them or for reimbursement for reversal of any provisional credits granted by the Account Bank to the Borrower Operating Account, Dry Dock Reserve Account or Debt Service Reserve Account or any of them, to the extent, in each case, that any of the Obligors have not separately paid or reimbursed the Account Bank therefor;

 

(e)          Liens imposed by law for Taxes that are not required to be paid pursuant to Section 5.14;

 

(f)           Liens on insurance policies and the proceeds of insurance policies solely to the extent securing the Indebtedness permitted by Section 6.01(d); and

 

(g)          Liens that are contractual rights of set-off or rights of pledge (under and pursuant to the general terms and conditions of the Account Bank) (i) relating to the establishment of depository relations with the Account Bank and not given in connection with the issuance of Indebtedness and (ii) relating to any pooled deposit or sweep accounts held with the Account Bank to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business;

 

6.03       Fundamental Changes. Neither the Borrower nor the Upstream Guarantor will, without the prior written approval of the Required Lenders, merge, dissolve, liquidate, consolidate with or into another Person, or Dispose of (whether in one transaction or in a series of transactions) any of its assets (whether now owned or hereafter acquired) to or in favor of any Person.

 

6.04       Restricted Payments. The Borrower and the Upstream Guarantor will not, and will not permit the Borrower or the Upstream Guarantor to, declare or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, except that, so long as no Event of Default shall have occurred and be continuing at the time of any action described below or would result therefrom:

 

(a)          the Borrower may make Restricted Payments to the Upstream Guarantor, and the Upstream Guarantor may make Restricted Payments to the Borrower, including in accordance with Section 7.03;

 

(b)          the Borrower may distribute the proceeds of the Borrowing to the Upstream Guarantor (i) in connection with the financing, refinancing or reimbursing of a part of the acquisition cost of the Vessel and (ii) for general corporate purposes; and

 

 

(c)          the Borrower may declare or pay cash dividends to its shareholders only if the Borrower delivers to the Facility Agent a certificate of an officer confirming that, after giving effect thereto, (A) excluding balances standing to the credit of the Debt Service Reserve Account and the Dry Dock Reserve Account, the Borrower shall have cash or Cash Equivalents on a consolidated basis in an amount not less than $1,500,000 per vessel (with respect to the Vessel and any Additional Vessels); (B) the Borrower shall be in compliance with Articles V, VI and VII; and (C) the Debt Service Reserve Account contains a balance of not less than $2,500,000.

 

6.05       Investments. Neither the Borrower nor the Upstream Guarantor will without the prior written consent of the Required Lenders (1) acquire any capital assets by purchase, charter or otherwise (including any vessel other than the Vessel or Additional Vessels) or (2) make any Investment, except:

 

(a)          Investments held by the Borrower or the Upstream Guarantor in the form of Cash Equivalents; and

 

(b)          to the extent constituting an Investment, transactions otherwise permitted by Sections 6.01, 6.03, 6.04 or 6.06.

 

6.06       Transactions with Affiliates. The Borrower and the Upstream Guarantor will not, and will not permit any Subsidiary thereof to, enter into any transaction of any kind with any Affiliate of the Borrower or the Upstream Guarantor, whether or not in the ordinary course of business, other than: (a) in the ordinary course of business, on fair and reasonable terms substantially as favorable, taken as a whole, to the Borrower, Upstream Guarantor or such Subsidiary as would be obtainable by the Borrower, Upstream Guarantor or such Subsidiary at the time in a comparable arm’s-length transaction with a Person other than an Affiliate, provided that any Indebtedness owing by the Borrower or Upstream Guarantor to any Affiliate shall be subject to Section 5.30; (b) transactions permitted pursuant to Sections 6.01 through 6.05 above; (c) the transactions contemplated by the Loan Documents, (d) the payment or reimbursement of the Borrower’s, Upstream Guarantor’s and their Subsidiaries’ pro rata share of expenses for shared personnel, office facilities, and administrative overhead of the Parent and its Subsidiaries, as fairly and reasonably allocated by the Parent; and (e) management services on economic terms at least as favorable to the Upstream Guarantor as those set forth on Schedule VI.

 

6.07       Changes in Fiscal Periods. The Borrower will not permit the last day of its fiscal year to end on a day other than December 31 or change the Borrower’s method of determining its fiscal quarters.

 

6.08       Changes in Nature of Business. Neither the Borrower nor the Upstream Guarantor will, without the prior written consent of the Required Lenders, engage to any material extent in any business other than those businesses conducted by the Borrower and the Upstream Guarantor on the date hereof or any business reasonably related or incidental thereto.

 

6.09       Changes in Name; Organizational Documents Amendments. Neither the Borrower nor the Upstream Guarantor will, without the prior consent of the Required Lenders, permit any change to its entity name or any amendment of its Organizational Documents.

 

6.10       Place of Business. Except for as specified in Section 3.19, neither the Borrower nor the Upstream Guarantor will establish or change any place of business in the United States of America, the District of Columbia, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States of America unless thirty (30) days’ prior written notice of such establishment is given to the Facility Agent.

 

 

6.11       Change of Control; Negative Pledge. No Obligor will take any action that would result in a Change of Control. The Borrower shall not permit any pledge or assignment of the Upstream Guarantor’s Equity Interests except in favor of the Security Trustee to secure the Obligations. The Parent shall not permit any pledge or assignment of the Borrower’s Equity Interests except in favor of the Security Trustee to secure the Obligations.

 

6.12       Restriction on Chartering. The Borrower and Upstream Guarantor will not, without the consent of the Facility Agent, which consent shall not unreasonably be withheld (i) let the Vessel on demise charter for any period; (ii) enter into any time or consecutive voyage charter in respect of the Vessel which would result in the chartering of a greater number of vessels than the Vessel owned by the Upstream Guarantor at the time; (iii) de-activate or lay up the Vessel; (iv) put the Vessel into the possession of any Person for the purpose of work being done upon her in an amount exceeding or likely to exceed $2,000,000 (or the equivalent in any other currency); (v) enter into any sale-and-leaseback arrangements with respect to the Vessel or (vi) agree to charter-in any other vessel.

 

6.13       Lawful Use. The Borrower and the Upstream Guarantor will not permit the Vessel to be employed: (a) in any way or in any activity which is unlawful under international law or the domestic laws of any relevant country; (b) in carrying illicit or prohibited goods; (c) in a way which may make it liable to be condemned by a prize court or destroyed, seized or confiscated; or (d) in carrying contraband goods; and the Obligors shall use commercially reasonable efforts to procure that the persons responsible for the operation of the Vessel shall take all necessary and proper precautions to ensure that this does not happen including participation in industry or other voluntary schemes available to the Vessel and in which leading operators of vessels operating under the same flag or engaged in similar trades generally participate at the relevant time.

 

6.14       Approved Manager. The Upstream Guarantor will not employ a manager of the Vessel other than an Approved Manager, or change the terms and conditions of the management of the Vessel in any material respect other than upon such terms and conditions as the Required Lenders shall approve (such approval not to be unreasonably withheld).

 

6.15       Insurances. The Upstream Guarantor will not:

 

(a)          agree to any amendment or supplement (other than related confirmations) to, or waive or fail to enforce, any obligatory insurance or material provisions thereof;

 

(b)          do nor omit to do (nor permit to be done or not to be done) any act or thing which would or might render any obligatory insurance invalid, void, voidable or unenforceable or render any sum payable under an obligatory insurance repayable in whole or in part; and, in particular: (i) the Upstream Guarantor shall take all necessary action and comply with all requirements which may from time to time be applicable to the obligatory insurances, and ensure that the obligatory insurances are not made subject to any exclusions or qualifications to which the Security Trustee has not given its prior approval; (ii) the Upstream Guarantor shall not make any changes relating to the classification or classification society or manager or operator of the Vessel unless approved by the underwriters of the obligatory insurances; and (iii) the Upstream Guarantor shall not employ the Vessel, nor allow it to be employed, otherwise than in conformity with the terms and conditions of the obligatory insurances, without first obtaining the consent of the insurers and complying with any requirements (as to extra premium or otherwise) which the insurers specify; or

 

(c)          settle, compromise or abandon any claim under any obligatory insurance for Total Loss without the consent of the Security Trustee (not to be unreasonably withheld or delayed), and if so requested by the Security Trustee shall do all things necessary and provide all documents, evidence and information to enable the Security Trustee to collect or recover any moneys which at any time become payable in respect of the obligatory insurances.

 

 

6.16       Modification; Removal of Parts. The Upstream Guarantor will not (a) make any modification or repairs to, or replacement of, the Vessel or equipment installed on the Vessel which would or is reasonably likely to materially alter the structure, type or performance characteristics of the Vessel or materially reduce its value; or (b) remove any material part of the Vessel, or any item of equipment installed on, the Vessel unless the part or item so removed is forthwith replaced by a suitable part or item which is in the same condition as or better condition than the part or item removed, is free from any security interest or any right in favor of any person other than the Security Trustee and becomes on installation on the Vessel, the property of the Upstream Guarantor and subject to the security constituted by the Vessel Mortgage, provided that the Upstream Guarantor may install and remove equipment owned by a third party if the equipment can be removed without any risk of damage to the Vessel.

 

6.17       Sanctions.

 

(a)          No Obligor will, directly or indirectly, use the proceeds of the Loan, or lend, contribute or otherwise make available such proceeds to any Subsidiary, joint venture partner or other Person, (i) to fund any activities or business of or with any Person, or in any country or territory, that, at the time of such funding, is, or whose government is, the subject of Sanctions, to the extent such funding by such Obligor would be prohibited if the Obligor were resident or organized in the United States, the European Union or the United Kingdom, (ii) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws or (iii) in any other manner that would result in a violation of Sanctions or any Anti-Corruption Laws by any Person (including any Person participating in the transactions contemplated hereby, whether as a lender, borrower, guarantor, underwriter, advisor, investor, or otherwise).

 

(b)          Without limiting paragraph (a) above, no Obligor shall charter or, to its knowledge, permit the charter of the Vessel to a Prohibited Person to the extent that such charter would be prohibited if the Obligor were resident or organized in the United States, the European Union or the United Kingdom.

 

(c)          None of the Obligors’ funds that are used to repay any obligation under this Agreement shall constitute property of, or shall be beneficially owned directly or indirectly by, any Prohibited Person to the extent that such would be prohibited if the Obligor were resident or organized in the United States, the European Union or the United Kingdom.

 

6.18       No Upstream Guarantor Accounts. The Upstream Guarantor shall not hold any account at any bank or financial institution.

 

6.19       Swap Contracts.

 

(a)          The Borrower shall not enter into any Swap Contract, other than Swap Contracts that are otherwise entered into in the ordinary course of business, and not for speculative purposes, in respect of changes in interest rates, commodity prices or foreign exchange rates.

 

(b)          The Borrower shall not permit more than 100% of the aggregate principal amount outstanding of the Loan to be subject to interest rate protection Swap Contracts.

 

 

ARTICLE VII

FINANCIAL COVENANTS

 

7.01       Financial Covenants.

 

(a)          Minimum Liquidity. The Borrower shall maintain, at all times after the Closing Date, free cash or Cash Equivalents on a consolidated basis (exclusive of any balance held in the Debt Service Reserve Account and the Dry Dock Reserve Account) in an amount of $825,000 per vessel (with respect to the Vessel and any Additional Vessels as applicable), in the Borrower Operating Account.

 

(b)          Most Favored Nation. If, after the Closing Date, the Parent shall execute any agreement or series of related agreements evidencing Indebtedness in an aggregate principal amount greater than $50,000,000 with one or more lenders that include financial covenants (excluding collateral maintenance covenants) binding on the Parent as obligor thereunder which financial covenants are materially more advantageous to those lenders than the terms set forth herein, the parties hereto shall as promptly as reasonably practicable thereafter amend this Agreement to incorporate such more advantageous provisions herein.

 

7.02       Debt Service Reserve Account. Prior to the Drawdown Date, the Borrower shall deposit into the Debt Service Reserve Account an amount of $2,500,000. In the event that there is insufficient liquidity (in excess of the level required to be maintained under Section 7.01(a)), the Borrower may withdraw from the Debt Service Reserve Account any amounts necessary in order to repay the Loan and to pay any interest in accordance with the provisions of Sections 2.06 and 2.09.

 

7.03       Dry Dock Reserve Account.

 

(a)          The Borrower shall deposit into the Dry Dock Reserve Account (i) an amount of $1,260,000 prior to the Drawdown Date and (ii) an amount of $105,000 on the First Repayment Date and on each of the seven (7) consecutive quarterly repayment dates thereafter, for a total amount of $2,100,000, in order to fund the projected dry dock expenses for the Vessel.

 

(b)          If there is no continuing Event of Default and both immediately before and after any withdrawal from the Dry Dock Reserve Account the Borrower would be in compliance with Section 5.04, the Borrower may withdraw any amounts from the Dry Dock Reserve Account for payments of such amounts necessary to meet the costs of dry docking, including special and intermediate surveys and any repairs in connection with dry docking or withdraw any excess amount on deposit in the Dry Dock Reserve Account based on the latest dry dock schedule provided to the Facility Agent.

 

7.04       Borrower Operating Account. During the term of this Agreement, no sum may be withdrawn from the Borrower Operating Account without the prior written consent of the Security Trustee provided that withdrawals relating to payments permitted pursuant to the terms of this Agreement, including payments for Operating Expenses, payments made in accordance with Section 6.04 and payments made in accordance with Section 6.05, shall not require the prior written consent of the Security Trustee. The Borrower Operating Account shall not be overdrawn during the term of this Agreement.

 

 

ARTICLE VIII

GUARANTY

 

8.01       Guaranty. The Guarantors hereby, jointly and severally, guarantee, as primary obligors and not as sureties, to each Finance Party and their respective successors and assigns, the prompt payment and performance in full when due (whether at stated maturity, by required prepayment, declaration, demand, by acceleration or otherwise) of the principal of, premium (if any) and interest (including any interest, fees, costs or charges that would accrue but for the provisions of the Bankruptcy Code after any bankruptcy or insolvency petition under Title 11 of the Bankruptcy Code) on the Loan made by the Lenders to, and the Notes, if any, held by each Lender of, the Borrower, and all other Obligations from time to time owing to the Finance Parties in each case strictly in accordance with the terms thereof (such obligations being herein collectively called the “Guaranteed Obligations”). Notwithstanding the foregoing, “Guaranteed Obligations”, with respect to any Guarantor, shall not include any Excluded Swap Obligations of such Guarantor. Each Guarantor hereby agrees that if the Borrower or other Guarantors shall fail to pay in full when due (whether at stated maturity, by acceleration or otherwise) any of the Guaranteed Obligations, such Guarantor will promptly pay the same in cash, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal.

 

8.02       Obligations Unconditional. The obligations of the Guarantors under Section 8.01 shall constitute a guaranty of payment and performance and not of collection and, to the fullest extent permitted by applicable Laws, are absolute, irrevocable and unconditional, joint and several, irrespective of the value, genuineness, validity, regularity or enforceability of the Guaranteed Obligations under this Agreement, the Notes, if any, or any other agreement or instrument referred to herein or therein, or any substitution, release or exchange of any other guarantee of or security for any of the Guaranteed Obligations, and irrespective of any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety or Guarantor (except for payment in full in cash of the Guaranteed Obligations). Without limiting the generality of the foregoing, it is agreed that the occurrence of any one or more of the following shall not alter or impair the liability of the Guarantors hereunder which shall remain absolute, irrevocable and unconditional under any and all circumstances as described above: (a) at any time or from time to time, without notice to the Guarantors, the time for any performance of or compliance with any of the Guaranteed Obligations shall be extended, or such performance or compliance shall be waived; (b) any of the acts mentioned in any of the provisions of this Agreement, the other Loan Documents or the Notes, if any, or any other agreement or instrument referred to herein or therein shall be done or omitted; (c) the maturity of any of the Guaranteed Obligations shall be accelerated, or any of the Guaranteed Obligations shall be amended in any respect, or any right under the Loan Documents or any other agreement or instrument referred to herein or therein shall be amended or waived in any respect or any other guarantee of any of the Guaranteed Obligations or any security therefor shall be released or exchanged in whole or in part or otherwise dealt with; or (d) any Lien or security interest granted to, or in favor of, any Finance Party as security for any of the Guaranteed Obligations shall fail to be valid, perfected or to have the priority required under the Loan Documents.

 

 

The Guarantors hereby expressly waive diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that any Finance Party exhaust any right, power or remedy or proceed against any Obligor under this Agreement or the Notes, if any, or any other agreement or instrument referred to herein or therein, or against any other person under any other guarantee of, or security for, any of the Guaranteed Obligations. The Guarantors waive any and all notice of the creation, renewal, extension, waiver, termination or accrual of any of the Guaranteed Obligations and notice of or proof of reliance by any Finance Party upon the guarantee in this Article VIII or acceptance of such guarantee, and the Guaranteed Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred in reliance upon such guarantee, and all dealings between the Borrower and the Finance Parties shall likewise be conclusively presumed to have been had or consummated in reliance upon such guarantee. The guarantee in this Article VIII shall be construed as a continuing, absolute, irrevocable and unconditional guarantee of payment and performance without regard to any right of offset with respect to the Guaranteed Obligations at any time or from time to time held by the Finance Parties, and the obligations and liabilities of the Guarantors hereunder shall not be conditioned or contingent upon the pursuit by the Finance Parties or any other person at any time of any right or remedy against the Borrower or against any other person which may be or become liable in respect of all or any part of the Guaranteed Obligations or against any collateral security or guarantee therefor or right of offset with respect thereto. The guarantee in this Article VIII shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon the Guarantors and their respective successors and assigns, and shall inure to the benefit of the Finance Parties, and their respective successors and assigns, notwithstanding that from time to time during the term of this Agreement there may be no Guaranteed Obligations outstanding.

 

8.03       Reinstatement. The obligations of the Guarantors under this Article VIII shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of the Borrower or other Security Party in respect of the Guaranteed Obligations is rescinded or must be otherwise restored by any holder of any of the Guaranteed Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise.

 

8.04       Subrogation; Subordination. Each Guarantor hereby agrees that until the indefeasible payment and satisfaction in full in cash of all Guaranteed Obligations (other than contingent indemnification or reimbursement obligations) and the expiration and termination of the Commitments of the Lenders under this Agreement it shall waive any claim and shall not exercise any right or remedy, direct or indirect, arising by reason of any performance by it of its guarantee in Section 8.01, whether by subrogation or otherwise, against the Borrower or any other Guarantor of any of the Guaranteed Obligations or any security for any of the Guaranteed Obligations.

 

8.05       Remedies. The Guarantors jointly and severally agree that, as between the Guarantors and the Lenders, the obligations of the Borrower under this Agreement and other Loan Documents may be declared to be forthwith due and payable as provided in Article IX (and shall be deemed to have become automatically due and payable in the circumstances provided in Article IX) for purposes of Section 8.01, notwithstanding any stay, injunction or other prohibition preventing such declaration (or such obligations from becoming automatically due and payable) as against the Borrower and that, in the event of such declaration (or such obligations being deemed to have become automatically due and payable), such obligations (whether or not due and payable by the Borrower) shall forthwith become due and payable by the Guarantors for purposes of Section 8.01.

 

8.06       Instrument for the Payment of Money. Each Guarantor hereby acknowledges that the guarantee in this Article VIII constitutes an instrument for the payment of money, and consents and agrees that any Lender or Facility Agent, at its sole option, in the event of a dispute by such Guarantor in the payment of any moneys due hereunder, shall have the right to bring a motion-action under New York CPLR Section 3213.

 

8.07       Continuing Guarantee. The guarantee in this Article VIII is a continuing guarantee of payment and performance, and shall apply to all Guaranteed Obligations whenever arising.

 

 

8.08       General Limitation on Guarantee Obligations. In any action or proceeding involving any state corporate, limited partnership or limited liability company law, or any applicable state, federal or foreign bankruptcy, insolvency, reorganization or other Laws affecting the rights of creditors generally, if the obligations of any Guarantor under Section 8.01 would otherwise be held or determined to be void, voidable, invalid or unenforceable, or subordinated to the claims of any other creditors, on account of the amount of its liability under Section 8.01, then, notwithstanding any other provision to the contrary, the amount of such liability shall, without any further action by such Guarantor, any Security Party or any other person, be automatically limited and reduced to the highest amount (after giving effect to the rights of subrogation and contribution established in Sections 8.04 and 8.09, respectively) that is valid and enforceable, not void or voidable and not subordinated to the claims of other creditors as determined in such action or proceeding.

 

8.09       Right of Contribution. Each Guarantor hereby agrees that to the extent that a Guarantor shall have paid more than its proportionate share of any payment made hereunder, such Guarantor shall be entitled to seek and receive contribution from and against any other Guarantor hereunder which has not paid its proportionate share of such payment. Each Guarantor’s right of contribution shall be subject to the terms and conditions of Section 8.04. The provisions of this Section 8.09 shall in no respect limit the obligations and liabilities of any Guarantor to any Finance Party, and each Guarantor shall remain liable to the Finance Parties for the full amount guaranteed by such Guarantor hereunder.

 

8.10       Set-off. If any of the Guarantors shall fail to pay any of its obligations hereunder when the same shall become due and payable, each Finance Party is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by each Finance Party to or for the Guarantor’s credit or account against any and all of the Guaranteed Obligations, whether or not any Lender shall have made any demand under this Article VIII. Each Finance Party agrees promptly to notify the relevant Guarantor after any such set-off and application, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Finance Parties under this paragraph are in addition to any other rights and remedies (including, without limitation, other rights of set-off) which any Finance Party may have.

 

8.11       Keepwell. Each Obligor that is a Qualified ECP Guarantor at the time this Agreement or the grant of a Lien under the Loan Documents, in each case, by any Specified Loan Party becomes effective with respect to any Swap Obligation, hereby jointly and severally, absolutely, unconditionally and irrevocably undertakes to provide such funds or other support to each Specified Loan Party with respect to such Swap Obligation as may be needed by such Specified Loan Party from time to time to honor all of its obligations under the Loan Documents in respect of such Swap Obligation (but, in each case, only up to the maximum amount of such liability that can be hereby incurred without rendering such Qualified ECP Guarantor’s obligations and undertakings under this Article VIII voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). The obligations and undertakings of each Qualified ECP Guarantor under this Section shall remain in full force and effect until the Obligations have been paid and performed in full. Each Specified Loan Party intends this Section to constitute, and this Section shall be deemed to constitute, a guarantee of the obligations of, and a “keepwell, support, or other agreement” for the benefit of, each Specified Loan Party for all purposes of the Commodity Exchange Act.

 

 

8.12       Parallel Liability.

 

(a)          The Borrower irrevocably and unconditionally undertakes to pay to the Security Trustee an amount equal to the aggregate amount of its Corresponding Liabilities (as these may exist from time to time).

 

(b)          The parties hereto agree that:

 

(i)          the Borrower’s Parallel Liability is due and payable at the same time as, for the same amount of and in the same currency as its Corresponding Liabilities;

 

(ii)         the Borrower’s Parallel Liability is decreased to the extent that its Corresponding Liabilities have been irrevocably paid or discharged and its Corresponding Liabilities are decreased to the extent that its Parallel Liability has been irrevocably paid or discharged;

 

(iii)        the Borrower’s Parallel Liability is independent and separate from, and without prejudice to, its Corresponding Liabilities, and constitutes a single obligation of the Borrower to the Security Trustee (even though the Borrower may owe more than one Corresponding Liability to the Finance Parties under the Loan Documents) and an independent and separate claim of the Security Trustee to receive payment of that Parallel Liability (in its capacity as the independent and separate creditor of that Parallel Liability and not as a co-creditor in respect of the Corresponding Liabilities); and

 

(iv)         for purposes of this Section 8.12, the Security Trustee acts in its own name and not as agent, representative or trustee of the Finance Parties and accordingly holds neither its claim resulting from a Parallel Liability nor any security interest securing a Parallel Liability on trust.

 

ARTICLE IX

EVENTS OF DEFAULT

 

9.01       Events of Default. If any of the following events (each, an “Event of Default”) shall occur and be continuing:

 

(a)          the Borrower or any other Security Party fails to pay when due any sum payable by such entity under a Loan Document or, only in the case of sums payable on demand, within three (3) Business Days after the date when first demanded, provided that if such failure to pay a sum when due is solely the result of an administrative or technical error, it shall not constitute an Event of Default unless such failure continues unremedied for more than five (5) Business Days from the occurrence thereof;

 

(b)          Any representation, warranty, certification or statement of fact made or deemed made by or on behalf of the Borrower or any other Security Party in or in connection with this Agreement or any other Loan Document or any amendment or modification hereof or thereof, or any waiver hereunder or thereunder, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with this Agreement or any other Loan Document or any amendment or modification hereof or thereof, or any waiver hereunder or thereunder, shall prove to have been incorrect or misleading in any material respect (or, in the case of any such representation or warranty under this Agreement or any other Loan Document already qualified by materiality, such representation or warranty shall prove to have been incorrect or misleading in any respect as so qualified) when made, deemed made or so furnished;

 

 

(c)           any Obligor shall fail to perform or observe any term, covenant or agreement contained in Articles VI and VII or in Sections 5.01 (Financial Statements), 5.04 (Vessel Value Maintenance), 5.06 (Preservation of Existence, Etc.), 5.08 (Maintenance of Properties), 5.09 (Insurances), 5.10 (Insurance Documentation; Letters of Undertaking; Certificates), 5.15 (Vessel Registration), 5.29 (Use of Proceeds), 5.30 (Subordination of Loans), 5.31 (Anti-Corruption Laws), 5.33 (Asset Control) or 5.36 (Sanctions) to be observed by it;

 

(d)          any Obligor shall fail to perform or observe any term, covenant or agreement contained in this Agreement or any other Loan Document on its part to be performed or observed (other than those specified in paragraphs (a) through (c) above) if such failure shall remain unremedied (A) beyond the expiration of any applicable notice and/or grace period or (B) if there is no applicable notice and/or grace period, for ten (10) Business Days after written notice thereof shall have been given to the Borrower by the Facility Agent;

 

(e)          (i) any Obligor shall fail to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Indebtedness (other than Indebtedness under the Loan Documents) having an aggregate principal amount of more than $2,000,000 (with respect to the Borrower or the Upstream Guarantor) or $25,000,000 (with respect to the Parent), in each case beyond the applicable grace period with respect thereto, if any; or (ii) any Obligor shall fail to observe or perform any other agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event is to cause, or to permit the holder or holders or beneficiary or beneficiaries of such Indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such Indebtedness to be made, prior to its stated maturity;

 

(f)           an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of any Obligor or its debts, or of a substantial part of its assets, under any Debtor Relief Law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for any Obligor or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for a period of 60 or more days or an order or decree approving or ordering any of the foregoing shall be entered;

 

(g)          any Obligor shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Debtor Relief Law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (g) of this Section, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for any Obligor or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing;

 

(h)          any Obligor shall become unable, admit in writing its inability or fail generally to pay its debts as they become due;

 

(i)           an ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan that has resulted or could reasonably be expected to result in liability of any Obligor under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount that could reasonably be expected to have a Material Adverse Effect;

 

 

(j)           there is entered against any Obligor (i) a final judgment or order for the payment of money in an aggregate amount (as to any such judgment or order) exceeding $2,000,000 (with respect to the Borrower or the Upstream Guarantor) or $25,000,000 (with respect to the Parent) (in each case to the extent not covered by independent third-party insurance as to which the insurer has been notified of such judgment or order and has not denied or failed to acknowledge coverage), or (ii) a non-monetary final judgment or order that, either individually or in the aggregate, has or could reasonably be expected to have a Material Adverse Effect and, in either case, (A) enforcement proceedings are commenced by any creditor upon such judgment or order, or (B) there is a period of thirty (30) consecutive days during which a stay of enforcement of such judgment, by reason of a pending appeal or otherwise, is not in effect;

 

(k)          any Obligor ceases or suspends or threatens to cease or suspend the carrying on of its business, or a part of its business which, in the opinion of the Required Lenders, is material in the context of this Agreement;

 

(l)           it becomes impossible or unlawful for any Obligor to fulfill any of the covenants and obligations required to be fulfilled as contained in any Loan Document or any of the instruments granting or creating rights in any of the Collateral, in each case in any material respect, or for any Finance Party to exercise any of the rights or remedies vested in it under any Loan Document, any of the Collateral or any of such instruments in any material respect;

 

(m)         any material provision of any Loan Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or thereunder or satisfaction in full of all Obligations, ceases to be in full force and effect; or any Obligor contests in writing the validity or enforceability of any provision of any Loan Document; or any Obligor denies in writing that it has any or further liability or obligation under any Loan Document, or purports in writing to revoke, terminate or rescind any Loan Document;

 

(n)          there occurs or develops a Material Adverse Effect; or

 

(o)          there occurs under any Secured Swap Contract an Early Termination Date or similar term (as defined in such Secured Swap Contract) resulting from (A) any event of default under such Secured Swap Contract as to which the Borrower is the Defaulting Party or similar term (as defined in such Secured Swap Contract) or (B) any Termination Event or similar term(as so defined) under such Secured Swap Contract as to which the Borrower is an Affected Party or similar term (as so defined);

 

then, and in any such event, the Facility Agent may, by notice to the Borrower, (i) declare the Commitments terminated, whereupon the same shall forthwith terminate, (ii) declare the principal of and accrued interest on the Loan, the Notes, and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the same shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; (iii) exercise any and all of its other rights and remedies under applicable Laws, hereunder and under the other Loan Documents, provided that, in any event described in clauses (f) and (g) above, (A) the Commitments shall automatically be terminated and (B) principal of and accrued interest on the Loan, the Notes, and all other amounts payable under this Agreement shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Obligors.

 

 

9.02       Application of Payments. Notwithstanding anything herein to the contrary, following the occurrence and during the continuance of an Event of Default, and notice thereof to the Facility Agent by the Borrower or the Required Lenders, all payments received on account of the Obligations shall, subject to Section 2.20, be applied by the Facility Agent as follows:

 

(i)          first, to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts (including fees and disbursements and other charges of counsel payable under Section 11.03) payable to the Facility Agent in its capacity as such;

 

(ii)         second, to payment of that portion of the Obligations constituting fees, indemnities and other amounts (other than principal and interest payable to the Lenders) payable to the Lenders (including fees and disbursements and other charges of counsel payable under Section 11.03) arising under the Loan Documents, ratably among them in proportion to the respective amounts described in this clause (ii) payable to them;

 

(iii)        third, to payment of that portion of the Obligations constituting accrued and unpaid interest on the Loan and any ordinary course swap settlements pursuant to any Secured Swap Contracts ratably among the Lenders and the Swap Banks in proportion to the respective amounts described in this clause (iii) payable to them;

 

(iv)         fourth, to payment of that portion of the Obligations constituting unpaid principal of the Loan and any swap termination payments pursuant to any Secured Swap Contracts ratably among the Lenders and the Swap Banks in proportion to the respective amounts described in this clause (iv) payable to them;

 

(v)          fifth, to the payment in full of all other Obligations (except Obligations in respect of a Secured Swap Contract and Obligations referenced under paragraphs (vi) and (vii) below), in each case ratably among the Facility Agent and the Lenders based upon the respective aggregate amounts of all such Obligations owing to them in accordance with the respective amounts thereof then due and payable;

 

(vi)         sixth, in or towards satisfaction of the Obligations constituting of any amounts then due and payable under any Secured Swap Contracts in the following order and proportions: (A) first, in or towards satisfaction pro rata of all amounts then due and payable to the Swap Banks under the Secured Swap Contracts other than those amounts referred to at paragraphs (B) and (C); (B) secondly, in or towards satisfaction pro rata of any and all amounts of interest or default interest payable to the Swap Banks under the Secured Swap Contracts (and, for this purpose, the expression "interest" shall include any net amount which the Borrower shall have become liable to pay or deliver under Section 2(e) (Obligations) of a Master Agreement but shall have failed to pay or deliver to the relevant Swap Bank (or any of them) at the time of application or distribution under this Section 9.02); and (C) thirdly, in or towards satisfaction pro rata of the aggregate Swap Termination Value (calculated as at the actual Early Termination Date applying to the Secured Swap Contracts (or any of them), or if no such Early Termination Date shall have occurred, calculated as if an Early Termination Date occurred on the date of application or distribution hereunder and pro rata as between them);

 

(vii)        seventh, to the payment in full of all other Obligations, in each case ratably among the Finance Parties based upon the respective aggregate amounts of all such Obligations owing to them in accordance with the respective amounts thereof then due and payable; and

 

(viii)      finally, the balance, if any, after all Obligations have been paid in full, to the Borrower or as otherwise required by Law.

 

 

(ix)         Notwithstanding the foregoing, no amount received from any Guarantor in respect of its Guaranteed Obligations shall be applied to any Excluded Swap Obligations.

 

ARTICLE X

AGENCY

 

10.01     Appointment and Authority.

 

(a)          The Facility Agent. Each Lender and each Swap Bank hereby irrevocably appoints the Facility Agent to act as its agent on its behalf hereunder and under the other Loan Documents and authorizes the Facility Agent, in such capacity, to take such actions on its behalf and to exercise such powers as are delegated to the Facility Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. Except as otherwise provided in Section 10.06(b), the provisions of this Article are solely for the benefit of the Facility Agent, the Security Trustee, the Lenders and the Swap Banks, and the Borrower shall not have rights as a third-party beneficiary of any of such provisions. It is understood and agreed that the use of the term “agent” herein or in any other Loan Documents (or any other similar term) with reference to the Facility Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any Applicable Law. Instead such term is used as a matter of market custom, and is intended to create or reflect only an administrative relationship between contracting parties.

 

(b)          The Security Trustee.

 

(i)          Each Lender, each Swap Bank and the Facility Agent appoints and authorizes (with a right of revocation) the Security Trustee to act as security trustee hereunder and under the other Loan Documents (other than the Notes) with such powers as are specifically delegated to the Security Trustee by the terms of this Agreement and such other Loan Documents, together with such other powers as are reasonably incidental thereto.

 

(ii)         To secure the payment of all sums of money from time to time owing to each Lender and each Swap Bank under the Loan Documents, and the performance of the covenants of the Borrower and any other Security Party herein and therein contained, and in consideration of the premises and of the covenants herein contained and of the extensions of credit by the Lenders, the Security Trustee does hereby declare that it will hold as such trustee in trust for the benefit of each Lender, each Swap Bank and the Facility Agent, from and after the execution and delivery thereof, all of its right, title and interest as mortgagee in, to and under the Vessel Mortgage and its right, title and interest as assignee and secured party under the other Security Documents (the right, title and interest of the Security Trustee in and to the property, rights and privileges described above, from and after the execution and delivery thereof, and all property hereafter specifically subjected to the security interest of the indenture created hereby and by the Security Documents by any amendment hereto or thereto are herein collectively called the “Estate”); TO HAVE AND TO HOLD the Estate unto the Security Trustee and its successors and assigns forever, BUT IN TRUST, NEVERTHELESS, for the equal and proportionate benefit and security of each Lender, each Swap Bank and the Facility Agent and their respective successors and assigns without any priority of any one over any other, UPON THE CONDITION that, unless and until an Event of Default under this Agreement shall have occurred and be continuing, the relevant Security Party shall be permitted, to the exclusion of the Security Trustee, to possess and use the Vessel. IT IS HEREBY COVENANTED, DECLARED AND AGREED that all property subject or to become subject hereto is to be held, subject to the further covenants, conditions, uses and trusts hereinafter set forth, and each Security Party, for itself and its respective successors and assigns, hereby covenants and agrees to and with the Security Trustee and its successors in said trust, for the equal and proportionate benefit and security of the each Lender, each Swap Bank and the Facility Agent as hereinafter set forth.

 

 

(iii)        The Security Trustee hereby accepts the trusts imposed upon it as Security Trustee by this Agreement, and the Security Trustee covenants and agrees to perform the same as herein expressed and agrees to receive and disburse all monies constituting part of the Estate in accordance with the terms hereof.

 

(c)          Except as otherwise provided in Section 10.03 and 10.06, the provisions of this Article are solely for the benefit of the Facility Agent, Security Trustee, the Lenders and the other Finance Parties under the Loan Documents, and neither the Borrower nor any Guarantor shall have rights as a third-party beneficiary of any of such provisions.

 

10.02     Rights as a Lender. The Person serving as the Facility Agent or Security Trustee hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Facility Agent or Security Trustee, and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Facility Agent or Security Trustee hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, own securities of, act as the financial advisor or in any other advisory capacity for, and generally engage in any kind of business with, the Borrower or any Subsidiary or other Affiliate thereof as if such Person were not the Facility Agent or Security Trustee hereunder and without any duty to account therefor to the Lenders.

 

10.03     Exculpatory Provisions.

 

(a)          Neither the Facility Agent nor the Security Trustee shall have any duties or obligations except those expressly set forth herein and in the other Loan Documents, and their duties hereunder shall be administrative in nature. Without limiting the generality of the foregoing, neither the Facility Agent nor the Security Trustee:

 

(i)          shall be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing;

 

(ii)         shall have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Facility Agent or Security Trustee is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents); provided that neither the Facility Agent nor the Security Trustee shall be required to take any action that, in its opinion or the opinion of its counsel, may expose such Facility Agent or Security Trustee to liability or that is contrary to any Loan Document or Applicable Law, including for the avoidance of doubt any action that may be in violation of the automatic stay under any Debtor Relief Law or that may effect a forfeiture, modification or termination of property of a Defaulting Lender in violation of any Debtor Relief Law; and

 

(iii)        shall, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and neither the Facility Agent nor the Security Trustee shall be liable for the failure to disclose, any information relating to the Borrower, any Guarantor, or any of their Affiliates that is communicated to or obtained by the Person serving as the Facility Agent, Security Trustee, or any of their Affiliates in any capacity.

 

 

(b)          Neither the Facility Agent nor the Security Trustee shall be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Facility Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 9.01 and 11.02), or (ii) in the absence of its own gross negligence or willful misconduct as determined by a court of competent jurisdiction by final and nonappealable judgment. The Facility Agent or Security Trustee shall be deemed not to have knowledge of any Default unless and until notice describing such Default is given to the either (as applicable) in writing by the Borrower, any Guarantor, or a Lender.

 

(c)          Neither the Facility Agent nor the Security Trustee shall be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Facility Agent or Security Trustee.

 

10.04     Reliance by Agent. Each of the Facility Agent and Security Trustee shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) reasonably believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. Each of the Facility Agent and the Security Trustee may also rely upon any statement made to it orally or by telephone and reasonably believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of the Loan, each of the Facility Agent and the Security Trustee may presume that such condition is satisfactory to each Lender unless the Facility Agent or the Security Trustee shall have received notice to the contrary from such Lender prior to the making of the Loan. Each of the Facility Agent and the Security Trustee may consult with legal counsel (who may be counsel for the Borrower or Guarantors), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in good faith in accordance with the advice of any such counsel, accountants or experts.

 

10.05     Delegation of Duties. Each of the Facility Agent and the Security Trustee may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Facility Agent or the Security Trustee (as the case may be). Each of the Facility Agent, the Security Trustee and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Article shall apply to any such sub-agent and to the Related Parties of the Facility Agent, Security Trustee and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the Commitments as well as activities as Facility Agent or the Security Trustee (as the case may be). Neither the Facility Agent nor the Security Trustee shall be responsible for the negligence or misconduct of any sub-agents except to the extent that a court of competent jurisdiction determines in a final and nonappealable judgment that the Facility Agent or Security Trustee acted with gross negligence or willful misconduct in the selection of such sub-agents.

 

 

10.06     Resignation of Agent.

 

(a)          Each of the Facility Agent or the Security Trustee may at any time give notice of its resignation to the Lenders, the Borrower, and the Guarantors. Upon receipt of any such notice of resignation, the Required Lenders shall have the right, in consultation with the Borrower and Guarantors, to appoint a successor, which shall be a bank with an office in New York, or an Affiliate of any such bank with an office in New York. If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Facility Agent or Security Trustee gives notice of its resignation (or such earlier day as shall be agreed by the Required Lenders) (the “Resignation Effective Date”), then the retiring Facility Agent or Security Trustee may (but shall not be obligated to), on behalf of the Lenders, appoint a successor Facility Agent or Security Trustee (as applicable) meeting the qualifications set forth above; provided that in no event shall any such successor be a Defaulting Lender. Whether or not a successor has been appointed, such resignation shall become effective in accordance with such notice on the Resignation Effective Date.

 

(b)          If the Person serving as Facility Agent or Security Trustee is a Defaulting Lender pursuant to clause (d) of the definition thereof, the Required Lenders may, to the extent permitted by Applicable Law, by notice in writing to the Borrower, the Guarantors and such Person remove such Person as Facility Agent or Security Trustee and, in consultation with the Borrower and Guarantors, appoint a successor. If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days (or such earlier day as shall be agreed by the Required Lenders) (the “Removal Effective Date”), then such removal shall nonetheless become effective in accordance with such notice on the Removal Effective Date.

 

(c)          With effect from the Resignation Effective Date or the Removal Effective Date (as applicable) (i) the retiring or removed Facility Agent or Security Trustee shall be discharged from its duties and obligations hereunder and under the other Loan Documents and (ii) except for any indemnity payments owed to the retiring or removed Facility Agent or Security Trustee, all payments, communications and determinations provided to be made by, to or through the Facility Agent or Security Trustee shall instead be made by or to each Lender directly, until such time, if any, as the Required Lenders appoint a successor Facility Agent or Security Trustee as provided for above. Upon the acceptance of a successor’s appointment as Facility Agent or Security Trustee hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring or removed Facility Agent (other than any rights to indemnity payments owed to the retiring or removed Facility Agent) or Security Trustee (other than any rights to indemnity payments owed to the retiring or removed Security Trustee), and the retiring or removed Facility Agent or Security Trustee shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents. The fees payable by the Borrower or Guarantor to a successor Facility Agent or Security Trustee shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower, the Guarantors and such successor. After the retiring or removed Facility Agent or Security Trustee’s resignation or removal hereunder and under the other Loan Documents, the provisions of this Article and Section 11.03 shall continue in effect for the benefit of such retiring or removed Facility Agent, Security Trustee, their sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring or removed Facility Agent was acting as Facility Agent or while the retiring or removed Security Trustee was acting as Security Trustee (as the case may be).

 

10.07     Non-Reliance on Agents and Other Lenders. Each Lender acknowledges that it has, independently and without reliance upon the Facility Agent, the Security Trustee or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Facility Agent, the Security Trustee or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.

 

 

10.08     No Other Duties. Anything herein to the contrary notwithstanding, none of the Bookrunners, Arrangers or Mandated Lead Arrangers listed on the cover page hereof shall (a) have any powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as the Facility Agent, the Security Trustee, or a Lender, and (b) none are required to execute any Loan Document or any amendment thereto, including this Agreement.

 

10.09     Facility Agent May File Proofs of Claim. In case of the pendency of any proceeding under any Debtor Relief Law or any other judicial proceeding relative to the Borrower or any Guarantor, the Facility Agent (irrespective of whether the principal of the Loan shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Facility Agent shall have made any demand on the Borrower or applicable Guarantor) shall be entitled and empowered (but not obligated) by intervention in such proceeding or otherwise:

 

(a)          to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loan and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders, the Facility Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders, the Security Trustee and the Facility Agent and their respective agents and counsel and all other amounts due the Lenders, the Security Trustee and the Facility Agent under Section 11.03) allowed in such judicial proceeding; and

 

(b)          to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;

 

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Facility Agent and, in the event that the Facility Agent shall consent to the making of such payments directly to the Lenders, to pay to the Facility Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Facility Agent and its agents and counsel, and any other amounts due the Facility Agent under Section 11.03.

 

10.10     Collateral and Guaranty Matters. The Lenders irrevocably authorize each of the Facility Agent and the Security Trustee, at its option and in its discretion, to release any Lien on any property granted to or held by the Facility Agent or the Security Trustee under any Loan Document (i) upon termination of the Commitments and payment in full of all Obligations (other than contingent indemnification or reimbursement obligations), (ii) that is sold or otherwise disposed of or to be sold or otherwise disposed of as part of or in connection with any sale or other disposition permitted hereunder or under any other Loan Document, or (iii) subject to Section 11.02, if approved, authorized or ratified in writing by the Required Lenders.

 

Upon request by the Facility Agent at any time, the Required Lenders will confirm in writing to the Facility Agent’s authority to release or subordinate its interest in particular types or items of property, or to release any Guarantor from its obligations under the Loan Documents pursuant to this Section 10.10. The Facility Agent and the Security Trustee shall not be responsible for or have a duty to ascertain or inquire into any representation or warranty regarding the existence, value or collectability of the Collateral, the existence, priority or perfection of the Facility Agent’s or the Security Trustee’s Lien thereon, or any certificate prepared by any Obligor in connection therewith, nor shall the Facility Agent or the Security Trustee be responsible or liable to the Lenders for any failure to monitor or maintain any portion of the Collateral.

 

 

ARTICLE XI

MISCELLANEOUS

 

11.01     Notices; Public Information.

 

(a)          Notices Generally. Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in paragraph (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by facsimile or email as follows:

 

(i)

if to any Obligor:

 

c/o International Seaways Ship Management LLC

600 Third Avenue, 39^th Floor

New York, New York 10016

Attention: Legal Department

Telephone: 212-578-1600

Fax: 212-578-1832

Email: [email protected] and [email protected]

 

(ii)

if to a Lender:

 

At the address below its name in Schedule I

 

(iii)

if to the Facility Agent or Security Trustee:

 

ABN AMRO Capital USA LLC

100 Park Avenue, 17^th floor

New York, NY 10017

Attention: Wudasse Zaudou

Facsimile: 917-284-6697

Email: [email protected]

 

Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by facsimile shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient). Notices delivered through electronic communications, to the extent provided in paragraph (b) below, shall be effective as provided in said paragraph (b).

 

(b)          Electronic Communications. Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communication (including e-mail, FpML, and Internet or intranet websites) pursuant to procedures approved by the Facility Agent, provided that the foregoing shall not apply to notices to any Lender pursuant to Article II if such Lender has notified the Facility Agent that it is incapable of receiving notices under such Article by electronic communication. The Facility Agent or any Obligor may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications.

 

 

Unless the Facility Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient, at its e-mail address as described in the foregoing clause (i), of notification that such notice or communication is available and identifying the website address therefor; provided that, for both clauses (i) and (ii) above, if such notice, email or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day for the recipient.

 

(c)          Change of Address, etc. Any party hereto may change its address or facsimile number for notices and other communications hereunder by notice to the other parties hereto.

 

(d)          Platform.

 

(i)          The Obligors agree that the Facility Agent may, but shall not be obligated to, make the Communications (as defined below) available to the other Lenders by posting the Communications on the Platform.

 

(ii)         The Platform is provided “as is” and “as available.” The Agent Parties (as defined below) do not warrant the adequacy of the Platform and expressly disclaim liability for errors or omissions in the Communications. No warranty of any kind, express, implied or statutory, including any warranty of merchantability, fitness for a particular purpose, non-infringement of third-party rights or freedom from viruses or other code defects, is made by any Agent Party in connection with the Communications or the Platform. In no event shall the Facility Agent or any of its Related Parties (collectively, the “Agent Parties”) have any liability to the Borrower, any Guarantor, any Lender or any other Person or entity for damages of any kind, including direct or indirect, special, incidental or consequential damages, losses or expenses (whether in tort, contract or otherwise) arising out of any Obligor’s or the Facility Agent’s transmission of communications through the Platform. “Communications” means, collectively, any notice, demand, communication, information, document or other material provided by or on behalf of any Obligor pursuant to any Loan Document or the transactions contemplated therein which is distributed to the Facility Agent or any Lender by means of electronic communications pursuant to this Section, including through the Platform.

 

(e)          Public Information. The Borrower hereby acknowledges that certain of the Lenders (each, a “Public Lender”) may have personnel who do not wish to receive material non-public information with respect to any Obligor or their Affiliates, or the respective securities of any of the foregoing, and who may be engaged in investment and other market-related activities with respect to such Persons’ securities. Each Obligor hereby agrees that it will use commercially reasonable efforts to identify that portion of the materials and information provided by or on behalf of any Obligor hereunder and under the other Loan Documents (collectively, “Obligor Materials”) that may be distributed to the Public Lenders and that (1) all such Obligor Materials shall be clearly and conspicuously marked “PUBLIC” which, at a minimum, shall mean that the word “PUBLIC” shall appear prominently on the first page thereof; (2) by marking Obligor Materials “PUBLIC,” such Obligor shall be deemed to have authorized the Facility Agent and the Lenders to treat such Obligor Materials as not containing any material non-public information with respect to such Obligor or its securities for purposes of U.S. Federal and state securities Laws (provided, however, that to the extent that such Obligor Materials constitute Information, they shall be subject to Section 11.12); (3) all Obligor Materials marked “PUBLIC” are permitted to be made available through a portion of the Platform designated “Public Side Information;” and (4) the Facility Agent shall be entitled to treat any Obligor Materials that are not marked “PUBLIC” as being suitable only for posting on a portion of the Platform not designated “Public Side Information”. Each Public Lender will designate one or more representatives that shall be permitted to receive information that is not designated as being available for Public Lenders.

 

 

11.02     Waivers; Amendments.

 

(a)          No Waiver; Remedies Cumulative; Enforcement. No failure or delay by the Facility Agent, the Security Trustee or any Lender in exercising any right, remedy, power or privilege hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, remedy, power or privilege, or any abandonment or discontinuance of steps to enforce such a right, remedy, power or privilege, preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges of the Facility Agent, the Security Trustee and the Lenders hereunder and under the Loan Documents are cumulative and are not exclusive of any rights, remedies, powers or privileges that any such Person would otherwise have.

 

Notwithstanding anything to the contrary contained herein or in any other Loan Document, the authority to enforce rights and remedies hereunder and under the other Loan Documents against the Borrower shall be vested exclusively in, and all actions and proceedings at law in connection with such enforcement shall be instituted and maintained exclusively by, the Facility Agent in accordance with Section 9.01 for the benefit of all the Lenders; provided that the foregoing shall not prohibit (i) the Facility Agent from exercising on its own behalf the rights and remedies that inure to its benefit (solely in its capacity as Facility Agent) hereunder and under the other Loan Documents, (ii) any Lender from exercising setoff rights in accordance with Section 11.08 (subject to the terms of Section 2.13), (iii) any Lender from filing proofs of claim or appearing and filing pleadings on its own behalf during the pendency of a proceeding relative to the Borrower under any Debtor Relief Law or (iv) the Security Trustee from exercising the rights and remedies under, and in accordance with, the Security Documents; provided, further, that if at any time there is no Person acting as Facility Agent hereunder and under the other Loan Documents, then (x) the Required Lenders shall have the rights otherwise provided to the Facility Agent pursuant to Section 9.01 and (y) in addition to the matters set forth in clauses (ii), (iii) and (iv) of the preceding proviso and subject to Section 2.13, any Lender may, with the consent of the Required Lenders, enforce any rights or remedies available to it and as authorized by the Required Lenders.

 

(b)          Amendments, Etc. Except as otherwise expressly set forth in this Agreement, no amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by any Obligor therefrom, shall be effective unless in writing executed by the Obligors and the Required Lenders, and acknowledged by the Facility Agent, or by the Obligors and the Facility Agent with the consent of the Required Lenders (provided, however, that any amendment or waiver of any provision of this Agreement or any other Loan Document which relates to any definitions or provisions or other matters relating to Sanctions shall additionally require the consent of the Required Lenders and the Facility Agent), and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that no such amendment, waiver or consent shall:

 

(i)          extend or increase any Commitment of any Lender without the written consent of such Lender (it being understood that a waiver of any condition precedent set forth in Article IV or the waiver of any Default shall not constitute an extension or increase of any Commitment of any Lender);

 

(ii)         reduce the principal of, or rate of interest specified herein on, the Loan, or any fees or other amounts payable hereunder or under any other Loan Document, without the written consent of each Lender directly and adversely affected thereby (provided that only the consent of the Required Lenders shall be necessary to amend the definition of “Default Rate” or to waive the obligation of the Borrower to pay interest at the Default Rate);

 

 

(iii)        postpone any date scheduled for any payment of principal of, or interest on, the Loan, or any fees or other amounts payable hereunder or under any other Loan Document, or reduce the amount of, waive or excuse any such payment, without the written consent of each Lender directly and adversely affected thereby;

 

(iv)         change Section 2.12(b) or Section 2.13 in a manner that would alter the pro rata sharing of payments required thereby without the written consent of each Lender directly and adversely affected thereby;

 

(v)          release all or substantially all of the Guarantors from their respective Guarantees, or limit their liability in respect of such Guarantees, without the written consent of each Lender, except to the extent the release of any Guarantor is in connection with a disposition permitted pursuant to Section 6.03 (in which case such release may be made by the Facility Agent acting alone);

 

(vi)         except as expressly permitted in this Agreement or any Security Document, release all or substantially all of the Collateral from the Liens of the Security Documents or alter the relative priorities of the Obligations entitled to the Liens of the Security Documents (except in connection with securing additional Obligations equally and ratably with the other Obligations), in each case without the written consent of each Lender;

 

(vii)        waive any conditions set forth in Article IV, without the written consent of each Lender;

 

(viii)      change any provision of this Section or the percentage in the definition of “Required Lenders” or any other provision hereof specifying the number or percentage of Lenders required to amend, waive or otherwise modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender; or

 

(ix)         waive any provisions of Section 5.04 or Section 7.01 without the written consent of each Lender;

 

provided, further, that no such amendment, waiver or consent shall amend, modify or otherwise affect the rights or duties hereunder or under any other Loan Document of (A) the Facility Agent, unless in writing executed by the Facility Agent, and (B) the Security Trustee, unless in writing executed by the Security Trustee, in each case in addition to the Obligors and the Lenders required above.

 

Notwithstanding anything herein to the contrary, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder (and any amendment, waiver or consent that by its terms requires the consent of all the Lenders or each affected Lender may be effected with the consent of the applicable Lenders other than Defaulting Lenders, except that (x) the Commitment of any Defaulting Lender may not be increased or extended, or the maturity of any of its portions of the Loan may not be extended, the rate of interest on any of its portions of the Loan may not be reduced and the principal amount of any of its portions of the Loan may not be forgiven, in each case without the consent of such Defaulting Lender and (y) any amendment, waiver or consent requiring the consent of all the Lenders or each affected Lender that by its terms affects any Defaulting Lender more adversely than the other affected Lenders shall require the consent of such Defaulting Lender.

 

Notwithstanding anything to the contrary in this Agreement, Incremental Commitments may be effected in accordance with Section 2.21 without the consent of any Person other than as specified in Section 2.21.

 

 

In addition, notwithstanding anything in this Section to the contrary, if the Facility Agent and the Borrower shall have jointly identified an obvious error or any error or omission of a technical nature, in each case, in any provision of the Loan Documents, then the Facility Agent and the Borrower shall be permitted to amend such provision, and, in each case, such amendment shall become effective without any further action or consent of any other party to any Loan Document if the same is not objected to in writing by the Required Lenders to the Facility Agent within ten (10) Business Days following receipt of notice thereof.

 

11.03     Expenses; Indemnity; Damage Waiver.

 

(a)          Costs and Expenses. Each Obligor shall pay (i) all reasonable and documented out-of-pocket expenses incurred by the Facility Agent, the Security Trustee and any Affiliates thereof (including the reasonable fees, charges and disbursements of one outside counsel in each relevant jurisdiction for the Facility Agent and the Security Trustee, taken as a whole), in connection with the syndication of the facility, preparation, negotiation, execution, delivery and administration of this Agreement and the other Loan Documents, or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable and documented out-of-pocket expenses incurred by the Facility Agent, the Security Trustee or any Lender (including the reasonable fees, charges and disbursements of one lead outside counsel for the Facility Agent, the Security Trustee and the Lenders, taken as a whole, one local counsel in each relevant jurisdiction and, in the event of any actual or potential conflict of interest, one additional firm of counsel (and local counsel) in each relevant jurisdiction for the Lender or group of Lenders subject to such conflict and similarly situated), in connection with the enforcement or protection of its rights (A) in connection with this Agreement and the other Loan Documents, including its rights under this Section, or (B) in connection with the Loan made hereunder, and (iii) all reasonable and documented out-of-pocket expenses incurred by the Facility Agent, Security Trustee or any Lender (including the reasonable fees, charges and disbursements of any counsel for the Facility Agent, Security Trustee or any Lender) during any workout or restructuring or negotiations relating to any workout or restructuring in respect of the Loan.

 

(b)          Indemnification by the Obligors. Each Obligor shall indemnify the Facility Agent (and any sub-agent thereof), the Security Trustee (and any sub-agent thereof), each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (including the reasonable and documented out-of-pocket fees, charges and disbursements of any counsel for any Indemnitee), incurred by any Indemnitee or asserted against any Indemnitee by any Person (including the Borrower) arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or thereby, (ii) the Loan or the use or proposed use of the proceeds therefrom, (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by any Obligor or any Subsidiaries thereof, or any Environmental Liability related in any way to any Obligor or any Subsidiaries thereof, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by any Obligor, and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee, (y) result from a claim brought by any Obligor against an Indemnitee for breach in bad faith of such Indemnitee's obligations hereunder or under any other Loan Document, if such Obligor has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction or (z) result from a claim not involving an act or omission of such Obligor and that is brought by an Indemnitee against another Indemnitee (other than against the Arranger or the Facility Agent in their capacities as such). Paragraph (b) of this Section shall not apply with respect to Taxes other than any Taxes that represent losses, claims, damages, etc. arising from any non-Tax claim.

 

 

(c)          Reimbursement by Lenders. To the extent that any Obligor for any reason fails to indefeasibly pay any amount required under paragraph (a) or (b) of this Section to be paid by it to the Facility Agent (or any sub-agent thereof), the Security Trustee (and any sub-agent thereof) or any Related Party of any of the foregoing, each Lender severally agrees to pay to the Facility Agent (or any such sub-agent), the Security Trustee (and any sub-agent thereof) or such Related Party, as the case may be, such Lender’s pro rata share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought based on each Lender’s Applicable Percentage at such time) of such unpaid amount (including any such unpaid amount in respect of a claim asserted by such Lender); provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Facility Agent (or any such sub-agent), the Security Trustee (and any sub-agent thereof) or against any Related Party of any of the foregoing acting for the Facility Agent (or any such sub-agent), the Security Trustee (and any sub-agent thereof), in connection with such capacity. The obligations of the Lenders under this paragraph (c) are subject to the provisions of Section 2.12(e).

 

(d)          Waiver of Consequential Damages, Etc. To the fullest extent permitted by Applicable Law, each Obligor shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, the Loan, or the use of the proceeds thereof. No Indemnitee referred to in paragraph (b) above shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby.

 

(e)          Payments. All amounts due under this Section shall be payable not later than ten (10) days after demand therefor.

 

(f)          Survival. Each party’s obligations under this Section shall survive the termination of the Loan Documents and payment of the obligations hereunder.

 

11.04     Successors and Assigns.

 

(a)          Successors and Assigns Generally. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that each Obligor may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Facility Agent and each Lender, and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an assignee in accordance with the provisions of paragraph (b) of this Section, (ii) by way of participation in accordance with the provisions of paragraph (d) of this Section, or (iii) by way of pledge or assignment of a security interest subject to the restrictions of paragraph (e) of this Section (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in paragraph (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Facility Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

 

 

(b)          Assignments by Lenders. Any Lender may at any time assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loan at the time owing to it); provided that any such assignment shall be subject to the following conditions:

 

(i)          Required Consents. No consent shall be required for any assignment except:

 

(A)         the consent of the Borrower (such consent not to be unreasonably withheld or delayed) shall be required unless (x) an Event of Default has occurred and is continuing at the time of such assignment, or (y) such assignment is to a Lender, an Affiliate of a Lender or an Approved Fund; provided that the Borrower shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to the Facility Agent within five (5) Business Days after having received written notice thereof and provided, further, that the Borrower’s consent shall not be required during the primary syndication of the Commitments; and

 

(B)         the consent of the Facility Agent (such consent not to be unreasonably withheld or delayed) shall be required for assignments to a Person that is not a Lender, an Affiliate of such Lender or an Approved Fund with respect to such Lender.

 

(ii)         Assignment and Assumption. The parties to each assignment shall execute and deliver to the Facility Agent an Assignment and Assumption, together with a processing and recordation fee of $7,500; provided that the Facility Agent may, in its sole discretion, elect to waive such processing and recordation fee in the case of any assignment. The assignee, if it is not a Lender, shall deliver to the Facility Agent an Administrative Questionnaire.

 

(iii)        No Assignment to Certain Persons. No such assignment shall be made to (A) any Obligor or any Obligors’ Affiliates or Subsidiaries or (B) any Defaulting Lender or any of its Subsidiaries, or any Person who, upon becoming a Lender hereunder, would constitute a Defaulting Lender or a Subsidiary thereof.

 

(iv)         No Assignment to Natural Persons. No such assignment shall be made to a natural Person (or a holding company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural Person).

 

(v)          Certain Additional Payments. In connection with any assignment of rights and obligations of any Defaulting Lender hereunder, no such assignment shall be effective unless and until, in addition to the other conditions thereto set forth herein, the parties to the assignment shall make such additional payments to the Facility Agent in an aggregate amount sufficient, upon distribution thereof as appropriate (which may be outright payment, purchases by the assignee of participations or subparticipations, or other compensating actions, including funding, with the consent of the Borrower and the Facility Agent, the applicable pro rata share of the Loan previously requested but not funded by the Defaulting Lender, to each of which the applicable assignee and assignor hereby irrevocably consent), to (x) pay and satisfy in full all payment liabilities then owed by such Defaulting Lender to the Facility Agent, the Security Trustee and each other Lender hereunder (and interest accrued thereon), and (y) acquire (and fund as appropriate) its full pro rata share of the Loan in accordance with its Applicable Percentage. Notwithstanding the foregoing, in the event that any assignment of rights and obligations of any Defaulting Lender hereunder shall become effective under Applicable Law without compliance with the provisions of this paragraph, then the assignee of such interest shall be deemed to be a Defaulting Lender for all purposes of this Agreement until such compliance occurs.

 

 

Subject to acceptance and recording thereof by the Facility Agent pursuant to paragraph (c) of this Section, from and after the effective date specified in each Assignment and Assumption, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 2.14, 2.15, 2.16 and 11.03 (subject in each case to the requirements and limitations therein) with respect to facts and circumstances occurring prior to the effective date of such assignment; provided, that except to the extent otherwise expressly agreed by the affected parties, no assignment by a Defaulting Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (d) of this Section.

 

(c)          Register. The Facility Agent, acting solely for this purpose as an agent of each Obligor, shall maintain at its office in New York, New York a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts (and stated interest) of the portion of the Loan owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive absent manifest error, and the Obligors, the Facility Agent, the Security Trustee and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by any Obligor, the Security Trustee and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

 

(d)          Participations. Any Lender may at any time, without the consent of, or notice to, any Obligor or the Facility Agent, sell participations to any Person (other than a natural Person, or a holding company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural Person, or each Obligor or any of the Obligors’ Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loan owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, and (iii) each Obligor, the Facility Agent, the Security Trustee and Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. For the avoidance of doubt, each Lender shall be responsible for the indemnity under Section 11.03(c) with respect to any payments made by such Lender to its Participant(s).

 

 

Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in Sections 11.02(b)(i) through (vii) that affects such Participant. Each Obligor agrees that each Participant shall be entitled to the benefits of Sections 2.14, 2.15 and 2.16 (subject to the requirements and limitations therein, including the requirements under Section 2.16(g) (it being understood that the documentation required under Section 2.16(g) shall be delivered to the participating Lender)) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section; provided that such Participant (A) agrees to be subject to the provisions of Section 2.19 as if it were an assignee under paragraph (b) of this Section; and (B) shall not be entitled to receive any greater payment under Section 2.15 or 2.16, with respect to any participation, than its participating Lender would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation. Each Lender that sells a participation agrees, at the Borrower's request and expense, to use reasonable efforts to cooperate with the Borrower to effectuate the provisions of Section 2.19(b) with respect to any Participant. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 11.08 as though it were a Lender; provided that such Participant agrees to be subject to Section 2.13 as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of each Obligor, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loan or other obligations under the Loan Documents (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant's interest in any commitments, loans, letters of credit or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Facility Agent (in its capacity as Facility Agent) shall have no responsibility for maintaining a Participant Register.

 

(e)          Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

 

11.05     Survival. All covenants, agreements, representations and warranties made by each Obligor herein and in any Loan Document or other documents delivered in connection herewith or therewith or pursuant hereto or thereto shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery hereof and thereof and the making of the Borrowing hereunder, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Facility Agent, the Security Trustee or any Lender may have had notice or knowledge of any Default at the time of the Borrowing, and shall continue in full force and effect as long as the Loan or any other Obligation hereunder shall remain unpaid or unsatisfied and so long as the Commitments have not expired or been terminated. The provisions of Sections 2.14, 2.15, 11.03, 11.15 and Article X  shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the payment in full of the Obligations, the expiration or termination of the Commitments or the termination of this Agreement or any provision hereof.

 

 

11.06     Counterparts; Integration; Effectiveness; Electronic Execution.

 

(a)          Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and the other Loan Documents, and any separate letter agreements with respect to fees payable to the Facility Agent, constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. This Agreement shall become effective when it shall have been executed by the Facility Agent and when the Facility Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature page of this Agreement by facsimile or in electronic (i.e., “pdf” or “tif”) format shall be effective as delivery of a manually executed counterpart of this Agreement.

 

(b)          Electronic Execution of Assignments. The words “execution,” “signed,” “signature,” and words of like import in any Assignment and Assumption shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any Applicable Law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.

 

11.07     Severability. If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Without limiting the foregoing provisions of this Section, if and to the extent that the enforceability of any provision of this Agreement relating to Defaulting Lenders shall be limited by Debtor Relief Laws, as determined in good faith by the Facility Agent, as applicable, then such provision shall be deemed to be in effect only to the extent not so limited.

 

11.08     Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by Applicable Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held, and other obligations (in whatever currency) at any time owing, by such Lender, or any such Affiliate, to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under this Agreement or any other Loan Document to such Lender or their respective Affiliates, irrespective of whether or not such Lender or Affiliate shall have made any demand under this Agreement or any other Loan Document and although such obligations of the Borrower may be contingent or unmatured or are owed to a branch, office or Affiliate of such Lender different from the branch, office or Affiliate holding such deposit or obligated on such indebtedness; provided that in the event that any Defaulting Lender shall exercise any such right of setoff, (x) all amounts so set off shall be paid over immediately to the Facility Agent for further application in accordance with the provisions of Section 2.20 and, pending such payment, shall be segregated by such Defaulting Lender from its other funds and deemed held in trust for the benefit of the Facility Agent, the Security Trustee and the Lenders, and (y) the Defaulting Lender shall provide promptly to the Facility Agent a statement describing in reasonable detail the Obligations owing to such Defaulting Lender as to which it exercised such right of setoff. The rights of each Lender and their respective Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender or their respective Affiliates may have. Each Lender agrees to notify the Borrower and the Facility Agent promptly after any such setoff and application; provided that the failure to give such notice shall not affect the validity of such setoff and application.

 

 

11.09     Governing Law; Jurisdiction; Etc.

 

(a)          Governing Law. This Agreement and the other Loan Documents and any claims, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon, arising out of or relating to this Agreement or any other Loan Document (except, as to any other Loan Document, as expressly set forth therein) and the transactions contemplated hereby and thereby shall be governed by, and construed in accordance with, the law of the State of New York (including Sections 5-1401 and 5-1402 of the General Obligations Law but otherwise excluding the laws applicable to conflicts or choice of law).

 

(b)          Jurisdiction. Each Obligor irrevocably and unconditionally agrees that it will not commence any action, litigation or proceeding of any kind or description, whether in law or equity, whether in contract or in tort or otherwise, against the Facility Agent, the Security Trustee, any Lender, or any Related Party of the foregoing in any way relating to this Agreement or any other Loan Document or the transactions relating hereto or thereto, in any forum other than the courts of the State of New York sitting in New York County, and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, and each of the parties hereto irrevocably and unconditionally submits to the jurisdiction of such courts and agrees that all claims in respect of any such action, litigation or proceeding may be heard and determined in such New York State court or, to the fullest extent permitted by Applicable Law, in such federal court.  Each of the parties hereto agrees that a final judgment in any such action, litigation or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.  Nothing in this Agreement or in any other Loan Document shall affect any right that the Facility Agent, the Security Trustee or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against any Obligor or its properties in the courts of any jurisdiction.

 

(c)          Waiver of Venue. Each Obligor irrevocably and unconditionally waives, to the fullest extent permitted by Applicable Law, any objection that it may now or hereafter have to the laying of venue of any action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by Applicable Law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

 

(d)          Service of Process. Each party hereto irrevocably consents to service of process in the manner provided for notices in Section 11.01. Nothing in this Agreement will affect the right of any party hereto to serve process in any other manner permitted by Applicable Law.

 

11.10     WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

 

11.11     Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.

 

11.12     Treatment of Certain Information; Confidentiality. Each of the Facility Agent, the Security Trustee and the Lenders agree to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and to its Related Parties (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and agree to keep such Information confidential); (b) to the extent required or requested by any regulatory authority purporting to have jurisdiction over such Person or its Related Parties (including any self-regulatory authority, such as the National Association of Insurance Commissioners); (c) to the extent required by Applicable Laws or by any subpoena or similar legal process; (d) to any other party hereto; (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, but solely to the extent required in connection therewith; (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights and obligations under this Agreement, or (ii) any actual or prospective party (or its Related Parties) to any swap, derivative or other transaction under which payments are to be made by reference to any Obligor and its obligations, this Agreement or payments hereunder; (g) on a confidential basis to any rating agency in connection with rating any Obligor or its Subsidiaries; (h) with the consent of the Borrower; or (i) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section, or (y) becomes available to the Facility Agent, the Security Trustee, any Lender or any of their respective Affiliates on a nonconfidential basis from a source other than the Borrower. In addition, the Facility Agent and the Lenders may disclose the existence of this Agreement and information about this Agreement to market data collectors, similar service providers to the lending industry and service providers to the Facility Agent or any Lender in connection with the administration of this Agreement, the other Loan Documents, and the Commitments.

 

For purposes of this Section, “Information” means all information received from any Obligor or any of the Subsidiaries thereof relating to any Obligor or any of the Subsidiaries thereof or any of their respective businesses, other than any such information that is available to the Facility Agent or any Lender on a nonconfidential basis prior to disclosure by any Obligor or any of the Subsidiaries thereof. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

 

11.13     PATRIOT Act. Each Lender subject to the PATRIOT Act hereby notifies each Obligor that pursuant to the requirements of the PATRIOT Act, it may be required to obtain, verify and record information that identifies any Obligor, which information includes the name and address of each Obligor and other information that will allow such Lender to identify each Obligor in accordance with the PATRIOT Act.

 

 

11.14     Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to the Loan, together with all fees, charges and other amounts that are treated as interest on the Loan under Applicable Law (collectively, “charges”), shall exceed the maximum lawful rate (the “Maximum Rate”) that may be contracted for, charged, taken, received or reserved by the Lender holding such portion of the Loan in accordance with Applicable Law, the rate of interest payable in respect of the Loan hereunder, together with all charges payable in respect thereof, shall be limited to the Maximum Rate. To the extent lawful, the interest and charges that would have been paid in respect of the Loan but were not paid as a result of the operation of this Section shall be cumulated and the interest and charges payable to such Lender in respect of other portions of the Loan or periods shall be increased (but not above the amount collectible at the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Rate for each day to the date of repayment, shall have been received by such Lender. Otherwise, any amount collected by such Lender that exceeds the maximum amount collectible at the Maximum Rate shall be applied to the reduction of the principal balance of the Loan or refunded to the Borrower so that at no time shall the interest and charges paid or payable in respect of the Loan exceed the maximum amount collectible at the Maximum Rate.

 

11.15     Payments Set Aside. To the extent that any payment by or on behalf of the Borrower is made to the Facility Agent or any Lender, or the Facility Agent, or any Lender exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Facility Agent or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender severally agrees to pay to the Facility Agent upon demand its applicable share (without duplication) of any amount so recovered from or repaid by the Facility Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from time to time in effect.

 

11.16     No Advisory or Fiduciary Responsibility. In connection with all aspects of each transaction contemplated hereby (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document), each Obligor acknowledges and agrees, and acknowledges its Affiliates’ understanding, that: (a) (i) no fiduciary, advisory or agency relationship between any Obligor and Subsidiaries and any Arranger, the Facility Agent, the Security Trustee or any Lender is intended to be or has been created in respect of the transactions contemplated hereby or by the other Loan Documents, irrespective of whether the Arranger, the Facility Agent, the Security Trustee or any Lender has advised or is advising any Obligor or any Subsidiary thereof on other matters, (ii) the arranging and other services regarding this Agreement provided by the Arranger, the Facility Agent, the Security Trustee and the Lenders are arm’s-length commercial transactions between each Obligor and its Affiliates, on the one hand, and the Arranger, the Facility Agent, the Security Trustee and the Lenders, on the other hand, (iii) each Obligor has consulted its own legal, accounting, regulatory and tax advisors to the extent that it has deemed appropriate and (iv) each Obligor is capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents; and (b) (i) the Arranger, the Facility Agent, the Security Trustee, and the Lenders each is and has been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for any Obligor or any of their Affiliates, or any other Person; (ii) none of the Arranger, the Facility Agent, the Security Trustee and the Lenders has any obligation to any Obligor or any of their Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; and (iii) the Arranger, the Facility Agent, the Security Trustee and the Lenders and their respective Affiliates may be engaged, for their own accounts or the accounts of customers, in a broad range of transactions that involve interests that differ from those of the Borrower and its Affiliates, and none of the Arranger, the Facility Agent, the Security Trustee and the Lenders has any obligation to disclose any of such interests to any Obligor or its Affiliates. To the fullest extent permitted by Law, each Guarantor hereby waives and releases any claims that it may have against any of the Arranger, the Facility Agent, the Security Trustee and the Lenders with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transaction contemplated hereby.

 

 

11.17     Acknowledgement and Consent to Bail-In of EEA Financial Institutions. Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any EEA Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the write-down and conversion powers of an EEA Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:

 

(a)          the application of any Write-Down and Conversion Powers by an EEA Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an EEA Financial Institution; and

 

(b)          the effects of any Bail-in Action on any such liability, including, if applicable:

 

(i)          a reduction in full or in part or cancellation of any such liability;

 

(ii)         a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such EEA Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or

 

(iii)        the variation of the terms of such liability in connection with the exercise of the write-down and conversion powers of any EEA Resolution Authority.

 

[Signature Pages Follow]

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

 

	SEAWAYS SHIPPING CORPORATION,
	as Borrower
	By	/s/ Lois K.  Zabrocky
		Name:	Lois K. Zabrocky
		Title:	President

 

 

INTERNATIONAL SEAWAYS, INC.,
as Initial Guarantor
By	/s/ Lois K. Zabrocky
	Name:	Lois K. Zabrocky
	Title:	President and Chief Executive Officer
SECOND KATSURA TANKER CORPORATION,
as Initial Guarantor
By	/s/ Jeffrey D. Pribor
	Name:	Jeffrey D. Pribor
	Title:	Senior Vice President and Treasurer

 

 

LENDERS
ABN AMRO CAPITAL USA LLC,
as Lender
By	/s/ Eden Rahman
	Name:	Eden Rahman
	Title:	Vice President
By	/s/ John Sullivan
	Name:	John Sullivan
	Title:	Managing Director

 

 

SWAP BANKS
ABN AMRO BANK N.V.,
as Swap Bank
By	/s/ Nicholas G. Santangelo
	Name:	Nicholas G. Santangelo
	Title:	Attorney-in-Fact

 

 

MANDATED LEAD ARRANGER
ABN AMRO CAPITAL USA LLC,
as Mandated Lead Arranger
By	/s/ Eden Rahman
	Name:	Eden Rahman
	Title:	Vice President
By	/s/ John Sullivan
	Name:	John Sullivan
	Title:	Managing Director

 

 

ABN AMRO CAPITAL USA LLC,			ABN AMRO CAPITAL USA LLC,
as Security Trustee			as Arranger
By	/s/ John Sullivan		By	/s/ John Sullivan
Name:	John Sullivan		Name:	John Sullivan
Title:	Managing Director		Title:	Managing Director
By	/s/ Eden Rahman		By	/s/ Eden Rahman
Name:	Eden Rahman		Name:	Eden Rahman
Title:	Vice President		Title:	Vice President
ABN AMRO CAPITAL USA LLC,			ABN AMRO CAPITAL USA LLC,
as Facility Agent			as Bookrunner
By	/s/ John Sullivan		By	/s/ John Sullivan
Name:	John Sullivan		Name:	John Sullivan
Title:	Managing Director		Title:	Managing Director
By	/s/ Eden Rahman		By	/s/ Eden Rahman
Name:	Eden Rahman		Name:	Eden Rahman
Title:	Vice President		Title:	Vice President

 

 

Exhibit 10.4

 

Execution Version

 

Dated _____________13 June_______________ 2018

 

GENER8 MARITIME SUBSIDIARY VII INC.

as Borrower

 

THE COMPANIES listed in Part A of Schedule 1

as Original Owner Guarantors and

Original Hedge Guarantors

 

EURONAV MI II INC.

(formerly KNOWN AS GENER8 MARITIME, INC.)

as Existing Parent Guarantor

 

SEAWAYS HOLDING CORPORATION

as New Parent Guarantor

 

international seaways, inc.

as Holdings Guarantor

 

CITIBANK, N.A.

NORDEA BANK AB (PUBL), New York BRANCH

as Global Co-ordinators

 

CITIBANK, N.A.

as Bookrunner

 

CITIBANK, N.A.

THE EXPORT-IMPORT BANK OF CHINA

BANK OF CHINA, new york branch

as Mandated Lead Arrangers

 

THE BANKS AND FINANCIAL INSTITUTIONS listed in Part B of Schedule 1

as Original Lenders

 

THE BANKS AND FINANCIAL INSTITUTIONS listed in Part C of Schedule 1

as Hedge Counterparties

 

CITIBANK, N.A., LONDON BRANCH

as ECA Co-ordinator and ECA Agent

 

NORDEA BANK AB (PUBL), NEW YORK BRANCH

as Facility Agent and Security Agent

 

 

AMENDING AND RESTATING AGREEMENT

 

 

relating to a facility agreement originally dated 30 November 2015

as supplemented by a supplemental agreement dated 28 December 2015, as amended and restated by an amending and restating deed dated 29 June 2016, as supplemented by a supplemental agreement dated 8 November 2017 and as further supplemented by a consent, supplemental and amendment letter dated 2 April 2018

 

  

INDEX

 

Clause		Page
1	INTERPRETATION	3
2	consent, waiver, RELEASE AND ACCESSION	3
3	CONDITIONS precedent	4
4	representations and WARRANTIES	7
5	amendment and restatement of Facility agreement and other finance documents	8
6	Further Assurance	9
7	Fees, Costs and Expenses	9
8	Notices	9
9	Counterparts	9
10	CONFIRMATION BY REMAINING OBLIGORS	9
11	Governing Law	10
12	Enforcement	10
SCHEDULE 1		12
Part A ORIGINAL OWNER GUARANTORS  AND ORIGINAL HEDGE GUARANTORS		12
Part B Original Lenders		13
Part C HEDGE COUNterparties		14
EXECUTION PAGES		15
EXHIBIT A  FORM OF EFFECTIVE date NOTICE		24
APPENDIX 1  PART A  FORM OF AMENDED AND RESTATED facility AGREEMENT MARKED TO INDICATE AMENDMENTS TO THE facility AGREEMENT		25
APPENDIX 1  PART B  form of clean copy amended and restated facility agreement		26

 

 

THIS AGREEMENT is made on ____________________________ 2018

 

BETWEEN

 

(1)

GENER8 MARITIME SUBSIDIARY VII INC., a corporation incorporated and existing under the laws of the Republic of The Marshall Islands whose registered office is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960 as borrower (the “Borrower”);

 

(2)

The companies listed in Part A of Schedule 1 (The Parties) hereto as joint and several original owner guarantors (the “Original Owner Guarantors”) and as joint and several original hedge guarantors (the “Original Hedge Guarantors”);

 

(3)

EURONAV MI II INC. (FORMERLY KNOWN AS GENER8 MARITIME, INC.), a corporation incorporated and existing under the laws of the Republic of The Marshall Islands whose registered office is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960 as the existing parent guarantor (the “Existing Parent Guarantor”);

 

(4)

SEAWAYS HOLDING CORPORATION, a corporation incorporated and existing under the laws of the Republic of The Marshall Islands whose registered office is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960 as the new parent guarantor (the “New Parent Guarantor”);

 

(5)

INTERNATIONAL SEAWAYS, INC., a corporation incorporated and existing under the laws of the Republic of The Marshall Islands whose registered office is at Trust Company Complex, Ajeltake Road, Ajeltake Islands, Majuro, Marshall Islands MH96960 as the holdings guarantor (the “Holdings Guarantor”);

 

(6)

CITIBANK, N.A. and NORDEA BANK AB (PUBL), NEW YORK BRANCH (as successor of Nordea Bank Finland Plc, New York Branch) as global co-ordinators (the “Global Co-ordinators” and each, a “Global Co-ordinator”);

 

(7)

CITIBANK, N.A. as bookrunner (the “Bookrunner”);

 

(8)

CITIBANK, N.A., THE EXPORT-IMPORT BANK OF CHINA and BANK OF CHINA, NEW YORK BRANCH as mandated lead arrangers (the “Mandated Lead Arrangers” and each, a “Mandated Lead Arranger”);

 

(9)

THE BANKS AND FINANCIAL INSTITUTIONS listed in Part B of Schedule 1 as lenders (the “Original Lenders” and each, an “Original Lender”);

 

(10)

THE BANKS AND FINANCIAL INSTITUTIONS listed in Part C of Schedule 1 as hedge counterparties (the “Hedge Counterparties” and each a, “Hedge Counterparty”);

 

(11)

CITIBANK, N.A., LONDON BRANCH as ECA agent (the “ECA Agent”) and as ECA co-ordinator (the “ECA Co-ordinator”);

 

(12)

NORDEA BANK AB (PUBL), NEW YORK BRANCH (as successor of Nordea Bank Finland Plc, New York Branch) as agent of the other Finance Parties (the “Facility Agent”); and

 

(13)

NORDEA BANK AB (PUBL), NEW YORK BRANCH (as successor of Nordea Bank Finland Plc, New York Branch) as security agent for the Secured Parties (the “Security Agent”).

 

  

BACKGROUND

 

(A)

By a facility agreement dated 30 November 2015 (as supplemented by a supplemental agreement dated 28 December 2015, as amended and restated by an amending and restating deed dated 29 June 2016 , as supplemented by a supplemental agreement dated 8 November 2017 and as further supplemented by a consent, supplemental and amendment letter dated 2 April 2018, the “Facility Agreement”) and made between (i) the Borrower, (ii) the Original Owner Guarantors and Original Hedge Guarantors, (iii) the Existing Parent Guarantor, (iv) the Global Co-ordinators, (v) the Bookrunner, (vi) the Mandated Lead Arrangers, (vii) the Original Lenders, (viii) the Hedge Counterparties, (ix) the ECA Co-ordinator, (x) the Facility Agent and (xi) the Security Agent, the Original Lenders made available to the Borrower a facility of up to US$385,227,495.00.

 

(B)

By a share purchase agreement (the “Share Purchase Agreement”) dated April 18, 2018 made between (i) the New Parent Guarantor as purchaser, (ii) Euronav NV, a corporation incorporated and existing under laws of the Kingdom of Belgium as seller parent and (iii) Euronav MI Inc., a corporation incorporated and existing under the laws of the Republic of the Marshall Islands as seller, it is intended that the New Parent Guarantor purchase the entire share capital of the Borrower (the “Shares Purchase”).

 

(C)

In order to facilitate the Share Purchase and the transactions contemplated thereby, the Parties have agreed inter alia that:

 

(i)

no Change of Control shall occur as a result of the Shares Purchase;

 

(ii)

clauses 21.22 (Disposals), 21.23 (Merger) and 29.1 (Assignment or Transfers by Obligors) shall be waived solely in respect of the Shares Purchase, subject to the occurrence of the Effective Date;

 

(iii)

the Existing Parent Guarantor shall be irrevocably and unconditionally released from all of its liabilities and obligations under the Facility Agreement and the other Finance Documents with effect from the Effective Date (as defined below) (the “Release”);

 

(iv)

the New Parent Guarantor shall accede to the Facility Agreement and shall provide a guarantee thereunder (as defined below) (the “Accession of New Parent Guarantor”) with effect from the Effective Date;

 

(v)

the Holdings Guarantor shall accede to the Facility Agreement and shall provide a guarantee thereunder (as defined below) (the “Accession of Holdings Guarantor”) with effect from the Effective Date; and

 

(vi)

certain amendments shall be made to the Facility Agreement (as set out in Appendix 1) to reflect the Accession of New Parent Guarantor and the Accession of the Holdings Guarantor and as a consequence of the Shares Purchase (the “Proposed Changes”).

 

(D)

This Agreement sets out the terms and conditions on which the Finance Parties agree, with effect on and from the Effective Date, at the request of the Borrower, to the Proposed Changes, each of the other consequential amendments to be made to the Finance Documents in connection therewith and certain other changes described herein.

 

 

IT IS AGREED as follows:

 

1

INTERPRETATION

 

1.1

Defined expressions

 

Words and expressions defined in the Facility Agreement shall have the same meanings when used in this Agreement unless the context otherwise requires.

 

1.2

Definitions. In this Agreement:

 

“Acceding Parties” means collectively, the New Parent Guarantor and the Holdings Guarantor (and each or any of them as the context may require, an “Acceding Party”).

 

“Amended and Restated Facility Agreement” means the Facility Agreement as amended and restated by this Agreement in the form set out in Appendix 1.

 

“Effective Date” means the date specified on the Effective Date Notice, such date being the date on which the conditions precedent in Clause 3 (Conditions Precedent) are satisfied.

 

“Effective Date Notice” means a notice in the form set out in Exhibit A.

 

“Facility Agreement” means the Facility Agreement referred to in Recital (A).

 

“Party” means a party to this Agreement.

 

“Remaining Obligors” means the Borrower, each Owner Guarantor and each Hedge Guarantor.

 

“Shares” means all of the shares in the share capital of the Borrower which are held by, to the order of or on behalf of the New Parent Guarantor.

 

“SPA Closing Date” means the closing of the transactions contemplated by the Share Purchase Agreement.

 

1.3

Application of construction and interpretation provisions of Facility Agreement

 

Clauses 1.2 (Construction) and 1.5 (Third party rights) of the Facility Agreement apply to this Agreement as if they were each expressly incorporated herein with any necessary modifications.

 

1.4

Designation as a Finance Document

 

The Borrower and the Facility Agent designate this Agreement a Finance Document.

 

2

consent, waiver, RELEASE AND ACCESSION

 

Subject to and upon the terms and conditions of this Agreement, in consideration of the Lenders continuing to make available the amounts presently extended under the Facility to the Borrower pursuant to the Facility Agreement and without prejudice to the continuing obligations of each Remaining Obligor under the Facility Agreement and/or each of the other Finance Documents (in each case, as amended and restated or amended pursuant to this Agreement):

 

  

(a)

all Lenders hereby provide their consent to the Shares Purchase and confirm that they waive the provisions of clause 7.2 (Change of control) of the Facility Agreement which require a mandatory prepayment to be made by the Borrower as a result of a Change of Control;

 

(b)

all Lenders hereby agree to waive the breach of clause 21.22 (Disposals), clause 21.23 (Merger), and clause 29.1 (Assignment or transfer by Obligors) of the Facility Agreement that will occur as a result of the Shares Purchase;

 

(c)

the Lenders and the other Finance Parties agree to the Proposed Changes and each of the other consequential amendments to be made to the Facility Agreement and the other Finance Documents and certain other changes as set out in this Agreement;

 

(d)

the Lenders and the other Finance Parties agree that, with effect from the Effective Date:

 

(i)

the Existing Parent Guarantor shall be irrevocably and unconditionally released from all of its liabilities and obligations under the Facility Agreement and the other Finance Documents;

 

(ii)

the Acceding Parties shall be deemed to be Guarantors under the Facility Agreement in accordance with the terms of this Agreement and the Amended and Restated Facility Agreement; and

 

(iii)

the Facility Agreement shall be amended and restated in the manner set out in the Amended and Restated Facility Agreement.

 

(e)

The Acceding Parties each agree to be bound by the terms of the Amended and Restated Facility Agreement as a Guarantor, and by signing this Agreement each of the Acceding Parties undertakes to perform all liabilities and to make all payments and to comply with all other obligations under the Amended and Restated Facility Agreement as if named as a party to it as a Guarantor.

 

3

CONDITIONS precedent

 

3.1

Agreement of the Lenders and the other Finance Parties

 

The agreement of the Lenders, the other Finance Parties and the other Parties contained in Clause 2 (Consent, Waiver, Release and Accession) is subject to:

 

(a)

no Default or Event of Default would result from entry into this Agreement or the occurrence of the Effective Date;

 

(b)

no event which would result in a Material Adverse Effect has occurred or would result from entry into this Agreement or the occurrence of the Effective Date;

 

(c)

the SPA Closing Date having occurred;

 

(d)

the representations and warranties set out in clause 18 (Representations) of the Facility Agreement to be made by each of the Remaining Obligors and the Acceding Parties being true on each of the date of this Agreement and the Effective Date (provided that the representations made under clause 18.7 (Financial Statements; financial condition; undisclosed liabilities) of the Facility Agreement shall be made with reference to the latest financial statements provided by the Acceding Parties to the Facility Agent and as at the last day of the financial period in relation to which such financial statements relate);

 

  

(e)

no Change of Control having occurred on the date of this Agreement or the Effective Date (it being understood that neither the Share Purchase nor the Merger (as defined in the consent, supplemental and amendment letter dated 2 April 2018) constitute a Change of Control); and

 

(f)

the Facility Agent having received the following documents and evidence, in each case in form and substance satisfactory to the Facility Agent (acting reasonably) on or before the date of this Agreement or such later date as the Facility Agent may agree with the Borrower:

 

(i)

an original of this Agreement duly executed by the parties to it;

 

(ii)

a duly executed copy of the Share Purchase Agreement (and each document required to be delivered thereunder);

 

(iii)

a copy of the shares certificate and any other documents evidencing title to the Shares;

 

(iv)

a duly executed original of the Shares Security in respect of the Borrower (and each document required to be delivered thereunder);

 

(v)

a duly executed original of the control agreement regarding deposit accounts to be made between the New Parent Guarantor and the Account Bank together with each Account Security in respect of the Minimum Liquidity Account and the Debt Service Reserve Account (and each document required to be delivered thereunder);

 

(vi)

a duly executed original of each transfer form, irrevocable proxy and power of attorney and letter of resignation to be delivered by the Borrower under each Shares Security in respect of each Owner Guarantor;

 

(vii)

a duly executed original of each notice of assignment of insurances and notice of assignment of management agreement to be delivered by each Owner under each General Assignment in respect of each Ship;

 

(viii)

documents establishing that each Ship will, on and from the Effective Date, be managed technically by Wallem Shipmanagement Limited as Approved Technical Manager together with:

 

(A)

a duly executed original of a Manager’s Undertaking for Wallem Shipmanagement Limited as Approved Technical Manager of each Ship; and

 

(B)

a copy of the Document of Compliance for Wallem Shipmanagement Limited;

 

(ix)

a copy of each Ship’s Safety Management Certificate (together with any other details of the applicable Safety Management System which the Facility Agent requires) and of any other documents required under the ISM Code and the ISPS Code in relation to such Ship including without limitation an ISSC;

 

(x)

in respect of each Ship, a copy of the class certificate from an Approved Classification Society indicating that such Ship meets the criteria specified in clause 24.2 (flag of ships; citizenship; ship classification) of the Amended and Restated Facility Agreement;

 

  

(xi)

documentary evidence that each Ship will be insured in accordance with the provisions of the Amended and Restated Facility Agreement and all requirements in the Amended and Restated Facility Agreement in respect of Insurances will be complied with on and from the Effective Date;

 

(xii)

an opinion from an independent insurance consultant acceptable to the Facility Agent on such matters relating to the Insurances as the Facility Agent may reasonably require;

 

(xiii)

copies of the Constitutional Documents of each of the Remaining Obligors and the Acceding Parties in each case certified by an authorized signatory of such party as being a true, correct and complete copy thereof;

 

(xiv)

evidence that each of the Remaining Obligors and the Acceding Parties are in goodstanding in its respective jurisdiction of incorporation or formation;

 

(xv)

copies of resolutions of the directors and (if required) resolutions of shareholders of each of the Existing Parent Guarantor, the Remaining Obligors and the Acceding Parties, authorising the execution of this Agreement and any other Finance Document that is to be delivered pursuant hereto, in each case certified by an authorized signatory of such party as being a true, correct and complete copy thereof;

 

(xvi)

a copy of Sinosure’s written approval notice in respect of the transactions contemplated by this Agreement together with (i) any amendments to each Sinosure Insurance Policy and (ii) evidence in relation to the due authorisation and execution by Sinosure of each such amendment to such Sinosure Insurance Policy, in each case in form and substance satisfactory to the Lenders;

 

(xvii)

a copy of (A) the audited consolidated financial statement of the Holdings Guarantor for its fiscal year ended on 31 December 2017, (B) the unaudited consolidated financial statement of the Holdings Guarantor for its fiscal quarter ended on 31 March 2018 and (C) the opening balance sheet of the New Parent Guarantor;

 

(xviii)

such evidence as the Facility Agent and Sinosure may require for the Finance Parties to be able to satisfy each of their “know your customer” or similar identification procedures in relation to the transactions contemplated by this Agreement, the other Finance Documents and the Shares Purchase;

 

(xix)

favourable legal opinions from lawyers appointed by the Facility Agent on such matters concerning the laws of the Republic of the Marshall Islands, England, the PRC, New York and such other relevant jurisdictions as the Facility Agent may reasonably require;

 

(xx)

evidence that any process agent referred to in Clause 12.2 (Service of process) has accepted its appointment;

 

(xxi)

evidence of payment of all fees, costs and expenses incurred by the Finance Parties in connection with this Agreement which are due and payable by the Remaining Obligors, the Acceding Parties or the Existing Parent Guarantor on or before the Effective Date pursuant to the terms of the Finance Documents and for which an invoice has been received; and

 

  

(xxii)

a certified English translation in respect of any documents referred to above as may be required by the Facility Agent.

 

3.2

Effective Date Notice

 

On the day of satisfaction or waiver of the conditions precedent specified in Clause 3.1 (Agreement of the Lenders and the other Finance Parties) (it being agreed that the condition precedent set out in Clause 3.1(c) may not be waived without the consent of the Acceding Parties), the Effective Date Notice shall be completed and signed by the Facility Agent and the Facility Agent shall promptly on such day provide a copy of the Effective Date Notice to the Borrower, the Existing Parent Guarantor, the Acceding Parties and the Lenders.

 

4

representations and WARRANTIES

 

4.1

General

 

(a)

The Remaining Obligors and the Acceding Parties each make the representations and warranties set out in clause 18 (Representations) of the Facility Agreement, as amended and restated by this Agreement and updated with appropriate modifications to refer to this Agreement, to each Finance Party, by reference to the circumstances then existing on the date of this Agreement and on the Effective Date.

 

(b)

The Remaining Obligors and the Acceding Parties each make the representations and warranties set out in the Finance Documents (other than the Facility Agreement) to which it is a party, as amended and restated and/or supplemented by this Agreement and updated with appropriate modifications to refer to this Agreement, by reference to the circumstances then existing on the date of this Agreement and on the Effective Date.

 

4.2

Corporate Power and Authority; Legal Validity and Enforceability

 

The Remaining Obligors, the Acceding Parties and the Existing Parent Guarantor each make the following representations and warranties to each Finance Party on the date of this Agreement and (except in the case of the Existing Parent Guarantor) on the Effective Date:

 

(a)

it has the corporate or other applicable power and authority to execute this Agreement and to perform the terms and provisions of this Agreement and (except in the case of the Existing Parent Guarantor) the Amended and Restated Facility Agreement, and it has taken all necessary corporate or other applicable action to authorise the execution of this Agreement, and performance by it of this Agreement and (except in the case of the Existing Parent Guarantor) the Amended and Restated Facility Agreement.

 

(b)

it has duly executed this Agreement, and this Agreement and (except in the case of the Existing Parent Guarantor) the Amended and Restated Facility Agreement constitutes its legal, valid and binding obligations enforceable against it in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws generally affecting creditors’ rights and by equitable principles (regardless of whether enforcement is sought in equity or at law).

 

  

4.3

No Violation

 

Each of the Remaining Obligors, the Acceding Parties and the Existing Parent Guarantor represent and warrant that neither the execution of this Agreement, nor the performance or compliance by it with the terms and provisions hereof (or (except in the case of the Existing Parent Guarantor) with the terms and provisions of the Amended and Restated Facility Agreement), will:

 

(a)

contravene any material provision of any applicable law, statute, rule or regulation or any applicable order, judgment, writ, injunction or decree of any court or governmental instrumentality;

 

(b)

conflict with or result in any breach of any of the terms, covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of (or the obligation to create or impose) any Security (except Other Permitted Security) upon any of its material properties or assets pursuant to the terms of any indenture, mortgage, deed of trust, credit agreement or loan agreement, or any other material agreement, contract or instrument, to which it is a party or by which it or any of its material property or assets is bound or to which it may be subject; or

 

(c)

violate any provision of its Constitutional Documents.

 

5

amendment and restatement of Facility agreement and other finance documents

 

5.1

Specific amendments to Facility Agreement. Subject to Clause 3 (Conditions Precedent), with effect on and from the Effective Date, the Facility Agreement shall be, and shall be deemed by this Agreement to be, amended and restated in the form of the Amended and Restated Facility Agreement; and, as so amended and restated, the Facility Agreement shall continue to be binding on each of the parties to it in accordance with its terms as so amended and restated.

 

5.2

Amendments to Finance Documents. Subject to Clause 3 (Conditions Precedent), with effect on and from the Effective Date, each of the Finance Documents shall be, and shall be deemed by this Agreement to be, amended as follows:

 

(a)

the definition of, and references throughout each of the Finance Documents to, the Facility Agreement and any of the other Finance Documents shall be construed as if the same referred to the Facility Agreement and those Finance Documents as amended and restated or amended by this Agreement;

 

(b)

by construing references throughout each of the Finance Documents to “this Deed”, “this Agreement”, “hereunder” and other like expressions as if the same referred to such Finance Documents as amended by this Agreement;

 

(c)

by construing references throughout each of the Finance Documents to “Parent Guarantor” as being references to the New Parent Guarantor;

 

(d)

by construing references throughout each of the Finance Documents to “Obligors” as being references to the Borrower, the New Parent Guarantor, the Holdings Guarantor, each Owner Guarantor and each Hedge Guarantor or any one of them; and

 

(e)

by construing references throughout each of the Finance Documents to “Transaction Obligors” as being references to a Remaining Obligor, any Acceding Party, any Approved Manager or any other member of the Group who executes a Transaction Document.

 

  

5.3

Finance Documents to remain in full force and effect. The Finance Documents shall remain in full force and effect:

 

(a)

in the case of the Facility Agreement, as amended and restated pursuant to Clause 5.1 (Specific amendments to Facility Agreement); and

 

(b)

in the case of the other Finance Documents, as amended and supplemented:

 

(i)

by the amendments contained in Clause 5.2 (Amendments to Finance Documents); and

 

(ii)

by such further or consequential modifications as may be necessary to give full effect to the terms of this Agreement.

 

6

Further Assurance

 

Clause 21.34 (Further assurance) of the Facility Agreement applies to this Agreement as if it were expressly incorporated in it with any necessary modifications.

 

7

Fees, Costs and Expenses

 

The Borrower shall reimburse the Facility Agent on demand for (i) all fees as set out any Fee Letter (Second Amending and Restating Agreement) (as defined in the Amended and Restated Facility Agreement) and (ii) all other fees and costs and expenses (including reasonable legal fees, VAT and other disbursements) incurred by the Finance Parties in connection with or arising out of the negotiation, execution, operation or implementation of this Agreement and any other documents required in connection herewith.

 

8

Notices

 

Clause 38 (Notices) of the Amended and Restated Facility Agreement applies to this Agreement as if it were expressly incorporated herein with any necessary modifications.

 

9

Counterparts

 

This Agreement may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of this Agreement.

 

10

CONFIRMATION BY REMAINING OBLIGORS

 

Notwithstanding any of the provisions of this Agreement:

 

(a)

each of the Remaining Obligors hereby acknowledge and confirm that:

 

(i)

the terms and conditions of the Finance Documents to which they are a party continue to constitute its legal, binding and valid obligations enforceable in accordance with their terms (as amended and restated or amended by this Agreement); and

 

(ii)

save as expressly amended under this Agreement, the Facility Agreement and the other Finance Documents to which it is a party to, shall remain in full force and effect.

 

  

(b)

Each Owner Guarantor hereby acknowledges and confirms that the guarantee in clause 17 (Guarantee and Indemnity) of the Facility Agreement (as amended and restated or amended by this Agreement) remains in full force and effect.

 

11

Governing Law

 

This Agreement and any non-contractual obligations arising out of or in connection with it are governed by English law.

 

12

Enforcement

 

12.1

Jurisdiction

 

(a)

The courts of England have non-exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement (including a dispute regarding the existence, validity or termination of this Agreement or any non-contractual obligation arising out of or in connection with this Agreement) (a "Dispute").

 

(b)

Each of the Borrower, the Original Owner Guarantors, the Original Hedge Guarantors, the Existing Parent Guarantor and the Acceding Parties accept that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly no party will argue to the contrary.

 

(c)

This Clause 12.1 is for the benefit of the Secured Parties only. As a result, no Secured Party shall be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Secured Parties may take concurrent proceedings in any number of jurisdictions.

 

12.2

Service of process

 

(a)

Without prejudice to any other mode of service allowed under any relevant law:

 

(i)

prior to the Effective Date:

 

(A)

each of the Borrower, the Original Owner Guarantors, the Original Hedge Guarantors and the Existing Parent Guarantor irrevocably appoints Euronav (UK) Agencies Ltd. as its agent for service of process in relation to any proceedings before the English courts in connection with this Agreement; and

 

(B)

each of the Acceding Parties irrevocably appoints OSG Ship Management (UK) Ltd. as its agent for service of process in relation to any proceedings before the English courts in connection with this Agreement; and

 

(ii)

on and from the Effective Date:

 

(A)

the Existing Parent Guarantor irrevocably appoints Euronav (UK) Agencies Ltd. as its agent for service of process in relation to any proceedings before the English courts in connection with this Agreement; and

 

(B)

each of the Borrower, the Original Owner Guarantors, the Original Hedge Guarantors and the Acceding Parties irrevocably appoints OSG Ship Management (UK) Ltd. as its agent for service of process in relation to any proceedings before the English courts in connection with this Agreement; and

 

  

(iii)

each of the Borrower, the Original Owner Guarantors, the Original Hedge Guarantors, the Existing Parent Guarantor and the Acceding Parties agree that failure by a process agent to notify the relevant appointing party of the process will not invalidate the proceedings concerned.

 

(b)

If any person appointed as an agent for service of process is unable for any reason to act as agent for service of process, the Existing Parent Guarantor or Borrower (as the case may be) (on behalf of the Original Owner Guarantors, the Original Hedge and/or the Acceding Parties) must immediately (and in any event within five (5) days of such event taking place) appoint another agent on terms acceptable to the Facility Agent. Failing this, the Facility Agent may appoint another agent for this purpose.

 

This AGREEMENT has been duly executed as on the date stated at the beginning of this Agreement.

 

 

SCHEDULE 1

 

Part A

 

ORIGINAL OWNER GUARANTORS

AND ORIGINAL HEDGE GUARANTORS

 

 

Name of Original Owner Guarantor / Hedge Guarantor		Place of Incorporation or Formation		Registration number (or equivalent, if any)		Address for Communication
GENER8 STRENGTH LLC GENER8 SUPREME LLC GENER8 SUCCESS LLC GENER8 ANDRIOTIS LLC GENER8 CHIOTIS LLC GENER8 MILTIADES LLC		REPUBLIC OF MARSHALL ISLANDS		963430 963435 963434 963431 963432 963433		prior to the Effective Date:   c/o Euronav NV De Gerlachekaai 20 2000, Antwerp, Belgium   Attention: Egied Verbeeck, General Counsel An Goris, Secretary General   Fax: +32 (3) 247-4409 Email: [email protected]   on and from the Effective Date:   c/o International Seaways Ship Management LLC, 600 Third Avenue, 39th Floor, New York, New York 10016 Attention: President Telephone: 212-953-4100 Fax: 212-578-1881 Email: [email protected] [email protected]

 

  

Part B

 

Original Lenders

 

Name of Commercial Lender		Address for Communication
CITIBANK, N.A., LONDON BRANCH		Citibank N.A., London Branch, Citigroup Centre, Canada Square, London, E14 5LB c/o Citibank International Limited, Poland Branch 7/9 Traugutta str., 1st Floor 00-985 Warsaw, Poland Attention: Loan Operations Department (Kara Catt / Romina Coates – EAF Middle Office) Telephone: +44 207986 4881 Facsimile: +44 207 655 2380 E-mail: [email protected]   With a copy to:   388 Greenwich Street, New York, NY, 10013 Attention: Meghan O’Connor Telephone: +1 212 816 8557 Facsimile: N/A E-mail: [email protected]
THE EXPORT-IMPORT BANK OF CHINA		No. 30 Fu Xing Men Nei St., Xicheng District Beijing, China, 100031 Attention: Transport Finance Department (Song Xiaofei / Gao Youzi) Telephone: +86 10 63693162/83579500 Facsimile:+86 10 83578428/9 Email: [email protected] / [email protected]
BANK OF CHINA, NEW YORK BRANCH		Bank of China, New York Branch 410 Madison Avenue New York, NY 10017 Attention: Operation Service Department  (Ms. Wenzhen Zhang) Telephone: +1 646 231 3143 Facsimile: +1 212 371 4185 E-mail: [email protected] [email protected]

 

  

Part C

 

HEDGE COUNterparties

 

Name of Hedge Counterparties		Address for Communication
CITIBANK, N.A., LONDON BRANCH		Citibank N.A., London Branch, Citigroup Centre, Canada Square, London, E14 5LB c/o Citibank International Limited, Poland Branch 7/9 Traugutta str., 1st Floor 00-985 Warsaw, Poland Attention: Loan Operations Department (Kara Catt / Romina Coates – EAF Middle Office) Telephone: +44 207986 4881 Facsimile: +44 207 655 2380 E-mail: [email protected]   With a copy to:   388 Greenwich Street, New York, NY, 10013 Attention: Meghan O’Connor Telephone: +1 212 816 8557 Facsimile: N/A E-mail: [email protected]

 

 

EXECUTION PAGES

 

SIGNED FOR AND ON BEHALF OF
GENER8 MARITIME SUBSIDIARY VII INC.,
as Borrower
/s/ Sophia Agathis
Name: Sophia Agathis
Title: Attorney-in-fact
SIGNED FOR AND ON BEHALF OF
GENER8 STRENGTH LLC,
as Original Owner Guarantor and Original Hedge Guarantor
/s/ Sophia Agathis
Name: Sophia Agathis
Title: Attorney-in-fact
SIGNED FOR AND ON BEHALF OF
GENER8 SUPREME LLC,
as Original Owner Guarantor and Original Hedge Guarantor
/s/ Sophia Agathis
Name: Sophia Agathis
Title: Attorney-in-fact
SIGNED FOR AND ON BEHALF OF
GENER8 SUCCESS LLC,
as Original Owner Guarantor and Original Hedge Guarantor
/s/ Sophia Agathis
Name: Sophia Agathis
Title: Attorney-in-fact

 

  

SIGNED FOR AND ON BEHALF OF
GENER8 ANDRIOTIS LLC,
as Original Owner Guarantor and Original Hedge Guarantor
/s/ Sophia Agathis
Name: Sophia Agathis
Title: Attorney-in-fact
SIGNED FOR AND ON BEHALF OF
GENER8 CHIOTIS LLC,
as Original Owner Guarantor and Original Hedge Guarantor
/s/ Sophia Agathis
Name: Sophia Agathis
Title: Attorney-in-fact
SIGNED FOR AND ON BEHALF OF
GENER8 MILTIADES LLC,
as Original Owner Guarantor and Original Hedge Guarantor
/s/ Sophia Agathis
Name: Sophia Agathis
Title: Attorney-in-fact
SIGNED FOR AND ON BEHALF OF
GENER8 MARITIME, INC,
as Existing Parent Guarantor
/s/ Sophia Agathis
Name: Sophia Agathis
Title: Attorney-in-fact

 

  

SIGNED FOR AND ON BEHALF OF
SEAWAYS HOLDING CORPORATION,
as New Parent Guarantor
/s/ Lois K. Zabrocky
Name: Lois K. Zabrocky
Title: President
SIGNED FOR AND ON BEHALF OF
INTERNATIONAL SEAWAYS, INC.,
as Holdings Guarantor
/s/ Lois K. Zabrocky
Name: Lois K. Zabrocky
Title: President and CBO
SIGNED FOR AND ON BEHALF OF
CITIBANK, N.A.,
as Global Co-ordinator
/s/ Meghan O’Connor
Name: Meghan O’Connor
Title: Vice President
SIGNED FOR AND ON BEHALF OF
NORDEA BANK AB (PUBL), New York BRANCH,
as Global Co-ordinator
Name:
Title:
Name:
Title:

 

  

signed FOR AND ON BEHALF OF
CITIBANK, N.A.,
as Bookrunner
/s/ Meghan O’Connor
Name: Meghan O’Connor
Title: Vice President
SIGNED FOR AND ON BEHALF OF
CITIBANK, N.A.,
as Global Co-ordinator
Name:
Title:
SIGNED FOR AND ON BEHALF OF
NORDEA BANK AB (PUBL), New York BRANCH,
as Global Co-ordinator
/s/ Erik Havnvik
Name: Erik Havnvik
Title: Director
/s/ Martin Lunder
Name: Martin Lunder
Title: Managing Director
signed FOR AND ON BEHALF OF
CITIBANK, N.A.,
as Bookrunner
Name:
Title:

 

  

signed FOR AND ON BEHALF OF
CITIBANK, N.A.,
as Mandated Lead Arranger
/s/ Meghan O’Connor
Name: Meghan O’Connor
Title: Vice President
signed FOR AND ON BEHALF OF
THE EXPORT-IMPORT BANK OF CHINA,
as Mandated Lead Arranger
/s/ Erik Havnvik
Name: Erik Havnvik
Title:Director
signed FOR AND ON BEHALF OF
BANK OF CHINA, new york branch,
as Mandated Lead Arranger
Name:
Title:
signed FOR AND ON BEHALF OF
CITIBANK, N.A.,
as Mandated Lead Arranger
Name:
Title:

 

  

signed FOR AND ON BEHALF OF
THE EXPORT-IMPORT BANK OF CHINA,
as Mandated Lead Arranger
/s/ Gao Zeteng
Name: Gao Zeteng
Title: Deputy General Manager
signed FOR AND ON BEHALF OF
BANK OF CHINA, new york branch,
as Mandated Lead Arranger
Name:
Title:
signed FOR AND ON BEHALF OF
CITIBANK, N.A.,
as Mandated Lead Arranger
Name:
Title:
signed FOR AND ON BEHALF OF
THE EXPORT-IMPORT BANK OF CHINA,
as Mandated Lead Arranger
Name:
Title:

 

  

signed FOR AND ON BEHALF OF
BANK OF CHINA, new york branch,
as Mandated Lead Arranger
/s/ Raymond Qiao
Name: Raymond Qiao
Title: Executive Vice President
SIGNED FOR AND ON BEHALF OF
CITIBANK, N.A., LONDON BRANCH,
as Original Lender
/s/ Meghan O’Connor
Name: Meghan O’Connor
Title: Vice President
SIGNED FOR AND ON BEHALF OF
THE EXPORT-IMPORT BANK OF CHINA,
as Original Lender
Name:
Title:
SIGNED FOR AND ON BEHALF OF
BANK OF CHINA, NEW YORK BRANCH,
as Original Lender
Name:
Title:
SIGNED FOR AND ON BEHALF OF
CITIBANK, N.A., LONDON BRANCH,
as Original Lender
Name:
Title:

 

  

SIGNED FOR AND ON BEHALF OF
THE EXPORT-IMPORT BANK OF CHINA,
as Original Lender
/s/ Gao Zetang
Name: Gao Zetang
Title: Deputy General Manager
SIGNED FOR AND ON BEHALF OF
BANK OF CHINA, NEW YORK BRANCH,
as Original Lender
Name:
Title:
signed FOR AND ON BEHALF OF
CITIBANK, N.A.,
as Mandated Lead Arranger
Name:
Title:
signed FOR AND ON BEHALF OF
THE EXPORT-IMPORT BANK OF CHINA,
as Mandated Lead Arranger
Name:
Title:

 

 

signed FOR AND ON BEHALF OF
BANK OF CHINA, new york branch,
as Mandated Lead Arranger
/s/ Raymond Qiao
Name: Raymond Qiao
Title: Exective Vice President
SIGNED FOR AND ON BEHALF OF
CITIBANK, N.A., LONDON BRANCH,
as Hedge Counterparty
/s/ Meghan O’Connor
Name: Meghan O’Connor
Title: Vice President
SIGNED FOR AND ON BEHALF OF
CITIBANK, N.A., LONDON BRANCH,
as ECA Co-ordinator and ECA Agent
/s/ Meghan O’Connor
Name: Meghan O’Connor
Title: Vice President
SIGNED FOR AND ON BEHALF OF
NORDEA BANK AB (PUBL), NEW YORK BRANCH,
as Facility Agent
/s/ Erik Havnvik
Name: Erik Havnvik
Title: Director
/s/ Martin Lunder
Name: Martin Lunder
Title: Managing Director

 

  

SIGNED FOR AND ON BEHALF OF
NORDEA BANK AB (PUBL), NEW YORK BRANCH,
as Security Agent
/s/ Erik Havnvik
Name: Erik Havnvik
Title: Director
/s/ Martin Lunder
Name: Martin Lunder
Title: Managing Director

 

 

 

 

Exhibit 10.5

 

Execution Version

 

SECOND AMENDMENT TO CREDIT AGREEMENT

 

This SECOND AMENDMENT to the Credit Agreement referred to below, dated as of June 14, 2018 (this “Second Amendment”), by and among International Seaways, Inc., a Marshall Islands corporation (“Holdings”), International Seaways Operating Corporation, a Marshall Islands corporation (the “Administrative Borrower”), OIN Delaware LLC, a Delaware limited liability company (the “Co-Borrower” and, together with the Administrative Borrower, the “Borrowers”), the other Guarantors (as defined in the Credit Agreement referred to below) party hereto, the Lenders (as defined in the Credit Agreement referred to below) party hereto, and Jefferies Finance LLC, as administrative agent (in such capacity, the “Administrative Agent”) for the Lenders. Capitalized terms used herein but not otherwise defined in this Second Amendment have the same meanings as specified in the Credit Agreement referenced below, as amended by this Second Amendment.

 

RECITALS

 

WHEREAS, the Borrowers, Holdings, the other Guarantors from time to time party thereto, the several Lenders from time to time party thereto, the Administrative Agent and the other parties thereto have entered into that certain Credit Agreement, dated as of June 22, 2017 (as amended, restated, supplemented or otherwise modified prior to the date hereof, including pursuant to that certain First Amendment to Credit Agreement, dated as of July 24, 2017, the “Credit Agreement”); and

 

WHEREAS, the Borrowers, Holdings, the other Guarantors, each Lender party hereto and the Administrative Agent have agreed to amend the Credit Agreement as hereinafter set forth;

 

NOW, THEREFORE, in consideration of the covenants and agreements contained herein, as well as other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

SECTION 1.          Amendments to Credit Agreement. The Credit Agreement is, effective as of the Second Amendment Effective Date, and subject to the satisfaction of the conditions precedent set forth in Section 3 below, hereby amended by (i) deleting the stricken text (indicated textually in the same manner as the following example: stricken text), and (ii) adding the double underlined text (indicated textually in the same manner as the following example: double-underlined text) as set forth in the amended Credit Agreement attached hereto as Exhibit A.

 

SECTION 2.          Representations and Warranties. In order to induce the Lenders party hereto to enter into this Second Amendment and to amend the Credit Agreement in the manner provided herein, each Loan Party hereby represents and warrants that:

 

(a)          the representations and warranties set forth in Article III of the Credit Agreement and in each other Loan Document shall be true and correct in all material respects (or true and correct in all respects in the case of representations and warranties qualified by materiality or Material Adverse Effect) on and as of the Second Amendment Effective Date with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct in all material respects (or true and correct in all respects in the case of representations and warranties qualified by materiality or Material Adverse Effect) on and as of such earlier date).

 

(b)          both before and after giving effect to this Second Amendment, no Default or Event of Default shall have occurred and be continuing; and

 

  

(c)          this Second Amendment has been duly authorized, executed and delivered by each Loan Party party hereto and each of this Second Amendment and the Credit Agreement, as amended hereby, constitutes a legal, valid and binding obligation, enforceable against each Loan Party in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

 

SECTION 3.          Conditions of Effectiveness. The effectiveness of this Second Amendment (including the amendments contained in Section 1 hereof) are subject to the satisfaction of the following conditions (the date of satisfaction of such conditions being referred to herein as the “Second Amendment Effective Date”):

 

(a)          this Second Amendment shall have been duly executed by the Borrowers, Holdings, each other Guarantor, the Lenders constituting the Required Lenders (calculated immediately prior to the making of the Second Amendment Prepayment described below) and the Administrative Agent (which may include a copy transmitted by facsimile or PDF or other electronic method), and delivered to the Administrative Agent;

 

(b)          (i) prior to the Second Amendment Effective Date the Borrowers shall have made a Discounted Prepayment Offer to prepay (the “Second Amendment Prepayment Offer” and the principal amount of such Second Amendment Prepayment Offer being the “Second Amendment Prepayment Offer Amount”) Term Loans in an aggregate principal amount of not less than $60,000,000 in connection with the effectiveness of this Second Amendment in accordance with Section 2.22 of the Credit Agreement (as amended hereby), together with a premium equal to 1.00% of the aggregate principal amount of Terms Loan so prepaid (the “Second Amendment Prepayment Premium”), and shall have specified a settlement date for such Second Amendment Prepayment Offer of not later than the Second Amendment Effective Date and (ii) on or prior to the Second Amendment Effective Date, the Borrowers shall have settled the Second Amendment Prepayment Offer in accordance with Section 2.22 of the Credit Agreement (as amended hereby) and prepaid (or shall prepay substantially concurrently with the effectiveness of this Second Amendment) at an amount not less than the principal amount of Term Loans of all Lenders accepting such Second Amendment Prepayment Offer in an aggregate principal amount not exceeding the Second Amendment Prepayment Offer Amount (such settlement and prepayment, the “Second Amendment Prepayment”), the Second Amendment Prepayment Premium on such prepaid Term Loans and all accrued and unpaid interest, if any, on such prepaid Term Loans up to the settlement date of such prepayment, which Second Amendment Prepayment and the payment of such Second Amendment Prepayment Premium and of accrued and unpaid interest relating thereto may be funded with the cash proceeds of the Permitted Holdings Unsecured Second Amendment Debt;

 

(c)          the Borrowers shall have paid (or shall pay substantially concurrently with the effectiveness of this Second Amendment), by wire transfer of immediately available funds, to the Administrative Agent, for the benefit of each Lender that executes a counterpart hereof and delivers a copy of same to the Administrative Agent by no later than 12:00 noon, New York City time, on May 9, 2018, a consent fee in an amount equal to 1.00% of the aggregate principal amount of all Term Loans held by each such Lender on the Second Amendment Effective Date (but, for this purpose, calculated immediately after giving effect to the Second Amendment Prepayment (to the extent accepted by the respective Lenders) that is to occur substantially concurrently with the occurrence of the Second Amendment Effective Date), it being understood and agreed that the consent fee described in this clause (c) shall only be payable if the Second Amendment Effective Date occurs;

 

  

(d)          the Borrowers shall have paid all other costs, fees, expenses and other amounts due and payable pursuant to the Loan Documents and any other fee due and payable to the Administrative Agent or any affiliate thereof as may have been separately agreed to by the Borrowers and the Administrative Agent or such affiliate in connection with this Second Amendment, including the reasonable fees and expenses of White & Case LLP;

 

(e)          the Administrative Agent and the Mortgage Trustee shall have received, in each case in form and substance reasonably satisfactory to the Administrative Agent and the Mortgage Trustee, an amendment to each Collateral Vessel Mortgage duly executed by the owner of the relevant Collateral Vessel giving effect to this Second Amendment, and evidence that such amendment has been duly recorded in accordance with the laws of the Applicable Flag Jurisdiction;

 

(f)          (i) all representations and warranties set forth in Section 2 of this Second Amendment shall be true and correct in all material respects (or true and correct in all respects in the case of representations and warranties qualified by materiality or Material Adverse Effect) on and as of the Second Amendment Effective Date with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct in all material respects (or true and correct in all respects in the case of representations and warranties qualified by materiality or Material Adverse Effect) on and as of such earlier date), (ii) no Default shall have occurred and be continuing or would occur after giving effect to this Second Amendment, and (iii) the Administrative Agent shall have received an Officer’s Certificate of the Administrative Borrower, dated the Second Amendment Effective Date, certifying compliance with the preceding clauses (i) and (ii);

 

(g)          Holdings shall have incurred or issued at least $50,000,000 in Permitted Holdings Unsecured Second Amendment Debt and shall have contributed the Net Cash Proceeds from the first $50,000,000 of such incurrence or issuance to the Administrative Borrower as a cash common equity contribution; and

 

(h) simultaneously with the effectiveness of this Second Amendment, the supplemental agreement to the Sinosure Agreement and the related amending and restating deed, in each case necessary to permit the SPV VLCC Transactions, shall be effective.

 

SECTION 4.          Effects on Loan Documents.

 

(a)          Except as specifically amended herein or contemplated hereby, all Loan Documents shall continue to be in full force and effect and are hereby in all respects ratified and confirmed.

 

(b)          The execution, delivery and effectiveness of this Second Amendment shall not operate as a waiver of any right, power or remedy of any Lender or any Agent under any of the Loan Documents, nor constitute a waiver of any provision of the Loan Documents or in any way limit, impair or otherwise affect the rights and remedies of the Lenders or any Agent under the Loan Documents.

 

  

(c)          (i) Each Loan Party acknowledges and agrees that, on and after the Second Amendment Effective Date, this Second Amendment shall constitute a Loan Document for all purposes of the Credit Agreement (as amended by this Second Amendment) and (ii) each Loan Party hereby (A) agrees that all Obligations shall be guaranteed pursuant to the Guarantees in accordance with the terms and provisions thereof and shall be secured pursuant to the Security Documents in accordance with the terms and provisions thereof, and that, notwithstanding the effectiveness of this Second Amendment, on and after the Second Amendment Effective Date, the Guarantees and the Liens created pursuant to the Security Documents for the benefit of the Secured Parties continue to be in full force and effect on a continuous basis and (B) affirms, acknowledges and confirms all of its obligations and liabilities under the Credit Agreement and each other Loan Document to which it is a party, in each case after giving effect to this Second Amendment, all as provided in such Loan Documents, and acknowledges and agrees that such obligations and liabilities continue in full force and effect on a continuous basis in respect of, and to secure, the Obligations under the Credit Agreement and the other Loan Documents, in each case after giving effect to this Second Amendment.

 

(d)          On and after the Second Amendment Effective Date, each reference in the Credit Agreement (as amended by this Second Amendment) to “this Agreement”, “hereunder”, “hereof”, “herein” or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to “Credit Agreement”, “thereunder”, “thereof” or words of like import referring to the Credit Agreement shall mean and be a reference to the Credit Agreement as amended by this Second Amendment, and this Second Amendment and the Credit Agreement as amended by this Second Amendment shall be read together and construed as a single instrument.

 

(e)          Nothing herein shall be deemed to entitle the Borrowers, Holdings nor the other Guarantors to a further consent to, or a further waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement as amended by this Second Amendment or any other Loan Document in similar or different circumstances.

 

SECTION 5.          Expense Reimbursement and Indemnification. Each Borrower hereby confirms that the expense reimbursement and indemnification provisions set forth in Section 11.03 of the Credit Agreement as amended by this Second Amendment shall apply to this Second Amendment and the transactions contemplated hereby.

 

SECTION 6.          Amendments; Severability.

 

(a)          This Second Amendment, (i) prior to the Second Amendment Effective Date, may not be amended except by an instrument in writing signed by the Loan Parties, the Administrative Agent and the Lenders and (ii) after the Second Amendment Effective Date, may not be amended nor may any provision hereof be waived except in accordance with the provisions of Section 11.02 of the Credit Agreement.

 

(b)          To the extent any provision of this Second Amendment is prohibited by or invalid under the applicable law of any jurisdiction, such provision shall be ineffective only to the extent of such prohibition or invalidity and only in such jurisdiction, without prohibiting or invalidating such provision in any other jurisdiction or the remaining provisions of this Second Amendment in any jurisdiction.

 

SECTION 7.          Governing Law; Waiver of Jury Trial; Jurisdiction. THIS SECOND AMENDMENT AND ANY CLAIMS, CONTROVERSY, DISPUTE OR CAUSE OF ACTION (WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE) BASED UPON, ARISING OUT OF OR RELATING TO THIS SECOND AMENDMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAW OF THE STATE OF NEW YORK. The provisions of Sections 11.09(b), 11.09(c), 11.09(d) and 11.10 of the Credit Agreement as amended by this Second Amendment are incorporated herein by reference, mutatis mutandis.

 

SECTION 8.          Headings. Section headings in Second Amendment are included herein for convenience of reference only, are not part of this Second Amendment and are not to affect the construction of, or to be taken into consideration in interpreting, this Second Amendment.

 

  

SECTION 9.          Counterparts. This Second Amendment may be executed by one or more of the parties hereto on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Signatures delivered by facsimile or PDF or other electronic means shall have the same force and effect as manual signatures delivered in person.

 

[Remainder of page intentionally left blank.]

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to be duly executed and delivered by their respective proper and duly authorized officers as of the day and year first above written.

 

	HOLDINGS:
	INTERNATIONAL SEAWAYS, INC.
	By:	/s/ Lois K. Zabrocky
		Name: Lois K. Zabrocky
		Title:   President and Chief Executive Officer
	BORROWERS:
	INTERNATIONAL SEAWAYS OPERATING CORPORATION
	By:	/s/ Lois K. Zabrocky
		Name: Lois K. Zabrocky
		Title:   President
	OIN DELAWARE LLC
	By:	/s/ Lois K. Zabrocky
		Name: Lois K. Zabrocky
		Title:   Manager

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

	GUARANTORS:
	1372 TANKER CORPORATION
	AFRICA TANKER CORPORATION
	ALCESMAR LIMITED
	ALCMAR LIMITED
	AMALIA PRODUCT CORPORATION
	AMBERMAR PRODUCT CARRIER CORPORATION
	ANDROMAR LIMITED
	ANTIGMAR LIMITED
	ARIADMAR LIMITED
	ATALMAR LIMITED
	ATHENS PRODUCT TANKER CORPORATION
	AURORA SHIPPING CORPORATION
	BATANGAS TANKER CORPORATION
	CABO HELLAS LIMITED
	CABO SOUNION LIMITED
	CARIBBEAN TANKER CORPORATION
	CARL PRODUCT CORPORATION
	CONCEPT TANKER CORPORATION
	DELTA AFRAMAX CORPORATION
	EIGHTH AFRAMAX TANKER
	CORPORATION
	EPSILON AFRAMAX CORPORATION,
	FIRST UNION TANKER CORPORATION
	FRONT PRESIDENT INC.
	GOLDMAR LIMITED
	HATTERAS TANKER CORPORATION
	JADEMAR LIMITED
	KATSURA TANKER CORPORATION
	KIMOLOS TANKER CORPORATION
	KYTHNOS CHARTERING CORPORATION
	LEYTE PRODUCT TANKER CORPORATION
	LUXMAR PRODUCT TANKER CORPORATION
	MAJESTIC TANKERS CORPORATION
	MAPLE TANKER CORPORATION
	MAREMAR PRODUCT TANKER CORPORATION
	MILOS PRODUCT TANKER CORPORATION
	MINDANAO TANKER CORPORATION
	By:	/s/ Lois K. Zabrocky
		Name: Lois K. Zabrocky
		Title:   President

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

 

	MONTAUK TANKER CORPORATION
	OAK TANKER CORPORATION
	OCEANIA TANKER CORPORATION
	OIN CHARTERING, INC.
	OSG CLEAN PRODUCTS INTERNATIONAL, INC.
	OVERSEAS SHIPPING (GR) LTD.
	PEARLMAR LIMITED
	PETROMAR LIMITED
	REYMAR LIMITED
	RICH TANKER CORPORATION
	ROSALYN TANKER CORPORATION
	ROSEMAR LIMITED
	RUBYMAR LIMITED
	SAKURA TRANSPORT CORP.
	SAMAR PRODUCT TANKER CORPORATION
	SERIFOS TANKER CORPORATION
	SEVENTH AFRAMAX TANKER CORPORATION
	SHIRLEY AFRAMAX CORPORATION
	SIFNOS TANKER CORPORATION
	SILVERMAR LIMITED
	SIXTH AFRAMAX TANKER CORPORATION
	SKOPELOS PRODUCT TANKER CORPORATION
	STAR CHARTERING CORPORATION
	THIRD UNITED SHIPPING CORPORATION
	TOKYO TRANSPORT CORP.
	URBAN TANKER CORPORATION
	VIEW TANKER CORPORATION
	By:	/s/ Lois K. Zabrocky
		Name: Lois K. Zabrocky
		Title:   President
	INTERNATIONAL SEAWAYS SHIP MANAGEMENT LLC
	By:	/s/ Lois K. Zabrocky
		Name: Lois K. Zabrocky
		Title:   President, Chief Executive Officer and Manager
	LIGHTERING LLC
	By:	/s/ Lois K. Zabrocky
		Name: Lois K. Zabrocky
		Title:   Senior Vice President and Manager

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	OSG SHIP MANAGEMENT (UK) LTD.
	By:	/s/ Lois K. Zabrocky
		Name: Lois K. Zabrocky
		Title:   Director
	JEFFERIES FINANCE LLC, as Administrative Agent and as a Lender
	By:	/s/ J.R. Young
		Name: J.R. Young
		Title:   Senior Vice President

 

	APEX CREDIT CLO 2018 LTD., as Lender
	By:	/s/ Andrew Stern
		Name:	Andrew Stern
		Title:	Managing Director
	APEX CREDIT CLO 2015-II LTD., as Lender
	By: Apex Credit Partners, its Asset Manager
	By:	/s/ Andrew Stern
		Name:	Andrew Stern
		Title:	Managing Director
	APEX CREDIT CLO 2016 LTD., as Lender
	By:	Apex Credit Partners, its Asset Manager
	By:	/s/ Andrew Stern
		Name:	Andrew Stern
		Title:	Managing Director

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

 

	APEX CREDIT CLO 2017 LTD., as Lender
	By: Apex Credit Partners, its Asset Manager
	By:	/s/ Andrew Stern
		Name:	Andrew Stern
		Title:	Managing Director
	APEX CREDIT CLO 2017-II LTD., as Lender
	By:	Credit Partners LLC
	By:	/s/ Andrew Stern
		Name:	Andrew Stern
		Title:	Managing Director
	ATRIUM IX, as Lender
	By:	Credit Suisse Asset Management, LLC, as Portfolio Manager
	By:	/s/ Louis Farano
		Name:	Louis Farano
		Title:	Managing Director
	ATRIUM VIII, as Lender
	By:	Credit Suisse Asset Management, LLC, as Portfolio Manager
	By:	/s/ Louis Farano
		Name:	Louis Farano
		Title:	Managing Director

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

 

	ATRIUM XI, as Lender
	By:	Credit Suisse Asset Management, LLC, as Portfolio Manager
	By:	/s/ Louis Farano
		Name:	Louis Farano
		Title:	Managing Director
	ATRIUM XII, as Lender
	By:	Credit Suisse Asset Management, LLC, as Portfolio Manager
	By:	/s/ Louis Farano
		Name:	Louis Farano
		Title:	Managing Director

  

	ATRIUM XIII, as Lender
	By:	Credit Suisse Asset Management, LLC, as Portfolio Manager
	By:	/s/ Louis Farano
		Name:	Louis Farano
		Title:	Managing Director
	BENEFIT STRET PARTNERS CLO II, LTD., as Lender
	By:	/s/ Todd Marsh
		Name:	Todd Marsh
		Title:	Authorized Signer

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

 

	BENEFIT STRET PARTNERS CLO V, LTD., as Lender
	By:	/s/ Todd Marsh
		Name:	Todd Marsh
		Title:	Authorized Signer
	BENEFIT STRET PARTNERS CLO VI, LTD., as Lender
	By:	/s/ Todd Marsh
		Name:	Todd Marsh
		Title:	Authorized Signer
	BENEFIT STRET PARTNERS CLO VII, LTD., as Lender
	By:	/s/ Todd Marsh
		Name:	Todd Marsh
		Title:	Authorized Signer
	BENEFIT STRET PARTNERS CLO VIII, LTD., as Lender
	By:	/s/ Todd Marsh
		Name:	Todd Marsh
		Title:	Authorized Signer

 

	BENEFIT STRET PARTNERS CLO X, LTD., as Lender
	By:	/s/ Todd Marsh
		Name:	Todd Marsh
		Title:	Authorized Signer

 

	BENEFIT STRET PARTNERS CLO XI, LTD., as Lender
	By:	/s/ Todd Marsh
		Name:	Todd Marsh
		Title:	Authorized Signer

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

 

	BENEFIT STRET PARTNERS CLO XIV, LTD., as Lender
	By:	/s/ Todd Marsh
		Name:	Todd Marsh
		Title:	Authorized Signer
	BLACK DIAMOND CLO 2013-1 LTD., as Lender
	By:	Black Diamond CLO 2013-1 Adviser, L.L.C. as its Collateral Manager
	By:	/s/ Stephen H. Deckoff
		Name:	Stephen H. Deckoff
		Title:	Managing Principal
	BLACK DIAMOND CLO 2014-1 LTD., as Lender
	By:	Black Diamond CLO 2014-1 Adviser, L.L.C. as its Collateral Manager
	By:	/s/ Stephen H. Deckoff
		Name:	Stephen H. Deckoff
		Title:	Managing Principal
	BLACK DIAMOND CLO 2015-1 DESIGNATED ACTIVITY COMPANY, as Lender
	By:	Black Diamond CLO 2015-1 Adviser, L.L.C. as its Collateral Manager
	By:	/s/ Stephen H. Deckoff
		Name:	Stephen H. Deckoff
		Title:	Managing Principal

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	BLACK DIAMOND CLO 2016-1 LTD., as Lender
	By:	Black Diamond CLO 2016-1 Adviser, L.L.C. as its Collateral Manager
	By:	/s/ Stephen H. Deckoff
		Name:	Stephen H. Deckoff
		Title:	Managing Principal
	BLACK DIAMOND CLO 2017-1 LTD., as Lender
	By:	Black Diamond CLO 2017-1 Adviser, L.L.C. as its Collateral Manager
	By:	/s/ Stephen H. Deckoff
		Name:	Stephen H. Deckoff
		Title:	Managing Principal

 

	BLACK DIAMOND CLO 2017-2 DESIGNATED ACTIVITY COMPANY, as Lender
	By:	Black Diamond CLO 2017-2 Adviser, L.L.C. as its Collateral Manager
	By:	/s/ Stephen H. Deckoff
		Name:	Stephen H. Deckoff
		Title:	Managing Principal
	BLUE CROSS OF IDAHO HEALTH SERVICE, INC., as Lender
	By:	Seix Investment Advisors LLC, as Investment Manager
	By:	/s/ George Goudelias
		Name:	George Goudelias
		Title:	Managing Principal

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	CALIFORNIA STATE TEACHERS’ RETIREMENT SYSTEM, as Lender
	By:	Credit Suisse Asset Management, LLC, as investment manager
	By:	/s/ Louis Farano
		Name:	Louis Farano
		Title:	Managing Principal

 

	CANYON CAPITAL CLO 2012-1, LTD., as Lender
	BY:	Canyon Capital Advisors LLC, its Collateral Manager
	By:	/s/ Jonathan M. Kaplan
		Name:	Jonathan M. Kaplan
		Title:	Authorized Signatory
	CANYON CAPITAL CLO 2014-1, LTD., as Lender
	BY:	Canyon Capital Advisors LLC, its Collateral Manager
	By:	/s/ Jonathan M. Kaplan
		Name:	Jonathan M. Kaplan
		Title:	Authorized Signatory
	CANYON CAPITAL CLO 2014-2, LTD., as Lender
	By:	Canyon Capital Advisors LLC, its Collateral Manager
	By:	/s/ Jonathan M. Kaplan
		Name:	Jonathan M. Kaplan
		Title:	Authorized Signatory

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	CANYON CAPITAL CLO 2015-1, LTD., as Lender
	By:	Canyon Capital Advisors LLC, its Collateral Manager
	By:	/s/ Jonathan M. Kaplan
		Name:	Jonathan M. Kaplan
		Title:	Authorized Signatory
	CANYON CAPITAL CLO 2016-1, LTD., as Lender
	By:	Canyon CLO Advisors LLC, its Collateral Manager
	By:	/s/ Jonathan M. Kaplan
		Name:	Jonathan M. Kaplan
		Title:	Authorized Signatory

 

	CANYON CAPITAL CLO 2016-2, LTD., as Lender
	By:	Canyon CLO Advisors LLC, its Collateral Manager
	By:	/s/ Jonathan M. Kaplan
		Name:	Jonathan M. Kaplan
		Title:	Authorized Signatory

 

	CANYON CAPITAL CLO 2017-1, LTD., as Lender
	By:	Canyon CLO Advisors LLC, its Collateral Manager
	By:	/s/ Jonathan M. Kaplan
		Name:	Jonathan M. Kaplan
		Title:	Authorized Signatory

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	CITI LOAN FUNDING BR 534 LLC, as Lender
	By:	Citibank, N.A.
	By:	/s/ Cynthia Gonzalvo
		Name:	Cynthia Gonzalvo
		Title:	Associate Director
	CITI LOAN FUNDING BR MUST LLC, as Lender
	By:	Citibank, N.A.
	By:	/s/ Cynthia Gonzalvo
		Name:	Cynthia Gonzalvo
		Title:	Associate Director
	BCA LOAN FUNDING LLC, as Lender
	By:	Citibank, N.A.
	By:	/s/ Cynthia Gonzalvo
		Name:	Cynthia Gonzalvo
		Title:	Associate Director

 

	CITY NATIONAL ROCHDALE FIXED INCOME OPPORTUNITIES FUND, as Lender
	By:	Seix Investment Advisors LLC, as Subadviser
	By:	/s/ George Goudelias
		Name:	George Goudelias
		Title:	Managing Director

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	CORBIN OPPORTUNITY FUNDS, L.P., as Lender
	By:	Corbin Capital Partner, L.P., its investment manager
	By:	/s/ Daniel Friedman
		Name:	Daniel Friedman
		Title:	General Counsel

 

	GLENDON OPPORTUNITIES FUND, LP, as Lender
	By:	/s/ Brian Lanktree
		Name:	Brian Lanktree
		Title:	Principal & Head Trader, Glendon Capital Management, LP

 

	ALTAIR GLOBAL CREDIT OPPORTUNITIES FUND (A), LLC, as Lender
	By:	/s/ Brian Lanktree
		Name:	Brian Lanktree
		Title:	Principal & Head Trader, Glendon Capital Management, LP

 

	CORNELL UNIVERSITY, as Lender
	By:	/s/ Brian Lanktree
		Name:	Brian Lanktree
		Title:	Principal & Head Trader, Glendon Capital Management, LP

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	CREDIT SUISSE FLOATING RATE TRUST, as Lender
	By:	Credit Suisse Asset Management, LLC, as its Investment Manager
	By:	/s/ Louis Farano
		Name:	Louis Farano
		Title:	Managing Director

 

	CREDIT SUISSE STRATEGIC INCOME FUND, as Lender
	By:	Credit Suisse Asset Management, LLC, as its Investment Advisor
	By:	/s/ Louis Farano
		Name:	Louis Farano
		Title:	Managing Director

 

	CVP CASCADE CLO-1 LTD., as Lender
	By:	CVP CLO Manager, LLC as Investment Manager
	By:	/s/ Joseph Matteo
		Name:	Joseph Matteo
		Title:	Portfolio Manager
	CVP CASCADE CLO-2 LTD., as Lender
	By:	CVP CLO Manager, LLC as Investment Manager
	By:	/s/ Joseph Matteo
		Name:	Joseph Matteo
		Title:	Portfolio Manager

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	CVP CLO 2017-1 LTD., as Lender
	By:	CVP CLO Advisors, LLC as Investment Manager
	By:	/s/ Joseph Matteo
		Name:	Joseph Matteo
		Title:	Partner
	CVP CLO 2017-2 LTD., as Lender
	By:	CVP CLO Advisors, LLC as Investment Manager
	By:	/s/ Joseph Matteo
		Name:	Joseph Matteo
		Title:	Partner

 

	DOLLAR SENIOR LOAN FUND, LTD., as Lender
	By:	Credit Suisse Asset Management, LLC, as Investment Manager
	By:	/s/ Louis Farano
		Name:	Louis Farano
		Title:	Managing Director

 

	ELLINGTON CLO management LLC ON BEHALF OF: ELLINGTON CLO I, LTD. ELLINGTON CLO II, LTD. ELLINGTON CLO III, LTD., as Lender
	By:	/s/ Mark Heron
		Name:	Mark Heron
		Title:	Portfolio Manager

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	ERIE INDEMNITY COMPANY, as Lender
	By:	Credit Suisse Asset Management, LLC, as Investment Manager
	By:	/s/ Louis Farano
		Name:	Louis Farano
		Title:	Managing Director

 

	ERIE INSURANCE EXCHANGE, as Lender
	By:	Credit Suisse Asset Management, LLC., as its Investment Manager For Erie Indemnity Company, as Attorney-In-Fact For Erie Insurance Exchange
	By:	/s/ Louis Farano
		Name:	Louis Farano
		Title:	Managing Director

 

	FIDELITY ADVISOR SERIES I: FIDELITY ADVISOR FLOATING RATE HIGH INCOME FUND, as Lender
	By:	/s/ Colm Hogan
		Name:	Colm Hogan
		Title:	Authorized Signatory

 

	ADVANCED SERIES TRUST-AST FI PYRAMIS QUANTITATIVE PORTFOLIO, FIAM LLC,
	By:	FIAM LLC as Investment Manager, as Lender
	By:	/s/ Daniel Campbell
		Name:	Daniel Campbell
		Title:	VP

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	FIDELITY FLOATING RATE HIGH INCOME INVESTMENT TRUST,
	By:	For Fidelity Investments Canada ULC as Trustee Of Fidelity Floating Rate High Income Investment Trust, as Lender
	By:	/s/ Colm Hogan
		Name:	Colm Hogan
		Title:	Authorized Signatory
	FIDELITY FLOATING RATE HIGH INCOME FUND
	By:	For Fidelity Investments Canada ULC as Trustee Of Fidelity Floating Rate High Income Fund, as Lender
	By:	/s/ Colm Hogan
		Name:	Colm Hogan
		Title:	Authorized Signatory

 

	FIDELITY CENTRAL INVESTMENT PORTFOLIOS LLC: FIDELITY FLOATING RATE CENTRAL FUND, as Lender
	By:	/s/ Colm Hogan
		Name:	Colm Hogan
		Title:	Authorized Signatory

 

	FIDELITY CENTRAL INVESTMENT PORTFOLIOS LLC: FIDELITY HIGH INCOME CENTRAL FUND 2, as Lender
	By:	/s/ Colm Hogan
		Name:	Colm Hogan
		Title:	Authorized Signatory

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	FIAM FLOATING RATE HIGH INCOME COMMINGLED POOL
	By:	Fidelity Institutional Asset Management Trust Company, as Lender
	By:	/s/ Colm Hogan
		Name:	Colm Hogan
		Title:	Authorized Signatory

 

	FIAM LEVERAGED LOAN, LP
	By:	FIAM LLC as Investment Manager, as Lender
	By:	/s/ Daniel Campbell
		Name:	Daniel Campbell
		Title:	VP

 

	FIDELITY SUMMER STREET TRUST: FIDELITY SERIES FLOATING RATE HIGH INCOME FUND, as Lender
	By:	/s/ Colm Hogan
		Name:	Colm Hogan
		Title:	Authorized Signatory

 

	FIDELITY SUMMER STREET TRUST: FIDELITY SERIES HIGH INCOME FUND, as Lender
	By:	/s/ Colm Hogan
		Name:	Colm Hogan
		Title:	Authorized Signatory

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	FIDELITY SUMMER STREET TRUST: FIDELITY HIGH INCOME FUND, as Lender
	By:	/s/ Colm Hogan
		Name:	Colm Hogan
		Title:	Authorized Signatory

 

	FIDELITY INCOME FUND: FIDELITY TOTAL BOND FUND, as Lender
	By:	/s/ Colm Hogan
		Name:	Colm Hogan
		Title:	Authorized Signatory

 

	FIDELITY QUALIFYING INVESTOR FUNDS PLC
	By:	FIAM LLC as Sub Advisor, as Lender
	By:	/s/ Daniel Campbell
		Name:	Daniel Campbell
		Title:	VP

 

	VARIABLE INSURANCE PRODUCTS FUND: FLOATING RATE HIGH INCOME PORTFOLIO, as Lender
	By:	/s/ Colm Hogan
		Name:	Colm Hogan
		Title:	Authorized Signatory

 

	FIGUEROA CLO 2013-2, LTD, as Lender
	By:	TCW Asset Management Company as Investment Manager
	By:	/s/ Nora Olan
		Name:	Nora Olan
		Title:	Senior Vice President

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	If Second Signature is Required:
	By:	/s/ Ryan Gable
		Name:	Ryan Gable
		Title:	Senior Vice President

 

	FIGUEROA CLO 2014-1, LTD, as Lender
	By:	TCW Asset Management Company as Investment Manager
	By:	/s/ Nora Olan
		Name:	Nora Olan
		Title:	Senior Vice President
	If Second Signature is Required:
	By:	/s/ Ryan Gable
		Name:	Ryan Gable
		Title:	Senior Vice President

 

	FLATIRON FUNDING II, LLC, as Lender
	By:	/s/ Gregg Bresner
		Name:	Gregg Bresner
		Title:	President and CIO

 

	NEBRASKA INVESTMENT COUNCIL, as Lender
	By:	/s/ Hague Van Dillen
		Name:	Hague Van Dillen
		Title:	Authorized Signer

 

	KANSAS PUBLIC EMPLOYEES RETIRMENT SYSTEM, as Lender
	By:	/s/ Hague Van Dillen
		Name:	Hague Van Dillen
		Title:	Authorized Signer

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	FRANKLIN TEMPLETPN SERIES II FUNDS - FRANKLIN FLOATING RATE II FUND, as Lender
	By:	/s/ Madeline Lam
		Name:	Madeline Lam
		Title:	Vice President

 

	FRANKLIN FLOATING RATE MASTER TRUST - FRANKLIN FLOATING RATE MASTER SERIES, as Lender
	By:	/s/ Madeline Lam
		Name:	Madeline Lam
		Title:	Vice President

 

	FRANKLIN INVESTORS SECURITIES TRUST - FRANKLIN FLOATING RATE DAILY ACCESS FUND, as Lender
	By:	/s/ Madeline Lam
		Name:	Madeline Lam
		Title:	Vice President

 

	COMMONWEALTH FIXED  INTEREST FUND 17, as Lender
	By:	/s/ Hague Van Dillen
		Name:	Hague Van Dillen
		Title:	Authorized Signer

 

	FRANKLIN FLOATING RATE MASTER TRUST - FRANKLIN LOWER TIER FLOATING RATE FUND, as Lender
	By:	/s/ Hague Van Dillen
		Name:	Hague Van Dillen
		Title:	Authorized Signer

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	FRANKLIN STRATEGIC SERIES-FRANKLIN STRATEGIC INCOME FUND, as Lender
	By:	/s/ Hague Van Dillen
		Name:	Hague Van Dillen
		Title:	Authorized Signer

 

	FRANKLIN STRATEGIC INCOME FUND (CANADA), as Lender
	By:	/s/ Hague Van Dillen
		Name:	Hague Van Dillen
		Title:	Authorized Signer

 

	FRANKLIN TEMPLETON VARIABLE INSURANCE TRUST-FRANKLIN STRATEGIC INCOME VIP FUND, as Lender
	By:	/s/ Hague Van Dillen
		Name:	Hague Van Dillen
		Title:	Authorized Signer

 

	FRANKLIN INVESTORS SECURITIES TRUST-FRANKLIN LOW DURATION TOTAL RETURN FUND, as Lender
	By:	/s/ Hague Van Dillen
		Name:	Hague Van Dillen
		Title:	Authorized Signer

 

	government of guam retirement fund, as Lender
	By:	/s/ Sue Park
		Name:	Sue Park
		Title:	Managing Director

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	GRAHAM MACRO STRATEGIC LTD, as Lender
	By:	/s/ Paul Sedlack
		Name:	Paul Sedlack
		Title:	COO, Graham Capital Management, L.P. as Sole Director
	HOTCHKIS AND WILEY CAPITAL INCOME FUND, as Lender
	By:	/s/ Sue Park
		Name:	Sue Park
		Title:	Managing Director

 

	HOTCHKIS AND WILEY HIGH YIELD FUND FUND, as Lender
	By:	/s/ Sue Park
		Name:	Sue Park
		Title:	Managing Director

 

	JFIN CLO 2014-II LTD., as Lender
	By:	Apex Credit Partners LLC, as Portfolio Manager
	By:	/s/ Andrew Stern
		Name:	Andrew Stern
		Title:	Managing Director
	JFIN CLO 2015 LTD., as Lender
	By:	Apex Credit Partners LLC, as Portfolio Manager
	By:	/s/ Andrew Stern
		Name:	Andrew Stern
		Title:	Managing Director

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	JFIN CLO 2014-LTD, as Lender
	By:	Apex Credit Partners LLC, as Portfolio Manager
	By:	/s/ Andrew Stern
		Name:	Andrew Stern
		Title:	Managing Director

 

	OZLM XVII, Ltd., as Lender
	By:	OZ CLO Management LLC, its Collateral Manager
	By:	/s/ Alesia J. Haas
		Name:	Alesia J. Haas
		Title:	CFO
	KP FIXED INCOME FUND, as Lender
	By:	Credit Suisse Asset Management, LLC, as Sub-Adviser For Callan Associates Inc., The Adviser For The KP Funds, The Trust For KP Fixed Income Fund
	By:	/s/ Louis Farano
		Name:	Louis Farano
		Title:	Managing Director

 

	LIBERTY MUTUAL INSURANCE COMPANY, as Lender
	By:	/s/ Scott Russian
		Name:	Scott Russian
		Title:	Authorized Signatory

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	LIBERTY MUTUAL RETIREMENT PLAN MASTER TRUST, as Assignee, as Lender
	By:	Liberty Mutual Group Asset Management Inc. Acting For And On Behalf Of Liberty Mutual Retirement Plan Master Trust
	By:	/s/ Scott Russian
		Name:	Scott Russian
		Title:	Authorized Signatory

 

	LINCOLN SQUARE FUNDING ULC, as Lender
	By:	/s/ Madonna Sequeira
		Name:	Madonna Sequeira
		Title:	Authorized Signatory
	LORD ABBETT BANK LOAN TRUST, as Lender
	By:	Lord Abbett & Co LLC, as Investment Manager
	By:	/s/ Kearney Posner
		Name:	Kearney Posner
		Title:	Associate Portfolio Manager
	LORD ABBETT FLOATING RATE FUND LTD., as Lender
	By:	Lord, Abbett & Co LLC, as Investment Manager
	By:	/s/ Kearney Posner
		Name:	Kearney Posner
		Title:	Associate Portfolio Manager

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	LORD ABBETT INVESTMENT TRUST - LORD ABBETT FLOATING RATE FUND, as Lender
	By:	Lord Abbett & Co LLC, as Investment Manager
	By:	/s/ Kearney Posner
		Name:	Kearney Posner
		Title:	Associate Portfolio Manager

 

	MADISON PARK FUNDING X, LTD., as Lender
	By:	Credit Suisse Asset Management, LLC, as Portfolio Manager
	By:	/s/ Louis Farano
		Name:	Louis Farano
		Title:	Managing Director

 

	MADISON PARK FUNDING XII, LTD., as Lender
	By:	Credit Suisse Asset Management, LLC, as Portfolio Manager
	By:	/s/ Louis Farano
		Name:	Louis Farano
		Title:	Managing Director
	MADISON PARK FUNDING XIV, LTD., as Lender
	By:	Credit Suisse Asset Management, LLC, as Portfolio Manager
	By:	/s/ Louis Farano
		Name:	Louis Farano
		Title:	Managing Director

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	MADISON PARK FUNDING XIX, LTD., as Lender
	By:	Credit Suisse Asset Management, LLC, as Collateral Manager
	By:	/s/ Louis Farano
		Name:	Louis Farano
		Title:	Managing Director

 

	MADISON PARK FUNDING XV, LTD., as Lender
	By:	Credit Suisse Asset Management, LLC, as Portfolio Manager
	By:	/s/ Louis Farano
		Name:	Louis Farano
		Title:	Managing Director
	MADISON PARK FUNDING XVI, LTD., as Lender
	By:	Credit Suisse Asset Management, LLC, as Portfolio Manager
	By:	/s/ Louis Farano
		Name:	Louis Farano
		Title:	Managing Director

 

	MADISON PARK FUNDING XVII, LTD., as Lender
	By:	Credit Suisse Asset Management, LLC, as Portfolio Manager
	By:	/s/ Louis Farano
		Name:	Louis Farano
		Title:	Managing Director

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	MADISON PARK FUNDING XVIII, LTD., as Lender
	By:	Credit Suisse Asset Management, LLC, as Collateral Manager
	By:	/s/ Louis Farano
		Name:	Louis Farano
		Title:	Managing Director

 

	MADISON PARK FUNDING XX, LTD., as Lender
	By:	Credit Suisse Asset Management, LLC, as Portfolio Manager
	By:	/s/ Louis Farano
		Name:	Louis Farano
		Title:	Managing Director

 

	MADISON PARK FUNDING XXI, LTD., as Lender
	By:	Credit Suisse Asset Management, LLC, as Portfolio Manager
	By:	/s/ Louis Farano
		Name:	Louis Farano
		Title:	Managing Director
	MADISON PARK FUNDING XXII, LTD., as Lender
	By:	Credit Suisse Asset Management, LLC, as Portfolio Manager
	By:	/s/ Louis Farano
		Name:	Louis Farano
		Title:	Managing Director

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	MADISON PARK FUNDING XXIII, LTD., as Lender
	By:	Credit Suisse Asset Management, LLC, as Collateral Manager
	By:	/s/ Louis Farano
		Name:	Louis Farano
		Title:	Managing Director

 

	MADISON PARK FUNDING XXIV, LTD., as Lender
	By:	Credit Suisse Asset Management, LLC, as Collateral Manager
	By:	/s/ Louis Farano
		Name:	Louis Farano
		Title:	Managing Director

 

	MADISON PARK FUNDING XXV, LTD., as Lender
	By:	Credit Suisse Asset Management, LLC, as Collateral Manager
	By:	/s/ Louis Farano
		Name:	Louis Farano
		Title:	Managing Director
	METROPOLITAN WEST FLOATING RATE INCOME FUND, as Lender
	By:	Metropolitan West Asset Management as Investment Manager
	By:	/s/ Nora Olan
		Name:	Nora Olan
		Title:	Senior Vice President

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	If Second Signature is Required:
	By:	/s/ Ryan Gable
		Name:	Ryan Gable
		Title:	Senior Vice President

 

	MOUNTAIN VIEW CLO 2013-1 LTD., as Lender
	By:	Seix Investment Advisors LLC, as Collateral Manager
	By:	/s/ George Goudelias
		Name:	George Goudelias
		Title:	Managing Director
	MOUNTAIN VIEW CLO 2014-1 LTD., as Lender
	By:	Seix Investment Advisors LLC, as Collateral Manager
	By:	/s/ George Goudelias
		Name:	George Goudelias
		Title:	Managing Director
	MOUNTAIN VIEW CLO 2016-1 LTD., as Lender
	By:	Seix Investment Advisors LLC, as Collateral Manager
	By:	/s/ George Goudelias
		Name:	George Goudelias
		Title:	Managing Director

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	MOUNTAIN VIEW CLO 2017-2 LTD., as Lender
	By:	Seix Investment Advisors LLC, as Collateral Manager
	By:	/s/ George Goudelias
		Name:	George Goudelias
		Title:	Managing Director

 

	MOUNTAIN VIEW CLO 2017-1 LTD., as Lender
	By:	Seix Investment Advisors LLC, as Collateral Manager
	By:	/s/ George Goudelias
		Name:	George Goudelias
		Title:	Managing Director

 

	MOUNTAIN VIEW CLO IX LTD., as Lender
	By:	Seix Investment Advisors LLC, as Collateral Manager
	By:	/s/ George Goudelias
		Name:	George Goudelias
		Title:	Managing Director
	MOUNTAIN VIEW CLO X LTD., as Lender
	By:	Seix Investment Advisors LLC, as Collateral Manager
	By:	/s/ George Goudelias
		Name:	George Goudelias
		Title:	Managing Director

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	MSD CREDIT OPPORTUNITY FUND, as Lender
	By:	/s/ Marcello Liguori
		Name:	Marcello Liguori
		Title:	Managing Director

 

	NASSAU 2017-I LTD, as Lender
	By:	/s/ Chris LaJaunie
		Name:	Chris LaJaunie
		Title:	Senior Analyst
	NASSAU 2017-II LTD., as Lender
	By:	/s/ Chris LaJaunie
		Name:	Chris LaJaunie
		Title:	Senior Analyst
	NATIONAL ELECTRICAL BENEFIT FUND, as Lender
	By:	Lord Abbett & Co LLC, as Investment Manager
	By:	/s/ Kearney Posner
		Name:	Kearney Posner
		Title:	Associate Portfolio Manager

 

	NATIONAL ELEVATOR INDUSTRY PENSION PLAN, as Lender
	By:	/s/ Sue Park
		Name:	Sue Park
		Title:	Managing Director

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	OHIO CASUALTY INSURANCE COMPANY, as Lender
	By:	/s/ Scott Russian
		Name:	Scott Russian
		Title:	Authorized Signatory
	ONE ELEVEN FUNDING I, LTD., as Lender
	By:	Credit Suisse Asset Management, LLC, as Portfolio Manager
	By:	/s/ Louis Farano
		Name:	Louis Farano
		Title:	Managing Director
	OZLM FUNDING II, LTD., as Lender
	By:	Och-Ziff Loan Management LP, its Portfolio Manager
	By:	Och-Ziff Loan Management LLC, its General Partner
	By:	/s/ Alesia J. Haas
		Name:	Alesia J. Haas
		Title:	CFO
	OZLM FUNDING III, LTD., as Lender
	By:	Och-Ziff Loan Management LP, its Portfolio Manager
	By:	Och-Ziff Loan Management LLC, its General Partner
	By:	/s/ Alesia J. Haas
		Name:	Alesia J. Haas
		Title:	CFO

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	OZLM FUNDING IV, LTD. as Lender
	By:	Och-Ziff Loan Management LP, its Portfolio Manager
	By:	Och-Ziff Loan Management LLC, its General Partner
	By:	/s/ Alesia J. Haas
		Name:	Alesia J. Haas
		Title:	CFO
	OZLM FUNDING, LTD., as Lender
	By:	OZ CLO Management LLC, its Portfolio Manager
	By:	/s/ Alesia J. Haas
		Name:	Alesia J. Haas
		Title:	CFO
	OZLM IX, LTD., as Lender
	By:	Och-Ziff Loan Management LP, its Collateral Manager
		Och-Ziff Loan Management LLC, its General Partner
	By:	/s/ Alesia J. Haas
		Name:	Alesia J. Haas
		Title:	CFO

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	OZLM VI, LTD., as Lender
	By:	Och-Ziff Loan Management LP, its Asset Manager
	By:	Och-Ziff Loan Management LLC, its General Partner
	By:	/s/ Alesia J. Haas
		Name:	Alesia J. Haas
		Title:	CFO
	OZLM VII, LTD., as Lender
	By:	Och-Ziff Loan Management LP, its Collateral Manager
	By:	Och-Ziff Loan Management LLC, its General Partner
	By:	/s/ Alesia J. Haas
		Name:	Alesia J. Haas
		Title:	CFO
	OZLM VIII, LTD., as Lender
	By:	Och-Ziff Loan Management LP, its Collateral Manager
	By:	Och-Ziff Loan Management LLC, its General Partner
	By:	/s/ Alesia J. Haas
		Name:	Alesia J. Haas
		Title:	CFO

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	OZLM XI, LTD., as Lender
	By:	Och-Ziff Loan Management LP, its Collateral Manager
	By:	Och-Ziff Loan Management LLC, its General Partner
	By:	/s/ Alesia J. Haas
		Name:	Alesia J. Haas
		Title:	CFO
	OZLM XII, LTD., as Lender
	By:	Och-Ziff Loan Management LP, its Collateral Manager
	By:	Och-Ziff Loan Management LLC, its General Partner
	By:	/s/ Alesia J. Haas
		Name:	Alesia J. Haas
		Title:	CFO
	OZLM XIII, LTD., as Lender
	By:	Och-Ziff Loan Management LP, its Collateral Manager
	By:	Och-Ziff Loan Management LLC, its General Partner
	By:	/s/ Alesia J. Haas
		Name:	Alesia J. Haas
		Title:	CFO

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	OZLM XIV, LTD., as Lender
	By:	Och-Ziff Loan Management LP, its Collateral Manager
	By:	Och-Ziff Loan Management LLC, its General Partner
	By:	/s/ Alesia J. Haas
		Name:	Alesia J. Haas
		Title:	CFO
	OZLM XV, LTD., as Lender
	By:	Och-Ziff Loan Management LP, its Collateral Manager
	By:	Och-Ziff Loan Management LLC, its General Partner
	By:	/s/ Alesia J. Haas
		Name:	Alesia J. Haas
		Title:	CFO
	OZLM XVI, LTD., as Lender
	By:	OZ CLO Management LLC, its Successor Portfolio Manager
	By:	/s/ Alesia J. Haas
		Name:	Alesia J. Haas
		Title:	CFO

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	OZLM XXII, LTD., as Lender
	By:	OZ CLO Management LLC, its Collateral Manager
	By:	/s/ Alesia J. Haas
		Name:	Alesia J. Haas
		Title:	CFO
	PEERLESS INSURANCE COMPANY, as Lender
	By:
	By:	/s/ Scott Russian
		Name:	Scott Russian
		Title:	Authorized Signatory
	PONTUS HOLDINGS LTD., as Lender
	By:	/s/ Russell Bryant
		Name:	Russell Bryant
		Title:	Chief Financial Officer Quadrant Capital Advisors, Inc. Investment Advisor to Pontus Holdings Ltd.

 

	REDWOOD MASTER FUND, LTD., as Lender
	By:	Redwood Capital Management, LLC, its Investment Manager
	By:	/s/ Ruben Kliksberg
		Name:	Ruben Kliksberg
		Title:	Co-Chief Executive Officer

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

 

	REDWOOD OPPORTUNITY MASTER FUND, LTD., as Lender
	By:	Redwood Capital Management, LLC, its Investment Manager
	By:	/s/ Ruben Kliksberg
		Name:	Ruben Kliksberg
		Title:	Co-Chief Executive Officer

 

	SAFECO INSURANCE COMPANY OF AMERICA, as Lender
	By:	/s/ Scott Russian
		Name:	Scott Russian
		Title:	Authorized Signatory
	SAN DIEGO COUNTY EMPLOYEES RETIREMENT ASSOCIATION, as Lender
	By:	/s/ Sue Park
		Name:	Sue Park
		Title:	Managing Director
	SANTA BARBARA COUNTY EMPLOYEES RETIREMENT SYSTEM, as Lender
	By:	/s/ Sue Park
		Name:	Sue Park
		Title:	Managing Director

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	SEIX MULTI-SECTOR ABSOLUTE RETURN FUND L.P., as Lender
	By:	Seix Multi-Sector Absolute Return Fund GP LLC, In its Capacity as Sole General Partner
	By:	Seix Investment Advisors LLC, its Sole Member
	By:	/s/ George Goudelias
		Name:	George Goudelias
		Title:	Managing Director

 

	SENIOR SECURED FLOATING RATE LOAN FUND, as Lender
	By:	Credit Suisse Asset Management, LLC, The Portfolio Manager For Propel Capital Corporation, The Manager For Senior Secured Floating Rate Loan Fund
	By:	/s/ Louis Farano
		Name:	Louis Farano
		Title:	Managing Director

 

	SKANDINAVISKA ENSKILDA BANKEN AB (PUBL) as Lender
	By:
	By:	/s/ Per Bjernekull
		Name:	Per Bjernekull
		Title:	General Manager
	If Second Signature is Required:
	By:	/s/ Anthony Racanelli
		Name:	Anthony Racanelli
		Title:	SVP

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	STEELE CREEK CLO 2014-1R, LTD, as Lender
	By:	/s/ Alan DeKeukelaere
		Name:	Alan DeKeukelaere
		Title:	Senior Research Analyst
	STEELE CREEK CLO 2015-1, LTD, as Lender
	By:	/s/ Alan DeKeukelaere
		Name:	Alan DeKeukelaere
		Title:	Senior Research Analyst
	STEELE CREEK CLO 2016-1, LTD, as Lender
	By:	/s/ Alan DeKeukelaere
		Name:	Alan DeKeukelaere
		Title:	Senior Research Analyst

 

	STEELE CREEK CLO 2017-1, LTD, as Lender
	By:	/s/ Alan DeKeukelaere
		Name:	Alan DeKeukelaere
		Title:	Senior Research Analyst
	TCW CLO 2017-1, LTD., as Lender
	By:	/s/ Nora Olan
		Name:	Nora Olan
		Title:	Senior Vice President

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	If Second Signature is Required:
	By:	/s/ Ryan Gable
		Name:	Ryan Gable
		Title:	Senior Vice President

 

	TCW CLO 2018-1, LTD., as Lender
	By:	TCW Asset Management Company LLC as Asset Manager
	By:	/s/ Nora Olan
		Name:	Nora Olan
		Title:	Senior Vice President
	If Second Signature is Required:
	By:	/s/ Ryan Gable
		Name:
		Title:	Senior Vice President

 

	TEXAS COUNTY AND DISTRICT RETIREMENT SYSTEM, as Lender
	By:	/s/ Sue Park
		Name:	Sue Park
		Title:	Managing Director
	THE CITY OF NEW YORK GROUP TRUST, as Lender
	By:	Credit Suisse Asset Management, LLC. as its Manager
	By:	/s/ Louis Farano
		Name:	Louis Farano
		Title:	Managing Director

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	UNIVERSITY OF DAYTON, as Lender
	By:	/s/ Sue Park
		Name:	Sue Park
		Title:	Managing Director

 

	THE WESTERN AND SOUTHERN LIFE INSURANCE COMPANY, as Lender
	By:	/s/ Bernie M. Casey
		Name:	Bernie M. Casey
		Title:	AVP & Senior Credit Analyst
	VENTURE 28A CLO, LIMITED, as Lender
	By:	its Investment Advisor MJX Venture Management II LLC
	By:	/s/ Lewis Brown
		Name:	Lewis Brown
		Title:	Managing Director / Head of Trading
	VENTURE X CLO, LIMITED, as Lender
	By:	its Collateral Manager, MJX Venture Management LLC
	By:	/s/ Lewis I. Brown
		Name:	Lewis I. Brown
		Title:	Managing Director / Head of Trading

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	VENTURE XII CLO, LIMITED, as Lender
	By:	its Investment Advisor MJX Venture Management LLC
	By:	/s/ Lewis I. Brown
		Name:	Lewis I. Brown
		Title:	Managing Director / Head of Trading
	VENTURE XIV CLO, LIMITED, as Lender
	By:	its Investment Advisor MJX Venture Management LLC
	By:	/s/ Lewis I. Brown
		Name:	Lewis I. Brown
		Title:	Managing Director / Head of Trading
	VENTURE XIX CLO, LIMITED, as Lender
	By:	its Investment Advisor MJX Asset Management LLC
	By:	/s/ Lewis I. Brown
		Name:	Lewis I. Brown
		Title:	Managing Director / Head of Trading
	VENTURE XV CLO, LIMITED, as Lender
	By:	its Investment Advisor MJX Asset Management LLC
	By:	/s/ Lewis I. Brown
		Name:	Lewis I. Brown
		Title:	Managing Director / Head of Trading

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	VENTURE XVI CLO, LIMITED, as Lender
	By:	its Investment Advisor MJX Venture Management II LLC
	By:	/s/ Lewis I. Brown
		Name:	Lewis I. Brown
		Title:	Managing Director / Head of Trading
	VENTURE XVII CLO, LIMITED, as Lender
	By:	its Investment Advisor MJX Asset Management LLC
	By:	/s/ Lewis I. Brown
		Name:	Lewis I. Brown
		Title:	Managing Director / Head of Trading
	VENTURE XVIII CLO, LIMITED, as Lender
	By:	its Investment Advisor MJX Venture Management II LLC
	By:	/s/ Lewis I. Brown
		Name:	Lewis I. Brown
		Title:	Managing Director / Head of Trading
	VENTURE XX CLO, LIMITED, as Lender
	By:	its Investment Advisor MJX Venture Management LLC
	By:	/s/ Lewis I. Brown
		Name:	Lewis I. Brown
		Title:	Managing Director / Head of Trading

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	VENTURE XXI CLO, LIMITED, as Lender
	By:	its Investment Advisor MJX Venture Management LLC
	By:	/s/ Lewis I. Brown
		Name:	Lewis I. Brown
		Title:	Managing Director / Head of Trading
	VENTURE XXII CLO, LIMITED, as Lender
	By:	its Investment Advisor MJX Venture Management II LLC
	By:	/s/ Lewis I. Brown
		Name:	Lewis I. Brown
		Title:	Managing Director / Head of Trading
	VENTURE XXIII CLO, LIMITED, as Lender
	By:	its Investment Advisor MJX Asset Management LLC
	By:	/s/ Lewis I. Brown
		Name:	Lewis I. Brown
		Title:	Managing Director / Head of Trading
	VENTURE XXIV CLO, LIMITED, LP, as Lender
	By:	its Investment Advisor MJX Asset Management LLC
	By:	/s/ Lewis I. Brown
		Name:	Lewis I. Brown
		Title:	Managing Director / Head of Trading

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	VENTURE XXIX CLO, LIMITED, as Lender
	By:	its Investment Advisor MJX Venture Management II LLC
	By:	/s/ Lewis Brown
		Name:	Lewis Brown
		Title:	Managing Director / Head of Trading
	VENTURE XXV CLO, LIMITED, as Lender
	By:	its Investment Advisor MJX Asset Management LLC
	By:	/s/ Lewis Brown
		Name:	Lewis Brown
		Title:	Managing Director / Head of Trading
	VENTURE XXVI CLO, LIMITED, as Lender
	By:	its Investment Advisor MJX Venture Management LLC
	By:	/s/ Lewis Brown
		Name:	Lewis Brown
		Title:	Managing Director / Head of Trading
	VENTURE XXVII CLO, LIMITED, as Lender
	By:	its Investment Advisor MJX Venture Management II LLC
	By:	/s/ Lewis Brown
		Name:	Lewis Brown
		Title:	Managing Director / Head of Trading

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	VENTURE XXVIII CLO, LIMITED, as Lender
	By:	its Investment Advisor MJX Venture Management II LLC
	By:	/s/ Lewis Brown
		Name:	Lewis Brown
		Title:	Managing Director / Head of Trading
	VENTURE XXX CLO, LIMITED, LP, as Lender
	By:	its Investment Advisor MJX Venture Management II LLC
	By:	/s/ Lewis Brown
		Name:	Lewis Brown
		Title:	Managing Director / Head of Trading

 

	VIRTUS SEIX FLOATING RATE HIGH INCOME FUND, as Lender
	By:	Seix Investment Advisors LLC, as Subadviser
	By:	/s/ George Goudelias
		Name:	George Goudelias
		Title:	Managing Director
	ZAIS CLO 1, LIMITED, as Lender
	By:	ZAIS CLO 1, Limited
	By:	/s/ Vincent Ingato
		Name:	Vincent Ignato
		Title:	Managing Director

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	ZAIS CLO 2, LIMITED, as Lender
	By:	ZAIS CLO 2, Limited
	By:	/s/ Vincent Ingato
		Name:	Vincent Ingato
		Title:	Managing Director
	ZAIS CLO 3, LIMITED, as Lender
	By:	ZAIS CLO 3, Limited
	By:	/s/ Vincent Ingato
		Name:	Vincent Ingato
		Title:	Managing Director
	ZAIS CLO 5, LIMITED, as Lender
	By:	Zais Leveraged Loan Master Manager, LLC its Collateral Manager
	By:	Zais Group, LLC, its Sole Member
	By:	/s/ Vincent Ingato
		Name:	Vincent Ingato
		Title:	Managing Director

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

  

	ZAIS CLO 6, LIMITED, as Lender
	By:	Zais Leveraged Loan Master Manager, LLC its Collateral Manager
	By:	Zais Group, LLC, its Sole Member
	By:	/s/ Vincent Ingato
		Name:	Vincent Ingato
		Title:	Managing Director
	ZAIS CLO 7, LIMITED, as Lender
	By:	/s/ Vincent Ingato
		Name:	Vincent Ingato
		Title:	Managing Director
	ZAIS CLO 8, LIMITED, as Lender
	By:	Zais Leveraged Loan Master Manager, LLC its Collateral Manager
	By:	Zais Group, LLC, its Sole Member
	By:	/s/ Vincent Ingato
		Name:	Vincent Ingato
		Title:	Managing Director

 

[Signature Page to Second Amendment to INSW Credit Agreement]

 

Exhibit 31.1

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO RULE 13a-14(a) AND 15d-14(a), AS AMENDED

 

I, Lois K. Zabrocky, certify that:

 

1.

I have reviewed this quarterly report on Form 10-Q of International Seaways, Inc.

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

 

4.

The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have:

 

a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

  

b.

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c.

Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d.

Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

 

5.

The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):

 

a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

 

b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

 

Date:  August 8, 2018	/s/ Lois K. Zabrocky
	Lois K. Zabrocky
	Chief Executive Officer

  

Exhibit 31.2

 

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO RULE 13a-14(a) AND 15d-14(a), AS AMENDED

 

I, Jeffrey D. Pribor, certify that:

 

1.

I have reviewed this quarterly report on Form 10-Q of International Seaways, Inc.

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

 

4.

The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have:

 

a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b.

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c.

Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d.

Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

 

5.

The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):

 

a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

 

b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

 

Date:  August 8, 2018	/s/ Jeffrey D. Pribor
	Jeffrey D. Pribor
	Chief Financial Officer

 

Exhibit 32

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

AND CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

Each of the undersigned, the Chief Executive Officer and the Chief Financial Officer of International Seaways, Inc. (the “Company”), hereby certifies, to the best of her/his knowledge and belief, that the Form 10-Q of the Company for the quarterly period ended June 30, 2018 (the “Periodic Report”) accompanying this certification fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) and that the information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company. This certification is provided solely for purposes of complying with the provisions of Section 906 of the Sarbanes-Oxley Act and is not intended to be used for any other purpose.

 

Date:  August 8, 2018	/s/ Lois K. Zabrocky
	Lois K. Zabrocky
	Chief Executive Officer
Date:  August 8, 2018	/s/ Jeffrey D. Pribor
	Jeffrey D. Pribor
	Chief Financial Officer