SHARE PLEDGE AGREEMENT — C&H REDLINE MARKUP
Redline Markup by Calderwood & Harkness LLP of the Draft Share Pledge Agreement Prepared by Whitmore, Jennings & Alcott LLP (as Counsel to the Administrative Agent and the Lenders)
Redline Date: June 23, 2023
Source Document: Draft Share Pledge Agreement circulated by Whitmore, Jennings & Alcott LLP on June 16, 2023
Matter: Thalassa Shipping & Logistics SA — $150,000,000 Senior Secured Revolving Credit Facility
C&H Matter Number: 1044-00002
Prepared by:
Sophie Tremblay, Senior Associate Daniel Obi, Associate Calderwood & Harkness LLP 425 Park Avenue New York, NY 10022
Reviewed by:
Ian Blackwood, Partner Calderwood & Harkness LLP
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT THIS DOCUMENT IS SUBJECT TO THE ATTORNEY-CLIENT PRIVILEGE AND THE WORK PRODUCT DOCTRINE. IT IS PREPARED BY CALDERWOOD & HARKNESS LLP IN ITS CAPACITY AS COUNSEL TO THALASSA SHIPPING & LOGISTICS SA AND IS NOT INTENDED FOR DISTRIBUTION TO ANY PERSON OTHER THAN THE ADDRESSEES AND THEIR AUTHORIZED REPRESENTATIVES.
TRANSMITTAL NOTE
June 23, 2023
FROM: Sophie Tremblay Calderwood & Harkness LLP 425 Park Avenue New York, NY 10022 Telephone: (212) 558-4000
Email: sophie.tremblay@calderwoodharkness.com
TO: Priya Subramanian Whitmore, Jennings & Alcott LLP 51 West 52nd Street New York, NY 10019
CC: Harrison Caldwell, Whitmore, Jennings & Alcott LLP Ian Blackwood, Calderwood & Harkness LLP Daniel Obi, Calderwood & Harkness LLP Aris Komnenidis, Thalassa Shipping & Logistics SA (General Counsel) Catherine Hsiang, Meridian Atlantic Bank, N.A. (Relationship Manager)
RE: Share Pledge Agreement — Borrower's Counsel Markup (Thalassa Shipping & Logistics SA — $150,000,000 Senior Secured Revolving Credit Facility)
Dear Priya,
We write on behalf of our client, Thalassa Shipping & Logistics SA ("TSL" or the "Borrower"), to deliver the enclosed marked-up version of the draft Share Pledge Agreement (the "Agreement") circulated by Whitmore, Jennings & Alcott LLP ("WJA") on June 16, 2023.
This redline markup reflects our comments and proposed revisions to the draft Agreement and is being delivered concurrently with our markups of the following additional collateral documents, each also dated June 23, 2023:
(a) the First Preferred Ship Mortgage (Form);
(b) the Assignment of Earnings; and
(c) the Assignment of Insurances.
Our comments in this markup are made in the context of, and should be read together with, the near-final Credit Agreement currently being negotiated between the parties. We have endeavored to conform the terms and provisions of this Agreement to those of the Credit Agreement, and we have flagged instances where the current draft of the Agreement is inconsistent with the Credit Agreement or where cross-references need to be updated. We note that the Credit Agreement itself remains subject to ongoing negotiation, and certain of our comments below may need to be further revised once the Credit Agreement is finalized.
We have identified a number of key open issues that we believe warrant discussion between our respective firms and the relevant business principals. In particular, we draw your attention to our comments regarding (i) the mechanics for the transfer of voting rights during an Event of Default, (ii) the commercially reasonable sale requirement and notice periods applicable to the Collateral Agent's remedies, (iii) multi-jurisdictional perfection requirements for the Cyprus and marshall Islands Pledged Entities, (iv) the automatic release mechanics tied to the collateral coverage ratio, (v) our proposed new collateral substitution provision, and (vi) the non-exclusive jurisdiction clause. We believe these items are most efficiently resolved through a call with the relevant deal teams, and we would appreciate the opportunity to schedule such a call at WJA's earliest convenience.
We have also identified certain items requiring input from our client, including confirmation of the exact shareholding structure and share counts for Schedule I, identification of the direct holder of shares in Thalassa Tanker Operations Ltd., confirmation regarding existing share pledges in favor of Harborstone National Bank, and authorized signatories per board resolutions. We are in the process of obtaining this information from Aris Komnenidis and Dimitrios Pantazis at TSL and will supplement this markup as appropriate once we receive their responses.
Please do not hesitate to contact me or Daniel Obi with any questions regarding our markup. We look forward to discussing these comments with you and your team.
Very truly yours,
Sophie Tremblay Senior Associate Calderwood & Harkness LLP Telephone: (212) 558-4000
Email: sophie.tremblay@calderwoodharkness.com
Enclosure: Redline Markup of Draft Share Pledge Agreement
SUMMARY OF PRINCIPAL COMMENTS
The following is a high-level summary of the categories of Calderwood & Harkness's principal comments and revisions to the draft Share Pledge Agreement. This summary is provided for the convenience of counsel and the deal teams and is not intended to be a comprehensive listing of every change reflected in the detailed section-by-section markup that follows. Counsel should review the full markup for the complete set of comments and proposed revisions.
1. Definition of Pledged Shares and Pledgors
We have proposed clarifications throughout the definitional framework to ensure that the Agreement provides for the pledge of 100% of the issued and outstanding equity interests in each vessel-owning subsidiary, using terminology appropriate to the entity type and jurisdiction of organization of each Pledged Entity. We have also sought to ensure the proper identification of each Pledgor entity and the governing jurisdiction applicable to such Pledgor, including specific references to the three Pledged Entities — Thalassa Dry Bulk Holdings Ltd. (Cyprus), Thalassa Tanker Operations Ltd. (Republic of the marshall Islands), and Thalassa Logistics International Ltd. (Cyprus). We have requested client confirmation on certain ownership chain questions, particularly regarding the direct holder of shares in Thalassa Tanker Operations Ltd.
2. Remedies Upon Event of Default
Our markup proposes significant revisions to the foreclosure and disposition mechanics set forth in Article VI. We have raised objections to certain self-help remedies proposed in the WJA draft, including the Collateral Agent's proposed right to accept the Pledged Shares in strict foreclosure without the prior written consent of the Pledgor. We have inserted a commercially reasonable disposition standard, which is a fundamental requirement under Article 9 of the UCC and consistent with prevailing market practice in secured shipping finance transactions. We have also proposed extending the notice period for public or private sales from 5 business days to 10 business days, reflecting the complexity inherent in a multi-jurisdictional share disposition involving shipping assets. Additional protections for the Pledgors include a right to cure the underlying Event of Default prior to consummation of a sale and a right to receive surplus proceeds.
3. Voting Rights During Continuance of Event of Default
We have proposed material revisions to Section 5.02 to narrow the circumstances under which voting rights transfer from the Pledgors to the Collateral Agent. In our view, the WJA draft's automatic transfer of voting rights upon the occurrence of an Event of Default is overly broad and inconsistent with market practice for shipping finance facilities of this size. We propose that voting rights transfer only upon both the occurrence and continuance of an Event of Default and the delivery of written notice by the Collateral Agent. We have also deleted the WJA draft's proposed irrevocable proxy mechanism as inconsistent with current market standards.
4. Release Provisions
We have proposed revisions to Article VIII to establish clear, automatic release mechanics for the Pledged Shares upon permitted vessel dispositions, mandatory prepayment events, or facility termination. In particular, we have proposed that the release be automatic upon the Borrower's certification that specified conditions are satisfied, including maintenance of the minimum collateral coverage ratio of 140%. We have also proposed a new Section 8.03 to allow the Borrower to substitute collateral in lieu of existing Pledged Shares, subject to Administrative Agent consent and maintenance of the collateral coverage ratio, to provide flexibility for fleet restructuring and internal reorganizations permitted under the Credit Agreement.
5. Multi-Jurisdictional Governing Law Issues
We accept New York law as the primary governing law for the Agreement but have inserted acknowledgments that the creation, validity, perfection, and enforcement of the security interest in the Pledged Shares of each Pledged Entity are also subject to the laws of the jurisdiction of organization of such Pledged Entity. Specific cross-references have been added to Cyprus law (Companies Law, Cap. 113) for Thalassa Dry Bulk Holdings Ltd. and Thalassa Logistics International Ltd., and to the Republic of the marshall Islands law (Business Corporations Act) for Thalassa Tanker Operations Ltd. We have proposed a new Section 7.02 addressing local law perfection requirements, including the 42-day filing requirement with the Cyprus Registrar of Companies. We have also proposed changing the exclusive jurisdiction clause to a non-exclusive jurisdiction clause to preserve enforcement flexibility in Cyprus and the marshall Islands.
6. Collateral Agent Provisions
Our markup proposes conforming amendments to ensure consistency between the Collateral Agent provisions in this Agreement and those in Article IX of the Credit Agreement. We have accepted the gross negligence/willful misconduct standard of care for the Collateral Agent but have proposed narrowing the Pledgors' indemnification obligations to exclude losses arising from the Collateral Agent's own gross negligence, willful misconduct, or breach. We have also proposed clarifications regarding the ministerial nature of the Collateral Agent's role and the appointment of a successor Collateral Agent upon resignation.
7. Representations and Warranties of Pledgors
We have proposed scope adjustments to several representations and warranties, including the replacement of "good standing" with "validly existing" for entities organized in Cyprus and the marshall Islands (where the concept of "good standing" may not apply), the addition of knowledge qualifiers for representations regarding the absence of third-party claims or encumbrances, and the insertion of materiality qualifiers for the no-conflict representation. We have also flagged the need for local counsel opinions to address representations that cannot be covered by C&H's New York law opinion.
8. Miscellaneous and Documentary Matters
We have proposed conforming changes throughout the Agreement to reflect the current state of the Credit Agreement negotiations, including updates to notices, amendments and waiver provisions, and counterpart and electronic signature provisions. We have confirmed that certain provisions are acceptable as drafted and have flagged a limited number of additional documentary items for resolution at or prior to closing.
SECTION-BY-SECTION REDLINE AND COMMENTS
The following section-by-section markup sets forth the WJA draft language (summarized where appropriate) together with Calderwood & Harkness's proposed revisions (shown in tracked changes format) and commentary. Tracked changes are indicated using and notation. Commentary from C&H is presented in the form of numbered comments following the relevant provision.
RECITALS. WJA Draft Recital A:
WHEREAS, reference is made to that certain Credit Agreement dated as of [●], 2023 (the "Credit Agreement") among Thalassa Shipping & Logistics SA, a société anonyme organized under the laws of the Hellenic Republic (the "Borrower"), the Guarantors party thereto from time to time, the Lenders party thereto from time to time, and Meridian Atlantic Bank, National Association, as Administrative Agent (in such capacity, the "Administrative Agent");
C&H Markup of Recital A:
WHEREAS, reference is made to that certain Credit Agreement dated as of [●], 2023 (the "Credit Agreement") among Thalassa Shipping & Logistics SA, a société anonyme organized under the laws of the Hellenic Republic (the "Borrower"), the Guarantors party thereto from time to time, the Lenders party thereto from time to time, ;
> C&H Comment 1: We have revised Recital A to insert a full description of the proposed $150,000,000 senior secured revolving credit facility, including the letter of credit sublimit of $20,000,000 and the swingline sublimit of $15,000,000, for completeness and to ensure that the scope of the facility being secured is clearly identified. We have also added a reference to Pinnacle Trust & Agency Services Inc. as Collateral Agent in this recital (see Comment 3 below).
WJA Draft Recital B:
WHEREAS, as an inducement to the Lenders to extend credit under the Credit Agreement and as security for the Secured Obligations (as defined herein), each Pledgor (as defined herein) has agreed to pledge and grant a security interest in its equity interests in the Pledged Entities (as defined herein) to the Collateral Agent, for the benefit of the Secured Parties (as defined herein);
C&H Markup of Recital B:
WHEREAS, as an inducement to the Lenders to extend credit under the Credit Agreement and as security for the Secured Obligations (as defined ), each Pledgor (as defined herein) has agreed to pledge and grant a security interest in its equity interests in the Pledged Entities (as defined herein) to the Collateral Agent, for the benefit of the Secured Parties (as defined );
> C&H Comment 2: We have clarified that the "Secured Obligations" definition incorporates all obligations under the Credit Agreement, any hedging agreements (including interest rate swaps and caps), and any cash management agreements entered into with Lenders or their affiliates, consistent with the definition of "Secured Obligations" in the near-final Credit Agreement. The WJA draft's internal cross-reference was ambiguous as to the scope of obligations being secured. This clarification is important to the Borrower's understanding of the full extent of the pledge.
C&H Proposed New Recital C:
> C&H Comment 3: We have added a new Recital C identifying Pinnacle Trust & Agency Services Inc. as Collateral Agent and security trustee acting on behalf of the Secured Parties. While Pinnacle Trust is referenced in the body of the WJA draft, it is not separately introduced in the recitals, which creates an incomplete narrative framework for the Agreement. The addition of this recital is consistent with the approach taken in the other Security Documents and conforms to the Credit Agreement's identification of the Collateral Agent.
ARTICLE I — DEFINITIONS AND INTERPRETATION
Section 1.01 — Definitions. As used in this Agreement, the following terms shall have the following meanings:
"Collateral Agent"
WJA Draft: "Collateral Agent" means Pinnacle Trust & Agency Services Inc., a Delaware corporation, acting in its capacity as collateral agent and security trustee for the Secured Parties.
C&H Markup:
"Collateral Agent" means Pinnacle Trust & Agency Services Inc., a Delaware corporation , acting in its capacity as collateral agent and security trustee for the Secured Parties .
> C&H Comment: We have added a reference to Pinnacle Trust's address and a cross-reference to Article IX of the Credit Agreement, where the Collateral Agent's appointment and authority are more fully described. This conforms the definition to the corresponding definition in the Credit Agreement and provides a clear reference point for the Collateral Agent's office for purposes of the notice provisions in Article X.
"Credit Agreement"
WJA Draft: "Credit Agreement" means the Credit Agreement dated as of [●], 2023 among Thalassa Shipping & Logistics SA as Borrower, the Guarantors, the Lenders, and Meridian Atlantic Bank, National Association as Administrative Agent, as amended, restated, supplemented, or otherwise modified from time to time.
C&H Markup:
"Credit Agreement" means the Credit Agreement dated as of [●], 2023 among Thalassa Shipping & Logistics SA as Borrower, the Guarantors, the Lenders, and Meridian Atlantic Bank, National Association as Administrative Agent, as amended, restated, supplemented, or otherwise modified from time to time .
> C&H Comment: We have inserted standard "refinancing" language to ensure that the definition of "Credit Agreement" covers successor credit agreements, refinancings, replacements, and restructurings. This is a customary provision in security documents and is important to ensure that the pledge continues to secure obligations under any replacement or refinanced facility without the need for a new pledge agreement. We have also added the Collateral Agent as a party to the Credit Agreement definition for completeness.
"Event of Default"
WJA Draft: "Event of Default" has the meaning assigned to such term in the Credit Agreement.
C&H Markup: No changes proposed.
> C&H Comment: Acceptable as drafted. We confirm that this cross-reference should be to Article VII of the near-final Credit Agreement. We will verify the article and section references upon finalization of the Credit Agreement.
"Pledged Entities"
WJA Draft: "Pledged Entities" means each of the entities listed on Schedule I hereto whose equity interests are pledged hereunder.
C&H Markup: No changes to the definition itself.
> C&H Comment: The definition is acceptable in form. We confirm that Schedule I should correctly list all three vessel-owning subsidiary entities: Thalassa Dry Bulk Holdings Ltd. (Cyprus), Thalassa Tanker Operations Ltd. (Republic of the marshall Islands), and Thalassa Logistics International Ltd. (Cyprus). Our comments on the population of Schedule I are set forth below in the Schedules section of this markup.
"Pledged Shares"
WJA Draft: "Pledged Shares" means 100% of the issued and outstanding equity interests in each Pledged Entity, together with any additional equity interests hereafter acquired.
C&H Markup:
"Pledged Shares" means .
> C&H Comment: We have revised the definition of "Pledged Shares" to clarify that "equity interests" includes shares, membership interests, partnership interests, and other ownership interests as applicable to each Pledged Entity's jurisdiction and entity type. The revised definition also expressly captures dividends, distributions, and related proceeds, and includes an automatic attachment provision for after-acquired shares. For the Cyprus entities, the equity interests take the form of shares in a private limited company under Cyprus Companies Law, Cap. 113. For the marshall Islands entity, the equity interests take the form of registered shares under the marshall Islands Business Corporations Act. This level of specificity avoids any ambiguity as to the nature of the interests being pledged across the three jurisdictions.
"Pledgors"
WJA Draft: "Pledgors" means Thalassa Shipping & Logistics SA and each Guarantor that directly holds equity interests in a Pledged Entity.
C&H Markup:
"Pledgors" means .
> C&H Comment: We have revised the definition to specifically identify each entity acting as a Pledgor, rather than relying on the generic cross-reference to "each Guarantor that directly holds equity interests in a Pledged Entity." This is important for clarity and certainty, particularly in a multi-jurisdictional structure. We have confirmed that TSL directly holds the equity interests in Thalassa Dry Bulk Holdings Ltd. and Thalassa Logistics International Ltd. However, we note an open question as to whether TSL holds shares in Thalassa Tanker Operations Ltd. directly or through Thalassa Dry Bulk Holdings Ltd. as an intermediate holding company. We have submitted a query to our client (Aris Komnenidis) and will update this definition upon receipt of confirmation of the ownership chain. We request that WJA also confirm its understanding of the corporate structure.
"Secured Obligations"
WJA Draft: "Secured Obligations" has the meaning assigned to such term in the Credit Agreement.
C&H Markup: No changes proposed.
> C&H Comment: Acceptable as drafted. We confirm that this cross-reference should align with the definition of "Secured Obligations" in the Credit Agreement, which we understand to cover all obligations under the Credit Agreement, any Hedging Agreements, and any Cash Management Agreements entered into with Lenders or their affiliates. We will verify this upon finalization of the Credit Agreement.
"UCC"
WJA Draft: "UCC" means the Uniform Commercial Code as in effect in the State of New York.
C&H Markup:
"UCC" means the Uniform Commercial Code as in effect in the State of New York .
> C&H Comment: We have added a "from time to time" qualifier and a standard choice-of-law provision for UCC financing statement purposes. We also note that UCC perfection is relevant only to the extent that New York law governs the perfection of the security interest. For the equity interests in the Cyprus Pledged Entities (Thalassa Dry Bulk Holdings Ltd. and Thalassa Logistics International Ltd.) and the marshall Islands Pledged Entity (Thalassa Tanker Operations Ltd.), local law perfection requirements will apply in addition to or in lieu of UCC perfection. Our comments on multi-jurisdictional perfection are set forth in detail in Article VII below.
Section 1.02 — Interpretation. WJA Draft: Standard interpretation provisions addressing the treatment of headings (not substantive), references to articles and sections (to this Agreement unless otherwise specified), the meaning of "including" (without limitation), and related matters.
C&H Markup:
> C&H Comment: We propose incorporating the interpretation provisions of the Credit Agreement by reference, rather than including a separate (and potentially inconsistent) set of interpretation rules. This approach promotes uniformity across the Loan Documents and avoids the risk of conflicting interpretation standards. To the extent WJA prefers to retain standalone interpretation provisions, we ask that they be conformed to the Credit Agreement provisions in all material respects.
ARTICLE II — PLEDGE AND GRANT OF SECURITY INTEREST
Section 2.01 — Pledge. WJA Draft:
Each Pledgor hereby pledges, assigns, and grants to the Collateral Agent, for the benefit of the Secured Parties, a first-priority security interest in and lien on all of its right, title, and interest in and to the Pledged Shares, together with all Proceeds thereof.
C&H Markup:
Each Pledgor hereby pledges, assigns, and grants to the Collateral Agent, for the benefit of the Secured Parties, a security interest in and lien on all of its right, title, and interest in and to the Pledged Shares, together with all thereof .
> C&H Comment 4: We have added a "subject to Permitted Liens" qualifier to the first-priority pledge. The Credit Agreement contains a definition of "Permitted Liens" that identifies certain encumbrances permitted to exist on the Borrower's and its subsidiaries' assets, and the security interest created under this Agreement should be consistent with that treatment. Without this qualifier, the representation of "first-priority" status could be read to conflict with the existence of any Permitted Liens, which would create an internal inconsistency within the Loan Documents.
> C&H Comment 5: We have expanded the description of "Proceeds" to make clear that it includes dividends, distributions, liquidating distributions, return of capital, and all other amounts received in respect of the Pledged Shares. The WJA draft's undefined reference to "Proceeds" was ambiguous and, depending on interpretation, might not have captured all forms of value derived from the Pledged Shares. The expanded definition is consistent with Article 9 of the UCC and with the definition of proceeds customarily used in pledge agreements in the shipping finance market.
> C&H Comment 6: We have inserted a proviso clarifying that the pledge does not constitute a transfer of legal title to the Pledged Shares except upon enforcement following an Event of Default. This is an important clarification for several reasons. First, under the laws of certain jurisdictions (including Cyprus and the marshall Islands), a transfer of legal title to shares may trigger regulatory, tax, or corporate governance consequences. Second, the Borrower requires ongoing legal and beneficial ownership of the Pledged Shares in order to operate the vessel-owning subsidiaries in the ordinary course of business. Third, the distinction between a security interest and a transfer of title is fundamental to the characterization of this transaction under applicable law and must be clearly stated to avoid recharacterization risk.
Section 2.02 — Delivery of Pledged Shares. WJA Draft:
Each Pledgor shall deliver to the Collateral Agent (a) all certificates representing the Pledged Shares, together with undated stock transfer powers executed in blank, and (b) any other instruments necessary to perfect the security interest.
C&H Markup:
Each Pledgor shall deliver to the Collateral Agent :
> C&H Comment 7: We have distinguished between certificated and uncertificated shares, as the perfection methods may differ depending on the form of the equity interests. We request that WJA confirm whether the shares in each Pledged Entity are certificated. Based on our current understanding, all three Pledged Entities issue certificated shares, but this should be verified against the organizational documents.
> C&H Comment 8: For the Cyprus entities (Thalassa Dry Bulk Holdings Ltd. and Thalassa Logistics International Ltd.), we have specified that delivery of original share certificates and signed but undated stock transfer forms is required for perfection. Under Cyprus Companies Law, Cap. 113, a share pledge is typically perfected by delivery of the share certificates together with blank transfer instruments. We note that additional perfection steps may be required under Cyprus law, including registration of the charge with the Cyprus Registrar of Companies (see our comments on Article VII below). We recommend that dedicated Cyprus counsel be consulted to confirm the precise perfection requirements.
> C&H Comment 9: For the marshall Islands entity (Thalassa Tanker Operations Ltd.), we have specified that share certificates and endorsed stock powers in blank are the appropriate delivery items under the marshall Islands Business Corporations Act. The marshall Islands generally follows a framework similar to the Model Business Corporation Act, under which perfection of a security interest in certificated shares is achieved by delivery of the certificates with endorsed stock powers. We recommend confirmation from marshall Islands counsel.
> C&H Comment 10: We have specified a reasonable time period for delivery of share certificates and transfer instruments — 10 Business Days after the Closing Date for existing Pledged Shares, and 10 Business Days after acquisition for any additional Pledged Shares. The WJA draft did not specify a time period, which created ambiguity as to when the Pledgors' delivery obligations arise.
Section 2.03 — Registration and Notation. WJA Draft:
Each Pledgor shall cause the pledge to be registered or noted in the books and records of each Pledged Entity.
C&H Markup:
Each Pledgor shall cause the pledge to be registered or noted in the of each Pledged Entity
> C&H Comment 11: For the Cyprus Pledged Entities, we have added a specific requirement to file notice of the charge with the Cyprus Registrar of Companies within the applicable statutory timeframe. Under Section 90 of the Cyprus Companies Law, Cap. 113, charges on the shares of a Cyprus company must be registered with the Registrar within 42 days of the date of creation. Failure to register within the statutory period may render the charge void against the liquidator and creditors of the company. This is a critical perfection step that must be specifically addressed in the Agreement.
> C&H Comment 12: For the marshall Islands Pledged Entity, we have added a requirement to note the pledge on the register of members and/or share register. Under marshall Islands law, notation of the pledge on the company's share register is a customary step to provide notice to the company and third parties. We recommend confirmation from marshall Islands counsel as to the precise requirements.
> C&H Comment 13: We have added a general qualification that the registration and notation requirements apply "to the extent required and permitted under the applicable laws of the jurisdiction of organization of the relevant Pledged Entity." This qualification is important because the specific perfection and registration requirements vary by jurisdiction, and the Agreement should not impose obligations on the Pledgors that may be inconsistent with or in excess of local law requirements.
ARTICLE III — REPRESENTATIONS AND WARRANTIES
Each Pledgor, severally and not jointly (except as otherwise specified herein), represents and warrants to the Collateral Agent and the Secured Parties as of the date hereof and as of the Closing Date as follows:
Section 3.01 — Organization and Standing of Pledged Entities. WJA Draft:
Each Pledgor represents that each Pledged Entity is duly organized, validly existing, and in good standing under the laws of its jurisdiction of organization.
C&H Markup:
Each Pledgor represents that each Pledged Entity is duly organized, validly existing, and in good standing under the laws of its jurisdiction of organization .
> C&H Comment 14: We have proposed a qualifying parenthetical — "to the extent such concept is recognized" — to address the fact that the concept of "good standing" may not be applicable or recognized in all jurisdictions. In particular, the Republic of Cyprus and the Republic of the marshall Islands do not issue "good standing" certificates in the same manner as U.S. state jurisdictions. The representation should use jurisdiction-appropriate formulations, and the "valid existence" concept is the more universally applicable standard. We recommend that the representation be further tailored in consultation with Cyprus and marshall Islands local counsel.
> C&H Comment 15: We have inserted a cross-reference table identifying each Pledged Entity's jurisdiction of organization. This information is critical to the representations and should be set forth clearly in the body of the Agreement (in addition to Schedule I) to avoid any ambiguity.
Section 3.02 — Ownership of Pledged Shares. WJA Draft:
Each Pledgor represents that it is the sole legal and beneficial owner of 100% of the Pledged Shares in the relevant Pledged Entity, free and clear of all liens and encumbrances other than the lien created hereby.
C&H Markup:
Each Pledgor represents that it is the sole legal and beneficial owner of 100% of the Pledged Shares in the relevant Pledged Entity, free and clear of all liens .
> C&H Comment 16: We have added "and Permitted Liens" as an exception to the free-and-clear representation, consistent with the Credit Agreement's treatment of Permitted Liens. The WJA draft's formulation would have been technically inaccurate to the extent that any Permitted Liens exist on the Pledged Shares, even if such liens are expressly permitted under the Credit Agreement.
> C&H Comment 17: We have added a knowledge qualifier for the representation regarding the absence of third-party claims or encumbrances. While each Pledgor can and should represent that it is the sole legal and beneficial owner of its Pledged Shares, a flat representation that no other person has any claim or interest may not be within the Pledgor's ability to confirm with certainty, particularly in a multi-jurisdictional structure where third-party claims could arise under local law without the Pledgor's knowledge. A "best knowledge" qualifier is appropriate and consistent with market practice.
> C&H Comment 18: We note that the existing Harborstone National Bank revolving credit facility — the $125,000,000 revolving credit agreement originally dated November 15, 2018, as amended by the First Amendment dated June 30, 2020 and the Second Amendment dated March 1, 2022 — may include share pledges over some or all of the Pledged Entities. Any such existing share pledges must be released at or prior to the closing of the Facility in order for the representation in this Section 3.02 to be accurate. We request that WJA confirm whether it has received information regarding existing Harborstone share pledges and whether arrangements are being made to obtain payoff letters and lien release documentation from Harborstone. We understand the relevant Harborstone contact is Philip Rennert at 350 Park Avenue, 20th Floor, New York, NY 10022. We will separately confirm with our client.
Section 3.03 — Authorization. WJA Draft:
Each Pledgor represents that the execution, delivery, and performance of this Agreement has been duly authorized by all necessary corporate or other organizational action.
C&H Markup:
Each Pledgor represents that the execution, delivery, and performance of this Agreement been duly authorized by all necessary action .
> C&H Comment 19: We have conformed the authorization representation to reflect the specific organizational types of each Pledgor entity. TSL is a société anonyme organized under Greek law, and the authorization requirements for such an entity are governed by Greek corporate law (including any requirements for board of directors' approval, extraordinary general meeting approval, or other actions). The Cyprus Pledged Entities are private limited companies under Cyprus law, and the marshall Islands Pledged Entity is a private limited company under marshall Islands law. The representation should acknowledge these distinctions rather than relying on the generic "corporate or other organizational" formulation.
> C&H Comment 20: We note that the Borrower's Corporate Authorization Checklist dated April 20, 2023 sets forth the board resolutions and other corporate actions required for the execution and delivery of this Agreement and the other Loan Documents. We request that WJA confirm that the authorization representation will be supported by certified copies of the relevant board resolutions to be delivered as a closing condition. C&H will prepare the Secretary's Certificates for TSL upon finalization of the required corporate actions.
Section 3.04 — No Conflicts; No Consents. WJA Draft:
Each Pledgor represents that the execution, delivery, and performance of this Agreement and the pledge of the Pledged Shares hereunder do not and will not (a) violate the organizational documents of such Pledgor or any Pledged Entity, (b) violate or constitute a default under any contract, agreement, or instrument to which such Pledgor or any Pledged Entity is a party, or (c) violate any applicable law, rule, or regulation, and that no governmental or third-party consent, approval, authorization, license, or filing is required in connection with the execution, delivery, and performance of this Agreement.
C&H Markup:
Each Pledgor represents that the execution, delivery, and performance of this Agreement and the pledge of the Pledged Shares hereunder do not and will not (a) violate the organizational documents of such Pledgor or any Pledged Entity , (b) violate or constitute a default under any contract, agreement, or instrument to which such Pledgor or any Pledged Entity is a party , or (c) violate any applicable law, rule, or regulation , and that no governmental or third-party consent, approval, authorization, license, or filing is required in connection with the execution, delivery, and performance of this Agreement .
> C&H Comment 21: We have added a carve-out for consents, approvals, and filings that have been obtained or will be obtained prior to closing. The WJA draft's flat representation that no consents or filings are required is technically inaccurate, given that registration filings with the Cyprus Registrar of Companies are required to perfect the charges over the shares of the Cyprus Pledged Entities. The carve-out appropriately addresses this issue.
> C&H Comment 22: We have added a Material Adverse Effect qualifier for the no-conflict and no-consent representations under clauses (b) and (c). This qualifier is consistent with the corresponding representations in the Credit Agreement and is appropriate given the multi-jurisdictional nature of the Pledgors' operations, where minor or immaterial conflicts with non-material contracts or obscure regulatory requirements should not give rise to a breach of representation.
> C&H Comment 23: We note that the Greek-law opinion from Pavlopoulos & Drakos Law Firm (22 Filellinon Street, Athens 105 57, Greece; lead partner Theodoros Pavlopoulos) will address Greek corporate power and no-conflict matters for TSL. Calderwood & Harkness will issue a New York law opinion covering the enforceability of this Agreement under New York law. However, C&H cannot opine on matters of Cyprus law or marshall Islands law. Separate local counsel opinions from qualified Cyprus counsel and marshall Islands counsel will be required to confirm the validity, enforceability, and perfection of the share pledge in those jurisdictions. We recommend that the engagement of such local counsel be addressed promptly.
Section 3.05 — Capitalization. WJA Draft:
Each Pledgor represents as to the authorized, issued, and outstanding equity interests of each Pledged Entity, that all Pledged Shares are duly authorized, validly issued, fully paid and non-assessable.
C&H Markup:
Each Pledgor represents that all Pledged Shares duly authorized, validly issued, fully paid and .
> C&H Comment 24: We have added a cross-reference to Schedule I for the capitalization details. The specific numbers of authorized shares, issued shares, and par values for each Pledged Entity should be populated on Schedule I or on a separate capitalization schedule attached hereto. We are in the process of confirming these details with our client and will provide the information as soon as it is available.
> C&H Comment 25: We have qualified the "non-assessable" representation by adding a parenthetical "to the extent such concept is recognized under the laws of the jurisdiction of organization of the relevant Pledged Entity." The concept of "non-assessable" shares is a feature of certain U.S. corporate law statutes and may not be applicable or recognized under Cyprus law or marshall Islands law. We request that WJA confirm with marshall Islands counsel whether the "non-assessable" concept applies under the marshall Islands Business Corporations Act. If not, the term should be deleted for the marshall Islands entity.
ARTICLE IV — COVENANTS
Each Pledgor covenants and agrees that, so long as any Secured Obligation remains outstanding or any commitment under the Credit Agreement remains in effect, such Pledgor shall comply with the following covenants:
Section 4.01 — Maintenance of Existence. WJA Draft:
Each Pledgor shall maintain the legal existence of each Pledged Entity.
C&H Markup:
Each Pledgor shall maintain .
> C&H Comment 26: We have added a qualifier "except as otherwise permitted under the Credit Agreement" to ensure that the maintenance of existence covenant does not inadvertently prohibit mergers, dissolutions, or dispositions that are permitted under the Credit Agreement's negative covenants. For example, if the Borrower is permitted under the Credit Agreement to sell a vessel-owning subsidiary in connection with a fleet restructuring or permitted disposition, the maintenance of existence covenant in this Agreement should not independently block such transaction. The qualifier ensures consistency between the Agreement and the Credit Agreement.
Section 4.02 — No Disposition of Pledged Shares. WJA Draft:
No Pledgor shall sell, transfer, or otherwise dispose of any Pledged Shares without the prior written consent of the Collateral Agent.
C&H Markup:
No Pledgor shall sell, transfer, assign, pledge, hypothecate, or otherwise dispose of any Pledged Shares without the prior written consent of the ; provided, however,
> C&H Comment 27: We have added exceptions to the disposition restriction for (a) dispositions permitted under the Credit Agreement, (b) dispositions required in connection with mandatory prepayment events, and (c) internal reorganizations permitted under the Credit Agreement. The WJA draft's absolute prohibition on disposition without Collateral Agent consent is inconsistent with the Credit Agreement, which permits certain vessel sales and other dispositions subject to specified conditions. The share pledge should not impose restrictions that are more onerous than those in the Credit Agreement, and the exceptions should be self-executing (rather than requiring Collateral Agent consent) to the extent the underlying disposition is already permitted under the Credit Agreement.
> C&H Comment 28: We have cross-referenced the release provisions in Article VIII of this Agreement. The mechanics should work as follows: upon a permitted vessel sale, the Borrower certifies compliance with the release conditions (including maintenance of the collateral coverage ratio), and the corresponding share pledge is released automatically. This is discussed in greater detail in our comments on Article VIII below.
Section 4.03 — No Issuance of Additional Equity. WJA Draft:
No Pledgor shall permit any Pledged Entity to issue additional equity interests without the prior consent of the Collateral Agent.
C&H Markup:
No Pledgor shall permit any Pledged Entity to issue additional equity interests without the prior consent of the .
> C&H Comment 29: We have narrowed the restriction to apply only to issuances that would be dilutive to the Pledgor's ownership percentage. Non-dilutive issuances (such as stock dividends or stock splits) do not reduce the value or percentage ownership of the Pledged Shares and therefore should not require Collateral Agent consent. This is consistent with the Borrower's need to maintain ordinary course flexibility in the administration of its subsidiaries.
> C&H Comment 30: We have added an after-acquired shares clause providing that any additional equity interests acquired by a Pledgor in a Pledged Entity automatically become Pledged Shares subject to this Agreement, with a delivery obligation for certificates and transfer instruments within 10 Business Days. This clause works in conjunction with the after-acquired property language in the definition of "Pledged Shares" (Section 1.01) and Section 2.02 (delivery) to ensure comprehensive coverage of all equity interests.
Section 4.04 — Further Assurances. WJA Draft:
Each Pledgor shall, at its expense, execute and deliver all further instruments and documents and take all further action that the Collateral Agent may reasonably request in order to perfect and protect the security interest and the priority thereof in the Pledged Shares, including filing financing statements and registrations under the UCC or other applicable law.
C&H Markup:
Each Pledgor shall, at expense , execute and deliver all further instruments and documents and take all further action that the Collateral Agent may reasonably request in order to perfect and protect the security interest and the priority thereof in the Pledged Shares, including filing financing statements and registrations under the UCC or other applicable law .
> C&H Comment 31: We have added a "commercially reasonable" qualifier to the further assurances covenant. While we acknowledge the Collateral Agent's legitimate interest in ensuring that the security interest is properly perfected and maintained, the further assurances obligation should not be open-ended or require the Pledgors to take actions that are disproportionate, impractical, or unreasonably burdensome relative to the benefit conferred on the Secured Parties.
> C&H Comment 32: We have specified that costs and expenses of further assurances shall be borne by the Borrower (rather than by each Pledgor individually) and shall be limited to "reasonable and documented out-of-pocket expenses." This is consistent with the expense allocation framework in the Credit Agreement, under which the Borrower bears the costs of the Loan Documents, and avoids imposing direct expense obligations on subsidiary Pledgors.
> C&H Comment 33: We have added specific references to the filings and registrations that may be required in Cyprus and the Republic of the marshall Islands. For the Cyprus Pledged Entities, the further assurances obligation may include filings with the Cyprus Registrar of Companies. For the marshall Islands Pledged Entity, filings may be required with the Maritime Administrator and/or the Trust Company of the marshall Islands, Inc. All such filings are at the Borrower's expense.
Section 4.05 — Notifications. WJA Draft:
Each Pledgor shall promptly notify the Collateral Agent of any event that could materially impair the value of the Pledged Shares or the security interest created hereunder.
C&H Markup:
Each Pledgor shall notify the Collateral Agent of any event that could materially the value of the Pledged Shares or the security interest created hereunder .
> C&H Comment 34: We have replaced the undefined term "promptly" with a specific time period — five (5) Business Days after a Responsible Officer of the Pledgor becomes aware of the relevant event. The use of an objective time period provides certainty and avoids disputes as to whether notice was given "promptly." Five Business Days is a reasonable period given the multi-jurisdictional and multi-entity nature of the Borrower's corporate structure.
> C&H Comment 35: We have added a materiality qualifier — requiring notice only for events that "could reasonably be expected to materially and adversely affect" the value of the Pledged Shares or the security interest. The WJA draft's lower threshold of events that "could" impair value would arguably require notice of immaterial events and impose an unreasonable administrative burden on the Pledgors.
ARTICLE V — VOTING RIGHTS AND DISTRIBUTIONS
Section 5.01 — Voting Rights Prior to Event of Default. WJA Draft:
So long as no Event of Default shall have occurred and be continuing, each Pledgor shall be entitled to exercise all voting and consensual rights pertaining to the Pledged Shares for any purpose not inconsistent with the terms of this Agreement, the Credit Agreement, or any other Loan Document.
C&H Markup: No substantive changes proposed to the WJA draft of Section 5.01.
> C&H Comment 36: We confirm that this provision is acceptable in principle. We note that the drafting correctly requires that an "Event of Default" (not merely a "Default") has occurred and is continuing before the voting rights transfer. This is an important distinction, as a Default is a precursor to an Event of Default and may be cured before maturing into an Event of Default.