DEED OF ASSIGNMENT OF EARNINGS AND INSURANCES
(Form — For Use in Respect of Each Collateral Vessel)
by
[Insert Name of Relevant Fleet-Owning Subsidiary]
(the "Assignor")
in favor of
ATLAS COLLATERAL AGENCY PTE. LTD.
(the "Security Agent")
Entered into in connection with the $400,000,000 aggregate principal amount of 8.750% Senior Secured Notes due 2029 issued by Thalassa Shipping & Logistics SA and Thalassa Finance Pte. Ltd. (together, the "Co-Issuers")
Governed by the laws of the Republic of Singapore
TEMPLATE INSTRUCTION: This is a form document prepared for use in connection with the offering of the Notes. Bracketed placeholders (indicated by "[Insert]" or "[●]") and italic instructions indicate vessel-specific and party-specific information to be completed for each Collateral Vessel at execution. This form should be reviewed by local counsel in the relevant flag state jurisdiction prior to execution. This form is unexecuted. Signature pages have been assembled but not signed due to the suspension of the offering on November 14, 2022.
SECTION 1: DEFINITIONS AND INTERPRETATION
1.1 Definitions. In this Deed, unless the context otherwise requires, the following terms shall have the meanings set out below:
"Approved Broker" means [Insert name(s) of approved brokers, if any, or such broker or brokers as may be designated from time to time as "Approved Brokers" under the Indenture].
"Assigned Property" means the aggregate of the Earnings, the Insurances, and the Requisition Compensation, each as defined in this Section 1.1.
"Assignor" means [Insert full legal name of the relevant fleet-owning subsidiary, being one of: Thalassa Dry Bulk Operations Ltd., a company organized under the laws of the Republic of Malta (company registration number C 92478); Thalassa Container Feeder Ltd., a corporation organized under the laws of the Republic of the marshall Islands (registration number 105682); or such other Guarantor Subsidiary as owns the relevant Collateral Vessel], having its registered office at [Insert registered office address].
"Business Day" means a day (other than a Saturday, Sunday, or public holiday) on which commercial banks are open for general business in each of Singapore, New York City (New York, United States), London (England, United Kingdom), Piraeus (Hellenic Republic), and [Insert relevant flag state jurisdiction in which the Vessel is registered].
"Charter" or "Charter Party" means any time charter, voyage charter, bareboat charter, contract of affreightment, or other contract for the employment, use, or operation of the Vessel, including any addenda, riders, amendments, extensions, renewals, or replacements thereof.
"Co-Issuers" means, collectively:
(a) Thalassa Shipping & Logistics SA, a société anonyme organized under the laws of the Hellenic Republic (GEMI No. 148276201000), having its registered office at 42 Akti Miaouli, Piraeus 185 35, Greece; and
(b) Thalassa Finance Pte. Ltd., a Singapore private company limited by shares (UEN 202209345K), having its registered office at 8 Marina Boulevard, #36-02, Marina Bay Financial Centre Tower 1, Singapore 018981,
and "Co-Issuer" means either of them.
"Collateral Vessel" or "Vessel" means the vessel described in Schedule 1 (Vessel Particulars), including [Insert vessel name], IMO number [Insert], registered under the flag of [Insert flag state], with official number [Insert], having a gross tonnage of [Insert], a deadweight tonnage of [Insert], built in [Insert year of build], and classified with [Insert classification society and class notation details], being one of the twenty-eight (28) designated Collateral Vessels under the Indenture (out of the total fleet of fifty (50) vessels owned or controlled by the Thalassa Group).
"Earnings" has the meaning given to it in Section 2.1(a) of this Deed.
"Enforcement Event" means the occurrence of an Event of Default under the Indenture that is continuing and in respect of which the Security Agent has been directed by the Trustee (acting on behalf of the requisite proportion of Noteholders as specified in the Indenture) to enforce the security constituted by this Deed and/or any other Security Document.
"Enforcement Notice" has the meaning given to it in Section 5.2 of this Deed.
"Event of Default" has the meaning given to the term "Event of Default" in the Indenture.
"Indenture" means the indenture dated [●] 2022 (near-final, 5th draft dated September 6, 2022) among the Co-Issuers, the Guarantor Subsidiaries, the Trustee, and the Security Agent, as the same may be amended, restated, supplemented, or otherwise modified from time to time in accordance with its terms, governing the issuance of the Notes.
"Insurances" has the meaning given to it in Section 2.2(a) of this Deed.
"Intercreditor Agreement" means the intercreditor agreement dated [●] 2022 (near-final, 3rd draft) among the Co-Issuers, the Guarantor Subsidiaries, the Security Agent, the Trustee, and any other parties thereto from time to time, as the same may be amended, restated, supplemented, or otherwise modified from time to time in accordance with its terms.
"Notes" means the $400,000,000 aggregate principal amount of 8.750% Senior Secured Notes due October 15, 2029, issued by the Co-Issuers pursuant to the Indenture.
"Noteholders" means, at any time, the holders of the Notes then outstanding.
"Permitted Liens" has the meaning given to the term "Permitted Liens" in the Indenture.
"Requisition Compensation" has the meaning given to it in Section 2.3(a) of this Deed.
"Secured Obligations" means all obligations of the Co-Issuers and the Guarantor Subsidiaries (including the Assignor) under or in connection with the Notes, the Indenture, the Guarantees, and each other Security Document, including without limitation all obligations in respect of principal, interest (including any default interest), premium (if any), make-whole amounts, fees, costs, expenses, indemnities, and all other amounts whatsoever from time to time due and payable or owing by the Co-Issuers or any Guarantor Subsidiary under any of the foregoing.
"Security Agent" means Atlas Collateral Agency Pte. Ltd., a Singapore private company limited by shares (UEN 200115678R), having its registered office at 80 Robinson Road, #02-00, Singapore 068898, acting in its capacity as Security Agent under the Indenture and the Intercreditor Agreement, and includes any successor Security Agent appointed in accordance with the terms of the Indenture and the Intercreditor Agreement. The key contact for the Security Agent is Karen Ng, Associate Director, Collateral Services.
"Security Document" means this Deed, the Ship Mortgage, and each other document creating, evidencing, or perfecting security for the Secured Obligations, as such term is defined in the Indenture.
"Ship Mortgage" means the first-priority deed of ship mortgage (or, as the context requires, statutory mortgage, preferred mortgage, or hypothèque, as applicable under the laws of the flag state of the Vessel) over the Vessel executed by the Assignor in favor of the Security Agent in connection with the Indenture.
"Trustee" means Marlowe Asset Management Trust Company of Singapore Pte. Ltd. (UEN 199804782D), a Singapore private company limited by shares, having its registered office at 80 Robinson Road, #02-00, Singapore 068898, acting in its capacity as indenture trustee under the Indenture, and includes any successor trustee appointed in accordance with the terms of the Indenture.
Where a term is defined in the Indenture and used but not separately defined in this Deed, such term shall have the meaning given to it in the Indenture. In the event of any conflict between the definition of a term in this Deed and the definition of the same term in the Indenture, the definition in the Indenture shall prevail unless the context of this Deed clearly requires otherwise. Additional vessel-specific definitions as may be required by the laws of the flag state of the Vessel shall be set forth in a supplement or appendix to this Deed.
1.2 Interpretation. In this Deed, unless the context otherwise requires:
(a) words importing the singular number shall include the plural number and vice versa, and words importing any gender shall include every gender;
(b) references to a "person" shall include any individual, corporation, company, partnership, limited liability company, joint venture, trust, unincorporated association, government or governmental authority or agency, or any other entity of whatever nature;
(c) references to any party to this Deed or to any other agreement or document shall include that party's successors in title, permitted transferees, and permitted assigns;
(d) the headings and sub-headings in this Deed are inserted for convenience of reference only and shall not affect the construction or interpretation of this Deed;
(e) references to any statute, law, regulation, or ordinance shall be construed as a reference to such statute, law, regulation, or ordinance as the same may have been, or may from time to time be, amended, modified, extended, consolidated, replaced, or re-enacted;
(f) references to any agreement or document shall be to such agreement or document as the same may have been, or may from time to time be, amended, restated, supplemented, or otherwise modified in accordance with its terms;
(g) references to "including" or "includes" shall be deemed to be followed by the words "without limitation";
(h) references to a "Section" or "Schedule" are references to a Section of, or Schedule to, this Deed, unless the context expressly provides otherwise;
(i) the words "hereof," "herein," "hereto," "hereunder," and words of similar import, when used in this Deed, shall refer to this Deed as a whole and not to any particular provision of this Deed;
(j) references to "assets" include present and future properties, revenues, and rights of every description;
(k) where the Assignor is required to use "best endeavors" or "reasonable endeavors," such expressions shall be construed in accordance with their meaning under the laws of the Republic of Singapore;
(l) a reference to any amount shall, unless the context otherwise requires, be to an amount denominated in United States Dollars ("USD" or "$");
(m) references to time are references to Singapore time (SGT, UTC+8); and
(n) the principles of interpretation applicable under the laws of the Republic of Singapore shall govern the construction and interpretation of this Deed.
In the event of any inconsistency between the provisions of this Deed and the provisions of the Indenture, the provisions of the Indenture shall prevail, except to the extent that this Deed expressly confers additional rights on the Security Agent that are not inconsistent with the Indenture, in which case such additional rights shall be given full effect.
1.3 Schedules and Annexes
The following Schedules are attached to and form an integral part of this Deed:
Schedule 1: Vessel Particulars
Schedule 2: Form of Notice of Assignment to Charterers
Schedule 3: Form of Notice of Assignment to Insurers/Brokers
Schedule 4: Form of Acknowledgment (Charterer)
Schedule 5: Form of Acknowledgment (Insurer/Broker)
Schedule 6: Existing Charters and Insurance Policies (to be completed at execution)
Each Schedule shall be completed with the relevant vessel-specific and party-specific information at the time of execution of this Deed in respect of a particular Collateral Vessel.
SECTION 2: ASSIGNMENT
2.1 Assignment of Earnings
The Assignor, as legal and beneficial owner and for valuable consideration (the receipt and sufficiency of which the Assignor hereby acknowledges), hereby assigns absolutely to the Security Agent by way of first-priority security for the discharge of the Secured Obligations all of the Assignor's right, title, and interest, both present and future, in, to, and under:
(a) all charter hire, freight, deadfreight, demurrage, detention money, damages (including damages for breach or termination of any Charter Party), and all other sums whatsoever payable or to become payable to the Assignor arising out of the use, employment, or operation of the Vessel, whether under any Charter Party or otherwise, whether now existing or hereafter arising, and whether payable in cash or in kind (collectively, the "Earnings");
(b) all claims, rights, causes of action, and remedies of the Assignor against any charterer, sub-charterer, shipper, consignee, cargo interest, port authority, or other person whatsoever in respect of the Earnings or arising from or in connection with any Charter Party or the use, employment, or operation of the Vessel;
(c) all proceeds of any of the foregoing, in whatever form received, including all cash proceeds, non-cash proceeds, insurance proceeds relating thereto, and any proceeds of proceeds; and
(d) all present and future Charter Parties relating to the Vessel, including all renewals, extensions, novations, supplements, amendments, and replacements thereof, and all rights of the Assignor thereunder.
For the avoidance of doubt, the assignment effected by this Section 2.1 covers all present and future Charter Parties relating to the Vessel, including any Charter Party entered into after the date of this Deed, whether by way of renewal, extension, replacement, or otherwise.
2.2 Assignment of Insurances
The Assignor, as legal and beneficial owner and for valuable consideration (the receipt and sufficiency of which the Assignor hereby acknowledges), hereby assigns absolutely to the Security Agent by way of first-priority security for the discharge of the Secured Obligations all of the Assignor's right, title, and interest, both present and future, in, to, and under:
(a) all policies and contracts of insurance of every kind and nature (including, without limitation, hull and machinery insurance, war risks insurance, protection and indemnity (P&I) insurance, loss of hire insurance, and increased value insurance) relating to or covering the Vessel and all renewals, extensions, supplements, and replacements thereof (collectively, the "Insurances");
(b) all claims and proceeds arising under or in respect of any Insurance, including without limitation total loss proceeds, constructive total loss proceeds, partial loss proceeds, salvage proceeds, sue and labor recoveries, third-party liability recoveries, return premiums, and any other moneys payable or to become payable under or in respect of any Insurance;
(c) all rights of the Assignor to make, pursue, settle, compromise, or withdraw any claims under or in respect of any Insurance, and to receive payment in respect thereof; and
(d) any and all insurance proceeds held by any broker, agent, underwriter, intermediary, or other person on behalf of the Assignor, whether now held or hereafter received.
2.3 Assignment of Requisition Compensation
The Assignor, as legal and beneficial owner and for valuable consideration (the receipt and sufficiency of which the Assignor hereby acknowledges), hereby assigns absolutely to the Security Agent by way of first-priority security for the discharge of the Secured Obligations all of the Assignor's right, title, and interest, both present and future, in, to, and under:
(a) all compensation, hire, charter hire equivalent, or other moneys payable or to become payable by any government, governmental authority, international organization, or other public body or entity in respect of any compulsory acquisition, requisition for title, requisition for hire, seizure, confiscation, expropriation, nationalization, or other compulsory disposition or taking of the Vessel (collectively, "Requisition Compensation"); and
(b) all claims, rights, causes of action, and remedies of the Assignor against any government, governmental authority, international organization, or other public body or entity in connection with any such acquisition, requisition, seizure, confiscation, expropriation, nationalization, or compulsory disposition of the Vessel.
2.4 Nature of Assignment
The assignment created by Sections 2.1, 2.2, and 2.3 of this Deed is a present, unconditional, and absolute assignment by way of security. Without limiting the generality of the foregoing:
(a) the assignment is granted as continuing security for the payment, discharge, and performance of all Secured Obligations from time to time owing, due, or remaining unpaid or unperformed, and the assignment shall remain in full force and effect until discharged in accordance with Section 7 of this Deed;
(b) the assignment shall not be satisfied, discharged, or affected by any intermediate payment or discharge of the Secured Obligations in whole or in part, or by any settlement of account, or by any other matter or thing whatsoever;
(c) the assignment shall not be affected by any change in the constitution, name, or corporate structure of the Assignor, the Security Agent, the Trustee, or any Co-Issuer;
(d) the Security Agent shall hold the benefit of the Assigned Property on trust for the Noteholders and for any other persons entitled to the benefit of the Secured Obligations, in each case in accordance with the terms of the Indenture and the Intercreditor Agreement; and
(e) the Security Agent shall not be deemed to be in possession, custody, or control of the Assigned Property by reason of this assignment unless and until the Security Agent has delivered an Enforcement Notice and has taken active steps to collect or receive the Assigned Property.
2.5 Supplemental to Ship Mortgage
This Deed is supplemental to and shall be read together with the Ship Mortgage over the Vessel. The security created by this Deed is in addition to, and not in substitution for, the Ship Mortgage and any other Security Document relating to the Vessel or any other Collateral Vessel. Nothing in this Deed shall be construed as limiting, diminishing, or otherwise adversely affecting any right, power, or remedy of the Security Agent under the Ship Mortgage or any other Security Document. The Security Agent shall be entitled to enforce the security created by this Deed independently of, or concurrently with, the Ship Mortgage and any other Security Document, as it may determine in its sole discretion (subject to the directions of the Trustee in accordance with the Indenture and the Intercreditor Agreement).
SECTION 3: REPRESENTATIONS AND WARRANTIES OF THE ASSIGNOR
The Assignor hereby represents and warrants to the Security Agent (for itself and on behalf of the Trustee and the Noteholders) as follows, and acknowledges that the Security Agent is entering into this Deed in reliance on each such representation and warranty:
3.1 Corporate Status and Authority
The Assignor is duly organized, validly existing, and in good standing (or the equivalent thereof) under the laws of [Insert jurisdiction of organization — e.g., the Republic of Malta or the Republic of the marshall Islands]. The Assignor has all requisite corporate power and authority to own, lease, and operate the Vessel and its other assets and to carry on its business as currently conducted, and to execute, deliver, and perform its obligations under this Deed and each other Security Document to which it is a party. The execution, delivery, and performance by the Assignor of this Deed have been duly authorized by all necessary corporate action on the part of the Assignor, including all requisite resolutions of its board of directors (or equivalent governing body) and, where required, its shareholders.
3.2 Binding Obligations
This Deed has been duly executed and delivered by the Assignor and constitutes the legal, valid, and binding obligations of the Assignor, enforceable against the Assignor in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and other similar laws of general applicability relating to or affecting creditors' rights generally and to general equitable principles (whether considered in a proceeding in equity or at law).
3.3 No Conflict
The execution, delivery, and performance by the Assignor of this Deed and the consummation of the transactions contemplated hereby do not and will not:
(a) violate, conflict with, or result in a breach of any provision of the memorandum and articles of association, certificate of incorporation, by-laws, or other organizational or constitutive documents of the Assignor;
(b) violate, conflict with, or result in a breach of, or constitute a default (or an event that with notice or lapse of time or both would constitute a default) under, or give rise to any right of termination, cancellation, acceleration, or loss of rights under, any contract, agreement, indenture, mortgage, lease, license, or other instrument to which the Assignor is a party or by which the Assignor or the Vessel or any of its assets is bound;
(c) violate any applicable law, statute, regulation, rule, order, judgment, injunction, or decree of any court or governmental authority applicable to the Assignor, the Vessel, or any of the Assigned Property; or
(d) result in the creation or imposition of any lien, charge, encumbrance, or security interest upon any of the Assigned Property, other than the security interest created by this Deed and the Permitted Liens.
3.4 Title to Assigned Property
The Assignor is the sole legal and beneficial owner of the Assigned Property, free and clear of all liens, charges, mortgages, pledges, assignments, hypothecations, security interests, encumbrances, and adverse claims of any kind or nature whatsoever, other than Permitted Liens. No prior assignment, transfer, or encumbrance of the Earnings, the Insurances, or the Requisition Compensation (or any part thereof) has been made by the Assignor, and the Assignor has not agreed to make any such assignment, transfer, or encumbrance. The Assignor has good right, full power, and lawful authority to assign the Assigned Property in the manner and for the purposes expressed and provided in this Deed.
3.5 No Default
No Event of Default under the Indenture, and no event that with the giving of notice or lapse of time, or both, would constitute an Event of Default under the Indenture, has occurred and is continuing as of the date of this Deed.
3.6 Consents and Approvals
All consents, licenses, authorizations, registrations, filings, approvals, and other actions by or with any governmental authority, regulatory body, or other person required for the due execution, delivery, and performance by the Assignor of this Deed and the validity and enforceability hereof have been duly obtained, made, or taken (as the case may be) and are in full force and effect. No such consent, license, authorization, registration, filing, or approval is subject to any condition that has not been satisfied or complied with in full.
3.7 Existing Charters
Schedule 6 (Part A) hereto sets forth a true, complete, and correct list of all existing Charter Parties relating to the Vessel as of the date of this Deed. For each such Charter Party, Schedule 6 (Part A) specifies the charterer name, type of charter, commencement date, expected duration and expiry or redelivery date, charter hire rate, payment currency, payment frequency, and whether the Charter Party contains any assignment restrictions. There are no other Charter Parties, contracts of employment, or arrangements for the commercial use of the Vessel that are in effect as of the date of this Deed, other than those listed in Schedule 6 (Part A).
3.8 Existing Insurances
Schedule 6 (Part B) hereto sets forth a true, complete, and correct list of all existing Insurance policies and contracts of insurance relating to the Vessel as of the date of this Deed. For each such Insurance, Schedule 6 (Part B) specifies the insurer or P&I club name, policy or entry number, type of insurance (hull and machinery, war risks, P&I, loss of hire, or increased value), coverage amounts and limits, deductibles, premiums, policy period (inception and expiry dates), broker name and contact information, and the status of loss payee and additional assured endorsements. All Insurances listed in Schedule 6 (Part B) are in full force and effect, all premiums due thereon have been paid, and no notice of cancellation or non-renewal has been received by the Assignor.
3.9 No Claims
No material claim is pending or, to the knowledge of the Assignor, threatened against the Assignor or the Vessel in respect of any part of the Assigned Property. There are no circumstances known to the Assignor that are likely to give rise to any such material claim. No dispute exists between the Assignor and any charterer regarding the payment of Earnings, and no dispute exists between the Assignor and any insurer, P&I club, or insurance broker regarding the validity, coverage, or payment under any Insurance.
SECTION 4: COVENANTS OF THE ASSIGNOR
The Assignor hereby covenants and undertakes with the Security Agent (for itself and on behalf of the Trustee and the Noteholders) as follows, and agrees that, for so long as any Secured Obligation remains outstanding or any commitment under the Indenture remains in effect:
4.1 Notification of Assignment — Charterers
The Assignor shall, promptly following the execution of this Deed (and in any event within five (5) Business Days thereof), deliver to each charterer of the Vessel under an existing Charter Party a notice of assignment in substantially the form set forth in Schedule 2 (Form of Notice of Assignment to Charterers), duly executed by an authorized signatory of the Assignor. The Assignor shall use its best endeavors to procure from each such charterer an acknowledgment of such notice in substantially the form set forth in Schedule 4 (Form of Acknowledgment — Charterer), duly executed by an authorized signatory of such charterer, and to deliver the original of each such acknowledgment to the Security Agent within twenty (20) Business Days following the date on which the notice was delivered.
Any new Charter Party entered into by the Assignor after the date of this Deed shall contain, or shall be accompanied by, a notice of assignment in the form of Schedule 2 and an acknowledgment in the form of Schedule 4, to be delivered to and procured from the relevant charterer promptly upon entry into such new Charter Party.
4.2 Notification of Assignment — Insurers and Brokers
The Assignor shall, promptly following the execution of this Deed (and in any event within five (5) Business Days thereof), deliver to each insurer, P&I club, and insurance broker for the Vessel a notice of assignment in substantially the form set forth in Schedule 3 (Form of Notice of Assignment to Insurers/Brokers), duly executed by an authorized signatory of the Assignor. The Assignor shall use its best endeavors to procure from each such insurer, P&I club, and insurance broker an acknowledgment of such notice in substantially the form set forth in Schedule 5 (Form of Acknowledgment — Insurer/Broker), duly executed by an authorized signatory of such insurer, P&I club, or insurance broker, and to deliver the original of each such acknowledgment to the Security Agent within twenty (20) Business Days following the date on which the notice was delivered.
The Assignor shall re-deliver such notices (and procure such acknowledgments) upon each renewal, replacement, or material amendment of any Insurance, and in any event not less than annually.
4.3 Payment of Earnings Prior to Enforcement
Prior to the occurrence of an Enforcement Event:
(a) the Assignor shall be entitled to receive and retain the Earnings and to apply the same in the ordinary course of its business for the purposes permitted under the Indenture (including the payment of operating expenses, drydocking costs, and other amounts permitted to be paid from the Earnings under the terms of the Indenture); and
(b) the Assignor shall ensure that all Earnings are paid into the designated account or accounts specified in the Indenture, and shall not divert or redirect Earnings to any other account without the prior written consent of the Security Agent.
Upon and after the occurrence of an Enforcement Event, and following the delivery of an Enforcement Notice by the Security Agent in accordance with Section 5.2 of this Deed:
(c) all Earnings shall be paid directly to an account designated by the Security Agent (or as otherwise directed by the Security Agent in the Enforcement Notice), and the Assignor's authority to receive and apply the Earnings shall thereupon cease; and
(d) the Assignor shall take all steps necessary to redirect payment of all Earnings to the account designated by the Security Agent, including by delivering irrevocable payment instructions to each charterer.
4.4 Insurance Covenants
The Assignor shall maintain the Insurances in accordance with the requirements of the Indenture and this Deed. Without limiting the generality of the foregoing, the Assignor shall:
(a) maintain hull and machinery insurance on the Vessel for a sum insured of not less than [Insert percentage — typically 110%–120%] of the outstanding principal amount of the Notes attributable to the Vessel on a pro rata basis (calculated by dividing the appraised fair market value of the Vessel by the aggregate appraised fair market value of all Collateral Vessels and multiplying the result by the aggregate outstanding principal amount of the Notes), or such greater amount as may be required to maintain the minimum collateral coverage ratio of 2.00x tested semi-annually under the Indenture;
(b) maintain protection and indemnity (P&I) insurance with a P&I club that is a member of the International Group of P&I Clubs for customary coverage amounts, including coverage for pollution liability, wreck removal, crew claims, cargo claims, collision liability (to the extent not covered by hull and machinery insurance), and third-party liabilities, in each case in amounts consistent with prudent shipowning practice for vessels of the same type, age, and trading pattern as the Vessel;
(c) maintain war risks insurance (including piracy, terrorism, and related perils coverage) on the Vessel in an amount not less than the insured value of the Vessel under its hull and machinery insurance, and with underwriters approved by the Security Agent;
(d) maintain loss of hire insurance on the Vessel, if and to the extent required under the Indenture, for a period of not less than [Insert — e.g., 180 days] at a daily indemnity rate of not less than [Insert — e.g., the daily operating cost of the Vessel];
(e) ensure that the Security Agent is named as first loss payee on all hull and machinery, war risks, and increased value policies of insurance relating to the Vessel, with a loss payable clause endorsed on each such policy directing that all claims in excess of $[Insert threshold amount — e.g., $500,000 per occurrence] shall be paid directly to the Security Agent;
(f) ensure that the Security Agent is named as additional assured and/or co-assured on all P&I entries and policies relating to the Vessel, with a provision that the interests of the Security Agent shall not be invalidated by any act or omission of the Assignor;
(g) ensure that each insurer, P&I club, and insurance broker has waived any rights of set-off, counterclaim, deduction, or defense against the Security Agent in respect of any claim under any Insurance;
(h) not vary, amend, cancel, surrender, or allow to lapse any Insurance, or do or omit to do any act or thing by reason of which any Insurance may be vitiated or rendered voidable, without the prior written consent of the Security Agent;
(i) promptly (and in any event within two (2) Business Days) notify the Security Agent in writing of any material claim, casualty, damage, loss, or event likely to give rise to a claim under any Insurance, including without limitation any total loss, constructive total loss, major casualty, grounding, collision, fire, piracy, detention, or arrest of the Vessel;
(j) provide the Security Agent with copies of all Insurance policies, cover notes, certificates of entry, endorsements, and renewals annually (and promptly upon each renewal) and promptly upon request by the Security Agent; and
(k) not employ the Vessel, or suffer the Vessel to be employed, in any manner or trade that is not covered by the Insurances or that would or might render any Insurance void or voidable.
4.5 Application of Insurance Proceeds
(a) Total Loss Proceeds. In the event of a total loss or constructive total loss of the Vessel, all Insurance proceeds payable in respect thereof shall be paid to the Security Agent and shall be applied in mandatory prepayment and repurchase of the Notes in accordance with the asset sale covenant in the Indenture. Under the terms of the Indenture, one hundred percent (100%) of the Net Proceeds in excess of $15,000,000 received in connection with such total loss shall be offered for repurchase of the Notes at par plus accrued and unpaid interest within three hundred and sixty-five (365) days of receipt of such proceeds, unless and to the extent such proceeds are reinvested in replacement collateral vessels or other assets in compliance with the reinvestment provisions of the Indenture.
(b) Partial Loss / Repair Proceeds. In the event of a partial loss of or damage to the Vessel, Insurance proceeds payable in respect of such partial loss or damage may be applied by the Assignor toward the cost of repair and restoration of the Vessel, provided that (i) no Event of Default has occurred and is continuing at the time of such application, (ii) the Assignor has delivered to the Security Agent a written undertaking to repair the Vessel in a timely manner, and (iii) the cost of repair does not exceed the coverage available under the Insurances. If an Event of Default has occurred and is continuing, all such proceeds shall be payable to the Security Agent.
(c) P&I Claims. Proceeds of P&I claims may be collected and applied by the Assignor in the ordinary course of its business, provided that no Enforcement Event has occurred and is continuing. Following the occurrence of an Enforcement Event, all P&I claim proceeds shall be payable to the Security Agent.
4.6 Application of Requisition Compensation
(a) Requisition for Hire. Any Requisition Compensation payable in respect of a requisition for hire of the Vessel shall be treated as Earnings and shall be applied in accordance with Section 4.3 of this Deed.
(b) Requisition for Title. Any Requisition Compensation payable in respect of a requisition for title, compulsory acquisition, or other compulsory disposition of the Vessel shall be treated as a total loss of the Vessel, and the proceeds thereof shall be applied in accordance with Section 4.5(a) of this Deed.
4.7 No Competing Assignment
The Assignor shall not, without the prior written consent of the Security Agent, create, grant, permit to arise, or suffer to subsist any lien, charge, mortgage, pledge, assignment, hypothecation, security interest, or other encumbrance of any kind or nature whatsoever upon or over any of the Assigned Property or any part thereof, other than the Permitted Liens and the security created under this Deed. The Assignor shall take all steps reasonably necessary to defend and protect the Assigned Property against all claims, demands, and actions of third parties that may affect the security created hereby.
4.8 Further Assurances
The Assignor shall, at its own cost and expense, promptly execute and deliver all further deeds, instruments, documents, transfers, assignments, and notices, provide all information, and take all further action as the Security Agent may from time to time reasonably request in order to:
(a) perfect, protect, preserve, and maintain the validity, enforceability, and priority of the security created by this Deed;
(b) enable the Security Agent to exercise and enforce its rights and remedies under this Deed; and
(c) comply with any applicable law, regulation, or requirement of any governmental authority, registry, or classification society relating to the registration, recording, or perfection of the assignment created by this Deed.
4.9 Charter Party Restrictions
(a) The Assignor shall not enter into, amend, supplement, extend, renew, novate, or terminate any Charter Party for the Vessel on terms that are materially adverse to the interests of the Noteholders without the prior written consent of the Security Agent (acting on the instructions of the Trustee). For the purposes of this Section 4.9, terms shall be deemed to be "materially adverse to the interests of the Noteholders" if they would result in a charter hire rate that is materially below the then-prevailing market rate for vessels of the same type and size, a charter duration in excess of [Insert — e.g., thirty-six (36) months] without the consent of the Security Agent, or the imposition of obligations on the Assignor that would be inconsistent with its obligations under the Indenture or this Deed.
(b) The Assignor shall ensure that no Charter Party contains any provision subordinating the assignment effected by this Deed, purporting to restrict or prohibit the assignment of Earnings hereunder, or granting to the charterer any lien, security interest, or set-off right that would take priority over the security created by this Deed.
(c) The Assignor shall promptly provide the Security Agent with a copy of each new Charter Party (and each amendment, supplement, or extension thereof) entered into after the date of this Deed.
4.10 Compliance with Indenture Covenants
The Assignor shall comply with all covenants, conditions, and obligations applicable to it under the Indenture, including without limitation the covenant to maintain a minimum collateral coverage ratio of not less than 2.00 to 1.00, tested semi-annually. The collateral coverage ratio is calculated as the ratio of the appraised fair market value of all Collateral Vessels to the aggregate outstanding principal amount of the Notes. For reference, as of June 2022, the twenty-eight (28) Collateral Vessels were appraised at an aggregate fair market value of $1,175,000,000 by Compass Marine Valuations Ltd. (an independent, internationally recognized ship valuation firm), yielding a collateral coverage ratio of approximately 2.94 to 1.00 against $400,000,000 of outstanding Notes. In the event that the collateral coverage ratio falls below 2.00 to 1.00 as of any semi-annual testing date, the Co-Issuers shall be required to take the remedial actions specified in the Indenture, which may include the designation of additional Collateral Vessels, the prepayment of Notes, or the provision of additional collateral, in each case in accordance with the terms of the Indenture.
SECTION 5: ENFORCEMENT
5.1 Enforcement Event
The Security Agent may enforce the security created by this Deed upon the occurrence of an Enforcement Event. An Enforcement Event shall occur when (a) an Event of Default under the Indenture has occurred and is continuing, and (b) the Security Agent has been directed by the Trustee (acting on behalf of the requisite proportion of Noteholders as specified in the Indenture) to enforce the security constituted by this Deed and/or any other Security Document. The Security Agent shall act on directions received from the Trustee in accordance with the provisions of the Indenture and the Intercreditor Agreement governing the exercise of enforcement rights and the coordination of remedies among the secured parties.
5.2 Enforcement Notice
Upon the occurrence of an Enforcement Event, the Security Agent may (and shall, if so directed by the Trustee) deliver a written notice (an "Enforcement Notice") to each of the following:
(a) the Assignor, at the address specified in Section 8.1 of this Deed;
(b) each charterer of the Vessel under any existing Charter Party, at the address of such charterer set forth in the relevant notice of assignment or as otherwise known to the Security Agent; and
(c) each insurer, P&I club, and insurance broker of the Vessel, at the address of such insurer, P&I club, or insurance broker set forth in the relevant notice of assignment or as otherwise known to the Security Agent.
The Enforcement Notice shall state that an Enforcement Event has occurred and is continuing and shall direct that:
(i) all Earnings payable to the Assignor under any Charter Party shall, from the date of the Enforcement Notice, be paid directly to the Security Agent or to such account as the Security Agent may designate in the Enforcement Notice;
(ii) all Insurance proceeds payable in respect of any claim under any Insurance shall be paid directly to the Security Agent or to such account as the Security Agent may designate in the Enforcement Notice; and
(iii) all Requisition Compensation payable in respect of the Vessel shall be paid directly to the Security Agent or to such account as the Security Agent may designate in the Enforcement Notice.
5.3 Powers of the Security Agent upon Enforcement
Following the delivery of an Enforcement Notice, the Security Agent shall have full power and authority, without further notice to or consent from the Assignor, to:
(a) collect, receive, and give valid and effectual receipts and discharges for all Earnings, Insurance proceeds, Requisition Compensation, and any other moneys forming part of the Assigned Property;
(b) commence, prosecute, conduct, defend, settle, compromise, or discontinue any claims, actions, suits, or proceedings in respect of the Assigned Property, whether in the name of the Assignor or in the name of the Security Agent, and to execute all documents and take all steps necessary in connection therewith;
(c) execute any document, instrument, transfer, assignment, notice, instruction, or other writing in the name and on behalf of the Assignor as the Security Agent may consider necessary or desirable to give full effect to the assignment created by this Deed and to realize the Assigned Property;
(d) appoint or engage agents, receivers, managers, brokers, solicitors, or other professional advisors in connection with the collection, management, or realization of the Assigned Property, on such terms as the Security Agent may determine;
(e) exercise all rights, powers, and remedies of the Assignor under any Charter Party, Insurance, or other contract or arrangement forming part of the Assigned Property, including the right to amend, terminate, or enforce any such Charter Party, Insurance, or contract; and
(f) take any other action or exercise any other right or remedy that the Security Agent would be entitled to take or exercise under applicable law or in equity as an assignee of the Assigned Property.
5.4 Application of Proceeds
All amounts received by the Security Agent pursuant to the enforcement of this Deed shall be held by the Security Agent and applied in the following order of priority (the "Payment Waterfall"), in accordance with the waterfall provisions of the Intercreditor Agreement and Section [●] of the Indenture:
First: in or toward payment of all costs, charges, expenses, and liabilities incurred by the Security Agent and the Trustee in connection with the enforcement of this Deed, the Indenture, and the other Security Documents (including without limitation all legal fees, valuation costs, receiver's remuneration, agent's fees, and other costs of enforcement);
Second: in or toward payment of all accrued and unpaid interest on the Notes (including any default interest), pari passu and pro rata among the Noteholders;
Third: in or toward payment of the principal of the Notes, pari passu and pro rata among the Noteholders;
Fourth: in or toward payment of any other amounts constituting Secured Obligations that remain outstanding and unpaid, in such order and manner as the Trustee may determine; and
Fifth: in payment of the surplus (if any) to the Assignor or to such other person as may be entitled thereto under applicable law, or as otherwise directed by a court of competent jurisdiction.
5.5 Power of Attorney
The Assignor hereby irrevocably and by way of security appoints the Security Agent as its true and lawful attorney-in-fact (with full power of substitution and delegation), with power on behalf of and in the name of the Assignor (or in the Security Agent's own name), to do all such acts and things and to execute all such documents, instruments, and notices as the Assignor is obligated to do or execute under this Deed but has failed to do or execute within any time period specified herein, or if no time period is specified, within a reasonable time after demand by the Security Agent. This power of attorney:
(a) is coupled with an interest and shall be irrevocable so long as any Secured Obligation remains outstanding;
(b) shall be exercisable only following the occurrence and during the continuance of an Enforcement Event; and
(c) shall extend to all actions reasonably necessary to protect, preserve, perfect, or enforce the security created by this Deed.
The Assignor hereby ratifies and confirms, and agrees to ratify and confirm, all acts lawfully done and documents lawfully executed by the Security Agent pursuant to this power of attorney.
5.6 No Duty to Act
The Security Agent shall be under no obligation to exercise any right, power, or discretion conferred upon it by this Deed unless and until directed to do so by the Trustee in accordance with the provisions of the Indenture. The Security Agent shall not be liable for any loss, damage, cost, expense, or other liability arising from any failure to exercise, or any delay in exercising, any such right, power, or discretion, whether or not the Security Agent has been directed to act by the Trustee. No single or partial exercise by the Security Agent of any right, power, or discretion hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power, or discretion.