NEAR-FINAL DRAFT — 3RD DRAFT — FOR DISCUSSION PURPOSES ONLY — SUBJECT TO CONTRACT
INTERCREDITOR AGREEMENT
Dated [●], 2022
3rd Draft — Near-Final
Dated September 6, 2022
(First draft circulated August 22, 2022)
among
THALASSA SHIPPING & LOGISTICS SA a Société Anonyme organized under the laws of the Hellenic Republic Registered Office: 42 Akti Miaouli, Piraeus 185 35, Greece GEMI No. 148276201000
(the "Company" or "Issuer")
THALASSA FINANCE PTE. LTD. a Singapore Private Company Limited by Shares Registered Office: 8 Marina Boulevard, #36-02, Marina Bay Financial Centre Tower 1, Singapore 018981 UEN 202209345K
(the "Co-Issuer")
(together with the Company, the "Co-Issuers")
THALASSA DRY BULK OPERATIONS LTD. a Malta private limited company ("TDBO")
THALASSA CONTAINER FEEDER LTD. a marshall Islands limited liability company ("TCF")
THALASSA PORT SERVICES FZCO a Dubai free zone company ("TPS")
THALASSA FREIGHT SOLUTIONS PTE. LTD. a Singapore private company limited by shares ("TFS")
(together, the "Guarantors," and together with the Co-Issuers, the "Obligors")
ATLAS COLLATERAL AGENCY PTE. LTD. a Singapore Private Company Limited by Shares Registered Office: 80 Robinson Road, #02-00, Singapore 068898 UEN 200115678R
(the "Security Agent")
Marlowe Asset Management TRUST COMPANY OF SINGAPORE PTE. LTD. a Singapore Private Company Limited by Shares Registered Office: 80 Robinson Road, #02-00, Singapore 068898 UEN 199804782D
(the "Trustee" or "Notes Trustee")
in respect of
$400,000,000 Aggregate Principal Amount of 8.750% Senior Secured Notes due 2029
(the "Notes")
Governing Law: Republic of Singapore
Prepared by: Calderwood & Harkness LLP 125 Broad Street New York, NY 10004 Matter No. 1044-00004 / Client No. 80214-TSL
TABLE OF CONTENTS
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RECITALS
WHEREAS:
(A) The Notes Offering. The Co-Issuers propose to issue $400,000,000 aggregate principal amount of 8.750% Senior Secured Notes due October 15, 2029 (the "Notes") pursuant to an Indenture (the "Indenture") to be dated as of [●], 2022, among the Co-Issuers, the Guarantors, the Trustee, and the Security Agent. The Notes are to be offered and sold (i) in the United States to "qualified institutional buyers" (as defined in Rule 144A under the Securities Act of 1933, as amended (the "Securities Act")) in reliance upon Rule 144A thereunder, and (ii) outside the United States to non-U.S. persons in reliance upon Regulation S under the Securities Act. The Notes offered pursuant to Regulation S shall bear the International Securities Identification Number (ISIN) XS2498731056, and the Notes offered pursuant to Rule 144A shall bear ISIN US87265TAA10. The Committee on Uniform Securities Identification Procedures (CUSIP) number for the 144A Notes shall be 87265T AA1, and the Common Code for the Regulation S Notes shall be 249873105. The initial purchasers in connection with the offering of the Notes are Anchor Bay Securities LLC, acting as lead bookrunner, and Halcyon Partners International Ltd., acting as co-manager (together, the "Initial Purchasers").
(B) The Guarantees. Each Guarantor has agreed to unconditionally guarantee the Co-Issuers' obligations under the Notes on a senior secured basis (each such guarantee, a "Guarantee" and collectively, the "Guarantees") pursuant to the terms of the Indenture. In addition, Kallistratos Maritime Holdings Ltd., a BVI Business Company with its registered office at Craigmuir Chambers, P.O. Box 71, Road Town, Tortola, British Virgin Islands (the "Parent"), has agreed to provide a limited parent guarantee of the obligations of the Co-Issuers under the Notes and of the Guarantors under the Guarantees, in each case capped at an aggregate amount of $50,000,000 (the "Parent Guarantee"). The Parent Guarantee is a separate contractual obligation of the Parent and is not directly secured by the Collateral; however, the Parent has consented to the terms of this Agreement as they relate to enforcement and the application of proceeds.
(C) The Security Documents. The obligations of the Co-Issuers under the Notes and of the Guarantors under the Guarantees are secured by the Collateral described in the Security Documents (as defined herein), which security is granted to and held by the Security Agent on behalf of and for the benefit of the Secured Parties. The Collateral includes, without limitation:
(i) first-priority ship mortgages over twenty-eight (28) vessels (the "Collateral Vessels"), as more particularly described in Schedule 1 hereto, which Collateral Vessels have been appraised at an aggregate fair market value of $1,175,000,000 by Compass Marine Valuations Ltd. as of June 2022, resulting in a collateral coverage ratio of approximately 2.94x based on the aggregate principal amount of the Notes;
(ii) first-priority assignments of earnings, insurances, and requisition compensation in respect of each of the Collateral Vessels;
(iii) first-priority pledges over 100% of the issued share capital of Thalassa Finance Pte. Ltd. and 100% of the equity interests in each Guarantor Subsidiary (as defined in the Indenture); and
(iv) first-priority assignments of intercompany loan receivables from Thalassa Finance Pte. Ltd. to the fleet-owning subsidiaries in an aggregate principal amount of $365,000,000.
The Security Agent holds all Collateral on behalf of and for the benefit of all Secured Parties (as defined herein) in accordance with and subject to the terms of this Agreement and the Security Documents.
(D) Purpose. The parties hereto wish to set forth their agreement with respect to (i) the relative rights, priorities, and interests of the Secured Parties with respect to the Collateral, (ii) the circumstances in which, and the manner by which, the security created by the Security Documents may be enforced, (iii) the application of any proceeds of enforcement, and (iv) certain other matters relating to the administration of the Collateral. This Agreement governs the relationship among the Notes Trustee, the Security Agent, the Obligors, and any future Permitted Hedging Counterparties (as defined herein) that may accede to this Agreement from time to time.
(E) Refinancing Context. The proceeds of the Notes will be used in part to (i) refinance $190,000,000 in aggregate principal amount outstanding under a bilateral ship-finance facility between certain Obligors and Meridian Maritime Bank AG (the "Meridian Facility"), and (ii) refinance $120,000,000 in aggregate principal amount outstanding under a bilateral ship-finance facility between certain Obligors and Clearwater Shipping Finance Ltd. (the "Clearwater Facility" and, together with the Meridian Facility, the "Existing Facilities"), resulting in an aggregate refinancing of $310,000,000. Upon the closing of the offering of the Notes and the application of proceeds as contemplated by the Indenture, all existing security granted in favor of Meridian Maritime Bank AG and Clearwater Shipping Finance Ltd. under the Existing Facilities will be released and discharged in full, and this Agreement, together with the Security Documents, will govern the security arrangements with respect to the Collateral on a standalone basis going forward. No rights, claims, or interests of Meridian Maritime Bank AG or Clearwater Shipping Finance Ltd. shall survive the discharge of the Existing Facilities or be preserved under this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1 — DEFINITIONS AND INTERPRETATION
Section 1.1 — Definitions
As used in this Agreement, the following terms shall have the meanings set forth below:
"Acceleration Event" means the occurrence of an Event of Default (as defined in the Indenture) followed by the acceleration of the maturity of the Notes in accordance with the terms of the Indenture, whether by declaration of the Trustee or the holders of the requisite percentage of aggregate principal amount of outstanding Notes.
"Accession Deed" means a deed of accession substantially in the form set out in Schedule 3 hereto, executed by a Permitted Hedging Counterparty for the purposes of acceding to this Agreement.
"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, London, and Athens.
"Collateral" means all assets and property that are at any time pledged, mortgaged, charged, assigned, or otherwise made subject to a security interest under the Security Documents, including, without limitation, (a) the Collateral Vessels, (b) all earnings, charter hire, freight, demurrage, and other income derived from the operation of the Collateral Vessels, (c) all insurances (including hull and machinery insurance, protection and indemnity insurance, war risk insurance, and loss-of-hire insurance) maintained in respect of the Collateral Vessels, (d) all requisition compensation payable in respect of the Collateral Vessels, (e) the pledged shares in Thalassa Finance Pte. Ltd. and each Guarantor Subsidiary, and (f) the assigned intercompany loan receivables from Thalassa Finance Pte. Ltd. to the fleet-owning subsidiaries.
"Collateral Coverage Ratio" means, as of any date of determination, the ratio of (a) the aggregate appraised fair market value of the Collateral Vessels (as determined by an independent appraiser approved by the Security Agent in accordance with the terms of the Indenture) to (b) the aggregate outstanding principal amount of the Notes. The parties acknowledge that the Collateral Coverage Ratio is subject to a maintenance covenant minimum of 2.00x, to be tested on a semi-annual basis, with the first testing date occurring no later than six (6) months following the Issue Date (as defined in the Indenture).
"Collateral Vessels" means the twenty-eight (28) vessels designated in Schedule 1 hereto, together with any replacement or substitution vessels that may be designated as Collateral Vessels from time to time in accordance with the terms of the Indenture and the Security Documents. As of the date hereof, the Collateral Vessels have an aggregate appraised fair market value of $1,175,000,000 as determined by Compass Marine Valuations Ltd. in its appraisal report dated June 2022.
"Co-Issuers" means, collectively, Thalassa Shipping & Logistics SA and Thalassa Finance Pte. Ltd., and each a "Co-Issuer." The Co-Issuers are jointly and severally liable for all obligations arising under the Notes, the Indenture, and this Agreement.
"Enforcement Action" means any action taken by the Security Agent or any Secured Party to enforce, foreclose upon, realize, or otherwise exercise remedies with respect to any Collateral, including, without limitation, (a) the arrest, detention, or judicial sale of any Collateral Vessel, (b) the foreclosure of any ship mortgage, (c) the enforcement of any share pledge, (d) the exercise of any right of set-off against any assigned receivable, (e) the appointment of a receiver, manager, or similar officer over any Collateral, and (f) the commencement of any legal or arbitral proceedings for the purpose of recovering amounts secured by the Collateral.
"Enforcement Instruction Notice" means a written notice delivered by the Trustee to the Security Agent, substantially in the form set out in Schedule 5 hereto, instructing the Security Agent to take Enforcement Action with respect to all or any part of the Collateral, which notice shall include a representation by the Trustee that it has received instructions from the holders of at least twenty-five percent (25%) in aggregate principal amount of the outstanding Notes to deliver such notice.
"Enforcement Proceeds" means all cash proceeds, non-cash consideration, and other amounts received by the Security Agent as a result of any Enforcement Action, net of any costs of realization incurred by the Security Agent in connection therewith.
"Event of Default" has the meaning given to such term in the Indenture.
"Guarantors" means, collectively, Thalassa Dry Bulk Operations Ltd. (TDBO), Thalassa Container Feeder Ltd. (TCF), Thalassa Port Services FZCO (TPS), and Thalassa Freight Solutions Pte. Ltd. (TFS), together with any future subsidiary that accedes as a Guarantor pursuant to a Supplemental Indenture (as defined in the Indenture), and each a "Guarantor."
"Hedging Liabilities" means all present and future liabilities, obligations, and indebtedness owed by any Obligor to any Permitted Hedging Counterparty under or in connection with any Permitted Hedging Agreement, including, without limitation, all amounts payable upon close-out, early termination, or netting under any such Permitted Hedging Agreement.
"Indenture" means the Indenture dated as of [●], 2022, among the Co-Issuers, the Guarantors, the Trustee, and the Security Agent, as the same may be supplemented, amended, restated, or otherwise modified from time to time in accordance with its terms.
"Initial Purchasers" means Anchor Bay Securities LLC, as lead bookrunner, and Halcyon Partners International Ltd., as co-manager.
"Instructing Group" has the meaning given to such term in Section 3.4 of this Agreement.
"Notes" means the $400,000,000 aggregate principal amount of 8.750% Senior Secured Notes due October 15, 2029, issued by the Co-Issuers under the Indenture.
"Notes Liabilities" means all present and future liabilities, obligations, and indebtedness owed by any Obligor under or in connection with the Notes, the Indenture, and the Guarantees, including, without limitation, (a) all principal, (b) all interest (including any default interest), (c) all make-whole amounts, premiums, or other early redemption amounts, (d) all fees, costs, and expenses, and (e) all indemnification obligations, in each case whether actual or contingent, direct or indirect.
"Obligors" means, collectively, the Co-Issuers and the Guarantors, and each an "Obligor."
"Officer's Certificate" has the meaning given to such term in the Indenture.
"Parent" means Kallistratos Maritime Holdings Ltd., a BVI Business Company with its registered office at Craigmuir Chambers, P.O. Box 71, Road Town, Tortola, British Virgin Islands.
"Permitted Hedging Agreement" means any interest rate hedging agreement (including interest rate swaps and interest rate caps) or currency hedging agreement entered into by any Obligor with a Permitted Hedging Counterparty in the ordinary course of business for bona fide hedging purposes and not for speculative purposes, in each case as permitted under the terms of the Indenture.
"Permitted Hedging Counterparty" means any financial institution or other counterparty that (a) has acceded to this Agreement by executing an Accession Deed in accordance with Section 7.1, and (b) at the time of such accession holds a long-term credit rating of at least BBB- (or its equivalent) from Standard & Poor's Ratings Services, Fitch Ratings Ltd., or Moody's Investors Service, Inc. (or any successor to any of the foregoing), or an equivalent rating from another internationally recognized credit rating agency.
"Permitted Liens" has the meaning given to such term in the Indenture.
"Secured Obligations" means, collectively, the Notes Liabilities and the Hedging Liabilities.
"Secured Parties" means, collectively, (a) the Trustee (acting on behalf of and for the benefit of the holders of the Notes), (b) the Security Agent, and (c) any Permitted Hedging Counterparty that has acceded to this Agreement in accordance with Section 7.1, and each a "Secured Party."
"Security Agent" means Atlas Collateral Agency Pte. Ltd. (UEN 200115678R), in its capacity as security agent and collateral agent under this Agreement and the Security Documents, or any successor security agent appointed in accordance with Section 3.5.
"Security Documents" means, collectively, the Deeds of Ship Mortgage, the Deeds of Assignment of Earnings and Insurances, the Share Pledge Agreements, the Assignment of Intercompany Loan Receivables, and any other security document entered into from time to time to secure the Secured Obligations in accordance with the terms of the Indenture and this Agreement, in each case as the same may be supplemented, amended, restated, or otherwise modified from time to time. A complete list of the Security Documents as of the date hereof is set out in Schedule 2.
"Standstill Period" has the meaning given to such term in Section 5.3 of this Agreement.
"Transaction Documents" means this Agreement, the Indenture, the Notes, the Guarantees, the Security Documents, the Parent Guarantee, and any other document designated as a "Transaction Document" by the Co-Issuers and the Trustee.
"Trustee" means Marlowe Asset Management Trust Company of Singapore Pte. Ltd. (UEN 199804782D), in its capacity as trustee under the Indenture and under this Agreement, or any successor trustee appointed in accordance with the Indenture.
"Waterfall" means the order of priority for the application of Enforcement Proceeds set forth in Section 6.1 of this Agreement.
Section 1.2 — Interpretation
(a) The headings in this Agreement are inserted for convenience of reference only and shall not affect the interpretation or construction of any provision of this Agreement.
(b) Unless the context otherwise requires, words importing the singular include the plural and vice versa, words importing any gender include all genders, and references to "persons" include individuals, corporations, partnerships, limited liability companies, trusts, unincorporated associations, governmental authorities, and any other legal or natural persons.
(c) References to any statute, regulation, or statutory provision include any statute, regulation, or statutory provision that amends, extends, consolidates, re-enacts, or replaces the same, or that has been amended, extended, consolidated, re-enacted, or replaced by the same, and include any orders, regulations, instruments, or other subordinate legislation made under the relevant statute or statutory provision.
(d) References to "including" and "includes" shall be deemed to be followed by the phrase "without limitation" and shall not be construed to limit any general statement that it follows to the specific or similar items or matters immediately following it.
(e) All references to times of day shall be references to Singapore time (SGT, UTC+8), unless otherwise specified.
(f) References to any agreement, instrument, or document shall be construed as references to such agreement, instrument, or document as the same may be amended, supplemented, restated, or otherwise modified from time to time in accordance with its terms.
(g) The Business Day convention applicable to this Agreement shall be the "Following Business Day" convention, meaning that if any date on which an act is to be performed or a payment is to be made falls on a day that is not a Business Day in Singapore, New York, London, and Athens, the relevant act or payment shall be performed or made on the next following day that is a Business Day in all such jurisdictions.
(h) Unless otherwise specified, all currency references in this Agreement are to United States Dollars ("USD" or "$").
(i) This Agreement shall be interpreted in accordance with the principles of interpretation applicable under the laws of the Republic of Singapore, including the Interpretation Act 1965 (as amended) and the relevant decisions of the courts of Singapore.
Section 1.3 — Relationship to Other Transaction Documents
(a) This Agreement supplements, and does not supersede, the Indenture, the Security Documents, or the Guarantees. It is the intention of the parties that this Agreement, the Indenture, the Security Documents, and the other Transaction Documents be read together and construed as a coherent and integrated set of contractual arrangements governing the issuance, guarantee, and security of the Notes.
(b) In the event of any conflict or inconsistency between any provision of this Agreement and any provision of the Indenture:
(i) as between the Trustee and the Security Agent, the provisions of this Agreement shall prevail; and
(ii) as between the Trustee and the holders of the Notes, the provisions of the Indenture shall prevail.
(c) For the avoidance of doubt, the covenant structure set forth in the Indenture is hereby incorporated by reference to the extent relevant to the provisions of this Agreement. The parties acknowledge that the Indenture includes, among other things, the following covenants:
(i) an incurrence-based leverage test requiring that no additional indebtedness may be incurred unless the Total Net Leverage Ratio (as defined in the Indenture) on a pro forma basis does not exceed 3.50x;
(ii) a restricted payments covenant that limits the aggregate amount of restricted payments to the greater of $30,000,000 and 10% of Consolidated Net Tangible Assets (as defined in the Indenture);
(iii) an asset sale covenant providing that the net proceeds of any asset sale with a value in excess of $15,000,000 must be applied to make an offer to repurchase Notes at 100% of the principal amount thereof within 365 days of receipt, unless such net proceeds are reinvested in assets useful in the business of the Obligors within such period; and
(iv) a change of control provision requiring a put of the Notes at 101% of the principal amount thereof upon the occurrence of a Change of Control (as defined in the Indenture).
(d) Nothing in this Agreement shall be construed to impose any obligation on the Security Agent or the Trustee to monitor compliance by the Co-Issuers or any other Obligor with any covenant set forth in the Indenture or any other Transaction Document, except as expressly provided herein.
ARTICLE 2 — RANKING AND PRIORITY
Section 2.1 — Priority of Secured Obligations
The Notes Liabilities shall rank pari passu with the Hedging Liabilities in right of payment from the Collateral, in each case subject to and in accordance with the Waterfall set forth in Article 6. Both the Notes Liabilities and the Hedging Liabilities are secured on a first-priority basis by the same Collateral, and no Secured Party shall have any priority of payment over any other Secured Party by reason of the order in which, or the date upon which, any Security Document was entered into, registered, or perfected, except as expressly set forth in the Waterfall.
Section 2.2 — No Subordination Among Notes and Hedging Liabilities
The Notes Liabilities and the Hedging Liabilities shall be secured equally and ratably by the Collateral. No Secured Party shall be entitled to claim any priority, preference, or seniority over any other Secured Party in respect of the Collateral, except that, as set forth in Sections 6.1(a) and 6.1(b) of this Agreement, the unpaid fees, costs, expenses, and indemnification obligations of the Security Agent and the Trustee shall rank senior to all other Secured Obligations in the application of Enforcement Proceeds. Subject to the foregoing, the relative rights of the holders of Notes and the Permitted Hedging Counterparties in the Enforcement Proceeds shall be determined solely by reference to the pro rata allocation mechanism set forth in Section 6.1(c) and Section 6.2.
Section 2.3 — Security Agent as Holder of Security
(a) All security created by or arising under the Security Documents is granted to and held by the Security Agent on behalf of all Secured Parties. The Security Agent holds legal title to the Collateral as agent and trustee for the Secured Parties, and the beneficial interest in the Collateral is vested in the Secured Parties in proportion to their respective Secured Obligations.
(b) No Secured Party may independently hold, possess, or exercise any right, title, or interest in or to any Collateral except through the Security Agent as provided in this Agreement and the Security Documents. Any attempt by a Secured Party to hold or enforce any Collateral independently of the Security Agent shall be void and of no effect.
(c) The Security Agent shall not be required to hold the Collateral as a bare trustee and shall be entitled to exercise its rights, powers, and discretions under this Agreement and the Security Documents in accordance with the provisions hereof, including the right to delegate the holding of Collateral to sub-agents, nominees, or custodians as it may deem necessary or appropriate.
Section 2.4 — Future Secured Indebtedness
(a) The parties acknowledge that the Indenture permits the Co-Issuers and the Guarantors to incur additional indebtedness subject to the incurrence-based leverage test (maximum Total Net Leverage Ratio of 3.50x). If any such future indebtedness is to be secured by the Collateral and to benefit from the provisions of this Agreement, such indebtedness may be included within the scope of this Agreement only by amendment to this Agreement in accordance with Section 12.1.
(b) Any such amendment shall require the written consent of:
(i) the Security Agent;
(ii) the Trustee, acting upon the direction of holders of at least a majority in aggregate principal amount of the outstanding Notes;
(iii) each Permitted Hedging Counterparty; and
(iv) the Co-Issuers.
(c) Until such amendment has been duly executed and delivered, no future indebtedness shall be entitled to share in the Collateral or to benefit from the enforcement and waterfall provisions of this Agreement, notwithstanding any provision of the Indenture to the contrary.
ARTICLE 3 — THE SECURITY AGENT
Section 3.1 — Appointment and Authorization
(a) Each of the Trustee (on behalf of and for the benefit of the holders of the Notes) and each Permitted Hedging Counterparty (on behalf of itself) hereby appoints Atlas Collateral Agency Pte. Ltd. as Security Agent to hold, administer, maintain, protect, and (when directed in accordance with this Agreement) enforce the Collateral on behalf of all Secured Parties.
(b) The Security Agent hereby accepts such appointment and agrees to act as Security Agent in accordance with the terms and conditions of this Agreement and the Security Documents.
(c) The Security Agent is authorized to execute and deliver each Security Document on behalf of the Secured Parties, and to exercise all rights, powers, and remedies vested in the Security Agent under the Security Documents, in each case subject to and in accordance with the terms of this Agreement.
(d) In consideration of the Security Agent's agreement to act as Security Agent hereunder, the Co-Issuers shall pay to the Security Agent:
(i) an acceptance fee of $20,000 (flat), payable upon execution and delivery of this Agreement; and
(ii) an annual fee of $30,000 per annum, payable in advance on each anniversary of the date of this Agreement (or, in respect of the first year, on the date of this Agreement), for so long as any Secured Obligations remain outstanding.
Section 3.2 — Duties and Standard of Care
(a) The Security Agent shall act in accordance with the instructions of the Instructing Group (as defined in Section 3.4) and shall not be required to exercise any independent judgment or discretion in the performance of its duties hereunder, except as specifically required by this Agreement, the Security Documents, or applicable law.
(b) In performing its duties hereunder, the Security Agent shall exercise the same degree of care, skill, and diligence as a prudent professional security agent holding security in similar commercial transactions under Singapore law would exercise in similar circumstances.
(c) The Security Agent does not owe any fiduciary duty to any individual holder of the Notes or to any other person. The duties and obligations of the Security Agent are limited to those expressly set forth in this Agreement and the Security Documents, and no implied covenants, duties, or obligations shall be read into this Agreement.
(d) The Security Agent shall not be responsible for the adequacy, accuracy, or completeness of any information, statement, or representation made in or pursuant to any Transaction Document, or for the legality, validity, perfection, adequacy, or enforceability of any Transaction Document or any other agreement, arrangement, or document entered into, made, or executed in anticipation of, under, or in connection with any Transaction Document.
Section 3.3 — Reliance and Protections
(a) The Security Agent may rely without liability upon any certificate, opinion, notice, request, consent, direction, instruction, or other communication (including any delivered by facsimile, electronic mail, or other electronic means) reasonably believed by it to be genuine and correct and to have been signed, sent, or given by or on behalf of the proper person or persons, including any certificate, opinion, or notice given by the Trustee, any Obligor, any Permitted Hedging Counterparty, or counsel to any of the foregoing.
(b) The Security Agent shall not be obligated to take any action that, in its reasonable judgment, would expose it to personal liability or expense (other than liability or expense for which it has been indemnified to its reasonable satisfaction), unless and until it has received indemnification, security, or prefunding satisfactory to it against such liability and expense.
(c) The Security Agent may engage and consult with legal counsel, independent auditors, financial advisors, and other experts selected by it with reasonable care, and the Security Agent shall not be liable for any action taken or omitted to be taken in good faith in accordance with the advice of such counsel, auditors, advisors, or experts.
(d) The Security Agent shall be fully protected in acting or refraining from acting in accordance with any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, or other document that it reasonably believes to be genuine and to have been signed or presented by the proper party or parties.
(e) The Security Agent shall not be held liable for any action taken or omitted to be taken by it in good faith and in accordance with the instructions of the Instructing Group, except to the extent that any loss, liability, or expense arises from the gross negligence, willful misconduct, or fraud of the Security Agent.
Section 3.4 — Instructing Group
(a) For the purposes of this Agreement, "Instructing Group" means:
(i) the Trustee, acting on instructions received from the holders of at least a majority in aggregate principal amount of the outstanding Notes, with respect to matters relating to the Notes Liabilities; and
(ii) each Permitted Hedging Counterparty, acting on its own behalf, with respect to matters relating to its own Hedging Liabilities.
(b) Where the instructions of the Trustee (representing the majority noteholders) and the instructions of one or more Permitted Hedging Counterparties conflict with respect to any matter requiring the direction of the Instructing Group, the instructions of the Trustee (representing the majority noteholders) shall prevail, subject to the Standstill Period provisions set forth in Article 5.
(c) The Security Agent shall be entitled to request written confirmation of the instructions of the Instructing Group before taking any action pursuant to such instructions, and shall not be liable for any delay in acting while awaiting such confirmation.
Section 3.5 — Resignation and Replacement of Security Agent
(a) The Security Agent may resign from its appointment hereunder by giving not less than ninety (90) days' prior written notice to the Trustee and the Co-Issuers. Such resignation shall take effect upon the appointment of a successor Security Agent in accordance with this Section 3.5.
(b) Upon receipt of a notice of resignation from the Security Agent, the Trustee (acting on the instructions of holders of at least a majority in aggregate principal amount of the outstanding Notes) shall use reasonable efforts to appoint a successor Security Agent within sixty (60) days following receipt of such notice.
(c) If no successor Security Agent has been appointed by the Trustee within such sixty (60) day period, the resigning Security Agent may appoint a successor Security Agent on its own initiative, provided that any successor Security Agent appointed under this Section 3.5 must satisfy each of the following requirements:
(i) it must be a trust company, agency company, or financial institution incorporated or licensed under the laws of the Republic of Singapore;
(ii) it must have a minimum paid-up capital of S$5,000,000; and
(iii) it must be willing and able to perform the duties of Security Agent under this Agreement and the Security Documents.
(d) Upon the effective date of the appointment of a successor Security Agent, (i) the resigning Security Agent shall be discharged from its duties and obligations under this Agreement (other than any obligations that by their nature survive termination), (ii) all references to the "Security Agent" in this Agreement shall be construed as references to the successor Security Agent, and (iii) the successor Security Agent shall have all the rights, powers, duties, and obligations of the Security Agent under this Agreement and the Security Documents.
(e) The resigning Security Agent shall, at the cost of the Co-Issuers, execute and deliver all documents and take all actions reasonably necessary to transfer the Collateral and all rights and interests in respect thereof to the successor Security Agent.
Section 3.6 — Fees and Expenses of Security Agent
(a) All reasonable and documented fees, costs, expenses, and disbursements of the Security Agent (including, without limitation, the legal fees and disbursements of counsel engaged by the Security Agent) incurred in connection with the preparation, negotiation, execution, delivery, administration, and enforcement of this Agreement and the Security Documents shall be borne by the Co-Issuers and shall constitute obligations of the Obligors under this Agreement.
(b) The fees, costs, expenses, and indemnification obligations of the Security Agent shall rank senior to all other Secured Obligations in the Waterfall, as set forth in Section 6.1(a).
(c) The obligation of the Co-Issuers to pay the fees, costs, and expenses of the Security Agent shall survive the termination of this Agreement, the resignation or replacement of the Security Agent, and the release of the Collateral.
Section 3.7 — Indemnification of Security Agent
(a) The Co-Issuers and the Guarantors hereby jointly and severally agree to indemnify and hold harmless the Security Agent and each of its officers, directors, employees, agents, and representatives (collectively, the "Security Agent Indemnified Persons") from and against any and all losses, liabilities, damages, claims, costs, and expenses (including, without limitation, reasonable legal fees and disbursements of counsel, costs of investigation, and costs of enforcement of this indemnity) incurred by any Security Agent Indemnified Person in connection with or arising out of the acceptance, performance, or administration of its duties under this Agreement and the Security Documents, or the exercise of its rights, powers, and remedies hereunder and thereunder.
(b) The foregoing indemnification obligation shall not apply to any loss, liability, damage, claim, cost, or expense to the extent that the same has been finally determined by a court of competent jurisdiction (in a judgment not subject to further appeal) to have arisen from the gross negligence, willful misconduct, or fraud of the Security Agent Indemnified Person seeking indemnification.
(c) The indemnification obligations set forth in this Section 3.7 shall survive the termination of this Agreement, the resignation or replacement of the Security Agent, and the release of the Collateral.
ARTICLE 4 — THE TRUSTEE
Section 4.1 — Role of the Trustee Under This Agreement
(a) The Trustee acts under this Agreement in its capacity as trustee under the Indenture on behalf of and for the benefit of the holders of the Notes. The Trustee does not act in any other capacity under this Agreement and shall not be deemed to be an agent or representative of any individual holder of the Notes.
(b) In consideration of the Trustee's agreement to act in its capacity under this Agreement, the Co-Issuers shall pay to the Trustee:
(i) an acceptance fee of $25,000 (flat), payable upon execution and delivery of this Agreement; and
(ii) an annual fee of $15,000 per annum, payable in advance on each anniversary of the date of this Agreement (or, in respect of the first year, on the date of this Agreement), for so long as any Notes remain outstanding.
(c) All rights, protections, immunities, limitations of liability, and indemnification provisions applicable to the Trustee under the Indenture (including, without limitation, the provisions relating to the standard of care, reliance on certificates and opinions, and limitation of personal liability) shall apply mutatis mutandis to the Trustee under this Agreement as if fully set forth herein.
Section 4.2 — Instructions to Security Agent
(a) The Trustee shall deliver Enforcement Instruction Notices, consents, waivers, directions, and other instructions to the Security Agent only when and to the extent directed by the requisite percentage of holders of the outstanding Notes as specified in the Indenture. Without limiting the generality of the foregoing:
(i) for the delivery of an Enforcement Instruction Notice, the Trustee shall act upon the direction of holders of at least twenty-five percent (25%) in aggregate principal amount of the outstanding Notes;
(ii) for the giving of consents, waivers, and other directions to the Security Agent (other than Enforcement Instruction Notices), the Trustee shall act upon the direction of holders of at least a majority in aggregate principal amount of the outstanding Notes, unless a higher threshold is specified in the Indenture or this Agreement; and
(iii) the Trustee shall not be obligated to act upon the direction of any lesser percentage of holders unless the Indenture expressly so provides.
(b) The Trustee is under no obligation to monitor, investigate, or verify compliance by the Co-Issuers or any other Obligor with the Collateral Coverage Ratio, any maintenance covenant, or any other covenant or obligation set forth in the Indenture, the Security Documents, or this Agreement. The Trustee shall be entitled to rely conclusively upon Officer's Certificates, compliance certificates, and other certifications delivered by the Co-Issuers pursuant to the Indenture, and shall have no liability for any failure by the Co-Issuers to deliver such certificates or for any inaccuracy therein.
Section 4.3 — Trustee Not Liable for Security Agent Actions
(a) The Trustee shall not be liable for any act, omission, default, or negligence of the Security Agent, whether in connection with the holding, administration, or enforcement of the Collateral or otherwise.
(b) There shall be no joint or vicarious liability as between the Trustee and the Security Agent. Each of the Trustee and the Security Agent acts in its own separate capacity under this Agreement and is solely responsible for its own acts and omissions.
(c) The Trustee shall not be required to supervise, direct, or control the actions of the Security Agent, and the Trustee shall have no duty to inquire into the propriety or adequacy of any action taken or not taken by the Security Agent.
Section 4.4 — Indemnification of Trustee
(a) The Co-Issuers and the Guarantors hereby jointly and severally agree to indemnify and hold harmless the Trustee and each of its officers, directors, employees, agents, and representatives (collectively, the "Trustee Indemnified Persons") from and against any and all losses, liabilities, damages, claims, costs, and expenses (including, without limitation, reasonable legal fees and disbursements of counsel, costs of investigation, and costs of enforcement of this indemnity) incurred by any Trustee Indemnified Person in connection with or arising out of the acceptance, performance, or administration of its duties under this Agreement, or the exercise of its rights, powers, and remedies hereunder.
(b) The foregoing indemnification obligation shall not apply to any loss, liability, damage, claim, cost, or expense to the extent that the same has been finally determined by a court of competent jurisdiction (in a judgment not subject to further appeal) to have arisen from the gross negligence, willful misconduct, or fraud of the Trustee Indemnified Person seeking indemnification.
(c) The indemnification obligations set forth in this Section 4.4 shall survive the termination of this Agreement, the resignation or replacement of the Trustee, and the release of the Collateral.
ARTICLE 5 — ENFORCEMENT OF SECURITY
Section 5.1 — Pre-Enforcement Period
(a) Prior to the occurrence of an Event of Default under the Indenture, no Secured Party and no agent acting on behalf of any Secured Party (including the Security Agent) shall take any Enforcement Action with respect to any Collateral.
(b) During the pre-enforcement period, the Collateral shall remain subject to the rights of the Obligors to use, operate, employ, charter, and insure the Collateral Vessels in the ordinary course of their respective businesses, subject at all times to compliance with the negative covenants and other restrictions set forth in the Indenture and the Security Documents. Without limiting the generality of the foregoing, the Obligors shall be entitled to:
(i) enter into, amend, extend, or terminate time charters, voyage charters, and contracts of affreightment for the Collateral Vessels in the ordinary course of business;
(ii) direct the employment, scheduling, and deployment of the Collateral Vessels;
(iii) maintain, dry-dock, repair, and upgrade the Collateral Vessels in accordance with classification society requirements and applicable maritime regulations;
(iv) maintain and renew insurance policies in respect of the Collateral Vessels; and
(v) collect and apply earnings, charter hire, and other income from the Collateral Vessels in the ordinary course of business, subject to any assignment of earnings under the Security Documents.
Section 5.2 — Triggering of Enforcement Rights
(a) Following the occurrence and during the continuance of an Event of Default under the Indenture:
(i) the Trustee, upon receipt of instructions from holders of at least twenty-five percent (25%) in aggregate principal amount of the outstanding Notes, may (and if so instructed, shall) deliver an Enforcement Instruction Notice to the Security Agent in accordance with this Agreement; and
(ii) upon receipt of an Enforcement Instruction Notice, the Security Agent shall be entitled (but shall not be obligated unless further instructed by the Instructing Group and indemnified and/or prefunded to its satisfaction) to take Enforcement Action with respect to all or any part of the Collateral.
(b) The Security Agent shall promptly notify all Secured Parties of its receipt of an Enforcement Instruction Notice. Such notification shall be given in writing and shall include a copy of the Enforcement Instruction Notice.
(c) For the avoidance of doubt, the Security Agent shall not be required to verify independently whether an Event of Default has occurred or is continuing. The Security Agent shall be entitled to rely conclusively upon the Enforcement Instruction Notice and the representations contained therein.
Section 5.3 — Enforcement Standstill
(a) Standstill Period. Following the occurrence of an Event of Default under the Indenture, but before the delivery of an Enforcement Instruction Notice by the Trustee to the Security Agent, no individual Secured Party (including any Permitted Hedging Counterparty) may independently take any Enforcement Action with respect to any Collateral for a period of one hundred and eighty (180) days from the date on which the relevant Event of Default first occurred (such period, the "Standstill Period").
(b) During the Standstill Period, the Obligors shall be entitled to attempt to cure the Event of Default, negotiate with the Secured Parties and other creditors, or take such other steps as the Obligors may deem appropriate to address the circumstances giving rise to the Event of Default. Nothing in this Section 5.3 shall require any Secured Party to accept any proposal made by the Obligors during the Standstill Period or to refrain from exercising any rights that are not Enforcement Actions (including, without limitation, the right to deliver default notices, demand payment, or participate in negotiations).
(c) The Standstill Period shall terminate automatically and immediately upon the earliest to occur of any of the following:
(i) the acceleration of the Notes pursuant to the terms of the Indenture (whether by declaration of the Trustee or the holders of the requisite percentage of outstanding Notes);
(ii) the commencement of any insolvency, bankruptcy, rehabilitation, liquidation, winding-up, judicial management, receivership, or similar proceeding against any Obligor in any jurisdiction;
(iii) the appointment (whether by a court, creditor, or otherwise) of a receiver, manager, administrative receiver, judicial manager, liquidator, trustee, or similar officer over all or any material part of the Collateral or the assets or undertaking of any Obligor; or
(iv) the delivery by the Trustee of an Enforcement Instruction Notice to the Security Agent in accordance with Section 5.2.