Exhibit
10.6


 


 


 


1 November 2004


 


 


Top Tankers Inc


109-111 Messogion Ave.


Politia Centre


Building C1


Athens 11526


Greece


 


Attention: Mr E Pistiolis


 


 


 


 


Dear Sirs


 


Further to
recent discussions relating to the proposed follow-on offering by Top Tankers
Inc. on the NASDAQ and related acquisition of up to five double-hull tanker
vessels, we have pleasure in confirming that The Royal Bank of Scotland plc
(the “Bank”) is prepared to offer a loan facility on the following principal
terms and conditions: -


 


1. BORROWERS


 


The Borrowers
shall comprise five single-purpose companies, each a wholly-owned subsidiary of
Top Tankers Inc, and incorporated in a jurisdiction acceptable to the Bank,
having joint and several liability in respect of the loan facility referred to below.  Each Borrower will be an owner of a
Purchased Ship (as detailed in attached table ‘A’), which Purchased Ships shall
hereinafter be collectively known together with the Existing Ships (as detailed
in attached table ‘B’) as the “Ships” or individually as a “Ship”.


 


2. LOAN AMOUNT


 


Up to
US$150,000,000 (United States Dollars One Hundred and Fifty Million only) to be
drawn in up to five tranches, no later than 30 April 2005 (the “Loan”).  The Loan amount will be limited to the least
of i) 60% of the aggregate purchase price of the Purchased Ships, as evidenced
by an MOA acceptable to the Bank (there shall be no address or similar
commission included in the MOA which has not previously been disclosed to and
agreed by the Bank), ii) 60% of the aggregate value of the Purchased Ships,
determined in accordance with paragraph 9 (c) of this letter and iii)
US$30,000,000 per Purchased Ship.


 


In the event
that the Loan is not fully drawn down by the above date, such undrawn amount
will automatically be cancelled by the Bank and the commitment will be reduced
to zero although the Borrowers may request the Bank to consider extending this
date on such terms as the Bank may agree.


 


 


 


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3.             PURPOSE


 


                To assist in the acquisition of
the Purchased Ships by the Borrowers.


 


4.             REPAYMENT AND PREPAYMENT OF THE LOAN


 


                The Loan will be repayable by 14
consecutive semi-annual instalments, the first such instalment being payable
six months after the final drawdown of the Loan, but not later than 31 July
2005.  The first four instalments shall
each be in the amount of US$11,250,000, the fifth and sixth instalments shall
each be in the amount of US$9,000,000, the seventh to fourteenth instalments
shall each be in the amount of US$7,062,500 and a balloon instalment of
US$30,500,000 shall be payable simultaneously with the last such instalment.


 


                Voluntary prepayment will be
permitted in whole or part subject to a minimum of fourteen (14) days’ notice
and to payment of interest breakage costs (if any) and the interest margin on
the amount prepaid for the balance of any then current Interest Period; partial
prepayment shall be made in multiples of US$500,000.  All prepayments, including prepayment arising from the sale or
total loss proceeds of a Purchased Ship, will be applied against instalments
(including the balloon instalment) pro-rata.


 


5.             INTEREST RATE AND PERIODS


 


(a)           The interest rate
will be 1% per annum (subject to paragraph 9 (c) hereof) (the “Interest
Margin”) over US$ LIBOR for interest periods of three, six or twelve months
(as, subject to availability, selected by the Borrower) or other agreed (in our
absolute discretion) interest periods (the “Interest Period”); interest shall
be payable on the last day of each Interest Period and, where any Interest
Period exceeds six months, interest will also be payable six-monthly during
such Interest Period.  Each repayment
instalment shall have a matching Interest Period where the Interest Period
selected or agreed would not otherwise achieve this.


 


 The Borrowers shall additionally compensate the
Bank for any cost to the Bank incurred in complying with reserve asset or
capital adequacy requirements or other regulations howsoever imposed from time
to time in relation to the making or maintaining of the Loan.


 


(b)           The Borrowers may,
at their option, enter into an interest hedging arrangement with the Bank to
fix the interest rate in respect of all or part of the Loan.  In this respect the Borrowers will be
required (as a condition precedent thereof and in addition to the Documentation
referred to in paragraph 11) to enter into ISDA documentation and, if required
by the Bank, a security deed in support thereof in terms satisfactory to the
Bank and other relevant provisions which will be incorporated into the
Documentation.


 


6.                                       FEES


 


                                                A fee of 1% flat on the amount
of the Loan (i.e. US$1,500,000) will be payable on the date of signing the loan
agreement.


 


                                                A commitment fee of 0.25% per
annum (calculated on a 360 day year basis) shall accrue on the amount of the
undrawn balance of the Loan from the date of this letter and will be payable
one month in arrears and on the date of drawdown of the Loan or on the latest
permitted date for drawdown, whichever is the earlier.


 


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7.           OPERATING ACCOUNTS


 


The Borrowers
shall open operating accounts (the “Operating Accounts”) with the Bank to which
the earnings of the Ships shall be credited.


 


Interest and
instalments will be debited to the Operating Accounts, which will bear interest
at the Bank’s rate for comparable deposits.


 


8.           SECURITY


 


As security
for the obligations of the Borrowers (including but not limited to any interest
hedging arrangement entered into as contemplated in paragraph 5(b) hereof), the
Bank will require:


 


A Loan
Agreement between the Bank and the Borrowers drafted in accordance with the
provisions of English Law to be dated not later than 30 November 2004, to be
supported by:


 


(a)                                  A first priority mortgage and
assignment of earnings, insurances and requisition compensation over each
Purchased Ship under a flag acceptable to the Bank in its absolute discretion.


 


(b)                                 A corporate guarantee from
each of the Existing Borrowers (as detailed in attached Table ‘B’), supported
by a second priority mortgage and a second priority general assignment of
earnings and insurances in relation to each of the Existing Ships.


 


(c)                                  The Corporate Guarantee of Top
Tankers Inc (the “Corporate Guarantor”). 
The Corporate Guarantor shall be the legal and beneficial owner of the
entire authorised share capital of the Borrowers.


 


(d)                                 A right of set-off and first
charge over the Operating Accounts.


 


As a further
condition to the Bank making the Loan available the Bank requires that the
Borrowers guarantee the Existing Loan (as hereinafter defined) and, as security
for that guarantee obligation, execute second priority mortgages and second
priority assignments of earnings, insurances and requisition compensation over
each Purchased Ship.


 


 


9.           OTHER
TERMS AND CONDITIONS


 


(a)           Prior
to the first notice of drawdown of the Loan the Bank will require (amongst
other things) evidence that the Corporate Guarantor has successfully completed
the follow-on offering on the NASDAQ, generating net proceeds (after costs and
expenses) adequate to meet the Borrowers’ minimum 40% equity participation in
the purchase price of the Purchased Ships.


 


(b)          Prior
to each drawdown of the Loan (including the first) the Bank will require
(amongst other things):-


 


(i)            An
acceptable valuation of the Purchased Ships, determined in accordance with
paragraph 9 (c) below.


 


(ii)           Details
of insurances effected in respect of the Ships as required pursuant to
paragraph 9 (d) below.


 


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(iii)                                        Evidence of compliance with
the ISM Code and the existence of a valid Safety Management Certificate for the
Ships and Document of Compliance pursuant to the ISM Code.


 


(c)                       The aggregate value of the
Ships (determined as set out below) shall at all times be not less than 130% of
the aggregate of (i) the outstanding principal amount of the Loan, (ii) the
notional cost or actual cost (if any), as determined by the Bank, of
terminating any interest rate swap or other product entered into by the
Borrower as contemplated in paragraph 5(b) hereof, (iii) the outstanding
principal amount of a loan (the “Existing Loan”) availed to the Existing
Borrowers pursuant to a loan agreement dated 10 August 2004 (the “Existing Loan
Agreement”) and (iv) the notional cost or actual cost (if any), as determined
by the Bank, of terminating any interest rate swap or other product entered
into by the Existing Borrowers, failing which other security acceptable to the
Bank (in its absolute discretion) shall be provided or the Loan shall be
prepaid to the extent necessary to comply with this requirement.


 


In addition to the above, the Bank will assess the
value of the Ships on a quarterly basis, with a view to determining the
Interest Margin for the ensuing quarter. 
The Interest Margin will be determined as follows:


 


i)                                        The aggregate of the Loan and
the Existing Loan to aggregate value of the Ships less than or equal to 60% -
Interest Margin will be 1%.


ii)                                     The aggregate of the Loan and
the Existing Loan to aggregate value of the Ships greater than 60% but less
than or equal to 70% - Interest Margin will be 1.125%.


iii)                                   The aggregate of the Loan and
the Existing Loan to aggregate value of the Ships greater than 70% - Interest
Margin will be 1.25%.


 


The value of the Ships will be determined by a written
valuation from one of Clarksons, Braemar Seascope or Fearnleys AS (the
“Approved Brokers”) obtained by the Bank. 
One such valuation per annum will be at the expense of the
Borrowers.  Within ten days of being
advised of such valuation, the Borrowers have the right to obtain a written
valuation from another Approved Broker (addressed to the Bank and at the expense
of the Borrowers) and, if the Borrowers exercise such option, the value of the
Ships shall be determined to be the average of the two valuations.


 


(d)       The
Ships shall be insured for marine, war and protection and indemnity risks
(without any exclusions), including maximum available protection and indemnity
cover for pollution risks, with brokers, underwriters and clubs and on terms
acceptable to the Bank (details must be provided in good time prior to notice
of drawdown).  All such insurances shall
be subject to approval by insurance consultants nominated by the Bank whose
costs shall be reimbursed by the Borrowers on demand.


 


(e)                       During the period of the Loan, the Bank shall require that the Borrowers, the
Existing Borrowers and/or the Corporate Guarantor maintain free cash balances
with the Bank totalling not less than i) US$10,000,000 on a monthly average
basis and ii) an absolute minimum of US$5,000,000, at all times.  Such deposits will bear interest at
the Bank’s rate for comparable deposits.


 


(f)                         The Documentation will contain
indemnification from the Borrowers, the Existing Borrowers and the Corporate
Guarantor against all consequences of any pollution incident.


 


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(g)       The Bank shall effect
Mortgagees Interest insurance and Mortgagees Additional Perils insurance for
120% of the outstanding principal amount of the Loan from time to time, the
costs of which policies shall be reimbursed by the Borrowers on demand.


 


(h)       No Borrower will
purchase any further tonnage or incur any secured or unsecured indebtedness
(other than indebtedness in respect of advances from the Corporate Guarantor or
any other Borrower incurred in the ordinary course of business of owning or
operating the Ships) without the prior written consent of the Bank.


 


(i)        Subject to the proviso
to this paragraph, the Corporate Guarantor and/or any wholly-owned subsidiary
(other than the Borrowers) (“Non-Borrower Subsidiary”) will be permitted to
incur further indebtedness including, without limitation, for the purposes of:


 


(a)                                             in the case of the Corporate
Guarantor, assisting any Non-Borrower Subsidiary to acquire; or


 


(b)                                            in the case of any
Non-Borrower Subsidiary, in acquiring, 


 


further tonnage over which such Non-Borrower
Subsidiary shall be entitled to grant mortgages, pledges, liens or other
encumbrances as security for its obligations in respect of such indebtedness.


 


The Corporate Guarantor and/or any Non-Borrower
Subsidiary will only be permitted to incur any such further indebtedness
provided that no event of default or breach of covenant has occurred and is
continuing under the Loan Agreement or any of the security documents or would
result as a consequence of incurring such further indebtedness.  If the terms of any future indebtedness
include financial covenants different to those detailed in paragraph 10 of this
letter, the Bank reserves the right to amend those covenants to ensure that the
Bank ranks at least pari passu with any incoming financial institution.  Appropriate cross-default provisions will be
incorporated into the Loan Agreement and the security documents to cover
defaults in respect of such further indebtedness.


 


(j)                          The Corporate Guarantor will
be permitted to declare and pay dividends, provided that no event of default or
breach of covenant has occurred and is continuing or would occur as a result of
the declaration or payment of such dividend including, without limitation, the
financial covenants set out in paragraph 10 below.


 


(k)                       The Corporate Guarantor will
not be permitted to appoint a Chief Executive Officer, other than Evangelos
Pistiolis, without the Bank’s prior consent.


 


(l)                          The rights of the equity
holders of the Corporate Guarantor and/or the Borrowers shall be legally and
effectively subordinated to any and all amounts due to the Bank under the Loan
Agreement and the other security documents. 
The equity will be non-convertible unless with the Bank’s prior written
consent.  Further equity participation
for the Corporate Guarantor and/or the Borrowers shall be permitted to the
extent that it is legally and effectively subordinated to all amounts due to
the Bank under the Loan Agreement and the other security documents.


 


(m)                    The Ships shall be managed by Top Tanker
Management, a wholly-owned subsidiary of the Corporate Guarantor, which will
subcontract the technical management of the Ships to V Ships, Unicom Management
Services (Cyprus) Ltd


 


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or any other company reasonably acceptable
to the Bank.  Any manager will
subordinate claims it may have against the Borrowers, the Corporate Guarantor
or the Ships to the Loan.


 


(n)                      The Bank is required by
applicable law and regulations, and its own internal guidelines, to take due
diligence steps in relation to the opening of bank accounts and the identity of
its customers.  The Bank will provide a
schedule in relation to these matters immediately after acceptance of this
offer letter to complete the necessary formalities before signing of the loan
agreement.  The acceptability of the
Borrowers will be dependent on such due diligence being completed and the results
being satisfactory to the Bank in all respects.


 


(o)                      All out of pocket expenses
(including VAT) incurred by the Bank in connection with the loan facility shall
be reimbursed by the Borrowers on demand; such expenses shall include (but
shall not be limited to) legal and other expenses incurred by the Bank after
acceptance of this letter and whether or not any drawdown is effected.


 


(p)                      It is a further condition of
this Loan that the Existing Borrowers enter into a supplemental agreement to
vary the terms of the Existing Loan Agreement, as follows:


 


i)                                                  The relevant sections of the
Existing Loan Agreement shall be amended in order that the minimum security
covenant and the interest margin be determined by taking account the value of
all the Ships (including the Purchased Ships) and the aggregate indebtedness
(including the Loan) as per paragraph 9 (c) above.


 


ii)                                               The net worth covenant shall
be amended as per paragraph 10 (a) below.


 


iii)                                            Any other subsequent technical
amendments as required, provided that they are not conflicting with the Existing
Loan Agreement.


 


10.           FINANCIAL
COVENANTS


 


                The
Corporate Guarantor shall promptly provide annual audited financial statements,
quarterly unaudited financial statements and such other management information
as may be reasonably required by the Bank, to be prepared in accordance with
SEC requirements, including US GAAP, together with a certificate (in a form
acceptable to the Bank) certifying that the Corporate Guarantor is complying
with the following covenants.  The
certificate shall contain details of the calculations made by the Corporate
Guarantor to demonstrate to the Bank compliance with these covenants:-


 


 (a)  Adjusted Net Worth will not at
any time be less than US$200,000,000.


 


                (b)                                 Adjusted
Net Worth will at all times exceed 35% of Total Assets.


 


                (c)                                  EBITDA
will at all times exceed 120% of the aggregate amount of Fixed Charges.


 


                                                (d)                                 Liquid
Funds shall not at any time be less than the highest of i) US$10,000,000 or ii)
US$500,000 per Fleet Vessel.


 


                For
these purposes the capitalised expressions shall have the meanings set out in
Appendix ‘A’ to this letter.


 


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11.           DOCUMENTATION


 


                This
letter contains an outline of certain terms and conditions (it does not
constitute a legally binding commitment on the Bank) which will, inter alia, be
embodied in loan and security documentation (the “Documentation”) containing
usual provisions of the Bank relating to the London Interbank Dollar Market,
covenants and events of default acceptable to the Bank, all of which shall be
completed as a condition precedent to drawdown; such legal agreement and
security documentation shall be governed by English law (except to the extent
any security otherwise requires).  The
Documentation shall supersede this letter and all prior discussions and
negotiations in relation to the Loan.


 


                The
Bank shall be entitled to obtain such legal opinions from such jurisdictions as
it may require and from lawyers appointed by it and the Borrower shall provide
such corporate and other documentation as may be required by the Bank or its lawyers.


 


12.           ACCEPTANCE


 


                This
offer will remain open for acceptance until 15 November 2004 and if no
acceptance is received by this date, the offer shall be automatically cancelled
and no longer available for acceptance. 
If the terms of this offer are acceptable, please sign the acceptance on
the enclosed copy of this letter and return it to the Bank.


 


                Please
note that this letter replaces our earlier letter dated 27 October 2004, which
is hereby cancelled.


 


 


Yours
faithfully


For THE ROYAL BANK OF SCOTLAND plc


 


 


 


 


	
  BARRY MARTIN

  	
   

  	
  ADRIAN
  MEADOWS

  	
   

  	
   

  	 

	
  SENIOR DIRECTOR, GREECE

  	
   

  	
  DIRECTOR, SHIP FINANCE

  	
   

  	
   

  	 

	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  We hereby
  unconditionally and irrevocably accept the terms and conditions set out
  above.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  For

  	
   

  	
   

  	
  Name

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Signed

  	
   

  	
   

  	
  Position

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date

  	
   

  	
   

  	
   

  	
   

  
															



 


 


 


 


 


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APPENDIX ‘A’


 


 


“Accounting
Information”  means the
quarterly financial statements and/or the annual audited financial statements
to be provided by the Corporate Guarantor to the Lender in accordance with
paragraph 10 of this letter;


 


“Accounting
Period”  means each
consecutive period of approximately three months falling during the Loan period
(ending on the last day in March, June, September and December of each year)
for which quarterly Accounting Information is required to be delivered pursuant
to paragraph 10 of this letter;


 


“Adjusted Net
Worth”  means, in respect of
an Accounting Period, the amount of Total Assets less Consolidated Debt;


 


“Consolidated Debt” means, in respect of an
Accounting Period, the aggregate amount of Debt due by the members of the Group
(other than any such Debt owing by any member of the Group to another member of
the Group) as stated in the then most recent Accounting Information;


 


“Consolidated Financial Indebtedness”  means, in respect of each Accounting Period,
the aggregate amount of Financial Indebtedness (including current maturities)
due by the members of the Group (other than any such Financial Indebtedness
owing by any member of the Group to another member of the Group) as stated in
the then most recent Accounting Information;


 


“Current Assets”  means, in respect of each Accounting Period, the aggregate of the
cash and marketable securities, trade and other receivables from persons other
than a member of the Group realisable within one year, inventories and prepaid
expenses which are to be charged to income within one year less any doubtful debts and
any discounts or allowances given as stated in the then most recent Accounting
Information;


 


“Debt”  means in relation to any member of the Group
(the “debtor”):


 


(a)                        Financial Indebtedness of the
debtor;


(b)                       liability for any credit to
the debtor from a supplier of goods or services or under any instalment
purchase or payment plan or other similar arrangement;


(c)                        contingent liabilities of the
debtor (including without limitation any taxes or other payments under dispute)
which have been or, under GAAP, should be recorded in the notes to the
Accounting Information; 


(d)                       deferred tax of the debtor;
and


(e)                        liability under a guarantee,
indemnity or similar obligation entered into by the debtor in respect of a
liability of another person who is not a member of the Group which would fall
within (a) to (d) if the references to the debtor referred to the other person;


“EBITDA”
means, in respect of an Accounting Period, the aggregate amount of consolidated
pre-tax profits of the Group before extraordinary or exceptional items,
depreciation, interest, rentals under finance leases and similar charges
payable as stated in the then most recent Accounting Information;


 


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                “Financial
Indebtedness”  means, in
relation to any member of the Group (the “debtor”), 
a liability of the debtor: 


 


(a)                        for principal, interest or any
other sum payable in respect of any moneys borrowed or raised by the debtor;


(b)                       under any loan stock, bond,
note or other security issued by the debtor;


(c)                        under any acceptance credit,
guarantee or letter of credit facility made available to the debtor;


(d)                       under a financial lease, a
deferred purchase consideration arrangement (in each case, other than in
respect of assets or services obtained on normal commercial terms in the
ordinary course of business) or any other agreement having the commercial
effect of a borrowing or raising of money by the debtor;


(e)                        under any foreign exchange
transaction, interest or currency swap or any other kind of derivative
transaction entered into by the debtor or, if the agreement under which any
such transaction is entered into requires netting of mutual liabilities, the
liability of the debtor for the net amount; or


(f)                          under a guarantee, indemnity
or similar obligation entered into by the debtor in respect of a liability of
another person which would fall within (a) to (e) if the references to the
debtor referred to the other person;


“Fixed
Charges”  means, in respect of
an Accounting Period, the aggregate of Interest Expenses and the portion of
Consolidated Financial Indebtedness (other than balloon repayments) falling due
during that period, as stated in the then most recent Accounting Information;


 


“Fleet
Vessels”  means any vessel
(including, but not limited to, the Ships) from time to time owned by any
member of the Group (each a “Fleet Vessel”);


 


“GAAP”  means accounting principles, concepts, bases
and policies generally adopted and accepted in the United States of America
consistently applied;


 


“Group”  means the Corporate Guarantor and its
subsidiaries (whether direct or indirect and including, but not limited to, the
Borrowers) from time to time during the Security Period and “member of
the Group” shall be construed accordingly;


 


“Interest Expenses” means, in
respect of an Accounting Period, the  aggregate on a consolidated basis of all interest incurred
by any member of the Group (excluding any amounts owing by one member of the
Group to another member of the Group) and any net amounts payable under
interest rate hedge agreements;


 


 


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                “Liquid Funds”  means, in respect of an Accounting Period:


 


(a)                        cash in hand or held with
banks or other financial institutions of the Corporate Guarantor and/or any
other member of the Group in Dollars or another currency freely convertible
into Dollars, which is free of any Security Interest (other than a Permitted
Security Interest and other than ordinary bankers’ liens which have not been
enforced or become capable of being enforced);


(b)                     any other short-term financial investments
which is free of any Security Interest (other than a Permitted Security
Interest) as stated in the then most recent Accounting Information;


“Tangible
Fixed  Assets” means, in respect of an Accounting Period, the value
(less depreciation computed in accordance with GAAP) on a consolidated basis of
all tangible fixed assets of the Group as stated in the then most recent
Accounting Information; and


 


“Total Assets”
means, in respect of an Accounting Period, the aggregate of Current Assets and
Tangible Fixed Assets”.


 


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