Document:

EX-4.50 Deed of Covenants

Exhibit 4.50

DEED OF COVENANTS

 

 

 

between

 

ADVENTURE SEVEN S.A.

as mortgagor

 

and

 

HOLLANDSCHE BANK-UNIE N.V.

as mortgagee

 

DATED the 19th day of March 2008

 

- relating to -

 

m.v. “FREE KNIGHT”

 

 

NAUTADUTILH N.V.

ROTTERDAM

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	Clause	 	Heading	 	Page
	1.

	 	Interpretation
	 	 	3	 
	 
	2.

	 	Representations and warranties
	 	 	9	 
	 
	3.

	 	Payment covenants
	 	 	10	 
	 
	4.

	 	Charging Clause
	 	 	10	 
	 
	5.

	 	Continuing security and other provisions
	 	 	11	 
	 
	6.

	 	Covenants
	 	 	12	 
	 
	7.

	 	Powers of Mortgagee to protect security and remedy defaults
	 	 	23	 
	 
	8.

	 	Events of Default
	 	 	24	 
	 
	9.

	 	Enforceability and Mortgagee’s powers
	 	 	27	 
	 
	10.

	 	Application of Moneys
	 	 	29	 
	 
	11.

	 	Omissions or Delay
	 	 	29	 
	 
	12.

	 	Delegation of Powers
	 	 	30	 
	 
	13.

	 	Indemnity
	 	 	30	 
	 
	14.

	 	Power of Attorney
	 	 	30	 
	 
	15.

	 	Further Assurance
	 	 	31	 
	 
	16.

	 	Partial Invalidity
	 	 	31	 
	 
	17.

	 	Notices
	 	 	31	 
	 
	18.

	 	Law and jurisdiction
	 	 	32	 

 

 

THIS DEED OF COVENANTS is made the 19th day of March 2008

BETWEEN:

	1.	 	ADVENTURE SEVEN S.A., a company incorporated and existing under the the Marshall Islands,
having its registered office at Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands
MH96960 (the “Mortgagor”)

of the one part;

and

	2.	 	HOLLANDSCHE BANK-UNIE N.V., a company incorporated and existing under the laws of the
Netherlands, having its registered office at Coolsingel 104, 3011 AG Rotterdam, the
Netherlands (the “Mortgagee”)

of the other part;

WHEREAS:

	(1)	 	the Mortgagor is the sole, absolute, legal and beneficial  owner of 64/64th shares
of and in the Vessel (as defined hereinafter);
	 
	(2)	 	by, and subject to and upon the terms and conditions of a credit agreement signed by the
Mortgagee and the Borrowers (as hereinafter defined) on the 21st day of January
2008 and a short term loan agreement dated the 21st day of January 2008 (together
as the same may be amended, supplemented or varied from time to time together with the therein
referred to HBU General Banking Conditions of 1995 and HBU General Credit Provisions of July
2006 the “Financial Agreement”), the Mortgagee agreed to make available to the
Borrowers (as hereinafter defined) as joint and several obligors:

	 	(i)	 	an overdraft facility in the amount of USD 3,100,000 (three million
one hundred thousand United States Dollars) (“Overdraft I”);
	 
	 	(ii)	 	and overdraft facility in the amount of USD 1,500,000 (one million
five hundred thousand United States Dollars (“Overdraft II”);
	 
	 	(iii)	 	an overdraft facility in the amount of USD 3,000,000 (three million
United States Dollars) (“Overdraft III”); and
	 
	 	(iv)	 	an eight year roll-over loan facility in the amount of USD 27,000,000
(twenty-seven million United States Dollars) (“the Roll-Over Loan”)

	 	 	(Overdraft I, Overdraft II, Overdraft III and the Roll-Over Loan together hereinafter
referred to as the “Facility”);

2

 

	(3)	 	as a condition of the Financial Agreement the Mortgagor has executed in favour of the
Mortgagee a statutory mortgage in account current form of even
date herewith constituting a first priority statutory mortgage over 64/64th shares in the
Vessel (the “Mortgage”) for securing the Outstanding Indebtedness (as hereinafter
defined);

	(4)	 	this Deed is supplemental to the Mortgage, the Financial Agreement, the other Security
Documents (as hereinafter defined) and the security thereby created;

NOW THIS DEED PROVIDES as follows:

	1.	 	Interpretation
	 
	1.1	 	In this Deed unless the context otherwise requires:
	 
	 	 	“Borrowers” means the Mortgagor, Adventure Two S.A. and Adventure Three S.A., all
of Majuro, Marshall Islands;
	 
	 	 	“Business Day” means a day on which the banks are open for business in Amsterdam
and New York (whichever is applicable) for all kinds of business as contemplated herein
and/or the Financial Agreement;
	 
	 	 	“DOC” means a document of compliance issued to an Operator in accordance with the
ISM Code;
	 
	 	 	“Dollars” and “USD” means the lawful currency of the United States of
America;
	 
	 	 	“Earnings” means all moneys whatsoever from time to time due or payable actually
or contingently to the Mortgagor arising out of the use or operation of the Vessel,
including without limitation all moneys payable to the Mortgagor under the Time Charter
and all other freight, hire and passage moneys, moneys arising under any contract or other
agreement or arrangement with any operator, income arising under pooling arrangements,
compensation payable to the Mortgagor as a result of, or otherwise in connection with, the
requisition of the Vessel for hire, remuneration for salvage and towage services,
demurrage and detention moneys, and all damages for breach, and all payments for, or
otherwise in connection with any variation or termination of any charterparty, contract or
other agreement or arrangement in respect of, or otherwise in connection with the
employment of the Vessel;
	 
	 	 	“Environmental Approval” means any and all consents, approvals, licences, permits,
exemptions or authorisations required under any Environmental Law;

3

 

	 	 	“Environmental Claim” means:

	 	(a)	 	any and all enforcement, clean-up, removal or other governmental, judicial
or regulatory action or order or claim instituted or made pursuant to any
Environmental Law or resulting from a Spill; or
	 
	 	(b)	 	any claim made by any other party howsoever relating to a Spill;

	 	 	“Environmental Incident” means any Spill:

	 	(a)	 	from the Vessel;
	 
	 	(b)	 	from a vessel other than the Vessel in circumstances where:

	 	(i)	 	the Vessel or the Mortgagor, the Operator or the Manager
may be liable for Environmental Claims arising from the Spill (other than
the Environmental Claims arising and fully satisfied before the date of this
Deed); and/or
	 
	 	(ii)	 	the Vessel may be arrested or attached in connection with
any Environmental Claim arising from such Spill;

	 	 	“Environmental Law” means any and all national and international and state laws,
rules, regulations, treaties, conventions and agreements whatsoever relating to the
pollution or protection of human health or the environment (including without limitation
the United States Oil Pollution Act of 1990 and any comparable laws of the individual
States of the United States of America);
	 
	 	 	“Environmentally Sensitive Material” means pollutants, contaminants, toxic
substances, oil and its products and all hazardous substances and any other substance
whose release into the environment is regulated, prohibited or penalised by or pursuant to
any Environmental Law;
	 
	 	 	“Event of Default” means any one of the events of default specified and referred
to in the Financial Agreement and/or clause 8;
	 
	 	 	“Facility” has the meaning given in recital (2) hereto;
	 
	 	 	“Financial Agreement” has the meaning given in recital (2) hereto;

4

 

	 	 	“Insurances” means all policies and contracts of insurance, including without
limitation all entries of the Vessel in a protection and indemnity or war risks
association which are from time to time in place or taken out or entered into by or for
the benefit of the Mortgagor in respect of, or otherwise in connection with, the Vessel
and/or her Earnings or any part thereof and all the benefits thereof, including without
limitation all claims of whatsoever nature and all return of premiums;
	 
	 	 	“ISM Code” means the International Safety Management Code for the Safe Operation
of Ships and for Pollution Prevention (as amended, including any regulation issued
thereunder), as adopted by the Assembly of the International Maritime Organisation on 4
November 1993 by resolution A.741 (18) and incorporated on 19 May 1994 as chapter IX of
the Safety of Life at Sea Convention 1974;
	 
	 	 	“ISPS Code” means the International Ship and Port Facility Security Code (as
amended, including any regulation issued thereunder), as adopted by the Assembly of the
International Maritime Organisation;
	 
	 	 	“ISSC” means an international ship security certificate issued in respect of the
Vessel in accordance with the ISPS Code;
	 
	 	 	“Major Casualty Amount” means USD 500,000 (five hundred thousand United States
Dollars) or the equivalent thereof in any other currency;
	 
	 	 	“Management Agreement” means the agreement dated the 22nd day of
January 2008 and made between the Mortgagor and the Manager regarding the management of
the Vessel;
	 
	 	 	“Manager” means FREE BULKERS S.A. or such other such manager of the Vessel as
approved by the Mortgagee in writing;
	 
	 	 	“Material Adverse Change” means (a) any material adverse change in the business,
assets, condition (financial or otherwise), operations, performance or prospects of the
Mortgagor or any of the other Security Parties, (b) any material adverse effect on the
ability of the Mortgagor or any of the other Security Parties to perform any of its
obligations under any of the Security Documents to which it is a party or (c) any material
adverse effect on the validity, binding nature, or enforceability of any of the Security
Documents;
	 
	 	 	“Mortgage” means the first priority statutory mortgage referred to in recital
(3) hereto;

5

 

	 	 	“Operator” means any entity who is at any time during the Security Period
concerned in the operation of the Vessel and falls within the definition of “Company” set
out in the ISM Code;
	 
	 	 	“Outstanding Indebtedness” means (a) the aggregate of all sums of money actual or
contingent, present or future due by the Borrowers as joint and several obligors to
the Mortgagee under or in connection with the Security Documents or any of them and
(b) all costs and expenses incurred in connection with the Security Documents,
including any taxes payable by the Mortgagee (other than on net profit), as well as
any reasonable costs and expenses incurred by the Mortgagee in connection with the
Mortgagor’s failure to comply with or fulfil any obligation under the Security
Documents at the time and in the manner required, including collection charges,
disbursements, fees of legal consultants and other experts and costs of proceedings,
irrespective against whom brought;
	 
	 	 	“Overdraft I” has the meaning given in recital (2) hereto;
	 
	 	 	“Overdraft II” has the meaning given in recital (2) hereto;
	 
	 	 	“Overdraft III” has the meaning given in recital (2) hereto;
	 
	 	 	“Pollutant” means and includes oil and its products, any other polluting, toxic or
hazardous substance and any other substance whose release into the environment is
regulated or penalised by Environmental Laws;
	 
	 	 	“Requisition Compensation” means all moneys or other compensation payable by
reason of requisition for title or other compulsory acquisition of the Vessel otherwise
than by requisition for hire;
	 
	 	 	“Roll-Over Loan” has the meaning given in recital (2) hereto;
	 
	 	 	“Security Documents” means the Financial Agreement, the Mortgage, this Deed and
any other such document as may be executed from time to time to secure and/or regulate the
Outstanding Indebtedness;
	 
	 	 	“Security Interest” means a mortgage, charge (whether fixed or floating), pledge,
lien, hypothecation, assignment or other security interest or arrangement of any kind
whatsoever;
	 
	 	 	“Security Parties” means the Mortgagor, the Borrowers, Free Seas Inc. or any other
party to the Security Documents other than the Mortgagee at any relevant time;

6

 

	 	 	“Security Period” means the period commencing on the date of this Deed and
terminating on the date upon which all moneys payable or to become payable from time to
time pursuant to the terms of the Financial Agreement, the Mortgage, this Deed and/or any
of the other Security Documents shall have been paid and discharged in full;
	 
	 	 	“SMC” means a safety management certificate issued in respect of the Vessel in
accordance with the ISM Code;
	 
	 	 	“Spill” means any actual or threatened emission, spill, release or discharge of a
Pollutant into the environment;
	 
	 	 	“Time Charter” means the time charterparty in respect of the Vessel and to be made
between the Mortgagor and the Time Charterer on the basis of the recapitulation already
provided by Time Charterer;
	 
	 	 	“Time Charterer” means MUR SHIPPING B.V. of World Trade Center,

Tower H, 20th floor, Zuidplein 164, 1077 XV Amsterdam, the Netherlands;
	 
	 	 	“Total Loss” means:

	 	(a)	 	actual or constructive or compromised or arranged total loss of the Vessel;
	 
	 	(b)	 	requisition for title or other compulsory acquisition of the Vessel
otherwise than by requisition for hire;
	 
	 	(c)	 	capture seizure arrest detention or confiscation of the Vessel by any
government or entity or individual acting or purporting to act on behalf of any
government unless the Vessel be released and restored to the Mortgagor from such
capture seizure arrest detention or confiscation within thirty (30) days after the
occurrence thereof;

	 	 	“Vessel” means the motor vessel “FREE KNIGHT” registered under the flag of
the Bahamas at the Port of Nassau under Official Number 8000949 and includes any share or
interest therein and the engines, machinery, boats, tackle, outfits, gear, instruments,
parts, spare parts, fuel, consumable and other stores, belongings, appurtenances,
accessories, furnishings and all other equipment of whatever kind onboard or ashore or
elsewhere, whether now belonging to it or hereafter acquired and all additions,
improvements or replacements thereto.

7

 

	1.2	 	In clause 6.1:
	 
	 	 	“excess risks” means the proportion (if any) of claims for general average,
salvage and salvage charges and under the ordinary collision clause not recoverable in
consequence of the value at which a vessel is assessed for the purpose of such claims
exceeding her insured value;
	 
	 	 	“protection and indemnity risks” means the usual risks (including oil pollution
cover and freight, demurrage and defence cover) covered by a protection and indemnity
association which is a member of the International Group of Protection and Indemnity
Associations (including the proportion of any sums payable to any entity or individual in
case of collision which are not recoverable under the hull and machineries policies by
reason of the incorporation therein of Clause 8 of the Institute Time Clauses (Hulls)
(1/11/95) or any replacement, amended or materially equivalent provision;
	 
	 	 	“war risks” means those risks covered by the standard form of English marine
policy with War and Strike Clauses (Hulls-Time) (1/11/95) attached or any replacement,
amended or materially equivalent provisions.
	 
	1.3	 	This Deed shall be read together with the Financial Agreement, but in the case of conflict
between the two instruments the provisions of the Financial Agreement shall prevail in as far
as it does not contravene the laws of the Common Wealth of the Bahamas.
	 
	1.4	 	In this Deed:

	 	(a)	 	clause headings are inserted for convenience of reference only and shall be
ignored in the interpretation of this Deed;
	 
	 	(b)	 	unless the context otherwise requires, words denoting the singular number
shall include the plural and vice versa;
	 
	 	(c)	 	references to clauses and schedules shall be construed as references to
clauses of and schedules to this Deed;
	 
	 	(d)	 	an “entity” shall be construed to include any firm, company, association,
partnership (whether or not having separate legal personality), institution,
government (local, national or supranational), state, agency or sub-division thereof
or international organisation;

8

 

	 	(e)	 	reference to any document including this Deed shall be construed as
reference to such document as amended supplemented or varied from time to time;
and
	 
	 	(f)	 	the Mortgagee, the Mortgagor, the Borrowers, the Security Parties and any
other entity or individual shall include their respective successors in title,
estates and, in the event of an assignment permitted under this Deed, assignees.

	2.	 	Representations and warranties
	 
	2.1	 	The Mortgagor hereby represents and warrants to the Mortgagee that:

	 	(a)	 	Entitlement to grant Mortgage
	 
	 	 	 	it is fully entitled to grant the Mortgage and enter into this Deed and further
to agree and perform the terms and conditions hereof and that such granting and
entering into and performance will not cause the Mortgagor to be in breach of any
agreement to which it is a party;
	 
	 	(b)	 	Ownership of Vessel
	 
	 	 	 	it is the sole, absolute, legal and beneficial owner of the Vessel;
	 
	 	(c)	 	Charter and sharing Earnings
	 
	 	 	 	the Vessel is, save for the Time Charter, not subject to any charter which, if
entered into after the date of this Deed, would have required the consent of the
Mortgagee under clause 6.1(k) and there is no existing agreement or
arrangement whereby the Earnings may be shared with any other entity or
individual;
	 
	 	(d)	 	Security Interest
	 
	 	 	 	the Vessel is not subject to any Security Interest (save as constituted by the
Security Documents or otherwise permitted by the terms thereof); and
	 
	 	(e)	 	DOC, SMC and ISSC
	 
	 	 	 	the Operator has obtained and maintains a DOC (a true copy of which has been
delivered to the Mortgagee) and has obtained and maintains a SMC and an ISSC
(true copies of which have been delivered to the
Mortgagee) in respect of the Vessel, all are in full force and effect and nothing
has happened which might cause any of them to be withdrawn, suspended, cancelled
or modified.

9

 

	2.2	 	The Mortgagor hereby further represents and warrants to the Mortgagee that:

	 	(a)	 	all applicable Environmental Laws and Environmental Approvals relating to
the Vessel, its operation and management and the business of the Mortgagor (as now
conducted and as reasonably anticipated to be conducted in the future) have been
complied with;
	 
	 	(b)	 	no Environmental Claim has been made or threatened or is pending against
the Mortgagor, the Manager or otherwise in connection with the Vessel and not fully
satisfied; and
	 
	 	(c)	 	no Environmental Incident has occurred.

	3.	 	Payment covenants
	 
	 	 	The Mortgagor hereby covenants duly to observe and perform all its obligations under the
Financial Agreement in accordance with the terms and conditions thereof and in particular:

	 	(a)	 	to repay the Loan by the instalments and on the dates referred to and
otherwise in the manner and upon the terms set out in the Financial Agreement;
	 
	 	(b)	 	to pay interest on the Loan and on other moneys payable under the Financial
Agreement at the rate or rates from time to time applicable thereto in the manner and
upon the terms set out in the Financial Agreement;
	 
	 	(c)	 	to pay all other moneys payable by the Mortgagor under or in connection
with the Security Documents or any of them at the times and in the manner therein
specified.

	4.	 	Charging Clause
	 
	 	 	By way of security for payment of the Outstanding Indebtedness and the performance of the
obligations under the Security Documents by the Borrowers as joint and several obligors,
the Mortgagor with full title guarantee hereby mortgages and charges and agrees to
mortgage and charge to and in
favour of the Mortgagee all its right, title and interest (present and future) to and in
the Vessel.

10

 

	5.	 	Continuing security and other provisions
	 
	 	 	It is declared and agreed that:

	 	(a)	 	the security created by the Mortgage, this Deed and the other Security
Documents shall be held by the Mortgagee as a continuing security for the payment of
the Outstanding Indebtedness and the performance and observance of and compliance
with all obligations of the Mortgagor under the Security Documents or any of them,
express or implied;
	 
	 	(b)	 	the security so created shall not be satisfied by any intermediate payment
or satisfaction of any part of the Outstanding Indebtedness and shall be in addition
to and shall not in any way prejudice or affect and may be enforced by the Mortgagee
without prior recourse to the security created by any other of the Security Documents
or by any other security now or hereafter held by the Mortgagee and shall not in any
way be prejudiced or affected thereby or by the invalidity or unenforceability
thereof or by the Mortgagee releasing, modifying or refraining from perfecting or
enforcing any of the same or granting time or indulgence or compounding with any
liable entity or individual;
	 
	 	(c)	 	all the rights, remedies and powers vested in the Mortgagee under the
Mortgage and this Deed shall be in addition to and not a limitation of any and every
other right, power or remedy vested in the Mortgagee under any other of the Security
Documents or at law (whether Bahamian or otherwise) and that all the powers so vested
in the Mortgagee may be exercised from time to time and as often as the Mortgagee may
deem expedient; and
	 
	 	(d)	 	the Mortgagee shall not be obliged to make any enquiry as to the nature or
sufficiency of any payment received by it under the Mortgage and/or this Deed or to
make any claim or to take any action or to enforce any rights and benefits hereby
assigned to the Mortgagee or to which the Mortgagee may at any time be entitled under
the Mortgage and this Deed.

11

 

	6.	 	Covenants
	 
	6.1	 	The Mortgagor further covenants with the Mortgagee throughout the Security Period:

	 	(a)	 	Insurance

	 	(i)	 	Type of insurances
	 
	 	 	 	to insure and keep the Vessel insured at the expense of the Mortgagor
against:

	 	(A)	 	fire and usual marine risks (including
excess risks);
	 
	 	(B)	 	war risks;
	 
	 	(C)	 	protection and indemnity risks
(including pollution risks and a freight demurrage and defence
cover); and
	 
	 	(D)	 	where the Vessel shall, at any time
enter waters under the jurisdiction of the United States of America
and/or the Exclusive Economic Zone (as defined in the United States
Oil Pollution Act of 1990) oil pollution liability risks in excess
of the cover for oil pollution liability risks included within the
cover for protection and indemnity risks;

	 	 	 	and, at the option of the Mortgagee, either (i) to effect and keep
effected, in the name and for the benefit of the Mortgagee, but at the
expense of the Mortgagor or (ii) to reimburse the Mortgagee on demand
for any and all costs incurred by it in effecting and maintaining such
insurance in relation to the Vessel:

	 	(E)	 	a mortgagee’s interest insurance; and
	 
	 	(F)	 	(where the Vessel shall, at any time
enter waters under the jurisdiction of the United States of America
and/or the Exclusive Economic Zone (as defined in the United States
Oil Pollution Act of 1990)) an insurance against the possible
consequences of pollution due to, without limitation, oil or any
other substance

12

 

	 	 	 	involving the Vessel including, without limitation, the risk of
expropriation or sequestration of the Vessel or the imposition
of any Security Interest having priority over the Mortgage
(“Mortgagee’s Interest Insurance — Additional Perils
(Pollution)”).

	 	(ii)	 	Currency and amounts
	 
	 	 	 	to effect and keep effected the Insurances (if not effected by the
Mortgagee) in such amounts and in such currency and upon such terms and
through such brokers (hereinafter called the “approved brokers”)
and with such insurance companies, underwriters, war risks and
protection and indemnity associations (hereinafter called the
“approved associations”) as shall from time to time be approved
in writing by the Mortgagee PROVIDED HOWEVER that the insurances against
war risks and protection and indemnity risks may be effected by the
entry of the Vessel with such war risks and protection and indemnity
risks associations as shall from time to time be approved in writing by
the Mortgagee and if so required by the Mortgagee (but without, as
between the Mortgagor and the Mortgagee, liability on the part of the
Mortgagee for premiums or calls) with the Mortgagee named as co-assured;
	 
	 	(iii)	 	Fleet cover
	 
	 	 	 	if any of the Insurances forms part of a fleet cover, to procure that
the approved brokers and (as the case may be) the approved associations
shall undertake to the Mortgagee that they shall neither set off against
any claims in respect of the Vessel any premiums due in respect of other
vessels under such fleet cover or any premiums due for other insurances,
nor cancel such insurance in respect of the Vessel for reason of
non-payment of premiums for other vessels under such fleet cover or of
premiums for such other insurances and shall undertake to issue a
separate policy in respect of the Vessel if and when so requested by the
Mortgagee;

13

 

	 	(iv)	 	Renewals
	 
	 	 	 	at least fourteen (14) days before the relevant policies,
contracts or entries expire, to notify the Mortgagee in writing of the
names of the brokers and/or the war risks and protection and indemnity
risks associations proposed to be employed by the Mortgagor for the
purposes of the renewal of such insurances (subject to the Mortgagee’s
approval of such brokers and/or associations) and of the amounts in
which such insurances are proposed to be renewed and the risks to be
covered and, (subject to compliance with any requirements of the
Mortgagee pursuant to this clause 6.1(a)), to renew (or procure
the renewal of) such Insurances at least ten (10) days before the
relevant policies, contracts or entries expire and to procure that such
brokers and (as the case may be) such associations will at least seven
(7) days before such expiry confirm such renewals in writing to the
Mortgagee;
	 
	 	(v)	 	Payments
	 
	 	 	 	punctually to pay all premiums, calls, contributions or other sums
payable in respect of the Insurances and to produce all relevant
receipts or other evidence if and when so required by the Mortgagee;
	 
	 	(vi)	 	Guarantees, indemnities
	 
	 	 	 	to arrange for the execution of such guarantees or indemnities as may
from time to time be required by or in connection with any protection
and indemnity or war risks association or required by or in connection
with a usual marine risks policy (including excess risks and war risks);
	 
	 	(vii)	 	Loss payable clause, notice of assignment
	 
	 	 	 	to procure that the interest of the Mortgagee shall be duly endorsed
upon all slips, cover notes, policies, certificates of entry or other
instruments of insurance issued or to be issued in connection with the
Insurances by means of a loss payable and notice of cancellation clause
and a notice of assignment (signed by the Mortgagor) in such forms as
from time to time required by the Mortgagee;

14

 

	 	(viii)	 	Instruments of insurance
	 
	 	 	 	to procure that all instruments of the Insurances shall be deposited
with the approved brokers and that such brokers shall (if so required by
the Mortgagee) furnish the Mortgagee with pro forma copies thereof and a
letter or letters of undertaking in such form as may from time to time
be required by the Mortgagee;
	 
	 	(ix)	 	Letter(s) of undertaking
	 
	 	 	 	to procure that the protection and indemnity and/or war risks
associations wherein the Vessel is entered shall (if so required by the
Mortgagee) furnish the Mortgagee with a letter or letters of undertaking
in such form as may from time to time be required by the Mortgagee;
	 
	 	(x)	 	Use of the Vessel
	 
	 	 	 	not to employ the Vessel or suffer the Vessel to be employed otherwise
than in conformity with the terms of the instruments of the Insurances
(including any warranties express or implied therein) without first
obtaining the consent to such employment of the insurers and complying
with such requirements as to extra premium or otherwise as the insurers
may prescribe;
	 
	 	(xi)	 	Reimbursement
	 
	 	 	 	to reimburse to the Mortgagee on demand any costs or expenses incurred
by the Mortgagee in obtaining (if and when so required by the Mortgagee)
reports from an independent marine insurance broker appointed by the
Mortgagee as to the adequacy of the insurances effected or proposed to
be effected pursuant to this clause 6 and procure that there is
delivered to such broker any and all such information in relation to
such insurances as such broker may require;

15

 

	 	(xii)	 	No consent, acts or omissions
	 
	 	 	 	not to make, do, consent or agree to any act or omission which would or
might render any instrument of insurance invalid, void, voidable or
unenforceable or render any sum paid thereunder repayable in whole or in
part;
	 
	 	(xiii)	 	Co-operation with collecting insurance moneys
	 
	 	 	 	to do all things necessary and provide all documents, evidence and
information to enable the Mortgagee to collect or recover any moneys
which shall at any time become due in respect of the Insurances;
	 
	 	(xiv)	 	Application insurance moneys
	 
	 	 	 	to apply such sums receivable in respect of the Insurances other than in
respect of a Total Loss and any major casualty (that is to say any
casualty the claim in respect of which exceeds the Major Casualty Amount
inclusive of any deductible) which shall be payable to the Mortgagee as
are paid to the Mortgagor for the purpose of making good the loss and
fully repairing all damage in respect whereof the insurance moneys shall
have been received;
	 
	 	(xv)	 	Voyage declaration
	 
	 	 	 	to make all such quarterly or other voyage declaration as may from time
to time be required by the protection and indemnity risks association to
maintain cover for trading (including, without limitation, trading to
the United States of America and Exclusive Economic Zone (as defined in
the United States Oil Pollution Act 1990))

	 	 	 	PROVIDED ALWAYS THAT the Mortgagee shall be entitled to review the requirements
of this clause 6.1(a) from time to time in order to take account of
significant changes in circumstances after the date of this Deed (such changes in
circumstances include, without limitation, changes in the availability or the
cost of insurance coverage). The Mortgagee may notify the Mortgagor in writing
from time to time of any proposed modification to the requirements of this

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	 	 	 	clause 6.1(a) which it deems appropriate in the circumstances, and such
modification shall take effect on and from the date it is notified in writing to
the Mortgagor as an amendment to this clause 6.1(a) and shall bind the
Mortgagor accordingly;

	 	(b)	 	Name and Registration
	 
	 	 	 	not to change the name of the Vessel and to keep the Vessel registered with full
registration as a Bahamian ship at the Port of Nassau in the name of the
Mortgagor and not do or suffer to be done anything, or omit to do anything, the
doing or omission of which could or might result in the Vessel being required to
be registered otherwise than as a Bahamian ship in/at the Port of Nassau and not
to do or suffer to be done anything, or omit to do anything, the doing or
omission of which could or might result in such registration being forfeited,
terminated or imperilled and not to register the Vessel or permit its
registration under any other name, flag or at any other port or with any other
numbers without the prior written consent of the Mortgagee and to procure the
renewal of such registration of the Vessel as a Bahamian ship with full
registration at least one month before the same shall expire;
	 
	 	(c)	 	Operator

	 	(i)	 	to comply and to procure that the Operator will comply with, and ensure that the Vessel and the Operator at all times comply with,
the requirements of the ISM Code and the ISPS Code;
	 
	 	(ii)	 	immediately to inform and to procure that the Operator
will inform the Mortgagee if there is any threatened or actual withdrawal,
suspension, cancellation or modification of its or the Operator’s DOC, the
Vessel’s SMC or the Vessel’s ISSC; and
	 
	 	(iii)	 	promptly to inform and to procure that the Operator will
promptly inform the Mortgagee and provide the Mortgagee with true copies of
such documents upon the issue to the Mortgagor or the Operator of a DOC and
to the Vessel of a SMC and an ISSC;

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	 	(d)	 	Employment
	 
	 	 	 	not knowingly to employ the Vessel or suffer its employment in any trade or
business which is forbidden by international law or is otherwise illegal or in
carrying illegal or prohibited goods or in any manner whatsoever which may render
the Vessel or its cargo liable to condemnation in a Prize Court or to penalty,
destruction, seizure or confiscation and in the event of any major political
confrontation or hostilities (whether or not war shall have been formally
declared) or during any civil war or insurrection, not to carry or permit to be
carried on or in the Vessel any cargo that is or may be declared contraband of
war or that may render the Vessel or its cargo liable to penalty, destruction,
seizure, or confiscation unless special war risks policies previously approved by
the Mortgagee shall have been effected prior to undertaking any such risk and to
deliver the signed cover notes in respect thereof forthwith to the Mortgagee;
	 
	 	(e)	 	Encumbrances, sale or other disposal

	 	(i)	 	not without the previous consent in writing of the
Mortgagee to create or suffer the creation of any Security Interest on or in
respect of the Vessel to or in favour of any entity or individual other than
the Mortgagee;
	 
	 	(ii)	 	not without the previous consent in writing of the
Mortgagee (and then only subject to such terms as the Mortgagee may impose)
to sell agree to sell transfer or abandon or otherwise dispose of the Vessel
or any share or interest therein;

	 	(f)	 	Prevention of and release from arrest
	 
	 	 	 	to pay and discharge all debts and liabilities which may give rise to maritime
statutory or possessory liens on the Vessel or to claims enforceable by actions
in rem against the Vessel or similar process so as to keep her free from arrest
or detention and in the event of arrest or detention of the Vessel being
threatened or effected forthwith to notify the Mortgagee thereof and to take all
steps and to make all payments necessary to obtain the release of the Vessel from
such arrest or detention within thirty days from receiving notice thereof;

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	 	(g)	 	Repair and Class

	 	(i)	 	to maintain the Vessel in her present class and to comply
with the provisions of all regulations and requirements (statutory or
otherwise) from time to time applicable to the Vessel and to comply with all
class recommendations of its classification society in accordance with their
terms; and
	 
	 	(ii)	 	to keep the Vessel in good and efficient state of repair
and procure that all repairs to or replacement of any damaged, worn or lost
parts or equipment are effected in such manner (both as regards workmanship
and quality of materials) as not to diminish the value of the Vessel;

	 	(h)	 	Surveys
	 
	 	 	 	to submit the Vessel to such periodical or other surveys as may be required for
classification purposes and if so required to supply to the Mortgagee copies of
all survey reports issued in respect thereof;
	 
	 	(i)	 	Inspections
	 
	 	 	 	to permit the Mortgagee to inspect the condition of the Vessel at all reasonable
times and to give the Mortgagee sufficient notice whenever practicable of
dry-dockings, surveys and major repairs so as to enable the Mortgagee’s surveyors
or other entity or individual appointed by it to attend thereat and if so
required to supply to the Mortgagee copies of survey reports on the Vessel;
	 
	 	(j)	 	Modification, Removal of Parts, Equipment owned by third parties
	 
	 	 	 	not without the prior written consent of the Mortgagee to:

	 	(i)	 	make any modification to the Vessel in consequence of
which her structure, type or performance characteristics could or might
materially be altered or her value materially reduced; or
	 
	 	(ii)	 	remove any material part of the Vessel or any equipment
the value of which is such that its removal from the Vessel would materially
reduce the value of the Vessel without replacing the same with equivalent
parts or equipment owned by the Mortgagor free from encumbrances; or

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	 	(iii)	 	install on the Vessel any equipment owned by a third
party which cannot be removed without causing damage to the structure or
fabric of the Vessel and not to permit any of the foregoing by any third
party;

	 	(k)	 	Chartering

	 	(i)	 	not without the prior written consent of the Mortgagee,
which shall not unreasonably be withheld, to:

	 	(a)	 	let the Vessel on demise charter for any period; or
	 
	 	(b)	 	save for the Time Charter let the
Vessel on time or consecutive voyage charter or otherwise dispose
of the Vessel, except for a time or consecutive voyage charter
agreement for a period which does not exceed or which by virtue of
any optional extensions therein contained is not likely to exceed
six (6) months’ duration; or
	 
	 	(c)	 	charter the Vessel on terms whereby
more than three (3) months’ hire is payable in advance;

	 	(ii)	 	to maintain the Time Charter materially unamended and
renew or extend the Time Charter on terms and conditions identical to the
Time Charter, but in any case for charter rates acceptable to the Mortgagee;

	 	(l)	 	Information
	 
	 	 	 	to supply to the Mortgagee on request full information regarding the Vessel, her
employment, position and engagements, particulars of all towages and salvages and
copies of all charters and other contracts concerning the Vessel;
	 
	 	(m)	 	Notification of certain events
	 
	 	 	 	to notify the Mortgagee forthwith by letter or in case of urgency by telefax of
any accident to the Vessel involving repairs the cost whereof is likely to exceed
the Major Casualty Amount, of any occurrence whereby the Vessel has or is likely
to become a Total Loss, of any

20

 

	 	 	 	actual or threatened arrest, detention, seizure, confiscation or requisition of
the Vessel, of any requirement of insurers, classification society or any
competent authority which is not immediately carried out and of any petition or
notice or meeting to consider any resolution to dissolve wind-up or liquidate the
Mortgagor;

	 	(n)	 	Reimbursement
	 
	 	 	 	to pay to the Mortgagee on demand all moneys whatsoever which the Mortgagee shall
or may expend be put to or become liable for in or about the protection
maintenance or enforcement of the security created by this Deed and the other
Security Documents or in or about the exercise by the Mortgagee of any of the
powers vested in it hereunder or thereunder and to pay interest thereon at the
default rate as per the Financial Agreement;
	 
	 	(o)	 	Costs
	 
	 	 	 	to pay on demand to the Mortgagee (or as it may direct) the amount of all
investigation and legal expenses of any kind whatsoever stamp duties (if any)
registration fees and any other charges incurred by the Mortgagee in connection
with the preparation completion registration and discharge of the Security
Documents or otherwise in connection with the Outstanding Indebtedness and the
security therefor and to pay interest thereon at the default rate as per the
Financial Agreement;
	 
	 	(p)	 	Manager
	 
	 	 	 	not without the previous consent in writing of the Mortgagee (and then only on
and subject to such terms as the Mortgagee may impose) to appoint a manager of
the Vessel other than the Manager or amend or terminate the Management Agreement;
	 
	 	(q)	 	Repairers’ liens
	 
	 	 	 	not without the previous consent in writing of the Mortgagee to put the Vessel
into the possession of any entity or individual for the purpose of work being
done upon her in an amount exceeding or likely to exceed the Major Casualty
Amount unless such entity or individual shall first have given to the Mortgagee
and in terms satisfactory to it a written undertaking not to exercise any lien on
the Vessel or her Earnings for the cost of such work or otherwise;

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	 	(r)	 	Payment of outgoings and evidence of payment
	 
	 	 	 	promptly to pay all tolls dues and other outgoings whatsoever in respect of the
Vessel and her Earnings and Insurances and to keep proper books of account in
respect of the Vessel and her Earnings and as and when the Mortgagee may so
require to make such books available for inspection on behalf of the Mortgagee
and furnish satisfactory evidence that the wages allotments the premiums for
social insurances and pension contributions of the master and crew are being
regularly paid and that all deductions from crew’s wages in respect of Bahamian
tax liability are being properly accounted for and that the master has no claim
for disbursements other than those incurred by him in the ordinary course of
trading on the voyage then in progress;
	 
	 	(s)	 	Notice on board Vessel
	 
	 	 	 	to keep a certified copy of the Mortgage and this Deed on board the Vessel and to
bring the contents thereof to the notice of the master of the Vessel and to all
parties who may have an interest with regard of the Vessel, her crew or cargo.

	6.2	 	Environmental Matters
	 
	 	 	The Mortgagor hereby further covenants with the Mortgagee that throughout the
Security Period and unless the Mortgagee shall have otherwise agreed in writing it
will:

	 	(a)	 	comply, or procure compliance with, all Environmental Laws and
Environmental Approvals relating to the Vessel, its operation or management and the
business of the Mortgagor from time to time;
	 
	 	(b)	 	notify the Mortgagee forthwith upon:

	 	(i)	 	any Environmental Claim being made against the Mortgagor,
the Manager or otherwise in connection with the Vessel; and
	 
	 	(ii)	 	any Environmental Incident occurring; and

	 	(c)	 	keep the Mortgagee advised, in writing on such regular basis and in such
detail as the Mortgagee shall require, of the Mortgagor’s response to any such
Environmental Claim or Environmental Incident.

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	7.	 	Powers of Mortgagee to protect security and remedy defaults
	 
	7.1	 	The Mortgagee shall without prejudice to its other rights and powers under the Mortgage, this
Deed and the other Security Documents be entitled (but not bound) at any time and as often as
may be necessary to take any such action as it may in its discretion think fit for the purpose
of protecting or maintaining the security created by the Mortgage and this Deed (including,
without limitation, such action as is referred to in clause 7.2) and each and every
expense, liability, or loss (including, without limitation, legal fees) so incurred by the
Mortgagee in or about the protection or maintenance of the said security together with default
interest as per the Financial Agreement payable thereon shall be repayable to it by the
Mortgagor on demand.
	 
	7.2	 	Without prejudice to the generality of clause 7.1:

	 	(a)	 	if the Mortgagor does not comply with the provisions of clause
6.1(a) the Mortgagee shall be entitled (but not bound) to effect or to replace
and renew and thereafter to maintain the Insurances in such manner as in its
discretion it may think fit and to require that all policies, contracts and other
records relating to the Insurances (including details of any correspondence
concerning outstanding claims) be forthwith delivered to such brokers as the
Mortgagee may nominate and to collect, recover, compromise and give a good discharge
for all claims then outstanding or thereafter arising under the Insurances or any of
them and to take over or institute (if necessary using the name of the Mortgagor) all
such proceedings in connection therewith as the Mortgagee in its absolute discretion
may think fit and to permit the brokers through whom the collection or recovery is
effected to charge the usual brokerage therefor; and
	 
	 	(b)	 	if the Mortgagor does not comply with the provisions of clauses 6.1(g),
6.1(h) and 6.1(i) or any of them the Mortgagee shall be entitled (but not bound)
to arrange for the carrying out of such repairs to and/or surveys of the Vessel as it
deems expedient or necessary; and
	 
	 	(c)	 	if the Mortgagor does not comply with the provisions of clauses 6.1(f)
and 6.1(r) or any of them the Mortgagee shall be entitled (but not bound) to pay
and discharge all such debts, damages and liabilities and all such tolls, dues,
taxes, assessments, charges, fines, penalties and other outgoings as are therein
mentioned and/or to take any such measures as it deems expedient or necessary for the
purpose of securing the release of the Vessel.

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	8.	 	Events of Default
	 
	 	 	Upon the happening of any of the following events the Outstanding Indebtedness
shall immediately become due and payable to the Mortgagee without notice and without
the necessity of any Court declaration to the effect that an Event of Default has
taken place:

	 	(a)	 	Non-payment
	 
	 	 	 	any of the Security Parties shall fail to pay on the due date (or before the
expiry of any grace period applicable thereto) any sum due under any Security
Document; or
	 
	 	(b)	 	Misrepresentation
	 
	 	 	 	any representation or warranty made by any of the Security Parties in any
Security Document or any notice, certificate or statement made or delivered
hereunder or thereunder is or proves to have been incorrect in any material
respect when made, or if replaced at any time during the continuance of this Deed
with reference to the facts subsisting at such time, would no longer be correct
and accurate in all material respects; or
	 
	 	(c)	 	Other obligations
	 
	 	 	 	any of the Security Parties defaults in the due performance and observance of any
of the terms, undertakings or conditions of — or the due compliance with its
obligations under — any Security Document and, if and only if such default other
than set out under clause 8(a) is capable of remedy, such default is not
remedied within 30 (thirty) days; or
	 
	 	(d)	 	Cross-default
	 
	 	 	 	any loan, debt, guarantee or other obligation constituting indebtedness of any of
the Security Parties becomes due prior to its specified maturity by reason of
default (unless such default is caused solely by the Vessel becoming a Total
Loss) or is not paid when due or any of the Security Parties is otherwise in
material breach of or default under any agreement, deed or mortgage under or
pursuant to which such
indebtedness was incurred unless in any such case the non-payment, breach or
default is remedied within 30 (thirty) days; or

24

 

	 	(e)	 	Distress
	 
	 	 	 	a distress or other execution is levied or sued out upon or against any part of
the property of any of the Security Parties and is not discharged within 30
(thirty) days of having been so levied or sued out; or
	 
	 	(f)	 	Insolvency
	 
	 	 	 	any of the Security Parties suspends or threatens to suspend its operations or
transfers or disposes of all or a substantial part of its undertakings or assets
or transfers its business to another country or ceases to pursue its corporate
objects or changes its corporate statute in any material way; or
	 
	 	(g)	 	any of the Security Parties (i) is unable or admits in writing its
inability to pay its lawful debts as they mature, or (ii) makes a general assignment
or pledge for the benefit of or a composition with its creditors; or
	 
	 	(h)	 	an application is made to, or any proceedings are commenced in or any order
or judgment is given by any court for the liquidation, winding-up, reorganisation or
reconstruction (where, in the opinion of the Mortgagee, such reorganisation or
reconstruction might prejudice the Mortgagee’s position hereunder or under any of the
Security Documents) of any of the Security Parties or for the appointment of a
receiver, trustee, liquidator, administrator or administrative receiver or similar
officer of any of the Security Parties or any part of its assets; or
	 
	 	(i)	 	any of the Security Parties is adjudicated bankrupt or insolvent or files a
voluntary petition in bankruptcy or insolvency; or
	 
	 	(j)	 	Authorisation
	 
	 	 	 	any authorisation, approval, consent, licence, exemption, registration,
notification or other requirement of any governmental or public body necessary
for the validity, enforceability or legality of any Security Document or the
performance thereof is not being obtained or, if obtained, ceases for any reason
to be in full force and effect; or

25

 

	 	(k)	 	Total Loss, change ownership or registration of the Vessel
	 
	 	 	 	the Vessel becomes Total Loss, there is any change in the ownership of the Vessel
or the Vessel ceases to be registered under Bahamian flag; or
	 
	 	(l)	 	Change shareholder or control; material change of directorship or
management
	 
	 	 	 	without the prior written consent of the Mortgagee there is after the date hereof
any change in the shareholding or control in or any material change in the
directorship or management of any of the Security Parties; or
	 
	 	(m)	 	Breach or termination charterparty
	 
	 	 	 	the Mortgagor defaults in the performance of any charterparty of the Vessel in
any material way or any charterparty of the Vessel terminates for any reason
other than the due performance in accordance with its terms or as a result of a
Total Loss; or
	 
	 	(n)	 	Unenforceability
	 
	 	 	 	any of the Mortgagee’s rights or powers of enforcement against or in respect of
the Vessel under any Security Document becomes unenforceable; or
	 
	 	(o)	 	Unlawfulness
	 
	 	 	 	the due performance in accordance with its terms of any Security Document becomes
illegal or impossible under the law of the country of incorporation of any party
thereto; or
	 
	 	(p)	 	Change of law and governmental measure
	 
	 	 	 	the law or its interpretation changes or a governmental measure is taken which
affects or may affect any of the Security Documents, and/or the underlying value
thereof, and the parties to such documents and the Mortgagee shall not have
reached within a reasonable period a written agreement adjusting the relevant
provisions and/or securities, on such a basis that the position of the Mortgagee
is not detrimentally affected; or

26

 

	 	(q)	 	Material Adverse Change
	 
	 	 	 	a Material Adverse Change occurs, or any events or circumstances arise which, in
the reasonable opinion of the Mortgagee, give grounds for belief that a Material
Adverse Change will occur; unless such events or circumstances are capable of
remedy and are remedied within 30 (thirty) days of the Mortgagee giving notice to
any of the Security Parties; or
	 
	 	(r)	 	Other events of default
	 
	 	 	 	if the Outstanding Indebtedness becomes immediately due and payable to the
Mortgagee in accordance with the provisions of the Financial Agreement or any of
the other Security Documents.

	9.	 	Enforceability and Mortgagee’s powers
	 
	 	 	Upon the happening of any Event of Default the Mortgagee shall become forthwith entitled
to enforce the security created by the Mortgage and this Deed without prior notice and in
any manner available to it and in such sequence as the Mortgagee may in its absolute
discretion prefer and when it may see fit to put into force and to exercise all or any of
the rights powers and remedies conferred upon mortgagees by law and/or possessed by it as
mortgagee and chargee of the Vessel by virtue of the Mortgage and this Deed and in
particular (without limiting the generality of the foregoing):

	 	(a)	 	to take possession of the Vessel;
	 
	 	(b)	 	to require that all policies, contracts, certificates of entry and other
records relating to the Insurances (including details of and correspondence
concerning outstanding claims) be forthwith delivered to such brokers as the
Mortgagee may nominate;
	 
	 	(c)	 	to collect, recover, compromise and give a good discharge for all claims
then outstanding or thereafter arising under the Insurances or any of them or in
respect of the Earnings or any Requisition Compensation and to take over or institute
(if necessary using the name of the Mortgagor) all such proceedings in connection
therewith as the Mortgagee in its absolute discretion thinks fit and to permit the
brokers through whom collection or recovery is effected to charge the usual brokerage
therefor;

27

 

	 	(d)	 	to discharge, compound, release or compromise claims against the Mortgagor
in respect of the Vessel which have given or may give rise to any charge or lien on
the Vessel or which are or may be enforceable by proceedings against the Vessel;
	 
	 	(e)	 	to terminate any charterparty in respect of the Vessel without being
responsible for any loss thereby occurred;
	 
	 	(f)	 	to sell the Vessel or any share therein with or without prior notice to the
Mortgagor and with or without the benefit of any charterparty or other contract for
her employment by public auction or private contract at such place and upon such
terms as the Mortgagee in its absolute discretion may determine with power to
postpone any such sale and without being answerable for any loss occasioned by such
sale or resulting from postponement thereof;
	 
	 	(g)	 	to manage, insure, maintain and repair the Vessel and to employ or lay up
the Vessel in such manner and for such period as the Mortgagee in its absolute
discretion deems expedient and for the purposes aforesaid the Mortgagee shall be
entitled to do all acts and things incidental or conducive thereto and in particular
to enter into such arrangement respecting the Vessel her insurance management
maintenance repair classification and employment in all respects as if the Mortgagee
was the owner of the Vessel and without being responsible for any loss thereby
incurred;
	 
	 	(h)	 	to recover from the Mortgagor on demand any such losses as may be incurred
by the Mortgagee in or about the exercise of the power vested in the Mortgagee under
sub-clause (g) of this clause with interest thereon at the default rate as of
the Financial Agreement from the date when such losses were incurred by the Mortgagee
until the date of payment whether before or after any relevant judgment;
	 
	 	(i)	 	to recover from the Mortgagor on demand all expenses payments and
disbursements incurred by the Mortgagee in or about or incidental to the exercise by
it of any of the powers aforesaid together with interest thereon at the default rate
as per the Financial Agreement from the date when such expenses, payments or
disbursements were incurred by the Mortgagee until the date of payment whether before
or after any relevant judgment

28

 

	 	 	PROVIDED ALWAYS that (i) the Mortgagee shall not be liable as mortgagee in possession in
respect of the Vessel to account or be liable for any loss upon realisation or for any
neglect or default of any nature whatsoever in connection therewith for which a mortgagee
in possession may be liable as such and (ii) upon any sale of the Vessel or any share
therein by the Mortgagee pursuant to sub-clause (f) of this clause the purchaser
shall not be bound to see or enquire whether the Mortgagee’s power of sale has arisen in
the manner herein provided and the sale shall be deemed to be within the power of the
Mortgagee and the receipt of the Mortgagee for the purchase money shall effectively
discharge the purchaser who shall not be concerned with the manner of application of the
proceeds of sale or be in any way answerable therefor.
	 
	10.	 	Application of Moneys
	 
	 	 	Upon the happening of any Event of Default the Mortgagee shall become forthwith entitled
as and when it may see fit to apply any amounts received by it from the Mortgagor and the
Mortgagee shall similarly be entitled to apply any amounts received by it in respect of:

	 	(a)	 	sale of the Vessel or any share therein;
	 
	 	(b)	 	recovery under the Insurances;
	 
	 	(c)	 	any Earnings or moneys received pursuant to the provisions of clause
9.(g);
	 
	 	(d)	 	any Requisition Compensation,

	 	 	in the manner as specified in the Financial Agreement.
	 
	11.	 	Omissions or Delay
	 
	 	 	No delay, indulgence or omission of the Mortgagee to exercise any right power or remedy
vested in it under the Security Documents or any of them shall in any way prejudice or
impair such right power or remedy or be construed as a waiver of or as acquiescence in any
default by the Mortgagor and in event of the Mortgagee at any time agreeing to waive any
such right power or remedy such waiver shall be revocable by the Mortgagee at any time and
the right power or remedy shall thereafter be again exercisable as though there had been
no such waiver.

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	12.	 	Delegation of Powers
	 
	 	 	The Mortgagee shall be entitled at any time and as often as may be expedient to delegate
all or any of the powers and discretions vested in it by the Security Documents or any of
them (including the powers vested in it by virtue of clause 7.2(a) and clause
14) in such manner upon such terms and to such entities or individuals as the
Mortgagee in its absolute discretion may think fit.
	 
	13.	 	Indemnity
	 
	13.1	 	The Mortgagor hereby agrees and covenants to indemnify the Mortgagee against all losses
actions claims expenses demands obligations and liabilities whatsoever and whensoever arising
which the Mortgagee may incur in respect of, in relation to or in connection with the Vessel
or otherwise, howsoever, in relation to or in connection with any of the matters dealt with in
the Security Documents or any of them.
	 
	13.2	 	The Mortgagor hereby agrees and undertakes to indemnify the Mortgagee on demand against all
losses, actions, claims, expenses, demands, obligations and liabilities sustained or incurred
as result of or in connection with any Environmental Claim being made against the Mortgagee or
otherwise howsoever arising out of any Environmental Incident.
	 
	14.	 	Power of Attorney
	 
	14.1	 	The Mortgagor, by way of security and in order more fully to secure the performance of the
Mortgagor’s obligations under the Mortgage and this Deed, hereby irrevocably appoints the
Mortgagee as its attorney during the Security Period for the purposes of:

	 	(a)	 	doing in its name all acts and executing, signing and (if required)
registering in its name all documents which the Mortgagor itself could do, execute,
sign or register in relation to the Vessel (including without limitation,
transferring title to the Vessel to a third party and deleting the Vessel from the
Bahamian Ships Registry), provided, however, that such power shall not be exercisable
by or on behalf of the Mortgagee until the Mortgage and this Deed shall have become
immediately enforceable pursuant to clause 9; and
	 
	 	(b)	 	executing, signing, perfecting, doing and (if required) registering every
such further assurance document, act or thing as is referred to in clause 15.

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	14.2	 	The exercise of such power as is referred to in clause 14.1(a) by or on behalf of the
Mortgagee shall not put any entity or individual dealing with the Mortgagee upon any enquiry
as to whether the Mortgage and this Deed have become enforceable nor shall such entity or
individual be in any way affected by notice that the Mortgage and this Deed have not become
enforceable and, in relation to both clauses 14.1(a) and 14.1(b), the exercise by the
Mortgagee of such power shall be conclusive evidence of its right to exercise the same.
	 
	15.	 	Further Assurance
	 
	 	 	The Mortgagor hereby further covenants at its own expense from time to time to execute,
sign, perfect, do and (if required) register any such further assurance, document, act or
thing as in the opinion of the Mortgagee may be necessary or desirable for the purpose of
more effectually mortgaging and charging the Vessel or perfecting the security constituted
or intended to be constituted by the Security Documents.
	 
	16.	 	Partial Invalidity
	 
	 	 	If at any time any one or more of the provisions in the Mortgage and/or this Deed is or
becomes invalid, illegal or unenforceable in any respect under any law or regulation, the
validity, legality and enforceability of the remaining provisions of the Mortgage and this
Deed shall not be in any way affected or impaired thereby.
	 
	17.	 	Notices
	 
	17.1	 	Any notice or other communication under or in connection with this Deed shall be in writing
and delivered by hand or sent by facsimile, by courier, or by registered mail to:

the Mortgagor:

 - ADVENTURE SEVEN S.A.

 - c/o FREE BULKERS S.A.

 - Akti Miaouli 93

 - Piraeus 185 382

 - Greece

 - telephone:     +30 210 4528770

 - fax:                +30 210 4291100

31

 

the Mortgagee:

 - HOLLANDSCHE BANK-UNIE N.V.

 - Coolsingel 104

 - 3011 AG Rotterdam

 - the Netherlands

or

 - P.O. Box 249

 - 3000 AE Rotterdam

 - the Netherlands

 - telephone:     +31 10 2820282

 - fax:                +31 10 2820399.

	17.2	 	Any such notice or other communication shall be deemed to have been duly given or made as
follows:

	 	(a)	 	if sent by personal delivery, upon delivery at the address of the relevant
party;
	 
	 	(b)	 	if sent by courier service or registered mail three (3) Business Days after
the date of dispatch; and
	 
	 	(c)	 	if sent by facsimile, when dispatched.

	 	 	Any communication by facsimile sent by the Mortgagor to the Mortgagee shall be confirmed
by letter if so required by the Mortgagee.
	 
	18.	 	Law and jurisdiction
	 
	18.1	 	This Deed shall be governed by and construed in accordance with the laws of Bahamas.
	 
	18.2	 	Subject to clause 18.3, the courts of Rotterdam, the Netherlands shall have exclusive
jurisdiction in relation to all matters which may arise out of or connection with the Mortgage
and/or this Deed with the exclusion of any other court of law.
	 
	18.3	 	For the exclusive benefit of the Mortgagee the Mortgagee reserves the right to commence
proceedings in relation to any matter which arises out of or in connection with the Mortgage
and/or this Deed in the courts of any place in the Netherlands other than Rotterdam or any
country other than the Netherlands and which have jurisdiction to that matter.

32

 

	18.4	 	In this clause 18 “proceedings” means proceedings of any kind, including an
application for a provisional or protective measure.
	 
	18.5	 	The Mortgagor hereby agrees that any writ, judgment or other notice of process shall be
sufficiently and effectively served on it, if served on it at the address specified in
clause 17.1.

IN WITNESS whereof the parties hereto have caused this Deed to be duly executed the day and year
first herein before written.

	 	 	 	 	 
	SIGNED AS A DEED

	 	 	)	 
	by: D.E. Saarloos

	 	 	)	 
	as: attorney-in-fact for

	 	 	)	 
	ADVENTURE SEVEN S.A.

	 	 	)	 
	in the presence of:

	 	 	)	 
	 
	 	 	 	 
	SIGNED AS A DEED

	 	 	)	 
	by: J. van Kranenburg

	 	 	)	 
	as attorney-in-fact for

	 	 	)	 
	HOLLANDSCHE BANK-UNIE N.V.

	 	 	)	 
	in the presence of:

	 	 	)	 

33EX-4.51 Second Preferred Mortgage

Exhibit 4.51

SECOND PREFERRED MORTGAGE

by

ADVENTURE TWO S.A.

as mortgagor

in favour of

HOLLANDSCHE BANK-UNIE N.V.

as mortgagee

 

DATED the            day of March 2008

 

- relating to -

m.v. “FREE DESTINY”

NAUTADUTILH N.V.

ROTTERDAM

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 
	Clause	 	Heading	 	Page
	 
	 	1.	 	 	Interpretation

	 	 	2	 
	 	2.	 	 	Representations and warranties

	 	 	8	 
	 	3.	 	 	Payment covenants

	 	 	9	 
	 	4.	 	 	Charging Clause

	 	 	9	 
	 	5.	 	 	Continuing security and other provisions

	 	 	10	 
	 	6.	 	 	Covenants

	 	 	11	 
	 	7.	 	 	Powers of Mortgagee to protect security and remedy defaults

	 	 	22	 
	 	8.	 	 	Events of Default

	 	 	23	 
	 	9.	 	 	Enforceability and Mortgagee’s powers

	 	 	27	 
	 	10.	 	 	Application of Moneys

	 	 	29	 
	 	11.	 	 	Omissions or Delay

	 	 	29	 
	 	12.	 	 	Delegation of Powers

	 	 	29	 
	 	13.	 	 	Indemnity

	 	 	30	 
	 	14.	 	 	Power of Attorney

	 	 	30	 
	 	15.	 	 	Further Assurance

	 	 	31	 
	 	16.	 	 	Total amount;

	 	 	31	 
	 	17.	 	 	Partial Invalidity

	 	 	31	 
	 	18.	 	 	Notices

	 	 	31	 
	 	19.	 	 	Law and jurisdiction

	 	 	32	 

 

 

THIS SECOND PREFERRED MORTGAGE is made the ___day of March 2008

BY:

ADVENTURE TWO S.A., a company incorporated and existing under the laws of the Marshall Islands,
having its registered office at Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960
(the “Mortgagor”)

IN FAVOUR OF:

HOLLANDSCHE BANK-UNIE N.V., a company incorporated and existing under the laws of the Netherlands,
having its registered office at Coolsingel 104, 3011 AG Rotterdam, the Netherlands (the
“Mortgagee”);

WHEREAS:

	(1)	 	the Mortgagor is the sole, absolute, legal and beneficial owner of the vessel described and
defined in clause 1.1;
	 
	(2)	 	by, and subject to and upon the terms and conditions of (i) a credit agreement signed by the
Mortgagee on the 23rd day of September 2005 and signed by the Mortgagor on the 26th day of
September 2005 and in which Adventure Three S.A. assumed joint and several liability towards
the Mortgagee for all sums which Mortgagor will owe to the Mortgagee under the credit
agreement from time to time, (ii) a short-term loan agreement dated the 26th day of September
2005 and made between the Mortgagor and the Mortgagee, (iii) a credit agreement signed by the
Mortgagee and the Borrowers (as hereinafter defined) on the 21st day of January
2008 and (iv) a short term loan agreement dated the 21st day of January 2008
(together as the same may be amended, supplemented or varied from time to time together with
the therein referred to HBU General Banking Conditions of 1995 and HBU General Credit
Provisions of July 2006 the “Financial Agreement”, a copy of which is annexed hereto as
Exhibit A, B, C and D) the Mortgagee agreed to make available to the Borrowers (as hereinafter
defined) as joint and several obligors:

	 	(i)	 	an overdraft facility in the amount of USD 3,100,000 (three
million  one hundred thousand United States Dollars) (“Overdraft
I”);
	 
	 	(ii)	 	and overdraft facility in the amount of USD 1,500,000 (one million
five hundred thousand United States Dollars (“Overdraft
II”);
	 
	 	(iii)	 	an overdraft facility in the amount of USD 3,000,000
(three million United States Dollars) (“Overdraft III”); and
	 
	 	(iv)	 	an eight year roll-over loan facility in the amount of USD 27,000,000
(twenty-seven million United States Dollars) (“the Roll-Over Loan”)

1

 

	 	 	        (Overdraft I, Overdraft II, Overdraft III and the Roll-Over Loan together hereinafter
referred to as the “Facility”);
	 
	(3)	 	it is a condition of the Financial Agreement that the Mortgagor shall execute in favour of
the Mortgagee a second preferred mortgage over the Vessel (as hereinafter defined) for
securing the Outstanding Indebtedness (as hereinafter defined) in the form herein set out;
	 
	(4)	 	the Mortgagor in order to secure the repayment of the Facility and the payment of interest
thereon and all other sums of moneys from time to time owing to the Mortgagee under the
Financial Agreement and the performance and observance of and compliance with by the Mortgagor
of all the covenants, terms and conditions contained in the Financial Agreement and this
Mortgage, has duly authorized the execution and delivery of this Second Preferred Mortgage
under and pursuant to Chapter 3 of the Maritime Act, 1990 of the Republic of the Marshall
Islands (as amended) which is executed by the Mortgagor in consideration of the Mortgagee
making available the Facility.

NOW THIS MORTGAGE PROVIDES as follows:

	1.  	 	Interpretation
	 
	1.1	 	In this Mortgage unless the context otherwise requires:
	 
	 	 	“Borrowers” means the Mortgagor, Adventure Three S.A. and Adventure Seven S.A.,
all of Majuro, Marshall Islands;
	 
	 	 	“Business Day” means a day on which the banks are open for business in Amsterdam
and New York (whichever is applicable) for all kinds of business as contemplated herein
and/or the Financial Agreement;
	 
	 	 	“DOC” means a document of compliance issued to an Operator in accordance with the
ISM Code;
	 
	 	 	“Dollars” and “USD” means the lawful currency of the United States of
America;
	 
	 	 	“Earnings” means all moneys whatsoever from time to time due or payable actually
or contingently to the Mortgagor arising out of the use or operation of the Vessel,
including without limitation all freight, hire and passage moneys, moneys arising under
any contract or other agreement or arrangement with any operator, income arising under
pooling arrangements, compensation payable to

2

 

	 	 	the Mortgagor as a result of, or otherwise in connection with, the requisition of the
Vessel for hire, remuneration for salvage and towage services, demurrage and detention
moneys, and all damages for breach, and all payments for, or otherwise in connection with
any variation or termination of any charterparty, contract or other agreement or
arrangement in respect of, or otherwise in connection with the employment of the Vessel;
	 
	 	 	“Environmental Approvals” means any and all consents, approvals, licences,
permits, exemptions or authorisations required under applicable Environmental Laws;
	 
	 	 	“Environmental Claim” means:

	 	(a)	 	any and all enforcement, clean-up, removal or other governmental, judicial
or regulatory action or order or claim instituted or made pursuant to any
Environmental Law or resulting from a Spill ; or
	 
	 	(b)	 	any claim made by any other party howsoever relating to a Spill;

	 	 	 “Environmental Incident” means any Spill:

	 	(a)	 	from the Vessel;
	 
	 	(b)	 	from a vessel other than the Vessel in circumstances where:

	 	(i)	 	the Vessel or the Mortgagor, the Operator or the Manager
may be liable for Environmental Claims arising from the Spill (other than
the Environmental Claims arising and fully satisfied before the date of this
Mortgage); and/or
	 
	 	(ii)	 	the Vessel may be arrested or attached in connection with
any Environmental Claim arising from such Spill;

	 	 	“Environmental Law” means any and all national and international and state laws,
rules, regulations, treaties, conventions and agreements whatsoever relating to the
pollution or protection of human health or environment (including, without limitation the
United States Oil Pollution Act of 1990 and any comparable laws of the individual States
of the United States of America);
	 
	 	 	“Environmentally Sensitive Material” means pollutions, contaminants, toxic
substances, oil and its products and all hazardous substances and any other substance
whose release into the environment is regulated, prohibited or
penalised by or pursuant to any Environmental Law;

3

 

	 	 	“Event of Default” means any one of the events of default specified and referred
to in the Financial Agreement and/or clause 8;
	 
	 	 	“Facility” has the meaning given in recital (2) hereto;
	 
	 	 	“Financial Agreement” has the meaning given in recital (2) hereto;
	 
	 	 	“Insurances” means all policies and contracts of insurance, including without
limitation all entries of the Vessel in a protection and indemnity or war risks
association which are from time to time in place or taken out or entered into by or for
the benefit of the Mortgagor in respect of, or otherwise in connection with, the Vessel
and/or her Earnings or any part thereof and all the benefits thereof, including without
limitation all claims of whatsoever nature and all return of premiums;
	 
	 	 	“ISM Code” means the International Safety Management Code for the Safe Operation
of Ships and for Pollution Prevention (as amended, including any regulation issued
thereunder), as adopted by the Assembly of the International Maritime Organisation on 4
November 1993 by resolution A.741 (18) and incorporated on 19 May 1994 as chapter IX of
the Safety of Life at Sea Convention 1974;
	 
	 	 	“ISPS Code” means the International Ship and Port Facility Security Code (as
amended, including any regulation issued thereunder), as adopted by the Assembly of the
International Maritime Organisation;
	 
	 	 	“ISSC” means an international ship security certificate issued in respect of the
Vessel in accordance with the ISPS Code;
	 
	 	 	“Major Casualty Amount” means USD 200,000 (two hundred thousand Dollars) or the
equivalent thereof in any other currency;
	 
	 	 	“Management Agreement” means the agreement dated 1 July 2004 and made between the
Mortgagor and the Manager regarding the management of the Vessel;
	 
	 	 	“Manager” means FREE BULKERS S.A. or such other manager of the Vessel as approved
by the Mortgagee in writing;

4

 

	 	 	“Material Adverse Change” means (a) any material adverse change in the
business, assets, condition (financial or otherwise), operations, performance or prospects
of the Mortgagor or any of the other Security Parties, (b) any material adverse effect on
the ability of the Mortgagor or any of the other Security Parties to perform any of its
obligations under any of the Security Documents to which it is a party or (c) any material
adverse effect on the validity, binding nature, or enforceability of any of the Security
Documents;
	 
	 	 	“Operator” means any entity who is at any time during the Security Period
concerned in the operation of the Vessel and falls within the definition of “Company” set
out in the ISM Code;
	 
	 	 	“Outstanding Indebtedness” means (a) the aggregate of all sums of money actual or
contingent, present or future due by the Borrowers as joint and several obligors to
the Mortgagee under or in connection with the Security Documents or any of them and
(b) all costs and expenses incurred in connection with the Security Documents,
including any taxes payable by the Mortgagee (other than on net profit), as well as
any reasonable costs and expenses incurred by the Mortgagee in connection with the
Mortgagor’s failure to comply with or fulfil any obligation under the Security
Documents at the time and in the manner required, including collection charges,
disbursements, fees of legal consultants and other experts and costs of proceedings,
irrespective against whom brought;
	 
	 	 	“Overdraft I” has the meaning given in recital (2) hereto;
	 
	 	 	“Overdraft II” has the meaning given in recital (2) hereto;
	 
	 	 	“Overdraft III” has the meaning given in recital (2) hereto;
	 
	 	 	“Pollutant” means and includes oil and its products, any other polluting, toxic or
hazardous substance and any other substance whose release into the environment is
regulated or penalised by Environmental Laws;
	 
	 	 	“Requisition Compensation” means all moneys or other compensation payable by
reason of requisition for title or other compulsory acquisition of the Vessel otherwise
than by requisition for hire;
	 
	 	 	“Roll-Over Loan” has the meaning given in recital (2) hereto;
	 
	 	 	“Security Documents” means the Financial Agreement, this Mortgage and any other
such document as may be executed from time to time to secure and/or regulate the
Outstanding Indebtedness;

5

 

	 	 	“Security Interest” means a mortgage, charge (whether fixed or floating), pledge,
lien, hypothecation, assignment or other security interest or arrangement of any kind
whatsoever;
	 
	 	 	“Security Parties” means the Borrowers and any other party to the Security
Documents other that the Mortgagee at any relevant time;
	 
	 	 	“Security Period” means the period commencing on the date of this Mortgage and
terminating on the date upon which all moneys payable or to become payable from time to
time pursuant to the terms of the Financial Agreement, this Mortgage and/or any of the
other Security Documents shall have been paid and discharged in full;
	 
	 	 	“SMC” means a safety management certificate issued in respect of the Vessel in
accordance with the ISM Code;
	 
	 	 	“Spill” means any actual or threatened emission, spill, release or discharge of a
Pollutant into the environment;
	 
	 	 	“Total Loss” means:

	 	(a)	 	actual or constructive or compromised or arranged total loss of the Vessel;
	 
	 	(b)	 	requisition for title or other compulsory acquisition of the Vessel
otherwise than by requisition for hire;
	 
	 	(c)	 	capture seizure arrest detention or confiscation of the Vessel by any
government or entity or individual acting or purporting to act on behalf of any
government unless the Vessel be released and restored to the Mortgagor from such
capture seizure arrest detention or confiscation within thirty (30) days after the
occurrence thereof;

	 	 	 “Vessel” means the Marshall Islands flag vessel “FREE DESTINY” with Official
Number 2077, Call Sign V7GD8, gross tonnage approximately 16282, net tonnage approximately
9377, built in Varna Bulgaria, by Georgi Dimitrov and includes her engines, machinery,
boats, tackle, outfit, equipment, spare gear, fuel, consumable or other stores, belongings
and appurtenances whether on board or ashore and whether now owned or hereafter required.

6

 

	1.2	 	In clause 6.1:
	 
	 	 	“excess risks” means the proportion (if any) of claims for general average and
salvage charges and under the Institute Collision Clause not recoverable in consequence of
the value at which a vessel is assessed for the purpose of such claims exceeding her
insured value;
	 
	 	 	“protection and indemnity risks” means the usual risks (including pollution and a
Freight Demurrage and Defence cover) covered by a protection and indemnity association
including the proportion (if any) not recoverable in case of collision under the Institute
Collision Clause;
	 
	 	 	“war risks” includes the risks of mines and all risks excluded from the standard
form of English marine policy by the Institute War Exclusion Clause.
	 
	1.3	 	This Mortgage shall be read together with the Financial Agreement, but in the case of
conflict between the two instruments the provisions of the Financial Agreement shall prevail
in as far as it does not contravene the laws of the Marshall Islands.
	 
	1.4	 	In this Mortgage:

	 	(a)	 	clause headings are inserted for convenience of reference only and shall be
ignored in the interpretation of this Mortgage;
	 
	 	(b)	 	unless the context otherwise requires, words denoting the singular number
shall include the plural and vice versa;
	 
	 	(c)	 	references to clauses and schedules shall be construed as references to
clauses of and schedules to this Mortgage;
	 
	 	(d)	 	an “entity” shall be construed to include any firm, company, association,
partnership (whether or not having separate legal personality), institution,
government (local, national or supranational), state, agency or sub division thereof
or international organisation;
	 
	 	(e)	 	reference to any document including this Mortgage shall be construed as
reference to such document as amended supplemented or varied from time to time; and
	 
	 	(f)	 	the Mortgagee, the Mortgagor, the Borrowers, the Security Parties and any other
entity or individual shall include their respective successors
in title, estates and, in the event of an assignment permitted under this
Mortgage, assignees.

7

 

	2.  	 	Representations and warranties
	 
	2.1	 	The Mortgagor hereby represents and warrants to the Mortgagee that:

	 	(a)	 	Entitlement to grant Mortgage
	 
	 	 	 	it is fully entitled to grant this Mortgage and further to agree and perform the
terms and conditions hereof and that such granting and performance will not
cause the Mortgagor to be in breach of any agreement to which it is a party;
	 
	 	(b)	 	Ownership of Vessel
	 
	 	 	 	it is the sole, absolute, legal and beneficial owner of the Vessel;
	 
	 	(c)	 	Charter and sharing Earnings
	 
	 	 	 	the Vessel is not subject to any charter which, if entered into after the date of
this Mortgage, would have required the consent of the Mortgagee under clause
6.1(k) and there is no existing agreement or arrangement whereby the Earnings
may be shared with any other entity or individual;
	 
	 	(d)	 	Security Interest
	 
	 	 	 	the Vessel is not subject to any Security Interest (save as constituted by the
Security Documents or otherwise permitted by the terms thereof); and
	 
	 	(e)	 	DOC, SMC and ISSC
	 
	 	 	 	the Operator has obtained and maintains a DOC (a true copy of which has been
delivered to the Mortgagee) and has obtained and maintains a SMC and an ISSC
(true copies of which have been delivered to the Mortgagee) in respect of the
Vessel, all are in full force and effect and nothing has happened which might
cause any of them to be withdrawn, suspended, cancelled or modified.

	2.2	 	The Mortgagor hereby further represents and warrants to the Mortgagee that:

8

 

	 	(a)	 	all applicable Environmental Laws and Environmental Approvals relating to
the Vessel, its operation and management and the business of the Mortgagor (as now
conducted and as reasonably anticipated to be conducted in the future) have been
complied with;
	 
	 	(b)	 	no Environmental Claim has been made or threatened or is pending against
the Mortgagor, the Manager or otherwise in connection with the Vessel and not fully
satisfied; and
	 
	 	(c)	 	no Environmental Incident has occurred.

	3.  	 	Payment covenants
	 
	 	 	The Mortgagor hereby covenants duly to observe and perform all its obligations under the
Financial Agreement in accordance with the terms and conditions thereof and in
particular:

	 	(a)	 	to repay the Facility by the instalments and on the dates referred to and
otherwise in the manner and upon the terms set out in the Financial Agreement;
	 
	 	(b)	 	to pay interest on the Facility and on other moneys payable under the
Financial Agreement at the rate or rates from time to time applicable thereto in the
manner and upon the terms set out in the Financial Agreement;
	 
	 	(c)	 	to pay all other moneys payable by the Mortgagor under or in connection
with the Security Documents or any of them at the times and in the manner therein
specified.

	4.  	 	Charging Clause
	 
	4.1	 	In pursuance of the Financial Agreement and in consideration of the premises and by way of
security for payment of the Outstanding Indebtedness and the performance of the obligations
under the Financial Agreement, this Mortgage and the other Security Documents by the Borrowers
as joint and several obligors, the Mortgagor as legal and beneficial owner with full
title guarantee hereby mortgages and charges and agrees to mortgage and charge to and
in favour of the Mortgagee all its right, title and interest (present and future) to and in
the Vessel TO HAVE AND HOLD the same unto and in favour of the Mortgagee forever upon the
terms set forth in this Mortgage to secure the

9

 

	 	 	Outstanding Indebtedness and further to secure the performance and observance of and the
compliance with the covenants, terms and conditions in the Financial Agreement, this
Mortgage and the other Security Documents contained.
	 
	4.2	 	Notwithstanding anything to the contrary in this Mortgage it is not intended that any
provision of this Mortgage shall waive the preferred status of this Mortgage and that if any
provision or part thereof in this Mortgage shall be construed as waiving the preferred status
of this Mortgage, then such provisions shall to such extent be void and of no effect.
	 
	4.3	 	The Mortgagor shall remain liable to perform all the obligations assumed by it in relation to
the Vessel and the Mortgagee shall not be under any obligation of any kind whatsoever in
respect thereof or be under any liability whatsoever in event of any failure by the Mortgagor
to perform its obligations in respect thereof.
	 
	5.  	 	Continuing security and other provisions
	 
	 	 	It is declared and agreed that:

	 	(a)	 	the security created by this Mortgage and the other Security Documents
shall be held by the Mortgagee as a continuing security for the payment of the
Outstanding Indebtedness and the performance and observance of and compliance with
all obligations of the Mortgagor under the Security Documents or any of them, express
or implied;
	 
	 	(b)	 	the security so created shall not be satisfied by any intermediate payment
or satisfaction of any part of the Outstanding Indebtedness and shall be in addition
to and shall not in any way prejudice or affect and may be enforced by the Mortgagee
without prior recourse to the security created by any other of the Security Documents
or by any other security now or hereafter held by the Mortgagee and shall not in any
way be prejudiced or affected thereby or by the invalidity or unenforceability
thereof or by the Mortgagee releasing, modifying or refraining from perfecting or
enforcing any of the same or granting time or indulgence or compounding with any
liable entity or individual;
	 
	 	(c)	 	all the rights, remedies and powers vested in the Mortgagee under this
Mortgage shall be in addition to and not a limitation of any and every
other right, power or remedy vested in the Mortgagee under any other of the
Security Documents or at law (whether Marshall Islands or otherwise) and that all
the powers so vested in the Mortgagee may be exercised from time to time and as
often as the Mortgagee may deem expedient; and

10

 

	 	(d)	 	the Mortgagee shall not be obliged to make any enquiry as to the nature or
sufficiency of any payment received by it under this Mortgage or to make any claim or
to take any action or to enforce any rights and benefits hereby assigned to the
Mortgagee or to which the Mortgagee may at any time be entitled under this Mortgage.

	6.  	 	Covenants
	 
	6.1	 	The Mortgagor further covenants with the Mortgagee throughout the Security Period:

	 	(a)	 	Insurance

	 	(i)	 	Type of insurances
	 
	 	 	 	to insure and keep the Vessel insured at the expense of the Mortgagor
against:

	 	(A)	 	fire and usual marine risks (including excess risks);
	 
	 	(B)	 	war risks;
	 
	 	(C)	 	protection and indemnity risks
(including pollution risks and a freight demurrage and defence
cover); and
	 
	 	(D)	 	where the Vessel shall, at any time
enter waters under the jurisdiction of the United States of America
and/or the Exclusive Economic Zone (as defined in the United States
Oil Pollution Act of 1990) and oil pollution liability risks in
excess of the cover for oil pollution liability risks included
within the cover for protection and indemnity risks;

	 	 	 	 and, at the option of the Mortgagee, either (i) to effect and keep
effected, in the name and for the benefit of the Mortgagee, but at the
expense of the Mortgagor or (ii) to
reimburse the Mortgagee on demand for any and all costs incurred by it
in effecting and maintaining such insurance in relation to the Vessel:

11

 

	 	(E)	 	a mortgagee’s interest insurance; and
	 
	 	(F)	 	(where the Vessel shall, at any time
enter waters under the jurisdiction of the United States of America
and/or the Exclusive Economic Zone (as defined in the United States
Oil Pollution Act of 1990)) an insurance against the possible
consequences of pollution due to, without limitation, oil or any
other substance involving the Vessel including, without limitation,
the risk of expropriation or sequestration of the Vessel or the
imposition of any Security Interest having priority over the
Mortgage (“Mortgagee’s Interest Insurance — Additional Perils
(Pollution)”);

	 	(ii)	 	Currency and amounts
	 
	 	 	 	to effect and keep effected the Insurances
(if not effected by the Mortgagee) in such amounts and in such
currency and upon such terms and through such brokers (hereinafter
called the “approved brokers”) and with such insurance
companies, underwriters, war risks and protection and indemnity
associations (hereinafter called the “approved
associations”) as shall from time to time be approved in
writing by the Mortgagee PROVIDED HOWEVER that the insurances
against war risks and protection and indemnity risks may be
effected by the entry of the Vessel with such war risks and
protection and indemnity risks associations as shall from time to
time be approved in writing by the Mortgagee and if so required by
the Mortgagee (but without, as between the Mortgagor and the
Mortgagee, liability on the part of the Mortgagee for premiums or
calls) with the Mortgagee named as co-assured;
	 
	 	(iii)	 	Fleet cover
	 
	 	 	 	if any of the Insurances forms part of a
fleet cover, to procure that the approved brokers and (as the case
may be) the approved associations shall undertake to the Mortgagee
that

12

 

	 	 	 	they shall neither set off against any claims in respect of the Vessel
any premiums due in respect of other vessels under such fleet cover or
any premiums due for other insurances, nor cancel such insurance in
respect of the Vessel for reason of non-payment of premiums for other
vessels under such fleet cover or of premiums for such other insurances
and shall undertake to issue a separate policy in respect of the Vessel
if and when so requested by the Mortgagee;
	 
	 	(iv)	 	Renewals
	 
	 	 	 	at least fourteen (14) days before the relevant policies, contracts or
entries expire, to notify the Mortgagee in writing of the names of the
brokers and/or the war risks and protection and indemnity risks
associations proposed to be employed by the Mortgagor for the purposes
of the renewal of such insurances (subject to the Mortgagee’s approval
of such brokers and/or associations) and of the amounts in which such
insurances are proposed to be renewed and the risks to be covered and,
(subject to compliance with any requirements of the Mortgagee pursuant
to this clause 6.1(a)), to renew (or procure the renewal of)
such Insurances at least ten (10) days before the relevant policies,
contracts or entries expire and to procure that such brokers and (as the
case may be) such associations will at least seven (7) days before such
expiry confirm such renewals in writing to the Mortgagee;
	 
	 	(v)	 	Payments
	 
	 	 	 	punctually to pay all premiums, calls, contributions or other sums
payable in respect of the Insurances and to produce all relevant
receipts or other evidence if and when so required by the Mortgagee;
	 
	 	(vi)	 	Guarantees, indemnities
	 
	 	 	 	to arrange for the execution of such guarantees or indemnities as may
from time to time be required by or in connection with any protection
and indemnity or war risks association or required by or in connection
with a usual marine risks policy (including excess risks and war risks);

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	 	(vii)	 	Loss payable clause, notice of assignment
	 
	 	 	 	to procure that the interest of the Mortgagee shall be duly
endorsed upon all slips, cover notes, policies, certificates of entry or
other instruments of insurance issued or to be issued in connection with
the Insurances by means of a loss payable and notice of cancellation
clause and a notice of assignment (signed by the Mortgagor) in such
forms as from time to time required by the Mortgagee;
	 
	 	(viii)	 	Instruments of insurance
	 
	 	 	 	to procure that all instruments of the Insurances shall be deposited
with the approved brokers and that such brokers shall (if so required by
the Mortgagee) furnish the Mortgagee with pro forma copies thereof and a
letter or letters of undertaking in such form as may from time to time
be required by the Mortgagee;
	 
	 	(ix)	 	Letter(s) of undertaking
	 
	 	 	 	to procure that the protection and indemnity and/or war risks
associations wherein the Vessel is entered shall (if so required by the
Mortgagee) furnish the Mortgagee with a letter or letters of undertaking
in such form as may from time to time be required by the Mortgagee;
	 
	 	(x)	 	Use of the Vessel
	 
	 	 	 	not to employ the Vessel or suffer the Vessel to be employed otherwise
than in conformity with the terms of the instruments of the Insurances
(including any warranties express or implied therein) without first
obtaining the consent to such employment of the insurers and complying
with such requirements as to extra premium or otherwise as the insurers
may prescribe;
	 
	 	(xi)	 	Reimbursement
	 
	 	 	 	to reimburse to the Mortgagee on demand any costs or expenses incurred
by the Mortgagee in obtaining (if and when so required by the Mortgagee)
reports from an independent
marine insurance broker appointed by the Mortgagee as to the adequacy of
the insurances effected or proposed to be effected pursuant to this
clause 6 and procure that there is delivered to such broker any
and all such information in relation to such insurances as such broker
may require;

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	 	(xii)	 	No consent, acts or omissions
	 
	 	 	 	not to make, do, consent or agree to any act or omission which would or
might render any instrument of insurance invalid, void, voidable or
unenforceable or render any sum paid thereunder repayable in whole or in
part;
	 
	 	(xiii)	 	Co-operation with collecting insurance moneys
	 
	 	 	 	to do all things necessary and provide all documents, evidence and
information to enable the Mortgagee to collect or recover any moneys
which shall at any time become due in respect of the Insurances;
	 
	 	(xiv)	 	Application insurance moneys
	 
	 	 	 	to apply such sums receivable in respect of the Insurances other than in
respect of a Total Loss and any major casualty (that is to say any
casualty the claim in respect of which exceeds the Major Casualty Amount
inclusive of any deductible) which shall be payable to the Mortgagee as
are paid to the Mortgagor for the purpose of making good the loss and
fully repairing all damage in respect whereof the insurance moneys shall
have been received;
	 
	 	(xv)	 	Voyage declaration
	 
	 	 	 	to make all such quarterly or other voyage declaration as may from time
to time be required by the protection and indemnity risks association to
maintain cover for trading (including, without limitation, trading to
the United States of America and Exclusive Economic Zone (as defined in
the United States Oil Pollution Act 1990))

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	 	 	 	PROVIDED ALWAYS THAT the Mortgagee shall be entitled to review the requirements
of this clause 6.1(a) from time to time in order
to take account of significant changes in circumstances after the date of this
Mortgage (such changes in circumstances include, without limitation, changes in
the availability or the cost of insurance coverage). The Mortgagee may notify the
Mortgagor in writing from time to time of any proposed modification to the
requirements of this clause 6.1(a) which it deems appropriate in the
circumstances, and such modification shall take effect on and from the date it is
notified in writing to the Mortgagor as an amendment to this clause
6.1(a) and shall bind the Mortgagor accordingly;
	 
	 	(b)	 	Name and Registration
	 
	 	 	 	not to change the name of the Vessel and to keep the Vessel registered with full
registration as a Marshall Island ship in the Republic of the Marshall Islands at
the Port of Majuro in the name of the Mortgagor and not do or suffer to be done
anything, or omit to do anything, the doing or omission of which could or might
result in the Vessel being required to be registered otherwise than as a Marshall
Islands ship in the Republic of Marshall Islands at the Port of Majuro and not to
do or suffer to be done anything, or omit to do anything, the doing or omission
of which could or might result in such registration being forfeited, terminated
or imperilled and not to register the Vessel or permit its registration under any
other name, flag or at any other port or with any other numbers without the prior
written consent of the Mortgagee and to procure the renewal of such registration
of the Vessel as a Marshall Islands ship with full registration at least one
month before the same shall expire;
	 
	 	(c)	 	Operator

	 	(i)	 	to comply and to procure that the Operator will comply
with, and ensure that the Vessel and the Operator at all times comply with,
the requirements of the ISM Code and the ISPS Code;
	 
	 	(ii)	 	immediately to inform and to procure that the Operator
will inform the Mortgagee if there is any threatened or actual withdrawal,
suspension, cancellation or modification of its or the Operator’s DOC, the
Vessel’s SMC or the Vessel’s ISSC;
	 
	 	(iii)	 	promptly to inform and to procure that the Operator will
promptly inform the Mortgagee upon the issue to the
Mortgagor or the Operator of a DOC and to the Vessel of a SMC and an
ISSC;

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	 	(d)	 	Employment
	 
	 	 	 	not knowingly to employ the Vessel or suffer its employment in any trade or
business which is forbidden by international law or is otherwise illegal or in
carrying illegal or prohibited goods or in any manner whatsoever which may render
the Vessel or its cargo liable to condemnation in a Prize Court or to penalty,
destruction, seizure or confiscation and in the event of any major political
confrontation or hostilities (whether or not war shall have been formally
declared) or during any civil war or insurrection, not to carry or permit to be
carried on or in the Vessel any cargo that is or may be declared contraband of
war or that may render the Vessel or its cargo liable to penalty, destruction,
seizure, or confiscation unless special war risks policies previously approved by
the Mortgagee shall have been effected prior to undertaking any such risk and to
deliver the signed cover notes in respect thereof forthwith to the Mortgagee;
	 
	 	(e)	 	Encumbrances, sale or other disposal

	 	(i)	 	not without the previous consent in writing of the
Mortgagee to create or suffer the creation of any Security Interest on or in
respect of the Vessel to or in favour of any entity or individual other than
the Mortgagee;
	 
	 	(ii)	 	not without the previous consent in writing of the
Mortgagee (and then only subject to such terms as the Mortgagee may impose)
to sell agree to sell transfer or abandon or otherwise dispose of the Vessel
or any share or interest therein;

	 	(f)	 	Prevention of and release from arrest
	 
	 	 	 	to pay and discharge all debts and liabilities which may give rise to maritime
statutory or possessory liens on the Vessel or to claims enforceable by actions
in rem against the Vessel or similar process so as to keep her free from arrest
or detention and in the event of arrest or detention of the Vessel being
threatened or effected forthwith to notify the Mortgagee thereof and to take all
steps and to make all payments necessary to obtain the release of the Vessel from
such arrest or detention within thirty days from receiving notice thereof;

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	 	(g)	 	Repair and Class

	 	(i)	 	to maintain the Vessel in her present class and to comply
with the provisions of all regulations and requirements (statutory or
otherwise) from time to time applicable to the Vessel and to comply with all
class recommendations of its classification society in accordance with their
terms; and
	 
	 	(ii)	 	to keep the Vessel in good and efficient state of repair
and procure that all repairs to or replacement of any damaged, worn or lost
parts or equipment are effected in such manner (both as regards workmanship
and quality of materials) as not to diminish the value of the Vessel;

	 	(h)	 	Surveys
	 
	 	 	 	to submit the Vessel to such periodical or other surveys as may be required for
classification purposes and if so required to supply to the Mortgagee copies of
all survey reports issued in respect thereof;
	 
	 	(i)	 	Inspections
	 
	 	 	 	to permit the Mortgagee to inspect the condition of the Vessel at all reasonable
and to give the Mortgagee sufficient notice whenever practicable of dry-dockings,
surveys and major repairs so as to enable the Mortgagee’s surveyors or other
entity or individual appointed by it to attend thereat and if so required to
supply to the Mortgagee copies of survey reports on the Vessel;
	 
	 	(j)	 	Modification, Removal of Parts, Equipment owned by third parties
	 
	 	 	 	not without the prior written consent of the Mortgagee to:

	 	(i)	 	make any modification to the Vessel in consequence of
which her structure, type or performance characteristics could or might
materially be altered or her value materially reduced; or
	 
	 	(ii)	 	remove any material part of the Vessel or any equipment
the value of which is such that its removal from the Vessel would materially
reduce the value of the Vessel without replacing the same with equivalent
parts or equipment owned by the

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	 	 	 	Mortgagor free from encumbrances; or
	 
	 	(iii)	 	install on the Vessel any equipment owned by a third
party which cannot be removed without causing damage to the structure or
fabric of the Vessel and not to permit any of the foregoing by any third
party;

	 	(k)	 	Chartering
	 
	 	 	 	not without the prior written consent of the Mortgagee, which
shall not
unreasonably be withheld, to:

	 	(a)	 	let the Vessel on demise charter for any period; or
	 
	 	(b)	 	let the Vessel on time or consecutive voyage charter or
otherwise dispose of the Vessel, except for a time or consecutive voyage
charter agreement for a period which does not exceed or which by virtue of
any optional extensions therein contained is not likely to exceed six (6)
months’ duration; or
	 
	 	(c)	 	charter the Vessel on terms whereby more than three (3)
months’ hire is payable in advance;

	 	(l)	 	Information
	 
	 	 	 	to supply to the Mortgagee on request full information regarding the Vessel, her
employment, position and engagements, particulars of all towages and salvages and
copies of all charters and other contracts concerning the Vessel;
	 
	 	(m)	 	Notification of certain events
	 
	 	 	 	to notify the Mortgagee forthwith by letter or in case of urgency by telefax of
any accident to the Vessel involving repairs the cost whereof is likely to exceed
the Major Casualty Amount, of any occurrence whereby the Vessel has or is likely
to become a Total Loss, of any actual or threatened arrest, detention, seizure,
confiscation or requisition of the Vessel, of any requirement of insurers,
classification society or any competent authority which is not immediately
carried out and of any petition or notice or meeting to consider any resolution
to dissolve wind-up or liquidate the Mortgagor;

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	 	(n)	 	Reimbursement
	 
	 	 	 	to pay to the Mortgagee on demand all moneys whatsoever which the Mortgagee shall
or may expend be put to or become liable for in or about the protection
maintenance or enforcement of the security created by this Mortgage and the other
Security Documents or in or about the exercise by the Mortgagee of any of the
powers vested in it hereunder or thereunder and to pay interest thereon at the
default rate as per the Financial Agreement;
	 
	 	(o)	 	Costs
	 
	 	 	 	to pay on demand to the Mortgagee (or as it may direct) the amount of all
investigation and legal expenses of any kind whatsoever stamp duties (if any)
registration fees and any other charges incurred by the Mortgagee in connection
with the preparation completion registration and discharge of the Security
Documents or otherwise in connection with the Outstanding Indebtedness and the
security therefor and to pay interest thereon at the default rate as per the
Financial Agreement;
	 
	 	(p)	 	Manager
	 
	 	 	 	not without the previous consent in writing of the Mortgagee (and then only on
and subject to such terms as the Mortgagee may impose) to appoint a manager of
the Vessel other than the Manager or amend or terminate the Management Agreement;
	 
	 	(q)	 	Repairers’ liens
	 
	 	 	 	not without the previous consent in writing of the Mortgagee to put the Vessel
into the possession of any entity or individual for the purpose of work being
done upon her in an amount exceeding or likely to exceed the Major Casualty
Amount, unless such entity or individual shall first have given to the Mortgagee
and in terms satisfactory to it a written undertaking not to exercise any lien on
the Vessel or her Earnings for the cost of such work or otherwise;

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	 	(r)	 	Payment of outgoings and evidence of payment
	 
	 	 	 	promptly to pay all tolls dues and other outgoings whatsoever in respect of the
Vessel and her Earnings and Insurances and to keep
proper books of account in respect of the Vessel and her Earnings and as and when
the Mortgagee may so require to make such books available for inspection on
behalf of the Mortgagee and furnish satisfactory evidence that the wages
allotments the premiums for social insurances and pension contributions of the
master and crew are being regularly paid and that all deductions from crew’s
wages in respect of Marshall Islands tax liability are being properly accounted
for and that the master has no claim for disbursements other than those incurred
by him in the ordinary course of trading on the voyage then in progress;
	 
	 	(s)	 	Notice on board Vessel
	 
	 	 	 	to carry a certified copy of this Mortgage with the Vessel’s papers on board and
exhibit it on demand to any person having business with the Vessel or to any
representative of the Mortgagee and to place and keep prominently displayed in
the chartroom and in the master’s cabin of the Vessel a notice, printed in plain
type of such size that the paragraph of reading matter shall cover a space not
less than six inches wide by nine inches high, framed, reading as follows:
	 
	 	 	 	“NOTICE OF MORTGAGE

This Vessel is covered by a SECOND PREFERRED SHIP MORTGAGE in favour of
HOLLANDSCHE BANK-UNIE N.V. under the authority of Chapter 3 of the Maritime Act
1990 of the Republic of the Marshall Islands (as amended). Under the terms of
said Mortgage, neither the Owner, any charterer nor the Master of the Vessel nor
any other person has any right, power or authority to create, incur or permit to
be imposed upon this vessel any lien whatsoever other than for crew’s wages or
salvage.”; and
	 
	 	(t)	 	Libel
	 
	 	 	 	if a libel be filed against the Vessel or the Vessel be otherwise attached,
levied upon or taken into custody by virtue of any legal proceedings in any
Court, to promptly notify the Mortgagee thereof by telex or fax confirmed by a
letter at its office as herein referred to and within thirty (30) days cause the
Vessel to be released and all liens thereon to be discharged except for this
Mortgage and promptly notify the Mortgagee within 48 (forty-eight) hours after is
has become known to the Mortgagor of any average or salvage incurred by the
Vessel.

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	6.2	 	Environmental Matters
	 
	 	 	The Mortgagor hereby further covenants with the Mortgagee that throughout the Security
Period and unless the Mortgagee shall have otherwise agreed in writing it will:

	 	(a)	 	comply, or procure compliance with, all Environmental Laws and
Environmental Approvals relating to the Vessel, its operation or management and the
business of the Mortgagor from time to time;
	 
	 	(b)	 	notify the Mortgagee forthwith upon:

	 	(i)	 	any Environmental Claim being made against the Mortgagor,
the Manager or otherwise in connection with the Vessel; and
	 
	 	(ii)	 	any Environmental Incident occurring; and

	 	(c)	 	keep the Mortgagee advised, in writing on such regular basis and in such
detail as the Mortgagee shall require, of the Mortgagor’s response to any such
Environmental Claim or Environmental Incident.

	7.  	 	Powers of Mortgagee to protect security and remedy defaults
	 
	7.1	 	The Mortgagee shall without prejudice to its other rights and powers under this Mortgage and
the other Security Documents be entitled (but not bound) at any time and as often as may be
necessary to take any such action as it may in its discretion think fit for the purpose of
protecting or maintaining the security created by this Mortgage (including, without
limitation, such action as is referred to in clause 7.2) and each and every expense,
liability, or loss (including, without limitation, legal fees) so incurred by the Mortgagee in
or about the protection or maintenance of the said security together with default interest as
per the Financial Agreement payable thereon shall be repayable to it by the Mortgagor on
demand.
	 
	7.2	 	Without prejudice to the generality of clause 7.1:

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	 	(a)	 	if the Mortgagor does not comply with the provisions of the Mortgagee shall
be entitled (but not bound) to effect or to replace and renew and thereafter to
maintain the Insurances in such manner as in its discretion it may think fit and to
require that all policies, contracts and other records relating to the Insurances
(including details of any
correspondence concerning outstanding claims) be forthwith delivered to such
brokers as the Mortgagee may nominate and to collect, recover, compromise and
give a good discharge for all claims then outstanding or thereafter arising under
the Insurances or any of them and to take over or institute (if necessary using
the name of the Mortgagor) all such proceedings in connection therewith as the
Mortgagee in its absolute discretion may think fit and to permit the brokers
through whom the collection or recovery is effected to charge the usual brokerage
therefor; and
	 
	 	(b)	 	if the Mortgagor does not comply with the provisions of or any of them the
Mortgagee shall be entitled (but not bound) to arrange for the carrying out of such
repairs to and/or surveys of the Vessel as it deems expedient or necessary; and
	 
	 	(c)	 	if the Mortgagor does not comply with the provisions of or any of them the
Mortgagee shall be entitled (but not bound) to pay and discharge all such debts,
damages and liabilities and all such tolls, dues, taxes, assessments, charges, fines,
penalties and other outgoings as are therein mentioned and/or to take any such
measures as it deems expedient or necessary for the purpose of securing the release
of the Vessel.

	 	 	8. Events of Default
	 
	 	 	Upon the happening of any of the following events the Outstanding Indebtedness shall
immediately become due and payable to the Mortgagee without notice and without the
necessity of any Court declaration to the effect that an Event of Default has taken place:

	 	(a)	 	Non-payment
	 
	 	 	 	any of the Security Parties shall fail to pay on the due date (or before the
expiry of any grace period applicable thereto) any sum due under any Security
Document; or
	 
	 	(b)	 	Misrepresentation
	 
	 	 	 	any representation or warranty made by any of the Security Parties in any
Security Document or any notice, certificate or statement made or delivered
hereunder or thereunder is or proves to have been incorrect in any material
respect when made, or if replaced at any time during
the continuance of this Mortgage with reference to the facts subsisting at such
time, would no longer be correct and accurate in all material respects; or

23

 

	 	(c)	 	Other obligations
	 
	 	 	 	any of the Security Parties defaults in the due performance and observance of any
of the terms, undertakings or conditions of — or the due compliance with its
obligations under — any Security Document and, if and only if such default other
than set out under clause 8(a) is capable of remedy, such default is not
remedied within 30 (thirty) days; or
	 
	 	(d)	 	Cross-default
	 
	 	 	 	any loan, debt, guarantee or other obligation constituting indebtedness of any of
the Security Parties becomes due prior to its specified maturity by reason of
default (unless such default is caused solely by the Vessel becoming a Total
Loss) or is not paid when due or any of the Security Parties is otherwise in
material breach of or default under any agreement, deed or mortgage under or
pursuant to which such indebtedness was incurred unless in any such case the
non-payment, breach or default is remedied within 30 (thirty) days; or
	 
	 	(e)	 	Distress
	 
	 	 	 	a distress or other execution is levied or sued out upon or against any part of
the property of any of the Security Parties and is not discharged within 30
(thirty) days of having been so levied or sued out; or
	 
	 	(f)	 	Insolvency
	 
	 	 	 	any of the Security Parties suspends or threatens to suspend its operations or
transfers or disposes of all or a substantial part of its undertakings or assets
or transfers its business to another country or ceases to pursue its corporate
objects or changes its corporate statute in any material way; or
	 
	 	(g)	 	any of the Security Parties (i) is unable or admits in writing its
inability to pay its lawful debts as they mature, or (ii) makes a general assignment
or pledge for the benefit of or a composition with its creditors; or

24

 

	 	(h)	 	an application is made to, or any proceedings are commenced in or any order
or judgement is given by any court for the liquidation, winding-up, reorganisation or
reconstruction (where, in the opinion of the Mortgagee, such reorganisation or
reconstruction might prejudice the Mortgagee’s position hereunder or under any of the
Security Documents) of any of the Security Parties or for the appointment of a
receiver, trustee, liquidator, administrator or administrative receiver or similar
officer of any of the Security Parties or any part of its assets; or
	 
	 	(i)	 	any of the Security Parties is adjudicated bankrupt or insolvent or files a
voluntary petition in bankruptcy or insolvency; or
	 
	 	(j)	 	Authorisation
	 
	 	 	 	any authorisation, approval, consent, licence, exemption, registration,
notification or other requirement of any governmental or public body necessary
for the validity, enforceability or legality of any Security Document or the
performance thereof is not being obtained or, if obtained, ceases for any reason
to be in full force and effect; or
	 
	 	(k)	 	Total Loss, change ownership or registration of the Vessel
	 
	 	 	 	the Vessel becomes Total Loss, there is any change in the ownership of the Vessel
or the Vessel ceases to be registered under Marshall Islands flag; or
	 
	 	(l)	 	Change shareholder or control; material change of directorship or
management
	 
	 	 	 	without the prior written consent of the Mortgagee there is after the date hereof
any change in the shareholding or control in or any material change in the
directorship or management of any of the Security Parties; or

25

 

	 	(m)	 	Breach or termination charterparty
	 
	 	 	 	the Mortgagor defaults in the performance of any charterparty of the Vessel in
any material way or any charterparty of the Vessel terminates for any reason
other than the due performance in accordance with its terms or as a result of a
Total Loss; or
	 
	 	(n)	 	Unenforceability
	 
	 	 	 	any of the Mortgagee’s rights or powers of enforcement against or in respect of
the Vessel under any Security Document becomes unenforceable; or
	 
	 	(o)	 	Unlawfulness
	 
	 	 	 	the due performance in accordance with its terms of any Security Document becomes
illegal or impossible under the law of the country of incorporation of any party
thereto; or
	 
	 	(p)	 	Change of law and governmental measure
	 
	 	 	 	the law or its interpretation changes or a governmental measure is taken which
affects or may affect any of the Security Documents, and/or the underlying value
thereof, and the parties to such documents and the Mortgagee shall not have
reached within a reasonable period a written agreement adjusting the relevant
provisions and/or securities, on such a basis that the position of the Mortgagee
is not detrimentally affected; or
	 
	 	(q)	 	Material Adverse Change
	 
	 	 	 	a Material Adverse Change occurs, or any events or circumstances arise which, in
the reasonable opinion of the Mortgagee, give grounds for belief that a Material
Adverse Change will occur; unless such events or circumstances are capable of
remedy and are remedied within 30 (thirty) days of the Mortgagee giving notice to
any of the Security Parties; or
	 
	 	(r)	 	Other events of default
	 
	 	 	 	if the Outstanding Indebtedness becomes immediately due and payable to the Mortgagee in
accordance with the provisions of the
Financial Agreement or any of the other Security Documents.

26

 

	 	 	9. Enforceability and Mortgagee’s powers
	 
	 	 	Upon the happening of any Event of Default the Mortgagee shall become forthwith entitled
to enforce the security created by this Mortgage without prior notice and in any manner
available to it and in such sequence as the Mortgagee may in its absolute discretion
prefer and when it may see fit to put into force and to exercise all or any of the rights
powers and remedies conferred upon mortgagees by law and/or possessed by it as mortgagee
and chargee of the Vessel by virtue of this Mortgage and in particular (without limiting
the generality of the foregoing):

	 	(a)	 	to take possession of the Vessel;
	 
	 	(b)	 	to require that all policies, contracts, certificates of entry and other
records relating to the Insurances (including details of and correspondence
concerning outstanding claims) be forthwith delivered to such brokers as the
Mortgagee may nominate;
	 
	 	(c)	 	to collect, recover, compromise and give a good discharge for all claims
then outstanding or thereafter arising under the Insurances or any of them or in
respect of the Earnings or any Requisition Compensation and to take over or institute
(if necessary using the name of the Mortgagor) all such proceedings in connection
therewith as the Mortgagee in its absolute discretion thinks fit and to permit the
brokers through whom collection or recovery is effected to charge the usual brokerage
therefor;
	 
	 	(d)	 	to discharge compound release or compromise claims against the Mortgagor in
respect of the Vessel which have given or may give rise to any charge or lien on the
Vessel or which are or may be enforceable by proceedings against the Vessel;
	 
	 	(e)	 	to terminate any charterparty in respect of the Vessel without being
responsible for any loss thereby occurred;

27

 

	 	(f)	 	to sell the Vessel or any share therein with or without prior notice to the
Mortgagor and with or without the benefit of any charterparty or other contract for
her employment by public auction or private contract at such place and upon such
terms as the Mortgagee in its absolute discretion may determine with power to
postpone any such sale and without being answerable for any loss occasioned by such
sale or resulting from postponement thereof;
	 
	 	(g)	 	to manage, insure, maintain and repair the Vessel and to employ or lay up
the Vessel in such manner and for such period as the Mortgagee in its absolute
discretion deems expedient and for the purposes aforesaid the Mortgagee shall be
entitled to do all acts and things incidental or conducive thereto and in particular
to enter into such arrangement respecting the Vessel her insurance management
maintenance repair classification and employment in all respects as if the Mortgagee
was the owner of the Vessel and without being responsible for any loss thereby
incurred;
	 
	 	(h)	 	to recover from the Mortgagor on demand any such losses as may be incurred
by the Mortgagee in or about the exercise of the power vested in the Mortgagee under
sub-clause (g) of this clause with interest thereon at the default rate as
per the Financial Agreement from the date when such losses were incurred by the
Mortgagee until the date of payment whether before or after any relevant judgment;
	 
	 	(i)	 	to recover from the Mortgagor on demand all expenses payments and
disbursements incurred by the Mortgagee in or about or incidental to the exercise by
it of any of the powers aforesaid together with interest thereon at the default rate
as per the Financial Agreement from the date when such expenses payments or
disbursements were incurred by the Mortgagee until the date of payment whether before
or after any relevant judgment

	 	 	PROVIDED ALWAYS that (i) the Mortgagee shall not be liable as mortgagee in possession in
respect of the Vessel to account or be liable for any loss upon realisation or for any
neglect or default of any nature whatsoever in connection therewith for which a mortgagee
in possession may be liable as such and (ii) upon any sale of the Vessel or any share
therein by the Mortgagee pursuant to sub-clause (f) of this clause the purchaser
shall not be bound to see or enquire whether the Mortgagee’s power of sale has arisen in
the manner herein provided and the sale shall be deemed to be within the power of the
Mortgagee and the receipt of the Mortgagee for the purchase money shall effectively
discharge the purchaser who shall not be concerned with the manner of application of the
proceeds of sale or be in any way answerable therefor.

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	 	 	10. Application of Moneys
	 
	 	 	Upon the happening of any Event of Default the Mortgagee shall become forthwith entitled
as and when it may see fit to apply any amounts received by it from the Mortgagor and the
Mortgagee shall similarly be entitled to apply any amounts received by it in respect of:

	 	(a)	 	sale of the Vessel or any share therein;
	 
	 	(b)	 	recovery under the Insurances;
	 
	 	(c)	 	any Earnings or moneys received pursuant to the provisions of clause
9.(g);
	 
	 	(d)	 	any Requisition Compensation,

	 	 	in the manner as specified in the Financial Agreement.
	 
	 	 	11. Omissions or Delay
	 
	 	 	No delay, indulgence or omission of the Mortgagee to exercise any right power or remedy
vested in it under the Security Documents or any of them shall in any way prejudice or
impair such right power or remedy or be construed as a waiver of or as acquiescence in any
default by the Mortgagor and in event of the Mortgagee at any time agreeing to waive any
such right power or remedy such waiver shall be revocable by the Mortgagee at any time and
the right power or remedy shall thereafter be again exercisable as though there had been
no such waiver.
	 
	 	 	12. Delegation of Powers
	 
	 	 	The Mortgagee shall be entitled at any time and as often as may be expedient to delegate
all or any of the powers and discretions vested in it by the Security Documents or any of
them (including the powers vested in it by virtue of clause 7.2(a) and clause
14) in such manner upon such terms and to such entities or individuals as the
Mortgagee in its absolute discretion may think fit.

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	13.  	 	Indemnity
	 
	13.1	 	The Mortgagor hereby agrees and covenants to indemnify the Mortgagee against all losses
actions claims expenses demands obligations and liabilities whatsoever and whensoever arising
which the Mortgagee may incur in respect of, in relation to or in connection with the Vessel
or otherwise, howsoever, in relation to or in connection with any of the matters dealt with in
the Security Documents or any of them.
	 
	13.2	 	The Mortgagor hereby agrees and undertakes to indemnify the Mortgagee on demand against all
losses, actions, claims, expenses, demands, obligations and liabilities sustained or incurred
as result of or in connection with any Environmental Claim being made against the Mortgagee or
otherwise howsoever arising out of any Environmental Incident.
	 
	14.  	 	Power of Attorney
	 
	14.1	 	The Mortgagor, by way of security and in order more fully to secure the performance of the
Mortgagor’s obligations under this Mortgage, hereby irrevocably appoints the Mortgagee as its
attorney during the Security Period for the purposes of:

	 	(a)	 	doing in its name all acts and executing, signing and (if required)
registering in its name all documents which the Mortgagor itself could do, execute,
sign or register in relation to the Vessel (including without limitation,
transferring title to the Vessel to a third party and deleting the Vessel from the
Marshall Islands Ships Registry); provided, however, that such power shall not be
exercisable by or on behalf of the Mortgagee until this Mortgage shall have become
immediately enforceable pursuant to clause 9; and
	 
	 	(b)	 	executing, signing, perfecting, doing and (if required) registering every
such further assurance document, act or thing as is referred to in clause 15.

	14.2	 	The exercise of such power as is referred to in clause 14.1(a) by or on behalf of the
Mortgagee shall not put any entity or individual dealing with the Mortgagee upon any enquiry
as to whether this Mortgage has become enforceable nor shall such entity or individual be in
any way affected by notice that this Mortgage has not become enforceable and, in relation to
both clauses 14.1(a) and 14.1(b), the exercise by the Mortgagee of such power shall be
conclusive evidence of its right to exercise the same.

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	15.  	 	Further Assurance
	 
	 	 	The Mortgagor hereby further covenants at its own expense from time to time to execute,
sign, perfect, do and (if required) register any such further assurance, document, act or
thing as in the opinion of the Mortgagee may be necessary or desirable for the purpose of
more effectually mortgaging and charging the Vessel or perfecting the security constituted
or intended to be constituted by the Security Documents.
	 
	16.  	 	Total amount;
	 
	 	 	For the purpose of recording this Mortgage as required by Chapter 3 of the Maritime Act,
1990 of the Marshall Islands (as amended), the total amount of this Mortgage is USD
34,600,000 (thirty-four million six hundred thousand United States Dollars) together with
interest thereon, fees, commissions and performance of mortgage covenants, and the
discharge amount is the same as the total amount.
	 
	17.  	 	Partial Invalidity
	 
	 	 	If at any time any one or more of the provisions in this Mortgage is or becomes invalid,
illegal or unenforceable in any respect under any law or regulation, the validity,
legality and enforceability of the remaining provisions of this Mortgage shall not be in
any way affected or impaired thereby.
	 
	18.  	 	Notices
	 
	18.1	 	Any notice or other communication under or in connection with this Mortgage shall be in
writing and delivered by hand or sent by facsimile, by courier, or by registered mail to:

	 	 	 the Mortgagor:

 — ADVENTURE TWO S.A.

 — c/o FREE BULKERS S.A.

 — Akti Miaouli 93

 — Piraeus 185 382

 — Greece

 — telephone: +30 210 4528770

 — fax:      +30 210 4291100

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	 	 	 the Mortgagee:

 — HOLLANDSCHE BANK-UNIE N.V.

 — Coolsingel 104

 — 3011 AG Rotterdam

 — the Netherlands

or

 — P.O. Box 249

 — 3000 AE Rotterdam

 — the Netherlands

 — telephone: +31 10 2820282

 — fax:      +31 10 2820399.

	18.2	 	Any such notice or other communication shall be deemed to have been duly given or made as
follows:

	 	(a)	 	if sent by personal delivery, upon delivery at the address of the relevant
party;
	 
	 	(b)	 	if sent by courier service or registered mail three (3) Business Days after
the date of dispatch; and
	 
	 	(c)	 	if sent by facsimile, when dispatched.

	 	 	Any communication by facsimile sent by the Mortgagor to the Mortgagee shall be confirmed
by letter if so required by the Mortgagee.
	 
	19.  	 	Law and jurisdiction
	 
	19.1	 	This Mortgage shall be governed by and construed in accordance with the laws of the Marshall
Islands.
	 
	19.2	 	Subject to clause 19.3, the courts of Rotterdam, the Netherlands shall have exclusive
jurisdiction in relation to all matters which may arise out of or connection with this
Mortgage with the exclusion of any other court of law.
	 
	19.3	 	For the exclusive benefit of the Mortgagee the Mortgagor agrees that the Mortgagee reserves
the right to commence proceedings in relation to any matter which arises out of or in
connection with this Mortgage in the courts of any place in the Netherlands other than
Rotterdam or any country other than the Netherlands and which have jurisdiction to that
matter.

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	19.4	 	In this clause 19 “proceedings” means proceedings of any kind, including an
application for a provisional or protective measure.
	 
	19.5	 	The Mortgagor hereby agrees that any writ, judgment or other notice of process shall be
sufficiently and effectively served on it, if served on it at the address specified in
clause 18.1.

IN WITNESS whereof the Mortgagor has caused this Mortgage to be duly executed the day and year
first written.

	 	 	 	 	 	 	 
	SIGNED

	 	 	)	 	 	 
	by:                              

	 	 	)	 	 	 
	as attorney-in-fact for

	 	 	)	 	 	 
	ADVENTURE TWO S.A.

	 	 	)	 	 	 
	in the presence of:

	 	 	)	 	 	 

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