Document:

Exhibit 10.22

 

	
First Supplemental Agreement to Secured Loan Facility Agreement dated 25 June 2014

	 
	 
	
Dated                            November 2015

	 
	 
	 
	
(1)

	
Eirini Shipping Ltd

Eleni Shipping Limited

 (as joint and several borrowers)

	 	 
	
(2)

	
Euroseas Ltd

 (as Guarantor)

	 	 
	
(3)

	
HSBC Bank plc

 (as Lender)

	 

	 

Contents

	 	 	
Page

	
1

	
Interpretation

	
1

	
2

	
Conditions precedent and subsequent

	
4

	
3

	
Representations and Warranties

	
8

	
4

	
Amendments to Loan Agreement

	
8

	
5

	
Confirmation and Undertaking

	
11

	
6

	
Communications, Law and Jurisdiction

	
12

	
Schedule 1

	
Effective Date Confirmation

	
13

Supplemental Agreement

Dated     November 2015

Between:

	(1)	
Eirini Shipping Ltd ("Eirini") and Eleni Shipping Limited ("Eleni"), each company incorporated according to the law of the Republic of Liberia with registered address at 80 Broad Street, Monrovia, Liberia (as joint and several borrowers, together, the "Borrowers");

	(2)	
Euroseas Ltd., a company incorporated according to the law of the Republic of the Marshall Islands with registered address at the Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, MH96960, Marshall Islands (the "Guarantor"); and

	(3)	
HSBC Bank plc, a company incorporated under the laws of England whose registered office is at 8 Canada Square, London, E14 5HQ, United Kingdom, acting through its Athens Branch at 109-111 Messoghion Ave, Athens, Greece (the "Lender").

Supplemental to a secured loan agreement dated 25 June 2014 (the "Loan Agreement") made between the Borrowers and the Lender, on the terms and subject to the conditions of which the Lender has made available to the Borrowers a loan facility of up to sixteen million five hundred thousand Dollars ($16,500,000).

Whereas:

	(A)	
The Borrowers have requested that the Applicable Margin is maintained at three point seventy five per cent (3.75%) per annum, subject to the Borrowers providing to the Lender additional security (the "Borrowers' Request").

	(B)	
The Lender is willing to accede to the Borrowers' Request on the terms and subject to the conditions contained in this Supplemental Agreement.

It is agreed as follows:

	1	
Interpretation

	1.1	
In this Supplemental Agreement:

"Additional Documents" means this Supplemental Agreement and the Additional Security Documents and "Additional Document" means any one of them;

"Additional Security Documents" means the Collateral Guarantees, the Collateral Mortgages, the Collateral Assignments, the Collateral Manager's Undertakings, the Cash Collateral Account Charge and any other agreement or document which may at any time be executed by any person as additional security for the payment of all or any part of the Indebtedness and "Additional Security Document" means any one of them;

"Cash Collateral" means the amount of seven hundred thousand Dollars ($700,000);

3

"Cash Collateral Account" means an interest bearing bank account opened or to be opened in the name of the Borrowers with the Lender and designated "HSBC Bank plc – Re: Eirini/Eleni";

"Cash Collateral Account Charge" means a first priority charge over the Cash Collateral Account and all amounts from time to time standing to the credit of the Cash Collateral Account, to be executed by the Borrowers in favour of the Lender, as additional security for the payment of the Indebtedness up to the Release Date, in such form and containing such terms and conditions as the Lender shall require;

"Collateral Assignments" means the second priority assignments of the Insurances, the Earnings, any Charter and the Requisition Compensation (as each such term is defined therein) in respect of the Collateral Vessels to be granted by the relevant Collateral Owners in favour of the Lender, in such form and containing such terms and conditions as the Lender shall require and "Collateral Assignment" means any one of them;

"Collateral Guarantees" means the guarantees and indemnities to be executed by the Collateral Owners in favour of the Lender, in such form and containing such terms and conditions as the Lender shall require and "Collateral Guarantee" means any one of them;

"Collateral Loan Agreements" means the Xingang/Joanna Loan Agreement and the Pantelis Loan Agreement and "Collateral Loan Agreement" means either of them;

"Collateral Manager's Undertakings" means the manager's undertakings in respect of the Collateral Vessels to be executed by the Manager in favour of the Lender, in such form and containing such terms and conditions as the Lender shall require and "Collateral Manager's Undertaking" means any one of them;

"Collateral Mortgages" means the second preferred Liberian mortgages in respect of the Collateral Vessels to be granted by the relevant Collateral Owners in favour of the Lender, in such form and containing such terms and conditions as the Lender shall require and "Collateral Mortgage" means any one of them;

"Collateral Owners" means the Xingang Collateral Owner, the Joanna Collateral Owner and the Pantelis Collateral Owner and "Collateral Owner" means any one of them;

"Collateral Vessels" means the Marinos Collateral Vessel, the Joanna Collateral Vessel and the Pantelis Collateral Vessel and "Collateral Vessel" means any one of them;

"Effective Date" means the date on which the Lender confirms to the Borrowers in writing substantially in the form set out in Schedule 1 that all of the conditions referred to in clause 2.1 have been satisfied, which confirmation the Lender shall be under no obligation to give if Event of Default shall have occurred and be continuing;

"Joanna Collateral Owner" means Joanna Maritime Ltd, a company incorporated under the laws of the Republic of Liberia, having its registered address at 80 Broad Street, Monrovia, Liberia;

4

"Joanna Collateral Vessel" means the motor vessel named "JOANNA" with IMO no. 9204477 built in Poland in 1999, currently registered under the flag of the Republic of Liberia in the ownership of the Joanna Collateral Owner and everything now or in the future belonging to her on board and ashore;

"Marinos Collateral Vessel" means the motor vessel named "MARINOS" with IMO no. 9053232 built in Germany in 1993, currently registered under the flag of the Republic of Liberia in the ownership of the Xingang Collateral Owner and everything now or in the future belonging to her on board and ashore;

"Pantelis Collateral Owner" means Pantelis Shipping Corp., a company incorporated under the laws of the Republic of Liberia, having its registered address at 80 Broad Street, Monrovia, Liberia;

"Pantelis Collateral Vessel" means the bulk carrier vessel named "PANTELIS" with IMO no. 9207730  built in Japan in 2000, currently registered in the ownership of the Pantelis Collateral Owner under the flag of the Republic of Liberia and everything now or in the future belonging to her on board and ashore;

"Pantelis Loan Agreement" means the loan agreement dated 15 December 2009 (as amended and supplemented form time to time) made between the Pantelis Collateral Owner (as borrower) and the Lender (as lender) for the purposes and pursuant to the terms and conditions contained therein;

"Release Date" means the date of actual release of the Cash Collateral Account Charge to be released by the Lender in accordance with Clause 27.8 of the Loan Agreement and the terms and conditions contained in such Cash Collateral Account Charge;

"Security Parties" all parties to this Supplemental Agreement and the Collateral Owners, other than the Lender and "Security Party" means any one of them;

"Supplemental Agreement" means the first supplemental agreement herein contained;

"Xingang Collateral Owner" means Xingang Shipping Ltd, a company incorporated under the laws of the Republic of Liberia, having its registered address at 80 Broad Street, Monrovia, Liberia; and

"Xingang/Joanna Loan Agreement" means the loan agreement dated    November 2015 made between the Xingang Collateral Owner and the Joanna Collateral Owner (as joint and several borrowers) and the Lender (as lender) for the purposes and pursuant to the terms and conditions contained therein.

	1.2	
All words and expressions defined in the Loan Agreement shall have the same meaning when used in this Supplemental Agreement unless the context otherwise requires, and Clause 2.1 of the Loan Agreement shall apply to the interpretation of this Supplemental Agreement as if it were set out in full.

	1.3	
All obligations, representations, warranties, covenants and undertakings of the Borrowers under or pursuant to this Supplemental Agreement shall, unless otherwise expressly provided, be entered into, made or given by them jointly and severally.

5

	2	
Conditions precedent and subsequent

	2.1	
Conditions precedent

As conditions for the agreement of the Lender to the request specified in Recital (A) above and for the effectiveness of clause 4, the Borrowers shall deliver or cause to be delivered to or to the order of the Lender the following documents and evidence:

		2.1.1	
Officer's certificate

A certificate from a duly authorised officer of each of the Borrowers, the Guarantor and the Manager confirming that none of the constitutional documents delivered to the Lender pursuant to Clause 19.1.5 of the Loan Agreement have been amended or modified in any way since the date of their delivery to the Lender, or attaching copies, certified by a duly authorised officer of each Borrower, the Guarantor or the Manager (as the case may be) as true, complete, accurate and neither amended nor revoked of any of the constitutional documents which have been amended or revoked and certifying that each copy document relating to it specified in Clauses 2.1.4, 2.1.5 and 2.1.6 is correct, complete and in full force and effect and setting out the names of the directors, officers and shareholders of the Borrower, the Guarantor and the Manager (as applicable) and the proportion of shares held by each shareholder.

		2.1.2	
Collateral Owners' constitutional documents

Copies of the constitutional documents of each Collateral Owner together with such evidence as the Lender may reasonably require that the relevant Collateral Owner is duly incorporated in its country of incorporation and remains in existence with power to enter into, and perform its obligations under, the Additional Security Documents to which it is or is to become a party.

		2.1.3	
Certificate of goodstanding

A certificate of good standing in respect of each Security Party.

		2.1.4	
Board resolutions

A copy of a resolution of the board of directors of each Security Party:

		(a)	
approving or ratifying the terms of, and the transactions contemplated by, the Additional Documents to each of which it is a party and resolving that it executes each of the Additional Documents; and

		(b)	
authorising a specified person or persons to execute the Additional Documents (and all documents and notices to be signed and/or dispatched under the Additional Documents) on its behalf.

		2.1.5	
Shareholders resolutions

A copy of a resolution signed by all the holders of the issued shares in each Security Party (other than the Guarantor), approving the terms of, and the transactions contemplated by, the Additional Documents.

6

		2.1.6	
Power of attorney

The legalised power of attorney of each Security Party under which the Additional Documents are to be executed or transactions undertaken by the Security Parties.

		2.1.7	
Collateral Owners' Officer's certificates   An original certificate of a duly authorised officer of each Collateral Owner certifying that each copy document relating to it specified in this Clause 2.1 is correct, complete and in full force and effect and setting out the names of the directors, officers and shareholders of that Collateral Owner and the proportion of shares held by each shareholder.

		2.1.8	
Additional Documents

The Additional Documents duly executed together with all other documents required by any of them, including, without limitation, all notices of assignment and/or charge and evidence that those notices will be duly acknowledged by the recipients.

		2.1.9	
Collateral Vessel documents

Photocopies, certified as true, accurate and complete by a director or the secretary or a legal adviser of the relevant Collateral Owner, of:

		(a)	
any charterparty or other contract of employment of a Collateral Vessel which will be in force on the Effective Date;

		(b)	
each Management Agreement (as defined in the relevant Collateral Loan Agreement) in respect of the Collateral Vessels;

		(c)	
each Collateral Vessel's Safety Construction, Safety Equipment, Safety Radio, Load Line and International Oil Pollution Prevention Certificates;

		(d)	
each Collateral Vessel's Certificate of Financial Responsibility issued pursuant to the United States Oil Pollution Act 1990;

		(e)	
each Collateral Vessel's safety management certificate (SMC);

		(f)	
the ISM Company's document of compliance (DOC);

		(g)	
each Collateral Vessel's current international ship security certificate under the ISPS Code (ISSC);

		(h)	
each Collateral Vessel's current international air pollution  prevention certificate for the Vessel issued under Annex VI (IAPPC);

		(i)	
each Collateral Vessel's current Tonnage Certificate,

in each case together with all addenda, amendments or supplements.

7

		2.1.10	
Evidence of Collateral Owner's title

Certificate of ownership and encumbrance (or equivalent) issued by the Registrar of Ships (or equivalent official) of the flag of the Republic of Liberia confirming that (a) each Collateral Vessel is permanently registered under that flag in the ownership of the relevant Collateral Owner, (b) each  Collateral Mortgage has been registered with second priority against the relevant Collateral Vessel and (c) there are no further Encumbrances registered against each Collateral Vessel (other a first preferred mortgage in favour of the Lender as security under the relevant Collateral Loan Agreement).

		2.1.11	
Evidence of insurance

Evidence that each Collateral Vessel is insured in the manner required by the Additional Security Documents and that letters of undertaking will be issued in the manner required by the Additional Security Documents, together with (if required by the Lender) the written approval of each Collateral Vessel's Insurances (as such term is defined in the relevant Collateral Loan Agreement) by an insurance adviser appointed by the Lender.

		2.1.12	
Confirmation of class

In respect of each Collateral Vessel, a Certificate of Confirmation of Class for hull and machinery confirming that the relevant Collateral Vessel is classed with the highest class applicable to vessels of her type with such other classification society as may be acceptable to the Lender free of recommendations affecting class.

		2.1.13	
Valuation

A valuation of each Collateral Vessel addressed to the Lender from a broker acceptable to the Lender certifying the market value for each Collateral Vessel, acceptable to the Lender.

		2.1.14	
Legal Opinions

Legal opinion(s) of the legal advisers to the Lender in each relevant jurisdiction, other than England and Wales, substantially in the form required by the Lender, prior to the signing of this Supplemental Agreement or confirmation satisfactory to the Lender that such an opinion will be given.

		2.1.15	
Process agent

Evidence that the process agent referred to in Clause 41.4 of the Loan Agreement and any process agent appointed under any other Finance Document has accepted its appointment as agent for service of process in relation to any proceedings before the English Courts in connection with the Additional Documents.

8

		2.1.16	
Account mandates

Such duly signed forms of mandate, and/or other evidence of the opening of the Cash Collateral Account, as the Lender may require.

		2.1.17	
Cash Collateral

Evidence in form and substance acceptable to the Lender that the Cash Collateral has been credited in to the Cash Collateral Account and secured in favour of the Lender as additional security for the payment of the Indebtedness up to the Release Date, free of Encumbrances (other than in favour of the Lender).

		2.1.18	
Other authorisations

A copy of any other consent, licence, approval, authorisation or other document, opinion or assurance which the Lender, reasonably considers to be necessary or desirable (if it has notified the Borrowers accordingly) in connection with the entry into and performance of the transactions contemplated by any of the Additional Documents or for the validity and enforceability of any of the Additional Documents.

	2.2	
Conditions subsequent

The Borrowers undertake to deliver or to cause to be delivered to or to the order of the Lender on the Effective Date or at the date specified by the Lender:

		2.2.1	
Acknowledgements of notices

Acknowledgements of all notices of assignment and/or charge given pursuant to any of the Additional Security Documents received by the Lender pursuant to clause 2.1

		2.2.2	
Legal opinions

Such of the legal opinions specified in clause 2.1 as have not already been provided to the Lender.

		2.2.3	
Letters of undertaking

Letters of undertaking in respect of each Collateral Vessel as required by the relevant Additional Security Documents in form and substance acceptable to the Lender.

		2.2.4	
Transaction expenses

Evidence of payment of the legal costs and expenses incurred by the Lender in connection with the preparation, negotiation, execution of the Additional Documents and any other document in connection with any of them.

	2.3	
No waiver

If any of the documents and evidence required by clause 2.1 have not been delivered to or to the order of the Lender in accordance therewith, the Borrowers undertake to deliver all outstanding documents and evidence to or to the order of the Lender no later than the date specified by the Lender after the Effective Date, and delivery on such later date shall not be taken as a waiver of the Lender's right to require production of all the documents and evidence required by clause 2.1.

9

	2.4	
Form and content

All documents and evidence delivered to the Lender pursuant to this clause shall:

		2.4.1	
be in form and substance acceptable to the Lender;

		2.4.2	
be accompanied, if required by the Lender, by translations into the English language, certified in a manner acceptable to the Lender; and

		2.4.3	
if required by the Lender, be certified, notarised, legalised or attested in a manner acceptable to the Lender.

	3	
Representations and Warranties

Each of the representations and warranties contained in Clause 17 of the Loan Agreement and Clause 3 of the Guarantee (respectively), shall be deemed repeated by each of the Security Parties (as applicable) at the date of this Supplemental Agreement and at the Effective Date, by reference to the facts and circumstances then pertaining, as if references to the Finance Documents included this Supplemental Agreement and the other Additional Documents.

	4	
Amendments to Loan Agreement

With effect from the Effective Date:

	4.1	
the definitions contained in clause 1.1 of this Supplemental Agreement (other than the definitions of "Effective Date", "Security Parties" and "Supplemental Agreement") shall be added to Clause 2.1 of the Loan Agreement in alphabetical order;

	4.2	
the definition of "Accounts" as set out in Clause 2.01 of the Loan Agreement shall be read and construed to include the Cash Collateral Account and when used in the singular shall mean any of them.

	4.3	
the definition of "Accounts' Charges" as set out in Clause 2.01 of the Loan Agreement shall be read and construed to include the Cash Collateral Account Charge;

	4.4	
the definition of "Applicable Margin" of Clause 2.01 of the Loan Agreement shall be deleted and restated as follows:

"'Applicable Margin" means three point seventy five per cent (3.75%) per annum";

	4.5	
the definition of "Classification Society" of Clause 2.01 of the Loan Agreement shall be deleted and restated as follows:

"'Classification Society' means in respect of (a) the Eirini Ship, Bureau Veritas, (b) the Eleni Ship, NIPPON KAIJ1 KYOKAI, (c) the Joanna Collateral Vessel, DNV-GL,           (d) the Marinos Collateral Vessel, DNV-GL and (e) the Pantelis Collateral Vessel, Rina or such other classification society member of the IACS as may be as may be acceptable to the Lender."; 

	4.6	
the definition of "Finance Documents" in Clause 2.01 of the Loan Agreement shall be read and construed to include this Supplemental Agreement;

10

	4.7	
the definition of "Management Agreement" in Clause 2.1 of the Loan Agreement shall be deleted and replaced as follows:

""Management Agreement" means in relation to a Ship, the management agreement in respect of that Ship made by and between (i) the Owner or a Collateral Owner thereof (as the case may be) and (ii) the Manager on terms acceptable to the Lender, as the same may from time to time be amended, varied or supplemented and, in "Management Agreements" means any of them";

	4.8	
the definition of "Mortgaged Ship" of Clause 2.01 of the Loan Agreement shall be deleted and restated as follows:

""Mortgaged Ship" means at any relevant time a Ship, which is, at such time, subject to a Mortgage or a Collateral Mortgage (as the case may be) and the Earnings, Insurances and Requisition Compensation of which are subject to an Encumbrance and, "Mortgaged Ships" means any Ship";

	4.9	
the definition of "Proceeds" of Clause 2.01 of the Loan Agreement shall be amended to include the words "the Cash Collateral Account", in the 5th line after the words "credit of", and the words "either of them" shall be deleted and replaced with the words "any of them";

	4.10	
the following new definitions shall be included in Clause 2.01 of the Loan Agreement in alphabetical order:

"'Effective Date' means the date as defined in the Supplemental Agreement"; and

"'Supplemental Agreement' means the agreement dated      November 2015 made between the Borrowers (as joint and several borrowers), the Guarantor (as guarantor) and the Lender (as lender) for the purposes and pursuant to the terms and conditions contained therein";

	4.11	
the definition of "Security Documents" as set out in Clause 2.01 of the Loan Agreement shall be read and construed to include the Additional Security Documents;

	4.12	
the definition of the term "Security Parties" set out in Clause 2.01 of the Loan Agreement shall be read and construed as including the Collateral Owners;

	4.13	
the definition of "Security Requirement" of Clause 2.1 of the Loan Agreement shall be deleted and replaced as follows:

""Security Requirement" means the amount in Dollars (as certified by the Lender whose certificate shall, in the absence of manifest error, be conclusive and binding on the Borrowers and the Lender) which is at least equal to one hundred and thirty per cent (130%) of the Facility at any relevant time";

	4.14	
all references to the terms "Borrower", "Borrowers" and "Owner" (as the case may be) in the definitions of "Earnings", "ISM Code Documentation", "Relevant Ship" of Clause 2.1 of the Loan Agreement and in Clauses 10.2.5, 17.2.1, 17.2.2, 17.2.9, 17.2.10, 17.2.11, 17.2.12, 17.2.13, 20.26, 22.5, 22.12, 22.18, 22.19, 22.20, 22.22, 22.27, 22.31, 24.1.5 up to (and including) 24.1.17, 24.1.23, 24.1.24, 24.1.31 and 24.4 shall be read and construed to include the Collateral Owners in respect of the Collateral Vessels (as the context may require);

11

	4.15	
all references to the term "Ship" in the Loan Agreement (other than in respect of the definitions of "General Assignment", "Manager's Undertakings" and "Mortgage" in Clause 2.1 of the Loan Agreement and in Clauses 1.1.2, 3.1.1.2, 10, 19, 20.37, 21, 24.1.25 and 27.01 of the Loan Agreement) shall be read and construed to include the Collateral Vessels and all references to the Borrowers in such clauses shall also refer to the Collateral Owners in respect of the Collateral Vessels (as the context may require);

	4.16	
Clause 17.02 of the Loan Agreement shall be deleted and replaced as follows:

		"17.02	
The Borrowers hereby further represent and warrant to the Lender that on the Drawdown Date in respect of the Eirini Ship and the Eleni Ship and on the Effective Date in respect of the Collateral Vessels and throughout the Security Period in respect of the Ships the following matters will be true and shall remain true in all material respects:";

Clause 17.2.5 of the Loan Agreement shall be deleted and restated as follows:

		"17.02.5	
the Mortgage in respect of each of the Eirini Ship and the Eleni Ship has been duly recorded against such Ship as a valid first priority ship mortgage and the Collateral Mortgage in respect of each of the Joanna Collateral Vessel, the Marinos Collateral Vessel and the Pantelis Collateral Vessel has been duly recorded against such Collateral Vessel as a valid second priority ship mortgage, in each case in favour of the Lender in accordance with the laws of her flag;";

	4.17	
Clause 18.1 of the Loan Agreement shall be deleted and restated as follows:

		"18.1	
The Borrowers hereby agree that the Security Documents shall secure with first priority in respect of each of the Eirini Ship and the Eleni Ship and with second priority in respect of the Collateral Vessels the due payment of the Indebtedness.";

	4.18	
Clause 22.32 of the Loan Agreement shall be amended to include the word "[second]" in the fifth line after the words "first";

	4.19	
Clause 24.1.4 of the Loan Agreement shall be deleted and restated as follows:

		"24.1.4	
any other Financial Indebtedness of a Borrower, including without limitation any Indebtedness (as defined in a Collateral Loan Agreement) exceeding in aggregate One million Dollars ($1,000,000) becomes due and payable or, with the giving of notice or lapse of time or any other condition or a combination thereof, capable of being declared due and payable prior to its stated maturity by reason of any circumstance entitling the creditors) thereof to declare such indebtedness due and payable and such indebtedness is not paid within fourteen (14) Banking Days therefrom;";

	4.20	
the heading of Clause 27 (Earnings and Retention Accounts) of the Loan Agreement and the heading of Clause 27 (Earnings and Retention Accounts) of the Index shall be deleted and replaced with "Accounts";

12

	4.21	
Clause 27.7 of the Loan Agreement shall be read and construed to exclude the Cash Collateral Account in respect of any withdrawals of moneys standing to the credit of the Cash Collateral Account; and

	4.22	
a new Clause 27.08 shall be added to the Loan Agreement as follows:

"27.08  The Borrowers shall ensure that at all times during the Security Period up to the Release Date the Cash Collateral is credited and maintained in the Cash Collateral Account, free of Encumbrances and rights of set off other than those created by or under the Finance Documents.

Following a request in writing by the Borrowers, the Lender shall, as soon as reasonably practicable, release the Borrowers from their obligations under and pursuant to the Cash Collateral Account Charge provided that:

		27.8.1	
(a) the Security Requirement in clause 2.01 of this Agreement is complied with and (b) the aggregate Market Value of the Eirini Ship and the Eleni Ship (determined in accordance with clause 22.26) is at least one hundred thirty per cent (130%) of the aggregate of (i) the outstanding amount of the Facility and (ii) (in case the Master Agreement is utilised) the Maximum Permitted Swap Exposure and in all respects to the absolute satisfaction of the Lender;

		27.8.2	
no Event of Default has occurred; and

		27.8.3	
where such release would not result in the occurrence of an Event of Default."

All other terms and conditions of the Loan Agreement shall remain unaltered and in full force and effect.

	5	
Confirmation and Undertaking

	5.1	
Each of the Borrowers and the Guarantor confirms that all of its respective obligations under or pursuant to each of the Security Documents to which it is a party remain in full force and effect, despite the amendments to the Loan Agreement made in this Supplemental Agreement, as if all references in any of the Security Documents to the Loan Agreement (however described) were references to the Loan Agreement as amended and supplemented by this Supplemental Agreement.

	5.2	
The definition of any term defined in any of the Security Documents shall, to the extent necessary, be modified to reflect the amendments to the Loan Agreement made in this Supplemental Agreement.

	5.3	
Each of the Borrowers and the Guarantor covenants that from time to time at the request of the Lender they will execute and deliver to the Lender or procure the execution and delivery to the Lender of all such documents as in the opinion of the Lender are necessary for giving full effect to this Supplemental Agreement and for perfecting and protecting the value of or enforcing any rights or securities granted to the Lender under or pursuant to the Loan Agreement and this Supplemental Agreement.

	6	
Communications, Law and Jurisdiction

The provisions of Clauses 31 (Confidentiality), 39 (Notices), 40 (Supplemental) and 41 (Law and Jurisdiction) of the Loan Agreement shall apply to this Supplemental Agreement as if they were set out in full and as if references to the Loan Agreement or the Finance Documents were references to this Supplemental Agreement.

13

Schedule 1

Effective Date Confirmation

	To:	
Eirini Shipping Ltd

80 Broad Street

Monrovia

 Liberia

Eleni Shipping Limited

80 Broad Street

Monrovia

 Liberia

We, HSBC Bank plc, refer to the first supplemental agreement dated      November 2015 (the "Supplemental Agreement") relating to a secured loan agreement dated 25 June 2014 (the "Loan Agreement") made between you, as the Borrowers, and ourselves, as the Lender in respect of a loan to you from us of up to sixteen million five hundred Dollars ($16,500,000).

We hereby confirm that all conditions precedent referred to in Clause 2.1 of the Supplemental Agreement have been satisfied. In accordance with Clauses 1.1 and 4 of the Supplemental Agreement, the Effective Date is the date of this confirmation and the amendments to the Loan Agreement are now effective.

Dated:                              2015

Signed:    _________________

          For and on behalf of

          HSBC Bank plc

14

In witness of which the parties to this Supplemental Agreement have executed this Supplemental Agreement as a deed the day and year first before written.

	
Signed and delivered as

	
)

	
a deed by

	
)

	
its duly authorised attorney-in-fact

	
)

	
for and on behalf of

	
)

	 	
)

	
Eirini Shipping Ltd

	
)

	
in the presence of:

	
)

Witness signature:................................................

Name:

Address:

	
Signed and delivered as

	
)

	
a deed by

	
)

	
its duly authorised attorney-in-fact

	
)

	
for and on behalf of

	
)

	 	
)

	
Eleni Shipping Limited

	
)

	
in the presence of:

	
)

Witness signature:................................................

Name:

Address:

	
Signed and delivered as

	
)

	
a deed by

	
)

	
its duly authorised attorney-in-fact

	
)

	
for and on behalf of

	
)

	 	
)

	
Euroseas Ltd.

	
)

	
in the presence of:

	
)

Witness signature:................................................

Name:

Address:

	
Signed and delivered as

	
)

	
a deed by

	
)

	
its duly authorised attorney-in-fact

	
)

	
for and on behalf of

	
)

	 	
)

	
HSBC Bank plc

	
)

	
in the presence of:

	
)

Witness signature:................................................

Name:

Address:

15Exhibit 10.23

 

 

Dated         September 2016

 

 

 

 

 

 

 

 

 

EIRINI SHIPPING LTD

ELENI SHIPPING LIMITED

as join and several Borrowers

and

PANTELIS SHIPPING CORP.

EUROSEAS LTD

JOANNA MARITIME LTD

XINGANG SHPPING LTD

as Guarantors

and

 

HSBC BANK PLC

as Lender

 

 

 

 

 

SECOND SUPPLEMENTAL AGREEMENT

 

relating to

 a loan agreement dated 25 June 2014

in respect of a term loan facility

of (originally) up to $16,500,000

 

 

 

 

WATSON & FARLEY

&

WILLIAMS

Index

 

 

	
Clause

	 	
Page

	 	 	 
	
1

	
Definitions

	
3

	
2

	
Representations and Warranties

	
3

	
3

	
Agreement of the Lender

	
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Conditions

	
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Variations to Loan Agreement and Security Documents

	
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Release of Xingang Shipping Ltd

	
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Costs and Expenses

	
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Communications

	
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Supplemental

	
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Law and Jurisdiction

	
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Schedule A:  Excess Cash Flow Notice

	
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Execution Page

	 	
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THIS SECOND SUPPLEMENTAL AGREEMENT is dated            September 2016 and made between

 

PARTIES

 

	(1)	
EIRINI SHIPPING LTD, a corporation incorporated under the laws of the Republic of Liberia, having its registered address at 80 Broad Street, Monrovia, Liberia ("Eirini");

 

	(2)	
ELENI SHIPPING LIMITED, a corporation incorporated under the laws of the Republic of Liberia, having its registered address at 80 Broad Street, Monrovia, Liberia ("Eleni" and together with Eirini, the "Borrowers" and each a "Borrower");

 

	(3)	
PANTELIS SHIPPING CORP., a corporation incorporated under the laws of the Republic of Liberia, with registered address at 80 Broad Street, Monrovia, Republic of Liberia ( "Pantelis");

 

	(4)	
EUROSEAS LTD, a corporation incorporated under the laws of the Republic of the Marshall Islands with its registered address at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH 96960 ("Euroseas");

 

	(5)	
JOANNA MARITIME LTD ("Joanna"), a corporation incorporated under the laws of the Republic of Liberia, having its registered address at 80 Broad Street, Monrovia, Liberia ("Joanna");

 

	(6)	
XINGANG SHIPPING LTD ("Xingang"), a corporation incorporated under the laws of the Republic of Liberia, having its registered address at 80 Broad Street, Monrovia, Liberia ("Xingang" and together with Pantelis, Joanna and Euroseas, the "Guarantors" and each a "Guarantor"); and

 

	(7)	
HSBC BANK plc, a company incorporated under the laws of England whose registered office is at 8 Canada Square, London, E14 5HQ, United Kingdom (as "Lender").

 

BACKGROUND

 

	(A)	
By a loan agreement dated 25 June 2014 (as amended by a supplemental agreement dated 12 November 2015 and as from time to time amended or supplemented, the "Loan Agreement") and made between (i) the Borrowers and (ii) the Lender, the Lender agreed to make available to the Borrowers a term loan facility of up to (originally) $16,400,000 on the terms and conditions contained therein secured on the Liberian flag vessels "EIRINI P." and "ELENI P".  The principal amount of the Loan currently outstanding is $12,850,000.

 

	(B)	
By a guarantee dated 25 June 2014 (the "Euroseas Guarantee") and made between (i) Euroseas and (ii) the Lender, Euroseas guaranteed the Borrowers' obligations under the Loan Agreement and the other Security Documents (as defined in the Loan Agreement).

 

	(C)	
By a guarantee dated 12 November 2015 (the "Eirini Guarantee") and made between (i) Eirini and (ii) the Lender, Eirini guaranteed the Borrowers' obligations under the Loan Agreement and the other Security Documents (as defined in the Loan Agreement).

 

	(D)	
By a guarantee dated 12 November 2015 (the "Eleni Guarantee") and made between (i) Eleni and (ii) the Lender, Eleni guaranteed the Borrowers' obligations under the Loan Agreement and the other Security Documents (as defined in the Loan Agreement).

 

	(E)	
By a guarantee dated 12 November 2015 (the "Joanna Guarantee") and made between (i) Joanna and (ii) the Lender, Joanna guaranteed the Borrowers' obligations under the Loan Agreement and the other Security Documents (as defined in the Loan Agreement).

 

 

	(F)	
By a guarantee dated 12 November 2015 (the "Xingang Guarantee") and made between (i) Xingang and (ii) the Lender, Xingang guaranteed the Borrowers' obligations under the Loan Agreement and the other Security Documents (as defined in the Loan Agreement).

 

	(G)	
The Borrowers and the Guarantors have requested (the "Requests") that the Lender agrees to (inter alia):

 

		(i)	
release Xingang from its obligations under the Xingang Guarantee and any other Security Documents executed by Xingang;

 

		(ii)	
apply $1,2500,000 currently held in the Cash Collateral Account and pledged in favour of the Lender towards prepayment of the Facility (such prepayment to take place by 7 October 2016) or on any other date selected by the Lender but without any Broken Funding Costs or additional expenses whatsoever under Clause 10.06 of the Loan Agreement or otherwise, thus reducing the principal amount of the Loan currently outstanding from $12,850,000 to $11,600,000;

 

		(iii)	
defer the repayment of seven (7) consecutive quarterly instalments of $350,000 each (being $2,450,000 in aggregate) from June 2016 to December 2017. Repayment to recommence in March 2018 and the outstanding amount of $11,600,000 (following the above mentioned prepayment of $1,250,000) will be repaid in six (6) quarterly instalments, the first two (2) instalments of $350,000 each, the following three (3) instalments in the amount of $725,000 each and the final instalment in the amount of $8,725,000 (comprised by $725,000 plus a balloon payment of $8,000,000 (the "Balloon Payment")). The first instalment will be repaid on 26 March 2018 and the following instalments on quarterly intervals thereafter and the last one on 26 May 2019);

 

		(iv)	
reduce the Applicable Security Margin required to be maintained in accordance with clause 21 of the Loan Agreement to 75% for the period commencing on the date of this Supplemental Agreement and ending on 31 December 2017; and

 

		(v)	
relax the financial covenants of Euroseas as follows:

 

		(A)	
increase the percentage of the Leverage Ratio required to be maintained pursuant to clause 18.24 (ii) of the Loan Agreement and clause 8.2.19.2 of the Euroseas Guarantee from 0.75:1 or 75% to 1.15:1 or 115%; and

 

		(B)	
waive the requirement that the minimum liquidity of $300,000 per Fleet Vessel to consist only of unencumbered cash (other than in favour of the Lender) as currently provided in clause 18.24(iii) of the Loan Agreement and clause 8.2.19.3 of the Euroseas Guarantee.

 

	(H)	
The Lender's consent to the Borrowers' request referred to in Recital (G) above is subject to:

 

		(i)	
application of a cash sweep mechanism in respect of the Excess Cash Flow (as defined below);

 

		(ii)	
restriction on dividends;

 

		(iii)	
restriction on new acquisitions by the Group; and

 

		(iv)	
no prepayments by any member of the Group to other lenders without the Lender's consent,

 

in each case referred to in paragraphs (i) to (iv) (inclusive) above, at all times while the Total Deferred Amount (as defined below) or any part thereof remains outstanding;

 

2

 

		(v)	
a prepayment of $1,250,000 (such prepayment to take place by 7 October 2016 or on any other date selected by the Lender but without any Broken Funding Costs or additional expenses whatsoever under Clause 10.06 of the Loan Agreement or otherwise) ;

 

		(vi)	
following the prepayment referred to in paragraph (v) above, cash collateral in the amount of $600,000 being remitted and/or maintained  in the Cash Collateral Account blocked and pledged in favour of the Lender pursuant to the Cash Collateral Account Charge until the end of the Security Period.

 

	(I)	
This Supplemental Agreement sets out the terms and conditions on which the Lender agrees to:

 

		(i)	
the Borrowers' Requests; and

 

		(ii)	
the consequential amendments to the Loan Agreement, the Euroseas Guarantee and the other Security Documents.

 

OPERATIVE PROVISIONSNOW THEREFORE IT IS HEREBY AGREED

 

	1	
DEFINITIONS

 

	1.1	
Defined Expressions

 

Words and expressions defined in the Loan Agreement (as hereby amended) and the recitals hereto and not otherwise defined herein shall have the same meanings when used in this Supplemental Agreement.

 

	1.2	
Definitions

 

In this Supplemental Agreement the words and expressions specified below shall have the meanings attributed to them below:

 

"Guarantee" means each of the Euroseas Guarantee, the Joanna Guarantee, the Pantelis Guarantee and the Xingang Guarantee, and in the plural, means all of them;

 

"Effective Date" means the date on which the conditions precedent in Clause 4 are satisfied;

 

"Mortgage Addendum" means, in relation to each Ship, and each Collateral Vessel, an addendum to the Mortgage over each Ship, or the Collateral Mortgage over that Collateral Vessel (as the case may be); and

 

"Ships" means collectively the Eirini Ship or the Eleni Ship and in the singular means either of them.

 

	1.3	
Application of construction and interpretation provisions of Loan Agreement

 

Clauses 2.01 to 2.03 of the Loan Agreement apply, with any necessary modifications, to this Supplemental Agreement.

 

	2	
REPRESENTATIONS AND WARRANTIES

 

	2.1	
Repetition of Loan Agreement representations

 

Each Borrower hereby represents to the Lender, as at the date of this Supplemental Agreement, that the representations and warranties set forth in clause 17 of the Loan Agreement (updated mutatis mutandis to the date of this Supplemental Agreement), are true and correct as if all references therein to "this Agreement" were references to the Loan Agreement as further amended by this Supplemental Agreement.

 

3

 

	2.2	
Repetition of Guarantee representations

 

Each Guarantor hereby represents to the Lender, as at the date of this Supplemental Agreement, that the representations and warranties set forth in clause 3 of the Guarantee to which it is a party (updated mutatis mutandis to the date of this Supplemental Agreement), are true and correct as if all references therein to "this Guarantee" were references to the relevant Guarantee as further amended by this Supplemental Agreement.

 

	2.3	
Further representations and warranties

 

Each of the Borrowers and each of the Guarantors hereby further represents and warrants to the Lender that as at the date of this Supplemental Agreement:

 

	(a)	
it is duly incorporated and validly existing and in good standing under the laws of Liberia (and in the case of Euroseas, the Marshall Islands), and has full power to enter into and perform its obligations under this Supplemental Agreement and has complied with all statutory and other requirements relative to its business, and does not have an established place of business in any part of the United Kingdom or the United States of America (for the avoidance of doubt, Euroseas is listed in the Nasdaq Capital Market);

 

	(b)	
all necessary governmental or other official consents, authorisations, approvals, licences, consents or waivers for the execution, delivery, performance, validity and/or enforceability of this Supplemental Agreement and all other documents to be executed in connection with the amendments to the Loan Agreement, the Guarantees and the other Security Documents as contemplated hereby have been obtained and will be maintained in full force and effect, from the date of this Supplemental Agreement and so long as any moneys are owing under any of the Security Documents and while all or any part of the Facilities remains outstanding;

 

	(c)	
it has taken all necessary corporate and other action to authorise the execution, delivery and performance of its obligations under this Supplemental Agreement and such other documents to which it is a party and such documents do or will upon execution thereof constitute its valid and binding obligations enforceable in accordance with their respective terms;

 

	(d)	
the execution, delivery and performance of this Supplemental Agreement and all such other documents as contemplated hereby does not and will not, from the date of this Supplemental Agreement and so long as any moneys are owing under any of the Security Documents and while all or any part of the Loan remains outstanding, constitute a breach of any contractual restriction or any existing applicable law, regulation, consent or authorisation binding on the Borrowers and the Guarantors or on any of  respective property or assets and will not result in the creation or imposition of any security interest, lien, charge or encumbrance (other than under the Security Documents as contemplated hereby) on any of such property or assets; and

 

	(e)	
it has fully disclosed in writing to the lender all facts which it knows or which it should reasonably know and which are material for disclosure to the Lender in the context of this Supplemental Agreement and all information furnished by the Borrowers and the Guarantors on behalf of each of them relating to their business and affairs in connection with this Supplemental Agreement was and remains true, correct and complete in all material respects at the date provided and there are no other material facts or considerations the omission of which would render any such information misleading at the date provided.

 

4

 

	3	
AGREEMENT OF THE LENDER

 

	3.1	
Agreement of the Lender

 

The Lender, relying upon each of the representations and warranties set out in Clauses 2.1, 2.2 and 2.3 of this Supplemental Agreement, hereby agrees with the Borrowers and the Guarantors, subject to and upon the terms and conditions of this Supplemental Agreement and in particular, but without limitation, subject to the fulfilment of the conditions precedent set out in Clause 4, to:

 

	(a)	
the Requests; and

 

	(b)	
the amendments/variations to the Loan Agreement, the Euroseas Guarantee and the other Security Documents referred to in Clause 5.

 

	3.2	
Effect of Lender's Agreement

 

The agreement of the Lender contained in Clause 1 shall have effect on and from the Effective Date.

 

	4	
CONDITIONS

 

	4.1	
Conditions precedent

 

The agreement of the Lender contained in Clause 3.1 of this Supplemental Agreement shall all be expressly subject to the condition that the Lender shall have received in form and substance satisfactory to it and its legal advisers on or before the Effective Date:

 

	(a)	
true and complete copy of the standing authorities of each Borrower and each Guarantor authorising and approving the execution of this Supplemental Agreement and the Mortgage Addendum relating to either Ship, or, as the case may be, the Collateral Vessel owned by it, and authorising their respective directors or other representatives to execute the same on their behalf;

 

	(b)	
the original of the power of attorney issued by each Borrower and each Guarantor pursuant to such resolutions aforesaid in paragraph (a) above;

 

	(c)	
an original of this Supplemental Agreement duly executed by the parties hereto;

 

	(d)	
a duly executed original of each Mortgage Addendum;

 

	(e)	
documentary evidence that each Mortgage Addendum has been duly recorded against either Ship or, as the case may be, each Collateral Vessel, as a valid first addendum to the Mortgage or the Collateral Mortgage according to the laws of the Republic of the Marshall Islands and Liberia respectively;

 

	(f)	
certified copies of all documents (with a certified translation if an original is not in English) evidencing any other necessary action, approvals or consents with respect to this Supplemental Agreement and each Mortgage Addendum and all necessary governmental and other official approvals and consents in such Relevant Jurisdictions as the Lender (acting reasonably) deems appropriate;

 

	(g)	
evidence that the Borrowers will make a voluntary prepayment of $1,250,000 from the cash held in the Cash Collateral Account by 7 October 2016;

 

	(h)	
evidence that there is standing to the credit of the Cash Collateral Account, following the prepayment of $1,250,000  referred to in paragraph (g) above, an amount of at least $600,000 pledged in favour of the Lender;

 

5

 

	(i)	
such legal opinions as the Lender may reasonably require in respect of the matters contained in this Supplemental Agreement and each Mortgage Addendum; and

 

	(j)	
evidence that the agent referred to in clause 37.04 of the Loan Agreement (as amended and supplemented by this Supplemental Agreement) has accepted its appointment as agent for service of process under this Supplemental Agreement.

 

	5	
VARIATIONS TO LOAN AGREEMENT AND SECURITY DOCUMENTS

 

	5.1	
Specific amendments to Loan Agreement

 

In consideration of the agreement of the Lender contained in Clause 3.1 of this Supplemental Agreement, each of the Borrowers and the Guarantors hereby agrees with the Lender that upon satisfaction of the conditions referred to in Clause 4.1, the provisions of the Loan Agreement shall be varied and/or amended and/or supplemented with effect on and from the Effective Date as follows:

 

	(a)	
by inserting the following definitions in clause 2.01 thereof:

 

""Applicable Percentage" means:

 

		(a)	
at any time until 31 December 2017, not less than 75%.

 

		(b)	
from 1 January 2018 and at all times thereafter, not less than 130%.

 

"Bail-In Action" means the exercise of any Write-down and Conversion Powers.

 

"Bail-In Legislation" means:

 

		(c)	
in relation to an EEA Member Country which has implemented, or which at any time implements, Article 55 of Directive 2014/59/EU establishing a framework for the recovery and resolution of credit institutions and investment firms, the relevant implementing law or regulation as described in the EU Bail-In Legislation Schedule from time to time; and

 

		(d)	
in relation to any other state, any analogous law or regulation from time to time which requires contractual recognition of any Write-down and Conversion Powers contained in that law or regulation.

 

"Cash Sweep" means one hundred per cent (100%) of the Excess Cash Flow of the Ship and each Collateral Vessel aggregated for all Collateral Vessels and the Ship, commencing from the date of this Agreement until the time when the Total Deferred Amount is reduced to zero.

 

"Collateral Deferred Amount" means, in relation to each Collateral Loan Agreement, the "Deferred Amount" as defined in that Collateral Loan Agreement and in the plural means all of them.

 

"Collateral Loan" means, in relation to each Collateral Loan Agreement, the principal amount outstanding at any time under that Collateral Loan Agreement and in the plural means the aggregate principal amount outstanding under all the Collateral Loan Agreements.

 

"Debt Service" means, at any given time, the aggregate payment obligations (in respect of principal, interest, fees, costs or other expenses) for that period of:

 

		(i)	
in the case of the Borrowers, the Borrowers under the Loan Agreement and the other Security Documents; and

 

6

 

		(ii)	
in the case of a Collateral Owner, that Collateral Owner under the relevant Collateral Loan Agreement and the "Finance Documents" or "Security Documents" (as each such term is defined in the relevant Collateral Loan Agreement).

 

"Deferred Amount" means the amount of $1,200,000 (consisting of seven Repayment Instalments of $350,000 each (being $2,450,000 in aggregate) in relation to each of the 8th to the 14th original repayment instalments, the payment of which has been deferred in accordance with Clause 10.01, minus the prepayment of $1,250,000 to reduce the principal amount of the Facility currently outstanding from $12,850,000 to $11,600,000)  as such amount may be reduced in accordance with Clause 11.06 of the Loan Agreement.

 

"EEA Member Country" means any member state of the European Union, Iceland, Liechtenstein and Norway.

 

"EU Bail-In Legislation Schedule" means the document described as such and published by the Loan Market Association (or any successor person) from time to time.

 

"Excess Cash Flow" means the Earnings of each of either Ship and each Collateral Vessel remaining from time to time after the calculations made pursuant to Clause 10.06 (Calculation of Excess Cash Flow).

 

"Excess Cash Flow Notice" means a notice of substantially in the form set out in Schedule A (Form of Excess Cash Flow Notice).

 

"Liquidity"  means, in respect of each period during which the consolidated financial statements delivered pursuant to Clause 18.01 are delivered by the Guarantor (Euroseas), (i) cash at bank or in hand which is not subject to any Encumbrance, as shown in the applicable financial statements of the Guarantor (Euroseas), for such accounting period and determined in accordance with Applicable Accounting Principles plus (ii) cash pledged in favour of the Guarantor's (Euroseas) other financing banks for such accounting period  Provided that in the case of Liquidity relating to each Ship and the Collateral Vessels only (but not the other Fleet Vessels) only cash held with the Lender which is not subject to any Encumbrance (other than in favour of the Lender) will be taken into account for the purposes of calculating the Liquidity in respect of the Ship and the Collateral Vessels;

 

"Operating Expenses" means, in relation to each Ship or a Collateral Vessel, the aggregate costs, charges and expenses incurred by the Borrower and/or (as the case may be) a Collateral Owner or Euroseas in connection with the operation, employment, maintenance, repair, insurance of the Ship or, as the case may be, a Collateral Vessel, salaries and contributions, crew expenses, stores, spares, repairs, maintenance, general corporate and administrative expenses, lay - up and re-activation of the Ship or, as the case may be, a Collateral Vessel, and, for drydocking and/or special survey costs and expenses including a pro-rata reserve for drydocking and/or special survey costs which is to be accounted separately every quarter with any balance released (or, any excess charged to operating expenses) upon the completion of the relevant dry docking or special survey.

 

"Resolution Authority" means any body which has authority to exercise any Write-down and Conversion Powers.

 

"Total Deferred Amount" means the amount of $3,330,000 representing the aggregate of (i) Deferred Amount and (ii) the Collateral Deferred Amounts as such amounts may be reduced from time to time pursuant to the provisions of Clause 11.01 of the Loan Agreement and the respective provisions of each Collateral Loan Agreement.

 

"Write-down and Conversion Powers" means:

 

7

 

		(a)	
in relation to any Bail-In Legislation described in the EU Bail-In Legislation Schedule from time to time, the powers described as such in relation to that Bail-In Legislation in the EU Bail-In Legislation Schedule; and

 

		(b)	
in relation to any other applicable Bail-In Legislation:

 

		(i)	
any powers under that Bail-In Legislation to cancel, transfer or dilute shares issued by a person that is a bank or investment firm or other financial institution or affiliate of a bank, investment firm or other financial institution, to cancel, reduce, modify or change the form of a liability of such a person or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers; and

 

		(ii)	
any similar or analogous powers under that Bail-In Legislation.";

 

	(b)	
by deleting the definition of "Cash Collateral" and replacing it with the following:

 

"Cash Collateral" means the amount of six hundred thousand Dollars ($600,000);

 

	(c)	
by deleting the definition of "Balloon Payment" from clause 2.01 thereof and replacing it with the following:

 

""Balloon Payment"  has the meaning given to that term in clause 11.01;";

 

	(d)	
by deleting the definition of "Collateral Mortgages" in clause 2.01 thereof and replacing it with the following:

 

""Collateral Mortgages" means the second preferred Liberian mortgages in respect of the  Collateral Vessels as the same may from time to time be amended or supplemented and "Collateral Mortgage" means any one of them;";

 

	(e)	
by deleting the definition of "Mortgage" in clause 2.01 thereof and replacing it with the following:

 

""Mortgage" means the first preferred mortgage in respect of each Ship as the same may from time to time be amended or supplemented;";

 

	(f)	
by deleting the definition of "Release Date" from Clause 2.01 thereof in in its entirety;

 

	(g)	
by deleting the definition "Repayment Dates" from clause 2.01 and replacing it with the following:

 

""Repayment Date" means a date when an instalment is required to be repaid in accordance with Clause 11.01; provided that if any such day is not a Banking Day the relevant Repayment Date shall be the next succeeding day which is a Banking Day unless such next succeeding Banking Day falls in another calendar month in which event the relevant Repayment Date shall be the immediately preceding Banking Day;";

 

	(h)	
by deleting the definition of "Security Requirement" from clause 2.01 thereof and replacing it with the following:

 

""Security Requirement" means the amount in Dollars as certified by the Lender whose certificate shall, in the absence of manifest error, be conclusive and binding on the Borrowers and the Lender) which is at least equal to, the Applicable Percentage of the aggregate of (i) Facility and (ii) the Collateral Loans at any relevant time;

 

8

 

	(i)	
by deleting the definition of "Security Value" from clause 2.01 thereof and replacing it with the following:

 

""Security Value" means the amount in Dollars (as certified by the Lender whose certificate shall, in the absence of manifest error, be conclusive and binding on the Borrowers and the Lender) which is, at any relevant time, the aggregate of (a) the Market Value of the each Ship as most recently determined in accordance with Clause 22.26, (b) the Market Value of the Collateral Vessels as most recently determined in accordance with the relevant clause of the Collateral Loans and (c) the market value of any additional security for the time being provided to the Lender;";

 

	(j)	
by adding a proviso at the end of penultimate paragraph of Clause 10.01.03 after the words "Eirini Ship" as follows:

 

"Provided that if, in the case of this Clause 10.01, a Collateral Vessel is sold or becomes a Total Loss, the "relevant proportion" means an amount which results (following such prepayment) in the Security Value being equal to the percentage which existed immediately prior to such sale or Total Loss (taking also into account the sale or the insurance proceeds of the Collateral Vessel concerned);";

 

	(k)	
by adding a new Clause 10.14 therein as follows:

 

"10.14          The Borrowers shall make a mandatory prepayment of $1,250,000 from funds held in the Cash Collateral Account and pledged in favour of the Lender by 7 October 2016or on any other date selected by the Lender but without any Broken Funding Costs or additional expenses whatsoever under Clause 10.06 of the Loan Agreement or otherwise, thus reducing the principal amount of the Facility to $11,600,000;"

 

	(l)	
by deleting Clause 11.01 in its entirety and substituting the same as follows:

 

		"11.01	
Save as otherwise repaid or prepaid subject to Clauses 10.14 and 11.06, the Borrowers shall repay the outstanding Facility in six (6) quarterly instalments, the first two instalments of $350,000 each, the three subsequent instalments in an amount of $725,000 each and the final instalment in the amount of $8,725,000 (comprised by $725,000 and a balloon payment of $8,000,000 (the "Balloon Payment")). The first instalment shall be repaid on 26 March 2018, the following instalments on quarterly intervals thereafter and the sixth and final instalment shall be repaid on 26 May 2019;

 

	(m)	
by adding a Clause 11.06 as follows:

 

"11.06          Prepayment out of Excess Cash Flow

 

11.06.01 Calculation of Excess Cash Flow

 

The Excess Cash Flow shall be calculated in arrears sixty (60) days after the end of each calendar quarter, commencing sixty (60) days after the end of the quarter ending on 30 September 2016 and quarterly thereafter, (the last date of each such quarter being an "Excess Cash Flow Date"), on the basis of actual cash received after deduction of (a) the Operating Expenses, (b) voyage expenses (if any) and (c) the Debt Service in respect of the relevant three (3) month period, as such Excess Cash Flow is evidenced in the relevant Excess Cash Flow Notice which the Borrowers shall provide the Lender on each Excess Cash Flow Date.

 

9

 

11.06.02 Payment of Cash Sweep

 

Until the time when the Total Deferred Amount is reduced to zero, Cash Sweep amounts shall, on each Interest Payment Date following the end of the relevant quarter, be applied against prepayment of Total Deferred Amount on a pro rata basis between the Facility and each facility remaining outstanding under the Collateral Loan Agreements.  Any prepayments of Cash Sweep shall be without any Broken Funding Costs, fee, premium or penalty (whether by application of Clause 10 of the Loan Agreement or otherwise).

 

11.06.03 Calculation of Cash Sweep payments

 

Cash Sweep payment amounts shall be calculated five (5) Banking Days prior to the relevant Interest Payment Date for which the relevant Cash Sweep is to be applied (the "Calculation Date") with the first Calculation Date falling on 31 December 2016.  The Borrowers shall provide the Lender on or immediately prior to each Calculation Date with a certificate evidencing the Cash Sweep in the form of Schedule A.

	(n)	
by adding a new clause 24.01.32 as follows:

 

"An "Event of Default" (as such term is defined in each Collateral Loan Agreement) occurs under either Collateral Loan Agreement.";

 

	(o)	
by deleting clause 20.38 thereof its entirety and substituting the same as follow:

 

		"20.38	
to (and procure that the Guarantor (Euroseas) will) ensure that throughout the Security Period:

 

		20.38.01	
the Market Value Adjusted Net Worth shall not be less than fifteen million Dollars ($15,000,000);

 

		20.38.02	
the Leverage Ratio shall not be higher than one hundred fifteen per cent. (115%)  Provided that if the Guarantor has not agreed such a high percentage with its other financing banks, the lowest percentage required to be maintained with another financing bank will also apply in this case;

 

		20.38.02	
Liquidity shall not be less than three hundred thousand Dollars ($300,000) per Fleet Vessel."

 

	(p)	
by adding new clauses 20.39 and 20.40 as follows:

 

"20.39          No acquisition of vessels

 

Until the Total Deferred Amount is reduced to zero the Borrowers shall procure that Euroseas will not (through its Subsidiaries or otherwise) acquire any vessels and/or companies without the prior written consent of the Lender, unless if the initial acquisition amount of such vessels and/or companies is financed with newly raised equity and the Leverage Ratio of Euroseas is not more than 75% and/or if Euroseas is in compliance with its original financial covenants, namely it maintains maximum Leverage Ratio of less than 75%, Liquidity being not less than US$300,000 per Fleet Vessel and Market Value Adjusted Net Worth of not less than US$15,000,000. For the avoidance of doubt the Lender has permitted Euroseas (through its Subsidiaries) to substitute the Eleni Ship with a younger bulk carrier ship acceptable to the Lender in all respects, which will also be mortgaged to the favour of the Lender.

 

10

 

20.40          No prepayments

 

Until the Total Deferred Amount is reduced to zero, the Borrowers shall procure Euroseas will not (through its Subsidiaries or otherwise) make any voluntary prepayments to its other financing banks without the prior written consent of the Lender.";

 

	(q)	
by deleting clause 27.08 thereof in its entirety and replacing it with the following:

 

"27.8 The Borrowers shall ensure that at all times during the Security Period that the Cash Collateral is credited and maintained in the Cash Collateral Account free of Encumbrances and rights of set off other than those created by or under the Finance Documents;";

 

	(r)	
by adding a new clause 39 thereof as follows:

 

"39          "Bail-in"

 

39.01          Bail-In

 

39.02          Contractual recognition of bail-in

 

Notwithstanding any other term of any Security Document or any other agreement, arrangement or understanding between the parties to a Security Document, each Party acknowledges and accepts that any liability of any party to a Security Document under or in connection with the Security Documents may be subject to Bail-In Action by the relevant Resolution Authority and acknowledges and accepts to be bound by the effect of:

 

		(c)	
any Bail-In Action in relation to any such liability, including (without limitation):

 

		(i)	
a reduction, in full or in part, in the principal amount, or outstanding amount due (including any accrued but unpaid interest) in respect of any such liability;

 

		(ii)	
a conversion of all, or part of, any such liability into shares or other instruments of ownership that may be issued to, or conferred on, it; and

 

		(iii)	
a cancellation of any such liability; and

 

		(d)	
a variation of any term of any Security Document to the extent necessary to give effect to any Bail-In Action in relation to any such liability."

 

	(s)	
by construing all references therein to "this Agreement" where the context admits as being references to "this Agreement as the same is amended and supplemented by this Supplemental Agreement and as the same may from time to time be further supplemented and/or amended";

 

	(t)	
by construing references to each of the Security Documents as being references to each such document as it is from time to time supplemented and/or amended;

 

	5.2	
Specific amendments to the Guarantee

 

In consideration of the agreement of the Lender contained in Clause 3.1 of this Supplemental Agreement, Euroseas hereby agrees with the Lender that upon satisfaction of the conditions referred to in Clause 4.1, the provisions of the Euroseas Guarantee shall be varied and/or amended and/or supplemented with effect on and from the Effective Date as follows:

 

	(a)	
by adding a new proviso after 9.01.13.3 as follows:

 

11

 

"Provided that even when the above restrictions do not apply the Guarantor will not

 

		(i)	
declare, make or pay dividend, charge, fee or other distribution (or interest on any unpaid dividend, charge, fee or other distribution) (whether in cash or in kind) on or in respect of its share capital ;

 

		(ii)	
repay or distribute any dividend or share premium reserve; or

 

		(iii)	
redeem, repurchase, defease, retire or repay any of its share capital or resolve to do so,

 

But for the avoidance of doubt these restrictions apply to the Guarantor common shares only.";

 

	(b)	
by deleting clause 9.01.31.2 thereof in its entirety and replacing the same with the following:

 

"9.01.31.2  the Leverage Ratio will not be higher than one hundred fifteen per cent. (115%)  Provided that if the Guarantor has not agreed such a high percentage with its other financing banks, the lowest percentage required to be maintained with another financing bank will also apply in this case;

 

	(c)	
by deleting clause 9.01.31.3 and replacing the same with the following:

 

""9.01.31.3" Liquidity shall not be less than three hundred thousand Dollars ($300,000 per Fleet Vessel);";

 

	(d)	
by adding a new clause 9.05 to the Euroseas Guarantee as follows:

 

"Until the Total Deferred Amount is reduced to zero the Guarantor (Euroseas) will not (through its Subsidiaries or otherwise) acquire any vessels and/or companies without the prior written consent of the Lender, unless if the initial acquisition amount of such vessels and/or companies is financed with newly raised equity and the Leverage Ratio of the Guarantor (Euroseas) is not more than 75% and/or if the Guarantor (Euroseas) is in compliance with its original financial covenants, namely it maintains maximum Leverage Ratio of less than 75%, Liquidity being not less than US$300,000 per Fleet Vessel and Market Value Adjusted Net Worth of not less than US$15,000,000. For the avoidance of doubt the Lender has permitted the Guarantor (Euroseas) (through its Subsidiaries) to substitute the Eleni Ship with a younger bulk carrier ship acceptable to the Lender in all respects, which will also be mortgaged to the favour of the Lender";

 

	(e)	
by adding a new clause  9.05 to the Euroseas Guarantee as follows:

 

"until the Total Deferred Amount is reduced to zero, the Guarantor (Euroseas) will not (through its Subsidiaries or otherwise) make any voluntary prepayments to its other financing banks without the prior written consent of the Lender".; and

 

	(f)	
by construing all references therein to "this Guarantee" where the context admits as being references to "this Guarantee as the same is amended and supplemented by this Supplemental Agreement and as the same may from time to time be further supplemented and/or amended".

 

	5.3	
Amendments to Security Documents

 

12

 

With effect on and from the Effective Date each of the Security Documents (other than the Loan Agreement) shall be, and shall be deemed by this Supplemental Agreement to have been, amended as follows:

 

	(a)	
by construing all references in the Loan Agreement and in the Security Documents to a "Mortgage" as references to that Mortgage as amended and supplemented by the relevant Mortgage Addendum;

 

	(b)	
the definition of, and references throughout each of the Security Documents (other than a Mortgage which shall be amended and supplemented by the relevant Mortgage Addendum) to, the Loan Agreement and any of the other Security Documents shall be construed as if the same referred to the Loan Agreement and those Security Documents as amended and supplemented by this Supplemental Agreement;

 

	(c)	
the definition of, and references throughout each of the Security Documents to, the Guarantee executed by Euroseas shall be construed as if the same referred to the Guarantee as amended and supplemented by this Supplemental Agreement; and

 

	(d)	
by construing references throughout each of the Security Documents to "this Agreement", "this Deed", "hereunder" and other like expressions as if the same referred to such Security Documents as amended and supplemented by this Supplemental Agreement.

 

	5.4	
Security Documents to remain in full force and effect

 

The Security Documents shall remain in full force and effect and the security constituted by any Security Document shall continue and remain valid and enforceable as amended and supplemented by:

 

	(a)	
the amendments to the Security Documents contained or referred to in Clauses 5.1, 5.2, 5.3 and each Mortgage Addendum; and

 

	(b)	
such further or consequential modifications as may be necessary to make the same consistent with, and to give full effect to, the terms of this Supplemental Agreement.

 

	6	
RELEASE OF XINGANG SHIPPING LTD

 

	6.1	
Release of Security Interests

 

The Lender releases all Encumbrances created in its favour by Xingang under the Xingang Guarantee and Security Documents to which Xingang is a party.

 

	6.2	
Release of obligations

 

The Lender releases Xingang from all its obligations under the Xingang Guarantee and the other Security Documents to which Xingang is a party.

 

	6.3	
Existing Borrowers' and Guarantors' confirmation

 

Each Borrower and each Guarantor (other than Xingang) confirms that all of its obligations under or pursuant to each of the Security Documents to which it is a party remain in full force and effect, despite the release of Xingang from its obligations under the Xingang Guarantee and the other Security Documents to which it is a party.

 

	7	
COSTS AND EXPENSES

 

	7.1	
Costs and expenses

 

13

 

The provisions of clause 28 ( Expenses) of the Loan Agreement shall apply to this Supplemental Agreement as if they were expressly incorporated in this Supplemental Agreement with any necessary amendments.

 

	8	
COMMUNICATIONS

 

	8.1	
General

 

The provisions of clause 39 (notices) of the Loan Agreement, as amended and supplemented by this Supplemental Agreement, shall apply to this Supplemental Agreement as if they were expressly incorporated in this Supplemental Agreement with any necessary modifications.

 

	9	
SUPPLEMENTAL

 

	9.1	
Counterparts

 

This Supplemental Agreement may be executed in any number of counterparts.

 

	9.2	
Third Party rights

 

A person who is not a party to this Supplemental Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce or to enjoy the benefit of any term of this Second Supplemental Agreement.

 

	10	
LAW AND JURISDICTION

 

	10.1	
Governing law

 

This Supplemental Agreement and any non-contractual obligations arising out of or in connection with it shall be governed by and construed in accordance with English law.

 

	10.2	
Incorporation of the Loan Agreement provisions

 

The provisions of Clause 41 (Law and Jurisdiction) of the Loan Agreement, as amended and supplemented by this Supplemental Agreement, shall apply to this Supplemental Agreement as if they were expressly incorporated in this Supplemental Agreement with any necessary medications.

 

This Supplemental Agreement has been duly executed by or on behalf of the parties and has, on the date stated at the beginning of this Deed, been delivered as a Deed.

 

14

SCHEDULE A:

 EXCESS CASH FLOW NOTICE

 

To:

From:

Dated:

Dear Sirs

 

Loan Agreement dated 25 June 2014 as amended and supplemented (the "Agreement")

 

We refer to the Agreement.  This is an Excess Cash Flow Notice.  Terms defined in the Agreement have the same meaning when used in this Excess Cash Flow Notice unless given a different meaning in this Excess Cash Flow Notice.

 

We confirm that the Excess Cash Flow is            $     based on the following calculation:

Gross Earnings:             ($         )

less voyage expenses:            ] ($[         ])

less Operating Expenses: [         ] ($[         ])

less Debt Service: [                ] ($[     ])

total Excess Cash Flow: [          ] ($[   ])

15

EXECUTION PAGE

 

 

BORROWERS

 

	
SIGNED by

	
 

	
)

	
 

	
for and on behalf of

	
 

	
)

	
 

	
EIRINI SHIPPING LTD

	
 

	
)

	
 

	
in the presence of:

	
 

	
)

	
 

	
SIGNED by

	
 

	
)

	
 

	
for and on behalf of

	
 

	
)

	
 

	
ELENI SHIPPING LIMITED

	
 

	
)

	
 

	
in the presence of:

	
 

	
)

	
 

 

GUARANTORS

 

	
SIGNED by

	
 

	
)

	
 

	
for and on behalf of

	
 

	
)

	
 

	
XINGANG SHIPPING LTD

	
 

	
)

	
 

	
in the presence of:

	
 

	
)

	
 

	
SIGNED by

	
 

	
)

	
 

	
for and on behalf of

	
 

	
)

	
 

	
JOANNA MARITIME LTD

	
 

	
)

	
 

	
in the presence of:

	
 

	
)

	
 

	
SIGNED by

	
 

	
)

	
 

	
for and on behalf of

	
 

	
)

	
 

	
PANTELIS SHIPPING CORP.

	
 

	
)

	
 

	
in the presence of:

	
 

	
)

	
 

	
SIGNED by

	
 

	
)

	
 

	
for and on behalf of

	
 

	
)

	
 

	
EUROSEAS LTD

	
 

	
)

	
 

	
in the presence of:

	
 

	
)

	
 

LENDER

 

	
SIGNED by

	
 

	
)

	
 

	
for and on behalf of

	
 

	
)

	
 

	
HSBC BANK PLC

	
 

	
)

	
 

	
in the presence of:

	
 

	
)

	
 

16

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