UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 20-F
(Mark
One)
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o
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF
THE SECURITIES EXCHANGE ACT OF 1934
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OR
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x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For
the fiscal year ended December 31, 2007
OR
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o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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| For the transition period from to |
OR
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o SHELL
COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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Date
of event requiring this shell company report:
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Commission file number:
1-33373
CAPITAL
PRODUCT PARTNERS L.P.
(Exact
name of Registrant as specified in its charter)
Republic
of The Marshall Islands
(Jurisdiction
of incorporation or organization)
3
Iassonos Street, Piraeus, 18537 Greece
+30
210 458 4950
(Address
and telephone number of principal executive offices)
Securities
registered or to be registered pursuant to Section 12(b) of the
Act:
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Title
of each class
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Name
of each exchange on which registered
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Common
units representing limited partnership interests
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Nasdaq
Global Market
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Securities
registered or to be registered pursuant to Section 12(g) of the Act:
None
Securities
for which there is a reporting obligation pursuant to Section 15(d) of
the Act: None
Indicate
the number of outstanding shares of each of the issuer’s classes of capital or
common stock as of the close of the period covered by the annual
report.
13,512,500
Common Units
8,805,522
Subordinated Units
455,470
General Partner Units
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
YES o
NO x
If this
report is an annual or transition report, indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934.
YES o
NO x
Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES x
NO o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definitions of “accelerated
filer” and “large accelerated filer” in Rule 12b-2 of the Exchange
Act. (Check one):
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Large accelerated filer o
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Accelerated
filer o
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Non-accelerated
filer x
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Indicate
by check mark which financial statements item the registrant has elected to
follow.
ITEM 17 o
ITEM 18 x
If this
is an annual report, indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act).
YES o
NO x
CAPITAL
PRODUCT PARTNERS L.P.
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This
annual report on Form 20-F (the “Annual Report”) should be read in conjunction
with the audited consolidated and predecessor combined financial statements and
accompanying notes included herein.
Statements
included in this Annual Report which are not historical facts (including
statements concerning plans and objectives of management for future operations
or economic performance, or assumptions related thereto) are forward-looking
statements. In addition, we and our representatives may from time to time make
other oral or written statements which are also forward-looking statements. Such
statements include, in particular, statements about our plans, strategies,
business prospects, changes and trends in our business, financial condition and
the markets in which we operate, and involve risks and uncertainties. In some
cases, you can identify the forward-looking statements by the use of words such
as “may,” “could,” “should,” “would,” “expect,” “plan,” “anticipate,” “intend,”
“forecast,” “believe,” “estimate,” “predict,” “propose,” “potential,” “continue”
or the negative of these terms or other comparable terminology. Forward-looking
statements appear in a number of places and include statements with respect to,
among other things:
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anticipated
future acquisition of vessels from Capital Maritime, and in particular the
expected acquisition of the M/T Aristofanis in the second quarter of
2008;
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our
anticipated growth strategies;
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future
charter hire rates and vessel
values;
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our
ability to make cash distributions on the
units;
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our
future financial condition or results of operations and our future
revenues and expenses, including revenues from profit sharing
arrangements;
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the
repayment of debt and settling of interest rate
swaps;
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our
ability to access debt and equity
markets;
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future
refined product and crude oil prices and
production;
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planned
capital expenditures and availability of capital resources to fund capital
expenditures;
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future
supply of, and demand for, refined products and crude
oil;
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increases
in domestic oil consumption;
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changes
in interest rates;
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our
ability to maintain long-term relationships with major refined product
importers and exporters, major crude oil companies, and major commodity
traders;
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our
ability to leverage to our advantage Capital Maritime & Trading
Corp.’s (“Capital Maritime”) relationships and reputation in the shipping
industry;
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our
continued ability to enter into long-term, fixed-rate time charters with
our tanker charterers;
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obtaining
tanker projects that we or Capital Maritime bid
on;
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our
ability to maximize the use of our vessels, including the re-deployment or
disposition of vessels no longer under long-term time
charter;
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timely
purchases and deliveries of newbuilding
vessels;
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our
ability to compete successfully for future chartering and newbuilding
opportunities;
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the
expected cost of, and our ability to comply with, governmental regulations
and maritime self-regulatory organization standards, as well as standard
regulations imposed by our charterers applicable to our
business;
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our
anticipated general and administrative expenses and our expenses under the
management agreement and the administrative services agreement with
Capital Ship Management Corp., a subsidiary of Capital Maritime (“Capital
Ship Management”), and for reimbursement for fees and costs of our general
partner;
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the
expected impact of heightened environmental and quality concerns of
insurance underwriters, regulators and
charterers;
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the
anticipated taxation of our partnership and distributions to our
unitholders;
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estimated
future maintenance and replacement capital
expenditures;
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expected
demand in the refined product shipping sector in general and the demand
for our medium range vessels in
particular;
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our
ability to retain key employees;
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customers’
increasing emphasis on environmental and safety
concerns;
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future
sales of our common units in the public market;
and
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our
business strategy and other plans and objectives for future
operations.
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These
and other forward-looking statements are made based upon management’s current
plans, expectations, estimates, assumptions and beliefs concerning future events
impacting us and therefore involve a number of risks and uncertainties,
including those risks discussed in “Risk Factors.” The risks, uncertainties and
assumptions involve known and unknown risks and are inherently subject to
significant uncertainties and contingencies, many of which are beyond our
control. We caution that forward-looking statements are not guarantees and that
actual results could differ materially from those expressed or implied in the
forward-looking statements.
We
undertake no obligation to update any forward-looking statement or statements to
reflect events or circumstances after the date on which such statement is made
or to reflect the occurrence of unanticipated events. New factors emerge from
time to time, and it is not possible for us to predict all of these factors.
Further, we cannot assess the impact of each such factor on our business or the
extent to which any factor, or combination of factors, may cause actual results
to be materially different from those contained in any forward- looking
statement. You should carefully review and consider the various disclosures
included in this Annual Report and in our other filings made with the SEC that
attempt to advise interested parties of the risks and factors that may affect
our business, prospects and results of operations.
Item 1. Identity of Directors, Senior
Management and Advisors.
Not Applicable.
Item 2. Offer Statistics and Expected
Timetable.
Not Applicable.
Item 3. Key Information.
Selected
Financial Data
We have
derived the following selected historical financial and other data for the three
years ending December 31, 2007 from our audited consolidated and
predecessor combined financial statements for the years ended December 31, 2007,
2006, 2005 respectively, appearing elsewhere in this Annual Report. The historical financial
and other data presented for the period from August 27, 2003 (inception) to
December 31, 2004 have been derived from audited financial statements not
required to be included in this Annual Report and are provided for comparison
purposes. August 27, 2003 refers to the incorporation date of the vessel-owning
subsidiary of the M/T Aktoras and is the earliest incorporation date of any of
our vessel-owning subsidiaries.
Consolidated Financial Statements.
Financial statements presented reflecting our balance sheet as of
December 31, 2007 and results of operations and cash flows from April 4, 2007
(completion of our initial public offering) to December 31, 2007 are referred to
herein as our “consolidated financial statements” and include operations of the
five vessels which had been delivered as of December 31, 2006 and the M/T
Attikos and operations of the remaining seven vessels in our fleet which were
delivered between January and September 2007 as of their respective
delivery dates.
Predecessor Combined Financial
Statements. Financial statements presented reflecting the historical
carrying costs of certain vessel-owning companies under the common control of
Capital Maritime which were contributed to us by Capital Maritime at the time of
our initial public offering or which were purchased by us from Capital Maritime
are collectively referred to herein as our “predecessor combined financial
statements”. These include the balance sheet as of December 31, 2006 and the
results of operations and cash flows of the eight vessels that comprised our
fleet at the time of our initial public offering (the “initial vessels”) from
their respective delivery dates in 2006 to April 3, 2007, the date they were
transferred to us, and of the M/T Attikos from January 20, 2005, the date it was
delivered to Capital Maritime, to September 23, 2007, the date it was acquired
by us. Construction
costs incurred by Capital Maritime in connection with the M/T Attikos during the
period from August 27, 2003 (inception) to December 31, 2004 are included in the
historical financial data for the period presented below.
Our
historical results are not necessarily indicative of the results that may be
expected in the future. Specifically, our audited consolidated and predecessor
combined financial statements are not comparable, as our initial public offering
and certain other transactions that occurred during 2007, including the delivery
of four newbuildings, the acquisition of the M/T Attikos, the agreement we
entered into with Capital Ship Management for the provision of management and
administrative services to our fleet for a fixed fee and the new financing
arrangements we entered into, have affected our results of operations.
Furthermore, for the year ended December 31, 2006, only six of the vessels in
our current fleet had been delivered to Capital Maritime. Five of these vessels
were delivered between April and November 2006 and were in operation for only a
portion of the year. The M/T Attikos was delivered on January 20, 2005 and is
the only vessel in our fleet which had been delivered to Capital Maritime during
the year ended December 31, 2005. Consequently, the following table should be
read together with, and is qualified in its entirety by reference to, the
historical audited consolidated and predecessor combined financial statements
and the accompanying notes included elsewhere in this Annual Report. The table
should also be read together with “Item 5: —Management’s Discussion and Analysis
of Financial Condition and Results of Operations”.
Our consolidated financial statements
are prepared in accordance with United States generally accepted accounting
principles. All numbers are in thousands of U.S. Dollars, except numbers of
units and earnings per unit.
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Period
from
Aug. 27, 2003 (inception) to Dec. 31, 2004* |
Year
Ended
Dec. 31, 2005*
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Year
Ended
Dec. 31, 2006*
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Year
Ended
Dec. 31, 2007
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Income
Statement Data:
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Revenues
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$ |
-
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$ |
4,377
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$ | 19,913 | $ | 72,543 | ||||||||
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Expenses:
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Voyage
expenses(1)
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-
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520
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373 | 770 | ||||||||||||
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Vessel
operating expenses—related party
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-
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216
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890 | 12,283 | ||||||||||||
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Vessel
operating expenses(2)
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40
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1,932
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4,043 | 3,196 | ||||||||||||
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General
and administrative expenses
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-
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-
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- | 1,477 | ||||||||||||
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Depreciation
and amortization
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-
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360
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3,370 | 13,109 | ||||||||||||
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Total
operating expenses
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40
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3,028
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8,676 | 30,835 | ||||||||||||
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Operating
income (expense)
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(40
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1,349
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11,237 | 41,708 | |||||||||||
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Interest
expense and finance costs
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-
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(389
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(4,584 |
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(10,809 |
)
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Loss
on interest rate swap agreement
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-
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- | - | (3,763 |
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Interest
income
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1 | 13 | 710 | ||||||||||||
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Foreign
currency gain/(loss), net
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9 | (56 |
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(19 |
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Net
income (loss)
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(40 |
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$ | 970 | $ | 6,610 | $ | 27,827 | ||||||||
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Less:
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Net
income attributable to predecessor operations:
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Initial
vessels’ net income from January 1, 2007 to April 3, 2007
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- | - | - | $ | (5,328 |
)
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Attikos’
net income from January 1, 2007 to September 23,
2007
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- | - | - | (928 |
)
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Partnership’s
net income for the period from April 4 to December 31,
2007
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- | - | - | 21,571 | ||||||||||||
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General
partner’s interest in our net income
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- | - | - | 431 | ||||||||||||
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Limited
partners’ interest in our net income
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- | - | - | 21,140 | ||||||||||||
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Net
income per limited partner unit, basic and diluted:
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Common units
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- | - | - | 1.11 | ||||||||||||
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Subordinated
units
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- | - | - | 0.70 | ||||||||||||
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Total
units
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- | - | - | 0.95 | ||||||||||||
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Weighted-average
units outstanding (basic and diluted):
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Common units
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- | - | - | 13,512,500 | ||||||||||||
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Subordinated units
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- | - | - | 8,805,522 | ||||||||||||
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Total units
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- | - | - | 22,318,022 | ||||||||||||
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Balance Sheet Data (at
end of period):
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Vessels,
net and under construction
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$
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25,152 | $ | 49,351 | $ | 208,028 | $ | 429,171 | ||||||||
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Total
assets
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25,165
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50,553 | 216,124 | 454,914 | ||||||||||||
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Total
partners’/stockholders’ equity
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19,658 | 24,840 | 49,397 | 161,939 | ||||||||||||
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Number
of shares/units
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3,700 | 3,700 | 3,700 | 22,773,492 | ||||||||||||
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Common
units
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- | - | - | 13,512,500 | ||||||||||||
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Subordinated units
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- | - | - | 8,805,522 | ||||||||||||
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General
Partner units
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- | - | - | 455,470 | ||||||||||||
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Dividends
declared per unit
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- | - | - | $ | 0.75 | |||||||||||
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Period
from
Aug. 27, 2003 (inception) to Dec. 31, 2004* |
Year
Ended
Dec. 31, 2005*
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Year
Ended
Dec. 31, 2006*
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Year
Ended
Dec. 31, 2007
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Cash
Flow Data:
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Net
cash provided by operating activities
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29 | 1,468 | 9,497 | 50,582 | ||||||||||||
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Net
cash used in investing activities
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(25,152 |
)
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(24,559 |
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(162,047
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)
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(246,938 |
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Net
cash provided by financing activities
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25,134 | 23,087 | 153,782 | 215,034 |
___________
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(1)
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Vessel
voyage expenses primarily consist of commissions, port expenses, canal
dues and bunkers. Since April 4, 2007 our only voyage expenses have been
commissions.
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(2)
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Since
April 4, 2007 our vessel operating expenses have consisted primarily of
management fees payable to our manager, who provides commercial and
technical services such as crewing, repairs and maintenance, insurance,
stores, spares and lubricants, as well as administrative services pursuant
to management and administrative services agreements. Vessel operating
expenses presented in the predecessor combined financial statements
consist of all expenses relating to the operation of the vessels including
crewing, repairs and maintenance, insurances, stores and lubricants,
management fees and miscellaneous
expenses.
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*
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The
amount of historical earnings per unit for the period from August 27, 2003
(inception) to December 31, 2004, for the years ended December 31,
2005 and 2006 and for the period from January 1, 2007 to April 3, 2007,
giving retroactive impact to the number of common and subordinated units
(and the 2% general partner interest) that were issued upon the completion
of our initial public offering on April 3, 2007 is not presented
in our selected historical financial data. We do not believe that a
presentation of earnings per unit for these periods would not be
meaningful to our investors as the vessels comprising our initial fleet
and the M/T Attikos were under construction during the period from August
27, 2003 (inception) to December 31, 2004 and during the year ended
December 31, 2005 the vessel-owning subsidiaries included herein,
with the exception of the one which owns the M/T Attikos which was
delivered in January 2005 to Capital Maritime, were in the start-up phase.
In addition, during the year ended December 31, 2006 only six of the 13
vessels we owned as of December 31, 2007 had been delivered to us and only
the M/T Attikos was in operation for the full year ended December 31,
2006, while the other five vessels were in operation for only part of the
period (the vessels were delivered in April, May, July, August and
November 2006, respectively) and a portion of the revenues generated
during 2006 was derived from charters with different terms and conditions
from those in the charters in place during 2007. Earnings per unit for
these periods are not reflective of our anticipated earnings and
operations going forward.
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Please
note that our audited consolidated and predecessor combined financial
statements for the years ended December 31, 2007, 2006 and 2005 and for
the period from August 27, 2003 (inception) to December 31, 2004 have been
retroactively adjusted to reflect the results of operations and initial
construction costs of the M/T Attikos, which was delivered in January 2005
to an entity under common control and acquired by us in September
2007.
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Risk
Factors
Some of
the following risks relate principally to the countries and the industry in
which we operate and the nature of our business in general. Although many of our
business risks are comparable to those of a corporation engaged in a similar
business would face, limited partner interests are inherently different from the
capital stock of a corporation. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial also may impair our business
operations. In particular, if any of the following
risks actually occurs, our business, financial condition or operating results
could be materially adversely affected. In that case, we might not be able to
pay distributions on our common units, the trading price of our common units
could decline, and you could lose all or part of your
investment.
Risks
Inherent in Our Business
We
may not have sufficient cash from operations to enable us to pay the quarterly
distribution on our common units following the establishment of cash reserves
and payment of fees and expenses.
We may
not have sufficient cash available each quarter to pay the declared quarterly
distribution per common unit following establishment of cash reserves and
payment of fees and expenses. The amount of cash we can distribute on our common
units principally depends upon the amount of cash we generate from our
operations, which may fluctuate based on numerous factors generally described
under this “Risk Factors” heading, including, among other things:
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the
rates we obtain from our charters;
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the
level of additional revenues we generate from our profit-sharing
arrangements, if any;
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the
level of our operating costs, such as the cost of crews and insurance,
following the expiration of our management agreement pursuant to which we
pay a fixed daily fee for an initial term of approximately five years from
the time we take delivery of each vessel, which includes the expenses for
its next scheduled special or intermediate survey, as applicable, and
related drydocking;
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the
number of unscheduled off-hire days for our fleet and the timing of, and
number of days required for, scheduled drydocking of our
vessels;
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delays
in the delivery of newbuildings and the beginning of payments under
charters relating to those vessels;
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demand
for seaborne transportation of refined oil products and crude
oil;
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supply
of product and crude oil tankers and specifically the number of
newbuildings entering the world tanker fleet each
year;
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prevailing
global and regional economic and political conditions;
and
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the
effect of governmental regulations and maritime self-regulatory
organization standards on the conduct of our
business.
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The
actual amount of cash we will have available for distribution also will depend
on other factors, some of which are beyond our control, such as:
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the
level of capital expenditures we make, including for maintaining vessels,
building new vessels, acquiring existing vessels and complying with
regulations;
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our
debt service requirements and restrictions on distributions contained in
our debt instruments;
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interest
rate fluctuations;
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the
cost of acquisitions, if any;
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fluctuations
in our working capital needs;
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our
ability to make working capital borrowings, including to pay distributions
to unitholders; and
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the
amount of any cash reserves, including reserves for future maintenance and
replacement capital expenditures, working capital and other matters,
established by our board of directors in its
discretion.
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The
amount of cash we generate from our operations may differ materially from our
profit or loss for the period, which will be affected by non-cash items. As a
result of this and the other factors mentioned above, we may make cash
distributions during periods when we record losses and may not make cash
distributions during periods when we record net income.
The
shipping industry is cyclical, which may lead to lower charter hire rates and
lower vessel values, resulting in decreased distributions to our common
unitholders.
The
shipping industry is cyclical, which may result in volatility in charter hire
rates and vessel values. We may not be able to successfully charter our vessels
in the future or renew existing charters at the same or similar rates. If we are
required to enter into a charter when charter hire rates are low, our results of
operations and our ability to make cash distributions to our common unitholders
could be adversely affected.
In
addition, the market value and charter hire rates of product and crude oil
tankers can fluctuate substantially over time due to a number of different
factors, including:
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prevailing
economic conditions in the market in which the vessel
trades;
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regulatory
change;
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lower
levels of demand for the seaborne transportation of refined products and
crude oil;
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increases
in the supply of vessel capacity;
and
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the
cost of retrofitting or modifying existing ships, as a result of
technological advances in vessel design or equipment, changes in
applicable environmental or other regulations or standards, or
otherwise.
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We have
entered into an agreement with Capital Maritime to purchase, among others, its
interests in the subsidiaries that own two newbuildings, expected to be
delivered during 2008, at pre-determined purchase prices. We will purchase from
Capital Maritime its interests in each subsidiary that owns the newbuildings
upon delivery of the vessel to the applicable subsidiary. Even if the market
value of similar vessels declines between the time we entered into the agreement
and the time the newbuildings are actually delivered, we will still be required
to purchase the interests in those subsidiaries at the prices specified in the
agreement with Capital Maritime. As a result, we may pay substantially more for
those vessels than we would pay if we were to purchase those vessels from
unaffiliated third parties. For more information on our agreement to purchase
the two newbuildings from Capital Maritime, please read “Item 4: Management’s
Discussion and Analysis of Financial Condition and Results of
Operations—Liquidity and Capital Resources—Purchase of Vessels Following the
Offering” and “Item 7B: Related Party Transactions—Share Purchase
Agreement.”
If we
sell a vessel at a time when the market value of our vessels has fallen, the
sale may be at less than the vessel’s carrying amount, resulting in a loss. A
decline in the market value of our vessels could also lead to a default under
any prospective credit facility to which we become a party, affect our ability
to refinance our existing credit facilities and/or limit our ability to obtain
additional financing.
We
have a limited operating history, which makes it more difficult to accurately
forecast our future results and may make it difficult for investors to evaluate
our business and our future prospects, both of which will increase the risk of
your investment.
We were
formed as an independent limited partnership on January 16, 2007. Only five of
the vessels in our current fleet had been delivered to the relevant
vessel-owning subsidiaries as of December 31, 2006 and were in operation
during a portion of the period then ended. Moreover, as these vessels were
operated as part of Capital Maritime’s fleet during the reporting period, the
vessels were operated in a different manner than they are currently operated,
and thus their historical results may not be indicative of their future results.
Because of our limited operating history, we lack extended historical financial
and operational data, making it more difficult for an investor to evaluate our
business, forecast our future revenues and other operating results, and assess
the merits and risks of an investment in our common units. This lack of
information will increase the risk of your investment. Moreover, you should
consider and evaluate our prospects in light of the risks and uncertainties
frequently encountered by companies with a limited operating history. These
risks and difficulties include challenges in accurate financial planning as a
result of limited historical data and the uncertainties resulting from having
had a relatively limited time period in which to implement and evaluate our
business strategies as compared to older companies with longer operating
histories. Our failure to address these risks and difficulties successfully
could materially harm our business and operating results.
We
must make substantial capital expenditures to maintain the operating capacity of
our fleet, which will reduce our cash available for distribution. In addition,
each quarter our board of directors is required to deduct estimated maintenance
and replacement capital expenditures from operating surplus, which may result in
less cash available to unitholders than if actual maintenance and replacement
capital expenditures were deducted.
We must
make substantial capital expenditures to maintain, over the long-term, the
operating capacity of our fleet. These maintenance and replacement capital
expenditures include capital expenditures associated with drydocking a vessel,
modifying an existing vessel or acquiring a new vessel to the extent these
expenditures are incurred to maintain the operating capacity of our fleet. These
expenditures could increase as a result of changes in:
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the
cost of our labor and materials;
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the
cost and replacement life of suitable replacement
vessels;
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customer/market
requirements;
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increases
in the size of our fleet;
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the
age of the vessels in our fleet;
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charter
rates in the market; and
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governmental
regulations, industry and maritime self-regulatory organization standards
relating to safety, security or the
environment.
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Our
significant maintenance and replacement capital expenditures will reduce the
amount of cash we have available for distribution to our unitholders. Any costs
associated with scheduled drydocking are included in a fixed daily fee of $5,500
per time chartered vessel ($8,500 for the M/T Amore Mio II), that we pay Capital
Ship Management under a management agreement, for an initial term of
approximately five years from the time we take delivery of each vessel, which
includes the expenses for its next scheduled special or intermediate survey, as
applicable, and related drydocking. In the event our management agreement is not
renewed, we will separately deduct estimated capital expenditures associated
with drydocking from our operating surplus in addition to estimated replacement
capital expenditures.
Our
partnership agreement requires our board of directors to deduct estimated,
rather than actual, maintenance and replacement capital expenditures from
operating surplus each quarter in an effort to reduce fluctuations in operating
surplus. The amount of estimated capital expenditures deducted from operating
surplus is subject to review and change by the conflicts committee at least once
a year. In years when estimated capital expenditures are higher than actual
capital expenditures, the amount of cash available for distribution to
unitholders will be lower than if actual capital expenditures were deducted from
operating surplus. If our board of directors underestimates the appropriate
level of estimated maintenance and replacement capital expenditures, we may have
less cash available for distribution in future periods when actual capital
expenditures exceed our previous estimates.
If
Capital Maritime or any third party seller we may contract with in the future
for the purchase of newbuildings fails to make construction payments for such
vessels, the shipyard may rescind the purchase contract and we may lose access
to such vessels or need to finance such vessels before they begin operating,
which could harm our business and our ability to make cash
distributions.
To date,
all the newbuildings we have acquired and agreed to acquire have been contracted
directly by Capital Maritime and all costs for the construction and delivery of
such vessels have been, or are being, incurred by Capital Maritime. Since our
initial public offering in April 2007 we have taken delivery of five
newbuildings from Capital Maritime, with an additional two expected for delivery
in 2008. In the future, we may enter into similar arrangements with Capital
Maritime or other third parties for the acquisition of newbuildings. If Capital
Maritime or any third party sellers we contract with in the future fail to make
construction payments for the newbuildings after receiving notice by the
shipbuilder following nonpayment on any installment due date, the shipbuilder
could rescind the newbuilding purchase contract. As a result of such default,
Capital Maritime or the third party seller could lose all or part of the
installment payments made prior to such default, and we could either lose access
to the remaining newbuildings or any future vessels we contract to acquire or
may need to finance such vessels before they begin operating and generating
voyage revenues, which could harm our business and reduce our ability to make
cash distributions.
If we finance the
purchase of any additional vessels we acquire in the future or the purchase of
the contracted newbuildings to be delivered in 2008 through cash from
operations or by issuing debt or equity securities, our ability to make cash
distributions may be diminished, our financial leverage could increase or our
unitholders could be diluted. In addition, if we expand the size of our fleet by
directly contracting newbuildings in the future, we generally will be required
to make significant installment payments for such acquisitions prior to their
delivery and generation of revenue.
The
actual cost of a new product or crude oil tanker varies significantly depending
on the market price charged by shipyards, the size and specifications of the
vessel, governmental regulations and maritime self-regulatory organization
standards. The total delivered cost of a vessel will be higher and include
financing, construction supervision, vessel start-up and other
costs.
To date,
all the newbuildings we have acquired and agreed to acquire were contracted
directly by Capital Maritime and all costs for the construction and delivery of
these vessels have been, or are being, incurred by Capital Maritime. As of March
31, 2008, we had taken delivery of five newbuildings and purchased two
additional vessels from Capital Maritime. We have financed the purchase of these
vessels, and intend to finance the purchase of the remaining newbuildings to be
delivered in 2008 and any other vessel we contract to acquire from Capital
Maritime, either with debt, or partly with debt and partly by issuing additional
equity securities. If we issue additional common units or other equity
securities your ownership interest in us will be diluted. Please read “—We may
issue additional equity securities without your approval, which would dilute
your ownership interest” below.
If we
elect to expand our fleet in the future by entering into contracts for
newbuildings directly with shipyards, we generally will be required to make
installment payments prior to their delivery. We typically must pay 5-25% of the
purchase price of a vessel upon signing the purchase contract, even though
delivery of the completed vessel will not occur until much later (approximately
18-36 months later for current orders), which could reduce cash available
for distributions to unitholders. If we finance these acquisition costs by
issuing debt or equity securities, we will increase the aggregate amount of
interest payments or quarterly distributions we must make prior to generating
cash from the operation of the newbuilding.
To fund
the remaining portion of the acquisition price of the two newbuildings expected
to be delivered in 2008 or the acquisition price of any additional vessels we
may contract to purchase from Capital Maritime or other third parties and other
related capital expenditures, we will be required to use cash from operations or
incur borrowings or raise capital through the sale of debt or additional equity
securities. Use of cash from operations will reduce cash available for
distributions to unitholders. Even if we are successful in obtaining necessary
funds, the terms of such financings could limit our ability to pay cash
distributions to unitholders. Incurring additional debt may significantly
increase our interest expense and financial leverage, and issuing additional
equity securities may result in significant unitholder dilution and would
increase the aggregate amount of cash required to meet our quarterly
distributions to unitholders, which could have a material adverse effect on our
ability to make cash distributions.
Our
ability to obtain bank financing and/or to access the capital markets for future
equity offerings may be limited by prevailing economic conditions. If we are
unable to obtain funding or access the capital markets, we may be unable to
complete any future purchases of vessels from Capital Maritime or from third
parties.
Our
ability to obtain bank financing or to access the capital markets for future
offerings may be limited by our financial condition at the time of any such
financing or offering, as well as by adverse market conditions resulting from,
among other things, general economic conditions, weakness in the financial
markets and contingencies and uncertainties that are beyond our control. Our
failure to obtain the funds for necessary future capital expenditures could have
a material adverse effect on our business, results of operations and financial
condition and on our ability to make cash distributions. We expect to fund part
of the purchase price of the vessels to be delivered in 2008 through drawdowns
on our existing credit facility and the remainder through issuances of equity.
If the prevailing equity market conditions at the time of delivery of the
vessels are not favorable, we may be unable to complete the purchases, or we may
have to complete them at terms not favorable to us or to our
unitholders.
Our
debt levels may limit our flexibility in obtaining additional financing and in
pursuing other business opportunities.
As of
March 31, 2008, we had drawn down $322.5 million under our existing credit
facility and had $47.5 million available. In addition, we entered into a new
$350.0 million credit facility on March 19, 2008 and, following the acquisition
of the M/T Amore Mio II on March 27, 2008, had $304.0 million available. For more information
regarding the terms of our existing revolving credit facilities, please read
“Item 5:—Liquidity and Capital Resources—Revolving Credit Facilities.” Our level
of debt could have important consequences to us, including the
following:
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our
ability to obtain additional financing, if necessary, for working capital,
capital expenditures, acquisitions or other purposes may be impaired, or
such financing may not be available on favorable
terms;
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we
will need a substantial portion of our cash flow to make interest payments
and, following the end of the relevant non-amortizing periods, principal
payments on our debt, reducing the funds that would otherwise be available
for operations, future business opportunities and distributions to
unitholders;
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our
debt level will make us more vulnerable to competitive pressures, or to a
downturn in our business or in the economy in general, than our
competitors with less debt; and
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our
debt level may limit our flexibility in responding to changing business
and economic conditions.
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Our
ability to service our debt will depend upon, among other things, our future
financial and operating performance, which will be affected by prevailing
economic conditions and financial, business, regulatory and other factors, some
of which are beyond our control. If our operating results are not sufficient to
service our current or future indebtedness, we will be forced to take actions
such as reducing distributions, reducing or delaying our business activities,
acquisitions, investments or capital expenditures, selling assets, restructuring
or refinancing our debt, or seeking additional equity capital or bankruptcy
protection. We may not be able to effect any of these remedies on satisfactory
terms, or at all.
Our
existing credit facilities contain, and we expect that any future credit
facilities we may enter into will contain, restrictive covenants, which may
limit our business and financing activities.
The
operating and financial restrictions and covenants in our existing revolving
credit facilities and in any future credit facility we enter into could
adversely affect our ability to finance future operations or capital needs or to
engage, expand or pursue our business activities. For example, our existing
revolving credit facilities require the consent of our lenders to, or limit our
ability to, among other items:
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incur
or guarantee indebtedness;
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charge,
pledge or encumber the vessels;
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change
the flag, class, management or ownership of our
vessels;
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change
the commercial and technical management of our
vessels;
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sell
or change the beneficial ownership or control of our vessels;
and
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subordinate
our obligations thereunder to any general and administrative costs
relating to the vessels, including the fixed daily fee payable under the
management agreement.
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Our
credit facilities also require us to comply with the ISM Code and to maintain
valid safety management certificates and documents of compliance at all
times.
In
addition, our existing credit facilities require us to:
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maintain
minimum free consolidated liquidity (50% of which may be in the form of
undrawn commitments under the relevant credit facility) of at least
$500,000 per financed vessel;
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maintain
a ratio of EBITDA (as defined in each credit facility) to interest expense
of at least 2.00 to 1.00 on a trailing four-quarter basis;
and
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maintain
a ratio of net Total Indebtedness to the aggregate Fair Market
Value (as defined in each credit facility) of our total fleet, current or
future, of no more than 0.725 to
1.00.
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We will also be required to maintain an
aggregate fair market value of our financed vessels equal to 125% of the
aggregate amount outstanding under each credit facility.
Our
ability to comply with the covenants and restrictions contained in our existing
revolving credit facilities and any other debt instruments we may enter into in
the future may be affected by events beyond our control, including prevailing
economic, financial and industry conditions. If market or other economic
conditions deteriorate, our ability to comply with these covenants may be
impaired. If we are in breach of any of the restrictions, covenants, ratios or
tests in our existing credit facility, especially if we trigger a cross-default
currently contained in certain of our loan agreements, a significant portion of
our obligations may become immediately due and payable, and our lenders’
commitment to make further loans to us may terminate. We may not have, or be
able to obtain, sufficient funds to make these accelerated payments. In
addition, obligations under our credit facilities are secured by our vessels,
and if we are unable to repay debt under the credit facilities, the lenders
could seek to foreclose on those assets.
Restrictions
in our debt agreements may prevent us from paying distributions.
Our
payment of interest and, following the end of the relevant non-amortizing
periods, principal on the debt will reduce cash available for distribution on
our units. In addition, our existing credit facilities prohibit the payment of
distributions if we are not in compliance with certain financial covenants
or upon the occurrence of an event of default or if the fair market
value of our financed vessels is less than 125% of the aggregate amount
outstanding under each of our credit facilities.
Events of
default under our credit facilities include:
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failure
to pay principal or interest when
due;
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breach
of certain undertakings, negative covenants and financial covenants
contained in the credit facility, any related security document or
guarantee or the interest rate swap agreements, including failure to
maintain unencumbered title to any of the vessel-owning subsidiaries or
any of the assets of the vessel-owning subsidiaries and failure to
maintain proper insurance;
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any
breach of the credit facility, any related security document or guarantee
or the interest rate swap agreements (other than breaches described in the
preceding two bullet points) if, in the opinion of the lenders, such
default is capable of remedy and continues unremedied for 20 days
after written notice of the
lenders;
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any
representation, warranty or statement made by us in the credit facility or
any drawdown notice thereunder or related security document or guarantee
or the interest rate swap agreements is untrue or misleading when
made;
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a
cross-default of our other indebtedness of $5.0 million or greater or
of the indebtedness of our subsidiaries of $750,000 or
greater;
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we
become, in the reasonable opinion of the lenders, unable to pay our debts
when due;
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any
of our or our subsidiaries’ assets are subject to any form of execution,
attachment, arrest, sequestration or distress in respect of a sum of
$1.0 million or more that is not discharged within 10 business
days;
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an
event of insolvency or bankruptcy;
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cessation
or suspension of our business or of a material part
thereof;
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unlawfulness,
non-effectiveness or repudiation of any material provision of our credit
facility, of any of the related finance and guarantee documents or of our
interest rate swap agreements;
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failure
of effectiveness of security documents or
guarantee;
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the
common units cease to be listed on the Nasdaq Global Market or on any
other recognized securities
exchange;
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any
breach under any provisions contained in our interest rate swap
agreements;
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termination
of our interest rate swap agreements or an event of default thereunder
that is not remedied within five business
days;
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invalidity
of a security document in any material respect or if any security document
ceases to provide a perfected first priority security interest;
or
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any
other event that occurs or circumstance that arises in light of which the
lenders reasonably consider that there is a significant risk that we will
be unable to discharge our liabilities under the credit facility, related
security and guarantee documents or interest rate swap
agreements.
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We
anticipate that any subsequent refinancing of our current debt or any new debt
will have similar restrictions. For more information regarding our financing
arrangements, please read “Item 5: Management’s Discussion and Analysis of
Financial Condition and Results of Operations—Liquidity and Capital
Resources.”
We
currently derive all of our revenues from a limited number of customers, and the
loss of any customer or charter or vessel could result in a significant loss of
revenues and cash flow.
We have
derived, and believe that we will continue to derive, all of our revenues and
cash flow from a limited number of customers. BP Shipping Limited, Morgan
Stanley Capital Group Inc. and Trafigura Beheer B.V. accounted for all of our
revenues for the year ending December 31, 2007, with BP and Morgan Stanley
representing 64% and 28% of our revenues, respectively. For the year ended
December 31, 2006, BP and Morgan Stanley represented 53% and 23% of the revenues
of our predecessor, respectively. In January 2008 we took delivery of the first
of the three newbuildings chartered to subsidiaries of Overseas Shipholding
Group Inc., increasing the number of our customers for 2008 to four. We could lose a customer
or the benefits of a charter if:
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the
customer fails to make charter payments because of its financial
inability, disagreements with us or
otherwise;
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the
customer exercises certain rights to terminate the charter or purchase the
vessel;
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the
customer terminates the charter because we fail to deliver the vessel
within a fixed period of time, the vessel is lost or damaged beyond
repair, there are serious deficiencies in the vessel or prolonged periods
of off-hire, or we default under the charter;
or
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a
prolonged force majeure event affecting the customer, including damage to
or destruction of relevant production facilities, war or political unrest
prevents us from performing services for that
customer.
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Please read “Item 4: Business
Overview—Our Charters”.
If we
lose a key charter, we may be unable to re-deploy the related vessel on terms as
favorable to us due to the long-term nature of most charters. If we are unable
to re-deploy a vessel for which the charter has been terminated, we will not
receive any revenues from that vessel, but we may be required to pay expenses
necessary to maintain the vessel in proper operating condition. Until such time
as the vessel is re-chartered, we may have to operate it in the spot market at
charter rates which may not be as favorable to us as our current charter
rates. In addition,
if a customer exercises its right to purchase a vessel, we would not receive any
further revenue from the vessel and may be unable to obtain a substitute vessel
and charter. This may cause us to receive decreased revenue and cash flows from
having fewer vessels operating in our fleet. Any replacement newbuilding would
not generate revenues during its construction, and we may be unable to charter
any replacement vessel on terms as favorable to us as those of the terminated
charter. Any compensation under our charters for a purchase of the vessels may
not adequately compensate us for the loss of the vessel and related time
charter.
The loss
of any of our customers, time or bareboat charters or vessels, or a decline in
payments under our charters, could have a material adverse effect on our
business, results of operations and financial condition and our ability to make
cash distributions.
Delays
in deliveries of newbuildings, our decision to cancel or our inability to
otherwise complete the acquisitions of our newbuildings, could harm our
operating results and lead to the termination of the related
charters.
We are
scheduled to take delivery of certain contracted newbuildings during the
remainder of 2008, which are being built at STX Shipbuilding Co., Ltd. shipyard
in South Korea. The
delivery of these vessels, or any other newbuildings we may contract to acquire
or order in the future, could be delayed, not completed or canceled, which would
delay or eliminate our expected receipt of revenues under the charters for the
vessels. The shipbuilder could fail to deliver the newbuilding vessels as
agreed, or Capital Maritime could cancel a purchase or a newbuilding contract
because the shipbuilder has not met its obligations, including its obligation to
maintain agreed refund guarantees in place for our benefit. For prolonged
delays, the customer may terminate the time charter.
Our
receipt of newbuildings could be delayed, canceled, or otherwise not completed
because of:
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quality
or engineering problems;
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changes
in governmental regulations or maritime self-regulatory organization
standards;
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work
stoppages or other labor disturbances at the
shipyard;
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bankruptcy
or other financial crisis of the
shipbuilder;
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a
backlog of orders at the shipyard;
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political
or economic disturbances in South Korea, where the vessels are being
built;
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weather
interference or catastrophic event, such as a major earthquake or
fire;
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the
shipbuilder failing to deliver the vessels in accordance with our vessel
specifications;
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our
requests for changes to the original vessel
specifications;
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shortages
of or delays in the receipt of necessary construction materials, such as
steel;
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our
inability to finance the purchase of the
vessels;
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a
deterioration in Capital Maritime’s relations with STX;
or
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our
inability to obtain requisite permits or
approvals.
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If
delivery of a vessel is materially delayed, it could adversely affect our
results of operations and financial condition and our ability to make cash
distributions.
We
depend on Capital Maritime and its affiliates to assist us in operating and
expanding our business.
Pursuant
to a management agreement and an administrative services agreement between us
and Capital Ship Management, Capital Ship Management provides significant
commercial and technical management services (including the commercial and
technical management of our vessels, class certifications, vessel maintenance
and crewing, purchasing and insurance and shipyard supervision) as well as
administrative, financial and other support services to us. Please read “Item
7B: Related Party Transactions—Management Agreement” and “—Administrative
Services Agreement”. Our operational success and ability to execute our growth
strategy will depend significantly upon Capital Ship Management’s satisfactory
performance of these services. Our business will be harmed if Capital Ship
Management fails to perform these services satisfactorily, if Capital Ship
Management cancels either of these agreements, or if Capital Ship Management
stops providing these services to us. We may also in the future contract with
Capital Maritime for it to have newbuildings constructed on our behalf and to
incur the construction-related financing. We would purchase the vessels on or
after delivery based on an agreed-upon price.
Our
ability to enter into new charters and expand our customer relationships will
depend largely on our ability to leverage our relationship with Capital Maritime
and its reputation and relationships in the shipping industry. If Capital
Maritime suffers material damage to its reputation or relationships, it may harm
our ability to:
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renew
existing charters upon their
expiration;
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obtain
new charters;
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successfully
interact with shipyards during periods of shipyard construction
constraints;
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obtain
financing on commercially acceptable terms;
or
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maintain
satisfactory relationships with suppliers and other third
parties.
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If our
ability to do any of the things described above is impaired, it could have a
material adverse effect on our business, results of operations and financial
condition and our ability to make cash distributions.
Our
growth depends on continued growth in demand for refined products and crude oil
and the continued demand for seaborne transportation of refined products and
crude oil.
Our
growth strategy focuses on expansion in the refined product tanker and crude oil
shipping sector. Accordingly, our growth depends on continued growth in world
and regional demand for refined products and crude oil and the transportation of
refined products and crude oil by sea, which could be negatively affected by a
number of factors, including:
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fluctuations
in the actual or projected price of refined products and crude
oil;
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refining
capacity and its geographical
location;
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increases
in the production of oil in areas linked by pipelines to consuming areas,
the extension of existing, or the development of new, pipeline systems in
markets we may serve, or the conversion of existing non-oil pipelines to
oil pipelines in those markets;
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decreases
in the consumption of oil due to increases in its price relative to other
energy sources, other factors making consumption of oil less attractive or
energy conservation measures;
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availability
of new, alternative energy sources;
and
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negative
or deteriorating global or regional economic or political conditions,
particularly in oil consuming regions, which could reduce energy
consumption or its growth.
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Reduced
demand for refined products and crude oil and the shipping of refined products
or crude oil or the increased availability of pipelines used to transport
refined products or crude oil, would have a material adverse effect on our
future growth and could harm our business, results of operations and financial
condition.
Our
growth depends on our ability to expand relationships with existing customers
and obtain new customers, for which we will face substantial
competition.
Medium to
long-term time charters and bareboat charters have the potential to provide
income at pre-determined rates over more extended periods of time. However, the
process for obtaining longer term time charters and bareboat charters is highly
competitive and generally involves a lengthy, intensive and continuous screening
and vetting process and the submission of competitive bids that often extends
for several months. In addition to the quality, age and suitability of the
vessel, longer term shipping contracts tend to be awarded based upon a variety
of other factors relating to the vessel operator further described below under
“Our vessels’ present and future employment could be adversely affected by an
inability to clear the oil majors’ risk assessment process”.
In
addition to having to meet the stringent requirements set out by charterers, it
is likely that we will also face substantial competition from a number of
competitors who may have greater financial resources, stronger reputation or
experience than we do when we try to recharter our vessels. It is also likely
that we will face increased numbers of competitors entering into our
transportation sectors, including in the ice class sector. Increased competition
may cause greater price competition, especially for medium to long-term
charters.
As a
result of these factors, we may be unable to expand our relationships with
existing customers or obtain new customers for medium to long-term time charters
or bareboat charters on a profitable basis, if at all. However, even if we are
successful in employing our vessels under longer term time charters or bareboat
charters, our vessels will not be available for trading in the spot market
during an upturn in the tanker market cycle, when spot trading may be more
profitable. If we cannot successfully employ our vessels in profitable time
charters, our results of operations and operating cash flow could be adversely
affected.
Our
vessels’ present and future employment could be adversely affected by an
inability to clear the oil majors’ risk assessment process.
Shipping,
and especially crude oil, refined product and chemical tankers have been, and
will remain, heavily regulated. The so called “oil majors companies”, together
with a number of commodities traders, represent a significant percentage of the
production, trading and shipping logistics (terminals) of crude oil and refined
products world-wide. Concerns for the environment have led the oil majors to
develop and implement a strict ongoing due diligence process when selecting
their commercial partners. This vetting process has evolved into a sophisticated
and comprehensive risk assessment of both the vessel operator and the vessel,
including physical ship inspections, completion of vessel inspection
questionnaires performed by accredited inspectors and the production of
comprehensive risk assessment reports. In the case of term charter
relationships, additional factors are considered when awarding such contracts,
including:
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office
assessments of the vessel operator, including extensive annual office
audits;
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the
operator’s environmental, health and safety
record;
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compliance
with the standards of the International Maritime Organization ("IMO"), a
United Nations agency that issues international trade standards for
shipping;
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compliance
with heightened industry standards that have been set by some energy
companies;
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shipping
industry relationships, reputation for customer service, technical and
operating expertise;
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shipping
experience and quality of ship operations, including
cost-effectiveness;
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quality,
experience and technical capability of
crews;
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the
ability to finance vessels at competitive rates and overall financial
stability;
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relationships
with shipyards and the ability to obtain suitable
berths;
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construction
management experience, including the ability to procure on-time delivery
of new vessels according to customer
specifications;
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willingness
to accept operational risks pursuant to the charter, such as allowing
termination of the charter for force majeure events;
and
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competitiveness
of the bid in terms of overall
price.
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Should Capital Maritime and Capital
Ship Management not continue to successfully clear the oil majors’ risk
assessment processes on an ongoing basis, our vessels’ present and future
employment as well as our relationship with our existing charterers and our
ability to obtain new charterers, whether medium or long-term, could be
adversely affected. Such a situation may lead to the oil majors’ terminating
existing charters and refusing to use our vessels in the future which would
adversely affect our results of operations and cash flows. Please read “Item 4:
Information on the Partnership—Major Oil Company Vetting Process” for more
information regarding this process.
We
may be unable to make or realize expected benefits from acquisitions, and
implementing our growth strategy through acquisitions may harm our business,
financial condition and operating results.
Our
growth strategy focuses on a gradual expansion of our fleet. Any acquisition of
a vessel may not be profitable to us at or after the time we acquire it and may
not generate cash flow sufficient to justify our investment. In addition, our
growth strategy exposes us to risks that may harm our business, financial
condition and operating results, including risks that we may:
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fail
to realize anticipated benefits, such as new customer relationships,
cost-savings or cash flow
enhancements;
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be
unable to hire, train or retain qualified shore and seafaring personnel to
manage and operate our growing business and
fleet;
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decrease
our liquidity by using a significant portion of our available cash or
borrowing capacity to finance
acquisitions;
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significantly
increase our interest expense or financial leverage if we incur additional
debt to finance acquisitions;
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incur
or assume unanticipated liabilities, losses or costs associated with the
business or vessels acquired; or
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incur
other significant charges, such as impairment of goodwill or other
intangible assets, asset devaluation or restructuring
charges.
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Unlike
newbuildings, existing vessels typically do not carry warranties as to their
condition. While we generally inspect existing vessels prior to purchase, such
an inspection would normally not provide us with as much knowledge of a vessel’s
condition as we would possess if it had been built for us and operated by us
during its life. Repairs and maintenance costs for existing vessels are
difficult to predict and may be substantially higher than for vessels we have
operated since they were built. These costs could decrease our cash flow and
reduce our liquidity.
The
vessels that currently make up our fleet, as well as the six vessels we may
purchase from Capital Maritime under our omnibus agreement, have been, or will
be, built in accordance with custom designs from three different shipyards, and
the vessels from each respective shipyard are the same in all material respects.
As a result, any latent defect discovered in one vessel will likely affect all
of our vessels.
The
vessels that make up our existing and contracted fleet, with the exception of
the M/T Amore Mio II, as well as the six vessels in Capital Maritime’s fleet for
which we have been granted a right of first offer, are, or will be, based on
standard designs from Hyundai MIPO Dockyard Co., Ltd., South Korea, STX
Shipbuilding Co., Ltd., South Korea and Baima Shipyard, China, and have been
customized by Capital Maritime, in some cases in consultation with the
charterers of the vessel, and are, or will be, uniform in all material respects.
As a result, any latent design defect discovered in one of our vessels will
likely affect all of our other vessels in that class. In addition, the remaining
vessels we have agreed to acquire have, or will have, the same or similar
equipment. As a result, any equipment defect discovered may affect all of our
vessels. Any disruptions in the operation of our vessels resulting from defects
could adversely affect our receipt of revenues under the charters for the
vessels affected.
Certain
design features in our vessels have been modified by Capital Maritime to enhance
the commercial capability of our vessels and have not yet been tested. As a
result, we may encounter unforeseen expenses, complications, delays and other
unknown factors which could adversely affect our revenues.
Capital
Maritime has modified certain design features in our vessels which have not yet
been tested and as a result, they may not operate as intended. If these
modifications fail to enhance the commercial capability of our vessels as
intended or interfere with the operation of our vessels, we could face expensive
and time-consuming design modifications, delays in the operation of our vessels,
damaged customer relationships and harm to our reputation. Any disruptions in
the operation of our vessels resulting from the design modifications could
adversely affect our receipt of revenues under the charters for the vessels
affected.
Terrorist
attacks, increased hostilities or war could lead to further economic
instability, increased costs and disruption of our business.
Terrorist
attacks, such as the attacks that occurred in the United States on
September 11, 2001, the bombings in Spain on March 11, 2004, the
bombings in London on July 7, 2005, and the current conflicts in Iraq and
Afghanistan and other current and future conflicts, may adversely affect our
business, operating results, financial condition, ability to raise capital and
future growth. Continuing hostilities in the Middle East may lead to additional
armed conflicts or to further acts of terrorism and civil disturbance in the
United States or elsewhere, which may contribute further to economic instability
and disruption of oil production and distribution, which could result in reduced
demand for our services.
In
addition, oil facilities, shipyards, vessels, pipelines and oil and gas fields
could be targets of future terrorist attacks. Any such attacks could lead to,
among other things, bodily injury or loss of life, vessel or other property
damage, increased vessel operational costs, including insurance costs, and the
inability to transport oil and other refined products to or from certain
locations. Terrorist attacks, war or other events beyond our control that
adversely affect the distribution, production or transportation of oil and other
refined products to be shipped by us could entitle our customers to terminate
our charter contracts, which would harm our cash flow and our
business.
Our
operations expose us to political and governmental instability, which could harm
our business.
Our
operations may be adversely affected by changing or adverse political and
governmental conditions in the countries where our vessels are flagged or
registered and in the regions where we otherwise engage in business. Any
disruption caused by these factors may interfere with the operation of our
vessels, which could harm our business, financial condition and results of
operations. In particular, we derive a substantial portion of our revenues from
shipping oil and oil products from politically unstable regions. Past political
efforts to disrupt shipping in these regions, particularly in the Arabian Gulf,
have included attacks on ships and mining of waterways. In addition to acts of
terrorism, trading in this and other regions has also been subject, in limited
instances, to piracy. Our operations may also be adversely affected by
expropriation of vessels, taxes, regulation, tariffs, trade embargoes, economic
sanctions or a disruption of or limit to trading activities, or other adverse
events or circumstances in or affecting the countries and regions where we
operate or where we may operate in the future.
Marine
transportation is inherently risky, and an incident involving significant loss
of, or environmental contamination by, any of our vessels could harm our
reputation and business.
Our
vessels and their cargoes are at risk of being damaged or lost because of events
such as:
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marine
disasters;
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bad
weather;
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mechanical
failures;
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grounding,
fire, explosions and collisions;
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piracy;
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human
error; and
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war
and terrorism.
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An
accident involving any of our vessels could result in any of the
following:
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environmental
damage, including potential liabilities or costs to recover any spilled
oil or other petroleum products and to restore the ecosystem where the
spill occurred;
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death
or injury to persons, loss of
property;
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delays
in the delivery of cargo;
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loss
of revenues from or termination of charter
contracts;
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governmental
fines, penalties or restrictions on conducting
business;
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higher
insurance rates; and
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damage
to our reputation and customer relationships
generally.
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Any of
these results could have a material adverse effect on our business, financial
condition and operating results.
Our
insurance may be insufficient to cover losses that may occur to our property or
result from our operations.
The
operation of ocean-going vessels in international trade is inherently risky.
Although we carry protection and indemnity insurance, all risks may not be
adequately insured against, and any particular claim may not be paid. We do not
currently maintain off-hire insurance, which would cover the loss of revenue
during extended vessel off-hire periods, such as those that occur during an
unscheduled drydocking due to damage to the vessel from accidents. Accordingly,
any extended vessel off-hire, due to an accident or otherwise, could have a
material adverse effect on our business and our ability to pay distributions to
our unitholders. Any claims covered by insurance would be subject to
deductibles, and since it is possible that a large number of claims may be
brought, the aggregate amount of these deductibles could be material. Certain of
our insurance coverage is maintained through mutual protection and indemnity
associations, and as a member of such associations we may be required to make
additional payments over and above budgeted premiums if member claims exceed
association reserves.
We may be
unable to procure adequate insurance coverage at commercially reasonable rates
in the future. For example, more stringent environmental regulations have led in
the past to increased costs for, and in the future may result in the lack of
availability of, insurance against risks of environmental damage or pollution. A
catastrophic oil spill or marine disaster could exceed our insurance coverage,
which could harm our business, financial condition and operating results. In
addition, certain of our vessels are under bareboat charters with BP Shipping
Limited and subsidiaries of Overseas Shipholding Group Inc. Under the terms
of these charters, the charterer provides for the insurance of the vessel and as
a result these vessels may not be adequately insured and/or in some cases may be
self-insured. Any uninsured or underinsured loss could harm our business and
financial condition. In addition, our insurance may be voidable by the insurers
as a result of certain of our actions, such as our ships failing to maintain
certification with applicable maritime self-regulatory
organizations.
Changes
in the insurance markets attributable to terrorist attacks may also make certain
types of insurance more difficult for us to obtain. In addition, the insurance
that may be available to us may be significantly more expensive than our
existing coverage.
The
maritime transportation industry is subject to substantial environmental and
other regulations, which may significantly limit our operations or increase our
expenses.
Our
operations are affected by extensive and changing international, national and
local environmental protection laws, regulations, treaties, conventions and
standards in force in international waters, the jurisdictional waters of the
countries in which our vessels operate, as well as the countries of our vessels’
registration. Many of these requirements are designed to reduce the risk of oil
spills and other pollution, and our compliance with these requirements can be
costly.
These
requirements can affect the resale value or useful lives of our vessels, require
a reduction in cargo-capacity, ship modifications or operational changes or
restrictions, lead to decreased availability of insurance coverage for
environmental matters or result in the denial of access to certain
jurisdictional waters or ports, or detention in certain ports. Under local,
national and foreign laws, as well as international treaties and conventions, we
could incur material liabilities, including cleanup obligations, in the event
that there is a release of petroleum or other hazardous substances from our
vessels or otherwise in connection with our operations. We could also become
subject to personal injury or property damage claims relating to the release of
or exposure to hazardous materials associated with our current or historic
operations. Violations of or liabilities under environmental requirements also
can result in substantial penalties, fines and other sanctions, including, in
certain instances, seizure or detention of our vessels.
We could
incur significant costs, including cleanup costs, fines, penalties, third-party
claims and natural resource damages, as the result of an oil spill or other
liabilities under environmental laws. The United States Oil Pollution Act of
1990 ("OPA 90") affects all vessel owners shipping oil or petroleum
products to, from or within the United States. OPA 90 allows for potentially
unlimited liability without regard to fault of owners, operators and bareboat
charterers of vessels for oil pollution in U.S. waters. Similarly, the
International Convention on Civil Liability for Oil Pollution Damage, 1969, as
amended, which has been adopted by most countries outside of the U.S., imposes
liability for oil pollution in international waters. OPA 90 expressly permits
individual states to impose their own liability regimes with regard to hazardous
materials and oil pollution incidents occurring within their boundaries. Coastal
states in the U.S. have enacted pollution prevention liability and response
laws, many providing for unlimited liability.
In
addition to complying with OPA 90, IMO regulations, such as Annex VI to the
International Convention for the Prevention of Pollution from Ships, EU
directives and other existing laws and regulations and those that may be
adopted, shipowners may incur significant additional costs in meeting new
maintenance and inspection requirements, in developing contingency arrangements
for potential spills and in obtaining insurance coverage. Government regulation
of vessels, particularly in the areas of safety and environmental requirements,
can be expected to become stricter in the future and require us to incur
significant capital expenditure on our vessels to keep them in compliance, or
even to scrap or sell certain vessels altogether. For example, draft amendments
to revise the regulations of the International Convention for the Prevention of
Pollution from Ships ("MARPOL") regarding the prevention of air pollution from
ships were agreed by the IMO Sub-Committee on Bulk Liquids and Gases when it met
for its 12th session. Following lengthy and technically challenging discussions
in the Air Pollution Working Group, the Sub-Committee agreed a draft revised
Annex VI to the MARPOL Convention and amendments to the NOx Technical Code.
These will now be submitted to the Marine Environment Protection Committee
(MEPC), which meets for its 57th session from March 31 to April 4,
2008.
A number
of options remain open for discussion at the MEPC, which is expected to approve
the amendments prior to their formal adoption at MEPC 58 in October 2008. The
amendments would then enter into force, under the tacit acceptance procedure, 16
months later, in March 2010, or on a date to be decided by the MEPC. Given the
significant environmental, human health, and economic consequences of a decision
on how best to further reduce emissions of sulphur oxide (SOx) and particulate
matter from ships, the Sub-Committee decided that relevant policy decisions
should be taken at the Committee level and that its principal duty was to
initiate such discussions.
Further
legislation applicable to international and national maritime trade is expected
over the coming years in areas such as ship recycling, sewage systems, emission
control, ballast treatment and handling, etc. This new legislation may require
additional capital expenditure in order to maintain our vessels’ compliance with
international and/or national regulations.
Additionally,
various jurisdictions are considering regulating the management of ballast water
to prevent the introduction of non-indigenous species considered to be invasive.
Further to that and as a result of marine accidents (such as the
November 2002 oil spill from the motor tanker Prestige, a 26 year-old
single-hull tanker - which was owned by a company unrelated to us), we
believe that regulation of the shipping industry will continue to become more
stringent and more expensive for us and our competitors. In recent years, the
IMO and EU have both accelerated their existing non-double-hull phase-out
schedules in response to highly publicized oil spills and other shipping
incidents involving companies unrelated to us. Future incidents may result in
the adoption of even stricter laws and regulations, which could limit our
operations or our ability to do business and which could have a material adverse
effect on our business and financial results. Please read “Item 4: Business
Overview—Regulation”.
We
have a limited history operating as a publicly traded entity.
We completed our initial public
offering on the Nasdaq Global Market on April 3, 2007 and have a limited history
operating as a publicly traded entity. As a publicly traded limited partnership,
we are required to comply with the SEC’s reporting requirements and with
corporate governance and related requirements of the U.S. Sarbanes-Oxley Act,
the SEC and the Nasdaq Global Market, on which our common units are listed.
Section 404 of the Sarbanes−Oxley Act requires that we evaluate and determine
the effectiveness of our internal control over financial reporting. However, as
a newly public non−accelerated filer, we are not subject to this requirement for
the first year of our operations. Currently, we would be subject to such
requirement by the end of our fiscal year ending December 31, 2008. If we have a
material weakness in our internal control over financial reporting, we may not
detect errors on a timely basis and our financial statements may be materially
misstated. We will have to dedicate a significant amount of time and resources
to ensure compliance with the regulatory requirements of Section 404. We will
continue to work with our legal, accounting and financial advisors to identify
any areas in which changes should be made to our financial and management
control systems to manage our growth and our obligations as a public company.
However, these and other measures we may take may not be sufficient to allow us
to satisfy our obligations as a public company on a timely and reliable
basis. We have
incurred and will continue to incur significant legal, accounting and other
expenses in complying with these and other applicable regulations. We anticipate
that our incremental general and administrative expenses as a publicly traded
limited partnership taxed as a corporation for U.S. federal income tax purposes
will include costs associated with annual reports to unitholders, tax returns,
investor relations, registrar and transfer agent’s fees, incremental director
and officer liability insurance costs and director compensation.
The
crew employment agreements manning agents enter into on behalf of Capital
Maritime or its affiliates may not prevent labor interruptions and the failure
to renegotiate these agreements successfully in the future may disrupt our
operations and adversely affect our cash flows.
The crew
employment agreements that manning agents enter into on behalf of Capital
Maritime or its affiliates may not prevent labor interruptions and are subject
to renegotiation in the future. Any labor interruptions, including due to a
failure to renegotiate employment agreements with our crew members successfully,
could disrupt our operations and could adversely affect our business, financial
condition and results of operations.
A
global economic slowdown could have a material adverse effect on our business,
financial position and results of operations.
Oil has
been one of the world’s primary energy sources for a number of decades. Global
economic growth has been strong in recent years which has had a significant
impact on shipping demand. However, such growth may not be sustained
or the global economy may experience negative growth in the near future. Such an
economic downturn may sharply reduce the demand for oil and refined petroleum
products, and also potentially affect tanker demand. Even though our vessels are
chartered under medium or long-term charters, a negative change in global
economic conditions will likely have a material adverse effect on our business,
financial position, results of operations and ability to pay dividends, as well
as our future prospects.
Risks
Inherent in an Investment in Us
Capital
Maritime and its affiliates may engage in competition with us.
Pursuant
to the omnibus agreement that we and Capital Maritime have entered into, Capital
Maritime and its controlled affiliates (other than us, our general partner and
our subsidiaries) generally will agree not to acquire, own or operate medium
range tankers under time charters of two or more years without the consent of
our general partner. The omnibus agreement, however, contains significant
exceptions that may allow Capital Maritime or any of its controlled affiliates
to compete with us, which could harm our business. Please read “Item
7B: Related Party Transactions—Omnibus Agreement—Noncompetition.”
Unitholders
have limited voting rights and our partnership agreement restricts the voting
rights of unitholders owning 5% or more of our common units.
Holders
of common units have only limited voting rights on matters affecting our
business. We will hold a meeting of the limited partners every year to elect one
or more members of our board of directors and to vote on any other matters that
are properly brought before the meeting. Common unitholders elect only four of
the seven members of our board of directors. The elected directors will be
elected on a staggered basis and will serve for three-year terms. Our general
partner in its sole discretion has the right to appoint the remaining three
directors and to set the terms for which those directors will serve. The
partnership agreement also contains provisions limiting the ability of
unitholders to call meetings or to acquire information about our operations, as
well as other provisions limiting the unitholders’ ability to influence the
manner or direction of management. Unitholders will have no right to elect our
general partner and our general partner may not be removed except by a vote of
the holders of at least 66⅔%
of the outstanding units, including any units owned by our general partner and
its affiliates, voting together as a single class and a majority vote of our
board of directors.
Our
partnership agreement further restricts unitholders’ voting rights by providing
that if any person or group, other than our general partner, its affiliates,
their transferees and persons who acquired such units with the prior approval of
our board of directors, owns beneficially 5% or more of any class of units then
outstanding, any such units owned by that person or group in excess of 4.9% may
not be voted on any matter and will not be considered to be outstanding when
sending notices of a meeting of unitholders, calculating required votes, except
for purposes of nominating a person for election to our board, determining the
presence of a quorum or for other similar purposes, unless required by law. The
voting rights of any such unitholders in excess of 4.9% will be redistributed
pro rata among the other common unitholders holding less than 4.9% of the voting
power of all classes of units entitled to vote.
Our
general partner and its other affiliates own a controlling interest in us and
have conflicts of interest and limited fiduciary and contractual duties, which
may permit them to favor their own interests to your detriment.
As of
March 31, 2008, Capital Maritime owned a 45.6% interest in us,
including a 2% interest through its ownership of our general partner which
effectively controls our day-to-day affairs consistent with policies and
procedures adopted by and subject to the direction of our board of directors.
Although our general partner and its affiliates and our directors have a
fiduciary duty to manage us in a manner beneficial to us and our unitholders,
the officers of our general partner have a fiduciary duty to manage our general
partner in a manner beneficial to Capital Maritime. Furthermore, all of the
officers of our general partner and certain of our directors are directors or
officers of Capital Maritime and its affiliates, and as such they have fiduciary
duties to Capital Maritime that may cause them to pursue business strategies
that disproportionately benefit Capital Maritime or which otherwise are not in
the best interests of us or our unitholders. Conflicts of interest may arise
between Capital Maritime and its affiliates, including our general partner and
its officers, on the one hand, and us and our unitholders, on the other hand. As
a result of these conflicts, our general partner and its affiliates may favor
their own interests over the interests of our unitholders. Please read “—Our
partnership agreement limits the fiduciary duties of our general partner and our
directors to our unitholders and restricts the remedies available to unitholders
for actions taken by our general partner or our directors” below. These
conflicts include, among others, the following situations:
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neither
our partnership agreement nor any other agreement requires our general
partner or Capital Maritime or its affiliates to pursue a business
strategy that favors us or utilizes our assets, and Capital Maritime’s
officers and directors have a fiduciary duty to make decisions in the best
interests of the unitholders of Capital Maritime, which may be contrary to
our interests;
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the
executive officers of our general partner and three of our directors also
serve as executive officers and/or directors of Capital
Maritime;
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our
general partner and our board of directors are allowed to take into
account the interests of parties other than us, such as Capital Maritime,
in resolving conflicts of interest, which has the effect of limiting their
fiduciary duties to our
unitholders;
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our
general partner and our directors have limited their liabilities and
reduced their fiduciary duties under the laws of the Marshall Islands,
while also restricting the remedies available to our unitholders, and, as
a result of purchasing common units, unitholders are treated as having
agreed to the modified standard of fiduciary duties and to certain actions
that may be taken by our general partner and our directors, all as set
forth in the partnership agreement;
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our
general partner and our board of directors will be involved in determining
the amount and timing of our asset purchases and sales, capital
expenditures, borrowings, and issuances of additional partnership
securities and reserves, each of which can affect the amount of cash that
is available for distribution to our
unitholders;
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our
general partner may have substantial influence over our board of
directors’ decision to cause us to borrow funds in order to permit the
payment of cash distributions, even if the purpose or effect of the
borrowing is to make a distribution on the subordinated units or to make
incentive distributions or to accelerate the expiration of the
subordination period;
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our
general partner is entitled to reimbursement of all reasonable costs
incurred by it and its affiliates for our
benefit;
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our
partnership agreement does not restrict us from paying our general partner
or its affiliates for any services rendered to us on terms that are fair
and reasonable or entering into additional contractual arrangements with
any of these entities on our behalf;
and
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our
general partner may exercise its right to call and purchase our common
units if it and its affiliates own more than 80% of our common
units.
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Although
a majority of our directors will over time be elected by common unitholders, our
general partner will likely have substantial influence on decisions made by our
board of directors. Please read “Item 7B: Related Party
Transactions”.
We
currently do not have any officers and expect to rely solely on officers of our
general partner, who face conflicts in the allocation of their time to our
business.
We do not
currently expect our board of directors to exercise its power to appoint
officers of Capital Product Partners L.P. and, as a result, we expect to rely
solely on the officers of our general partner, who are not required to work
full-time on our affairs and who also work for affiliates of our general
partner, including Capital Maritime. For example, our general partner’s Chief
Executive Officer and Chief Financial Officer is also an executive officer of
Capital Maritime. The affiliates of our general partner conduct substantial
businesses and activities of their own in which we have no economic interest. As
a result, there could be material competition for the time and effort of the
officers of our general partner who also provide services to our general
partner’s affiliates, which could have a material adverse effect on our
business, results of operations and financial condition.
Our
partnership agreement limits our general partner’s and our directors’ fiduciary
duties to our unitholders and restricts the remedies available to unitholders
for actions taken by our general partner or our directors.
Our
partnership agreement contains provisions that reduce the standards to which our
general partner and directors would otherwise be held by Marshall Islands
law. For example, our partnership agreement:
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permits
our general partner to make a number of decisions in its individual
capacity, as opposed to in its capacity as our general partner. Where our
partnership agreement permits, our general partner may consider only the
interests and factors that it desires, and in such cases it has no duty or
obligation to give any consideration to any interest of, or factors
affecting us, our affiliates or our unitholders. Decisions made by our
general partner in its individual capacity will be made by its sole owner,
Capital Maritime. Specifically, pursuant to our partnership agreement, our
general partner will be considered to be acting in its individual capacity
if it exercises its call right, pre-emptive rights or registration rights,
consents or withholds consent to any merger or consolidation of the
partnership, appoints any directors or votes for the election of any
director, votes or refrains from voting on amendments to our partnership
agreement that require a vote of the outstanding units, voluntarily
withdraws from the partnership, transfers (to the extent permitted under
our partnership agreement) or refrains from transferring its units,
general partner interest or incentive distribution rights or votes upon
the dissolution of the partnership;
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provides
that our general partner and our directors are entitled to make other
decisions in “good faith” if they reasonably believe that the decision is
in our best interests;
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generally
provides that affiliated transactions and resolutions of conflicts of
interest not approved by the conflicts committee of our board of directors
and not involving a vote of unitholders must be on terms no less favorable
to us than those generally being provided to or available from unrelated
third parties or be “fair and reasonable” to us and that, in determining
whether a transaction or resolution is “fair and reasonable,” our board of
directors may consider the totality of the relationships between the
parties involved, including other transactions that may be particularly
advantageous or beneficial to us;
and
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provides
that neither our general partner and its officers nor our directors will
be liable for monetary damages to us, our limited partners or assignees
for any acts or omissions unless there has been a final and non-appealable
judgment entered by a court of competent jurisdiction determining that our
general partner or directors or its officers or directors or those other
persons engaged in actual fraud or willful
misconduct.
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In order
to become a limited partner of our partnership, a common unitholder is required
to agree to be bound by the provisions in the partnership agreement, including
the provisions discussed above.
Fees
and cost reimbursements, which Capital Ship Management will determine for
services provided to us and certain of our subsidiaries, will be substantial,
may fluctuate, and will reduce our cash available for distribution to you. Such
fees and cost reimbursements may change upon the expiration of the management
and administrative agreements currently in place.
We pay a
fixed daily fee for an initial term of approximately five years from the time we
take delivery of each vessel for services provided to us by Capital Ship
Management, and we reimburse Capital Ship Management for all expenses it incurs
on our behalf. The fixed daily fee to be paid to Capital Ship Management
includes all costs incurred in providing certain commercial and technical
management services to us, including vessel maintenance, crewing, purchasing and
insurance and also includes the expenses for each vessel’s next scheduled
special or intermediate survey, as applicable, and related
drydocking. In addition to the fixed daily fees payable under the
management agreement, Capital Ship Management is entitled to reasonable
supplementary remuneration for extraordinary fees and costs of any direct and
indirect expenses it incurs in providing these services which may vary from time
to time. In addition, Capital Ship Management provides us with
administrative services, including audit, legal, banking and insurance services,
pursuant to an administrative services agreement with an initial term of five
years from the date of our initial public offering, and we reimburse Capital
Ship Management for all costs and expenses reasonably incurred by it in
connection with the provision of those services. Costs for these services are
not fixed and may fluctuate depending on our requirements.
Going
forward, when we acquire new vessels or when the respective management
agreements for our vessels expire, we will have to enter into new agreements
with Capital Ship Management or a third party for the provision of the above
services. It is possible that any such new agreement may not be on the same or
similar terms as our existing agreements, and that the level of our operating
costs may change following any such renewal. Any increase in the costs and
expenses associated with the provision of these services by our manager in the
future, such as the costs of crews for our time-chartered vessels and insurance,
will lead to an increase in the fees we will have to pay to Capital Ship
Management under any new agreements we enter into. The payment of fees to
Capital Ship Management and reimbursement of expenses to Capital Ship Management
could adversely affect our ability to pay cash distributions.
Our
partnership agreement contains provisions that may have the effect of
discouraging a person or group from attempting to remove our current management
or our general partner, and even if public unitholders are dissatisfied, they
will be unable to remove our general partner without Capital Maritime’s consent,
unless Capital Maritime’s ownership share in us is decreased, all of which could
diminish the trading price of our common units.
Our
partnership agreement contains provisions that may have the effect of
discouraging a person or group from attempting to remove our current management
or our general partner.
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The
unitholders will be unable to remove our general partner without its
consent because our general partner and its affiliates own sufficient
units to be able to prevent its removal. The vote of the holders of at
least 66⅔%
of all outstanding units voting together as a single class and a majority
vote of our board of directors is required to remove the general partner.
As of March 31, 2008, Capital Maritime
owned a 45.6% interest in us, including a 2% interest through its
ownership of our general partner.
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If
our general partner is removed without “cause” during the subordination
period and units held by our general partner and Capital Maritime are not
voted in favor of that removal, all remaining subordinated units will
automatically convert into common units and any existing arrearages on the
common units will be extinguished. A removal of our general partner under
these circumstances would adversely affect the common units by prematurely
eliminating their distribution and liquidation preference over the
subordinated units, which would otherwise have continued until we had met
certain distribution and performance tests. “Cause” is narrowly defined to
mean that a court of competent jurisdiction has entered a final,
non-appealable judgment finding our general partner liable for actual
fraud or willful or wanton misconduct in its capacity as our general
partner. Cause does not include most cases of charges of poor management
of the business, so the removal of our general partner because of the
unitholders’ dissatisfaction with the general partner’s performance in
managing our partnership will most likely result in the termination of the
subordination period.
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Common
unitholders elect only four of the seven members of our board of
directors. Our general partner in its sole discretion has the right to
appoint the remaining three
directors.
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Election
of the four directors elected by unitholders is staggered, meaning that
the members of only one of three classes of our elected directors are
selected each year. In addition, the directors appointed by our general
partner will serve for terms determined by our general
partner.
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Our
partnership agreement contains provisions limiting the ability of
unitholders to call meetings of unitholders, to nominate directors and to
acquire information about our operations as well as other provisions
limiting the unitholders’ ability to influence the manner or direction of
management.
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Unitholders’
voting rights are further restricted by the partnership agreement
provision providing that if any person or group, other than our general
partner, its affiliates, their transferees, and persons who acquired such
units with the prior approval of our board of directors, owns beneficially
5% or more of any class of units then outstanding, any such units owned by
that person or group in excess of 4.9% may not be voted on any matter and
will not be considered to be outstanding when sending notices of a meeting
of unitholders, calculating required votes, except for purposes of
nominating a person for election to our board, determining the presence of
a quorum or for other similar purposes, unless required by law. The voting
rights of any such unitholders in excess of 4.9% will be redistributed pro
rata among the other common unitholders holding less than 4.9% of the
voting power of all classes of units entitled to
vote.
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We
have substantial latitude in issuing equity securities without unitholder
approval.
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The
effect of these provisions may be to diminish the price at which the common
units will trade.
The
control of our general partner may be transferred to a third party without
unitholder consent.
Our
general partner may transfer its general partner interest to a third party in a
merger or in a sale of all or substantially all of its assets without the
consent of the unitholders. In addition, our partnership agreement does not
restrict the ability of the members of our general partner from transferring
their respective membership interests in our general partner to a third party.
Any such change in control of our general partner may affect the way we and our
operations are managed, which could have a material adverse effect on our
business, results of operations or financial condition and our ability to make
cash distributions.
Substantial
future sales of our common units in the public market could cause the price of
our common units to fall.
We have
granted registration rights to Capital Maritime and certain affiliates of
Capital Maritime. These unitholders have the right, subject to some conditions,
to require us to file registration statements covering any of our common,
subordinated or other equity securities owned by them or to include those
securities in registration statements that we may file for ourselves or other
unitholders. As of March 31, 2008, Capital Maritime owned 2,007,847 common
units, 8,805,522 subordinated units and certain incentive distribution
rights. Following
their registration and sale under the applicable registration statement, the
subordinated units will become freely tradeable. By exercising their
registration rights and selling a large number of common units or other
securities, these unitholders could cause the price of our common units to
decline.
We
may issue additional equity securities without your approval, which would dilute
your ownership interests.
We may,
without the approval of our unitholders, issue an unlimited number of additional
units or other equity securities, including securities to Capital Maritime. In
particular, we have financed a portion of the purchase price of the
non-contracted vessel we acquired from Capital Maritime during the first quarter
of 2008 through the issuance of additional common units to Capital Maritime and
we may finance a substantial portion of the purchase price of the remaining newbuildings
to be delivered in 2008 through the issuance of additional common
units.
The
issuance by us of additional common units or other equity securities of equal or
senior rank will have the following effects:
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our
unitholders’ proportionate ownership interest in us will
decrease;
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the
amount of cash available for distribution on each unit may
decrease;
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because
a lower percentage of total outstanding units will be subordinated units,
the risk that a shortfall in the payment of the quarterly distribution
will be borne by our common unitholders will
increase;
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the
relative voting strength of each previously outstanding unit may be
diminished; and
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the
market price of the common units may
decline.
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In
establishing cash reserves, our board of directors may reduce the amount of cash
available for distribution to you.
Our
partnership agreement requires our general partner to deduct from operating
surplus cash reserves that it determines are necessary to fund our future
operating expenditures. These reserves will also affect the amount of cash
available for distribution to our unitholders. Our board of directors may
establish reserves for distributions on the subordinated units, but only if
those reserves will not prevent us from distributing the full quarterly
distribution, plus any arrearages, on the common units for the following four
quarters. As described above in “—Risks Inherent in Our Business—We must make
substantial capital expenditures to maintain the operating capacity of our
fleet, which will reduce our cash available for distribution. In addition, each
quarter our board of directors is required to deduct estimated maintenance and
replacement capital expenditures from operating surplus, which may result in
less cash available to unitholders than if actual maintenance and replacement
capital expenditures were deducted.” Our partnership agreement requires our
board of directors each quarter to deduct from operating surplus estimated
maintenance and replacement capital expenditures, as opposed to actual
expenditures, which could reduce the amount of available cash for distribution.
The amount of estimated maintenance and replacement capital expenditures
deducted from operating surplus is subject to review and change by our board of
directors at least once a year, provided that any change must be approved by the
conflicts committee of our board of directors.
Our
general partner has a limited call right that may require you to sell your
common units at an undesirable time or price.
If at any
time our general partner and its affiliates own more than 80% of the common
units, our general partner will have the right, which it may assign to any of
its affiliates or to us, but not the obligation, to acquire all, but not less
than all, of the common units held by unaffiliated persons at a price not less
than their then-current market price. As a result, you may be required to sell
your common units at an undesirable time or price and may not receive any return
on your investment. You may also incur a tax liability upon a sale of your
units.
As of March 31, 2008, Capital Maritime,
an affiliate of our general partner, owned 12.9% of our common units. At
the end of the subordination period, assuming no further issuances of common
units and conversion of our subordinated units into common units, Capital
Maritime will own 45.6% of our common units, including a 2% interest through its
ownership of our general partner.
You
may not have limited liability if a court finds that unitholder action
constitutes control of our business.
As a
limited partner in a partnership organized under the laws of the Marshall
Islands, you could be held liable for our obligations to the same extent as a
general partner if you participate in the “control” of our business. Our general
partner generally has unlimited liability for the obligations of the
partnership, such as its debts and environmental liabilities, except for those
contractual obligations of the partnership that are expressly made without
recourse to our general partner. In addition, the Marshall Islands Limited
Partnership Act (the "Marshall Islands Act") provides that, under some
circumstances, a unitholder may be liable to us for the amount of a distribution
for a period of three years from the date of the distribution. In addition, the
limitations on the liability of holders of limited partner interests for the
obligations of a limited partnership have not been clearly established in some
jurisdictions in which we do business. Please read “The Partnership
Agreement—Limited Liability” for a discussion of the implications of the
limitations on liability to a unitholder.
We
can borrow money to pay distributions, which would reduce the amount of credit
available to operate our business.
Our
partnership agreement will allow us to make working capital borrowings to pay
distributions. Accordingly, we can make distributions on all our units even
though cash generated by our operations may not be sufficient to pay such
distributions. Any working capital borrowings by us to make distributions will
reduce the amount of working capital borrowings we can make for operating our
business. For more information, please read “Item 5: Management’s Discussion and
Analysis of Financial Condition and Results of Operations—Liquidity and Capital
Resources—Financing Arrangements.”
Increases
in interest rates may cause the market price of our common units to
decline.
An
increase in interest rates may cause a corresponding decline in demand for
equity investments in general, and in particular for yield-based equity
investments such as our common units. Any such increase in interest rates or
reduction in demand for our common units resulting from other relatively more
attractive investment opportunities may cause the trading price of our common
units to decline.
Unitholders
may have liability to repay distributions.
Under
some circumstances, unitholders may have to repay amounts wrongfully returned or
distributed to them. Under the Marshall Islands Act, we may not make a
distribution to you if the distribution would cause our liabilities to exceed
the fair value of our assets. Marshall Islands law provides that for a period of
three years from the date of the impermissible distribution, limited partners
who received the distribution and who knew at the time of the distribution that
it violated Marshall Islands law will be liable to the limited partnership for
the distribution amount. Assignees who become substituted limited partners are
liable for the obligations of the assignor to make contributions to the
partnership that are known to the assignee at the time it became a limited
partner and for unknown obligations if the liabilities could be determined from
the partnership agreement. Liabilities to partners on account of their
partnership interest and liabilities that are non-recourse to the partnership
are not counted for purposes of determining whether a distribution is
permitted.
We
have been organized as a limited partnership under the laws of the Republic of
The Marshall Islands, which does not have a well developed body of partnership
law.
Our
partnership affairs are governed by our partnership agreement and by the
Marshall Islands Act. The provisions of the Marshall Islands Act resemble
provisions of the limited partnership laws of a number of states in the United
States, most notably Delaware. The Marshall Islands Act also provides that it is
to be applied and construed to make it uniform with the Delaware Revised Uniform
Partnership Act and, so long as it does not conflict with the Marshall Islands
Act or decisions of the Marshall Islands courts, interpreted according to the
non-statutory law (or case law) of the State of Delaware. There have been,
however, few, if any, court cases in the Marshall Islands interpreting the
Marshall Islands Act, in contrast to Delaware, which has a fairly well-developed
body of case law interpreting its limited partnership statute. Accordingly, we
cannot predict whether Marshall Islands courts would reach the same conclusions
as the courts in Delaware. For example, the rights of our unitholders and the
fiduciary responsibilities of our general partner under Marshall Islands law are
not as clearly established as under judicial precedent in existence in Delaware.
As a result, unitholders may have more difficulty in protecting their interests
in the face of actions by our general partner and its officers and directors
than would unitholders of a limited partnership formed in the United
States.
Because
we are organized under the laws of the Marshall Islands, it may be difficult to
serve us with legal process or enforce judgments against us, our directors or
our management.
We are
organized under the laws of the Marshall Islands, and all of our assets are
located outside of the United States. Our business is operated primarily from
our office in Greece. In addition, our general partner is a Marshall Islands
limited liability company and its directors and officers generally are or will
be non-residents of the United States, and all or a substantial portion of the
assets of these non-residents are located outside the United States. As a
result, it may be difficult or impossible for you to bring an action against us
or against these individuals in the United States if you believe that your
rights have been infringed under securities laws or otherwise. Even if you are
successful in bringing an action of this kind, the laws of the Marshall Islands
and of other jurisdictions may prevent or restrict you from enforcing a judgment
against our assets or the assets of our general partner or its directors and
officers. For more information regarding the relevant laws of the Marshall
Islands, please read “Service of Process and Enforcement of Civil
Liabilities.”
Tax
Risks
In
addition to the following risk factors, you should read “Item 10E:—Taxation” for
a more complete discussion of the expected material U.S. federal and non-U.S.
income tax considerations relating to us and the ownership and disposition of
common units.
U.S.
tax authorities could treat us as a “passive foreign investment company,” which
could have adverse U.S. federal income tax consequences to U.S.
holders.
A foreign
entity taxed as a corporation for U.S. federal income tax purposes will be
treated as a “passive foreign investment company” (a “PFIC”) for U.S. federal
income tax purposes if at least 75.0% of its gross income for any taxable year
consists of certain types of “passive income,” or at least 50.0% of the average
value of the entity’s assets produce or are held for the production of those
types of “passive income.” For purposes of these tests, “passive income”
includes dividends, interest, gains from the sale or exchange of investment
property, and rents and royalties other than rents and royalties that are
received from unrelated parties in connection with the active conduct of a trade
or business. For purposes of these tests, income derived from the performance of
services does not constitute “passive income.” U.S. shareholders of a PFIC are
subject to a disadvantageous U.S. federal income tax regime with respect to the
income derived by the PFIC, the distributions they receive from the PFIC, and
the gain, if any, they derive from the sale or other disposition of their shares
in the PFIC.
Based on
our current and projected method of operation we do not believe that we were a
PFIC for our 2006 or 2007 taxable years nor do we expect to become a PFIC with
respect to any other taxable year. Twelve of the 15 vessels in our fleet as well
as the M/T Aristofanis, which we intend to acquire during the second quarter of
2008, are or will be engaged in time chartering activities and we intend to
treat our income from those activities as non-passive income, and the vessels
engaged in those activities as non-passive assets, for PFIC purposes. However,
no assurance can be given that the Internal Revenue Service (the “IRS”) will
accept this position. The remainder of our fleet will be engaged in activities
that may be characterized as passive for PFIC purposes and the income from that
portion of our fleet may be treated as passive income for PFIC purposes. See
“Item 10E:—Taxation—PFIC Status and Significant Tax Consequences.”
The
preferential tax rates applicable to qualified dividend income are temporary,
and the enactment of previously proposed legislation could affect whether
dividends paid by us constitute qualified dividend income eligible for the
preferential rate.
Certain
of our distributions may be treated as qualified dividend income eligible for
preferential rates of U.S. federal income tax to U.S. individual unitholders
(and certain other U.S. unitholders). In the absence of legislation extending
the term for these preferential tax rates, all dividends received by such U.S.
taxpayers in tax years beginning on January 1, 2011 or later will be taxed
at ordinary graduated tax rates. Please read “Item 10E:—Taxation—U.S. Federal
Income Taxation of U.S. Holders—Distributions.”
In
addition, previously proposed legislation proposed during a preceding
legislative session of the U.S. Congress would deny the preferential rate of
U.S. federal income tax currently imposed on qualified dividend income with
respect to dividends received from a non-U.S. corporation, unless the non-U.S.
corporation either is eligible for benefits of a comprehensive income tax treaty
with the United States or is created or organized under the laws of a foreign
country that has a comprehensive income tax system. Because the Marshall Islands
has not entered into a comprehensive income tax treaty with the United States
and imposes only limited taxes on entities organized under its laws, it is
unlikely that we could satisfy either of these requirements. Consequently, if
this legislation were enacted the preferential tax rates of federal income tax
discussed under “Item 10E:—Taxation—U.S. Federal Income Taxation of U.S.
Holders—Distributions” may no longer be applicable to distributions received
from us. As of the date hereof, it is not possible to predict with any certainty
whether this previously proposed legislation will be reintroduced and
enacted.
We
may have to pay tax on United States source income, which would reduce our
earnings.
Under the
Code, 50% of the gross shipping income of a vessel-owning or chartering
corporation that is attributable to transportation that both begins or ends, but
that does not begin and end, in the U.S. is characterized as U.S. source
shipping income and such income generally is subject to a 4% U.S. federal income
tax without allowance for deduction, unless that corporation qualifies for
exemption from tax under Section 883 of the Code.
We
believe that we and each of our subsidiaries will qualify for this
statutory tax exemption, and we will take this position for U.S. federal income
tax return reporting purposes. See “Item 10E:—Taxation.” However, there are
factual circumstances, including some that may be beyond our control, which
could cause us to lose the benefit of this tax exemption. In addition, our
conclusion that we qualify for this exemption is based upon legal authorities
that do not expressly contemplate an organization structure such as ours.
Although we have elected to be treated as a corporation for U.S. federal income
tax purposes, for corporate law purposes we are organized as a limited
partnership under Marshall Islands law and our general partner will be
responsible for managing our business and affairs and has been granted certain
veto rights over decisions of our board of directors. Therefore, we can give no
assurances that the IRS will not take a different position regarding our
qualification, or the qualification of any of our subsidiaries, for this tax
exemption.
If we or
our subsidiaries are not entitled to this exemption under Section 883 for
any taxable year, we or our subsidiaries generally would be subject for those
years to a 4% U.S. federal gross income tax on our U.S. source shipping income.
The imposition of this taxation could have a negative effect on our business and
would result in decreased earnings available for distribution to our
unitholders.
You
may be subject to income tax in one or more non-U.S. countries, including
Greece, as a result of owning our common units if, under the laws of any such
country, we are considered to be carrying on business there. Such laws may
require you to file a tax return with and pay taxes to those
countries.
We intend
that our affairs and the business of each of our controlled affiliates will be
conducted and operated in a manner that minimizes income taxes imposed upon us
and these controlled affiliates or which may be imposed upon you as a result of
owning our common units. However, because we are organized as a partnership,
there is a risk in some jurisdictions that our activities and the activities of
our subsidiaries may be attributed to our unitholders for tax purposes and,
thus, that you will be subject to tax in one or more non-U.S. countries,
including Greece, as a result of owning our common units if, under the laws of
any such country, we are considered to be carrying on business there. If you are
subject to tax in any such country, you may be required to file a tax
return with and to pay tax in that country based on your allocable share of our
income. We may be required to reduce distributions to you on account of any
withholding obligations imposed upon us by that country in respect of such
allocation to you. The United States may not allow a tax credit for any foreign
income taxes that you directly or indirectly incur.
We
believe we can conduct our activities in a manner so that our unitholders should
not be considered to be carrying on business in Greece solely as a consequence
of the acquisition, holding, disposition or redemption of our common units.
However, the question of whether either we or any of our controlled affiliates
will be treated as carrying on business in any country, including Greece,
will largely be a question of fact determined through an analysis of contractual
arrangements, including the management agreement and the administrative services
agreement we will enter into with Capital Ship Management, and the way we
conduct business or operations, all of which may change over time. The laws of
Greece or any other foreign country may also change, which could cause the
country’s taxing authorities to determine that we are carrying on business in
such country and are subject to its taxation laws. Any foreign taxes imposed on
us or any subsidiaries will reduce our cash available for
distribution.
Item 4. Information on the Partnership.
A.
History and Development of the Partnership
We are a
limited partnership incorporated as Capital Product Partners L.P. under the laws
of the Marshall Islands on January 16, 2007 by Capital Maritime. On April
3, 2007, we completed our initial public offering (the “Offering”) on the Nasdaq
Global Market of 13,512,500 common units at a price of $21.50 per unit. At the
time of the Offering, Capital Maritime transferred all of the shares of eight
wholly owned subsidiaries, each of which owned a newly built, double hull medium
range product tanker, to us and we entered into an agreement with Capital Ship
Management, a subsidiary of Capital Maritime, to provide management and
technical services in connection with these and future vessels. As of March 31,
2008, Capital Maritime owned a 45.6% interest in us, including a 2% interest
through its ownership of our general partner, Capital GP L.L.C. We maintain our
principal executive headquarters at 3 Iassonos Street, Piraeus, 18537 Greece and
our telephone number is +30 210 4584 950.
B.
Business Overview
We are an
international owner of product tankers formed by Capital Maritime, an
international shipping company with a long history of operating and investing in
the shipping market. Our fleet currently consists of 15 double-hull, high
specification tankers including the largest Ice Class 1A medium range (MR)
product tanker fleet in the world based on number of vessels
and carrying capacity. Since the Offering we have taken delivery of five
newbuildings and have also acquired two additional vessels from Capital
Maritime, almost doubling the size of our fleet in terms of carrying capacity.
We also expect to take delivery of an additional 12,000 dwt small tanker from
Capital Maritime during the second quarter of 2008 and of two additional
newbuildings in June and August of 2008 which we contracted to acquire from
Capital Maritime prior to our Offering. Our vessels are capable of carrying
crude oil, refined oil products, such as gasoline, diesel, fuel oil and jet
fuel, as well as edible oils and certain chemicals such as ethanol and comply
not only with the strict regulatory standards that are currently in place but
also with the stricter regulatory standards that are currently expected to be
implemented. We charter our vessels under medium to long-term time and bareboat
charters (two to 10 years, with an average remaining term of approximately
5.3 years) to large
charterers such as BP Shipping Limited, Morgan Stanley Capital Group Inc.,
Trafigura Beheer B.V., and subsidiaries of Overseas Shipholding Group Inc.
All our charters provide for the receipt of a fixed base rate for the life of
the charter, and in the case of 10 of our 11 time charters, also provide for
profit sharing arrangements in excess of the base rate.
Business
Strategies
|
●
|
Our primary
business objective is to increase quarterly distributions per unit over
time. In
order to achieve this objective we execute the following business
strategies:
|
|
|
•
|
Maintain
and grow our cash flows. We believe that the medium to
long-term, fixed-rate nature of our charters, our profit sharing
arrangements, our contracted and potential acquisitions from Capital
Maritime or third parties and our agreement with Capital Ship Management
for the commercial and technical management of our vessels, which provides
for a fixed management fee for an initial term of approximately five years
from when we take delivery of each vessel and includes the expenses for
its next scheduled special or intermediate survey, as applicable, and
related drydocking will provide a stable and growing base of revenue and
predictable expenses that will result in stable cash flows in the medium
term.
|
|
|
•
|
Continue to
grow our fleet. We intend to continue to make strategic
acquisitions and to take advantage of our unique relationship with Capital
Maritime in a prudent manner that is accretive to our unitholders and to
long-term distribution growth. Since the Offering we have taken
delivery of five newbuildings and have also acquired two additional
vessels from Capital Maritime. We also expect to take delivery of one
additional 12,000 dwt small tanker during the second quarter of 2008 and
of two additional newbuildings in June and August of 2008. Furthermore,
pursuant to our omnibus agreement with Capital Maritime, we have the
opportunity to purchase six sister vessels currently owned or on order by
Capital Maritime, but only in the event those vessels are fixed under
medium to long-term charters. Capital Maritime also has a substantial
newbuilding program in place and we will continue to
evaluate opportunities to acquire both newbuildings and second-hand
vessels, if and when they are chartered for more than two years, from
Capital Maritime and from third parties as we seek to grow our
fleet. We
believe that our medium to long-term charters, strong relationships with
reputable shipyards and financial flexibility will allow us to make
additional accretive acquisitions based on our judgment and experience as
to prevailing market conditions.
|
|
|
•
|
Capitalize
on our relationship with Capital Maritime and expand our charters with
recognized charterers. We believe that we can leverage
our relationship with Capital Maritime and its ability to meet the
rigorous vetting processes of leading oil companies in order to attract
new customers. We also plan to increase the number of vessels we charter
to our existing charterers as well as enter into charter agreements with
new customers in order to maintain a portfolio of charters that is diverse
from a customer, geographic and maturity perspective. Following our
Offering we have added Trafigura Beheer B.V. to our customer
base, delivered the first of three vessels to Overseas Shipholding Group
and chartered an additional vessel with BP Shipping
Limited.
|
|
|
•
|
Maintain
and build on our ability to meet rigorous industry and regulatory safety
standards. Capital Ship Management, an affiliate of our
general partner that manages our vessels, has an excellent vessel safety
record, is capable of fully complying with rigorous health, safety and
environmental protection standards, and is committed to provide our
customers with a high level of customer service and support. We believe
that in order for us to be successful in growing our business in the
future we will need to maintain our excellent vessel safety record and
maintain and build on our high level of customer service and
support.
|
Competitive
Strengths
We
believe that we are well-positioned to execute our business strategies and our
future prospects for success are enhanced because of the following competitive
strengths:
|
|
•
|
Stable and
growing cash flows based on medium to long-term
charters. We believe that the medium to long-term,
fixed-rate nature of our charters, our profit sharing arrangements and our
fixed-rate management agreement provide a stable and growing base of
revenue and predictable expenses that result in stable and growing cash
flows. Our existing fleet has experienced significant growth since our
Offering, almost doubling in terms of carrying capacity. In addition, we
believe our intention to acquire the M/T Aristofanis in the second quarter
of 2008, our commitment to purchase two additional vessels scheduled for
delivery in 2008 and the potential opportunity to purchase up to an
additional six sister vessels and up to 25 modern double-hull
tankers of various sizes from Capital Maritime provides visible
opportunity for future growth in our revenue, operating income and net
income.
|
|
|
•
|
Strong
relationship with Capital Maritime. We believe our
relationship with Capital Maritime and its affiliates provides numerous
benefits that are key to our long-term growth and success, including
Capital Maritime’s reputation within the shipping industry and its network
of strong relationships with many of the world’s leading oil companies,
shipyards, commodity traders, and shipping companies. We also benefit from
Capital Maritime’s expertise in technical fleet management and its ability
to meet the rigorous vetting processes of some of the world’s most
selective major international oil companies, including BP p.l.c., Royal
Dutch Shell plc, StatoilHydro ASA, and most recently Chevron Corporation
and ExxonMobil Corporation. We believe we are well-positioned not only to
retain existing customers such as BP Shipping Limited, Morgan Stanley
Capital Group Inc., Trafigura Beheer B.V. and Overseas Shipholding Group
Inc., but also to enter into agreements with other large charterers and
oil companies.
|
|
|
•
|
Leading
position in the product tanker market, with a modern, capable fleet, built
to high specifications. Our fleet of
15 tankers includes the largest Ice Class 1A MR fleet in the
world based on number of vessels and carrying capacity. The IMO II/III and
Ice Class 1A classification notations of most of our vessels provide a
high degree of flexibility as to what cargoes our charterers can choose to
trade as they employ our fleet. We also believe that the range in size and
geographic flexibility of our fleet are attractive to our charterers,
allowing them to consider a variety of trade routes and cargoes. In
addition, with an average age of approximately 2.5 years, our fleet is one
of the youngest fleets of its size in the world. Finally, we
believe our vessels’ compliance with
existing and expected regulatory standards, the high technical
specifications of our vessels and our fleet’s flexibility to transport a
wide variety of refined products and crude oil across a wide range of
trade routes is attractive to our existing and potential
charterers.
|
|
|
•
|
Financial
strength and flexibility. At the time of the Offering we
entered into a non-amortizing revolving credit facility that provided us
with the funds to purchase the vessels delivered to us to date, including
the M/T Attikos, and we expect will provide us with the funds to pay a
substantial portion of the purchase price for the remaining two newbuildings to be
delivered in 2008. On March 19, 2008 we entered into a new 10-year
revolving credit facility of up to $350.0 million, which is non-amortizing
until March 2013, further enhancing our financial flexibility to realize
new vessel acquisitions from Capital Maritime and third parties. We may
use this facility to finance a portion of the acquisition price of
certain identified vessels currently in Capital Maritime’s fleet which we
may elect to acquire in the future and up to 50% of the purchase
price of any potential future purchases of modern tanker vessels from
Capital Maritime or any third parties. To date, we have
used $46.0 million of this
facility to fund part of the acquisition price of the M/T Amore Mio II
from Capital Maritime and expect to use approximately $11.5 million in
connection with the acquisition of the M/T Aristofanis in the second
quarter of 2008.**
|
Our
Customers
We
provide marine transportation services under medium to long-term time charters
or bareboat charters with counterparties that we believe are creditworthy.
Currently, our customers are:
|
|
•
|
BP Shipping
Limited, the shipping affiliate of BP p.l.c., one of the world’s
largest producers of crude oil and natural gas. BP p.l.c. has exploration
and production interests in 26 countries and as of December 31,
2006, BP p.l.c. had proved reserves of 17.7 billion barrels of oil
and gas equivalent.
|
|
|
•
|
Morgan
Stanley Capital Group Inc., the commodities division of Morgan
Stanley, the international investment bank, is a leading commodities
trading firm in the energy and metals markets, encompassing both physical
and derivative capabilities.
|
|
|
•
|
Overseas
Shipholding Group Inc., one of the largest independent
shipping companies in the world operating crude and product tankers. As of
December 31, 2007, Overseas
Shipholding Group Inc.’s operating fleet consisted of 214 vessels, 44
of which were under construction, aggregating 14.8 million
dwt.
|
|
|
•
|
Trafigura
Beheer
B.V., a large trader of crude oil and refined products based in The
Netherlands and founded in 1993. Trafigura is the world’s largest
independent oil trader with investments
in industrial assets around the world of more than $600 million as of
October 2007.
|
BP
Shipping Limited and Morgan Stanley Capital Group Inc. accounted for 64%
and 28% of our revenues, respectively, for the year ended December 31, 2007 and
53% and 23% of the revenues, respectively, of our predecessor, for the year
ended December 31, 2006. The loss of any significant customer or a substantial
decline in the amount of services requested by a significant customer could harm
our business, financial condition and results of operations.
Our
Fleet
At the time of the Offering on April 3,
2007, our fleet consisted of eight newly built, Ice Class 1A, IMO II/III
double-hull, MR chemical/product tankers constructed by Hyundai MIPO Dockyard
Co., Ltd. to high specifications. We also agreed to purchase from
Capital Maritime a further four Ice Class 1A IMO II/III sister vessels
which were delivered in 2007 and three IMO II/III MR chemical/product tanker
sister vessels constructed by STX Shipbuilding Co., Ltd. scheduled for
delivery in 2008 at a fixed price. Sister vessels are vessels of similar
specifications and size typically built at the same shipyard. All of the vessels
are or were designed, constructed, inspected and tested in accordance with the
rules and regulations of either Det Norske Veritas (DNV) or the American Bureau
of Shipping (ABS) and are under time or
bareboat charters commencing at the time of their delivery. The three MR
chemical/product tankers are chartered under bareboat charters to subsidiaries
of Overseas Shipholding Group Inc., which has an option to purchase
each vessel at the end of the eighth, ninth or tenth year of its
charter.
Since the
Offering, the size of our fleet has almost doubled in terms of carrying
capacity. We have
acquired the following vessels:
|
|
•
|
The
four Ice Class 1A, IMO II/III, 47,000 dwt, MR chemical/product contracted
newbuildings were delivered to us between May and September 2007 and
delivered to Morgan Stanley Inc., their charterer. The charters for all
four of these vessels are subject to profit sharing arrangements which
allow each party to share additional revenues above the base rate on a
50/50 basis. Our current fleet of 12 newly built, Ice Class 1A MR vessels
represents the largest such fleet in the world based on number of vessels
and carrying capacity. Ice Class 1A vessels may earn a premium
during winter months as they are capable of navigating through many
ice-covered routes inaccessible to standard product
tankers.
|
|
|
•
|
The
M/T Attikos, a 12,000 dwt, 2005 built, double-hull product tanker which is
chartered to Trafigura Beheer B.V. under a charter with an earliest
scheduled expiration date of September 2009, was our first non-contracted
acquisition from Capital Maritime. The vessel was delivered to us in
September 2007.
|
|
|
•
|
The
M/T Alexandros II, a 51,258 dwt IMO II/III MR chemical/product tanker, the
first of three such contracted newbuilding MR sister vessels, was
delivered in January 2008 and delivered to subsidiaries of Overseas
Shipholding Group Inc., its charterer. The two sister vessels we have
agreed to acquire from Capital Maritime are scheduled for delivery in June
and August of 2008, respectively. All vessels are capable of transporting
a range of refined oil products, chemicals (including ethanol and
biodiesel feedstock), fuel oil and crude oil
worldwide.
|
|
|
•
|
The
M/T Amore Mio II, a 159,982 dwt, 2001 built,
double-hull tanker, which is chartered to BP Shipping Limited under a
charter with an earliest scheduled expiration date of January 2011, was
acquired from Capital Maritime in March 2008. The charter is subject to a
profit sharing arrangement which is calculated and settled monthly and
which allows each party to share additional revenues above the base rate
on a 50/50 basis.
|
In
addition to the above vessels, we have entered into a letter of intent with
Capital Maritime to acquire the M/T Aristofanis and intend to complete such
acquisition during the second quarter of 2008. The M/T Aristofanis, a 12,000
dwt, 2005 built, double-hull product tanker, is chartered to Shell International
Trading & Shipping Company Ltd. under a charter with an earliest scheduled
expiration date of March 2010 and is a sister vessel to the M/T
Attikos.
We expect
that by the end of the third quarter of 2008 our fleet will consist of 18 double-hull tankers,
including the M/T Aristofanis, with an average age of approximately 2.5 years.
Potential
Additional Vessels from Capital Maritime
We intend
to continue to make strategic acquisitions and to take advantage of our unique
relationship with Capital Maritime in a prudent manner that is accretive to our
unitholders and to long-term distribution growth. Pursuant to our omnibus
agreement with Capital Maritime, Capital Maritime has granted us a right of
first offer for any MR tankers in its fleet under charter for two or more years,
giving us the opportunity to purchase up to an additional six vessels comprised
of two 37,000 dwt Ice Class 1A MR chemical/product tanker sister vessels and
four 51,000 dwt MR IMO II/III chemical/product tanker sister vessels in the
future. Capital Maritime is, however, under no obligation to fix any of these
six vessels under charters of two or more years. All six vessels are
currently under charter for less than two years or are yet to be chartered as
they are under construction. Please
read “Item 7B: Related Party Transactions” for a detailed description of our
omnibus agreement with Capital Maritime.
In
addition, Capital Maritime currently owns or has on order a total of 25
modern, double-hull
product and crude oil tankers of different sizes which we may potentially
acquire in the event those vessels were fixed under charters of two or more
years.
The first
table below provides summary information as of March 31, 2008 about the vessels
in our fleet and the vessels we have contracted to acquire or may have the
opportunity to acquire from Capital Maritime as well as their delivery date or
expected delivery date to us and their employment. The table
also includes the approximate expected termination date of the management
agreement with Capital Ship Management with respect to each vessel. The second
table provides information about the modern vessels in Capital Maritime’s fleet
as of March 31, 2008 and the year they were built or expected delivery date to
Capital Maritime. We may agree to purchase certain of these vessels from Capital
Maritime in the future. Sister vessels are denoted by the same letter in the
tables.
OUR
FLEET
|
Vessel
Name
|
Sister
Vessels
(1)
|
Year
Built/ Delivery
Date |
DWT
|
OPEX
(per
day) |
Management
Agreement Expiration |
Duration/
Charter
Type
(2)
|
Expiry
of
Charter
(3)
|
Daily
Charter
Rate (Net)
(4)
|
Profit
Sharing
|
Charterer
(5) |
Description
|
|
VESSELS CURRENTLY IN
OUR FLEET
|
|||||||||||
|
Initial
Fleet – Delivered to Us At Time of the Offering (6)
|
|||||||||||
|
Atlantas
|
A
|
2006
|
36,760
|
$250
|
Jan-Apr
2011
|
8-year
BC
|
Mar-2014
|
$15,000(7)
|
BP
|
Ice
Class 1A IMO II/III Chemical/ Product
|
|
|
Aktoras
|
A
|
2006
|
36,759
|
$250
|
Apr-Jul
2011
|
8-year
BC
|
Jun-2014
|
$15,000(7)
|
BP
|
||
|
Aiolos
|
A
|
2007
|
36,725
|
$250
|
8-year
BC
|
Feb-2015
|
$15,000(7)
|
BP
|
|||
|
Agisilaos
|
A
|
2006
|
36,760
|
$5,500
|
May-Aug
2011
|
2.5-year
TC
|
Jan-2009
|
$17,500(7)
|
ü
|
BP
|
|
|
Arionas
|
A
|
2006
|
36,725
|
$5,500
|
Aug-Nov
2011
|
2.5-year
TC
|
Apr-2009
|
$21,000(9)(8)
|
ü
|
BP
|
|
|
Axios
|
B
|
2007
|
47,872
|
$5,500
|
Dec-2011-Mar-2012
|
3-year
TC
|
Jan-2010
|
$20,500(8)
|
ü
|
BP
|
|
|
Avax
|
B
|
2007
|
47,834
|
$5,500
|
Jun
2010
|
3-year
TC
|
May-2010
|
$20,500
|
ü
|
BP
|
|
|
Assos
|
B
|
2006
|
47,872
|
$5,500
|
Feb-May
2011
|
3-year
TC
|
Oct-2009
|
$20,000
|
ü
|
MS
|
|
|
Total
DWT:
|
327,307
|
|
|||||||||
|
Vessels
Purchased from Capital Maritime since the Offering
|
|||||||||||
|
Atrotos
(6)
|
B
|
May-2007
|
47,786
|
$5,500
|
Feb-May
2012
|
3-year
TC
|
Apr-2010
|
$20,000
|
ü
|
MS
|
Ice
Class 1A IMO II/III Chemical/ Product
|
|
Akeraios
(6)
|
B
|
Jul-2007
|
47,781
|
$5,500
|
May-Aug
2012
|
3-year
TC
|
Jun-2010
|
$20,000
|
ü
|
MS
|
|
|
Anemos
I (6)
|
B
|
Sept-2007
|
47,782
|
$5,500
|
Jul-Oct
2012
|
3-year
TC
|
Aug-2010
|
$20,000
|
ü
|
MS
|
|
|
Apostolos
(6)
|
B
|
Sept-2007
|
47,782
|
$5,500
|
Jul-Oct
2012
|
3-year
TC
|
Aug-2010
|
$20,000
|
ü
|
MS
|
|
|
Attikos
(10)
|
C
|
2005
|
12,000
|
$5,500
|
Sept-Nov
2012
|
26-28
mon. TC
|
Sept-2009
|
$13,503
|
Trafigura
|
Product
|
|
|
Alexandros
II (11)(12)
|
D
|
Jan-2008
|
51,258
|
$250
|
Dec-2012-Mar
2013
|
10-year
BC
|
Dec-2017
|
$13,000
|
OSG
|
IMO
II/III Chem./Prod.
|
|
|
Amore
Mio II (13)
|
E
|
2001
|
159,982
|
$8,500
|
Mar-Apr
2013
|
3-year
TC
|
Jan-2011
|
$36,000
|
ü
|
BP
|
Crude
Oil
|
|
Total
DWT:
|
704,858
|
||||||||||
|
VESSELS WE HAVE AGREED
TO OR MAY PURCHASE FROM CAPITAL MARITIME
|
|||||||||||
|
Additional
Contracted Vessels (With Expected Delivery Date)
|
|||||||||||
|
Aristofanis
(10)
|
C
|
2005
|
12,000
|
$5,500
|
2-year
TC
|
Mar-2010
|
$12,952
|
Shell
|
Product
|
||
|
Aristotelis
II (11)(12)
|
D
|
Jun-2008
|
51,000
|
$250
|
Mar-Jun
2013
|
10-year
BC
|
May-2018
|
$13,000
|
OSG
|
IMO
II/III Chem./Prod.
|
|
|
Aris
II (11)(12)
|
D
|
Aug-2008
|
51,000
|
$250
|
May-Aug
2013
|
10-year
BC
|
Jul-2018
|
$13,000
|
OSG
|
||
|
Total
DWT:
|
114,000
|
|
|||||||||
|
Vessel
Name
|
Sister
Vessels
(1)
|
Year
Built/ Delivery
Date |
DWT
|
OPEX
(per
day) |
Management
Agreement Expiration |
Duration/
Charter
Type
(2)
|
Expiry
of
Charter
(3)
|
Daily
Charter
Rate (Net)
(4)
|
Profit
Sharing
|
Charterer
(5) |
Description
|
|
May
Purchase if Under Long-Term Charter (With Expected Delivery Date to
Capital Maritime)
|
|||||||||||
|
Aristidis
(6)
|
A
|
Jan-2006
|
36,680
|
Ice
Class 1A IMO II/III Chem./Prod.
|
|||||||
|
Alkiviadis
(6)
|
A
|
Mar-2006
|
36,721
|
||||||||
|
Agamemnon
II (11)
|
D
|
Oct-2008
|
51,000
|
IMO
II/III Chemical/
Product
|
|||||||
|
Ayrton
III (11)
|
D
|
Jan-2009
|
51,000
|
||||||||
|
Adonis
II (11)
|
D
|
Jan-2009
|
51,000
|
||||||||
|
Asterix
II (11)
|
D
|
Mar-2009
|
51,000
|
||||||||
|
Total
DWT:
|
277,401
|
||||||||||
___________
|
|
(1)
|
Sister
vessels, which are vessels of similar specifications and size typically
built at the same shipyard, are denoted in the tables by the same
letter.
|
|
(2)
|
TC:
Time Charter, BC: Bareboat Charter.
|
|
(3)
|
Earliest
possible redelivery date. With the exception of the charter for the M/T
Attikos and the M/T Aristofanis, whose charters expire on the date of
expiration, redelivery date is +/–30 days at the charterer’s
option.
|
|
(4)
|
All
rates quoted above are the net rates after we or our charterers have paid
commissions on the base rate. The BP time and bareboat charters are
subject to 1.25% commissions. The Trafigura time charter is subject to
2.5% commissions. The Shell time charter is subject to 2.25% commissions.
We do not pay any commissions for the MS time
charters.
|
|
(5)
|
BP:
BP Shipping Limited. MS: Morgan Stanley Capital Group Inc., OSG:
certain subsidiaries of Overseas Shipholding Group Inc. Trafigura:
Trafigura Beheer B.V. Shell: Shell International Trading &
Shipping Company Ltd.
|
|
(6)
|
These
vessels were built by Hyundai MIPO Dockyard Co., Ltd., South
Korea.
|
|
(7)
|
The
last three years of the BC will be at a daily charter rate of $13,433
(net).
|
|
(8)
|
In
addition to the commission on the gross charter rate, the ship broker is
entitled to an additional 1.25% commission on the amount of profit
share.
|
|
(9)
|
The
last six months of the TC will be at a net daily charter rate of
$19,000 plus a 50/50 profit sharing arrangement (from November 4, 2008 to
April 4, 2009).
|
|
(10)
|
These
vessels were built by Baima Shipyard, China. The M/T Attikos was acquired
by us in September 2007. We intend to acquire the M/T Aristofanis by the
end of the second quarter of 2008 in accordance with a letter of intent
entered into with Capital Maritime in February
2008.
|
|
(11)
|
These
vessels were built or are being built by STX Shipbuilding Co., Ltd.,
South Korea.
|
|
(12)
|
OSG
has an option to purchase each of the three STX vessels delivered or to be
delivered in 2008 at the end of the eighth, ninth or tenth year of the
applicable charter, for $38.0 million, $35.5 million and
$33.0 million, respectively, which option is exercisable six months
before the date of completion of the eighth, ninth or tenth year of the
charter. The expiration date above may therefore change depending on
whether the charterer exercises its purchase
option.
|
|
(13)
|
This
vessel was built by Daewoo Shipbuilding and Marine Engineering
Co., Ltd., South Korea and was acquired by us in March 2008.
|
|
|
CAPITAL MARITIME’S
FLEET
|
|
Vessel
Name
|
Sister Vessels
(1)
|
Year
Built/Expected Delivery
Date
|
DWT
|
Description
|
|
Suezmaxes
|
||||
|
Miltiadis
M II (2)
|
-
|
2006
|
162,396
|
ICE
Class 1A Product/Crude Oil
|
|
Alterego
II (2)
|
E
|
2002
|
159,924
|
Crude
Oil
|
|
Handy
Tankers (3)
|
||||
|
Achilleas
II
|
F
|
Jun-2010
|
25,000
|
IMO
II Chemical/Product
|
|
Athlos
II
|
F
|
Jun-2010
|
25,000
|
IMO
II Chemical/Product
|
|
Amor
II
|
F
|
Jul-2010
|
25,000
|
IMO
II Chemical/Product
|
|
Aktor
II
|
F
|
Jul-2010
|
25,000
|
IMO
II Chemical/Product
|
|
Aristos
II
|
F
|
Aug-2010
|
25,000
|
IMO
II Chemical/Product
|
|
Anaxagoras
II
|
F
|
Aug-2010
|
25,000
|
IMO
II Chemical/Product
|
|
Amadeus
II
|
F
|
Sep-2010
|
25,000
|
IMO
II Chemical/Product
|
|
Aiolos
II
|
F
|
Sep-2010
|
25,000
|
IMO
II Chemical/Product
|
|
Aktoras
II
|
F
|
Oct-2010
|
25,000
|
IMO
II Chemical/Product
|
|
Alkaios
II
|
F
|
Oct-2010
|
25,000
|
IMO
II Chemical/Product
|
|
Atlantas
II
|
F
|
Nov-2010
|
25,000
|
IMO
II Chemical/Product
|
|
Amfitrion
II
|
F
|
Nov-2010
|
25,000
|
IMO
II Chemical/Product
|
|
Small
Tankers – 14,000 dwt (4)
|
|
|||
|
Amorito
II
|
G
|
Sep-2008
|
14,000
|
IMO
II Chemical/Product
|
|
Allegro
II
|
G
|
Nov-2008
|
14,000
|
IMO
II Chemical/Product
|
|
Archimidis
II
|
G
|
Dec-2008
|
14,000
|
IMO
II Chemical/Product
|
|
Aias
II
|
G
|
Apr-2009
|
14,000
|
IMO
II Chemical/Product
|
|
Active
II
|
G
|
Jun-2009
|
14,000
|
IMO
II Chemical/Product
|
|
Amigo
II
|
G
|
Jul-2009
|
14,000
|
IMO
II Chemical/Product
|
|
Apollonas
II
|
G
|
Aug-2009
|
14,000
|
IMO
II Chemical/Product
|
|
Adamastos
II
|
G
|
Sep-2009
|
14,000
|
IMO
II Chemical/Product
|
|
Anikitos
II
|
G
|
Dec-2009
|
14,000
|
IMO
II Chemical/Product
|
|
Small
Tankers – 12,000 dwt (5)
|
|
|
||
|
Asopos
|
H
|
Aug-2008
|
12,000
|
IMO
II Chemical/Product
|
|
Akadimos
|
H
|
Nov-2008
|
12,000
|
IMO
II Chemical/Product
|
|
TOTAL
DWT:
|
772,320
|
___________
|
(1)
|
Sister
vessels, which are vessels of similar specifications and size typically
built at the same shipyard, are denoted in the tables by the same
letter.
|
|
(2)
|
These
vessels were built by Daewoo Shipbuilding and Marine Engineering
Co., Ltd., South Korea.
|
|
(3)
|
These
vessels are being built by Samho Shipbuilding Co., Ltd., South
Korea.
|
|
(4)
|
These
vessels are being built or were built by Baima Shipyard,
China.
|
| (5) |
These
vessels are being built by Ziuziang Yinxing Shipyard Co. Ltd,
China.
|
Our
Charters
All of our current vessels and the
vessels we have contracted to purchase from Capital Maritime are or will be at
the time of delivery under medium to long-term time charters or bareboat
charters of more than two years. Under certain circumstances we may operate
vessels in the spot market until the vessels have been fixed under appropriate
medium to long-term charters.
Time
Charters
A time
charter is a contract for the use of a vessel for a fixed period of time at a
specified daily rate. Under a time charter, the vessel’s owner provides crewing
and other services related to the vessel’s operation, the cost of which is
included in the daily rate and the charterer is responsible for substantially
all vessel voyage costs, except for commissions which are assumed by the owner.
In the case of the vessels under time charter to Morgan Stanley Capital Group
Inc., the charterer is also responsible for the payment of all commissions. The
basic hire rate payable under the charters is a previously agreed daily rate, as
specified in the charter, payable at the beginning of the month in U.S. Dollars.
We currently have 11 vessels under time charter of which five are with Morgan
Stanley Capital Group Inc., five with BP Shipping Limited and one with Trafigura
Beheer B.V. Of our 11 time charters, 10 contain profit-sharing provisions that
allow us to realize at a pre-determined percentage additional revenues when spot
rates are higher than the base rates incorporated in our charters or, in some
instances, through greater utilization of our vessels by our
charterers.
Profit
Sharing Arrangements
Morgan Stanley Profit
Sharing. The profit sharing
arrangements for our vessels time chartered with Morgan Stanley Capital Group
Inc. are calculated on the basis of a weighted monthly average of three indices
published daily by the Baltic Exchange based on specific routes and cargo sizes
representative of the vessel’s trading. At the end of each month, the
monthly average of each route is calculated and the Time Charter Equivalent
(TCE) for a round voyage is estimated based upon the weighted average of the
three routes, the speed and consumption of the vessel in question, bunker prices
at agreed ports as published by Platts, port expenses adjusted twice a year and
other parameters mutually agreed such as loading/discharging time, bad weather
and commissions. If the weighted average hire rate is less than or equal to the
basic hire rate, then we receive the basic hire rate only. If the weighted
average hire exceeds the basic hire rate, then we receive the basic hire
rate plus 50% of the excess. However, we also have the right to access the
charterer’s annual results of operations for each vessel and if it is shown that
the vessel has performed better than the estimated profit outlined above, then
we may opt to use the charterer’s results of operations and are reimbursed the
difference between profits received under the first option outlined above, and
50% of actual vessel profits above the basic hire rate. With the exception of
the profit share arrangement for the M/T Assos, where 1.25% commission is
deducted from the gross profit share amount, no commissions are payable on
revenues derived from our profit shares. Annual results of operations from the
charterer are to be presented by December 31 of each year for the period
commencing December 1 of the previous year to November 30 of the year
in question.
BP Profit Sharing. With the
exception of the M/T Amore Mio II, our profit sharing arrangements for our
vessels time chartered with BP Shipping Limited are based on the calculation of
the TCE according to the “last to next” principle. Actual voyage revenues earned
and received, actual expenses incurred and actual time taken to perform the
voyage are used for the purpose of the calculation. The charterer is obliged to
provide us with a copy of each fixture note and all reasonable documentation
with respect to items of cost and earnings referring to each voyage within every
calculation period, as well as with a statement listing actual voyage results
for voyages completed and estimated results for any voyage not completed at the
time of settlement. When actual revenue and/or expenses have not been settled,
BP Shipping Limited’s estimates apply but remain subject to adjustment upon
closing of actual accounts. If the average daily TCE is less than or equal to
the basic gross hire rate, then we receive the basic net hire rate only. If the
average daily TCE exceeds the basic gross hire rate, then we receive the basic
net hire rate plus 50% of the excess over the gross hire rate. In addition to
the 1.25% commission we pay on the gross charter rate for each vessel, the
relevant ship broker is also entitled to an additional 1.25% commission on the
amount of profit share received from the M/T Agisilaos, the M/T Arionas, the M/T
Axios and the M/T Amore Mio II. In the case of the M/T
Amore Mio II, the calculation of the profit share is based on the weighted
monthly average of two indices published daily by the Baltic Exchange based on specific routes
and cargo sizes representative of the vessel’s trading. The profit share
with BP Shipping Limited is calculated and settled quarterly, except for the
profit share for the M/T Amore Mio II, which is calculated and settled
monthly.
TCE rate
is a shipping industry performance measure used primarily to compare daily
earnings generated by vessels on time charters with daily earnings generated by
vessels on voyage charters, because charter hire rates for vessels on voyage
charters are generally not expressed in per day amounts while charter hire rates
for vessels on time charters generally are expressed in such amounts. TCE is
expressed as per ship per day rate and is calculated as voyage and time charter
revenues less voyage expenses during a period divided by the number of operating
days during the period, which is consistent with industry
standards.
Please
read “—Our Fleet” above, including the chart and accompanying notes, for more
information on our time charters, including expected expiration dates and daily
charter rates.
Bareboat
Charters
A
bareboat charter is a contract pursuant to which the vessel owner provides the
vessel to the customer for a fixed period of time at a specified daily rate, and
the customer provides for all of the vessel’s operating expenses including
crewing, repairs, maintenance, insurance, stores, lube oils and communication
expenses in addition to the voyage costs and generally assumes all risk of
operation. The customer undertakes to maintain the vessel in a good state of
repair and efficient operating condition and drydock the vessel during this
period at its cost and as per the classification society requirements. The basic
rate hire is payable to us monthly in advance in U.S. Dollars.
We
currently have four vessels under bareboat charter, three with BP Shipping
Limited and one with subsidiaries of Overseas Shipholding Group Inc. The two
vessels scheduled for delivery by the third quarter of 2008 have also been fixed
under bareboat charters commencing at the time of delivery with subsidiaries of
Overseas Shipholding Group Inc. The charters entered into with subsidiaries of
Overseas Shipholding Group Inc. are fully and unconditionally guaranteed by
Overseas Shipholding Group Inc. Our charters with respect to the M/T
Alexandros II, Aristotelis II and Aris II include options for the charterer to
purchase each vessel for $38.0 million, $35.5 million or
$33.0 million at the end of the eighth, ninth or tenth year of the charter,
respectively. In each case, the option to purchase the vessel must be exercised
six months prior to the end of the charter year. Please read “—Our Fleet” above,
including the chart and accompanying notes, for more information on our bareboat
charters, including the expected expiration dates and daily charter
rates.
Seasonality
Our
vessels operate under medium to long-term charters and are not generally subject
to the effect of seasonable variations in demand.
Management
of Ship Operations, Administration and Safety
Capital
Maritime provides, through its subsidiary Capital Ship Management, expertise in
various functions critical to our operations. This affords a safe, efficient and
cost-effective operation and, pursuant to a management agreement and an
administrative services agreement we have entered into with Capital Ship
Management, we have access to human resources, financial and other
administrative services, including bookkeeping, audit and accounting services,
administrative and clerical services, banking and financial services, client and
investor relations and technical management services, including commercial
management of the vessels, vessel maintenance and crewing (not required for
vessels subject to bareboat charters), purchasing and insurance and shipyard
supervision.
Under
our time charter arrangements, Capital Ship Management, our manager, is
generally responsible for commercial, technical, health and safety and
other management services related to the vessels’ operation, and the charterer
is responsible for port expenses, canal dues and bunkers and, in the case of the
Morgan Stanley Capital Group Inc. time charters, for
commissions. Pursuant to our management
agreement, we pay a fixed daily fee of $5,500 per vessel for our time chartered
vessels ($8,500 for the M/T Amore Mio II), for an initial term of approximately
five years from when we take delivery of each vessel and covers vessel operating
expenses, which include crewing, repairs and maintenance, insurance and the
expenses of the next scheduled special or intermediate survey for each vessel,
as applicable, and related drydocking. Please see the table in “—Our Fleet” above for a list of the
approximate expected termination dates of the management agreement with
Capital Ship Management with respect to each vessel currently in our fleet.
Capital Ship Management is directly responsible for providing all of these items
and services. The sole expense we incur in connection with our vessels under
bareboat charter is a daily fee of $250 per bareboat chartered vessel payable to
Capital Ship Management, mainly to cover compliance costs. Capital Ship
Management may provide these services to us directly or it may subcontract for
certain of these services with other entities, including other Capital Maritime
subsidiaries. Going
forward, when we acquire new vessels or when the respective management
agreements for our vessels expire, we will have to enter
into new agreements which may provide for different fees or include different
terms. For more information on the management agreement and
administrative services agreements we have with Capital Ship Management please
read “Item 7B: Related Party Transactions—Management Agreement” and
“—Administrative Services Agreement.”
Capital
Ship Management operates under a safety and quality management system certified
under the ISM Code and complies with the quality assurance standard ISO 9001,
the environmental management standard ISO 14001 and the Occupational Health
& Safety Management System (OHSAS) 18001 with Lloyds Register of Shipping.
As a result, our vessels are operated in a manner intended to protect the safety
and health of Capital Maritime’s employees, the general public and the
environment. Capital Maritime’s technical management team actively manages the
risks inherent in our business and is committed to eliminating incidents that
threaten safety, such as groundings, fires, collisions and petroleum spills, as
well as reducing emissions and waste generation.
Major
Oil Company Vetting Process
Shipping
in general, and crude oil, refined product and chemical tankers, in particular,
have been, and will remain, heavily regulated. Many international and national
rules, regulations and other requirements – whether imposed by the
classification societies, international statutes (IMO, SOLAS (defined below),
MARPOL, etc.), national and local administrations or industry – must be complied
with in order to enable a shipping company to operate and a vessel to
trade.
Traditionally
there have been relatively few large players in the oil trading business and the
industry is continuously consolidating. The so called “oil majors companies”,
such as ExxonMobil Corporation, BP p.l.c., Royal Dutch Shell plc, Chevron
Corporation, ConocoPhillips, StatoilHydro ASA and Total S.A., together with a
few smaller companies, represent a significant percentage of the production,
trading and, especially, shipping logistics (terminals) of crude and refined
products world-wide. Concerns for the environment, health and safety have led
the oil majors to develop and implement a strict due diligence process when
selecting their commercial partners. This vetting process has evolved into a
sophisticated and comprehensive risk assessment of both the vessel operator and
the vessel.
While a
plethora of parameters are considered and evaluated prior to a commercial
decision, the oil majors, through their association, the Oil Companies
International Marine Forum (OCIMF), have developed and are implementing two
basic tools: (i) a Ship Inspection Report Programme (SIRE) and (ii) the Tanker
Management & Self Assessment (TMSA) Program. The former is a physical ship
inspection based upon a thorough Vessel Inspection Questionnaire (VIQ), and
performed by accredited OCIMF inspectors, resulting in a report being logged on
SIRE, while the latter is a recent addition to the risk assessment tools used by
the oil majors.
Based
upon commercial needs, there are three levels of risk assessment used by the oil
majors: (i) terminal use, which will clear a vessel to call at one of the oil
major’s terminals; (ii) voyage charter, which will clear the vessel for a single
voyage; and (iii) term charter, which will clear the vessel for use for an
extended period of time. The depth, complexity and difficulty of each of these
levels of assessment vary. While for the terminal use and voyage charter
relationships a ship inspection and the operator’s TMSA will be sufficient for
the assessment to be undertaken, a term charter relationship also requires a
thorough office assessment. In addition to the commercial interest on the part
of the oil major, an excellent safety and environmental protection record is
necessary to ensure an office assessment is undertaken.
We
believe Capital Maritime and Capital Ship Management are among a small number of
ship management companies to have undergone and successfully completed audits by
five major international oil companies in the last few years (i.e., BP p.l.c.,
Royal Dutch Shell plc, StatoilHydro ASA, Chevron Corporation and ExxonMobil
Corporation).
Crewing
and Staff
Capital
Maritime recruits the senior officers and all other crew members for our vessels
either directly through a subsidiary crewing office in Romania or through a
crewing agent. Capital Maritime also maintains a presence in Russia and has
entered into an agreement for the training of officers under ice conditions at a
specialized training center in St. Petersburg. Capital Maritime’s vessels are
currently manned primarily by Romanian, Russian and Filipino crew members.
Having employed these crew configurations for a number of years, Capital
Maritime has considerable experience in operating vessels in this configuration
and has a pool of certified and experienced crew members.
Classification,
Inspection and Maintenance
Every
oceangoing vessel must be “classed” and certified by a classification society.
The classification society is responsible for verifying that the vessel has been
built and maintained in accordance with the rules and regulations of the
classification society and ship’s country of registry as well as the
international conventions of which that country has accepted and signed. In
addition, where surveys are required by international conventions and
corresponding laws and ordinances of a flag state, the classification society
will undertake them on application or by official order, acting on behalf of the
authorities concerned. The classification society also undertakes on request
other surveys and checks that are required by regulations and requirements of
the flag state or port authority. These surveys are subject to agreements made
in each individual case and/or to the regulations of the country
concerned.
For
maintaining the class status, regular and extraordinary surveys of hull and
machinery, including the electrical plant, and any special equipment classed are
required to be performed as follows:
Annual Surveys, which are
conducted for the hull and the machinery at intervals of 12 months.
Intermediate Surveys, which
are extended surveys and are conducted two and one-half years after
commissioning and after each class renewal survey. In the case of newbuildings,
the requirements of the intermediate survey can be met through an underwater
inspection in lieu of drydocking the vessel.
Class Renewal Surveys (also
known as special
surveys) are carried out at the intervals indicated by the classification
for the hull (usually at five year intervals). During the special survey, the
vessel is thoroughly examined, including Non-Destructive Inspections
(NDIs) to determine the thickness of the steel structures. Should the
thickness be found to be less than class requirements, the classification
society will order steel renewals. The classification society may grant a
one-year grace period for completion of the special survey. Substantial amounts
of funds may have to be spent for steel renewals to pass a special survey if the
vessel experiences excessive wear and tear. In lieu of the special survey every
five years, depending on whether a grace period is granted, a ship-owner has the
option of arranging with the classification society for the vessel’s hull or
machinery to be on a continuous survey cycle, in which every part of the vessel
would be surveyed within a five-year cycle. At an owner’s application, the
surveys required for class renewal may be split according to an agreed schedule
to extend over the entire period of class. This process is referred to as ESP -
Enhanced Survey Program and CSM - Continuous Machinery Survey.
All areas
subject to survey, as defined by the classification society, are required to be
surveyed at least once per class period, unless shorter intervals between
surveys are prescribed elsewhere.
Most
insurance underwriters make it a condition for insurance coverage that a vessel
be certified as “in class” by a classification society which is a member of the
International Association of Classification Societies. All of our vessels are
certified as being “in class” by American Bureau of Shipping, Det Norske Veritas
and, in the case of the M/T Attikos, China Classification
Society. All of the newbuildings we currently have on order and any
other new and secondhand vessels that we purchase must be certified prior to
their delivery. If any vessel we have contracted to purchase is not certified as
“in class” on the date of closing, we have no obligation to take delivery of the
vessel.
Risk
Management and Insurance
The
operation of any ocean-going vessel carries an inherent risk of catastrophic
marine disasters, death or personal injury and property losses caused by adverse
weather conditions, mechanical failures, human error, war, terrorism, piracy and
other circumstances or events. The occurrence of any of these events may result
in loss of revenues or increased costs or, in the case of marine disasters,
catastrophic liabilities. Although we believe our current insurance program is
comprehensive, we cannot insure against all risks, and we cannot be certain that
all covered risks are adequately insured against or that we will be able to
achieve or maintain similar levels of coverage throughout a vessel’s useful
life. Furthermore, there can be no guarantee that any specific claim will be
paid by the insurer or that it will always be possible to obtain insurance
coverage at reasonable rates. More stringent environmental regulations at times
in the past have resulted in increased costs for, and may result in the lack of
availability of, insurance against the risks of environmental damage or
pollution. Moreover, under the terms of our bareboat charters, the charterer
provides for the insurance of the vessel, and as a result, these vessels may not
be adequately insured and/or in some cases may be self-insured. Any uninsured or
under-insured loss could harm our business and financial condition.
We
currently carry “hull and machinery”, “increased value”, “protection and
indemnity” and “war risk” insurance coverage for each of our vessels to protect
against most of the accident-related risks involved in the conduct of our
business:
|
|
•
|
Hull and machinery
insurance covers loss of or damage to a vessel due to marine perils
such as collisions, grounding and weather and the coverage is usually to
an agreed “insured value” which, as a matter of policy, is never less than
the particular vessel’s fair market
value.
|
|
|
•
|
Increased value insurance
augments hull and machinery insurance cover by providing a low-cost
means of increasing the insured value of the vessels in the event of a
total loss casualty.
|
|
|
•
|
Protection and indemnity
insurance is the principal coverage for third party liabilities and
indemnifies against other liabilities incurred while operating vessels,
including injury to the crew, third parties, cargo or third party property
loss for which the shipowner is responsible and pollution. The current
available amount of our coverage for pollution is $1.0 billion per
vessel per incident.
|
|
|
•
|
War Risks insurance
covers such items as piracy and
terrorism.
|
Not all
risks are insured and not all risks are insurable. The principal insurable risks
which nevertheless remain uninsured across the fleet are “loss of hire” and
“strikes.” Capital Maritime does not insure these risks because the costs are
regarded as disproportionate to the benefit.
The
following table sets forth certain information regarding our insurance coverage
as of December 31, 2007.
|
Type
|
Aggregate Sum Insured
For All Vessels in our Existing Fleet
|
|
|
Hull
and Machinery
|
$551.0
million (increased value insurance (including excess liabilities) provides
additional coverage).
|
|
|
Increased
Value (including Excess Liabilities)
|
Up
to $268.0 million additional coverage in total.
|
|
|
Protection
and Indemnity (P&I)
|
Pollution
liability claims: limited to $1.0 billion per vessel per
incident.
|
|
|
War
Risk
|
$819.0
million.
|
The
International Product Tanker Industry
The
international seaborne transportation industry represents the most cost
effective method of transporting large volumes of crude oil and refined
petroleum products. The seaborne movement of refined petroleum products between
regions addresses demand and supply imbalances for such products caused by the
lack of resources or refining capacity in consuming countries. Global demand for
the shipping of refined products and crude oil has grown historically at a
faster rate than the demand for the refined products and the crude oil
themselves. The demand for product and crude oil tankers is cyclical
and a function of several factors, including the general strength of the
economy, location of oil production and the distance from refineries as well as
refining and consumption and world oil demand and supply. Due to increasing
environmental restrictions on the building of refineries in the countries that
belong to the Organization for Economic Co-operation and Development (the
“OECD”), additional refineries are expected to continue to be built at locations
far from such points of consumption, resulting in refined product tankers being
required to travel longer distances on each voyage.
Competition
We
operate in a highly fragmented, highly diversified global market with many
charterers, owners and operators of vessels. Competition for charters can be
intense and depends on price as well as on the location, size, age, condition
and acceptability of the vessel and its operator to the charterer and is
frequently tied to having an available vessel which has met the strict
operational and financial standards established by oil majors to pre-qualify or
vet tanker operators prior to entering into charters with them. Although we
believe that at the present time no single company has a dominant position in
the markets in which we compete, that could change and we may face substantial
competition for medium to long-term charters from a number of experienced
companies who may have greater resources or experience than we do when we try to
recharter our vessels. However, we believe the young age of our fleet which is
one of the youngest in the industry, the high specifications of our vessels,
including the ability of most of our vessels to transport refined oil products
and certain chemicals, and the fact that 11 of our 15 charter contracts will
expire on or after January 2010 (the date at which all single-hull tankers
are due to be phased out under IMO regulations) when the number of vessels
available for rehire will have decreased, position us well to recharter our
vessels. In addition, Capital Maritime is among a small number of ship
management companies that has undergone and successfully completed audits by
five major international oil companies in the last few years, including audits
with BP p.l.c., Royal Dutch Shell plc, StatoilHydro ASA, Chevron Corporation and
ExxonMobil Corporation. We believe our ability
to comply with the rigorous and comprehensive standards of major oil companies
relative to less qualified or experienced operators allows us to compete
effectively for new charters.
Regulation
General
Our
operations and our status as an operator and manager of ships are significantly
regulated by international conventions, (i.e. SOLAS, MARPOL), Class
requirements, U.S. federal, state and local and foreign health, safety and
environmental protection laws and regulations, including OPA 90, the
Comprehensive Environmental Response, Compensation, and Liability Act
("CERCLA"), the U.S. Port and Tanker Safety Act, the Act to Prevent Pollution
from Ships, regulations adopted by the IMO and the European Union, various
volatile organic compound air emission requirements, IMO/U.S. Coast Guard
pollution regulations and various Safety of Life at Sea ("SOLAS") amendments, as
well as other regulations described below. In addition, various jurisdictions
either have or are considering regulating the management of ballast water to
prevent the introduction of non-indigenous species considered to be invasive.
Compliance with these laws, regulations and other requirements could entail
additional expense, including vessel modifications and implementation of certain
operating procedures.
We are
also required by various other governmental and quasi-governmental agencies to
obtain permits, licenses and certificates for our vessels, depending upon such
factors as the country of registry, the commodity transported, the waters in
which the vessel operates, the nationality of the vessel’s crew, the age and
size of the vessel and our status as owner or charterer. Failure to maintain
necessary permits, licenses or certificates could require us to incur
substantial costs or temporarily suspend operations of one or more of our
vessels.
We
believe that the heightened environmental and quality concerns of insurance
underwriters, regulators and charterers will in the future impose greater
inspection and safety requirements on all vessels in the shipping industry. In
addition to inspections by us, our vessels are subject to both scheduled and
unscheduled inspections by a variety of governmental and private entities, each
of which may have unique requirements. These entities include the local port
authorities (such as U.S. Coast Guard, harbor master or equivalent),
classification societies, flag state administration P&I Clubs, charterers,
and particularly terminal operators and major oil companies which conduct
frequent vessel inspections.
Our
vessels operate in full compliance with applicable environmental laws and
regulations. However, because such laws and regulations frequently change and
may impose increasingly strict requirements, we cannot predict the ultimate cost
of complying with these and any future requirements or the impact of these and
any future requirements on the resale value or useful lives of our
vessels.
United
States Requirements
The
United States regulates the tanker industry with an extensive regulatory and
liability regime for environmental protection and the cleanup of oil spills,
primarily through OPA 90 and CERCLA.
OPA 90
affects all vessel owners and operators shipping oil or petroleum products to,
from, or within U.S. waters. The law phases out the use of tankers having
single-hulls and can effectively impose unlimited liability on vessel owners and
operators in the event of an oil spill. Under OPA 90, vessel owners, operators
and bareboat charterers are liable, without regard to fault, for all containment
and clean-up costs and other damages, including natural resource damages and
economic loss without physical damage to property, arising from oil spills and
pollution from their vessels. OPA 90 had historically limited liability to the
greater of $1,200 per gross ton or $10.0 million per tanker that is over
3,000 gross tons (subject to possible adjustment for inflation), unless the
incident was caused by gross negligence, willful misconduct, or a violation of
certain regulations, in which case liability was unlimited. Amendments to OPA 90
signed into law on July 11, 2006, however, increased these limits on the
liability of responsible parties to the greater of $1,900 per gross ton or
$16.0 million per tanker that is double-hulled and over 3,000 gross tons.
In addition, OPA 90 does not preempt state law and permits individual states to
impose their own liability regimes with regard to oil pollution incidents
occurring within their boundaries. Coastal states have enacted pollution
prevention, liability and response laws, many providing for unlimited liability.
CERCLA, which applies to the discharge of hazardous substances (other than oil)
whether on land or at sea, contains a similar liability regime and provides for
cleanup, removal and natural resource damages. Liability under CERCLA is limited
to the greater of $300 per gross ton or $0.5 million, unless the incident
is caused by gross negligence, willful misconduct, or a violation of certain
regulations, in which case liability is unlimited.
The
financial responsibility regulations for tankers issued under OPA 90 also
require owners and operators of vessels entering U.S. waters to obtain, and
maintain with the U.S. Coast Guard, Certificates of Financial Responsibility, or
COFRs, in the amount of $1,500 per gross ton for tankers, combining the previous
OPA 90 limitation of liability of $1,200 per gross ton with the CERCLA liability
of $300 per gross ton. The U.S. Coast Guard has indicated that it intends to
propose a rule that will increase the required amount of such COFRs to $2,200
per gross ton to reflect the higher limits on liability imposed by the
July 2006 amendments to OPA 90, as described above. Under the regulations,
owners or operators of fleets of vessels are required to demonstrate evidence of
financial responsibility for each covered tanker up to the maximum aggregate
liability under OPA 90 and CERCLA. All of our vessels that need COFRs have
them.
We insure
each of our tankers with pollution liability insurance in the maximum
commercially available amount of $1.0 billion per incident. A catastrophic
spill could exceed the insurance coverage available, in which event there could
be a material adverse effect on our business. OPA 90 requires that tankers over
5,000 gross ton calling at U.S. ports have double hulls if contracted after
June 30, 1990 or delivered after January 1, 1994. Furthermore, OPA 90
calls for the phase-out of all single hull tankers by the year 2015 according to
a schedule that is based on the size and age of the vessel, unless the tankers
are retrofitted with double-hulls. All of our current vessels as well as the
vessels that we have agreed to purchase have double hulls.
OPA 90
also amended the Federal Water Pollution Control Act (the "Clean Water Act") to
require owners and operators of vessels to adopt contingency plans for reporting
and responding to oil spill scenarios up to a “worst case” scenario and to
identify and ensure, through contracts or other approved means, the availability
of necessary private response resources to respond to a “worst case discharge.”
In addition, periodic training programs and drills for shore and response
personnel and for vessels and their crews are required. Our vessel response
plans have been approved by the U.S. Coast Guard.
The Clean
Water Act prohibits the discharge of oil or hazardous substances in U.S.
navigable waters and imposes strict liability in the form of penalties for
unauthorized discharges. The Clean Water Act also imposes substantial liability
for the costs of removal, remediation and damages and complements the remedies
available under the more recent OPA 90 and CERCLA, discussed above. The U.S.
Environmental Protection Agency (the "EPA") had exempted the discharge of
ballast water and other substances incidental to the normal operation of vessels
in U.S. ports from Clean Water Act permitting requirements. However, on
March 30, 2005, a U.S. District Court ruled that the EPA exceeded its
authority in creating an exemption for ballast water. On September 18,
2006, the court issued an order invalidating the exemption in the EPA’s
regulations for all discharges incidental to the normal operation of a vessel as
of September 30, 2008, and directing the EPA to develop a system for
regulating all discharges from vessels by that date. The EPA has appealed this
decision. However, if the exemption is ultimately repealed, we would be subject
to Clean Water Act permit requirements that could include ballast water
treatment obligations that could increase the cost of operating in the United
States. For example, this could require the installation of equipment on our
vessels to treat ballast water before it is discharged or the implementation of
other port facility disposal arrangements or procedures at potentially
substantial cost and/or otherwise restrict our vessels from entering U.S.
waters.
We
believe that we are in compliance with OPA 90, CERCLA and all applicable state
regulations in U.S. ports where our vessels call.
International
Requirements
The IMO
has also negotiated international conventions that impose liability for oil
pollution in international waters and a signatory’s territorial waters. In
September 1997, the IMO adopted Annex VI to the International Convention
for the Prevention of Pollution from Ships to address air pollution from ships.
Annex VI, which became effective in May 2005, sets limits on sulphur oxide
and nitrogen oxide emissions from ship exhausts and prohibits deliberate
emissions of ozone depleting substances, such as chlorofluorocarbons. Annex VI
also includes a global cap on the sulphur content of fuel oil and allows for
special areas to be established with more stringent controls on sulphur
emissions. A failure to comply with Annex VI requirements could result in a
vessel not being able to operate.
All of
our vessels are subject to Annex VI regulations. We believe that our existing
vessels meet relevant Annex VI requirements and that our undelivered product
tankers will be fitted with these emission control systems prior to their
delivery.
The ISM
Code, promulgated by the IMO, also requires the party with operational control
of a vessel to develop an extensive safety management system that includes,
among other things, the adoption of a safety and environmental protection policy
setting forth instructions and procedures for operating its vessels safely and
describing procedures for responding to emergencies. The ISM Code requires that
vessel operators obtain a safety management certificate for each vessel they
operate. No vessel can obtain a certificate unless its manager has been awarded
a document of compliance, issued by each flag state, under the ISM Code. All of
our ocean going vessels are ISM certified.
Noncompliance
with the ISM Code and other IMO regulations may subject the shipowner or
bareboat charterer to increased liability, may lead to decreases in available
insurance coverage for affected vessels and may result in the denial of access
to, or detention in, some ports. For example, the U.S. Coast Guard and EU
authorities have indicated that vessels not in compliance with the ISM Code will
be prohibited from trading in U.S. and EU ports.
Many
countries have ratified and follow the liability plan adopted by the IMO and set
out in the International Convention on Civil Liability for Oil Pollution Damage
of 1969 (the "CLC") (the United States, with its separate OPA 90 regime, is not
a party to the CLC). Under this convention and depending on whether the country
in which the damage results is a party to the 1992 Protocol to the International
Convention on Civil Liability for Oil Pollution Damage, a vessel’s registered
owner is strictly liable for pollution damage caused in the territorial waters
of a contracting state by discharge of persistent oil, subject to certain
defenses. Under an amendment to the Protocol that became effective on
November 1, 2003, for vessels of 5,000 to 140,000 gross tons, liability
will be limited to approximately $6.6 million plus $926 for each additional
gross ton over 5,000. For vessels of over 140,000 gross tons, liability will be
limited to approximately $131.0 million. As the convention calculates
liability in terms of a basket of currencies, these figures are based on
currency exchange rates on December 31, 2006. The right to limit liability
is forfeited under the International Convention on Civil Liability for Oil
Pollution Damage where the spill is caused by the owner’s actual fault and under
the 1992 Protocol where the spill is caused by the owner’s intentional or
reckless conduct. Vessels trading to states that are parties to these
conventions must provide evidence of insurance covering the liability of the
owner. In jurisdictions where the International Convention on Civil Liability
for Oil Pollution Damage has not been adopted, various legislative schemes or
common law regimes govern, and liability is imposed either on the basis of fault
or in a manner similar to that convention. We believe that our P&I insurance
will cover the liability under the plan adopted by the IMO.
IMO
regulations also require owners and operators of vessels to adopt Shipboard
Marine Pollution Emergency Plans ("SMPEPs"). Periodic training and drills for
response personnel and for vessels and their crews are required. The SMPEPs
required for our vessels are in place.
In
addition, our operations are subject to compliance with the International Bulk
Chemical ("IBC") Code, as required by MARPOL and SOLAS for chemical tankers
built after July 1, 1986, which provides ship design, construction and
equipment requirements and other standards for the bulk transport of certain
liquid chemicals. Under October 2004 amendments to the IBC Code
(implemented to meet recent revisions to SOLAS and Annex II to MARPOL), some
previously unrestricted vegetable oils, including animal fats and marine oils,
must be transported in chemical tankers meeting certain double-hull construction
requirements. Our vessels may transport such cargoes but are restricted as to
the volume they are able to transport per cargo tank. This restriction does not
apply to edible oils. In addition, those amendments require re-evaluation of the
categorization of certain products with respect to their properties as marine
pollutants, as well as related ship type and carriage requirements. Where
necessary pollution data is not supplied for those products missing such data,
it is possible that the bulk carriage of such products will be
prohibited.
Vessel
Security Regulations
Since the
terrorist attacks of September 11, 2001, there have been a variety of
initiatives intended to enhance vessel security. On November 25, 2002, the
Maritime Transportation Security Act of 2002 ("MTSA") came into effect. To
implement certain portions of the MTSA, in July 2003, the U.S. Coast Guard
issued regulations requiring the implementation of certain security requirements
aboard vessels operating in waters subject to the jurisdiction of the United
States.
Similarly,
in December 2002, amendments to SOLAS created a new chapter of the
convention dealing specifically with maritime security. The new chapter went
into effect in July 2004, and imposes various detailed security obligations
on vessels and port authorities, most of which are contained in the newly
created International Ship and Port Facilities Security ("ISPS") Code. Among the
various requirements are:
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on-board
installation of automatic identification systems to enhance
vessel-to-vessel and vessel-to-shore
communications;
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on-board
installation of ship security alert
systems;
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the
development of vessel security plans;
and
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compliance
with flag state security certification
requirements.
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The U.S.
Coast Guard regulations, intended to align with international maritime security
standards, exempted non-U.S. vessels from MTSA vessel security measures provided
such vessels had on board, by July 1, 2004, a valid International Ship
Security Certificate that attests to the vessel’s compliance with SOLAS security
requirements and the ISPS Code. We have implemented the various security
measures addressed by the MTSA, SOLAS and the ISPS Code and have ensured that
our vessels are compliant with all applicable security
requirements.
C.
Organizational Structure
Please
also see Exhibit
8.1 to this Annual Report for a list of our significant subsidiaries as of
December 31, 2007.
D.
Property, Plants and Equipment
Other
than our vessels, we do not have any material property.
Item 4A. Unresolved Staff Comments.
Not Applicable.
Item 5. Operating and Financial
Review and Prospects.
You
should read the following discussion of our financial condition and results of
operations in conjunction with the audited consolidated and predecessor combined
financial statements and related notes of Capital Product Partners L.P. included
elsewhere in this Annual Report. Among other things, those financial statements
include more detailed information regarding the basis of presentation for the
following information. The financial statements have been prepared in accordance
with U.S. GAAP and are presented in U.S. Dollars.
A.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
Overview
We are an international owner of
product tankers formed in January 2007 by Capital Maritime, an international
shipping company with a long history of operating and investing in the shipping
market. As of December 31, 2007, our fleet consisted of 13
double-hull, high specification tankers, eight of which were transferred to us
by Capital Maritime at the time of our Offering. Concurrently with the Offering,
we also agreed to purchase an additional seven newbuildings from Capital
Maritime delivered or scheduled for delivery during 2007 and 2008 at a fixed
price, four of which had been delivered as of December 31, 2007. These four Ice
Class 1A IMO II/III newbuilding sister vessels were delivered between May and
September 2007. In September 2007 we also acquired the M/T Attikos, a 12,000
dwt, 2005 built product tanker from Capital Maritime which we had not previously
agreed to purchase. In January 2008 we took delivery of the M/T Alexandros II, a
51,258 dwt MR IMO II/III chemical/product tanker, the first of three such
newbuilding sister vessels which we contracted to acquire from Capital Maritime
at the time of our Offering. The remaining two vessels are scheduled for
delivery in June and August 2008 respectively. In addition, in the first quarter
of 2008 we acquired the M/T Amore Mio II, a 159,982 dwt, 2001 built tanker from
Capital Maritime. We also intend to acquire the M/T Aristofanis, a 12,000 dwt,
2005 built product tanker, from Capital Maritime during the second quarter of
2008. We expect that by the end of the third quarter of 2008 our fleet will
consist of 18 double-hull tankers, including the M/T Aristofanis, with an
average age of approximately 2.5 years.
Our primary business objective is to
provide our unitholders with steadily rising distributions per unit over the
long-term. Our growth strategy focuses on maintaining and growing our cash
flows, continuing to grow our product tanker fleet and maintaining and building
on our ability to meet rigorous industry and regulatory safety standards. We
believe that the combination of the medium to long-term nature of our charters
and our agreement with Capital Ship Management for the commercial and technical
management of our vessels, which provides for a fixed management fee for an
initial term of approximately five years from when we take delivery of each
vessel, will provide us with a strong base of stable cash flows in the medium
term. We intend to continue to make strategic
acquisitions and leverage the expertise and reputation of Capital Maritime in a
prudent manner that is accretive to our unitholders and to long-term
distribution growth.
Our
Initial Public Offering
On April 3, 2007, we completed our
Offering on the Nasdaq Global Market of 13,512,500 common units at a price of
$21.50 per unit which included 1,762,500 common units issued to the underwriters
in connection with the exercise of their over-allotment option. The Offering
also included 8,805,522 subordinated units
issued to Capital Maritime and 455,470 general partner units issued to Capital GP
L.L.C., our general partner, a wholly owned subsidiary of Capital Maritime. The net proceeds from
the Offering were $270,472,956.0, including the proceeds
from the exercise of the over-allotment option by the underwriters. We
did not receive any proceeds from the sale of our common units. Capital Maritime
used part of the proceeds from our Offering to repay the debt on the eight
vessels that made up our fleet at the time of the Offering. Capital Maritime
transferred its interest in the vessel-owning companies of these eight vessels
to us at the time of the Offering. Capital Maritime also paid the offering
expenses, underwriting discounts, selling commissions and brokerage fees
incurred in connection with the Offering. As of December 31, 2007, Capital
Maritime owned a 40.7% interest in us, including a 2% interest through its
ownership of our general partner.
Potential
Additional Vessels
Pursuant
to our omnibus agreement with Capital Maritime, we have been granted a right of
first offer to purchase an additional six vessels from Capital Maritime if they
are fixed under charters of two or more years. Capital Maritime also owns or has
on order a total of 25 modern,
double-hull, modern tankers of different sizes which we may potentially
acquire in the event those vessels were fixed under charters of two or more
years. Furthermore, we will continue to evaluate
opportunities to acquire both newbuildings and second-hand vessels from Capital
Maritime and from third parties as we seek to grow our
fleet.
Historical
Results of Operations
We
commenced operations as an independent entity on April 4, 2007, at which time
Capital Maritime transferred its interest in eight vessel-owning companies to
us. Our historical results are not necessarily indicative of the results that
may be expected in the future. Specifically, our audited consolidated and
predecessor combined financial statements are not comparable, as our Offering
and certain other transactions that occurred during 2007, including the delivery
of four newbuildings, the acquisition of the M/T Attikos, the agreement we
entered into with Capital Ship Management for the provision of management and
administrative services to our fleet for a fixed fee and the new financing
arrangements we entered into, have affected our results of operations.
Furthermore, for the year ended December 31, 2006, only six of the vessels in
our current fleet had been delivered to Capital Maritime. Five of these vessels
were delivered between April and November 2006 and were in operation for only a
portion of the year.
For more detail on the differences
between our historical results and expected future results, please read
“—Factors to Consider when Evaluating our Results” and “—Results of Operations”
below.
Accounting
for Deliveries of Vessels
All
vessels we acquire or have acquired from Capital Maritime are or were
transferred to us at historical cost and accounted for as a combination of
entities under common control or a transfer of assets between entities under
common control. All assets, liabilities and equity, other than the relevant
vessel, related charter agreement and related permits, of these vessels’
ship-owning companies were retained by Capital Maritime.
At the
time of our Offering, Capital Maritime contributed eight vessels to our fleet.
Between May and September 2007 we acquired an additional five vessels from
Capital Maritime for a total purchase price of $247.0 million. These five
vessels have been recorded in our financial statements at the amount of $166.1
million, which represents the net book value of the vessels as reflected in
Capital Maritime’s consolidated financial statements at the time of transfer. We
recognize transfers of assets between entities under common control at Capital
Maritime’s basis in the assets contributed. The amount of the purchase price in
excess of Capital Maritime’s basis in the assets, $80.9 million, was recognized
as a reduction to partners’ equity and presented as a financing activity in the
statement of cash flows. For additional information on how we have accounted for
specific transfers of vessels please see Note 1 (Basis of Presentation and
General Information) to our consolidated and predecessor combined financial
statements included elsewhere in this Annual Report.
Our
Charters
We
generate revenues by charging our customers for the use of our vessels to
transport their products. Historically, we have provided services to our
customers under the following two types of contractual
relationships:
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Time charters, which
are contracts for the use of a vessel for a fixed period of time at a
specified daily rate. With the exception of our time charters with Morgan
Stanley Capital Group Inc. where we receive net daily rates, we are
responsible for the payment of all commissions under our time charters.
All other expenses related to time charter voyages are assumed by the
charterers. Capital Ship Management, our manager, is generally responsible
for commercial, technical, health and safety and other management
services related to the vessels’ operation. With the exception of the time
charter for the M/T Attikos, as of December 31, 2007 all of our time
charter agreements contained profit sharing arrangements. Profit sharing
refers to an arrangement between owners and charterers to share, at a
pre-determined percentage, voyage profit in excess of the basic hire
rate.
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Bareboat charters,
which are contracts pursuant to which the vessel owner provides the vessel
to the charterer for a fixed period of time at a specified daily rate, and
the customer provides for all of the vessel’s operating expenses including
crewing, repairs, maintenance, insurance, stores, lube oils and
communication expenses in addition to the voyage costs (with the exception
of commissions) and generally assumes all risk of
operation.
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As of
December 31, 2007, all of the vessels in our fleet as well as the two vessels
expected to be delivered in 2008 were under medium- to long-term time or
bareboat charters of between two to 10 years, with an average remaining term of
approximately 5.3 years commencing at the time of their delivery. In addition,
of our 13 charter contracts as of December 31, 2007, nine were scheduled to
expire on or after January 2010 and of our 10 time charters, nine contained
profit-sharing arrangements. The three-year time charter of the M/T Amore Mio
II, purchased in March 2008 from Capital Maritime, also contains a
profit-sharing arrangement.
All of
our vessels are under charter contracts with BP Shipping Limited, Morgan Stanley
Capital Group Inc., Trafigura Beheer B.V., and subsidiaries of Overseas
Shipholding Group Inc. For the year ended December 31 2007, BP Shipping Limited
and Morgan Stanley Capital Group Inc. accounted for 64% and 28% of our
revenues, respectively, and 53% and 23% of our revenues for the year ended
December 31, 2006, respectively. For the year ended December 31, 2006,
Canterbury Tankers Inc., the charterer for the M/T Attikos, represented 24% of
the revenues of our predecessor. During 2008, we expect to derive the majority
of our revenues from BP Shipping Limited, Morgan Stanley Capital Group Inc., and
Overseas Shipholding Group Inc. In the future, as our fleet expands, we also
expect to enter into charters with new charterers in order to maintain a
portfolio that is diverse from a customer, geographic and maturity perspective.
The vessel purchased in March 2008 from Capital Maritime is also under time
charter with BP Shipping Limited. We may in the future operate vessels in the
spot market until the vessels have been chartered under appropriate medium to
long-term charters.
Please
read “Item 4: Business—Our Fleet”, “Item 4: Business—Our Charters” and “Item 4:
Business—Profit Sharing Arrangements” for additional details regarding the
length, daily charter rate, information regarding the calculation of our profit
share arrangements and description of our charters.
Factors
Affecting Our Future Results of Operations
We
believe the principal factors that will affect our future results of operations
are the economic, regulatory, political and governmental conditions that affect
the shipping industry generally and that affect conditions in countries and
markets in which our vessels engage in business. Other key factors that will be
fundamental to our business, future financial condition and results of
operations include:
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the
continuing strong demand for seaborne transportation
services;
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supply
of product and crude oil tankers and specifically the number of
newbuildings entering the world tanker fleet each
year;
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the
successful implementation of our fleet expansion strategy, including
taking delivery of our newbuildings on or about their scheduled delivery
dates;
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the
ability of Capital Maritime’s commercial and chartering operations to
successfully employ our vessels at economically attractive rates,
particularly as our fleet expands and our charters
expire;
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our
ability to benefit from new maritime regulations concerning the phase-out
of single-hull vessels and the more restrictive regulations for the
transport of certain products and
cargoes;
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the
effective and efficient technical management of our
vessels;
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Capital
Maritime’s ability to obtain and maintain major international oil company
approvals and to satisfy their technical, health, safety and compliance
standards; and
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the
strength of and growth in the number of our customer relationships,
especially with major international oil companies and major commodity
traders.
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In
addition to the factors discussed above, we believe certain specific factors
have impacted, and will continue to impact, our combined and consolidated
results of operations. These factors include:
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the
charterhire earned by our vessels under time charters and bareboat
charters;
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our
access to capital required to acquire additional vessels and/or to
implement our business strategy;
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our
ability to sell vessels at prices we deem
satisfactory;
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our
level of debt and the related interest expense and amortization of
principal; and
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the
level of any distribution on our common
units.
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Please
read “Risk Factors” for a discussion of certain risks inherent in our
business.
Factors
to Consider When Evaluating Our Results
Our
historical results of operations and cash flows are not indicative of results of
operations and cash flows to be expected from any future period and our
financial statements and the financial statements of our predecessor are not
comparable, principally for the following reasons:
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Limited
Operations. The results of operations and cash flows
presented in our audited consolidated and predecessor combined financial
statements for the years ended December 31, 2007, 2006 and 2005 do not
reflect operations of all the vessels comprising our fleet for the
reporting period. As of December 31, 2007 our fleet was comprised of 13
vessels. The results of operations for the year ended December 31, 2007
include operations of the five vessels and the M/T Attikos which had been
delivered as of December 31, 2006. The remaining seven vessels of our
fleet were delivered from the shipyard between January and September of
2007 and are
included in our results of operations and cash flows only as of their
respective delivery dates. During the year ended December 31, 2006, our
fleet was comprised of five vessels, which were in operation for only a
part of the reporting period and the M/T Attikos which was in operation
for the whole year. During the year ended December 31, 2005, our fleet was
comprised of the M/T Attikos, which was in operation for the period from
January 20, 2005 to December 31, 2005. The two vessels we have acquired or
taken delivery of in the first quarter of 2008 are not reflected in our
financial statements. Please read “—Accounting for Deliveries of Vessels”
above and “—Different Statements of Income” below for a description of the
financial treatment of vessel acquisitions, including of the M/T
Attikos.
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Different Sources of
Revenues. A portion of the revenues generated during the
year ended December 31, 2006 and for the period ended April 3, 2007
was derived from charters with different terms than the charters that are
currently in place.
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Different Structure of
Operating Expenses. On April 3, 2007, we entered into a
management agreement with Capital Ship Management pursuant to which
Capital Ship Management agreed to provide commercial and technical
management services to us for an initial term of approximately five years
from when we take delivery of each vessel. Under the agreement we pay Capital Ship
Management a fixed daily fee of $5,500 per vessel for our time chartered
vessels which covers vessel operating expenses, including crewing, repairs
and maintenance, insurance and the cost of any scheduled
special/intermediate surveys for each vessel, and related drydocking, as
applicable, and a fixed daily fee of $250 per bareboat chartered vessel.
Operating expenses for the year ended December 31, 2006 and for the
period ended April 3, 2007 for the initial vessels, and September 23, 2007
for M/T Attikos, represent actual costs incurred by the vessel-owning
subsidiaries and Capital Ship Management in the operation of the vessels
that were operated as part of Capital Maritime’s
fleet.
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Different Structure of General
and Administrative Expenses. Since our Offering we have
incurred certain general and administrative expenses as a publicly traded
limited partnership that we had not previously incurred. For the year
ended December 31, 2006, we did not incur any similar general and
administrative expenses.
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Different Financing
Arrangements. The vessels delivered to Capital Maritime
during 2005 and 2006 were purchased under financing arrangements with
terms that differ from those of the $370.0 million credit facility we
entered into at the time of the Offering and which we used to finance the
acquisition of the seven vessels we committed to purchase from Capital
Maritime in 2007 and 2008. Importantly, under the financing arrangements
entered into following our Offering, we are not required to make
repayments of principal before June 2012. In addition, the historical bank
debt bore interest at floating rates while we have entered into
interest rate swap agreements to fix the LIBOR portion of our interest
rate in connection with the debt drawn down under our existing credit
facility. For a description of our non-amortizing revolving credit
facility, please read “—Liquidity and Capital Resources—Revolving Credit
Facilities” below.
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The Size of our Fleet
Continues to Change. At the time of our Offering, our fleet
consisted of eight vessels and we contracted to purchase an additional
seven vessels from Capital Maritime. Between May and September 2007 we
took delivery of four of the contracted vessels and also acquired the
M/T Attikos from Capital Maritime. All of the vessels delivered
between May and September 2007 were under long-term charters at the time
of their delivery. An additional
contracted vessel was delivered in January 2008 and the remaining two
vessels we contracted to purchase are expected to be delivered by the end
of the third quarter of 2008. In March 2008 we acquired an additional
vessel from Capital Maritime which we had not contracted to purchase at
the time of our Offering and we expect to acquire one additional
non-contracted vessel from Capital Maritime during the second quarter of
2008. We intend to continue to make strategic acquisitions in a prudent
manner that is accretive to our distributable cash flow per
unit.
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Statements of Income
Retroactively Adjusted. Our statement of income for the year ended
December 31, 2007 includes the results of operations of the eight vessels
comprising our fleet at the time of our Offering, the four vessels we had
contracted to purchase from Capital Maritime which were delivered during
2007 and the M/T Attikos which was acquired from an entity under common
control on September 24, 2007. Following the acquisition of the M/T
Attikos, the statements of income for the years ended December 31, 2006
and 2005 have been retroactively adjusted to reflect the results of
operations of the M/T Attikos as if it were owned by us for the entire
three-year period from its delivery to Capital Maritime.
|
Results
of Operations
Because
we have a limited operating history, with the years ended December 31, 2007
and December 31, 2006 being the only periods with meaningful operations, other
period-to-period comparisons of our results of operations are not yet be
possible and may not be meaningful in the near future.
Year Ended December 31, 2007
Compared to Year Ended December 31, 2006
Revenues
Time and
bareboat charter revenues amounted to approximately $72.5 million for the year
ended December 31, 2007, as compared to $19.9 million for the year ended
December 31, 2006 primarily due to the higher number of vessels in our
fleet.
Time and
bareboat charter revenues are mainly comprised of the charter hire received from
unaffiliated third-party customers. Time and bareboat charter
revenues are affected by daily hire rates, the number of days our vessels
operate and the overall number of vessels in our fleet. For an explanation why
revenues for this period are not indicative of revenues to be expected from any
future period, please read “—Factors to Consider When Evaluating Our Results”
above. Please also read “Item 4: Business Overview—Our Fleet” and “—Our
Charters” for information about the charters on these vessels, including daily
charter rates.
Voyage
Expenses
Voyage
expenses amounted to $0.8 million for the year ended December 31, 2007, as
compared to $0.4 million for the year ended December 31, 2006 primarily due
to the higher number of vessels in our fleet.
Voyage
expenses are direct expenses to voyage revenues and primarily consist of
commissions, port expenses, canal dues and bunkers. Voyage costs, except for
commissions, are paid for by the charterer under time and bareboat charters. In
the case of our time charters with Morgan Stanley Capital Group Inc., the
charterer is also responsible for commissions.
Vessel
Operating Expenses
For the
year ended December 31, 2007, our vessel operating expenses amounted to
approximately $15.5 million, of which $12.3 million was paid to our
manager. For the
year ended December 31, 2006, vessel operating expenses amounted to
approximately $4.9 million, of which $0.9 million was paid to the
manager.
Vessel
operating expenses for the years ended December 31, 2007 and December 31, 2006
are not comparable. Vessel operating expenses for the period from April 4, 2007
to December 31, 2007 represent management fees payable to Capital Ship
Management pursuant to our management agreement. For each time chartered vessel
in our fleet as of December 31, 2007 we paid Capital Ship Management a fixed
daily fee of $5,500 for the provision of commercial and technical services such
as crewing, repairs and maintenance, insurance, stores, spares and lubricants.
The fee also includes expenses related to the next scheduled special and
intermediate survey, and related drydocking for each vessel. For each bareboat
chartered vessel we pay a fixed daily fee of $250 to Capital Ship Management
mainly for expenses to cover compliance costs, while the bareboat charterer is
responsible for all other operating expenses such as crewing, repairs and
maintenance, insurance, stores, spares, lubricants and expenses related to
the next scheduled surveys and related drydocking of each vessel. The fee is payable for an
initial term of approximately five years from when we take delivery of each
vessel. For the year ended December 31, 2006 and for the period ended April
3, 2007 (and September 23, 2007 for the M/T Attikos), vessel operating expenses
represent actual costs incurred by the vessel-owning subsidiaries in the
operation of the vessels that were operated as part of Capital
Maritime.
General
and Administrative Expenses
General
and administrative expenses amounted to $1.5 million for the year ended December
31, 2007. General and administrative expenses include consultancy fees, board of
directors fees and expenses, audit fees, and other fees related to the expenses
of the publicly traded company. For the year ended December 31, 2006, we
did not incur any similar general and administrative expenses.
Depreciation
and Amortization
Depreciation
of fixed assets amounted to $13.1 million for the year ended December 31, 2007
as compared to $3.4 million for the year ended December 31,
2006.
This
amount represents depreciation on six vessels for the whole year and on seven
vessels for a part of the year commencing from their delivery dates in January,
February, March, May, July and on two vessels in September of 2007,
respectively. The amount of depreciation for the year ended December 31, 2006
represents depreciation on one vessel for the whole year and on five vessels for
a part of the year commencing from their delivery dates in April, May, July,
August and November of 2006, respectively.
Depreciation
is expected to increase as our fleet grows.
Other
Income (Expense), Net
Other
income (expense), net for the year ended December 31, 2007 was
approximately $(13.9) million as compared to $(4.6) million for the year
ended December 31, 2006.
The 2007
amount represents interest expense and amortization of financing charges and
bank charges of $(14.6) million of which $(3.8) million represent a loss from
the transfer of interest rate swap agreements entered into by Capital Maritime
prior to April 4, 2007 and acquired by us on that date and interest income of
$0.7 million. The 2006 amount represents interest expense charged to the
vessel-owning companies and amortization of financing charges and bank charges
of $(4.6) million. Interest expense for the period ending December 31, 2006 is
not indicative of interest expense to be expected for any future period,
predominantly because the historical bank debt bore interest at floating rates
while we have entered into interest rate swap agreements to fix the LIBOR
portion of our interest rate in connection with the debt drawn down under our
credit facilities.
Net
Income
Net
income for the year ended December 31, 2007 amounted to $27.8 million
as compared to $6.6 million for the year ended December 31, 2006. For an
explanation of why our historical net income is not indicative of net income to
be expected in future periods, please refer to the discussion under “— Factors
to Consider When Evaluating Our Results,” “—Time and Bareboat Charter Revenues,”
“—Voyage Expenses”, and “—Vessel Operating Expenses” above.
Year Ended December 31, 2006
Compared to Year Ended December 31, 2005
The
results of operations for the years ended December 31, 2006 and December 31,
2005 are not necessarily indicative of the results that may be expected in the
future and as such we do not believe that a presentation of the comparison of
the results of operations for these years would be useful to our investors or
provide meaningful information regarding our current results of operations as
the number of vessels, chartering agreements, nature of operating expenses and
management and financing arrangements in place during these two years differ
significantly from the arrangements in place as of the time of our
Offering.
In
particular, for the year ended December 31, 2006, only six of the vessels in our
current fleet had been delivered to Capital Maritime. Five of these were
delivered between April and November 2006 and were in operation for only a
portion of the year. During the year ended December 31, 2005, the M/T Attikos
was the only vessel which had been delivered to Capital Maritime and was in
operation from its date of delivery, January 20, 2005. In addition, during the
years ended December 31, 2006 and 2005 these vessels were managed as part of
Capital Maritime’s fleet and operating expenses represented actual costs
incurred by the vessel-owning subsidiaries and Capital Ship Management in the
operation of the vessels. As of the time of our Offering, however, we entered
into a fixed fee agreement with Capital Ship Management for the provision of
technical and management services to our vessels for an initial term of
approximately five years from the date each vessel was delivered to us.
Furthermore, the vessels delivered to Capital Maritime during 2005 and 2006 were
purchased under financing arrangements with terms that differ from those of the
existing credit facility which we used to finance the acquisition of the
vessels. Importantly, under the financing arrangements entered into following
our Offering, we are not required to make repayments of principal before June
2012. In addition, the historical bank debt bore interest at floating rates
while we have currently entered into interest rate swap agreements to fix the
LIBOR portion of our interest rate in connection with the debt drawn down under
our existing credit facility. Finally, we do not believe that the presentation
of information regarding the charter agreements our vessels operated under in
2005 is useful to our investors as the M/T Attikos traded in the spot market
from the date of its delivery to May 2005, at which time it entered into a two
year time-charter with Canterbury Tankers Inc. on different terms from the
time-charter it is currently under with Trafigura Beheer B.V.
B.
Liquidity and Capital Resources
As at
December 31, 2007, total cash and cash equivalents were $19.9 million and total
liquidity including cash and undrawn long-term borrowings was
$115.4 million. As at December 31, 2006 total cash and cash equivalents
were $1.2 million. This increase is primarily due to the different financing
arrangements in place prior to the Offering and the increased number of vessels
in our fleet.
We
anticipate that our primary sources of funds for our liquidity needs will be
cash flows from operations. Generally, our long-term sources of funds will be
from cash from operations, long-term bank borrowings and other debt or equity
financings. Because we distribute all of our available cash, we expect that we
will rely upon external financing sources, including bank borrowings and the
issuance of debt and equity securities, to fund acquisitions and expansion and
investment capital expenditures, including opportunities we may pursue under the
omnibus agreement with Capital Maritime.
We
believe that our working capital will be sufficient to meet our existing
liquidity needs for at least the next 12 months.
|
|
Cash
Flows
|
Net
Cash Provided by Operating Activities
Net cash
provided by operating activities increased to $50.6 million for the year
ended December 31, 2007 from $9.5 million for the year ended December
31, 2006 primarily due to an increase in net income due to the higher number of
vessels in our fleet and an increase in hire received in advance from charterers
($8.6 million in 2007 as compared to $0.5 million in 2006). For an explanation
of why our historical net cash provided by operating activities is not
indicative of net cash provided by operating activities to be expected in future
periods, please read “—Factors to Consider when Evaluating our Results” as well
as “—Time and Bareboat Charter Revenues”, “—Voyage Expenses” and “—Vessel
Operating Expenses” above.
Net
Cash Used in Investing Activities
Net cash
used in investing activities amounted to $246.9 million for the year ended
December 31, 2007, up from $162.0 million for the year ended
December 31, 2006. Cash was used primarily for vessel acquisitions.
Specifically, for the year ended December 31, 2007, $243.7 million of the net
cash used was comprised of:
|
|
•
|
$77.6
million, representing advances to the shipyards paid by Capital Maritime
between January 1, 2007 and April 3, 2007 with respect to the construction
of three of the vessels in our initial fleet: the M/T Aiolos, the M/T Avax
and the M/T Axios; and
|
|
|
•
|
$166.1
million, representing the net book value at the time of their acquisition
by us of five vessels we contracted to purchase from Capital Maritime at
the time of our Offering that were delivered between May and September
2007: the M/T Atrotos, the M/T Akeraios, the M/T Anemos I, the M/T
Apostolos and the M/T
Attikos.
|
The
remaining $3.2 million represents restricted cash, which is the minimum amount
of free cash we are required to maintain at all times under our credit
facilities.
For the
year ended December 31, 2006, $142.8 million related to the acquisition of
the five newbuildings delivered to Capital Maritime in this period that were
then transferred to us at the time of our Offering (the M/T Atlantas, the M/T
Aktoras, the M/T Agisilaos, the M/T Assos and the M/T Arionas). The remaining
$19.2 million related to advances toward the other three initial vessels:
the M/T Aiolos, the M/T Avax and the M/T Axios. For the year ended
December 31, 2006, there was no restricted cash.
Net
Cash Provided by Financing Activities
Net cash
provided by financing activities amounted to $215.0 million for the year ended
December 31, 2007, up from $153.8 million for the year ended
December 31, 2006.
During
the second and the third quarters of 2007 we acquired five additional vessels
from Capital Maritime: the M/T Atrotos, the M/T Akeraios, the M/T Apostolos, the
M/T Attikos and the M/T Anemos I, for a total purchase price of
$247.0 million. The excess of purchase price over book value of the
acquired vessels, $80.9 million, is presented in our cash flow statement under
net cash provided by financing activities as we recognize transfers of net
assets between entities under common control at Capital Maritime’s basis in the
net assets contributed.
Proceeds
from the issuance of long-term debt amounted to $344.4 million for the year
ended December 31, 2007, up from $77.4 million for the year ended December 31,
2006. The proceeds for the year ended December 31, 2007 consisted of $274.5
million from our credit facility entered into on March 22, 2007 and $69.9
million from credit facilities entered into by Capital Maritime and certain
vessel-owning subsidiaries prior to our Offering in order to finance the
construction of the M/T Aiolos, M/T Axios and M/T Avax.
There
were no proceeds from long-term debt due to related parties for the year ended
December 31, 2007 as compared to $82.3 million for the year ended December
31, 2006.
Repayment
of debt amounted to $16.8 million for the year ended December 31, 2007,
down from $21.4 million for the year ended December 31, 2006, and comprised
of installment payments made prior to the Offering for vessels in our fleet and
the repayment of M/T Attikos’ loan on September 9, 2007 by Capital Maritime.
There was no repayment of related party debt for the year ended December 31,
2007 by us, as compared to the repayment of $2.3 million for the year ended
December 31, 2006. Relevant related party debt in the amount of $134.0 million
for the year ended December 31, 2007, was repaid by Capital Maritime from the
proceeds from our Offering.
Capital
contributions by Capital Maritime amounted to $13.7 million for the year ended
December 31, 2007 and relate to contributions made prior to the Offering in
connection with the acquisition of three initial vessels (the M/T Aiolos, M/T
Avax and M/T Axios). Capital contributions for the year ended December 31, 2006
were $17.9 million. This decrease is mainly due to the different financing
arrangements in place following our Offering.
Following
completion of our Offering on April 4, 2007, we paid a $25.0 million cash
dividend to Capital Maritime and also made distributions to unitholders in an
aggregate amount of $17.0 million for the second and third quarters of
2007.
Borrowings
Our
long-term third party borrowings are reflected in our audited consolidated and
predecessor combined balance sheet as “Long-term debt, net” and as current
liabilities in “Current portion of long-term debt.” As of December 31,
2007, long-term debt was $274.5 million and the current portion of long-term
debt was $0 million
as compared to $59.3 million and $6.0 million, respectively, for the period
ended December 31, 2006. Related party debt is reflected in our combined balance
sheet as “Long-term related party debt” and as “Current portion of related party
debt.” As of December 31, 2007, there was no long-term related party and
there was no current portion of related party debt as compared to
$87.5 million and $8.0 million, respectively, for the year ended
December 31, 2006.
Revolving Credit
Facilities
The financing
arrangements in place prior to our Offering are not indicative of our current or
future financing arrangements. The financing
arrangements in existence at December 31, 2006 represent loans with four
separate banks in which Capital Maritime acted as the borrower and the
respective vessel-owning companies as the guarantors or, in one instance, the
vessel-owning company acted as the borrower and Capital Maritime as the
guarantor, for the financing of the construction of the eight vessels which
comprised our fleet at the time of our Offering. These loans were repaid in
their entirety by Capital Maritime with a portion of the proceeds from our
Offering and the vessels were transferred to us debt free.
On March
22, 2007, we entered into a non-amortizing revolving credit facility with a
syndicate of financial institutions, including HSH Nordbank AG, Hamburg, for up
to $370.0 million for the financing of the acquisition cost, or part thereof, of
up to seven medium range product tankers (the “existing credit
facility”).
This facility provided us with sufficient funds to
purchase the four newbuildings delivered in 2007, the newbuilding delivered in
January 2008 and to partly fund the purchase price for the remaining two
newbuildings we agreed to purchase from Capital Maritime at the time of our
Offering which are scheduled for delivery in June and August of 2008. The
loan agreement was amended on September 19, 2007 to include the financing of the
acquisition cost of the M/T Attikos. As of December 31, 2007, we had drawn down
$274.5 under our revolving credit facility. We drew down $48.0 million in
connection with the acquisition of the M/T Alexandros II in January 2008 and
expect to draw down all or a portion of the remaining balance of the loan in
connection with the expected delivery in June and August of 2008 of the M/T
Aristotelis II and the M/T Aris II, our remaining two contracted
vessels. Please see Note 5 (Long-Term Debt)
to our
consolidated
and predecessor combined financial statements for more
information.
On March 19, 2008, we entered into a
new 10-year revolving credit facility of up to $350.0 million which is
non-amortizing until March 2013, with HSH Nordbank (the “new credit
facility”).
We may use this
facility to finance a portion of the acquisition price of certain
identified vessels currently in Capital Maritime’s fleet which we may elect to
acquire in the future. We may also use this facility to finance up to 50% of the
purchase price of any potential future purchases of modern tanker vessels from
Capital Maritime or any third parties. To date, we have used
$46.0 million of this facility
to fund part of the acquisition price of the M/T Amore Mio II from Capital
Maritime and expect to use approximately $11.5 million in connection with the
acquisition of the M/T Aristofanis in the second quarter of 2008. The new
credit facility is subject to similar covenants and restrictions as those in our
existing facility described below.
Our obligations under both our credit
facilities are secured by first-priority mortgages covering each of our financed
vessels and are guaranteed by each vessel-owning subsidiary.
Borrowings under our $370.0 million
existing credit facility bear interest at a rate of 0.75% over US$ LIBOR. We may
continue to draw down amounts under this facility until June 2012, at which date
any amounts available for borrowing will automatically terminate and the
outstanding amount will automatically convert into a five-year term loan. In
addition, we are not required to make any repayments of the principal amounts
outstanding under the facility until June 2012 provided that we maintain an
aggregate market value of our financed vessels equal to 125% of the aggregate
amount outstanding under the facility. The final maturity date of this facility
is June 2017.
Borrowings under our $350.0 million new
credit facility bear interest at a rate of 1.1% per annum over US$ LIBOR. We may
continue to draw amounts under this facility until March 2013, at which date any
amounts available for borrowing will automatically terminate and the outstanding
amount will automatically convert into a five-year term loan. In addition, we
are not required to make any repayments of the principal amounts outstanding
under the facility until March 2013, provided that we maintain an aggregate
market value of our financed vessels equal to 125% of the aggregate amount
outstanding under the facility. The final maturity date of this facility is
March 2018.
Our
credit facilities contain restrictive covenants that, subject to the approval of
our lenders, prohibit us from, among other things: incurring or guaranteeing
indebtedness; charging, pledging or encumbering the vessels; changing the flag,
class, management or ownership of our vessels; changing the commercial and
technical management of our vessels; selling or changing the beneficial
ownership or control of our vessels; and subordinating the obligations under our
existing credit facility to any general and administrative costs relating to the
vessels, including the fixed daily fee payable under the management
agreement.
Under the
terms of our credit facilities, we may not be able to pay distributions to our
unitholders if we are not in compliance with certain financial covenants or upon
the occurrence of an event of default or if the fair market value of our
financed vessels is less than 125% of the aggregate amount outstanding under
each credit facility.
In
addition, our credit facilities require us to maintain minimum free consolidated
liquidity (50% of which may be in the form of undrawn commitments under the
credit facility) of at least $500,000 per financed vessel, maintain a ratio of
EBITDA to net interest expense of at least 2.00 to 1.00 on a trailing
four-quarter basis and maintain a ratio of total indebtedness to the aggregate
market value of our total fleet of no more than 0.725 to 1.00. We are also
required to maintain an aggregate market value of our financed vessels equal to
125% of the aggregate amount outstanding under each credit
facility.
In
connection with our existing credit facility and in order to hedge our exposure
to interest rate changes, we have entered into eight interest rate swap
agreements to fix the LIBOR portion of our interest rate at 5.1325% for $326.0
million in borrowings, of which we have drawn down $302.0 million, under
the facility and into one interest swap agreement to fix the LIBOR portion of
our interest rate at 4.925% for $20.5 million in borrowing under the facility
for a period up to June 29, 2012. On March 27, 2008 we drew down $46.0
million under our new credit facility and entered into an interest rate swap
agreement to fix the LIBOR portion of our interest rate at 3.525% for a period
up to March 27, 2013. We also intend to swap the
LIBOR portion of any further amounts drawn down under our new credit facility
into a fixed rate until the end of the non-amortizing period on March 30,
2013.
Purchase
of Vessels Following the Offering
The table
below summarizes certain information with respect to the vessels we have
purchased and have agreed to purchase from Capital Maritime in 2007 and 2008,
including their purchase prices and the date they were delivered or are expected
to be delivered to us.
|
Name of
Vessel
|
Delivery
Date/(Expected Delivery Date) |
Expiration of
Charter |
Daily Charter
Rate (Net) |
OPEX
(per
day)
|
Charterer
(1)
|
Purchase
Price
|
|
Atrotos
|
May
2007
|
April
2010
|
$20,000(2)
|
$5,500
|
MS
|
$56,000,000
|
|
Akeraios
|
July
2007
|
June
2010
|
$20,000(2)
|
$5,500
|
MS
|
$56,000,000
|
|
Anemos
I
|
September
2007
|
August
2010
|
$20,000(2)
|
$5,500
|
MS
|
$56,000,000
|
|
Apostolos
|
September
2007
|
August
2010
|
$20,000(2)
|
$5,500
|
MS
|
$56,000,000
|
|
Attikos
|
September
2007
|
September
2009
|
$13,504(3)
|
$5,500
|
Trafigura
|
$23,000,000
|
|
Alexandros
II
|
January
2008
|
December
2017
|
$13,000(4)
|
$250
|
OSG
|
$48,000,000
|
|
Amore
Mio II
|
March
2008
|
January
2011
|
$36,000(2)(3)
|
$8,500
|
BP
|
$95,000,000
|
|
Aristofanis
|
April-June
2008 (E)
|
March
2010
|
$12,952(3)
|
$5,500
|
Shell
|
$23,000,000
|
|
Aristotelis
II
|
June
2008 (E)
|
May
2018
|
$13,000(4)
|
$250
|
OSG
|
$48,000,000
|
|
Aris
II
|
August
2008 (E)
|
July
2018
|
$13,000(4)
|
$250
|
OSG
|
$48,000,000
|
___________
|
(1)
|
BP:
BP Shipping Limited. Morgan Stanley: Morgan Stanley Capital
Group Inc., OSG: certain subsidiaries of Overseas Shipholding
Group Inc. Trafigura: Trafigura Beheer B.V. Shell: Shell
International Trading & Shipping Company
Ltd.
|
|
(2)
|
Subject
to 50/50 profit sharing arrangement. Please read “Item 4: Business —Time
Charters—Profit Sharing” and “Item 4: Business —Our Fleet” above for more
information on our profit sharing arrangements and relevant
commissions.
|
|
(3)
|
The
rates quoted above are the net rates after we have paid commissions on the
base rates. The rates for the M/T Attikos, the M/T Amore Mio II and the
M/T Aristofanis are subject to 2.5%, 1.25% and 2.25% commissions,
respectively.
|
|
(4)
|
Under
the charters with Overseas Shipholding Group Inc. for the three STX
vessels to be delivered in 2008, Overseas Shipholding Group Inc. has
an option to purchase each vessel at the end of the eighth, ninth or tenth
year of the charter, for $38.0 million, $35.5 million and
$33.0 million respectively, which option is exercisable six months
before the date of completion of the eighth, ninth or tenth year of the
respective charter. The expiration date above may therefore change
depending on whether the charterer exercises its purchase
option.
|
E.
Off-Balance Sheet Arrangements
As of the
date of this Annual Report, we have not entered into any off-balance sheet
arrangements.
F.
Contractual Obligations and Contingencies
The
following table summarizes our long-term contractual obligations as of
December 31, 2007 (thousands of U.S. Dollars).
|
December
31,
|
||||||||||||||||||||||||||||
|
2008
|
2009
|
2010
|
2011
|
2012
|
Thereafter
|
Total
|
||||||||||||||||||||||
|
Long-term
Debt Obligations
|
- | - | - | - | $ | 13,725 | $ | 260,775 | $ | 274,500 | ||||||||||||||||||
|
Interest
Obligations (1)
|
$ | 16,373 | $ | 16,328 | $ | 16,329 | $ | 16,329 | $ | 16,227 | $ | 54,200 | $ | 135,786 | ||||||||||||||
|
Vessel
Purchase Commitments (2)(3)
|
$ | 144,000 | - | - | - | - | - | $ | 144,000 | |||||||||||||||||||
|
Total
|
$ | 160,373 | $ | 16,328 | $ | 16,329 | $ | 16,329 | $ | 29,952 | $ | 314,975 | $ | 554,286 | ||||||||||||||
___________
|
(1)
|
Interest
expense has been calculated based on the fixed interest rate of 5.1325%
plus a margin of 0.75% for the amount of $254.0 million and 4.925% plus a
margin of 0.75% for the amount of $20.5 million. The interest rate
fixation resulted from the nine interest rate swap agreements that we
entered into in order to reduce our exposure to cash flow risks from
fluctuating interest rates and fully cover our
debt.
|
|
(2)
|
Purchase
commitments represent outstanding purchase commitments relating to the
acquisition of the final three MR product tankers (M/T Alexandros II, M/T
Aristotelis II and M/T Aris II) to be delivered to us pursuant to the
share purchase agreement we entered into with Capital Maritime. The M/T Alexandros
II was delivered to us in January 2008 and the remaining two vessels are
scheduled for delivery in June and August 2008
respectively.
|
|
(3)
|
On
March 27, 2008, we entered into a share purchase agreement with Capital
Maritime to acquire the M/T Amore Mio II for an aggregate purchase price
of $95.0 million. Please read “Item 8B: Significant
Changes” for more
information regarding this
acquisition.
|
Critical
Accounting Policies
The
discussion and analysis of our financial condition and results of operations is
based upon our combined financial statements, which have been prepared in
accordance with U.S. GAAP. The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amount of
assets and liabilities, revenues and expenses and related disclosure of
contingent assets and liabilities at the date of our financial statements.
Actual results may differ from these estimates under different assumptions or
conditions.
Critical
accounting policies are those that reflect significant judgments or
uncertainties, and potentially result in materially different results under
different assumptions and conditions. We have described below what we believe
are our most critical accounting policies that involve a higher degree of
judgment and the methods of their application. For a description of all of our
significant accounting policies, see Note 2 (Significant Accounting
Policies) to our consolidated and predecessor combined financial statements
included elsewhere in this Annual Report. Please also refer to Note 2
(Significant Accounting Policies – Recent Accounting Pronouncements) for a
description of the most recent pronouncements issued by the Financial Accounting
Standards Board which apply to us.
Vessel
Lives and Impairment
The
carrying value of each of our vessels represents its original cost (contract
price plus initial expenditures) at the time of delivery or purchase less
accumulated depreciation or impairment charges. Depreciation is calculated
based on the vessel’s capitalized costs using the straight line method over an
estimated useful life of 25 years from the date the vessel was originally
delivered from the shipyard, after considering the estimated residual value.
However, the actual life of a vessel may be different, with a shorter
life potentially resulting in an impairment loss. Vessels transferred from
Capital Maritime to us are transferred at their net book values because such
transfers are accounted for as transfers of assets between entities under
common
control.
We are not aware of any regulatory changes or environmental liabilities
that we anticipate will have a material impact on the vessel lives of our
current fleet. The carrying values of our vessels may not represent their fair
market value at any point in time since the market prices of second-hand vessels
tend to fluctuate with changes in charter rates and the cost of newbuildings.
Both charter rates and newbuilding costs tend to be cyclical in nature. We
review vessels and equipment for impairment whenever events or changes in
circumstances indicate the carrying amount of an asset may not be recoverable.
If impairment indicators are present, we measure the recoverability of an asset
by comparing its carrying amount to future undiscounted cash flows that the
asset is expected to generate over its remaining useful life. If we consider a
vessel or equipment to be impaired, we recognize impairment in an amount equal
to the excess of the carrying value of the asset over its fair market value. No
impairment loss was recorded for any of the periods presented in our audited
consolidated and predecessor combined financial statements.
Revenue
Recognition
We
generate revenues from charterers for the charterhire of our vessels which are
chartered either under time or bareboat charters. All of our time
charters and bareboat charters are classified as operating leases. Revenues
under operating lease arrangements are recognized when a charter agreement
exists, the charter rate is fixed and determinable, the vessel is made available
to the lessee, and collection of the related revenue is reasonably assured.
Revenues are recognized ratably on a straight line basis as the average revenue
over the period of the respective time or bareboat charter agreement in
accordance with FASB 13 “Accounting for Leases”, paragraph 19b. We currently do
not enter into spot voyage arrangements with respect to any of our vessels but
may do so in the future. Although our charter revenues are fixed, and,
accordingly, little judgment is required to be applied to the amount of revenue
recognition, there is no certainty as to the daily charter rates or other terms
that will be available upon the expiration of our existing
charters.
Revenues
from profit sharing arrangements in time charters represent the portion of time
charter equivalent (voyage income less direct expenses divided by operating
days), that exceeds the agreed base rate and are recognized in the period
earned.
Interest
Rate Swap Agreements
We
designate our derivatives based upon the criteria established by SFAS No. 133
“Accounting for Derivative Instruments and Hedging Activities”, which
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. SFAS 133, as amended by SFAS No. 138, Accounting for
Certain Derivative Instruments and Certain Hedging Activities—An amendment of
SFAS 133 ("SFAS 138") and SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities, ("SFAS 149"), requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair
value. The accounting for the changes in the fair value of the
derivative depends on the intended use of the derivative and the resulting
designation. For a derivative that does not qualify as a cash flow
hedge, the change in fair value is recognized at the end of each accounting
period on the income statement. For a derivative that qualifies as a
cash flow hedge, the change in fair value is recognized at the end of each
reporting period in other comprehensive income/ (loss) (effective portion) until
the hedged item is recognized in income. The ineffective portion of a
derivative’s change in fair value is immediately recognized in the income
statement.
We
entered into eight interest rate swap agreements that were transferred from
Capital Maritime through novation agreements on April 4, 2007 in order to reduce
our exposure to cash flow risks from fluctuating interest rates for an amount of
$326.0 million in borrowings, of which we have drawn down $302.0 million, under
the facility we entered into on March 22, 2007. These swap agreements fix the
LIBOR portion of interest rate at 5.1325% for a period up to June 29, 2012. We
recognized a loss of $3.8 million in our income statement on April 4, 2007 as a
result of the valuation of the eight interest rate swap
agreements. On September 20, 2007 we entered into an additional
interest rate swap agreement in order to reduce our exposure to cash flow risks
from fluctuating interest rates for an amount of $20.5 million drawn down under
the existing revolving credit facility in connection with the purchase of the
M/T Attikos. The swap agreement fixes the LIBOR portion of interest
rate at 4.925% for a period up to June 29, 2012. As of December 31, 2007 our
nine interest rate swaps qualified as a cash flow hedge and the changes in their
fair value were recognized in accumulated other comprehensive gain/(loss). On
March 27, 2008 we entered into an additional interest rate swap agreement in
order to reduce our exposure to cash flow risks from fluctuating interest rates
with respect to $46.0 million drawn down under our new credit facility in
connection with the purchase of the M/T Amore Mio II. The swap agreement
fixes the LIBOR portion of interest rate at 3.525% for a period up to March 27,
2013. This swap agreement also qualifies as a cash flow hedge and any changes in
the fair value of the swap will be recorded in “other comprehensive
income”.
Item 6. Directors, Senior Management and
Employees.
A.
Directors and Senior Management
Management
of Capital Product Partners L.P.
Pursuant
to our partnership agreement, our general partner has delegated to our board of
directors the authority to oversee and direct our operations, management and
policies on an exclusive basis, and such delegation is binding on any successor
general partner of the partnership. Our general partner, Capital GP L.L.C., a
Marshall Islands limited liability company wholly owned by Capital Maritime,
manages our day-to-day activities consistent with the policies and procedures
adopted by our board of directors.
Our board
of directors consists of three persons who are designated by our general partner
in its sole discretion and four who are elected by the common unitholders.
Directors appointed by our general partner serve as directors for terms
determined by our general partner and directors elected by our common
unitholders are divided into three classes serving staggered three-year terms.
The initial four directors appointed by Capital Maritime and designated as
Class I, Class II and Class III elected directors will serve
until our annual meetings of unitholders in 2008, 2009 and 2010, respectively.
At each annual meeting of unitholders, directors will be elected to succeed the
class of directors whose terms have expired by a plurality of the votes of the
common unitholders (excluding common units held by Capital Maritime and its
affiliates). Directors elected by our common unitholders will be nominated by
the board of directors or by any limited partner or group of limited partners
that holds at least 10% of the outstanding common units.
Our
general partner owes a fiduciary duty to our unitholders and is liable, as
general partner, for all of our debts (to the extent not paid from our assets),
except for indebtedness or other obligations that are expressly non-recourse to
it. Whenever possible, the partnership agreement directs that we should incur
indebtedness or other obligations that are non-recourse to our general partner.
Officers of our general partner and other individuals providing services to us
or our subsidiaries may face a conflict regarding the allocation of their time
between our business and the other business interests of Capital Maritime. Our
general partner intends to cause its officers to devote as much time to the
management of our business and affairs as is necessary for the proper conduct of
our business and affairs. Our general partner’s Chief Executive Officer and
Chief Financial Officer, Ioannis E. Lazaridis, allocates his time between
managing our business and affairs and the business and affairs of Capital
Maritime. The amount of time Mr. Lazaridis allocates between our business
and the businesses of Capital Maritime varies from time to time depending on
various circumstances and needs of the businesses, such as the relative levels
of strategic activities of the businesses.
Directors
and Senior Management
Set forth
below are the names, ages and positions of our directors and director nominees
and our general partner’s executive officers.
|
Name
|
Age
|
Position
|
|
|
Evangelos
M. Marinakis (1)
|
40
|
Director
and Chairman of the Board
|
|
|
Ioannis
E. Lazaridis (1)
|
40
|
Chief
Executive Officer and Chief Financial Officer and
Director
|
|
|
Nikolaos
Syntychakis (1)
|
46
|
Director
|
|
|
Robert
Curt (2)
|
57
|
Director
(5)
|
|
|
Abel
Rasterhoff (3)
|
67
|
Director
(5)
|
|
|
Evangelos
G. Bairactaris (4)
|
37
|
Director
and Secretary
|
|
|
Keith
Forman (4)
|
49
|
Director
(5)
|
| (1) | Appointed by our general partner (term expires in 2010). |
|
(2)
|
Appointed
as initial Class I director (term expires in
2008).
|
|
(3)
|
Appointed
as initial Class II director (term expires in
2009).
|
|
(4)
|
Appointed
as initial Class III director (term expires in
2010).
|
|
(5)
|
Member
of our Audit Committee and our Conflicts
Committee.
|
Biographical
information with respect to each of our directors, our director nominees and our
general partner’s executive officers is set forth below. The business address
for our directors and executive officers is 3 Iassonos Street Piraeus, 18537
Greece.
Evangelos
M. Marinakis, Director and Chairman of the Board.
Mr. Marinakis
joined our board of directors on March 13, 2007 and serves as the Chairman
of the Board. Mr. Marinakis has served as Capital Maritime’s President and
Chief Executive Officer and as a director since its incorporation in
March 2005. From 1992 to 2005, Mr. Marinakis was the Commercial
Manager of Capital Ship Management and oversaw the businesses of the group of
companies that form Capital Maritime. For the past 15 years,
Mr. Marinakis has also been active in various other family businesses, all
related to the shipping industry. During this time he founded Curzon Maritime
Limited and ESTC. Mr. Marinakis began his career as a Sale &
Purchase trainee broker at Harley Mullion in the UK, and then worked as a
chartering broker for Elders Chartering Limited, also in the UK.
Mr. Marinakis holds a B.A. in International Business Administration and an
MSC in International Relations from the United States International University
Europe, London.
Ioannis
E. Lazaridis, Chief Executive and Chief Financial Officer and
Director.
Mr. Lazaridis
has served as the Chief Executive and Chief Financial Officer of our general
partner since its formation in January 2007 and joined our board of directors on
March 13, 2007. Mr. Lazaridis has served as Capital Maritime’s Chief
Financial Officer and as a director since its incorporation in March 2005.
From 2004 to March 2005, Mr. Lazaridis was employed by our predecessor
companies. From 1996 to 2004, Mr. Lazaridis was employed by Credit Agricole
Indosuez Cheuvreux in London, where he worked in the equity department. From
1993 to 1996, Mr. Lazaridis was employed by Kleinwort Benson in equity
sales and from 1990 to 1993 was employed by Norwich Union Investment Management.
Mr. Lazaridis holds a B.A. degree in economics from the University of
Thessaloniki in Greece and an M.A. in Finance from the University of Reading in
the UK. He is also an Associate for the Institute of Investment Management and
Research in the UK.
Evangelos
G. Bairactaris, Director and Secretary.
Mr. Bairactaris
joined our board of directors on March 13, 2007 and has served as our
Secretary since our formation in January 2007. Mr. Bairactaris is a Greek
attorney at law and a member of the Piraeus Bar Association.
Mr. Bairactaris has been a partner in G.E.Bairactaris & Partners
since 2000 and has acted as managing partner since 2003. He has regularly
provided his professional services to our predecessor companies and many Greek
and international shipping companies and banks. Mr. Bairactaris holds a
degree in law from the Law School of the Kapodistrian University of Athens in
Greece.
Nikolaos
Syntychakis, Director.
Mr. Syntychakis
joined our board of directors on April 3, 2007. Mr. Syntychakis, Managing
Director of Capital Ship Management, joined Capital Ship Management in
January 2001 where he has served as Vetting Manager, Crew Manager and
Operations Manager. From 2000 to 2001, Mr. Syntychakis served as Fleet
Operator of Delfi S.A. in Piraeus, Greece and from 1988 to 1997, he worked as
the Chief Officer of Sougerka Maritime also in Piraeus, Greece.
Mr. Syntychakis has been involved in the shipping industry in various
capacities for over 25 years and has also been closely involved with
vetting matters, serving on Intertanko’s Vetting Committee for several
years.
Abel
Rasterhoff, Director.
Mr. Rasterhoff
joined our board of directors on April 3, 2007. He serves on our conflicts
committee and has been designated as the audit committee’s financial expert.
Mr. Rasterhoff joined Shell International Petroleum Maatschappij in 1967,
and worked for various entities of the Shell group of companies until his
retirement from Shell in 1997. From 1981 to 1984, Mr. Rasterhoff was
Managing Director of Shell Tankers B.V., Vice Chairman and Chairman-elect of the
Dutch Council of Shipping and a Member of the Dutch Government Advisory
Committee on the North Sea. From 1991 to 1997, Mr. Rasterhoff was Director
and Vice President Finance and Planning for Shell International Trading and
Shipping Company Limited. During this period he also served as a Board Member of
the Securities and Futures Authority (SFA) in London. From February 1998 to
2004, Mr. Rasterhoff has served as a member of the executive board and as
Chief Financial Officer of TUI Nederland, the largest Dutch tour operator. From
February 2001 to September 2001, Mr. Rasterhoff served as a
member of the executive board and as Chief Financial Officer of Connexxion, the
government owned public transport company. Mr. Rasterhoff was also on the
Supervisory Board of SGR and served as an advisor to the trustees of the TUI
Nederland Pension Fund. Mr. Rasterhoff served on the Capital Maritime Board
from May 2005 until his resignation in February 2007 as the chairman
of the audit committee. Mr. Rasterhoff is currently a director and audit
committee member of Aegean Marine Petroleum Network Inc., a company listed
on the New York Stock Exchange. Mr. Rasterhoff holds a graduate business
degree in economics from Groningen State University.
Keith
Forman, Director.
Mr.
Forman joined our board of directors on April 3, 2007 and serves on our
conflicts committee and our audit committee. Mr. Forman is a member of the board
of directors of Kayne Anderson Energy Management, as investment company
investing primarily in energy companies, and is also a member of the board of
directors of Energy Solutions International Ltd., a supplier of oil and gas
pipeline software management systems. From January 2004 to July 2005,
he was Senior Vice President, Finance for El Paso Corporation, a leading
provider of natural gas services. Mr. Forman, who joined El Paso in 1998
upon their acquisition of the general partner of the Leviathan Gas Pipeline
Partners, also served as Vice President from 2001 to 2003, of El Paso Field
Services and from 1992 to 2003 he served as Chief Financial Officer, GulfTerra
Energy Partners L.P., a publicly traded master limited partnership. In his
position with GulfTerra, he was responsible for the financing activities of the
partnership, including its commercial and investment banking
relationships.
Robert
P. Curt, Director
Mr. Curt
joined our board of directors on July 24, 2007 and serves on our conflicts
committee and our audit committee. He had been a career executive for more than
30 years with ExxonMobil, and was named General Manager of ExxonMobil’s Marine
Transportation department following the merger of Exxon and Mobil in 1999. In
2003, he was seconded to Qatargas to lead its LNG vessel acquisition program and
subsequently was appointed Managing Director of Qatar Gas Transport Company, the
world’s largest owner of LNG vessels. In 2006, he returned to the U.S., where he
served as Vice President in ExxonMobil’s SeaRiver subsidiary. Mr. Curt received
his B.S. degree in Marine Engineering from the U.S. Merchant Marine Academy,
Kings Point, and holds an MBA in Finance from Iona College.
B.
Compensation
Reimbursement
of Expenses of Our General Partner
Our
general partner does not receive any management fee or other compensation for
managing us. Our general partner and its other affiliates are reimbursed for
expenses incurred on our behalf. These expenses include all expenses necessary
or appropriate for the conduct of our business and allocable to us, as
determined by our general partner. Our general partner did not incur any such
expenses during 2006.
Executive
Compensation
We and
our general partner were formed in January 2007. Neither we nor our general
partner have paid any compensation to our directors or our general partner’s
officers nor accrued any obligations with respect to management incentive or
retirement benefits for our directors or our general partner’s officers prior to
April 3, 2007. Because our Chief Executive Officer and Chief Financial Officer,
Mr. Lazaridis, is an employee of Capital Maritime, his compensation is set and
paid by Capital Maritime, and we reimburse Capital Maritime for the cost of the
provided services.
We do not
have a retirement plan for our executive officers or directors. Officers and
employees of our general partner or its affiliates may participate in employee
benefit plans and arrangements sponsored by Capital Maritime, our general
partner or their affiliates, including plans that may be established in the
future.
Compensation
of Directors
Officers
of our general partner or Capital Maritime who also serve as our directors do
not receive additional compensation for their service as directors. Our
directors receive compensation for attending meetings of our board of
directors or committee meetings as well as for serving in the role of
committee chair. For the year ended December 31, 2007, our directors, excluding
our chairman, received an aggregate amount of $202,274. In lieu of
any other compensation, our chairman receives an annual fee of $100,000 for
acting as a director and as the chairman of our board of
directors. For the year ended December 31, 2007 this compensation
amounted to $80,205. In addition, each director is reimbursed for out–of–pocket
expenses in connection with attending meetings of the board of directors or
committees and is fully indemnified by us for actions associated with being a
director to the extent permitted under Marshall Islands law.
Employment
Agreement
Under the
three-year employment agreement entered into between our general partner and
Mr. Lazaridis at the time of our Offering, if a change in control occurs
within two years from the date of the agreement, Mr. Lazaridis may resign
within six months of such change in control.
C.
Board Practices
Our
general partner, Capital GP L.L.C., manages our day-to-day activities consistent
with the policies and procedures adopted by our board of directors which
currently consists of seven members, four of which are independent. Unitholders
are not entitled to elect the directors of our general partner or directly or
indirectly participate in our management or operation. There are no service
contracts between us and any of our directors providing for benefits upon
termination of their employment or service.
Although
the Nasdaq Global Market does not require a listed limited partnership like us
to have a majority of independent directors on our board of directors or to
establish a compensation committee or a nominating/corporate governance
committee our board of directors has established an audit committee and a
conflicts committee comprised solely of independent directors. Each of the
committees operates under a written charter adopted by our board of directors
which is available under “Corporate Governance” in the Investor Relations tab of
our web site at www.capitalpplp.com. The membership and main functions of each
committee are described below
Audit Committee. The audit
committee of our board of directors is composed of three or more independent
directors, each of whom must meet the independence standards of the Nasdaq
Global Market, the SEC and any other applicable laws and regulations governing
independence from time to time. The audit committee is currently comprised of
directors Abel Rasterhoff (chair), Robert P. Curt and Keith Forman. All members
of the committee are financially literate and our board of directors has
determined that Mr. Rasterhoff qualifies as an “audit committee financial
expert” for purposes of the U.S. Sarbanes-Oxley Act. The audit committee, among
other things, reviews our external financial reporting, engages our external
auditors and oversees our internal audit activities and procedures and the
adequacy of our internal accounting controls.
Conflicts Committee. The
conflicts committee of our board of directors is composed of the same directors
constituting the audit committee, being Keith Forman (chair), Abel Rasterhoff
and Robert P. Curt. The members of our conflicts committee may not be officers
or employees of our general partner or directors, officers or employees of its
affiliates, and must meet the independence standards established by The Nasdaq
Global Market to serve on an audit committee of a board of directors and certain
other requirements. The conflicts committee reviews specific matters that the
board believes may involve conflicts of interest and determines if the
resolution of the conflict of interest is fair and reasonable to
us. Any matters approved by the conflicts committee will be
conclusively deemed to be fair and reasonable to us, approved by all of our
partners, and not a breach by our directors, our general partner or its
affiliates of any duties any of them may owe us or our unitholders.
D.
Employees
We
currently do not have our own executive officers and expect to rely on the
officers of our general partner to manage our day-to-day activities consistent
with the policies and procedures adopted by our board of directors. All of the
executive officers of our general partner and three of our directors also are
executive officers, directors or affiliates of Capital Maritime.
E.
Share Ownership
|
Common Units
Owned
|
Subordinated Units
Owned
|
Percentage
of
Total
Common and
Subordinated
Units
|
|||
|
Name of Beneficial
Owner
|
Number
|
%
|
Number
|
%
|
|
|
Capital
Maritime(1)(2)
|
2,007,847
|
12.9%
|
8,805,522
|
100
|
43.6%
|
|
All
executive officers and directors as a group (7 persons)
(2)
|
0
|
0
|
8,805,522
|
100
|
36.2%
|
___________
|
(1)
|
Excludes
the 2% general partner interest held by our general partner, a wholly
owned subsidiary of Capital
Maritime.
|
|
(2)
|
The
Marinakis family, including our chairman Mr. Marinakis, may be deemed to
beneficially own all of our subordinated units through its ownership of
Capital Maritime. None of our directors, director nominees or the officers
of our general partner (other than Mr. Marinakis) may be deemed to
beneficially own any of our subordinated
units.
|
Restricted
Units
We
currently have not adopted a long-term incentive plan for our employees and
directors. We expect, however, to establish an incentive compensation plan under
which we will be able to issue a limited number of restricted units to some of
our employees, affiliates or directors at a future date. Such number is not
anticipated to exceed 500,000 restricted units.
Item 7. Major Unitholders and
Related Party Transactions.
A.
Major Unitholders
The following table sets
forth as of March 31, 2008 the beneficial ownership
of our common and subordinated units by each person we know beneficially owns
more than 5.0% or more of our common or subordinated units, and all of our
directors, director nominees and the executive officers of our general partner
as a group. The number of units beneficially owned by each person is
determined under SEC rules and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under SEC rules a person
beneficially owns any units as to which the person has or shares voting or
investment power.
|
Common
Units
Owned
|
Subordinated
Units Owned |
Percentage
of
Total
Common and
Subordinated
Units
|
|||
|
Name of Beneficial
Owner
|
Number
|
%
|
Number
|
%
|
|
|
Capital
Maritime (1)(2)
|
2,007,847
|
12.9%
|
8,805,522
|
100
|
43.6%
|
|
All
executive officers and directors as a group (7 persons)
(2)
|
0
|
0
|
8,805,522
|
100
|
36.2%
|
|
OppenheimerFunds,
Inc., Oppenheimer Small- & Mid-Cap Value Fund (3)
|
2,215,001
|
14.3%
|
0
|
0
|
9.1%
|
|
Morgan
Stanley, Morgan Stanley Strategic Investments, Inc. (4)
|
1,417,284
|
9.1%
|
0
|
0
|
5.8%
|
|
Lehman
Brothers Holdings Inc.(5)
|
978,500
|
6.3%
|
0
|
0
|
4.0%
|
|
Swank
Capital, LLC, Swank Energy Income Advisors, LP and Jerry V. Swank
(6)
|
1,386,000
|
8.9%
|
0
|
0
|
5.7%
|
___________
|
(1)
|
Excludes
the 2% general partner interest held by our general partner, a wholly
owned subsidiary of Capital
Maritime.
|
|
(2)
|
The
Marinakis family, including our chairman Mr. Marinakis, may be deemed to
beneficially own all of our subordinated units through its ownership of
Capital Maritime. None of our directors, director nominees or the officers
of our general partner (other than Mr. Marinakis) may be deemed to
beneficially own any of our subordinated
units.
|
|
(3)
|
Includes
shared voting power and shared dispositive power as to 2,215,001 units
(with respect to Oppenheimer Funds, Inc.) and 1,000,000 units (with
respect to Oppenheimer Small- & Mid-Cap Value
Fund). Oppenheimer Funds, Inc. is an investment adviser and
Oppenheimer Small- & Mid-Cap Value Fund is an investment company. This
information is based on the Schedule 13G/A filed by these parties with the
SEC on February 6, 2008.
|
|
(4)
|
This
information is based on the Schedule 13G filed by these parties with the
SEC on March 24, 2008. These units are owned, or may be deemed to be
beneficially owned, by Morgan Stanley Strategic Investments, Inc., a
wholly-owned subsidiary of Morgan Stanley.
|
| (5) | This information is based on the Schedule 13G/A filed by this person with the SEC on February 13, 2008. |
| (6) |
Includes
shared voting and shared dispositive power of Swank Energy Income
Advisors, LP as to 1,386,000 units. Swank Capital LLC, as general partner
of Swank Energy Income Advisors, LP, may direct voting or disposition of
the 1,386,000 units held by Swank Energy Income Advisors, LP. Jerry V.
Swank, as the principal of Swank Capital, LLC, may direct voting or
disposition of the 1,386,000 units held by Swank Capital, LLC and Swank
Energy Income Advisors, LP. This information is based on the
Schedule 13G filed by these parties with the SEC on February 14,
2008.
|
Our
majority unitholders have the same voting rights as our other unitholders except
that if at any time, any person or group, other than our general partner, its
affiliates, their transferees, and persons who acquired such units with the
prior approval of our board of directors, owns beneficially 5% or more of any
class of units then outstanding, any such units owned by that person or group in
excess of 4.9% may not be voted on any matter and will not be considered to be
outstanding when sending notices of a meeting of unitholders, calculating
required votes, except for purposes of nominating a person for election to our
board, determining the presence of a quorum or for other similar purposes under
our partnership agreement, unless otherwise required by law. The voting rights
of any such unitholders in excess of 4.9% will be redistributed pro rata among
the other common unitholders holding less than 4.9% of the voting power of all
classes of units entitled to vote. As of March 31, 2008 Capital Maritime owned
subordinated and common units representing a 43.6% interest in us and also
had a 2% general partner interest in us through its ownership of our general
partner, which gives it the ability to control the outcome of unitholder votes
on certain matters. We are not aware of any
arrangements, the operation of which may at a subsequent date result in a change
in control of Capital Product Partners L.P.
B.
Related Party Transactions
Capital
Maritime, the sole member of our general partner, owns 2,007,847 common units
and 8,805,522 subordinated units, representing a 43.6% limited partner interest
in us. In addition, our general partner owns a 2% general partner interest in us
and all of the incentive distribution rights. Capital Maritime’s
ability, as sole member of our general partner, to control the appointment of
three of the seven members of our board of directors and to approve certain
significant actions we may take and its ownership of all of the outstanding
subordinated units and its right to vote the subordinated units as a separate
class on certain matters, means that Capital Maritime, together with its
affiliates, will have the ability to exercise influence regarding our
management.
|
1.
|
Contribution Agreement.
Pursuant to a Contribution Agreement, entered into concurrently
with the closing of our Offering, Capital Maritime sold us all of the
outstanding capital stock of eight vessel-owning subsidiaries that owned
the vessels in our initial fleet (Capital Maritime retained all assets of
those subsidiaries other than the vessels, and paid off all debt of those
subsidiaries), in exchange for:
|
|
a.
|
the
issuance to Capital Maritime of 11,750,000 common units and 8,805,522
subordinated units,
|
|
b.
|
the
payment to Capital Maritime of a cash dividend in the amount of $25.0
million at the closing of our
Offering,
|
|
c.
|
the
issuance to Capital Maritime of the right to receive an additional
dividend of $30.0 million in cash or a number of common units
necessary to satisfy the underwriters’ overallotment option or a
combination thereof, and
|
|
d.
|
the
issuance of the 2% general partner interest in us and all of our incentive
distribution rights to Capital GP L.L.C, a wholly owned subsidiary of
Capital Maritime.
|
|
2.
|
Omnibus Agreement. In
connection with our Offering, we have entered into an omnibus agreement
with Capital Maritime, Capital GP L.L.C., our general partner, and our
operating subsidiary. The following discussion describes provisions of the
omnibus agreement.
|
Noncompetition. Under the
omnibus agreement, Capital Maritime has agreed, and has caused its controlled
affiliates (other than us, our general partner and our subsidiaries) to agree,
not to acquire, own or operate medium range tankers under charter for two or
more years. This restriction will not prevent Capital Maritime or any of its
controlled affiliates (other than us and our subsidiaries) from:
|
a.
|
acquiring,
owning, chartering or operating medium range tankers under charter for
less than two years;
|
|
b.
|
acquiring
one or more medium range tankers under charter for two or more years if
Capital Maritime offers to sell to us the tanker for the acquisition price
plus any administrative costs associated with transfer and re-flagging,
including related legal costs, to Capital Maritime that would be required
to transfer the medium range tankers and related charters to us at the
time it is acquired or putting a medium range tanker that Capital Maritime
owns or operates under charter for two or more years if Capital Maritime
offers to sell the tanker to us for fair market value at the time it is
chartered for two or more years and, in each case, at each renewal or
extension of that charter for two or more
years;
|
|
c.
|
acquiring
one or more medium range tankers under charter for two or more years as
part of the acquisition of a controlling interest in a business or package
of assets and owning and operating or chartering those vessels provided,
however, that:
|
|
|
i.
|
if
less than a majority of the value of the total assets or business acquired
is attributable to those medium range tankers and related charters, as
determined in good faith by the board of directors of Capital Maritime;
Capital Maritime must offer to sell such medium range tankers and related
charters to us for their fair market value plus any additional tax or
other similar costs to Capital Maritime that would be required to transfer
the medium range tankers and related charters to us separately from the
acquired business.
|
|
|
ii.
|
if
a majority or more of the value of the total assets or business acquired
is attributable to the medium range tankers and related charters, as
determined in good faith by the board of directors of Capital Maritime.
Capital Maritime shall notify us in writing, of the proposed acquisition.
We shall, not later than the 10th calendar day following receipt of such
notice, notify Capital Maritime if we wish to acquire the medium range
tankers and related charters forming part of the business or package of
assets in cooperation and simultaneously with Capital Maritime acquiring
the Non-Medium Range Tankers (as defined below) and related charters
forming part of that business or package of assets. If we do not notify
Capital Maritime of our intent to pursue the acquisition within 10
calendar days, Capital Maritime may proceed with the acquisition as
provided in (i) above.
|
|
d.
|
acquiring
a non-controlling interest in any company, business or pool of
assets;
|
|
e.
|
acquiring,
owning or operating medium range tankers under charter for two or more
years subject to the offers to us described in paragraphs (b) and
(c) above (i) pending our determination whether to accept such
offers and pending the closing of any offers we accept, or (ii) if we
elect to acquire the medium range tankers and related
charter;
|
|
f.
|
providing
ship management services relating to any vessel whatsoever, including to
medium range tankers owned by the controlled affiliates of Capital
Maritime; or
|
|
g.
|
acquiring,
operating or chartering medium range tankers under charter for two or more
years if we have previously advised Capital Maritime that we consent to
such acquisition, operation or
charter.
|
If
Capital Maritime or any of its controlled affiliates (other than us or our
subsidiaries) acquires, owns, operates and charters medium range tankers
pursuant to any of the exceptions described above, it may not subsequently
expand that portion of its business other than pursuant to those
exceptions.
In
addition, under the omnibus agreement we have agreed, and have caused our
subsidiaries to agree, to only acquire, own, operate or charter medium range
tankers with charters of two or more years (any vessels that are not medium
range tankers will in the following be referred to as the “Non-Medium Range
Tankers”). This restriction does not:
|
a.
|
apply
to any Non-Medium Range Tanker owned, operated or chartered by us or any
of our subsidiaries, and the ownership, operation or chartering of any
Non-Medium Range Tanker that replaces any of those Non-Medium Range
Tankers in connection with the destruction or total loss of the original
tanker; the tanker being damaged to an extent that makes repairing it
uneconomical or renders it permanently unfit for normal use, as determined
in good faith by our board of directors within 90 days after the
occurrence of the damage; or the tanker’s condemnation, confiscation,
requisition, seizure, forfeiture or a similar taking of title to or use of
it that continues for at least six
months;
|
|
b.
|
prevent
us or any of our subsidiaries from acquiring Non-Medium Range Tankers and
any related charters as part of the acquisition of a controlling interest
in a business or package of assets and owning and operating or chartering
those vessels, provided, however,
that:
|
|
|
i.
|
if
less than a majority of the value of the total assets or business acquired
is attributable to Non-Medium Range Tankers and related charters, as
determined in good faith by our board of directors we must offer to sell
such Non-Medium Range Tankers and related charters to Capital Maritime
within 30 days for their fair market value plus any additional tax or
other similar costs to us that would be required to transfer the
Non-Medium Range Tankers and related charters to Capital Maritime
separately from the acquired
business;
|
|
|
ii.
|
if
a majority or more of the value of the total assets or business acquired
is attributable to Non-Medium Range Tankers and related charters, as
determined in good faith by our board of directors we shall notify Capital
Maritime in writing of the proposed acquisition. Capital Maritime shall,
not later than the 10th calendar day following receipt of such notice,
notify us if it wishes to acquire the Non-Medium Range Tankers forming
part of the business or package of assets in cooperation and
simultaneously with the us acquiring the medium range tankers under
charter for two or more years forming part of that business or package of
assets. If Capital Maritime does not notify us of its intent to pursue the
acquisition within 10 calendar days, we may proceed with the acquisition
as provided in (i) above.
|
|
c.
|
prevent
us from acquiring a non-controlling interest in any company, business or
pool of assets;
|
|
d.
|
prevent
us or any of our subsidiaries from owning, operating or chartering any
Non-Medium Range Tankers subject to the offer to Capital Maritime
described in paragraph (b) above, pending its determination whether
to accept such offer and pending the closing of any offer it accepts;
or
|
|
e.
|
prevent
us or any of our subsidiaries from acquiring, operating or chartering
Non-Medium Range Tankers if Capital Maritime has previously advised us
that it consents to such acquisition, operation or
charter.
|
If we or
any of our subsidiaries owns, operates and charters Non-Medium Range Tankers
pursuant to any of the exceptions described above, neither we nor such
subsidiary may subsequently expand that portion of our business other than
pursuant to those exceptions.
Rights of First Offer on Medium
Range Tankers. Under the omnibus agreement, we and our subsidiaries have
granted to Capital Maritime a first offer on any proposed sale, transfer or
other disposition of any of our medium range tankers and related charters or any
Non-Medium Range Tankers and related charters owned or acquired by us. Likewise,
Capital Maritime has agreed (and has caused its subsidiaries to agree) to grant
a similar right of first offer to us for any medium range tankers under charter
for two or more years it might own. These rights of first offer will not apply
to a sale, transfer or other disposition of vessels between any affiliated
subsidiaries, or pursuant to the terms of any charter or other agreement with a
charter party.
|
3.
|
Management Agreement.
We have entered into a Management Agreement with Capital Ship Management,
a subsidiary of Capital Maritime, pursuant to which Capital Ship
Management provides us with certain commercial and technical management
services. These services will be provided in a commercially reasonable
manner in accordance with customary ship management practice and under our
direction. Capital Ship Management may provide these services to us
directly or it may subcontract for certain of these services with other
entities, including other Capital Maritime
subsidiaries.
|
|
a.
|
We
pay Capital Ship Management a fixed daily fee of $5,500 per time chartered
vessel ($8,500 for the M/T Amore Mio II) in our fleet to provide the
commercial and technical management services and costs to such time
chartered vessels, which includes the cost of the first special survey. We
pay a fixed daily fee of $250 per bareboat chartered vessel in our fleet,
mainly to cover compliance costs, which include those costs incurred by
Capital Ship Management to remain in compliance with the oil majors’
requirements, including vetting
requirements.
|
|
b.
|
With
respect to each vessel in our fleet at the time of our Offering, the
management agreement has an initial term of approximately five years
beginning from when each vessel commenced operations through and including
the date of its next scheduled special or intermediate survey and includes
the expenses for such special or intermediate survey, as applicable, and
related drydocking. With respect to each vessel that has been or will be
subsequently delivered the management agreement will have an initial term
of approximately five years from when we take delivery of each
vessel.
|
|
c.
|
In
addition to the fixed daily fees payable under the management agreement,
Capital Ship Management is entitled to reasonable supplementary
remuneration for extraordinary fees and costs of any direct and indirect
expenses it incurs in providing these
services.
|
|
4.
|
Administrative Services
Agreement. We have entered into an administrative services
agreement with Capital Ship Management, pursuant to which Capital Ship
Management will provide certain administrative management services to us.
The agreement has an initial term of five years from the closing date of
our Offering. The services Capital Ship Management provides us with under
the agreement include, among others (a) bookkeeping, audit and accounting
services, (b) legal and insurance services, (c) administrative and
clerical services, (d) banking and financial services, (e) advisory
services and (f), client and investor relations services. We reimburse
Capital Ship Management for reasonable costs and expenses incurred in
connection with the provision of these services within 15 days after
Capital Ship Management submits to us an invoice for such costs and
expenses, together with any supporting detail that may be reasonably
required.
|
|
5.
|
Share Purchase
Agreement. In connection with our Offering, we entered into a share
purchase agreement with Capital Maritime to purchase its interests in the
subsidiaries that owned the seven vessels and related charters that
comprised our contracted fleet at the time of the Offering. At this time,
we have completed the purchase of five of these vessels and expect
delivery of the final two to take place in June and August of 2008
respectively. Please read “Item 4: Business—Overview—Our Fleet” for more
information on these acquisitions.
|
|
6.
|
Related Party Loans.
For the financing of the construction of five of the vessels in our
initial fleet, the Atlantas, Aktoras, Avax, Aiolos and Assos, Capital
Maritime had entered into loan agreements with three separate banks on
behalf of the related vessel-owning subsidiaries. Capital Maritime acted
as the borrower and the vessel-owning subsidiaries acted as guarantors in
all of these loan agreements. The five vessels in our initial fleet
described above had been financed in the aggregate amounts of $0, $15.5
million and $95.5 million as of December 31, 2004, 2005 and
2006, respectively. These loans were repaid in their entirety by Capital
Maritime with a portion of the proceeds of our
Offering.
|
|
7.
|
Dividend to Capital
Maritime. At the closing of our Offering, we borrowed
$30.0 million under our existing credit facility, $5 million of which
we used for working capital purposes and $25.0 million of
which we used to pay a cash dividend to Capital Maritime. We
also issued to Capital Maritime a number of common units necessary to
satisfy the underwriters’ overallotment option. We accounted for the
distribution to Capital Maritime of the common units necessary to satisfy
the underwriters’ overallotment option as a common unit dividend, which
had no net impact on partners’
equity.
|
|
8.
|
Purchase of M/T
Attikos. On September 24, 2007 we entered into a share purchase
agreement with Capital Maritime pursuant to which we acquired all of
Capital Maritime’s interests in the wholly owned subsidiary that owns the
M/T Attikos. The aggregate purchase price for the vessel was $23.0
million. The M/T Attikos, a 12,000 dwt, 2005 built double-hull product
tanker, is chartered to Trafigura Beheer B.V., under a charter with an
earliest scheduled expiration date of September 2010 at a gross rate of
$13,850 per day (net rate $13,503). The transaction was approved by our
board of directors following approval by the conflicts committee of
independent directors.
|
|
9.
|
Purchase of M/T Amore Mio
II. On March 27, 2008 we entered into a
share purchase agreement with Capital Maritime pursuant to which we
acquired all of Capital Maritime’s interests in the wholly owned
subsidiary that owns the M/T Amore Mio II. The aggregate purchase price
for the vessel was $95.0 million. We funded a portion of the purchase
price of the vessel through the issuance of 2,048,823 common units to
Capital Maritime at a price of $22.94 per unit, which was the weighted
average unit price for the period from October 15, 2007 to February 15,
2008, and the remainder through the incurrence of $46.0 million of debt
under our new credit facility and $2.0 million in cash. The M/T Amore Mio
II, a 159,982 dwt, 2001 built,
double-hull tanker, is chartered to BP Shipping Limited under a charter
with an earliest scheduled expiration date of January 2011 at a base gross
rate of $36,456 per day (net rate $36,000). The charter is also subject to
a profit sharing arrangement which is calculated and settled monthly and
which allows each party to share additional revenues above the base rate
on a 50/50 basis. The transaction was approved by our board of directors
following approval by the conflicts committee of independent
directors.
|
C.
Interest of Experts and Counsel
Not applicable.
Item 8. Financial
Information.
See Item 18 for additional information
required to be disclosed under this Item 8.
Legal
Proceedings
Although
we may, from time to time, be involved in litigation and claims arising out of
our operations in the normal course of business, we are not at present party to
any legal proceedings and are not aware of any proceedings against us, or
contemplated to be brought against us. We maintain insurance policies with
insurers in amounts and with coverage and deductibles as our board of directors
believes are reasonable and prudent. We expect that these claims would be
covered by insurance, subject to customary deductibles. Those claims, even if
lacking merit, could result in the expenditure of significant financial and
managerial resources.
Cash
Distribution Policy
Rationale
for Our Cash Distribution Policy
Our cash
distribution policy reflects a basic judgment that our unitholders will be
better served by our distributing our cash available (after deducting expenses,
including estimated maintenance and replacement capital expenditures and
reserves) rather than retaining it. Because we believe we will generally finance
any expansion capital expenditures from external financing sources, we believe
that our investors are best served by our distributing all of our available
cash. Our cash distribution policy is consistent with the terms of our
partnership agreement, which requires that we distribute all of our available
cash quarterly (after deducting expenses, including estimated maintenance and
replacement capital expenditures and reserves).
Limitations
on Cash Distributions and Our Ability to Change Our Cash Distribution
Policy
There is
no guarantee that unitholders will receive quarterly distributions from us. Our
distribution policy is subject to certain restrictions and may be changed at any
time, including:
|
|
•
|
Our
unitholders have no contractual or other legal right to receive
distributions other than the obligation under our partnership agreement to
distribute available cash on a quarterly basis, which is subject to the
broad discretion of our board of directors to establish reserves and other
limitations.
|
|
|
•
|
While
our partnership agreement requires us to distribute all of our available
cash, our partnership agreement, including provisions requiring us to make
cash distributions contained therein, may be amended. Although during the
subordination period, with certain exceptions, our partnership agreement
may not be amended without the approval of non-affiliated common
unitholders, our partnership agreement can be amended with the approval of
a majority of the outstanding common units after the subordination period
has ended.
|
|
|
•
|
Even
if our cash distribution policy is not modified or revoked, the amount of
distributions we pay under our cash distribution policy and the decision
to make any distribution is determined by our board of directors, taking
into consideration the terms of our partnership agreement and the
establishment of any reserves for the prudent conduct of our
business.
|
|
|
•
|
Under
Section 51 of the Marshall Islands Limited Partnership Act, we may
not make a distribution if the distribution would cause our liabilities to
exceed the fair value of our
assets.
|
|
|
•
|
We
may lack sufficient cash to pay distributions to our unitholders due to
decreases in net revenues or increases in operating expenses, principal
and interest payments on outstanding debt, tax expenses, working capital
requirements, maintenance and replacement capital expenditures or
anticipated cash needs.
|
|
|
•
|
Our
distribution policy will be affected by restrictions on distributions
under our revolving credit facilities which contain
material financial tests and covenants that must be satisfied. Should we
be unable to satisfy these restrictions included in our credit facilities
or if we are otherwise in default under the credit agreements, our ability
to make cash distributions to our unitholders, notwithstanding our stated
cash distribution policy, would be materially adversely
affected.
|
|
|
•
|
If
we make distributions out of capital surplus, as opposed to operating
surplus, such distributions will constitute a return of capital and will
result in a reduction in the quarterly distribution and the target
distribution levels. We do not anticipate that we will make any
distributions from capital surplus.
|
|
|
•
|
If
the ability of our subsidiaries to make any distribution to us is
restricted by, among other things, the provisions of existing and future
indebtedness, applicable partnership and limited liability company laws or
any other laws and regulations, our ability to make distributions to our
unitholders may be restricted.
|
Quarterly
Distributions
Our
common unitholders are entitled under our partnership agreement to receive a
quarterly distribution to the extent we have sufficient cash on hand to pay the
distribution after we establish cash reserves and pay fees and expenses.
Although we intend to continue to make strategic acquisitions and to take
advantage of our unique relationship with Capital Maritime in a prudent manner
that is accretive to our unitholders and to long-term distribution growth there
is no guarantee that we will pay a quarterly distribution on the common units
and subordinated units in any quarter. Even if our cash distribution policy is
not modified or revoked, the amount of distributions paid under our policy and
the decision to make any distribution is determined by our board of directors,
taking into consideration the terms of our partnership agreement and other
factors. We will be prohibited from making any distributions to unitholders if
it would cause an event of default, or an event of default is existing, under
our credit agreement.
Following
the completion of our initial public offering on April 3, 2007, the following
cash distributions have been declared and paid:
|
Distributions for
Quarter Ended:
|
Amount of Cash
Distributions
|
Cash Distributions per
Unit
|
|
Jun.
30, 2007*
|
$8.3
million
|
$0.3626
per unit
|
|
|
Sep.
30, 2007
|
$8.8
million
|
$0.385
per unit
|
|
|
Dec.
31, 2007
|
$9.0
million
|
$0.395
per unit
|
|
___________
*
Prorated for the period from April 4, 2007 to June 30,
2007.
|
Subordination
Period
During
the subordination period applicable to the subordinated units held by Capital
Maritime. The common units have the right to receive quarterly distributions of
available cash from operating surplus, plus any arrearages in the payment of the
quarterly distribution on the common units from prior quarters, before any
distributions of available cash from operating surplus may be made on the
subordinated units. Distribution arrearages do not accrue on the subordinated
units. The purpose of the subordinated units is to increase the likelihood that
during the subordination period there will be available cash to be distributed
on the common units.
Incentive
Distribution Rights
Incentive
distribution rights represent the right to receive an increasing percentage of
quarterly distributions of available cash from operating surplus (as defined in
our partnership agreement) after the minimum quarterly distribution and the
target distribution levels have been achieved. Our general partner currently
holds the incentive distribution rights, but may transfer these rights
separately from its general partner interest, subject to restrictions in the
partnership agreement. Except for transfers of incentive distribution rights to
an affiliate or another entity as part of our general partner’s merger or
consolidation with or into, or sale of substantially all of its assets to such
entity, the approval of a majority of our common units (excluding common units
held by our general partner and its affiliates), voting separately as a class,
generally is required for a transfer of the incentive distribution rights to a
third party prior to March 31, 2017. Any transfer by our general partner of
the incentive distribution rights would not change the percentage allocations of
quarterly distributions with respect to such rights.
Percentage
Allocations of Available Cash From Operating Surplus
The
following table illustrates the percentage allocations of the additional
available cash from operating surplus among the unitholders and our general
partner up to the various target distribution levels. The amounts set forth
under “Marginal Percentage Interest in Distributions” are the percentage
interests of the unitholders and our general partner in any available cash from
operating surplus we distribute up to and including the corresponding amount in
the column “Total Quarterly Distribution Target Amount,” until available cash
from operating surplus we distribute reaches the next target distribution level,
if any. The percentage interests shown for the unitholders and our general
partner for the minimum quarterly distribution are also applicable to quarterly
distribution amounts that are less than the minimum quarterly distribution. The
percentage interests shown for our general partner assume that our general
partner maintains its 2% general partner interest and assume our general partner
has not transferred the incentive distribution rights.
|
Marginal Percentage
Interest in Distributions
|
|||
|
Total Quarterly
Distribution Target Amount
|
Unitholders
|
General
Partner
|
|
|
Minimum
Quarterly Distribution
|
$0.3750
|
98%
|
2%
|
|
First
Target Distribution
|
up
to $0.4313
|
98%
|
2%
|
|
Second
Target Distribution
|
above
$0.4313 up to $0.4688
|
85%
|
15%
|
|
Third
Target Distribution
|
above
$0.4688 up to $0.5625
|
75%
|
25%
|
|
Thereafter
|
above
$0.5625
|
50%
|
50%
|
B.
Significant Changes
No significant changes have occurred
since the date of our audited consolidated financial statements included herein
except for those set out below:
|
1.
|
On
January 28, 2008 we declared a dividend of $0.395 per unit to unitholders
of record on February 5, 2008, which amounted to $9.0 million. The
dividend was paid on February 15,
2008.
|
|
2.
|
On
January 29, 2008 we took delivery of the M/T Alexandros II, the first of
the three 51,000 dwt newbuilding MR chemical/product tanker sister vessels
we had contracted to purchase from Capital Maritime at a fixed purchase
price of $48 million. The vessel is chartered to subsidiaries of Overseas
Shipholding Group Inc. under a 10 year bareboat charter at a rate of
$13,000 per day.
|
|
3.
|
On
March 19, 2008 we entered into a new 10-year revolving credit facility of
up to $350.0 million which is non-amortizing until March 2013 with HSH
Nordbank. The credit facility is intended to finance a portion of the
acquisition price of the M/T Amore Mio II, the M/T Aristofanis and of two
other vessels currently in Capital Maritime’s fleet which we may elect to
acquire in the future. We may also use this facility to finance up to 50%
of the purchase price of any potential future purchases of modern tanker
vessels from Capital Maritime or any third parties. The loan facility is
subject to similar covenants and restrictions as those in our existing
facility.
|
|
4.
|
On
March 27, 2008 we entered into a
share purchase agreement with Capital Maritime pursuant to which we
acquired all of Capital Maritime’s interests in the wholly owned
subsidiary that owns the M/T Amore Mio II, a 159,982 dwt, 2001 built,
double-hull tanker. A portion of the $95.0 million aggregate purchase
price was funded through the issuance of 2,048,823 common units to
Capital Maritime at a price of $22.94 per unit, which was the weighted
average unit price for the period from October 15, 2007 to February 15,
2008, and the remainder was funded through the issuance of $46.0 million
of debt under our new credit facility and $2.0 million in cash. The M/T
Amore Mio II is chartered to BP Shipping Limited under a charter with an
earliest scheduled expiration date of January 2011 at a base gross rate of
$36,456 per day (net rate $36,000).
|
|
5.
|
On
March 31, 2008, Capital Maritime, which owns and controls our general
partner, Capital GP L.L.C, made a capital contribution of 40,976 common
units to our general partner, which our general partner in turn
contributed to us in exchange for the issuance of 40.976 general partner
units to our general partner in order for it to maintain its 2% general
partner interest in us. Following the issuance of common units in
connection with the purchase of the Amore Mio II and the capital
contribution described above, Capital Maritime owns a 45.6% interest in
us, including its 2% interest through its ownership of our general
partner.
|
Please read Note 14 (Subsequent Events)
to our audited consolidated and predecessor combined financial statements
included elsewhere in this Annual Report for more information regarding the
events described above.
Item 9. The Offer and Listing.
Our common units started trading on the
Nasdaq Global Market under the symbol “CPLP” on March 30, 2007. The following
table sets forth the high and low closing sales prices in U.S. Dollars for our
common units for each of the periods indicated.
|
High
|
Low
|
|
| Year Ended: | ||
|
December
31, 2007*
|
32.50
|
20.80
|
|
Quarter
Ended:
|
||
|
March
31, 2008
|
24.93
|
16.35
|
|
December
31, 2007
|
27.75
|
20.80
|
|
September
30, 2007
|
32.50
|
23.33
|
|
June
30, 2007*
|
28.90
|
24.08
|
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Month
Ended:
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March 31,
2008
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20.31
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16.34
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February
29, 2008
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20.75
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19.05
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January
31, 2008
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24.93
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17.52
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December
31, 2007
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24.91
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20.80
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November
30, 2007
|
27.75
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20.98
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October
31, 2007
|
27.38
|
22.66
|
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_________________
*
Period commenced on March 30, 2007.
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Item 10. Additional Information.
A.
Share Capital
Not applicable.
B.
Memorandum and Articles of Association
The information required to be
disclosed under Item 10B is incorporated by reference to the following sections
of the prospectus included in our Registration Statement on Form F-1 filed with
the SEC on March 19, 2007: “The Partnership Agreement,” “Description of the
Common Units – The Units,” “Conflicts of Interest and Fiduciary Duties” and “Our
Cash Distribution Policy and Restrictions on Distributions.”
C.
Material Contracts
The following is a summary of each
material contract, other than material contracts entered into in the ordinary
course of business, to which we or any of our subsidiaries is a party, for the
two years immediately preceding the date of this Annual Report, each of which is
included in the list of exhibits in Item 19.
Please
read “Item 7B: Related Party Transactions” for a summary of certain contract
terms.
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Share
Purchase Agreement dated March 27, 2008 with Capital
Maritime to acquire all of its interest in the wholly owned subsidiary
that owns the M/T Amore Mio II for an aggregate purchase price of $95.0
million. A portion of the acquisition price was funded through the
issuance of 2,048,823 common units to
Capital Maritime at a price of $22.94 per unit and the remainder through
the issuance of $46.0 million of debt under our new credit facility and
$2.0 million in cash. The transaction was approved by our board of
directors following approval by the conflicts committee of independent
directors.
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Share
Purchase Agreement dated September 24, 2007 with Capital Maritime to
acquire all of its interest in the wholly owned subsidiary that owns the
M/T Attikos for an aggregate purchase price of $23.0 million. The
transaction was approved by our board of directors following approval by
the conflicts committee of independent
directors.
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Revolving
Facility Agreement, dated March 19, 2008, for a new 10-year revolving
credit facility of up to $350.0 million with HSH Nordbank AG which is
non-amortizing until March 2013. The credit facility bears interest at US$
LIBOR plus a margin of 1.1% and may be
used to
finance a portion of the acquisition price of certain identified vessels
currently in Capital Maritime’s fleet which we may elect to acquire in the
future. We may also use this facility to finance up to 50% of the purchase
price of any potential future purchases of modern tanker vessels from
Capital Maritime or any third parties. To date, we have used
$46.0 million
of this facility to fund part of the acquisition price of the M/T Amore
Mio II from Capital Maritime and expect to use approximately $11.5 million
in connection with the acquisition of the M/T Aristofanis in the second
quarter of 2008. Please read “Item 5: Management’s Discussion and Analysis
of Financial Condition and Results of Operation—Liquidity and Capital
Resources—Revolving Credit Facilities” for a full description of the new
credit facility.
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Revolving
Facility Agreement, dated March 22, 2007, as amended September 19, 2007,
for a 10-year revolving credit facility of up to $370.0 million with HSH Nordbank
AG which is non-amortizing until June 2012. The credit facility bears
interest at US$ LIBOR plus a margin of 0.75%. The credit facility may be
used for acquisitions and for general partnership purposes. Our
obligations under the facility are secured by first-priority mortgages
on 14 product tankers.
Please read “Item 5: Management’s Discussion and Analysis of Financial
Condition and Results of Operation—Liquidity and Capital
Resources—Revolving Credit Facilities” for a full description of the
existing credit facility.
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Omnibus
Agreement with Capital Maritime & Trading Corp., Capital GP LLC, our
general partner, and Capital Product Operating GP LLC dated April 3,
2007.
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Management
Agreement with Capital Ship Management pursuant to which Capital Ship
Management shall provide commercial and technical management services to
us dated April 3, 2007, as amended on September 24, 2007 and March 27,
2008 to reflect the acquisitions of the M/T Attikos and the M/T Amore Mio
II, respectively.
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Administrative
Services Agreement with Capital Ship Management pursuant to which Capital
Ship Management shall provide administrative support services to us dated
April 3, 2007.
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Contribution
Agreement with Capital Maritime & Trading Corp., Capital GP LLC, our
general partner, and Capital Product Operating GP LLC pursuant to which
certain vessels were contributed to us at the time of our Offering dated
April 3, 2007.
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Share
Purchase Agreement with Capital Maritime to purchase its interest in the
subsidiaries that owned the seven vessels and related charters we agreed
to purchase from Capital Maritime at the time of our Offering dated April
3, 2007.
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D.
Exchange Controls and Other Limitations Affecting Unitholders
We are not aware of any governmental
laws, decrees or regulations, including foreign exchange controls, in the
Republic of The Marshall Islands that restrict the export or import of capital,
or that affect the remittance of dividends, interest or other payments to
non-resident holders of our securities. We are not aware of any limitations on
the right of non-resident or foreign owners to hold or vote our securities
imposed by the laws of the Republic of The Marshall Islands or our Articles of
Incorporation and Bylaws.
E.
Taxation
Marshall
Islands Taxation
Because
we, our operating subsidiary and our controlled affiliates do not, and we do not
expect that we and our controlled affiliates will, conduct business or
operations in the Republic of The Marshall Islands, neither we nor our
controlled affiliates will be subject to income, capital gains, profits or other
taxation under current Marshall Islands law. As a result, distributions by our
operating subsidiary and our controlled affiliates to us will not be subject to
Marshall Islands taxation.
United
States Taxation
The following is a discussion of
material U.S. federal income tax considerations and is based upon provisions of
the U.S. Internal Revenue Code of 1986, as amended (the “Code”),
Treasury Regulations, and current administrative rulings and court decisions,
all of which are subject to change, possibly with retroactive effect, all as of
the date of this Annual Report. Changes in these authorities may cause the tax
consequences to vary substantially from the consequences described
below.
Election to be
Taxed as A Corporation. We have elected to be taxed as a
corporation for U.S. federal income tax purposes. As such, we will be subject to
U.S. federal income tax on our income to the extent it is from U.S. sources or
otherwise is effectively connected with the conduct of a trade or business in
the Unites States as discussed below.
Taxation of
Operating Income. We expect that substantially all of our
gross income will be attributable to the transportation of crude oil and related
products. For this purpose, gross income attributable to transportation ("Transportation Income") includes income derived from, or in
connection with, the use (or hiring or leasing for use) of a vessel to transport
cargo, or the performance of services directly related to the use of any vessel
to transport cargo, and thus includes both time charter or bareboat charter
income.
Transportation
Income that is attributable to transportation that begins or ends, but that does
not both begin and end, in the United States ("U.S. Source International
Transportation Income") will be considered to be 50.0% derived from
sources within the United States. Transportation Income attributable to
transportation that both begins and ends in the United States ("U.S. Source Domestic Transportation
Income") will be considered to be 100.0% derived from sources within the
United States. Transportation Income attributable to transportation exclusively
between non-U.S. destinations will be considered to be 100% derived from sources
outside the United States. Transportation Income derived from sources outside
the United States generally will not be subject to U.S. federal income
tax.
Based on
our current operations, we do not expect to have U.S. Source Domestic
Transportation Income. However, certain of our activities give rise to U.S.
Source International Transportation Income, and future expansion of our
operations could result in an increase in the amount of U.S. Source
International Transportation Income, as well as give rise to U.S. Source
Domestic Transportation Income, all of which could be subject to U.S. federal
income taxation, unless the exemption from U.S. taxation under Section 883
of the Code (the "Section 883 Exemption")
applies.
The
Section 883 Exemption. In general, the Section 883
Exemption provides that if a non-U.S. corporation satisfies the requirements of
Section 883 of the Code and the Treasury Regulations thereunder (the "Section 883
Regulations"), it will not be subject to the net basis and branch taxes
or 4.0% gross basis tax described below on its U.S. Source International
Transportation Income. The Section 883 Exemption only applies to U.S.
Source International Income. As discussed below, we believe that under our
current ownership structure, the Section 883 Exemption will apply and we
will not be taxed on our U.S. Source International Transportation Income. The
Section 883 Exemption does not apply to U.S. Source Domestic Transportation
Income.
We will
qualify for the Section 883 Exemption if, among other matters, we meet the
following three requirements:
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We
are organized in a jurisdiction outside the United States that grants an
equivalent exemption from tax to corporations organized in the United
States (an "Equivalent
Exemption");
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We
satisfy the Publicly
Traded Test (as described below);
and
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We
meet certain substantiation, reporting and other
requirements.
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The
Publicly Traded Test requires that one or more classes of equity representing
more than 50.0% of the voting power and value in a non-U.S. corporation be
“primarily and regularly traded” on an established securities market either in
the United States or in a jurisdiction outside the United States that grants an
Equivalent Exemption. The Section 883 Regulations provide, in pertinent
part, that equity interests in a non-U.S. corporation will be considered to be
“primarily traded” on an established securities market in a given country if the
number of units of each class of equity that are traded during any taxable year
on all established securities markets in that country exceeds the number of
units in each such class that are traded during that year on established
securities markets in any other single country. Equity of a non-U.S corporation
will be considered to be “regularly traded” on an established securities market
under the Section 883 Regulations if one or more classes of equity of the
corporation that, in the aggregate, represent more than 50.0% of the combined
vote and value of the non-U.S corporation are listed on such market and certain
trading volume requirements are met or deemed met as described below. For this
purpose, if one or more “5.0% unitholders” (i.e., a unitholder holding, actually
or constructively, at least 5.0% of the vote and value of a class of equity) own
in the aggregate 50.0% or more of the vote and value of a class of equity, such
class of equity will not be treated as primarily and regularly traded on an
established securities market (the “Closely Held Block Exception”).
We are
organized under the laws of the Republic of The Marshall Islands. The U.S.
Treasury Department has recognized the Republic of The Marshall Islands as a
jurisdiction that grants an Equivalent Exemption. Consequently, our U.S. Source
International Transportation Income (including for this purpose, any such income
earned by our subsidiaries that have properly elected to be treated as
partnerships or disregarded as entities separate from us for U.S. federal income
tax purposes) will be exempt from U.S. federal income taxation provided we meet
the Publicly Traded Test.
Since our
common units will only be traded on the Nasdaq Global Market, which is
considered to be an established securities market, we believe that our common
units will be deemed to be “primarily traded” on an established securities
market. In addition, we believe our common units represent more than 50% of our
vote and more than 50% of our value, and thus will be considered to be
“regularly traded” on an established securities market. We believe that our
common units represent more than 50% of our value and intend to take that
position. These conclusions, however, are based upon legal authorities which do
not expressly contemplate an organization structure such as ours. In particular,
although we have elected to be treated as a corporation for U.S. federal income
tax purposes, for corporate law purposes we are organized as a limited
partnership under Marshall Islands law and our general partner will be
responsible for managing our business and affairs and has been granted certain
veto rights over decisions of our board of directors. Accordingly, it is
possible that the IRS could assert that our common units do not meet the
“regularly traded” test.
We
believe we will meet the trading volume requirements described previously
because the pertinent regulations provide that trading volume requirements will
be deemed to be met with respect to a class of equity traded on an established
securities market in the United States where, as will be the case for our common
units, the units are regularly quoted by dealers who regularly and actively make
offers, purchases and sales of such common units to unrelated persons in the
ordinary course of business.
In
addition, we expect that our common units will not lose eligibility for the
Section 883 Exemption as a result of the Closely Held Block Exception,
because our partnership agreement provides that the voting rights of any 5.0%
unitholders are limited to a 4.9% voting interest in us regardless of how many
common units are held by that 5.0% unitholder. Thus, although the matter is not
free from doubt, we believe that we will satisfy the Publicly Traded Test.
Should any of the facts described above cease to correct, our ability to satisfy
the test will be compromised.
The Net Basis Tax
and Branch Profits Tax. If we earn U.S. Source International
Transportation Income and the Section 883 Exemption does not apply, the
U.S. source portion of such income may be treated as effectively connected with
the conduct of a trade or business in the United States ("Effectively Connected
Income") if we have a fixed place of business in the United States and
substantially all of our U.S. Source International Transportation Income is
attributable to regularly scheduled transportation or, in the case of bareboat
charter income, is attributable to a fixed place of business in the United
States. Based on our current operations, none of our potential U.S. Source
International Transportation Income is attributable to regularly scheduled
transportation or is received pursuant to bareboat charters. As a result, we do
not anticipate that any of our U.S. Source International Transportation Income
will be treated as Effectively Connected Income. However, there is no assurance
that we will not earn income pursuant to regularly scheduled transportation or
bareboat charters attributable to a fixed place of business in the United States
in the future, which would result in such income being treated as Effectively
Connected Income. In addition, any U.S. Source Domestic Transportation Income
generally will be treated as Effectively Connected Income.
Any
income we earn that is treated as Effectively Connected Income would be subject
to U.S. federal corporate income tax (the highest statutory rate is currently
35.0%). In addition, a 30.0% branch profits tax imposed under Section 884
of the Code also would apply to such income, and a branch interest tax could be
imposed on certain interest paid or deemed paid by us.
On the
sale of a vessel that has produced Effectively Connected Income, we could be
subject to the net basis corporate income tax and to the 30.0% branch profits
tax with respect to our gain not in excess of certain prior deductions for
depreciation that reduced Effectively Connected Income. Otherwise, we would not
be subject to U.S. federal income tax with respect to gain realized on the sale
of a vessel, provided the sale is considered to occur outside of the United
States under U.S. federal income tax principles.
The 4.0% Gross
Basis Tax. If the Section 883 Exemption does not apply
and the net basis tax does not apply, we would be subject to a 4.0% U.S. federal
income tax on the U.S. source portion of our gross U.S. Source International
Transportation Income, without benefit of deductions.
U.S.
Federal Income Taxation of U.S. Holders
As used
herein, the term U.S.
Holder means a beneficial owner of our common units that:
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is
an individual U.S. citizen or resident (as determined for U.S. federal
income tax purposes), a corporation or other entity organized under the
laws of the United States or its political subdivisions and classified as
a corporation for U.S. federal income tax purposes, an estate the income
of which is subject to U.S. federal income taxation regardless of its
source, or a trust if a court within the United States is able to exercise
primary jurisdiction over the administration of the trust and one or more
U.S. persons have the authority to control all substantial decisions of
the trust;
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owns
the common units as a capital asset, generally, for investment purposes;
and
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owns
less than 10% of our common units for United States federal income tax
purposes.
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Distributions
Subject
to the discussion of the rules applicable to passive foreign investment
companies ("PFICs")
below, any distributions made by us with respect to our common units to a U.S.
Holder generally will constitute dividends, which may be taxable as ordinary
income or “qualified dividend income” as described in more detail below, to the
extent of our current and accumulated earnings and profits, as determined under
U.S. federal income tax principles. Distributions in excess of our earnings and
profits will be treated first as a nontaxable return of capital to the extent of
the U.S. Holder’s tax basis in its common units on a dollar-for-dollar basis and
thereafter as capital gain. U.S. Holders that are corporations generally will
not be entitled to claim a dividend received deduction with respect to any
distributions they receive from us. Dividends paid with respect to our common
units generally will be treated as “passive category income” for purposes of
computing allowable foreign tax credits for U.S. federal income tax
purposes.
Dividends
paid on our common units to a U.S. Holder who is an individual, trust or estate
(a "U.S. Individual
Holder") will be treated as “qualified dividend income” that is taxable
to such U.S. Individual Holder at preferential capital gain tax rates (through
2010) provided that: (i) our common units are readily tradable on an
established securities market in the United States (such as the Nasdaq Global
Market on which we expect our common units to be traded); (ii) we are not a
PFIC for the taxable year during which the dividend is paid or the immediately
preceding taxable year (which we do not believe we are, have been or will be, as
discussed below); (iii) the U.S. Individual Holder has owned the common
units for more than 60 days in the 121-day period beginning 60 days
before the date on which the common units become ex-dividend; and (iv) the
U.S. Individual Holder is not under an obligation to make related payments with
respect to positions in substantially similar or related property. There is no
assurance that any dividends paid on our common units will be eligible for these
preferential rates in the hands of a U.S. Individual Holder, and any dividends
paid on our common units that are not eligible for these preferential rates will
be taxed as ordinary income to a U.S. Individual Holder. In the absence of
legislation extending the term of the preferential tax rates for qualified
dividend income, all dividends received by a taxpayer in tax years beginning
January 1, 2011 or later will be taxed at rates applicable to ordinary
income.
Special
rules may apply to any “extraordinary dividend” paid by us. An extraordinary
dividend is, generally, a dividend with respect to a common unit if the amount
of the dividend is equal to or in excess of 10 percent of a unitholder’s
adjusted basis (or fair market value in certain circumstances) in such common
unit. If we pay an “extraordinary dividend” on our common units that is treated
as “qualified dividend income,” then any loss derived by a U.S. Individual
Holder from the sale or exchange of such common units will be treated as
long-term capital loss to the extent of the amount of such
dividend.
In
addition, under previously proposed legislation, the preferential rate of
federal income tax currently imposed on qualified dividend income would be
denied with respect to dividends received form a non-U.S. corporation,
unless the non-U.S. corporation either is eligible for benefits of a
comprehensive income tax treaty with the United States or is created or
organized under the laws of a foreign country which has a comprehensive income
tax system. Because the Marshall Islands has not entered into a comprehensive
income tax treaty with the United States and imposes only limited taxes on
corporations organized under its laws, it is unlikely that we could satisfy
either of these requirements. Consequently, if this legislation were enacted the
preferential tax rates imposed on qualified dividend income may no longer be
applicable to dividends received from us. Any dividends paid on our common
shares that are not eligible for the preferential rate will be taxed as ordinary
income to a U.S. Individual Holder. As of the date hereof, it is not possible to
predict with any certainty whether this previously proposed legislation will be
reintroduced or enacted.
Sale,
Exchange or other Disposition of Common Units
Subject
to the discussion of PFICs below, a U.S. Holder generally will recognize taxable
gain or loss upon a sale, exchange or other disposition of our units in an
amount equal to the difference between the amount realized by the U.S. Holder
from such sale, exchange or other disposition and the U.S. Holder’s tax basis in
such units. Such gain or loss will be treated as long-term capital gain or loss
if the U.S. Holder’s holding period is greater than one year at the time of the
sale, exchange or other disposition. Such capital gain or loss will generally be
treated as U.S. source income or loss, as applicable, for U.S. foreign tax
credit purposes. A U.S. Holder’s ability to deduct capital losses is subject to
certain limitations.
PFIC
Status and Significant Tax Consequences
Special
and adverse U.S. federal income tax rules apply to a U.S. Holder that owns an
equity interest in a non-U.S. entity taxed as a corporation and classified as a
PFIC for U.S. federal income tax purposes. In general, we will be treated as a
PFIC with respect to a U.S. Holder if, for any taxable year in which such holder
held our common units, either:
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at
least 75.0% of our gross income (including the gross income of our
vessel-owning subsidiaries) for such taxable year consists of passive
income (e.g., dividends, interest, capital gains and rents derived other
than in the active conduct of a rental business),
or
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at
least 50.0% of the average value of the assets held by us (including the
assets of our vessel-owning subsidiaries) during such taxable year
produce, or are held for the production of, passive
income.
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Income
earned, or deemed earned, by us in connection with the performance of services
would not constitute passive income. By contrast, rental income would generally
constitute “passive income” unless we were treated under specific rules as
deriving our rental income in the active conduct of a trade or
business.
Provided
we meet certain statutory requirements, we will not be treated as a PFIC in the
first year in which we have taxable income even if we satisfy the income test or
asset test set out in the bullet points above. Based on our current and
projected methods of operation, we do not believe that we will be a PFIC with
respect to any taxable year. Although there is no legal authority directly on
point, and we are not obtaining a ruling from the IRS on this issue, our
counsel’s opinion is based principally on the position that, for purposes of
determining whether we are a PFIC, the gross income we derive or are deemed to
derive from the time chartering activities of our wholly owned subsidiaries
should constitute services income, rather than rental income. Correspondingly,
such income should not constitute passive income, and the assets that we or our
wholly owned subsidiaries own and operate in connection with the production of
such income, in particular, the vessels we or our subsidiaries own that are
subject to time charters, should not constitute passive assets for purposes of
determining whether we were a PFIC. We expect that at least five out of the
eight vessels in our initial fleet and four of the seven newbuildings we have
committed to purchase will be engaged in time chartering activities and intend
to treat our income from those activities as non-passive income, and the vessels
engaged in those activities as non-passive assets. The remainder of our fleet
will be engaged in activities that may be characterized as passive for PFIC
purposes and the income from that portion of our fleet may be treated as passive
income for PFIC purposes. We believe that there is substantial legal authority
supporting our position consisting of case law and IRS pronouncements concerning
the characterization of income derived from time charters as services income for
other tax purposes. However, in the absence of any legal authority specifically
relating to the statutory provisions governing PFICs, the IRS or a court could
disagree with this position. In addition, although we intend to conduct our
affairs in a manner to avoid being classified as a PFIC with respect to any
taxable year, we cannot assure you that the nature of our operations will not
change in the future.
As
discussed more fully below, if we were to be treated as a PFIC for any taxable
year, a U.S. Holder would be subject to different taxation rules depending on
whether the U.S. Holder makes an election to treat us as a “Qualified Electing
Fund”, which election we refer to as a “QEF election”. As an alternative to
making a QEF election, a U.S. Holder should be able to make a “mark-to-market”
election with respect to our common units, as discussed below.
Taxation
of U.S. Holders Making a Timely QEF Election
If a U.S.
Holder makes a timely QEF election, which U.S. Holder we refer to as an
“Electing Holder”, the Electing Holder must report each year for U.S. federal
income tax purposes his pro rata share of our ordinary earnings and our net
capital gain, if any, for our taxable year that ends with or within the taxable
year of the Electing Holder, regardless of whether or not distributions were
received from us by the Electing Holder. The Electing Holder’s adjusted tax
basis in the common units will be increased to reflect taxed but undistributed
earnings and profits. Distributions of earnings and profits that had been
previously taxed will result in a corresponding reduction in the adjusted tax
basis in the common units and will not be taxed again once distributed. An
Electing Holder would generally recognize capital gain or loss on the sale,
exchange or other disposition of our common units. A U.S. Holder would make a
QEF election with respect to any year that we are a PFIC by filing one copy of
IRS Form 8621 with his U.S. federal income tax return and a second copy in
accordance with the instructions to such form. If we were to be treated as a
PFIC for any taxable year, we would provide each U.S. Holder with all necessary
information in order to make the QEF election described above.
Taxation
of U.S. Holders Making a “Mark-to-Market” Election
Alternatively,
if we were to be treated as a PFIC for any taxable year and, as we anticipate,
our units were treated as “marketable stock,” a U.S. Holder would be allowed to
make a “mark-to-market” election with respect to our common units, provided the
U.S. Holder completes and files IRS Form 8621 in accordance with the
relevant instructions and related Treasury Regulations. If that election is
made, the U.S. Holder generally would include as ordinary income in each taxable
year the excess, if any, of the fair market value of the common units at the end
of the taxable year over such holder’s adjusted tax basis in the common units.
The U.S. Holder would also be permitted an ordinary loss in respect of the
excess, if any, of the U.S. Holder’s adjusted tax basis in the common units over
the fair market value thereof at the end of the taxable year, but only to the
extent of the net amount previously included in income as a result of the
mark-to-market election. A U.S. Holder’s tax basis in his common units would be
adjusted to reflect any such income or loss amount. Gain realized on the sale,
exchange or other disposition of our common units would be treated as ordinary
income, and any loss realized on the sale, exchange or other disposition of the
common units would be treated as ordinary loss to the extent that such loss does
not exceed the net mark-to-market gains previously included by the U.S.
Holder.
Taxation
of U.S. Holders Not Making a Timely QEF or Mark-to-Market Election
Finally,
if we were to be treated as a PFIC for any taxable year, a U.S. Holder who does
not make either a QEF election or a “mark-to-market” election for that year,
whom we refer to as a “Non-Electing Holder,” would be subject to special rules
with respect to (1) any excess distribution (i.e., the portion of any
distributions received by the Non-Electing Holder on our common units in a
taxable year in excess of 125 percent of the average annual distributions
received by the Non-Electing Holder in the three preceding taxable years, or, if
shorter, the Non-Electing Holder’s holding period for the common units), and
(2) any gain realized on the sale, exchange or other disposition of our
common units. Under these special rules:
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the
excess distribution or gain would be allocated ratably over the
Non-Electing Holder’s aggregate holding period for the common
units;
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the
amount allocated to the current taxable year and any year prior to the
year we were first treated as a PFIC with respect to the Non-Electing
Holder would be taxed as ordinary income;
and
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the
amount allocated to each of the other taxable years would be subject to
tax at the highest rate of tax in effect for the applicable class of
taxpayer for that year, and an interest charge for the deemed deferral
benefit would be imposed with respect to the resulting tax attributable to
each such other taxable year.
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These
penalties would not apply to a qualified pension, profit sharing or other
retirement trust or other tax-exempt organization that did not borrow money or
otherwise utilize leverage in connection with its acquisition of our common
units. If we were treated as a PFIC for any taxable year and a Non-Electing
Holder who is an individual dies while owning our common units, such holder’s
successor generally would not receive a step-up in tax basis with respect to
such units.
U.S.
Federal Income Taxation of Non-U.S. Holders
A
beneficial owner of our common units (other than a partnership, including any
entity or arrangement treated as a partnership for U.S. federal income tax
purposes) that is not a U.S. Holder is a "Non-U.S.
Holder".
Distributions
Distributions
we pay to a Non-U.S. Holder will not be subject to U.S. federal income tax or
withholding tax if the Non-U.S. Holder is not engaged in a U.S. trade or
business. If the Non-U.S. Holder is engaged in a U.S. trade or business,
distributions we pay will be subject to U.S. federal income tax to the extent
those distributions constitute income effectively connected with that Non-U.S.
Holder’s U.S. trade or business. However, distributions paid to a Non-U.S.
Holder who is engaged in a trade or business may be exempt from taxation under
an income tax treaty if the income represented thereby is not attributable to a
U.S. permanent establishment maintained by the Non-U.S. Holder.
Disposition
of Units
The U.S.
federal income
taxation of Non-U.S. Holders on any gain resulting from the disposition of our
common units is generally the same as described above regarding distributions.
However, individual Non-U.S. Holders may be subject to tax on gain resulting
from the disposition of our common units if they are present in the United
States for 183 days or more during the taxable year in which those shares
are disposed and meet certain other requirements.
Backup
Withholding and Information Reporting
In
general, payments of distributions or the proceeds of a disposition of common
units to a non-corporate U.S. Holder will be subject to information reporting
requirements. These payments to a non-corporate U.S. Holder also may
be subject to backup withholding, if the non-corporate
U.S. Holder:
|
|
•
|
fails
to provide an accurate taxpayer identification
number;
|
|
|
•
|
is
notified by the IRS that he has failed to report all interest or corporate
distributions required to be shown on its U.S. federal income tax returns;
or
|
|
|
•
|
in
certain circumstances, fails to comply with applicable certification
requirements.
|
Non-U.S.
Holders may be required to establish their exemption from information reporting
and backup withholding on payments within the United States by certifying their
status on IRS Form W-8BEN, W-8ECI or W-8IMY, as applicable.
Backup
withholding is not an additional tax. Rather, a unitholder generally may obtain
a credit for any amount withheld against his liability for U.S. federal income
tax (and a refund of any amounts withheld in excess of such liability) by filing
a return with the IRS.
F.
Dividends and Paying Agents
Not applicable.
G.
Safe Harbor
Not applicable.
H.
Documents on Display
We have
filed with the SEC a registration statement on Form F-1 regarding the
common units. This Annual Report does not contain all of the information found
in the registration statement. For further information regarding us and our
common units, you may wish to review the full registration statement, including
its exhibits. The registration statement, including the exhibits, may be
inspected and copied at the public reference facilities maintained by the SEC at
100 F Street, N.E., Washington, D.C. 20549. Copies of this material can also be
obtained upon written request from the Public Reference Section of the SEC at
100 F Street, N.E, Washington, D.C. 20549, at prescribed rates or from the SEC’s
web site on the Internet at http://www.sec.gov free of charge. Please call the
SEC at 1-800-SEC-0330 for further information on public reference room. Our
registration statement can also be inspected and copied at the offices of the
Nasdaq Global Market, One Liberty Plaza, New York, New York 10006.
I.
Subsidiary Information
Please
see Exhibit 8.1 to this Annual Report for a list of our significant subsidiaries
as of December 31, 2007.
Item 11. Quantitative and Qualitative Disclosures About Market
Risk.
Our
Risk Management Policy
Our
policy is to continuously monitor our exposure to business risks, including the
impact of changes in interest rates and currency rates on earnings and cash
flows. We intend to assess these risks and, when appropriate, take measures to
minimize our exposure to the risks.
Foreign
Exchange Risk
We do not have a material
currency exposure risk. We generate
all of our revenues in U.S. Dollars and incur less than 5% of our expenses in
currencies other than U.S. Dollars. For accounting purposes, expenses incurred
in Euros are translated into U.S. Dollars at the exchange rate prevailing on the
date of each transaction. At December 31, 2007, less than 5% of liabilities were
denominated in currencies other than U.S. Dollars (mainly in Euros). These
liabilities were translated into U.S. Dollars at the exchange rate prevailing on
December 31, 2007. We have not hedged currency exchange risks and our operating
results could be adversely affected as a result.
Interest
Rate Risk
The
international tanker industry is capital intensive, requiring significant
amounts of investment, a significant portion of which is provided in the form of
long-term debt. Our current debt contains interest rates that fluctuate with
LIBOR. Our existing credit facility of $370.0 million bears floating interest of
0.75% per annum over US$LIBOR. Our $350.0 million new credit facility bears
floating interest of 1.10% per annum over US$LIBOR. Therefore, we are exposed to
the risk that our interest expense may increase if interest rates
rise.
In order
to hedge our exposure to interest rate changes, we have entered into eight
interest rate swap agreements to fix the LIBOR portion of our interest rate at
5.1325% for $326.0 million in borrowings, of which we have drawn down $302.0
million, under our existing facility and into one interest swap agreement
to fix the LIBOR portion of our interest rate at 4.925% for $20.5 million in
borrowing under our existing credit facility for a period up to June 29,
2012. On March 27, 2008 we entered into an interest rate swap agreement to fix
the LIBOR portion of our interest rate at 3.525% for $46.0 million in
borrowings, under our new non-amortizing credit facility entered into on March
19, 2008, for a period of up to March 27, 2013. We intend to swap the
LIBOR portion of any further amounts drawn down under our new credit facility
into a fixed rate until the end of the non-amortizing period on March 31, 2013.
As our
interest rate is fixed under the swap agreements changes in LIBOR would not
affect our interest expense.
Please
read Note 2 (Significant Accounting Policies – Interest Rate Swap
Agreements) and Note 5 (Long-Term Debt) to our consolidated and predecessor
combined financial statements included elsewhere in this Annual Report, which
provide additional information with respect to our derivative financial
instruments and existing debt agreements.
Concentration
of Credit Risk
Financial
instruments, which potentially subject us to significant concentrations of
credit risk, consist principally of cash and cash equivalents, and trade
accounts receivable. We place our cash and cash equivalents, consisting mostly
of deposits, with financial institutions with high credit ratings. We perform
periodic evaluations of the relative credit standing of those financial
institutions. As of December 31, 2007, 76% of our revenue was derived from
two charterers. We do not obtain rights to collateral to reduce our credit
risk.
Inflation
Inflation
has had a minimal impact on vessel operating expenses, drydocking expenses and
general and administrative expenses. Our management does not consider inflation
to be a significant risk to direct expenses in the current and foreseeable
economic environment. However, in the event that inflation becomes a significant
factor in the global economy, inflationary pressures would result in increased
operating, voyage and financing costs.
Item 12. Description of Securities Other than Equity
Securities.
Not Applicable.
Item 13. Defaults, Dividend, Arrearages and
Delinquencies.
None.
Item 14. Material Modifications to the Rights of Security
Holders and Use of Proceeds.
No
material modifications to the rights of security holders.
We
completed our Offering on April 3, 2007. We did not receive any proceeds from
the sale of our common units by Capital Maritime. Capital Maritime used the
proceeds from our Offering to repay the existing debt on the eight vessels that
made up our fleet at the time of our Offering. Capital Maritime also paid the
offering expenses, underwriting discounts, selling commissions and brokerage
fees incurred in connection with the Offering.
Item 15. Controls and Procedures.
As of
December 31, 2007, our management (with the participation of our chief executive
officer and chief financial officer) conducted an evaluation pursuant to Rule
13a-15 and 15d-15 promulgated under the U.S. Securities Exchange Act of 1934, as
amended (the “Exchange Act”), of the effectiveness of the design and operation
of our disclosure controls and procedures. Based on this evaluation, our chief
executive officer and chief financial officer concluded that as of December 31,
2007, such disclosure controls and procedures (which include, without
limitation, controls and procedures designed to ensure that information required
to be disclosed by us in the reports we file or submit under the Exchange Act is
accumulated and communicated to the management, including our chief executive
officer and chief financial officer, as appropriate to allow timely decisions
regarding required disclosure) were effective to provide reasonable assurance
that information required to be disclosed by us in reports we file or submit
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the rules and forms of the Securities and Exchange
Commission. There have been no changes in internal controls over financial
reporting that occurred during the year covered by this annual report that have
materially affected, or are reasonably likely to materially affect, our internal
controls over financial reporting.
Item 16A. Audit Committee Financial Expert.
Our board
of directors has determined that director Abel Rasterhoff, the chairman of our
audit committee, qualifies as an audit committee financial expert for purposes
of the U.S. Sarbanes-Oxley Act and is independent under applicable Nasdaq Global
Market and SEC standards.
Item 16B. Code of Ethics
Our board
of directors has adopted a Code of Business Conduct and Ethics that includes a
Code of Ethics that applies to our chief executive officer, chief financial
officer, principal accounting officer and persons performing similar functions.
This document is available under “Corporate Governance” in the Investor
Relations area of our web site (www.capitalpplp.com). We will also
provide a hard copy of our code of ethics free of charge upon written request.
We intend to disclose, under “Corporate Governance” in the Investor Relations
area of our web site, any waivers to or amendments of the Code of Business
Conduct and Ethics for the benefit of any of our directors and executive
officers.
Item 16C. Principal Accountant Fees and Services.
Our
principal accountant for 2007 and 2006 was Deloitte Hadjipavlou, Sofianos &
Cambanis S.A. (“Deloitte”). The following table shows the fees we paid or
accrued for audit services provided by Deloitte for 2007 and 2006 (thousands of
U.S. Dollars).
|
Fees
|
2007
|
2006*
|
|||||||
|
Audit
Fees (1)
|
$ | 227 | $ | - | |||||
|
Audit-Related
Fees
|
- | - | |||||||
|
Tax
Fees
|
- | - | |||||||
|
Total
|
$ | 227 | - | ||||||
|
*
|
Capital
Maritime was responsible for all fees payable to Deloitte for the year
ended December 31, 2006.
|
||
|
|
(1)
|
Audit
fees represent fees for professional services provided in connection with
the audit of our consolidated financial statements, review of our
quarterly consolidated financial statements and audit services provided in
connection with other regulatory filings. Fees in connection with the
review of our regulatory filings for our Offering of common units in April
2007 amounted to $1.0 million and were paid by Capital Maritime with
part of the proceeds from the offering.
|
The audit
committee of our board of directors has the authority to pre-approve permissible
audit-related and non-audit services not prohibited by law to be performed by
our independent auditors and associated fees. Engagements for proposed services
either may be separately pre-approved by the audit committee or entered into
pursuant to detailed pre-approval policies and procedures established by the
audit committee, as long as the audit committee is informed on a timely basis of
any engagement entered into on that basis. The audit committee separately
pre-approved all engagements and fees paid to our principal accountant in
2007.
Item 16D. Exemptions from the Listing Standards for Audit
Committees.
None.
Item 16E. Purchases of Equity Securities by the Issuer and
Affiliated Purchasers.
On
March 27, 2008, we issued 2,048,823 common units to Capital
Maritime at a price of $22.94 per unit, which was the weighted average unit
price for the period from October 15, 2007 to February 15, 2008, in order to
finance a portion of the acquisition price of the M/T Amore Mio II which we
acquired from Capital Maritime on the same date. On March 31, 2008, Capital
Maritime, which owns and controls our general partner, Capital GP L.L.C, made a
capital contribution of 40,976 common units to our general partner, which our
general partner then contributed to us in exchange for the issuance of 40,976
general partner units to our general partner in order for it to maintain its 2%
general partner interest in us.
Following the issuance of common units
and the capital contribution described above, Capital Maritime owns 2,007,847
common units and 8,805,522 subordinated units, representing a 43.6% limited
partner interest in us. In addition, our general partner, which is owned and
controlled by Capital Maritime, owns a 2% general partner interest in us and all
of the incentive distribution rights.
Item 17. Financial Statements
Not Applicable.
Item 18. Financial Statements
|
INDEX
TO FINANCIAL STATEMENTS
|
Page
|
|
CAPITAL
PRODUCT PARTNERS L.P.
|
|
|
Report
of Independent Registered Public Accounting Firm
|
F-1
|
|
Consolidated
and Predecessor Combined Balance Sheets as of December 31, 2007 and
2006
|
F-2
|
|
Consolidated
and Predecessor Combined Statements of Income for the years ended December
31, 2007, 2006 and 2005
|
F-3
|
|
Consolidated
and Predecessor Combined Statement of Changes in Partners’/ Stockholders’
Equity for the years ended December 31, 2007, 2006, 2005 and
2004
|
F-4
|
|
Consolidated
and Predecessor Combined Statements of Cash Flows for the years ended
December 31, 2007, 2006 and 2005
|
F-5
|
|
Notes
to the Consolidated and Predecessor Combined Financial
Statements
|
F-6
|
Item 19. Exhibits
The
following exhibits are filed as part of this Annual Report:
|
Exhibit
No.
|
Description
|
|
|
1.1
|
Certificate
of Limited Partnership of Capital Product Partners L.P.
(1)
|
|
|
1.2
|
First
Amended and Restated Agreement of Limited Partnership of Capital Product
Partners L.P. (2)
|
|
|
1.3
|
Certificate
of Formation of Capital GP L.L.C. (1)
|
|
|
1.4
|
Limited
Liability Company Agreement of Capital GP L.L.C. (1)
|
|
|
1.5
|
Certificate
of Formation of Capital Product Operating GP L.L.C. (1)
|
|
|
4.1
|
Revolving
$370.0 Million Credit Facility dated March 22, 2007 (1)
|
|
|
4.2
|
Amendment
to Revolving $370.0 million Credit Facility dated September 19,
2007
|
|
|
4.3
|
Omnibus
Agreement (1)
|
|
|
4.4
|
Management
Agreement with Capital Ship Management (1)
|
|
|
4.5
|
Amendment
1 to Management Agreement with Capital Ship Management dated
September 24, 2007
|
|
|
4.6
|
Amendment
2 to Management Agreement with Capital Ship Management dated
March 27, 2008
|
|
|
4.7
|
Administrative
Services Agreement with Capital Ship Management (1)
|
|
|
4.8
|
Contribution
and Conveyance Agreement for Initial Fleet (1)
|
|
|
4.9
|
Share
Purchase Agreement for 2007 and 2008 Vessels (1)
|
|
|
4.10
|
Revolving
$350.0 Million Credit Facility dated March 19,
2008
|
|
|
4.11
|
Share
Purchase Agreement for M/T Attikos dated September 24,
2007
|
|
|
4.12
|
Share
Purchase Agreement for M/T Amore Mio II dated March 27,
2008
|
|
|
8.1
|
List
of Subsidiaries of Capital Product Partners L.P.
|
|
|
12.1
|
Rule
13a-14(a)/15d-14(a) Certification of Capital Product Partners L.P.’s Chief
Executive Officer
|
|
|
12.2
|
Rule
13a-14(a)/15d-14(a) Certification of Capital Product Partners L.P.’s Chief
Financial Officer
|
|
|
13.1
|
Capital
Product Partners L.P. Certification of Ioannis E. Lazaridis, Chief
Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
|
|
(1)
|
Previously
filed as an exhibit to Capital Product Partners L.P.’s Registration
Statement on Form F-1 (File No. 333-141422), filed with the SEC on March
19, 2007 and hereby incorporated by reference to such Registration
Statement.
|
|
(2)
|
Previously
filed as Appendix A to the Partnership’s Rule 424(b)(4) Prospectus filed
with the SEC on March 30, 2007, and hereby incorporated by reference to
this Annual Report.
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this Annual Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
|
CAPITAL
PRODUCT PARTNERS L.P.,
|
||
|
By:
|
Capital
GP L.L.C., its general partner
|
|
|
By:
|
/s/
Ioannis E. Lazaridis
|
|
|
Name: Ioannis
E. Lazaridis
|
||
|
Title:
Chief Executive Officer and Chief Financial Officer of Capital GP
L.L.C.
|
||
Dated: April
4, 2008
74
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Unitholders of Capital Product Partners L.P., Majuro,
Republic of the Marshall Islands.
We have
audited the accompanying consolidated and predecessor combined balance sheets of
Capital Product Partners L.P. (the “Partnership”) as of December 31, 2007 and
2006, and the related consolidated and predecessor combined statements of
income, changes in partners’/stockholders’ equity, and cash flows for each of
the three years in the period ended December 31, 2007. These
financial statements are the responsibility of the Partnership’s
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Partnership is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Partnership’s internal control
over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our
opinion, such consolidated and predecessor combined financial statements present
fairly, in all material respects, the financial position of Capital Product
Partners L.P. as of December 31, 2007 and 2006, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2007, in conformity with accounting principles generally accepted
in the United States of America.
As
discussed in Note 1 to the consolidated and predecessor combined financial
statements, on January 16, 2007, Capital Product Partners L.P. was formed for
the purpose of acquiring interests in eight wholly owned subsidiaries of Capital
Maritime & Trading Corp. On April 4, 2007 the acquisition was completed and
Capital Product Partners L.P. began operating as a separate company. Through
April 4, 2007 the accompanying predecessor combined financial statements have
been prepared from the separate records maintained by Capital Maritime &
Trading Corp. and may not necessarily be indicative of the conditions that would
have existed or the results of operations if the Partnership had been operated
as an unaffiliated entity.
The
consolidated and predecessor combined financial statements give retroactive
effect to the September 23, 2007 acquisition by Capital Product Partners L.P. of
Ross Shipmanagement Co., the owner of M/T Attikos which, as a combination of
entities under common control, has been accounted for similar to a pooling of
interests as described in Note 1 to the consolidated and predecessor combined
financial statements. Also as described in Note 1 to the consolidated and
predecessor combined financial statements, through September 23, 2007, the
portion of the accompanying consolidated and predecessor combined financial
statements attributable to Ross Shipmanagement Co., have been prepared from the
separate records maintained by Capital Maritime & Trading Corp. and may not
necessarily be indicative of the conditions that would have existed or the
results of operations if Ross Shipmanagement Co. had been operated as an
unaffiliated entity.
April 2,
2008
/s/
Deloitte.
Hadjipavlou,
Sofianos & Cambanis S.A.
Athens,
Greece
F-1
Capital
Product Partners L.P.
Consolidated
and Predecessor Combined Balance Sheets (Note 1)
(In
thousands of United States dollars, except number of shares)
|
December
31, 2007
|
December
31, 2006
|
|||||||
|
Assets
|
||||||||
|
Current
assets
|
||||||||
|
Cash
and cash equivalents
|
$ | 19,917 | $ | 1,239 | ||||
|
Trade
accounts receivable
|
1,488 | 771 | ||||||
|
Insurance
claims
|
- | 69 | ||||||
|
Due
from related parties (Note 3)
|
- | 4,954 | ||||||
|
Prepayments
and other assets
|
140 | 172 | ||||||
|
Inventories
|
- | 259 | ||||||
|
Total
current assets
|
21,545 | 7,464 | ||||||
|
Fixed
assets
|
||||||||
|
Vessels
under construction (Note 4)
|
- | 29,225 | ||||||
|
Vessels,
net (Note 4)
|
429,171 | 178,803 | ||||||
|
Total
fixed assets
|
429,171 | 208,028 | ||||||
|
Other
non-current assets
|
||||||||
|
Deferred
finance charges, net (Note 7)
|
948 | 632 | ||||||
|
Restricted
cash (Note 2,5)
|
3,250 | - | ||||||
|
Total
non-current assets
|
433,369 | 208,660 | ||||||
|
Total
assets
|
$ | 454,914 | $ | 216,124 | ||||
|
Liabilities
and Partners’ / Stockholders’ Equity
|
||||||||
|
Current
liabilities
|
||||||||
|
Current
portion of long-term debt (Note 5)
|
- | $ | 6,029 | |||||
|
Current
portion of related party debt (Note 3)
|
- | 8,042 | ||||||
|
Trade
accounts payable
|
$ | 257 | 1,539 | |||||
|
Due
to related parties (Note 3)
|
28 | 1,899 | ||||||
|
Accrued
loan interest (Note 6)
|
- | 1,513 | ||||||
|
Accrued
other liabilities (Note 6)
|
249 | 478 | ||||||
|
Deferred
revenue
|
3,200 | 475 | ||||||
|
Total
current liabilities
|
3,734 | 19,975 | ||||||
|
Long-term
liabilities
|
||||||||
|
Long-term
debt (Note 5)
|
274,500 | 59,254 | ||||||
|
Long-term
related party debt (Note 3)
|
- | 87,498 | ||||||
|
Deferred
revenue
|
690 | - | ||||||
|
Derivative
instruments (Note 2)
|
14,051 | - | ||||||
|
Total
long-term liabilities
|
289,241 | 146,752 | ||||||
|
Total
liabilities
|
292,975 | 166,727 | ||||||
|
Commitments
and contingencies (Note 13)
|
- | |||||||
|
Stockholders’
Equity
|
||||||||
|
Common
stock (par value $0; 3,500 shares issued and outstanding at
December 31, 2006)
|
- | - | ||||||
|
Additional
paid in capital - Predecessor
|
- | 41,857 | ||||||
|
Retained
earnings - Predecessor
|
- | 7,540 | ||||||
|
Partners’
Equity
|
||||||||
|
General
Partner interest
|
3,444 | - | ||||||
|
Limited
Partners
|
||||||||
|
· Common
(13,512,500 units issued and outstanding at Dec. 31, 2007)
|
102,130 | - | ||||||
|
· Subordinated (8,805,522 units
issued and outstanding at Dec. 31, 2007)
|
66,653 | - | ||||||
|
Accumulated
other comprehensive loss (Note 2)
|
(10,288 | ) | - | |||||
|
Total
partners’ / stockholders’ equity
|
161,939 | 49,397 | ||||||
|
Total
liabilities and partners’ / stockholders’ equity
|
$ | 454,914 | $ | 216,124 | ||||
The
accompanying notes are an integral part of these
consolidated
and predecessor combined financial statements.
F-2
Capital
Product Partners L.P.
Consolidated
and Predecessor Combined Statements of Income (Note 1)
(In
thousands of United States dollars, except number of units and earnings per
unit)
|
For
the year ended December 31,
|
||||||||||||
|
2007
|
2006
|
2005
|
||||||||||
|
Revenues
|
$ | 72,543 | $ | 19,913 | $ | 4,377 | ||||||
|
Expenses:
|
||||||||||||
|
Voyage
expenses (Note 8)
|
770 | 373 | 520 | |||||||||
|
Vessel
operating expenses - related party (Note 3 and Note 8)
|
12,283 | 890 | 216 | |||||||||
|
Vessel
operating expenses (Note 8)
|
3,196 | 4,043 | 1,932 | |||||||||
|
General
and administrative expenses
|
1,477 | - | - | |||||||||
|
Depreciation
and amortization (Note 4, 7)
|
13,109 | 3,370 | 360 | |||||||||
|
Operating
income
|
41,708 | 11,237 | 1,349 | |||||||||
|
Other
income (expense), net:
|
||||||||||||
|
Interest
expense and finance cost
|
(10,809 | ) | (4,584 | ) | (389 | ) | ||||||
|
Loss
on interest rate agreements
|
(3,763 | ) | - | - | ||||||||
|
Interest
income
|
710 | 13 | 1 | |||||||||
|
Foreign
currency gain/(loss), net
|
(19 | ) | (56 | ) | 9 | |||||||
|
Total
other expense, net
|
(13,881 | ) | (4,627 | ) | (379 | ) | ||||||
|
Net
income
|
$ | 27,827 | $ | 6,610 | $ | 970 | ||||||
|
Less:
|
||||||||||||
|
Net
income attributable to predecessor operations
|
||||||||||||
|
Initial
vessels’ net income from January 1, 2007 to April 3, 2007
|
(5,328 | ) | - | - | ||||||||
|
Attikos
net income from January 1, 2007 to September 23, 2007
|
(928 | ) | - | - | ||||||||
|
Partnership’s
net income
|
21,571 | - | - | |||||||||
|
General
Partner’s interest in Partnership’s net income
|
$ | 431 | - | - | ||||||||
|
Limited
Partners’ interest in Partnership’s net income
|
21,140 | - | ||||||||||
|
Net
income per:
|
||||||||||||
|
· Common
unit (basic and diluted)
|
1.11 | - | - | |||||||||
|
· Subordinated
unit (basic and diluted)
|
0.70 | - | - | |||||||||
|
· Total
unit (basic and diluted)
|
0.95 | - | - | |||||||||
|
Weighted-average
units outstanding:
|
||||||||||||
|
· Common
units (basic and diluted)
|
13,512,500 | - | - | |||||||||
|
· Subordinated
unit (basic and diluted)
|
8,805,522 | - | - | |||||||||
|
· Total
units (basic and diluted)
|
22,318,022 | - | - | |||||||||
The
accompanying notes are an integral part of these
consolidated
and predecessor combined financial statements.
F-3
Capital
Product Partners L.P.
Consolidated
and Predecessor Combined Statements of Partners' / Stockholders'
Equity
(In
thousands of United States dollars)
|
Partners’
Capital
|
||||||||||||||||||||||||||||||||
|
Comprehensive
Income
|
Common
Stockholders’
Equity
|
Common
|
Subordinated
|
General
Partner
|
Total
|
Accumulated
Other Comprehensive
Loss
|
Total
|
|||||||||||||||||||||||||
|
Balance
at December 31, 2004
|
$ | - | $ | 19,658 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 19,658 | ||||||||||||||||
|
Additional
paid in capital
|
- | 4,212 | - | - | - | - | - | 4,212 | ||||||||||||||||||||||||
|
Net
Income
|
970 | 970 | - | - | - | - | - | 970 | ||||||||||||||||||||||||
|
Comprehensive
income
|
970 | |||||||||||||||||||||||||||||||
|
Balance
at December 31, 2005
|
24,840 | - | - | - | - | - | 24,840 | |||||||||||||||||||||||||
|
Additional
paid in capital
|
- | 17,947 | - | - | - | - | - | 17,947 | ||||||||||||||||||||||||
|
Net
Income
|
6,610 | 6,610 | - | - | - | - | - | 6,610 | ||||||||||||||||||||||||
|
Comprehensive
income
|
6,610 | |||||||||||||||||||||||||||||||
|
Balance
at December 31, 2006
|
49,397 | - | - | - | - | - | 49,397 | |||||||||||||||||||||||||
|
Additional
paid in capital “Initial Vessels” up to April 3, 2007
|
- | 13,679 | - | - | - | - | - | 13,679 | ||||||||||||||||||||||||
|
Net
income “Initial Vessels” predecessor operations
|
5,328 | 5,328 | - | - | - | - | - | 5,328 | ||||||||||||||||||||||||
|
Comprehensive
income
|
5,328 | |||||||||||||||||||||||||||||||
|
Balance
at April 3, 2007
|
- | 68,404 | - | - | - | - | - | 68,404 | ||||||||||||||||||||||||
|
Distribution
of “Initial Vessels” retained earnings as of April 3, 2007, to previous
owners
|
- | (9,919 | ) | - | - | - | - | - | (9,919 | ) | ||||||||||||||||||||||
|
Balance
at April 3, 2007
Allocation
of predecessor’s “Initial Vessels” equity to unit holders
|
- | (55,073 | ) | 32,658 | 21,313 | 1,102 | 55,073 | - | - | |||||||||||||||||||||||
|
Contributions
to the Partnership
|
- | - | 129,556 | 84,550 | 4,369 | 218,475 | - | 218,475 | ||||||||||||||||||||||||
|
Excess
of purchase price over book value of vessels acquired from entity under
common control (Note 4)
|
- | - | (47,954 | ) | (31,295 | ) | (1,617 | ) | (80,866 | ) | - | (80,866 | ) | |||||||||||||||||||
|
Dividend
to CMTC
|
- | - | (14,825 | ) | (9,675 | ) | (500 | ) | (25,000 | ) | - | (25,000 | ) | |||||||||||||||||||
|
Dividends
paid (Note 11)
|
- | - | (10,096 | ) | (6,589 | ) | (341 | ) | (17,026 | ) | - | (17,026 | ) | |||||||||||||||||||
|
Attikos
net income January 1, 2007 through September 23, 2007 – predecessor
operations
|
928 | 928 | - | - | - | - | - | 928 | ||||||||||||||||||||||||
|
Distribution
of retained earnings as of September 23, 2007, “M/T Attikos”, to previous
owners
|
- | (3,877 | ) | - | - | - | - | - | (3,877 | ) | ||||||||||||||||||||||
|
Distribution
of paid in capital of “M/T Attikos” to previous owners
|
- | (463 | ) | - | - | - | - | - | (463 | ) | ||||||||||||||||||||||
|
Net
Partnership income April 4, 2007 through December 31, 2007
|
21,571 | - | 12,791 | 8,349 | 431 | 21,571 | - | 21,571 | ||||||||||||||||||||||||
|
Other
comprehensive income:
|
||||||||||||||||||||||||||||||||
|
· Unrealized
loss on derivative instruments
|
(10,288 | ) | - | - | - | - | - | (10,288 | ) | (10,288 | ) | |||||||||||||||||||||
|
Comprehensive
income
|
12,211 | |||||||||||||||||||||||||||||||
|
Balance
at December 31, 2007
|
$ | - | $ | 102,130 | $ | 66,653 | $ | 3,444 | $ | 172,227 | $ | (10,288 | ) | $ | 161,939 | |||||||||||||||||
The
accompanying notes are an integral part of these consolidated and predecessor
combined financial statements.
F-4
Capital
Product Partners L.P.
Consolidated
and Predecessor Combined Statements of Cash Flows (Note 1)
(In
thousands of United States dollars)
|
For
the Year Ended December 31,
|
||||||||||||
|
2007
|
2006
|
2005
|
||||||||||
|
Cash
flows from operating activities:
|
||||||||||||
|
Net
income
|
$ | 27,827 | $ | 6,610 | $ | 970 | ||||||
|
Adjustments to reconcile net
income to net cash provided by operating
activities:
|
||||||||||||
|
Vessel
depreciation
|
13,017 | 3,370 | 360 | |||||||||
|
Amortization
of deferred charges
|
204 | 41 | 4 | |||||||||
|
Loss
on interest rate swap agreement
|
3,763 | - | - | |||||||||
|
Changes
in operating assets and liabilities:
|
||||||||||||
|
Trade
accounts receivable
|
(2,757 | ) | (734 | ) | (36 | ) | ||||||
|
Insurance
claims
|
(1 | ) | (65 | ) | (3 | ) | ||||||
|
Due
from related parties
|
(2,644 | ) | (4,247 | ) | (705 | ) | ||||||
|
Prepayments
and other assets
|
(325 | ) | (141 | ) | (31 | ) | ||||||
|
Inventories
|
(69 | ) | (229 | ) | (30 | ) | ||||||
|
Dry
docking cost
|
(921 | ) | - | - | ||||||||
|
Trade
accounts payable
|
1,113 | 1,386 | 152 | |||||||||
|
Due
to related parties
|
3,646 | 1,131 | 694 | |||||||||
|
Accrued
loan interest
|
(1,476 | ) | 1,433 | 81 | ||||||||
|
Accrued
other liabilities
|
577 | 479 | - | |||||||||
|
Deferred
revenue
|
8,628 | 463 | 12 | |||||||||
|
Net
cash provided by operating activities
|
50,582 | 9,497 | 1,468 | |||||||||
|
Cash
flows from investing activities:
|
||||||||||||
|
Vessel
acquisitions
|
(243,688 | ) | (142,795 | ) | (9,523 | ) | ||||||
|
Vessel
advances – new buildings
|
- | (19,252 | ) | (15,036 | ) | |||||||
|
Increase
of restricted cash
|
(3,250 | ) | - | - | ||||||||
|
Net
cash used in investing activities
|
(246,938 | ) | (162,047 | ) | (24,559 | ) | ||||||
|
Cash
flows from financing activities:
|
||||||||||||
|
Proceeds
from issuance of long-term debt
|
344,361 | 77,426 | 10,000 | |||||||||
|
Proceeds
from related party debt/financing
|
- | 82,341 | 15,453 | |||||||||
|
Payments
of long-term debt
|
(16,841 | ) | (21,393 | ) | (750 | ) | ||||||
|
Payments
of related party debt/financing
|
- | (2,254 | ) | (5,436 | ) | |||||||
|
Loan
issuance costs
|
(1,022 | ) | (285 | ) | (392 | ) | ||||||
|
Excess
of purchase price over book value of vessels acquired from entity under
common control (Note 4)
|
(80,866 | ) | - | - | ||||||||
|
Dividends
paid
|
(42,026 | ) | - | - | ||||||||
|
Cash
balance as of April 3, 2007 that was distributed to the previous
owner
|
(2,251 | ) | - | - | ||||||||
|
Capital
contributions by predecessor
|
13,679 | 17,947 | 4,212 | |||||||||
|
Net
cash provided by financing activities
|
215,034 | 153,782 | 23,087 | |||||||||
|
Net
increase in cash and cash equivalents
|
18,678 | 1,232 | (4 | ) | ||||||||
|
Cash
and cash equivalents at beginning of period
|
1,239 | 7 | 11 | |||||||||
|
Cash
and cash equivalents at end of period
|
$ | 19,917 | $ | 1,239 | $ | 7 | ||||||
|
Supplemental
Cash Flow information
|
||||||||||||
|
Cash
paid for interest
|
$ | 12,250 | $ | 4,713 | $ | 223 | ||||||
The
accompanying notes are an integral part of these
consolidated
and predecessor combined financial statements.
F-5
Capital
Product Partners L.P.
Notes
to the Consolidated and Predecessor Combined Financial Statements
(In
thousands of United States dollars, except number of shares
and units)
|
1.
|
Basis
of Presentation and General
Information
|
CAPITAL
PRODUCT PARTNERS L.P. (the “Partnership” or “CPP”) was formed on January 16,
2007 under the laws of the Marshall Islands for the purpose of acquiring
interests in eight wholly owned subsidiaries of Capital Maritime & Trading
Corp. (“CMTC”), each of which owned a newly built, double-hull medium-range
product tanker (the “Initial Vessels”).
The
Partnership is engaged in the seaborne transportation services of crude oil and
refined petroleum products, edible oils and soft chemicals, by chartering its
vessels under medium to long-term time and bareboat charters.
On April
4, 2007 the Initial Public Offering (the “IPO”or the “Offering”) of CPP on the
NASDAQ Global Market was completed successfully. Upon completion of the IPO CMTC
contributed the shares of the Initial Vessel owning companies to the
Partnership. In exchange for the vessels, CMTC received 11,750,000 common units
and 8,805,522 subordinated units of the Partnership. Capital GP L.L.C. (“CGP”),
a wholly owned subsidiary of CMTC that acts as the Partnership’s general
partner, received 419,500 general partner units. The net proceeds of the IPO
were $236,330 (after underwriters’ discount) and were used by CMTC in order to
repay the existing debt of the Initial Vessels’ of $213,917 (including interest
of $74) and all the expenses relating to the IPO. The Partnership issued an
additional 1,762,500 common units to the underwriters in connection with the
exercise of their over-allotment option. CMTC sold these units to the public
(through the underwriters) receiving an additional amount of $34,143. In
connection with the exercise of the over-allotment option the Partnership issued
an additional 35,970 general partner units to CGP in order to maintain its 2%
ownership. Following the Offering the Partnership remitted a cash dividend of
$25,000 to CMTC.
Upon
completion of the IPO, the Partnership entered into several new agreements,
including:
|
·
|
An
omnibus agreement with CMTC, CGP and others governing, among other things,
the circumstances under which the Partnership and CMTC can compete with
each other and certain rights of first offer on medium range product
tankers;
|
|
·
|
A
management agreement with Capital Shipmanagement Corp. (the “Manager” or
“CSM”), a wholly owned subsidiary of CMTC, pursuant to which the
Manager agreed to provide commercial and technical management services to
the Partnership;
|
|
·
|
An
administrative services agreement with the Manager pursuant to which the
Manager agreed to provide administrative management services to the
Partnership; and
|
|
·
|
A
share purchase agreement with CMTC to purchase for a total consideration
of $368,000 its interests in seven wholly owned subsidiaries each of which
owns a newly built, double-hull medium-range product tanker (the
“Committed Vessels”). The Committed Vessels have been or will be
transferred to the Partnership at historical cost and all assets and
liabilities of vessel owning subsidiaries other than vessels at the
transfer date were or will be assumed by CMTC. On May 8, July 13,
September 20, and September 28, 2007 the Partnership remitted to CMTC the
amount of $224,000 in exchange for the acquisition of the shares in the
vessel-owning companies of the vessels: “Motor Tanker (“M/T”) Atrotos”,
“M/T Akeraios”, “M/T Apostolos”, and “M/T Anemos I”, (four of the seven
Committed Vessels) respectively. On September 24, 2007 the
partnership remitted to CMTC the amount of $23,000 in exchange for the
acquisition of the shares in the vessel owning company of M/T Attikos,
(this vessel was not part of the Committed Vessels) a 2005-built double
hull product tanker which has a capacity of 12,000
DWT.
|
|
·
|
Revolving
credit facility of up to $370,000 and swapped the interest portion for
$346,500 in order to reduce the exposure of interest rates fluctuations
(Note 2);
|
Since
April 4, 2007, CMTC, the Partnership’s ultimate parent as determined by the
provision of Emerging Issues Task Force Issue (“EITF”) No. 04-5, “Determining
Whether a General Partner, or the General Partners as a Group, Controls a
Limited Partnership or Similar Entity When the Limited Partners Have Certain
Rights” was deemed to have control over the Partnership and included the
Partnership’s accounts, balances results of operations in its consolidated
financial statements.
F-6
Capital
Product Partners L.P.
Notes
to the Consolidated and Predecessor Combined Financial Statements
(In
thousands of United States dollars, except number of shares
and units)
|
1.
|
Basis
of Presentation and General Information –
Continued
|
Following
the guidance provided by the provision of EITF No. 87-21 “Change of Accounting
Basis in Master Limited Partnerships” the “Initial Vessels” were transferred to
the partnership at historical cost at the date of transfer and accounted for as
a combination of entities under common control. All assets,
liabilities and equity other than the relevant vessel, related charter agreement
and related permits, of these vessels’ ship-owning companies were retained
by CMTC.
As
required by the provision of Statement of Financial Accounting Standards No.
141, “Business Combinations” (“SFAS No. 141”), the Partnership accounted for the
acquisition of the vessel owning company of M/T Attikos as a transfer of net
assets between entities under common control. For combinations of entities under
common control, the purchase cost provisions (as they relate to purchase
business combinations involving unrelated entities) of SFAS No. 141 explicitly
do not apply; instead the method of accounting prescribed by SFAS No. 141 for
such transfers is similar to pooling -of-interests method of accounting. Under
this method, the carrying amount of net assets recognized in the balance sheets
of each combining entity are carried forward to the balance sheet of the
combined entity, and no other assets or liabilities are recognized as a result
of the combination (that is, no recognition is made for a purchase premium or
discount representing any difference between the cash consideration paid and the
book value of the net assets acquired).
Following
the acquisition of the shipowning company of M/T Attikos from CMTC the
Partnership recognized the vessel acquired at its carrying amounts (historical
cost) in the accounts of CMTC (the transferring entity) at the date of transfer.
In addition, transfers of net assets between entities under common control are
accounted for as if the transfer occurred at the beginning of the period, and
prior years are retroactively adjusted to furnish comparative information
similar to the pooling method. The amount of the purchase price in excess of
CMTC’s basis in the net assets is recognized as a reduction to partners’
equity.
The
acquisition of the Committed Vessels through the acquisition of the shares of
the vessel owning companies represents acquisition of assets (“vessels”), as the
vessels were built by an unrelated party. The vessels were delivered to CMTC
from the shipyard and on the same date the Partnership acquired the shares of
the vessel owning companies. These vessel owning companies did not have an
operating history, as such, there is no information to retroactively restate
that should be considered. Accordingly the four Committed Vessels (M/T Atrotos,
M/T Akeraios, M/T Apostolos, and M/T Anemos I) were transferred to the
Partnership at historical cost of CMTC at the date of transfer. All assets,
other than the vessels, liabilities and equity that the shipowning companies of
the Committed Vessels had at the time of the transfer were retained by
CMTC.
Predecessor
combined information presented in these financial statements reflect the
historical carrying costs of the contributed companies, as each vessel owning
company was under the common control of CMTC, and is collectively referred to as
“Predecessor Combined” financial statements, which include the balance sheet at
December 31, 2006 of the Initial Vessels and M/T Attikos and results of
operations and cash flows of the Initial Vessels from January 01, 2005 to April
03, 2007 and of the M/T Attikos from January 01, 2005 to September 23, 2007.
Financial statements presented reflecting Partnerships’ balance sheet at
December 31, 2007 and results of operations and cash flows from April 4, 2007
(Offering closing date) to December 31, 2007 are referred to as “consolidated”
financial statements.
As of
December 31, 2007, CMTC owned 8,805,522 subordinated units directly and 455,470
subordinated units indirectly, through CGP, which represent a 40.7% interest in
the Partnership including a 2% participation through CGP.
F-7
Capital
Product Partners L.P.
Notes
to the Consolidated and Predecessor Combined Financial Statements
(In
thousands of United States dollars, except number of shares
and units)
|
1.
|
Basis
of Presentation and General Information –
Continued
|
The
consolidated and predecessor combined financial statements include the following
vessel owning companies and management company which were all incorporated under
the laws of the Marshall Islands.
|
Subsidiary/
Vessel Owing
Company
|
Date
of
Incorporation
|
Name
of Vessel
Owned
by
Subsidiary
|
DWT
|
Delivery
Date
from Shipyard
|
|
Capital
Product Operating GP
|
01/16/2007
|
-
|
-
|
-
|
|
Shipping
Rider Co.
|
09/16/2003
|
M/T
Atlantas
|
36,760
|
04/26/2006
|
|
Canvey
Shipmanagement Co.
|
03/18/2004
|
M/T
Assos
|
47,872
|
05/17/2006
|
|
Centurion
Navigation Limited
|
08/27/2003
|
M/T
Aktoras
|
36,759
|
07/12/2006
|
|
Polarwind
Maritime S.A.
|
10/10/2003
|
M/T
Agisilaos
|
36,760
|
08/16/2006
|
|
Carnation
Shipping Company
|
11/10/2003
|
M/T
Arionas
|
36,725
|
11/02/2006
|
|
Apollonas
Shipping Company
|
02/10/2004
|
M/T
Avax
|
47,834
|
01/12/2007
|
|
Tempest
Maritime Inc.
|
09/12/2003
|
M/T
Aiolos
|
36,725
|
03/02/2007
|
|
Iraklitos
Shipping Company
|
02/10/2004
|
M/T
Axios
|
47,872
|
02/28/2007
|
|
Epicurus
Shipping Company
|
02/11/2004
|
M/T Atrotos
|
47,786
|
05/08/2007
|
|
Laredo
Maritime Inc.
|
02/03/2004
|
M/T
Akeraios
|
47,781
|
07/13/2007
|
|
Lorenzo
Shipmanagement Inc.
|
05/26/2004
|
M/T
Apostolos
|
47,782
|
09/20/2007
|
|
Splendor
Shipholding S.A.
|
07/08/2004
|
M/T
Anemos I
|
47,782
|
09/28/2007
|
|
Ross
Shipmanagement Co.
|
12/29/2003
|
M/T
Attikos
|
12,000
|
01/20/2005
|
F-8
Capital
Product Partners L.P.
Notes
to the Consolidated and Predecessor Combined Financial Statements
(In
thousands of United States dollars, except number of shares
and units)
|
2.
|
Significant Accounting
Policies
|
|
(a)
|
Principles
of Consolidation and Combination: The accompanying consolidated and
predecessor combined financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of
America (“U.S. GAAP”), and include the accounts of the legal entities
comprising the Partnership as discussed in Note 1. Intra-group balances
and transactions have been eliminated upon consolidation and
combination. Intercompany balances and transactions with CMTC
and its affiliates have not been eliminated, but are presented as balances
and transactions with related
parties.
|
|
(b)
|
Use of
Estimates: The preparation of consolidated and predecessor combined
financial statements in conformity with U.S. GAAP requires management to
make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the amounts of revenues and expenses
recognized during the reporting period. Actual results could differ from
those estimates. Additionally, these consolidated financial statements
include allocations for certain expenses, including corporate overhead
expenses that are normally incurred by a listed company, such expenses
have not incurred in the periods covered by the Predecessor Combined
financial statements.
|
|
(c)
|
Other
Comprehensive Income (Loss): The Partnership follows the provisions
of Statement of Financial Accounting Standards (“SFAS”) No. 130 “Statement
of Comprehensive Income” ("SFAS 130") which requires separate presentation
of certain transactions, which are recorded directly as components of
partners’ / stockholders’ equity. For the year ended December 31, 2007 the
Partnership had accumulated other Comprehensive Loss of $10,288, related
to the change of the fair value of derivatives that qualify for cash flow
hedge accounting.
|
|
(d)
|
Accounting
for Revenue, Voyage and Operating Expenses: The Partnership
generates its revenues from charterers for the charterhire of its
vessels. Vessels are chartered using either time charters or
bareboat charters. A time charter is a contract for the use of
a vessel for a specific period of time and a specified daily charterhire
rate, which is generally payable monthly in advance. Some of
the Partnership’s time charters also include profit sharing provisions,
under which the Partnership can realize additional revenues in the event
that spot rates are higher than the base rates in these time charters. A
bareboat charter is a contract in which the vessel owner provides the
vessel to the charterer for a fixed period of time at a specified daily
rate, which is generally payable monthly in advance, and the customer
generally assumes all risk and costs of operation during the lease
term.
|
All of
the Partnership’s time charters and bareboat charters are classified as
operating leases. Revenues under operating lease arrangements are recognized
when a charter agreement exists, charter rate is fixed and determinable, the
vessel is made available to the lessee, and collection of the related revenue is
reasonably assured. Revenues are recognized ratably on a straight line basis
over the period of the respective time or bareboat charter agreement in
accordance with SFAS No. 13 “Accounting for Leases”, paragraph 19b. Revenues
from profit sharing arrangements in time charters represent 50 % portion of time
charter equivalent (voyage income less direct expenses divided by operating
days), that exceeds the agreed base rate and are recognized in the period
earned. Deferred revenue represents cash received in advance of being earned.
The portion of the deferred revenue that will be earned within the next twelve
months is classified as current liability and the rest as long term
liability.
Vessel
voyage expenses are direct expenses to voyage revenues and primarily consist of
commissions, port expenses, canal dues and bunkers. Commissions are expensed
over the related charter period and all the other voyage expenses are expensed
as incurred. Under the Partnership’s time and bareboat charter agreements, all
voyages expenses, except commissions, are assumed by the charterer. With the
exception of our Morgan Stanley Capital Group Inc. time charter agreements where
the charterer is responsible for the commissions, we are liable for commissions
on all of our time and bareboat charter agreements.
Vessel
operating expenses presented in the consolidated financial statements consist of
management fees payable to the Manager. The Manager provides commercial and
technical services such as crewing, repairs and maintenance, insurance, stores,
spares, lubricants through a management agreement for a fixed daily fee of $5.5
per vessel for the time chartered vessels. The fee also includes expenses
related to the next scheduled special or intermediate survey as applicable and
related drydocking for each vessel. For bareboat chartered vessels,
the bareboat charterer is responsible for operating expenses such as crewing,
repairs and maintenance, insurance, stores, spares, lubricants and the
Partnership pays a fixed daily fee of $0.3 to the Manager for expenses mainly to
cover compliance costs. Vessel operating expenses presented in the predecessor
combined financial statements consist of all expenses relating to the operation
of the vessels including crewing, repairs and maintenance, insurances, stores
and lubricants, management fees and miscellaneous expenses.
F-9
Capital
Product Partners L.P.
Notes
to the Consolidated and Predecessor Combined Financial Statements
(In
thousands of United States dollars, except number of shares
and units)
|
2.
|
Significant Accounting Policies –
Continued
|
|
(d)
|
Accounting
for Revenue, Voyage and Operating Expenses (continued): Vessel
operating expenses are expensed as
incurred.
|
|
(e)
|
Foreign
Currency Transactions: The functional currency of the Partnership
is the U.S. dollar because the Partnership’s vessels operate in
international shipping markets that utilize the U.S. dollar as the
functional currency. The accounting records of the Partnership are
maintained in U.S. dollars. Transactions involving other
currencies during the year are converted into U.S. dollars using the
exchange rates in effect at the time of the transactions. At
the balance sheet dates, monetary assets and liabilities, which are
denominated in currencies other than the U.S. dollar, are translated into
the functional currency using the exchange rate at that
date. Gains or losses resulting from foreign currency
transactions and translations are included in foreign currency gains and
losses, net in the accompanying consolidated and predecessor combined
statements of income.
|
|
(f)
|
Cash and
Cash Equivalents: The Partnership considers highly liquid
investments such as time deposits and certificates of deposit with an
original maturity of three months or less to be cash
equivalents.
|
|
(g)
|
Restricted
Cash: In order for the Partnership to comply with the
debt covenants under its credit facility it must maintain a minimum cash
at bank available at all times. Such amount is considered by the
Partnership as restricted cash. As of December 31, 2007, restricted cash
amounted to $3,250 and is presented under other non current
assets.
|
|
(h)
|
Trade
Accounts Receivable: The amount shown as trade accounts receivable
primarily consists of profit share earned but not yet collected. At each
balance sheet date all potentially uncollectible accounts are assessed
individually for purposes of determining the appropriate provision for
doubtful accounts. No allowance for doubtful accounts was established at
December 31, 2007 and 2006.
|
|
(i)
|
Inventories:
Inventories consist of consumable bunkers, lubricants, spares and
stores and are stated at the lower of cost or market value. The cost is
determined by the first-in, first-out
method.
|
|
(j)
|
Fixed
Assets: Fixed assets consist of vessels and vessels under
construction. The vessels are stated at cost, less accumulated
depreciation. Vessel cost consists of the contract price for
the vessel and any material expenses incurred upon their construction
(improvements and delivery expenses, on-site supervision costs incurred
during the construction periods, as well as capitalized interest expense
during the construction period). The cost of each of the Partnership’s
vessels is depreciated beginning when the vessel is ready for its intended
use, on a straight-line basis over the vessels’ remaining economic useful
life, after considering the estimated residual value. Management estimates
the useful life to be 25 years.
|
|
(k)
|
Impairment
of Long-lived Assets: The Partnership applies SFAS No. 144,
“Accounting for the Impairment or Disposal of Long-lived Assets” (“SFAS
144”) which addresses financial accounting and reporting for the
impairment or disposal of long-lived assets. SFAS 144 requires that
long-lived assets and certain identifiable intangibles held and used or
disposed of by an entity be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of the assets
may not be recoverable. An impairment loss for an asset held for use is
recognized when the estimate of undiscounted cash flows expected to be
generated by the use and eventual disposition of the asset is less than
its carrying amount. Measurement of the impairment loss is based on the
fair value of the asset. The Partnership regularly assesses whether
impairment indicators are present. No impairment loss was recorded for any
of the periods presented.
|
|
(l)
|
Deferred
Finance Charges: Fees paid to lenders for obtaining new loans or
refinancing existing loans are capitalized as deferred finance charges and
amortized to interest expense over the term of the respective loan using
the effective interest rate method.
|
|
(m)
|
Pension and
Retirement Benefit Obligations: The vessel-owning companies
included in the consolidated and predecessor combined financial statements
employ the crew on board under short-term contracts (usually up to seven
months) and accordingly, they are not liable for any pension or post
retirement benefits.
|
F-10
Capital
Product Partners L.P.
Notes
to the Consolidated and Predecessor Combined Financial Statements
(In
thousands of United States dollars, except number of shares
and units)
|
2.
|
Significant
Accounting Policies – Continued
|
|
(n)
|
Concentration
of Credit Risk: Financial instruments, which potentially subject
the Partnership to significant concentrations of credit risk, consist
principally of cash and cash equivalents and trade accounts receivable.
The Partnership places its cash and cash equivalents, consisting mostly of
deposits, with financial institutions with high credit ratings. The
Partnership performs periodic evaluations of the relative credit standing
of those financial institutions. Most of the Partnership’s revenues were
derived from a few charterers. For the year ended December 31, 2007
British Petroleum Shipping Limited and Morgan Stanley Capital Group Inc.
accounted for 64% and 28% of Partnership’s revenue,
respectively.
|
For the
year ended December 31, 2006 British Petroleum Shipping Limited, Morgan Stanley
Capital Group Inc. and Canterbury Tankers Inc accounted for 53%, 23% and 24% of
the Predecessor revenue, respectively. For the year ended December
31, 2005 the charterers Canterbury Tankers Inc., and Pacific International
accounted for 69% and 16%, of the Predecessor's revenue, respectively. The
Partnership does not obtain rights of collateral from its charterers to reduce
its credit risk.
|
(o)
|
Fair Value
of Financial Instruments: The carrying value
of trade receivables, accounts payable, current accrued liabilities and
interest rates swaps approximates fair value. The fair values of long-term
variable rate bank loans approximate the recorded values, due to their
variable interest rates.
|
|
(p)
|
Interest
Rate Swap Agreements: The Partnership designates its
derivatives based upon the criteria established by SFAS No. 133 Accounting
for derivative instruments and hedging activities which establishes
accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts, and for
hedging activities. SFAS 133, as amended by Statement of Financial
Accounting Standards No. 138, Accounting for Certain Derivative
Instruments and Certain Hedging Activities—An amendment of SFAS 133,
("SFAS 138") and Statement of Financial Accounting Standards No. 149,
Amendment of Statement 133 on Derivative Instruments and Hedging
Activities, ("SFAS 149"), requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. The
accounting for the changes in the fair value of the derivative depends on
the intended use of the derivative and the resulting
designation. For a derivative that does not qualify as a hedge,
the change in fair value is recognized at the end of each accounting
period on the income statement. For a derivative that qualifies
as a cash flow hedge, the change in fair value is recognized at the end of
each reporting period in other comprehensive income/ (loss) (effective
portion) until the hedged item is recognized in income. The ineffective
portion of a derivative’s change in fair value is immediately recognized
in the income statement.
|
The
Partnership entered into eight interest rate swap agreements that were
transferred from CMTC through novation agreements on April 4, 2007, (“Novation
Date”) in order to reduce its exposure to cash flow risks from fluctuating
interest rates for an amount of $326,000, of which we have drawn down
$302,000, arising from the revolving credit facility that the Partnership
entered into on March 22, 2007. These swap agreements fix the LIBOR portion of
interest rate at 5.1325% for a period up to June 29, 2012. The Partnership at
the Novation Date recognized a loss of $3,763 in its income statement which
resulted from the valuation of the eight interest rate swap
agreements.
On
September 20, 2007 the Partnership entered into an additional interest rate swap
agreement in order to reduce its exposure to cash flow risks from fluctuating
interest rates for an amount of $20,500 arising from the drawn-down under the
existing revolving credit facility for the purchase of “M/T
Attikos”. The swap agreement fixes the LIBOR portion of interest rate
at 4.925% for a period up to June 29, 2012.
F-11
Capital
Product Partners L.P.
Notes
to the Consolidated and Predecessor Combined Financial Statements
(In
thousands of United States dollars, except number of shares
and units)
|
2.
|
Significant
Accounting Policies – Continued
|
|
(p)
|
Interest
Rate Swap Agreements (continued): As of December 31,
2007 the Partnership’s nine interest rate swaps qualify as a cash flow
hedge and the changes in their fair value are recognized in accumulated
other comprehensive (loss).
|
|
Bank
|
Currency
|
Notional
Amount
|
Fixed
rate
|
Trade
date
|
Value
date
|
Maturity
date
|
Fair market
value as of
Dec. 31,
2007
|
|
HSH Nordbank
AG
|
USD
|
30,000
|
5.1325%
|
02.20.2007
|
04.04.2007
|
06.29.2012
|
$(1,246)
|
|
HSH Nordbank
AG
|
USD
|
56,000
|
5.1325%
|
02.20.2007
|
05.08.2007
|
06.29.2012
|
(2,326)
|
|
HSH Nordbank
AG
|
USD
|
56.000
|
5.1325%
|
02.20.2007
|
07.13.2007
|
06.29.2012
|
(2,326)
|
|
HSH Nordbank
AG
|
USD
|
56,000
|
5.1325%
|
02.20.2007
|
09.28.2007
|
06.29.2012
|
(2,326)
|
|
HSH Nordbank
AG
|
USD
|
56,000
|
5.1325%
|
02.20.2007
|
09.20.2007
|
06.29.2012
|
(2,266)
|
|
HSH Nordbank
AG
|
USD
|
24,000
|
5.1325%
|
02.20.2007
|
01.15.2008
|
06.29.2012
|
(1,004)
|
|
HSH Nordbank AG
|
USD
|
24,000
|
5.1325%
|
02.20.2007
|
01.15.2008
|
06.29.2012
|
(1,004)
|
|
HSH Nordbank
AG
|
USD
|
24,000
|
5.1325%
|
02.20.2007
|
08.15.2008
|
06.29.2012
|
(891)
|
|
HSH Nordbank
AG
|
USD
|
20,500
|
4.9250%
|
09.20.2007
|
09.24.2007
|
06.29.2012
|
(662)
|
|
Total derivative instruments fair
value
|
$(14,051)
|
||||||
|
(q)
|
Net Income
(loss) Per Limited Partner Unit: Basic and diluted net income per
limited partner unit is calculated by dividing limited partners’ interest
in net income, less pro forma general partner incentive distributions
under EITF Issue No. 03-6, “Participating Securities and the Two — Class
Method Under FASB Statement No. 128”, or EITF 03-6, by the
weighted-average number of outstanding limited partner units during the
period (Note 12). Diluted net income per limited partner unit reflects the
potential dilution that could occur if securities or other contracts to
issue common stock were exercised. The Partnership had no dilutive
securities outstanding during the year ended
December 31, 2007.
|
|
(r)
|
Income
Taxes: The Partnership is
not subject to the payment of any income tax on its income. Instead, a tax
is levied based on the tonnage of the vessels, which is included in
operating expenses (Note 9).
|
|
(s)
|
Segment
Reporting: The Partnership
reports financial information and evaluates its operations by charter
revenues and not by the length or type of ship employment for its
customers, i.e. time or bareboat charters. The Partnership does not use
discrete financial information to evaluate the operating results for each
such type of charter. Although revenue can be identified for these types
of charters, management cannot and does not identify expenses,
profitability or other financial information for these charters. As a
result, management, including the chief operating decision maker, reviews
operating results solely by revenue per day and operating results of the
fleet and thus the Partnership has determined that it operates under one
reportable segment. Furthermore, when
the Partnership charters a vessel to a charterer, the charterer is free to
trade the vessel worldwide and, as a result, the disclosure of geographic
information is impracticable.
|
|
|
|
(t)
|
Recent
Accounting Pronouncements: In September 2006 the FASB issued
SFAS No. 157, “Fair Value Measurement” (“SFAS 157”). SFAS 157 addresses
standardizing the measurement of fair value for companies that are
required to use a fair value measure of recognition for recognition or
disclosure purposes. The FASB defines fair value as “the price that would be received
to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measure date.” SFAS 157 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007. The Partnership is currently
evaluating the impact, if any, of SFAS 157 on its financial position,
results of operations and cash
flows.
|
F-12
Capital
Product Partners L.P.
Notes
to the Consolidated and Predecessor Combined Financial Statements
(In
thousands of United States dollars, except number of shares
and units)
|
2.
|
Significant
Accounting Policies – Continued
|
|
(t)
|
Recent
Accounting Pronouncements (continued): In February 2007, the FASB issued
SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities” (“SFAS No. 159”). SFAS No. 159 permits
entities to choose to measure many financial instruments and certain other
items at fair value, with changes in fair value recognized in
earnings. SFAS No. 159 is effective as of the beginning of the
first fiscal year that begins after November 15, 2007. On January 01, 2008
the Partnership did not make any fair value
elections.
|
In December 2007, the FASB issued SFAS
No. 141(R), “Business Combinations” (“SFAS No. 141(R)”). SFAS No. 141(R) supersedes
SFAS No. 141 and establishes principles and requirements for how the acquirer of
a business recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, and any non-controlling interest in
the acquired. The Statement also provides guidance for recognizing and measuring
the goodwill acquired in the business combination and determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination. This
Statement applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. An entity may not apply it
before that date. The effective date of this Statement is the same as that of
the related FASB Statement No. 160, Non controlling Interests in Consolidated
Financial Statements, an
amendment of ARB No. 51” (“SFAS No. 160”). The Partnership is currently evaluating
the effect, if any, this statement may have on future financial
statements.
In December 2007, the FASB issued SFAS
No. 160. This Statement establishes accounting and reporting standards for the
non-controlling interest in a subsidiary and for the deconsolidation of a
subsidiary. The guidance will become effective as of the beginning of a
company’s fiscal year beginning after December
15, 2008. The Partnership is currently evaluating the effect that this statement
may have on future financial statements.
In March 2008, the FASB issued FASB
Statement No. 161, “Disclosures about Derivative Instruments
and Hedging Activities”. The new standard is intended to
improve financial reporting about derivative instruments and hedging activities
by requiring enhanced disclosures to enable investors to better understand their
effects on an entity’s financial position, financial
performance, and cash flows. It is effective for financial statements issued for
fiscal years and interim periods beginning after November 15, 2008, with early
application encouraged. The Partnership is currently evaluating the effect that
this statement may have on future financial statements.
F-13
Capital
Product Partners L.P.
Notes
to the Consolidated and Predecessor Combined Financial Statements
(In
thousands of United States dollars, except number of shares
and units)
|
3.
|
Transactions
with Related Parties
|
Since
April 4, 2007, the Partnership and its subsidiaries, have related party
transactions only with the Manager, a wholly-owned subsidiary of CMTC, which
provides management services to the Partnership for a total daily fixed fee of
$5.5 and $0.3 for the time and bare boat chartered vessels respectively. The
daily fixed fee for the time chartered vessels also includes expenses related to
the next scheduled special or intermediate survey as applicable and related
drydocking for each vessel. Total management fees charged by the
Manager for the period from April 4, to December 31, 2007 were $11,573 and are
included in “Vessel operating expenses – related party” in the consolidated
income statement.
On April
4, 2007, the Partnership entered into an administrative services agreement with
the Manager, pursuant to which the Manager will provide certain administrative
management services to the Partnership such as accounting, auditing, legal,
insurance, clerical, and other administrative services. The Partnership
reimburses the Manager for reasonable costs and expenses incurred in connection
with the provision of these services within 15 days after the Manager
submits to the Partnership an invoice for such costs and expenses, together with
any supporting detail that may be reasonably required. The Manager did not
charge any fees in connection with this agreement for the year ended December
31, 2007.
However,
the Manager invoiced the Partnership for payments that it made on the
Partnership’s behalf. As of December 31, 2007, the total outstanding amount due
to Manager was $28.
The
vessel owning companies of the Initial Vessels and the vessel owning company of
M/T Attikos had related party transactions with CMTC and its subsidiaries before
their acquisition by CPP mainly for the following reasons:
|
·
|
Loan
agreements that CMTC entered into, acting as the borrower, for the
financing of the construction of five of the Initial
Vessels,
|
|
·
|
Manager
payments on behalf of the vessel owning companies and hire receipts from
charterers,
|
|
·
|
Manager
fixed monthly fees, (which were based on agreements with different terms
and conditions than those in the Partnership’s administrative and
management agreements) for providing services such as chartering,
technical support and maintenance, insurance, consulting, financial and
accounting services, (Note 8),
|
|
·
|
Funds
advanced/received to/from entities with common ownership,
and
|
|
·
|
Loan
draw downs in excess of the advances made to the shipyard by the Manager
for the funding of vessels’ extra
costs.
|
Balances
with related parties consisted of the following:
|
As
of
December
31, 2007
|
Predecessor
Combined
Balance as of
December
31, 2006
|
|||||||
|
I.
Due From:
|
||||||||
|
Vessels’
operation (a)
|
$ | - | $ | 4,429 | ||||
|
Manager
- loan surplus (b)
|
- | 500 | ||||||
|
Other
affiliated companies (c)
|
- | 25 | ||||||
|
Total
due from:
|
$ | - | $ | 4,954 | ||||
|
II.
Due To:
|
||||||||
|
CMTC
– loans current portion (d)
|
$ | - | $ | 8,042 | ||||
|
CMTC
– loans long-term portion (d)
|
- | 87,498 | ||||||
|
Manager
– payments on behalf of vessel-owning companies (e)
|
- | 1,867 | ||||||
|
Manager
– payments on behalf of Capital Product Partners
L.P. (f)
|
28 | - | ||||||
|
Other
affiliated companies (c)
|
- | 32 | ||||||
|
Total
due to:
|
$ | 28 | $ | 97,439 | ||||
F-14
Capital
Product Partners L.P.
Notes
to the Consolidated and Predecessor Combined Financial Statements
(In
thousands of United States dollars, except number of shares
and units)
|
3.
|
Transactions
with Related Parties – Continued
|
|
(a)
|
Vessels’
Operation: The balance in
this line-item relates to funds that are received from charterers less
disbursements made by the Manager on behalf of the vessel-owning
subsidiaries with operations. As of December 31, 2007 and
December 31 2006, this line item balance amounted to $0 and $4,429
respectively.
|
|
(b)
|
Manager -
Loan Surplus: The balance in this line-item related to the loan
proceeds of M/T Axios in excess of advances made to the shipyard by the
Manager. This excess was used in 2007 for the vessel’s extra costs in
accordance with the loan agreement.
|
|
(c)
|
Other
Affiliated Companies: The balance in this line-item related to
funds advanced/received to/from entities with common
ownership.
|
|
(d)
|
CMTC
Loans: For the financing of the construction of the M/T Atlantas,
M/T Aktoras, M/T Aiolos, M/T Avax M/T Assos, CMTC was the borrower under
loan agreements with three separate banks and the vessel-owning companies
acted as guarantors under these loans (related party
loans).
|
As of
December 31, 2006, the balance on these loans was $95,540. A summary
of the CMTC loans is shown below:
|
Vessel
|
As
of
December
31, 2007
|
Predecessor
Combined Balances as of
December
31, 2006
|
||||||||
|
(i)
|
Issued
on November 25, 2005
Maturing
in April, 2017
|
M/T
Atlantas
|
-
|
$ | 25,190 | |||||
|
(ii)
|
Issued
on December 23, 2005
Maturing
in July, 2016
|
M/T
Aktoras
|
-
|
25,283 | ||||||
|
(iii)
|
Issued
on October 18, 2005
Maturing
in February, 2017
|
M/T
Aiolos
|
-
|
6,920 | ||||||
|
(iv)
|
Issued
on December 23, 2005
Maturing
in May, 2016
|
M/T
Assos
|
-
|
30,477 | ||||||
|
(v)
|
Issued
on October 18, 2005
Maturing
in January, 2017
|
M/T
Avax
|
-
|
7,670 | ||||||
|
Total
|
|
-
|
$ | 95,540 | ||||||
|
Less:
Current portion
|
-
|
8,042 | ||||||||
|
Long-term
portion
|
-
|
$ | 87,498 | |||||||
All of
the above bank loans bore interest at LIBOR plus a margin between 90 and 95
basis points payable quarterly or semi-annually. Each bank loan is secured by a
first preferred mortgage on the respective vessel or vessels and a general
assignment of the earnings, insurances, mortgage interest insurance, and
requisition compensation of the respective vessel or vessels. The weighted
average interest rate for the year ended December 31, 2006 was 6.18%. Interest
expense for related party loans amounted to $1,839, $3,144 and $81 for the year
ended December 31, 2007, 2006 and 2005 respectively.
The loan agreements contained other
customary ship finance covenants, including restrictions as to: changes in
management and ownership of
the mortgaged vessels, the incurrence of additional indebtedness, the mortgaging
of vessels, the minimum cash requirement, as well as minimum requirements as to
the applicable vessels’ market value and insured value in
relation to the outstanding balance of the applicable loan. Also the
borrower may pay dividends or make distributions when no event of default has
occurred and the payment of such dividend or distribution has not resulted in a
breach of any of the financial covenants. As of December 31, 2006, we were in compliance with all
debt covenants.
On April 4, 2007, following completion
of the IPO, CMTC settled all outstanding loan balances on the M/T Atlantas, M/T Aktoras, M/T
Aiolos, M/T Avax and M/T Assos, amounting to $133,958, with the proceeds of the IPO. These vessels were
contributed debt-free to the Partnership.
|
(e)
|
Manager -
Payments on Behalf of Vessel-owning Companies: This payable
includes the settlement of vessel obligations related to pre-delivery
expenses and amounted to $1,867 as of December 31,
2006.
|
F-15
Capital
Product Partners L.P.
Notes
to the Consolidated and Predecessor Combined Financial Statements
(In
thousands of United States dollars, except number of shares
and units)
|
3.
|
Transactions
with Related Parties – Continued
|
|
(f)
|
Manager -
Payments on Behalf of Capital Product Partners L.P.: Following the
IPO, the Manager is invoicing the Partnership for payments that it makes
on behalf of the Partnership and its subsidiaries. The Partnership’s total
outstanding balance due to Manager as of December 31, 2007 amounted to
$28.
|
|
4.
|
Vessels
and Vessels under Construction
|
An
analysis of vessels and vessels under construction is as follows:
|
As
of
December
31, 2007
|
Predecessor
Combined
Balances as of
December
31, 2006
|
|||||||
|
Cost:
|
||||||||
|
Vessels
|
$ | 445,918 | $ | 182,533 | ||||
|
Advances
for vessels under construction
|
- | 29,225 | ||||||
|
Total
cost
|
445,918 | 211,758 | ||||||
|
Accumulated
depreciation
|
(16,747 | ) | (3,730 | ) | ||||
|
Vessels,
net
|
$ | 429,171 | $ | 178,803 | ||||
|
Vessels
under construction
|
$ | - | $ | 29,225 | ||||
The Partnership’s vessels (M/T Atlantas, M/T Aktoras,
M/T Agisilaos, M/T Arionas, M/T Aiolos, M/T Avax, M/T Axios, M/T
Attikos, M/T Atrotos M/T Akeraios, M/T Assos, M/T Apostolos, and M/T
Anemos I), having total net
book value $429,171 as of December 31, 2007 have been provided as collateral to
secure the revolving credit facility of up to $370,000.
In the table above, the capitalized
interest for the years ended December 31, 2007, 2006 and 2005 amounted to $223, $1,455 and $81,
respectively.
On May 8, July 13, September 20,
September 24, and September 28, 2007 the Partnership acquired from CMTC the
shares of vessel owning companies of M/T Atrotos, M/T Akeraios, M/T Apostolos,
M/T Attikos, and M/T Anemos
I, respectively for a total purchase price of $247,000. The vessels have been
recorded in the Partnership’s financial statements at the amount of
$166,134 which represents net book value of vessels reflected in CMTC
consolidated financial statements at the time of transfer to the
Partnership. The amount of the purchase price in excess of CMTC’s basis of the assets of $80,866 was
recognized as a reduction of partners’ equity and is presented as a financing
activity in the statement of cash flows.
F-16
Capital
Product Partners L.P.
Notes
to the Consolidated and Predecessor Combined Financial Statements
(In
thousands of United States dollars, except number of shares
and units)
|
5.
|
Long-Term
Debt
|
Long-term
debt consists of the following:
|
Bank
Loans
|
Vessel
Entity
|
As
of
December
31, 2007
|
Predecessor
Combined
Balances
as
of
December
31, 2006
|
|||||||
|
(i)
|
Issued
on October 31, 2006
Maturing
in October 2016
|
M/T
Arionas
|
$ | - | $ | 26,180 | ||||
|
(ii)
|
Issued
on August 14, 2006
Maturing
in August 2016
|
M/T
Agisilaos
|
- | 25,740 | ||||||
|
(iii)
|
Pre-delivery
facility issued on
July
18, 2006 and refinanced on February 28, 2007
(Vessel’s
delivery date)
|
M/T
Axios
|
- | 5,613 | ||||||
| (iv) |
Issued
on March 4, 2005
Maturing March 4, 2015
|
M/T Attikos | - | 7,750 | ||||||
|
(v)
|
Issued
on April 4, 2007
maturing
on June 30, 2017
|
Capital
Product
Partners
L.P.
|
274,500 | - | ||||||
|
Total
|
$ | 274,500 | $ | 65,283 | ||||||
|
Less:
Current portion
|
- | 6,029 | ||||||||
|
Long-term
portion
|
$ | 274,500 | $ | 59,254 | ||||||
On April
4, 2007, the M/T Arionas’, M/T Agisilaos’ and M/T Axios’ outstanding loan
balances, which amounted to $79,885, were settled in full by the Offering
proceeds (Note 1). Furthermore, on September 6, 2007 the M/T Attikos outstanding
loan balance, which amounted to $7,000, was fully paid by CMTC. Interest expense
for the M/T Agisilaos, M/T Axios, M/T Arionas and M/T Attikos amounted to
$1,313, $1,389 and $381 for the years ended December 31, 2007, 2006 and
2005.
On March
22, 2007, the Partnership entered into a loan agreement with a syndicate of
financial institutions including HSH Nordbank AG, Hamburg for a revolving credit
facility, of up to $370 million for the financing of the acquisition cost, or
part thereof, up to fifteen medium range product tankers. The loan
agreement was amended on September 19, 2007 to include the financing of the
acquisition cost of “M/T Attikos”. The credit facility (as amended) is divided
into four Tranches. Tranche A amounting to $30,000 was drawn on April 4, 2007.
Tranche B amounting to $224,000 was drawn in four installments of $56,000 each
on May 8, July 13, September 20, and September 28 2007. Tranche C amounting to
$86,000 will be utilized to partly finance the acquisition of the last three
“Committed Vessels” during 2008, and Tranche D amounting to $30,000 of which
$20,500 have been drawn-down on September 24, 2007 was utilized to partly
finance the acquisition of M/T Attikos.
As of
December 31, 2007, the Partnership recorded interest expense of $7,400 relating
to its revolving credit facility. As of December 31, 2007, $86,000 from Tranche
C and $9,500 from Tranche D of the revolving credit facility had not been drawn
down. Loan commitment fees are calculated at 0.20% p.a. on any amount not
drawn-down and are paid quarterly.
Borrowings
under this credit facility are jointly and severally secured by the owning
companies of the fifteen vessels (Initial and Committed Vessels) and the M/T
Attikos and bear interest at a rate of 0.75% per annum over US$
LIBOR. The loan will be repaid in twenty equal consecutive three
month instalments commencing on September 30, 2012 plus a balloon payment due in
June, 2017.
The
credit facility has a general assignment of the earnings, insurances and
requisition compensation of the respective vessel or vessels. Each also requires
additional security, including: pledge and charge on current account; corporate
guaranteed from each of the sixteen vessel owning companies, and mortgage
interest insurance. Following the
swap agreements that the Partnership entered into upon the Offering
completion (Note 2) the interest rate for period from April 4, 2007 to December
31, 2007 is fixed at 5.1325% for Tranches A and B and 4.9250% for Tranche
D. The fixed interest rate of 5.1325% and 4.9250% will be valid up to
June 29, 2012.
F-17
Capital
Product Partners L.P.
Notes
to the Consolidated and Predecessor Combined Financial Statements
(In
thousands of United States dollars, except number of shares
and units)
|
5.
|
Long-Term
Debt – Continued
|
The loan agreement also contains other
customary ship finance covenants, including restrictions as to: changes in
management and ownership of the mortgaged vessels, the incurrence of additional
indebtedness, the mortgaging of vessels, the ratio of EBITDA to Net Interest
Expenses shall be no less than 2:1, minimum cash requirement of $500 per vessel
of which 50% may be constituted by undrawn commitments under the revolving
facility as well as minimum requirements as to the applicable
vessels’ market value and insured value in
relation to the outstanding balance of the applicable loan. Also the vessel
owning companies may pay dividends or make distributions when no event of
default has occurred and the payment of such dividend or distribution has not
resulted in a breach of any of the financial covenants. As of December 31, 2007,
the Partnership was in compliance with all debt covenants.
The
required annual loan payments to be made subsequent to December 31, 2007 are as
follows:
|
Year
ending December 31
|
Bank
Loan Repayment Schedule
|
|||
|
2008
|
$ | - | ||
|
2009
|
- | |||
|
2010
|
- | |||
|
2011
|
- | |||
|
2012
|
13,725 | |||
|
Thereafter
|
260,775 | |||
|
Total
|
$ | 274,500 | ||
|
6.
|
Accrued
Liabilities
|
Accrued
liabilities consist of the following:
|
As
of
December
31, 2007
|
Combined
Balances
as
of
December
31, 2006 Predecessor
|
|||||||
|
Accrued
loan interest and loan fees
|
$ | 2 | $ | 1,513 | ||||
|
Accrued
wages and crew expenses
|
- | 248 | ||||||
|
Accrued
other operating expenses
|
- | 172 | ||||||
|
Accrued
voyage expenses and commission
|
184 | 35 | ||||||
|
Accrued
insurance
|
- | 23 | ||||||
|
Accrued
general and administrative
|
63 | - | ||||||
|
Total
|
$ | 249 | $ | 1,991 | ||||
F-18
Capital
Product Partners L.P.
Notes
to the Consolidated and Predecessor Combined Financial Statements
(In
thousands of United States dollars, except number of shares
and units)
|
7.
|
Deferred
Charges
|
Deferred
charges are analyzed as follows:
|
Deferred
Finance
Charges
|
||||
|
Predecessor
Combined Balance as of January 1, 2005
|
- | |||
|
Additions
|
392 | |||
|
Amortization
|
(4 | ) | ||
|
Predecessor
Combined Balance as of December 31, 2005
|
$ | 388 | ||
|
Additions
|
285 | |||
|
Amortization
|
(41 | ) | ||
|
Predecessor
Combined Balance as of December 31, 2006
|
632 | |||
|
Amortization
for the period from January 1, 2007 to April 3, 2007 for the Initial
Vessels
|
(20 | ) | ||
|
Amortization
for the period from January 1, 2007 to September 23, 2007 for M/T
Attikos
|
(18 | ) | ||
|
Deferred
loan fees assumed by CMTC on April 3, 2007
|
(594 | ) | ||
|
Additions
(new credit facility of up to $370 million)
|
1,022 | |||
|
Amortization
of new credit facility loan fees
|
(74 | ) | ||
|
Balance
as of December 31, 2007
|
$ | 948 | ||
|
Deferred
Dry
Docking
|
||||
|
Predecessor
Combined Balance as of December 31, 2006
|
- | |||
|
Addition
Dry Docking of M/T Attikos
|
921 | |||
|
Amortization
for the period from July to September 23, 2007
|
(92 | ) | ||
|
Deferred
Dry Docking assumed by CMTC on September 23, 2007
|
(829 | ) | ||
|
Balance
as of December 31, 2007
|
$ | - | ||
F-19
Capital
Product Partners L.P.
Notes
to the Consolidated and Predecessor Combined Financial Statements
(In
thousands of United States dollars, except number of shares
and units)
|
8.
|
Voyage
Expenses and Vessel Operating
Expenses
|
Voyage
expenses and vessel operating expenses consist of the following:
|
For
the year ended December 31,
|
||||||||||||
|
2007
(Note
1)
|
2006
(Note
1)
|
2005
(Note
1)
|
||||||||||
|
Voyage
expenses
|
$ | 770 | $ | 373 | $ | 520 | ||||||
|
Voyage
expenses consist of:
|
||||||||||||
|
Commissions
|
695 | 339 | 134 | |||||||||
|
Port
expenses
|
- | - | 218 | |||||||||
|
Bunkers
|
- | - | 164 | |||||||||
|
Other
|
75 | 34 | 4 | |||||||||
|
Total
|
770 | 373 | 520 | |||||||||
|
Vessel
operating expenses
|
3,196 | 4,043 | 1,932 | |||||||||
|
Vessel
operating expenses – related parties (Note 3)
|
12,283 | 890 | 216 | |||||||||
|
Total
|
15,479 | 4,933 | 2,148 | |||||||||
|
Vessel
operating expenses consist of:
|
||||||||||||
|
Crew
costs and related costs
|
1,895 | 2,000 | 705 | |||||||||
|
Insurance
|
218 | 421 | 96 | |||||||||
|
Spares,
repairs, maintenance and other
|
593 | 706 | 756 | |||||||||
|
Stores
and lubricants
|
329 | 714 | 309 | |||||||||
|
Management
fees(Note 3)
|
12,283 | 890 | 216 | |||||||||
|
Other
operating expenses
|
161 | 202 | 66 | |||||||||
|
Total
|
$ | 15,479 | $ | 4,933 | $ | 2,148 | ||||||
|
9.
|
Income
Taxes
|
Under the
laws of the countries of the vessel-owning subsidiaries’ incorporation and/or
vessels’ registration, these companies are not subject to tax on international
shipping income. However, they are subject to registration and tonnage taxes,
which have been included in vessel operating expenses in the accompanying
predecessor combined statements of operations.
Based on
its current operations, the Partnership does not expect to have U.S. source
domestic transportation income. However, certain of the Partnership’s
activities give rise to U.S. Source International Transportation Income, and
future expansion of the Partnership’s operations could result in an increase in
the amount of U.S. source international transportation income, as well as give
rise to U.S. Source Domestic Transportation Income, all of which could be
subject to U.S. federal income taxation, unless the exemption from U.S. taxation
under Section 883 of the Code applies.
F-20
Capital
Product Partners L.P.
Notes
to the Consolidated and Predecessor Combined Financial Statements
(In
thousands of United States dollars, except number of shares
and units)
|
10.
|
Cash
Flow
|
The
following assets, liabilities and equity accounts were retained by CMTC on April
3, 2007 and September 23, 2007, when the shares of the initial vessels’ owning
companies and M/T Attikos owning company were transferred from CMTC to the
Partnership respectively (Note 1). The cash flow for the year ended December 31,
2007 is adjusted accordingly to exclude the following assets, liabilities and
equity accounts as they did not result in cash inflows or outflows in
consolidated and predecessor combined financial statements:
|
Balances
assumed
by
CMTC on September 23,
2007
|
Balances
assumed
by
CMTC on
April 3, 2007
|
|||||||
|
Cash
and cash equivalents
|
$ | - | $ | 2,251 | ||||
|
Trade
receivables
|
118 | 1,922 | ||||||
|
Insurance
claims
|
1 | 70 | ||||||
|
Due
from related parties
|
- | 7,598 | ||||||
|
Prepayments
and other
|
116 | 241 | ||||||
|
Inventories
|
54 | 274 | ||||||
|
Deferred
charges
|
829 | 594 | ||||||
|
Total
assets
|
1,118 | 12,950 | ||||||
|
Trade
accounts payable
|
651 | 1,744 | ||||||
|
Accrued
interest and other liabilities
|
273 | 570 | ||||||
|
Due
to related parties
|
5,153 | 364 | ||||||
|
Deferred
revenue
|
228 | 4,985 | ||||||
|
Long
term debt
|
- | 213,843 | ||||||
|
Total
liabilities
|
6,305 | 221,506 | ||||||
|
Net
liabilities assumed by CMTC
|
5,187 | 208,556 | ||||||
|
Contribution
to the Partnership
|
(9,064 | ) | (218,475 | ) | ||||
|
Retained
earnings assumed by CMTC
|
3,877 | 9,919 | ||||||
|
Net Partners’
/ Stockholders’ Equity contributed by CMTC
|
$ | (5,187 | ) | $ | (208,556 | ) | ||
The cash
and cash equivalents of $2,251 as of April 3, 2007 is presented as cash dividend
in the accompanying cash flow statement for the year ended December 31,
2007.
F-21
Capital
Product Partners L.P.
Notes
to the Consolidated and Predecessor Combined Financial Statements
(In
thousands of United States dollars, except number of shares
and units)
|
11.
|
Partnership
Equity and Distributions
|
General:
The partnership agreement requires that within approximately 45 days after the
end of each quarter, beginning with the quarter ending June 30, 2007, all of the
Partnership’s available cash will be distributed to unitholders of record on the
applicable record date.
Definition of
Available Cash: Available Cash, for each fiscal quarter,
consists of all cash on hand at the end of the quarter:
|
·
|
less
the amount of cash reserves established by our board of directors
to:
|
|
o
|
provide
for the proper conduct of Partnership’ s business (including reserves for
future capital expenditures and for our anticipated credit
needs);
|
|
o
|
comply
with applicable law, any of Partnership’s debt instruments, or
other agreements; or
|
|
o
|
provide
funds for distributions to Partnership’s unitholders and to general
partner for any one or more of the next four
quarters;
|
|
·
|
plus
all cash on hand on the date of determination of available cash for the
quarter resulting from working capital borrowings made after the end of
the quarter. Working capital borrowings are generally borrowings that are
made under our credit agreement and in all cases are used solely for
working capital purposes or to pay distributions to
partners.
|
General Partner
Interest and Incentive Distribution Rights: The General Partner has a 2%
interest in the Partnership as well as the incentive distribution
rights.
Incentive
distribution rights represent the right to receive an increasing percentage of
quarterly distributions of available cash from operating surplus after the
minimum quarterly distribution and the target distribution levels have been
achieved. The Partnership’s general partner as of December 31, 2007, holds the
incentive distribution rights.
The
following table illustrates the percentage allocations of the additional
available cash from operating surplus among the unitholders and general partner
up to the various target distribution levels. The amounts set forth under
‘‘Marginal Percentage Interest in Distributions’’ are the percentage interests
of the unitholders and general partner in any available cash from operating
surplus that is being distributed up to and including the corresponding amount
in the column ‘‘Total Quarterly Distribution Target Amount,’’ until available
cash from operating surplus we distribute reaches the next target distribution
level, if any. The percentage interests shown for the unitholders and general
partner for the minimum quarterly distribution are also applicable to quarterly
distribution amounts that are less than the minimum quarterly
distribution.
|
Marginal
Percentage Interest
in
Distributions
|
|||||||
|
Total
Quarterly
Distribution Target Amount
|
Unitholders
|
General
Partner
|
|||||
| Minimum Quarterly Distribution | $0.3750 |
98%
|
2%
|
||||
| First Target Distribution | up to | $0.4313 |
98%
|
2%
|
|||
| Second Target Distribution | above | $0.4313 | up to $0.4688 |
85%
|
15%
|
||
| Third Target Distribution | above | $0.4688 | up to $0.5625 |
75%
|
25%
|
||
| Thereafter | above | $0.5625 |
50%
|
50%
|
|||
Subordinated
Units: All of the Partnership’s subordinated units are held by CMTC. The
Partnership agreement provides that, during the subordination period, the common
units will have the right to receive distributions of available cash from
operating surplus in an amount equal to the minimum quarterly distribution of
$0.3750 per quarter, plus any arrearages in the payment of the minimum quarterly
distribution on the common units from prior quarters, before any distributions
of available cash from operating surplus may be made on the subordinated units.
Distribution arrearages do not accrue on the subordinated units. The purpose of
the subordinated units is to increase the likelihood that during the
subordination period there will be available cash to be distributed on the
common units.
F-22
Capital
Product Partners L.P.
Notes
to the Consolidated and Predecessor Combined Financial Statements
(In
thousands of United States dollars, except number of shares
and units)
|
11.
|
Partnership
Equity and Distributions –
Continued
|
Distributions of
Available Cash From Operating Surplus During the Subordination
Period: The Partnership
agreement requires that we will make distributions of available cash
from operating surplus for any quarter during the subordination period in the
following manner:
|
·
|
first,
98% to the common unitholders, pro rata, and 2.0% to our general partner,
until we distribute for each outstanding common unit an amount equal to
the minimum quarterly distribution for that
quarter;
|
|
·
|
second,
98% to the common unitholders, pro rata, and 2.0% to our general partner,
until we distribute for each outstanding common unit an amount equal to
any arrearages in payment of the minimum quarterly distribution on the
common units for any prior quarters during the subordination
period;
|
|
·
|
third,
98% to the subordinated unitholders, pro rata, and 2.0% to our general
partner, until we distribute for each subordinated unit an amount equal to
the minimum quarterly distribution for that quarter;
and
|
Thereafter,
in the manner described in the above table under section “General Partner
Interest and Incentive Distribution Rights”.
Distributions of
Available Cash From Operating Surplus After the Subordination Period: Our Partnership
agreement requires that we will make distributions of available cash from
operating surplus for any quarter after the subordination period in the
following manner:
|
·
|
first,
98% to all unitholders, pro rata, and 2.0% to our general partner, until
we distribute for each outstanding unit an amount equal to the minimum
quarterly distribution for that quarter;
and
|
Thereafter,
in the manner described in the above table under section “General Partner
Interest and Incentive Distribution Rights”.
As of
December 31, 2007 our partners’ capital included the following
units:
|
As
of
December 31, 2007
|
||||
|
Common
units
|
13,512,500 | |||
|
Subordinated
units
|
8,805,522 | |||
|
Number
of limited partners’ units outstanding
|
22,318,022 | |||
|
General
Partners units
|
455,470 | |||
|
Total
partnership’s units
|
22,773,492 | |||
As of
December 31, 2007, the Partnership’s common units consisted of 13,512,500 units
held by third parties, 8,805,522 subordinated units held by CMTC and 455,470
general partner units held by CGP a wholly owned subsidiary of
CMTC.
On August
14, 2007, the Partnership paid a cash distribution of $0.3626 per unit to all
unitholders of record on August 6, 2007 which amounted to $8,258. That
distribution presented the pro-rata portion of our minimum quarterly
distribution of $0.3750 per unit for the period from April 4, 2007 to June 30,
2007 (88 days).
On
November 15, 2007, the partnership paid a cash distribution of $0.385 per unit
to all unitholders of record on November 7, 2007 which amounted to
$8,768.
F-23
Capital
Product Partners L.P.
Notes
to the Consolidated and Predecessor Combined Financial Statements
(In
thousands of United States dollars, except number of shares
and units)
|
12.
|
Net
Income (loss) Per Unit
|
As
required by EITF Issue No. 03-6, “Participating Securities and Two-Class Method
under FASB Statement No. 128”, “Earnings Per Share”, the general partner’s,
common unit holders’ and subordinated unitholders’ interests in net income are
calculated as if all net income for periods subsequent to April 4, 2007 were
distributed according to the terms of the Partnership’s Agreement, regardless of
whether those earnings would or could be distributed. The Partnership Agreement
does not provide for the distribution of net income; rather, it provides for the
distribution of available cash (Note 11), which is a contractually defined term
that generally means all cash on hand at the end of each quarter after
establishment of cash reserves established by the Capital Product Partners L.P.
board of directors to provide for the proper resources for the Partnership’s
business. Unlike available cash, net income is affected by non-cash items. Net
income for the period from April 4, 2007 to December 31 2007 was $21,571. The
limited partners’ interest in net income for this period was
$21,140.
Under the
Partnership Agreement, the holder of the incentive distribution rights in the
Partnership, which is currently the CGP, assuming that there are no cumulative
arrearages on common unit distributions, has the right to receive an increasing
percentage of cash distributions after the minimum quarterly distribution (Note
11). During the period from April 4, 2007 to December 31, 2007 the Partnership’s
net income did not exceed the First Target Distribution level, and as a result,
the assumed distribution of net income did not result in the use of increasing
percentages to calculate the CGP’s interest in net income.
Furthermore
the Partnership’s net income did not exceed the minimum required quarterly
distribution of $0.375 per common unit ($0.3626 prorated for the period from
April 4, 2007 to June 30, 2007) and consequently, the assumed distribution of
net income resulted in an unequal distribution of net income between the
subordinated unit holders and common unit holders.
The
amount of historical earnings per unit for the years ended December 31,
2005 and 2006 and the period from January 1, 2007 to April 3, 2007 giving
retroactive impact to the number of common and subordinated units (and the 2%
general partner interest) that were issued upon the completion of the Offering
on April 3, 2007 is not presented in the Predecessor Combined Statements of
Income. A presentation of such earnings per unit for the above periods would not
be meaningful to investors as the vessels comprising the initial fleet were
under construction and only M/T Attikos, which was delivered in January 2005,
was under operation for the year ended December 31, 2005. In addition, during
the year ended December 31, 2006 only six of the 13 vessels the Partnership
owned as of December 31, 2007 had been delivered to the Partnership and only the
M/T Attikos was in operation for the full year ended December 31, 2006, while
the other five vessels were in operation for only part of the period (the
vessels were delivered in April, May, July, August and November 2006,
respectively) and a portion of the revenues generated during 2006 was derived
from charters with different terms and conditions from those in the charters in
place during 2007.
13. Commitments
and Contingencies
Commitments:
The
Partnership is party to legal proceedings, claims and complaints in the
ordinary course of its business but does not expect the outcome of any
proceedings, claims or complaints individually or in the aggregate, to have
a material adverse effect on the Partnership’s financial position, results of
operations or liquidity.
|
(a)
|
Vessel
Purchase Commitments: As of December 31, 2007 the Partnership had
outstanding purchase commitments relating to the acquisition of the three
remaining Committed Vessels amounting to $144,000. An analysis of the
purchase commitments is as follows:
|
|
Vessel-owning
Company
|
Date
of
Incorp.
|
DWT
|
Expected
Delivery
Date
|
Name
of
Vessel
Owned
by
Subsidiary
|
Vessel
Purchase
Price
|
|
Sorrel
Shipmanagement Inc.
|
02/07/2006
|
51,000
|
01/2008
|
M/T
Alexandros II
|
$48,000
|
|
Wind
Dancer Shipping Inc.
|
02/07/2006
|
51,000
|
06/2008
|
M/T
Aristotelis II
|
$48,000
|
|
Belerion
Maritime Co.
|
01/24/2006
|
51,000
|
08/2008
|
M/T
Aris II
|
$48,000
|
F-24
Capital
Product Partners L.P.
Notes
to the Consolidated and Predecessor Combined Financial Statements
(In
thousands of United States dollars, except number of shares
and units)
13. Commitments
and Contingencies – Continued
|
(b)
|
Lease
Commitments: The vessel-owning subsidiaries owning the Initial and
Committed Vessels have entered into time and bareboat charter agreements,
which are summarized below:
|
|
Vessel Name
|
Time
Charter (TC)/
Bare
Boat Charter
(BC)
(Years)
|
Commencement
of Charter
|
Charterer
|
Profit
Sharing
(1)
|
Gross
Daily Hire Rate
(Without
Profit Sharing)
|
|
M/T
Atlantas
(British
Ensign)
|
5+3
BC
|
04/2006
|
B.P.
Shipping Ltd
|
-
|
$15.2
(5y) &
$13.5
(3y)
|
|
M/T
Aktoras
(British
Envoy)
|
5+3
BC
|
07/2006
|
B.P.
Shipping Ltd
|
-
|
$15.2
(5y) &
$13.5
(3y)
|
|
M/T
Agisilaos
|
2.5
TC
|
08/2006
|
B.P.
Shipping Ltd
|
50/50
|
$17.7
|
|
M/T
Arionas
|
2+0.5
TC
|
11/2006
|
B.P.
Shipping Ltd
|
50/50
|
$21.3
(2y) &
$19.2
(0.5y)
|
|
M/T
Aiolos
(British
Emissary)
|
5+3
BC
|
03/2007
|
B.P.
Shipping Ltd
|
-
|
$15.2
(5y) &
$13.5
(3y)
|
|
M/T
Avax
|
3
TC
|
06/2007
|
B.P.
Shipping Ltd
|
50/50
|
$20.8
(3y)
|
|
M/T
Axios
|
3
TC
|
03/2007
|
B.P.
Shipping Ltd
|
50/50
|
$20.8
|
|
M/T
Assos
|
3
TC
|
11/2006
|
Morgan
Stanley
|
50/50
|
$20.0
|
|
M/T
Atrotos
|
3
TC
|
05/2007
|
Morgan
Stanley
|
50/50
|
$20.0
|
|
M/T
Akeraios
|
3
TC
|
07/2007
|
Morgan
Stanley
|
50/50
|
$20.0
|
|
M/T
Anemos I
|
3
TC
|
09/2007
|
Morgan
Stanley
|
50/50
|
$20.0
|
|
M/T
Apostolos
|
3
TC
|
09/2007
|
Morgan
Stanley
|
50/50
|
$20.0
|
|
M/T
Alexandros II
|
10
BC
|
01/2008
|
O.S.G.
(2)
|
-
|
$13.0
|
|
M/T
Aristotelis II
|
10
BC
|
06/2008
|
O.S.G.
(2)
|
-
|
$13.0
|
|
M/T
Aris II
|
10
BC
|
08/2008
|
O.S.G.
(2)
|
-
|
$13.0
|
|
M/T
Attikos
|
2.2
to 2.3 TC
|
07/2007
|
Trafigura
Beheer B.V.
|
-
|
$13.9
|
|
|
(1)
|
Profit
sharing refers to an arrangement between vessel-owning companies and
charterers to share a predetermined percentage voyage profit in excess of
the basic rate.
|
|
|
(2)
|
OSG
has an option to purchase each of the three STX vessels delivered or to be
delivered in 2008 at the end of the eighth, ninth or tenth year of the
charter, for $38.0 million, $35.5 million and
$33.0 million, respectively, which option is exercisable six months
before the date of completion of the eighth, ninth or tenth year of the
charter. The expiration date above may therefore change depending on
whether the charterer exercises its purchase
option.
|
Future
minimum rental receipts, excluding any profit share revenue that may arise,
based on vessels committed to non-cancelable long-term time and bareboat charter
contracts, as of December 31, 2007 will be:
|
Year
ending December 31
|
Amount
|
|||
|
2008
|
$ | 96,308 | ||
|
2009
|
87,009 | |||
|
2010
|
49,163 | |||
|
2011
|
30,157 | |||
|
2012
|
29,202 | |||
|
Thereafter
|
71,842 | |||
|
Total
|
$ | 363,681 | ||
F-25
Capital
Product Partners L.P.
Notes
to the Consolidated and Predecessor Combined Financial Statements
(In
thousands of United States dollars, except number of shares
and units)
14. Subsequent
Events
|
(a)
|
Dividends:
On January 28, 2008 the Partnership declared a dividend of $0.395 per unit
to all unitholders of record on February 5, 2008, which amounted to
$8,996. The dividend was paid on February 15,
2008.
|
|
(b)
|
Delivery of
new buildings: On January 29, 2008 M/T Alexandros II (M/T Overseas
Serifos), the fifth Committed Vessel was delivered to the Partnership
through CMTC for a total consideration of $48,000. The acquisition of M/T
Alexandros II was financed in full by a draw down on Tranche C of the
existing revolving credit facility.
|
|
(c)
|
Commitment
for a new credit facility: On March 19, 2008 the Partnership
entered into a loan agreement with a syndicate of financial institutions
including HSH Nordbank AG (the “Agent”), for a non amortizing credit
facility, of up to $350,000 for the financing
of:
|
|
·
|
Partial
acquisition cost of up to $57,500 for Amore Mio, and Aristofanis (Tranche
A)
|
|
·
|
50%
of the acquisition cost of up to $52,500 for M/T Alkiviadis and M/T
Aristidis (Tranche B)
|
|
·
|
50%
of the acquisition cost of up to $240,000 for any further modern tanker
(Tranche C)
|
Borrowings
under this credit facility will be jointly and severally secured by the owning
companies of the Collateral vessels and will bear interest at a rate
of 1.10% per annum over US$ LIBOR. The credit facility will be repaid
by twenty equal consecutive three month installments commencing on June 30, 2013
plus a balloon payment due in March 2018.
The
credit facility will have a general assignment of the earnings, insurances and
requisition compensation of the respective vessel or vessels and will include
the following financial covenants:
· The ratio
of EBITDA to Net Interest Expenses shall be no less than
2:1,
· Minimum cash requirements of $500 per vessel,
· The total indebtedness shall not be greater than 0.725 to
1 of the aggregate fair market value of the vessels.
On March
27, 2008 the Partnership drew down $46,000 under its new credit facility in
order to partially fund the acquisition of the shares of the vessel owning
company of M/T Amore Mio II.
On the
same date the Partnership entered into an interest rate swap agreement to fix
the LIBOR portion of interest rate at 3.5250% until March 27, 2013.
|
(d)
|
Vessel
acquisition: On March 27, 2008 the Partnership entered into share
purchase agreement with CMTC for the acquisition of the shares of the
vessel owning company (Baymont Enterprises Incorporated) of M/T Amore Mio
II, a 159,982 dwt, 2001 built, double hull tanker from CMTC and took
delivery of the vessel on the same date. The total purchase price for the
shares of the vessel owning company of M/T Amore Mio II is $95,000. All
assets, liabilities and equity other than the vessel, related charter
agreement and related permits, at the date of the acquisition were assumed
by CMTC. The acquisition of the shares of the vessel owning company was
funded by $2,000 from available cash, $46,000 through a drawn down from
the new revolving $350,000 credit facility, and the remaining amount
through the issuance of 2,048,823 common units to CMTC at a price of
$22.94 per unit which equals the volume weighted average price of the
common units for the period from October 15, 2007 to February 15, 2008.
M/T Amore Mio is chartered to BP Shipping Limited under a charter with an
earliest scheduled expiration date of January 2011 at a base gross rate of
$36.5 per day (net rate $36), and is subject to profit
sharing. The combination of the vessel owning company of M/T
Amore Mio II with the Partnership will be accounted for as a combination
of entities under common control in accordance with guidance provided in
SFAS 141 which prescribes the method of accounting for such transfers is
similar to the pooling-of-interest method of
accounting.
|
F-26
Exhibit
4.2
Date 19
September 2007
CAPITAL
PRODUCT PARTNERS L.P.
as
Borrower
THE
BANKS AND FINANCIAL INSTITUTIONS
listed
in Schedule 1
as
Lenders
- and
- -
HSH
NORDBANK AG
as Swap
Bank
- and
- -
HSH
NORDBANK AG
as
Bookrunner
- and
- -
HSH
NORDBANK AG
as Agent
and Security Trustee
__________________________________
SUPPLEMENTAL
AGREEMENT
___________________________________
in
relation to a Loan Agreement dated
22 March
2007 relating to revolving credit
and term
loan facilities not exceeding US$370,000,000
WATSON,
FARLEY & WILLIAMS
Piraeus
|
Page
|
||
|
3
|
||
|
4
|
||
|
4
|
||
|
5
|
||
|
5
|
||
|
8
|
||
|
9
|
||
|
9
|
||
|
9
|
||
|
9
|
||
|
11
|
||
|
14
|
||
THIS AGREEMENT is made on 19
September 2007
BETWEEN
|
(1)
|
CAPITAL PRODUCT PARTNERS
L.P. (the “Borrower”);
|
|
(2)
|
THE BANKS AND FINANCIAL
INSTITUTIONS listed in Schedule 1, as Lenders;
|
|
(3)
|
HSH NORDBANK AG acting
through its office at Gerhart-Hauptmann-Platz 50, D-20095, Hamburg,
Germany, as Agent;
|
|
(4)
|
HSH NORDBANK AG acting
through its office at Gerhart-Hauptmann-Platz 50, D-20095, Hamburg,
Germany, as Security Trustee;
|
|
(5)
|
HSH NORDBANK AG acting
through its office at Gerhart-Hauptmann-Platz 50, D-20095, Hamburg,
Germany, as Swap
Bank; and
|
|
(6)
|
HSH NORDBANK AG acting
through its office at Gerhart-Hauptmann-Platz 50, D-20095, Germany as Bookrunner.
|
BACKGROUND
|
(A)
|
By
a loan agreement dated 22 March 2007 and made between (i) the Borrower,
(ii) the Lenders, (iii) the Agent, (iv) the Security Trustee, (v) the Swap
Bank and (vi) the Bookrunner, the Lenders agreed to make available to the
Borrower revolving credit and term loan facilities not exceeding
US$370,000,000.
|
|
(B)
|
The
Borrower has made a request to the Creditor Parties to make available a
new tranche in the amount of up to US$30,000,000 (“Tranche D”) under the
Loan Agreement (by reducing the maximum amount of Tranche A by
US$30,000,000) to allow the Borrower to part-finance the acquisition of
all the shares in Ross Shipmanagement Co. and to provide it with working
capital for its general corporate purposes or to part-finance future
acquisitions of vessels or shares in shipowning companies or for any of
the purposes applicable to Tranche C.
|
|
(C)
|
This
Agreement sets out the terms and conditions on which the Creditor Parties
agree, with effect on and from the Effective Date, at the request of the
Borrower to make available Tranche D and the consequential amendments to
the Loan Agreement and the other Finance
Documents.
|
IT IS AGREED as
follows:
|
1
|
|
|
1.1
|
Defined
expressions. Words and expressions defined in the Loan
Agreement and the other Finance Documents shall have the same meanings
when used in this Agreement unless the context otherwise
requires.
|
|
1.2
|
Definitions. In
this Agreement, unless the contrary intention appears:
|
|
“ATTIKOS” means
the oil tanker of approximately 12,000 deadweight metric tons registered
in the ownership of Ross under Liberian flag with the name
“ATTIKOS”;
|
|
| “Attikos Charter” means a time charter in respect of “ATTIKOS” dated 31 May 2007 and made between Ross as owner and Trafigura Beheer BV as charterer; | |
|
“Effective
Date” means the date on which all the conditions
precedent referred to in Clause 3.1 have been fulfilled by the Borrower,
to be a Business Day not later than 24 September 2007 (or such later date
as the Lenders may agree with the Borrower);
|
|
|
“Loan
Agreement” means the loan agreement dated 22 March 2007
referred to in Recital (A);
|
|
|
“Ross” means
Ross Shipmanagement Co., a Marshall Islands corporation whose registered
office is at Trust Company Complex, Ajeltake Road, Ajeltake Island,
Majuro, Marshall Islands; and
|
|
|
“Tranche
D” means an amount of up to $30,000,000 to be made
available by the Lenders to the Borrower in up to two Advances pursuant to
the terms of the Loan Agreement (as supplemented by this Agreement) of
which:
|
|
(a)
|
$20,500,000
shall be paid by the Borrower to Capital Maritime & Trading Corp. in
part-financing the acquisition of all the shares in
Ross;
|
|
|
(b)
|
$9,500,000
shall be used by the Borrower for its general corporate purposes or to
part-finance future acquisitions of vessels or in shipowning companies or
for any of the purposes applicable to Tranche
C.
|
|
1.3
|
Application of construction and
interpretation provisions of Loan Agreement. Clauses
1.2, 1.3, 1.4 and 1.5 of the Loan Agreement apply, with any necessary
modifications, to this Agreement.
|
|
2
|
|
|
2.1
|
Agreement of the
Lenders. The Lenders agree, subject to and upon the
terms and conditions of this Agreement, to make available Tranche D to the
Borrower under the Loan Agreement.
|
|
2.2
|
Agreement of the Creditor
Parties. The Creditor Parties agree, subject to and upon
the terms and conditions of this Agreement, to the consequential amendment
of the Loan Agreement and the other Finance Documents in connection with
the matters referred to in Clause 2.1.
|
|
2.3
|
Effective Date. The
agreement of the Lenders and the other Creditor Parties contained in
Clause 2.1 shall have effect on and from the Effective
Date.
|
|
3
|
|
|
3.1
|
General. The
agreement of the Lenders and the other Creditor Parties contained in
Clauses 2.1 and 2.2 is subject to the fulfilment of the conditions
precedent of Part D of Schedule 3 of the Loan Agreement as supplemented by
this Agreement and in Clause 3.2.
|
|
3.2
|
Conditions Precedent to Tranche
D. The conditions referred to in Clause 3.1 are that, in
addition to the fulfilling of the conditions precedent referred to in Part
D of Schedule 3 of the Loan Agreement as supplemented by this Agreement,
the Agent shall have received the following documents and evidence in all
respects in form and substance satisfactory to the Agent and its lawyers
on or before the Effective Date (or such later date as the Lenders may
agree with the Borrower):
|
| (a) |
documents
of the kind specified in paragraphs 3, 4 and 5 of Schedule 3, Part A of
the Loan Agreement in relation to the Borrower updated with appropriate
modifications to refer to this Agreement;
|
|
(b)
|
originals
of this Agreement duly executed by the parties thereto;
|
|
(c)
|
the
endorsement at the end of this Agreement signed by the relevant
Owners;
|
|
(d)
|
documentary
evidence that the agent for service of process named in Clause 30 of the
Loan Agreement has accepted its appointment; and
|
|
(e)
|
any
further opinions, consents, agreements and documents in connection with
this Agreement and the Finance Documents which the Lenders may request by
notice to the Borrower prior to the Effective Date.
|
|
4
|
|
|
4.1
|
Repetition of Loan Agreement
representations and warranties. The Borrower represents
and warrants to the Creditor Parties that the representations and
warranties in clause 10 of the Loan Agreement, as amended and supplemented
by this Agreement and updated with appropriate modifications to refer to
this Agreement, remain true and not misleading if repeated on the date of
this Agreement with reference to the circumstances now
existing.
|
|
4.2
|
Repetition of Finance Document
representations and warranties. The Borrower and each of
the Security Parties represents and warrants to the Creditor Parties that
the representations and warranties in the Finance Documents (other than
the Loan Agreement) to which it is a party, as amended and supplemented by
this Agreement and updated with appropriate modifications to refer to this
Agreement remain true and not misleading if repeated on the date of this
Agreement with reference to the circumstances now
existing.
|
|
5
|
|
|
5.1
|
Specific amendments to Loan
Agreement. With effect on and from the Effective Date
the Loan Agreement shall be, and shall be deemed by this Agreement to be,
amended as follows:
|
|
(a)
|
by
adding in Clause 1.1 thereof each of the definitions in Clause 1.1 of this
Agreement (other than the definitions “Effective Date” and
“Loan
Agreement”);
|
|
(b)
|
by
adding in Clause 1.1 thereof the following
definition:
|
|
““Attikos
Advance” has the meaning given to that term in Clause
4.2(d);”;
|
|
|
(c)
|
by
adding a new sub-paragraph (h) in the definition of “Existing Charter” in
Clause 1.1 thereof as follows:
|
|
“(h)
|
“ATTIKOS”,
the Attikos Charter;
|
|
(d)
|
by
adding a new sub-paragraph (h) in the definition of “New Ships Owners” in
Clause 4.1. thereof as follows:
|
|
“(h)
|
Ross
Shipmanagement Co. (“Ross”);”
|
|
(e)
|
by
adding a new sub-paragraph (p) in the definition of “Owner” in Clause 1.1
thereof as follows:
|
|
“(p)
|
“ATTIKOS”,
Ross”;
|
|
(f)
|
by
construing all references to “Ships” in the Loan Agreement as if the same
included reference to “ATTIKOS”;
|
|
(g)
|
by
deleting the figure “$60,000,000” from the definition of “Tranche A” in
Clause 1.1 thereof and replacing it with “$30,000,000”;
|
|
(h)
|
by
adding in the definition of “Tranche” in Clause 1.1 thereof the words “and
Tranche D” after reference to “Tranche C” and by deleting the word “and”
between the “Tranche B” and “Tranche C”;
|
|
(i)
|
by
deleting the figure “$60,000,000” from Clause 2.1(a) thereof and replacing
it with “$30,000,000”;
|
|
(j)
|
by
adding a new sub-paragraph (d) in Clause 2.1 thereof as
follows:
|
|
“(d)
|
Tranche
D shall be in an amount not exceeding
$30,000,000”;
|
|
(k)
|
by
redesignating the existing sub-paragraph (d) of Clause 2.1 thereof as
sub-paragraph (e) and by deleting in that sub-paragraph the word “and”
after the words “four Advances” and by adding the following words at the
end of the sub-paragraph:
|
|
“and
Tranche D may be drawn down in up to two Advances”;
|
|
|
(l)
|
by
adding a new sub-paragraph (d) in Clause 4.2. thereof as fol
lows:
|
|
“(d)
|
each
Advance under Tranche D shall:
|
|
(i)
|
in
the case of the Advance which shall be used in part-financing the
acquisition of all the shares in Ross (the “Attikos Advance”), be in
an amount of $20,500,000; and
|
||
|
(ii)
|
in
the case of the advance which may be used by the Borrower for its general
corporate purpose, be in the amount of
$9,500,000;”;
|
|
(m)
|
by
redesignating the existing sub-paragraphs (d) and (e) of Clause 4.2
thereof as sub-paragraphs (f) and (g)
respectively;
|
|
(n)
|
by
adding a new sub-paragraph (e) in Clause 9.1 thereof as
follows:
|
|
“(e)
|
that,
on or before the service of the Drawdown Notice in respect of the Attikos
Advance, the Agent receives the documents described in Part D of Schedule
3 in form and substances satisfactory to the Agent and its
lawyers”;
|
|
(o)
|
by
redesignating the existing sub-paragraphs (e), (f) and (g) in Clause 9.1
thereof as sub-paragraphs (f), (g) and (h)
respectively;
|
|
(p)
|
by
adding a Part D in Schedule 3 thereof as
follows:
|
“PART
D
|
The
following are the documents referred to in Clause 9.1(e) required on or
before the Drawdown Date of the Attikos Advance.
|
|
|
In
Part D of Schedule 3, the following definitions shall have the following
meanings:
|
|
1
|
Copies
of resolutions of the shareholders and directors of Ross and the Borrower
authorising the execution of each of the Finance Documents to which Ross
is a party and, in the case of the Borrower, approving the borrowing of
the Attikos Advance and authorising named directors or attorneys to give
the Drawdown Notices and other notices under this
Agreement.
|
|
|
2
|
The
original of any power of attorney under which any Finance Document is
executed on behalf of Ross.
|
|
|
3
|
Copies
of all consents which Ross or the Borrower requires to enter into, or make
any payment under, any Finance Document.
|
|
|
4
|
A
duly executed original of the Guarantee of Ross and of the Mortgage, the
General Assignment and the Owner’s Earnings Account Pledge relative to
“ATTIKOS”, and of each document to be delivered pursuant to each such
Finance Document.
|
|
|
5
|
A
duly executed original of the Charterparty Assignment in respect of the
Attikos Charter and of each document to be delivered pursuant to such
Charterparty Assignment.
|
|
|
6
|
Evidence
satisfactory to the Agent that Ross is a direct or indirect wholly-owned
subsidiary of the Borrower.
|
|
|
7
|
The
originals of any documents required in connection with the opening of the
Earnings Account in respect of “ATTIKOS”.
|
|
|
8
|
Documentary
evidence that:
|
|
|
(a)
|
“ATTIKOS”
is registered in the ownership of Ross under an Liberian
flag;
|
|
|
(b)
|
“ATTIKOS”
is in the absolute and unencumbered ownership of Ross save as contemplated
by the Finance Documents;
|
|
|
(c)
|
“ATTIKOS”
maintains the highest available class with a classification society which
is a member of the IACS as the Agent may approve free of all overdue
recommendations and conditions of such classification
society;
|
|
|
(d)
|
the
Mortgage relating to “ATTIKOS” has been duly registered or recorded
against “ATTIKOS” as a valid first preferred ship mortgage in accordance
with the laws of the Republic of Liberia; and
|
|
|
(e)
|
“ATTIKOS”
is insured in accordance with the provisions of this Agreement and all
requirements therein in respect of insurances have been complied
with.
|
|
|
9
|
A
copy of the Management Agreement and a duly executed original of the
Approved Manager’s Undertaking in relation to
“ATTIKOS”.
|
|
|
10
|
Copies
of:
|
|
|
(a)
|
the
document of compliance (DOC) and safety management certificate
(SMC) referred to in paragraph (a) of the definition of the ISM Code
Documentation in respect of “ATTIKOS” and the Approved Manager certified
as true and in effect by Ross; and
|
|
|
(b)
|
the
ISPS Code Documentation in respect of “ATTIKOS” and Ross certified as true
and in effect by Ross.
|
|
|
11
|
Two
valuations (at the cost of the Borrower) of “ATTIKOS”, addressed to the
Agent, stated to be for the purposes of this Agreement and dated not
earlier than 4 weeks before the Drawdown Date relative to the Attikos
Advance, each from an Approved Broker (such valuations to be made in
accordance with Clause 15.4).
|
|
12
|
A
survey report in respect of “ATTIKOS” prepared (at the cost of the
Borrower) by an independent marine surveyor appointed by the Agent dated
no later than 20 days prior to the Drawdown Date of the Attikos Advance in
form, scope and substance satisfactory to the Agent and its technical
advisers.
|
|
|
13
|
At
the cost of the Borrower, a favourable opinion from an independent
insurance consultant acceptable to the Lenders on such matters relating to
the insurances for “ATTIKOS” as the Agent may require.
|
|
|
14
|
Favourable
legal opinions from lawyers appointed by the Lender on such matters
concerning the laws of the Republic of Liberia and such other relevant
jurisdictions as the Agent may require.
|
|
|
15
|
If
the Agent so requires, in respect of any of the documents referred to
above, a certified English translation prepared by a translator approved
by the Agent.
|
|
Every
copy document delivered under this Schedule shall be certified as a true
and up to date copy by a director or the secretary (or equivalent officer)
of the Borrower.”;
|
|
(q)
|
by
construing references throughout to “this Agreement”, “hereunder” and
other like expressions as if the same referred to the Loan Agreement as
amended and supplemented by this Agreement.
|
|
5.2
|
Amendments to Finance
Documents. With effect on and from the Effective Date
each of the Finance Documents other than the Loan Agreement, shall be, and
shall be deemed by this Agreement to be, amended as
follows:
|
|
(a)
|
the
definition of, and references throughout each of the Finance Documents to,
the Loan Agreement and any of the other Finance Documents shall be
construed as if the same referred to the Loan Agreement and those Finance
Documents as amended and supplemented by this
Agreement;
|
|
(b)
|
by
construing references throughout each of the Finance Documents to “this
Agreement”, “this Deed”, “hereunder” and other like expressions as if the
same referred to such Finance Documents as amended and supplemented by
this Agreement.
|
|
5.3
|
Finance Documents to remain in
full force and effect. The Finance Documents shall
remain in full force and effect as amended and supplemented
by:
|
|
(a)
|
the
amendments to the Finance Documents contained or referred to in Clauses
5.1 and 5.2 ; and
|
|
(b)
|
such
further or consequential modifications as may be necessary to give full
effect to the terms of this Agreement,
|
|
6
|
|
|
6.1
|
Borrower’s obligation to
execute further documents etc. The Borrower shall, and
shall procure that any other party to any Security Document
shall:
|
|
(a)
|
execute
and deliver to the Security Trustee (or as it may direct) any assignment,
mortgage, power of attorney, proxy or other document, governed by the law
of England or such other country as the Security Trustee may, in any
particular case, specify;
|
|
(b)
|
effect
any registration or notarisation, give any notice or take any other step,
which the Agent may, by notice to the Borrower or other party, specify for
any of the purposes described in Clause 6.2 or for any similar or
related purpose.
|
|
6.2
|
Purposes
of further assurances. Those purposes are:
|
|
(a)
|
validly
and effectively to create any Security Interest or right of any kind which
the Security Trustee intended should be created by or pursuant to the Loan
Agreement or any other Security Document, each as amended and supplemented
by this Agreement; and
|
|
(b)
|
implementing
the terms and provisions of this Agreement.
|
|
6.3
|
Terms of further
assurances. The Security Trustee may specify the terms
of any document to be executed by the Borrower or any other party under
Clause 6.1, and those terms may include any covenants, powers and
provisions which the Security Trustee considers appropriate to protect its
interests.
|
|
6.4
|
Obligation to comply with
notice. The Borrower or any other party shall comply
with a notice under Clause 6.1 by the date specified in the
notice.
|
|
6.5
|
Additional corporate
action. At the same time as the Borrower or any other
party delivers to the Agent any document executed under Clause 6.1(a), the
Borrower or any other party shall also deliver to the Agent a certificate
signed by 2 of the Borrower’s or that other party’s directors which
shall:
|
|
(a)
|
set
out the text of a resolution of the Borrower’s or that other party’s
directors specifically authorising the execution of the document specified
by the Agent; and
|
|
(b)
|
state
that either the resolution was duly passed at a meeting of the directors
validly convened and held throughout which a quorum of directors entitled
to vote on the resolution was present or that the resolution has been
signed by all the directors and is valid under the Borrower's or that
other party’s articles of association or other constitutional
documents.
|
|
7
|
|
|
7.1
|
Expenses. The
provisions of clause 20 (Fees and Expenses) of the Loan Agreement, as
amended and supplemented by this Agreement, shall apply to this Agreement
as if they were expressly incorporated in this Agreement with any
necessary modifications.
|
|
8
|
|
|
8.1
|
General. The
provisions of clause 28 (Notices) of the Loan Agreement, as amended and
supplemented by this Agreement, shall apply to this Agreement as if they
were expressly incorporated in this Agreement with any necessary
modifications.
|
|
9
|
|
|
9.1
|
Counterparts. This
Agreement may be executed in any number of
counterparts.
|
|
9.2
|
Third party
rights. A person who is not a party to this 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
Agreement.
|
|
10
|
|
|
10.1
|
Governing
law. This Agreement shall be governed by and construed
in accordance with English law.
|
|
10.2
|
Incorporation of the Loan
Agreement provisions. The provisions of clause 30 (Law
and Jurisdiction) of the Loan Agreement, as amended and supplemented by
this Agreement, shall apply to this Agreement as if they were expressly
incorporated in this Agreement with any necessary
modifications.
|
THIS AGREEMENT has been duly
executed as a Deed on the date stated at the beginning of this
Agreement.
BORROWER
|
EXECUTED as a DEED
|
)
|
|
by
CAPITAL PRODUCT PARTNERS
L.P.
|
)
|
|
acting
by
|
)
|
|
its
duly authorised attorney-in-fact
|
)
|
LENDERS
|
SIGNED
by
|
)
|
|
for
and on behalf of
|
)
|
|
HSH
NORDBANK AG
|
)
|
|
SIGNED
by
|
)
|
|
for
and on behalf of
|
)
|
|
ALPHA
BANK A.E.
|
)
|
|
SIGNED
by
|
)
|
|
for
and on behalf of
|
)
|
|
DEUTSCHE
SCHIFFSBANK AG
|
)
|
|
SIGNED
by
|
)
|
|
for
and on behalf of
|
)
|
|
NATIONAL
BANK OF
|
)
|
|
GREECE
S.A.
|
)
|
|
SIGNED
by
|
)
|
|
for
and on behalf of
|
)
|
|
FORTIS
BANK
|
)
|
AGENT
|
SIGNED
by
|
)
|
|
for
and on behalf of
|
)
|
|
HSH NORDBANK
AG
|
)
|
SECURITY
TRUSTEE
|
SIGNED
by
|
)
|
|
for
and on behalf of
|
)
|
|
HSH
NORDBANK AG
|
)
|
SWAP
BANK
|
SIGNED
by
|
)
|
|
for
and on behalf of
|
)
|
|
HSH
NORDBANK AG
|
)
|
BOOKRUNNER
|
SIGNED
by
|
)
|
|
for
and on behalf of
|
)
|
|
HSH
NORDBANK AG
|
)
|
|
Witness
to all the above
|
)
|
|
signatures:
|
)
|
Name:
Address:
We hereby confirm and acknowledge we have read and understood the terms and conditions of the above Supplemental Agreement and agree in all respects to the same and confirm that the Finance Documents to which we are a party shall remain in full force and effect and shall continue to stand as security for the obligations of the Borrower under the Loan Agreement (as amended by the Supplemental Agreement) and shall, without limitation, secure the Loan.
|
for
and on behalf of
|
for
and on behalf of
|
|||
|
APOLLONAS
SHIPPING COMPANY
|
CANVEY
SHIPMANAGEMENT CO.
|
|||
|
for
and on behalf of
|
for
and on behalf of
|
|||
|
CARNATION
SHIPPING COMPANY
|
CENTURION
NAVIGATION LIMITED
|
|||
|
for
and on behalf of
|
for
and on behalf of
|
|||
|
IRAKLITOS
SHIPPING COMPANY
|
POLARWIND
MARITIME S.A.
|
|||
|
for
and on behalf of
|
for
and on behalf of
|
|||
|
SHIPPING
RIDER CO.
|
TEMPEST
MARITIME INC.
|
|||
|
for
and on behalf of
|
for
and on behalf of
|
|||
|
LAREDO
MARITIME INC.
|
EPICURUS
SHIPPING COMPANY
|
|||
Dated: 19
September 2007
LENDERS
|
Lender
|
Lending
Office
|
|
HSH
Nordbank AG
|
Gerhart-Hauptmann-Platz
50
20095
Hamburg
Germany
Fax
No: +(49) 40 33 33 34118
|
|
Alpha
Bank A.E.
|
Akti
Miaouli 89
185
38 Piraeus
Greece
Fax
No: +30 210 429 0348
|
|
Deutsche
Schiffsbank AG
|
Domshof
17
D-28195
Bremen
Fax
No: +49 421 3609329
|
|
National
Bank of Greece S.A.
|
Bouboulinas
2 & Akti Miaouli
185
35 Piraeus
Fax
No: +30 210 414 4120
|
|
Fortis
Bank
|
166
Syngrou Ave
176
71 Athens
Greece
|
14
Exhibit
4.5
EXECUTION
COPY
AMENDMENT
TO MANAGEMENT AGREEMENT
AMENDMENT NO. 1 made effective the 24th
day of September 2007 to the Management Agreement dated the 3rd day of April
2007 (the “Management
Agreement”); by and between CAPITAL PRODUCT PARTNERS L.P., a limited
partnership duly organized and existing under the laws of the Marshall Islands
(“CLP”), and
CAPITAL SHIP MANAGEMENT CORP., a company duly organized and existing
under the laws of Panama with its registered office at Hong Kong Bank building,
6th
floor, Samuel Lewis Avenue, Panama, and a representative office established in
Greece at 3, Iassonos street, Piraeus Greece (“CSM”).
WHEREAS:
|
|
A.
|
CLP
owns vessels and requires certain commercial and technical management
services for the operation of its
fleet;
|
|
|
B.
|
Pursuant
to the Management Agreement, CLP engaged CSM to provide such commercial
and technical management services to CLP on the terms set out
therein;
|
|
|
C.
|
CLP
wishes to acquire the product tanker M/T
Attikos;
|
|
|
D.
|
CLP
wishes for CSM to provide commercial and technical services under the
Management Agreement with respect to the product tanker M/T
Attikos;
|
|
|
E.
|
CLP
has requested that CSM agree to amend certain provisions of the Management
Agreement, as set forth herein; and
|
|
|
F.
|
CSM
is willing to agree to such amendments as set forth
herein.
|
NOW THEREFORE, in consideration of the
premises and the agreements, provisions and covenants herein contained, the
parties hereto hereby agree, on the terms and subject to the conditions set
forth herein, as follows:
Section 1. Defined
Terms. Capitalized terms used but not defined herein shall
have the meanings assigned to such terms in the Management
Agreement.
Section 2. Amendments. (a)
The definition of “Additional Vessels” set forth in Section 1 of the Management
Agreement is hereby amended to read in its entirety as follows:
“Additional Vessels”
means product tankers not in the ownership of CLP on the date of this agreement
and product tankers not forming part of the newbuildings fleet as set out in
Schedule “C” to this Agreement, that CLP may subsequently purchase.
A-1
Such
Additional Vessels, after their acquisition by CLP, for the purposes of this
Agreement shall also be referred to herein as Vessels.
(b) Schedule “B” of the Management
Agreement is hereby amended to read in its entirety as follows:
SCHEDULE B
FEES
In consideration for the provision of
the Services listed in Schedule A by CSM to CLP, CLP shall pay CSM a fixed daily
fee of US$5,500 per time-chartered Vessel, payable on the last day of each
month, and will also pay a fixed daily fee of US$250 per bareboat-chartered
Vessel, as set forth in the table below. Notwithstanding anything in
this Agreement to the contrary, this Schedule will be amended from time to time
to reflect the applicable fee for each Additional Vessel, which fee shall be
negotiated on a vessel-by-vessel basis.
|
Vessel
Name
|
Daily
Fee in US$
|
|
|
Atlantas
|
250
|
|
|
Aktoras
|
250
|
|
|
Agisilaos
|
5,500
|
|
|
Assos
|
5,500
|
|
|
Arionas
|
5,500
|
|
|
Axios
|
5,500
|
|
|
Aiolos
|
250
|
|
|
Avax
|
5,500
|
|
|
Atrotos
|
5,500
|
|
|
Akeraios
|
5,500
|
|
|
Anemos
I
|
5,500
|
|
|
Apostolos
|
5,500
|
|
|
Alexandros
II
|
250
|
|
|
Aristotelis
II
|
250
|
|
|
Aris
II
|
250
|
|
|
Attikos
|
5,500
|
(c) Schedule “E” of the
Management Agreement is hereby amended to read in its entirety as
follows:
SCHEDULE
E
DATE OF
TERMINATION
|
Vessel
Name
|
Expected
Termination
Date
|
|
|
Atlantas
|
January-April
2011
|
|
|
Aktoras
|
April-July
2011
|
|
|
Agisilaos
|
May-August
2011
|
|
|
Assos
|
February-May
2011
|
|
|
Arionas
|
August-November
2011
|
|
|
Axios
|
December
2011-March 2012
|
|
|
Aiolos
|
November
2011- February 2012
|
|
|
Avax
|
June
2010
|
|
|
Atrotos
|
February-May
2012
|
|
|
Akeraios
|
May-August
2012
|
|
|
Anemos
I
|
July-October
2012
|
|
|
Apostolos
|
July-October
2012
|
|
|
Alexandros
II
|
December
2012-March 2013
|
|
|
Aristotelis
II
|
March-June
2013
|
|
|
Aris
II
|
May-August
2013
|
|
|
Attikos
|
September-November
2009
|
Section 3. Effectiveness of
Amendment. This Amendment shall become effective as of the
date hereof (the “Amendment Effective
Date”).
Section 4. Effect of
Amendment. Except as expressly set forth herein, this
Amendment shall not by implication or otherwise limit, impair, constitute a
waiver of, amend, or otherwise affect the rights and remedies of CLP or CSM
under the
Management
Agreement, and shall not alter, modify, amend or in any way affect any of the
terms, conditions, obligations, covenants or agreements contained in the
Management Agreement, all of which are ratified and affirmed in all respects and
shall continue in full force and effect. Nothing herein shall be
deemed to entitle CLP or CSM to a consent to, or a waiver, amendment,
modification or other change of, any of the terms, conditions, obligations,
covenants or agreements contained in the Management Agreement in similar or
different circumstances. This Amendment shall apply and be effective
with respect to the matters expressly referred to herein. After the
Amendment Effective Date, any reference to the Management Agreement shall mean
the Management Agreement with such amendments effected hereby.
Section 5. Counterparts. This
Amendment may be executed in one or more signed counterparts, facsimile or
otherwise, which shall together form one instrument.
IN WITNESS WHEREOF the Parties have
executed this Amendment by their duly authorized signatories with effect on the
date first above written.
|
CAPITAL
PRODUCT PARTNERS L.P. BY ITS
GENERAL PARTNER, CAPITAL GP L.L.C.,
|
||||
|
|
By:
|
|||
| Name: Ioannis E. Lazaridis | ||||
|
Title: Chief Executive Officer and
Chief Financial Officer of
Capital GP L.L.C.
|
||||
|
CAPITAL
SHIP MANAGEMENT CORP.,
|
||||
|
|
By:
|
|||
| Name: Nikolaos Syntichakis | ||||
|
Title : Attorney-in-Fact
|
||||
Exhibit
4.6
EXECUTION
COPY
AMENDMENT
NO. 2 made effective the 27th day of March 2008 to the Management Agreement
dated the 3rd day of April 2007, as amended the 24th day of September 2008 (the
“Management
Agreement”); by and between CAPITAL PRODUCT PARTNERS L.P., a limited
partnership duly organized and existing under the laws of the Marshall Islands
(“CLP”), and
CAPITAL SHIP MANAGEMENT CORP., a company duly organized and existing
under the laws of Panama with its registered office at Hong Kong Bank building,
6th floor, Samuel Lewis Avenue, Panama, and a representative office established
in Greece at 3, Iassonos street, Piraeus Greece (“CSM”).
WHEREAS:
|
A.
|
CLP
owns vessels and requires certain commercial and technical management
services for the operation of its fleet;
|
|
B.
|
Pursuant
to the Management Agreement, CLP engaged CSM to provide such commercial
and technical management services to CLP on the terms set out
therein;
|
|
C.
|
CLP
wishes to acquire the product tanker Amore Mio II;
|
|
D.
|
CLP
wishes for CSM to provide commercial and technical services under the
Management Agreement with respect to the product tanker Amore Mio
II;
|
|
E.
|
CLP
has requested that CSM agree to amend certain provisions of the Management
Agreement, as set forth herein; and
|
|
F.
|
CSM
is willing to agree to such amendments as set forth
herein.
|
NOW THEREFORE, in consideration of the
premises and the agreements, provisions and covenants herein contained, the
parties hereto hereby agree, on the terms and subject to the conditions set
forth herein, as follows:
Section 1. Defined
Terms. Capitalized terms used but not defined herein shall
have the meanings assigned to such terms in the Management
Agreement.
Section 2. Amendments. (a)
The definition of “Additional Vessels” set forth in Section 1 of the Management
Agreement is hereby amended to read in its entirety as follows:
“Additional Vessels”
means tankers not in the ownership of CLP on the date of this agreement and
tankers not forming part of the newbuildings fleet as set out in Schedule “C” to
this Agreement, that CLP may subsequently purchase.
Such
Additional Vessels, after their acquisition by CLP, for the purposes of this
Agreement shall also be referred to herein as Vessels.
|
|
(b) The
first paragraph of Section 9 of the Management Agreement is hereby amended
to read in its entirety as follows:
|
Section
9. Term And
Termination. With respect to each of the Vessels, this
Agreement shall commence from the date on which each Vessel is acquired by CLP
and will continue for approximately five years or as more specifically described
on Schedule E to this Agreement, unless terminated by either party hereto on not
less than one hundred and twenty (120) days notice if:
(c)
Schedule “A” of the Management Agreement is hereby amended to read in its
entirety as follows:
SCHEDULE
A
SERVICES
CSM shall provide such of the following
commercial and technical management services (the “Services”) to CLP, as
CGP may from time to time request and direct CSM to provide pursuant to Section
1.02:
(1) Negotiating
on behalf of CLP time charters, bareboat charters and other employment contracts
with respect to the Vessels and monitor payments thereunder;
(2) Exercising
of due diligence to:
|
|
(i)
|
maintain
and preserve each Vessel and her equipment in full compliance with
applicable rules and regulations, including Environmental Laws, good
condition, running order and repair, so that each Vessel shall be, insofar
as due diligence can make her in every respect seaworthy and in good
operating condition;
|
|
|
(ii)
|
keep
each Vessel in such condition as will entitle her to the highest
classification and rating from the classification society chosen by her
owner or charter for vessels of the class, age and
type;
|
|
|
(iii)
|
prepare
and obtain all necessary approvals for a shipboard oil pollution emergency
plan (SOPEP) in a form approved by the Marine Environment Protection
Committee of the International Maritime Organisation pursuant to the
requirements of Regulation 26 of Annex I of the International Convention
for the Prevention of Pollution from Ships, 1973, as modified by the
Protocol of 1978 relating thereto, as amended (MARPOL 73/78), and provide
assistance with respect to such other documentation and record-keeping
requirements pursuant to applicable Environmental
Laws;
|
|
|
(iv)
|
arrange
for the preparation, filing and updating of a contingency Vessel Response
Plan in accordance with the requirements of the U.S. Oil Pollution Act of
1990 as amended (“OPA”), and instruct the crew in all aspects of the
operation of such plan;
|
|
|
(v)
|
inform
CLP promptly of any major release or discharge of oil or other hazardous
material in compliance with law and identify and ensure the availability
by contract or otherwise of a Qualified Individual, a Spill Management
Team, an Oil Spill Removal Organisation (as such terms are defined by
applicable Environmental Laws), and any other individual or entity
required by Environmental Laws, resources having salvage, firefighting,
lightering
and, if applicable, dispersant capabilities, and public relations/media
personnel to assist CLP to deal with the media in the event of discharges
of oil;
|
|
|
(vi)
|
arrange
and procure for the vetting of the Vessels and CLP or CSM by
major charterers and arranging and attending relevant inspections of the
Vessels, including pre-vetting inspections, or visits at the premises of
CSM up to a maximum number of five inspection visits per Vessel per year
to be attended by CSM, with additional visits to be for the account of
CLP; and
|
|
|
(vii)
|
provide
copies of any vessel inspection reports, valuations, surveys or similar
reports upon request.
|
CSM is
expressly authorized as agents for CLP to enter into such arrangements by
contract or otherwise as are required to ensure the availability of the Services
outlined above. CSM is further expressly authorized as agents for CLP to enter
into such other arrangements as may from time to time be necessary to satisfy
the requirements of OPA or other Federal or State laws.
(3) Storing,
victualing and supplying of each Vessel and the arranging for the purchase of
certain day to day stores, supplies and parts;
(4) Procuring
and arrangement for port entrance and clearance, pilots, vessel agents, consular
approvals, and other services necessary or desirable for the management and safe
operation of each Vessel;
(5) Preparing,
issuing or causing to be issued to shippers the customary freight contract,
cargo receipts and/or bills of lading;
(6) Performance
of all usual and customary duties concerned with the loading and discharging of
cargoes at all ports;
(7) Naming
of vessel agents for the transaction of each Vessel’s business;
(8) Arrangement
and retention in full force and effect of all customary insurance pertaining to
each Vessel as instructed by the owner or charterer and all such policies of
insurance, including but not limited to protection and indemnity, hull and
machinery, war risk and oil pollution covering each Vessel; if requested by the
owner or charterer, making application for certificates of financial
responsibility on behalf of the Vessels covered hereunder;
(9) Adjustment
and the negotiating of settlements, with or on behalf of claimants or
underwriters, of any claim, damages for which are recoverable under policies of
insurance;
(10) If
requested, provide CLP with technical assistance in connection with any sale of
any Vessel. CSM will, if requested in writing by CLP, comment on the
terms of any proposed Memorandum of Agreement, but CLP will remain solely
responsible for agreeing the terms of any Memorandum of Agreement regulating any
sale;
(11) Arrangement
or the prompt dispatch of each Vessel from loading and discharging ports and for
transit through canals;
(12) Arrangement
for employment of counsel, and the investigation, follow-up and negotiating of
the settlement of all claims arising in connection with the operation of each
Vessel; it being understood that CLP will be responsible for the payment of such
counsel’s fees and expenses;
(13) Arrangement
for the appointment of an adjuster and assistance in preparing the average
account, taking proper security for the cargo’s and freight’s proportion of
average, and in all ways reasonably possible protecting the interest of each
Vessel and her owner; it being understood that CLP will be responsible for the
payment of such adjuster’s fees and expenses;
(14) Arrangement
for the appointment of surveyors and technical consultants as necessary; it
being understood that CLP will be responsible for the payment of such surveyor’s
or technical consultant’s fees and expenses outside the ordinary course of
business;
(15) Negotiating
of the settlement of insurance claims of Vessel owner’s or charterer’s
protection and indemnity insurance and the arranging for the making of
disbursements accordingly for owner’s or charterer’s account; CLP
shall arrange for the provision of any necessary guarantee bond or other
security;
(16) Attendance
to all matters involving each Vessel’s crew, including, but not limited to, the
following:
|
|
(i)
|
arranging
for the procurement and enlistment for each Vessel, as required by
applicable law, of competent, reliable and duly licensed personnel
(hereinafter referred to as “crew members”)
in accordance with the requirements of International Maritime Organisation
Convention on Standards of Training Certification and Watchkeeping for
Seafarers 1978 and as subsequently amended, and all replacements therefore
as from time to time may be
required;
|
|
|
(ii)
|
arranging
for all transportation, board and lodging for the crew members as and when
required at rates and types of accommodations as customary in the
industry;
|
|
|
(iii)
|
keeping
and maintaining full and complete records of any labour agreements which
may be entered into between owner or disponent owner and the crew members
and the prompt reporting to owner or disponent
owner as soon as notice or knowledge thereof is received of any change or
proposed change in labour agreements or other regulations relating to the
master and the crew members;
|
|
|
(iv)
|
negotiating
the settlement and payment of all wages with the crew members during the
course of and upon termination of their
employment;
|
|
|
(v)
|
the
handling of all details and negotiating the settlement of any and all
claims of the crew members including, but not limited to, those arising
out of accidents, sickness, or death, loss of personal effects, disputes
under articles or contracts of enlistment, policies of insurance and
fines;
|
|
|
(vi)
|
keeping
and maintaining all administrative and financial records relating to the
crew members as required by law, labour agreements, owner or charterer,
and rendering to owner or charterer any and all reports when, as and in
such form as requested by owner or
charterer;
|
|
|
(vii)
|
the
performance of any other function in connection with crew members as may
be requested by owner or charterer;
and
|
|
|
(viii)
|
negotiating
with unions, if
required.
|
(17) Payment
of all charges incurred in connection with the management of each Vessel,
including, but not limited to, the cost of the items listed in (2) to (16)
above, canal tolls, repair charges and port charges, and any amounts due to any
governmental agency with respect to the Vessel crews;
(18) In
such form and on such terms as may be requested by CLP, the prompt reporting to
CLP of each Vessel’s movement, position at sea, arrival and departure dates,
casualties and damages received or caused by each Vessel;
(19) In
case any of the Vessels is employed under a voyage charter, CLP shall pay for
all voyage related expenses (including bunkers, canal tolls and port
dues) and CSM shall arrange for the provision of bunker fuel of the
quality agreed with CLP as required for any Vessel's trade. CSM shall be
entitled to order bunker fuel through such brokers or suppliers as CLP deem
appropriate unless CLP instruct CSM to utilize a particular supplier which CSM
will be obliged to do provided that the CLP have made prior credit arrangements
with such supplier. CLP shall comply with the terms of any credit
arrangements made by CSM on their behalf;
(20) CSM
shall not in any circumstances have any liability for any bunkers which do not
meet the required specification. CSM will, however, take such action, on behalf
of CLP, against the supplier of the bunkers, as is agreed with CLP.
(21) Except
as provided in paragraph (22) below, CSM shall make arrangements as instructed
by the Classification Society of each Vessel for the intermediate and special
survey of each Vessel and all costs in connection with passing such surveys
(including dry-docking) and satisfactory compliance with class requirements will
be borne by CSM.
(22) CSM
shall make arrangements as instructed by the Classification Society of the Amore
Mio II for the next scheduled intermediate or special survey of the Amore Mio
II, as applicable, and all costs in connection with passing such survey
(including dry-docking) and satisfactory compliance with class requirements will
be borne by CSM.
(d)
Schedule “B” of the Management Agreement is hereby amended to read in its
entirety as follows:
SCHEDULE B
FEES
In consideration for the provision of
the Services listed in Schedule A by CSM to CLP, CLP shall pay CSM a fixed daily
fee of US$5,500 per time-chartered Vessel, payable on the last day of each
month, and will also pay a fixed daily fee of US$250 per bareboat-chartered
Vessel, as set forth in the table below. Notwithstanding anything in
this Agreement to the contrary, this Schedule will be amended from time to time
to reflect the applicable fee for each Additional Vessel, which fee shall be
negotiated on a vessel-by-vessel basis.
|
Vessel
Name
|
Daily Fee in US$
|
|
Atlantas
|
250
|
|
Aktoras
|
250
|
|
Agisilaos
|
5,500
|
|
Assos
|
5,500
|
|
Arionas
|
5,500
|
|
Axios
|
5,500
|
|
Aiolos
|
250
|
|
Avax
|
5,500
|
|
Atrotos
|
5,500
|
|
Akeraios
|
5,500
|
|
Anemos
I
|
5,500
|
|
Apostolos
|
5,500
|
|
Alexandros
II
|
250
|
|
Aristotelis
II
|
250
|
|
Aris
II
|
250
|
|
Attikos
|
5,500
|
|
Amore
Mio II
|
8,500
|
(e) Schedule
“E” of the Management Agreement is hereby amended to read in its entirety as
follows:
SCHEDULE
E
DATE OF
TERMINATION
|
Vessel
Name
|
Expected
Termination
Date
|
|
Atlantas
|
January-April
2011
|
|
Aktoras
|
April-July
2011
|
|
Agisilaos
|
May-August
2011
|
|
Assos
|
February-May
2011
|
|
Arionas
|
August-November
2011
|
|
Axios
|
December
2011-March 2012
|
|
Aiolos
|
November
2011- February 2012
|
|
Avax
|
June
2010
|
|
Atrotos
|
February-May
2012
|
|
Akeraios
|
May-August
2012
|
|
Anemos
I
|
July-October
2012
|
|
Apostolos
|
July-October
2012
|
|
Alexandros
II
|
December
2012-March 2013
|
|
Aristotelis
II
|
March-June
2013
|
|
Aris
II
|
May-August
2013
|
|
Attikos
|
September-November
2012
|
|
Amore
Mio II
|
March
- April 2013
|
Section 3. Effectiveness of
Amendment. This Amendment shall become effective as of the
date hereof (the “Amendment Effective
Date”).
Section 4. Effect of
Amendment. Except as expressly set forth herein, this
Amendment shall not by implication or otherwise limit, impair, constitute a
waiver of, amend, or otherwise affect the rights and remedies of CLP or CSM
under the Management Agreement, and shall not alter, modify, amend or in any way
affect any of the terms, conditions, obligations, covenants or agreements
contained in the Management Agreement, all of which are ratified and affirmed in
all respects and shall continue in full force and effect. Nothing
herein shall be deemed to entitle CLP or CSM to a consent to, or a waiver,
amendment, modification or other change of, any of the terms, conditions,
obligations, covenants or agreements contained in the Management Agreement in
similar or different circumstances. This Amendment shall apply and be
effective with respect to the matters expressly referred to
herein. After the Amendment Effective Date, any reference to the
Management Agreement shall mean the Management Agreement with such amendments
effected hereby.
Section 5. Counterparts. This
Amendment may be executed in one or more signed counterparts, facsimile or
otherwise, which shall together form one instrument.
IN WITNESS WHEREOF the Parties have
executed this Amendment by their duly authorized signatories with effect on the
date first above written.
|
CAPITAL
PRODUCT PARTNERS L.P. BY ITS
GENERAL
PARTNER, CAPITAL GP L.L.C.,
|
||||
|
|
By:
|
|||
|
Name: Ioannis E. Lazaridis
|
||||
|
Title: Chief Executive Officer and
Chief
Financial Officer of Capital GP L.L.C.
|
||||
|
CAPITAL
SHIP MANAGEMENT CORP.,
|
||||
|
|
By:
|
|||
|
Name: Nikolaos Syntichakis
|
||||
|
Title : Attorney-in-Fact
|
||||
Exhibit
4.10
Date 19
March 2008
CAPITAL
PRODUCT PARTNERS L.P.
as
Borrower
- and
- -
THE
BANKS AND FINANCIAL INSTITUTIONS
listed
in Schedule 1
as
Lenders
- and
- -
HSH
NORDBANK AG
as Swap
Bank
- and
- -
HSH
NORDBANK AG
as
Bookrunner
- and
- -
HSH
NORDBANK AG
as
Mandated Lead Arranger,
Facility
Agent and Security Trustee
- and
- -
DnB
NOR BANK ASA
as
Co-Arranger
__________________________________
LOAN
AGREEMENT
__________________________________
relating
to revolving credit and term loan facilities not
exceeding
US$350,000,000 in aggregate to initially
part-finance
the acquisition cost of four tanker vessels and
further
part-finance the acquisition cost of certain additional vessels
WATSON,
FARLEY & WILLIAMS
Piraeus
| Clause | Page | |
THIS LOAN AGREEMENT is made on
19 March 2008
BETWEEN:
|
(1)
|
CAPITAL PRODUCT PARTNERS
L.P. being a limited partnership formed in the Republic of the
Marshall Islands whose registered office is at Trust Company House, Trust
Company Complex, Ajeltake Road, Ajeltake Island, Majuro, the Marshall
Islands as Borrower.
|
|
(2)
|
THE BANKS AND FINANCIAL
INSTITUTIONS listed in Schedule 1, as Lenders.
|
|
(3)
|
HSH NORDBANK AG as Swap
Bank.
|
|
(4)
|
HSH NORDBANK AG as
Bookrunner.
|
|
(5)
|
HSH NORDBANK AG as Mandated Lead Arranger,
Facility Agent and Security
Trustee.
|
|
(6)
|
DnB NOR BANK ASA, London
as
Co-Arranger.
|
WHEREAS
|
(A)
|
The
Lenders have agreed to make available to the Borrower a revolving credit
facility (initially divided into 3 tranches) of up to US$350,000,000 for
the purpose of:
|
|
|
(i)
|
in
the case of Tranche A (being in an amount of up to US$57,500,000), to
refinance part of the cost of acquiring the issued share capital of the
Existing Owners of the 2001-built Suezmax tanker “AMORE MIO II” and the
2005-built chemical tanker
“ARISTOFANIS”;
|
|
|
(ii)
|
in
the case of Tranche B (being in an amount of up to US$52,500,000), to
refinance part of the cost of acquiring the issued share capital of the
Existing Owners of the 2006-built medium range product tankers “ARISTIDIS”
and “ALKIVIADIS”; and
|
|
|
(iii)
|
in
the case of Tranche C (being in an amount of up to US$240,000,000), to
part-finance or refinance the acquisition cost of certain Additional Ships
or to part-finance or refinance the cost of acquiring the issued share
capital of an Additional Ship
Owner.
|
Subject
to the terms and conditions of this Agreement all amounts outstanding under the
revolving credit facility on the Termination Date shall on that date be
converted into a term loan facility which shall be repaid over a period of 5
years (or, through the operation of Clause 4.9, 2 years) in accordance with the
terms of this Agreement.
|
(B)
|
To
the extent initially borrowed for the purposes referred to in Recital (A)
and prepaid, the Borrower shall be entitled to reborrow the prepaid
amounts for the purpose referred to in paragraph (iii) of Recital (A) or
in order to provide the Borrower with additional liquidity for its general
working capital and corporate
purposes
|
|
(C)
|
The
Swap Bank has agreed to enter into interest rate swap transactions with
the Borrower from time to time to hedge the Borrower’s exposure under this
Agreement to interest rate
fluctuations.
|
|
(D)
|
The
Lenders and the Swap Bank have agreed to share in the security to be
granted to the Security Trustee pursuant to this Agreement with the
obligations of the Borrower to the Swap Bank being subordinated to those
of the Borrower to the Lenders.
|
IT IS AGREED as
follows:
|
1.1
|
Definitions. Subject
to Clause 1.5, in this Agreement:
|
“Accounting
Information” means the annual audited consolidated accounts to
be provided by the Borrower to the Facility Agent in accordance with Clause
11.6(a)(i) of this Agreement or the quarterly unaudited management accounts of
the Borrower to be provided by the Borrower to the Facility Agent in accordance
with Clause 11.6(b)(i) of this Agreement (as the context may
require);
“Additional
Advance” means each Advance which is to be used in refinancing
or financing on delivery part of the purchase price of an Additional Ship or in
financing or refinancing part of the cost of acquiring the issued share capital
of an Additional Ship Owner and which is to be made available in accordance with
and pursuant to Clauses 2.1 and 4.2(c);
“Additional
Ship” means any ship which is, or is to be, purchased by an
Additional Ship Owner, each of which (unless all of the Lenders acting in their
absolute discretion agree otherwise) must satisfy all the Additional Ship
Requirements;
“Additional Ship
MOA” means, in relation to an Additional Ship, a memorandum of
agreement or a shipbuilding contract to be made between the Additional Ship
Seller of that Additional Ship and the Additional Ship Owner which is the buyer
thereof on terms and conditions acceptable to the Lenders and, in the plural,
mean all of them;
“Additional Ship
Owner” means a company which is or will be a direct or
indirect wholly-owned subsidiary of the Borrower incorporated in a jurisdiction
acceptable to the Lenders (in their absolute discretion) which shall be the
owner of an Additional Ship and, in the plural, means all of them;
“Additional Ship
Requirements” means, in relation to any Ship which is, or is
to be, purchased by an Additional Ship Owner, a ship which satisfies the
following requirements:
|
|
(a)
|
it
is a tanker built in or after 2002;
|
|
|
(b)
|
it
maintains the highest class with an Approved Classification Society free
of any overdue recommendations and
conditions;
|
|
|
(c)
|
it
is to be registered on an Approved
Flag;
|
“Additional Ship
Seller” means, in relation to an Additional Ship, the seller
of such Additional Ship and, in the plural, means all of them;
“Adrian” means
Adrian Shipholding Inc., a corporation incorporated and existing under the laws
of the Republic of Marshall Islands and having its registered office at Trust
Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall
Islands;
“Advance” means the
principal amount of each borrowing by the Borrower under this
Agreement;
“Affected
Lender” has the meaning given in Clause 5.5;
“Agency and Trust
Agreement” means the agency and trust agreement executed or to
be executed between the Borrower, the Lenders, the Swap Bank and the Security
Trustee in such form as the Lenders may approve or require;
“ALKIVIADIS” means
the 2006-built medium range product tanker of approximately 37,000 deadweight
tons registered in the ownership of Adrian under the Marshall Islands flag with
the name “ALKIVIADIS”;
“AMORE MIO II” means
the 2001-built Suezmax tanker of approximately 160,000 deadweight tons
registered in the ownership of Baymont under the Liberian flag with the name
“AMORE MIO II”;
“Approved
Broker” means each of H. Clarksons & Company Limited, RS
Platou, Galbraith’s Limited, E.A. Gibson Shipbrokers and Barry Rogliano Salles
and in the plural means all of them;
“Approved Classification
Society” means any of the following:
|
|
(a)
|
American
Bureau of Shipping;
|
|
|
(b)
|
Bureau
Veritas;
|
|
|
(c)
|
Det
Norske Veritas;
|
|
|
(d)
|
Germanischer
Lloyd;
|
|
|
(e)
|
Korean
Register of Shipping;
|
|
|
(f)
|
Lloyd’s
Register of Shipping;
|
|
|
(g)
|
Nippon
Kaiji Kyokai;
|
|
|
(h)
|
Registro
Italiano Navale; and
|
in the
case of “ARISTOFANIS” only, China Classification Society;
“Approved
Flag” means the Liberian or Marshall Islands or Bahamas or
Greek or Malta flag or such flag as the Facility Agent may, with the
authorisation of all the Lenders, approve as the flag on which a Ship shall be
registered, such approval not to be unreasonably withheld;
“Approved Flag
State” means any country in which the Facility Agent may with
the authorisation of all the Lenders, approve that a Ship be registered, such
approval not to be unreasonably withheld;
“Approved
Manager” means, in relation to a Ship, Capital Ship Management
Corp., a company incorporated in Panama having its registered office at Hong
Kong Bank Building, 6th floor,
Samuel Lewis Avenue, Panama, Republic of Panama, or any other company which the
Lenders may approve (such approval not to be unreasonably withheld) from time to
time as the commercial, technical and/or operational manager of that
Ship;
“Approved Manager’s
Undertaking” means, in relation to each Ship, a letter of
undertaking executed or to be executed by the Approved Manager in favour of the
Security Trustee in the terms required by the Security Trustee agreeing certain
matters in relation to the Approved Manager serving as the manager of the Ship
and subordinating the rights of the Approved Manager against such Ship and the
Owner thereof to the rights of the Creditor Parties under the Finance Documents,
in such form as the Security Trustee, with the authorisation of the Majority
Lenders, may reasonably approve or require and in the plural means all of
them;
“ARISTIDIS” means
the 2006-built medium range product tanker of approximately 37,000 deadweight
tons registered in the ownership of Atlantas under the Marshall Islands flag
with the name “ARISTIDIS”;
“ARISTOFANIS” means
the 2005-built chemical tanker of approximately 12,000 deadweight tons
registered in the ownership of Forbes under the Liberian flag with the name
“ARISTOFANIS”;
“Atlantas” means
Atlantas Shipping Company, a corporation incorporated and
existing under the law of the Republic of the Marshall Islands and
having its registered office at Trust Company Complex, Ajeltake Road, Ajeltake
Island, Majuro, Marshall Islands;
“Availability
Period” means the period commencing on the date of this
Agreement and ending on:
|
|
(a)
|
30
March 2013 (as such date may be extended in accordance with Clause 4.9),
or such later date as the Facility Agent may, with the authorisation of
all the Lenders, agree with the Borrower;
or
|
|
|
(b)
|
if
earlier, the date on which the Total Commitments are cancelled or
terminated;
|
“Balloon
Instalment” has the meaning given to that term in Clause
8.2(b);
“Bareboat Charter Security
Agreement” means, in relation to any Ship which is subject to
a bareboat charter (other than any bareboat charter to which BP is a party)
(which charter may be entered into by the relevant Owner in accordance with
Clause 14.17), an agreement or agreements whereby the Security Trustee receives
an assignment of the rights of the relevant Owner under the bareboat charter and
certain undertakings from that Owner and the relevant charterer and, if so
agreed by the Security Trustee (acting with the authorisation of the Lenders),
agrees to give certain undertakings to that charterer, in each case, in such
form as the Majority Lenders may reasonably approve or require and, in the
plural, means all of them;
“Baymont” means Baymont
Enterprises Incorporated, a corporation incorporated and exising under the laws
of the Liberia and having its registered office at 80 Broad Street, Monrovia,
Liberia
“Borrower” means
Capital Product Partners L.P., a limited partnership formed under the laws of
the Republic of the Marshall Islands and having its registered office at Trust
Company House, Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro,
the Marshall Islands;
“BP” means BP
Shipping Limited, a company incorporated in England whose registered office is
at Chartsey Road, Sunbury Upon Thames, Middlesex TW16 7BP, United
Kingdom;
“Business Day” means
a day on which banks are open in London, Hamburg, Athens and Piraeus and in
respect of a day on which a payment is required to be made under a Finance
Document, also in New York City;
“Charterparty” means
any bareboat charterparty or any time charterparty in respect of a Ship of a
duration (or capable of being or exceeding a duration) of 11 months or more,
made on terms and with a charterer acceptable in all respects to the Lenders,
such acceptance not to be unreasonably withheld;
“Charterparty
Assignment” means, in relation to:
|
|
(a)
|
a
Ship (at all times during the term of the Existing Charter relative
thereto), an assignment of the rights of the Owner of that Ship under the
Existing Charter relative to that Ship executed or to be executed by the
relevant Owner in favour of the Security Trustee;
and
|
|
|
(b)
|
each
Ship (in the case of AMORE MIO II and ARISTOFANIS, after the expiry of the
Existing Charter relative thereto), an assignment of the rights of the
relevant Owner under any Charterparty in respect of such Ship with a
duration of at least 11 consecutive months executed or to be executed by
the relevant Owner in favour of the Security
Trustee,
|
in each
case, in such form as the Lenders may approve or require and, in the plural,
means all of them;
“Closing Date” means
a Business Day falling no later than 30 March 2008;
“Co-Arranger” means
DnB NOR Bank ASA, London, acting through its office at 20 St Dunstan’s Hill,
London EC3R 8HY, England;
“Commitment” means,
in relation to a Lender, the amount set opposite its name in Schedule 1, or, as
the case may require, the amount specified in the relevant Transfer Certificate,
as that amount may be reduced, cancelled or terminated in accordance with this
Agreement (and “Total
Commitments” means the aggregate of the Commitments of all the
Lenders);
“Compliance
Certificate” means a certificate in the form set out in
Schedule 6 (or in any other form which the Facility Agent, acting with the
authorisation of all the Lenders, approves or requires);
“Confirmation” and
“Early Termination
Date”, in relation to any continuing Designated Transaction, have the
meanings given in the Master Agreement;
“Contractual
Currency” has the meaning given in Clause 21.5;
“Contribution” means,
in relation to a Lender, the part of the Loan which is owing to that
Lender;
“Creditor
Party” means the Facility Agent, the Security Trustee, the
Mandated Lead Arranger, the Swap Bank or any Lender, whether as at the date of
this Agreement or at any later time;
“Deed of Covenant” means, in
relation to a Ship registered or to be registered under Bahamas or Malta flag, a
deed of covenant collateral to the Mortgage of that Ship creating charges over
the Ship, executed or to be executed by the Owner of that Ship in favour of the
Security Trustee, in such form as the Lenders may approve or require, and in the
plural means all of them;
“Designated Transaction” means
a Transaction which fulfils the following requirements:
|
|
(a)
|
it
is entered into by the Borrower pursuant to the Master Agreement with the
Swap Bank which, at the time the Transaction is entered into, is also a
Lender;
|
|
|
(b)
|
its
purpose is the hedging of the Borrower’s exposure under this Agreement to
fluctuations in LIBOR arising from the funding of the Loan (or any part
thereof) for a period expiring no later than the final Repayment Date;
and
|
|
|
(c)
|
it
is designated by the Borrower, by delivery by the Borrower to the Facility
Agent of a notice of designation in the form set out in Schedule 5, as a
Designated Transaction for the purposes of the Finance
Documents;
|
“Distribution Declaration Date”
means, in respect of each quarterly period during each Financial Year, a date
(being a Business Day) falling no later than 60 days after the end of the
relevant preceding financial quarter;
“Dollars” and “$” means the lawful
currency for the time being of the United States of America;
“Drawdown
Date” means, in relation to an Advance, the date requested by
the Borrower for the Advance to be made, or (as the context requires) the date
on which the Advance is actually made;
“Drawdown
Notice” means a notice in the form set out in Schedule 2 (or
in any other form which the Facility Agent, acting with the authorisation of all
the Lenders, approves or reasonably requires);
“Earnings” means, in
relation to a Ship, all moneys whatsoever which are now, or later become,
payable (actually or contingently) to the Owner owning the Ship or the Security
Trustee and which arise out of the use or operation of the Ship, including (but
not limited to):
|
|
(a)
|
all
freight, hire and passage moneys, compensation payable to the Owner owning
the Ship or the Security Trustee in the event of requisition of the Ship
for hire, remuneration for salvage and towage services, demurrage and
detention moneys and damages for breach (or payments for variation or
termination) of any charterparty or other contract for the employment of
the Ship;
|
|
|
(b)
|
all
moneys which are at any time payable under Insurances in respect of loss
of earnings; and
|
|
|
(c)
|
if
and whenever the Ship is employed on terms whereby any moneys falling
within paragraphs (a) or (b) above are pooled or shared with any other
person, that proportion of the net receipts of the relevant pooling or
sharing arrangement which is attributable to the
Ship;
|
“Earnings
Account” means, with respect to an Owner, an account in the
name of that Owner with the Facility Agent in Hamburg which is designated by the
Facility Agent in writing as the Earnings Account with respect to that Owner for
the purposes of this Agreement and in the plural means all of them;
“Earnings Account
Pledge” means, in relation to an Earnings Account, a deed of
pledge of that Earnings Account, in such form as the Lender may approve or
require, and in the plural means all of them;
“EBITDA” means, in
respect of the relevant period, the aggregate amount of consolidated or combined
pre-tax profits of the Group before extraordinary or exceptional items,
depreciation, interest, repayment of principal in respect of any loan, rentals
under finance leases and similar charges payable;
“Environmental
Claim” means:
|
|
(a)
|
any
claim by any governmental, judicial or regulatory authority which arises
out of an Environmental Incident or an alleged Environmental Incident or
which relates to any Environmental Law;
or
|
|
|
(b)
|
any
claim by any other person which relates to an Environmental Incident or to
an alleged Environmental Incident,
|
and
“claim” means a claim
for damages, compensation, fines, penalties or any other payment of any kind
whether or not similar to the foregoing; an order or direction to take, or not
to take, certain action or to desist from or suspend certain action; and any
form of enforcement or regulatory action, including the arrest or attachment of
any asset;
“Environmental
Incident” means:
|
|
(a)
|
any
release of Environmentally Sensitive Material from a Ship;
or
|
|
|
(b)
|
any
incident in which Environmentally Sensitive Material is released from a
vessel other than a Ship and which involves a collision between a Ship and
such other vessel or some other incident of navigation or operation, in
either case, in connection with which a Ship is actually or potentially
liable to be arrested, attached, detained or injuncted and/or a Ship or an
Owner and/or any operator or manager is at fault or allegedly at fault or
otherwise liable to any legal or administrative action;
or
|
|
|
(c)
|
any
other incident in which Environmentally Sensitive Material is released
otherwise than from a Ship and in connection with which a Ship is actually
or potentially liable to be arrested and/or where an Owner and/or any
operator or manager of a Ship is at fault or allegedly at fault or
otherwise liable to any legal or administrative
action;
|
“Environmental
Law” means any law relating to pollution or protection of the
environment, to the carriage of Environmentally Sensitive Material or to actual
or threatened releases of Environmentally Sensitive Material;
“Environmentally Sensitive
Material” means oil, oil products and any other substance
(including any chemical, gas or other hazardous or noxious substance) which is
(or is capable of being or becoming) polluting, toxic or hazardous;
“Event of
Default” means any of the events or circumstances described in
Clause 19.1;
“Existing
Charter” means, in relation to:
|
|
(a)
|
“AMORE
MIO II”, a time charter in respect of that Ship dated 12 September 2007
and made between Baymont and BP;
and
|
|
|
(b)
|
“ARISTOFANIS”,
a time charter in respect of that Ship dated 23 June 2005 and made between
Forbes and Shell;
|
“Existing
Owners” means each of:
(a) Adrian
Shipholding Inc. (“Adrian”);
(b) Atlantas
Shipping Company (“Atlantas”);
(c) Baymont
Enterprises Incorporated (“Baymont”); and
(d) Forbes
Maritime Co. (“Forbes”),
each a
corporation incorporated under the laws of the Republic of the Marshall Islands
whose registered office is at Trust Company House, Trust Company Complex,
Ajeltake Road, Ajeltake Island, Majuro, the Marshall Islands or, in the case of
Baymont, under the laws of
Liberia, whose registered office is at 80 Broad Street, Monrovia, and, in the
singular, means one of them;
“Existing
Ships” means, together, “AMORE MIO II”, “ARISTOFANIS”,
“ARISTIDIS” and “ALKIVIADIS” and in the singular means any of them;
“Fee Letter” means a letter
issued or to be issued by the Borrower to the Facility Agent in which the
Borrower agrees to pay certain fees to the Facility Agent in connection with
this Agreement;
“Finance
Documents” means:
|
|
(a)
|
this
Agreement;
|
|
|
(b)
|
the
Master Agreement;
|
|
|
(c)
|
the
Agency and Trust Agreement;
|
|
|
(d)
|
the
Guarantees;
|
|
|
(e)
|
the
Master Agreement Assignment;
|
|
|
(f)
|
the
General Assignments;
|
|
|
(g)
|
the
Mortgages;
|
|
|
(h)
|
the
Deeds of Covenant;
|
|
|
(i)
|
the
Earnings Account Pledges;
|
|
|
(j)
|
the
Retention Account Pledge;
|
|
|
(k)
|
the
Swap Account Pledge;
|
|
|
(l)
|
the
Management Agreement Assignments;
|
|
|
(m)
|
any
Charterparty Assignments;
|
|
|
(n)
|
any
Bareboat Charter Security
Agreements;
|
|
|
(o)
|
the
Approved Manager’s Undertakings;
and
|
|
|
(p)
|
any
other document (whether creating a Security Interest or not) which is
executed at any time by the Borrower, an Owner or any other person as
security for, or to establish any form of subordination or priorities
arrangement in relation to, any amount payable to the Lenders under this
Agreement or any of the documents referred to in this
definition;
|
“Final Maturity
Date” means 30 March 2018;
“Financial
Indebtedness” means, in relation to a person (the “debtor”), a
liability of the debtor:
|
|
(a)
|
for
principal, interest or any other sum payable in respect of any moneys
borrowed or raised by the debtor;
|
|
|
(b)
|
under
any loan stock, bond, note or other security issued by the
debtor;
|
|
|
(c)
|
under
any acceptance credit, guarantee or letter of credit facility made
available to the debtor;
|
|
|
(d)
|
under
a financial lease, a deferred purchase consideration arrangement or any
other agreement having the commercial effect of a borrowing or raising of
money by the debtor;
|
|
|
(e)
|
under
any interest or currency swap or any other kind of derivative transaction
entered into by the debtor or, if the agreement under which any such
transaction is entered into requires netting of mutual liabilities, the
liability of the debtor for the net amount;
or
|
|
|
(f)
|
under
a guarantee, indemnity or similar obligation entered into by the debtor in
respect of a liability of another person which would fall within (a) to
(e) if the references to the debtor referred to the other
person;
|
“Fleet
Vessels” means all of the vessels (including, but not limited
to, the Ships) from time to time wholly owned by members of the Group (each a
“Fleet
Vessel”);
“Forbes” means Forbes Maritime
Co., a corporation incorporated and existing under the laws of the Republic of
the Marshaall Islands and having its registered office at Trust Company Complex,
Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands.
“General
Assignment” means, in relation to a Ship, a general assignment
of the Earnings, the Insurances and any Requisition Compensation, in such form
as the Lenders may approve or require and in the plural means all of
them;
“Group” means the
Borrower and its subsidiaries (whether direct or indirect and including, but not
limited to, each Owner) from time to time during the Security
Period and “member
of the Group” shall be construed accordingly;
“Guarantee” means,
in relation to an Owner, the guarantee to be given by that Owner in favour of
the Security Trustee, guaranteeing the obligations of the Borrower under this
Agreement and the other Finance Documents, in such form as the Lenders may
approve or require and in the plural means all of them;
“Initial Borrowing
Date” means the first Drawdown Date under this
Agreement;
“Insurances” means,
in relation to a Ship:
|
|
(a)
|
all
policies and contracts of insurance, including entries of such Ship in any
protection and indemnity or war risks association, which are effected in
respect of such Ship, her Earnings or otherwise in relation to her;
and
|
|
|
(b)
|
all
rights and other assets relating to, or derived from, any of the
foregoing, including any rights to a return of a
premium;
|
“Interest
Period” means a period determined in accordance with Clause
6;
“ISM Code” means, in
relation to its application to each Owner, its Ship and its
operation:
|
|
(a)
|
‘The
International Management Code for the Safe Operation of Ships and for
Pollution Prevention’, currently known or referred to as the ‘ISM Code’,
adopted by the Assembly of the International Maritime Organisation by
Resolution A.741(18) on 4 November 1993 and incorporated on 19 May 1994
into chapter IX of the International Convention for the Safety of Life at
Sea 1974 (SOLAS 1974); and
|
|
|
(b)
|
all
further resolutions, circulars, codes, guidelines, regulations and
recommendations which are now or in the future issued by or on behalf of
the International Maritime Organisation or any other entity with
responsibility for implementing the ISM Code, including without
limitation, the ‘Guidelines on implementation or administering of the
International Safety Management (ISM) Code by Administrations’ produced by
the International Maritime Organisations pursuant to Resolution A.788(19)
adopted on 25 November 1995,
|
as the
same may be amended, supplemented or replaced from time to time;
“ISM Code
Documentation” includes:
|
|
(a)
|
the
document of compliance (DOC) and safety management certificate (SMC)
issued pursuant to the ISM Code in relation to the Ships or either or them
within the periods specified by the ISM Code;
and
|
|
|
(b)
|
all
other documents and data which are relevant to the ISM SMS and its
implementation and verification which the Facility Agent may require;
and
|
|
|
(c)
|
any
other documents which are prepared or which are otherwise relevant to
establish and maintain the Ships’ or the Owners’ compliance with the ISM
Code which the Facility Agent may
require;
|
“ISM SMS” means the
safety management system for each Ship which is required to be developed,
implemented and maintained under the ISM Code;
“ISPS Code” means
the International Ship and Port Facility Security Code constituted pursuant to
resolution A.924 (22) of the International Maritime Organisation (“IMO”) adopted by a Diplomatic
conference of the IMO on Maritime Security on 13 December 2002 and now set out
in Chapter XI-2 of the Safety of Life at Sea Convention (SOLAS) 1974 (as
amended) to take effect on 1 July 2004;
“ISSC” means a valid
and current International Ship Security Certificate issued under the ISPS
Code;
“Lender” means,
subject to Clause 26.6:
|
|
(a)
|
a
bank or financial institution listed in Schedule 1 and acting through its
branch indicated in Schedule 1 (or through another branch notified to the
Borrower under Clause 26.14) unless it has delivered a Transfer
Certificate or Certificates covering the entire amounts of its Commitment
and its Contribution; and
|
|
|
(b)
|
the
holder for the time being of a Transfer
Certificate;
|
“LIBOR” means, for
an Interest Period:
|
|
(a)
|
the
rate per annum equal to the offered quotation for deposits in Dollars for
a period equal to, or as near as possible equal to, the relevant Interest
Period which appears on the appropriate page of the Reuters Monitor Money
Rates Service at or about 11.00 a.m. (London time) on the Quotation Date
for that Interest Period or on such other service as may be nominated by
the British Bankers’ Association as the information vendor for the purpose
of displaying British Bankers’ Association Interest Settlement Rates for
Dollars; or
|
|
|
(b)
|
if
no rate is quoted on the appropriate page of the Reuters Monitor Money
Rates Service, the rate per annum determined by the Facility Agent to be
the arithmetic mean (rounded upwards, if necessary, to the nearest
one-sixteenth of one per cent.)
of the rates per annum notified to the Facility Agent by each Lender as
the rate at which deposits in Dollars are offered to
that Lender by leading banks in the London Interbank Market at that
Lender’s request at or about 11.00 a.m. (London time) on the Quotation
Date for that Interest Period for a period equal to that Interest Period
and for delivery on the first Business Day of
it;
|
“Liquid
Assets” means, at any relevant time hereunder, the aggregate
of:
|
|
(a)
|
cash
in hand or held with banks or other financial institutions of the Borrower
and/or any other member of the Group in Dollars or another currency freely
convertible into Dollars,;
|
|
|
(b)
|
the
market value of transferable certificates of deposit in a freely
convertible currency acceptable to the Lenders (being for the purposes of
this Agreement, Dollars, Japanese Yen, Swiss Francs, Euros or Sterling)
issued by a prime international bank;
and
|
|
|
(c)
|
the
market value of equity securities (if and to the extent that the Facility
Agent is satisfied that such equity securities are readily saleable for
cash and that there is a ready market therefor) and investment grade debt
securities which are publicly traded on a major stock exchange or
investment market (valued at market value as at any applicable date of
determination);
|
in each
case owned by the Borrower or any other member of the Group where:
|
|
(i)
|
the
market value of any asset specified in paragraph (b) and (c) shall be the
bid price quoted for it on the relevant calculation date by the Facility
Agent: and
|
|
|
(ii)
|
the
amount or value of any asset denominated in a currency other than Dollars
shall be converted into Dollars using the Facility Agent’s spot rate for
the purchase of Dollars with that currency on the relevant calculation
date.
|
“Loan” means the
principal amount of the Advances for the time being outstanding under this
Agreement;
“Major
Casualty” means, in relation to a Ship, any casualty to the
Ship in respect of which the claim or the aggregate of the claims against all
insurers, before adjustment for any relevant franchise or deductible, exceeds
$750,000 or the equivalent in any other currency;
“Majority
Lenders” means:
|
|
(a)
|
at
any time when no Advances are outstanding, Lenders whose Commitments total
66 2/3 per cent. of the Total Commitments;
and
|
|
|
(b)
|
at
any other time, Lenders whose Contributions total 66 2/3 per cent. of the
Loan;
|
“Management
Agreement” means, in relation to each Ship, an agreement made
or to be made between (i) the Owner of that Ship and (ii) the Approved Manager
in respect of the commercial and technical management of the Ship to be in form
and substance in all respects reasonably acceptable to the Lenders and, in the
plural, means both of them;
“Management Agreement
Assignment” means, in relation to each Management Agreement,
the first priority assignment of the rights and interests of the relevant Owner
under
that Management Agreement in such form as the Lenders may approve or require
and, in the plural, means all of them;
“Mandated Lead
Arranger” means HSH Nordbank AG, acting through its office at
Gerhart-Hauptmann-Platz 50, 20095 Hamburg, Germany;
“Mandatory Cost
Rate” means, in relation to the Loan, the cost calculated as a
percentage rate per annum incurred by a Lender as a result of compliance with
any applicable regulatory or central bank requirements, including any reserve
costs imposed by the European Central Bank or the European System of Central
Banks;
“Margin” means,
subject to Clause 5.14, 1.10 per cent. per annum;
“Market
Value” means, in respect of each Ship and each Fleet Vessel,
the market value thereof determined from time to time in accordance with Clause
15.4;
“Master Agreement” means a
master agreement (on the 1992 or, as the case may be, 2002 ISDA (Multicurrency -
Crossborder) form) made between the Borrower and the Swap Bank and includes all
Designated Transactions from time to time entered into and Confirmations from
time to time exchanged under the master agreement;
“Master Agreement Assignment”
means the assignment of the Master Agreement in such form as the Lenders may
approve or require;
“Mortgage” means, in
relation to a Ship, the first preferred or, as the case may be, priority ship
mortgage on the Ship under the relevant Approved Flag executed by the Owner of
that Ship in favour of the Security Trustee, in such form as the Lenders may
approve or require;
“Negotiation
Period” has the meaning given in Clause 5.8;
“Net Interest
Expenses” means, in respect of the relevant
period:
|
|
(a)
|
the
aggregate of all interest payable by any member of the Group on any
Financial Indebtedness (excluding any amounts owing by one member of the
Group to another member of the Group) and any net amounts payable under
interest rate hedge agreements,
less
|
|
|
(b)
|
the
aggregate of all interest received by any member of the Group arising from
any Liquid Assets and any net amounts received by any member of the Group
under interest rate hedge
agreements;
|
“Notifying
Lender” has the meaning given in Clause 23.1 or Clause 24.1 as
the context requires;
“Owner” means:
|
|
(a)
|
in
relation to each Existing Ship, the Existing Owner thereof;
and
|
|
|
(b)
|
in
relation to each Additional Ship, the Additional Ship Owner
thereof;
|
“Partnership
Agreement” means the first amended and restated agreement of
limited partnership in respect of the Borrower made between Capital GP L.L.C., a
Marshall Islands limited liability company, as general partner, and Capital
Maritime and Trading Corp., a Marshall Islands corporation, as organisational
limited partner;
“Payment
Currency” has the meaning given in Clause 21.5;
“Permitted Security
Interests” means:
|
|
(a)
|
Security
Interests created by the Finance
Documents;
|
|
|
(b)
|
liens
for unpaid crew’s wages in accordance with usual maritime
practice;
|
|
|
(c)
|
liens
for salvage;
|
|
|
(d)
|
liens
arising by operation of law for not more than 2 months’ prepaid hire under
any charter in relation to a Ship not prohibited by this
Agreement;
|
|
|
(e)
|
liens
for master’s disbursements incurred in the ordinary course of trading and
any other lien arising by operation of law or otherwise in the ordinary
course of the operation, repair or maintenance of a Ship, provided such
liens do not secure amounts more than 45 days overdue (unless the overdue
amount is being contested by the relevant Owner in good faith by
appropriate steps) and subject, in the case of liens for repair or
maintenance, to Clause 14.13(e);
|
|
|
(f)
|
any
Security Interest created in favour of a plaintiff or defendant in any
action of the court or tribunal before whom such action is brought as
security for costs and expenses where the Borrower is prosecuting or
defending such action in good faith by appropriate steps;
and
|
|
|
(g)
|
Security
Interests arising by operation of law in respect of taxes which are not
overdue for payment other than taxes being contested in good faith by
appropriate steps and in respect of which appropriate reserves have been
made;
|
“Pertinent Jurisdiction”, in
relation to a company, means:
|
|
(a)
|
England
and Wales;
|
|
|
(b)
|
the
country under the laws of which the company is incorporated or
formed;
|
|
|
(c)
|
a
country in which the company’s central management and control is or has
recently been exercised;
|
|
|
(d)
|
a
country in which the overall net income of the company is subject to
corporation tax, income tax or any similar
tax;
|
|
|
(e)
|
a
country in which assets of the company (other than securities issued by,
or loans to, related companies) having a substantial value are situated,
in which the company maintains a permanent place of business, or in which
a Security Interest created by the company must or should be registered in
order to ensure its validity or priority;
and
|
|
|
(f)
|
a
country the courts of which have jurisdiction to make a winding up,
administration or similar order in relation to the company or which would
have such jurisdiction if their assistance were requested by the courts of
a country referred to in paragraphs (b) or (c)
above;
|
“Potential Event of
Default” means an event or circumstance which, with the giving
of any notice, the lapse of time, a determination of the Majority Lenders and/or
the satisfaction of any other condition, would constitute an Event of
Default;
“Quotation Date” means, in
relation to any Interest Period (or any other period for which an interest rate
is to be determined under any provision of a Finance Document), the day on which
quotations would ordinarily be given by leading banks in the London Interbank
Market
for deposits in the currency in relation to which such rate is to be determined
for delivery on the first day of that Interest Period or other
period;
“Relevant Distribution Declaration
Date” has the meaning given in Clause 8.2(a);
“Relevant
Person” has the meaning given in Clause 19.9;
“Repayment
Date” means a date on which a repayment is required to be made
under Clause 8;
“Repayment
Instalment” has the meaning given to that item in Clause
8.2(b);
“Requisition
Compensation” includes all compensation or other moneys
payable by reason of any act or event such as is referred to in paragraph (b) of
the definition of “Total Loss”;
“Retention Account” means an
account in the name of the Borrower with the Facility Agent in Hamburg
designated “Capital Product Partners L.P. - Retention Account” which is
designated by the Facility Agent in writing as the Retention Account for the
purposes of this Agreement and to which transfers are only to be made in the
circumstances referred to in Clause 8.2(a);
“Retention Account Pledge”
means a pledge agreement creating security in favour of the Security Trustee in
respect of the Retention Account in such form as the Lenders may approve or
require;
“Revolving
Facility” means the aggregate principal amount of up to
$350,000,000 which may be drawn by the Borrower in accordance with the terms and
conditions of this Agreement or, as the context may require, the aggregate
principal amount of the Advances outstanding under this Agreement at any time
prior to the conversion of the Revolving Facility into the Term Loan pursuant to
Clause 8.1;
“Secured
Liabilities” means all liabilities which the Borrower, the
Security Parties or any of them have, at the date of this Agreement or at any
later time or times, under or by virtue of the Finance Documents or any judgment
relating to the Finance Documents; and for this purpose, there shall be
disregarded any total or partial discharge of these liabilities, or variation of
their terms, which is effected by, or in connection with, any bankruptcy,
liquidation, arrangement or other procedure under the insolvency laws of any
country;
“Security Cover
Ratio” means the ratio which is determined at any time by
comparing the aggregate Market Value of the Ships subject to a Mortgage at the
relevant time against the Loan;
“Security
Interest” means:
|
|
(a)
|
a
mortgage, charge (whether fixed or floating) or pledge, any maritime or
other lien or any other security interest of any
kind;
|
|
|
(b)
|
the
rights of the plaintiff under an action in rem in which the
vessel concerned has been arrested or a writ has been issued or similar
step taken; and
|
|
|
(c)
|
any
arrangement entered into by a person (A) the effect of which is to place
another person (B) in a position which is similar, in economic terms, to
the position in which B would have been had he held a security interest
over an asset of A; but (c) does not apply to a right of set off or
combination of accounts conferred by the standard terms of business of a
bank or financial institution;
|
“Security
Party” means each of the Owners and any other person (except a
Creditor Party and any charterer of any Ship) who, as a surety or mortgagor, as
a party to any subordination or priorities arrangement, or in any similar
capacity, executes a document falling within the final paragraph of the
definition of “Finance Documents”;
“Security
Period” means the period commencing on the date of this
Agreement and ending on the date on which the Facility Agent notifies the
Borrower, the Security Parties and the Lenders that:
|
|
(a)
|
all
amounts which have become due for payment by the Borrower or any Security
Party under the Finance Documents have been
paid;
|
|
|
(b)
|
no
amount is owing or has accrued (without yet having become due for payment)
under any Finance Document;
|
|
|
(c)
|
neither
the Borrower nor any Security Party has any future or contingent liability
under Clause 20, 21 or 22 below or any other provision of this Agreement
or another Finance Document; and
|
|
|
(d)
|
the
Facility Agent, the Security Trustee and the Majority Lenders do not
consider that there is a significant risk that any payment or transaction
under a Finance Document would be set aside, or would have to be reversed
or adjusted, in any present or possible future bankruptcy of the Borrower
or a Security Party or in any present or possible future proceeding
relating to a Finance Document or any asset covered (or previously
covered) by a Security Interest created by a Finance
Document;
|
“Security
Trustee” means HSH Nordbank AG or any successor of it
appointed under clause 5 of the Agency and Trust Agreement;
“Shell” means Shell
International Trading & Shipping Ltd., acting through its office in London
or any wholly owned subsidiary of Royal Dutch Shell plc.;
“Ships” means,
together, the Existing Ships and the Additional Ships, and in the singular means
any of them;
“Swap Account” means
an account in the name of the Borrower with the Facility Agent in Hamburg
designated “Capital Product Partners L.P. - Swap Account”, which is designated
by the Facility Agent as the Swap Account for the purposes of this
Agreement;
“Swap Account
Pledge” means a pledge agreement creating security in favour
of the Security Trustee in respect of the Swap Account in such form as the
Lenders may approve or require;
“Swap Bank” means
HSH Nordbank AG acting through its office at Martensdamm 6, D-24103 Kiel,
Germany;
“Swap Exposure” means, as at
any relevant date, the amount certified by the Swap Bank to the Facility Agent
to be the aggregate net amount in Dollars which would be payable by the Borrower
to the Swap Bank under (and calculated in accordance with) section 6(e)
(Payments on Early Termination) of the Master Agreement if an Early Termination
Date had occurred on the relevant date in relation to all continuing Designated
Transactions entered into between the Borrower and the Swap Bank;
“Term Loan” means,
on the Termination Date, the aggregate principal amount of all the Advances
(following the conversion of the Revolving Facility to the Term Loan pursuant
to Clause
8.1) and, at all times thereafter, the Loan for the time being outstanding under
this Agreement;
“Termination
Date” means 30 March 2013 (as such date may be extended
pursuant to Clause 4.9);
“Total Indebtedness” means
the aggregate Financial Indebtedness of the Group as stated in the most recent
Accounting Information;
“Total Loss” means,
in relation to a Ship:
|
|
(a)
|
actual,
constructive, compromised, agreed or arranged total loss of the
Ship;
|
|
|
(b)
|
any
expropriation, confiscation, requisition or acquisition of the Ship,
whether for full consideration, a consideration less than her proper
value, a nominal consideration or without any consideration, which is
effected by any government or official authority or by any person or
persons claiming to be or to represent a government or official authority,
excluding a requisition for hire for a fixed period not exceeding one year
without any right to an extension;
|
|
|
(c)
|
any
condemnation of the Ship by any tribunal or by any person or person
claiming to be a tribunal;
|
|
|
(d)
|
any
arrest, capture, seizure or detention of the Ship (including any hijacking
or theft) unless she is within 90 days redelivered to the full control of
the Owner owning the Ship;
|
“Total Loss
Date” means, in relation to a Ship:
|
|
(a)
|
in
the case of an actual loss of the Ship, the date on which it occurred or,
if that is unknown, the date when the Ship was last heard
of;
|
|
|
(b)
|
in
the case of a constructive, compromised, agreed or arranged total loss of
the Ship, the earliest of:
|
|
|
(i)
|
the
date on which a notice of abandonment is given to the insurers;
and
|
|
|
(ii)
|
the
date of any compromise, arrangement or agreement made by or on behalf of
the Owner owning the Ship, with the Ship’s insurers in which the insurers
agree to treat the Ship as a total loss;
and
|
|
|
(c)
|
in
the case of any other type of total loss, on the date (or the most likely
date) on which it appears to the Facility Agent that the event
constituting the total loss
occurred;
|
“Tranche A” means an
amount of up to $57,500,000 to be made available by the Lenders to the Borrower
in up to two Advances pursuant to the terms of this Agreement and which shall be
on-lent by the Borrower to the Owners of the Tranche A Ships to assist such
Owners in refinancing up to 50 per cent. of the aggregate Market Value of the
Tranche A Ships or, as the context may require, the aggregate principal amount
thereof outstanding at the relevant time under this Agreement;
“Tranche A
Ships” means, together, “AMORE MIO II” and “ARISTOFANIS” and
in the singular means either of them;
“Tranche B” means an
amount of up to $52,500,000 to be made available by the Lenders to the Borrower
in up to two Advances pursuant to the terms of this Agreement and which
shall be
on-lent by the Borrower to the Owners of the Tranche B Ships to assist such
Owners in refinancing up to 50 per cent. of the aggregate Market Value of the
Tranche B Ships or, as the context may require, the aggregate principal amount
thereof outstanding at the relevant time under this Agreement;
“Tranche B
Ships” means, together, “ARISTIDIS” and “ALKIVIADIS”, and in
the singular means either of them;
“Tranche C” means an
amount of up to $240,000,000 to be made available by the Lenders to the Borrower
in multiple Advances (which shall not exceed the number of Additional Ships at
any relevant time subject to a Mortgage) pursuant to the terms of this Agreement
and which shall be on-lent by the Borrower to the Owners of the Additional Ships
to assist such Owners in financing up to 50 per cent. of the aggregate Market
Value of the Additional Ships or in part-financing the acquisition of shares in
an Additional Ship Owner or, as the context may require, the aggregate principal
amount thereof outstanding at the relevant time under this
Agreement;
“Tranches” mean
together, Tranche A, Tranche B and Tranche C, and in the singular
means any of them;
“Transaction” has
the meaning given in the Master Agreement;
“Transfer
Certificate” has the meaning given in Clause
26.2;
“Trust Property” has the
meaning given in clause 3.1 of the Agency and Trust Agreement; and
“US GAAP” means
generally accepted accounting principles as from time to time in effect in the
United States of America.
|
1.2
|
Construction of certain
terms. In this
Agreement:
|
“approved” means,
for the purposes of Clause 13, approved in writing by the Facility
Agent;
“asset” includes every kind of
property, asset, interest or right, including any present, future or contingent
right to any revenues or other payment;
“company” includes any
partnership, joint venture and unincorporated association;
“consent” includes an
authorisation, consent, approval, resolution, licence, exemption, filing,
registration, notarisation and legalisation;
“contingent liability” means a
liability which is not certain to arise and/or the amount of which remains
unascertained;
“document” includes a deed;
also a letter, fax or telex;
“excess
risks” means, in relation to a Ship, the proportion of claims
for general average, salvage and salvage charges not recoverable under the hull
and machinery policies in respect of the Ship in consequence of her insured
value being less than the value at which the Ship is assessed for the purpose of
such claims;
“expense” means any kind of
cost, charge or expense (including all legal costs, charges and expenses) and
any applicable value added or other tax;
“law” includes any form of
delegated legislation, any order or decree, any treaty or international
convention and any regulation or resolution of the Council of the European
Union, the European Commission, the United Nations or its Security
Council;
“legal or administrative
action” means any legal proceeding or arbitration and any administrative
or regulatory action or investigation;
“liability” includes every kind
of debt or liability (present or future, certain or contingent), whether
incurred as principal or surety or otherwise;
“months” shall be
construed in accordance with Clause 1.3;
“obligatory
insurances” means, in relation to a Ship, all insurances
effected, or which the Borrower owning the Ship is obliged to effect, under
Clause 13 below or any other provision of this Agreement or another Finance
Document;
“parent company” has
the meaning given in Clause 1.4;
“person” includes
any company; any state, political sub-division of a state and local or municipal
authority; and any international organisation;
“policy”, in relation to any
insurance, includes a slip, cover note, certificate of entry or other document
evidencing the contract of insurance or its terms;
“protection and indemnity
risks” means the usual risks covered by a protection and
indemnity association managed in London, including pollution risks and the
proportion (if any) of any sums payable to any other person or persons in case
of collision which are not recoverable under the hull and machinery policies by
reason of the incorporation therein of clause 1 of the Institute Time Clauses
(Hulls)(1/10/83) or clause 8 of the Institute Time Clauses (Hulls) (1/11/1995)
or the Institute Amended Running Down Clause (1/10/71) or any equivalent
provision;
“regulation” includes any
regulation, rule, official directive, request or guideline (either having the
force of law or compliance with which is reasonable in the ordinary course of
business of the party concerned) of any governmental, intergovernmental or
supranational body, agency, department or regulatory, self-regulatory or other
authority or organisation;
“subsidiary” has the
meaning given in Clause 1.4;
“successor” includes any person
who is entitled (by assignment, novation, merger or otherwise) to any other
person’s rights under this Agreement or any other Finance Document (or any
interest in those rights) or who, as administrator, liquidator or otherwise, is
entitled to exercise those rights; and in particular references to a successor
include a person to whom those rights (or any interest in those rights) are
transferred or pass as a result of a merger, division, reconstruction or other
reorganisation of it or any other person;
“tax” includes any
present or future tax, duty, impost, levy or charge of any kind which is imposed
by any state, any political sub-division of a state or any local or municipal
authority (including any such imposed in connection with exchange controls), and
any connected penalty, interest or fine; and
“war risks” means
the risks according to Institute War and Strike Clauses (Hull Time) (1/10/83) or
(1/11/95), or equivalent conditions, including, but not limited to risk of
mines, blocking and trapping, missing vessel, confiscation and all risks
excluded from the standard form of English or other marine policy.
|
1.3
|
Meaning of
“month”. A period of one or more “months” ends on the
day in the relevant calendar month numerically corresponding to the day of
the calendar month on which the period started (“the numerically corresponding
day”), but:
|
|
(a)
|
on
the Business Day following the numerically corresponding day if the
numerically corresponding day is not a Business Day or, if there is no
later Business Day in the same calendar month, on the Business Day
preceding the numerically corresponding day;
or
|
|
(b)
|
on
the last Business Day in the relevant calendar month, if the period
started on the last Business Day in a calendar month or if the last
calendar month of the period has no numerically corresponding
day,
|
and
“month” and “monthly” shall be construed
accordingly.
|
1.4
|
Meaning of “subsidiary”.
A company (S) is a subsidiary of another company (P)
if:
|
|
(a)
|
a
majority of the issued shares in S (or a majority of the issued shares in
S which carry unlimited rights to capital and income distributions) are
directly owned by P or are indirectly attributable to P;
or
|
|
(b)
|
P
has direct or indirect control over a majority of the voting rights
attached to the issued shares of S;
or
|
|
(c)
|
P
has the direct or indirect power to appoint or remove a majority of the
directors of S,
|
and
any company of which S is a subsidiary is a parent company of S.
|
1.5
|
General
Interpretation.
|
|
(a)
|
In
this Agreement:
|
|
|
(i)
|
references
to, or to a provision of, a Finance Document or any other document are
references to it as amended or supplemented, whether before the date of
this Agreement or otherwise;
|
|
|
(ii)
|
references
to, or to a provision of, any law include any amendment, extension,
re-enactment or replacement, whether made before the date of this
Agreement or otherwise; and
|
|
|
(iii)
|
words
denoting the singular number shall include the plural and vice
versa.
|
|
(b)
|
Clauses
1.1 to 1.4 and paragraph (a) of this Clause 1.5 apply unless the contrary
intention appears.
|
|
(c)
|
References
in Clause 1.1 to a document being in the form of a particular Appendix
include references to that form with any modifications to that form which
the Facility Agent (with the authorisation of the Majority Lenders in the
case of substantial modifications) approves or reasonably
requires.
|
|
(d)
|
The
clause headings shall not affect the interpretation of this
Agreement.
|
|
2
|
|
2.1
|
Amount of
facilities. Subject to the other provisions of this
Agreement, the Lenders shall make available to the Borrower revolving
credit and term loan facilities not exceeding $350,000,000 in aggregate at
any time. The revolving credit facility shall initially be made
available in three Tranches as
follows:
|
|
(a)
|
Tranche
A shall be in an amount not exceeding
$57,500,000;
|
|
(b)
|
Tranche
B shall be in an amount not exceeding
$52,500,000;
|
|
(c)
|
Tranche
C shall be in an amount not exceeding $240,000,000;
and
|
|
(d)
|
Tranche
A and Tranche B may each be drawn in up to two Advances each and Tranche C
may be drawn in multiple Advances, with each Additional Ship (or the
acquisition of the shares in an Additional Ship Owner) being part-financed
by not more than one Advance.
|
|
2.2
|
Consolidation of
Tranches. On the Drawdown Date of the Advance under
Tranche C which will result in Tranche C being fully drawn, all the
Tranches shall be consolidated to form a single tranche constituting the
Revolving Facility.
|
|
3.1
|
Interests of Lenders and Swap
Bank several. The rights of the Lenders and the Swap
Bank under this Agreement and the Master Agreement are several;
accordingly:
|
|
(a)
|
each
Lender shall be entitled to sue for any amount which has become due and
payable by the Borrower to it under this Agreement;
and
|
|
(b)
|
the
Swap Bank shall be entitled to sue for any amount which has become due and
payable by the Borrower to it under the Master
Agreement,
|
without
joining the Facility Agent, the Security Trustee, any other Lender or the Swap
Bank as additional parties in the proceedings.
|
3.2
|
Proceedings by individual
Lender or Swap Bank. However, without the prior consent
of the Majority Lenders, no Lender and the Swap Bank may bring proceedings
in respect of:
|
|
(a)
|
any
other liability or obligation of the Borrower or a Security Party under or
connected with a Finance Document or the Master Agreement;
or
|
|
(b)
|
any
misrepresentation or breach of warranty by the Borrower or a Security
Party in or connected with a Finance Document or the Master
Agreement.
|
|
3.3
|
Obligations
several. The obligations of the Lenders under this
Agreement and of the Swap Bank under the Master Agreement are several; and
a failure of a Lender to perform its obligations under this Agreement or
of the Swap Bank to perform its obligations under the Master Agreement
shall not result in:
|
|
(a)
|
the
obligations of the other Lenders being increased;
nor
|
|
(b)
|
the
Borrower, any Security Party or any other Creditor Party being discharged
(in whole or in part) from its obligations under any Finance
Document;
|
|
and
in no circumstances shall a Lender or the Swap Bank have any
responsibility for a failure of another Lender or the Swap Bank to perform
its obligations under this Agreement or the Master
Agreement.
|
|
3.4
|
Parties bound by certain
actions of Majority Lenders. Every Lender, the Swap
Bank, the Borrower and each Security Party shall be bound
by:
|
|
(a)
|
any
determination made, or action taken, by the Majority Lenders under any
provision of a Finance Document;
|
|
(b)
|
any
instruction or authorisation given by the Majority Lenders to the Facility
Agent or the Security Trustee under or in connection with any Finance
Document;
|
|
(c)
|
any
action taken (or in good faith purportedly taken) by the Facility Agent or
the Security Trustee in accordance with such an instruction or
authorisation.
|
|
3.5
|
Reliance on action of Facility
Agent. However, the Borrower and each Security
Party:
|
|
(a)
|
shall
be entitled to assume that the Majority Lenders have duly given any
instruction or authorisation which, under any provision of a Finance
Document, is required in relation to any action which the Facility Agent
has taken or is about to take; and
|
|
(b)
|
shall
not be entitled to require any evidence that such an instruction or
authorisation has been given.
|
|
3.6
|
Construction. In
Clauses 3.4 and 3.5 references to action taken include (without
limitation) the granting of any waiver or consent, an approval of any
document and an agreement to any
matter.
|
|
4
|
|
4.1
|
Request for
Advance. Subject to the following conditions, the
Borrower may request an Advance to be made by ensuring that the Facility
Agent receives a completed Drawdown Notice not later than 11.00 a.m.
(Hamburg time) 3 Business Days prior to the intended Drawdown
Date.
|
|
4.2
|
Availability. The
conditions referred to in Clause 4.1 are
that:
|
|
(a)
|
a
Drawdown Date has to be a Business Day during the Availability
Period;
|
|
(b)
|
each
Advance under Tranche A or Tranche B shall be used in refinancing the
acquisition of a Tranche A Ship or, as the case may be, a Tranche B Ship
or in part-financing or financing the acquisition of the issued share
capital (free of any encumbrances or charges, except those permitted by
the Majority Lenders) of the Existing Owners of the Tranche A Ships and
the Tranche B Ships;
|
|
(c)
|
each
Advance under Tranche C shall be used in part-financing or refinancing the
acquisition of an Additional Ship or in part-financing or refinancing the
acquisition of shares (free of any encumbrances or charges, except those
permitted by the Majority Lenders) in an Additional Ship Owner Provided
that:
|
|
|
(i)
|
the
Borrower may draw down an Advance under Tranche C to finance or refinance
the acquisition of an Additional Ship or the whole of the issued share
capital of an Additional Ship Owner if, after such Advance is drawn down,
the then outstanding amount of the Revolving Facility does not exceed 60
per cent. of the aggregate Market Value of all Ships then subject to a
Mortgage;
|
|
|
(ii)
|
an
Advance under Tranche C may only be used to finance or refinance the
acquisition of the whole of the issued share capital of an Additional Ship
Owner if the Additional Ship Owner has entered into an Additional Ship MOA
to acquire a tanker newbuilding or the seller of the shares is Capital
Maritime & Trading Corp.; and
|
|
|
(iii)
|
subject
to the other provisions of this Agreement, an Advance under Tranche C may
only be used to finance or refinance a newbuilding upon delivery of the
same to its Owner by the relevant shipyard or by a person who has taken
delivery of the newbuilding from a shipyard and is on-selling the same to
the Owner;
|
|
(d)
|
if
any part of the Total Commitments has not been borrowed before the end of
the Availability period, the Total Commitments shall on that date be
permanently cancelled by an amount equal to such undrawn
amount.
|
|
4.3
|
Purpose of
Advances. The Borrower undertakes with each Creditor
Party to use each Advance only for the purposes stated in the Recitals to
this Agreement.
|
|
4.4
|
Notification to Lenders of
receipt of a Drawdown Notice. The Facility Agent shall
promptly notify the Lenders that it has received a Drawdown Notice and the
Facility Agent shall inform each Lender
of:
|
|
(a)
|
the
amount of the Advance and the Drawdown
Date;
|
|
(b)
|
the
amount of that Lender’s participation in the Advance;
and
|
|
(c)
|
the
duration of the first Interest
Period.
|
|
4.5
|
Drawdown Notice
irrevocable. A Drawdown Notice must be signed by a
director or other authorised person of the Borrower; and once served, a
Drawdown Notice cannot be revoked without the prior consent of the
Facility Agent, acting on the authority of the Majority
Lenders.
|
|
4.6
|
Lenders to make available
Contributions. Subject to the provisions of this
Agreement, each Lender shall, on and with value on each Drawdown Date,
make available to the Facility Agent for the account of the Borrower the
amount due from that Lender on that Drawdown Date under Clause
2.1.
|
|
4.7
|
Disbursement of
Advance. Subject to the provisions of this Agreement,
the Facility Agent shall on each Drawdown Date pay to the Borrower the
amounts which the Facility Agent receives from the Lenders under Clause
4.6; and that payment to the Borrower shall be
made:
|
|
(a)
|
to
such account which the Borrower specifies in the Drawdown Notice;
and
|
|
(b)
|
in
the like funds as the Facility Agent received the payments from the
Lenders.
|
|
4.8
|
Disbursement of Advance to
third party. The payment by the Facility Agent under
Clause 4.7 to an Additional Ship Seller or any other third party shall
constitute the making of the Advance and the Borrower shall thereupon
become indebted, as principal and direct obligor, to each Lender in an
amount equal to that Lender’s
Contribution.
|
|
4.9
|
Extension of Termination
Date. If on 30 March 2013 (for the purposes of this
Clause 4.9, the “Original
Termination Date”) the outstanding principal amount of the
Revolving Facility does not exceed 60 per cent. of the aggregate Market
Value of the Ships then subject to a Mortgage (determined by taking the
average of the aggregate Market Value of the Ships on the Original
Termination Date and on the date falling 6 months prior to the Original
Termination Date), the Borrower may, by giving the Facility Agent notice
in writing, request the extension of the Original Termination Date for a
further period of up to 3 years. If Lenders whose Contributions
total 80 per cent. of the Loan, acting in their sole and absolute
discretion, agree to extend the Original Termination Date in accordance
with this Clause 4.9 the Facility Agent shall send to the Borrower a
notice in writing advising it of the period by which the Original
Termination Date
will be extended Provided that the new
termination date shall be no later than 30 March 2016 and at all times
thereafter the term “Termination Date” shall
be read and construed to mean the new extended termination
date.
|
|
5
|
|
5.1
|
Payment of normal
interest. Subject to the provisions of this Agreement,
interest on each Advance in respect of each Interest Period shall be paid
by the Borrower in arrears on the last day of that Interest
Period.
|
|
5.2
|
Normal rate of
interest. Subject to the provisions of this Agreement,
the rate of interest on each Advance in respect of an Interest Period
shall be the aggregate of:
|
|
(a)
|
the
applicable Margin; and
|
|
(b)
|
LIBOR
for that Interest Period.
|
|
5.3
|
Payment of accrued
interest. In the case of an Interest Period longer than
3 months, accrued interest shall be paid every 3 months during that
Interest Period and on the last day of that Interest
Period.
|
|
5.4
|
Notification of Interest
Periods and rates of normal interest. The Facility Agent
shall notify the Borrower and each Lender
of:
|
|
(a)
|
each
rate of interest; and
|
|
(b)
|
the
duration of each Interest Period,
|
as soon
as reasonably practicable after each is determined.
|
5.5
|
Market
disruption. The following provisions of this Clause 5
apply if:
|
|
(a)
|
no
rate is quoted on the appropriate page of the Reuters Monitor Money Rates
Service and at least half of the total number of Lenders at any time do
not, before 1.00 p.m. (London time) on the Quotation Date for an Interest
Period, provide quotations to the Facility Agent in order to fix LIBOR;
or
|
|
(b)
|
at
least 1 Business Day before the start of an Interest Period, the majority
of the Lenders (in numbers) who together have Contributions amounting to
more than 50 per cent. of the Loan (or, if no Advance is outstanding at
the relevant time, Commitments amounting to more than 50 per cent. of the
Total Commitments) notify the Facility Agent that LIBOR fixed by the
Facility Agent would not accurately reflect the cost to those Lenders of
funding their respective Contributions (or any part of them) during the
Interest Period in the London Interbank Dollar Market at or about 11.00
a.m. (London time) on the second Business Day before the commencement of
the Interest Period; or
|
|
(c)
|
at
least 1 Business Day before the start of an Interest Period, the Facility
Agent is notified by a Lender (the “Affected Lender”) that
for any reason it is unable to obtain Dollars in the London Interbank
Market in order to fund its Contribution (or any part of it) during the
Interest Period.
|
|
5.6
|
Notification of market
disruption. The Facility Agent shall promptly notify the
Borrower and each of the Lenders stating the circumstances falling within
Clause 5.5 which have caused its notice to be
given.
|
|
5.7
|
Suspension of
drawdown. If the Facility Agent’s notice under Clause
5.6 is served before an Advance is
made:
|
|
(a)
|
in
a case falling within paragraphs (a) or (b) of Clause 5.5, the Lenders’
obligations to make the Advance;
|
|
(b)
|
in
a case falling within paragraph (c) of Clause 5.5, the Affected Lender’s
obligation to participate in the
Advance,
|
|
shall
be suspended while the circumstances referred to in the Facility Agent’s
notice continue.
|
|
5.8
|
Negotiation of alternative rate
of interest. If the Facility Agent’s notice under Clause
5.6 is served after an Advance is made, the Borrower, the Facility Agent
and the Lenders or (as the case may be) the Affected Lender shall use
reasonable endeavours to agree, within the 30 days after the date on which
the Facility Agent serves its notice under Clause 5.6 (the “Negotiation Period”), an
alternative interest rate or (as the case may be) an alternative basis for
the Lenders or (as the case may be) the Affected Lender to fund or
continue to fund their or its Contribution to the relevant Advance or
Advances during the Interest Period
concerned.
|
|
5.9
|
Application of agreed
alternative rate of interest. Any alternative interest
rate or an alternative basis which is agreed during the Negotiation Period
shall take effect in accordance with the terms
agreed.
|
|
5.10
|
Alternative rate of interest in
absence of agreement. If an alternative interest rate or
alternative basis is not agreed within the Negotiation Period, and the
relevant circumstances are continuing at the end of the
Negotiation Period, then the Facility Agent shall, with the agreement of
each Lender or (as the case may be) the Affected Lender, set an interest
period and interest rate representing the cost of funding of the Lenders
or (as the case may be) the Affected Lender in Dollars or in any available
currency of their or its Contribution to the relevant Advance or Advances
plus the applicable Margin; and the procedure provided for by this Clause
5.10 shall be repeated if the relevant circumstances are continuing at the
end of the interest period so set by the Facility
Agent.
|
|
5.11
|
Notice of
prepayment. If the Borrower does not agree with an
interest rate set by the Facility Agent under Clause 5.10, the Borrower
may give the Facility Agent not less than 15 Business Days’ notice of its
intention to prepay the relevant Advance or Advances at the end of the
interest period set by the Facility
Agent.
|
|
5.12
|
Prepayment; termination of
Commitments. A notice under Clause 5.11 shall be
irrevocable; the Facility Agent shall promptly notify the Lenders or (as
the case may require) the Affected Lender of the Borrower’ notice of
intended prepayment; and:
|
|
(a)
|
on
the date on which the Facility Agent serves that notice, the Total
Commitments or (as the case may require) the Commitment of the Affected
Lender so far as they relate to the relevant Advance shall be cancelled;
and
|
|
(b)
|
on
the last Business Day of the interest period set by the Facility Agent,
the Borrower shall prepay (without premium or penalty) the Loan or, as the
case may be, the Affected Lender’s Contribution, together with accrued
interest thereon at the applicable rate plus the applicable
Margin.
|
|
5.13
|
Application of
prepayment. The provisions of Clause 8 shall apply in
relation to the prepayment.
|
|
5.14
|
Renegotation of
Margin. The Borrower shall negotiate in good faith with
the Lenders an adjustment to the Margin which is to apply as from the date
falling on the fifth anniversary of the date of this Agreement (the “Margin Determination
Date”). The Borrower
shall use its best endeavours to ensure that such negotiations commence
not later than the date falling 30 days before the Margin Determination
Date. If:
|
|
(a)
|
an
adjustment is agreed between the parties, the Facility Agent will send to
the Borrower and the Creditor Parties a notice in writing by no later than
the date falling 5 Business Days before the Margin Determination Date
specifying the new amount of the Margin which will apply as from the
Margin Determination Date and at all times thereafter the term “Margin” shall be read
and construed to mean such amount;
or
|
|
(b)
|
an
adjustment cannot be agreed by the Margin Determination Date, the Borrower
acknowledges and agrees that the Facility Agent (acting upon the
instructions of all the Lenders) may request the Borrower to prepay the
Loan within 30 Business Days of the Facility Agent’s notice and the
Borrower agrees to make such prepayment within a 60 Business Day
period.
|
|
6.1
|
Commencement of Interest
Periods. The first Interest Period applicable to an
Advance shall commence on the relevant Drawdown Date and each subsequent
Interest Period shall commence on the expiry of the preceding Interest
Period.
|
|
6.2
|
Duration of normal Interest
Periods. Subject to Clauses 6.3 and 6.4, each Interest
Period in respect of each Advance shall
be:
|
|
(a)
|
1,
3, 6, 9 or 12 months as notified by the Borrower to the Facility Agent not
later than 11.00 a.m. (Hamburg time) 3 Business Days before the
commencement of the Interest
Period;
|
|
(b)
|
in
the case of the first Interest Period applicable to the second and any
subsequent Advance of a Tranche, a period ending on the last day of the
then current Interest Period applicable to such Tranche, whereupon all of
the Advances in respect of such Tranche shall be consolidated and treated
as a single advance;
|
|
(c)
|
3
months, if the Borrower fail to notify the Facility Agent by the time
specified in paragraph (a) above;
or
|
|
(d)
|
such
other period as the Borrower may request from the Facility Agent, which
may be agreed by the Facility Agent
|
Provided that no more than 6
Interest Periods in aggregate of 1-month’s duration may be current at any
time.
|
6.3
|
Duration of Interest Periods
for repayment instalments. In respect of an amount due
to be repaid under Clause 8 on a particular Repayment Date, an Interest
Period in relation to the relevant Tranche shall end on that Repayment
Date.
|
|
6.4
|
Non-availability of matching
deposits for Interest Period selected. If, after the
Borrower has selected an Interest Period longer than 6 months, any Lender
notifies the Facility Agent by 11.00 a.m. (Hamburg time) on the third
Business Day before the commencement of the Interest Period that it is not
satisfied that deposits in Dollars for a period equal to the Interest
Period will be available to it in the London Interbank Market when the
Interest Period commences, the Interest Period shall be of 6
months.
|
|
7.1
|
Payment of default interest on
overdue amounts. The Borrower shall pay interest in
accordance with the following provisions of this Clause 7 on any amount
payable by the Borrower
under any Finance Document which the Facility Agent, the Security Trustee
or the other designated payee does not receive on or before the relevant
date, that is:
|
|
(a)
|
the
date on which the Finance Documents provide that such amount is due for
payment; or
|
|
(b)
|
if
a Finance Document provides that such amount is payable on demand, the
date on which the demand is served;
or
|
|
(c)
|
if
such amount has become immediately due and payable under Clause 19.4, the
date on which it became immediately due and
payable.
|
|
7.2
|
Default rate of
interest. Interest shall accrue on an overdue amount
from (and including) the relevant date until the date of actual payment
(as well after as before judgment) at the rate per annum determined by the
Facility Agent to be 2 per cent.
above:
|
|
(a)
|
in
the case of an overdue amount of principal, the higher of the rates set
out at paragraphs (a) and (b) of Clause 7.3;
or
|
|
(b)
|
in
the case of any other overdue amount, the rate set out at paragraph (b) of
Clause 7.3.
|
|
7.3
|
Calculation of default rate of
interest. The rates referred to in Clause 7.2
are:
|
|
(a)
|
the
rate applicable to the overdue principal amount immediately prior to the
relevant date (but only for any unexpired part of any then current
Interest Period);
|
|
(b)
|
the
applicable Margin plus, in respect of successive periods of any duration
(including at call) up to 3 months which the Facility Agent may select
from time to time:
|
|
|
(i)
|
LIBOR;
or
|
|
|
(ii)
|
if
the Facility Agent determines that Dollar deposits for any such period are
not being made available to a Lender or (as the case may be) Lenders by
leading banks in the London Interbank Market in the ordinary course of
business, a rate from time to time determined by the Facility Agent by
reference to the cost of funds to the Facility Agent from such other
sources as the Facility Agent may from time to time
determine.
|
|
7.4
|
Notification of interest
periods and default rates. The Facility Agent shall
promptly notify the Lenders and the Borrower of each interest rate
determined by the Facility Agent under Clause 7.3 and of each period
selected by the Facility Agent for the purposes of paragraph (b) of that
Clause; but this shall not be taken to imply that the Borrower is liable
to pay such interest only with effect from the date of the Facility
Agent’s notification.
|
|
7.5
|
Payment of accrued default
interest. Subject to the other provisions of this
Agreement, any interest due under this Clause shall be paid on the last
day of the period by reference to which it was determined; and the payment
shall be made to the Facility Agent for the account of the Creditor Party
to which the overdue amount is due.
|
|
7.6
|
Compounding of default
interest. Any such interest which is not paid at the end
of the period by reference to which it was determined shall thereupon be
compounded.
|
|
7.7
|
Application to Master
Agreement. For the avoidance of doubt, this Clause 7
does not apply to any amount payable under the Master Agreement in respect
of any continuing Designated Transaction as to which section 2(e) (Default
Interest; Other Amounts) of the Master Agreement shall
apply.
|
|
8.1
|
Conversion to Term
Loan. On the Termination Date, the Revolving Facility
shall be converted into the Term
Loan.
|
|
8.2
|
Mandatory amortisation and
amount of repayments of Term Loan. The following
provisions of this Clause 8.2 shall apply to the repayment of the
Loan:
|
|
(a)
|
if
on a Distribution Declaration Date falling before the Termination Date,
the Security Cover Ratio (expressed as a percentage) is less than 125 per
cent., then the Borrower shall repay the Loan in an amount which, once
repaid, shall eliminate the shortfall. If a repayment is
required pursuant to this Clause 8.2(a) on any Distribution Declaration
Date (being the “Relevant
Distribution Declaration Date”), then the Borrower shall transfer
the amount of the repayment due under this Clause 8.2(a) into the
Retention Account no later than 5 days after the Relevant Distribution
Declaration Date. On the last day of the first Interest Period
to expire which is current as at the Relevant Distribution Declaration
Date the Facility Agent shall apply all amounts standing to the credit of
the Retention Account in or towards repayment of the Loan and the payment
of interest thereon in accordance with Clause 18.4;
and
|
|
(b)
|
after
the Termination Date, the Term Loan shall be repaid by up to 20 equal
consecutive three-monthly repayment instalments (each a “Repayment Instalment”
and together the “Repayment Instalments”)
and a final balloon instalment (the “Balloon Instalment”).
The Balloon Instalment shall be equal to 50 per cent of the Revolving
Facility on the Termination Date and each Repayment Instalment shall be in
an amount equal to one-twentieth of the amount by which the Revolving
Facility on the Termination Date exceeds the Balloon
Instalment Provided that if the
Termination Date is extended pursuant to Clause 4.9, the Balloon
Instalment shall remain unchanged but each Repayment Instalment shall be
in an amount equal to one-eighth of the original Balloon
Instalment.
|
|
8.3
|
Repayment
Dates. The first Repayment Instalment shall be repaid on
the date falling 3 months after the Termination Date, each subsequent
Repayment Instalment shall be repaid at 3-monthly intervals thereafter and
the Balloon Instalment, together with the Final Repayment Instalment,
shall be repaid on the date falling on the earlier of (a) the tenth
anniversary of the first Drawdown Date and (b) the Final Maturity
Date.
|
|
8.4
|
Final Repayment
Date. On the final Repayment Date, the Borrower shall
additionally pay to the Facility Agent for the account of the Creditor
Parties all other sums then accrued or owing under any Finance
Document.
|
|
8.5
|
Optional facility
cancellation. The Borrower shall be entitled, upon
giving to the Facility Agent not less than 3 Business Days prior written
notice (which notice shall be irrevocable), to cancel, in whole or in
part, and, if in part, by an amount not less than $1,000,000 or a higher
multiple of $1,000,000, the undrawn balance of the Revolving
Facility. Upon such cancellation taking effect on expiry of
such notice the several obligations of the Lenders to make their
respective Commitments available in relation to the portion of the Total
Commitments to which such notice relates shall terminate and the
commitment fee referred to in Clause 20.1(a)) on such portion shall cease
to accrue.
|
|
8.6
|
Voluntary
prepayment. Subject to the following conditions, the
Borrower may prepay, the whole or any part of the Loan on the last day of
an Interest Period in respect
thereof.
|
|
8.7
|
Conditions for voluntary
prepayment. The conditions referred to in Clause 8.6 are
that:
|
|
(a)
|
a
partial prepayment shall be $1,000,000 or a multiple of
$1,000,000;
|
|
(b)
|
the
Facility Agent has received from the Borrower at least 5 Business Days’
prior written notice specifying the amount to be prepaid and the date on
which the prepayment is to be made (such date to be the last day of an
Interest Period relative to the amount being so prepaid);
and
|
|
(c)
|
the
Borrower has provided evidence satisfactory to the Facility Agent that any
consent required by the Borrower or any Security Party in connection with
the prepayment has been obtained and remains in force, and that any
requirement relevant to this Agreement which affects the Borrower or any
Security Party has been complied
with.
|
|
8.8
|
Effect of notice of
prepayment. A prepayment notice may not be withdrawn or
amended without the consent of the Facility Agent, given with the
authority of the Majority Lenders, and the amount specified in the
prepayment notice shall become due and payable by the Borrower on the date
for prepayment specified in the prepayment
notice.
|
|
8.9
|
Notification of notice of
prepayment. The Facility Agent shall notify the Lenders
promptly upon receiving a prepayment notice, and shall provide any Lender
which so requests with a copy of any document delivered by the Borrower
under Clause 8.7(c).
|
|
8.10
|
Mandatory
prepayment. The Borrower shall be obliged to prepay the
Relevant Amount if a Ship is sold or becomes a Total
Loss:
|
|
(a)
|
in
the case of a sale, on or before the date on which the sale is completed
by delivery of that Ship to the buyer;
or
|
|
(b)
|
in
the case of a Total Loss, on the earlier of the date falling 150 days
after the Total Loss Date and the date of receipt by the Security Trustee
of the proceeds of insurance relating to such Total
Loss.
|
In this
Clause 8.10, “Relevant
Amount” means an amount which, after giving credit for the
amount of the prepayment made pursuant to this Clause 8.10, results in the
Security Cover Ratio being equal to the higher of (i) the Security Cover Ratio
maintained immediately prior to the prepayment made pursuant to this Clause 8.10
and (ii) the Security Cover Ratio referred to in Clause 15.1.
|
8.11
|
Amounts payable on
prepayment. A prepayment shall be made together with
accrued interest (and any other amount payable under Clause 21 below or
otherwise) in respect of the amount prepaid and, if the prepayment is not
made on the last day of an Interest Period together with any sums payable
under Clause 21.1(b) but without premium or
penalty.
|
|
8.12
|
Application of partial
prepayment. Each partial prepayment made after the
Termination Date shall be applied to reduce pro rata each Repayment
Instalment and the Balloon
Instalment.
|
|
8.13
|
Reborrowing.
|
|
(a)
|
No
amount of the Term Loan prepaid may be
reborrowed.
|
|
(b)
|
Subject
to the terms of this Agreement, any amount of the Revolving Facility
repaid or prepaid may be
reborrowed.
|
|
8.14
|
Unwinding of Designated
Transactions. On or prior to any repayment or prepayment
of the Loan under this Clause 8 or any other provision of this Agreement,
the Borrower shall wholly or partially reverse, offset, unwind or
otherwise terminate one or more of the continuing Designated Transactions
to the extent necessary to ensure that the notional principal
amount of the continuing Designated Transactions thereafter remaining does
not and will not in the future (taking into account the scheduled
amortisation) exceed the amount of the Loan as reducing from time to time
thereafter pursuant to Clause
8.2.
|
|
8.15
|
Prepayment of Swap
Benefit. If a Designated Transaction is terminated in
circumstances where the Swap Bank would be obliged to pay an amount to the
Borrower under the Master Agreement, the Borrower hereby agrees that such
payment shall be applied in prepayment of the Loan in accordance with
Clause 8.12 and authorises the Swap Bank to pay such amount to
the Facility Agent for such
purpose.
|
|
9.1
|
Documents, fees and no
default. Each Lender’s obligation to contribute to an
Advance is subject to the following conditions
precedent:
|
|
(a)
|
that
on or before the date of this Agreement, the Facility Agent receives the
fees referred to in Clause 20.1 which are due and payable at that
time;
|
|
(b)
|
that,
on or before the service of the Drawdown Notice in respect of the first
Advance of Tranche A, the Facility Agent receives the documents described
in Part A of Schedule 3 in form and substance satisfactory to the Facility
Agent and its lawyers;
|
|
(c)
|
that,
on or before the service of the Drawdown Notice in respect of each Advance
of Tranche A and Tranche B, the Facility Agent receives the
documents described in Part B of Schedule 3 in form and substance
satisfactory to the Facility Agent and its
lawyers;
|
|
(d)
|
that,
on or before the service of the Drawdown Notice in respect of each Advance
of Tranche C, the Facility Agent receives the documents described in Part
C of Schedule 3 in form and substance satisfactory to the Facility Agent
and its lawyers;
|
|
(e)
|
that
both at the date of each Drawdown Notice and at each Drawdown
Date:
|
|
|
(i)
|
no
Event of Default or Potential Event of Default has occurred and is
continuing or would result from the borrowing of the relevant Advance;
and
|
|
|
(ii)
|
the
representations and warranties in Clause 10 and those of the Borrower or
any Security Party which are set out in the other Finance Documents would
be true and not misleading if repeated on each of those dates with
reference to the circumstances then existing;
and
|
|
|
(iii)
|
none
of the circumstances contemplated by Clause 5.5 has occurred and is
continuing;
|
|
|
(iv)
|
there
has been no material adverse change in the financial condition, state of
affairs or prospects of the Borrower or any Owner from that applying at
the date of this Agreement;
|
|
|
(v)
|
the
Borrower has entered into Designated Transactions with the Swap Bank in
order to hedge all the interest rate risk under this Agreement as at the
relevant Drawdown Date (immediately following the drawdown of the relevant
Advance); and
|
|
|
(vi)
|
the
Facility Agent receives any fees referred to in Clause 20.1 which are due
and payable at that time;
|
|
(f)
|
that,
if the ratio set out in Clause 15.1 were applied immediately following the
making of the relevant Advance, the Borrower would not be obliged to
provide additional security or prepay part of the Loan under that Clause;
and
|
|
(g)
|
that
the Facility Agent has received, and found to be acceptable to it, any
further opinions, consents, agreements and documents in connection with
the Finance Documents which the Facility Agent may, with the authorisation
of the Majority Lenders, request by notice to the Borrower prior to the
relevant Drawdown Date.
|
|
9.2
|
Waiver of conditions
precedent. If the Majority Lenders, at their discretion,
permit an Advance to be borrowed before certain of the conditions referred
to in Clause 9.1 are satisfied, the Borrower shall ensure that those
conditions are satisfied within 5 Business Days after the relevant
Drawdown Date (or such longer period as the Facility Agent may, with the
authorisation of the Majority Lenders,
specify).
|
|
10.1
|
General. The
Borrower represents and warrants to each Creditor Party as
follows.
|
|
10.2
|
Status. The
Borrower is a limited partnership (comprised of a single general partner
and multiple limited partners) formed and validly existing and in good
standing under the laws of the Republic of Marshall
Islands.
|
|
10.3
|
Capital. The
Borrower’s capital consists of 13,512,000 common units held by public
unitholders, 8,805,522 subordinated units held by Capital Maritime &
Trading Corp. and a general partner interest held by Capital GP
L.L.C.
|
|
10.4
|
Corporate
power. The Borrower (or, in the case of paragraphs (a)
and (b), each Existing Owner) has the partnership or corporate capacity,
and has taken all partnership or corporate action and obtained all
consents necessary for it:
|
|
(a)
|
to
own and register the Existing Ship owned by it under the relevant Approved
Flag;
|
|
(b)
|
to
enter into, and perform its obligations under, the Existing Charter to
which it is a party;
|
|
(c)
|
to
execute the Finance Documents to which the Borrower is a party;
and
|
|
(d)
|
to
borrow under this Agreement, to enter into Designated Transactions under
the Master Agreement and to make all the payments contemplated by, and to
comply with, those Finance Documents to which the Borrower is a
party.
|
|
10.5
|
Consents in
force. All the consents referred to in Clause 10.4
remain in force and nothing has occurred which makes any of them liable to
revocation.
|
|
10.6
|
Legal validity; effective
Security Interests. The Finance Documents to which the
Borrower is a party, do now or, as the case may be, will, upon execution
and delivery (and, where applicable, registration as provided for in the
Finance Documents):
|
|
(a)
|
constitute
the Borrower’s legal, valid and binding obligations enforceable against
the Borrower in accordance with their respective terms;
and
|
|
(b)
|
create
legal, valid and binding Security Interests enforceable in accordance with
their respective terms over all the assets to which they, by their terms,
relate,
|
subject
to any relevant insolvency laws affecting creditors’ rights
generally.
|
10.7
|
No third party Security
Interests. Without limiting the generality of Clause
10.6, at the time of the execution and delivery of each Finance Document
to which the Borrower is a party:
|
|
(a)
|
the
Borrower will have the right to create all the Security Interests which
that Finance Document purports to create;
and
|
|
(b)
|
no
third party will have any Security Interest (except for Permitted Security
Interests) or any other interest, right or claim over, in or in relation
to any asset to which any such Security Interest, by its terms,
relates.
|
|
10.8
|
No
conflicts. The execution by the Borrower of each Finance
Document to which it is a party, and the borrowing by the Borrower of the
Loan, and its compliance with each Finance Document to which it is a party
will not involve or lead to a contravention
of:
|
|
(a)
|
any
law or regulation; or
|
|
(b)
|
the
constitutional documents of the Borrower;
or
|
|
(c)
|
any
contractual or other obligation or restriction which is binding on the
Borrower or any of its assets.
|
|
10.9
|
No withholding
taxes. All payments which the Borrower is liable to make
under the Finance Documents may be made without deduction or withholding
for or on account of any tax payable under any law of any Pertinent
Jurisdiction.
|
|
10.10
|
No
default. No Event of Default has occurred and is
continuing.
|
|
10.11
|
Information. All
information which has been provided in writing by or on behalf of the
Borrower or any Security Party to any Creditor Party in connection with
any Finance Document satisfied the requirements of Clause 11.5; all
audited and unaudited accounts which have been so provided satisfied the
requirements of Clause 11.7; and there has been no material adverse change
in the financial position or state of affairs of the Borrower from that
disclosed in the latest of those
accounts.
|
|
10.12
|
No
litigation. No legal or administrative action involving
the Borrower has been commenced or taken or, to the Borrower’s knowledge,
is likely to be commenced or taken.
|
|
10.13
|
Validity
and completeness of Existing
Charters.
|
|
(a)
|
each
Existing Charter constitutes valid, binding and enforceable obligations of
the parties thereto respectively in accordance with its terms;
and
|
|
(b)
|
no
amendments or additions to any Existing Charter have been agreed (other
than those notified to the Facility Agent prior to the date of this
Agreement) nor has any party thereto waived any of their respective rights
under any Existing Charter.
|
|
10.14
|
Compliance with certain
undertakings. At the date of this Agreement, the
Borrower is in compliance with Clauses 11.2, 11.4, 11.9
and 11.14.
|
|
10.15
|
Taxes
paid. The Borrower has paid all taxes applicable to, or
imposed on or in relation to the Borrower and its
business.
|
|
10.16
|
ISM and ISPS Code
compliance. All requirements of the ISM Code and the
ISPS Code as they relate to the Borrower, any Owner, the Approved Manager
and any Existing Ship have been complied
with.
|
|
10.17
|
No money
laundering. Without prejudice to the generality of
Clause 4.3, in relation to the borrowing by the Borrower of the Loan, the
performance and discharge of its obligations and liabilities under the
Finance Documents, and the transactions and other arrangements effected or
contemplated by the Finance Documents to which the Borrower is a party,
the Borrower confirms that it is acting for its own account and that the
foregoing will not involve or lead to contravention of any law, official
requirement or other regulatory measure or procedure implemented to combat
“money laundering” (as defined in Article 1 of the Directive (91/308/EEC)
of the Council of the European
Communities).
|
|
11.1
|
General. The
Borrower undertakes with each Creditor Party to comply with the following
provisions of this Clause 11 at all times during the Security Period
except as the Facility Agent may, with the authorisation of the Majority
Lenders, otherwise permit (which
permission shall not be unreasonably withheld in connection with Clause
11.13).
|
|
11.2
|
Title; negative pledge and pari
passu ranking. The Borrower
will:
|
|
(a)
|
hold
the legal title to, and own the entire beneficial interest in, each Owner
free from all Security Interests and other interests and rights of every
kind, except for those created by the Finance
Documents;
|
|
(b)
|
not
create or permit to arise any Security Interest over any other asset,
present or future other than in the normal course of its business of
acquiring and financing vessels;
and
|
|
(c)
|
procure
that its liabilities under the Finance Documents to which it is a party do
and will rank at least pari passu with all its other present and future
unsecured liabilities, except for liabilities which are mandatorily
preferred by law.
|
|
11.3
|
No disposal of
assets. The Borrower will not transfer, lease or
otherwise dispose of:
|
|
(a)
|
all
or a substantial part of its assets, whether by one transaction or a
number of transactions, whether related or not if such transfer, lease or
disposal results in the Borrower being in breach of any of the financial
covenants referred to in Clause 12.5 or in the occurrence of an Event of
Default; or
|
|
(b)
|
any
debt payable to it or any other right (present, future or contingent
right) to receive a payment, including any right to damages or
compensation.
|
|
11.4
|
No other liabilities or
obligations to be incurred. The Borrower will not incur
any liability or obligation except liabilities and obligations under the
Finance Documents and liabilities or obligations reasonably incurred in
the ordinary course of its business of acquiring, operating and financing
vessels, acquiring shares in vessel owning companies and financing such
acquisitions and all other matters reasonably incidental thereto (which
shall include, without limitation, but subject to Clause 12.8, any
Financial Indebtedness which may be incurred by the Borrower in the
ordinary course of its business).
|
|
11.5
|
Information provided to be
accurate. All financial and other information which is
provided in writing by or on behalf of the Borrower under or in connection
with any Finance Document will be true and not misleading and will not
omit any material fact or
consideration.
|
|
11.6
|
Provision of financial
statements. The Borrower will send or procure there are
sent to the Facility Agent:
|
|
(a)
|
as
soon as possible, but in no event later than 180 days after the end of
each financial year of the Borrower (commencing with the financial
statements for the year ending 31 December 2007), the audited consolidated
annual accounts of the Group;
|
|
(b)
|
as
soon as possible, but in no event later than 90 days after the end of each
3-month period in each financial year of the Borrower (commencing with the
financial statements for the 3-month period ending 31 March
2008):
|
|
|
(i)
|
the
unaudited consolidated management accounts of the Group for that 3-month
period certified as to their correctness by the chief financial officer of
the Borrower; and
|
|
|
(ii)
|
the
management accounts of each Owner for that 3-month period certified as to
their correctness by an officer of the
Borrower;
|
|
(c)
|
promptly
after each request by the Facility Agent, such further financial
information about the Borrower, the Ships and the Owners (including, but
not limited to, charter arrangements, Financial Indebtedness and operating
expenses) as the Facility Agent may
require.
|
|
11.7
|
Form of financial
statements. All accounts (audited and unaudited)
delivered under Clause 11.6 will:
|
|
(a)
|
be
prepared in accordance with all applicable laws and US GAAP consistently
applied;
|
|
(b)
|
give
a true and fair view of the state of affairs of the relevant person at the
date of those accounts and of its profit for the period to which those
accounts relate; and
|
|
(c)
|
fully
disclose or provide for all significant liabilities of the relevant person
and its subsidiaries.
|
|
11.8
|
Creditor
notices. The Borrower will send to the Facility Agent,
at the same time as they are despatched, copies of all communications
which are despatched to all of its creditors or to the whole or any class
of them.
|
|
11.9
|
Consents. The
Borrower will maintain in force and promptly obtain or renew, and will
promptly send certified copies to the Facility Agent of, all consents
required:
|
|
(a)
|
for
the Borrower to perform its obligations under any
Finance Document to which it is
party;
|
|
(b)
|
for
the validity or enforceability of any Finance Document to which it is
party; and
|
|
(c)
|
for
each Owner to continue to own and operate the Ship owned by
it,
|
and the
Borrower will comply (or procure compliance as the case may be) with the terms
of all such consents.
|
11.10
|
Maintenance of Security
Interests. The Borrower
will:
|
|
(a)
|
at
its own cost, do all that it reasonably can to ensure that any Finance
Document validly creates the obligations and the Security Interests which
it purports to create; and
|
|
(b)
|
without
limiting the generality of paragraph (a) above, at its own cost, promptly
register, file, record or enrol any Finance Document with any court or
authority in all Pertinent Jurisdictions, pay any stamp, registration or
similar tax in all Pertinent Jurisdictions in respect of any Finance
Document, give any notice or take any other step which, in the opinion
of the Majority Lenders, is or has become necessary or desirable for any
Finance Document to be valid, enforceable or admissible in evidence or to
ensure or protect the priority of any Security Interest which it
creates.
|
|
11.11
|
Notification of
litigation. The Borrower will provide the Facility Agent
with details of any legal or administrative action involving the Borrower,
any Security Party, the Approved Manager or the Ships, their Earnings or
their Insurances as soon as such action is instituted, unless it is clear
that the legal or administrative action cannot be considered material in
the context of any Finance
Document.
|
|
11.12
|
No amendment to Master
Agreement; Transactions. The Borrower will
not:
|
|
(a)
|
agree
to any amendment or supplement to, or waive or fail to enforce, the Master
Agreement or any of its provisions;
or
|
|
(b)
|
enter
into any Transaction pursuant to the Master Agreement except Designated
Transactions.
|
|
11.13
|
No amendment to the Existing
Charters and of the Charterparty. The Borrower will
ensure that no Owner shall agree to any material amendment or supplement
to, or waive or fail to enforce, any Existing Charter or any Charterparty
or any of its provisions.
|
|
11.14
|
Principal place of
business. The Borrower will maintain its place of
business, and keep its corporate documents and records, at the address
stated at Clause 28.2(a) and the Borrower will not establish nor do
anything as a result of which it would be deemed to have, a place of
business in England or the United States of
America.
|
|
11.15
|
Confirmation of no
default. The Borrower will, within 2 Business Days after
service by the Facility Agent of a written request, serve on the Facility
Agent a notice which is signed by 2 directors of the Borrower and
which:
|
|
(a)
|
states
that no Event of Default has occurred;
or
|
|
(b)
|
states
that no Event of Default has occurred, except for a specified event or
matter, of which all material details are
given,
|
|
the
Facility Agent may serve requests under this Clause 11.15 from time to
time; this Clause 11.15 does not affect the Borrower’s
obligations under Clause 11.16.
|
|
11.16
|
Notification of
default. The Borrower will notify the Facility Agent as
soon as the Borrower becomes aware
of:
|
|
(a)
|
the
occurrence of an Event of Default;
or
|
|
(b)
|
any
matter which indicates that an Event of Default may have
occurred,
|
and will
thereafter keep the Facility Agent fully up-to-date with all
developments.
|
11.17
|
Provision of further
information. The Borrower will, as soon as practicable
after receiving the request, provide the Facility Agent with any
additional financial or other information
relating:
|
|
(a)
|
to
the Borrower, the Ships, their Insurances, their Earnings or the Owners;
or
|
|
(b)
|
to
any other matter relevant to, or to any provision of, a Finance
Document,
|
which may
be requested by the Facility Agent, the Security Trustee or any Lender at any
time.
|
11.18
|
General and administrative
costs. The Borrower shall ensure that the payment of all
the general and administrative costs of the Borrower and the Owners in
connection with the ownership and operation of the Ships (including,
without limitation, the payment of the management fees pursuant to the
Management Agreements) shall be fully subordinated to the payment
obligations of the Borrower and the Owners under this Agreement and the
other Finance Documents throughout the Security
Period.
|
|
11.19
|
Provision of copies of SEC
filings. The Borrower will send to the Facility Agent
copies of all filings made with, and reports submitted to, the US
Securities and Exchange Commission promptly after making such filings or
submitting such reports Provided that any such
filings or reports which are made available to the public shall be
considered to have been delivered to the Facility Agent subject to the
Borrower first having notified the Facility Agent that such filings or
reports have been made or
submitted.
|
|
11.20
|
Provision of copies and
translation of documents. The Borrower will supply the
Facility Agent with a sufficient number of copies of the documents
referred to above to provide 1 copy for each Creditor Party; and if the
Facility Agent so requires in respect of any of those documents, the
Borrower will provide a certified English translation prepared by a
translator approved by the Facility
Agent.
|
|
11.21
|
Hedging of interest rate
risks. The Borrower shall from time to time enter into
Designated Transactions with the Swap Bank in order to hedge all the
interest rate risk under this
Agreement.
|
|
12.1
|
General. The
Borrower also undertakes with each Creditor Party to comply with the
following provisions of this Clause 12 at all times during the Security
Period except as the Facility Agent may, with the authorisation of the
Majority Lenders, otherwise permit (such permission not to be unreasonably
withheld in the case of Clause
12.3(d)).
|
|
12.2
|
Maintenance of
status. The Borrower will maintain its separate
existence as a limited partnership and remain in good standing under the
laws of the Republic of the Marshall
Islands.
|
|
12.3
|
Negative
undertakings. The Borrower will
not:
|
|
(a)
|
change
the nature of its business; or
|
|
(b)
|
pay
any dividend or make any other form of distribution or effect any form of
redemption, purchase or return of share capital Provided that the
Borrower may make a distribution
if:
|
|
|
(i)
|
the
Borrower has first submitted to the Facility Agent a Compliance
Certificate (with supporting evidence satisfactory to the Facility Agent)
which confirms that (A) no Event of Default has occurred or is continuing
and (B) the making of such distribution will not result in the Borrower
being in breach of any of the financial covenants referred to in Clause
12.5 or in the occurrence of an Event of Default;
and
|
|
|
(ii)
|
the
Facility Agent is satisfied that the Security Cover Ratio referred to in
Clause 15.1 is maintained at the time the distribution is
made;
|
|
(c)
|
provide
any form of credit or financial assistance
to:
|
|
|
(i)
|
a
person who is directly or indirectly interested in the Borrower’s share or
loan capital; or
|
|
|
(ii)
|
any
company in or with which such a person is directly or indirectly
interested or connected,
|
|
or
enter into any transaction with or involving such a person or company on
terms which are, in any respect, less favourable to the Borrower than
those which it could obtain in a bargain made at arms’
length Provided that this shall
not prevent or restrict the Borrower from on-lending the Loan to the
Owners;
|
|
(d)
|
allow
any Owner to open or maintain any account with any bank or financial
institution except accounts with the Facility Agent or any other Creditor
Party for the purposes of the Finance Documents Provided that until the
completion of the syndication process (as referred to in Clause 12.8) an
Owner may continue to maintain any other accounts already opened with
other banks for the purposes of previous
financings;
|
|
(e)
|
cause
the common units of the Borrower to cease to be listed on the Nasdaq
National Market in New York unless the common units of the Borrower are
listed instead on any other internationally recognised stock exchange
acceptable to the Lenders, such acceptance not to be unreasonably
withheld.
|
|
12.4
|
Subordination of rights of
Borrower. All rights which the Borrower at any time has against any
Owner or its assets shall be fully subordinated to the rights of the
Creditor Parties under the Finance Documents; and in
particular, the Borrower shall not during the Security
Period:
|
|
(a)
|
claim,
or in a bankruptcy of any Owner prove for, any amount payable to the
Borrower by any Owner, whether in respect of the on-lending of the Loan or
any other transaction;
|
|
(b)
|
take
or enforce any Security Interest for any such amount;
or
|
|
(c)
|
claim
to set-off any such amount against any amount payable by the Borrower to
any Owner.
|
|
12.5
|
Financial
Covenants. The Borrower shall ensure that at all
times:
|
|
(a)
|
the
ratio of Total Indebtedness less unencumbered cash and cash equivalents to
the aggregate Market Value of all the Fleet Vessels shall not exceed
0.725:1;
|
|
(b)
|
the
ratio of EBITDA to Net Interest Expenses (calculated on a trailing
4-quarter basis (or such other period as the Facility Agent (acting upon
the instructions of the Majority Lenders) may otherwise reasonably
require)) shall be no less than 2:1;
and
|
|
(c)
|
at
all times the Borrower and all the other members of the Group shall
maintain immediately freely available and unencumbered bank or cash
deposits in an aggregate amount of not less than the product of $500,000
and the number of Ships which are subject to a Mortgage at the relevant
time, 50 per cent. of such liquidity may be constituted by undrawn
Commitments under the Revolving
Facility.
|
|
12.6
|
Compliance
Check. Compliance with the undertakings contained in
Clause 12.5 shall be determined by reference to the unaudited consolidated
accounts for the first 3 financial quarters in each Financial Year of the
Borrower and for the fourth financial quarter in each Financial Year of
the Borrower, the audited consolidated accounts for that Financial Year of
the Group delivered to the Facility Agent pursuant to this
Agreement. At the same
time as it delivers those consolidated accounts, the Borrower shall
deliver to the Facility Agent a Compliance Certificate signed by the chief
financial officer of the
Borrower.
|
|
12.7
|
Maintenance of ownership of
Owners. The Borrower shall remain the ultimate legal
owner of the entire issued and allotted share capital of each Owner which
at the relevant time is party to a Guarantee free from any Security
Interest.
|
|
12.8
|
Free Syndication
market. The Borrower shall not, and shall ensure that no
Owner and no member of the Group shall, until the earlier of 30 August
2008 and the date on which the Facility Agent declares that the primary
syndication of the Loan has closed:
|
|
(a)
|
syndicate
or issue or attempt to syndicate or issue;
or
|
|
(b)
|
announce
or authorise the announcement of the syndication or issuance of;
or
|
|
(c)
|
engage
in discussions concerning the syndication or issuance
of,
|
any
Financial Indebtedness with any banks or financial institutions in the
commercial banking market Provided that this shall not
restrict the Borrower from incurring any further Financial Indebtedness to banks
or financial institutions (other than the Lenders) subject to the Facility Agent
having been given the opportunity to match the terms and conditions of any
financing offered to the Borrower.
|
13
|
|
13.1
|
General. The
Borrower undertakes with each Creditor Party to procure that each Owner
will comply with the following provisions of this Clause 13 at all times
during the Security Period (after the Ship which is owned or to be owned
by that Owner has been delivered to it under the relevant Shipbuilding
Contract) except as the Facility Agent may, with the authorisation of the
Majority Lenders, otherwise permit (which permission has been given to
each Owner whose Ship is subject to a bareboat charter with BP and such
permission shall be deemed to be given to each Owner whose Ship may from
time to time be subject to a bareboat charter with
BP).
|
|
13.2
|
Maintenance of obligatory
insurances. The Borrower shall procure that each Owner
will keep the Ship owned by it insured at the expense of that Owner
against:
|
|
(a)
|
fire
and usual marine risks (including hull and machinery and excess risks);
and
|
|
(b)
|
war
risks; and
|
|
(c)
|
protection
and indemnity risks in excess of the limit of cover for oil pollution
liability risks included within the protection and indemnity risks;
and
|
|
(d)
|
any
other risks against which the Majority Lenders consider, having regard to
practices and other circumstances prevailing at the relevant time, it
would in the opinion of the Majority Lenders be reasonable for that Owner
to insure and which are specified by the Security Trustee by notice to
that Owner.
|
|
13.3
|
Terms of obligatory
insurances. The Borrower shall procure that each Owner
will effect such insurances:
|
|
(a)
|
in
Dollars;
|
|
(b)
|
in
the case of fire and usual marine risks and war risks, in such amounts as
shall from time to time be approved by the Facility Agent but in any event
in an amount not less than
the greater of (i) the Market Value of the Ship owned by that Owner for
the time being and (ii) such amount, which when aggregated with the amount
for which any other Ship then subject to a Mortgage is insured, is equal
to 120 per cent. of the Loan;
and
|
|
(c)
|
in
the case of oil pollution liability risks, for an aggregate amount equal
to the highest level of cover from time to time available under basic
protection and indemnity club entry (with the international group of
protection and indemnity clubs) and the international marine insurance
market (currently $1,000,000,000);
|
|
(d)
|
in
relation to protection and indemnity risks in respect of the full value
and tonnage of the Ship owned by that
Owner;
|
|
(e)
|
on
such terms as shall from time to time be approved in writing by the
Facility Agent (including, without limitation, a blocking and trapping
clause); and
|
|
(f)
|
through
approved brokers and with approved insurance companies and/or underwriters
or, in the case of war risks and protection and indemnity risks, in
approved war risks and protection and indemnity risks
associations.
|
|
13.4
|
Further protections for the
Creditor Parties. In addition to the terms set out in
Clause 13.3, the Borrower shall procure that the obligatory insurances
shall:
|
|
(a)
|
(except
in relation to risks referred to in Clause 13.2(c)) name (or be amended to
name) the Security Trustee as additional named assured for its rights and
interests, warranted no operational interest and with full waiver of
rights of subrogation against the Security Trustee, but without the
Security Trustee thereby being liable to pay (but having the right to pay)
premiums, calls or other assessments in respect of such insurance and
shall not name any other additional assured without the prior written
consent of the Security Trustee, such consent not to be unreasonably
withheld and excluding the Approved Manager and any bareboat
charterer;
|
|
(b)
|
name
the Security Trustee as sole loss payee with such directions for payment
as the Security Trustee may
specify;
|
|
(c)
|
provide
that all payments by or on behalf of the insurers under the obligatory
insurances to the Security Trustee shall be made without set-off,
counterclaim or deductions or condition
whatsoever;
|
|
(d)
|
provide
that the insurers shall waive, to the fullest extent permitted by English
law, their entitlement (if any) (whether by statute, common law, equity,
or otherwise) to be subrogated to the rights and remedies of the Security
Trustee in respect of any rights or interests (secured or not) held by or
available to the Security Trustee in respect of the Secured Liabilities,
until the Secured Liabilities shall have been fully repaid and discharged,
except that the insurers shall not be restricted by the terms of this
paragraph (d) from making personal claims against persons (other than the
Owners or any Creditor Party) in circumstances where the insurers have
fully discharged their liabilities and obligations under the relevant
obligatory insurances;
|
|
(e)
|
provide
that such obligatory insurances shall be primary without right of
contribution from other insurances which may be carried by the Security
Trustee;
|
|
(f)
|
provide
that the Security Trustee may make proof of loss if the Owners fail to do
so; and
|
|
(g)
|
provide
that if any obligatory insurance is cancelled, or if any substantial
change is made in the coverage which adversely affects the interest of the
Security Trustee, or if any obligatory insurance is allowed to lapse for
non-payment of premium, such cancellation, charge or lapse shall not be
effective with respect to the Security Trustee for 30 days (or 7 days
in the case of war risks) after receipt by the Security Trustee of prior
written notice from the insurers of such cancellation, change or
lapse.
|
|
13.5
|
Renewal of obligatory
insurances. The Borrower shall procure that each Owner
shall:
|
|
(a)
|
at
least 21 days before the expiry of any obligatory
insurance:
|
|
|
(i)
|
notify
the Security Trustee of the brokers (or other insurers) and any protection
and indemnity or war risks association through or with whom that Owner
proposes to renew that insurance and of the proposed terms of renewal;
and
|
|
|
(ii)
|
in
case of any substantial change in insurance cover, obtain the Majority
Lenders’ approval to the matters referred to in paragraph (i)
above;
|
|
(b)
|
at
least 14 days before the expiry of any obligatory insurance, renew the
insurance; and
|
|
(c)
|
procure
that the approved brokers and/or the war risks and protection and
indemnity associations with which such a renewal is effected shall
promptly after the renewal notify the Security Trustee in writing of the
terms and conditions of the
renewal.
|
|
13.6
|
Copies of policies; letters of
undertaking. The Borrower shall procure that each Owner
shall ensure that all approved brokers provide the Security Trustee with
copies of all policies relating to the obligatory insurances which they
effect or renew and of a letter or letters of undertaking in a form
required by the Majority Lenders and including undertakings by the
approved brokers that:
|
|
(a)
|
they
will have endorsed on each policy, immediately upon issue, a loss payable
clause and a notice of assignment complying with the provisions of Clause
13.4;
|
|
(b)
|
they
will hold such policies, and the benefit of such insurances, to the order
of the Security Trustee in accordance with the said loss payable
clause;
|
|
(c)
|
they
will advise the Security Trustee immediately of any material change to the
terms of the obligatory insurances;
|
|
(d)
|
they
will notify the Security Trustee, not less than 14 days before the expiry
of the obligatory insurances, in the event of their not having received
notice of renewal instructions from that Owner or its agents and, in the
event of their receiving instructions to renew, they will promptly notify
the Security Trustee of the terms of the instructions;
and
|
|
(e)
|
they
will not set off against any sum recoverable in respect of a claim
relating to the Ship owned by that Owner under such obligatory insurances
any premiums or other amounts due to them or any other person whether in
respect of that Ship or otherwise, they waive any lien on the policies or,
any sums received under them, which they might have in respect of such
premiums or other amounts, and they will not cancel such obligatory
insurances by reason of non-payment of such premiums or other amounts, and
will arrange for a separate policy to be issued in respect of that Ship
forthwith upon being so requested by the Security
Trustee.
|
|
13.7
|
Copies of certificates of
entry. The Borrower shall procure that each Owner shall
ensure that any protection and indemnity and/or war risks associations in
which the Ship owned by that Owner is entered provides the Security
Trustee with:
|
|
(a)
|
a
certified copy of the certificate of entry for that Ship;
and
|
|
(b)
|
a
letter or letters of undertaking in such form as may be required by the
Majority Lenders; and
|
|
(c)
|
where
required to be issued under the terms of insurance/indemnity provided by
that Owner’s protection and indemnity association, a certified copy of
each United States of America voyage quarterly declaration (or other
similar document or documents) made by that Owner in relation to its Ship
in accordance with the requirements of such protection and indemnity
association; and
|
|
(d)
|
a
certified copy of each certificate of financial responsibility for
pollution by oil or other Environmentally Sensitive Material issued by the
relevant certifying authority in relation to that
Ship.
|
|
13.8
|
Deposit of original
policies. The Borrower shall procure that each Owner
shall ensure that all policies relating to obligatory insurances are
deposited with the approved brokers through which the insurances are
effected or renewed.
|
|
13.9
|
Payment of
premiums. The Borrower shall procure that each Owner
shall punctually pay all premiums or other sums payable in respect of the
obligatory insurances and produce all relevant receipts when so required
by the Security Trustee.
|
|
13.10
|
Guarantees. The
Borrower shall procure that each Owner shall ensure that any guarantees
required by a protection and indemnity or war risks association are
promptly issued and remain in full force and
effect.
|
|
13.11
|
Restrictions on
employment. The Borrower shall procure that no Owner
shall employ the Ship owned by it, nor shall permit her to be employed,
outside the cover provided by any obligatory
insurances.
|
|
13.12
|
Compliance with terms of
insurances. The Borrower shall procure that no Owner
shall do or omit to do (or permits to be done or not to be done) any act
or thing which would or might render any obligatory insurance invalid,
void, voidable or unenforceable or render any sum payable thereunder
repayable in whole or in part; and in
particular:
|
|
(a)
|
the
Borrower shall procure that each Owner shall take all necessary action and
comply with all requirements which may from time to time be applicable to
the obligatory insurances, and (without limiting the obligation contained
in Clause 13.7(c) above) ensure that the obligatory insurances are not
made subject to any exclusions or qualifications to which the Security
Trustee has not given its prior
approval;
|
|
(b)
|
the
Borrower shall procure that no Owner shall make any changes relating to
the classification or classification society or manager or operator of the
Ship owned by it approved by the underwriters of the obligatory
insurances;
|
|
(c)
|
the
Borrower shall procure that each Owner shall make all quarterly or other
voyage declarations which may be required by the protection and indemnity
risks association in which the Ship owned by it is entered to maintain
cover for trading to the United States of America and Exclusive Economic
Zone (as defined in the United States Oil Pollution Act 1990 or any other
applicable legislation); and
|
|
(d)
|
the
Borrower shall procure that no Owner shall employ the Ship owned by it,
nor shall allow it to be employed, otherwise than in conformity with the
terms and conditions of the obligatory insurances, without first obtaining
the consent of the insurers and complying with any requirements (as to
extra premium or otherwise) which the insurers
specify.
|
|
13.13
|
Alteration to terms of
insurances. The Borrower shall procure that no Owner
shall either make or agree to any alteration to the terms of any
obligatory insurance or waive any right relating to any obligatory
insurance without the prior written consent of the Security
Trustee.
|
|
13.14
|
Settlement of
claims. The Borrower shall procure that no Owner shall
settle, compromise or abandon any claim under any obligatory insurance for
Total Loss or for a Major Casualty, and shall procure that the relevant
Owner shall do all things necessary and provide all documents, evidence
and information to enable the Security Trustee to collect or recover any
moneys which at any time become payable in respect of the obligatory
insurances.
|
|
13.15
|
Provision of copies of
communications. The Borrower shall procure that each
Owner shall provide the Security Trustee, at the time of each such
communication, copies of all written communications between that Owner
and:
|
|
(a)
|
the
approved brokers; and
|
|
(b)
|
the
approved protection and indemnity and/or war risks associations;
and
|
|
(c)
|
the
approved insurance companies and/or underwriters, which relate directly or
indirectly to:
|
|
|
(i)
|
that
Owner’s obligations relating to the obligatory insurances including,
without limitation, all requisite declarations and payments of additional
premiums or calls; and
|
|
|
(ii)
|
any
credit arrangements made between that Owner and any of the persons
referred to in paragraphs (a) or (b) above relating wholly or partly to
the effecting or maintenance of the obligatory
insurances.
|
|
13.16
|
Provision of
information. In addition, the Borrower shall procure
that each Owner shall promptly provide the Security Trustee (or any
persons which it may designate) with any information which the Security
Trustee (or any such designated person) requests for the purpose
of:
|
|
(a)
|
obtaining
or preparing any report from an independent marine insurance broker as to
the adequacy of the obligatory insurances effected or proposed to be
effected; and/or
|
|
(b)
|
effecting,
maintaining or renewing any such insurances as are referred to in Clause
13.17 below or dealing with or considering any matters relating to any
such insurances, and
the Borrower shall procure that each Owner shall, forthwith upon demand,
indemnify the Security Trustee in respect of all reasonable fees and other
expenses incurred by or for the account of the Security Trustee in
connection with any such report as is referred to in paragraph (a)
above.
|
|
13.17
|
Mortgagee’s interest,
additional perils. The Security Trustee shall be
entitled from time to time to effect, maintain and renew all or any of the
following insurances in an amount equal to 120 per cent. of the Loan in
the case of the mortgagee’s interest marine insurance referred to in
paragraph (a) below and in an amount equal to 110 per cent. of the Loan in
the case of the mortgagee’s interest additional perils policy referred to
in paragraph (b) below, on such terms, through such insurers and generally
in such manner as the Majority Lenders may from time to time consider
appropriate:
|
|
(a)
|
a
mortgagee’s interest marine insurance in relation to each Ship in such
amount as the Security Trustee may consider appropriate, providing for the
indemnification of the Security
Trustee for any losses under or in connection with any Finance Document
which directly or indirectly result from loss of or damage to any Ship or
a liability of any Ship or of any Owner, being a loss or damage which is
prima facie covered by an obligatory insurance but in respect of which
there is a non-payment (or reduced payment) by the underwriters by reason
of, or on the basis of an allegation
concerning:
|
|
|
(i)
|
any
act or omission on the part of an Owner, of any operator, charterer,
manager or sub-manager of the Ship owned by it or of any officer, employee
or agent of that Owner or of any such person, including any breach of
warranty or condition or any non-disclosure relating to such obligatory
insurance;
|
|
|
(ii)
|
any
act or omission, whether deliberate, negligent or accidental, or any
knowledge or privity of an Owner, any other person referred to in
paragraph (i) above, or of any officer, employee or agent of that Owner or
of such a person, including the casting away or damaging of the Ship owned
by it and/or the Ship owned by it being unseaworthy;
and/or
|
|
|
(iii)
|
any
other matter capable of being insured against under a mortgagee’s interest
marine insurance policy whether or not similar to the
foregoing;
|
|
(b)
|
a
mortgagee’s interest additional perils policy in relation to each Ship in
such amount as the Security Trustee may consider appropriate, providing
for the indemnification of the Security Trustee against, among other
things, any possible losses or other consequences of any Environmental
Claim, including the risk of expropriation, arrest or any form of
detention of a Ship, the imposition of any Security Interest over a Ship
and/or any other matter capable of being insured against under a
mortgagee’s interest additional perils policy whether or not similar to
the foregoing,
|
|
and
the Borrower shall upon demand fully indemnify the Security Trustee in
respect of all premiums and other expenses which are incurred in
connection with or with a view to effecting, maintaining or renewing any
such insurance or dealing with, or considering, any matter arising out of
any such insurance.
|
|
13.18
|
Review of insurance
requirements. The Majority Lenders shall be entitled to
review the requirements of this Clause 13 from time to time in order to
take account of any changes in circumstances after the date of this
Agreement which are, in the opinion of the Majority Lenders, significant
and capable of affecting the Borrower or any Ship and its or their
insurance (including, without limitation, changes in the availability or
the cost of insurance coverage or the risks to which the Owners may be
subject), and may appoint insurance consultants in relation to this review
at the cost of the Borrower.
|
|
13.19
|
Modification of insurance
requirements. The Security Trustee shall notify the
Borrower of any proposed modification under Clause 13.18 to the
requirements of this Clause 13 which the Majority Lenders reasonably
consider appropriate in the circumstances, and such modification shall
take effect on and from the date it is notified in writing to the Borrower
as an amendment to this Clause 13 and shall bind the Borrower
accordingly.
|
|
13.20
|
Compliance with mortgagee’s
instructions. The Security Trustee shall be entitled
(without prejudice to or limitation of any other rights which it may have
or acquire under any Finance Document) to require a Ship to remain at any
safe port or to proceed to and remain at any safe port designated by the
Security Trustee until the relevant Owner implements any amendments to the
terms of the obligatory insurances and any operational changes required as
a result of a notice served under Clause
13.19.
|
|
14.1
|
General. The
Borrower also undertakes with each Creditor Party to procure that each
Owner complies with the following provisions of this Clause 14 at all
times during the Security Period (after the Ship has been delivered to it
under the Shipbuilding Contract) except as the Facility Agent, with the
authorisation of the Majority Lenders, may otherwise permit (in the case
of the Clauses 14.2, 14.3(b) and 14.13(e), such permission not to be
unreasonably withheld).
|
|
14.2
|
Ship’s name and
registration. The Borrower shall procure that each Owner
shall keep the Ship owned by it registered in its name under the relevant
Approved Flag; shall not do or allow to be done anything as a result of
which such registration might be cancelled or imperilled; and shall not
change the name or port of registry of that
Ship.
|
|
14.3
|
Repair and
classification. The Borrower shall procure that each
Owner shall keep the Ship owned by it in a good and safe condition and
state of repair:
|
|
(a)
|
consistent
with first-class ship ownership and management
practice;
|
|
(b)
|
so
as to maintain the highest class with an Approved Classification Society
acceptable to the Majority Lenders free of overdue recommendations and
conditions and, upon the Security Trustee’s request, the Approved
Classification Society shall provide the Security Trustee with any
information and documentation required in respect of the Ship as the same
is maintained in the records of the Approved Classification Society;
and
|
|
(c)
|
so
as to comply with all laws and regulations applicable to vessels
registered at ports in the relevant Approved Flag State or to vessels
trading to any jurisdiction to which that Ship may trade from time to
time, including but not limited to the ISM Code, the ISM Code
Documentation and the ISPS Code.
|
|
14.4
|
Modification. The
Borrower shall procure that no Owner shall make any modification or
repairs to, or replacement of, any Ship or equipment installed on her
which would or might materially alter the structure, type or performance
characteristics of that Ship or materially reduce her
value.
|
|
14.5
|
Removal of
parts. The Borrower shall procure that no Owner shall
remove any material part of any Ship, or any item of equipment installed
on, any Ship unless the part or item so removed is forthwith replaced by a
suitable part or item which is in the same condition as or better
condition than the part or item removed, is free from any Security
Interest or any right in favour of any person other than the Security
Trustee and becomes on installation on the relevant Ship the property of
the relevant Owner and subject to the security constituted by the Mortgage
and the Deed of Covenant Provided that an Owner
may install equipment owned by a third party if the equipment can be
removed without any risk of damage to the Ship owned by
it.
|
|
14.6
|
Surveys. The
Borrower shall procure that each Owner shall submit the Ship owned by it
regularly to all periodical or other surveys which may be required for
classification purposes and, if so required by the Majority Lenders
provide the Security Trustee, with copies of all survey
reports.
|
|
14.7
|
Technical
Survey. Without prejudice to the Owners’ obligations
pursuant to Clause 14.6, if the survey report to be delivered as a
condition to the drawdown of the Advance which shall be used to (inter
alia) finance or refinance a Ship (as referred to in the applicable
paragraph of Schedule 3) is not satisfactory to the Facility Agent (acting
reasonably), the Borrower shall procure that the relevant Owner shall
promptly following the request of the Facility Agent (to be made within 6
months of the Drawdown Date relative to the Advance which was used (inter
alia) to finance or refinance such Ship) submit
the Ship owned by it for a technical survey by an independent surveyor or
surveyors appointed by the Facility Agent. All fees and expenses incurred
in relation to the appointment of the surveyor or surveyors and the
preparation and issue of all technical reports pursuant to this Clause
14.7 shall be for the account of the
Borrower.
|
|
14.8
|
Inspection. The
Borrower shall procure that each Owner shall permit the Security Trustee
(by surveyors or other persons appointed by it for that purpose) to board
the Ship owned by it at all reasonable times to inspect her condition or
to satisfy themselves about proposed or executed repairs and shall afford
all proper facilities for such inspections Provided
that so long as a Ship is found to be in a satisfactory
condition to the Facility Agent (acting reasonably) and no continuing
Event of Default or Potential Event of Default shall be in existence, the
Borrower or the relevant Owner, as the case may be, shall not be obliged
to pay the fees and expenses incurred in connection with the inspection of
the relevant Ship more than once in any twelve-month
period.
|
|
14.9
|
Prevention of and release from
arrest. The Borrower shall procure that each Owner shall
promptly discharge:
|
|
(a)
|
all
liabilities which give or may give rise to maritime or possessory liens on
or claims enforceable against the Ship owned by it, the Earnings or the
Insurances;
|
|
(b)
|
all
taxes, dues and other amounts charged in respect of the Ship owned by it,
the Earnings or the Insurances; and
|
|
(c)
|
all
other outgoings whatsoever in respect of the Ship owned by it, the
Earnings or the Insurances,
|
|
and,
forthwith upon receiving notice of the arrest of the Ship owned by it, or
of her detention in exercise or purported exercise of any lien or claim,
the Borrower shall procure her release by providing bail or otherwise as
the circumstances may require.
|
|
14.10
|
Compliance with laws
etc. The Borrower shall procure that each Owner
shall:
|
|
(a)
|
comply,
or procure compliance with the ISM Code, all Environmental Laws, the ISPS
Code and all other laws or regulations relating to the Ship owned by it,
its ownership, operation and management or to the business of that
Owner;
|
|
(b)
|
not
employ the Ship owned by it nor allow her employment in any manner
contrary to any law or regulation in any relevant jurisdiction including,
but not limited, to the ISM Code and the ISPS Code;
and
|
|
(c)
|
in
the event of hostilities in any part of the world (whether war is declared
or not), not cause or permit the Ship owned by it to enter or trade to any
zone which is declared a war zone by any government or by the Ship’s war
risks insurers unless the prior written consent of the Majority Lenders
has been given and that Owner has (at its expense) effected any special,
additional or modified insurance cover which the Majority Lenders may
require.
|
|
14.11
|
Provision of
information. The Borrower shall procure that each Owner
shall promptly provide the Security Trustee with any information which the
Majority Lenders request regarding:
|
|
(a)
|
the
Ship owned by it, her employment, position and
engagements;
|
|
(b)
|
the
Earnings and payments and amounts due to the master and crew of the Ship
owned by it;
|
|
(c)
|
any
expenses incurred, or likely to be incurred, in connection with the
operation, maintenance or repair of the Ship owned by it and any payments
made in respect of that Ship;
|
|
(d)
|
any
towages and salvages; and
|
|
(e)
|
its
compliance or the compliance of the Ship owned by it with the ISM Code and
the ISPS Code, and,
upon the Security Trustee’s request, provide copies of any current charter
relating to the Ship owned by it and of any current charter guarantee, and
copies of the ISM Code Documentation and the
ISCC.
|
|
14.12
|
Notification of certain
events. The Borrower shall procure that each Owner shall
immediately notify the Security Trustee by letter
of:
|
|
(a)
|
any
casualty which is or is likely to be or to become a Major
Casualty;
|
|
(b)
|
any
occurrence as a result of which the Ship owned by it has become or is, by
the passing of time or otherwise, likely to become a Total
Loss;
|
|
(c)
|
any
requirement or recommendation made by any insurer or classification
society or by any competent authority which is not immediately complied
with;
|
|
(d)
|
any
arrest or detention of the Ship owned by it, any exercise or purported
exercise of any lien on that Ship or her Earnings or any requisition of
that Ship for hire,
|
|
(e)
|
any
intended dry docking of the Ship owned by it where the cost of the dry
docking will, or is likely to, exceed $500,000 (or the equivalent in any
other currency) in aggregate;
|
|
(f)
|
any
Environmental Claim made against that Owner or in connection with the Ship
owned by it, or any Environmental
Incident;
|
|
(g)
|
any
claim for breach of the ISM Code or the ISPS Code being made against that
Owner, the Approved Manager or otherwise in connection with the Ship owned
by it; or
|
|
(h)
|
any
other matter, event or incident, actual or threatened, the effect of which
will or could lead to the ISM Code or the ISPS Code not being complied
with,
|
|
and
that Owner shall keep the Security Trustee advised in writing on a regular
basis and in such detail as the Security Trustee shall require of that
Owner’s, the Approved Manager’s or any other person’s response to any of
those events or matters.
|
|
14.13
|
Restrictions on, appointment of
managers etc. The Borrower shall procure that
no Owner shall:
|
|
(a)
|
enter
into any time charter in relation to the Ship owned by it under which more
than 2 months’ hire (or the equivalent) is payable in
advance;
|
|
(b)
|
charter
the Ship owned by it otherwise than on bona fide arm’s length terms at the
time when the Ship is fixed;
|
|
(c)
|
appoint
a manager of the Ship owned by it other than the Approved
Manager;
|
|
(d)
|
de-activate
or lay up the Ship owned by it; or
|
|
(e)
|
put
the Ship owned by it into the possession of any person for the purpose of
work being done upon her in an amount exceeding or likely to exceed
$750,000 (or the equivalent in any other currency) unless that person has
first given to the Security Trustee and in terms satisfactory to it a
written undertaking not to exercise any lien on that Ship or her Earnings
for the cost of such work or
otherwise.
|
|
14.14
|
Notice of
Mortgage. The Borrower shall procure that each Owner
shall keep the Mortgage registered against the Ship owned by it as a valid
first priority or, as the case may be, preferred mortgage, carry on board
that Ship a certified copy of the relevant Mortgage and place and maintain
in a conspicuous place in the navigation room and the Master’s cabin of
that Ship a framed printed notice stating that that Ship is mortgaged by
that Owner to the Security Trustee.
|
|
14.15
|
Sharing of
Earnings. The Borrower shall procure that no Owner
shall:
|
|
(a)
|
enter
into any agreement or arrangement for the sharing of any
Earnings;
|
|
(b)
|
enter
into any agreement or arrangement for the postponement of any date on
which any Earnings are due; the reduction of the amount of any Earnings or
otherwise for the release or adverse alteration of any right of that Owner
to any Earnings; or
|
|
(c)
|
enter
into any agreement or arrangement for the release of, or adverse
alteration to, any guarantee or Security Interest relating to any
Earnings.
|
|
14.16
|
Time Charter
Assignment. If any Owner enters into any Charterparty or
a bareboat charter in respect of its Ship, the Borrower shall procure that
the relevant Owner shall, at the request of the Facility Agent, execute in
favour of the Security Trustee a Charterparty Assignment or, in the case
of a bareboat charter, a Bareboat Charter Security Agreement, and shall
deliver to the Facility Agent such other documents equivalent to those
referred to at paragraphs 3, 4 and 5 of Part A of Schedule 3 hereof as the
Facility Agent may require.
|
|
14.17
|
Bareboat
Charters. Any Owner may enter into a bareboat
charter in respect of its Ship subject to the following
conditions:
|
|
(a)
|
such
bareboat charter shall be with one of the charterers which is a party to
an Existing Charter or an affiliate or subsidiary of such charterer or any
other company which in the reasonable opinion of the Majority Lenders is
equivalent to any such charterer or any other company which may be
approved by the Majority Lenders (acting reasonably)
and
|
|
(b)
|
each
such bareboat charterer shall enter into and execute a Bareboat Charter
Security Agreement except in circumstances where the Majority Lenders
(acting reasonably) may agree
otherwise.
|
|
15.1
|
Provision of additional
security cover; prepayment of Loan. The Borrower
undertakes with each Creditor Party that, if the Facility Agent notifies
the Borrower that at any time after the Drawdown Date of the first Advance
to be drawn under this Agreement the aggregate Market Value of the Ships
subject to a Mortgage is below 125 per cent. of the Loan, the Borrower
will, within 1 month after the date on which the Facility Agent’s notice
is served, either:
|
|
(a)
|
provide,
or ensure that a third party provides, additional security which, in the
opinion of the Majority Lenders, has a net realisable value at least equal
to the shortfall and which consists of either (i) cash pledged to the
Security Trustee or (ii) a Security Interest (including, but not limited
to, a first priority or, as the case may be, preferred mortgage over
another vessel), covering such asset or assets and documented in such
terms as the Facility Agent may, with authorisation from the Majority
Lenders, approve or require;
or
|
|
(b)
|
prepay
in accordance with Clause 8 such part (at least) of the Loan as will
eliminate the shortfall.
|
|
15.2
|
Meaning of additional
security. In Clause 15.1 “security” means a
Security Interest over an asset or assets (whether securing the Borrower’s
liabilities under the Finance Documents or a guarantee in respect of those
liabilities), or a guarantee, letter of credit or other security in
respect of the Borrower’s liabilities under the Finance
Documents.
|
|
15.3
|
Requirement for additional
documents. The Borrower shall not be deemed to have
complied with Clause 15.1(a) above until the Facility Agent has received
in connection with the additional security certified copies of documents
of the kinds referred to in paragraphs 3, 4 and 5 of Schedule 3, Part A
and such legal opinions in terms acceptable to the Majority Lenders from
such lawyers as they may select.
|
|
15.4
|
Valuation of
Ships. The market value of a Ship at any date is that
shown by the average of two valuations
prepared:
|
|
(a)
|
as
at a date not more than 14 days
previously;
|
|
(b)
|
by
2 Approved Brokers, one appointed by the Borrower and the other by the
Facility Agent;
|
|
(c)
|
with
or without physical inspection of the relevant Ship (as the Facility Agent
may require);
|
|
(d)
|
on
the basis of a sale for prompt delivery for cash on normal arm’s length
commercial terms as between a willing seller and a willing buyer, free of
any existing charter or other contract of employment;
and
|
|
(e)
|
after
deducting the estimated amount of the usual and reasonable expenses which
would be incurred in connection with the
sale,
|
Provided that if
the difference between the 2 valuations obtained at any one time pursuant to
this Clause 15.4 is greater than 15 per cent. a valuation shall be commissioned
from a third Approved Broker appointed by the Facility Agent. Such
valuation shall be conducted in accordance with this Clause 15.4 and the Market
Value of the Ship in such circumstances shall be the average of the initial 2
valuations and the valuation provided by the third Approved Broker.
|
15.5
|
Value of additional
security. The net realisable value of any additional
security which is provided under Clause 15.1 and which consists of a
Security Interest over a vessel shall be that shown by a valuation
complying with the requirements of Clause
15.4.
|
|
15.6
|
Valuations
binding. Any valuation under Clause 15.1(a), 15.4 or
15.5 shall be binding and conclusive as regards the Borrower, as shall be
any valuation which the Majority Lenders make of a security which does not
consist of or include a Security
Interest.
|
|
15.7
|
Provision of
information. The Borrower shall promptly provide the
Facility Agent and any Approved Broker or expert acting under Clause 15.4
or 15.5 with any information which the Facility Agent or the Approved
Broker or expert may request for the purposes of the valuation; and, if
the Borrower fails to provide the information by the date specified in the
request, the valuation may be made on any basis and assumptions which the
Approved Broker or the Majority Lenders (or the expert appointed by them)
consider prudent.
|
|
15.8
|
Payment of valuation
expenses. Without prejudice to the generality of the
Borrower’s obligations under Clauses 20.2, 20.3 and 21.3, the Borrower
shall, on demand, pay the Facility Agent the amount of the reasonable fees
and expenses of any Approved Broker or expert instructed by the Facility
Agent under this Clause and all reasonable legal and other expenses
incurred by any Creditor Party in connection with any matter arising out
of this Clause Provided that so long as
no Event of Default or Potential Event of Default shall have occurred and
be continuing the Borrower shall not be obliged to pay such fees or
expenses in respect of more than one set of valuations of each Ship in any
twelve-month period.
|
|
15.9
|
Frequency of
valuations. The Borrower acknowledges and agrees that
the Facility Agent may commission valuations of the Ships at such times as
the Majority Lenders shall reasonably deem necessary and, in any event,
not less often than once during each 12-month period of the Security
Period.
|
|
16.1
|
Currency and method of
payments. All payments to be
made:
|
|
(a)
|
by
the Lenders to the Facility Agent;
or
|
|
(b)
|
by
the Borrower to the Facility Agent, the Security Trustee or any
Lender,
|
|
under
a Finance Document shall be made to the Facility Agent or to the Security
Trustee, in the case of an amount payable to
it:
|
|
|
(i)
|
by
not later than 11.00 a.m. (New York City time) on the due
date;
|
|
|
(ii)
|
in
same day Dollar funds settled through the New York Clearing House
Interbank Payments System (or in such other Dollar funds and/or settled in
such other manner as the Facility Agent shall specify as being customary
at the time for the settlement of international transactions of the type
contemplated by this Agreement);
|
|
|
(iii)
|
in
the case of an amount payable by a Lender to the Facility Agent or by the
Borrower to the Facility Agent or any Lender, to the account of the
Facility Agent at JP Morgan Chase Bank, New York, SWIFT Code CHASUS33 (Account No
001-1-331808 under reference “Capital Product Partners L.P. - US$350m
Facility”), or to such other account with such other bank as the Facility
Agent may from time to time notify to the Borrower and the other Creditor
Parties; and
|
|
|
(iv)
|
in
the case of an amount payable to the Security Trustee, to such account as
it may from time to time notify to the Borrower and the other Creditor
Parties.
|
|
16.2
|
Payment on non-Business
Day. If any payment by the Borrower under a Finance
Document would otherwise fall due on a day which is not a Business
Day:
|
|
(a)
|
the
due date shall be extended to the next succeeding Business Day;
or
|
|
(b)
|
if
the next succeeding Business Day falls in the next calendar month, the due
date shall be brought forward to the immediately preceding Business
Day,
|
|
and
interest shall be payable during any extension under paragraph (a) at the
rate payable on the original due
date.
|
|
16.3
|
Basis for calculation of
periodic payments. All interest and commitment fee and
any other payments under any Finance Document which are of an annual or
periodic nature shall
accrue from day to day and shall be calculated on the basis of the actual
number of days elapsed and a 360 day
year.
|
|
16.4
|
Distribution of payments to
Creditor Parties. Subject to Clauses 16.5, 16.6 and
16.7:
|
|
(a)
|
any
amount received by the Facility Agent under a Finance Document for
distribution or remittance to a Lender or the Security Trustee shall be
made available by the Facility Agent to that Lender or, as the case may be
or the Security Trustee by payment, with funds having the same value as
the funds received, to such account as the Lender or the Security Trustee
may have notified to the Facility Agent not less than 5 Business Days
previously; and
|
|
(b)
|
amounts
to be applied in satisfying amounts of a particular category which are due
to the Lenders generally shall be distributed by the Facility Agent to
each Lender pro rata to the amount in that category which is due to
it.
|
|
16.5
|
Permitted deductions by
Facility Agent. Notwithstanding any other provision of this
Agreement or any other Finance Document, the Facility Agent may, before
making an amount available to a Lender, deduct and withhold from that
amount any sum which is then due and payable to the Facility Agent from
that Lender under any Finance Document or any sum which the Facility Agent
is then entitled under any Finance Document to require that Lender to pay
on demand.
|
|
16.6
|
Facility Agent only obliged to
pay when monies received. Notwithstanding any other
provision of this Agreement or any other Finance Document, the Facility
Agent shall not be obliged to make available to the Borrower or any Lender
any sum which the Facility Agent is expecting to receive for remittance or
distribution to the Borrower or that Lender until the Facility Agent has
satisfied itself that it has received that
sum.
|
|
16.7
|
Refund to Facility Agent of
monies not received. If and to the extent that the
Facility Agent makes available a sum to the Borrower or a Lender, without
first having received that sum, the Borrower or (as the case may be) the
Lender concerned shall, on demand:
|
|
(a)
|
refund
the sum in full to the Facility Agent;
and
|
|
(b)
|
pay
to the Facility Agent the amount (as certified by the Facility Agent)
which will indemnify the Facility Agent against any funding or other loss,
liability or expense incurred by the Facility Agent as a result of making
the sum available before receiving
it.
|
|
16.8
|
Facility Agent may assume
receipt. Clause 16.7 shall not affect any claim which
the Facility Agent has under the law of restitution, and applies
irrespective of whether the Facility Agent had any form of notice that it
had not received the sum which it made
available.
|
|
16.9
|
Creditor Party
accounts. Each Creditor Party shall maintain accounts
showing the amounts owing to it by the Borrower and each Security Party
under the Finance Documents and all payments in respect of those amounts
made by the Borrower and any Security
Party.
|
|
16.10
|
Facility Agent’s memorandum
account. The Facility Agent shall maintain a memorandum
account showing the amounts advanced by the Lenders and all other sums
owing to the Facility Agent and the Security Trustee and each Lender from
the Borrower and each Security Party under the Finance Documents and all
payments in respect of those amounts made by the Borrower and any Security
Party.
|
|
16.11
|
Accounts prima facie
evidence. If any accounts maintained under Clauses 16.9
and 16.10 show an amount to be owing by the Borrower or a Security Party
to a Creditor Party,
those accounts shall, absent manifest error, be prima facie evidence that
that amount is owing to that Creditor
Party.
|
|
17.1
|
Normal order of
application. Except as any Finance Document may
otherwise provide, any sums which are received or recovered by any
Creditor Party under or by virtue of any Finance Document shall be
applied:
|
|
(a)
|
FIRST:
in or towards satisfaction of any amounts then due and payable under the
Finance Documents (other than under the Master Agreement) in the following
order and proportions:
|
|
|
(i)
|
first,
in or towards satisfaction pro rata of all amounts then due and payable to
the Creditor Parties under the Finance Documents (other than the Master
Agreement) other than those amounts referred to at paragraphs (ii) and
(iii) (including, but without limitation, all amounts payable by the
Borrower under Clauses 20, 21 and 22 of this Agreement or by the Borrower
or any Security Party under any corresponding or similar provision in any
other Finance Document (other than the Master
Agreement));
|
|
|
(ii)
|
secondly,
in or towards satisfaction pro rata of any and all amounts of interest or
default interest payable to the Creditor Parties under the Finance
Documents (other than under the Master Agreement);
and
|
|
|
(iii)
|
thirdly,
in or towards satisfaction of the
Loan;
|
|
(b)
|
SECONDLY: in
or towards satisfaction of any amounts then due and payable under the
Master Agreement in the following order and
proportions:
|
|
|
(i)
|
first,
in or towards satisfaction pro rata of all amounts then due and payable to
the Swap Bank under the Master Agreement other than those amounts referred
to at paragraphs (ii) and (iii);
|
|
|
(ii)
|
secondly,
in or towards satisfaction pro rata of any and all amounts of interest or
default interest payable to the Swap Bank under the Master Agreement (and,
for this purpose, the expression “interest” shall include
any net amount which the Borrower shall have become liable to pay or
deliver under section 2(e) (Obligations) of the Master Agreement but shall
have failed to pay or deliver to the Swap Bank at the time of application
or distribution under this Clause 17);
and
|
|
|
(iii)
|
thirdly,
in or towards satisfaction of the Swap Exposure of the Swap Bank
calculated as at the actual Early Termination Date applying to each
particular Designated Transaction, or if no such Early Termination Date
shall have occurred, calculated as if an Early Termination Date occurred
on the date of application or distribution
hereunder);
|
|
(c)
|
THIRDLY:
in retention of an amount equal to any amount not then due and payable
under any Finance Document (other than the Master Agreement) but which the
Facility Agent, by notice to the Borrower, the Security Parties and the
other Creditor Parties, states in its opinion will or may become due and
payable in the future and, upon those amounts becoming due and payable, in
or towards satisfaction of them in accordance with the foregoing
provisions of this Clause;
|
|
(d)
|
FOURTHLY:
in retention of an amount equal to any amount not then due under and
payable under the Master Agreement but which the Swap Bank, by notice to
the Borrower,
the Security Parties and the other Creditor Parties, states in its opinion
will or may become due and payable in the future and, upon those amounts
becoming due and payable, in or towards satisfaction of them in accordance
with the foregoing provisions of this Clause;
and
|
|
(e)
|
FIFTHLY:
any surplus shall be paid to the Borrower or to any other person appearing
to be entitled to it.
|
|
17.2
|
Variation of order of
application. The Facility Agent may, with the
authorisation of the Majority Lenders, by notice to the Borrower, the
Security Parties and the other Creditor Parties provide for a different
manner of application from that set out in Clause 17.1 either as regards a
specified sum or sums or as regards sums in a specified category or
categories.
|
|
17.3
|
Notice of variation of order of
application. The Facility Agent may give notices under
Clause 17.2 from time to time; and such a notice may be stated to apply
not only to sums which may be received or recovered in the future, but
also to any sum which has been received or recovered on or after the third
Business Day before the date on which the notice is
served.
|
|
17.4
|
Appropriation rights
overridden. This Clause 17 and any notice which the
Facility Agent gives under Clause 17.2 shall override any right of
appropriation possessed, and any appropriation made, by the Borrower or
any Security Party.
|
|
18.1
|
Payment of
Earnings. The Borrower undertakes with each Creditor
Party to ensure that, throughout the Security Period (subject only to the
provisions of the General Assignments), all the Earnings of each Ship are
paid to the Earnings Account for that Ship and all payments by the Swap
Bank to the Borrower under a Designated Transaction are paid to the Swap
Account. Any monies standing to the credit of the Earnings
Accounts shall be freely available to the Owners subject to there not
being any Event of Default or Potential Event of Default in existence at
the relevant time.
|
|
18.2
|
Retentions. The
Borrower undertakes with each Creditor Party (only if the circumstances
referred to in Clause 8.2(a) shall apply at the relevant time) to ensure
that no later than 3 Business Days after a Relevant Distribution
Declaration Date, there shall be transferred to the Retention Account out
of the aggregate Earnings received in the Earnings Accounts, the repayment
instalment falling due under Clause 8.2(a) at that
time.
|
|
18.3
|
Application of
Earnings. The Borrower undertakes with the Lenders to
procure that money from time to time credited to, or for the time being
standing to the credit of, an Earnings Account shall, unless and until an
Event of Default or Potential Event of Default shall have occurred
(whereupon the provisions of Clause 17.1 shall be and become applicable),
be available for application in the following
manner:
|
|
(a)
|
in
or towards meeting the costs and expenses from time to time incurred by or
on behalf of the relevant Owner in connection with the operation of the
Ship owned by it;
|
|
(b)
|
in
or towards making payments of all amounts due and payable by the Borrower
under this Agreement other than the payments of principal and interest
pursuant to Clauses 8.2 and 5.1;
|
|
(c)
|
in
or towards making any transfers to the Retention Account in accordance
with Clause 18.2; and
|
|
(d)
|
as
to any surplus from time to time arising on an Earnings Account following
application as aforesaid, to be paid to the relevant Owner or to
whomsoever it may direct.
|
|
18.4
|
Application of
retentions. Until an Event of Default occurs, the
Facility Agent shall on each due date for the payment of interest under
this Agreement distribute to the Lenders in accordance with Clause 16.4 so
much of the then balance on the Retention Account as equals any repayment
instalment due in accordance with Clause 8.2(a) on that interest payment
date in discharge of the Borrower’s liability for that repayment
instalment.
|
|
18.5
|
Interest accrued on Retention
Account. Any credit balance on the Retention Account
shall bear interest at the rate from time to time offered by the Facility
Agent to its customers for Dollar deposits of similar amounts and for
periods similar to those for which such balances appear to the Facility
Agent likely to remain on the Retention
Account.
|
|
18.6
|
Release of accrued
interest. Interest accruing under Clause 18.5 shall be
released to the Borrower on each interest payment date unless an Event of
Default or a Potential Event of Default has occurred or the then credit
balance on the Retention Account is less than what would have been the
balance had the full amount required by Clause 18.2 been transferred in
that and each previous month.
|
|
18.7
|
Location of
accounts. The Borrower shall
promptly:
|
|
(a)
|
comply
or procure compliance by the Owners with any requirement of the Facility
Agent as to the location or re-location of the Retention Account, the Swap
Account and the Earnings Accounts (or any of them);
and
|
|
(b)
|
execute
any documents which the Facility Agent specifies to create or maintain in
favour of the Lenders a Security Interest over the Retention Account, the
Swap Account and the Earnings Accounts (or any of
them).
|
|
19.1
|
Events of
Default. An Event of Default occurs
if:
|
|
(a)
|
the
Borrower or any Security Party fails to pay when due or (if so payable) on
demand any sum payable under a Finance Document or under any document
relating to a Finance Document; or
|
|
(b)
|
any
breach occurs of Clause 9.2, 11.2, 11.3, 12.2, 12.3, 12.5, 13.2, 13.3,
15.1 or 18.1; or
|
|
(c)
|
any
breach by the Borrower or any Security Party occurs of any provision of a
Finance Document (other than a breach covered by paragraphs (a) or (b)
above) if, in the reasonable opinion of the Majority Lenders, such default
is capable of remedy, and such default continues unremedied 20 days after
written notice from the Facility Agent requesting action to remedy the
same; or
|
|
(d)
|
(subject
to any applicable grace period specified in the Finance Document) any
breach by the Borrower or any Security Party occurs of any provision of a
Finance Document (other than a breach covered by paragraphs (a), (b) or
(c) above); or
|
|
(e)
|
any
representation, warranty or statement made by, or by an officer of, the
Borrower or a Security Party in a Finance Document or in a Drawdown Notice
or any other notice or document relating to a Finance Document is untrue
or misleading when it is made; or
|
|
(f)
|
any
of the following occurs in relation to any Financial Indebtedness of a
Relevant Person exceeding $750,000 (or, in the case of the Borrower,
$5,000,000) (or, in either case, the equivalent in any other currency) in
aggregate:
|
|
|
(i)
|
any
Financial Indebtedness of a Relevant Person is not paid when due or, if so
payable, on demand; or
|
|
|
(ii)
|
any
Financial Indebtedness of a Relevant Person becomes due and payable or
capable of being declared due and payable prior to its stated maturity
date as a consequence of any event of default;
or
|
|
|
(iii)
|
a
lease, hire purchase agreement or charter creating any Financial
Indebtedness of a Relevant Person is terminated by the lessor or owner or
becomes capable of being terminated as a consequence of any termination
event; or
|
|
|
(iv)
|
any
overdraft, loan, note issuance, acceptance credit, letter of credit,
guarantee, foreign exchange or other facility, or any swap or other
derivative contract or transaction, relating to any Financial Indebtedness
of a Relevant Person ceases to be available or becomes capable of being
terminated as a result of any event of default, or cash cover is required,
or becomes capable of being required, in respect of such a facility as a
result of any event of default; or
|
|
|
(v)
|
any
Security Interest securing any Financial Indebtedness of a Relevant Person
becomes enforceable; or
|
|
(g)
|
any
of the following occurs in relation to a Relevant
Person:
|
|
|
(i)
|
a
Relevant Person becomes, in the reasonable opinion of the Majority
Lenders, unable to pay its debts as they fall due;
or
|
|
|
(ii)
|
any
assets of a Relevant Person are subject to any form of execution,
attachment, arrest, sequestration or distress in respect of a sum of, or
sums aggregating, $1,000,000 or more or the equivalent in another currency
unless such execution, attachment, arrest, sequestration or distress is
dismissed, withdrawn, released or lifted within 15 Business Days of the
occurrence of such event; or
|
|
|
(iii)
|
any
administrative or other receiver is appointed over any asset of a Relevant
Person; or
|
|
|
(iv)
|
a
Relevant Person makes any formal declaration of bankruptcy or any formal
statement to the effect that it is insolvent or likely to become
insolvent, or a winding up or administration order is made in relation to
a Relevant Person, or the members or directors of a Relevant Person pass a
resolution to the effect that it should be wound up, placed in
administration or cease to carry on business, save that this paragraph
does not apply to a fully solvent winding up of a Relevant Person other
than the Borrower or an Owner which is, or is to be, effected for the
purposes of an amalgamation or reconstruction previously approved by the
Majority Lenders and effected not later than 3 months after the
commencement of the winding up; or
|
|
|
(v)
|
a
petition is presented in any Pertinent Jurisdiction for the winding up or
administration, or the appointment of a provisional liquidator, of a
Relevant Person unless the petition is being contested in good faith and
on substantial grounds and is dismissed or withdrawn within 30 days of the
presentation of the petition; or
|
|
|
(vi)
|
a
Relevant Person petitions a court, or presents any proposal for, any form
of judicial or non-judicial suspension or deferral of payments,
reorganisation of its debt (or certain of its debt) or arrangement with
all or a substantial proportion (by number or value) of its creditors or
of any class of them or any such suspension or deferral of payments,
reorganisation or arrangement is effected by court order, contract or
otherwise; or
|
|
|
(vii)
|
any
meeting of the members or directors of a Relevant Person is summoned for
the purpose of considering a resolution or proposal to authorise or take
any action of a type described in paragraphs (iii), (iv), (v) or (vi)
above; or
|
|
(viii)
|
in
a Pertinent Jurisdiction other than England, any event occurs or any
procedure is commenced which, in the opinion of the Majority Lenders, is
similar to any of the foregoing; or
|
|
(h)
|
the
Borrower or any Owner ceases or suspends carrying on its business or a
part of its business which, in the opinion of the Majority Lenders, is
material in the context of this Agreement;
or
|
|
(i)
|
it
becomes unlawful in any Pertinent Jurisdiction or
impossible:
|
|
|
(i)
|
for
the Borrower or any Security Party to discharge any liability under a
Finance Document or to comply with any other obligation which the Majority
Lenders consider material under a Finance Document;
or
|
|
|
(ii)
|
for
the Facility Agent, the Security Trustee or the Lenders to exercise or
enforce any right under, or to enforce any Security Interest created by, a
Finance Document; or
|
|
(j)
|
any
official consent necessary to enable any Owner to own, operate or charter
the Ship owned by it or to enable any Owner or any Security Party to
comply with any provision which the Majority Lenders consider material of
a Finance Document is not granted, expires without being renewed, is
revoked or becomes liable to revocation or any condition of such a consent
is not fulfilled; or
|
|
(k)
|
if
the common units of the Borrower cease to be quoted on the Nasdaq National
Market in New York or any other internationally recognised stock exchange
acceptable to the Lenders or if the whole of the issued share capital of
any Owner whose Ship is at the relevant time subject to a Mortgage is not
wholly owned by the Borrower; or
|
|
(l)
|
any
provision which the Majority Lenders reasonably consider material of a
Finance Document proves to have been or becomes invalid or unenforceable,
or a Security Interest created by a Finance Document proves to have been
or becomes invalid or unenforceable or such a Security Interest proves to
have ranked after, or loses its priority to, another Security Interest or
any other third party claim or interest;
or
|
|
(m)
|
the
Master Agreement is terminated, cancelled, suspended, rescinded or revoked
or otherwise ceases to remain in full force and effect for any reason
except with the consent of the Facility Agent, acting with the
authorisation of the Majority Lenders;
or
|
|
(n)
|
an
Event of Default (as defined in Section 14 of the Master Agreement) occurs
which remains unremedied 5 Business Days after the occurrence thereof;
or
|
|
(o)
|
the
security constituted by a Finance Document is in any way imperilled or in
jeopardy; or
|
|
(p)
|
any
other event occurs or any other circumstances arise or develop including,
without limitation:
|
|
|
(i)
|
a
material adverse change in the financial position, state of affairs or
prospects of the Borrower or the Owners;
or
|
|
|
(ii)
|
any
accident or other event involving a Ship or another vessel owned,
chartered or operated by a Relevant
Person,
|
|
in
the light of which the Majority Lenders reasonably consider that there is
a significant risk that any Security Party is, or will later become,
unable to discharge its liabilities under the Finance Documents as they
fall due.
|
|
19.2
|
Actions following an Event of
Default. On, or at any time after, the occurrence of an
Event of Default:
|
|
(a)
|
the
Facility Agent may, and if so instructed by the Majority Lenders, the
Facility Agent shall:
|
|
|
(i)
|
serve
on the Borrower a notice stating that the Commitments and all other
obligations of each Lender to the Borrower under this Agreement are
terminated; and/or
|
|
|
(ii)
|
serve
on the Borrower a notice stating that the Loan, all accrued interest and
all other amounts accrued or owing under this Agreement are immediately
due and payable or are due and payable on demand;
and/or
|
|
|
(iii)
|
take
any other action which, as a result of the Event of Default or any notice
served under paragraph (i) or (ii) above, the Facility Agent and/or the
Lenders are entitled to take under any Finance Document or any applicable
law; and/or
|
|
(b)
|
the
Security Trustee may, and if so instructed by the Facility Agent, acting
with the authorisation of the Majority Lenders, the Security Trustee shall
take any action which, as a result of the Event of Default or any notice
served under paragraph (a) (i) or (ii) above, the Security Trustee, the
Facility Agent and/or the Lenders are entitled to take under any Finance
Document or any applicable law.
|
|
19.3
|
Termination of
Commitments. On the service of a notice under paragraph
(a)(i) of Clause 19.2, the Commitments and all other obligations of each
Lender to the Borrower under this Agreement shall
terminate.
|
|
19.4
|
Acceleration of
Loan. On the service of a notice under paragraph (a)(ii)
of Clause 19.2, the Loan, all accrued interest and all other amounts
accrued or owing from the Borrower or any Security Party under this
Agreement and every other Finance Document shall become immediately due
and payable or, as the case may be, payable on
demand.
|
|
19.5
|
Multiple notices; action
without notice. The Facility Agent may serve notices
under paragraphs (a) (i) and (ii) of Clause 19.2 simultaneously or on
different dates and it and/or the Security Trustee may take any action
referred to in that Clause if no such notice is served or simultaneously
with or at any time after the service of both or either of such
notices.
|
|
19.6
|
Notification of Creditor
Parties and Security Parties. The Facility Agent shall
send to each Lender, the Security Trustee and each Security Party a copy
or the text of any notice which the Facility Agent serves on the Borrower
under Clause 19.2; but the notice shall become effective when it is served
on the Borrower, and no failure or delay by the Facility Agent to send a
copy or the text of the notice to any other person shall invalidate the
notice or provide the Borrower or any Security Party with any form of
claim or defence.
|
|
19.7
|
Lender’s rights
unimpaired. Nothing in this Clause shall be taken to
impair or restrict the exercise of any right given to individual Lenders
under a Finance Document or the general law; and, in particular, this
Clause is without prejudice to Clause
3.1.
|
|
19.8
|
Exclusion of Creditor Party
Liability. No Creditor Party, and no receiver or manager
appointed by the Security Trustee, shall have any liability to the
Borrower or a Security Party:
|
|
(a)
|
for
any loss caused by an exercise of rights under, or enforcement of a
Security Interest created by, a Finance Document or by any failure or
delay to exercise such a right or to enforce such a Security Interest;
or
|
|
(b)
|
as
mortgagee in possession or otherwise, for any income or principal amount
which might have been produced by or realised from any asset comprised in
such a Security Interest or for any reduction (however caused) in the
value of such an asset,
|
|
except
that this does not exempt a Creditor Party or a receiver or manager from
liability for losses shown to have been caused by the gross negligence or
the wilful misconduct of such Creditor Party’s own officers and employees
or ( as the case may be) such receiver’s or manager’s own partners or
employees.
|
|
19.9
|
Relevant
Persons. In this Clause 19 “a Relevant Person” means
the Borrower, an Owner and any company which is a subsidiary of the
Borrower or an Owner.
|
|
19.10
|
Interpretation. In
Clause 19.1(f) references to an event of default or a termination event
include any event, howsoever described, which is similar to an event of
default in a facility agreement or a termination event in a finance lease;
and in Clause 19.1(g) “petition” includes an
application.
|
|
20.1
|
Commitment and certain other
fees. The Borrower shall pay to the Facility
Agent:
|
|
(a)
|
a
commitment fee for distribution among the Lenders pro rata to their
Commitments at the rate of 0.325 per cent. per annum on the amount of the
Total Commitments less the amount of the Loan for the period from (and
including) the date of this Agreement up to and including the Termination
Date, such fee to be paid quarterly in arrears and on the last day of such
period; and
|
|
(b)
|
certain
other fees as are referred to in the Fee Letter, such fees to be in such
amount and to be payable at the times and in the manner referred to in the
Fee Letter.
|
|
20.2
|
Costs of negotiation,
preparation etc. The Borrower shall pay to the Facility
Agent on its demand the amount of all expenses incurred by the Facility
Agent or the Security Trustee in connection with the negotiation,
preparation, execution or registration of any Finance Document or any
related document (including, for the avoidance of doubt, any expenses
incurred by the Lenders in obtaining the legal opinions referred to in
Schedule 3) or with any transaction contemplated by a Finance Document or
a related document.
|
|
20.3
|
Costs of variations,
amendments, enforcement etc. The Borrower shall pay to
the Facility Agent, on the Facility Agent’s demand, the amount of all
expenses incurred by a Lender in connection
with:
|
|
(a)
|
any
amendment or supplement to a Finance Document, or any proposal for such an
amendment to be made;
|
|
(b)
|
any
consent or waiver by the Lenders, the Majority Lenders or the Lender
concerned under or in connection with a Finance Document, or any request
for such a consent or waiver;
|
|
(c)
|
the
valuation of any security provided or offered under Clause 15 or any other
matter relating to such security;
|
|
(d)
|
where
the Facility Agent, in its absolute opinion, considers that there has been
a material change to the insurances in respect of any Ship, the review of
the insurances or any Ship pursuant to Clause 13.18;
and
|
|
(e)
|
any
step taken by any Lender concerned with a view to the protection, exercise
or enforcement of any right or Security Interest created by a Finance
Document or for any similar
purpose.
|
|
There
shall be recoverable under paragraph (d) the full amount of all legal
expenses, whether or not such as would be allowed under rules of court or
any taxation or other procedure carried out under such
rules.
|
|
20.4
|
Documentary
taxes. The Borrower shall promptly pay any tax payable
on or by reference to any Finance Document, and shall, on the Facility
Agent’s demand, fully indemnify each Creditor Party against any
liabilities and expenses resulting from any failure or delay by the
Borrower to pay such a tax.
|
|
20.5
|
Certification of
amounts. A notice which is signed by two officers of a
Creditor Party, which states that a specified amount, or aggregate amount,
is due to that Creditor Party under this Clause 20 and which indicates
(without necessarily specifying a detailed breakdown) the matters in
respect of which the amount, or aggregate amount, is due shall be prima
facie evidence that the amount, or aggregate amount, is
due.
|
|
21
|
|
21.1
|
Indemnities regarding borrowing
and repayment of Loan. The Borrower shall fully
indemnify the Facility Agent and each Lender on the Facility Agent’s
demand and the Security Trustee on its demand in respect of all expenses,
liabilities and losses which are incurred by that Creditor Party, or which
that Creditor Party reasonably and with due diligence estimates that it
will incur, as a result of or in connection
with:
|
|
(a)
|
an
Advance not being borrowed on the date specified in the Drawdown Notice
for any reason other than a default by the Lender claiming the
indemnity;
|
|
(b)
|
the
receipt or recovery of all or any part of the Loan or an overdue sum
otherwise than on the last day of an Interest Period or other relevant
period;
|
|
(c)
|
any
failure (for whatever reason) by the Borrower to make payment of any
amount due under a Finance Document on the due date or, if so payable, on
demand (after giving credit for any default interest paid by the Borrower
on the amount concerned under Clause 7);
and
|
|
(d)
|
the
occurrence and/or continuance of an Event of Default or a Potential Event
of Default and/or the acceleration of repayment of the Loan under Clause
19, and
in respect of any tax (other than tax on its overall net income) for which
a Creditor Party is liable in connection with any amount paid or payable
to that Creditor Party (whether for its own account or otherwise) under
any Finance Document.
|
|
21.2
|
Breakage
costs. Without limiting its generality, Clause 21.1
covers any liability, expense or loss, including a loss of a prospective
profit, incurred by a Lender:
|
|
(a)
|
in
liquidating or employing deposits from third parties acquired or arranged
to fund or maintain all or any part of its Contribution and/or any overdue
amount (or an aggregate amount which includes its Contribution or any
overdue amount); and
|
|
(b)
|
in
terminating, or otherwise in connection with, any interest and/or currency
swap or any other transaction entered into (whether with another legal
entity or with another office or department of the Lender concerned) to
hedge any exposure arising under this Agreement or that part which the
Lender concerned determines is fairly attributable to this Agreement of
the amount of the liabilities, expenses or losses (including losses of
prospective profits) incurred by it in terminating, or otherwise in
connection with, a number of transactions of which this Agreement is
one.
|
|
21.3
|
Miscellaneous
indemnities. The Borrower shall fully indemnify the
Facility Agent and the Security Trustee severally on their respective
demands in respect of all claims, demands, proceedings, liabilities,
taxes, losses and expenses of every kind (“liability items”) which
may be made or brought against, or incurred by, the Facility Agent or the
Security Trustee, in any country, in relation
to:
|
|
(a)
|
any
action taken, or omitted or neglected to be taken, under or in connection
with any Finance Document by the Facility Agent, the Security Trustee or
any other Creditor Party or by any receiver appointed under a Finance
Document; and
|
|
(b)
|
any
other event, matter or question which occurs or arises at any time during
the Security Period and which has any connection with, or any bearing on,
any Finance Document, any payment or other transaction relating to a
Finance Document or any asset covered (or previously covered) by a
Security Interest created (or intended to be created) by a Finance
Document,
|
|
other
than liability items which are shown to have been caused by the gross
negligence or the wilful misconduct of the Facility Agent’s or (as the
case may be) the Security Trustee’s own officers or
employees.
|
|
21.4
|
Extension of indemnities;
environmental indemnity. Without prejudice to its
generality, Clause 21.3 covers:
|
|
(a)
|
any
matter which would be covered by Clause 20.3 if any of the references in
that Clause to a Lender were a reference to the Facility Agent or (as the
case may be) to the Security Trustee;
and
|
|
(b)
|
any
liability items which arise, or are asserted, under or in connection with
any law relating to safety at sea, pollution or the protection of the
environment, the ISM Code or the ISPS
Code.
|
|
21.5
|
Currency
indemnity. If any sum due from the Borrower or any
Security Party to a Creditor Party under a Finance Document or under any
order or judgment relating to a Finance Document has to be converted from
the currency in which the Finance Document provided for the sum to be paid
(the “Contractual
Currency”) into another currency (the “Payment Currency”) for
the purpose of:
|
|
(a)
|
making
or lodging any claim or proof against the Borrower or any Security Party,
whether in its liquidation, any arrangement involving it or otherwise;
or
|
|
(b)
|
obtaining
an order or judgment from any court or other tribunal;
or
|
|
(c)
|
enforcing
any such order or judgment,
|
|
the
Borrower shall indemnify the Creditor Party concerned against the loss
arising when the amount of the payment actually received by that Creditor
Party is converted at the available rate of exchange into the Contractual
Currency.
|
|
In
this Clause 21.5, the “available rate of
exchange” means the rate at which the Creditor Party concerned is
able at the opening of business (London time) on the Business Day after it
receives the sum concerned to purchase the Contractual Currency with the
Payment Currency.
|
|
This
Clause 21.5 creates a separate liability of the Borrower which is distinct
from its other liabilities under the Finance Documents and which shall not
be merged in any judgment or order relating to those other
liabilities.
|
|
21.6
|
Certification of
amounts. A notice which is signed by 2 officers of a
Creditor Party, which states that a specified amount, or aggregate amount,
is due to that Creditor Party under this Clause 21 and which indicates
(without necessarily specifying a detailed breakdown) the matters in
respect of which the amount, or aggregate amount, is due shall be prima
facie evidence that the amount, or aggregate amount, is
due.
|
|
21.7
|
Sums deemed due to a
Lender. For the purposes of this Clause 21, a sum
payable by the Borrower to the Facility Agent or the Security Trustee for
distribution to a Lender shall be treated as a sum due to that
Lender.
|
|
22.1
|
No
deductions. All amounts due from the Borrower under a
Finance Document shall be paid:
|
|
(a)
|
without
any form of set-off, cross-claim or condition;
and
|
|
(b)
|
free
and clear of any tax deduction except a tax deduction which the Borrower
is required by law to make.
|
|
22.2
|
Grossing-up for
taxes. If the Borrower is required by law to make a tax
deduction from any payment:
|
|
(a)
|
the
Borrower shall notify the Facility Agent as soon as it becomes aware of
the requirement;
|
|
(b)
|
the
Borrower shall pay the tax deducted to the appropriate taxation authority
promptly, and in any event before any fine or penalty arises;
and
|
|
(c)
|
the
amount due in respect of the payment shall be increased by the amount
necessary to ensure that each Creditor Party receives and retains (free
from any liability relating to the tax deduction) a net amount which,
after the tax deduction, is equal to the full amount which it would
otherwise have received.
|
|
22.3
|
Evidence of payment of
taxes. Within 1 month after making any tax deduction,
the Borrower shall deliver to the Facility Agent documentary evidence
satisfactory to the Facility Agent that the tax had been paid to the
appropriate taxation authority.
|
|
22.4
|
Exclusion of tax on overall net
income. In this Clause 22 “tax deduction” means any
deduction or withholding for or on account of any present or future tax
except tax on a Creditor Party’s overall net
income.
|
|
23.1
|
Illegality. This
Clause 23 applies if a Lender (the “Notifying Lender”)
notifies the Facility Agent that it has become, or will with effect from a
specified date, become:
|
|
(a)
|
unlawful
or prohibited as a result of the introduction of a new law, an amendment
to an existing law or a change in the manner in which an existing law is
or will be interpreted or applied;
or
|
|
(b)
|
contrary
to, or inconsistent with, any
regulation,
|
|
for
the Notifying Lender to maintain or give effect to any of its obligations
under this Agreement in the manner contemplated by this
Agreement.
|
|
23.2
|
Notification of
illegality. The Facility Agent shall promptly notify the
Borrower, the Security Parties, the Security Trustee and the other Lenders
of the notice under Clause 23.1 which the Facility Agent receives from the
Notifying Lender.
|
|
23.3
|
Prepayment; termination of
Commitment. On the Facility Agent notifying the Borrower
under Clause 23.2, the Notifying Lender’s Commitment shall terminate; and
thereupon or, if later, on the date specified in the Notifying Lender’s
notice under Clause 23.1 as the date on which the notified event would
become effective the Borrower shall prepay the Notifying Lender’s
Contribution in accordance with Clause
8.
|
|
24.1
|
Increased
costs. This Clause 24 applies if a Lender (the “Notifying Lender”)
notifies the Facility Agent that the Notifying Lender considers that as a
result of:
|
|
(a)
|
the
introduction or alteration after the date of this Agreement of a law or an
alteration after the date of this Agreement in the manner in which a law
is interpreted or applied (disregarding any effect which relates to the
application to payments under this Agreement of a tax on the Lender’s
overall net income); or
|
|
(b)
|
the
effect of complying with any regulation (including any which relates to
capital adequacy or liquidity controls or which affects the manner in
which the Notifying Lender allocates capital resources to its obligations
under this Agreement including, without limitation, the implementation of
any regulations which may replace those set out in the statement of the
Basle Committee on Banking Regulations and Supervisory Practices dated
July 1998 and entitled “International Convergence of Capital Measurement
and Capital Structures”) which is introduced, or altered, or the
interpretation or application of which is altered, after the date of this
Agreement,
|
|
is
that the Notifying Lender (or a parent company of it) has incurred or will
incur an “increased
cost”, that is to say,:
|
|
|
(i)
|
an
additional or increased cost incurred as a result of, or in connection
with, the Notifying Lender having entered into, or being a party to, this
Agreement or a Transfer Certificate, of funding or maintaining its
Commitment or Contribution or performing its obligations under this
Agreement, or of having outstanding all or any part of its Contribution or
other unpaid sums; or
|
|
|
(ii)
|
a
reduction in the amount of any payment to the Notifying Lender under this
Agreement or in the effective return which such a payment represents to
the Notifying Lender or on its
capital;
|
|
|
(iii)
|
an
additional or increased cost of funding all or maintaining all or any of
the advances comprised in a class of advances formed by or including the
Notifying Lender’s Contribution or (as the case may require) the
proportion of that cost attributable to the Contribution;
or
|
|
|
(iv)
|
a
liability to make a payment, or a return foregone, which is calculated by
reference to any amounts received or receivable by the Notifying Lender
under this Agreement,
|
|
but
not an item attributable to a change in the rate of tax on the overall net
income of the Notifying Lender (or a parent company of it) or an item
covered by the indemnity for tax in Clause 21.1 or by Clause
22.
|
|
For
the purposes of this Clause 24.1 the Notifying Lender may in good faith
allocate or spread costs and/or losses among its assets and liabilities
(or any class thereof) on such basis as it considers
appropriate.
|
|
24.2
|
Notification to Borrower of
claim for increased costs. The Facility Agent shall
promptly notify the Borrower and the Security Parties of the notice which
the Facility Agent received from the Notifying Lender under Clause
24.1.
|
|
24.3
|
Payment of increased
costs. The Borrower shall pay to the Facility Agent, on
the Facility Agent’s demand, for the account of the Notifying Lender the
amounts which the Facility Agent from time to time notifies the Borrower
that the Notifying Lender has specified to be necessary to compensate the
Notifying Lender for the increased
cost.
|
|
24.4
|
Notice of
prepayment. If the Borrower is not willing to continue
to compensate the Notifying Lender for the increased cost under Clause
24.3, the Borrower may give the Facility Agent not less than 15 days’
notice of its intention to prepay the Notifying Lender’s Contribution at
the end of an Interest Period.
|
|
24.5
|
Prepayment; termination of
Commitment. A notice under Clause 24.4 shall be
irrevocable; the Facility Agent shall promptly notify the Notifying Lender
of the Borrower’s notice of intended prepayment;
and:
|
|
(a)
|
on
the date on which the Facility Agent serves that notice, the Commitment of
the Notifying Lender shall be cancelled;
and
|
|
(b)
|
on
the date specified in its notice of intended prepayment, the Borrower
shall prepay (without premium or penalty) the Notifying Lender’s
Contribution, together with accrued interest thereon at the applicable
rate plus the applicable Margin.
|
|
24.6
|
Application of
prepayment. Clause 8 shall apply in relation to the
prepayment.
|
|
25
|
|
25.1
|
Application of credit
balances. Each Creditor Party may following the
occurrence of an Event of Default and without prior
notice:
|
|
(a)
|
apply
any balance (whether or not then due) which at any time stands to the
credit of any account in the name of the Borrower at any office in any
country of that Creditor Party in or towards satisfaction of any sum then
due from the Borrower to that Creditor Party under any of the Finance
Documents; and
|
|
(b)
|
for
that purpose:
|
|
|
(i)
|
break,
or alter the maturity of, all or any part of a deposit of the
Borrower;
|
|
|
(ii)
|
convert
or translate all or any part of a deposit or other credit balance into
Dollars; and
|
|
|
(iii)
|
enter
into any other transaction or make any entry with regard to the credit
balance which the Creditor Party concerned considers
appropriate.
|
|
25.2
|
Existing rights
unaffected. No Creditor Party shall be obliged to
exercise any of its rights under Clause 25.1; and those rights shall be
without prejudice and in addition to any right of set-off, combination of
accounts, charge, lien or other right or remedy to which a Creditor Party
is entitled (whether under the general law or any
document).
|
|
25.3
|
Sums deemed due to a
Lender. For the purposes of this Clause 25, a sum
payable by the Borrower to the Facility Agent or the Security Trustee for
distribution to, or for the account of, a Lender shall be treated as a sum
due to that Lender; and each Lender’s proportion of a sum so payable for
distribution to, or for the account of, the Lenders shall be treated as a
sum due to such Lender.
|
|
26.1
|
Transfer by
Borrower. The Borrower may not, without the consent of
the Facility Agent, given on the instructions of all the
Lenders:
|
|
(a)
|
transfer
any of its rights or obligations under any Finance Document;
or
|
|
(b)
|
enter
into any merger, de-merger or other reorganisation, or carry out any other
act, as a result of which any of its rights or liabilities would vest in,
or pass to, another person.
|
|
26.2
|
Transfer by a
Lender. Subject to Clause 26.4 and the other terms and
conditions of this Clause 26.2, a Lender (the “Transferor Lender”) may
at any time cause:
|
|
(a)
|
its
rights in respect of all or part of its Contribution;
or
|
|
(b)
|
its
obligations in respect of all or part of its Commitment;
or
|
|
(c)
|
a
combination of (a) and (b),
|
|
to
be (in the case of its rights) transferred to, or (in the case of its
obligations) assumed by, any third party, another bank, financial
institution, pension scheme or single purpose vehicle (a “Transferee Lender”) by
delivering to the Facility Agent a completed certificate in the form set
out in Schedule 4 with any modifications approved or required by the
Facility Agent (a “Transfer Certificate”)
executed by the Transferor Lender and the Transferee
Lender.
|
However
any rights and obligations of the Transferor Lender in its capacity as Facility
Agent or Security Trustee will have to be dealt with separately in accordance
with the Agency and Trust Agreement.
A
transfer pursuant to this Clause 26.2 shall:
|
|
(i)
|
require
the prior written consent of the Facility Agent (except in the case of a
transfer to a subsidiary of a
Lender);
|
|
|
(ii)
|
the
Contribution or Commitment (or the combination of the two) being
transferred by the Transferor Lender to the Transferee Lender shall not be
less than $30,000,000;
|
|
|
(iii)
|
be
effected without the consent of, but with notice to, the Borrower and
without any cost to the Borrower:
|
|
|
(A)
|
following
the occurrence of an Event of
Default;
|
|
|
(B)
|
if
such transfer is to a subsidiary or any other company or financial
institution which is in the same ownership or control as the Transferor
Lender; and
|
|
|
(iv)
|
require
the consent of the Borrower (such consent not to be unreasonably withheld
or delayed) in all other
circumstances.
|
|
26.3
|
Transfer Certificate, delivery
and notification. As soon as reasonably practicable
after a Transfer Certificate is delivered to the Facility Agent, it shall
(unless it has reason to believe that the Transfer Certificate may be
defective):
|
|
(a)
|
sign
the Transfer Certificate on behalf of itself the Borrower, the Security
Parties, the Security Trustee and each of the other
Lenders;
|
|
(b)
|
on
behalf of the Transferee Lender, send to the Borrower and each Security
Party letters or faxes notifying them of the Transfer Certificate and
attaching a copy of it; and
|
|
(c)
|
send
to the Transferee Lender copies of the letters or faxes sent under
paragraph (b) above.
|
|
26.4
|
Effective Date of Transfer
Certificate. A Transfer Certificate becomes effective on
the date, if any, specified in the Transfer Certificate as its effective
date Provided that
it is signed by the Facility Agent under Clause 26.3 on or before that
date.
|
|
26.5
|
No transfer without Transfer
Certificate. No assignment or transfer of any right or
obligation of a Lender under any Finance Document is binding on, or
effective in relation to, the Borrower, any Security Party, the Facility
Agent or the Security Trustee unless it is effected, evidenced or
perfected by a Transfer
Certificate.
|
|
26.6
|
Lender re-organisation; waiver
of Transfer Certificate. However, if a Lender enters
into any merger, de-merger or other reorganisation as a result of which
all its rights or obligations vest in another person (the “successor”), the
Facility Agent may, if it sees fit, by notice to the successor and the
Borrower and the Security Trustee waive the need for the execution and
delivery of a Transfer Certificate; and, upon service of the Facility
Agent’s notice, the successor shall become a Lender with the same
Commitment and Contribution as were held by the predecessor
Lender.
|
|
26.7
|
Effect of Transfer
Certificate. A Transfer Certificate takes effect in
accordance with English law as
follows:
|
|
(a)
|
to
the extent specified in the Transfer Certificate, all rights and interests
(present, future or contingent) which the Transferor Lender has under or
by virtue of the Finance Documents are assigned to the Transferee Lender
absolutely, free of any defects in the Transferor Lender’s title and of
any rights or equities which the Borrower or any Security Party had
against the Transferor Lender;
|
|
(b)
|
the
Transferor Lender’s Commitment is discharged to the extent specified in
the Transfer Certificate;
|
|
(c)
|
the
Transferee Lender becomes a Lender with the Contribution previously held
by the Transferor Lender and a Commitment of an amount specified in the
Transfer Certificate;
|
|
(d)
|
the
Transferee Lender becomes bound by all the provisions of the Finance
Documents which are applicable to the Lenders generally, including those
about pro-rata sharing and the exclusion of liability on the part of, and
the indemnification of, the Facility Agent and the Security Trustee and,
to the extent that the Transferee Lender becomes bound by those provisions
(other than those relating to exclusion of liability), the Transferor
Lender ceases to be bound by them;
|
|
(e)
|
any
part of the Loan which the Transferee Lender advances after the Transfer
Certificate’s effective date ranks in point of priority and security in
the same way as it would have ranked had it been advanced by the
transferor, assuming that any defects in the transferor’s title and any
rights or equities of the Borrower or any Security Party against the
Transferor Lender had not existed;
|
|
(f)
|
the
Transferee Lender becomes entitled to all the rights under the Finance
Documents which are applicable to the Lenders generally, including but not
limited to those relating to the Majority Lenders and those under Clause
5.7 and Clause 20, and to the extent that the Transferee Lender becomes
entitled to such rights, the Transferor Lender ceases to be entitled to
them; and
|
|
(g)
|
in
respect of any breach of a warranty, undertaking, condition or other
provision of a Finance Document or any misrepresentation made in or in
connection with a Finance Document, the Transferee Lender shall be
entitled to recover damages by reference to the loss incurred by it as a
result of the breach or misrepresentation, irrespective of whether the
original Lender would have incurred a loss of that kind or
amount.
|
|
The
rights and equities of the Borrower or any Security Party referred to
above include, but are not limited to, any right of set off and any other
kind of cross-claim.
|
|
26.8
|
Maintenance of register of
Lenders. During the Security Period the Facility Agent
shall maintain a register in which it shall record the name, Commitment,
Contribution and administrative details (including the lending office)
from time to time of each Lender holding a Transfer Certificate and the
effective date (in accordance with Clause 26.4) of the Transfer
Certificate; and the Facility Agent shall make the register available for
inspection by any Lender, the Security Trustee and the Borrower during
normal banking hours, subject to receiving at least 3 Business Days prior
notice.
|
|
26.9
|
Reliance on register of
Lenders. The entries on that register shall, in the
absence of manifest error, be conclusive in determining the identities of
the Lenders and the amounts of their Commitments and Contributions and the
effective dates of Transfer Certificates and may be relied upon by the
Facility Agent and the other parties to the Finance Documents for all
purposes relating to the Finance
Documents.
|
|
26.10
|
Authorisation of Facility Agent
to sign Transfer Certificates. The Borrower, the
Security Trustee and each Lender irrevocably authorise the Facility Agent
to sign Transfer Certificates on its
behalf.
|
|
26.11
|
Registration
fee. In respect of any Transfer Certificate, the
Facility Agent shall be entitled to recover a registration fee of $3,000
(and all costs, fees and expenses incidental to the transfer (including,
but not limited to legal fees and expenses)) from the Transferor Lender or
(at the Facility Agent’s option) the Transferee
Lender.
|
|
26.12
|
Sub-participation; subrogation
assignment. A Lender may sub-participate all or any part of its
rights and/or obligations under or in connection with the Finance
Documents without the consent of, or any notice to, the Borrower, any
Security Party, the Facility Agent or the Security Trustee; and the
Lenders may assign, in any manner and terms agreed by the Majority
Lenders, the Facility Agent and the Security Trustee, all or any part of
those rights to an insurer or surety who has become subrogated to
them.
|
|
26.13
|
Disclosure of
information. A Lender may disclose to a potential
Transferee Lender or sub-participant (as well as to any rating agency,
trustee or accountant) any information which the Lender has received in
relation to the Borrower, any Security Party or their affairs under or in
connection with any Finance Document which the Facility Agent may consider
necessary or appropriate to be disclosed in order to ensure a successful
transfer or sub-participation to a potential Transferee Lender or a
sub-participant and the ongoing monitoring of the Loan by any Lender or
potential Transferee Lender or sub-participant. In such case,
the Facility Agent shall be released from its obligation of secrecy and
confidentiality Provided
that if a potential Transferee Lender, sub-participant, rating
agency, trustee or accountant is not subject to a duty of confidentiality,
the Facility Agent shall require the execution of a confidentiality
agreement by such potential Transferee Lender, sub-participant, rating
agency, trustee or accountant.
|
|
26.14
|
Change of lending
office. A Lender may change its lending office by giving
notice to the Facility Agent and the change shall become effective on the
later of:
|
|
(a)
|
the
date on which the Facility Agent receives the notice;
and
|
|
(b)
|
the
date, if any, specified in the notice as the date on which the change will
come into effect.
|
|
26.15
|
Notification. On
receiving such a notice, the Facility Agent shall notify the Borrower and
the Security Trustee; and, until the Facility Agent receives such a
notice, it shall be entitled to assume that a Lender is acting through the
lending office of which the Facility Agent last had
notice.
|
|
27.1
|
Variations, waivers etc. by
Majority Lenders. Subject to Clause 27.2, a document
shall be effective to vary, waive, suspend or limit any provision of a
Finance Document, or any Creditor Party’s rights or remedies under such a
provision or the general law, only if the document is signed, or
specifically agreed to by fax, by the Borrower, by the Facility Agent on
behalf of the Majority Lenders, by the Facility Agent and the Security
Trustee in their own rights, and, if the document relates to a Finance
Document to which a Security Party is party, by that Security
Party.
|
|
27.2
|
Variations, waivers etc.
requiring agreement of all Lenders. However, as regards
the following, Clause 27.1 applies as if the words “by the Facility Agent
on behalf of the Majority Lenders” were replaced by the words “by or on
behalf of every Lender” (in the case of all the paragraphs below (other
than paragraph (i)) and “by or on behalf of Lenders whose Contributions
total 80 per cent. of the Loan” (in the case of paragraphs (d) and
(i)):
|
|
(a)
|
a
change in the Margin or in the definition of
LIBOR;
|
|
(b)
|
a
change to the date for, the amount of, any payment of principal, interest,
fees, or other sum payable under this
Agreement;
|
|
(c)
|
a
change to any Lender’s Commitment;
|
|
(d)
|
an
extension of the Availability
Period;
|
|
(e)
|
a
change to the definition of “Majority Lenders” or “Finance
Documents”;
|
|
(f)
|
a
change to the preamble or to Clause 2, 3, 4, 5.1, 17, 18 or
30;
|
|
(g)
|
a
change to this Clause 27;
|
|
(h)
|
any
release of, or material variation to, a Security Interest, guarantee,
indemnity or subordination arrangement set out in a Finance
Document;
|
|
(i)
|
any
other change or matter as regards which this Agreement or another Finance
Document expressly provides that each Lender’s consent is required; and
any change to, or waiver of a breach of, Clause 15.1 of this
Agreement.
|
|
27.3
|
Exclusion of other or implied
variations. Except for a document which satisfies the
requirements of Clauses 27.1 and 27.2, no document, and no act, course of
conduct, failure or neglect to act, delay or acquiescence on the part of
the Creditor Parties or any of them (or any person acting on behalf of any
of them) shall result in the Creditor Parties or any of them (or any
person acting on behalf of any of them) being taken to have varied,
waived, suspended or limited, or being precluded (permanently or
temporarily) from enforcing, relying on or
exercising:
|
|
(a)
|
a
provision of this Agreement or another Finance Document;
or
|
|
(b)
|
an
Event of Default; or
|
|
(c)
|
a
breach by the Borrower or a Security Party of an obligation under a
Finance Document or the general law;
or
|
|
(d)
|
any
right or remedy conferred by any Finance Document or by the general
law,
|
|
and
there shall not be implied into any Finance Document any term or condition
requiring any such provision to be enforced, or such right or remedy to be
exercised, within a certain or reasonable
time.
|
|
28
|
|
28.1
|
General. Unless
otherwise specifically provided, any notice under or in connection with
any Finance Document shall be given by letter or fax; and references in
the Finance Documents to written notices, notices in writing and notices
signed by particular persons shall be construed
accordingly.
|
|
28.2
|
Addresses for
communications. A notice shall be
sent:
|
|
(a)
|
to
the Borrower:
|
c/o
Capital Ship Management Corp.
|
|
3
Iassonos Street
|
||
|
185
37 - Piraeus
|
||
|
Greece
|
||
|
Fax
No: +30 210 4285 679
|
||
|
for
the attention of: the Chief Financial Officer
|
||
|
(b)
|
to
a Lender:
|
at
the address below its name in Schedule 1 or (as the case may require) in
the relevant Transfer Certificate.
|
|
(c)
|
to
the Swap Bank:
|
Zinsderivateabwicklung
OE 3652
|
|
Gerhart-Hauptmann-Platz
50
|
||
|
20095
Hamburg
|
||
|
Germany
|
||
|
Fax
No: +49 40 3333 34086
|
||
|
(d)
|
to
the Facility Agent
|
HSH
Nordbank AG
|
|
and
Security Trustee:
|
Shipping,
Greek clients
|
|
|
Gerhart-Hamptmann-Platz
50
|
||
|
D-20095
Hamburg
|
||
|
Germany
|
||
|
Fax
No: +49 40 3333 34118
|
|
or
to such other address as the relevant party may notify the Facility Agent
or, if the relevant party is the Facility Agent or the Security Trustee,
the Borrower, the Lenders and the Security
Parties.
|
|
28.3
|
Effective date of
notices. Subject to Clauses 28.4 and
28.5:
|
|
(a)
|
a
notice which is delivered personally or posted shall be deemed to be
served, and shall take effect, at the time when it is delivered;
and
|
|
(b)
|
a
notice which is sent by fax shall be deemed to be served, and shall take
effect, 2 hours after its transmission is
completed.
|
|
28.4
|
Service outside business
hours. However, if under Clause 28.3 a notice would be
deemed to be served:
|
|
(a)
|
on
a day which is not a business day in the place of receipt;
or
|
|
(b)
|
on
such a business day, but after 5 p.m. local
time,
|
|
the
notice shall (subject to Clause 28.5) be deemed to be served, and shall
take effect, at 9 a.m. on the next day which is such a business
day.
|
|
28.5
|
Illegible
notices. Clauses 28.3 and 28.4 do not apply if the
recipient of a notice notifies the sender within one hour after the time
at which the notice would otherwise be deemed to be served that the notice
has been received in a form which is illegible in a material
respect.
|
|
28.6
|
Valid
notices. A notice under or in connection with a Finance
Document shall not be invalid by reason that its contents or the manner of
serving it do not comply with the requirements of this Agreement or, where
appropriate, any other Finance Document under which it is served
if:
|
|
(a)
|
the
failure to serve it in accordance with the requirements of this Agreement
or other Finance Document, as the case may be, has not caused any party to
suffer any significant loss or
prejudice; or
|
|
(b)
|
in
the case of incorrect and/or incomplete contents, it should have been
reasonably clear to the party on which the notice was served what the
correct or missing particulars should have
been.
|
|
28.7
|
English
language. Any notice under or in connection with a
Finance Document shall be in
English.
|
|
28.8
|
Meaning of
“notice”. In this Clause “notice” includes any demand,
consent, authorisation, approval, instruction, waiver or other
communication.
|
|
29
|
|
29.1
|
Rights cumulative,
non-exclusive. The rights and remedies which the Finance
Documents give to each Creditor Party
are:
|
|
(a)
|
cumulative;
|
|
(b)
|
may
be exercised as often as appears expedient;
and
|
|
(c)
|
shall
not, unless a Finance Document explicitly and specifically states so, be
taken to exclude or limit any right or remedy conferred by any
law.
|
|
29.2
|
Severability of
provisions. If any provision of a Finance Document is or
subsequently becomes void, unenforceable or illegal, that shall not affect
the validity, enforceability or legality of the other provisions of that
Finance Document or of the provisions of any other Finance
Document.
|
|
29.3
|
Third party
rights. A person who is not a party to this 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
Agreement.
|
|
29.4
|
Counterparts. A
Finance Document may be executed in any number of
counterparts.
|
|
30.1
|
English
law. This Agreement shall be governed by, and construed
in accordance with, English law.
|
|
30.2
|
Exclusive English
jurisdiction. Subject to Clause 30.3, the courts of
England shall have exclusive jurisdiction to settle any disputes which may
arise out of or in connection with this
Agreement.
|
|
30.3
|
Choice of forum for the
exclusive benefit of the Creditor Parties. Clause 30.2
is for the exclusive benefit of the Creditor Parties, each of which
reserves the right:
|
|
(a)
|
to
commence proceedings in relation to any matter which arises out of or in
connection with this Agreement in the courts of any country other than
England and which have or claim jurisdiction to that matter;
and
|
|
(b)
|
to
commence such proceedings in the courts of any such country or countries
concurrently with or in addition to proceedings in England or without
commencing proceedings in England.
|
No
Borrower shall commence any proceedings in any country other than England in
relation to a matter which arises out of or in connection with this
Agreement.
|
30.4
|
Process
agent. The Borrower irrevocably appoints Curzon Maritime
Ltd. at its office for the time being, presently at 30/33 Minories Street,
St. Clare House, London EC3N 1DJ, England, to act as its agent to receive
and accept on its behalf any process or other document relating to any
proceedings in the English courts which are connected with this
Agreement.
|
|
30.5
|
Creditor Party rights
unaffected. Nothing in this Clause 30 shall exclude or
limit any right which any Creditor Party may have (whether under the law
of any country, an international convention or otherwise) with regard to
the bringing of proceedings, the service of process, the recognition or
enforcement of a judgment or any similar or related matter in any
jurisdiction.
|
|
30.6
|
Meaning of
“proceedings”. In this Clause 30, “proceedings” means
proceedings of any kind, including an application for a provisional or
protective measure.
|
AS WITNESS the hands of the
duly authorised officers or attorneys of the parties the day and year first
before written.
LENDERS
AND COMMITMENTS
|
Lender
|
Lending
Office
|
Commitment
($)
|
Percentage
of
Total
Commitments
(%)
|
|
HSH
Nordbank AG
|
Gerhart-Hauptmann-Platz
50
20095
Hamburg
Germany
Fax
No: +(49) 40 33 33 34118
|
90,000,000
|
25.7
|
|
DnB
NOR Bank ASA
|
20
St. Dunstan’s Hill
London
EC3R 8HY
England
Fax
No: 0044 207 626 5356
|
75,000,000
|
21.5
|
|
Alpha
Bank A.E.
|
Akti
Miaouli
89
185
38 Piraeus
Greece
Fax
No: +30 210 429 0348
|
60,000,000
|
17.1
|
|
National
Bank of Greece S.A.
|
Bouboulinas
2 &
Akti
Miaouli
185
35 Piraeus
Fax
No: +30 210 414 4120
|
60,000,000
|
17.1
|
|
Piraeus
Bank A.E.
|
47-49
Akti Miaouli
185
36 Piraeus
Fax
No: +30 210 429 2601
|
65,000,000
|
18.6
|
DRAWDOWN
NOTICE
|
To:
|
HSH
Norbank AG
|
|
Gerhart-Hauptmann-Platz
50
|
|
|
20095
Hamburg
|
|
|
Germany
|
| Attention: Loans Administration |
2008
|
DRAWDOWN
NOTICE
|
1
|
We
refer to the loan agreement (the “Loan Agreement”) dated
19 March 2008 and made between us, as Borrower, the Lenders referred to
therein, HSH Nordbank AG as Swap Bank, you as Bookrunner, Facility Agent,
Mandated Lead Arranger, Security Trustee and DnB NOR Bank ASA, London as
Co-Arranger in connection with revolving credit and term loan facilities
of up to US$350,000,000 in aggregate. Terms defined in the Loan
Agreement have their defined meanings when used in this Drawdown
Notice.
|
|
2
|
We
request to borrow an Advance under Tranche [ ] as
follows:
|
|
(a)
|
Amount:
US$[ ];
|
|
(b)
|
Drawdown
Date: [ ];
|
|
(c)
|
Duration
of the first Interest Period shall be
[ ]
months;
|
|
(d)
|
Payment
instructions : account of
[ ]
and numbered
[ ]
with
[ ]
of
[ ].
|
|
3
|
We
represent and warrant that:
|
|
(a)
|
the
representations and warranties in Clause 10 of the Loan Agreement would
remain true and not misleading if repeated on the date of this notice with
reference to the circumstances now existing;
and
|
|
(b)
|
no
Event of Default or Potential Event of Default has occurred or will result
from the borrowing of the Loan.
|
|
4
|
This
notice cannot be revoked without the prior consent of the Majority
Lenders.
|
|
5
|
[We
authorise you to deduct any facility fees referred to in Clause 20.1 from
the amount of the Advance].
|
________________________________
Attorney-in-Fact
for and
on behalf of
CAPITAL
PRODUCT PARTNERS L.P.
CONDITION
PRECEDENT DOCUMENTS
PART
A
The
following are the documents referred to in Clause 9.1(b) required before the
Drawdown Date of the first Advance of Tranche A.
|
1
|
A
duly executed original of each of:
|
|
(a)
|
this
Agreement;
|
|
(b)
|
the
Agency and Trust Deed;
|
|
(c)
|
the
Master Agreement;
|
|
(d)
|
the
Master Agreement Assignment;
|
|
(e)
|
the
Fee Letter;
|
|
(f)
|
the
Guarantees to be entered into by the Existing
Owners;
|
|
(g)
|
the
Retention Account Pledge; and
|
|
(h)
|
the
Swap Account Pledge.
|
|
2
|
Copies
of the certificate of limited partnership (in the case of the Borrower),
the certificate of incorporation (in the case of each Existing Owner) and
the constitutional documents of the Borrower and each Existing
Owner.
|
|
3
|
Copies
of resolutions of the directors of the Borrower and the directors and
shareholders of each Existing Owner authorising the execution of each of
the Finance Documents to which the Borrower or that Owner is a party and,
in the case of the Borrower, authorising named officers to give the
Drawdown Notices and other notices under this
Agreement.
|
|
4
|
The
original of any power of attorney under which any Finance Document is
executed on behalf of the Borrower or an Existing
Owner.
|
|
5
|
Copies
of all consents which the Borrower or any Existing Owner requires to enter
into, or make any payment under, any Finance
Document.
|
|
6
|
The
originals of any mandates or other documents required in connection with
the opening or operation of each Earnings Account relative to an Existing
Ship and the Retention Account and the Swap
Account.
|
|
7
|
Evidence
satisfactory to the Facility Agent that each Existing Owner is a direct or
indirect wholly-owned subsidiary of the
Borrower.
|
|
8
|
Copies
of all the Management Agreements of the Existing
Ships.
|
|
9
|
Copies
of all the Existing Charters duly executed by the parties
thereto.
|
|
10
|
A
copy of the Partnership Agreement duly executed by the parties
thereto.
|
|
11
|
All
documentation required by each Creditor Party in relation to the Borrower
and any Security Party pursuant to that Creditor Party’s “know your
customer” requirements.
|
|
12
|
Documentary
evidence that the agent for service of process named in Clause 30 has
accepted its appointment.
|
|
13
|
Favourable
legal opinions from lawyers appointed by the Facility Agent on such
matters concerning the laws of the Marshall Islands, Liberia and such
other relevant jurisdictions as the Facility Agent may
requires.
|
|
14
|
If
the Facility Agent so requires, in respect of any of the documents
referred to above, a certified English translation prepared by a
translator approved by the Facility
Agent.
|
PART
B
The
following are the documents referred to in Clause 9.1(c) required before the
Drawdown Date of each Advance under Tranche A and Tranche B.
In Part B
of Schedule 3, the following definitions shall have the following
meanings:
“Relevant Owner” means the
Owner of the Relevant Ship; and
“Relevant Ship” means, in
relation to each Advance under Tranche A and Tranche B, the Tranche A Ship and
Tranche B Ship which is to act as security for such Advance.
|
1
|
Copies
of resolutions of the shareholders and directors of the Relevant Owner and
the Borrower authorising the execution of each of the Finance Documents to
which such Owner is a party and, in the case of the Borrower, approving
the borrowing of the relevant Advance and authorising named directors or
attorneys to give the Drawdown Notices and other notices under this
Agreement.
|
|
2
|
The
original of any power of attorney under which any Finance Document is
executed on behalf of the Relevant
Owner.
|
|
3
|
Copies
of all consents which the Relevant Owner or the Borrower requires to enter
into, or make any payment under, any Finance
Document.
|
|
4
|
A
duly executed original of the Guarantee of the Relevant Owner and of the
Mortgage (and, if applicable, the Deed of Covenant) and the General
Assignment relative to the Relevant Ship, the Earnings Account Pledge, the
Management Agreement Assignment and of each document to be delivered
pursuant to each such Finance
Document.
|
|
5
|
If
applicable, a duly executed original of the Charterparty Assignment in
respect of the Existing Charter (in the case of each Tranche A Ship) of
the Relevant Ship and of each document to be delivered pursuant to each
such Finance Document.
|
|
6
|
Evidence
satisfactory to the Facility Agent that the Relevant Owner is a direct or
indirect wholly-owned subsidiary of the
Borrower.
|
|
7
|
The
originals of any documents required in connection with the opening of the
Earnings Account in respect of the Relevant
Ship.
|
|
8
|
Documentary
evidence that:
|
|
(a)
|
the
Relevant Ship is registered in the ownership of the Relevant Owner under
an Approved Flag;
|
|
(b)
|
the
Relevant Ship is in the absolute and unencumbered ownership of the
Relevant Owner save as contemplated by the Finance
Documents;
|
|
(c)
|
the
Relevant Ship maintains the highest available class with an Approved
Classification Society as the Facility Agent may approve free of all
overdue recommendations and conditions of such classification
society;
|
|
(d)
|
the
Mortgage relating to the Relevant Ship has been duly registered or
recorded against the Relevant Ship as a valid first preferred ship
mortgage in accordance with the laws of the relevant Approved Flag State;
and
|
|
(e)
|
the
Relevant Ship is insured in accordance with the provisions of this
Agreement and all requirements therein in respect of insurances have been
complied with.
|
|
9
|
A
copy of the Management Agreement and a duly executed original of the
Approved Manager’s Undertaking in relation to the Relevant
Ship.
|
|
10
|
Copies
of:
|
|
(a)
|
the
document of compliance (DOC) and safety management certificate
(SMC) referred to in paragraph (a) of the definition of the ISM Code
Documentation in respect of the Relevant Ship and the Approved Manager
certified as true and in effect by the Relevant Owner;
and
|
|
(b)
|
the
ISPS Code Documentation in respect of the Relevant Ship and the Relevant
Owner certified as true and in effect by the Relevant
Owner.
|
|
11
|
Two
valuations (at the cost of the Borrowers) of the Relevant Ship, addressed
to the Facility Agent, stated to be for the purposes of this Agreement and
dated not earlier than 4 weeks before the Drawdown Date relative to the
relevant Advance, each from an Approved Broker (such valuations to be made
in accordance with Clause 15.4).
|
|
12
|
A
survey report in respect of the Relevant Ship prepared (at the cost of the
Borrower) by an independent marine surveyor appointed by the Facility
Agent dated no later than 20 days prior to the Drawdown Date of the
relevant Advance in form, scope and substance satisfactory to the Facility
Agent and its technical advisers.
|
|
13
|
At
the cost of the Borrower, a favourable opinion from an independent
insurance consultant acceptable to the Lenders on such matters relating to
the insurances for the Relevant Ship as the Facility Agent may
require.
|
|
14
|
Favourable
legal opinions from lawyers appointed by the Lender on such matters
concerning the laws of the Approved Flag State in which the Relevant Ship
is registered and such other relevant jurisdictions as the Facility Agent
may require.
|
|
15
|
If
the Facility Agent so requires, in respect of any of the documents
referred to above, a certified English translation prepared by a
translator approved by the Facility
Agent.
|
PART
C
The
following are the documents referred to in Clause 9.1(d) required before the
Drawdown Date of each Advance under Tranche C.
In Part C
of Schedule 3, the following definitions shall have the following
meanings:
“Relevant Owner” means the
owner of the Relevant Ship; and
“Relevant Ship” means, in
relation to each Advance under Tranche C, the Additional Ship which is to act as
security for such Advance.
|
1
|
Copies
of resolutions of the shareholders and directors of each Relevant Owner
and the Borrower authorising the execution of each of the Finance
Documents to which such Owner is a party and, in the case of the Borrower,
approving the borrowing of the relevant Advance and authorising named
directors or attorneys to give the Drawdown Notices and other notices
under this Agreement.
|
|
2
|
The
original of any power of attorney under which any Finance Document is
executed on behalf of the Relevant
Owner.
|
|
3
|
Copies
of all consents which each Relevant Owner or the Borrower requires to
enter into, or make any payment under, any Finance
Document.
|
|
4
|
A
duly executed original of the Guarantee of the Relevant Owner and of the
Mortgage and the General Assignment relative to the Relevant Ship, the
Owner’s Earnings Account Pledge and of each document to be delivered
pursuant to each such Finance
Document.
|
|
5
|
If
applicable, a duly executed original of the Charterparty Assignment or the
Bareboat Charter Security Agreement in respect of the Relevant Ship and of
each document to be delivered pursuant to each such Finance
Document.
|
|
6
|
Evidence
satisfactory to the Facility Agent that the Relevant Owner is a direct or
indirect wholly-owned subsidiary of the
Borrower.
|
|
7
|
The
originals of any documents required in connection with the opening of the
Earnings Account in respect of the Relevant
Ship.
|
|
8
|
Documentary
evidence that:
|
|
(a)
|
the
Relevant Ship is registered in the ownership of the Relevant Owner under
an Approved Flag;
|
|
(b)
|
the
Relevant Ship is in the absolute and unencumbered ownership of the
Relevant Owner save as contemplated by the Finance
Documents;
|
|
(c)
|
the
Relevant Ship maintains the highest available class with an Approved
Classification Society as the Facility Agent may approve free of all
overdue recommendations and conditions of such classification
society;
|
|
(d)
|
the
Mortgage relating to the Relevant Ship has been duly registered or
recorded against the Relevant Ship as a valid first preferred ship
mortgage in accordance with the laws of the relevant Approved Flag State;
and
|
|
(e)
|
the
Relevant Ship is insured in accordance with the provisions of this
Agreement and all requirements therein in respect of insurances have been
complied with.
|
|
9
|
A
copy of the Management Agreement and a duly executed original of the
Approved Manager’s Undertaking in relation to the Relevant
Ship.
|
|
10
|
Copies
of:
|
|
(a)
|
the
document of compliance (DOC) and safety management certificate
(SMC) referred to in paragraph (a) of the definition of the ISM Code
Documentation in respect of the Relevant Ship and the Approved Manager
certified as true and in effect by the Relevant Owner;
and
|
|
(b)
|
the
ISPS Code Documentation in respect of the Relevant Ship and the Relevant
Owner certified as true and in effect by the Relevant
Owner.
|
|
11
|
Two
valuations (at the cost of the Borrowers) of the Relevant Ship, addressed
to the Facility Agent, stated to be for the purposes of this Agreement and
dated not earlier than 4 weeks before the Drawdown Date relative to the
relevant Advance, each from an Approved Broker (such valuations to be made
in accordance with Clause 15.4).
|
|
12
|
A
survey report in respect of the Relevant Ship prepared (at the cost of the
Borrower) by an independent marine surveyor appointed by the Facility
Agent dated no later than 20 days prior to the Drawdown Date of the
relevant Advance in form, scope and substance satisfactory to the Facility
Agent and its technical advisers.
|
|
13
|
At
the cost of the Borrower, a favourable opinion from an independent
insurance consultant acceptable to the Lenders on such matters relating to
the insurances for each Relevant Ship as the Facility Agent may
require.
|
|
14
|
Favourable
legal opinions from lawyers appointed by the Lender on such matters
concerning the laws of the Approved Flag State in which the Relevant Ship
is registered and such other relevant jurisdictions as the Facility Agent
may require.
|
|
15
|
If
the Facility Agent so requires, in respect of any of the documents
referred to above, a certified English translation prepared by a
translator approved by the Facility
Agent.
|
Every
copy document delivered under this Schedule shall be certified as a true and up
to date copy by a director or the secretary (or equivalent officer) of the
Borrower.
TRANSFER
CERTIFICATE
The
Transferor and the Transferee accept exclusive responsibility for ensuring that
this Certificate and the transaction to which it relates comply with all legal
and regulatory requirements applicable to them respectively.
|
To:
|
HSH NORDBANK AG for
itself and for and on behalf of the Borrower, each Security Party, the
Security Trustee and each Lender, as defined in the Loan Agreement
referred to below.
|
[ ]
200[ ]
|
1
|
This
Certificate relates to a Loan Agreement (the “Loan Agreement”) dated
19 March 2008 and made between (1) Capital Product Partners L.P. (the
“Borrower”), (2)
the banks and financial institutions named therein, (3) HSH Nordbank AG as
Swap Bank (4) HSH Nordbank AG as Bookrunner, Facility Agent, Mandated Lead
Arranger and Security Trustee and (5) DnB NOR Bank ASA as Co-Arranger and,
for revolving credit and term loan facilities of up to US$350,000,000 in
aggregate.
|
|
2
|
In
this Certificate:
|
|
“the Relevant Parties”
means the Facility Agent, the Borrower, [each Security Party], the
Security Trustee, and each Lender;
|
|
“the Transferor” means
[full name] of [lending office];
|
|
“the Transferee” means
[full name] of [lending office].
|
|
Terms
defined in the Loan Agreement shall, unless the contrary intention
appears, have the same meanings when used in this
Certificate.
|
|
3
|
The
effective date of this Certificate is .........200[ ] Provided that this
Certificate shall not come into effect unless it is signed by the Facility
Agent on or before that date.
|
|
4
|
The
Transferor assigns to the Transferee absolutely all rights and interests
(present, future or contingent) which the Transferor has as Lender under
or by virtue of the Loan Agreement and every other Finance Document in
relation to [ ] per cent. of the
Contribution outstanding to the Transferor (or its predecessors in title)
which is set out below:
|
|
Contribution
|
Amount
transferred
|
|
|
5
|
By
virtue of this Transfer Certificate and Clause 26 of the Loan Agreement,
the Transferor is discharged [entirely from its Commitment which amounts
to $[ ]] [from
[ ] per cent. of its Commitment, which
percentage represents $[ ]] and the
Transferee acquires a Commitment of
$[ ].
|
|
6
|
The
Transferee undertakes with the Transferor and each of the Relevant Parties
that the Transferee will observe and perform all the obligations under the
Finance Documents which Clause 26 of the Loan Agreement provides will
become binding on it upon this Certificate taking
effect.
|
|
7
|
The
Facility Agent, at the request of the Transferee (which request is hereby
made) accepts, for the Facility Agent itself and for and on behalf of
every other Relevant Party, this Certificate as a Transfer Certificate
taking effect in accordance with Clause 26 of the Loan
Agreement.
|
|
8
|
The
Transferor:
|
|
(a)
|
warrants
to the Transferee and each Relevant
Party:
|
|
|
(i)
|
that
the Transferor has full capacity to enter into this transaction and has
taken all corporate action and obtained all consents which are in
connection with this transaction;
and
|
|
|
(ii)
|
that
this Certificate is valid and binding as regards the
Transferor;
|
|
(b)
|
warrants
to the Transferee that the Transferor is absolutely entitled, free of
encumbrances, to all the rights and interests covered by the assignment in
paragraph 4 above;
|
|
(c)
|
undertakes
with the Transferee that the Transferor will, at its own expense, execute
any documents which the Transferee reasonably requests for perfecting in
any relevant jurisdiction the Transferee’s title under this Certificate or
for a similar purpose.
|
|
9
|
The
Transferee:
|
|
(a)
|
confirms
that it has received a copy of the Loan Agreement and each other Finance
Document;
|
|
(b)
|
agrees
that it will have no rights of recourse on any ground against either the
Transferor, the Facility Agent, the Security Trustee, any Lender in the
event that:
|
|
|
(i)
|
the
Finance Documents prove to be invalid or
ineffective,
|
|
|
(ii)
|
the
Borrower or any Security Party fails to observe or perform its
obligations, or to discharge its liabilities, under the Finance
Documents;
|
|
|
(iii)
|
it
proves impossible to realise any asset covered by a Security Interest
created by a Finance Document, or the proceeds of such assets are
insufficient to discharge the liabilities of the Borrower or Security
Party under the Finance Documents;
|
|
(c)
|
agrees
that it will have no rights of recourse on any ground against the Facility
Agent, the Security Trustee or any Lender in the event that this
Certificate proves to be invalid or
ineffective;
|
|
(d)
|
warrants
to the Transferor and each Relevant Party (i) that it has full capacity to
enter into this transaction and has taken all corporate action and
obtained all official consents which it needs to take or obtain in
connection with this transaction; and (ii) that this Certificate is valid
and binding as regards the Transferee;
and
|
|
(e)
|
confirms
the accuracy of the administrative details set out below regarding the
Transferee.
|
|
10
|
The
Transferor and the Transferee each undertake with the Facility Agent and
the Security Trustee severally, on demand, fully to indemnify the Facility
Agent and/or the Security Trustee in respect of any claim, proceeding,
liability or expense (including all legal expenses) which they or either
of them may incur in connection with this Certificate or any matter
arising out of it, except such as are shown to have been mainly and
directly caused by the gross and culpable negligence or dishonesty of the
Facility Agent’s or the Security Trustee’s own officers or
employees.
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11
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The
Transferee shall repay to the Transferor on demand so much of any sum paid
by the Transferor under paragraph 10 above as exceeds one-half of the
amount demanded by the Facility Agent or the Security Trustee in respect
of a claim, proceeding, liability or expense which was not reasonably
foreseeable at the date of this Certificate; but nothing in this paragraph
shall affect the liability of each of the Transferor and the Transferee to
the Facility Agent or the Security Trustee for the full amount demanded by
it.
|
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[Name
of Transferor]
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[Name
of Transferee]
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By:
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By:
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|
Date:
|
Date:
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Facility
Agent
Signed
for itself and for and on behalf of itself
as
Facility Agent and for every other Relevant Party
HSH
Nordbank AG
By:
Date:
Administrative
Details of Transferee
Name of
Transferee:
Lending
Office:
Contact
Person
(Loan
Administration Department):
Telephone:
Telex:
Fax:
Contact
Person
(Credit
Administration Department):
Telephone:
Telex:
Fax:
Account
for payments:
|
Note:
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This
Transfer Certificate alone may not be sufficient to transfer a
proportionate share of the Transferor’s interest in the security
constituted by the Finance Documents in the Transferor’s or Transferee’s
jurisdiction. It is the responsibility of each Lender to
ascertain whether any other documents are required for this
purpose.
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DESIGNATION
NOTICE
To: HSH
Norbank AG
Gerhart-Hauptmann-Platz
50
20095
Hamburg
Germany
[●]
Dear
Sirs
Loan
Agreement dated 19 March 2008 made between (inter alia) (i) ourselves as
Borrower, (ii) the Lenders, (iii) yourselves as Swap Bank, Bookrunner, Mandated
Lead Arranger, Facility Agent and Security Trustee and (iv) DnB NOR Bank ASA as
Co-Arranger in respect of revolving credit and term loan facilities of up to
US$350,000,000 in aggregate (the “Loan Agreement”)
We refer
to:
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1
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the
Loan Agreement;
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2
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the
Master Agreement dated [●] March 2008 made between ourselves and HSH
Nordbank AG; and
|
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3
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a
Confirmation delivered pursuant to the said Master Agreement dated [●]
March 2008 and addressed by HSH Nordbank AG to
us.
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In
accordance with the terms of the Loan Agreement, we hereby give you notice of
the said Confirmation and hereby confirm that the Transaction evidenced by it
will be designated as a “Designated Transaction” for the purposes of the Loan
Agreement and the Finance Documents.
Yours
faithfully,
|
for
and on behalf of
|
|
CAPITAL
PRODUCT PARTNERS L.P.
|
FORM
OF COMPLIANCE CERTIFICATE
To:
HSH NORDBANK AG
Gerhart-Hauptmann-Platz
50
20095
Hamburg
Germany
From: Capital
Product Partners L.P.
Dated:
[●]
Dear
Sirs
USD
350,000,000 Loan Agreement
dated 19 March 2008 (the
“Agreement”)
|
1
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We
refer to the Agreement. This is a Compliance Certificate and attached
hereto are the calculations which will provide evidence of compliance.
Terms defined in the Agreement have the same meaning when used in this
Compliance Certificate unless given a different meaning in this Compliance
Certificate.
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2
|
We
refer to clauses 12.5 and 15.1 of the Agreement and hereby certify
that:
|
(a) Leverage Ratio
Requirement: Leverage
Ratio of not more than 72.50%.
Satisfied [YES] :
[NO]
(b) Minimum Liquidity
Requirement: maintain
on a consolidated basis liquidity in a minimum amount determined in accordance
with Clause 12.5(c) of the Agreement.
Satisfied
[YES] : [NO]
(c) Interest Coverage
Requirement: maintain
a ratio of EBITDA to Net Interest Expenses on a trailing 4-quarter basis of not
less than 2.00 to 1.00.
Satisfied
[YES] : [NO]
(d) Collateral
Maintenance
Requirement: Market
Value of the Ships subject to a Mortgage is not less than 125% of the
Loan.
Satisfied
[YES] : [NO]
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3
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We
confirm that no Event of Default is continuing and that no Event of
Default would occur out of the distribution or dividend [made][to be
made].*
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…..................
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Chief
Financial Officer
|
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…..................
for and
on behalf of
[name of auditors of the
Company]**
_____________________
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*
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If
this statement cannot be made, the certificate should identify any Event
of Default that is continuing and the steps, if any, being taken to remedy
it.
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**
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Only
applicable if the Compliance Certificate accompanies the audited financial
statements and is to be signed by the auditors. To be agreed
with the Company’s auditors prior to signing the
Agreement.
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EXECUTION
PAGES
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BORROWER
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SIGNED
by
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)
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for
and on behalf of
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)
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CAPITAL
PRODUCT
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)
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PARTNERS
L.P.
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)
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LENDERS
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SIGNED
by
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)
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for
and on behalf of
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)
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HSH
NORDBANK AG
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)
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SIGNED
by
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)
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for
and on behalf of
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)
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DNB
NOR BANK ASA
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)
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SIGNED
by
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)
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for
and on behalf of
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ALPHA
BANK A.E.
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)
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SIGNED
by
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)
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for
and on behalf of
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)
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NATIONAL
BANK OF
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)
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GREECE
S.A.
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)
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SIGNED
by
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for
and on behalf of
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)
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PIRAEUS
BANK A.E.
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)
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SWAP
BANK
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SIGNED
by
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)
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for
and on behalf of
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)
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HSH
NORDBANK AG
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)
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BOOKRUNNER
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SIGNED
by
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)
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for
and on behalf of
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HSH
NORDBANK AG
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)
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MANDATED
LEAD ARRANGER
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SIGNED
by
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)
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for
and on behalf of
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)
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HSH
NORDBANK AG
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)
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FACILITY
AGENT
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SIGNED
by
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)
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for
and on behalf of
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)
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HSH
NORDBANK AG
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)
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SECURITY
TRUSTEE
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SIGNED
by
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)
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for
and on behalf of
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)
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HSH
NORDBANK AG
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)
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CO-ARRANGER
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SIGNED
by
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)
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for
and on behalf of
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)
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DNB
NOR BANK ASA
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)
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Witness
to all the above
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)
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Signatures:
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)
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Name:
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Address:
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85
Exhibit
4.11
EXECUTION
COPY
SHARE
PURCHASE AGREEMENT
Dated 24
September, 2007
between
CAPITAL
MARITIME & TRADING CORP.
and
CAPITAL
PRODUCT PARTNERS L.P.
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SHARE PURCHASE AGREEMENT (the “Agreement”), dated as
of September 24, 2007, by and between CAPITAL MARITIME & TRADING CORP.
(the “Seller”),
a corporation organized under the laws of the Republic of the Marshall Islands,
and CAPITAL PRODUCT PARTNERS L.P. (the “Buyer”), a limited
partnership organized under the laws of the Republic of the Marshall Islands and
recently formed by the Seller.
RECITAL
WHEREAS, the Buyer wishes to purchase
from the Seller, and the Seller wishes to sell to the Buyer, the five hundred
(500) shares of common stock (the “Shares”) representing
all of the issued and outstanding shares of common stock of Ross Shipmanagement
Co., a corporation organized under the laws of the Republic of the
Marshall Islands (the “Vessel Owning
Subsidiary”).
WHEREAS, the Vessel Owning Subsidiary
is the registered owner of the Liberian flagged motor tanker “Attikos” (the
“Vessel”).
WHEREAS, the Vessel is subject to a
time charter party agreement (type SHELLTIME 4) dated May 31, 2007
and entered into between the Vessel Owning Subsidiary and Trafigura Beheer BV,
Amsterdam (the “Charterer”) for a
period of 26 to 28 months from July 12, 2007, the date on
which the Vessel was delivered to the Charterer (the “Charter”).
WHEREAS, contemporaneously with the
execution of this Agreement, the Buyer and Capital Ship Management Corp. (“CSM”) will execute an
amendment to the Management Agreement dated as of April 3, 2007 and entered into
between the Buyer and CSM (the “Amendment to the Management
Agreement”).
NOW, THEREFORE, the parties hereto
agree as follows:
Interpretation
SECTION 1.01 Definitions. In
this Agreement, unless the context requires otherwise or unless otherwise
specifically provided herein, the following terms shall have the respective
meanings set out below and grammatical variations of such terms shall have
corresponding meanings:
“Agreement” means this
Agreement, including its recitals and schedules, as amended, supplemented,
restated or otherwise modified from time to time;
“Applicable Law” in
respect of any Person, property, transaction or event, means all laws, statutes,
ordinances, regulations, municipal by-laws, treaties, judgments
and
decrees applicable to that Person, property, transaction or event and, whether
or not having the force of law, all applicable official directives, rules,
consents, approvals, authorizations, guidelines, orders, codes of practice and
policies of any Governmental Authority having or purporting to have authority
over that Person, property, transaction or event and all general principles of
common law and equity;
“Business Day” means
any day other than a Saturday, Sunday or any statutory holiday on which banks in
London, Greece and New York are required to close;
“Buyer” has the
meaning given to it in the preamble;
“Buyer Indemnitees”
has the meaning given to it in Section 10.01;
“Charter” has the
meaning given to it in the recitals;
“Charterer” has the
meaning given to it in the recitals;
“Closing” has the
meaning given to it in Section 2.02;
“Closing Date” has the
meaning given to it in Section 2.02;
“Contracts” has the
meaning given to it in Section 5.08;
“Credit Facility”
means the US$370 million credit facility agreement dated March 22, 2007 between
the Buyer and HSH Nordbank AG;
“Daily Charter Rate”
means, with respect to the Vessel, the daily charter rate provided in the
Charter in the amount of US Dollars 13,850;
“Encumbrance” means
any mortgage, lien, charge, assignment, adverse claim, hypothecation,
restriction, option, covenant, condition or encumbrance, whether fixed or
floating, on, or any security interest in, any property whether real, personal
or mixed, tangible or intangible, any pledge or hypothecation of any property,
any deposit arrangement, priority, conditional sale agreement, other title
retention agreement or equipment trust, capital lease or other security
arrangements of any kind;
“Governmental
Authority” means any domestic or foreign government, including federal,
provincial, state, municipal, county or regional government or governmental or
regulatory authority, domestic or foreign, and includes any department,
commission, bureau, board, administrative agency or regulatory body of any of
the foregoing and any multinational or supranational organization;
“Losses” means, with
respect to any matter, all losses, claims, damages, liabilities, deficiencies,
costs, expenses (including all costs of investigation, legal and other
professional fees and disbursements, interest, penalties and amounts paid in
settlement) or diminution of value, whether or not involving a claim from a
third party, however specifically excluding consequential, special and indirect
losses, loss of profit and loss of opportunity;
“Notice” means any
notice, citation, directive, order, claim, litigation, investigation,
proceeding, judgment, letter or other communication, written or oral, actual or
threatened, from any Person;
“Parties” means all
parties to this Agreement and “Party” means any one
of them;
“Person” means an
individual, entity or association, including any legal personal representative,
corporation, body corporate, firm, partnership, trust, trustee, syndicate, joint
venture, unincorporated organization or Governmental Authority;
“Permits” has the
meaning given to it in Section 5.13;
“Purchase Price” has
the meaning given to it in Section 2.03;
“Seller” has the
meaning given to it in the preamble;
“Seller Indemnities”
has the meaning given to it in Section 10.02;
“Shares” has the
meaning given to it in the recitals;
“Taxes” means all
income, franchise, business, property, sales, use, goods and services or value
added, withholding, excise, alternate minimum capital, transfer, excise,
customs, anti-dumping, stumpage, countervail, net worth, stamp, registration,
franchise, payroll, employment, health, education, business, school, property,
local improvement, development, education development and occupation taxes,
surtaxes, duties, levies, imposts, rates, fees, assessments, dues and charges
and other taxes required to be reported upon or paid to any domestic or foreign
jurisdiction and all interest and penalties thereon;
“Vessel” has the
meaning given to it in the recitals; and
“Vessel Owning
Subsidiary” has the meaning given to it in the recitals.
SECTION 2.01 Purchase and Sale of
Shares. The Seller agrees to sell and transfer to the Buyer,
and the Buyer agrees to purchase from the Seller for the Purchase Price and in
accordance with and subject to the terms and conditions set forth in this
Agreement, the Shares.
SECTION 2.02 Closing. On
the terms of this Agreement, the sale and transfer of the Shares and payment of
the Purchase Price shall take place on the date hereof (the “Closing
Date”). The sale and transfer of the Shares is hereinafter
referred to as “Closing.”
SECTION
2.03 Place of
Closing. The Closing shall take place at the premises of
Capital Ship Management Corp. at 3 Iassonos street, Piraeus,
Greece.
SECTION 2.04 Purchase Price for
Shares. On the Closing Date, the Buyer shall pay to the Seller
(to such account as the Seller shall nominate) the amount of US Dollars
23,000,000 for the Shares (the “Purchase
Price”).
SECTION 2.05 Payment of the Purchase
Price. The Purchase Price will be paid by the Buyer to the
Seller of the Shares by wire transfer of immediately available funds to an
account designated in writing by the Seller.
Representations
and Warranties of the Buyer
The Buyer represents and warrants to
the Seller that as of the date hereof:
SECTION 3.01 Organization and Limited
Partnership Authority. The Buyer is duly formed, validly
existing and in good standing under the laws of the Republic of the Marshall
Islands, and has all requisite limited partnership power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Buyer, has been
effectively authorized by all necessary action, limited partnership or
otherwise, and constitutes legal, valid and binding obligations of the Buyer. No
meeting has been convened or resolution proposed or petition presented and no
order has been made to wind up the Buyer.
SECTION 3.02 Agreement Not in Breach of
Other Instruments. The execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby and the
fulfillment of the terms hereof will not result in a breach of any of the terms
or provisions of, or constitute a default under, or conflict with, any agreement
or other instrument to which the Buyer is a party or by which it is bound, the
Certificate of Formation and the Partnership Agreement, any judgment, decree,
order or award of any court, governmental body or arbitrator by which the Buyer
is bound, or any law, rule or regulation applicable to the Buyer which
would have a material effect on the transactions contemplated
hereby.
SECTION 3.03 No Legal
Bar. The Buyer is not prohibited by any order, writ,
injunction or decree of any body of competent jurisdiction from consummating the
transactions contemplated by this Agreement and no such action or proceeding is
pending or, to the best of its knowledge and belief, threatened against the
Buyer which questions the validity of this Agreement, any of the transactions
contemplated hereby or any action which has been taken by any of the parties in
connection herewith or in connection with any of the transactions contemplated
hereby.
Representations
and Warranties of the Seller
The Seller represents and warrants to
the Buyer that as of the date hereof:
SECTION
4.01 Organization and Corporate
Authority. The Seller is duly incorporated, validly existing
and in good standing under the laws of the Republic of the Marshall Islands, and
has all requisite corporate power and authority to enter into this Agreement and
to consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by the Seller, has been effectively
authorized by all necessary action, corporate or otherwise, and constitutes
legal, valid and binding obligations of the Seller. No meeting has been convened
or resolution proposed or petition presented and no order has been made to wind
up the Seller.
SECTION
4.02 Agreement Not in
Breach. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and the fulfillment of the
terms hereof will not result in a breach of any of the terms or provisions of,
or constitute a default under, or conflict with, any agreement or other
instrument to which the Seller is a party or by which it is bound, the Articles
of Incorporation and Bylaws of the Seller, any judgment, decree, order or award
of any court, governmental body or arbitrator by which the Seller is bound, or
any law, rule or regulation applicable to the Seller.
SECTION
4.03 No
Legal Bar. The Seller is not prohibited by any order, writ,
injunction or decree of any body of competent jurisdiction from consummating the
transactions contemplated by this Agreement and no such action or proceeding is
pending or, to the best of its knowledge and belief, threatened against the
Seller which questions the validity of this Agreement, any of the transactions
contemplated hereby or any action which has been taken by any of the parties in
connection herewith or in connection with any of the transactions contemplated
hereby.
SECTION
4.04 Good and Marketable Title to
Shares. The Seller is the owner (of record and beneficially)
of all of the Shares and has good and marketable title to the Shares, free and
clear of any and all Encumbrances.
SECTION
4.05 Right to Enter
Agreement. The Seller has the full right, power and authority
to enter into this Agreement and to transfer, convey and sell to the Buyer as of
the date hereof the Shares and upon consummation of the purchase contemplated
hereby, the Buyer will acquire from the Seller good and marketable title to the
Shares, free and clear of all covenants, conditions, restrictions, voting trust
arrangements, liens, charges, encumbrances, options and adverse claims or rights
whatsoever.
Representations
and Warranties of
the
Seller Regarding the Vessel Owning Subsidiary
The Seller represents and warrants to
the Buyer that as of the date hereof:
SECTION 5.01 Organization Good Standing
and Authority. The Vessel Owning Subsidiary is a corporation
duly incorporated, validly existing and in good standing under the laws of the
Republic of the Marshall Islands. The Vessel Owning Subsidiaries has
full corporate power and authority to carry on its business as it is now, and
has since its incorporation been, conducted, and is entitled to own, lease or
operate the properties and assets it now owns, leases or operates and to enter
into legal and binding contracts. No meeting has been convened or
resolution proposed or petition presented and no order has been made to wind up
the Vessel Owning Subsidiary.
SECTION
5.02 Capitalization. The
Shares consist of the 500 shares of common stock without par value and have been
duly authorized and validly issued and are fully paid and non-assessable, and
constitute the total issued and outstanding capital stock of the Vessel Owning
Subsidiary. There are not outstanding (i) any options, warrants
or other rights to purchase from the Vessel Owning Subsidiary any capital stock
of the Vessel Owning Subsidiary, (ii) any securities convertible into or
exchangeable for shares of such capital stock or (iii) any other
commitments of any kind for the issuance of additional shares of capital stock
or options, warrants or other securities of the Vessel Owning
Subsidiary.
SECTION
5.03 Organizational
Documents. The Seller has supplied to the Buyer true and
correct copies of the organizational documents of the Vessel Owning Subsidiary,
as in effect as of the date hereof (the “Organizational
Documents”).
SECTION
5.04 Agreement Not in
Breach. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will violate, or
result in a breach of, any of the terms and provisions of, or constitute a
default under, or conflict with, or give any other party thereto a right to
terminate any agreement or other instrument to which the Vessel Owning
Subsidiary is a party or by which it is bound including, without limitation, any
of the Organizational Documents, or any judgment, decree, order or award of any
court, governmental body or arbitrator applicable to the Vessel Owning
Subsidiary.
SECTION
5.05 Litigation.
(a). There
is no action, suit or proceeding to which the Vessel Owning Subsidiary is a
party (either as a plaintiff or defendant) pending before any court or
governmental agency, authority or body or arbitrator; there is no action, suit
or proceeding threatened against the Vessel Owning Subsidiary; and, to the best
knowledge of the Seller, there is no basis for any such action, suit or
proceeding;
(b). The
Vessel Owning Subsidiary has not been permanently or temporarily enjoined by any
order, judgment or decree of any court or any governmental agency, authority or
body from engaging in or continuing any conduct or practice in connection with
the business, assets, or properties of the Vessel Owning Subsidiary;
and
(c). There
is not in existence any order, judgment or decree of any court or other tribunal
or other agency enjoining or requiring the Vessel Owning Subsidiary to take any
action of any kind with respect to its business, assets or
properties.
SECTION 5.06 Indebtedness to and from
Officers, etc. The Vessel Owning Subsidiary will not be
indebted, directly or indirectly, to any person who is an officer, director,
stockholder or employee of any of the Seller or any spouse, child, or other
relative or any affiliate of any such person, nor shall any such officer,
director, stockholder, employee, relative or affiliate be indebted to the Vessel
Owning Subsidiary.
SECTION 5.07 Personnel. The
Vessel Owning Subsidiary has no employees.
SECTION
5.08 Contracts
and Agreements. Other than the Charter and the Amendment to
the Management Agreement (together, the “Contracts”), there
are no material contracts or agreements, written or oral, to which the Vessel
Owning Subsidiary is a party or by which any of its assets are
bound.
(a). Each
of the Contracts is a valid and binding agreement of the Vessel Owning
Subsidiary, and to the best knowledge of the Seller, of all other parties
thereto;
(b). The
Vessel Owning Subsidiary has fulfilled all material obligations required
pursuant to its Contracts to have been performed by it prior to the date hereof
and has not waived any material rights thereunder; and
(c). There
has not occurred any material default under any of the Contracts, or to the best
knowledge of the Seller, on the part of any other party thereto nor has any
event occurred which with the giving of notice or the lapse of time, or both,
would constitute any material default on the part of the Vessel Owning
Subsidiary under any of the Contracts nor, to the best knowledge of the Seller,
has any event occurred which with the giving of notice or the lapse of time, or
both, would constitute any material default on the part of any other party to
any of the Contracts.
SECTION 5.09 Compliance with
Law. The conduct of business by the Vessel Owning Subsidiary
does not and the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby will not violate any laws, statutes,
ordinances, rules, regulations, decrees, orders, permits or other similar items
in force (including, but not limited to, any of the foregoing relating to
employment discrimination, environmental protection or conservation) of any
country, province, state or other governing body, the enforcement of which would
materially and adversely affect the business, assets, condition (financial or
otherwise) or prospects of the Vessel Owning Subsidiary taken as a whole, nor
has the Vessel Owning Subsidiary received any notice of any such
violation.
SECTION 5.10 No Undisclosed
Liabilities. The Vessel Owning Subsidiary (or the Vessel owned
by it) has no liabilities or obligations of any nature, whether
absolute, accrued, contingent or otherwise, and whether due or to become due
(including, without limitation, any liability for Taxes and interest, penalties
and other charges payable with respect to any such liability or obligation).
Notwithstanding the foregoing, the Parties acknowledge and agree that there may
be obligations under the Contracts that are not due and payable as of the date
hereof and that will be the responsibility of the Seller pursuant to Section
8.01(c) of this Agreement.
SECTION 5.11 Disclosure of
Information. The Seller has disclosed to the Buyer all
material information on, and about, the Vessel Owning Subsidiary and the Vessel
and all such information is true, accurate and not misleading in any material
respect. Nothing has been withheld from the material provided to the Buyer which
would render such information untrue or misleading.
SECTION
5.12 Payment of
Taxes. The Vessel Owning Subsidiary has filed all foreign,
federal, state and local income and franchise tax returns required to be filed,
which returns are correct and complete in all material respects, and has timely
paid all taxes due from it, and the Vessel is in good standing with respect to
the payment of past and current Taxes, fees and other amounts payable under the
laws of the jurisdiction where it is registered as would affect its registry
with the ship registry of such jurisdiction.
SECTION 5.13 Permits. The
Vessel Owning Subsidiary has such permits, consents, licenses, franchises,
concessions, certificates and authorizations (“Permits”) of, and has
all declarations and filings with, and is qualified and in good standing in each
jurisdiction of, all federal, provincial, state, local or foreign Governmental
Authorities and other Persons, as are necessary to own or lease its properties
and to conduct its business in the manner that is standard and customary for a
business of its nature other than such Permits the absence of which,
individually or in the aggregate, has not and could not reasonably be expected
to materially or adversely affect the Vessel Owning Subsidiary. The
Vessel Owning Subsidiary has fulfilled and performed all its obligations with
respect to such Permits which are or will be due to have been fulfilled and
performed by such date and no event has occurred that would prevent the Permits
from being renewed or reissued or that allows, or after notice or lapse of time
would allow, revocation or termination thereof or results or would result in any
impairment of the rights of the holder of any such Permit, except for such
non-renewals, non-issues, revocations, terminations and impairments that would
not, individually or in the aggregate, materially or adversely affect the Vessel
Owning Subsidiary, and none of such Permits contains any restriction that is
materially burdensome to the Vessel Owning Subsidiary.
SECTION 5.14 No Material Adverse Change
in Business. Since July 12, 2007, there has been no material
adverse change in the condition, financial or otherwise, or in the earnings,
properties, business affairs or business prospects of the Vessel Owning
Subsidiary, whether or not arising in the ordinary course of business, that
would have or could reasonably be expected to have a material adverse effect on
the condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Vessel Owning Subsidiary.
Representations
and Warranties of
the
Seller regarding the Vessel
The Seller represents and warrants to
the Buyer that as of the date hereof:
SECTION
6.01 Title to
Vessel. The Vessel Owning Subsidiary is the owner
(beneficially and of record) of the Vessel and has good and marketable title to
the Vessel.
SECTION 6.02 No
Encumbrances. The Vessel Owning Subsidiary and the Vessel are
free of all Encumbrances other than the Encumbrances arising under the Charter
or the Credit Facility.
SECTION 6.03 Condition. The
Vessel is (i) adequate and suitable for use by the Vessel Owning Subsidiary in
the manner that is standard and customary for a vessel of its type, ordinary
wear and tear excepted; (ii) seaworthy in all material respects for hull and
machinery insurance warranty purposes and in good running order and repair;
(iii) insured against all risks, and in amounts, consistent with common industry
practices; (iv) in compliance with maritime laws and regulations; and (v) in
compliance in all material respects with the requirements of its class and
classification society; and all class certificates of the Vessel are clean and
valid and free of recommendations affecting class; and the Buyer acknowledges
and agrees that, subject only to the representations and warranties in this
Agreement, it is acquiring the Vessel on an “as is, where is”
basis.
Amendments
and Waivers
SECTION
7.01 Amendments and
Waivers. This Agreement may not be amended except by an
instrument in writing signed on behalf of each parties hereto. By an
instrument in writing the Buyer, on the one hand, or the Seller, on the other
hand, may waive compliance by the other with any term or provision of this
Agreement that such other party was or is obligated to comply with or
perform.
Indemnification
SECTION
8.01 Indemnity by the
Seller. The Seller shall be liable for, and shall indemnify
the Buyer and each of its subsidiaries and each of their directors, employees,
agents and representatives (the “Buyer Indemnitees”)
against and hold them harmless from, any Losses, suffered or incurred by such
Buyer Indemnitee:
(a).
by reason of, arising out of or otherwise in respect of any inaccuracy in, or
breach of, any representation or warranty (without giving effect to any
supplement to the schedules or qualifications as to materiality or dollar amount
or other similar qualifications), or a failure to perform or observe any
covenant, agreement or obligation of, the Seller in or under this Agreement or
in or under any document, instrument or agreement delivered pursuant to this
Agreement by the Seller;
(b). any
fees, expenses or other payments incurred or owed by the Seller or the Vessel
Owning Subsidiary to any brokers, financial advisors or comparable other persons
retained or employed by it in connection with the transactions contemplated by
this Agreement; or
(c). by
reason of, arising out of or otherwise in respect of obligations, liabilities,
expenses, cost and claims relating to, arising from or otherwise attributable to
the assets owned by the Vessel Owning Subsidiary or the assets, operations, and
obligations of the Vessel Owning Subsidiary or the businesses thereof, in each
case, to the extent relating to, arising from, or otherwise attributable to
facts, circumstances or events occurring prior to the Closing Date.
SECTION
8.02 Indemnity by the
Buyer. The Buyer shall indemnify the Seller and its
subsidiaries other than any Buyer Indemnitees and each of their respective
officers, directors, employees, agents and representatives (the “Seller Indemnitees”)
against and hold them harmless from, any Losses, suffered or incurred by such
Seller Indemnitee by reason of, arising out of or otherwise in respect of any
inaccuracy in, or breach of, any representation or warranty (without giving
effect to any supplement to the schedules occurring after the date hereof or
qualifications as to materiality or dollar amount or other similar
qualifications), or a failure to perform or observe any covenant, agreement or
obligation of, the Buyer in or under this Agreement or in or under any document,
instrument or agreement delivered pursuant to this Agreement by the
Buyer.
Miscellaneous
SECTION
9.01 Governing
Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York applicable to contracts made
and to be performed wholly within such jurisdiction without giving effect to
conflict of law principles thereof other than Section 5-1401 of the New York
General Obligations Law, except to the extent that it is mandatory that the law
of some other jurisdiction, wherein the Vessels are located, shall
apply.
SECTION 9.02 Counterparts. This
Agreement may be executed simultaneously in one or more counterparts, each of
which shall be deemed an original, but all of which shall constitute but one and
the same instrument.
SECTION 9.03 Complete
Agreement. This Agreement and Schedules hereto contain the
entire agreement between the parties hereto with respect to the transactions
contemplated herein and, except as provided herein, supersede all previous oral
and written and all contemporaneous oral negotiations, commitments, writings and
understandings.
SECTION 9.04 Interpretation. The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this
Agreement.
SECTION 9.05 Severability. If
any of the provisions of this Agreement are held by any court of competent
jurisdiction to contravene, or to be invalid under, the laws of any governmental
body having jurisdiction over the subject matter hereof, such contravention or
invalidity shall not invalidate the entire Agreement. Instead, this
Agreement shall be construed as if it did not contain the particular provision
or provisions held to be invalid, and an equitable adjustment shall be made and
necessary provision added so as to give effect, as nearly as possible, to the
intention of the Parties as expressed in this Agreement at the time of execution
of this Agreement.
SECTION 9.06 Third Party
Rights. Except to the extent provided in Article X, a Person
who is not a party to this Agreement has no right to enforce or to enjoy the
benefit of any term of this Agreement.
SECTION 9.07 Notices. Any
notice, claim or demand in connection with this Agreement shall be delivered to
the parties at the following addresses (or at such other address or facsimile
number for a party as may be designated by notice by such party to the other
party):
(a). if
to Capital Maritime & Trading Corp., as follows:
c/o
Capital Ship Management Corp., 3 Iassonos Street, Piraeus, Greece
Attention: Evangelos
M. Marinakis
Facsimile: +30
210 428 4286
(b). if
to Capital Product Partners L.P., as follows:
c/o
Capital Ship Management Corp., 3 Iassonos Street, Piraeus, Greece
Attention: Ioannis
E. Lazaridis
Facsimile: +30
210 428 4285
and any
such notice shall be deemed to have been received (i) on the next working
day in the place to which it is sent, if sent by facsimile or (ii) forty
eight (48) hours from the time of dispatch, if sent by courier.
SECTION 9.08 Representations and
Warranties to Survive. All representations and warranties of
the Buyer and Seller contained in this Agreement shall survive the Closing and
shall remain operative and in full force and effect after the Closing,
regardless of (a) any investigation made by or on behalf of any Party or its
affiliates, any Person controlling any Party, its officers or directors, and (b)
delivery of and payment for the Shares.
12
IN WITNESS WHEREOF, each of the parties
hereto has caused this Agreement to be signed as of the date first above
written.
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CAPITAL
MARITIME & TRADING CORP.
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By:
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| Name: Evangelos M. Marinakis | |||
| Title: President and Chief Executive Officer | |||
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CAPITAL
PRODUCT PARTNERS L.P.
By:
Capital GP L.L.C., its general partner
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By:
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| Name: Ioannis E. Lazaridis | |||
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Title:
Chief Executive Officer and Chief
Financial
Officer of Capital GP, L.L.C.
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13
Exhibit
4.12
EXECUTION
COPY
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SHARE
PURCHASE AGREEMENT
Dated
March 27, 2008
between
CAPITAL
MARITIME & TRADING CORP.
and
CAPITAL
PRODUCT PARTNERS L.P.
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SHARE PURCHASE AGREEMENT (the “Agreement”), dated as
of March 27, 2008, by and between CAPITAL MARITIME & TRADING CORP. (the
“Seller”), a
corporation organized under the laws of the Republic of the Marshall Islands,
and CAPITAL PRODUCT PARTNERS L.P. (the “Buyer”), a limited
partnership organized under the laws of the Republic of the Marshall Islands and
recently formed by the Seller.
RECITAL
WHEREAS, the Buyer wishes to purchase
from the Seller, and the Seller wishes to sell to the Buyer, the five hundred
(500) shares of common stock (the “Shares”) representing
all of the issued and outstanding shares of common stock of Baymont Enterprises
Incorporated, a corporation organized under the laws of the Republic of Liberia
(the “Vessel Owning
Subsidiary”).
WHEREAS, the Vessel Owning Subsidiary
is the registered owner of the Liberian flagged motor tanker “Amore Mio II” (the
“Vessel”).
WHEREAS, the Seller wishes to transfer
to the Buyer all right, title and interest in the Vessel, and retain all assets
other than the Vessel, the Contracts (as defined below) and any necessary
permits and all liabilities of the Vessel Owning Subsidiary.
WHEREAS, the Vessel is subject to a
time charter party agreement (type BPTIME3) dated September 27, 2007 and entered
into between Baymont and BP Shipping Limited (the “Charterer”) for a
period of 35 to 37 months from October 1, 2007, the date on which the Amore Mio
II was delivered to the Charterer (the “Charter”).
WHEREAS, contemporaneously with the
execution of this Agreement, the Buyer and Capital Ship Management Corp. (“CSM”) will execute an
amendment to the Management Agreement dated as of April 3, 2007, as amended on
September 24, 2007, and entered into between the Buyer and CSM (the “Amendment to the Management
Agreement”).
NOW, THEREFORE, the parties hereto
agree as follows:
Interpretation
SECTION 1.01 Definitions. In this Agreement, unless
the context requires otherwise or unless otherwise specifically provided herein,
the following terms shall have the respective meanings set out below and
grammatical variations of such terms shall have corresponding
meanings:
“Agreement” means this
Agreement, including its recitals and schedules, as amended, supplemented,
restated or otherwise modified from time to time;
“Amendment to the Management
Agreement” has the meaning given to it in the recitals;
“Applicable Law” in
respect of any Person, property, transaction or event, means all laws, statutes,
ordinances, regulations, municipal by-laws, treaties, judgments and decrees
applicable to that Person, property, transaction or event and, whether or not
having the force of law, all applicable official directives, rules, consents,
approvals, authorizations, guidelines, orders, codes of practice and policies of
any Governmental Authority having or purporting to have authority over that
Person, property, transaction or event and all general principles of common law
and equity;
“Amore Mio II” has the
meaning given to it in the recitals;
“Buyer” has the
meaning given to it in the preamble;
“Buyer Entities” means
the Buyer and its subsidiaries;
“Buyer Indemnitees”
has the meaning given to it in Section 9.01;
“Charter” has the
meaning given to it in the recitals;
“Charterer” has the
meaning given to it in the recitals;
“Closing” has the
meaning given to it in Section 2.02;
“Closing Date” has the
meaning given to it in Section 2.02;
“Commitment” means (a)
options, warrants, convertible securities, exchangeable securities, subscription
rights, conversion rights, exchange rights or other contracts that could require
a Person to issue any of its equity interests or to sell any equity interests it
owns in another Person (other than this Agreement and the related transaction
documents); (b) any other securities convertible into, exchangeable or
exercisable for, or representing the right to subscribe for any equity interest
of a Person or owned by a Person; and (c) stock appreciation rights, phantom
stock, profit participation, or other similar rights with respect to a
Person;
“Common Units” has the
meaning ascribed to such term in the Partnership Agreement.
“Contracts” has the
meaning given to it in Section 5.08;
“Credit Facility”
means the US$350 million credit facility agreement dated March 19, 2008 between
the Buyer and HSH Nordbank AG;
“CSM” has the meaning
given to it in the recitals;
“Encumbrance” means
any mortgage, lien, charge, assignment, adverse claim, hypothecation,
restriction, option, covenant, condition or encumbrance, whether fixed or
floating, on, or any security interest in, any property whether real, personal
or mixed, tangible or intangible, any pledge or hypothecation of any property,
any deposit arrangement, priority, conditional sale agreement, other title
retention agreement or equipment trust, capital lease or other security
arrangements of any kind;
“Equity Interest”
means (a) with respect to any entity, any and all shares of capital stock or
other ownership interest and any Commitments with respect thereto, (b) any other
direct equity ownership or participation in a Person and (c) any Commitments
with respect to the interests described in (a) or (b);
“Governmental
Authority” means any domestic or foreign government, including federal,
provincial, state, municipal, county or regional government or governmental or
regulatory authority, domestic or foreign, and includes any department,
commission, bureau, board, administrative agency or regulatory body of any of
the foregoing and any multinational or supranational organization;
“Losses” means, with
respect to any matter, all losses, claims, damages, liabilities, deficiencies,
costs, expenses (including all costs of investigation, legal and other
professional fees and disbursements, interest, penalties and amounts paid in
settlement) or diminution of value, whether or not involving a claim from a
third party, however specifically excluding consequential, special and indirect
losses, loss of profit and loss of opportunity;
“Notice” means any
notice, citation, directive, order, claim, litigation, investigation,
proceeding, judgment, letter or other communication, written or oral, actual or
threatened, from any Person;
“Organizational
Documents” has the meaning given to it in Section 5.03;
“Parties” means all
parties to this Agreement and “Party” means any one
of them;
“Partnership
Agreement” means the Amended and Restated Agreement of Limited
Partnership of the Buyer dated April 3, 2007.
“Person” means an
individual, entity or association, including any legal personal representative,
corporation, body corporate, firm, partnership, trust, trustee, syndicate, joint
venture, unincorporated organization or Governmental Authority;
“Permits” has the
meaning given to it in Section 5.13;
“Purchase Price” has
the meaning given to it in Section 2.04;
“SEC Documents” means
the Prospectus of the Buyer dated March 29, 2007 and filed with the U.S.
Securities and Exchange Commission and all filings the
Buyer is
required to make pursuant to the Securities Act and the Securities Exchange Act
of 1934, as amended from time to time;
“Securities Act” means
the Securities Act of 1933, as amended from time to time;
“Seller” has the
meaning given to it in the preamble;
“Seller Entities”
means the Seller and its affiliates other than the Buyer Entities;
“Seller Indemnities”
has the meaning given to it in Section 9.02;
“Shares” has the
meaning given to it in the recitals;
“Taxes” means all
income, franchise, business, property, sales, use, goods and services or value
added, withholding, excise, alternate minimum capital, transfer, excise,
customs, anti-dumping, stumpage, countervail, net worth, stamp, registration,
franchise, payroll, employment, health, education, business, school, property,
local improvement, development, education development and occupation taxes,
surtaxes, duties, levies, imposts, rates, fees, assessments, dues and charges
and other taxes required to be reported upon or paid to any domestic or foreign
jurisdiction and all interest and penalties thereon;
“Transferred Common
Units” has the meaning given to it in Section 2.04;
“Vessel Owning
Subsidiary” has the meaning given to it in the recitals; and
“Vessel” has the
meaning given to it in the recitals.
Purchase and Sale of Shares;
Closing
SECTION 2.01 Purchase and Sale of
Shares. The Seller agrees to sell and transfer to the
Buyer, and the Buyer agrees to purchase from the Seller for the Purchase Price
and in accordance with and subject to the terms and conditions set forth in this
Agreement, the Shares which in turn shall result in the Buyer indirectly owning
the Vessel.
SECTION 2.02 Purchase and Sale of
Shares. On the
terms of this Agreement, the sale and transfer of the Shares and payment of the
Purchase Price shall take place on the date hereof (the “Closing
Date”). The sale and transfer of the Shares is hereinafter
referred to as “Closing.”
SECTION 2.03 Place of
Closing. The Closing shall take place at the premises of
CSM at 3 Iassonos Street, Piraeus, Greece.
SECTION 2.04 Purchase Price for
Shares. On the Closing Date, the Buyer shall pay to the
Seller (to such account as the Seller shall nominate) the amount of US Dollars
$48,000,000 and shall issue to the Seller 2,048,823 Common Units at a price of
US Dollars 22.94 per unit, which equals the volume weighted average price of the
Common Units on the NASDAQ Global Market for the period from October 15, 2007 to
February 15, 2008 (the “Transferred Common
Units” and, together with such cash consideration, the “Purchase Price”) in
exchange for the Shares. The Buyer shall have no responsibility or
liability hereunder for the Seller’s allocation and distribution of the Purchase
Price among the Seller Entities.
SECTION 2.05 Payment
of the Purchase Price. The Purchase Price (i) (to the
extent paid in US Dollars) will be paid by the Buyer to the Seller of the Shares
by wire transfer of immediately available funds to an account designated in
writing by the Seller and (ii) (to the extent paid in Common Units) will be paid
by the Buyer to the Seller of the Shares by delivery of certificates
representing the Transferred Common Units.
Representations and
Warranties of the Buyer
The Buyer represents and warrants to
the Seller that as of the date hereof:
SECTION 3.01 Organization and Limited
Partnership Authority. The Buyer is duly formed, validly
existing and in good standing under the laws of the Republic of the Marshall
Islands, and has all requisite limited partnership power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Buyer, has been
effectively authorized by all necessary action, limited partnership or
otherwise, and constitutes legal, valid and binding obligations of the Buyer. No
meeting has been convened or resolution proposed or petition presented and no
order has been made to wind up the Buyer.
SECTION 3.02 Agreement Not in Breach of
Other Instruments. The execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby and the
fulfillment of the terms hereof will not result in a breach of any of the terms
or provisions of, or constitute a default under, or conflict with, any agreement
or other instrument to which the Buyer is a party or by which it is bound, the
Certificate of Formation and the Partnership Agreement, any judgment, decree,
order or award of any court, governmental body or arbitrator by which the Buyer
is bound, or any law, rule or regulation applicable to the Buyer which
would have a material effect on the transactions contemplated
hereby.
SECTION 3.03 No Legal
Bar. The Buyer is not prohibited by any order, writ,
injunction or decree of any body of competent jurisdiction from consummating the
transactions contemplated by this Agreement and no such action or proceeding is
pending or, to the best of its knowledge and belief, threatened against the
Buyer which questions the validity of this Agreement, any of the transactions
contemplated hereby or any action
which has
been taken by any of the parties in connection herewith or in connection with
any of the transactions contemplated hereby.
SECTION 3.04 Issuance of Transferred
Common Units. The Transferred Common Units have been duly
authorized and validly issued and are fully paid and
non-assessable.
SECTION 3.05 The
Transferred Common Units. Assuming the Seller has the
requisite power and authority to be the lawful owner of the Transferred Common
Units, upon delivery to the Seller at the Closing of certificates representing
the Transferred Common Units, or delivery of such Transferred Common Units by
electronic means, and upon the consummation of the purchase contemplated hereby,
the Seller shall own good and valid title to the Transferred Common Units, free
and clear of any Encumbrances, other than those arising from acts of the Seller
Entities. Other than those created by or described in this Agreement
and the related transaction documents, the Buyer’s organizational documents,
restrictions imposed by Applicable Law or as disclosed in the SEC Documents, at
the Closing, the Transferred Common Units will not be subject to any voting
trust agreement or other contract, agreement, arrangement, commitment or
understanding restricting or otherwise relating to the voting, dividend rights
or disposition of the Transferred Common Units other than any agreement to which
any Seller Entity is a party.
SECTION 3.06 Securities Act. The Shares purchased by
the Buyer pursuant to this Agreement are being acquired for investment purposes
only and not with a view to any public distribution thereof, and the Buyer shall
not offer to sell or otherwise dispose of the Shares so acquired by it in
violation of any of the registration requirements of the Securities
Act. The Buyer acknowledges that it is able to fend for itself, can
bear the economic risk of its investment in the Shares, and has such knowledge
and experience in financial and business matters that it is capable of
evaluating the merits and risks of an investment in all of the
Shares. The Buyer is an “accredited investor” as such term is defined
in Regulation D under the Securities Act. The Buyer understands that,
when issued to the Buyer at the Closing, none of the Shares will be registered
pursuant to the Securities Act and that all of the Shares will constitute
“restricted securities” under the federal securities laws of the United
States.
SECTION 3.07 Private
Offering. None of the Buyer, its affiliates and its
representatives has issued, sold or offered any security of the Buyer to any
person under circumstances that would cause the issuance and delivery of the
Transferred Common Units as contemplated by this Agreement to be subject to the
registration requirements of the Securities Act. None of the Buyer,
its affiliates and its representatives will offer the Transferred Common Units
or any part thereof or any similar securities for issuance or sale to, or
solicit any offer to acquire any of the same from, any person so as to make the
issuance and sale of the Transferred Common Units subject to the registration
requirements of the Securities Act. Assuming the representations of
the Seller contained in Section 4.06 are true and correct, the issuance and
delivery of the Transferred Common Units on or prior to the Closing Date will be
exempt from the registration and prospectus delivery requirements of the
Securities Act.
SECTION 3.08 Independent
Investigation. The Buyer has had the opportunity to
conduct to its own satisfaction independent investigation, review and analysis
of the business, operations, assets, liabilities, results of operations,
financial condition and prospects of the Vessel Owning Subsidiary and, in making
the determination to proceed with the transactions contemplated hereby, has
relied solely on the results of its own independent investigation and the
representations and warranties set forth in Articles IV, V and VI.
Representations and
Warranties of the Seller
The Seller represents and warrants to
the Buyer that as of the date hereof:
SECTION 4.01 Organization and Corporate
Authority. The Seller is duly incorporated, validly
existing and in good standing under the laws of the Republic of the Marshall
Islands, and has all requisite corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the
Seller, has been effectively authorized by all necessary action, corporate or
otherwise, and constitutes legal, valid and binding obligations of the Seller.
No meeting has been convened or resolution proposed or petition presented and no
order has been made to wind up the Seller.
SECTION 4.02 Agreement Not in Breach. The execution
and delivery of this Agreement, the consummation of the transactions
contemplated hereby and the fulfillment of the terms hereof will not result in a
breach of any of the terms or provisions of, or constitute a default under, or
conflict with, any agreement or other instrument to which the Seller is a party
or by which it is bound, the Articles of Incorporation and Bylaws of the Seller,
any judgment, decree, order or award of any court, governmental body or
arbitrator by which the Seller is bound, or any law, rule or regulation
applicable to the Seller.
SECTION 4.03 No Legal
Bar. The Seller is not prohibited by any order, writ,
injunction or decree of any body of competent jurisdiction from consummating the
transactions contemplated by this Agreement and no such action or proceeding is
pending or, to the best of its knowledge and belief, threatened against the
Seller which questions the validity of this Agreement, any of the transactions
contemplated hereby or any action which has been taken by any of the parties in
connection herewith or in connection with any of the transactions contemplated
hereby.
SECTION 4.04 Good and Marketable Title to
Shares. The Seller is the owner (of record and
beneficially) of all of the Shares and has good and marketable title to the
Shares, free and clear of any and all Encumbrances. The Shares
constitute 100% of the issued and outstanding Equity Interests of the Vessel
Owning Subsidiary.
SECTION 4.05 The
Shares. Assuming the Buyer has the requisite power and
authority to be the lawful owner of the Shares, upon delivery to the Buyer at
the Closing
of
certificates representing the Shares, duly endorsed by the Seller for transfer
to the Buyer or accompanied by appropriate instruments sufficient to evidence
the transfer from the Seller to the Buyer of the Shares under the Applicable
Laws of the relevant jurisdiction, or delivery of such Shares by electronic
means, and upon the Seller’s receipt of the Purchase Price, the Buyer shall own
good and valid title to the Shares, free and clear of any Encumbrances, other
than those arising from acts of the Buyer Entities. Other than this
Agreement and any related transaction documents, the Organizational Documents
and restrictions imposed by Applicable Law, at the Closing, the Shares will not
be subject to any voting trust agreement or other contract, agreement,
arrangement, commitment or understanding restricting or otherwise relating to
the voting, dividend rights or disposition of the Shares, other than any
agreement to which any Buyer Entity is a party.
SECTION 4.06 Securities Act. The Transferred Common
Units transferred to the Seller pursuant to this Agreement are being acquired
for investment purposes only and not with a view to any public distribution
thereof, and the Seller shall not offer to sell or otherwise dispose of the
Transferred Common Units so acquired by it in violation of any of the
registration requirements of the Securities Act. The Seller
acknowledges that it is able to fend for itself, can bear the economic risk of
its investment in the Transferred Common Units, and has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of an investment in all of the Transferred Common
Units. The Seller is an “accredited investor” as such term is defined
in Regulation D under the Securities Act. The Seller understands
that, when issued to the Seller at the Closing, none of the Transferred Common
Units will be registered pursuant to the Securities Act and that all of the
Transferred Common Units will constitute “restricted securities” under the
federal securities laws of the United States.
SECTION 4.07 Independent
Investigation. The Seller has had the opportunity to
conduct to its own satisfaction independent investigation, review and analysis
of the business, operations, assets, liabilities, results of operations,
financial condition and prospects of the Buyer and, in making the determination
to proceed with the transactions contemplated hereby, has relied solely on the
results of its own independent investigation and the representations and
warranties set forth in Article III.
Representations and
Warranties of
the Seller Regarding the
Vessel Owning Subsidiary
The Seller represents and warrants to
the Buyer that as of the date hereof:
SECTION 5.01 Organization Good Standing
and Authority. The Vessel Owning Subsidiary is a
corporation duly incorporated, validly existing and in good standing under the
laws of the Republic of Liberia. The Vessel Owning Subsidiary has
full corporate power and authority to carry on its business as it is now, and
has since its incorporation been, conducted, and is entitled to own, lease or
operate the properties and assets it now
owns,
leases or operates and to enter into legal and binding contracts. No
meeting has been convened or resolution proposed or petition presented and no
order has been made to wind up the Vessel Owning Subsidiary.
SECTION 5.02 Capitalization. The
Shares consist of the 500 shares of common stock without par value and have been
duly authorized and validly issued and are fully paid and non-assessable, and
constitute the total issued and outstanding capital stock of the Vessel Owning
Subsidiary. There are not outstanding (i) any options, warrants
or other rights to purchase from the Vessel Owning Subsidiary any capital stock
of such Vessel Owning Subsidiary, (ii) any securities convertible into or
exchangeable for shares of the capital stock of the Vessel Owning Subsidiary or
(iii) any other commitments of any kind for the issuance of additional
shares of capital stock or options, warrants or other securities of the Vessel
Owning Subsidiary.
SECTION 5.03 Organizational
Documents. The Seller has supplied to the Buyer true and
correct copies of the organizational documents of the Vessel Owning Subsidiary,
as in effect as of the date hereof (the “Organizational
Documents”).
SECTION 5.04 Agreement Not in
Breach. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
violate, or result in a breach of, any of the terms and provisions of, or
constitute a default under, or conflict with, or give any other party thereto a
right to terminate any agreement or other instrument to which the Vessel Owning
Subsidiary is a party or by which it is bound including, without limitation, any
of the Organizational Documents, or any judgment, decree, order or award of any
court, governmental body or arbitrator applicable to the Vessel Owning
Subsidiary.
(a). There
is no action, suit or proceeding to which the Vessel Owning Subsidiary is a
party (either as a plaintiff or defendant) pending before any court or
governmental agency, authority or body or arbitrator; there is no action, suit
or proceeding threatened against the Vessel Owning Subsidiary; and, to the best
knowledge of the Seller, there is no basis for any such action, suit or
proceeding;
(b). The
Vessel Owning Subsidiary has not been permanently or temporarily enjoined by any
order, judgment or decree of any court or any governmental agency, authority or
body from engaging in or continuing any conduct or practice in connection with
its respective business, assets, or properties; and
(c). There
is not in existence any order, judgment or decree of any court or other tribunal
or other agency enjoining or requiring the Vessel Owning Subsidiary to take any
action of any kind with respect to its respective business, assets or
properties.
SECTION 5.06 Indebtedness to and from
Officers, etc. The Vessel Owning Subsidiary will not be
indebted, directly or indirectly, to any person who is an officer,
director,
stockholder or employee of the Seller or any spouse, child, or other relative or
any affiliate of any such person, nor shall any such officer, director,
stockholder, employee, relative or affiliate be indebted to the Vessel Owning
Subsidiary.
SECTION 5.07 Personnel. The
Vessel Owning Subsidiary has no employees.
SECTION 5.08 Contracts and
Agreements. Other than the Charter and the Amendment to
the Management Agreement (together, the “Contracts”), there
are no material contracts or agreements, written or oral, to which the Vessel
Owning Subsidiary is a party or by which any of the assets of the Vessel Owning
Subsidiary are bound.
(a). Each
of the Contracts is a valid and binding agreement of the Vessel Owning
Subsidiary, and to the best knowledge of the Seller, of all other parties
thereto;
(b). The
Vessel Owning Subsidiary has fulfilled all material obligations required
pursuant to its Contracts to have been performed by it prior to the date hereof
and has not waived any material rights thereunder; and
(c). There
has not occurred any material default on the part of the Vessel Owning
Subsidiary under any of the Contracts, or to the best knowledge of the Seller,
on the part of any other party thereto nor has any event occurred which with the
giving of notice or the lapse of time, or both, would constitute any material
default on the part of the Vessel Owning Subsidiary under any of the Contracts
nor, to the best knowledge of the Seller, has any event occurred which with the
giving of notice or the lapse of time, or both, would constitute any material
default on the part of any other party to any of the Contracts.
SECTION 5.09 Compliance with
Law. The conduct of business by the Vessel Owning
Subsidiary does not and the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not violate any laws,
statutes, ordinances, rules, regulations, decrees, orders, permits or other
similar items in force (including, but not limited to, any of the foregoing
relating to employment discrimination, environmental protection or conservation)
of any country, province, state or other governing body, the enforcement of
which would materially and adversely affect the business, assets, condition
(financial or otherwise) or prospects of the Vessel Owning Subsidiary taken as a
whole, nor has the Vessel Owning Subsidiary received any notice of any such
violation.
SECTION 5.10 No Undisclosed
Liabilities. The Vessel Owning Subsidiary (and the Vessel
owned by it) has no liabilities or obligations of any nature, whether absolute,
accrued, contingent or otherwise, and whether due or to become due (including,
without limitation, any liability for Taxes and interest, penalties and other
charges payable with respect to any such liability or obligation).
Notwithstanding the foregoing, the Parties acknowledge and agree that there may
be obligations under the Contracts that are not due and payable as of the date
hereof and that will be the responsibility of the Seller pursuant to Section
9.01(c) of this Agreement.
SECTION 5.11 Disclosure of
Information. The Seller has disclosed to the Buyer all
material information on, and about, the Vessel Owning Subsidiary and the Vessel
and all such information is true, accurate and not misleading in any material
respect. Nothing has been withheld from the material provided to the Buyer which
would render such information untrue or misleading.
SECTION 5.12 Payment of
Taxes. The Vessel Owning Subsidiary has filed all foreign,
federal, state and local income and franchise tax returns required to be filed,
which returns are correct and complete in all material respects, and has timely
paid all taxes due from it, and the Vessel is in good standing with respect to
the payment of past and current Taxes, fees and other amounts payable under the
laws of the jurisdiction where it is registered as would affect its registry
with the ship registry of such jurisdiction.
SECTION 5.13 Permits. The
Vessel Owning Subsidiary has such permits, consents, licenses, franchises,
concessions, certificates and authorizations (“Permits”) of, and has
all declarations and filings with, and is qualified and in good standing in each
jurisdiction of, all federal, provincial, state, local or foreign Governmental
Authorities and other Persons, as are necessary to own or lease its properties
and to conduct its business in the manner that is standard and customary for a
business of its nature other than such Permits the absence of which,
individually or in the aggregate, has not and could not reasonably be expected
to materially or adversely affect the Vessel Owning Subsidiary. The
Vessel Owning Subsidiary has fulfilled and performed all its obligations with
respect to such Permits which are or will be due to have been fulfilled and
performed by such date and no event has occurred that would prevent the Permits
from being renewed or reissued or that allows, or after notice or lapse of time
would allow, revocation or termination thereof or results or would result in any
impairment of the rights of the holder of any such Permit, except for such
non-renewals, non-issues, revocations, terminations and impairments that would
not, individually or in the aggregate, materially or adversely affect the Vessel
Owning Subsidiary, and none of such Permits contains any restriction that is
materially burdensome to the Vessel Owning Subsidiary.
SECTION 5.14 No Material Adverse Change
in Business. Since December 31, 2007, there has been no material
adverse change in the condition, financial or otherwise, or in the earnings,
properties, business affairs or business prospects of the Vessel Owning
Subsidiary, whether or not arising in the ordinary course of business, that
would have or could reasonably be expected to have a material adverse effect on
the condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Vessel Owning Subsidiary.
Representations and
Warranties of
the Seller regarding the
Vessel
The Seller represents and warrants to
the Buyer that as of the date hereof:
SECTION 6.01 Title to
Vessel. (a) The Vessel Owning Subsidiary is the owner
(beneficially and of record) of the Vessel and has good and marketable title to
the Vessel.
SECTION 6.02 No
Encumbrances. The Vessel Owning Subsidiary and the Vessel
are free of all Encumbrances other than the Encumbrances arising under the
Charter or the Credit Facility.
SECTION 6.03 Condition. The
Vessel is (i) adequate and suitable for use by the Vessel Owning Subsidiary in
the manner that is standard and customary for a vessel of its type, ordinary
wear and tear excepted; (ii) seaworthy in all material respects for hull and
machinery insurance warranty purposes and in good running order and repair;
(iii) insured against all risks, and in amounts, consistent with common industry
practices; (iv) in compliance with maritime laws and regulations; and (v) in
compliance in all material respects with the requirements of its class and
classification society; and all class certificates of the Vessel are clean and
valid and free of recommendations affecting class; and the Buyer acknowledges
and agrees that, subject only to the representations and warranties in this
Agreement, it is acquiring the Vessel on an “as is, where is”
basis.
Covenants
SECTION 7.01 Financial
Statements. The Seller agrees to cause the Vessel Owning
Subsidiary to provide access to the books and records of the Vessel Owning
Subsidiary to allow the Buyer’s outside auditing firm to prepare at the Buyer’s
expense any information, review or audit the Buyer reasonably believes is
required to be furnished or provided by the Buyer pursuant to applicable
securities laws. The Seller will (A) direct its auditors to provide
the Buyer’s auditors access to the auditors’ work papers and (B) use its
commercially reasonable efforts to assist the Buyer with any such information,
review or audit and to provide other financial information reasonably requested
by the Buyer or its auditors, including the delivery by the Seller Entities of
any information, letters and similar documentation, including reasonable
“management representation letters” and attestations.
Amendments and
Waivers
SECTION 8.01 Amendments and
Waivers. This Agreement may not be amended except by an
instrument in writing signed on behalf of each parties hereto. By an
instrument in writing the Buyer, on the one hand, or the Seller, on the other
hand, may waive compliance by the other with any term or provision of this
Agreement that such other party was or is obligated to comply with or
perform.
Indemnification
SECTION 9.01 Indemnity by the
Seller. The Seller shall be liable for, and shall
indemnify the Buyer and each of its subsidiaries and each of their directors,
employees, agents and representatives (the “Buyer Indemnitees”)
against and hold them harmless from, any Losses, suffered or incurred by such
Buyer Indemnitee:
(a). by
reason of, arising out of or otherwise in respect of any inaccuracy in, or
breach of, any representation or warranty (without giving effect to any
supplement to the schedules or qualifications as to materiality or dollar amount
or other similar qualifications), or a failure to perform or observe any
covenant, agreement or obligation of, the Seller in or under this Agreement or
in or under any document, instrument or agreement delivered pursuant to this
Agreement by the Seller;
(b). any
fees, expenses or other payments incurred or owed by the Seller or the Vessel
Owning Subsidiary to any brokers, financial advisors or comparable other persons
retained or employed by it in connection with the transactions contemplated by
this Agreement; or
(c). by reason of, arising
out of or otherwise in respect of obligations, liabilities, expenses, cost and
claims relating to, arising from or otherwise attributable to the assets owned
by the Vessel Owning Subsidiary or the assets, operations, and obligations of
the Vessel Owning Subsidiary or the businesses thereof, in each case, to the
extent relating to, arising from, or otherwise attributable to facts,
circumstances or events occurring prior to the Closing Date.
SECTION 9.02 Indemnity by the
Buyer. The Buyer shall indemnify the Seller and its
subsidiaries other than any Buyer Indemnitees and each of their respective
officers, directors, employees, agents and representatives (the “Seller Indemnitees”)
against and hold them harmless from, any Losses, suffered or incurred by such
Seller Indemnitee by reason of, arising out of or otherwise in respect of any
inaccuracy in, or breach of, any representation or warranty (without giving
effect to any supplement to the schedules occurring after the date hereof or
qualifications as to materiality or dollar amount or other similar
qualifications), or a failure to perform or observe any covenant, agreement or
obligation of, the Buyer in or under this Agreement or in or under any document,
instrument or agreement delivered pursuant to this Agreement by the
Buyer.
SECTION 9.03 Exclusive Post-Closing
Remedy. After the Closing, and except for any
non-monetary, equitable relief to which any Party may be entitled, or any
remedies for willful misconduct or actual fraud, the rights and remedies set
forth in this Article IX shall constitute the sole and exclusive rights and
remedies of the Parties under or with respect to the subject matter of this
Agreement.
Miscellaneous
SECTION 10.01 Governing
Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York applicable to contracts made
and to be performed wholly within such jurisdiction without giving effect to
conflict of law principles thereof other than Section 5-1401 of the New York
General Obligations Law, except to the extent that it is mandatory that the law
of some other jurisdiction, wherein the Vessel is located, shall
apply.
SECTION 10.02 Counterparts. This
Agreement may be executed simultaneously in one or more counterparts, each of
which shall be deemed an original, but all of which shall constitute but one and
the same instrument.
SECTION 10.03 Complete
Agreement. This Agreement and Schedules hereto contain the
entire agreement between the parties hereto with respect to the transactions
contemplated herein and, except as provided herein, supersede all previous oral
and written and all contemporaneous oral negotiations, commitments, writings and
understandings.
SECTION 10.04 Interpretation. The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this
Agreement.
SECTION 10.05 Severability. If
any of the provisions of this Agreement are held by any court of competent
jurisdiction to contravene, or to be invalid under, the laws of any governmental
body having jurisdiction over the subject matter hereof, such contravention or
invalidity shall not invalidate the entire Agreement. Instead, this
Agreement shall be construed as if it did not contain the particular provision
or provisions held to be invalid, and an equitable adjustment shall be made and
necessary provision added so as to give effect, as nearly as possible, to the
intention of the Parties as expressed in this Agreement at the time of execution
of this Agreement.
SECTION 10.06 Third Party
Rights. Except to the extent provided in Article IX, a Person
who is not a party to this Agreement has no right to enforce or to enjoy the
benefit of any term of this Agreement.
SECTION 10.07 Notices. Any
notice, claim or demand in connection with this Agreement shall be delivered to
the parties at the following addresses (or at such other address or facsimile
number for a party as may be designated by notice by such party to the other
party):
(a). if
to Capital Maritime & Trading Corp., as follows:
c/o
Capital Ship Management Corp., 3 Iassonos Street, Piraeus, Greece
Attention: Evangelos
M. Marinakis
Facsimile: +30
210 428 4286
(b). if
to Capital Product Partners L.P., as follows:
c/o
Capital Ship Management Corp., 3 Iassonos Street, Piraeus, Greece
Attention: Ioannis
E. Lazaridis
Facsimile: +30
210 428 4285
and any
such notice shall be deemed to have been received (i) on the next working
day in the place to which it is sent, if sent by facsimile or (ii) forty
eight (48) hours from the time of dispatch, if sent by courier.
SECTION 10.08 Representations and
Warranties to Survive. All representations and warranties
of the Buyer and Seller contained in this Agreement shall survive the Closing
and shall remain operative and in full force and effect after the Closing,
regardless of (a) any investigation made by or on behalf of any Party or its
affiliates, any Person controlling any Party, its officers or directors, and (b)
delivery of and payment for the Shares.
SECTION 10.09 Remedies. Except
as expressly provided in Section 9.03, the rights, obligations and remedies
created by this Agreement are cumulative and in addition to any other rights,
obligations or remedies otherwise available at law or in
equity. Except as expressly provided in this Agreement, nothing in
this Agreement will be considered an election of remedies.
SECTION 10.10 Non-recourse to General
Partner. Neither the Buyer’s general partner nor any other
owner of Equity Interests in the Buyer shall be liable for the obligations of
the Buyer under this Agreement or any of the related transaction documents,
including, in each case, by reason of any payment obligation imposed by
governing partnership statutes.
IN WITNESS WHEREOF, each of the parties
hereto has caused this Agreement to be signed as of the date first above
written.
|
CAPITAL
MARITIME & TRADING CORP.
|
|||
|
By:
|
|||
|
Name:
|
Evangelos
M. Marinakis
|
||
|
Title:
|
President
and Chief Executive Officer
|
||
|
CAPITAL
PRODUCT PARTNERS L.P.
|
|||
|
By:
Capital GP L.L.C., its general partner
|
|||
|
By:
|
|||
|
Name:
|
Ioannis
E. Lazaridis
|
||
|
Title:
|
Chief
Executive Officer and Chief
Financial
Officer of Capital GP, L.L.C.
|
||
16
Exhibit 8.1
LIST
OF SIGNIFICANT SUBSIDIARIES
The
following is a list of Capital Product Partners L.P.’s significant subsidiaries
as at December 31, 2007:
|
Name of
Subsidiary
|
Jurisdiction of
Incorporation
|
Proportion of
Ownership Interest
|
|
Capital
Product Operating GP L.L.C.
|
Republic
of The Marshall Islands
|
100%
|
Exhibit 12.1
CERTIFICATION
OF CHIEF EXECUTIVE OFFICER
I,
Ioannis E. Lazaridis, certify that:
|
|
1.
|
I
have reviewed this annual report on Form 20-F of Capital Product Partners
L.P.;
|
|
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
|
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the company
as of, and for, the periods presented in this
report;
|
|
|
4.
|
The
company’s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company and
have:
|
|
|
a.
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the company, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
|
|
b.
|
Evaluated
the effectiveness of the company’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation;
and
|
|
|
c.
|
Disclosed
in this report any change in the company’s internal control over financial
reporting that occurred during the period covered by the annual report
that has materially affected, or is reasonably likely to materially
affect, the company’s internal control over financial reporting;
and
|
|
|
5.
|
The
company’s other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the company’s auditors and the audit committee of the company’s board of
directors (or persons performing the equivalent
functions):
|
|
|
a.
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the company’s ability to record,
process, summarize and report financial information;
and
|
|
|
b.
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the company’s internal control
over financial reporting.
|
Dated:
April 4, 2008
|
By:
|
/s/ Ioannis E.
Lazaridis
|
|
Name
|
Ioannis
E. Lazaridis
|
|
Title:
|
Chief
Executive Officer
|
Exhibit 12.2
CERTIFICATION
OF CHIEF FINANCIAL OFFICER
I,
Ioannis E. Lazaridis, certify that:
|
|
1.
|
I
have reviewed this annual report on Form 20-F of Capital Product Partners
L.P.;
|
|
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
|
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the company
as of, and for, the periods presented in this
report;
|
|
|
4.
|
The
company’s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company and
have:
|
|
|
a.
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the company, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
|
|
b.
|
Evaluated
the effectiveness of the company’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation;
and
|
|
|
c.
|
Disclosed
in this report any change in the company’s internal control over financial
reporting that occurred during the period covered by the annual report
that has materially affected, or is reasonably likely to materially
affect, the company’s internal control over financial reporting;
and
|
|
|
5.
|
The
company’s other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the company’s auditors and the audit committee of the company’s board of
directors (or persons performing the equivalent
functions):
|
|
|
a.
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the company’s ability to record,
process, summarize and report financial information;
and
|
|
|
b.
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the company’s internal control
over financial reporting.
|
Dated:
April 4, 2008
|
By:
|
/s/ Ioannis E.
Lazaridis
|
|
Name:
|
Ioannis
E. Lazaridis
|
|
Title:
|
Chief
Financial Officer
|
Exhibit 13.1
Certification
Pursuant to
18
U.S.C. Section 1350
As
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the annual report on
Form 20-F of Capital Product Partners L.P., a master limited partnership
organized under the laws of the Republic of The Marshall Islands (the
"Company"), for the period ending December 31, 2007 as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), each of the
undersigned officers of the Company certify pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
that:
|
1.
|
the
Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934;
and
|
|
2.
|
the
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
|
Dated:
April 4, 2008
|
By:
|
/s/ Ioannis E.
Lazaridis
|
|
Name:
|
Ioannis
E. Lazaridis
|
|
Title:
|
Chief
Executive Officer and Chief Financial
Officer
|